consent must be given expressly for the reason that, since novation extinguishes the personality of the first debtor who is to be substituted by a new one, it implies Onthe part of the creditor a waiver of the right that he had before the novation, which waiver must be express under the principle of renuntiatio non praesumitur, recognized by the law in declaring that a waiver of right may not be presumed unless the will to waive is indisputably shown by him who holds the right. (Chester Babst vs. CA, G.R. No. 9939/104625, January 26, 2001 citing Testate Estate of Mota, et al. vs. Serra, 47 Phil. 464).


An action to nullify the waiver in the next preceding . question was filed by the heirs ofY contending that it is inofficious. What is the defense of X if any?
If in order to nullify this waiver be inofficious, the debtor and his providing that the delivery of the .virtue of payment of the debt. (Art. it should be claimed to heirs may uphold it by document was made in 1271, NCC).



Xis indebted to Yin the amount ofPlOO,OOO.OO secured by a real estate mortgage. Y renounced his right over the mortgage. Can he still demand the payment of the obligation? Why,?
Yes, because the renunciation of the principal debt shall extinguish the accessory obligations; but the waiver of the accessory shall leave the principal. (Art. 1273, NCC). Here, what was renounced was the accessory. Hence, the principal remains.





What is remission?
It is an act of liberality by virtue ofwhieh the obligee, without receiving any price or equivalent, renounces the enforcement of the obligation; as a result of which, it is extinguished in its entirety or in that part or aspect of the same to which the remission refers. (8 Manresa, 5th Ed., Bk. I, p. 673).


What is a contract?
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. (Art. 1305, NCC). It is juridical convention in legal form, by virtue of which one or . more persons bind themselves in favor of another, or others, or reciprocally, to the fulfillment of a prestation to do, to give or not to do. (Sanchez v. Mapalad Realty Corp., G.R. No. 148516; n-ecember27, 2007).


What are the requisites of reniission?
They are: (a). (b) (c) It must be gratuitous; It."Q'lUstbe accepted by the obligor; The obligationznust be demandable. (Art. 1270, NCG). -


Xborrowed money from Yin th~~ountofP150,OOO.OO. One morning, Y went to X and delivered to the latter tlie promissory note he issued to Y.What is the effect of such delivery? Explain.
There is extinguishment of the obligation of X. Under-the law, the delivery of a private document evidencing a credit, made voluntarily by the creditor to the debtor, implies the renunciation of the action which the former had against the latter. (Art. 1271, NCC).


What is the so-called liberty of contracts? .Is . it absolute? Why?
The liberty of contracts simply means the right of the parties to enter Into such stipulations Or terms and conditions in their contracts. The liberty of contracts is not absolute. It is subject to certain limitations imposed by law and that the contracting parties may establish such stipulations, clauses, terms, and conditions as they may deem convenient, provided they are










not contrary to law, morals, good customs, public order, or public policy. (Art. 1306, NCC). Q.

Petitioner was employed as Division Marketing , Director of the respondent, a pre-need company. In 1995,she stopped working and became the Vice President for Sales of Professional Pension Plans, Inc., another pre-need company. She was sued for damages for violating her contract with' respondent which prohibited her from working In a business of the same nature within two (2)years after separation, whether voluntary or involuntary. The RTC and the .CA held her liable. Before the, se, the petitioner contended that the non-involvement clause is offensive to public policy since the restraint imposed is much greater than what is necessary to afford respondent a fair and reasonable protection. She added that since the products sold in the pre-need industry are more or less the same, the transfer to a rival company is acceptable. She likewise argued that a strict application of the non-involvement clause would deprive her of the right to engage.in the only work she knows. Respondent countered that the validity of a non-involvement clause has been sustained by the Supreme Court in a long line of cases. It contended that the inclusion of the two-year non-involvement clause in the contract of employment was reasonable and needed since her job gave her access to the _~ompany'sconfidential marketing.strategies. It added that the non-involvement ,clause merely enjoined her from engaging in pre-need business akin to respondent's within two years _~omher separation from respondent. She had not been prohibited from marketing other service plans. Whose contention IScorrect? Explain.

What makes the non-involvement clause valid is that, she had been privy to confidential and highly sensitive marketing strategies of respondent's business. To allow her to engage in a rival business soon after she leaves would make respondent's trade secrets vulnerable especially in a highly competitive marketing environment. In sum, the non-involvement clause is not contrary to public welfare and not greater than is necessary to afford a fair and reasonable protection to respondent. (Ollendorff vs. Abrahamsom, 38 Phil. 5&5 [1918]). In any event, Article 1306 of the Civil Code provides that parties to a contract may establish such stipulations, clauses, terins and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy. Article 1159 of the same Code also provides that obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. Courts cannot stipulate for the parties nor amend their agreement where the same does not contravene law, morals, good customs, public order or public policy, for to do so would be to alter the real intent of the parties, and would run contrary to the function of the courts to give force and effect thereto. (PhiL Communications Satellite Corp. vs. Telecom, Inc., G.R. Nos. 147324 and 147334, May 25, 2004, 429 SCRA 153; Daisy Tiu vs. Platinum Plans, Inc., G.R. No. 163512, February 8, 2007). Q.

A telegraphic transfer ':was obtained from pern for the money to be transmitted to Equitable Bank in Cagayan de Or-o. But the money was not trans~tte!1; hence, the checks that were issued were dishonored. There is, however, a stipulation exempting the pcm from liability. A suit for damages was filed, but the pem interposed such defense. Rule on the contention ofPCrn.
The defense is untenable. Having established that, pern acted fraudulently and in bad faith, it is implausible to absolve it from its wrongful acts on account of the assailed provision exempting it from any liability. In Geraldez us. Court of Appeals, G.R. No. 108253, February 23, 1994,


The contention of the respondent is correct. In this case, the ---non-involvement clause has a time limit: two years from the time petitioner's employment with respondent ends. It is also limited as to trade, since it- only prohibits petitioner from engaging in any pre-need business akin to respondent's.







48 SCAD 508, it was declared that notwithstanding the enforceability of a contractual limitation, responsibility arising from a fraudulent act cannot be exculpated because the same is contrary to public policy. Indeed, Art. 21 of the Civil Code is quite explicit in providing that: "Any person who willfully causes loss or injury to another in a manner that is contrary to morals, good customs, .or public policy shall compensate the latter for the damage." Freedom of contract is subject to the limitation that the agreement must not be against public policy, and any agreement or contract made in violation of this rule is not binding and will not be enforced. The prohibition against this type of contractual stipulation is moreover treated by law as void which may not be ratified or waived by a contracting party. Undoubtedly, the services' being offered by a banking institution like petitioner are imbued with .public interest. The use of telegraphic transfers have now become commonplace among businessmen because it facilitates commercial transactions. Any attempt to completely exempt one of the contracting parties from any liability in case of loss, notwithstanding its bad faith, fault, or negligence, cannot be sanctioned for being inimical to public interest and therefore contrary to public , policy. Resultingly, there being-no dispute that petitioner. acted fraudulently and in bad faith, the award of moral and exemplary damages were proper. (PCrn vs. CA, et al., G.R. No. 97.785, March 29, 1996, 69 SCAD 707). . Q. A and B are contending parties over a parcel of land owned by the State. To settle their dispute, they entesed into a-eompromise agreement whereby 'B recognized the ownership of ~ with a consideration. Is the compromise agreement valid? Why?

quali1ied citizens. The title holders objected on the ground that they have entered into a contract with the State and that the law is violative of the ~edom of contract. Is their contention valid? Why? No, because the freedom of contract must yield to the police power of the State to promote the health and general welfare. A contract affecting general welfare is one that has a congenital defect in that the State reserves the right to violate it. (Kabiling vs. NHA, G.R. No. 57424, December 18, 1987).


At B, and C were

dismissed by XYZ Corporation. They filed a complaint at the NLRC where they were asked to dismiss their complaint for a consideration of P500.00 each. Their individual claims amounted to P50,OOO.OO each. Discuss the validity or invalidity of the contract. Cite your reasons.


The contract is void because it is contrary to public policy. The Constitution and the law seek to promote and protect the interest of the workers to the extent of assuring them substantialincome for their welfare. To dismiss a complaint for a measly sum of P500.00 is shocking to the conscience of man, hence, it is contrary to public policy. (Carmelcraft Corp. vs. NLRC, G.R. Nos. 90634-35, June 6, 1990; Gatchalian.vs. Delim, et al., G.R. No. 56487, October 21, 1991). What is the principle of mutuality of contracts?



ANS .. No, because it is contrary to law. In Maneclang us. lAC, September 30, 1986, a compromise on property belonging to the State was held as void.


It means that the contracts are binding between the' parties; its validity or compliance cannot be left to the. will of one of them. (Art. 1308, NCC). For a contract is a contract. Once agreed upon and the-essential elements are present, it is valid and binding between the parties. (Ma,_te. CA, et al., vs. G.R. Nos. 120724-25, May 21, 1998, 94 SCAD 615; ·BIas VS. Linda Angeles-Hutalla, G.R. No. 155594, September 27, 2004; Sps.Dumlao v. Marlon Realty Corp., G.R. No. 131491c, August 17, 2007).
What is the basic purpose of contracts? Explain. of the principle of mutuality

Titles were issued to several persons over a real property. Ten years later, Congress- passed a law revoking the titles and declaring the property public property once again. The purpose is to develop the property as a housing project to be distributed to


The ultimate purpose of the mutuality principle is thus to nullify a contract containing a condition which makes its

\__ .j

fulfillment or pre-termination dependent exclusivelyupon ...' the uncontrolled will of one of the contracting parties.. . Not :all contracts though which vest' to one party their determination of validity or compliance or the right to terminate the same are void for being violative of the mutuality principle.Jurisprudence is replete with instances , of.cases where the Court upheld the legality of contracts which left their fulfillment or implementation to the will 'of either ofthe parties, for as long as there is the presence of essential equality of the parties to the contracts, thus preventing the perpetration ofinjustice onthe weaker party. (G.F. Equity, Inc. vs. Arturo Valenzona, G.R. No. 156841, June 30, 2005).' .

clauses,terms, and conditionsthey have agreed to (Art. 1308, NCC), "the only limitation being that these stipulations, clauses,terms and conditionsare not contrary to law, morals, public order, or public policy." Not being repugnant to any legal proscription, the agreement entered into by the parties herein involvedmust be respectedand held to be the law betweenthem. (Art. 1306, NCe). R.A. No. 6552 does not apply because it excludes industriallots, commercialbuildings, and sales to tenants. It applies only to a sale or financing of real estate on installment payments. (OdysseyPark, Inc. vs. CA, et al., G.R.No. 107992, October8, 1997, 87 SCAD735).

.' .iafe

. 'i'heparties

in a contract- agreed that ..he interest t is 20% and it can be increased if there is a law that would authorize the increase of interest rates. Suppose A would increase the rate of interest without a law authorizing it, is A's action valid? Why?

ANS. No, because that is violativeof the principle of mutuality of . contracts, (PNBvs. Padilla, et al., G.R.No. 88880,April 30,
i991). . Q.

A and B entered into a contract of lease where B, the lessee was granted the exclusive option to renew for a like term. Is the stipulation in the-contract of lease to the effect that the contract may be renewed for a like term at the option of the lessee be considered void for being potestative or violative of the principle of mutuality of contracts under Art. 1308, NCe? What is the meaning of the clause "may be renewed for a like term" at the option of the lessee? Explain.

The contract of the parties pr'ovided that in the event Odyssey fails to pay any portion of the purchase price of the. property or the interest or service charges thereon as they fall due or otherwise fails to comply with the provisions of the contract, the seller shall '. have the absolute discretion to rescind and cancel the contract and_decla~e it null and void, and all payments shall be forfeited in favor of the seller as rentals for the use and occupancy of the property. It further provided that all improvements shall belong to the seller without reimbursements provided that the seller may waive the discretion to require the buyer to remove the same. There was failure to pay and comply with the .terms of the contract. Which _ shall apply, the terms of the contract or R.A. 6552, otherwise known as "An Act to Protect Buyers of Real Estate On Installments," or Art. 1592,NCC? Why?


ANS. The stipulation is valid. Article 1308 of the Civil Code expresses what is known as the principle of mutuality of contracts. It providesthat "the contract must bind both the contracting parties; its validity or compliancecannot be left to the will of one of them." This binding effectof a contract . on both parties is based on the principlethat the obligations arising from.contracts have the force of law between the contracting parties, and there must be mutuality between them based essentially on their equality' under which-it is repugnant to have one party bound by the contract while leaving the other free therefrom. The ultimate purpose is to render void a contract containing a condition,which makes its fulfillmentdependent solelyupon the uncontrolledwill of one of the contracting parties.
An express agreement which gives the lessee the sole option to renew the lease is frequent and subject to statutory restriction, valid and binding on the parties. This option, which is provided in the same lease agreement, is fundamentally part of the consideration iii the contract and


ANS. The contract shall apply. It is a familiar doctrinein the law on contracts that the parties are bound by the stipulations,

.ariations in the terms of the contract to be renewed. 2d. (Allied Banking Corp. hence.. 1311. the lessor is free to give or not to give the option to the lessee. except in case where the rights and obligations arising from the contract are not transmissible by their nature. And while the lessee has a right to elect whether to continue with the lease or not. Tillanan. Since there was a pending case between RCAM and Advertising Associates. LPI contended that the rentals of ASTRO should have been credited in its favor. A mere incidental benefit or interest of a person is not sufficient. The fact that such option is binding only on the lessor and can be exercised only by the lessee does not render it void "for hick of mutuality. to insist upon different terms. There was an application for lease over the premises by ASTRO Advertising. 121 SCRA 794. agreement. and the lessee is entitled to retain possession of the property for the duration of the new lease. In the meantime the sublease contract expired but RCAM did not surrender the premises to LPI. vs. Inc . Their rights and obligations become mutually fixed.90 SCAD 325). • of the consideration for the contract . Ine. unless it expressly provides for v. and the lessor may hold him liable for the rent therefore. ANS." the clause means that the exercise of the option resulted in the automatic extension of the contract oflease under the same terms and conditions. In Ledesma vs.. NCC).p. Javellana. G. it was referred to LPI where a contract of sublease was ' entered into between the two~ Under the agreement.. After all. No. . The heir is not liable beyond the value of the property he received from the decedent. If a contract should contain some stipulation in favor of a third person. and that a stipulation to renew always relates to the contract in which it is found _andthe rights granted thereunder. the lease contract was amended. despite demands. It is purely an executory contract and at most confers a right to obtain a renewal if there is compliance with the conditions on which the right is made to depend.R. Q. their assigns and heirs. CA.. as owner of a property leased a property to Limitless Potentials. and does not permit the defendant upon-the renewal of the contractin which the clause is found. 556 CIVIL LAW REVIEWER OBLIGATIONS AND CONTRACTS Contracts 557 is no different from any other provision of the lease carrying an undertaking on the part of the lessor to act conditioned on the performance by the lessee.. or by stipulation or by provision of law. both parties are thereafter bound by the new lease . he may demand its fulfillment provided he communicated his acceptance to the obligor before its revocation. once he exercises his option to continue and the lessor accepts. (2) With respect to the meaning of the clause "may be renewed for a like term at the option of the lessee. ReAM likewise informed LPI that it was remiss in the payment of its rents-and considered the contract rescinded. 124290. (Art. then the option . 1 P. For then. the lessor could easily defeat the. than those embraced in the contract to be renewed. The right of renewal constitutes a part of the lessee's interest in the land and forms a substantial and integral part of the agreement. RTC. It was ruled that the rentals ._. Instead.: '-. If we w_&e to adopt the contrary theory that the terms and conditions to be embodied in the renewed contract were still subject to mutual agreement by and between the parties. The contracting parties must have clearly and deliberately conferred a favor upon a third person. The rentals paid by ASTRO were not -creditad for LPI. it was held that such a clause reTates to the very contract in which it_ is-placed.which is an integral part Roman Catholic Archbishop of Manila. January 16. Q. citing Hicks us. CA ruled that RCAM had no cause of action for ejectment. lessee's right of renewal by simply imposing unreasonable and onerous conditions to prevent the parties from reaching an agreement. An action for unlawful detainer was filed but the MTC. Manila Hotel Company.would be rendered worthless. State the general rule with respect to effectivity contracts. ASTRO would pay its rental directly to RCAM so it would earn more to which RCAM agreed. (Shimonek vs. it leased it to MCIC.1998. What are the exceptions if any? ' of Contracts take effect only between the parties. 154)..

in view of the accompanying circumstances.such only if'it appears from the terms of the promise. Who may be the third-party stipulation? beneficiary in such a Q. Q. Quilala. Q. RCAM accepted the rentals from ASTRO. et al.558 CIVIL LAW REVIEWER OBLIGATIONS AND CONTRACTS Contracts 559 of ASTRO should have been credited in favor of LPI... he is a creditor beneficiary is upon the theory that the contracting parties intended to create a cause of action in his favor.. None. not a mere incidental benefit or interest. supra. 79 SCRA 193 (1977). What is controlling Explain. (c) the favorable stipulations should not be conditioned or compensated by any kind of obligation whatsoever. Encarnacion. G. If. (LimitlessPotentials. 2005). Otherwise stated. it was ruled that the acceptance does not have to be in any particular form. Absent the intent to benefit a third-party. G. No. Notification of acceptance other than such as is involved in the making of demand" is unnecessary. et al. or whether there is an obligation owing from the promisee to the third person. there is no time limit. there is an intent ofthe parties to a contract to benefit ': a third person. the third-party beneficiary which should be a part. The right of the beneficiary is. No. such-party is merely an incidental beneficiary. Quilala. Adonee beneficiary is regarded as . of the contract. It need not be made expressly or formally. even when the stipulation is for the third person an act of liberality or generosity on the part of the promisor or promisee. Hon. Inc. Inc. .R. vs. In this case. 157391 and companion cases. Intent. as there was a stipulation pour autrui in favor of ReAM which accepted the same. 157391. While a stipulation in favor of a third person has no binding effect in itself until its acceptance by the party favored.. indeed. that the purpose of the promisee in obtaining the promise of and/or part of the performance thereof is to make a gift. July 31. Here. and (e) neither of the contracting parties bear the legal representation or authorization ofthe third party. The intent of the promisee to benefit a third person as a primary party-in-interest is generally said to be controlling.). The Hon.vs.) . (Limitless Potentials. In Florentino vs. (b) a creditor beneficiary. Hon. It is not enough that the contract may operate to the benefit of a third-party. Inc. Hon.. not the whole. Sr. Such party is one who benefits from the contract of another but whose benefit was not the intent of the contracting parties. vs. Q.of a gift. in a stipulation pour autrui? ANS. it matters not whether the stipulation is in _ the nature. such third person has all the time until the stipulation is revoked.the stipulation in its favor. (d) the third person must have communicated his acceptance to the obligor before its revocation. there was acceptance of. Is there a limitation as to time for a third party to accept a stipulation in his favor? Explain. or (c) an i~~idental beneficiary. et al. An incidental beneficiary has no right or obligation under the contract. if the -performance of a promise will satisfy an actual or supposed or asserted duty of the promisee to the beneficiary. supra.2005). et al. The third-party may be. the law does not provide when the third person must make his acceptance. The law does not require that it be in writing. ANS. Inc. is defined as the purpose to use a particular manner to effect a certain result. to the beneficiary orto confer upon him a right ANS.. ANS. limited by the terms of the promise. Quilala. The acceptance may be in any form.vs. July 15. (b) the contracting parties must have clearly and deliberately conferred a favor upon a third person. Yes. (a) a donee beneficiary. QuilaIa. As a rule. Such intent may be gleaned from the construction of the contract in the light of the surrounding circumstances. however. thus. The requisites for such stipulation are the following: (a) the stipulation in favor of a third person.. the Court find that the church accepted the stipulation in its favor before it is sought to be revoked by .R. in a legal sense.' (Limitless Potentials.(Limitless Potentials. Is the ruling correct? Why? ANS. Renato C. What are the requisites of stipulation pour autrui?. and other cases. against the promisee to secure performance neither due nor supposed or asserted to be due from the promisee to the beneficiary. It must appear that the parties' intent to recognize him as the primary party-in-interest and privy to the promise.

. (Art. Nee) considering that public officewas involved whichis not a property and cannot be the subject matter of a contract. The enjoyment of benefits flowing therefrom for almost seventeen years without question from any quarters . the lessor would be acting illegally. In ruling that the lease was suspended and thus. _ effectively suspended the efficacy ofthe lease contract. ANS. et al. RCAM is obliged to maintain LPI's peaceful and adequate possession and enjoyment of the lease for the . The defendant contended that he never induced the heirs-to sell. can only be construed as an implied acceptance by the Church of the stipulation pour autrui before its revocation. hence. Indeed. The lessee has-the right to be respected in his possession and should he be disturbed therein. Quilala. NCC). Q. supra. . Is the contract binding between the parties? Why? No. A and B entered into a contract whereby A. vs.) . et al. The reason for his liability is the damage caused to the aggrieved party due to his inducement. ANS. he filed a complaint for damages based on tortious interference in contractual relationship. included all kinds of possession. To rule otherwise would enrich RCAM and allowing it to profit by its misdeeds .. Furthermore. supra. NCC). rns. 'Possession is not protection against right but against the exercise ofa right by one's own authority. The contract was for a consideration. (Limitless Potentials. a public officer.entire duration of the contract. it is the duty of the lessor to place the lessee in the legal possession of the premises and to maintain the peaceful possession thereof during the entire term of the lease. vs.and the lessee shall be entitled to be restored to his possession via an action for forcible entry with a plea for a writ of preliminary mandatory injunction within five (5) days from the filing of the complaint to restore him to his possession. It As lessor. citing Florentino vs. vs. of the contract.. Hon. Inc. NCC). (Art. Inc. it was not exten: ing the lease.(Limitless Potentials.. under the law. the lessee discovered that the property was' sold to someone who induced the heirs to sell the. but since they were in dire need for money to pay their-p1'edecessor_'s debts. but it was merely enforcing the same. (Art. supra. If the owner/lessor forcibly dispossesses a lessee. because the rights and obligations arising from the contract are not transmissible by their nature or by provision oflaw. the efficacy of the lease contract was suspended.). Under what circumstances may a third person be liable in case one of the parties to a contract violates the same? Why? If that third person interferes with the contractual relationship between the parties. Quilala. Q. Hon. but modified by the CA. 1311._.appellees . Maguindanao with the condition that the Iessee would put up a commercial building.herein.. Every possessor. (Limitless Potentials. Q. is this not an extension of the lease? Why? No. the waiver is contrary to law and public policy (Art..property to him. 1314. et al. What is the effect ofRCAM's deprivation of possession by LPI during the pendency of the action? Explain. Encarnacion. or only the latter. _ After the death of the owner. Hon. 1654 [3J. including that of a mere holder. namely the petitioners . supra. by an accion-publiciana or by an action to compel the lessor to comply with his obligation under the contract oflease. Quilala.). There was a contract of lease over a property in Sultan Kudarat. . Inc. The RTC ruled in favor of the plaintiff.. In ruling that during the period of the litigation. The lessee may ask for the rescission of the lease contract and indemnification for damages. 6.': ) RAC'l'S ~61 560 CIVIL LAW REVIEWER \. Any third person who induces another to violate his contract shall be liable for damages to the other contracting party. allowing the contract to remain in force. the lessee should remain in the property for the unused portion Q. OBLIGATIONS AND C Contracts some of the co-owners. Q. they sold it to him. he shall be restored to said possession by the means established by the law or by the Rules of Court. The basic question is this: Is the buyer liable for tortious interference? Why? ANS. would resign before his term expires and B would replace him and continue his term.

property was merely an . Z. CA. advancement of his financial or economic interests. 1314. . . The interference is penalized because it violates the property rights of a party in a contract to reap the benefits that should result therefrom (45 Am Jur. et al. Since the contracts were not . March 18. Trendsetter Marketing.term of one year. X and Y entered into a contract whereby Y's services were engaged for the purpose of constructing a building on the lot belonging to . justification for interfering with the business relations of another exists where the actor's motive is to benefit himself.renewed.: > - i . Inc. pp.' such . W4at are the requisites of tortious interference? In the case of So Ping Bun us. prompting X to cancel his contract with Y and awarded the same to Z. 373 Phil.. Can Z be heldIiable for damages? Why? Yes. So Ping Bun occupied the warehouse for his own textile busin. the Court declared that a person is not a malicious interferer if his conduct is impelled by a proper business interest. 29 Phil. and that an individual acts under an economic interest that is substantial. No.end of Y. any third person who induces another to contract shall be liable for damages to the other. Such justification does not exist where the actor's motive is. 119107. CA. . ANS. 1976. 2005). he even requested for a formalJease ~ontra(lt with DCCSI to which the latter acceded. refused. Tek Hua Trading Company over the premises owned by Dee C. his grandson. they . 532 (1999)._/ OBLIGATIONS AND CONTRACTS Contracts 'or " 563 ms. some authorities believe that it is not necessary that the interferer's interest outweigh that of the party whose rights are invaded. 119107. March 18. As a general rule. (Jose Lagon vs. et al.. existence of a valid contract.. 542 (1915). CA. When is interference justified? Explain. Article 1314 of the Civil Code provides -that any third person who induces another to violate his contract shall be liable for damages to the other contracting party. After So Pek Giok. 562 ::.IVIL LAW REVIEWER I.. Nee). ANS.a. 2d.(-y. 2Q05). Note: The purchase of the subject.x. 29 Phil. G.e~s. of Gilchrist vs. G.Corporation. went to see X and. In this case. Chuan and Sons. a financial or profit motivation will not necessarily make a person an officious interferer liable for damages as long as there is no malice or bad faith involved.became month-to-month. for he acts in self-protection-Moreover. the original members of said company formed Tek Hua Enterprising .R. In. a fii. ~ ~ '. 373 Phil. Q.. contracts.Tek -Hua Trading €ompany was dissolved b~t . wrote a letter of demand to So Ping 'Bun asking him to vacete the warehouse. (b) knowledge on the part of the third person of the existence of the contract and (c) interference of the third person without legal justification or excuse. [ Q. Instead. Cuddy. CA. The President of Tek Hua Enterprising C9!'Poration. 532 [1999]).justification for protecting one's financial position should not be made to depend on a comparison of his economic interest in the subject matter with ~at of the others: It is sufficient if the impetus of his conduct lies in a proper business interest rather than in wrongful motives. 542. Added to this.. ~ . (DCCSI) for . 'violate his In the case that this is of the third v i ANS. The tort recognized in that provision is known as interference with contractual relationship. the Court said that there are three (3) elements of tortious interference with contractual relations: (a). In the very early case of Gilchrist Cuddy. not merely de minimis. (See Art. Q. 280-281).. (Jose Lagon vs. No. In other words'. There were contracts of lease between. absent any proof that he was enthused by improper motives. No. =.R. A petition for . the buyer conducted an investigation and found no suspicious circumstances that would lead a cautious man to probe deeper and watch out for any conflicting claim over the property. the manager of Tek Hua Trading 'pomp~y 'died.Iater -on. told X that Y' is well-known for his failure to finish his contracts within the period agreed upon. Even the registry of property had no record of the same. to cause harm to the other.that wrongful and malicious motives are negative. Q. but he. (So Ping Bun vs. the SC said regardless of the presence or absence ofbdd faith person.

1318. any third person who induces another to violate his contract shall be liable for damages to the other contracting party. Lack of malice. CA. see also Art. There were bidders. There was likewise no Construction Agreement. .! ·. et al. ANS. CIVIL LAW REVIEWER <. ANS. 152132. ESSENTIAL REQUISITES OF CONTRACTS Q. Deliarte.J. b) object contract. a right to represent him. What are the elements of a valid contract? They are: a) consent of the contracting certain which is the subject matter of the of the obligation which is established. no agreement or contract is perfected.was said that the conduct complained of did not transcend the limits forbidding an obligatory award for damages in the absence of malice. but the rule is not absolute. G. Then. Q. ~S.a person enter into a contract for another? Is it absolute? Why? As a rule. Where the alleged interferer is financially interested. The offer must be certain and the acceptance. . 1403[1]. it cannot be said that he is an officious or malicious intermeddler. There was a proposed building of Insular Life in Lucena City. NCC). ~_20554. May. it sent a letter to Insular that it cannot undertake the construction because of the escalation of the prices of materials. a party cannot be a malicious interferer. Bow are contracts perfected? It depends. (Art. parties. Oremland. As early as Gilchrist us. Torts. c) cause (Art. they are perfected by the _. because there was no meeting of the minds. To produce an agreement. A conference was held between the representatives of both parties. NS. by law. Is so Ping Bun liable for damages? ExPlain. NCC. The business desire is there to make some gain to the detriment of the contracting parties. 111 A-2d 100. a person may not enter into a contract fo~another. et al. A 'qualified acceptance constitutes a counter-offer. 33 N. No. Arrogante. and the impulse behind one's conduct lies in a proper business' interest. ~. Super. (Art. NCC). vs. The exceptions are: (a) when he is authorized by the other party. Was there a perfected contract? None. July 24. It . 542 (1915). If they are real. 2007). (So Ping Bun vs. Sec.. 1315 and 1316. 1319. NCC). Q.J I OBLIGA'rIONS AND CONTRACTS Essential Requisites of Contracts 565 injunction was filed which was decided in favor ofTek Hua Enterprising Corporation annulling the lease contract between DCCSI and So Ping Bun. G. Subsequently it agreed to readjust the amount of bid. it has been said that where there was no malice in the interference of a contract. 2d. among which was Asset Builders which submitted a proposal to contract the same. Asset did not affix its _signature to the Notice of Award. Under Article 1314 of the New Civil Code. holding the latter for damages by way of attorney's fees due to interference in contractual relationship. t. the offer must be certain and the acceptance timely and absolute. Restatement of the Law. 29 Phil.September 21. delivery-of the object. rather than in wrongful motives. because there was no malice on his part. A party may withdraw its offer or counter-offer prior to its receipt of the other party's acceptance thereof. and such interest motivates his conduct. ANS. 1317. Insular awarded the contract to Asset and issued a memorandum to commence with the construction and sent a copy to Asset with a Notice ofAward and to Proceed. How is consent manifested? Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. NCC. It is axiomatic that where the parties merely exchange offers and counter-offers. 769)..R. (Kurtz vs. precludes damages.they are perfected by mere consent . Finally. 443. Insular proposed the adjustment of the bid to accommodate the wage increase but the representatives of Asset were noncommittal. however. or (b) when he has.. as no malice was found in Sa Ping Bun's acts. If the contracts are consensual. Cuddy. No.R. 1999). ms. absolute. No. (Arts.

vs. vs.83 SCAD 130). (People's Industrial and Commercial Corp. but because of the failure to pay the monthly installments due they agreed to enter into a new contract to sell.R. there was no acceptance.. Q. No. not the number of the lots which is a material component of the Contract to Sell. in order that their concurrence can giv~ rise to a perfected contract. if the offer has been accepted. The draft of the new contract to sell was sent by the owner to the buyer. Asset Builders Corp. that it had already sent five (5) checks as downpayment which 'Yere duly received. et al. but when there allegedly came an acceptance that could have had a binding effect. Note that the rule that contracts may be valid even if the parties did not affix their signatures to its written form was not applied in this case. ANS. ANS. Ltd.1997. Is the ruling correct? Why? No. 1319. there was a confusion in the concepts of validity and efficacy of a contract.a definite agreement as they only agreed on the price. No. 389 SCRA 204 [2000]. 112733.would still be stipulated and agreed upon by the parties. If there is an offer and there is an acceptance with conditionsJ is there a perfected contract? Why? None. It was further said that since the five (5) checks were net encashed.. vs. only the effectivity and not the validity of 'the contract is affected. ANS. I ~ ANS. (See Art. (Jardine Davies. No. Since no new contract was signed. the owner sued for the recovery of the lots but the buyer contended that a contract has been perfected even if no document was signed. The owner received the checks but did not encash the same because the draft contract was not signed by the President of the buyer-company. (Heirs of Pedro Escanlar. While there was an initial offer made. Asset Builders Corp. G. NCC).ros Occidental where the testate case was pending. A contract to sell mvolves the performance of an obligation. If it is not founded on a consideration. especially so. 2005). Was the buyer correct? Why? No. There was a eontraot to. G. because other matters or details . or. the parties may not in any way be considered as having arrived at a contract under the law.. there is no meeting of the minds. '. sent five (5) checks covering the downpayment. Arias Rodriguez. June 9. the buyer should have deposited the corresponding amounts of the said checks in court. 43 Phil.. not having been approved by the probate court. 270 [1922].R. the contract's validity is not affected." (citing Laudico vs. No.). If there are conditions imposed.__ " 566 CIVIL LAW REVIEWER o U OBLIGATIONS AND CONTRA. 119777.88 SCAD 565). Ltd. not merely the exercise of a privilege or a right. G. It is consignation which is essential to the extinguishment of the buyer's obligation to pay the price. In a contract of sale of hereditary rights it was agreed that it shall be effective. No. G. Q. In this case. even if it does not bear the stamp approval of the court. Insular Life Assurance CQ. et al.CTS Essential Requisites of Contracts 567 The rule on the concurrence of the offer and its acceptance did not apply. Q. Insular Life Assurance Co. The offer and its acceptance "did not meet to give birth to a contract.. (Maria Cristina Fertilizer Corp. et al.only upon the approval by the RTe of Neg. Q.R. vs. Both lower courts held it to be void for . but the company president ()fthe buyer did not sign. et al.in addition to the subject matter and the consideration .. but it did not lift a finger to do it. 147410. February 05. 147410. vs. vs. G. for in the words of the stipulation.R. EXl!lain. 123905. October 24. et al. CA.1997.. CA. Payment cannot be effected by mere tender of payment but also by consignation.R. because the parties have not arrived at. the offeror has the freedom and the right to withdraw the offer by communicating such withdrawal to the offeree before the latter's acceptance of the offer.2004. - of . As long as the essential requisites of a contract are present. J. the offer was already lacking. as the same is a mere counteroffer. Inc. because an offer must be clear and definite while an acceptance must be unconditional and unfounded. State the effect if the period given to a party within which to accept the offer was not itself founded upon or supported by any consideration. CA. Panganiban.. Without it. before the acceptance came to be known by such party. February 05. CA.sell between two (2) persons.

1319. time it came to his knowledge. It is a rule that it is within the jurisdiction of the probate court to approve the sale of properties of a deceased person by his prospective heirs before final adjudication. (Art. 55998.00 ' shall be paid upon the presentation and delivery of clean titles over the land within 20 months from the ~ signing of the contract. 103 SeRA 7). has full ownership of his part and may therefore alienate it. to allow them would be the height of inequity as they would be ANS. B also sent a letter . reference to judicial approval cannot adversely affect the substantive rights of the heirs to dispose of their ideal share in the coheirship and/or co-ownership among the heirs. CA. PNB vs. NCC. 1985). CA. 154 SCRA 270. Suppose B would not sign. 102606.OOO. otherwise.R.821. No.00shall be paid upon the signing of the document of sale. Tabangao filed a complaint for specific performaniebut the Babasas filed a motion to dismiss on the ground' that the contract became void with the expiratioe-of the 20-month period given them to deliver clean titles.asking A to include three (3) proposed terms -and placed therein a COVer-letter that if A would 'be agreeable to the three (3) terms the 'contract would' be considered signed and perfected A agreed and later sent the contract already signed by him. 74470. et al. The Babasas cannot rescind the contract. A sent a draft of his proposed contract to B. Was there a meeting of the minds? Why? None. CA. but when the letter of acceptance reachedX's residence. Q. and lot. CA. 217 SCRA 186. does not bind the offerer except from the.R. March 8. No. can you consider the contract signed and perfected? Why? Yes. 120690 October 23.0 [1988]). he could ~ot have known the said acceptance. NCC).1997. x owns a house ANS. 163 SCRA 63. Sometime . A contract of conditional sale was entered into between the Babasas and 'I'abangao Realty. It is settled that court approval is necessary for the validity of any disposition of the decedent's estate. like a series of communications (Ramon Magsaysay Award Foundation vs. the Babasas executed a unilateral act of rescission. or through the acceptance ofa down- Q.R. Acceptance made by letter. Abesamis. (Acebedo vs. CA. Holgado. However. CIVIL LAW REVIEWER (J OBLIGATIONS AND CONTRACTS Essential Requisites of Contracts 569 92 SCAD 873. Laureta. they started negotiating for a new contract. 98 SCRA 207. (Topacio vs. et al. Go Ong vs. Y sent X a letter accepting the offer.88 SCAD 537). Cite reasons. JUly 3. Suppose the acceptance was communicated to the agent of X who was alive at the time his agent came to know of such acceptance. Rule on the contention of Babasas.1989). . ANS. or through a marginal note (NGA vs. Before the lapse Dfthe peri04~' the Babasas asked for postponement but Tabangao refused. Q. 154 SCRA 270). G. Inc. G. Two days after receipt. ANS. G. because the act of the agent or know ledge acquired by the agent duly authorized is also the act of the principal. 493. - A and B are the parties in a contract oflease which is to expire-on December 31. January 17. ANS. Dillena vs. (2) the balance of Pl. 1992). hence. No. et at. payment. because the consent can be derived from the communications between A and B. 1993.. Since X was already dead when the letter of acceptance reached his residence. He sent a letter to Y and offered it for sale.568 0. IAC. is there a binding contract? Why? Yes. (Art. No. he was already dead.9~0. G. Is there a need for judicial approval in case an heir sells his individual share in the estate of his father? VVby? . Consent can be manifested in any form. being a co-owner. ' Q. Q. each heir. The conditions were the following: (1) the amount of P300. CA. But the effect of the alienation with respect to the co-owners shall be limited to the portion which may be allotted to him in the division Upon the termination of the co-ownership. Go Ong vs. vs.R. provided that he acted within the scope of his authority.in November 1993.. (Caram vs. to B for ~is signature. No. It must be recalled that during the period of indivision of a decedent's estate. CA.

G. and mistake or fraud IS alleged.102 SCAD 459). Q. it must be plain. The conditions imposed were conditions for performance. In determining the effect of an alleged error. when one of the parties is unable to read. the acceptance must be absolut~ and mu_st not qualify the terms of the offer. and terms of payment a contra~t IS produced. et al. While failure to comply with the first condition results in failure of a contract. Concio. 1999~ 105 SCAD 842). Once there is concurre~ce between the offer and the acceptance upon the subJe~t matter. A person cannot benefit out of his own wrongdoing or failure. through.R. 94 SCAD 679). the validity thereof must-be determined in light of the circumstances under which the stipulation is intended to apply.. (ABS~CBN Broadcasting Corp. Q. et al.\ U OBLIGATIONS AND CONTRACTS Essential Requisites of Contracts 571 invoking their own failure to deliver the titles over the lots within the stipulated period of time. No. Give the nature and concept of a contract of adhesion. This counter-proposal could be nothing less than the counter-offer of Mr. failure to comply with the second merely gives the _other party the option to either refuse to proceed with the sale or to waive the condition. the person enforcing the contract must show that the terms thereof have been fully explained to the former. when something is desired which is not exactly what is proposed in the offer. for it was met by counter~offer which substantially varied the terms of the offer. in order to invalidate consent should refer to the sUbstance of the thing which is the object of the contract. In determining the effect of an error in a contract. April 21. consideration. ANS. Furthermore. Consequently. unconditional. and without variance of any sort from the proposal. ANS. CA. No. CA. Explain. January 21. 1998. No. for the parties had a perfected contract. however. such acceptance is not sufficient to generate consent because any modification or variation from the terms of the offe~ annuls the offer. The Supreme Court. Under Article 1332 of the Civil-Code. Because of the peculiar nature of contracts of adhesion. Ermitafio vs.R. Del Rosario of VIVA met with Mr. (Article 1331. Said package of 104 VIVA Films was VIVA's offer to ABS-CBN to enter into a new Film Exhibition Agreement. But ABS-CBN. ANS. or to those conditions which have principally moved one. 128690. (Babasa vs. Contracts that are consensual in nature are perfected upon mere meeting of the minds. A qualified acceptance. 127246. said that it will not hesitate to rule as void adherence to such contracts if they prove to be too one-sided under the attendant facts and circumstances. during his conference with Del Rosario at Tamarind Grill Restaurant.C) 570 CIVIL LAW REVIE~iVER (~-. Mistake. et al. rescission can only be availed of by the aggrieved party. a distinction between a condition imposed on the perfection of a contract and a condition imposed merely on the performance of an obligation. CA. CA. G. May 21. (Sps. The contract provided for conditions. A contract of adhesion is one where its terms are prepared by only one party while the other party merely affixes his signature signifying his adhesion thereto. None because there was no acceptance of VIVA's offer. Like in Lim VB. what should the court consider? Explain. 124045. Ms. unequivocal. "I'o convert the offer into a contract. In view of the foregoing. Was there a perfected contract? Explain. G. the courts must consider both the objective and subjective aspec:ts of the case-wlllcb is the intellectual capacity'of the person\vho committed the mistake.1999. sent. or both parties to enter into the contract. They are binding as ordinary contracts. there was no infected contract. NCC). Lopez . 263 SCRA 569. Parties who enter into such contract are free to reject the stipulations entirely. The offer must be certain. -Lopez of ABSCBN at the Tamarind Grill on 2 ~pril 1992 to discuss a package of films. Q. 75 SCAD 574.R.. a counter-proposal in the form of a draft contract proposing exhibition of 53 films for a consideration of P35M. Such contracts are not void in themselves. or one tha. vs.t invol-:es ~ new proposal constitutes a counter-offer and IS a rejectIon of the original offer. or if the contract is ~ a language not understood by him. Mr..

Q. (Art. -G. (Constantinovs.9'5-1. spaces in the deed. (Art. Apparently. he would not have agreed to. No.of the contracting parties is vitiated by mistake or fraud committed by the other. ignorance. citing Alcasid vs.etai. CA. It was employed other. several spaces blank. pursuant to their understanding. public order or public policy binds. ANS. and then causing the issuance of transfer of certificates of title without their knowledge.. G. o . All rights which are not intransmissible may also be the object of contracts.petitioner to induce .. "It resulted in damages 'and injury to the party seeking annulment. December 5. No. petitioner deceived respondents by filling the blank. sign the document only upon the assurance of the petitioner that respondent Roque. mental weakness or some other handicap. The heirs were persuaded to. An absolutely simulated or fictitious contract is void. (Art. without them. G. 116018. still incomplete since the petitioner who caused it to be prepared left. except in cases expressly authorized' by law. . more practically as regards the dimensionS of the property to be _ sold.the parties to their real agreementJArt. When the other parties to a contract affixed their signatures on the deed. What is the effectifboth parties to a contract employed fraud? Why? The contract is valid and they cannot invoke the fraud to . 1344. Give an example~f such fraudulent act. . it should be serious and should not have been employed by both contracting parties. 69996. when it does not prejudice a third person and is not intended for any purpose contrary tu:law. 1346. surfaced.OF CONTRACTS It induced the other party to enter into the contract.. ~~C). G. ANS. when the parties conceal their true agreement. OBJECT. When is there fraud? There is fraud when. - Q.76 SCAD 47. may be the object of a contract. . No. November 13. having the lots surveyed and subdivided. No. - -What may be the object of a contract? All things which are not outside the commerce of men. 1345. it was.. much less consent. 194. No contract inay be entered into upon future inheritance .R.respondents to sign the deed without which the latter would not have given their conformity thereto. Q.morals. ANS.which.1994. CA. The former takes place when the parties do not intend to be bound at all. of fraud that vitiate consent for purposes of annulling a contract. NCC). OBLIGATIONS AND CONTRACTS Object of Contracts 573 understanding was merely a ruse by . the supposed Q.avoid liability as their mutual fraud would negate each other. ANS. wherein a contract is entered into but the consent of one .R. the latter. would be present when the property would be surveyed after obtaining permission from the Bureau of Lands. et al. lAC. good customs. 1994. It was serious. NCC). It contemplates a situation.76 SCAD 47. necessitated by the fact that there continues to be a fair number of. 1996. Article 1332 was a provision taken from American law. 116018. in order that fraud may make a contract voidable. (2) (3) (4) by ~ contracting party upon the Q. the other is induced to enter into a contract·.R. 58 SCAD 40). through insidious words or machinations of one of the contracting parties. (Constantino vs. NCe). citing Periquet VB. inCluding future things. CA. Under the law. November 13.October 7. State the elements. 1338.R. They are: (1) . A relative simulation. ANS. people in this country without the benefit of a good education or documents have been written in English or Spanish. The provision was intended to protect a party to a contract disadvantaged by illiteracy. As it. Q. ANS. 1996. 57 SCAD 236). What are the kinds of simulation of contracts and what are their effects? Simulation of a contract may be absolute or relative..572 CML LAW-REVIEWER .

agree on the sI~eof the land to be sold Was there a. 962. .entered into a contract of sale with right t r~purchase with Y over a house and lot belonging ~ him. . vs. Q. unless the debtor proves the contrary. In Philippine Refining Co. In a contract of lease over a 490square meter lot. 1349. or public policy may likewise be the object ofa contract. supra. however.! ANS. Q. 1354. February 28. 1347. CA. . It did not generate consent that would perfect a contract. is determinate. Q. although the cause is not stated in the contract. after the death of ~ his heirs filed an action for reconveyance contending that the contract is void due to lack of consideration. Was the contention correct? Why? No. Can he sell that right? Why? Yes. NCC). No one would be required to pay more tharrthe usual priee of the products. 18 SCRA 247). 148 SCRA 313. X . without the need of a contract between the parties. (See Palomar vs. ANS. L-29881. provided it is possible to determine the same. ANS. 1989). The scheme was to the effect that participants would submit pictures. one-half of which is found in the labels of the products and the other half from its accountants. . Palomar. Participants would get the exact value of the price for the goods plus the chance of winning in the scheme.NCC). even if intangible. is the contract valid? Why? Yes. (Gitirtg Uy v. What are the causes of contracts? In onerous contracts. -. Non-payment of the price is not the controlling criterion to make a contract void. I . The fact that the quantity is not determinate shall not be a~ obstacle to t~e eXIstence of the contract.es. where the company resorted to schemes to promote the sale of its products. and in contracts of pure beneficence. Q. The acceptance of the offer was not absolute. the mere liberality of the benefactor (Art 1350.toutany cause or consideration. The contract. (Art. in remuneratory c-p._ 1969. Entries were sent to the accountant of the company with self-stamped envelopes.. as there was no agreement on the exact area proposed' ~ob~ sold. T~e object of every contract must be determinate as to its kind. NCC). Is the contract valId? Why? No. A plan whereby prizes can be obtained without any additional consideration when the product is purchased is not a lottery. Postmaster General. hence. NCC). . (Art. or ea co~ rae ng party. hence. there was ~n offer to sell. ANS. . 575 OBLIGATIONS AND CONTRACTS Cause of Contracts All servi~es which are not contrary to law. 39 Phil.). both of which envisioned the giving for free of certain prizes without additional consideration for the purchase of its products.the service or bene~t which is r~munerated." " " o. did not state the consideration. because under the law. ANS. .. vs.S. Q. 1988). 1318 NCC' Robleza vs CA G R N 80364. Caltex [Phils. Baguio. Inc. Non-payment is merely a ground for specific performance or rescission. June 28. it is presumed that it exists and is lawful. public order. morals. U.574 c=J . CIYIL LAW REVIEWER .meeting of the mmds of the parties? Why? e: ANS. the cause is understood to be f ch t ti . be. (Art.L-23248. CF! of Manila. because the law requires as one of the requirements for ~he v~lidity of a contract that there be a cause or consideranon. Suppose the cause or price was not paid. vs.cause that right. August 31. Will the action prosper? Why? No. (Robleza vs. new ANS. He contended that this is a lottery.]. X and Y e~tered into a contract of sale over a parcel of land WItI. but the parties failed to. Q. good cu~toms. None. A contract of sale was entered into by and between A and B whereby A sold and delivered a parcel of land to B. the prestation or promise of a thing or service by the other. CAUSE OF CONTRACTS I Q..s~Palomru:. . Petitioner sought to prevent the sales promotion scheme designated as "Grand Slam" for respondent's products. (Art.

Q. I.. (Arts.er court granted the motion..R. 1470 ~CC). contracts where the amount involved exceeds pesos (p500. Contracts shall be obligatory in whatever form they may have been entered into.2 and 1405.er which has for its object an act appeanng or which should appear in a public document.2. '-' .nt of real rights over im. 1358. Q. and 1405. (Arl.. No. ~-: - (2) FORM OF CONTRACTS (3) Q. What nght. I. transmission. Is the contract valid? Why? is a valid and sufficient consideration. Was the order dlsmlssmg the complaint proper? Why? No because contracts are binding between the parties in whatever form they may be. X paid the consideration.OBLIGATIONS AND CONTRACTS Form of Contracts . are governe~ ~~ - Q. I~ an oral contract of sale over a parcel of land valid and binding? Why? Y. whether oral or written.00 and other considerations _contracting parties may compel each other t~ o?serve that form once the contract has been perfected. ANS. chattels or things ~ action by Articles 1~03. The company filed a motion to dismiss on the ground that the claim was not evidenced by any written document.o written contract evidencing the same. Arrogante. ~ -. ANS.OO and other considerations.sales of real property or of an interest therein are governed by Articles 1403. One exception thereto is the Statute of Frauds which requires a written instrument for !~e ~nforc~l. ~e !o. ANS.es. Y refused. or an~ other po. et al. vs. G.2' July 24. 66 SCAD 136). contending that there ~as n. . - 577 ~. G.~ay be v~id or enforceable.tary rights or of those of the conjugal partnershIp of gains. ~e can ask for a specific performance. especially so with the presumption of consideratio~ In the law.7oo. No.!_bilityof a contract. Tins right may be exercised simultaneously with the action upon the contract. (See Ong vs. if the law requires a document or other special form. 1356. a movie ~ctress. No.. but with respect to inno-cent third persons. does X have as against Y to enforce his rights? Explain. .The cession. The power to administerproperty. (Art. _provided all the essential requisites fo~ their validity are 'present. The rule is that the gross inadequacy of the price does not invalidate a contract of sale (Art. public or private.m. if any.!. CA. No.an oral contract of sale over a parcel ofland is valid and bU_Idmgbetween the parties. or that a coatract be ~ro~en m a certain way. seeking to recover the _amount of P14. Maya contract be entered into in any form? Why? (4) Yes.R. modification or extin~ishme. even But sales of goods. Acts and contracts which have for their object the creation. because P1.:". ' . 1995. when the law reqwres that a contract be in some form in order that it . The cession of actions or rights proceeding from an act appearing in a public document. 2007). However. Under the law. Ong. it is not binding upon them._et al. NCC). It violated Art. filed a eomplatnt against A Co.. of sale o! a car between A and B. 1521~. the All other Five hundred a private one.. repudiation or renunciation o~heredi. No. X and Y entered into an oral contract of sale of ~ ~arcel of land. 67888 October 8 1985). 1356 and-1402 NCC. Limketkai vs.(._/ 576 CIVIL LAW REVIEWER .. Yes. 1358.~'-) \.R. 1357. What contracts or acts must appear in a public instru-- ment? The following must appear in a public instrument: (1) Q. 'When he demanded the delivery-of the title. they agreed that the consideration is Pl.00) must appear in writing. that requirement is absolute and indispensable.oV'ableproperty. ANS. In a contract ANS. -(Art. December 1. 118509. or should prejudice a third person. II WS. et al.00 representing the balance of her fee as leading actress in two movies produced by A_ Co. NCC. Nee. Deliarte. G. I I- Marlene Dauden. (Arts.

749. e~ al. QLIGATIONS _&. fraud. Cite some laws that . et al. Judge Leanda and Leyte Gulf Traders. Camit.for reformation of instrument? Why? Yes. the law 1874. the law requires it to be in writing (Art. 5734. ANS. ENIA.the designation of the lot in the deed. The right of _ reformation is necessarily an invasion or limitation of the parol evidence rule since. there having been a meeting' of the minds of the parties to a contract. vs. when a writing is reformed the result is that an oral agreement is by court. Sps. G. 2000). an instiument already executed is allowed by law to be reformed. and (3) . NCC). NCC. Renate Cenido. Conde vs. A contract of sale was entered into between the parties whereby Lot No.R: No . November 19. or compliance therewith.) -. in order to express the true intention of the contracting parties. (1) In case of donation of personal properties the value of which exceeds P5.. decree made legally effective. 128991. When should an action for reformation be filed? of instrument ANS. parties may ask for the reformation of the instrument to the end that such true intention may be expressed (Article 1359 NCC). otherwise. but the requirement is designed merely for purposes of enforceability. Such action is instituted in a special civil action for declaratory relief. Statetiie basis and nature oftheremedyofr~formation. the courts. 99 Phil. fraud. 4163 •.1999). CA. NCC).. reformation of instrument is proper in order that the document may reflect Q. NCC). . REFORMATION 'an . OF INSTRUMENTS Since the purpose of an action for declaratoryreliefis to secure an authoritative statement of the rights and obligations of the parties for their guidance in the enforcement thereof. In this case. inequitable conduct or accident. The seller did not object when the buyer took possession of Lot No. Sta. a' rule. Q. 748. The remedy of reformation of an instrument is grounded on .~he 'p~nciple of equity where. by reason stake. there was meeting of the minds of the parties but the deed did not express their true intention due' to mistake in . being an extraordinary one. and not to settle issues arising from an alleged breach thereof.00. Aprl112. Donation of real property must be in a public instrument and accepted to be valid (Art. 4163 was intended to be sold but mistakenly designated as Lot No. vs. the requirement that contracts be in a ~ertain form does not necessarily mean that they be so Inorder to be valid.}. one of the of . Ana. the failure of the instrument to express the true intention of the parties is due to mistake. (2) (3) (M. (Huibonhoa vs. ' m: ANS. hence. their true intention is not expressed in the inst:r:mnent purporting to embody the agreement.R.. 320 SCRA 625).authorized by law to exercise the power to reform an instrument.' When. 1056).i 578 C1VIL LAW REVIEWER \. must be subject to limitations as may be provided by law.j!) CONTRACTS Reformation of Instruments . Cuenca. must necessarily exercise that power sparingly and with great caution and zealous care. Moreover.. Q~ ANS. 579 1315 and 1356.132474.. et al. et al. Q. 215 SCRA-436. Consequently. the remedy.require contracts to be in a certain form to be valid. it may be entertained only before the breach or violation of the law or contract to which it refers. Its elements are: (1) there must be meeting of the minds of the parties to the contract. Reformation is that remedy in equity by means of which a written instrument is made or construed so as to express or "Conform to-the Teal intention of the parties. In t~e sale of real property through requires the agency to be in writing. G. When is reformation of instrument proper? Q. Inc.____. Dauden-Hemaes vs. agent. of instrument. as the agencies .May this contract be the subject of an action . etc. it will be barred by the mere lapse of time (Bentir and Formida vs.000. ANS. mequitable conduct or accident. As.. A suit for reformation of an instrument must be brought within the period prescribed by law. (2) the instrument _ does not express the true intention of the parties. De los Angeles 27 SCRA 1276. Explain. No.

June 6. (NIA vs. 1359[par. inequitable conduct..mnation of Instruments 581 the true intention of the parties. (Art. No..1364. Under Rule 131. Gamit. Alcaraz vs. one. November 6. Q. Q. Under the law. Hence. . NCC)." 580 CIVIL LAW REVIEWER QI~~~~O~S ~D C0l'1TRACTS Ref. the children of Virginia. hence. 2. he cannot. their true intention is not expressed in the instrument purporting to embody the agreement. The late Virginia Tangga-an leased a house to the Spouses Alcaraz."ld deliberately led another to believe a particular thing true.The contract provided for a 5. 12. of the parties may ask for the reformation of the instrument to the end that such true intention may be expressed.l~re of the instrument to express the true intention of the p~rtie~ is due to mistake. fraud. (Sps.they contended that the change in ownership of the' house and lot resulted in the cancellation of the lease contract. inequitable conduct. Y can ask for specific performance. the minds of'the parties. there have been a meeting of the minds of the pa~les to a contract. by his own declaration. (c) ignorance or_lack of skill in the preparation? In those cases. et al. asked Yto sign a document which purported -to be a sale of a parcel of land with the assurance that the same would only be a security for the payment of the obligation. if mistake.62. fraud. but did not include the lot as it was owned by the NHA. or accidenf. The remedy is annulment.R. No. be permitted to falsify it. 1359[par. a complaint for unlawful detainer was filed. ANS. the lessees are barred from alleging automatic cancellation of the contract on the ground that there has been a transfer of the lot to another. ANS. Q. and to ad upon such belief. there is a conclusive presumption whenever a party . G. 2003). Q. -1]. Therefore. What is the remedy of the parties if the following are present in the . April 9. (2) th~ instrument doe~ not express the true intention of the parties. G. G. intentionally -2. After recognizing the validity of the lease contract. No.. however. by reason of mistake. the ~roper remedy is not reformation of the instrument but annulment of _!he co~tract. what is the remedy of the aggrieved party? Explain. PedrcTangga-an. .R. They knew that their contract 'pertained only to the house and not the lot. or omission. because they are estopped from raising the issue of ownership. or accident has prevented a meetm~ of . contending that X is now the owner of the property? Explain. If in the contract ofAand B there was fraud or mistake which prevented the meeting of the minds between the parties. Is the contention of the defendants proper? Why? No. in any litigation arising out of such declaration. vs. What is the remedy of Y in case X demands the delivery of the supposed security . 85869. ~aud. the creditor. Sec.Q• ANS. 1361. 2]. The defendants flled an answer stating that the NHA transferred the house and lot to Virgilio and Angelita Tangga-an. the remedy is reformation of instrument in ~rder to reflect their true intention. act or omission. (Rita Sarming. NCC). as the lot belonged to the NHA. ANS. (Art. act. Under the law. year period but the lessees failed to pay the rentals despite demands to pay and vacate made by the lessor. . What are the requirements before an action for reformation of instruments may prosper? They are: (1) there must have been a meeting of the minds of the parties to the contract. Their claim that the transfer of ownership of the lot stripped the lessor of the ownership of the house is without merit.eontraet such th~t the~ failed to express their true intention: (a) mutual mistaker (b) fraud of one and mistake of one.:x. ~hen. .. Xand Yentered into a contract ofloan. 1992). et al. Cresencio Dy. NCC) . 133643. of the Rules of Court. et al. inequitable conduct or accident. et al.R. and (3) the faJ. 128568. they paid the Tents to the new owners as the lessors have no more right to collect the rents. 2002). ANS. (Arts. has.

ANS. X and Y entered into a contract. Q. Ute respondent prayed that it be paid damages because of the losses it incurred for the poor service rendered by the petitioner. The law does not require. Q. as a public service and it becomes necessary to remove the electric light' posts. the petitioners were required to pay the respondent for the use of the posts in Naga City and other towns at the . . . hence. reformation is necessary. NCC does not apply because the contract does not involve the rendition of service or personal prestation and it is not for future service with future unusual change.NCC applies and that the contract is subject to a potestative condition which rendered said condition void. ._) . X sought to enforce it by way of a suit in court. Article 1267 states that the law or doctrine of unforeseen events based on the discredited rebus sic stantibus in public international law where the parties stipulate in the light of certain prevailing conditions. It is also alleged: tha~ the petitioner used its posts outside NagaCity. Article 1267 speaks of "service" which has become so difficult. because when one of the parties has brought an action to enforce the instrument. The trial court ruled for the respondent as it has become disadvantageous and unfair to private respondent. (Art. and that the telephone cables strung by them have become much heavier with the iricrease in the volume of subscribers. T9 abolish the inequities. Under what circumstances is reformation not proper? Reformation is not proper in the following cases: (a) Simple donations imposed. (Art. reformation is the remedy if the instrument does not reflect the true intention ofthe parties./ 582 CIVIL LAW REVIEWER V \ \. 1367. hence. but taking into consideration the consequences like disruption of essential public service.\ . NCC). Petitioner contended that Art. he cannot subsequently ask for its reformation. A. What do you understand by the principle that you do not reform the contract but you reform the instrument evidencing it? It simply means that the contract is binding as it is the law between the parties.said article. Service should be understood to refer to "performance" of the obligation. . and once these conditions cease to exist. The obligation of the respondent consists in allowing petitioners to use its posts in Naga City which is the service contemplated in the _ . On appeal to the CA. hence. the electric company filed an action for the reformation of the instrument on the ground that the contract is too one-sided in favor of petitioner . it ordered the parties to reform their contract. 1267. but it shall be terminated if the electric company is forced to stop or abandon its operations. AJ:'1D CONTRACTS of Instruments 583 Q. After the contract had been enforced for over ten (10)years.~ontract was entered into between the petitioner telephone company and Camarines Sur II Electric Cooperativerfnc. inter vivos wherein no condition is (b) Wills. The se released the parties from their. to the extent that petitioner should pay for the use of the posts of respondent and respondent should pay the telephone service. hence this petition. (c) Q. for the former to use the electric posts of the latter ill:consideration of the installation of ten (10) telephone lines free of charge with the condition that the period of the contract shall be for as long as the telephone company has need for the posts. it must be reformed in order to reflect the true intention of the parties. The contention is not correct.that the contract be for futureservice with future unusual change. ANS.. but the instrument that evidences the terms and conditions of the contract may not be reflective of the same. As a rule. OBLIGATIONS Refonnation . ANS. correlative obligations under the contract. the latter affirmed the trial court's decision stating that Article 1267. When the real agreement is void. It must pay damages.. ANS. NCC). the contract also ceases to exist. Can he still ask for the reformation of the instrument? Why? No. 1366. Finally. A motion for reconsideration was filed but it was denied.

ANS. i 584 CIVIL LAW REVIEWER \J" / ~ " . paY':lblein . G. New Civil Code). X offered it to Z for P5M. Q. (Art.. by means of the restoration of things to their condition prior to the celebration of the said contract. 5B5 rate of P10. and the respondent was required to pay telephone bills at the same rate paid by the public from January 1989. What is the nature of an action for rescission? The action for rescission is subsidiary. All other contracts specially declared subject to rescission.arrive at their true meaning. 1381. CA..R. The doctrine closely adheres to the spirit of Art. et al. Enumerate the rescissible contracts. Q.. the lessor. the right of first refusal to purchase the premises in case X decides to sell the property. Since Y could not afford. RESCISSIBLE CONTRACTS When should an action for rescission be filed? "v . it was ruled that the surety bond must be read in its entirety and together with the contract between the NPC and the contractors. o\NS. Y communicated the inability to pay. availed only after all legal remedies have been exhausted and proven futile. 1999. 145 SeRA 533 (1986). 124049. New Civil Code). Director of Lands. For~persons under guardianship and for absenteea. giving y.. Those which refer to things under litigation if they have been entered into by the defendant without the know ledge and approval of the litigants or of competent judicial authority.. NCC). 144169. The actionto claim rescission must be commenced within four years." . G. the period of four years shall not begin-uritil the termination of the former's Incapacity. I i. by law to be (4) Q. No. (Article 1383. March 28. Hence.• If there is a principal contract and a surety agreement.00 per post per month from January 1989. it cannot be instituted except when the party suffering damage has no other legal means to obtain reparation for the same. ANS. ANS. When X decided to sell. Velasquez vs. (3) Those undertaken in fraud of creditors when the latter cannot in any other manner collect the claims due them. applying the doctrine. (Citing Agne vs. In the earlier case of NPC us." and what is its basis? Explain. vs. (5) What is rescission? Rescission is a remedy granted by law to the contracting parties and to third persons in order to secure reparation of damages caused them by a contract. February 24.the lessee. Q. Naga Telephone Co. hence. NCC which states that the various stipulations of a contract shall be interpreted together. 181 SCRA 793 [1990]. et al.48 SCAD 539). - Q. (Khe Hong Cheng vs. G. No. Q . r ANS. he offered it to Y for P5M payable within one (1)year . (2) X and Y entered into a lease contract over a house and lot of X. or until the domicile of the latter is known. June 30. Certain stipulations cannot be segregated and then made to control. The provisions must be construed together to . 108 SCAD 465). CA. 107112.. OBLIGATIONS AND CONTRACTS Rescissible Contracts . CA. (Rodolfo vs.. .R.1994. et -a. the principle leaves no doubt that it is the intention of the parties that the surety be personally liable in the deed of suretyship because of the loan agreement. if the latter suffer the lesion 'stated in the preceding number.. CA. Give the concept of the "doctrine of complementary contracts construed together. (Article 1389. The following contracts are rescissible: (1) Those which are entered into by guardrans whenever the wards whom they represent suffer lesion by more than one-fourth of the value of the things which are the object thereof. 2001). 1374. .R. even if the contract be valid. These circumstances necessitated the exercise of equity jurisdiction. No. attributing to the doubtful ones that sense which may result from all of them taken jointly . it must be availed of as the last resort. 'Phose agreed upon in representation of absentees.

A contract of sale of land was entered into where the' seller warranted peaceful possession olthe property sold. (206 SCRA 668 [1992]) . the same condition was not present. such a condition was imposed that in case of failure to remove the tenants. Lim Yhi Luya vs.R. OBLIGATIONS AND CONTRACTS Rescissible Contracts 587 four (4) years. if it is by onerous title. 3.Jn the case at bar. CA. NCC. Rosa Lim.9-nthe signing of the instrument of sale.OOO. Rescissible contracts are valid until rescinded.586 CIVIL LAW REVIEWER .R.26578. and not a condition that was not met.ANS. CA. the other has the right to either refuse to . Any obscurity in a contract must be construed against the party who caused it. Can this failure to eject the tenants be a ground to rescind the contract? Why? . ms. as against X and Z. has been an accomplice in the fraud. Adding all the payments made. The remedy is to file an action for rescission because the sale was made in fraud of creditors. 1974. (c) there must be mutual restitution of the object and cause. NCC. (Power Commercial and Industrial Corp. However. In Romero vs. vs. the buyer can be ordered to recover one of the two lots. The act being impugned is fraudulent. If at all. the Leafio spouses shall pay P200. 1997. ~.'ho re~ived the property conveyed. Bocaling & Co. et al. such condition was not stated. Title was lll. it would result in unfairness to the buyer. Solis vs. November -19.1t was stipulated that up. G. . 4. June 20. must be economic or financial prejudice. No. What is an aecion pauliana and state its requisites? Q. 5. ~t was further stipulated that the buyers shall assume the mortgage. No. Its requisites are: (a) there must be a valid or voidable contract. No. (Maria Antonia Siguan vs. Saldana. Ang vs. In Legarda Hermanos V8. No. otherwise. CA. The plaintiff asking for rescission has a credit prior to the alienation (Panlilio vs. the seller failed to eject the tenants.OOO. ANS. 50 Phil. 706. the buyer was able to pay an amount equivalent to one lot but he failed to pay for the two lots. (Art. 1999). (b) there.spouses for P400. The buyer was the one who prepared the document. because it was not stipulated.Z. Victoria.NS. What are requisites? rescissible contracts and what are its . January 28. State whether the action will prosper and why.prosper? Wb_y? An accion pauliana is an action to rescind contracts in fraud of creditors. yet. which is similarly situated with the case at bar. 2. G. thus"he filed an ejectment suit against Y who discovered the manner of payment. 99 SCRA 668). a sale on installment of two (2) lots was enteredinto by the parties. - Q. They have extrinsic defects in that there is economic damage or lesion suffered by one party.. et al. 84 SCAD 67).OO with the balance payable within a certain period.. Discuss the remedy/remedies of Y. \NS. 636) although demandable later. The Barredo spouses sold a house and lot to the Leafio .proceed with the agreement or waive that condition to ejectin accordance with Art. there can 'be no rescission under the circumstances. 119745. 170 SCRA 286.. ~. The creditor has no other legal remedy to satisfy his claim. The debtor has made a subsequent contract conveying a patrimonial benefit to a third person. Bonneuie. 134685.ter acquired by. In Guzman. L. it was said that the lessee can be considered a creditor because of the substantial right he acquired from the contract giving him the right to buy under equal terms and conditions as are offered to others in case he cannot avail of such right. The provision was more of the usual warranty against eviction. indebtedness to the SSS and Apex Mortgage & Loans Corporation upon the . Will the action . CA. 1377. Chua Pua Hermanos. hence. The third person . vs. 1545. 35 Phil. f\. if any. an action for rescission was filed ~y ~he seller.OO. Its requisites are: 1.

Q. June 4. Lim. The buyers contended that rescission cannot prosper because the payment of the mortgage indebtedness was only a collateral matter or agreement which does not detract from the condition of paying the principal consideration. Siquan. On March 27.R. without retroactive effect to the date when the credit was constituted.ANS.the agreement was it stipulated that the sale was conditioned upon their full payment of the loans with SSS and Apex. Ysold it to Zwho registered it under his name. November 19. breach. Rosa Lim. lAC. 156627. X executes a real estate mortgage with the condition that if X fails to pay Y could foreclose the mortgage. (Sps. Barredo vs. 134685. VS. (Suria vs. 2004).115 SCAD 833). Q. The complaint was dismissed on the ground that there was no material breach.R.OOO. 'The Barredo spouses filed a complaint for rescission of the contract for failure of the buyer to pay the mortgage indebtedness. et al. G. it is merely declaratory. To include the full payment of the obligations with the SSS and Apex as a condition would be to unnecessarily stretch and put a new meaning to the provisions of the ·agreement. 0" OBLIGATIONS AND CONTRACTS Rescissible Contracts 589 signing of the document of sale. The assumption of mortgage by the buyers is a natural consequence of their buying a mortgaged property. The action for rescission is subsidiary.OO. In case Ad(_)esnot pay the loan. still rescission would not be available since noncompliance with such condition would just be a minor or casual breach thereof as it does not defeat the very ohject of the parties in entering into the contract. Mter Y paid P300.: X can no longer rescind the contract because Y cannot return the thing to him anymore. Xobtains a loan from Y. (Art.00 within ten (10)day's from the registration of the same. .OOO. Xhas a property.. NCC). Is the dismissal correct? Explain. hence. the person asking for it has a credit prior to the alienation. Y failed to pay.R.1999). No. 134685.OOO. there was no credit yet existing. While itis necessary that the credit of the plaintiff in the accion pauliana must exist prior to the fraudulent alienation.the amortizations by the buyers directly to the SSS and Apex simply because the sellers have already parted with their property with the payment of the price. The main consideration of the sale is the payment of P200. R. Without any prior existing debt. June 30. No. The assumption of the mortgage over the property and their payment of amortizations are just collateral matters which are natural consequences of the sale of the mortgaged property. In fact. ANS. X sold his car to 'X for P400. can Y rescind the contract? Why? No. G. G. Sps. what is his remedy? Explain .588 CIVIL LAW REVIEWER o . He donated it to Yon March 27. Can X rescind the contract? If not. . there can be neither injury nor fraud. because at the time of the donation. It is a requirement that for rescission to prosper. X agreed to have the car transferred in the name ofYprovided that Ywould pay the balance of PI00. ANS. November 19. Yes. But even if the payment ofthe mortgage amortizations to the SSS and Apex as a condition on which the sale is based on.OO. the cause of action is subordinated to the existence of that prejudice because it is the raison d'etre as well as the measure of the right to rescind.As security for the payment of the obligation. 1383. it cannot be instituted except when the party suffering damage has no other legal means to obtain reparation for the same.. Even if the judgment be subsequent to the alienation. 73893. It must be recalled that in rescission based on lesion. Leano. No. Q.1987.X Incurred an obligation from Z. Nowhere in. et al. (Siquan vs. the dismissal was correct as there was no material . et al. 2000. the sellers do not stand to benefit from the payment of. Rescission creates the obligation of mutual restitution of the object and the cause ANS. 1999. Mter the certificate of registration was issued.1999. rescission was not proper. .00 to the vendors within the period agreed upon. Q. Can Zfile an action for rescission of the donation after a judgment is rendered holding X liable? Why? No. No. the date of the judgment is immaterial.OOO.

1388. 1385. hence. March 28. NCC).OOO. X paid PIOO. NCC). . X bought a car from Y valued at P200. CA. there was no prior offer to the lessee for the latter to exercise the right of first option ~r priority to buy. 1) ~S. For persons under guardianship and for absentees.Y notified X that he has rescinded the contract for X's failure to pay the balance on time. In a contract of lease there is a provision giving the rns. the period of four (4) years shall not begin until the termination of the former's incapacity. Q. March 3. X and Yentered into a contract of sale over a parcel of la:ml. CJ OBLIGATIONS AND CONTRACTS Rescissible Contracts 591 or consideration. or until the domicile of the latter is known. G. State the liability of one who acquires the thing in bad faith where rescission can no longer be availed of. and only under the same terms and conditions previously offered to the lessee. 1987. the first acquirer shall be liable first. it should be impossible for him to return them.1993.R.I cin the lessee filean action for rescission so that he can exercise the first option to buy? Why? (2) What Is. ANS. grace period. 2001). In the first sale. P20. Yes. shall indemnify the latter for damages suffered by them on account of the alienation. (Tayag. (Art. Upon the signing . X can. meant by the phrase "all things and conditions being equal" in a contract of first option to buy? Explain.and PIO. Y failed to comply but X gave him a series of extensions.OOO. -(3) State the basis of the right of first refusal. Can he validly do so? Why? No more. (Art.OOO. It is the legal possibility of bringing the action which determines the starting point for the computation of the four-year prescriptive period as provided in the law. NCC). -(1) . IAC. (Khe Hong Cheng vs. Since Y has already transferred the car to Z. InPilipinasBank.OO August 1993. owner-seller. Y waived the right ofrescission.On November 3. (Art. it can also be waived. Q. 144169. If there are two or more alienations. CA. The right of the first option to buy by the: lessee has already been upheld. Finally. vs. !\NS. Q. 1~93). though X had been in arrears beyond the lessee the right of first option or priority to buy the properties subject of the lease wherein a violation of the same gives rise to a valid cause of action. et al. and so on successively. et al. 96053.OOO. Only if the lessee failed to exercise . reserved the right to rescind the in case Y would not comply.OO pa~~bl~ in three (3) montlily "mstallments. What is the period within which rescission should be resorted to? The action to claim rescission must be commenced within four (4) years. Whoever acquires in bad faith the things alienated in fraud of creditors. G.590 CIVIL LAW REVIEWER o Q. However. the lessor sold the property leased to a third person. it was said that a contractual provision allowing automatic rescission is valid. and realizing her error. rescission is no longer possible. he wanted to rescind the contract.R. balance was The payable in May and June 1993 with an extension of one (1) month. Is the action of Y proper? Why? No.OOO.OOOctober 1993. 1389. If there was a series of extensions given to the vendee the same can be considered as a waiver of the contractual provision allowing automatic rescission. No.OO. In this case. 1191. whenever. due to any cause. file an action for specific performance withdamages against Y.vs. ANS.ofthe contract. Thereafter. (Art.OO September in in . she sold it to another for P9M. the right of first priority could the lessor lawfully sell the subject property to others. X failed to pay. however. in 1993. ~. NCC).No. June 30.. because when Y accepted and received delayed payments of installments. she repurchased the same. She then offered it for sale to the lessee for P15Mwhich the latter rejected because the price was ridiculous. X paid Y the amount of PI0.·JC. Demands were made for the payment.

It is thus evident that the Statute of Frauds does not contemplate cases involving a right of first refusal. Once ratification is made.are valid until annulled. NS. What is the nature of aright of first refusal? Is it enforceable even if orally given? Explain. Inquing.R. A right of first refusal is not by any means perfected contract of sale of real property. Mayfair Theater. 140479. 106063. contract of sale._1396. Furthermore.. the .1997. '. No. What are some basic characteristics contracts? of voidable Voidable contracts . November 21. March 8. The basis of the right of first refusal must be the current offer to sell of the seller or offer to purchase of any prospective buyer. Those where the consent is vitiated by mistake. which had substantive interest over the subject property. but of the right offirst refusal over the property sought to be sold. and may be proven by oral evidence (Rosencor Development Corporation. a right of first refusal need not be written to be enforceable . et al.2001). No. NCe). it is a contractual grant. ANS. ~. They 'are susceptible of ratification. cleansed of their defects and such ratification retroacts to the constitution of the contracts. citing Guzman.92 CIVIL LAW REVIEWER o· ·0 OBLIGATIONS AND CONTRACTS Voidable Contracts 593 2) The SC interpreted the phrase "all things and conditions being equal" to mean that there should be identity of terms and conditions to be offered to the lessee enjoying the right of first priority. not of the sale of the real property involved. but of the right offust refusal over the property sought to be sold. Q. et al. intimidation.76 SCAD 407.. a right of first-refusal need not be written to be enforceable and may be proven by oral evidence (Rosencor Development. vs.. 79 SCAD 936. contemplate cases involving a right of first refusal because the application of such statute presupposes the existence of a perfected contract. Q. 'lfS. Is the Statute of Frauds applicable to contracts with right of first refusal? Why? No. (Art. again. No. supra.R. un:der the same term's and conditions offered to the grantee. VOIDABLE CONTRACTS In Equatorial Realty VS. CA. Inc. undue influence or fraud. not of the sale of real property involved. et al. At best. Only after the grantee fails to exercise its right of first priority under the same terms and conditions and within the period contemplated could the owner validly offer to sell the property to a third person. Corporation vs:_~nquing.1996.. (See also Paraiiaque Kings Ent. 140479. NCC). ANS. Thus. Bonnevie. (Arl. Inc. February 26. even though there may have been no damage to the contracting parties: (1) Those where one of the parties is incapable of giving consent to a contract.). A right of first refusal' is not by_any means a' perfected contract of sale of real property. . G. As such. 111538. the right offirst refusal to buy was also upheld considering that Mayfair.2001) "'p. par. was prejudiced by its sale to Equatorial without Carmelo conferring to Mayfair every opportunity to negotiate within the 30-day stipulated period.. vs.R. The Statute of Frauds does not. It is a contractual grant. 3) application of Article 1403. 1390. 2(e) of the New Civil Code presupposes the existence of a perfected.. albeit unwritten. (2) Q. vs. the said contracts shall be. G. What are the requisites required for the ratification of voidable contracts? They are: (a) The contract must be voidable. What ar~the voidable contracts? The following contracts are voidable or annullable. ANS. March 8. A right of first refusal is not among those listed as unenforceable under the Statute of Frauds. No.R. Bocaling and Co. violence. G. This rule applies even without the same provision if the right of first refusal is not to be rendered illusory. G.

because the Association was neither a party nor privy to the contract of sale or assignment. Alcantara. GSIS foreclosed the mortgage with it as the highest bidder. 215. GSIS foreclosed the mortgage. vs. ANS.Bldg. X failed to deliver the object of the contract. 1398. Q. Inc. and yet. he was the one who filed a suit to annul the contract. March 4. NCC). rns. The cause of its being voidable must not continue to exist at the time of ratiflcation. G. the sheriff issued a final sale. It has therefore no right to question the contract. Espiritu. and the price with its interest. the value thereof shall be the basis for damages. Will the action prosper? Why? . ~. he cannot question the validity of the contract. was the highest bidder. Centertown."1 594 CML LAW REVIEWER (j C) OBLIGATIONS AND CONTRACTS Voidable Contracts 595 (b) (c) (d) (e) Q. (Art. and Towers for annulment of the title on the ground that it is void because it is ultra vires. He borrowed money from the GSISusing the building as security by way of a real estate mortgage. (Sia Suan and Chiao vs. The Tenants Associatfon sued the GSIS. hence. it was said that since the minor was under estoppel. NCC). what is his obligation? He shall restore the value and the fruits only. House International Bldg. A failed to redeem it. Will the action prosper? Why? No. 195). 1990): Note that the tenants association was not a party to the contract. the action forannulment of contracts may be instituted by all who are thereby obliged principally or subsidiarily. No. INS. 1950).. their fruits. Xmortgaged his land and building to GSISas security for the payment of his obligation~ Since he failed to pay his obligation.000tenants. as provided by law. (Bastida vs. What is the obligation of each party in case of annulment of a contract? Th~ contracting parties-shall restore to each other the things which have been the subject matter of the contract. Tenants Assn. Thereafter. Dy Buncio and Co. NCC). Suppose the thing was lost through the fault of the person who must return it. Since the GSIS was not authorized to engage in the real estate business. 37 Phil. June" 30. it organized a corporation known as Towers. 54305. 1400. 1396. 1987). The person ratifYing must know the reason for the contract being voidable. 1987. except in cases In obligations to render service. CHouse Int'l. " There must be no implied or express waiver of the action. The reason for the rule that the person prejudiced can question the validity of a contract is that. X. CA. The person ratifying must be the injured party. (Alt.R. -No. Inc . because the tenants association cannot question the validity of the sale. rns. In MercadO vs. (Art. 1397. 93 Phil. NCC). Centertown. February 14. He failed to pay. he who comes to court must come with clean hands. thus. (Art. - ANS: l. vs. X and Y entered into a contract of sale. (Art. Atlas Consolidafed Mintng vs. with Q.. represented What is the effect of ratification of voidable contracts? Ratification of voidable contracts cleanses the contracts from all its defects from the moment they were constituted. A is the owner of a building with about 1. " Q. The tenants association of the building questioned the sale as ultra vires._The "action for the annulment of contracts may be instituted by all who are thereby obliged principally or subsidiarily. Will the action prosper? Why? No. June 30. NCC. can he ask for its annulment on the ground of his minority? Wby?" ANS. himself to be of age. He entered into a contract. 1397. a minor. Under the law. lAC. Q. Tenaflts Assn. GSIS sold the building to XYZCorporation which was not authorized to engage in any realty business. lAC.

Renata Cenido.(Art. 1993. CA.1993. or by the acceptance of benefits under them.. An agreement for _the' sale of goods. and it would prosper because the requirement is . Q. or who has acted beyond his powers. but B refuses now to execute the deed of conveyance. names of the purchasers and person on whose account the sale is made. and subscribed by the party charged. or the evidences. of the agreement cannot be received without the writing. 195). November 19. or some note or memorandum thereof. (Bastida vs. other than a mutual promise to marry. but B would refuse to convey the land. NCe). of such things in action. (1) Can A sue B to enforce the oral contract? Why? (2) What is the defense of B. at the time of the sale./ -. default. Ana.R. Will vour answer in nos. or a secondary evidence of its contents: (a) An agreement that by its-terms is not to be performed within a year from the making thereof. therefore. Why are they called unenforceable contracts? They are called unenforceable contracts because they cannot be sued upon or enforced unless they are ratified.at the time some part of the purchase money.ratified? They are ratified by the failure to object to the presentation of oral evidence to prove the same. because the guilty party cannot file an action for annulment. Sta.. (c) (d) An agreement made in consideration of marriage. unless they are ratified: Those where both parties consent . Dy Buncio and Co. ANS. or some of them. A representation person. A and B entered into an oral contract of sale of a parcel of land agreeing on the price. of the amount and kind of property sold. what would be the remedy of the aggrieved party? Explain. unless the same. (2) Those that do not comply with the Statute of Frauds How are contracts infringing the Statute of Frauds referred to in Art. it is a sufficient memorandum. but when a sale is made by auction and entry is made bythe auctioner in his sales book.. He who comes to court must come with clean hands. 160 SeRA 821. or miscarriage of another. etc. chattels or things in action. 1 and 2 be the same if'B accepted a downpayment? ExPlain~ . NS. ANS. Q. Nee). price. OBLIGATIONS AND CONTRACTS Unenforceable Contracts 597 NS. or pay . 1403(2). Sps.the title on August 30. Suppose on August 30.16 CIVIL LAW REVIEWER o (e) (D U . No. if any? Will it prosper? Why? (3) (b) _Aspecial promise to answer for the debt. In the following cases an agreement hereafter made shall be unenforceable by action. be in writing. (Hernandez vs.1999). evidence. or for the sale of real property or of an interest therein. date of payment and delivery of. . Q. or by his agent. because the oral contract of sale over real property is unenforceable if not in writing. (Art. terms of sale. (I) Those entered into in the name of another person by one who lias been given no authority or legal representation. No. 132474. (2) The defense ofB is thatthe oral contract is not enforceable. at a price not less than Five hundred pesos.~ -- (4) Suppose A has already delivered the consideration. as set forth in this number. 93 Phil. 1405. (1) No .A will go to B's house and deliver the money. ANS. I (3) What are the unenforceable contracts? The following contracts are unenforceable. An agreement for the leasing for a longer period than one year. unless the buyer accept and receive part of such goods and chattels. as to the credit of a third are incapable of giving UNENFORCEABLE CONTRACTS . vs. 1403. G.

September 26. he asked for leave to sell a particular portion of B's estate which was approved by the court. ANS. Evidence. No. Gavina Gaglucot-aw. the se said that "a supposed sale of a piece of land belonging to the estate of the deceased under custodia legis. of the agreement cannot be received without the writing or a secondary evidence of its contents. only to refuse it later. NCC which requires that conveyances involving land must be put to Writing. Bumanlag vs. hence. B. 160 SCRA821). . 199 SeRA 640:[1991]. (Art. This is due to the fact that under Art. The compromise' agreement is unenforceable. 1403. and in both cases. Is the contract enforceable? Why? No. December 12. March 28. 1986. 1 and 2 would no longer prosper because if a downpayment was accepted it would mean that the contract is no longer executory but partly executed.: r. X. G.. A is the owner of a house "which is being verbally leased to B for five years. vs. 1403[11. and C entered into a contract of oral partition of ~. be in writing and subscribed by the party charged or by his agent. The Statute of Fraude applies Qmy to leases and conveyances of land. rns. L-39119. ~BLIGATIONS AND CONTRACTS Unenforceable Contracts 599 that. To enforce his right and to be able to register the same. Can B go to court and enforce his right tbat the contract be renewed after the expiration of the contract? Why? No. Leopoldo Maglucot. ms. In need of money to support the children ofB. leasing for a period longer than one year is unenforceable "byan action unless the same or some note or memorandum thereof. His remedy is specific performance where X. CA. "an agreement for' the. ~. NCC). NCC). 2]. ANS. (Art.)98 CIVIL LAW REVIEWER . such contract must be in writing. ANS. CA. Partition is not a lease or conveyance. A. 1987~it was ruled that an oral assurance that the lease would be renewed IS not enforceable. (Vda. does not apply as it applies only to leases and conveyances. but Y has not yet delivered the land. the buyer. to be enforceable. B objected on the ground that the oral agreement must be followed. X and Y entered into an oral contract of sale of a parcel of land. \NS. because the requirement that contracts pertaining to land must be in writing does not apply in an agreement on the boundary of the same. oecause there is no need to put the agreement defining the boundary of their two (2) parcels of land to writing Q. In Syq~ia vs. The sale was effected hut the administrator did not have the deed of sale approved by the court. Q. (Art. A and B entered into an oral agreement defurlng the boundary of their two (2) parcels of land which are adjacent to one another. it can be ratified by the client expressly or impliedly. because it is not a conveyance of land. CA. 1986). A orally promise" B th~t the lease would be renewed. ~. but a mere division of the property. Is A!s contention valid? Why?~ No. (3) No more the defense in nos.R. InLeabres vs. et al. made by the administrator without court approval cannot Bind the estate. 132518. 1406.. a real property they iDherited from their parents. Alzate. A contended that "such agreement is unenforceable. de Reyes vs. June 30. The sale should have been submitted to the court for its approval in order that the right of the buyer could be recognized. No. A partly executed contract does not fall under the Statute of Frauds. Is the contract enforceable? Whyf Yes. et al.can ask Y to execute the necessary document in order that his right may be registered. (4) The aggrieved party can file an action for specific performance or rescission. with damages. Article 1403. A applied for registration of his land but did not follow the oral agreement. 2(00) . what is his remedy? Explain. 1191[par. (Hernandez VB. CA. therefore. Q•. paid the value of the land." What is the effect if a lawyer enters into a compromise agreement for his client without authority to do.2 of the Nee.so? Explain. A is the administrator of the estate of B.

Oil Co. After a sister of the husband obtained guardianship over the persons and properties of the minors. and that ofher children. April 9. it likewise ordered the execution of a necessary document and the submission of the same to it for approval.. and since B refused. 48 PhiL 67). G. et al. hence. because the contract no longer falls under the Statute of Frauds. The Statute of Frauds covers only those contracts that are executory.in her own behaH.his rights over the leases to which B did not comply. Further.. The trial court rendered judgment in favor of the plaintiffs. how would you decide? Explain.. No. The questioned contracts carl rightfully be classified as unenforceable for having been entered into by one who had acted beyond his powers due to receiver Amor's failure to secure the court's approval of said contracts. Veg. L-22796.R. Furthermore. 1. sold properties belonging to her husband. Q. The Statute of Frauds was designed to prevent fraud. not to perpetrate . July 29. the SC said that the general powers of a court-appointed receiver are provided in Section 7. It is a rule. A bought a building together with the land upon which it is 'built fro~ B. (See also Nario vs. One of the conditions is that upon the payment of 112of its value. because that would result in unfairness. G. us. (Almirol and Carino vs. not those that have already been executed or partly executed.and promote fraud and perjury. No. 601 Q.by way of. 1967).-35367. 152132. where such a contract has for its object the creation of or ANS. Is the contention correct? Why? No.puhlfc document that was approved by ~he court.""--'-"_ U' " 600 CIVI~ LAW REVIEWER <) OBLIGATIONS AND CONTRACTS Unenforceable Contracts /. In Badillo us. 51369. Co. January 27.. The second sale was evidenced. July 24. falling under the Statute of Frauds? Why? ." A court-appointed receiver cannot validly enter into a contract without the approval of the court. June 26. Rule 59 of the Rules of Court. B would then be enriching himself at Ns expense. The widow. Oral evidence is allowed. Ferrer.. No. The second sale was in a public instrument and approved by the court. Under such rule. Monserrat.. 1992. G. that when a law requires thata contract be in a public instrument in order to be enforceable. CA. et al. B would assign . As between the two (2) sales. vs. ANS.. No. Can B in the case above 0bject to the proof ofpayment of 1/2 of the value of the land and building on the ground that there was rio receipt at all. 2007). Deliarte.a. vs. 51058. Q.R. ANS. the same having been partly executed as a result of the payment of 1/2 of the value of the land and the building. ~f you were the ponente. Pafio. ANS. 49 PhiL 857). . (PNB vs. an action to annul the sale together with a prayer that they be allowed to redeem the properties of the minor was filed. Q. Phil. the Supreme Court said that the sale by the special administrator did not bind the estate and the buyer in the first sale because the first sale was not in public instrument and there was no approval of the court. (Asia Production Co. the probate court also authorized the sale and it was sold to another person. I would sustain the lower court. 1987. A demanded the refmid of his money. Inc. he filed a suit for collection of sum of money. American Life Ins. On appeal. To allow B to interpose the rule in the Statute of Frauds would be to allow him to perpetrate fraud.. as natural guardian. B filed a motion to dismiss on the ground that the contract is unenforceable since it is only an oral one. which vested a better title? Explain. Phil. -' In Manotok Realty. the contract has already been partly executed. the Supreme Court said.50 per square meter. In the meantime. A here is not enforcing the contract but backing out from it because of B's violation. 1987.R. the receiver is "subject to the control of the court in which the action is pending" and he can "generally do such acts respecting the property as the court may authorize.r. Arrogante. The probate court authorized the special administrator to sell a parcel of land at PO. There was a sale but there was no public instrument made in writing evidencing the sale.

(Art. Those where the intention of the parties relati~e to the principal object of the contract cannot be ascertained' . (7) .. 141941. October 30.d B entered into a contract of sale whereby the. 1408. contract. public order or public policy. G. the same is taken out of the scope of the Statute of Frauds..wanting m CIvil effects. Yes. (Cari. CA.NCC). Q. 2004. 857. NCC) . parties verbally agreed that A would be allowed to repurchase the property. (2) (3) Those which are absolutely simulated or fictitious. If there is ratification of the contract by the parents or guardians of the persons who entered into the unenforceable . a contract for the sale of real property shall be unenforceable unless the same or some note or memorandum thereof be "in writing and subscribed by the party charged or his agent. In a suit filed by the employees of ABC Corporation to enforce their rights over benefits under the law' the employer interposed the defense that they have signed a quitclaim of certain benefits.489 SCRA424. Those whose cause or object did not exist at the time of the transaction. Phil. No.~ntractis equivalent to nothing. hence. (PNB vs. 121506. Moreover. void and absolutely simulated contracts cannot be ratified. 194 SCRA 19). vs.r>J V OBLIGATIONS AND CONTRA. (Art. La'o. These contracts cannot be ratified. (1) . be considered as an integral whole. Mactan Cebu Int'I. ANS.R. If an unenforceable contract persons who· are incapable ratified. CA. 154765. No. simulatedcontl'acts -- be ratified? .2007).Those expressly prohibited or declared void by law. (Art. ANS. NCC~. ANS. . and not to contracts either partially or totally performed (citing Victoriano vs. the deed of sale and the verbal agreement allowing: the right to repurchase should. Maya third person assail an unenforceable contract? No. Corp. 40 Phil. unenforceable contracts cannot be assailed by third persons. Q.. Vegetable Oil.fi. 1407. Q. Airport Authority vs. . The deed of sale relied upon by the petitioners is in itself the note or memorandum evidencing the contract. period of its validity? Can void or absolutely Explain. Those whose cause. that . as In this case where the sale has been consummated. (Rep. Those whose object is outside the commerce of men: . henoe. et al.. whatIs the reckoning entered into between ot giving consent is . 1996. it is absolutely . . G. Neither can the right to set up the defense of illegality be waived.is ~e fact that the apparent contract is not really desired or mtended to produce legal effects nor in any way alter the ~ juridical situation. the principle of the Statute of Frauds only applies to executory contracts.R. Barcero v. morals. Evidence of the agreement cannot be received without the writing or a secondary evidence of its contents. Can A enforce the verbal agreement? Explain. 1987) . the same shall be validated from its inception.CTS Void Contr~cts 603 transmission of rights over immovable requirement is absolute and indispensable. March 29. May 4. Co. it cannot be the basis of actions to enforce compliance.ovs. 1409. Thus.R. July 31. In the case at bench. G. 1409. No. Capitol Dev. CA. Those which contemplate an impossible service. (Art. this bars· them from enforcing their rights over the said Q. 1403 of the Civil Code. 75 SCAD 722). are the void contracts? A BD.. ANS. NCC). the requirement of the Statute of Frauds has been sufficiently complied with. because under the law. The characteristic of simulation . L-47661. object or purpose is contrary to law..A ~oid . The following contracts begUuring: are inexistent and void from the . VOID CONTRACTS What. No. ANS. good customs.602 CML LAW REVIEWER u properties. (4) (5) (6) . under Art.

6 of the Civil' Code. The law does not consider as valid any agreement to receive compensation less than.SCRA 205. The defenseof laches applies independently of prescription. whereas prescription applies at law. Prescription is statutory. The quitclaim is inequitable and incongruous to the declared policy of the State to afford protection to labor and to assure the rights of workers to security of tenure. he needed to secure all his credentials from the defendant university which was denied by the latter until he paid fully his last. 2 . The employees' signing of a quitclaim did not result in a waiver. Under Article 1410. law. what the worker is entitled to recover. He then transferred to Abad Santos University on the last semester of his fourth year. but the lower court denied it. granting scholarships to increase the business potential of an educational institution is inconsistent with sound public policy as well as good morals. hence.rights may be waived unless the waiver is contrary to law. public order. -Plaintiff passed the barexamination and instituted an action against the defendant. public policy.therefore null and void. clauses. terms and conditions as they may deem convenient. good . (Carmelcraft Corp. Under Art. No. delay in asserting the complainant's. No. but laches may prevent the declaration of its nullity. and not to attract brilliant students in school for their propaganda value. The wai"~'er was· for less than what they are entitled to. ANS. under the provision of Art 1306. for all its elements are present. laches is not. and customs and .' an action to declare' it void is imprescriptible. Prescription is a matter. NLRC.: OBLIGATIONS AND CONTRACTS Void Contracts 605 benefits. ANS. morals. He entered into a contract not to transfer to another school. but before doing so. or One under whom he claims. failing to pay his' tuition fee on his last semester in the defendant university. 186 SCRA 393). laches is not. this appeal. the Supreme Court held that the contract signed by the plaintiff is contrary to public policy.-U9 SCRA146). The plaintiff then applied to take the bar examination. Prescription is concerned with the fact of delay.-Barba. tuition fee which he did' but under protest. Q. In Cui us. Nos. Mayan contract action or defense prescribe? based on the nullity of a No.: a) conduct on the part of the defendant. public policy. the contracting parties may establish such stipulations. laches is principally a question of inequity of permitting a claim to be enforced. How do you distinguish one from the other? Explain. 1990. ANS. Likewise. Issue: Is the contract executed by and between defendant and plaiittiff valid? . ' Q. Arellano Uniuersity. or prejudicial to a third person with a right recognized by law. G. provided they are not contrary to .as pointed out in b) . whereas laches is concerned with the effect of delay. and good customs. Prescription is based on fixed-time. June 6. It has. the prevailing doctrine is that the right to have a contract declared void a!J initio may be barred by laches although not -bmed by -prescription. the inequity being founded in some change in the condition of the property or the relation of the parties. (Rafols vs. NCC. of time. . the Memorandum 38 are awarded in recognition ofmerit. morals or good customs.eights. If a contract is void. NCC. viz. Thus. The plaintiff took up law in the defendant university and finished up to and including the first semester of his fourth year.604 CIVIL LAW REVIEWER r-' . public order. Is the defense proper? Why? ANS. 90634-35. Scholarship grants.R. giving rise to the situation that led to the complaint and for which the complaint seeks remedy. Laches applies in inequity. Laches Is different from the Statute of Limitations. Hence. the action or defense for the declaration of the inexistence of a contract does not prescribe.morals. having had knowledge or notice of the defendant's conduct and having been afforded an opportunity to institute a suit. Q. vs.

G.injury or prejudice to the defendant in the event relief is accorded to the complainant. the same having been filed after ten years. Q. (Yusingco vs. giving rise to the situation of which the complaint seeks a remedy. Fontanilla. and no affirmative relief of any kind will be given to one against the other. Is the contention correct? Why? No.R. it must be extrinsic or collateral. What do you understand by the principle of in pari delicto? ItIs expressed in the maxims: "Ex dolo malo non oritur actio" and "In pari delicto potior est conditio defendentisi" The law will not aid either party to an illegal agreement. to recover' the property agreed to be sold or delivered. (Art. the complainant having had knowledge or notice of the defendant's conduct as havingbeen afforded an opportunity to institute a suit. and . and the act constitutes a criminal offense.. No. Each must bear the consequences of his own acts. Buan. (3) lack of knowledge or notice on the part of the defendant that the complainant would assert the right in which he bases his suit. (Serna. et al.. Nielson and Co. 124605. both parties being in pari delicto. They will be left where they have place themselves since they did not come to court 'with clean hands. (Barcero vs. June 18. the action has not yet prescribed. 154765. 1999. Q. 'Phe fraud that is contemplated by law is actual and extrinsic fraud which includes an intentional omission of a fact required by law. Corp. A died in 1955. A contract of sale was entered into by and between A and B purporting. and the heirs of . No. 107 SCAD 648). A discovered the sale in 1975. 18 SCRA 1040). It was contended that the action 'has prescribed since 16 years have already lapsed. 133895. B filed an ans~er contending that the action has already prescribed.annulment of a decree. Santos. to be a sale of a 12·hectare lot for P300. 2001).' Q. ANS.. (Maneclang vs. it leaves them where they are. There was an action for reconveyance of a real property allegedly sold but without consideration. They are the following.. No. because an action or defense based on the nullity of a document does not prescribe. Is the defense proper? Why? No. Capitol Dev. et al. G.00 or for total lack of eonsideratfon. No suit can be maintained for its specific perfomance. Ong Hing Lian. or the money agreed to be paid. Are there legal feundations of the Principle of in pari delicto? Yes. For fraud to justifY the .R.. OBLIGATIONS AND CONTRACTS Void Contracts 607 c) lack of knowledge or notice on the part of the defendant that the complainant would assert the right on which he bases his suit. d) Q. 208 SCRA 179. 42 SCRA 589. Santos VB. In the review of a decree of registration of a parcel of land.606 CIVIL LAW REVIEWER o Q. what fraud is required? Explain. and both shall be prosecuted. (2) delay in asserting the complainant's rights. vs. or the suit is not held barred. Moreover. and (4) injury or prejudice to the defendant in the event relief is accorded to the complainant.G. they shall have no action against each other. vs.the facts upon 'which it is based have not been controverted or resolved in the case where the judgment sought to be annulled 'was rendered. Neither is their action barred by laches. The elements -01'laches are: (1) conduct 'on the part of the defendant.2007). Lepanto Consolidated Mining Oo. When the nullity proceeds from the illegality of the cause or object of the contract. '.R. because the contract is void. and . They filed an action for nullification of the deed of sale contending that their father never received the amount of P300. March 29. 1410. ANS. October 2. ANS. or· of one under whom he claims. . or the suit is not held barred. the provisions of the Penal Code relative to the disposal of effects or instruments of a crime shall be applicable to the things or the price of the contract. or damages for its isolation. (1) ms. NCC).00 in 1950. ANS. et al.

or authorizes the setting of a minimum wage for laborers. Q.1\-. When only one of the contracting parties is at fault. Y sold his franchise to Z. (7) Give certain excepttons-to the principle of in pari delicto. When the pticeof mined by statute. NCC). 1412. No. f\NS. paying any amount lowed may recover any article or commodity is deteror by authority of law. neither may recover what he has given by virtue of the contract.'' CIVIL LAW REVIEWER OBLIGATIONS AND80NTRACTS Void Contracts 609 This rule shall be applicable when only one of the parties is guilty. NCC).' hence. 1414. (Art. into a contract whereby Z made it appear that he conveyed the buses to X just so to have the same registered and covered by the franchise. (2) (b) (3) (4) Q. or ask for the fulfillment of what has been promised him. 1413. NCC). In Teja Marketing vs. hence. (Art. (5) I\NS . parties to an illegal contract is consent. .. but the innocent one may claim what he has given. 1411. it was said that the kabit system has been the source of corruption in the government agency (LTO or LTFRB). (Art. March 9. if the public interest will thus be subserved. Z sought the reconveyance of the buses to him from XX.the fixing of the maximum number of hours of labor. if public policy is thereby enhanced. because they are in pari delicto. he sought the assistance 'ofXwho told him that he can accommodate his buses for a fee. and the prohibition by the law is designed for the protection of the plaintiff. NCC). NCC). 1417. NCC). 1418. allow recovery of money by the incapacitated person. (Art. may -demand the return of what he has given without any obligation to comply with his promise. the court would leave the parties where they are. (Art._is action for specific performance. allow the party repudiating the contract to recover the money or property. he shall be entitled to recover the deficitmcy. t~. (Art. he may.' Where one of the incapable of giving interest of justice so or property delivered 1415. Willthe action prosper? Why? When the agreement is not illegal per se but is merely prohibited. They then entered.08 /''-~. NCC). X is a franchise holder 8Iong the route from Manila to Biiian. One year: later. refused. thus. Laguna. Thereafter. wants to engage in the transportation business but he has no franchise. The other. a friend.the law fixes. who is not at fault. recover what he has paid or delivered. NCC). _When . 'he cannot recover what he has given by reason of the contract. the courts may. In such case. When money is paid or property delivered for an illegal purpose.) 6. with interest thereon· from the date of the payment. the courts may. or authorizes . however. the following rules shall be observed: (a) When the fault is on the part of both contracting parties. or demand the performance of the other's Undertaking. NCC). he may demand additional compensation for service rendered beyond the time limit. Z. (Art. 1419. 1987. and a contract is agreed upon by which a laborer accepts a lower wage. (2) If the act in which the unlawful (1) Interest paid in excess of the interest allowed by the usury laws may be recovered by the debtor. or before any damage has been caused to a third person. if the demands. 1416. These are the exceptions to the principle of in pari delicto: When the law' sets. (Art. and a contract is entered into whereby a-laborer undertakes to work longer than the maximum thus fixed. (Art. . any person in excess of the maximum price alsuch excess. the contract may be repudiated by one of the parties before the purpose has been accomplished. or forbidden cause consists does not constitute a criminal offense. (6J. CA. and shall not be bound to comply with his promise..

What are the distinctions between natural and civil obligations? (1) (2) Natural obligations are based on eqUity and natural lawwhile civil obligations are based on positive law.e or the value of the service he has rendered. the payment is valid and cannot be rescinded by the payer.OO. -the father ofY. Q.tion and demanded payment. Natural obligations. 1423. he sued DBP for reimbursement of whatever he had paid. voluntarily pays a debt of the decedent exceeding the value of the property which he received by will or by the law of intestacy from the estate of the deceased.d ofbis father.accordance with the formalities required by law. (Art. X paid the obligation together with its interest. NCC). Can A. May 11. Q. No. ANS. is rendered conclusive upon the person making it. G. Y inherited from X properties worth only P400. . (Art. (2) estoppel by deed. NCC. . AdH. after the settlement of the debts' of the. been . Suppose in the problem above.IGATIONS Q.OOO. 1433~ NCC). X contracted a loan with the DBP in 1965but failed to pay. Under the law. \ ANS. but the debtor voluntarily reimburses the third person.exeeuted in . NCe). DBP vs. NCC). "' •.1431. (Art. Can Y ask for the refund of what he paid toZ? Why? ANS. not being based on positive law but on equity and natural law. No. the obligor who voluntarily performs the contract cannot ·. 1430. No. (Art. NeC). 1425. the payment is effective and irrevocable. Natural obligations are not enforceable by court action while civil obligations are enforceable by court action. ANS. can Yrevoke it or ask for a l. What is estoppel? It is a condition or state by virtue of which an admission or representation. 1429. What are the kinds of estoppel? They are: (1) estoppel in pais.. Y paid Z the amount of PIM one month after X's death. ( 610 CIVIL LAW REVIEWER -::OBLIGATIONS "') AND CONTRACTS Estoppel 611 NATURAL OBl:. Q:. the obligor cannot recover what he has paid. a third person pays a debt which the Q. (Art. in 1966. What are.n relying thereon. ANS. but one of the intestate heirs. because when a will is declared void because it has not . . ask for reimbursement from X? Can A recover from X?Why? No . authorize the retention of what has been delivered or rendered by reason thereof. hence. do not grant a right of action to enforce their performance. obligor is not legally bound to pay because the action thereon has prescribed.Q. without his knowledge and consent. Advised that the action has already prescribed. Will the action prosper? Why? No. (Art. but after voluntary fulfillment by the obligor. deceased.. when without the knowledge or against the will of the debtor. the ·friend-who made the payment. 1988).the DBPunearlhedhis oblig. and cannot be denied or disproved as against the perso. .ANS. there was payment of X's obligation in 1986 by a frie-nd. when a testate or intestate heir . . In 1987.:Under the law.natural obligations? civil obligations? Civil obligations give a right of action to compel their performance. cover what he has delivered . pays a legacy in compliance with a clause in the defective will. ANS. they. A.. X. ANS. 1424.. He died without paying it.. NCC).R. because when a right to sue upon a civil obligation has lapsed by extinctive prescription. Upon receipt of the demand letter. L-48889.·· Suppose in the problem above X executed a will but it was declared void and the heirs paid a legacy to a frien. was indebted to Z in the amount of PIM during his lifetime.the obligation became due and demandable."efund? Why? Q. ESTOPPEL Q. (Art .

CA. Furthermore. G. in good faith. Pureza vs. Q.. by his acts. because he is bound by the principle of estoppel. ANS.R. G. 2004. NCC. (Art. 122053. such party (1) commits conduct amounting to false representation or concealment of material facts or at least calculated to convey the impression that the facts are inconsistent with those which the party subsequently attempts to assert. G. For the party to be estopped. such title passes by operation of law to the buyer or grantee. (Art. and to the party invoking the estoppel in his favor. Q. Arefused contending that he could not have sold it when he was not yet the owner. (2) has relied. a parcel of land on installment basis payable within two (2) years at the rate of P10. No. because a seller need not be the owner of the property at the time of the perfection of the contract. 37 Phil. 77 SCAD 642. No. On the fourth (4th) month. or at least expectation that his conduct shall at least influence the other party. March 28. At the time of the commencement of their rights. he could no longer pay the balance. Gabar. vs. Luz. 91 Phil. PBC vs. They agreed and A executed a deed of sale over 112of said property subject to the condition that delivery shall be made after title shall have been issued to A. (2) has the intent. vs. Under the law. Reyes. ANS. or by his own silence when he ought to speak out. however. 1434. and (3) has knowledge. because it is in estoppel in pais. B demanded the delivery of 112 the of land. it asked for ample time to source funds to substantially settle the account.R. actual or constructive. 34 SCRA 337. NCC). 1992. induces another to believe certain facts to exist and such other rightfully relies and acts on such belief. 215). (PNB vs. ANS. Y sold and delivered the car to Z. Melegrito. he talked to B. vs. Will Y's action prosper? Wby? No. 289 SCRA 178. 1434. Bucton vs. where one who is not yet the owner of a property sells it to another and subsequently acquires ownership over the same. Awas a minor. 1997.OOO. detriment or prejudice. intentionally or through culpable negligence. B agreed but with the condition that A would sell onehalf (112) of the land to B. hence. G. o OBLIGATIONS AND CONTRACTS Estoppel 613 Q. Q. CA. such party (1) has lack of knowledge and of the means of knowledge ofthe truth on the facts in question.38 which was received by the lessee without any protest. ?007).R.94 SCAD 303). because he is bound by the principle of estoppel from doing so. Title was issued to A after full payment.'thparties benefited out of it. (Roblett Industrial Construction Corp. 666). lliS. CA. Instead of returning it to X.R. such title passes by operation oflaw to the buyer or grantee. One week after. 166558. May 15. (3) has acted or refrained from acting based on such conduct or statements as to change the position or status of the party claiming the estoppel. instead. and later the seller or grantor acquires title thereto. 55 seRA 499. Estoppel in pais arises when one. Can it later on deny? Why? -.612 CIVIL LAW REVIEWER o Q. July 30. No. 1459. January 2. CA. 144413. No. et al. 174 SCRA 500. so that he will be prejudiced if the former is permitted to deny the existence of such facts. his brother-in-law. Espiritu. when a person who is not the owner of a thing sells or alienates and delivers it. citing Panay Electric Co. Is A's contention correct? Why? No. of the real facts. The lessee did not likewise controvert it. A purchased from ABC Realty Corp. Republic Glass Corp. Martin vs. 308 SCRA 229. but he must be the owner at the time Qfthe delivery. No.. Kalalo vs. Can he attack the validity oIthe contract? Why? No. The lessor sent th~ lessee a statement of account for unpaid rentals' amounting to P342. on the conduct or statements of the party to be estopped. A lease contract covering various construction equipment was entered into by the parties.909. Qua. . What are the requisites ofestoppel in pais? It is said that the essential elements of estoppel in pais are considered in relation to the party to be estopped. to his injury. went to Z seeking to recover the car from the latter. et al. On the party claiming the estoppel. Pasion vs. NCC). 116682. X and Yentered into a contract whereby X sold the car to Y who. (Mercado vs. - ANS. hence. to help him pay. representations or admissions. after acquiring ownership. 1998.OOper month. (Art. A and B entere'd into a contract whereby b-. CA. X lent his car to Y with the undertaking to return it on or before January 31.

No. intentionally or through culpable negligence. Section 2(a) of Rule 131 provides: "Whenever a party has by his own declaration. et al. G. induces another to believe certain. The "doctrine of equitable estoppel" does not apply to respondent. L-57204. The loan was intended to be for P300. 155. August 30.prejudiced if the former is permitted to deny the existence of such facts.S.OOO. When informed of the mortgage. Is the contention of Y correct? Why? his silence when he ought to speak out. or by No. Estoppel by deed is one by virtue of which a party to a deed and his privies are precluded from asserting. but granted the loan instead. he is barred from denying the lessor's title of better right of possession as a lessor.R.. any right or title in derogation of the deed. G. Define estoppel in pais." Implementing this substantive law. March 14. without undergoing the usual bank procedure.OOO. - A contract of loan was entered . (31 C. 2004. Q. from denying any materialfact asserted therein. 1997. G. 237). or admissions. The-exeeptien -Q. Inc. and/or Jaime Aquino vs. it was shown that mortgage . if not outrightly ultr-a vires~(Datalift Movers. In an ejectment suit. y dlseovered that the land belongs to the State~ l1.R. Is the contention correct? Why? ANS. because having admitted the existence of a lessor-lessee relationship.OOO. NCC. ANS. which was aifirme"d by the CA.R.edfro~ doing . Q. A contract of lease was entered into by and between X8. (31 C. overturn the conclusive presumption that the lessor has valid title to or better right of possession to the subject leased premises than they have. November 18. No.OO only.' The bank contended before the SC that respondent/wife was in estoppel from questioning the validity of the real estate mortgage. as a consequence of which he would be. 2.into between the petitioner and private respondent. cannot by any proof.·Y refused to further pay his rentals to X' conte~4ing that X is not entitled to the rentals. Her residence certificate was also «spurtous. Borre vs.so. 1988. 144268.. representations. G. be an obiter dictum. facts to exist and such other rightfully relies and acts on such belief. It turned out that the respondent applied for a P3. 158 SCRA560). 86 SCAD 559).OOO. It would unjustly enrich the lessor if the lessee were required to pay the. Article 1431 provides that "through estoppel. The wife of the respondent signed blank papers/blank forms' of real estate mortgage where the amount of P3. ANS. intentionally . she filed a suit to nullify the same as she did not authorize her husband to do so. (1) Estoppel in pais or by conduct is that which arises when one. may the lessee contest the title of th~ lessor? Why? No. where the lessor committed fraud against the lessee by pretending to be the owner ofthe leased premises when in truth. (2) ANS. He further asked for reimbursement of the rentals he previously paid. Belgravia Realty & Dev't. at the very least. is in Tamio vs. the tenant is not permitted to deny the title of his landlord at the time of the commencement of the relationship of landlord and tenant between them. Sec. The bank did not investigate the authority to mortgage. No. Phil. he was not. however strong.0'-· 614 CIVIL LAW REVIEWER OBLIGATIONS AND CONTRACTS Estoppel 615 Q. CA. as lessee. Under Rule 131. the former.forms were signed in blank.OO and that loan the paraphernal properties of the wife were mortgaged using the blank forms signed by the wife. Ticzon. He cannot also question the title of the lessor because he is estopp. No. 1436.rent to him. as against the other party and his privies.. et al.~nce. as against the lessor or bailor. 154895.J. (Art.OOO. Afte~ a period of five y~~s. 106858. Corp. The RTC rendered -:judgment ill favor of the plaintiff. because a lessee or a bailee is estopped from asserting title to the thing leased or received. No. act or omission. CA. 2006). Bank of Communications vs. Any ruling which the court may render on this issue will. September 5.l1d y ov~r a house belonging to X.S.R.J. estoppel by deed. At the trial. an admission or representation is rendered conclusive upon the person making it and cannot be denied or disproved as against the person relying thereon. by his acts.OO was written in pencil. As long as the lessor-lessee relationship between the lessee and lessor exists.

Q. CA. implied to. It involves the existence of equitable duties imposed upon the holder of the title to the property.Resulting trusts-are based on the equitable doctrine that valuablesgnsideration. in any litigation arising out of such declaration. 2007). Give the characteristics The characteristics 1. It is a rslationahipfiduciary It is a relationship with respect to property. Heirs of Laruan.R. and not legal title determines the equitable title or interest and -!I.earlier. Neither will it matter if the bank. (Morales. in that the trustee has legal title to the property. June 19. vs. Under Art. It is a relationship. either through implication of.2007). Q. the bank's reliance on the mortgage application signed in blank is not a reasonable reliance. guardianship and agency.. estoppel in out jurisdiction has become. and to act upon such belief. a certain property and another trusts are either resulting or constructive trusts. it was grossly negligent when it took no step to verify whether she was offering her properties as collateral. G. to do that which. etc. eK. . et al. et al. 160711. No. _What is a trust? It is the legal relationship between one person having an equitable ownership over. not one involving merely personal duties.re presumed always to have been contemplated by the parties. kinds of trust and how are they 5. ANS." By its incorporation in the Civil Code. What is laches? . They arise from the nature or circumstances of the consideration involved in a transaction whereby a person thereby becomes invested with legal title but is obligated . 1998. the equitable ownership of the former entitling him to tbe performance of certain duties and the exercise of certain powers of the latter. and even contra_ry any such intention. such as deposit. to believe a particular thing true. No. for an· unreasonable and unexplained length of time. No. 83 SCAD 750). August 14. It was her husband who made the misrepresentation. 109803. warranting a presumption that the party entitled to assert it either has abandoned it or declined to assert it. et al. Nee. Heirs of Lacamen vs. 117228.1997. Its successful invocation can therefore bar a right and not merely its equitable enforcement. G. 93 SeAD 601). and It arises as a result of a manifestation of intention to create the relationship. G. while implied trusts come into being by operation of law. What are the created? Trusts are either express or implied. an equitable defense that is both substantive and remedial. (PBCom vs.. 2. (Tijam vs. when it made no credit check on the debtor. the misrepresentation of a third person will vitiate consent if it has resulted in substantial mistake and the same is mutual. Express trusts are created by the intention of the trustor or of the parties. he cannot. to deal with it for the benefit of another. The reason why estoppel does not apply to respondent is because she did not deliberately mislead the bank to believe that she was putting up her paraphernal properties to secure the P3.R. Sibonghanoy.000. As a banking institution. In fact. of a trust are the following: in character. 23 SCRA 29. G. No. was misled by a third person to the contract.negligence or omission to assert a right within.00 loan. This legal relationship can be distinguished from other relationships of a fiduciary character. Heirs of Constantino Labanon. April 20. The business of a bank is affected with public interest and it should observe a higher standard of diligence when dealing with the public.. It is the failure or neglect. a reasonable time. etc. could or should have been done . 4. August 14. 1342.R. it is . act or omission be permitted to falsify it. (Heirs of Maximo Labanon vs. of trust. an intention to create a trust as a matter oflaw orthrough the imposition of the trust irrespective of. 3.000.. vs. 160711. ANS. (Heirs of Maximo Labanon. NS.R..NS. having legal title thereto. Heirs of Constatrtino Labanon. 65 SCRA 605). TRUSTS !. In turn..516 CML LAW REVIEWER o o OBLIGATIONS AND CONTRACTS 617 Trusts and deliberately led another. by exercising due diligence.

and riot legal title determines the equitable title or interest and is presumed always to have been cont-emplated by the parties.R. G. It may either by resulting or constructive trust. G. citing 76 Am. obtains or holds the legal right to property which he ought not. Trusts ~80. and such consideration must be furnished by the alleged beneficiary of a resulting trust.. or an equivalent.1993). CA. September 13. vs. G. determines the equitable title or interest. et al. No. 145849. Vda. ANS. Cabreros. What is a constructive trust? Explain. the person obtaining it is by force oflaw.618 CIVIL LAW REVIEWER OBLIGATIONS AND CONTRACTS 619 Trusts in equity to hold the legal title for the benefit of another. February 1. et al..R. consisting of valuable consideration. Q. Bejos vs. (Canezo. G. supra. Valentin Co Cho Chit. Q. both coming into being by operation oflaw. is deducible from the nature of the transaction as a matter of intent or which is superinduced on the transaction by operation of law as a matter of equity. et al. (Sps. constructive trusts are created by the construction of equity in order to satisfy the demands of justice and prevent unjust enrichment. A constructive trust is created.). WS.--et al. et al. An implied trust is one that. No. 2005. What is an implied trust? Explain. to hold. (O'Laco vs. Jur. money resulting trust. ANS. Canezo. Cabreros. G.. Q. vs.R. 2DfJ7). et al. 67 SCAD 642. Rojas.R. G. by fraud. 2005). No. supra. July 22. Jur. G. and such proof must . It arises contrary to an agreement or intention against one who. 145849. They arise contrary to intention against one who. (Huang vs. (76 Am. 148788. (Sps. CA. Rojas. ANS. or abuse of confidence. 2d.nature of their transaction but not expressed in the deed itself. obtains or holds the legal right to property which he ought not. duress or abuse of confidence. without being express.R.. Cabreros. 55 SCAD 289. vs. I ANS. Bejos vs.. 2. it is an a-ctual payment of money. 2d. etal. property or services. the intention as to which is to be found in the. et al. 1997. CA. November 23. 145849. No.R. Q. de Esconde vs.R. order to satisfy the demand of justice and to prevent unjust enrichment. As a rule. ANS. not by any word evincing a direct intention to create trust. et al. 58010. 148788. G. G. to hold. It arises from the nature or circumstances of the consideration involved in a transaction whereby one person thereby becomes invested with legal title but is obliged in equity to hold his legal title for the benefit of another. No. independently of the particular intention of the parties. vs. What is a resulting trust? Explain. No. but by operation of law in Q. No. Bejos vs. A constructive trust is illustrated in Article 1456 of the Civil Code when it provides that if the property is acquired through mi~take or fraud. No.. Q. 103635. July 22. Q. by fraud. 117228. No. the burden of proving the existence of a trust is on the party asserting its existence. June 19.1996. • ••• 1 • I What are the requisites of a purchase of money resulting trust? To give rise to a purchase essential that there be: 1. 1994. Who has the burden to prove the existence of trust and what is the nature of the evidence? Explain. 108525. (O'Laco.. March 31. 2007). not legal title. in equity and good conscience. 2005). What are the kinds of implied trusts? Implied trusts may either be: (1) resulting. How may a resulting trust arise and what is its basis? Resulting trust is based on the equitable doctrine that valuable consideration. or (2) constructive trusts. Valentin Co Cho Chit.R. et al. in equity and good conscience. Morales. It is based on the equitable doctrine that valuable consideration.. duress. 429). On the other hand. Morales vs. et al. July 22. A resulting trust is presumed to have been contemplated by the parties. (Sps.R. CA. November 23. considered a trustee of an implied trust for the benefit of the person from whom the property comes.83 SCAD 750). ANS.

57 SCAD 619. Jur. Jr._ __ . a trust is established by implication of law for the benefit of the true owner. An actual paym-ent of money. The extrajudicial settlement is valid. holding that the same was valid. equivocal or indefinite declarations.84 SCAD 121). Indeed. was not barred by laches since he was a minor at the time the extrajudicial settlement was executed.. ANS. and should not be made to rest on loose. .act of repudiation adverse to petitioner Gregorio Yap. Are there exceptions to the establishment of a purchase money resulting trust? . VB. Q.).Whyis a purchase money resulting trust created? The trust is created in order to e~ectuate what th.289 [1994]). 1997. 166 SCRA 375. A parcel of land used to be the conjugal property of Gregorio Yap and Rosario Diez.'s claim. or an equivalent. A cestui que trust may make a claim und.-. consisting nf valuable consideration. CA. ." In the case of O'Laco DS. 55 SCAD. CA. was barred by laches. CA. de la Serna added that the partition only involved the shares of the three participants. Q. The heirs filed an action for partition alleging that the extrajudicial settlement was simulated and void. et al. the evidence must be trustworthy and received by the courts with extreme caution.). property or services. (Huang vs. Howis a purchase money resulting trust created? . 1451 was held as creating a resulting trust. et al. To facilitate the approval of a loan. (76 Am.R. As a general rule. de Esconde vs. CA. to the e~ent of his ~hare. While implied trusts may be proved by oral evidence.ez testified that she did not claim the entire property. et al. 112260.l__) 20 CIVIL LAW REVIEWER (J OBLIGATIONS AND CONTRACTS 621 Trusts be clear and satisfactorily to' show the existence of the trust and its elements.. while Atty.cl~lm of ownership it cannot be taken as an. Salao. G. 2. Is the ruling correct? Why? ' ~S. supra.. supra. CA.Jr. whose ~ha:e in the property was precisely not included by the parties ill the partition. (Pangan vs. June 30. The former died. No. The registration of the land under Rosario merely created an implied trust in her favor by analogy to Article 1451 of the Civil Code which o provides.nt Diez's name operated as a constructive notice of her .. Jr. Jr. et al. Co Cho Chit. Morales. et al. Jr. 70 scRA 65. CO Cho Chit. I~ this case the records disclose that the intentlon of the parties to the extrajudicial settlement was to establish a trust in favor of petitioner Yap.as conveyed holds it as a trustee for the person who supplied the purchase money. it arises where such may be reasonably presumed to be the intention of the parties as determined from the facts and circumstances existing at the time of the transaction out of which it is sought to be established. And such consideration must be furnished by the alleged beneficiary of a resulting trust. CA. CA. et al. 253 SCRA 66 ~199~].e la_w presumes to have been the intention of the parties ill the circumstances that the person to whom the land ". it has not been shown whe~her he had been informed ofher exclusive claim-over the entire property before 1985 when he was notified by petitioner Jovita Yap Ancog of their mother's plan to sell the property. Although the registration of the land ill pn~ate responde. vs. leaving as heirs his wife and children. O'Laco vs. Trusts 180. but Gregorio Yap. Q. 236 SCRA 420. (Vda. Rosario Di. Trustworthy evidence is required because oral evidence can easily be fabricated. The title was cancelled and Rosario exercised the rights of ownership over the property. Yes. she executed an extrajudicial settlement of the property signed by the heirs except Gregorio Yap. Ong Ching Po vs..67 SCAD642). (Morales. (Salao vs. ANS. In fact. vs. 2d."When land passes by succession to any person " and he causes the legal title to be put in the name of another. 239 SCRA 341). which is founded on the presumed intention of the parties. Ancog.er a res~ting trust within 10 years from the time the trust IS rapudiated. 220 SCRA 656. 220 SeRA 656. both courts ruled that Gregorio Yap. but the RTC dismissed the action which was affirmed by the CA. To give rise to a purchase money resulting trust. it is _ essential that there be: 1.. Art. then a minor.

a trust by virtue of law is established. in order to satisfy the demands of justice and prevent unjust enrichment. of course. vs. et al. by force of law . (Art. (Morales. no trust is implied by law. in equity and good conscience. Dolores Sandoval bought a parcel of land (3) in Dasmariiias Village. The former is the trustee. (Art.. 1453). guardian or other person holding a fiduciary relationship uses trust funds for the purchase of property and causes the conveyance to be made to him or to a third.considered a trustee of an implied trust for the benefit of the person from whom the property comes. if the -person to whom the title is conveyed is a child. If two or more persons agree to purchase property and by common consent the legal title is taken in the name (3) When any trustee. How is a constructive trust created and what is its basis? A constructive trust is created by the construction of equity . where A pays the purchase money and title is conveyed by absolute deed to A's child or to a person to whom A stands in loco parentis and who makes no express promise. (Art. to hold. 1455) .22 CIVIL LAW REVIEWER OBLIGATIONS AND CONTRACTS Trusts • 623 ms. by fraud. (Art. NS. of the one paying the price of the sale. it being disputably presumed that there is a gift in favor of the child. while the latter is the beneficiary. It arises contrary to intention against one who. Give examples of constructi:ve trusts. 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. She bought another lot but placed it under the name of Ricardo Huang because of the policy of the subdivision owner prohibiting the acquisition of . 1449) . (Art. Thus. part of Art. the person obtaining it is. 446). duress. However. Makati. et al.. Give examples of resulting trusts. a trust is established by oparation" of law in favor ot~the person to "whom the -funds belong. They are the following: (1) There is an implied trust when property is sold. 1448). the presumption being that a gift was intended. (1) If the price of a sale of property is loaned or paid by cine person for the benefit of another and the conveyance is made to the lender or payor to secure the payment of the debt a trust arises by operation of law in favor of the person to whom the money is loaned or for whom it is paid. or abuse of confidence. supra. . Valentin Co Cho Chit. no trust can result in favor of the party who is guilty of the fraud. In 1965 . a trust is created by force of law in favor of the others in proportion to the interest of each. They are the following: ANS. Another exception is. to secure the performance of an obligation of the grantor toward the grantee. (Art. a trust does not result. (2) If an absolute conveyance of property is made in order ~. 1448 itself. CA. there is an implied trust in favor of the person whose benefit is contemplated.. Q. citing 76 Am. (Art. 1454). If property is acquired through mistake or fraud. he may demand the reconveyance of the property to him. et al. where the purchase is made in violation of an existing statute and in evasion of its express provision. Yes. obtains or holds the legal right to property which he ought not. The latter may redeem the property and compel a conveyance thereof to him. 1456).. (Art. Also. NS. vs. (4) (2) Q. 1450). 1452). he nevertheless is either to have no beneficial interest or onlya part thereof. The first is stated in the last. Jur. ~. supra. If the fulfillment of the obligation is offered by the grantor when it becomes due. There are recognized exceptions to the establishment of an implied resulting trust.). 'I'here is also an implied trust when a donation is made to a person but it appears that although the legal estate is transmitted to the donee. that in which an actual contrary intention is proved. 2d. person. of one of them for the benefit of all. (4) When property is conveyed to a person in reliance ~pon his declared intention to hold it for.. or transfer It to another or the grantor. (O'Laco. legitimate or illegitimate. placing it under her name.

the beneficial interest of the property. Thus. receipt of initial premium of insurance coverage. because there was an implied trust.\__) 624 CIVIL LAW REVIEWER :"~. G.When . G. B died. March 31. No. The RTC decided for Sandoval which was affirmed by the CA. Later. financial capacity to buy at the time the property was bought. G. in their possession for 17 years.R. CA. The cases were consolidated. Reyes.R.00. her husband. and the legal estate is granted to one party but the price is paid by another for the purpose of havin?. No. Yes. et al. It is d"'lar from the facts that a trust was really created: ANS. hence. his legitimate children sought to recover possession and ownership of the lot claiming that Joaquina Roxas was but a trustee of their father. it being disputably presumed that there was a gift in favor of the child. they were able to comply with all the requirements under the law. 1448.1993).3) efore Z got married. no trust is_implied by law.. They presented evidence of a resulting trust like: (1) an agreement that the owner's duplicate of the TCT. In De los Santos vs.contended that they .-of the one paying.The son of A and B filed an . see also O'Laeo. R~mero: 109 Phil. Joaquin told Julio that it be drawn in the name of Joaquina Roxas. and real estate tax receipts were in. However. l. Under Art. The former is the trustee. they filed an application for homestead. afterwards. Willthe action against Joaquina Roxas prosper? Yes.ed out to be a deed of sale with assumption of mortgage.. 500 [1960J. (. (4) Z had no . There is an iinplied trust when property is sold. 58010. X and Y. There was a trust because the money used to purchase the lot was provided by Sandoval although it was placed under the name of Huang. Q.thedeed was about to be prepared. No. January 27. WS.000. Valentin Co Cho Chit.. L-45027. X and Y asked for the b transfer of the land to them and Z assured them that Q. et al. while the latter is the beneficiary.. NCC. March 31. Before B died. Decide. In 1968. a resulting trust was intended by the parties.were the r-eal buyers but the legal title was·merely placed under Z's name. insurance policies. (Huang vs. 108525. vs. 1993). Joaquin Reyes bought from Julio Cruz a residential lot of 300 square m. vs. citing Heirs of Emilio Candelaria vs. a patent was issued under the name of A and C. it was-said that there is an implied trust when property is sold. (Art.'and before the patent could be issued. September 13 1994 55 SCA? 289. 58010.1992.R. Valentin Co Cho Chit. A resulting trust a~ses .because of the presumption that he who pays for a thmg mtends beneficial interest therein for himself.the price of the sale. Is there a resulting trUst? Why? ANS. Emilia O'Laco. X and Ysued Zto recover the purchase price but the la!ter refus_e~to deliy!r contending that sh~ and her liusband bought the land. A complaint was also filed by Sandoval asking' the SSSto release the title to her not to Huang. it would be arranged after the wedding. this petition to the Supreme Court. et al. and the legal estate is granted to one party but the price is paid by anot~er for the purpose of having the beneficial interest of the property. - During the existence ofthe marriage between Aand B. A married C. It was executed. et al. Joaquina then built a house on the lot where she. 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. Upon Joaquin's death. the deed was so prepared and executed by Julio. (2) X and Y bought another property and placed it under the name of a brother of Z. there is an implied trust when property is sold.eters in Quezon City for which Joaquin paid Julio the amount of P300. X and Y'bought a parcel of land but placed it under the name of Z who sold it to the Roman Catholic Church. his acknowledged natural child. and children resided. if the person to whom title is conveyed is a child.the possession of X and Yand in fact. legitimate or illegitimate. NCC. 1448. On the contrru-y. Huang filed a complaint for the declaration of nullity of the deed of sale with assumption of mortgage contending that Sandoval made him sign blank papers which turn.Dolores requested Huang to execute a deed of sale with ~ssumption of mortgage in her favor to protect her Interest on the property. OBLIGATIONS AND CONTRACTS 625 Trusts two (2) lots by a single individual. et al.

10 Phil. X executed a real estate mortgage in favor of PNB to secure the payment of Y's obligation.:6 CIVIL LAW REVIEWER o. ANS. a . Q. Depifio. He again failed to pay. He then went to the bank and made an arrangement for the payment of the obligation by signing a promissory note obligating himself to pay within a period of two years. Having given that assurance. May a trustee acquire title over a property held in trust? As a rule. One ma~n~t goback on his own acts and representations to the prejudice of the other party who relied upon them. in the problem above. _758). OBLIGATIONS AND CONTRACTS Trusts '. a new demand letter was sent to him demanding the payment . Can the PNB. the foreclosure of the mortgage. lAC. hence. (Doliendovs. he failed to deliver the 1/2 share of X. In 1965. Demand was made for him to pay the total amount of the obligation. Hence. 627 action for partition seeking for the 112 portion of the homestead as the share of his mother. 511.revocationembodiedin private-wdting"lS"validand binding between the parties. (Magallon vs. Will the motion prosper? Why? ~S. No. (DBP vs. 1358.the right to prescription may be waived or renounced and it is deemed to have been tacitly renounced when the renunciation' results from acts which imply the abandonment of the right acquired. because A and C merely hold the said portion in trust for the true owner.Art.. Y failed to pay his obligation. 12 Phil. a new management took over the bank and it was discovered that A has not paid his obligation. 1990). Is the foreclosure valid? Why? ANS. no because the possessionis not adverse. (PNB vs. hence. 1112. PNB vs. He filed a motion to dismiss on the ground of prescription. One year later. a suit for the collection of the obligation was filed. 1988). In orderthat he may-acquire title by acquisitive prescription. Babasa. After Y got the money. Under . NCC. A borrowed money from the DBP obligating - be divided between X and Y. the law requires that acts or contracts which ~ave for their object the extinguisbnient of real rights over Immovableproperty must appear in a public instrume~t. Will the action prosper? Why? NS. by the signing of the promissorynote obligating himself to 'pay within two years . Adil.December 16. May 11. despite the assurance of the manager of the PNB that X's property would not be included. hence. IAC. While it is true that under Art. . No suit was filed by the bank. Montejo.NCC. because under the doctrine of promissory estoppel. In 1985. Y executed a renewal of the loan and the mortgage representing X who granted him a Special Power ofAttorney for that purpose as there was an agreement that the proceeds of the renewal of the loan would ANS. and they have the obligation to convey to plaintiff that portion of the land in question to which he now claims as said portion rightfully pertains to plaintiffs deceased mother as her share in the conjugal partnership with A. interpose the defense that the revocation of the SPA is not valid since it was not in a public instrument? Explain. his property should not b~ included i~ the list of collaterals and in effect revokmg the special power of attorney of Y. himself to pay the monthly installments beginning January 1966 which he failed to pay.that was equivalent to a waiver of the prescription he hgs already acquired. . the bank may not turn around and do the exac:t oppositeofwhat it shouldnot do. 1986). While-it is true that originally the action has already prescribed however.of his obligation. but he failed. n~verthel~ss. No. The requirement that it be in a public instrument is a me:-e condition of form in order that such contract may be valid against third persons. No. (Alane vs. Yes. September 18. the followingrequisites must be present: Q. his property was again included. the act or assurance of the PNB manager that he shall not include the property of X as collateral for any renewal of the loan of Y is binding upon the bank. 1990). When the loan was renewed. he went to the manager of PNB and delivered a letter asking that in case Y would renew his loan the following year.. September 18.

November 21. B. Gorricho. (d) Q. the same an .R. CA. There must be adverse. (c) the evidence thereon is clear and conclusive. 72623. such He must communicate beneficiaries. Ramos. the SC said that "if an a~tion filed after 23 years. 124605. B. so is the corresponding obligation to convey the property and the title thereto to the true owner.pcint is repudiation of the trust by the trustee because from that moment his possession becomes adverse which gives rise to a cause of action. G. Art. Mter their death. . Gegato. open. the action to recover must be brought within 10 years from the-issuance of the title to the property.reckoning.. the action shall prescribe. and C filed action for partition against D. " Mayan action to compel the trustee to convey the property registered under his name for the benefit of the cestui que trust prescribe? Explain. de BIas. A. 261 [1958]. Diaz vs. } I is Q. December 18. Heirs of Maria de la Cruz vs. Jr.R. As a rule. No. 281 SCRA 624).. No. 1144 of the Civil Code provides that: "The following actions must be brought within 10 years from the time the right of action accrues: (1) upon a written contract. No. 51 SeRA 71 [1973]). Olorga. January 20. Fontanilla. G. IAC.. They have children. (b) such positive acts of repudiati~n have been made known to the cestui que trust. (2) upon an obligation created by law. vs. vs. January 29. (Enriquez vs. ANS. Withinwhat period should a personeniorce an implied trust if a parcel of land is fraudulently registered under the name of another? Explain. and C. but before the period starts to run. 63575. 1988. 1999. Gonzales vs. 88 SCAD 941. Valdez vs. the rents and profits by the trustee and erecting fences and NS. Santos Vda. IAC. CA. they transferred a real property to D.107 SCAD 648).1989. no." (Serna. Ramos vs. During their lifetime.R. Mere -collection of . 71 Phil. 638). it is only when the trustee repudiates the trust that the period of prescription commences to run. Sta.103 SCAD 143. (Caladiao vs. An action based on implied or constructive trust prescribes in ten (10) years.R. X and Y are married. et al. filing or entering. 182 SCRA. 1988. In an implied trust. buildings adapted for cultivation of the land held in trust are not equivalent to unequivocal acts of ouster of the cestui que trust. 1991). 566. J I I Q. CA. (3) upon a judgment. 1999. CA. it must be shown that: (a) the trustee has performed unequivocal acts of repudiation amounting to an ouster of the cestui que trust. 10 SCRA 691 [1964]. Within what period should the beneficiaries in an implied trust file an action to recover their shares? Explain.their granddaughter. Thereafter. time would have already eroded the right of action and ultimately erased it. (Bernardino Ramos vs. and continuous possession within the period fixed by law. June 18. No. This means that a person should have enforced the trust within ten (10) years from the time of its creation Or upon the alleged fraudulent registration of the property. et al. It is 10 years because just as a resulting trust is an offspring of the law. A mere silent possession by the trustee unaccompanied by acts amountingto an ouster of the Cestuique trust cannot be construed as an adverse possession. In Gicano vs." 'I'he. Adille vs. G. A. February 3. 66479. The evidence thereon must be clear and conclusive' . No. who interposed the defense of prescription.R. ANS.. G. as a sand castle on a shore is slowly and inexorably obliterated by the rising tide. public. 104 SCRA 656. 103 Phil. The prescription is 10 years from the repudiation of the trust. L-44546. Ana. The action to compel the trustee to convey the property registered in his name for the benefit of the cestui que trust does not prescribe.. (Citing Laguna vs. et al. Levantino. Hat all.." (See also Lebrilla vs. Discovery of the fraud must be deemed to have taken place from the issuance of the certificate of title "because registration of real property is considered a 'constructive notice to all persons' and it shalf be counted from the time of such registering. G. 111027. 28 GrvIL LAW REVIEWER o repudiation to the OBLIGATIONS AND' CONTRACTS Trusts 629 (a) (b) (c) He must repudiate the trust. CA. 61 SCRA 284 [1974]).

. A 30·door apartment was leased to several tenants with Rosito Uy as President. whether it is based on. As long as the trustee recognizes the trust. CA.without any issue. on the other hand. August 26. Here. either expressly or impliedly. intention to create a trust. August 26. ~. years. Uy. 1456 of the Civil Code which-says that if property is acquired through mistake or fraud. therefore. the defense of prescription does not apply. In effect.. CA.Arl. enforceable solely . is one raised by construction of law or arising by operation of law. pI SCRA 284): While resulting trust is one raised by implication oflaw and presumed to have been contemplated by the parties. are deducible from the nature of the transaction by operation oflaw as matters ANS. He was survived by his brothers Tomas.73 SCAD 586)." (Salvatierra vs. The prescriptive period is based on Art.ito the beneficial enjoyment of pro perty. This case more specifically involves constructive trust. an implied trust was created by virtue of Art. et al. No. 1144of the Civil Code. et al.the tenants.. ANS.R. . - . de N acalaban vs. 73 SCAD 586). it was also said: "The registration of an instrument in the Office of the Register of Deeds constitutes constructive notice to the whole world. Decide.R. et al. 530 CIVIL LAW REVIEWER i . 80 SCRA 428). Implied trust. but by the construction of equity in order to satisfy the demands of justice. The prescriptive period of such actions is ten (10) years from the date the right of action accrued. In 1930. title to which is vested in another and is further subdivided into resulting and constructive trust. in equity.. ' '~BLIGATI6N. vs.Enrique Salvatierra . Q. Implied trusts are those which. supra. Uy. The period is 10 years. 107797. If you were the ponente on appeal. CA. that an action for reconveyance of registered land based on an implied trust. discovery of the fraud is deemed to have taken place at the time of registration. De Matias. No. The RTe held that there was an implied trust. 16 SCRA 849). etal. Bartolome. 1391or Art. betrayed. Macario. 1996. In a more restricted sense. (Ramos. Domingo. Q. but it turned out that lie bought the property from tlie owner. et al. He was designated by the tenants' association. In Duque vs. (Salvatierra vs. 26 in Anselmo's . 96 SCRA 178. 1144 of the Civil Code as it involved fraud in registering Lot No. 80 SCRA 654. The question raised before the SC was the determination of the applicable prescriptive period to file an action. the right. vs. 107797. It is now settled that an action on an implied or constructive trust prescribes in ten (10) years from the date the right of action accrued. and a sister named Marcela. G. without being expressed. It was held in Armamento vs. 631 having been based on an implied trust. CA.1996. the Iegal .. Is the defense proper? Why? ms. Vebancio. Such registration is deemed to be a constructive notice that the alleged fiduciary or trust relationship has been repudiated. Feeling . constructive trust. but the Court of Appeals reversed it. how would you decide? Why? I would decide in favor of the tenants as there was implied trust between the tenants and Mr. considered a trustee of an implied trust for the benefit of the person from whom the property comes. prescribes in ten (10) years even if the decree of registration is no longer open to review. by force of law. and.to negotiate for the purchase of the same by. Guerrero. (Vda. CA. there was reliance on D's integrity and fidelity in carrying out the wishes of her grandparents.died. evincing a direct ms. No.is defined as. name. He left several properties but it appeared that Anselmo registered Lot No. the person obtaining it is. (De Buencamino vs. It does not arise by agreement or intention but by operation oflaw. it is a trust not created by any words.S ' AND CONTRACTS Trusts . the rule does not apply where the fiduciary relation exists and is recognized by the trustee. Within what time should an action for reconveyance of registered land based on implied trust be filed? Why? An action for reconveyance of registered land based on an implied trust may be barred by laches. because while the implied or constructive trust prescribes in 10. 26 in his name with evident bad faith. G. they sued for redemption alleging that ~ there was implied trust between them and Mr.). (Ramos.

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