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515-541 DE LEON

G.R. No. L-27696 September 30, 1977

MIGUEL FLORENTINO, ROSARIO ENCARNACION de FLORENTINO, MANUEL ARCE, JOSE

FLORENTINO, VICTORINO FLORENTINO, ANTONIO FLORENTINO, REMEDION ENCARNACION and
SEVERINA ENCARNACION, petitioners-appellants,
vs.
SALVADOR ENCARNACION, SR., SALVADOR ENCARNACION, JR., and ANGEL
ENCARNACION, oppositors to encumbrance-petitioners-appelles.

Jose F. Singson and Miguel Florentino for appellants.

Pedro Singson for appellees.

GUERRERO, J.:

On May 22, 1964, the petitioners-appellants, and the Petitiners-appellees filed with the Court of First Instance
of ilocos Sur an application for the registration under Act 496 of a parcel of agricultural land located at Barrio
Lubong Dacquel Cabugao Ilocos Sur.

that said applicants had acquired the aforesaid land thru and by inheritance from their predecessors in interest,
lately from their aunt, Doa Encarnacion Florentino who died in Vigan, Ilocos Sur in 1941, and for which the
said land was adjudicated to them by virtue of the deed of extrajudicial partition dated August 24, 1947; that
applicants Salvador Encarnacion, Jr. and Angel Encarnacion acquired their respective shares of the land thru
purchase from the original heirs, Jesus, Caridad, Lourdes and Dolores surnamed Singson one hand and from
Asuncion Florentino on the other.

Salvador Encamacion, Sr., Salvador Encarnaciori, Jr. and Angel Encarriacion filed on October 3, 1966 a
manifestation seeking to withdraw their application on their respective shares of the land sought to be
registered. The withdrawal was opposed by the petitioners-appellants.

. The stipulation embodied in Exhibit O-1 on religious expenses is not revocable at the unilateral option of the
co-owners and neither is it binding only on the petitioners-appellants Miguel Florentino, Rosario Encarnacion
de Florentino Manuel Arce, Jose Florentino, Victorino Florentino Antonio Florentino, Remedios Encarnacion
and Severina E It is also binding on the oppositors-appellees Angel Encarnacion,

The stipulation (Exhibit 411) in pan of an extrajudicial partition (Exh. O) duly agreed and signed by the parties,
hence the same must bind the contracting parties thereto and its validity or compliance cannot be left to the
with of one of them (Art. 1308, N.C.C.). Under Art 1311 of the New Civil Code, this stipulation takes effect
between the parties, their assign and heirs. The article provides:

Art. 1311. Contracts take effect only between the parties, their assigns and heirs, except in
cases 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.

If a contract should contain a 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.
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The second paragraph of Article 1311 above-quoted states the law on stipulations pour autrui. Consent the
nature and purpose of the motion (Exh. O-1), We hold that said stipulation is a station pour autrui. A stipulation
pour autrui is a stipulation in favor of a third person conferring a clear and deliberate favor upon him, and which
stipulation is merely a part of a contract entered into by the parties, neither of whom acted as agent of the third
person, and such third person and demand its fulfillment provoked that he communicates his to the obligor
before it is revoked. 3 The requisites are: (1) that the stipulation in favor of a third person should be a part, not
the whole, of the contract; (2) that the favorable stipulation should not be conditioned or compensated by any
kind of obligation whatever; and (3) neither of the contracting bears the legal represented or authorization of
third person.

To constitute a valid stipulation pour autrui it must be the purpose and intent of the stipulating parties to benefit
the third and it is not sufficient that the third person may be incidentally benefited by the stipulation. The fairest
test to determine whether the interest of third person in a contract is a stipulation pour autrui or merely an
incidental interest, is to rely upon the intention of the parties as disclosed by their contract. In the case at bar,
the determining point is whether the co-owners intended to benefit the Church when in their extrajudicial
partition of several parcels of land inherited by them from Doa Encarnacion Florendo they agreed that with
respect to the land situated in Barrio Lubong Dacquel Cabugao Ilocos Sur, the fruits thereof shall serve to
defray the religious expenses specified in Exhibit O-1. The evidence on record shows that the true intent of the
parties is to confer a direct and material benefit upon the Church. The fruits of the aforesaid land were used
thenceforth to defray the expenses of the Church in the preparation and celebration of the Holy Week, an
annual Church function.

We find that the Church accepted the stipulation in its favor before it is sought to be revoked by some of the
co-owners, namely the petitioners-appellants herein. It is not disputed that from the time of the with of Doa
Encarnacion Florentino in 1941, as had always been the case since time immemorial up to a year before the
firing of their application in May 1964, the Church had been enjoying the benefits of the stipulation.

The acceptance does not have to be in any particular form, even when the stipulation is for the
third person an act of liberality or generosity on the part of the promisor or promise. 5

It need not be made expressly and formally. Notification of acceptance, other than such as is
involved in the making of demand, is unnecessary. 6

A trust constituted between two contracting parties for the benefit of a third person is not subject
to the rules governing donation of real property. The beneficiary of a trust may demand
performance of the obligation without having formally accepted the benefit of the this in a public
document, upon mere acquiescence in the formation of the trust and acceptance under the
second paragraph of Art. 1257 of the Civil Code. 7

IN VIEW OF THE FOREGOING, the decision of the Court of First Instance of Ilocos Sur in Land Registration
Case No. N-310 is affirmed but modified to allow the annotation of Exhibit O-1 as an encumbrance on the face
of the title to be finally issued in favor of all the applications (herein appellants and herein appellees) in the
registration proceedings below.

No pronouncement as to cost.
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G.R. No. 79518 January 13, 1989

REBECCA C. YOUNG assisted by her husband ANTONIO GO, petitioner,

vs.
COURT OF APPEALS, PH CREDIT CORP., PHIL. HOLDING, INC. FRANCISCO VILLAROMAN, FONG
YOOK LU, ELLEN YEE FONG and THE REGISTER OF DEEDS OF MANILA, respondents.

Diego O. Untalan for petitioner.

Esteban B. Bautista for respondents Fong Yook Lu and Ellen Yee Fong.

Janette Borres for respondents.

PARAS, J.:

Defendant Philippine Holding, Inc. is the former owner of a piece of land occupied by Antonio Young,
Rebecca C. Young, Chui Wan and Felisa Tan Yu, Fong Yook Lu and Ellen Yee Fong, Guan Heng
Hardware

The owner Philippine Holding, Inc. secured an order from the City Engineer of Manila to demolish the
building. Antonio Young, then a tenant of said Unit 1352, filed an action to annul the City Engineer's
demolition. parties submitted a Compromise Agreement and Rebecca Young and all persons claiming
rights under them bind themselves to voluntarily and peacefully vacate the premises which they were
occupying as lessees which are the subject of the condemnation and demolition order and to surrender
possession thereof to the defendant Philippine Holding, Inc. within sixty (60) days from written notice,
subject to the proviso that should defendant decided to sell the subject property or portion thereof,
"plaintiff and Rebecca C. Young have the right of first refusal thereof." (Rollo, p. 49).

Plaintiff Rebecca C. Young, now petitioner, also claimed the right of first refusal purportedly granted to her
under the aforestated proviso of the abovesaid compromise agreement and prayed that the sale be
annulled and that they be allowed to exercise her right of first refusal to purchase subject property (Rollo,
p. 50).

The lower court decided in favor of the defendants and against the plaintiffs (young), thus dismissing the
complaint together with defendants' counterclaims (Rollo, p. 15)

The main issue in this case is whether or not petitioner can enforce a compromise agreement to which
she was not a party. where it was ruled that appellant is not entitled to enforce a compromise agreement
to which he was not a party and that as to its effect and scope, it has been determined in the sense that its
effectivity if at all, is limited to the parties thereto and those mentioned in the exhibits t was reiterated later
that a compromise agreement cannot bind persons who are not parties thereto

From the terms of this agreement, the conditions are very clear, such as: (1) that Rebecca C. Young shall
be impleaded in the action and (2) that she shall signify her written conformity thereto.

For unknown reasons, the above conditions were not complied with. The parties did not make any move
to implead Rebecca as necessary party in the case. Neither did her written conformity appear in said
agreement. she did not affix her signature above her printed name, nor on the left margin of each and
every page thereof.
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Petitioner further argued that the stipulation giving her the right of first refusal is a stipulation pour autrui or
a stipulation in favor of a third person under Article 1311 of the Civil Code.

The requisites of a stipulation pour autrui or a stipulation in favor of a third person are the following:

(1) there must be a stipulation in favor of a third person.

(2) the stipulation must be a part, not the whole of the contract.

(3) the contracting parties must have clearly and deliberately conferred a favor upon a third
person, not a mere incidental benefit or interest.

(4) the third person must have communicated his acceptance to the obligor before its
revocation.

(5) neither of the contracting parties bears the legal representation or authorization of the
third party. (Florentino v. Encarnacion, Sr., 79 SCRA 193 [1977]).

Assuming that petitioner is correct in claiming that this is a stipulation pour autrui it is unrebutted that she
did not communicate her acceptance whether expressly or impliedly. She insists however, that the
stipulation has not yet been revoked, so that her present claim or demand is still timely.

As correctly observed by the Court of Appeals, the above argument is pointless, considering that the sale
of subject property to some other person or entity constitutes in effect a revocation of the grant of the right
of first refusal to Rebecca C. Young.
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G.R. No. L-27014 October 5, 1927

PAULINA CRISTOBAL, ET AL., plaintiffs-appellees,

vs.
MARCELINO GOMEZ, defendant-appellant.

M. H. de Joya and Jose Batungabacal for appellant.

Ambrosio Santos for appellees.

STREET, J.:

This action was instituted in the Court of First Instance of the Province of Cavite by Paulina Cristobal, Luis
Gomez, Josefa Gomez, Paciencia Gomez and Jose Gomez, for the purpose of recovering from Marcelino
Gomez two parcels of land located in the sitio of Jabay, municipality of Bacoor, Province of Cavite, and lot
located in the town of Bacoor, Cavite, all more particularly described in the second paragraph of the
complaint, and for the purpose of compelling the defendant to pay to the plaintiffs the income received by
him from said property since 1918. To the complaint the defendant answered with a general denial and
two special defenses not necessary to be here recounted other than to indicate that he claimed to be
owner in his own right of all of the property which is the subject of the action. Upon hearing the cause the
trial court found that the property in question belongs to the plaintiffs, as coowners, and he therefore
ordered the defendant to surrender the property to them and execute an appropriate deed of transfer as
well as to pay the costs of the proceeding. From this judgment the defendant appealed.

The property with which this action is concerned formerly belonged to Epifanio Gomez, deceased
husband of the plaintiff Paulina Cristobal an father of the four Gomez children who joined with their mother
Paulina in the complaint. On December 13, 1891, Epifanio Gomez sold this property under contract of
sale with pacto de retro to Luis R. Yangco, redeemable in five years for the sum of P2,500 the vendor
remaining in possession in the character of lessee. The period expressed in this agreement passed of
lessee. The period expressed in this agreement passed without redemption, with the result that the
property consolidated in Yangco, who, nevertheless, many years later conceded to the vendor the
privilege of repurchasing. Gomez was without means to effect the repurchase of the property himself, and
he therefore found it necessary to apply to a kinsman, Bibiano Baas, for assistance. Baas hesitated to
lend Gomez the money upon his own sole credit; but told him that he would let him have the money if his
brother Marcelino Gomez and his sister Telesfora Gomez would make themselves responsible for the
loan. Epifanio therefor consulted with his brother and sister and they agreed to assist him in getting back
his property. Accordingly, in the latter part of July, 1907, Bibiano Baas was called in consultation, at the
home of Telesfora Gomez in Manila, with Epifanio Gomez and Marcelino Gomez. These four being
present upon that occasion, an agreement was reached, which was, in substance, that Bibiano Baas,
should advance the sum of P7,000, upon the personal credit of Marcelino and Telesfora Gomez, and that
this money should be used to repurchase the property in the name of Telesfora Gomez and Marcelino
Gomez, who should hold and administer the property until the capital advanced by Baas should be paid
off, after which the property would be returned to Epifanio Gomez. This agreement was carried into effect
by the execution of the Exhibits A and D of the plaintiffs, and though executed two days apart, these
documents, as the trial court found, really constitute parts of one transaction. By the Exhibit A, executed
on August 12, 1907, Marcelino Gomez and Telesfora Gomez created a "private partnership in
participation" for the purpose of redeeming the property which their brother Epifanio had sold to Yangco. It
was therein agreed that the capital of this partnership should consist of P7,000, of which Marcelino
Gomez was to supply the amount of P1,500, and Telesfora Gomez the sum of P5,550. It was further
agreed that all the property to redeemed should be placed in the name of the two namely, Marcelino
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Gomez and Telesfora Gomez, and that Marcelino Gomez should be its manager. Among the provisions in
this agreement of major importance to the present decision, we find the following:

(h) That all the income, rent, and produce of the aforesaid property of Epifanio Gomez shall be
applied exclusively to the amortization of the capital employed by the two parties, that is to say,
Don Marcelino Gomez and Doa Telesfora Gomez, with its corresponding interest and other
incidental expenses.

(i) As soon as the capital employed, with its interest and other incidental expenses, shall have been
covered, said properties shall be returned to our brother Epifanio Gomez or to his legitimate
children, with the direct intervention, however, of both parties, namely, Don Marcelino Gomez and
Doa Telesfora Gomez, or one of them.

(j) In order that the property of Epifanio Gomez may be returned, it is made essential that he shall
manifest good behavior in the opinion of Don Marcelino Gomez and Doa Telesfora Gomez jointly.

By the Exhibit D, executed on July 10, 1907, Luis Yangco conveyed to Marcelino Gomez and Telesfora
Gomez the three pieces of property which he had obtained from Epifanio Gomez. Though this
conveyance recited a consideration of 5,000, the amount really paid to Yangco upon this occasion was
P6,700, consisting of the sum of P5,000 which was needed to redeem the property from Yangco, the
further sum of P1,500 necessary to pay a loan which Epifanio Gomez had obtained from Gregoria
Yangco, sister of Luis R. Yangco, and finally the sum of P200 which Yangco exacted as a present for his
manager. The payment of these sums left P300 of the capital which Baas had advanced, and this
balance was left with Marcelino Gomez to pay the expenses of documentation and to make certain
needed repairs upon the property.

A little more than a year after the transaction above-mentioned had been consummate, Epifanio Gomez
died, leaving a widow, Paulina Cristobal, and the four children who are coplaintiffs with their mother in this
action. Marcelino Gomez meanwhile entered into possession of the property, a possession which he
subsequently maintained until his death, which occurred after this action had been tried in the court below.
During this period of about twenty years Marcelino Gomez improved the larger parcel by extending the
salt beds constructed upon it and by converting them from the Filipino form to the Chinese style. During
the same period the three parcels of property quintupled in value, being now worth about P50,000,
according to the estimate made by Marcelino Gomez himself.

Less than a year after the death of Epifanio Gomez, his sister Telesfora became desirous of freeing
herself from the responsibility which she had assumed to Bibianio Baas. Accordingly, on September 10,
1909, with the consent of Baas, the document Exhibit E was prepared and executed by Telesfora and
Marcelino Gomez. By this instrument Telesfora conveyed to Marcelino her interest and share in the three
properties previously redeemed from Yangco. The conveyance recites a consideration of the sum of
P6,096, paid in the act. Nevertheless, no money passed, and the real consideration of the conveyance, as
admitted by Marcelino Gomez himself, was that Marcelino should assume the obligation which Telesfora
had contracted with Baas by reason of the loan of P7,000 made the latter upon the occasion of the
redemption of the property from Yangco. The amount of this obligation was estimated at P6,096, and the
consideration mentioned in the Exhibit E was therefore fixed in this amount. At the time that Exhibit E was
executed the same parties, Marcelino Gomez and Telesfora Gomez, executed the document Exhibit 13 of
the defendant, whereby they declared dissolved the partnership that had been created by the Exhibit A;
and Telesfora Gomez again declared that she conveyed to Marcelino Gomez the three parcels in
questions for the same consideration recited in the Exhibit E.

As long as both Telesfora and Marcelino Gomez had been personally answerable to Baas for the loan of
P7,000, he had been content to look to their personal responsibility for reimbursement; but not that the
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loan was being novated, with Marcelino as the sole debtor, Baas required him to execute a contract of
sale for the three parcels, with pacto de retro, for the purpose of securing the indebtedness (Exhibit 14 of
the defendant). This instrument was executed on September 10, 1909, contemporaneously with the
execution of the documents by which Telesfora conveyed her interest in the property to Marcelino and by
which the partnership was declared dissolved. In the instrument Exhibit 14 it is declared that Marcelino
Gomez sells the property to Baas for the sum of P8,500, with pacto de retro, redeemable within the
period of five years, extendible for whatever time Baas may consider convenient. At the same time, and
by the same instrument, Baas leased the property to the vendor Gomez for the period fixed for
repurchase at a semiannual rental of P510, taxes to be paid by the lessee. The period of repurchase fixed
in this contract passed without redemption having been effected, but by an instrument dated June 26,
1915, Baas conceded to Gomez the right to repurchase, without any definite limit of time, conditioned
upon the payment of the rent. Finally, on April 1, 1918, Marcelino Gomez paid to Baas the sum of
P7,575.92 in full satisfaction of the entire claim and received from Baas a reconveyance of the three
parcels, thus closing the documentary history of the property so far as concerns this litigation. Reflection
upon the foregoing transaction leaves no room for doubt as to the fact that Baas held the property under
the contract of sale with pacto de retro (Exhibit 14) as a mere security for his loan. This inference is borne
out by the fact that partial payments on the capital had been accepted by him and that he voluntarily
extended the period of redemption indefinitely after the property had nominally consolidated.

The defendant Gomez says that the money used by him to redeem the property in the end was money of
his own which he had obtained from the sale of lithographic plant. Assuming that this is true, it must
nevertheless be remembered that the properties in question, especially the salt beds, were productive of
considerable income; and Gomez admitted at the trial that he had obtained enough from the property to
reimburse him for all outlays. It is therefore evident that the Baas loan has been fully liquidated from the
income of the property, or the equivalent, and that the purpose of the original trust had been fully
accomplished before this action was brought.

The proof shows that Epifanio Gomez was in financial straits from the time of the Philippine revolution until
his death; and in the early years of the present century he had from time to time informally hypothecated
several of these salt beds to different creditors to secure petty loans, and this notwithstanding the fact that
the property had previously been sold under contract of sale with pacto de retro to Luis R. Yangco. The
fact that these loans had been made was known to Marcelino and Telesfora Gomez when they entered
into partnership arrangement to get back the property from Yangco. Marcelino Gomez, as a manager, was
therefore confronted with the necessity of paying off these small debts, with the result that he finally paid
out upon the property a total of around P10,000, including of course the debt to Baas of P7,000. For
these and all other expenses incident to the property he has, upon his own statement, been fully
reimbursed. 1awph!l.net

The facts sketched above exhibit the dominant features of the case, and reflection upon their import
conducts us to the conclusion that the trial court committed no error in holding that the defendant
Marcelino Gomez must surrender the property involved in this lawsuit; and he being now dead, the same
obligation devolves on his heirs. The so-called partnership agreement (Exhibit A) between Marcelino
Gomez and his sister created a trust for the express purpose of rescuing the property of Epifanio Gomez;
and now that the purpose has been accomplished, the property should be returned to his legitimate
children, as provided in paragraph (i) of the agreement. This bilateral contract was fully binding on both
the contracting parties; and the trial court did not err in declaring that, under the second trial paragraph of
article 1257 of the Civil Code, the successors of Epifanio Gomez are entitled to demand fulfillment of the
trust. In Martinez vs. Grao (42 Phil., 35), we held that a person who, before consolidation of property in
the purchaser under a contract of sale with pacto de retro, agrees with the vendors to buy the property
and administer it till all debts constituting an encumbrance thereon shall be paid, after which the property
shall be turned back to the original owner, is bound by such agreement; and upon buying in the property
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under these circumstances such person becomes in effect a trustee and is bound to administer the
property in this character. The same rule is applicable in the case before us.

But it is claimed for the applicant that the trust agreement (Exhibit A) was kept secret from Epifanio
Gomez and that, having no knowledge of it, he could not have accepted it before the stipulation was
revoked. This contention is contradicted in act by the testimony of Bibiano Baas, who says that Epifanio
Gomez was present when the arrangement for the repurchase of the property from Yangco was discussed
and that he assented thereto. Moreover, Baas states that after the agreement had been executed, he
told Epifanio Gomez in the presence of his brother and sister that he should be well pleased as the object
he had in view had been accomplished, meaning, that the property was recorded. But even supposing
that Epifanio Gomez may never have seen the Exhibit A, we have no doubt that he understood the nature
of the arrangement and his assent thereto was a sufficient acceptance. This being true, it was not
competent for the parties to the trust agreement thereafter to dissolve the partnership and destroy the
beneficial right of Epifanio Gomez in the property. The effect of Exhibits E and 13 was merely to eliminate
Telesfora Gomez from responsibility in the performance of the trust and to clothe Marcelino Gomez alone
with the obligations that had been created by Exhibit A.

Much energy has been expended by the attorneys for the appellant in attempting to demonstrate that, if
Epifanio Gomez at any time had any right in the property by virtue of the Exhibit A, such right could only
be derived from the aspect of Exhibit A as a donation, and that, inasmuch as the donation was never
accepted by Epifanio Gomez in a public document, his supposed interest therein is unenforceable. But
this, in our opinion, is not a tenable hypothesis. The partnership agreement should not be viewed in the
light of an intended donation, but as an express trust.

Much stress is placed in the appellant's brief upon paragraph (j) of the partnership agreement which, it is
claimed, makes it a condition precedent to the return of the property to Epifanio Gomez that he should
Exhibit good behavior in the opinion of Marcelino and Telesfora Gomez; and it is claimed that Epifanio
Gomez violated this condition by two kinds of misbehavior before his death, namely, first, by selling
different salt lots to various persons, and secondly, by attending cockfights, an activity distasteful to his
brother and sister. This feature of the case if fully discussed and the contention of the appellant refuted in
the appealed decision. But a few words may be here added upon this aspect of the case. The trust
agreement provides that after the capital employed and other expenses shall have been covered, the
property shall be returned to Epifanio Gomez or his legitimate children. This contemplated the action to be
taken when the debt should be fully liquidated, something that did not occur in this case until 1918. But
Epifanio Gomez died in 1908. It is evident that misbehavior on the part of Epifanio Gomez during the year
or more that he lived after the trust agreement was made could not be attributed as a ground of forfeiture
to his legitimate children ten years later, especially as no step had ever been taken in the life of Epifanio
Gomez to defeat his rights under the trust on account of his alleged misbehavior.

Again, it is contended for the appellant that inasmuch as the property consolidated in Baas in the year
1915 under the contract of sale with pacto de retro to him, the subsequent repurchase of the property by
Marcelino Gomez in 1918 vested an indefeasible title in the latter free from the original trust. But it is
obvious that the purchase effected in 1918 was really a repurchase, consequent upon the extension of the
time of redemption by Baas, and Gomez must be considered to be holding in the same right as before,
that is, subject to the trust in favor of Epifanio Gomez.

Lastly, it is urged that Gomez has the benefit of prescription in his favor, having been in possession more
than ten years under the deed by which he acquired the sole right from his sister in 1909. This contention
would be valid if the defendant had really been holding adversely under a claim of title exclusive of any
other right and adverse to all other claimants; but, as we have already demonstrated, he was merely a
trustee in possession under a continuing and subsisting trust. Prescription is not effective in favor of such
a holder (Code of Civil Procedure, sec. 38). Moreover, even supposing that the statute of limitations might
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have begun to run in the defendant's favor when he recovered the property from Baas in 1918, the ten
years allowed by law had not been completed when this action was instituted; and in this connection the
minority of one or more of the plaintiffs during this period may be disregarded.

A point unconnected with the other issues in the case is raised by the fourth assignment of error in the
appellants brief. This has reference to the title to parcel C, the lot located in Bacoor. There can be no
doubt that the ownership of this piece of property was originally vested in Epifanio Gomez by virtue of a
composition title from the Government; and said title has never passed from him except by virtue of the
contract of sale of 1891 in favor of Luis R. Yangco. Nevertheless, the defendant has submitted in evidence
a notarial document emitted on December 31, 1904, by Epifanio Gomez, in the character of notary public,
wherein he certifies that Marcelino Gomez had requested him to draw up a notarial act showing the
properties of which Marcelino Gomez was known to be the true owner: upon which follows an
enumeration of properties possessed by Marcelino Gomez. Among these we find the lot in Bacoor, being
the parcel C described in the complaint. The appellant relies upon this instrument as proving title in
Marcelino Gomez, and it is contended that Epifanio Gomez and his successors are estopped from
claiming said lot. This contention is untenable. It is true that we have here the written admission of
Epifanio Gomez would have been estopped from asserting ownership in himself. Nevertheless, it is clear
enough this document Epifanio Gomez, in conclusion with his brother Marcelino, was merely laying the
basis of a scheme to defeat Yangco's rights under his contract of purchase of 1891, or perhaps to defeat
other creditors of Epifanio Gomez, a plot which, in view of subsequent occurrences, they did not
attempt to carry into effect. No estoppel can be invoked by Marcelino Gomez or his successors, based
upon this document, for the reason that he was not misled by the false statement contained therein.

In conclusion we note that the trial court did not determine the extent of the proportional interest in the
property pertaining to the different plaintiffs, and no issue has been made with respect to the extent of
their several rights. The solution of this point, if any contention should arise among them in the future,
depends upon the character of the property in relation to the spouses Epifanio Gomez and Paulina
Cristobal, that is, whether it was conjugal property or the individual property of Epifanio Gomez. In the
dispositive paragraph of the appealed decision the court ordered Marcelino Gomez to executed a deed
conveying the three parcels in question to the plaintiffs; but, the defendant being now dead, and the exact
extent of the several interests pertaining to the plaintiffs not being determined, it will be sufficient for us to
declares, as we now do, that the plaintiffs are the owners of the property in question, and to require the
successors in interest of the defendant to deliver the property to the plaintiffs.

The appealed judgment will therefore be modified by incorporating therein a declaration of ownership in
favor of the plaintiffs and by eliminating the requirement for the specific execution of a conveyance. In
other respects the judgment is affirmed. So ordered, with costs against the appellant.

Avancea, C. J., Johnson, Malcolm, Villamor, Ostrand and Romualdez JJ., concur.
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G.R. No. L-23276 November 29, 1968

MELECIO COQUIA, MARIA ESPANUEVA and MANILA YELLOW TAXICAB CO., INC., plaintiffs-
appellees,
vs.
FIELDMEN'S INSURANCE CO., INC., defendant-appellant.

Antonio de Venecia for plaintiffs-appellees.

Rufino Javier for defendant-appellant.

CONCEPCION, C.J.:

This is an appeal from a decision of the Court of First Instance of Manila, certified to us by the Court of
Appeals, only questions of law being involved therein. Indeed, the pertinent facts have been stipulated
and/or, admitted by the parties at the hearing of the case in the trial court, to dispense with the
presentation of evidence therein.

It appears that on December 1, 1961, appellant Fieldmen's Insurance Company, Inc. hereinafter
referred to as the Company issued, in favor of the Manila Yellow Taxicab Co., Inc. hereinafter
referred to as the Insured a common carrier accident insurance policy, covering the period from
December 1, 1961 to December 1, 1962. It was stipulated in said policy that:

The Company will, subject to the Limits of Liability and under the Terms of this Policy, indemnify the
Insured in the event of accident caused by or arising out of the use of Motor Vehicle against all
sums which the Insured will become legally liable to pay in respect of: Death or bodily injury to any
fare-paying passenger including the Driver, Conductor and/or Inspector who is riding in the Motor
Vehicle insured at the time of accident or injury. 1

While the policy was in force, or on February 10, 1962, a taxicab of the Insured, driven by Carlito Coquia,
met a vehicular accident at Mangaldan, Pangasinan, in consequence of which Carlito died. The Insured
filed therefor a claim for P5,000.00 to which the Company replied with an offer to pay P2,000.00, by way
of compromise. The Insured rejected the same and made a counter-offer for P4,000.00, but the Company
did not accept it. Hence, on September 18, 1962, the Insured and Carlito's parents, namely, Melecio
Coquia and Maria Espanueva hereinafter referred to as the Coquias filed a complaint against the
Company to collect the proceeds of the aforementioned policy. In its answer, the Company admitted the
existence thereof, but pleaded lack of cause of action on the part of the plaintiffs.

After appropriate proceedings, the trial court rendered a decision sentencing the Company to pay to the
plaintiffs the sum of P4,000.00 and the costs. Hence, this appeal by the Company, which contends that
plaintiffs have no cause of action because: 1) the Coquias have no contractual relation with the Company;
and 2) the Insured has not complied with the provisions of the policy concerning arbitration.

As regards the first defense, it should be noted that, although, in general, only parties to a contract may
bring an action based thereon, this rule is subject to exceptions, one of which is found in the second
paragraph of Article 1311 of the Civil Code of the Philippines, reading:

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. 2
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This is but the restatement of a well-known principle concerning contracts pour autrui, the enforcement of
which may be demanded by a third party for whose benefit it was made, although not a party to the
contract, before the stipulation in his favor has been revoked by the contracting parties. Does the policy in
question belong to such class of contracts pour autrui?

In this connection, said policy provides, inter alia:

Section I Liability to Passengers. 1. The Company will, subject to the Limits of Liability and
under the Terms of this Policy, indemnify the Insured in the event of accident caused by or arising
out of the use of Motor Vehicle against all sums which the Insured will become legally liable to pay
in respect of: Death or bodily injury to any fare-paying passenger including the Driver ... who is
riding in the Motor Vehicle insured at the time of accident or injury.

Section II Liability to the Public

xxx xxx xxx

3. In terms of and subject to the limitations of and for the purposes of this Section, the Company
will indemnify any authorized Driver who is driving the Motor Vehicle....

Conditions

xxx xxx xxx

7. In the event of death of any person entitled to indemnity under this Policy, the Company will, in
respect of the liability incurred by such person, indemnify his personal representatives in terms of
and subject to the limitations of this Policy, provided, that such representatives shall, as though
they were the Insured, observe, fulfill and be subject to the Terms of this Policy insofar as they can
apply.

8. The Company may, at its option, make indemnity payable directly to the claimants or heirs of
claimants, with or without securing the consent of or prior notification to the Insured, it being the
true intention of this Policy to protect, to the extent herein specified and subject always to the
Terms Of this Policy, the liabilities of the Insured towards the passengers of the Motor Vehicle and
the Public.

Pursuant to these stipulations, the Company "will indemnify any authorized Driver who is driving the Motor
Vehicle" of the Insured and, in the event of death of said driver, the Company shall, likewise, "indemnify
his personal representatives." In fact, the Company "may, at its option, make indemnity payable directly to
the claimants or heirs of claimants ... it being the true intention of this Policy to protect ... the liabilities of
the Insured towards the passengers of the Motor Vehicle and the Public" in other words, third parties.

Thus, the policy under consideration is typical of contracts pour autrui, this character being made more
manifest by the fact that the deceased driver paid fifty percent (50%) of the corresponding premiums,
which were deducted from his weekly commissions. Under these conditions, it is clear that the Coquias
who, admittedly, are the sole heirs of the deceased have a direct cause of action against the
Company,3 and, since they could have maintained this action by themselves, without the assistance of the
Insured, it goes without saying that they could and did properly join the latter in filing the complaint herein. 4

The second defense set up by the Company is based upon Section 17 of the policy reading:
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If any difference or dispute shall arise with respect to the amount of the Company's liability under
this Policy, the same shall be referred to the decision of a single arbitrator to be agreed upon by
both parties or failing such agreement of a single arbitrator, to the decision of two arbitrators, one
to be appointed in writing by each of the parties within one calendar month after having been
required in writing so to do by either of the parties and in case of disagreement between the
arbitrators, to the decision of an umpire who shall have been appointed in writing by the arbitrators
before entering on the reference and the costs of and incident to the reference shall be dealt with
in the Award. And it is hereby expressly stipulated and declared that it shall be a condition
precedent to any right of action or suit upon this Policy that the award by such arbitrator, arbitrators
or umpire of the amount of the Company's liability hereunder if disputed shall be first obtained.

The record shows, however, that none of the parties to the contract invoked this section, or made any
reference to arbitration, during the negotiations preceding the institution of the present case. In fact,
counsel for both parties stipulated, in the trial court, that none of them had, at any time during said
negotiations, even suggested the settlement of the issue between them by arbitration, as provided in said
section. Their aforementioned acts or omissions had the effect of a waiver of their respective right to
demand an arbitration. Thus, in Kahnweiler vs. Phenix Ins. Co. of Brooklyn, 5 it was held:

Another well-settled rule for interpretation of all contracts is that the court will lean to that
interpretation of a contract which will make it reasonable and just. Bish. Cont. Sec. 400. Applying
these rules to the tenth clause of this policy, its proper interpretation seems quite clear. When there
is a difference between the company and the insured as to the amount of the loss the policy
declares: "The same shall then be submitted to competent and impartial arbitrators, one to be
selected by each party ...". It will be observed that the obligation to procure or demand an
arbitration is not, by this clause, in terms imposed on either party. It is not said that either the
company or the insured shall take the initiative in setting the arbitration on foot. The company has
no more right to say the insured must do it than the insured has to say the company must do it. The
contract in this respect is neither unilateral nor self-executing. To procure a reference to arbitrators,
the joint and concurrent action of both parties to the contract is indispensable. The right it gives and
the obligation it creates to refer the differences between the parties to arbitrators are mutual. One
party to the contract cannot bring about an arbitration. Each party is entitled to demand a
reference, but neither can compel it, and neither has the right to insist that the other shall first
demand it, and shall forfeit any right by not doing so. If the company demands it, and the insured
refuses to arbitrate, his right of action is suspended until he consents to an arbitration; and if the
insured demands an arbitration, and the company refuses to accede to the demand, the insured
may maintain a suit on the policy, notwithstanding the language of the twelfth section of the
policy, and, where neither party demands an arbitration, both parties thereby waive it.6

To the same effect was the decision of the Supreme Court of Minnesota in Independent School Dist. No.
35, St. Louis County vs. A. Hedenberg & Co., Inc. 7 from which we quote:

This rule is not new in our state. In Meyer v. Berlandi, 53 Minn. 59, 54 N.W. 937, decided in 1893,
this court held that the parties to a construction contract, having proceeded throughout the entire
course of their dealings with each other in entire disregard of the provision of the contract
regarding the mode of determining by arbitration the value of the extras, thereby waived such
provision.

xxx xxx xxx

The test for determining whether there has been a waiver in a particular case is stated by the
author of an exhaustive annotation in 117 A.L.R. p. 304, as follows: "Any conduct of the parties
inconsistent with the notion that they treated the arbitration provision as in effect, or any conduct
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which might be reasonably construed as showing that they did not intend to avail themselves of
such provision, may amount to a waiver thereof and estop the party charged with such conduct
from claiming its benefits".

xxx xxx xxx

The decisive facts here are that both parties from the inception of their dispute proceeded in entire
disregard of the provisions of the contract relating to arbitration and that neither at any stage of
such dispute, either before or after commencement of the action, demanded arbitration, either by
oral or written demand, pleading, or otherwise. Their conduct was as effective a rejection of the
right to arbitrate as if, in the best Coolidge tradition, they had said, "We do not choose to arbitrate".
As arbitration under the express provisions of article 40 was "at the choice of either party," and was
chosen by neither, a waiver by both of the right to arbitration followed as a matter of law.

WHEREFORE, the decision appealed from should be as it is hereby affirmed in toto, with costs against
the herein defendant-appellant, Fieldmen's Insurance Co., Inc. It is so ordered.
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G.R. No. L-22404 May 31, 1971

PASTOR B. CONSTANTINO, plaintiff-appellant,

vs.
HERMINIA ESPIRITU, defendant-appellee.

David Guevara for plaintiff-appellant.

DIZON, J.:

This is a direct appeal on a question of law taken by Pastor B. Constantino from an order of the Court of
First Instance of Rizal denying his motion for the admission of his amended complaint in Civil Case No.
5924, entitled "Pastor B. Constantine vs. Herminia Espiritu."

Appellant's complaint alleged, inter alia, that he had, by a fictitious deed of absolute sale annexed thereto,
conveyed to appellee on October 30, 1953, for a consideration of P8,000.00, the two-storey house and
four (4) subdivision lots covered by Transfer Certificate of Title No. 20174 issued by the Register of Deeds
of Rizal, on October 25, 1950 in the name of Pastor B. Constantino, married to Honorata Geukeko with
the understanding that appellee would hold the properties in trust for their illegitimate son, Pastor
Constantino, Jr., still unborn at the time of the conveyance; that thereafter appellee mortgaged said
properties to the Republic Savings Bank of Manila twice to secure payment of two loans, one of P3,000.00
and the other of P2,000.00, and that thereafter she offered them for sale. The complaint then prayed for
the issuance of a writ of preliminary injunction restraining appellee and her agents or representatives from
further alienating or disposing of the properties, and for judgment ordering her to execute a deed of
absolute sale of said properties in favor of Pastor B. Constantino, Jr., the beneficiary (who, at the filing of
said complaint, was about five years of age), and to pay attorney's fees in the sum of P2,000.00.

As a result of the conveyance mentioned heretofore, TCT No. 20714 in the name of plaintiff was partially
cancelled and in lieu thereof, TCT No. 32744 was issued by the Register of Deeds of Rizal in the name of
appellee Herminia Espiritu.

On December 16, 1959, appellee moved to dismiss the complaint on the ground that it stated no cause of
action because Pastor Constantino, Jr., the beneficiary of the alleged trust, was not included as party-
plaintiff, and on the further ground that appellant's cause of action was unenforceable under the Statute of
Frauds.

In his opposition to said motion to dismiss, appellant argued that the Statute of Frauds does not apply to
trustee and cestui que trust as in the case of appellee and her illegitimate child, and that for this reason
appellant would not be barred from proving by parol evidence an implied trust existing under Article 1453
of the Civil Code. On the other hand, in her rejoinder to appellant's opposition, appellee argued that what
the former was invoking in his complaint (Paragraph V, Complaint) was an implied trust under Article 1453
of the Civil Code and not an express trust under Section 3, Rule 3 of the Revised Rules of Court. Finding
the grounds alleged in the motion to dismiss to be meritorious, the trial court dismissed the complaint, with
costs.

Immediately after receiving notice of said order of dismissal, appellant filed a motion for the admission of
an amended complaint, attaching thereto a copy hereof, the amendment consisting mainly of the inclusion
of the minor, Pastor Constantino, Jr. as co-plaintiff. The amended complaint further prayed for the
appointment of appellant as said minor's guardian ad litem. An opposition thereto was filed on the ground
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that the amendment aforesaid was not an inclusion but a substitution of the party plaintiff. As the latter had
no interest whatsoever in the subject matter of the case, it was argued that the substitution was not
allowed in this jurisdiction. Appellant's answer to appellee's opposition alleged that, as the ground relied
upon in the said opposition was purely technical, even the substitution of the party plaintiff should be
allowed under Section 2, Rule 17 of the Rules of Court. Thereafter the lower court issued the appealed
order denying appellant's motion for the admission of his amended complaint. Hence, the instant direct
appeal.

The original as well as the amended complaint mentioned above allege that the sale made by appellant
Constantino in favor of appellee of the properties described in said pleadings was subject to the
agreement that the vendee would hold them in trust for their at that time already conceived but unborn
illegitimate child; that the vendee violated this agreement, firstly, by subjecting them to two different
contracts of mortgage, and later by trying to sell them, this being not only in violation of the aforesaid
agreement but prejudicial to the cestui que trust; that the action was commenced to compel the vendee to
comply with their agreement by executing the corresponding deed of conveyance in favor of their minor
son, and to desist from further doing any act prejudicial to the interests of the latter.

It appears then that, upon the facts alleged by appellant, the contract between him and appellee was a
contract pour autrui, although couched in the form of a deed of absolute sale, and that appellant's action
was, in effect, one for specific performance. That one of the parties to a contract is entitled to bring an
action for its enforcement or to prevent its breach is too clear to need any extensive discussion. Upon the
other hand, that the contract involved contained a stipulation pour autrui amplifies this settled rule only in
the sense that the third person for whose benefit the contract was entered into may also demand its
fulfillment provided he had communicated his acceptance thereof to the obligor before the stipulation in
his favor is revoked.

It appearing that the amended complaint submitted by appellant to the lower court impleaded the
beneficiary under the contract as a party co-plaintiff, it seems clear that the three parties concerned
therewith would, as a result, be before the court and the latter's adjudication would be complete and
binding upon them.

The ruling in the case of Echaus vs. Gan, 55 Phil. 527 involving facts similar to the ones before us is of
obvious application to the latter. We quote the following pertinent portions of our decision in said case:

This action was instituted in the Court of First Instance of Occidental Negros by Adoracion
Rosales de Echaus, assisted by her husband Enrique Echaus, for the purpose of obtaining
a judicial order requiring the defendant Maria Gan, as administratrix of the estate of her
deceased husband, Manuel Gay Yulingco, as well as the heirs of said decedent, to execute
in due form a contract, with appropriate description of the real property involved, in
conformity with the terms of an agreement dated September 3, 1927, executed by the
deceased Manuel Gay Yulingco, in life, and Enrique Echaus, one of the plaintiffs in the case
(Exhibit A). To this action the defendants interposed a general answer and cross-complaint,
in the latter of which they sought a decree annulling the contract Exhibit A as excessively
onerous and illegal. Upon hearing the cause the trial court absolved the plaintiffs from the
cross-complaint and gave judgment in favor of the plaintiffs upon the complaint, requiring
the defendants, within thirty days from the date of the finality of the decision, to execute
before a notary public and deliver to the plaintiffs a contract similar in terms to that indicated
in the Exhibit A but containing, in addition, a description of the real property involved, in
such form as would enable the plaintiffs to procure said contract to be inscribed on the
certificate of title corresponding to said property, with costs against the defendants. From
this judgment the defendants appealed.
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xxx xxx xxx

The contract in question, Exhibit A, on which this action is based, was executed by Manuel
Gay Yulingco and Enrique Echaus, and although the contract binds Yulingco to pay to
Adoracion Rosales de Echaus, the wife of Enrique Echaus, the sum of fifty centavos for
each picul of sugar that may be produced upon the two haciendas covered by the contract
during the fourteen years beginning with the crop for 1927-1928, nevertheless this action is
not instituted by the nominal beneficiary, Adoracion Rosales de Echaus, directly for the
purpose of obtaining the benefit which said contract purports to confer upon her. The
purpose of the action is to compel the defendants to execute a contract pursuant to the
tenor of the contract Exhibit A, but containing an adequate description of the property
contained in the two haciendas, for the purpose of enabling Echaus to procure the
annotation of said contract on the Torrens certificates of title. It is therefore evident that,
technically speaking, the proper person to bring this action is Enrique Echaus, the person
with whom the contract was made by Yulingco. It is, nevertheless, equally obvious that the
wife of Enrique Echaus is a party in interest, and she is certainly a proper, if not an entirely
necessary party to the action. It results that there is really no improper joinder of parties
plaintiff.

Whether the contract of sale entered into between appellant and appellee was as claimed and the
amended complaint subject to the agreement that appellee would hold the properties in trust for their
unborn child is a question of fact that appellee may raise in her answer for the lower court to determine
after trial. On the other hand, the contention that the contract in question is not enforceable by action by
reason of the provisions of the Statute of Frauds does not appear to be indubitable, it being clear upon the
facts alleged in the amended complaint that the contract between the parties had already been partially
performed by the execution of the deed of sale, the action brought below being only for the enforcement of
another phase thereof, namely, the execution by appellee of a deed of conveyance in favor of beneficiary
thereunder.

WHEREFORE, the appealed order is hereby set aside and the case is remanded to the lower court for
further proceedings in accordance with law.

Concepcion, C.J., Reyes, J.B.L., Zaldivar, Castro, Fernando, Teehankee, Villamor and Makasiar, JJ.,
concur.

Makalintal, J., concurs in the result.

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