May 24 Obli Digests

Espiritu,
Gervacio, Liao, Maravilla, Obnamia, Ongtenco, Pobe, Tabalingcos

May 23, 2017 Oblicon Digests
14. CLCI subsequently claimed that the bank breached the terms of repurchase, as it had
1320 Traders Royal Bank vs Cuison Lumber (G.R. No. 174286, June 5, 2009) wrongly considered its payments (in the amounts of P140,485.18, P200,000.00 and
P100,000.00) as earnest money, instead of applying them to the purchase price.
Art. 1320. An acceptance may be express or implied. (n) 15. Through its counsel, CLCI demanded that the bank rectify the repurchase
agreement to reflect the true consideration agreed upon for which the earnest
FACTS: money had been given. The bank did not act on the demand. Instead, it informed
1. CLCI, through its President, Cuison Sr., obtained two loans from Traders Royal Bank, CLCI that the amounts it received were not earnest money, and that the bank was
secured by a REM, on July 14, 1978 and December 9, 1979, respectively. willing to return these sums, less the amounts forfeited to answer for the
2. CLCI failed to pay the loan (defaulted), prompting the bank to extrajudicially foreclose unremitted rentals on the subject property. CLCI: no perfected contract.
the mortgage on the subject property. 16. The RTC ruled that a perfected contract existed based mainly on the following
3. The bank was declared the highest bidder; title transferred after auction sale. facts:
4. In a series of written communications between CLCI and the bank, CLCI manifested a. The existence of the TRB Repurchase Agreement which clearly depicts the
its intention to restructure its loan obligations and to repurchase the subject repurchase agreement of the subject property under the terms therein
property. embodied;
5. **IMPORTANT** Cuison, Sr. died. On July 31, 1986, Mrs. Cuison, the widow and b. The payment of earnest money in the total amount of P435,000.00 which
administratrix of the estate of Roman Cuison Sr., wrote the banks OIC, forms part of the price and, as initial payment, is proof of the perfection of
Remedios Calaguas, a letter indicating her offered terms of repurchase; terms the contract.
of repurchase. 17. In concurring with the foregoing findings on appeal, the CA, in turn, declared that there
6. CLCI paid the bank P50,000.00 (on August 8, 1986) and P85,000.00 (on September was a meeting of the minds between the parties on the offer and acceptance
3, 1986). The bank received and regarded these amounts as earnest money for the
repurchase of the subject property. ISSUE: Whether or not a perfected contract of repurchase existed and can be enforced
7. **IMPORTANT** On October 20, 1986, the bank sent Atty. Roman Cuison, Jr. between the parties
(Atty. Cuison), as the president and general manager of CLCI, a letter informing
CLCI of the banks board of directors resolution of October 10, 1986 (TRB RULING: YES, BUT THE CONTRACT WAS A PERFECTED CONTRACT, IN THE
Repurchase Agreement), laying down the conditions for the repurchase of the NATURE OF A CONTRACT TO SELL. Non-payment thereof constituted a condition
subject property. The purchase price amounted to approximately Php 1.2M, preventing the obligation of the vendor to convey title from acquiring any obligatory
principal, plus payment of interests. force.
8. CLCI failed to comply with the terms notwithstanding the extensions of time given by
the bank. Nevertheless, CLCI tendered, on February 3, 1987, a check for RATIO:
P135,091.57 to cover fifty percent (50%) of the twenty percent (20%) bid price. The Under the law, a contract is perfected by mere consent, that is, from the moment that
check, however, was returned for insufficiency of funds. there is a meeting of the offer and the acceptance upon the thing and the cause that
9. On May 13, 1987, CLCI tendered an additional P50,000.00. On May 29, 1987, the constitute the contract.[14] The law requires that the offer must be certain and the
bank sent Atty. Cuison a letter informing him that the P185,000.00 CLCI paid was not acceptance absolute and unqualified.[15] An acceptance of an offer may be express
a deposit, but formed part of the earnest money under the TRB Repurchase and implied; a qualified offer constitutes a counter-offer.[16]
Agreement. Case law holds that an offer, to be considered certain, must be definite,[17] while an
10. On August 28, 1987, Atty. Cuison, by letter, requested that CLCIs outstanding acceptance is considered absolute and unqualified when it is identical in all respects
obligation of P1,221,075.61 (as of July 31, 1987) be reduced to P1 million, and the with that of the offer so as to produce consent or a meeting of the minds.[18]
amount of P221,075.61 be condoned by the bank. To show its commitment to the The ascertainment of whether there is a meeting of minds on the offer and acceptance
request, CLCI paid the bank P100,000.00 and P200,000.00 on August 28, 1987. The depends on the circumstances surrounding the case.[19]
bank credited both payments as earnest money. The facts of the present case, although ambivalent in some respects, point on the
11. A year later, CLCI inquired about the status of its request. The bank responded whole to the conclusion that both parties agreed to the repurchase of the
that the request was still under consideration by the banks Manila office. subject property.
(implied acceptance) Proof of contract not being perfected considered by the RTC and CA:
12. On September 30, 1988, the bank informed CLCI that it would resell the subject o The tenor of acceptance in the, except for the repurchase price, was subject
property at an offered price of P3 million, and gave CLCI 15 days to make a to conditions not identical in all respects with the CLCIs letter-offer of July
formal offer; otherwise, the bank would sell the subject property to third 31, 1986. In this sense, the banks October 20, 1986 letter was effectively a
parties. (implied acceptance) counter-offer that CLCI must be shown to have accepted absolutely and
13. On October 26, 1988, CLCI offered to repurchase the subject property for P1.5 unqualifiedly in order to give birth to a perfected contract.
million, given that it had already tendered the amount of P400,000.00 as earnest o Evidence exists showing that CLCI did not sign any document to show its
money. (implied acceptance) conformity with the banks counter-offer. Testimony also exists explaining
why CLCI did not sign; Atty. Cuison testified that CLCI did not agree with the
Espiritu, Gervacio, Liao, Maravilla, Obnamia, Ongtenco, Pobe, Tabalingcos
implementation of the repurchase transaction since the bank made a wrong Respondents countered that the complaint must be dismissed for lack of cause
computation. of action that the filing was a mere leverage of Roberto against them because
RE. DOCTRINE ARTICLE 1320 IMPLIED CONSENT: Notwithstanding the of the favorable decision in the MeTC in the ejectment case
foregoing facts, THE SUPREME COURT FOUND THAT THE CLCI accepted the RTC issued an order: (dismissed complaint)
terms of the TRC Repurchase Agreement and thus unqualifiedly accepted the banks o the DOAS made by Lourdes in favor of the De Leons is VALID and
counter-offer under the TRB Repurchase Agreement and, in fact, partially executed BINDING
the agreement. This was proven by the fact that CLCI requested for an extension of o the offer made by Lourdes to Roberto did not ripen into a contract to sell
time, continuously paid the repurchase price, and took possession of the subject because the price offered by the former was not acceptable to the latter
property, even though they didn't have a signed contract between the parties. o the offer made by Lourdes is no longer binding and effective at the time
The evidence that may point to an absence to a meeting of the minds, were the she decided to sell the subject lot to the De Leons because the same
results of CLCIs failure to comply with its obligations to pay the amounts due on the was not accepted by Roberto
stipulated time and were made after the parties minds had met on the terms of the CA affirmed RTC decision
contract. The seemingly contrary indications, therefore, do not go into and affect the
perfection of the contract; they came after the contract had been perfected and, ISSUE: WON respondents letter is an option contract or a contract of a right of first refusal
as discussed below, were indicative of the banks cancellation of the repurchase
agreement. HELD: OPTION CONTRACT. petition is denied. RTC and CA decision are affirmed.
RATIO:
1324 Tuazon vs Suarez, et al. (G.R. No. 168325, December 8, 2010) This case involves an option contract and not a contract of a right of first refusal
CONTRACT OF OPTION An agreement in writing to give a person the option
Article 1324. When the offerer has allowed the offeree a certain period to accept, the to purchase lands within a given time at a named price is neither a sale nor an
offer may be withdrawn at any time before acceptance by communicating such agreement to sell. It is simply a contract by which the owner of property agrees
withdrawal, except when the option is founded upon a consideration, as something with another person that he shall have the right to buy his property at a fixed
paid or promised. (n) price within a certain time
RIGHT OF FIRST REFUSAL while the object might be made determinate, the
FACTS: exercise of the right, however, would be dependent not only on the grantor's
Respondent Lourdes Suarez owner of a parcel of land located along Tandang eventual intention to enter into a binding juridical relation with another but also on
Sora Street, Barangay Old Balara, Quezon City terms, including the price, that obviously are yet to be later firmed up
On June 24, 1994, petitioner Roberto D. Tuazon and Lourdes executed a it is clear that an option contract is entirely different and distinct from a right of
Contract of Lease over the abovementioned parcel of land for a period of three first refusal in that in the former, the option granted to the offeree is for a fixed
years lease commenced in March 1994 and ended in February 1997 period and at a determined price. Lacking these two essential requisites, what is
During the effectivity of the lease, Lourdes sent a letter to Roberto where she involved is only a right of first refusal
offered to sell to the latter subject parcel of land She pegged the price It is clear that the letter embodies an option contract as it grants Roberto a
at P37,541,000.00 and gave him two years from January 2, 1995 to decide on fixed period of only two years to buy the subject property at a price certain
the said offer of P37,541,000.00
On June 19, 1997 (more than four months after the expiration of the Contract of Art. 1324. When the offerer has allowed the offeree a certain period to
Lease) Lourdes sold subject parcel of land to her only child, Catalina Suarez- accept, the offer may be withdrawn at any time before acceptance by
De Leon, her son-in-law Wilfredo De Leon, and her two grandsons, Miguel Luis communicating such withdrawal, except when the option is founded upon
S. De Leon and Rommel S. De Leon for a total consideration of a consideration, as something paid or promised
only P2,750,000.00 as evidenced by a Deed of Absolute Sale It is clear from the provision of Article 1324 that there is a great difference
A TCT was then issued by the Registry of Deeds of Quezon City in the name of between the effect of an option which is without a consideration from one which is
the De Leons founded upon a consideration
The new owners notified Roberto to vacate the premiseS Roberto refused If the option is without any consideration, the offeror may withdraw his offer by
the De Leons filed a complaint for Unlawful Detainer before the MeTC communicating such withdrawal to the offeree at anytime before acceptance; if it
MeTC rendered a decision ordering Roberto to vacate the property for non- is founded upon a consideration, the offeror cannot withdraw his offer before the
payment of rentals and expiration of the contract lapse of the period agreed upon
While the case was pending, Roberto filed a complaint with the RTC for under Article 1324 of the new Civil Code, the general rule regarding offer and
annulment of DOAS, Reconveyance, damages and application for preliminary acceptance: when the offerer gives to the offeree a certain period to accept, "the
injunction against Lourdes and the De Leons 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 o Her husband, Pedro Domingo Uy is a Chinese national but was
promise to buy and sell" specifically. As already stated, this rule requires that a naturalized as a Filipino on January 16, 1976
promise to sell to be valid must be supported by a consideration distinct from the o In his income tax return for the year 1990, Johnny P. Uy appears to be
price Pedro Domingo Uys lone dependent
The counter-offer of Roberto for a much lower price was not accepted by Lourdes o Lino Uy and Mario Uy, the spouses of Jolly Gan Uy and Leoncia
no contract that was perfected between them with regard to the sale of subject Coloma, respectively, are the brothers of Pedro Domingo Uy and both
propert are Chinese citizens
Roberto, thus, does not have any right to demand that the property be sold to him o In their Joint Affidavit, Pedro Domingo Uy and Preciosa Uy alleged
at the price for which it was sold to the De Leons neither does he have the right among others that they gave their son Johnny P. Uy to the spouses
to demand that said sale to the De Leons be annulled Lino Uy and Jolly Gan Uy upon his birth and Leoncia Coloma
purchased the land in question for Johnny P. Uy on January 4, 1979
RTC in favor of respondents
1327 Pua vs CA (G.R. No. 134992, November 20, 2000) o Deed of donation executed by Pepiro and late qife Lourdes valid and
binding
Article 1327. The following cannot give consent to a contract: o Deeds of sale in favor of minor null and void
(1) Unemancipated minors; CA affirmed RTC ruling
(2) Insane or demented persons, and deaf-mutes who do not know how to write.
(1263a) ISSUE: WON the Court of Appeals erred when it upheld the lower courts erroneous finding
that 1979 Deed of Sale was void because petitioner Johnny Uy lacked legal capacity
FACTS:
Plaintiff Myrna S. Pua and the defendant Pepito S. Pua are sister and brother, HELD: NO. Decision appealed from is hereby AFFIRMED.
their mother being Jovita S. Pua
Jovita Pua former owner of the subject property RATIO:
Jovita placed the subject property in the name of her eldest son Pepito Pua, but Court finds no cogent reason to disturb the findings of both courts below where
continued to exercise rights of dominion over said property by leasing such to the facts found by the Court of Appeals sustaining the trial court readily converge
Cesar Calitis towards one conclusion that the alleged sales by Pepito Pua in favor Johnny P.
as representative of Pepito S. Pua, Jovita S. Pua entered into an amicable Uy in 1979 and 1990 were absolutely simulated
settlement in an ejection case wherein she agreed to convey to Arsenio Uy The contract of sale is perfected at the moment there is a meeting of the minds
twelve (12) square meters of the land in question sale was registered upon the thing which is the object of the contract and upon the price
the remaining lot was intended for Jovitas daughter she required Pepito to Consent is manifested by the meeting of the offer and the acceptance upon the
convey the same a deed of donation was executed thing and the cause which are to constitute the contract
the daughter leased the lot And building to Cesar Calitis but executed a Unemancipated minors, insane or demented persons, and deaf-mutes who do
document promising to sell the same property to the intervenors Arsenio Uy and not know how to write can not validly give consent to contracts Johnny P. Uy
Rosita Uy for a consideration of P1,200,000.00 (out of which P400,000 was could not have validly given his consent to the contract of sale, as he was not
already paid) even conceived yet at the time of its alleged perfection
a Deed of Absolute Sale of the property donated to the daughter was executed Appellate court, therefore, correctly ruled that for lack of consent of one of the
by Pepito S. Pua and Lourdes Uy in favor of one Johnny P. Uy (minor contracting parties, the deed of sale is null and void
represented by Leoncia Coloma Uy) registered in the ROD Evidence shows that Johnny P. Uy who was named in the deed of sale as the
another deed of absolute sale of the same property was executed by Pepito S. buyer, was actually born on March 1, 1980 said deed of sale in his favor was
Pua and Lourdes Uy in favor of the same Johnny P. Uy ratified by notary executed on January 4, 1979
public but not registered appellate court correctly found that since said Johnny P. Uy was not even
During trial, OIC clerk of Isabela testified that among the documents on file are conceived yet at the time of the alleged sale, he therefore had no legal
ratified by Atty. Remigio in his capacity as notary public that upon motion of personality to be named as a buyer in the said deed of sale. Neither could he
the petitioners, these documents were submitted for handwriting examination of have given his consent thereto
the genuine signatures of notary public Remigio The appellate court likewise correctly found that Leoncia Coloma could not have
Conclusion of handwriting expert: the signature in the exhibit was not written by acted as representative of Johnny P. Uy. In the first place, she did not have the
Remigio right to represent Johnny P. Uy for lack of legal authority to act for and in behalf
evidence further shows that: of said minor
o Johnny P. Uy was delivered by Preciosa Uy at the Chinese General
Hospital in Manila on March 1, 1980
petitioners themselves insist that Leoncia Coloma was not acting in a o That the defendant has nothing with which to support herself and her
representative capacity when she purchased the subject, but rather, that she was children, and that P80 which at present the plaintiff is giving her is not
acting in her own behalf as the actual buyer of said land sufficient for that purpose
GENERAL RULE: without authority from the Court, no person can make a valid o That to properly support herself and the children and to employ an
contract for or on behalf of a minor attorney to defend the suit, she requires a pension of P500 per month
and the sum of P800 to be paid in advance on account of attorney's
fees
1327 Engle vs Doe (G.R. No. L-23317, August 7, 1925) Defendant prays that that she be absolved from the complaint, and that the court
make an order requiring the plaintiff to make such allowances for her pension and
Article 1327. The following cannot give consent to a contract: attorney's fees
(1) Unemancipated minors; Lower Court found that:
(2) Insane or demented persons, and deaf-mutes who do not know how to write. o That plaintiff at the time of said marriage ceremony in St. Luke's
(1263a) Hospital was mentally deranged to such an extent that he was
incapable of entering into the marriage contract or any other contract,
FACTS: and that for this reason the marriage ceremony was null and void.
it is alleged that Floyd Engle for about two months has been an inmate of the St. o That the defendant is not entitled to anything
Luke's Hospital in the City of Manila, where he was being treated for serious Lower Court rendered a decree to the effect that the marriage between the
physical and mental disorders by Doctor N.M. Saleeby, the Director of the plaintiff and the defendant was "illegal, null, and void ab initio, and without any
Hospital legal effect as to plaintiff's and defendant's property rights, without costs to either
defendant is a resident of the town of Tacloban, Province of Leyte, but at present party
is somewhere in the City of Manila
on or about December 9, 1922, and in the hospital in the City of Manila, the ISSUE: WON petitioner was mentally deranged to such an extent that he was incapable of
defendant, through the aid of her friends and agents, induced and coerced Floyd entering into the marriage contract, so as to render the marriage between petitioner and
Engle to go through some sort of a marriage ceremony with her, knowing at the defendant null and void ab initio
time that he, Floyd Engle, was out of his mind and mentally deranged
after the procuring of the certificate of the so-called marriage, the defendant HELD: YES. Judgment appealed from is affirmed. there is a failure of proof on the part of
forthwith returned to Tacloban, and endeavored to take possession of all of the defendant. It is not sufficient to overcome the clear, positive and convincing testimony
Engle's property who was worth at least P50,000 That the conspiracy of the for the plaintiff, that Engle was of unsound mind at the time of the marriage
defendant to marry him was for the sole purpose of obtaining his property, and to
default Engle and his legitimate heirs of their property RATIO:
plaintiff prays that a special provisional guardian be appointed for Engle and that October 18, 1922. Floyd Engle became an inmate of St. Luke's Hospital in the
a preliminary injunction issue against the defendant, restraining her from City of Manila with Dr. N.M. Saleeby as his physician. It appears from the hospital
interfering with his property, and that the alleged marriage be declared void ab records that at the time of his admission his disease was defined as: Insanity,
initio, and for costs, and such other and further relief as may be deemed just and Delusional & Melancholic & Amebic Infection & Tertiary Syphilis
equitable Dr. Saleeby testified in Court:
defendant denied all allegations and alleges that:
o That for the last 14 years she has been living martially under the same Q. Will you state to the court whether or not during all that time he had sufficient mentality
roof with the petitioner by whom she has 6 children to knowingly enter into a contract of any kind? A. He was absolutely unable to make any
o That on December 7, 1922 they were legally married decision of any kind, and was not fit to make a contract with any one in any business
o That in contracting the marriage, plaintiff was in the full enjoyment of all transaction of any significance.
of his mental faculties, and that he entered into the contract freely, not
only for the purpose of making his status and that of the defendant and Q. Was the mental condition of Mr. Engle the same from the time he entered the hospital
her children legal, but to provide for her future in case of his death up to the time he left, or did it suffer any change? A. He was at his worst at the time the
o That induced by his alleged friends, the plaintiff has caused and priest visited him, and he kept in that same condition until about a month prior to his
consented to the filing of the complaint, together with the application for discharge from the hospital. At the time of his discharge he was in better condition than
the appointment of a guardian of his person and property, to make it when the priest visited him, but he was by no means in a fit mental condition.
appear that he is not of sound mind, when in truth and in fact he was
then and is now in the full enjoyment of all of his mental faculties Q. Will you state to the court whether or not during the time that Mr. Engle was in the
o alleges that when they began living together, plaintiff did not have any hospital he was sane or insane? A. Mr. Engle was insane from the date he entered the
property, and that through her aid and assistance, he has amassed a hospital until he was discharged.
considerable fortune, which at present is not less than P200,000
record is conclusive that Doctor Saleeby was a fair and impartial witness, and Petitioner maintained that no joint settlement of the estate of Jose Sebastian and
that he had no interest whatever in the result of this suit, and that he was in daily Tomasina Paul could be effected since what existed between them was co-
attendance upon Engle from the time that he entered until he left the hospital, ownership, not conjugal partnership They were never married to each other
covering a period of about five months the extrajudicial partition was therefore unlawful and illegal
insanity is a manifestation in language or conduct, of disease or defect of the Petitioner also claimed that her consent was vitiated because she was deceived
brain, or a more or less permanently diseased or disordered condition of the into signing the extrajudicial settlement and further denied having appeared
mentality, functional or organic, and characterized by perversion, inhibition, or before Judge Juan Austria of the MTC to acknowledge the execution of the
disordered function of the sensory or of the intellective faculties, or by impaired or extrajudicial partition
disordered volition Private respondents raised the defense of lack of cause of action, insisting that
evidence is conclusive that at the time he was admitted to the hospital Engle was the document in question was valid and binding between the parties that they
of unsound mind, and it tends to show that his disease was incurable. The fact personally appeared before Judge Austria of the MTC of Urbiztondo, who read
that Engle was received and treated as an insane patient on October 18, 1922, and explained the contents of the document which all of them, including
and that he was not discharged from the hospital until March, 1923, throws the petitioner, voluntarily signed
burden of proof upon the defendant to establish the fact that he was of sound Private respondents contended that their declaration that they were legitimate
mind at the time of the alleged marriage children of Jose Sebastian and Tomasina Paul did not affect the validity of the
extrajudicial partition because the Petitioners act of signing the document
estopped her to deny or question its validity and averred that the action filed by
petitioner was incompatible with her complaint so considering that petitioner
1330 Leonard vs CA (G.R. No. 125485, September 13, 2004) claimed vitiation of consent, the proper action was annulment and not declaration
of nullity of the instrument
Article 1330. A contract where consent is given through mistake, violence, No amicable settlement was reached and the parties agreed that the only issue
intimidation, undue influence, or fraud is voidable. (1265a) to be resolved was whether petitioners consent to the extrajudicial partition was
voluntarily given
FACTS: RTC dismissed complaint and ruled that the element of duress or fraud that
Petitioner Restituta Leonardo is the only legitimate child of the late spouses vitiates consent was NOT established and that proper action was the reformation
Tomasina Paul and Balbino Leonardo of the instrument, not the declaration of nullity of the extrajudicial settlement of
Private respondents Teodoro, Victor, Corazon, Piedad, as well as the late the estate
Eduvigis and Dominador, all surnamed Sebastian, are the illegitimate children of CA affirmed RTC judgment
Tomasina with Jose Sebastian after she separated from Balbino Leonardo
Petitioner filed an action to declare the nullity of the extrajudicial settlement of the ISSUE: WON the consent of petitioner was obtained through mistake, fraud, violence,
estate of Tomasina Paul and Jose Sebastian, alleging that on June 24, 1988, at undue influence, intimidation or fraud
around 5:00 p.m., private respondent Corazon Sebastian and her niece Julieta
Sebastian, and a certain Bitang, came to petitioners house to persuade her to HELD: No. CA decision is reversed. The extrajudicial settlement of the estate of Tomasina
sign a deed of extrajudicial partition of the estate of Tomasina Paul and Jose Paul and Jose Sebastian is hereby ANNULLED and SET ASIDE
Sebastian
Before signing the document, petitioner allegedly insisted that they wait for her RATIO:
husband Jose Ramos so he could translate the document which was written in The essence of consent is the agreement of the parties on the terms of the
English but Petitioner proceeded to sign the document even without her contract, the acceptance by one of the offer made by the other. It is the
husband and without reading the document, on the assurance of private concurrence of the minds of the parties on the object and the cause which
respondent Corazon Sebastian that petitioners share as a legitimate daughter of constitutes the contract. The area of agreement must extend to all points that the
Tomasina Paul was provided for in the extrajudicial partition parties deem material or there is no consent at all
Petitioner then asked private respondent Corazon and her companions to wait for To be valid, consent must meet the following requisites: (a) it should be
her husband so he could read the document but when petitioners husband intelligent, or with an exact notion of the matter to which it refers; (b) it should be
arrived, however, private respondent Corazon and her companions had left free and (c) it should be spontaneous. Intelligence in consent is vitiated by error;
without leaving a copy of the document. It was only when petitioner hired a freedom by violence, intimidation or undue influence; and spontaneity by fraud
lawyer that they were able to secure a copy and read the contents thereof in case one of the parties to a contract is unable to read and fraud is alleged, the
Petitioner refuted private respondents claim that they were the legitimate children person enforcing the contract must show that the terms thereof have been fully
and sole heirs of Jose Sebastian and Tomasina Paul explained to the former
Despite the (de facto) separation of petitioners father Balbino Leonardo and Where a party is unable to read, and he expressly pleads in his reply that he
Tomasina Paul, the latter remained the lawful wife of Balbino signed the voucher in question without knowing (its) contents which have not
been explained to him, this plea is tantamount to one of mistake or fraud in the illegitimate children (Sumipats). She filed a complaint for declaration of nullity of titles,
execution of the voucher or receipt in question and the burden is shifted to the contracts, partition, recovery of ownership.
other party to show that the former fully understood the contents of the document 7. Lydia disclaims participation in the execution of the assailed document, she
and if he fails to prove this, the presumption of mistake (if not fraud) stands claiming to have acquired knowledge of its existence only on January 10, 1983 or five
unrebutted and controlling days after its execution when Lauro Sumipat gave the properties to her.
Contracts where consent is given by mistake or because of violence, intimidation, 8. RTC: the due execution of the Deed was not contested by Placida earlier (and her
undue influence or fraud are voidable signature was on it); the properties were absolutely transferred to petitioners Sumipat.
In determining whether consent is vitiated by any of the circumstances mentioned 9. CA: Since Placida was unlettered (did not know how to write), the petitioners, as the
in Art. 1330 of the Civil Code, courts are given a wide latitude in weighing the parties interested in enforcing the deed, have the burden of proving that the terms
facts or circumstances in a given case and in deciding in favor of what they thereof were fully explained to her, which they failed to do.
believe actually occurred, considering the age, physical infirmity, intelligence,
relationship and the conduct of the parties at the time of making the contract and ISSUE: Whether or not the Deed of Absolute Transfer and/or Quitclaim is voidable
subsequent thereto, irrespective of whether the contract is in a public or private
writing RULING: NO. IF THE CONTRACT IS TO BE VIEWED AS A CONTRACT OF SALE, IT IS
the presumption of mistake or error on the part of petitioner was not sufficiently VOID because consent was not VITIATED, but TOTALLY ABSENT.
rebutted by private respondents respondents failed to offer any evidence to
prove that the extrajudicial settlement of estate was explained in a language RATIO:
known to the petitioner Under the Civil Code, a contract where consent is given through mistake, violence,
intimidation, undue influence or fraud is voidable. 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
1331 Sumipat vs Banga [G.R. No. 155810. August 13, 2004] enter into the contract.
The jurat indicates that it was only Lauro Sumipat who appeared before Judge Garcia
Art. 1331. In order that mistake may invalidate consent, it should refer to the and to whom he explained the contents of the deed. Further, the appellate court noted
substance of the thing which is the object of the contract, or to those conditions that Judge Garcia himself was under the impression that the deed conveyed the
which have principally moved one or both parties to enter into the contract. exclusive properties of Lauro Sumipat. Hence, he could not have explained to Placida
that the deed actually transferred the conjugal properties of Lauro Sumipat and
FACTS: Placida.
1. The spouses Placida Tabo-tabo and Lauro Sumipat, who contracted marriage on July The Court (brilliantly, I think) resolved the issue by determining the kind of contract the
20, 1939, acquired three parcels of land. Deed was. They characterized it as a donation: it was a gratuitous disposition of
2. The couple was childless. Lauro Sumipat, however, sired five illegitimate children out property a donation although Lauro Sumipat imposed upon the petitioners the
of an extra-marital affair with Pedra Dacola,: Lydia, Laurito, Alicia, Alejandro and condition that he and his wife, Placida, shall be entitled to one-half (1/2) of all the fruits
Lirafe, all surnamed Sumipat (they are the petitioners of this case). or produce of the parcels of land for their subsistence and support.
3. On January 5, 1983, Lauro Sumipat executed a document denominated DEED OF As a donation, therefore, acceptance needs to be communicated from the donee
ABSOLUTE TRANSFER AND/OR QUIT-CLAIM OVER REAL PROPERTIES (the (Sumipats) to the donor (Placida and Lauro) in a public instrument before title can
assailed document) in favor of the illegitimate children covering the three parcels pass. Failure to show this acceptance renders the donation void.
of land (the properties). On the document appears the signature of his wife Placida Other indications that donation is not valid: absence of any proof of filing of the
which indicates that she gave her marital consent thereto. necessary return, payment of donors taxes on the transfer, or exemption from
4. On January 5, 1983 when the Deed of Transfer and Quitclaim, Lauro Sumipat was payment thereof.
already very sick and bedridden; that upon Lydias request, their neighbor Benjamin The Court said that the contract cannot be one of barter or any other onerous
Rivera lifted the body of Lauro Sumipat whereupon Lydia guided his (Lauros) hand conveyance, in the absence of valid cause or consideration and consent
in affixing his signature on the assailed document which she had brought; that competently and validly given. While it is true that the appellate court found
Lydia thereafter left but later returned on the same day and requested Lauros Placidas consent to have been vitiated by mistake, her testimony on the matter
unlettered wife Placida to sign on the assailed document, as she did in haste, actually makes out a case of total absence of consent, not merely vitiation
even without the latter getting a responsive answer to her query on what it was all thereof.
about. o In her testimony, it was shown that deeds of sale questioned therein are not
5. After Lauro Sumipats death on January 30, 1984, his wife Placida and Banga merely voidable but null and void ab initio as the supposed seller declared
(respondent) jointly administered the properties 50% of the produce of which went under oath that she signed the deeds without knowing what they were.
to Banga. The significant circumstance meant, the Court added, that her consent was
6. Placida noticed that she no longer received any share of the produce and learned that not merely marred by vices of consent so as to make the contracts
the titles to the properties in question were already transferred/made in favor of the voidable, but that she had not given her consent at all.
months thereafter.
o She made her last payment amounting to P4,500.00 on March 12,
1985, leaving five quarterly amortizations unpaid.
DBP demanded remaining P12K obligation otherwise it would be constrained to
1332 Asmeron vs DBP (GR 157330, November 23, 2011) sell the property.
She did not pay the six quarterly amortizations, DBP rescinded the deed of
FACTS conditional sale and applied for a writ of possession
March 17, 1975 - petitioner and her brother Celedonio Calilap constituted a real RTC denied complaint.
estate mortgage over two parcels of land to secure the performance of their loan o Stipulations in the deed of conditional sale and the tenor of the
obligation with respondent Development Bank of the Philippines (DBP) petitioners communications to DBP clearly indicated that she had
Principal obligation was unpaid. DBP foreclosed the mortgaged. DBP was the intended to repurchase both foreclosed properties, not just the property
highest bidder. One-year redemption period expired on Sept. 1, 1981. covered by TCT No. T 164117
Petitioners version: CA affirmed RTC. Petitioner had not presented testimonial or documentary
o DBP accorded to her a preferential right to repurchase the property evidence to support her claim that she had been misled into signing the deed of
o petitioner negotiated with DBP to buy back the property for P15K as conditional sale.
downpayment.
o Offer was rejected by DBP and required her to pay the full purchase ISSUE: WON art. 1332 applies to petitioner (NO)
price of P55,500 for the property within 10 days.
o She signed deed of conditional sale covering both lots for a RULING
consideration of P157K believing that the lot covered by TCT 164117 Her bare allegation of having been misled was not tantamount to proof, and that,
would be released after paying two amortizations. DBP did not approve secondly, she, as the party alleging a disputed fact, carried the burden of proving
the release. her allegation.
o She continued to pay until she had paid P40K but DBP denied warning The records contained clear indicia of her real intention visvis her reacquisition
her that it would rescind the contract should her remaining of the two foreclosed properties.
amortizations be still not paid. Petitioner would have the court consider that she had not given her full consent to
o Aug. 7, 1985 DBO rescinded the Deed of conditional sale and sold it the deed of conditional sale on account of her lack of legal and technical
to respondent Pablo Cruz via a deed of absolute sale. knowledge.
Respondents version: Petitioner did not specify which of the stipulations of the deed of conditional sale
o petitioners real intention had been to repurchase the two lots on she had difficulty or deficiency in understanding.
installment basis. She manifested her real intention to that effect in Stipulations of the deed of conditional sale were simply worded and plain enough
writing through her letter dated September 14, 1981, for even one with a slight knowledge of English to easily understand.
I am interested to reacquire the mortgage properties The petitioner was not illiterate. She had appeared to the trial court to be
consisting of two (2) parcels of land under TCT Nos. educated
T160929 and T164117 located at Sumapa, Malolos, Her testimony also revealed that she had no difficulty understanding English
Bulacan.I would like to reacquire the above stated properties
Thereby revealed was her distinctive ability to understand written and spoken
under installment basis but I am requesting your goodselves English, the language in which the terms of the contract she signed had been
to extend an extension of time up to the first week of
written
November, 1981 for my money is coming by that time.
In fact, she offered therein to pay a total of P157,000.00 for the two properties
o Petitioner also sent a telegram on September 15, 1981, where she
with P55,500.00 to be advanced by her as deposit and the balance to be paid in
similarly expressed to DBP her interest in reacquiring the properties
five (5) years under a quarterly amortization plan.
o A letter dated August 31, 1982 was sent to reiterate her intention to
o Letter has not been categorically denied by the appellant as during her
repurchase the two properties and to offer to deposit P55,500.00 as
testimony she merely feigned any recollections of its content.
initial payment
DBP validly exercised its right to rescind the deed of conditional sale upon the
o The petitioner subsequently made the downpayment on September 10,
petitioners default
1992, and DBP formally accepted the offer through its letter dated
PETITION DENIED.
September 14, 1982, stating therein the terms and conditions.
Terms and conditions, which were later embodied in the deed
of conditional sale executed on January 21, 1983, included
one that bound her to pay the first amortization of P7,304.15
three months from the execution of the deed, and the
1335 Mangahas vs Brobio (G.R. No. 183852, October 20, 2010)
remaining amortizations to be due and payable every three
The fact that respondent was forced to sign the documents doe not amount to
FACTS vitiated consent.
January 10, 2002 Pacifico Brobio died intestate, leaving three parcels of land. Undue influence is present when a person takes improper advantage of his power
o Survived by wife, respondent Eufroncia and four legitimate and three over the will of another, depriving the latter of a reasonable freedom of choice.
illegitimate children There was no showing that she was deprived of free agency when she signed the
o Petitioner Carmela Mangahas (illegitimate) promissory note.
May 12, 2002 heirs executed a Deed of Extrajudicial Settlement of Estate with Being forced into a situation does not amount to vitiated consent.
Waiver. Respondent had the choice:
o Deed: Petitioner and other children, in consideration of their love for o Refuse to execute PN and resort to judicial means to obtain the signature
respondent and P150L, waived and ceded their shares over the three Respondent herself testified that she haggled with petitioner to lower the amount.
parcels in favor of respondent. The situation did not amount to intimidation that vitiated consent.
Petitioner respondent promised to give her an additional amount for her share. Respondent failed to prove that the PN was supported by any consideration. It is clear
After signing the Deed, petitioner demanded the said promise but respondent that the PN was issued for a cause or consideration obtain petitioners signature.
refused claiming that she had no more money. Properties are no longer under a state of co-ownership; there is nothing more to be
2003 while processing her tax obligations with BIR, respondent was required to partitioned.
submit an original copy of the Deed. She had to ask petitioner to countersign a
copy of the Deed.
Petitioner refused and demanded respondent to give her promised additional 1336 BMG Records vs Aparecio (G.R. No. 153290, September 5, 2007)
amount. (considering the value of the three parcels, she asked for P1M but Aparecio the promo girl
respondent haggled P600K) FACTS
Respondent did not have money at that time, petitioner refused to sign without Petitioner is engaged in the business of selling various audio records nationwide.
any assurance. Respondent executed a promissory note. Sept. 2, 1990 it hired private respondent Aida Aparecio as one of the promo
Petitioner agreed to sign the deed when respondent signed. girls in its Cebu Branch.
Respondent failed and refused to pay despite demand. o Monday to Sunday work P181 per day
Petitioner filed a complaint for specific performance. Aparecio filed a complaint against BMG and its Branch Manager, Jose Yap for
Respondent averred that she was just forced to sign the PN and that the illegal dismissal and non-payment of overtime pay, holiday pay, premium pay for
undertaking was not supported by any consideration. rest day, 13th month pay, service incentive leave, and separation pay.
o She held that she was held hostage by the demand of the plaintiff. Aparecios Position paper:
o Out of pressure and confused disposition, she was constrained to make o she was asked to resign and will be paid all her benefits due one-
a PN in a reduced amount. month pay for every year of service, payment of services rendered,
RTC ruled in favor of petitioner. overtime and holiday pay, rest day, 13th month, service incentive leave,
o The pressure and confused disposition experienced by respondent and separation pay.
and the circumstances that led to the execution of the PN do not o Respondent did an accounting by themselves in the absence of
constitute undue influence as would vitiate respondents consent. Aparecio and arrived on a computation that her liability is P8,000.
o The PN was an additional consideration for the waiver of petitioners o Offered P12,000 separation pay (minus P8,000)
share in the three properties. o She was under BMGs employ for 7 years when she was terminated.
o Pay P600K to petitioner BMGs version:
CA reversed. There was complete absence of consideration in the execution of o She was initially performing well but as years passed by, she seemed
the PN, which made it inexistent and without any force and effect. to be complacent in the performance of her job and had been
o The financial assistance was not the real reason why respondent comparing salaries of promo girls in other companies.
executed the PN, but only to secure petitioners signature. o She and two more promo girls told her supervisor that they were
o Waiver of petitioner in her shares may not be considered as the intending to resign and were requesting for some financial assistance.
consideration of the PN. o BMG explained that as their company policy, an employee who resigns
o There was intimidation. is not entitled to financial assistance, but considering the length of their
service and due to humanitarian consideration, it would accede to the
ISSUE: WON undue influence attended the execution of the PN (NO) request after they secure their clearances.
o Accepted the resignations.
RULING o When they processed their clearance, it was found that they had
Nowhere is it alleged that mistake, violence, fraud or intimidation attended the incurred some shortages after inventory (per agreement, shortages
execution of the PN. were deducted from the amounts due them).
Labor arbiter dismissed complaint because the severance of her employment in In 1997 and while in the US, Fernando purchased for him and his wife two (2)
BMG was brought about by her resignation and not by illegal dismissal. Ordered round trip airline tickets from San Diego, California to Newark, New Jersey on
payment of P18K instead of P9K. board Continental Airlines.
NLRC found Aparecio to be illegally dismissed. Reversed LA decision. Pay her Fernando purchased the tickets at US$400.00 each from a travel agency called
separation pay computes. Holiday Travel and was attended to by a certain Margaret Mager (Mager).
o Admitted its dilemma in determining whether she offered her
According to Spouses Viloria, Fernando agreed to buy the said tickets after
resignation on the condition that she would be paid with termination
Mager informed them that there were no available seats at Amtrak, an intercity
benefits or whether termination was triggered by BMG, which offered
the monetary consideration. passenger train service provider in the US.
CA affirmed NLRC. Petitioner failed to prove that the termination was out of Per the tickets, Spouses Viloria were scheduled to leave for Newark on August
Aparecios own volition as she did it in consideration of the separation pay and 13, 1997 and return to San Diego on August 21, 1997.
other benefits promised. Subsequently, Fernando requested Mager to reschedule their flight to Newark
Mager informed him that flights to Newark via Continental Airlines were already
ISSUE: WON Aparecios consent was vitiated at the time she tendered her resignation fully booked and offered the alternative of a round trip flight via Frontier Air.
(NO) Since flying with Frontier Air called for a higher fare of US$526.00 per passenger
and would mean traveling by night, Fernando opted to request for a refund.
RULING Mager denied.
Findings of NLRC appear to be contrary to the evidence at hand.
Fernando decided to reserve two (2) seats with Frontier Air.
Aparecios submissions in all her pleadings failed to substantiate the allegation
Fernando then went to the Greyhound Station where he saw an Amtrak station
that her consent was vitiated and that petitioners are guilty of illegal dismissal.
nearby. He made inquiries and was told that there are seats available and he
No evidence to support her allegation that fraud was employed on her to resign.
then purchased two (2) tickets for Washington, D.C.
Fraud only exists when, through insidious words or machinations, the other party
is induced to act and without which, the latter would not have agreed. From Amtrak, Fernando went to Holiday Travel and confronted Mager with the
Fraud and misrepresentations are never presumed. Amtrak tickets, telling her that she had misled them into buying the Continental
Aparecio maintains that her resignation was wrongfully obtained when petitioners Airlines tickets by misrepresenting that Amtrak was already fully booked.
did not keep the promise of giving her employment benefits and financial Fernando reiterated his demand for a refund but Mager was firm in her position
assistance without any deductions. that the subject tickets are non-refundable.
o Without a showing of the nature and extent of such inducement, such Upon returning to the Philippines, Fernando sent a letter to CAI on demanding a
submission fails. refund and alleging that Mager had deluded them into purchasing the subject
Aparecio failed to produce evidence that petitioners applied force or threat. tickets.
Court agrees with petitioners contention that the circumstances surrounding her Continental Micronesia informed Fernando that his complaint had been referred
resignation should be given due weight in determining whether she had intended to the Customer Refund Services of Continental Airlines at Houston, Texas.
to resign:
In a letter, Continental Micronesia denied Fernandos request for a refund and
o She already communicated to people that she was about to resign to
advised him that he may take the subject tickets to any Continental ticketing
look for a better paying job
location for the re-issuance of new tickets within two (2) years from the date they
o She approached her supervisor and intimated her desire to resin and
requested for financial assistance were issued.
o She submitted resignation letters (BMG accepted) When Fernando went to the ticketing office of Continental, he was informed that
o She already initiated the processing of her clearance Lourdes ticket was non-transferable, thus, cannot be used for the purchase of a
NLRC erred when it did not give probative weight to their testimonies ticket in his favor. He was also informed that a round trip ticket to Los Angeles
PETITION GRANTED. AFFIRM LA DECISION. was US$1,867.40 so he would have to pay what will not be covered by the value
of his San Diego to Newark round trip ticket.
Fernando demanded for the refund of the subject tickets as he no longer wished
G.R. No. 188288 January 16, 2012 to have them replaced.
SPOUSES FERNANDO and LOURDES VILORIA, Petitioners, v. CONTINENTAL In addition to the dubious circumstances under which the subject tickets were
AIRLINES, INC., Respondent.
issued, Fernando claimed that CAIs act of charging him with US$1,867.40 for a
REYES, J.:
round trip ticket to Los Angeles, which other airlines priced at US$856.00, and
refusal to allow him to use Lourdes ticket, breached its undertaking under its
FACTS:
letter.
Spouses Viloria filed a complaint against CAI, praying that CAI be ordered to the subject tickets and Spouses Viloria are obliged to pay whatever amount is not
refund the money they used in the purchase of the subject tickets with legal covered by the value of the subject tickets.
interest plus damages. PETITION DENIED
RTC: ruled in favor of Sps Viloria
Spouses Viloria are entitled to a refund in view of Magers misrepresentation in
obtaining their consent in the purchase of the subject tickets. 1346 Balite vs Lim [G.R. No. 152168. December 10, 2004]
CA: revered the decision of RTC
CAI cannot be held liable for Magers act in the absence of any proof that a Art. 1346. An absolutely simulated or fictitious contract is void. A relative
principal-agent relationship existed between CAI and Holiday Travel. simulation, when it does not prejudice a third person and is not intended for any
Refund is not available to Spouses Viloria as the word non-refundable was purpose contrary to law, morals, good customs, public order or public policy binds
the parties to their real agreement. (n)
clearly printed on the face of the subject tickets, which constitute their contract
with CAI. Therefore, the grant of their prayer for a refund would violate the
FACTS:
proscription against impairment of contracts.
1. Aurelio and Esperanza Balite owned a parcel of land in Catarman, Northern Samar,
ISSUE: W/N the representation of Mager as to unavailability of seats at Amtrak be with an area of 17,551 square meters. When Aurelio died intestate, his wife,
considered fraudulent as to vitiate the consent of Spouse Viloria in the purchase of the Esperanza, and ther children, Antonio, Flor, Visitacioon, Pedro, Pablo, Gaspar,
subject tickets Cristeta, and Aurelio Jr., inherited the property and became the co-owners.
2. Esperanza became ill. Through her daughter, Cristeta, she offered to sell Rodrigo Lim
HELD: NO (petitioner) her undivided share of the land for Php 1,000,000.00. Under the Deed of
Even on the assumption that CAI may be held liable for the acts of Mager, Absolute Sale, it will be made to appear that the purchase price was for Php 150,000
still, Spouses Viloria are not entitled to a refund. (presumably to avoid payment of large sales taxes and other fees).
Magers statement cannot be considered a causal fraud that would justify a. They executed the DoAS, which indicated the contract price as Php 150,000
the annulment of the subject contracts that would oblige CAI to indemnify b. They executed a Joint Affidavit on the same day, declaring the price of the
Spouses Viloria and return the money they paid for the subject tickets. property as Php 1,000,000, payable in installments.
Under Article 1338 of the Civil Code, there is fraud when, through insidious words 3. Only Esperanza and two of her children, namely, Antonio and Cristeta, knew about
or machinations of one of the contracting parties, the other is induced to enter the said transaction.
into a contract which, without them, he would not have agreed to. 4. Thereafter, Lim took actual possession of the property and introduced improvements
thereon. He remitted to Esperanza and Cristeta sums of money in partial payments of
In order that fraud may vitiate consent, it must be the causal (dolo causante), not
the property, for which he signed Receipts.
merely the incidental (dolo incidente), inducement to the making of the contract.
5. Gaspar, Visitacion, Flor, Pedro and Aurelio, Jr. learned of the sale, and on August 21,
After meticulously poring over the records, this Court finds that the fraud alleged 1996, they wrote a letter to the Register of Deeds [RD] of Northern Samar, [saying]
by Spouses Viloria has not been satisfactorily established as causal in that they [were] not informed of the sale of a portion of the said property by their
nature to warrant the annulment of the subject contracts. mother, nor did they give their consent thereto.
In fact, Spouses Viloria failed to prove by clear and convincing evidence that 6. On August 24, 1996, Antonio received from Lim the amount of P30,000.00 in partial
Magers statement was fraudulent. payment of [the] property and signed a Receipt for the said amount, declaring therein
Specifically, Spouses Viloria failed to prove that (a) there were indeed available that the remaining balance of P350,000.00 shall personally and directly be
seats at Amtrak for a trip to New Jersey on August 13, 1997 at the time they released to my mother, Esperanza Balite, only. However, Lim drew and issued
spoke with Mager on July 21, 1997; (b) Mager knew about this; and (c) that she RCBC Check No. 309171, dated August 26, 1996, [payable] to the order of Antonio
purposely informed them otherwise. Balite in the amount of P30,000.00 in partial payment of the property.
7. On October 31, 1996, Esperanza died intestate and was survived by her aforenamed
This Court finds the only proof of Magers alleged fraud, which is Fernandos
children.
testimony that an Amtrak had assured him of the perennial availability of seats at
8. [Meanwhile], Lim caused to be published, in the Samar Reporter, on November 14, 21
Amtrak, to be wanting and 28, 1996, the aforesaid Deed of Absolute Sale. Earlier, on November 21, 1996,
Therefore, CAIs liability for damages for its refusal to accept Lourdes ticket for Antonio received the amount of P10,000.00 from Lim for the payment of the estate tax
the purchase of Fernandos round trip ticket is offset by Spouses Vilorias liability due from the estate of Esperanza. The capital gains tax was paid to the Bureau of
for their refusal to pay the amount, which is not covered by the subject tickets. Internal Revenue which issued a Certification of said payments, on March 5, 1997,
Moreover, the contract between them remains, hence, CAI is duty bound to issue authorizing the registration of the Deed of Absolute Sale.
new tickets for a destination chosen by Spouses Viloria upon their surrender of 9. However, the Register of Deeds refused to issue a title over the property to and under
the name of Rodrigo unless and until the owners duplicate of OCT No. 10824 was
presented to [it]. Lim filed a Petition for Mandamus against the RD. The Register of ruled that the waiver is null and void for being violative of Article 1347, hence, adverse
Deeds was ordered to issue the OCT for the property. claim which was based upon such waiver is likewise void and cannot confer upon the latter
10. Siblings Balite filed a petition for quieting of title to settle the dispute. At issue is the any right or interest over the property.
validity of the Deed of Sale.
11. The CA held that the sale was valid and binding insofar as Esperanza Balites FACTS:
undivided share of the property was concerned. It affirmed the trial courts ruling that Version of the Petitioner
the lack of consent of the co-owners did not nullify the sale. o Original Complaint: The Diazes, as represented by their daughter
Comandante, through a SPA, obtained from him a loan of
ISSUE: Whether or not the Deed of Sale was valid and binding P1,118,228.00
secured by:
RULING: YES. Although the written Deed did not indicate the actual purchase price of the 1. a REM Contract by way of 2nd mortgage
parties, the parties, nonetheless, intended to be bound to the contract. However, the 2. a Promissory Note payable within 6 months or up to
sale is valid only insofar as the pro-indiviso share of the co-owner. November 7, 1999.
3. postdated checks.
RATIO: o Prior to this, Comandante, for a valuable consideration of P600K, which
The contract was valid, but relatively simulated. amount formed part of the secured loan, executed in his favor an
o In absolute simulation, there is a colorable contract but without any instrument entitled Waiver of Hereditary Rights and Interests Over a
substance, because the parties have no intention to be bound by it. An Real Property (Still Undivided).
absolutely simulated contract is void, and the parties may recover from each Petitioner executed an Affidavit of Adverse Claim which he
other what they may have given under the contract. This is VOID. caused to be annotated at the back of TCT.
o In relative simulation, the parties state a false cause in the contract to o The Diazes reneged on their obligation as the checks issued by
conceal their real agreement. Here, the parties real agreement binds Comandante were dishonored upon presentment and failed and
them. refused to settle the loan despite repeated demands.
In the present case, the parties intended to be bound by the Contract, even if it did not o Thus, petitioner filed a complaint for collection of sum of money secured
reflect the actual purchase price of the property. That the parties intended the by REM Contract against the Diazes and Comandante.
agreement to produce legal effect is revealed by the letter of Esperanza Balite to Petitioner twice amended his complaint:
respondent dated October 23, 1996 and petitioners admission that there was a partial 1. by including as an alternative relief the Judicial Foreclosure of Mortgage
payment of P320,000 made on the basis of the Deed of Absolute Sale. There was an 2. by impleading as additional defendants the Pangans as the mortgaged
intention to transfer the ownership of over 10,000 square meters of the property. Clear property was already transferred under their names,
from the letter is the fact that the objections of her children prompted Esperanza to o Petitioner prayed in his second amended complaint that all the
unilaterally withdraw from the transaction. respondents be ordered to jointly and solidarily pay him and/or for the
judicial foreclosure of the property pursuant to the REM Contract.
ART. 1347. All things which are not outside the commerce of men, including future things, Version of the Respondents
may be the object of a contract. All rights which are not intransmissible may also be the o Ferrer and his wife were fellow members in the Couples for Christ
object of contracts. Movement.
o Respondent sought the help of petitioner with regard to the mortgage
No contract may be entered into upon future inheritance except in cases expressly with a bank of her parents lot located at No. 6, Rd. 20, Project 8,
authorized by law. Quezon City and financial accommodations from the couple on several
occasions which totaled P500,000.00.
All services which are not contrary to law, morals, good customs, public order or public These loans were secured by chattel mortgages over her taxi
policy may likewise be the object of a contract. units in addition to several postdated checks.
o As she could not practically comply with her obligation, petitioner and
his wife, presented to Comandante a document pertaining to a waiver of
Ferrer vs. Diaz her hereditary share over her parents property to secure her loan with
(G.R. No. 165300, April 23, 2010) the couple which at that time had already ballooned to P600,000.00 due
to interests.
RECIT-READY: Comandante has a personal loan from spouses Ferrer secured by REM o A year later, the couple again required Comandante to sign the
Contract by way of 2nd mortgage over her parents property, promissory note, and following documents:
postdated checks. She likewise executed a waiver of her hereditary share over her (1) REM Contract; and
parents property and by virtue of which, spouses executed an affidavit of adverse claim. (2) an undated Promissory Note.
Upon default, spouses Ferrer filed a complaint for collection of sum of money. The Court
o Respondent reminded petitioner that she was not the registered owner Comandante who was clothed with SPA acknowledged before
of the subject property and that although her parents granted her SPA, the Consul of New York
same only pertains to her authority to mortgage the property to banks immediately took actual possession of the property without
and other financial institutions and not to individuals. anyone complaining or protesting
Petitioner assured Comandante that the SPA was also respondent admitted that her parents were not aware of such
applicable to their transaction. mortgage and that they did not authorize her to enter into
o As respondent was still hesitant, the couple threatened to foreclose the such contract and that the signatures of her parents appearing
formers taxi units and present the postdated checks she issued to the on the SPA are fictitious and that it was petitioner who
bank for payment. prepared such document.
For fear of losing her taxi units which were the only source of RTC: in favor of petitioner.
her livelihood, Comandante was thus constrained to sign the CA: declared the Waiver null and void but found the REM binding between the
mortgage agreement as well as the promissory note. parties thereto.
Petitioner did not furnish her with copies of said documents on
the pretext that they still have to be notarized (from the ISSUE/S:
records, the documents were never notarized). 1. Is Comandantes waiver of hereditary rights valid?
o The SPA alluded to by petitioner in his complaint was not the same 2. Is petitioners adverse claim based on such waiver likewise valid and effective?
SPA under which she thought she derived the authority to execute the
mortgage contract. HELD: YES. The Waiver is null and void for being violative of Article 1347 of the Civil
o Comandante alleged that she executed an Affidavit of Code, hence, petitioners adverse claim which was based upon such waiver is likewise
Repudiation/Revocation of Waiver of Hereditary Rights and Interests void and cannot confer upon the latter any right or interest over the property.
Over A (Still Undivided) Real Property, which she caused to be
annotated on the title of the subject property with the Registry of Deeds RATIO:
of Quezon City on the same day. WAIVER:
Petitioner filed his complaint later that day too. o Pursuant to the second paragraph of Article 1347 of the Civil Code, no
o Comandante asserted: contract may be entered into upon a future inheritance except in cases
complaint states no cause of action because the REM expressly authorized by law.
Contract and the waiver were not duly, knowingly and validly For the inheritance to be considered future, the succession
executed by her; must not have been opened at the time of the contract.
the Waiver is a useless document as its execution is o A contract may be classified as a contract upon future inheritance,
prohibited by Article 1347 of the Civil Code, hence, it cannot prohibited under the second paragraph of Article 1347, where the
be the source of any right or obligation in petitioners favor; following requisites concur:
the REM was of doubtful validity as she executed the same (1) That the succession has not yet been opened -> parents are still
without valid authority from her parents; and living
the prayer for collection and/or judicial foreclosure was (2) That the object of the contract forms part of the inheritance ->
irregular as petitioner cannot seek said remedies at the same property subject matter of waiver forms part of the properties of her
time. parents
o Diazes asserted: 3) That the promissor has, with respect to the object, an expectancy of
they do not even know petitioner and did not execute any SPA a right which is purely hereditary in nature -> she expect to inherit from
in favor of Comandante authorizing her to mortgage for the her parents upon their death.
second time the subject property ADVERSE CLAIM
contested the due execution of the SPA as it was neither o Section 70 of PD 1529 provides that it is necessary that the claimant
authenticated before the Philippine Consulate in the United has a right or interest in the registered land adverse to the registered
States nor notarized before a notary public in the State of New owner and that it must arise subsequent to registration.
York where the Diazes have been residing for 16 years o Here, as no right or interest on the subject property flows from
they do not owe petitioner anything Comandantes invalid waiver of hereditary rights upon petitioner, the
the complaint merely refers to Comandantes personal latter is thus not entitled to the registration of his adverse claim.
obligation to petitioner with which they had nothing to do. o Therefore, petitioners adverse claim is without any basis and must
o Pangans end: consequently be adjudged invalid and ineffective and perforce be
acquired the subject property by purchase in good faith and cancelled.
for a consideration of P3M from the Diazes through
Villanueva et al. vs. Castaneda, Jr.
(G.R. No. L-61311 September 21, 1987) ISSUE: Whether or not there is a violation of Article 1347.
RECIT-READY: There is, in the vicinity of the public market of San Fernando, Pampanga, HELD: YES. A public plaza is beyond the commerce of man and so cannot be the subject
along Mercado Street, a strip of land on which stands a conglomeration of vendors stalls of lease or any other contractual undertaking.
together forming a talipapa. The petitioners claim they have a right to remain in and
conduct business in this area by virtue of a previous authorization granted to them by the RATIO:
municipal government. The respondents deny this and justify the demolition of their stalls Article 344 of the Civil Code: Property for public use in provinces and in towns
as illegal constructions on public property. The Court ruled that A public plaza is beyond comprises the provincial and town roads, the squares, streets, fountains, and
the commerce of man and so cannot be the subject of lease or any other contractual public waters, the promenades, and public works of general service supported by
undertaking said towns or provinces.
Article 1271 prescribes that everything which is not outside the commerce of man
FACTS: may be the object of a contractand plazas and streets are outside of this
On November 7, 1961, the municipal council of San Fernando adopted commerce, as was decided by the supreme court of Spain, which says:
Resolution No. 218 authorizing some 24 members of the Fernandino United 'Communal things that cannot be sold because they are by their very
Merchants and Traders Association to construct permanent stalls and sell in the nature outside of commerce are those for public use, such as the plazas,
place. streets, common lands, rivers, fountains, etc.'
The action was protested in a civil case where the CFI of Pampanga issued a writ Town plazas are properties of public dominion, to be devoted to public use
of preliminary injunction that prevented the defendants from constructing the said and to be made available to the public in general. They are outside the
stalls until final resolution of the controversy. commerce of man and cannot be disposed of or even leased by the municipality
While this case was pending, the municipal council of San Fernando adopted to private parties
Resolution No. 29, which declared the subject area as "the parking place and The petitioners had no right in the first place to occupy the disputed premises and
as the public plaza of the municipality," thereby impliedly revoking the cannot insist in remaining there now on the strength of their alleged lease
previous Resolution. contracts.
Four years later, Judge Andres C. Aguilar decided the civil case and held that the The problems caused by the usurpation of the place by the petitioners are
land occupied by the petitioners, being public in nature, was beyond the covered by the police power as delegated to the municipality under the general
commerce of man and therefore could not be the subject of private occupancy. welfare clause.
o The writ of preliminary injunction was made permanent.
The decision was not enforced, for the petitioners were not evicted from the
place. ART. 1348. Impossible things or services cannot be the object of contracts. (1272)
o according to petitioners, they and the 128 other persons were in 1971
assigned specific areas or space allotments therein for which they paid Guevent Industrial Development Corporation vs. Philippine Lexus Amusement
daily fees to the municipal government Corporation
The Association of Concerned Citizens and Consumers of San Fernando filed a (G.R. No. 159279, July 11, 2006)
petition for the immediate implementation of Resolution No. 29, to restore the
subject property "to its original and customary use as a public plaza." *super short
Respondent Vicente A. Macalino, as officer-in-charge of the office of the mayor of
San Fernando, issued a resolution requiring the municipal treasurer and the FACTS:
municipal engineer to demolish the stalls. Respondent leased for the period of December 11, 1993 to December 10, 1994,
Petitioners filed a petition for prohibition with the CFI of Pampanga but was petitioners warehouse at Libertad St., Mandaluyong, Metro Manila for the
denied. storage of its video machines.
Petitioners: the disputed area is under lease to them by virtue of contracts they On September 25, 1994, heavy rains flooded Libertad St. and damaged the video
had entered into with the municipal government: machines.
1. in 1961 insofar as the original occupants were concerned, United Adjustment Company (UAC), commissioned by respondent, estimated the
2. later with them and the other petitioners by virtue of the space value of the damage at P865,149.25 and concluded that the clogged storm
allocations made in their favor in 1971 for which they saw they are drainage and sewer pipes installed underground along petitioners private road
paying daily fees. caused the flooding.
Respondents: the municipal government has denied making such agreements. On the basis of this report, respondent demanded the payment of the value of the
In any case, since the fees were collected daily, the leases, assuming they are damage from petitioner.
valid, could be terminated at will, or any day, as the claimed rentals indicated that When petitioner refused, respondent filed a complaint for damages with the RTC
the period of the leases was from day to day. of Pasig City.
Petitioner averred that:
o it was the clogged public drainage of Mandaluyong City that caused the
flood;
o it was respondents fault that it did not insure its machines as stipulated Camacho vs. Court of Appeals
in their lease contract. (G.R. No. 127520, February 9, 2007)
During trial, petitioner showed evidence that it had regularly de-clogged its private
drainage and had constantly requested the city to de-clog and rehabilitate the FACTS:
public sewers. Camacho was the owner of Lot 261, a 7.5-hectare parcel of land situated in
RTC: ruled that petitioner was not negligent since it did all that it could. It cleaned Balanga, Bataan.
its own drainage, and solicited the help of the city engineer and mayor to repair On July 14, 1968:
the public drainage system. The RTC found that the damage was caused by a 1. Camacho and respondent Atty. Angelino Banzon entered into a contract for
fortuitous event and exempted petitioner from liability. legal services.
CA: ruled that the flooding was not due to a fortuitous event but caused by the 2. Pursuant to the agreement, Atty. Banzon, sent a letter-proposal to the
clogging of petitioners internal drainage system as reported by UAC; that municipal council offering 3 sites for the proposed public market which
respondents failure to insure the machines did not excuse petitioner from liability. included Lot 261.
3. Camacho executed a SPA giving Atty. Banzon the authority to execute and
ISSUE: Whether or not the maintenance of the public sewers is something impossible to sign for her behalf a Deed of Donation transferring a 17,000 sq.m. portion of
expect from the lessor. Lot 261 to the municipal government of Balanga, Bataan.
The Deed of Donation was executed, which was later accepted by the LGU.
HELD: YES. The petitioner is accountable only for its pipes, and it should not be held Silvestre Tuazon had been an agricultural tenant in Lot 261 since World War II.
responsible for the maintenance of the public sewers. RTC Decision reinstated. On August 22, 1968, Tuazon and Camacho entered into an agreement where
Tuazon voluntarily surrendered his right as a tenant of the landholding.
RATIO: o Despite the agreement, Tuazon plowed a portion of the lot and planted
The CA based its ruling on the assessment report of the respondent- palay without Camachos consent.
commissioned UAC pointing to the clogged internal pipes as the cause of the Tuazon refused to vacate the premises so Camacho and the Municipality of
flooding. Balanga filed a complaint for forcible entry before MTC of Balanga, Bataan.
o UAC did not explain how it arrived at its conclusions. o Decided in favor of the plaintiffs and Tuazon was ordered to vacate the
o Neither are we told of UACs qualifications to determine the conditions lot.
of the drainage pipes. o Later, plaintiffs, through Atty. Banzon, and Tuazon entered into an
o UAC was commissioned by respondent, and UAC is not an Agreement to Stay Court Order.
independent, impartial nor neutral investigator. Camacho terminated the services of Atty. Banzon and retained the services of
There was proof that the public drainage system needed de-clogging. new counsel, Atty. Victor De La Serna in the Civil Case.
o Petitioner presented a barangay certification that the area is always Atty. Banzon filed a Complaint-in-Intervention in the Civil Case where he prayed
flooded whenever there is heavy downpour. for the ejectment of Tuazon and the delivery of the portions of the Lot as
o The Office of the City Mayor does not deny that the public drainage compensation for the cases he won for Camacho and his services citing the
system needed rehabilitation. Contract of Attorneys Fee stipulating that Camacho would compensate him with
o Therefore, the poor condition of the public drainage, and not the private a 5,000-sq-m portion of Lot 261 in case he succeeds in negotiating with the
pipes, primarily caused the flooding Municipality of Balanga in transferring the projected new public market.
We cannot hold petitioner negligent, for the record reveals that it had constantly RTC: in favor of Atty. Banzon.
requested the local government to dredge and de-clog the public sewers. CA: all the elements of a valid contract were present.
The maintenance of the public drainage system could not have been o Camacho (a dentistry graduate and an experienced businesswoman
contemplated by the lease contract when it provided that the lessor shall conversant in English) cannot plead that she did not understand the
maintain the premises in good and tenantable condition. undertaking she had entered into;
o The law on contract does not force the performance of impossible o the object of the contract is certain since the genus of the object
obligations by the parties, and the maintenance of the public sewers is was expressed although there was no determination of the
something impossible to expect from the lessor. individual specie; and
o the cause of the obligation to negotiate and offer a site where the
ARTICLE 1349. The object of every contract must be determinate as to its kind. The fact public market will be constructed is not unlawful and cannot be
that the quantity is not determinate shall not be an obstacle to the existence of the considered as influence peddling.
contract, provided it is possible to determine the same, without the need of a new contract Petitioner:
between the parties.
oconsent was not clearly proven; the conclusion of the CA was based on Art. 1351. The particular motives of the parties in entering into a contract are
the presumption that the document was read prior to being signed different from the cause thereof. (n)
o there is no object certain to speak of since the exact location of
the subject property cannot be determined; in short, the issue is FACTS:
not the quality of the property but its identity 1. Republic filed a petition for prohibition against Aguilar, which would enjoin Aguilar
o the cause of the contract pirating of the municipalitys market project from selling to consumers goods and commodities that he imported (commercial
and ejecting the tenant to convert the property into a commercial coconut oil). The goods were not released.
establishment is illegal 2. Subsequently, however, the petitioners agreed to the release of the goods on the
Respondent: undertaking of surety bonds in the total amount of P1,351,000.00, the
o the elements of a valid contract are present: approximate value of the goods so imported.
1. Camachos consent to the contract is evidenced by her signature 3. In due time, a notice of appeal to the Supreme Court was filed with the lower
which was in fact admitted by the latter; court by petitioners Republic and Central Bank. Prior, however, to the
2. while it is true that the identity of the 5,000-sq-m portion of Lot transmission of the record of the case to the Supreme Court, the parties arrived
261 has not been specified due to the absence of the at an amicable settlement, and submitted to the lower court a Compromise
necessary technical descriptions, it is capable of being made Agreement, which is the subject of this case. The lower court rendered a
determinate without the need of a new agreement between judgment approving the Compromise Agreement.
the parties; Aguilar proposed to take part in the NAMARCO trading assistance
3. as to the validity of the cause of the contract, the general principle program, but the Central Bank said it had no jurisdiction: With regard to
of estoppel applies. the proposal of Mr. Bienvenido Y. Aguilar to import P15 million worth of
consumer and producer commodities through the National Marketing
ISSUE: Whether or not the object of the contract is certain. Corporation (NAMARCO) trading assistance program, pursuant to
Administrative Order No. 16 dated August 31, 1966, the Board decided
HELD: YES. to inform Mr. Aguilar that the Central Bank does not have
jurisdiction thereon and, therefore, the same may not be the object
RATIO: of an agreement between him and the Bank.
4. The Trade Assistance Agreement mentioned in the above-quoted Compromise
Article 1349. The object of every contract must be determinate as to its kind. The fact that Agreement was executed on November 7, 1966, although notarized on
the quantity is not determinate shall not be an obstacle to the existence of the contract, November 17th, by and between the NAMARCO, thru Jovenal D. Almendras,
provided it is possible to determine the same, without the need of a new contract between General Manager thereof, and Bienvenido Y. Aguilar. On its face, it appears that
the parties. one of the considerations for the said Trade Assistance Agreement was
the projected filing of a joint motion to dismiss, as well as the waiver by
Article 1460. A thing is determinate when it is particularly designated and/or physically Aguilar of his rights under the July 1, 1965 decision. It was stipulated therein
segregated from all others of the same class. that the implementation of the Agreement would be suspended pending the
dismissal of Civil Case No. 38224, and that in the event the said case was not
The requisite that a thing be determinate is satisfied if at the time the contract is entered dismissed, the Agreement would be deemed rescinded and of no further force
into, the thing is capable of being made determinate without the necessity of a new or and effect.
further agreement between the parties. 5. Under the terms thereof, the NAMARCO agreed to allow and authorize
Aguilar to finance the importation of certain commodities not exceeding
In this case, the object of the contract is the 5,000-sq-m portion of Lot 261, $15,000,000.00 U.S. currency.
Balanga Cadastre. 6. Alleging that the Trade Assistance Agreement was being assailed in certain
The failure of the parties to state its exact location in the contract is of no quarters as immoral, illegal and ultra vires on the part of the NAMARCO,
moment; this is a mere error occasioned by the parties failure to describe with Aguilar filed with the court below a petition praying that the December 2, 1966
particularity the subject property, which does not indicate the absence of the decision approving the Compromise Agreement be set aside; that the Trade
principal object as to render the contract void. Assistance Agreement be declared as without effect. This was denied.
Since Camacho bound herself to deliver a portion of Lot 261 to Atty. Banzon, the Aguilar thereafter filed with the lower court a motion for execution
description of the property subject of the contract is sufficient to validate the praying that court, among others, to command the petitioners in the
same. case and the NAMARCO to take the necessary steps to comply
with the terms of the Compromise Agreement by implementing the
Trade Assistance Agreement. On May 29, 1967, the petitioners filed
1351 Republic vs Cloribel (G.R. No. L-27905 December 28, 1970) an opposition, arguing that the Trade Assistance Agreement was a
separate matter, and was not the cause or consideration of the
amicable settlement, even if respondent Aguilar might have been abandonment by respondent Aguilar of his rights under the July 1, 1966
motivated by it; hence, execution thereof could not be compelled by decision and the reimbursement to the Central Bank by respondent Aguilar
mere motion. of the amount of P4,925,33. Considering the enormity of the amount
The judge compelled the execution of the Trade Assistance Agreement, (P3,556,624.11) adjudicated in respondent Aguilars favor by the court in its
anyway. original decision, it may be asked why the said respondent would be willing
7. On February 25, 1967, the Republic and the Central Bank filed an opposition to to forego the said sum in exchange for the dismissal of the seizure cases
Aguilars petition, stating that **the Trade Assistance Agreement was not a against him. In the first place, we do not know the exact nature of the said
cause or consideration in the amicable settlement**; that the NAMARCO is cases and the relative positions of the parties thereto. And in the second
not a. party to the case; and that the parties agreed to the dismissal of their place, the Central Bank and the Republic had already perfected their appeal
respective Amended Petition and Counterclaim separately from the Trade from the July 1, 1965 decision, so that the possibility that respondent Aguilar
Assistance Agreement. might lose in the appeal was still there.
Cause is the essential reason for the contract, while motive is the particular
ISSUE: Whether or not the Compromise Agreement should be set aside, as that reason of a contracting party which does not affect the other party and which
agreement had no cause/consideration, an essential element of the contract. does not preclude the existence of a different consideration. (Cf. Gonzales, Et.
Al. v. Trinidad, Et Al., 67 Phil., 682.) Article 1351 of the Civil Code provides that" [t]he
RULING: NO. The Trade Assistance Agreement should be set aside not because the particular motives of the parties in entering into a contract are different from the cause
Compromise Agreement validated the Trade Assistance Agreement, but because thereof.
the Trade Assistance Agreement is not a binding and perfected contract when there o In entering into the Compromise Agreement, respondent Aguilar was in large
is no approval of the President. The Compromise Agreement is valid. measure motivated by the Trade Assistance Agreement. Unfortunately
for him, however, the Compromise Agreement is devoid of any provision
RATIO which will clearly show the intention of the parties to include the
The Trade Assistance Agreement entered into by and between the NAMARCO and implementation of the Trade Assistance Agreement as one of the subject
Bienvenido Y. Aguilar on November 17, 1966, is not a binding and perfected matters of the compromise.
contract. While it is true that the NAMARCO Board of Directors approved the In deducing the intention of the parties, courts should necessarily be guided by
extension of trade assistance to Aguilar Enterprises and authorized the General the terms of their written agreement. An examination of the terms of the
Manager to enter into the said agreement, approval thereof by the President of the Compromise Agreement, insofar as they relate to the Trade Assistance Agreement,
Philippines was still necessary to make it binding on the government, pursuant shows that the Central Bank had dissociated itself from the said Trade
to Executive Order No. 298, Series of 1940, and Memorandum Circular No. 150, Assistance Agreement for lack of jurisdiction on the subject matter thereof.
Series of 1955. Indeed, in the petition filed by him with the lower court praying that That the Trade Assistance Agreement was mentioned in the Compromise Agreement,
the decision of December 2, 1966, approving the Compromise Agreement, be set would only confirm the belief that one of the parties apparently respondent Aguilar
aside, respondent Aguilar in effect admitted that the Trade Assistance Agreement was motivated by it.
should still be submitted to the President for approval. The said agreement not Considering, however, that no meeting of the minds between the parties is
having been approved by the President, it stands to reason that the same is not reflected in the Compromise Agreement insofar as the Trade Assistance
a perfected and operative contract. Agreement is concerned, the end result is that no compromise was entered into
The General Manager was not authorized to sign any compromise agreement in on that matter. If the Trade Assistance Agreement is mentioned at all in the
Civil Case No. 38224. Although the text of the Trade Assistance Agreement shows Compromise Agreement, it is only to state the fact that a trade assistance agreement
that one of the consideration for its execution was the filing by the Central Bank and was entered into between respondent Aguilar and the NAMARCO. It can be said with
respondent Aguilar of a joint motion to dismiss, the NAMARCO was not in a position certainty that it is this fact to which the NAMARCO General Manager had given his
to legally bind the Central Bank, which, in spite of the terms of the Trade Assistance conformity.
Agreement, was still free to decide for itself whether or not to enter into an amicable
settlement of the case, as well as the terms of such settlement. 1352 Basic Books vs Lopez (G.R. No. L-20753, February 28, 1966)
**IMPORTANT - In any event, the Trade Assistance Agreement was not the
cause or consideration of the Compromise Agreement submitted to, and FACTS:
approved by the court in its decision of December 2, 1966. The cause of a Basic Books filed a complaint to recover from Lopez and Kintanar the value of
contract is "the essential or more proximate purpose which the contracting the books sold on commission by the former.
parties have in view at the time of entering into the contract." (8 Manresa, 697.) Lopez as agent of Basic Books received on consignment books for sale on
o In the Compromise Agreement entered into by and between the Central commission which he failed to account despite repeated demands.
Bank and the Republic on one hand, and Aguilar on the other, the cause is To secure payment, the parties entered into an agreement:
the mutual waiver and abandonment of the claims and counterclaims o Lopez and Kintanar shall be jointly and severally liable to pay in
of the parties in Seizure Cases Nos. 5677-78 initiated by the installments the amount due to Basic Books with interest.
Government against respondent Aguilar, as well as the waiver and o Lopez and KIntanar will put up a surety bond to assure compliance.
o Upon posting of the bond, Basic Books shall petition the Court for the Later, he sold the entire land to the Narcisos (sale was registered) who took
absolute dismissal of the criminal case for estafa filed by Basic Books possession only of the eastern portion.
against Lopez. Narcisos then filed suit to be declared as owners of the entire land brought
o Failure of Lopez and Kintanar to pay 2 successive installments shall against the Mapalo
render the obligation due and demandable. Mapalo: asked that the DOS over the western portion of the land be declared null
Lopez confessed judgment but Kintanar denied being liable under the contract and void as the signatures to the DOS was procured by fraud and for being
which he claims to be void since the purpose is to stifle Lopez prosecution for absolutely simulated or fictitious.
estafa.
Municipal Court: ordered Lopez to pay Basic Books but absolved Kintanar ISSUE: W/N there was simulated DOSwith respect to the western portion of the land
because the agreement was based on illegal consideration. RULING: YES. There was in fact NO CONSIDERATION.
CFI: upheld validity of the contract; Kintanar knew of such liability as proven by RATIO:
his letter to Basic Books thus shall be also liable. The DOS allegedly executed by Magpalo stated that it had for its consideration
Contentions of the parties- Consideration for: 500 but this said consideration is totally absent.
o Basic Books: promise for the payment of the pre-existing civil obligation o Contracts without a cause or consideration produce no effect
o Lopez: promise to reduce obligation and novate contract to allow whatsoever.
installments. o Statement of false consideration renders the contract voidable unless
proven that it is supported by another real and licit consideration.
ISSUE: W/N the obligation is based on an illegal consideration thus void The deed in this case is one without consideration rather than a contract with
false consideration.
RULING: NO. The agreement is not void. o Contract without consideration: VOID (imprescriptible)
RATIO: o Contract with false consideration: VOIDABLE (4 years prescription)
Kintanars assumption of a joint and several liability cannot in any way be One with a rea consideration but the same is not the one
interpreted based upon the alleged illegal consideration of stifling a criminal stated in the document.
prosecution against Lopez.
Although in Kintanars letter to Basic Books, it can be inferred that his motive in 1355 Golden Apple Realty vs Sierra Grande Realty (G.R. No. 119857, July 28, 2010)
assuming joint and several obligation is to save Lopez from criminal case, this
cannot be the reason to declare the agreement void. QUICK FACTS:
o Cause: essential reason which moves contracting parties to enter into it Hyari took a loan from Manphil for 2.5M. Bernardino became a surety. It was secured by a
which must be immediate, direct and proximate reason. real estate mortgage by a property of Sierra Grande which is the Roberts Property.
Bernardino entered into a contract of sale with Golden Apple and Rosvibon for the Roberts
property for the amount of 400k. Golden Apply and Rosvibon, through Elmer Tan, paid
1352 Mapalo vs Mapalo (G.R. No. L-21489 and L-21628, May 19, 1966) amortizations to Manphil on Hyaris account. Bernardino tried to obtain the TCT from
Manphil but Sierra severed its ties with him and asked that all third party payment made to
FACTS: Manphil for Hyaris account must be with express consent of Hyari. Manphil, eventually let
Out of love and affection for the brother of Miguel, Maximo (defendant) who was Elmer Tan to pre-terminate Hyaris account by paying 3M. Now Golden Apple is filing for
about to get married, Spouses Miguel and Candida decided to donate the easter the release of the TCT of the Roberts Property.
half of their land. FACTS:
o Spouses Magpalo are illiterate farmers and registered owners of the Hyari Trading Corporation, through a Loan Agreement, borrowed from Manphil
subject property. Investment Corporation an amount of P2,500,000.00 for the benefit of Filipinas
However, the spouses were deceived into signing a DoAS over the entire Textile Mills, Inc.
property in favor of Maximo. Hyari President Yu Han Yat, Jr, his wife Terry Villanueva Yu, and the latters
o Signatures were procured by fraud: they were made to believe by uncle, Bernardino Villanueva, executed an Assumption of Joint and Solidary
Maximo and the notary who translated the document that the same was Liability.
a deed of donation. Also, Valiant Realty and Development Corporation, represented by its General
o Although it stated a consideration of 500.00, the spouses never Manager Bernardino Villanueva, and Sierra Grande Realty Corporation, executed
received any amount. a Third Part Real Estate Mortgage on a parcel of land, otherwise known as the
After the execution of the document, the spouses built a permanent fence to Roberts property.
segregate the eastern portion from the western; the spouses have been in Bernardino suggested that the Roberts property be subdivided to make it easier
continuous possession of the land. for Sierra Grande to sell the same, and the same was approved.
Maximo was able to register the deed of sale in his favor and TCT was
subsequently issued.
In June 22, 1985, Bernardino Villanueva executed a contract to sell the Roberts residence certificates of the vendees which is required in Notary Law. (3) there
property with Golden Apple Realty and Development Inc, and Rosvibon Realty was no sufficient consideration paid for the property involved and worse, was
Corporation for the amount of P441,032.00. attended with fraudulent conflict of interest because the vendor, Bernardino
In July 26, 1985, Sierra Grande, through Bernardino Villanueva, finally executed Villanueva, was a stockholder of the buyer corporation.
a Deed of Sale.
Meanwhile, on August 29, 1985, Sierra Grandes Board passed a resolution
revoking the authority of Bernardino Villanueva to sell the Roberts property. 1356 Municipality of Hagonoy Bulacan vs Dumdum (G.R. No. 168289, March 22,
On August 30, 1985, Hayari advised Manphil that all dealings with respect to its 2010)
loan or credit facility with Manphil shall be coursed through or effected with the
express knowledge, representation or consent of the president of hayari. FACTS:
Nevertheless, Elmer Tan (majority stockholder of Golden Apple), in behalf of the Emily Rose Go Kim Chao, doing business as KD Surplus entered into an
buyer corporations (Golden Apple and Rosvibon) paid to Manphil for Hyaris agreement with the Municipality of Hagonoy through Ople as the chief executive
account an amount with a total of around P130,000.00 for the delivery of 21 motor vehicles for 5.82M, which supposedly were needed to
Sierra Learned that Bernardino tried to secure the TCT of the Roberts property carry out certain developmental undertakings in the municipality.
from Manphil, Sierra Grande wrote to Manphil that Bernardino Villanueva was no o Evidenced by bills of lading showing that the items were consigned,
longer connected with the company, and that the TCT must not be released delivered to and received by the municipality.
without the express consent of Hayari. Despite having made several deliveries, Ople allegedly did not heed respondents
HOWEVER, October 20, 1988, Manphil allowed Elmer Tan to pre-terminate claim for payment (liab reached 10M)
Hayaris obligation after making total payments to Manphil in the amount of TC: granted prayer for writ of preliminary attachment conditioned upon the
P3,134,921.00. posting of a bond and ordering the sheriff to attach the estate of the petitioner
HENCE, Golden Apple and Rosvibon files a case against Sierra Grande and Municipality of Hagonoy filed Motion to Dismiss on the ground that it is
Manphil for specific performance (to release TCT) and damages. unenforceable under the Statute of Fraud since there was no written contract.
RTC ruled in favor of Golden apple but upon appeal, CA reverses and held that Municipality of Hagonoy also filed a Motion to Dissolve and/or Discharge the Writ
Contract of Sale between Bernardino and the Buyer corporations. of Prelim Attachment invoking state immunity from suit, unenforceability of
contract and failure to substantiate allegation of fraud.
ISSUE: WON the contract of sale is invalid-YES. Not for having insufficient consideration TC as affirmed by CA: denied the 2 motions.
but for being fraudulent.
ISSUE: W/N the contract is unenforceable since it was not in writing
RATIO:
One of the reasons why CA held that the Contract of Sale was invalid is for RULING: NO. Since there exists an indication by way of allegations that there has been
having no sufficient consideration. The petitioners argues that there is sufficient performance of the obligation on the part of respondent, the case is excluded from the
consideration since Elmer Tan paid to Manphil around 3M for the property. coverage of the rule on dismissals based on unenforceability under the stature of frauds
HOWEVER, the court held that the amount paid by Elmer Tan is for the loan in and either party may then enforce its claims against the other.
favor of Hayari and not to be considered as part of the consideraition of the sale
of the land owned by Sierra. It appears then that the only consideration paid for RATIO:
the sale of the propertt was P441,032.00 Statute of Frauds (Art. 1403, par 2) requires the enforceability of certain contracts
Petitioner further argues that assuming arguendo that the consideration is not enumerated therein to be evidenced by some note/memorandum.
sufficient, such insufficiency should not invalidate a contract. It requires certain classes of contracts to be in WRITING for the purpose of
HOWEVER, it was clear that the main reason for invalidating the contracts in merely regulating the formalities of the contract necessary to render it
question is that there is fraud. The inadequacy of price was merely one of the enforceable.
circumstances upon which the CA was able to find the existence of fraud and not It lays down methods by which the enumerated contracts may be proved but it
the main cause for the invalidation of the subject contacts. does NOT DECLARE them invalid.
Badges of Fraud refers to fraudulent acts that attended the execution of the The object of this regulation is to prevent fraud and perjury in the enforcement of
Contract to Sell and the Deeds of Absolute Sale which would eventually tend to obligations.
prove that the same transactions were indeed suspicious as the said contracts Effect of non-compliance is that NO ACTION can be enforced under the given
were antedated, simulated and fraudulent. contracts.
The following was considered in the finding that there is fraud. (1) Rosvibon had
no legal personality to purchase the property at the time of the June 22, 1985
deed of sale since it was incorporated only on July 8, 1985. (2) the deed of sale
was executed irregularly, the notarial acknowledgement did not indicate the
1356 Swedish Match vs CA [G.R. No. 128120. October 20, 2004] subject to availability of additional information and audit verification of the
company finances.
Art. 1356. Contracts shall be obligatory, in whatever form they may have been 10. Responding to Litonjuas offer, Rossi sent a letter, informing the Litonhua that ALS
entered into, provided all the essential requisites for their validity are present. should undertake a due diligence process or pre-acquisition audit and review of the
However, when the law requires that a contract be in some form in order that it may draft contract for the Match and Forestry activities of Phimco at ALS convenience.
be valid or enforceable, or that a contract be proved in a certain way, that However, Rossi made it clear that at the completion of the due diligence
requirement is absolute and indispensable. In such cases, the right of the parties process, ALS should submit its final offer in US dollar terms not later than 30
stated in the following article cannot be exercised. (1278a) June 1990.
11. Litonjua in a letter dated 18 June 1990, expressed disappointment at the apparent
FACTS: change in SMABs approach to the bidding process. He pointed out that in their 4
1. Swedish Match, AB (hereinafter SMAB)1 is a corporation organized under the laws of June 1990 meeting, he was advised that one final bidder would be selected from
Sweden not doing business in the Philippines. SMAB, however, had three among the four contending groups as of that date and that the decision would
subsidiary corporations in the Philippines, all organized under Philippine laws: be made by 6 June 1990. He criticized SMABs decision to accept a new bidder who
a. Phimco Industries, Inc. (Phimco), was not among those who participated in the 25 May 1990 bidding. He informed Rossi
b. Provident Tree Farms, Inc., and that it may not be possible for them to submit their final bid on 30 June 1990,
c. OTT/Louie (Phils.), Inc. citing the advice to him of the auditing firm that the financial statements would not be
2. Sometime in 1988, STORA, the then parent company of SMAB, decided to sell completed until the end of July. Litonjua added that he would indicate in their final
SMAB of Sweden and the latters worldwide match, lighter and shaving products offer more specific details of the payment mechanics and consider the possibility of
operation to Eemland Management Services, now known as Swedish Match NV signing a conditional sale at that time.
of Netherlands, (SMNV), a corporation organized and existing under the laws of 12. Litonjua again told Rossi that they would be unable to submit the final offer by 30 June
Netherlands. STORA, however, retained for itself the packaging business. 1990, considering that the acquisition audit of Phimco and the review of the draft
3. SMNV initiated steps to sell the worldwide match and lighter businesses while agreements had not yet been completed. He said, however, that they would be able
retaining for itself the shaving business. SMNV adopted a two-pronged strategy, the to finalize their bid on 17 July 1990 and that in case their bid would turn out
first being to sell its shares in Phimco Industries, Inc. and a match company in better than any other proponent, they would remit payment within ten (10) days
Brazil, which proposed sale would stave-off defaults in the loan covenants of from the execution of the contracts.
SMNV with its syndicate of lenders. The other move was to sell at once or in one 13. Enriquez sent notice to Litonjua that they would be constrained to entertain bids
package all the SMNV companies worldwide which were engaged in match and from other parties in view of Litonjuas failure to make a firm commitment for
lighter operations thru a global deal (hereinafter, global deal). the shares of Swedish Match in Phimco by 30 June 1990.
4. Ed Enriquez (Enriquez), Vice-President of Swedish Match Sociedad Anonimas 14. In a letter dated 3 July 1990, Rossi informed Litonjua that on 2 July 1990, they signed
(SMSA), the management company of the Swedish Match group, was commissioned a conditional contract with a local group for the disposal of Phimco. He told
and granted full powers to negotiate by SMNV, with the resulting transaction, Litonjua that his bid would no longer be considered unless the local group would
however, made subject to final approval by the board. Enriquez was held under strict fail to consummate the transaction on or before 15 September 1990.
instructions that the sale of Phimco shares should be executed on or before 30 15. Irked by SMABs decision to junk his bid, Litonjua promptly responded by letter dated 4
June 1990, in view of the tight loan covenants of SMNV. July 1990. Contrary to his prior manifestations, he asserted that, for all intents
5. Enriquez came to the Philippines in November 1989 and informed the Philippine and purposes, the US$36 million bid which he submitted on 21 May 1990 was
financial and business circles that the Phimco shares were for sale. their final bid based on the financial statements for the year 1989. He pointed out
6. Several interested parties tendered offers to acquire the Phimco shares, among that they submitted the best bid and they were already finalizing the terms of the
whom were the AFP Retirement and Separation Benefits System, herein respondent sale.
ALS Management & Development Corporation and respondent Antonio Litonjua 16. More than two months from receipt of Litonjuas last letter, Enriquez sent a fax
(Litonjua), the president and general manager of ALS. communication to the former, advising him that the proposed sale of SMABs
7. In his letter dated 3 November 1989, Litonjua submitted to SMAB a firm offer to shares in Phimco with local buyers did not materialize. Enriquez then invited
buy all of the latters shares in Phimco and all of Phimcos shares in Provident Litonjua to resume negotiations with SMAB for the sale of Phimco shares.
Tree Farm, Inc. and OTT/Louie (Phils.), Inc. for the sum of P750,000,000.00. a. New Terms for Sale: SMAB would be prepared to negotiate with ALS on an
8. Through its CEO, Massimo Rossi (Rossi), SMAB thanked respondents for their exclusive basis for a period of fifteen (15) days from 26 September 1990
interest in the Phimco shares, but informed Litonhua that their price offer was below subject to the terms contained in the letter. Additionally, if the sale would not
their expectations. be completed at the end of the fifteen (15)-day period, SMAB would enter
9. Thereafter, SMAB and Litonhua, et. al. exchanged letters regarding the projected sale into negotiations with other buyers.
of the Phimco shares. Litonjua stressed that the bid amount could be adjusted 17. Litonjua sent a letter expressing his objections to the totally new set of terms and
conditions for the sale of the Phimco shares. He emphasized that the new offer
constituted an attempt to reopen the already perfected contract of sale of the
1
SMAB - noadays, they make snus and chewing tobacco moist smokeless tobacco. They also make razors,
batteries, light bulbs and toothpicks.
shares in his favor. He intimated that he could not accept the new terms and However, for a note or memorandum to satisfy the Statute, it must be complete
conditions contained therein. in itself and cannot rest partly in writing and partly in parol. The note or
18. On 14 December 1990, ATP, filed before the Regional Trial Court (RTC) of Pasig a memorandum must contain the names of the parties, the terms and conditions of the
complaint for specific performance with damages, with a prayer for the issuance of a contract, and a description of the property sufficient to render it capable of
writ of preliminary injunction, against SMAB. identification. Such note or memorandum must contain the essential elements of
19. Arguments of ATP & Litonhua: Phimco management, in utter bad faith, induced the contract expressed with certainty that may be ascertained from the note or
SMAB to violate its contract with ATP. SMABs refusal to consummate the perfected memorandum itself, or some other writing to which it refers or within which it is
sale of the Phimco shares amounted to an abuse of right and constituted conduct connected, without resorting to parol evidence.
which is contrary to law, morals, good customs and public policy. o Contrary to the Court of Appeals conclusion, the exchange of
20. Arguments of SMAB: Traversing the complaint, petitioners alleged that respondents correspondence between the parties hardly constitutes the note or
have no cause of action, contending that no perfected contract, whether verbal or memorandum within the context of Article 1403 of the Civil Code.
written, existed between them. Petitioners added that respondents cause of action, if Rossis letter dated 11 June 1990, heavily relied upon by respondents, is not
any, was barred by the Statute of Frauds since there was no written instrument or complete in itself. First, it does not indicate at what price the shares were
document evidencing the alleged sale of the Phimco shares to ATP. being sold. Second, there was as yet no definite agreement as to the price.
Second, the letter does not state the mode of payment of the price. In fact,
ISSUES: Litonjua was supposed to indicate in his final offer how and where payment
1. Whether or not ATP can make a valid claim based on proof, absent a written for the shares was planned to be made.
instrument (or alternatively, whether or not the contract is within the ambit of the Assuming arguendo that a valid claim can be made, no contract existed between
Statute of Frauds); the parties. Litonjuas letter dated 21 May 1990, proposing the acquisition of the
2. Whether or not there was a perfected contract of sale between the parties. Phimco shares for US$36 million was merely an offer. This offer, however, in
Litonjuas own words, is understood to be subject to adjustment on the basis of an
RULING: NO on both counts. The Statute of Frauds is applicable only to contracts which audit of the assets, liabilities and net worth of Phimco and its subsidiaries and on the
are executory and not to those which have been consummated either totally or partially. It final negotiation between ourselves.
does NOT apply to contracts that are not even perfected yet. In this case, the Contract was There was in the first place no meeting of the minds with respect to the price.
not yet perfected. Respondents plea of partial performance should likewise fail. The acquisition audit
and submission of a comfort letter, even if considered together, failed to prove the
RATIO: perfection of the contract. Quite the contrary, they indicated that the sale was far from
The Statute of Frauds embodied in Article 1403, paragraph (2), of the Civil Code concluded.
requires certain contracts enumerated therein to be evidenced by some note or
memorandum in order to be enforceable. The term Statute of Frauds is
descriptive of statutes which require certain classes of contracts to be in
writing. The Statute does not deprive the parties of the right to contract with
respect to the matters therein involved, but merely regulates the formalities of 1358 Meneses vs Venturoza (G.R. No. 172196, October 19, 2011)
the contract necessary to render it enforceable. Evidence of the agreement
cannot be received without the writing or a secondary evidence of its contents.
The Statute, however, simply provides the method by which the contracts FACTS:
enumerated therein may be proved but does not declare them invalid because June 8, 1988: Rosario G. Venturozo, filed a Complaint for ownership, possession
they are not reduced to writing. By law, contracts are obligatory in whatever and damages against defendant Adelaida Meneses, alleging that she is the
form they may have been entered into, provided all the essential requisites for absolute owner of an untitled coconut land in Pangasinan
their validity are present. However, when the law requires that a contract be in Venturoza alleged that she purchased the property from the spouses Basilio de
some form in order that it may be valid or enforceable, or that a contract be proved in Guzman and Crescencia Abad on as evidenced by a Deed of Absolute Sale, and
a certain way, that requirement is absolute and indispensable. that the vendors, in turn, purchased the property from defendant as evidenced by
Consequently, the effect of non-compliance with the requirement of the Statute a Deed of Absolute Sale dated June 20, 1966.
is simply that no action can be enforced unless the requirement is complied Venturoza alleged that she has been in possession of the land until May 1983
with. Clearly, the form required is for evidentiary purposes only. Hence, if the parties when Meneses, with some armed men grabbed possession of the land and
permit a contract to be proved, without any objection, it is then just as binding as if the refused to vacate despite repeated demands prompting her to engage the
Statute has been complied with. The purpose of the Statute is to prevent fraud and services of counsel.
perjury in the enforcement of obligations depending for their evidence on the Meneses:
unassisted memory of witnesses, by requiring certain enumerated contracts and o Venturozo is the daughter of Basilio de Guzman, the vendee in the
transactions to be evidenced by a writing signed by the party to be charged. Deed of Absolute Sale dated June 20, 1966 that was purportedly
executed by her covering the subject property.
o alleged that she never signed any Deed of Absolute Sale dated June strong and convincing as to exclude all controversy as to falsity.
20, 1966, and that the said deed is a forgery The presumptions that attach to notarized documents can be affirmed only so
o she acquired the subject property from her deceased father and she long as it is beyond dispute that the notarization was regular.
has been in possession of the land for more than 30 years in the A defective notarization will strip the document of its public character and reduce
concept of owner. it to a private instrument.
o Plaintiffs allegation that she (defendant) forcibly took possession of the Consequently, when there is a defect in the notarization of a document, the clear
land is a falsehood. and convincing evidentiary standard normally attached to a duly-notarized
o in view of the nullity of the falsified Deed of Absolute Sale of the subject document is dispensed with, and the measure to test the validity of such
property, and the fact that plaintiff and her father Basilio de Guzman document is preponderance of evidence.
had never been in actual possession of the property, Venturoza is In this case, it should be pointed out that contrary to the finding of the Court of
under legal obligation to execute a deed of reconveyance over the said Appeals, the Deed of Sale dated June 20, 1966 did not comply with the
property in her favor. formalities required by law, specifically Act No. 496, otherwise known as The
RTC: Land Registration Act
o rendered a Decision in favor of defendant Adelaida Meneses
o defendant Adelaida Meneses inherited the land in dispute from her Section 127. Deeds, conveyances, mortgages,
father, Domingo Meneses leases, releases, and discharges affecting lands, whether
o Meneses did not sell her property to Basilio de Guzman in 1966; registered under this Act or unregistered, shall be sufficient
o and that the signature of Adelaida Meneses on the Deed of Absolute in law when made substantially in accordance with the
Sale dated June 20, 1966 is a forgery following forms, and shall be as effective to convey,
o there was no valid transfer of the property by Adelaida Meneses to encumber, lease, release, discharge, or bind the lands as
Basilio de Guzman, the conveyance of the same property in 1973 by though made in accordance with the more prolix form heretofore
Basilio de Guzman to his daughter, plaintiff Rosario G. Venturozo, was in use: Provided, That every such instrument shall be signed
also invalid by the person or persons executing the same, in the
CA: presence of two witnesses, who shall sign the instrument as
o Reversed RTC witnesses to the execution thereof, and shall be
o Adelaida Meneses failed to prove by clear and convincing evidence that acknowledged to be his or their free act and deed by the person
her signature on the Deed of Absolute Sale dated June 20, 1966 was a or persons executing the same, before the judge of a court of
forgery record or clerk of a court of record, or a notary public, or a
o a notarized document, like the questioned Deed of Absolute Sale dated justice of the peace, who shall certify to such
June 20, 1966, has in its favor the presumption of regularity, and to acknowledgment x x x
overcome the same, there must be evidence that is clear, convincing
and more than merely preponderant; otherwise, the document should
be upheld In the Deed of Absolute Sale dated June 20, 1966, the Notary Public signed his
o Atty. Abelardo G. Biala the notary public before whom the questioned name as one of the two witnesses to the execution of the said deed; hence, there
Deed of Sale was acknowledged testified and confirmed its was actually only one witness thereto.
genuineness and due execution, particularly the signature in question. Moreover, the residence certificate of petitioner was issued to petitioner and then
o The testimony of a notary public enjoys greater credence than that of it was given to the Notary Public the day after the execution of the deed of sale
an ordinary witness and notarization; hence, the number of petitioners residence certificate and the
date of issuance (June 21, 1966) thereof was written on the Deed of Absolute
ISSUE: W/N the sale made by defendant Adelaida Meneses in favor of plaintiffs father, Sale by the Notary Public on June 21, 1966, after the execution and notarization
Basilio de Guzman, was valid of the said deed on June 20, 1966.
RULING: NO. SC reversed RTC. WHEREFORE, the petition is GRANTED. Considering the defect in the notarization, the Deed of Absolute Sale dated June
20, 1966 cannot be considered a public document, but only a private document,
RATIO: and the evidentiary standard of its validity shall be based on preponderance of
evidence.
The necessity of a public document for contracts which transmit or extinguish real Petitioners signature on the Deed of Absolute Sale dated June 20, 1966 is a
rights over immovable property, as mandated by Article 1358 of the Civil Code, is forgery.
only for convenience; it is not essential for validity or enforceability.
As notarized documents, Deeds of Absolute Sale carry evidentiary weight
conferred upon them with respect to their due execution and enjoy the 1359 Veluz vs Veluz (G.R. No. L-23261, July 31, 1968)
presumption of regularity which may only be rebutted by evidence so clear,
FACTS: RATIO:
There was no trial in this case. Instead of an answer, the defendants filed a In support thereof appellants argue that the allegations, as well as the relief
motion to dismiss upon the grounds of prescription and want of cause of action. sought, in the complaint, clearly show that the action is for reformation of
The facts as alleged in the complaint must, therefore, be considered instrument under Articles 1365 and 1605, of the Civil Code, which action
hypothetically admitted. prescribes in ten years, and not for annulment of contract which prescribes in
July 30, 1958: original plaintiff Ernesto Veluz filed a complaint before the CFI in four years; that assuming that the action was for annulment, it could be said that
Quezon original plaintiff Ernesto Veluz discovered the fraud only in 1958 when his
A motion for bill of particulars by defendants, the court ordered plaintiff to file an brothers and sisters, taking advantage of the deed of sale, refused to allow him to
amended complaint, which plaintiff did. redeem the property.
In the amended complaint plaintiff alleged that on January 2, 1953: The defendants-appellees rely principally on Article 1391 of the Civil Code which
o he asked defendants for a loan of five thousand pesos, to secure the provides that the action for the annulment of a contract on the ground of fraud
payment of which he proposed to mortgage his share on a parcel of must be brought within four years from the date of the discovery of the fraud.
land that the defendants agreed and caused forthwith the preparation of The appellees urge that the four-year period of prescription of the action began
a deed; on January 2, 1953 when the deed in question was signed by original plaintiff
o that when defendants asked plaintiff to sign the deed as prepared, the Ernesto Veluz who already knew of the fraud.
latter noticed that the deed was an absolute sale instead of a mortgage, The action is clearly one for the reformation of an instrument as contemplated in
and so he asked defendants why the document was couched that way, Articles 1359 and 1365 of the Civil Code of the Philippines.
to which query defendants answered that it had to be so in order that In the order appealed from the lower court starts with the statement "This is an
defendants could take possession and enjoy the fruits of the land and action for reformation of contract with damages ...", but later declared "that the
that plaintiff had nothing to worry about the document as defendants, plaintiff's action in the case at bar is for annulment of contract based on fraud
being his brothers and sisters, would not take advantage of the deed of (although ultimately it is for recovery of title and possession) which, under Article
sale, and that plaintiff could redeem the property anytime; 1391 of the new Civil Code shall be brought within four years from the discovery
o that because of the assurance of his brothers and sisters, plaintiff of the fraud."
affixed his signature on the document; The action for reformation of instrument should not be confused with the action
o that said document did not express the real intention of the parties; for annulment of contract.
o that in May 1956 plaintiff wanted to redeem the property but the Reformation of instrument presupposes a valid, existing contract, in which
defendants refused, claiming that what plaintiff had executed was a there had been a meeting of the minds of the parties but the instrument drawn up
deed of sale; and signed by them does not correctly express the terms of their agreement.
o that several days later, plaintiff came to know that the property had Annulment of a contract, on the other hand, presupposes a defective contract
been registered already in defendants' name; in which the minds of the parties did not meet, or the consent of one was vitiated.
o that the value of the land with its improvements could be no less than The equity of reformation is ordinarily limited to written agreements, and its
P80,000.00 yielding a monthly produce value at no less than purpose is to establish and perpetuate the true agreement; annulment, on the
P1,000.00. other hand, is intended to declare the inefficiency which the contract already
Plaintiff prayed that judgment be issued "ordering the reformation of the deed of carries in itself and to render the contract inefficacious.
sale to express the true intention of the parties, to wit: the same be made as a In other words, what is sought is 'reformation", which is defined as "that remedy
deed of mortgage in equity by means of which a written instrument is made or construed so as to
Defendants moved for the dismissal of the complaint upon the grounds that the express or conform to the real intention of the parties when some error or mistake
cause of action has prescribed and that the complaint states no cause of action, has been committed."
to which motion plaintiff filed his opposition. As an action for reformation, plaintiff had 10 years within which to bring it from
RTC: dismissed the complaint, upon the ground that plaintiff action was for the time the right of action accrued.
annulment of contract based on fraud (although ultimately it was for recovery of Hence, in the case at bar, even if the ten-year period of prescription be computed
title and possession), which under Article 1391 had to be brought within four from the date of the execution of the instrument on January 2, 1953, or from May,
years from the discovery of the fraud; that from January 2, 1953 when the fraud 1958 when defendants refused to allow redemption evincing thus their intent
was discovered to the date of institution of the action on July 30, 1958, more than not to live up to the true agreement and thereby giving rise to the right of action,
four years had elapsed. until July 30, 1958 when the instant case was commenced, the ten year period
for prescription of the action had not yet elapsed.
ISSUE: W/N the cause of action had already prescribed
RULING: NO. IN VIEW OF THE FOREGOING, the appealed order of the lower court, 1361 Maagad vs Maagad (GR No. 1717162, June 5, 2009)
dated June 28, 1960, dismissing plaintiff's complaint, should be, as it is hereby, set aside;
and this case is remanded to the court a quo for further proceedings. FACTS:
20 June 1972: the heirs of Proceso executed an Extrajudicial Partition of Real RATIO:
Estate (Partition) dividing among themselves their fathers properties. In the The strongest evidence of mistake, however, is the admission by the
Partition, Lot 6297 was conveyed to Adelo while Lot No. 6270 was allotted to petitioner himself.
respondent Juanito. In his Petition for Review on Certiorari, petitioner admits that, because of mutual
Respondent Juanito claimed that the Partition mistakenly adjudicated Lot 6297 to mistake, the Memorandum of Exchange failed to express the agreement of the
Adelo, and Lot No. 6270 to himself, when it should have been the reverse. parties to exchange the properties. Moreover, he quotes, and agrees with, the
He asserted that: decision of the CA and even refers to the reformation of the original contract.
o (1) he had been in continuous possession of Lot 6297 even before the In the case at bar, it became apparent that there was failure of the Memorandum
death of their father, Proceso; of Exchange to disclose the real agreement of the parties brought about by the
o (2) the lot was given to him by their father when Juanito married in mutual mistakes of the parties as reflected in the said instrument (Article 1361)
1952; By reason of the mutual mistake which did not express the true intent and
o (3) he had been religiously paying the realty taxes due the land; and agreement of the parties from a prior oral agreement to exchange the
o (4) Adelo, up to his death in 1989, recognized and respected Juanitos property before they have attempted to reduce it in writing, which attempt fails
possession and ownership over Lot 6297 and, in turn, possessed and by reason of such mistake, hence reformation enforces the original contract, if
paid realty taxes for Lot No. 6270. necessary.
29 January 1990: To rectify the alleged mistake, respondent Juanito and the defendant-appellees contention tenuous that Lot No. 6297 belonged to him and
children of Adelo, namely: Dina, Ely and petitioner Lynn, executed a his siblings by way of inheritance from their father, Adelo, who in turn obtained
Memorandum of Exchange the same through Extra-judicial Partition.
However, an erroneous assignment of the Party of the First Part and the Party of It would be highly illogical and absurd for the parties to execute a Memorandum
the Second Part resulted in a repeat of the mistake attendant in the Partition of Exchange in the first place if there was nothing to exchange at all, unless the
which the parties had intended to correct. purpose of said exchange was precisely to rectify and effect the correct
Thus, once again, Lot 6297 was allotted to the heirs of the now deceased Adelo adjudication of the two lots in question.
while Lot No. 6270 was partitioned to respondent Juanito. Indeed there was an attempt to rectify and effect the correct adjudication of
The latter only discovered the error later on in the year when petitioner Lynn the two lots in question.
caused the publication of the Partition in a local newspaper. With the mistake in both the Partition and the Memorandum of Exchange duly
15 October 1992: Unbeknownst to respondent Juanito, petitioner Lynn, shown and admitted, respondent Juanito Maagad has a superior right
representing his siblings, applied for a free patent over Lot 6297 with the Bureau over Lot 6297 pursuant to the intended distribution of properties in the Partition.
of Lands, Cagayan de Oro City.
6 January 1993: he wrote respondent demanding the surrender of the
possession of Lot 6297 which the latter ignored, believing in good faith that the 1362 PCI Leasing and Finance, Inc. (G.R. 176381, December 15, 2010)
demand had no basis.
4 August 1993: petitioner Lynns free patent application was approved and was FACTS:
issued on Sometime in 1997, respondent Trojan Metal Industries, Inc. (TMI) came to
10 August 1993: OCT No. P-3614, in the name of the Heirs of Adelo Maagad petitioner PCI Leasing and Finance, Inc. (PCILF) to seek a loan.
represented by Lynn V. Maagad, was issued and recorded in the Register of Instead of extending a loan, PCILF offered to buy various equipment TMI owned,
Deeds of Cagayan de Oro City namely: a Verson double action hydraulic press with cushion, a Hinohara
21 February 1994: respondent Juanito filed a Complaint for Annulment of Title powerpress 75-tons capacity, a USI-clearing powerpress 60-tons capacity, a
with Damages before the RTC, which was later amended to include a prayer for Watanabe powerpress 60-tons capacity, a YMGP powerpress 30-tons capacity,
the alternative relief of reconveyance of title. a YMGP powerpress 15-tons capacity, a lathe machine, a vertical milling
6 March 1997: the RTC granted the demurrer and dismissed the case for lack of machine, and a radial drill.
evidence. PCILF and TMI immediately executed deeds of sale evidencing TMIs sale to
CA: reversed and set aside the ruling of the RTC: OCT No. P-3614 issued to the PCILF of the various equipment in consideration of the total amount of P
Heirs of Adelo Maagad is hereby declared NULL AND VOID and plaintiff- 2,865,070.00.
appellant declared the rightful owner and possessor of Lot No. 6297 8 April 1997: PCILF and TMI then entered into a lease agreement, whereby the
latter leased from the former the various equipment it previously owned.
ISSUE: W/N the title can be reconveyed to respondent The lease agreement required TMI to give PCILF a guaranty deposit of
RULING: YES. IN VIEW WHEREOF, the instant petition for review on certiorari P1,030,350.00, which would serve as security for the timely performance of
is DENIED. The assailed 7 February 2006 Decision of the Court of Appeals in CA-G.R. CV TMIs obligations under the lease agreement, to be automatically forfeited should
No. 56663 is AFFIRMED. TMI return the leased equipment before the expiration of the lease agreement.
Further, spouses Walfrido and Elizabeth Dizon, as TMIs President and Vice-
President, respectively executed in favor of PCILF a Continuing Guaranty of assist a buyer in acquiring movable property which he can use and eventually
Lease Obligations own.
To obtain additional loan from another financing company, TMI used the leased If the movable property already belonged to the borrower-lessee, the transaction
equipment as temporary collateral. between the parties, according to the Court, was a loan with mortgage in the
PCILF considered the second mortgage a violation of the lease agreement. guise of a lease.
At this time, TMIs partial payments had reached P1,717,091.00. Since the transaction between PCILF and TMI involved equipment already
8 December 1998: PCILF sent TMI a demand letter for the payment of the latters owned by TMI, it cannot be considered as one of financial leasing, as defined by
outstanding obligation. PCILFs demand remained unheeded. law, but simply a loan secured by the various equipment owned by TMI.
7 May 1999: PCILF filed in the RTC a complaint against TMI, spouses Dizon, Articles 1359 and 1362 of the Civil Code provide:
and John Doe (collectively referred to as respondents hereon) for recovery of
sum of money and personal property with prayer for the issuance of a writ of Art. 1359. When, there having been a meeting of the minds of the parties to a contract,
replevin their true intention is not expressed in the instrument purporting to embody the agreement,
7 September 1999: the RTC issued the writ of replevin PCILF prayed for, by reason of mistake, fraud, inequitable conduct, or accident, one of the parties may ask
directing the sheriff to take custody of the leased equipment. Not long after, for the reformation of the instrument to the end that such true intention may be expressed.
PCILF sold the leased equipment to a third party and collected the proceeds
amounting to P1,025,000.00. Art. 1362. If one party was mistaken and the other acted fraudulently or inequitably in such
Respondents: a way that the instrument does not show their true intention, the former may
o claimed that the sale with lease agreement was a mere scheme to ask for the reformation of the instrument.
facilitate the financial lease between PCILF and TMI. TMI timely exercised its right of action when it filed an answer asking for the
o explained that in a simulated financial lease, property of the debtor reformation of the lease agreement.
would be sold to the creditor to be repaid through rentals; at the end of Hence, had the true transaction between the parties been expressed in a proper
the lease period, the property sold would revert back to the debtor. instrument, it would have been a simple loan secured by a chattel mortgage,
o prayed that they be allowed to reform the lease agreement to show the instead of a simulated financial leasing.
true agreement between the parties, which was a loan secured by a Thus, upon TMIs default, PCILF was entitled to seize the mortgaged equipment,
chattel mortgage. not as owner but as creditor-mortgagee for the purpose of foreclosing the chattel
RTC: the lease agreement must be presumed valid as the law between the mortgage.
parties even if some of its provisions constituted unjust enrichment on the part of PCILFs sale to a third party of the mortgaged equipment and collection of the
PCILF. proceeds of the sale can be deemed in the exercise of its right to foreclose the
CA: set aside the Decision of the RTC chattel mortgage as creditor-mortgagee.
o the sale with lease agreement was in fact a loan secured by chattel The transaction between the parties was simply a loan secured by a chattel
mortgage. mortgage.
o since PCILF sold the equipment to a third party for P1,025,000.00 and However, in reckoning the amount of the principal obligation, the Court of
TMI paid PCILF a guaranty deposit of P1,030,000.00, PCILF had in its Appeals should have taken into account the proceeds of the sale to PCILF less
hands the sum of P2,055,250.00, as against TMIs remaining obligation the guaranty deposit paid by TMI. After deducting payments made by TMI to
of P888,423.48, or an excess of P1,166,826.52, which should be PCILF, the balance plus applicable interest should then be applied against the
returned to TMI in accordance with Section 14 of the Chattel Mortgage aggregate cash already in PCILFs hands.
Law. TMIs right to the refund accrued from the time PCILF received the proceeds of
the sale of the mortgaged equipment.
ISSUE: W/N TMI can ask for reformation of the lease agreement However, since TMI never made a counterclaim or demand for refund due on the
RULING: YES. Petitioner PCI Leasing and Finance, Inc. is hereby ORDERED to PAY resulting overpayment after offsetting the proceeds of the sale against the
respondent Trojan Metal Industries, Inc., by way of refund remaining balance on the principal loan plus applicable interest, no interest
applies on the amount of refund due.
Nonetheless, in accord with prevailing jurisprudence, the excess amount PCILF
RATIO: must refund to TMI is subject to interest at 12% per annum from finality of this
TMI already owned the subject equipment before it transacted with PCILF. Decision until fully paid.
Therefore, the transaction between the parties in this case cannot be deemed to
be in the nature of a financial leasing as defined by law.
The Court differentiated between a true financial leasing and a loan with
mortgage in the guise of a lease.
The Court said that financial leasing contemplates the extension of credit to

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