1. FEDERICO SERRA VS.

CA
229 SCRA 60 – Civil Law – Contracts – Option Contract – Consideration Distinct from the
Price

In 1975, a “Lease Contract with Option to Buy” was executed between Federico Serra and
the Rizal Commercial Banking Corporation (RCBC). It was agreed that Serra shall lease to
RCBC his land from the year 1975 to 2000. It was also agreed that within 10 years from 1975,
RCBC shall exercise an option whether or not to buy the said lot at a price not exceeding
P210.00 per square meter. However, no option money was provided for in the contract hence,
RCBC did not pay any option money for the exercise of such option to buy. What was
provided, however, was a clause which states that in case RCBC fails to exercise such option
to buy, it shall forfeit all improvements it made (or will make) on said land in favor of Serra.

In 1984, RCBC communicated to Serra that it now wants to buy the said land. Serra however
refused. RCBC sued Serra. Serra now contends that the option to buy was ineffective
because it was not supported by any consideration distinct from the price hence, it is not
binding upon him.

ISSUE: Whether or not there was no consideration distinct from the price.

HELD: No, there is a consideration here. The Supreme Court ruled that in this case, the
consideration which is distinct from the price was the agreement in the contract which stated
that if RCBC fails to exercise its option to buy, it shall transfer all improvements made on the
land [by RCBC] in favor of Serra. Such is an agreement more onerous than the payment of
option money. Since there is a consideration distinct from the price, Serra is bound by the
option contract. Therefore, he cannot refuse to sell the land to RCBC.

2. DOMINGO MERCADO, ET AL., VS. JOSE ESPIRITU

37 Phil 215 – Civil Law – Obligations and Contracts – Parties to a Contract – Liability of a
Minor

Margarita Espiritu was the owner of a 48 hectare land. In 1897, she died and the land was
left to her husband (Wenceslao Mercado) and her children, Domingo Mercado, Josefa
Mercado and 3 other siblings.

Apparently however, during the lifetime of Margarita in 1894, she executed a deed of sale
transferring about 71% of her land (covering 15 cavanes of seeds) to her brother Luis Espiritu
(father of Jose Espiritu) for P2,000.00. After her death, Wenceslao had a hard time making
ends meet for his family and so he took out a loan from Luis in the amount of P375.00. The
loan was secured by the remainder of the lot. Later, that loan was increased to P600.00.

In May 1910, Luis entered into a notarized agreement with Domingo and Josefa whereby the
two, while purporting to be of legal age, acknowledged the sale and the loan previously

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entered into by their parents with Luis. In the same agreement, the siblings agreed that for
and in consideration of the amount of P400.00, they are transferring the remainder 29%
(covering 6 cavanes of seeds) to Luis.

But later, the siblings contested the said agreement. Luis later died and he was substituted
by Jose. It is the contention of Domingo et al that the agreement is void because they were
only minors, 19 and 18 years of age respectively, when the contract was entered into in May
1910 (21 being the age of minority at that time).

ISSUE: Whether or not the agreement between Luis and Domingo et al in May 1910 is valid
despite the minority of the latter party.

HELD: Yes. In the first place, their minority of Domingo and Josefa was not proven with
certainty because of the loss of official records (got burned down). However, even assuming
that they were indeed minors, they are bound by their declaration in the notarized document
where they presented themselves to be of legal age. Domingo claimed he was 23 years old
in the said document. The Supreme Court declared: the sale of real estate, made by minors
who pretend to be of legal age, when in fact they are not, is valid, and they will not be permitted
to excuse themselves from the fulfillment of the obligations contracted by them, or to have
them annulled in pursuance of the provisions of Law.

Further, there was no showing that the said notarized document was attended by any
violence, intimidation, fraud, or deceit.

3. FELIPE AGONCILLO VS. CRISANTO JAVIER

In 1897, one Anastasio Cruz incurred a P2,730.50 loan from Marcela Mariño, wife of Felipe
Agoncillo. Cruz however died. Later, in February 1904, the heirs of Cruz, namely: Jose Alano,
Anastasio Alano (for his children), and Florencio Alano executed a document whereby they
promised to pay Marcela the said debt. The debt is scheduled to mature on February 27,
1905. In 1908, Anastasio Alano paid P200.00 pesos to Marcela. The payment was received
as “payment made on the account of the debt o Anastacio Alano”. Apparently, other than the
P200.00 payment from Anastasio Alano, no other payment was received from the Alanos.

In 1912, Anastasio Alano died. Crisanto Javier was named as the administrator of Anastasio
Alano’s estate.

In March 1916, Agoncillo and Marcela filed a civil case against the Javier as administrator of
Anastasio Alano’s estate. Florencio and Jose were impleaded.

In the main, Javier et al invoked the defense of prescription; that Agoncillo’s claim is barred
by the statute of limitations; that Agoncillo has ten years from the date of maturity (February
1905) to collect hence his collection effort in 1916 is already way beyond the prescriptive
period.

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Agoncillo averred that the payment of P200.00 by Anastasio Alano in 1908 has tolled the
running of the prescriptive period hence his civil action in 1916 is still within the 10 year
prescriptive period.

ISSUE: Whether or not Agoncillo’s claim is barred by the statute of limitations.

HELD: Yes. One mode of extinguishing an obligation is by prescription. It cannot be said that
the payment made by Anastasio Alano in 1908 suspended the running of the period of
prescription. For one, it is doubtful that he was ever personally liable to the document
executed in February 1904 because he signed the same on behalf of his children (Leonina,
Anastacio, Leocadio) – who were not made parties to this case. At any rate, assuming
arguendo that the it did toll the running of the statute of limitations, it only suspended it as
regards to him alone and it did not bind his brothers (Jose and Florencio). This is because
there was no showing that Anastasio Alano made the P200.00 payment with the authority of
Florencio and Jose or for the benefit of the two. Further, the payment was received by Marcela
as “payment made on the account of the debt o Anastacio Alano”.

4. FELIX GOCHAN AND SONS REALTY CORP. VS. HEIRS OF

RAYMUNDO BARBA
409 SCRA 306 – Civil Law – Obligations and Contract – Null and Void Contracts – Lack of
Consent

In 1966, Dorotea Inot and 2 of her children, Victoriano Baba and Gregorio Baba sold a parcel
of land to Felix Gochan and Sons Realty Corporation (Gochan Realty). Consequently, the
title over the land was transferred to Gochan Realty.

In 1995, the other 5 children of Inot (Bestra, Maricel, Crecencia, Antonio and Petronila – all
surnamed Baba) discovered the sale executed in 1966. They filed a complaint for quieting of
title and reconveyance with damages against Gochan Realty. They alleged that Gochan
Realty and their mother and two siblings connived in executing the extrajudicial settlement
and deed of sale which fraudulently deprived them of their hereditary share in the said parcel
of land. And that said transactions are void insofar as their respective shares are concerned
because they never consented to the said sale and extrajudicial settlement.

The trial court dismissed the complaint filed by Baba et al as it ruled that their action has
prescribed by reason of prescription and laches. It applied the rule that the fraudulent
conveyance of the property creates an implied trust, an obligation created by law, which
prescribes in ten years from the date of the issuance of the certificate of title.

The Court of Appeals reversed the decision of the trial court. It found that the heirs’ action is
a suit to enforce an implied or constructive trust based on fraud, but it ruled that since the
heirs are in possession of the disputed property, their action cannot be barred by prescription
and laches, being in the nature of a suit for quieting of title.

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ISSUE: Whether or not the decision of the Court of Appeals is correct.

HELD: Yes. But the ground relied upon by the CA is erroneous. The contract in question
executed in 1966 is void ab initio by reason of the lack of consent from the other heirs in
executing said contract. Without said consent, there can be no valid contract of sale between
Inot et al and Gochan Realty. The rule is: Actions for the declaration of inexistence of
contracts on the ground of absence of any of the essential requisites thereof do not prescribe.

The case is however remanded to the trial court to determine whether or not the heirs are
guilty of laches (which is different from prescription). Though laches applies even to
imprescriptible actions, its elements must be proved positively. Laches is evidentiary in nature
which could not be established by mere allegations in the pleadings and cannot be resolved
in a motion to dismiss, hence, it must be settled in the trial court. Gochan Realty is not
precluded from presenting evidence that it is a purchaser in good faith or that the heirs have
no personality to sue for reconveyance or, even assuming that they are lawful heirs of Dorotea
Inot and Raymundo Baba, that they are guilty of laches or are estopped from questioning the
validity of the extrajudicial partition and deed of sale.

5. DOMINGO BAUTISTA VS. C.A.

20 SCRA – Civil Law – Obligations and Contract – Extinguished Obligation Via Payment
Cannot Be Revived

From 1951 to 1952, Philippine Ready-Mixed Concrete Co., Inc. (PRMCCI) undertook to build
roads for the government. PRMCCI is to get its payment from the Bureau of Public Works.
On the other hand, Domingo Bautista was a contractor which provides construction materials.
Bautista was contracted by PRMCCI to be its provider of construction materials.

From September 1951 to January 1952, Bautista provided materials for the construction of
the roads, one of the roads being built was Highway 54. At the end of January 1952, he sued
PRMCCI for the latter’s failure to pay. PRMCCI acknowledged its indebtedness and it entered
into a compromise agreement with Bautista which provides that it is authorizing Bautista to
receive checks from the Bureau of Public Works as payment. The total amount of the checks
would equal to P140,000.00 – the total amount of the indebtedness. The compromise
agreement was approved by the judge and Bautista did receive his checks as agreed.

From February 1952 to March 1952, Bautista continued supplying materials worth P37k for
the construction of the roads. But he was again unpaid so in April 1952, he again sued
PRMCCI. He then received a letter from the Bureau of Public Works that he can go after the
P313k bond posted by PRMCCI to ensure the construction of the roads of Highway 54 among
others.

He then filed a new case against PRMCCI, this time impleading the surety company which
posted the bond, and it amended its claim from P37k to P48k. The P48k, according to
Bautista, represents unpaid debt worth P40k from January 1952 and the remaining P8k is for
the unpaid debt from February to March 1952.

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ISSUE: Whether or not Bautista’s claim is valid.

HELD: No. To allow Bautista’s claim would be a violation of the compromise agreement which
settled PRMCCI’s indebtedness from September 1951 to January 1952. The debt from said
period is already settled by operation of the compromise agreement. What Bautista did is to
apply payments intended to debt incurred from September 1951 to January 1952 to debt
incurred after the compromise agreement i.e. February to March 1952. As can deduced from
the facts, Bautista initially applied the check payments to debts incurred from September
1951 to January 1952. But when he received the letter from the Bureau of Public Works, he
re-appropriated the check payments to debts incurred after January 1952 which made it
appear that PRMCCI’ debt from September 1951 to January 1952 is not fully paid. Bautista
did this to take advantage of the security of the bond. Bautista, however, cannot, by the simple
expedient of changing the application of payments, revive an obligation that had been legally
extinguished by payment.