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oblicon finals

NPC vs. Dayrit (novation)

Held: It is elementary that novation is never presumed; it must be explicitly
stated or there must be manifest incompatibility between the old and the new
obligations in every aspect. Thus the Civil Code provides:
Art. 1292. In order that an obligation may be extinguished by another which
substitutes the same, it is imperative that it be so declared in unequivocal
terms, or that the old and the new obligations be on every point incompatible
with each other.
In the case at bar there is nothing in the May 14, 1982, agreement which
supports the petitioner's contention. There is neither explicit novation nor
incompatibility on every point between the "old" and the "new" agreements.
Facts: Daniel Roxas sued NPC to compel the NPC to restore the contract of
Roxas for security services which the former had terminated. However, they
reached a compromise agreement, and the court approved it. One of the
stipulations of the agreement was that the parties shall continue with the
contract of security services under the same terms and conditions as the
previous contract effective upon the signing thereof. Parties entered into
another contract for security services but NPC refused to implement the new
contract for which Daniel filed a Motion for Execution. The NPC assails the
Order on the ground that it directs execution of a contract which had been
novated by that of the new contracts. NPC contends there was novation
because they executed the second contract with Josefina Roxas; therefore
there was a change of party. Upon the other hand, Roxas claims that said
contract was executed precisely to implement the compromise agreement for
which reason there was no novation.
Inchausti vs. Yulo (novation)

The contract of May 12, 1911 does not constitute a novation of the former one
of Aug.12, 1909, with respect to the other debtors who executed this contract.
First, in order that an obligation may be extinguished by another which
substitutes it, it is necessary that it should be so expressly declared or that the
old and the new be incompatible in all points(art. 1292). It is always
necessary to state that it is the intentionof the contracting parties to
extinguish the former obligation by the new one. The obligation to pay a sum
of money is not novated in a new instrument wherein the old is ratified, by
changing only the term of payment and adding other obligations not
incompatible with the old one.
The obligation being solidary, the remission of any part of the debt made by a
creditor in favor of one or more of the solidary debtors necessarily benefits
the others, and therefore there can be no doubt that, in accordance with the
provision of Art. 1215, 1222, the defendant has the right to enjoy the benefits
of the partial remission. At present judgment can be rendered only as to
Facts: This suit is brought for the recovery of a certain sum of money, the
balance of a current account opened by the firm of Inchausti & Company with
Teodor Yulo and after his death continued by Gregorio Yulo as principal
representative of his children. On Aug.12, 1909, Gregorio Yulo, in
representation of his 3 siblings, executed a notarial instrument, ratifying all
the contents of the prior document of Jan.26, 1908, severally and joint
acknowledged their indebtedness for P253,445.42, 10 % per annum, 5
installments. Plaintiff brought an action againsta Gregorio for the payment of
the said balance due. But on May 12, 1911, 3 siblings executed another
instrument in recognition of the debt, reduced to P225,000, interest reduced
to 6% per annum, installments increased to 8.

Kabankalan Sugar Co. vs. Pacheco (novation)

Held: When an easement of right way is one of the principal conditions of a
contract, and the duration of said easement is specified, the reduction of said
period in a subsequent contract, wherein the same obligation is one of the
principal conditions, constitutes a novation and to that extent extinguishes
the former contractual obligation.
In the contract of November 1, 1920, the duration of the right of way which
the defendant bound herself to impose upon her estate in favor of the plaintiff
was twenty years, while in the contract of September 29, 1922, that period
was reduced to seven crops which is equivalent to seven years. There can be
no doubt that these two contracts, in so far as the duration of the right of way
is concerned, are incompatible with each other, for the second contract
reduces the period agreed upon in the first contract, and so both contracts
cannot subsist at the same time. The duration of the right of way is one of the
principal conditions of the first as well as of the second contract, and
inasmuch as said principal condition has been modified, the contract has
been novated, in accordance with the provision quoted above.
Facts: Josefa Pacheco binds herself to acknowledge in favor of the
Kabankalan Sugar Co., Inc., all the easements which the Kabankalan may
consider convenient and necessary for its railroad on the Hilabagan estate
belonging to the Pacheco; the only differences being that the term of the
contract of November 1, 1920, is twenty years, while that of the contract
entered into on September 29, 1922, is seven crops (one of the stipulations of
the contract).
Fua vs. Yap (novation)
Held: We concur in the theory that appellants liability under the judgment in
civil case No. 42125 had been extinguished by the settlement evidenced by the

mortgage executed by them in favor of the appellee on December 16, 1933.

Although said mortgage did not expressly cancel the old obligation, this was
impliedly novated by reason of incompatibly resulting from the fact that,
whereas the judgment was for P1,538.04 payable at one time, did not provide
for attorney's fees, and was not secured, the new obligation is or P1,200
payable in installments, stipulated for attorney's fees, and is secured by a
Facts: By virtue of a judgment for P1,538.04 which Fua obtained against Yap,
a writ of execution was issued in pursuance of which a parcel of land
belonging to Yap was levied upon and its sale at public auction duly
advertised. The sale was, however, suspended as a result of an agreement
between the parties, by the terms of which the obligation under the judgment
was reduced to P1,200 payable in four installments, and to secure the
payment of this amount, the land levied upon with its improvement was
mortgaged to appellee with the condition that in the event of appellants'
default in the payment of any installment, they would pay 10 per cent of any
unpaid balance as attorney's fees as well as the difference between the full
judgment credit and the reduced amount thus agreed. Appellants failed to
comply with the terms of the settlement, whereupon, appellee sought the
execution of the judgment, and by virtue of an alias writ of execution, the land
was sold at public auction to appellee and a final deed was executed in his
favor. Appellants refused, however, to vacate the land and to recognize
appellee's title thereto; hence, the latter instituted the present action for
Millar vs. CA (novation)
Held: No substantial incompatibility between the mortgage obligation and
the judgment liability of the respondent sufficient to justify a conclusion of
implied novation. The stipulation for the payment of the obligation under the
terms of the deed of chattel mortgage serves only to provide an express and

specific method for its extinguishment payment in two equal installments.

The chattel mortgage simply gave the respondent a method and more time to
enable him to fully satisfy the judgment indebtedness. The chattel mortgage
agreement in no manner introduced any substantial modification or
alteration of the judgment. Instead of extinguishing the obligation of the
respondent arising from the judgment, the deed of chattel mortgage expressly
ratified and confirmed the existence of the same, amplifying only the mode
and period for compliance by the respondent.
The defense of implied novation requires clear and convincing proof of
complete incompatibility between the two obligations. The law requires no
specific form for an effective novation by implication. The test is whether the
two obligations can stand together. If they cannot, incompatibility arises, and
the second obligation novates the first. If they can stand together, no
incompatibility results and novation does not take place.
Facts: Millar obtained a favorable condemning Antonio P. Gabriel to pay him
the sum of P1,746.98 with interest at 12% per annum from the date of the
filing of the complaint, the sum of P400 as attorney's fees, and the costs of
suit. The lower court issued the writ of execution on the basis of which the
sheriff seized the respondent's Willy's Ford jeep. The respondent, however,
pleaded with the petitioner to release the jeep under an arrangement whereby
the respondent, to secure the payment of the judgment debt, agreed to
mortgage the vehicle in favor of the petitioner. The petitioner agreed to the
arrangement; thus, the parties executed a chattel mortgage on the jeep.
Resolution of the controversy posed by the petition at bar hinges entirely on a
determination of whether or not the subsequent agreement of the parties as
embodied in the deed of chattel mortgage impliedly novated the judgment

Sandico vs. Piguing (novation)

Held: Reduction of the amount of money to be paid does not amount to
novation. The payment by the respondent of the lesser amount of P4,000,
accepted by the petitioners without any protest or objection and
acknowledged by them as "in full satisfaction of the money judgment",
completely extinguished the judgment debt and released the respondent from
his pecuniary liability.
In the case at hand, we fail to see what new or modified obligation arose out
of the payment by the respondent of the reduced amount of P4,000 and
substitute the monetary liability for P6,000 of the said respondent under the
appellate court's judgment. Additionally, to sustain novation necessitates that
the same be so declared in unequivocal terms clearly and unmistakably
shown by the express agreement of the parties or by acts of equivalent import
or that there is complete and substantial incompatibility between the two
obligations. 5
Facts: The appellate court's judgment obliges the respondent to do two
things: (1) to recognize the easement, and (2) to pay the petitioners the sums
of P5,000 actual and P500 exemplary damages and P500 attorney's fees, or a
total of P6,000. The full satisfaction of the said judgment requires specific
performance and payment of a sum of money by the respondent. The parties
entered into an agreement reducing the payment to P4000, and was
subsequently paid by respondent. Was there a novation?
Cui vs. Arellano University (contracts; contrary to public policy)
Held: The waiver signed by Cui was void as it was contrary to public policy; it
was null and void.

Facts: Cui was a law scholar at the Arellano University; he paid the tuition
fees but it was returned to him at the end of every semester. Before Arellano
awarded the scholarship grant, Cui was made to sign a contract covenant and
agreement saying that he waives his right to transfer to another school in
consideration of the scholarship grant and if he transfers, he shall pay the
tuition fees awarded to him while being a scholar. He transferred to another
school to finish his last term in law school. When he was about to take the
Bar, his TOR at Arellano was not issued unless he pays the amount of the
tuition fees that were returned to him when he was still their scholar. He paid
under protest.
RP vs. PLDT (contracts; autonomy of will)
Held: We agree with the court below that parties can not be coerced to enter
into a contract where no agreement is had between them as to the principal
terms and conditions of the contract. Freedom to stipulate such terms and
conditions is of the essence of our contractual system, and by express
provision of the statute, a contract may be annulled if tainted by violence,
intimidation, or undue influence. But the court a quo has apparently
overlooked that while the Republic may not compel the PLDT to celebrate a
contract with it, the Republic may, in the exercise of the sovereign power of
eminent domain, require the telephone company to permit interconnection of
the government telephone system and that of the PLDT, as the needs of the
government service may require, subject to the payment of just compensation
to be determined by the court. Nominally, of course, the power of eminent
domain results in the taking or appropriation of title to, and possession of,
the expropriated property; but no cogent reason appears why the said power
may not be availed of to impose only a burden upon the owner of condemned
property, without loss of title and possession. It is unquestionable that real
property may, through expropriation, be subjected to an easement of right of
way. The use of the PLDT's lines and services to allow inter-service

connection between both telephone systems is not much different. In either

case private property is subjected to a burden for public use and benefit. If,
under section 6, Article XIII, of the Constitution, the State may, in the
interest of national welfare, transfer utilities to public ownership upon
payment of just compensation, there is no reason why the State may not
require a public utility to render services in the general interest, provided just
compensation is paid therefor. Ultimately, the beneficiary of the
interconnecting service would be the users of both telephone systems, so that
the condemnation would be for public use.
Facts: The Bureau of Telecommunications had a contract with PLDT; that the
Bureau would pay PLDT for the use the trunk lines of PLDT to establish
phone lines in all government offices in the country. However, after
sometime, the Bureau extended its services for commercial use as PLDT
could not cope with the demands of the public for phone line connections.
PLDT knew about the actuations of the Bureau but it took PLDT a long time
to file a complaint for the Bureaus act.

Saura vs. Sindico (contracts; contrary to public policy)

Held: Contract or agreement is a nullity. Among those that may not be the
subject matter (object) of contracts are certain rights of individuals, which the
law and public policy have deemed wise to exclude from the commerce of
man. Among them are the political rights conferred upon citizens, including,
but not limited to, once's right to vote, the right to present one's candidacy to
the people and to be voted to public office, provided, however, that all the
qualifications prescribed by law obtain. Such rights may not, therefore, be
bargained away curtailed with impunity, for they are conferred not for
individual or private benefit or advantage but for the public good and

Facts: Saura and Sindico were contesting for nomination as the official
candidate of the Nacionalista. On August 23, 1957, the parties entered into a
written agreement bearing the same date, containing among other matters
stated therein, a pledge that
Each aspirant shall respect the result of the aforesaid convention, i.e., no one
of us shall either run as a rebel or independent candidate after losing in said
Saura was elected and proclaimed the Party's official congressional candidate
for the aforesaid district of Pangasinan. Nonetheless, Sindico filed her
certificate of candidacy for election. Saura commenced this suit for the
recovery of damages. RTC dismissed the complaint on the basis that the
agreement sued upon is null and void, in that (1) the subject matter of the
contract, being a public office, is not within the commerce of man; and (2) the
"pledge" was in curtailment of the free exercise of elective franchise and
therefore against public policy
Kauffman vs. PNB (contracts; stipulation pour autrui)
Held: Yes; it is a stipulation pour autrui.
Should the contract contain any stipulation in favor of a third person, he may
demand its fulfillment, provided he has given notice of his acceptance to the
person bound before the stipulation has been revoked. (Art. 1257, par. 2, Civ.
Code.) In the light of the conclusion thus stated, the right of the plaintiff to
maintain the present action is clear enough; for it is undeniable that the
bank's promise to cause a definite sum of money to be paid to the plaintiff in
NYC is a stipulation in his favor within the meaning of the paragraph above
quoted; and the circumstances under which that promise was given disclose
an evident intention on the part of the contracting parties that the plaintiff
should have the money upon demand in NYC. The recognition of this
unqualified right in the plaintiff to receive the money implies in our opinion
the right in him to maintain an action to recover it.
It will be noted that under the paragraph cited a third person seeking to

enforce compliance with a stipulation in his favor must signify his acceptance
before it has been revoked. In this case the plaintiff clearly signified his
acceptance to the bank by demanding payment; and although PNB had
already directed its NY agency to withhold payment when this demand was
made, the rights of the plaintiff cannot be considered to as there used, must
be understood to imply revocation by the mutual consent of the contracting
parties, or at least by direction of the party purchasing he exchange.
Note: Legniti vs. Mechanics, etc. Bank (130 N.E. Rep., 597), decided by CA of
NYC on March 1, 1921, it was held that, by selling a cable transfer of funds on
a foreign country in ordinary course, a bank incurs a simple contractual
obligation, and cannot be considered as holding the money which was paid
for the transfer in the character of a specific trust. Thus, it was said, "Cable
transfers, therefore, mean a method of transmitting money by cable wherein
the seller engages that he has the balance at the point on which the payment
is ordered and that on receipt of the cable directing the transfer his
correspondent at such point will make payment to the beneficiary described
in the cable. All these transaction are matters of purchase and sale create no
trust relationship."
Facts: Kauffman, based in NYC, was the president of a Philippine Company;
he was entitled to receive a dividend so the treasurer of the company went to
the exchange department of PNB and requested to that a telegraphic transfer
of the money Kauffman was supposed to receive from the company. The PNB
agreed with additional charges for the transaction. The treasurer issued a
check to PNB and it was accepted. The PNBs representative in New York sent
a message suggesting the advisability of withholding this money from
Kauffman, in view of his reluctance to accept certain bills of the company.
PNB acquiesced in this and dispatched to its NY agency a message to
withhold the Kauffman payment as suggested. Meanwhile, Wicks then he
informed Kauffman that his dividends had been wired to his credit in the NY
agency of PNB. So Kauffman went to PNB office in NYC and demanded the
money, however, he was refused payment. So he filed this complaint. Does
Kauffman have a right of action against PNB?

Florentino vs. Encarnacion (contracts; stipulation pour autrui)

Held: The stipulation embodied on religious expenses is not revocable at the
unilateral option of the co-owners and neither is it binding to both parties
The stipulation in part of an extrajudicial partition duly agreed and signed by
the parties, hence the sanie must bind the contracting parties thereto and its
validity or compliance cannot be left to the will of one of them (Art. 1308,
N.C.C.). Under Art 1311 of the New Civil Code, this stipulation takes effect
between the parties, their assign and heirs. The article provides:
Art. 1311. Contracts take effect only between the parties, their assigns and
heirs, except in cases where the rights and obligations arising from the
contract are not transmissible by their nature, or by stipulation or by
provision of law. The heir is not liable beyond the value of the property he
received from the decedent.
If a contract should contain a stipulation in favor of a third person, he may
demand its fulfillment provided he communicated his acceptance to the
obligor before its revocation. A mere incidental benefit or interest of a person
is not sufficient. The contracting parties must have clearly and deliberately
conferred a favor upon a third person.
In the case at bar, the determining point is whether the co-owners intended
to benefit the Church when in their extrajudicial partition of several parcels of
land inherited by them from Doa Encarnacion Florendo they agreed that
with respect to the land, the fruits thereof shall serve to defray the religious
expenses. The evidence on record shows that the true intent of the parties is
to confer a direct and material benefit upon the Church. The fruits of the
aforesaid land were used thenceforth to defray the expenses of the Church in
the preparation and celebration of the Holy Week.
We find that the trial court erred in holding that the stipulation, arrangement
or grant is revocable at the option of the co-owners. While a stipulation in
favor of a third person has no binding effect in itself before its acceptance by
the party favored, the law does not provide when the third person must make

his acceptance. As a rule, there is no time at such third person has after the
time until the stipulation is revoked. Here, We find that the Church accepted
the stipulation in its favor before it is sought to be revoked by some of the coowners, namely the petitioners-appellants herein. It is not disputed that from
the time of the will of Doa Encarnacion Florentino in 1941, as had always
been the case since time immemorial up to a year before the filing of their
application in May 1964, the Church had been enjoying the benefits of the
stipulation. The enjoyment of benefits flowing therefrom for almost
seventeen years without question from any quarters can only be construed as
an implied acceptance by the Church of the stipulation pour autrui before its
The acceptance does not have to be in any particular form, even when the
stipulation is for the third person an act of liberality or generosity on the part
of the promisor or promise.
It need not be made expressly and formally. Notification of acceptance, other
than such as is involved in the making of demand, is unnecessary.
A trust constituted between two contracting parties for the benefit of a third
person is not subject to the rules governing donation of real property. The
beneficiary of a trust may demand performance of the obligation without
having formally accepted the benefit of the this in a public document, upon
mere acquiescence in the formation of the trust and acceptance under the
second paragraph of Art. 1257 of the Civil Code.

Bonifacio vs. Mora (contracts; stipulation pour autrui)

Held: The appellants seek to recover the insurance proceeds, and for this
purpose, they rely upon paragraph 4 of the insurance contract document
executed by and between the State Bonding & Insurance Company, Inc. and
Enrique Mora. The appellants are not mentioned in the contract as parties
thereto nor is there any clause or provision thereof from which we can infer

that there is an obligation on the part of the insurance company to pay the
cost of repairs directly to them. It is fundamental that contracts take effect
only between the parties thereto, except in some specific instances provided
by law where the contract contains some stipulation in favor of a third
person. Such stipulation is known as stipulation pour autrui or a provision in
favor of a third person not a pay to the contract. Under this doctrine, a third
person is allowed to avail himself of a benefit granted to him by the terms of
the contract, provided that the contracting parties have clearly and
deliberately conferred a favor upon such person. Consequently, a third person
not a party to the contract has no action against the parties thereto, and
cannot generally demand the enforcement of the same. The question of
whether a third person has an enforcible interest in a contract, must be
settled by determining whether the contracting parties intended to tender
him such an interest by deliberately inserting terms in their agreement with
the avowed purpose of conferring a favor upon such third person. In this
connection, this Court has laid down the rule that the fairest test to determine
whether the interest of a third person in a contract is a stipulation pour autrui
or merely an incidental interest, is to rely upon the intention of the parties as
disclosed by their contract. In the instant case the insurance contract does not
contain any words or clauses to disclose an intent to give any benefit to any
repairmen or materialmen in case of repair of the car in question. The parties
to the insurance contract omitted such stipulation, which is a circumstance
that supports the said conclusion. On the other hand, the "loss payable"
clause of the insurance policy stipulates that "Loss, if any, is payable to H.S.
Reyes, Inc." indicating that it was only the H.S. Reyes, Inc. which they
intended to benefit.
Another cogent reason for not recognizing a right of action by the appellants
against the insurance company is that "a policy of insurance is a distinct and
independent contract between the insured and insurer, and third persons
have no right either in a court of equity, or in a court of law, to the proceeds of
it, unless there be some contract of trust, expressed or implied between the

insured and third person." In this case, no contract of trust, expressed or

implied exists. We, therefore, agree with the trial court that no cause of action
exists in favor of the appellants in so far as the proceeds of insurance are
concerned. The appellants' claim, if at all, is merely equitable in nature and
must be made effective through Enrique Mora who entered into a contract
with the Bonifacio Bros. Inc.
Facts: Mora mortgaged his car to H.S Reyes with a condition that Mora would
insure the car with H.S. Reyes Inc. as the beneficiary. State Bonding &
Company insured the car and a motor car insurance policy was issued to
Mora. Right after, the car met an accident. The insurance company then
assigned the accident to the Bayne Adjustment Co. for investigation and
appraisal of the damage. Mora, without the consent and knowledge of H.S.
Reyes Inc., authorized Bonifacio Brothers Inc. to fix the car. For the cost of
labor and materials, Enrique Mora was billed at P2,102.73 through the H.H.
Bayne Adjustment Co. The insurance company after claiming a franchise in
the amount of P100, drew a check in the amount of P2,002.73, as proceeds of
the insurance policy, payable to the order of Enrique Mora or H.S. Reyes,.
Inc., and entrusted the check to the H.H. Bayne Adjustment Co. for
disposition and delivery to the proper party. In the meantime, the car was
delivered to Enrique Mora without the consent of the H.S. Reyes, Inc., and
without payment to the Bonifacio Bros. Inc. of the cost of repairs and
materials. Upon the theory that the insurance proceeds should be paid
directly to them, the Bonifacio Bros. Inc filed a complaint against Mora and
the State Bonding & Insurance Co., Inc. for the collection of the sum of
Corpus vs. CA (innominate contracts)
Held: While there was no express agreement between petitioner Corpus and
respondent David as regards attorney's fees, the facts of the case support the
position of respondent David that there was at least an implied agreement for

the payment of attorney's fees.

Payment of attorney's fees to respondent David may be justified by virtue of
the innominate contract of facio ut des (I do and you give which is based on
the principle that "no one shall unjustly enrich himself at the expense of
another." Innominate contracts have been elevated to a codal provision in the
New Civil Code by providing under Article 1307 that such contracts shall be
regulated by the stipulations of the parties, by the general provisions or
principles of obligations and contracts, by the rules governing the most
analogous nominate contracts, and by the customs of the people.
WE reiterated this rule in Pacific Merchandising Corp. vs. Consolacion
Insurance & Surety Co., Inc. (73 SCRA 564 [1976]) citing the case of Perez v.
Pomar, supra thus:
Where one has rendered services to another, and these services are accepted
by the latter, in the absence of proof that the service was rendered
gratuitously, it is but just that he should pay a reasonable remuneration
therefor because 'it is a well-known principle of law, that no one should be
permitted to enrich himself to the damage of another.
Facts: David accepted the case of Corpus though there was no express
agreement regarding attorneys fees.
Corpus was administratively charged. He employed the services of David.
David won the administrative case
For Copuz. Corpus gave a check to David, but was returned by David with the
intention of getting paid after
the case is ruled with finality by the SC and Corpus gets his back salaries and
wages. (Your appreciation of the
efforts I have invested in your case is enough compensation therefor,
however, when you shall have obtained a
decision which would have finally resolved the case in your favor,
remembering me then will make me happy.
In the meantime, you will make me happier by just keeping the check) David
continued to fight for Corpus

case and got a favorable judgment. Corpus refused to pay David contending
that since David refused the first
check given by him, he gave his services gratuitously.

Daywalt vs. La Corporation de los Padres Agustinos Recoletos (Art 1314)

Held: The most that can be said with reference to the conduct of Teodorica
Endencia is that she refused to carry out a contract for the sale of certain land
and resisted to the last an action for specific performance in court. The result
was that the plaintiff was prevented during a period of several years from
exerting that control over the property which he was entitled to exert and was
meanwhile unable to dispose of the property advantageously. The extent of
the liability for the breach of a contract must be determined in the light of the
situation in existence at the time the contract is made; and the damages
ordinarily recoverable in all events limited to such as might be reasonably
foreseen in the light of the facts then known to the contracting parties. Where
the purchaser desires to protect himself, in the contingency of the failure of
the vendor promptly to give possession, from the possibility of incurring
other damages than such as are incident to the normal value of the use and
occupation, he should cause to be inserted in the contract a clause providing
for stipulated amount to be paid upon failure of the vendor to give
possession; and no case has been called to our attention where, in the absence
of such a stipulation, damages have been held to be recoverable by the
purchase in excess of the normal value of use and occupation.
The damages recoverable in case of the breach of a contract are two sorts,
namely, (1) the ordinary, natural, and in a sense, necessary damage; and (2)
special damages. Ordinary damages is found in all breaches of contract
where there are no special circumstances to distinguish the case especially
from other contracts. The consideration paid for an unperformed promise is
an instance of this sort of damage. In all such cases the damages recoverable

are such as naturally and generally would result from such a breach,
according to the usual course of things. In cases involving only ordinary
damage, it is conclusively presumed from the immediateness and
inevitableness of the damage, and the recovery of such damage follows as a
necessary legal consequence of the breach. Ordinary damage is assumed as a
matter of law to be within the contemplation of the parties. Special damage,
on the other hand, is such as follows less directly from the breach than
ordinary damage. It is only found in cases where some external condition,
apart from the actual terms of the contract exists or intervenes, as it were, to
give a turn to affairs and to increase damage in a way that the promissor,
without actual notice of the external condition, could not reasonably be
expected to foresee.
Plaintiffs right chiefly as against Teodorica Endencia; and what has been said
suffices in our opinion to demonstrate that the damages laid under the
second cause of action in the complaint could not be recovered from her, first,
because the damages in question are special damages which were not within
contemplation of the parties when the contract was made, and secondly,
because said damages are too remote to be subject of recovery. This
conclusion is also necessarily fatal to the right of the plaintiff to recover such
damages from the defendant corporation for, as already suggested, by
advising Teodorica Endencia not to perform the contract, said corporation
could in no event render itself more extensively liable than the principal in
the contract. Our conclusion is that the judgment of the trial court should be
affirmed, and it is so ordered, with costs against the appellant.

Facts: Teodorica Endencia obligated herself to sell a parcel of land to the

plaintiff. It was agreed that the final deed of sale will be executed when the
land was registered in Endencias name. Subsequently, the Torrens Title for
the land was issued in her favor but in the course of the proceedings for

registration it was found that the land involved in the sale contained a greater
area than what Endencia originally thought and she became reluctant to
consummate the sale of the land to the plaintiff. This reluctance was due to
the advice of the defendant which exercised a great moral influence over her.
However, in advising Endencia that she was not bound by her contract with
the plaintiff, the defendant was not actuated with improper motives but did
so in good faith believing that, under the circumstances, Endencia was not
really bound by her contract with the plaintiff. In view of Endencias refusal
to make the conveyance, the plaintiff instituted a complaint for specific
performance against her and, upon appeal, the Supreme Court held that she
was bound by the contract and she was ordered to make the conveyance of
the land in question to the plaintiff. The plaintiff then instituted an action
against the defendant to recover the following damages: (a) The amount of
Pesos 24,000.00 for the use and occupation of the land in question by reason
of the pasturing of cattle therein during the period that the land was not
conveyed by Endencia to the plaintiff; (b) The amount of Pesos 500,000.00
for plaintiffs failure to sell the land in question to a sugar growing and
milling enterprise, the successful launching of which depended on the ability
of Daywalt to get possession of the land and the Torrens Title. The lower
court held that the defendant was liable to the plaintiff for the use and
occupation of the land in question and condemned the defendant to pay the
plaintiff Pesos 2,497.00 as damages. The Supreme Court affirmed this
adjudication of the lower court. With respect to the claim of Pesos
500,000.00 damages, the Supreme Court.
Ong Yiu vs. CA (contracts of Adhesion)
Held: PAL did not act in bad faith therefore Petitioner is not granted moral
and exemplary damages; liability if PAL is limited to P100 as stipulated in the
We agree with the foregoing finding. The pertinent Condition of Carriage

printed at the back of the plane ticket reads:

8. BAGGAGE LIABILITY ... The total liability of the Carrier for lost or
damaged baggage of the passenger is LIMITED TO P100.00 for each ticket
unless a passenger declares a higher valuation in excess of P100.00, but not
in excess, however, of a total valuation of P1,000.00 and additional charges
are paid pursuant to Carrier's tariffs.
There is no dispute that petitioner did not declare any higher value for his
luggage, much less did he pay any additional transportation charge.
But petitioner argues that there is nothing in the evidence to show that he had
actually entered into a contract with PAL limiting the latter's liability for loss
or delay of the baggage of its passengers, and that Article 1750 of the Civil
Code has not been complied with.
While it may be true that petitioner had not signed the plane ticket, he is
nevertheless bound by the provisions thereof. "Such provisions have been
held to be a part of the contract of carriage, and valid and binding upon the
passenger regardless of the latter's lack of knowledge or assent to the
regulation". 5 It is what is known as a contract of "adhesion", in regards
which it has been said that contracts of adhesion wherein one party imposes a
ready made form of contract on the other, as the plane ticket in the case at
bar, are contracts not entirely prohibited. The one who adheres to the
contract is in reality free to reject it entirely; if he adheres, he gives his
consent. "A contract limiting liability upon an agreed valuation does not
offend against the policy of the law forbidding one from contracting against
his own negligence.
Facts: Petitioner was a frequent passenger of PAL. He travelled from Cebu to
Butuan for a case bringing his luggage that contained his documents for the
case. It was loaded to the wrong plane. Petitioner demanded the return of his
luggage and PAL complied accordingly. It was delivered to him the next day

but it was allegedly opened already and his case documents missing.
Petitioner sued for damages contending that PAL acted in bad faith. RTC gave
petitioner a favorable judgment but he appealed to CA for more damages.
However, CA only granted him P100 as damages finding that PAL acted
without bad faith and petitioner not being able to declare the contents and
value of his luggage as stipulated in the PAL ticket.

Velasco vs. CA (Elements)

HELD: It is not difficult to glean from the aforequoted averments that the
petitioners themselves admit that they and the respondent still had to meet
and agree on how and when the down-payment and the installment payments
were to be paid. Such being the situation, it cannot, therefore, be said that a
definite and firm sales agreement between the parties had been perfected
over the lot in question. Indeed, this Court has already ruled before that a
definite agreement on the manner of payment of the purchase price is an
essential element in the formation of a binding and unforceable contract of
sale. 3 The fact, therefore, that the petitioners delivered to the respondent the
sum of P10,000 as part of the down-payment that they had to pay cannot be
considered as sufficient proof of the perfection of any purchase and sale
agreement between the parties herein under article 1482 of the new Civil
Code, as the petitioners themselves admit that some essential matter the
terms of payment still had to be mutually covenanted.
Sir Mik: The manner of payment is NOT an essential element of a contract.

Bienvenido Babao vs. Florencio Perez (Article 1324; statute of fraud)

Held: Contracts which by their terms are not to be performed within one
year, may be taken out of the statute through performance by one party

thereto. All that is required in such case is complete performance within the
year by one party, however many tears may have to elapse before the
agreement is performed by the other party. But nothing less than full
performance by one party will suffice, and it has been held that, if anything
remains to be done after the expiration of the year besides the mere payment
of money, the statute will apply. It is not therefore correct to state that
Santiago Babao has fully complied with his part within the year from the
alleged contract in question.
Having reached the conclusion that all the parol evidence of appellee was
submitted in violation of the Statute of Frauds, or of the rule which prohibits
testimony against deceased persons, we find unnecessary to discuss the other
issues raised in appellants' brief.
The case is dismissed, with costs against appellee.

Facts: Santiago Babao married the niece of Celestina Perez. 1924, Santi and
Celestina allegedly had a verbal agreement where Santi was bound to improve
the land of Celestina by leveling, clearing, planting fruits and other crops;
that he will act as the administrator of the land; that all expenses for labor
and materials will be at his cost, in consideration of which Celestina in turn
bound herself to convey to Santi or his wife of the land,, with all the
improvements after the death of Celestina. But, shortly before Celestinas
death, she sold the land to another part. Thus, Santi filed this complaint
alleging the sale of the land as fraudulent and fictitious and prays to recover
the land or the expenses he incurred in improving the land.
Issue: whether or not the verbal agreement falls within the Stature of Frauds

Sanchez vs. Rigos (contracts;acceptance)

Held: The SC affirmed the decision appealed from, with costs against
Severina Rigos.
1. Option to purchase not a contract to buy and sell
The option did not impose upon Sanchez the obligation to purchase Rigos
property. The contract denominated as Option to Purchase is not a
contract to buy and sell, it merely granted Sanchez an option to buy, and
both parties so understood it, as indicated by the caption given by them to
said instrument. Under the provisions thereof, Rigos agreed, promised and
committed herself to sell the land therein described to Sanchez for
P1,510.00, but there is nothing in the contract to indicate that her
aforementioned agreement, promise and undertaking is supported by a
consideration distinct from the price stipulated for the sale of the land.
2. Article 1354 applicable to contracts in general, Article 1479 refers to sales
in particular
Relying upon Article 1354 of the Civil Code, which provides that when the
offerer has allowed the offeree a certain period to accept, the offer may be
withdrawn at any time before acceptance by communicating such withdrawal,
except when the option is founded upon consideration, as something paid or
promised, the lower court presumed the existence of a consideration distinct
from the price. It must be noted however that Article 1354 applies to
contracts in general, whereas the second paragraph of Article 1479 refers to
sales in particular, and, more specifically, to an accepted unilateral
promise to buy or to sell. In other words, Article 1479 is controlling in the
present case. Article 1479 provides that A promise to buy and sell a
determinate thing for a price certain is reciprocally demandable. An accepted
unilateral promise to buy or to sell a determinate thing for a price certain is
binding upon the promissor if the promise is supported by a consideration
distinct from the price.
3. Article 1479 imposes condition for a unilateral promise to be binding;
Burden of proof
In order that a unilateral promise may be binding upon the promisor,

Article 1479 requires the concurrence of a condition, namely, that the

promise be supported by a consideration distinct from the price.
Accordingly, the promisee can not compel the promisor to comply with the
promise, unless the former establishes the existence of said distinct
consideration. In other words, the promisee has the burden of proving such
consideration. In the present case, Sanchez has not even alleged the existence
thereof in his complaint.
4. Implied admission of the truth of the other partys averment if party joins
in the petition for a judgment based on the pleadings without introducing
In the case of Bauermann v. Casas (14 March 1908), it was held that one who
prays for judgment on the pleadings without offering proof as to the truth of
hie own allegations, and without giving the opposing party an opportunity to
introduce evidence, must be understood to admit the truth of all the material
and relevant allegations of the opposing party, and to rest his motion for
judgment on those allegations taken together with such of his own as are
admitted in the pleading. (La Yebana Company vs. Sevilla, 9 Phil. 210). This
view was reiterated in Evangelista V. De la Rosa and Mercys Incorporated v.
Herminia Verde. In the present case, Rigos explicitly averred in her answer,
and pleaded as a special defense, the absence of said consideration for her
promise to sell and, by joining in the petition for a judgment on the pleadings,
Sanchez has impliedly admitted the truth of said averment in Rigos answer.
5. Southwestern Sugar & Molasses Co. v. Atlantic Gulf & Pacific Co. case
The Court in the Southwestern Sugar case held that under article 1479 of the
new Civil Code an option to sell, or a promise to buy or to sell, as used in
said article, to be valid must be supported by a consideration distinct from
the price. This is clearly inferred from the context of said article that a
unilateral promise to buy or to sell, even if accepted, is only binding if
supported by a consideration. In other words, an accepted unilateral
promise can only have a binding effect if supported by a consideration, which
means that the option can still be withdrawn, even if accepted, if the same is
not supported by any consideration. Here it is not disputed that the option is

without consideration. It can therefore be withdrawn notwithstanding the

acceptance made of it by appellee. The Court held that the general rule
regarding offer and acceptance under Article 1324 must be interpreted as
modified by the provision of article 1479, which applies to a promise to buy
and sell specifically. In short, the rule requires that a promise to sell to be
valid must be supported by a consideration distinct from the price.
6. Atkins, Kroll and Co. v. Cua Hian Tek
In the case of Atkins, Kroll and Co., Inc. v. Cua Hian Tek, decided later than
Southwestern Sugar & Molasses Co. v. Atlantic Gulf & Pacific Co., the Court
saw no distinction between Articles 1324 and 1479 of the Civil Code and
applied the former where a unilateral promise to sell similar to the one sued
upon here was involved, treating such promise as an option which, although
not binding as a contract in itself for lack of a separate consideration,
nevertheless generated a bilateral contract of purchase and sale upon
7. Option is unilateral
Furthermore, an option is unilateral: a promise to sell at the price fixed
whenever the offeree should decide to exercise his option within the specified
time. After accepting the promise and before he exercises his option, the
holder of the option is not bound to buy. He is free either to buy or not to buy
later. In the present case, however, upon accepting Rigos offer a bilateral
promise to sell and to buy ensued, and Sanchez ipso facto assumed the
obligation of a purchaser. He did not just get the right subsequently to buy or
not to buy. It was not a mere option then; it was bilateral contract of sale.
8. Option without consideration is a mere offer of a contract of sale, which is
not binding until accepted
If the option is given without a consideration, it is a mere offer of a contract of
sale, which is not binding until accepted. If, however, acceptance is made
before a withdrawal, it constitutes a binding contract of sale, even though the
option was not supported by a sufficient consideration. . . . (77 Corpus Juris
Secundum p. 652. See also 27 Ruling Case Law 339 and cases cited.) It can be
taken for granted that the option contract was not valid for lack of

consideration. But it was, at least, an offer to sell, which was accepted by

latter, and of the acceptance the offerer had knowledge before said offer was
withdrawn. The concurrence of both acts the offer and the acceptance
could at all events have generated a contract, if none there was before (arts.
1254 and 1262 of the Civil Code; Zayco vs. Serra, 44 Phil. 331.) In other
words, since there may be no valid contract without a cause or consideration,
the promisor is not bound by his promise and may, accordingly, withdraw it.
Pending notice of its withdrawal, his accepted promise partakes, however, of
the nature of an offer to sell which, if accepted, results in a perfected contract
of sale.
9. Proper construction of conflicting provisions of the same law; Harmonize
to implement the same principle rather than to create exceptions
In line with the cardinal rule of statutory construction that, in construing
different provisions of one and the same law or code, such interpretation
should be favored as will reconcile or harmonize said provisions and avoid a
conflict between the same. Indeed, the presumption is that, in the process of
drafting the Code, its author has maintained a consistent philosophy or
position. Moreover, the decision in Southwestern Sugar & Molasses Co. v.
Atlantic Gulf & pacific Co., holding that Art. 1324 (on the general principles
on contracts) is modified by Art. 1479 (on sales) of the Civil Code, in effect,
considers the latter as an exception to the former, and exceptions are not
favored, unless the intention to the contrary is clear, and it is not so, insofar
as said 2 articles are concerned. What is more, the reference, in both the
second paragraph of Art. 1479 and Art. 1324, to an option or promise
supported by or founded upon a consideration, strongly suggests that the 2
provisions intended to enforce or implement the same principle.
10. Atkins, Kroll & Co. case modifies or abandons Southwestern Sugar case
insofar as to inconsistencies
Upon mature deliberation, the Court is of the considered opinion that it
should, as it hereby reiterates the doctrine laid down in the Atkins, Kroll &
Co. case, and that, insofar all inconsistent therewith, the view adhered to in
the South western Sugar & Molasses Co. case should be deemed abandoned

or modified.
Facts: On 3 April 1961, Nicolas Sanchez and Severina Rigos executed an
instrument, entitled Option to Purchase, whereby Mrs. Rigos agreed,
promised and committed . . . to sell to Sanchez, for the sum of P1,510.00, a
parcel of land situated in the barrios of Abar and Sibot, municipality of San
Jose, province of Nueva Ecija, and more particularly described in TCT NT12528 of said province, within two (2) years from said date with the
understanding that said option shall be deemed terminated and elapsed, if
Sanchez shall fail to exercise his right to buy the property within the
stipulated period. Inasmuch as several tenders of payment of the sum of
P1,510.00, made by Sanchez within said period, were rejected by Mrs. Rigos,
on 12 March 1963, the former deposited said amount with the CFI Nueva
Ecija and commenced against the latter the present action, for specific
performance and damages. On 11 February 1964, after the filing of
defendants answer, both parties, assisted by their respective counsel, jointly
moved for a judgment on the pleadings. Accordingly, on 28 February 1964,
the lower court rendered judgment for Sanchez, ordering Mrs. Rigos to accept
the sum judicially consigned by him and to execute, in his favor, the requisite
deed of conveyance. Mrs. Rigos was, likewise, sentenced to pay P200.00, as
attorneys fees, and the costs. Hence, the appeal by Mrs. Rigos to the Court of
Appeals, which case was the certified by the latter court to the Supreme Court
upon the ground that it involves a question purely of law.
Liguez vs. CA (void contracts)
Held: CA erred in applying to the present case the pari delicto rule. First,
because it can not be said that both parties here had equal guilt when we
consider that as against the deceased Salvador P. Lopez, who was a man
advanced in years and mature experience, the appellant was a mere minor, 16
yrs of age, when the donation was made; that there is no finding made by CA
that she was fully aware of the terms of the bargain entered into by and Lopez
and her parents; that, her acceptance in the deed of donation (Art. 741) did

not necessarily imply knowledge of conditions and terms not set forth
therein; and that the substance of the testimony of the instrumental witnesses
is that it was the appellant's parents who insisted on the donation before
allowing her to live with Lopez. These facts are more suggestive of seduction
than of immoral bargaining on the part of appellant. It must not be forgotten
that illegality is not presumed, but must be duly and adequately proved.
Second, the rule that parties to an illegal contract, if equally guilty, will not be
aided by the law but will both be left where it finds them, has been
interpreted by this Court as barring the party from pleading the illegality of
the bargain either as a cause of action or as a defense.
CA correctly held that Lopez could not donate the entirety of the property in
litigation, to the prejudice of his wife Maria Ngo, because said property was
conjugal in character and the right of the husband to donate community
property is strictly limited by law
ART. 1409. The conjugal partnership shall also be chargeable with anything
which may have been given or promised by the husband alone to the children
born of the marriage in order to obtain employment for them or give then, a
profession or by both spouses by common consent, should they not have
stipulated that such expenditures should be borne in whole or in part by the
separate property of one of them.".
ART. 1415. The husband may dispose of the property of the conjugal
partnership for the purposes mentioned in Article 1409.)
ART. 1413. In addition to his powers as manager the husband may for a
valuable consideration alienate and encumber the property of the conjugal
partnership without the consent of the wife.
The text of the articles makes it plain that the donation made by the husband
in contravention of law is not void in its entirety, but only in so far as it
prejudices the interest of the wife. In this regard, as Manresa points out the
law asks no distinction between gratuitous transfers and conveyances for a
consideration. To determine the prejudice to the widow, it must be shown

that the value of her share in the property donated can not be paid out of the
husband's share of the community profits. The requisite data, however, are
not available to us and necessitate a remand of the records to the court of
origin that settled the estate of the late Salvador P. Lopez.
The decisions appealed from are reversed and set aside, and the appellant
Conchita Liguez declared entitled to so much of the donated property as may
be found, upon proper liquidation, not to prejudice the share of the widow
Maria Ngo in the conjugal partnership with Salvador P. Lopez or the legitimes
of the forced heirs of the latter.
Plaintiff averred to be a legal owner, pursuant to a deed of donation of a land,
executed in her favor by the late owner, Salvador P. Lopez, on 18 May 1943.
The defense interposed was that the donation was null and void for having an
illicit causa or consideration, which was the plaintiff's entering into marital
relations with Salvador P. Lopez, a married man; and that the property had
been adjudicated to the appellees as heirs of Lopez by the court of First
Instance, since 1949.
The Court of Appeals rejected the appellant's claim on the basis of the wellknown rule "in pari delicto non oritur actio" as embodied in Article 1306 of
1889 (reproduced in Article 1412 of the new Civil Code):
ART. 1412. If the act in which the unlawful or forbidden cause consists does
not constitute a criminal offense, the following rules shall be observed:
(1) When the fault is on the part of both contracting parties, neither may
recover what he has given by virtue of the contract, or demand the
performance of the other's undertaking;
(2) When only one of the contracting parties is at fault, he cannot recover,
what he has given by reason of the contract, or ask for fulfillment of what has
been promised him. The other, who is not at fault, may demand the return of
what he has given without any obligation to comply with his promise.