[Obligations and Contracts]

2nd semester, A.Y. 2014-2015

Advertisement for Bidders Article 1326
Jardine Davis vs CA
G.R. No. 128066
Date: June 19, 2000
Petitioner: JARDINE DAVIS INC.
Respondents: CA and FAR EAST MILLS SUPPLY CORPORATION

6.

FEMSC filed a complaint

PF Reneged the contract
Jardine Unwarranted interference and inducement
Jardine filed a demurrer to evidence (dismiss complaint on ground of
insufficiency of evidence)

7.

RTC Pasig
Granted Jardine's Demurrer to evidence
While it may seem to the plaintiff that by the actions of the two defendants
there is something underhanded going on, this is all a matter of perception,
and unsupported by hard evidence, mere suspicions and suppositions
would not stand up very well in a court of law.
Proceeded with the case against PF
DECISION in favor of FEMSC. PF to pay FEMSC
P2.3m Value of engineering services it rendered
$14k + P900k Contractor's mark-up on installation work since it would be
impossible to compel PF to fulfill its obligation since Jardine's construction
already started
20% of total amount attorney's fees
Costs

8.

They both appealed

FEMSC Against the granting of the demurrer to evidence which resulted to the
dismissal of the case against Jardine
PF Decision of RTC which ordered it to pay FEMSC

9.

CA's Decision
Affirmed the decision against PF
Plus P2m moral damages, P1m exemplary damages, 20% attorney's fees
Jardine to pay FEMSCO for inducing PF to violate its contract
P2m moral damages

Petitioner: PURE FOODS CORPORATION

Respondents: CA and FAR EAST MILLS SUPPLY CORPORATION (FEMSC)
Ponente: J. Bellosilo
FACTS

1.

In 1992, during the height of power crisis, Pure Foods decided to install (2) 1500 KW
generators in its food processing plant in San Roque, Marikina City to curtail losses.

2.

November 1992, a bidding was held

Out of the 8 prospective bidders who attended the pre-bidding conference, only 3
submitted bid proposals and gave bid bonds of 5% of their bid
FEMSC
Monark
Advance Power

3.

Pure foods confirmed the award to FEMSC through a letter to the latter's president.
Lump sum: P6,137,293
For materials and labor
Payable: 2x a month with 10% retention
Retained amount will be released 30 days after acceptance of the
completed project and upon posting of Guarantee bond (20% of contract
price)
When: 20 working days after the delivery of the Generator Set
Penalty of 1/10 of 1% of the purchase price for every day of delay
Contractor will put up a 30% performance bond and all-risk insurance policy.
Warranty of 1 year against defective material or/and workmanship.

4.

FEMSC paid the performance bond, acquired an all-risk insurance policy and started
purchasing materials while PF returned the bidder's bond of P1m.

5.

December 22, 1992, PF's vice-president unilaterally cancelled the award due to
significant factors were uncovered and brought to their attention which dictate the
cancellation and warrant a total review and re-bid of the project. FEMSC protested
this but PF awarded it to JARDINE NELL, which was not one of the bidders.

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Batac, Endaya, Lingat, Santos, Saturnino, Villafuerte, Yee

ISSUE1: WON a perfected contract existed between PF and FEMSCO

Pure Food's Argument No perfected contract
1. Its December letter to FEMSCO was not an acceptance of the latter's bid proposal and
award of the project but more of a qualified acceptance constituting a counter-offer
which required FEMSCO's express conforme.
2. Since PUREFOODS never received FEMSCO's conforme, PUREFOODS was very
well within reason to revoke its qualified acceptance or counter-offer.
3. Hence, no contract was perfected between PUREFOODS and FEMSCO.
HELD1: YES. PF accepted the offer of FEMSCO which respondent to the advertisement.

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1.

2.
3.

4.
5.
6.

Contracts are perfected by mere consent, upon the acceptance by the offeree of the
offer made by the offeror. From that moment, the parties are bound not only to the
fulfillment of what has been expressly stipulated but also to all the consequences
which, according to their nature, may be in keeping with good faith, usage and law. 6
To produce a contract, the acceptance must not qualify the terms of the offer.
However, the acceptance may be express or implied. For a contract to arise, the
acceptance must be made known to the offeror. Accordingly, the acceptance can be
withdrawn or revoked before it is made known to the offeror.
The only issue is whether or not there was an acceptance of an offer and if it was
communicated, thereby creating a contract.
Since PF conducted a bid, Article 1326 applies (Advertisements for bidders are simply
invitations to make proposals)
Advertisement: Terms and Conditions of the Bidding
Offer: bid proposals or quotations submitted by the prospective suppliers
Reply: Acceptance or rejection by PF of the offers.
The December letter constituted as an acceptance. . The tenor of the letter, i.e., "This
will confirm that Pure Foods has awarded to your firm FEMSCO the project," could not
be more categorical.
The terms and conditions were imposed on the performance rather than on the
perfection of the contract.
Failure to comply with a condition on the perfection of contract results in the failure of
a contract, failure to comply with the condition on performance merely gives the other
party options and/or remedies to protect his interests.

ISSUE2: Assuming that the letter was a conditional counter-offer, was there acceptance?
HELD2: YES.

1.
2.

3.
4.

An acceptance may either be express or implied, and this can be inferred from the
contemporaneous and subsequent acts of the contracting parties.
FEMCO's submission of the performance bond and contractor's all-risk insurance was
an implied acceptance. It acquiesced to the terms that the performance bond and the
contractor's all-risk insurance should be given upon the commencement of the
contract.
The acknowledgment thereof by petitioner PUREFOODS, not to mention its return of
FEMSCO's bidder's bond, was a concrete manifestation of its knowledge that
respondent FEMSCO indeed consented to the "conditional counter-offer."
PF's letter is hereby canceling the award to your company of the project,"
presupposes that the contract has been perfected. For, there can be no cancellation if
the contract was not perfected in the first place

NOTES:
The discussion on the price of the project 2 months after the December letter can be deemed as
nothing more than a pressure being exerted by petitioner PF on respondent FEMSCO to lower
the price even after the contract had been perfected. PF was haggling for a lower price even after

agreeing to the earlier quotation, and was threatening to unilaterally cancel the contract, which it
eventually did.
PF also asserts the absence of a purchase order. But purchase orders do not make or break a
contract.
ISSUE3: WON there was bad faith that warrants the awarding of moral damages?
Pure Food's Argument Bad faith absent
1. It was never in bad faith when it dealt with FEMSCO. Hence moral and exemplary
damages should not have been awarded.
HELD3: YES, there was bad faith.
1. The SC subscribes to the factual findings of the lower court
2. PF has acted with bad faith and this was further aggravated by the subsequent
contract with Jardine. It is very evident that PF thought that by the expedient means of
merely writing a letter would automatically cancel or nullify the existing contract
entered into by both parties after a process of bidding. This, to the Court's mind, is a
flagrant violation of the express provisions of the law and is contrary to fair and just
dealings to which every man is due.
3. FEMSC's reputation was besmirched since it ordered from suppliers only to cancel
them. But moral damages is reduced to P1m as it is never intended to enrich FEMSC.
Exemplary is also reduced to P100k.
ISSUE4: Assuming there existed a perfected contract, WON there is any showing that
JARDINE induced or connived with PF to violate the latter's contract with FEMSCO.
Jardine's Argument:
1. Records are bereft of any showing that it had prior knowledge of the supposed
contract between PF and FEMSCO, and that it induced PF to violate the latter's
alleged contract with FEMSCO.
2. FEMSCO, an artificial person, is not entitled to moral damages.
3. But granting arguendo that the award of moral damages is proper, P2,000,000.00 is
extremely excessive.
HELD4: No showing that Jardine induced PF to violate the contract.
1.

While it may seem that there was connivance, no specific evidence supports such
conclusion.

DISPOSITIVE:
Pure Foods to pay

P2.3 m engineering services

$14k and P900k the contractor's mark-up on installation work,

Attorney's fees equivalent to twenty percent (20%) of the total amount due,

Moral damages of P1,000,000.00

Exemplary damages of P1,000,000.00.

Costs against petitioner (Jardine and Pure Foods).

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Period of Acceptance Article 1324
Sanchez vs Riegos
G.R. No. L-25494
Ponente: C.J. Concepcion
Date: June 14, 1972

ART. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally
demandable.
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding
upon the promissor if the promise is supported by a consideration distinct from the price.

Plaintiff-Appellee: NICOLAS SANCHEZ

Defendant-Appellant: SEVERINA RIGOS
Art. 1354. Although the cause is not stated in the contract, it is presumed that it exists and is
lawful, unless the debtor proves the contrary.

FACTS:

1.

2.

3.

4.

On April 3, 1961, Sanchez and Rigos executed an Option to Purchas

Rigos to sell a land in the barrios of Abar and Sibot, San Jose, Nueva Ecija, for
P1,510
Option shall be deemed terminated and elapsed if Sanchez fails to buy this
within 2 years (April 3, 1963)
Sanchez made several tenders of of payment amounting to P1,510 but were rejected
by Riegos.
On March 2, 1963, Sanchez consignated the amount and file an action against
her for specific performance and damages.
Rigos' Defense
That contract is a unilateral promise to sell, and the same being unsupported by
any valuable consideration, hence, null and void.
Lower Court in favor of Sanchez
Relied on Article 1354
Rigos to accept the consigned amount and to execute the deed of conveyance.
Rigos to pay attorney's fees of P200

HELD2: Article 1479 (2)

1.

ISSUE3: WON the contract is binding upon the promisor (Riegos?)

HELD3: YES, it is binding upon Riegos.
Art. 1324. When the offerer has allowed the offeree a certain period to accept, the offer may be
withdrawn at any time before acceptance by communicating such withdrawal, except when the
option is founded upon a consideration, as something paid or promised

1.
2.
3.
4.
5.

ISSUE1: WON the contract is a contract to buy and sell or merely an option to buy?
Sanchez's argument:
Rigos was committed to sell while he (sanchez) was committed to buy the land.
The promise is reciprocally demandable (under 1st paragraph of Article 1479)
HELD 1: Merely an option to buy.
1. As seen in their contract entitled - Option to Purchas
2. Hence, the option did not impose to Sanchez the obligation to purchase Rigos'
property.
3. However, there is no consideration distinct from the price for the sale of land.
ISSUE2: What is the applicable article 1479 or 1354?

Article 1354 applies to contracts in general while the 2 nd paragraph of Article 1354
refers more to sales and to an an accepted unilateral promise to buy or to sell.

There is no distinction between Article 1324 and 1479 reconcile them.

In this case, the option was without consideration and was accepted before the
withdrawal.
The promise as an option which, although not binding as a contract in itself due to lack
of a separate consideration, nevertheless generated a bilateral contract of purchase
and sale upon acceptance.
This is similar to a mere offer of contract of sale, which is not binding until accepted. If
acceptance is made before withdrawal, it is binding.
Since there may be no valid contract without a cause or consideration, the
promisor is not bound by his promise and may, accordingly, withdraw it.
Pending notice of its withdrawal, his accepted promise partakes, however, of the
nature of an offer to sell which, if accepted, results in a perfected contract of
sale.

NOTES:

American authorities state that once an offer is accepted, it cannot be withdrawn

regardless of the existence of consideration. This is not applied in our jurisdiction
because the law is clear, hence, it must be applied, unless amended by Congress.

Southwestern Sugar & Molasses (Ruling which Supreme Court abandoned in this case)

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The option can still be withdrawn, even if accepted, if the same is not supported by
any consideration.
Article 1324 but this is modified by 1479.
Vices of Consent 1330 1346.
Heirs of William Sevilla vs Leopoldo
G.R. No. 150179
Date: April 30, 2003
Ponente: J. Ynares-Santiago
Petitioners:
Heirs of William Sevilla
Wilfredo Sevilla
Wilson Sevilla
William Sevilla
Willington Sevilla
William Sevilla Jr,
Heirs of Maria Sevilla
Amador Sevilla
Jeno Cortes
Maricel Cortes
Alelei Cortes and
Anjei Cortes
Respondents:
Leopoldo Sevilla
Peter Sevilla
Luzvilla Sevilla

FACTS

1.
2.

Filomena Almiro de Sevilla died intestate leaving 8 children (William, Maria, Jimmy,
Felipe, Rosa and Peter, Leopoldo, Luzvilla all surnamed Sevilla)
William, Jimmy and Maria are now deceased and survived by their family.
Filomena left the following 4 properties
Parcel 1: General Luna St., Dipolog City (P31,360)
With commercial building
Paraphernal property of Filomena which she co-owned with her sisters
(Honorato and Felisa both single)
Parcel 2: Olingan, Dipolog City (P5,890)
Conjugal property with her late husband Andres (no prob)
Parcel 3: Magsaysay Street, Dipolog City (P12,870)
Conjugal property with her late husband Andres (no prob)
Parcel 4: Sta. Filomena, Dipolog City (P3,150)
Conjugal property with her late husband Andres (no prob)

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3.
4.
5.
6.
7.
8.

9.

Felisa and Honorato lived in Filomena's house with their nephew Leopoldo and his
family. Leopoldo attended to the needs of his mother, Filomena, and his 2 aunts.
Honorato died and 1/3 of her share went to Felisa and the heirs of Filomena.
Felisa and Peter adjudicated the 1/3 share of Honorato the heirs of Filomena and to
Felisa via an extra judicial partition.
Respondents obtained a cancellation of TCT and its issuance in the name of Felisa
and the heirs of Filomena. But these were left unsigned pending Peter's submssion of
an SPA which authorized him to represent the other heirs of Filomena.
Felisa donated to Leopoldo of her share in Parcel 1 and when she died, her last will
was effected share of her share in Parcel 1 to the Leopoldo spouses
The heirs of the 3 deceased with Felipe and Rosa filed a complaint to annul the deed
of donation and extra judicial partition.
a) Deed of donation is tainted with fraud
Felisa was 81 and seriously ill and unsound mind during that time
b) Deed of extra-judicial partition is void
Executed without their knowledge and consent.
Respondent's Reply VALID
No fraud and Felisa was of sound mind.
She freely did that because of love and Leopoldo's service in the past

10. RTC's Decision Deed of Donation valid but Extra-judicial partition unenforceable
11. Both appealed

Petitioners The Deed of donation is invalid!!!

Respondents The extra-judicial partition is enforceable!!

12. CA's Decision RTC affirmed in toto
ISSUE1: WON the deed of donation executed by Felisa to Leopoldo is invalid for being
executed with fraud, undue pressure and influence?
HELD1: VALID. Fraud, undue pressure and influence is not present.
Precepts

Donation is an act of liberality whereby a person disposes gratuitously of a thing or

right in favor of another who accepts it.

Under Article 737 of the Civil Code, the donors capacity shall be determined as of the
time of the making of the donation.

An agreement of the parties is essential, and the attendance of a vice of consent

renders the donation voidable.
Present Property

During the execution of donation, Felisa was already the owner of Parcel 1
Her 1/3 share was increased by when she inherited from Honorato.

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This is a present property which she can validly dispose of.

On Fraud
1. There is fraud when, through the insidious words or machinations of one of the
contracting parties, the other is induced to enter into a contract which, without them,
he would not have agreed to. There is undue influence when a person takes improper
advantage of his power over the will of another, depriving the latter of a reasonable
freedom of choice. The following circumstances shall be considered: the confidential,
family, spiritual and other relations between the parties, or the fact that the person
alleged to have been unduly influenced was suffering from mental weakness, or was
ignorant or in financial distress.
2. Ei incumbit probatio qui dicit, non qui negat. He who asserts, not he who denies, must
prove. If the one who asserts fail to sufficiently prove, then defendant is not obliged to
assert a defense.
3. Factual findings of RTC, more so if affirmed by CA, is respected. This may be set
aside in exceptional circumstances, but none is present since fraud or influence is not
present in the following allegations of the petitioner:
a) Felisa lived with Leopoldo and she was being supported out of the rentals
derived from the building constructed on the land which was a common fund.
b) She was 82 years old when he accompanied her for the purpose of executing
her last will and testament .
c) That in said last will, she had devised in favor of respondent Leopoldo of the
land but he was not contented and consulted a lawyer as to how he will be able
to own the land immediately;
d) That upon getting the advice of the Clerk of Court of RTC Zamboanga, she
executed a Deed of Donation
e) That at the time of the execution of the Deed of Donation, Parcel 1 was not yet
partitioned.
f)
Leopoldo, Peter and Felisa were the only ones who executed the Deed of Extrajudicial Partition. He divided parcel 1 into 2 lots, for him and the other half to
Peter and Felisa and himself.
g) Leopoldo filed a petition for issuance of the corresponding titles for the two lots,
but the Register of Deeds of Dipolog City refused to issue the corresponding
titles for the two lots to respondent Leopoldo so that up to this moment the two
tiles were left unsigned by the Register of Deeds.
4. These are vague what acts of Leopoldo constituted fraud and undue influence and
on how these acts vitiated the consent of Felisa.
5. Fraud and undue influence that vitiated a party's consent must be established by full,
clear and convincing evidence, otherwise, the latter's presumed consent to the
contract prevails.
6. Anyway, the notary public testified that even if Felisa was old, she was of sound mind
and could talk sensibly.
ISSUE2: WON the deed of Extra-judicial partition is valid?
HELD2: No, it is void ab initio and not just unenforceable.

1.
2.
3.
4.
5.

One of the requisites of a contract is consent, and consent presupposes legal

capacity.
Thus, there is said to be no consent, and consequently, no contract when the
agreement is entered into by one in behalf of another who has never given him
authorization therefor unless he has by law a right to represent the latter
When Felisa executed this partition, she was no longer the owner of the since she
already donated it to Leopoldo who accepted it such donation is immediately
operative and final and became the absolute owner.
Felisa did not possess the capacity to give consent to or execute the deed of partition
inasmuch as she was neither the owner of the land nor the authorized representative
of Leopoldo.
But this does not affect the validity of the donation.

Parcel 1:

Leopoldo due to donation

Divided equally among heirs of Filomena including Leopoldo.

Notes:

Rosa's name was omitted in the RTC's decision, SC included it.

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Contract of Option Article 1324
Adelfa Properties vs CA
G.R. No. 111238
Date: January 25, 1995
Ponente:
Petitioner: ADELFA PROPERTIES INC.
Respondents: CA, ROSARIO JIMENEZ-CASTANEDA and SALUD JIMENEZ
FACTS
1.
2.
3.

The respondents and their brothers (Jose and Dominador) were the co-owners of a
land in Barrio Culasi, Las Pinas, Metro Manila (17,710 sq.m)
Jose and Dominador sold their shares (which consists of ) to ADELFA properties
A Confirmatory Extrajudicial Partition was executed by the Jimenezes

Eastern Part: Jose and Dominador

Western Part: Rosario and Salud

4.

Adelfa expressed interest in buying the Western part

5.

An Exclusive Option to Purchase was executed.

Price: P2,806,150

Option money: P50,000 (received from Adelfa) credited as partial payment

Due: November 30, 1989

Default: Option is cancelled and 50% of the option is forfeited and 50% will be
returned upon sale of the land to a 3rd party.

6.

The owner's copy of the title of Salud was lost and was reissued. This copy remained
in possession of Atty. Bernardo (respondent's counsel) until turned over to Adelfa.
7. Before Adelfa was able to pay, it received summons for a complaint filed by the
nephews and nieces of the Jimenezes for annulment of deed of sale in favor of
Household Corporation and recovery of ownership.
8. Because of that, Adelfa informed the respondents and Jose and Dominador that it
would suspend payment of the full price and that they settle the case. Also that on
November 30, although a holiday, Adelfa will wait at our office until 7pm.
9. Salud refused Adelfa's suggestion and asserts that the suspension of payment
amounts to lack of work of honor.
10. Adelfa caused the annotation of the option contract on the titles and the 1st sale of the
Eastern portion.
11. Respondents sent Francisca Jimenez to Atty. Bernardo (as adelfa's counsel
weird??) to tell them that they were cancelling the transaction.

Atty. Bernardo offered to pay the purchase price provided that the P500k be
deducted rejected by respondents.
12. The case initiated by the nephews and nieces were dismissed.

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Batac, Endaya, Lingat, Santos, Saturnino, Villafuerte, Yee

13. On February 28, 1990, respondents executed a deed of conditional sale in favor of
Emylene Chua.

Price: P3,029,250
P1.5m was paid on the same date while the balance to be paid upon
transfer of title.
14. Atty. Bernardo wrote them informing that since the case was dismissed, they were
willing to pay the purchase price simultaneous with your execution of the deed of
absolute sale, but this was ignored.
15. Respondents sent a letter to Adelfa and enclosed is the refunded P25k option price.
They then requested that the owner's duplicate copy of the certificate of title of Salud
be returned to them and Adelfa failed to do so.
16. RTC's Decision In favor of respondents

Since this is an option contract, the suspension of payment was a counter-offer

which is tantamount to rejection of the offer.

Adelfa cannot suspend payment since the case did not involve the Western part
but the Eastern.

Exclusive Option cancelled

Sale to Chua valid

17. CA's Decision RTC affirmed

Failure of petitioner to pay the purchase price within the period agreed upon was
tantamount to an election by petitioner not to buy the property

Suspension of payment constituted an imposition of a condition which was

actually a counter-offer amounting to a rejection of the option

CC 1590 on suspension of payments applies only to a contract of sale or a

contract to sell, but not to an option contract which it opined was the nature of
the document subject of the case at bar.
ISSUE1: WON this was a contract of sale or contract to sell
HELD1: Contract to sell.
Contract to Sell

Contract of Sale

By agreement the ownership is reserved in the The title passes to the vendee upon the
vendor and is not to pass until the full payment delivery of the thing sold
of the price.
Title is retained by the vendor until the full
Vendor has lost and cannot recover ownership
payment of the price, such payment being a
until and unless the contract is resolved or
positive suspensive condition and failure of
rescinded
which is not a breach but an event that
prevents the obligation of the vendor to convey
title from becoming effective.
Deed of sale is considered absolute in nature where there is neither a stipulation in the deed that
title to the property sold is reserved in the seller until the full payment of the price, nor one giving
the vendor the right to unilaterally resolve the contract the moment the buyer fails to pay within a
fixed period

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1.
2.

The option contract was a contract to sell and not a contract of sale.
Parties never intended to transfer title until payment of purchase price
a) Although it provided for automatic rescission of the contract and partial forfeiture
of the amount already paid in case of default, it does not mention that petitioner
is obliged to return possession or ownership of the property as a consequence of
non-payment. Deed of absolute sale would have been issued only upon the
payment of the balance of the purchase price.
b) Not been shown there was delivery of the property, actual or constructive, made
to herein petitioner.

The exclusive option to purchase is not contained in a public instrument the

execution of which would have been considered equivalent to delivery.

The possession of the title by Atty. Bernardo would normally be understood

as delivery but they really had no intention since it was only with Bernardo
since he was their counsel for the reconstitution of the title.

ISSUE2: WON this was strictly an option contract?

HELD2: NO, again, a contract to sell.

The intention and subsequent acts of the parties must be considered. Their intention
was to enter into a contract to sell and the title of Exclusive Option to Purchase is not
controlling where text shows it is more of a contract to sell.
Option

An option, as used in the law on sales, is a continuing offer or contract by which the
owner stipulates with another that the latter shall have the right to buy the property at a
fixed price within a certain time, or under, or in compliance with, certain terms and
conditions, or which gives to the owner of the property the right to sell or demand a
sale. It is also sometimes called an "unaccepted offer."
An option is not of itself a purchase, but merely secures the privilege to buy. It is not a
sale of property but a sale of the right to purchase. a contract by which the owner of
property agrees with another person that he shall have the right to buy his property at
a fixed price within a certain time. He does not sell his land; he does not then agree to
sell it; but he does sell something, that it is, the right or privilege to buy at the election
or option of the other party.
It imposes no obligation on the person holding the option. Until acceptance, strictly
speaking, it is not a contract and does not vest any right but is merely a contract by
which the owner of property gives the optionee the right or privilege of accepting the
offer and buying the property on certain terms.

Contract

Involves a meeting of minds two persons whereby one binds himself, with respect to
the other, to give something or to render some service.
Option vs Contract

Option is an unaccepted offer

Only upon acceptance and notice does it become binding.
Contract of Sale
Fixes definitely the relative rights and obligations of both parties at the time of its
execution. The offer and the acceptance are concurrent, since the minds of the
contracting parties meet in the terms of the agreement.
The test in determining whether a contract is a "contract of sale or purchase" or a
mere "option" is whether or not the agreement could be specifically enforced

In this Case

There is concurrence of Adelfa's offer to buy and respondent's acceptance thereof.

It was first required that the title be reconstituted and adelfa's counsel Atty.
Bernardo helped them.

The exclusive option to purchase was prepared, signed, thereby creating a perfected
contract to sell.
ISSUE3: WON Adelfa's offer to deduct the P500k from purchase price for settlement of civil
case is tantamount to counter-offer?
HELD3: No.
1. There already existed a perfected contract between the parties at the time the alleged
counter-offer was made.
2. Any new offer by a party becomes binding only when it is accepted by the other. In the
case of private respondents, they actually refused to concur in said offer of petitioner,
by reason of which the original terms of the contract continued to be enforceable.
3. ANYWAY, IT IS STILL NOT A COUNTER-OFFER since Adefla's sole purpose was to
settle the case so it could comply with its obligation.
4. It believed in good faith that compliance is improbable at that time.
5. The use of lack of word of honor indicates that respondents believe Adelfa was
already bound to pay the balance
ISSUE4: WON this was option money or earnest money?
HELD4: Earnest money.
1. While there is jurisprudence to the effect that a contract which provides that the initial
payment shall be totally forfeited in case of default in payment is to be considered as
an option contract, what is involved in the instant case is not an option contract, for the
reason that the parties were already contemplating the payment of the balance of the
purchase price, and were not merely quoting an agreed value for the property. The
term "balance," connotes a remainder or something remaining from the original total
sum already agreed upon.
2. The option money was actually earnest money, to form part of the purchase price. It
was not distinct.
3. Even if called option money, it clearly is earnest money.

Option Money

Earnest Money

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Money given as a distinct
consideration for an option
contract

Part of the purchase price

Applies to a sale not yet perfected Given only where there is already
a sale
While when the would-be buyer
gives option money, he is not
required to buy

When given, the buyer is bound to

pay the balance.

ISSUE5: WON there was a valid suspension of payment?

Adelfa's Argument Valid suspension

Art. 1590. Should the vendee be disturbed in the possession or ownership of the thing
acquired, or should he have reasonable grounds to fear such disturbance, by a
vindicatory action or a foreclosure of mortgage, he may suspend the payment of the
price until the vendor has caused the disturbance or danger to cease, unless the latter
gives security for the return of the price in a proper case, or it has been stipulated that,
notwithstanding any such contingency, the vendee shall be bound to make the
payment. A mere act of trespass shall not authorize the suspension of the payment of
the price.
HELD5: Yes, justified.
1. The case filed by nephews and nieces not only touched the Eastern portion but
recovery of the land of the Western part. The plaintiffs were claiming to be co-owners
of the entire land.
2. The assurance made by private respondents that petitioner did not have to worry
about the case because it was pure and simple harassment is not the kind of guaranty
contemplated under the exceptive clause in CC 1590 wherein the vendor is bound to
make payment even with the existence of a vindicatory action if the vendee should
give a security for the return of the price.
ISSUE6: WON respondents may be compelled to sell and deliver the property?
HELD6: No, they may not be compelled.
1. Adelfa's failure to duly effect the consignation of the purchase price after the
disturbance had ceased

It already knew of the dismissal of that case yet only sent a letter 2 months after
and it was only a mere notice to pay. Sending of a letter is not a valid tender of
payment and they failed to consign it.

The rule is different in case of an option contract or in legal

redemption or in a sale with right to repurchase, wherein
consignation is not necessary because these cases involve an
exercise of a right or privilege (to buy, redeem or repurchase)

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Batac, Endaya, Lingat, Santos, Saturnino, Villafuerte, Yee

2.

rather than the discharge of an obligation, hence tender of

payment would be sufficient to preserve the right or privilege.
But again, this is not an option contract so consignation is
necessary.
They can only suspend until the dismissal of the case, after such
they should have paid but failed to do so in time.

The fact that the contract to sell had been validly rescinded by private respondents.

CC1592 Code which requires rescission either by judicial action or notarial act is
not applicable to a contract to sell

Judicial action for rescission of a contract is not necessary where the contract
provides for automatic rescission in case of breach

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Violence and Intimidation
Martinez vs Hongkong and Shanghai Bank
G.R. No. L-5496
Date: February 19, 1910
Ponente: J. Moreland
Plaintiffs-appellants: MERCEDES MARTINEZ Y FERNANDEZ, ET AL.
Defendants-appellants: THE HONGKONG & SHANGHAI BANKING CORPORATION, ET AL.
FACTS:
1.
2.
3.
4.

5.
6.

7.

8.

10

Alejandro S. Macleod (husband of Mercedes) was for many years the managing
partner of the house of Aldecoa & Co. in the city of Manila.
He withdrew from the management when Aldecoa & Co. went into liquidation.
Hongkong & Shanghai banking Corporation was a creditor of that firm to the extent of
several hundred thousand pesos and claimed to have a creditor's lien in the nature of
a pledge over certain properties of the debtor.
Bank began a civil action against Alejandro, Mercedes, Aldecoa & Co., and the firm
known as Viuda e Hijos de Escao.

A certain undertaking in favor of Aldecoa & Co. had been pledged to the bank to
secure the indebtedness of Aldecoa & Co., but that this obligation had been
wrongfully transferred by Alejandro into an obligation in favor in Mercedes to the
prejudice of the bank.

Aldecoa & Co. began a civil action against Alejandro S. Macleod and others for
the recovery of certain shares of stock basing its right to recover upon alleged
criminal misconduct of Alejandro in his management of the firm's affairs.
Knowing that criminal complaints would be filed against him, Alejandro went to Macao
(Portuguese colony) a territory not covered by the extradition treaty between US and
Portuguese.
Aldecoa filed a complaint against Alejandro for

Falsification of commercial document. The GPR requested the Portuguese

government for extradition but this was denied

Embezzlement
Aldecoa & Co. and the bank, on the settlement, insisted upon the conveyance not only
of all the property of Alejandro but also of at least a portion of the property claimed by
Mercedes.

Alejandro's representative did not resist but Mercedes resisted with respect to
her properties alleging that these were exclusively hers.
They met again to try and settle the case

The conditions and terms were to be explained to Mr. Kingcome (son-in-law of

Mercedes and businessman)

The explanation was made by Mr. Stephen, the manager of the bank (one of the
friends of Mr. Kingcome) but it is contested whether Kingcome communicated
such substance to Mercedes before she signed the document

9.

Reference was made to the British Colony in Manila where Kingcome, Stephen,
Alejandro were prominent members and scandal and disgrace will ensure if
settlement is not made.
Mr. Kingcome got the impression from that interview that Mr. Stephen thought
unless the settlement were consummated additional and mortifying misfortunes
wound fall upon Alejandro's family.

A long conference was held

If Mercedes accepts, the civil suits against them would be dismissed and criminal
charges would be withdrawn

If she refuses, her husband will spend the rest of his life in Macao or be
criminally prosecuted

She refused and it was evident no settlement or comprise can be arrived at and
just do the best to defend Alejandro.

10. Mercedes and Mr. William (nephew and close friend of Mercedes and Alejandro), now
her attorney, talked wherein Mercedes agreed to the terms and authorized William to
execute the contract of settlement on her behalf, and after corrections, it was signed.
11. Aldecoa took possession of the properties of Alejandro and Mercedes, and the
complaints were withdrawn or dismissed, Alejandro returned to Manila.
12. Mercedes filed a complaint that there was intimidation.
ISSUE1: WON the contract can be annulled since Mercedes' consent was obtained due to
violence and intimidation?
HELD 1: Valid, no duress.
Discussion
Contracts which are declared void and of no force upon the ground that they were
obtained by fraud, duress, or undue influence are so declared for the reason that the
complaining party never really gave his consent thereto. The consent in such case is
not in the eye of the law a consent at all. The person has not acted. He has done
nothing he was in vinculis(in chains).

Real Duress

Consent given against his wishes

or judgment or reluctantly or
without hope of profit

Void

Valid
Example: A person settles since
he injured another. He must make
reparation or face the

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consequences.
No difference between one
choosing which gives him greater
profit and one choosing the lesser
evil
In this case
1. The elements of duress is lacking.
2. The most that the facts disclose is that the plaintiff was reluctant to relinquish certain
rights which she claimed to have in certain property to the end that she might be
relieved from litigation then pending against her and that her husband might escape
prosecution for crimes alleged to have been committed; and that she persisted for a
considerable time in her refusal to relinquish such claimed rights.
3. The fact that she did relinquish them upon such consideration and under such
condition does not of itself constitute duress or intimidation, nor does it destroy the
obligatory effect and force of her consent.
4. Duress needs more than that she must have acted from fear and not from judgment.
ISSUE2: WON the cases cited by plaintiff is applicable?
HELD2: NO, not applicable.
1.
2.

3.
4.
5.

In those cases there was no time within which to deliberate the matter as it should
have been deliberated or take the advice of others or counsel.
The treats made to secure the performance of the acts complained of were made
directly to the complaining party by the person directly interested or by someone in his
behalf who was working in his interest and who had no interest whatever in the welfare
of the complaining party.
There was no consideration for the performance of the act complained of except
immunity from the prosecution threatened.
The property transferred or encumbered by the act complained of was the separate
property of the person performing the act in which the person for whom the act was
performed claimed no interest whatever.
There was no dispute as to the title of the property transferred or encumbered, no
claim made to it by anybody, no suits pending to recover it or any portion of it, and no
pretension that it could be taken for the debts of the husband or of any other person.

The 2 other cases had the benefit of legal advice or friend but none of the other circumstances
listed above were present.
Basically, the cases cited had material differences with the instant case.

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Usual exaggerations in trade; opportunity to know facts Article 1340
Laureta Trinidad vs IAC
G.R. No. L-65822
Date: December 3, 1991
Ponente: J. Cruz
Petitioner: Laureta Trinidad
Respondent: IAC and Vicente J. Francisco
FACTS
1.
2.

3.
4.

5.
6.
7.
8.

9.

The late Vicente owned a house (Bungalow No. 17) at Commonwealth Village,
Quezon City.
Laureta offered to buy it, inspected the house and examined a vicinity map which
shows the drainage canals along the property.

Purchase Price: P70,000

Downpayment: P17,500

Balance: 5 equal installments

Trinidad paid P5,000 earnest money and possessed it. She heard from neighbors that
2 buyers previously vacated the property due to flooding.
She talked to Vincente who assured her flooding would not happen anymore. Assured,
she gave the downpayment and they signed the Contract of Conditional Sale.
Trinidad paid the first 2 installments but decided not to pay the 3rd due to flooding (5
feet high)
Upon returning from US, she asked the City Engineer of QC to inspect the cause of
flooding and the result was that it was because the lot is low and is in a narrowed
portion of the creek.
Trinidad filed her complaint against Francisco alleging that she was induced to enter
into the contract of sale because of his misrepresentations.
Vicente's Defense:

Trinidad thoroughly inspected the property before deciding to buy it.

Floods were not uncommon in the Greater Manila area, moreover, they are
fortuitous events and cannot be imputed to him.
CFI Rizal's Decision (Judge Apostol) In favor of Trinidad

Annulled the contract

Vicente to pay Trinidad

10. IAC's Decision In favor of Vicente Francisco

Cancelled the contract of conditional sale

Forfeiture of payment by Trinidad in favor of Francisco

11. They appealed and during pendency, Francisco died and was replaced by his heirs.
ISSUE1: WON Francisco misrepresented as to warrant rescission of sale and award of
damages to Trinidad?

HELD1: No. It has not been satisfactorily established that the private respondent induced
the petitioner through false representation to buy the subject property. Assuming that he
did make such representations, she is deemed to have accepted them at her own risk and
must therefore be responsible for the consequences of her careless credulousness.
Art. 1338. There is fraud when, through insidious words or machinations of one of the contracting
parties, the other is induced to enter into a contract which, without them, he would not have
agreed to.
Art. 1339. Failure to disclose facts, when there is a duty to reveal them, as when the parties are
bound by confidential relations, constitutes fraud.
Art. 1340. The usual exaggerations in trade, when the other party had an opportunity to know the
facts, are not in themselves fraudulent.
1.
2.
3.

4.
5.

6.
7.

It was Trinidad who approached Francisco who never advertised the property to her.
She had full opportunity to inspect the premises, including the drainage canal before
entering into a contract.
She made her appraisal of the property not with the untrained eye of the ordinary
prospective buyer but with the experience and even expertise of the licensed real
estate broker that she was. If she minimized the presence of the drainage canals, she
has only her own negligence to blame.
Seeing that the lot was depressed and there was a drainage lot abutting it, she cannot
say she was not forewarned of the possibility that the place might be flooded.
Notwithstanding the obvious condition of the property, she still decided to buy it.
There is no evidence except her own testimony that two previous owners of the
property had vacated it because of the floods and that Francisco assured her that the
house would not be flooded again. The supposed previous owners were not presented
as witnesses and neither were the neighbors. Francisco himself denied having made
the alleged assurance.
She paid the first 2 installments despite experiencing floods about 1 feet deep.
Despite floods, she made decorations.

One who contracts for the purchase of real estate in reliance on the representations and
statements of the vendor as to its character and value, but after he has visited and examined it for
himself and has had the means and opportunity of verifying such statements, cannot avoid the
contract on the ground that they were false and exaggerated.
ISSUE2: WON since the house stands on a portion of a creek, it therefore is outside the
commerce of man?
HELD2: NO.
1.
2.

The property is registered in the Registry of Deeds of QC and covered by the Torrens
Title, which becomes indefeasible upon expiry of 1 year from date of registration.
If the title is challenged, it cannot be done collaterally

ISSUE3: WON the contract is cancelled

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HELD4: NO.
1.
2.
3.
4.

The sale contains the condition that there is automatic rescission upon default.
She was not unable to pay but she refused to due to the defects.
It is noteworthy that she initiated the complaint and not the other way around.
Court feels and so holds that the above-quoted stipulation should not be strictly
enforced, to justify the rescission of the contract. To make her forfeit the payments
already made by her and at the same time return the property to the private
respondents for standing up to what she considered her right would, in our view, be
unfair and unconsionable. Justice demands that we moderate the harsh stipulations.

DISPOSITIVE:
Contract of Conditional Sale shall be maintained between the parties except that the petitioner
shall not return the house to the private respondents. BUT, she will have to pay them the balance
of the purchase price with 12% interest.
ISSUE5: WON her claim for moral or exemplary damages may be sustained?
HELD5: NO.
1.

This is merely a bad bargain, not illegal transaction vitiated by fraud.

[[

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