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SUBJECT ELEMENTS OCAMPO III. VS. PEOPLEG.R Nos. 156547-51.

February 4, 200 FACTS : The Department of Budget and Management released the amountof Php 100 Million for the support of the local government unit of theprovince of Tarlac. However, petitioner Ocampo, governor of Tarlac, loaned out more than P 56.6 million in which he contracted with Lingkod Tarlac Foundation, Inc., thus, it was the subject of 25 criminal chargesagainst the petitioner. T h e S a n d i g a n b a ya n c o n v i c t e d t h e p e t i t i o n e r o f t h e c r i m e o f malversation of public funds. However, the petitioner contended that theloan was private in character since it was a loan contracted with the Taralc Foundation. ISSUE :Whether or not the amount loaned out was private in nature. RULING : Yes, the loan was private in nature because Art. 1953 of the NewCivil Code provides that a person who receives a loan of money or anyother fungible thing acquires the ownership thereof, and is bound to paythe creditor an equal amount of the same kind and quality. The fact that the petitioner-Governor contracted the loan, the publicfund changed its nature to private character, thus it is not malversation which is the subject of this case, instead it must be a simple collection of money suit against the petitioner in case of non payment . Therefore, thepetitioner is acquitted for the crime of malversation. SOURCES OF OBLIGATIONS A . L A W

1.LEUNG BEN VS. OBRIEN, 38 PHIL 182 2.PELAYO VS. LAURON, 12 PHIL 453 3.NIKKO HOTEL VS. REYES, 452 SCRA 532 4.ST. MARYS ACADEMY VS. CARPITANOS, FEB. 6, 2002 5.REGINO VS. PANGASINAN COLLEGE, NOV. 18, 2004 6.COSMO ENTERTAINMENT VS. LA VILLE, AUG. 20, 2004 LEUNG BEN; plaintiff, VS. P. J. OBRIEN, JAMES A. OSTRAND and GEO. R. HARVEY, Judgesof First Instance of the City of Manila, defendants April 6, 1918 FACTS: On December 12, 1917, an action was instituted in the Court of FirstInstance of Manila by P.J. OBrien to recover of Leung Ben the sum of P15,000, alla l l e g e d t o h a v e b e e n l o s t b y t h e p l a i n t i f f t o t h e d e f e n d a n t i n a s e r i e s o f gambling, banking, and percentage games conducted during the two or three months prior to the institution of the suit. The plaintiff asked for an attachmentagainst the property of the defendant, on the

ground that the latter was about todepart from the Philippines with intent to defraud his creditors. This attachmentwas issued. The provision of law under which this attachment was issuedrequires that there should be a cause of action arising upon contract, express orimplied. The contention of the petitioner is that the statutory action to recover money lost at gaming is not such an action as is contemplated in this provision,and he insists that the original complaint shows on its face that the remedy of attachment is not available in aid thereof; that the Court of First Instance actedin excess of its jurisdiction in granting the writ of attachment; that the petitionerhas no plain, speedy, and adequate remedy by appeal or otherwise; and thatconsequently the writ of certiorari supplies the appropriate remedy for this relief. ISSUE: Whether or not the statutory obligation to restore money won at gaming isan obligation arising from contract, express or implied. RULING: Yes. In permitting the recovery money lost at play, Act No. 1757 has introduced modifications in the application of Articles 1798, 1801, and 1305 of the Civil Code. The first two of these articles relate to gambling contracts, while article 1 3 0 5 t r e a t s o f t h e n u l l i t y o f c o n t r a c t s p r o c e e d i n g f r o m a v i c i o u s o r i l l i c i t consideration. Taking all these provisions together, it must be apparent that theobligation to return money lost at play has a decided affinity to contractual obligation; and the Court believes that it could, without violence to the doctrinesof the civil law, be held that such obligations is an innominate quasi-contract.It is however, unnecessary to place the decision on this ground. In theopinion of the Court, the cause of action stated in the complaint in the court below is based on a contract, express or implied, and is therefore of such naturethat the court had authority to issue the writ of attachment. The application forthe writ of certiorari must therefore be denied and the proceedings dismissed.LAW AS A SOURCE OF OBLIGATION ARTURO PELAYO, plaintiff-appellantVS. MARCELO LAURON, defendant-appellee12 Phil 453 January 12, 1909FACTS: On November 23, 1906, Arturo Pelayo, a physician, filed a complaint against Marcelo and Juana Abella. He alleged that on October 13, 1906 at night,Pelayo was called to the house of the defendants to assist their daughter-in-lawwho was about to give birth to a child. Unfortunately, the daughter-in-law diedas a consequence of said childbirth. Thus, the defendant refuses to pay. Thed e f e n d a n t s a r g u e t h a t t h e i r d a u g h t e r - i n - l a w l i v e d w i t h h e r h u s b a n d independently and in a separate house without any relation, that her stay therewas accidental and due to fortuitous event. ISSUE: Whether or not the defendants should be held liable for the f e e s demanded by the plaintiff upon rendering medical assistance to the defendantsdaughterin-law. RULING: No. The Court held that the rendering of medical assistance is one of theo b l i g a t i o n s t o w h i c h s p o u s e s a r e b o u n d b y m u t u a l s u p p o r t , e x p r e s s l y determined by law and readily demanded. Therefore, there was no obligation onthe part of the in-laws but rather on the part of the husband who is not a party. Thus, decision affirmed.LAW AS A SOURCE OF OBLIGATION

ASI CORPORATION, plaintiff-appellant VS.EVANGELISTA, defendant-appellee February 14, 2008FACTS :P r i v a t e r e s p o n d e n t E v a n g e l i s t a c o n t r a c t e d P e t i t i o n e r A S J Corporation for the incubation and hatching of eg gs and by productsowned by Evangelista Spouses. The contract includes the scheduled payments of the service of ASJ Corporation that the amount of installments h a l l b e p a i d a f t e r t h e d e l i v e r y o f t h e c h i c k s . H o w e v e r , t h e A S J Corporation detained the chicks because Evangelista Spouses failed topay the installment on time. ISSUE : W h e t h e r o r n o t t h e d e t e n t i o n o f t h e a l l e g e d c h i c k s v a l i d a n d recognized under the law? RULING :N o , b e c a u s e A S J C o r p o r a t i o n m u s t g i v e d u e t o t h e E v a n g e l i s t a Spouses in paying the installment, thus, it must not delay the delivery of the chicks. Thus, under the law, they are obliged to pay damages with each other for the breach of the obligation. Therefore, in a contract of service, each party must be in good faithi n t h e p e r f o r m a n c e o f t h e i r o b l i g a t i o n , t h u s w h e n t h e p e t i t i o n e r h a d detained the hatched eggs of the respondents spouses, it is an implicationof putting prejudice to the business of the spouses due to the delay of paying installment to the petitioner. LAW AS A SOURCE OF OBLIGATION RAMAS, plaintiff-appellant VS.QUIAMCO, defendant-appellee December 6, 2006FACTS :Q u i a m c o h a s a m i c a b l y s e t t l e d w i t h D a v a l a n , G a b u t e r o a n d G e n e r o s o f o r t h e c r i m e o f r o b b e r y a n d t h a t i n r e t u r n , t h e t h r e e h a d surrendered to Quiamco a motorcycle with its registration. However, Atty.Ramas has sold to Gabutero the motorcycle in installment but when thelatter did not able to pay the installment, Davalon continued the paymentbut when he became insolvent, he said that the motorcycle was taken byQ u i a m c o s m e n . H o w e v e r , a f t e r s e v e r a l ye a r s , t h e p e t i t i o n e r R a m a s together with policemen took the motorcycle without the respondents permit and shouted that the respondent Quiamco is a thief of motorcycle.Respondent then filed an action for damages against petitioner allegingt h a t p e t i t i o n e r i s l i a b l e f o r u n l a w f u l t a k i n g o f t h e m o t o r c yc l e a n d utterance of a defamatory remark and filing a baseless complaint. Also,p e t i t i o n e r s c l a i m t h a t t h e y s h o u l d n o t b e held liable for petitionersexercise of its right as seller-mortgagee to r e c o v e r t h e m o r t g a g e d motorcycle preliminary to the enforcement of its right to foreclose on themortgage in case of default. ISSUE :Whether or not the act of the petitioner is correct. RULING

:No. The petitioner being a lawyer must know the legal procedurefor the recovery of possession of the alleged mortgaged property in whichsaid procedure must be conducted through judicial action. Furthermore,t h e p e t i t i o n e r a c t e d i n m a l i c e a n d i n t e n t t o c a u s e d a m a g e t o t h e respondent when even without probable cause, he still instituted an actagainst the law on mortgage. LAW AS A SOURCE OF OBLIGATION NIKKO HOTEL MANILA GARDEN AND RUBY LIMVS. ROBERTO REYES a.k.a. AMAY BISAYA2005 Feb 28G.R. No. 154259 FACTS: In the evening of October 13, 1994, while drinking coffee at the lobby of Hotel Nikko, respondent was invited by a friend, Dr. Filart to join her in a party incelebration of the birthday of the hotels manager. During the party and whenrespondent was lined -up at the buffet table, he was stopped by Ruby Lim, theExecutive Secretary of the hotel, and asked to leave the party. Shocked andembarrassed, he tried to explain that he was invited by Dr. Filart, who was h e r s e l f a g u e s t . N o t l o n g a f t e r , a M a k a t i p o l i c e m a n a p p r o a c h e d h i m a n d escorted him out of her party.Ms. Lim admitted having asked respondent to leave the party but not under the ignominious circumstances painted by Mr. Reyes, that she did the actpolitely and discreetly. Mindful of the wish of the celebrant to keep the partyintimate and exclusive, she spoke to the respondent herself when she saw himby the buffet table with no other guests in the immediate vicinity. She askedhim to leave the party after he finished eating. After she had turned to leave,the latter screamed and made a big scene.Dr. Filart testified that she did not want the celebrant to think that she invited Mr. Reyes to the party.Respondent filed an action for actual, moral and/or exemplary damagesand attorneys fees. The lower court dismissed the complaint. On appeal, theCourt of Appeals reversed the ruling of the trial court, consequently imposing upon Hotel Nikko moral and exemplary damages and attorneys fees. On motionfor reconsideration, the Court of Appeals affirmed its decision. Thus, this instantpetition for review. ISSUES: Whether or not Ms. Ruby Lim is liable under Articles 19 and 21 of the CivilC o d e i n a s k i n g M r . R e ye s t o l e a v e t h e p a r t y a s h e w a s n o t i n v i t e d b y t h e celebrant thereof and whether or not Hotel Nikko, as the employer of Ms. Lim, besolidarily liable with her. RULING: The Court found more credible the lower courts findings of facts. Therewas no proof of motive on the part of Ms. Lim to humiliate Mr. Reyes and to e x p o s e h i m t o r i d i c u l e a n d s h a m e . M r . R e ye s v e r s i o n o f t h e s t o r y w a s unsupported, failing to present any witness to back his story. Ms. Lim, not having abused her right to ask Mr. Reyes to leave the party to which he was notinvited, cannot be made liable for damages under Articles 19 and 21 of the CivilCode. Necessarily, neither can her employer, Hotel Nikko, be held liable as itsliability springs from that of its employees.When a right is exercised in a manner which does not conform with the norms enshrined in Article 19 and results in damage to another, a legal wrong isthereby committed for which the wrongdoer must be responsible. Article 21 states that any person who willfully causes loss or injury to another in a mannerthat is contrary to morals, good customs or public policy shall compensate thelatter for the damage.Without proof of any ill-motive on her part, Ms. Lims act cannot amount toabusive conduct. The maxim Volenti Non Fit Injuria (self -

inflicted injury) was upheld bythe Court, that is, to which a person assents is not esteemed in law as injury,t h a t c o n s e n t t o i n j u r y p r e c l u d e s t h e r e c o v e r y o f d a m a g e s b y o n e w h o h a s knowingly and voluntarily exposed himself to danger.LAW AS A SOURCE OF OBLIGATION ST. MARYS ACADEMY, petitioner,VS. WILLIAM CARPITANOS and LUCIA S. CARPITANOS, GUADA DANIEL, JAMES DANIEL II, JAMES DANIEL, SR., and VIVENCIO VILLANUEVA,respondentsFebruary 6, 2002FACTS: From February 13 to 20, 1995, defendant-appellant St. Marys Academy of Dipolog City conducted an enrollment drive for the school year 1995-1996. As astudent of St. Marys Academy, Sherwin Carpitanos was part of the campaigninggroup. Accordingly, Sherwin, along with other high school students were ridingin a Mitsubishi jeep owned by defendant Vivencio Villanueva on their way toLarayan Elementary School, Larayan, Dapitan City. The jeep was driven by James Daniel II then 15 years old and a student of the same school. Allegedly,the latter drove the jeep in a reckless manner and as a result the jeep turnedturtle. Sherwin Carpitanos died as a result of the injuries he sustained from theaccident. The trial court ordered the defendants, St. Marys Academy principallyliable and the parents of James Daniel as subsidiarily liable for damages. The Court of Appeals affirmed the decision of the trial court. The Court of Appeals held petitioner St. Marys Academy liable for the death of SherwinCarpitanos under Articles 218 and 219 of the Family Code, pointing out that petitioner was negligent in allowing a minor to drive and in not having a teacheraccompany the minor students in the jeep. ISSUE: Whether or not the appellant St. Marys Academy is principally liable for damages for the death of Sherwin. RULING: No. Under Article 219 of the Family Code, if the person under custody is aminor, those exercising special parental authority are principally and s olidarilyliable for damages caused by the acts or omissions of the unemancipated minorwhile under their supervision, instruction, or custody.However, for petitioner to be liable, there must be a finding that the act oromission considered as negligent was the proximate cause of the injury causedbecause the negligence must have a causal connection to the accident.Respondents Daniel spouses and Villanueva admitted that the immediatecause of the accident was not the negligence of petitioner or the reckless drivingof James Daniel II, but the detachment of the steering wheel guide of the jeep.Hence, liability for the accident, whether caused by the negligence of theminor driver or mechanical detachment of the steering wheel guide of the jeep,must be pinned on the minors parents primarily. The negligence of petitionerSt. Marys Academy was only a remote cause of the accident. Between theremote cause and the injury, there intervened the negligence of the minors parents or the detachment of the steering wheel guide of the jeep. Consideringthat the negligence of the minor driver or the detachment of the steering wheelguide of the jeep owned by respondent Villanueva was an event over whichpetitioner St. Marys Academy had no control, and which was the proximatecause of the accident, petitioner may not be held liable for the death resultingfrom such accident. SOURCES OF OBLIGATIONSA . C O N T R A C T S 1 . T S P I , I N C . , V S . TSPOC EMPLOYEES UNION 545 S 215 2 . R E G I N O V S . C A , NOVEMBER 18, 19923 . P S B A V S . C A , F E B . 4 ,

1 9 9 2 4.COSMO ENTERTAINMENT VS. LA VILLE, 20 AUGUST 20045.AYALA CORP. VS. ROSA DIANA REALTY, 346 SCRA 6636 . B R I C K T O W N D E V E L O P M E N T V S . A M O R T I E R R A DEVELOPMENT, 239 SCRA 1267 . P I L I P I N A S H I N O V S . C A , 3 3 8 SCRA 355 TSPI, INCORPORATION VS. TSPIC EMPLOYEES UNIONG.R No. 163419. February 13, 2008FACTS : TSPI Corporation entered into a Collective Bargaining Agreement w i t h t h e c o r p o r a t i o n U n i o n f o r t h e i n c r e a s e o f s a l a r y f o r t h e l a t t e r s members for the year 2000 to 2002 starting from January 2000. thus, theincreased in salary was materialized on January 1, 2000. However, onOctober 6, 2000, the Regional Tripartite Wage and production Boardraised daily minimum wage from P 223.50 to P 250.00 starting November1, 2000. Conformably, the wages of the 17 probationary employees wereincreased to P250.00 and became regular employees therefore receivinganother 10% increase in salary. In January 2001, TSPIC implemented thenew wage rates as mandated by the CBA. As a result, the nine employeeswho were senior to the 17 recently regularized employees, received lesswages. On January 19, 2001, TSPICs HRD notified the 24 employees whoare private respondents, that due to an error in the automated payrollsystem, they were overpaid and the overpayment would be deductedfrom their salaries starting February 2001. The Union on the other hand, a s s e r t e d t h a t t h e r e w a s n o e r r o r a n d t h e d e d u c t i o n o f t h e a l l e g e d overpayment constituted diminution of pay. ISSUE :Whether the alleged overpayment constitutes diminution of pay asalleged by the Union. RULING : Yes, because it is considered that Collective Bargaining Agreemententered into by unions and their employers are binding upon the partiesand be acted in strict compliance therewith. Thus, the CBA in this case isthe law between the employers and their employees. Therefore, there was no overpayment when there was an increaseof salary for the members of the union simultaneous with the increasingof minimum wage for workers in the National Capital Region. The CBAshould be followed thus, the senior employees who were first promoted asregular employees shall be entitled for the increase in their salaries and the same with lower rank workers. REGINO VS. PCSTG.R No. 156109. November 18, 2004FACTS :P e t i t i o n e r K r i s t i n e R e g i n o w a s a p o o r s t u d e n t e n r o l l e d a t t h e P a n g a s i n a n C o l l e g e o f S c i e n c e a n d T e c h n o l o g y. T h u s , a f u n d r a i s i n g project pertaining to a dance party was organized by PCST, requiring all its students to purchase two tickets in consideration as a prerequisite forthe final exam.Regino, an underprivileged, failed to purchase the tickets becauseof her status as well as that project was against her religious belief, thus,she was not allowed to take the final examination by her two professors. ISSUE :Was the refusal of the university to allow Regino to take the final examination valid? RULING :No, the Supreme Court declared that the act of PCST was not valid,though, it can impose its administrative policies, necessarily, the amounto f t i c k e t s o r p a ym e n t s h a l l b e i n c l u d e d o r e x p r e s s e d i n t h e s t u d e n t handbooks given to every student before the start

of the regular classesof the semester. In this case, the fund raising project was not included inthe activities to be undertaken by the university during the semester. Thepetitioner is entitled for damages due to her traumatic experience on theacts of the university causing her to stop studying sand later transfer to another school. CONTRACT AS A SOURCE OF OBLIGATION PHILIPPINE SCHOOL OF BUSINESS ADMINISTRATION, ET AL. petitioners,VS. COURT OF APPEALS, HON. REGINA ORDOEZ-BENITEZ, SEGUNDA R.BAUTISTA, and ARSENIA D. BAUTISTA, respondents The accused Manuel Opulencia pleaded not guilty. On 2 February 1976,he filed a motion to dismiss the information upon the grounds that the crimethere charged had already prescribed and that the civil indemnity there soughtto be recovered was beyond the jurisdiction of the Batangas City Court to awardwhich was dismissed by the judge.F o u r t e e n ( 1 4 ) d a ys l a t e r , o n 2 0 A p r i l 1 9 7 6 , t h e A c t i n g C i t y F i s c a l o f Batangas City filed before the Court of First Instance of Batangas, Branch II,another information against Manuel Opulencia, this time for theft of electric power under Article 308 in relation to Article 309, paragraph (1), of the RevisedPenal Code. Before he could be arraigned thereon, Manuel Opulencia filed a M o t i o n t o Q u a s h , d a t e d 5 M a y 1 9 7 6 , a l l e g i n g t h a t h e h a d b e e n p r e v i o u s l y acquitted of the offense charged in the second information and that the filingthereof was violative of his constitutional right against double jeopardy. ByO r d e r d a t e d 1 6 A u g u s t 1 9 7 6 , t h e r e s p o n d e n t J u d g e g r a n t e d t h e a c c u s e d ' s Motion to Quash and ordered the case dismissed. ISSUES: Whether or not Manuel Opulencia can be tried for violation of the RevisedPenal Code after acquittal from the violation of an ordinance due to prescriptionwhich were based from the same act and whether or not he may still be held liable civilly. RULING: The Supreme Court held that the accused was placed in double jeopardy,hence, could not be tried in the criminal case.H o w e v e r , t h e c i v i l l i a b i l i t y a s p e c t s o f t h i s c a s e a r e a n o t h e r m a t t e r . Because no reservation of the right to file a separate civil action was made bythe Batangas City electric light system, the civil action for recovery of civill i a b i l i t y a r i s i n g f r o m t h e o f f e n s e c h a r g e d w a s i m p l i e d l y i n s t i t u t e d w i t h t h e criminal action both before the City Court of Batangas City and the Court of FirstInstance of Batangas. The extinction of criminal liability whether by prescription or by the bar of double jeopardy does not carry with it the extinction of civil liability arising fromthe offense charged.In the present case, accused Manuel Opulencia freely admitted during thepolice investigation having stolen electric current through the installation and u s e o f u n a u t h o r i z e d e l e c t r i c a l c o n n e c t i o n s o r d e v i c e s . W h i l e t h e a c c u s e d pleaded not guilty before the City Court of Batangas City, he did not deny havingappropriated electric power. However, there is no evidence in the record as tothe amount or value of the electric power appropriated by Manuel Opulencia, thecriminal informations having been dismissed both by the City Court and by theCourt of First Instance (from which dismissals the Batangas City electric lightsystem could not have appealed) before trial could begin. Accordingly, the related civil action which has not been waived expressly or impliedly, should ber e m a n d e d t o t h e C o u r t o f F i r s t I n s t a n c e o f B a t a n g a s C i t y for reception of evidence on the amount or value of the electric power

a p p r o p r i a t e d a n d converted by Manuel Opulencia and rendition of judgment conformably withsuch evidence.DELICT AS A SOURCE OF OBLIGATION MANANTAN VS. COURT OF APPEALS350 SCRA 387 January 29, 2001FACTS: On June 1, 1983, the Provincial Fiscal of Isabela filed an informationcharging petitioner Manantan with reckless imprudence resulting to homicide, a l l e g e d l y committed on or about the 25 th d a y o f S e p t e m b e r 1 9 8 2 , i n t h e municipality of Santiago, Isabela. The said accused being then the driver andperson -in-charge of an automobile bearing Plate No. NGA-816 willfully andunlawfully drove and operated the same while along the Daang Maharlika of thesaid municipality, in a negligent manner causing the automobile to sideswipe apassenger jeepney, thereby causing the said automobile to turn turtle twice resulting to the death Ruben Nicolas passenger of the said automobile.In its decision dated June 30, 1988, promulgated on August 4, 1988, thetrial court decided the criminal case in favor of Manantan.Subsequently, the private respondent spouses Nicolas filed their notice of appeal on the civil aspect of the trial courts judgment. The Nicolas spousesprayed that the decision appealed from be modified and that the appellee beordered to pay indemnity and damages. On its decision, the Court of Appealsdecided in favor of the private respondents. In finding petitioner civil liabilit y,the court a quo noted that at the time the accident occurred, Manantan was in astate of intoxication, due to his having consume all in all a total amount of at least twelve bottles of beer between 9 a.m. to 11 p.m. The petitioner moved for reconsideration but the appellate court denied the motion. ISSUE: Whether or not the acquittal of the accused also extinguished his civil liability. RULING: NO. Our law recognizes two kinds of acquittal, with different effects onthe civil liability of the accused. First is an acquittal on the ground that the accused is not the author of the act or omission complained of as a felony. Thisinstance closes the door to civil liability, for a person who has been found not tobe the perpetrator of any act or omission cannot and can never be held liable forsuch act or omission. There being no delict , civil liability ex delicto is out of thequestion, and the civil action, if any, which will be instituted must be based onground other than the delict complained of. The second instance is an acquittalbased on reasonable doubt on the guilt of the accused. In this case, even if theguilt of the accused has not been satisfactorily established, he is not exemptfrom civil liability which may be proved by preponderance of evidence only.In the case at bar, the accuseds acquittal is based on reasonable doubt. The decision of the trial court did not state in clear and equivocal terms thatpetitioner was not recklessly imprudent or negligent. Hence, impliedly, the trialcourt acquitted him on reasonable doubt. Since civil liability is not extinguishedin criminal cases if the accused acquittal is based on reasonable doubt, the decision of the Court of Appeals finding that the defendant is civilly liable for hisnegligent and reckless act of driving his car which was the proximate cause of the vehicular accident, and sentenced him to

indemnify plaintiff-appellants inthe amount of P74,400.00 for the death of Ruben Nicolas.DELICT AS A SOURCE OF OBLIGATION PEOPLE OF THE PHILIPPINES, plaintiff-appellee,VS. ROGELIO BAYOTAS Y CORDOVA, accused-appellantG.R. No. 102007Sept. 2, 1994236 SCRA 239FACTS: Rogelio Bayotas was charged with rape and eventually convicted on June19, 1991. While the appeal was pending, Bayotas died. The Supreme Courtd ismissed the criminal aspect of the appeal; however, it required the Solicitor -G e n e r a l t o c o m m e n t w i t h r e g a r d t o B a yo t a s c i v i l l i a b i l i t y a r i s i n g f r o m h i s commission of the offense charged.In his comment, the Solicitor-General expressed his view that the death of a c c u s e d a p p e l l a n t d i d n o t e x t i n g u i s h h i s c i v i l l i a b i l i t y a s a r e s u l t o f h i s commission of the offense charged. This comment was opposed by the counselof accused-appellant, arguing that the death of the accused while judgment of the conviction is pend ing appeal extinguishes both criminal and civil penalties,he cited in support and invoked the ruling of the Court of Appeals in People v.Castillo , which was held that the civil obligation in a criminal case takes root in the criminal responsibility and therefore civil liability is extinguished if accusedshould die before final judgment is rendered. ISSUE: Whether or not the death of the accused pending appeal of his convictionextinguishes his civil liability. RULING: Yes, the death of the accused pending ap peal of his c o n v i c t i o n extinguishes his civil liability because tire liability is based solely on the criminalact committed. Corollarily, the claim for civil liability survives notwithstandingthe death of the accused, if the same may also be predicted as one source of obligation other than delict.Moreover, when a defendant dies before judgment becomes executory,'there cannot be any determination by final judgment whether or not the felonyupon which the civil action might arise exists,' for the simple reason that `thereis no party defendant.' The Rules of Court state that a judgment in a criminalcase becomes final 'after the lapse of the period for perfecting an appeal or w h e n t h e s e n t e n c e h a s b e e n p a r t i a l l y o r t o t a l l y s a t i s f i e d o r s e r v e d , o r t h e defendant has expressly waived in writing his right to appeal.'In addition, where the civil liability does not exist independently of thec r i m i n a l r e s p o n s i b i l i t y, t h e e x t i n c t i o n o f t h e l a t t e r b y d e a t h , i p s o f a c t o extinguishes the former, provided, of course, that death supervenes before final judgment. As in this case, the right to institute a separate civil action is notr e s e r v e d , t h e d e c i s i o n t o b e r e n d e r e d m u s t , o f n e c e s s i t y, c o v e r ' b o t h thecriminal and the civil aspects of the case.' The accused died before final judgment was rendered, thus, he is absolved of both his criminal and c i v i l liabilities based solely on delict or the crime committed.Appeal dismissed. SOURCES OF OBLIGATIONSE . Q U A S I - D E L I C T S 1 . B A R R E D O VS. GARCIA, 73 PHIL 6072.DY TEBAN VS. CHING, 543 S 5 6 0 3.SAFEGUARD SECURITY VS. TANGCO, 511 S 674.VILLANUEVA VS. DOMINGO, 438 S 485 5 . C A L A L A S V S . C A , 3 1 M A Y 2 0 0 0 6.LUDO AND LUYM CORP. VS. CA, FEB. 1,

20017.THERMOCHEM VS. NAVAL, OCT. 30, 2000 8 . P I C A R T V S . S M I T H , 3 7 P H I L 8 1 3 FAUSTO BARREDO VS. SEVERINO GARCIA and TIMOTEO ALMARIOG.R. No. 48006 July 08, 194273 PHIL 607FACTS: O n M a y 3 , 1 9 3 6 , t h e r e w a s a h e a d - o n c o l l i s i o n b e t w e e n a t a x i o f t h e Malate Taxi driven by Fontanilla and a carretela guided by Dimapilis. Theca rretela was overturned and a passenger, 16 -year-old boy Garcia, sufferedinjuries from which resulted to his death. A criminal action was filed againstFontanilla, and he was convicted. The court in the criminal case granted thepetition to reserve the civil action against Barredo, the proprietor of the Malate T a x i a n d t h e e m p l o ye r o f F o n t a n i l l a , m a k i n g h i m p r i m a r i l y a n d d i r e c t l yr e s p o n s i b l e u n d e r c u l p a a q u i l i a n a . I t w a s u n d i s p u t e d t h a t F o n t a n i l l a s negligence was the cause of the accident as he was driving on the wrong side of the road at high speed, and there was no showing that Barredo exercised thediligence of a good father of a family.B a r r e d o s t h e o r y o f d e f e n s e i s t h a t F o n t a n i l l a s n e g l i g e n c e b e i n g punishable by the Revised Penal Code, that his liability as employer is onlysubsidiary liable but Fontanilla was sued for civil liability, hence, Barredo claimsthat he can not be held liable. ISSUE: Whether or not complainants liability as employer of Fontanilla was onlysubsidiary and not as primarily and directly responsible under Article 1903 of theCivil Code. RULING: No, the Supreme Court ruled that complainants liability is not o n l y subsidiary but also primary liability. The Court affirmed the decision of the Courtof Appeals which ruled that the liability sough t to be imposed upon Barredo int h i s a c t i o n i s n o t a c i v i l o b l i g a t i o n a r i s i n g f r o m a f e l o n y, b u t a n o b l i g a t i o n imposed in Article 1903 of the Civil Code by reason of his negligence in theselection or supervision of his servant or employee. QUASI-DELICT OR CULPA AQUILIANA is a separate legal institution underthe Civil Code and is entirely distinct and independent from a delict or crime aspunished under the Revised Penal Code (RPC). In this jurisdiction, the samenegligent act causing damage may produce civil liability (subsidiary) arising froma crime under Art. 103 of the RPC; or create an action for the quasi delict orculpa aquiliana (primary) and the parties injured are free to choice which courseto take.In the instant case, the negligent act of Fontanilla produced two liabilitiesof Barredo. First, a subsidiary one because of the civil liability of Fontanilla arising from the latters criminal negligence; and second, Barredos primary anddirect responsibility arising from his presumed negligence as an employer in theselection of his employees or their supervision, under Art. 1903 of the Civil Code. The parties instituted an action for damages under Art. 1903 of the CivilC o d e . B a r r e d o w a s f o u n d g u i l t y o f n e g l i g e n c e f o r c a r e l e s s l y e m p l o yi n g Fontanilla, who had been caught several times for violation of the AutomobileL a w a n d s p e e d i n g v i o l a t i o n . T h u s , t h e p e t i t i o n i s d e n i e d . B a r r e d o m u s t indemnify plaintiffs under the provisions of Art. 1903 of the Civil Code. QUASI-DELICT AS A SOURCE OF OBLIGATION DY TEBAN VS. LIBERTY FORESTG.R No. 161803. February 4, 2008FACTS :A Prime Mover Trailer suffered a tire blow out during the night of itstravel at a national highway. The trailer was owned by the respondent Liberty Forest. The driver allegedly put earl warning devices but the onlyevidence being witnessed was a banana trunks and candles.

Since the carwas placed at the right wing of the road, thus it cause the swerving of aNissan van owned by the petitioner when a passenger bus was coming inbetween the trailer. The Nissan van owner claimed for damages againstthe respondent. The trial court found that the proximate cause of thethree way accident is the negligence and carelessness of driver of therespondent . However reversed the decision of the trial court. ISSUE :Whether there was negligence on the part of the respondent. RULING : Yes. There was negligence on the part of the respondent when thelatter failed to put and used an early warning device because it was foundout that there was no early warning device being prescribed by law thatwas used by the driver in order to warn incoming vehicle. Furthermore,the proximate cause of the accident was due to the position of the trailerwhere it covered a cemented part of the road, thus confused and madetrick way for other vehicles to pass by. Thus the respondent is declared liable due to violation of road rules and regulations. QUASI-DELICT AS A SOURCE OF OBLIGATION SAFEGUARD SECURITY VS. TANGCOG.R No. 165732. December 14, 2006FACTS : The victim Evangeline Tangco was depositor of Ecology Bank. Shewas also a licensed-fire arm holder, thus during the incident, she wasentering the bank to renew her time deposit and along with her was her firearm. Suddenly, the security guard of the bank, upon knowing that thevictim carries a firearm, the security guard shot the victim causing thelatters instant death. The heirs of the victim filed a criminal case againstsecurity guard and an action against Safeguard Security for failure to observe diligence of a goof father implied upon the act of its agent. ISSUE :Whether Safeguard Security can be held liable for the acts of its agent. RULING : Yes. The law presumes that any injury committed either by fault oromission of an employee reflects the negligence of the employer. Inquasi-delicts cases, in order to overcome this presumption, the employermust prove that there was no negligence on his part in the supervision of his employees.I t w a s d e c l a r e d t h a t i n t h e s e l e c t i o n o f e m p l o ye e s a n d a g e n t s , e m p l o ye r s a r e r e q u i r e d t o e x a m i n e t h e m a s t o t h e i r q u a l i f i c a t i o n s , experience and service records. Thus, due diligence on the supervisionand operation of employees includes the formulation of suitable rules andregulations for the guidance of employees and the issuance of p roperinstructions intended for the protection of the public and persons withwhom the employer has relations through his employees. Thus, in thiscase, Safeguard Security committed negligence in identifying thequalifications and ability of its agents. QUASI-DELICT AS A SOURCE OF OBLIGATION VILLANUEVA VS. DOMINGOG.R No. 144274. September 20, 2004FACTS :In 1991, a collision was made by a green Mitsubishi lancer owned byOcfemia against a silver Mitsubishi lancer driven by Leandro Domingo andowned by petitioner Priscilla Domingo. The incident caused the car of D o m i n g o b u m p e d a n o t h e r t w o p a r k e d v e h i c l e s . A c h a r g e d w a s f i l e d against Ocfemia and the owner Villanueva. Villanueva claimed that hemust not be held liable for the incident because he is no longer the ownerof the

car, that it was already swapped to another car . however, the trialcourt ordered the petitioner to pay the damages incurred by the silverMitsubishi lancer car. ISSUE :Whether the owner Villanueva be held liable for the mishap. RULING :Under the Motor Vehicle law, it was declared that the registered owner of any vehicle is primary land directly liable for any injury it incurswhile it is being operated. Thus, even the petitioner claimed that he wasno longer the present owner of the c ar, still the registry was under hisname, thus it is presumed that he still possesses the car and that thedamages caused by the car be charge against him being the registered owner. The primary function of Motor vehicle registration is to identify theowner so that if any accident happens, or that any damage or injury is caused by the vehicle, responsibility therefore can be fixed on a definiteindividual, the registered owner. QUASI-DELICT AS A SOURCE OF OBLIGATION CALALAS VS. COURT OF APPEALSG.R No. 122039. May 31, 2000FACTS :Eliza Sunga was a passenger of a jeepney owned and operated by the petitioner Calalas. Private respondent Sunga sat in the rear protion of the jeepney where the conductor gave Sunga an extension seat. Whenthe jeep stopped, Sunga gave way to a passenger going outside the jeep.H o w e v e r , a n I s u z u T r u c k d r i v e n b y V e r e n e a n d o w n e d b y S a l v a , accidentally hit Sunga causing the latter to suffer physical injuries wherethe attending physician ordered a three months of rest. Sunga filed an a c t i o n f o r d a m a g e s a g a i n s t t h e p e t i t i o n e r f o r b r e a c h o f c o n t r a c t o f common carriage by the petitioner.On the other hand, the petitioner Calalas filed an action against Salva, being the owner of the truck. The lower court ruled in favor of therpetitioner, thus the truck owner is liable for the damage to the jeep of thepetitioner. ISSUE :Whether the petitionerr is liable. RULING : Yes. The petitioner is liable for the injury suffered by Sunga. UnderArticle 1756 of the New Civil Code, it provides that common carriers arepresumed to have been at fault or to have acted negligently unless theyprove that they observed extraordinary diligence as defined in Arts. 1733and 1755 of the Code. This provision necessarily shifts to the commoncarrier the burden of proof.I n t h i s c a s e , t h e l a w p r e s u m e s t h a t a n y i n j u r y s u f f e r e d b y a passenger of the jeep is deemed to be due to the negligence of the driver. T h i s i s a c a s e o n C u l p a C o n t r a c t u a l w h e r e t h e r e w a s p r e e x i s t i n g obligations and that the fault is incidental to the performance of theo b l i g a t i o n . T h u s , i t w a s c l e a r l y o b s e r v e d t h a t t h e p e t i t i o n e r h a s negligence in the conduct of his duty when he allowed Sunga to seat in the rear portion of the jeep which is prone to accident. QUASI-DELICT AS A SOURCE OF OBLIGATION LUDO AND LUYM CORPORATION, petitioner,VS. COURT OF APPEALS, GABISAN SHIPPING LINES, INC.and/or ANSELMO OLASIMAN, respondents . G.R. No. 125483February 1, 2001351 SCRA 35FACTS: Private respondent Anselmo Olasiman, as captain, was maneuvering the ship MV Miguela owned by respondent Gabisan Shipping lines, at the pier ownedb y p e t i t i o n e r L u d o

a n d L u ym C o r p o r a t i o n w h e n i t r a m m e d t h e p i l e c l u s t e r damaging it and deforming the cable wires wound around it.In an action for recovery of damages filed by Petitioner, the Regional TrialCourt ruled against respondents for incompetence and negligence. In an appealt h e C o u r t o f A p p e a l s r e v e r s e d t h e l o w e r c o u r t s d e c i s i o n , s a yi n g t h a t t h e petitioners witness Naval was incompetent to testify on the negligence of thecrew and that petitioners evidence did not positively identify that MV Miguelacaused the damage. Thus, petitioner filed this petition for review. ISSUE: Whether or not the private respondents are responsible for the damage done to the pier by the ship based on the doctrine of RES IPSA LOQUITOR . RULING: The Supreme Court sustained the Regional Trial Court decision partly onthe ground that the incompetence of eyewitness Naval was not an assigned error at the appellate court. The doctrine of RES IPSA LOQUITOR says that when the thing that causesthe damage is in the control and management of the respondent, and in theordinary course of things the accident does not happen if those who have the management use proper care, it affords reasonable evidence, in the absence of explanation, that the accident arose from want of care. The principle applieshere. The MV Miguela was in the exclusive control of respondent Olasiman, anda s i d e f r o m p e t i t i o n e r s w i t n e s s t e s t i m o n y t h a t t h e v e s s e l r a m m e d t h e p i l e cluster, respondent did not show persuasively o ther possible causes of thedamage. Therefore, respondents were responsible for the damage. Petition isgranted and the decision of the Regional Trial Court reinstated.QUASIDELICT AS A SOURCE OF OBLIGATION THERMOCHEM INCORPORATED and JEROME O. CASTRO, petitioners,VS. LEONORA NAVAL and THE COURT OF APPEALS, respondentsG.R. No. 1315412000 Oct 20FACTS: On May 10, 1992, at around 12:00 o'clock midnight, Eduardo Edem was driving a "Luring Taxi" along Ortigas Avenue, near Rosario, Pasig, going towardsCainta. Prior to the collision, the taxicab was parked along the right side of O r t i g a s A v e n u e , n o t f a r f r o m t h e R o s a r i o B r i d g e , t o u n l o a d a p a s s e n g e r . Thereafter, the driver executed a U-turn to traverse the same road, going to thedirection of EDSA. At this point, the Nissan Pathfinder traveling along the sameroad going to the direction of Cainta collided with the taxicab. The point of impact was so great that the taxicab was hit in the middle portion and waspushed sideward, causing the driver to lose control of the vehi cle. The taxicabw a s t h e n d r a g g e d i n t o t h e n e a r b y Q u e s t i o n T a i l o r i n g S h o p , t h u s , c a u s i n g damage to the said tailoring shop, and its driver, Eduardo Eden, sustainedinjuries as a result of the incident.Private respondent, as owner of the taxi, filed a damage suit againstpetitioner, Thermochem Incorporated, as the owner of the Nissan Pathfinder, andits driver, petitioner Jerome Castro.A f t e r t r i a l , t h e l o w e r c o u r t a d j u d g e d p e t i t i o n e r C a s t r o n e g l i g e n t a n d ordered petitioners, jointly and severally, to pay private respondent actual,compensatory and exemplary damages plus attorney's fees and costs of suit.On appeal, the Court of Appeals affirmed the judgment of the court a quo.Hence, this petition for review on certiorari. ISSUE:

Whether or not the petitioners are liable based on quasi-delict. RULING: Yes. The Court held that the driver of the oncoming Nissan Pathfindervehicle was liable and the driver of the U-turning taxicab was contributorilyliable.From petitioner Castro's testimonial admissions, it is established that hewas driving at a speed faster than 50 kilometers per hour. But as he allegedlystepped on the brake, it locked causing his Nissan Pathfinder to skid to the left and consequently hit the taxicab. The sudden malfunction of the vehicle's brakesystem is the usual excuse of drivers involved in collisions which are the result of speedy driving. Malfunction or loss of brake is not a fortuitous event. The ownerand his driver are presumed to know about the conditions of the vehicle and isduty bound to take care thereof with the diligence of a good father of the family.A mechanically defective vehicle should avoid the streets.Moreover, the record shows that the Nissan Pathfinder was on the wronglane when the collision occurred. This was a disregard of traffic safety rules. The law considers what would be reckless, blameworthy or negligent in a man of ordinary diligence and prudence and determines liability by that.As mentioned earlier, the driver of the taxi is contributorily liable. U-turnsare not generally advisable particularly on major streets. The driver of the taxiought to have known that vehicles coming from the Rosario bridge are on adownhill slope. Obviously, there was lack of foresight on his part, making him contributorily liable.C o n s i d e r i n g t h e c o n t r i b u t o r y n e g l i g e n c e o f t h e d r i v e r o f p r i v a t e respondent's taxi, the award of P47,850.00, for the repair of the taxi, should bereduced in half. All other awards for damages are deleted for lack of merit.QUASI-DELICT AS A SOURCE OF OBLIGATION PICART VS. SMITH37 PHIL 813FACTS: Plaintiff was riding on his pony across the bridge. Before he had gottenhalf -way across, the defendant approached from the opposite direction in anautomobile. As the defendant neared the bridge, he saw the plaintiff and blewhis horn to give warning. The plaintiff heard the warning signal but instead of going to the let, he pulled the pony closely up against the railing on the right side of the bridge. He averred that he thought he did not have sufficient time toget over the other side. As the automobile approached, the defendant guided ittoward the plaintiff, without diminution to speed, assuming the horseman wouldm o v e t o t h e o t h e r s i d e . W h e n h e h a d g o t t e n q u i t e n e a r , t h e r e b e i n g n o possibility o the horse getting across to the other side, the defendant quicklyturned his car sufficiently to the right to escape hitting the horse. However, thehorse was still hit and died while the rider was thrown off violently. ISSUE: Whether the defendant was negligent in maneuvering his car giving rise to a civil obligation. RULING: Yes. The Court held that the control of the situation has shifted to the defendant when the incident occurred. At first, he has the right to assume thatthe horse and rider would pass over to the other side but as he moved to the center, it was demonstrated that this would not be done. It was then his duty tobring his car to an immediate stop or, seeing that there were no other person onthe bridge, to take the other side and ass sufficiently far away from the horse toavoid the danger of collision. Instead of doing this, the defendant ran straight onuntil he was almost upon the horse. When the defendant exposed the horse andrider to this danger he was negligent in the eye of the law.Conduct is said to be negligent when a prudent man in the

position of thetortfeasor would have foreseen that an effect harmful to another was sufficientlyp r o b a b l e t o w a r r a n t h i s f o r e g o i n g t h e c o n d u c t o r g u a r d i n g a g a i n s t i t s consequences. Applying this test to the conduct of the defendant, it is clear thatnegligence is established. A prudent man, laced in the position o the defendant,would have recognized that the course which he was pursuing was fraught withr i s k , a n d w o u l d t h e r e f o r e h a v e f o r e s e e n h a r m t o t h e h o r s e a n d r i d e r a s a reasonable consequence of that course. Under these circumstances the lawimposed on the defendant the duty to guard against the threatened harm. The plaintiff on the other hand was guilty of antecedent negligence inplanting himself on the wrong side o the road. The negligent acts of the twoa r t i e s w e r e n o t c o n t e m p o r a n e o u s , s i n c e t h e n e g l i g e n c e o f t h e d e f e n d a n t succeeded the negligence of the plaintiff by an appreciable interval. Under thesecircumstances, the law is that the person who has the last fair chance to avoidthe impending harm and fails to do is chargeable wit the consequences, withoutreference to the prior negligence of the other party. In sum, though the plaintiff was guilty of negligence or being on the wrongside of the bridge, the defendant was civilly liable as he had fair chance to avoidthe accident. NATURE AND EFFECT OF OBLIGATIONS POSITIVE PERSONAL OBLIGATIONS / TO DO1 . F R A N C I S C O V S . C A , 4 0 1 S C R A 5 9 4 2 . T A N G U I L I N G V S . C A , 2 6 6 S C R A 7 8 SPOUSES LORENZO G. FRANCISCO and LORENZA D. FRANCISCO,petitioners,VS. HONORABLE COURT OF APPEALS, andBIENVENIDO C. MERCADO, respondentsApril 25, 2003401 SCRA 594FACTS: On 3 February 1984, the spouses Lorenzo and Lorenza Francisco and Engineer Bienvenido C. Mercado entered into a Contract of Development for thedevelopment into a subdivision of several parcels of land in Pampanga.Respondent committed to complete the construction within 27 months.R e s p o n d e n t a l s o a d v a n c e d P 2 0 0 , 0 0 0 . 0 0 f o r t h e i n i t i a l e x p e n s e s o f t h e development work. In return, respondent would receive 50% of the total grosssales of the subdivision lots and other income of the subdivision. Respondentalso enjoyed the exclusive and irrevocable authority to manage, control andsupervise the sales of the lots within the subdivision.On 5 August 1986, respondent secured from the Human Settle mentsRegulatory Commission ("HSRC") an extension of time to finish the subdivisiondevelopment until 30 July 1987. On 8 August 1986, petitioners instructedrespondent to stop selling subdivision lots and collecting payments from lot buyers.O n 2 0 J a n u a r y 1 9 8 7 , p e t i t i o n e r s g r a n t e d r e s p o n d e n t a n a u t h o r i t y t o resume the sale of subdivision lots and the collection of payments subject to thefollowing conditions: (1) all collections shall be deposited in a joint account withChina Banking Corporation, San Fernando, Pam panga branch; (2) withdrawalsshall be limited to 50% of the total collections or to respondent's share, whichcan only be used for development expenses, and any withdrawal shall be subjectto the approval of petitioners; (3) only Franda Village Subdivision receipts, dulycountersigned by petitioners, shall be used; (4) collections shall be subject to aweekly or monthly audit; and (5) any violation of these conditions shall result inthe automatic cancellation of the authority.Respondent filed an action to resci nd the contract on the ground thatconditional authority issued by petitioners violated the Contract. Petitionersc o u n t e r e d t h a t r e s p o n d e n t b r e a c h e d t h e C o n t r a c t b y f a i l i n g t o f i n i s h t h e subdivision within the 27 months agreed upon, and therefore respondent was

indelay. Petitioners also alleged that respondent sold one subdivision lot to twodifferent buyers. The trial Court ruled that the petitioners breached the Contract by: (1)hiring Rosales to do development work on the subdivision within the 27 monthp e r i o d e x c l u s i v e l y g r a n t e d t o r e s p o n d e n t ; ( 2 ) i n t e r f e r i n g w i t h t h e l a t t e r s development work; and (3) stopping respondent from managing the sale of lotsand collection of payments.B e c a u s e p e t i t i o n e r s w e r e t h e f i r s t t o b r e a c h t h e C o n t r a c t a n d e v e n interfered with the development work, the trial court declared that respondentdid not incur delay even if he completed only 28% of the development work.Further, the HSRC extended the Contract up to July 1987. Since the Contracth a d n o t e x p i r e d a t t h e t i m e r e s p o n d e n t f i l e d t h e a c t i o n f o r r e s c i s s i o n , petitioners defense that respondent did not finish the development work ontime was without basis. The Court of Appeals affirmed the decision. ISSUE: Whether or not the respondent incurred delay in not finishing the work inthe stipulated time. RULING: The Supreme Court finds no merit in petitioners claim that respondentincurred delay in the performance of his obligation under the Contract. At that of admitting patients into the hospital. The physicians performance is g e n e r a l l y e v a l u a t e d a n d i f s a i d p h ys i c i a n f a l l s s h o r t o f t h e m i n i m u m standards he is normally terminated. In the said case, the hospital has acontrol over its attending or visiting physician.I n g e n e r a l , a h o s p i t a l i s n o t l i a b l e f o r t h e n e g l i g e n c e o f a n independent contractor-physician. However, the hospital may be held l i a b l e i f t h e p h ys i c i a n i s t h e o s t e n s i b l e a g e n t o f t h e h o s p i t a l . T h i s exception is also known as the doctrine of apparent authority. The doctrine of apparent authority involves two factors to determinethe liability of an independent contractor-physician. First factor focuses onthe hospitals manifestations and is sometimes described as an inquirywhether the hospital acted in a manner which would lead a responsibleperson to conclude that the individual who was alleged to be negligentwas an employee or agent of the hospital. The second factor focuses onthe patients reliance. It is sometimes characterized as an inquiry onwhether the plaintiff acted in reliance upon the conduct of the hospital orits agent, consistent with ordinary care and prudence.In this case, it has been proven that the two factors were present. The hospital indeed made it appear that Dr. Ampil was its employee whenthey advertise and displayed his name in the directory at the lobby of thesaid hospital and that Natividad relied on such knowledge that Dr. Ampilwas indeed an employee of the hospital.Wherefore PSI and Dr. Ampil are liable jointly and severally. Malicious Prosecution1. DIAZ VS. DAVAO LIGHT, 4 APRIL 20072. YASONNA VS. DE RAMOS, 440 S 154 DIAZ VS. DAVAO LIGHTGR No. 160959 April 2, 2007FACTS: Plaintiff asks for damages for defendants alleged maliciousprosecution o f a c r i m i n a l c a s e o f t h e f t o f e l e c t r i c i t y a g a i n s t h i m , f o r plaintiffs filing of a charge of violation of P.D. 401 as am ended afterdismissal of the theft case, the filing of a damage suit against him beforet h e R T C o f C e b u C i t y w h i c h w a s d i s m i s s e d a n d t h e f i l i n g o f a n o t h e r damage suit before the same Cebu RTC which is still pending. Damagesare also being sought for defendants removal of Electric Meter, but this isa subject matter of a case pending before Branch 13 of this Court and therefore said court retains jurisdiction over the said cause of action. The RTC held that while the City

Prosecutor, and later the Secretaryof Justice, concluded that there was no probable cause for the crime of theft, this did not change the fact that plaintiff made an illegal connectionfor electricity. A persons right to litigate should not be penalized by holding him liable for damages.On October 1, 2003, the CA affirmed the decision of the RTC. Itconcluded that the evidence on hand showed good faith on the part of DLPC in filing the subject complaints. It pointed out that Diaz had been using the electrical services of DLPC without its consent. As to the effectof the compromise agreement, the CA ruled that it did not bar the filing of the criminal action. Thus, under the principle of damnum absque injuria,t h e l e g i t i m a t e e x e r c i s e o f a p e r s o n s r i g h t , e v e n i f i t c a u s e s l o s s t o another, does not automatically result in an actionable injury.Diaz, now petitioner, comes before this Court in this petition for review on certiorari ISSUES: 1. Whether or not the compromise agreement entered into betweenDLPC and Diaz barred the former from instituting further actions; and2. Whether or not DLPC acted in bad faith in instituting the criminalcases against Diaz RULING: The petition is without merit. Petitioner insists that the compromisea g r e e m e n t a s w e l l a s t h e d e c i s i o n o f t h e C A a l r e a d y s e t t l e d t h e controversies between them; yet, DLPC instituted the theft case againstDiaz, and worse, instituted another action for violation of P.D. 401, asamended by B.P. Blg. 876. Thus, the only conclusion that can be inferred from the acts of DLPC is that they were designed to harass, embarrass,prejudice, and ruin him. He further avers that the compromise agreementcompletely erased litigious matters that could necessarily arise Moreover,Diaz asserts that the evidence he presented is sufficient to prove thedamages he suffered by reason of the malicious institution of the criminalcases. The court does not agree. Article 2028 of the Civil Code defines acompromise as a contract whereby the parties, by making reciprocalconcessions, avoid litigation or put an end to one alr eady commenced. The purpose of compromise is to settle the claims of the parties and barall future disputes and controversies. However, criminal liability is not a f f e c t e d b y c o m p r o m i s e f o r i t i s a p u b l i c o f f e n s e w h i c h m u s t b e prosecuted and punished by the Government on its own motion, though complete reparation should have been made of the damages suffered bythe offended party. A criminal case is committed against the People, andthe offended party may not waive or extinguish the criminal liability thatt h e l a w i m p o s e s f o r t h e c o m m i s s i o n o f t h e o f f e n s e . M o r e o v e r , a compromise is not one of the grounds prescribed by the Revised Penal Code for the extinction of criminal liability. On the other hand, malicious prosecution has been defined as anaction for damages brought by or against whom a criminal prosecution,civil suit or other legal proceeding has been instituted maliciously and without probable cause, after the termination of such prosecution, suit, orother proceeding in favor of the defendant therein. It is an establishedrule that in order for malicious prosecution to prosper, the followingrequisites must be proven by petitioner: (1) the fact of prosecution andt h e f u r t h e r f a c t t h a t t h e d e f e n d a n t ( r e s p o n d e n t ) w a s h i m s e l f t h e prosecutor, and that the action finally t erminated with an acquittal; (2)that in bringing the action, the prosecutor acted without probable cause;and (3) that the prosecutor was actuated or impelled by legal malice, thati s , b y i m p r o p e r o r s i n i s t e r m o t i v e . T h e

f o r e g o i n g a r e n e c e s s a r y t o preserve a persons right to litigate which may be emasculated by theu n d u e f i l i n g o f m a l i c i o u s p r o s e c u t i o n c a s e s . From the foregoing requirements, it can be inferred that malice andwant of probable cause must both be clearly established to justify ana w a r d o f d a m a g e s b a s e d o n m a l i c i o u s p r o s e c u t i o n . D L P C w a s n o t motivated by malicious intent or by a sinister design to unduly harassp e t i t i o n e r , b u t o n l y b y a w e l l - f o u n d e d a n x i e t y t o p r o t e c t i t s r i g h t s . Respondent DLPC cannot therefore be faulted in availing of the remediesprovided for by law. Malicious Prosecution YASOA VS. DE RAMOSGR No. 156339 October 6, 2004FACTS: Aurea Yasoa and her son, Saturnino, went to the house of Jovenciode Ramos to ask for financial assistance in paying their loans to PhilippineNational Bank (PNB), otherwise their residential house and lot would beforeclosed. Inasmuch as Aurea was his aunt, Jovencio acceded to therequest. They agreed that, upon payment by Jovencio of the loan to PNB,half of Yasoas subject property would be sold to him. Jovencio paidAureas bank loan. As agreed upon, Aurea executed a deed of absolutesale in favor of Jovencio over half of the lot consisting of 123 square meters. Thereafter, the lot was surveyed and separate titles were issuedby the Register of Deeds of Sta. Cruz, Laguna in the names of Aurea and Jovencio T w e n t y - t w o ye a r s l a t e r , i n A u g u s t 1 9 9 3 , A u r e a filed an estafacomplaint against brothers Jovencio and Rodencio de Ramos on theg r o u n d t h a t s h e w a s d e c e i v e d b y t h e m w h e n s h e a s k e d f o r t h e i r assistance in 1971 concerning her mortgaged property. In her complaint,A u r e a alleged that Rodencio asked her to sign a blank paper on thepretext that it w o u l d b e u s e d i n t h e r e d e m p t i o n o f t h e m o r t g a g e d propertyOn February 21, 1994, Assistant Provincial Prosecutor Rodrigo B. Zayenis dismissed the criminal complaint for estafa for lack of evidence.On account of this dismissal, Jovencio and Rodencio filed a complaint fordamages on the ground of malicious prosecution. They alleged that thefiling of the estafa complaint against them was done w ith malice and itcaused irreparable injury to their reputation, as Aurea knew fully well thatshe had already sold half of the property to Jovencio. ISSUE: Whether or not the filing of the criminal complaint for estafa by petitioners against respondents constituted malicious prosecution? RULING: To constitute malicious prosecution, there must be proof that thep r o s e c u t i o n w a s p r o m p t e d b y a s i n i s t e r d e s i g n t o v e x o r h u m i l i a t e a person, and that it was initiated deliberately by the defendant knowingthat his charges were false and groundless. Concededly, the mere act of submitting a case to the authorities for prosecution does not make oneliable for malicious prosecution.In this case, the records show that the sale of the property wasevidenced by a deed of sa le duly notarized and registered with the localRegister of Deeds. After the execution of the deed of sale, the propertywas surveyed and divided into two portions. Separate titles were thenissued in the names of Yasoa and Jovencio. Since 1973, Jovencio had been paying the realty taxes of the portion registered in his name. In1974, Aurea even requested Jovencio to use his portion as bond for thetemporary release of her son who was charged with malicious

mischief.Also, when Aurea borrowed money from the Rural Bank of Lumban in1973 and the PNB in 1979, only her portion was mortgaged.All these pieces of evidence indicate that Aurea had long acknowledged Jovencios ownership of half of the property. Furthermore, it was only in1 9 9 3 w h e n p e t i t i o n e r s d e c i d e d t o f i l e t h e e s t a f a c o m p l a i n t a g a i n s t respondents. If petitioners had honestly believed that they still owned thee n t i r e p r o p e r t y, i t w o u l d n o t h a v e t a k e n t h e m 2 2 ye a r s t o q u e s t i o n Jovencios ownership of half of the property.M a l i c i o u s p r o s e c u t i o n , b o t h i n c r i m i n a l a n d c i v i l c a s e s , r e q u i r e s t h e elements of (1) malice and (2) absence of probable cause.These twoelements are present in the present controversy. The complaint for estafawas dismissed outright as the prosecutor did not find any probable causeagainst respondents. A suit for malicious prosecution will prosper where legal prosecution is carried out without probable cause. ULPA CRIMINAL PEOPLE VS. DE LOS SANTOSG.R. No. 131588March 27, 2001355 SCRA 415FACTS: As part of the Special Counter Insurgency Operation Unit Training held atCamp Damilag, Manolo Fortich, Bukidnon, several members of the Philippine National Police were undergoing an endurance run on October 5, 1995 whichstarted at 2:20 am. The PNP trainees were divided into three columns and werewearing black t-shirts, bl;ack short pants, and green and black combat shoes. There were two rear guards assigned to each rear column. Their duty was to jogb a c k w a r d s f a c i n g t h e o n c o m i n g v e h i c l e s a n d g i v e h a n d s i g n a l s f o r o t h e r vehicles. From Alae to Maitum Highway, Puerto, Cagayan de Oro City, about 20vehicles passed them, all of which slowed down and took the left portion of theroad when signaled to do so.While they were negotiating Maitum Highway, they saw an Isuzu Elf truckcoming at high speed towards them. The vehicle lights were in the high beam.At a distance of 100 meters, the rear security guards started waving their handsfor the vehicle to take the other side of the road, but the vehicle just kept itsspeed, apparently ignoring their signals and coming closer and closer to them. T h e r e a r g u a r d s t o l d t h e i r c o t r a i n e e s t o r e t r a c t . T h e g u a r d s j u m p e d i n different directions. They saw their co-trainees being hit by the said vehicle,falling like dominoes one after the other. Some were thrown, and others wereoverrun by the vehicle. The driver, Glenn de los Santos did not reduce his speedeven after hitting the first and second columns.After arraignment and trial, the court convicted accused -appellant guiltyof complex crime of multiple murder, multiple frustrated murder and mu ltipleattempted murder, with the use of motor vehicle as the qualifying circumstance. ISSUE: Whether or not the incident was a product of a malicious intent on the part of accusedappellant RULING: The Supreme Court held that the incident, tragic though it was in the lightof the number of persons killed and seriously injured, was an accident than of am a l i c i o u s i n t e n t o n G l e n n s p a r t . G l e n n s h o w e d a n i n e x c u s a b l e l a c k o f precaution. Since the place of the incident was foggy and dark, he should haveobserved due care in accordance with the conduct of a reasonably prudent man,such as by slackening his speed, applying his brakes, or turning to the left sideeven if it would mean entering the opposite lane.W h e r e f o r e , t h e Supreme Court convicted Glenn de Los Santos of onecomplex crime of r e c k l e s s i m p r u d e n c e r e s u l t i n g i n m u l t i p l e h o m i c i d e w i t h serious physical

injuries and less serious physical injuries and sentenced him tos u f f e r a n i n d e t e r m i n a t e p e n a l t y o f f o u r ye a r s o f p r i s i o n c o r r e c c i o n a l , a s minimum, to 10 years of prision mayor, as maximum; and 10 counts of recklessimprudence resulting in slight physical injuries and sentenced for each count, tothe penalty of 2 months of arresto mayor. The awards of death indemnity foreach group of heirs of trainees are reduced to P50,000, and the awards in favorof other victims are deleted.CONTRAVENTION OF THE TERMS VICTORINO D. MAGAT, petitioner, VS. HON. LEO D. MEDIALDEA and SANTIAGO A. GUERRERO, respondents G.R. No. L-37120April 20, 1983FACTS: Sometime in September 1972, the defendant entered into a contract withthe U.S. Navy Exchange, Subic Bay, Philippines, for the operation of a fleet of taxicabs, each taxicab to be provided with the necessary taximeter and a radiotransceiver for receiving and sending of messages from mobile taxicab to fixedbase stations within the Naval Base at Subic Bay, Philippines. Since hereinpetitioner is known of his good reputation as a businessman, the defendant,through his agent, entered into a contract with the former. In said contract, thedefendant must open a letter of credit in favor of the petitioner, since the latterwould also engage a foreign company for such taximeter.Defendant and his agent have repeatedly assured plaintiff herein of thedefendant's financial capabilities to pay for the goods ordered by him and in facthe accomplished the necessary application for a letter of credit with his banker,b u t h e s u b s e q u e n t l y i n s t r u c t e d h i s b a n k e r n o t t o g i v e d u e course to hisapplication for a letter of credit and that for reasons only k n o w n t o t h e defendant, he fails and refuses to open the necessary letter of credit to coverpayment of the goods ordered by him. After some time, herein defendant failedto comply with his obligation, and several demands were made by petitioner soas to reinforce such contract, and even communicated if defendant would like tor e s c i n d c o n t r a c t , b u t s a i d d e f e n d a n t d i d n o t r e p l y t o s u c h d e m a n d s . T h e defendant even used as a defense that the petitioner was delayed in deliveringthe taximeters when the former was apprehended by U.S. Navy Exchange for notcomplying with their agreement. As a consequence, petitioner filed a caseagainst the defendant but respondent judge dismissed such petition in a minuteorder for lack of cause of action. ISSUE: Whether or not petitioner has a cause of action against the defendant forthe latters contravention of the terms of contract. RULING: Article 1170 of the Civil Code provides:Those who in the performance of their obligation are guilty of fraud, negligence,or delay, and those who in any manner con travene the tenor thereof are liablefor damages. T h e p h r a s e " i n a n y m a n n e r c o n t r a v e n e t h e t e n o r " o f t h e o b l i g a t i o n includes any ilicit act or omission which impairs the strict and faithful fulfillmentof the obligation and every kind of defective performance. The damages whichthe obligor is liable for includes not only the value of the loss suffered by theobligee [dao emergente] but also the profits which the latter failed to obtain[lucro cesante]. If the obligor acted in good faith, he shall be liable for thosedamages that are the natural and probable consequences of the breach of theo b l i g a t i o n a n d w h i c h t h e p a r t i e s h a v e f o r e s e e n o r c o u l d h a v e

r e a s o n a b l y foreseen at the time the obligation was constituted; and in case of fraud, badfaith, malice or wanton attitude, he shall be liable for all damages which may bereasonably attributed to the non-performance of the obligation. The same is true with respect to moral and exemplary damages. Theapplicable legal provisions on the matter, Articles 2220 and 2232 of the CivilC o d e , a l l o w t h e a w a r d o f s u c h d a m a g e s i n b r e a c h e s o f c o n t r a c t w h e r e t h e defendant acted in bad faith. To our mind, the complaint sufficiently alleges badfaith on the part of the defendant. In fine, the Supreme Court held that on the basis of the facts alleged in the complaint, the court could render a valid judgment in accordance with the prayer thereof. SPECIFIC PERFORMANCE: NECESSITY (Art. 1165, CC)1 . V D A . D E M I S T I C A V S . N A G U I A T , 4 1 8 S C R A 7 3 2 . C O V S . C A , A U G . 1 7 , 1 9 9 9 VDA DE MISTICA VS. NAGUAIT418 SCRA 73FACTS: Eulalio Mistica, predecessor-in-interest of herein petitioner, is the owner of the parcel of land which was leased to respondent Bernardinio Naguiat.Mistica entered into a contract to sell with respondent over a portion of t h e a f o r e m e n t i o n e d l o t c o n t a i n i n g a n a r e a o f 2 0 0 s q u a r e m e t e r s . T h i s agreement was reduced to writing in a document. Pursuant to said agreement,respondent gave a down payment of P2,000. He made another partial paymentof P1,000 on February 8, 1980. He failed to make any paymen ts thereafter.Mistica died sometime in October 1986.On December 4,1991, petitioner filed a complaint for rescission alleging,among others that the failure and refusal of respondent to pay the balance of the purchase price constitute a violation of the contract which established her torescind the same. That respondent have been in possession of the subjectmatter, should be ordered to vacate and surrender possession of the same. ISSUE: Whether or not the Court of Appeals erred in the application of Article 1191 of the Civil Code, as it ruled that there is no breach of obligation in spite of the lapse of their stipulated period and the failure of the respondent to pay. RULING: NO. The failure of respondent to pay the value of the purchase price within ten (10) years from execution of the deed did not amount to a substantialbreach.In the agreement, it was stipulated that payment could be made even after ten (10) years from execution provided that the vendee paid 12% interest. The stipulation of the parties constitute the law between them, thus court haven o a l t e r n a t i v e b u t t o e n f o r c e t h e m a s a g r e e d u p o n and written. Thus, theSupreme Court ruled that the Court of Appeals did n o t c o m m i t a n e r r o r i n deciding this issue.SPECIFIC PERFORMANCE: NECESSITY (Art. 1165, CC) SPS. HENRY CO AND ELIZABETH CO AND MELODY CO, petitioners,VS. COURT OF APPEALS AND MRS. ADORACION CUSTODIO, representedby her Attorney-infact, TRINIDAD KALAGAYAN, respondentsAug 17, 1999G.R. No. 112330FACTS: On October 9, 1984, the spouses Co entered into a ve rbal contract withCustodio for her purchase of the their house and lot worth $100,000.00. One w e e k t h e r e a f t e r , a n d s h o r t l y b e f o r e s h e l e f t f o r t h e U n i t e d S t a t e s s h e p a i d amounts of $1,000.00 and P40,000.00 as earnest money, in order that the samemay be reserved for her purchase, said earnest money to be deducted from thetotal purchase price. The purchase price of $100,000.00 is payable in twopayments $40,000.00 on December 4, 1984 and the balance of

$60,000.00 on January 5, 1985. On January 25, 1985, although the period of payment hadalready expired, she paid to the defendant Melody Co in the United States, thesum of $30,000.00, as partial payment of the purchase price. Spouses Coscounsel, Atty. Leopoldo Cotaco, wrote a letter to the plaintiff dated March 15,1985, demanding that she pay the balance of $70,000.00 and not receiving anyresponse thereto, said lawyer wrote another letter to plaintiff dated August 8,1986, informing her that she has lost her option to purchase the propertysubject of this case and offered to sell her another property.A t t y. E s t r e l l a O . L a ys a , c o u n s e l o f C u s t o d i o , w r o t e a l e t t e r t o A t t y. Leopoldo Cotaco informing him that Custodio is now ready to pay the remainingbalance to complete the sum of $100,000.00, the agreed amount as sellingprice and on October 24, 1986, plaintiff filed the instant complaint. The trial court ruled in favor of Custodio and ordered the spouses Co to refund the amount of $30,000.00. Not satisfied with the decision, the spouses Co appealed to the Court of Appeals, which affirmed the decision of the RTC. Hence, this appeal. ISSUE: Whether or not the Court of Appeals erred in ordering the Cos to return the $30,000.00 paid by Custodio pursuant to the option granted to her. RULING: An option is a contract granting a privilege to buy or sell within an agreedtime and at a determined price. It is a separate and distinct contract from thatwhich the parties may enter into upon the consummation of the option. It mustbe supported by consideration. However, the March 15, 1985 letter sent by theCOS through their lawyer to Custodio reveals that the parties entered into aperfected contract of sale and not an option contract.A contract of sale is a consensual contract and is perfected at the momentthere is a meeting of the minds upon the thing which is the object of the contractand upon the price. From that moment the parties may reciprocally demandp e r f o r m a n c e s u b j e c t t o t h e p r o v i s i o n s o f t h e l a w g o v e r n i n g t h e f o r m o f contracts. The elements of a valid contract of sale under Article 1458 of the CivilCode are (1) consent or meeting of the minds; (2) determinate subject matter;and (3) price certain in money or its equivalent. As evidenced by the March 15,1985 letter, all three elements of a contract of sale are present in the transactionbetween the petitioners and respondent. Custodios offer to purchase the Beataproperty, subject of the sale at a price of $100,000.00 was accepted by the Cos.Even the manner of payment of the price was set forth in the letter. Earnestmoney in the amounts of US$1,000.00 and P40,000.00 was already received bythe Cos. Under Article 1482 of the Civil Code, earnest money given in a saletransaction is considered part of the purchase price and proof of the perf ectionof the sale.D e s p i t e t h e f a c t t h a t C u s t o d i o s f a i l u r e t o p a y t h e a m o u n t s o f US$40,000.00 and US$60,000.00 on or before December 4, 1984 and January 5,1985 respectively was a breach of her obligation under Article 1191 of the CivilCode, the Cos did not sue for either specific performance or rescission of thec o n t r a c t . T h e C o s w e r e o f t h e m i s t a k e n b e l i e f t h a t C u s t o d i o h a d l o s t h e r option over the Beata property when she failed to pay the remaining balanceof $70,000.00 pursuant to their August 8, 1986 let ter. In the absence of anexpress stipulation authorizing the sellers to extrajudicially rescind the contractof sale, the Cos cannot unilaterally and extrajudicially rescind the contract of sale.Accordingly, Custodio acted well within her rights when she attempted top a y t h e

r e m a i n i n g b a l a n c e o f $ 7 0 , 0 0 0 . 0 0 t o c o m p l e t e t h e s u m o w e d o f $100,000.00 as the contract was still subsisting at that time. When the Cosrefused to accept said payment and to deliver the Beata property, Custodioimmediately sued for the rescission of the contract of sale and prayed for the return of the $30,000.00 she had initially paid.Under Article 1385 of the Civil Code, rescission creates the obligation toreturn the things, which were the object of the contract, but such rescission canonly be carried out when the one who demands rescission can return whateverhe may be obliged to restore. This principle has been applied to rescission of reciprocal obligations under Article 1191 of the Civil Code. The Court of Appealstherefore did not err in ordering the Cos to return the amount of $30,000.00 to Custodio after ordering the rescission of the contract of sale over the property.Since it has been shown that the appellee who was not in default, waswilling to perform part of the contract while the appellants were not, rescissiono f t h e c o n t r a c t i s i n o r d e r . T h e p o w e r t o r e s c i n d o b l i g a t i o n s i s i m p l i e d i n reciprocal ones, in case one of the obligors should not comply with what isi n c u m b e n t u p o n h i m , ( A r t i c l e 1 1 9 1 , s a m e C o d e ) . R e s c i s s i o n c r e a t e s t h e obligation to return the things which were the object of the contract, togetherwith their fruits, and the price with its interest x x x x (Article 1385, same Code).In the case at bar, the property involved has not been delivered to theappellee. She has therefore nothing to return to the appellants. The pricereceived by the appellants has to be returned to the appellee as aptly ruled by the lower court, for such is a consequence of rescission, which is to restore theparties in their former situations.Petition denied. Decision affirmed. RIGHT TO RESOLVE/RESCIND: REQUISITES1. UFC VS. CA, 33 S 1 2. UP VS. DELOS ANGELES, 35 S 1023. FRANCISCO VS. DEAC CONST. INC., 543 S 6444. CANNU VS. GALANG, 459 S 805. VILLANUEVA VS. ESTATE OF GONZAGA, 498 S 2856. PAGUYO VS. ASTORGA, 470 S 337. CASINO VS. CA, 470 S 578. CARRASCOSO VS. CA, 477 S 6669. GOLDENROD VS. CA, 299 S 141 UNIVERSAL FOOD CORPORATION VS. CAL-29155 February 22, 1971FACTS: T h e p e t i t i o n e r c o n t e n d s t h a t ( a ) u n d e r t h e t e r m s o f t h e B i l l o f Assignment, exh. A, the respondent Magdalo V. Francisco ceded andtransferred to the petitioner not only the right to the use of the formula for Mafran sauce but also the formula itself, because this, allegedly, wasthe intention of the parties; (b) that on the basis of the entire evidence onrecord and as found by the trial court, the petitioner did not dismiss the respondent Francisco because he was, and still is, a member of the boardof directors, a stockholder, and an officer of the petitioner corporation, and that as such, had actual knowledge of the resumption of productionby the petitioner, but that despite such knowledge, he refused to reportback for work notwithstanding the petitioner's call for him to do so; (c) t h a t the private respondents are not entitled to rescind the Bill of Assignment; and (d) that the evidence on record shows that t h e respondent Francisco was the one not ready, willing and able to comply with his obligations under the Bill of Assignment, in the sense that he notonly irregularly reported for work but also failed to assign, transfer andconvey to the petitioner of the said deed of conveyance. ISSUE: Whether respondent Francisco ceded to the petitioner merely theuse of the formula for Mafran sauce and not the formula itself.

RULING: The Court concluded that what was act ually ceded and transferred wasonly the use of the Mafran sauce formula. The fact that the trademark "Mafran" was duly registered in the name of the petitioner pursuant to theBill of Assignment, standing by itself alone, to borrow the petitioner'sl a n g u a g e , i s n o t s u f f i c i e n t p r o o f t h a t t h e r e s p o n d e n t F r a n c i s c o w a s supposedly obligated to transfer and cede to the petitioner the formulafor Mafran sauce and not merely its use. For the said respondent allowedt h e p e t i t i o n e r t o r e g i s t e r t h e t r a d e m a r k f o r p u r p o s e s m e r e l y o f t h e "marketing of said project." RIGHT TO RESOLVE/RESCIND: REQUISITES UNIVERSITY OF THE PHILIPPINES VS. DELOS ANGELESL-28602 September 29, 1970FACTS: UP and ALUMCO entered into a logging agreement under which thelatter was granted exclusive authority, for a period starting from the dateof the agreement to 31 December 1965, extendible for a further period of five (5) years by mutual agreement, to cut, co llect and remove timberfrom the Land Grant, in consideration of payment to UP of royalties, forestfees, etc.; that ALUMCO cut and removed timber therefrom but, as of 8 December 1964, it had incurred an unpaid account of P219,362.94, which,despite repeated demands, it had failed to pay; that after it had received n o t i c e t h a t U P w o u l d r e s c i n d o r t e r m i n a t e t h e l o g g i n g a g r e e m e n t , ALUMCO executed an instrument, entitled "Acknowledgment of Debt andProposed Manner of Payments," dated 9 December 1964, which was a p p r o v e d b y t h e p r e s i d e n t o f U P . A L U M C O c o n t i n u e d i t s l o g g i n g operations, but again incurred an unpaid account, for the period from 9December 1964 to 15 July 1965, in the amount of P61,133.74, in additionto the indebtedness that it had previously acknowledged. That on 19 July 1965, petitioner UP informed respondent ALUMCOthat it had, as of that date, considered as rescinded and of no furtherlegal effect the logging agreement that they had entered in 1960. That before the issuance of the aforesaid preliminary injunction UPhad taken steps to have another concessionaire take over the logging o p e r a t i o n , a n d t h e c o n c e s s i o n w a s a w a r d e d t o S t a . C l a r a L u m b e r Company, Inc. ISSUE: Whether petitioner U.P. can treat its contract with ALUMCOr e s c i n d e d , a n d m a y d i s r e g a r d t h e s a m e b e f o r e a n y j u d i c i a l pronouncement to that effect. RULING: Respondent ALUMCO contended, and the lower court, in issuing theinjunction order of 25 February 1966. apparently sustained it (although the order expresses no specific findings in this regard), that it is only aftera final court decree declaring the contract rescinded for violation of itsterms that U.P. could disregard ALUMCO's rights under the contract andtreat the agreement as breached and of no force or effect.UP and ALUMCO had expressly stipulated in the "Acknowledgmentof Debt and Proposed Manner of Payments" that, upon default by thed e b t o r A L U M C O , t h e c r e d i t o r ( U P ) h a s " t h e r i g h t a n d t h e p o w e r t o consider the Logging Agreement dated 2 December 1960 as rescindedwithout the necessity of any judicial suit." "There is nothing in the law thatprohibits the parties from entering into agreement that violation of theterms of the contract would cause cancellation thereof, even without c o u r t i n t e r v e n t i o n . I n o t h e r

w o r d s , i t i s n o t a l w a ys n e c e s s a r y f o r t h e injured party to resort to court for rescission of the contract."In other words, the party who deems the contract violated mayconsider it resolved or rescinded, and act accordingly, without previous c o u r t a c t i o n , b u t i t p r o c e e d s a t i t s o w n r i s k . F o r i t i s o n l y t h e f i n a l judgment of the corresponding court that will conclusively and finally settle whether the action taken was or was not correct in law. But the lawdefinitely does not require that the contracting party who believes itself i n j u r e d m u s t f i r s t f i l e s u i t a n d w a i t f o r a j u d g m e n t b e f o r e t a k i n g extrajudicial steps to protect its interest. Otherwise, the party injured byt h e o t h e r ' s b r e a c h w i l l h a v e t o p a s s i v e l y s i t a n d w a t c h i t s d a m a g e s accumulate during the pendency of the suit until the final judgment of rescission is rendered when the law itself requires that he should exercisedue diligence to minimize its own damages. RIGHT TO RESOLVE/RESCIND: REQUISITES FRANCISCO VS. DEAC CONSTRUCTION, INC.GR No. 171312 February 4, 2008FACTS: Spouses Francisco obtained the services of DEAC Construction, Inc.to construct a 3-storey residential building with mezzanine and roof deckon their lot for a contract price of 3.5M. as agreed upon, a downpaymentof 2M should be paid upon signing of the construct of construction, andthe remaining balance of 1.5M was to be paid in two equal installments. T o u n d e r t a k e t h e s a i d p r o j e c t , D E A C e n g a g e d t h e s e r v i c e s o f a sub-contractor, Vigor Construction and Development Corporation, b u t allegedly without the spouses knowledge and consent.Even prior to the execution of the contract, spouses Francisco hadp a i d t h e d o w n p a ym e n t . H o w e v e r , t h e s a i d c o n s t r u c t i o n c o m m e n c e d although DEAC had not yet obtained the necessary building permit for thep r o p o s e d c o n s t r u c t i o n a n d t h a t t h e c o n t r a c t o r d e v i a t e d f r o m t h e approved plans. EFFECTS OF FORTUITOUS EVENT UPON OBLIGATIONS VASQUEZ VS. COURT OF APPEALS138 SCRA 558FACTS: A vessel sailed from Manila to Cebu despite the knowledge by the captainand officers that a typhoon was building up somewhere in Mindanao. When it passed Tanguigui Island, the weather suddenly changed and the vessel struck areef, sustained leaks and eventually sunk. The ship sunk with the children of thepetitioners who sued for damages before the CFI of Manila, which was granted.Respondents defense o f force majeure t o e x t i n g u i s h i t s l i a b i l i t y w e r e n o t entertained. On appeal, the judgment was reversed. ISSUE: Whether or not the defense of force majeure is tenable. RULING: NO. A fortuitous event is constituted by the following: 1) The event mustbe independent of the human will; 2) the occurrence must render it impossiblefor the debtor to fulfill the obligation in a normal manner; and 3) the obligormust be free of participation in the aggravation of the injury suffered by the obligee or if it could be foreseen, it must have been impossible to avoid. Theremust be an entire exclusion of human agency from the cause of the injury orloss. Such is not the case at bar. The vessel still proceeded even though thecaptain already knew that they were within the ty phoon zone and

despite thefact that they were kept posted about the weather conditions. They failed toexercise that extraordinary diligence required from them, explicitly mandated bythe law, for the safety of the passengers.EFFECTS OF FORTUITOUS EVENT UPON OBLIGATIONS YOBIDO VS. COURT OF APPEALS281 SCRA 01G.R. No. 113003Oct. 17, 1997FACTS: On April 26, 1988, spouses Tito and Leny Tumboy and their minor childrennamed Ardee and Jasmin, boarded at Mangagoy , Surigao Del Sur, a Yobido Linerbus bound for Davao City. Along Picop Road in Km. 17, Sta.Maria, Agusan delSur, the left front tire of the bus exploded. The bus fell into a ravine around three (3) feet from the road and struck a tree. The incident resulted in the deathof 28-year-old Tito Tumboy and physical injuries to other passengers. On Nov.21, 1988, a complaint for breach of contract of carriage, damages and attorneysfees was filed by Leny and her children against Alberta Yobido, the owner of thebus, and Cresencio Yobido, its driver, before the Regional T rial Court of DavaoCity. When the defendants therein filed their answer to the complaint, theyraised the affirmative defense of caso fortuito. They also filed a third -partyc o m p l a i n t a g a i n s t P h i l i p p i n e S u r e t y a n d I n s u r a n c e , I n c . T h i s t h i r d - p a r t yd e f e n d a n t f i l e d a n a n s w e r w i t h c o m p u l s o r y c o u n t e r c l a i m . A t t h e p r e - t r i a l conference, the parties agreed to a stipulation of facts.On August 29, 1991, the lower court rendered a decision dismissing theaction for lack of merit. On the issue of whether or not the tire blowout was acaso fortuito, it found that the falling of the bus to the cliff was a result of noother outside factor than the tire bolw -out. It held that the ruling in the LaMallorca and Pampanga Bus Co. v. De Jesus that a tire blowout is a mechanicald e f e c t o f t h e c o n v e y a n c e o r a f a u l t i n i t s e q u i p m e n t w h i c h w a s e a s i l y discoverable if the bus had been subjected to a more thorough or rigid check-upbefore it took to the road that morning is inapplicable to this case. It reasonedout that in said case. It reasoned out that in said case, it was found that theblowout was caused by the established fact that the inner tube of the left fronttire was pressed between the inner circle of the left wheel and the rim whichhad slipped out of the left wheel . In this ca se, however, the cause of theexplosion remains a mystery until at present. As such, the court added, the tireblowout was a caso fortuito which is completely an extraordinary circumstanceindependent of the will of the defendants who should be relieved of whateverliability the plaintiffs may have suffered by reason of the explosion pursuant toArticle 1174 of the Civil Code. ISSUE: Whether or not the Trial Court erred in their findings that the tire blowoutwas a caso fortuito . RULING: On August 23, 1193, the Court of Appeals rendered the decision reversingthe decision of the trial court. Article 1755 provides that (a) common carrier isbound to carry the passenger safely as far as human care and foresight canprovide, using the utmost diligence very cautious persons, with a due regard for all the circumstances. Accordingly, in culpa contractual, once a passenger diesor is injured, the carrier is presumed to have been at fault or to have actednegligently. The

disputable presumption may only be overcome by evidencethat the carrier had observed extraordinary diligences as prescribed by Articles1733, 1755 and 1756 of the Civil Code or that the injury of the passenger was due to fortuitous event. Consequently, the court need make an express findingo f f a u l t o r n e g l i g e n c e o n t h e p a r t o f t h e c a r r i e r t o h o l d i t r e s p o n s i b l e f o r damages sought by the passenger. T h e d e c i s i o n o f t h e C o u r t o f A p p e a l s w a s a f f i r m e d s u b j e c t t o t h e modification that petitioners shall, in addition to the monetary awards therein, be liable for the award of exemplary damages in the amount of P20,000.00.EFFECTS OF FORTUITOUS EVENT UPON OBLIGATIONS ROBERTO JUNTILLA VS. CLEMENTE FONTANAR136 SCRA 625G.R. No. L45637FACTS: The plaintiff was a passenger of the public utility jeepney on the course of the trip from Danao City to Cebu City. The jeepney was driven by defendantBerfol Camoro. It was registered under the franchise of defendant ClementeFontanar but was actually owned by defendant Fernando Banzon. When the jeepney reached Mandaue City, the right rear tire exploded causing the vehicleto turn turtle. The plaintiff who was sitting at the front seat was thrown out of the vehicle and momentarily lost consciousness. When he came to his senses,he found that he had a lacerated wound on his right palm and injuries on his leftarm, right thigh and on his back. Because of his shock and injuries, he went back to Danao City but on the way, he discovered that his "Omega" wrist watchwas lost. Upon his arrival in Danao City, he immediately entered the Danao CityHospital to attend to his injuries, and also requested his father-in-law to proceedimmediately to the place of the accident and look for the watch. In spite of the efforts of his father-in-law, the wrist watch could no longer be found. ISSUE:W hether or not the accident that happened was due to a fortuitous event,thereby, absolving the respondents from any obligation. RULING: NO. The accident was not due to a fortuitous event. There are specificacts of negligence on the part of the respondents. The passenger jeepneyt u r n e d t u r t l e a n d j u m p e d i n t o a d i t c h i m m e d i a t e l y a f t e r i t s r i g h t r e a r t i r e exploded. It was running at a very high speed before the accident and wasoverloaded. The petitioner stated that there were three (3) passengers in the front seat and fourteen (14) passengers in the rear.While the tire that blew-up was still good because the grooves were stillvisible, this does not make the explosion of the tire a fortuitous event. Noevidence was presented to show that the accident was due to adverse roadconditions or that precautions were taken by the jeepney driver to avert possibleaccidents. The blowing-up of the tire, therefore, could have been caused by toomuch air pressure and aggravated by the fact that the jeepney was overloaded and speeding at the time of the accident. The accident was caused either through the negligence of the driver orbecause of mechanical defects in the tire. Common carriers are obliged to supervise their drivers and ensure that they follow rules and regulations such asnot to overload their vehicles, not to exceed safe and legal speed limits, and toknow the correct measures to take when a tire blows up. The source of a common carrier's legal liability is the contract of carriage,and by entering into the said contract, it binds itself to carry the passengerss a f e l y a s f a r a s h u m a n c a r e a n d f o r e s i g h t c a n p r o v i d e , u s i n g t h e u t m o s t diligence of a

very cautious person, with a due regard for all the circumstances. The driver and the owner of the vehicle are liable for damages.EFFECTS OF FORTUITOUS EVENT UPON OBLIGATIONS THE PHILIPPINE AMERICAN GENERAL INSURANCE CO., INC,VS. MGG MARINE SERVICES, INC. and DOROTEO GAERLAN 2002 Mar 8G.R. No. 135645FACTS: On March 1, 1987, San Miguel Corporation insured several beer bottlecases with an aggregate value of P5,836,222.80 with petitioner Philippine American General Insurance Company. The cargo were loaded on board the M/VPeatheray Patrick-G to be transported from Mandaue City to Bislig, Surigao del Sur.A f t e r h a v i n g b e e n c l e a r e d b y t h e C o a s t G u a r d S t a t i o n i n C e b u t h e previous day, the vessel left the port of Mandaue City for Bislig, Surigao del Suron March 2, 1987. The weather was calm when the vessel started its voyage. The following day, March 3, 1987, M/V Peatheray Patrick G listed andsubsequently sunk off Cawit Point, Cortes, Surigao del Sur. As a consequencethereof, the cargo belonging to San Miguel Corporation was lost. Subsequently,San Miguel Corporation claimed the amount of its loss from petitioner. The Court of Appeals observed respondents from any liability because thecargo was lost due to a fortuitous event; strong winds and huge waves caused the vessel to sink. ISSUE: Whether the loss of the cargo was due to the occurrence of a naturaldisaster, and if so, whether such natural disaster was the sol e and proximatecause of the loss or whether private respondents were partly to blame for failingto exercise due diligence to prevent the loss of the cargo. RULING: Common carriers, from the nature of their business and for reasons of public policy, are mandated to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them. Owingto this high degree of diligence required of them, common carriers, as a generalrule, are presumed to have been at fault or negligent if the goods transported bythem are lost, destroyed or if the same deteriorated. The parties do not dispute that on the day the M/V Peatheray Patrick -Gsunk, said vessel encountered strong winds and huge waves ranging from six toten feet in height. The vessel listed at the port side and eventually sunk at CawitPoint, Cortes, Surigao del Sur.In the case at bar, it was adequately shown that before the M/V PeatherayPatrick-G left the port of Mandaue City, the Captain confirmed with the CoastGuard that the weather condition would permit the safe travel of the vessel toBislig, Surigao del Sur. Thus, he could not be expected to have foreseen theunfavorable weather condition that awaited the vessel in Cortes, Surigao del Sur.It was the presence of the strong winds and enormous waves which caused thevessel to list, keel over, and consequently lose the cargo contained therein. Theappellate court likewise found that there was no negligence on the part of thecrew of the M/V Peatheray Patrick-G. Since the presence of strong winds andenormous waves at Cortes, Surigao del Sur on March 3, 1987 was shown to be the proximate and only cause of the sinking of the M/V Peatheray Patrick-G andthe loss of the cargo belonging to San Miguel Corporation, private respondentscannot be held liable for the said loss.EFFECTS OF FORTUITOUS EVENT UPON OBLIGATIONS MINDEZ RESOURCES DEVELOPMENT VS. MORILLO379 SCRA 144March 12, 2002FACTS:

On February 1991 a verbal agreement was entered into between EphraimMorillo and Mindex Resources Corporation fro the lease of the formers 6x6 10 -wheeler cargo truck for use in Mindexs mining operations in Oriental Mindoro ata stipulated rental of P300.00 per hour for a minimum of 8 hours a day or a totalof P2,400.00 daily. Mindex was paying its rentals until April 10, 1991. On April11, unidentified persons burned the truck while it was parked unattended at San Teodoro, Oriental Mindoro due to mechanical trouble. Upon learning the burningi n c i d e n t , M o r i l l o o f f e r e d t o s e l l t h e t r u c k t o M i n d e x b u t t h e l a t t e r r e f u s e d . Instead, it replaced the vehicles burned tires and had it towed to a shop forrepair and overhauling. On April 15, 1991, Morillo sent a letter to Mindexproposing that he will entrust the said vehicle in the amount of P275,000.00 thatis its cost price without charging for the encumbrance of P76,800.00.Mindex responded by a hand written letter expressing their reservations on the above demands due to their tight financial situation. However, he madecounter offers which state that they will pay th e rental of the 6x6 truck in theamount of P76,000.00, repair and overhaul the truck on their own expenses andreturn it to Morillo on good running condition after repair. April 18, Morilloreplied that he will relinquish to Mindex the damaged truck; that he is amenable to receive the rental in the amount of P76, 000.00; and that Mindex will payP50,000.00 monthly until the balance of P275,000.00 is fully paid. Except for hisacceptance of the proffered P76,000.00 unpaid rentals. Morillos stand has notbeen changed as he merely lowered the first payment on the P275,000.00 valuation of the truck from P150,000.00 to P50,000.00. The parties had since remain intransigent and so on August, Morillo pulledout the truck from the repair shop of Mindex and had it repair ed elsewhere forw h i c h h e s p e n t t h e a m o u n t o f P 1 3 2 , 7 5 0 . 0 0 . T h e R T C f o u n d p e t i t i o n e r responsible fro the destruction of loss of the leased 6x6 truck and ordered it topay respondent P76,000.00 as balance of the unpaid rental for the 6x6 truckwith interest of 12%, P132,750.00 representing the cost of repair and overhaulof the truck with interest of 12% until fully paid; and P20,000.00 as attorneys fees. The appellate court sustained RTCs finding. The CA found petitioner wasn o t w i t h o u t f a u l t f o r t h e l o s s a n d d e s t r u c t i o n o f t h e t r u c k a n d t h u s l i a b l e therefore. However, it modified the 12% interest on the P76,000.00 rentals andP132,750.00 repair cost to 6% per annum form June 22, 1994 to the date of finality of the said decision. It affirmed the award of attorneys fees. ISSUE: Whether or not the CA is correct in finding the petitioner liable due to negligence and cannot be exonerated due to the defense of fortuitous event. RULING: YES. As stated by the Court of Appeals, the burning of the subject truckwas impossible to foresee, but not impossible to avoid. Mindex could haveprevented the incident by immediately towing the truck to a motor shop for repair.In this case, petitioner was found negligent and thus liable for the loss ordestruction of the leased truck. Article 1174 of the Civil Code states that, Noperson shall be responsible for a fortuitous event that could not be foreseen or,though foreseen, was inevitable. In other words, there must be an exclusion of human intervention form the cause of injury on loss. In this case, the petitioneris contributory negligent to the incident.Decision was denied. Deleting attorneys fees, modified the RTC and CAsdecision.EFFECTS OF FORTUITOUS EVENT UPON OBLIGATIONS

NATIONAL POWER CORPORATIONVS. PHILIPP BROTHERS OCEANIC, INC.G.R. No. 126204November 20, 2001369 SCRA 629FACTS: On May 14, 1987, the National Power Corporation (NAPOCOR) issued invitations to bid for the supply and delivery of 120,000 metric tons of importedcoal for its Batangas CoalFired Thermal Power Plant in Cala ca, Batangas. TheP h i l i p p B r o t h e r s O c e a n i c , Inc. (PHIBRO) prequalified and was allowed toparticipate as one of the b i d d e r s . A f t e r t h e p u b l i c b i d d i n g w a s c o n d u c t e d , PHIBROs bid was accepted. NAPOCORs acceptance was conveyed in a letter dated July 8, 1987, which was received by PHIBRO on July 15, 1987.On July 10, 1987, PHIBRO sent word to NAPOCOR that industrial disputesmight soon plague Australia, the shipments point of origin, which could seriouslyhamper PHIBROs ability to supply the needed coal unless a strike-free clauseis incorporated in the charter party or the contract of carriage. In order to hastenthe transfer of coal, PHIBRO proposed to NAPOCOR that they equally share the burden of a strikefree clause. NAPOCOR refused. On August 6, 1987, PHIBROreceived from NAPOCOR a confirmed and workable letter of credit. Instead of delivering the coal on or before the thirtieth day after receipt of the Letter of Credit, as agreed upon by the parties in the July contract, PHIBRO effected its first shipment only on November 17, 1987.Consequently, in October 1987, NAPOCOR once more advertised for thedelivery of coal to its Calaca thermal plant. PHIBRO participated anew in thissubsequent bidding but its application was denied for not meeting the minimumrequirements. However, PHIBRO found that the real reason for the disapprovalwas its purported failure to satisfy NAPOCORs demand for damages due to thedelay in the delivery of the first coal shipment. Thus, PHIBRO filed an action fordamages with application for injunction against NAPOCOR with the Regional TrialCourt, Branch 57, Makati City. In its complaint, PHIBRO alleged that NAPOCORsact of disqualifying it in the October 1987 bidding and in all subsequent biddingswas tainted with malice and bad faith. PHIBRO prayed for actual, moral andexemplary damages and attorneys fees. On the other hand NAPOCOR averred that the strikes in Australia could notbe invoked as reason for the delay in the delivery of coal because PHIBRO itself admitted that as of July 28, 1987 those strikes had already ceased. Furthermore,NAPOCOR claimed that due to PHIBROs failure to deliver the coal on time, it wascompelled to purchase coal from ASEA at a higher price. NAPOCOR claimed foractual damages in the amount of P12,436,185.73, representing the increase inthe price of coal, and a claim of P500,000.00 as litigation expenses.O n J a n u a r y 1 6 , 1 9 9 2 , t h e t r i a l c o u r t r e n d e r e d a d e c i s i o n i n f a v o r o f PHIBRO. Unsatisfied, NAPOCOR elevated the case to the Court of Appeals whichaffirmed in toto the latters decision. Hence, this present petition. ISSUE: Whether or not the lower court erred in holding that PHIBROs delay in thedelivery of imported coal was due to force majeure. RULING: It was disclosed from the records of the case that what prevented PHIBROf r o m c o m p l yi n g w i t h i t s o b l i g a t i o n u n d e r t h e J u l y 1 9 8 7 c o n t r a c t w a s t h e industrial disputes which besieged Australia during that time. The Civil Code provides that no person shall be responsible for those events which could not beforeseeen, or which, though foreseen, were inevitable. This means that when anobligor is unable to fulfill his obligation because of

a fortuitous event or forcemajeure, he cannot be held liable for damages for nonperformance.In addition to the above legal precept, it is worthy to n ote that PHIBROa n d N A P O C O R e x p l i c i t l y a g r e e d i n S e c t i o n X V I I o f t h e B i d d i n g T e r m s a n d Specifications that neither seller (PHIBRO) nor buyer (NAPOCOR) shall be liablefor any delay in or failure of the performance of its obligations, other than thepayment of money due, if any such delay or failure is due to ForceMajeure. Strikes then are undoubtedly included in the force majeure clauseof the Bidding Terms and Specifications. TRANSMISSIBILITY OF RIGHTS AND OBLIGATIONS1 . U N I O N B A N K V S . SANTIBANEZ, 452 S 2282.SAN AGUSTIN VS. CA, 371 SCRA 3 4 8 3.PROJECT BUILDERS, INC. VS. CA, 358 SCRA 626 UNION BANK OF THE PHILIPPINES versus EDMUND SANTIBAEZand FLORENCE SANTIBAEZ ARIOLAG . R . N o . 1 4 9 9 2 6 2 0 0 5 F e b 2 3 FACTS: On May 31, 1980, the First Countryside Credit Corporation (FCCC)and Efraim M. Santibaez entered into a loan agreement in the amount of P128,000.00. The amount was intended for the payment of the purchaseprice of one unit Ford 6600 Agricultural All-Purpose Diesel Tractor. In viewthereof, Efraim and his son, Edmund, executed a promissory note in favorof the FCCC, the principal sum payable in five equal annual amortizationsof P43,745.96 due on May 31, 1981 and every May 31st thereafter up to May 31, 1985.On December 13, 1980, the FCCC and Efraim entered into another loan agreement, this time in the amount of P123,156.00. It was intendedto pay the balance of the purchase price of another unit of Ford 6600Agricultural All -Purpose Diesel Tractor, with accessories, and one unitHoward Rotamotor Model AR 60K. Again, Efraim a nd his son, Edmund,executed a promissory note for the said amount in favor of the FCCC. Aside from such promissory note, they also signed a Continuing GuarantyAgreement for the loan dated December 13, 1980.Sometime in February 1981, Efraim died, leaving a holographic will.Subsequently in March 1981, testate proceedings commenced before theR T C o f I l o i l o C i t y. O n A p r i l 9 , 1 9 8 1 , E d m u n d , a s o n e o f t h e h e i r s , w a s appointed as the special administrator of the estate of the decedent.During the pendency of the testate proceedings, the surviving heirs,E d m u n d a n d h i s s i s t e r F l o r e n c e S a n t i b a e z A r i o l a , e x e c u t e d a J o i n t Agreement dated July 22, 1981, wherein they agreed to divide betweenthemselves and take possession of the three tractors; that is, two tractorsfor Edmund and one tractor for Florence. Each of them was to assume the indebtedness of their late father to FCCC, corresponding to the tractor respectively taken by them.O n A u g u s t 2 0 , 1 9 8 1 , a D e e d o f A s s i g n m e n t w i t h A s s u m p t i o n o f Liabilities was executed by and between FCCC and Union Savings andM o r t g a g e B a n k , w h e r e i n t h e F C C C a s t h e a s s i g n o r , a m o n g o t h e r s , assigned all its assets and liabilities to Union Savings and Mortgage Bank.Demand letters for the settlement of his account were sent by petitionerUnion Bank of the Philippines (UBP) to Edmund, but the latter failed to h e e d t h e s a m e a n d r e f u s e d t o p a y. T h u s , o n F e b r u a r y 5 , 1 9 8 8 , t h e petitioner filed a Complaint for sum of money against the heirs of EfraimSantibaez, Edmund and Florence, before the RTC of Makati City. ISSUE: 1. Whether in testate succession, there can be no valid partition among the heirs.2. Whether or not the heirs assumption of the indebtedness of thedeceased is binding.3. Whether or not the petitioner can hold the heirs liable on the obligation of the deceased.

RULING: 1. In testate succession, there can be no valid partition among theheirs until after the will has been probated. The law enjoins the probateof a will and the public requires it, because unless a will is probated andnotice thereof given to the whole world, the right of a person to dispose of his property by will may be rendered nugatory. It presupposes that theproperties to be partitioned are the same properties embraced in the will. The court then agrees with the appellate court that the provisionss t a t e d i n t h e w i l l i s a n a l l e n c o m p a s s i n g p r o v i s i o n e m b r a c i n g a l l t h e properties left by the decedent which might have escaped his mind atthat time he was making his will, and other properties he may acquirethereafter. This being so, any partition involving the said tractors amongt h e h e i r s i s n o t v a l i d . T h e j o i n t a g r e e m e n t e x e c u t e d b y E d m u n d a n d Florence, partitioning the tractors among themselves, is invalid, speciallys o s i n c e a t t h e t i m e o f i t s e x e c u t i o n , t h e r e w a s a l r e a d y a p e n d i n g proceeding for the probate of their late fathers holographic will coveringthe said tractors. 2. The heirs assumption of the indebtedness is not binding. Theassumption of liability was conditioned upon the happening of an event,that is, that each heir shall takepossession and use of their respective share under the agreement. It wasmade dependent on the validity of the partition, and that they were toassume the indebtedness corresponding to the chattel that they wereeach to receive. The partition being inv alid, the heirs in effect did notreceive any such tractor. It follows then that the assumption of liability cannot be given any force and effect.3. Florence S. Ariola could not be held accountable for any liabilityi n c u r r e d b y h e r l a t e f a t h e r . T h e d o c u m e n t a r y e v i d e n c e p r e s e n t e d , particularly the promissory notes and the continuing guaranty agreement,were executed and signed only by the late Efraim Santibaez and his sonEdmund. As the petitioner failed to file its money claim with the probatecourt, at most, it may only go after Edmund as co-maker of the decedentunder the said promissory notes and continuing guaranty, of course,subject to any defenses Edmund may have as against the petitioner. H o w e v e r , t h e c o u r t h a d n o t a c q u i r e d j u r i s d i c t i o n o v e r t h e p e r s o n o f Edmund. Also, the petitioner had not sufficiently shown that it is thesuccessor -in-interest of the Union Savings and Mortgage Bank to whichthe FCCC assigned its assets and liabilities. TRANSMISSIBILITY OF RIGHTS AND OBLIGATIONS SAN AGUSTIN VS. COURT OF APPEALS371 S 348FACTS: On February 11, 1974, the Government Service Insurance System (GSIS)sold to Macaria Vda de Caiquep, a parcel or residential land located in Pasig City,part of the GSIS Low Cost Housing Project evidenced by a Deed of Absolute Sale.On February 19, 1974, the Register of Deeds of Rizal issued in the nameof Caiquep, Transfer Certificate of Title. The next day, Caiquep sold the subjectl o t t o p r i v a t e r e s p o n d e n t M a x i m o M e n e z . S o m e t i m e i n 1 9 7 9 , f o r b e i n g suspected as a subversive, military men ransacked Menez's house in Rizal. Hesurrendered to the authorities and was detained for two years. When released,another order for his arrest was issued so he hid in Mindanao for another fouryears or until March 1984. In December 1990, he discovered that the subject TCT was missing. He consulted a lawyer but the latter did not act immediatelyon the matter. Upon consulting a new counsel, an Affidavit of Loss was filed withthe Register of Deeds and a certified copy of TCT was issued. Private respondentalso declared the property for tax purposes and obtained a certification thereof from the Assessors office. His search for the registered owner to different partsof the country failed prompting the former to file a petition for the

issuance of owners duplicate copy to replace the lost one.During the hearing, only Menez and counsel were present because theRegister of Deeds and the Provincial Prosecutor were not notified. The trial courtgranted his petition after Menez presented his evidence ex parte . San Agustinclaimed this was the first time he became aware of the case of his aunt Ma. Vdade Caiquep and the present occupant of the property. He filed A Motion toReopen Reconstitution Proceedings but RTC denied said motion. Petitioner moved for motion for reconsideration but was again denied. ISSUE: Whether or not petitioner is bound by the contract entered into by his predecessor-ininterest. RULING: Yes, petitioner is bound by contracts entered into by his predecessors-in-interest. Heirs are bound by contracts entered into by their predecessors -in-interest. In this case, the GSIS has not filed any action for the annulment of Deedof Absolute Sale of the lot the latter sold to Caiquep, nor the forfeiture of the lotin question.In the Courts view, the contract of sale remains valid between the parties,unless and until annulled in the proper suit filed by the rightful party, the GSIS.For now, the said contract of sale is binding upon the heirs of Macaria Vda deCaiquep., including petitioner who alleges to be one of her heirs, in line with therule that heirs are bound by contracts entered into by their predecessors -ininterest. TRANSMISSIBILITY OF RIGHTS AND OBLIGATIONS PROJECT BUILDERS, INC., GALICANO A. CALAPATIA, JR., and LEANDROENRIQUEZ, petitioners, vs. THE COURT OF APPEALS and INDUSTRIALFINANCE CORPORATION, respondents2001 Jun 19358 SCRA 626FACTS: On August 21, 1975, plaintiff and defendant PBI entered into a n agreement whereby it was agreed that plaintiff would provide a m a x i m u m amount of P2,000,000.00 against which s aid defendant would discount andassign to plaintiff on a with recourse non -collection basis its (PBIs) accountsreceivable under the contracts to sell specified in said agreement. Eventually,the same parties entered into an agreement whereby it was agree d that PBIscredit line with plaintiff be increased to P5,000,000.00. It was stipulated that thec r e d i t line of P5,000,000.00 granted includes the amount a l r e a d y assigned/discounted.Against the above -mentioned credit line, defendant PBIdiscounted with plaintiff on different dates accounts receivables with differentmaturity dates from different condominium -unit buyers. The total amount of receivables discounted by defendant PBI is P7,986,815.38 and consists of twentyaccounts. Of such receivables amounting to P7,986,815.38 plaintiff released todefendant PBI the amount of P4,549,132.72 and the difference of P3,437,682.66represents the discounting fee or finance fee. To secure compliance with the terms and conditions of the agreementdefendants executed a Deed of Real Estate Mortgage in favor of plaintiff. Whendefendants allegedly defaulted in the payment of the subject account, plaintiff foreclosed the mortgage and plaintiff was the highest bidder in the amount of P3,500,000.00. The foreclosed property was redeemed a year later but aftera p p l i c a t i o n o f t h e r e d e m p t i o n p a ym e n t , p l a i n t i f f c l a i m s t h a t t h e r e i s s t i l l a deficiency in the amount of P1,323,053.08.A collection suit was then filed by IFC against PBI. However, PBI deniedliability alleging that IFC has no case or right of action because the

obligation isfully paid out of the proceeds of foreclosure sale of its property. Further, it alleged that a proper accounting of the transaction between the parties will showthat it is the IFC who is liable to PBI. The trial court dismissed the complaint but the Court of Appeals reversedit. It ordered PBI to pay IFC the deficiency in the amount of P1,237,802.48 andthe monetary interests. ISSUE: Whether or not said Republic Act No. 5980 should govern the transactionbetween petitioners and private respondent which in reality was bilateral, nottrilateral, and respondent financing company was not really subrogated in the place of the supposed seller or assignor. RULING: The assignment of the contracts to sell falls within the purview of the Act. The term credit has been defined to - "(c) x x x mean any loan, mortgage, deedof trust, advance, or discount; any conditional sales contract, any contract to sell, or sale or contract of sale of property or service, either for present or futured e l i v e r y, u n d e r w h i c h , p a r t o r a l l o f t h e p r i c e i s p a ya b l e s u b s e q u e n t t o t h e making of such sale or contract; any rental -purchase contract; any option,demand, lien, pledge, or other claim against, or for the delive ry of, property ormoney, any purchase, or other acquisition of or any credit upon the security of,any obligation or claim arising out of the foregoing; and any transaction or seriesof transactions having a similar purpose or effect.A n a s s i g n m e n t o f c r e d i t i s a n a c t o f t r a n s f e r r i n g , e i t h e r o n e r o u s l y o r gratuitously, the right of an assignor to an assignee who would then be capableof proceeding against the debtor for enforcement or satisfaction of the credit. The transfer of rights takes place upon perfection of the contract, and ownershipof the right, including all appurtenant accessory rights, is thereupon acquired bythe assignee. The assignment binds the debtor only upon acquiring knowledgeof the assignment but he is entitled, even then, to raise against the assignee thesame defenses he could set up against the assignor. Where the assignment ison account of pure liberality on the part of the assignor, the rules on donationwould likewise be pertinent; where valuable consideration is involved, the assignment partakes of the nature of a contract of sale or purchase.U p o n a n a s s i g n m e n t o f a c o n t r a c t t o s e l l , t h e a s s i g n e e i s e f f e c t i v e l y subrogated in place of the assignor and in a position to enforce the contract tosell to the same extent as the assignor could.A n i n s i s t e n c e o f p e t i t i o n e r s t h a t t h e s u b j e c t t r a n s a c t i o n s h o u l d b e considered a simple loan since private respondent did not communicate with thedebtors, condominium unit buyers, to collect payment from them, is untenable.In an assignment of credit, the consent of the debtor is not essential for itsperfection, his knowledge thereof or lack of it affecting only the efficaciousnessor inefficaciousness of any payment he might make. The assignment, it might be pointed out, was "with recourse," and defaulti n t h e p a ym e n t o f i n s t a l l m e n t s h a d b e e n duly established when petitionercorporation foreclosed on the mortgaged p a r c e l s o f l a n d . T h e r e s o r t t o foreclosure of the mortgaged properties did not preclude private respondentfrom collecting interest from the assigned Contr acts To Sell from the time of foreclosure to the redemption of the foreclosed property. The imposition of interest was a mere enforcement or exercise of the right to the ownership of thec r e d i t o r r e c e i v a b l e s w h i c h t h e p a r t i e s s t i p u l a t e d i n t h e 1 9 7 6 f i n a n c i n g agreement. Thus -"f. That the Assignor shall comply with all the terms

andconditions specified on the said Contracts to Sell, executed by the assignor andits individual purchaser or customers, and assigned/discounted to Assignee.O n e o f t h e p r o v i s i o n s i n t h e c o n t r a c t s t o s e l l , s u b j e c t m a t t e r o f t h e assignment agreement, related to the imposition of interest in the event of default by the debtor in the payment of installments, to wit: "All payments shallbe made on or before their respective due dates withou t necessity of demandtherefor, and failure to make such payments on time shall entitle the Developerto charge interest at the rate of one percent (1%) per month without prejudice tot h e other remedies available to the Developer. As owner of the a c c o u n t receivables, private respondent was impressed with the entitlement over suchinterest payment.REQUISITES OF CONDITIONAL OBLIGATIONS (Art. 1179, CC) DEVELOPMENT BANK OF THE PHILIPPINES, petitioner,VS. COURT OF APPEALS, Sps. NORMY D. CARPIO and CARMEN ORQUISA;Sps. ROLANDO D. CARPIO and RAFAELA VILLANUEVA; Sps. ELISEO D.CARPIO and ANUNCIACION del ROSARIO; LUZ C. REYES, MARIO C.REYES, JULIET REYES-RUBIN, respondents1996 September 20G.R. No. 118180262 SCRA 245 FACTS: Private respondents were the original owner of a parcel of agriculturalland covered by a TCT, with an area of 113,695 square meters, more or less. On30 May 1977, Private respondents mortgaged said land to petitioner. Whenprivate respondents defaulted on their obligation, petitioner foreclosed themortgag e on the land and emerged as sole bidder in the ensuing auction sale. Consequently, a TCT was eventually issued in petitioner's name. On 6 April 1984petitioner and private respondents entered into a Deed of Conditional Salew h e r e i n p e t i t i o n e r a g r e e d t o r e c o n v e y t h e f o r e c l o s e d p r o p e r t y t o p r i v a t e respondents. T h e D e e d p r o v i d e d , a m o n g o t h e r s , t h a t : t h e VENDEES offered torepurchase and the VENDOR agreed to sell the a b o v e - d e s c r i b e d p r o p e r t y, subject to the terms and stipulations as hereinafter stipulated, for the sum of SEVENTY THREE THOUSAND SEVEN HUNDRED ONLY (P73,700.00), with a downpayment of P8,900.00 and the balance of P64,800 shall be payable in six (6)years on equal quarterly amortization plan at 18% interest per annum. The firstquarterly amortization of P4,470.36 shall be payable three months from the dateof the execution of the documents and all subsequent amortization shall be dueand payable every quarter thereafter. . .that, upon completion of the payment herein stipulated and agreed, the Vendor agrees to deliver to the Vendee/s(,) hisheirs, administrators and assigns(,) a good and sufficient deed of conveyancec o v e r i n g t h e p r o p e r t y , s u b j e c t m a t t e r o f t h i s d e e d o f c o n d i t i o n a l s a l e , i n accordance with the provision of law.On 6 April 1990, upon completing the payment of the full repurchaseprice, private respondents demanded from petitioner the execution of a Deed of Conveyance in their favor. Petitioner then informed private respondents that thep r e s t a t i o n t o e x e c u t e a n d d e l i v e r a d e e d o f c o n v e ya n c e i n t h e i r f a v o r h a d b e c o m e l e g a l l y i m p o s s i b l e i n v i e w o f S e c . 6 o f R e p . A c t 6 6 5 7 ( t h e Comprehensive Agrarian Reform Law or CARL) approved 10 June 1988, and Sec.1 of E.O. 407 issued 10 June 1990.Aggrieved, private respondents filed a complaint for specific performancew i t h d a m a g e s a g a i n s t p e t i t i o n e r b e f o r e t h e R T C . T h e t r i a l c o u r t r e n d e r e d judgment ordering defendant to execute and deliver unto plaintiffs a deed of final sale of there land subject of their deed of conditional sale.Dissatisfied, petitioner appealed to the CA, still insisting that its obligationto execute a Deed of Sale in favor of private respondents had become a

legalimpossibility and that the non-impairment clause of the Constitution must yieldt o t h e d e m a n d s o f p o l i c e p o w e r . T h e C A r e n d e r e d j u d g m e n t d i s m i s s i n g petitioner's appeal. ISSUE: Whether or not the petitioners prestation to execute and deliver a deed of conveyance in favor of private respondents had become legally impossible inview of Sec. 6 of Rep. Act 6657 (the Comprehensive Agrarian Reform Law orCARL) approved 10 June 1988, and Sec. 1 of E.O. 407 issued 10 June 1990. RULING: If the obligation depends upon a suspensive condition, the demandabilityas well as the acquisition or effectivity of the rights arising from the obligation issuspended pending the happening or fulfillment of the fact or event whichconstitutes the condition. Once the event which constitutes the condition isfulfilled resulting in the effectivity of the obligation, its effects retroact to themoment when the essential elements w hich gave birth to the obligation havetaken place. Applying this precept to the case, the full payment by the appelleeo n A p r i l 6 , 1 9 9 0 r e t r a c t s t o t h e t i m e t h e c o n t r a c t o f c o n d i t i o n a l s a l e w a s executed on April 6, 1984. From that time, all elements of the contract of salewere present. Consequently, the contract of sale was perfected. As such, thesaid sale does not come under the coverage of R.A. 6657.Despite the mandate of Sec. 1, R.A. 6657, appellant continued to accept the payments made by the appellant until it was fully paid on April 6, 1990. Allthat the appellant has to do then is to execute the final deed of sale in favor of the appellee. Obligations arising from contracts have the force of law betweenthe contracting parties and should be complied with in good faith.E . O . 4 0 7 c a n n e i t h e r a f f e c t a p p e l l a n t ' s o b l i g a t i o n u n d e r t h e d e e d o f conditional sale. Under the said law, appellant is required to transfer to the Republic of the Philippines "all lands foreclosed" effective June 10, 1990. Underthe facts obtaining, the subject property has ceased to belong to the mass of f o r e c l o s e d p r o p e r t y failing within the reach of said law. The property hasalready been sold to h e r e i n a p p e l l e e s e v e n b e f o r e t h e s a i d E . O . h a s b e e n enacted. On this same reason, the Court held that they need not delve on theapplicability of DBP Circular No. 11. The Court ruled in favor of private respondents. In conditional obligations,the acquisition of rights, as well as the extinguishment or loss of those alreadyacquired, shall depend upon the happening of the event which constitutes the c o n d i t i o n . T h e d e e d o f c o n d i t i o n a l s a l e b e t w e e n p e t i t i o n e r a n d p r i v a t e respondents was executed on 6 April 1984. Private respondents had religiously paid the agreed installments on the property until they completed payment on 6April 1990. Petitioner, in fact, allowed private respondents to fulfill the conditionof effecting full payment, and invoked Section 6 of Rep. Act 6657 only afterprivate respondents, having fully paid the repurchase price, demanded the execution of a Deed of Sale in their favor. T h e C o u r t r u l e d t h a t t h e t r i a l c o u r t a n d C A h a v e c o r r e c t l y r u l e d t h a t neither Sec. 6 of Rep. Act 6657 nor Sec. 1 of E.O. 407 was intended to impair theo b l i g a t i o n o f c o n t r a c t p e t i t i o n e r h a d m u c h e a r l i e r c o n c l u d e d w i t h p r i v a t e respondents. Petitioner cannot invoke the last paragraph of Sec. 6 of Rep. Act6657 to set aside its obligations already existing prior to its enactment. In thefirst place, said last paragraph clearly deals with "any sale, lease, managementcontract or transfer or possession of private lands executed by the original landowner." The

original owner in this case is not the petitioner but the privaterespondents. Petitioner acquired the land through foreclosure proceedings butagreed thereafter to reconvey it to private respondents, albeit conditionally. Sec. 6 of Rep. Act 6657 in its entirety deals with retention limits allowed by lawto small landowners. Since the property here involved is more or less ten (10)hectares, it is then within the jurisdiction of the Department of Agrarian Reform(DAR) to determine whether or not the property can be subjected to agrarianreform. But this necessitates an entirely differently proceeding.While DBP committed egregious error in interpreting Sec. 6 of RA 6657,the same is not equivalent to gross and evident bad faith when it refused to execute the deed of sale in favor of private respondents. The petition was DENIED, and the decision of the CA was AFFIRMED withthe MODIFICATION that attorney's fees and nominal damages awarded to privaterespondent were DELETED. SUSPENSIVE CONDITIONS MEANING1 . G O N Z A L E S V S . H E I R S , 3 1 4 SCRA 5852.INSULAR LIFE VS. YOUNG, 373 SCRA 6 2 6 3 . D I R E C T F O U N D E R S V S . L A V I N A , 3 7 3 S C R A 6 4 5 FELIX L. GONZALES, petitioner,VS. THE HEIRS OF THOMAS and PAULA CRUZ, herein represented byELENA C. TALENS, respondentsG.R. No. 13178419 September 1999314 SCRA 585FACTS: On December 1, 1983, Paula Cruz together with the plaintiffs heirs of Thomas and Paula Cruz, entered into a Contract of Lease/Purchase with the defendant, Felix L. Gonzales, the sole proprietor and manager of Felgon Farms,of a half-portion of a 'parcel of land containing an area of 12 hectares, more orless, and an accretion of 2 hectares, more or less, situated in Rodriguez Town, P r o v i n c e o f R i z a l . T h e c o n t r a c t o f L e a s e / P u r c h a s e c o n t a i n s t h e f o l l o w i n g provisions:'1.......The terms of this Contract is for a period of one year upon the signing thereof. After the period of this Contract, the LESSEE shall purchase theproperty on the agreeable price of One Million Pesos (P1,000,000.00) payablewithin Two (2) Years period with an interest of 12% per annum subject to thedevalued amount of the Philippine Peso, according to the following schedule of payment: Upon the execution of the Deed of Sale 50% - and thereafter 25%every six (6) months thereafter, payable within the first ten (10) days of thebeginning of each period of six (6) months.'2.......The LESSEE shall pay by way of annual rental an amount equivalentto Two Thousand Five Hundred (P2,500.00) Pesos per hectare, upon the signingof this contract on Dec. 1, 1983.'9.......The LESSORS hereby commit themselves and shall undertake too b t a i n a s e p a r a t e a n d d i s t i n c t T . C . T . o v e r t h e h e r e i n l e a s e d p o r t i o n t o t h e LESSEE within a reasonable period of time which shall not in any case exceedf o u r ( 4 ) y e a r s , a f t e r w h i c h a n e w C o n t r a c t shall be executed by the herein p a r t i e s w h i c h s h a l l b e t h e s a m e i n a l l r e s p e c t s w i t h t h i s C o n t r a c t o f Lease/Purchase insofar as the terms and conditions are concerned. The defendant Gonzales paid the P2,500.00 per hectare or P15,000.00annual rental on the half -portion of the property in accordance with the secondprovision of the Contract of Lease/Purchase and thereafter took possession of the property, installing thereon the defendant Jesus Sambrano as his caretaker. The defendant Gonzales did not, however, exercise his option to purchase the property immediately after the expiration of the one-year lease on November 30,1984. He remained in possession of the property without paying the purchaseprice provided for in the Contract of Lease/Purchase and without paying anyfurther rentals thereon.

A letter was sent by one of the plaintiffs -heirs Ricardo Cruz to thedefendant Gonzales informing him of the lessors' decision to re scind theC o n t r a c t o f L e a s e / P u r c h a s e d u e t o a b r e a c h t h e r e o f c o m m i t t e d b y t h e defendant. The letter also served as a demand on the defendant to vacate thepremises within 10 days from receipt of said letter. The defendant Gonzales refused to vacate the property and continuedpossession thereof. The property subject of the Contract of Lease/Purchase is currently the subject of an Extra-Judicial Partition. Title to the property remains in the name of the plaintiffs' predecessors-in-interest, Bernardina Calixto and Severo Cruz.Alleging breach of the provisions of the Contract of Lease/Purchase, theplaintiffs filed a complaint for recovery of possession of the property - subject of the contract with damages, both moral and compensatory and attorney's fees and litigation expenses. ISSUE: Whether or not the trial court gravely erred in holding that plaintiffs -appellants could not validly rescind and terminate the lease/purchase contractand thereafter to take possession of the land in question and eject therefrom defendants-appellees. RULING: Alleging that petitioner has not purchased the property after the lapse of one year, respondents seek to rescind the Contract and to recover the property.Petitioner, on the other hand, argues that he could not be compelled to purchasethe property, because respondents have not complied with paragraph nine,which obligates them to obtain a separate and distinct title in their names. Hecontends that paragraph nine was a condition precedent to the purchase of theproperty.B o t h t h e t r i a l c o u r t a n d t h e C o u r t o f A p p e a l s ( C A ) i n t e r p r e t e d t h i s provision to mean that the respondents had obliged themselves to obtain a TCTin the name of petitioner-lessee. The trial court held that this obligation was acondition precedent to petitioner's purchase of the property. Since respondentshad not performed their obligation, they could not compel petitioner to buy theparcel of land. The CA took the opposite view, holding that the property shouldbe purchased first before respondents may be obliged to obtai n a TCT in thename of petitionerlessee-buyer.As earlier noted, petitioner disagrees with the interpretation of the twocourts and maintains that respondents were obligated to procure a TCT in theirnames before he could be obliged to purchase the property in question.Basic is the rule in the interpretation of contracts that if some stipulationtherein should admit of several meanings, it shall be understood as bearing thatimport most adequate to render it effectual. Considering the antecedents of theownership of the disputed lot, it appears that petitioner's interpretation rendersclause nine most effectual. The record shows that at the time the contract was executed, the land inquestion was still registered in the name of Bernardina Calixto and Severo Cruz,respondents' predecessors-in-interest. There is no showing whether respondentswere the only heirs of Severo Cruz or whether the other half of the land in thename of Bernardina Calixto was adjudicated to them by any means. In fact, theya d m i t t h a t e x t r a j u d i c i a l p r o c e e d i n g s w e r e s t i l l o n g o i n g . H e n c e , w h e n t h e Contract of Lease/Purchase was executed, there was no assurance that the r e s p o n d e n t s w e r e i n d e e d t h e o w n e r s o f t h e s p e c i f i c p o r t i o n o f t h e l o t t h a t petitioner wanted to buy, and if so, in what concept and to what extent. T h u s , t h e c l e a r i n t e n t o f t h e n i n t h p a r a g r a p h w a s f o r r e s p o n d e n t s t o obtain a separate and distinct TCT in their names. This was necessary to enablethem to show their ownership of the stipulated portion of

the land and theirconcomitant right to dispose of it. Absent any title in their names, they could nothave sold the disputed parcel of land.SUSPENSIVE CONDITIONS: MEANING INSULAR LIFE ASSURANCE COMPANY, LTD., INSULAR SAVINGS BANK and JACINTO D. JIMENEZVS. ROBERT YOUNG, GABRIEL LA'O II, ARTHUR TAN, LOPE JUBAN, JR.,MARIA LOURDES ONGPIN, ANTONIO ONGPIN, ELSIE DIZON, YOLANDABAYER, CECILIA VIRAY, MANUEL VIRAY and JOSE VITO BORROMEO2002 Jan 16G.R. No. 140964FACTS: In December, 1987, respondent Robert Young, together with h i s associates and co-respondents, acquired by purchase Home Bankers Savings and Trust Co., now petitioner Insular Savings Bank ("the Bank," for brevity), from RULING: Petitioners offer to pay is clearly not the payment contemplated in thecontract. While he might have tendered payment through a check, this is notconsidered payment until the check is encashed. Besides, a mere tender of payment is not sufficient. Consignation is essential to extinguish petitioner's obligation to pay the purchase price. The Supreme Court also affirmed the decision of the Court of Appealswhere the respondents have the right to rescind the contract on the ground thatthere is failure on the part of the petitioners to pay the balance within ten daysupon the conveyance of the Court of the Title of La nd to respondents. Thus,private respondents are under no obligation, and may not be compelled, to convey title to petitioner and receive the full purchase price.OBLIGATIONS TO PAY MONEY SPOUSES TIBAJIA v. COURT OF APPEALS and EDEN TANG. R. No. 100290, June 4, 1993FACTS: A suit of collection of sum of money was filed by Eden Tan againstthe spouses. A writ of attachment was issued, the Deputy Sheriff filed a return stating that a deposit made by Tibajia in the amount of P442,750 inanother case, had been garnished by him. RTC ruled in favor of Eden Tanand ordered the spouses to pay her an amount in excess of P3,000,000.C o u r t o f A p p e a l s m o d i f i e d t h e d e c i s i o n b y r e d u c i n g t h e a m o u n t f o r damages. Tibajia Spouses delivered to Sheriff Bolima the total money judgment of P398483.70. Tan refused to accept the payment and insistedthat the garnished funds be withdrawn to satisfy the judgment obligation. ISSUE: Whether or not payment by means of check is considered paymentin legal tender RULING: The ruling applies the statutory provisions which lay down the rulethat a check is not legal tender and that a creditor may validly refuse payment by check, whether it be a managers check, cashiers or personalcheck. The decision of the court of Appeals is affirmed. OBLIGATIONS TO PAY MONEY DEVELOPMENT BANK OF THE PHILIPPINES v. COURT OFAPEEALSG.R.No. 138703,June 30, 2006FACTS: In March 1968, DBP granted to private respondents an industrialloan in the amount of P2,500,000 P500,000 n cash and P2,000,000 inDBP Progress Bank. It was evidenced by a promissory note and securedby a mortgage executed by respondents over their present and futurep r o p e r t i e s . A n o t h e r l o a n w a s g r a n t e d b y D B P i n t h e f o r o f a 5 - ye a r revolving guarantee to P1,700,000. In 1975, the outstanding accounts wthD B P w a s r e s t r u c t u r e d i n v i e w o f f a i l u r e t o p a y .

A m o u n t i n g t o P4,655,992.35 were consolidated into a single account. On the otherhand, all accrued interest and charges due amounting to P3,074,672.21were denominated as Notes Taken for Interests and evidenced by aseparate promissory note. For failure to comply with its obligation, DBP initiated foreclosure proceedings upon its computation that respondentsloans were arrears by P62,954,473.68. Respondents contended that thec o l l e c t i o n w a s u n c o n s c i o n a b l e i f n o t u n l a w f u l o r u s u r i o u s . R T C , a s affirmed by the CA, ruled in favor of the respondents. ISSUE: Whether the prestation to collect by the DBP is unconscionable or usurious RULING: It cannot be determined whether DBP in fact applied an interest ratehigher than what is prescribed under the law. Assuming it did exceed 12%in addition to the other penalties stipulated in the note, this should bestricken out for being usurious. The petition is partly granted. Decision of the court of Appeals isreversed and set aside. The case is remanded o the trial court for thedetermination of the total amount of the respondents obligation based onthe promissory notes, according to the interest rate agreed upon by theparties on the interest rate of 12% per annum, whichever is lower. INSTRUMENTS/EVIDENCES OF CREDIT METROBANK v. CABLZOG . R . N o . 1 5 4 4 6 9 D e c e m b e r 6 , 2 0 0 6 FACTS: Respondent Cabilzo was one of the Metrobanks client w h o maintained a current account. On November 12, 199, Cabilzo issued aMetrobank check payable to cash in the amount of P1,000 and was paidto a certain Mr. Marquez. The check was oresented to Westmont Bank orpayment and in turn indorsed to etrobank for appropriate clearing. It wasdiscovered that the amount withdrawn wa P91,000, thus, the check wasa l t e r e d . C a b i l z o r e - c r e d i t t h e a m o u n t o f P 9 1 , 0 0 0 t o h i s a c c o u n t b u t Metrobank refused to comply despite demands. RTC ordered Metrobankt o p a y t h e s u m o f P 9 0 , 0 0 0 t o C a b i l z o . C o u r t o f A p p e a l s a f f i r m e d t h e decision with modification. ISSUE: W h e t h e r h o l d i n g M e t r o b a n k , a s d r a w e e b a n k , l i a b l e f o r t h e alternations on the subject check bearing the authentic signature of the drawer thereof RULING: The degree of diligence in the exercise of his tasks and t h e performance of his duties have been faithfully complied with by Cabilzo. Iti s o b v i o u s t h a t M e t r o b a n k w a s r e m i s s i n t h e d u t y a n d v i o l a t e d t h a t fiduciary relationship with its clients as it appeared that there are materialalterations on the check that are visble to the naked eye but the bankfailed to detect such.P e t i t i o n i s d e n i e d . C o u r t o f Appeals decision is affirmed withmodification that exemplary damages in t h e a m o u n t o f P 5 0 , 0 0 0 b e awarded. OBLIGATIONS TO PAY MONEY: EFFECTS OF INFLATION1. ALMEDA VS. BATHALA MKTNG., 542 S 4702. PCI VS. NG SHEUNG NGOR, 541 S 223 EUFEMIA and ROMEL ALMEDA v. BATHALA MARKETINGG.R.No. 150806, January 28, 2008FACTS: In May 1997, Bathala Marketng, renewed its Contract of Leasewith Ponciano Almeda. Under the contract, Ponciano agreed to lease aporton of Almeda Compound for a

monthly rental of P1,107,348.69 forfour years. On January 26, 1998, petitioner informed respondent that itsmonthly rental be increased by 73% pursuant to the condition No. 7 of thecontract and Article 1250. Respondent refused the demand and insistedthat there was no extraordinary inflation to war rant such application.Respondent refused to pay the VAT and adjusted rentals as demanded bythe petitioners but continually paid the stipulated amount. RTC ruled infavor of the respondent and declared that plaintiff is not liable for the payment of VAT and the adjustment rental, there being no extraordinaryinflation or devaluation. CA affirmed the decision deleting the amountsrepresenting 10% VAT and rental adjustment. ISSUE: W h e t h e r t h e a m o u n t o f r e n t a l s d u e t h e p e t i t i o n e r s s h o u l d b e adjusted by reason of extraordinary inflation or devaluation RULING: Petitioners are stopped from shifting to respondent the burden of paying the VAT. 6th Condition states that respondent can only be held liable for new taxes imposed after the effectivity of the contract of lease,after 1977, VAT cannot be considered a new tax. Neither can petitionerslegitimately demand rental adjustment because of extraordinary inflationo r d e v a l u a t i o n . A b s e n t a n o f f i c i a l p r o n o u n c e m e n t o r d e c l a r a t i o n b y competent authorities of its existence, its effects are not to be applied.Petition is denied. CA decision is affirmed. OBLIGATIONS TO PAY MONEY: EFFECTS OF INFLATION EQUITABLE PCI BANK, YU and APASv. NG SHEUNG NGOR G.R.NO. 171545, December 19, 2007FACTS: On October 7, 2001, respondents Ngor and Go filed an actionfor amendment and/or reformation of documents and contracts against Equitable and its employees. They claimed that they were induced by thebank to avail of its peso and dollar credit facilities by offering low interestsso they accepted and signed Equitables proposal. They alleged that theywere unaware that the documents contained escalation clauses grantingEquitable authority to increase interest without their consent. These wererebutted by the bank. RTC ordered the use of the 1996 dollar exchangerate in computing respondents dollar-denominated loans. CA granted theBanks application for injunction but the properties were sold to publicauction. ISSUE: Whether or not there was an extraordinary deflation RULING: E x t r a o r d i n a r y i n f l a t i o n e x i s t s w h e n t h e r e i s a n u n u s u a l decrease in the purchasing power of currency and such decrease could n o t b e r e a s o n a b l y f o r e s e e n o r w a s b e y o n d t h e c o n t e m p l a t i o n o f t h e parties at the time of the obligation. Deflation is an inverse situation.Despite the devaluation of the peso, BSP never declared asituation of extraordinary inflation. Respondents should pay their dollardenominated loans at the exchange rate fixed by the BSP on the date of maturity.Decision of lower courts are reversed and set aside. INTEGRITY OF PRESTATION / SUBSTANTIAL PAYMENT SIMPLICIO PALANCAVS. ULYSSIS GUIDES joined by her husband LORENZO GUIDESFebruary 28, 2005452 SCRA 461FACTS:

On August 23, 1983, Simplicio Palanca executed a Contract to Sell a parcel of land on installment with a certain Josefa Jopson for P11, 250.00. Jopsonpaid the petitioner in the amount of P1, 650 as her down payment, leaving abalance of P9, 600.00. Sometime in December 1983, Jopson assigned andtransferred all her rights and interests over the property in question in favor of the respondent Ulyssis Guides.In the deed of transfer, respondent undertook to assume the balance of J o p s o n s a c c o u n t a n d t o pay the same in accordance with the terms andconditions of the Contract to Sell. After reimbursing Jopson P1,650.00,respondent acquired possession of the lot and paid petitioner the stipulatedamortizations which were in turn acknowledged by petitioner through receiptsissued in the name of respondent. Believing that she had fully paid the purchaseprice of the lot, respondent verified the status of the lot with the Register of Deeds, only to find out that title thereto was not in the name of the petitioner asi t w a s c o v e r e d b y T r a n s f e r C e r t i f i c a t e o f T i t l e N o . 1 0 5 7 4 2 i s s u e d o n 2 6 September 1978 in the name of a certain Carissa T. de Leon. Respondent wentto petitioners office to secure the title to the lot, but petitioner informed her thatshe could not as she still had unpaid accounts. Thereafter, respondent, through a lawyer, sent a letter to petitioner demanding compliance with his obligationand the release of the title in her name.A s p e t i t i o n e r d i d n o t h e e d h e r d e m a n d s , r e s p o n d e n t , j o i n e d b y h e r husband, filed a Complaint for specific performance with damages. Petitionersought the dismissal of the complaint on the ground of respond ents allegedfailure to comply with the mandatory requirement of Presidential Decree (P.D.) No. 1508. Respondent alleged that she paid petitioner P14,880.00, which notonly fully settled her obligation to him, but in fact overpaid it by P3,620.00. Inaddition, she claimed that petitioner charged her devaluation charges and illegalinterest. At the pre-trial in 1989, both parties admitted that Jopson assigned herrights over the property in favor of respondent and respondent paid petitionerthe subsequent monthly amortizations on installments. Petitioner likewiseacknowledged the payments made by respondent as stated in the statement of accounts initiated by its manager, Oscar Rivera. On November 1996, the trialcourt rendered its decision ordering the petitioner to execute in favor of therespondent a Deed of Sale. The petitioner appealed to the Court of Appeals; however, it affirmed the decision of the lower court. ISSUE: Whether or not the petitioner has a right to claim for unpaid charges as stipulated in the contract from the private respondent. RULING: T h e S u p r e m e C o u r t h e l d t h a t p r i m a r i l y p r e v e n t i n g p e t i t i o n e r f r o m recovering the amounts claimed from respondent is the effective waiver of thesecharges. Assuming that said charges are due, petitioner waived the same whenhe accepted respondents payments without qualification, without any specific demand for the individual charges he now seeks to recover. The same goes truefor the alleged forfeiture of the down payment made by Jopson. From its ownStatements of Accounts and Payments Made, petitioner credited to respondentsaccount the P1,650.00 down payment paid by Jopson at the commencement of the contract. There is no indication that he informed respondent of the allegedforfeiture, much

more demanded the payment again of the amount previouslyp a i d b y J o p s o n . A r t . 1 2 3 5 o f t h e C i v i l C o d e w h i c h p r o v i d e s t h a t W h e n t h e obligee accepts the performance, knowing its incompleteness or irregularity, andwithout expressing any protest or objection, the obligation is deemed fullyc o m p l i e d w i t h , i s i n p o i n t . T h u s , w h e n p e t i t i o n e r a c c e p t e d r e s p o n d e n t s installment payments despite the alleged charges incurred by the latter, andwithout any showing that he protested the irregularity of such payment, nordemanded the payment of the alleged charges, respondents liability, if any forsaid charges, is deemed fully satisfied. The petition is denied. WHO MAY DEMAND PAYMENT1 . P C I B V S . C A , 4 8 1 S 1 2 7 2 . L A G O N VS. HOOVEN COMALCO, 349 SCRA 3633 . B P I V S . C A , 2 3 2 SCRA 302 PCIBv. COURT OF APPEALSG . R . N O . 1 2 1 9 8 9 J a n u a r y 3 1 , 2 0 0 6 FACTS: P C I B a n d M B C w e r e j o i n t b i d d e r s i n a f o r e c l o s u r e s a l e h e l d o f assorted mining machinery and equipment previously mortgaged to themb y P h i l i p p i n e I r o n Mines. Atlas agreed to purchase some of these p r o p e r t i e s a n d t h e s a l e w a s e v i d e n c e d b y a D e e d o f S a l e w i t h a downpayment of P12,000,000 and the balance of P18,000,000 payable in6 monthly installments. In compliance with the contract, Atlas issuedHongKong and shanghai Bank check amounting to P12,000,000. Atlaspaid to NAMAWU the amount of P4,298,307.77 in compliance with the writof garnishment issued against Atlas to satisfy the judgment in favor of N A M A W U . A t l a s a l l e g e d t h a t t h e r e w a s o v e r p a ym e n t , h e n c e t h e s u i t against PCIB to obtain reimbursement. PCIB contended that Atlas still owed P908,398.75 because NAAWU had been partially paid in the amountof P601,260.00. RTC ruled against Atlas to pay P908,398.75 to PCIB. CA reversed the decision. ISSUE: Whether atlas had complied with its obligation to PCIB RULING: While the original amount sought to be garnished w a s P4,298,307,77, the partial payment of P601,260 naturally reduced it toP3,697,047.77 Atlas overpaid NAMAWU, thus the remedy if Atlas would beto proceed against NAAWU nut not against PCIB in relation to article 1236of the Civil Code The petition is partly granted.CA decision is reversed and set asideand in lieu thereof Atlas is ordered to pay PCIB the sum of P146,058.96,with the legal interest commencing from the time of first demand onAugust 22, 1985. WHO MAY DEMAND PAYMENT,CREDITORS RIGHT OF PAYMENT (Art. 1240, CC) JOSE V. LAGON, petitioner,vs. HOOVEN COMALCO INDUSTRIES, INC., respondent G.R. No. 135657 January 17, 2001 349 SCRA 363FACTS: Petitioner Jose V. Lagon is a businessman and owner of a commercialbuilding in Tacurong, Sultan Kudarat. Respondent HOOVEN on the other is adomestic corporation known to be the biggest manufacturer and installer of aluminum materials in the country with branch office at E. Quirino Avenue, Davao City.S o m e t i m e i n A p r i l 1 9 8 1 L a g o n a n d H O O V E N e n t e r e d i n t o t w o ( 2 ) contracts, both denominated Proposal, whereby for a total consideration of P104,870.00 HOOVEN agreed to sell and install various aluminum materials in Lagonsc o m m e r c i a l

b u i l d i n g i n T a c u r o n g , S u l t a n K u d a r a t . U p o n e x e c u t i o n o f t h e contracts, Lagon paid HOOVEN P48,000.00 in advance.Lagon, in his answer, denied liability and averred that HOOVEN was theparty guilty of breach of contract by failing to deliver and install some of thematerials specified in the proposals; that as a consequence he was compelled top r o c u r e t h e u n d e l i v e r e d m a t e r i a l s f r o m o t h e r s o u r c e s ; t h a t a s r e g a r d s t h e materials duly delivered and installed by HOOVEN, they were fully paid. Hecounterclaimed for actual, moral, exemplary, temperate and nominal damages,as well as for attorneys fees and expenses of litigation. ISSUE: Whether or not all the materials specified in the contracts had b e e n delivered and installed by respondent in petitioners commercial building in Tacurong, Sultan Kudarat. RULING: Firstly, the quantity of materials and the amounts sated in the deliveryreceipts do not tally with those in the invoices covering them, notwithstandingthat, according to HOOVEN OIC Alberto Villanueva, the invoices were based merely on the delivery receipts.Secondly, the total value of the materials as reflected in all the invoices isP117, 329.00 while under the delivery receipts it is only P112, 870.50, or a difference of P4,458.00Even more strange is the fact that HOOVEN instituted the present action for collection of sum of money against Lagon only on 24 February 1987, or morethan five (5) years after the supposed completion of the project. Indeed, it is contrary to common experience that a creditor would take its own sweet time inc o l l e c t i n g i t s c r e d i t , m o r e s o i n t h i s c a s e w h e n t h e a m o u n t i n v o l v e d i s n o t miniscule but substantial.All the delivery receipts did not appear to have been signed by petitioneror his duly authorized representative acknowledging receipt of the materialslisted therein. A closer examination of the receipts clearly showed that thedeliveries were made to a certain Jose Rubin, claimed to be petitioners driver,Armando Lagon, and a certain bookkeeper. Unfortunately for HOOVEN, theidentities of these persons were never been established, and there is no way of d e t e r m i n i n g n o w w h e t h e r t h e y w e r e i n d e e d a u t h o r i z e d r e p r e s e n t a t i v e s o f petitioner.WHEREFORE, the assailed Decision of the Court of Appeals dated 28 April1997 is MODIFIED. Petitioner Jose V. Lagon is ordered to pay respondent HoovenC o m a l c o I n d u s t r i e s , I n c . , P 6 , 3 7 7 . 6 6 r e p r e s e n t i n g t h e v a l u e o f t h e u n p a i d materials admittedly delivered to him. On the other hand, respondent is orderedto pay petitioner P50,000.00 as moral damages, P30,000.00 as attorneys feesand P46,554.50 as actual damages and litigation expenses. WHO MAY DEMAND PAYMENT,CREDITORS RIGHT OF PAYMENT (Art. 1240, CC) BANK OF THE PHILIPPINE ISLANDS VS. COURT OF APPEALS232 SCRA302G.R. NO. 104612MAY 10, 1994FACTS: Private respondents Eastern Plywood Corporation and Benigno Lim as officer of the corporation, had an AND/OR joint account with Commercial Banka n d T r u s t C o ( C B T C ) , t h e p r e d e c e s s o r - i n - i n t e r e s t o f p e t i t i o n e r B a n k o f t h e Philippine Islands. Lim withdraw funds from such account and used it to open a joint checking account (an AND account) with Mariano Velasco. When Velascodied in 1977, said joint checking account had P662,522.87. By virtue of anIndemnity Undertaking executed by Lim and as President and

General Managero f E a s t e r n w i t h d r e w o n e h a l f o f t h i s a m o u n t a n d d e p o s i t e d i t t o o n e o f t h e accounts of Eastern with CBTC.Eastern obtained a loan of P73,000.00 from CBTC which was not secured.However, Eastern and CBTC executed a Holdout Agreement providing that theloan was secured by the Holdout of the C/A No. 2310-00142 referring to the joint checking account of Velasco and Lim.Meanwhile, a judicial settlement of the estate of Velasco ordered the withdrawal of the balance of the account of Velasco and Lim.Asserting that the Holdout Agreement provides for the security of the loano b t a i n e d b y E a s t e r n a n d t h a t i t i s t h e d u t y o f C B T C t o d e b i t t h e a c c o u n t o f respondents to set off the amount of P73,000 covered by the promissory note,BPI filed the instant petition for recovery. Private respondents Eastern and Lim,however, assert that the amount deposited in the joint a ccount of Velasco andLim came from Eastern and therefore rightfully belong to Eastern and/or Lim.Since the Holdout Agreement covers the loan of P73,000, then petitioner canonly hold that amount against the joint checking account and must return the rest. ISSUE: Whether BPI can demand the payment of the loan despite the existence of the Holdout Agreement and whether BPI is still liable to the private respondentson the account subject of the withdrawal by the heirs of Velasco. RULING: Y e s , f o r b o t h i s s u e s . R e g a r d i n g t h e f i r s t , t h e H o l d o u t A g r e e m e n t conferred on CBTC the power, not the duty, to set off the loan from the accounts u b j e c t o f t h e A g r e e m e n t . W h e n B P I d e m a n d e d p a y m e n t o f t h e l o a n f r o m Eastern, it exercised its right to collect payment based on the promissory note,and disregarded its option under the Holdout Agreement. Therefore, its demandwas in the correct order.Regarding the second issue, BPI was the debtor and Eastern was the creditor with respect to the joint checking account. Therefore, BPI was obligedto return the amount of the said account only to the creditor. When it allowedthe withdrawal of the balance of the account by the heirs of Velasco, it made thep a y m e n t t o t h e w r o n g p a r t y. T h e l a w p r o v i d e s t h a t p a ym e n t m a d e b y t h e debtor to the wrong party does not extinguish its obligation to the creditor whois without fault or negligence. Therefore, BPI was still liable to the true creditor,Eastern.PAYMENT WHO MUST PAY: DEBTOR AUDION ELECTRIC CO., INC.,VS. NATIONAL LABOR RELATIONS COMMISSION and NICOLAS MADOLID1999 Jun 17G.R. No. 106648FACTS: From the position paper and affidavit corroborated by oral testimony, it a p p e a r s t h a t c o m p l a i n a n t w a s e m p l o ye d b y r e s p o n d e n t A u d i o n E l e c t r i c Company on June 30, 1976 as fabricator and continuously rendered serviceassig ned in different offices or projects as helper electrician, stockman andtimekeeper. He has rendered thirteen (13) years of continuous, loyal and dedicated service with a clean record. On August 3, complainant was surprisedto receive a letter informing him that he will be considered terminated after theturnover of materials, including respondents tools and equipments not laterthan August 15, 1989.Complainant claims that he was dismissed without justifiable cause anddue process and that his dismissal was done in bad faith which renders thedismissal illegal. For this reason, he claims that he is entitled to reinstatementwith full backwages. He also claims that he is entitled to moral and exemplaryd a m a g e s . H e i n c l u d e s p a ym e n t o f h i s o v e r t i m e p a y, p r o j e c t a l l o w a n c e ,

minimum wage increase adjustment, proportionate 13th month pay a n d attorneys fees. ISSUES: Whether or not the respondent NLRC committed grave abuse of discretionamounting to lack or excess of jurisdiction when it ruled that private respondentwas a regular employee and not a project employee;Whether or not petitioner was denied due process when all the moneyclaims of private respondent, i.e. overtime pay, project allowances, salarydifferential, proportionate 13th month pay, moral and exemplary damage s aswell as attorneys fees, were granted. RULING: Respondents assigning complainant to its various projects did not makecomplainant a project worker. As found by the Labor Arbiter, it appears thatcomplainant was employed by respondent as fabricator and or projects as helperelectrician, stockman and timekeeper. Simply put, complainant was a regular non-project worker.P r i v a t e r e s p o n d e n t s e m p l o y m e n t s t a t u s w a s e s t a b l i s h e d b y t h e Certification of Employment dated April 10, 1989 issued by petitioner whichcertified that private respondent is a bonafide employee of the petitioner from June 30, 1976 up to the time the certification was issued on April 10, 1989. Thesame certificate of employment showed that private respondents exposure to t h e i r field of operation was as fabricator, h e l p e r / e l e c t r i c i a n , stockman/timekeeper. This proves that private respondent was regularly andcontinuously employed by petitioner in various job assignments from 1976 to1989, for a total of 13 years. The alleged gap in employment service cited bypetitioner does not defeat private respondents regular status as he was rehiredfor many more projects without interruption and performed functions which arevital, necessary and indispensable to the usual business of petitioner.P e t i t i o n e r f a i l e d t o p r e s e n t s u c h e m p l o y m e n t c o n t r a c t f o r a s p e c i f i c project signed by private respondent that would show that his employment withthe petitioner was for the duration of a particular project.Moreover, notwithstanding petitioners claim in its reply that in takinginterest in the welfare of its workers, petitioner would strive to provide them withmore continuous work by successively employing its workers, in this case, p r i v a t e r e s p o n d e n t , p e t i t i o n e r f a i l e d t o p r e s e n t a n y r e p o r t o f t e r m i n a t i o n . Petitioner should have submitted or filed as many reports of termination as therewere construction projects actually finished, considering that private respondenth a d b e e n h i r e d s i n c e 1 9 7 6 . T h e f a i l u r e o f p e t i t i o n e r t o s u b m i t r e p o r t s o f termination supports the claim of private respondent that he was indeed aregular employee. The Court finds no grave abuse of discretion committed by NLRC in findingthat private respondent was not a project employee.Private respondent clearly specified in his affidavit the specific dates inwhich he was not paid overtime pay, that is, from the period March 16, 1989 toApril 3, 1989 amounting to P765.63, project allowance from April 16, 1989 to July31, 1989 in the total amount of P255.00, wage adjustment for the period from A u g u s t 1 , 1 9 8 9 t o A u g u s t 1 4 , 1 9 8 9 i n t h e a m o u n t o f P 2 5 6 . 5 0 a n d t h e proportionate 13th month pay for the period covering January to May 1988,November -December 1988, and from January to August 1989. This sameaffidavit was confirmed by private respondent in one of the scheduled hearingswhere he moved that he be allowed to present his evidence ex-parte for failureof petitioner or any of his representative to appear thereat. On the

other hand,petitioner submitted its unverified Comment to private respondents complaintstating that he had already satisfied the unpaid wages and 13th month payclaimed by private respondent, but this was not considered by the Labor Arbiterfor being unverified.Petitioner failed to rebut the claims of private respondent. It failed tos h o w p r o o f b y m e a n s o f p a yr o l l o r o t h e r e v i d e n c e t o d i s p r o v e t h e c l a i m o f private respondent. Petitioner was given the opportunity to cross -examineprivate respondent yet petitioner forfeited such chance when it did not attend the hearing, and failed to rebut the claims of private respondent.However, the award of moral and exemplary damages must be deleted forbeing devoid of legal basis. Moral and exemplary damages are recoverable onlywhere the dismissal of an employee was attended by bad faith or fraud, orconstituted an act oppressive t o labor, or was done in a manner contrary tomorals, good customs or public policy. The person claiming moral damagesmust prove the existence of bad faith by clear and convincing evidence for thelaw always presumes good faith. It is not enough that one mere ly sufferedsleepless nights, mental anguish, serious anxiety as the result of the actuationsof the other party. Invariably, such action must be shown to have been willfullydone in bad faith or with ill -motive, and bad faith or ill motive under the lawc a n n o t b e p r e s u m e d b u t m u s t b e e s t a b l i s h e d w i t h c l e a r a n d c o n v i n c i n g evidence. Private respondent predicated his claim for such damages on his own allegations of sleepless nights and mental anguish, without establishing bad faith, fraud or ill motive as legal basis therefor.Private respondent not being entitled to award of moral damages, anaward of exemplary damages is likewise baseless. Where the award of moraland exemplary damages is eliminated, so must the award for attorneys fees bedeleted. Private respondent has not shown that he is entitled thereto pursuantto Art. 2208 of the Civil Code.WHEREFORE, the challenged resolutions of the respondent NLRC areh e r e b y A F F I R M E D w i t h t h e M O D I F I C A T I O N t h a t t h e a w a r d s o f m o r a l a n d exemplary damages and attorneys fees are DELETED.WHERE PAYMENT MUST BE MADE LORENZO SHIPPING VS. BJ MARTHEL443 S 163 November 19, 2004FACTS: Petitioner Lorenzo Shipping is engaged in coastwiseshipping and owns the cargo M/V Dadiangas Express. BJ Marthel ise n g a g e d i n t r a d i n g , m a r k e t i n g a n dselling various industrialcommodities. Lorenzo Shipping ordered for the s e c o n d t i m e cylinder lines from the respondent stating the term of payment tobe 25% upon delivery, the balance payable in 5 bi -monthly equalinstallments, no again stating the date of the cylinders delivery. Itwas allegedly paid through post dated checks but the same wasdishonored due to insufficiency of funds. Despite due demands bythe respondent, petitioner falied contending that time was of the essence in the delivery of the cylinders and that there was a delaysince the respondent committed said items within two monthsa f t e r r e c e i p t o f f i r o r d e r . R T C h e l d r e s p o n d e n t s b o u n d t o t h e quotation with respect to the term of payment, which was reversedb y t h e Court of appeals ordering appellee to pay a ppellantP954,000 plus interest. T h e r e w a s n o d e l a y s i n c e t h e r e w a s n o demand. ISSUE: Whether or not respondent incurred delay in performing its obligation under the contract of sale

RULING: By accepting the cylinders when they were delivered to thewarehouse, petitioner waived the claimed delay in the delivery of said items. Supreme Court geld that time was not of the essence. T h e r e h a v i n g b e e n n o f a i l u r e o n t h e p a r t o f t h e respondent toperform its obligations, the power to rescind the contract i s unavailing to the petitioner.Petition is denied. Court of appeals decision is affirmed. SPECIAL FORMS OF PAYMENT:A. DACION EN PAGO / DATION IN PAYMENT1 . E S T A N I S L A O V S . E A S T - W E S T B A N K I N G C O R P . , 5 4 4 S 3692 . A Q U I N T E Y V S . T I B O N G , 5 1 1 S 4 1 4 3 . V D A . D E J A Y M E VS. CA, 390 SCRA 3804 . C A L T E X V S . I A C , N O V . 1 3 , 1 9 9 2 SPOUSES RAFAEL ESTANISLAO v. EASTWEST BANKINGCORPORATIONG.R. No. 178537,February 11, 2008FACTS: Kausapin shall have the usufructuary rights over the parcel of land h e r e i n described during her lifetime or widowhood.O n F e b r u a r y 2 8 , 1 9 7 9 , E n r i q u e D . H e m e d e s s o l d t h e p r o p e r t y t o Dominium Realty and Construction Corporation (Dominium). On April 10, 1981, Justa Kausapin executed an affidavit affirming the conveyance of the subject property in favor of Enrique D. Hemedes as embodied in the Kasunduan datedMay 27, 1971, and at the same time denying the conveyance made to MaximaHemedes.On August 27, 1981, Dominium and Enrique D. Hemedes filed a complaintwith the Court of First Instance of Binan, Laguna for the annulment of TCT No.41985 issued in favor of R & b Insurance and/or the reconveyance to Dominiumof the subject property. Specifically, the complaint alleged that Dominium wasthe absolute owner of the subject property by virtue of the February 28, 1979deed of sale executed by Enrique D. Hemedes, who in turn obtained ownershipof the land from Justa Kausapin, as evidenced by the Kasunduan dated May 27, 1971. The Plaintiffs asserted that Justa Kausapin never transferred the landto Maxima Hemedes and that Enrique D. Hemedes had no knowledge of theregistration proceedings initiated by Maxima Hemedes.After considering the merits of the case, the trial court rendered judgmenton February 22, 1989 in favor of plaintiffs Dominium and Enrique D. Hemedes.Both R & B Insurance and Maxima Hemedes appealed from the trial courtsdecision. On September 11, 1992 the Court of Appeals affirmed the assailed decision in toto and on December 29, 1992, it denied R & Insurances motion forr e c o n s i d e r a t i o n . T h u s , Maxima Hemedes and R & B Insurance filed th eirrespective petitions for r e v i e w w i t h t h i s C o u r t o n N o v e m b e r 3 , 1 9 9 2 a n d February 22, 1993, respectively. ISSUE: Which of the two conveyances by Justa Kausapin, the first in favor of Maxima Hemedes and the second in favor of Enrique D. Hemedes, effectivel ytransferred ownership over the subject land? RULING: Public respondents finding that the Deed of Conveyance of UnregisteredReal Property By Reversion executed by Justa Kausapin in favor of MaximaHemedes is spurious is not supported by the factual findings in this case. It isgrounded upon the mere denial of the same by Justa Kausapin.A party to a contract cannot just evade compliance with his contractualobligations by the simple expedient of denying the execution of such contract.If, after a perfect and binding contract has been executed between the parties, itoccurs to one of them to allege some defect therein as a reason for annulling it,the alleged defect must

be conclusively proven, since the validity and fulfillmentof contracts cannot be left to the will of one of the contracting parties.In upholding the deed of conveyance in favor of Maxima Hemedes, theCourt must concomitantly rule that Enrique D. Hemedes and his transferee,Dominium, did not acquire any rights over the subject property. Justa Kausapin sought to transfer to her stepson exactly what she hadearlier transferred to Maxima Hemedes he ownership of the subject propertypursuant to the first condition stipulated in the deed of donation executed by herhusband. Thus, the donation in favor of Enrique D. Hemedes is null and void forthe purported object thereof did not exist at the time of the transfer, havingalready been transferred to his sister.S i m i l a r l y, t h e s a l e o f t h e s u b j e c t p r o p e r t y b y E n r i q u e D . H e m e d e s t o Dominium is also a nullity for the latter cannot acquire more rights than itspredecessor -in-interest and is definitely not an innocent purchaser for valuesince Enrique D. Hemedes did not present any certificate of title upon which it relied. The Court upheld petitioner R & B Insurances assertion of ownership overt h e p r o p e r t y i n d i s p u t e , a s e v i d e n c e d b y T C T N o . 4 1 9 8 5 , s u b j e c t t o t h e usufructuary rights of Justa Kausapin, which encumbrance has been properlyannotated upon the said certificate of title. RIGHTS OF FIRST REFUSAL1.VILLEGAS VS. CA2.EQUATORIAL REALTY VS. CARMELO3 . P U P V S . C A 4.LITONJUA VS. L &R JOSELITO VILLEGAS and DOMINGA VILLEGAS vs. COURT OFAPPEALS G.R. No. 129977. February 1, 2001 FACTS: Before September 6, 1973, Lot B-3-A, with an area of 4 hectareswas registered under TCT No. 68641 in the names of Ciriaco D. Andresand Henson Caigas. This land was also declared for real estate taxationunder Tax Declaration No. C2 -4442. On September 6, 1973, Andres andCaigas, with the consent of their respective spouses, Anita Barrientos andConsolacion Tobias, sold the land to Fortune Tobacco Corporation forP60,000.00. Simultaneously, they executed a joint affidavit declaring thatt h e y h a d n o t e n a n t s o n s a i d l o t . O n t h e s a m e d a t e , t h e s a l e w a s registered in the Office of the Register of Deeds of Isabela. TCT No. 68641was cancelled and TCT No. T-68737 was issued in Fortunes name. On August 6, 1976, Andres and Caigas executed a Deed of Reconveyance of the same lot in favor of Filomena Domingo, the mother of Joselito Villegas,d e f e n d a n t i n t h e c a s e b e f o r e t h e t r i a l c o u r t . A l t h o u g h n o t i t l e w a s mentioned in this deed, Domingo succeeded in registering this documentin the Office of the Register of Deeds on August 6, 1976, causing thelatter to issue TCT No. T-91864 in her name. It appears in this title that t h e s a m e w a s a t r a n s f e r f r o m T C T N o . T - 6 8 6 4 1 . O n A p r i l 1 3 , 1 9 8 1 , Domingo declared the lot for real estate taxation under Tax DeclarationNo. 10-5633. On December 4, 1976, the Office of the Register of Deeds of Isabela was burned together with all titles in the office. On December 17,1976, the original of TCT No. T-91864 was administratively reconstitutedby the Register of Deeds. On June 2, 1979, a Deed of Absolute Sale of aportion of 20,000 square meters of Lot B-3-A was executed by FilomenaD o m i n g o i n f a v o r o f V i l l e g a s for a consideration of P1,000.00. Thisdocument was registered on June 3, 1 9 8 1 a n d a s a r e s u l t T C T N o . T - 131807 was issued by the Register of Deeds to Villegas. On the samedate, the technical description of Lot B-3-A-2 was registered and TCT

No. T-131808 was issued in the name of Domingo. On January 22, 1991, thisd o c u m e n t w a s r e g i s t e r e d a n d T C T N o . 1 5 4 9 6 2 w a s i s s u e d t o t h e defendant, Joselito Villegas.On April 10, 1991, the trial court upon a petition filed by Fortune ordered the reconstitution of the original of TCT No. T-68737. After trial onthe merits, the trial court rendered its assailed decision in favor of Fortune T o b a c c o , d e c l a r i n g i t t o b e e n t i t l e d t o t h e p r o p e r t y. P e t i t i o n e r s t h u s appealed this decision to the Court of Appeals, which affirmed the trialcourts decision. ISSUES: Whether or not the Court of Appeals was correct in affirming the trial courts decision. RULING: Even if Fortune had validly acquired the subject property, it would s t i l l b e b a r r e d f r o m a s s e r t i n g t i t l e b e c a u s e o f l a c h e s . T h e f a i l u r e o r neglect, for an unreasonable length of time to do that which by exercisingdue diligence could or should have been done earlier constitutes laches. Iti s n e g l i g e n c e o r o m i s s i o n t o a s s e r t a r i g h t w i t h i n a r e a s o n a b l e t i m e , warranting a presumption that the party entitled to assert it has eitherabandoned it or declined to assert it. While it is by express provision of law that no title to registered land in derogation of that of the registeredo w n e r s h a l l b e a c q u i r e d b y p r e s c r i p t i o n o r a d v e r s e p o s s e s s i o n , i t i s likewise an enshrined rule that even a registered owner may be barred from recovering possession of property by virtue of laches.H e n c e , p e t i t i o n w a s G R A N T E D a n d t h e D e c i s i o n o f t h e C o u r t o f Appeals was REVERSED. EQUATORIAL REALTY DEVELOPMENT, INC. & CARMELO &BAUERMANN, INC vs. MAYFAIR THEATER, INC G.R. No. 106063 1996 Nov 21 264 SCRA 483 FACTS: Carmelo owned a parcel of land, together with two 2 s t o r e y buildings constructed thereon. On June 1, 1967 Carmelo entered into ac o n t r a c t o f l e a s e w i t h M a yf a i r f o r t h e l a t t e r s l e a s e o f a p o r t i o n o f Carmelos property. Two years later, on March 31, 1969, Mayfair enteredinto a second contract of lease with Carmelo for the lease of another portion of Carmelos property. Both contracts of lease provide identically wo rded paragraph 8,which reads:That if the LESSOR should desire to sell the leased premises, the LESSEE shall be given 30days exclusive option to purchase the same.In the event, however, that the leased premises is sold to someoneother than the LESSEE, the LESSOR is bound and obligated, as it herebybinds and obligates itself, to stipulate in the Deed of Sale thereof that thepurchaser shall recognize this lease and be bound by all the terms andconditions thereof.M r . H e n r y P a s c a l o f C a r m e l o i n f o r m e d M r . H e n r y Y a n g , P r e s i d e n t o f Mayfair, through a telephone conversation that Carmelo was desirous of selling the entire Claro M. Recto property. Mr. Pascal told Mr. Yang that acertain Jose Araneta was offering to buy the whole property for US Dollars1,200,000, and Mr. Pascal asked Mr. Yang if the latter was willing to buythe property for Six to Seven Million Pesos.Under your companys two lease contracts with our client, it is uniformlyprovided: 8 . T h a t i f t h e L E S S O R s h o u l d d e s i r e t o s e l l t h e l e a s e d p r e m i s e s t h e LESSEE shall be given 30-days exclusive option to purchase the same. Inthe event, however, that the leased premises is sold to someone other than the LESSEE, the LESSOR is bound and obligated, as it here binds andobligates itself, to stipulate in the Deed of Sale thereof that the purchasershall recognize this lease and be bound by all the terms

and conditionshereof.Carmelo did not reply to this letter.On September 18, 1974, Mayfair sent another letter to Carmelopurporting to express interest in acquiring not only the leased premisesbut the entire building and other improvements if the price is reasonable.However, both Carmelo and Equatorial questioned the authenticity of thesecond letter.Four years later, on July 30, 1978, Carmelo sold its entire C.M. RectoAvenue land and building, which included the leased premises housingthe Maxim and Miramar theatres, to Equatorial by virtue of a Deed of Absolute Sale, for the total sum of P11,300,000.00.In September 1978, Mayfair instituted the action a quo for specificp e r f o r m a n c e a n d a n n u l m e n t o f t h e s a l e o f t h e l e a s e d p r e m i s e s t o Equatorial. It dismissed the complaint with costs against the plaintiff. TheCourt of Appeals reversed the decision of the trial court. RULING: Whether or not the decision of the Court of Appeals d ecision wascorrect. RULING: The Court agrees with the Court of Appeals that the aforecitedcontractual s t i p u l a t i o n p r o v i d e s f o r a r i g h t o f f i r s t r e f u s a l i n f a v o r o f Mayfair. It is not an option clause or an option contract. It is a contract of a right of first refusal.As early as 1916, in the case of Beaumont vs. Prieto, unequivocal w a s o u r c h a r a c t e r i z a t i o n o f a n o p t i o n c o n t r a c t a s o n e n e c e s s a r i l yi n v o l v i n g t h e c h o i c e g r a n t e d t o a n o t h e r f o r a d i s t i n c t a n d s e p a r a t e consideration as to whether or not to purchase a determinate thing at apredetermined fixed price.Further, what Carmelo and Mayfair agreed to, by executing the twolease contracts, was that Mayfair will have the right of first refusal in theevent Carmelo sells the leased premises. It is undisputed that Carmelo didrecognize this right of Mayfair, for it informed the latter of its intention tos e l l t h e s a i d p r o p e r t y i n 1 9 7 4 . T h e r e w a s a n e x c h a n g e o f l e t t e r s evidencing the offer and counteroffers made by both parties. Carmelo,however, did not pursue the exerc ise to its logical end. While it initiallyrecognized Mayfairs right of first refusal, Carmelo violated such rightwhen without affording its negotiations with Mayfair the full process to ripen to at least an interface of a definite offer and a p o s s i b l e corresponding acceptance within the 30 -day exclusive option timegranted Mayfair, Carmelo abandoned negotiations, kept a low profile forsome time, and then sold, without prior notice to Mayfair, the entire ClaroM. Recto property to Equatorial.Since Equatorial is a buyer in bad faith, this finding renders the saleto it of the property in question rescissible. We agree with respondentAppellate Court that the records bear out the fact that Equatorial wasaware of the lease contracts because its lawyers had, prior to the sale,studied the said contracts. As such, Equatorial cannot tenably claim to bea purchaser in good faith, and, therefore, rescission lies.Hence, the petition was denied. POLYTECHNIC UNIVERSITY OF THE PHILIPPINES vs . COURT OFAPPEALS and FIRESTONE CERAMICS, INC. G.R. No. 143513. November 14, 2001 NATIONAL DEVELOPMENT CORPORATION vs. FIRESTONE CERAMICS INC G.R. No. 143590. November 14, 2001 FACTS:

In the early sixties, petitioner National Development Corporation (NDC), had in its disposal a ten-hectare property located along Pureza St.,Sta. Mesa, Manila. The estate was popularly known as the NDC compoundand covered by Transfer Certificates of Title Nos. 92885, 110301 and145470. Private respondent Firestone Ceramics Inc. manifested its desireto lease a portion of the property for its ceramic manufacturing business.NDC and FIRESTONE entered into a contract of lease denominated asContract No. C -30-65 covering a portion of the property measured at 2.90118 hectares for use as a manufacturing plant for a term of ten years,renewable for another ten years under the same terms and conditions. Inconsequence of the agreement, FIRESTONE constructed on the leasedpremises several warehouses and other improvements needed for the fabrication of ceramic products. Three and a half years later, FIRESTONEentered into a second contract of lease with NDC over the latter's four -unit pre-fabricated reparation steel warehouse stored in Daliao, Davao. FIRESTONE agreed to ship the warehouse to Manila for eventual assemblywithin the NDC compound. The second contract, denominated as ContractNo. C-26-68, was for similar use as a ceramic manufacturing plant andwas agreed expressly to be "co-extensive with the lease of LESSEE withLESSOR on the 2.60 hectare-lot. The parties signed a similar contractconcerning a six -unit prefabricated steel warehouse which, as agreed u p o n b y t h e p a r t i e s , w o u l d e x p i r e on 2 December 1978. Prior to theexpiration of the aforementioned c o n t r a c t , F I R E S T O N E w r o t e N D C requesting for an extension of their lease agreement. Consequently, theBoard of Directors of NDC adopted the Resolution extending the term of the lease, subject to several conditions among which was that in the event NDC "with the approval of higher authorities, decide to dispose ands e l l t h e s e p r o p e r t i e s i n c l u d i n g t h e l o t , p r i o r i t y s h o u l d b e g i v e n t o t h e LESSEE". In pursuance of the resolution, the parties entered into a newagreement for a ten-year lease of the property, renewable for another tenyears, expressly granting FIRESTONE the first option to purchase theleased premises in the event that it decided "to dispose and sell these properties including the lot. The parties' lessor-lessee relationship went smoothly until early1988 when FIRESTONE, cognizant of the impending expiration of theirlease agreement with NDC, informed the latter through several letters and telephone calls that it was renewing its lease over the property. Whileits letter of 17 March 1988 was answered by Antonio A. Henson, GeneralManager of NDC, who promised immediate action on the matter, the resto f i t s c o m m u n i c a t i o n s r e m a i n e d u n a c k n o w l e d g e d . F I R E S T O N E ' s predicament worsened when rumors of NDC's supposed plans to disposeof the subject property in favor of petitioner Polytechnic University of thePhilippines came to its knowledge. Forthwith, FIRESTONE served noticeon NDC conveying its desire to purchase the property in the exercise of itscontractual right of first refusal. Apprehensive that its interest in thep r o p e r t y w o u l d b e d i s r e g a r d e d , F I R E S T O N E i n s t i t u t e d a n a c t i o n f o r specific performance to compel NDC to sell the leased property in itsf a v o r . F o l l o w i n g t h e d e n i a l o f i t s p e t i t i o n , F I R E S T O N E a m e n d e d i t s complaint to include PUP and Executive Secretary Catalino Macaraeg, Jr.,as partydefendants, and sought the annulment of Memorandum Order No. 214 .After trial, judgment was rendered declaring the contracts of leasee x e c u t e d b e t w e e n F I R E S T O N E a n d N D C c o v e r i n g t h e 2 . 6 0 - h e c t a r e property and the warehouses

constructed thereon valid and existing until2 June 1999. The Court of Appeals affirmed the decision of the trial courtordering the sale of the property in favor of FIRESTONE. ISSUE: Whether or not the Court of Appeals decided a question of substance in a way definitely not in accord with law or jurisprudence. RULING: The courts a quo did not hypothesize, much less conjure, the sale of the disputed property by NDC in favor of petitioner PUP. Aside from thefact that the intention of NDC and PUP to enter into a contract of sale wasclearly expressed in the Memorandum Order No. 214 , a close perusal of t h e c i r c u m s t a n c e s o f t h i s c a s e s t r e n g t h e n s t h e t h e o r y t h a t t h e conveyance of the property from NDC to PUP was one of absolute sale, fora valuable consideration, and not a mere paper transfer as argued b ypetitioners.A contract of sale, as defined in the Civil Code, is a contract whereone of the parties obligates himself to transfer the ownership of and to deliver a determinate thing to the other or others who shall pay thereforea sum certain in money or its equivalent. It is therefore a general requisitefor the existence of a valid and enforceable contract of sale that it be mutually obligatory, i.e., there should be a concurrence of the promise of the vendor to sell a determinate thing and the promise of the vendee toreceive and pay for the property so delivered and transferred. The CivilCode provision is, in effect, a "catch-all" provision which effectively bringswithin its grasp a whole gamut of transfers whereby ownership of a thingis ceded for a consideration.Contrary to what petitioners PUP and NDC propose, there is not just oneparty involved in the questioned transaction. Petitioners NDC and PUPhave their respective charters and therefore each possesses a separate and distinct individual personality.Hence, the petition was denied. SPS. LITONJUA vs . L & R CORPORATION G.R. No. 130722. December 9, 1999320 SCRA 405 FACTS: This stems from loans obtained by the spouses Litonjua from L&R Corporation in the aggregate sum of P400,000.00; P200,000.00 of whichwas obtained on August 6, 1974 and the remaining P200,000.00 obtainedon March 27, 1978. The loans were secured by a mortgage constituted bythe spouses upon their two parcels of land and the improvements thereon The mortgage was duly registered with the Register of Deeds.Spouses Litonjua sold to Philippine White House Auto Supply, Inc.(PWHAS) the parcels of land they had previously mortgaged to L & RCorporation for the sum of P430,000.00. Meanwhile, with the spousesLitonjua having defaulted in the payment of their loans, L & R Corporationinitiated extrajudicial foreclosure proceedings with the Ex-Oficio Sheriff of Quezon City. The mortgaged properties were sold at public auction to L &R Corporation as the only bidder for the amount of P221,624.58. The Deputy Sheriff informed L & R Corporation of the payment byPWHAS of the full redemption price and advised it that it can claim thepayment upon surrender of its owners duplicate certificates of title. Thespouses Litonjua presented for registration the Certificate of Redemptioni s s u e d i n t h e i r f a v o r t o

t h e R e g i s t e r o f D e e d s o f Q u e z o n C i t y. T h e Certificate also informed L & R Corporation of the fact of redemption anddirected the latter to surrender the owners duplicate certificates of titlewithin five days.On April 22, 1981, L & R Corporation wrote a letter to the Sheriff, copyf u r n i s h e d t o t h e R e g i s t e r o f D e e d s , s t a t i n g : ( 1 ) t h a t t h e s a l e o f t h e mortgaged properties to PWHAS was without its consent, in contraventionof paragraphs 8 and 9 of their Deed of Real Estate Mortgage; and (2) thatit was not the spouses Litonjua, but PWHAS, who was seeking to redeemthe foreclosed properties, when under Articles 1236 and 1237 of the NewCivil Code, the latter had no legal personality or capacity to redeem thesame. O n t h e o t h e r h a n d , t h e s p o u s e s L i t o n j u a a s k e d t h e R e g i s t e r o f Deeds to annotate their Certificate of Redemption as an adverse claim onthe titles of the subject properties on account of the refusal of L & R Corporation to surrender the owners duplicate copies of the titles to thesubject properties. With the refusal of the Register of Deeds to annotatetheir Certificate of Redemption, the Litonjua spouses filed a Petition on July 17, 1981 against L & R Corporation for the surrender of the ownersduplicate of Transfer Certificates of Title No. 197232 and 197233 before the then CFI.While the said case was pending, L & R Corporation executed an Affidavit of Consolidation of Ownership. The Register of Deeds cancelled Transfer Certificates of Title No. 197232 and 197233 and in lieu thereof,issued Transfer Certificates of Title No. 280054 and 28055 in favor of L &R Corporation, free of any lien or encumbrance. A complaint for Quietingof Title, Annulment of Title and Damages with preliminary injunction wasfiled by the spouses Litonjua and PWHAS against herein respondents before the then CFI. ISSUE: Whether or not the Court of Appeals erred in its decision. RULING: In the case at bar, PWHAS cannot claim ignorance of the right of first refusal granted to L & R Corporation over the subject properties sincethe Deed of Real Estate Mortgage containing such a provision was dulyregistered with the Register of Deeds. As such, PWHAS is presumed tohave been notified thereof by registration, which equates to notice to thewhole world. Thus, the Decision appealed from was AFFIRMED with the following MODIFICATIONS. MUTUALITY OF CONTRACT JOSEFA VS. ZHANDONG TRADING CORPORATION417 SCRA 269G.R. NO. 150903DECEMBER 8, 2003FACTS: Respondent Zhandong delivered to petitioner Josefa, who was introducedto it as a client by Mr. Tan, the total volume of 313 crates of boards valued at P 4 , 5 5 8 , 1 0 0 . 0 0 p a ya b l e w i t h i n 6 0 d a ys f r o m d e l i v e r y. I n s t e a d o f p a yi n g r e s p o n d e n t , h o w e v e r , p e t i t i o n e r r e m i t t e d h i s p a ym e n t s t o T a n w h o i n t u r n d e l i v e r e d v a r i o u s c h e c k s t o r e s p o n d e n t , w h o a c c e p t e d t h e m u p o n T a n s assurance that said checks came from petitioner. When a number of the checksbounced, Tan issued his own checks and those of his mother, but Tan later stopped payments. Respondent demanded payment from Tan and petitioner butwas ignored; hence he filed the instant complaint.I n h i s a n s w e r p e t i t i o n e r a v e r r e d t h a t h e h a d a l r e a d y p a i d a l l h i s obligations to respondent through Tan. Furthermore, he claimed he is not privyt o t h e a g r e e m e n t s b e t w e e n T a n a n d r e s p o n d e n t , a n d h e n c e , i n c a s e h i s payments were not remitted to respondent, then it was not his (petitioner) faultand that respondent should bear the consequences.

ISSUE: Whether or not petitioner is liable for payment of the boards t o respondent when he did not negotiate the transaction with it, rather through Tanas intermediary. RULING: No. The transaction was negotiated between Tan and petitioner who onlyreceived the goods delivered by respondent. Petitioner was not privy to thearrangement between Tan and respondent. Petitioner has fully paid for thegoods to Tan with whom he had arranged the transaction.C o n t r a c t s t a k e e f f e c t o n l y b e t w e e n t h e p a r t i e s , t h e i r s u c c e s s o r s i n interest, heirs, and assigns. When there is no privity of contract, there is likewiseno obligation or liability and thus, no cause of action arises. Petitioner, being notprivy to the transaction between Tan and respondent, should not be made liablefor the failure of Tan to deliver the payment to respondent. Therefore, respondent should recover the payment from Tan. PRINCIPLE OF EQUALITY / CONTRACTS OF ADHESION1 . P C I V S . N G S H E UN G N GO R 2.DIO VS. ST.FERDINAND MEMORIAL3 . P I L T E L V S . T E C S O N 4.PAL VS. CA, 255 SCRA 485.ERMITANO VS. CA, 306 SCRA 218 PCI VS NG SHUENG NGOR A.M. No. P-05-1973. March 18, 2005 FACTS: Complainant EPCIB is the defendant in Civil Case No. CEB-26983before the Regional Trial Court (RTC), Branch 16, Cebu City, entitled, NgSheung Ngor, doing business under the name and style Ken Marketing,Ken Appliance Division, Inc. and Benjamin Go, Plaintiffs, vs. Equitable PCIB a n k , A i m e e Y u a n d B e n A p a s , D e f e n d a n t s f o r A n n u l m e n t a n d / o r Reformation of Documents and Contracts.Respondents Antonio A. Bellones and Generoso B. Regalado are thesheriffs in Branches 9 and 16, respectively, of the RTC of Cebu City.For garnishing accounts maintained by Equitable PCI Bank, Inc. (EPCIB) at Citibank, N.A., and Hongkong and Shanghai Bank Corporation(HSBC), allegedly in violation of Section 9(b) of Rule 39 of the Rules of Court, a complaint for grave abuse of authority was filed by Atty. PaulinoL. Yusi against Sheriffs Antonio A. Bellones and Generoso B. Regalado. There was an offer of other real property by petitioner. ISSUE: Did respondents violate the Rules of Court? RULING: By serving notices of garnishment on Citibank, N.A., HSBC and PNB,Sheriff Regalado violated EPCIBs right to choose which property may belevied upon to be sold at auction for the satisfaction of the judgment debt. Thus, it is clear that when EPCIB offered its real properties, it exercised itsoption because it cannot immediately pay the full amount stated in thewrit of execution and all lawful fees in cash, certified bank check or any other mode of payment acceptable to the judgment obligee.I n t h e c a s e a t b a r , E P C I B c a n n o t i m m e d i a t e l y p a y b y w a y o f Managers Check so it exercised its option to choose and offered its realproperties. With the exercise of the option, Sheriff Regalado should havec e a s e d s e r v i n g n o t i c e s o f g a r n i s h m e n t a n d d i s c o n t i n u e d t h e i r implementation. This is not true in the instant case. Sheriff Regalado wasadamant in his posture even if real properties have been offered which were sufficient to satisfy the judgment debt. PRINCIPLE OF EQUALITY / CONTRACTS OF ADHESION

TERESITA DIO vs. ST. FERDINAND MEMORIALPARK, INC.G.R. No. 169578 November 30, 2006509 SCRA 453FACTS: On December 11, 1973, Teresita Dio agreed to buy, on installmentbasis, a memorial lot from the St. Ferdinand Memorial Park, Inc. (SFMPI) inL u c e n a C i t y. T h e p u r c h a s e w a s e v i d e n c e d b y a P r e - N e e d P u r c h a s e Agreement. She obliged herself to abide by all such rules and regulationsgoverning the SFMPI dated May 25, 1972. SFMPI issued a Deed of Saleand Certificate of Perpetual. The ownership of Dio over the property wasm a d e s u b j e c t t o t h e r u l e s a n d r e g u l a t i o n s o f S F M P I , a s w e l l a s t h e government, including all amendments, additions and modifications thatm a y l a t e r b e a d o p t e d . A c c o r d i n g t o t h e R u l e s ( R u l e 6 9 ) M a u s o l e u m building and memorials should be constructed by the Park Personnel. LotOwners cannot contract other contractors for the construction of the saidbuildings and memorial, however, the lot owner is free to give their owndesign for the mausoleum to be constructed, as long as it is in accordancew i t h t h e p a r k s t a n d a r d s . T h e c o n s t r u c t i o n s h a l l b e u n d e r t h e c l o s e supervision of the Park Superintendent. The mortal remains of Dios husband, father and daughter werei n t e r r e d i n t h e l o t a t h e r o w n e x p e n s e , w i t h o u t t h e k n o w l e d g e a n d intervention of SFMPI.. In October 1986, Dio informed SFMPI, through its president and controlling stockholder, Mildred F. Tantoco, that she was planning to builda mausoleum on her lot and sought the approval thereof. Dio showed to Tantoco the plans and project specifications accomplished by her privatec o n t r a c t o r a t a n e s t i m a t e d c o s t o f P 6 0 , 0 0 0 . 0 0 . T h e p l a n s a n d specifications were approved, but Tantoco insisted that the mausoleumbe built by it or its agents at a minimum cost of P100,000.00 as providedin Rule 69 of the Rules and Regulations the SFMPI issued on May 25, 1972. The total amount excluded certain specific designs in the approvedplan which if included would cost Dio much more. Dio, through counsel,demanded that she be allowed to construct the mausoleum within 10days, otherwise, she would be impelled to file the necessary action/sagainst SFMPI and Tantoco. Dio filed a Complaint fo r Injunction withDamages against SFMPI and Tantoco before the RTC. She averred thatshe was not aware of Rule 69 of the SFMPI Rules and Regulations; the a m o u n t o f P 1 0 0 , 0 0 0 . 0 0 a s c o n s t r u c t i o n c o s t o f t h e m a u s o l e u m w a s unconscionable and oppressive. She prayed that, after trial, judgment berendered in her favor, granting a final injunction perpetually restrainingd e f e n d a n t s f r o m e n f o r c i n g t h e i n v a l i d R u l e 69 of SFMPIs Rules forMemorial Work in the Mausoleum of the Park o r f r o m r e f u s i n g o r preventing the construction of any improvement upon her property in thepark. The court issued a cease and desist order against defendants. T h e t r i a l c o u r t r e n d e r e d j u d g m e n t i n f a v o r o f d e f e n d a n t s . O n appeal, the CA affirmed the decision of the trial court. ISSUE: Whether or not petitioner had knowledge of Rule 69 of SFMPI Rulesand Regulations for memorial works in the mausoleum areas of the parkw h e n t h e P r e - N e e d P u r c h a s e A g r e e m e n t a n d t h e D e e d o f S a l e w a s executed and whether the said rule is valid and binding upon petitioner. RULING: Plaintiffs allegation that she was not aware of the said Rules and Regulations lacks credence. Admittedly, in her Complaint and during thetrial, plaintiff testified that she informed

the defendants of her intention toconstruct a mausoleum. Even counse l for the plaintiff, who is the son of t h e p l a i n t i f f , i n f o r m e d t h e C o u r t d u r i n g t h e t r i a l i n t h i s case that hermother, the plaintiff herein, informed the defendants of her p l a n t o construct and erect a mausoleum. This act of the plaintiff clearly showsthat she was fully aware of the said rules and regulations otherwise sheshould not consult, inform and seek permission from the defendants of her intention to build a mausoleum if she is not barred by the rules and r e g u l a t i o n s t o d o t h e s a m e . W h e n s h e s i g n e d t h e c o n t r a c t w i t h t h e defendants, she was estopped to question and attack the legality of saidcontract later on.F u r t h e r , a c o n t r a c t o f a d h e s i o n , w h e r e i n o n e p a r t y i m p o s e s a readymade form of contract on the other, is not strictly against the law. Acontract of adhesion is as binding as ordinary contracts, the reason beingthat the party who adheres to the contract is free to reject it entirely.Contrary to petitioners contention, not every contract of adhesion is an invalid agreement. Thus, the petition was denied. PRINCIPLE OF EQUALITY / CONTRACTS OF ADHESION PILIPINO TELEPHONE CORPORATION vs. DELFINO TECSONG.R. No. 156966. May 7, 2004FACTS: On various dates in 1996, Delfino C. Tecson applied for 6 cellular p h o n e s u b s c r i p t i o n s w i t h p e t i t i o n e r P i l i p i n o T e l e p h o n e C o r p o r a t i o n (PILTEL), a company engaged in the telecommunications business, whicha p p l i c a t i o n s w e r e e a c h a p p r o v e d a n d c o v e r e d , r e s p e c t i v e l y, b y s i x mobiline service agreements. On 05 April 2001, respondent filed with theRegional Trial Court a complaint agains t petitioner for a Sum of Moneyand Damages. Petitioner moved for the dismissal of the complaint on theground of improper venue, citing a common provision in the mobiline service agreements to the effect that - Venue of all suits arising from thisA g r e e m e n t o r a n y o t h e r s u i t d i r e c t l y o r i n d i r e c t l y a r i s i n g f r o m t h e relationship between PILTEL and subscriber shall be in the proper courtsof Makati, Metro Manila. Subscriber hereby expressly waives any othervenues. The Regional Trial Court of Iligan City, Lanao del Norte, denied petitioners motion to dismiss and required it to file an answer within 15days from receipt thereof.Petitioner filed a petition for certiorari before the Court of Appeals. T h e C o u r t o f A p p e a l s s a w n o m e r i t i n t h e p e t i t i o n a n d a f f i r m e d t h e assailed orders of the trial court. ISSUE: Whether or not the Court of Appeals erred in affirming the orders of the trial court. RULING: The contract herein involved is a contract of adhesion. But such anagreement is not per se inefficacious. The rule instead is that, should there be ambiguities in a contract of adhesion, such ambiguities are to beconstrued against the party that prepared it. If, however, the stipulationsare not obscure, but are clear and leave no doubt on the intention of theparties, the literal meaning of its stipulations must be held controlling. Acontract of adhesion is just as binding as ordinary contracts. It is true thatt h i s C o u r t h a s , o n o c c a s i o n , s t r u c k d o w n

s u c h c o n t r a c t s a s b e i n g assailable when the weaker party is left with no choice by the dominantbargaining party and is thus completely deprived of an opportunity tob a r g a i n e f f e c t i v e l y . N e v e r t h e l e s s , c o n t r a c t s o f a d h e s i o n a r e n o t prohibited even as the courts remain careful in scrutinizing the factualcircumstances underlying each case to determine the respective claims of c o n t e n d i n g p a r t i e s o n t h e i r e f f i c a c y. I n t h e c a s e a t b a r , r e s p o n d e n t secured 6 subscription contracts for cellular phones on various dates. Itwould be difficult to assume that, during each of those times, respondenth a d n o s u f f i c i e n t o p p o r t u n i t y t o r e a d a n d g o o v e r t h e t e r m s a n d conditions embodied in the agreements. Respondent continued, in fact, toa c q u i r e i n t h e p u r s u i t o f h i s b u s i n e s s s u b s e q u e n t s u b s c r i p t i o n s a n d remained a subscriber of petitioner for quite sometime.Hence, the petition was granted by the Court and the decision of the Court of Appeals is reversed and set aside. The Civil Case pendingbefore the Regional Trial Court of Iligan City, Branch 4, was DISMISSEDwithout prejudice to the filing of an appropriate complaint by respondentagainst petitioner with the court of proper venue. PRINCIPLE OF EQUALITY / CONTRACTS OF ADHESIONPHILIPPINE AIRLINES VS. COURT OF APPEALSG.R. No. 119706March 14, 1996255 SCRA 48FACTS: On January 27, 1990, plaintiff Gilda C. Mejia shipped thru defendant, Philippine Airlines, one (1) unit microwave oven under PAL Air Waybill No. 0-79-1013008-3, with a gross weight of 33 kilograms from San Francisco, U.S.A. to Manila, Philippines. Upon arrival, however, of said article in Manila, Philippines,p l a i n t i f f d i s c o v e r e d t h a t i t s front glass door was broken and the damagerendered it unserviceable. D e m a n d s b o t h o r a l a n d w r i t t e n w e r e m a d e b yp l a i n t i f f a g a i n s t t h e defendant for the reimbur sement of the value of thedamaged microwave o v e n , a n d t r a n s p o r t a t i o n c h a r g e s p a i d b y p l a i n t i f f t o defendant company. But these demands fell on deaf ears. This is because, according to petitioner, was filed out of time under paragraph 12, a (1) of the AirW a yb i l l w h i c h p r o v i d e s : " ( a ) t h e p e r s o n e n t i t l e d t o d e l i v e r y m u s t m a k e a complaint to the carrier in writing in case: (1) of visible damage to the goods,immediately after discovery of the damage and at the latest within 14 days fromthe receipt of the goods.On September 25, 1990, Gilda C. Mejia filed an action for damages againstthe petitioner in the lower court. The latter rendered a decision rendering PALliable to pay, actual, moral and exemplary damages as well as attorneys fees.On appeal, the Court of Appeals similarly ruled in favor of private respondent byaffirming in full the trial court's judgment, with costs against petitioner. ISSUE: Whether or not the respondent court erred in affirming the conclusions of the trial court that since the air waybill is a contract of adhesion, its provisionsshould be strictly construed against herein petitioner. RULING: The Supreme Court affirmed the appealed decision. The trial court relied on the ruling in the case of Fieldmen's Insurance Co.,Inc. vs. Vda. De Songco, et al. in finding that the provisions of the air waybill should be strictly construed against petitioner. More particularly, the court belowstated its findings thus: I n t h i s c a s e , i t i s s e r i o u s l y d o u b t e d w h e t h e r p l a i n t i f f h a d r e a d t h e p r i n t e d conditions at the back of the Air Waybill, or even if she had, if she was given achance to negotiate on the conditions for loading her microwave oven.

Insteadshe was advised by defendant's employee at San Francisco, U.S.A., that there isno need to declare the value of her oven since it is not brand new. Further, plaintiff testified that she immediately submitted a formal claim for P30,000.00with defendant. But their claim was referred from one employee to another thentold to come back the next day, and the n ext day, until she was referred to ac e r t a i n A t t y . P a c o . W h e n t h e y g o t t i r e d a n d f r u s t r a t e d o f c o m i n g w i t h o u t a settlement of their claim in sight, they consulted a lawyer who demanded fromdefendant on August 13, 1990.Respondent appellate court approved said findings of the trial court in thismanner: We cannot agree with defendantappellant's above contention. Underour jurisprudence, the Air Waybill is a contract of adhesion considering that allthe provisions thereof are prepared and drafted only by the carrier. The onlyparticipation left of the other party is to affix his signature thereto. In the earlierc a s e o f A n g e l e s v . C a l a s a n z , t h e S u p r e m e C o u r t r u l e d t h a t t h e t e r m s o f a contract of adhesion must be interpreted against the party who drafted the same. PRINCIPLE OF EQUALITY / CONTRACTS OF ADHESION ERMITAO VS. COURT OF APPEALS306 SCRA 218FACTS: Petitioner Luis Ermitao applied for a credit card from private respondentBPI Express Card Corp. (BECC) on October 8, 1986 with his wife, Manuelita, as extension card holder. The spouses were given credit limit of P10, 000.00. Theyoften exceeded this credit limit without protest from BCC.On August 9, 1989, Manuelitas bag was snatched from her as she wasshopping at the greenbelt mall in Makati, Metro Manila. Among the items insidethe bag was her BECC credit card. That same night she informed, by telephone,BECC of the loss. The call was received by BECC offices through a certain GinaB a n z o n . T h i s w a s f o l l o w e d b y a l e t t e r d a t e d A u g u s t 3 0 , 1 9 8 9 . S h e a l s o surrendered Luis credit card and requested for replacement cards. In her letter,Manuelita stated that she shall not be responsible for any and all chargesincurred [through the use of the lost card] After August 29, 1989.However, when Luis received his monthly billing st atement from BECCdated September 20,1989, the charges included amounts for purchases were made, one amounting to P2,350.05 and the other, P607.50. Manuelita received abilling statement dated October 20,1989 which required her to immediately paythe total amount of P3,197.70 covering the same (unauthorized) purchases. Manuelita wrote again BECC disclaiming responsibility for those charges, whichwere made after she had served BECC with notice of loss of her card.H o w e v e r , B E C C , i n a l e t t e r d a t e d J u l y 1 3 , 1 9 9 0 , p o i n t e d t o L u i s t h e following stipulation in their contract:In his reply dated July 18, 1990, Luis stressed that the contract BECC wasreferring to was a contract of adhesion and warned that if BECC insisted oncharging him and his wife for the unauthorized pur chases, they will sue BECCcontinued to bill the spouses for said purchases. The trial court only opined that the only purpose for the suspension of thespouses credit privileges was to compel them to pay for the unauthorizedpurchases. The trial court ruled that the latter portion of the condition in theparties contract, which states the liability for purchases made after a card is lostor stolen shall be for the account of the cardholder until after notice of the lost ortheft has been given to BECC and after the latter has informed its membere s t a b l i s h m e n t s , i s v o i d f o r b e i n g c o n t r a r y t o p u b l i c p o l i c y a n d f o r b e i n g dependent upon the sole will of the debtor. ISSUE: Whether or not the Court of Appeals gravely erred in relying on the case of Serra v. Court of appeals, 229 SCRA 60, because unlike that case, petitionershave no chance at all to

contest the stipulations appearing in the credit card a p p l i c a t i o n t h a t w a s d r a f t e d e n t i r e l y b y p r i v a t e r e s p o n d e n t , t h u s , a c l e a r contract of adhesion. RULING: At the outset, we note that the contract between the parties in this case isindeed a contract of adhesion, so-called because its terms are prepared by onlyo n e p a r t y w h i l e t h e o t h e r p a r t y m e r e l y a f f i x e s h i s s i g n a t u r e s i g n i f yi n g h i s adhesion thereto. Such contracts are not void in themselves. They are asbinding as ordinary contracts. Parties who enter in to such contracts are free toreject the stipulations entirely. I n t h i s c a s e , t h e c a r d h o l d e r , M a n u e l i t a , h a s c o m p l i e d w i t h w h a t w a s required of her under the contract with BECC, She immediately notified BECC of loss of her card on the same day it was lost and, the following day, she sent a written notice of the loss to BECC.C l e a r l y, w h a t h a p p e n e d i n t h i s c a s e w a s t h a t B E C C f a i l e d t o n o t i f y promptly the establishment in which the unauthorized purchases were madewith the use of Manuelitas lost card. Thus, Manuelita was being liable for thosepurchases, even if there is no showing that Manuelita herself had signed for saidpurchases, and after notice by her concerning her cards loss was already givento BECC. NON-BINDING TO THIRD PARTIES1.UNIWIDE VS. TITAN-IKEDA2.HEIRS OF SALASVS. LAPERAL3 . M E D R A N O V S . C A 4 . T A N V S . G U L L A S UNIWIDE SALES REALTY AND RESOURCES CORPORATION,vs. TITAN-IKEDA CONSTRUCTIONAND DEVELOPMENTCORPORATIONG.R. No. 126619 December 20, 2006511 SCRA 335FACTS: PROJECT 1. The first agreement was a written ConstructionContract entered into by T i t a n a n d U n i w i d e s o m e t i m e i n M a y 1 9 9 1 whereby Titan undertook to construct Uniwides Warehouse Club andAdministration Building in Libis, Quezon City for a fee of P120,936,591.50,p a ya b l e i n m o n t h l y p r o g r e s s b i l l i n g s t o b e c e r t i f i e d t o b y U n i w i d e s representative. The parties stipulated that the building shall be completednot later than 30 November 1991. As found by the CIAC, the building waseventually finished on 15 February 1992 and turned over to Uniwide. PROJECT 2. Sometime in July 1992, Titan and Uniwide entered into t h e s e c o n d a g r e e m e n t w h e r e b y t h e f o r m e r a g r e e d t o c o n s t r u c t a n additional floor and to renovate the latters warehouse located at theEDSA Central Market Area in Mandaluyong City. There was no writtencontract executed between the parties for this project. Construction wasallegedly to be on the basis of drawings and spe cifications provided byUniwides structural engineers. The parties proceeded on the basis of acost estimate of P21,301,075.77 inclusive of Titans 20% mark -up. Titanc o n c e d e d i n i t s c o m p l a i n t t o h a v i n g r e c e i v e d P 1 5 , 0 0 0 , 0 0 0 . 0 0 o f t h i s amount. This project was completed in the latter part of October 1992 andturned over to Uniwide. PROJECT 3. The parties executed the third agreement in May 1992.In a written Construction Contract, Titan undertook to construct the Uniwide Sales Department Store Building in Kalookan City for the price of P 1 1 8 , 0 0 0 , 0 0 0 . 0 0 p a ya b l e i n p r o g r e s s b i l l i n g s t o b e c e r t i f i e d t o b yU n i w i d e s r e p r e s e n t a t i v e . I t w a s s t i p u l a t e d t h a t t h e p r o j e c t s h a l l b e completed not later than 28 February 1993. The project was completed and turned over to Uniwide in June 1993.U n i w i d e a s s e r t e d i n i t s p e t i t i o n t h a t : ( a ) i t

o v e r p a i d T i t a n f o r unauthorized additional works in Project 1 and Project 3; (b) it is not liableto pay the Value-Added Tax for Project 1; (c) it is entitled to liquidateddamages for the delay incurred in constructing Project 1 and Project 3;a n d ( d ) i t s h o u l d n o t h a v e b e e n f o u n d l i a b l e f o r d e f i c i e n c i e s i n t h e defectively constructed Project 2. The decision: On Project 1 Libis : Uniwide is absolved of any liability for the claims made by [Titan] on this Project. Project 2 Edsa Central : Uniwide is absolved of any liability for VAT payment on this project, the same being for the account of Titan. Onthe other hand, Titan is absolved of any liability on the counterclaim fordefective construction of this project. Uniwide is held liable for the unpaidbalance in the amount of P6,301,075.77 which is ordered to be paid to the Titan with 12% interest per annum commencing from 19 December 1992until the date of payment. On Project 3 Kalookan : Uniwide is held liable for the unpaidbalance in the amount of P5,158,364.63 which is ordered to be paid to Titan with 12% interest per annum commencing from 08 September 1993until the date of payment. Uniwide is held liable to pay in full the VAT ont h i s p r o j e c t , i n s u c h a m o u n t a s m a y b e c o m p u t e d b y t h e B u r e a u o f Internal Revenue to be paid directly thereto. The BIR is hereby notified t h a t U n i w i d e S a l e s R e a l t y a n d R e s o u r c e s C o r p o r a t i o n h a s a s s u m e d responsibility and is held liable for VAT payment on this project. This accordingly exempts Claimant Titan-Ikeda Construction and DevelopmentCorporation from this obligation. ISSUE: Whether or not the decision rendered is correct. RULING: The petition is DENIED and the Decision of the Court of Appeals wasAFFIRMED. NON-BINDING TO THIRD PARTIES HEIRS OF AUGUSTO L. SALAS, JR. vs. LAPERAL REALTY CORPORATIONG.R. NO. 135362. December 13, 1999FACTS: Salas, Jr. was the registered owner of a vast tract of land in LipaCity, Batangas spanning 1,484,354 square meters. On May 15, 1987, heentered into an OwnerContractor Agreement with respondent Laperal R e a l t y C o r p o r a t i o n t o r e n d e r a n d p r o v i d e c o m p l e t e ( h o r i z o n t a l ) construction services on his land. O n S e p t e m b e r 2 3 , 1 9 8 8 , S a l a s , J r . executed a Special Power of Attorney in favor of respondent LaperalRealty to exercise general control, supervision and management of thesale of his land, for cash or on installment basis. On June 10, 1989, Salas, Jr. left his home in the morning for a business trip to Nueva Ecija. Henever returned.On August 6, 1996, Teresita Diaz Salas filed with theRegional Trial Court a verified petition for the declaration of presumptivedeath of her husband, Salas, Jr., who had then been missing for more thanseven (7) years. It was granted on December 12, 1996.Meantime, respondent Laperal Realty subdivided the land of Salas, Jr. and sold subdivided portions thereof to respondents Rockway RealEstate Corporation and South Ridge Village, Inc. on February 22, 1990; torespondent spouses Abrajano and Lava and Oscar Dacillo on June 27,1991; and to respondents Eduardo Vacuna, Florante de la Cruz and JesusVicente Capalan on June 4, 1996.On February 3, 1998, petitioners as heirs of Salas, Jr. filed in

theR e g i o n a l T r i a l C o u r t a C o m p l a i n t f o r d e c l a r a t i o n o f n u l l i t y o f s a l e , reconveyance, cancellation of contract, accounting and damages againstherein respondents. Laperal Realty filed a Motion to Dismiss on the groundthat petitioners failed to submit their grievance to arbitration as requiredunder Article VI of the Agreement. Spouses Abrajano an d Lava andrespondent Dacillo filed a Joint Answer with Counterclaim and Crossclaimpraying for dismissal of petitioners Complaint for the same reason. The trial court issued an Order dismissing petitioners Complaint fornoncompliance with the arbitration clause. ISSUE: Whether or not the trial court erred in dismissing the complaint. RULING: A submission to arbitration is a contract. As such, the Agreement, containing the stipulation on arbitration, binds the parties thereto, as wellas their assigns and heirs. But only they. Petitioners, as heirs of Salas, Jr.,and respondent Laperal Realty are certainly bound by the Agreement. If respondent Laperal Realty, had assigned its rights under the Agreementt o a t h i r d p a r t y, m a k i n g t h e f o r m e r , t h e a s s i g n o r , a n d t h e l a t t e r , t h e assignee, such assignee would also be bound by the arbitration provisions i n c e a s s i g n m e n t i n v o l v e s s u c h t r a n s f e r o f r i g h t s a s t o v e s t i n t h e assignee the power to enforce them to the same extent as the assignor could have enforced them against the debtor or in this case, against the heirs of the original party to the Agreement. However, r e s p o n d e n t s Rockway Real Estate Corporation, South Ridge Village, Inc., MaharamiDevelopment Corporation, spouses Abrajano, spouses Lava, Oscar Dacillo,Eduardo Vacuna, Florante de la Cruz and Jesus Vicente Capellan are not assignees of the rights of respondent Laperal Realty under the Agreementto develop Salas, Jr.s land and sell the same. They are, rather, buyers of t h e l a n d t h a t r e s p o n d e n t L a p e r a l R e a l t y w a s g i v e n t h e a u t h o r i t y t o develop and sell under the Agreement. As such, they are not assignscontemplated in Art. 1311 of the New Civil Code which provides thatcontracts take effect only between the parties, their assigns and heirs.Laperal Realty, as a contracting party to the Agreement, has theright to compel petitioners to first arbitrate before seeking judicial relief.However, to split the proceedings into arbitration for respondent LaperalRealty and trial for the respondent lot buyers, or to hold trial in abeyancepending arbitration between petitioners and respondent Laperal Realty,would in effect result in multiplicity of suits, duplicitous procedure and u n n e c e s s a r y d e l a y. O n t h e o t h e r h a n d , i t w o u l d b e i n t h e i n t e r e s t o f justice if the trial court hears the complaint against all herein respondentsa n d a d j u d i c a t e s p e t i t i o n e r s r i g h t s a s a g a i n s t t h e i r s i n a s i n g l e a n d complete proceeding.Hence, the trial courts decision was nullified and set aside. Saidcourt was ordered to proceed with the hearing. NON-BINDING TO THIRD PARTIES BIENVENIDO R. MEDRANO and IBAAN RURAL BANK vs

. CA, PACITAG. BORBON, JOSEFINA E. ANTONIO and ESTELA A. FLORG.R. No. 150678. February 18, 2005FACTS: Bienvenido R. Medrano was the Vice-Chairman of Ibaan Rural Bank,a bank owned by the Medrano family. In 1986, Mr. Medrano asked Mrs. Estela Flor, a cousin-in-law, to look for a buyer of a foreclosed asset of thebank, a 17-hectare mango plantation priced at P2,200,000.00. Mr. D o m i n a d o r L e e , a b u s i n e s s m a n f r o m M a k a t i C i t y , w a s a c l i e n t o f respondent Mrs. Pacita G. Borbon, a licensed real estate broker. Borbonrelayed to her business associates and friends that she had a ready buyerfor a mango orchard. Flor then advised her that her cousin-inlaw owned am a n g o p l a n t a t i o n w h i c h w a s u p f o r s a l e . S h e t o l d F l o r t o c o n f e r w i t h Medrano and to give them a written authority to negotiate the sale of theproperty. Thus, Medrano issued the Letter of Authority in favor of PacitaG. Borbon and Josefina E. Antonio.A D e e d o f S a l e w a s e v e n t u a l l y e x e c u t e d b e t w e e n t h e b a n k , represented b y i t s P r e s i d e n t / G e n e r a l M a n a g e r T e r e s a M . G a n z o n ( a s Vendor) and KGB Farms, Inc., represented by Dominador Lee (as Vendee),for the purchase price of P1,200,000.00. Since the sale of the propertywas consummated, the respondents asked from the petitioners theircommission, or 5% of the purchase price. The petitioners refused to payand offered a measly sum of P5,000.00 each. Hence, the respondentswere constrained to file an action against herein petitioners. The trial court rendered a Decision in favor of the respondents. Itf o u n d t h a t t h e l e t t e r o f a u t h o r i t y w a s v a l i d a n d b i n d i n g a s a g a i n s t Medrano and the Ibaan Rural bank. Medrano signed the said letter for andin behalf of the bank, and as owner of the property, promising to pay therespondents a 5% commission for their efforts in looking for a purchaserof the property. He is, therefore, estopped from denying liability on the basis of the letter of authority he issued in favor of the respondents. Thetrial court further stated that the sale of the property could not have beenp o s s i b l e w i t h o u t t h e r e p r e s e n t a t i o n a n d i n t e r v e n t i o n o f t h e respondents. As such, they are entitled to the brokers commission of 5%of the selling price of P1,200,000.00 as evidenced by the deed of sale. Onappeal, the CA affirmed the trial courts decision. ISSUE: Whether or not the Court of Appeals erred in affirming the trial courts decision. RULING: There can be no other conclusion than the respondents are indeedthe procuring cause of the sale. If not for the respondents, Lee would noth a v e k n o w n a b o u t t h e m a n g o p l a n t a t i o n b e i n g s o l d b y t h e petitioners. The sale was consummated. The bank had profited from suchtransaction. It would certainly be iniquitous if the respondents would not be rewarded their commission pursuant to the letter of authority. Hence,the Court of Appeals decision is affirmed. NON-BINDING TO THIRD PARTIES MANUEL B. TAN, GREGG M. TECSON and ALEXANDER SALDAA, vs. EDUARDO R. GULLAS and NORMA S. GULLASG.R. No. 143978. December 3, 2002FACTS: Spouses Eduardo R. Gullas and Norma S. Gullas, were the registeredo w n e r s o f a p a r c e l o f l a n d m e a s u r i n g 1 0 4 , 1 1 4 s q . m . , w i t h T r a n s f e r Certificate of Title No. 31465. On June 29, 1992, they executed a specialpower of attorney authorizing petitioners Manuel

B. Tan, a licensed reale s t a t e b r o k e r , a n d h i s a s s o c i a t e s G r e g g M . T e c s o n a n d AlexanderSaldaa, to negotiate for the sale of the land at P550.00 per squaremeter, at a commission of 3% of the gross price. The power of attorneywas non-exclusive and effective for one month from June 29, 1992. On thesame date, petitioner Tan contacted Engineer Ledesma, constructionmanager of the Sisters of Mary of Banneaux, Inc. (hereafter, Sisters of Mary), a religious organization interested in acquiring a property.O n 1 , 1 9 9 2 , p e t i t i o n e r T a n v i s i t e d t h e p r o p e r t y w i t h E n g i n e e r Ledesma. Thereafter, the two men accompanied Sisters Michaela Kim andAzucena Gaviola, representing the Sisters of Mary, who had seen and i n s p e c t e d t h e l a n d , f o u n d t h e s a m e s u i t a b l e f o r t h e i r p u r p o s e a n d expressed their desire to buy it. However, they requested that the sellingprice be reduced to P530.00 per square meter instead of P550.00 persquare meter. Private respondent Eduardo Gullas referred the prospectivebuyers to his wife.I t w a s t h e f i r s t t i m e t h a t t h e b u ye r s c a m e t o k n o w t h a t p r i v a t e r e s p o n d e n t E d u a r d o G u l l a s w a s t h e o w n e r o f t h e p r o p e r t y. P r i v a t e r e s p o n d e n t s a g r e e d t o s e l l t h e p r o p e r t y t o t h e S i s t e r s o f M a r y, a n d subsequently executed a special power of attorney in favor of EufemiaCaete, giving her the special authority to sell, transfer and convey theland at a fixed price of P200.00 per square meter. Attorney-in-fact Caeteexecuted a deed of sale in favor of the Sisters of Mary for the price of P20,822,800.00, or at the rate of P200.00 per square meter. The buyerssubsequently paid the corresponding taxes. Thereafter, the Register of D e e d s o f i s s u e d T C T N o . 7 5 9 8 1 i n t h e n a m e o f t h e S i s t e r s o f M a r y o f Banneaux, Inc.Earlier, on July 3, 1992, petitioners went to see private respondentEduardo Gullas to claim their commission, but the latter told them that heand his wife have already agreed to sell the property to the Sisters of Mary. Private respondents refused to pay the brokers fee and allegedthat another group of agents was responsible for the sale of land to theSisters of Mary.petitioners filed a complaint against the defendants for recovery of their brokers fee in the sum of P1,655,412.60, a s w e l l a s m o r a l a n d exemplary damages and attorneys fees. They alleged that they were theefficient procuring cause in bringing about the sale of the property to theSisters of Mary, but that their efforts in consummating the sale werefrustrated by the private respondents who, in evident bad faith, maliceand in order to evade payment of brokers fee, dealt directly with thebuyer whom petitioners introduced to them. They further pointed out thatthe deed of sale was undervalued obviously to evade payment of thec o r r e c t a m o u n t o f c a p i t a l g a i n s t a x , d o c u m e n t a r y s t a m p s a n d o t h e r internal revenue taxes.I n t h e i r a n s w e r , p r i v a t e r e s p o n d e n t s c o u n t e r e d t h a t , c o n t r a r y t o petitioners claim, they were not the efficient procuring cause in bringingabout the consummation of the sale because another broker, Roberto P a c a n a , introduced the property to the Sisters of Mary ahead of thepetitioners. P r i v a t e r e s p o n d e n t s m a i n t a i n e d t h a t w h e n p e t i t i o n e r s introduced the buyers to private respondent Eduardo Gullas, the formerwere already decided in buying the property through Pacana, who hadbeen paid his commission. Private respondent Eduardo Gullas admittedthat petitioners were in his office on July 3, 1992, but only to ask for thereimbursement of their cellular phone expenses. After trial, the lower court rendered judgment in favor of petitioners.Eduardo and Norma Gullas were ordered to pay jointly and severallyplaintiffs Manuel Tan, Gregg

Tecson and Alexander Saldaa the sum of P 6 2 4 , 6 8 4 . 0 0 a s b r o k e r s f e e w i t h l e g a l i n t e r e s t a t t h e r a t e o f 6 % p e r annum from the date of filing of the complaint; and the sum of P50,000.00as attorneys fees and costs of litigation. T h e C o u r t o f A p p e a l s r e v e r s e d a n d s e t a s i d e t h e l o w e r c o u r t s decision and rendered another judgment dismissing the complaint. ISSUE: Whether or not the Court of Appeals erred in dismissing t h e complaint. RULING: It is readily apparent that private responde nts are trying to evadepayment of the commission which rightfully belongs to petitioners as brokers with respect to the sale. There was no dispute as to the role thatpetitioners played in the transaction. At the very least, petitioners set thesale in motion. They were not able to participate in its consummation onlybecause they were prevented from doing so by the acts of the privater e s p o n d e n t s . I n t h e c a s e o f A l f r e d H a h n v . C o u r t o f A p p e a l s a n d Bayerische Motoren Werke Aktiengesellschaft (BMW) the SC ruled that,An agent receives a commission upon the successful conclusion of asale. On the other hand, a broker earns his pay merely by bringing thebuyer and the seller together, even if no sale is eventually made. Clearly,therefore, petitioners, as brokers, should be entitled to the commissionwhether or not the sale of the property subject matter of the contract wasconcluded through their efforts. ENFORCEABILITY JESUS M. GOZUN vs. JOSE TEOFILO T. MERCADOG.R. No. 167812 December 19, 2006FACTS: In the local elections of 1995, respondent vied for the gubernatorialpost in Pampanga. Upon respondents request, petitioner, owner of JMGPublishing House, a printing shop, submitted to respondent draft samplesand price quotation of campaign materials.B y p e t i t i o n e r s c l a i m , r e s p o n d e n t s w i f e h a d t o l d h i m t h a t respondent already approved his price quotation and that he could startprinting the campaign materials, hence, he did print campaign materials.Given the urgency and limited time to do the job order, petitioner availedof the services and facilities of Metro Angeles Printing and of St. Joseph Printing Press, owned by his daughter Jennifer Gozun and mother EpifaniaMacalino Gozun, respectively.P e t i t i o n e r d e l i v e r e d t h e c a m p a i g n m a t e r i a l s t o r e s p o n d e n t s headquarters.O n M a r c h 3 1 , 1 9 9 5 , r e s p o n d e n t s s i s t e r - i n - l a w , L i l i a n S o r i a n o obtained from petitioner cash advance of P253,000 allegedly for theallowances of poll watchers who were attending a seminar and for otherrelated expenses. Lilian acknowledged on petitioners 1995 diary receiptof the amount.Petitioner later sent respondent a Statement of Account in the totalamount of P2,177,906 itemized as follows: P640,310 for JMG PublishingHouse; P837,696 for Metro Angeles Printing; P446,900 for St. JosephPrinting Press; and P253,000, t he cash advance obtained by Lilian.Respondents wife partially paid P1,000,000 to petitioner who issued areceipt therefor. Despite repeated demands and respondents promise topay, respondent failed

to settle the balance of his account to petitioner.Petitioner thus filed with the RTC a complaint against respondent toc o l l e c t t h e r e m a i n i n g a m o u n t o f P 1 , 1 7 7 , 9 0 6 p l u s i n f l a t i o n a r y adjustment and attorneys fees. The trial court rendered judgment infavor of the petitioner. The CA however, reversed the trial courts decisionand dismissed the complaint for lack of cause of action. ISSUE: Whether or not the Court of Appeals erred in reversing the trialcourts decision. RULING: Petitioner is the real party in interest in this case. The trial courtsfindings on the matter were affirmed by the appellate court. It erred,however, in not declaring petitioner as a real party in interest insofar as recovery of the cost of campaign materials made by petitioners motherand sister are concerned, upon the wrong notion that they should havebeen, but were not, impleaded as plaintiffs. RELATIVITY: PRIVITY: EXCEPTIONS (Art. 1311, CC) JOSEPH CHAN, WILSON CHAN and LILY CHAN VS. BONIFACIO S.MACEDA,JR2003 Apr 30G.R. No. 142591402 SCRA 352FACTS: On July 28, 1976, Bonifacio S. Maceda, Jr., herein respondent, obtained aP 7 . 3 m i l l i o n l o a n f r o m t h e D e v e l o p m e n t B a n k o f t h e P h i l i p p i n e s f o r t h e construction of his New Gran Hotel Project in Tacloban City. Thereafter, onSeptember 29, 1976, respondent entered into a building construction c ontractwith Moreman Builders Co., Inc. They agreed that the construction would befinished not later than December 22, 1977. Respondent purchased variousconstruction materials and equipment in Manila. Moreman, in turn, depositedthem in the warehouse of Wilson and Lily Chan, herein petitioners. The depositwas free of charge. Unfortunately, Moreman failed to finish the construction of the hotel at the stipulated time. Hence, on February 1, 1978, respondent filedwith the then CFI an action for rescission and da mages against Moreman. OnN o v e m b e r 2 8 , 1 9 7 8 , t h e C F I r e n d e r e d i t s D e c i s i o n r e s c i n d i n g t h e c o n t r a c t between Moreman and respondent and awarding to the latter P445,000.00 asactual, moral and liquidated damages; P20,000.00 representing the increase inthe construction materials; and P35,000.00 as attorneys fees. Moremaninterposed an appeal to the Court of Appeals but the same was dismissed on M a r c h 7 , 1 9 8 9 f o r b e i n g d i l a t o r y. H e e l e v a t e d t h e c a s e t o t h i s C o u r t v i a a petition for review on certiorari. In a Decision dated February 21, 1990, theCourt denied the petition. On April 23, 1990 an Entry of Judgment was issued.M e a n w h i l e , d u r i n g t h e p e n d e n c y o f t h e c a s e , r e s p o n d e n t o r d e r e d petitioners to return to him the construction materials and equipment whichMoreman deposited in their warehouse. Petitioners, however, told them thatMoreman withdrew those construction materials in 1977. Hence, on December1 1 , 1 9 8 5 , r e s p o n d e n t f i l e d w i t h t h e R T C a n a c t i o n f o r d a m a g e s w i t h a n application for a writ of preliminary attachment against petitioners. ISSUE: Whether or not respondent have the right to demand the release of the said materials and equipment or claim for damages. RULING: At the outset, the case should have been dismissed outright by the trial c o u r t because of patent procedur al infirmities. Even without such s e r i o u s procedural flaw, the case should also be dismissed for utter lack of merit. UnderArticle

1311 of the Civil Code, contracts are binding upon the parties (and theirassigns and heirs) who execute them. When there is no privity of contract, thereis likewise no obligation or liability to speak about and thus no cause of actionarises. Specifically, in an action against the depositary, the burden is on theplaintiff to prove the bailment or deposit and the performance of conditionsprecedent to the right of action. A depositary is obliged to return the thing to thedepositor, or to his heirs or successors, or to the person who may have beendesignated in the contract.In the present case, the record is bereft of any contract of deposit, oral orwritten, between petitioners and respondent. If at all, it was only betweenpetitioners and Moreman. And granting arguendo that there was indeed acontract of deposit between petitioners and Moreman, it is still incumbent uponr e s p o n d e n t t o p r o v e i t s e x i s t e n c e a n d t h a t i t w a s e x e c u t e d i n h i s f a v o r . However, respondent miserably failed to do so. The only pieces of evidence r e s p o n d e n t p r e s e n t e d t o p r o v e t h e c o n t r a c t o f d e p o s i t w e r e t h e d e l i v e r y receipts. Significantly, they are unsigned and not duly received or authenticatedb y e i t h e r M o r e m a n , p e t i t i o n e r s o r r e s p o n d e n t o r a n y o f t h e i r a u t h o r i z e d representatives. Hence, those delivery receipts have no probative value at all. While our laws grant a person the remedial right to prosecute or institute a civila c t i o n a g a i n s t a n o t h e r f o r t h e e n f o r c e m e n t o r p r o t e c t i o n o f a r i g h t , o r t h e prevention or redress of a wrong, every cause of action ex-contractu must bef o u n d e d u p o n a c o n t r a c t , o r a l o r written, express or implied. Moreover, respondent also failed to prove that there were construction materials andequipment in petitioners warehouse at the time he made a demand for theirreturn. Considering that respondent failed to prove (1) the existence of anycontract of deposit between him and petitioners, nor between the latter andM o r e m a n i n h i s f a v o r , a n d ( 2 ) t h a t t h e r e w e r e c o n s t r u c t i o n m a t e r i a l s i n petitioners warehouse at the time of respondents demand to return the same,w e h o l d t h a t p e t i t i o n e r s h a v e n o c o r r e s p o n d i n g o b l i g a t i o n o r l i a b i l i t y t o respondent with respect to those construction materials. STIPULATION pour autrui TIMOTEO BALUYOT, JAIME BENITO, BENIGNO EUGENIO, ROLANDOGONZALES, FORTUNATO FULGENCIO and CRUZ-NA-LIGAS HOMESITEASSOCIATION, INC., petitioners,VS. THE HONORABLE COURT OF APPEALS, THE QUEZON CITY GOVERNMENT and UNIVERSITY OF THE PHILIPPINES, respondents1999 Jul 22FACTS: Petitioners are residents of Barangay Cruz-na-Ligas. Diliman, Quezon City. The Cruz-na-Ligas Homesite Association, Inc. is a non-stock corporation of whichpetitioners and other residents of Barangay Cruz-na-Ligas are members.P e t i t i o n e r s f i l e d a c o m p l a i n t f o r s p e c i f i c performance and damagesagainst private respondent University of the P h i l i p p i n e s b e f o r e t h e R T C o f Quezon City. The complaint was later on amended to include private respondentQuezon City government as defendant. As amended, the complaint alleged:that plaintiffs and their ascendants are owners since memory can nolonger recall of that parcel of riceland known Sitio Libis, Barrio Cruz -na-Ligas,Quezon City (now Diliman, Quezon City), while the members of the plaintiff Association and their ascendants have possessed since time immemorial openly,adversely, continuously and also in the concept of an owner, the rest of the areaembraced by and within the Barrio Cruz-na-Ligas,

Diliman, Quezon City;that since October 1972, the claims of the plaintiffs and/or members of plaintiff Association have been the subject of quasi -judicial proceedings anda d m i n i s t r a t i v e i n v e s t i g a t i o n s i n t h e d i f f e r e n t b r a n c h e s o f t h e g o v e r n m e n t penultimately resulting in the issuance of that Indorsement dated May 7, 1975by the Bureau of Lands, and ultimately, in the issuance of the Indorsement of February 12, 1985, by the office of the President of the Rep. of the Philippinesconfirming the rights of the bonafi de residents of Barrio Cruz -na-Ligas to theparcel of land they have been possessing or occupying;that defendant UP, pursuant to the said Indorsement from the Office of the President of the Rep. of the Philippines, issued that Reply Indorsementwherein it approved the donation of about 9.2 hectares of the site, directly to theresidents of Brgy. Krus Na Ligas. After several negotiations with the residents,the area was increased to 15.8 hectares (158,379 square meters);that, however, defendant UP backed-out from the arrangement to donatedirectly to the plaintiff Association for the benefit of the qualified residents andhigh -handedly resumed to negotiate the donation thru the defendant QuezonCity Government under the terms disadvantageous or contrary to the right s of the bonafide residents of the Barrio; that plaintiff Association forthwith amendedits petition and prayed for a writ of preliminary injunction to restrain defendantUP from donating the area to the defendant Quezon City Government which wasgranted;that in the hearing of the Motion for Reconsideration filed by defendantUP, plaintiff Association finally agreed to the lifting of the said Order granting theinjunction after defendant UP made an assurance in their said Motion that thedonation to the defendant Quezon City Government will be for the benefit of theresidents of Cruz-Na-Ligas;that, however, defendant UP took exception to the aforesaid Order liftingthe Order of Injunction and insisted on the dismissal of the case;t h a t p l a i n t i f f m a n i f e s t e d i t s willingness to the dismissal of the case, p r o v i d e d , t h a t t h e a r e a t o b e d o n a t e d t h r u t h e d e f e n d a n t Q u e z o n C i t y government be subdivided i n t o l o t s t o b e g i v e n t o t h e q u a l i f i e d r e s i d e n t s together with the certificate of titles, without cost;that defendant UP failed to deliver the certificate of title covering theproperty to be donated thus the defendant Quezon City Government was notable to register the ownership so that the defendant Quezon City Government c a n legally and fully comply with their obligations under the said deed of donation;that upon expiration of the period of eighteen (18) months, for allegednoncompliance of the defendant Quezon City Government with terms andconditions quoted in par. 16 hereof, defendant UP thru its President, Mr. Jose A b u e v a , u n i l a t e r a l l y, c a p r i c i o u s l y, w h i m s i c a l l y a n d u n l a w f u l l y i s s u e d t h a t Administrative Order No. 21 declaring the deed of donation revoked and the donated property be reverted to defendant UP. The petitioners, then, prayed that a writ of preliminary injunction or atleast a temporary restraining order be issued, ordering defendant UP to observes t a t u s q u o ; t h e r e a f t e r , a f t e r d u e n o t i c e a n d h e a r i n g , a w r i t o f p r e l i m i n a r y injunction be issued; (a) to restrain defendant UP or to their representative fromejecting the plaintiffs from and demolishing their improvements on the ricelandor farmland situated at Sitio Libis; (b) to order defendant UP to refrain fromexecuting another deed of donation in favor another person or entity and infavor of non bonafide residents of Barrio Cruz -na-Ligas different from the Deedof Donation, and after trial on the merits, judgment be rendered:declaring the Deed of Donation as valid

and subsisting and ordering the defendant UP to abideby the terms and conditions thereof. The Court of Appeals reversed the decision of the trial court. ISSUE: Whether or not defendant UP could execute another deed of donation in favor of third person. RULING: The Court found all the elements of a cause of action contained in theamended complaint of petitioners. While, admit tedly, petitioners were notparties to the deed of donation, they anchor their right to seek its enforcement upon their allegation that they are intended beneficiaries of the donation to theQ u e z o n C i t y g o v e r n m e n t . A r t . 1 3 1 1 , s e c o n d p a r a g r a p h , o f t h e C i v i l C o d e provides: If a contract should contain some stipulation in favor of a third person, he may demand its fulfillment provided he communicated his acceptance to the obligor before its revocation. A mere incidental benefit or interest of a person is not sufficient. The contracting parties must have clearly and deliberately conferred a favor upon a third person. Under this provision of the Civil Code, the following requisites must be present in order to have a stipulation pour autrui:(1) there must be a stipulationin favor of a third person; (2) the stipulation must be a part, not the whole of thecontract;(3) the contracting parties must have clearly and deliberately conferreda favor upon a third person, not a mere incidental benefit or interest; (4) thethird person must have communicated his acceptance to the obligor before itsr e v o c a t i o n ; a n d ( 5 ) n e i t h e r o f t h e c o n t r a c t i n g p a r t i e s b e a r s t h e l e g a l representation or authorization of the third party. The allegations in the following paragraphs of the amended complaint aresufficient to bring petitioners action within the purview of the second paragraphof Art. 1311 on stipulations pour autrui:1. Paragraph 17, that the deed of donation contains a stipulation that the Quezon City government, as donee, is required to transfer to qualified residentsof Cruz-na-Ligas, by way of donations, the lots occupied by them;2. The same paragraph, that this stipulation is part of conditions and obligationsimposed by UP, as donor, upon the Quezon City government, as donee;3. Paragraphs 15 and 16, that the intent of the parties to the deed of donationw a s t o c o n f e r a f a v o r u p o n p e t i t i o n e r s b y t r a n s f e r r i n g t o t h e l a t t e r t h e l o t s occupied by them;4. Paragraph 19, that conferences were held between the parties to convince UPto surrender the certificates of title to the city government, implying that thedonation had been accepted by petitioners by demanding fulfillment thereof andthat private respondents were aware of such acceptance; and5. All the allegations considered together from which it can be fairly inferredthat neither of private respondents acted in representation of the other; each of the private respondents had its own obligations, in view of conferring a favorupon petitioners. T h e a m e n d e d c o m p l a i n t f u r t h e r a l l e g e s t h a t r e s p o n d e n t U P h a s a n obligation to transfer the subject parcel of land to the city government so thatthe latter can in turn comply with its obligations to make improvements on theland and thereafter transfer the same to petitioners but that, in breach of thisobligation, UP failed to deliver the title to the land to the city government andthen revoked the deed of donation after the latter failed to fulfill its obligationswithin the time allowed in the contract. For the purpose of determining thesufficiency of petitioners cause of action, these allegations of the amendedcomplaint must be deemed to be hypothetically true. So assuming the truth of the allegations, we hold that petitioners have a cause of action against UP.I t i s h a r d l y

n e c e s s a r y t o s t a t e t h a t o u r c o n c l u s i o n t h a t p e t i t i o n e r s complaint states a cause of action against respondents is in no wise a ruling on the merits. That is for the trial court to determine in light of respondent UPsd e f e n s e t h a t t h e d o n a t i o n t o t h e Q u e z o n C i t y g o v e r n m e n t , u p o n w h i c h petitioners rely, has been validly revoked. Respondents contend, however, thatthe trial court has already found that the donation (on which petitioners base their action) has already been revoked. This contention has no merit. The trial courts ruling on this point wasm a d e i n c o n n e c t i o n w i t h p e t i t i o n e r s a p p l i c a t i o n f o r a w r i t o f p r e l i m i n a r y injunction to stop respondent UP from ejecting petitioners. The trial court deniedi n j u n c t i o n o n t h e g r o u n d t h a t t h e d o n a t i o n h a d a l r e a d y b e e n r e v o k e d a n d therefore petitioners had no clear legal right to be protected. It is evident thatthe trial courts ruling on this question was only tentative, without prejudice tothe final resolution of the question after the presentation by the parties of theirevidence. The decision of the Court of Appeals is reversed and the case is remandedto the RTC of Quezon City for trial on the merits. CONTRACTS CREATING REAL RIGHTS SPOUSES ADELINA S. CUYCO and FELICIANO U. CUYCOvs.SPOUSES RENATO CUYCO and FILIPINA CUYCOG.R. No. 168736 April 19, 2006FACTS: Petitioners obtained a loan in the amount of P1,500,000.00 fromrespondents payable within one year at 18% interest per annum , ands e c u r e d b y a R e a l E s t a t e M o r t g a g e o v e r a p a r c e l o f l a n d w i t h improvements thereon situated in Cubao, Quezon City covered by a TCT.S u b s e q u e n t l y, p e t i t i o n e r s o b t a i n e d a d d i t i o n a l l o a n s f r o m t h e respondents in the aggregate amount of P1,250,000.00, broken down asfollows: (1) P150,000.00 on May 30, 1992; (2) P150,000.00 on July 1,1992; (3) P500,000.00 on September 5, 1992; (4) P200,000.00 on October29, 1992; and (5) P250,000.00 on January 13, 1993.Petitioners made payments amounting to P291,700.00, but failed tosettle their outstanding loan obligations. Respondents filed a complaint forforeclosure of mortgage with the RTC. They alleged that petitioners loanswere secured by the real estate mortgage; that as of August 31, 1997,their indebtedness amounted to P6,967,241.14, inclusive of the 18%interest compounded monthly; and that petitioners refusal to settle thesame entitles the respondents to foreclose the real estate mortgage.P e t i t i o n e r s f i l e d a m o t i o n t o d i s m i s s o n t h e g r o u n d t h a t t h e complaint states no cause of action which was denied by the RTC for lackof merit. Petitioners admitted their loan obligations but argued that onlyt h e o r i g i n a l l o a n o f P 1 , 5 0 0 , 0 0 0 . 0 0 w a s s e c u r e d b y t h e r e a l e s t a t e mortgage at 18% per annum and that there was no agreement that thesame will be compounded monthly. T h e R T C r e n d e r e d j u d g m e n t i n f a v o r o f t h e r e s p o n d e n t s a n d ordered the petitioners to pay to the Court or to the respondents theamounts of P6,332,019.84, plus interest until fully paid, P25,000.00 asattorneys fees, and costs of suit, within a period of 120 days from thee n t r y o f j u d g m e n t , a n d i n c a s e o f d e f a u l t o f s u c h p a ym e n t a n d u p o n proper motion, the property shall be ordered sold at public auction tosatisfy the judgment. The CA partially granted the petition and modified the RTC decisioninsofar as the amount of the loan obligations secured by the real

estatemortgage. It held that by express intention of the parties, the real estatemortgage secured the original P1,500,000.00 loan and the subsequent l o a n s o f P 1 5 0 , 0 0 0 . 0 0 a n d P 5 0 0 , 0 0 0 . 0 0 o b t a i n e d o n J u l y 1 , 1 9 9 2 a n d September 5, 1992, respectively. As regards the loans obtained on May3 1 , 1 9 9 2 , O c t o b e r 2 9 , 1 9 9 2 a n d J a n u a r y 1 3 , 1 9 9 3 i n t h e a m o u n t s o f P150,000.00, P200,000.00 and P250,000.00, respectively, the appellatetribunal held that the parties never intended the same to be secured bythe real estate mortgage.Hence, this petition. ISSUE: Whether or not petitioners must pay respondents legal interest of 12% per annum on the stipulated interest of 18% per annum, computed from the filing of the complaint until fully paid. RULING: A p p l yi n g t h e r u l e s i n t h e c o m p u t a t i o n o f i n t e r e s t , t h e p r i n c i p a l a m o u n t o f l o a n s s u b j e c t o f t h e r e a l e s t a t e m o r t g a g e m u s t e a r n t h e stipulated interest of 18% per annum, which interest, as long as unpaid,also earns legal interest of 12% per annum , computed from the date of the filing of the complaint on September 10, 1997 until finality of theCourts Decision. Such interest is not due to stipulation but due to themandate of the law as embodied in Article 2212 of the Civil Code. From such date of finality, the total amount due shall earn interest of 12% per annum until satisfiedCertainly, the computed interest from the filing of the complaint onSeptember 10, 1997 would no longer be true upon the finality of this C o u r t s d e c i s i o n . I n accordance with the rules laid down in EasternShipping Lines, Inc. v. Court of Appeals , t h e S C d e r i v e d t h e f o l l o w i n g formula for the RTCs guidance: TOTAL AMOUNT DUE = [principal + interest + interest on interest] -partial payments madeInterest = principal x 18 % per annum x no. of years from due dateuntil finality of judgmentI n t e r e s t o n i n t e r e s t = I n t e r e s t c o m p u t e d a s o f t h e f i l i n g o f t h e complaint (September 10, 1997) x 12% x no. of years until finality of judgment Total amount due as of the date of finality of judgment will earn aninterest of 12% per annum until fully paid.H e n c e , t h e S C a f f i r m e d t h e C A d e c i s i o n w i t h m o d i f i c a t i o n s . I t ordered petitioners to pay the respondents (1) the total amount due, ascomputed by the RTC in accordance with the formula specified above, (2)the legal interest of 12% per annum on the total amount due from suchf i n a l i t y u n t i l f u l l y p a i d , ( 3 ) t h e r e a s o n a b l e a m o u n t o f P 2 5 , 0 0 0 . 0 0 a s attorneys fees, and (4) the costs of suit, within a period of not less than90 days nor more than 120 days from the entry of judgment, and in caseof default of such payment the property shall be sold at public auction tosatisfy the judgment. TORTIOUS INTERFERENCE1 . S O V S . C A , S E P T . 2 1 , 1 9 9 9 2 . T A Y A G V S . C A , 2 5 M A R C H 2 0 0 4 SO PING BUN VS. COURT OF APPEALS314 SCRA 751FACTS:

In 1963, Tek Hua Trading Co., through its managing partner, So Pek Giok,entered into lease agreements with lessor Dee C. Chuan and Sons Inc (DCCSI). Subjects of four (4) lease contracts were premises located at Nos. 930, 930- Int.,924-B and 924-C, Soler Street, Binondo, Manila. Tek Hua used the areas to storeits textiles. The contracts each had a one year term. They provided that shouldthe lessee continue to occupy the premises after the term, the lease shall be ona month to month basis.When the contracts expired, the parties did not renew the contracts, but Tek Hua continued to occupy the premises in 1976 Tek Hua Trading Corp. wasdissolved. Later, the original members of Tek Hua Trading Co., including ManuelC.Tiong, formed Tek Hua Enterprising Corp., herein respondent corporation.So Pek Giok, managing partner of Tek Hua Trading, died in 1986. So PekGioks grandson, petitioner So Ping Bun, occupied the warehouse for his owntextile business, Trendsetter Marketing.O n A u g u s t 1 , 1 9 8 9 , l e s s o r D C C S I s e n t l e t t e r s a d d r e s s e d t o T e k H u a enterprises, informing the latter of the 25% increase in rent effective September1, 1989. The rent increase was later on reduced to 20% effective January 1,1990, upon other lessees demand. Again on December 1, 1990, the lessorimplemented a 30% rent increase. Enclosed in these letters were new leasecontracts for signing. DCCSI warned that failure of the lessee to accomplish thec o n t r a c t s s h a l l b e d e e m e d a s l a c k o f i n t e r e s t o n t h e l e s s e e s p a r t , a n d agreement to the termination of the lese. Private respondents did not answerany of these letters. Still, the lease contracts were not rescinded.On March 1, 1991, private respondent Tiong sent a letter to petitioner asking Mr. So Ping Bun to vacate the premise because he used a warehouse.Petitioner refused to vacate. On March 4, 1992, petitioner requestedformal contracts of lease with DCCSI in favor Trendsetter Marketing. So Ping Bunc l a i m e d t h a t a f t e r t h e d e a t h o f h i s g r a n d f a t h e r , S o P e k G i o k , h e h a d b e e n occupying the premises for his textile business and religiously paid rent. DCCSI acceded to petitioners request. The lease contracts in favor of Trendsetter wereexecuted. ISSUE: Whether the appellate court erred in affirming the trial courts decision finding So Ping Bun guilty of tortuous interference of contact. RULING: In the instant case, it is clear that petitioner So Ping Bun prevailed uponDCCSI to lease the warehouse to his enterprise at the expense of respondentcorporation. Though petitioner took interest in the property of respondent corporation and benefited from it, nothing on record imputes deliberate wrongfulmotives or malice on him.A duty which the law of torts is concerned with is respect for the propertyof others, and cause of action ex delicto may be predicated upon an unlawfulinterference by one person of the enjoyment by the other of his private property. This may pertain to a situation where a third person induces a party to renegeon or violate his undertaking under a contract. In the case before us, petitioners Trendsetter Marketing asked DCCSI to execute lease contracts in its favor, andas a result petitioner deprived respondent corporation of the latters propertyr i g h t . C l e a r l y, a n d a s c o r r e c t l y v i e w e d b y t h e a p p e l l a t e c o u r t , t h e t h r e e elements of tort interference above mentioned are present in the instant case.Authorities debate on whether interference may be justified where thedefendant acts for the sole purpose of furthering his own financial or economic interest. One view is that, as a general rule, justification for interfering with thebusiness relations of another exist where the actors motive is to benefit himself.Such justification does not exist where his sole motive is to cause

harm to theother. Added to this, some authorities believe that it is not necessary that theinterferers interest outweigh that o f the party whose rights are invaded, andthat an individual acts under an economic interest that is substantial, not merelyI de minimis for he acts in self protection. Moreover, justification for protectingones financial position should not be made to depend on a comparison of hiseconomic interest in the subject matter with that of others. It is sufficient if theimpetus of his conduct lies in a proper business interest rather than in wrongfulmotives.As early as Gilchrist vs. Cuddy we held that where there was no malice inthe interference of a contract, and the impulse behind ones conduct lies in aproper business interest rather than in wrongful motives, a party cannot be amalicious interferer. Where the alleged interferer is financially interested andsuch interest motivates his conduct it cannot be said that he is an officious ormalicious intermeddler. TORTIOUS INTERFERENCETAYAG VS. COURT OF APPEALS219 SCRA 481FACTS: Petitioners are the heirs of Juan Galicia, Sr. who are seeking to rescind thedeed of conveyance executed by Galicia, Sr. together with Celerina Labuguin, infavor of Albrigido Leyva, respondent involving the undivided one-half portion of apiece of land situated at Poblacion, Guimba, Nueva Ecija. They contend thatrespondent is in breach of the con ditions of the deed. Contained in the deed were stipulations regarding the payment and settlement of the purchase price of the land. The respondent however did not strictly comply this with. Despite theposterior payments however, petitioners accepted them. Respondent, on thec o n t e n t i o n t h a t h e f u l f i l l e d h i s o b l i g a t i o n t o p a y f i l e d t h i s c a s e f o r s p e c i f i c performance by the petitioners. The court of origin which tried the suit for specific performance on accountof the herein petitioners reluctance to abide by t he covenant, ruled in favor of the vendee while respondent court practically agreed with the trial court exceptas to the amount to be paid to petitioners and the refund to private respondentare concerned. ISSUE: The issue is whether or not petitioners prayer for the rescission of thedeed can prosper. RULING: The Supreme Court affirmed the decision of the lower courts. The suggestion of petitioners that the covenant must be cancelled in thelight of private respondents so-called breach seems to overlook petitionersdemeanor who, instead of immediately filing the case precisely to rescind theinstrument because of non -compliance, allowed private respondent to effectnumerous payments posterior to the grace periods provided in the contract. This apathy of petitioners, who even permitted private respondent to take the initiative in filing the suit for specific performance against them, is akin to waiverof abandonment of the right to rescind.STAGES IN THE EXECUTION OF A CONTRACT CONSUMMATION/TERMINATION METROPOLITAN MANILA DEVELOPMENT AUTHORITY, petitioner, VS. JANCOM ENVIRONMENTAL CORPORATION and JANCOMINTERNATIONAL DEVELOPMENT PROJECTS PTY. LIMITED OF AUSTRALIA,

respondents January 30, 2002G.R. No. 147465FACTS: The Philippine Government under the Ramos Administration, and throughthe Metro Manila Development Authority (MMDA) Chairman, and the Cabinet Officer for Regional Development-National Capital Region (CORD-NCR), enteredinto a contract with herein respondent JANCOM, on waste-to-energy projects forthe waste disposal sites in San Mateo, Rizal and Carmona, Cavite under thebuild-operate-transfer (BOT) scheme.However, before President Ramos could have signed the said contract, there was a change in the Administration and EXECOM. Said change caused thepassage of the law, the Clean Air Act, prohibiting the incineration of garbage andthus, against the contents of said contract. The Philippine Government, throughthe MMDA Chairman, declared said contract inexistent for several reasons. Herein respondent filed a suit against petitioner. The Regional Trial Court ruledin favor of the respondent. Instead of filing an appeal to the decision, petitionerfiled a writ of certiorari on the Court of Appeals, which the latter granted. TheRegional Trial Court declared its decisi on final and executory, for which thepetitioner appealed to the CA, which the CA denied such appeal and affirmingRTCs decision. ISSUE: Whether or not a valid contract is existing between herein petitioner andrespondent. RULING: Under Article 1305 of the Civil Code, a contract is a meeting of mindsbetween two persons whereby one binds himself, with respect to the other, to give something or to render some service. A contract undergoes three distincts t a g e s - p r e p a r a t i o n o r n e g o t i a t i o n , i t s p e r f e c t i o n , a n d f i n a l l y , i t s consummation. Negotiation begins from the time the prospective contracting p a r t i e s m a n i f e s t t h e i r i n t e r e s t i n t h e c o n t r a c t a n d e n d s a t t h e m o m e n t o f agreement of the parties. The perfection or birth of the contract takes placewhen the parties agree upon the essential elements of the contract. The laststage is the consummation of the contract wherein the parties fulfill or perform t h e t e r m s a g r e e d u p o n i n t h e c o n t r a c t , c u l m i n a t i n g i n t h e e x t i n g u i s h m e n t thereof. Article 1315 of the Civil Code, provides that a contract is perfected bymere consent. Consent, on the other hand, is manifested by the meeting of theoffer and the acceptance upon the thing and the cause which are to constitutethe contract. In the case at bar, the signing and execution of the contract by theparties clearly show that, as between the parties, there was a concurrence of offer and acceptance with respect to the material details of the contract, therebygiving rise to the perfection of the contract. The execution and signing of thec ontract is not disputed by the parties. As the Court of Appeals aptly held:Contrary to petitioners insistence that there was no perfected contract, the meeting of the offer and acceptance upon the thing and the cause, which are toconstitute the contract (Arts. 1315 and 1319, New Civil Code), is borne out bythe records.Admittedly, when petitioners accepted private respondents bid proposal(offer), there was, in effect, a meeting of the minds upon the object (wastemanagement project) and the cause (BOT scheme). Hence, the perfection of thecontract. In City of Cebu vs. Heirs of Candido Rubi , the Supreme Court held thatthe effect of an unqualified acceptance of the offer or proposal of the bidder isto perfect a contract, upon notice of the award to the bidder.In fact,

in asserting that there is no valid and binding contract between the parties, MMDA can only allege that there was no valid notice of award; thatthe contract does not bear the signature of the President of the Philippines; andthat the conditions precedent specified in the contract were not complied with.In asserting that the notice of award to JANCOM is not a proper notice of award, MMDA points to the Implementing Rules and Regulations of Republic ActNo. 6957, otherwise known as the BOT Law, which re quire that i) prior to thenotice of award, an Investment Coordinating Committee clearance must first beobtained; and ii) the notice of award indicate the time within which the awardeeshall submit the prescribed performance security, proof of commitment of equitycontributions and indications of financing resources. Admittedly, the notice of award has not complied with t h e s e requirements. However, the defect was cured by the subsequent execution of the contract entered into and signed by authorized representatives of t h e parties; hence, it may not be gainsaid that there is a perfected contract existingbetween the parties giving to them certain rights and obligations (conditionsprecedents) in accordance with the terms and conditions thereof. We borrow the words of the Court of Appeals:Petitioners belabor the point that there was no valid notice of award as toconstitute acceptance of private respondents offer. They maintain that formerMMDA Chairman Oretas letter to JANCOM EC dated February 27, 1997 cannot bec o n s i d e r e d a s a v a l i d n o t i c e o f a w a r d a s i t d o e s n o t c o m p l y w i t h t h e r u l e s implementing Rep. Act No. 6957, as amended. The argument is untenable. ELEMENTS OF CONSENT: OFFER AND ACCEPTANCE1 . R O C K L A N D V S . M I D PASIG LAND DEVELOPMENT 2 . M A N I L A M E T A L V S . P N B 3.MONTECILLO VS. REYNES, 385 SCRA 2444 . S O L E R VS. CA, 358 S CRA 57 5.PALATTAO VS. CA, MAY 7, 20026.ABS-CBN VS. CA, JAN. 21, 1999 ROCKLAND CONSTRUCTION COMPANY, INC vs. MID-PASIG LANDDEVELOPMENT CORPORATIONG.R. No. 164587, February 04, 2008 Rockland Construction Company, Inc. in a letter dated March 1, 2000, offered to lease from Mid-Pasig Land Development Corporation thelatters 3.1-hectare property in Pasig City. This property is covered by Transfer Certificate of Title Nos. 469702 and 337158 under the control of the Presidential Commission on Good Government. Upon instruction of Mid-Pasig to address the offer to the PCGG, Rockland wrote the PCGG onApril 15, 2000. The letter, addressed to PCGG Chairman Magdangal Elma,included Rockland proposed terms and conditions for the lease. Thisletter was also received by Mid Pasig on April 18, 2000, but Mid -Pasigmade no response.A g a i n , i n a n o t h e r l e t t e r d a t e d J u n e 8 , 2 0 0 0 a d d r e s s e d t o t h e Chairman of Mid-Pasig, Mr. Ronaldo Salonga, Rockland sent a MetropolitanBank and Trust Company Check No. 2930050168 for P1 million as a signof its good faith and readiness to enter into the lease agreement under t h e c e r t a i n t e r m s a n d c o n d i t i o n s s t i p u l a t e d i n t h e l e t t e r . M i d - P a s i g received this letter on July 28, 2000.In a subsequent follow-up letter dated February 2, 2001, Rocklandthen said that it presumed that Mid-Pasig had accepted its offer becausethe P1 million check it issued had been credited to Mid-Pasigs account onDecember 5, 2000.M i d - P a s i g , h o w e v e r , d e n i e d i t a c c e p t e d R o c k l a n d s o f f e r a n d claimed that no check was attached to the said letter. It also vehementlyd e n i e d r e c e i v i n g t h e P 1 m i l l i o n c h e c k , m u c h l e s s d e p o s i t i n g i t i n i t s account.In its

letter dated February 6, 2001, Mid-Pasig replied to Rocklandthat it was only upon receipt of the latters February 2 letter that theformer came to know where the check came from and what it was for.N e v e r t h e l e s s , i t c a t e g o r i c a l l y i n f o r m e d R o c k l a n d t h a t i t c o u l d n o t entertain the latters lease application. Mid-Pasig reiterated its refusal of Rocklands offer in a letter dated February 13, 2001.Rockland then filed an action for specific performance. Rocklandsought to compel Mid-Pasig to execute in Rocklands favor, a contract of lease over a 3.1-hectare portion of Mid-Pasigs property in Pasig City. The RTCs decision:1.the plaintiff and the defendant have duly agreed upon a valid andenforceable lease agreement of subject portions of defendants p r o p e r t i e s comprising an area of 5,000 square meters, 11,000square meters and 1 5 , 0 0 0 s q u a r e m e t e r s , o r a t o t a l o f 3 1 , 0 0 0 square meters;2.the principal terms and conditions of the aforesaid lease agreement are as stated in plaintiffs June 8, 2000 letter;3.defendant to execute a written lease contract in favor of the plaintiff containing the principal terms and conditions mentioned in thenext-preceding paragraph, within sixty (60) days from finality of this j u d g m e n t , a n d l i k e w i s e o r d e r i n g t h e p l a i n t i f f t o p a y r e n t t o t h e defendant as specified in said terms and conditions;4 . d e f e n d a n t t o k e e p a n d m a i n t a i n t h e p l a i n t i f f i n t h e p e a c e f u l possession and enjoyment of the leased premises during the term of said contract; 5.defendant to pay plaintiff attorneys fees in the sum of One Million Pesos (P1,000,000.00), plus P2,000.00 for every appearance madeby counsel in court;6 . T h e temporary restraining order dated April 2, 2001 is m a d e PERMANENT;7.Dismissed defendants counterclaim. The Court of Appeals reversed the trial courts decision. ISSUES: 1.Was there a perfected contract of lease?2.Had estoppel in pais set in? RULING: 1.A close review of the events in this case, in the light of t h e parties evidence, shows that there was no perfected contract of leasebetween the parties. Mid-Pasig was not aware that Rockland depositedthe P1 million check in its account. It only learned of Rocklands checkwhen it received Rocklands February 2, 2001 letter. Mid-Pasig, uponinvestigation, also learned that the check was deposited at the PhilippineNational Bank San Juan Branch, instead of PNB Ortigas Branch where Mid-Pasig maintains its account. Immediately, Mid-Pasig wrote Rockland onFebruary 6, 2001 rejecting the offer, and proposed that Rockland applythe P1 million to its other existing lease instead. These circumstances clearly show that there was no concurrence of Rocklands offer and Mid-Pasigs acceptance. 2. Mid-Pasig is also not in estoppel in pais . T h e d o c t r i n e o f estoppel is based on the grounds of public policy, fair dealing, good faithand justice, and its purpose is to forbid one to speak against his own act,representations, or commitments to the injury of one to whom they weredirected and who reasonably relied thereon. Since estoppel is based onequity and justice, it is essential that before a person can be barred fromasserting a fact contrary to his act or conduct, it must be shown that suchact or conduct has been intended and would unjustly cause harm to thosewho are misled if the principle were not applied against him.Hence, the petition was denied.

ELEMENTS OF CONSENT: OFFER AND ACCEPTANCE METROPOLITAN MANILA DEVELOPMENT AUTHORITY, VS. JANCOMENVIRONMENTAL CORPORATIONG.R. No. 147465 January 30, 2002FACTS: The Philippine Government under the Ramos Administration, and through the Metro Manila Development Authority (MMDA) Chairman, andthe Cabinet Officer for Regional Development-National Capital Region(CORD-NCR), entered into a contract with respondent JANCOM, on waste-to-energy projects for the waste disposal sites in San Mateo, Rizal andCarmona, Cavite under the build-operate-transfer (BOT) scheme. However, before President Ramos could have signed the said contract, there was a change in the Administration and EXECOM. Said change caused thepassage of the law, the Clean Air Act, prohibiting the incineration of garbage andthus, against the contents of said contract. The Philippine Government, throughthe MMDA Chairman, declared said contract inexistent for several reasons.Herein respondent filed a suit against petitioner. The Regional Trial Court ruled in favor of the respondent. Instead of filing an appeal to the decision, petitionerfiled a writ of certiorari on the Court of Appeals, which the latter granted. TheRegional Trial Court declared its decision final and executory, for which thepetitioner appealed to the CA, which the CA denied such appeal and affirmingRTCs decision. ISSUE: Whether or not a valid contract is existing between herein petitionerand respondent. RULING: Under Article 1305 of the Civil Code, a contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service. A c o n t r a c t undergoes three distinct stages- preparation or negotiation, its perfection,and finally, its consummation. Negotiation begins from the time the prospective contracting parties manifest their interest in the contract andends at the moment of agreement of the parties. The perfection or birthof the contract takes place when the parties agree upon the essentialelements of the contract. The last stage is the consummation of thecontract wherein the parties fulfill or perform the terms agreed upon inthe contract, culminating in the extinguishment thereof. Article 1315 of the Civil Code, provides that a contract is perfected by mere consent.Consent, on the other hand, is manifested by the meeting of the offer andthe acceptance upon the thing and the cause which are to constitute thecontract. In the case at bar, the signing and execution of the contract byt h e p a r t i e s c l e a r l y s h o w t h a t , a s b e t w e e n t h e p a r t i e s , t h e r e w a s a concurrence of offer and acceptance with respect to the material detailsof the contract, thereby giving rise to the perfection of the contract. Theexecution and signing of the contract is not disputed by the parties. Asthe Court of Appeals aptly held: Contrary to petitioners insistence that there was no perfected contract, the meeting of the offer and acceptanceupon the thing and the cause, which are to constitute the contract (Arts.1315 and 1319, New Civil Code), is borne out by the records.Admittedly, when petitioners accepted private respondent s bidproposal (offer), there was, in effect, a meeting of the minds upon the object (waste management project) and the cause (BOT scheme). Hence,the perfection of the contract. In City of Cebu vs. Heirs of Candido Rubi ,the Supreme Court held that the eff ect of an unqualified acceptance of the offer or proposal of the bidder is to perfect a contract, upon notice of the award to the bidder.I n f a c t ,

i n a s s e r t i n g t h a t t h e r e i s n o v a l i d a n d b i n d i n g c o n t r a c t between the parties, MMDA can only allege that there was no valid noticeof award; that the contract does not bear the signature of the President of t h e P h i l i p p i n e s ; a n d t h a t t h e c o n d i t i o n s p r e c e d e n t s p e c i f i e d i n t h e contract were not complied with.In asserting that the notice of award to JANCOM is not a propernotice of award, MMDA points to the Implementing Rules and Regulationsof Republic Act No. 6957, otherwise known as the BOT Law, which requiret h a t i) prior to the notice of award, an Investment C o o r d i n a t i n g Committee clearance must first be obtained; and ii) the notice of awardindicate the time within which the awardee shall submit the prescribedperformance security, proof of commitment of equity contributions andindications of financing resources.A d m i t t e d l y, t h e n o t i c e o f a w a r d h a s n o t complied with thesereq uirements. However, the defect was cured by the subsequente x e c u t i o n o f t h e c o n t r a c t e n t e r e d i n t o a n d s i g n e d b y a u t h o r i z e d representatives of the parties; hence, it may not be gainsaid that there isa perfected contract existing between the parties giving to them certainrights and obligations (conditions precedents) in accordance with the t e r m s a n d c o n d i t i o n s t h e r e o f . W e b o r r o w t h e w o r d s o f t h e C o u r t o f Appeals:Petitioners belabor the point that there was no valid notice of awardas to constitute acceptance of private respondents offer. They maintainthat former MMDA Chairman Oretas letter to JANCOM EC dated February27, 1997 cannot be considered as a valid notice of award as it does not comply with the rules implementing Rep. Act No. 6957, as amended. Theargument is untenable. ELEMENTS OF CONSENT: OFFER AND ACCEPTANCEMONTECILLO VS. REYNES385 SCRA 244FACTS: Respondents Ignacia Reynes and spouses Abucay filed on June 20, 1984 acomplaint for Declaration of Nullity and Quieting of Title against petitioner RicoMontecillo. Reynes asserted that she is the owner of a lot situated in Mabolo,Cebu City. In 1981 Reynes sold 185 square meters of the Mabolo Lot to the Abucay Spouses who built a residential house on the lot they bought. Reynes alleged further that on March 1, 1984, she signed a Deed of Saleof the Mabolo Lot in favor of Montecillo. Reynes, being illiterate signed byaffixing her thumb - mark on the document. Montecillo promised to pay theagreed P47,000.00 purchase price within one month from the signing of t heDeed of Sale.Reynes further alleged that Montecillo failed to pay the purchase priceafter the lapse of the one -month period, prompting Reynes to demand fromMontecillo the return of the Deed of Sale. Since Montecillo refused to return theDeed of Sale, Reynes executed a document unilaterally revoking the sale andgave a copy of the document to Montecillo.Subsequently, on May 23, 1984 Reynes signed a Deed of Sale transferringto the Abucay Spouses the entire Mabolo Lot, at the same time confirming theprevious sale in 1981 of a 185 square meter portion of the lot.R e yn e s a n d t h e A b u c a y S p o u s e s a l l e g e d t h a t o n J u n e 1 8 , 1 9 8 4 t h e y received information that the Register of Deeds of Cebu City issued Certificate of Title No. 90805 in the name of Montecillo for the Mabolo Lot.Reynes and the Abucay Spouses argued that for lack for consideration there (was) no meeting of the minds) between Reynes and Montecillo. Thus, thetrial court should declare null and void ab initio Monticellos Deed of sale, andorder the cancellation of certificates of title No. 90805 in the name of Montecillo.In his Answer, Montecillo a bank executive with a BS Commerce degree,claimed he was a buyer in good faith and had actually paid the

P47,000.00consideration stated on his Deed of Sale. Montecillo however admitted he stillowned Reynes a balance of P10,000.00. He also alleged that he paid P50,000.00for the release of the chattel mortgage which he argued constituted a lien on theMabolo Lot. He further alleged that he paid for the real property tax as well asthe capital gains tax on the sale of the Mabolo Lot.In their reply, Reynes and the Abucay Spouses contended that Montecillodid not have authority to discharge the chattel mortgage especially after Reynesr e v o k e d M o n t e c i l l o s D e e d o f S a l e a n d g a v e t h e m o r t g a g e e a c o p y o f t h e d o c u m e n t o f r e v o c a t i o n . R e yn e s a n d t h e A b u c a y S p o u s e s c l a i m e d t h a t Montecillo secured the release of the chattel mortgage through machination. They further asserted that Montecillo took advantage of the real property taxespaid by the Abucay Spouses and surreptitiously caused the transfer of the title tothe Mabolo Lot in his name.During pre-trial Montecillo claimed that the consideration for the sale of t h e Mabolo Lot was the amount he paid to Cebu Iced and Cold S t o r a g e Corporation for the mortgage debt. Of Bienvenido Jayag. Montecillo argued thatthe release of the mortgage was necessary since the mortgage constituted a lienon the Mabolo Lot.Reynes, however stated that she had nothing to do with Jayags mortgagedebt except that the house mortgaged by Jayag stood on a portion of the MaboloL o t . R e yn e s f u r t h e r s t a t e d t h a t t h e p a ym e n t b y M o n t e c i l l o t o r e l e a s e t h e mortgage on Jayags house is a matter between Montecillo and J a ya g . T h e m o r t g a g e o n t h e h o u s e b e i n g a c h a t t e l m o r t g a g e c o u l d n o t b e interpreted in any way as an encumbrance on the Mabolo Lot. Reynes furtherc l a i m e d t h a t t h e m o r t g a g e d e b t h a d l o n g p r e s c r i b e d s i n c e t h e P 4 7 , 0 0 0 . 0 0 mortgage debt was due for payment on January 30,1967. ISSUE: Whether or not there was a valid consent in the case at bar to have a validcontract. RULING: One of the three essential requisites of a valid contract is consent of the parties on the object and cause of the contract. In a contract of sale, the paritiesmust agree not only on the p[rice, but also on the manner of payment of theprice. An agreement on the price but a disagreement on the manner of itspayment will not result in consent, thus preventing the existence of a validcontract for a lack of consent. This lack of consent is separate and distinct forlack of consideration where the contract states that the price has been paidwhen in fact it has never been paid.Reynes expected Montecillo to pay him directly the P47, 000.00 purchaseprice within one month after the signing of the Deed of Sale. On the other hand,Montecillo thought that his agreement with Reynes required him to pay the P47,000.00-purchase price to Cebu Ice Storage to settle Jayags mortgage debt.Montecillo also acknowledged a balance of P10, 000.00 in favor of Reynesalthough this amount is not stated in Montecillos Deed of Sale. Thus, there wasno consent or meeting of the minds, between Reynes and Montecillo on the manner of payment. This prevented the existence of a valid contract because of lack of consent.In summary, Montecillos Deed of Sale is null and void ab initio not only forlack of consideration, but also for lack of consent. The cancellation of TCT No. 90805 in the name of Montecillo is in order as there was no valid contract transferring ownership of the Mabolo Lot from Reynes to Montecillo.

ELEMENTS OF CONSENT: OFFER AND ACCEPTANCE JASMIN SOLER, petitioner,VS. COURT OF APPEALS, COMMERCIAL BANK OF MANILA, andNIDA LOPEZ, respondentsMay 2, 2001G.R. No. 123892FACTS: Petitioner is a professional interior designer. In November 1986, her friendR o s a r i o P a r d o a s k e d h e r t o t a l k t o N i d a L o p e z , w h o w a s m a n a g e r o f t h e COMBANK Ermita Branch for they were planning to renovate the branch offices.E v e n p r i o r t o N o v e m b e r 1 9 8 6 , p e t i t i o n e r a n d N i d a L o p e z k n e w e a c h o t h e r because of Rosario Pardo, the latters sister. During their meeting, petitionerwas hesitant to accept the job because of her many out of town commitments, and also considering that Ms. Lopez was asking that the designs be submitted byDecember 1986, which was such a short notice. Ms. Lopez insisted, however,because she really wanted petitioner to do the design for renovation. Petitioneracceded to the request. Ms. Lopez assured her that she would be compensatedfor her services. Petitioner even told Ms. Lopez that her professional fee wasP10,000.00, to which Ms. Lopez acceded.During the November 1986 meeting between petitioner and Ms. Lopez,there were discussions as to what was to be renovated. Ms. Lopez again assuredp e t i t i o n e r t h a t t h e b a n k w o u l d p a y h e r f e e s . A f t e r a f e w d a ys , p e t i t i o n e r requested for the blueprint of the building so that the proper design, plans andspecifications could be given to Ms. Lopez in time for the board meeting inDecember 1986. Petitioner then asked her draftsman Jackie Barcelon to go tothe jobsite to make the proper m easurements using the blue print. Petitioneralso did her research on the designs and individual drawings of what the bankw a n t e d . P e t i t i o n e r h i r e d E n g i n e e r O r t a n e z t o m a k e t h e e l e c t r i c a l l a yo u t , architects Frison Cruz and De Mesa to do the drafting. For the services renderedby these individuals, petitioner paid their professional fees. Petitioner also contacted the suppliers of the wallpaper and the sash makers for their quotation.So come December 1986, the lay out and the design were submitted to Ms. Lopez. She even told petitioner that she liked the designs.Subsequently, petitioner repeatedly demanded payment for her servicesbut Ms. Lopez just ignored the demands. In February 1987, by chance petitionera n d Ms. Lopez saw each other in a concert at the Cultural C enter of t h e Philippines. Petitioner inquired about the payment for her services, Ms. Lopezcurtly replied that she was not entitled to it because her designs did not conformt o t h e b a n k s p o l i c y o f h a v i n g a s t a n d a r d d e s i g n , a n d t h a t t h e r e w a s n o agreement between her and the bank.P e t i t i o n e r , t h r o u g h h e r l a w ye r s , w h o w r o t e M s . L o p e z , d e m a n d i n g payment for her professional fees in the amount of P10,000.00 which Ms. Lopezignored. The lawyers wrote Ms. Lopez once again demanding the return of theblueprint copies petitioner submitted which Ms. Lopez refused to return. Thepetitioner then filed at the trial court a complaint against COMBANK and Ms.Lopez for collection of professional fees and damages.I n i t s a n s w e r , C O M B A N K s t a t e d t h a t t h e r e w a s n o c o n t r a c t b e t w e e n COMBANK and petitioner; that Ms. Lopez merely invited petitioner to participatein a bid for the renovation of the COMBANK Ermita Branch; that any proposal was still subject to the approval of the COMBANKs head office. The trial court rendered judgment in fav or of plaintiff. On appeal, theCourt of Appeals reversed the decision. Hence, this petition. ISSUE: Whether or not the Court of Appeals erred in ruling that there was nocontract between petitioner and respondents, in the absence of the element of consent.

RULING: A contract is a meeting of the minds between two persons whereby one binds himself to give something or to render some service to bind himself to givesomething to render some service to another for consideration. There is nocontract unless the follo wing requisites concur: 1. Consent of the contractingparties; 2. Object certain which is the subject matter of the contract; and 3. Cause of the obligation which is established.In the case at bar, there was a perfected oral contract. When Ms. Lopez and petitioner met in November 1986, and discussed the details of the work, thefirst stage of the contract commenced. When they agreed to the payment of theP10,000.00 as professional fees of petitioner and that she should give thedesigns before the December 1986 board meeting of the bank, the second stageof the contract proceeded, and when finally petitioner gave the designs to Ms. Lopez, the contract was consummated. Petitioner believed that once shesubmitted the designs she would be paid her professional fees. M s. L o p e z assured petitioner that she would be paid.It is familiar doctrine that if a corporation knowingly permits one of itsofficers, or any other agent, to act within the scope of an apparent authority, it holds him out to the public as possessing the power to do those acts; and thus,t h e c o r p o r a t i o n w i l l , a s a g a i n s t a n yo n e w h o h a s i n g o o d f a i t h d e a l t w i t h i t through such agent, be estopped from denying the agents authority. A l s o , p e t i t i o n e r m a y b e p a i d o n t h e b a s i s o f q u a n t u m m e r u i t . " I t i s essential for the proper operation of the principle that there is an acceptance of t h e b e n e f i t s b y o n e s o u g h t t o b e c h a r g e d f o r t h e s e r v i c e s r e n d e r e d u n d e r circumstances as reasonably to notify him that the lawyer performing the task w a s e x p e c t i n g t o b e p a i d c o m p e n s a t i o n t h e r e f o r . T h e d o c t r i n e o f q u a n t u m meruit is a device to prevent undue enrichment based on the equitable postulatethat it is unjust for a person to retain benefit without paying for it." The designs petitioner submitted to Ms. Lopez were not returned. Ms.L o p e z , a n o f f i c e r o f t h e b a n k a s b r a n c h m a n a g e r u s e d s u c h d e s i g n s f o r presentation to the board of the bank. Thus, the designs were in fact useful toMs. Lopez for she did not appear to the board without any designs at the time of the deadline set by the board.Decision reversed and set aside. Decision of the trial court affirmed. ELEMENTS OF CONSENT: OFFER AND ACCEPTANCEPALATTAO VS. COURT OF APPEALS381 SCRA 681MAY 7, 2002FACTS: Petitioner Yolanda Palattao interred into a lease contract whereby sheleased to private respondent a house and a 490-square-meter lot located in101 Caimito Road, Caloocan City, covered by Transfer Certificate of Title No.247536 and registered in the name of petitioner. The duration of the leasecontract was for three years, commencing from January 1, 1991, to December31, 1993, renewable at the option of the parties. The agreed monthly rental wasP7,500.00 for the first year; P 8,000.00 for the second year: and P8,500.l00 forthe third year. The contract gave respondent lessee the first option to purchasethe leased property.During the last year of the contract, the parties began negotiations for thesale of the leased premises to private respondent. In a letter dated April 2, 1993,petitioner offered to sell to private respondents 413.28 square m eters of thel e a s e d l o t a t P 7 , 8 0 0 . 0 0 p e r s q u a r e m e t e r , o r f o r t h e t o t a l a m o u n t o f P3,223,548.00. private respondents replied on April 15, 1993 w h e r e i n h e informed petitioner that he shall definitely exercise his option to buy theleased property. Private respondent, however, manifested his desire to buy thewhole 490-

square meters inquired from petitioner the reason why only 413.28square meters of the leased lot were being offered for sale. In a letter dated November 6, 1993, petitioner made a final offer to sell the lot at P 7,500.00 persquare meter with a down payment of 50% upon the signing of the contract of conditional sale, the balance payable in one year with a monthly lease/interestpayment P 14,000.00 which must be paid on or before the fifth day every monththat the balance is still outstanding. On November 7, 1993, private respondentsaccepted petitioners offer and reiterated his request for respondent acceptedpetitioners offers and reiterated his request for clarification as to the size of thelot for sale. Petitioner acknowledged private respondents acceptance of the offer in his letter dated November 10, 1993.Petitioner gave private respondent on or before November 24, 1993,w i t h i n w h i c h t o p a y t h e 5 0 % d o w n p a ym e n t i n c a s h o r m a n a g e r s c h e c k . Petitioner stressed that failure to pay the downpayment on the stipulated periodwill enable petitioner to freely sell her property to others. Petitioner likewise notified private respondent, that she is no longer renewing the lease agreementupon its expiration on December 31, 1993.P r i v a t e r e s p o n d e n t d i d n o t a c c e p t t h e t e r m s p r o p o s e d b y p e t i t i o n e r . Neither were there any documents of sale nor payment by private respondent of the required downpayment. Private respondent wrote a letter to petitioner onNovember 29, 1993 manifesting his intention to exercise his option to renew t h e i r l e a s e c o n t r a c t f o r a n o t h e r t h r e e ye a r s , s t a r t i n g J a n u a r y 1 , 1 9 9 4 t o December 31, 1996. This was rejected by petitioner, reiterating that she was nolonger renewing the lease. Petitioner demanded that private respondent vacatethe premises, but the latter refused.Hence, private respondent filed with the Regional Trial Court of Caloocan,Branch 127, a case for specified performance, docketed as Civil Case No, 16287,s e e k i n g t o c o m p e l p e t i t i o n e r t o s e l l t o h i m t h e l e a s e d p r o p e r t y. P r i v a t e respondent further prayed for the issuance of a writ preliminary injunction to prevent petitioner from filing an ejectment case upon the expiration of the leasecontract on December 31, 1993.During the proceedings in the s pecific performance case, the partiesa g r e e d t o m a i n t a i n t h e status quo . A f t e r t h e y f a i l e d t o r e a c h a n a m i c a b l e settlement, petitioner filed the instant ejectment case before the Metropolitan Trial Court of Caloocan City, Branch 53. In his answer, private respondentalleged that he refused to vacate the leased premises because there was aperfected contract of sale of the leased property between him and petitioner.Private respondent argued that he did not abandon his option to buy the leasedp r o p e r t y a n d t h a t h i s p r o p o s a l t o r e n e w t h e l e a s e w a s b u t a n a l t e r n a t i v e proposal to the sale. He further contended that the filing of the ejectment caseviolated their agreement to maintain the status quo. ISSUE: Whether or not there was a valid consent in the case at bar. RULING: There was no valid consent in the case at bar. C o n t r a c t s t h a t a r e c o n s e n s u a l i n n a t u r e , l i k e a c o n t r a c t o f s a l e , a r e perfected upon mere meeting of the minds. Once there is concurrence betweenthe offer and the acceptance upon the subject matter, consideration, and ternsof payment, a contract is produced. The offer must be certain. To convert the offer into a contract, the

acceptance must be absolute and must not qualify theterms of the offer; it must be plain, unequivocal, unconditional, and withoutvariance of any sort from the proposal. A qualified acceptance, or one thatinvolves a new proposal, constitutes a counter -offer and is a rejection of theoriginal offer. Consequently, when something is desired which is not exactly isproposed in the offer, such acceptance is not sufficient to generate consentbecause any modification or variation from the terms of the offer annuals theoffer.I n t h e c a s e a t b a r , w h i l e i t i s t r u e t h a t p r i v a t e r e s p o n d e n t i n f o r m e d petitioner that he is accepting the latters offer to sell the leased property, itappears that they did not reach an agreement as to the extent of the lot subjectof the proposed sale.Letters reveal that private respondent did not give his consent to buy only413.28 square meters of the leased lot, as he desired to purchase the whole 490square-meter- leased premises which, however, was not what was exactlyp r o p o s e d i n p e t i t i o n e r s o f f e r . C l e a r l y, t h e r e f o r e , p r i v a t e r e s p o n d e n t s acceptance of petitioners offer was not absolute, and will consequently not generate consent that would perfect a contract. ELEMENTS OF CONSENT: OFFER AND ACCEPTANCEABS-CBN BROADCASTING CORPORATIONVS. HONORABLE COURT OF APPEALS, REPUBLIC BROADCASTING CORP.,VIVA PRODUCTIONS, INC., and VICENTE DEL ROSARIOG.R. No. 128690 January 21, 1999301 SCRA 573FACTS: In 1990, ABS -CBN and VIVA ex ecuted a Film Exhibition A g r e e m e n t whereby Viva gave ABS-CBN an exclusive right to exhibit some Viva films. Viva,through defendant Del Rosario, offered ABS -CBN, through its vicepresidentCharo Santos-Concio, a list of three (3) film packages (36 title) from which ABS-CBN may exercise its right of first refusal under the afore-said agreement. ABS-CBN, however through Mrs. Concio, "can tick off only ten (10) titles" (from the list) "we can purchase" and therefore did not accept said list. The titles ticked off by Mrs. Concio are not the subject of the case at bar except the film "Maging Sino Ka Man."On February 27, 1992, defendant Del Rosario approached ABS-CBNs Ms.Concio, with a list consisting of 52 original movie titles (i.e., not yet aired ontelevision) including the 14 titles subject of the present case, as well as 104 re-runs (previously aired on television) from which ABS-CBN may choose another52 titles, as a total of 156 titles, proposing to sell to ABSCBN airing rights overt h i s p a c k a g e o f 5 2 o r i g i n a l s a n d 5 2 r e - r u n s f o r P 6 0 , 0 0 0 , 0 0 0 . 0 0 o f w h i c h P30,000,000.00 will be in cash and P30,000,000.00 worth of television spots.On April 2, 1992, defendant Del Rosario and ABS-CBNs general manager,Eugenio Lopez III, met at the Tamarind Grill Restaurant in Quezon City to discussthe package proposal of VIVA. Mr. Lopez testified that he and Mr. Del Rosario allegedly agreed that ABS-CBN was granted exclusive film rights to fourteen (14)f i l m s f o r a t o t a l c o n s i d e r a t i o n o f P 3 6 m i l l i o n ; t h a t h e a l l e g e d l y p u t t h i s agreement as to the price and number of films in a "napkin" and signed it andgave it to Mr. Del Rosario. On the other hand, Del Rosario denied having made any agreement with Lopez regarding the 14 Viva films; denied the existence of a napkin in which Lopez wrote something; and insisted that what he and Lopezdiscussed at the lunch meeting was Vivas film package offer of 104 films (52originals and 52 re-runs) for a total price of P60 million.On April 06, 1992, Del Rosario and Mr. Graciano Gozon of RBS Senior vice-president for Finance discussed the terms and conditions of Vivas offer to sellthe 104 films, after the rejection of the same package by ABS-CBN. On thefollowing day, Del Rosario received a draft contract

from Ms. Concio whichcontains a counter-proposal of ABS-CBN on the offer made by VIVA including theright of first refusal to 1992 Viva Films. However, the proposal was rejected bythe Board of Directors of VIVA and such was relayed to Ms. Concio.On April 29, 1992, after the rejection of ABS-CBN and following severalnegotiations and meetings defendant Del Rosario and Vivas President TeresitaCruz, in consideration of P60 million, signed a letter of agreement dated April 24,1992, granting RBS the exclusive right to air 104 Viva-produced and/or acquiredfilms including the fourteen (14) films subject of the present case.On 27 May 1992, ABS-CBN filed before the RTC a complaint for specificperformance with a prayer for a writ of preliminary injunction and/or temporaryrestraining order against private respondents Republic Broadcasting System( n o w G M A N e t w o r k I n c . ) O n 2 8 M a y 1 9 9 2 , t h e R T C i s s u e d a t e m p o r a r y restraining order. The RTC then rendered decision in favor of RBS and against ABS-CBN. Onappeal, the same decision was affirmed. Hence, this decision. ISSUE: Whether or not there exists a perfected contract between ABS -CBN andVIVA. RULING: A contract is a meeting of minds between two persons whereby one bindshimself to give something or render some service to another [Ar t. 1305, CivilCode.] for a consideration. There is no contract unless the following requisites concur:(1)consent of the contracting parties;(2)object certain which is the subject of the contract; and(3)cause of the obligation, which is established. [Art. 1318, Civil Code.]A contract undergoes three stages:( a ) p r e p a r a t i o n , c o n c e p t i o n , o r g e n e r a t i o n , w h i c h i s t h e p e r i o d o f negotiation and bargaining rending at the moment of agreement of the parties;(b) perfection or birth of the contract, which is the moment when theparties come to agree on the terms of the contract; and(c) consummation or death, which is the fulfillment or performance of the terms agreed upon in the contract.Contracts that are consensual in nature are perfected upon mere meetingof the minds. Once there is concurrence between the offer and the acceptanceupon the subject matter, consideration, and terms of payment a contract isproduced. The offer must be certain. To convert the offer into a contract, the acceptance must be absolute and must not qualify the terms of the offer; it mustbe plain, unequivocal, unconditional, and without variance of any sort from the p r o p o s a l . A q u a l i f i e d a c c e p t a n c e , o r o n e t h a t i n v o l v e s a n e w p r o p o s a l , constitutes a counter-offer and is a rejection of the original offer. Consequently,when something is desired which is not exactly what is proposed in the offer,such acceptance is not sufficient to generate consent because any modificationor variation from the terms of the offer annuls the offer.In the present case, when Mr. Del Rosario of Viva met Mr. Lopez of ABS -CBN at the Tamarind Grill on 2 April 1992 to discuss the package of films, said package of 104 VIVA films was VIVAs offer to ABS-CBN to enter into a new FilmExhibition Agreement. But ABS-CBN, sent through Ms. Concio, counter-proposalin the form a draft contract proposing exhibition of 53 films for a consideration of P35 million. This counter-proposal could be nothing less than the counter-offerof Mr. Lopez during his conference with Del Rosario at Tamarind Grill Restaurant.Clearly, there was no acceptance of VIVAs offer, for it was met by a counter-offer which substantially varied the terms of the offer.Furthermore, ABS-CBN made no acceptance of VIVAs offer hence, theyunderwent period of bargaining. ABSCBN then formalized its counter-proposalsor counter-offer in a draft contract. VIVA through its Board of Directors, rejecteds u c h c o u n t e r - o f f e r . E v e n i f i t b e c o n c e d e d a r g u e n d o

t h a t D e l R o s a r i o h a d accepted the counter-offer, the acceptance did not bind VIVA, as there was noproof whatsoever that Del Rosario had the specific authority to do so.WHEREFORE, the instant petition is GRANTED. REQUISITES OF OFFER AS DISTINGUISHED FROM OPTION LOURDES ONG LIMSON VS. COURT of APPEALS, et alG. R. No. 135929April 20, 2001357 SCRA 209FACTS: In July 1978, respondent spouses Lorenzo de Vera and Asuncion Santos-deVera, through their agent Marcosa Sanchez, offered to sell to petitioner LourdesOng Limson a parcel of land situated in Barrio San Dionisio, Paranaque, Metro Manila. The respondent spouses were the owners of the subject property.On July 31, 1978, she agreed to but the property at the price of P34. 00per square meter and gave P20, 000.00 as earnest money. The respondentspouses signed a receipt thereafter and gave her a 10 -day option period topurchase the property. Respondent spouses informed petitioner that the subjectproperty was mortgaged to Emilio Ramos and Isidro Ramos. Petitioner was askedto pay the balance of the purchase price to enable the respondent spouses to settle their obligation with the Ramoses. Petitioner agreed to meet respondentspouses and the Ramoses on August 5, 1978, to consummate the transaction;however, the respondent spouses and the Ramoses did not appear, same withtheir second meeting.On August 23, 1978, petitioner allegedly gave respondent spouses threechecks for the settlement the back taxes of property. On September 5, 1978,the agent of the respondent spouses informed petitioner that the property wast h e s u b j e c t o f a n e g o t i a t i o n f o r t h e s a l e t o r e s p o n d e n t S u n v a r R e a l t y Development Corporation.Petitioner alleged that it was only on September 15, 1978, that TCT No. S-72946 covering the property was issued to respondent spouses. On the sameday, petitioner filed and Affidavit of Adverse Claim with the Office of the Registryof Deeds of Makati, Metro Manila. The Deed of Sale between respondent spousesand respondent Sunvar was executed on September 15, 1978 and TCT No. S-72377 was issued in favor of Sunvar on September 26, 1978 with the AdverseClaim of petitioner annotated thereon.Respondent spouses and Sunvar filed their Answers and Answers to Cross-Claim, respectively. On appeal, the Court of Appeals completely reversed thedecision of the trial court and ordered the Register of Deeds of Makati City to liftt h e A d v e r s e C l a i m a n d o r d e r e d p e t i t i o n e r t o p a y r e s p o n d e n t S u n v a r a n d respondent spouses exemplary and nominal damages and attorneys fees.Hence, this petition. ISSUE: W h e t h e r o r n o t t h e a g r e e m e n t b e t w e e n p e t i t i o n e r a n d r e s p o n d e n t spouses was a mere option or a contract to sell. RULING: The Supreme Court held that the agreement between the parties was acontract of option and not a contract to sell. An option is continuing offer or contract by which the owner stipulates with another that the latter shall have theright to buy the property at a fixed price within a time certain, or under, or in compliance with, certain terms and conditions, or which gives the owner of thep r o p e r t y t h e r i g h t t o s e l l o r d e m a n d a s a l e . I t i s a l s o s o m e t i m e s c a l l e d a n unaccepted offer. An option is not of itself a purchase, but merely secures theprivilege to buy. It is not a sale of property but a sale of the right to purchase. Itsdistinguishing characteristic is that it imposes no binding obligation on theperson holding the option, aside from the consideration for the offer.Hence, the

assailed decision is affirmed, with the modification that the award of nominal and exemplary damages as well as attorneys fees is deleted. The petition is denied. VICES OF CONSENT1.CATALAN VS. BASA2 . D O M I N G O V S . C A 3.MENDOZONA VS. OZAMIZ4 . L I M V S . C A 5 . R U I Z V S . C A 6 . D E L A C R U Z V S . C A 7.RURAL BANK OF STA. MARIA VS. CA CATALAN vs. BASA JULY 31, 2007FACTS: On October 20, 1948, FELICIANO CATALAN Feliciano was dischargedf r o m a c t i v e m i l i t a r y s e r v i c e . T h e B o a r d o f M e d i c a l O f f i c e r s o f t h e Department of Veteran Affairs found that he was unfit to render militarys e r v i c e d u e t o h i s s c h i z o p h r e n i c r e a c t i o n , c a t a t o n i c t yp e , w h i c h i n c a p a c i t a t e s h i m b e c a u s e o f f l a t t e n i n g o f m o o d a n d a f f e c t , preoccupation with w o r r i e s , w i t h d r a w a l , a n d s p a r s e a n d p o i n t l e s s speech. On September 28, 1949, Feliciano married Corazon Cerezo.On June 16, 1951, a document was executed, titled Absolute Deedof Donation, wherein Feliciano allegedly donated to his sister MERCEDESCATALAN one-half of the real property described, viz :A parcel of land located at Barangay Basing, Binmaley, Pangasinan.Bounded on the North by heirs of Felipe Basa; on the South by Barrio R o a d ; O n t h e E a s t b y h e i r s o f S e g u n d o C a t a l a n ; a n d o n t h e W e s t b y Roman Basa. Containing an area of Ei ght Hundred One (801) squaremeters, more or less. The donation was registered with the Register of Deeds.On December 11, 1953, Peoples Bank and Trust Company filed aSpecial Proceedings before the Court of First Instance to declare Felicianoincompetent. On December 22, 1953, the trial court issued its Order for Adjudication of Incompetency for Appointing Guardian for the Estate andFixing Allowance of Feliciano. The following day, the trial court appointedPeoples Bank and Trust Company as Felicianos guardian. Peoples Bankand Trust Company has been subsequently renamed, and is presentlyknown as the Bank of the Philippine Islands (BPI).On November 22, 1978, Feliciano and Corazon Cerezo donated Lots1 and 3 of their property, registered under Original Certificate of Title(OCT) No. 18920, to their son Eulogio Catalan.Mercedes sold the property in issue in favor of her children Delia a n d J e s u s B a s a . T h e D e e d o f Absolute Sale was registered with theRegister of Deeds and a Tax D e c l a r a t i o n w a s i s s u e d i n t h e n a m e o f respondents.Feliciano and Corazon Cerezo donated Lot 2 of the aforementionedproperty registered under OCT No. 18920 to their children Alex Catalan,Librada Catalan and Zenaida Catalan. On February 14, 1983, Felicianoand Corazon Cerezo donated Lot 4 (Plan Psu-215956) of the same OCTNo. 18920 to Eulogio and Florida Catalan.BPI, acting as Felicianos guardian, filed a case for Declaration of Nullity of Documents, Recovery of Possession and Ownership, as well asdamages against the herein respondents. BPI alleg ed that the Deed of Absolute Donation to Mercedes was void ab initio , as Feliciano neverdonated the property to Mercedes. In addition, BPI averred that even if Feliciano had truly intended to give the property to her, the donation w o u l d s t i l l b e v o i d , a s h e w a s n o t o f s o u n d m i n d a n d w a s t h e r e f o r e incapable of giving valid consent. Thus, it claimed that if the Deed of Absolute Donation was void ab initio

, the subsequent Deed of AbsoluteSale to Delia and Jesus Basa should likewise be nullified, for MercedesCatalan had no right to sell the property to anyone. BPI raised doubtsabout the authenticity of the deed of sale, saying that its registration longafter the death of Mercedes Catalan indicated fraud. Thus, BPI sought remuneration for incurred damages and litigation expenses.On August 14, 1997, Feliciano passed away. The original complaintwas amended to substitute his heirs in lieu of BPI as complainants in CivilCase No. 17666. T h e t r i a l c o u r t f o u n d t h a t t h e e v i d e n c e p r e s e n t e d b y t h e complainants was insufficient to overcome the presumption that Felicianowas sane and competent at the time he executed the deed of donation infavor of Mercedes Catalan. Thus, the court declared, the presumption of sanity or competency not having been duly impugned, the presumption of due execution of the donation in question must be upheld. The Court of Appeals upheld the trial courts decision. ISSUE: Whether said decision of the lower courts is correct. RULING: Petitioners questioned Felicianos capacity at the time he donatedthe property, yet did not see fit to question his mental competence whenhe entered into a contract of marriage with Corazon Cerezo or when heexecuted deeds of donation of his other properties in their favor. Thepresumption that Feliciano remained co mpetent to execute contracts,despite his illness, is bolstered by the existence of these other contracts.Competency and freedom from undue influence, shown to have existed in the other acts done or contracts executed, are presumed to continue untilthe contrary is shown.Needless to state, since the donation was valid, Mercedes had the right to sell the property to whomever she chose. Not a shred of evidencehas been presented to prove the claim that Mercedes sale of the propertyto her children was tainted with fraud or falsehood. It is of little bearingthat the Deed of Sale was registered only after the death of Mercedes.What is material is that the sale of the property to Delia and Jesus Basawas legal and binding at the time of its execution. Thus, the proper ty inquestion belongs to Delia and Jesus Basa.petitioners raised the issue of prescription and laches for the firsttime on appeal before this Court. It is sufficient for this Court to note thateven if the present appeal had prospered, the Deed of Donation was still avoidable, not a void, contract. As such, it remained binding as it was notannulled in a proper action in court within four years. IN VIEW WHEREOF , there being no merit in the arguments of thepetitioners, the petition is DENIED. The CA decision was affirmed in toto. VICES OF CONSENT DOMINGO V. COURT OF APPEALS G.R. No. 127540. October 17, 2001 FACTS: Paulina Rigonan owned three parcels of land including the house and warehouse on one parcel. She allegedly sold them to private respondents,t h e s p o u s e s F e l i p e a n d C o n c e p c i o n R i g o n a n , w h o c l a i m t o b e h e r relatives. In 1966, petitioners who claim to be her closest survivingrelatives, allegedly took possession of the properties by means of stealth,force and intimidation, and refused to vacate the same. Acc ording

todefendants, the alleged deed of absolute sale was void for being spuriousas well as lacking consideration. They said that Paulina Rigonan did notsell her properties to anyone. As her nearest surviving kin within the fifthdegree of consanguinity, they inherited the three lots and the permanentimprovements thereon when Paulina died. They said they had been inpossession of the contested properties for more than 10 years. ISSUE: 1 . ) W h e t h e r o r n o t t h e c o n s i d e r a t i o n i n D e e d o f S a l e c a n b e u s e d t o impugn the validity of the Contract of Sale.2.) Whether or not the alleged Deed of Sale executed by Paulina Rigonanin favor of the private respondents is valid. RULING: 1.) Consideration is the why of a contract, the essential reason whichmoves the contracting parties to enter into the contract. The Court hadseen no apparent and compelling reason for her to sell the subject 9parcels of land with a house and warehouse at a meager price of P850only. On record, there is unrebutted testimony that Paulina as landownerw a s f i n a n c i a l l y w e l l o f f . S h e l o a n e d m o n e y t o s e v e r a l p e o p l e . Undisputably, the P850.00 consideration for the nine (9) parcels of landincluding the house and bodega is grossly and shockingly inadequate, andthe sale is null and void ab initio.2.) The Curt ruled in the negative. Private respondents presented only acarbon copy of this deed. When the Register of Deeds was subpoenaed toproduce the deed, no original typewritten deed but only a carbon copywas presented to the trial court. None of the witnesses directly testifiedto prove positively and convincingly Paulinas execution of the originaldeed of sale. The carbon copy did not bear her signature, but only heralleged thumbprint. Juan Franco testified during the direct examinationthat he was an instrumental witness to the deed. However, when cross-examined and shown a copy of the subject deed, he retracted and said that said deed of sale was not the document he signed as witness. VICES OF CONSENT MENDOZANA, ET AL. V. OZAMIZ ET AL. G.R. No. 143370, February 6, 2002 FACTS: Petitioner spouses Mario J. Mendezona and Teresita M. Mendezona,petitioner spouses Luis J. Mendezona and Maricar L. Mendezona, andpetitioner Teresita Adad Vda. de Mendezona own a parcel of land eachwith almost similar areas of 3,462 square meters, 3,466 square metersand 3,468 square meters. The petitioners ultimately traced their titles of o w n e r s h i p o v e r t h e i r r e s p e c t i v e p r o p e r t i e s f r o m a n o t a r i z e d D e e d o f Absolute Sale executed in their favor by Carmen Ozamiz. The petitionersinitiated the suit to remove a cloud on their said respective titles causedby the inscription thereon. The respondents opposed the petitionersclaim of ownership of the said parcels of land alleging that the titlesi s s u e d i n t h e p e t i t i o n e r s n a m e s a r e d e f e c t i v e a n d i l l e g a l , a n d t h e ownership of the said property was acquired in bad faith and withoutvalue inasmuch as the consideration for the sale is grossly inadequate and unconscionable. Respondents further alleged that at the time of thes a l e a s a l l e g e d , C a r m e n O z a m i z w a s a l r e a d y a i l i n g a n d n o t i n f u l l possession of her mental faculties; and that her properties having been placed in administration, she was in effect incapacitated to contract withpetitioners. They argue that the Deed of Absolute sale is a simulatedcontract.

ISSUE: Whether or not the Deed of Absolute Sale in the case at bar was simulated. RULING: The Court ruled that the Deed in the case at bar is not a simulatedcontract. Simulation is defined as the declaration of a fictitious will,deliberately made by agreement of the parties, in order to produce, for the purposes of deception, the appearances of a juridical act which doesnot exist or is different from what that which was really executed. Therequisites of simulation are:(a) an outward declaration of will different from the will of the parties; (b)the false appearance must have been intended by mutual agreement;and (c) the purpose is to deceive third persons.None of these were clearly shown to exist in the case at bar. The Deed of Absolute Sale is a notarized document duly acknowledged before a notarypublic. As such, it has in its favor the presumption of regularity, and itcarries the evidentiary weight conferred upon it with respect to its duee x e c u t i o n . I t i s a d m i s s i b l e i n e v i d e n c e w i t h o u t f u r t h e r p r o o f o f i t s authenticity and is entitled to full faith and credit upon its face. The burden fell upon the respondents to prove their allegations attacking thevalidity and due execution of the said Deed of Absolute Sale. Respondentsfailed to discharge that burden; hence, the presumption in favor of thesaid deed stands. VICES OF CONSENTLIM VS. COURT OF APPEALS229 SCRA 616FACTS: The case involves the partition of the properties of the deceased spouses Tan Quico and Josefa Oraa. The former died on May 11, 1932 and the latter onAugust 6, 1932. Both died intestate. They left some ninety six hectares of landlocated in the municipality of Guinobatan and Camalig, Albay. The late spouseswere survived by four children; Cresencia, Lorenzo, Hermogenes and Elias. Eliasdied on May 2, 1935, without issue. Cresencia died on December 20, 1967. Shewas survived by her husband, Lim Chay Sing, and children, Mariano, Jaime, Jose Jovita, Anacoreta, Antonietta, Ruben, Benjamin and Rogelio. They are the petitioners in the case at bench. The sad spectacle of the heirs squabbling overthe properties of their deceased parents was again replayed in the case atbench. The protagonists were the widower and children of Cresencia on oneside, and Lorenzo and Hermogenes on the other side. The late Cresencia and Lorenzo had contrasting educational background.Cresencia only reached the second grade of elementary school. She could notread or write in English. On the other hand, Lorenzo is a lawyer and a CPA.Heirs of Cresencia alleged that since the demise of the spou ses Tan Quico and J o s e f a O r a a , t h e subject properties had been administered by respondent Lorenzo. They claimed that before her death, Cresencia had demanded their partition from Lorenzo. After Cresencias death, they likewise clamored for theirpartition. Their effort proved fruitless.Respondents Lorenzo and Hermogenes adamant stance against partitionis based on various contentions. Principally, they urge: 1) that the propertieshad already been partitioned, albeit, orally; and 2) during her lifetime, the lateC r e s e n c i a h a d s o l d a n d c o n v e ye d a l l h e r i n t e r e s t s i n s a i d p r o p e r t i e s t o respondent Lorenzo. They cited as evidence the Deed of Confirmation of Extra Judicial Settlement of the Estate of Tan Quico and Josefa Oraa and a receipt of payment. ISSUE: Whether or not there is error in the signing of the Deed. RULING:

In the petition at bench, the questioned Deed is written in English, a language not understood by the late Cresencia an illiterate. It was prepared bythe respondent Lorenzo, a lawyer and CPA. Respondent Lorenzo did not causethe notarization of the Deed. Considering these circumstances, the burden wason private respondents to prove that the content of the Deed was explained tot h e i l l i t e r a t e C r e s e n c i a b e f o r e s h e s i g n e d i t . I n t h i s r e g a r d , t h e e v i d e n c e adduced by the respondents failed to discharge their burden. The conclusion drawn by the Honorable of Appeals that there was no u n d u e i n f l u e n c e e x e r t e d o n C r e s e n c i a O . T a n b y h e r ( L a w ye r - C P A ) b r o t h e r Lorenzo O. Tan based on facts stated in the questione d judgment is clearlyincorrect. As it is contrary to the provision of Art. 1337, Civil Code. The respondent court, reversing the trial court, held that the evidencefailed to establish that it was signed by the late Cresencia as a result of fraud, mistake or undue influence. The Court upheld this ruling erroneous.In calibrating the credibility of the witnesses on this issue, we take ourmandate from Article 1332 of the Civil Code which provides: When one of theparties is unable to read, or if the contract is in a language not understood byhim, and mistake or fraud is alleged, the person enforcing the contract must show that the terms thereof have been fully explained to the former. T h i s s u b s t a n t i v e l a w c a m e i n t o b e i n g d u e t o t h e f i n d i n g o f t h e C o d e Commission that there is still a fairly large number of illiterates in this country,and documents are usually drawn up in English or Spanish. It is also in accord with our state policy of promoting social justice. It also supplements Article 24 of the Civil Code which calls on court to be vigilant in the protection of the rights of those who are disadvantaged in life. In the petition at bench, the questionedDeed is written in English, a language not understood by the late Cresencia anilliterate. VICES OF CONSENT:RUIZ VS. COURT OF APPEALS401 SCRA 410G.R. NO. 146942APRIL 22, 2003FACTS: Petitioner Corazon Ruiz is engaged in the business of buying and selling j e w e l r y. S h e o b t a i n e d l o a n s f r o m p r i v a t e r e s p o n d e n t C o n s u e l o T o r r e s o n different occasions and in different amounts. P rior to their maturity, the loanswere consolidated under 1 promissory note dated March 22, 1995. T h e c o n s o l i d a t e d l o a n o f P 7 5 0 , 0 0 0 . 0 0 w a s s e c u r e d b y a r e a l e s t a t e mortgage on a lot in Quezon City, covered by Transfer of Certificate of Title No.RT-96686, and registered in the name of petitioner. The mortgage was signed bypetitioner for herself and as attorney-in-fact of her husband Rogelio. It wase x e c u t e d o n 2 0 M a r c h 1 9 9 5 , o r 2 d a ys b e f o r e t h e e x e c u t i o n o f t h e s u b j e c t promissory note. Thereafter, petitioner obtained 3 more loans from private respondent,under the following promissory notes: 1) promissory note dated 21 April 1995, int h e a m o u n t o f P 1 0 0 , 0 0 0 . 0 0 ; 2 ) p r o m i s s o r y n o t e d a t e d 2 3 M a y ! 9 9 5 i n t h e amount of P100,000.00, and 3) promissory note dated 21 December 1995, in theamount of P100,000.00. These combined loans of P300,000.00 were secured byP571,000.00 worth of jewelry pledged by petitioner to private respondent.From April 1995 to March 1996, petitioner paid the stipulated 3% monthlyinterest on the P750,000.00 loan, amounting to P270,000. After March 1996,p e t i t i o n e r w a s u n a b l e t o m a k e i n t e r e s t p a ym e n t s a s s h e h a d d i f f i c u l t i e s collecting from her clients in her jewelry business.Because of petitioners failure to pay the principal loan of P750,000.00, aswell as the interest payment for April 1996, private respondent demandedpayment not only of the P750,000.00 loan but also of the P300,000.00 loan.

W h e n p e t i t i o n e r f a i l e d t o p a y, p r i v a t e r e s p o n d e n t s o u g h t t h e e x t r a j u d i c i a l foreclosure of the aforementioned real estate mortgage. ISSUE: Whether or not there is undue influence in the signing of the promissory note, which determines if foreclosure proceedings could proceed. RULING: The promissory note in question did not contain any fine prin t provisionwhich could have escaped the attention of the petitioner. Petitioner had all thetime to go over and study the stipulations embodied in the promissory note.Aside from the March 22, 1995 promissory note for P750,000.00, three other promissory notes of different dates and amounts were executed by petitioner infavor of private respondent. These promissory notes contain similar terms andconditions, with a little variance in the terms of interests and surcharges. Thefact that petitioner and private resp ondent had entered into not only one butseveral loan transactions shows that petitioner was not in any way compelled toaccept the terms allegedly imposed by private respondent. Moreover, petitioner,in her complaint dated October 7, 1996 filed with the trial court, never claimedt h a t s h e w a s f o r c e d t o s i g n t h e s u b j e c t n o t e . T h e r e f o r e , t h e f o r e c l o s u r e proceedings may now proceed. VICES OF CONSENTEPIFANIA DELA CRUZ, substituted by LAUREANA V. ALBERTOVS. SPS. EDUARDO C. SISON and EUFEMIA S. SISONG.R. No. 163770February 17, 2005FACTS: Initially, the complainant in this case was Epifania S. Dela Cruz (Epifania),but she died on November 1, 1996, while the case was pending in the Court of Appeals. Upon her demise, she was substituted by her niece, Laureana V. Alberto.Epifania claimed that sometime in 1992, she discovered that her rice landin Salomague Sur, Bugallon, Pangasinan, has been transferred and registered inthe name of her nephew, Eduardo C. Sison, without her knowledge and consent,purportedly on the strength of a Deed of Sale she executed on November 24,1989.Epifania thus filed a complaint before the Regional Trial Court of Lingayen,Pangasinan, to declare the deed of sale null and void. She alleged that Eduardot r i c k e d h e r i n t o s i g n i n g t h e D e e d o f S a l e , b y i n s e r t i n g t h e d e e d a m o n g t h e documents she signed pertaining to the transfer of her residential land, houseand camarin, in favor of Demetrio, her foster child and the brother of Eduardo.Respondents, spouses Eduardo and Eufemia Sison (Spouses Sison), deniedthat they employed fraud or trickery in the execution of the Deed of Sale. Theyclaimed that they purchased the property from Epifania for P20,000.00. Theyaverred that Epifania could not have been deceived into signing the Deed of Absolute Sale because it was duly notarized before Notary Public Maximo V.Cuesta, Jr.; and they have complied with all requisites for its registration, asevidenced by the Investigation Report by the Department of Agrarian Reform(DAR), Affidavit of Seller/Transferor, Affidavit of Buyer/Transferee, Certificationissued by the Provincial Agrarian Reform Officer (PARO), Letter for the Secretaryof Agrarian Reform, Certificate Authorizing Payment of Capital Gains Tax, andthe payment of the registration fees. Some of these documents even bore thesignature of Epifania, proof that she agreed to the transfer of the property. ISSUES: Whether the deed of absolute sale is valid.Whether fraud attended the execution of a contract. RULING:

On the issue of whether fraud attended the execution of a co ntract isfactual in nature. Normally, this Court is bound by the appellate courts findings,unless they are contrary to those of the trial court, in which case we may wadeinto the factual dispute to settle it with finality. After a careful perusal of therecords, we sustain the Court of Appeals ruling that the Deed of Absolute Saledated November 24, 1989 is valid. There being no evidence adduced to support her bare allegations, thus, Epifania failed to satisfactorily establish her inability to read and understand theEnglish language.Although Epifania was 79 years old at the time of the execution of the assailed contract, her age did not impair her mental faculties as to prevent herfrom properly and intelligently protecting her rights. Even at 83 years, shee x h i b i t e d m e n t a l a s t u t e n e s s w h e n s h e t e s t i f i e d i n c o u r t . I t i s , t h e r e f o r e , inconceivable for her to sign the assailed documents without ascertaining theircontents, especially if, as she alleges, she did not direct Eduardo to prepare thesame.A comparison of the deed of sale in favor of Demetrio and the deed of salein favor Eduardo, draws out the conclusion that there was no trickery employed.O n e c a n r e a d i l y s e e t h a t t h e f i r s t d e e d o f s a l e i s i n a l l s i g n i f i c a n t r e s p e c t s different from the second deed of sale. A casual perusal, even by someone asold as Epifania, would enable one to easily spot the differences. Epifania couldnot have failed to miss them.Indeed, if the intention was to deceive, both deeds of sale should havebeen mirror images as to mislead Epifania into thinking that she was signingwhat appeared to be the same document.In addition, the questioned deed of sale was duly notarized. It is a settledrule that one who denies the due execution of a deed where ones signatureappears has the burden of prov ing that, contrary to the recital in the jurat, onenever appeared before the notary public and acknowledged the deed to be avoluntary act. Epifania never claimed her signatures as forgeries. In fact, Epifania never questioned the deed of sale in favor of Demetrio, accepting it as avalid and binding document. It is only with respect to the deed of sale in favor of Eduardo that she denies knowledge of affixing her signature. Unfortunately, forboth parties, the notary public, Atty. Maximo V. Cuesta, Jr. before whom theyappeared, died prior to the filing of the case. KINDS OF FRAUD HOW COMMITTEDRURAL BANK OF ST. MARIA, PANGASINAN VS. COURT OF APPEALS314 SCRA 255FACTS: Manuel Behis mortgaged a land in favor of RBS, Pangasinan, in a Real E s t a t e M o r t g a g e d a t e d O c t o b e r 2 3 , 1 9 7 8 a s a s e c u r i t y f o r l o a n s o b t a i n e d amounting to P156,270.00. Unfortunately thereafter, Manuel, being a delinquenti n p a yi n g h i s d e b t s , s o l d t h e l a n d . A n d s o a D e e d o f A b s o l u t e S a l e w i t h Assumption of Mortgage was executed between him as vendor/ assignor andRayandayan and Arceo as vendees/assignees for the sum of P250,000.00. Onthe same day, Rayandayan and Arceo, together with Manual Behis executedanother Agreement embodying the consideration of the sale of the land in the sum of P2.4 million. The land, however, remained in the name of Behis becausethe former did not present to the Register of Deeds the contracts.Meanwhile, the loan, still in the name of Behis, accumulated an accountamounting to P316,368.13 in a Statement of Account sent to Behis on May, 30,1985. Thereafter, Rayandaran and Arceo presented the Deed of Absolute Saleto the bank and negotiated with the principal stockholder of the bank, Engr. E. Natividad, in Manila for the assumption of the indebtedness of Manuel Behis andt h e s u b s e q u e n t r e l e a s e o f t h e m o r t g a g e o n t h e p r o p e r t y b y t h e b a n k . Rayandaran and Arceo did not show to the bank the agreement with ManuelBehis providing for the

real consideration of P2.4 million. Subsequently, the bank consented to the substitution of plaintiffs as mortgage debtors in place of Manuel Behis in a Memorandum of Agreement between private respondents andthe bank with restricted and liberalized terms for the payment of the mortgagedebt including the initial payment of P143,782.22. The bank discontinued to comply with the Memorandum of Agreement due to the appearance of Christina Behis, Manuels wife and a co-signatory in themortgaged land, who claimed that her signature was forged. For this reason, thebank considered the MA as void.On January 7, 1986, plaintiffs demanded in a letter that the bank complywith its obligation under the Memorandum of Agreement to which the latter denied. Petitioner bank argued that the Memorandum of Agreement is voidableon the ground that its consent to enter said agreement was vitiated by fraudb e c a u s e p r i v a t e r e s p o n d e n t s w i t h h e l d f r o m p e t i t i o n e r b a n k t h e m a t e r i a l information that the real consideration for the sale with assumption of mortgageof the property by Manuel Behis to Rayandayan and Arceo is P2,400,000.00,and not P250,000.00 as represented to petitioner bank. According to petitionerbank, had it known for the real consideration for the sale, i.e. P2.4 million, itwould not have consented into entering the Memorandum of Agreement withRayandayan and Arceo as it was put in the d ark as to the real capacity and financial standing of private respondents to assume the mortgage from ManuelB e h i s . P e t i t i o n e r b a n k p o i n t e d o u t t h a t i t w o u l d n o t h a v e a s s e n t e d t o t h e agreement, as it could not expect the private respondents to pay the bank theapproximately P343,000.00 mortgage debt when private respondents have to pay at the same time P2,400,000.00 to Manuel Behis on the sale of the land. ISSUE: Whether or not there existed a fraud in the case at bar. RULING: NO. The kind of fraud that will vitiate a contract refers to those insidiouswords or machinations resorted to by one of the contracting parties to induce tothe other to enter into a contract which without them he would not have agreedto. Simply stated, the fraud must be determining cause of the contract, or musthave caused the consent to be given. It is believed that the non disclosure tot h e b a n k o f t h e p u r c h a s e p r i c e o f t h e s a l e o f t h e l a n d b e t w e e n p r i v a t e respondents and Manuel Behis cannot be the fraud contemplated by Article1338 of the Civil Code. From the sole reason submitted by the petitioner bankthat it was kept in the dark as to the financial capacity of private respondents,we cannot see how the omission or concealment of the real purchase price couldhave induced the bank into giving its consent to the agreement; or that the bankwould not have otherwise given its consent had it known of the real purchase price.Pursuant to Art. 1339 of the Code, silence or concealment, by itself, doesnot constitute fraud unless there is a special duty to disclose certain facts. Inthe case at bar, private respondents had no duty to do such. ESSENTIAL REQUISITES OF CONTRACT: LICIT OBJECTCHAVEZ VS. PUBLIC ESTATES AUTHORITY 415 SCRA 403SYNOPSIS: This case involves a government contract conveyed to a private entity (Amari), where 157.84 hectares of reclaimed public lands along Roxas Boulevard were sold at a negotiated price of P 1,200/ square meter. Reports place themarket price of land in that are a at a high of P 90, 000/ square meter. Thedifference is a mammoth P 140.16 B from the purchase price of the actual sale,equivalent to the Judiciarys budget for 17 years and

three times the Marcos Swiss deposits forfeited in favor of the government as decided by the SupremeCourt. At the end, the contract was voided for Amari, the private entity, was proven to have inveigled the Public Estates Authority to sell the reclaimed landswithout public bidding, in violation of the Government Code. FACTS: T w o S e n a t e C o m m i t t e e s , t h e S e n a t e B l u e R i b b o n C o m m i t t e e a n d Committee on Accountability of Public Officers, conducted extensive public hearings to determine the actual market value of the public lands; and found outthat the sale of such was grossly undervalued based on official documentssubmitted by the proper government agencies during the investigations. It wasf o u n d o u t t h a t t h e P u b l i c E s t a t e s A u t h o r i t y ( P E A ) , u n d e r t h e J o i n t V e n t u r e Agreement (JVA), sold to Amari Coastal Bay Development Corporation 157.84hectares of reclaimed public lands totaling to P 1.89 B or P 1,200 per squaremeter. However during the investigation process, the BIR pitted the value at P7,800 per square meter, while the Municipal Assessor of Paraaque at P 6,000per square meter and by the Commission on Audit (COA) at P21,333 per squaremeter. Based on the official appraisal of the COA, the actual loss on the part of the government is a gargantuan value of P 31.78 B. However, PEA justified thep u r c h a s e p r i c e b a s e d f r o m t h e v a r i o u s a p p r a i s a l s o f p r i v a t e r e a l e s t a t e corporations, amounting from P 500 1,000 per square meter. Further, it wasalso found out that there were various offers from different private entities tobuy the reclaimed public land at a rate higher than the offer of Amari, but still,PEA finalized the JVA with Amari. During the process of investigation, Amari didnot hide the fact that they agreed to pay huge commissions and bonuses to various persons for professional efforts and services in successfully negotiatingand securing for Amari the JVA. The amount constituting the commissions andbonuses totaled to a huge P 1.76 B; an indicia of great bribery. ISSUE: Whether or not the sale between PEA and Amari is unconstitutional. RULING: YES, it is unconstitutional for what was sold or alienated ar e lands of thepublic domain. Further, the Ponce doctrine , t o w h i c h t h e r e s p o n d e n t s e e k s refuge and sanctuary, does not fall squarely in the case.First, the subject of the sale was a submerged land; i.e., 78% of the totala r e a s o l d b y PEA to Amari is still s ubmerged land. Submerged lands, like f o r e s h o r e lands, is of the public domain and cannot be alienated. A s unequivocally stated in Article XII, Section 2 of the Constitution, all lands of the public domain, waters, minerals, coals, petroleum, forces which are potentialenergies, fisheries, forests or timber, wildlife, flora and fauna, and other naturalresources, with the exception of agricultural lands, are inalienable. Submergedlands fall within the scope of such provision.Second, in the Ponce case , the irrevocable option to purchase portionsof the foreshore lands shall be enforceable only upon reclamation, not prior toreclamation. In the case at bar, even without actual reclamation, the submergedlands were immediately transferred and sold to Amari. Third, the

Ponce doctrine has been superseded by the provisions of theGovernment Auditing Code, which has been bolstered by the provisions of theLocal Government Code, which states that any sale of the public land must bemade only thru a public bidding. There b eing no public bidding in the subjectsale of land; the amended JVA is a negotiated contract in patent violation of suchlaw.Fourth, the Ponce doctrine which involved the validity to reclaim foreshorelands based on RA 1899 (authorizing municipalities and chartered cities toreclaim foreshore lands) is not applicable in the instant case because what isinvolved in the case at bar are submerged lands.F i f t h , i n the Ponce case , t h e C i t y o f C e b u w a s s a n c t i o n e d t o r e c l a i m foreshore lands under RA 1899 for it is a qualified end user government agency ;therefore, can sell patrimonial property to private parties. But PEA is not an endu s e r a g e n c y w i t h r e s p e c t t o r e c l a i m e d l a n d s u n d e r t h e a m e n d e d J V A f o r reclaimed lands are public and therefore are inalienable.Finally, the Ponce case was decided under the 1935 Constitution (1965-66), which allowed private corporations to acquire alienable lands of the publicdomain. The case at bar falls within the ambit of the 1987 Constitution whichprohibits corporations from acquiring alienable lands of the public domain.Ergo, the submerged lands, being inalienable and outside the commerce of man, could not be the subject of the commercial transactions specified in theAmended JVA. Hence, the contract between Amari and the PEA is void. REQUISITE OF CONTRACT DETERMINATE OBJECTMELLIZA VS. CITY OF ILOILO 23 SCRA 477 FACTS: Juliana Melliza during her lifetime owned three parcels of residential landin Iloilo City. On 1932, she donated to the then Municipality of Iloilo a certain lotto serve as site for the municipal hall. The donation was however revoked byt h e p a r t i e s f o r t h e r e a s o n t h a t a r e a w a s f o u n d i n a d e q u a t e t o m e e t t h e requirements of the development plan. Subsequently the said lot was divided into several divisions.Sometime in 1938, Juliana Melliza sold her remaining interest on the saidlot to Remedios San Villanueva. Remedios in turn transferred the rights to saidportion of land to Pio Sian Melliza. The transfer Certificate of title in Mellizas n a m e b e a r s o n a n n o t a t i o n s t a t i n g t h a t a p o r t i o n o f s a i d l o t b e l o n g s t o t h e Municipality of Iloilo.Later the City of Iloilo, which succeeds to the Municipality of Iloilo, donatedthe city hall sit to the University of the Philippines, Iloilo Branch. On 1952, the University of the Philippines enclosed the site donated with a wire fence.Pio Sian Melliza then filed action in the Court of First Instance of Iloiloagainst Iloilo City and the University of the Philippines for recovery of the parcelof land or of its value specifically LOT 1214-B.Petitioner contends that LOT 1214-B was not included in those lots whichwere sold by Juliana Melliza to the then municipality of Iloilo

and to say he wouldrender the Deed of Sale invalid because the law requires as an essential elementof sale, determinate object. ISSUE: Whether or not IF Lot 1214 B is included in the Deed of Sale, it would r e n d e r the contract invalid because the object would allegedly not b e determinate as required by law. RULING: NO. The requirement of the law specifically Article 1460 of the Civil Code,that the sale must have for its object a determinate thing, is fulfilled as long as,at the time the contract is entered into, the object of the sale is cable of beingdeterminate without the necessity of a new or further agreement between the parties. The specific mention of some of the lots plus the statement that the lotsobject of the sale are the ones needed for city hall site sufficient provides a basis, as of the time, of the execution of the contract, for rendering determinatesaid lots without the need of a new further agreement of the parties. ABSENCE OF CAUSE VS. FAILURE/INADEQUACY OF CAUSEASKAY, plaintiffappellant, VS. FERNANDO A. COSALAN, defendant-appellee1924 September 1546 PHIL 179FACTS: The plaintiff in this case is Askay, an illiterate Igorrote between 70 and 80years of age, residing in the municipal district of Tublay, Province of Benguet, who at various times has been the owner of mining property. The defendant isFernando A. Cosalan, the nephew by marriage of Askay, and municipal presidentof Tublay, who likewise has been interested along with his uncle in miningenterprisesAbout 1907, Askay obtained title to the Pet Kel Mineral Claim located in Tublay, Benguet. On November 23, 1914, if we are to accept defendant's Exhibit1, Askay sold this claim to Cosalan. Nine years later, in 1923, Askay institutedaction in the Court of First Instance of Benguet to have the sale of the Pet KelMineral Claim declared null, to secure possession of the mineral claim, and toobtain damages from the defendant in the a mount of P10,500. Following thepresentation of various pleadings including the answer of the defendant, andfollowing trial before Judge of First Instance Harvey, judgment was rendereddismissing the complaint and absolving the defendant from the same, with costsa g a i n s t t h e p l a i n t i f f . O n b e i n g i n f o r m e d o f t h e j u d g m e n t o f t h e t r i a l c o u r t , plaintiff attacked it on two grounds: The first, jurisdictional, and the second,formal. Both motions were denied and an appeal was perfected. ISSUE: Whether or not the plaintiff has established his cause of action by a preponderance of the evidence. RULING: Plaintiff contends that the sale of the Pet Kel Mineral Claim w a s accomplished through fraud and deceit on the part of the defendant. Plaintiff may be right but in our judgment he has failed to establish his claim. Fraud mustbe both alleged and proved. One fact exists in plaintiffs favor, and this is theage and ignorance of the plaintiff who could be easily by the defendant, a manof greater intelligence. Another fact is the inadequacy of the consideration forthe transfer which, according to the conveyance, consisted of P1 and othervaluable consideration, and which, according to the oral testimony, in realityconsisted of

P107 in cash, a bill-fold, one sheet, one cow, and t wo carabaos.Gross inadequacy naturally suggest fraud is some evidence thereof, so that it may be sufficient to show it when taken in connection with other circumstances,such as ignorance or the fact that one of the parties has an advantage over theo t h e r . B u t t h e f a c t t h a t t h e b a r g a i n w a s a h a r d o n e , c o u p l e d w i t h m e r e inadequacy of price when both parties are in a position to form an independent j u d g m e n t c o n c e r n i n g t h e t r a n s a c t i o n , i s n o t a s u f f i c i e n t g r o u n d f o r t h e cancellation of a contract.A g a i n s t t h e p l a i n t i f f a n d i n f a v o r o f t h e d e f e n d a n t , t h e C o u r t h a d t h e document itself executed in the presence of witnesses and before a notarypublic and filed with the mining recorder. The notary public, Nicanor Sison, andone of the attesting witnesses, Apolonio Ramos, testified to the effect that in thepresence of the plaintiff and the defendant and of the notary public and thesubscribing witnesses, the deed of sale was interpreted to the plaintiff and thatthereupon he placed his thumb mark on the document. Two finger print experts,Dr. Charles S. Banks and A. Simkus, have declared in depositions that the thumbmark on exhibit is that of Askay. No less than four other witnesses testified thatat various times Askay had admitted to them that he had sold the Pet Kel Mineto Fernando A. Cosalan.Having in mind of these circumstances, how can the plaintiff expect thecourts to nullify the deed of sale on mere suspicion? Having waited nine years from the date when the deed was executed, nine years from the time FernandoA. Cosalan started developing the mine, nine years from the time Askay himself had been deprived of the possession of the mine, and nine years permitting of at h i r d p a r t y t o o b t a i n a c o n t r a c t o f l e a s e f r o m C o s a l a n , h o w c a n t h e c o u r t overlook plaintiff's silent acquiescence in the legal rights of the defendant? Onthe facts of record, the trial judge could have done nothing less than dismiss theaction. T h e C o u r t c o n c l u d e s , t h e r e f o r e , t h a t t h e c o m p l a i n t w a s p r o p e r l y dismissed. As a result, judgment is affirmed CAUSE: TRUE/REAL: SIMULATION OF CONTRACTS HEIRS OF THE LATE SPOUSES AURELIO AND ESPERANZA BALITE VS. LIM446 SCRA 57FACTS: The spouses Aurelio and Esperanza Balite were the owners of a parcel of l a n d a t C a t a r m a n , N o r t h e r n S a m a r . W h e n A u r e l i o d i e d i n t e s t a t e , h i s w i f e Esperanza and their children inherited the subject property and became co -owners thereof. In the meantime, Esperanza became ill and was in dire need of money fro her hospital expenses. She, through her daughter, Cristeta, offered tos e l l t o R o d r i g o L i m , h e r u n d i v i d e d s h a r e f o r t h e p r i c e o f P 1 , 0 0 0 , 0 0 0 . 0 0 . Esperaza and Rodrigo agreed that under the Deed of Absolute Sale, it will bemade to appear that the purchase price of the property would be P150,000.00a l t h o u g h t h e a c t u a l p r i c e a g r e e d u p o n b y t h e m f o r t h e p r o p e r t y w a s P1,000,000.00. On April 16, 1996, Esperanza executed a Deed of Absolute Salein favor of Rodrigo. They also executed on the same day a Joint Affidavit underwhich they declared that the real price of the property was P1,000,000.00payable to Esperanza by installments. Only Esperanza and two of her childrenAntonio and Cristeta knew about the said transaction. When the rest of thechildren knew of the sale, they wrote to the Register of Deeds saying that theirmother did not inform them of the sal e of a portion of the said property nor didthey give consent thereto. Nonetheless, Rodrigo made partial payments to Antonio who is authorized by his mother through a Special Power of Attorney.On October 23, 1996, Esperanza signed a letter addressed to Rodri goinforming the latter that her children did

not agree to the sale of the property tohim and that she was withdrawing all her commitments until the validity of thesale is finally resolved. On October 31, 1996, Esperanza died intestate and wassurvived by her children. Meanwhile, Rodrigo caused to be published in theSamar Reporter the Deed of Absolute Sale.On June 27, 1997, petitioners filed a complaint against Rodrigo with theRegional Trial Court for the annulment of sale, quieting of title, injunction andda mages. Subsequently, Rodrigo secured a loan from the Rizal Commercial Banking Corporation in the amount of P2,000,000.00 and executed a Real EstateMortgage over the property as security thereof. On motion of the petitioners,they were granted leave to file a n amended complaint impleading the bank asadditional party defendant. On March 30, 1998, the court issued an orderrejecting the amended complaint of the petitioners. Likewise, the trial courtdismissed the complaint. It held that pursuant to Article 493 of the Civil Code, ac o owner is not invalidated by the absence of the consent of the other co owners. Hence, the sale by Esperanza of the property was valid; the excess fromher undivided share should be taken from the undivided shares of Cristeta and A n t o n i o , w h o e x p r e s s l y a g r e e d t o a n d b e n e f i t f r o m t h e s a l e . T h e C o u r t o f Appeals likewise held that the sale was valid and binding insofar as EsperanzaBalites undivided share of the property was concerned. It affirmed the trial courts ruling that the lack of consent of the co-owners did not nullify the sale. ISSUE: Whether or not the Deed of Absolute Sale is null and void on the ground that it is falsified; it has an unlawful cause; and it is contrary to law and/or publicpolicy. RULING: No. The contract is an example of a simulated contract. Article 1345 of the Civil Code provides that the simulation of a contract may either be absoluteor relative. In absolute simulation, there is a colorable contract but without anys u b s t a n c e , b e c a u s e t h e p a r t i e s h a v e n o i n t e n t i o n t o b e b o u n d b y i t . A n absolutely simulated contract is void, and the parties may recover from eachother what they may have given under the contract. On the other hand, if thep a r t i e s s t a t e a f a l s e c a u s e i s r e l a t i v e l y s i m u l a t e d . H e r e , t h e p a r t i e s r e a l agreement binds them. In the present case, the parties intended to be bound bythe Contract, even if it did not reflect the actual purchase price of the property. The letter of Esperanza to respondent and petitioners admission that there waspartial payment made on the basis of the Absolute Sale reveals that the partiesintended the agreement to produce legal effect.S i n c e t h e D e e d o f A b s o l u t e S a l e w a s m e r e l y r e l a t i v e l y s i m u l a t e d , i t remains valid and enforceable. All the essential requisites prescribed by law forthe validity and perfection of contracts is present. However, the parties shall bebound by their real agreement for a consideration of P1,000,000 as reflected bytheir Joint Affidavit. The petition is DENIED and the assailed decision AFFIRMED. CAUSE: TRUE/REAL: SIMULATION OF CONTRACTS SUNTAY V. COURT OF APPEALS G.R. No. 114950, December 19, 1995 FACTS: Respondent Federico Suntay is the owner of a parcel of land and arice mill, warehouse, and other improvements situated in the said land. Ar i c e m i l l e r , F e d e r i c o , i n a l e t t e r a p p l i e d a s a m i l l e r - c o n t r a c t o r o f t h e National Rice and Corn Corporation (NARIC). He informed the

NARIC thathe had a daily rice mill output of 400 cavans of palay and warehousestorage capacity of 150,000 cavans of p alay. His application, althoughprepared by his nephew-lawyer, Rafael Suntay, was disapproved, becauseat that time he was tied up with several unpaid loans.For purposes of circumvention, he had thought of allowing Rafael tomake the application for him. Rafael prepared an absolute deed of salewhereby Federico, for and in consideration of P20,000.00 conveyed toRafael said parcel of land with all its existing structures. Said deed wasnotarized as Document No. 57 and recorded on Page 13 of Book 1, Seriesof 1962, of the Notarial Register of Atty. Herminio V. Flores. Less thanthree months after this conveyance, a counter sale was prepared andsigned by Rafael who also caused its delivery to Federico. Through thisc o u n t e r c o n v e ya n c e , t h e s a m e p a r c e l o f l a n d w i t h a l l i t s e x i s t i n g structures was sold by Rafael back to Federico for the same considerationof P20,000.00. Although on its face, this second deed appears to havebeen notarized as Document No. 56 and recorded on Page 15 of Book 1,Series of 1962, of the notarial register of Atty. Herminio V. Flores, an examination thereof will show that, recorded as Document No. 56 on Page13, is not the said deed of sale but a certain "real estate mortgage on aparcel of land with TCT No. 16157 to secure a loan of P3,500.00 in favor of the Hagonoy Rural Bank."Nowhere on page 13 of the same notarial register could be founda n y e n t r y p e r t a i n i n g t o R a f a e l ' s d e e d o f s a l e . T e s t i f y i n g o n t h i s irregularity, Atty. Flores admitted that he failed to submit to the Clerk of Court a copy of the second deed. Neither was he able to enter the samein his notarial register. Even Federico himself alleged in his Complaint that, when Rafael delivered the second deed to him, it was neither datednor notarized.Upon the execution and registration of the first deed, Certificate of Title No. 0-2015 in the name of Federico was cancelled and in lieu thereof, T C T N o . T - 3 6 7 1 4 w a s i s s u e d i n t h e n a m e o f R a f a e l . E v e n a f t e r t h e execution of the deed, Federico remained in possession of the propertysold in concept of owner. Significantly, notwithstanding the fact that Rafael became the titled owner of said land and rice mill, he never madea n y a t t e m p t t o t a k e p o s s e s s i o n t h e r e o f a t a n y t i m e , w h i l e F e d e r i c o continued to exercise rights of absolute ownership over the property.I n a l e t t e r , d a t e d A u g u s t 1 4 , 1 9 6 9 , F e d e r i c o , t h r o u g h h i s n e w counsel, Agrava & Agrava, requested that Rafael deliver his copy of TCTNo. T-36714 so that Federico could have the counter deed of sale in his favor registered in his name. The request having been obviously turneddown, Agrava & Agrava filed a petition with the Court of First Instance of Bulacan asking Rafael to surrender his owner's duplicate certificate of TCTNo. T-36714. In opposition thereto, Rafael chronicled the discrepancy in the notarization of the second deed of sale upon which said petition waspremised and ultimately concluded that said deed was a counterfeit or "atleast not a public document which is sufficient to transfer real rightsaccording to law." On September 8, 1969, Agrava & Agrava filed a motionto withdraw said petition, and, on September 13, 1969, the Court grantedthe same.On July 8, 1970, Federico filed a complaint for reconveyance anddamages against Rafael. In his answer, Rafael scoffed at the attack against the validity and genuineness of the sale to him of Federico's landand rice mill. Rafael insisted that said property was "absolutely sold andconveyed . . . for a consideration of P20,000.00, Philippine currency, andfor other valuable consideration".While the trial court upheld the validi ty and genuineness of thed e e d o f s a l e e x e c u t e d b y F e d e r i c o i n f a v o r o f R a f a e l , w h i c h d e e d i s referred to

above as Exhibit A, it ruled that the counter-deed, referred toas Exhibit B, executed by Rafael in favor of Federico, was simulated andwithout consideration, hence, null and void ab initio .Moreover, while the trial court adjudged Rafael as the owner of theproperty in dispute, it did not go to the extent of ordering Federico to payback rentals for the use of the property as the court made the evidentialf i n d i n g t h a t R a f a e l s i m p l y a l l o w e d h i s u n c l e t o h a v e c o n t i n u o u s possession of the property because or their understanding that Federicowould subsequently repurchase the same.From the aforecited decision of the trial court, both Federico andRafael appealed. The Court of Appeals rendered judgment affirming thetrial court's decision, with a modification that Federico was ordered tosurrender the possession of the disputed property to Rafael. Counsel of Federico filed a motion for reconsideration of the aforecited decision.While the motion was pending resolution, Atty. Ricardo M. Fojas enteredhis appearance in behalf of the heirs of Rafael who had passed away on November 23, 1988. Atty. Fojas prayed that said heirs be substituted asdefendants-appellants in the case. The prayer for substitution was dulynoted by the court in a resolution dated April 6, 1993. Thereafter, Atty.F o j a s f i l e d i n b e h a l f o f t h e h e i r s a n o p p o s i t i o n t o t h e m o t i o n f o r reconsideration. The parties to the case were heard on oral argument onOctober 12, 1993. On December 15, 1993, the Court of Appeals reverseditself and rendered an amended judgment. ISSUE: Whether or not the deed of sale executed by Federico in favor of Rafael is simulated and fictitious and, hence, null and void. RULING: In the aggregate, the evidence on record demonstrate a combination of circumstances from which may be reasonably inferred certain badges of simulation that attach themselves to the deed of sale inquestion. The complete absence of an attempt on the part of the buyer toassert his rights of ownership over the land and rice mill in question is themost protuberant index of simulation. The deed of sale executed by Federico in favor of his now deceasednephew, Rafael, is absolutely simulated and fictitious and, hence, null andvoid, said parties having entered into a sale transaction to which they didnot intend to be legally bound. As no property was validly conveyedunder the deed, the second deed of sale executed by the late Rafael in favor of his uncle, should be considered ineffective and unavailing. T h e a l l e g a t i o n o f R a f a e l t h a t t h e l a p s e o f s e v e n ye a r s b e f o r e Federico sought the issuance of a new title in his name necessarily makesFederico's claim stale and unenforceable does not hold water. Federico'stitle was not in the hands of a stranger or mere acquaintance; it was in t h e p o s s e s s i o n o f h i s n e p h e w w h o , b e i n g h i s l a w ye r , h a d s e r v e d h i m faithfully for many years. Federico had been all the while in possession of the land covered by his title and so there was no pressing reaso n forFederico to have a title in his name issued. Even when the relationship between the late Rafael and Federico deteriorated, and eventually ended,i t i s n o t a t a l l s t r a n g e f o r F e d e r i c o t o h a v e b e e n c o m p l a c e n t a n d unconcerned about the status of his title over the disputed property sincehe has been possessing the same actually, openly, and adversely, to theexclusion of Rafael. It was only when Federico needed the title in order toobtain a collaterized loan that Federico began to attend to the task of obtaining a title in his name over the subject land and rice mill. CAUSE VS. MOTIVEUY VS. COURT OF APPEALS314 SCRA 69SEPTEMBER 9, 1999FACTS:

Petitioners William Uy and Rodel Roxas are agents authorized to sell eight(8) parcels of land by the owners thereof. By virtue of such authority, petitionersoffered to sell the lands, located in Tuba, Tadiangan, Benguet to respondentNational Housing Authority (NHA) to be utilized and developed as a housingproject.On February 14, 1989, NHA approved the acquisition of the said parcels of land with an area of 31.8231 hectares at the cost of P23.867 million, pursuant towhich the parties executed a series of Deeds of Absolute Sale covering thesubject lands. Of the eight parcels of lands, however, only five were paid for bythe NHA because of the report it received from the Land Geosciences Bureau of the Department of Environment and Natural Resources that the remaining areais located at an active landslide area and therefore, not suitable for developmentinto a housing project. NHA eventually cancelled the sale over the remainingthree (3) parcels of land.On March 9, 1992, petitioners filed a complaint for damages. After trial, the RTC of Quezon City rendered the cancellation of contract to be justified andawarded P1.255 million as damages in favor of petitioners.Upon appeal by petitioners, the Court of Appeals reversed the decisiona n d e n t e r e d a n e w o n e d i s m i s s i n g t h e c o m p l a i n t i n c l u d i n g t h e a w a r d o f damages. The motion for reconsideration having been denied, petitioners seek relief from this court contending, inter alia , that the CA erred in declaring that NHA had any legal basis to rescind the subject sale. ISSUE: Whether or not the contention of petitioner is correct.Whether or not a partys entry into a contract affects the validity of thecontract. RULING: Anent the 1 st issue, NO. Petitioners confuse the cancellation of the contract by the NHA as a rescission of the contract under Article 1191 of the CivilCode. The right to rescission is predicated on a breach of faith by the otherparty that violates the reciprocity between them. The power to rescind is givento the injured party. In this case, the NHA did not rescind the contract. Indeed,i t d i d n o t h a v e t h e r i g h t t o d o s o f o r t h e o t h e r p a r t i e s t o t h e c o n t r a c t , t h e vendors did not commit any breach, much less a substantial breach, of theiro b l i g a t i o n . T h e N H A d i d n o t s u f f e r a n y i n j u r y. T h e c a n c e l l a t i o n w a s n o t therefore a rescission under Article 1191. Rather, it was based on the negationof the cause arising from the realization that the lands, which were the objects of the sale, were not suitable for housing.Anent the 2 nd issue, as a general rule, a partys motives for entering into acontract do not affect the contract. However, when the motive predetermines the cause, the motive may be regarded as the cause. As held in Liguez v. CA , ... It is well to note, however, that Manresa himself, while maintaining t h e distinction and upholding the inoperativess of the motives of the parties todetermine the validity of the contract, expressly excepts from the rule

thosecontracts that are conditioned upon the attainment of the motives of either party. The same view is held by the Supreme Court of Spain, in its decisions of Fevruary 4, 1941 and December 4, 1946, holdinmg that the motive may be regarded as causa when it predermones the purpose of the contract. GRATUITOUS CAUSE1 . L I G U E Z V S . C A , 1 0 2 P H I L 5 7 7 2 . P H I L B A N K V S . L U I S H E , 2 1 S C R A 5 2 CONCHITA LIGUEZ, petitioner, VS. THE HONORABLE COURT OF APPEALS,MARIA NGO VDA. DE LOPEZ, ET AL., respondents 102 P 577December 18, 1957G.R. No. L-11240FACTS: The case began upon complaint filed by petitioner -appellant against thew i d o w a n d h e i r s o f t h e l a t e S a l v a d o r P . L o p e z t o r e c o v e r a p a r c e l o f 5 1 . 8 4 hectares of land, situated in Barrio Bogac-Linot, of the municipality of Mati, Province of Davao. Plaintiff averred to be its legal owner, pursuant to a deed of donation of said land, executed in her favor by the late owner, Salvador P. Lopez,on 18 May 1943. The defense interposed was that the donation was null andvoid for having an illicit causa or consideration, which was plaintiff's enteringi n t o m a r i t a l r e l a t i o n s w i t h S a l v a d o r P . L o p e z , a m a r r i e d m a n ; a n d t h a t t h e property had been adjudicated to the appellees as heirs of Lopez by the Court of First Instance, since 1949. The Court of Appeals found that the deed of donation was prepared by the Justice of the Peace of Mati, Davao, before whom it was signed and ratified onthe date aforesaid. At the time, appellant Liguez was a minor, only 16 years of age. Salvador donated it to Liguez out of his love and affection to her. The Courtof Appeals found that when the donation was made, Lopez had been living withthe parents of appellant for barely a month; that the donation was made in viewo f t h e d e s i r e o f S a l v a d o r P . L o p e z , a m a n o f m a t u r e ye a r s t o h a v e s e x u a l relations with appellant Conchita Liguez; that Lopez had confessed to his love forappellant to the instrumental witnesses, with the remark that her parents wouldnot allow Lopez to live with her unless he first donated the land in question; thatafter the donation, Conchita Liguez and Salvador P. Lopez lived together in thehouse that was built upon the latter's orders, until Lopez was killed on July 1st,1943, by some guerrillas who believed him to be pro-Japanese.It was also ascertained by the Court of Appeals that the donated land originally belonged to the conjugal partnership of Salvador P. Lopez and his wife,Maria Ngo; that the latter had met and berated Conchita for living maritally withher husband, sometime during June of 1943; that the widow and children of Lopez were in possession of the land and made improvements thereon; that theland was assessed in the tax rolls first in the name of Lopez and later in that of his widow; and that the need of donation was never recorded.Upon these facts, the Court of Appeals held that the deed of donation wasinoperative, and null and void (1) because the husband, Lopez, had no right to donate conjugal property to the plaintiff appellant; and (2) because the donationwas tainted with illegal causa or consideration, of which donor and donee wereparticipants.Appellant vigorously contends that the Court of First Instance as well asthe Court of Appeals erred in holding the donation void for having an illicit causaor consideration. It is argued that under Article 1274 of the Civil Code of 1889(which was the governing law in 1943, when the donation was executed), "in contracts of pure beneficence the

consideration is the liberality of the donor",and that liberality per se can never be illegal, since it is neither against law or morals or public policy. ISSUE: Whether or not the deed of donation made by Lopez in favor of Liguez wasvalid. RULING: Under Article 1274, liberality of the donor is deemed causa only in those contracts that are of "pure" beneficence; that is to say, contracts designed solelyand exclusively to procure the welfare of the beneficiary, without any int ent of producing any satisfaction for the donor; contracts, in other words, in which theidea of self-interest is totally absent on the part of the transferor.For this very reason, the same Article 1274 provides that in remuneratorycontracts, the consideration is the service or benefit for which the remunerationi s given; causa is not liberality in these cases because the contract o r conveyance is not made out of pure beneficence, but "solvendi animo." Inconsonance with this view, the Court in Philippine Long Distance Co. vs. Jeturian*G. R. L-7756, July 30, 1955 , like the Supreme Court of Spain in its decision of 16Feb. 1899, has ruled that bonuses granted to employees to excite their zeal andefficiency, with consequent benefit for the employer, do not constitute donationhaving liberality for a consideration.Here the facts as found by the Court of Appeals, which the Supreme Courtcould not vary, demonstrate that in making the donation in question, the lateSalvador P. Lopez was not moved exclusively by the desire to benefit appellantConchita Liguez, but also to secure her cohabiting with him, so that he couldgratify his sexual impulses. This is clear from the confession of Lopez to thewitnesses Rodriguez and Ragay, that he was in love with appellant, but he rparents would not agree unless he donated the land in question to her. Actually,therefore, the donation was but one part of an onerous transaction (at least withappellant's parents) that must be viewed in its totality. Thus considered, the conveyance was clearly predicated upon an illicit causa.Appellant seeks to differentiate between the alleged liberality of Lopez, ascausa for the donation in her favor, and his desire for cohabiting with appellant,as motives that impelled him to make the donation, and quo tes from Manresaand the jurisprudence of this Court on the distinction that must be maintainedbetween causa and motives. It is well to note, however, that Manresa himself,while maintaining the distinction and upholding the inoperativeness of them o t i v e s o f t h e p a r t i e s t o d e t e r m i n e t h e v a l i d i t y o f t h e c o n t r a c t , e x p r e s s l y excepts from the rule those contracts that are conditioned upon the attainmentof the motives of either party.Appellees, as successors of the late donor, being thus precluded frompleading the d efense of immorality or illegal causa of the donation, the total or partial ineffectiveness of the same must be decided by different legal principles.In this regard, the Court of Appeals correctly held that Lopez could not donatethe entirety of the property in litigation, to the prejudice of his wife Maria Ngo,because said property was conjugal in character, and the right of the husband todonate community property is strictly limited by law. The situation of the children and forced heirs of Lopez approximate s thatof the widow. As privies of their parent, they are barred from invoking theillegality of the donation. But their right to a legitime out of his estate is notthereby affected, since the legitime is granted them by the law itself, over and above the wishes of the deceased. Hence, the forced heirs are entitled to havethe donation set aside in so far as inofficious: i.e., in excess of the portion of freedisposal , computed as provided in Articles 818 and 819, and bearing in

mindthat "collationable gifts" under Article 818 should include gifts made not only infavor of the forced heirs, but even those made in favor of strangers, as decided by the Supreme Court of Spain in its decisions of 4 May 1899 and 16 June 1902.So that in computing the legitimes, the value of the property donated to hereinappellant, Conchita Liguez, should be considered part of the donor's estate. Only the court of origin has the requisite date to determine whether the donationis inofficious or not. With regard to the improvements in the land in question,the same should be governed by the rules of accession and possession in good faith, it being undisputed that the widow and heirs of Lopez were unaware of thedonation in favor of the appellant when the improvements were made. Appellant Conchita Liguez was declared by the Supreme Court entitled toso much of the donated property as may be found, upon proper liquidation, notto prejudice the share of the widow Maria Ngo in the conjugal partnership with Salvador P. Lopez or the legitimes of the forced heirs of the latter. GRATUITOUS CAUSEPHILIPPINE BANKING CORPORATION, representing the estate of JUSTINA SANTOS Y CANON FAUSTINO, deceased, plaintiff-appellant,VS. LUI SHE, in her own behalf and as administratrix of theintestate of Wong Heng, deceased, defendantappellant21 SCRA 52FACTS: Justina Santos and her sister Lorenza were the owners in common of a piece of land in Manila. In it are two residential houses. The sisters lived in oneo f t h e h o u s e s , w h i l e W o n g H e n g , a C h i n e s e , l i v e d w i t h h i s f a m i l y i n t h e restaurant. Wong had been a long time lessee of a portion of the property, paying monthly rentals. On September 22, 1957, Justina became the owner of the entire property as her sister died with no other heir.On November 1, 1957, Justina executed a contra ct of lease in favor of Wong, covering a portion already leased to him and another portion of t h e property. The lease was for 50 years, although the lessee was give the right towithdraw at anytime from the agreement with a stipulated monthly rental.On December 1, she executed another contract giving Wong the option tobuy the leased premises for P120,000 payable within 10 years at monthlyinstallment of P1,000. The option was conditioned on his obtaining Philippinecitizenship, which was then pending. His appli cation for naturalization waswithdrawn when it was discovered that he was a resident of Rizal.On November 18,1958, she executed two other contracts one extendingthe term to 99 years and the term fixing the term of the option of 50 years. In the two wills, she bade her legatees to respect the contract she had entered intowith Wong, but it appears to have a change of heart in a codicil. Claiming that the various contracts were made because of her machinations and inducementspracticed by him, she now directed her executor to secure the annulment of thecontracts.On November 18, the action was filed in the CFI of Manila. The complaintalleged that Wong obtained the contracts through fraud. Wong denied havingtaken advantage of her trust in order to secure the execution of the contracts onquestion. He insisted that the various contracts were freely and voluntarily entered into by the parties. The lower court declared all the contracts null and void with the exceptionof the first, which is the contract of lease of Novemb er 15, 1957. From thisd e c i s i o n , b o t h p a r t i e s a p p e a l e d d i r e c t l y t o t h e C o u r t . A f t e r t h e c a s e w e r e submitted for decision, both parties died, Wong on 1962, and Justina on 1964. Wong as substituted by his wife Lui She while Justina by the Philippine BankingCorporation. ISSUE:

Whether or not the contracts entered into by the parties are void being inviolation of the Constitutional prohibition on transfer of lands to aliens or thosewho are not citizens of the Philippines. RULING: YES. The Court held the lease and the rest of the contracts were obtainedwith the consent of Justina freely given and voluntarily. However the contactsare not necessarily valid on the ground that it circumvents the Constitutionalprohibition against the transfer of lands to aliens. The illi cit purpose thenbecomes the illegal causa, rendering the contracts void.It does not follow from what has been said that because the parties are in pari delicto they will be left where they are, without relief. For one thing, theoriginal parties who were guilty of violation of fundamental charter have died and have since substituted by their administrators to whom it would e unjust toimpute their guilt. For another thing, Article 1416 of the Civil Code provides anexception to the pari de licto , that when the agreement is not illegal per se but ismerely prohibited, and the prohibition of the law is designed for the protection of the plaintiff, he may recover what he has paid or delivered. FORM AS ESSENTIAL ELEMENT OF CONTRACTSSONIA F. LONDRES, ARMANDO V. FUENTES, CHI-CHITA FUENTESQUINTIA, ROBERTO V. FUENTES, LEOPOLDO V. FUENTES, OSCAR V.FUENTES and MARILOU FUENTES ESPLANA petitioners, vs. THE COURTOF APPEALS, THE DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS, THE DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS, ELENAALOVERA SANTOS and CONSOLACION ALIVIO ALOVERA, respondentsDec 17, 2002G.R. No. 136427FACTS: The present case stemmed from a battle of ownership over Lots 1320 and1333 both located in Barrio Baybay, Roxas City, Capiz. Paulina originally ownedthese two parcels of land. After Paulinas death, ownership of the lots passed toher daughter, Filomena. The surviving children of Filomena, namely, SoniaFuentes Londres, Armando V. Fuentes, Chi Chita Fuentes Quintia, Roberto V.Fuentes, Leopoldo V. Fuentes and Maril ou Fuentes Esplana, herein petitioners,now claim ownership over Lots 1320 and 1333. On the other hand, privaterespondents Consolacion and Elena anchor their right of ownership over Lots1320 and 1333 on the Absolute Sale executed by Filomena on April 24, 1959.Filomena sold the two lots in favor of Consolacion and her husband, Julian. Elenais the daughter of Consolacion and Julian.On March 30, 1989, petitioners filed a complaint for the declaration of nullity of contract, damages and just compensation. Petitioners sought to nullifyt h e A b s o l u t e S a l e c o n v e y i n g L o t s 1 3 2 0 a n d 1 3 3 3 a n d t o r e c o v e r j u s t compensation from public respondents DPWH and DOTC. Petitioners claimedthat as the surviving children of Filomena, they are the owners of Lots 1320 and1 3 3 3 . P e t i t i o n e r s c l a i m e d t h a t t h e s e t w o l o t s w e r e n e v e r s o l d t o J u l i a n . Petitioners doubt the validity of the Absolute Sale because it was tampered. Thecadastral lot number of the second lot mentioned in the Absolute Sale was altered to read Lot 1333 when it was originally written as Lot 2034. Petitionerspointed out that Lot 2034, situated in Barrio Culasi, Roxas City, Capiz, was alsoowned by their grandmother, Paulina. And that it was only recently that theylearned of the claim of private respondents when Consolacion filed a petition forthe judicial reconstitution of the original certificates of title of Lots 1320 and1333 with the Capiz Cadastre. Upon further inquiry,

petitioners discovered thatthere exists a notarized Absolute Sale executed on April 24, 1959 registered onlyon September 22, 1982 in the Office of the Register of Deeds of Roxas City. Theprivate respondents copy of the Absolute Sale was tampered so that the secondparcel of lot sold, Lot 2034 would read as Lot 1333. However, the RecordsManagement and Archives Office kept an unaltered copy of the Absolute Sale. This other copy shows that the objects of the sale were Lots 1320 and 2034.Private respondents maintained that they are the legal owners of Lots1333 and 1320. Julian purchased the lots from Filomena in good faith and for avalid consideration. Private respondents explained that Julian was deaf andd u m b a n d a s s u c h , w a s p l a c e d i n a d i s a d v a n t a g e o u s p o s i t i o n compared toFilomena. Julian had to rely on the representation of other p e r s o n s i n h i s business transactions. After the sale, Julian and Consolacion took possession of the lots. Up to now, the spouses successors-in-interest are in possession of thelots in the concept owners. Private respondents claimed that the alteration in theAbsolute Sale was made by Filomena to make it conform to the description of t h e l o t i n t h e A b s o l u t e S a l e . P r i v a t e r e s p o n d e n t s f i l e d a c o u n t e r c l a i m w i t h damages. The cross-claim of petitioners against public respondents was for therecovery of just compensation. Petitioners claimed that during the lifetime of Paulina, public respondents took a 3,200square meter portion of Lot 1320. Thel a n d w a s u s e d a s p a r t o f t h e A r n a l d o B o u l e v a r d i n R o x a s C i t y w i t h o u t a n y payment of just compensation. In 1988, public respondents also appropriated a1,786-square meter portion of Lot 1333 as a vehicular parking area for the RoxasCity Airport. Sonia, one of the petitioners, executed a deed of absolute sale infavor of the Republic of the Philippines over this portion of Lot 1333. Accordingto petitioners, the vend ee agreed to pay petitioners P214,320.00. Despitedemands, the vendee failed to pay the stipulated amount. The trial court issued its decision upholding the validity of the Absolute Sale. This was affirmed by the Court of Appeals. ISSUE Whether or not the notarized copy should prevail. RULING Among others, petitioners harp on the fact that the notarized andregistered copy of the Absolute Sale should have, been c o r r e s p o n d i n g l yc o r r e c t e d . P e t i t i o n e r s b e l i e v e t h a t t h e n o t a r i z e d a n d a r c h i v e d c o p y s h o u l d prevail. We disagree. A contract of sale is perfected at the moment there is ameeting of the minds upon the thing which is the object of the contract and uponthe price. Being consensual, a contract of sale has the force of law between thec o n t r a c t i n g p a r t i e s a n d t h e y a r e e x p e c t e d t o a b i d e i n g o o d f a i t h w i t h t h e i r respective contractual commitments. Article 1358 of the Civil Code, whichrequires certain contracts to be embodied in a public instrument, is only forconvenience, and registration of the instrument is needed only to adverselya f f e c t t h i r d p a r t i e s . F o r m a l r e q u i r e m e n t s a r e , t h e r e f o r e , f o r t h e p u r p o s e o f binding or informing third parties. Non -compliance with formal requirements does not adversely affect the validity of the contract or the contractual rights and obligations of the parties.Decision affirmed with the modification that the cross-claim against publicrespondents is dismissed.

FORM FOR CONVENIENCE OF CONTRACTS (Art. 1358, CC)1.BALATBAT VS. CA2.UNIVERSAL ROBINA VS. HEIRS OF TEVESCLARA M. BALATBATVS. COURT OF APPEALS and Spouses JOSE REPUYAN and AURORAREPUYANG.R. No. 109410August 28, 1996261 SCRA 128FACTS: The lot in question covered by Transfer Certificate of Title No. 51330 wasacquired by plaintiff Aurelio Roque and Maria Mesina during their conjugal unionand the house constructed thereon was likewise built during their marital union.Out of their union, plaintiff and Maria Mesina had four children. When MariaMesina died on August 28, 1966, the only conjugal properties left are the houseand lot above stated of which plaintiff herein, as the legal spouse, is entitled toone-half share pro-indiviso thereof. With respect to the one half share pro-indiviso now forming the estate of Maria Mesina, plaintiff and the four children,the defendants here, are each entitled to one-fifth (1/5) share proindiviso.A u r e l i o R o q u e t h e n e n t e r e d i n t o a c o n t r a c t o f A b s o l u t e S a l e w i t h t h e spouses Aurora and Jose Repuyan. However, on August 20, 1980, Aurelio filed acomplaint for Rescission of Contract against Spouses Repuyan for the la ttersfailure to pay the balance of the purchase price. A deed of absolute sale wasthen executed on February 4, 1982 between Aurelio S. Roque, Corazon Roque, Feliciano Roque, Severa Roque and Osmundo Roque and Clara Balatbat, marriedto Alejandro Balatbat. On April 14, 1982, Clara Balatbat filed a motion for the i s s u a n c e o f a w r i t o f p o s s e s s i o n w h i c h w a s g r a n t e d b y t h e t r i a l c o u r t o n September 14, 1982 "subject, however, to valid rights and interest of thirdpersons over the same portion thereof, other than vendor or any other person orpersons privy to or claiming any rights or interests under it." The correspondingwrit of possession was issued on September 20, 1982. The lower court then rendered judgment in favor of the Spouses Repuyana n d d e c l a r e d t h e D e e d o f A b s o l u t e S a l e a s v a l i d . O n a p p e a l b y p e t i t i o n e r Balatbat, the Court of Appeals affirmed the lower courts decision. ISSUE: Whether or not the delivery of the owners certificate of title to spouses Repuyan by Aurelio Roque is for convenience or for validity or enforceability. RULING: The Supreme Court found that the sale between Aurelio and the SpousesRepuyan is not merely for the reason that there was no delivery of the subject p r o p e r t y a n d t h a t c o n s i d e r a t i o n / p r i c e w a s n o t f u l l y p a i d b u t t h e s a l e a s consummated, hence, valid and enforceable. The non-delivery of the possession of the subject property to the privaterespondent, suffice it to say that ownership of the thing sold is acquired onlyfrom the time of delivery thereof, either actual or constructive. Articl e 1498 of the Civil Code provides that when the sale is made through a public instrument,the execution thereof shall be equivalent to the delivery of the thing which is theobject of the contract, if from the deed the contrary does not appear or cannotbe in ferred. The execution of the public instrument, without actual delivery of the thing, transfers the ownership from the vendor to the vendee, who maythereafter exercise the rights of an owner over the same. In the instant case,v e n d o r R o q u e d e l i v e r e d t h e o w n e r ' s c e r t i f i c a t e o f t i t l e t o h e r e i n p r i v a t e respondent. It is not necessary that vendee be physically present at everysquare inch of the land bought by him, possession of the public instrument of theland is sufficient to accord him the rights of ownership. Thus, delivery of aparcel of land may be done by placing the vendee in control and

possession of the land (real) or by embodying the sale in a public instrument (constructive). The provision of Article 1358 on the necessity of a public document is only for convenience, not for validity or enforceability. It is not a requirement for the validity of a contract of sale of a parcel of land that this be embodied in a publicinstrument. A contract of sale being consensual, it is perfected by the mere consent of t h e p a r t i e s . D e l i v e r y o f t h e t h i n g b o u g h t o r p a ym e n t o f t h e p r i c e i s n o t necessary for the perfection of the contract; and failure of the vendee to pay theprice after the execution of the contract does not make the sale null and void forlack of consideration but results at most in default on the part of the vendee, forwhich the vendor may exercise his legal remedies. Tthe petition for review ishereby dismissed for lack of merit. FORM FOR CONVENIENCE OF CONTRACTS (Art. 1358, CC)UNIVERSAL ROBINA SUGAR MILLING CORPORATION, petitioner,VS. HEIRS OF ANGEL TEVES, respondents2002 Sep 18G.R. No. 128574389 SCRA 316FACTS: Andres Abanto owned two parcels of land situated in Campuyo, Manjuyod,N e g r o s O r i e n t a l . O n e l o t i s r e g i s t e r e d i n h i s n a m e a n d t h e o t h e r l o t i s unregistered. When he died, his heirs executed an "Extrajudicial Settlement of the Estate of the Deceased and Simultaneous Sale." In this document, Abanto'sheirs adjudicated unto themselves the two lots and sold the unregistered lot tothe United Planters Sugar Milling Company, Inc. (UPSUMCO), and the registeredl o t t o A n g e l M . T e v e s , f o r a t o t a l s u m o f P 1 1 5 , 0 0 0 . 0 0 . T h e s a l e w a s n o t registered.Out of respect for his uncle Montenegro, who was UPSUMCO's founder andpresident, Teves verbally allowed UPSUMCO to use the registered lot for pier andloading facilities, free of charge, subject to the condition that UPSUMCO shallshoulder the payment of real property taxes and that its occupation shall be co-terminus with its corporate existence. UPSUMCO then bui lt a guesthouse andpier facilities on the property. Years later, UPSUMCOs properties were acquiredb y t h e P h i l i p p i n e N a t i o n a l B a n k ( P N B ) . L a t e r , P N B t r a n s f e r r e d t h e s a m e properties to the Asset Privatization Trust (APT) which, in turn, sold the same tothe Universal Robina Sugar Milling Corporation (URSUMCO). URSUMCO then tookpossession of UPSUMCOs properties, including Teves' lot.U p o n l e a r n i n g o f t h e a c q u i s i t i o n o f h i s l o t , T e v e s f o r m a l l y a s k e d t h e corporation to turn over to him possession thereof or the corresponding rentals.He stated in his demand letters that he merely allowed UPSUMCO to use hisp r o p e r t y u n t i l i t s c o r p o r a t e d i s s o l u t i o n ; a n d t h a t i t w a s n o t m o r t g a g e d b y UPSUMCO with the PNB and, therefore, not included among the foreclosedproperties acquired by URSUMCO.URSUMCO refused to heed Teves' demand, claiming that it acquired theright to occupy the property from UPSUMCO which purchased it from AndresAbanto; and that it was merely placed in the name of Angel Teves, as shown bythe "Deed of Transfer and Waiver of Rights and Possession" dated November 26,1987. Under this document, UPSUMCO transferred to URSUMCO its applicationfor agricultural and foreshore lease. The same document partly states that thelands subject of the foreshore and agricultural lease applications are bounded onthe north by the "titled property of Andres Abanto bought by the transferor (UPSUMCO) but placed in the name of Angel Teves". URSUMCO further claimedthat it was UPSUMCO, not Teves, which has been paying the correspondingrealty taxes.Consequently, Teves filed a complaint for recovery of possession of realproperty with damages against

URSUMCO. However, on September 4, 1992, Teves died and was substituted by his heirs. On April 6, 1994, the RTC held thatURSUMCO has no personality to question the validity of the sale of the propertybetween the heirs of Andres Abanto and Angel Teves since it is not a partythereto; that Teves' failure to have the sale registered with the Registry of Deedswould not vitiate his right of ownership, unless a t hird party has acquired theland in good faith and for value and has registered the subsequent deed; thatthe list of properties acquired by URSUMCO from the PNB does not include thedisputed lot and, therefore, was not among those conveyed by UPSUMCO to URSUMCO.On appeal by URSUMCO, the Court of Appeals affirmed the RTC decision,holding that the transaction between Angel Teves and Andres Abanto's heirs is acontract of sale, not one to sell, because ownership was immediately conveyedto the purchaser upon payment of P115,000.00. On October 29, 1996, URSUMCOfiled a motion for reconsideration but was denied by the Appellate Court. Hence,the instant petition for review on certiorari. ISSUE: W h e t h e r o r n o t t h e r e s p o n d e n t s h a v e e s t a b l i s h e d a c a u s e o f a c t i o n against petitioner. RULING: No. Petitioner URSUMCO contends that respondents have no cause of action because the "Extrajudicial Settlement of the Estate of the DeceasedAndres Abanto and Simultaneous Sale" is merely a promise to sell and not anabsolute deed of sale, hence, did not transfer ownership of the disputed lot to Angel Teves. Assuming that the document is a contract of sale, the same is voidf o r l a c k o f c o n s i d e r a t i o n b e c a u s e t h e t o t a l p r i c e o f P 1 1 5 , 0 0 0 . 0 0 d o e s n o t specifically refer to the registered lot making the price uncertain. Furthermore,the transaction, being unregistered, does not bind third parties.Petitioner's contentions lack merit. As held by the RTC and the Court of Appeals, the transaction is not merely a contract to sell but a contract of sale. Ina contract of sale, title to the property passes to the vendee upon delivery of thething sold; while in a contract to sell, ownership is, by agreement, reserved inthe vendor and is not to pass to the vendee until full payment of the purchaseprice. In the case at bar, the subject contract, duly notarized, provides that the Abanto heirs sold to Teves the lot covered by TCT No. H-37. There is no showingthat the Abanto heirs merely promised to sell the said lot to Teves. The absolute ownership over the registered land was indeed transferredt o Teves is further shown by his acts subsequent to the execution of t h e contract. As found by the trial court, it was Teves, not Andres Abanto's heirs,who allowed UPSUMCO to construct pier facilities and guesthouse on the land.When the property was erroneously included among UPSUMCO's properties thatwere transferred to petitioner URSUMCO, it was Teves, not the heirs of AndresAbanto, who informed petitioner that he owns the same and negotiated for an arrangement regarding its use. Teves even furnished petitioner documents andletters showing his ownership of the lot, such as a copy of the "Extrajudicial Settlement of the Estate of the Deceased Andres Abanto and Simultaneous Sale"and a certified true copy of TCT No. H-37 covering the disputed lot. Indeed, thetrial court and the Court of Appeals correctly ruled that Teves purchased the lotfrom the Abanto heirs. That the contract of sale was not registered does not affect its validity.Being consensual in nature, it is binding between the parties, the Abanto heirs and Teves. Article 1358 of the New Civil Code, which requires the embodimentof certain contracts in a

public instrument, is only for convenience, and theregistration of the instrument would merely affect third persons. Formal itiesintended for greater efficacy or convenience or to bind third persons, if not done,would not adversely affect the validity or enforceability of the contract betweenthe contracting parties themselves. Thus, by virtue of the valid sale, Angel Tevesstepped into the shoes of the heirs of Andres Abanto and acquired all their rightsto the property. Thus, petition is denied. REFORMATION OF INSTRUMENTS: WHEN PROHIBITED (Art. 1366-1367, CC)1 . S A R M I N G V S . D Y , J U N E 6 , 2 0 0 2 2 . C E B U V S . C A , 4 0 7 S C R A 1 5 4 SARMING VS. DY 383 SCRA 131 JUNE 6, 2002FACTS: Petitioners are the succesors -in-interest of original defendant Silveria Flores, while respondents Cresencio Dy and Ludivina Dy-Chan are the succesors-in-interest of the original plaintiff Alejandra Delfino, the buyer of one of the lotssubject of this case. They were joined in this petition by the successors -in-i n t e r e s t o f I s a b e l , J u a n , H i l a r i o , R u p e r t o , T o m a s a , a n d L u i s a a n d T r i n i d a d themselves, all surnamed Flores, who were also the original plaintiffs in thelower court. They are the descendants of Venancio and Jose, the brothers of theoriginal defendant Silveria Flores.A controversy arose regarding the sale of Lot 4163 which was half-ownedby the original defendant, Silveria Flores, although it was solely registered underher name. The other half was originally owned by Silverias brother, Jose. On January 1956, the heirs of Jose entered into a contract with plaintiff AlejandraDelfino, for the sale of their one-half share of Lot 4163 after offering the same totheir co-owner, Silveria, who declined for lack of money. Silveria did not objectto the sale of said portion to Alejandra.Atty. Deogracias Pinili, Alejandras lawyer then prepared the document of sale. In the preparation of the document however, OCT no. 4918-A, covering Lot5734, and not the correct title covering Lot 4163 was the one delivered to Pinili. Unaware of the mistake committed, Alejandra immediately t o o k possession of Lot 4163 and introduced improvements on the said lot. Two years later, when Alejandra Delfino purchased the adjoinin portion of the lot she had been occupying, she discovered that what was designated in thedeed, Lot 5734, was the wrong lot. Thus, Alejandra and the vendors filed for thefeformation of the Deed of Sale. ISSUE: Whether or not reformation is proper in this case. RULING: YES. Reformation is that remedy in equity by means of which a written instrument is made or construed so as to express or inform to the real intentionof the parties.An action for reformation of instrument under this provision of law mayprosper only upon the concurrence of the following requisites: (1) there must h a v e b e e n a m e e t i n g o f t h e m i n d s o f t h e p a r t i e s t o t h e c o n t r a c t ; ( 2 ) t h e instrument does not express the true intention of the parties; and (3) the failureof the instrument to express the true intention of the parties is due to mistake, fraud, inequitable conduct or accident.All of these requesites are present in this case. There was a meeting of the minds between the parties to the contract but the deed did not express thetrue intention ot the parties due to the designation of the lot subject of the deed. There is no dispute as to the intention of the parties to sell the land to AlejandraDelfino but there was a mistake as to the designation of the lot intended to besold as stated in the Settlement of Estate and Sale. REFORMATION OF INSTRUMENTS: WHEN PROHIBITED (Art. 13661367,CC)CEBU CONTRACTORS CONSORTIUM CO., petitioner,VS. COURT OF

APPEALS andMAKATI LEASING & FINANCE CORPORATION, respondentsG.R. No. 107199 July 22, 2003FACTS: The instant Petition for Review on Certiorari stems from a complaint forcollection of a sum of money with replevin filed by respondent Makati Leasingand Finance Corporation (MLFC) against petitioner Cebu Contractors ConsortiumCompany (CCCC) before the Regional Trial Court of Makati.MLFC alleges that on August 25, 1976 a lease agreement relating tovarious equipment was entered into between MLFC, as lessor, and CCCC, aslessee. The terms and conditions of the lease were defined in said agreementand in two lease schedules of payment. To secure the lease rentals, a chattelmortgage, and a subsequent amendment thereto, were executed in favor of MLFC over other various equipment owned by CCCC.On June 30, 1977, CCCC began defaulting on the lease rentals, promptingMLFC to send demand letters. When the demand letters were not heeded, MLFCfiled a complaint for the payment of the rentals due and prayed that a writ of replevin be issued in order to obtain possession of the equipment leased and toforeclose on the equipment mortgaged.CCCs position is that it is no longer indebted to MLFC because the totalamounts collected by the latter from the Ministry of Public Highways, by virtue of the deed of assignment, and from the proceeds of the foreclosed chattels weremore than enough to cover CCCs liabilities. CCC submits that in any event, thedeed of assignment itself already freed CCC from its obligation to MLFC. The trial court rendered decision upholding the lease agreement andfinding CCC liable to M LFC in lease rentals. On appeal, the appellate courtaffirmed the trial courts decision. ISSUE: Whether or not respondent court erred in upholding the so - called sale-lease back scheme of the private respondent when the same is in reality nothingbut an equitable mortgage. RULING: The Court finds in favor of CCC.MLFCs own evidence discloses that it offers two types of financing lease:a direct lease and a sale- lease back. The client sells to MLFC equipment that itowns, which will be leased back to him. The transaction between CCC and MLFCinvolved the second type of financing lease.CCC argues that the sale and leaseback scheme is nothing more than an equitable mortgage and consequently,asks for its reformation. The right of action for reformation accrued from the date of execution of the contract of lease in 1976. This was properly exercisedby CCC when it filed its answer with counterclaim to MLFCs complaint in 1978and asked for the reformation of the lease contract.Wherefore, the decision appealed from is hereby affirmed. INTERPRETATION OF CONTRACT LITERAL INTERPRETATIONADR SHIPPING SERVICESS, INC, Petitioner,VS. MARCELINO GALLARDO AND Court OF APPEALS, RespondentG.R. No. 134873September 17, 2002FACTS: Petitioner ADR Shipping Services, Inc. entered into a contract with privaterespondent Gallardo for the use of the formers vessel MV Pacific Breeze to t r a n s p o r t l o g s t o T a i w a n . T h e l o g s w e r e t h e s u b j e c t o f a s a l e s a g r e e m e n t between private respondent as seller being a timber concessionaire and log dealer, and Stywood Philippines, as buyer. Private respondent paid an advancecharter fee of P242,000 representing ten percent of the agreed charter fee.Under the charter agreement, the boat should be ready to load by February 5, 1988. The boat failed to arrive on time,

prompting private respondent to notifypetitioner of its cancellation of the charter contract and the withdrawal of theadvance payment deposited to the account of ADR shipping. ADR Shippingrefused to return the advance payment to Gallardo claiming that the agreementon the date of February 5, 1988 was just the reference commencing date andthe true loading date was February 16, 1988. This prompted the latter to file acase for sum of money and damages. The Regional Trial Court ordered ADRS h i p p i n g t o p a y G a l l a r d o t h e a d v a n c e p a ym e n t w i t h 6 p e r c e n t i n t e r e s t p e r annum and attorneys fees. The decision of the trial court was affirmed by theCourt of Appeals. Hence, this petition. ISSUE: Whether or not private respondent is entitled to the refund of the advancep a ym e n t r e p r e s e n t i n g h i s d e p o s i t f o r t h e c h a r t e r o f t h e s h i p p r o v i d e d b y petitioner. RULING: Yes. Private respondent is entitled to the refund of the advance paymentit made to petitioner. There was ambiguity in the interpretation of the contract provisions as tothe date of the loading of the ship. Ambiguities in a contract are interpretedstrictly, albeit not unreasonably, against the drafter thereof when justified in l i g h t o f t h e o p e r a t i v e f a c t s a n d s u r r o u n d i n g c i r c u m s t a n c e s . I n t h i s c a s e , ambiguity must be construed strictly against ADR which drafted and caused theinclusion of the ambiguous provisions. The charter agreement explicitly states that February 5, 1988 is the intended date when the ship is expected ready to load while February 16, 1988is merely the canceling date. Considering that the subject contract contains theforegoing express provisions, the parties have no other recourse but to apply theliteral meaning of the stipulations. The cardinal rule is that when the terms of the contract are clear, leaving no doubt as to the intention of the parties, theliteral meaning of its stipulations is controlling.P u r s u a n t t o t h e p r o v i s i o n o f A r t 1 1 9 1 o f t h e C i v i l C o d e , t h e p o w e r t o rescind obligations is implied in reciprocal ones in case one of the obligors should not comply with what is incumbent upon him, and the injured party mayr e s c i n d t h e o b l i g a t i o n , w i t h p a ym e n t o f d a m a g e s . I n t h i s c a s e t h e p r i v a t e respondent is entitled to the return of his down payment, subject to a legalinterest of 6 percent per annum, and to the payment of damages. INTERPRETATION OF CONTRACTS: IN CASE OF DOUBT1 . T S P I C C O R P , VS. TSPIC EMPLOYEES UNION2.ESTANISLAO VS. EAST WEST BANKING CORP.3 . A Q U I N T E Y V S . T I B O N G 4.CR UZ VS. CA , 4 56 SC RA 165 5.GONZALEZ VS. CA, 454 SCRA 86.ALMIRA VS. CA, 399 SCRA 351 TSPIC CORPORATION V. TSPIC EMPLOYEES UNION G.R. No. 163419, February 13, 2008 FACTS: TSPIC is engaged in the business of designing, manufacturing, andmarketing integrated circuits to serve the communication, automotive, d a t a p r o c e s s i n g , a n d a e r o s p a c e i n d u s t r i e s . T S P I C E m p l o ye e s U n i o n (Union), on the other hand, is the registered bargaining agent of the rank-and-file employees of TSPIC. TSPIC and the Union entered into a CollectiveBargaining Agreement. As a result all the regular rank-and-file employeesof TSPIC received a 10% increase in their salary. A wage order was issuedby the National Capital Region which raised the daily minimum wage fromPhP 223.50 to PhP 250, hence, the wages of 17 probationary employeeswere increased to PhP 250.00. TSPIC implemented the new wage

rates asmandated by the CBA. As a result several employees received fewerwage. A few weeks after the salary increase for the year 2001 became effective, TSPIC notified some of their employees were overpaid and theoverpayment would be deducted from their salaries in a staggered basis. ISSUE: Whether or not deduction of the alleged overpayment from thesalaries of the affected members of the Union constitute diminution of benefits in violation of law. RULING: The deduction of the alleged overpayment from the salaries of therespondents is a valid act. T h e C B A p r o v i d e d i n i t s p r o v i s i o n i n t h e c o m p u t a t i o n f o r t h e increase in TSPICs employees, hence, the intention therein must bepursued basing on the principle that littera necat spiritus vivificate . Thefundamental doctrine in labor law that the CBA is the law between the parties and they are obliged to comply with its provisions. Therefore, thee r r o r f o u n d b y T S P I C i n p u r s u a n c e t o t h e t e r m s i n t h e C B A m u s t b e sustained. The Court also agrees that TSPIC in charging the overpaymentsm a d e t o t h e r e s p o n d e n t s t h r o u g h s t a g g e r e d d e d u c t i o n s f r o m t h e i r salaries does not constitute diminution of benefits. Any amount given tot h e e m p l o ye e s i n e x c e s s o f w h a t t h e y w e r e e n t i t l e d t o , a s c o m p u t e d above, may be legally deducted by TSPIC from the employees salariesbecause on the first place that excess was not vested in them legally as aright because that will amount to unjust enrichment. INTERPRETATION OF CONTRACTS: IN CASE OF DOUBT ESTANISLAO V. EAST WEST BANKING CORPORATION G.R. No. 178537, February 11, 2008 FACTS: Spouses Rafael and Zenaida Estanislao obtained a loan from East West Banking Corporation videnced by a promissory note and secured by twodeeds of chattel mortgage of two dump trucks and a bulldozer for the firstand bulldozer and a wheel loader for the other. Spouses defaulted in theamortizations and the entire obligation became due and demandable. Thebank filed a suit for replevin with damages but subsequently, the bank m o v e d f o r s u s p e n s i o n o f t h e p r o c e e d i n g s o n a c c o u n t o f a n e a r n e s t attempt to arrive at an amicable settlement of the case. Both partiesexecuted a Deed of Assignment, drafted by the bank, where it provides that the two dump trucks and the bulldozer shall be transferred, assigneda n d c o n v e ye d f o r t h e f u l l p a ym e n t o f t h e d e b t . B u t t h e b a n k , f o r a n unknown reason failed to sign on the deed, but it accepted the threeh e a v y v e h i c l e s f r e e l y a n d v o l u n t a r i l y u p o n d e l i v e r y m a d e b y t h e petitioner. After some time, the bank file a petition in court praying for thed e l i v e r o f t h e o t h e r h e a v y v e h i c l e s m o r t g a g e d i n t h e s e c o n d c h a t t e l mortgage. The regional trial court dismissed the complaint for lack of merit but it was reversed and set aside by the court of appeals. ISSUE: Whether or not the Deed of Assignment, unsigned by private respondent,extinguishes the whole and full obligation of the petitioner. RULING:

T h e d e e d o f a s s i g n m e n t w a s a p e r f e c t e d a g r e e m e n t w h i c h extinguished petitioners total outstanding obligation to the respondent. T h e d e e d e x p l i c i t l y p r o v i d e s t h a t t h e a s s i g n o r ( p e t i t i o n e r s ) , i n f u l l payment of its obligation, shall deliver the three units of heavy equipmentt o t h e a s s i g n e e ( r e s p o n d e n t ) , w h i c h a c c e p t s t h e a s s i g n m e n t i n f u l l payment of the above-mentioned debt. This could only mean that shouldpetitioners complete the delivery of the three units of heavy equipmentcovered by the deed, respondents credit would have been satisfied in full, and petitioners aggregate indebtedness would then be consideredto have been paid in full as well. The nature of the assignment was a dation in payment, wherebyproperty is alienated to the creditor in satisfaction of a debt in money.Such transaction is governed by the law on sales. Even if we were to consider the agreement as a compromise agreement, there was no needfor respondents signature on the same, because with the delivery of theh e a v y e q u i p m e n t w h i c h t h e l a t t e r a c c e p t e d , t h e a g r e e m e n t wasconsummated. Respondents approval may be inferred from i t s unqualified acceptance of the heavy equipment. INTERPRETATION OF CONTRACTS: IN CASE OF DOUBT QUINTEY V.TIBONG G.R. No. 166704, December 20, 2006 FACTS: Agrifina Aquintey filed a complaint for sum of money and damagesagainst the respondents, spouses Felicidad and Rico Tibong. Agrifina alleged that Felicidad had secured loans from her on several occasions, atmonthly interest rates. Despite demands, the spouses Tibong failed top a y t h e i r o u t s t a n d i n g l o a n e x c l u s i v e o f i n t e r e s t s . S p o u s e s T i b o n g admitted that they had secured loans from Agrifina. The proceeds of theloan were then re-lent to other borrowers at higher interest rates. They, likewise, alleged that they had executed deeds of assignment in favor of A g r i f i n a , a n d t h a t t h e i r d e b t o r s h a d executed promissory notes inAgrifina's favor. According to the spouses T i b o n g , t h i s r e s u l t e d i n a novation of the original obligation to Agrifina. They insisted that by virtueof these documents, Agrifina became the new collector of their debtors;a n d t h e o b l i g a t i o n t o p a y t h e b a l a n c e o f t h e i r l o a n s h a d b e e n extinguished. ISSUE: Whether or not consent is necessary in novation. RULING: Novation which consists in substituting a new debtor (delegado) inthe place of the original one (delegante) may be made even without the knowledge or against the will of the latter but not without the consent of the creditor. Substitution of the person of the debtor may be effected bydelegacion, meaning, the debtor offers, and the creditor (delegatario),accepts a third person who consents to the substitution and assumes theobligation. Thus, the consent of those three persons is necessary. In thiskind of novation, it is not enough to extend the juridical relation to a thirdperson; it is necessary that the old debtor be released from the obligation,and the third person or new debtor takes his place in the relation. Withoutsuch release, there is no novation; the third person who has assumed theobligation of the debtor merely becomes a co-debtor or a surety. If therei s n o a g r e e m e n t a s t o s o l i d a r i t y, t h e f i r s t a n d t h e n e w d e b t o r a r e considered obligated jointly. Therefore, the Court agrees with the appellate courts decision thatrespondents' obligation to pay the balance of their

account with petitionerw a s e x t i n g u i s h e d , p r o t a n t o , b y t h e d e e d s o f a s s i g n m e n t o f c r e d i t executed by respondent Felicidad in favor of petitioner. INTERPRETATION OF CONTRACTS: IN CASE OF DOUBTADORACION E. CRUZ, THELMA DEBBIE E. CRUZ, GERRY E. CRUZ andNERISSA CRUZ-TAMAYO vs. THE HONORABLE COURT OF APPEALS,SUMMIT FINANCING CORP., VICTOR STA. ANA, MAXIMO C. CONTRERAS,RAMON G. MANALASTAS and VICENTE TORRESG.R. NO.122904 April 15,2005FACTS: Herein petitioner is the mother of her co petitioners Thelma Cruz, Gerry C r u z a n d N e r i s s a C r u z - T a m a y o , a s w e l l a s A r n e l C r u z , w h o w a s o n e o f t h e defendants in Civil Case No. 49466. Petitioner s files said case on February 11,1983 against Arnel Cruz and herein private respondents Summit Financing Corporation (Summit), Victor S. Sta. Ana and Maximo C. Contreras, the last twoin their capacity as deputy sheriff and ex-officio sheriff of Rizal, respectively, andRamon G. Manalastas in his capacity as Acting Register of Deeds of Rizal. The Complaint alleged that petitioners and Arnel Cruz were coowners of aparcel of land situated in Taytay, Rizal. Yet the property, which was then coveredby Transfer Certificate of Title (TCT) No. 495225, was registered only in the n a m e o f A r n e l C r u z . A c c o r d i n g t o p e t i t i o n e r s , t h e p r o p e r t y w a s a m o n g t h e properties they and Arnel Cruz inherited upon the death of Delfin Cruz, husbandof Adoracion Cruz.On August 22, 1977, petitioners and Arnel Cruz executed a Deed of PartialPartition, distributing to each of them their shares consisting of several lots p r e v i o u s l y h e l d b y t h e m i n c o m m o n . A m o n g t h e p r o p e r t i e s a d j u d i c a t e d t o defendant Cruz was the parcel of land covered at the time by TCT No. 495225. Itis the subject of this case.Subsequently, the same parties to the Deed of Partition agreed in writingto share equally in the proceeds of the sale of the properties although they havebeen subdivided and individually titled in the name s of the former co-ownersp u r s u a n t t o t h e D e e d o f P a r t i t i o n . T h i s a r r a n g e m e n t w a s e m b o d i e d i n a Memorandum of Agreement executed on August 23, 1977 or a day after thepartition. The tenor of the Memorandum of Agreement was annotated at theback of the TCT No. 495225 on September 1, 1977.Sometime in January 1983, petitioner Thelma Cruz discovered that TCTNo. 514477 was issued on October 18, 1982 in the name of Summit. Uponinvestigation, petitioners learned that Arnel Cruz had executed a Special Powero f A t t o r n e y o n M a y 1 6 , 1 9 8 0 i n f a v o r o f o n e N e l s o n T a m a yo , h u s b a n d o f petitioner Nerissa Cruz Tamayo, authorizing him to obtain a loan in the amountof One Hundred Four Thousand Pesos from respondent Summit, to be secured bya real estate mortgage on the subject parcel of land.Since the loan remained outstanding on maturity, Summit instituted extra- judicial foreclosure proceedings, and at the foreclosure sale, it was declared thehighest bidder. Consequently, Sheriff Sta. Ana issued a Certificate of Sale torespondent Summit which more than a year later consolidated its ownership of the foreclosed property. Upon presentation of the affidavit of consolidation of ownership, the Acting Register of Deeds of Rizal cancelled TCT No. 495225 andissued and in lieu thereof, TCT No. 514477 in the name of respondent Summit.In their complaint before the RTC, petitioners asserted that they co-ownedthe properties with Arnel Cruz, as evidenced by the Memorandum of Agreement.Hence, they argued that the mortgage was void since they did not consent to it. ISSUE:

Whether or not the real estate mortgage on the property then covered by TCT No. 495225 is valid and whether the mortgaged property was the exclusiveproperty of Arnel Cruz when it was mortgaged. RULING: A reading of the provisions of the Deed of Partition, no other meaning canbe gathered other than that petitioners and Arnel Cruz had put an end to the co-ownership. In the aforesaid deed, the shares of petitioners and Arnel Cruzs in the mass of co-owned properties were concretely determined and distributed toeach of them. In particular, to Arnel Cruz was assigned the disputed property. There is nothing from the words of said deed which expressly or impliedly statedthat petitioners and Arnel Cruz intended to remain as co-owners with respect tothe disputed property or to any of the properties for that matter.Petitioners do not question the validity or efficacy of the Deed of Partial Partition. In fact, they admitted its existence in their pleadings and submitted itas a part of their evidence. Thus, the deed is accorded its legal dire effect. Since a partition legally made confers upon each heir their exclusive ownershipof the property adjudicated to him, it follows that Arnel Cruz acquired absoluteownership over the specific parcels of land assigned to him in the Deed of PartialPartition, including the property subject of this case. As the absolute ownerthereof then, Arnel Cruz had the right to enjoy and dispose of the property, aswell as the right to constitute a real estate mortgage over the sa me withoutsecuring the consent of the petitioners.On the other hand, there is absolutely nothing in the Memorandum of Agreement which diminishes the right of Arnel Cruz to alienate or encumber theproperties allotted to him in the deed of partition. As correctly held by the Court of Appeals, the parties only boundthemselves to share in the proceeds of the sale of the properties. Theagreement does not direct reconveyance of the properties to reinstate t h e common ownership of the properties.M o r e o v e r , t o a s c e r t a i n t h e i n t e n t o f t h e p a r t i e s i n a c o n t r a c t u a l relationship, it is imperative that the various stipulations provided for in thecontracts be construed together, consistent with the parties contemporaneousand subsequent acts as regards the execution of the contract. Subsequent tothe execution of the Deed of Partition and Memorandum of Agreement, theproperties were titled individually in the names of the co -owners to which theyw e r e r e s p e c t i v e l y a d j u d i c a t e d , t o t h e e x c l u s i o n o f t h e o t h e r c o o w n e r s . Petitioners Adoracion Cruz and Thelma Cruz separately sold the propertiesdistributed to them as absolute owners thereof. Being clear manifestations of sole and exclusive dominion over the properties affected, the acts signify totalincongruence with the state of co-ownership claimed by the petitioners. The real estate mortgage on the disputed property is valid and does not contravene the agreement of the parties. INTERPRETATION OF CONTRACTS: IN CASE OF DOUBTGONZALES VS. COURT OF APPEALS354 SCRA 8FACTS: Private respondents, Mr. and Mrs. Gabriel Caballero, are the registeredowneres of two parcels of land situated in Cubao, Quezon City described in Transfer Certificate fo Title No. 247309 (Lot 1) and TCT No. 247310 (Lot 2). Thespouses residence stood in Lot 2.Sometime in 1979, they obtained a loan from the Cavite DevelopmentBank in the amount of P225,000.00. The two lots were mortgaged to securetheir loan. The loan

matured in 1984. To pay the loan they offered Lot 1 for s a l e . T h e o f f e r w a s advertised in the Bulletin Today. However, offers topurchase from prospective buyers did not materialize.On October 24, 1985, a certain Mrs. Lagrimas approached the spouses offering to broker the sale to an interested buyer. Initially, the spouses told thebroker that they were selling only to direct buyers. Nonetheless, Mrs. Lagrimasbrought to the spouses her buyer, herein petitioner Napoleon H. Gonzales, whoturned out to be Mrs. Lagrimas relative.P e t i t i o n e r o f f e r e d t o b u y t h e v a c a n t l o t f o r P 4 7 0 , 0 0 0 . 0 0 . I n i t i a l l y, respondents refused to reduce their asking price. Petitioner bargained for a lower price with the suggestion that on paper the price will be markedly lower sothe spouses would pay lower capital gains tax. Petitioner assured the spousest h i s c o u l d b e d o n e s i n c e h e h a d c o n n e c t i o n s w i t h t h e B u r e a u o f I n t e r n a l Revenue. The spouses agreed to sell at P470.000.00. Petitioners paid the bankP375,000.00, to be deducted from the purchase price. After the mortgage wascancelled and upon release of the two titles, Gonzales asked for the deeds of sale of the two lots and delivery of the titles to him. Defendants signed the deedof sale covering only Lot 1 but refused to deliver its title until petitioner paid theremaining balance of P70,000.00 This prompted petitioner to file a complaint for specific perfor mance anddamages. ISSUE: Whether or not the sale involved only Lot 1 and not both Lots. RULING: YES. Principally, the issue here is whether the contract of sale between the parties involved Lot 1 and 2 as claimed by petitioner or only Lot 1 as privaterespondents contend. In a case where we have to judge conflicting claims on the intent of the parties, as in this instance, judicial determination of the partiesintention is mandated. Contemporaneous and subsequent acts of the partiesmaterial to the case are to be considered.Petitioner admits he himself caused the preparation of the deed of sale presented before the lower court. Yet he could not explain why I referred only tothe sale of Lot 1 and not to the two lots, if the intention of the parties was reallyto cover the sale of two lots. As the courts a quo observed, even if it were truethat two lots were mortgaged and were about to be foreclosed, the ads privaterespondents placed in the Bulletin Today offered only Lot 1 and was strongindication that they did not intend to sell Lot 2. The 501 sq.m. lot was offered forP1,150.00 per sq.m. It alone would have fetched P576,150.00. The loan still tobe paid the bank was only P375,000.00 which was what petitioner actually paidthe bank. As the trial court observed, it was incomprehensible why the spouseswould part with two lots, one with a 2-storey house, and both situated at a primecommercial district for less than the price of one lot. Contrary to what petitionerwould make us believe, the sale of Lot 1 valued at P576,150.00 for P470,000.00, with petitioner assuming the bank loan of P375,000.00 as well as payment of thecapital gains tax, appears more plausible. INTERPRETATION OF CONTRACTS: IN CASE OF DOUBTALMIRA VS. COURT OF APPEALS399 SCRA 351FACTS: Petitioners are the wife and the children of the late Julio Garcia w h o inherited from his mother, Ma. Alibudbud, a portion of a 90,655 square

meterproperty denominated as lot 1642 of the Sta. Rosa Estate in Brgy. Caingin Sta.R o s a L a g u n a . T h e l o t w a s c o - o w n e d a n d r e g i s t e r e d i n t h e n a m e s o f t h r e e persons with the following shares: Vicente de Guzman (1/2), Enrique Hemedes(1/4) and Francisco Alibudbud, the father of Ma. Alibudbud (1/4). Although therewad no separate title in the name of Julio Garcia, there were tax declarati on inhis name to the intent of his grandfathers share covering the area of 21460 square meter.O n J u l y 5 , 1 9 8 4 , p e t i t i o n e r a s h e i r s o f J u l i o G a r c i a , a n d r e s p o n d e n t Federico Brines entered a Kasunduan ng Pagbibilihan (Kasunduan for Brevity)over the 21460 squa re meter portion for the sum of P150.000.00. Respondentpaid P65, 000.00 upon execution of the contract while the balance of P85,000.00 was made payable within six (6) months from the date of the executionof the instrument. The time of the execution of the kasunduan, petitionersallegedly informed respondent that TCT No. RT -1076 was in the possession of their cousin, Conchila Alibudbud, who having bought Vicente de Guzmans shares, owned the bigger portion of lot 1642. This standing notwithstanding,respondent willingly entered into the Kasunduan provided that the full paymentof the purchase price will be made upon delivery to him of the title.Respondent took possession of the property subject of the Kasunduan andmade various payments to petitioiners amountiong to P58500.00. However uponfailure of petitionere to deliver to him a separate title to the property in thename of Julio Garcia he refused to make further payments, prompting petitionerto file a civil action before the RTC for a rescission of the Kasunduan, return byrespondent to petitioner of the possession of the subject parcel of land, andpayment by respondent of damages in favour of petitioners. ISSUE Whether or not the petitioner may rescind the Kasunduan pursuant to Article 1191 of the Civil Code for the failure of respondent to give full payment of the balance of the purchase price. RULING: NO, the right of the parties are governed by the terms ands the nature of the contract they entered. Hence, although the nature of the Kasunduan was never places in dispute by both parties, it is necessary to ascertain whether theKasunduan is a contract to sell or a contract of Sale. Although both parties haveconsistency referred to the Kasunduan as a contract to Sell, a careful reading of the provision of the Kasunduan reveals that it is a contract of Sale. A deed of sale is absolute in nature in the absence of an any stipulation reserving title tothe vendor until full payment of the purchase price. The delivery of a separationt i t l e i n the name of Julio Garcia was a condition imposed on r e s p o n d e n t s obligation to pay the balance of the purchase price. It was not a conditionimposed in the perfection of the contract of Sale. The rescission will not prosper since the power to rescind is only given tothe injured party. The injured party is the party who has faithfully fulfilled hisobligation. In the case at bar, the petitioners were not ready, willing and able tocomply with their obligation to deliver a separate title in the name of Julio Garciato respondent therefore, thy are not in a position to ask for rescission. Failure tocomply with a condition imposed on the performance of an obligation gives theother party the option either to refuse to proceed with the sale or to waive thecondition under Art 1545 of the civil code. Hence it is the respondent who hasthe option. DOCTRINE OF COMPLEMENTARY CONTRACTS C O N S T R U E D TOGETHER1 . P H I L . B A N K O F C O M M U N I C A T I O N S V S .

LIM, 455 SCRA 4362.RIGOR VS. CONSOLIDATED LEASING, 387 S C R A 4 3 7 3 . V E L A S Q U E Z V S . C A , J U N E 3 0 , 1 9 9 9 PHILIPPINE BANK OF COMMUNICATIONSVS. ELENA LIM, RAMON CALDERON and TRI-ORO INTERNATIONALTRADING &MANUFACTURING CORPORATIONG.R. NO. 158138April 12, 2005 FACTS: On September 3, 1999, petitioner filed a complaint against respondentsfo0r the collection of a deficiency amounting to P4,014,297.23 exclusive of i n t e r e s t . P e t i t i o n e r a l l e g e d t h a t r e s p o n d e n t s o b t a i n e d a l o a n f r o m i t a n d executed a continuing surety agreement dated November 16, 1995 in favor of petitioner for all loans, credits, etc., that were extended or may be extended int h e f u t u r e t o r e s p o n d e n t s . P e t i t i o n e r g r a n t e d a r e n e w a l o f s a i d l o a n u p o n respondents request, the most recent being on January 21, 1998 as evidencedby a promissory note renewal BD-Variable No. 8298021001 on the amount of P3,000,000.00. it was expressly stipulated therein that the venue for any legalaction that may arise out of said promissory note shall be Makati City to thee x c k l u s i o n o f a l l o t h e r c o u r t s . R e s p o n d e n t a l l e g e d l y f a i l e d t o p a y s a i d obligation upon maturity. Thus petitioner foreclosed the real estate mortgageexecuted by the respondents valued at P1,081,600.00 leaving a deficiencybalance of P4,014,297.23 as of August 31, 1999.Respondents moved to dismiss the complaint on the ground of impropervenue, invoking the stipulation contained in the last paragraph of the promissorynote with respect to the restriction/exclusive venue. The trial court denied saidmotion asseverating that petitioners had separate causes of action arising fromthe promissory note and the continuing surety agreement. Thus, under Rule 4,Section 2 of the 1997 Rules of Civil Procedure, as amended, venue was properlylaid in Manila. The trial court supported its order with cases where venue washeld to be permissive. A motion for reconsideration of said order was likewise denied. ISSUE: Whether or not the complementary-contracts-construed togetherprinciple is applicable in the case at bar. RULING: According to this principle, an accessory contract must be read in itsentirety and together with the principal agreement. This principle is used inconstruing contractual stipulations in order to arrive at their true meaning;certain stipulations cannot be segregated and then made to control. This no-segregation principle is based on Article 1374 of the Civil Code. The aforementioned doctrine is applicable to the present case. In capableof standing by itself, the surety agreement can be enforced only in conjuctionwith the promissory note. The latter documents the debt that is sought to becollected in the action against the sureties. The factual milieu of the present case shows that the surety agreementwas entered into to facilitate existing and future loan agreements. Petitionerapproved the loan covered by the promissory note, partly because of the suretya g r e e m e n t t h a t a s s u r e d t h e p a y m e n t o f t h e p r i n c i p a l o b l i g a t i o n . T h e circumstances that relate to the issuance of the promissory note and the suretyagreement are so intertwined th at neither one could be separated from the other. It makes no sense to argue that the parties to the surety agreement werenot bound by the stipulations in the promissory note.Notably, the promissory note was a contract of adhesion that petitionerrequired th e principal debtor to execute as a condition of the

approval of theloan. It was made in the form and language prepared by the bank. By insertingthe provision of that Makati City would be the venue for any legal action thatmay arise out of the promissory note, petitioner also restricted the venue of actions against the sureties. The legal action against the sureties arose not onlyfrom the security agreement but also from the promissory note. DOCTRINE OF COMPLEMENTARY CONTRACTS CONSTRUED TOGETHERSPOUSES EFREN N. RIGOR and ZOSIMA D. RIGOR, for themselves and asowners of CHIARA CONSTRUCTION, petitioners,VS. CONSOLIDATED ORIX LEASING and FINANCE CORPORATION,respondent2002 Aug 20FACTS: Petitioners obtained a loan from private respondent Consolidated OrixLeasin g and Finance Corporation in the amount of P1,630,320.00. Petitionersexecuted a promissory note on July 31, 1996 promising to pay the loan in 24 e q u a l m o n t h l y i n s t a l l m e n t s o f P 6 7 , 9 3 0 . 0 0 e v e r y f i f t h d a y o f t h e m o n t h commencing on September 5, 1996. The promissory note also provides thatdefault in paying any installment renders the entire unpaid amount due and payable. To secure payment of the loan, petitioners executed in favor of privaterespondent a deed of chattel mortgage over two dump trucks.Petitioners failed to pay several installments despite demand from privaterespondent.On January 5, 1998, private respondent sought to foreclose the chattelmortgage by filing a complaint for Replevin with Damages against petitionersbefore the Regional Trial Court of Dagupan City.After service of summons,petitioners moved to dismiss the complaint on the ground of improper venuebased on a provision in the promissory note which states that, x x x all legal actions arising out of this note or in connection with the chattels subject hereof s h a l l o n l y b e b r o u g h t i n o r s u b m i t t e d t o t h e p r o p e r c o u r t i n M a k a t i C i t y , Philippines. Private respondent opposed the motion to dismiss and argued thatvenue was properly laid in Dagupan City where it has a branch office based on aprovision in the deed of chattel mortgage which states that, x x x in case of litigation arising out of the transaction that gave rise to this contract, complete jurisdiction is given the proper court of the city of Makati or any proper courtwithin the province of Rizal, or any court in the city, or province where theh o l d e r / m o r t g a g e e h a s a b r a n c h o f f i c e , w a i v i n g f o r t h i s p u r p o s e a n y p r o p e r venue. After a further exchange of pleadings, the Dagupan trial court deniedpetitioners motion to dismiss Not satisfied with the orders, petitioners filed ap e t i t i o n f o r c e r t i o r a r i b e f o r e t h e C o u r t o f A p p e a l s i m p u t i n g g r a v e a b u s e o f discretion by the Dagupan trial court in denying the motion to dismiss which wasdenied. ISSUE: Whether or not venue was properly laid under the provisions of the chattelmortgage contract in the light of Article 1374 of the Civil Code. RULING: Yes. Art. 1374 provides that the various stipulations of a contract shall beinterpreted together, attributing to the doubtful ones that sense which mayresult from all of them taken jointly.Applying the doctrine to the instant case, we cannot sustain petitionerscontentions. The promissory note and the deed of chattel mortgage must bec o n s t r u e d t o g e t h e r . P r i v a t e r e s p o n d e n t e x p l a i n e d t h a t i t s o l d e r s t a n d a r d promissory notes confined venue in Makati City where it had its main office.A f t e r i t o p e n e d a b r a n c h o f f i c e i n D a g u p a n C i t y, p r i v a t e r e s p o n d e n t m a d e corrections in the deed of chattel mortgage, but due to oversight, failed to makethe

corresponding corrections in the promissory notes. Petitioners affixed theirsignatures in both contracts. The presumption is applied that a person takesordinary care of his concerns. It is presumed that petitioners did not sign the deed of chattel mortgage without informing themselves of its contents. As aptlystated in a case, they being of age and businessmen of experience, it must bepresumed that they acted with due care and have signed the documents inq u e s t i o n w i t h f u l l k n o w l e d g e o f t h e i r i m p o r t a n d t h e o b l i g a t i o n t h e y w e r e assuming thereby. In any event, petitioners did not contest the deed of chattelmortgage under Section 8, Rule 8 of the Revised Rules of Civil Procedure.As held in Velasquez, this omission effectively eliminated any defense r e l a t i n g t o t h e a u t h e n t i c i t y a n d d u e e x e c u t i o n o f t h e d e e d , e . g . t h a t t h e document was spurious, counterfeit, or of different import on its face as the onee x e c u t e d b y t h e p a r t i e s ; o r t h a t the signatures appearing thereon wereforgeries; or that the signatures w e r e u n a u t h o r i z e d . C l e a r l y, t h e C o u r t o f Appeals did not err in ruling that venue was properly laid in Dagupan City as p r o v i d e d i n t h e d e e d o f c h a t t e l m o r t g a g e . T h e C o u r t h o l d s t h a t p r i v a t e respondent is not barred from filing its case against petitioners in Dagupan Citywhere private respondent has a branch office as provided for in the deed of chattel mortgage.Petition denied. DOCTRINE OF COMPLEMENTARY CONTRACTS CONSTRUED TOGETHERRODOLFO P. VELASQUEZ, petitioner, VS. COURT OF APPEALS, and PHILIPPINE COMMERCIAL INTERNATIONALBANK, INC., respondents G.R. No. 124049 June 30, 1999FACTS: The case arose from a complaint for a sum of money with preliminary a t t a c h m e n t f i l e d w i t h t h e R e g i o n a l T r i a l C o u r t o f M a k a t i C i t y b y p r i v a t e respondent Philippine Commercial International Bank (PCIB) against petitioner Rodolfo P. Velasquez together with Mariano N. Canilao Jr., Inigo A. Nebrida, CesarR. Dean and Artemio L. Raymundo.Sometime in December 1994 the Pick-up Fresh Farms, Inc. (PUFFI), of which petitioner Velasquez was an officer and stockholder, filed an applicatio nfor a loan of P7,500,000.00 with PCIB under the government's Guarantee Fund f o r S m a l l and Medium Enterprises (GFSME). On 16 April 1985 the partiesexecuted the corresponding loan agreement. As security for the loan,promissory n o t e s n u m b e r e d T L 1 2 1 2 3 1 a n d T L 1 2 1 2 5 8 f o r t h e a m o u n t s o f P4,000,000.00 and P3,500,000.00, respectively, were signed by Inigo A. Nebridaand Mariano N. Canilao, Jr. as officers of and for both PUFFI and Aircon andRefrigeration Industries, Inc. (ARII). A chattel mortgage was also executed byARII over its equipment and machineries in favor of PCIB. Petitioner along withNebrida and Canilao, Jr. also executed deeds of suretyship in favor of PCIB.S e p a r a t e d e e d s o f s u r e t y s h i p w e r e f u r t h e r e x e c u t e d b y C e s a r R . D e a n a n d Artemio L. Raymundo. When PUFFI defaulted in the payment of its obligationsPCIB foreclosed the chattel mortgage. The proceeds of the sale amounted to P678,000.00. Thus, PCIB filed an action to recover the remaining balance of the entireobligation including interests, penalties and other charges. Exemplary damagesand attorneys fees of 25% of the total amount due were also sought. On 9October 1989 a writ of preliminary attachment was granted by the trial court.On 20 June 1990 the

trial court rendered a summary judgment in favor o f PCIBholding petitioner and Canilao solidarily liable to pay P7,227,624.48 plus annualinterest of 17%, and P700,000.00 as attorneys fees and the costs of suit. Thecase was dismissed without prejudice with regard to the other defendants asthey were not properly served with summons. On appeal, the Court of Appealson 28 September 1995 affirmed in toto the RTC judgment. Petitioners motionfor reconsideration was thereafter denied. Hence this petition. ISSUE: W h e t h e r o r n o t t h e a p p e l l a t e c o u r t c o m m i t t e d r e v e r s i b l e e r r o r i n sustaining or affirming the summary judgment despite the existence of genuinetriable issues of facts and in refusing to set aside the default order against petitioner. RULING: The more appropriate doctrine in this case is that of the complementarycontracts construed together doctrine. The surety bond must be read in itsentirety and together with the contract between the NPC and the contractors. The provisions must be construed together to arrive at their true meaning. Certain stipulations cannot be segregated and then made to control. That the complementary contracts construed together doctrine appliesin this case finds support in the principle that the surety contract is merely anaccessory contract and must be interpreted with its principal contract, which inthis case was the loan agreement. This doctrine closely adheres to the spirit of Art. 1374 of the Civil Code which states thatArt. 1374. The various stipulations of a contract shall be interpretedtogether, attributing to the doubtful ones that sense which may resultfrom all of them taken jointly.Applying the complementary contracts construed together doctrine leaves no doubt that it was the intention of the parties that petitioner would bepersonally liable in the deed of suretyship because the loan agreement, amongothers, provided to further secure the obligations of the BORROWER to the LENDER, Messrs. Nebrida, Raymundo, Canilao, Dean and Velasquez and Airconand Refrigeration Ind. Inc. shall each execute a suretyship agreement in favor of the LENDER in form and substance acceptable to the LENDER.WHEREFORE, the petition is DENIED. The Decision of 28 September 1995of the Court of Appeals affirming the 20 June 1990 judgment of the RTC- Br. 61,Makati City, ordering petitioner Rodolfo P. Velasquez and Mariano N. Canilao, Jr.to solidarily pay respondent Philippine Commercial and Industrial Bank (PCIB) theamount of P7,227,624.48 with annual interest of 17% and attorneys fees of P700,000.00 plus costs of suit as well as its Resolution of 19 February 1995denying reconsideration, is AFFIRMED. RESCISSIBLE CONTRACTS-NATURE AND EFFECTSMUTUALRESTITUTION1 . E Q U A T O R I A L R E A L T Y V S . M A Y F A I R THEATER, 370 SCRA 562 . S I G U A N V S . L I M , N O V E M B E R 1 9 , 19993 . KH E KO N G V S . C A , 3 5 5 S C R A 7 0 1 4 . S U N T A Y V S . C A , 2 5 1 S C R A 4 3 0 EQUATORIAL REALTY DEVELOPMENT, INC.VS. MAYFAIR THEATER, INC.370 SCRA 56FACTS: Carmelo & Bauermann, Inc. (Carmelo) used to own a parcel of l a n d , together with two two-storey buildings constructed thereon. On June 1, 1967,Carmelo entered into a lease with Mayfair Theater, Inc. (Mayfair) for a period of 20 years. The lease covered a portion of the second floor and mezzanine. Two (2) years later, Mayfair entered into a second lease with Carmelo for the lease of another property, a part

of the second floor and two spaces on the ground floor. The lease was also for a period of twenty (20) years. Both leases contained aprovision granting Mayfair a right of first refusal to purchase the said properties.However, on July 30, 1978, within the 20-yearlease term, Carmelo sold thesubject properties to Equatorial Realty Development, Inc. (Equatorial) for thesum of P11.3M without their first being offered to Mayfair. A s a r e s u l t , M a yf a i r f i l e d a c o m p l a i n t f o r s p e c i f i c p e r f o r m a n c e a n d damages. After trial, the court ruled in favor of Equatorial. On appeal, the Courtof Appeals (CA) reversed and set aside the judgment of the lower court. On November 21, 1996, the Supreme Court denied Equatorials petition for reviewand declared the contract between Carmelo and Equatorial rescinded. Thedecision became final and executory and Mayfair filed a motion for its execution,which the court granted on April 25, 1997. However, Carmelo could no longer belocated thus Mayfair deposited with the court its payment to Carmelo. The lowerc o u r t i s s u e d a d e e d o f r e c o n v e ya n c e i n f a v o r o f C a r m e l o a n d i s s u e d n e w certificates in the name of Mayfair.On September 18, 1997, Equatorial filed an action for the collection of s u m o f m o n e y a g a i n s t M a yf a i r c l a i m i n g p a ym e n t o f r e n t a l s o r r e a s o n a b l e compensation for the defendants use of the premises after its lease contractshad expired. The lower court debunked the claim of the petitioner for unpaidrentals, holding that the rescission of the Deed of Absolute Sale in the mothercase did not confer on Equatorial any vested or residual proprietary rights, evenin expectancy. ISSUE: Whether or not Equatorial may collect rentals or reasonable compensationfor Mayfairs use of subject premises after its lease contracts had expired. RULING: N O . R e n t i s a c i v i l f r u i t t h a t b e l o n g s t o t h e o w n e r o f t h e p r o p e r t y producing it by right of accession. Consequently and ordinarily, the rentals thatf e l l d u e f r o m t h e t i m e o f t h e p e r f e c t i o n o f t h e s a l e t o p e t i t i o n e r u n t i l i t s rescission by final judgment should belong to the owner of the property during that period.Petitioner never took actual control and possession of the property sold, inv i e w o f t h e r e s p o n d e n t s timely objection to the sale and continued actualpossession of the p r o p e r t y. T h e o b j e c t i o n t o o k t h e f o r m o f a c o u r t a c t i o n impugning the sale that was rescinded by a judgment rendered by the Court inthe mother case. It has been held that the execution of a contract of sale as a form of constructive delivery is a legal fiction. It holds true only when there is noimpediment that may prevent the passing of the property from the hands of thevendor into those of the vendee. When there is such impediment, fiction yieldsto reality; the delivery has not been effected. Hence, respondents opposition tothe transfer of property by way of sale to Equatorial was a legally sufficientimpediment that effectively prevented the passing of the property into the latters hands.Article 1386 of the Civil Code provides rescission, which creates theobligation to return the things, which were the object of the contract, together with their fruits, and the price with its interest, but also the rentals paid, if any,had to be returned by the buyer. RESCISSIBLE CONTRACTS-NATURE AND EFFECTS-MUTUAL RESTITUTIONMARIA ANTONIA SIGUAN, petitioner, VS. ROSA LIM, LINDE LIM, INGRID LIM and NEIL LIM, respondents

1999 Nov 19G.R. No. 134685FACTS: On 25 and 26 August 1990, Lim issued two Metrobank checks in the sumsof P300,000 and P241,668, respectively, payable to "cash." Upon presentmentby petitioner with the drawee bank, the checks were dishonored for the reason"account closed." Demands to make good the checks proved futile. As aconsequence, a criminal case for violation of Batas Pambansa Blg. 22, docketedas Criminal Cases Nos. 22127-28, were filed by petitioner against LIM withBranch 23 of the Regional Trial Court (RTC) of Cebu City.In its decision dated 29 December 1992, the court a quo convicted Lim ascharged. The case is pending before this Court for review and docketed as G.R.No. 134685. It also appears that on 31 July 1990, Lim was convicted of estafa bythe RTC of Quezon City in Criminal Case No. Q -89-22162 filed by a certainVictoria Suarez. This decision was affirmed by the Court of Appeals. On appeal,h o w e v e r , t h e S u p r e m e C o u r t , i n a d e c i s i o n p r o m u l g a t e d o n 7 A p r i l 1 9 9 7 , acquitted Lim but held her civilly liable in the amount of P169,000, as actualdamages, plus legal interest.Meanwhile, on 2 July 1991, a Deed of Donation conveying parcels of landand purportedly executed by Lim on 10 Augu st 1989 in favor of her children,Linde, Ingrid and Neil, was registered with the Office of the Register of Deeds of Cebu City. New transfer certificates of title were thereafter issued in the namesof the donees.On 23 June 1993, petitioner filed an accion p auliana against Lim and herchildren before Branch 18 of the RTC of Cebu City to rescind the questioned Deed of Donation and to declare as null and void the new transfer certificates of title issued for the lots covered by the questioned Deed. The complaint wasdocketed as Civil Case No. CEB-14181. Petitioner claimed therein that sometime in July 1991, Lim, through a Deed of Donation, fraudulently transferred all her real property to her children in bad faith and in fraud of creditors, including her;t h a t L i m c o n s p i r e d a n d c o n f e d e r a t e d w i t h h e r c h i l d r e n i n a n t e d a t i n g t h e questioned Deed of Donation, to petitioner's and other creditors' prejudice; andthat Lim, at the time of the fraudulent conveyance, left no sufficient properties to pay her obligations.On the other hand, Lim denied any liability to petitioner. She claimed thather convictions in Criminal Cases Nos. 22127-28 were erroneous, which was thereason why she appealed said decision to the Court of Appeals. As regards thequestioned Deed of Donation, she maintained that it was not antedated but wasmade in good faith at a time when she had sufficient property. Finally, shealleged that the Deed of Donation was registered only on 2 July 1991 becauseshe was seriously ill.In its decision of 31 December 1994 the trial court ordered the rescissiono f t h e q u e s t i o n e d d e e d o f d o n a t i o n ; ( 2 ) d e c l a r e d n u l l a n d v o i d t h e t r a n s f e r certificates of title issued in the names of private respondents Linde, Ingrid andNeil Lim; (3) ordered the Register of Deeds of Cebu City to cancel said titles andto reinstate the previous titles in the name of Rosa Lim; and (4) directed theLIMs to pay the petitioner, jointly and severally, the sum of P10,000 as moral damages; P10,000 as attorney's fees; and P5,000 as expenses of litigation.On appeal, the Court of Appeals, in a promulgated on 20 February 1998,r e v e r s e d t h e d e c i s i o n o f t h e t r i a l c o u r t a n d d i s m i s s e d p e t i t i o n e r ' s a c c i o n pauliana. It held that two of the requisites for filing an accion pauliana wereabsent, namely, (1) there must be a credit existing prior to the celebration of thecontract; and (2) there must be a fraud, or at least the intent to commit fraud, tothe prejudice of the creditor seeking the rescission.A c c o r d i n g t o t h e C o u r t o f A p p e a l s , t h e D e e d o f D o n a t i o n , w h i c h w a s executed and acknowledged before a notary public, appears on its face to havebeen executed on 10 August 1989. Under Section 23 of

Rule 132 of the Rules of Court, the questioned Deed, being a public document, is evidence of the factwhich gave rise to its execution and of t he date thereof. No antedating of theDeed of Donation was made, there being no convincing evidence on record toindicate that the notary public and the parties did antedate it.Since Lim's indebtedness to petitioner was incurred in August 1990, or ayear after the execution of the Deed of Donation, the first requirement for accionpauliana was not met.Anent petitioner's contention that assuming that the Deed of Donationwas not antedated it was nevertheless in fraud of creditors because Victoria Suarez became Lims creditor on 8 October 1987, the Court of Appeals found thesame untenable, for the rule is basic that the fraud must prejudice the creditorseeking the rescission. ISSUE: Whether or not the deed of donation is valid. RULING: The Supreme Court upheld the validity of the deed of donation.A r t i c l e 1 3 8 1 o f t h e C i v i l Code enumerates the contracts which arerescissible, and among them are " t h o s e c o n t r a c t s u n d e r t a k e n i n f r a u d o f creditors when the latter cannot in any other manner collect the claims duethem." The action to rescind contracts in fraud of creditors is known as accionpauliana. For this action to prosper, the following requisites must be present: (1)the plaintiff asking for rescission has a credit prior to the alienation, althoughdemandable later; (2) t he debtor has made a subsequent contract conveying apatrimonial benefit to a third person; (3) the creditor has no other legal remedyto satisfy his claim; (4) the act being impugned is fraudulent; (5) the third personw h o r e c e i v e d t h e p r o p e r t y c o n v e y e d , i f i t i s b y o n e r o u s t i t l e , h a s b e e n a n accomplice in the fraud. The general rule is that rescission requires the existence of creditors at the time of the alleged fraudulent alienation, and this must be proved as one of the bases of the judicial pronouncement setting aside the contract. Without anyprior existing debt, there can neither be injury nor fraud. While it is necessarythat the credit of the plaintiff in the accion pauliana must exist prior to thefraudulent alienation, the date of the judgment enforcing it is immaterial. Evenif the judgment be subsequent to the alienation, it is merely declaratory, withretroactive effect to the date when the credit was constituted.In the instant case, the alleged debt of Lim in favor of petitioner wasincurred in August 19 90, while the deed of donation was purportedly executed on 10 August 1989. The Supreme Court is not convinced with the allegation of the petitionerthat the questioned deed was antedated to make it appear that it was made prior to petitioner's credit. Notabl y, that deed is a public document, it havingbeen acknowledged before a notary public. As such, it is evidence of the fact which gave rise to its execution and of its date, pursuant to Section 23, Rule 132of the Rules of Court.In the present case, the fact that the questioned Deed was registered onlyon 2 July 1991 is not enough to overcome the presumption as to the truthfulnessof the statement of the date in the questioned deed, which is 10 August 1989.Petitioner's claim against Lim was constituted only in August 1990, or a yearafter the questioned alienation. Thus, the first two requisites for the rescissionof contracts are absent.Even assuming arguendo that petitioner became a creditor of Lim prior tothe celebration of the contract of donation, still her action for rescission wouldnot fare well because the third requisite was not met. Under Article 1381 of theCivil Code, contracts entered into in fraud of creditors may be rescinded onlywhen the creditors cannot in any manner collect the claims due them.

Also,Article 1383 of the same Code provides that the action for rescission is but asubsidiary remedy which cannot be instituted except when the party sufferingdamage has no other legal means to obtain reparation for the same. The term"subsidiary remedy" has been defined as "the exhaustion of all remedies by theprejudiced creditor to collect claims due him before rescission is resorted to." Itis, therefore, essential that the party asking for rescission prove that he hasexhausted all other legal means to obtain satisfaction of his claim. Petitionerneither alleged nor proved that she did so. On this score, her action for therescission of the questioned deed is not maintainable even if the fraud chargedactually did exist." The fourth requisite for an accion pauliana to prosper is notpresent either. RESCISSIBLE CONTRACTS-NATURE AND EFFECTS-MUTUAL RESTITUTIONRAFAEL G. SUNTAY, substituted by his heirs, namely: ROSARIO,RAFAEL, JR., APOLINARIO, RAYMUND, MARIA VICTORIA, MARIA ROSARIOand MARIA LOURDES, all surnamed SUNTAY, petitioners, VS. THE HON. COURT OF APPEALS and FEDERICO C. SUNTAY, respondents G.R. No. 114950December 19, 1995FACTS: Respondent Federico Suntay was the registered owner of a parcel of landwith an area in Bulacan. On the land may be found: a rice mill, a warehouse,and other improvements. A rice miller, Federico, in a letter, dated September30, 1960, applied as a miller-contractor of the then National Rice and Corn Corporation (NARIC). He informed the NARIC that he had a daily rice mill outputof 400 cavans of palay and warehouse storage capacity of 150,000 cavans of palay. His application, although prepared by his nephew -lawyer, petitionerRafael Suntay, was disapproved, obviously because at that time he was tied up with several unpaid loans.For purposes of circumvention, he had thought of allowing Rafael to makethe application for him. Rafael prepared an absolute deed of sale wherebyFederico, for and in consideration of P20,000.00 conveyed to Rafael said parcelof land with all its existing structures. Said deed was notarized as Document No.57 and recorded on Page 13 of Book 1, Series of 1962, of the Notarial Register of Atty. Herminio V. Flores. Less than three months after this conveyance, a counter sale was prepared and signed by Rafael who also caused its delivery toFederico. Through this counter conveyance, the same parcel of land with all itse x i s t i n g s t r u c t u r e s w a s s o l d b y R a f a e l b a c k t o F e d e r i c o f o r t h e s a m e consideration of P20,000.00. Although on its face, this second deed appears tohave been notarized as Document No. 56 and recorded on Page 15 of Book 1,S e r i e s o f 1 9 6 2 , o f t h e n o t a r i a l r e g i s t e r o f A t t y . H e r m i n i o V . F l o r e s , a n examination thereof will show that, recorded as Document No. 56 on Page 13, isnot the said deed of sale but a certain "real estate mortgage on a parcel of landwith TCT No. 16157 to secure a loan of P3,500.00 in favor of the Hagonoy RuralBank."Nowhere on page 13 of the same notarial register could be found anyentry pertaining to Rafael's deed of sale. Testifying on this irregularity, Atty. F l o r e s a d m i t t e d t h a t h e f a i l e d t o s u b m i t t o t h e C l e r k o f C o u r t a c o p y o f t h e second deed. Neither was he able to

enter the same in his notarial register.Even Federico himself alleged in his Complaint that, when Rafael delivered thesecond deed to him, it was neither dated nor notarized.Upon the execution and registration of the first deed, Certificate of Title No. 0-2015 in the name of Federico was cancelled and in lieu thereof, TCT No. T-36714 was issued in the name of Rafael. Even after the execution of the deed,F e d e r i c o r e m a i n e d i n p o s s e s s i o n o f t h e p r o p e r t y s o l d i n c o n c e p t o f o w n e r . Significantly, notwithstanding the fact that Rafael became the titled owner of said land and rice mill, he never made any attempt to take possession thereof atany time, while Federico continued to exercise rights of absolute ownership overthe property. In a letter, dated August 14, 1969, Federico, through his new counsel, Agrava & Agrava, requested that Rafael deliver his copy of TCT No. T-36714 sothat Federico could have the counter deed of sale in his favor registered in his name. The request having been obviously turned down, Agrava & Agrava filed apetition with the Court of First Instance of Bulacan asking Rafael to surrender hisowner's duplicate certificate of TCT No. T -36714. In opposition thereto, Rafaelchronicled the discrepancy in the notarization of the second deed of sale uponwhich said petition was premised and ultimately concluded that said deed was acounterfeit or "at least not a public document which is sufficient to transfer realrights according to law." On September 8, 1969, Agrava & Agrava filed a motionto withdraw said petition, and, on September 13, 1969, the Court granted the same.On July 8, 1970, Federico filed a complaint for reconveyance and damagesagainst Rafael. In his answer, Rafael scoffed at the attack against the validityand genuineness of the sale to him of Federico's land and rice mill. Rafael i n s i s t e d t h a t s a i d p r o p e r t y w a s " a b s o l u t e l y s o l d a n d c o n v e ye d . . . f o r a c o n s i d e r a t i o n o f P 2 0 , 0 0 0 . 0 0 , P h i l i p p i n e c u r r e n c y , a n d f o r o t h e r v a l u a b l e consideration".While the trial court upheld the validity and genuineness of the deed of sale executed by Federico in favor of Rafael, which deed is referred to above asExhibit A, it ruled that the counter -deed, referred to as Exhibit B, executed byRafael in favor of Federico, was simulated and without consideration, hence, nulland void ab initio .M o r e o v e r , w h i l e t h e t r i a l c o u r t a d j u d g e d R a f a e l a s t h e o w n e r o f t h e property in dispute, it did not go to the extent of ordering Federico to pay backrentals for the use of the property as the court made the evidential finding thatRafael simply allowed his uncle to have continuous possession of the propertybecause or their understanding that Federico would subsequently repurchasethe same.From the aforecited decision of the trial court, both Federico and Rafaelappealed. The Court of Appeals rendered judgment affirming the trial court'sd e c i s i o n , w i t h a m o d i f i c a t i o n t h a t F e d e r i c o w a s o r d e r e d t o s u r r e n d e r t h e possession of the disputed property to Rafael. Counsel of Federico filed a motionfor reconsideration of the aforecited decision. While the motion was pending resolution, Atty. Ricardo M. Fojas entered his appearance in behalf of the heirs of Rafael who had passed away on November 23, 1988. Atty. Fojas prayed thatsaid heirs be substituted as defendants-appellants in the case. The prayer forsubstitution was duly noted by the court in a resolution dated April 6, 1993. Thereafter, Atty. Fojas filed in behalf of the heirs an opposition to the motion forr e c o n s i d e r a t i o n . T h e p a r t i e s t o t h e c a s e w e r e h e a r d o n o r a l a r g u m e n t o n October 12, 1993. On December 15, 1993, the Court of Appeals reversed itself and rendered an amended judgment.

ISSUE: Whether or not the deed of sale executed by Federico in favor of Rafael issimulated and fictitious and, hence, null and void. RULING: In the aggregate, the evidence on record demonstrate a combination of circumstances from which may be reasonably inferred certain badges of simulation that attach themselves to the deed of sale in question. The completeabsence of an attempt on the part of the buyer to assert his rights of ownershipo v e r t h e l a n d a n d r i c e m i l l i n q u e s t i o n i s t h e m o s t p r o t u b e r a n t i n d e x o f simulation. T h e d e e d o f s a l e e x e c u t e d b y F e d e r i c o i n f a v o r o f h i s n o w d e c e a s e d nephew, Rafael, is absolutely simulated and fictitious and, hence, null and void,said parties having entered into a sale transaction to which they did not intendto be legally bound. As no property was validly conveyed under the deed, thesec ond deed of sale executed by the late Rafael in favor of his uncle, should beconsidered ineffective and unavailing. The allegation of Rafael that the lapse of seven years before Federicosought the issuance of a new title in his name necessarily makes Feder ico'sclaim stale and unenforceable does not hold water. Federico's title was not in theh a n d s o f a s t r a n g e r o r mere acquaintance; it was in the possession of hisnephew who, being his l a w ye r , h a d s e r v e d h i m f a i t h f u l l y f o r m a n y y e a r s . Federico had been all the while in possession of the land covered by his title andso there was no pressing reason for Federico to have a title in his name issued.Even when the relationship between the late Rafael and Federico deteriorated,a n d e v e n t u a l l y e n d e d , i t i s n o t a t a l l s t r a n g e f o r F e d e r i c o t o h a v e b e e n complacent and unconcerned about the status of his title over the disputedproperty since he has been possessing the same actually, openly, and adversely,to the exclusion of Rafael. It was only when Federico needed the title in order toobtain a collaterized loan that Federico began to attend to the task of obtaininga title in his name over the subject land and rice mill.Decision affirmed. Petitioners, the heirs of Rafael G. Suntay, were orderedto reconvey to private respondent Federico G. Suntay the property described in paragraph 2.1 of the complaint, within 10 days from the finality of the Decision,and to surrender to him within the same period the owner's duplicate copy of Transfer Certificate of Title No. T-36714 of the Registry of Deeds of the Provinceo f B u l a c a n . I n t h e e v e n t t h a t t h e p e t i t i o n e r s f a i l o r r e f u s e t o e x e c u t e t h e necessary deed of reconveyance as herein directed, the Clerk of Court of the Regional Trial Court of Bulacan was ordered to execute the same at the expenseof the aforesaid heirs. RESCISSIBLE CONTRACTS-NATURE AND EFFECTS-MUTUAL RESTITUTIONKHE HONG CHENG, alias FELIX KHE, SANDRA JOY KHE andRAY STEVEN KHE, petitioners,VS. COURT OF APPEALS, HON. TEOFILO GUADIZ, RTC 147, MAKATI CITY and PHILAM INSURANCE CO., INC., respondentsG.R. No. 14416928 March 2001355 SCRA 701FACTS: Petitioner Khe Hong Cheng, alias Felix Khe, is the owner of B u t u a n Shipping Lines to which the Philippine Agricultural Trading Corporation used itsvessel M/V Prince Eric Corporation to ship 3,4 00 bags of Copra at Masbate fordelivery to Dipolog. Such shipping of 3, 400 bags was covered by a marineinsurance policy issued by American Home Insurance Company (eventuallyPhilam). However, M/V Prince Eric sank somewhere between Negros Island andNorthern Mindanao which resulted to the total loss of the shipment.

InsurerPhilam paid the amount of P 354, 000.00, which is the value of the copra, toP h i l i p p i n e A g r i c u l t u r a l T r a d i n g C o r p o r a t i o n . A m e r i c a n H o m e w a s t h e r e b y subrogated unto the rights of the consignee and filed a case to recover moneypaid to the latter, based on breach of common carriage.W h i l e t h e c a s e w a s p e n d i n g , K h e H o n g C h e n g e x e c u t e d d e e d s o f donations of parcels of land in favor of his children. As a consequence of a favorable judgment for American Home, a writ of execution to garnish Khe HongChengs property was issued but the sheriff failed to implement the same forC h e n g s p r o p e r t y w e r e a l r e a d y t r a n s f e r r e d t o h i s c h i l d r e n . C o n s e q u e n t l y, American home filed a case for the rescission of the deeds of donation executedby petitioner in favor of children for such were made in fraud of his creditors.Petitioner answered saying that the action should be dismissed for it alreadyp r e s c r i b e d . P e t i t i o n e r p o s i t e d t h a t t h e r e g i s t r a t i o n o f t h e d o n a t i o n w a s o n December 27, 1989 and such constituted constructive notice. And since thecomplaint was filed only in 1997, more than four (4) years after registration, theaction is thereby barred by prescription. ISSUE: Whether or not the action for the rescission of the deed o f donation hasprescribed. RULING: An accion pauliana accrues only when the creditor discovers that he hasno other legal remedy for the satisfaction of his claim against the debtor other than an accion pauliana. The accion pauliana is an action of a last resort. Foras long as the creditor still has a remedy at law for the enforcement of his claimagainst the debtor, the creditor will not have any cause of action against thecreditor for rescission of the contracts entered into by and between the debtorand anoth er person or persons. Indeed, an accion pauliana presupposes a j u d g m e n t a n d t h e i s s u a n c e b y t h e t r i a l c o u r t o f a w r i t o f e x e c u t i o n f o r t h e satisfaction of the judgment and the failure of the Sheriff to enforce and satisfythe judgment of the court. It presup poses that the creditor has exhausted theproperty of the debtor. The date of the decision of the trial court against thed e b t o r i s i m m a t e r i a l . W h a t i s i m p o r t a n t i s t h a t t h e c r e d i t o f t h e p l a i n t i f f antedates that of the fraudulent alienation by the debtor of his property. Afterall, the decision of the trial court against the debtor will retroact to the time when the debtor became indebted to the creditor.Although Article 1389 of the Civil Code provides that The action to claimrescission must be commenced within four (4) years is silent as to where theprescriptive period would commence, the general rule is such shall be reckonedf r o m the moment the cause of action accrues; i.e., the legal possibility of bringing the action. Since accion pauliana is an action of last resort after allother legal remedies have been exhausted and have been proven futile, in thecase at bar, it was only in February 25, 1997, barely a month from discoveringthat petitioner Khe Hong Cheng had no other property to satisfy the judgmentaward against him that the action for rescission accrued. So the contention of K h e H o n g C h e n g t h a t t h e a c t i o n a c c r u e d f r o m t h e t i m e o f t h e constructivenotice; i.e., December 27, 1989, the date that the deed of d o n a t i o n w a s registered, is untenable.

EFFECTS OF ANNULMENT OF VOIDABLE CONTRACTS1 . V D A . D E A P E V S . C A , 4 5 6 S C R A 1 9 3 2.FRANCISCO VS. HERRERA, 392 SCRA 3 1 7 3.BRAGANZA VS. VILLA ABRILLE, 105 PHIL. 456 4 . M I A I L H E V S . C A , 3 5 4 S C R A 6 7 5 5.KATIPUNAN VS. KATIPUNAN, JANUARY 30, 2002 6 . J U M A L O N V S . C A , J A N U A R Y 3 0 , 2 0 0 2 PERPETUA VDA. DE APE, petitioner,VS. THE HONORABLE COURT OF APPEALS and GENOROSA CAWIT VDA.DE LUMAYNO, respondents G.R. No. 133638April 15, 2005FACTS: Cleopas Ape was the registered owner of a parcel of land (Lot No. 2319)which is covered by Original Certificate of Title (OCT) No. RP 1379 (RP -154[300]). Upon Cleopas Apes death sometime in 1950, the property passed on tohis wife, Maria Ondoy, and their eleven (11) children, namely: Fortunato, Cornelio, Bernalda, Bienvenido, Encarnacion, Loreta, Lourdes, Felicidad, Adela,Dominador, and Angelina. On 15 March 1973, private respondent, joined by herhusband, Braulio, instituted a case for Specific Performance of a Deed of Salewith Damages against Fortunato and his wife Perpetua (petitioner herein). Itwas al leged in the complaint that on 11 April 1971, private respondent andFortunato entered into a contract of sale of land under which for a considerationof P5,000.00, Fortunato agreed to sell his share in Lot No. 2319 to privaterespondent. The agreement was co ntained in a receipt prepared by privaterespondents son-in-law, Andres Flores, at her behest.As private respondent wanted to register the claimed sale transaction, shesupposedly demanded that Fortunato executes the corresponding deed of salea n d t o r e c e i v e t h e b a l a n c e o f t h e c o n s i d e r a t i o n . H o w e v e r , F o r t u n a t o unjustifiably refused to heed her demands. Private respondent, therefore, prayed that Fortunato be ordered to execute and deliver to her a sufficient andr e g i s t r a b l e d e e d o f s a l e i n v o l v i n g h i s o n e - e l e v e n t h ( 1 / 1 1 ) s h a r e ; t o p a y P5,000.00 in damages; P500.00 reimbursement for litigation expenses as well asadditional P500.00 for every appeal made; P2,000.00 for attorneys fees; and topay the costs.Fortunato and petitioner denied the material allegations of the complainta n d c l a i m e d that Fortunato never sold his share in Lot No. 2319 to privaterespondent a n d t h a t h i s s i g n a t u r e a p p e a r i n g o n t h e p u r p o r t e d r e c e i p t w a s forged. By way of counterclaim, the defendants below maintained having entered into a contract of lease with respondent involving Fortunatos portion of Lot No. 2319.In their reply, the private respondent and her husband alleged that theyhad purchased from Fortunatos co-owners, as evidenced by various written instruments, their respective portions of Lot No. 2319. By virtue of these sales,they insisted that Fortunato was no longer a co-owner of Lot No. 2319 thus, hisright of redemption no longer existed.At the trial court level, Fortunato died and was substituted by his childrennamed Salodada, Clarita, Narciso, Romeo, Rodrigo, Marieta, Furtunato, Jr., andSalvador, all surnamed Ape.During the trial, private respondent contended that her husband caused the annotation of an adverse claim on the certificate of title of Lot No. 2319. Inaddition, she and her husband had the whole Lot No. 2319 surveyed by a certainOscar Mascada who came up with a technical description of said piece of land.Significantly, private respondent alleged that Fortunato was present when thesurvey was conducted.After due trial, the court a quo rendered a decision

dismissing both thecomplaint and the counterclaim. The Court of Appeals, reversed and set asidethe trial courts dismissal of the private respondents complaint but upheld theportion of the court a quos decision ordering the dismissal of petitioner and herchildrens counterclaim. It upheld private respondents position that Exhibit Gwhich is the receipt of partial payment had all the earmarks of a valid contract of sale. ISSUE: W h e t h e r t h e r e c e i p t s i g n e d b y F o r t u n a t o p r o v e s t h e e x i s t e n c e o f a contract of sale between him and private respondent. RULING: No, the Court ruled that the records of this case betray the stance of private respondent that Fortunato Ape entered into such an agreement with her.A contract of sale is a consensual contract, thus, it is perfected by mere consent of the parties. Upon its perfection, the parties may reciprocally demandperformance, that is, the vendee may compel the transfer of the ownership andto deliver the object of the sale while the vendor may demand the vendee to payt h e t h i n g s o l d . F o r t h e r e t o b e a p e r f e c t e d c o n t r a c t o f s a l e , h o w e v e r , t h e following elements must be present: consent, object, and price in money or itsequivalent. To be valid, consent: (a) should be intelligent; (b) should be free and ( c)should be spontaneous. Intelligence in consent is vitiated by error; freedom byviolence, intimidation or undue influence; spontaneity by fraud.In this jurisdiction, the general rule is that he who alleges fraud or mistakein a transaction must substantiate his allegation as the presumption is that aperson takes ordinary care for his concerns and that private dealings have beenentered into fairly and regularly. The exception to this rule is provided for underArticle 1332 of the Civil Code which provides that when one of the parties isunable to read, or if the contract is in a language not understood by him, andmistake or fraud is alleged, the person enforcing the contract must show that the terms thereof have been fully explained to the former.I n t h i s c a s e , a s p r i v a t e r e s p o n d e n t i s t h e o n e s e e k i n g t o e n f o r c e t h e claimed contract of sale, she bears the burden of proving that the terms of theagreement were fully explained to Fortunato Ape who was an illiterate. This shefailed to do. While she claimed in her testimony that the contents of the receiptwere made clear to Fortunato, such allegation was debunked by Andres Flores himself when the latter took the witness stand.Flores testified that, while he was very much aware of Fortunatos inabilityto read and write in the English language, he did not bother to fully explain to the latter the substance of the receipt (Exhibit G). He even dismissed the ideaof asking somebody else to assist Fortunato considering that a measly sum of thirty pesos was involved. Evidently, it did not occur to Flores that the documenthe himself prepared pertains to the transfer altogether of Fortunatos property tohis mother-in-law. It is precisely in situations such as this when the wisdom of Article 1332 of the Civil Code readily becomes a pparent which is to protect aparty to a contract disadvantaged by illiteracy, ignorance, mental weakness orsome other handicap. Thus, the Court annuls the contract of sale betweenFortunato and private respondent on the ground of vitiated consent. EFFECTS OF ANNULMENT OF VOIDABLE CONTRACTS1.SANCHES VS. MAPALAD2 . O E S M E R V S . P D C 3.VDA. DE APE VS. CA4.BRAGANZA VS. VILLA ABRILLLE5 . M I A L H E V S . C A 6.KATIPUNAN VS. KATIPUNAN7 . J U M A L O N V S . C A SANCHEZ vs. MAPALAD

541 SCRA 397FACTS:Respondent Mapalad was the registered owner of four (4) parcels of land located along Roxas Boulevard, Baclaran, Paraaque The PCGG issued writs of sequestration for Mapalad and all its properties. Josef, Vice president/treasurer and General Manager of Mapaladdiscovered that the 4 TCTs were missing, however the four missing tctsturned out to be in possession of Nordelak Development Corporation.Nordelak came into possession of the 4 TCTs by deed of sale purportedlyexecuted by Miguel Magsaysay in his capacity as President and BoardChairman of Mapalad.Mapalad filed an action for annulment of deed of sale and reconveyanceof title with damages against Nordelak.RTC ruled in favour of Nordelak. The Ca reversed the decision of RTC.ISSUE:Whether or not there was a valid sale between Mapalad andNordelak.RULING:In the present case, consent was purportedly given by Miguel Magsaysay,the person who signed for and in behalf of Mapalad in the deed of absolute sale dated November 2, 1989. However, as he categoricallystated on the witness stand during trial, he was no longer connected withMapalad on the said date because he already divested all his interests insaid corporation as early as 1982. Even assuming, for the sake of argument, that the signatures purporting to be his were genuine, it wouldstill be voidable for lack of authority resulting in his incapacity to giveconsent for and in behalf of the corporation. 1944, P40.00 Japanese notes were equivalent to P1.00 of current Philippine money. EFFECTS OF ANNULMENT OF VOIDABLE CONTRACTSWILLIAM ALAIN MIALHE, petitioner,VS. COURT OF APPEALS and REPUBLIC OF THE PHILIPPINES,respondentG.R. No. 10899March 20, 2001FACTS: On March 23, 1990, William Alain Mialhe, on his own behalf and on behalf o f V i c t o r i a Desbarats-Mialhe, Momique Mialhe-Sichere and Elaine Mialhe L e n c q u e s a i n g f i l e d a C o m p l a i n t f o r A n n u l m e n t o f S a l e , R e c o n v e ya n c e a n d Damages against Republic of the Philippines and defendant Development Bankof the Philippines before the court.On May 25, 1990 filed its Answer denying the substantial facts allrged inthe complaint and raising, as special and affirmative defenses, that there was noforcible take-over of the subject properties and that the amount paid to privaterespondents was fair and reasonable Defendant DBP also filed its Answer raisingas Special and Affirmative Defense that action had already prescribed.On September 11, 1992, the court issued an Order. The Court of Appeals ruled that petitioners action had prescribed. A suitto annul a voidable contract may be filed within four (4) years from the time thedefect ceases. The CA also ruled that Article 1155 of the Civil Code, according to which awritten extrajudicial demand by the creditors would interrupt prescription, referred only to a creditor-debtor relationship, which is not the case here. ISSUE: Whether or not the action for the annulment of the Contract of Sale has prescribed. RULING: CA correctly set aside the Order of the trial court. The records in this case indubitably show the lapse of the prescriptiveperiod, thus warranting the immediate dismissal of the Complaint. The suit before the trial court was an action for the annulment on theContract of Sale on the alleged ground of vitiation of consent by intimidation. The reconveyance of the three parcels of land, which the petitioner half-heatedlyespouses as the real nature of the action, can prosper only if and when the Contract of Sale covering the subject lots is annulled. Thus, the reckoning periodf o r p r e s c r i p t i o n w o u l d b e t h a t p e r t a i n i n g t o a n a c t i o n f o r t h e a n n u l m e n t o f contract; that is, four years from the time the defect in the consent ceases. There is as yet no obligation in existence. Respondent has

no obligation toreconvey the subject lots because of the existing Contract of Sale. Althoughallegedly voidable, it is binding unless annulled by a proper action in court. Notbinding a determinate conduct that can be extra judicially demanded, it cannot be considered as an obligation either. Since Article 1390 of the Civil Code statesthat voidable contracts are binding, unless they are annulled by a proper actionin court, it is clear that the defendant were not obligated to accede to any extra judicial demand to annul the Contract of Sale. EFFECTS OF ANNULMENT OF VOIDABLE CONTRACTSKATIPUNAN VS. KATIPUNAN375 SCRA 199FACTS: Respondent is the owner of a lot and a five-door apartment constructedthereon occupied by lessees. On December 29, 1985, respondent, assisted byhis brother, petitioner, entered into a Deed of Absolute Sale with their other brothers (copetitioners, represented by their father, Atty. Balguma involving thesubject property for P187, 000. 00. Consequently, respondents title to theproperty was cancelled and in lieu thereof, a new TCT was issued in favor of petitioners. Thereafter, respondent filed with the RTC a complaint for annulment of the above Deed of Absolute Sale on the ground that petitioners, with evident badfaith, conspired with one another in taking advantage of his ignorance, he being only a third grader and through insidious words and machinations, they made him sign a document purportedly a contract of employment, which turned out tobe a Deed of Absolute Sale. The lower court dismissed the complaint holding that respondent failed toprove his causes of action since he admitted that: 1.) He obtained loans from theBalgumas; 2.) He signed the Deed of Absolute Sale; and 3.) He acknowledged selling the property and that he stopped collecting the rentals. The said decision was however reversed by the Court of Appeals. ISSUE: Whether or not the subject contract is void ab initio or voidable on theground that one of the parties is incapable of giving consent or where consent isvitiated by mistake, fraud, or intimidation. RULING: A contract of sale is born from the moment there is meeting of minds u p o n t h e t h i n g w h i c h i s t h e o b j e c t o f t h e c o n t r a c t a n d u p o n t h e p r i c e . T h i s meeting of minds speaks of the intent of the parties in entering into the contractrespecting the subject matter and the consideration thereof. Thus, the elementsof a contract of sale are consent, object, and price in money or its equivalent.Under Article 1330 of the Civil Code, consent may be vitiated by any of thefollowing: 1.) mistake, 2.) violence, 3.) intimidation, 4.) undue influence, and 5.)fraud. The presence of any of these vices renders the contract voidable.A c o n t r a c t w h e r e o n e o f t h e p a r t i e s i s i n c a p a b l e o f g i v i n g c o n s e n t o r where the consent is vitiated by mistake, fraud, or intimidation, is not void ab initio but only voidable and is binding upon the parties unless annulled by propercourt action. The effect of annulment is to restore the parties to the status quo ante in so far as legally and equitably possible. As an exception, however, to theprinciple of mutual restitution, Article 1399 provides that when the defect of thecontract consists in the incapacity of one of the parties, the incapacitatedperson is not obliged to make restitution, except when he has been benefited

bythe things or price received by him. Since the Deed of Absolute Sale betweenRespondent and the Balguma brothers is voidable, and hereby annulled , thenthe restitution of the property and its fruits to respondent is just and proper. Therefore, the petitioners are hereby ordered to turn over to respondentBraulio Katipunan, Jr. the rentals they received for the five -door apartmentcorresponding to the period from January, 1986 up to the time the property shallhave been returned to him, with interest at the legal rate. EFFECTS OF ANNULMENT OF VOIDABLE CONTRACTS JUMALON VS. COURT OF APPEALS375 SCRA 175 JANUARY 30, 2002FACTS: On July 16, 1991, petitioner and complainant entered into a Conditional Sales Agreement whereby the latter purchased from the former a house and lot.On July 24, 1991, petitioner executed in favor of complainant a Deed of AbsoluteSale. Title was transferred to complainant on July 29, 1991. Thereafter, complainant learned from neighboring residents that thepresence of high -tension wires in the subdivision where the house and lot islocated generate tremendous static electricity and produce electric sparkswhenever it rains. Upon complainant s inquiries to the Meralco and HLURB, hefound out that the subject house and lot was built within the 30 -meter right of way of Meralco wherein high tension wires carrying 115, 000 volts are located which posed serious risks on the property and its occupants.Consequently, sometime in November 1992, complainant filed a case fordeclaration of nullity or annulment of sale of real property before the R.T.C.. Thelower court dismissed the case. Thereafter, complainant filed before the HLURBa complaint before the HLURB seeking the rescission of the Conditional SalesA g r e e m e n t a n d t h e A b s o l u t e D e e d o f S a l e o n t h e g r o u n d o f f r a u d . H L U R B rendered decision in favor of complainant which was upheld by the Court of Appeals, hence this petition. ISSUE: Whether or not there was fraud on the part of petitioner as to warrant therescission of the Conditional Sales Agreement and of the Absolute Deed of Sale. RULING: The Supreme Court found the petition without merit for it involvedquestions of fact which is not reviewable unless it is within the a m b i t o f exceptions.Nonetheless, SC agrees with the Court of Appeals that respondent de Leonwas entitled to annul the sale. There was fraud in the sale of the subject house.I t i s n o t s a f e l y h a b i t a b l e . I t i s b u i l t i n a s u b d i v i s i o n a r e a w h e r e t h e r e i s a n existing 30-meter right of way of the Manila Electric Company (Meralco) withhigh -tension wires over the property, posing a danger to life and property. The c o n s t r u c t i o n o f houses underneath the high tension wires is prohibited ashazardous to li fe a n d p r o p e r t y b e c a u s e t h e l i n e c a r r i e s 1 1 5 , 0 0 0 v o l t s o f electricity, generates tremendous static electricity and produces electric sparkswhenever it rained. CABALES, ET. AL vs COURT OF APPEALS August 31, 2007FACTS:Saturnina and her children Bonifacio, Al bino, Francisco, Leonara,Alberto and petitioner Rito inherited a parcel of land. They sold suchproperty to Dr. Cayetano Corrompido with a right to repurchase within 8years.Alberto secured a note from Dr. Corrompido in the amount of Php 300.00.Alberto died leaving a wife and son, petitioner Nelson.Within the 8-year redemption period, Bonifacio and Albino tenderedtheir payment to Dr. Corrompido. But Dr. Corrompido only released

thedocument of sale with pacto de retro after Saturnina paid the share of herdeceased son, Alberto, plus the note.Saturnina and her children executed an affidavit to the effect thatpetitioner Nelson would only receive the amount of Php 176.34 fromrespondents-spouses when he reaches the age if 21 considering that Saturnina paid Dr. Corrompido Php 966.66 for the obligation of petitionerNelsons late father Alberto.ISSUE:Whether or not the slae entered into is valid and binding.RUKING: The legal guardian only has the plenary power of administration of the minors property. It does not include the power to alienation whichn e e d s j u d i c i a l a u t h o r i t y . T h u s w h e n S a t u r n i n a , a s l e g a l g u a r d i a n o f petitioner Rito, sold the latters pro indiviso share in subject land, she didnot have the legal authority to do so. The contarct of sale as to the proindiviso share of Petitioner Rito was unenforceable. However when hea c k n o w l e d g e d r e c e i p t o f t h e p r o c e e d s o f t h e s a l e o n J u l y2 4 , 1 9 8 6 , petitioner Rito effectively ratified it. This act of ratification rendered the sale valid and binding as to him. NECESSITY OF WRITING1.SHOEMAKER VS. LA TONDENA2 . P N B V S . PVOC SHOEMAKER vs. LA TONDEMA 68 Phil 24FACTS:D e f e n d a n t c o m p a n y, L a t o n d e n a , I n c . e n t e r e d i n t o a w r i t t e n contract of lease of services with plaintiff Harry Ives Shoemaker for ap e r i o d o f 5 ye a r s , w i t h a c o m p e n s a t i o n c o n s i s t i n g o f 8 % o f t h e n e t earnings of defendant. That during each year that the contract was in force, plaintiff would receive monthly during the period of the contract of t h e s u m o f P h p 1 , 5 0 0 . 0 0 o r P h p 1 8 , 0 0 0 . 0 0 p e r a n n u m a s m i n i m u m compensation if 8% of the net earnings of the aforementioned alleged business would not reach the amount. The defendant company alleged that there were changes in the contract in which both the parties agreed upon.P l a i n t i f f f i l e d a c o m p l a i n t a g a i n s t d e f e n d a n t c o m p a n y . T h e defendant interposed a demurrer based on the ground that the factstherein alleged do not constitute a cause of action, since it is not averredthat the alleged mutual agreement modifying the contract of lease of services, has been put in writing, whereas it states that its terms andconditions may only be modified upon the written consent of both parties.ISSUE:Whether or not the ocurt a quo ered in sustaining the demurrerinterposed by the defendant company to the second amended complaintf i l e d b y p l a i n t i f f , o n t h e g r o u n d t h a t t h e f a c t s a l l e g e d t h e r e i n d o n o t constitute a couse of action.RUKING:When in an oral contract which by its terms, is not to be performedwithin 1 year from the execution thereof, one of the contracting partieshas complied within the year with the obligations imposed on him said contract, the other party cannot avoid the fulfillment of what is incumbenton him under the same contract by invoking the statute of frauds becausethe latter aims to prevent and not to protect fraud. EXECUTORY VS. EXECUTEDPNB vs. PHILIPPINE VEGETABLE OIL COMPANY 49 Phil 897FACTS: This appeal involves the legal right of the PNB to obtain a judgementagainst Vegetable Oil Co., Inc., for Php 15,812,454 and to foreclose amortgage on the property of the PVOC for Php 17,000,000.00 and thelegal right of the Phil C. Whitaker as intervenor to obtain a judgementdeclaring the mortgage which the PNB seeks to foreclose to be withoutforce and effect, requiring an accouting from the PNB of the sales of theproperty and assets of the Vegetable Co. and ordering the PVOC and thePNB to pay him the sum of Php 4,424,418.37In 1920, the Vegetable Oil Company, found itself in financial straits. It wasin debt to the extent of

approximately Php 30,000,000.00. The PNB wasthe largest creditor. The VOC owed the bank Php 17,000,000.00. The PNBwas securedly principally by a real and chattel mortgage in favor of thebank on its vessels Tankerville and H.S. Everett to guarantee the paymentof sums not exceed Php 4,000,000.00ISSUE:Whether or not the plaintiff had failed to comply with the contract, that itwas alleged to have celebrated with the defendant and the intervenor,that it would furnish funds to the defendant so that it could continueoperating its factory.RUKING:In the present instance, it is found that the Board of Directors of the PNBhad not consented to an agreement for practically unlimited backing of the V corporation and had not ratified any promise to trhat effect made byits general manager.All the evidence, documentary and oral, pertinent to the issue consideredand found to disclose no binding promise, tacit, or express made by thePNB to continue indefinitely the operation of the V corporation.Accordingly, intervenor Whitaker is not entitled to recover damages fromthe bank. EXECUTORY VS. EXECUTEDTAN vs VILLAPAZ 475 SCRA 720 November 22, 2005FACTS: Respondent Carmelito Villapaz issued a Philippine Bank of Communications (PBCom) crossed check in the amount of P250,000.00, payable to the order of petitioner Tony Tan. The Malita, Davao del Sur Police i ssued an invitationrequest topetitioner Antonio Tan inviting him to appear before the Deputy Chief of P o l i c e O f f i c e o n J u n e 2 7 , 1 9 9 4 a t 9 : 0 0 o c l o c k i n t h e m o r n i n g i n connection with the request of [herein respondent] Carmelito Villapaz, forconference of vital importance. The invitation-request was received by petitioner Antonio Tan on June 22, 1994 but on the advice of his lawyer, he did not show up at the Malita, Davao del Sur Police Office.R e s p o n d e n t f i l e d a C o m p l a i n t f o r s u m o f m o n e y a g a i n s t p e t i t i o n e r s spouses, alleging that, , his issuance of the February 6, 1992 PBCom crossed check which loan was to be settled interest-free in six (6) months;on the maturity date of the loan or on August 6, 1992, petitioner Antonio Tan failed to settle the same, and despite repeated demands, petitionersnever did.Petitioners alleged that they never received from respondent any demandfor payment, be it verbal or written, respecting the alleged loan; since thealleged loan was one with a period payable in six months, it shouldhave been expressly stipulated upon in writing by the parties but it was not. ISSUE: Whether or not Honorable Court of Appeals erred in concludingthat the transaction in dispute was a contract of loan and not a merematter of check encashment as found by the trial court. RUKING:At all events, a check, the entries of which are no doubt in writing,could prove a loan transaction. T h a t p e t i t i o n e r A n t o n i o T a n h a d , o n F e b r u a r y 6 , 1 9 9 2 , a n outstanding balance of more than P950,000.00 in his account at PBCom Monteverde branch where he was later to deposit respondents check didnot rule out petitioners securing a loan. It is pure naivete to believe thatif a businessman has such an outstanding balance in his bank account, hewould have no need to borrow a lesser amount.I n f i n e , a s p e t i t i o n e r s s i d e o f t h e case is incredible as it isinconsistent with the principles by which men s i m i l a r l y s i t u a t e d a r e governed, whereas respondents claim that the proceeds of the check,w h i c h w e r e a d m i t t e d l y r e c e i v e d b y p e t i t i o n e r s , r e p r e s e n t e d a l o a n extended to petitioner Antonio Tan is credible, the preponderance of evidence inclines on respondent. EXECUTORY VS. EXECUTEDSPOUSES VENANCIO DAVID and PATRICIA MIRANDA DAVID andFLORENCIA VENTURA VDA. DE BASCO, petitioners,vs. ALEJANDRO and GUADALUPE TIONGSON, respondents.

G.R. No. 108169 August 25, 1999FACTS: Three sets of plaintiffs, namely spouses Ventura, spouses David andVda. De Basco, filed a complaint for specific performance with damges,against private respondents spouses Tiongson, allegi ng that the lattersold to them lots located in Pampanga. The parties expressly agredd that in case of payment has been fullypaid respondents would execute an individual deed of absolute sale in plaintiffs flavor. The respondents demanded the executuion of a deed of sale andissuance of certificate of titile but the respondents refused to issue the same. The trial court rendered its decision in favor of the respondents. H o w e v e r t h e C A r u l e d t h a t c o n t r a c t o f s a l e w a s n o t b e e n p e r f r e c t e d between spouses David and/or Vda. De Basco and respondents. As with regard to the spouses Ventura, the CA affirmed the RTC.ISSUE: W h e t h e r o r n o t c o n t r a c t o f s a l e h a s n o t b e e n p e r f e c t e d b u t petitioners and respondents.RUKING: T h e S C r u l e d t h a t t h e r e w a s a p e r f e c t e d c o n t a c t . H o w e v e r , t h e statute of frauds is inapplicable. The rule is settled that the statute of f r a u d s a p p l i e s o n l y t o e x e c u t o r a n d n o t t o c o m p l e t e d , e x e c u t e d o r partially executed contract. In the case of spouses Da vid, the paymentmade rendered the sales contract beyong the ambit of the statutre of frauds/ The CA erred in concluding that there was no perfected contract of sale. However, in view of the stipulation of the parties that the deed of s a l e a n d c o r r e s p o n d i n g c e r t i f i c a t e o f t i t l e w o u l d b e i s s u e d a f t e r f u l l payment, then, they ad entered into a contract to sell and not a contractof sale. EXECUTORY VS. EXECUTEDGENARO CORDIAL, petitioner, vs. DAVID MIRANDA, respondent. December 14, 2000FACTS:David Miranda, a businessman from Angeles City, was engaged inrattan business. Gener Buelva was the supplier of David but the formerm e t a n a c c i d e n t a n d d i e d . G e n e r o C o r d i a l a n d M i r a n d a m e t t h r o u g h Buelvas widow, Cecilla. They agreed that Cordial will be his supplier of rattan poles. Cordials h i p p e d r a t t a n p o l e s a s t o t h e a g r e e d n u m b e r o f p i e c e s a n d s i z e s however Miranda refused to pay the cost of the rattan poles delivered.Miranda alleged that there exist no privity of contract between Miranda and Cordial.C o r d i a l f i l e d a c o m p l a i n t a g a i n t M i r a n d a . T h e R T C r e n d e r e d i t s decision in favor of the petitioner. The CA reversed the decision of the RTC.ISSUE:Whether or not Statute of Frauds applies in this case.RUKING: The CA and respondent Miranda stress the absence of a writtenmemorandum of the alleged contract between the parties. Respondentimplicity agrues that the alleged contract is unenforceable under the Statute of Frauds however, the statute of frauds applies only to executorand not to completed, executed, or partially executed contracts. Thus,were one party has performed ones obligation, oral evidence will beadmitted to prove the agreement. In the present case, it has already beenestablished that petitioner had delivered the rattan poles to respondent. The contract was partially executed, the Statute of Frauds does not apply. EXECUTORY VS. EXECUTEDVILLANUEVA-MIJARES petitioners,vs.THE COURT OF APPEALS, respondents .G.R. No. 108921 April 12, 2000FACTS:During the lifetime, Felipe, owned real property, a parcel of landsituated at Estancia, Kalibo, Capiz. Upong Felipes death, ownership of theland was passed on to his children. Pedro, on of the children, got hisshare. The remaining undivided portion of the land was held in trust by leon. His

co-heirs made several seasonable and lawful demands upon himto subdivide the partition the property, but no subdivision took place.After the death of Leon, private respondents discovered that theshares of four of the heirs of Felipe was purchased by Leon as evidencedby Deed of Sale.ISSUE:Whether or not the appellate court erred in declaring the Deed of Sale unenforceable against the private respondent fro being unauthorizedcontract.RUKING: The court has ruled that the nullity of the unenforceable contract isof a permanent nature and it will exist as long the unenforceable contractis not duly ratifired. The mere lapse of time cannot igve efficacy to such ac o n t r a c t . T h e d e f e c t i s s u c h t h a t i t c a n n o t b e c u r e d e x c e p t b y t h e subsequent ratification of the unenforceable contract by the person inwhose name the contract was executed. In the instant case, there is no showing of any express or implied ratification of the assailed Deed of Saleby the private respondents Procerfina, Ramon,. Prosperidad, and Rosa. Thus, the said Deed of Sale must remain unenforceable as to them. REMEDIESROSENCOR DEVELOPMENT CORPORATION and RENE JOAQUIN,petitioners,vs.PATERNO INQUING, IRENE GUILLERMO, FEDERICO BANTUGAN,FERNANDO MAGBANUA and LIZZA TIANGCO, respondents. G.R. No. 140479 March 8, 2000FACTS:Plaintiffs and plaintiffs-intervenors averred that they are the lessess since1971 of a two-story residential apartment and owned by spouses Faustinoand Cresencia Tiangco. The lease was nocovered by any contract. The lesses were renting the premises then for Php 150.00 a month and werea l l e g e d l y v e r b a l l y g r a n t e d b y t h e l e s s o r s t h e p r e - e m p t i v e r i g h t t o purchase the property if ever they decide to sell the same.Upon the death of the spouses Tiangco, the management of the propertywas adjudicated to their heirs who were represented by Eufrocina deLeon. The lessees received a letter from de Leon advising them that the heirs of the late spouses have already sold the property to Resencor. The lessees filed an action f\before th RTC praying for the following: a)rescission of the Deed of Absolute Sale between de Leon and Rocencor, b)t h e d e f e n d a n t s R o s e n c o r / R e n e J o a q u i n b e o r d e r e d t o r e c o n v e y t h e property to de Leon, c) de Leon be ordered to reimburse the plaintiffs fort h e r e p a i r o f t h e p r o p e r t y o r a p p l y t h e s a i d a m o u n t a s p a r t o f t h e purchase of the property. The RTC dismissed the complaint while the Ca reversed the decision of the RTC.ISSUE:W h e t h e r o r n o t a r i g h t o f f i r s t r e f u s a l i s i n d e e d c o v e r e d b y t h e provisions of the NCC on the Statute of Frauds.RUKING:A right of first refusal is not among those listed as unenforceableunder the statute of frauds. Furthermore, the application of Article 1403, par. 2(e) of the NCC, presupposes the existence of a perfected, albeit u n w r i t t e n , c o n t r a c t o f s a l e . A r i g h t o f f i r s t r e f u s a l , s u c h a s t h e o n e involved in the instant case, is not by any means a perfected contract of sale of real property. At best, it is a contractual grant, not of the sale of the real property involed byt of the right of first refusal over the propertysought to be sold.It is thus evident that the statute of frauds does not contemplatecases involving a right of right of first refusal. As such, a right of firstrefusal need not be written to be enforceable and may be proven by oralevidence. An action for recovery of what has been paid without just cause has beendesignated as an accion in rem verso. This provision does not apply if, asi n t h i s c a s e , t h e a c t i o n i s p r o s c r i b e d b y t h e C o n s t i t u t i o n o r b y t h e application of the pari delicto doctrine. 68 It may be unfair and unjust tobar the petitioner from filing an accion in rem verso over the subjectproperties, or from recovering the money he paid for the said properties,but, as Lord Mansfield stated in the early case of Holman vs. Johnson:69"The objection that a contract is

immoral or illegal as between the plaintiff a n d t h e d e f e n d a n t , s o u n d s a t a l l t i m e s very ill in the mouth of thedefendant. It is not for his sake, however, that the objection is everallowed; but it is founded in general principles of p o l i c y, w h i c h t h e defendant has the advantage of, contrary to the real justice, as betweenhim and the plaintiff." VOID/ INEXISTENT CONTRACTS: WHO MAY BRING ACTION FORDECLARATION OF NULLITY LA BUGAAL-BLAAN vs RAMOS December 1, 2004FACTS: The Petition for Prohibition and Mandamus before the Court challengesthe constitutionality of (1) Republic Act No. [RA] 7942 (The PhilippineMining Act of 1995); (2) its Implementing Rules and Regulations (DENRAdministrative Order No. [DAO] 96-40); and (3) the FTAA dated March 30,1995, executed by the government with Western Mining Corporation (Philippines), Inc. (WMCP).On January 27, 2004, the Court en banc promulgated its Decision grantingthe Petition and declaring the unconstitutionality of certain provisions of RA 7942, DAO 96-40, as well as of the entire FTAA executed between thegovernment and WMCP, mainly on the finding that FTAAs are servicecontracts prohibited by the 1987 Constitution.ISSUE:Whether or nor it is a void contract.RULING:Section 7.9 of the WMCP FTAA has effectively given away the State'ss h a r e w i t h o u t a n yt h i n g i n e x c h a n g e . M o r e o v e r , i t c o n s t i t u t e s u n j u s t enrichment on the part of the local and foreign stockholders in WMCP,because by the mere act of divestment, the local and foreign stockholdersg e t a windfall, as their share in the net mining revenues of WMCP i s automatically increased, without having to pay anything for it.Beinggrossly disadvantageous to government and detrimental to the Filipino people, as well as violative of public policy, Section 7.9 must therefore bestricken off as invalid.Section 7.8(e) of the WMCP FTAA likewise is invalid, since by allowing thes u m s s p e n t b y g o v e r n m e n t f o r t h e b e n e f i t o f t h e c o n t r a c t o r t o b e deductible from the State's share in net mining revenues, it results inbenefiting the contract or twice over. This constitutes unjust enrichmenton the part of the contractor, at the expense of government. For beinggrossly disadvantageous and prejudicial to government and contrary to public policy, Section 7.8(e) must also be declared without effect. It maylikewise be stricken off without affecting the rest of the FTAA. HEIRS OF THE LATE SPOUSES AURELIO AND ESPERANZA BALITEVS. RODRIGO N. LIM,G.R. No. 152168, December 10, 2004446 SCRA 56FACTS: The spouses Aurelio and Esperanza Balite were the owners of a parcel of land, located at Poblacion Barangay Molave, Catarman, Northern Samar, with anarea of 17,551 square meters. When Aurelio died intestate in 1985, his wife, Esperanza Balite, and their children, petitioner Antonio Balite, Flor Balite-Zamar,Visitacion Balite-Difuntorum, Pedro Balite, Pablo Balite, Gaspar Balite, CristetaBalite and Aurelio Balite, Jr., inherited the subject property and became co -owners thereof, with Esperanza inheriting an undivided share of 9,751 square meters.In the meantime, Esperanza became ill and was in dire need of money forher hospital expenses. She, through her daughter, Cristeta, offered to sell toRodrigo Lim, her undivided share for the price of P1,000,000.00. Esperanza andRodrigo agreed that, under the Deed of Abso lute Sale, to be executed byEsperanza over the property, it will be made to appear that the purchase price of the property would be P150,000.00, although the actual price agreed upon by them for the property

was P1,000,000.00.Gaspar, Visitacion, Flor, Pedr o and Aurelio, Jr. learned of the sale, and onAugust 21, 1996, they wrote a letter to the Register of Deeds [RD] of NorthernSamar, saying that they were not informed of the sale of a portion of the saidproperty by their mother nor did they give their consent thereto, and requestedthe RD to hold the approval of any application for the registration of title of o w n e r s h i p i n t h e n a m e o f t h e b u y e r o f s a i d l o t w h i c h h a s n o t y e t b e e n partitioned judicially or extrajudicially, until the issue of the legality/validit y of the above sale has been cleared.On October 23, 1996, Esperanza signed a letter addressed to Rodrigoinforming the latter that her children did not agree to the sale of the property to him and that she was withdrawing all her commitments until the val idity of thesale is finally resolved. On October 31, 1996, Esperanza died intestate and wassurvived by her children.On June 27, 1997, petitioners filed a complaint against Rodrigo with theRegional Trial Court of Northern Samar for Annulment of Sale, Quieting of Title,Injunction and Damages. The trial court dismissed the Complaint. The Court of Appeals held thatthe sale was valid and binding insofar as Ezperanza Balites undivided share of the property was concerned.Hence, this Petition. ISSUE: Whether or not the heirs of Esperanza has the right to question the said contract. RULING: T h e S u p r e m e C o u r t h e l d t h a t t h e p e t i t i o n e r s c a n n o t b e p e r m i t t e d t o unmake the Contract voluntarily entered into by their predecessor, even if the stated consideration included therein was for an unlawful purpose. The bindingforce of a contract must be recognized as far as it is legally possible to do so.Article 1345 of the Civil Code provides that the simulation of a contractmay either be absolute or relative. In absolute simulation, there is a colorablecontract but without any substance, because the parties have no intention to bebound by it. An absolutely simulated contract is void, and the parties mayrecover from each other what they may have given under the contract. On theother hand, if the parties state a false cause in the contract to conceal their realagreement, such a contract is relatively simulated. Here, the parties real agreement binds them.In the present case, the parties intended to be bound by the Contract,even i f it did not reflect the actual purchase price of the property. That the parties intended the agreement to produce legal effect is revealed by the letterof Esperanza Balite to respondent dated October 23, 1996 and petitionersadmission that there was a part ial payment of P320,000 made on the basis of the Deed of Absolute Sale. There was an intention to transfer the ownership of over 10,000 square meters of the property. The Deed of Absolute Sale wasm e r e l y r e l a t i v e l y s i m u l a t e d , i t r e m a i n s v a l i d a n d enforceable between theparties and their successors in interest since all t h e e s s e n t i a l r e q u i s i t e s prescribed by law for the validity and perfection of contracts are present. VOID/ INEXISTENT CONTRACTS: WHO MAY BRING ACTION F O R DECLARATION OF NULLITY ALEJANDRIA PINEDA and SPOUSES ADEODATO DUQUE, JR., andEVANGELINE MARY JANE DUQUE, petitioners,VS. COURT OF APPEALS and SPOUSES NELSON BAEZ andMERCEDES BAEZ, respondents2002 Feb 6FACTS: The appellees and the petitioner, Pineda, executed an Agreement toExchange Real Properties. The appellees exchanging their property at White Plains with that of the

Pinedas located in California. At the time of the executionof the agreement, the white plains property was mortgaged with the GSIS, whilet h e C a l i f o r n i a p r o p e r t y a l s o h a d a m o r t g a g e d o b l i g a t i o n . A s s t a t e d i n t h e exchange agreement, Pineda paid the appellees the total amount of $12, 000.Pineda and the spouses Duque executed an agreement to sell over the whiteplains property, whereby Pineda sold the property in the amount of P1.6M.P i n e d a p a i d t h e m o r t g a g e o f t h e w h i t e p l a i n s p r o p e r t y a n d r e q u e s t e d t h e appellees for a written authority for the release of the title from GSIS. Theappellees gave Pineda the authority with the understanding that Pineda willdeliver the title to the appel lees. Upon their return to the Philippines, theappellees discovered that the spouses Duque were occupying the white plainsproperty and a fictitious deed of sale in the name of Pineda. In a civil case filedby the appellees, the trial court declared them as the absolute owners of theproperty located in White Plains. ISSUE: Whether petitioners validly acquired the subject property. RULING: No. The Court denies the petition. It appears that the Baez spouseswere the original owners of the parcel of land and imp rovements located at 32Sarangaya St., White Plains, Quezon City. On January 11, 1983, the Baez s p o u s e s a n d petitioner Pineda executed an agreement to exchange real properties. However, the exchange did not materialize. Petitioner Pinedas " s a l e " o f t h e p r o p e r t y t o p e t i t i o n e r s D u q u e w a s n o t a u t h o r i z e d b y t h e r e a l owners of the land, respondent Baez. The Civil Code provides that in a sale of aparcel of land or any interest therein made through an agent, a special power of attorney is essential. This authority must be in writing; otherwise the sale shallbe void. In his testimony, petitioner Adeodato Duque confirmed that at the timehe "purchased" respondents property from Pineda, the latter had no SpecialPower of Authority to sell the property.A special power of attorney is necessary to enter into any contract bywhich the ownership of an immovable is transmitted or acquired for a valuableconsideration. Without an authority in writing, petitioner Pineda could not validlysell the subject property to petitioners D uque. Hence, any "sale" in favor of petitioners Duque is void. Further, Article 1318 of the Civil Code lists ther e q u i s i t e s o f a v a l i d a n d p e r f e c t e d c o n t r a c t , n a m e l y: ( 1 ) c o n s e n t o f t h e contracting parties; (2) object certain which the subject matter of the contract;(3) cause of the obligation which is established. Pineda was not authorized toenter into a contract to sell the property. As the consent of the real owner of theproperty was not obtained, no contract was perfected. Consequently, petitionerDuque failed to validly acquire the subject property. VOID/ INEXISTENT CONTRACTS: WHO MAY BRING ACTION F O R DECLARATION OF NULLITY LA BUGAL-BLAAN TRIBAL ASSOCIATION, INC. et al VS. RAMOSG.R. No. 127882December 1, 2004445 SCRA 1FACTS: Petitioners challenged constitutionality of Republic Act No. 7942 (The Philippine Mining Act of 1995) and its Implementing Rules and Regulations andt h e F i n a n c i a l a n d T e c h n i c a l A s s i s t a n c e A g r e e m e n t d a t e d M a r c h 3 0 , 1 9 9 5 , executed by the government with Western Mining Corporation (Philippines), Inc.On January 27, 2004, the Supreme Court en banc promulgated its decisiondeclaring the unconstitutionality of certain provisions of RA 7942 as well as of the entire FTAA executed between the

government and WMCP, mainly on thefinding that FTAA s are service contracts prohibited by the 1987 Constitution.Subsequently, respondents filed separate Motions for Reconsideration.I n a R e s o l u t i o n d a t e d M a r c h 9 , 2 0 0 4 , t h e S u p r e m e C o u r t r e q u i r e d petitioners to comment. The case was set for Oral Argument on June 29, 2004.After hearing the opposing sides, the Court required the parties to submit their respective memoranda in amplification of their arguments. On the same day, theCourt noted inter alia, the Manifestation and Motion for Intervention filed by theOffice of the Solicitor General on behalf of public respondents. The OSG said thatit was not interposing any objection to the Motion for Intervention filed by theChamber of Mines of the Philippines, Inc. and was in fact joining and adoptingthe latters Motion for Reconsideration. Memoranda were accordingly filed by theintervenor as well as by petitioners, public respondents, and private respondent,dwelling at length on three issues, namely, (1) mootness of the case by the saleof WMC shares in WMCP to Sagittarius which 60% its equity is owned by Filipinosand by the subsequent transfer and registration of the FTAA from WMCP to Sagittarius; (2) constitutionality of the assailed provisions of the Mining Law, itsI m p l e m e n t i n g R u l e s a n d R e g u l a t i o n s a n d t h e W M C P F T A A ; a n d , ( 3 ) p r o p e r interpretation of the phrase agreements involving either technical of financial assistance contained in paragraph 4 of Section 2 of Article XII of the Constitution.Among the assailed provisions of the Mining Law were Section 80 and thecolatilla in Section 84, as well as Section 112. The petitioners alleged that thesesections limit the States share in a mineral production-sharing agreement to justthe excise tax on the mineral product and the WMCP FTAA contains a provisionwhich grants the contractor unbridled and automatic authority to convert theFTAA into MPSA (mineral production-sharing agreements. However, the Court r u l e d t h a t t h e s e w e r e n o t a r g u e d u p o n b y t h e p a r t i e s i n t h e i r r e s p e c t i v e pleadings. Also, the Court stated that these particular provisions do not comewithin issues that were defined and delineated by during the Oral Argument, particularly the third issue, which pertained exclusively to FTAAs.L a t e r , W M C P s u b m i t t e d i t s R e p l y M e m o r a n d u m , w h i l e t h e O S G , i n compliance to the order of the Supreme Court, filed a Compliance submittingcopies of more FTAAs entered into by the government. ISSUE: Whether or not petitioners have a right to assail the statutory provisions (Sections 80, 84 and 112) for its unconstitutionality. RULING: T h e S u p r e m e C o u r t h e l d t h a t i t c a n n o t r u l e o n m e r e s u r m i s e s a n d hypothetical assumptions, without firm factual anchor, in relation to the assailedprovisions. Stated in Article 1421, The defense of illegality of contracts is notavailable to third persons whose interests are not directly affected. The Court thus held that due process requires hearing the parties who have a real legalinterests in the MPSAs (i.e. the parties who executed them) before the MPSAs can be reviewed, or worse, struck down by the Court. Thus, the petitioners have no right to question the assailed provisions. VOID/ INEXISTENT CONTRACTS: WHO MAY BRING ACTION F O R DECLARATION OF NULLITY COMMISSION ON ELECTIONS, COMELEC CHAIRMAN ALFREDO L.BENIPAYO, COMELEC COMMISSIONERS RESURRECCION Z. BORRA andFLORENTINO A. TUASON, JR., petitioners

,VS. JUDGE MA. LUISA QUIJANO-PADILLA, REGIONAL TRIAL COURT OFQUEZON CITY, BRANCH 215 and PHOTOKINA MARKETING CORP., respondents September 18, 2002G.R. No. 151992FACTS: In 1996, the Philippine Congress passed Republic Act No. 8189, otherwiseknown as the "Voter's Registration Act of 1996," providing for the modernizationand computerization of the voters' registration list and the appropriate of fundstherefor "in order to establish a clean, complete, permanent and updated list of voters."Pursuant thereto, the Commission on Elections (COMELEC) promulgatedResolution No. 00-0315 approving in principle the Voter's Registration andIdentification System Project [(VRIS) Project]. The VRIS Project envisions acomputerized database system for the May 2004 Elections. The idea is to havea national registration of voters whereby each registrant's fingerprints will be digitally entered into the system and upon completion of registration, comparedand matched with other entries to eliminate double entries. A tamper-proof andc o u n t e r f e i t - r e s i s t a n t v o t e r ' s i d e n t i f i c a t i o n c a r d w i l l t h e n b e i s s u e s t o e a c h registrant as a visual record of the registration.On September 9, 1999, the COMELEC issued invitations to pre-qualify andbid for the supply and installations of information technology equipment andancillary services for its VRIS Project. Private respondent Photokina Marketing Corporation (PHOTOKINA) pre-qualified and was allowed to participate as one of the bidders, and eventually won. A contract was perfected between the parties,but COMELEC failed to comply with the contract due to insufficiency of funds. Respondent filed a suit against petitioner, of which respondent judge granted thew r i t o f p r o h i b i t o r y i n j u n c t i o n t o p r i v a t e r e s p o n d e n t . U p o n m o t i o n f o r reconsideration of both parties, respondent judge granted the writ of mandatoryinjunction of respondent and denying the Omnibus Motion of petitioner. Hence,the instant petition for certiorari filed by the Office of the Solicitor General (OSG)in behalf of then COMELEC. PHOTOKINA filed a Comment with Motion to Dismiss,the present petition, on two procedural grounds. First, the petition violates thedoctrine of hierarchy of courts. And second, the OSG has no authority and/ors t a n d i n g t o f i l e t h e p e t i t i o n c o n s i d e r i n g t h a t t h e p e t i t i o n e r s h a v e n o t beena u t h o r i z e d b y t h e C O M E L E C e n b a n c t o t a k e s u c h a c t i o n . W i t h o u t t h e concurrence of at least a majority of the members of the COMELEC, neitherpetitioners nor the OSG could file the petition in behalf of the COMELEC. ISSUE: Whether or not the Office of the Solicitor-General has no authority and/ors t a n d i n g t o f i l e t h e p e t i t i o n c o n s i d e r i n g t h a t t h e p e t i t i o n e r s h a v e n o t b e e n authorized by the COMELEC en banc to take such action. RULING: The OSG is an independent office. Its hands are not shackled to thecause of its client agency. In the discharge of its task, the primordial concern of the OSG is to see to it that the best interest of the government is upheld. This isr e g a r d l e s s o f t h e f a c t t h a t w h a t i t p e r c e i v e d a s t h e " b e s t i n t e r e s t o f t h e government" runs counter to its client agencys position. Endowed with a broadperspective that spans the legal interest of virtually the entire governmentofficialdom, the OSG may transcend the parochial concerns of a particular clienta g e n c y a n d i n s t e a d , p r o m o t e a n d p r o t e c t t h e p u b l i c w e a l t h . T h e S u p r e m e Courts ruling in Orbos vs. Civil Service Commission, is relevant, thus:"x x x It is incumbent upon him (Solicitor General) to present to the court what he considers

would legally uphold the best interest of the government althoughit may run counter to a clients position. x x x."In the present case, it appears that after the Solicitor General studied theissues he found merit in the cause of the petitioner based on the applicable lawand jurisprudence. Thus, it is his duty to represent the petitioner as he did byfiling this petition. He cannot be disqualified from appearing for the petitioner even if in so doing his representation runs against the interests of the CSC. This is not the first time that the Office of the Solicitor General has taken ap o s i t i o n a d v e r s e t o h i s c l i e n t s l i k e t h e C S C , t h e N a t i o n a l L a b o r R e l a t i o n s Commission, among others, and even the People of the Philippines. x x x"Hence, while petitioners stand is contrary to that of the majority of theCommissioners, still, the OSG may represent the COMELEC as long as in its assessment, such would be for the best interest of the government. For, indeed,in the final analysis, the client of the OSG is not the agency but no less than theRepublic of the Philippines in whom the plenum of sovereignty resides.Moreover, it must be emphasized that petitioners are also public officialsentitled to be represented by the OSG. Under Executive Order No. 292 andP r e s i d e n t i a l D e c r e e N o . 4 7 8 , t h e O S G i s t h e l a w ye r o f t h e g o v e r n m e n t , i t s agencies and instrumentalities, and its officials or agents. Surely, this mandateincludes the three petitioners who have been impleaded as public respondentsin Special Civil Action No. Q-01-45405.Anent the alleged breach of the doctrine of hierarchy of courts, suffice it to say that it is not an iron-clad dictum. On several instances where this Courtwas confronted with cases of national interest and of serious implications, it never hesitated to set aside the rule and proceed with the judicial determinationof the case. The case at bar is of similar import. It is in the interest of the Statethat questions relating to government contracts be settled without delay. This ismore so when the contract, as in this case, involves the disbursement of publicfunds and the modernization of our countrys election process, a project that haslong been overdue. VOID/ INEXISTENT CONTRACTS: WHO MAY BRING ACTION F O R DECLARATION OF NULLITY MANSUETO CUATON, petitioner,VS . REBECCA SALUD andCOURT OF APPEALS (Special Fourteenth Division), respondents G.R. No. 158382 January 27, 2004FACTS: On January 5, 1993, respondent Rebecca Salud, joined by her husbandRolando Salud, instituted a suit for foreclosure of real estate mortgage with damages against petitioner Mansueto Cuaton and his mother, Conchita Cuaton,with the trial court. The trial court rendered a decision declaring the mortgage constituted on October 31, 1991 as void, because it was executed by MansuetoCuaton in favor of Rebecca Salud without expressly stating that he was merelyacting as a representative of Conchita Cuaton, in whose name the mortgaged lotwas titled. The court ordered petitioner to pay Rebecca Salud, inter alia , thel o a n s e c u r e d b y t h e m o r t g a g e i n t h e a m o u n t o f P 1 , 0 0 0 , 0 0 0 p l u s a t o t a l P610,000.00 representing interests of 10% and 8% per month for the periodFebruary 1992 to August 1992.Both parties filed their respective notices of appeal. The Court of Appeals affirmed the judgment of the trial court. Petitioner filed a motion for partial reconsideration of the trial courts decision with respectto the award of interest in the amount of P610,000.00, arguing that the same was iniquitous and exorbitant. This was denied by the Court of Appeals.

ISSUE: Whether or not the excessive interest rates cannot be considered as anissue presented for the first time on appeal. RULING: The contention regarding the excessive interest rates cannot be considereda s a n i s s u e p r e s e n t e d f o r t h e f i r s t t i m e o n a p p e a l . T h e r e c o r d s s h o w t h a t petitioner raised the validity of the 10% monthly interest in his answer filed withthe trial court. To deprive him of his right to assail the imposition of excessiveinterests would be to sacrifice justice to technicality. Furthermore, an appellatec o u r t i s c l o t h e d w i t h a m p l e a u t h o r i t y t o r e v i e w r u l i n g s e v e n i f t h e y a r e n o t assigned as errors. This is especially so if the court finds that their considerationis necessary in arriving at a just decision of the case before it. The Court hasconsistently held that an unassigned error clos ely related to an error properlyassigned, or upon which a determination of the question raised by the errorp r o p e r l y a s s i g n e d i s d e p e n d e n t , w i l l b e c o n s i d e r e d b y t h e a p p e l l a t e c o u r t notwithstanding the failure to assign it as an error. Since respondents pointedout the matter of interest in their Appellants Brief before the Court of Appeals,the fairness of the imposition thereof was opened to further evaluation. TheCourt therefore is empowered to review the same.Petition granted. Decision modified. The interest rates of 10% and 8% permonth imposed by the trial court is reduced to 12% per annum, computed fromthe date of the execution of the loan on October 31, 1991 until finality of thisdecision. After the judgment becomes final and executory until the obligation issatisfied, the amount due shall further earn interest at 12% per year. VOID/ INEXISTENT CONTRACTS: WHO MAY BRING ACTION F O R DECLARATION OF NULLITY DEMOSTHENES P. AGAN, JR., et al., petitioners, VS. PHILIPPINE INTERNATIONAL AIR TERMINALS CO., INC., MANILA INTERNATIONAL AIRPORT AUTHORITY,DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS and SECRETARY LEANDRO M. MENDOZA, respondents G.R. No. 155001January 21, 2004FACTS: On October 5, 1994, Asias Emerging Dragon Corp. (AEDC) submitted an unsolicited proposal to the PhilippineGovernment through the Department of Transportation and Communication (DOTC) and Manila International Airport Authority(MIAA) for the construction and development of the NAIA IPT III under a build-operate-and-transfer arrangement pursuant toR.A. No. 6957, as amended by R.A. No. 7718 (BOT Law). In accordance with the BOT Law and its Implementing Rules andRegulations (Implementing Rules), the DOTC/MIAA invited the public for submission of competitive and comparative proposalsto the unsolicited proposal of AEDC.On September 20, 1996 a consortium composed of the Peoples Air Cargo and Warehousing Co., Inc. (Paircargo),Phil. Air and Grounds Services, Inc. (PAGS) and Security Bank Corp. (Security Bank) (collectively, Paircargo Consortium),submitted their competitive proposal to the Prequalification Bids and Awards Committee (PBAC).After finding that the PaircargoConsortium submitted a bid superior to the unsolicited proposal of AEDC and after failure by AEDC to match the said bid, theDOTC issued the notice of award for the NAIA IPT III project to the Paircargo Consortium, which later organized into hereinrespondent PIATCO. Hence, on July 12, 1997, the Government, through then DOTC Secretary Arturo T. Enrile, and

PIATCO,through its President, Henry T. Go, signed the Concession Agreement for the BuildOperate-and-Transfer Arrangement of theNinoy Aquino International Airport Passenger Terminal III (1997 Concession Agreement).On November 26, 1998, the 1997 Concession Agreement was superseded by the Amended and Restated ConcessionAgreement (ARCA) containing certain revisions and modifications from the original contract. A series of supplementalagreements was also entered into by the Government and PIATCO. The First Supplement was signed on August 27, 1999, theSecond Supplement on September 4, 2000, and the Third Supplement on June 22, 2001 (collectively, Supplements) (the 1997Concession Agreement, ARCA and the Supplements collectively referred to as the PIATCO Contracts).On September 17, 2002,various petitions were filed before this Court to annul the 1997 Concession Agreement, the ARCA and the Supplements and to prohibit the public respondents DOTC and MIAA from implementing them.In a decision dated May 5, 2003, this Court granted the said petitions and declared the 1997 Concession Agreement,the ARCA and the Supplements null and void.Respondent PIATCO, respondentCongressmen and respondents-intervenors nowseek the reversal of the May 5, 2003 decision and pray that the petitions be dismissed. In the alternative, PIATCO prays thatthe Court should not strike down the entire 1997 Concession Agreement, the ARCA and its supplements in light of theirseparability clause.Respondent-Congressmen and NMTAI also pray that in the alternative, the cases at bar should be referred toarbitration pursuant to the provisions of the ARCA. PIATCOEmployees pray that the petitions be dismissed and remanded tothe trial courts for trial on the merits or in the alternative that the 1997 Concession Agreement, the ARCA and the Supplementsbe declared valid and binding. ISSUE :Whether or not that petitioners lack legal personality to file the cases at bar as they are not real parties in interestwho are bound principally or subsidiarily to the PIATCO Contracts. RULING: The determination of whether a person may institute an action or become a party to a suit brings to fore theconcepts of real party in interest, capacity to sue and standing to sue. To the legally discerning, these three concepts aredifferent although commonly directed towards ensuring that only certain parties can maintain an action. As defined in theRules of Court, a real party in interest is the party who stands to be benefited or injured by the judgment in the suit or theparty entitled to the avails of the suit.Capacity to sue deals with a situation where a person who may have a cause of action isdisqualified from bringing a suit under applicable law or is incompetent to bring a suit or is under some legal disability thatwould prevent him from maintaining an action unless represented by a guardian ad litem .Legal standing is relevant in the realm of public law. In certain instances, courts have allowed private parties toinstitute actions challenging the validity of governmental action for violation of private rights or constitutional principles. Inthese cases, courts apply the doctrine of legal standing by determining whether the party has a direct and personal interest inthe controversy and whether such party has sustained or is in imminent danger of sustaining an injury as a result of the actcomplained of, a standard which is distinct from the concept of real party in interest. Measured by this yardstick, theapplication of the doctrine on legal standing necessarily involves a preliminary consideration of the merits of the case and isnot purely a procedural issue.Considering the nature of the controversy and the issues raised in the cases at bar, this Court affirms its ruling thatthe petitioners have the requisite legal standing. The petitioners in

G.R. Nos. 155001 and 155661 are employees of serviceproviders operating at the existing international airports and employees of MIAA while petitioners-intervenors are serviceproviders with existing contracts with MIAA and they will all sustain direct injury upon the implementation of the PIATCOContracts. The 1997 Concession Agreement and the ARCA both provide that upon the commencement of operations at theNAIA IPT III, NAIA Passenger Terminals I and II will cease to be used as international passenger terminals. Further, the ARCAprovides:(d)For the purpose of an orderly transition, MIAA shall not renew any expired concession agreementrelative to any service or operation currently being undertaken at the Ninoy Aquino International Airport Passenger Terminal I, or extend any concession agreement which may expire subsequent hereto, except to the extent thatthe continuation of the existing services and operations shall lapse on or before the In-Service Date.Beyond iota of doubt, the implementation of the PIATCO Contracts, which the petitioners and petitionersintervenorsdenounce as unconstitutional and illegal, would deprive them of their sources of livelihood.Under settled jurisprudence, one's employment, profession, trade, or calling is a property right and is protected fromwrongful interference. It is also self evident that the petitioning service providers stand in imminent danger of losing legitimatebusiness investments in the event the PIATCO Contracts are upheld.Over and above all these, constitutional and other legal issues with far-reaching economic and social implicationsare embedded in the cases at bar, hence, this Court liberally granted legal standing to the petitioning members of the House of RepresentativesFirst, at stake is the build-operate-andtransfer contract of the countrys premier international airport with aprojected capacity of 10 million passengers a year. Second, the huge amount of investment to complete the project isestimated to be P13,000,000,000.00. Third, the primary issues posed in the cases at bar demand a di scussion andinterpretation of the Constitution, the BOT Law and its implementing rules which have not been passed upon by this Court inprevious cases. They can chart the future inflow of investment under the BOT Law. The Court notes the bid of new parties to participate in the cases at bar as respondents-intervenors, namely, (1) thePIATCO Employees and (2) NMTAI (collectively, the New Respondents-Intervenors). After the Courts Decision, the NewRespondents-Intervenors filed separate Motions for Reconsideration-In-Intervention alleging prejudice and direct injury.PIATCO employees claim that they have a direct and personal interest [in the controversy]... since they stand to lose their jobsshould the governments contract with PIATCO be declared null and void. NMTAI, on the other hand, represents itself as acorporation composed of responsible tax-paying Filipino citizens with the objective of protecting and sustaining the rights of its members to civil liberties, decent livelihood, opportunities for social advancement, and to a good, conscientious and honestgovernment. The Rules of Court govern the time of filing a Motion to Intervene. Section 2, Rule 19 provides that a Motion toIntervene should be filed before rendition of judgment.... The New Respondents-Intervenors filed their separate motions aftera decision has been promulgated in the present cases. They have not offered any worthy explanation to justify their lateintervention. Consequently, their Motions for Reconsideration-In-Intervention are denied for the rules cannot be relaxed toawait litigants who sleep on their rights. In any event, a sideglance at these late motions will show that they hoist no novelarguments. VOID/ INEXISTENT CONTRACTS: WHO MAY BRING ACTION F O R DECLARATION OF NULLITY SENATOR ROBERT S. JAWORSKI, petitioner, vs. PHILIPPINE AMUSEMENTAND GAMING CORPORATION and SPORTS AND GAMES ENTERTAINMENTCORPORATION, respondents2004 Jan 14G.R. No. 144463FACTS:

On March 31, 1998, PAGCORs board of directors approved an instrumentdenominated as Grant of Authority and Agreement for the Operation of Sports Betting and Internet Gaming, which granted SAGE the authority to operate andmaintain Sports Betting station in PAGCORs casino locations, and Internet Gaming facilities to service local and international bettors, provided that to thesatisfaction of PAGCOR, appropriate safeguards and procedures are establishedto ensure the integrity and fairness of the games.Petitioner, in his capacity as member of the Senate and Chairman of the Senate Committee on Games, Amusement and Sports, files the instant petition,praying that the grant of authority by PAGCOR in favor of SAGE be nullified. Hemaintains that PAGCOR committed grave abuse of discretion amounting to lackor excess of jurisdiction when it authorized SAGE to operate gambling on theinternet. He contends that PAGCOR is not authorized under its legislativefranchise, P.D. 1869, to operate gambling on the internet for the simple reasonthat the said decree could not have possibly contemplated internet gambl ings i n c e a t t h e t i m e o f i t s e n a c t m e n t o n J u l y 1 1 , 1 9 8 3 t h e i n t e r n e t w a s ye t inexistent and gambling activities were confined exclusively to real -space.F u r t h e r , h e a r g u e s t h a t t h e i n t e r n e t , b e i n g a n i n t e r n a t i o n a l n e t w o r k o f computers, necessarily transcends the territorial jurisdiction of the Philippines, and the grant to SAGE of authority to operate internet gambling contravenes thelimitation in PAGCORs franchise, under Section 14 of P.D. No. 1869. Accordingto petitioner, internet gambling does not fall under any of the categories of theauthorized gambling activities enumerated under Section 10 of P.D. No. 1869 which grants PAGCOR the right, privilege and authority to operate and maintaingambling casinos, clubs, and other recreation or amusement places, sport sgaming pools, within the territorial jurisdiction of the Republic of the Philippines.Respondents argue that petitioner does not have the requisite personaland substantial interest to impugn the validity of PAGCORs grant of authority toSAGE. ISSUE: Whether or not the petitioner has legal standing to file the instant petitionas a concerned citizen or as a member of the Philippine Senate. RULING: Objections to the legal standing of a member of the Senate or House of Representative to maintain a suit and assail the constitutionality or validity of laws, acts, decisions, rulings, or orders of various government agencies orinstrumentalities are not without precedent. Ordinarily, before a member of Congress may properly challenge the validity of an official act of any departmentof the government there must be an unmistakable showing that the challengedofficial act affects or impairs his rights and prerogatives as legislator. Howeverin a number of cases, the Court clarified that where a case involves an issue of utmost importance, or one of overreaching significance to society, the Court, inits discretion, can brush aside procedural technicalities and take cognizance of the petition. Considering that the instant petition involves legal questions thatmay have serious implications on public interests, petitioner has the requisitelegal standing to file this petition. The instant petition is GRANTED. The Grant of Authority and Agreementto Operate Sports Betting and Internet Gaming executed by PAGCOR in favor of SAGE is declared NULL and VOID. PROHIBITED CONTRACTS: EFFECTS AND REMEDIES IN CASE ONEPARTY IS INNOCENT / DISADVANTAGED1 . I N F O R M A T I O N T E C H .

F O U N D A T I O N V S . C O M E L E C , J A N . 1 3 , 20042 . P A B U G A I S V S . SAHIJWANI, 423 SCRA 5963 . L I G U E Z V S . C A , 1 0 2 P H I L 5 7 7 4 . P H I L B A N K V S . L U I S H E , 2 1 S C R A 5 2 5.EPG CONSTRUCTION VS. VIGILAR, 354 SCRA 566 6 . G O C H A N V S . Y O U N G , 3 5 4 S C R A 5 6 6 7.FRANCISCO VS. HERRERA, 392 SCRA 3178.MENDEZONA VS. OZAMIZ, 376 SCRA 4 8 2 INFORMATION TECHNOLOGY FOUNDATION OF THE PHILIPPINESVS. COMMISSION ON ELECTIONS2004 Jan 13G.R. No. 159139FACTS: On June 7, 1995, Congress passed Republic Act 8046, which authorizedComelec to conduct a nationwide demonstration of a compu terized electionsystem and allowed the poll body to pilot-test the system in the March 1996elections in the Autonomous Region in Muslim Mindanao (ARMM). On December22, 1997, Congress enacted Republic Act 8436authorizing Comelec to use anautomated election system (AES) for the process of voting, counting votes and canvassing/consolidating the results of the national and local elections. It alsom a n d a t e d t h e p o l l b o d y t o a c q u i r e a u t o m a t e d c o u n t i n g m a c h i n e s ( A C M s ) , computer equipment, devices and materials; and to adopt new electoral formsand printing materials.Initially intending to implement the automation during the May 11, 1998p r e s i d e n t i a l e l e c t i o n s , C o m e l e c e v e n t u a l l y d e c i d e d a g a i n s t f u l l n a t i o n a l implementation and limited the automation to the Autonomous Region in MuslimMindanao (ARMM). However, due to the failure of the machines to read correctlysome automated ballots in one town, the poll body later ordered their manual count for the entire Province of Sulu.In the May 2001 elections, the counting and ca nvassing of votes for bothnational and local positions were also done manually, as no additional ACMs hadbeen acquired for that electoral exercise allegedly because of time constraints.O n O c t o b e r 2 9 , 2 0 0 2 , C o m e l e c a d o p t e d i n i t s R e s o l u t i o n 0 2 - 0 1 7 0 a modernization program for the 2004 elections. It resolved to conduct biddingsfor the three (3) phases of its Automated Election System; namely, Phase I -Voter Registration and Validation System; Phase II - Automated Counting andCanvassing System; and Phase III - Electronic Transmission.On January 24, 2003, President Macapagal -Arroyo issued EO No. 172,which allocated the sum of P2.5 billion to fund the AES for the May 10, 2004e l e c t i o n s . U p o n t h e r e q u e s t o f C o m e l e c , s h e a u t h o r i z e d t h e r e l e a s e o f a n additional P500 million.On January 28, 2003, the Commission issued an Invitation to Apply forEligibility and to Bid.On February 17, 2003, the poll body released the Request for Proposal( R F P ) t o p r o c u r e t h e e l e c t i o n a u t o m a t i o n m a c h i n e s . T h e B i d s a n d A w a r d s Committee (BAC) of Comelec convened a pre-bid conference on February 18,2 0 0 3 a n d g a v e p r o s p e c t i v e b i d d e r s u n t i l M a r c h 1 0 , 2 0 0 3 t o s u b m i t t h e i r respective bids.Among others, the RFP provided that bids from manufacturers, suppliersand/or distributors forming themselves into a joint venture may be entertained,provided that the Philippine ownership thereof shall be at least 60 percent. Jointv e n t u r e i s d e f i n e d i n t h e R F P a s a g r o u p o f t w o o r m o r e m a n u f a c t u r e r s , suppliers and/or distributors that intend to be jointly and severally responsible orliable for a particular contract. Basically, the public bidding was to be conductedunder a two-envelope/two stage system. The bidders first envelope or the E l i g i b i l i t y Envelope should establish the bidders eligibility to bid and i t s qualifications to perform the acts if accepted. On the other hand, the

secondenvelope would be the Bid Envelope itself.O u t o f t h e 5 7 b i d d e r s , t h e B A C f o u n d M P C a n d t h e T o t a l I n f o r m a t i o n Management Corporation (TIMC) eligible. For technical evaluation, they wererefe rred to the BACs Technical Working Group (TWG) and the Department of Science and Technology (DOST).In its Report on the Evaluation of the Technical Proposals on Phase II, DOST said that both MPC and TIMC had obtained a number of failed marks in thetechnical evaluation. Notwithstanding these failures, Comelec en banc, on April15, 2003, promulgated Resolution No. 6074 awarding the project to MPC. TheCommission publicized this Resolution and the award of the project to MPC on May 16, 2003.O n M a y 2 9 , 2 0 0 3 , f i v e i n d i v i d u a l s a n d e n t i t i e s ( i n c l u d i n g t h e h e r e i n Petitioners Information Technology Foundation of the Philippines, represented byits president, Alfredo M. Torres; and Ma. Corazon Akol) wrote a letter to ComelecChairman Benjamin Abalos Sr. They protested the award of the Contract toRespondent MPC due to glaring irregularities in the manner in which the biddingprocess had been conducted. Citing therein the noncompliance with eligibilityas well as technical and procedural requirements (many of which have beendiscussed at length in the Petition), they sought a re -bidding. However, theComelec chairman -- speaking through Atty. Jaime Paz, his head executiveassistant -- rejected the protest and declared that the award would stand up tothe strictest scrutiny.Hence, the present Petition. ISSUE: Whether or not the Commission on Elections, the agency vested with thee x c l u s i v e c o n s t i t u t i o n a l m a n d a t e t o o v e r s e e e l e c t i o n s , g r a v e l y a b u s e d i t s discretion when, in the exercise of its administrative functions, it awarded to MPC the contract for the second phase of the comprehensive Automated ElectionSystem. RULING: Yes. There is grave abuse of discretion (1) when an act is done contrary t o t h e Constitution, the law or jurisprudence; or (2) when it is e x e c u t e d whimsically, capriciously or arbitrarily out of malice, ill will or personal bias. In the present case, the Commission on Elections approved the assailed Resolutiona n d a w a r d e d the subject Contract not only in clear violation of law and jurisprudence, b u t a l s o i n r e c k l e s s d i s r e g a r d o f i t s o w n b i d d i n g r u l e s a n d procedure.For the automation of the counting and canvassing of the ballots in the 2004 elections, Comelec awarded the Contract to Mega Pacific Consortium anentity that had not participated in the bidding. Despite this grant, the poll bodysigned the actual automation Contract with Mega Pacific eSolutions, Inc., acompany that joined the bidding but had not met the eligibility requirements.Comelec awarded this billion -peso undertaking with inexplicable haste,without adequatel y checking and observing mandatory financial, technical andlegal requirements. It also accepted the proferred computer hardware andsoftware even if, at the time of the award, they had undeniably failed to passeight critical requirements designed to safegua rd the integrity of elections,especially the following three items: (a) They failed to achieve the accuracyrating criteria of 99.9995 percent set-up by the Comelec itself, (b) They were nota b l e to detect previously downloaded results at various canvassing o r consolidation levels and to prevent these from being inputted again and (c) Theywere unable to print the statutorily required audit trails of the count/canvass atdifferent levels without any loss

of dataBecause of the foregoing violations of law and the glaring grave abuse of discretion committed by Comelec, the Court declared null and void the assailedResolution and the subject Contract. The illegal, imprudent and hasty actions of the Commission have not only desecrated legal and jurisprudential norms, b uth a v e a l s o c a s t s e r i o u s d o u b t s u p o n t h e p o l l b o d y s a b i l i t y a n d c a p a c i t y t o conduct automated elections. Truly, the pith and soul of democracy -- credible,orderly, and peaceful elections -- has been put in jeopardy by the illegal andgravely abusive acts of Comelec. The letter-protest is sufficient compliance with the requirement to exhaustadministrative remedies particularly because it hews closely to the procedureoutlined in Section 55 of RA 9184. And even without that May 29, 2003 letter -protest, the Court still holds that petitioners need not exhaust administrativeremedies in the light of Paat v. Court of Appeals. Paat enumerates the instanceswhen the rule on exhaustion of administrative remedies may be disregarded, asfollows: (1) when there is a violation of due process, (2) when the issue involvedis purely a legal question, (3) when thea d m i n i s t r a t i v e a c t i o n i s p a t e n t l y i l l e g a l a m o u n t i n g t o l a c k o r e x c e s s o f jurisdiction, (4) when there is estoppel on the part of the administrativeagency concerned, (5) when there is irreparable injury, (6) when the respondentis a department secretary whose acts as an alter ego of the President bears theimplied and assumed approval of the latter, (7) when to require exhaustion of administrative remedies would be unreasonable, (8) when it would amount to anullification of a claim, (9) when the subject matter is a private land in land caseproceedings, (10) when the rule does not provide a plain, speedy and adequater e m e d y, a n d ( 1 1 ) w h e n t h e r e a r e c i r c u m s t a n c e s i n d i c a t i n g t h e u r g e n c y o f judicial intervention. The present controversy precisely falls within the exceptions listed as Nos. ( 7 ) w h e n t o r e q u i r e e x h a u s t i o n o f a d m i n i s t r a t i v e r e m e d i e s w o u l d b e unreasonable; (10) when the rule does not provide a plain, speedy and adequater e m e d y, a n d ( 1 1 ) w h e n t h e r e a r e c i r c u m s t a n c e s i n d i c a t i n g t h e u r g e n c y o f judicial intervention. As already stated, Comelec itself made the exhaustion of administrative remedies legally impossible or, at the very least, unreasonable. PROHIBITED CONTRACTS: EFFECTS AND REMEDIES IN CASE ONE PARTY IS INNOCENT / DISADVANTAGEDTEDDY G. PABUGAIS v. DAVE P. SAHIJWANIG.R. No. 156846February 23, 2004423 SCRA 596FACTS: Pursuant to an Agreement And Undertaking on December 3, 1993, petitioner Teddy G. Pabugais, in consideration of the amount of P15,487,500.00,agreed to sell to respondent Dave P. Sahijwani a lot containing 1,239 squaremeters located at Jacaranda Street, North Forbes Park, Makati, Metro Manila. Respondent paid petitioner the amount of P600,000.00 as option/reservation feeand the balance of P14,887,500.00 to be paid within 60 days from the executionof the contract, simultaneous with delivery of the owners duplicate TransferC e r t i f i c a t e o f T i t l e i n r e s p o n d e n t s n a m e t h e D e e d o f Absolute Sale; theCertifica te of Non-Tax Delinquency on real estate taxes a n d C l e a r a n c e o n Payment of Association Dues. The parties further agreed that failure on the partof respondent to pay the balance of the purchase price entitles petitioner to forfeit the P600,000.00 option/reservation fee; while non-delivery by the latter of the necessary documents obliges him to return to respondent the s a i d option/reservation fee with interest at 18% per annum.Petitioner failed to deliver the required documents. In compliance witht h e i r a g r e e m e n t , h e r e t u r n e d t o r e s p o n d e n t t h e l a t t e r s P 6 0 0 , 0 0 0 . 0 0 option/reservation fee by way of Far

East Bank & Trust Company Check, which was, however, dishonored.Petitioner claimed that he twice tendered to respondent, through his c o u n s e l , t h e a m o u n t o f P 6 7 2 , 9 0 0 . 0 0 ( r e p r e s e n t i n g t h e P 6 0 0 , 0 0 0 . 0 0 option/reservation fee plus 18% interest per annum computed from December 3,1 9 9 3 t o A u g u s t 3 , 1 9 9 4 ) i n t h e f o r m o f F a r E a s t B a n k & T r u s t C o m p a n y Managers Check No. 088498, dated August 3, 1994, but said counsel refused toaccept the same. On August 11, 1994, petitioner wrote a letter to respondentsaying that he is consigning the amount tendered with the Regional Trial Courtof Makati City. On August 15, 1994, petitioner filed a complaint for consignation.Respondents counsel, on the other hand, admitted that his office receivedp e t i t i o n e r s l e t t e r d a t e d A u g u s t 5 , 1 9 9 4 , b u t c l a i m e d t h a t n o c h e c k wasappended thereto. He averred that there was no valid tender of p a ym e n t b e c a u s e n o c h e c k w a s t e n d e r e d a n d t h e c o m p u t a t i o n o f t h e a m o u n t t o b e tendered was insufficient, because petitioner verbally promised to pay 3%monthly interest and 25% attorneys fees as penalty for default, in addition to the interest of 18% per annum on the P600,000.00 option/reservation fee.On November 29, 1996, the trial court rendered a decision declaring theconsignation invalid for failure to prove that petitioner tendered payment to respondent and that the latter refused to receive the same. Petitioner appealedthe decision to the Court of Appeals. Petitioners motion to withdraw the amountconsigned was denied by the Court of Appeals and the decision of the trial courtwas affirmed.O n a m o t i o n f o r r e c o n s i d e r a t i o n , t h e C o u r t o f A p p e a l s d e c l a r e d t h e consignation as valid in an Amended Decision dated January 16, 2003. It heldthat the validity of the consignation had the effect of extinguishing petitionersobligation to return the option/reservation fee to respondent. Hence, petitionercan no longer withdraw the same.Unfazed, petitioner filed the instant petition for review contending that hecan withdraw the amount deposited with the trial court as a matter of rightbecause at the time he moved for the withdrawal thereof, the Court of Appealshas yet to rule on the consignations validity and the respondent had not yetaccepted the same. ISSUE: Whether or not assigning the amount of P672, 900.00 to Atty. De Guzmanis prohibited. RULING: The amount consigned with the trial court can no longer be withdrawn bypetitioner because respondents prayer in his answer that the amount consignedbe awarded to him is equivalent to an acceptance of the consignation, which hasthe effect of extinguishing petitioners obligation.Moreover, petitioner failed to manifest his intention to comply with theAgreement And Undertaking by delivering the necessary documents and thelot subject of the sale to respondent in exchange for the amount deposited. W i t h d r a w a l o f t h e m o n e y c o n s i g n e d w o u l d e n r i c h p e t i t i o n e r a n d u n j u s t l y prejudice respondent. The withdrawal of the amount deposited in order to pay attorneys fees to petitioners counsel, Atty. De Guzman, Jr., violates Article 1491 of the Civil Codewhich forbids lawyers from acquiring by assignment, property and rights whichare the object of any litigation in which they may take part by virtue of their profession. Furthermore, Rule 10 of the Canons of Professional Ethics providesthat the lawyer should not purchase any interest in the subject matter of thelitigation which he is conducting. The assailed transaction falls within the prohibition because the Deed assigning the amount of P672,900.00 to Atty.

DeGuzman, Jr., as part of his attorneys fees was executed during the pendency of this case with the Court of Appeals. In his Motion to Intervene, Atty. De Guzman, Jr., not only asserted ownership over said amount, but likewise prayed that thesame be released to him. That petitioner knowingly and voluntarily assigned thesubject amount to his counsel did not remove their agreement within the ambit of the prohibitory provisions. To grant the withdrawal would be to sanction avoid contract. WHEREFORE, in view of all the foregoing, the instant petition for review isDENIED. PROHIBITED CONTRACTS: EFFECTS AND REMEDIES IN CASE ONE PARTY IS INNOCENT / DISADVANTAGED LIGUEZ VS. COURT OF APPEALS102 PHIL 577FACTS: Petitioner filed a complaint for the recovery of parcel of land against the widow and heirs of Salvador Lopez. Petitioner averred that he is the owner of theaforementioned parcel of land pursuant to a Deed of Donation executed in her f a v o r b y t h e l a t e o w n e r , S a l v a d o r L o p e z . T h e d e f e n s e i n t e r p o s e d t h a t t h e donation was null and void for having illicit cause or consideration which was thepetitioners entering into a marital relations with Salvador, a married man, andthat the property had been adjudicated to the appellees as heirs of SalvadorLopez by the Court of First Instance.Meanwhile, the Court of Appeals found that the Deed of Donation wasprepared by a Justice of Peace and was ratified and signed when petitioner Liquez was still a minor, 16 years of age. It was the ascertainment of the Court of Appeals that the donated land belonged to the conjugal partnership of Salvadorand his wife and that the Deed of Donation was never recorded. Hence, theCourt of Appeals held that the Deed of Donation was inoperative and null andvoid because the donation was tainted with illegal cause or consideration. ISSUE: Whether or not the Deed of Donation is void for having illicit cause or consideration. RULING: N O . U n d e r A r t i c l e 1 2 7 9 o f t h e C i v i l C o d e o f 1 9 8 9 , w h i c h w a s t h e governing law during the execution of the Deed of Donation, the liberality of thedonor is deemed cover only in those contracts that are pure beneficence. In t h e s e c o n t r a c t s , t h e i d e a o f s e l f i n t e r e s t i s t o t a l l y a b s e n t i n t h e p a r t o f t h e transferee. Here, the facts as found demonstrated that in making the donation, Salvador Lopez was not moved exclusively by the desire to benefit the petitionerbut also to secure her cohabiting with him. Petitioner seeks to differentiatebetween the liberality of Lopez as cause and his desire as a motive. However,motive may be regarded as cause when it predetermined the purpose of thecontract. The Court of Appeals rejected the claim of petitioner on the ground onthe rule on pari delicto embodied in Article 1912 of the Civil Code. However, thisrule cannot be applied in the case because it cannot be said that both partieshad equal guilt where petitioner was a mere minor when the donation was madeand that it was not shown that she was fully aware of the terms of the said donation. PROHIBITED CONTRACTS: EFFECTS AND REMEDIES IN CASE ONE PARTY IS INNOCENT / DISADVANTAGEDPHILBANK VS. LUI SHE21 SCRA 52FACTS: Justinia Santos was the owner of the property where a restaurant owned by Weng Heng is located. Being 90 years of age, without any surviving relatives,d e l i v e r e d t o Weng being closed to her then, various sum of money f o r safekeeping. Subsequently, she executed a contract of lease in favor of Weng for

a period of 50 years. However, the lessee was given the right to withdraw atany time from the agreement. Subsequently, she again executed another c o n t r a c t g i v i n g W e n g t h e o p t i o n t o b u y t h e p r e m i s e s . T h e o p t i o n w a s conditioned on Wengs obtaining a Filipino citizenship, which however, Wengfailed to obtain. After which, Justinia again executed two other contracts,extending the term of the lease to 99 years and another fixing the term of theoption to 50 years. However, a year later, she filed a complaint before the trialc o u r t a l l e g i n g t h a t t h e v a r i o u s c o n t r a c t s w e r e e x e c u t e d b y h e r b e c a u s e o f machination, and inducement practiced by Weng, thereby she directed herexecutor to secure the annulment of the contract. ISSUE: Whether or not the various contracts were void. RULING: Article 1308 of the Civil Code creates no impediment to the insertion in acontract of a resolutory condition permitting the cancellation of the contract byone of the parties. Such a stipulation does not make either the validity or thef u l f i l l m e n t o f t h e c o n t r a c t d e p e n d e n t u p o n t h e w i l l o f t h e p a r t y t o w h o m I t conceded the privilege of the cancellation.In the case, the lease for an alien for a reasonable period is valid. So is t h e o p t i o n g i v i n g t h e a l i e n t h e r i g h t t o b u y t h e r e a l p r o p e r t y s u b j e c t t o t h e condition that he must obtain Filipino citizenship. Since aliens residence in thePhilippines is temporary, they may be grated temporary rights such as a lease contract which is not forbidden. However, if the alien is given not only the leaseof, but also the option to buy a piece of land by virtue of which the Filipino ownercannot sell, or otherwise dispose of his property, this to last for 50 years, then it becomes clear that the arrangement is a virtual transfer of ownership. As such,the constitutional ban against alien landholding is in grave peril.However, it does not follow that because the parties are in pari delicto,they will be left where they are without relief. Article 1416 of the Civil Codeprovides an exception when the agreement is not illegal per se but is merelyp r o h i b i t e d , a n d t h e p r o h i b i t i o n b y l a w i s d e s i g n e d f o r t h e p r o t e c t i o n o f t h e plaintiff, he may, if public policy is thereby enhanced, recover what he had paidon delivery. PROHIBITED CONTRACTS: EFFECTS AND REMEDIES IN CASE ONE PARTY IS INNOCENT / DISADVANTAGEDEPG CONSTRUCTION VS. VIGILAR259 SCRA 566FACTS: In 1989, the Ministry of Human Settlement through the B L I S S Development Corporation, initiated a housing project on a government property.For this purpose, the MHS entered into a Memorandum of Agreement (MOA) w i t h t h e M i n i s t r y o f P u b l i c W o r k s ( M P W H ) a n d H i g h w a y w h e r e t h e l a t t e r undertook to develop the housing site and construct therein 145 housing units.By virtue of the MOA, the MPWH forged individual contracts with petitioners fort h e c o n s t r u c t i o n o f t h e h o u s i n g u n i t s . U n d e r t h e c o n t r a c t s , t h e s c o p e o f construction covered only 2/3 of each housing unit. After complying, the MPWHundersecretary made a verbal request for the additional construction, for thecompletion of the housing units, which the petitioner agreed. Subsequently, petitioner received payment for the construction work dulyc o v e r e d b y t h e i n d i v i d u a l c o n t r a c t s , h o w e v e r , t h e a m o u n t c o v e r i n g t h e additional contracts were unpaid. The petitioner then sent a demand letter. TheMPWH assistant secretary averred that the money claim should be based onquantum meruit to be forwarded to t he

COA. The amount of money was finallyreleased, however, the MPWH secretary denied the subject money claim, whichprompted the petitioner to file a case before the RTC. However, the trial courtdismissed the case. ISSUE: Whether or not the petitioner has the right to be compensated for thepublic works housing project by virtue of the implied contract which was verballyexecuted. RULING: YES, the petitioner has the right to be compensated for the additionalconstruction applying the principle of quantum meruit. Notably, the peculiarc i r c u m s t a n c e s p r e s e n t i n t h e i n s t a n t c a s e b u t t r e s s p e t i t i o n e r s c l a i m f o r compensation for the additional construction, despite the illegality and void nature of the implied contracts forged between the MPWH and petitioners. Int h i s m a t t e r , i t i s b e a r s t r e s s i n g t h a t , t h e i l l e g a l i t y o f t h e s u b j e c t c o n t r a c t s proceeds from the express declaration or prohibition of the law, and not for anyintrinsic illegality. Stated differently, the subject contracts are not illegal per se. The Court cannot sanction an injustice so patent on its face and allowi t s e l f t o b e a n i n s t r u m e n t i n t h e p e r p e t r a t i o n t h e r e o f . J u s t i c e a n d e q u i t y demands that the States cloak of invincibility against suit be shred in thisparticular case and that the petitioners-contractors be duly compensated, on thebasis of quantum meruit, for the construction done on the public housing project.Petition is granted. Accordingly, the Commission on Audit is herebydirected to determine as ascertain with dispatch the total compensation duepeti tioners for the additional constructions on the housing project and to allowpayment thereof. PROHIBITED CONTRACTS: EFFECTS AND REMEDIES IN CASE ONE PARTY IS INNOCENT / DISADVANTAGEDGO CHAN VS. YOUNG354 SCRA 201FACTS: Gochan Realty was registered with the Security and E x c h a n g e Commission with Felix Gochan Sr., Maria Tiong, Pedro Gochan, Tomasa Gochan,Esteban Gochan and Crispo Gochan as its incorporators. Later, Felix GochanSr.s daughter, Alice, mother of herein respondents, inherited 50 shares of stocksin Gochan Realty from the former. Alice subsequently died leaving the 50 sharesto her husband, John Young Sr. Sometime in 1962, the RTC adjudicated 6/14 of these shares to her children. When her children, herein respondents, reached the age of majority, their father requested Gochan Realty to partition the shares of his late wife by canceling the stock certificate in his name and issuing, in lieuthereof, a new stock certificate in favor of his children. The Realty however, refused.Meanwhile, fifteen years later, Cecilia Uy and Miguel Uy filed a complaintwith the SEC for issuance of shares of stocks to the rightful owners, nullificationo f s h a r e s o f s t o c k , r e c o n v e ya n c e o f t h e p r o p e r t y i m p r e s s e d w i t h t r u s t a n d damages. The petitioners moved to dismiss the complaint. The SEC thereafterheld that the Youngs were not shown to have been stockholders stock holders of Gochan Realty to confer them with the legal capacity to bring and maintain theira c t i o n . T h a t i s w h y t h e c a s e c a n n o t b e c o n s i d e r e d a s a n i n t r a c o r p o r a t e controversy within the jurisdiction of the Commission. The Court of Appeals, onappeal, held that the SEC had no jurisdiction over the case as far as the heirs of Alice Gochan were concerned; however, it upheld the capacity of Cecilia GochanUy and her spouse, Miguel Uy. ISSUE:

Whether or not the spouses Uy have personality to file the suit before theSecurity and Exchange Commission. RULING: YES, the spouses have the personality. As a general rule, the jurisdictionof a court or tribunal over the subject matter is determined by the allegation in the complaint. The spouse averment in the complaint that the purchase of herstocks by the corporation was null and void ab initio was deemed admitted. It iselementary that a void contract produces no effect either against or in favor of anyone; it cannot create, modify or extinguish the juridical relations to where itattaches. Thus, Cecilia remains a stockholder of the corporation in view of thenullity of the contract of sale. Although she was no longer registered as a stockholder in the corporate record, the admitted allegation in the complaint made her still a bona fide stock holder of the corporation. PROHIBITED CONTRACTS: EFFECTS AND REMEDIES IN CASE ONE PARTY IS INNOCENT / DISADVANTAGEDFRANCISCO VS. HERRERA392 SCRA 317FACTS: Eligio Herrera Sr. was the owner of 2 parcels of land located in Cainta,Rizal. On January 3, 1991, petitioner Julian Francisco bought from Herrera thefirst parcel of land covered by tax Declaration No. 01-00495 for P1M pain ininstallments from November 30, 1990 to August 10, 1991. Eventually, Franciscobought the second parcel of land covered by TD No. 01-00497 for P750T. Thereafter, the children of Eligio Sr. tried to negotiate with petitioner toincrease the purchase price contending that it was grossly inadequate. Whenpetitioner refused, respondent Pastor Herrera, son of Eligio, filed a complaint fora n n u l m e n t o f s a l e . H e c l a i m e d o w n e r s h i p o v e r t h e s e c o n d p a r c e l o f l a n d allegedly by virtue of a sale in his favor since 1973. Moreover, he claimed thatthe first lot was subject to co-ownership of the surviving heirs of his parentsbefore the alleged sale to Francisco. Ultimately, Pastor alleged that the sale of the 2 parcels of land was null and void on the ground that at the time of sale,Eligio Sr. was already incapacitated to give consent to a contract because of Senile Dementia which is characterized by deteriorating mental and physical condition including loss of memory.A t v a r i a n c e , F r a n c i s c o a l l e g e d t h a t r e s p o n d e n t w a s e s t o p p e d f r o m assailing the sale of the lots because respondent had effectively ratified bothsales by receiving the consideration offered in each transaction.On November 14, 1994, the trial court declared the Deeds of Sale null andv o i d . F r a n c i s c o w a s o r d e r e d t o r e t u r n t h e l o t s i n q u e s t i o n i n c l u d i n g a l l improvements. Concomitantly, Herrera was ordered to return the purchase priceof the lots sold. ISSUE: Whether or not the assailed contracts of sale are void or merely voidableand hence capable of being ratified. RULING: YES, the Supreme Court ruled that the contracts are merely voidable orannullable. Note that Article 1390 of the Civil Code specifically provides thatwhen an insane or demented person enters into a contract, the legal effect is t h a t t h e c o n t r a c t i s v o i d a b l e , n o t v o i d o r i n e x i s t e n t p e r s e . T h e r e f o r e , t h e contracts of sale entered into by Eligio Sr. are valid and binding unless annulledthrough a proper action filed in court seasonably. Furthermore, the questioneda n n u l l a b l e c o n t r a c t w a s r e n d e r e d p e r f e c t l y v a l i d i n t h i s c a s e b e c a u s e o f respondents acts of ratification. He actually received the

payments on behalf of his father further manifesting that he was agreeable to the contracts. Similarly, respondents previous negotiation for an increase in the price bolster that indeedthere was ratification of what he himself questions as a void contract. PROHIBITED CONTRACTS: EFFECTS AND REMEDIES IN CASE ONE PARTY IS INNOCENT / DISADVANTAGEDMENDEZONA VS. OZAMIZ376 SCRA 4822002 Feb 6FACTS: A civil case for quieting of title was in stituted on September 25, 1991 bypetitioner spouses Mendezona as plaintiffs.I n t h e i r c o m p l a i n t , t h e p e t i t i o n e r s , a s p l a i n t i f f s t h e r e i n , a l l e g e d t h a t petitioner spouses own a parcel of land each with almost similar areas coveredand described in Transfer Certificates of Title (TCT). The petitioners ultimatelytraced their titles of ownership over their respective properties from a notarizedDeed of Absolute Sale dated April 28, 1989 executed in their favor by Carmen Ozamiz for and in consideration of the sum of One Million Forty Thousand Pesos(P1,040,000.00). T h e petitioners initiated the suit to remove a cloud on their s a i d respective titles caused by the inscription thereon of a notice of lis pendens,which came about as a result of an incident in a Special Proceeding of the RTC. This Special Proceeding is a proceeding for guardianship over the person and properties of Carmen Ozamiz.In the course of the guardianship proceeding, the petitioners and theoppositors thereto agreed that Carmen Ozamiz needed a guardian ove r herperson and her properties, and thus respondent Montalvan was designated as g u a r d i a n o v e r t h e p e r s o n o f C a r m e n O z a m i z w h i l e p e t i t i o n e r M e n d e z o n a , respondents Roberto J. Montalvan and Julio H. Ozamiz were designated as jointguardians over the properties of the said ward. The respondents opposed the petitioners claim of ownership of the Lahugproperty and alleged that the titles issued in the petitioners names are defectiveand illegal, and the ownership of the said property was acquired in bad faith andwithout value inasmuch as the consideration for the sale is grossly inadequate and unconscionable. Respondents further alleged that at the time of the sale onApril 28, 1989 Carmen Ozamiz was already ailing and not in full possession of h e r m e n t a l f a c u l t i e s ; a n d t h a t h e r p r o p e r t i e s h a v i n g b e e n p l a c e d i n administration, she was in effect incapacitated to contract with petitioners. T r i a l o n t h e m e r i t s e n s u e d a n d t h e l o w e r c o u r t r u l e d i n f a v o r o f petitioners. The appellate court reversed the factual findings of the trial courtand ruled that the Deed of Absolute Sale dated April 28, 1989 was a simulatedcontract since the petitioners failed to prove that the consideration was actuallypaid, and, furthermore, that at the time of the execution of the contract themental faculties of Carmen Ozamiz were already seriously impaired. Thus, theappellate court declared that the Deed of Absolute Sale of April 28, 1989 is nulland void. It ordered the cancellation of the certificates of title issued in the petitioners names and directed the issuance of new certificates of title in favorof Carmen Ozamiz or her estate. The motion for reconsideration was denied. ISSUE: Whether or not the CA erred in ruling that the Deed of Absolute Sale datedon April 28, 1989 was a Simulated Contract. RULING: YES. Simulation is defined as "the declaration of a fictitious w i l l , deliberately made by agreement of the parties, in order to produce, for

thepurposes of deception, the appearances of a juridical act which does not exist ori s different from what that which was really executed." The requisites of simulation are: (a) an outward declaration of will different from the will of thep a r t i e s ; ( b ) t h e f a l s e a p p e a r a n c e m u s t h a v e b e e n i n t e n d e d b y m u t u a l agreement; and (c) the purpose is to deceive third persons. None of these wereclearly shown to exist in the case at bar.Contrary to the erroneous conclusions of the appellate court, a simulatedcontract cannot be inferred from the mere non-production of the checks. It wasnot the burden of the petitioners to prove so. It is significant to note that theD e e d o f Absolute Sale dated April 28, 1989 is a notarized document dul ya c k n o w l e d g e d b e f o r e a n o t a r y p u b l i c . A s s u c h , i t h a s i n i t s f a v o r t h e presumption of regularity, and it carries the evidentiary weight conferred upon itwith respect to its due execution.It is admissible in evidence without further proof of its authenticity and isentitled to full faith and credit upon its face. Payment is not merely presumed from the fact that the notarized Deed of Absolute Sale dated April 28, 1989 has gone through the regular procedure as evidenced by the transfer certificates of title issued in petitioners names by theRegister of Deeds.C o n s i d e r i n g t h a t Carmen Ozamiz acknowledged, on the face of thenotarized deed, that she r e c e i v e d t h e c o n s i d e r a t i o n a t O n e M i l l i o n F o r t y Thousand Pesos (P1,040,000.00), the appellate court should not have placed toomuch emphasis on the checks, the presentation of which is not really necessary.Besides, the burden to prove alleged non -payment of the consideration of thesale was on the respondents, not on the petitioners. Also, between its conclusionbased on inconsistent oral testimonies and a duly notarized document thatenjoys presumption of regularity, the appellate court should have given moreweight to the latter. Spoken words could be notoriously unreliable as against awritten document that speaks a uniform language.It has been held that a person is not incapacitated to contract merelybecause of advanced years or by reason of physical infirmities. Only when suchage or infirmities impair her mental faculties to such extent as to prevent herfrom properly, intelligently, and fairly protecting her property rights, is sheconsidered incapacitated. The respondents utterly failed to show adequate proof that at the time of the sale on April 28, 1989 Carmen Ozamiz had allegedly lostcontrol of her mental faculties.A person is presumed to be of sound mind at any particular time and thec o n d i t i o n i s p r e s u m e d t o c o n t i n u e t o e x i s t , i n t h e a b s e n c e o f p r o o f t o t h e contrary. Competency and freedom from undue influence, shown to have existedin the other acts done or contracts executed, are presumed to continue until thecontrary is shown.WHEREFORE, the instant petition is hereby GRANTED and the assailedDecision and Resoluti on of the Court of Appeals are hereby REVERSED and SETASIDE. The Decision dated September 23, 1992 of the Regional Trial Court of C e b u C i t y , B r a n c h 6 , i n C i v i l C a s e N o . C E B - 1 0 7 6 6 i s R E I N S T A T E D . N o pronouncement as to costs. NATURAL OBLIGATIONS: KINDS (1424-1430)1 . M A N Z A N I L L A V S . C A , M A R C H 1 5 , 1 9 9 0 2.RURAL BANK OF PARAAQUE VS. R E M O L A D O , M A R C H 1 8 , 1985MANZANILLA VS. COURT OF APPEALS183 SCRA 207FACTS: In 1963, spouses Celedonio and Dolores Manzanilla sold on installment anundivided one-half portion of their residential house and lot. At the time of thesale, the said property was mortgaged to the Government Service InsuranceSystem (GSIS), which fact was

known to the vendees, spouses Magdaleno and Justina Campo. The Campo spouses took possession of the premises uponpayment of the first installment. Some payments were made to petitioners whilesome were made directly to GSIS.On May 17, 1965, the GSIS filed its application to foreclose the mortgageo n t h e p r o p e r t y f o r f a i l u r e o f t h e M a n z a n i l l a s p o u s e s t o p a y t h e i r m o n t h l y amortizations.On October 11, 1965, the property was sold at public auction where GSISwas the highest bidder. Two months before the expiration of the period to redeem or on August31, 1966, the Manzanilla spouses executed a Deed of Absolute Sale of theundivided one half portion of their property in favor of the Campo spouses.U p o n t h e e x p i r a t i o n o f t h e p e r i o d t o r e d e e m w i t h o u t t h e Manzanillaspouses exercising their right of redemption, title to the p r o p e r t y w a s consolidated in favor of the GSIS and a new title issued in its name.I n J a n u a r y 1 9 6 9 , t h e M a n z a n i l l a s p o u s e s m a d e r e p r e s e n t a t i o n s a n d succeeded in re-acquiring the property form the GSIS. Upon full payment of thepurchase price, an Absolute Deed Of Sale was executed by GSIS in favor of the Manzanilla spouses.On May 14, 1973, the Manzanilla spouses mortgaged the property to theBian Rural Bank. On September 7, 1973, petitioner Ines Carpio purchased theproperty from the Manzanilla spouses and agreed to assume the mortgage in favor of Bian Rural Bank.On November 12, 1973, private respondent Justina Campo registered heradverse claim over the said lot. On October 3, 1977, petitioner Carpio filed an ejectment case against private respondent Justina Campo.On July 31, 1979, private respondent Justina Campo (already a widow)filed a complaint for quieting of title against the Manzanilla spouses and InesCarpio praying among others, for the issuance to her of a certificate of title overthe undivided one-half portion of the property. The trial court rendered its decision in favor of Campo. The decision wasappealed by petitioners to the Court of Appeals; however it only affirmed thedecision of the trial court. Petitioners Motion for reconsideration was denied. ISSUE: Whether or not petitioners are under any legal duty to reconvey t h e undivided one-half portion of the property to private respondent Justina Campo. RULING: NO, there may be a moral duty on the part of petitioners to convey the one-half portion of the property previously sold to private respondent. However,they are under no legal obligation to do so. Hence, the action to quiet title filedby private respondent must fail. NATURAL OBLIGATIONS: KINDS (1424-1430)RURAL BANK OF PARAAQUE, INC., petitioner,VS. ISIDRA REMOLADO and COURT OF APPEALS, respondents1985 March 18FACTS: This case is about the repurchase of mortgaged property after the periodo f r e d e m p t i o n h a d e x p i r e d . I s i d r a R e m o l a d o , 6 4 , a w i d o w , a n d r e s i d e n t o f Makati, Rizal, owned a lot with an area of 308 square meters, with a bungalow thereon, which was leased to Beatriz Cabagnot. In 1966 she mortgaged it to theRural Bank of Paraaque, Inc. as security for a loan of P15,000. She paid theloan. On April 17, 1971 she mortgaged it again to the bank. She eventuallys e c u r e d l o a n s t o t a l l i n g P 1 8 , 0 0 0 . T h e l o a n s become overdue. The bankforeclosed the mortgage on July 21, 1972 and b o u g h t t h e p r o p e r t y a t t h e foreclosure sale for P22,192.70. The one -year, period of redemption was toexpire on August 21, 1973. On August 8, 1973 the bank advised Remolado thatshe had until August 23 to redeem the property. On August 9, 1973 or 14

daysbefore the expiration of the one-year redemption period, the bank gave her astatement showing that she should pay P25,491.96 for the redemption of the property on August 23. No redemption was made on that date. On September3, 1973 the bank consolidated its ownership over the property. Remolado's titlew a s c a n c e l l e d . A n e w t i t l e , T C T N o . 4 1 8 7 3 7 , w a s i s s u e d t o t h e b a n k o n September 5. On September 24, 1973, the bank gave Remolado up to teno ' c l o c k i n t h e m o r n i n g o f O c t o b e r 3 1 , 1 9 7 3 , o r 3 7 d a ys , w i t h i n w h i c h t o r e p u r c h a s e ( n o t r e d e e m s i n c e t h e p e r i o d o f r e d e m p t i o n h a d e x p i r e d ) t h e property. The bank did not specify the price.On October 26, 1973 Remolado and her daughter, Patrocinio Gomez,promised to pay the bank P33,000 on October 31 for the repurchase of the property. Contrary to her promise, Remolado did not repurchase the property onOctober 31. Five days later, or on November 5, Remolado and her daughterdelivered P33,000 cash to the bank's assistant manager as repurchase price. The amount was returned to them the next day, November 6, 1973. At thattime, the bank was no longer willing to allow the repurchase. Remolado filed anaction to compel the bank to reconvey the property to her for P25,491.96 plusinterest and other charges and to pay P35,000 as damages. The repurchaseprice was not consigned. A notice of lis pendens was registered. On November15, the bank sold the property to Pilar Aysip for P50,000. A new title was issuedto Aysip with an annotation of lis pendens The trial court ordered the bank to return the property to Remolado uponpayment of the redemption price of P25,491.96 plus interest and other bankcharges and to pay her P15,000 as damages. The Appellate Court affirmed the judgment. ISSUE: Whether or not the appellate court erred in reconveying the disputed property to Remolado. RULING: Yes. We hold that the trial court and the Appellate Court erred in orderingthe reconveyance of the property. There was no binding agreement for itsrepurchase. Even o n the assumption that the bank should be bound by its commitment to allow repurchase on or before October 31, 1973, still Remoladohad no cause of action because she did not repurchase the property on thatdate. Justice is done according to law. As a rule, equity follows the law. Therem a y b e a m o r a l o b l i g a t i o n , o f t e n r e g a r d e d a s a n equitable consideration (meaning compassion), but if there is no enforceable legal duty, the action mustfail although the disadvantaged party deserves commiseration or sympathy. The choice between what is legally just and what is morally just, when these twooptions do not coincide, is explained by Justice Moreland in Vales vs. Villa, 35Phil. 769, 788 where he said: "Courts operate not because one person has beend e f e a t e d o r o v e r c o m e b y a n o t h e r , b u t b e c a u s e h e h a s b e e n d e f e a t e d o r overcome illegally. Men may do foolish things, make ridiculous contracts, usemiserable judgment, and lose money by them - indeed, all they have in theworld; but not for that alone can the law intervene and restore. There must be,in addition, a violation of law, the commission of what the law knows as anactionable wrong before the courts are authorized to lay hold of the situationand remedy it."In the instant case, the bank acted within its legal rights when it refusedto give Remolado any extension to repurchase after October 31, 1973. It

hadgiven her about two years to liquidate her obligation. She failed to do so. Thus,the Appellate Court's judgment is reversed and set aside. KINDS OF TRUSTS: EXPRESS TRUST VS. IMPLIED TRUST1 . H U A N G V S . C A , 2 3 6 S C R A 4 2 0 2.VDA. DE ESCONDE VS. CA, 253 SCRA 663 . ANCO G VS . CA, J UNE 3 0 , 1 9 9 7 4 . MO RAL E S VS . CA , J U N E 1 9 , 1 9 9 7 5.TALA REALTY VS. BANCO FILIPINO, 392 SCRA 5 0 6 SPS. RICARDO AND MILAGROS HUANG, Petitioner,VS. COURT OF APPEALS,Et. al, RespondentsG.R. No. 108525September 13, 1994FACTS: Private respondents Dolores and Aniceto Sandoval wanted to buy two lotsin Dasmarinas Village, Makati but was allowed to buy only one lot per policy of the subdivision owner. Private respondents bought Lot 21 and registered it intheir name. Respondents also bought Lot 20 but the deed of sale was in thename of petitioner Ricardo Huang and registered in his name. Respondents constructed a house on Lot 21 while petitioners were allowed by respondents tobuild a house on Lot 20. Petitioners were also allowed to mortgage the Lot 20 tothe SSS to secure a loan. Respondents actually financed the construction of thehouse, the swimming pool, and the fence surrounding the properties on the u n d e r s t a n d i n g t h a t t h e p e t i t i o n e r s w o u l d m e r e l y h o l d t i t l e i n t r u s t f o r t h e respondents beneficial interest.Petitioner Huangs leased the property to Deltron Corporation for its officialquarters without the permission of the respondents. But later, the lesseesprohibited the use of the swimming pool by the respondents, and the Huangsb e g a n c h a l l e n g i n g t h e r e s p o n d e n t s o w n e r s h i p o f t h e p r o p e r t y. T h u s , respondents filed a complaint before the trial court for the nullification of thedeed of sale to the petitioners and the quieting of title of Lot 20. The trial court found that the respondents were the real owners of the Lot20 and therefore ordered the petitioners to vacate the property and to remit tothe respondents the rentals earned from Lot 20. The Court of Appeals affirmedthe lower courts decision. Hence, the instant recourse. ISSUE: Whether or not petitioners can claim ownership of the property registeredin their name but for which was paid by the respondents. RULING: No. Respondent Sandoval provided the money for the purchase of Lot 20but the corresponding deed of sale and transfer certificate of title were placed inthe name of petitioner Huang. Through this transaction, a resulting trust wascreated. Petitioner became the trustee of Lot 20 and its improvements for thebenefit of respondent as owner. Article 1448 of the New Civil Code provides thatthere is an implied trust when property is sold and the legal estate is granted too n e p a r t y b u t t h e p r i c e i s p a i d b y a n o t h e r f o r t h e p u r p o s e o f h a v i n g t h e beneficial interest for the property. A res ulting trust arises because of thepresumption the he who pays for a thing intends a beneficial therein for himself.Given these provisions of law, petitioner was only a trustee of the propertyin question for the benefit of the respondent who is the real owner. Therefore,petitioner cannot claim ownership of the property even when it was registered inhis name. Thus, petition is denied. The decision of the trial court as sustainedby the Court of Appeals is affirmed, with costs against petitioners. KINDS OF TRUSTS: EXPRESS TRUST VS. IMPLIED TRUST CATALINA BUAN VDA. DE ESCONDE, CONSTANCIA ESCONDE VDA. DEPERALTA, ELENITA ESCONDE and BENJAMIN ESCONDE, petitioners,

VS. HONORABLE COURT OF APPEALS and PEDRO ESCONDE, respondents 1996 February 01G.R. No. 103635FACTS: Petitioners Constancia, Benjamin and Elenita, and private respondent Pedro, are the children of the late Eulogio Esconde and petitioner Catalina Buan.Eulogio Esconde was one of the children and heirs of Andres Esconde. Andres isthe brother of Estanislao Esconde, the original owner of the disputed lot whodied without issue on April 1942. Survived by his only brother, Andres, Estanislaoleft an estate consisting of four (4) parcels of land in Samal, Bataan.Eulogio died in April, 1944 survived by petitioners and private respondent.At that time, Lazara and Ciriaca, Eulogio's sisters, had already died without having partitioned the estate of the late Estanislao Esconde.On December 5, 1946, the heirs of Lazara, Ciriaca and Eulogio executed adeed of extrajudicial partition, with the heirs of Lazara identified therein as theParty of the First Part, that of Ciriaca, the Party of the Second Part and that of E u l o g i o , t h e P a r t y o f t h e T h i r d P a r t . S i n c e t h e c h i l d r e n o f E u l o g i o , w i t h t h e exception of Constancia, were then all minors, they were represented by theirmother and judicial guardian, petitioner Catalina Buan vda. de Esconde whorenounced and waived her usufructuary rights over the parcels of land in favor of her children in the same deed. The deed bears the thumbmark of Catalina Buanand the signature of Constancia Esconde, as well as the approval and signatureof Judge Basilio Bautista.Pursuant to the same deed, transfer certificates of title were issued to thenew owners of the properties. Transfer Certificate of Title No. 394 for Lot No.1700 was issued on February 11, 1947 in the name of private respondent butCatalina kept it in her possession until she delivered it to him in 1949 whenprivate respondent got married.Meanwhile, Benjamin constructed the family home on Lot No. 1698-Bwhich is adjacent to Lot No. 1700. A portion of the house occupied an area of twenty (20) square meters, more or less, of Lot No. 1700. Benjamin also built aconcrete fence and a common gate enclosing the two (2) lots, as well as anartesian well within Lot No. 1700.Sometime in December, 1982, Benjamin discovered that Lot No. 1700 wasregistered in the name of his brother, private respondent. Believing that the lotwas co-owned by all the children of Eulogio Esconde, Benjamin demanded hisshare of the lot from private respondent. However, private respondent assertedexclusive ownership thereof pursuant to the deed of extrajudicial partition and,in 1985 constructed a "buho" fence to segregate Lot No. 1700 from Lot No. 1698-B.Hence, on June 29, 1987, petitioners herein filed a complaint before theRegional Trial Court of Bataan against private respondent for the annulment of TCT No. 394. They further prayed that private respondent be directed to enter into a partition agreement with them, and for damages (Civil Case No. 5552).In its decision of July 31, 1989, the lower court dismissed the complaintand the counterclaims. It found that the deed of extrajudicial partition was anunenforceable contract as far as Lot No. 1700 was concerned because petitionerCatalina Buan vda. de Esconde, as mother and judicial guardian of her children,exceeded her authority as such in "donating" the lot to private respondent orwaiving the rights thereto of Benjamin and Elenita in favor of private respondent.Because of the unenforceability of the deed, a trust relationship was created with private respondent as trustee and Benjamin and Elenita as beneficiariesHowever, the lower court ruled that the action had been barred by bothprescription and laches. Lot No. 1700 having been registered in the name of p r i v a t e r e s p o n d e n t o n F e b r u a r y 1 1 , 1 9 4 7 , t h e a c t i o n t o a n n u l s u c h t i t l e prescribed within ten (10) years on February

11, 1957 or more than thirty (30) years before the action was filed on June 29, 1987. T h u s , even if Art. 1963 of the old Civi l Code providing for a 30 yearprescriptive period for real actions over immovable properties were to b e applied, still, the action would have prescribed on February 11, 1977. Hence,petitioners elevated the case to the Court of Appeals which affirmed the lowercourt's decision. The appellate court held that the deed of extrajudicial partitionestablished "an implied trust arising from the mistake of the judicial guardian infavoring one heir by giving him a bigger share in the hereditary property." Itstressed th at "an action for reconveyance based on implied or constructive trust" prescribes in ten (10) years "counted from the registration of the propertyin the sole name of the co-heir." ISSUE: Whether or not the action was already barred with laches a n d prescription. RULING: Trust is the legal relationship between one person having an equitable o w n e r s h i p i n p r o p e r t y a n d a n o t h e r p e r s o n o w n i n g t h e l e g a l t i t l e t o s u c h property, the equitable ownership of the former entitling him to the performanceof certain duties and the exercise of certain powers by the latter. Trusts are either express or implied. An express trust is created by the direct and positiveacts of the parties, by some writing or deed or will or by words evidencing anintention to create a trust. No particula r words are required for the creation of an express trust, it being sufficient that a trust is clearly intended.O n t h e o t h e r h a n d , i m p l i e d t r u s t s a r e t h o s e w h i c h , w i t h o u t b e i n g expressed, are deducible from the nature of the transaction as matters of intentor which are superinduced on the transaction by operation of law as matters of equity, independently of the particular intention of the parties. In turn, impliedtrusts are either resulting or constructive trusts. These two are differentiated from each other as follows:R e s u l t i n g t r u s t s a r e b a s e d o n t h e e q u i t a b l e d o c t r i n e t h a t v a l u a b l e consideration and not legal title determines the equitable title or interest and arepresumed always to have been contemplated by the parties. They arise from thenature or circumstances of the consideration involved in a transaction wherebyone person thereby becomes invested with legal title but is obligated in equity tohold his legal title for the benefit of another. On the other hand, constructivetrusts are created by the construction of equity in order to satisfy the demands o f j u s t i c e a n d p r e v e n t u n j u s t e n r i c h m e n t . T h e y a r i s e c o n t r a r y t o i n t e n t i o n against one who, by fraud, duress or abuse of confidence, obtains or holds thelegal right to property which he ought not, in equity and good conscience, tohold.While the deed of extrajudicial partition and the registration of Lot No. 1700 occurred in 1947 when the Code of Civil Procedure or Act No. 190 was yetin force, the Supreme Court held that the trial court correctly applied Article1456.A d e e p e r a n a l ys i s o f A r t i c l e 1 4 5 6 r e v e a l s t h a t i t i s n o t a t r u s t i n t h e technical sense for in a typical trust, confidence is reposed in one person who isnamed a trustee for the benefit of another who is called the cestui que trust,respecting property which is held by the trustee for the benefit of the cestui quetrust. A constructive trust, unlike an express trust, does not emanate from, orgenerate a fiduciary relation. While in an express trust, a beneficiary and atrustee are linked by confidential or fiduciary relations, in a constructive trust, there is neither a promise nor any fiduciary relation to speak of and the so-calledt r u s t e e n e i t h e r a c c e p t s a n y t r u s t

n o r i n t e n d s h o l d i n g t h e p r o p e r t y f o r t h e beneficiary.In the case at bench, petitioner Catalina Buan vda. de Esconde, as mothera n d l e g a l g u a r d i a n o f h e r c h i l d r e n , a p p e a r s t o h a v e f a v o r e d h e r e l d e r s o n , private respondent, in allowing that he be given Lot No. 1700 in its entirety inthe extrajudicial partition of the Esconde estate to the prejudice of her otherchildren. Although it does not appear on record whether Catalina intentionallygranted private respondent that privileged bestowal, the fact is that, said lot wasregistered in private respondent's name. After TCT No. 394 was handed to himb y h i s m o t h e r , p r i v a t e r e s p o n d e n t e x e r c i s e d e x c l u s i v e r i g h t s o f o w n e r s h i p therein to the extent of even mortgaging the lot when he needed money.If, as petitioners insist, a mistake was committed in allotting Lot No. 1700to private respondent, then a trust relationship was created between them andprivate respondent. However, private respondent never considered himself a trustee. If he allowed his brother Benjamin to construct or make improvementsthereon, it appears to have been out of tolerance to a brother.Consequently, if indeed, by mistake, private respondent was given the entirety of Lot No. 1700, the trust relationship between him and petitioners wasa constructive, not resulting, implied trust. Petitioners, therefore, correctly q u e s t i o n e d p r i v a t e r e s p o n d e n t ' s e x e r c i s e o f a b s o l u t e o w n e r s h i p o v e r t h e property. Unfortunately, however, petitioners assailed it long after their right todo so had prescribed. The rule that a trustee cannot acquire by prescription ownership overproperty entrusted to him until and unless he repudiates the trust, applies toexpress trusts and resulting implied trusts. However, in constructive impliedtrusts, prescription may supervene even if the trustee does not repudiate ther e l a t i o n s h i p . N e c e s s a r i l y, r e p u d i a t i o n o f t h e s a i d t r u s t i s n o t a c o n d i t i o n precedent to the running of the prescriptive period.Since the action for the annulment of private respondent's title to Lot No.1700 accrued during the effectivity of Act No. 190, Section 40 of Chapter III thereof applies. It provides: Sec. 40. Period of prescription as to real estate. Anaction for recovery of title to, or possession of, real property, or an interest therein, can only be brought within ten years after the cause of such action accrues. Thus, in Heirs of Jose Olviga v. Court of Appeals, the Court ruled that theten-year prescriptive period for an action for reconveyance of real property b a s e d o n i m p l i e d o r c o n s t r u c t i v e t r u s t w h i c h i s c o u n t e d f r o m t h e d a t e o f registration of the property, applies when the plaintiff is not in possession of thec o n t e s t e d p r o p e r t y. I n t h i s c a s e , p r i v a t e r e s p o n d e n t , n o t p e t i t i o n e r s w h o instituted the action, is in actual possession of Lot No. 1700. Having filed their action only on June 29, 1987, petitioners' action has been barred by prescription.Not only that. Laches has also circumscribed the action for, whether the impliedt r u s t i s c o n s t r u c t i v e o r r e s u l t i n g , t h i s d o c t r i n e a p p l i e s . 2 3 A s r e g a r d s constructive implied trusts, the Court held in Diaz, et al. v. Gorricho and Aguadothat:. . . in constructive trusts (that are imposed by law), there is neither promise norfiduciary relation; the so-called trustee does not recognize any trust and has nointent to hold for the beneficiary; therefore, the latter is not justified in delayingaction to recover his property. It is his fault if he delays; hence, he may beestopped by his own laches.It is tragic that a land dispute has once again driven a wedge betweenbrothers. However, credit must be given to petitioner Benjamin Esconde forresorting to all means possible in arriving at a settlemen t between him and hisbrother in accordance with Article 222 of the Civil Code. Verbally and in twoletters, he demanded that private respondent give him and his sisters their share in Lot No. 1700. He even reported

the matter to the barangay authoritiesf o r w h i c h t h r e e c o n f e r e n c e s w e r e h e l d . U n f o r t u n a t e l y, h i s e f f o r t s d r o v e d fruitless. Even the action he brought before the court was filed too late.On the other hand, private respondent should not be unjustly enriched bythe improvements introduced by his brother on Lot No. 1700 which he himself had tolerated. He is obliged by law to indemnify his brother, petitioner BenjaminEsconde, for whatever expenses the latter had incurred. KINDS OF TRUSTS: EXPRESS TRUST VS. IMPLIED TRUST JOVITA YAP ANCOG, and GREGORIO YAP, JR., petitioners ,VS. COURT OF APPEALS, ROSARIO DIEZ, and CARIDAD YAP, respondents G.R. No. 112260 June 30, 1997 FACTS: The land, with improvements thereon, was formerly the conjugal property of the spouses Gregorio Yap and RosarioDiez. In 1946, Gregorio Yap died, leaving his wife, private respondent Rosario Diez, and children, petitioners Jovita Yap Ancogand Gregorio Yap, Jr., and private respondent Caridad Yap as his heirs. In 1954 and again 1958, Rosario Diez obtained loansfrom the Bank of Calape, secured by a mortgage on the disputed land, which was annotated on its Original Certificate of TitleNo. 622. When Rosario Diez applied again for a loan to the bank, offering the land in question as security, the banks lawyer,Atty. Narciso de la Serna, suggested that she submit an extrajudicial settlement covering the disputed land as a means of facilitating the approval of her application. The suggestion was accepted and on April 4, 1961, Atty. de la Serna prepared anextrajudicial settlement, which the heirs, with the exception of petitioner Gregorio Yap, Jr., then only 15 years old, signed. As aresult, OCT No. 622 was cancelled and Transfer Certificate of Title No. 3447 (T-2411) was issued on April 13, 1961. On April 14,1961, upon the execution of a real estate mortgage on the land, the loan was approved by the bank. Rosario Diez exercisedrights of ownership over the land. In 1985, she brought an ejectment suit against petitioner Jovita Yap Ancogs husband andson to evict them from the ground floor of the house built on the land for failure to pay rent. Shortly thereafter, petitioner Jovita Ancog learned that private respondent Rosario Diez had offered the land for sale.Petitioner Ancog immediately informedher younger brother, petitioner Gregorio Yap, Jr., who was living in Davao, of their mothers plan to sell the land. On June 6,1985, they filed this action for partition in the Regional Trial Court of Bohol where it was docketed as Civil Case No. 3094. Asprivate respondent Caridad Yap was unwilling to join in the action against their mother, Caridad was impleaded as a defendant.Petitioners alleged that the extrajudicial instrument was simulated and therefore void. They claimed that in signingthe instrument they did not really intend to convey their interests in the property to their mother, but only to enable her toobtain a loan on the security of the land to cover expenses for Caridads school fees and for household repairs. The trial courtrendered judgment dismissing petitioners action. It dismissed petitioners claim that the extrajudicial settlement wassimulated and held it was voluntarily signed by the parties. Observing that even without the need of having title in her nameRosario Diez was able to obtain a loan using the land in question as collateral, the court held that the extrajudicial settlementcould not have been simulated for the purpose of enabling her to obtain another loan. Petitioners failed to overcome thepresumptive validity of the extrajudicial settlement as a public instrument. The court instead found that petitioner Ancog had waived her right to the land, as shown by the fact that on February28, 1975, petitioners husband, Ildefonso Ancog, leased the property from private

respondent Diez. Furthermore, when thespouses Ancog applied for a loan to the Development Bank of the Philippines using the land in question as collateral, theyaccepted an appointment from Rosario Diez as the latters attorney-in-fact. The court also found that the action forpartition had already prescribed.On appeal, the Court of Appeals upheld the validity of the extrajudicial settlement andsustained the trial courts dismissal of the case. The appellate court emphasized that the extrajudicial settlement could nothave been simulated in order to obtain a loan, as the new loan was merely in addition to a previous one which privaterespondent Diez had been able to obtain even without an extrajudicial settlement. Neither did petitioners adduce evidence toprove that an extrajudicial settlement was indeed required in order to obtain the additional loan. The appellate court held thatconsidering petitioner Jovita Yap Ancogs educational attainment (Master of Arts and Bachelor of Laws), it was improbable thatshe would sign the settlement if she did not mean it to be such. Hence, this petition. ISSUE: Whether or not the appellate court erred in ruling that petitioner Gregorio Yap, Jr., one of the coowners of thelitigated property, had lost his rights to the property through prescription or laches. RULING: In this case, the trial court and the Court of Appeals found no evidence to show that the extrajudicial settlement wasrequired to enable private respondent Rosario Diez to obtain a loan from the Bank of Calape. Petitioners merely claimed thatthe extrajudicial settlement was demanded by the bank.To the contrary, that the heirs (Jovita Yap Ancog and Caridad Yap)meant the extrajudicial settlement to be fully effective is shown by the fact that Rosario Diez performed acts of dominion overthe entire land, beginning with its registration, without any objection from them. Instead, petitioner Jovita Ancog agreed tolease the land from her mother, private respondent Rosario Diez, and accepted from her a special power of attorney to use theland in question as collateral for a loan she was applying from the DBP. Indeed, it was private respondent Diez who paid theloan of the Ancogs in order to secure the release of the property from mortgage Petitioner Jovita Yap Ancog contends that shecould not have waived her share in the land because she is landless. For that matter, private respondent Caridad Yap is alsolandless, but she signed the agreement. She testified that she did so out of filial devotion to her mother. Thus, what the recordof this case reveals is the intention of Jovita Ancog and Caridad Yap to cede their interest in the land to their mother RosarioDiez. It is immaterial that they had been initially motivated by a desire to acquire a loan. Under Art. 1082 of the Civil Code,every act which is intended to put an end to indivision among co-heirs is deemed to be a partition even though it shouldpurport to be a sale, an exchange, or any other transaction. The Supreme Court held that the Court of Appeals erred in ruling that the claim of petitioner Gregorio Yap, Jr. wasbarred by laches. In accordance with Rule 74, 1 of the Rules of Court, as he did not take part in the partition, he is not boundby the settlement. It is uncontroverted that, at the time the extrajudicial settlement was executed, Gregorio Yap, Jr. was aminor. For this reason, he was not included or even informed of the partition. Instead, the registration of the land in RosarioDiezs name created an implied trust in his favor by analogy to Art. 1451 of the Civil Code, which provides: When land passesby succession to any person and he causes the legal title to be put in the name of another, a trust is established by implicationof law for the benefit of the true owner. In the case of OLaco v. Co Cho Chit , Art. 1451 was held as creating a resulting trust,which is founded on the presumed intention of the parties. As a general rule, it arises where such may be reasonablypresumed to be the intention

of the parties, as determined from the facts and circumstances existing at the time of thetransaction out of which it is sought to be established. In this case, the records disclose that the intention of the parties to theextrajudicial settlement was to establish a trust in favor of petitioner Yap, Jr. to the extent of his share. Rosario Diez testifiedthat she did not claim the entire property, while Atty. de la Serna added that the partition only involved the shares of the threeparticipants.A cestui que trust may make a claim under a resulting trust within 10 years from the time the trust is repudiated.Although the registration of the land in private respondent Diezs name operated as a constructive notice of her claim of ownership, it cannot be taken as an act of repudiation adverse to petitioner Gregorio Yap, Jr.s claim, whose share in theproperty was precisely not included by the parties in the partition. Indeed, it has not been shown whether he had beeninformed of her exclusive claim over the entire property before 1985 when he was notified by petitioner Jovita Yap Ancog of their mothers plan to sell the property.This Court has ruled that for prescription to run in favor of the trustee, the trust must berepudiated by unequivocal acts made known to the cestui que trust and proved by clear and conclusive evidence. Furthermore, the rule that the prescriptive period should be counted from the date of issuance of the Torrens certificate of titleapplies only to the remedy of reconveyance under the Property Registration Decree. Since the action brought by petitioner Yapto claim his share was brought shortly after he was informed by Jovita Ancog of their mothers effort to sell the property,Gregorio Yap, Jr.s claim cannot be considered barred either by prescription or by laches. WHEREFORE , the decision of the Court of Appeals is AFFIRMED with the MODIFICATION that this case is REMANDEDto the Regional Trial Court for the determination of the claim of petitioner Gregorio Yap, Jr. KINDS OF TRUSTS: EXPRESS TRUST VS. IMPLIED TRUSTRODOLFO MORALES, represented by his heirs, and PRISCILA MORALES,petitioners,VS. COURT OF APPEALS (Former Seventeenth Division), RANULFOORTIZ, JR., and ERLINDA ORTIZ, respondents Jun 19, 1997G.R. No. 117228FACTS: This is an action for recover y of possession of land and damages with a prayer for a writ of preliminary mandatory injunction filed by private respondentsherein, spouses Ranulfo Ortiz, Jr. and Erlinda Ortiz, against Rodolfo Morales. Thecomplaint prayed that private respondents be declared the lawful owners of aparcel of land and the two-storey residential building standing thereon, and thatMorales be ordered to remove whatever improvements he constructed thereon,vacate the premises, and pay actual and moral damages, litigation expenses, attorney's fees and costs of the suit.Priscila Morales, one of the daughters of late Rosendo Avelino and Juana Ricaforte, filed a motion to intervene in the case. No opposition thereto havingbeen filed, the motion was granted on March 4, 1988. On November 30, 1988Rodolfo Morales passed away. The trial court allowed his substitution by hisheirs, Roda, Rosalia, Cesar and Priscila, all surnamed Morales. The trial courtr e n d e r e d i t s d e c i s i o n i n f a v o r o f p l a i n t i f f s , p r i v a t e r e s p o n d e n t s h e r e i n . Dissatisfied with the trial court's decision, defendants heirs of Rodolfo Moralesand intervenor Priscila Morales, petitioners herein, appealed to the Court of Appeals which in turn affirmed the decision.

ISSUE: Whether or not Celso Avelino purchase the lan d in question from theMendiolas as a mere trustee for his parents and siblings. RULING: Trusts are either express or implied.Express trusts are created by the intention of the trustor or of the parties,w h i l e i m p l i e d t r u s t s c o m e i n t o b e i n g b y o p e r a t i o n o f l a w , e i t h e r t h r o u g h implication of an intention to create a trust as a matter of law or through theimposition of the trust irrespective of, and even contrary to, any such intention.In turn, implied trusts are either resulting or constructive trusts.R e s u l t i n g t r u s t s a r e b a s e d o n t h e e q u i t a b l e d o c t r i n e t h a t v a l u a b l e consideration and not legal title determines the equitable title or interest and arepresumed always to have been contemplated by the parties. They arise fromt h e n a t u r e o r c i r c u m s t a n c e s o f t h e c o n s i d e r a t i o n i n v o l v e d i n a t r a n s a c t i o n whereby one person thereby becomes invested with legal title but is obligated inequity to hold his legal title for the benefit of another.On the other hand, constructive trusts are created by the construction of equity in order to satisfy the demands of justice and prevent unjust enrichment. They arise contrary to intention against one who, by fraud, duress or abuse of confidence, obtains or holds the legal right to property which he ought not, in equity and good conscience, to hold.In the instant case, petitioners' theory is that Rosendo Avelino owned themoney for the purchase of the property and he requested Celso, his son, to buythe property allegedly in trust for the former. The fact remains, however, thatt i t l e t o t h e p r o p e r t y w a s c o n v e ye d t o C e l s o . A c c o r d i n g l y, t h e s i t u a t i o n i s governed by or falls within the exception under the third sentence of Article1448, However, if the person to whom the title is conveyed is a child, legitimateor illegitimate, of the one paying the price of the sale, no trust is implied by law,it being disputably presumed that there is a gift in favor of the child. The preponderance of evidence, as found by the trial court and affirmedby the Court of Appeals, established positive acts of Celso Aveli no indicating,without doubt, that he considered the property he purchased from the Mendiolasas his exclusive property. He had its tax declaration transferred in his name, caused the property surveyed for him by the Bureau of Lands, and faithfully paidthe realty taxes. Finally, he sold the property to private respondents. Thetheory of implied trust with Celso Avelino as the trustor and his parents RosendoAvelino and Juan Ricaforte as trustees is not even alleged, expressly or impliedly.Decision affirmed. KINDS OF TRUSTS: EXPRESS TRUST VS. IMPLIED TRUSTTALA REALTY SERVICES CORPORATION, petitioner,VS. BANCO FILIPINO SAVINGS AND MORTGAGE BANK, respondent2004 Jan 29G.R. No. 143263FACTS: In 1979, Banco Filipino, respondent, had to unload some of its branch sitessince it has reached its allowable limit under Section 25(a) and 34 of Republic Act 337, as amended, otherwise known as the General Banking Act. The major stockholders of Banco Filipino formed a corporation known as TALA Realty Services Corporation, herein petitioner. TALA stands for the namesof Banco Filipinos four major stockholders, namely, Antonio Tiu, Tomas Aguirre,Nancy Lim and Pedro Aguirre.On August 25, 1981, respondent bank executed in favor of petitioner TALAeleven deeds of sale transferring to the latter its branch sites. In turn, petitionerleased these branch sites to respondent through separate contracts of lease fora period of twenty years, renewable for another twenty years, at the option of respondent, with a monthly rental of P12,000.00 and require respondent bank topay petitioner

P602,500.00 as advance rentals. That day, another lease contract was executed by the parties coveringeach branch site providing for a period of eleven years, renewable for anothernine years at the option of responden t. And respondent bank was required topay P602,500.00 as security deposit for the performance of the terms andconditions of the contract.In August 1992, petitioner wrote respondent informing it of the expirationof the 11-year lease contract. They failed to reach an agreement. Thus, on April1 4 , 1994, petitioner notified respondent that the lease shall no longer b e renewed and demanded that it vacate the premises and pay the rents in arrearsamounting to P2,057,600.00. Respondent did not heed such demand, promptingpetitioner to file civil case for illegal detainer.On February 5, 1998, the RTC rendered its Decision dismissing petitionerscomplaint for ejectment for lack of merit. On appeal via a petition for review,the Court of Appeals, on July 23, 1999, had dismissed the petition and upholdingthe 20year lease contract between the parties. ISSUE: Whether respondent may be ejected from the leased premises for non -payment of rent. RULING: No, the Supreme Court ruled that the parties deliberately circumventedthe real estate investment limit under Sections 25(a) and 34 of the General Banking Act. Being in pari delicto, they should suffer the consequences of theirdeception by denying them any affirmative relief. Equity dictates that Talashould not be allowed to colle ct rent from the Bank. Both the Bank and Talaparticipated in the deceptive creation of a trust to circumvent the real estatei n v e s t m e n t l i m i t u n d e r S e c t i o n s 2 5 ( a ) a n d 3 4 o f t h e G e n e r a l B a n k i n g A c t . Upholding Talas right to collect rent from the period during which the Bank wasarbitrarily closed would allow Tala to benefit from the illegal warehousingagreement. This would result in the application of the Banks advance rentalscovering the eleventh to the twentieth years of the lease, to the rentals due forthe period during which the Bank was arbitrarily closed. With the advancerentals already used up, and the Bank having stopped payment of the rent on the thirteenth year of the lease or in April 1994, rentals would be due Tala fromthe time the Bank stopped paying rent in April 1994 up to the expiration of the lease period. The Bank should not be allowed to dispute the sale of its lands to Tala nor should Tala be allowed to further collect rent from the Bank. The cleanhands doctrine will not allow the creation or the use of a juridical relation such asa trust to subvert, directly or indirectly, the law. Neither the Bank nor Tala cameto court with clean hands; neither will obtain relief from the court as one whoseeks equity and justice must come to court with clean hands Thus, the petition is DENIED. The challenged Decision of the Court of A p p e a l s d a t e d J u l y 2 3 , 1 9 9 9 a n d i t s R e s o l u t i o n d a t e d M a y 1 6 , 2 0 0 0 , a r e REVERSED and SET ASIDE. IMPLIED TRUSTS: PRESCRIPTIVE PERIODS OF ACTION T O ENFORCE IMPLIED TRUSTS: IN ACTIONS TO QUIET TITLE1 . H E I R S O F KIONISALA VS. HEIRS OF DACUT, 378 SCRA 206 2 . R A M O S V S . R A M O S , 6 1 S C R A 2 8 4 3.INTESTATE ESTATE OF TY VS. CA, 356 SCRA 6614 . V D A . D E R E T E R T O V S . B A R Z , 3 7 2 S C R A 7 1 2 5 . C H I A LIONG TAN VS. CA, 228 SCRA 756.OLACO VS. CO CHO C H I T , 2 2 0 S C R A 6 5 6 HEIRS OF AMBROCIO KIONISALA, namely, ANA, ISABEL, GRACE, JOVENand CARMELO, all surnamed KIONISALA vVS. HEIRS OF HONORIO DACUTG.R. No. 147379February 27, 2002378 SCRA 206FACTS:

On 19 December 1995 private respondents filed a complaint f o r declaration of nullity of titles, reconveyance and damages against petitioners inthe Regional Trial Court of Manolo Fortich, Bukidnon. This complaint involved 2parcels of land known as Lot No. 1017 and Lot No. 1015 with areas of 117,744 square meters and 69,974 square meters respectively, located in Pongol, Libona,Bukidnon. On 7 September 1990 Lot No. 1017 was granted a free patent topetitioners Heirs of Ambrocio Kionisala under Free Patent No. 603393, and on 13N o v e m b e r 1 9 9 1 L o t 1 0 1 5 w a s b e s t o w e d u p o n I s a b e l K i o n i s a l a , o n e o f t h e impleaded heirs of Ambrocio Kionisala under Free Patent No. 101311-91-904. Thereafter, on 19 November 1990 Lot 1017 was registered under the Torrenssystem and was issued Original Certificate of Title No. P -19819 in petitionersname, while on 5 December 199 1 Lot No. 1015 was registered in the name of Isabel Kionisala under Original Certificate of Title No. P-20229.In support of their causes of action for declaration of nullity of titles and reconveyance, private respondents claimed absolute ownership of Lot 1015 and1 0 1 7 e v e n p r i o r t o t h e i s s u a n c e o f t h e c o r r e s p o n d i n g f r e e p a t e n t s a n d certificates of title.A f t e r t h e h e a r i n g o n 3 D e c e m b e r 1 9 9 6 t h e t r i a l c o u r t d i s m i s s e d t h e complaint on the ground that the cause of action of private respondents was t r u l y f o r r e v e r s i o n s o t h a t o n l y t h e Director of Lands could have filed the c o m p l a i n t . O n 2 3 D e c e m b e r 1 9 9 6 p r i v a t e r e s p o n d e n t s m o v e d f o r reconsideration of the order of dismissal but on 3 June 1997 the motion was denied by the trial court.On 7 June 1997 private respondents appealed the order of dismissal to theCourt of Appeals. On 15 February 2000 the appellate court promulgated its assailed Decision reversing the order of dismissal. On 7 March 2000 petitionersmoved for reconsideration of the CA Decision. On 22 January 2001 the appellatecourt denied the motion for lack of merit, hence this petition for review. ISSUE: Whether or not the action for nullity of free patents and certificates of titleof Lot 1015 and Lot 1017 or the action for reconveyance based on implied trustof the same lots has prescribed. RULING: The Supreme Court ruled that neither the action for declaration of nullityof free patents and certificates of title of Lot 1015 and Lot 1017 nor the actionfor reconveyance based on an implied trust of the same lots has pre scribed. Itruled that a free patent issued over private land is null and void, and producesno legal effects whatsoever. Moreover, private respondents claim of open,public, peaceful, continuous and adverse possession of the 2 parcels of land andi t s i l l e g a l i n c l u s i o n i n t h e f r e e p a t e n t s o f p e t i t i o n e r s a n d i n their originalcertificates of title also amounts to an action for quieting of t i t l e w h i c h i s imprescriptible. The action for reconveyance based on implied trust, on the other hand,prescribes only after 1 0 years from 1990 and 1991 when the free patents andthe certificates of title over Lot 1017 and Lot 1015, respectively, were registered.Obviously the action had not prescribed when private respondents filedtheir complaint against petitioners on 19 December 1995. At any rate, theaction for reconveyance in the case at bar is also significantly deemed to be ana c t i o n t o q u i e t t i t l e f o r p u r p o s e s o f d e t e r m i n i n g t h e p r e s c r i p t i v e p e r i o d o n account of private respondents allegations of actual possession of the disputedlots. In such a case, the cause of action is truly imprescriptible. Wherefore, the instant petition for review is denied.

IMPLIED TRUSTS: PRESCRIPTIVE PERIODS OF ACTION TO ENFORCEIMPLIED TRUSTS: IN ACTIONS TO QUIET TITLERAMOS VS. RAMOS61 SCRA 284FACTS: Spouses Martin Ramos and Candida Tanate died on October 4, 1906 and O c t o b e r 2 6 , 1 8 8 0 , r e s p e c t i v e l y. T h e y w e r e s u r v i v e d b y t h e i r 3 c h i l d r e n . Moreover, Martin was survived by his 7 natural children. In December 1906, a special proceeding for the settlement of the intestate estate of said spouses wasconducted. Rafael Ramos, a brother of Martin, administered the estate for morethan 6 years. Eventually, a partition project was submitted which was signed bythe 3 legitimate children and 2 of the 7 natu ral children. A certain TimoteoZayco signed in representation of the other 5 natural children who were minors. The partition was sworn to before a justice of peace. The conjugal hereditary estate was appraised at P74,984.93, consisting of 18 parcels of land, some head of cattle and the advances to the legitimatechildren. thereof represented the estate of Martin. 1/3 thereof was the freeportion or P12,497.98. The shares of the 7 natural children were to be takenfrom that 1/3 free portion. Indeed, the partition was made in accordance with theOld Civil code. Thereafter, Judge Richard Campbell approved the partitionproject. The court declared that the proceeding will be considered closed andthe record should be archived as soon as proof was submitted that each he3irhad received the portion adjudicated to him.On February 3, 1914, Judge Nepumoceno asked the administrator tosubmit a report showing that the shares of the heirs had been delivered to themas required by the previous decision. Nevertheless, the manifestation was not instrict conformity with the terms of the judges order and with the partition project itself. 8 lots of the Himamaylan Cadastre were registered in equal sharesin the names of Gregoria (widow of Jose Ramos) and her daughter, when in factthe administrator was supposed to pay the cash adjudications to each of them asenshrined in the partition project. Plaintiffs were then constrained to bring thes u i t b e f o r e t h e c o u r t s e e k i n g f o r t h e r e c o n v e y a n c e i n t h e i r f a v o r t h e i r corresponding participations in said parcels of land in accordance with Article840 of the old Civil Code. Note that 1/6 of the subject lots represents the 1/3 free portion of martins shares which will eventually redound to the shares of his7 legally acknowledged natural children. The petitioners action was predicatedo n t h e t h e o r y t h a t t h e i r s h a r e s w e r e m e r e l y h e l d i n t r u s t b y d e f e n d a n t s . Nonetheless, no Deed of Trust was alleged and proven. Ultimately, the lowercourt dismissed the complaint on the grounds of res judicata, prescription andlaches. ISSUE: Whether or not the plaintiffs action was barred by prescription, laches and res judicata to the effect that they were denied of their right to share in theirfathers estate. RULING: YES, there was inexcusable delay thereby making the plain tiffs actionunquestionably barred by prescription and laches and also by res judicata.Inextricably interwoven with the questions of prescription and res judicata is thequestion on the existence of a trust. It is noteworthy that the main thrust of plaintiffs action is the alleged holding of their shares in trust by defendants.Emanating from such, the Supreme Court elucidated on the nature of trusts andthe availability of prescription and laches to bar the action for reconveyance of

property allegedly held in trust. It is said that trust is the right, enforceable solely in equity to the beneficial enjoyment of property, the legal title to which isvested in another. It may either be express or implied. The latter ids further subdivided into resulting and constructive trusts. Applying it now to the case atbar, the plaintiffs did not prove any express trust. Neither did they specify thekind of implied trust contemplated in their action. Therefore, its enforcementmaybe barred by laches and prescription whether they contemplate a resultingor a constructive trust. IMPLIED TRUSTS: PRESCRIPTIVE PERIODS OF ACTION TO ENFORCEIMPLIED TRUSTS: IN ACTIONS TO QUIET TITLETHE INTESTATE ESTATE OF ALEXANDER T. TY, represented by theAdministratrix, SYLVIA S. TE, petitioner,VS. COURT OF APPEALS, HON. ILDEFONSO E. GASCON,and ALEJANDRO B. TY, respondentsG.R. No. 112872April 19, 2001FACTS: Petitioner Sylvia S. Tywas married to Alexander T. Ty, son of private respondent Alejandro b. ty, on January 11, 1981. Alexander died of leukemia onMay 19, 1988 and was survived by his wife, petitioner Silvia, and only child, Krizia Katrina. In the settlement of his estate, petitioner was a p p o i n t e d administratrix of her late husbands intestate estate.O n N o v e m b e r 4 , 1 9 9 2 , petitioner filed a motion for leave to sell ormortgage estate property in o r d e r t o g e n e r a t e f u n d s f o r t h e p a ym e n t o f deficiency estate taxes in the sum of P4,714,560.00.Privite respondent Alejandro Ty then filed two complaints for the recoveryof the above-mentioned property, praying for the declaration of nullity of thedeed of absolute sale of the shares of stock executed by private respondent in f a v o r o f t h e d e c e a s e d A l e x a n d e r , p r a yi n g f o r t h e r e c o v e r y o f t h e p i e c e s o f p r o p e r t y that were placed in the name of deceased Alexander, they were a c q u i r e d through private-respondents money, without any cause o r consideration from deceased Alexander. The motions to dismiss were denied. Petitioner then filed petitions forcertiorari in the Courts of Appeals, which were also dismissed for lack of merit. Thus, the present petitions now before the Court. ISSUE: Whether or not an express trust was created by private respondent whenhe transferred the property to his son. RULING: Private respondent contends that the pieces of property were transferredin the name of the deceased Alexander for the purpose of taking care of theproperty for him and his siblings. Such transfer having been effected without cause of consideration, a resulting trust was created.WHEREFORE, the petition for certiorari in G.R. No. 112872 is DISMISSED,having failed to show that grave abuse of discretion was committed in declaringthat the regional trial court had jurisdiction over the case. The petition forreview on certiorari in G.R. 114672 is DENIED, having found no reversible errorwas committed. IMPLIED TRUSTS: PRESCRIPTIVE PERIODS OF ACTION TO ENFORCEIMPLIED TRUSTS: IN ACTIONS TO QUIET TITLEVDA. DE RETUERTO VS. BARZ372 SCRA 712FACTS: Petitioners are the heirs of Panfilo Retuerto, while respondents are theheirs of Pedro Barz who is the sole heir of Juana Perez Barz. Juana Perez Barz was the original owner of Lot No. 896 having an area of 13,160 square meters.Before her death on April 16,

1929, Juana Perez executed a Deed of Absolute Sale in favor of Panfilo Retuerto over a parcel of land, identified as Lot No. 896-A,a subdivision of Lot No. 896, with an approximate area of 2,505 square meters.On July 22, 1940, the Court issued an Order directing the Land RegistrationC o m m i s s i o n f o r t h e i s s u a n c e o f t h e a p p r o p r i a t e D e c r e e i n f a v o r o f P a n f i l o Retuerto over the said parcel of land. However, no such Decree was issued asdirected by the Court because, by December 8, 1941, the Second World Warensued in the Pacific. However, Panfilo failed to secure the appropriate decreeafter the war.Sometime in 1966, Pedro Barz, as the sole heir of Juana Perez, filed andapplication, with the then CFI of Cebu for the confirmation of his title over Lot896 which included the Lot sold to Panfilo Retuerto. The Court ruled in his favordeclaring him the lawful owner of the said property, and thus Original Certificateof Title No. 521 was issued. Lot No. 896-A however was continuously occupiedby the petitioners. Thus, a confrontation arose and as a result respondents filedan action on September 5, 1989 for Quieting of Title, Damages and AttorneysFees. In their answer, petitioners claimed that they were the owners of ap o r t i o n o f t h e l o t w h i c h w a s r e g i s t e r e d u n d e r t h e n a m e o f P e d r o B a r z a n d therefore the issuance of the Original Certificate of Title in Pedro Barzs name didnot vest ownership but rather it merely constituted him as a trustee under aconstructive trust. Petitioners further contend that Pedro Barz misrepresentedw i t h t h e l a n d r e g i s t r a t i o n c o u r t t h a t h e i n h e r i t e d t h e w h o l e l o t t h e r e b y constituting fraud on his part. ISSUE: Whether or not petitioners defense is tenable. RULING: NO, the contention is bereft of merit. Constructive trusts are created in equity to prevent unjust enrichment, arising against one who, by fraud, duress orabuse of confidence, obtains or holds the legal right to property which he oughtnot, in equity and good conscience, to hold. Petitioners failed to substantiate their allegation that their predecessor-in-interest had acquired any legal right tothe property subject of the present controversy. Nor had they adduced evidenceto show that the certificate of title of Pedro Barz was obtained through fraud. Even assuming arguendo that Pedro Barz acquired title to the propertythrough mistake or fraud, petiti oners are nonetheless barred from filing theirc l a i m o f o w n e r s h i p . A n a c t i o n f o r r e c o n v e ya n c e b a s e d o n a n i m p l i e d o r constructive trust prescribes within ten years from the time of its creation orupon the alleged fraudulent registration of the property. Since registration of real property is considered a constructive notice to all persons, then the ten-yearp r e s c r i p t i v e p e r i o d i s r e c k o n e d f r o m t h e t i m e o f s u c h r e g i s t e r i n g , f i l i n g o r entering. Thus, petitioners should have filed an action for reconveyance withinten years from the issuance of OCT No. 521 in November 16, 1968. This, theyfailed to do so. IMPLIED TRUSTS: PRESCRIPTIVE PERIODS OF ACTION TO ENFORCEIMPLIED TRUSTS: IN ACTIONS TO QUIET TITLECHIAO LIONG TAN VS. COURT OF APPEALS228 SCRA 75FACTS: Petitioner Chiao Liong Tan claims to be the owner of a motor vehicle, particularly described as Isuzu Elf van, 1976 Model that he purchased in March1987. As owner thereof,

petitioner says he has been in possession, enjoymentand utilization of the said motor vehicle until his older brother, Tan Ban Yong,the private respondent, took it from him.Petitioner relies principally on the fact that the van is registered in hisname under Certificate of Registration. He claims in his testimony before thetrial court that the said motor vehicle was purchased from Balintawak Isuzu Motor Center for a price of over P100, 000. 00; that he sent his brother to pay forthe van and the receipt fro payment was placed in his name because it was hismoney that was used to pay for the vehicle; that he allowed his brother to usethe van because the latter was working for his company, the CLT Industries; andthat his brother later refused to return the van to him and appropriated thesame for himself.On the other hand, private respondent testified that CLT Industries is afamily business that was placed in petitioners name because at that time hewas then leaving for the United Stated and petitioner remaining Filipino in thefamily residing in the Philippines. When the family business needed a vehicle in1987 for use in the deliver of machinery to its customers, he asked petitioner tolook for a vehicle and gave him the amount of P5,000.00 to be deposited as down payment for the van, which would be available in about a month. After amonth, he himself paid the whole price out of a loan of P140, 000.00 from hisfriend Tan Pit Sin. Nevertheless, respondent allowed the registration of thevehicle in petitioners name. It was also their understanding that he would keepthe van for himself because CLT Industries was not in a position to pay him.Hence, from the time of the purchase, he had been in possession of the vehicleincluding the original registration papers thereof, but allowing petitioner fromtime to time to use the van for deliveries of machinery.After hearing, the trial court found for the private respondent. Finding nomerit in the appeal, the Court of Appeals affirmed the decision of the trail court. ISSUE: Whether or not the petitioner-appellant established proof of ownership over the subject motor vehicle. RULING: No. Petitioner did not have in his possession the Certificate of Registration of the motor vehicle and the official receipt of payment for thesame, thereby lending credence to the claim of private respondent who haspossession thereof, that he owns the subject motor vehicle. A certificate of r e g i s t r a t i o n o f a m o t o r v e h i c l e i n o n e s n a m e i n d e e d c r e a t e s a s t r o n g presumption of ownership. For all practical purposes, the person in whose favorit has been issued is virtually the owner thereof unless proved otherwise. In other words, such presumption is rebuttable by competent proof. The New Civil Code recognizes cases of implied trusts other than thoseenumerated therein. Thus, although no specific provision could be cited to applyto the parties herein, it is undeniable that an implied trust was created when thecertificate of registration of the motor vehicle was placed in the name of the p e t i t i o n e r a l t h o u g h t h e p r i c e t h e r e o f w a s n o t p a i d b y h i m b u t b y p r i v a t e respondent. The principle that a trustee who puts a certificate of registration inhis name cannot repudiate the trust relying on the registration is one of the well-known limitations upon a title. A trust, which derives its strength from theconfidence one reposes on another especially between brothers, does not losethat character simply because of what appears in a legal document.WHEREFORE, the instant petition for review is hereby DENIED for lack of merit.

IMPLIED TRUSTS: PRESCRIPTIVE PERIODS OF ACTION TO ENFORCEIMPLIED TRUSTS: IN ACTIONS TO QUIET TITLEO'LACO VS. CO CHO CHIT220 SCRA 6561993 Mar 31FACTS: This Case involves half-sisters each claiming ownership over a parcel of land. While petitioner Emilia O'Laco asserts that she merely left the certificate of title covering the property with private respondent O Lay Kia for safekeeping, t h e l a t t e r w h o i s t h e former's older sister insists that the title was in herpossession because she a n d h e r h u s b a n d b o u g h t t h e p r o p e r t y f r o m t h e i r conjugal funds. T h e t r i a l c o u r t d e c l a r e d t h a t t h e r e w a s n o t r u s t r e l a t i o n o f a n y s o r t between the sisters. The Court of Appeals ruled otherwise. Hence, the instantpetition for review on certiorari of the decision of the appellate court togetherwith its resolution denying reconsideration. ISSUE: Whether a resulting trust was intended by them in the acquisition of the property; Whether Prescription has set in. HELD: I.YES. By definition, trust relations between parties may either b e express or implied.Express trusts are those which are created by the direct and positive actsof the parties, by some writing or deed, or will, or by words evincing an intentionto create a trust. Implied trusts are those which, without being express, arededucible from the nature of the transaction as matters of intent, or which are s u p e r i n d u c e d o n t h e t r a n s a c t i o n b y o p e r a t i o n o f l a w a s m a t t e r s o f e q u i t y, independently of the particular intention of the parties. Implied trusts mayeither be resulting or constructive trusts, both coming into being by operation of law.A resulting trust was indeed intended by the parties under Art. 1448 of theNew Civil Code which states ---"Art. 1448. There is an implied trust when property is sold, and the legal estate is granted to one party but the price is paid by another for the purpose of having the beneficial interest of the property. The former is the trustee, while the latter is the beneficiary . . ." I I . A s d i f f e r e n t i a t e d f r o m c o n s t r u c t i v e t r u s t s , w h e r e t h e s e t t l e d r u l e i s that prescription may supervene, in resulting trust, the rule of imprescriptibilitymay apply for as long as the trustee has not repudiated the trust. Once there sulting trust is repudiated, however, it is converted into a constructive trust and is subject to prescription.A resulting trust is repudiated if the following requisites concur: (a) thetrustee has performed unequivocal acts of repudiation amounting to an ouster of the cestui qui trust; (b) such positive acts of repudiation have been made knownto the cestui qui trust; and, (c) the evidence thereon is clear and convincing.In Tale v. Court of Appeals , the Court categorically ruled that an action forreconveyance based on an implied or constructive trust must perforce prescribein ten (10) years , and not otherwise, thereby modifying previous decisions holding that the prescriptive period was four (4) years.N e i t h e r t h e r e g i s t r a t i o n o f t h e O r o q u i e t a p r o p e r t y i n t h e n a m e o f petitioner Emilia O'Laco nor the issuance of a new Torrens title in 1944 in hername in lieu of the alleged loss of the original may be made the basis for thecommencement of the prescriptive period. For, the issuance of the Torrens titlei n t h e name of Emilia O'Laco could not be considered adverse, much l e s s fraudulent. Precisely, although the property was bought by respondent-spouses,the legal

title was placed in the name of Emilia O'Laco. The transfer of the Torrens title in her name was only in consonance with the deed of sale in her f a v o r . Consequently, there was no cause for any alarm on the part of respondent-spouses. As late as 1959, or just before she got married, Emilia continued to recognize the ownership of respondent-spouses over the Oroquietaproperty. Thus, until that point, respondent-spouses were not aware of any act of E m i l i a w h i c h w o u l d c o n v e y t o t h e m t h e i d e a t h a t s h e w a s r e p u d i a t i n g t h e resulting trust. The second requisite is therefore absent. Hence, prescription didnot begin to run until the sale of the Oroquieta property, which was clearly anact of repudiation. But immediately after Emilia sold the Oroquieta propertyw h i c h i s o b v i o u s l y a d i s a v o w a l o f t h e r e s u l t i n g t r u s t , r e s p o n d e n t - s p o u s e s instituted the present suit for breach of trust. Correspondingly, laches cannot lieagainst them. After all, so long as the trustee recognizes the trust, the beneficiary may rely upon the recognition, and ordinarily will not be in fault for omitting to bringan action to enforce his rights. There is no running of the prescriptive period if the trustee expressly recognizes the resulting trust. Since the complaint forbreach of trust was filed by respondent-spouses two (2) months after acquiringknowledge of the sale, the action therefore has not yet prescribed.WHEREFORE, the Petition for Review on Certiorari is DENIED. The Decisiono f t h e C o u r t o f A p p e a l s o f 9 A p r i l 1 9 8 1 , w h i c h r e v e r s e d t h e t r i a l c o u r t , i s AFFIRMED. Costs against petitioners. THEEND Note: This is page 188A of Casebook (Part I-Obligations)IDENTITY OF PRESTATION (WHERE PAYMENT MUST BE MADE)BINALBAGAN VS. COURT OF APPEALSG.R. No. 100594March 10, 1993FACTS: On May 11, 1967, private respondents, through Angelina P. Echaus, in hercapacity as Judicial Administrator of the intestate estate of Luis B. Puentevella,executed a Contract to Sell and a Deed of Sale of forty-two subdivision lotsw i t h i n t h e P h i b - K h i k S u b d i v i s i o n o f t h e P u e n t e v e l l a f a m i l y, c o n v e yi n g a n d transferring said lots to petitioner Binalbagan Tech., Inc. (hereinafter referred toas Binalbagan). In turn Binalbagan, through its president, petitioner Hermilo J.Nava (hereinafter referred to as Nava), executed an Acknowledgment of Debtw i t h M o r t g a g e A g r e e m e n t , m o r t g a g i n g s a i d l o t s i n f a v o r o f t h e e s t a t e o f Puentevella.Upon the transfer to Binalbagan of titles to the 42 subdivision lots, said p e t i t i o n e r t o o k p o s s e s s i o n o f t h e l o t s a n d t h e b u i l d i n g a n d i m p r o v e m e n t s thereon. Binalbagan started operating a school on the property from 1967 whenthe titles and possession of the lots were transferred to it.It appears that there was a pending case, Civil Case No. 7435 of Regional Trial Court stationed at Himamaylan, Negros Occidental. In this pending casethe intestate estate of the late Luis B. Puentevella, thru Judicial Administratrix, Angelina L. Puentevella sold said aforementioned lots to Raul Javellana with thecondition that the vendee-promisee would not transfer his rights to said lotswithout the express consent of Puentevella and that in case of the cancellationo f t h e c o n t r a c t b y r e a s o n o f t h e v i o l a t i o n o f a n y o f t h e t e r m s t h e r e o f , a l l payments therefor made and all improvements introduced on the property shallpertain to the promissor and shall be considered as rentals for the use andoccupation thereof. Javellana having failed to pay the installments for a period of five years,Civil Case No. 7435 was filed by defendant Puentevella against Raul Javellanaand the Southern Negros Colleges which was impleaded as a party defendant itbeing

in actual possession thereof, for the rescission of their contract to sell andthe recovery of possession of the lots and buildings with damages.Accordingly, after trial, judgment was rendered in favor of Puentevella.Came December 29, 1965 when the plaintiffs in the instant case on appeal filedtheir Third-Party Claim based on an alleged Deed of Sale executed in their favorby spouses Jose and Lolita Lopez, thus Puentevella was constrained to assertp h y s i c a l p o s s e s s i o n o f t h e p r e m i s e s t o c o u n t e r a c t t h e f i c t i t i o u s a n d unenforceable claim of herein plaintiffs. Upon the filing of the instant case for injunction and damages on January3, 1966, an ex-parte writ of preliminary injunction was issued by the HonorableP r e s i d i n g J u d g e C a r l o s A b i e r a , w h i c h o r d e r , h o w e v e r , w a s e l e v a t e d t o t h e Honorable Court of Appeals which issued a writ of preliminary injunction ordering Judge Carlos Abiera or any other person or persons in his behalf to refrain fromfurther enforcing the injunction issued by him in this case and from furtheriss uing any other writs or prohibitions which would in any manner affect theenforcement of the judgment rendered in Civil Case 7435, pending the finality of t h e d e c i s i o n o f t h e H o n o r a b l e C o u r t o f A p p e a l s i n t h e l a t t e r c a s e . T h u s , defendant Puentevella was restored to the possession of the lots and buildingssubject of this case. However, plaintiffs filed a petition for review with theS u p r e m e C o u r t w h i c h i s s u e d a r e s t r a i n i n g o r d e r a g a i n s t t h e s a l e o f t h e properties claimed by the spouses-plaintiffs.When the Supreme Court dissolved the aforesaid injunction issued by theCourt of Appeals, possession of the building and other property was taken frompetitioner Binalbagan and given to the third -party claimants, the de la Cruzspouses. Petitioner Binalbagan transferred its school to another location. In them e a n t i m e , t h e d e f e n d a n t s i n C i v i l C a s e N o . 2 9 3 w i t h t h e C o u r t o f A p p e a l s interposed an appeal. On October 30, 1978, the Court of Appeals rendered judgment, reversing the appealed decision in Civil Case No. 293. On April 29 ,1981, judgment was entered in CA-G.R. No. 42211, and the record of the casewas remanded to the court of origin on December 22, 1981. Consequently, in1982 the judgment in Civil Case No. 7435 was finally executed and enforced, and petitioner was restored to the possession of the subdivision lots an May 31,1982. It will be noted that petitioner was not in possession of the lots from 1974to May 31, 1982.A f t e r p e t i t i o n e r B i n a l b a g a n w a s a g a i n p l a c e d i n p o s s e s s i o n o f t h e subdivision lots, private respondent Angelina Echaus demanded payment frompetitioner Binalbagan for the subdivision lots, enclosing in the letter of demand astatement of account as of September 1982 showing a total amount due of P367,509.93, representing the price of the land and accrued interest as of thatdate.As petitioner Binalbagan failed to effect payment, private respondentAngelina P. Echaus filed on October 8, 1982 Civil Case No. 1354 of the Regional T r i a l C o u r t o f t h e S i x t h J u d i c i a l R e g i o n s t a t i o n e d i n H i m a m a yl a n , NegrosOccidental against petitioners for recovery of title and damages. P r i v a t e respondent Angelina P. Echaus filed an amended complaint by including hermother, brothers, and sisters as co-plaintiffs, which was admitted by the trialcourt on March 18, 1983. The trial court rendered a decision in favor of the petitioner because of prescription. Nonetheless, the Court of Appeals reversed said decision. ISSUE: Whether or not the petition is with merit.

RULING: No. A party to a contract cannot demand performance of the other party'so b l i g a t i o n s u n l e s s h e i s i n a p o s i t i o n t o c o m p l y w i t h h i s o w n o b l i g a t i o n s . Similarly, the right to rescind a contract can be demanded only if a party theretois ready, willing and able to comply with his own obligations there under (Art. 1191, Civil Code ).In a contract of sale, the vendor is bound to transfer the ownership of anddeliver, as well as warrant, the thing which is the object of the sale (Art. 1495, Civil Code ); he warrants that the buyer shall, from the time ownership is passed,have and enjoy the legal and peaceful possession of the thing. As afore -stated,petitioner was evicted from the subject subdivision lots in 1974 by virtue of a court order in Civil Case No. 293 and reinstated to the possession thereof only in1982. During the period, therefore, from 1974 to 1982, seller private respondentA n g e l i n a E c h a u s ' w a r r a n t y a g a i n s t e v i c t i o n g i v e n t o b u ye r p e t i t i o n e r w a s breached though, admittedly, through no fault of her own. It follows that duringthat period, 1974 to 1982, private respondent Echaus was not in a legal positionto demand compliance of the prestation of petitioner to pay the price of saidsubdivision lots. In short, her right to demand payment was suspended duringthat period, 1974-1982. The prescriptive period within which to institute an action upon a writtencontract is ten years (Art. 1144, Civil Code ) . T h e c a u s e o f a c t i o n o f p r i v a t e respondent Echaus is based on the deed of sale afore-mentioned. The deed of s a l e w h e r e b y p r i v a t e r e s p o n d e n t E c h a u s t r a n s f e r r e d o w n e r s h i p o f t h e subdivision lots was executed on May 11, 1967. She filed Civil Case No. 1354 forrecovery of title and damages only on October 8, 1982. From May 11, 1967 toOctober 8, 1982, more than fifteen (15) years elapsed. Seemingly, the 10yearprescriptive period had expired before she brought her action to recover title.H o w e v e r , t h e p e r i o d 1 9 7 4 t o 1 9 8 2 s h o u l d b e d e d u c t e d i n c o m p u t i n g t h e prescriptive period for the reason that, as above discussed, from 1974 to 1982,private respondent Echaus was not in a legal position to initiate action againstpetitioner since as afore-stated, through no fault of hers, her warranty againstevictio n was breached. In the case of it was held that a court order deferring action on the execution of judgment suspended the running of the 5-year periodfor execution of a judgment. Here the execution of the judgment in Civil Case No. 7435 was stopped by the writ of preliminary injunction issued in Civil CaseNo. 293. It was only when Civil Case No. 293 was dismissed that the writ of e x e c u t i o n i n C i v i l C a s e N o . 7 4 3 5 c o u l d b e i m p l e m e n t e d a n d p e t i t i o n e r Binalbagan restored to the possession of the subject lots.Deducting eight years (1974 to 1982) from the period 1967 to 1982, onlyseven years elapsed. Consequently, Civil Case No. 1354 was filed within the 10-y e a r p r e s c r i p t i v e period. Working against petitioner's position too is theprinciple against u n j u s t e n r i c h m e n t , w h i c h w o u l d c e r t a i n l y b e t h e r e s u l t i f petitioner were allowed to own the 42 lots without full payment thereof.W H E R E F O R E , t h e p e t i t i o n i s D E N I E D a n d t h e d e c i s i o n o f t h e C o u r t o f Appeals in CA-G.R. CV No. 24635 is AFFIRMED.