Adamson University

College of Law

Obligations and Contracts

Mistake of Fact
Asiain vs Jalandoni,45Phil296
FACTS
The parties agreed upon a sale the land in question, the seller attested that the land contained more or
less 25,000 hectares with crop estimated at 2000 picul. The price was 55,000, Jalandoni paid 30,000, the
unpaid balance to be paid within a year with interest. After the sale, the buyer Jalandoni still unsure on the
accuracy of the land had a surveyor measure the land and found that the land contained only a little more
than 18 hectares and about 800 piculs. Appellant Jalandoni sued for the remaining balance. CFI declared
the contract rescinded and ordered the parties to return what they have received to each other. Appellant
asiain appealed.

ISSUE
Whether or not there was mistake of fact in the contract which would entitle rescission

RULING
Yes. The Supreme Court held that there was mistake of fact as disclosed not alone by the terms of the
contract but by the attendant circumstances, which it is proper to consider in order to throw light upon the
intention of the parties, is, as it is sometimes expressed, the efficient cause of the concoction. The
mistake with reference to the subject-matter of the contract is such that, at the option of the purchaser, it
is rescindable. Without such mistake the agreement would not have been made and since this is
true, the agreement is inoperative and void. It is not exactly a case of over reaching on the plaintiff's
part, or of misinterpretation and deception, or of fraud, but it more nearly akin to a bilateral mistake for
which relief should be granted. Specific performance of the contract can therefore not allowed at the
instance of the vendor. The SC agreed with the lower court’s decision and the ultimate result is to put the
parties back in exactly their respective positions before they became involved in the negotiations and
before accomplishment of the agreement as this decision conforms to the facts, the law, and the
principles of equity.

Heirs of William Sevilla vs Sevilla, 402 SCRA 501

FACTS:

Filomena Almirol de Sevilla died intestate leaving 8 children. Filomena’s sister Felisa who co-owned the
lands died on 1988, but previously on 1985 Felisa donated her ½ share of lot 653 to her nephew
Leopoldo Sevilla and his wife. On August 8, 1986, Felisa executed another document denominated as
"Donation Inter Vivos" ceding to Leopoldo Sevilla her 1/2 undivided share in Lot No. 653, which was
accepted by Leopoldo in the same document.

The petitioners, heirs of William Sevilla now assails the deed of donation among others and they allege
that the Deed of Donation is tainted with fraud because Felisa Almirol, who was then 81 years of age, was
seriously ill and of unsound mind at the time of the execution. The lower court deemed the donation to be
valid. Petitioners appealed.

ISSUE:

Whether or not there was lack of valid consent to the assailed donation by reason of fraud or undue
influence

RULING:
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Obligations and Contracts
Course Outline

No. The Supreme Court held that there is fraud when, through the 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. There is undue influence when a person takes improper advantage of his power over the
will of another, depriving the latter of a reasonable freedom of choice. Ei incumbit probatio qui dicit, non
qui negat. He who asserts, not he who denies, must prove. The SC have consistently applied the ancient
rule that if the plaintiff, upon whom rests the burden of proving his cause of action, fails to show in a
satisfactory manner facts on which he bases his claim, the defendant is under no obligation to prove his
exception or defense.

In this case, the self-serving testimony of the petitioners are vague on what acts of Leopoldo Sevilla
constituted fraud and undue influence and on how these acts vitiated the consent of Felisa Almirol. Fraud
and undue influence that vitiated a party's consent must be established by full, clear and convincing
evidence, otherwise, the latter's presumed consent to the contract prevails. Neither does the fact that the
donation preceded the partition constitute fraud. It is not necessary that partition should first be had
because what was donated to Leopoldo was the 1/2 undivided share of Felisa in Lot No. 653. Moreover,
petitioners failed to show proof why Felisa should be held incapable of exercising sufficient judgment in
ceding her share to respondent Leopoldo. As testified by the notary public who notarized the Deed of
Donation, Felisa confirmed to him her intention to donate her share in Lot No. 653 to Leopoldo. He
stressed that though the donor was old, she was of sound mind and could talk sensibly. Significantly,
there is nothing in the record that discloses even an attempt by petitioners to rebut said declaration of the
notary public.

Clearly, therefore, the courts below did not err in sustaining the validity of the deed of donation.

Andres vs Manufacturers Hanover and Trust, 177 SCRA 618

FACTS:

Andres, using the business name “Irene’s Wearing Apparel” was engaged in the manufacture of ladies
garments, children’s wear, men’s apparel and linens for local and foreign buyers. Among its foreign
buyers was Facts of the United States. Sometime in August 1980, Facts instructed the First National
State Bank (FNSB) of New Jersey to transfer $10,000 to Irene’s Wearing Apparel via Philippine National
Bank (PNB) Sta. Cruz, Manila branch. FNSB instructed Manufacturers Hanover and Trust Corporation
(Mantrust) to effect the transfer by charging the amount to the account of FNSB with private respondent.
After Mantrust effected the transfer, the payment was not effected immediately because the payee
designated in the telex was only “Wearing Apparel.” Private respondent sent PNB another telex stating
that the payment was to be made to “Irene’s Wearing Apparel.” FNSB was informed about the delay and
unaware that petitioner has already received the remittance instructed PCIB to pay 10,000 again to
petitioner. FNSB discovered that private respondent had made a duplication of remittance. Private
respondent asked petitioner to return the second remittance of $10,000 but the latter refused to do so
contending that the doctrine of solution indebiti does not apply because there was negligence on the part
of the respondents and that they were not unjustly enriched since Facets still has a balance of $49,324.

ISSUE:

Whether or not the second payment was made by mistake

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RULING:

YES. The Supreme Court has held that the doctrine of solutio indebiti under Art 2154 is applicable in this
case. For this article to apply the following requisites must concur: "(1) that he who paid was not under
obligation to do so; and, (2) that payment was made by reason of an essential mistake of fact". It is
undisputed that private respondent delivered the second $10,000.00 remittance. However, petitioner
contends that the doctrine of solutio indebiti, does not apply because its requisites are absent.

Petitioner also invokes the equitable principle that when one of two innocent persons must suffer by the
wrongful act of a third person, the loss must be borne by the one whose negligence was the proximate
cause of the loss. The Supreme Court held that since Article 2154 of the Civil Code which embodies the
doctrine of solutio indebiti applies in the case at bar, the court must reject the common law principle that if
one of two persons must suffer by the wrongful act of a third persons, the loss must be borne by one
whose negligence was the proximate cause of the loss.