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CASE DIGEST CONTRACT PART 3 1

MANILA RAILROAD VS LA COMPANIA Atlantic Company, but absolved the


TRANSATLANTICA Steamship Company from the complaint.

Facts: Issue:

Two locomotive boilers owned by The Manila (1) Is the Steamship Company liable to the
Railroad Company arrived at Manila via the plaintiff by reason of having delivered the
Steamship Alicante owned by Compañia boiler in question in a damaged condition? (2)
Trasatlantica de Barcelona. The equipment of Is the Atlantic Company liable to be made to
the ship for discharging heavy cargo was not respond to the steamship company for the
sufficiently strong to handle these boilers, so amount the latter may be required to pay to the
the Steamship Company had to procure plaintiff for the damage done ? (3) Is the
assistance from The Atlantic, Gulf and Pacific Atlantic Company directly liable to the plaintiff,
Company (hereafter called the Atlantic as the trial court held?
Company). The service to be performed by the
Atlantic Company consisted in bringing its Ruling:
floating crane alongside the Alicante, lifting the
boilers out of the ship's hold, and transferring The accident is to be attributed to the failure of
them to a barge which would be placed ready Leyden (foreman) to exercise the degree of
to receive them. care which an ordinarily competent and
prudent person would have exhibited under
While the boiler was being hoisted, it was not the circumstances which then confronted him.
properly done as the rivet near the head of the This conclusion of fact cannot be refuted; and,
boiler was caught under the edge of the hatch. indeed, no attempt is here made by the
The weight on the crane was thus increased appellant to reverse this finding of the trial
by a strain estimated at fifteen tons with the court.
result that the cable of the sling parted and the
boiler fell to the bottom of the ship's hold. It will be observed that a contractual relation
(natagak ang boiler unya nakaduha pa jud xa existed between the Railroad Company and
natagak) the Steamship Company; and the duties of the
latter with respect to the carrying and delivery
The boiler was badly damaged that it had to be of the boilers are to be discovered by
reshipped to England where it was rebuilt, and considering the terms and legal effect of that
afterwards was returned to Manila. The contract. A contractual relation also existed
Railroad Company's damage by reason of the between the Steamship Company and the
cost of repairs, expenses, and loss of the use Atlantic Company; and the duties owing by
of the boiler proved to be P22,343.29; and as the latter to the former with respect to the lifting
to the amount of the damage so resulting there and the transferring of the boilers are likewise
is practically no dispute. To recover these to be discovered by considering the terms and
damages the present action was instituted by legal effect of the contract between these
the Railroad Company against the Steamship parties. On the other hand, no contractual
Company who in turn caused the Atlantic relation existed directly between the
Company to be brought in as a codefendant, Railroad Company and the Atlantic
and insisted that whatever liability existed Company.
should be fixed upon the Atlantic Company as
an independent contractor who had Under the contract for transportation from
undertaken to discharge the boilers and had England to Manila, the Steamship Company is
become responsible for such damage as had liable to the plaintiff for the injury done to the
been done. boiler while it was being discharged from the
ship under articles 1103 and 1104 of the Civil
The judge of the Court of First Instance gave Code, for the consequences of the omission of
judgment in favor of the plaintiff against the the care necessary to the proper performance
of its obligation. The contract to transport and
CASE DIGEST CONTRACT PART 3 2

deliver at the port of Manila a locomotive the agreement was a most inequitable and
boiler, which was received by it in proper unfair one, and hence it is one that the
condition, is not complied with by delivery at Steamship Company can not be lightly
the port of destination of a mass of iron the assumed to have made. Understood in that
utility of which had been destroyed. sense it is the equivalent of licensing the
Atlantic Company to perform its tasks in any
The Steamship Company cannot escape manner and fashion that it might please, and
liability by reason of the fact that it employed a to hold it harmless from the consequences.
competent independent contractor to
discharge the boilers..
There may have been in the minds of the
Defenses of Atlantic officials of the Atlantic Company an idea that
Atlantic contends that by the terms of the the promise to use due care in the lifting
engagement in accordance with which the operations was not accompanied by a legal
Atlantic Company agreed to render the obligation, such promise being intended
service, all risk incident to the discharge of the merely for its moral effect as an assurance to
boilers was assumed by the Steamship the steamship company that the latter might
Company; and secondly, that the Atlantic rely upon the competence and diligence of the
Company should be absolved under the last employees of the Atlantic Company to
paragraph of article 1903 of the Civil Code, accomplish the work in a proper way. The
inasmuch as it had used due care in the contract can not be permitted to operate in this
selection of the employee whose negligent act one-sided manner. The two features of the
caused the damage in question. engagement, namely, the promise to use due
care and the exemption from liability for
At the hearing, the president of the Atlantic damage should be so construed as to give
company said that the agreement was that some legal effect to both. The result is, as
their company would not assume already indicated, that the Atlantic Company
responsibility for any damage. was bound by its undertaking to use due care
and that the exemption was intended to cover
The Atlantic Company offered in evidence a accidents due to hidden defects in the
number of letters which had been written by it apparatus or other unforeseeable occurrences
at different times, extending over a period of not having their origin in the immediate
years, in response to inquiries made by other personal negligence of the party in charge of
firms and persons in Manila concerning the the operations.
terms upon which the Atlantic Company would
make heavy lifts. The company recognized its W/N Atlantic should be absolved
duty to exercise due supervisory care; and the
exemption from liability, whatever may have We now proceed to consider the contention
been its precise words, had reference to that the Atlantic Company should be absolved
disasters which might result from some from liability to the Steamship Company under
inherent hidden defect in the lifting apparatus the last paragraph of article 1903 of the Civil
or other unforeseen occurrence not directly Code, which declares that the liability there
attributable to negligence of the company in referred to shall cease when the persons
the lifting operations. Neither party could have mentioned therein prove that they employed
supposed for a moment that it was intended to all the diligence of a good father of a family to
absolve the Atlantic Company from its duty to avoid the damage. Even when Atlantic used
use due care in the work. proper care in the selection of Leyden, the
obligation of the Atlantic Company was
The court said that if the exemption should be created by contract, and article 1903 is not
understood in the sense which counsel for the applicable to negligence arising in the
Atlantic Company now insists it should bear, course of the performance of a contractual
that is, as an absolute exemption from all obligation. Article 1903 is exclusively
responsibility for negligence, it is evident that concerned with cases where the
CASE DIGEST CONTRACT PART 3 3

negligence arises in the absence of damages brought upon the latter by the
agreement. failure of the Atlantic Company to use due
care in discharging the boiler, regardless
In discussing the liability of the Steamship of the fact that the damage was caused by
Company to the plaintiff Railroad Company we the negligence of an employee who was
have already shown that a party is bound to qualified for the work and who had been
the full performance of his contractual chosen by the Atlantic Company with due
engagements under articles 1101 et seq. of care.
the Civil Code, and other special provisions of
the Code relative to contractual obligations; Can the Atlantic Company be held directly
and if he falls short of complete performance liable to the Railroad Company?
by reason of his own negligence or that of any Having regard then to the bare fact that the
person to whom he may commit the work, he Atlantic Company undertook to remove the
is liable for the damages resulting therefrom.. boiler from the ship's hold and for this purpose
It is desirable, however, in this connection, to took the property into its power and control,
bring out somewhat more fully the distinction there arose a duty to the owner to use due
between negligence in the performance of a care in the performance of that service and to
contractual obligation (culpa contractual) and avoid damaging the property in the course of
negligence considered as an independent such operation. This duty was obviously in
source of obligation between parties not existence before the negligent act was done
previously bound (culpa aquiliana). which resulted in damage, and said negligent
act may, if we still ignore the existence of the
Justice Tracey, the author of the opinion from express contract, be considered as an act
which we have quoted, proceeds to observe done in violation of this duty.
that Manresa, in commenting on articles 1102
and 1104, has described these two species of The duty thus to use due care is an implied
negligence as contractual and extra- obligation, of a quasi contractual nature,
contractual, the latter being the culpa since it is created by implication of law in
aquiliana of the Roman law. "This terminology the absence of express agreement. The
is unreservedly accepted by Sanchez Roman conception of liability with which we are here
(Derecho Civil, fourth section, chapter XI, confronted is somewhat similar to that which is
article II, No. 12), and the principle stated is revealed in the case of the depositary, or
supported by decisions of the supreme court commodatary, whose legal duty with respect
of Spain, among them those of November 20, to the property committed to their care is
1896 (80 Jurisprudencia Civil, No. 151), and defined by law even in the absence of express
June 27, 1894 (75 Jurisprudencia Civil, No. contract; and it can not be doubted that a
182.)" person who takes possession of the property
of another for the purpose of moving or
The principle that negligence in the conveying it from one place to another, or for
performance of a contract is not governed by the purpose of performing any other service in
article 1903 of the Civil Code but rather by connection therewith (locatio operis faciendi),
article 1104 of the same Code was directly owes to the owner a positive duty to refrain
applied by this court in the case of Baer Senior from damaging it, to the same extent as if an
& Co.'s Successors vs. Compañia Maritima (6 agreement for the performance of such
Phil. Rep., 215); and the same idea has been service had been expressly made with the
impliedly if not expressly recognized in other owner. The obligation here is really a species
cases (N. T. Hashim & Co. vs. Rocha & Co., of contract le, and it has its source and
18 Phil. Rep., 315; Tan Chiong Sian vs. explanation in the vital fact that the active party
Inchausti & Co., 22 Phil. Rep., 152). has taken upon himself to do something with
or to the property and has taken it into his
What has been said suffices in our opinion to power and control for the purpose of
demonstrate that the Atlantic Company is performing such service. (Compare art. 1889,
liable to the Steamship Company for the Civil Code.)
CASE DIGEST CONTRACT PART 3 4

expressions was an unbroken line of ancient


In the passage which we have already quoted English precedents holding persons liable for
from the decision in the Rakes case this Court damage inflicted by reason of a misfeasance
recognized the fact that the violation of a quasi in carrying out an undertaking. The principle
contractual duty is subject to articles 1101, determined by the court in the case cited is
1103, and 1104 of the Civil Code and not expressed in the syllabus in these words: "If a
within the purview of article 1903. Manresa man undertakes to carry goods safely and
also, in the paragraph reproduced above, is of securely, he is responsible for any damage
the opinion that negligence, considered as a they may sustain in the carriage through his
substantive and independent source of neglect, though he was not a common carrier
liability, does not include cases where the and was to have nothing for the carriage."
parties are previously bound by any other Though not stated in so many words, this
obligation. Again, it is instructive in this decision recognizes that from the mere fact
connection to refer to the contents of article that a person takes the property of another into
1103 of the Civil Code, where it is declared his possession and control there arises an
that the liability proceeding from negligence is obligation in the nature of an assumpsit that he
demandable in the fulfillment of all kinds of will use due care with respect thereto. This
obligations. These words evidently must be considered a principle of universal
comprehend both forms of positive jurisprudence, for it is consonant with justice
obligations, whether arising from express and common sense and as we have already
contract or from implied contract (quasi seen harmonizes with the doctrine above
contract). deduced from the provisions of the Civil Code.

In this connection it is instructive to recall the The conclusion must therefore be that if there
celebrated case of Coggs vs. Bernard (2 Ld. had been no contract of any sort between the
Raym, 909), decided in the court of the King's Atlantic Company and the Steamship
Bench of England in the year 1703. The action Company, an action could have been
was brought by the owner of certain casks of maintained by the Railroad Company, as
brandy to recover damages from a person who owner, against the Atlantic Company to
had undertaken to transport them from one recover the damages sustained by the former.
place to another. It was alleged that in so doing Such damages would have been demandable
the defendant so negligently and improvidently under article 1103 of the Civil Code and the
put them down that one of the casks was action would not have been subject to the
staved and the brandy lost. The complaint did qualification expressed in the last paragraph of
not allege that the defendant was a common article 1903.
carrier or that he was to be paid for his
services. It was therefore considered that the The circumstance that a contract was made
complaint did not state facts sufficient to between the Atlantic Company and the
support an action for breach of any express Steamship Company introduces, however, an
contract. This made it necessary for the court important, and in our opinion, controlling factor
to go back to fundamental principles and to into this branch of the case. It cannot be
place liability on the ground of a violation of the denied that the Steamship Company had
legal duty incident to the mere fact of carriage. possession of this boiler in the capacity of
Said Powell, J.: "An action indeed will not lie carrier and that, as such, it was authorized to
for not doing the thing, for want of a sufficient make a contract with the Atlantic Company to
consideration; but yet if the bailee will take the discharge the same from the ship. Indeed, it
goods into his custody, he shall be answerable appears in evidence that even before the
for them; for the taking of the goods into his contract of affreightment was made the
custody is his own act." So Gould, J.: " . . . any Railroad Company was informed that it would
man that undertakes to carry goods is liable to be necessary for the Steamship Company to
an action, be he a common carrier or whatever procure the services of some contractor in the
he is, if through his neglect they are lost or port of Manila to effect the discharge, as the
come to any damage: . . .." Behind these ship's tackle was inadequate to handle heavy
CASE DIGEST CONTRACT PART 3 5

cargo. It is therefore to be assumed that the of the plaintiff directly against the Atlantic
Railroad Company had in fact assented to the Company but also with respect to the
employment of a contractor to perform this absolution of the Steamship Company and the
service. further failure of the court to enter judgment in
favor of the latter against the Atlantic
Now, it cannot be admitted that a person who Company. The Compañia Trasatlantica de
contracts to do a service like that rendered by Barcelona should be and is hereby adjudged
the Atlantic Company in this case incurs a to pay to the Manila Railroad Company the
double responsibility upon entering upon sum of twenty two thousand three hundred
performance, namely, a responsibility to the forty three pesos and twenty nine centavos
party with whom he contracted, and another (P22,343.29), with interest from May 11, 1914,
entirely different responsibility to the owner, until paid; and when this judgment is satisfied,
based on an implied contract. The two the Compañia Trasatlantica de Barcelona is
liabilities can not in our opinion coexist. It is a declared to be entitled to recover the same
general rule that an implied contract never amount from the Atlantic Gulf & Pacific
arises where an express contract has been Company, against whom judgment is to this
made. end hereby rendered in favor of the Compañia
Trasatlantica de Barcelona. No express
If double responsibility existed in such a case adjudication of costs of either instance will be
as this, it would result that a person who had made. So ordered.
limited his liability by express stipulation might ||| (Manila Railroad Co. v. La Compa, G.R. No.
find himself liable to the owner without regard 11318, [October 26, 1918], 38 PHIL 875-901)
to the limitation which he had seen fit to
impose by contract. There appears to be no
possibility of reconciling the conflict that would
be developed in attempting to give effect to
those inconsistent liabilities. The contract
which was in fact made, in our opinion,
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. It is of course quite clear that if the
Atlantic Company had 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. (Art. 1257, Civil Code;
Donaldson, Sim & Co. vs. Smith, Bell & Co., 2
Phil. Rep., 766; Uy Tam and Uy Yet vs.
Leonard, 30 Phil. Rep., 471.) In view of the
preceding discussion it is equally obvious that,
for lack of privity with the contract, the Railroad
Company can have no right of action to
recover damages from the Atlantic Company
for the wrongful act which constituted the
violation of said contract. The rights of the
plaintiff can only be made effective through
the Compañia Trasatlantica de Barcelona with
whom the contract of affreightment was made.

The judgment entered in the Court of First


Instance must, therefore, be reversed not only
with respect to the judgment entered in favor
CASE DIGEST CONTRACT PART 3 6

G.R. No. 118248. April 5, 2000 accept the tendered rental fee and to
DKC HOLDINGS CORPORATION V. CA surrender possession of the property to
petitioner. On April 23, 1990, petitioner filed
FACTS: a complaint for specific performance and
The subject of the controversy is a 14,021 damages against Victor and the Register of
square meter parcel of land located in Deeds. Petitioner prayed for the surrender
Valenzuela, which was originally owned by and delivery of possession of the subject land
private respondent Victor U. Bartolome’s in accordance with the Contract terms; the
deceased mother, Encarnacion Bartolome, surrender of title for registration and
under TCT No. B-37615 of the Register of annotation thereon of the Contract. RTC
Deeds of Metro Manila, District III. This lot was dismissed the complaint.
in front of one of the textile plants of petitioner ISSUE: W/N the Contract of Lease with Option
and, as such, was seen by the latter as a to Buy entered into by the late Encarnacion
potential warehouse site. On March 16, 1988, Bartolome with petitioner was terminated upon
petitioner entered into a Contract of Lease with her death and does not bind her sole heir,
Option to Buy with Encarnacion Bartolome, Victor, even after her demise
whereby petitioner was given the option to HELD: No, under both Article 1311 of the Civil
lease or lease with purchase the subject land, Code and jurisprudence, the legal heir, Victor,
which option must be exercised within a period is bound by the subject Contract of Lease with
of two years counted from the signing of the Option to Buy executed by his predecessor-in-
Contract. In turn, petitioner undertook to pay interest, Encarnacion. It is futile for Victor to
P3,000 a month as consideration for the insist that he is not a party to the contract
reservation of its option. Within the two-year because of the clear provision of Article 1311
period, petitioner shall serve formal written of the Civil Code. Indeed, being an heir of
notice upon the lessor Encarnacion Bartolome Encarnacion, there is privity of interest
of its desire to exercise its option. The contract between him and his deceased mother. He
also provided that in case petitioner chose to only succeeds to what rights his mother
lease the property, it may take actual had and what is valid and binding against
possession of the premises. In such an event, her is also valid and binding as against
the lease shall be for a period of six years, him. The general rule is that heirs are
renewable for another six years, and the bound by contracts entered into by their
monthly rental fee shall be P15,000 for the first predecessors-in-interest except when the
six years and P18,000 for the next six years, rights and obligations arising therefrom are not
in case of renewal. transmissible by (1) their nature, (2) stipulation
Petitioner regularly paid the monthly P3,000 or (3) provision of law.
provided for by the Contract to Encarnacion
until her death in January 1990. Thereafter, The nature of intransmissible rights as
petitioner coursed its payment to private explained by Arturo Tolentino, an eminent
respondent Victor Bartolome, being the sole civilist, is as follows:
heir of Encarnacion. Victor, however, refused "Among contracts which are intransmissible
to accept these payments. Meanwhile, on are those which are purely personal, either by
January 10, 1990, Victor executed an provision of law, such as in cases of
Affidavit of Self-Adjudication over all the partnerships and agency, or by the very nature
properties of Encarnacion, including the of the obligations arising therefrom, such as
subject lot. Accordingly, respondent Register those requiring special personal qualifications
of Deeds cancelled TCT No. B-37615 and of the obligor. It may also be stated that
issued Transfer Certificate of Title No. V- contracts for the payment of money debts are
14249 in the name of Victor Bartolome. not transmitted to the heirs of a party, but
On March 14, 1990, petitioner served upon constitute a charge against his estate. Thus,
Victor, via registered mail, notice that it was where the client in a contract for professional
exercising its option to lease the property, services of a lawyer died, leaving minor heirs,
tendering the amount of P15,000 as rent for and the lawyer, instead of presenting his claim
the month of March. Again, Victor refused to for professional services under the contract to
CASE DIGEST CONTRACT PART 3 7

the probate court, substituted the minors as a property interest in the subject matter of the
parties for his client, it was held that the contract.
contract could not be enforced against the
minors; the lawyer was limited to a recovery on
the basis of quantum meruit."
It has also been held that a good measure for
determining whether a contract terminates
upon the death of one of the parties is whether
it is of such a character that it may be
performed by the promissor’s personal
representative. Contracts to perform personal
acts which cannot be as well performed by
others are discharged by the death of the
promissor. Conversely, where the service or
act is of such a character that it may as well
be performed by another, or where the
contract, by its terms, shows that
performance by others was contemplated,
death does not terminate the contract or
excuse nonperformance.

In the case at bar, there is no personal act


required from the late Encarnacion Bartolome.
Rather, the obligation of Encarnacion in the
contract to deliver possession of the subject
property to petitioner upon the exercise by the
latter of its option to lease the same may very
well be performed by her heir Victor.

As early as 1903, it was held that "(H)e who


contracts does so for himself and his
heirs." In 1952, it was ruled that if the
predecessor was duty-bound to reconvey land
to another, and at his death the reconveyance
had not been made, the heirs can be
compelled to execute the proper deed for
reconveyance. This was grounded upon the
principle that 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.
In the case at bar, the subject matter of the
contract is likewise a lease, which is a property
right.

The death of a party does not excuse non-


performance of a contract which involves a
property right, and the rights and
obligations thereunder pass to the
personal representatives of the deceased.
Similarly, nonperformance is not excused by
the death of the party when the other party has
CASE DIGEST CONTRACT PART 3 8

TRUST RECEIPTS LAW – under its SCS Program, not a dealer primarily
DANILO RICO II obligated to PPI for the products delivered to
her; that she had not collected from the
SPOUSES QUIRINO V. DELA CRUZ and farmers participating in the SCS Program
GLORIA DELA CRUZ, because of the typhoon Kading that had
VS. destroyed the participating farmers’ crops.
PLANTERS PRODUCTS, INC.
G. R. No. 158649; February 18, 2013; The RTC found that based on the terms and
Bersamin conditions of the SCS Program, a creditor-
debtor relationship was created between
Action: Petition for Review on certiorari. Gloria and PPI. It ordered petitioners to pay
Facts: the respondent. The CA affirmed the judgment
of the RTC.
Gloria de la Cruz applied for and was granted
by respondent Planters Products, Inc. (PPI) a Issue: whether the two transaction documents
regular credit line of P200,000 for a 60- day signed by Gloria expressed the intent of the
term, with trust receipts as collaterals. She and parties to establish a creditor-debtor
her husband, Quirino, submitted a list of their relationship between the petitioner and the
assets in support of her credit application for respondent?
participation in the Special Credit Scheme
(SCS) of PPI. Ruling: Yes.

Gloria signed a Trust Receipt/Special Credit Gloria signed the application for credit facilities
Scheme, indicating the invoice number, indicating that a trust receipt would serve as
quantity, value, and names of the agricultural collateral for the credit line. Gloria, as “dealer,”
inputs she received “upon the trust” of PPI. signed together with Quirino the list of their
Gloria thereby subscribed to specific assets that they tendered to PPI “to support
undertakings. our credit application in connection with our
participation to your Special Credit Scheme.”
The products were released to Gloria under Gloria further signed the Trust Receipt/SCS
the supervision of Cristina G. Llanera of documents defining her obligations under the
PPI.The 60-day credit term lapsed without agreement, and also the invoices pursuant to
Gloria paying her obligation under the Trust the agreement with PPI, indicating her having
Receipt/SCS. received PPI products on various dates.

PPI brought against Quirino and Gloria a These established circumstances comprised
complaint for the recovery of a sum of money by the contemporaneous and subsequent acts
with prayer for a writ of preliminary attachment. of Gloria and Quirino that manifested their
PPI alleged that Gloria had violated the intention to enter into the creditor-debtor
“fiduciary undertaking in the Trust Receipt relationship with PPI show that the CAproperly
agreement covering product withdrawals held the petitioners fully liable to PPI. The law
under the Special Credit Scheme which were of contracts provides that in determining the
subsequently charged to defendant dealer’s intention of the parties, their contemporaneous
regular credit line; therefore, she is guilty of and subsequent acts shall be principally
fraudulently misapplying or converting to her considered.
own use the items delivered to her as
contained in the invoices.” It charged that Consequently, the written terms of their
Gloria did not return the goods indicated in the contract with PPI, being clear upon the
invoices and did not remit the proceeds of intention of the contracting parties, should be
sales. literally applied.

In her answer, the petitioners alleged that The first circumstance was the credit line
Gloria was only a marketing outlet of PPI of P200,000.00 that commenced the business
CASE DIGEST CONTRACT PART 3 9

relationship between the parties. A credit line


is really a loan agreement between the WHEREFORE, the Court AFFIRMS the
parties. The second circumstance was the Decision by the Court of Appeals, subject to
offer by Gloria of trust receipts as her collateral the MODIFICATIONS.
for securing the loans that PPI extended to
her. The third circumstance was the offer of
Gloria and Quirino to have their conjugal real
properties beef up the collaterals for the credit
line. Gloria signed the list of the properties
involved as "dealer," thereby ineluctably
manifesting that Gloria considered herself a
dealer of the products delivered by PPI under
the credit line. The fourth circumstance had to
do with the undertakings under the trust
receipts. A close look at the Trust
Receipt/SCS indicates that the farmer-
participants were mentioned therein only with
respect to the duties and responsibilities that
Gloria personally assumed to undertake in
holding goods "in trust for PPI." Under the
notion of relativity of contracts embodied in
Article 1311 of the Civil Code, contracts take
effect only between the parties, their assigns
and heirs.

At this juncture, the Court clarifies that the


contract, its label notwithstanding, was not a
trust receipt transaction in legal contemplation
or within the purview of the Trust Receipts
Law (Presidential Decree No. 115) such that
its breach would render Gloria criminally liable
for estafa.

There are two obligations in a trust receipt


transaction. The first is covered by the
provision that refers to money under the
obligation to deliver it (entregarla) to the owner
of the merchandise sold. The second is
covered by the provision referring to
merchandise received under the obligation to
return it (devolverla) to the owner. However,
had PPI intended to charge Gloria with estafa,
it could have then done so. Instead, it brought
this collection suit, a clear indication that the
trust receipts were only collaterals for the
credit line as agreed upon by the parties.

As the assignor "with recourse" of the Trust


Agreement executed by the farmer
participating in the SCS, therefore, Gloria
made herself directly liable to PPI for the value
of the inputs delivered to the farmer-
participants.
CASE DIGEST CONTRACT PART 3 10

-The Court after hearing the motion for


Florentino vs. Encarnacion, Sr. withdrawal and the opposition issued an order
GUERRERO, September 30, 1977 and for the purpose of ascertaining and
implifying that the products of the land made
NATURE subject matter of this land registration case
APPEAL from the decision of the Court of First had been used in answering for the payment
Instance of Ilocos Sur. Arciaga, J. of expenses for the religious functions
specified in the Deed of Extrajudicial Partition
FACTS which was no registered in the office of the
-On May 22, 1964, the petitioners-appellants Register of Deeds from time immemorial; and
and the petitioners-appelleed filed with CFI an that the applicants knew of this arrangement
application for the registration under Act 496 and the Deed of Extrajudicial Partition of
of a parcel of agricultural land located at August 24, 1947, was not signed by Angel
Cabugao, Ilocos Sur. The application alleged Encarnacion or Salvador Encarnacion, Jr.
among other things that the applicants are the -CFI: The self-imposed arrangement in favor
common and pro-indiviso owners in fee simple of the Church is a simple donation, but is void
of the said land with the improvements existing since the donee has not accepted the donation
thereon; that to the best of the knowledge and and Salvador Encarnacion, Jr. and Angel
belief, there is no mortgage, hen or Encarnacion had not made any oral or written
encumbrance of any kind whatsoever affecting grant at all so the court allowed the religious
said land, nor any other person having any expenses to be made and entered on the
estate or interest thereon, legal or equitable, undivided shares, interests and participations
remainder, reservation at in expectancy; that of all the applicants in this case, except that of
said applicants had acquired the aforesaid Salvador Encarnacion, Sr., Salvador
land thru and by inheritance from their Encarnacion, Jr. and Angel Encarnacion."
predecessors in interest, their aunt, Doña -the petitioners-appellants filed their Reply to
Encarnacion Florentino, and Angel the Opposition reiterating their previous
Encarnacion acquired their respective shares arguments, and also attacking the jurisdiction
of the land thru purchase from the original of the registration court to pass upon the
heirs, Jesus, Caridad, Lourdes and Dolores, validity or invalidity of the agreement Exhibit
all surnamed Singson, on one hand and from O-1, alleging that such is litigable only in an
Asuncion Florentino on the other. ordinary action and not proper in a land
-After due notice and publication, the Court set registration proceeding.
the application for hearing. Only the Director of -The Motion for Reconsideration and of New
Lands filed an opposition but was later Trial was denied for lack of merit, but the court
withdrawn so an order of general default was modified in highlighting that the donee Church
issued. Upon application of the applicants, the has not showed its clear acceptance of the
Clerk of Court was commissioned and donation, and is the real party of this case, not
authorized to receive the evidence of the the petitioners-appellants
applicants and ordered to submit the same for
the Court's proper resolution. ISSUES
-Exhibit O-1 embodied in the deed of 1. WON the lower own erred in concluding that
extrajudicial partition (Exhibit O), which states the stipulation embodied in Exhibit O on
that with respect to the land situated in Barrio religious expenses is just an arrangement
Lubong, Dacquel, Cabugao, Ilocos Sur, the stipulation, or grant revocable at the unilateral
fruits thereof shall serve to defray the religious option of the co-owners
expenses, was the source of contention in this 1.1 WON the lower court erred in finding and
case (Spanish text). Florentino wanted to concluding that the encumbrance or religious
include Exhibit O-1 on the title but the expenses embodied in Exhibit O, the
Encarnacions opposed and subsequently extrajudicial partition between the co-heirs, is
withdrawn their application on their shares, binding only on the applicants Miguel
which was opposed by the former. Florentino, Rosario Encarnacion de
Florentino, Manuel Arce, Jose Florentino,
CASE DIGEST CONTRACT PART 3 11

Antonio Florentino, Victorino Florentino, benefited by the stipulation. The intention of


Remedios Encarnacion and Severina the parties may be disclosed by their contract.
Encarnacion It matters not whether the stipulation is in the
2. WON the lower court erred in holding that nature of a gift or whether there is an obligation
rule that the petitioners-appellants are not the owing from the promise to the third person.
real parties in interest, but the Church That no such obligation exists may in some
3. WON the lower court as a registration court degree assist in determining whether the
erred in passing upon the merits of the parties intended to benefit a third person.
encumbrance (Exhibit O-1) as the same was -The evidence on record shows that the true
never put to issue and as the question involved intent of the parties is to confer a direct and
is an adjudication of rights of the parties material benefit upon the Church.
- While a stipulation in favor of a third person
HELD has no binding effect in itself before its
1. YES, the court erred in concluding that acceptance by the party favored, the law does
the stipulation is just an arrangement not provide when the third person must make
stipulation. It cannot be revoked his acceptance. As a rule, there is no time limit;
unilaterally. such third person has all the time until the
Ratio The contract must bind both parties, stipulation is revoked. Here, We find that the
based on the principles (1) that obligation Church accepted (implicitly) the stipulation in
wising from contracts have the force of law its favor before it is sought to be revoked by
between the contracting parties; and (2) that some of the coowners.
them must be mutuality between the parties
band on their essential equality, to which is 1.1 YES, the court should have found the
repugnant to have one party bound by the other co-owners to be bound by the
contract leaving the other free therefrom. extrajudicial partition.
Reasoning The stipulation (Exhibit O-1) is Ratio Being subsequent purchasers, they are
part of an extrajudicial partition (Exh. O) duly privies or successors in interest; it is axiomatic
agreed and signed by the parties, hence the that contracts are enforceable against the
same must bind the contracting parties thereto parties and their privies.
and its validity or compliance cannot be left to Reasoning The co-owners are shown to have
the will of one of them given their conformity to such agreement
- The said stipulation is a stipulation pour when they kept their peace in 1962 and 1963,
autrui. A stipulation pour autrui is a having already bought their respective shares
stipulation in favor of a third person conferring of the subject land but did not question the
a clear and deliberate favor upon him, and enforcement of the agreement as against
which stipulation is merely a part of a contract them. They are also shown to have knowledge
entered into by the parties, neither of whom of Exhibit O-1 as they had admitted in a Deed
acted as agent of the third person, and such of Real Mortgage executed by them.
third person may demand its fulfillment
provided that he communicates his 2. YES
acceptance to the obligor before it is revoked. Ratio That one of the parties to a contract pour
-Requisites: (1) that the stipulation in favor of autrui is entitled to bring an action for its
a third person should be a part, not the whole, enforcement or to prevent its breach is too
of the contract, (2) that the favorable clear to need any extensive discussion. Upon
stipulation should not be conditioned or the other hand, that the contract involved
compensated by any kind of obligation contained a stipulation pour autrui amplifies
whatever; and (3) neither of the contracting this settled rule only in the sense that the third
parties bears the legal representation or person for whose benefit the contract was
authorization of third party. entered into may also demand its fulfillment
-Valid stipulation pour autrui: it must be the provided he had communicated his
purpose and intent of the stipulating parties to acceptance thereof to the obligor before the
benefit the third person, and it is not sufficient stipulation in his favor is revoked.
that the third person may be incidentally
CASE DIGEST CONTRACT PART 3 12

Reasoning The annotation of Exhibit O-1 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.

3. NO
Ratio The otherwise rigid rule that the
jurisdiction of the Land Registration Court,
being special and limited in character and
proceedings thereon summary in nature, does
not extend to cases involving issues properly
litigable in other independent suits or ordinary
civil actions

Reasoning The peculiarity of the exceptions


is based not alone on the fact that Land
Registration Courts are likewise the same
Courts of First Instance, but also the following
premises: (1) Mutual consent of the parties or
their acquiescence in submitting the aforesaid
issues for determination by the court in the
registration proceedings; (2) Full opportunity
given to the parties in the presentation of their
respective sides of the issues and of the
evidence in support thereto; (3) Consideration
by the court that the evidence already of
record is sufficient and adequate for rendering
a decision upon these issues.
-Also, the case has been languishing in our
courts for thirteen long years. To require that it
be remanded to the lower own for another
proceeding under its general jurisdiction is not
in consonance with our avowed policy of
speedy justice.

Dispositive IN VIEW OF THE FOREGOING,


the decision of the Court of First Instance of
Ilocos Sur in Land Registration Case No. N-
310 is affirmed but modified to allow the
annotation of Exhibit O-1 as an encumbrance
on the face of the title to be finally issued in
favor of all the applicants (herein appellants
and herein appellees) in the registration
proceedings below.
No pronouncement as to costs.
SO ORDERED
CASE DIGEST CONTRACT PART 3 13

water facility site. The Guiang spouses


(defendants below) denied having had
MARMONT RESORT HOTEL v. Sps. Guiang any previous knowledge of the first
and CA Memorandum of Agreement and
“water supply” asserted that the second Memorandum
Art. 1131: Stipulation Pour Autrui of Agreement was invalid for not having
been executed in accordance with law.
 A Memorandum of Agreement was ISSUE:
executed between Maris Trading and Is the case at a bar a case of stipulation pour
petitioner Marmont Resort Hotel autrui under 1311 of the Civil Code?  YES
Enterprises, Inc. ("Marmont"), a RULING:
corporation engaged in hotel and resort  A closer scrutiny of the second and third
business. Under the agreement, Maris paragraphs of the second
Trading undertook to drill for water and Memorandum of Agreement discloses
to provide all equipment necessary to that the first Memorandum of
install and complete a water supply Agreement, including the obligations
facility to service the Marmont Resort imposed thereunder upon Maris
Hotel for a stipulated fee of P40,000.00. Trading, had been acknowledged. The
 In fulfillment of its contract, Maris above paragraphs establish, among
Trading installed a water pump on a other things, that construction work had
portion of a parcel of land situated in been performed by Maris trading on the
Olongapo City, then occupied by land occupied by respondent spouses;
respondent spouses Federico and that such construction work had been
Aurora Guiang performed in accordance with terms
 Five (5) months later, a second and conditions stipulated in the first
Memorandum of Agreement was Memorandum of Agreement and that
executed between Maris Trading and the purpose of the work was to build a
Aurora Guiang, with Federico Guiang water supply facility for petitioner
signing as witness. Marmont. The same excerpts also
 After some time, the water supply of the show that the work so performed was
Marmont Resort Hotel became with the knowledge and consent of
inadequate to meet the hotel's water the Guiang spouses, who were then
requirements. Petitioner Marmont occupying the land. It is clear from the
secured the services of another foregoing stipulations that petitioner
contractor, which suggested that in Marmont was to benefit from the
addition to the existing water pump, a second Memorandum of Agreement. In
submersible pump be installed to fact, said stipulations appear to have
increase the pressure and improve the been designed precisely to benefit
flow of water to the hotel. Accordingly, petitioner and, thus, partake of the
Juan Montelibano, Jr., manager of the nature of stipulations pour autrui,
Marmont Resort Hotel, sought contemplated in Article 1311 of the
permission from the Guiang spouses to Civil Code.
inspect the water pump which had been  A stipulation pour autrui is a
installed on the portion of the land stipulation in favor of a third person
previously occupied by the spouses conferring a clear and deliberate
and to make the necessaryadditional favor upon him,which stipulation is
installations thereon. No such found in a contract entered into by
permission, however, was granted. parties neither of whom acted as
 Petitioner Marmont filed a Complaint 2 agent of the beneficiary.
against the Guiang spouses for  In the case at bar the purpose and
damages resulting from their refusal to intent of the stipulating parties (Maris
allow representatives of petitioner and Trading and respondent spouses) to
the second contractor firm entry into the benefit the third person (petitioner
CASE DIGEST CONTRACT PART 3 14

Marmont) is sufficiently clear in the alternative source of water for its hotel
second Memorandum of Agreement. which of course involved expenditure of
Marmont was not of course a party to money and perhaps loss of hotel
that second Agreement but, as revenues. We believe they should
correctly pointed out by the trial court respond in damages.
and the appellate court, the respondent
spouses could not have prevented
Maris Trading from entering the
property possessory rights over which
had thus been acquired by Maris
Trading.
 That respondent spouses remained in
physical possession of that particular
bit of land, is of no moment; they did so
simply upon the sufferance of Maris
Trading. Had Maris Trading, and not
the respondent spouses, been in
physical possession, we believe that
Marmont would have been similarly
entitled to compel Maris Trading to give
it (Marmont) access to the site involved.
 The two (2) courts failed to take
adequate account of the fact that the
sole purpose of Maris Trading in
acquiring possessory rights over that
specific portion of the land where well
and pump and piping had been
installed, was to supply the water
requirements of petitioner's hotel
purpose was known by respondent
spouses, is made explicit by the second
Memorandum of Agreement
 Trading itself had no need for a water
supply facility; neither did the
respondent spouses. The water facility
was intended solely for Marmont Resort
Hotel. The interest of Marmont
cannot therefore be regarded as
merely "incidental."
 Finally, even if it be assumed that the
second Memorandum of Agreement did
not constitute a stipulation pour autrui,
still respondent spouses, in the
circumstances of this case, must be
regarded as having acted contrary to
the principles of honesty, good faith and
fair dealing embodied in Articles 19 and
21 of the Civil Code when they refused
petitioner Marmont access to the water
facility to inspect and repair the same
and to increase its capacity and thereby
to benefit doing, respondent spouses
forced petitioner Marmont to locate an
CASE DIGEST CONTRACT PART 3 15

for the losses and damages occasioned by the


sale. Also, Duran had been occupying the said
Gutierrez Hermanos Vs Orense (Gr. No. L- propertysince February 14, 1911, and refused
9188 1914) to pay the rental notwithstanding the demand
made upon him at the rate of P30 per month.
Facts: Plaintiff prays that the land and improvements
Orense is the owner a parcel of land (with be declared as belonging legitimately and
masonry house, and with the nipa roof exclusively to him, and that defendant be
erected) situated in the pueblo of Guinobatan, ordered to execute in the plaintiff's behalf the
Albay. This property has been recorded in the said instrument of transfer and conveyance of
new property registry in his name. Feb 14, the property and of all the right, interest, title
1907. Jose DURAN, a nephew of Orense, and share which the defendant has.
executed before a notary apublic instrument Respondent contends that the Facts in the
that he sold and conveyed to the plaintiff complaint did not constitute a cause of action
company the said property for P1,500 and that and He is the lawful owner of the property
the vendor Duran reserved to himself the right claimed in the complaint, and since his
to repurchase it for the same price within a Ownership was recorded in the property
period of four years. registry, this was conclusive against the
plaintiff, He had not executed any written
Gutierrez Hermanos had not entered into power of attorney nor given any verbal
possession of the purchased property, authority to Jose DURAN to sell the property
because of its continued occupancy by to Gutierrez Hermanos. His knowledge of the
ORENSE and DURAN by virtue of a contract sale was acquired long after the execution of
of lease executed by the plaintiff to Duran, the contract of sale between Duran and
effective up to February 14, 1911.After the Gutierrez Hermanos, and he did not
lapse of the four years stipulated for the intentionally and deliberately perform any act
redemption, the defendant refused to deliver such as might have induced the plaintiff
the property to the purchaser. Gutierrez company to believe that Duran was
Hermanos then charged DURAN with estafa, empowered and authorized by the defendant.
for having represented himself in the said
deed of sale to be the absolute owner of the Issue:
land. During that trial, when ORENSE was
called as a witness, he admitted that he Whether Orense is bound by Duran’s act of
consented to Duran’s selling of property under selling plaintiff’s property.
right of redemption. Because of this, the court
acquitted DURAN for charge of estafa. Mar 5, Held:
1913 Gutierrez Hermanos then filed a Yes. Ratio It having been proven at the trial
complaint in the CFI Albay against Engracio that he gave his consent to the said sale, it
Orense. follows that the defendant conferred verbal, or
at least implied, power of agency upon his
Petitioner Claims that The instrument of sale nephew Duran, who accepted it in the same
of the property, executed by Jose Duran, was way by selling the said property. The principal
publicly and freely confirmed and ratified by must therefore fulfill all the obligations
ORENSE. In order to perfect the title to the contracted by the agent, who acted within the
said property, all plaintiff had to do was scope of his authority. (Civil Code, arts. 1709,
demand of Orense to execute in legal form a 1710 and
deed of conveyance. But Orense refused to do 1727)Article 1259 of the Civil Code prescribes:
so, without any justifiable cause or reason, and "No one can contract in the name of another
so he should be compelled to execute the said without being authorized by him or without his
deed by an express order of the court. Jose legal representation according to law. A
DURAN is notoriously insolvent and cannot contract executed in the name of another by
reimburse the plaintiff company for the price of one who has neither his authorization nor legal
the sale which he received, nor pay any sum representation shall be void, unless it should
CASE DIGEST CONTRACT PART 3 16

be ratified by the person in whose name it was


executed before being revoked by the other
contracting party.”- The sworn statement
made by the defendant, Orense, while
testifying as a witness at the trial of Duran for
estafa, virtually confirms and ratifies the sale
of his property effected by his nephew, Duran,
and, pursuant to article 1313 of the Civil Code,
remedies all defects which the contract may
have contained from the moment of its
execution.
CASE DIGEST CONTRACT PART 3 17

a. Agreement was that Burke


would pay for repairs in
CW ROSENSTOCK (as admin of estate of exchange for gratuitous use of
HW ELSER) v the yacht
EDWIN BURKE, THE COOPER COMPANY b. Cross-complaint: comply with
1924 letter stating sale, and give
Ponente: Avancena, J. downpayment of 10k

FACTS TRIAL COURT

1. Burke owned a yacht called 1. With respect to Burke: Pay 6k to Elser,


Bronzewing purchased in Australia for pay 1k to Cooper Company for unpaid
sale repairs
2. Burke mortgaged it for a loan of 100k 2. With respect to Elser: Purchase the
from Mr Avery (manager of Asia yacht (appealed by Elser to SC)
Banking Corp), which he was unable to
pay ISSUE
3. Elser wanted organize a yacht club and
sell the yacht to members of the club for WON letter written on 3 April 1922 was a valid
120k contract of sale binding on Elser
4. Elser would keep 20k as commission
and 100k would go to Burke RULING
5. Burke acquired a written option saying
that Elser confirmed his verbal offer of 1. No
120k for the yacht, with the offer open a. A common man would use “I am
for 30 days from 12 Feb 1922 willing to buy, I intend to
6. Elser proposed conducting a pleasure purchase”
cruise the south, with prominent b. Elser was a prosperous
businessmen aboard the yacht as a merchant and so his specific
means to advertise the yacht words should be presumed to
7. To fix the yacht, Elser incurred have been chosen for specific
expenses of 6k because Burke had no effect. Thus his statement that “I
money am willing to entertain the
8. Elser attempted to loan 20k from Mr purchase” shows that he did not
Avery but the latter refused, in view of intend to buy the yacht, but
the subsisting debt merely ENTERTAINED the idea
9. Elser notified Burke that he was now c. Esler never wanted to buy the
unwilling to purchase the yacht for more yacht for himself, only sell it to
than 70k and that he should talk to Mr members of a yacht club
Avery d. Elser only considered
10. Elser wrote a letter (3 April 1922) purchasing the yacht when he
stating that he would pay 80k for the negotiated with Avery to obtain a
yacht, with 10k downpayment and 5k 20k loan to replace the engine.
monthly installments, and would use Since he had not yet acquired
80k worth of stocks from Pickering Inc the 20k to replace the engine, it
as security, signed by Burke, Elser, can be assumed that he was not
Avery yet willing to purchase the yacht
11. Current action is for Elser’s recovery of e. 3 April 1922 letter was made by
6k used to fix the yacht stenographer who supports
Elser’s claim that Elser refused
ARGUMENTS to remove “entertained” even
when Burke asked to remove it
1. Burke
CASE DIGEST CONTRACT PART 3 18

*Also reversed ruling on Burke paying for petitioner ARC still accepted it without any
repairs – it was Elser who initiated and ordered objections. Hence, it still deemed complied
repairs, and it was Elser’s word against Burke with.
in this situation, so follow logic: Whoever
asked for repairs, and got something in return
(use of yacht) liable to pay for repairs.

ARRA REALTY CORP. VS. GUARANTEE


DEVELOPMENT CORP.

FACTS:
Arra Realty Corporation (ARC) was the owner
of a parcel of land located at Makati City.
Through its president, Architect Carlos
Arguelles, ARC decided to construct a five-
storey building on its property and engaged
the services of Engr. Erlinda Peñaloza as the
project and structural engineer. ARC
and Peñaloza agreed that the former would
share the purchase price of one floor of the
building which the latter took possession on
the one-half portion of the second floor.
Unknown to her, ARC executed a mortgage
over the entire lot and building to China Bank
Corporation. When ARC failed to pay its loan
to the said Bank, the subject property was
foreclosed extrajudicially and sold at a public
auction by the said Bank. Peñaloza filed a
complaint for specific performance against
petitioners.

ISSUE:
Whether or not there has been a perfected
contract of sale?

HELD:
YES. The parties agreed on the price and the
terms of payment. The contract of sale was
perfected. It being consensual in nature,
perfected by mere consent, was manifested
the moment there was meeting of the minds as
to the offer and acceptance. The parties
entered into the contract of sale as vendor and
vendee. Perfection per se does not transfer
ownership but which occurs upon actual or
constructive delivery of the thing sold.

Moreover, Article 1205 provides that, if the


creditor accepted the debtor’s defaulted
payment without any protest, it is deemed
complied with. In the case at bar, Peñaloza
defaulted in the downpayment but the
CASE DIGEST CONTRACT PART 3 19

the signed Letter-offer to respondent on April


MALBAROSA V COURT OF APPEALS 7, 1996 and he alleged that he had already
CALLEJO; April 30, 2003 accepted the offer of the respondent when he
affixed his conformity thereto on the space
NATURE provided therefor on March 28, 1990 and had
Petition for review on certiorari of the decision sent to the respondent corporation on April 7,
of the CA. 1990 a copy of said March 14, 1990 Letter-
offer bearing his conformity to the offer of the
FACTS respondent; hence, the respondent can no
- The petitioner Salvador Malbarosa was the longer demand the return of the vehicle in
president and general manager of Philtectic question. He further avers that he had already
Corporation and an officer of other impliedly accepted the offer when after said
corporations belonging to the SEADC group of respondent’s offer, he retained possession of
companies. SEADC assigned to him a 1982 the car.
model Mitsubishi Gallant Super Saloon car
and was also issued membership certificates Procedure
in the Architectural Center, Inc. - Due to petitioner's refusal to return the
vehicle after April 3, 1996, the respondent filed
- On January 8, 1990, Malabarosa tendered a complaint for recovery of personal property
his resignation from all his positions in the with replevin, with damages and atty's fee.
SEADC group of companies and reiterating - RTC – issued a writ of replevin
his request for the payment of his incentive - CA – affirmed RTC's decision
compensation for 1989 which is approximately
P395,000.00 according to him. ISSUES
1. WON there was a valid acceptance on
- SEADC, through its President Louis Da Malbarosa's part of the March 14, 1990
Costa, accepted his resignation and entitled letter-offer of respondent
him to an incentive amounting to P251,057.67, 2. WON there was an effective withdrawal by
which was lower than Malbarosa's the respondent of said Letter-offer
expectation. It is to be satisfied by transferring
to him the car assigned to him, which HELD
estimated fair market value is P220,000.00 1. NO.
and the membership share of SEADC - Article 1318 of CC says that “There is no
subsidiary, Tradestar International Inc. in the contract unless the following requisites
Architectural Center, Inc. amounting to concur:
P60,000.00. (1) Consent of the contracting parties;
(2) Object certain which is the subject matter
- The respondent prepared the letter-offer of the contract
dated march 14, 1990 and required Malbarosa (3) Cause of the obligation which is
to affix his conformity on the space provided established
therefor and the date thereof on the right In this case, there is no contract as Malbarosa
bottom position of the letter. failed to meet the requirements of a valid
acceptance to wit:
- On March 16, 1990, Da Costa met with the (a) May be express or implied
petitioner and handed to him the original copy (b) Must be absolute, unconditional and
of the letter-offer for his consideration but he without variance of any sort from the offer
refused to sign it, instead said that he will © must be made known to the offeror
review the offer first. More than two weeks (d) Must be made in the manner prescribed by
have passed and Da Costa never heard the offeror
feedback from Malbarosa. Thus he decided to
finally withdraw his offer on April 3, 1996. Reasoning Malabarosa communicated his
However, Malbarosa transmitted the copy of acceptance only after the knowledge of
revocation or withdrawal of his offer. He failed
CASE DIGEST CONTRACT PART 3 20

to transmit his conformity while the offer was


subsisting. An acceptance which is not made
in the manner prescribed by the offeror is not
effective but constitutes a counter-offer which
the offeror may accept or reject. The
respondent required the petitioner to accept
the offer by affixing his signature on the space
provided in said letter-offer and writing the
date of said acceptance, thus foreclosing an
implied acceptance or any other mode of
acceptance by the petitioner. However, when
the letter-offer of the respondent was delivered
to the petitioner on March 16, 1990, he did not
accept or reject the same for the reason that
he needed time to decide whether to reject or
accept the same. There was no contract
perfected between the petitioner and the
respondent corporation.

The petitioner’s plaint that he was not


accorded by the respondent reasonable time
to accept or reject its offer does not
persuade. It must be underscored that there
was no time frame fixed by the respondent for
the petitioner to accept or reject its
offer. When the offeror has not fixed a period
for the offeree to accept the offer, and the offer
is made to a person present, the acceptance
must be made immediately. In this case, the
respondent made its offer to the petitioner
when Da Costa handed over on March 16,
1990 to the petitioner its March 14, 1990
Letter-offer but that the petitioner did not
accept the offer. The respondent, thus, had
the option to withdraw or revoke the offer,
which the respondent did on April 4, 1990.

2. YES
- Implicit in the authority given to Philtectic
Corporation to demand for and recover from
the petitioner the subject car and to institute
the appropriate action against him to recover
possession of the car is the authority to
withdraw the respondent's Letter-offer.

Disposition Decision of the CA is AFFIRMED.