• ZULUETA VS.

MARIANO111 SCRA 206

FACTS:
Petitioner Zulueta was the owner of a house and lot in
Antonio Subdivision, Pasig Rizal, while private respondent is a movie
director. They entered into a “Contract to Sell” the said property of
petitioner for P75,000 payable in 20 years with respondent buyer
assuming to pay a down payment of P5,000 and a monthly
installment of P630 payable in advance before the 5th day of the
corresponding month, starting with December, 1964.
One of their stipulations was that upon failure of the buyer to
fulfill any of the conditions being stipulated, the buyer automatically
and irrevocably authorizes owner to recover extra-judicially, physical
possession of the land, building and other improvements, which
were the subject of the said contract, and to take possession also
extra-judicially whatever personal properties may be found within
the aforesaid premises from the date of said failure to answer for
whatever unfulfilled monetary obligations buyer may have with
owner. Demand was also waived.
• On the allegation that private respondent failed to
comply with the monthly amortizations stipulated
in the contract, despite demands to pay and to
vacate the premises, and that thereby the contract
was converted into one of lease, petitioner
commenced an Ejectment suit against respondent
before the Municipal Court of Pasig, praying that
judgment be rendered ordering respondent to 1)
vacate the premises; 2) pay petitioner the sum of
P11, 751.30 representing respondent’s balance
• owing as of May, 1966; 3) pay petitioner the
sum of P630 every month after May, 1966,
and costs. Private respondent contended that
the Municipal Court had no jurisdiction over
the nature of the action as it involved the
interpretation and/or rescission of the
contract.
• ISSUE:

Was the action before the Municipal

Court essentially one for rescission or
annulment of a contract?
• RULING:
Yes. According to the Supreme Court, “...proof of
violation is a condition precedent to resolution or
rescission. It is only when the violation has been established
that the contract can be declared resolved or
rescinded. Upon such rescission in turn, hinges a
pronouncement that possession of the realty has become
unlawful.”
The Supreme Court, in Nera vs. Vacante (3 SCRA 505),
also said, “A violation by a party of any of the stipulations of a
contract on agreement to sell real property would entitle the
other party to resolved or rescind it.”
Also, according to the book of Tolentino, Civil Code of
the Phil., Vol. IV, 1962 ed. P. 168, citing Magdalena Estate vs.
Myrick, 71 Phil. 344 (1941), extra-judicial rescission has legal
effect when the parties does not oppose it. If it is objected to,
judicial determination of the issue is still necessary.
• AYSON-SIMON VS. ADAMOS AND FERIA
G.R. NO. L-39378 AUGUST 28, 1984
FACTS:
Defendants, Nicolas Adamos and Vicente Feria, purchased two lots forming part
of the Piedad Estate in Quezon City, from Juan Porciuncula. Thereafter, the
successors-in-interest of the latter filed Civil Case No. 174 for annulment of the sale
and the cancellation of TCT No. 69475, which had been issued to defendants-
appellants by virtue of the disputed sale. The Court rendered a Decision annulling
the saleThe said judgment was affirmed by the Appellate Court and had attained
finality.
Meanwhile, during the pendency of the case above, defendants sold the said
two lots to Petitioner Generosa Ayson-Simon for Php3,800.00 plus Php800.00 for
facilitating the issuance of the new titles in favor of petitioner. Due to the failure of
the defendants to deliver the said lots, petitioner filed a civil case for specific
performance. The trial court rendered judgment to petitioner’s favor. However,
defendants could not deliver the said lots because the CA had already annulled the
sale of the two lots in Civil Case No. 174. Thus, petitioner filed another civil case
for the rescission of the contract. Defendants were contending that petitioner
cannot choose to rescind the contract since petitioner chose for specific
performance of the obligation. Also, even though petitioner can choose to rescind
the contract, it would not be possible, because it has already prescribed.
• ISSUES:

1. Can petitioner choose to rescind the

contract even after choosing for the specific
performance of the obligation?

2. Had the option to rescind the contract

prescribed?
•
• RULING:
1. Yes. The rule that the injured party can only choose between fulfillment and
rescission of the obligation, and cannot have both, applies when the obligation is
possible of fulfillment. If, as in this case, the fulfillment has become impossible,
Article 1191 allows the injured party to seek rescission even after he has chosen
fulfillment.
2. No. Article 1191 of the Civil Code provides that the injured party may also
seek rescission, if the fulfillment should become impossible. The cause of action to
claim rescission arises when the fulfillment of the obligation became impossible
when the Court of First Instance of Quezon City in Civil Case No. 174 declared the
sale of the land to defendants by Juan Porciuncula a complete nullity and ordered
the cancellation of Transfer Certificate of Title No. 69475 issued to them. Since the
two lots sold to plaintiff by defendants form part of the land involved in Civil Case
No. 174, it became impossible for defendants to secure and deliver the titles to and
the possession of the lots to plaintiff. But plaintiff had to wait for the finality of the
decision in Civil Case No. 174, According to the certification of the clerk of the
Court of First Instance of Quezon City (Exhibit "E-2"), the decision in Civil Case No.
174 became final and executory "as per entry of Judgment dated May 3, 1967 of
the Court of Appeals." The action for rescission must be commenced within four
years from that date, May 3, 1967. Since the complaint for rescission was filed on
August 16, 1968, the four year period within which the action must be commenced
had not expired.
• PHILIPPINE AMUSEMENT ENTERPRISES VS. NATIVIDAD
21 SCRA 284

FACTS:
On January 6, 1961 the plaintiff, Philippine Amusement Enterprises, Inc.,
entered into a contract with the defendant Soledad Natividad, whereby the
former leased to the latter an automatic phonograph, more popularly
known as "jukebox". Sometime thereafter, Natividad wrote a letter to
plaintiff requesting for the return of the jukebox to the company. Natividad
reasoned out that said jukebox is defective. The plaintiff however,
contended that the stocking up of coins is quite normal in any coin-
operated phonograph. It then rightfully re-installed a new jukebox in
replacement of the first one.
On August 4 and October 16, 1961, plaintiff demanded from defendant
spouses the compliance to renew the lease contract. Defendants refused
the demand and ordered for the rescission of the contract in their favor by
reason of the plaintiff's failure to perform its obligation to render the
automatic phonograph suitable for the purpose for which it was intended.
• ISSUE:

Is defendant entitled to rescission?

• RULING:

No. Rescission by judicial action under Article 1191 will

be ordered only where the breach complained of is
substantial as to defeat the object of the parties in
entering into the agreement. It will not be granted
where the breach is slight or casual. The defendants
asked the plaintiff to retrieve its phonograph, claiming
that there were times when the coins dropped into the
slot would get stuck, resulting in its failure to play the
desired music. But apart from this bare statement, there
is nothing in the evidence which shows the frequency
with which the jukebox failed to function properly. The
expression "there are times" connotes occasional failure
of the phonograph to operate, not frequent enough to
render it unsuitable and unserviceable.
• JACINTO VS. KAPARAZ
G.R. No. 81158 May 22, 1992
FACTS:
On 11 March 1966, petitioners and private respondents entered into an agreement
under which the private respondents agreed to sell and convey to petitioners a
portion consisting of 600 square meters of a lot located in Davao Oriental for a total
amount of P1,800.00 with a downpayment of P800.00 upon execution of the
Agreement. The balance of P1,000.00 was to be paid by petitioners on installment
at the rate of P100.00 a month to the Development Bank of the Philippines to be
applied to private respondents' loan accounts. The pertinent portions of the
Agreement read as follows:
6. That the PARTY OF THE FIRST PART hereby agrees, promises and binds himself to
sell, cede, transfer, and convey absolutely to the PARTY OF THE SECOND PART 600 -
square meter portion of the property together with all the improvements
thereon…
9. That the PARTY OF THE FIRST PART agrees and binds himself to acknowledge
receipt of every and all monthly payments remitted to the Development Bank of
the Philippines by the PARTY OF THE SECOND PART and further agrees and binds
himself to execute the final deed of absolute sale of the 600 square meters herein
above referred to in favor of the PARTY OF THE SECOND PART as soon as the
settlement or partition of the estate of the deceased Narcisa Kaparaz shall have
been consummated and effected, but not later than March 31, 1967.
• Upon the execution of the agreement, petitioners paid the
downpayment of P800.00 and were placed in possession of
the portion described therein. As to the P1,000.00 which
was to be paid directly to the DBP, petitioners claim that
they had even made an excess payment of P100.00.In view
of the refusal of private respondents to execute the deed of
sale, petitioners filed against them a complaint for specific
performance with the Court of First Instance.Private
respondents alleged that the sale did not materialize
because of the failure of petitioners to fulfill their promise
to make timely payments on the stipulated price to the
DBP; as a result of such failure, they (private respondents)
failed to secure the release of the mortgage on the
property. They then prayed for the dismissal of the case
and a declaration that the agreement is null and void.
• ISSUE:

Are respondents entitled to rescind the

agreement?
• RULING:
No. Since in a contract of sale, the non-payment of the price is a resolutory
condition, the remedy of the seller under Article 1191 of the Civil Code is to
exact fulfillment or to rescind the contract. In respect, however, to the sale of
immovable property, this Article must be read together with Article 1592 of
the same Code:
Art. 1592. In the sale of immovable property, even though it may have been
stipulated that upon failure to pay the price at the time agreed upon the
rescission of the contract shall of right take place, the vendee may pay, even
after the expiration of the period, as long as no demand for rescission of the
contract has been made upon him either judicially or by a notarial act. After
the demand, the court may not grant him a new term.
In the case at bar, there was non-compliance with the requirements prescribed
in there provisions. It is not controverted that private respondents had neither
filed an action for specific performance nor demand the rescission of the
agreement either judicially or by a notarial act before the filing of the
complaint. It is only in their Answer that they belatedly raised the defense of
resolution of the contract pursuant to Article 1191 by reason of petitioner’s
breach of their obligation. Moreover, the delay incurred by petitioners was but
a casual or slight breach of the agreement, which did not defeat the object of
the parties in entering in the agreement. A mere casual breach does not justify
rescission. Rescission of the agreement was not available to private
respondents.
• NAGA TELEPHONE CO. INC. (NATELCO) AND LUYCIANO MAGGAY VS. COURT OF
APPEALS AND CAMARINES SUR II ELECTRIC COOPERATIVE INC. (CASURECO II)

230 SCRA 351

FACTS:

NATELCO is a telephone company rendering local and long distance

telephone service in Naga City. While CASURECO is a private corporation
established for purpose of operating and electric power service in the same city.

In 1977, the parties entered into a contract for the use of the electric light
post of CASURECO by NATELCO in operation of its telephone service. In
consideration, NATELCO agreed to install free of charge ten-telephone connection
for the use of CASURECO. The term of the contract shall be as long as NATELCO has
need for the electric light post of the CASURECO, it being understood that the same
contract shall be terminated by any reason whatsoever, if CASURECO is forced to
stop or abandon its operation as a public service.
• After 10 years, CASURECO filed a case against NATELCO for
the reformation of contract with damages on the ground that
it was too-one sided in favor of NATELCO. That after 11 years,
the cable strung by NATELCO was much heavier due to the
increase in volume of their subscribers, worsened by the fact
that their linemen bore holes through the post at which
points those post were broken during typhoons. NATELCO
used posts in the towns outside Naga without any contract or
permission from CASURECO. After filing the complaints,
NATELCO had refused to pay despite the demands made.
NATELCO’s answered that CASURECO did not sufficiently state
the cause of action for the reformation of contract and that it
was barred by the prescription because it was filed after 10
years.
• The trial court ruled in favor of CASURECO,
ordering the reformation of contract and
ordering NATELCO to pay CASURECO the
compensation for the use of their post in
Naga. Moreover, CASURECO was ordered to
pay the monthly bills for the use of the
telephones. Disagreeing with the judgment,
NATELCO appealed to the Court of Appeals.
The Court of Appeals affirmed the decision.
• ISSUE:

1. Was reformation of the contract a proper

remedy for NASURECO?

2. Was the contract subject to potestative

condition?
• RULING:
1. No. NASURECO cannot correctly invoke reformation of contract as a
proper remedy, because there had been no showing of mistake or
error in said contract on the part of any of the parties, so as to result
in its failure to express their true intent.
2. No. A potestative condition is a condition wherein the fulfillment of
which depends upon the sole sill of the debtor, in which conditional
obligation is void. Based on the provision in the contract, the term
shall be as long as NATELCO had need for the electric post of the
CASURECO, which was a potestative condition. But it should be noted
that the same provision also stated that the contract shall terminate
when for any reason whatsoever, CASURECO was to stop or abandon
its operation as a public service and it becomes necessary to remove
the electric light post, which were casual condition since they depend
on chance, hazard, or the will of the third person. The contract was
subject to mixed conditions, depending partly in the will of the debtor
and partly on chance or will of a third person that would not
invalidate the provision.
 MERCADO VS ESPIRITU
• Margarita Espiritu was the owner of a 48 hectare land. In 1897, she
died and the land was left to her husband (Wenceslao Mercado)
and her children, Domingo Mercado, Josefa Mercado and 3 other
siblings.
• Apparently however, during the lifetime of Margarita in 1894, she
executed a deed of sale transferring about 71% of her land
(covering 15 cavanes of seeds) to her brother Luis Espiritu (father of
Jose Espiritu) for P2,000.00. After her death, Wenceslao had a hard
time making ends meet for his family and so he took out a loan
from Luis in the amount of P375.00. The loan was secured by the
remainder of the lot. Later, that loan was increased to P600.00.
• In May 1910, Luis entered into a notarized agreement with
Domingo and Josefa whereby the two, while purporting to be of
legal age, acknowledged the sale and the loan previously entered
into by their parents with Luis. In the same agreement, the siblings
agreed that for and in consideration of the amount of P400.00, they
are transferring the remainder 29% (covering 6 cavanes of seeds) to
Luis.
• But later, the siblings contested the said
agreement. Luis later died and he was
substituted by Jose. It is the contention of
Domingo et al that the agreement is void
because they were only minors, 19 and 18
years of age respectively, when the contract
was entered into in May 1910 (21 being the
age of minority at that time).
• ISSUE: Whether or not the agreement
between Luis and Domingo et al in May 1910
is valid despite the minority of the latter party.
• HELD: Yes. In the first place, their minority of Domingo and
Josefa was not proven with certainty because of the loss of
official records (got burned down). However, even
assuming that they were indeed minors, they are bound by
their declaration in the notarized document where they
presented themselves to be of legal age. Domingo claimed
he was 23 years old in the said document. The Supreme
Court declared: the sale of real estate, made by minors who
pretend to be of legal age, when in fact they are not, is
valid, and they will not be permitted to excuse themselves
from the fulfillment of the obligations contracted by them,
or to have them annulled in pursuance of the provisions of
Law.
• Further, there was no showing that the said notarized
document was attended by any violence, intimidation,
fraud, or deceit.
• GOLDENROD V CA – G.R. NO. 126812
• Facts:
• Barretto owned parcels of land which were mortgaged to
UCPB. Barretto failed to pay; the properties were
foreclosed. Goldenrod made an offer to Barretto that it
would buy the properties and pay off the remaining
balance of Barretto’s loan with UCPB. It paid Barretto 1
million pesos as part of the purchase price. The
remaining balance would be paid once Barretto had
consolidated the titles. On the date that Goldenrod was
supposed to pay, Goldenrod asked for an extension.
UCPB agreed. When the extension date arrived,
Goldenrod asked for another extension. UCPB
refused. Barretto successfully consolidated the
titles. Goldenrod informed Barretto that it would not be
able to push through with their agreement. It asked
Barretto to return the 1 million pesos. Barretto did not
give in to Goldenrod’s rescission. Instead, it sold the
property that was part of their agreement to Asiaworld.
• Issue:
• Should Goldenrod be paid back the 1 million
pesos?
•
• Held:
• Yes. Rescission creates the obligation to return
the things which were the object of the contract
together with the fruits and interest. Barretto is
obliged to pay Goldenrod back because 1)
Goldenrod decided to rescind the sale; 2) the
transaction was called off and; 3) the property
was sold to a third person. By virtue of the
extrajudicial rescission of the contract to sell by
Goldenrod, without opposition from Barretto,
who in turn sold it to a third person, Barretto had
the obligation to return the 1 million pesos plus
legal interest from the date it received the notice
of rescission.
• MUNICIPALITY OF CAVITE V. ROJAS – G.R.
NO. 9069
• Facts:
• The municipal council of Cavite by Resolution No.
10, leased to Rojas some 70 or 80 square meters of
Plaza Soledad, on condition that she pay rent
quarterly in advance according to the schedule
fixed in Ordinance No. 43, series of 1903 and that
she obligate herself to vacate said land within 60
days subsequent to notification to that effect. Upon
such notification, however, she refused to vacate
the land, forcing the municipality to file a complaint
before the CFI to order her to vacate the land. After
a hearing of the case, the CFI dismissed the
complaint.
• Issues:
• (1) Is the contract valid?
• (2) If in the negative, what are the obligations
of the parties?
• Held: (1) No. Article 1271 of the Old Civil Code,
prescribes that everything which is not outside
the commerce of man may be the object of a
contract, and plazas and streets are outside of
this commerce. Communal things that cannot be
sold because they are by their very nature
outside of commerce are those for public use,
such as the plazas, streets, common lands, rivers,
fountains, etc.
• (2) Rojas must restore and deliver possession of
the land described in the complaint to the
municipality of Cavite, which in its turn must
restore to her all the sums it may have received
from her in the nature of rentals just as soon as
she restores the land improperly leased.
• Ong Chua vs Carr 53 Phil. 975 (1929)
• March 25, 2016
• FACTS
• Henry Teck and Magdalena Lim owns some land
which they sold to Ong Chua, with the right to
repurchase within 4 years. The land was later sold
by Ong to Edward Carr. In the deed of sale however,
the right to repurchase was removed, without the
knowledge of Ong, in order for Carr to obtain a loan
using the land.
• When the spouses Teck and Lim offered to repurchase
the property, Carr refused, claiming that he has absolute
title to the property. Ong then filed a case for the
reformation of the deed which was granted by the lower
court. Hence, this appeal.
• ISSUE
• Whether or not the reformation of the deed should be
granted?
• HELD
• Yes. Carr’s conduct was tainted with fraud, which was
established beyond a doubt and not by mere
preponderance of evidence. Hence, since there was
mistake by one party, and fraud in the other, the party
who was mistaken has the right to demand the
reformation of the contract.
• Also, it is conclusive in the evidence that the
plaintiff had no clear conception of the contents of
the deed. That he was anxious to protect the rights
of redemption held by the parties who sold the land
to him, is very obvious; indeed, if he had failed to
do so, he would have laid himself open to an action
for damages. But the deed was written in the
English language, with which the plaintiff was
unfamiliar, and he had to rely on the statements of
Moore as to the contents and effect of the deed
and was told that the document was sufficient. He
had confidence in Moore, with whom he had
previous business relations, and it was but natural
for him to believe Moore’s statement.
 Bumanlag vs Alzate
• Facts: On the first case which entitled
Bumanlag, et. al. v. Bumanlag, et. al. the
petitioner sued herein the private
respondents for partition of the lots inherited
by both parties from their deceased father,
respondents however moved to dismiss on
the ground that some years before a final and
executory judgment (based on a compromise
agreement) involving the same parties, same
subject matter, and same causes of action had
already been rendered by a court of
• competent jurisdiction and that therefore the
doctrine of res judicata clearly bars the
present case; petitioners contend that said
judgment is void because the compromise
agreement had been signed in their behalf by
their lawyer who had not been authorized by
them to enter into such agreement,
consequently there can be no res judicata.
• Issue: Whether or not the lawyer who signed
a compromised agreement in behalf of his
client without the consent of the latter is
void?
• Ruling: No, the compromise is not void but
only unenforceable and may therefore be
ratified by the client expressly or impliedly
which stated on “Art. 1403 The following
contracts are unenforceable, unless they are
ratified: 1. Those entered into in the name of
another person by one who has been given no
authority or legal representation, or who has
acted beyond his powers.”
• FAUSTA BATARRA, plaintiff-appellee,
• vs.
• FRANCISCO MARCOS, defendant-appellant
• FACTS: Fausta Batarra filed a complaint in court
for the recovery of the damages brought by
Francisco Marcos for the breach of promise of
marriage by the latter. The defendant induced
the plaintiff to submit herself to sexual relation
with him on account of such promise of
marriage.
• Issue: Whether or not the plaintiff can recover
for the damages brought by the defendant for
the breach of promise of marriage.
• Ruling: No, because it was contrary with law
which stated on “Art. 1411 When the nullity
proceeds from the illegality of the cause or
object of the contract, and the set constitutes a
criminal offense, both parties being in pari
delicto, they shall have no action against each
other, and both shall be prosecuted…” in which
the cause of the action taken by the defendant
in making a promise with the plaintiff is based
on his immoral act which constitutes a criminal
offense.
• The first judgment was entered in favor of the
plaintiff. The defendant has brought the case
by bill of exceptions. The judgment of the
court below is reversed and the defendant is
acquitted of the complaint, with costs of the
first instance. No costs will be allowed to
either party in this court.
• Marin vs Adil 130 SCRA 406 (1984)
• March 25, 2016
• Ponente: J. Aquino
• FACTS
• Brothers Manuel and Ariston Armada are first
cousins of Mrs. Marin. They were expecting to
inherit some lots from their uncle, however,
the property was adjudicated to Soledad
Elevencionado, the sister of Mrs. Marin, who
claimed to be the sole heir of their uncle.
• out a letter receipt of acceptance specifying
the terms of payment of the balance
approving the stipulated date on or before
January 25, 1945. January 22, 1945, After
supposedly failing to deliver the balance of
P585,000, Cornejo deposited the sum with the
clerk of court, securing corresponding receipt
and filed the corresponding complain against
Calupitan and the two real estate brokers for
specific performance and for payment of
damages.
• The trial court absolve the defendant-appelle
and held that Cornejo repudiated the original
agreement by proposing money be reduced
from P70,000 to P65,000 and the balance
adjusted from 19th of January to 25, 1945.
• ISSUE
• Whether or not that the condition being
offered to the plaintiff by the appellant is
Justifiable in terms of the status of the
situation or the en-viewed coming events of
war.
• HELD
• Yes, its up to the prospective purchaser to
accept or reject it, but he should return the
value of the said amount P65,000 Japanese
notes at the time to the plaintiff. Exhibit B
between Cornejo and Calupitan had been
abandoned and rendered void by Cornejo
himself, and that as to new proposition made
by Cornejo, there was no meeting of minds of
the parties for it was not accepted entirely by
Calupitan, consequently the contract of sale of
the land in question was not perfected and so
Calupitan may not be compelled to convey
• said land to plaintiff-appllant. Calupitan is
ordered to return to the plaintiff the value of
the P65,000 Japanese war notes he received,
which value is to be ascertained according to
the ballantyne schedule as of January 6, 1945
in Manila. Said value is hereby fixed at
P541.66 with legal interest from January 6,
1945 until paid.
• Cui vs Arellano University 2 SCRA 205, May 30, 1961
• March 15, 2016
• Ponente: J. Concepcion
• FACTS
• Emeritio Cui was granted scholarship by the defendant
university on scholarship merit as a student of the
College of Law. Stipulated in the contract for the
scholarship grant is the following:
• “In consideration of the scholarship granted to me by
the University, I hereby waive my right to transfer to
another school without having refunded to the
University (defendant) the equivalent of my scholarship
cash.”
• On his last semester on the University, Cui
transferred to Abad Santos University where
his uncle, the previous dean and legal adviser
of Arellano University, was now the dean of
the College of Law of Abad Santos University.
• Before taking the bar, Cui petitioned the
defendant university for the release of his
TOR. The university refused until Cui refunded
the scholarship granted to him totaling the
amount of Php 1,033.87, which he did under
protest.
• Thereafter, he filed for recovery plus damages.
The Court of First Instance of Manila ruled in
favor or Arellano University. Hence, this
petition for review.
• ISSUE
• Whether or not the stipulation on waiver of
right to transfer without having refunded the
scholarship is void.
• HELD
• Yes. The stipulation contravenes both moral
and public policy. Scholarship grants are not
for propaganda purposes but are awards for
merits.
• Songco vs. Sellner (37 Phil. 254)
• March 25, 2016
• FACTS
• Sellner bought the uncut sugarcane drop of
Songco still standing in the sugarcane field on
Songco’s estimation that it would produce
3,000 piculs of sugar. It turned out, it
produced only 2,017 piculs of sugar.
• ISSUES
• Whether the estimation made by Songco is
fraudulent as to constitute fraud as to
invalidate the sale.
• HELD
• The court found the representation made by
Songco as a mere expression of an opinion.
• Auyong Hian
• Vs.
• Court of Tax Appeals, et. al.
• Fact: On December 30, 1961, 600 hogsheads of
Virginia leaf tobacco arrived in the Port of Manila.
As the Import Control Law was already expired, the
Collector of Customs in Manila refused to release
the shipment of the subject goods. The shipment
was then, declared illegal upon the ground that the
importation was made long after the expiration of
the effectivity of the Import Control Law and that
the importation contravened the government policy
• as declared in Republic Acts 698 and 1194. The
goods were declared forfeited to the government
and its sale was ordered for public auction which
the CTIP took advantage of. The petitioner prayed
for several errors by the CTA. One of them is the
petitioner’s contention that the sale to the CTIP was
invalid on ground that the amount paid by the CTIP
was insufficient in respect with the petitioner’s
claim that the goods’ value was Php 7,000,000 and
what CTIP paid was only Php 1,500,000.
• Issue: Whether the sale of the tobacco from
the public auction to STIP was invalid?
• Ruling: No. The sale of the tobacco from the public
auction to CTIP was valid. Even if the consideration
paid for the forfeited tobacco was inadequate, such
inadequate consideration is not a ground for the
invalidity of a contract. Article 1355 of the Civil
Code provides the law for this matter. It was not
shown that the instant sale is a case exempted by
law from the operation of the aforementioned
Article; neither has the petitioner shown that there
was fraud, mistake or undue influence in the sale.
Therefore, the SC can only conclude with the CTA
that “In these circumstances, we find no reason to
invalidate the sale of said tobacco to CTIP.”