Case Digest for Contracts

METRO RAIL TRANSIT DEVELOPMENT CORPORATION v. GAMMON PHILIPPINES, GR

No. 200401, 2018-01-17

Facts:

Construction Industry Arbitration Commission (CIAC) Decision... denied Metro Rail Transit
Development Corporation's (MRT) Motion for Reconsideration... his case involves MRT's
MRT-3 North Triangle Description Project (Project), covering 54 hectares of land, out of
which 16 hectares were allotted for a commercial center. Half of the commercial center
would be used for a podium structure (Podium), which was meant to provide the structure
for the Project's Leasable Retail Development and to serve as the maintenance depot of the
rail transit system.

Gammon won the bid. On August 27, 1997, Parsons issued a Letter of Award and Notice to
Proceed (First Notice to Proceed) to Gammon.

Please note that Mr. Salagdo's signature is missing).

Site Manager is Mr. Ferdinand Fabro

September 8, 1997, MRT wrote Gammon that it would need one (1) or two (2) weeks before
it could issue the latter the Formal Notice to Proceed:

Gammon presented to MRT the sequencing and phasing of the work... reimbursed based
on actual cost plus a negotiated fee... ammon had already started its engineering services
pursuant to the Second Notice to Proceed.

Fourth Notice to Proceed also expressly cancelled the First and Third Notices to Proceed.

MRT treated Gammon's qualified acceptance as a new offer.

contract would be awarded instead to Filsystems if Gammon would not accept the Fourth
Notice to Proceed within five (5) day

MRT informed Gammon that it was willing to reimburse Gammon for its cost in participating
in the bid amounting to about 5% of Gammon's total claim of more or less P121,000,000.00

CIAC ruled

P58,642,969.62 - TOTAL DUE THE CLAIMANT SO ORDERED.

CIAC was created under Executive Order No. 1008[92] to establish an arbitral machinery
that will settle expeditiously problems arising from, or connected with, contracts in the
construction industry.

A quasi-judicial agency is a government body, not part of the judiciary or the legislative
branch, which adjudicates disputes and creates rules which affect private parties' rights...
under the Construction Industry Arbitration Law, arbitral awards are binding and shall be
final and unappealable, except on pure questions of law

Voluntary arbitration involves the reference of a dispute to an impartial body, the members
of which are chosen by the parties themselves, which parties freely consent in advance to
abide by the arbitral award issued after proceedings where both parties had the opportunity
to be heard... there is a perfected contract between MRT and Gammon.

Gammon only accepted MRT's offer after MRT had already revoked it... contract was not
cancelled and was only temporarily and partially suspended... the award of a contract to a
bidder perfects the contract. [128] Failure to sign the physical contract does not affect the
contract's existence or the obligations arising from it.

MRT has already awarded the contract to Gammon, and Gammon's acceptance of the
award was communicated to MRT before MRT rescinded the contract.

Letter dated July 14, 1997, Gammon submitted another offer to MRT in response to the
latter's invitation to submit a final offer considering the fluctuation in foreign exchange rates
and an odd-and-even vehicle restriction plan

Second Letter, Gammon transmitted to Parsons the signed Letter of Comfort to guarantee
its obligations in the Project.

September 9, 1997, Gammon returned to Parsons the contract documents.

MRT had already accepted the offered bid of Gammon and had made known to Gammon
its acceptance when it awarded the contract and issued it the First Notice to Proceed on
August 27, 1997.

Gammon's receipt of the First Notice to Proceed constitutes the acceptance that is
necessary to perfect the contract.

Gammon's acceptance is also manifested in its undertakings to mobilize resources, to

prepare the Performance and Advance Payment Bonds, and to procure materials
necessary for the Project.

MRT claims that this Court's ruling in Gammon did not determine that a contract was
perfected as to warrant the application of the doctrine of the law of the case.

Gammon must first present proof of its claims for the cost of engineering and design
services, and of de-watering and clean-up works nor amended the Answer with Compulsory
Counterclaim to either correct this allegation or to qualify that Gammon must first present
official receipts.

Issues:
"willing to pay GAMMON the total amount of P5,493,639.27 representing the sum of
P4,821,261.91 and P672,377.36, which comprise GAMMON's claim for cost of the
engineering and design services and site de-watering and clean-up works, respectively"

Ruling:

ontract was perfected when the contract documents were returned to MRT on September 9,
1997. It found that the contract was merely suspended and not terminated when MRT was
studying the effects of the foreign exchange rates and interests on the Project.

Principles:

contract is perfected when both parties have consented to the object and cause of the
contract. There is consent when the offer of one party is absolutely accepted by the other
party.[113] The acceptance of the other party may be express or implied.[114] However, the
offering party may impose the time, place, and manner of acceptance by the other party,
and the other party must comply.[115]... there are three (3) stages in a contract: negotiation,
perfection, and consummation. Negotiation refers to the time the parties signify interest in
the contract up until the time the parties agree on its terms and conditions. The perfection of
the contract occurs when there is a meeting of the minds of the parties such that there is a
concurrence of offer and acceptance, and all the essential elements of the
contract—consent, object and cause—are present. The consummation of the contract
covers the period when the parties perform their obligations in the contract until it is finished
or extinguished.[116] To determine when the contract was perfected, the acceptance of the
offer must be unqualified, unconditional, and made known to the offeror.[117] Before
knowing of the acceptance, the offeror may withdraw the offer.[118] Moreover, if the offeror
imposes the manner of acceptance to be done by the offerree, the offerree must accept it in
that manner for the contract to be binding.[119] If the offeree accepts the offer in a different
manner, it is not effective, but constitutes a counter-offer, which the offeror may accept or
reject.[

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, there must be acceptance of the offer which may be express or
implied but must not qualify the terms of the offer. The acceptance must be absolute,
unconditional and without variance of any sort from the offer. The acceptance of an offer
must be made known to the offeror. Unless the offeror knows of the acceptance, there is no
meeting of the minds of the parties, no real concurrence of offer and acceptance. The
offeror may withdraw its offer and revoke the same before acceptance thereof by the
offeree. The contract is perfected only from the time an acceptance of an offer is made
known to the offeror. If an offeror prescribes the exclusive manner in which acceptance of
his offer shall be indicated by the offeree, an acceptance of the offer in the manner
prescribed will bind the offeror. On the other hand, an attempt on the part of the offeree to
accept the offer in a different manner does not bind the offeror as the absence of the
meeting of the minds on the altered type of acceptance. An offer made inter praesentes
must be accepted immediately. If the parties intended that there should be an express
acceptance, the contract will be perfected only upon knowledge by the offeror of the
express acceptance by the offeree of the offer. An acceptance which is not made in the
manner prescribed by the offeror is not effective but constitutes a counter-offer which the
offeror may accept or reject. The contract is not perfected if the offeror revokes or withdraws
its offer and the revocation or withdrawal of the offeror is the first to reach the offeree. The
acceptance by the offeree of the offer after knowledge of the revocation or withdrawal of the
offer is inefficacious. The termination of the contract when the negotiations of the parties
terminate and the offer and acceptance concur, is largely a question of fact to be
determined by the trial court.[122]... the meeting of the minds need not always be put in
writing, and the fact that the documents have not yet been signed or notarized does not
mean that the contract has not been perfected.[145] A binding contract may exist even if the
signatures have not yet been affixed because acceptance may be express or implied.

Novation is defined as the extinguishment of an obligation by the substitution or change of

the obligation by a subsequent one which terminates the first, either by changing the object
or principal conditions; substituting the person of the debtor; or subrogating a third person in
the rights of the creditor. In order tha[t] an obligation may be extinguished by another which
substitutes the same, it is imperative that it be so declared in unequivocal terms, or that the
old and the new obligations be on every point incompatible with each other. Novation
cannot be presumed. The animus novandi, whether partial or total, must appear by the
express agreement of the parties, or by their acts that are too clear and unequivocal to be
mistaken. Further, novation may either be extinctive or modificatory. It is extinctive when an
old obligation is terminated by the creation of a new one that takes the place of the former. It
is merely modificatory when the old obligation subsists to the extent that it remains
compatible with the amendatory agreement.

Law of the case' has been defined as the opinion delivered on a former appeal. More
specifically, it means that whatever is once irrevocably established as the controlling legal
rule of decision between the same parties in the same case continues to be the law of the
case, whether correct on general principles or not, so long as the facts on which such
decision was predicated continue to be the facts of the case before the court.

LEONCIO GABRIEL v. MONTE DE PIEDAD Y CAJA DE AHORROS, GR No. 47806,

1941-04-14

Facts:

petitioner was employed as appraiser of jewels in the pawnshop of the Monte de Piedad
from 1913 up to May, 1933.
December 13, 1932,. he executed a chattel mortgage to secure the payment of the
deficiencies which resulted from his erroneous appraisal of the... jewels pawned to the
appellee, amounting to P14,679.07, with six per cent (6%) interest from said date.

the appellant promised to pay to the appellee the sum of P300 a month until the sum of
P14,679.07, with interest is fully paid.

The document was... registered on December 22, 1932

To recover the aforementioned sum less what had been paid, amounting to P3,333.25 or
the balance of P11,345.75, and in case of default to effectuate the chattel mortgage, an
action was instituted against... the petitioner by the respondent Monte de Piedad...
petitioner answered,... denied under oath the genuiness of the execution of the... alleged
chattel mortgage attached thereto... he alleged (1) that the chattel mortgage was a part of a
scheme on the part of the management of the Monte de Piedad to cover up supposed
losses incurred in its pawnshop department; (2) that a criminal action... had been instituted
at the instance of the plaintiff against him wherein said chattel mortgage was presented by
the prosecution with regard to his supposed responsibility as expert appraiser of jewels of
the plaintiff entity but he was therein acquitted; and (3) that said... acquittal constituted a bar
to the civil case.

the petitioner alleged (1) that the chattel mortgage was entered into by E. Marco for and in
behalf of the Monte de Piedad without being duly authorized to do so by the latter; (2) that
the defendant was... induced, through false representation, to sign said chattel mortgage
against his will; (3) that the chattel mortgage was based upon all nonexisting subject matter
and nonexisting consideration; and (4) that the chattel mortgage was null and void ab initio.
B

The lower court rendered judgment in favor of the Monte de Piedad against the herein
petitioner.

Court of Appeals, which affirmed the judgment of the lower court in a decision

Issues:

Petitioner contends that the provisions of the chattel mortgage contract by which he
guaranteed to pay the deficiencies amounting to P14,679.07 are contrary to law, morals and
public policy, and hence, the chattel mortgage contract is ineffective and the principal
obligation... secured by it is void.

Petitioner also contends that the chattel mortgage in question is void because it lacks
consideration.

The second assignment of error made by the petitioner is that the Court of Appeals erred in
not holding that the acquittal of the petitioner in criminal case No. 49078 of the Court of First
Instance of Manila bars the action to enforce any civil liability under said chattel... mortgage.
Ruling:

A contract is to be judged by its character, and courts will look to the substance and not to
the mere form of the transaction. The freedom of contract is both a constitutional and
statutory right and to uphold this right, courts should move with all the... necessary caution
and prudence in holding contracts void.

he term "public policy" is vague... and uncertain in meaning, floating and changeable in
connotation. It may be said, however, that, in general, a contract which is neither prohibited
by law nor condemned by judicial decision, nor contrary to public morals, contravenes no
public policy. 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.

xamining the contract at bar, we are of the opinion that it does not in... anyway militate
against the public good. Neither does it contravene the policy of the law nor the established
interests of society.

A consideration, in the legal sense of the word, is some right, interest, benefit, or advantage
conferred upon the promisor, to which he is otherwise not lawfully entitled,... or any de-
triment, prejudice, loss, or disadvantage suffered or undertaken by the promisee other than
to such as he is at the time of consent bound to suffer. We think that there is sufficient
consideration in this contract, for, according to the Court of Appeals, "it has been...
satisfactorily established that it was executed voluntarily by the latter to guarantee the
deficiencies resulting from his erroneous appraisals of the jewels." A preexisting admitted
liability is a good consideration for a promise. The fact that the bargain is a hard one will...
not deprive it of validity.

We do not need to dwell at length on this assignment of error, for we find no reason for
disturbing the conclusion reached by the Court of Appeals on this point:

"The appellant claims that his acquittal in criminal case No. 49078 of the Court of First
Instance of Manila is ft bar to the institution of the present case. The evidence of record
does not bear out this contention. There is no identity of subject matter between the two...
cases; nor is the instant case dependent upon the said criminal action. We agree with the
trial court that the transactions involved in this case are different from those involved in
criminal case No. 49078. The court's finding that the transactions involved in the case at
bar... commenced in August, 1932, can not be considered erroneous simply because
Exhibit F-32 of the plaintiff is allegedly dated August 20, 1931. Exhibit F-22 can not be given
any probative value, it was undated during the hearing of the case."
 IGNACIO ARROYO, Plaintiff-Appellant, v. ALFRED BERWIN, Defendant-Appellee.
FACTS:
-
Berwin acted as counsel in the court of Iloilo for Marcela Juanesa because she was prosecuted for
theft by plaintiff Ignacio Arroyo.
-
Berwin requested Arroyo to dismiss the criminal proceeding because Marcela Juaneza would
recognize the ownership of Arroyo in the land in Calle San Juan, Molo, Iloilo.
-
Berwin, moreover, agreed that Arroyo must obtain a torrens title in the next term of the court for
the trial of cadastral cases and Marcela Juaneza would not object to the application for
registration of the said land by the applicant PROVIDED that Arroyo will ask the prosecutor to
dismiss the criminal charges against her.
-
Arroyo complied and requested the prosecutor to cease from pursuing the criminal case.
-
The prosecutor then petitioned and the court dismissed. Arroyo then made a written agreement
stating the agreed terms and sent it to Berwin to be signed by Marcela.
-
Berwin, as her legal counsel, did not return the said written agreement.
ISSUE:
-
W/N the consideration of the contract is illegal.
RULING:
-
The Supreme Court dismissed this complaint on the ground of the illegality of the consideration
of the alleged contract.
-
An agreement by the owner of stolen goods to stifle the prosecution of the person charged with
the theft, for a pecuniary or other valuable consideration, is manifestly contrary to public policy
and the due administration of justice.
-
In the interest of the public, it is of the utmost importance that criminals should be prosecuted and
that all criminal proceedings should be instituted and maintained in the form and manner
prescribed by law.
-
To permit an offender to escape the penalties prescribed by law by the purchase of immunity
from private individuals would result in a manifest perversion of justice.
-
The order entered in the court below should, therefore, be affirmed, with the costs of this instance
against the appellant.

FILIPINAS COMPANIA DE SEGUROS v. FRANCISCO Y. MANDANAS, GR No. L-19638,

1966-06-20

Facts:

Thirty-nine (39) non-life insurance companies instituted it, in the Court of First Instance of
Manila,to secure a declaration of legality of Article 22 of the Constitution of the Philippine
Rating
Bureau, of which they are members, inasmuch as respondent Insurance Commissioner
assails its validity upon the ground that it constitutes an illegal or undue restraintof trade.

twenty (20) other non-life insurance companies, likewise,... members of said Bureau, were
allowed to intervene in support of the petition.

court rendered judgment declaring that the aforementioned Article 22 is neither contrary to
law nor against public policy

Hence this appeal by respondent Insurance Commissioner, who... insists that the Article in
question constitutes an illegal or undue restraint of trade and, hence, null and void.

appellant maintains that, since, in the aforementioned Article 22, members of the Bureau
"agree not to represent nor to effect reinsurance with, nor to accept reinsurance from any
company, body, or underwriter, licensed to do business in the Philippines not a member... in
good standing of the Bureau", said provision is illegal as a combination in restraint of trade.

Issues:

The issue in the case at bar hinges, therefore, on the purpose or effect of the disputed
provision

Ruling:

Salvador Estrada, Chairman of the Bureau when it was first organized and when he took
the witness stand.

Briefly stated, he declared that the purpose of Article 22 is to maintain a high degree or
standard of ethical practice, so that insurance companies may earn and maintain the
respect of the public

We find nothing unlawful, or immoral, or unreasonable, or contrary to public policy either in

the objectives thus sought to be attained by the Bureau, or in the means availed of to
achieve said objectives, or in the consequences of the accomplishment thereof. The
purpose of... said Article 22 is not to eliminate competition, but to promote ethical practices
among non-life insurance companies, although, incidentally, it may discourage, and, hence,
eliminate unfair competition, through underrating, which, in itself, is eventually... injurious to
the public.

Principles:

The true test of... legality is whether the restraint imposed is such as merely regulates and
perhaps thereby promotes competition, or whether it is such as may suppress or even
destroy competition.
 WELLEX GROUP v. SHERIFF EDGARDO A. URIETA OF
SANDIGANBAYAN SECURITY +

DECISION

PEREZ, J.:
Before this Court is a Petition,[1] on pure questions of law, assailing the
Order dated 9 January 2012 of the Regional Trial Court of Makati City,
Branch 132 (trial court) in Civil Case No. 09-399,[2] with a prayer for the
issuance of a temporary restraining order and preliminary injunction
against respondents, enjoining them and persons acting under their
authority from selling 450,000,000 shares of Waterfront Philippines Inc.
(WPI shares) that are owned and registered in the name of petitioner The
Wellex Group, Inc. (Wellex).[3]

In resolving the prayer of Wellex for the issuance of injunctive relief, this
Court is constrained to examine the merits of the Petition and at once notes'
that this case is essentially intertwined with G.R. 187951,[4] a landmark
case, wherein this Court declared, among others, that the WPI shares are
included among those assets of Investment Management Agreement with
Account No. 101-78056-1, under the name of Jose Velarde, (IMA Account)
formerly managed by respondent BDO Unibank, Inc., previously Equitable
PCI Bank, Inc. (BDO). The said account was duly forfeited in favor of the
State by virtue of the Resolution dated 24 September 2008 of the
Sandiganbayan in Criminal Case No. 26558, the case for plunder against
former President Joseph Ejercito Estrada.

The material facts of this case, as culled from the records,[5] are as follows:

On 4 February 2000, Wellex obtained a loan in the principal amount of

P500,000,000.00 from the IMA Account with BDO. As security for the
loan, Wellex mortgaged the WPI shares.

By the time the loan obligation matured on 29 January 2001, Wellex was
not able to settle the same; however, BDO, as investment manager of the
IMA Account did not institute any foreclosure proceeding against the WPI
shares.

Thereafter, BDO, through a Letter dated 14 March 2001, informed Wellex

that it shall cease to manage the IMA Account effective 2 May 2001. In the
same letter, BDO informed Wellex tha't on 29 January 2000, the Bureau of
Internal Revenue (BIR) issued a Notice of Constructive Distraint against
the IMA Account, which effectively froze all goods, chattels or personal
property owned by Jose Velarde, including the WPI shares, which BDO
could consequently neither remove nor dispose of without the express
authority of the BIR.

Subsequently, Wellex alleged that considering that BDO had relinquished

its authority to act as the investment manager of the IMA Account, and that
Wellex had supposedly settled its loan obligation in full directly with Jose
Velarde, BDO, as the principal of the IMA Account, should return the WPI
shares to Wellex. BDO, however, did not.

In the meantime, on 12 September 2007, the Sandiganbayan in Criminal

Case No. 26558 found former President Estrada guilty of the crime of
plunder. The conviction ultimately carried with it the penalty of
forfeiture,[6] wherein all ill-gotten wealth amassed by former President
Estrada, including the IMA Account and the assets therein, were forfeited
in favor of the State.

Former President Estrada was, thereafter, pardoned by former President

Gloria Macapagal-Arroyo on 25 October 2007; nonetheless, the said
forfeiture remained in force.

Consequently, the Sandiganbayan, in the same case, issued a Resolution

dated 24 September 2008 directing the Sheriff of the Sandiganbayan to
cause the forfeiture of, among others, the IMA Account, including the WPI
shares in favor of the State.
Wellex sought to intervene in Criminal Case No. 26558 and moved for the
reconsideration of the above-mentioned Resolution dated 24 September
2008. Wellex argued that the WPI shares should be excluded from the
forfeiture order. However, the Sandiganbayan, in a Resolution dated 02
April 2009, denied the said reconsideration sought by Wellex.

By virtue of the foregoing resolutions, respondent Sheriff Edgardo A. Urieta

(Urieta) of the Sandiganbayan issued to BDO a Notice to Deliver dated 20
April 2009. BDO delivered to Urieta, among others, the WPI shares, which
shares Urieta subsequently scheduled[7] for sale at a public auction on 15
May 2009.

As mentioned above, Wellex filed G.R. No 187951 to question the inclusion

of the WPI shares among the forfeited assets; however, this Court affirmed
the inclusion of the WPI shares as part of the assets covered by the
forfeiture order.

Subsequently, Wellex filed Civil Case No. 09-399 with the trial court for the
recovery of the possession of the WPI shares. In essence, Wellex claims that
it is the owner of the WPI Shares, that it fully paid its loan obligation and
that it is entitled to the return thereof. Wellex prayed that the trial court
issue a temporary restraining order and a writ of preliminary injunction
against the Sandiganbayan to enjoin them from selling the WPI shares at a
public auction. Wellex alleged that it instituted the case as a third (3rd)
party claimant because the Sandiganbayan failed to observe the
requirements under Section 16, Rule 39 of the Rules of Court,[8] and that
Wellex was left with no recourse but to file an action with a competent court
to recover ownership of the WPI shares by virtue of the extinguishment of
the obligation through payment.

With the filing of the foregoing case, Urieta and the Sandiganbayan Security
and Sheriff Services agreed to maintain status quo and to defer the public
auction of the WPI shares until the resolution of the case.
Thereafter, Urieta and the Sandiganbayan Security and Sheriff Services, as
well as BDO, filed their respective motions to dismiss in Civil Case No.
09-399, which motions were granted by the trial court in its Order dated 9
January 2012. The aforestated order of the trial court directed the dismissal
of Civil Case No. 09-399 on the grounds of lack of jurisdiction based on the
principle of hierarchy of courts, and failure to state a cause of action.

Wellex moved for the reconsideration of the above-mentioned order dated

9 January 2012, which was, however, denied by the trial court in its
Resolution dated 15 January 2014.

Hence, Wellex comes to this Court via the instant Petition, on pure
questions of law.

Wellex contends that the trial court erred in its ruling dismissing Civil Case
No. 09-399 because it can take cognizance of the same by determining the
existence of legal and formal requirements for executing on a security,
particularly on the WPI shares. Thus, Wellex seeks that this Court set aside
the dismissal order and direct the resumption of proceedings.

We clarify.

Before delving into the merits of the Petition, this Court recognizes the
crucial need to emphasize that as per the Decision in G.R. 187951, this
Court had already declared with absolute finality that the WPl shares were
and should rightfully be included among the forfeited assets in favor of the
State. Therefore, this matter is beyond cavil. This Court aptly and succinctly
ruled "[i]t is beyond doubt that IMA Trust Account No. 101-78056-1 and its
assets were traceable to the account adjudged as ill-gotten. As such, the
trust account and its assets were indeed within the scope of the forfeiture
Order issued by the Sandiganbayan in the plunder case"[9] against former
President Estrada.

However, this Court is cognizant of the fact that the issues in this case are,
while novel, unambiguous: whether the Sandiganbayan may proceed to sell
outright, at public auction, the forfeited WPI shares; and whether the trial
court may take cognizance of Civil Case No. 09-399.

To resolve these issues, there is a need to first establish the nature of the
WPI shares.

In its final and executory Decision in G.R. No. 187951, this Court had
already ruled that:

There is no dispute that the subject shares of stock were mortgaged by

petitioner Wellex as security for its loan. These shares being the subject of a
contract that was accessory to the Wellex loan and being an asset of the
forfeited IMA Trust Account, the said shares necessarily follow the fate of
the trust account and are forfeited as well. However, the forfeiture . of the
said trust account, tofiether with all its assets and receivables, does not
affect the validity of the loan transaction between BDO the creditor and
Wellex the debtor. The loan continues to be valid despite the forfeiture by
the government of the IMA Trust Account and is considered as an asset.

Consequently, the forfeiture had the effect of subrogating the state to the
rights of the trust account as creditor.[10] (Underscoring supplied)

Thus, this Court reiterates that the WPI shares assume the character of a
security for a valid and existing loan obligation, which is included in the.
IMA Account. Stated in simpler terms, one (1) of the assets in the IMA
Account is a receivable secured by a chattel mortgage, more particularly the
valid and existing loan obligation between BDO and petitioner, secured by
the WPI shares.

Consequently, considering that the loan obligation of petitioner is valid and

existing, it necessarily follows that BDO, the creditor, or its
successor-in-interest, cannot be allowed to unilaterally sell the chattel
securing the loan and apply the proceeds thereof as payment, full or partial,
to the said loan. This would constitute a clear case of pactum
commissorium, which is expressly prohibited by Article 2088[11] of the
Civil Code.[12]

In line with our holding in The Wellex Group, Inc. v. Sandigfinbayan,[13]

that "the forfeiture had the effect x x x as creditor," the state has stepped
into the shoes of the BDO. As this Court has consistently ruled,
"[sjubrogation is the substitution of one person by another with reference
to a lawful claim or right, so that he who is substituted succeeds to the
rights of the other in relation to a debt or claim, including its remedies or
securities, x x x It contemplates full substitution such that it places the
party subrogated in the shoes of the creditor, and he may use all means that
the creditor could employ to enforce payment."[14] Given that the subrogee
merely steps into the shoes of the creditor, he acquires no right greater than
those of the latter.

Considering that the WPI shares serves as security to an acknowledged

valid and existing loan obligation, the subrogee, in this case the State, is
obliged to avail of the very same remedies available to the original creditor
to collect the loan obligation, which is to first demand from the original
debtor to pay the same, and if not paid despite demand, institute either
foreclosure proceedings, or the appropriate action for collection before the
proper forum. In either case, the debtor will be afforded the opportunity to
pay the obligation, or to assert any claim or defense, which the debtor may
have against the original creditor. This is the essence of constitutional right
to due process. In this case, the action of public respondent in offering for
sale, at public auction, the WPI shares would unavoidably trample upon a
constitutionally enshrined right.

This Court is well aware that the Sandiganbayan had earlier asserted in
Criminal Case No. 26558 that as regards the BDO loan, Wellex is
considered a delinquent debtor. However, the pronouncement cannot be an
excuse to omit the steps needed to be taken regarding the mortgaged WPI
shares. It is a fact that Wellex was not impleaded as a party to the said case,
ergo, the effect of the pronouncement cannot be extended to it. It is
axiomatic that no man shall be affected by any proceeding to which he is a
stranger, and strangers to a case are not bound by any judgment rendered
by the court.[15] Thus, only those who have had their day in court are
considered the real parties in interest in an action, and it is they who are
bound by the judgment therein and by writs of execution issued pursuant
thereto.[16]

Even more important, this Court notes that the subject matter of
controversy brought forth by Wellex is purely civil in nature. This involves
the third (3rd) party claim of Wellex against the WPI shares vis-a-vis the
loan obligation per se, which should be properly lodged before and heard by
the regular trial courts. To the mind of this Court, it is clear that the same
does not pertain to the jurisdiction of the Sandiganbayan. Jurisdiction,
which is the authority to hear and the right to act in a case, is conferred by
the Constitution and by law. Although the Sandiganbayan, a
constitutionally-mandated court, is a regular court, it has, nevertheless,
only a special or limited jurisdiction.[17]

While this Court has time and again affirmed[18] that the Sandiganbayan
has jurisdiction over the civil aspect of criminal cases, as conferred to it by
law, the case before the trial court does not involve the civil aspect of
Criminal Case No. 26558. The same has nothing to do with the ownership
of the IMA Account and/or any of its financial assets, which, as stated
above, has been adjudged forfeited in favor of the State. In contrast, the
said case is an ordinary civil case entailing the propriety of the actions of a
creditor in proceeding against the security for its loan, which necessitates
the application of the provisions of the Civil Code, therefore falling under
the exclusive jurisdiction of the Regional Trial Courts.[19]

Given that the cause of action of Wellex in Civil Case No. 09-399 partakes
of a valid third (3rd) party claim sanctioned by the Rules of Court, affording
Wellex the opportunity to assert its claim or defense against its creditor,
presently the State, the latter should likewise avail of this avenue to affirm
its own claims, as creditor, against the loan and/or mortgage securing the
said loan, paving the way to the realization of any of the fruits of plunder.
Thus, this Court deems it proper to remand this case to the trial court for
further proceedings, where all the civil issues may properly be ventilated.

At this point, this Court commends the trial court for acting cautiously and
exercising prudence in applying the principle of hierarchy of courts when it
issued its Order dated 9 January 2012 and Resolution dated 15 January
2014. As a consequence of the rulings rendered in this case, that is, that the
State, acting through the Sandiganbayan, may not sell the WPI shares
outright without first complying with the requirements set by law, the
prayer of petitioner for injunctive relief against the Sandiganbayan is now
rendered moot and academic. And as previously stated, given the fact that
the State has validly substituted BDO as the creditor of Wellex, the cause of
action of Wellex against BDO is, likewise, rendered moot and academic.

WHEREFORE, premises considered, JUDGMENT is hereby rendered

GRANTING the instant Petition and SETTING ASIDE the Order dated 9
January 2012 and Resolution dated 15 January 2014 of the Regional Trial
Court of Makati City, Branch 132 in Civil Case No. 09-399. This case is
hereby remanded to the trial court for further proceedings.

SO ORDERED.

GEO. W. DAYWALT v. LA CORPORACION DE LOS PADRES AGUSTINOS RECOLETOS

ET AL., GR No. 13505, 1919-02-04

Facts:

In the year 1902, Teodorica Endencia, an unmarried woman, resident in the Province of
Mindoro, executed a contract whereby she obligated herself to convey to Geo. W. Daywalt,
.a tract of land situated in the barrio of Mangrarin, municipality of Bulalacao,... now San
Jose, in said province. It was agreed that a deed should be executed as soon as the title to
the land should be perfected by proceedings in the Court of Land Registration and a
Torrens certificate should be procured therefor in the name of Teodorica Endencia. A
decree... recognizing the right ,of Teodorica as owner was entered in said court, in August
1906, but the Torrens certificate was not issued until later. The parties, however, met
immediately upon the entering of this decree and made a new contract with a view to
carrying their original... agreement into effect. This new contract was executed in the form of
a deed of conveyance and bears date of August 16, 1906. The stipulated price was fixed at
P4,000, and the area of the land encased in the boundaries defined in the contract was
stated to be 452 hectares and a... fraction.

The second contract was not immediately carried into effect for the reason that the Torrens
certificate was not yet obtainable and in fact said certificate was not issued until the period
of performance contemplated in the contract had, expired. Accordingly, upon October 3,...
1908, the parties entered into still another agreement, superseding the old, by which
Teodorica Endencia agreed, upon receiving the Torrens title to the land in question, to
deliver the same to the Hongkong and Shanghai Bank in Manila, to be forwarded to the
Crocker National

Bank in San Francisco, where it was to be delivered to the plaintiff upon payment of a
balance of P3,100.

The Torrens certificate was in time issued to Teodorica Endencia, but in the course of the
proceedings relative to the registration of the land, it was found by official survey that the
area of the tract inclosed in the boundaries stated in the contract was about 1,48 hectares...
instead of 4.2 hectares as stated in the contract. In view of this development Teodorica
Endencia became reluctant to transfer the whole tract to the purchaser, asserting that she
never intended to sell &o large an amount of land and that she had been misinformed as to
its... area.

Father Sanz was fully aware of the existence of the contract of 1902 by which Teodorica
Endencia agreed to sell her land to the plaintiff as well asof the later important
developments connected with the history of that contract and the contract substituted
successively for it;... and in particular Father Sanz, as well as other members of the
defendant corporation, knew of the existence of the contract of October 3, 1908, which, as
we have already seen, finally fixed the rights of the parties to the property in question. When
the Torrens certificate was... finally issued in 1909 in favor of Teodorica Endencia, she
delivered it for safekeeping to the defendant corporation, and it was then taken to Manila
where it remained in the custody and under the control of P. Juan Labarga the procurator
and chief official of the defendant... corporation, until the delivery thereof to the plaintiff was
made compulsory by reason of the decree of the Supreme Court in 1914.

Under the first cause stated in the complaint in the present action the plaintiff seeks to
recover from the defendant corporation the sum of P24,000, as damages for the use and
occupation of the land in question by reason of the pasturing of cattle thereon during the
period... stated. The trial court came to the conclusion that the defendant corporation was
liable for damages by reason Qf the use and occupation of the premises in the manner
stated; and fixed the amount to be recovered at P2,497. The plaintiff appealed and has
assigned error to this... part of the judgment of the court below, insisting that damages
should have been awarded in a much larger sum and at least to tfhe full extent of P24,000,
the amount claimed in the complaint.

Issues:
whether a person who is not a party to a contract for the sale of land makes himself liable
for damages .to the vendee, beyond the value of the use and... occupation, by colluding
with the vendor and maintaining him in the effort to resist an action for specific performance.

Ruling:

The attorney for the plaintiff maintains that, by interfering in the performance of the contract
in question and obstructing the plaintiff in his efforts to secure the certificate of title to the
land, the defendant corporation made itself a co-participant with Teodorica

Endencia in the breach of said contract; and inasmuch as father Juan Labarga, at the time
of said unlawful intervention between the contracting parties, was fully aware of the
existence of the contract (Exhibit C) which the plaintiff had made with S. B. Wakefield, of
San

Francisco, it is insisted that the defendant corporation is liable for the loss consequent upon
the failure of the project outlined in said contract.

In this connection reliance is placed by the plaintiff upon certain American and English
decisions in which it is heldr r that a person who is a stranger to a contract may, by an
unjustifiable interference in the performance thereof, render himself liable for the damages...
consequent upon non-performance.

indicates that the defendant corporation, having notice of the, sale of the land in question to
Daywalt, might have been enjoined by the: latter from using the... property for grazing its
cattle' therein. That the defendant corporation is also liable in this action for the damage
resulting to the plaintiff from the wrongful use and occupation of the property has also been
already determined. But it will be observed that in order to... sustain this liability it is not
necessary to resort to any subtle exegesis relative to the liability of a stranger to a contract
for unlawful interference in the performance thereof. It is enough that defendant used the
property with notice that the plaintiff had a prior and... better right.

Principles:

Article 1902 of the Civil Code declares that any person who by an act or omission,
characterized by fault or negligence, causes damage to another shall be liable for the
damage so done. Ignoring so much of this article as relates to liability for negligence, we
take the rule to... be that a person is liable for damage done to another by any culpable act;
and by "culpable act" we mean any act which is blameworthy when judged by accepted
legal standards.

7. SO PING BUN v. CA, GR No. 120554, 1999-09-21

Facts:

Tek Hua Trading Co, through its managing partner, So Pek Giok, entered into lease
agreements with lessor Dee C. Chuan & Sons
Subjects of four (4) lease contracts were premises located at Nos. 930, 930-Int., 924-B and
924-C, 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-month basis

When the contracts expired, the parties did not renew the contracts, but Tek Hua continued
to occupy the premises. In 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.

So Pek Giok, managing partner of Tek Hua Trading, died in 1986. So Pek Giok's grandson,
petitioner So Ping Bun, occupied the warehouse for his own textile business, Trendsetter
Marketing.

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. Again on December 1,... 1990,
the lessor implemented a 30% rent increase. Enclosed in these letters were new lease
contracts for signing. DCCSI warned that failure of the lessee to accomplish the contracts
shall be deemed as lack of interest on the lessee's part, and agreement to the termination
of the... lease. Private respondents did not answer any of these letters. Still, the lease
contracts were not rescinded.

petitioner requested formal contracts of lease with DCCSI in favor Trendsetter Marketing.
So Ping Bun claimed that after the death of his grandfather, So Pek Giok, he had been
occupying the premises for his textile business and... religiously paid rent. DCCSI acceded
to petitioner's request. The lease contracts in favor of Trendsetter were executed.

private respondents pressed for the nullification of the lease contracts between DCCSI and
petitioner. They also claimed damages.

trial court ruled:

"WHEREFORE, judgment is rendered:

1.

Annulling the four Contracts of Lease (Exhibits A, A-1 to A-3, inclusive) all dated March 11,
1991, between defendant So Ping Bun, doing business under the name and style of
'Trendsetter Marketing', and defendant Dee C. Chuan & Sons

Ordering defendant So Ping Bun to pay the aggrieved party, plaintiff Tek Hua Enterprising
Corporation, the sum of P500,000.00

Court of Appeals upheld the trial court.

Issues:

WHETHER THE APPELLATE COURT ERRED IN AFFIRMING THE TRIAL COURT'S

DECISION FINDING SO PING BUN GUILTY OF TORTUOUS INTERFERENCE OF
CONTRACT

Ruling:

Damage is the loss, hurt, or harm which results from injury, and damages are the
recompense or compensation awarded for the damage suffered.[6] One becomes liable in
an action for damages for a nontrespassory invasion of another's interest in the private...
use and enjoyment of asset if (a) the other has property rights and privileges with respect to
the use or enjoyment interfered with, (b) the invasion is substantial, (c) the defendant's
conduct is a legal cause of the invasion, and (d) the invasion is either intentional and...
unreasonable or unintentional and actionable under general negligence rules... elements of
tort interference are: (1) existence of a valid contract; (2) knowledge on the part of the third
person of the existence of contract; and (3) interference of the third person is without legal
justification or excuse... a cause of action ex delicto may be predicated upon an unlawful
interference by one person of the enjoyment by the other of his private property.

petitioner's Trendsetter Marketing asked DCCSI to execute lease contracts in its favor, and
as a result petitioner deprived respondent... corporation of the latter's property right. Clearly,
and as correctly viewed by the appellate court, the three elements of tort interference
above-mentioned are present in the instant case.

Authorities debate on whether interference may be justified where the defendant acts for the
sole purpose of furthering his own financial or economic interest.[10] One view is that, as a
general rule, justification for interfering with the business... relations of another exists where
the actor's motive is to benefit himself. Such justification does not exist where his sole
motive is to cause harm to the other. Added to this, some authorities believe that it is not
necessary that the interferer's interest outweigh that of the... party whose rights are
invaded, and that an individual acts under an economic interest that is substantial, not
merely de minimis, such that wrongful and malicious motives are negatived, for he acts in
self-protection.

where there was no malice in the interference of a contract, and the impulse behind one's
conduct lies in a proper business interest rather than in wrongful motives, a party cannot be
a malicious... interferer. Where the alleged interferer is financially interested, and such
interest motivates his conduct, it cannot be said that he is an officious or malicious
intermeddler.

petitioner So Ping Bun prevailed upon DCCSI to lease the warehouse to his enterprise at
the expense of respondent corporation. Though petitioner took interest in the property of
respondent corporation and benefited from it, nothing on record... imputes deliberate
wrongful motives or malice on him.
Lack of malice, however, precludes damages. But it does not relieve petitioner of the legal
liability for entering into contracts and causing breach of existing ones. The... respondent
appellate court correctly confirmed the permanent injunction and nullification of the lease
contracts between DCCSI and Trendsetter Marketing, without awarding damages. The
injunction saved the respondents from further damage or injury caused by petitioner's...
interference

8. [ G.R. No. 103590, January 29, 1993 ]

GOVERNMENT SERVICE INSURANCE SYSTEM v. CA + D E C I S I O N
https://lawyerly.ph/app/#/cases/30893

(NO DIGEST)

Facts:
Several years back, the Queen's Row Subdivision, Inc. (QRSI) entered into a
construction project agreement with the Government Service Insurance System (GSIS) by virtue
of which the latter agreed to extend a financing loan to the former for the construction and
development of a residential subdivision, comprising some four thousand four hundred
ninety-three (4,493) housing units, situated at Molino, Bacoor, Cavite; these units were to be
sold to GSIS members in accordance with the System's housing program.

Pursuant to said project agreement, QRSI entered into a construction contract with private
respondent Valencia involving various phases of land development in the said subdivision. Upon
accomplishing and completing his undertaking under the contract, Valencia demanded payment
from QRSI. Despite repeated demands, however, QRSI refused to pay. Valencia then filed the
complaint in the aforementioned Civil Case No. BCV-78-33, an action for a sum of money with
prayer for the issuance of a writ of preliminary attachment. During the trial of the case, Valencia,
after manifesting that he was not seeking any relief against the personal funds of petitioner
GSIS, proceeded to present his evidence. No evidence was offered by both the petitioner and
QRSI.

1. Ordering defendant Queen's Row to pay plaintiff the sum of FOUR HUNDRED FORTY
EIGHT THOUSAND THREE HUNDRED SEVENTY FOUR and 01/100 Pesos (P448,374.01),
for the first cause of action; the sum of TWO HUNDRED FOUR THOUSAND EIGHT HUNDRED
TWENTY ONE and 32/100 Pesos (P204,821.32), for the second cause of action; the sum of
ONE HUNDRED TWO THOUSAND EIGHT HUNDRED SIXTY SIX and 37/100 (P102,866.37)
Pesos under the third cause of action and ordering the said defendant to return to plaintiff the
amount of TEN THOUSAND PESOS (P10,000.00) posted as performance bond, the same
amounts to be recovered by plaintiff shall bear legal rate of interest from the date of demands on
February 10, 1974, September 13, 1976 and February 3, 1977, for the first, second and third
causes of action, respectively;
2. Sentencing defendant Queen's Row to pay attorney's fees in favor of the plaintiff in the
sum equal to twenty (20%) percent of the said amounts ordered recovered and payable to said
plaintiff;

3. Requiring defendant GSIS to hold whatever amounts it has granted to, retained and
obtained for defendant Queen's Row, and to deliver same to plaintiff by way of payment to the
aforecited amount ordered recovered by plaintiff, the same to be credited as payment made by
defendant Queen's Row. It is distinctly made clear that defendant GSIS shall not be personally
liable for the said obligation of co-defendant Queen's Row, except, as herein above-ordered;
however, pending payment of the said claim of plaintiff, defendants are ordered to respect and
satisfy the contractor's lien in favor of the plaintiff as provided for by law.

4. Defendant Queen's Row is hereby ordered to pay the costs.

5. All other claims and counterclaims are hereby ordered dismissed.

Issues:

Ruling:

9. MANILA RAILROAD CO. v. LA COMPAÑIA TRASATLANTICA, GR No. 11318, 1918-10-26

Facts:

In March, 1914, the steamship Alicante, belonging to the Compañia Trasatlantica de Barcelona,
arrived at Manila with two locomotive boilers aboard, the property of The Manila Railroad
Company.

The equipment of the ship for discharging heavy... cargo was not sufficiently strong to handle
these boilers, and it was therefore necessary for the Steamship Company to procure assistance
in the port of Manila.

the Atlantic Company) was accordingly employed by the Steamship Company, as having
probably the best equipment for this purpose of any contracting company in the city.

Upon the arrival of the Alicante, the Atlantic Company sent out its crane in charge of one
Leyden.

the boiler fell.

It was found to be so badly damaged that it had to be rehipped to England where it was rebuilt,
and afterwards vas returned to Manila.
The Railroad Company's damage by reason of the cost of repairs, expenses, and loss of he...
use of the boiler proved to be P22,343.29

To recover these damages the present action was instituted by the Railroad Company against
the Steamship Company.

The latter caused the Atlantic Company to... be brought in as a codefendant, and insisted that
whatever liability existed should be fixed upon the Atlantic Company as an independent
contractor who had underaken to discharge the boilers and had become responsible or such
damage as had been done.

Court of First Instance... in favor of the plaintiff against the Atlantic Company, but absolved the
Steamship Company from the complaint.

The mishap was undoubtedly due, as the lower court found, to the negligence of one Leyden,
the foreman in charge; and we may add that the evidence tends to show that his negligence
was of a type which may without exaggeration be denominated gross.

The foreman was... therefore guilty of negligence in attempting to hoist the boiler the second
time under the conditions that had thus developed. It should be noted that the operation was at
all its stages entirely under Leyden's control; and, although in the first lift he utilized the ship's...
tackle to aid in hoisting the boiler, everything was done under his immediate supervision.

Issues:

(1) Is the Steamship Company liable to the plaintiff by reason of having delivered the boiler in
question in a damaged condition? (2) Is the Atlantic Company liable to be made to respond to
the steamship company for the amount... the latter may be required to pay to the plaintiff for the
damage done? (3) Is the Atlantic Company directly liable to the plaintiff, as the trial court held?

Ruling:

no contractual relation existed directly between the Railroad Company and the Atlantic
Company.

We are all agreed, that, under the contract for transportation from England to Manila, the
Steamship Company is liable to the plaintiff for the injury done to the boiler while it was being
discharged from the ship.

10. GUTIERREZ HERMANOS v. ENGRACIO ORENSE, GR No. 9188, 1914-12-04

Facts:
Gutierrez Hermanos filed a complaint... in the Court of First Instance of Albay against Engracio
Orense

Orense had been the owner of a parcel of land,... with the buildings and improvements thereon,
situated in the pueblo of Guinobatan, Albay... the said property has up to date been recorded in
the new property registry in the name of the said Orense

Jose Duran, a nephew of the defendant, with the latter's knowledge and consent, executed
before a notary a public instrument whereby he sold and conveyed to the plaintiff company, for

P1,500, the aforementioned property, the vendor Duran reserving to himself the right to
repurchase it for the same price within a period of four years... the plaintiff company had not
entered into possession of the purchased property,... owing to its continued occupancy by the
defendant and his nephew, Jose Duran, by virtue of a contract of lease executed by the plaintiff
to Duran... the said instrument of sale of the property, executed by Jose Duran, was... publicly
and freely confirmed and ratified by the defendant Orense in a verbal declaration made by him...
plaintiff had to demand of the defendant that he execute in legal form a deed pf conveyance of
the property, but that the defendant Orense refused to do so, without any justifiable cause or
reason,... wherefore he should be compelled to execute the said deed by an express order of
the court, for Jose Duran is notoriously insolvent and cannot reimburse the plaintiff company for
the price of the sale which he received... it was prayed that judgment be rendered by holding
that the land and improvements in question belong legitimately and exclusively to the plaintiff,
and ordering the defendant... to execute in the plaintiff's behalf the said instrument of transfer
and conveyance of the property

As the second special defense, he alleged that the defendant was the lawful owner of the
property claimed in the complaint, as his ownership was recorded in the property registry... the
defendant had not executed any written power of attorney nor given any verbal authority to Jose

Duran in order that the latter might, in his name and representation, sell the said property to the
plaintiff company... that... prior thereto the defendant did not intentionally and deliberately
perform any act such as might have induced the plaintiff to believe that Duran was empowered
and authorized by the defendant and which would warrant him in acting to his own detriment,
under the influence of that... belief.

the court rendered the judgment aforementioned, to which counsel for the defendant excepted
and moved for a new trial... plaintiff firm, therefore, charged Jose Duran, in the Court of First
Instance of the said province, with estafa, for having represented himself in the said deed of
sale to be the absolute owner of the aforesaid land and improvements, whereas in reality they
did not belong... to him, but to the defendant Orense. However, at the trial of the case Engracio
Orense, called as a witness, being interrogated by the fiscal as to whether he had consented to
Duran's selling the said property under right of redemption to the firm of Gutierrez Hermanos,
replied... that he had. In view of this statement by the defendant, the court acquitted Jose Duran
of the charge of estafa... the record in this case shows that he did give his consent in order that
his nephew, Jose Duran, might sell the property in question to Gutierrez Hermanos,... and that
he did thereafter confirm and ratify the sale by means of a... public instrument executed before a
notary.

Issues:

suit involves the validity and efficacy of the sale under right of redemption of a parcel of land and
a masonry house with a nipa roof erected thereon, effected by Jose Duran, a nephew of the
owner of the property, Engracio Orense,

Ruling:

After the lapse of the four years stipulated for the redemption, the defendant refused to deliver
the property to the purchaser, the firm of Gutierrez Hermanos

His refusal was based on the allegations that he had been and was then the owner of the said
property, which was registered in his name in the property registry; that he had not executed any
written power of attorney to Jose Duran, nor... had he given the latter any verbal authorization to
sell the said property... having been proven at the trial that he gave his consent to the said sale,
it follows that the defendant conferred verbal, or at least implied, power of agency upon his
nephew Duran, who accepted it in the same way by selling the said property. The principal must
therefore... fulfill all the obligations contracted by the agent, who acted within the scope of his
authority.

Even should it be held that the said consent was granted subsequently to the sale, it is
unquestionable that the defendant, the owner of the property, approved the action of his
nephew, who in this case acted as the manager of his uncle's business, and Orense's
ratification... produced the effect of an express authorization to make the said sale

The sale of the said property made by Duran to Gutierrez Hermanos was indeed null and void in
the beginning, but afterwards became perfectly valid and cured of the defect of nullity it bore at
its execution by the confirmation solemnly made by the said owner upon his stating... under
oath to the judge that he himself consented to his nephew Jose Duran's making the said sale.

The contract of sale of the said property contained in the notarial instrument of February 14,
1907, is alleged to be invalid, null and void under the provisions, of paragraph 5 of section 335
of the Code of Civil Procedure, because the authority which Orense may have given... to Duran
to make the said contract of sale is not shown to have been in writing and signed by Orense, but
the record discloses satisfactory and conclusive proof that the defendant Orense gave his
consent to the contract of sale executed in a public instrument by his nephew Jose

Duran. Such consent was proven in a criminal action by the sworn testimony of the principal and
presented in this civil suit by other sworn testimony of the same principal and by other evidence
to which the defendant made no objection. Therefore the principal is bound to abide... by the
consequences of his agency as though it had actually been given in writing

The repeated and successive statements made by the defendant Orense in two actions,
wherein he affirmed that he had given his consent to the sale of his property, meet the
requirements of the law and legally excuse the lack of written authority, and, as they are a full...
ratification of the acts executed by his nephew Jose Duran, they produce the effects of an
express power of agency.

Judgment appealed from is hereby affirmed

11. MELECIO COQUIA v. FIELDMEN'S INSURANCE CO., GR No. L-23276, 1968-11-29

Facts:

Fieldmen's Insurance Company, Inc.

issued, in favor of the Manila Yellow Taxicab Co., Inc.

a common carrier accident insurance policy, covering the... period from December 1, 1961 to
December 1, 1962.

"The Company will, subject to the Limits of Liability and under the Terms of this Policy, indemnify
the insured in the event of accident caused by or arising out of the use of Motor Vehicle against
all stuns which the Insured will become legally liable to pay in respect of:

Death or bodily injury to any fare-paying passenger including the Driver, Conductor and/or
Inspector who is riding in the Motor Vehicle insured at the time of accident or injury."

While the policy was in force,... a taxicab of the Insured, driven by Carlito Coquia, met a
vehicular accident... in consequence of which Carlito died.

The Insured filed therefor a claim for P5,000.00 to which the Company replied... with an offer to
pay P2,000.00, by way of com­promise.

The Insured rejected the same and made a counter-offer for P4,000.00, but the Company did
not accept it.

the Insured and Carlito's parents,... filed a complaint against the Company to collect the
proceeds of the aforementioned policy.

Company admitted the existence thereof, but pleaded lack of cause of action on the part of the
plaintiffs.

trial court rendered a decision

Company to pay to the plaintiffs the sum of P4,000.00 and the costs.

Company... contends that plaintiffs have no cause of action because:

Coquias have no... contractual relation with the Company... and... the Insured has not complied
with the provisions of the policy concerning arbitration.

Issues:

Does the policy in question belong to such class of contracts pour autrui?

Ruling:

As regards the first defense, it should be noted that, although, in general, only parties to a
contract may bring an action based thereon, this rule is subject to exceptions, one of which is
found in the second paragraph of Article 1311 of the Civil Code of the Philippines,... reading:

"If a contract should contain some stipulation in favor of a third person, he may demand its
fulfillment provided communicated his acceptance to the obligor before its revocation. A mere
incidental benefit or interest of a person is not sufficient. The contracting... parties must have
clearly and deliberately conferred a favor upon a third person."

Pursuant to these stipulations, the Company "will indemnify any authorized Driver who is driving
the Motor Vehicle" of the Insured and, in the event of death of said driver, the Company shall,
likewise, "indemnify his personal representatives." In fact, the Company

"may, at its option, make indemnity payable directly to the claimants or heirs of claimants x x x it
being the true intention of this Policy to protect x x x the liabilities of the Insured towards the
passengers of the Motor Vehicle and the

Public" - in other words, third parties.

Thus, the policy under consideration is typical of contracts pour autrui... being made more
manifest by the fact that the deceased driver paid fifty percent (50%) of the corresponding
premiums, which were deducted from his weekly commissions.

Coquias - who, admittedly, are the sole heirs of the deceased - have a direct cause of action
against the Company,... The second defense set up by the Company is based upon Section 17
of the policy

"If any difference or dispute shall arise with respect to the amount of the Company's liability
under this Policy, the same shall be referred to the decision of a single arbitrator to be agreed
upon by both parties or failing such agreement of a single arbitrator, to the... decision of two
arbitrators, one to be appointed in writing by each of the parties... and in case of disagreement
between the arbitrators, to the decision of an umpire who shall have... been appointed in writing
by the arbitrators

The record shows, however, that none of the parties to the contract invoked this section, or
made any reference to arbitration, during the negotiations preceding the institution of the
present case.

WHEREFORE, the decision appealed from should be as it is hereby affirmed... against the
herein defendant-appellant, Fieldmen's Insurance Co., Inc.

Principles:

Kahnweiler vs. Phenix Ins. Co. of Brooklyn

"Another well-settled rule for interpretation of all contracts is that the court will lean to that
interpretation of a contract which will make it reasonable and just.

To procure a reference to arbitrators, the joint and concurrent action of both parties to the
contract is indispensable. The right it gives and the... obligation it creates to refer the differences
between the parties to arbitrators are mutual. One party to the contract cannot bring about an
arbitration. Each party is entitled to demand a reference, but neither can compel it, and neither
has the right to insist that the other... shall first demand it, and shall forfeit any right by not doing
so.

12. Pastor Constantino vs. Herminia Espiritu G.R. No. L-22404 May 31, 1971

Facts:
Constantino alleges that he conveyed to Espiritu a two-storey house and four subdivision lots by
a fictitious deed of sale. The deed was issued with the understanding that Espiritu would hold
the properties in trust for their illegitimate son, Pastor Constantino Jr. (still unborn at this time)
Espiritu mortgaged the properties to Republic Savings Bank of Manila to secure payment of two
loans (3k and 2k). She offered them for sale after. Constantino filed a complaint praying for the
issuance of writ of preliminary injunction and judgement ordering Espiritu to execute a deed of
absolute sale of the properties in favor of Constantino Jr. (the beneficiary, who was 5 years old
at this time) o Espiritu moved to dismiss the complaint because Constantino Jr. was not
included as party-plaintiff RTC dismissed complaint o Constantino filed an amended complaint
which included Constantino Jr. as coplaintiff and prayed for appointment of Constantino as
Constantino Jr.’s guardian ad litem o Espiritu opposed: amendment was not an inclusion but a
substitution of Constantino. She contends that since Constantino had no interest in the subject
matter of the case, substitution was not allowed. o RTC denied motion for admission of
amended complaint o Constantino filed a direct appeal to SC assailing the order of RTC

Issue: W/N Constantino is an interested party in the subject matter of the case
Decision: RTC order is SET ASIDE. Case is REMANDED to lower court for further proceedings
Held: YES. The contract between Constantino and Espiritu was a contract pour autrui even
though it is in the form of a deed of sale. In such contract, it is a settled rule that a third person
for whose benefit the contract was entered into may ALSO demand its fulfillment provided he
had communicated his acceptance to the obligor before the stipulation in his favor is revoked. It
is clear that Constantino, who is a party to the contract, is entitled to bring an action for its
enforcement. He also had an interest in the subject matter of the case. (So, it’s not just the
beneficiary who is an interested party in enforcing a contract. It should be: the beneficiary is also
an interested party together with the main parties in the contract)

13. MARMONT RESORT HOTEL vs. GUIANG (168 SCRA 373)

FACTS:

A Memorandum of Agreement was executed between Maris Trading and petitioner Marmont
Resort Hotel Enterprises, Inc. (“Marmont”). Under the agreement, Maris Trading undertook to
drill for water and to provide all equipment necessary to install and complete a water supply
facility to service the Marmont Olongapo, for a stipulated fee of P40,000.00. In fulfillment of its
contract, Maris Trading drilled a well and installed a water pump on a portion of a parcel of land
then occupied by respondent spouses Federico and Aurora Guiang.

Five months later, a Memorandum of Agreement was executed between Maris Trading and
Aurora Guiang, with Federico Guiang signing as witness. This agreement states that in
consideration of the sum of P1, 500.00 the Guiangs sell and cede all rights and claims over the
lot where the water source of Marmont is located unto and in favor of Maris Trading.

After some time, the water supply of the Marmont became inadequate which prompted them to
secure the services of another contractor. They sought permission from the Guiang spouses to
inspect the water pump which had been installed but it was not granted. Marmont filed a
Complaint against the Guiang spouses for damages resulting from their refusal. The claimed
damages totaled P110, 000.

The Guiangs moved to dismiss the Complaint. They assailed the validity of the second
Memorandum of Agreement, alleging that the subject matter thereof involved conjugal property
alienated by Aurora Guiang without the marital consent of her husband, Federico Guiang.

ISSUE:

Would the spouses be solidarily liable for the damages claimed by Marmont?

HELD:
It was established that The Guiangs have acted contrary to the principles of honesty, good faith
and fair dealing embodied in Articles 19 and 21 of the Civil Code when they refused petitioner
Marmont access to the water facility and to benefit from it which forced Marmont to locate an
alternative source of water which resulted to their lost revenues. Therefore, they are liable for
damages.

The Memorandum of Agreement entered into by Aurora Guiang was with full consent of
Federico and the proceeds thereof redounded to the benefit of the conjugal partnership.
Therefore, they are solidarily liable for the damages claimed.

14. NICOLAS SANCHEZ v. SEVERINA RIGOS, GR No. L-25494, 1972-06-14

Facts:

Nicolas Sanchez and defendant Severina Rigos executed an instrument, entitled "Option to
Purchase," whereby Mrs. Rigos "agreed, promised and committed * * * to sell" to Sanchez... a
parcel of land... situated in the barrios of Abar and Sibot... with the understanding that said
option shall be... deemed "terminated and elapsed," if "Sanchez shall fail to exercise his right to
buy the property" within the stipulated period.

Inasmuch as several tenders of payment of the sum of P1,510.00, made by Sanchez within said
period, were rejected by Mrs. Rigos... the former deposited said amount with the Court of First
Instance of Nueva Ecija and commenced against the latter the present action, for specific
performance and damages.

After the filing of defendant's answer... alleging, as special defense, that the contract between
the parties "is a unilateral promise to sell, and the same being unsupported by any valuable...
consideration, by force of the New Civil Code, is null and void"... lower court rendered judgment
for Sanchez... ordering Mrs. Rigos to accept the sum judicially consigned by him and to execute

Hence, this appeal by Mrs. Rigos.

In his complaint plaintiff alleges that, by virtue of the option under consideration, "defendant
agreed and committed to sell" and "the plaintiff agreed and committed to buy" the land
described in the option

Hence, plaintiff maintains that the promise contained in the contract is "reciprocally
demandable," pursuant to the first paragraph of said Article 1479.

Issues:

This case admittedly hinges on the proper application of Article 1479 of our Civil Code
"ART. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally
demandable.

"An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding
upon the promissor if the promise is supported by a consideration distinct from the price."

Ruling:

Although defendant had really "agreed, promised and committed"... herself to sell the land to the
plaintiff, it is not true that the latter had, in turn, "agreed and committed himself" to buy said
property.

The option did not impose upon plaintiff the obligation to purchase defendant's property.

It merely granted plaintiff an "option" to buy.

Under the provisions thereof, the defendant "agreed, promised and committed" herself to sell
the land therein described to the plaintiff for P1,510.00, but there is nothing in the contract to
indicate that... her aforementioned agreement, promise and undertaking is supported by a
consideration "distinct from the price" stipulated for the sale of the land.

In order that said unilateral promise may be "binding" upon the promisor. Article 1479 requires
the concurrence of a condition, namely, that the promise be "supported by a consideration
distinct from the price." Accordingly, the promisee can not compel... the promisor to comply with
the promise, unless the former establishes the existence of said distinct consideration. In other
words the promiseehastheburdenofproving such consideration.

Squarely in point is Southwestern Sugar & Molasses Co. vs. Atlantic Gulf & Pacific Co

There is no question that under article 1479 of the new Civil Code 'an option to sell,' or 'a
promise to buy or to sell,' as used in said article, to be valid must be 'supported by a
consideration distinct from the price.'... his is clearly inferred from the context of said... article
that a unilateral promise to buy or to sell, evenifaccepted, is only binding if supported by a
consideration. In other words, 'an accepted unilateral promise' can only have a binding effect if
supported by a consideration, which means... that the option can still be withdrawn,
evenifaccepted, if the same is not supported by any consideration.

It is true that under article 1324 of the new Civil Code, the general rule regarding offer and
acceptance is that, when the offerer gives to the offeree a certain period to accept, 'the offer
may be withdrawn at any time before acceptance' except when the option is founded... upon
consideration, but this general rule must be interpreted as modified by the provision of article
1479 above referred to, which applies to 'a promise to buy and sell' specifically. As already
stated, this rule requires that a promise to sell to be... valid must be supported by a
consideration distinct from the price.
this Court itself, in the case of Atkins, Kroll and Co., Inc. vs. Cua Hian Tek... saw no distinction...
between Articles 1324 and 1479 of the Civil Code and applied the former where a unilateral
promise to sell similar to the one sued upon here was involved, treating such promise as an
option which, although not binding as a contract in itself for lack of a separate consideration,...
nevertheless generated a bilateral contract of purchase and sale upon acceptance.

Furthermore, an option is unilateral: a promise to sell at the price fixed whenever the offeree
should decide to exercise his option within the specified time. After accepting the promise and
before he exercises his option, the holder of... the option is not bound to buy. He is free either
to buy or not to buy later. In this case, however, upon accepting herein petitioner's offer a
bilateral promise to sell and to buy ensued, and the respondent ipso facto assumed the
obligations of a... purchaser. He did not just get the right subsequently to buy or not to buy. It
was not a mere option then, it was bilateral contract of sale.

If the option is given without a consideration, it is a mere offer of a contract of sale, which is not
binding until accepted. If, however, acceptance is made before a withdrawal, it constitutes a
binding contract of sale, even though the option was not supported by a... sufficient
consideration.

In other words, since there may be no valid contract without a cause or consideration, the
promisor is not bound by his promise and may, accordingly, withdraw it.

Pending notice of its withdrawal, his accepted promise partakes, however, of the nature of an
offer to sell... which, if accepted, results in a perfected contract of sale.

This view has the advantage of avoiding a conflict between Articles 1324 on the general
principles on contracts and 1479 on sales of the Civil Code, in line with the cardinal rule of
statutory construction that, in construing different provisions of one and the same law or code,...
such interpretation should be favored as will reconcile or harmonize said provisions and avoid a
conflict between the same.

Indeed, the presumption is that, in the process of drafting the Code, its author has maintained a
consistent philosophy or position. Moreover,... the decision in Southwestern Sugar & Molasses
Co. vs. Atlantic Gulf & Pacific Co.,[10] holding that Art. 1324 is modified by Art. 1479 of the Civil
Code, in effect, considers the latter as an exception to the former,... and exceptions are not
favored, unless the intention to the contrary is clear, and it is not so, insofar as said two (2)
articles are concerned.

Upon mature deliberation, the Court is of the considered opinion that it should, as it hereby
reiterates the doctrine laid down in the Atkins, Kroll & Co. case, and that, insofar as inconsistent
therewith, the view adhered to in the Southwestern Sugar & Molasses Co.
Case should be deemed abandoned or modified.
 15. C.W. Rosenstock (administrator of the estate of H.W. Elser) vs Edwin Burke
September 26, 1924 | AVANCEÑA, J.
Essential Requisites: Consent (Requisites) Art. 1319

FACTS:
• Defendant Edwin Burke owned a yacht known as Bronzewing, which he acquired in Australia
in 1920 for the purpose
of selling it and it was purely for recreation
• Nobody wanted to buy the yacht until Plaintiff H.W. Elser began negotiations with Burke in
1922.
• At that time, the yacht was mortgaged to the Asia Banking Corporation to secure the payment
of a debt of Php 100k
which was due and unpaid since 1 year prior, contracted by Burke in favor of said bank of which
Mr. Avery was the
manager.
• Plaintiff wanted to organize a yacht club and sell the yacht afterwards for 120k with 20k as
commission and 100k to
be paid to Burke
• On Feb. 12, 1922, Burke obtained from Plaintiff an option in writing that plaintiff confirms his
verbal offer to Burke of
the yacht at a price of Php 120k.
• First, the plaintiff wanted to make a voyage on board the yacht to the south with businessmen
for the purpose of
advertising the vessel. But the yacht needed some repairs in order for it to be seaworthy.
• The defendant did not have funds to make the repairs hence, the plaintiff paid almost all the
amount, the repairs cost
6,972 and 1730 due to Cooper Company.
• Once the repairs were done, the voyage commenced from March 6, 1922 to March 23, 1922.
After the voyage, the
plaintiff believed that the engine should be replaced which would cost 20k. The plaintiff then
negotiated another loan
with Mr. Avery of 20k to purchase the new engine.
• On March 31, Plaintiff wrote a letter to Burke stating that he tried to obtain a loan from Mr.
Avery for the purchase
of the new engine and that he was not disposed to purchase the vessel for more than 70k, Mr.
Avery told him that
he was not in position to give one cent more
• The defendant had arrived at an agreement with Mr. Avery about the sale of the yacht to
plaintiff for 80k payable
5k/month for the first 6 months then 10k thereafter until full payment.
• On April 1, Plaintiff informed the defendant that he was not inclined to accept this proposition.
On April 3, the Plaintiff
met with the Defendant and wrote a letter addressed to the defendant that:
o “In connection with the yacht Bronzewing, I am in position and am willing to entertain the
purchase of it…”
• Defendant and Mr. Avery signed at the bottom of the letter of Plaintiff. But on April 5, the
Plaintiff sent defendant a
letter that in view of the attitude of Mr. Avery regarding the 20k loan, it was impossible for him to
take charge of the
boat and he made delivery thereof to the defendant
• On April 8, Defendant demanded on plaintiff for the performance because he had accepted the
offer for the purchase
of the yacht by the plaintiff.
• Plaintiff brings an action against defendant to recover Php 6k for the repairs made on the yacht
which he paid for.
• Defendant alleges as a defense that the repairs will be paid for by plaintiff in exchange of the
gratuitous use of the
yacht for the voyage to the south. He also made a counterclaim and to compel plaintiff to comply
with the terms of
the contract.
• The Cooper Company was admitted to intervene for the unpaid repairs made on the yacht
amounting to 1,730.
• Trial Court: sentenced defendant to pay plaintiff 6k and to pay Cooper Company 1.7k. The
Plaintiff was also sentenced
to comply in all its parts with the contract for the purchase of the yacht.
• Both parties appeal the decision: for the Plaintiff argues that the letter was not a definite offer
to purchase while the
defendant raised the question as to who must pay the repairs made on the yacht.

ISSUE: W/N the statement “willing to entertain the purchase of it” is considered as a definite
offer to purchase – NO

HELD:
THERE WAS NO DEFINITE OFFER TO PURCHASE
• To convey the idea of a resolution to purchase, a man of ordinary intelligence would use these
clear and simple words:
I offer to purchase, I want to purchase, I am in position to purchase.
• But the plaintiff instead used the “willing to entertain” and the word “entertain” does not mean
the resolution to
perform said act but simply a position to deliberate for deciding to perform or not to perform said
act.
• It was a mere invitation to a proposal being made to him, which might be accepted by him or
not.
• Also looking at the circumstance, it would show that the intention of the plaintiff was not to
make a definite offer
since the purpose of acquiring the yacht was to sell it to another hence, he was not in a position
to make a definite
offer unless he is sure to be able to resell it to another.
• It can also be seen that the plaintiff thought it was necessary to replace the engine of the yacht
and the resolution of
the plaintiff to purchase the yacht depended on him being able to replace the engine which
depended on successfully
obtaining the 20k loan hence, the plaintiff was not in a position to make a definite offer.
• But above all, the letter was written by his stenographer, Mr. Parkins, when the plaintiff met
with the defendant to
talk about the purchase.
o The plaintiff stated that he was in a position to entertain the purchase, but the defendant
wanted to eliminate
the word entertain and instead make it into a definite offer but after discussion with the
defendant that
plaintiff was not in a position to make a definite offer, the word “entertain” was left in the letter.
• The Lower Court was wrong it stating that it was anomalous for the plaintiff to write the letter if
his purpose was only
to indicate to the defendant that he wanted the latter to make a proposal which he might reject
or accept.
• A proposition may be acceptable in itself, but its acceptance may depend on other
circumstance. The acceptance of
the defendant of the letter has no other meaning than that of accepting the proposition to make
this offer.
PLAINTIFF MUST PAY FOR THE REPAIRS
• Plaintiff: Agreement was that he had to advance only the amount of the repairs and that the
defendant was at last
the one to pay therefor.
• Defendant: Agreement was that the plaintiff was to pay for these repairs in exchange for the
use of the yacht
• The testimony of the plaintiff contradicted by that of the defendant, cannot be considered as a
sufficient evidence to
establish defendant’s obligation.
• Nothing was agreed upon about the kind of the repairs to be made and there was no limit to
said repairs. It is strange
that the defendant should accept liability for the amount of these repairs, leaving their extent
entirely to the
discretion of the plaintiff.

DISPOSITION:
Judgment is REVERSED. DEFENDANT is ABSOLVED from the complaint. PLAINTIFF is
sentenced to PAY to Cooper
Company and to the Defendant. The PLAINTIFF is DECLARED to be under NO OBLIGATION
to Purchase the yacht.
 16. ALEXANDER vs. SPS. ESCALONA
G.R. No. 256141
19 July 2022

FACTS:

Spouses Jorge and Hilaria Escalona were married on November 14, 1960. They acquired
unregistered parcels of land in Olongapo City (Lots 1 and 2). Jorge waived his rights over Lot 1
to this illegitimate son, Reygan. A few years later, Reygan relinquished his right over Lot 1 to
petitioner Belinda. Reygan also transferred Lot 2 to Belinda. They entered into a deed of sale
covering lots 1 and 2.

The spouses confronted Belinda and said that Reygan cannot validly sell the lots, while Belinda
invoked the validity of her contracts with Reygan.

The spouses filed a complaint for annulment of documents with damages against Belinda since:
(1) Hilaria did not consent to the waiver of rights to Reygan as to Lot 1, (2) They never sold Lot
2 to a third person.

RTC upheld the transactions between Belinda and Reygan, ruling that the action to annul the
documents have already prescribed. The CA reversed the RTC’s judgment.

ISSUE:

1. What rules shall govern the status of a contract and the prescriptive period of an action when
the husband and wife were married during the effectivity of the Civil Code, but the alienation or
encumbrance of the property transpired after the effectivity of the Family Code without the
spouse’s consent?

2. What is the reckoning point of the applicable law — is the date of the marriage or the time of
the transaction?

RULING:

The SC held that the governing law is the Family Code. More than the date of marriage of the
spouses, the applicable law must be reckoned on the date of the alienation or encumbrance of
the conjugal property made without the consent of the other spouse.

17. HEIRS OF WILLIAM SEVILLA v. LEOPOLDO SEVILLA, GR No. 150179, 2003-04-30

Facts:

Filomena Almirol de Sevilla died intestate leaving 8 children: William, Jimmy and Maria are now
deceased and are survived by... their respective spouses and children
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... respondents denied that there was fraud or undue pressure
in the execution of the questioned documents. They alleged that Felisa was of sound mind at
the time of the execution of the assailed deeds and that she freely and voluntarily... ceded her
undivided share in Lot No. 653 in consideration of Leopoldo's and his family's love, affection,
and services rendered in the past

Issues:

alleged 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 thereof; and
that the Deed of Extra-judicial Partition is void because it was executed without their knowledge
and consent.

Ruling:

petitioners failed to show proof why Felisa should be held incapable of exercising sufficient
judgment in ceding her share to respondent Leopoldo.

Principles:

One who alleges defect or lack of valid consent to a contract by reason of fraud or undue
influence must establish by full, clear and convincing evidence such specific acts that vitiated a
party's consent, otherwise, the latter's presumed consent to the... contract prevails.

Donation is an act of liberality whereby a person disposes gratuitously of a thing or right in favor
of another who accepts it.

donor's capacity shall be determined as of the time of the making of the donation.

Like any other contract, an agreement of the parties is essential,[22] and the attendance of a
vice of consent renders the donation voidable.

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.
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

18. 97.G.R. No. 126013. February 12, 1997

SPOUSES THEIS vs. COURT OF APPEALS

Facts:
Private respondent Calsons Development Corporation is the owner of three (3) adjacent parcels
of land. Adjacent to parcel no. 3, which is the lot covered by TCT No. 15684, is a vacant lot
denominated as parcel no. 4. Calsons Development constructed a two-storey house on parcel
no. 3. In a survey Conducted in 1985, the two idle lands (parcel nos. 1 and 2) were mistakenly
surveyed to be located on parcel no. 4, which was not owned by private respondent. Unaware
of the mistake, Calsons Development through its authorized representative, one Atty. Tarcisio S.
Calilung, sold said parcel no. 4 to petitioners. When petitioners returned to the Philippines, they
went to Tagaytay to look over the vacant lots and to plan the construction of their house thereon,
they discovered that parcel no. 4 was owned by another person. They also discovered that the
lots actually sold to them were parcel nos. 2 and 3 covered by TCT Nos. 15516 and 15684,
respectively. Parcel no. 3, however, could not have been sold to the petitioners by the private
respondents as a two-storey house, the construction cost of which far exceeded the price paid
by the petitioners, had already been built thereon even prior to the execution of the contract
between the disputing parties. To remedy the mistake, private respondent offered parcel nos. 1
and 2 covered by TCT Nos. 15515 and 15516, respectively, as these two were precisely the two
vacant lots which private respondent owned and intended to sell when it entered into the
transaction with petitioners. Petitioners adamantly rejected the good faith offer.

Issue: Whether or not the Contract of Sale between Spouses Theis and Calsons corporation is
voidable.

Ruling: Yes. Under Article 1390, contracts are voidable or annullable when the consent is
vitiated by mistake, violence, intimidation, undue influence, or fraud. Calsons obviously
committed an honest mistake in selling parcel no. 4 for it is quite impossible to sell the lot in
question as the same is not owned by Calsons. The good faith of the private respondent is
evident in the fact that when the mistake was discovered, it immediately offered two other
vacant lots to the petitioners or to reimburse them with twice the amount paid. That petitioners
refused either option left the private respondent with no other choice but to file an action for the
annulment of the deed of sale on the ground of mistake. A contract may be annulled where the
consent of one of the contracting parties was procured by mistake, fraud, intimidation, violence,
or undue influence.

Art. 1331 of the New Civil Code provides for the situations whereby mistake may invalidate
consent. It states:
"Art. 1331. In order that mistake may invalidate consent, it should refer to the substance of the
thing which is the object of the contract, or to those conditions which have principally moved one
or both parties to enter into the contract."
The concept of error in this article must include both ignorance, which is the absence of
knowledge with respect to a thing, and mistake properly speaking, which is a wrong conception
about said thing, or a belief in the existence of some circumstance, fact, or event, which in
reality does not exist. In both cases, there is a lack of full and correct knowledge about the thing.
The mistake committed by the private respondent in selling parcel no. 4 to the petitioners falls
within the second type. Verily, such mistake invalidated its consent and as such, annulment of
the deed of sale is proper

17. ADORACION LUSTAN v. CA, GR No. 111924, 1997-01-27 +

Facts:
Petitioner Adoracion Lustan is the registered owner of a parcel of land... petitioner leased the...
above described property to private respondent Nicolas Parangan for a term of ten (10) years
and an annual rent of One Thousand (P1,000.00) Pesos.

During the period of lease, Parangan was regularly extending loans in small amounts to
petitioner to defray her daily expenses and... to finance her daughter's education... the petitioner
executed a Special Power of Attorney in favor of Parangan to secure an agricultural loan from
private respondent Philippine National Bank (PNB) with the aforesaid lot as collateral.

a second

Special Power of Attorney was executed by petitioner, by virtue of which, Parangan was able to
secure four (4) additional loans

The last three loans were without the knowledge of herein petitioner and all the proceeds
therefrom were used by Parangan for his own benefit

These encumbrances were duly annotated on the certificate of title... petitioner... signed a Deed
of Pacto de Retro Sale... in favor of Parangan which was superseded by the Deed of Definite
Sale... which petitioner signed upon Parangan's representation that the same merely evidences
the loans... extended by him unto the former.

petitioner demanded the return of her certificate... of title.

Parangan asserted his rights over the property which allegedly had become his by virtue of...
the aforementioned Deed of Definite Sale.

Under said document, petitioner conveyed the subject property and all the improvements
thereon unto Parangan absolutely for and in consideration of the sum of Seventy Five Thousand
(P75,000.00) Pesos.
Aggrieved, petitioner filed an action for cancellation of liens, quieting of title, recovery of
possession and damages against Parangan and PNB in the Regional Trial Court

After trial, the lower court rendered judgment

Ordering cancellation by the Register of Deeds of the Province of lloilo, of the unauthorized
loans, the liens and encumbrances appearing in the Transfer Certificate of Title No. T-561,

Issues:

whether or not the Deed of Definite Sale is in reality an equitable mortgage and whether or not
petitioner's property is liable to PNB for the loans contracted by Parangan by virtue of the
special power of attorney.

Ruling:

The court a quo ruled that the Deed of Definite Sale is in reality an equitable mortgage as it was
shown beyond doubt that the intention of the parties was one of a loan secured by petitioner's
land

We agree.

In the case at bench, the evidence is sufficient to warrant a finding that petitioner and Parangan
merely intended to consolidate the former's indebtedness to the latter in a single instrument and
to secure the same with the subject property. Even when a document... appears on its face to
be a sale, the owner of the property may prove that the contract is really a loan with mortgage
by raising as an issue the fact that the document does not express the true intent of the parties

From a reading of the above-quoted provisions, for a presumption of an equitable mortgage to

arise, we must first satisfy two requisites namely: that the parties entered into a contract
denominated as a contract of sale and that their intention was to secure an existing debt by...
way of mortgage

Art. 1602, (6), in relation to Art 1604 provides that a contract of sale is presumed to be an
equitable mortgage in any other case where it may be fairly inferred that the real intention of the
parties is that the transaction shall secure the payment of a debt or the performance... of any
other obligation. That the case clearly falls under this category can be inferred from the
circumstances surrounding the transaction as herein set forth:

Third persons who are not parties to a loan may secure the latter by pledging or mortgaging
their own property.[20] So long as valid consent was given, the fact that the loans were solely for
the benefit of Parangan would not invalidate the mortgage with... respect to petitioner's property
In consenting thereto, even granting that petitioner may not be assuming personal liability for
the debt, her property shall nevertheless secure and respond for the performance of the
principal obligation.

It is... admitted that petitioner is the owner of the parcel of land mortgaged to PNB on five (5)
occasions by virtue of the Special Powers of Attorney executed by petitioner in favor of
Parangan. Petitioner argues that the last three mortgages were void for lack of authority

She... totally failed to consider that said Special Powers of Attorney are a continuing one and
absent a valid revocation duly furnished to the mortgagee, the same continues to have force
and effect as against third persons who had no knowledge of such lack of authority

The Special Power of Attorney executed by petitioner in favor of Parangan duly authorized the
latter to represent and act on behalf of the former. Having done so, petitioner clothed Parangan
with authority to deal with PNB on her behalf and in the absence of any proof that the... bank
had knowledge that the last three loans were without the express authority of petitioner, it
cannot be prejudiced thereby. As far as third persons are concerned, an act is deemed to have
been performed within the scope of the agent's authority if such is within the terms of... the
power of attorney as written even if the agent has in fact exceeded the limits of his authority
according to the understanding between the principal and the agent

Even when the agent has exceeded his authority, the principal is solidarily liable with the agent if
the former allowed the latter to act as though he had full powers (Article 1911, Civil Code)

The mortgage directly and immediately... subjects the property upon which it is imposed.

The property of third persons which has been expressly mortgaged to guarantee an obligation
to which the said persons are foreign, is directly and jointly liable for the fulfillment thereof; it is...
therefore subject to execution and sale for the purpose of paying the amount of the debt for
which it is liable

20. Katipunan v. Katipunan

G.R. No. 132415 | January 30, 2002 | Petition for review on certiorari of a decision of the
Court of Appeals | J. Sandoval-Gutierrez
FACTS:
Respondent Braulio Katipunan, Jr. is the owner of a 203-sq. m. lot and a five-door
apartment located at San Miguel Manila. The lot is registered in his name under TCT
No. 109193 of the Registry of Deeds of Manila. The apartment units are occupied by
lessees.
On December 1985, respondent assisted by his brother, petitioner Miguel
Katipunan, entered into a Deed of Absolute Sale with brothers Edgardo Balguma
and Leopoldo Balguma, Jr. (co-petitioners), represented by their father Atty. Leopoldo
Balguma, Sr., involving the subject property for a consideration of P187,000.00
Consequently, respondent’s title to the property was cancelled and in lieu thereof,
TCT No. 168394 was registered and issued in the names of the Balguma brothers. In
January, 1986, Atty. Balguma, then still alive, started collecting rentals from the
lessees of the apartments.
On March 10, 1987, respondent filed with the RTC of Manila a complaint for
annulment of the Deed of Absolute Sale, docketed as Civil Case No. 87-39891.
Respondent’s (Braulio) version:
o Braulio averred that his brother Miguel, Atty. Balguma and Inocencio Valdez
convinced him to work abroad. They even brought him to the NBI and other
government offices for the purpose of securing clearances and other
documents which later turned out to be falsified. Through insidious words and
machinations, they made him sign a document purportedly a contract of
employment, which document turned out to be a Deed of Absolute Sale.
o By virtue of the said sale, brothers Edgardo and Leopoldo, Jr. (co-defendants),
were able to register the title to the property in their names. Respondent
further alleged that he did not receive the consideration stated in the
contract.
o He was shocked when his sister Agueda Katipunan-Savellano told him that the
Balguma brothers sent a letter to the lessees of the apartment informing them
that they are the new owners. Finally, he claimed that the defendants, now
petitioners, with evident bad faith, conspired with one another in taking
advantage of his ignorance, he being only a third grader.
Petitioners’ version:
o Denied the allegations: They say that respondent was aware of the contents
of the Deed of Absolute Sale and that he received the consideration involved;
that he also knew that the Balguma brothers have been collecting the rentals
since December, 1985 but that he has not objected or confronted them; and
that he filed the complaint because his sister, Agueda Savellano, urged him to
do so
Twice respondent moved to dismiss his complaint (which were granted) on the
grounds that he was actually instigated by his sister to file the same; and that the
parties have reached an amicable settlement after Atty. Balguma, Sr. paid him 2,500
as full satisfaction of his claim.
In granting the MR, the TC was convinced that respondent did not sign the motion to
dismiss because of his poor comprehension, as shown by the medical report of Dr.
Revilla, a PGH psychiatrist. Besides, the RTC noted that respondent was not assisted
by counsel in signing said motions, thus it is possible that he did not understand the
consequences of his action.
RTC set the case for pre-trial and appointed Savellano as his guardian ad litem.
After hearing, the RTC dismissed the complaint, holding that the respondent failed to
prove his causes of action since he admitted that: (1) he obtained loans from the
Balgumas; (2) he signed the Deed of Absolute Sale; and (3) he acknowledged selling
the property and that he stopped collecting the rentals.
Upon appeal, CA rendered the assailed Decision which reversed and set aside the TC
judgment, and directed the Register of Deeds to cancel the same and restore TCT No.
109193 in the name of Braulio Katipunan.
In reversing the RTC decision, the Court of Appeals ruled the ff:
o The appellant’s contention finds support in the certification of Dr. Revilla that
the Braulio was slow in comprehension and has a very low IQ
o Art 1332 of the Civil Code: When one the parties is unable to read, or if the
contract is in a language not understood by him and mistake or fraud os
alleged, the person enforcing the contract must show that the terms thereof
have been fully explained to the former.
o Braulio has a mental state of a 6-y.o child, he cannot be considered fully
capactitated. He falls under the category of “incompetent” as defined in Sec
2, Rule 92 of the Rules of Court.
o Miguel aalso admitted that he and Braulio received the considerations of the
sale, although he did not explain what portion went to each of them. There is
nor eason why Miguel should receive part of the consideration, since he is not
a co-oqner of the property. Everything should have gone to Braulio. Yet, Miguel
did not refute he was giving him only small amounts
o As to the scheme utilized in defrauding Braulio, neither Miguel nor Artty.
Balguma refuted the staement that he was being enticed to go abroad – which
was the alleged reason for the purpoted sale. It is then most probable that it
was Miguel who wanted to go abroad and needed the money for it.
o The contract entered ino by Braulio and Atty. Balguma is voidable, pursuant to
Art 1390 of the Civil Code.
Art. 1390. The following contracts are voidable or annullable, even though
there may have been no damage to the contracting parties:
(1) Those where one of the parties is incapable of giving consent to a
contract;
(2) Those where the consent is vitiated by mistake, violence,
intimidation, undue influence or fraud.
These contracts are binding, unless they are annulled by a proper action in
court, they are susceptible of ratification.
ISSUE/HELD:
Whether the consent of Braulio Katipunan, Jr., in the sale of his property was vitiated
rendering the Deed of Absolute sale voidable – YES
RATIO:
A contract of sale is born from the moment there is a meeting of minds upon the
thing which is the object of the contract and upon the price. This meeting of the
minds speaks of the intent of the parties in entering into the contract respecting the
subject matter and the consideration thereof. Thus, the elements of a contract of sale
are consent, object, and price in money or its equivalent. Under Article 1330 of the
Civil Code, consent may be vitiated by any of the following: (a) mistake, (2)
violence, (3) intimidation, (4) undue influence, and (5) fraud. The presence of any of
these vices renders the contract voidable.
The facts show that Braulio signed the deed withoit the remotest idea of what it was
(based on the transcript of the Court). The circumstances surrounding the execution
of the contract manifest a vitiated consent on the part of respondent. Undue
influence was exerted upon him by brother Miguel and Inocencio Valdez (petitioners)
and Atty. Balguma. However, they did not explain to him the nature and contents of
the document. Worse, they deprived him of a reasonable freedom of choice.
Respondent signed the deed without the remotest idea of what it was. The
circumstances surrounding the execution of the contract manifest a vitiated consent
on the part of respondent. Undue influence was exerted upon him by his brother
Miguel and Inocencio Valdez and Atty. Balguma. It was his brother Miguel who
negotiated with Atty. Balguma. However, they did not explain to him the nature and
contents of the document. Worse, they deprived him of a reasonable freedom of
choice. It bears stressing that he reached only grade three. Thus, it was impossible
for him to understand the contents of the contract written in English and embellished
in legal jargon. His lack of education, coupled with his mental affliction, placed him
not only at a hopelessly disadvantageous position vis- à-vis petitioners to enter into a
contract, but virtually rendered him incapable of giving rational consent. To be sure,
his ignorance and weakness made him most vulnerable to the deceitful cajoling and
intimidation of petitioners.
Braulio did not receive the purchase price. His testimony was not controverted by
Miguel. Moreover, Atty. Balguma admitted that it was Miguel who received the money
from him. What Miguel gave respondentwas merely loose change or “barya-barya,”
grossly disproportionate to the value of his property.
A contract where one of the parties is incapable of giving consent or where consent is
vitiated by mistake, fraud, or intimidation is not void ab initio but only voidable and is
binding upon the parties unless annulled by proper Court action. The effect of
annulment is to restore the parties to the status quo ante insofar as legally and
equitably possible-- this much is dictated by Article 1398 of the Civil Code. As an
exception however to the principle of mutual restitution, Article 1399 provides that
when the defect of the contract consists in the incapacity of one of the parties, the
incapacitated person is not obliged to make any restitution, except when he has been
benefited by the things or price received by him. Thus, since the Deed of Absolute
Sale between respondent and the Balguma brothers is voidable and hereby annulled,
then the restitution of the property and its fruits to respondent is just and proper.
Petitioners should turn over to respondent all the amounts they received starting
January, 1986 up to the time the property shall have been returned to the latter.
Article 24 of the Civil Code enjoins courts to be vigilant for the protection of a party to
a contract who is placed at a disadvantage on account of his ignorance, mental
weakness or other handicap, like respondent herein.
DISPOSITIVE:
WHEREFORE, the petition is DENIED. The assailed Decision of the Court of Appeals dated
July
3, 1997 in CA- G.R. CV No. 45928 is AFFIRMED with MODIFICATION in the sense that
petitioners Edgardo Balguma and Leopoldo Balguma, Jr., are ordered to turn over to
respondent Braulio Katipunan, Jr. the rentals they received for the five-door apartment
corresponding to the period from January, 1986 up to the time the property shall have been
returned to him, with interest at the legal rate. Costs against petitioners.

21.Martinez vs Hongkong and Shanghai Bank

G.R. No. L-5496
Date: February 19, 1910
Ponente: J. Moreland

Plaintiffs-appellants: MERCEDES MARTINEZ Y FERNANDEZ, ET AL.

Defendants-appellants: THE HONGKONG & SHANGHAI BANKING CORPORATION, ET
AL.
FACTS:
1. Alejandro S. Macleod (husband of Mercedes) was for many years the managing
partner of the house of Aldecoa & Co. in the city of Manila.
2. He withdrew from the management when Aldecoa & Co. went into liquidation.
3. Hongkong & Shanghai banking Corporation was a creditor of that firm to the extent of
several hundred thousand pesos and claimed to have a creditor's lien in the nature of
a pledge over certain properties of the debtor.
4. Bank began a civil action against Alejandro, Mercedes, Aldecoa & Co., and the firm
known as Viuda e Hijos de Escaño.
• A certain undertaking in favor of Aldecoa & Co. had been pledged to the bank to
secure the indebtedness of Aldecoa & Co., but that this obligation had been
wrongfully transferred by Alejandro into an obligation in favor in Mercedes to the
prejudice of the bank.
• Aldecoa & Co. began a civil action against Alejandro S. Macleod and others for
the recovery of certain shares of stock basing its right to recover upon alleged
criminal misconduct of Alejandro in his management of the firm's affairs.
5. Knowing that criminal complaints would be filed against him, Alejandro went to Macao
(Portuguese colony) a territory not covered by the extradition treaty between US and
Portuguese.
6. Aldecoa filed a complaint against Alejandro for
• Falsification of commercial document. The GPR requested the Portuguese
government for extradition but this was denied
• Embezzlement
7. Aldecoa & Co. and the bank, on the settlement, insisted upon the conveyance not only
of all the property of Alejandro but also of at least a portion of the property claimed by
Mercedes.
• Alejandro's representative did not resist but Mercedes resisted with respect to
her properties alleging that these were exclusively hers.
8. They met again to try and settle the case
• The conditions and terms were to be explained to Mr. Kingcome (son-in-law of
Mercedes and businessman)
• The explanation was made by Mr. Stephen, the manager of the bank (one of the
friends of Mr. Kingcome) but it is contested whether Kingcome communicated
such substance to Mercedes before she signed the document
• Reference was made to the British Colony in Manila where Kingcome, Stephen,
Alejandro were prominent members and scandal and disgrace will ensure if
settlement is not made.
• Mr. Kingcome got the impression from that interview that Mr. Stephen thought
unless the settlement were consummated additional and mortifying misfortunes
wound fall upon Alejandro's family.
9. A long conference was held
• If Mercedes accepts, the civil suits against them would be dismissed and criminal
charges would be withdrawn
• If she refuses, her husband will spend the rest of his life in Macao or be
criminally prosecuted
• She refused and it was evident no settlement or comprise can be arrived at and
just do the best to defend Alejandro.
10. Mercedes and Mr. William (nephew and close friend of Mercedes and Alejandro), now
her attorney, talked wherein Mercedes agreed to the terms and authorized William to
execute the contract of settlement on her behalf, and after corrections, it was signed.
11. Aldecoa took possession of the properties of Alejandro and Mercedes, and the
complaints were withdrawn or dismissed, Alejandro returned to Manila.
12. Mercedes filed a complaint that there was intimidation.

ISSUE1: WON the contract can be annulled since Mercedes' consent was obtained due to
violence and intimidation?

HELD 1: Valid, no duress.

Discussion
• Contracts which are declared void and of no force upon the ground that they were
obtained by fraud, duress, or undue influence are so declared for the reason that the
complaining party never really gave his consent thereto. The consent in such case is
not in the eye of the law a consent at all. The person has not acted. He has done
nothing he was in vinculis(in chains)

In this case:
1. The elements of duress is lacking.
2. The most that the facts disclose is that the plaintiff was reluctant to relinquish certain
rights which she claimed to have in certain property to the end that she might be
relieved from litigation then pending against her and that her husband might escape
prosecution for crimes alleged to have been committed; and that she persisted for a
considerable time in her refusal to relinquish such claimed rights.
3. The fact that she did relinquish them upon such consideration and under such
condition does not of itself constitute duress or intimidation, nor does it destroy the
obligatory effect and force of her consent.
4. Duress needs more than that – she must have acted from fear and not from judgment.
ISSUE2: WON the cases cited by plaintiff is applicable?

HELD2: NO, not applicable.

1. In those cases there was no time within which to deliberate the matter as it should
have been deliberated or take the advice of others or counsel.
2. The treats made to secure the performance of the acts complained of were made
directly to the complaining party by the person directly interested or by someone in his
behalf who was working in his interest and who had no interest whatever in the welfare
of the complaining party.
3. There was no consideration for the performance of the act complained of except
immunity from the prosecution threatened.
4. The property transferred or encumbered by the act complained of was the separate
property of the person performing the act in which the person for whom the act was
performed claimed no interest whatever.
5. There was no dispute as to the title of the property transferred or encumbered, no
claim made to it by anybody, no suits pending to recover it or any portion of it, and no
pretension that it could be taken for the debts of the husband or of any other person.
The 2 other cases had the benefit of legal advice or friend but none of the other circumstances
listed above were present.
Basically, the cases cited had material differences with the instant case.

22. FERRO CHEMICALS v. ANTONIO M. GARCIA, GR No. 168134, 2016-10-05

Facts:

Ferro Chemicals Incorporated (Ferro Chemicals), is a domestic corporation duly authorized

by existing law to engage in business in the Philippines. It is represented in this action by its
President, Ramon M. Garcia.

On 15 July 1988, Antonio Garcia and Ferro Chemicals entered into a Deed of Absolute Sale
and Purchase of Shares of Stock[5] over 1,717,678 shares of capital stock of Chemical
Industries registered under the name of Antonio Garcia for a consideration of
P-79,207,331.28 (subject shares). Included as subjects of the sale were Antonio Garcia's
371,697 shares of stocks in Vision Insurance Consultants, Inc., (VIC) and his proprietary
membership in Alabang Country Club and Manila Polo Club.

Pursuant to the sale contract, Ferro Chemicals remitted the amount of P-35,462,869.92 to
Security Bank and Trust Co. (SBTC) in the form of a check drawn against its account with
Bank of America. On the ground that the amount tendered was insufficient to satisfy Antonio
Garcia's obligation, the payment was not accepted by Security Bank, leaving the obligor
with no recourse but to consign the check to the court which adjudicated his liability.
(Security Bank Case) On 19 June 1990, the CA approved the consignation effected by
Antonio Garcia and held that the amount tendered is sufficient to discharge his liability. In a
Resolution dated 21 November 1990 the Court affirmed the final settlement of Antonio
Garcia's liability with the bank. This settled the Security Bank Case with finality.
On 17 January 1989, Antonio Garcia entered into a Compromise Agreement[6] with
Philippine Investments System Organization (PISO), Bank of the Philippine Islands (BPI),
Philippine Commercial International Bank (PCIB), Rizal Commercial Banking Corporation
(RCBC) and Land Bank of the Philippines (LBP) (collectively known as Consortium Banks).
The settlement was entered in connection with the Surety Agreements previously
contracted by Antonio Garcia and Dynetics Corporation with the onsortium Banks.

Issues:

Subsequently, the RTC issued Orders dated 25 March 1988 and 20 May 1988 dismissing
Civil Case No. 8527. In effect, the causes of ac... action of the plaintiffs and the
counterclaims of the defendants were all denied. Insisting on their right to enforce the surety
contracts, the Consortium Banks assailed the dismissal of Civil Case No. 8527 before the
appellate court. During the pendency of the appeal docketed as CA-G.R. No. 20467, the
parties agreed to amicably settle the case, and thus, the creditors accepted the offer of the
debtors to immediately pay the obligation in exchange for the waiver of interests, penalties
and attorney's fees. The compromise agreement, which required Antonio Garcia and
Dynetics to pay the Consortium Banks the amount of P145,000,000.00, was consequently
approved by the CA in a Judgment dated 22 May 1989.

Ruling:

After the parties in the First Consortium Case forged a Compromise Agreement, Antonio
Garcia and Ferro Chemicals entered into a Deed of Right to Repurchase[8] dated 3 March
1989. Under the repurchase contract, Ferro Chemicals stipulated to sell back the subject
shares to Antonio Garcia within 180 days from its execution or until 30 August 1989