Autonomy of Contracts Azcuna vs.

Court of Appeals, 1996 validity of contract stipulation FACTS: Under a one (1) year lease contract commencing on July 1, 1992 and ending on June 30, 1993 but renewable upon agreement, herein petitioner Azcuna, Jr., as lessee, occupied three (3) units (C, E and F) of the building owned by private respondent Barcelonas family. Came expiration date of the lease without an agreed renewal thereof and coupled by petitioners failure to surrender the leased units despite private respondents demands, private respondent filed before the Municipal Trial Court an ejectment case against petitioner. Judgment of that inferior court, affirmed in its entirety by the Regional Trial Court and herein public respondent Court of Appeals on subsequent appeals taken by petitioner, favored private respondent. Defendant is likewise ordered to pay the following: 1. The sum of P25,000.00 monthly as rental for continued use by defendant of the three (3) units of leased premises in question starting July 1, 1993 less the amount that have been deposited or given by the defendant to the plaintiff up to such time the defendant and all persons claiming rights under him finally vacate the aforesaid premises; 2. The further sum of P3,000.00 per day, by way of damages for his failure to turn over peacefully the three (3) commercial spaces to the plaintiff from July 1, 1993 until such time the defendant and all persons claiming rights under him vacate the premises; . Petitioner Azcuna contests the CAs decision insofar as it affirmed the municipal trial courts award of P3,000.00 per day as damage. Petitioner invokes the doctrine enunciated in the cases Felesilda v.Villanueva, Shoemart, Inc. v. CA and Hualam Construction and Development Corp. v. CA that the only damages that can be recovered in an ejectment suit are the fair rental value or the reasonable compensation for the use and occupation of the real property. Other damages must be claimed in an ordinary action. ISSUE: Whether or not the award of P3,000.00 per day, by way of damages for failure to turnover leased units as stipulated in the contract enforceable. RULING: YES.

Petitioners reliance on such doctrine is misplaced, inasmuch as the Felesilda, Shoemart and Hualam cases dealt with additional damages and chargesother than liquidated dam ages, defined as x x x those agreed upon by the parties to a contract, to be paid in case of breach [4] thereof. Here, the municipal trial court, in making the P3,000.00 per day award, was merely enforcing what was stipulated upon in black and white by private respondent-lessor and petitioner-lessee appearing in paragraph 10 of the lease contract which reads: That after the termination of the lease, the LESSEE shall peaceably deliver to the LESSOR the leased premises vacant and unencumbered and in good tenantable conditions minus the ordinary wear and tear. In case the LESSEEs failure or inability to do so, LESSOR has the right to charge the LESSEE P1,000.00 per day as damages without prejudice to other remedies which LESSOR is entitled in the premise. (Italics supplied) This is clearly an agreement for liquidated damages - entitling private respondent to claim a stipulated amount by way of damages (correctly totalling P3,000.00 per day as there were three [3] units being leased by petitioner) over and above other damages still legally due him, i.e., the fair rental value for the use and occupation of the property as provided for in Section 8, Rule 70 of the Rules of Court. The freedom of the contracting parties to make stipulations in their contract provided they are not contrary to law, morals, good customs, public order or public policy is so settled, and the Court finds nothing immoral or illegal with the indemnity/ penalty clause of the lease contract (paragraph 10) which does not appear to have been forced upon or fraudulently foisted on petitioner. Petitioner cannot now evade further liability for liquidated damages, forafter entering into such an agreement, petitioner cannot thereafter turn his back on his word with a plea that on him was inflicted a penalty shocking to the conscience and impressed with iniquity as to call for the relief sought on the part of a judicial tribunal Pakistan International Airlines vs. Ople Art. 1306, principle of autonomy of contract FACTS: On 2 December 1978, petitioner Pakistan International Airlines Corporation ("PIA"), a foreign corporation licensed to do business in the Philippines, executed in Manila two (2) separate contracts of employment, one with private respondent Ethelynne B. Farrales and the other with private

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respondent Ma. M.C. Mamasig. 1 The contracts, which became effective on 9 January 1979, provided in pertinent portion as follows: 5. DURATION OF EMPLOYMENT AND PENALTY

and bonuses, against PIA with the then Ministry of Labor and Employment ("MOLE"). PIA further claimed that the services of both private respondents were terminated pursuant to the provisions of the employment contract. In his Order dated 22 January 1981, Regional Director Francisco L. Estrella ordered the reinstatement of private respondents with full backwages or, in the alternative, the payment to them of the amounts equivalent to their salaries for the remainder of the fixed three-year period of their employment contracts; the payment to private respondent Mamasig of an amount equivalent to the value of a round trip ticket Manila-USA Manila; and payment of a bonus to each of the private respondents equivalent to their one-month salary. The Order stated that private respondents had attained the status of regular employees after they had rendered more than a year of continued service; that the stipulation limiting the period of the employment contract to three (3) years was null and void as violative of the provisions of the Labor Code and its implementing rules and regulations on regular and casual employment; and that the dismissal, having been carried out without the requisite clearance from the MOLE, was illegal and entitled private respondents to reinstatement with full backwages.

This agreement is for a period of three (3) years, but can be extended by the mutual consent of the parties. xxx 6. xxx xxx xxx

TERMINATION xxx xxx

Notwithstanding anything to contrary as herein provided, PIA reserves the right to terminate this agreement at any time by giving the EMPLOYEE notice in writing in advance one month before the intended termination or in lieu thereof, by paying the EMPLOYEE wages equivalent to one month's salary. xxx 10. xxx xxx

APPLICABLE LAW:

This agreement shall be construed and governed under and by the laws of Pakistan, and only the Courts of Karachi, Pakistan shall have the jurisdiction to consider any matter arising out of or under this agreement.

On 2 August 1980, roughly one (1) year and four (4) months prior to the expiration of the contracts of employment, local branch of PIA, sent separate letters both dated 1 August 1980 to private respondents Farrales and Mamasig advising both that their services as flight stewardesses would be terminated "effective 1 September 1980, conformably to clause 6 (b) of the employment agreement [they had) executed with [PIA]." Private respondents Farrales and Mamasig jointly instituted a complaint, for illegal dismissal and non-payment of company benefits

On appeal, in an Order dated 12 August 1982, Hon. Vicente Leogardo, Jr., Deputy Minister, MOLE, adopted the findings of fact and conclusions of the Regional Director and affirmed the latter's award save for the portion thereof giving PIA the option, in lieu of reinstatement, "to pay each of the complainants [private respondents] their salaries corresponding to the unexpired portion of the contract[s] [of employment] . . .". In the instant Petition for Certiorari, petitioner PIA [] for having been issued in disregard and in violation of petitioner's rights under the employment contracts with private respondents. 3. In its third contention, petitioner PIA invokes paragraphs 5 and 6 of its contract of employment with private respondents Farrales and Mamasig, arguing that its relationship with them was governed by the provisions of its contract rather than by the general provisions of the Labor Code. 9

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ISSUE: Whether or not principle of party autonomy in contracts is absolute. RULING: NO The principle of party autonomy in contracts is not, however, an absolute principle. The rule in Article 1306, of our Civil Code is that the contracting parties may establish such stipulations as they may deem convenient, "provided they are not contrary to law, morals, good customs, public order or public policy." Thus, counter-balancing the principle of autonomy of contracting parties is the equally general rule that provisions of applicable law, especially provisions relating to matters affected with public policy, are deemed written into the contract. 11 Put a little differently, the governing principle is that parties may not contract away applicable provisions of law especially peremptory provisions dealing with matters heavily impressed with public interest. The law relating to labor and employment is clearly such an area and parties are not at liberty to insulate themselves and their relationships from the impact of labor laws and regulations by simply contracting with each other. It is thus necessary to appraise the contractual provisions invoked by petitioner PIA in terms of their consistency with applicable Philippine law and regulations. As noted earlier, both the Labor Arbiter and the Deputy Minister, MOLE, in effect held that paragraph 5 of that employment contract was inconsistent with Articles 280 and 281 of the Labor Code as they existed at the time the contract of employment was entered into, and hence refused to give effect to said paragraph 5. These Articles read as follows: Art. 280. Security of Tenure. In cases of regular employment, the employer shall not terminate the services of an employee except for a just cause or when authorized by this Title An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and to his backwages computed from the time his compensation was withheld from him up to the time his reinstatement. Art. 281. Regular and Casual Employment. The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreements of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project

or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season. An employment shall be deemed to be casual if it is not covered by the preceding paragraph: provided, that, any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered as regular employee with respect to the activity in which he is employed and his employment shall continue while such actually exists. Examining the provisions of paragraphs 5 and 6 of the employment agreement between petitioner PIA and private respondents, we consider that those provisions must be read together and when so read, the fixed period of three (3) years specified in paragraph 5 will be seen to have been effectively neutralized by the provisions of paragraph 6 of that agreement. Paragraph 6 in effect took back from the employee the fixed three (3)-year period ostensibly granted by paragraph 5 by rendering such period in effect a facultative one at the option of the employer PIA. For petitioner PIA claims to be authorized to shorten that term, at any time and for any cause satisfactory to itself, to a one-month period, or even less by simply paying the employee a month's salary. Because the net effect of paragraphs 5 and 6 of the agreement here involved is to render the employment of private respondents Farrales and Mamasig basically employment at the pleasure of petitioner PIA, the Court considers that paragraphs 5 and 6 were intended to prevent any security of tenure from accruing in favor of private respondents even during the limited period of three (3) years, 13 and thus to escape completely the thrust of Articles 280 and 281 of the Labor Code.

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Petitioner PIA cannot take refuge in paragraph 10 of its employment. The first clause of paragraph 10 cannot be invoked to prevent the application of Philippine labor laws. Even a cursory scrutiny of the relevant circumstances of this case will show the multiple and substantive contacts between Philippine law and Philippine courts, on the one hand, and the relationship between the parties, upon the other: the contract was not only executed in the Philippines, it was also

performed here, at least partially; private respondents are Philippine citizens and respondents, while petitioner, although a foreign corporation, is licensed to do business (and actually doing business) and hence resident in the Philippines; lastly, private respondents were based in the Philippines in between their assigned flights to the Middle East and Europe. De Leon vs. Court of Appeals 1990 FACTS: On October 18, 1969, private respondent Jose Vicente De Leon and petitioner Sylvia Lichauco De Leon were united in wedlock before the Municipal Mayor of Binangonan, Rizal. Sometime in October, 1972, a de facto separation between the spouses occured due to irreconcilable marital differences, with Sylvia leaving the conjugal home. Sometime in March, 1973, Sylvia went to the United States where she obtained American citizenship. On November 23, 1973, Sylvia filed with the Superior Court of California, County of San Francisco, a petition for dissolution of marriage against Jose Vicente. Since Jose Vicente was then a Philippine resident and did not have any assets in the United States, Sylvia chose to hold in abeyance the divorce proceedings, and in the meantime, concentrated her efforts to obtain some sort of property settlements with Jose Vicente in the Philippines. Thus, on March 16, 1977, Sylvia succeeded in entering into a LetterAgreement with her mother-in-law, private respondent Macaria De Leon, which We quote in full, as follows (pp. 40-42, Rollo): March 16, 1977 Mrs. Macaria Madrigal de Leon 12 Jacaranda, North Forbes Park Makati, Metro Manila Dear Dora Macaria: This letter represents a contractual undertaking among (A) the undersigned (B) your son, Mr. Jose Vicente de Leon, represented by you, and (C) yourself in your personal capacity.

You hereby bind yourself jointly and severally to answer for the undertakings of Joe Vincent under this contract. In consideration for a peaceful and amicable termination of relations between the undersigned and her lawfully wedded husband, Jose Vicente de Leon, your son, the following are agreed upon: Obligations of Jose Vicente de Leon and/ or yourself in a joint and several capacity: 1. To deliver with clear title free from all liens and encumbrances and subject to no claims in any form whatsoever the following properties to Sylvia Lichauco-de Leon hereinafter referred to as the wife: A. Suite 11-C, Avalon Condominium, Ortigas Ave., corner Xavier St., Mandaluyong, Rizal, Philippines. B. Apartment 702, Wack Wack Condominium, Mandaluyong, Rizal, Philippines. C. The rights to assignment of 2 Ayala lots in Alabang, Rizal (Corner lots, 801 s q. meters each). (Fully paid). D. 2470 Wexford Ave., South San Francisco, California, U.S.A. (Lot 18 Block 22 Westborough Unit No. 2). (Fully paid). E. 1) The sum of One Hundred Thousand Pesos (P100,000) 2) $30,000 3) $5,000 2. To give monthly support payable six (6) months in advance every year to any designated assignee of the wife for the care and upbringing of Susana Lichauco de Leon which is hereby pegged at the exchange rate of 7.50 to the dollar subject to adjustments in the event of monetary exchange fluctuations. Subsequent increase on actual need upon negotiation. 3. To respect the custody of said minor daughter as pertaining exclusively to the wife except as herein provided. Obligations of the wife:

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1. To agree to a judicial separation of property in accordance with Philippine law and in this connection to do all that may be necessary to secure said separation of property including her approval in writing of a joint petition or consent decree. 2. To amend her complaint in the United States before the Federal Court of California, U.S.A. entitled "Sylvia Lichauco de Leon vs. Jose V. de Leon" in a manner compatible with the objectives of this herein agreement. It is the stated objective of this agreement that said divorce proceedings will continue. 3. All the properties herein described for assignment to the wife must be assigned to Sylvia Lichauco de Leon upon the decree of the Court of First Instance in the Joint Petition for Separation of Property; except for the P100,000, $30,000 and $5,000 which will be paid immediately. 4. This contract is intended to be applicable both in the Republic of the Philippines and in the United States of America. It is agreed that this will constitute an actionable document in both jurisdictions and the parties herein waive their right to object to the use of this document in the event a legal issue should arise relating to the validity of this document. In the event of a dispute, this letter is subject to interpretation under the laws of California, U.S.A. 5. To allow her daughter to spend two to three months each year with the father upon mutual convenience. Very truly yours,

their conjugal partnership, the main part of which reads as follows (pp. 3738,Rollo): xxx xxx xxx (c) The following properties shall be adjudicated to petitioner Sylvia Lichauco De Leon. These properties will be free of any and all liens and encumbrances, with clear title and subject to no claims by third parties. Petitioner Jose Vicente De Leon fully assumes all responsibility and liability in the event these properties shall not be as described in the previous sentence: [] After ex-parte hearings, the trial court issued an Order dated February 19, 1980 approving the petition, While the motions for reconsideration was pending resolution, on April 20, 1980, Macaria filed with the trial court a motion for leave to intervene alleging that she is the owner of the properties involved in the case. The motion was granted. On October 29, 1980, Macaria assailed the validity and legality of the Letter-Agreement which had for its purpose, according to her, the termination of marital relationship between Sylvia and Jose Vicente . RTC rendered decision in favour of Macaria, declaring the letter agreement null and void. Sylvia appealed to the respondent Court of Appeals. The respondent court affirmed the decision in toto. The motion for reconsideration was denied. Hence, the present petition. ISSUE: Whether or not the letter agreement was valid.

(Sgd.) Sylvia de Leon t/ SYLVIA L. DE LEON CONFORME: s/t/MACARIA M. DE LEON with my marital consent: s/t/JUAN L. DE LEON On the same date, Macaria made cash payments to Sylvia in the amount of P100,000 and US$35,000.00 or P280,000.00, in compliance with her obligations as stipulated in the aforestated Letter-Agreement. On March 30, 1977, Sylvia and Jose Vicente filed before the then Court of First Instance of Rizal a joint petition for judicial approval of dissolution of

RULING: Sylvia insists that the consideration for her execution of the Letter-Agreement was the termination of property relations with her husband. Indeed, Sylvia and Jose Vicente subsequently filed a joint petition for judicial approval of the dissolution of their conjugal partnership, sanctioned by Article 191 of the Civil Code. On the other hand, Macaria and Jose Vicente assert that the consideration was the termination of marital relationship. We sustain the observations and conclusion made by the trial court, to wit (pp. 44- 46, Rollo):

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On page two of the letter agreement (Exhibit' E'), the parties contemplated not only to agree to a judicial separation of property of the spouses but likewise to continue with divorce proceedings (paragraphs 1 and 2, Obligations of the Wife, Exhibit 'E-1'). If taken with the apparently ambiguous provisions in Exhibit E' regarding termination of 'relations', the parties clearly contemplated not only the termination of property relationship but likewise of marital relationship in its entirety. [] Article 1306 of the New Civil Code provides: Art. 1306. The contracting parties may establish such stipulations, clauses, terms, and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order or public policy. If the stipulation is contrary to law, morals or public policy, the contract is void and inexistent from the beginning. Art. 1409. The following contracts are inexistent and void from the beginning: Those whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy; xxx xxx xxx (7) Those expressly prohibited or declared void by law. These contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived. Thus, Art. 52 of the Civil Code provides: Art. 52. Marriage is not a mere contract but an inviolable social institution. Its nature, consequences and incidents are governed by law and not subject to stipulations... From the foregoing provisions of the New Civil Code, this court is of the considered opinion and so holds that intervenor's undertaking under Exhibit 'E' premised on the termination of marital relationship is not only contrary to law but contrary to Filipino morals and public Policy. As such, any agreement

or obligations based on such unlawful consideration and which is contrary to public policy should be deemed null and void. (emphasis supplied) Granting, in gratia argumenti, that the consideration of the Letter-Agreement was the termination of property relations, We agree with the respondent court that (pp. 46-47, Rollo): ... the agreement nevertheless is void because it contravenes the following provisions of the Civil Code: Art. 221. The following shall be void and of no effect: (1) Any contract for personal separation between husband and wife; (2) Every extra-judicial agreement, during marriage, for the dissolution of the conjugal partnership of gains or of the absolute community of property between husband and wife; _______________________________ To determine the degree of the intimidation, the age, sex and condition of the person shall be borne in mind. A threat to enforce one's claim through competent authority, if the claim is just or legal, does not vitiate consent. In order that intimidation may vitiate consent and render the contract invalid, the following requisites must concur: (1) that the intimidation must be the determining cause of the contract, or must have caused the consent to be given; (2) that the threatened act be unjust or unlawful; (3) that the threat be real and serious, there being an evident disproportion between the evil and the resistance which all men can offer, leading to the choice of the contract as the lesser evil; and (4) that it produces a reasonable and wellgrounded fear from the fact that the person from whom it comes has the necessary means or ability to inflict the threatened injury. Applying the foregoing to the present case, the claim of Macaria that Sylvia threatened her to bring Jose Vicente to court for support, to scandalize their family by baseless suits and that Sylvia would pardon Jose Vicente for possible crimes of adultery and/or concubinage subject to the transfer of certain properties to her, is obviously not the intimidation referred to by law. With respect to mistake as a vice of consent, neither is Macaria's alleged mistake in having signed the Letter-Agreement because of her belief that Sylvia will thereby

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eliminate inheritance rights from her and Jose Vicente, the mistake referred to in Article 1331 of the Civil Code, supra. It does not appear that the condition that Sylvia "will eliminate her inheritance rights" principally moved Macaria to enter into the contract. Rather, such condition was but an incident of the consideration thereof which, as discussed earlier, is the termination of marital relations. In the ultimate analysis, therefore, both parties acted in violation of the laws. However, the pari delicto rule, does not apply in this case. Article 1414 of the Civil Code, which is an exception to the pari delicto rule, is the proper law to be applied. It provides: When money is paid or property delivered for an illegal purpose, the contract may be repudiated by one of the parties before the purpose has been accomplished, or before any damage has been caused to a third person. In such case, the courts may, if the public interest wig thus be subserved, allow the party repudiating the contract to recover the money or property. Since the Letter-Agreement was repudiated before the purpose has been accomplished and to adhere to the pari delicto rule in this case is to put a premium to the circumvention of the laws, positive relief should be granted to Macaria. Justice would be served by allowing her to be placed in the position in which she was before the transaction was entered into.

On May 20, 1953 the petitioners instituted the civil case mentioned above against the respondent to have certain contracts numbered 322, 324, and 965 declared as existing and subsisting; to compel the respondent to accept payments tendered by them; and to recover moral and exemplary damages and attorney's fees in the amounts of P6,000.00 and P1,500.00, respectively. The three causes of action alleged in their complaint involved the three parcels of land subject matter of the contracts aforesaid. Each had an area of about 150 square meters, and formed part of the Rita Legarda Estate situated in Manila, and subdivided into lots sold on installment basis. (1) Contract to Sell No. 322 (Exhs. A and A-1) covering Lot 40, Block 8-CC, was executed by the respondent in favor of Emiliano Orellana on March 1, 1947. On June 26, 1947, the latter transferred all his rights, and interest thereunder to Encarnacion Vito who, in turn, on November 3 of the same year, made a similar transfer of rights in favor of Delfin Bacho. Finally, on May 29, 1948, Bacho also transferred all his rights and interest to the petitioners. (2) On March 1, 1947, Contract to Sell No. 324 (Exh. 2) covering Lot No. 20, Block 5-CC was executed by respondent in favor of Jesusa Felix. Two months later, Felix, with the written consent of the respondent, sold her rights and interest to petitioners. (3) Contract to Sell No. 965 (Exh. 3) covering Lot No. 27, Block 5-CC was executed by the respondent in favor of Angela Alvarez Solomon on January 8, 1948. With the written consent of the former, Solomon also sold her rights and interest to the petitioners on May 11, 1948. In its answer to the complaint, the respondent averred that in relation to the Contracts to Sell Nos. 822, 965 and 324, petitioners paid on November 7, 1951 the 53rd, 43rd and 53rd installments, respectively, corresponding to the installments for the month of July, 1951; that the petitioners, as of June 11, 1952, had failed to pay the stipulated monthly installments for Contracts Nos. 322 and 324 corresponding to the period from August, 1951 through June, 1952, and in the case of Contract No. 965, from August, 1951 through May, 1952; that despite several demands for payment of arrears made between December, 1951 and June, 1952 by the respondent, the petitioners had failed to pay the amounts due; and that upon the expiration of the 90-day grace period on June 11, 1952 stipulated in the sixth paragraph of the contracts, the respondent had cancelled them. The answer also prayed for an award of damages and attorney's fees in the sum of P2,000.00.

Mutuality of Contracts Garcia vs. Rita Legarda FACTS: Appeal taken by the spouses Maria A. Garcia and Marcelino A. Timbang hereinafter referred to as petitioners from the decision of the Court of Appeals in CA-G.R. No. 27194-R reversing the one rendered on January 9, 1960 by the Court of First Instance of Manila in Civil Case No. 1962 entitled "Maria A. Garcia, et al. vs. Rita Legarda, Inc." The latter is a corporation organized under Philippine laws, and is engaged in the sale and resale of residential lots in Manila and suburbs. We shall refer to it hereinafter as the respondent.

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After trial the Court rendered judgment declaring Contracts Nos. 322, 324 and 965 as existing and subsisting; ordering the respondent to accept the payments tendered by the petitioners and to pay attorney's fees in the sum of P1,500.00. but denied the award of moral and exemplary damages. From this decision the respondent appealed to the Court of Appeals from whose decision reversing that of the lower court the instant appeal was taken. Issue: WON Paragraph 9of the contracts in question is not in violation of Art. 1308 of the new Civil Code RULING: NO Article 1308 of the New Civil Code reads as follows: The contract must bind both contracting parties; its validity or compliance cannot be left to the will of one of them. The above legal provision is a virtual reproduction of Article 1256 of the old Civil Code but it was so phrased as to emphasize the principle that the contract must bind both parties. This, of course, is based firstly, on the principle that obligations arising from contracts have the force of law between the contracting parties and secondly, that there must be mutuality between the parties based on their essential equality to which is repugnant to have one party bound by the contract leaving the other free therefrom (8 Manresa 556). Its ultimate purpose is to render void a contract containing a condition which makes its fulfillment dependent exclusively upon the uncontrolled will of one of the contracting parties. Paragraph 6 of the contracts in question which is the one claimed to be violative of the legal provision above quoted reads as follows: SIXTH In case the party of the SECOND PART fails to satisfy any monthly installments, or any other payments herein agreed upon, he is granted a month of grace within which to make the retarded payment, together with the one corresponding to the said month of grace; it is understood, however, that should the month of grace herein granted to the party of the SECOND PART expire, without the payments corresponding to both months having been satisfied, an interest of 10% per annum will be charged on the amounts he should have paid; it is understood further, that should a period of 90 days elapse, to begin from the expiration of the month of grace herein mentioned, and the party of the SECOND PART has not paid all the

amounts he should have paid with the corresponding interest up to that date, the party of the FIRST PART has the right to declare this contract cancelled and of no effect, and as consequence thereof, the party of the FIRST PART may dispose of the parcel or parcels of land covered by this contract in favor of other persons, as if this contract had never been entered into. In case of such cancellation of this contract, all the amounts paid in accordance with this agreement together with all the improvements made on the premises, shall be considered as rents paid for the use and occupation of the above mentioned premises, and as payment for the damages suffered by failure of the party of the SECOND PART to fulfill his part of this agreement; and the party of the SECOND PART hereby renounces all his right to demand or reclaim the return of the same and obliges himself to peacefully vacate the premises and deliver the same to the party of the FIRST PART. The above stipulation, to our mind, merely gives the vendor "the right to declare this contract cancelled and of no effect" upon fulfillment of the conditions therein set forth. It does not leave the validity or compliance of the contract entirely "to the will of one of the contracting parties"; the stipulation or agreement simply says that in case of default in the payment of installments by the vendee, he shall have (1) "a month of grace", and that (2) should said month of grace expire without the vendee paying his arrears, he shall have another "period of 90 days" to pay "all the amounts he should have paid", etc., then the vendor "has the right to declare this contract cancelled and of no effect." We have heretofore upheld the validity of similar stipulations. In Taylor vs. Ky Tieng Piao, the ruling was that a contract expressly giving to one party the right to cancel, the same if a resolutory condition therein agreed upon similar to the one under consideration is not fulfilled, is valid, the reason being that when the contract is thus cancelled, the agreement of the parties is in reality being fulfilled. Indeed, the power thus granted can not be said to be immoral, much less unlawful, for it could be exercised not arbitrarily but only upon the other contracting party committing the breach of contract of non-payment of the installments agreed upon. Obviously, all that said party had to do to prevent the other from exercising the power to cancel the contract was for him to comply with his part of the contract. And in this case, after the maturity of any particular installment and its non-payment, the contract gave him not only a month gracebut an additional period of 90 days. ALLIED BANKING CORPORATION v. COURT OF APPEALS (284 SCRA 345) Facts:

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Sps. Tanqueco leased a property to Petitioner ALLIED BANKING CORPORATION for 14 years and may be renewed at the option of the lessee as stated in the contract. Sometime in 1988, the Tanqueco executed a deed of donation in favor of their 4 children. In 1991, a year before the expiration On 13 February 1991, a year before the expiration of the contract of lease, the Tanquecos notified petitioner ALLIED that they were no longer interested in renewing the lease. [2] ALLIED replied that it was exercising its option to renew their lease under the same terms with additional proposals. [3] Respondent Ruben D. Tanqueco, acting in behalf of all the donee-lessors, made a counter-proposal. [4] ALLIED however rejected the counter-proposal and insisted on Provision No. 1 of their lease contract. the lease contract expired in 1992 private respondents demanded that ALLIED vacate the premises. But the latter asserted its sole option to renew the lease and enclosed in its reply letter a cashiers check representing the advance rental payments for six (6) months taking into account the escalation clause. Private respondents however returned the check to ALLIED, prompting the latter to consign the amount in court. An action for ejectment was commenced before the Metropolitan Trial Court of Quezon City. After trial, the MeTC-Br. 33 declared Provision No. 1 of the lease contract void for being violative of Art. 1308 of the Civil Code On appeal to the Regional Trial Court, and later to the Court of Appeals, the assailed decision was affirmed. On 20 February 1993, while the case was pending in the Court of Appeals, ALLIED vacated the leased premises by reason of the controversy. Issue WON Provision No. 1 of the lease contract was mutually agreed upon hence valid and binding on both parties? Held: Yes. We agree with petitioner. Article 1308 of the Civil Code expresses what is known in law as the principle of mutuality of contracts. It provides that "the contract must bind both the contracting parties; its validity or compliance cannot be left to the will of one of them." This binding effect of a contract on both parties is based on the principle that the obligations arising from contracts have the force of law between the contracting parties, and there must be mutuality between them based essentially on their equality under which it is repugnant to have one party bound by the contract while leaving the other free therefrom. The ultimate purpose is to render void a contract containing a condition which makes its fulfillment dependent solely upon the uncontrolled will of one of the contracting parties.

An express agreement which gives the lessee the sole option to renew the lease is frequent and subject to statutory restrictions, valid and binding on the parties. This option, which is provided in the same lease agreement, is fundamentally part of the consideration in the contract and is no different from any other provision of the lease carrying an undertaking on the part of the lessor to act conditioned on the performance by the lessee. It is a purely executory contract and at most confers a right to obtain a renewal if there is compliance with the conditions on which the right is made to depend. The right of renewal constitutes a part of the lessees interest in the land and forms a substantial and integral part of the agreement. The fact that such option is binding only on the lessor and can be exercised only by the lessee does not render it void for lack of mutuality. After all, the lessor is free to give or not to give the option to the lessee. And while the lessee has a right to elect whether to continue with the lease or not, once he exercises his option to continue and the lessor accepts, both parties are thereafter bound by the new lease agreement. Their rights and obligations become mutually fixed, and the lessee is entitled to retain possession of the property for the duration of the new lease, and the lessor may hold him liable for the rent therefor. The lessee cannot thereafter escape liability even if he should subsequently decide to abandon the premises. Mutuality obtains in such a contract and equality exists between the lessor and the [7] lessee since they remain with the same faculties in respect to fulfillment. The case of Lao Lim v. Court of Appeals relied upon by the trial court is not applicable here. In that case, the stipulation in the disputed compromise agreement was to the effect that the lessee would be allowed to stay in the premises "as long as he needs it and can pay the rents." In the present case, the questioned provision states that the lease "may be renewed for a like term at the option of the lessee." The lessor is bound by the option he has conceded to the lessee. The lessee likewise becomes bound only when he exercises his option and the lessor cannot thereafter be excused from performing his part of the agreement. Likewise, reliance by the trial court on the 1967 case of Garcia v. Rita [9] Legarda, Inc., is misplaced. In that case, what was involved was a contract to sell involving residential lots, which gave the vendor the right to declare the contract cancelled and of no effect upon the failure of the vendee to fulfill any of the conditions therein set forth. In the instant
[8]

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case, we are dealing with a contract of lease which gives the lessee the right to renew the same. With respect to the meaning of the clause "may be renewed for a like term at the option of the lessee," we sustain petitioner's contention that its exercise of the option resulted in the automatic extension of the contract of lease under the same terms and conditions. The subject contract simply provides that "the term of this lease shall be fourteen (14) years and may be renewed for a like term at the option of the lessee." As we see it, the only term on which there has been a clear agreement is the period of the new contract, i.e., fourteen (14) years, which is evident from the clause "may be renewed for a like term at the option of the lessee," the phrase "for a like term" referring to the period. It is silent as to what the specific terms and conditions of the renewed lease shall be. Relativity of Contracts DKC HOLDINGS CORPORATION, petitioner, vs. COURT OF APPEALS, VICTOR U. BARTOLOME and REGISTER OF DEEDS FOR METRO MANILA, DISTRICT III,respondents. francis FACTS: The subject of the controversy is parcel of land located in Malinta, Valenzuela, which was originally owned by private respondent Victor U. Bartolomes deceased mother, Encarnacion Bartolome, This lot was in front of one of the textile plants of petitioner and, as such, was seen by the latter as a potential warehouse site. On March 16, 1988, petitioner entered into a Contract of Lease with Option to Buy with Encarnacion Bartolome, whereby petitioner was given the option to lease or lease with purchase the subject land, which option must be exercised within a period of two years counted from the signing of the Contract. In turn, petitioner undertook to pay P3,000.00 a month as consideration for the reservation of its option. Within the two-year period, petitioner shall serve formal written notice upon the lessor Encarnacion Bartolome of its desire to exercise its option. The contract also provided that in case petitioner chose to lease the property, it may take actual possession of the premises. In such an event, the lease shall be for a period of six years, renewable for another six years, and the monthly rental fee shall be P15,000.00 for the first six years and P18,000.00 for the next six years, in case of renewal.

Petitioner regularly paid the monthly P3,000.00 provided for by the Contract to Encarnacion until her death in January 1990. Thereafter, petitioner coursed its payment to private respondent Victor Bartolome, being the sole heir of Encarnacion. Victor, however, refused to accept these payments. iska On March 14, 1990, petitioner served upon Victor, via registered mail, notice that it was exercising its option to lease the property, tendering the amount of P15,000.00 as rent for the month of March. Again, Victor refused to accept the tendered rental fee and to surrender possession of the property to petitioner. Petitioner thus opened Savings Account with the China Banking Corporation, in the name of Victor Bartolome and deposited therein the P15,000.00 rental fee for March as well as P6,000.00 reservation fees for the months of February and March. Petitioner also tried to register and annotate the Contract on the title of Victor to the property. Although respondent Register of Deeds accepted the required fees, he nevertheless refused to register or annotate the same or even enter it in the day book or primary register. Thus, on April 23, 1990, petitioner filed a complaint for specific performance [3] and damages against Victor and the Register of Deeds. Petitioner prayed for the surrender and delivery of possession of the subject land in accordance with the Contract terms; the surrender of title for registration and annotation thereon of the Contract; and the payment of P500,000.00 as actual damages, P500,000.00 as moral damages, P500,000.00 as exemplary damages and P300,000.00 as attorneys fees. Meanwhile, on May 8, 1990, a Motion for Intervention with Motion to [4] Dismiss was filed by one Andres Lanozo, who claimed that he was and has been a tenant-tiller of the subject property, which was agricultural riceland, for forty-five years. After trial on the merits, the RTC of Valenzuela, branch 172 rendered its Decision on January 4, 1993, dismissing the Complaint and ordering petitioner to pay Victor P30,000.00 as attorneys fees. On appeal to the CA, the Decision was affirmed in toto.

RULING: YES.

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ISSUE: Whether or not the Contract of Lease with Option to Buy entered into by the late Encarnacion Bartolome with petitioner was terminated upon her death or whether it binds her sole heir, Victor, even after her demise.

Article 1311 of the Civil Code provides, as follows"ART. 1311. Contracts take effect only between the parties, their assigns and heirs, except in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law. The heir is not liable beyond the value of the property he received from the decedent. brnado xxx xxx x x x."

of the party when the other party has a property interest in the subject [16] matter of the contract. Under both Article 1311 of the Civil Code and jurisprudence, therefore, Victor is bound by the subject Contract of Lease with Option to Buy. G.R. No. 79734 December 8, 1988 MARMONT RESORT HOTEL ENTERPRISES, petitioner, vs. FEDERICO GUIANG, AURORA GUIANG, and COURT OF APPEALS, respondents.

The general rule, therefore, is that heirs are bound by contracts entered into by their predecessors-in-interest except when the rights and obligations arising therefrom are not transmissible by (1) their nature, (2) stipulation or (3) provision of law. In the case at bar, there is neither contractual stipulation nor legal provision making the rights and obligations under the contract intransmissible. More importantly, the nature of the rights and obligations therein are, by their nature, transmissible. In American jurisprudence, "(W)here acts stipulated in a contract require the exercise of special knowledge, genius, skill, taste, ability, experience, judgment, discretion, integrity, or other personal qualification of one or both parties, the agreement is of a personal nature, and terminates on the death [10] of the party who is required to render such service." marinella In the case at bar, there is no personal act required from the late Encarnacion Bartolome. Rather, the obligation of Encarnacion in the contract to deliver possession of the subject property to petitioner upon the exercise by the latter of its option to lease the same may very well be performed by her heir Victor. It is futile for Victor to insist that he is not a party to the contract because of the clear provision of Article 1311 of the Civil Code. Indeed, being an heir of Encarnacion, there is privity of interest between him and his deceased mother. He only succeeds to what rights his mother had and what is valid and binding against her is also valid and binding as against him. In the case at bar, the subject matter of the contract is likewise a lease, which is a property right. The death of a party does not excuse nonperformance of a contract which involves a property right, and the rights and obligations thereunder pass to the personal representatives of the deceased. Similarly, nonperformance is not excused by the death

FACTS:

On 2 May 1975, a Memorandum of Agreement was executed between Maris Trading and petitioner Marmont Resort Hotel Enterprises, Inc. ("Marmont"). Under the agreement, Maris Trading undertook to drill for water and to provide all equipment necessary to install and complete a water supply facility to service the Marmont Resort Hotel in Olongapo, for a stipulated fee of P40,000.00. In fulfillment of its contract, Maris Trading drilled a well and installed a water pump on a portion of a parcel of land situated in Olongapo City, then occupied by respondent spouses Federico and Aurora Guiang.

Five (5) months later, a second Memorandum of Agreement was executed between Maris Trading and Aurora Guiang, with Federico Guiang signing as witness. This second agreement in essential part read: 1

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That the First Party [Maris Trading] has dug, drilled and tapped water source for Marmont Resort, located at Bo. Barretto, Olongapo City in accordance with their agreement executed on May 2, 1975 and notarized before Isagani M. Jungco, Notary Public and entered as Doc. No. 166; Page No. 135; Book No. XV; Series of 1975.

That the First Party has erected, built and drilled for the water source of Marmont Resort on the land owned by the Second Party [Aurora Guiang] at the corner of J. Montelibano Street and Maquinaya Drive (Provincial Road) with the latter's permission.

That for and in consideration of the sum of P1,500.00 the Second Party hereby Sell, Transfer and Cede all possessory rights, interest and claims over that portion of the lot wherein the water source of Marmont Resort is located unto and in favor of Maris Trading.

Petitioner Marmont appealed to the Court of Appeals which affirmed the decision of the trial court and dismissed the appeal for lack of merit. 7 The appellate court, citing Section 55, Rule 132 of the Revised Rules of Court, held that the first and second Memoranda of Agreement could not legally be considered by the court as included in the body of evidence of the case, as neither document had been formally offered in evidence by either party. It also held that, in any event, neither document showed that Marmont had in fact acquired from Maris Trading whatever rights the latter had over the land in dispute.

After some time, the water supply of the Marmont Resort Hotel became inadequate to meet the hotel's water requirements. Petitioner Marmont secured the services of another contractor (the name of which was not disclosed), which suggested that in addition to the existing water pump, a submersible pump be installed to increase the pressure and improve the flow of water to the hotel. Accordingly, Juan Montelibano, Jr., manager of the Marmont Resort Hotel, sought permission from the Guiang spouses to inspect the water pump which had been installed on the portion of the land previously occupied by the spouses and to make the necessary additional installations thereon. No such permission, however, was granted.

ISSUE: Whether or not under the second memorandum of agreement Marmont acquired from Maris Trading whatever rights the latter had over the land in dispute, if so, does Article 1311 (par. 2) of the Civil Code was violated by respondent spouses.

RULING: YES

On 13 May 1980, petitioner Marmont filed a Complaint 2 against the Guiang spouses for damages resulting from their refusal to allow representatives of petitioner and the second contractor firm entry into the water facility site.

It is clear from the foregoing stipulations that petitioner Marmont was to benefit from the second Memorandum of Agreement. In fact, said stipulations appear to have been designed precisely to benefit petitioner and, thus, partake of the nature of stipulations pour autrui, contemplated in Article 1311 of the Civil Code.

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In their Answer, 3 the Guiang spouses (defendants below) denied having had any previous knowledge of the first Memorandum of Agreement and asserted that the second Memorandum of Agreement was invalid for not having been executed in accordance with law. The spouses added a counterclaim for damages in the amount of P200,000.00.

A stipulation pour autrui is a stipulation in favor of a third person conferring a clear and deliberate favor upon him, which stipulation is found in a contract entered into by parties neither of whom acted as agent of the beneficiary. We believe and so hold that the purpose and intent of the stipulating parties (Maris Trading and respondent spouses) to benefit the third person (petitioner Marmont) is sufficiently clear in the second Memorandum of Agreement. Marmont was not of course a party to that second Agreement but, as correctly pointed out by the trial court and the appellate court, the respondent spouses could not have

prevented Maris Trading from entering the property possessory rights over which had thus been acquired by Maris Trading. That respondent t spouses remained in physical possession of that particular bit of land, is of no moment; they did so simply upon the sufferance of Maris Trading. Had Maris Trading, and not the respondent spouses, been in physical possession, we believe that Marmont would have been similarly entitled to compel Maris Trading to give it (Marmont) access to the site involved. The two (2) courts below failed to take adequate account of the fact that the sole purpose of Maris Trading in acquiring possessory rights over that specific portion of the land where well and pump and piping had been installed, was to supply the water requirements of petitioner's hotel. That said purpose was known by respondent spouses, is made explicit by the second Memorandum of Agreement. Maris Trading itself had no need for a water supply facility; neither did the respondent spouses. The water facility was intended solely for Marmont Resort Hotel. The interest of Marmont cannot therefore be regarded as merely "incidental ." 13 Finally, even if it be assumed (for purposes of argument merely) that the second Memorandum of Agreement did not constitute a stipulation pour autrui, still respondent spouses, in the circumstances of this case, must be regarded as having acted contrary to the principles of honesty, good faith and fair dealing embodied in Articles 19 and 21 of the Civil Code when they refused petitioner Marmont access to the water facility to inspect and repair the same and to increase its capacity and thereby to benefit from it. In so doing, respondent spouses forced petitioner Marmont to locate an alternative source of water for its hotel which of course involved expenditure of money and perhaps loss of hotel revenues. We believe they should respond in damages.

In the evening of 19 Oct 1989, private respondent de Jesus hosted a dinner for his friends at the peririoners restaurant, the Mandarin Villa Seafoods Village in Mandaluyong City. After dinner, the waiter handed to de Jesus the bill amounting to P2,658.50. De Jesus offered his BANKARD credit card to the waiter for payment. Minutes later, the waiter returned and audibly informed that said credit card had expired. De Jesus demonstrated that the card had yet to expire on Sept 1990, as embossed on its face. De Jesus approached the cashier who again dishonored such card. De Jesus offered his BPI express credit card instead and this was accepted, honored and verified. The trial court and CA held petitioner to be negligent. ISSUE: Whether or not petitioner is bound to accept payment by means of credit card. RULING: YES. We note that Mandarin Villa Seafood Village is affiliated with BANKARD. In fact, an "Agreement" 6 entered into by petitioner and BANKARD dated June 23, 1989, provides inter alia:

The MERCHANT shall honor validly issued PCCCI credit cards presented by their corresponding holders in the purchase of goods and/or services supplied by it provided that the card expiration date has not elapsed and the card number does not appear on the latest cancellation bulletin of lost, suspended and canceled PCCCI credit cards and, no signs of tampering, alterations or irregularities appear on the face of the credit card. 7

The evidence on record, however, appears insufficient for determination of the amount of damages for which respondent spouses should be liable. For this reason, the Court is compelled to remand this case to the trial court for determination of such damages in appropriate further proceedings.

Mandarin Villa, Inc. vs. CA and Clodualdo de Jesus G.R. No. 119850. 20 June 1996. Facts:

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While private respondent, may not be a party to the said agreement, the above-quoted stipulation conferred a favor upon the private respondent, a holder of credit card validly issued by BANKARD. This stipulation is a stipulation pour autri and under Article 1311 of the Civil Code private respondent may demand its fulfillment provided he communicated his acceptance to the petitioner before its revocation. 8 In this case, private respondent's offer to pay by means of his BANKARD credit card constitutes not only an acceptance of the said stipulation but also an explicit communication of his acceptance to the obligor.

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In addition, the record shows that petitioner posted a logo inside Mandarin Villa Seafood Village stating that "Bankard is accepted here. 9 This representation is conclusive upon the petitioner which it cannot deny or disprove as against the private respondent, the party relying thereon. Petitioner, therefore, cannot disclaim its obligation to accept private respondent's BANKARD credit card without violating the equitable principle of estoppel. 10

agreement provides that plaintiff (Antonio S. Young) and Rebecca Young and all persons claiming rights under them bind themselves to voluntarily and peacefully vacate the premises which they were occupying as lessees (Units 1352 and 1354, respectively) which are the subject of the condemnation and demolition order and to surrender possession thereof to the defendant Philippine Holding, Inc. within sixty (60) days from written notice, subject to the proviso that should defendant decided to sell the subject property or portion thereof, "plaintiff and Rebecca C. Young have the right of first refusal thereof." (Rollo, p. 49). On September 17, 1981, Philippine Holding, Inc. had previously sold the above said property described in the compromise agreement by way of dacion in payment to PH Credit Corporation (Rollo, p. 49). On December 8, 1982, PH Credit Corporation sold the property to the Blessed Land Development Corporation represented by its President Antonio T. S. Young; and on September 16, 1983, PH Credit Corporation sold the property embracing Units 1356, 1358 and 1360 to spouses Fong Yook Lu and Ellen Yee Fong (Rollo, p. 15). Thereafter, petitioner Rebecca C. Young and her co-plaintiffs, the spouses Chui Wan and Felisa Tan Yu filed in the Regional Trial Court of Manilafor the annulment of the sale in favor of herein respondent spouses, Fong Yook Lu and Ellen Yee Fong and for specific performance and damages against the PH Credit Corporation and Philippine Holding, Incorporated. Plaintiff Rebecca C. Young, now petitioner, also claimed the right of first refusal purportedly granted to her under the aforestated proviso of the abovesaid compromise agreement and prayed that the sale be annulled and that they be allowed to exercise her right of first refusal to purchase subject property On the other hand, the claim of Rebecca C. Young was similarly rejected by the trial court on the following grounds: (1) that she was not a party in the Civil Case No. 123883, wherein subject compromise agreement was submitted and approved by the trial court apart from the fact that she did not even affix her signature to the said compromise agreement; (2) that Rebecca Young had failed to present any evidence to show that she had demanded from the defendants-owners, observance of her right of first refusal before the said owners sold units 1356, 1358 and 1360; (3) that even assuming that her supposed right of first refusal is a stipulation for the benefit of a third

REBECCA C. YOUNG assisted by her husband ANTONIO GO, petitioner, vs. COURT OF APPEALS, PH CREDIT CORP., PHIL. HOLDING, INC. FRANCISCO VILLAROMAN, FONG YOOK LU, ELLEN YEE FONG and THE REGISTER OF DEEDS OF MANILA, respondents. Jan. 13, 1989 FACTS: This is a petition for review on certiorari seeking to set aside the decision of 1 the Court of Appeals in CA-G.R. No. 1002, entitled Spouses Chui Wan and Felisa Tan Yu and Rebecca Young vs. PH Credit Corporation et al., which affirmed the decision of the Regional Trial Court of Manila, Branch XXXII, earlier dismissing the complaint of petitioners for Annulment of Sale, Specific Performance and Damages, against respondents. The facts of the case are as follows: Defendant Philippine Holding, Inc. is the former owner of a piece of land located at Soler St., Sta. Cruz, Manila, and a two storey building erected thereon, consisting of six units; Unit 1350 which is vacant, Unit 1352 occupied by Antonio Young, Unit 1354 by Rebecca C. Young, Unit 1356 by Chui Wan and Felisa Tan Yu, Unit 1358 by Fong Yook Lu and Ellen Yee Fong and Unit 1360 by the Guan Heng Hardware (Rollo, pp. 14-15). The owner Philippine Holding, Inc. secured an order from the City Engineer of Manila to demolish the building. Antonio Young, then a tenant of said Unit 1352, filed an action to annul the City Engineer's demolition Order before the then Court of First Instance of Manila, Branch XXX. As an incident in said case, the parties submitted a Compromise Agreement to the Court on September 24, 1981. Paragraph 3 of said

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person, she did not inform the obligor of her acceptance as required by the second paragraph of Article 1311 of the Civil Code. Chui Wan and Felisa Tan Yu and Rebecca C. Young, assisted by her husband, appealed to the Court of Appeals which dismissed the same on August 7, 1987, for lack of merit. ISSUE: Whether or not petitioner can enforce a compromise agreement to which she was not a party and Won she can validly claim rights by virtue of article 1311 of NCC. RULING: This issue has already been squarely settled by this Court in the negative in J.M. Tuason & Co., Inc. v. Cadampog where it was ruled that appellant is not entitled to enforce a compromise agreement to which he was not a party and that as to its effect and scope, it has been determined in the sense that its effectivity if at all, is limited to the parties thereto and those mentioned in the exhibits. It was reiterated later that a compromise agreement cannot bind persons who are not parties thereto. The pertinent portion of the Compromise Agreement reads: Plaintiff Antonio T.S. Young and the Defendant HOLDING hereby agree to implead in this action as necessary partyplaintiff, plaintiff's daughter Rebecca C. Young who is the recognized lawful lessee of the premises known and identified as 1354 Soller St., Sta. Cruz, Manila and whose written conformity appears hereunder. (Rollo, p. 18) From the terms of this agreement, the conditions are very clear, such as: (1) that Rebecca C. Young shall be impleaded in the action and (2) that she shall signify her written conformity thereto. For unknown reasons, the above conditions were not complied with. The parties did not make any move to implead Rebecca as necessary party in the case. Neither did her written conformity appear in said agreement. While there is the printed name of Rebecca C. Young appearing at the end of the joint motion for approval of the Compromise Agreement, she did not affix her signature above her printed name, nor on the left margin of each and every page thereof.

Petitioner further argued that the stipulation giving her the right of first refusal is a stipulation pour autrui or a stipulation in favor of a third person under Article 1311 of the Civil Code. The requisites of a stipulation pour autrui or a stipulation in favor of a third person are the following: (1) there must be a stipulation in favor of a third person. (2) the stipulation must be a part, not the whole of the contract. (3) the contracting parties must have clearly and deliberately conferred a favor upon a third person, not a mere incidental benefit or interest. (4) the third person must have communicated his acceptance to the obligor before its revocation. (5) neither of the contracting parties bears the legal representation or authorization of the third party. (Florentino v. Encarnacion, Sr., 79 SCRA 193 [1977]). Assuming that petitioner is correct in claiming that this is a stipulation pour autrui it is unrebutted that she did not communicate her acceptance whether expressly or impliedly. She insists however, that the stipulation has not yet been revoked, so that her present claim or demand is still timely. As correctly observed by the Court of Appeals, the above argument is pointless, considering that the sale of subject property to some other person or entity constitutes in effect a revocation of the grant of the right of first refusal to Rebecca C. Young.

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