BALUYOT V.

CA
FACTS:

Petitioners in this case are residents and members of Cruz-naLigas Homesite Association, Inc. at Diliman, Quezon City.

Petitioners were contending that they have been in open,

peaceful, adverse and continuous possession in the concept of an
owner, for the rest of the land in Barrio Cruz-na-Ligas, consisting at
least 42 hectares.

Since Oct. 1972, the said land is actually subject of quasi-judicial

proceedings and administrative investigations by different branches of
government. In fact the Bureau of land and the President of the RP
issued endorsements confirming the rights of the bona fide residents
of barrio Cruz-na-Ligas to the parcel of land.

In 1979, UP Board of Regents approved the donation of 9.2

hectares of the site that was endorsed by the President of RP. But
after several negotiations with the residents, the area was increased
to 15.8 hectares.

Due to the unreasonable demand of the residents for an area

bigger than 15.8 hectares, the execution of the legal instrument to
formalize the donation failed.

Later on, the association proposed to accept the offer of the UP

to donate 15.8 hectares. UP manifested in writing its consent to the
intended donation in favor with the association provided that they will
agree and comply with the terms and conditions of the donation.

Defendant UP backed-out from the arrangement to donate

directly to the Association the said land, instead, the former decided to
negotiate the donation thru the Quezon City Govt under the terms
and conditions not favorable to the residents of the said barrio.

The Association added to its cause of action in its petition the

specific performance aside from the exclusion from the technical
description of Certificate of Title of Defendant UP the 42 hectares
covering Barrio Cruz-na-Ligas.

The said association also filed a petition for writ of preliminary

injunction to restraint defendant UP from donating the area to the
Quezon City Government.

After the TCs decision, UP assured the residents through motion

of reconsideration that the donation of the 15.8 hectares to the
Quezon City Govt will be for the benefit of the residents of the said
barrio.

As the Quezon City Governments willing to comply with the

terms and conditions of the donation made by UP, President Jose
Abueva (UP), failed to deliver the certificate of title of the said land
which enabled the QC government to register the deed of donation.

It reached the expiration period of 18 months, for the noncompliance of the QC govt under par.16 of the terms and conditions
of the said donation.

President Abueva issued Administrative order No. 21 declaring

the deed of donation revoked.

RTC ordered that petitioners are not parties to the said deed of
donation.

CA set aside the TCs order and dismissed the case.

ISSUE: WON the petitioners has the cause of action and right to seek
the enforcement of the deed of donation though they were not parties
of such deed?
HELD: SC said Yes.

SC said that even if petitioners were not parties to the deed of

donation, they have the right to seek its enforcement upon their
allegation that they are intended beneficiaries of the donation to the
Quezon City Government.

Art. 1311 provides, 2nd par. of the CC provides that: If a contract

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

Following requisites must be present in order to have a

stipulation POUR AUTRUI:

There must be a stipulation in favor of a 3rd person.

The stipulation must be a part, not the whole of the contract.

The contracting parties must have clearly and deliberately

conferred a favor upon a 3rd person, not a mere incidental benefit or
interest.

The 3rd person must have communicated his acceptance to the

obligor before its revocation.

Neither of the contracting parties bears the legal representation

of the 3rd party.

There was stipulation in the said deed of donation that QC govt

as the donee, is required to transfer to qualified residents, said lots by

way of donation.

The stipulation is part of the conditions imposed by UP.

Par. 15 and 16 that the intent of the parties to the deed of

donation was to favor petitioner by transferring the latter the lots
occupied by them.

Through conferences, petitioners accepted the said donation and

private respondents were aware of such acceptance.

Neither of private respondents acted in representation of the

other. Each of the private respondents had its own obligations, in view
of conferring a favor upon petitioners.

The trial courts decision about the donation has been revoked
and petitioner had no clear and legal right to be protected was still
tentative.

The SC ordered the decision of the CA be reversed and the case

was remanded to the RTC.

INTEGRATED PACKAGING V. CA
Nature of the case: This is a petition to review the decision of the
Court of Appeals rendered on April 20, 1994 reversing the judgment of
the Regional Trial Court of Caloocan City in an action for recovery of
sum of money filed by private respondent against petitioner.
FACTS:

Petitioner and private respondent executed on May 5, 1978, an

order agreement whereby private respondent bound itself to deliver to
petitioner reams of printing paper, coated, 2 sides basis, short grain in
the following schedules: May and June 1978, August and September
1978, January 1979, March 1979, July 1979 and March 1979.

In accordance with the standard operating practice of the parties,

the materials were to be paid within a minimum of thirty days and
maximum of ninety days from delivery.

Later, on June 7, 1978, petitioner entered into a contract with

Philippine Appliance Corporation (Philacor) to print three volumes of
"Philacor Cultural Books"

Petitioner alleged it wrote private respondent to immediately

deliver the balance because further delay would greatly prejudice
petitioner.

From June 5, 1980 and until July 23, 1981, private respondent
delivered again to petitioner various quantities of printing paper
amounting to P766,101.70.

However, petitioner encountered difficulties paying private

respondent said amount.

Accordingly, private respondent made a formal demand upon

petitioner to settle the outstanding account.

Meanwhile, petitioner entered into an additional printing contract

with Philacor. Unfortunately, petitioner failed to fully comply with its
contract with Philacor for the printing of books VIII, IX, X and XI.

Philacor demanded compensation from petitioner for the delay

and damage it suffered on account of petitioners failure.

On July 5, 1990, the trial court rendered judgment declaring that

petitioner should pay private respondent the sum of P763,101.70
representing the value of printing paper delivered by private
respondent from June 5, 1980 to July 23, 1981.

On appeal, the respondent Court of Appeals reversed and set

aside the judgment of the trial court.

Petitioner filed this instant petition contending that the appellate

courts judgment is based on erroneous conclusions of facts and law.
ISSUE: WON private respondent is liable for petitioners breach of
contract with Philacor
HELD:

Petitioners contention lacks factual and legal basis, hence,

bereft of merit.

The transaction between the parties is a contract of sale whereby

private respondent (seller) obligates itself to deliver printing paper to
petitioner (buyer) which, in turn, binds itself to pay therefore a sum of
money or its equivalent (price).

Clearly, petitioner did not fulfill its side of the contract as its last
payment in August 1981 could cover only materials covered by
delivery invoices dated September and October 1980.

There is no dispute that the agreement provides for the delivery

of printing paper on different dates and a separate price has been
agreed upon for each delivery.

As correctly held by the appellate court, private respondent

cannot be held liable under the contracts entered into by petitioner
with Philacor.


Private respondent is not a party to said agreements.

It is also not a contract pour autrui.

Aforesaid contracts could not affect third persons like private

respondent because of the basic civil law principle of relativity of
contracts which provides that contracts can only bind the parties who
entered into it, and it cannot favor or prejudice a third person, even if
he is aware of such contract and has acted with knowledge thereof.

Indeed, the order agreement entered into by petitioner and

private respondent has not been shown as having a direct bearing on
the contracts of petitioner with Philacor.

As pointed out by private respondent and not refuted by

petitioner, the paper specified in the order agreement between
petitioner and private respondent are markedly different from the
paper involved in the contracts of petitioner with Philacor.

Instant petition is DENIED.

A&C MINIMART V. VILLAREAL

FACTS: Petitioner leased the six stalls of the one-storey commercial
building from spouses Bonifacio under a lease agreement. However,
the ownership of the subject property is under dispute between
respondents Villareal and spouses Bonifacio. Spouses Bonifacio
claimed to have purchased the property from spouses Sevilla, original
owners of the disputed property.
On the other hand Respondents Villareal claimed ownership of
the same alleging that in a separate case, the said property is sold to
them at a public auction and they were adjudged as the sole and
highest bidder. The said property was sold to satisfy the damages
awarded to respondents Villareal against spouses Sevilla, original
owners of the disputed property, arising from the murder of Jose
Villareal.
Upon learning that the spouses Bonifacios claim of ownership
over the subject property had been seriously denied by the Makati
RTC, petitioner stopped paying its rentals on the subject property on
March 2, 1999, in violation of the renewed Lease Contract.
The appellate court ordered petitioner A & C Minimart to pay
respondents Villareal, a monthly interest of 3% on the total amount of
rental and other charges not paid on time, in addition to the unpaid
rental and other charges which the trial court ordered petitioner to pay.
ISSUE: Whether or not petitioner Minimart is obligated to pay the
penalty interest of 3% per month to respondents Villareal pursuant to
the Contract of Lease.
HELD: No. Petitioner Minimart is not obligated to pay the penalty
interest because the Lease Contract, including the stipulation for the
3% penalty interest, was bilateral between petitioner and Teresita
Bonifacio. So respondents cannot succeed to any contractual rights
which may accrue to the spouses Bonifacio. Contracts produce an
effect only between the parties who execute them. A contract cannot
be binding upon and cannot be enforced by one who is not party to it.
Article 1311 of the Civil Code: 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.
Here, the Lease Contract was executed between the spouses
Bonifacio and petitioner. None of the respondents had taken part in
the contract in question nor entered into a contract with either the
lessee or the lessor, as to an assignment of any right under the Lease
Contract in question. Respondents claim ownership over the
subject property, but not as a successor-in-interest of the
spouses Bonifacios. They purchased the property in an execution
sale from the spouses Sevilla. Thus, respondents cannot succeed
to any contractual rights which may accrue to the spouses
Bonifacio.
Although the respondents were adjudged to be entitled to
rentals accruing from March 2, 1999, until the time the petitioner
vacated the premises, the obligation to pay rent was not derived
from the Lease Contract, but from a quasi-contract. In the present
case, the spouses Bonifacio, who were named as the lessors in the
Lease Contracts, are already adjudged not to be the real owners of
the subject property. In Civil Case, the Makati RTC declared that the
Deed of Sale, between the spouses Bonifacio and the spouses Sevilla
was a forgery and, hence, did not validly transfer ownership to the
spouses Bonifacio.
Since the spouses Bonifacio are not the owners of the subject
property, they cannot unjustly benefit from it by collecting rent which
should accrue to the rightful owners of the same. Hence, the Makati
RTC had set up a bank account where the rent due on the subject
property should be deposited and kept in trust for the real owners

thereto.

LLENADO V. LLENADO
Facts:

The subject of this controversy is a parcel of land consisting of

1,554 sq. m. located in Barrio Malinta, Valenzula, Matro Manila and
registered under the names of Eduardo and Jorge LLenado. The
subject lot once formed part, owned by, and registered under the
name of their father Cornelio Llenado.

On Dec. 2, 1975, Cornelio leased the subject lot to his nephew

Romeo Llenado for a period of 5 yrs, renewable for another 5 yrs at
the option of Cornelio.

On march 31, 1978, Cornelio, Romeo, and the latters father

Orlando executed an agreement whereby Romeo assigned all his
rights to his father Orlando over the unexpired portion of the aforesaid
leased contract, and further agreed that Orlando shall have the option
to renew the contract for 3 yrs commencing from Dec. 3, 1980- 1983,
renewable for another 4 yrs up to 1987. That during that period the
property cannot be sold, transferred, alienated or conveyed in
whatever manner to any 3rd party.

Shortly thereafter, Cornelio and Orlando entered into a

supplementary agreement. Orlando was given an additional option to
renew the contract for an aggregate period of 10 yrs at 5 yr intervals.
The provision was inserted in order to comply with the requirements of
Mobil Philippines Inc. for the operation of the gasoline station
subsequently built on the subject lot.

Upon the death of Orlando, his wife, Wenifreda, took over the
operation of the gasoline station. Meanwhile, Cornelio sold a lot to his
children through a deed of absolute sale denominated as Kasulatan
sa Ganap na Bilihan for 160,000. As earlier stated, the subject lot was
owned by Eduardo and Jorge. Several months thereafter, Cornelio
passed away.

Sometime in 1993, Eduardo informed Wenifreda of his desire to

take over the subject lot however the latter refused to vacate the
premises prompting Eduardo to file a complaint of unlawful detainer.
MTC rendered decision in favor of Eduardo however the RTC
reversed MTCs decision. On appeal, CA reinstated MTCs decision
hence this petition.
Issue: WON the sale of the subject lot by Cornelio is invalid for
violation the prohibitory clause.
Held: No.

Petitioner claims that when Cornelio sold the subject lot to

respondents Eduardo and Jorge, the Lease was in full force and effect
thus, the sale violated the prohibitory clause rendering it invalid.

The petition lacks merit.

Under Art. 1311 of CC, the heirs are bound by the contract
entered into by their predecessors-in-interest except when the rights
and obligations are not transmissible by their nature, by their
stipulation, or by provisions of law.

In the instant case, the lease subsisited at the time of the sale of
the subject lot but when Orlando died on Nov 7, 1983, the lease was
set to expire 26 days later or on Dec. 3, 1983, unless renewed by the
heirs of Orlando. While the option to renew is an enforceable right, it
must necessarily be first exercised to be given effect.

There is no dispute that the lessees were granted the option to

renew the lease for another 4yrs yet there was never any positive act
on the part of the petitioner before or after the termination of the
original period to show their exercise of such option. The silence of the
lessees cannot be taken to mean that they opted to renew the
contract. Neither can the exercise of the option to renew can be
inferred from their persistence to remain in the premises despite
respondents demand from them to vacate.
As a result, there was no obstacle to the sale of the subject lot by
Cornelio to respondents Eduardo and Jorge as the prohibitory clause
under the lease contract was no longer in force.

Case Digest: PNB vs. Tan Dee

G.R. No. 182128 : February 19, 2014
PHILIPPINE NATIONAL BANK, Petitioner, v.
TERESITA TAN DEE, ANTIPOLO

PROPERTIES, INC., (now PRIME EAST

PROPERTIES, INC.) and AFP-RSBS,
INC.,Respondents.
REYES, J.:
FACTS:
Some time in July 1994, respondent Teresita Tan
Dee (Dee) bought from respondent Prime East
Properties Inc. (PEPI) ) on an installment basis a
residential lot located in Binangonan, Rizal.
Subsequently, PEPI assigned its rights over a
213,093-sq m property on August 1996 to
respondent Armed Forces of the PhilippinesRetirement and Separation Benefits System, Inc.
(AFP-RSBS), which included the property
purchased by Dee. Thereafter, or on September 10,
1996, PEPI obtained aP205,000,000.00 loan from
petitioner Philippine National Bank (petitioner),
secured by a mortgage over several properties,
including Dees property.
After Dees full payment of the purchase price, a
deed of sale was executed by respondents PEPI and
AFP-RSBS on July 1998 in Dees favor.
Consequently, Dee sought from the petitioner the
delivery of the owners duplicate title but latter
refused. As a result, Dee filed with Housing and
Land Use Regulatory Board (HLURB) a case for
specific performance to compel the delivery of the
title by the petitioner, PEPI and AFP- RSBS.
HLURB ruled in favor of Dee and directed the
petitioner to cancel/ release the mortgage over the
lot and ordered that PEPI and AFP- RSBS to
deliver the title to of the lot in the name of Dee,
free from all liens and encumbrances.
The HLURB decision was affirmed by its Board of
Commissioners and by the OP, hence the petitioner
filed a petition for review with the CA which also
affirmed the OP decision.
Petitioner maintains that it cannot be compelled to
cancel the mortgage until the mortgagor (PEPI and
AFP RSBS) has settled its obligation.
ISSUE: Whether or not petitioner may be
compelled to cancel/ release the mortgage
HELD: YES. Petition Denied
CIVIL LAW: Obligations of the parties in a
contract of sale

There are two phases involved in the transactions

between respondents PEPI and Dee the first phase
is the contract to sell, which eventually became the
second phase, the absolute sale, after Dees full
payment of the purchase price. In a contract of sale,
the parties obligations are plain and simple. The
law obliges the vendor to transfer the ownership of
and to deliver the thing that is the object of sale. On
the other hand, the principal obligation of a vendee
is to pay the full purchase price at the agreed time.
The obligation of PEPI, as owners and vendors of
Lot 12, Block 21-A, Village East Executive Homes,
is to transfer the ownership of and to deliver Lot
12, Block 21-A to Dee, who, in turn, shall pay, and
has in fact paid, the full purchase price of the
property. There is nothing in the decision of the
HLURB, as affirmed by the OP and the CA, which
shows that the petitioner is being ordered to assume
the obligation of any of the respondents. There is
also nothing in the HLURB decision, which
validates the petitioners claim that the mortgage has
been nullified.The order of cancellation/release of
the mortgage is simply a consequence of Dees full
payment of the purchase price.
MERCANTILE LAW: Mortgage contract a
mere accessory contract
The mortgage contract between PEPI and the
petitioner is merely an accessory contract to the
principal three-year loan takeout from the petitioner
by PEPI for its expansion project. It need not be
belaboured that a mortgage is an accessory
undertaking to secure the fulfilment of a principal
obligation and it does not affect the ownership of
the property as it is nothing more than a lien
thereon serving as security for a debt.
Note that at the time PEPI mortgaged the property
to the petitioner, the prevailing contract between
respondents PEPI and Dee was still the Contract to
sell, as Dee was yet to fully pay the purchase price
of the property. On this point, PEPI was acting fully
well within its right when it mortgaged the property
to the petitioner, for in a contract to sell, ownership
is retained by the seller and is not to pass until full
payment of the purchase price.
Nevertheless, despite the apparent validity of the
mortgage between the petitioner and PEPI, the
former is still bound to respect the transactions
between respondents PEPI and Dee. The petitioner
was well aware that the properties mortgaged by
PEPI were also the subject of existing contracts to
sell with other buyers. While it may be that the

petitioner is protected by Act No. 3135, as

amended, it cannot claim any superior right as
against the installment buyers. This is because the
contract between the respondents is protected by
P.D. No. 957, a social justice measure enacted
primarily to protect innocent lot buyers.