Pokemon​ ​Digest​ ​-​ ​Oblicon

1
CONTRACTS

PART​ ​II-A​​ ​- 3​rd​​ ​Long​ ​Quiz

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Obligatory​ ​force,​ ​NCC​ ​1315,​ ​1314

Art. 1314. Any third person who induces another to violate his contract shall be liable for
damages​ ​to​ ​the​ ​other​ ​contracting​ ​party.​ ​(n)

S, a movie actress, has a one-year contract with XYZ Studio. If F, a friend of S induces her,
without​ ​any​ ​justifiable​ ​cause,​ ​to​ ​break​ ​the​ ​contract,​ ​then​ ​XYZ​ ​Studio​ ​can​ ​sue​ ​F​ ​for​ ​damages

(Sample-Mustang)

Art. 1315. Contracts are perfected by mere consent, and from that moment the parties are
bound not only to the fulfillment of what has been expressly stipulated but also to all the
consequences which, according to their nature, may be in keeping with good faith, usage
and​ ​law.​ ​(1258)

(Sample-Yana)

(23)R.S. Tomas, Inc. v Rizal, G.R. No. 173155, March 21,

2012​-Mustang

Nature:​ ​Petition​ ​for​ ​review​ ​on​ ​decision​ ​of​ ​CA

Facts:
Petitioner undertook to complete the projects within one hundred twenty (120) days
from the effectivity of the contract. It was agreed upon that petitioner would be liable to
respondent​ ​for​ ​liquidated​ ​damages​ ​for​ ​delay​ ​in​ ​the​ ​completion​ ​of​ ​the​ ​projects.
March 9, 1991, petitioner requested for an extension of seventy-five (75) days within
which to complete the projects because of the need to import some of the materials
needed. In the same letter, it also asked for a price adjustment of P255,000.00 to cover
the​ ​higher​ ​cost​ ​of​ ​materials.
March 27, 1991, petitioner requested for another 75 days extension for the completion
of the transformer portion of the projects for failure of its supplier to deliver the
materials.
Eventually, petitioners requests, respondent, through counsel, manifested its
observation that petitioners financial status showed that it could no longer complete the
projects as agreed upon. Respondent also informed petitioner that it was already in
default having failed to complete the projects within 120 days from the effectivity of the
contract. Respondent further notified petitioner that the former was terminating the
contract. It also demanded for the refund of the amount already paid to petitioner,
otherwise,​ ​the​ ​necessary​ ​action​ ​would​ ​be​ ​instituted.
respondent entered into two contracts with Geostar Philippines, Inc. (Geostar) for the
completion of the projects commenced but not completed by petitioner for a total
consideration
Pokemon​ ​Digest​ ​-​ ​Oblicon

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On December 14, 1991, petitioner reiterated its desire to complete the 2 projects but the
same was denied by respondent, respondent pointed out that amicable settlement is
impossible.
Hence, the ​Complaint for Sum of Money​filed by respondent against petitioner praying for
the payment of the following: P493,695.00 representing the amount which they owed
respondent​ ​from​ ​the​ ​downpayment​ ​and​ ​advances​ ​made.

Petitioner also insisted that the proximate cause of the delay is the misrepresentation of
the​ ​respondent​ ​on​ ​the​ ​extent​ ​of​ ​the​ ​defect​ o
​ f​ ​the​ ​transformer.

Issue: Whether or not petitioner is guilty of inexcusable delay in the completion of the
projects

Held:​​ ​No

It explained that its failure to complete the project was due to the misrepresentation of
the respondent. It claimed that more time and money were needed, because the
condition of the subject transformer was worse than the representations of respondent.
Is​ ​this​ ​defense​ ​tenable?
We​ ​answer​ ​in​ ​the​ ​negative.
Letters, petitioner justified its inability to complete the projects within the stipulated
period on the alleged unavailability of the materials to be used to perform the projects as
stated in the job orders. Nowhere in said letters did petitioner claim that it could not
finish the projects, particularly the conversion of the transformer unit because the
defects​ ​were​ ​worse​ ​than​ ​the​ ​representation​ ​of​ ​respondent.
In other words, there was no allegation of fraud, bad faith, concealment or
misrepresentation on the part of respondent as to the true condition of the subject
transformer.
It can be inferred from the foregoing facts that there was not only a delay but a failure
to complete the projects as stated in the contract; that petitioner could not complete the
projects because it did not have the materials needed; and that it is in need of financial
assistance.
The Court likewise notes that petitioner repeatedly asked for extension allegedly
because it needed to import the materials and that the same could not be delivered on
time. Petitioner also repeatedly requested that respondent make a direct payment to the
suppliers notwithstanding the fact that it contracted with respondent for the supply of
labor, materials, and technical supervision. It is, therefore, expected that petitioner
would be responsible in paying its suppliers because respondent is not privy to their
(petitioner​ ​and​ ​its​ ​suppliers)​ ​contract.

This is especially true in this case since respondent had already made advance payments
to petitioner. It appears, therefore, that in offering its bid, the source and cost of
materials were not seriously taken into consideration. It appears, further, that petitioner
had a hard time in fulfilling its obligations under the contract that is why it asked for
financial assistance from respondent. This is contrary to petitioners representation that it
was​ ​capable,​ ​competent,​ ​and​ ​duly​ ​licensed​ ​to​ ​handle​ ​the​ ​projects.

This lack of evidence, coupled with petitioners failure to raise the same at the
earliest opportunity, belies petitioners claim that it could not complete the
projects​ ​because​ ​the​ ​subject​ ​transformer​ ​could​ ​no​ ​longer​ ​be​ ​repaired​.

Bad faith does not simply connote bad judgment or negligence; it imports a dishonest
purpose or some moral obliquity and conscious doing of a wrong, a breach of a known
duty through some motive or interest or ill will that partakes of the nature of fraud.
Fraud has been defined to include an inducement through insidious machination.
Pokemon​ ​Digest​ ​-​ ​Oblicon

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Insidious machination refers to a deceitful scheme or plot with an evil or devious
purpose. Deceit exists where the party, with intent to deceive, conceals or omits to state
material facts and, by reason of such omission or concealment, the other party was
induced to give consent that would not otherwise have been given. These are allegations
of fact that demand clear and convincing proof. They are serious accusations that can be
so conveniently and casually invoked, and that is why they are never presumed. In this
case, the evidence presented is insufficient to prove that respondent acted in bad faith or
fraudulently​ ​in​ ​dealing​ ​with​ ​petitioner.

C.​ ​Elements​ ​of​ ​a​ ​Contract

(24)​Gironella​ ​v.​ ​PNB,​ ​G.R.​ ​No.​ ​194515,​ ​September​ ​16,​ ​2015​-Erica

FACTS​: Spouses Oscar and Gina Gironella obtained two (2) loans from PNB dated 11
November 1991 and 16 January 1992 in the amount of Php 7, 500, 000.00 and Php 2, 000,
000.00 for the construction of Dagupan Village Hotel and Sports Complex. The loans were
co-terminus, both payable on installment and secured by the same real estate mortgage
over​ ​a​ ​parcel​ ​of​ ​land​ ​covered​ ​by​ ​TCT​ ​No.​ ​56059​ ​in​ ​favor​ ​of​ ​PNB.

On May 1992 the spouses applied another loan with PNB amounting Php 5, 800, 000.00 for
the​ ​construction​ ​of​ ​the​ ​restaurant​ ​and​ ​purchase​ ​of​ ​generator​ ​set.

The Spouses Gironella believed that the third loan would be approved and that they used
their generated income for the construction while the loan is still pending, resulting to default
of​ ​their​ ​previous​ ​two​ ​(2)​ ​loans.

The Spouses proposed a restructuring of the Php 5, 800, 000.00 and maintain payment for
the​ ​interests​ ​of​ ​the​ ​previous​ ​loans.

By the year 2000 the PNB wrote a letter to the Spouses Gironella for the restructuring of the
said​ ​loan​ ​and​ ​that​ ​it​ ​will​ ​be​ ​subject​ ​for​ ​evaluation​ ​and​ ​approval​ ​of​ ​the​ ​higher​ ​management.

On 7 February 2000, the Spouses Gironella gave a qualified acceptance of PNB’s proposed
restructuring, specifically referring to specific terms in the 25 January 2000 proposal of PNB.
However PNB rejected the counter offer of the Spouses Gironella and later on filed for
Extra-Judicial​ ​Foreclosure​ ​of​ ​the​ ​mortgage​ ​property.

The Spouses filed a Complaint before the RTC with prayer for issuance of a Temporary
Restraining Order (TRO) and preliminary injunction to enjoin enforcement of the original
credit​ ​agreements,​ ​and​ ​security​ ​therefor,​ ​between​ ​the​ ​parties.​ ​The​ ​RTC​ ​granted​ ​the​ ​petition.

PNB appealed to the CA questioning the trial court’s decision. CA ruled in favor of PNB, the
appellate court found that there was no final agreement reached by the parties where the
offer was certain and acceptance thereof by the other party was absolute. The appellate
court held that, in this case, a qualified acceptance equated to a counter-offer and, at that
point, there was no absolute and unqualified acceptance which is identical in all respects
with​ ​that​ ​of​ ​the​ ​offer​ ​so​ ​as​ ​to​ ​produce​ ​consent​ ​or​ ​meeting​ ​of​ ​the​ ​minds.
Pokemon​ ​Digest​ ​-​ ​Oblicon

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ISSUE​: WHETHER OR NOT there is fraud or gross negligence when the PNB did not
approved​ ​their​ ​loan​ ​application​ ​by​ ​giving​ ​them​ ​“false​ ​hope​ ​or​ ​assurances”.
WHETHER OR NOT there is a Perfected Contract or Partial Restructuring of
Loan.

HELD​: The Spouses Gironella claim fraud and gross negligence, as plaintiffs, the Spouses
Gironella had the duty, the burden of proof, to present evidence, required by law, on the
facts​ ​in​ ​issue​ ​necessary​ ​to​ ​establish​ ​their​ ​claim.

The foregoing statement fails to take into consideration the three (3) distinct stages of a
contract: (1) preparation or negotiation, (2) perfection, and finally, (3) consummation.
Necessarily, the Spouses Gironella as debtors applying for an additional loan, ought to
participate in the negotiations thereof and await PNB’s assessment and processing of their
additional​ ​loan​ ​application.

A contract is perfected by mere consent. In turn, consent is manifested by the meeting of the
offer and the acceptance upon the thing and the cause which are to constitute the contract.
The offer must be certain and the acceptance seasonable and absolute. If qualified, the
acceptance​ ​would​ ​merely​ ​constitute​ ​a​ ​counter-offer​ ​as​ ​what​ ​occurred​ ​in​ ​this​ ​case.

To reach that moment of perfection, the parties must agree on the same thing in the same
sense, so that their minds meet as to all the terms. The minds of parties must meet at every
point; nothing can be left open for further arrangement. So long as there is any uncertainty or
indefiniteness, or future negotiations or considerations to be had between the parties, there
is​ ​not​ ​a​ ​completed​ ​contract,​ ​and​ ​in​ ​fact,​ ​there​ ​is​ ​no​ ​contract​ ​at​ ​all.

The Spouses Gironella’s payments under its original loan cannot be considered as partial
execution​ ​of​ ​the​ ​proposed​ ​restructuring​ ​of​ ​loan​ ​agreement.

The letter dated 20 January 2000 which qualifiedly accepted by the Spouses on 7 February
2000 and constituted a counter-offer in which PNB ultimately rejected on 8 March 2000,
clearly show that the parties never passed the negotiation stage. There was no meeting of
the minds on the restructuring of the loans. Thus, the Spouses Gironella's original Php
9,500,000.00​ ​loan​ ​agreement​ ​subsists.

The SC affirmed the CA’s decision and held that PNB is not liable either for fraud, gross
negligence or abuse of right. PNB did not breach any agreement, the restructured loan was
never​ ​perfected​ ​and​ ​PNB​ ​was​ ​not​ ​liable​ ​to​ ​pay​ ​the​ ​spouses​ ​any​ ​forms​ ​of​ ​damages.

1.​ ​ ​ ​ ​ ​Essential,​ ​NCC​ ​1318

Art.​ ​1318.​ ​There​ ​is​ ​no​ ​contract​ ​unless​ ​the​ ​following​ ​requisites​ ​concur:
(1)​ ​Consent​ ​of​ ​the​ ​contracting​ ​parties;

(2)​ ​Object​ ​certain​ ​which​ ​is​ ​the​ ​subject​ ​matter​ ​of​ ​the​ ​contract;

(3)​ ​Cause​ ​of​ ​the​ ​obligation​ ​which​ ​is​ ​established.​ ​(1261)

Pokemon​ ​Digest​ ​-​ ​Oblicon

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(Sample-Edward)

(a)​ ​ ​Consent​ ​of​ ​the​ ​contracting​ ​parties,​ ​NCC​ ​1319

Art. 1319. Consent is manifested by the meeting of the offer and the acceptance upon
the thing and the cause which are to constitute the contract. The offer must be certain
and​ ​the​ ​acceptance​ ​absolute.​ ​A​ ​qualified​ ​acceptance​ ​constitutes​ ​a​ ​counter-offer.

Acceptance made by letter or telegram does not bind the offerer except from the time
it came to his knowledge. The contract, in such a case, is presumed to have been
entered​ ​into​ ​in​ ​the​ ​place​ ​where​ ​the​ ​offer​ ​was​ ​made.​ ​(1262a)

(Sample-Erica)

Meaning​ ​of​ ​consent.

Consent is the conformity of wills and with respect to contracts, it is the agreement of the will
of one contracting party with that of another or others, upon the object and terms of the
contract.​ ​(4​ ​Sanchez​ ​Roman​ ​191;​ ​8​ ​Manresa​ ​648.)

Concurrence​ ​of​ ​offer​ ​and​ ​acceptance.

It is the meeting of minds, i.e., the concurrence of offer and acceptance between the parties
which expresses their intent in entering into the contract respecting the subject matter and
the​ ​cause​ ​or​ ​consideration​ ​thereof.

The minds of the parties must meet as to all the terms and nothing is left open for further
arrangement. Similarly, contract changes must be made with the assent or consent of the
contracting parties. If this assent or consent is wanting on the part of one who contracts, his
act has no more efficacy than if it had been done under duress or by a person of unsound
mind. (Phil. National Bank vs. Court of Appeals, 238 SCRA 20 [1994]; Luxuria Homes, Inc.
vs.​ ​Court​ ​of​ ​Appeals,​ ​302​ ​SCRA​ ​315​ ​[1999].)

Meaning​ ​of​ ​offer.

Offer is a proposal made by one party (offerer) to another to enter into a contract. It is more
than an expression of desire or hope. It is really a promise to act or to refrain from acting on
condition​ ​that​ ​the​ ​terms​ ​thereof​ ​are​ ​accepted​ ​by​ ​the​ ​person​ ​(offeree)​ ​to​ ​whom​ ​it​ ​is​ ​made.

Meaning​ ​of​ ​acceptance.

Acceptance is the manifestation by the offeree of his assent to the terms of the offer. Without
acceptance, there can be no meeting of the minds between the parties. (Art. 1305.) A mere
offer​ ​produces​ ​no​ ​obligation.

Acceptance​ ​made​ ​by​ ​a​ ​telegram

An example of constructive knowledge is where the letter or telegram containing the
acceptance is received by the offerer who for some reason did not read it but not where he
could not have read it as when he was absent or physically incapacitated at the time of the
receipt of the same. The presumption, however, is that the offerer read the contents thereof
or​ ​came​ ​to​ ​know​ ​of​ ​the​ ​acceptance.
Pokemon​ ​Digest​ ​-​ ​Oblicon

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Requisites of Consent​. — Under the Civil Code, in order that there is consent, the following
requisites must concur: first, the consent must be manifested by the concurrence of the offer
and the acceptance (Arts. 1319-1326); second, the contracting parties must possess the
necessary legal capacity (Arts. 1327-1327); and third, the consent must be intelligent, free,
spontaneous,​ ​and​ ​real

→S offered to sell his hacienda to B for “P100,000.00, Philippine currency in cash” should
the latter indicate his acceptance on or before a certain date otherwise S would sell the
same to others. B sent a reply stating that “I am very much interested to buy and acquire this
Hacienda​ ​of​ ​yours​ ​in​ ​the​ ​same​ ​price,​ ​manner,​ ​conditions​ ​and​ ​considerations​ ​of​ ​your​ ​offer”

The​ ​reply​ ​of​ ​B​ ​is​ ​an​ ​indication​ ​that​ ​he​ ​accepts​ ​the​ ​offer.​ ​(offer​ ​certain,​ ​acceptance​ ​absolute).

But, if B states “I am very much interested to buy and acquire this Hacienda of yours in the
but​ ​for​ ​a​ ​price​ ​of​ ​PhP​ ​90,000.00--​ ​this​ ​is​ ​a​ ​Counter​ ​offer/​ ​qualified​ ​acceptance)

(b)​ ​ ​Offer,​ ​NCC​ ​1321,​ ​1323-1326

Art. 1321. The person making the offer may fix the time, place, and manner of acceptance,
all​ ​of​ ​which​ ​must​ ​be​ ​complied​ ​with.​ ​(n)
(Sample-Jerald)

The offerer can indicate the manner of acceptance and the time when and the place where it
should be made. The offerer will not be bound by an acceptance made by the acceptor in
any other manner than that specified by the offerer unless the latter acquiesces in the
change.

Art. 1323. An offer becomes ineffective upon the death, civil interdiction, insanity, or
insolvency​ ​of​ ​either​ ​party​ ​before​ ​acceptance​ ​is​ ​conveyed.​ ​(n)
(Sample-Joy)

Art. 1324. When the offerer has allowed the offeree a certain period to accept, the offer may
be withdrawn at any time before acceptance by communicating such withdrawal, except
when​ ​the​ ​option​ ​is​ ​founded​ ​upon​ ​a​ ​consideration,​ ​as​ ​something​ ​paid​ ​or​ ​promised.​ ​(n)
(Sample-Jued)

Art. 1325. Unless it appears otherwise, business advertisements of things for sale are not
definite​ ​offers,​ ​but​ ​mere​ ​invitations​ ​to​ ​make​ ​an​ ​offer.​ ​(n)

(1) “For sale: 1,000 square meters lot at Green Plains Village, Quezon City for
P5,000,000.00​ ​—​ ​Tel.​ ​No.​ ​817-12-84.”​ ​This​ ​is​ ​not​ ​a​ ​definite​ ​offer.

(2) “For sale: 1,000 square meters lot at Green Plains Village, Quezon City located at the
corner of Geronimo and Magallanes Streets for P5,000,000.00 cash. — Tel. No. 817-12-84.”
This​ ​is​ ​a​ ​definite​ ​offer.

(Sample-Mark)
Pokemon​ ​Digest​ ​-​ ​Oblicon

Art. 1326. Advertisements for bidders are simply invitations to make proposals, and the
advertiser is not bound to accept the highest or lowest bidder, unless the contrary appears.
(n)

EXAMPLE:
The owner of the property which is advertised for sale, either at public or private auction, has
the right to prescribe the manner, conditions and terms of the sale and anybody participating
in​ ​such​ ​sale​ ​is​ ​bound​ ​by​ ​all​ ​the​ ​conditions,​ ​whether​ ​he​ ​knew​ ​them​ ​or​ ​not.

(Sample-Yana)

(c)​ ​ ​Acceptance,​ ​NCC​ ​1320,​ ​1322,​ ​1319

Art.​ ​1320.​ ​An​ ​acceptance​ ​may​ ​be​ ​express​ ​or​ ​implied.​ ​(n)
(Sample-Edward)

● Silence is Ambiguous. Silence in itself is neither acceptance nor rejection. Can it

mean​ ​acceptance?​ ​One​ ​must​ ​look​ ​at​ ​the​ ​circumstances.

Example: ​A and B are owner of stalls which sell rice,. C delivers 1000 kilos of rice to
A every Sunday. If A is not there, C just leaves it with A’s assistant. C tries to do business
with B. B is not there though. C leaves rice with B’s assistant. B does not call C. Both A and
B are silent. A accepted the rice because of the arrangement. If A did not want to accept the
rice,​ ​then​ ​A​ ​should​ ​have​ ​called.​ ​B’s​ ​silence​ ​is​ ​not​ ​acceptance.

Art. 1322. An offer made through an agent is accepted from the time acceptance is
communicated​ ​to​ ​him.​ ​(n)
(Sample-Erica)

For a contract to arise, the acceptance must be made known to the offeror. By legal fiction,
an agent is considered an extension of the personality of his principal. (Art. 1910, par. 1.) If
duly​ ​authorized,​ ​the​ ​act​ ​of​ ​the​ ​agent​ ​is,​ ​in​ ​law,​ ​the​ ​act​ ​of​ ​the​ ​principal.

Article 1322 applies only if the offer is made through the agent and the acceptance is
communicated through him. Hence, there would be no meeting of the minds if the principal
himself made the offer and the acceptance is communicated to the agent unless, of course,
the​ ​latter​ ​is​ ​authorized​ ​to​ ​receive​ ​the​ ​acceptance.

→ X, through his agent Y, offers Z to buy his (z’s) car for PhP 120,000.00. Acceptance can
be considered when Z communicates through Y (X’s agent) his willingness to accept the
offer.

Art. 1319. Consent is manifested by the meeting of the offer and the acceptance upon the
thing and the cause which are to constitute the contract. The offer must be certain and the
acceptance​ ​absolute.​ ​A​ ​qualified​ ​acceptance​ ​constitutes​ ​a​ ​counter-offer.
Pokemon​ ​Digest​ ​-​ ​Oblicon

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Acceptance made by letter or telegram does not bind the offerer except from the time it
came to his knowledge. The contract, in such a case, is presumed to have been entered into
in​ ​the​ ​place​ ​where​ ​the​ ​offer​ ​was​ ​made.

(Sample-Jerald)

Acceptance must be unconditional. It must be identical to the terms of the offer. It must not
vary from the proposal either by way of omission, addition or alteration. If it does, neither
party is bound as the acceptance is qualified. But an acceptance is not conditional because
the acceptor expresses dissatisfaction with the offer, yet nevertheless gives his unqualified
assent, nor because he adds immaterial words. If the acceptance is qualified, it is
considered​ ​by​ ​the​ ​law​ ​as​ ​a​ ​counter-offer

A offers to sell his only car to B for P1M. B accepted the offer by paying the price of the car
at​ ​P1M.

Assuming B agreed to buy the car but ask to lower the price to P900K. In this case, B makes
a​ ​counter-offer​ ​subject​ ​to​ ​A’s​ ​approval.

If A offered to B his car and B, through telegram, sent his acceptance but, before A actually
received the telegram, he informs B of the revocation of his offer, no contract can be
perfected.

(25)​Rosenstock​ ​v​ ​Burke,​ ​46​ ​Phil​ ​217​ ​(1924)-Jerald

(26)​ ​Sanchez​ ​v​ ​Rigos,​ ​45​ ​SCRA​ ​368​ ​(1972)​ ​-Joy

SUPRA (27)​Capalla v COMELEC, G.R. No. 201112, June 2012 (concurring of J. Sereno)
-Jued

SUPRA​ ​(28)​Malbarosa​ ​v​ ​CA,​ ​402​ ​SCRA​ ​108​ ​(2003)​ ​-Mark

(29)Traders​ ​Royal​ ​Bank​ ​v​ ​Cuison,​ ​June​ ​5,​ ​2009​ ​-Mustang

Facts

Del​ ​Rosario​ ​Realty​ ​(represented​ ​by​ ​Pedro​ ​Del​ ​Rosario)​ ​entered​ ​into​ ​a​ ​Contract​ ​to​ ​Sell
with​ ​spouses​ ​Leonardo​ ​Faustino​ ​and​ ​Angelina​ ​Lim​ ​(“Faustino​ ​spouses”)​ ​a​ ​lot.
Faustino​ ​spouses​ ​sold​ ​their​ ​rights​ ​over​ ​the​ ​property​ ​to​ ​spouses​ ​Vicente​ ​Padiernos​ ​and
Concordia​ ​Garcia​ ​assume​ ​the​ ​former's​ ​obligations
Pedro​ ​Del​ ​Rosario​ ​executed​ ​a​ ​deed​ ​assigning​ ​all​ ​of​ ​his​ ​rights​ ​contract​ ​to​ ​sell​ ​to​ ​Socorro
A.​ ​Ramos.
Vicente​ ​Padiernos​ ​sold:
​ ​(a)​ ​sold​ ​one-half​ ​of​ ​the​ ​property​ ​to​ ​petitioner​ ​Jose​ ​Toledo​ ​(Toledo​ ​shall​ ​“continue
payments​ ​until​ ​fully​ ​paid

(b)​ ​the​ ​remaining​ ​half​ ​of​ ​the​ ​property​ ​to​ ​spouses​ ​Virgilio​ ​and​ ​Leticia​ ​Padiernos.
>>>​ ​Virgilio​ ​and​ ​Leticia​ ​Padiernos​ ​assigned​ ​their​ ​rights​ ​over​ ​the​ ​property​ ​to​ ​their
children,​ ​petitioners​ ​Glenn​ ​and​ ​Danilo​ ​Padiernos.
Pokemon​ ​Digest​ ​-​ ​Oblicon

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***​
spouses​ ​Toledo​ ​and​ ​spouses​ ​Virgilio​ ​and​ ​Leticia​ ​Padiernos​ ​paid​ ​quarterly​ ​installments
on​ ​the​ ​property​ ​until​ ​full​ ​payment​ ​sometime​ ​in​ ​1971.
​ ​When​ ​petitioners​ ​requested​ ​for​ ​the​ ​release​ ​of​ ​the​ ​owner's​ ​duplicate​ ​certificate​ ​of​ ​title,
respondent​ ​Antonio​ ​A.​ ​Ramos,​ ​representing​ ​the​ ​heirs​ ​of​ ​Socorro​ ​Ramos,​ ​issued​ ​a
Certification​ ​stating​ ​that​ ​while​ ​the​ ​property​ ​“has​ ​been​ ​paid​ ​in​ ​full​​ ​by​ ​Mr.​ ​Vicente
Padiernos...Title​ ​#44436​ ​could​ ​not​ ​be​ ​released​ ​pending​ ​final​ ​decision​ ​of​ ​the​ ​Supreme
Court.”

In​ ​1974,​ ​Virgilio​ ​Padiernos​ ​and​ ​petitioner​ ​Jose​ ​Toledo​ ​constructed​ ​their​ ​houses​ ​on​ ​the
property

In​ ​the​ ​meantime,​ ​it​ ​appears​ ​that​ ​execution​ ​proceedings​ ​were​ ​taken​ ​against​ ​the​ ​estate​ ​of
Socorro​ ​Ramos.As​ ​a​ ​consequence,​ ​eighteen​ ​(18)​ ​parcels​ ​of​ ​land​ ​belonging​ ​to​ ​the​ ​estate,
including​ ​the​ ​property,​ ​were​ ​sold​ ​in​ ​auction​ ​to​ ​Guillermo​ ​N.​ ​Pablo​ ​and​ ​Primitiva​ ​C.​ ​Cruz,
who​ ​thereafter​ ​sold​ ​said​ ​properties​ ​to​ ​ARC​ ​Marketing.

On​ ​March​ ​14,​ ​1977,​ ​all​ ​heirs​ ​of​ ​Socorro​ ​A.​ ​Ramos,​ ​filed​ ​a​ ​Complaint​ ​for​ ​Nullity​ ​of
Execution​ ​Sale​ ​against​ ​auction​ ​sale​ ​winners​ ​Guillermo​ ​N.​ ​Pablo​ ​and​ ​Primitiva​ ​C.​ ​Cruz,
and​ ​their​ ​transferee​ ​ARC​ ​Marketing.
There​ ​was​ ​settled,​ ​and​ ​the​ ​parties​ ​entered​ ​into​ ​a​ ​Final​ ​Compromise​ ​Agreement
(“Compromise​ ​Agreement”).​ ​Under​ ​the​ ​Compromise​ ​Agreement,​ ​then​ ​sole​ ​plaintiff
Lourdes​ ​A.​ ​Ramos​ ​agreed​ ​to​ ​settle​ ​the​ ​case​ ​for​ ​the​ ​total​ ​compromise​ ​amount​ ​of​ ​Two
Million​ ​Pesos​ ​(P2,000,000.00)​ ​to​ ​be​ ​paid​ ​by​ ​ARC​ ​Marketing​ ​to​ ​the​ ​former​ ​in​ ​installments.
Petitioners​ ​Jose​ ​Toledo,​ ​Glenn​ ​Padiernos​ ​and​ ​Danilo​ ​Padiernos​ ​filed​ ​a​ ​complaint​ ​for
reconveyance​ ​and​ ​damages.
ARC​ ​Marketing​ ​argues​ ​that​ ​petitioners'​ ​action​ ​is​ ​barred​ ​by​ ​the​ ​statute​ ​of​ ​limitations:​L

25. Plaintiffs waited for more than ten (10) years from the issuance of the …
certification, more than ten (10) [sic] after title over the subject property was issued in
favor of Guillermo Pablo, more than ten (10) years … after title over the subject property
was issued in favor of ARC and, for more than four (4) years from the rendition of the
Decision​ ​dated​ ​January​ ​13,​ ​1993,​ ​before​ ​they​ ​instituted​ ​the​ ​present​ ​action.

26. Clearly, plaintiffs’' cause of action, if there was any, prescribed or was barred by the
statute​ ​of​ ​limitation​ ​a​ ​long,​ ​long​ ​time​ ​ago.​ ​Perforce,​ ​this​ a
​ ction​ ​should​ ​be​ ​dismissed.​51

Issue:​ ​WON​ ​petition​ ​cause​ ​of​ ​action​ ​is​ ​barred​ ​by​ ​the​​ ​by​ ​the​ ​statute​ ​of​ ​limitations
Held:​ ​NO
Article​ ​1456​ ​of​ ​the​ ​Civil​ ​Code​ ​provides​ ​that​ ​a​ ​person​ ​acquiring​ ​property​ ​through​ ​fraud
becomes,​ ​by​ ​operation​ ​of​ ​law,​ ​a​ ​trustee​ ​of​ ​an​ ​implied​ ​trust​ ​for​ ​the​ ​benefit​ ​of​ ​the​ ​real
owner​ ​of​ ​the​ ​property.​ ​The​ ​presence​ ​of​ ​fraud​ ​in​ ​this​ ​case,​ ​as​ ​shown​ ​by​ ​the​ ​disposition​ ​of
the​ ​property​ ​to​ ​ARC​ ​Marketing​ ​by​ ​Lourdes​ ​Ramos​ ​despite​ ​knowledge​ ​of​ ​petitioners'​ ​title
over​ ​the​ ​same,​ ​created​ ​an​ ​implied​ ​trust​ ​in​ ​favor​ ​of​ ​petitioners​ ​Toledo,​ ​et​ ​al.​ ​This​ ​gives
petitioners​ ​the​ ​right​ ​to​ ​seek​ ​reconveyance​ ​of​ ​the​ ​property​ ​from​ ​the​ ​subsequent​ ​buyers.

An​ ​action​ ​for​ ​reconveyance​ ​based​ ​on​ ​an​ ​implied​ ​trust​ ​prescribes​ ​in​ ​ten​ ​years,​ ​the
reckoning​ ​point​ ​of​ ​which​ ​is​ ​the​ ​date​ ​of​ ​registration​ ​of​ ​the​ ​deed​ ​or​ ​the​ ​date​ ​of​ ​issuance​ ​of
the​ ​certificate​ ​of​ ​title​ ​over​ ​the​ ​property.​ ​However,​ ​if​ ​the​ ​plaintiff​ ​also​ ​remains​ ​in
possession​ ​of​ ​the​ ​same,​ ​as​ ​in​ ​this​ ​case,​ ​the​ ​prescriptive​ ​period​ ​to​ ​recover​ ​title​ ​and
Pokemon​ ​Digest​ ​-​ ​Oblicon

10
possession​ ​of​ ​the​ ​property​ ​does​ ​not​ ​run​ ​against​ ​him.​ ​In​ ​such​ ​a​ ​case,​ ​an​ ​action​ ​for
reconveyance,​ ​if​ ​nonetheless​ ​filed,​ ​would​ ​be​ ​in​ ​the​ ​nature​ ​of​ ​a​ ​suit​ ​for​ ​quieting​ ​of​ ​title,
an​ ​action​ ​that​ ​is​ ​imprescriptible:

Prescription does not run against the plaintiff in actual possession of the disputed land
because such plaintiff has a right to wait until his possession is disturbed or his title is
questioned before initiating an action to vindicate his right. His undisturbed possession
gives him the continuing right to seek the aid of a court of equity to determine the
nature​ ​of​ ​the​ ​adverse​ ​claim​ ​of​ ​a​ ​third​ ​party​ ​and​ ​its​ ​effect​ ​on​ ​his​ ​title.

Here,​ ​petitioners'​ ​undisturbed​ ​possession​ ​of​ ​the​ ​property​ ​is​ ​uncontroverted.​ ​Petitioners
have​ ​alleged​ ​that​ ​they​ ​have​ ​been​ ​in​ ​“continued,​ ​open​ ​and​ ​uninterrupted​ ​possession​ ​of
the​ ​property​ ​for​ ​over​ ​forty​ ​(40)​ ​years,”​ ​as​ ​evidenced​ ​not​ ​only​ ​by​ ​their​ ​payment​ ​of​ ​real
property​ ​taxes​ ​but​ ​also​ ​the​ ​construction​ ​of​ ​their​ ​house​ ​thereon.​ ​This​ ​was​ ​notably​ ​never
disputed​ ​by​ ​ARC​ ​Marketing.​ ​As​ ​plaintiffs​ ​in​ ​possession​ ​of​ ​the​ ​disputed​ ​property,
petitioners​ ​are​ ​not​ ​barred​ ​from​ ​seeking​ ​relief​ ​from​ ​the​ ​court​ ​via​ ​an​ ​action​ ​for
reconveyance.
Neither​ ​can​ ​petitioners​ ​be​ ​considered​ ​to​ ​have​ ​slept​ ​on​ ​their​ ​rights​ ​for​ ​laches​ ​to​ ​operate
against​ ​them.​ ​Petitioners​ ​have​ ​clearly​ ​taken​ ​steps​ ​to​ ​protect​ ​their​ ​interests​ ​in​ ​the
property.​ ​While​ ​respondents​ ​correctly​ ​point​ ​out​ ​that​ ​the​ ​sale​ ​of​ ​the​ ​property​ ​between​ ​the
predecessors-in-interest​ ​of​ ​petitioners​ ​and​ ​respondents​ ​was​ ​not​ ​registered,​ ​the​ ​records
show​ ​that​ ​petitioners​ ​(and/or​ ​their​ ​predecessors-in-interest)​ ​have​ ​registered​ ​their
adverse​ ​claim​ ​over​ ​the​ ​property​ ​as​ ​early​ ​as​ ​October​ ​20,​ ​1960.​ ​Petitioners​ ​also​ ​previously
requested​ ​for​ ​the​ ​release​ ​of​ ​the​ ​owner's​ ​duplicate​ ​certificate​ ​of​ ​title​ ​sometime​ ​in​ ​1973
but​ ​was​ ​given​ ​a​ ​Certification/Acknowledgment​ ​of​ ​Full​ ​Payment​ ​instead​ ​as​ ​the​ ​title​ ​then
could​ ​not​ ​be​ ​released​ ​due​ ​to​ ​a​ ​pending​ ​case​ ​involving​ ​the​ ​property.

More​ ​importantly,​ ​petitioners​ ​were​ ​not​ ​parties​ ​to​ ​Civil​ ​Case​ ​No.​ ​Q-22850​ ​between
respondents​ ​Ramos,​ ​Cruz​ ​and​ ​ARC​ ​Marketing.​ ​They​ ​cannot​ ​therefore​ ​be​ ​presumed​ ​to​ ​be
aware​ ​of​ ​the​ ​January​ ​13,​ ​1993​ ​decision​ ​in​ ​said​ ​case​ ​for​ ​their​ ​action​ ​for​ ​reconveyance
filed​ ​four​ ​years​ ​after​ ​(or​ ​in​ ​1997)​ ​to​ ​be​ ​barred​ ​by​ ​laches.

SUPRA​ ​(30)​ ​Talampas​ ​vs.​ ​Moldex​ ​Realty,​ ​G.R.​ ​No.​ ​170134,​ ​June​ ​17,​ ​2015​ ​-Yana

We’ve​ ​discussed​ ​this​ ​case​ ​already.​ ​But​ ​for​ ​our​ ​ref,​ ​here’s​ ​the​ ​digest.​ ​©​ ​Jerald.

(d)​ ​ ​Object,​ ​NCC​ ​1347​ ​–​ ​1349

Art. 1347. All things which are not outside the commerce of men, including future things,
may be the object of a contract. All rights which are not intransmissible may also be the
object​ ​of​ ​contracts.

No contract may be entered into upon future inheritance except in cases expressly
authorized​ ​by​ ​law.

(Sample-Joy)
Pokemon​ ​Digest​ ​-​ ​Oblicon

11
All services which are not contrary to law, morals, good customs, public order or public policy
may​ ​likewise​ ​be​ ​the​ ​object​ ​of​ ​a​ ​contract.​ ​(1271a)

D entered into a contract with C, Where D will supply illegal firearms or ammunitions to C for
1 year in the condition that C will have to pay D 10,000 per month. Since firearms are not
legal​ ​without​ ​proper​ ​license​ ​and​ ​is​ ​contrary​ ​to​ ​law​ ​it​ ​cannot​ ​be​ ​an​ ​object​ ​in​ ​the​ ​contract.

(Sample-Mark)

Art.​ ​1348.​ ​Impossible​ ​things​ ​or​ ​services​ ​cannot​ ​be​ ​the​ ​object​ ​of​ ​contracts.​ ​(1272)

Requisites of things as ​object of contract. In order that things may be the object of a
contract,​ ​the​ ​following​ ​requisites​ ​must​ ​be​ ​present:
(1)​ ​The​ ​thing​ ​must​ ​be​ ​within​ ​the​ ​commerce​ ​of​ ​men,​ ​that​ ​is,​ ​it​ ​can
legally​ ​be​ ​the​ ​subject​ ​of​ ​commercial​ ​transaction
(2)​ ​It​ ​must​ ​not​ ​be​ ​impossible,​ ​legally​ ​or​ ​physically​ ​(Art.​ ​1348.);
(3)​ ​It​ ​must​ ​be​ ​in​ ​existence​ ​or​ ​capable​ ​of​ ​coming​ ​into​ ​existence​ ​(see
Arts.​ ​1461,​ ​1493,​ ​1494.);​ ​and
(4)​ ​It​ ​must​ ​be​ ​determinate​ ​or​ ​determinable​ ​without​ ​the​ ​need​ ​of​ ​a
new​ ​contract​ ​between​ ​the​ ​parties.​ ​(Arts.​ ​1349,​ ​1460,​ ​par.​ ​2.)

Requisites​ ​of​ ​services​​ ​as​ ​object

of​ ​contract.
In​ ​order​ ​that​ ​service​ ​may​ ​be​ ​the​ ​object​ ​of​ ​a​ ​contract,​ ​the​ ​following
requisites​ ​must​ ​concur:
(1)​ ​The​ ​service​ ​must​ ​be​ ​within​ ​the​ ​commerce​ ​of​ ​men;
(2)​ ​It​ ​must​ ​not​ ​be​ ​impossible,​ ​physically​ ​or​ ​legally​ ​(Art.​ ​1348.);
and
(3)​ ​It​ ​must​ ​be​ ​determinate​ ​or​ ​capable​ ​of​ ​being​ ​made​ ​determinate.
(Arts.​ ​1318[2],​ ​1349.)

(Sample-Mustang)

Art. 1349. The object of every contract must be determinate as to its kind. The fact that the
quantity is not determinate shall not be an obstacle to the existence of the contract, provided
it is possible to determine the same, without the need of a new contract between the parties.
(1273)

EXAMPLE:
(1) S sold to B all the chickens in his poultry. Here, the object itself (chickens) is determinate
but the quantity though not yet determined can be ascertained without the necessity of
entering​ ​into​ ​a​ ​new​ ​contract.
Pokemon​ ​Digest​ ​-​ ​Oblicon

12
(2) S agreed to deliver one of his carabaos to B. Here, the object is determinable without the
need of a new contract between the parties. It becomes determinate the moment it is
delivered.

(3) If the subject matter of the agreement is a parcel of agricultural land owned by S and S
happens to own many agricultural lands, the contract is void, if the particular land sold
cannot​ ​be​ ​determined​ ​without​ ​a​ ​new​ ​or​ ​further​ ​agreement​ ​between​ ​the​ ​parties.

(4) S obligates himself to sell to B for a price certain (P3,000.00) a specified quantity of
sugar (200 kilos) of a given quality (of the first grade and second grade) without designating
a​ ​particular​ ​lot​ ​of​ ​sugar.

(Sample-Yana)

(30)​Blas​ ​v.​ ​Santos,​ ​1​ ​SCRA​ ​899​ ​S​ ​(1961)-Edward

Facts:

Sometime before 1898, Simeon Blas married Marta Cruz with whom he had three children. He also
had grandchildren from his children with Marta Cruz. In 1898, Marta Cruz died. In 1899, Blas married
Maxima Santos (they had no children) but the properties he and his former wife acquired during the
first​ ​marriage​ ​were​ ​not​ ​liquidated.

In 1936, Simeon Blas executed a will disposing half of his properties in favor of Maxima the other
half for payment of debts, Blas also named a few devisees and legatees therein. In lieu of this,
Maxima executed a document whereby she intimated that she understands the will of her husband;
that she ​promises that she’ll be giving, upon her death, one-half of the properties she’ll be acquiring
to the heirs and legatees named in the will of his husband; that she can select or choose any of them
depending​ ​upon​ ​the​ ​respect,​ ​service,​ ​and​ ​treatment​ ​accorded​ ​to​ ​her​ ​by​ ​said​ ​legatees/heirs/devisees.

In 1937, Simeon Blas died. In 1956, Maxima died and Rosalina Santos became administratrix of her
estate. In the same year, Maria Gervacio Blas, child of Simeon Blas in his first marriage, together with
three other grandchildren of Simeon Blas (heirs of Simeon Blas), learned that Maxima did not fulfill
her promise as it was learned that Maxima only disposed not even one-tenth of the properties she
acquired​ ​from​ ​Simeon​ ​Blas.

The heirs are now contending that they did not partition Simeon Blas’ property precisely because
Maxima​ ​promised​ ​that​ ​they’ll​ ​be​ ​receiving​ ​properties​ ​upon​ ​her​ ​death.

Issue:
Whether​ ​or​ ​not​ ​the​ ​heirs​ ​should​ ​receive​ ​properties​ ​based​ ​on​ ​the​ ​promise​ ​of​ ​Maxima​.

Held:
Yes. The promise ​is valid and enforceable upon her death​. Though it is not a will (it lacks the
formality) nor a donation, it is still enforceable because said promise was actually executed to avoid
litigation​ ​(partition​ ​of​ ​Simeon​ ​Blas’​ ​estate)​ ​hence​ ​it​ ​is​ ​a​ ​compromise​.
Pokemon​ ​Digest​ ​-​ ​Oblicon

13
It is not disputed that this document was prepared at the instance of Simeon Blas for the reason that
the conjugal properties of his first marriage had not been liquidated. It is an obligation or promise
made by the maker to transmit one-half of her share in the conjugal properties acquired with her
husband, which properties are stated or declared to be conjugal properties in the will of the
husband.

And​ ​also…
They can acquire the properties that Maxima promised with them because it was stated in ​Art. 1347
that ​“No contract may be entered into upon future inheritance except in cases expressly
authorized by law.”. In this case ​the contract was authorized by law because the ​promised made by
Maxima to their heirs before she died is a valid reason and it should be enforceable upon her death
and​ ​her​ ​heirs​ ​can​ ​now​ ​acquire​ ​the​ ​succession​ ​of​ ​the​ ​properties​ ​in​ ​issue.

(31)​Tanedo​ ​v​ ​CA,​ ​252​ ​SCRA​ ​80​ ​(1996)​​ ​-Erica

Parties:
Petitioner:​ ​Belinda​ ​Tanedo​ ​et​ ​al-​ ​children​ ​of​ ​deceased​ ​Lorenzo​ ​Tanedo
Respondent:​ ​Brother​ ​of​ ​Lorenzo​ ​Tanedo

FACTS​:
Petitioners Belinda Tanedo, et al are the children of deceased Lorenzo Tanedo. Respondent
Ricardo​ ​Tanedo,​ ​on​ ​the​ ​other​ ​hand,​ ​is​ ​the​ ​brother​ ​of​ ​the​ ​deceased.

In 1962, Lorenzo sold to his brother Ricardo one hectare of his share in a parcel of land
located in Tarlac which was owned by his parents. Said property, therefore, is Lorenzo’s
“future​ ​inheritance”​ ​from​ ​his​ ​parents.

On February 28, 1980, Lorenzo and Ricardo’s sole living parent, their father Matias, died. On
the same day, Lorenzo executed an Affidavit of Conformity re-affirming the sale he executed
in​ ​1962.

In 1981, Lorenzo executed another Deed of Sale in favor of Ricardo covering his “undivided
ONE TWELVE (1/12) of a parcel of land known as Lot 191”. However, Belinda told Ricardo
via a telephone conversation that Lorenzo sold the same parcel of land to her and the other
petitioners (Belinda et al) on December 29, 1980. Ricardo hastily recorded his Deed of Sale
with​ ​the​ ​Registry​ ​of​ ​Deeds.

Thus, in 1982, the petitioners, children of Lorenzo, filed a complaint for rescission (plus
damages) of the deeds of sale executed by Lorenzo in favor of private respondents covering
the​ ​property​ ​inherited​ ​by​ ​Lorenzo​ ​from​ ​his​ ​father.

Both​ ​the​ ​RTC​ ​and​ ​the​ ​CA​ ​upheld​ ​the​ ​validity​ ​of​ ​the​ ​1981​ ​sale​ ​and​ ​ruled​ ​in​ ​favor​ ​of​ ​Ricardo.

ISSUES​:
1.​ ​Is​ ​the​ ​1962​ ​sale​ ​valid?​ ​Otherwise​ ​stated,​ ​is​ ​the​ ​sale​ ​of​ ​future​ ​inheritance​ ​valid?
2.​ ​Is​ ​the​ ​1981​ ​sale​ ​valid?​ ​Otherwise​ ​stated,​ ​when​ ​is​ ​ownership​ ​vested​ ​upon​ ​the​ ​successor?

HELD​:
Pokemon​ ​Digest​ ​-​ ​Oblicon

14

The​ ​1962​ ​sale​ ​is​ ​VOID​ ​while​ ​the​ ​1981​ ​sale​ ​is​ ​VALID.

Pursuant to Article 1347 of the Civil Code, “(n)o contract may be entered into upon a future
inheritance except in cases expressly authorized by law.” Lorenzo was not the owner of the
property that he sold in 1962 as it was at that time only his future inheritance from his father,
Matias. He had therefore no right to transfer the ownership thereof. The Affidavit of
Conformity that he executed in 1980 upon his father’s death did not cure the defect because
there​ ​was​ ​nothing​ ​to​ ​re-affirm​ ​–​ ​the​ ​1962​ ​sale​ ​having​ ​been​ ​void.

On the other hand, the 1981 sale of Lazaro’s undivided share to Ricardo is valid because
ownership passes to the heir at the very moment of death who from that moment acquires
the​ ​right​ ​to​ ​dispose​ ​of​ ​his​ ​share.

Further, following Article 1544 of the Civil Code, because Ricardo was the first to register his
right,​ ​he​ ​is​ ​now​ ​deemed​ ​the​ ​owner​ ​of​ ​the​ ​property​ ​in​ ​question.

(e)​ ​ ​Cause,​ ​NCC​ ​1350​ ​–​ ​1355

Art. 1350. In onerous contracts the cause is understood to be, for each contracting party, the
prestation or promise of a thing or service by the other; in remuneratory ones, the service or
benefit which is remunerated; and in contracts of pure beneficence, the mere liberality of the
benefactor.​ ​(1274)

Art. 1351. The particular motives of the parties in entering into a contract are different from
the​ ​cause​ ​thereof.​ ​(n)

(Sample-Edward)

Art. 1352. Contracts without cause, or with unlawful cause, produce no effect whatever. The
cause is unlawful if it is contrary to law, morals, good customs, public order or public policy.
(1275a)
(Sample-Erica)

Since cause is one of the essential elements of a contract, its absence does not create a
contract​ ​as​ ​there​ ​can​ ​be​ ​no​ ​meeting​ ​of​ ​the​ ​minds.​ ​This​ ​is​ ​also​ ​true​ ​if​ ​the​ ​cause​ ​is​ ​unlawful.
→​ ​ ​a​ ​contract​ ​to​ ​engage​ ​a​ ​party​ ​to​ ​steal​ ​is​ ​unlawful​ ​as​ ​it​ ​is​ ​against​ ​the​ ​law.
→ a contract between a husband and wife to have their respective paramours is contrary to
morals.
→​ ​A​ ​contract​ ​to​ ​foment​ ​riots​ ​is​ ​contrary​ ​to​ ​public​ ​order​ ​and
→ a contract waiving the right of an employee to receive what is due him under the law is
contrary​ ​to​ ​public​ ​policy.

Art. 1353. The statement of a false cause in contracts shall render them void, if it should not
be​ ​proved​ ​that​ ​they​ ​were​ ​founded​ ​upon​ ​another​ ​cause​ ​which​ ​is​ ​true​ ​and​ ​lawful.​ ​(1276)

(Sample-Jerald)
Pokemon​ ​Digest​ ​-​ ​Oblicon

15

Art. 1354. Although the cause is not stated in the contract, it is presumed that it exists and is
lawful,​ ​unless​ ​the​ ​debtor​ ​proves​ ​the​ ​contrary.​ ​(1277)
(Sample-Joy)

Art. 1355. Except in cases specified by law, lesion or inadequacy of cause shall not
invalidate​ ​a​ ​contract,​ ​unless​ ​there​ ​has​ ​been​ ​fraud,​ ​mistake​ ​or​ ​undue​ ​influence.​ ​(n)
(Sample-Jued)

(32)​Liguez​ ​v​ ​CA,​ ​102​ ​Phil​ ​577​ ​(1957)​ ​-​ ​Jerald

(33)​Carantes​ ​v​ ​CA,​ ​76​ ​SCRA​ ​524​ ​(1977)​ ​-Joy
(33)​Sps.​ ​Buenaventura​ ​v​ ​CA,​ ​416​ ​SCRA​ ​263​ ​(2003)​​ ​-Mark

NOTE:​​ ​Natural​ ​Elements

(1)​ ​ ​Right​ ​to​ ​resolve,​ ​NCC​ ​1191

Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the
obligors​ ​should​ ​not​ ​comply​ ​with​ ​what​ ​is​ ​incumbent​ ​upon​ ​him.

The injured party may choose between the fulfillment and the rescission of the obligation,
with the payment of damages in either case. He may also seek rescission, even after he has
chosen​ ​fulfillment,​ ​if​ ​the​ ​latter​ ​should​ ​become​ ​impossible.

The court shall decree the rescission claimed, unless there be just cause authorizing the
fixing​ ​of​ ​a​ ​period.

This is understood to be without prejudice to the rights of third persons who have acquired
the​ ​thing,​ ​in​ ​accordance​ ​with​ ​Articles​ ​1385​ ​and​ ​1388​ ​and​ ​the​ ​Mortgage​ ​Law.

(1) D borrowed from C P50,000.00. C, on the other hand, borrowed D’s car. The
performance by D of his obligation to C is not conditioned upon the performance by C of his
obligation​ ​and​ ​vice​ ​versa.

Although D and C are debtors and creditors of each other, their obligations are not
reciprocal. The obligation of D arises from the contract of loan, while that of C, from the
contract of commodatum. The obligations are not dependent upon each other and are not
simultaneous.​ ​Article​ ​1191​ ​applies​ ​only​ ​if​ ​the​ ​reciprocity​ ​arises​ ​from​ ​the​ ​same​ ​cause.
(Sample-Mark)

(2)​ ​Warranties​ ​in​ ​sales​ ​contracts

(34)​Toledo​ ​vs.​ ​CA,​ ​G.R.​ ​No.​ ​167838,​ ​August​ ​5,​ ​2015​-Mustang

D.​ ​Stages​ ​of​ ​a​ ​Contract,​ ​NCC​ ​1315,​ ​1316

Art. 1315. Contracts are perfected by mere consent, and from that moment the parties are
bound not only to the fulfillment of what has been expressly stipulated but also to all the
Pokemon​ ​Digest​ ​-​ ​Oblicon

16
consequences which, according to their nature, may be in keeping with good faith, usage
and​ ​law.​ ​(1258)

How​ ​Contracts​ ​Are​ ​Perfected

(a)​ ​consensual​ ​contracts​​ ​—​ ​by​ ​mere​ ​consent​ ​(this​ ​is​ ​the​ ​general
rule)​ ​(Art.​ ​1315).​ ​(Example:​ ​contract​ ​of​ ​sale)
(b)​ ​real​ ​contracts​​ ​—​ ​perfected​ ​by​ ​delivery​ ​(Examples:​ ​deposit
and​ ​pledge).​ ​(Art.​ ​1316,​ ​Civil​ ​Code).
(c)​ ​formal​ ​or​ ​solemn​ ​contracts​​ ​—​ ​here​ ​a​ ​special​ ​form​ ​is​ ​required
for​ ​perfection​ ​(Example:​ ​A​ ​simple​ ​donation​ ​inter​ ​vivos​ ​of
real​ ​property,​ ​to​ ​be​ ​valid​ ​and​ ​perfected,​ ​must​ ​be​ ​in​ ​a​ ​public
instrument).​ ​(Art.​ ​749,​ ​Civil​ ​Code).​ ​[NOTE:​ ​To​ ​be​ ​a​ ​written
contract,​ ​all​ ​its​ ​terms​ ​must​ ​be​ ​in​ ​writing,​ ​so​ ​that​ ​a​ ​contract
partly​ ​in​ ​writing​ ​and​ ​partly​ ​oral​ ​is,​ ​in​ ​legal​ ​effect,​ ​an​ ​oral
contract.​ ​(Manuel​ ​v.​ ​Rodriguez,​ ​et​ ​al.,​ ​L-13435,​ ​Jul.​ ​26,
1960).]

(Sample-Mustang)

Art. 1316. Real contracts, such as deposit, pledge and Commodatum, are not perfected until
the​ ​delivery​ ​of​ ​the​ ​object​ ​of​ ​the​ ​obligation.​ ​(n)

EXAMPLE:
X borrowed from Y P5,000. As X’s security for the debt, X promised to pledge his diamond
ring​ ​to​ ​Y.

Before the delivery of the ring to Y, the contract of pledge is not yet perfected. If X later on
refuses to pledge the ring, Y can demand the payment of the obligation although it is with a
period. (Art. 1198[2].) But Y cannot require X to deliver the ring as security because there is
no real contract of pledge yet. There is merely a consensual contract to constitute a pledge.
What exists, is a personal right, the right of action on the part of Y to demand the constitution
of​ ​the​ ​pledge.​ ​(see​ ​Art.​ ​2092.)

(Sample-Yana)

E.​ ​Essential​ ​Requisites​ ​of​ ​Contracts - 1318-1319

Art.​ ​1318.​ ​There​ ​is​ ​no​ ​contract​ ​unless​ ​the​ ​following​ ​requisites​ ​concur:
(1)​ ​Consent​ ​of​ ​the​ ​contracting​ ​parties;

(2)​ ​Object​ ​certain​ ​which​ ​is​ ​the​ ​subject​ ​matter​ ​of​ ​the​ ​contract;

(3)​ ​Cause​ ​of​ ​the​ ​obligation​ ​which​ ​is​ ​established.​ ​(1261)

(Sample-Edward)

SECTION​ ​1.​ ​-​ ​Consent

Pokemon​ ​Digest​ ​-​ ​Oblicon

17

Art. 1319. Consent is manifested by the meeting of the offer and the acceptance upon the
thing and the cause which are to constitute the contract. The offer must be certain and the
acceptance​ ​absolute.​ ​A​ ​qualified​ ​acceptance​ ​constitutes​ ​a​ ​counter-offer.

Acceptance made by letter or telegram does not bind the offerer except from the time it
came to his knowledge. The contract, in such a case, is presumed to have been entered into
in​ ​the​ ​place​ ​where​ ​the​ ​offer​ ​was​ ​made.​ ​(1262a)

(Sample-Erica)-​ ​see​ ​1319​ ​above.

a) Consent​ ​freely​ ​given

Offer​ ​and​ ​Acceptance;
Advertisement​ ​is​ ​not​ ​an​ ​offer​ ​but​ ​an​ ​invitation​ ​to​ ​make​ ​an​ ​offer;
Qualified​ ​acceptance;​ ​counter-offer;
Capacity​ ​to​ ​give​ ​consent:
i.​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​If​ ​one​ ​party​ ​is​ ​a​ ​minor​ ​and​ ​the​ ​other​ ​is​ ​not,​ ​the​ ​contract​ ​is​ v​ oidable
ii.​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​If​ ​both​ ​parties​ ​are​ ​minors,​ ​the​ ​contract​ ​is​ ​unenforceable
Vices​ ​of​ ​consent
i.​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​Mistake - 1330-1334​ ​ ​-
Art. 1330. A contract where consent is given through mistake, violence, intimidation, undue
influence,​ ​or​ ​fraud​ ​is​ ​voidable.​ ​(1265a)

(Sample-Jerald)

Art. 1331. In order that mistake may invalidate consent, it should refer to the substance of
the thing which is the object of the contract, or to those conditions which have principally
moved​ ​one​ ​or​ ​both​ ​parties​ ​to​ ​enter​ ​into​ ​the​ ​contract.

(Sample-Joy)

Mistake as to the identity or qualifications of one of the parties will vitiate consent only when
such​ ​identity​ ​or​ ​qualifications​ ​have​ ​been​ ​the​ ​principal​ ​cause​ ​of​ ​the​ ​contract.

A​ ​simple​ ​mistake​ ​of​ ​account​ ​shall​ ​give​ ​rise​ ​to​ ​its​ ​correction.​ ​(1266a)

Art. 1332. When one of the parties is unable to read, or if the contract is in a language not
understood by him, and mistake or fraud is alleged, the person enforcing the contract must
show​ ​that​ ​the​ ​terms​ ​thereof​ ​have​ ​been​ ​fully​ ​explained​ ​to​ ​the​ ​former.​ ​(n)

(Sample-Jued)

Art. 1333. There is no mistake if the party alleging it knew the doubt, contingency or risk
affecting​ ​the​ ​object​ ​of​ ​the​ ​contract.​ ​(n)
Pokemon​ ​Digest​ ​-​ ​Oblicon

18
B bought a parcel of land from S who informed him before the contract was perfected that
the​ ​land​ ​was​ ​involved​ ​in​ ​a​ ​litigation​ ​in​ ​which​ ​C​ ​is​ ​the​ ​claimant.

In case the land is recovered later on by C, B cannot allege mistake in his contract because
he​ ​knew​ ​the​ ​risk​ ​that​ ​the​ ​land​ ​might​ ​later​ ​on​ ​be​ ​recovered​ ​by​ ​C.

(Sample-Mark)

Art. 1334. Mutual error as to the legal effect of an agreement when the real purpose of the
parties​ ​is​ ​frustrated,​ ​may​ ​vitiate​ ​consent.

EXAMPLES:
(1) D borrows P10,000.00 from C. As security for the debt, it was agreed that D should
mortgage his parcel of land in favor of C. However, the document as written is one of
antichresis,18​ ​the​ ​parties​ ​erroneously​ ​believing​ ​that​ ​it​ ​has​ ​the​ ​same​ ​effect​ ​as​ ​a​ ​mortgage.
In​ ​this​ ​case,​ ​the​ ​contract​ ​of​ ​antichresis​ ​is​ ​voidable​ ​because​ ​there​ ​is​ ​no
meeting​ ​of​ ​the​ ​minds.​ ​(Art.​ ​1359,​ ​par.​ ​2.)

(2) In the same example, if the parties really agreed on a sale, but the document as written
discloses a mortgage, there is a meeting of the minds but the document does not show their
true​ ​intention.​ ​In​ ​this​ ​case,​ ​the​ ​remedy​ ​is​ ​reformation.​ ​(see​ ​Art.​ ​1359.)

(3) C delivers, as a deposit, a movable property to D, who receives it as loan (commodatum).

(see​ ​Art.​ ​1316.)
Here, the mutual error is not on the legal effect, but on the nature of the contract entered
into. There is no meeting of the minds. D must return the property as there is neither a
deposit​ ​nor​ ​a​ ​loan.
(Sample-Mustang)

(35)​Sps.​ ​Theis​ ​v.​ ​CA,​ ​GR​ ​No.​ ​L-126013,​ ​February​ ​12,​ ​1997​ ​-Yana

FACTS: Calson’s Development owned three lots in Tagaytay – Parcels Nos. 1, 2, and 3.
Adjacent to parcel no. 3 was parcel no. 4, which was not owned by Calson’s. Calson’s built a
house on Parcel No. 3. In a subsequent survey, parcel no. 3, where the house was built, was
erroneously indicated to be covered by the title to parcel no. 1. Parcel nos. 2 and 3 were
mistakenly​ ​surveyed​ ​to​ ​be​ ​located​ ​where​ ​parcel​ ​no.​ ​4​ ​was​ ​located.

Unaware of this mistake by which Calson’s appeared to be the owner of parcel no. 4,
Calson’s sold what it thought was parcel nos. 2 and 3 (but what was actually parcel no. 4) to
the​ ​Theis​ ​spouses.

Upon execution of the deed of sale in favor of Their spouses, Calson’s delivered the
certificates of title to parcel nos. 2 and 3 to the spouses. The spouses then went to
Germany. About three years later, they returned to Tagaytay to plan the construction of their
house. It was then that they discovered that parcel no. 4, which was sold to them, was
owned by someone else, and that what was actually sold to them were parcel nos. 2 and 3.
The real parcel no. 3, however, could not have been sold to them since a house had already
Pokemon​ ​Digest​ ​-​ ​Oblicon

19
been built thereon by Calson’s even before the execution of the contract, and its construction
cost​ ​far​ ​exceeded​ ​the​ ​price​ ​paid​ ​by​ ​the​ ​spouses​ ​for​ ​the​ ​two​ ​parcels​ ​of​ ​land.

The spouses insisted that they wanted parcel no. 4, but this was impossible, since Calson’s
did not own it. Calson’s offered them the real parcel nos. 1 and 2 instead since these were
really what it intended to sell to the spouses. The spouses refused and insisted that they
wanted parcel nos. 2 and 3 since the TCTs to these lots were the ones that had been issued
in​ ​their​ ​name.

Calson’s then offered to return double the amount already paid by the spouses. The spouses
still​ ​refused.​ ​Calson’s​ ​filed​ ​an​ ​action​ ​to​ ​annul​ ​the​ ​contract​ ​of​ ​sale.

ISSUE:​ ​Whether​ ​the​ ​contract​ ​of​ ​sale​ ​can​ ​be​ ​annulled.

HELD:​ ​Yes,​ ​the​ ​contract​ ​can​ ​be​ ​annulled​ ​on​ ​the​ ​ground​ ​of​ ​mistake.

A contract may be annulled where the consent of one of the contracting parties was
procured by mistake, fraud, intimidation, violence, or undue influence. Article 1390 of
the Civil Code provides that contracts where the consent is vitiated by mistake are
annullable. In order that mistake may invalidate consent, it should refer to the substance of
the thing which is the object of the contract, or to those conditions which have principally
moved one or both parties to enter into the contract. The concept of error includes: (1)
ignorance, which is the absence of knowledge with respect to a thing; and (2) mistake, which
is a wrong conception about said thing, or a belief in the existence of some fact,
circumstance, or event, which in reality does not exist. In both cases, there is a lack of full
and​ ​correct​ ​knowledge​ ​about​ ​the​ ​thing.

In the case at bar, the private respondent obviously committed an honest mistake in selling
parcel no. 4. As correctly noted by the Court of Appeals, it is quite impossible for said private
respondent to sell the lot in question as the same is not owned by it. The good faith of the
private respondent is evident in the fact that when the mistake was discovered, it
immediately offered two other vacant lots to the petitioners or to reimburse them with twice
the amount paid. That petitioners refused either option left the private respondent with no
other choice but to file an action for the annulment of the deed of sale on the ground of
mistake.

ii.​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​Violence​ ​and​ ​Intimidation​ ​- 1335-1337

● Violence shall annul the obligation, although it may not been employed by a 3rd
person​ ​who​ ​did​ ​not​ ​take​ ​part​ ​in​ ​the​ ​contract​ ​(Art.1336).

Requisites​ ​of​ ​Violence

1.​ ​Irresistible​ ​physical​ ​force​ ​is​ ​employed
2.​ ​The​ ​force​ ​is​ ​the​ ​determining​ ​cause​ ​for​ ​giving​ ​consent

Requisites​ ​of​ ​Intimidation

1.The​ ​threat​ ​must​ ​be​ ​the​ ​determining​ ​cause​ ​for​ ​giving​ ​consent
2.The​ ​threatened​ ​act​ ​is​ ​unjust​ ​and​ ​unlawful
Pokemon​ ​Digest​ ​-​ ​Oblicon

20
● A threat to enforce one’s claim through competent authority, if the claim is just
or​ ​legal,​ ​does​ ​not​ ​vitiate​ ​consent​ ​(Art.1335,4th)
● Thus, the rule is, generally, a threat to do something lawful does not
constitute​ ​intimidation.
● Example: If you don’t marry my daughter, I’ll report you to the IBP (in case the
daughter of the person got pregnant out of wedlock). This is not unlawful
because​ ​the​ ​person​ ​did​ ​commit​ ​immorality.
● Example: ​A saw B commit murder. A threatened B that he will report him to
the police unless B gives his house. This is intimidation because there is no
connection​ ​between​ ​the​ ​crime​ ​and​ ​the​ ​contract.

3.The​ ​threat​ ​is​ ​real​ ​and​ ​serious

● Example: ​For example the threat must be to kill you or burn your house and
not​ ​merely​ ​to​ ​pinch​ ​you.
4. The threat produces a well-grounded fear that the person making it can and will
inflict​ ​harm
● To determine the degree of intimidation, the age, sex, and condition of the
person​ ​shall​ ​be​ ​borne​ ​in​ ​mind​ ​(Art.1335,3rd)
● Example: ​A 75 year old bed man who is bed ridden and says that he will kill
you​ ​does​ ​not​ ​produce​ ​a​ ​well-grounded​ ​fear.
● Intimidation shall annul the obligation, although it may have been employed
by​ ​a​ ​3rd​ ​person​ ​who​ ​did​ ​not​ ​take​ ​part​ ​in​ ​the​ ​contract​ ​(Art.1336)

Art. 1335. There is ​violence when in order to wrest consent, serious or irresistible force is
employed.

There is ​intimidation when one of the contracting parties is compelled by a reasonable and
well-grounded fear of an imminent and grave evil upon his person or property, or upon the
person​ ​or​ ​property​ ​of​ ​his​ ​spouse,​ ​descendants​ ​or​ ​ascendants,​ ​to​ ​give​ ​his​ ​consent.

To determine the degree of intimidation, the age, sex and condition of the person shall be
borne​ ​in​ ​mind.

A threat to enforce one's claim through competent authority, if the claim is just or legal, does
not​ ​vitiate​ ​consent.​ ​(1267a)

EXAMPLE:
Got​ ​this​ ​from​ ​De​ ​Leon​ ​ha​ ​:-)

Facts​: H, an insured under a life insurance policy, died leaving his widow, W, a
beneficiary. C, a creditor of H, threatened W that if the latter would not pay the
indebtedness of H, C would institute suit and allege not only fraud but that H met his
death​ ​through​ ​other​ ​than​ ​accidental​ ​means.

Upon receipt of the insurance money, W paid C. It appeared that she paid C his
credit upon the advice of her lawyers who assisted her throughout the negotiations
because she wanted to obtain the release of the balance of the insurance money, as
she​ ​was​ ​then​ ​in​ ​dire​ ​need.
Pokemon​ ​Digest​ ​-​ ​Oblicon

21

Issue: Has W the right to recover the payment made on the ground that she did so
on​ ​by​ ​reason​ ​of​ ​C’s​ ​intimidation?

Held​: No. Article 1335 is not applicable. She made the payment not because of the
fear of litigation threatened by C but in order to obtain the release of the insurance.
(Tapia​ ​Vda.​ ​de​ ​Jones​ ​vs.​ ​Carmen​ ​and​ ​Elser,​ ​60​ ​Phil.​ ​756​ ​[1954].)

(Sample-Yana)

Art. 1336. Violence or intimidation shall annul the obligation, although it may have been
employed​ ​by​ ​a​ ​third​ ​person​ ​who​ ​did​ ​not​ ​take​ ​part​ ​in​ ​the​ ​contract.​ ​(1268)
(Sample-Edward)

Art. 1337. There is undue influence when a person takes improper advantage of his power
over the will of another, depriving the latter of a reasonable freedom of choice. The following
circumstances shall be considered: the confidential, family, spiritual and other relations
between the parties, or the fact that the person alleged to have been unduly influenced was
suffering​ ​from​ ​mental​ ​weakness,​ ​or​ ​was​ ​ignorant​ ​or​ ​in​ ​financial​ ​distress.

(Sample-Erica)

Meaning-- there is undue in uence when a person takes improper advantage of his power
over​ ​the​ ​will​ ​of​ ​another,​ ​depriving​ ​the​ ​latter​ ​of​ ​a​ ​reasonable​ ​freedom​ ​of​ ​choice.

Illustrative​ ​case:

In Marubeni Corporation vs. Lirag,70 where a consultancy agreement was obtained from a
government agency because of the use of in uence of executive of cials, the Supreme Court
declared​ ​the​ ​contract​ ​not​ ​only​ ​voidable​ ​but​ ​null​ ​and​ ​void,​ ​thus:

Any agreement entered into because of the actual or supposed influence which the party
has, engaging him to in uence executive of cials in the discharge of their duties, which
contemplates the use of personal in uence and solicitation rather than an appeal to the
judgment of the of cial on the merits of the object sought is contrary to public policy.
Consequently, the agreement, assuming that the parties agreed to the consultancy, is null
and​ ​void​ ​as​ ​against​ ​public​ ​policy.​ ​Therefore,​ ​it​ ​is​ ​unenforceable​ ​before​ ​a​ ​court​ ​of​ ​justice.

(35)​Martinez​ ​v.​ ​Hong​ ​Kong​ ​and​ ​Shanghai​ ​Bank,​ ​15​ ​Phil.​ ​252​ ​(1910)​​ ​-​ ​Erica

Plaintiffs-appellants:​ ​MERCEDES​ ​MARTINEZ​ ​Y​ ​FERNANDEZ,​ ​ET​ ​AL.

Defendants-appellants: THE HONGKONG & SHANGHAI BANKING CORPORATION, ET
AL.
Pokemon​ ​Digest​ ​-​ ​Oblicon

22

FACTS:
1. Alejandro S. Macleod (husband of Mercedes) was for many years the
managing​ ​partner​ ​of​ ​the​ ​house​ ​of​ ​Aldecoa​ ​&​ ​Co.​ ​in​ ​the​ ​city​ ​of​ ​Manila.
2. He​ ​withdrew​ ​from​ ​the​ ​management​ ​when​ ​Aldecoa​ ​&​ ​Co.​ ​went​ ​into​ ​liquidation.
3. Hongkong & Shanghai banking Corporation was a creditor of that firm to the
extent of several hundred thousand pesos and claimed to have a creditor's lien in the nature
of​ ​a​ ​pledge​ ​over​ ​certain​ ​properties​ ​of​ ​the​ ​debtor.
4. Bank began a civil action against Alejandro, Mercedes, Aldecoa & Co., and
the​ ​firm​ ​known​ ​as​ ​Viuda​ ​e​ ​Hijos​ ​de​ ​Escaño.
• A certain undertaking in favor of Aldecoa & Co. had been pledged to the bank
to secure the indebtedness of Aldecoa & Co., but that this obligation had been wrongfully
transferred​ ​by​ ​Alejandro​ ​into​ ​an​ ​obligation​ ​in​ ​favor​ ​of​ ​Mercedes​ ​to​ ​the​ ​prejudice​ ​of​ ​the​ ​bank.
• Aldecoa & Co. began a civil action against Alejandro S. Macleod and others
for the recovery of certain shares of stock basing its right to recover upon alleged criminal
misconduct​ ​of​ ​Alejandro​ ​in​ ​his​ ​management​ ​of​ ​the​ ​firm's​ ​affairs.

1. Knowing that criminal complaints would be filed against him, Alejandro went
to Macao (Portuguese colony) a territory not covered by the extradition treaty between US
and​ ​Portuguese.
2. Aldecoa​ ​filed​ ​a​ ​complaint​ ​against​ ​Alejandro​ ​for
• Falsification of commercial document. The GPR requested the Portuguese
government​ ​for​ ​extradition​ ​but​ ​this​ ​was​ ​denied
• Embezzlement
1. Aldecoa & Co. and the bank, on the settlement, insisted upon the conveyance
not only of all the property of Alejandro but also of at least a portion of the property claimed
by​ ​Mercedes.
• Alejandro's representative did not resist but Mercedes resisted with respect to
her​ ​properties​ ​alleging​ ​that​ ​these​ ​were​ ​exclusively​ ​hers.
1. They​ ​met​ ​again​ ​to​ ​try​ ​and​ ​settle​ ​the​ ​case
• The conditions and terms were to be explained to Mr. Kingcome (son-in-law
of​ ​Mercedes​ ​and​ ​businessman)
• The explanation was made by Mr. Stephen, the manager of the bank (one of
the friends of Mr. Kingcome) but it is contested whether Kingcome communicated such
substance​ ​to​ ​Mercedes​ ​before​ ​she​ ​signed​ ​the​ ​document
• Reference was made to the British Colony in Manila where Kingcome,
Stephen, Alejandro were prominent members and scandal and disgrace will ensure if
settlement​ ​is​ ​not​ ​made.
• Mr. Kingcome got the impression from that interview that Mr. Stephen thought
unless the settlement were consummated additional and mortifying misfortunes would fall
upon​ ​Alejandro's​ ​family.

1. A​ ​long​ ​conference​ ​was​ ​held

• If Mercedes accepts, the civil suits against them would be dismissed and
criminal​ ​charges​ ​would​ ​be​ ​withdrawn
• If she refuses, her husband will spend the rest of his life in Macao or be
criminally​ ​prosecuted
Pokemon​ ​Digest​ ​-​ ​Oblicon

23
• She refused and it was evident no settlement or compromise can be arrived
at​ ​and​ ​just​ ​do​ ​the​ ​best​ ​to​ ​defend​ ​Alejandro.

1. Mercedes and Mr. William (nephew and close friend of Mercedes and
Alejandro), now her attorney, talked wherein Mercedes agreed to the terms and authorized
William to execute the contract of settlement on her behalf, and after corrections, it was
signed.

1. Aldecoa took possession of the properties of Alejandro and Mercedes, and

the​ ​complaints​ ​were​ ​withdrawn​ ​or​ ​dismissed,​ ​Alejandro​ ​returned​ ​to​ ​Manila.

1. Mercedes​ ​filed​ ​a​ ​complaint​ ​that​ ​there​ ​was​ ​intimidation.

ISSUE1: WON the contract can be annulled since Mercedes' consent was obtained due to
violence​ ​and​ ​intimidation?
HELD​ ​1:​ ​Valid,​ ​no​ ​duress.

Discussion
• Contracts which are declared void and of no force upon the ground that they
were obtained by fraud, duress, or undue influence are so declared for the reason that the
complaining party never really gave his consent thereto. The consent in such case is not in
the eye of the law a consent at all. The person has not acted. He has done nothing he was in
vinculis(in​ ​chains).

Real Duress-- Consent given against his wishes or judgment or reluctantly or without hope of
profit

Void
Valid

Example: A person settles since he injured another. He must make reparation or face the
consequences.

No difference between one choosing which gives him greater profit and one choosing the
lesser​ ​evil

In​ ​this​ ​case

1. The​ ​elements​ ​of​ ​duress​ ​is​ ​lacking.
2. The most that the facts disclose is that the plaintiff was reluctant to relinquish
certain rights which she claimed to have in certain property to the end that she might be
relieved from litigation then pending against her and that her husband might escape
prosecution for crimes alleged to have been committed; and that she persisted for a
considerable​ ​time​ ​in​ ​her​ ​refusal​ ​to​ ​relinquish​ ​such​ ​claimed​ ​rights.
3. The fact that she did relinquish them upon such consideration and under such
condition does not of itself constitute duress or intimidation, nor does it destroy the obligatory
effect​ ​and​ ​force​ ​of​ ​her​ ​consent.
4. Duress needs more than that – she must have acted from fear and not from
judgment.
Pokemon​ ​Digest​ ​-​ ​Oblicon

24
ISSUE2:​ ​WON​ ​the​ ​cases​ ​cited​ ​by​ ​plaintiff​ ​is​ ​applicable?
HELD2:​ ​NO,​ ​not​ ​applicable.

1. In those cases there was no time within which to deliberate the matter as it
should​ ​have​ ​been​ ​deliberated​ ​or​ ​take​ ​the​ ​advice​ ​of​ ​others​ ​or​ ​counsel.
2. The threats made to secure the performance of the acts complained of were
made directly to the complaining party by the person directly interested or by someone in his
behalf who was working in his interest and who had no interest whatever in the welfare of
the​ ​complaining​ ​party.
3. There was no consideration for the performance of the act complained of
except​ ​immunity​ ​from​ ​the​ ​prosecution​ ​threatened.
4. The property transferred or encumbered by the act complained of was the
separate property of the person performing the act in which the person for whom the act was
performed​ ​claimed​ ​no​ ​interest​ ​whatever.
5. There was no dispute as to the title of the property transferred or
encumbered, no claim made to it by anybody, no suits pending to recover it or any portion of
it, and no pretension that it could be taken for the debts of the husband or of any other
person.

The 2 other cases had the benefit of legal advice or friend but none of the other
circumstances​ ​listed​ ​above​ ​were​ ​present.

Basically,​ ​the​ ​cases​ ​cited​ ​had​ ​material​ ​differences​ ​with​ ​the​ ​instant​ ​case.

Usual​ ​exaggerations​ ​in​ ​trade;​ ​opportunity​ ​to​ ​know​ ​facts​ ​–​ ​Article​ ​1340

iii.​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​Fraud​ ​- 1338-1346

● This is known as deceit or dolo causante. This is different from dolo incidente which
means fraud on things which would not prevent you from entering into a contract but
may​ ​hold​ ​the​ ​other​ ​liable​ ​for​ ​damages.

● Requisites​ ​of​ ​Fraud:

1. Fraud​ ​is​ ​employed​ ​by​ ​1​ ​party​ ​on​ ​the​ ​other​ ​(Art.1342,1344)
2. The​ ​other​ ​party​ ​was​ ​induced​ ​to​ ​enter​ ​into​ ​the​ ​contract​ ​(Art.1338)
3. The​ ​fraud​ ​must​ ​be​ ​serious​ ​(1344)
4. There​ ​is​ ​damage​ ​or​ ​injury​ ​caused

Art. 1338. There is fraud when, through insidious words or machinations of one of the
contracting parties, the other is induced to enter into a contract which, without them, he
would​ ​not​ ​have​ ​agreed​ ​to.​ ​(1269)

(Sample-Jerald)

Art. 1339. Failure to disclose facts, when there is a duty to reveal them, as when the parties
are​ ​bound​ ​by​ ​confidential​ ​relations,​ ​constitutes​ ​fraud.​ ​(n)
Pokemon​ ​Digest​ ​-​ ​Oblicon

25

(Sample-Joy)

Art. 1340. The usual exaggerations in trade, when the other party had an opportunity to
know​ ​the​ ​facts,​ ​are​ ​not​ ​in​ ​themselves​ ​fraudulent.​ ​(n)
(Sample-Mark)

Art. 1341. A mere expression of an opinion does not signify fraud, unless made by an expert
and​ ​the​ ​other​ ​party​ ​has​ ​relied​ ​on​ ​the​ ​former's​ ​special​ ​knowledge.​ ​(n)

EXAMPLE:
F,​ ​a​ ​farmer,​ ​found​ ​a​ ​ring.​ ​He​ ​does​ ​not​ ​know​ ​anything​ ​about​ ​precious
stones.​ ​He​ ​sells​ ​the​ ​ring​ ​to​ ​B​ ​honestly​ ​believing,​ ​and​ ​telling​ ​B,​ ​that​ ​it​ ​is​ ​a
diamond​ ​ring.
In​ ​this​ ​case,​ ​there​ ​is​ ​no​ ​fraud​ ​even​ ​if​ ​it​ ​turned​ ​out​ ​that​ ​the​ ​ring​ ​is​ ​not
diamond​ ​because​ ​his​ ​statement​ ​is​ ​merely​ ​an​ ​expression​ ​of​ ​an​ ​opinion.
(see​ ​Art.​ ​1343.)
However,​ ​if​ ​F​ ​is​ ​an​ ​expert​ ​on​ ​precious​ ​stones​ ​and​ ​he​ ​sells​ ​the​ ​ring
to​ ​B​ ​saying,​ ​“I​ ​believe​ ​this​ ​is​ ​a​ ​diamond​ ​ring,’’​ ​and​ ​B,​ ​knowing​ ​that​ ​F
is​ ​an​ ​expert,​ ​relies​ ​on​ ​his​ ​special​ ​knowledge,​ ​the​ ​contract​ ​is​ ​voidable
on​ ​the​ ​ground​ ​of​ ​fraud.​ ​Actually,​ ​F,​ ​being​ ​an​ ​expert,​ ​is​ ​making​ ​a
misrepresentation​ ​of​ ​fact​ ​and​ ​he​ ​cannot​ ​escape​ ​liability​ ​by​ ​expressing​ ​it
in​ ​the​ ​form​ ​of​ ​an​ ​opinion.

(Sample-Mustang)

Art. 1342. Misrepresentation by a third person does not vitiate consent, unless such
misrepresentation​ ​has​ ​created​ ​substantial​ ​mistake​ ​and​ ​the​ ​same​ ​is​ ​mutual.​ ​(n)

EXAMPLE:
S bought the land of B for P2,000.00 per square meter. The reasonable price of
lands in the same vicinity is P3,000.00 per square meter but B sold it only for
P2,000.00 per square meter because C had deceived him regarding its market
value.

In this case, the contract cannot be annulled unless it can be shown that S was a
party​ ​to​ ​the​ ​fraud.

(Sample-Yana)

Art.​ ​1343.​ ​Misrepresentation​ ​made​ ​in​ ​good​ ​faith​ ​is​ ​not​ ​fraudulent​ ​but​ ​may​ ​constitute​ ​error.​ ​(n)

Art. 1344. In order that fraud may make a contract voidable, it should be serious and should
not​ ​have​ ​been​ ​employed​ ​by​ ​both​ ​contracting​ ​parties.
(Sample-Erica)
Pokemon​ ​Digest​ ​-​ ​Oblicon

26

A unilateral mistake of law as to the legal effect of an agreement is generally not a ground to
annul a contract. This is so because, in such a situation, the document embodying the
agreement is drafted the way the parties have intended it to be such that only its legal effect
is different from what the parties have assumed. However, a mistake of law may vitiate
consent if the following requisites are present: rst, the mistake as to the legal effect of the
agreement must be mutual and, second, such mutual mistake frustrates the real purpose of
the parties. Hence, if A leases to B a property where the latter will construct a four-story
building but it turned out that such building cannot be erected in the said city because of an
ordinance​ ​prohibiting​ ​the​ ​same,​ ​the​ ​contract​ ​can​ ​be​ ​annulled.
--

Incidental​ ​fraud​ ​only​ ​obliges​ ​the​ ​person​ ​employing​ ​it​ ​to​ ​pay​ ​damages.​ ​(1270)

xxx

● If a 3rd person should commit violence or intimidation on 1 of the contracting parties

and this vitiates the contracting party’s consent, then the contract may be annulled
(Art.1336). By analogy, if a 3rd person should exert undue influence on 1 of the
contracting parties and this vitiates consent of the contracting part, then the contract
may be annulled. However, if the 3rd party commits fraud, damages is the only
remedy unless the fraud committed by the 3rd person has created a mutual
substantial​ ​mistake​ ​(Art.1342)

Art. 1345. Simulation of a contract may be absolute or relative. The former takes place when
the parties do not intend to be bound at all; the latter, when the parties conceal their true
agreement.​ ​(n)
(Sample-Jerald)

Absolute simulation ​(simulados) – In a sale of a car, it was made to appear that the price
was​ ​paid​ ​when​ ​actually​ ​it​ ​was​ ​not.​ ​ ​The​ ​sale​ ​being​ ​without​ ​any​ ​consideration​ ​is​ ​fictitious.

Relative simulation (​dissimulados​) – A donor is donating a fish pond to a donee.

However, instead of executing a deed of donation, the donor executed a deed of sale,
concealing​ ​the​ ​donation​ ​intended.

Art. 1346. An absolutely simulated or fictitious contract is void. A relative simulation, when it
does not prejudice a third person and is not intended for any purpose contrary to law,
morals, good customs, public order or public policy binds the parties to their real agreement.
(n)
(Sample-Joy)

(36)​International​ ​Corporate​ ​Bank​ ​v.​ ​Gueco,​ ​351​ ​SCRA​ ​516​ ​-​ ​Charry