Aniversario v.

Ternate
10 Phil. 53
FACTS: A document reads as follows: “Received from Doña
Maria Aniversario the sum of P510.00, in payment of the price of
a white horse purchased at San Juan de Bocoboc, Manila, Nov.
25, 1902. (SGD). FLORENTINO TERNATE.” Issue: Was the
money paid for a horse already purchased or for a horse still to
be purchased?

HELD: The money was paid for a horse already purchased.

The document “exhibited by the plaintiff in support of her action does not prove the allegation of the complaint but those
of the answer of the defendant, to the effect that the latter, on
the abovementioned date, received the sum of P510.00, not to
purchase a horse at that time, as contended by the plaintiff, but
in payment of the price of a white horse already bought, as alleged by the defendant. This construction by the lower court is
in conformity with the provisions of Art. 1281 of the Civil Code
(now Art. 1370 of the new Civil Code) which says that “if the
terms of a contract are clear and leave no doubt as to the intention of the contracting parties, the literal sense of its provisions
shall be observed.”

Effect of the Use of General Terms

Example:
A sold B his house including “all the furniture therein.”
Suppose part of the furniture belonged to a relative of A who had
asked him (A) for permission to leave them there temporarily,
should such furniture be included?

ANS.: No, such furniture should not be included, because

although the term “all” is general, still it should “not be understood to comprehend things that are distinct and cases that are
different from those upon which the parties intended to agree.”
(Art. 1372, Civil Code).
In one case, the Supreme Court said: “Considering that
the land of the applicant was not the subject of the contract,
and that it could not be so for the reason that it did not belong
to the vendor, it can in no wise be understood as included in the
instrument of sale which appears at folio 66, no matter what
may be the terms of the document.” (Reyes v. Limjap, 15 Phil.
420)

Stipulation Admitting of Several Meanings

Example:
A wife exchanged “her house” for a diamond ring. Now
the wife had a house which was her paraphernal property,
and another house, which, however, belonged to the conjugal
partnership. The contract entered into by the wife was against
the consent of the husband. To which house should “her house”
refer?
ANS.: It should refer to her paraphernal house, because this
would validate the contract. If the other interpretation would
be followed, the exchange would not be valid since the husband
had not given consent.

Stipulations To Be Read Together

Bank of the P.I. v. Ty Camco Sobrino
57 Phil. 801
FACTS: A mortgaged his property to B. In the contract, it
was stated that a second mortgage was prohibited, except with
the written consent of B. The contract further stated that the
penalty for such a violation would be that B can immediately
foreclose the mortgage. Without the consent of B, A mortgaged
the property a second time to C. Has B the right to consider the
second mortgage null and void?

HELD: No, B has no right to consider the second mortgage

null and void. His only right is to foreclose the first mortgage
right now. The whole mortgage contract must be read. Said the
Supreme Court:
“The mortgage contract should be read in its entirety. If
so read, it is at once seen that while the making of the second
mortgage except with the written consent of the mortgagee is
prohibited, the contract continues and states the penalty for such
a violation, namely, it gives the mortgagee (B) the right to immediately foreclose the mortgage. It does not give the mortgagee
the right to treat the second mortgage as null and void.”

Words to Be Interpreted in Keeping with the Nature and

Object of the Contract
Example:
If authority is given “to exact payment by legal
means,” does this include authority to file actions in court
for the recovery of sums of money?

ANS.: Yes. The clause in question means “the power

to exact payment of debts due the concerned by means of
the institution of suits for their recovery. If there could
be any doubt as to the meaning of this language taken by
itself, it would be removed by a consideration of the general
scope and purpose of the instrument in which it concurs.”
(German & Co. v. Donaldson, Sim & Co., 1 Phil. 63).

A donated his land to B. Before the time he made

the donation, he had several debts, but he did not reserve
enough property to pay all these debts. Instead, he made
the donation. Is the donation presumed fraudulent.

ANS.: Yes, the donation is presumed in fraud of creditors. But, of course, this presumption may be rebutted by
adequate proof.

A made a donation to B. Later A contracted several

debts. What A has left as assets are much less than his
present liabilities. May the donation to B be rescinded?

ANS.: No, because the debts here of A were incurred

after the donation had been made. As a matter of fact, the
presumption of fraud does not even arise in this case. However, under the doctrine of “anticipatory fraud,” rescission
may still prosper if it can be shown that the donation had
been deliberately made beforehand to avoid the payment
of debts still to be contracted.

After a judgment had been rendered against him, A

sold his property to B. Is the sale presumed fraudulent?

ANS.: Yes, the sale here is presumed fraudulent because it was made after a judgment had been issued against
A. (See Gaston v. Hernaez, 58 Phil. 823). Upon the other
hand, if the sale had been made BEFORE the judgment,
the presumption of fraud cannot apply. This is so even if,
unknown to the buyer, the suit had already been brought,
but STILL PENDING as long as of course no attachment
had been issued. (Adolfo Gaspar v. Leopoldo Dorado, et al.,
L-17884, Nov. 29, 1965)

A brought an action against B, his debtor. A won. After

judgment, B sold his property to C. X, another creditor of
B, wants to rescind this sale to C. Both C and B claim that
X does not have the right to interfere because, after all, it
was A, not X, who had won a judgment against B. Are C
and B justified?

ANS.: No, C and B are not justified. It is true that it

was A, not X, who won the judgment, but this is immaterial since the law says that the decision need not have been
obtained by the party seeking the rescission. (2nd sentence,
second paragraph, Art. 1387, Civil Code).
A, in fraud of creditors, sold his house to B, who is in
bad faith. B in turn alienated it in favor of C, who later sold
it to D. Both C and D were also in bad faith. The contract
is rescinded but the house is destroyed. Who, if any, are
liable for damages?

ANS.: B is liable first. If he cannot pay, then C will be

liable. If C cannot pay, D will be liable. The law says that
“if there are two or more alienations, the first acquirer shall
be liable first, and so on successively.” (2nd paragraph, Art.
1388, Civil Code).

A forced B to take A’s car in exchange for B’s ring. B asked

for annulment, and the court gave the decree of annulment ordering each to return what had been received. B refused to
give A the car. May A be compelled to give back the ring?

No.

Illustration of Specific Agreement No. 1 — “An Agreement

that by its terms is not to be performed within a year from the
making thereof.” (Art. 1403, No. 2-a, Civil Code).

A and B, neighbors, orally agreed that A would sell and B

would buy A’s transistor radio for P200 three years from the
date of the agreement. At the end of three years, A refused
to hand over the radio although B was willing to pay. Is
the agreement enforceable under the Statute of Frauds?

ANS.: No, because under the terms of the contract,

the sale was to be performed at the end of three years. It
should have been, therefore, made in writing. The Statute
recognizes the frailty of man’s memory, and apparently
only 1 year is the limit.

Illustration of Specific Agreement No. 2 — “A special promise to answer for the debt, default, or miscarriage of another.”
(Art. 1403, No. 2-b, Civil Code).

A borrowed money from B, with C as guarantor. The

contract of guaranty between B, the creditor, and C, the
guarantor, must be in writing to be enforceable. (See Gull
v. Lindsay, 4 Ech. 45).
(15) Illustration of Specific Agreement No. 3 — “An agreement
made in consideration of marriage other than a mutual promise
to marry.” (Art. 1403, No. 2-c, Civil Code).

(d) Example of the Exception:

A and B mutually promised to marry each other. The
promise need not be in writing unless the marriage be deferred till after the lapse of one year from the agreement.
(See Atienza v. Castillo, et al., 71 Phil. 589). For breach of a
mutual promise to marry, the groom may sue the bride for
actual damages and oral evidence of such mutual promise
is admissible. (Cabague v. Auxilio, supra).

Illustration of Specific Agreement No. 5 — “An agreement

for the leasing for a longer period than one year, or for the sale
of real property or of an interest therein.’’ (Art. 1403, No. 2-e,
Civil Code).

(e) A verbal agreement was made between A and B whereby

A agreed to sell and B agreed to buy A’s farm for P100,000.
The price was paid. Possession was not given nor was the
deed delivered, both being refused. B comes to you and
wants to know if he can compel A to give him the deed and
possession. What would you advise?

ANS.: I would advise B to sue for specific performance and also ask A to execute the deed of conveyance. The
Statute of Frauds refers only to purely executory contracts;
hence the Statute will not apply in this case. (See Art. 1403,
No. 2 [e]; see also Facturan v. Sabanal, 81 Phil. 512). Since
the contract is valid and enforceable, we can now apply
Art. 1357 of the new Civil Code which states that: “If the
law requires a document or other special form, as in the
acts and contracts enumerated in the following article,
the contracting parties may compel each other to observe
that form, once the contract has been perfected. This right
may be exercised simultaneously with the action upon the
contract.’’

Illustration of Specific Agreement No. 6 — “A representation as to the credit of a third person.” (Art. 1403, No. 2-f, Civil
Code).

A was borrowing money from B, and gave C as his reference.

When C was asked regarding A’s credit C said: “You can safely
lend money to A because A is the owner of a parcel of land and I have the title deeds in my possession.” This was made orally.
Incidentally, A was C’s client, C being a lawyer. This representation by C is not enforceable against him because it is not in
writing. A representation as to the credit of a third person must
be in writing to be enforceable. (See Art. 1403, No. 2-f, Civil Code;
see also Cook v. Churchman, 104 Ind. 141, 152).

[NOTE: This must not be confused with a guaranty. Here

no promise to answer for another’s debt is made; there is merely
an assurance that somebody has a certain amount of credit,
made with the intention of enabling the person in whose favor
it is made to obtain credit by virtue of such assurance or representation. (Reiss v. Memije, 15 Phil. 350).]

[NOTE further that the person making the representation does not take part in the contract proper. However, his
assurance to the person about to give credit may be considered
some form of agreement. According to Justice J.B.L. Reyes and
Justice Puno, however, “The liability . . . is not ex contractu but
on tort. This number, therefore, is improperly included among
unenforceable contracts. In fact, these representations were not
included in the original Statute of Frauds (29 Cas. II) but were
dealt with in Lord Tenterden’s Act (1828)” (9 George IV C. 14).
(Reyes & Puno, Outline of Civil Law, Vol. IV, p. 254).]

BAR QUESTION
Of what statutes is the term “Statute of Frauds” descriptive? To what kind of contract are these statutes applicable, and
in what kind of actions may they be invoked?

ANS.:
(a) The term “Statute of Frauds” is descriptive of those laws,
statutes, or provisions which require certain agreements
to be in writing before they can be enforced in a judicial
action. The law considers the memory of man unreliable,
hence the need for the writing. The statute was designed
to prevent fraud and the commission of perjury. (See Nat.
Bank v. Phil. Veg. Oil Co., 49 Phil. 857).

(b) These statutes are applicable only to executory contracts,

not to partially or totally executed or performed contracts.
(Facturan v. Sabanal, 81 Phil. 512).

(c) These statutes may be invoked in actions for damages for breach of said agreement or for specific performance thereof, and not
in any matter. (Facturan v. Sabanal, 81 Phil. 512; see Lim v. Lim, 10 Phil. 635).

For a reward, A promised to kill C for B. B gave the reward.

Before A could kill C, B repudiated the contract. Is B allowed to
do so?

Yes, because here, the purpose has not yet been accomplished and no damage has as yet been caused to a third person.

May B recover what he has paid?

It depends on the discretion

of the court. If public interest allows the party repudiating the
contract to recover the money or property given. If, however,
the repudiation took place after the crime has been done, such
repudiation is invalid and both parties will be guilty.

An insane man gave money to another to kill X. May the

insane man recover what he has paid?

Yes, since the interest

of justice so demands.

A, a minor, entered into a contract with a sui juris, without

the consent of his (A’s) parents. In said contract, A received a
car. This car was afterwards destroyed by a fortuitous event.
Later when the contract was annulled, A returned voluntarily
the value of the car although he had not profited or benefited
a single centavo from the car. Has he now the right to demand
that the price be returned?

No more.

A dies, leaving an estate of P10,000,000 and debts amounting to P15,000,000. His heir here is not expected to make up
for the difference, BUT if he does so voluntarily, then he cannot
recover said difference. After all, one does have a moral duty to
see to it that the dead relative’s or friend’s obligations in life are
all carried out. Here, the heir is not really required by law to
shoulder the deficit, but since he does so voluntarily, he cannot
now back out.

A has a diamond ring. He allowed B to assume apparent ownership over the ring so that B might sell the same.
Instead, B pledged the ring with C to obtain a loan. The
money lent was later handed over to A. Later A attacks
the validity of the pledge claiming that under the law, the
pledgee must be the owner thereof, and since B in this case
acted without authority, the pledge is invalid. Is A allowed
to do this?

ANS.: No, A is not allowed to do this. His receipt

of the sum for which the pledge was made is an implied
ratification of the pledge and A is, therefore, in estoppel.