Dizon vs.
Gaborro, 83 SCRA 688-691 – latter may have paid on account of the mortgage
ARTICLE 1359
Facts:
Petitioner, Jose P. Dizon, was the owner of the
three parcels of land, situated in Mabalacat,
Pampanga. He constituted a first
mortgage to DBP to secure a loan of
P38,000.00 and a second mortgage
to PNB amounting P93,831.91.
Petitioner defaulted in the payment of his debt,
therefore, the Development Bank of the
Philippines foreclosed the mortgage
extrajudicially. Gaborro became interested in the
lands of Dizon. But since the property was
already foreclosed by the DPB. They then
entered into a contract captioned as “Deed of
sale with assumption of mortgage” and the
second contract executed the same day, is called
“Option to Purchase Real Estate” After the
execution of said contracts, Alfredo G. Gaborro
took possession of the three parcels of land.
After the execution of the contract and its
conditions to him, Gaborro made several
payments to the DBP and PNB. He improved,
cultivated the kinds raised sugarcane and other
crops produce.
Jose P. Dizon through his lawyer, wrote a letter
to Gaborro informing him that he is formally
offering reimburse Gaborro of what he paid to
the banks. Gaborro did not agreed to the
demands of the petitioner, hence, Jose P. Dizon
instituted a complaint in the Court of First
Instance of Pampanga, alleging that the
documents Deed of Sale With Assumption of
Mortgage and the Option to Purchase Real
Estate did not express the true intention and
agreement between the parties. Petitioner,
contended that the two deeds constitute in fact a
single transaction that their real agreement was
not an absolute sale of the land but merely an
equitable mortgage or conveyance by way of
security for the reimbursement or refund by
Dizon to Gaborro of any and all sums which the
debts in favor of the DBP and the PNB.
Issue:
Whether or not the contract showed the true
agreement  between the parties.
Held:
No. The court held that the true agreement
between the plaintiff and defendant is that the
defendant would assume and pay the
indebtedness of the plaintiff to DBP and PNB,
and in consideration therefore, the defendant
was given the possession and enjoyment of the
properties in question until the plaintiff shall
have reimbursed to defendant fully the amount
of P131,831.91 plus 8% interest per annum from
October 6, 1959 until full payment, said right to
be exercised within one year from the date the
judgment becomes final, if he fails to do so
within the said period, then he is deemed to have
lost his right over the lands forever.
Pakistan International Airlines v. Ople
G.R. No. 61594, 28 September 1990
FACTS:
Pakistan International Airlines Corporation
(“PIA”), a foreign corporation licensed to do
business in the Philippines, executed in Manila
two (2) separate contracts of employment, one
with private respondent Ethelynne B. Farrales
and the other with private respondent Ma. M.C.
Mamasig.
The contracts provided that (1) the Duration of
Employment is for a period of 3 years, (2) PIA
reserves the right to terminate this agreement at
any time by giving the EMPLOYEE notice in
writing in advance one month before the
intended termination or in lieu thereof, by
paying the EMPLOYEE wages equivalent to
one month’s salary; and (3) the agreement shall
be construed and governed under and by the
laws of Pakistan, and only the Courts of
Karachi, Pakistan shall have the jurisdiction to
consider any matter arising out of or under this
agreement.
Farrales and Mamasig then commenced training
in Pakistan and after such, they began
discharging their job functions as flight
attendants with base station in Manila and flying
assignments to different parts of the Middle East
and Europe.
Roughly one (1) year and four (4) months prior
to the expiration of the contracts of employment,
PIA sent separate letters to private respondents
advising both that their services as flight
stewardesses would be terminated. PIA claimed
that both were habitual absentees, were in the
habit of bringing in from abroad sizeable
quantities of “personal effects”.
Prior Proceedings:  Regional Director of
MOLE ordered the reinstatement of private
respondents with full backwages or, in the
alternative, the payment to them of the amounts
equivalent to their salaries for the remainder of
the fixed three-year period of their employment
contracts having attained the status of regular
employees.
On appeal the Deputy Minister of MOLE,
adopted the findings of fact and conclusions of
the Regional Director and affirmed the latter’s
award save for the portion thereof giving PIA
the option, in lieu of reinstatement, “to pay each
of the complainants [private respondents] their
salaries corresponding to the unexpired portion
of the contract[s] [of employment] . . .”
Hence, this instant Petition for Certiorari by
PIA.
ISSUE:
Whether or not the provisions of the contract
superseded the general provisions of the Labor
Code
RULING:
No. The principle of freedom to contract is not
absolute. Art. 1306 provides that stipulations by
the parties may be allowed provided they are not
contrary to law, morals, good customs, public
order & policy. Thus, the principle of autonomy
of contracting parties must be counterbalanced
with the general rule that provisions of the
applicable law are deemed written into the
contract.
In this case, the law relating to labor and
employment is an area which the parties are not
at liberty to insulate themselves and their
relationship from by simply contracting with
each other.
AVON COSMETICS vs. LUNA
511 SCRA 376
FACTS: The present petition stemmed from a
complaint dated 1 December 1988, filed by
herein respondent Luna alleging, inter alia¸ that
she began working for Beautifont, Inc. in 1972,
first as a franchise dealer and then a year later,
as a Supervisor. Sometime in 1978, Avon
Cosmetics, Inc. (Avon), herein petitioner,
acquired and took over the management and
operations of Beautifont, Inc. Nonetheless,
respondent Luna continued working for said
successor company. Aside from her work as a
supervisor, respondent Luna also acted as a
make-up artist of petitioner Avon’s Theatrical
Promotion’s Group, for which she received a per
diem for each theatrical performance. 
The contract was that: 
The Company agrees: 
1) To allow the Supervisor to purchase at
wholesale the products of the Company. 
The Supervisor agrees: 
1) To purchase products from the Company
exclusively for resale and to be responsible for
obtaining all permits and licenses required to
sell the products on retail. 
The Company and the Supervisor mutually
agree: 
1) That this agreement in no way makes the
Supervisor an employee or agent of the
Company, therefore, the Supervisor has no
authority to bind the Company in any contracts
with other parties.  consideration or thing to be done, has a tendency
2) That the Supervisor is an independent to injure the public, is against the public good,
retailer/dealer insofar as the Company is or contravenes some established interests of
concerned, and shall have the sole discretion to society, or is inconsistent with sound policy and
determine where and how products purchased good morals, or tends clearly to undermine the
from the Company will be sold. However, the security of individual rights, whether of personal
Supervisor shall not sell such products to stores, liability or of private property. 
supermarkets or to any entity or person who
sells things at a fixed place of business.  From another perspective, the main objection to
3) That this agreement supersedes any exclusive dealing is its tendency to foreclose
agreement/s between the Company and the existing competitors or new entrants from
Supervisor.  competition in the covered portion of the
4) That the Supervisor shall sell or offer to sell, relevant market during the term of the
display or promote only and exclusively agreement. Only those arrangements whose
products sold by the Company.  probable effect is to foreclose competition in a
5) Either party may terminate this agreement at substantial share of the line of commerce
will, with or without cause, at any time upon affected can be considered as void for being
notice to the other. against public policy. The foreclosure effect, if
any, depends on the market share involved. The
Later, respondent Luna entered into the sales relevant market for this purpose includes the full
force of Sandre Philippines which caused her range of selling opportunities reasonably open to
termination for the alleged violation of the terms rivals, namely, all the product and geographic
of the contract. The trial court ruled in favor of sales they may readily compete for, using easily
Luna that the contract was contrary to public convertible plants and marketing organizations. 
policy thus the dismissal was not proper. The
Court of Appeals affirmed the decision, hence Applying the preceding principles to the case at
this petition.  bar, there is nothing invalid or contrary to public
policy either in the objectives sought to be
ISSUE:  attained by paragraph 5, i.e., the exclusivity
clause, in prohibiting respondent Luna, and all
Whether the Court of Appeals erred in ruling other Avon supervisors, from selling products
that the Supervisor’s Agreement was invalid for other than those manufactured by petitioner
being contrary to public policy  Avon. 

Whether there was subversion of the autonomy
of contracts by the lower courts  embodied in paragraph 5 of the Supervisor’s
HELD: Agreements in violation of orden
público must be considered as those which
conflict with law, whether properly, strictly and
wholly a public law (derecho) or whether a law
of the person, but law which in certain respects
affects the interest of society. Plainly 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. 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
Having held that the “exclusivity clause” as
Agreement is valid and not against public
policy, we now pass to a consideration of
respondent Luna’s objections to the validity of
her termination as provided for under paragraph
6 of the Supervisor’s Agreement giving
petitioner Avon the right to terminate or cancel
such contract. The paragraph 6 or the
“termination clause” therein expressly provides
that: 
The Company and the Supervisor mutually
agree: 
6) Either party may terminate this agreement at
will, with or without cause, at any time upon
 notice to the other.  his employment and within 5 years after termination
except when given written permission; if he does, he will
In the case at bar, the termination clause of the pay Gsell P10k;  Gsell was employed in cement
Supervisor’s Agreement clearly provides for two
industry);
ways of terminating and/or canceling the
contract. One mode does not exclude the other. -           Trial court favoured Ferrazzini
The contract provided that it can be terminated
and declined to consider the counterclaim, so Gsell
or cancelled for cause, it also stated that it can be
terminated without cause, both at any time and appealed.
after written notice. Thus, whether or not the
termination or cancellation of the Supervisor’s Issues:
Agreement was “for cause,” is immaterial. The
-                     Was  the discharge lawful? Yes.
only requirement is that of notice to the other
party. When petitioner Avon chose to terminate
-                     Is the stipulation preventing Ferrazzinito
the contract, for cause, respondent Luna was
duly notified thereof.  “enter into the employment of any enterprise in the
Philippine Islands, whatever, save and except after
Worth stressing is that the right to unilaterally obtaining special written permission therefor” valid? No,
terminate or cancel the Supervisor’s Agreement against publicpolicy.
with or without cause is equally available to
respondent Luna, subject to the same notice
requirement. Obviously, no advantage is taken
against each other by the contracting parties.  Ratio:

Hence, the petition was granted. -     The discharge was lawful.

-                     Court looked into whether Gsell

Ferrazzini v Gsell | 1916 |
Facts:
-          Carlos Gsell is engaged in the manufacture
of umbrellas, matches and hats;
-          Anselmo Ferrazzini was employed by Gsell as
foreman in the umbrella factory;
o    At some point, he was discharged by Gsell so he filed this
case to recover damages for an alleged wrongful
discharge;
-          Gsell, for his part admitted he discharged Ferrazzini
without “written advice of six months in advance” as
provided in the contract;
o    But, he says the discharge was lawful on account of
absence, unfaithfulness, and disobedience of orders;
o    He also sought a counterclaim for further alleged breach
by Ferrazzini after his discharge (that he cannot enter into
employment of any enterprise in the Philippines, during
had just cause to discharge Ferrazzini; Gsell has
to prove justification for his act because it was in
contravention of the six-month clause in the contract; if it
was without just cause, it was in violation of the contract
and Ferrazzini  is entitled to recover;
Court based the justifications on
the testimonies of the parties;
1.       For Ferrazzini’s absences during working
hours for the purpose of drinking:
-          Ferrazini – he said he was allowed by Gsell in the
morning ten or fifteen minutes during the hot season to
absent himself to have a drink of beer or whiskey ,and the
same in the afternoon and that the manager (whose name
is Bender) merely told him not to do it in such
anostentatious manner;
-             Gsell – he directed the manager to discontinue the
habit of during; Bender – he expressly told Ferrazini not to
go out without permission;
2.       F o r h i s u n f a i t h f u l n e s s :
-            Ferrazzini – headmitted saying to persons ats upper
in the mess hall that Gsell measured the cloth for the
umbrellas, that it is his idea that Gsell has no confidence in
his employees; but he testified that he did not remember
saying that Specht, the foreman, was not receiving
sufficient salary;
-        Specht and another co-worker, however, testified
Rivera v. Solidbank
G.R. No. 163269, 19 April 2006
FACTS:
Petitioner had been working for Solidbank
Corporation since July 1, 1977. In December
1994, Solidbank offered two retirement
programs to its employees, the ORP and SRP.
Petitioner applied for retirement under the SRP.
Solidbank approved the application and gave
petitioner the amount due to him. Rivera
received the amount and confirmed his
separation from Solidbank on February 25,
1995. Subsequently, Solidbank required Rivera
to sign an undated Release, Waiver and
Quitclaim, which was notarized on March 1,
1995. It stipulated that petitioner cannot “seek
employment with any competitor bank or
financial institution within one (1) year from
February 28, 1995.” Furthermore, the bank was
entitled to go after the petitioner for the amount
he received, in case of breach. On May 1, 1995,
the Equitable Banking Corporation. Solidbank,
then, demanded the benefits received by the
petitioner to be returned.
ISSUE:
WON the undated Release, Waiver and
Quitclaim is void for being contrary to the
Constitution, the law and public policy, because
it was unreasonable, arbitrary, oppressive,
discriminatory, cruel, unjust, inhuman, and
violative of his human rights.
RULING:
Yes. The stipulation in the contract is against
public policy, in that it is injurious to the public
or against the public good. Generally, the law
does not relieve a party from the effects of an
unwise, foolish or disastrous contract, entered
into with full awareness of what he was doing
and entered into and carried out in good faith.
Such a contract will not be discarded even if
there was a mistake of law or fact. On the other
hand, retirement plans, in light of the
constitutional mandate of affording full
protection to labor, must be liberally construed
in favor of the employee, it is the general rule
that pension or retirement plans formulated by
the employer are to be construed against it.
Retirement benefits, after all, are intended to
help the employee enjoy the remaining years of
his life, releasing him from the burden of
worrying for his financial support, and are a
form of reward for being loyal to the employer.
Respondent, as an employer, is burdened to
establish that a restrictive covenant barring an
employee from accepting a competitive
employment after retirement or resignation is
not an unreasonable or oppressive, or in undue
or unreasonable restraint of trade, thus,
unenforceable for being repugnant to public
policy.
Thus, in determining whether the contract is
reasonable or not, the trial court should consider
the following factors: (a) whether the covenant
protects a legitimate business interest of the
employer; (b) whether the covenant creates an
undue burden on the employee; (c) whether the
covenant is injurious to the public welfare; (d)
whether the time and territorial limitations
contained in the covenant are reasonable; and (e)
whether the restraint is reasonable from the
standpoint of public policy.
TIU vs. PLATINUM PLANS PHILIPPINES
Case Digest
TIU vs. PLATINUM PLANS PHILIPPINES  sustaining the validity of the non-involvement
G.R. No. 163512, February 28, 2007 
FACTS: Respondent Platinum Plans
Philippines, Inc. is a domestic corporation
engaged in the pre-need industry. From 1987 to
1989, petitioner Daisy B. Tiu was its Division
Marketing Director. On January 1, 1993,
respondent re-hired petitioner as Senior
Assistant Vice-President and Territorial
Operations Head in charge of its Hong Kong and
Asean operations. The parties executed a
contract of employment valid for five years.  Hongkong and Asean operations, she had been
On September 16, 1995, petitioner stopped
reporting for work. In November 1995, she
became the Vice-President for Sales of
Professional Pension Plans, Inc., a corporation
engaged also in the pre-need industry.  competitive marketing environment. In sum,
Consequently, respondent sued petitioner for
damages before the RTC of Pasig City, Branch
261. Respondent alleged, among others, that
petitioner’s employment with Professional
Pension Plans, Inc. violated the non-
involvement clause in her contract of
employment. In upholding the validity of the
non-involvement clause, the trial court ruled that
a contract in restraint of trade is valid provided
that there is a limitation upon either time or
place. In the case of the pre-need industry, the
trial court found the two-year restriction to be
valid and reasonable. On appeal, the Court of
Appeals affirmed the trial court’s ruling. It
reasoned that petitioner entered into the contract
on her own will and volition. Thus, she bound
herself to fulfill not only what was expressly
stipulated in the contract, but also all its
consequences that were not against good faith,
usage, and law. The appellate court also ruled
that the stipulation prohibiting non-employment
for two years was valid and enforceable
considering the nature of respondent’s business. 
ISSUE: Whether the Court of Appeals erred in
clause 
HELD: 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. More
significantly, since petitioner was the Senior
Assistant Vice-President and Territorial
Operations Head in charge of respondent’s
privy to confidential and highly sensitive
marketing strategies of respondent’s business.
To allow her to engage in a rival business soon
after she leaves would make respondent’s trade
secrets vulnerable especially in a highly
The Court finds the non-involvement clause not
contrary to public welfare and not greater than is
necessary to afford a fair and reasonable
protection to respondent. Hence the restraint is
valid and such stipulation prevails.
Acol vs Philippine Commercial Credit Card Inc
- No digest
PSALM v Pozzolanic Phil.. Inc
- No digest
Floirendo vs Metrobank – no digest
Allied Banking Corporation v. CA (Case
Digest) G.R. No. 124290
Allied Banking Corporation v. CA
G.R. No. 124290
January 16, 1998
ALLIED BANKING CORPORATION,
petitioner, vs. COURT OF APPEALS, HON.
JOSE C. DE GUZMAN, OSCAR D.
TANQUECO, LUCIA D.
TANQUECOMATIAS RUBEN D.
TANQUECO and NESTOR D. TANQUECO,
respondents
Facts:
Felimon Tanquenco and Lucia Domingo-
Tanquenco owned a lot in Quezon City that they
leased to the petitioner Allied Banking
Corporation. In its Provision No. 1, the lease
contract specifically states that “the term of the
lease shall be fourteen years commencing from
April 1, 1978, and may be renewed for a like
term at the option of the lessee.” Allied
constructed a building to be used as its office
and, as stipulated, the ownership of the building
would be transferred to the lessors upon the
contract’s expiration. On February 1988, the
lessor spouses executed a deed of donation over
the subject property of their four children, herein
respondents, who accepted the donation.
On February 13, 1991, the Tanquenco children
told Allied that they were no longer interested in
extending the lease, but Allied replied that it was
exercising its option to renew their lease under
the same terms with additional proposals. An
action for ejectment was filed against Allied,
and the trial court granted the same, declaring
Provision No. 1 of the contract void for violating
Article 1308 of the Civil Code which provides
“The contract must bind both contracting
parties; its validity or compliance cannot be left
to the will of one of them.”
Issue:
Was Provision No. 1 valid?
Ruling:
Yes. The lease contract was mutually agreed
upon and was hence valid and binding on both
parties. The fact that the option is binding only
on the lessor and can be exercised only by the
lessee does not render the provision void for
lack of mutuality because the lessor was free not
to give the option to the lessee if he so desires.
In addition, it is a settled rule that in case of
uncertainty in granting extension to a contract of
lease, the tenant is favored over the landlord.
Estate of K.H. Hemady vs Luzon Surety Co., Inc
- No digest
GILCHRIST V CUDDY February 18, 1915
G.R. No. L-9356 C. S. GILCHRIST, plaintiff-
appellee, vs. E. A. CUDDY, ET AL.,
defendants. JOSE FERNANDEZ ESPEJO
and MARIANO ZALDARRIAGA,
appellants. 
FACTS:
One Cuddy, the owner of a cinematographic
film “Zigomar”, let it under a rental contract to
the plaintiff Gilchrist, the owner of a
cinematograph theater in Iloilo, for a specified
period of time or for a number of days beginning
May 26. In violation of the terms of this
agreement, Cuddy proceeded to turn over the
film also under a rental contract, to the
defendants Espejo and Zaldarriaga The
arrangement between Cuddy and the appellants
for the exhibition of the film by the latter on the
26th of May were perfected after April 26, so
that the six weeks would include and extend
beyond May 26. Gilchrist thereupon restored to
the Court of First Instance 
DECISION OF LOWER COURTS:
1. CFI - produced an injunction restraining the
defendants from exhibiting the film in question
in their theater during the period specified in the
contract of Cuddy with Gilchrist 
ISSUE: 
Whether the injunction was properly granted;
Whether Cuddy is liable for damages to
Gilchrist  competition, or the exercise of like rights by
RULING:
Yes, although the defendants did not, at the time
their contract was made, know the identity of the
plaintiff as the person holding the prior contract
but did know of the existence of a contract in
favor of someone In the case at bar the only
motive for the interference with the Gilchrist -
Cuddy contract on the part of the appellants was
a desire to make a profit by exhibiting the film
in their theater. There was no malice beyond this
desire; but this fact does not relieve them of the
legal liability for interfering with that contract
and causing its breach. It is, therefore, clear,
under the above authorities, that they were liable
to Gilchrist for the damages caused by their acts,
unless they are relieved from such liability by
reason of the fact that they did not know at the
time the identity of the original lessee (Gilchrist)
of the film.  the land was perfected in the Court of Land
Article 1902 of that code provides that a
person who, by act or omission, causes
damages to another when there is fault or
negligence, shall be obliged to repair the
damage do done. There is nothing in this
article which requires as a condition
precedent to the liability of a tort-feasor that
he must know the identity of a person to
whom he causes damages. In fact, the chapter
wherein this article is found clearly shows
that no such knowledge is required in order
that the injured party may recover for the
damage suffered.  Meanwhile, La Corporacion de los Padres
One who buys something which he knows has
been sold to some other person can be restrained
from using that thing to the prejudice of the
person having the prior and better right. 
Chief Justice Wells:"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. If
disturbance or loss come as a result of
others, it is damnum absque injuria, unless
some superior right by contract or otherwise
is interfered with." 
"One who wrongfully interferes in a contract
between others, and, for the purpose of gain
to himself induces one of the parties to break
it, is liable to the party injured thereby; and
his continued interference may be ground for
an injunction where the injuries resulting will
be irreparable." 
DAYWALT v LA CORPORACION DE
LOS PADRES AGUSTINOS
RECOLETOS
Facts: in 1902, Teodorica Endencia executed a
contract whereby she obligated herself to
conveyto Geo W. Daywalt a 452-hectare parcel
of land for P 4000. They agreed that a deed
should beexecuted as soon as Endencia’s title to
Registrationand a Torrens title issued in her
name. When the Torrens title was issued,
Endencia found outthat the property measured
1248 hectares instead of 452 hectares, as she
initially believed.Because of this, she became
reluctant to transfer the whole tract to Daywalt,
claiming that shenever intended to sell so large
an amount and that she had been misinformed as
to its area.Daywalt filed an action for specific
performance. The SC ordered Endencia to
convey the entiretract to Daywalt.
Agustinos Recoletos (Recoletos), was a
religiouscorp., w/c owned an estate immediately
adjacent to the property sold by Endencia to
Daywalt. Italso happened that Fr. Sanz, the
representative of the Recoletos, exerted some
influence andascendancy over Endencia,
who was a woman of little force and easily
subject to the influence of other people. Fr. Sanz
knew of the existence of the contracts with
Daywalt and discouraged her from conveying the
entire tract. Daywalt filed an action for damages
against the Recoletos on the ground that it
unlawfullyinduced Endencia to refrain from the
performance of her contract for the sale of the
land inquestion and to withhold delivery of the
Torrens title. Daywalt’s claim for damages
against theRecoletos was for the huge sum of P
500000 [in the year 1919], since he claims that
because of the interference of the Recoletos, he
failed to consummate a contract with another
person for thesale of the property and its
conversion into a sugar mill.  month basis.
Issue: whether Recoletos is liable to Daywalt?  did not renew the contracts, but Tek Hua
Held: No, it is not liable. The stranger
who interferes in a contract between other
parties cannot become more extensively liable
in damages for the non-performance of the
contract than the party in whose behalf
heintermediates. Hence, in order to determine
the liability of the Recoletos, there is first a need
toconsider the liability of Endencia to Daywalt.
The damages claimed by Daywalt from
Endenciacannot be recovered from her, first,
because these are special damages w/c were not
w/in thecontemplation of the parties when the
contract was made, and secondly, these
damages are tooremote to be the subject of
recovery. Since Endencia is not liable for
damages to Daywalt,neither can the Recoletos
be held liable. As already suggested, by advising
Endencia not toperform the contract, the
Recoletos could in no event render itself more
extensively liable thanthe principal in the
contract.
So Ping Bun V. Court Of Appeals (1999)
Lessons Applicable: Interference with
Contractual Relations (Torts and Damages)
Laws Applicable: Sec. 1314 of the Civil Code
 
FACTS:
 1963: Tek Hua Trading Co, through its
managing partner, So Pek Giok, entered into
lease agreements with lessor Dee C. Chuan
& Sons Inc. (DCCSI)
 Subjects of 4 lease contracts were
premises located at Soler Street, Binondo,
Manila
 Tek Hua used the areas to store
its textiles. 
 The contracts each had a one-
year term. They provided that should the
lessee continue to occupy the premises after
the term, the lease shall be on a month-to-
 When the contracts expired, the parties
continued to occupy the premises
 1976: Tek Hua Trading Co. was
dissolved.  Later, the original members of
Tek Hua Trading Co. including Manuel C.
Tiong, formed Tek Hua Enterprising Corp.
 1986: So Pek Giok died
 So Ping Bun, occupied the warehouse
for his own textile business, Trendsetter
Marketing
 August 1, 1989: lessor DCCSI sent
letters addressed to Tek Hua Enterprises,
informing the latter of the 25% increase in
rent effective September 1, 1989.
 The rent increase was later on
reduced to 20% effective January 1, 1990,
upon other lessees' demand. 
 December 1, 1990: the lessor
implemented a 30% rent increase. 
 Enclosed in their letters were
new lease contracts for signing which So
Ping Bun did not answer. Still, the lease
contracts were not rescinded.
 So Ping Bun refused to vacate
 So Ping Bun requested formal contracts
of lease with DCCSI in favor Trendsetter
Marketing
 A suit for injunction was filed
 RTC: Granted annulling the four
Contracts of Lease without awarding
damages
 CA upheld RTC
ISSUE: W/N the injunction should be upheld
and 
HELD: AFFIRMED, with MODIFICATION
that the award of attorney's fees is reduced from
two hundred thousand (P200,000.00) to one
hundred thousand (P100,000.00) pesos
 Damage is the loss, hurt, or harm which Petitioner Jose Lagon purchased from the estate
results from injury, and damages are the of Bai Tonina Sepi, through an intestate court,
recompense or compensation awarded for two parcels of land located at Tacurong, Sultan
the damage suffered.  One becomes liable in Kudarat. A few months after the sale, private
an action for damages for a nontrespassory respondent Menandro Lapuz filed a complaint
invasion of another's interest in the private for torts and damages against petitioner before
use and enjoyment of asset if  the Regional Trial Court (RTC) of Sultan
 (a) the other has property rights Kudarat.
and privileges with respect to the use or
enjoyment interfered with,  Private respondent claimed that he entered into a
 (b) the invasion is substantial,  contract of lease with the late Bai Tonina Sepi
 (c) the defendant's conduct is a Mengelen Guiabar over three parcels of land
legal cause of the invasion, and  (the property) in Sultan Kudarat, Maguindanao
 (d) the invasion is either beginning 1964. One of the provisions agreed
intentional and unreasonable or upon was for private respondent to put up
unintentional and actionable under general commercial buildings which would, in turn, be
negligence rules leased to new tenants. The rentals to be paid by
 elements of tort interference are:  those tenants would answer for the rent private
 (1) existence of a valid respondent was obligated to pay Bai Tonina
contract;  Sepi for the lease of the land. The lease contract
 (2) knowledge on the part of the ended but since the construction of the
third person of the existence of contract; commercial buildings had yet to be completed,
and  the lease contract was allegedly renewed.
 (3) interference of the third
person is without legal justification or When Bai Tonina Sepi died, private respondent
excuse started remitting his rent to the court-appointed
 Son Ping Bun asked DCCSI to execute administrator of her estate. But when the
lease contracts in its favor, and as a result administrator advised him to stop collecting
deprived DCCSI's property right rentals from the tenants of the buildings he
 damage is NOT an essential element of constructed, he discovered that petitioner,
tort interference representing himself as the new owner of the
 lower courts did not award damages, but property, had been collecting rentals from the
this was only because the extent of damages tenants. He thus filed a complaint against the
was not quantifiable latter, accusing petitioner of inducing the heirs
 Lack of malice precludes damages. But of Bai Tonina Sepi to sell the property to him,
it does not relieve petitioner of the legal thereby violating his leasehold rights over it.
liability for entering into contracts and
causing breach of existing ones.
In his answer to the complaint, petitioner denied
 The injunction saved the respondents
that he induced the heirs of Bai Tonina to sell
from further damage or injury caused by
the property to him, contending that the heirs
petitioner's interference.
were in dire need of money to pay off the
obligations of the deceased. He also denied
interfering with private respondents leasehold
Jose Lagon v. CA and Lapuz rights as there was no lease contract covering the
property when he purchased it; that his personal
investigation and inquiry revealed no claims or
G.R. No. 119107, 18 March 2005 encumbrances on the subject lots

FACTS: ISSUE:
Whether or not the purchase by Lagon of the petitioner in purchasing the property. Therefore,
subject property, during the supposed existence the claim of tortuous interference was never
of the private respondent’s lease contract with established.
the late Bai Tonina Sepi, constituted tortuous
interference for which Lagon should be held
liable for damages.

RULING:

No, the interference of Lagon was with a legal

justification (in furtherance of a personal
financial interest) and without bad faith

The elements of Tortuous Interference with

contractual relation are: (1) Existence of a valid
contract; (2) Knowledge on the part of the third
person of the existence of the contract; (3)
Interference of the third person without legal
justification or excuse.

As regard to the first element, the existence of a

valid contract must be duly established. In the
given case the Court ruled that the notarized
copy of lease contract presented in court
appeared to be an incontestable proof that Bai
Tonin Sepi and private respondent renewed their
contract.  The second element on the other hand,
requires that there be knowledge on the part of
the interferer that the contract exists. In this
case, Lagon had no knowledge of the lease
contract as he even conducted his own personal
investigation and inquiry, and unearthed no
suspicious circumstance that would have made a
cautious man probe deeper and watch out for
any conflicting claim over the property; that an
examination of the entire property title bore no
indication of the leasehold interest of private
respondent and that even the registry of property
had no record of the same. As to the third
element, a party may be held liable only when
there was no legal justification or excuse for his
action or when his conduct was stirred by a
wrongful motive. To sustain a case for tortuous
interference, the other party must have acted
with malice or must have been driven by purely
impious reasons to injure the other. In the case,
even assuming that private respondent was able
to prove the renewal of his lease contract with
Bai Tonina Sepi, the fact was that he was unable
to prove malice or bad faith on the part of