CASE DIGEST ON CONTRACTS

AUTONOMY- ACCEPTANCE; REQUISITES;

DISTINGUISHED FROM COUNTER-OFFER

JULATON, Eleonor E.
BSCE-5
1:00-2:00 TTHS; H-409

CONTRACTS: AUTONOMY
Duncan Association of Detailman-PTGWO and PEDRO A. TECSON vs. Glaxo
Wellcome Phils., Inc.

G.R. No. 162994, September 17,2004

FACTS:
Tecson is a medical representative of Glaxo. Contract of employment signed by
Tecson stipulates that marital relationships with competing companies that poses a
possible conflict of interest is prohibited, and hence the employee must resign from his
position or the management may transfer him to another department in a noncounterchecking position.
Tecson entered into a romantic relationship with Betsy, an employee of Astra,
Glaxos competition. The two eventually got married. Unable to comply with the condition
that either he or Betsy resigns, Glaxo transferred Tecson to the Butuan-Surigao CityAgusan del Sur sales area. His request against transfer was denied.
ISSUE:
Whether or not the policy of a pharmaceutical company prohibiting its employees
from marrying employees of any competitor company is valid
HELD:
Yes. Glaxo has a right to guard its trade secrets, manufacturing formulas,
marketing strategies, and other confidential programs and information from competitors.
The prohibition against personal or marital relationships with employees of competitor
companies upon Glaxo's employees is reasonable under the circumstances because
relationships of that nature might compromise the interests of the company. That Glaxo
possesses the right to protect its economic interest cannot be denied.
DISSENTING OPINION:
The cases lay down the rule that the requirement of reasonableness must be clearly
established to uphold the questioned employment policy. The employer has the burden to
prove the existence of a reasonable business necessity. The burden was successfully
discharged in this case.

In other words the no-spouse policy could be a valid exercise of management prerogative
provided it reflects an inherent quality reasonably necessary for satisfactory job
performance and the employer has the burden to prove the existence of this reasonable
business necessity.

Star Paper Corporation vs. Ronaldo Simbol

G.R. No. 164774, April 12, 2006

FACTS:
Simbol was employed by the company and met a co-employee and they eventually
had a relationship and got married. Prior to the marriage, the manager advised the couple
that should they decide to get married, one of them should resign pursuant to a company
policy: 1) new applicant will not be allowed to be hired if he/she has a relative, up to 3rd
degree of consanguinity, already employed by the company. 2) if the two employees got
married, one of them should resign to preserve the policy stated first. Simbol resigned.
ISSUE:
Whether or not the policy of the employer banning spouse from working in the
same company, a valid exercise of management prerogative
RULING:
No, it is not a valid exercise of management prerogative and violates the rights of
employees under the constitution. The case at bar involves Article 136 of the Labor Code
which provides it shall be unlawful for an employer to require as a condition of
employment or continuation of employment that a woman employee shall not get
married, or to stipulate expressly or tacitly that upon getting married, a woman employee
shall be deemed resigned or separated, or to actually dismiss, discharge, discriminate or
otherwise prejudice a woman employee merely by reason of her marriage.

DAISY B. TIU, Petitioner, versus PLATINUM PLANS PHIL., INC., Respondent.

(G.R. No. 163512, February 28, 2007, 2nd Division)

FACTS:
Respondent Platinum Plans Philippines, Inc. is a domestic corporation engaged in
the pre-need industry. From 1987 to 1989, petitioner Daisy B. Tiu was its Division
Marketing Director. On January 1, 1993, respondent re-hired petitioner as Senior Assistant
Vice-President and Territorial Operations Head in charge of its Hong Kong and Asean
operations. The parties executed a contract of employment valid for five years. On
September 16, 1995, petitioner stopped reporting for work. In November 1995, she
became the Vice-President for Sales of Professional Pension Plans, Inc., a corporation
engaged also in the pre-need industry. Consequently, respondent sued petitioner for
damages before the RTC. Respondent alleged, among others, that petitioners
employment with Professional Pension Plans, Inc. violated the non-involvement clause in
her contract of employment.
ISSUE:
Whether the Court of Appeals erred in sustaining the validity of the noninvolvement clause
HELD:
In this case, the non-involvement clause has a time limit: two years from the time
petitioners employment with respondent ends. It is also limited as to trade, since it only
prohibits petitioner from engaging in any pre-need business akin to respondents. More
significantly, since petitioner was the Senior Assistant Vice-President and Territorial
Operations Head in charge of respondents Hongkong and Asean operations, she had been
privy to confidential and highly sensitive marketing strategies of respondents business. To
allow her to engage in a rival business soon after she leaves would make respondents
trade secrets vulnerable especially in a highly competitive marketing environment. In
sum, The Court finds the non-involvement clause not contrary to public welfare and not
greater than is necessary to afford a fair and reasonable protection to respondent. Hence
the restraint is valid and such stipulation prevails.

AVON COSMETICS, INCORPORATED and JOSE MARIE FRANCO, Petitioners, versus

LETICIA H. LUNA, Respondent. (G.R. No. 153674, December 20, 2006, 1st
Division)
FACTS:
The present petition stemmed from a complaint[3] dated 1 December 1988, filed by
herein respondent Luna alleging, inter alia that she began working for Beautifont, Inc. in
1972, first as a franchise dealer and then a year later, as a Supervisor. Sometime in 1978,
Avon Cosmetics, Inc. (Avon), herein petitioner, acquired and took over the management
and operations of Beautifont, Inc. Nonetheless, respondent Luna continued working for
said successor company. Aside from her work as a supervisor, respondent Luna also acted
as a make-up artist of petitioner Avons Theatrical Promotions Group, for which she
received a per diem for each theatrical performance. The contract was that:The Company
agrees:1) To allow the Supervisor to purchase at wholesale the products of the
Company.The Supervisor agrees:1) To purchase products from the Company exclusively
for resale and to be responsible for obtaining all permits and licenses required to sell the
products on retail. The Company and the Supervisor mutually agree:1) That this
agreement in no way makes the Supervisor an employee or agent of the Company,
therefore, the Supervisor has no authority to bind the Company in any contracts with
other parties. 2) That the Supervisor is an independent retailer/dealer insofar as the
Company is concerned, and shall have the sole discretion to determine where and how
products purchased from the Company will be sold. However, the Supervisor shall not sell
such products to stores, supermarkets or to any entity or person who sells things at a
fixed place of business. 3) That this agreement supersedes any agreement/s between the
Company and the Supervisor. 4) That the Supervisor shall sell or offer to sell, display or
promote only and exclusively products sold by the Company. 5) Either party may
terminate this agreement at will, with or without cause, at any time upon notice to the
other.
Later, respondent Luna entered into the sales force of Sandre Philippines which
caused her termination for the alleged violation of the terms of the contract. The trial
court ruled in favor of Luna that the contract was contrary to public policy thus the
dismissal was not proper. The Court of Appeals affirmed the decision, hence this petition.
ISSUE:
Whether there was subversion of the autonomy of contracts by the lower courts
HELD:
Agreements in violation of orden pblico must be considered as those which conflict
with law, whether properly, strictly and wholly a public law (derecho) or whether a law of
the person, but law which in certain respects affects the interest of society. Plainly put,
public policy is that principle of the law which holds that no subject or citizen can lawfully
do that which has a tendency to be injurious to the public or against the public good. As
applied to contracts, in the absence of express legislation or constitutional prohibition, a
court, in order to declare a contract void as against public policy, must find that the
contract as to the consideration or thing to be done, has a tendency to injure the public, is
against the public good, or contravenes some established interests of society, or is
inconsistent with sound policy and good morals, or tends clearly to undermine the security
of individual rights, whether of personal liability or of private property.

SPOUSES BENEDICT and MARICEL DY TECKLO, Petitioners, versusRURAL BANK

OF PAMPLONA, INC. represented by its President/Manager, JUAN Respondent.
(G.R. No. 142277, December 11, 2002, 3rd Division)
FACTS:
On 20 January 1994, spouses Roberto and Maria Antonette Co obtained from
respondent Rural Bank of Pamplona, Inc. a P100,000.00 loan due in three months or on
20 April 1994. The loan was secured by a real estate mortgage on a 262-square meter
residential lot owned by spouses Co located in San Felipe, Naga City and covered by
Transfer Certificate of Title (TCT) No. 24196. Petitioners, spouses Benedict and Maricel Dy
Tecklo, meanwhile instituted an action for collection of sum of money against spouses Co.
When the two loans remained unpaid after becoming due and demandable, respondent
bank instituted extrajudicial foreclosure proceedings. In its 5 September 1994 petition for
extrajudicial foreclosure, respondent bank sought the satisfaction solely of the first loan
although the second loan had also become due. At the public auction scheduled on 19
December 1994, respondent bank offered the winning bid of P142,000.00, which did not
include the second loan. The provisional certificate of sale to respondent bank was
annotated on the TCT of the mortgaged property as Entry No. 60794. Petitioners then
exercised the right of redemption as successors-in-interest of the judgment debtor.
Stepping into the shoes of spouses Co, petitioners tendered on 9 August 1995 the amount
of P155,769.50, based on the computation made by the Office of the Provincial Sheriff.
ISSUE:
Whether or not the redemption amount includes the second loan in the amount of
P150,000.00 even if it was not included in respondent banks application for extrajudicial
foreclosure
HELD:
Petitioners pointed out that the second loan was not annotated as an additional loan
on the TCT of the mortgaged property. Petitioners argued that the second loan was just a
private contract between respondent bank and spouses Co, which could not bind third
parties unless duly registered. Petitioners stressed that respondent banks application for
extrajudicial foreclosure referred solely to the first loan.

OBLIGATORY FORCE

MAXIMA HEMEDES, petitioner, vs. THE HONORABLE COURT OF APPEALS,

DOMINIUM REALTY AND CONSTRUCTION CORPORATION, ENRIQUE D. HEMEDES
and R & B INSURANCE CORPORATION, respondents. G.R. No. 107132 October 8,
1999

FACTS:
Jose Hemedes executed a document entitled "Donation Inter Vivos With
Resolutory Conditions" whereby he conveyed ownership over the subject land, together
with all its improvements, in favor of his third wife, Justa Kausapin, subject to the
following resolutory conditions that upon her death or marriage, the DONEE shall revert
the said property to anyone of Jose Hemedes children.
September 27, 1960 a "Deed of Conveyance of Unregistered Real Property by
Reversion" conveying to Maxima Hemedes. She had it titled and mortgaged to R & B
Insurance with an annotation of USUFRUCT favor of her stepmother,Justa Kausapin.
Unable to pay the mortgage, R & B Insurance extra-judicially foreclosed the property.
However, Justa Kausapin executed another agreement stepson, Enrique D. Hemedes. He
obtained tax declarations and pay realty taxes from thereon.
Enrique Hemedes sold the property to Dominium Realty Const. Corp.(Dominium), a
sister company of Asia Brewery. Asia Brewery started to introduce some improvements
already when R & B insurance informed them that they are the owners of the property
where these improvements are being built. Hence, this civil case.
ISSUES:
Whether or not the donation in favor of Enrique Hemedes was valid
HELD:
NO. Enrique D. Hemedes and his transferee, Dominium, did not acquire any rights
over the subject property. Justa Kausapin sought to transfer to her stepson exactly what
she had earlier transferred to Maxima Hemedes the ownership of the subject property
pursuant to the first condition stipulated in the deed of donation executed by her husband.
Thus, the donation in favor of Enrique D. Hemedes is null and void for the purported
object thereof did not exist at the time of the transfer, having already been transferred to
his sister.

RIGHT OF FIRST REFUSAL

JOSELITO VILLEGAS and DOMINGA VILLEGAS, petitioners, vs. COURT OF

APPEALS and FORTUNE TOBACCO CORPORATION, respondents. G.R. No. 129977
February 1, 2001
FACTS:
On September 6, 1973, Ciriaco D. Andres and Henson Caigas sold a land to Fortune
Tobacco Corporation (Fortune) for P60,000.00. The Transfer of Certificate Title was issued
in Fortunes name.
On August 6, 1976, Andres and Caigas executed a Deed of Reconveyance of the
same lot in favor of Filomena Domingo, the mother of Joselito Villegas, defendant in the.
Although no title was mentioned in this deed, Domingo succeeded in registering this
document in the Office of the Register of Deeds.
On December 4, 1976, the Office of the Register of Deeds was burned together with
all titles in the office. A Deed of Absolute Sale of a portion of 20,000 square meters of the
said lot was executed by Filomena Domingo in favor of Villegas . On April 10, 1991, the
trial court upon a petition filed by Fortune ordered the reconstitution of the original of TCT.
After Trial on the merits, the trial court rendered its assailed decision in favor of
Fortune Tobacco, declaring it to be entitled to the property. Petitioners thus appealed this
decision to the Court of Appeals.
ISSUE:
Who among of the parties is entitled to the property based from the validity of their
respective titles?
HELD:
It is petitioners contention that Fortune was a buyer in bad faith. Even if Fortune
had validly acquired the subject property, it would still be barred from asserting title
because of laches. The failure or neglect, for an unreasonable length of time to do that
which by exercising due diligence could or should have been done earlier constitutes
laches. It is negligence or omission to assert a right within a reasonable time, warranting
a presumption that the party entitled to assert it has either abandoned it or declined to
assert it. While it is by express provision of law that no title to registered land in
derogation of that of the registered owner shall be acquired by prescription or adverse
possession, it is likewise an enshrined rule that even a registered owner may be barred
from recovering possession of property by virtue of laches.

MUTUALITY
VICENTE JOSEFA, petitioner, vs. ZHANDONG TRADING CORPORATION,
respondent.
(G.R. No. 150903, December 8, 2003, 3rd Division)

FACTS:
Zhandong is alleged to be engaged in the importation and sale of hardboards/staple
boards and other merchandise. In the course of its business, its president, Eleanor Chy,
met Tan, who referred Vicente Josefa, as a client, to Chy. Relying on Tans assurance that
Josefa is a good customer and owns a construction supply store, Zhandong, sold and
delivered to Josefa crates of boards. However, Josefa, instead of paying Zhandong,
remitted his payments to Tan. In turn, Tan delivered various checks to Zhandong, which
accepted them upon Tans declaration that they came from Josefa. A number of the
checks bounced. When Zhandong confronted Tan, the latter issued his own checks and
those of his mother, Evelyn Chua. Later, without any valid reason, Tan stopped payment
by checks. Those issued by his mother bounced. This prompted Josefa to send Zhandong
and Tan a demand letter but they ignored it. Consequently, Zhandong suffered damages
and was constrained to file the instant complaint with the assistance of counsel for a fee.

ISSUE:
Whether or not petitioner is liable to pay the respondent

HELD:
No. Since petitioner had fully paid Tan for all the hardboards, respondent Zhandong
has no right to demand payments from him. To be sure, he cannot be made responsible
for Tans failure to pay respondent for the subject hardboards. Contracts take effect only
between the parties, their successors in interest, heirs and assigns.When there is no
privity of contract, there is likewise no obligation or liability to speak about and thus no
cause of action arises. Clearly, petitioner, not being privy to the transaction between
respondent and Tan, should not be made to answer for the latters default.

EQUALITY/ CONTRACTS OF ADHESION

TERESITA DIO, Petitioner, vs. ST. FERDINAND MEMORIAL
PARK, INC. and MILDRED F. TANTOCO, Respondents.
(G.R. No. 169578, November 30, 2006, 1st Division)

FACTS:
On December 11, 1973, Teresita Dio agreed to buy, on installment basis, a
memorial lot from the St. Ferdinand Memorial Park, Inc. (SFMPI). The ownership of Dio
over the property was made subject to the rules and regulations of SFMPI, as well as the
government, including all amendments, additions and modifications that may later be
adopted.
In the early part of October 1986, Dio informed SFMPI, through its president and
controlling stockholder, Mildred F. Tantoco, that she was planning to build a mausoleum on
her lot and sought the approval thereof. The plans and specifications were approved, but
Tantoco insisted that the mausoleum be built by it or its agents. Dio, through counsel,
demanded that she be allowed to construct the mausoleum within 10 days, otherwise, she
would be impelled to file the necessary action/s against SFMPI and Tantoco.
On October 17, 1986, SFMPI wrote Dio informing her that under Rule 69 of SFMPI
Rules and Regulations, she was prohibited from engaging an outside contractor for the
construction of buildings, improvements and memorials. A lot owner was only allowed to
submit a preferred design as long as it is in accordance with park standards.
ISSUE:
Whether the said rule is valid and binding upon petitioner
HELD:
YES. Petitioner is obliged to abide by the terms and conditions of the Pre-Need
Purchase Agreement and the Deed of Sale, as well as said rules and regulations which
formed integral parts of said deeds.
Basic is the principle that contracts, once perfected, bind both contracting parties.
The parties may establish such stipulations, clauses, terms and conditions as they may
deem convenient, provided these are not contrary to law, morals, good customs, public
order, or public policy. It follows that obligations arising from contracts have the force of
law between the contracting parties and should be complied with in good faith.

PILIPINO TELEPHONE CORPORATION, petitioner, vs. DELFINO TECSON,

respondent.
(G. R. No. 156966, May 7, 2004, 3rd Division)
FACTS:
On various dates in 1996, Delfino C. Tecson applied for six (6) cellular phone
subscriptions with Pilipino Telephone Corporation (PILTEL), which applications were each
approved and covered, respectively, by six mobiline service agreements.
On 05 April 2001, respondent filed with the Regional Trial Court of Iligan City, Lanao Del
Norte, a complaint against petitioner for a "Sum of Money and Damages." Petitioner
moved for the dismissal of the complaint on the ground of improper venue, citing a
common provision in the mobiline service agreements to the effect that:
"Venue of all suits arising from this Agreement or any other suit directly or indirectly
arising from the relationship between PILTEL and subscriber shall be in the proper courts
of Makati, Metro Manila. Subscriber hereby expressly waives any other venues."
ISSUE:
Whether or not the contract is valid and binding.
HELD:
YES.Section 4, Rule 4, of the Revised Rules of Civil Procedure allows the parties to
agree and stipulate in writing, before the filing of an action, on the exclusive venue of any
litigation between them. Such an agreement would be valid and binding provided that the
stipulation on the chosen venue is exclusive in nature or in intent, that it is expressed in
writing by the parties thereto, and that it is entered into before the filing of the suit.

NON-BINDING AS TO THIRD PARTIES; EXCEPTIONS

HEIRS OF AUGUSTO L. SALAS, JR., namely: TERESITA D. SALAS for herself and as
legal guardian of the minor FABRICE CYRILL D. SALAS, MA. CRISTINA S. LESACA,
and KARINA TERESA D. SALAS, petitioners, vs. LAPERAL REALTY CORPORATION,
ROCKWAY REAL ESTATE CORPORATION, SOUTH RIDGE VILLAGE, INC.,
MAHARAMI DEVELOPMENT CORPORATION, Spouses THELMA D. ABRAJANO and
GREGORIO ABRAJANO, OSCAR DACILLO, Spouses VIRGINIA D. LAVA and RODEL
LAVA, EDUARDO A. VACUNA, FLORANTE DE LA CRUZ, JESUS VICENTE B.
CAPELLAN, and the REGISTER OF DEEDS FOR LIPA CITY, respondents.
(G.R. No. 135362, December 13, 1999, 2nd division)

FACTS:
Salas, Jr., a registered owner of a vast tract of land, entered into an OwnerContractor Agreement with Laperal Realty Corporation to render and provide complete
(horizontal) construction services on his land.
On June 10, 1989, Salas, Jr. left his home in the morning for a business trip and
never returned.
Laperal Realty subdivided the land of Salas, Jr. and sold subdivided portions to
respondents. On February 3, 1998, heirs of Salas, Jr. filed a Complaint for declaration of
nullity of sale, reconveyance, cancellation of contract, accounting and damages against
respondents. Laperal Realty filed a Motion to Dismiss on the ground that petitioners failed
to submit their grievance to arbitration as required under Article VI of the Agreement.
On August 9, 1998, the trial court issued the herein assailed Order dismissing
petitioners' Complaint for non-compliance with the foregoing arbitration clause.
ISSUE:
Whether or not rescission is the proper remedy
HELD:
No. For while rescission, as a general rule, is an arbitrable issue, they impleaded in
the suit for rescission the respondent lot buyers who are neither parties to the Agreement
nor the latter's assigns or heirs. Consequently, the right to arbitrate as provided in Article
VI of the Agreement was never vested in respondent lot buyers.

ENFORCEABILITY

JESUS M. GOZUN, petitioner, vs. JOSE TEOFILO T. MERCADO a.k.a. DON PEPITO
MERCADO, respondent.
(G.R. No. 167812, December 19, 2006, 3rd Division)

FACTS:
Don Pepito Mercado was a gubernatorial candidate in the local elections of 1995
while Jesus M. Gozun was the owner of a printing shop who made the petitioners
campaign material. Don Mercados sister-in-law, Lilan Soriano obtained cash advance of
P253,000.00 from Gozun for allegedly allowances of poll watchers. Lilian acknowledged on
Gozuns diary receipt of the amount.
Gozun later sent Don Mercado a Statement of Account in the total amount of
P2,177,906. A partial payment of P1-M was paid by Don Mercados wife. Despite repeated
demands and respondents promise to pay, respondents failed to settle the balance of his
account.
ISSUE:
Whether or not Lilian R. Soriano was authorized by the respondent to receive the
cash advance from the petitioner in the amount of P253,000.00
HELD:
No. Nowhere in the note can it be inferred that defendant-appellant was connected
with the said transaction. Under Article 1317 of the New Civil Code, a person cannot be
bound by contracts he did not authorize to be entered into his behalf.

RELATIVITY; PRIVITY: EXCEPTIONS

STA. LUCIA REALTY & DEVELOPMENT, INC., Petitioner, vs. SPOUSES FRANCISCO
&
EMELIA*
BUENAVENTURA,
as
represented
by
RICARDO
SEGISMUNDO,Respondents.
(G.R. No. 177113, October 2, 2009, 3rd Division)

FACTS:
Respondent-spouses Segismundo bought a lot from Loida Gonzales Alfonso which
is part of a subdivision project owned and being developed by Sta. Lucia Realty. In the
course of the construction of their house, they discovered that their lot had been
subdivided and occupied by Marilou Panlaque and Ma. Veronica Banez; and like
respondents, the two occupants were also issued a construction permit by petitioner.
Respondents thus demanded from petitioner the rightful possession of their lot; but to no
avail.
ISSUE:
Whether or not Petitioner has no privity of contract with respondents as it did not
directly sell the subject property to them
HELD:
No. Petitioner originally sold the subject lot to Alfonso, and the latter subsequently
sold the same to herein respondents. As assignees or successors-in-interest of Alfonso in
petitioners subdivision project, respondents succeed to what rights the former had; and
what is valid and binding against Alfonso is also valid and binding as against them.
Petitioner was remiss and negligent in the performance of its obligations towards its
buyers, their heirs, assignees, and/or successors-in-interest; and that it was petitioners
negligence which caused the confusion on the identity of the lot, which likewise resulted to
the erroneous construction done by RCD Realty Corporation.

STIPULATIONS POUR AUTRUI

TIMOTEO BALUYOT, JAIME BENITO, BENIGNO EUGENIO, ROLANDO GONZALES,
FORTUNATO FULGENCIO and CRUZ-NA-LIGAS HOMESITE ASSOCIATION, INC.,
petitioners, vs. THE HONORABLE COURT OF APPEALS, THE QUEZON CITY
GOVERNMENT and UNIVERSITY OF THE PHILIPPINES, respondents.

(G.R. No. 122947, July 22, 1999, 2nd Division)

FACTS:
Petitioners Timoteo Baluyot, Jaime Benito, Benigno Eugenio, Rolando Gonzales, and
Fortunato Fulgencio are residents of Barangay Cruz-na-Ligas, Diliman, Quezon City. The
Cruz-na-Ligas Homesite Association, Inc. is a non-stock corporation of which petitioners
and other residents of Barangay Cruz-na-Ligas are members. On March 13, 1992,
petitioners filed a complaint for specific performance and damages against, University of
the Philippines before the Regional Trial Court. The complaint was later on amended to
include Quezon City government as defendant.
However, the Regional Trial Court denied the application. Petitioners moved for a
reconsideration of the above order. Without resolving petitioners' motion, the trial court
ordered petitioners to amend their complaint to implead respondent Quezon City
government as defendant.
On July 27, 1992, respondent city government filed its Answer to the Amended
Complaint with Cross-Claim. However, on November 29, 1993, it moved to withdraw its
cross-claim against UP on the ground that, after conferring with university officials, the
city government had recognized "the propriety, validity and legality of the revocation of
the Deed of Donation."
The motion was granted by the trial court. On the same day, a Joint Motion to
Dismiss was filed by UP and the Quezon City government on the ground that the
complaint fails to state a cause of action. Petitioners opposed the motion.
ISSUE:
Whether or not the complaint states a cause of action
HELD:
Yes. A cause of action exists if the following elements are present, namely: (1) a
right in favor of the plaintiff by whatever means and under whatever law it arises or is
created; (2) an obligation on the part of the defendant to respect or not to violate such
right; and (3) an act or omission on the part of such defendant in violation of the right of
the plaintiff or constituting a breach of the obligations of the defendant to the plaintiff for
which the latter may maintain an action for recovery of damages. All the elements of a
cause of action were contained in the amended complaint of petitioners.

CONTRACTS CREATING REAL RIGHTS

Chanell; Fango-ok, Cita Cuyco v Cuyco SPOUSES ADELINA S. CUYCO and
FELICIANO U. CUYCO, Petitioners, vs. SPOUSES RENATO CUYCO and FILIPINA
CUYCO,Respondents.
(G.R. No. 168736, April 19, 2006, 1st Division)
FACTS:
Spouses Adelina and Feliciano Cuyco, obtained a loan in the amount of
P1,500,000.00 from respondents, spouses Renato and Filipina Cuyco, payable within one
year at 18% interest per annum, and secured by a Real Estate Mortgage over a parcel of
land with improvements thereon. Subsequently, petitioners obtained additional loans from
the respondents in the aggregate amount of P1,250,000.00. Petitioners made payments
amounting to P291,700.00, but failed to settle their outstanding loan obligations. Thus,
respondents filed a complaint for foreclosure of mortgage with the RTC.
ISSUE:
Whether or not the contract established a right in this case
HELD:
As a general rule, a mortgage liability is usually limited to the amount mentioned in
the contract. However, the amounts named as consideration in a contract of mortgage do
not limit the amount for which the mortgage may stand as security if from the four
corners of the instrument the intent to secure future and other indebtedness can be
gathered. While a real estate mortgage may exceptionally secure future loans or
advancements, these future debts must be sufficiently described in the mortgage contract.
An obligation is not secured by a mortgage unless it comes fairly within the terms of the
mortgage contract.

TORTOUS INTERFERENCE
HERMINIO TAYAG, petitioner, vs. AMANCIA LACSON, ROSENDO LACSON,
ANTONIO LACSON, JUAN LACSON, TEODISIA LACSON-ESPINOSA and THE COURT
OF APPEALS, respondents.
(G.R. No. 134971,March 25, 2004, 2nd Division)

FACTS:
On March 17, 1996, a group of original farmers/tillers of tenanted agricultural land,
individually executed in favor of Herminio Tayag separate Deeds of Assignment in which
the assignees assigned to Tayag their respective rights as tenants/tillers of the
landholdings possessed and tilled by them for and in consideration of P50.00 per square
meter. The price was payable "when the legal impediments to the sale of the property to
the petitioner no longer existed." The petitioner was also granted the exclusive right to
buy the property if the respondents would sell such land.
Tayag called a meeting in order to work out the implementation of their separate
agreements. However, the defendants-tenants gave a notice of their collective decision to
sell all their rights and interests, as tenants/lessees, over the landholding to the Lacsons.
ISSUE:
Whether or not the tenants are allowed to sell their rights over the land to the
Lacsons
HELD:
The petitioner failed to establish the essential requisites for the issuance of a writ of
preliminary injunction. The trial court cannot enjoin the respondents, at the instance of
the petitioner, from selling, disposing of and encumbering their property. As the registered
owners of the property, the respondents have the right to enjoy and dispose of their
property without any other limitations than those established by law, in accordance with
Article 428 of the Civil Code. Under Article 1306 of the New Civil Code, the respondents
may enter into contracts covering their property with another under such terms and
conditions as they may deem beneficial provided they are not contrary to law, morals,
good conduct, public order or public policy.

STAGES IN THE EXECUTION OF A CONTRACT

INTERNATIONAL
FREEPORT
TRADERS,
INTERCONTINENTAL, INC.,Respondent.

INC.,

Petitioner,

vs.

DANZAS

(G.R. No. 181833 , January 26, 2011, 2nd Division)

FACTS:
In March 1997 petitioner International Freeport Traders, Inc. (IFTI) ordered a
shipment of Toblerone chocolates and assorted confectioneries from Jacobs Suchard Tobler
Ltd. of Switzerland through its Philippine agent, Colombo Merchants Phils., Inc., under the
delivery term "F.O.B. Ex-Works."
To ship the goods, Jacobs dealt with Danmar Lines of Switzerland (Danmar) which issued
to Jacobs negotiable house bills of lading1 signed by its agent, respondent Danzas
Intercontinental, Inc..The bills of lading stated that the terms were "F.O.B." and "freight
payable at destination," with Jacobs as the shipper, China Banking Corporation as the
consignee, and IFTI as the party to be notified of the shipment. The shipment was to be
delivered at the Clark Special Economic Zone with Manila as the port of discharge. The
goods were also covered by Letters of Credit MK-97/0467 and MK-97/0468 under a
"freight collect" arrangement.
Since Danmar did not have its own vessel, it contracted Orient Overseas Container Line
(OOCL) to ship the goods from Switzerland. OOCL issued a non-negotiable master bill of
lading,2 stating that the freight was prepaid with Danmar as the shipper and Danzas as
the consignee and party to be notified. The shipment was to be delivered at Angeles City
in Pampanga. Danmar paid OOCL an arbitrary fee of US$425.00 to process the release of
the goods from the port and ship the same to Clark in Angeles City. The fee was to cover
brokerage, trucking, wharfage, arrastre, and processing expenses.
ISSUES:
Whether or not a contract of lease of service exists between IFTI and Danzas
HELD:
The facts show the existence of several contracts: one between IFTI and Jacobs,
another between Jacobs and Danmar, and still another between Danmar and OOCL. IFTI
bought chocolates and confectioneries from Jacobs; Jacobs got Danmar to deliver the
goods to its destination; Danmar got OOCL to carry the goods for it by ship to Manila. For
this purpose, Danmar paid OOCL an arbitrary fee to process the release of the goods from
the port of Manila and deliver the same to Clark. In all these transactions, Danzas acted
as an agent of Danmar who signed the house bills of lading in favor of Jacobs.

CONSUMMATION/ TERMINATION
METROPOLITAN MANILA DEVELOPMENT AUTHORITY, petitioner, vs. JANCOM
ENVIRONMENTAL CORPORATION and JANCOM INTERNATIONAL DEVELOPMENT
PROJECTS PTY. LIMITED OF AUSTRALIA, respondents.
(G.R. No. 147465. January 30, 2002, 3rd Division)

FACTS:
The Philippine Government under the Ramos Administration, and through the Metro
Manila Development Authority (MMDA) Chairman, and the Cabinet Officer for Regional
Development-National Capital Region (CORD-NCR), entered into a contract with
respondent JANCOM, on waste-to-energy projects for the waste disposal sites in San
Mateo, Rizal and Carmona, Cavite under the build-operate-transfer (BOT) scheme.
However, before President Ramos could have signed the said contract, there was a
change in the Administration and EXECOM. Said change caused the passage of the law,
the Clean Air Act, prohibiting the incineration of garbage and thus, against the contents of
said contract. The Philippine Government, through the MMDA Chairman, declared said
contract inexistent for several reasons. Herein respondent filed a suit against petitioner.
The Regional Trial Court ruled in favor of the respondent. Instead of filing an appeal to the
decision, petitioner filed a writ of certiorari on the Court of Appeals, which the latter
granted. The Regional Trial Court declared its decision final and executory, for which the
petitioner appealed to the CA, which the CA denied such appeal and affirming RTCs
decision.
ISSUE:
Whether or not a valid contract is existing between herein petitioner and
respondent.
HELD:
A contract undergoes three distinct stages- preparation or negotiation, its
perfection, and finally, its consummation. Negotiation begins from the time the
prospective contracting parties manifest their interest in the contract and ends at the
moment of agreement of the parties. The perfection or birth of the contract takes place
when the parties agree upon the essential elements of the contract. The last stage is the
consummation of the contract wherein the parties fulfill or perform the terms agreed upon
in the contract, culminating in the extinguishment thereof.
Admittedly, when petitioners accepted private respondents bid proposal (offer),
there was, in effect, a meeting of the minds upon the object (waste management project)
and the cause (BOT scheme). Hence, the perfection of the contract.

ESSENTIAL REQUISITES OF CONTRACTS; ELEMENTS: OFFER AND ACCEPTANCE

MANILA
METAL
CONTAINER
CORPORATION,Petitioner,
REYNALDO
C.
TOLENTINO, Intervenor, vs. PHILIPPINE NATIONAL BANK, Respondent, DMCIPROJECT DEVELOPERS, INC., Intervenor.
(G.R. No. 166862, December 20, 2006, 1st Division)

FACTS:
Manila Metal Corp. executed a real estate mortgage as a security for its loan from
PNB. PNB filed a petition for extrajudicial foreclosure for the property to be sold at a public
auction. PNB won the public auction at P1,000,000.00.
Meanwhile, Special Assets Management Department (SAMD) had prepared a
statement of account as of Jun 25,1984 amounting to 1,574,560.47 php. Petitioner
deposited 725,000 php as deposit to repurchase and was issued an O.R.
ISSUE:
Whether or not earnest money establishes a contract of sale
HELD:
NO. ART. 1482. Whenever earnest money is given in a contract of sale, it shall be
considered as part of the price and as proof of the perfection of the contract. The deposit
of P725,000 was accepted by PNB on the condition that the purchase price is still subject
to the approval of the PNB Board. Absent proof of the concurrence of all the essential
elements of a contract of sale, the giving of earnest money cannot establish the existence
of a perfected contract of sale.

RIDO MONTECILLO, petitioner, vs. IGNACIA REYNES and SPOUSES REDEMPTOR

and ELISA ABUCAY, respondents.
(G.R. No. 138018 , July 26, 2002, 3rd Division)

FACTS:
Respondents Ignacia Reynes and spouses Abucay filed on June 20, 1984 a
complaint for Declaration of Nullity and Quieting of Title against petitioner Rico Montecillo.
Reynes asserted that she is the owner of a lot situated in Mabolo, Cebu City. In 1981
Reynes sold 185 square meters of the Mabolo Lot to the Abucay Spouses who built a
residential house on the lot they bought.
Reynes alleged further that she signed a Deed of Sale of the Mabolo Lot in favor of
Montecillo. Reynes, being illiterate signed by affixing her thumb-mark on the document.
Montecillo promised to pay the agreed P47,000.00 purchase price within one month from
the signing of the Deed of Sale. And that Montecillo failed to pay the purchase price after
the lapse of the one-month period, prompting Reynes to demand from Montecillo the
return of the Deed of Sale. Since Montecillo refused to return the Deed of Sale, Reynes
executed a document unilaterally revoking the sale and gave a copy of the document to
Montecillo.
Subsequently, on May 23, 1984 Reynes signed a Deed of Sale transferring to the Abucay
Spouses the entire Mabolo Lot, at the same time confirming the previous sale in 1981 of a
185 square meter portion of the lot.
ISSUE:
Whether or not there was a valid consent in the case at bar to have a valid contract
HELD:
One of the three essential requisites of a valid contract is consent of the parties on
the object and cause of the contract. In a contract of sale, the parties must agree not only
on the price, but also on the manner of payment of the price. An agreement on the price
but a disagreement on the manner of its payment will not result in consent, thus
preventing the existence of a valid contract for a lack of consent. This lack of consent is
separate and distinct for lack of consideration where the contract states that the price has
been paid when in fact it has never been paid.

OFFER: REQUISITES

LOURDES ONG LIMSON, petitioner, vs. COURT OF APPEALS, SPOUSES LORENZO

DE VERA and ASUNCION SANTOS-DE VERA, TOMAS CUENCA, JR. and SUNVAR
REALTY DEVELOPMENT CORPORATION, respondents.
(G.R. No. 135929, April 20, 2001, 2nd Division)

FACTS:
In July 1978, respondent spouses Lorenzo de Vera and Asuncion Santos-de Vera,
through their agent Marcosa Sanchez, offered to sell to petitioner Lourdes Ong Limson a
parcel of land.
On July 31, 1978, she agreed to buy the property at the price of P34. 00 per square
meter and gave P20, 000.00 as earnest money. The respondent spouses signed a
receipt thereafter and gave her a 10-day option period to purchase the property. On
September 5, 1978, the agent of the respondent spouses informed petitioner that the
property was the subject of a negotiation for the sale to respondent Sunvar Realty
Development Corporation.
ISSUE:
Whether or not the agreement between petitioner and respondent spouses was a
mere option or a contract to sell
HELD:
The Supreme Court held that the agreement between the parties was a contract of
option and not a contract to sell. An option is 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 time certain, or under, or in compliance with, certain terms and
conditions, or which gives 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. Its distinguishing characteristic is that it imposes no binding obligation on the
person holding the option, aside from the consideration for the offer.

ACCEPTANCE: REQUISITES, DISTINGUISHED FROM COUNTER-OFFER

REYNALDO VILLANUEVA, petitioner, vs. PHILIPPINE NATIONAL BANK (PNB),
respondent.
(G.R. No. 154493 , December 6, 2006, 1st Division)
FACTS:
The Special Assets Management Department (SAMD) of the Philippine National
Bank (PNB) issued an advertisement for the sale thru bidding of certain PNB properties in
Calumpang, General Santos City, including Lot No. 17, with an advertised floor price of
P1,409,000.00, and Lot No. 19, with an advertised floor price of P2,268,000.00. Bidding
was subject to the following conditions: 1) that cash bids be submitted not later than April
27, 1989; 2) that said bids be accompanied by a 10% deposit in managers or cashiers
check; and 3) that all acceptable bids be subject to approval by PNB authorities.
In a June 28, 1990 letter to Reynaldo Villanueva (Villanueva) offered to purchase
Lot Nos. 17 and 19 for P3,677,000.00. He also manifested that he was depositing
P400,000.00 to show his good faith but with the understanding that said amount may be
treated as part of the payment of the purchase price only when his offer is accepted by
PNB. At the bottom of said letter there appears an unsigned marginal note stating that
P400,000.00 was deposited into Villanuevas account with PNB-General Santos Branch.
On July 6, 1990, Guevara informed Villanueva that only Lot No. 19 is available and
that the asking price therefore is P2,883,300.00. Instead of submitting a revised offer,
Villanueva merely inserted at the bottom of Guevaras letter a July 11, 1990 marginal note
On October 11, 1990, however, Guevara wrote Villanueva that, upon orders of the
PNB Board of Directors to conduct another appraisal and public bidding of Lot No. 19,
SAMD is deferring negotiations with him over said property and returning his deposit of
P580,000.00. Villanueva attempted to deliver postdated checks covering the balance of
the purchase price but PNB refused the same.
Hence, Villanueva filed with the RTC a Complaint for specific performance and
damages against PNB. In its September 14, 1995 Decision, the RTC granted the
Complaint.
ISSUE:
Whether or not there is already a meeting of the minds between Villanueva and
PNB
HELD:
No, the acceptance allegedly made by Villanueva constituted a counter-offer.
Contracts of sale are perfected by mutual consent whereby the seller obligates himself, for
a price certain, to deliver and transfer ownership of a specified thing or right to the buyer
over which the latter agrees. Mutual consent being a state of mind, its existence may only
be inferred from the confluence of two acts of the parties: an offer certain as to the object
of the contract and its consideration, and an acceptance of the offer which is absolute in
that it refers to the exact object and consideration embodied in said offer. Anything short
of that level of mutuality produces not a contract but a mere counter-offer awaiting
acceptance.

In this case, indeed Villanueva accepted the counter-offer made by PNB wherein he
the bank only Lot 19 is available and that the price was increased. However, he qualified
the acceptance by determining the terms of the payment. The qualification turned the
acceptance into a counter-offer, thus it is not yet binding among the parties.