Subrogation

Metrobank vs Rural Bank of Gerona – loans of farmers reversed

As discussed, Metrobank was a third party to the Central Bank-RBG agreement,

had no interest except as a conduit, and was not legally answerable for the IBRD
loans. Despite this, it was Metrobanks demand deposit account, instead of RBGs,
which the Central Bank proceeded against, on the assumption perhaps that this
was the most convenient means of recovering the cancelled loans. That
Metrobanks payment was involuntarily made does not change the reality that it
was Metrobank which effectively answered for RBGs obligations.

Article 1303 of the Civil Code states that subrogation transfers to the person
subrogated the credit with all the rights thereto appertaining, either against the
debtor or against third persons. As the entity against which the collection was
enforced, Metrobank was subrogated to the rights of Central Bank and has a
cause of action to recover from RBG the amounts it paid to the Central Bank, plus
14% per annum interest.
CONRACTS

AUTONOMY OF CONTRACTS –freedom of contract

New World vs AMA – AMA leases of bldg of New World, damages

The law does not relieve a party from the consequences of a contract it entered
into with all the required formalities.32 Courts have no power to ease the burden
of obligations voluntarily assumed by parties, just because things did not turn out
as expected at the inception of the contract.

Art. 1159. Obligations arising from contracts have the force of law between the
contracting parties and should be complied with in good faith
Tiu vs Platinum plans – contract of employment, non-involvement clause

a non-involvement clause is not necessarily void for being in restraint of trade as

long as there are reasonable limitations as to time, trade, and place.
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.

Avon vs Luna -Exclusivity Clause

This exclusivity clause is more often the subject of critical scrutiny when it is
perceived to collide with the Constitutional proscription against reasonable
restraint of trade or occupation

In sum, contracts requiring exclusivity are not per se void.

lainly put, public policy is that principle of the law which holds that no subject or
citizen can lawfully do that which has a tendency to be injurious to the public or
against the public good.[22] As applied to contracts, in the absence of express
legislation or constitutional prohibition, a court, in order to declare a contract
void as against public policy, must find that the contract as to the consideration or
thing to be done, has a tendency to injure the public, is against the public good, or
contravenes some established interests of society, or is inconsistent with sound
policy and good morals, or tends clearly to undermine the security of individual
rights, whether of personal liability or of private property.

Applying the preceding principles to the case at bar, there is nothing invalid or
contrary to public policy either in the objectives sought to be attained by
paragraph 5, i.e., the exclusivity clause, in prohibiting respondent Luna, and all
other Avon supervisors, from selling products other than those manufactured by
petitioner Avon.

ACOL vs PCCI –credit card

It cited provision no. 1 of the Terms and Conditions Governing

The Issuance and Use of the Bankard found at the back of the
application form:
 xxx Holders responsibility for all charges made through the
use of the card shall continue until the expiration or its return to
the Card Issuer or until a reasonable time after receipt by the
Card Issuer of written notice of loss of the Card and its actual
inclusion in the Cancellation Bulletin. xxx

Prompt notice by the cardholder to the credit card company of the loss or theft of his
card should be enough to relieve the former of any liability occasioned by the
unauthorized use of his lost or stolen card.

To require the cardholder to still pay for the unauthorized purchases after he has given prompt
notice of the loss or theft of his card to the credit card company would simply be unfair
and unjust. The Court cannot give its assent to such a stipulation which could clearly run
against public policy.

Article 1306 of the Civil Code[10] prohibits contracting parties from

establishing stipulations contrary to public policy.

MUTUALITY OF CONTRACTS

SPOUSES SILOS VS PNB –INTEREST RATES UNILATERALLY IMPOSED BY PNB

In order that obligations arising from contracts may have the force of law between the parties, there
must be mutuality between the parties based on their essential equality. A contract containing a
condition which makes its fulfillment dependent exclusively upon the uncontrolled will of one of the
contracting parties, is void (Garcia vs. Rita Legarda, Inc., 21 SCRA 555). Hence, even assuming that
the ₱1.8 million loan agreement between the PNB and the private respondent gave the PNB a
license (although in fact there was none) to increase the interest rate at will during the term of the
loan, that license would have been null and void for being violative of the principle of mutuality
essential in contracts.

PNB vs sps Manalo

Although banks are free to determine the rate of interest they could impose on their borrowers, they
can do so only reasonably, not arbitrarily. They may not take advantage of the ordinary borrowers'
lack of familiarity with banking procedures and jargon. Hence, any stipulation on interest unilaterally
imposed and increased by them shall be struck down as violative of the principle of mutuality of
contracts.

Any contract which appears to be heavily weighed in favor of one of the parties so as to lead to an
unconscionable result, thus partaking of the nature of a contract of adhesion, is void. Any stipulation
regarding the validity or compliance of the contract left solely to the will of one of the parties is
likewise invalid.
MIA vs Velayo Sports Center – Lease Contract

It is a purely 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. 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. 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 lack of mutuality. After all, the lessor is free to give or not to give the option to the lessee.
And while the lessee has a right to elect whether to continue with the lease or not, once he exercises his
option to continue and the lessor accepts, both parties are thereafter bound by the new lease
agreement. Their rights and obligations become mutually fixed, and the lessee is entitled to retain
possession of the property for the duration of the new lease, and the lessor may hold him liable for the
rent therefor.

RELATIVITY

Honrado vs gma –broadcasting of films, TV Rights Agreement, non-remittance of payment to owner of

films

We entertain no doubt that petitioner forged separate contractual arrangements with the owners of the films
listed in the Agreement, spelling out the terms of payment to the latter. Whether or not petitioner complied
with these terms, however, is a matter to which GMA Films holds absolutely no interest. Being a stranger to
such arrangements, GMA Films is no more entitled to complain of any breach by petitioner of his contracts
with the film owners than the film owners are for any breach by GMA Films of its Agreement with petitioner.

DKC holdings vs CA – Contract of lease with option to buy

whether son is bound by lease contract entered by mother

The general rule, therefore, is that heirs are bound by contracts entered into by their
predecessors-in-interest except when the rights and obligations arising therefrom are not
transmissible by (1) their nature, (2) stipulation or (3) provision of law.

It has also been held that a good measure for determining whether a contract terminates upon
the death of one of the parties is whether it is of such a character that it may be performed by
the promissors personal representative.

In the case at bar, there is no personal act required from the late Encarnacion Bartolome.
Rather, the obligation of Encarnacion in the contract to deliver possession of the subject
property to petitioner upon the exercise by the latter of its option to lease the same may very
well be performed by her heir Victor.

Gilchrist vs Cuddy

"Everyone has a right to enjoy the fruits and advantages of his own enterprise, industry, skill and
credit. He has no right to be free from malicious and wanton interference, disturbance or annoyance
SALVADOR P. MALBAROSAvs. HON. COURT OF APPEALS

Under Article 1319 of the New Civil Code, the consent by a party
is manifested by the meeting of the offer and the acceptance upon the thing
and the cause which are to constitute the contract. An offer may be reached at
any time until it is accepted. An offer that is not accepted does not give rise to
a consent.The contract does not come into existence. To produce a contract,
[24]

there must be acceptance of the offer which may be express or implied but [25]

must not qualify the terms of the offer. The acceptance must be absolute,
unconditional and without variance of any sort from the offer. [26]

The acceptance of an offer must be made known to the offeror. Unless [27]

the offeror knows of the acceptance, there is no meeting of the minds of the
parties, no real concurrence of offer and acceptance.
In this case, the respondent made its offer through its Vice-Chairman of
the Board of Directors, Senen Valero. On March 16, 1990, Da Costa handed
over the original of the March 14, 1990 Letter-offer of the respondent to the
petitioner. The respondent required the petitioner to accept the offer by
affixing his signature on the space provided in said letter-offer and writing the
date of said acceptance, thus foreclosing an implied acceptance or any other
mode of acceptance by the petitioner. However, when the letter-offer of the
respondent was delivered to the petitioner on March 16, 1990, he did not
accept or reject the same for the reason that he needed time to decide
whether to reject or accept the same. There was no contract perfected
[33]

between the petitioner and the respondent corporation. Although the [34]

petitioner claims that he had affixed his conformity to the letter-offer on March
28, 1990, the petitioner failed to transmit the said copy to the respondent. It
was only on April 7, 1990 when the petitioner appended to his letter to the
respondent a copy of the said March 14, 1990 Letter-offer bearing his
conformity that he notified the respondent of his acceptance to said offer. But
then, the respondent, through Philtectic Corporation, had already withdrawn
its offer and had already notified the petitioner of said withdrawal via
respondents letter dated April 4, 1990 which was delivered to the petitioner on
the same day. Indubitably, there was no contract perfected by the parties on
the March 14, 1990 Letter-offer of the respondent.
The petitioners plaint that he was not accorded by the respondent
reasonable time to accept or reject its offer does not persuade. It must be
underscored that there was no time frame fixed by the respondent for the
petitioner to accept or reject its offer. When the offeror has not fixed a period
for the offeree to accept the offer, and the offer is made to a person present,
the acceptance must be made immediately. In this case, the respondent
[35]
made its offer to the petitioner when Da Costa handed over on March 16,
1990 to the petitioner its March 14, 1990 Letter-offer but that the petitioner did
not accept the offer. The respondent, thus, had the option to withdraw or
revoke the offer, which the respondent did on April 4, 1990.
HEIRS OF FAUSTO C. IGNACIO vs HEIRS OF FAUSTO C. IGNACIO

-property foreclosed, redemption by Ignacio

The core issue for resolution is whether a contract for the repurchase of the foreclosed properties
was perfected between petitioner and respondent bank.

The foregoing clearly shows that petitioner's acceptance of the respondent bank's terms and
conditions for the repurchase of the foreclosed properties was not absolute. Petitioner set a different
repurchase price and also modified the terms of payment, which even contained a unilateral
condition for payment of the balance (₱600,000), that is, depending on petitioner's "financial
position." The CA thus considered the qualified acceptance by petitioner as a counter-proposal
which must be accepted by respondent bank. However, there was no evidence of any document or
writing showing the conformity of respondent bank's officers to this counter-proposal.

In the absence of conformity or acceptance by properly authorized bank officers of petitioner's

counter-proposal, no perfected repurchase contract was born out of the talks or negotiations
between petitioner and Mr. Lazaro and Mr. Fajardo. Petitioner therefore had no legal right to compel
respondent bank to accept the ₱600,000 being tendered by him as payment for the supposed
balance of repurchase price. In the absence of conformity or acceptance by properly authorized
bank officers of petitioner's counter-proposal, no perfected repurchase contract was born out of the
talks or negotiations between petitioner and Mr. Lazaro and Mr. Fajardo. Petitioner therefore had no
legal right to compel respondent bank to accept the ₱600,000 being tendered by him as payment for
the supposed balance of repurchase price.

SM INVESTMENTS CORPORATION, Petitioner, v. ESTELA MARFORI POSADAS, MARIA ELENA

POSADAS AND AIDA MACARAIG POSADAS. Respondents.

Joint venture Agreement bet SM and Posadas perfected? Yes

In this case, the first and second stage of the contract had been fulfilled. Negotiations took place when the
parties made their exchange of correspondences until the letter of 24 August 1995. The perfection of the
contract came thereafter, when SMIC, through the letter of 24 August 1995, accepted the counter-offer of
respondents in their letter of 18 August 1995.

The same statement of respondents in said letter of 18 August 1995 already deals with the consummation
stage of the contract, wherein the parties fulfill or perform the terms agreed upon in the contract. Verily, the
details of the development of the Subject Property, particularly the plans and specifications of the same
shall come only after the parties have already agreed to enter into a joint venture agreement to develop the
same. In other words, the said plans and specifications are but the result of the perfected contract; these
were done in execution of the perfected contract.

The fact that the above-mentioned drawings came three and a half (3 1/2) months after the joint venture
agreement was perfected is not a valid cause for respondents to unilaterally back out from the same. We
note that nowhere in the records does it appear that SMIC was given a specific period within which to submit
drawings and/or plans.
MIGUELA R. VILLANUEVA, RICHARD R. VILLANUEVA, and MERCEDITA VILLANUEVA-
TIRADOS, petitioners,
vs.
COURT OF APPEALS, CENTRAL BANK OF THE PHILIPPINES, ILDEFONSO C. ONG, and
PHILIPPINE VETERANS BANK, respondents.

Under Article 1323 of the Civil Code, an offer becomes ineffective upon the death, civil
interdiction, insanity, or insolvency of either party before acceptance is conveyed.

In a nutshell, the insolvency of a bank and the consequent appointment of a receiver restrict the
bank's capacity to act, especially in relation to its property, Applying Article 1323 of the Civil Code,
Ong's offer to purchase the subject lots became ineffective because the PVB became insolvent
before the bank's acceptance of the offer came to his knowledge. Hence, the purported contract of
sale between them did not reach the stage of perfection. Corollarily, he cannot invoke the resolution
of the bank approving his bid as basis for his alleged right to buy the disputed properties.

RIZAL COMMERCIAL BANKING CORPORATION, PETITIONER,

vs.
FEDERICO A. SERRA,

Contract of lease with option to buy

In a unilateral promise to sell, where the debtor fails to withdraw the promise before the acceptance
by the creditor, the transaction becomes a bilateral contract to sell and to buy, because upon
acceptance by the creditor of the offer to sell by the debtor, there is already a meeting of the minds
of the parties as to the thing which is determinate and the price which is certain. 14 In which case, the
parties may then reciprocally demand performance.

In the present case, the consideration is even more onerous on the part of the lessee since it entails
transferring of the building and/or improvements on the property to petitioner, should respondent
bank fail to exercise its option within the period stipulated. 18

BENJAMIN CORONEL AND EMILIA MEKING VDA. DE

CORONEL, petitioners, vs.FLORENTINO CONSTANTINO, AUREA
BUENSUCESO, AND THE HONORABLE COURT OF
APPEALS, respondents.

Ratification means that one under no disability voluntarily adopts and gives sanction
to some unauthorized act or defective proceeding, which without his sanction would
not be binding on him. It is this voluntary choice, knowingly made, which amounts to
a ratification of what was theretofore unauthorized, and becomes the authorized act
of the party so making the ratification.
No evidence was presented to show that the three brothers were aware of the sale made by
their mother. Unaware of such sale, Catalino, Ceferino and Benjamin could not be considered
as having voluntarily remained silent and knowingly chose not to file an action for the annulment
of the sale. Their alleged silence and inaction may not be interpreted as an act of ratification on
their part.

ANDREA MAYOR and VERGEL ROMULO, petitioners, vs. LOURDES

MASANGKAY Y BELEN and LEONARDO BELEN, respondents.
The issue for resolution is whether or not fraud attended the execution of the Kasulatan ng
Bilihan and Kasulatan ng Sanglaan.

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

As defined, fraud refers to all kinds of deception, whether through

insidious machination, manipulation, concealment or misrepresentation to
lead another party into error. The deceit employed must be serious. It must
[4]

be sufficient to impress or lead an ordinarily prudent person into error, taking

into account the circumstances of each case. [5

This brings to the fore Lourdes M. Belens limited educational attainment. While indeed
petitioners point out that the deeds denominated as Kasulatan ng Bilihang
Tuluyan and Kasulatan ng Sanglaan were executed in Tagalog, a close scrutiny thereof shows
that they are practically literal translations of their English counterparts. Thus, the mere fact that
the documents were executed in the vernacular neither clarified nor simplified matters for
Lourdes who admitted on cross-examination that she merely finished Grade 3, could write a
little, and understand a little of the Tagalog language

ART. 1332. When one of the parties is unable to read, or if the contract is in a
language not understood by him, and mistake or fraud is alleged, the person
enforcing the contract must show that the terms thereof have been fully explained
to the former.
The burden rests upon the party who seeks to enforce the contract to show that the other party
fully understood the contents of the document. If he fails to discharge this burden, the
presumption of mistake, if not, fraud, stands unrebutted and controlling.

PRUDENTIAL GUARANTEE AND ASSURANCE INC., - versus -ANSCOR LAND,

INC.,
That the complementary contracts construed together doctrine applies in this case finds support in the
principle that the surety contract is merely an accessory contract and must be interpreted with its
principal contract

Art. 1374. The various stipulations of a contract shall be interpreted together, attributing to the doubtful
ones that sense which may result from all of them taken jointly.

In the case at bar, the performance bond was silent with regard to arbitration. On
the other hand, the construction contract was clear as to arbitration in the event
of disputes. Applying the said doctrine, we rule that the silence of the accessory
contract in this case could only be construed as acquiescence to the main
contract.
GUZMAN, BOCALING & CO., petitioner,
vs.
RAOUL S. V. BONNEVIE,

Even if the letter had indeed been sent to and received by the private respondent and they did not
exercise their right of first priority, Reynoso would still be guilty of violating Paragraph 20 of the
Contract of Lease which specifically stated that the private respondents could exercise the right of
first priority, "all things and conditions being equal." The Court reads this mean that there should be
identity of the terms and conditions to be offered to the Bonnevies and all other prospective buyers,
with the Bonnevies to enjoy the right of first priority.

The selling price qouted to the Bonnevies was P600,000.00, to be fully paid in cash less only the
mortgage lien of P100,000.00. 2 On the other hand, the selling price offered to and accepted by the
petitioner was only P400,000.00 and only P137,500.00 was paid in cash while the balance of
P272,500.00 was to be paid "when the property (was) cleared of tenants or occupants.

The respondent court correctly held that the Contract of Sale was not voidable rescissible. Under
Article 1380 to 1381 (3) of the Civil Code, a contract otherwise valid may nonetheless be
subsequently rescinded by reason of injury to third persons, like creditors. The status of creditors
could be validly accorded the Bonnevies for they had substantial interests that were prejudiced by
the sale of the subject property to the petitioner without recognizing their right of first priority under
the Contract of Lease.

EQUATORIAL REALTY DEVELOPMENT, INC. & CARMELO & BAUERMANN, INC., petitioners,
vs.
MAYFAIR THEATER, INC., respondent.

The rule so early established in this jurisdiction is that the deed of option or the option clause in a
contract, in order to be valid and enforceable, must, among other things, indicate the definite price at
which the person granting the option, is willing to sell.

The consideration for the lease includes the consideration for the right of first refusal. Thus, Mayfair
is in effect stating that it consents to lease the premises and to pay the price agreed upon provided
the lessor also consents that, should it sell the leased property, then, Mayfair shall be given the right
to match the offered purchase price and to buy the property at that price.
While it initially recognized Mayfair's right of first refusal, Carmelo violated such right when without
affording its negotiations with Mayfair the full process to ripen to at least an interface of a definite
offer and a possible corresponding acceptance within the "30-day exclusive option" time granted
Mayfair, Carmelo abandoned negotiations, kept a low profile for some time, and then sold, without
prior notice to Mayfair, the entire Claro M Recto property to Equatorial.

Since Equatorial is a buyer in bad faith, this finding renders the sale to it of the property in question
rescissible.

TANAY RECREATION CENTER AND DEVELOPMENT

CORP., petitioner, vs.CATALINA MATIENZO FAUSTO and
ANUNCIACION FAUSTO PACUNAYEN, respondents

When a lease contract contains a right of first refusal, the lessor is under a legal duty to the
lessee not to sell to anybody at any price until after he has made an offer to sell to the latter at a
certain price and the lessee has failed to accept it. Petitioners right of first refusal is an integral
and indivisible part of the contract of lease and is inseparable from the whole contract.

AIR FRANCE, petitioner,

vs.
HONORABLE COURT OF APPEALS, IOLANI DIONISIO, MULTINATIONAL TRAVEL
CORPORATION OF THE PHIL., FIORELLO and VICKY PANOPIO, respondents.

Petitioner's contrary claim that the property belongs to private respondent spouses, if true, requires a
rescissory action which cannot be done in the same case, but through the filing of a separate action.

Rescission is a relief which the law grants on the premise that the contract is valid for the protection
of one of the contracting parties and third persons from all injury and damage the contract may
cause, or to protect some incompatible and preferential right created by the contract

An action for rescission may not be raised or set up in a summary proceeding through a motion, but
in an independent civil action and only after a full-blown trial.

SAMUEL U. LEE and PAULINE LEE and ASIATRUST DEVELOPMENT

BANK, INC.,,- versus - BANGKOK BANK PUBLIC COMPANY, LIMITED,

In this case, prior to the annotation of the REM on February 23, 1998, SBC was
able to successfully acquire a writ of preliminary attachment in its favor
against the spouses Lee on January 30, 1998 in a case for a sum of money for
nonpayment of its obligation.

The presumption of fraud established under Art. 1387 does not apply to
registered lands IF the judgment or attachment made is not also registered.
Under Art. 1387 of the Code, fraud is presumed only in alienations by onerous
title of a person against whom a judgment or attachment has been issued. The
term, alienation, connotes the transfer of the property and possession of lands,
tenements, or other things, from one person to another.[51] This term is
particularly applied to absolute conveyances of real property and must involve a
complete transfer from one person to another.[52] A mortgage does not
contemplate a transfer or an absolute conveyance of a real property.

Sps. Tongson vs. Emergency pawnshop, Napala

We find no causal fraud in this case to justify the annulment of the contract of
sale between the parties. It is clear from the records that the Spouses Tongson
agreed to sell their 364-square meter Davao property to Napala who offered to
pay P3,000,000 as purchase price therefor. Contrary to the Spouses Tongsons
belief that the fraud employed by Napala was already operational at the time of
the perfection of the contract of sale, the misrepresentation by Napala that the
postdated PNB check would not bounce on its maturity hardly equates to dolo
causante. Napalas assurance that the check he issued was fully funded was not
the principal inducement for the Spouses Tongson to sign the Deed of Absolute
Sale. Even before Napala issued the check, the parties had already consented and
agreed to the sale transaction. The Spouses Tongson were never tricked into
selling their property to Napala. On the contrary, they willingly accepted Napalas
offer to purchase the property at P3,000,000. In short, there was a meeting of the
minds as to the object of the sale as well as the consideration therefor.

Clearly, respondents committed a substantial breach of their reciprocal

obligation, entitling the Spouses Tongson to the rescission of the sales contract.
ECE REALTY AND DEVELOPMENT INC., Petitioner, v. RACHEL G. MANDAP

Jurisprudence has shown that in order to constitute fraud that provides basis to annul contracts, it must
fulfill two conditions.

First, the fraud must be dolo causante or it must be fraud in obtaining the consent of the party.16 This is
referred to as causal fraud. The deceit must be serious. The fraud is serious when it is sufficient to impress,
or to lead an ordinarily prudent person into error; that which cannot deceive a prudent person cannot be a
ground for nullity.17 The circumstances of each case should be considered, taking into account the personal
conditions of the victim.18 cralawred

Second, the fraud must be proven by clear and convincing evidence and not merely by a preponderance
thereof.

In the present case, this Court finds that petitioner is guilty of false representation of a fact. This is
evidenced by its printed advertisements indicating that its subject condominium project is located in Makati
City when, in fact, it is in Pasay City.

the misrepresentation made by petitioner in its advertisements does not constitute causal fraud which would
have been a valid basis in annulling the Contract to Sell between petitioner and respondent.

Indeed, evidence shows that respondent proceeded to sign the Contract to Sell despite information
contained therein that the condominium is located in Pasay City. This only means that she still agreed to buy
the subject property regardless of the fact that it is located in a place different from what she was originally
informed.

SPOUSES VICTOR and EUNA BINUA, Petitioners,

vs.
LUCIA P. ONG

The petitioners claim that they were compelled by duress or intimidation when they executed the
mortgage contracts. According to them, they "were still suffering from the effect of the conviction of
1âwphi1

[petitioner] Edna, and could not have been freely entered into said contracts."23 The petitioners also
allege that the respondent subsequently "rammed the two (2) mortgage contracts involving two (2)
prime properties on [petitioner Victor’s] throat, so to speak[,] just so to make him sign the said
documents,"24 and that the respondent took advantage of the misfortune of the petitioners and was
able to secure in her favor the real estate mortgages.25

Article 1390(2) of the Civil Code provides that contracts where the consent is vitiated by mistake,
violence, intimidation, undue influence or fraud are voidable or annullable. Article 1335 of the Civil
Code, meanwhile, states that "[t]here is intimidation when one of the contracting parties is compelled
by a reasonable and well-grounded fear of an imminent and grave evil upon his person or property,
or upon the person or property of his spouse, descendants or ascendants, to give his consent." The
same article, however, further states that "[a] threat to enforce one’s claim through competent
authority, if the claim is just or legal, does not vitiate consent."

In De Leon v. Court of Appeals,26 the Court held that in order that intimidation may vitiate consent
and render the contract invalid, the following requisites must concur:

(1) that the intimidation must be the determining cause of the contract, or must have caused the
consent to be given;

(2) that the threatened act be unjust or unlawful;

(3) that the threat be real and serious, there being an evident disproportion between the evil and the
resistance which all men can offer, leading to the choice of the contract as the lesser evil; and

(4) that it produces a reasonable and well-grounded fear from the fact that the person from whom it
comes has the necessary means or ability to inflict the threatened injury.27
Based on the petitioners’ own allegations, what the respondent did was merely inform them of
petitioner Edna’s conviction in the criminal cases for estafa. It might have evoked a sense of fear or
dread on the petitioners’ part, but certainly there is nothing unjust, unlawful or evil in the
respondent's act.

BARCELIZA P. CAPISTRANO, Petitioner,

vs.
DARRYL LIMCUANDO and FE S. SUMIRAN,

We simply cannot uphold petitioner’s contention that the deed of sale she executed in favor of
respondents should be declared null and void on the basis of the previous deed of sale with right of
repurchase petitioner executed in favor the spouses Zuasola and Subida. Ostensibly, when
petitioner sold the subject property to herein respondents, she no longer had any right to do so for
having previously sold the same property to other vendees. However, it is elementary that he who
comes to court must do so with clean hands.12 Being the vendor in both sales, petitioner knew
perfectly well that when she offered the subject property for sale to respondents she had already
previously sold it to the spouses Zuasola and Subida. It is undeniable then that petitioner
fraudulently obtained the consent of respondents in the execution of the assailed deed of sale. She
even admits her conviction of the crime of estafa for the deception she perpetrated on respondents
by virtue of the double sale.

Certainly, petitioner’s action for annulment of the subject deed should be dismissed based on Article
1397 of the Civil Code which provides that the person who employed fraud cannot base his action
for the annulment of contracts upon such flaw of the contract, thus:

Art. 1397. The action for the annulment of contracts may be instituted by all who are thereby obliged
principally or subsidiarily. However, persons who are capable cannot allege the incapacity of those
with whom they contracted; nor can those who exerted intimidation, violence, or undue influence, or
employed fraud, or caused mistake base their action upon these flaws of the contract.

Petitioner is, therefore, precluded from seeking the annulment of the said contract based on the
fraud which she herself has caused.

ASIA PRODUCTION CO., INC., WANG TA PENG and WINSTON WANG, petitioners,
vs.
HON. ERNANI CRUZ PAñO, as Judge of the Court of First Instance of Rizal (Quezon City,
Branch XVIII), LOLITA LEE LE HUA and ALBERTO DY,

Statute of Frauds

The purpose of the statute is to prevent fraud and perjury in the enforcement of obligations
depending for their evidence on the unassisted memory of witnesses by requiring certain
enumerated contracts and transactions to be evidenced by a writing signed by the party to be
charged. It was not designed to further or perpetuate fraud. Accordingly, its application is limited. It
makes only ineffective actions for specific performance of the contracts covered by it; it does not
declare them absolutely void and of no effect.
There can be no dispute that the instant case is not for specific performance of the agreement to sell
the building and to assign the leasehold right. Petitioners merely seek to recover their partial
payment for the agreed purchase price of the building, which was to be paid on installments, with the
private respondents promising to execute the corresponding deed of conveyance, together with the
assignment of the leasehold rights, within two (2) months from the payment of the agreed
downpayment of P20,000.00. By their motion to dismiss, private respondents theoretically or
hypothetically admitted the truth of the allegations of fact in the complaint.

It follows then that the statute applies only to executory contracts and in actions for their specific
performance. It does not apply to actions which are neither for violation of a contract nor for the
performance thereof.

VALENTINA S. CLEMENTE, Petitioner, v. THE COURT OF APPEALS, ANNIE SHOTWELL JALANDOON,

ET AL., Respondents.

The Deeds of Absolute Sale between

petitioner and the late Adela Shotwell
are null and void for lack of consent
and consideration.

Here, there was no valid contract of sale between petitioner and Adela because their consent was absent.
The contract of sale was a mere simulation.

Simulation takes place when the parties do not really want the contract they have executed to produce the
legal effects expressed by its wordings. Article 1345 of the Civil Code provides that the simulation of a
contract may either be absolute or relative. The former takes place when the parties do not intend to be
bound at all; the latter, when the parties conceal their true agreement.

In short, in absolute simulation there appears to be a valid contract but there is actually none because the
element of consent is lacking.49 This is so because the parties do not actually intend to be bound by the
terms of the contract.

In ruling that the Deeds of Absolute Sale were absolutely simulated, the lower courts considered the
totality of the prior, contemporaneous and subsequent acts of the parties. The following circumstances led
the RTC and the CA to conclude that the Deeds of Absolute Sale are simulated, and that the transfers were
never intended to affect the juridical relation of the parties:
chanRob lesvi rtual Lawli bra ry

a)� There was no indication that Adela intended to alienate her properties in favor of petitioner. In fact, the
letter of Adela to Dennis dated April 18, 198951 reveals that she has reserved the ownership of the
Properties in favor of Dennis.

b) Adela continued exercising acts of dominion and control over the properties, even after the execution of
the Deeds of Absolute Sale, and though she lived abroad for a time.

c) The SPA executed on the same day as the Deeds of Absolute Sale appointing petitioner as administratrix
of Adela's properties, including the Properties, is repugnant to petitioner's claim that the ownership of the
same had been transferred to her.

AVELINA ABARIENTOS REBUSQUILLO [substituted by her heirs, except Emelinda R.

Gualvez] and SALVADOR A. OROSCO, Petitioners,
vs.
SPS. DOMINGO and EMELINDA REBUSQUILLO GUALVEZ and the CITY ASSESSOR OF
LEGAZPI CITY,

In the present case, the true intention of the parties in the execution of the Deed of Absolute Sale is
immediately apparent from respondents’ very own Answer to petitioners’ Complaint. As respondents
themselves acknowledge, the purpose of the Deed of Absolute Sale was simply to "facilitate the
titling of the [subject] property," not to transfer the ownership of the lot to them. Furthermore,
respondents concede that petitioner Salvador remains in possession of the property and that there is
no indication that respondents ever took possession of the subject property after its supposed
purchase. Such failure to take exclusive possession of the subject property or, in the alternative, to
collect rentals from its possessor, is contrary to the principle of ownership and is a clear badge of
simulation that renders the whole transaction void.12

SPOUSES JOSELINA ALCANTARA

AND ANTONIO ALCANTARA, and
SPOUSES JOSEFINO RUBI AND
ANNIE DISTOR- RUBI,
- versus -
BRIGIDA L. NIDO, as attorney-in-fact of REVELEN N. SRIVASTAVA,

Article 1874 of the Civil Code explicitly requires a written authority before an
agent can sell an immovable property. Based on a review of the records, there is
absolutely no proof of respondents written authority to sell the lot to
petitioners. In fact, during the pre-trial conference, petitioners admitted that at
the time of the negotiation for the sale of the lot, petitioners were of the belief
that respondent was the owner of lot.[19] Petitioners only knew that Revelen was
the owner of the lot during the hearing of this case. Consequently, the sale of
the lot by respondent who did not have a written authority from Revelen is void.
A void contract produces no effect either against or in favor of anyone and
cannot be ratified.[
TEJA MARKETING AND/OR ANGEL JAUCIAN, petitioner,
vs.
HONORABLE INTERMEDIATE APPELLATE

Unquestionably, the parties herein operated under an arrangement, commonly known as the "kabit
system" whereby a person who has been granted a certificate of public convenience allows another
person who owns motor vehicles to operate under such franchise for a fee. A certificate of public
convenience is a special privilege conferred by the government. Abuse of this privilege by the
grantees thereof cannot be countenanced. The "kabit system" has been Identified as one of the root
causes of the prevalence of graft and corruption in the government transportation offices.

Although not outrightly penalized as a criminal offense, the kabit system is invariably recognized as
being contrary to public policy and, therefore, void and in existent under Article 1409 of the Civil
Code. It is a fundamental principle that the court will not aid either party to enforce an illegal contract,
but will leave both where it finds then. Upon this premise it would be error to accord the parties relief
from their predicament. Article 1412 of the Civil Code denies them such aid. It provides:

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 that
he has given by virtue of the contract, or demand, the performance of the other's
undertaking.

The defect of in existence of a contract is permanent and cannot be cured by ratification or by

prescription. The mere lapse of time cannot give efficacy to contracts that are null and void.

DEVELOPMENT BANK OF THE PHILIPPINES (DBP), petitioner,

vs.
THE HONORABLE MIDPAINTAO L. ADIL, Judge of the Second Branch of the Court of First
Instance of Iloilo and SPOUSES PATRICIO CONFESOR and JOVITA
VILLAFUERTE, respondents.

The right to prescription may be waived or renounced. Article 1112 of Civil Code provides:

Art. 1112. Persons with capacity to alienate property may renounce prescription
already obtained, but not the right to prescribe in the future.

Prescription is deemed to have been tacitly renounced when the renunciation results
from acts which imply the abandonment of the right acquired.

There is no doubt that prescription has set in as to the first promissory note of February 10, 1940.
However, when respondent Confesor executed the second promissory note on April 11, 1961
whereby he promised to pay the amount covered by the previous promissory note on or before June
15, 1961, and upon failure to do so, agreed to the foreclosure of the mortgage, said respondent
thereby effectively and expressly renounced and waived his right to the prescription of the action
covering the first promissory note.

when a debt is already barred by prescription, it cannot be enforced by the creditor. But a new
contract recognizing and assuming the prescribed debt would be valid and enforceable

Where, therefore, a party acknowledges the correctness of a debt and promises to pay it after the
same has prescribed and with full knowledge of the prescription he thereby waives the benefit of
prescription

A new express promise to pay a debt barred ... will take the case from the operation of the statute of
limitations as this proceeds upon the ground that as a statutory limitation merely bars the remedy
and does not discharge the debt,

FELIX BUCTON AND NICANORA GABAR BUCTON, petitioners,

vs.
ZOSIMO GABAR, JOSEFINA LLAMOSO GABAR AND THE HONORABLE COURT OF
APPEALS, respondents.
There is no question that petitioner Nicanora Gabar Bucton paid P1,500.00 to respondent Josefina
Gabar as purchase price of one-half of the lot now covered by TCT No. II, for respondent Court of
Appeals found as a fact "that plaintiffs really paid for a portion of the lot in question pursuant to their
agreement with the defendants that they would own one-half (1/2) of the land." That sale, although
not consigned in a public instrument or formal writing, is nevertheless valid and binding between
petitioners and private respondents, for the time-honored rule is that even a verbal contract of sale
or real estate produces legal effects between the parties.1 Although at the time said petitioner paid
P1,000.00 as part payment of the purchase price on January 19, 1946, private respondents were not
yet the owners of the lot, they became such owners on January 24, 1947, when a deed of sale was
executed in their favor by the Villarin spouses. In the premises, Article 1434 of the Civil Code, which
provides that "[w]hen a person who is not the owner of a thing sells or alienates and delivers it, and
later the seller or grantor acquires title thereto, such title passes by operation of law to the buyer or
grantee," is applicable.2 Thus, the payment by petitioner by Nicanora Gabar Bucton of P1,000.00 on
January 19, 1946, her second payment of P400.00 on May 2, 1948, and the compensation, up to the
amount of P100.00 (out of the P1,000.00-loan obtained by private respondents from petitioners on
July 30, 1951), resulted in the full payment of the purchase price and the consequential acquisition
by petitioners of ownership over one-half of the lot. Petitioners therefore became owners of the one-
half portion of the lot in question by virtue of a sale which, though not evidenced by a formal deed,
was nevertheless proved by both documentary and parole evidence.