Obligations and Contracts
executed the mortgage contract and
Metropolitan Fabrics, Inc. (MFI) and
Enrique Ang v. Prosperity Credit
Resources, Inc., Domingo Ang and Caleb
Ang
G.R. No. 154390. March 17, 2014
FACTS:
 MFI, entered into a loan agreement
with Manphil Investment Corporation
(MIC). Manphil retained four lots
owned by MFI as mortgage security
and the other seven lots were left
with MFI. MFI sought from PCRI
without further checking on the
background of the business and a
feasibility study of MFI. PCRI released
the loan to MFI.
 Forms consisting of the real estate
mortgage contract, promissory note,
comprehensive surety agreement and
disclosure statement "had no entries
specifying the rate of interest and
schedules of amortization." The
signing was allegedly witnessed but
without any PCRI representative
present. MFI secured the loan with its
seven remaining lots.
 First amortization check bounced for
insufficient fund due to MFI's
continuing business losses. PCRI
finally furnished MFI with its copy of
the promissory note and terms
reflected is to be unconscionable. It
was then that they allegedly learned
that PCRI had filled up the 24 blank
checks with dates and amounts that
reflected a 35% interest rate per
annum, instead of just 24%, and a 2-
year repayment period, instead of 10
years.
 MFI received a Notice of Sheriff's Sale
announcing the auction of the seven
lots due to unpaid indebtedness.
ISSUE:
Whether the Mortgage Contract was void. No.
RELEVANT RULING:
 As the records show, MFI really
agreed to mortgage their properties
as security for their loan and signed
the deed of mortgage for the purpose.
Thereafter, they delivered the TCTs of
the properties subject of the mortgage
to respondents. Consequently, MFI’s
contention of absence of consent had
no firm moorings. It remained
unproved. To begin with, they neither
alleged nor established that they had
been forced or coerced to enter into
the mortgage. Also, they had freely
and voluntarily applied for the loan,
turned over the TCTs of their
properties. And, lastly, contrary to
their modified defense of absence of
consent, Vicky Ang’s (Enrique’s
daughter) testimony tended at best to
prove the vitiation of their consent
through insidious words,
machinations or misrepresentations
amounting to fraud, which showed
that the contract was voidable. 
 Where the consent was given through
fraud, the contract was voidable, not
void ab initio. This is because a
voidable or annullable contract is
existent, valid and binding, although it
can be annulled due to want of
capacity or because of the vitiated
consent of one of the parties. Article
1390, in relation to Article 1391 of the
Civil Code, provides that if the consent
of the contracting parties was
obtained through fraud, the contract
is considered voidable and may be
annulled within four years from the
time of the discovery of the fraud. 
 According to Article 1338 of the Civil
Code, there is fraud when one of the
contracting parties, through insidious
words or machinations, induces the
other to enter into the contract that,
without the inducement, he would not
have agreed to. Yet, fraud, to vitiate
consent, must be the causal (dolo
causante), not merely the incidental
(dolo incidente), inducement to the
making of the contract. In Samson v.
Court of Appeals, causal fraud is
defined as “a deception employed by
one party prior to or simultaneous to
the contract in order to secure the
consent of the other.”
Obligations and Contracts
Solomon Boysaw and Alfredo Yulo Jr. v.
Interphil Promotions, Inc., Lope Sarreal,
Sr., and Manuel Nieto Jr.
G.R. No. L-22590. March 20, 1987
FACTS:
 Boysaw and his then Manager,
Ketchum, signed with Interphil
represented by Sarreal, a contract to
engage "Flash" Elorde in a boxing
contest for the junior lightweight
championship of the world. It was
stipulated that the bout would be held
at the Rizal Memorial Stadium on
September 30, 1961 or not later than
30 days thereafter should a
postponement be mutually agreed
upon, and that Boysaw would not,
prior to the date of the boxing contest,
engage in any other such contest
without the written consent of
Interphil.
 However, before September 30, 1961,
Boysaw entered into a non-title bout
on June 19, 1961 and without consent
from Interphil, Ketchum assigned to
Araneta the managerial rights over
Boysaw. Araneta in turn transferred
the earlier acquired managerial rights
to Alfredo, again without the consent
from Interphil. Yulo thereafter
informed Interphil of Boysaw’s
readiness to comply with the boxing
contract of May 1, 1961. The Games
and Amusement Board after a series
of conferences of both parties
scheduled the Elorde-Boysaw fight on
November 4, 1961.
 Yulo refused to accept the charge in
the fight date even after Sarreal
offered to advance the fight date to
October 28, 1961. However, he
changed his mind and decided to
accept the fight date on November 4,
1961. While an Elorde-Boysaw fight
was eventually staged, the fight
contemplated in the May 1, 1961
boxing contract never materialized.
As a result, Yulo and Boysaw sued
Interphil for damages allegedly due to
the latter’s refusal to honor their
commitments under the boxing
contract of May 1, 1961.
ISSUE:
Whether the offending party in a
reciprocal obligation may compel the other
party for specific performance. No
RELEVANT RULING:
 Evidence established that the contract
was violated by Boysaw when,
without the approval or consent
of Interphil, he fought a boxing match
in Las Vegas. Another violation was
the assignment and transfer of the
managerial rights over Boysaw
without the knowledge or consent of
Interphil.
 While the contract imposed no
penalty for such violation, this does
not grant any of the parties the
unbridled liberty to breach it with
impunity. Our law on contracts
recognizes the principle that
actionable injury inheres in every
contractual breach. Article 1170 of
the Civil Code provides that “those
who in the performance of their
obligations are guilty of
fraud, negligence or delay, and those
who in any manner contravene
the terms thereof, are liable for
damages.”
 Article 1191 of the Civil Code states
that “the power to rescind obligations
is implied, in reciprocal ones, in case
one of the obligors should not comply
with what is incumbent upon
him. The contract in question gave
rise to reciprocal obligations.
 Reciprocal obligations are those
which arise from the same cause, and
in which each party is a debtor and
a creditor of the other, such that
the obligation of one is dependent
upon the obligation of the other. They
are to be performed simultaneously,
so that the performance of one
is conditioned upon the simultaneous
fulfillment of the other. The power to
rescind is given to the injured party.
 Where the plaintiff Is the party who
did not perform the undertaking
which he was bound by the terms
of the agreement to perform, he is
not entitled to insist upon the
performance of the contract by the
defendant or recover damages by
reason of his own breach.
 RELEVANT RULING:
Obligations and Contracts
Lafarge Cement Philippines, Inc. (Lafarge),
Luzon Continental Land Corporation
(LCLC) , Continental Operating
Corporation and Philip Roseberg v.
Continental Cement Ccorporation (CCC),
Gregory T. Lim and Anthony A. Mariano
G.R. No. 155173. November 23, 2004
FACTS:
 Origins of the controversy can be
traced to the Letter of Intent (LOI)
executed by Petitioner Lafarge on
behalf of its affiliates and other
qualified entities, including Petitioner
LCLC, wherein agreed to purchase the
cement business of Respondent CCC.
Both parties entered into a Sale and
Purchase Agreement (SPA). At the
time of the foregoing transactions,
petitioners were well aware that CCC
had a case pending with the Supreme
Court (GR No. 119712).
 In anticipation of the liability that the
High Tribunal might adjudge against
CCC, the parties, under the SPA,
allegedly agreed to retain from the
purchase price a portion of the
contract price for payment to Asset
Privatization Trust (APT). However,
petitioners allegedly refused to apply
the sum for payment to APT, despite
final court decision and the repeated
instructions of CCC. Fearful that
nonpayment to APT would result in
the foreclosure, not just of its
properties covered by the SPA with
Lafarge but of several other
properties as well, CCC filed a
"Complaint with Application for
Preliminary Attachment" against
petitioners. The Complaint prayed,
that petitioners be directed to pay the
"APT Retained Amount" referred to in
the SPA.
ISSUE:
Whether CCC has no personality to
move to dismiss petitioners' compulsory
counterclaims on respondents Lim and
Mariano's behalf.
 The procedural rules are founded on
practicality and convenience. They
are meant to discourage duplicity and
multiplicity of suits. This objective is
negated by insisting as the court a quo
has done that the compulsory counter
claim for damages be dismissed, only
to have it possibly re-filed in a
separate proceeding. More important,
as we have stated earlier,
Respondents Lim and Mariano are
real parties in interest to the
compulsory counterclaim; it is
imperative that they be joined
therein. Section 7 of Rule 3 provides:
"Compulsory joinder of indispensable
parties.”
 Parties in interest without whom no
final determination can be had of an
action shall be joined either as
plaintiffs or defendants."Moreover, in
joining Lim and Mariano in the
compulsory counterclaim, petitioners’
are being consistent with the solidary
nature of the liability alleged therein.
 Obligations may be classified as either
joint or solidary. "Joint" or "jointly" or
"conjoint" means mancum or
mancomunada or pro rata obligation;
on the other hand, "solidary
obligations" may be used
interchangeably with "joint and
several" or "several." Thus,
petitioners' usage of the term "joint
and solidary" is confusing and
ambiguous. The ambiguity in
petitioners' counterclaims
notwithstanding, respondents'
liability, if proven, is solidary. This
characterization finds basis in Article
1207 of the Civil Code, which provides
that obligations are generally
considered joint, except when
otherwise expressly stated or when
the law or the nature of the obligation
requires solidarity. However,
obligations arising from tort are, by
their nature, always solidary.

Obligations and Contracts
United Coconut Planters Bank v. Spouses
Walter Uy and Lily Uy
G.R. No. 204039. January 10, 2018
FACTS:
 Prime Town Property Group,
Inc. (PPGI) and E. Ganzon Inc. were
the joint developers of the Kiener
Hills. In 1997, respondents spouses
Walter and Lily Uy entered into a
Contract to Sell with PPGI for a unit in
Kiener Hills. PPGI and petitioner
United Coconut Planters
Bank (UCPB) executed the following:
Memorandum of Agreement, and Sale
of Receivables and Assignment of
Rights and Interests. By virtue of the
said agreements, PPGI transferred the
right to collect the receivables of the
buyers, which included respondents,
of units in Kiener Hills. The parties
entered into the said agreement as
PPGI's partial settlement of its
₱1,814,500,000.00 loan with UCPB.
 On 17 April 2006, the Housing and
Land Use Regulatory Board Regional
Office (HLURB Regional
Office) received respondents'
complaint for sum of money and
damages against PPGI and UCPB. They
claimed that in spite of their full
payment of the purchase price, PPGI
failed to complete the construction of
their units in Kiener Hills.
ISSUE:
Whether UCPB is only jointly liable to PPGI in
reimbursing unit owners of Kiener Hills
RELEVANT RULING:
 In Liam v. UCPB (Liam), the Court
maintained its position that the
transaction between PPGI and UCPB
was merely an assignment of credit.
Hence, what was transferred to UCPB
was only the right to collect PPGI's
receivables from the purchases of
Kiener Hills and not the obligation to
complete the said condominium
project. Thus: The terms of the MOA
and Deed of Sale/Assignment
between PPGI and UCPB
unequivocally show that the parties
intended an assignment of PPGl's
credit in favor of UCPB.
 The provisions of the foregoing
agreements between PPGI and UCPB
are clear, explicit and unambiguous as
to leave no doubt about their
objective of executing an assignment
of credit instead of subrogation. The
MOA and the Deed of
Sale/Assignment clearly state that
UCPB became an assignee of PPGI's
outstanding receivables of its
condominium buyers. The Court
perceives no proviso or any
extraneous factor that incites a
contrary interpretation. Even the
simultaneous and subsequent acts of
the parties accentuate their intention
to treat their agreements as
assignment of credit.
 The last paragraph of the letter also
confirms that UCPB's acquisition of
PPGI's receivables did not involve any
changes in the Contract to Sell
between PPGI and Liam; neither did it
vary the rights and the obligations of
the parties therein. Thus, no novation
by subrogation could have taken
place.
 The CA was therefore correct in ruling
that the agreement between PPGI and
UCPB was an assignment of credit.
UCPB acquired PPGI's right to
demand, collect and receive Liam's
outstanding balance; UCPB was not
subrogated into PPGI's place as
developer under the Contract to Sen.
 It is noteworthy that the
circumstances and issues in Liam fall
squarely with the case at
bar. First, PPGI and UCPB were
prominent parties in the cited
cases. Second, it involved the same
documents and agreement between
PPGI and UCPB whereby the right to
collect the receivables were assigned
to the latter. Third, the controversy
arose from the complaints of
disgruntled unit owners to recover
the amount they had paid from PPGI
or UCPB after Kiener Hills was not
completed.