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Cases: Contracts

GSIS v Leuterio
petitioners conducted a lottery draw for the allocation of lots and housing units in GSIS Village;
respondent won and was issued a Certificate of Acknowledgment to purchase the subject house and
lot; they entered into a Deed of Conditional Sale evidencing the conveyance of the subject property
and all improvements thereon to the Leuterio spouses; after the land development and and housing
construction were completed petitioner’s Board increased the purchase price inficatred in the Deeds pf
Conditional Sale covering houses and lots therein; a final Deed of Sale was to be executed upon final
payment; the Conditional Deed contained a marginal notation “subject to adjustment pending approval
of the Board”; spoused alleged that this notation was not in the Deed when they signed the same;
private respondents informed petitioner that the payments for the property had been completed and
the execution of an absolute deed of sale was in order; no action on the matter was taken by petitioner
no agreement to the notation of adjustment (1) found that the appended words were inserted into the
document without the knowledge or consent of respondents (2) Answer or petitioner to the Complaint
of respondents admitted the non-existence of this notation at the time the Deed of Conditional Sale
was signed calling the omission honest mistake (3) confirmed by petitioner in the instant Petition for
Review on Certiorari that respondents were not required to sign a new contract but instead the words
were inserted (4) purchase price was mutually agreed upon by the parties and respondents did not
give consent for petitioner to make a unilateral upward adjustment of this price depending on the fine
cost of construction (5) illegal for petitioner to claim this prerogative as the fixing of the price can never
be left to the discretion of one of the contracting parties (6) estopped as petitioner cannot increase the
price of the subject house and lot after it failed through the years to protest against private
respondents amortization or to require the payment by them of bigger monthly installments (7)
petitioner failed to factor in the increase in the cost of constriction and have nobody to blame but itself
and it alone should suffer the loss (8) law on contract does not excuse a party from specifically
performing his obligation on the gourd that he made a bad business judgment
petiton for review on certiorari dismissed; sale valid
Manila Railroad v La Company Transatlantica (Relativity)
steamship belonging to respondent Transatlantica arrived at Manila with 2 locomotive boilers aboard
which are the property of petitioner; Steamship Company’s assistance was procured to discharge the
boilers who then employed Atlantic Company having probably the best equipment in the city; the
service to be performed by Atlantic Company consisted in bringing its floating crane alongside the
steamship, lifting the boilers and transferring them to a barge; the boiler was so damaged to had to be
reshipped and rebuilt in England costing the petitioners P22,343.29 for repairs, expenses, and loss of
the use; present action instituted to recover these damages; Steamship Company caused the Atlantic
Company to be brought in as a codefendant and insisted that whatever liability existed should be fixed
upon the Atlantic Company as an independent contractor
(1) contractual relations existed between the Railroad Company and Steamship regarding the carrying
and delivering of the boilers, and between the Steamship Company and Atlantic respecting the and
lifting and the transferring of the boilers (2) no contractual relation existed directly between the
Railroad Company and Atlantic Company
Steamship liable (1) contract to transport imports the duty to convey and deliver safely and securely
with reference to the degree of care which under the circumstances are required by the law and
custom applicable to the case (2) does not escape liability by reason of the fact that it employed a
competent independent contractor to discharge the boilers (3) Atlantic was no more than an employee
and it has never yet been held that the failure to comply with a contractual obligation can be excused
by showing that such delinquency was due to the negligence of one to whom the contracting party
had committed the performance of the contract
Atlantic liable not to petitioner but to Transatlantica (1) contract combined 2 features namely and
undertaking in the part of the Atlantic Company to use all due care combined with a reservation
concerning the company’s liability for damage (2) exemption from liability was not intended to absolve
the Atlantic Company from its duty to use due care but only had reference to disasters from some
inherent hidden defect in the lifting apparatus or other unforeseen occurrence not directly attributed to
the negligence of the company (3) absolute exemption from all responsibility from negligence is
inequitable (4) Atlantic is liable to Steamship for the damages by its failure to exercise due care in
discharging the boiler regardless of the fact that the damage was caused by the negligence of an
employee who was qualified for the work and who had been chosen with due care (5) as they
undertook to remove the boiler from the ship’s hold and for this purpose and took the property into its
power and control there arose a duty to the owner to use due care and this duty was in existence
before the negligent act was done which may be considered and act done in violation of this duty
ignoring the existence of the express contract between Atlantic and Steamship (6) Steamship informed
petitioner that it would be procuring the services of a contractor therefore it is to be assumed that
petitioner had in fact assented to the employment of a contractor to perform this service (7) cannot be
admitted that a person who contracts to do a service like that rendered by Atlantic incurs double
responsibility (8) the 2 liabilities cannot coexist as an implied contract (negotiorum gestio) never arises
where an express contract has been made (9) the contract made determines not only the character
and extent of the liability of the Atlantic Company but also the person or entity by whom the obligation
is exigible (10) had Atlantic refused to carry out its agreement to discharge the cargo the plaintiff could
not have enforced specific performance and could not have recovered damages for non-performance
(11) for lack of privity with the contract the petitioner can have no right of action to recover damages
from the Atlantic Company for the wrongful act as their rights can only be made effective through
Transatlantica with whom the contract of affreightment was made
CFI: in favor of plaintiff and against Atlantic Company but absolved the Steamship Company from the
complaint finding the mishap was due to the negligence of the foreman in charge and the accident is
therefore to be attributed to the failure of the latter to exercise the degree of care which an ordinarily
competent and prudent person would have exhibited under the circumstances
(1) Transatlantica liable to petitioner (2) Steamship liable (3) Atlantic liable to Transatlantica (4) Atlantic
liable to Steamship
DKG Holdings Corporation v Bartolome
a parcel of land was originally owner by private respondent’s deceased mother; petitioner saw this as
a potential warehouse site; petitioner entered into a Contract of Lease with Option to Buy with the
mother whereby petitioner was given the option to lease or lease with purchase the subject land which
must be exercised within 2 years; petitioner undertook to pay P3,000 monthly as consideration for the
reservation of its option; petitioner regularly paid the monthly P3,000 until the death of the mother and
thereafter coursed its payment to respondent Victor Bartolome being the sole heir; respondent
however refused to accept these payments executing an Affidavit of Self-Adjudication over all the
properties of the deceased including the subject lot; petitioner served upon respondent notice that it
was exercising its option to lease the property; upon respondent refusing to accept the tendered rental
fee and to surrender possession of the property petitioner opened a Savings Account in his name and
deposited the rental fee therein as well as reservation fees; petitioner also tried to register and
annotate the Contract on the title of Victor to the property which was refused although the required
fees were accepted; petitioner filed a Complaint for specific performance and damages against
respondent and the Register of Deeds
CA affirming RTC: dismissed the Complaint and ordered petitioner to pay Victor P30,000 as AF
bound by the Contract of Lease with Option to Buy (1) there is neither contractual stipulation nor legal
provision making the rights and obligations under the contract intransmissible and the nature of the
rights and obligations therein are by their nature transmissible (2) there is no personal act required from
the deceased mother thus the obligation to deliver possession of the subject property to petitioner
upon the exercise by the latter of its option to lease the same may very well be performed by
respondent (3) he who contracts does so for himself and his heirs thus the heirs cannot escape the
legal consequence of a transaction entered into by their predecessor-in-interest because they have
inherited the property subject to the liability affecting their common ancestor (4) futile for Victor to
insist he is not a party to the contract as their is privity of interest between him and his deceased
mother being an heir and only succeeds to what rights his mother had and what is valid and binding
against her is also valid and binding against him (5) death of a party does not excuse nonperformance
of a contract which involves a property right and the rights and obligations thereunder pass to the
personal representatives of the deceased (6) petitioner paid its monthly rent and reservation fees as
well as complied with its duty to inform the other party of its intention to exercise its option to lease
well within the 2yr period and it was appropriate for petitioner to address its letter to her heir
petitioner granted (1) surrender and deliver possession of the parcel of land (2) surrender and deliver
his copy of the Transfer Certificate (3) pay costs of the suit (4) Register of Deeds ordered to register
and annotate the subject Contract of Lease with Option to Buy
Gutierrez Hermanos v Orense
Gabriel v Monte de Piedad (Freedom to Contract: yes)
petitioner was employed as appraiser of jewels in the pawnshop of the respondent; he executed a
chattel mortgage to secure the payment of the deficiencies which resulted from his erroneous
appraisal of the jewels pawned to the appellee promising to pay to the appellee the sum of P300 a
month until the sum of P14,679.07, with interest is fully paid and such document was registered; an
action was instituted against the petitioner by the respondent for recovery of the sum less what had
been paid
chattel mortgage contract guaranteeing to pay deficiencies valid (1) a contract is to be judged by its
character and courts will look to the substance and not to the mere form of the transaction (2) freedom
of contract is both a constitutional and statutory right and to uphold this right courts should move with
all the necessary caution and prudence in holding contracts void (3) in general, a contract which is
neither prohibited by law nor condemned by judicial decision, nor contrary to public morals,
contravenes no public policy (4) the contract does not in any way militate against the public good
neither contravene the policy of the law nor the established interests of society (5) there is sufficient
consideration in this contract for it has been satisfactorily established that it was executed voluntarily
by the latter to guarantee the deficiencies resulting from his erroneous appraisals of the jewelry and
a preexisting admitted liability is a good consideration for a promise (6) case does not fall within the
exception where the inadequacy is so gross as to amount to fraud, oppression or undue influence (7)
there is substantial compliance with the requirements of the Chattel Mortgage Law
SC affirming CA & RTC: in favor of respondent against petitioner
Pakistan International Airlines v Ople (Freedom to contract: no)
petitioner executed 2 separate contracts of employment with each of the private respondents;
the agreement was for a period of 3 years which can be extended by mutual consent however it was
also stipulated that petitioner reserves the right to terminate the agreement at any time by giving the
employee notice in writing in advance and paying wages equivalent to 1 month’s salary; it also
stipulated that it shall be construed and governed under and by the laws of Pakistan and only the
Courts of Karachi, Pakistan shall have the jurisdiction; respondents then commenced training in
Pakistan and subsequently began discharging their job functions as flight attendants with base station
in Manila; roughly 1 year and 4 months prior to the expiration of the contracts they were advised
that they would be terminated; respondents jointly instituted a complaint for illegal dismissal and non-
payment of company benefits and bonuses with the Ministry of Labor and Employment;
petitioner submitted its position paper, without evidence claiming (1) both private respondents were
habitual absentees (2) both were in the habit of bringing in from abroad sizeable quantities of "personal
effects" (3) PIA personnel at the Manila International Airport had been discreetly warned by customs
officials to advise private respondents to discontinue that practice (4) the services of both private
respondents were terminated pursuant to the provisions of the employment contract
MOLE regional director and deputy minister (appeal): reinstated with full backwages or payment of
salaries corresponding to the unexpired portion of the contracts; private respondents had attained the
status of regular employees after rendering more than a year of continued service; that the stipulation
limiting the period of the employment contract to 3 years was null and void as violative of the
provisions of the Labor Code; and that the dismissal having been carried out without the requisite
clearance from the MOLE was illegal
illegally dismissed (1) Regional Director had jurisdiction over termination cases as Article 278 of the
Labor Code, as it then existed, forbade the termination of the services of employees with at least 1
year of service without prior clearance from the Department of Labor and Employment (2) in case of a
termination without the necessary clearance the Regional Director was authorized to order the
reinstatement of the employee concerned and the payment of backwages (3) the principle of party
autonomy in contracts is not an absolute principle|as counter-balancing the principle of autonomy of
contracting parties is the equally general rule that provisions of applicable law, especially provisions
relating to matters affected with public policy, are deemed written into the contract (4) parties may not
contract away applicable provisions of law especially peremptory provisions dealing with matters
heavily impressed with public interest such as the law relating to labor and employment (5) not at
liberty to insulate themselves and their relationships from the impact of labor laws and regulations by
simply contracting with each other (6) a contract providing for employment with a fixed period is not
necessarily unlawful and the critical consideration is the presence or absence of a substantial
indication that the period specified in an employment agreement was designed to circumvent the
security of tenure of regular employees (7) the period was in effect a facultative one at the option of
peittioner as they claim to be authorized to shorten the term at any time for any cause thus basically
employed at the pleasure of petitioner (8) considered intended to prevent any security of tenure from
accruing in favor of private respondents even during the limited period of 3 years (9) relationship is
much affected with public interest and the otherwise applicable Philippine laws and regulations cannot
be rendered illusory by the parties agreeing to some other law
(1) reinstated or paid separation fee equivalent to 1 months salary for every year of service including
the 3 years putatively rendered (2) 3 years backwages without qualification or deduction
Cui v Arellano (May not stipulate: waiver of right to transfer)
plaintiff finished his law studies in the defendant university up to and including the 1st sem of the 4th
year; plaintiff enrolled for the last semester in the defendant university but failed to pay his tuition;
plaintiff left the defendant’s law college and enrolled for the last semester in another university
graduating from the latter; plaintiff during all his time studying law in the defendant university was
awarded scholarship grants for scholastic merit; to secure permission to take the bar he needed the
transcripts of his records in defendant university; defendant refused until after he paid back the whole
amount of tuition fees paid by plaintiff to defendant and refunded to him by the latter totaling
P1,033.87; plaintiff paid to defendant the sum under protest; before he was awarded the scholarship
grants he was made to sign a contract whereby he waives his right to transfer to another school
without having refunded the equivalent of the scholarship cash;
RTC: although the contractual provision may be unethical it was more unethical for plaintiff to quit
studying with the defendant without good reason
stipulation contrary to public policy hence null and void (1) scholarships are awarded in recognition of
merit not to keep outstanding students in school to bolster its prestige otherwise the university
scholarships award becomes a business scheme to increase the business potential of an educational
institution (2) scholarships are not granted to attract and to keep brilliant students in school for their
propaganda value but to reward merit or help gifted. students in whom society has an established
interest or a first lien (3) other leading colleges and universities do not require scholars to reimburse the
corresponding value of the scholarships if they transfer to other schools (4) contracts void as against
public policy contravenes some established interest of society or is inconsistent with sound policy and
good morals
defendant to pay plaintiff P1,033.87 with interest + costs
Arroyo v Berwin (May not stipulate: stifling of prosecution)
defendant as procurador judicial represented Marcela Juaneza in the justice of the peace in a
proceeding for theft prosecuted by plaintiff; the case was decided against the accused who appealed
the the CFI; the defendant then requested the plaintiff to agree to dismiss the criminal proceeding and
in return Marcela would recognize plaintiff’s ownership in the land where Marcela ordered the cane cut
and which land and cut cane are referred to in the cause for theft; defendant also agreed that plaintiff
should obtain a Torrens title to the said land and that Marcela would not oppose the application for
registration to be filed by said applicant provided petitioner would dismiss the case for theft; plaintiff
complied with his part of the agreement regarding dismissal; defendant did not comply thus plaintiff
delivered to defendant for the signature of Marcela a written agreement attesting that she recognized
plaintiff’s ownership and would not oppose the application; defendant did not return the
written agreement despite demands; petitioner instituted a case praying defendant be ordered to
comply with the agreement ang get his client to sign the agreement
null agreement (1) an agreement by the owner of stolen goods to stifle the prosecution of the person
charged with the theft for a pecuniary or other valuable consideration is manifestly contrary to public
policy and the due administration of justice (2) it is if the utmost importance to the interest of the
public that criminals should be prosecuted and that all criminal proceedings should be instituted and
maintained in the form and manner prescribed by law (3) to permit an offender to escape the penalties
prescribed by law by the purchase of immunity from private individuals would result in a manifest
perversion of justice
SC affirming RTC: dismissed on the ground of illegality of the consideration of the alleged contract
Bustamante v Rosel (May not stipulate: pactum commissorium)
respondent entered into a loan agreement with petitioners to borrow P100,000; to guaranty payment
thereof they put up as collateral 70 sq meters of a parcel of land and in the event of failure to pay
respondents have the option to buy the collateral for P200,000 inclusive of the borrowed amount and
interest; as the loan was about to mature respondents proposed to buy at the pre-set price of
P200,000 which petitioner refused requesting for an extension and offering to sell another residential
lot with the principal loan plus interest to be used as down payment; respondents refused to extend
the payment as well as the lot; petitioners tendered payment of the loan which respondents refused
to accept insisting petitioner sign a prepared deed of absolute sale of the collateral; respondents filed
a complaint for specific performance with consignation; respondents sent a demand letter asking
petitioner to sell the collateral pursuant to the option to buy embodied in the loan agreement; petitioner
filed a petition for consignation and deposited P153,000 with the City Treasurer; respondents
consigned P47,500 which is the balance upon petitioner’s refusal to sell and failure of barangay
pactum commissorium void(1) petitioner did not fail to pay the loan as they tendered payment
to settle the loan which respondents refused insisting on the sale of the collateral and upon refusal
petitioners consigned the amount (2) sale of the collateral is an obligation with a suspensive
condition dependent upon the happening of an event without which the obligation to sell does not
arise (2) since the event did not occur respondents do not have the right to demand fulfillment of
petitioner's obligation especially where the same would not only be disadvantageous to petitioner but
would also unjustly enrich respondents considering the inadequate consideration (3) scrutiny of the
stipulation of the parties reveals a subtle intention of the creditor to acquire the property given as
security for the loan and such is embraced in the concept of pactum commissorium which is
proscribed by law (4) as the debtor is obliged to dispose of the collateral at the pre-agreed
consideration amounting to practically the same amount as the loan in effect the creditor acquires the
collateral in the event of non-payment of the loan which is within the concept of pactum
commissorium (5) courts are duty bound to exercise caution in the interpretation and resolution of
contracts lest the lenders devour the borrowers like vultures do their prey
plaintiffs to pay the loan; respondents prayer for petitioners to execute the Deed of Sale to convey the
collateral denied
Dizon v Gaborro (Classification according to name)
petitioner was the owner of 3 parcels of land and constituted 2 mortgage liens to secure 2 loans
in favor of the Development Bank of the Philippines and the Philippine National Bank respectively;
petitioner defaulted in the payment of his debt thus the Development Bank of the Philippines
foreclosed the mortgage extrajudicially and the lands were sold to the DBP for an amount
which covered the loan, interest and expenses; the corresponding Certificate of Sale was executed
and petitioner executed the deed of sale which was recorded in the Office of the Register of Deeds;
prior to the execution of the deed of sale respondent became interested in the lands; petitioner
originally intended to lease to Gaborro the property which had been lying idle for some time but as it
was already sold they abandoned the projected lease; instead they entered into a Deed of Sale
with Assumption of Mortgage whereby respondent would assume the entire mortgage indebtedness
with both banks and petitioner would sell the properties; they also entered into an Option to Purchase
giving petitioner the option to repurchase within 4 years upon refund of the amount paid in the
previous agreement; respondent then took possession of the 3 parcels; the DBP BOG approved the
request of respondent to assume the mortgage and executed a conditional sale; petitioner
then assigned his right of redemption to respondent in an instrument whereby he transferred his right
to redeem the properties and relinquished any and all rights to said properties with respondent
assuming the obligation in favor of DBP; respondent made several payments to both banks and
introduced improvements on the lands and appropriated the produce to himself; petitioner informed
respondent that he is formally offering to reimburse respondent what he paid to the banks without
tendering any cash and demanded an accounting; respondent did not accede; petitioner filed a
complaint alleging the Deed of Sale and Option to Purchase did not express the true intention and
agreement between the parties contending they are a single transaction and that the real agreement
was not an absolute sale but merely an equitable mortgage or conveyance by way of security for the
reimbursement or refund by petitioner to respondent
innominate (1) true agreement is that defendant would assume and pay the indebtedness of the
plaintiff and in consideration would be given the possession and enjoyment of the properties until the
plaintiff reimburses fully the defendant (2) person having a lien on the property subsequent to the
mortgage or deed of trust under which the property is sold may redeem the same at any time within
the term or 1 year from and after the date of sale (3) the judgment debtor remains in possession of the
property foreclosed and sold during the period of redemption thus entitled to retain it and receive the
fruits, the purchaser not being entitled to such possession (4) right to redeem land sold under
execution is a property right and may be sold (5) the purchaser of land sold at public auction under a
writ of execution only has an inchoate right in the property, subject to be defeated and terminated
within the period of 12 months from the date of sale, by a redemption on the part of the owner (6) after
the extrajudicial foreclosure and sale of his properties petitioner retained the right to redeem the lands,
the possession, use and enjoyment of the same during the period of redemption and these are the
only rights that Dizon could legally transfer, cede and convey unto respondent (7) instrument cannot be
legally considered a real and unconditional sale of the parcels of land, firstly, because there was
absolutely no money consideration therefor and because the properties had already been previously
sold by the sheriff at the foreclosure sale, thereby divesting the petitioner of his full right as owner
thereof to dispose and sell the lands (8) respondent as transferee of these certain limited rights cannot
grant to petitioner more than said rights thus the only effect of the Option Deed is the grant of the right
to recover the properties upon reimbursement (9) the agreement between petitioner and respondent is
one of those innominate contracts whereby petitioner and respondent agreed "to give and to do"
certain rights and obligations respecting the lands and the mortgage debts of petitioner which would
be acceptable to the bank (10) mistake is a ground for reformation and it was a mistake for the parties
to execute the 2 contracts and stand on the literal meaning of the terms an stipulations used therein
SC (1) petitioner has the right of reconveyance by reimbursing respondent whatever amount the latter
has actually paid on the principal only (2) any outstanding balance on the principal shall be deducted
from the reconveyance price and will be paid by petitioner directly to the banks (3) respondent not to
account for the income from the products and petitioner not to pay any of the interest or any interests
or taxes paid by respondent (4) respondent to deliver possession of the properties to him
Florentino v Encarnacion (Stipulations pour autrui)
petitioners Miguel Florentino, Rosario Encarnacion de Florentino, Manuel Arce, Jose Florentino,
Victorino Florentino, Antonio Florentino, Remedios Encarnacion and Severina Encarnacion, and
the opposers Salvador Encarnacion, Sr., Salvador Encarnacion, Jr. and Angel Encarnacion filed an
application for the registration of a parcel of agricultural land; application alleged among other things
that the applicants are the common and pro-indiviso owners of the land with the improvements
existing thereon stipulating that to the best of their knowledge and belief there is no mortgage, lien or
encumbrance of any kind nor any other person having any estate or interest thereon; that said
applicants had acquired the aforesaid land thru and by inheritance from their predecessors in interest
and said land was adjudicated to them by virtue of the deed of extrajudicial partition; that applicants
Salvador Encarnacion, Jr. and Angel Encarnacion acquired their respective shares of the land thru
purchase from the original heirs; applicant Miguel Florentino asked the court to include a stipulation in
the deed of extrajudicial partition as an encumbrance on the land sought to be registered and cause
the entry of the same on the face of the title that will finally be issued; the stipulation provided that the
products of the land be used in answering for the payment of expenses for the religious functions
specified in the Deed of Extrajudicial Partition; opposers filed a manifestation seeking to withdraw their
application on their respective shares of the land sought to be registered
court: opposers motion to withdraw denied for lack of merit; confirmed title of property; the
arrangement can be revoked as in fact opposers did revoke it as shown by acts accompanying his
refusal to have the same appear as an encumbrance to the title; if viewed as a stipulation pour autrui it
cannot now be enforced because the Church in whose favor it was made has not communicated its
acceptance to the opposers before the latter revoked it
stipulation pour autrui (1) the stipulation is part of an extrajudicial partition duly agreed and signed by
the parties hence binding the contracting parties thereto taking effect between the parties, their
assigns and heirs and its validity or compliance cannot be left to the will of one of them (2) evidence on
record shows that the true intent of the parties is to confer a direct and material benefit upon the
Church as fruits of the aforesaid land were used thenceforth to defray the expenses of the Church in
the preparation and celebration of the Holy Week, an annual Church function (3) while a stipulation in
favor of a third person has no binding effect in itself before its acceptance by the party favored the law
does not provide when the third person must make his acceptance thus there is no time limit and such
third person has all the time until the stipulation is revoked (4) the Church accepted the stipulation in
its favor before it is sought to be revoked by some of the co-owners as it had been enjoying the
benefits of the stipulation for almost seventeen years which can only be construed as an implied
acceptance by the Church of the stipulation pour autrui before its revocation (5) the acceptance does
not have to be in any particular form (6) the stipulation cannot now be revoked by any of the stipulators
at their own option following the cardinal rule of contracts that it has the force of law between the
parties and the principle that there must be mutuality between the parties based on their essential
equality to which is repugnant to have one party bound by the contract leaving the other free
therefrom (7) consequently opposers must bear with the stipulation being a signatory to the Deed of
Extrajudicial Partition or being privies or successors in interest (8) furthermore they are shown to have
given their conformity to such agreement when they kept their peace having already bought their
respective shares without questioning the enforcement of the agreement as well as having knowledge
as admitted in a Deed of Real Mortgage (9) the annotation on the face of the title to be issued in this
case is merely a guarantee of the continued enforcement and fulfillment of the beneficial stipulation
opposers motion to withdraw denied for lack of merit; annotation allowed
Coquia v Fieldman’s Insurance (Stipulations pour autrui)
respondent issued in favor of Manila Yellow Taxicab Co a common carrier accident insurance policy
under which they will "indemnify the Insured in the event of accident caused by or arising out of the
use of Motor Vehicle against all sums which the Insured will become legally liable to pay in respect of:
Death or bodily injury to any fare-paying passenger including the Driver, Conductor and/or Inspector”;
a taxicab driven by Carlito Coquia met a vehicular accident which caused his death; the insured filed a
claim for P5,000 which was replied with an offer of P2,000; Insured counter-offered P4,000 which was
rejected; Coquias filed a complaint against the Company to collect the proceeds of the
aforementioned policy
direct cause of action (1) although in general only parties to a contract may bring an action based
thereon this rule is subject to exceptions one of which is stipulations pour autrui (2) the enforcement of
stipulations pour autrui may be demanded by a third party for whose benefit it was made before the
stipulation in his favor has been revoked by the contracting parties although not a party to the contract
(3) the policy under consideration is typical of contracts pour autrui this character being made more
manifest by the fact that the deceased driver paid 50% of the corresponding premiums which were
deducted from his weekly commissions (4) Coquias as sole heirs have a direct cause of action against
the Company (5) as 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 (6) both parties from the inception of their dispute proceeded in entire disregard of the
provisions of their contract relating arbitration thus their conduct was as effective a rejection of the
right to arbitrate
SC affirming RTC: respondents to pay P4,000 + costs

Constantino v Espiritu (Stipulations pour autrui: yes)

petitioner's complaint alleged that he had by a fictitious deed of absolute sale conveyed to respondent
for a consideration of P8,000.00 the two-storey house and 4 subdivision lots covered by a
transfer certificate in the name of Pastor B. Constantino with the understanding that respondent would
hold the properties in trust for his illegitimate son Pastor Constantino, Jr. still unborn at the time of the
conveyance; thereafter respondent mortgaged said properties twice to secure payment of two loans
and that thereafter she offered them for sale; the complaint prayed for the issuance of a writ of
preliminary injunction restraining respondent and her agents or representatives from further alienating
or disposing of the properties and for judgment ordering her to execute a deed of absolute sale of said
properties in favor of Pastor B. Constantino Jr; petitioner argued that the Statute of Frauds does not
apply to trustee and cestui que trust as in the case of appellee and her illegitimate child, and that for
this reason appellant would not be barred from proving by parol evidence an implied trust; the trial
court dismissed the complaint and petitioner filed a motion of the admission of an amended complaint
with the inclusion of the minor as co-plaintiff and praying for the appointment of petitioner as his
guardian ad litem; the complaint alleged that the attempts to dispose of the property not only violated
the agreement but was prejudicial to the cestui que trust respondent argued that the amendment was
not an inclusion but a substitution which is not allowed in the jurisdiction; the complaint alleges that
the sale was subject to the agreement that the vendee would hold them in trust for their at that time
already conceived but unborn illegitimate child
proper party (1) the contract between petitioner and respondent was a contract pour autrui although
couched in the form of a deed of absolute sale thus petitioners action was in effect one for specific
action (2) the stipulation pour autrui amplifies the settled rule that the third person for whose benefit
the contract was entered into may also demand its fulfillment provided he had communicated his
acceptance thereof to the obligor before the stipulation in his favor is revoked (3) the contention that
the contract in question is not enforceable by action by reason of the provisions of the Statute of
Frauds does not appear to be indubitable (4) clear upon the facts alleged that the contract between
the parties had already been partially performed by the execution of the deed of sale (5) the action
brought being only for the enforcement of another phase thereof namely the execution by appellee of a
deed of conveyance in favor of the beneficiary thereunder
case not dismissed and remanded to the lower court for further proceedings
Daywalt v La Corporacion de los Padres Agustinos Recoletos (Interference by 3rd persons)
Teodorica Endencia executed a contract whereby she obligated herself to convey to petitioner a tract
of land; it was agreed that a deed should be executed as soon as the title to the land should be
perfected by proceedings in the Court of Land Registration and a Torrens certificate should be
procured therefor in the name of Teodorica Endencia; a decree recognizing the right of Teodorica as
owner was entered but the Torrens certificate was not issued until later; the parties, however, met
immediately upon the entering of this decree and made a new contract in the form of a deed of
conveyance with a view to carrying their original agreement into effect; the stipulated price was fixed
at P4,000, and the area of the land enclosed in the boundaries defined in the contract was stated to be
452 hectares and a fraction; the parties entered into still another agreement which superseded the old
by which Teodorica Endencia agreed upon receiving the Torrens title to the land in question to cause
the delivery of the same to the plaintiff upon payment of the balance; the Torrens certificate was not
issued until the period of performance contemplated in the contract had expired; it was found by
official survey that the area of the tract inclosed in the boundaries stated in the contract was about
1,248 hectares instead of 452 thus Teodorica became reluctant to transfer the whole tract to the
purchaser asserting that she never intended to sell so large an amount of land and that she had been
misinformed as to its area; Daywalt succeeded in the litigation and obtained a decree for
specific performance ordering Teodorica to convey the entire tract of land as the contract was
declared to be in full force and effect
defendant is a religious corporation was the owner of an estate immediately adjacent upon which
they maintained large herds of cattle; their representative charged with management of the farm was
well acquainted with Teodorica and exerted over her an influence and ascendancy; the representative
was fully aware of the contract and when the Torrens certificate was finally issued she delivered it to
defendant for safekeeping until delivery thereof was made compulsory; defendant sold its estate and it
became necessary to remove the cattle; as Teodorica still retained possession of her property an
agreement was entered into whereby large numbers of cattle were pastured upon said land; plaintiff
seeks to recover damges for the use and occupation of the land
no special damages only ordinary (1) ignored the fact that defendant corporation paid Teodorica
for the use and occupation as defendant had notice of the contract and cannot be permitted to escape
liability by proving payment of rent (2) damages assessed are sufficient as the wrongful use of the land
by the defendant was not continuous throughout the year but was confined mostly to the season when
the forage obtainable on the land of the defendant corporation was not sufficient to maintain its
cattle and it is not clear that the whole of the land was used for pasturage at any time (3) defendant did
not make itself a co-participant thus plaintiff cannot recover the sum of P500,000 as damages on the
ground that said corporation for its own selfish purposes unlawfully induced Teodorica Endencia to
refrain from the performance of her contract for the sale of the land (4) to sustain the liability for
damages it is not necessary to resort to any subtle exegesis relative to the liability of a stranger to a
contract for unlawful interference as it is enough that defendant used the property with notice (5)
there must be a certain mutuality in the obligation and if defendant as a stranger cannot sue to enforce
is then it cannot be held liable upon it (6) stranger cannot become more extensively liable
in damages for the nonperformance of the contract than the party in whose behalf he intermeddles (7)
defendant corporation in advising and prompting Teodorica not to comply with the contract of sale
were not actuated by improper and malicious motives as they believed in good faith that the
contract could not be enforced and that she would be wronged if it should be carried into effect (8)
nothing was known to defendant about the San Francisco capitalist who would be willing to back a
project (9) to recover special damages plaintiff must show that the particular condition which made the
damage a possible and likely consequence of the breach was known to the defendant at the time the
contract was made (10) to bring damages which would ordinarily be treated as remote within the
category of recoverable special damages it is necessary that the condition should be made the subject
of contract in such sense as to become an express or implied term of the engagement (11) special
damages cannot be recovered as they were not within contemplation of the parties when the contract
was made and they are too remote to be the subject or recovery (12) as plaintiff cannot recover from
Teodorica they also cannot recover from defendant by advising they could in no event be held more
extensively liable than the principal in the contract
SC affirming RTC: defendant liable to pay damages P2,497
So Ping Bun v CA, Tek Hua and Manuel Tiong (Interference by 3rd persons)
Tek Hua Trading Co through its managing partner So Pek Giok entered into 4 lease agreements; Tek
Hua used the areas to store its textiles and the contracts each had a one-year term provided that
should the lessee continue to occupy the premises after the term the lease shall be on a month-to-
month basis; upon expiry the parties did not renew the contracts but Tek Hua continued to occupy the
premises; Tek Hua Trading Co. was dissolved and the original members including Manuel C. Tiong
formed Tek Hua Enterprising Corp; So Pek Giok died hence his grandson petitioner So Ping Bun
occupied the warehouse for his own textile business; lessor informing Tek Hua of a rent increase
of 20% increase; the lessor then implemented a 30% rent increase; lessor enclosed in letters new
lease contracts for signing DCCSI warning that failure to accomplish the contracts shall be deemed as
lack of interest and agreement to the termination of the lease; private respondents did not answer
yet the lease contracts were not rescinded; respodent Tiong sent a letter to petitioner stating that he
allowed the latter to temporarily use the warehouse due to his relations with the latter’s grandfather but
was now advising the latter to vacate unless he had good reasons of a right to stay; petitioner refused
to vacate and requested formal contract of lease from the lessor claiming that he had been religiously
paying rent since his grandfather’s death thus the lessor acceded; respondents pressed for the
nullification of the lease contracts and claimed damages
A duty which the law of torts is concerned with is respect for the property of others, and a cause of
action ex delicto may be predicated upon an unlawful interference by one person of the enjoyment by
the other of his private property||| (So Ping Bun v. Court of Appeals, G.R. No. 120554, [September 21,
1999], 373 PHIL 532-544)
SC modifying CA & RTC: annulling the contracts of lease and ordering petitioner to pay respondents
as well as costs, without prejudice to the rights of respondents and lessor to negotiate for the renewal
of their lease contracts

Rosenstock v Burke (Contract: no || not a definite offer)

defendant owned a motor yacht which he acquired for the purpose of selling it here; plaintiff began
negotiations for the purchase of the yacht which was mortgaged at the time to secure the payment of
a debt to a bank which Mr. Avery was the manager of; plaintiff planned to organize a yacht club and
sell the yacht for a profit; the defendant obtained from plaintiff an option on writing; plaintiff proposed
to make a voyage on board the yacht to advertise the vessel but the yacht needed repairs to make it
seaworthy; as the defendant had no funds the plaintiff paid almost the entire amount; it was stipulated
that the plaintiff was not to pay anything for the use of the yacht; plaintiff never accepted the offer of
the defendant or the purchase of the yacht; as a result of the voyage plaintiff believed that the engine
of the yacht needed replacing; plaintiff negotiated with Mr. Avery another loan for the purchase of a
new engine; plaintiff then informed the defendant that he was not disposed to purchase the vessel for
more than P70,000; the defendant answered that he had reached an agreement with Mr. Avery about
the sale of the yacht for P80,000; as a result of an interview held on between the parties plaintiff in the
presence of the defendant wrote a letter on April 3rd addressed to the latter which includes the
statement “i am in position and am willing to entertain the purchase”; on April 5th plaintiff delivered the
boat claiming it was impossible for him to take charge of the same; defendant answered that had
accepted the offer of the plaintiff for the purchase of the yacht and demanded performance thereof;
plaintiff filed a suit for recovery of the value of the repairs made on the yacht which he paid for;
TC: defendant to pay the sum of the repairs; plaintiff sentenced to comply in all its parts with the
contract for the purchase of the yacht according to the terms of his letter
contract not a definite offer but a mere invitation (1) according to the defendant the plaintiff was a
prosperous and progressive merchant thus it must be presumed that a man in his transactions in good
faith uses the best means of expressing his mind that his intelligence and culture permit so as to
convey and exteriorize his will faithfully and unequivocally (2) the word “entertain” applied to an act
does not mean the resolution to perform said act but simply a position to deliberate for deciding to
perform or not perform or a mere invitation to a proposal being made t him which might be accepted
by him or not (3) the resolution of the plaintiff to acquire the yacht depended upon him being able to
replace the engine which depended upon the plaintiff being successful in obtaining ate loan (4) there is
in the record positive proof that in his writing the letter the plaintiff had no intention to make a definite
offer as when the defendant suggested the elimination of the word entertain and the substation of a
definite offer plaintiff said he was not in a position to do so and the word entertain was preserved (5)
acceptance of the defendant being placed at the bottom of this letter has no other main than that of
accepting to proposition to make an offer
repairs to be paid by plaintiff in exchange for the use (1) plaintiff was the one who directly and
personally ordered the repairs (2) plaintiff was not obliged to pay anything for the use of the yacht (3)
nothing was agreed upon about the kind of repairs to be made and there was no limit to said repairs
thus left to plaintiff’s discretion
plaintiff to pay the repairs but under no obligation to purchase the yacht upon the terms of his letter
Malbarosa v CA (Contract: no || failure to communicate acceptance)
petitioner was the president and general manager of Philtectic and an officer of other corporations
belonging to the SEADC group; respondent assigned to petitioner one of its vehicles for his use and
was also issued membership certificates; petitioner intimated to the Vice-Chairman of the BOD of
respondent his desire to retire tendering his resignation and requesting for the payment of his incentive
compensation for 1989; petitioner met with the president of respondent insurance company who
ventured that petitioner wold be entitled to an incentive compensation package of P395,000;
respondent signed a letter-offer on March 14, 1990 addressed to petitioner accepting the latter’s
resignation and starting that he was entitled to an incentive compensation of P251,057.67; petitioner
reused to sign the letter-offer; after two weeks without the return of the letter-offer respondents
withdraw the offer and approved a resolution on April 3, 1990 authorizing the Philtectic Corporation or
the Vice-Chairman to demand from petitioner the return of the car and to take such action for the
recovery of the motor vehicle; on April 4, 1990 Philtectic wrote respondent withdrawing the letter-offer
and demanding the return of the car and the membership certificates within 24 hours from receipt;
petitioner received the original copy of the letter on the same day; petitioner wrote Philtectic informing
the latter that he cannot comply with the demand as he already accepted the offer when he affixed on
March 28, 1990 his signature on the original copy of the letter-offer and petitioner enclosed a xerox
copy; respondent filed a complaint for recovery of the personal property with replevin with damages
and AF
CA affirming TC (1) issued an order for the issuance of a writ of replevin (2) there existed no perfected
contract for failure of petitioner to effectively notify respondent of his acceptance of said letter-offer
date March 14, 1990 before the respondent withdrew the same on April 4, 1990
no contract (1) respondent required the petitioner to accept the offer by affixing his signature on the
space provided (2) petitioner did not accept or reject the same upon delivery for the reason that he
needed time (3) although he claims to have accepted the same on March 28, 1990 he filed to transmit
the said copy to the respondent as he only appended the copy on April 7, 1990 (4) the offer was
already revoked on April 4, 1990 via a letter delivered to petitioner on the same day (5) there was no
time frame fixed by the respondent for the acceptance thus the acceptance must be made
immediately (6) the petitioner did not accept the offer thus the respondent had the option to withdraw
or revoke the offer which the respondent did (7) petitioner had more than 2 weeks which is more than
sufficient (8) until and unless the respondent received a copy of the letter-offer it cannot be argued that
a contract had already been perfected between the petitioner and respondent
authority (1) implicit in the authority given to Philtectic to demand for and recover the subject car and
to institute the appropriate action against him to recover possession of the car is the authority to
withdraw the letter-offer (2) the Vice-Chairman stated tat the letter of Philtectic was upon his
instruction and conformably with the aforesaid resolution of the BOD
SC (1) plaintiff to deliver the car or pay its value if delivery cannot be made (2) plaintiff to pay for AF
and costs of litigation (3) defendant to pay rentals up to the date of actual delivery
Sanchez v Rigos (Contract: no || option only)
parties executed an instrument entitled Option to Purchase whereby defendant “agreed, promised,
and committed to sell” to petitioner for the sum of P1,510 a parcel of land within 2 years from the
execution of the contract with the understanding that said option shall be deemed terminated and
elapsed if petitioner fails to exercise his right; petitioner made several tenders of payment which were
rejected by respondent; petitioner deposited the amount with the CFI and commenced an action for
specific performance and damages; defendant put up as a special defense that the contract between
the parties is a unilateral promise to sell and the same being unsupported by any valuable
consideration is null and void by force the New Civil Code; plaintiff alleges that the option did not
impose upon plaintiff the obligation to purchase the property as it merely granted an option
TC: defendant to accept the sum judicially consigned and execute the requisite deed of conveyance
SC (1) in order that a unilateral promise may be binding upon the promise Article 1479 requires the
concurrence of a condition that the promise be supported by a consideration distinct from the price as
a unilateral promise, under said article, is only binding is supported by such consideration even if
accepted (2) unilateral option since after accepting the promise and before exercising his option the
holder of the option is not bound to buy (3) 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 (4) 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
sanchez won
Asiain v Jalandoni (Mistake or error: yes || mutual)
plaintiff is the owner of a hacienda; defendant is the owner of an adjoining hacienda; both parties
happened to meet and petitioner told defendant that he was willing to sell a portion of his hacienda
indicating with a wave of his hand the tract of land in question and affirming that it contained between
25-30 hectares and that the crop of sugar cane planted would produce not less than 2,000 pixels of
sugar; defendant remained doubtful thus a letter by petitioner was written assuring him that the lot
contained more than 20 hectares and that if the sugar milled does not amount to 2,000 piculs then he
would pay the deficit but if it exceeds that he keeps the excess; a memorandum-agreement was
prepared and signed; once in possession of the land defendant had the sugar cane ground which gave
an output of 800 pickups and 23 cates; he secured the certificate of title and the parcel contained a
little over 18 hectares; of the purchase price there was an unpaid balance of P25,000; plaintiff filed a
complaint for the recovery of the sum or to obtain the certificate of title and the rent
inoperative contract due to mutual error (1) under art. 1471 the vendor shall be bound to deliver all that
is within the boundaries stated although it may exceed the area or number expressed in the contract
and in case he cannot deliver it the purchaser shall have the right to reduce the price proportionately
to what is lacking or rescind the contract at his option (2) the principle is that if the land shall be sold
within the boundaries with an expression of the area and the area is grossly deficient the vendee has
an option either to have the price reduced proportionately or to ask fro the rescission of her contract
(3) rule is that equity will rescind a contract for the sale of land for mutual mistakes as to the quantity of
land which the boundaries given in the contract contained where the deficiency is material (4) “more or
less” used in the contract in connection with the statement of there quantity will not prevent the
granting of such relief as it covers only a reasonable excess or deficiency, they only relieve from
exactness not gross deficiency (5) the contract was not a contract of hazard but a sale in gross in
which there was a mutual mistake as to the quantity of land sold and as to the amount of the standing
crop (6) without such mistake the agreement would not have bee named and thus the agreement is
inoperative and void (7) specific performance cannot be allowed at the instance of the debtor
(8) remedy is to put the parties back in exactly their respective positions before they became involved
in the negotiations and before accomplishment of the agreement
SC affirming RTC (1) declared null the document of purchase and its related memo (2) absolved the
defendant from the payment of the balance of P25,000 (3) plaintiff was ordered to return the
amount already paid (4) defendant was ordered to turn over the tract of land and the certificate of title
Sevilla v Sevilla (Fraud: no || cannot be inferred)
Filomena Sevilla dies intestate leaving 6 children; 1 of her 4 parcels of land was paraphernal which she
co-owned with her siblings; the other 3 were conjugal properties between her and her late husband;
during the lifetime of her sisters they lived in her house with her son Leopoldo who attended to their
needs; 1 sister Felisa died after executing a last will and testament devising her 1/2 share in the shared
parcel of land to Leopoldo; she also executed another document denominated as “Donation Inter
Vivos” ceding to Leopoldo her 1/2 share which was accepted by Leopoldo in the same document; she
then executed a Deed of Extra-judicial Partition on her behalf and on behalf of the hairs of Filomena
identifying and adjudicating the 1/3 share of the other sibling to herself and the heirs of Filomena;
plaintiffs filed a complaint for the annulment of the Deed of Donation and the Deed
of Extrajudicial Partition, accounting, damages with prayer for receivership and for partition of the
properties of the late Filomena alleging that Felisa who was 81 then was seriously island of unsound
mind at the time of the execution thereof and that the Deed of Extrajudicial Partition is void because
it was executed without their knowledge and consent
valid deed of donation (1) no question that at the time Felisa executed the deed of donation she
was already the owner of 1/2 undivided portion of the parcel of land hence it is considered present
property which she can validly dispose of (2) neither fraud nor undue influence employed by
Leopoldo can be inferred from the circumstance alleged by petitioners (3) one who alleges defect
or lack of avalid consent to a contract by reason of fraud or undue influence must establish by full,
clear and convincing evidence such specific acts that vitiated a party’s consent otherwise the latter’s
presumed consent to the contract prevails (4) fact that the donation preceded the partition does not
constitute fraud as it is not necessary that partition should first be had because what was donated was
the 1/2 undivided share of Felisa (5) notary public testified that Felisa confirmed her intention to donate
her share and that she was of sound mind and could talk sensibly although she was old
void deed of extrajudicial partition (1) at the time she divided the share of her deceased sister between
her and the heirs of Filomena she was no longer the owner of the 1/2 undivided portion
having previously donated the same to Leopoldo through the deed of donation and the latter accepted
the same in the same document (2) a donation inter vivos is immediately operative and final (3) she did
not possess the capacity to give consent or to execute the deed of partition as she was neither the
owner nor the authorized representative of Leopoldo to whom she previously transmitted ownership of
her undivided share (4) since there is no consent give not the execution of the deed there is therefore
no contract to speak of thus it is void and not susceptible of ratification
SC affirming CA & RTC (1) upheld the validity of the Deed of Donation (2) declared the Deed
of Extrajudicial Partition unenforceable and void (3) the subject lot shall be divided equally into two
between Leopoldo on one hand and collectively the heirs of Filomena one the other hand including
Leopoldo (4) the other 4 lots are to be divided equally (5) Rosa who is a daughter of Filomena is to
be included as one of the heirs entitled to share in the properties
Damasug v Modelo (Mistake or error in consent: yes)
defendant persuaded plaintiff to sign a document by falsely and maliciously making her believe that it
contained an engagement to pay defendant a sum of money as expenses occasioned by reason of a
lawsuit in which plaintiff was one of the parties and was aided and protected by defendant; plaintiff
does not know how to write thus she signed the document by affixing her mark thereto believing
in good faith that defendant told her the truth; 3 months after defendant tool possession of a carabao
and 2 parcels of land belonging to plaintiff notifying the latter that she had conveyed to bum by
absolute sale the same; defendant filed a complaint for nullity of alleged contract of purchase and sale
of carabao and 2 parcels of land
invalid due to error in consent (1) plaintiff admitted the sum of P101 and it is not unreasonable to
suppose that said sum as the principal expense she incurred as AF (2) amount of P333.49 cannot be
credited as the proceedings in the CFI were dismissed before the complaint was answered and the
trial was held (3) conclusion that the sole document plaintiff signed related the sum of P101 which
she acknowledged she was owing to defendant and not the sale of all her properties (4) evident that
the document by which defendant made himself the owner of the property in question is not the
instrument of debt which petitioner signed and if it is the same it was not duly and faithfully explained
to petitioner in the act of its execution (5) in either case the consent said to have been given in said
document is null and void as it was given by mistake (6) the error invalidates the contract as it goes to
the very substance of the thing which was the subject matter of the contract for had the maker truly
understood the contents of said document she would neither have accepted nor authenticated it by
her mark
SC affirming RTC (1) defendant must return and deliver the parcels of land with their fruits or the value
thereof (2) pay and deliver to plaintiff the value of said animal with interest as an indemnity for the
detriment caused to its owner
Hill v Veloso (Fraud: yes but by 3rd person || not annulled)
petitioner executed and signed a document promising to pay Michael and Co. P6,000+ for value of the
goods they have received in La Cooperative Filipino; the promissory note was endorsed to
petitioner; petitioner brought a suit revere the unpaid balance of P4,000 + with interest;
defendants alleged as a special defense that her son-in-law and co-executor stated to them that Atty.
Levering in his capacity as guardian of the minor children of Potenciano Chiong Veloso had suggested
the necessity of t heexecution of a document setting forth that the defendants would pay to him
the sum of P8,000 which defendants borrowed from Damasa Ricablanca, the former guardian of the
minors; her son-in-law had her sign a blank paper stating that it would be filled by recording on the
sheet the obligation contracted by them on behalf of said wards; only after her son-in-law
died did they learn that at no time did he ever deliver to said attorney any document alleging that the
paper he had the sign was for a totally different obligation than what they had been made to believe
(1) they therefore allege that there had had no transaction with Michael & Co. nor with the plaintiff as
they had not received any goods (2) further alleging the deceased utilized the paper for the execution
of said promisor note which they did not intend to execute (3) it was false that Michael & Co delivered
goods to them
RTC: absolved defendants finding the signatures in the promissory note were obtained by means of
signatures were written and the obligation contracted without error or deceit (1) the recognition during
testimony of the signature by defendant rendered the document effective (2) defendant presented
absolutely no proof of the mistake by reason of which she signed nor fraud or deceit (3) even if it
was proven that Franco acted in the manner alleged by defendant the deceit and error alleged could
not annul the consent of the parties to the promissory note nor exempt the obligation incurred as
it was a not that which the law defines as a cause (4) Franco is not one of the contracting parties who
may have deceitfully induced the other contracting party, Michael & Co, to execute the contract (5)
Franco, like any other person who might have been able to induce defendant under the influence of
deceit would be but a 3rd person (6) deceit by a 3rd person does not generally annul consent as it is
alleged that the 2 contracting parties acted in good faith thus there is no reason for making one of the
parties suffer for the consequences of the act of a 3rd person on whom the other contracting
party may have reposed an imprudent confidence (7) neither by reason of the endorsement nor
by reason of its object is the promissory note null or annul able (8) fully proven that the goods were
received in the La Cooperative Filipino which was likewise proven to belong to defendant and that the
goods came from Michael and Co (9) nothing in the record to show why Franco had to sign such an
instrument attesting to a debt to the minors when the creditor required only the defendant to sign
SC (1) unpaid balance to be paid with interest (2) interest on the paid portion of the principal cannot be
recovered due to rules and also no reservation
Woodhouse v Halili (Fraud: yes but merely incidental || consent not vitiated)
plaintiff entered into a written agreement with the defendant wherein they shall organize a partnership
for the bottling and distribution of Mission soft drinks with plaintiff to act as the industrial partner
or manager and defendant as capitalist; plaintiff was to secure the franchise for and on behalf of
the partnership and wast receive 30% of the net profits; plaintiff had informed the Mission Dry Corp in
the US that he had interested a prominent financier and requested the right to bottle and distribute be
granted to him for a limited time in order to close the deal under the condition that it will be transferred
to the corporation; plaintiff was given a 30 days option on exclusive bottling and distribution rights;
a franchise agreement was entered into between Mission Dry and the parties granting defendant
the exclusive right, license, and authority to produce, bottle, distribute, sell Mission beverages in the
PH; plaintiff was given advances and the use of a car which was later withdrawn; when the bottling
plant was already in operation plaintiff demanded that the partnership papers be executed and
defendant refused to give further allowances; plaintiff filed a compliant asking for the execution of the
contract, an accounting of profits, and a share thereof of 30% plus damages; defendant alleges (1)
consent to the agreement was secured by the representation of plaintiff that he was the owner or was
about to become the absolute owner of an exclusive bottling franchise which was false as it was given
to defendant himself (2) defendant did not fail to carry out his undertakings as it was plaintiff who failed
(3) plaintiff agreed to contributethe exclusive franchise to the partnership but failed to do so
dolo incidente, did not vitiate consent (1) drafts should be considered as these statements prove the
representations or inducement s with which plaintiff secured the other party's consent (2) were parties
prohibited from proving said representations on the ground that the agreement had already been
entered into it would be impossible to prove fraud (3) alleged representation took place before the
conferences were had thus before representation (4) defendant would not have done to US unless he
belivedthat plaintiff had the exclusive privilege thus he may not be allowed to deny that defendant was
induced by that belief (5) while he had already lost his 30d option when the contract was entered into
the principal obligation that he undertook was to secure said franchise for the partnership thus if he
was guilty of misrepresentation it was not the causal consideration or the principal inducement that
led defendant to enter into the partnership agreement (6) the transfer of the supposed ownership was
actually the consideration in exchange for the 30% share in the net profits (7) dolo incidente because it
was used to get the other party's consent to a big share in the profits which is an incidental matter to
the agreement (8) plaintiffs entitlement must be set off (9) upon knowledge of the falsity defendant's
spontaneous reactions to reduce the plaintiffs share to 15% which appears to have been readily given
and consent to by plaintiff (10) considered a fair estimate
no compulsion (1) defendant may not be compelled to execute or carry out the agreement against his
will as the defendant has an obligation to do not to give (2) law recognizes the individual’s freedom to
do enact which he has promised as he pleases as it is a personal act of which courts may not compel
compliance as it is considered an act of violence to do so
SC modifying CFI (1) defendant to render an accounting and pay plaintiff 15% thereof (2) 15% to be
continually paid as defendant uses the franchise
Geraldez v CA & Kenstar Travel Corp (Fraud: yes || fraudulent misrepresentations amounting to bad faith)
petitioner came to know of respondent from numerous advertisements of general circulation regarding
tours in Europe; she availed of a tour classified as Volare 3 paying a total amount of P190,000 charged
by respondent; petitioner filed an action for damages by reason of contractual breach (1) there was
no European tour manager (2) the hotels were not 1st class (3) the UGC Leather Factory which was
s[ecaifically added as a highlight of the tour was not visited (4) the Filipino lady tour guide was a 1st
time; petitioner likewise moved fort he issuance of a writ of preliminary attachment on the ground that
respondent committed fraud in contracting an obligation
fraudulent misrepresentations amounting to bad faith (1) indifference to the convenience, satisfaction
and peace of mind of its clients despite the express commitment to provide such facilities under the
tour program (2) selection of inexperienced tour guide who admittedly had not even theretofore been
to Europe was a deliberate and conscious choice in order to afford her an OJT training and equip her
with the proper opportunities so as to later equip her with the proper opportunities to later qualify her
as an experienced tour guide and eventually be an asset of respondent corporation (3) virtual
project experiment with petitioner and the members of the tour as the unwitting participants (4) tour
guide is supposed to attend to the routinely needs of the tourists not only when the latter ask for he
assistance but at the moment such need becomes apparent but the petitioner and her sister were
left to fend for themselves when her sister became ill as the tour guide left with the other participants
after calling for an ambulance (5) neglect and ineptness of the tour guide in attentively following the
itinerary must necessarily be traced to the lack of due diligence on the part of respondent in the
selection of its employees (6) cursory reading of the advertisement readily reveal the
express representation that the European tour manager is a natural person thus they were obliged not
only to provide a European tour manager but also local European tour guides (7) the delimitation of
responsibility printed on the brochure is a contract of adhesion which must be strictly
construed against the respondent company who drafted the same (8) respondents cannot
be exculpated even if the delimitation is enforceable as responsibility arisen from fraudulent acts
cannot be stipulated abasing by reason of public policy (8) fact that respondents supposedly paid a
lower amount and that respondents barely profited does not justify a substandard form of service in
return as it was respondent in the first place which fixed the charges for the package tour and
determined the services which could be availed of (9) respondent can be faulted with fraud in the
inducement which was employed in securing the consent of petitioner (10) dolo causante nullifies the
contract and the indemnification of damages, and dolo incidente also obliges the person employing it
to pay dmaes
defendant to pay P100,000 moral damages, P50,000 exemplary damages, P20,000 AF + costs
Tuason v Marquez (Fraud: no || estopped, caveat emptor)
defendant was the owner of an electric light plant for which a franchise was granted for 35 years; he
gave plaintiff an option for the purchase of the plant who took advantege thereof; only the 1st
installment had been paid; petitioner was once in possession of the electric light plant but the property
was sold under execution by reason of a judgment; the purchase at said sale was defendant's brother;
the rights of the company passed to defendant as sheriff's sale but the company seems never have
functioned property at the time or any other time thus he intent to give up the franchise prior to
the accomplishment of the contract; the Public Utility Commissioner declared the franchise cancelled
and acquired by defendant; petitioner was permitted to operate the company pursuant
ta special license which was to continue until he obtained a new franchise with certain conditions
which amount to a renovation of the entire plant; petitioner then decided to bring a suit
against defendant for the rescission of the contract alleging misrepresentations and fraud perpetrated
by the defendant in the selling of the plant with a franchise when defendant had already given up the
rights to said franchise
no fraud and estopped (1) the franchise was not the determining cause of the purchase wa
the franchise was then in force and either part yoculd have easily ascertained it status by applyingat
the office of the Public Utility Commissioner (2) caveat emptor: the innocent non-disclosure of a fact
does not affect the formation of the contract nor operate to discharge the parties from their agreement
(3) plaintiff estopped as he operated the plant for about 16 months without question and made the
1st payment for the contract without protest bestirring himself to recover damages only after
the venture had proven disastrous and only after the property had passed into the hands of a 3rd party
SC affirming CFI: defendant absolved from the complaint and permitted to recover from plaintiff the
unpaid balance
Rural Bank v CA; Rayandayan & Arceño v CA & Rural Bank (Failure to disclose: not the fraud contemplated ||
a parcel of land was registered in the name of Manuel Behis married to Cristina; such parcel of land
was originally paper of a bigger tract of land owned by his father; upon the latter’s death his children in
an extrajudicial settlement with Simultaneous Sale of Inheritance agreed to sell the land to Manuel;
Manuel mortgaged said land in favor of petitioner bank; Manuel was delinquent in the
payment; Manuel then sold the land to the plaintiffs in a Deed of Absolute Sale with Assumption of
Mortgage for P250,000; plaintiffs and Manuel simultaneously executed another Agreement whereby
plaintiffs are indebted to Manuel for P2,400,000; the real consideration of the sale of the land of
Manuel to the plaintiffs is contained in this agreement; plaintiffs did not annotate at the back of the title
the aforesaid 2 contracts nor did they immediately go to the bank and present said 2 contracts thus
the title of the land remained in the name of Manuel; plaintiffs were unable to complete
their full payment to Manuel of the sale of the land; the Bank initiated foreclosure proceedings but the
same was discontinued as nothing materialized
plaintiffs finally presented the Deed of Absolute Sale with Assumption of Mortgage to the Bank
when negotiating with its principal stockholder but did not show the latter the Agreement with Manuel
providing for the real consideration; a Memorandum of Agreement was entered into between plaintiffs
and the Bank whereby the assignees offered to redeem the real property and the Bank agreed to
release the mortgage upon payment; after the last payment a letter was written with instructions that
payment be duly credited and the transfer of the title will be communicated to them
Cristina wrote a letter to the Bank claiming the Real Estate mortgage was without her signature and
stressed that she did not authorize anybody to redeem the property on her behalf; plaintiffs demanded
that the Bank comply with its obligation under the Memorandum; the Bank replied that it cannot
comply enclosing the letters of Cristina; Cristina wrote another letter claiming she was not a party to
the Deed of Absolute Sale with Assumption of Mortgage and requested the Bank not to release the
title to the plaintiffs
Hanselma Inc heard about the land and had preliminary talks with the Bank; an Assignment
of Mortgage (made originally by Manuel) was entered into for a consideration amounting to the
total indebtedness of Manuel with the Bank at the time; Hanselma was informed by counsel that it was
the cheapest and fastest way to acquire the property; the Bank explained that it entered into
the Agreement as they considered the Memorandum cancelled as (1) plaintiffs failed to settle the
objections of Cristina (2) the terms were not fully complied with (3) their consent was obtained through
fraud as the Bank was not shown the Agreement containing the real consideration of P2,400,000;
Bank sent notice of the Assignment of Mortgage to Manuel (deadz) and Crisitina; as the account of
Manuel has been delinquent and his widow and siblings could not pay as they have already assigned
the rights to redeem Halsema instituted foreclosure prooceedings and the latter was the only bidder
thus was issued the Sheriff’s certificate
since the Bank could not comply with the Memorandum of Agreement, plaintiffs instituted a case
for specific performance, declaration of nullity and/or annulment of assignment of mortgage and
RTC (1) Deed of Sale with Assumption of Mortgage and the Agreement valid until annulled (2) Bank to
pay plaintiffs for their bad faith in violating the Memorandum of Agreement (3) plaintiffs to pay the Bank
for plaintiff’s bad faith in deceiving the Bankto enter into the Memorandum (4) ordering the setting off
in compensation the damages (5) declaring the Memorandum annulled due to fraud
non-disclosure not fraud contemplated (1) fraud must be the determining cause of the contract
or use have caused the consent to be given (2) the non-disclosure to the bank of the purchase price
cannot be the fraud contemplated (3) allegation by Bank that it was kept in the dark as to the financial
capacity of plaintiffs thus the omission or concealment could not have induced the bank into giving
its consent to the agreement or that the bank would not have otherwise given its consent had it
known of the real purchase price (4) the bank entered into said agreement in order to effect payment in
the indebtedness of Manuel (5) plaintiffs had no duty to disclose and therefore did not act in bad fait in
failing to disclose the real consideration of the sale between them and Manuel (6) bank had
other means and opportunity of verifying there financial capacity of plaintiffs and cannot avoid the
contract (7) the bank security remained unimpaired regardless the consideration of the sale (8) cannot
even allege that the agreement was operating to its disadvantage as there were no damages suffered
by it (9) allegation of fraud and deceit have not been established sufficiently and competently to rebut
the presumption of regularity and due execution of the agreement
SC affirming CA (1) declaring the Deed of Absolute Sale with Assumption of Mortgage and the
Memorandum of Agreement valid as between the parties (2) ordering and sentencing the Bank to
pay plaintiffs (3) dismissing the counterclaims (4) reversing and setting aside the finding of the TC on
the bad faith of plaintiffs in concealing the real purchase price of the land
Azarraga v Gay (Usual exaggerations || had opportunity to appraise self)
plaintiff sold 2 parcels of land to defendant for a lump sum; defendant failed to pay; plaintiff filed a
case for recovery; defendant allefges that there was misrepresentation as she was made
to believe that the second parcel of land contained the area of 98 acres when it only had 60 this
unducing her to pay the lump sum for both parcels which was represented to cantina an area odd no
less than 200 acres which for a price hse would not have bound herself had she known thus she
should be entitled to a reduction in the price of in proportion to the area lacking; further alleging that
she never refused to pay the justly reduced price but plaintiff refused to accept the just amount of the
no deception (1) defendant had visited the land and made calculations as to the area before
the execution of the contract (2) plaintiff delivered to the defendant the document covering the land
in question (3) the defendant had in her possession a document which is the deed by which te
plaintiff acute the land from the original owner and the area of 70 acres of the second parcel appears
in the document (4) it was defendant who entrusted the drawing od the dodo sale to her attorney
and notary thus presumed that both she and her lawyer had read the contents of the document (5) no
evidence of record that the plaintiff made false representations to the defendant as to the area of the
aid second parcel and even if he did the defendant accepted the same at her own risk and she is the
only one responsible for the consequences (6) the defendant had ample opportunity
to appraise herself of the condition of the land which she purchased and the plaintiff did nothing to
prevent her from making such investigation as she deemed fit (7) misrepresentation s as to the area are
not actionable where a correct description of the property was given in thedeed and recorded chain if
title which the purchaser’s agent undertook to investigate and report upon and the vendor made not
effort to prevent a full investigation (8) one who relies on the statements of the vendor as to its
character and value after visiting and examining it for herself and having the means and opportunity of
verifying such statements cannot avoid the contract on the ground that they were false or exaggerated
(9) Art 1491: as the contract is concerned with a determinate object the price is to be determined in
relation to it thus its lesser or greater area cannot influence the increase or decrease of the price
agreed upon so long as they are sold for a single price constituting a lump sum and not for a specified
amount per unit of measure of number (10) no right to complain either on the part of the seller even if
there be a greater area than that stated in the deed or on the part of the buyer though the area of the
second parcel be really much smaller
SC affirming LC: defendant to pay the balance with interest as she was in default; in favor
of plaintiff as neither party gave any important to the area of the land in consenting to the
contract in question and there was no fraud
Trinidad v IAC (Usual exaggerations || bad bargain not illegal, opportunity and means to appraise self)
petitioner approached defendant and offered to buy a property; defendant was willing to sell
thus petitioner inspected the house and examined a vicinity map which indicated drainage canals near
the property; petitioner paid earnest monet and enterd into possession of he house; she subsequently
heard form neighbors that the 2 peevious buyers vacated the property because
it was subject to flooding; the spoke to defendant about the and he told her everything had been fixed
and the house would never be flooded again; assured, she gave him the complete down payment;
they signed the Contract of Conditional Sale; petitioner asked or an extension to pay for the 3rd
installment but she eventually decided not to continue paying the amortization because the house was
flooded 5ft deep; she wrote the City Engineer’s office and requested an inspection of the premises to
determine the case of the flooding; the finding was that the lot is low and is a narrowed portion of the
creek; petitioner sued the seller for the annulment of the sale and damages alleging fraud as she was
induced into the contract od sale because of his misrepresentations
bad bargain not illegal transaction (1) fraud is never lightly inferred and the fraud alleged has not been
satisfactorily established to call for the annulment of the contract (2) peititoner was who admittedly
approached the respondent who had never advertised the property nor offered it for sale (3) petitioner
had full means to inspect the premises including the drainage canals indicated in the vicinity map thus
had the full opportunity to verifying the statements and cannot avoid the contract in the ground that
the same were false or exaggerated (4) assumed that she made her appraisal of the property not with
an untrained eye but with the experience and even expertise of the licensed real estate broker that she
was and she still decided to buy it notwithstanding the obvious condition of the property (5) the
supposed previous owners were not presented as witnesses and defendeatn denied having made the
alleged assurance (6) petitioner paid the previous 2 amortizations despite flooding and made annexes
and decorations on the house all of a permanent nature (7) lot is within the commerce of man as it
is covered by a Torrens certificate thus binding on all. persons whether to not they were notified or
participated in the registration proceedings (8) petitioner was not strictly speaking in default in the
payment as the fact is she refused and it was she who sued the respondent and who argued that the
seller was not entitled to the additional installements because of his violation of the contract (9) Courts
operate not because one person had been defeated or overcome by another but because he has
been defeated or overcome illegally (10) there must be in addiiton the commission of an actionable
wrong before the courts are authorized to lay hold of the situation and remedy it (11) justice demands
the moderation of the harsh effects of the stipulation as she merely stood upon for what
she considered was right thus no forfeiture of payments thus Conditional Sale shall be maintained
(1) Conditional Sale shall be maintained (2) petitioner to pay the balance with interest until full payment
De Braganza v De Villa Abrille (Misrepresentation: yes but passive or constructive || unenforceable contract but
liable under law)
petitioners received from respondent a load in Japanese war notes and in consideration thereof
promised in writing to pay him P10,000 "in legal currency 2 years after the cessation of the
present hostilities or as soon as the Intl exchagne has been established in the PH”; respondent sued
for failure to pay; petitioners claimed (1) to have received only P40,000 instead of P70,000 (2)
Guillermo and Rodolfo were minors when they signed
unenforceable but liable (1) minority in the consignors does not release her from liability as it is
a personal defense of the minors and will only benefit her in the extent of the shares for
which such minors may be responsible (2) failure to disclose their minority in the same promissory note
they signed does not mean that they will not be permitted thereafter to assert it as they had no
juridical duty to disclose their inability (3) in order to hold them liable the fraud must be aortal and
not constructive thus mere silence when making a contract as to their age does not constitute
fraud which can be made the basis of an action of deceit (4) of the minors were guilty at all which the
court doubts it is of passive or constructive misrepresentation thus being minors they cannot be legally
bound by their signatures on the promissory note (5) Rodolfo’s exact birth date was not specified thus
it cannot be ascertained whether the defense of minority may not be invoked by him (6) however they
may not be completely absolved of monetary responsibility even if their written contract is
unenforceable thus they must make restitution to the extent that they may have profited as there is
testimony that the funds were used for their support during the Japanese occupation
conclusion: their promise to pay the P10,000 cannot be enforced since they were minors incapable of
binding themselves thus their liability is presently declared in pursuance of Art 1304
SC affirming CA & RTC (1) Rosario to pay 1/3 of the P10,000 + 2% interest (2) Rodolfo and Guillermo
to pay jointly P1,667 + 6% interest
Vda. de Rodriguez v Rodriguez (Simulation: no || valid due to ratification or confirmation)
petitioner was the widow of Don Felipe with whom she had one living child, Concepcion; she
contracted a second marriage with Domingo who had 4 children including respondent; prior to her
marriage to Domingo petitioner was the registered owner of 2 fishponds; petitioner appeared to have
executed a deed of sale conveying ownership of the properties to her daughter Concepcion which was
notarized and registered; Domingo died intestate and was survived by petitioner and his children and
grandchildren who then entered into an extrajudicial settlement of his estate consisting of 1/2 of the
properties allegedly belonging to the conjugal partnership including the fishpond; in a power
of attorney executed by the children and grandchildren petitioner was named their attorney-in-fact and
was authorized to manage their shares in the fishponds; the heirs ended their co-ownership by
executing a deed of partition; the children executed another document granting the widow lifetime
usufruct over 1/3 of the fishpond which they received as hereditary share which grant was accepted
by petitioner; the widow then appeared to have leased from the children and grandchildren the
fishpond; the relationship turned sour thus when she failed to deliver then the balance of the
earnings of the fishponds they endorsed the matter to their lawyer who sent a letter of
demand; petitioner filed an action to declare null and void the deeds of transfer of plaintiff’s properties
to the conjugal partnership on the basis of alleged employment by Domingo of force and pressure on
her and that both conveyances of the properties (to daughter and then to the conjugal partnership) are
both without consideration; she alleged that she participated in the extrajudicial settlement on the false
assumption that the properties had become conjugal by reason of the execution of the deed of
transfer thus she delivered to defendants the income of the properties
real and effective conveyance (1) although purpose was to convert the separate property into conjugal
assets the consent of the parties was voluntary (2) having taken part in the questioned transactions the
plaintiff was not the proper party to plead lack of consideration as then the contract would not be
inexistent but only voidable (3) there was ratification or confirmation of the transfer by her execution of
the extrajudicial settlement thus being a voluntary party to the contracts she cannot recover the
properties (4) appellant entered into a series of subsequent transactions with respondents that
confirmed the contracts thus cause of action is clearly barred (5) evidence is not convincing that the
contract were executed through violence or intimidation as the change is predicated solely on the
biased testimony of appellant’s daughter (6) duress being merely a vice of consent must be brought
within 4 years after it has ceased and the present action was instituted 28 years after the intimidation
is claimed to have occurred and 8 years after the death of her husband (7) characteristic of simulation
is the fact that the apparent contract is not rely desired or intended to produce legal effects or alter the
juridical situation of the parties in any way but appellant contends that they were done for the purpose
of converting the property from paraphernal to conjugal evading the prohibition against donations this
appellant and her daughter must have intended the two conveyances to be real and effective (8)
intent to circumvent the law against donations between the spouses does not make them simulated (9)
since in each conveyance the buyer became obligated to pay a definite price in money such
undertakings constituted in themselves actual consideration for the conveyance of the fishponds (10)
that the prices were not paid does not make the sale inexistent for want of cause (11) what would
invalidate the conveyances is the fact that they were resorted to in order to circumvent the law but
since both parties are in pari delicto the present action was correctly repulsed (12) cannot be denied
that the plaintiff had knowledge of the nullity of the contract being a party thereto and her failure to
enforce her right for 28 years is ignorance which is the effect of inexcusable negligence and is no
excuse for laches
judgment rendered for the defendants upholding the validity of the contracts
Suntay v CA & Suntay (Simulated: yes || mere accomodation agreement)
Federico Suntay was the registered owner of a parcel of land; he applied as a miller-contractor of the
Natl Rice and Corn Corporation; his application was disapproved as he had several unpaid loans; to
circumvent this he allowed Rafael to apply for him; Rafael prepared an absolute deed of sale whereby
Federico conveyed to Rafel said parcel of land for P20,000 and said deed was notarized; it was agreed
that at ny time plaintiff needed or desired that the tile be restored the defendant would
execute whatever deed and take whatever steps would be necessary to do so; Federico remained
in possession of the property notwithstanding the fact that Rafael became the titled owner; Rafael
never attempted to take possession thereof at any time while Federico continued to exercise the rights
of absolute ownership; less than 3 months later a counter sale was prepared and signed by Rafael
wherein the same parcel of land was sold by Rafael back to Federico for the same consideration of
P20,000; the document appeared to have been notarized but upon examination it was not the deed of
sale that was notarized; Federico claims that the sale was merely simulated and has been executed
only for purposes of accommodation and alleged that when Rafael delivered the second deed to him it
was neither dated nor notarized; Federico through his new counsel requested that Rafael deliver his
copy of the TCT so that the former may have the counter deed of sale registered in his name but the
request was turned down; Rafael alleged the second deed of sale was counterfeit or at least not a
public document which is sufficient to transfer real rights according to law; defendant never paid or
delivered and plaintiff never demanded or received the P20,000 since the Deed of Absolute Sale was
absolutely simulated intended solely to accommodate and assist defendant;
mere accommodation agreement (1) 2 instruments were executed closely one after the other
involving transferred re-transfer of the same property at exactly the same price (2) the existing close
relationship between the parties whose blood relation was the foundation of their professional and
business relationship and is an unmistakable token of simulation as it has been observed that fraud
is generally accompanied by trust (3) gross inadequacy of the stated contractual consideration
given the value and location of the property (4) not considered dacion en pago because Rafael
never informed defendant that he considered the transfer to be in consideration of his alleged unpaid
AF and illogical if it was a dation as he agreed to the repurchase pf the property 3
months thereafter (5) physical possession, enjoyment and use of the property in question
remained through the years up to the present in the hands of Federico (6) Rafael’s failure to
take possession of the property is a clear badge of fraud since he never assumed the benefits let alone
the burden of ownership and he did not even include the property in his statement of assets
and liabilities (7) Deed of Absolute sale is absolutely simulated and cannot be ratified as it was never
intended to produce the actual transfer of ownership and/or rights attached to ownership (8) the
counter deed of sale is also fictitious and is incapable of producing legal effects (9) as no property was
validly conveyed under the deed the second deed of sale executed is considered ineffective and
heirs of Rafael Suntay ordered to reconvey the property to private respondent and surrender the
duplicate copy of the TCT

Blas v Santos (What may not be the objects of contracts)

action was instituted by plaintiffs to secure a judicial declaration that 1/2 of the properties left by
Maxima Santos had been promised by the deceased to be delivered upon her death and in her will to
the plaintiffs and requesting that the said properties so promised be adjudicated to the plaintiffs;
complainants allege that they are entitled to inherit certain properties which have already been
included in the inventory of the estate of the deceased Simeon Blas and evidently partitioned and
conveyed to his heirs in the proceedings for the administration of his estate; Simon had three children
during his first marriage to Marta Cruz; he contracted a second marriage with Maxima; at the time of
the marriage the properties of Simeon acquired during his first marriage had not been liquidated
thus were not separated from those acquired during the second marriage; Maxima does not appear to
have apportioned properties to her marriage with Simeon; Simeon executed a last will and
testament declaring that 1/2 of the properties after payment of the indebtedness constitutes the share
of Maxima; petitioners were claiming the properties left by their grandmother but the claim was not
pushed through as they reached an agreement whereby 1/2 of the estate will be given by Maxima to
the heirs and legatees or the beneficiaries named in Simeon’s will; defendant alleges (1) properties of
the spouses Blas and Santos had been settled and liquidated in the project of partition of the estate of
Simeon (2) pursuant to the project of partition plaintiffs and some defendants had already received the
respective properties adjudicated to them (3) plaintiffs and the defendants are in estoppel (4) the
testament executed by Maxima Santos is valid and the plaintiffs have no right to recover any portion of
Maxima’s estate now under administration by the court
(1) the testament of Maxima was prepared at the instance of Simeon for the reason that the conjugal
properties of his 1st marriage had not been liquidated and it was prepared at the same time as the will
of Simeon (2) as the properties had not been liquidated the properties of the first marriage were
actually included as conjugal properties acquired during the second thus the testament of Maxima was
ordered executed by Simeon to prevent his heirs from contesting his will and demanding liquidation of
the conjugal properties acquired during the 1st marriage (3) the testament therefore appears to be a
compromise and at the same time a contract with a sufficient cause or consideration (4) Maxima
contracted the obligation and promised to give 1/2 of the conjugal properties to the heirs and legatees
of Simeon (5) the conjugal properties were in existence at the time of the execution as the property
does not refer to any properties that the maker would inherit upon the death of her husband but to
properties she will receive by operation of law on the death of her husband because it is her share of
the conjugal assets (6) the action to enforce the promise did not arise until and after her death when it
was found that she did not comply with her promise (7) as the right of action arose at the time of the
death of Maxima and the plaintiffs presented the action immediately upon learning of her failure there
can be no claim of prescription (8) did not comply with the obligation to devise 1/2 as in her will
Maxima devised to Marta Blas the 80 hectare fishpond which is not even 1/10 of the total area and she
imposed upon Marta an existing obligation of a lease on the fishponds
defendant as administratrix of the estate is ordered to convey and deliver 1/2 of the properties
adjudicated to Maxima as her share in the conjugal properties to the heirs and the legatees of her
husband Simeon
Liguez v CA & Lopez (Absence of cause / unlawful cause: yes but not in pari delicto so valid donation)
plaintiff averred to be the legal owner of a parcel of land pursuant to a deed of donation executed in
her favor by the late owner; the defense alleged that (1) the donation was null and void for having an
illicit cause or consideration which was plaintiff entering into marital relations with Lopez who was a
married man (2) the property had been adjudicated to them as heirs since 1949
SC (1) under Art 1274 liberality of the donor is deemed cause only in those contracts that are of “pure”
beneficence; in remunatory contracts the consideration is the service or benefit for which the
remuneration is given (2) motive may be regarded as cause when it predetermines the purposes of the
contract and the late Lopez was not moved solely by the desire to benefit petitioner but also to secure
her cohabiting with him so that he could gratify his sexual impulses (3) the donation was but one part
of an onerous transaction thus the conveyance was clearly predicate upon an illicit causa (4) motive
may be regarded as cause when it predetermines the purpose of the contract (5) Lopez would not
have conveyed the property in question had he known that appellant would refuse to cohabit with him
so the cohabitation was an implied condition to the donation and being unlawful necessarily tainted
the donation itself (6) not in pari delicto as the late Lopez was a man advanced in years and mature
experience while the appellant was a mere minor and there was no finding that she was fully aware of
the terms of the bargain entered into between Lopez and her parents (7) her acceptance in the deed of
donation did not necessarily imply knowledge of conditions and terms set forth (8) it was appellant
parent’s who were insisted on the donation before allowing her to live with Lopez suggesting seduction
more than immoral bargaining on the part of appellant (9) illegality is not presumed but must be duly
and adequately proved (10) the heirs cannot set up the plea of illegality to recover the disputed land as
Lopez would be barred from setting up that plea and the heirs can have no better rights than Lopez
himself (11) Lopez could not donate the entirety of the property in litigation to the prejudice of his wife
because said property was conjugal in character (12) the donation made by the husband in
contravention of law is not void in its entirety but only insofar as it prejudices the interest of the wife
and the law makes no distinction between gratuitous transfers and conveyances fora consideration
(13) the heirs are barred from invoking the illegality of the donation but their right to a legitimate out of
his estate is not affected as it is granted by the law itself hence the forced heirs are entitled to have the
donation set aside insofar as in officious (14) petitioner should be considered part of the donor’s estate
in computing the legitimes (15) a contract with an illegal cause may produce effects under certain
circumstances where the parties are not of equal guilt
petitioner declared entitled to so much of the donated property as may be found upon proper
liquidation not to prejudice the share of the widow in the conjugal partnership or the legitimes of the
forced heirs
Maximino Carantes v CA & Lauro Carantes (Lesion / inadequacy of cause: no)
Mateo Carantes was the original owner of Lot No. 44; Mateo died survived by his widow and six
children; the contruction of the Loakan Airport was commenced by the Government; a portion of the
lot was needed for the landing field so the govt instituted expropriation proceedings; the lot was
subdivided and the portion expropriated was lot 44-A; special proceedings were filed for the
settlement of the estate and petitioner Maximino was appointed and qualified as judicial administrator
of the estate; petitioner filed a project of partition; as negotiations were underway for the purchase of
the govt for lots 44-b and 44-c the only properties listed were lots 44-d and 44-e; an Assignment of
Right of Inheritance was executed by the other children assigning to petitioner their rights to
inheritance with a stated monetary consideration of P1; petitioner sold lots 44-b and 44-c and divided
the proceeds among the heirs; the TCT for the remaining lots were issued in the name of petitioner
who remains the registered owner of the lots; respondents allege that the Assignment to Right of
Inheritance was only executed as they were made to believe by petitioner that it merely authorized
petitioner to convey the portions of Lot 44 to the govt on their behalf and that they came to know of
the assignment only after they secured a copy of the deed; plaintiff claims their cause of actions is
barred by the statue of limitations
(1) the petitioner’s theory that the respondents action is for reformation of an instrument is a new one
adopted for the first time on appeal (2) consideration was not absent as the sum of P1 appears in the
document as one of the considerations for the assignment of inheritance and the document recites
that the decedent had expressed that the property rightly and exclusively belonged to petitioner
definitely constituting valuable consideration for the contract (3) contract is merely voidable as fraud or
deceit does not render a contract void ab initio (4) prescriptive period is 4 years from the discovery of
the fraud which is reckoned from the registration of the instrument as this serves as notice to the
whole world (5) there was no continuing and subsisting trust s the exercise of petitioner of rights of
dominion is anathema to the concept
complaint dismissed
Joaquin v CA (Lesion or inadequacy of cause)
defendant spouses are the parents of plaintiffs and defendants; they executed certain deeds of sale of
real property in favor of their co-defendant children and the corresponding certificate of title issued in
their names; petitioners filed a case seeking that the deeds alleged to be simulated be declared null
and void ab initio (1) no actual valid consideration (2) assuming there was a consideration the
properties are more than 3x more valuable (3) the deeds of sale do not reflect and express the true
intent of the parties (4) the purported sale was the result of a deliberate conspiracy designed to
unjustly deprive the rest of the compulsory heirs of their legitimate
(1) failed to show any legal right to the properties as they are not principally nor subsidiarily bound
thereby and an action must be prosecuted in the name of the real-party-in-interest (2) no valid cause of
action as there can be no legitimate to speak of prior to the death of their parents (3) the sale of the
lots to the siblings does not affect the value of their parents’ estate as the cash equivalent value of the
sale replaced the lots taken from the estate (4) a contract of sale is a consensual contract which is
valid upon the meeting of minds as to price (5) it is not the act of payment of price that determines the
validity of a contract of sale as the payment of price had nothing to do with the perfection of the
contract as payment goes into the performance of the contract (6) failure to pay is different from lack
of consideration and it is the latter which prevents the existence of a valid contract (7) Deeds of Sale
clearly show the cost of each lot sold and as of the filing of the complaint respondent siblings have
also fully paid the price to their father (8) no requirement that the price be equal to the exact value of
the subject matter of sale thus the respondents believe that they received the commutative value of
what they gave
RTC: dismissed as they were executed for a valid consideration and the plaintiffs did not have a cause
of action against the defendants
Dauden-Hernaez v Delos Angeles (Law requires contract to be in some form: written but not prescribed
unenforceable thus still valid)
petitioner is a motion picture actress and filed a complaint against respondents allegedly to recover
P14,700 representing a balance allegedly due for her services as leading actress in 2 motion pictures
produced by the company; respondent court dismissed the case as the claim of plaintiff was not
evidenced by any written document either public or private and the complaint was defective on its
(1) contractual system of the Civil Code upholds the spirit and intent of the parties over formalities
hence in general contracts are valid and binding from their perfection regardless of form (2) once the 3
elements (COC) exist the contract is generally valid and obligatory regardless of the form (3) Art 1356
establishes only two exception which are solemn contracts and contracts covered by the Statute of
Frauds (4) the contract sued upon does not come under either exception (5) while Art 1358 provides
that all other contracts where the amount involved exceeds P500 must appear in writing nowhere is it
provided that the absence of written form in this case will make the agreement invalid or unenforceable
(6) respondent court was grossly mistaken in holding that because the contract for services was not in
writing the same could not be sued upon or that her complaint should be dismissed for failure to state
a cause of action because it did not plead any written agreement (7) overlooked that in the contractual
system it is not enough that the law should require that the contract be in writing as the law must
further prescribe that without the writing the contract is not valid or not enforceable by action
case not dismissed and ordered remanded to the court or origin
Garcia v Bisaya (Requisites)
plaintiff filed a complaint against the defendants alleging that defendants executed a deed of sale
covering a parcel of land and that the said land was erroneously designated by the parties in the deed
of sale as an unregistered land when in truth and in fact said land is a portion of a big mass of
registered land; despite persistent demands from plaintiff to have the error corrected defendants
refused to do so; plaintiff alleged that he was without knowledge of the error sought to be corrected
attest time the deed of sale was executed and for many years thereafter having discovered the error
only recently
not prescribed (1) appellant could not have instituted his action to correct an error in a deed until that
error was discovered (2) nothing in the pleadings to show that the error was discovered more than 10
years before the present action but there is an allegation that it was discovered only recently
no cause of action (1) complaint states no cause of action as it fails to allege that the instrument to be
reformed does not expressly reel agreement or intention of the parties and such allegation is essential
as the object sought is to make an instrument conform to the real agreement or intention of the parties
(2) complaint does not even allege what the real agreement or intention was (3) not the function or
remedy of reformation to make a new agreement but to establish and perpetuate the true existing one
(4) courts do not reform instruments merely for the sake of reforming them but only to enable some
party to assert right under them as reformed
dismissal affirmed not because of prescription but because of lack of a cause of action
Bentir v Leanda (Requisites || laches)
respondent corporation alleged that it entered into a contract of lease of a parcel of land with
petitioner for a period of 20 years which was extended for another 4 years; before the end of the
period petitioner sold the leased premises to petitioner spouses; respondent questioned the sale
alleging that it had a right of first refusal and sought the reformation of the expired contract on the
ground that its lawyer inadvertently omitted to incorporate in the contract of lease the verbal
agreement or understanding between the parties that in the event petitioner leases or sells the lot after
the expiration of the lease respondent had the right to equal the highest offer; petitioners allege (1)
inadvertence of the lawyer is not a ground for reformation (2) respondent corporation is guilty of laches
for not bringing the action for reformation within the 10y prescriptive period; the TC dismissed the
complaint due to prescription but the case was re-raffled and assigned to respondent judge who
reversed the order of dismissal as it had not yet prescribed and the dismissal was premature and
precipitate denying respondent their right to procedural due process; the 4 causes of action (specific
performance, annulment of sale and title, issuance of a writ of injunction, damages) should be
deliberated upon
prescribed (1) the remedy of reformation is grounded on the principle of equity where an instrument
already executed is allowed by law to be reformed in order to express the true intention of the
contracting parties (2) the remedy of reformation being an extraordinary one is subject to limitations as
may be provided by law one of which is laches (3) the prescription period for actions based upon a
written contract is 10 years to prevent facts from becoming so obscure from the lapse of time or
defective memory (4) respondent only filed the case 24 years after the cause of action carried hence
its cause of action has become stale (5) the extended period of lease was expressly agreed upon thus
the term should be exactly what the parties stipulated (6) the prescriptive period of 10 years applies by
operation of law not by the will of the parties therefore the right of action accrued from the date of the
execution of the contract (7) the purpose of an action for declaratory relief is to secure an authoritative
statement of the rights and obligations of the parties for their guidance in the enforcement thereof or
compliance therewith not to settle issues arising from an alleged breach (8) as respondent brought the
action after an alleged breach or violation of the contract committed by petitioner the remedy of
reformation no longer lies
SC affirming RTC: dismissed
Atilano v Ladislao & Gregorio Atilano (Procedure of reformation)
Eulogio Atilano acquired by purchase Lot 535 thereafter obtaining the certificate of title; the land was
subdivided into five parts; Eulogio then executed a deed of sale in favor of his brother Eulogio Atilano
II; three portions were sold to other persons while Eugenio retained for himself only the remaining
portion of the land presumable covered by the title to Lot 535-A; upon his death the title passed to
respondent Ladislao; Eugenio II (brother) became widowed thus he and his children obtained the
certificate of title over Lot 535-E in their names as co-owners; desiring to put an end to the co-
ownership a survey was conducted and it was found that they were actually occupying Lot 535-A on
the strength of the deed of sale; heirs of Eugenio II filed the present complaint alleging they had
offered to surrender to the defendants the possession of Lot 535-A and demanded in return the
possession of Lot 535-E (which was larger) but that defendants refused to accept the exchange;
defendants pray that plaintiffs be ordered to execute in their favor the corresponding deed of
sale alleging (1) the reference to Lot 535-E was an involuntary error and that the intention of the parties
to that sale was to convey the lot correctly identified as Lot 535-A (2) up to the time of his death
Eulogio I (owner) was in possession of the portion designated as Lot 535-E and had his house thereon
(3) he even increased the area buying a portion of the adjoining lot
(1) one sells and buys as he sees it, in actual setting, not by the mere lot number assigned to it in the
certificate of title (2) the portion correctly referred to as Lot 535-A was already in possession of vendee
(brother) who had constructed his residence on it even before the sale in his favor (3) the 2 brother
scontinyed in possession of the respective portions for the rest of their lives ignorant of the initial
mistake in the designation of the lot until almost 40 years later when the mistake was first discovered
(4) the object of the sale as intended and understood by the parties was that specific portion where the
vendee was residing where he reconstructed his house which is Lot 535-A (5) its designation as Lot
535-E in the deed of sale was a simple mistake which did not vitiate consent nor affect the validity and
binding effect of the contract between them (6) remedy provided by the Civil Code is reformation (7)
deed of sale need no longer be reformed as the parties have retained possession of their respective
properties conformably to the real intention of the parties to the sale and all they should do is execute
mutual deeds of conveyance
plaintiffs are ordered to execute a deed of conveyance of Lot 535-E in favor of defendants and
defendants are to execute a similar document covering Lot 535-A in favor of plaintiffs
Sarming v Dy (Procedure of reformation)
petitioners are the successors-in-interest of original defendant Flores while respondents are the
successors-in-interest of original plaintiff Delfino the buyer of one of the lots; Delfino filed a complaint
for reformation of instrument alleging they are the heirs of Valentina Flores who originally owner the
lot in question; after the death of Valentina her 3 children took possession of Lot 5734 with each
occupying a 1/3 portion; upon their death their children and grandchildren took possession of their
respective shares; the other parcel Lot 4163 which was solely registered under the name of Silveria
was sub-divided between Silveria and Jose; the grandchildren of Jose who owned 1/2 of Lot 4163
after offering the same to their co-owner Silveria who declined for insufficient funds; Silveria did not
object to the sale of said portion; before preparingthedocumentofthe sale Alejandra’s lawyer conferred
with Silveria who declared she owned half of the lot while the other half belong to the vendors and that
she was selling her coconut trees found in the hall portion belonging to Alejandra; when the lawyer
asked for the title she delivered the title covering Lot 5734 and not the correct title; at the time the
parties knew the location of Lot 4163 but not the OCT number; believing the title to be correct the
lawyer notarized and prepared a Notarized Settlement of Estate and Sale; Silveria was present during
the preparation and signing of the deed and stated that it covered Lot 4163; Alejandra took
possession of the lot and introduced improvements; she then purchased the adjoining lot and
discovered that the designated lot in the deed was wrong; she approached the Registry of Deeds and
paid the necessary fee to have the title released to Silveria who promised to tuen it over to the lawyer
for reformation; despite repeated demands she did not do so thus the present action for reformation of
the deed of sale; Silveria claimed (1) she was the sole owner of Lot 4163 (2) respondents had no right
to sell the lot (3) contract of sale clearly stated the property being sold was Lot 5734 (4) respondents
illegally took possession of 1/2 of Lot 4163
reformation is the proper remedy (1) Alejandra had been occupying the lot since 1956 and it was the
lot pointed to her by the vendors (2) clear that the object of the sale as understood by the parties is a
portion of Lot 4163 and thats its designation as Lot 5734 was a simple mistake in the redrafting of the
document (3) mistake did not vitiate consent or affect the validity or the binding effect of the document
thus reformation is proper (4) Silveria did not object when Alejandra took possession of the land (5)
theres is cause of action as Silveria Flores was a party to the contract as she is not only the seller of
the coconut tress but also one of te heirs entitled to the estate (6) established that it was Silveria who
delivered the subject lot to the vendee (7) Silveria made the parties believe through her actions that the
lot intended to be the object of the sale was the lot described in the deed thus could not
deny involvement in the transaction that resulted (8) there was a meeting of the minds but the contract
did not express their true intention due to mistake in the designation
SC affirming CA & RTC: reformation of the instrument is proper

Borromeo v CA & Villamor (Interpretation: justice and fairness)

Jose Villamor was a dustributor of lumber belonging to Mr. Miller; defendant being a friend of plaintiff
used to borrow from the latter from time to time; one on occasion with some pressing obligation to
settle with Mr. Miller defendant borrowed from plaintiff a large sum of money for which he mortgaged
his land and house; Mr. Miller filed a civil action against defendant and attached his properties
including those he mortgaged to plaintiff; the deed of mortgage was not registered as it could not
properly be drawn up; plaintiff then pressed the defendant for a settlement of his obligation but
defendant instead offered to execute a document promising to pay his indebtedness even after the
lapse of 10 years; the note stipulated that he would pay as soon as he has the money and that
defendant hereby relinquishes, renounces, or otherwise waives his rights to the prescription provided
by the Code of Civil Procedure; plaintiff limited himself too verbally requesting defendant to settle his
indebtedness from time to time; plaintiff did not file any complaint against the defendant within 10
years; defendants failed to settle his account thus plaintiff instituted a complaint for collection
CFI: sentenced defendant to pay the P7,220 within 90 days
CA: reversed the judgment on the legal basis of a lack of validity of the stipulation amounting to a
waiver in line with the principle “that a person cannot renounce future prescription”
(1) creditor, moved by ties of friendship, was more than willing to give the debtor the utmost latitude as
to when his resources would allow his to pay there had since been verbal requests (2) he was not
renouncing any right but being considerate, perhaps excessively so (3) well-settled maxim that
between 2 possible interpretations that which saves rather than destroys is to be preferred (4) what
vitiates the appealed decision is that it would amount not just to negating an agreement duly entered
into but would put a premium on conduct that is hardly fair and could be characterized as duplicitous
(5) the document which has all the earmarks of validity and is in consonance with justice and morality
thus the appealed decision must be reversed (6) there is nothing implausible in the view that such
language renouncing the debtor’s right to the prescription should be given the meaning that the debtor
could be trusted to pay even after the termination of the prescription period (7) spirit of good morals
and justice should not be alien to legal norms as in the determination of the rights of the parties the
interest of justice and equity should not be ignored (8) while ordinarily the literal sense of the words
employed is to be followed, intention shall prevail when they appear to be contrary to the evident
intention of the contracting parties (9) all other rules are ancillary to the ascertainment of the meaning
intended by the parties and once this intention is ascertained it becomes an integral part of the
contract as though it had been originally expressed in unequivocal terms (10) terms, clauses and
conditions contrary to low, morals, and public order should be separated from the valid and legal
contract when such separation can be made because they are independent of the valid contract which
expresses the will of the contracting parties (11) rule is that a lawful promise made for a lawful
consideration is not invalid merely because an unlawful promise was made at the same time (12)
contracts are not what the parties see fit to call them but what they really are as determined by the
principles of law (13) intention prevails over performance (14) disapproval when the result reached is
neither fair, nor equitable as what is to be avoided is an interpretation that may work injustice rather
than promote justice
SC reverses CA decision giving full force and effect to CFI decision
Kasilag v Rodriguez (Primacy of intention)
respondents, heirs of Emiliana, commenced the case to recover from petitioner the possession of the
land and its improvements granted by way of homestead to their predecessor; petitioner alleged he
was in possession of the land and that he was receiving the fruits thereof by virtue of a mortgage
contract entered into between him and the deceased which was duly ratified by a notary public;
Emiliana was unable to pay the stipulated interest as well as the tac on the land and the improvements
thus she and petitioner entered into another verbal contract whereby she conveyed to the latter the
possession of the land on the condition that the latter (1) would not collect interest on the loan (2)
would attend to the payment of he land tax (3) would benefit the fruits of the land (4) would introduce
improvements thereon; the petitioner acted accordingly
CA: absolute purchase and sale of the land and its improvements and respondents ordered to pay
petitioner the P1,000 loan with legal interest
valid and binding mortgage (1) intention of the parties should always prevail because their will has the
force of law between them (2) if the terms of the contract are clear and leave no doubt as to the
intention of the contracting parties the literal sense of its stipulations should be followed but if the
words appear to be contrary to their evident intention then their intention shall prevail (3) the words in
the public deed clearly show that they intended to enter into a principal contract of loan and an
accessory contract of mortgage of the improvements (4) another fundamental rule in interpretations is
that terms, clauses and conditions contrary to law, morals, and public order should be separated from
the valid and legal contract when such separation can be made because they are independent of the
valid contract which expresses the will of the contracting parties (5) no question that the principal
contract of the loan and the accessory contract of a mortgage are valid (6) there was however a verbal
modification [including that the petitioner should apply the value of the fruits of the land to the
payment of the stipulated interest] made by the parties independently calculated to alter the mortgage
contract converting it into a contract of antichresis which, being a real encumbrance burdening the
land, is illegal and void (8) the clauses regarding antichresis are separable from the contracting and
can be eliminated leaving the later in being because it is legal and valid (9) the possession of the land
and enjoyment of the fruits by petitioner is illegal being considered integral elements of the contract of
antichresis (10) one is a possessor in bad faith when he knows that there is a flaw in his title or in the
manner of its acquisition by which it is invalidated (11) from the facts established it cannot be deduced
nor presumed that the petitioner was aware of a flaw as he is not a lawyer thus he proceeded on the
well-grounded belief that he was not violating the prohibition regarding the alienation of the land (12)
his ignorance is excusable and may therefore be the basis of his good faith
SC (1) contract of mortgage of the improvements is valid and binding (2) the contract of antichresis is
null and without effect (3) petitioner is in good faith (4) respondents are entitled to have the
improvements and plants upon indemnifying the petitioner or may elect to compel the petitioner to
have the land by paying its market value (5) respondents shall have the rights of possession of the land
and to enjoy the mortgaged improvements (6) respondents may redeem the mortgage of the
improvements by paying to the petitioner the amount of the loan with interest (7) petitioner is not
bound to render an accounting of the value of the fruits of the mortgaged improvements as the value
hardly covers the interest earned by the secured indebtedness

Universal Food Corporation v CA & Francisco (Rescission: yes || substantial and fundamental breach)
defendants instituted an action for rescission of a contract entitled “Bill of Assignment” against
petitioners; defendant invented a formula for the manufacture of a food seasoning derived from
banana fruit popularly known as Mafran sauce; petitioner registered the trademark but due to a lack of
sufficient capital to finance the expansion of his business he secured financial assistance from Tirso
Reyes who formed with the others defendant Universal Food Corporation eventually leading to the
execution of the subject Bill of Assignment; petitioner contends (1) respondent’s are not entitled to
rescission (2) trial court found that the respondents not only have failed to show that the petitioner has
been guilty of default in performing its contractual obligations but the record sufficiently reveals the
fact that it was plaintiff who had been remiss in the compliance of his contractual obligation to cede
and transfer the formula (3) nothing in the successive memoranda issued from which it can be implied
that the respondent patentee was being dismissed from his position as chief chemist
right to use only (1) one of the principal considerations of the Bill of Assignment is the payment of a
royalty and a royalty when employed in connection with a license under a patent means the
compensation paid for the use of a patented invention (2) in order to preserve the secrecy of the
Mafran formula and to prevent its unauthorized proliferation it is provided that defendant be appointed
chief chemist permanently and that in case of his death or disability then his heirs or assigns who may
have the necessary qualifications will be preferred to succeed thus the intention of the respondent
patentee at the time of the execution was to part not with the formula but with the use to preserve the
monopoly and to effectively prohibit anyone from availing of the invention (3) the Bill stipulated that
should dissolution of the petitioner corporation eventually the place the property rights and interests
over said trademark and formula shall automatically revert to the respondent patentee (4) in the
respondents complaint it is alleged that what was ceded and transferred is the use of the formula and
this incontrovertible fact is admitted without equivocation in petitioner’s answer (5) facts of the case
compellingly demonstrate continued possession of the sauce formula by the respondent patentee (6)
conveyance should be interpreted to effect the least transmission of rights thus what is allowed is only
the use of the formula without the transfer of ownership (7) as the Bill vested in the petitioner
corporation no title to the formula the finding by the trial court that respondent had been remiss is
without basis (8) the prevailing milieu when the rescission of the Bill was filed clearly prove that the
petitioner schemed and maneuvered to ease out, separate, and dismiss the respondent from the serve
in flagrant violation of the contract (9) the fact that a month after the institution of the action the
petitioner requested the patentee to report for duty is of no consequence as it was merely a recall to
place said plaintiff (10) no controversy that the Bill is reciprocal in nature and by termination
the services of respondent patentee without lawful and justifiable cause and without nay fault or
negligence on his part the petitioner substantially and fundamentally breached the Bill (11)
respondents were left with no choice but to file the present action for rescission and damages (12) the
provisions of the Bill are so interdependent that violation of one would result oil virtual nullification of
the rest (12) one of the considerations for the transfer of the use was the undertaking by petitioner to
employ respondent in a permanent status this cannot escape liability fro pay the private respondent
(13) rescission creates the obligation to return the things which were the object of the contract thus
petitioner has to return the use and the right to such use
(1) Bill of Assignment rescinded (2) corporation to return and restore the right t the use of his Mafran
sauce (3) corporation and all its assigns and successors are permanently enjoined from using in any
manner the such trademark and formula (4) pay his monthly salary and other costs
Oria Gonzales v McMiking (Badges of Fraud: all present)
Gutierrez Hermanos brought an action against Oria Hermanos for the recovery of P147,204.28; plaintiff
brought another action against the same defendant for the recovery of P12,318.57; members of the
company of Oria Hermanos on account of expiration of the time stated in their agreement this
dissolving their relations and entering into liquidation; Tomas Oria as managing partner entered into a
contract with plaintiff for the purpose of selling and transferring to the plaintiff in this action all of the
property of which the said Oria Hermanos was owner; among the goods transferred was the
steamship which his the subject of the litigation; the case was resolved in favor of Gutierres Hermanso
and the execution was issued theron; the sheriff demanded that Tomas Oria make payment of the said
judgment; he replied that there were no funds with which to pay the same; the sheriff levied upon the
said steamer and took possession of the same announcing its sale at public auction; the plaintiff
presented to the sheriff a written statement claiming to be the owner and to have the right of
possession by reason of the sale to him by Oria Hermanos of all the property belonging to said
company including the steamer; at the sale Gutierrez became the purchase being the highest bidder;
Guetierrez contended that (1) the sale is fraudulent against the creditors of Oria Hermanos (2) that the
transfer consummated of the steamship was void as to the creditor sand as to Gutierrez in particular;
plaintiffs contended that aside form the property included in the sale that it had sufficient other
property o pay the judgment of Gutierrez
(1) it is not sufficient that it is founded on good consideration or is made with bona fide intent as it
must have both elements thus if defective in either of these particulars the conveyance is voidable as
to the creditors (2) the case presents every one of the badges of fraud as the sale in the form in which
it was made leaves the creditors substantially without recourse (3) record shows there was no property
with which the judgment could be paid thus the defendants were obliged to resort to and levy upon
the steamer (4) lower court correct in finding the sale fraudulent and void as to Gutierrez in so far as
was necessary to permit the collection of its judgment (5) evidence failed to show that plaintiff was the
owner or entitled to the possession of the steamer in question at the time of the levy and sale
complained of or that he was damaged (6) defendant had the right tom make the sect and test the
validity of the sale in that way without first resorting to a direct action to annul the sale (7) the creditor
may annul the sale by ignoring it and seizing under his execution the property or any necessary portion
thereof which is the subject of he sale
Siguan v Lim (Rescission: no || dismissed accion pauliana due to lacking requisite and lack of fraud)
in August 1990 Lim issued 2 checks payable to cash; upon presentation by petitioner they were
dishonored for the reason that the account was closed; demands to make goos the checks proved
futile; petitioner filed a case for violation of BP 22; the court convicted Lim as charged; it was also
discovered that she was previously convicted in July 1990 of estafa but the decision was overturned
by the SC holding her only civilly liable; on July 2, 1990 a Deed of Donation conveying parcels of land
were purportedly executed by Lim in facie of he children which was registered; petitioner filed an
accion pauliana against Lim and her children to rescind the questioned deed and declare null and void
the new transfer certificates of title issued for the lots covered by the deed alleging (1) fraudulent
transfer of all her real property to her children in bad faith (2) in fraud of her creditors she conspired
and confederate with her children in antedating the Deed to the prejudice of her creditors (3) at the
time of the fraudulent conveyance, no sufficient properties were left tot pay her obligations; defendant
(1) denied any liability to petitioner (2) convictions in the criminal cases were erroneous (3) dded was
not antedated but made in food faith at a time when she had sufficient property (4) deed was
registered late as she was seriously ill
TC: rescinded the questioned documents (2) nullified the transfer certificates issued in the names of
her children (3) ordered the reinstatements of the previous title (4) defendants to pay petitioner
lacking requisites and no fraud (1) without any prior existing debt there can be neither injury nor fraud
as since the alleged debt was incurred in August 1990 while the dded of donation was executed on
August 1989 the first requisite is lacking (2) not proven that the deed was antedated to make it appear
that it was made prior to petitioner’s credit (3) deed of donation is a public document and as such is
evidence of the fact which gave rise to its execution and of its date (4) the fact that the questioned
deed was registered only on July 2, 1990 is not enough to overcome the presumption as to the
truthfulness of the statements of the date (5) essential that the party asking for the rescission prove
that he has exhausted all other legal means to obtain satisfaction of his claim and petitioner neither
alleged nor proved that she did so (6) for the presumption of fraud to be applied it must be established
that the donor did not leave adequate properties which creditors mights have recourse for the
collection of their credits existing before the execution of the donation (7) petitioner’s alleged credit
existed only a year after the deed was executed thus she cannot be said to have been prejudiced by
such alienation (8) in any case when she deed of donation was executed defendant still had properties
left thus it was not established that the properties left were insufficient to cover her debts existing
before the donation and the presumption of fraud will not come into play (9) petitioner failed to prove
the existence of any of the circumstances from which fraud may be inferred this since the
requirements for the rescission of a gratuitous contract are not present the action must fail (10) Suarez,
albeit a creditor prior to the questioned alienation, is not a party to this accion pauliana thus her credit
cannot be invoked to justify rescission of the subject deed of donation
SC affirming CA: reversed the decision of the trial court and dismissed the accion pauliana
Suntay v CA & Suntay (Badges of fraud: blood relationship, failure to take possession)
Federico Suntay was the registered owner of a parcel of land; he applied as a miller-contractor of the
Natl Rice and Corn Corporation; his application was disapproved as he had several unpaid loans; to
circumvent this he allowed Rafael to apply for him; Rafael prepared an absolute deed of sale whereby
Federico conveyed to Rafel said parcel of land for P20,000 and said deed was notarized; it was agreed
that at ny time plaintiff needed or desired that the tile be restored the defendant would
execute whatever deed and take whatever steps would be necessary to do so; Federico remained
in possession of the property notwithstanding the fact that Rafael became the titled owner; Rafael
never attempted to take possession thereof at any time while Federico continued to exercise the rights
of absolute ownership; less than 3 months later a counter sale was prepared and signed by Rafael
wherein the same parcel of land was sold by Rafael back to Federico for the same consideration of
P20,000; the document appeared to have been notarized but upon examination it was not the deed of
sale that was notarized; Federico claims that the sale was merely simulated and has been executed
only for purposes of accommodation and alleged that when Rafael delivered the second deed to him it
was neither dated nor notarized; Federico through his new counsel requested that Rafael deliver his
copy of the TCT so that the former may have the counter deed of sale registered in his name but the
request was turned down; Rafael alleged the second deed of sale was counterfeit or at least not a
public document which is sufficient to transfer real rights according to law; defendant never paid or
delivered and plaintiff never demanded or received the P20,000 since the Deed of Absolute Sale was
absolutely simulated intended solely to accommodate and assist defendant;
mere accommodation agreement (1) 2 instruments were executed closely one after the other
involving transferred re-transfer of the same property at exactly the same price (2) the existing close
relationship between the parties whose blood relation was the foundation of their professional and
business relationship and is an unmistakable token of simulation as it has been observed that fraud
is generally accompanied by trust (3) gross inadequacy of the stated contractual consideration
given the value and location of the property (4) not considered dacion en pago because Rafael
never informed defendant that he considered the transfer to be in consideration of his alleged unpaid
AF and illogical if it was a dation as he agreed to the repurchase pf the property 3
months thereafter (5) physical possession, enjoyment and use of the property in question
remained through the years up to the present in the hands of Federico (6) Rafael’s failure to
take possession of the property is a clear badge of fraud since he never assumed the benefits let alone
the burden of ownership and he did not even include the property in his statement of assets
and liabilities (7) Deed of Absolute sale is absolutely simulated and cannot be ratified as it was never
intended to produce the actual transfer of ownership and/or rights attached to ownership (8) the
counter deed of sale is also fictitious and is incapable of producing legal effects (9) as no property was
validly conveyed under the deed the second deed of sale executed is considered ineffective and
heirs of Rafael Suntay ordered to reconvey the property to private respondent and surrender the
duplicate copy of the TCT
Singson v Isabella Sawmill (Who may and may not institute action for annulment)
defendants enters into a contract of partnership under the firm name Isabella Sawmill; plaintiff sold a
truck and 2 tractors to the partnership who then agreed to make arrangements with Intl Harvester so
that the latter would sell farm machinery to petitioner with the understanding that the price was to be
paid by the partnership; Intl Harvester has not been paid P1,288.89; defendants allege (1) the
partnership had been dissolved (2) the other defendants became the successors-in-interest and have
bound themselves to answer for any and all obligations of the defunct partnership (3) to secure the
performance of the obligations they constituted a chattel mortgage over the properties (4) the chattel
mortgage may no longer be annulled because it had been judicially approved and the same had been
ordered foreclosed
(1) where the basic issue is something other than the right to recover a sum of money this Court has
considered such actions as cases where the subject may not be estimated in terms of money and are
cognizable by CFI (2) the plaintiff’s cause of action springs from the alleged nullity of the judgment
based on one ground or another, particularly fraud, which fact affords the plaintiff rights to judicial
interference in his behalf (3) the cause of action is entirely different from that in the action which gave
rise to the judgment sought to be annulled thus there is no plausible reason why the venue of the
action to annul the judgment must necessary follow the venue of the previous judgment (4) a CFI or a
branch thereof has the authority and jurisdiction to take cognizance of and to act in a suit to annul final
and executory judgment or order rendered by another CFI by another branch of the same court (5)
dissolution of a partnership is cause by any partner ceasing to be associated in the carrying on of the
business however the partnership is not terminated but continues until the winding up of the business
(6) the partners did not terminate the business of the partnership instead they continued the business
still in the name of said partnership as it is expressly stipulated in the memo-agreement that the
remaining parties had constituted themselves as the partnership entity (7) there was no liquidation of
the assets of the partnership and the used the properties of said partnership as the properties they
mortgaged belonged to Isabela Sawmill (8) appellant was correctly held liable by the trial court
because she purchased at public auction the properties of the partnership which was mortgaged to
her (9) doesn’t appear that the withdrawal of one partner from the partnership was punished in the
newspaper thus the appellees and the public in general had a right to expect that the credit they
extended could be enforced against the properties of the partnership (10) the judicial foreclosure of the
chattel mortgage executed did not excuse Saldajeno from liability to the creditors of the partnership
and she cannot complain as she is partly to blame for not insisting on the liquidation of the partnership
(11) while it may be presumed that both parties acted in good faith the person who gave occasion to
the damage must bear the consequences where one must suffer (12) the parties were prejudiced in
their rights by the execution of the chattel mortgage over the properties of the partnership to Saldajeno
thus they have a right to file the action to nullify the chattel mortgage in question (13) no showing that
the appellants displayed a wanton disregard of the rights of the plaintiffs as they believed in good faith,
albeit erroneously, that they are not liable to pay the claims
defendants have a right to be reimbursed whatever amounts they shall pay the petitioners by their co-
defendants (2) blah blah blah
Cadwaller v Smith, Bell & Company and Peabody & Co (Mutual restitution)
petitioner sues for recovery of the difference between the amount turned over to the company on
account of a cargo of cedar piles consigned to the defendants as its agents and afterwards bought by
them, and the amount actually received by them on the subsequent sale thereof; Pacific shipped 581
piles to defendant Peabody on the sale of which they were to receive a commission of 1/2 of whatever
sum was obtained over $15 for each pile and 5% of the price of thr piles after storage; defendant
wrote a letter informing petitioner as the agent of Pacific that due to the lack of demand the piles
would have t be sold at considerably less than $15; petitioner directed them to make the bet possible
offer for the piles; it was discovered that Peabody had entered into negotiations with for the sale of the
piles for $20 as well as the sale of 213 piles for $19; in total they received $3,445.66 above the
amount paid by defendant to petitioner
(1) at the time the agents were buying from their principal the piles at $12 in the strength of their
representation that no better price was obtainable they had already sold a substantial part for $19 thus
they are consequently liable (2) in concealing from their principal the negotiations with the Government
and misrepresenting the condition of the market the agents committed a breach of duty from which
they should benefit (3) the contract of sale thereby induced was founded on fraud and was subject to
annulment by the aggrieved party
$4,541.98 to be entered in favor of the defendants (1) the defendants are not entitled to retain their
commission realized upon the piles included under the contract so annulled (2) they can keep the
commission the 213 piles already sold under the original agency at the time of making the contract
Velarde v CA & Raymundo (Mutual restitution: yes)
petitoners entered into a deed of sale with assumption of mortgage with private respondents paying a
dp of P800,000 and assuming the mortgage amount of P1.8M in favor of BPI; petitioner executed an
undertaking that during the pendency of the application for the assumption of the mortgage she would
continue paying said loan in accordance with the mortgage deed and that in the event of violation she
P800,000 dp would be forfeited and the deed of sale with assumption of mortgage shall be deemed
automatically cancelled without necessity of notice or judicial declaration; after payment for 3
months the bank denied the application for assumption of mortgage thus petitioners stopped
making payments; petitioners informed respondents that they are willing to pay the balance if (1)
deliver actual possession of the property (2) cause the release of title and mortgage and make it
available without any liens or encumbrances (3) execute an absolute deed of sale; notice of
cancellation/rescission was sent to petitioners for non-performance; petitioners filed a complaint for
specific performance, nullity of cancellation, writ of possession and damages
breach of performance on reciprocal obligation (1) assumption of the mortgage is part of the obligation
of petitioner under the contract as it was part of the consideration of the sale (2) non-payment of
mortgage and subsequently non-payment of agreed price results in substantial and
fundamental violation of the contract (3) having violated the contract petitioners lost their right to its
enforcement thus cannot avail of action for specific performance (4) payment of price may still be
allowed as long as no demand for rescission has been made judicially or by notarial act which in this
case was sent (5) conditional offer to pay cannot take the place of actual payment as the additional
burdens were not agreed upon in the original contract (6) private respondents already performed their
execution through the execution of the Deed of Sale which constructively delivered possession (7)
deed of sale violated not mortgage contract thus stipulation in the latter for forfeiture of dp does not
apply and Art 1191 governs (8) rescission abrogates the contract from its inception and requires a
mutual restitution of benefits received
mutual restitution; initial and mortgage payments to be returned lest there be unjust enrichment
PNB v Philippine Vegetable Oil Company v Whitaker (Unenforceable: Purpose of Statute: prevent fraud thus
should not be made an instrument furthering them)
respondent company was in debt and petitioner was its largest creditor; petitioner was secured
principally by a real and chattel mortgage; respondent executed another chattel mortgage in favor of
petitioner; Bankruptcy was imminent; respondent Whitaker was the general manager of the
respondent corporation and he pledged certain private properties to secure the creditors of the Oil
Company; at his instance but inspired to such action by the bank a receiver for the Company was
appointed by the CFI; petitioners then obtained from respondent a new mortgage on Feb 20; on Feb
28 the receivership was terminated; March 8 it was notarized and then registered on March 22; the
bank suspended the operation of respondent in May and definitely closed the plaint on August 14;
petitioner then instituted the action to foreclose the mortgage of respondent; respondent Whitaker
presented a complaint on intervention
mortgage had not been legally executed (1) the mortgage was executed by petitioner before the
termination of the receivership when it could not have been legally secured as the property was in
custodia legis thus the company was then absolutely inhibited from giving a mortgage on its property
(2) the receiver was not a party to the mortgage and the court would not have authorized the receiver
to consent to the execution as it would desire to protect the rights of all the creditors and not the rights
of one particular creditor (3) the mortgage could not have been executed without the dissolution of the
receivership and such was dissolved through representations made to the court that the bank would
continue to finance the company however less than two months after the mortgage the bank withdrew
its support if effect closing the company (4) the mortgage accomplished during a receivership is a
nullity and it was accomplished when the petitioner had a dominating influence in the affairs of the
company (5) unconscionable to allow the bank after the hands of the other creditors were tied to
virtually appropriate to itself all the property of the company (6) mortgage is clearly voidable whether
due to undue influence, deceit, or constructive fraud (7) PNB not left without security as the previous 3
mortgages remain in effect and may be foreclosed
no valid agreement by which PNB bound itself to finance respondent (1) Statute of Frauds applies only
to agreement not to be performed within a year from the making thereof and since it was enacted for
the purpose of preventing frauds it should not be made the instrument to further them (2) stipulated
that no contract entered into by the GM would be valid unless made with the advice and consent of its
BOD and there was no indication that it had consented to an agreement for practically unlimited
backing of the company or that it had ratified any such promise made by its GM (3) although a proxy
may have been procured at the instance of petitioner it obviously did not bind the officials of the bank
(4) despite testimony that respondent had evidently made good money in the past and that petitioner
contemplated financing the former to keep them out on insolvency this did not amount to a definite
agreement binding on the bank but a general intimation proffered by the GM of the bank (5) no binding
promise, tacit or express, made by petitioners to continue indefinitely backing respondent (6)
respondent Whitaker was in no way personally liable for any part of the obligations of the company but
he nevertheless signed the creditors agreement without making himself the successor in interest thus
he cannot recover from the company in the proceedings as sympathy cannot be transmuted into legal
SC (1) plaintiff entitled to money judgment against respondent (2) mortgage has not been legally
executed and cannot be given effect but the prior mortgages can be foreclosed (3) PNB has a
preferred claim when the prior 3 mortgages are foreclosed and the remainder of the assets if any are to
be applied to the payment pro rata of the unsecured claims (Whitaker and unsecured portion of PNB
debt) (4) Whitaker failed to establish an agreement binding petitioner to finance petitioner thus not
entitled to recover damages nor can he recover from respondent company as he is not the legatee of
the assets of the company (5) no pronouncement as to Whitaker’s possible rights in connection with
the creditor’s agreement since it is not here in question and the parties thereto are not before the court
Rosencor & Joaquin v Inquing (Unenforceable: no because not under Statute || Purpose of statute: prevent
fraud and perjury due to unassisted memory)
respondents originally filed the case for annulment of the absolute deed of sale which was later
amended to one of rescission; respondents averred that they are the lessees of a residential
apartment; such lease was not covered by any contract; they allegedly were verbally granted by the
lessors the pre-emptive right to purchase the property if ever they decide to sell the same; upon the
death of the spouses Tiangco the management of the property were adjudicated to their heirs
represented by De Leon; they were allegedly promised the same pre-emptive right by the heirs;
lessees continued to stay in the premises and allegedly spent their own money for its upkeep which
were not deducted from the rentals which had increased from P150 to P1,000; lessees then received a
letter from Atty. Aguila demanding that they vacate the premises so that the demolition of the building
may be undertaken; respondents refused; De Leon refused to accept the lessee’s rental payment and
subsequently sent a letter offering to sell the property leased for P2,000,000; lessees countered with
P1,000,000 but no answer was received; petitioner Joaquin then came to the property introducing
himself as the new owner; lessees receive a letter from Atty. Aguila advising them that the heirs had
already sold the property to petitioner Rosencor; lessees questioned the disregard of their pre-emptive
right and requested a copy of the deed of sale which was refused; respondents tender of payment was
also refused; before demolition could take place the barangay interceded; the lessees were given a
copy of the deed and discovered that they were deceived as the sale took place on Sept 4, 1990 for
only P726,000 while De Leon only made them the offer for P2,000,000 in October 1990; the lessees
offered to reimburse De Leon for the P726,000 plus P274,000 to complete there P1M offer which was
refused thus the present action
RTC: dismissed as the right of redemption was merely oral thus cannot be enforced
CA: reversed as respondents had duly proven the right by reason of petitioner’s waiver of the
protection of the statute for failure to object to the presentation of oral evidence of the said right and
thus ordered the sale rescinded, the recoveyance of the premises and the respondents to be entitled
to first refusal
statute of frauds does not contemplate a right of first refusal thus need not be written to be
enforceable and may be proven by oral evidence (1) statute of frauds does not deprive the parties of
the right to contract but merely regulates the formalities of the contract necessary to render it
enforceable (2) purpose is to prevent fraud and perjury in the enforcement of obligations evidenced by
unassisted memory of witnesses by requiring certain enumerated contracts and transactions to be
evidenced in writing (3) the statute of frauds refers to specific transactions and cannot be applied to
others and it presupposes the existence of a perfected contract (4) not all agreements affecting land
must be put into writing to attain enforceability as these agreements are not among those enumerated
under Art. 1403 (5) a right of first refusal is not among those listed and is not by any means a perfected
contract as at most it is a contractual grant not of the sale but the right of first refusal over the property
sought to be sold (6) respondents adequately proved the existence of their right as they uniformly
testified of the promise and De Leon informed them of the receipt of the offer and offered to sell the
same to them which she would not have done if she did not recognize the right (7) no evidence to the
contrary thus the right was substantially proven

oral only and notice [bad faith] not proven (1) contract otherwise said may be rescinded by reason of
injury to 3rd persons who have substantial interests which were prejudiced by the sale without their
right of first refusal being recognized (2) contractual right of first option is a valid cause of action
enforceable by an action for specific performance and right of first refusal can only be exercised over
the property if the fraudulent sale is first rescinded (3) in this case however the right of first refusal was
an oral one thus constructive notice is inapplicable as it was never reduced into writing much less
registered as even the lease contract was oral (4) good faith is always presumed thus in order to hold
the petitioners guilty of bad faith there must be clear and convincing proof that petitioners were made
aware of the said right of first refusal (5) respondents failed to present any evidence that prior to the
sale of the property petitioners were aware or had notice of the oral right if first refusal (6) if there was
any indication of bad faith based on the evidence it is only on the part of De Leon as she was aware of
the right and proceeded to sell the property (7) bad faith on the part of De Leon does not mean the
petitioner acted in bad faith as it was shown that the latter was in lawful possession and acted in good
SC: remedy for unjustified violation of their right of first refusal is an action for damages against the
heirs of spouse Tiangco not one for rescission
Carbonnel v Poncio (How ratified || executed thus exception to Statute of Frauds and oral evidence admissible)
petitioner purchased from respondent Poncio a parcel of land paying a an amount and assuming
respondent's obligation with the Republic Savings Bank with the understanding that the balance
would be payable upon execution of the deed of conveyance; one of the conditions was that
respondent would continue staying on the land for 1 year as stated on the document ordered executed
by the plaintiff in defendant’s dialect and signed by the latter; respondent refused to execute the
corresponding deed of sale despite repeated demands and conveyed the property to defendant
spouses Infante who knew of the sale to plaintiff; plaintiff thereby alleged she suffered damage filing
the complaint to annul the sale to Infantes; defendants allege (1) the claim is unforceable under the
Statute of Frauds
exception to Statute of frauds and oral evidence is admissible (1) well settled that the Statute is
applicable only to executory contracts not to contracts totally or partially performed as a sufficient part
performance by the purchaser under a parol contract removes the contract from its operation (2)
reason is that there is a wide field for fraud in executory contract as unless they be in writing there is
no palpable evidence of the intention of the parties thus the statute has been enacted precisely to
prevent fraud (3) if the contract has been partially or totally performed, the exclusion of parol evidence
would promote fraud or bad faith for it would enable the defendant to keep the benefits already
derived by him from the transaction in litigation and at the same time evade the obligations or liabilities
(4) it is not enough for a party to allege partial performance but neither is such party required to
establish such partial performance by documentary proof before he could have the opportunity to
introduce oral testimony as the rejection of testimonial evidence on partial performance would nullify
the rule that the Statute is inapplicable to contracts which have been partly executed and lead to the
very evils that the statute seeks to prevent (5) the principle is that oral evidence is admissible in such
cases to prove both the contract and its part performance and if the evidence fails to prove clearly that
there had been partial performance then the Court should apply the Stature otherwise it should not be
applied (6) respondent Poncio admitted that plaintiff had offered several times to purchase his land
and a document signed by him shows that he sold the property and that he would stay for one year
free of charge and if he cannot find a place to transfer he may remain in said lot (7) if Poncio had not
decided to sell the land there was no reason for him to get the permit to stay (8) if plaintiff intended to
mislead Poncio she would have caused the document to be written in English instead of troubling
herself to see to it that it was written in his native dialect (9) Poncio’s signature on the document
suggests that he is neither illiterate nor so ignorant as to sign a document without reading its contents
(10) clear that she is entitled legally as well as equitably to an opportunity t ointroduce parol evidencee
in support of the allegations of her second amended complaint
SC: cause to be remanded to the lower court for further proceedings; costs against defendants
Liguez v CA & Lopez (When the contract is illegal and one of the parties is incapable of giving consent: not in
pari delicto thus donation valid)
plaintiff averred to be the legal owner of a parcel of land pursuant to a deed of donation executed in
her favor by the late owner; the defense alleged that (1) the donation was null and void for having an
illicit cause or consideration which was plaintiff entering into marital relations with Lopez who was a
married man (2) the property had been adjudicated to them as heirs since 1949
SC (1) under Art 1274 liberality of the donor is deemed cause only in those contracts that are of “pure”
beneficence; in remunatory contracts the consideration is the service or benefit for which the
remuneration is given (2) motive may be regarded as cause when it predetermines the purposes of the
contract and the late Lopez was not moved solely by the desire to benefit petitioner but also to secure
her cohabiting with him so that he could gratify his sexual impulses (3) the donation was but one part
of an onerous transaction thus the conveyance was clearly predicate upon an illicit causa (4) motive
may be regarded as cause when it predetermines the purpose of the contract (5) Lopez would not
have conveyed the property in question had he known that appellant would refuse to cohabit with him
so the cohabitation was an implied condition to the donation and being unlawful necessarily tainted
the donation itself (6) not in pari delicto as the late Lopez was a man advanced in years and mature
experience while the appellant was a mere minor and there was no finding that she was fully aware of
the terms of the bargain entered into between Lopez and her parents (7) her acceptance in the deed of
donation did not necessarily imply knowledge of conditions and terms set forth (8) it was appellant
parent’s who were insisted on the donation before allowing her to live with Lopez suggesting seduction
more than immoral bargaining on the part of appellant (9) illegality is not presumed but must be duly
and adequately proved (10) the heirs cannot set up the plea of illegality to recover the disputed land as
Lopez would be barred from setting up that plea and the heirs can have no better rights than Lopez
himself (11) Lopez could not donate the entirety of the property in litigation to the prejudice of his wife
because said property was conjugal in character (12) the donation made by the husband in
contravention of law is not void in its entirety but only insofar as it prejudices the interest of the wife
and the law makes no distinction between gratuitous transfers and conveyances fora consideration
(13) the heirs are barred from invoking the illegality of the donation but their right to a legitimate out of
his estate is not affected as it is granted by the law itself hence the forced heirs are entitled to have the
donation set aside insofar as in officious (14) petitioner should be considered part of the donor’s estate
in computing the legitimes (15) a contract with an illegal cause may produce effects under certain
circumstances where the parties are not of equal guilt
petitioner declared entitled to so much of the donated property as may be found upon proper
liquidation not to prejudice the share of the widow in the conjugal partnership or the legitimes of the
forced heirs
Rellosa v Gaw Chee Hun (When the contract is illegal and one of the parties is incapable of giving consent:
Reversion or Escheat)
petitioner sold to respondent a parcel of land together with the house erected thereon; petitioner
remained in possession of the property under a contract of lease; petitioner alleged the sale was
executed subject to the condition that vendee being a Chinese citizen would obtain the approval of the
Japanese Military Administration in conformity with Seirei No. 6 which required approval before aliens
could acquire private land; as the approval had not been obtained and even if it were the sale would
be void under the Constitution the petitioner instructed the present action seeking the annulment of
the sale and praying that the property be returned
RTC & CA: both the sale and lease valid and dismissed the complaint
(1) the law that should govern is the Constitution as it was adopted Sept 1943 and the sale was
executed Feb 1944 (2) under the Constitution aliens may not acquire private or public agricultural land
including residential lands thus disposing of the question on the validity of the sale (3) even if petitioner
could invoke the Constitution they are prevented from doing so if their purpose is to recover the lands
that they have voluntarily parted with because of their guilty knowledge that it was violative of the
Constitution and they cannot escape the conclusion because they are presumed to know the law (4)
the law will not aid any party to an illegal agreement as when they are in pari delicto no affirmative
relief of any kind will be given to one against the other (5) the contract does not come under the
exception of advancement of public policy as it is not intrinsically contrary to public policy nor does
the illegality consist in its opposition to public policy as it is not illegal because it is against the
Constitution (6) application of the doctrine of in pari delicto does not contravene the fundamental
policy of the constitutional prohibition of aliens possessing land as the remedy is lodged elsewhere (7)
2 remedies available with is an action for reversion and escheat to the State [escheat imputes to the
government the ownership of all the lands and makes such government the original source of all
private titles thus reversion takes place when the title falls; reversion is the consequence of annulment
or cancellation when no one else could legitimately claim the property except its orginal owner- the
state] (8) thus possible to enforce the fundamental policy of the Constitution regarding natural
resources without doing violence to the principle of in pari delicto
SC: sale in question is null and void but plaintiff is barred from taking the present action under the
principle of in pari delicto
PBC (Justina Santos) v Lui She (Wong Heng) (Agreement is not illegal per se but is prohibited: exception to in
pari delicto if public policy is enhanced)
Justina Santos and her sister were the owners in common of a piece of land with 2 residential houses
thereon; the sisters lived in one of the houses while Wong Heng, a Chinese, lived with his family in the
other which was a restaurant; Justina became the owner of the entire property as her sister died; she
was 90 years old at the time and her only companions were her 17 dogs and 8 maids; Wong’s 4
children became the joy of her life and Wong’s himself was entrusted with the safekeeping of various
accounts including the rentals of the property he was leasing; Wong was also in charge of paying, on
her behalf, taxes, salaries and household expenses; in grateful acknowledgement Justina executed a
contract of lease in favor of Wong covering more land for 50 years giving him the right to withdraw at
any time; 10 days later the contract was amended to cover the entire property including the portion on
which her house stood; for his part Wong undertook to pay the food for her dogs and the salaries of
her maids; Justina then executed a contract giving Wong the option to buy the leased premises
conditioned in his obtaining Philippine citizenship; his petition pending in Rizal was withdrawn when it
was discovered that he was not a resident thereof; Justina then filed a petition to adopt him and his
children which was abandoned upon discovering the error in her belief that the adoption would confer
on them Philippine citizenship; she executed two contracts extending the lease to 99 years and fixing
the term of the option at 50 years
Justine them claimed that the various contracts were made by her because of machinations and
inducements and by taking advantage of her helplessness and that they were made to circumvent the
constitutional prohibition precluding aliens from acquiring lands in the Philippines and also of the Phil
Naturalization Laws

Wong (1) admitted that he enjoyed her trust and confidence but denied having taken advantage
thereof to secure the execution of the contracts in question (2) insisted that the various contracts were
freely and voluntarily entered into by the parties
LC: contracts declared null and void except the 1st lease contract
subsequent to the submission for decision to the CA both parties died and were substituted for the
current parties
PBC (1) annul lease contract as it lacks mutuality (2) it included a portion which was in custodia legis
at the time (3) the contract was obtained in violation of the fiduciary relations of the parties (4) consent
was vitiated (5) the lease contract is absolutely simulated like the rest of the contracts
the consent of Justina was given freely and voluntarily (1) where the contracting parties have agreed
that such option shall exist the exercise of the option is as much in the fulfillment of the contract as
any other act which may have been the subject of the contract (2) Justina became the owner of the
entire property upon the death of her sister hence when she else the property she did so already as
owner thereof and it was not in custodia legis (3) Wong was never an agent of Justina as the
relationship of the parties did not amount to an agency (4) Wong may have indeed supplied the data
which embodied the lease contract but this does not detract from the binding force of the contract as
it was fully explained to Justina by her own lawyer (5) the lawyer, in preparing in the lease contract,
tried to persuade her to modify the contract to a month-to-month basis but she remained firm and
unyielding (6) while her lawyer declared that he saw no money paid at the execution of the contract,
the consideration need not pass from one party to the other at the time of the execution because the
promise of one is the consideration for the other (7) the contracts considered collectively reveal an
insidious pattern to subvert by indirection the Constitution thus the illicit purpose became the illegal
cause rendering the contracts void (8) while a lease to an alien for a reasonable period and option
giving an alien the right to buy conditioned on his acquiring Phil citizenship are valid the arrangement
is clearly a virtual transfer of ownership whereby the owner divests himself of right the sum total of
which make up ownership consolidated in an alien (9) while the parties are in pari delicto there is still
relief as the original parties have since been instituted by their administrators to whom would be unjust
to impute their guilt (10) the exception to the rule is when the agreement is not illegal per se the plaintiff
may recover if public policy is thereby enhanced and the Constitutional provision is an expression of
public policy to conserve lands for the Filipinos (11) the policy would be defeated and its continued
violation sanctioned if instead of setting the contracts aside and ordering the restoration of the land to
the estate of Justina the Court applies the rule of in pari delicto (12) claims by Justina of rentals due
and Wong’s claims from liquidation of expenses are dismissed under Rule 69 Sec 123 of the Rules of
Proof whether the Court shall conclude there is neither deficit nor superavit and will let the matter rest
as in the ordinary course of things a person will live within his income
SC (1) contracts are set aside (2) land is ordered returned to the estate (3) respondent ordered to pay
the balance of his accounts and the amounts consigned shall be applied to the payment of rentals
until the premises are vacated
Frezel v Catitio (When the agreement is not illegal per se but is prohibited: applies only to contracts
merely prohibited to benefit private interest not those void ab initio)
petitioner is an Australian citizen who arrived in the Philippines and started engaging in business and
married a Filipino citizen; they legally separated (bed and board) without obtaining a divorce; petitioner
then arrived in Sydney and met respondent, a Filipino masseuse, who, unknown to petitioner, was
married to a German national; petitioner persuaded her to return to the Philippines telling her he was
eager to divorce his wife and marry her; defendant then proceeded to purchase various properties,
including one turned into a beauty parlor, all registered in the name of defendant; while he was abroad
he received a letter from defendants husband begging him to leave her alone; petitioner confronted her
and she admitted to being married but assured him that she would divorce him; petitioner then
continued purchasing properties, including a beach resort, and registered them in defendant’s name as
sole vendee; defendant’s petitions for divorce were denied as her husband opposed them wanting half
of all the property she owned in the Philippines before he would agree and threatening to file a
bigamy case; the parties agreed to put up a corporation but defendant changed her mind at the
last minute and was advised to insist on claiming ownership over the properties acquired during their
relationship; their relationship began deteriorating and petitioner decided to live separately and cut off
all contact; petitioner filed a complaint for recovery of real and personal properties and another
for specific performance, declaration of ownership, sum of money and damages
RTC Quezon: in favor of petitioner declaring him as owner
void ab ignition and in pari delicto favors respondent (1) the transactions are in violation of the
Constitution and are null and void and produces no legal effect at all (2) the petitioner being a party to
an illegal contract cannot ask to have his illegal objective carried out as one who loses money
by knowingly engaging in a contract or transaction which involves his own moral turpitude may
not maintain an action for his loses (3) equity follows the law and where the wrong of one party equals
that of the other the defendant is in the stronger position (4) the petitioner is charged with
the knowledge of the constitutional prohibition and it can be gleaned from the decision that the
petitioner was fully aware that he was disqualified thus he had the deeds placed in respondent’s name
as the sole vendee (5) the parties could not lawfully be wed and evidence on record shows petitioner
knew of respondent’s marriage but continued to purchase the subject properties and even if they
could be wed petitioner is still disqualified to own the properties in tandem with respondent (6) Art
1416 When the agreement is not illegal per se but merely prohibited the plaintiff may recover if public
policy is enhanced.. applies only to contracts which are merely prohibited to benefit private interests
not contracts void ab initio (7) the sales of the parcels of land in favor of petitioner are illegal per se as
they were entered into in violation of the Constitution (8) it may be unfair to bar petitioner from filing an
accion in rem verso for the properties or from recovering the money he paid but it is founded on
general principles of policy which the defendant has the advantage of contrary to the real justice as
between petitioner and respondent
SC affirming CA & RTC Davao: in favor of defendant (1) the parcels of land was purchased by
defendant based on documentary evidence (2) petitioner has no cause even if he was the buyer as he
is an alien disqualified from owning and acquiring lands (3) the sale to petitioner was null and void (4)
petitioner was precluded from recovering being in pari delicto (5) petitioner knowingly violated the
Constitution (6) allowing recovery would embolden aliens to violate the Constitution and defeat rather
than enhance policy

Villaroel v Estrada (Natural obligation distinguished from moral: voluntary assumption)

defendant’s mother obtained a loan from spouses Severina; defendant, as the sole heir, signed a
document in which he declared the amount of P1,000 to claimant; petitioner, as sole heir of lender,
filed the action of for collection
subsequent obligation voluntary (1) noted that the parties to the present case are the sole heirs of the
original creditors and debtor (2) although the action not recover the original obligation has already
prescribed when the claim was filed the action is not based on the original obligation but in which the
defendant contracted upon assuming the fulfillment of that obligation (3) defendant being the sole heir
of the original debtor with the right to succeed in his inheritance that debt contract by his mother
legally although it lost its effectiveness by prescription is now a moral obligation (4) rule that a promise
to pay a prescribed debt must be made by the same obligated person or by another legally authorized
by it is not applicable as what is demanded is not the fulfillment of the original debt but the later debt
which voluntarily assumed this obligation
SC affirming RTC: defendant condemned to pay petitioner the claimed amount of P1,000
Fisher v Robb (Natural obligation distinguished from moral: mere moral obligation over which human judges
have no jurisdiction)
the BOD of the Phil Greyhound Club told defendant to go to Shanghai and study the operation of a
dog racing course; while there he became acquainted with plaintiff who became interested in PGC;
plaintiff asked to take part therein as a shareholder and paid the 1st installment of his subscription and
subsequently his 2nd installment; defendant returned to Manila; due to manipulations during his
absence the enterprise failed; defendant undertook the organization of Philippine Racing Club and
immediately endeavored to save the investment of those who had subscribed to PGC by having the
PRC acquire the remaining assets; defendant wrote several letters to petitioner informing him of the
situation, stating that he felt morally responsible for the 2nd payments and would do everything
possible so that stockholders who paid the 2nd installments may receive the amount paid by them
through his personal funds without delay because they voluntarily assumed the responsibility to make
such payment as soon as they receive from PRC certain shares for their services as promoters;
plaintiff requested him to return the entire amount; defendant answered that it was not his duty to
reimburse the plaintiff for any loss which he might have suffered in connection with PGC in the same
way that he could not expect anyone to reimburse him for his own losses
moral obligation, courts have no jurisdiction (1) does not appear that plaintiff had consented to said
form of reimbursement of the P2,000 which he directly paid to PGC in satisfaction of the 2nd
installment thus the first requisite of a valid contract (consent) is not present (2) the contract sought to
be enforced by the plaintiff is onerous and for it to be legally valid there must be a consideration but he
has not given nor promised anything to the defendant which may compel the latter to make such
payment (3) a mere moral obligation will not furnish a consideration for an executory promise and the
promise made by the defendant is not the consideration required by Art 1261 as an essential element
for the legal existence of an onerous contract which would bind the promisor to comply with the
promise (4) defendant was prompted by a feeling of pity for plaintiff as a result of the loss he suffered
due to the failure of the enterprise (5) the obligation therefore is purely moral and as such is not
demandable in law but only in conscience over which human judges have no jurisdiction
SC: defendant is absolved from the complaint

Kalalo v Luz (Estoppel: no || defendant did not rely thereon)

plaintiff is an engineer who rendered services to defendant who is an architect for fees agreed upon to
be percentages of the fees of the latter; petitioner then sent a statement of account with an amount of
P59,565; respondent countered that the balance should only be P10,861 sending a check for
said amount; petitioner refused to accept the same as full payment; petitioner filed a complaint for
collection; defendant (1) admitted the petitioner rendered services but that some of the services were
not in accordance with the agreement and that the claims were unjustified (2) petitioner is in estoppel
as he led defendant to believe certain facts to exist and act upon such facts (3) the statement of
accounts specified various projects and such statement barred petitioner from asserting any
claim contrary to what was stated therein thus the court could not award fees in excess of what was
stated (4) sufficient that there had been representations intended to make the defendant act thereon (5)
it constituted a formal admission that bound petitioner and (6) the statement establishes prime facie
evidence of the accuracy and correctness of the items and can no longer be impeached for fraud or
mistake (7) statement constitutes the plaintiff’s own interpretation of the contract hence it is conclusive
against him
Commissioner: reported that the amount due to plaintiff is P51,540 + $28,000 less the amount
received and also recommended the payment of P5,000 as AF
(1) plaintiff is not in estoppel as defendant did not rely thereon and insisted on a claim that petitioner
was only entitled to P10,861 (2) estoppel may only apply when the person to whom
the representations may have even made relied and acted on such as it is an esential element that
the person invoking it had been influenced and had relied on the representations or conduct of
the person sought to be estopped (3) estoppel cannot be sustained by mere argument or doubtful
influence as it must be clearly proved in all its essential elements by cleat and convincing evidence (4)
when petitioner write the statement he had not yet consulted the services of his counsel and it was
only upon the advice of counsel that the terms of the contract were interpreted to him resulting in the
subsequent letters thus the statement was written through ignorance or mistake (5) statements which
arento estoppels nor judicial admission have no equality of conclusiveness and an opponent whose
admission have been offered against him may offer any evidence which serves as an explanation for
his former assertion and this may involve the showing of mistake (6) the ignorance or mistake was
sufficient that attended the writing of the statement was sufficient to overcome the prima facie
evidence of correctness (7) although the practical construction of a contract by one party can be
used against him but if he makes a wrong interpretation through carelessness or performs more than
the contract requires he is entitled to a restitutionary remedy and the other party should not
be permitted to profit by such mistakes
SC affirming TC: in favor of plaintiff ordering the defendant to pay P50,540 + $28,000 to be
converted using the exchange rate at the time of the payment of this judgment from which shall be
deducted the amount already paid + P8,000 AF
Miguel & Ventura v Catalino (Cases where estoppel applies: passivity and inaction justifies equitable defense of
plaintiffs claim to be the children and heirs of the original registered owners of a parcel of land; they
averred that defendant without their knowledge or consent had unlawfully taken possession of the
land, gathered its produce, and unlawfully excluded petitioners therefrom; defendant answered
pleading ownership and adverse possession for 30 years; plaintiffs are the children of Bacaquio who
acquired the land when his second wife died and sold it to defendant’s father; no formal deed of sale
was executed but since the sale over 30 years ago vendee and his son had been in possession of the
land in the concept of owner paying the taxes thereon and introducing improvements; plaintiff Ventura
on her own sold anew the same land to Agyapao who in turn sold it to his son
(1) while the sale to Agyapao by their father was invalid for lack of executive approval vendor Bacaquio
allowed the vendee to enter into possession and enjoy the land until his death and the appellant in turn
upon succeeding the deceased also remained inactive without taking any steps to reivindicate the lot
(2) passivity and inaction for 30 years justifies the equitable defense of laches as while defendant may
not be considered as having acquired title by virtue of continued possession the original owner’s right
to recover have been converted into a stale demand (3) vendor and his heir could have instituted an
action to annul the sale as they know of the invalidity of the sale but they waited 34 years to institute
the suit thus defendant was made to feel secure in the belief that no action would be filed and thus
would be prejudiced in the event the present action is not barred (4) the subsequent sale by Ventura
may not be contested as needing executive approval as it has not been shown that she is a non-
christian inhabitant like her father which is an essential fact that cannot be assumed (5) plaintiffs are
barred from recovery, their divestiture of all the elements of ownership of the land is complete
SC affirming TC: (1) dismissed the complaint (2) declared defendant to be the lawful owner (3) ordered
the issuance of a transfer certificate in his name
De Lima v Tio (Cases where estoppel applies: inaction and neglect leading to acquisitive prescription || always
a prescription period)
plaintiff alleged that a contract was entered into in 1936 by her husband wherein he sold her
paraphernal property to the predecessor-in-interest of defendant with a right to repurchase for an
unlimited time; her husband also sold an adjoining parcel of land; petitioner asserted her husband
entered into such contracts without authorization; in 1938 she sought the return of the lands but was
prevailed upon not to insist on such demand; it was not until 1964 that the complaint was actually
filed; defendant filed a motion to dismiss on the grounds that the causes of action were barred by
the statute of limitations and that defendant acquired the property by acquisitive prescription
(1) established doctrine that inaction and neglect convert what otherwise could be a valid claim into a
stale demand and such passivity is visited with the loss of such a right (2) clear from the complaint that
plaintiff waited almost 28 years before filing the action and the unexplained interval that plaintiff
allowed to lapse constitutes laches that places her in estoppel to question the validity of the
transactions executed (3) an action for recovery of title to, or possession of, real property can only be
brought within 10 years after the cause of such action accrues (4) the right of redemption could not be
for an unlimited period as in this kind of contracts the period may be either conventional [10 fixed by
the parties] or legal [4 fixed by law] so there is always a period within which the right of redemption
must be exercised otherwise the title of the purchaser becomes absolute (5) allegation of plaintiff of
demand is negligible as whether the period is reckoned from 1936 or 1938 much more than 10 years
had lapsed (6) not only was the action barred by prescription but the person in possession acquired
the property by acquisitive prescription as 10 years actual adverse possession by any person claiming
to be the owner for that time whether he had right to the possession to not could result in the
acquisition of the title thereto by prescription and the right of the plaintiff who had the better title is
barred by that adverse possession (7) good or bad faith is immaterial for purposes of acquisitive
prescription as adverse possession in either character ripens into ownership after 10 years (8) contract
dealing as it did with paraphernal property cannot be considered void but merely unenforceable
SC affirming TC: dismiss on the ground of the statute of limitations as well as laches

Fabian v Fabian (Implied trust: yes || if property is acquired through fraud there is an implied trust)
petitioners filed a complaint for reconveyance alleging their father bought from the govt a parcel
of land of the Friar Lands Estate; and when he died he was survived by his
children including the plaintiffs; defendants Silbina and Teodora, niece of te deceased, executed an
affidavit on the strength of which the lands were sold by the Director of Land, on behalf of the govt, to
them who took physical possession thereof and exercises all rights and obligations of ownership
including paying taxes and subdividing the lot into two equal parts; plaintiffs alleged that
the defendants acquired the property through fraud and that the affidavit they executed was a false
narration of facts becasue Sibling knew she was not the only daughter and heir and Teodora likewise
knew that as a mere niece she is precluded from inheriting in the presence of his 4 surviving daughters
thus the lot was not transferred to an innocent purchaser for value; defendants claim (1) Pablo
was not the owner of the lot at the time of his death as he had not fully paid the amortizations (2) they
are the absolute owners having purchased it from the government (3) they exercised all the attributes
of ownership and up to the present (4) the present action for reconveyance had already prescribed
LC: defendants had acquired a valid and complete title to the property by acquisitive prescription and
dismissed the complaint
(1) the lot was part of the friar lands estate governed by the Friar Lands Act thus title is reserved to the
government until the purchase makes full payment of all the required installments and interest thereon
however the govt retains no right as the owner as the reservation of title is made merely to protect the
interest of the govt so as to preclude or prevent the purchaser from encumbering or disposing of the
lot before full payment (2) the deed of conveyance and the certificate of title , at least in equity, retroact
thus pending the completion of the payment of the purchase price the purchaser is entitled to all the
benefits and advantages as well as losses which may accrue to the land (3) Pablo had paid five annual
installment to the govt and had been issued the sale certificate in his name at the title thus he was the
owner at the time of his death and his rights and interest over the property passed to his heirs upon his
demise (4) the assignment and sale of the lot to the defendants were therefore null and void as to the
portion sold to Teodora and as well as to that portion which lawfully devolved in favor of petitioners (5)
principle that if the property is acquired through fraud the person obtaining it is considered a trustee of
an implied trust for the benefit of the person from whom the property comes and in constructive trusts
the rule is that laches constitutes a bar to actions to enforce the trust and repudiation is not
required unless there is a concealment of the facts giving rise to the trust (6) the action was filed only
after 32 years and it was not shown that defendants concealed the facts going rise to the trust thus
the action should have been filed within 4 years from the discovery of the fraud which is deemed to
have taken place when the new certificate of title were issued exclusively in the names of defendants
(7) the statute of limitations operates from the moment such adverse title is asserted by the
possessor although generally actions for partition do not describe (8) not only had laches set in when
the petitioners instituted their action for reconveyance but their right to enforce the constructive trust
had already prescribed thus logically the acquisitive prescrioption has likewise operated to vest
absolute title in the defendants as they had exercised adverse possession
SC (1) dismissed as the motion to enforce the constructive trust had prescribed and full and complete
title has vested in the defendants by acquisitive prescription
Bueno v Reyes (Implied trust: yes || operation of law to prevent unjust enrichment)
petitioner filed an answer claiming a lot as property belonging to himself and to his 2 brothers; the
case was heard without opposition and the land was adjudicated to them; 23 years
thereafter petitioners filed an action for reconveyance alleging (1) the said lot originally belonged to
Jorge Bueno leaving the property to his children upon his death and that herein petitioner acquired the
same through intestate succession (2) defendant had the land declared in his name either in bad faith
or by mistake as he knew fully well that said land was never owner by them and has never been in
their possession (3) knowing further that said parcel belonged to and and was possessed by the wife
of defendant Francisco in conjunction with her siblings herein petitioners (4) the fact that defendants
were declared the owners has only bee discovered this year; defendants raised the defenses of laches,
imprescriptibility of title and prescription of action
(1) what was apparently designed to be an express trust for the filing of the answer in
the cadastral proceeding failed to materialize thus if any trust can be deduced it is an implied one
arising by operation of law to satisfy the demands of justice and to protect against unfair dealing of
downright fraud (2) registration of the property by one person in his name whether by mistake or fraud
impresses upon the title so acquired the character of a constructive trust for the real owner which
would justify the action for reconveyance (3) prescription supervenes where the trust is merely an
implied one where no fiduciary relationship exists and the trustee does not recognize the trust (4)
action for reconveyance is subject to prescription in 10 years but the constructive trust arose
by reason of the bad faith or mistake thus the cause of action is deemed to have accrued only upon
the discovery of such bad faith or mistake which is when they discovered that Francisco Reyes had
obtained registration of the property in violation of their agreement (5) the cadastral proceeding itself
was not constructive notice as the answer they had authorized him to file was not adverse to them
and neither may invoke the constructive notice rule on the basis of their own breach of the authority
given (6) the prescription period is to be reckoned from 1962 when the petitioners appeared on the
scened and tried to get possession wherein they discovered the mistaken or fraudulent registration (7)
more in keeping with justice to afford the plaintiffs as well as the defendants the opportunity to lay
their respective claims and defenses before the court in a full-blown litigation
SC: reversed order and the case is remanded for further proceedings
Tamayo v Callejo (Implied trust: no || express because created by the will of the parties)
petitioners owned a parcel of land and sold part of the northern portion to Fernando Domantay who
took possession thereof; sometime after thus sale Vicente Domantay died; his widow waived her rights
to the remaining portion of the original property in favor of her children, Mariano and Marcos, who
were then declared sole heirs of the deceased; the brothers then applied for registration of a parcel of
land alleging the they had thus inherited the same from their deceased father; they obtained
registration for a portion and acknowledged that the remaining portion thereof belonged to the estate
of Flor Mata; Domantay then sold the land he purchase to respondent who took possession;
Marcos sold his undivided share in the property to his brother herein petitioner; petitioner sold part of
the western portion of the property and upon the buyer’s request a surveyor went to the property
to prepare a subdivision plan and segregate the 7 hectares conveyed but such was not accomplished
as respondent refused entry to the portion he held and asked petitioner to exclude the same from
the transfer certificate held by the latter; petitioner refused thus respondent registered his adverse
claim over the land and had it annotated; petitioner claimed that respondent was outside the perimeter
of the area covered by the certificate and also pleaded the statute of limitations
land claimed by respondent is part of the land covered by the certificates of title and that it is held in
trust by petitioner (1) although the trust created may have had a constructive or implied nature, its
status was substantially affected by several circumstances such as when petitioner explicitly
acknowledged that his deceased parents has sold a portion to Domantay and that he us the absolute
owner of said land (2) the effect of such imparting is an express trust having been created by the will of
the parties (3) it expresses a continuing and subsisting trust not subject to the state of limitations until
repudiated in which case the period of prescription begins to run only from the time of the repudiation
(4) case at bar was filed on on June 25, 1952 when the period of prescription had barely begun to
run and the CA granted him affirmative relief (5) based on the records the portion bought by
respondent is persuasively shown to be that northern portion of the land of petitioner
SC affirming CA: (1) the action to enforce said trust does not prescribe (2) land is deemed reconveyed
to defendant after a survey defining with precision the metes and bounds of the area to be segregated
for respondent (3) case remanded to court of origin for preparation of a subdivision plan of the portion
to the segregated