Professional Documents
Culture Documents
291
CONCEPCION, C.J.:
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"On August 14, 1945, herein plaintiff Jose L. Ponce de Leon and
Francisco Soriano, father of thirdparty plaintiffs Teofila Soriano
del Rosario, Rosalina Soriano and Rev. Fr. Eugenio Soriano,
obtained a loan for P10,000.00 from the Philippine National Bank
(PNB), Manila, mortgaging a parcel of land situated at Barrio
Ibayo, Municipality of Paraaque, Rizal, covered by original
certificate of title No. 8094 of the land records of Rizal Province in
the name of Francisco Soriano, married to Tomasa Rodriguez, as
security for the loan (Exhibit 15Soriano). On August 16, 1945,
Ponce de Leon gave P2,000.00 to Soriano from the proceeds of the
loan (Exhibit 'N'). The loan was subsequently increased to
P17,500.00 and an amendment to the real estate mortgage,
Exhibit '15Soriano,' was executed by Jose L. Ponce de Leon and
Francisco Soriano on March 13, 1946 (Exhibit '16Soriano').
"On May 4, 1951, Jose L. Ponce de Leon filed with the
Rehabilitation Finance Corporation (RFC for short) Manila, his
loan application, Exhibit '1RFC,' for an industrial loan, for
putting up a sawmill, in the amount of P800,000.00 offering as
security certain parcels of land, among which, was the parcel
which Ponce de Leon and Soriano mortgaged to the PNB. The
application stated that the properties offered for security for the
RFC loan are encumbered to the PNB, Bacolod, and to Cu Unjieng
Bros. The properties offered for security to the RFC were
inspected by the appraisers of the latter, who submitted the
following appraisals:
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the amount for which the RFC acquired the whole lot in the
sheriff's sale. The third partyplaintiffs also ask that Ponce de
Leon be ordered to reimburse them for whatever amount they
may use in redeeming the lot and expenses incident thereto and
that Ponce de Leon and the RFC be made to pay them moral
damages which their father suffered and attorney's fees.
"Answering the thirdparty complaint, the RFC and Ponce de
Leon affirm the legality of the mortgage deed insofar as Soriano is
concerned. The RFC further contends that the mortgage was
binding on the whole Soriano lot and that there was no valid
redemption of this lot.
"Ponce de Leon interposed a counterclaim for various sums of
money allegedly received from him by Francisco Soriano and the
2
present thirdparty plaintiffs."
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The facts thus relied upon by His Honor, the Trial Judge,
are borne out by the record, and We are fully in accord with
the conclusions drawn therefrom.
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Plaintiff's Appeal
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erred: (1) "in not setting aside the foreclosure sales on the
mortgage contract dated October 8, 1951"; (2) "in stating
that the proceeds of the foreclosure sales were
conscionable"; (3) in not granting Ponce de Leon's claim for
adjustment and not "giving him a reasonable time to pay
whatever obligations he may have"; (4) in not granting him
damages nor directing the return of his properties; (5) "in
not ordering a new trial for the purpose of adjusting" his
"obligations and determining the terms and conditions of
his obligation"; and (6) in not granting his claim against
the Sorianos.
With respect to his first assignment of error, plaintiff
maintains that his promissory note Exhibit A was not yet
overdue when the mortgage was foreclosed, because the
installments stipulated in said promissory note have "no
fixed or determined dates of payment," so that the note is
unenforceable and "the RFC should have first asked the
court to determine the terms, conditions and period of
maturity thereof."
In this connection, it should be noted that, pursuant to
Exhibit A, the total sum of P495,000 involved therein shall
be satisfied in quarterly installments of P28,831.64 each
representing interest and amortizationand that,
although the date of maturity of the first installment was
left blank, the promissory note states that the "date of
maturity (was) to be fixed as of the date of the last release,"
completing the delivery to the plaintiff of the sum of
P495,000 lent to him by the RFC. He now says that this
sum of P495,000 has not, as yet, been fully released by the
RFC. But this is contrary to the facts of record, for, during
the trial, his counsel, Atty. Jose Orozco, made the following
admission:
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306 SUPREME COURT REPORTS ANNOTATED
Ponce de Leon vs. Rehabilitation Finance Corporation
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Defendant's Appeals
The RFC contends that the lower court erred: (1) in holding
that the Paraaque property is presumed to belong to the
conjugal partnership of Mr. and Mrs. Francisco Soriano; (2)
in failing to give due weight to the testimony of Gregorio
Soriano, and in holding that the same is insufficient to
overcome the presumption in favor of the conjugal nature
of said property; (3) in failing to consider that the Sorianos
are now estopped from questioning the validity of the
mortgage on and the foreclosure sale of said property; (4) in
annulling the mortgage insofar as onehalf of said property
is concerned, despite the finding that part of the proceeds
of the RFC loan was paid to settle the PNB loan secured by
the same property; and (5) in holding that the mortgage
thereon and the sheriff's sale thereof to the RFC are null
and void as regards onehalf of said property. These
assignments of error may be reduced to one, namely, that
the lower court erred in voiding the sale to the RFC of the
Paraaque property, upon the ground that the same
formed part of the conjugal partnership of Mr. and Mrs.
Francisco Soriano.
In this connection, it appears that the property was
registered in the name of "Francisco Soriano, married to
Tomasa Rodriguez," and that based upon this fact alone
without any proof establishing satisfactorily that the
property had been acquired during coverturethe lower
court presumed that it belongs to the conjugal partnership
of said spouses. We agree with the RFC that the lower
court has erred in applying said presumption.
We should not overlook the fact that the title to said
property was not a transfer certificate of title, but an
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13 Record on Appeals, p. 114. Italics ours.
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18 52 O.G. 2031.
19 Record on Appeal, pp. 128129.
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21 Tiaoqui v. Chaves, L10086, May 20, 1957, quoting from 59 C.J.S. p.
1372: "By claiming a right to redeem, or availing himself of a statutory
stay, or by seeking to impress a trust on the property in the hands of the
purchaser, one affims the validity of the sale and may not assail it; x x x."
Italics ours.
22 Tolentino v. Philippine Land Improvement Co., Inc., L2469,
September 30, 1950 (Unreported) Italics ours.
23 Philippine National Bank v. Mallorca, L22538, October 31, 1967.
Italics ours.
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ANNOTATION
CONTRACTS
1. Subject Matter
316
2. Consideration
324
3. Consent
333
336
4. Capacity of Parties
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338
5. Perfection of Contract
Contract was perfected upon acceptance of offer.It can be
taken for granted, as contended by the defendants, that the
option contract was not valid for lack of consideration. But
it was, at least, an offer to sell, which was accepted by
letter, and of this acceptance the offeror had knowledge
before said offer was withdrawn. The concurrence of both
actsthe offer and the acceptancecould at all events
have generated a contract, if none there was before (Arts.
1254 and 1262 of the Civil Code). (Zayco vs. Serra, 44 Phil.
331.) Atkins, Kroll & Co., Inc. vs. B. Cua Hian Tek, 102
Phil. 948.
Acceptance of offer to sell gives rise to bilateral contract
of sale.An option is unilateral: a promise to sell at the
price fixed whenever the offeree should decide to exercise
his option within the specified time. After accepting the
promise and before he exercises his option, the holder of
the option is not bound to buy. He is free either to buy or
not to buy later. In this case, however, upon accepting
herein petitioner's offer a bilateral promise to sell and to
buy ensued, and the respondent ipso facto assumed the
obligation of a purchaser. He did not just get the right
subsequently to buy or not to buy. It was not a mere option
then; it is a bilateral contract of sale. Id.
Offer to buy or sell may be withdrawn before acceptance.
Ordinarily an offer to buy or sell may be with
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enter into any lease of fishponds for more than five years.
Acts executed contrary to the provisions of the law are void
except in cases where the law itself orders their validity. As
these leases were contrary to law, they were void.
Municipality of Hagonoy vs. Evangelista, 73 Phil. 586.
No estoppel attaches to validate a contract that in itself is
contrary to law.The purchaser acted undoubtedly under
the erroneous impression that legal redemption, as noted
by the sheriff on the deed, was valid, accepting thus the
deed without any objection whatsoever. But, as a general
rule, and under the circumstances of the case, no estoppel
attaches to validate a contract or any part thereof that in
itself is contrary to law. Abarro vs. De Guia, 72 Phil. 245.
Building contract exempting owner from payment of
wages is null and void.The fact that according to the
building contract, the owner of the building shall not
respond to any claim, for wages not paid, does not exempt
the owner of the building from the obligation to pay jointly
and severally the salary of the watchman, because such
contract is null and void for being contrary to the purpose
of Act No. 3959. Fernandez vs. Garcia, 92 Phil. 592.
Bona fide possessor of public land can be a landlord
thereof.Alfafara vs. Mapa, 95 Phil. 125.
No suit for performance of illegal contract."The
proposition is universal that no action arises, in equity or
at law, from an illegal contract; no suit can be maintained
for its specific performance, or to recover the property
agreed to be sold or delivered, or the money agreed to be
paid, or damages for its violation. The rule has sometimes
been laid down as though it were equally universal, that
where the parties are in pari delicto, no affirmative relief of
any kind will be given to one against the other." (Pomeroy's
Equity Jurisprudence, Vol. 3, 5th ed., p. 728.) It is true that
this doctrine is subject to one important limitation, namely,
"whenever public policy is considered as advanced by
allowing either party to sue for relief
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"ART. 1506. Where the seller of goods has a voidable title thereto,
but his title has not been avoided at the time of the sale, the
buyer acquires a good title to the goods, provided he
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buys them in good faith, for value, and without notice of the
seller's defect of title." (Civil Code.)
Hence, until the contract of Ong Shu with Soto is set aside
by a competent court (assuming that the fraud is
established to its satisfaction), the validity of appellant's
claim to the property in question can not be disputed, and
his right of the possession thereof should be respected.
Chua Hai vs. Kapunan, Jr., 104 Phil. 110.
Court action is necessary to annul voidable contract.
Plaintiff's claim that the sale is inexistent or void ab initio
cannot be sustained, it appearing that out of its
consideration of P370,000.00 plaintiff applied the amount
of P93,928.56 to pay its prewar indebtedness to the
Agricultural and Industrial Bank and distributed the
balance of P276,071.44 among its stockholders. This is a
clear indication that the sale, even if vitiated, is merely
voidable and as such cannot have reversible effects unless
proper action is brought for its annulment. As this court
has aptly said:
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7. Compromise
AGenerally
Unwise or disastrous contracts.The plaintiff says in
another part of his lengthy brief that the use he was able to
make of the Japanese money paid him by defendant was
much less than he had expected. This complaint seems to
run counter to the plaintiff's vehement protest that the
Japanese war notes were illegally depreciated in the
contract. However, setting aside this apparent
inconsistency in the plaintiff's position, the plaintiff is not
entitled to a rescission or to a discount on the basis of the
benefit he actually derived from the purchase price. The
law does not relieve a party from the effects of an unwise,
foolish, or disastrous contract, entered into with all the
required legal formalities and with full awareness of what
he was doing. The trial court affirmatively found that no
fraud or deception had been perpetrated by the defendant
on the plaintiff. The welldemonstrated high intelligence of
the plaintiff, his legal acumen and good grasp of the
intricacies of law, precludes every possibility of his having
been duped. Tanda vs. Aldaya, 89 Phil. 497.
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352 SUPREME COURT REPORTS ANNOTATED
Ponce de Leon vs. Rehabilitation Finance Corporation
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the plaintiff had the right "within sixty days after final
judgment, for a failure to pay the amount due and owing
him, to foreclose his mortgage in a proper proceeding and
sell all or any part of the ten parcels of land to satisfy his
debt." Zubiri vs. Quijano, 74 Phil. 47.
Ownership of property conditionally transferred to
vendee upon execution.Where the contract conditionally
transfers ownership to the vendee upon its execution, the
property is not merely given as security for a loan; and the
contract is not one of equitable mortgage but a sale subject
to a resolutory condition. Rodriguez, Sr. vs. Francisco, 2
SCRA 648.
FConsidering Situation of PartiesSurrounding
Circumstances
Where circumstances indicated sale of whole estate for a
lump sum.It seems plain from all the attending
circumstances that the dominant and paramount thought
in the minds of the parties during and at the end of the
negotiation was a sale of the entire property owned by the
sellers for a gross amount. x x x In a sale involving an
extensive agricultural estate containing undetermined lots
of different classes, unappraised improvements, barrio lots
and roads and standing crop, it was well nigh difficult, not
to say impossible, to conclude a transaction technically and
strictly by the hectare. Such form of sale would leave the
parties in uncertainty on the amount to be added to or
taken from the price in the ensuing readjustment in the
event of discrepancy in the assumed area. Such form of sale
would be fraught, as the parties ought to have realized,
with extreme difficulties and harassing controversies.
xxx The recital in the deed of sale, that the vendors
conveyed "todo su derecho, interes, y participacion en la
Hacienda Esperanza," literally and properly construed, was
a conveyance of the whole estate in the property in the
absence of any limitations denoting intent to convey a less
interest. Gonzales vs. Santos, 87 Phil. 471.
Interpretation of a clause in insurance contract regard
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(Exh. D), one for a lump sum and not at a specified price for
each unit of measure, and therefore, no reduction can be
authorized although the area was less than what was
stated in the contract. There are instances in which
equitable relief may be granted to the purchaser, as where
the deficiency is very great, for, under such circumstances,
gross mistake may be inferred. (Asian vs. Jalandoni, 45
Phil. 296). But, in the instant case, were are satisfied that,
although the shortage amounts to practically onefourth of
the total area, the purchase clearly intended to take the
risk of quantity, and that the area has been mentioned in
the contract, merely for the purpose of description. From
the circumstances that the defendant, before her purchase
of the fishpond, had been in possession and control thereof
for two years as a lessee, she can rightly be presumed to
have acquired a good estimate of its value and area, and
her subsequent purchase thereof must have been premised
on the knowledge of such value and area. Accordingly, she
cannot now be heard to claim an equitable reduction in the
purchase price on the pretext that the property is much
less than she thought it was. Garcia vs. Velasco, 72 Phil.
248.
A clear stipulation does not need any construction.In
our opinion, the purpose of the parties in making that
stipulation is to defer the payment of the claim until after
the share of Fred M. Harden in the assets of the conjugal
partnership shall have been determined in order that said
defendant may not be burdened with the liability to pay it
during the pendency of the receivership. Be it as it may,
the fact remains that the terms of the stipulation are clear
and it is a well known rule of statutory construction that
when the terms of a contract are clear there is no room for
interpretation. Dalupan vs. Harden, 90 Phil. 417.
Management contract containing provisions which are in
the nature of stipulations "pour autrui" is binding to one not
a party thereto.Section 15 of the Arrastre Management
Contract containing provisions, which are in the nature of
stipulations "pour autrui," entered into by and be
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"It has been proven that the plaintiff himself was the person who
prepared the document, Exhibit A. Therefore, if there is any
ambiguity or obscurity in the interpretation and meaning of said
contract, the same 'shall not favor the party who caused the
obscurity.' (Art. 1377 of the Civil Code corresponding to Art. 1288
of the Spanish Civil Code of 1889) Yatco vs. El Hogar Filipino, 67
Phil. 610; Calanoc vs. Phil.American Life Ins. Co., 52 O.G. 191,
192."
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10. Performance
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377
380
12. Novation
383
AAnnulment
BRescission
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15. Reformation
tract for the parties, but only to make the instrument speak
their genuine intentionCosio vs. Palileo, 17 SCRA 196.
ATTY.MARIA LUISA MENDOZA and JOJO MA.LACSON.
Notes.(a) Inadequacy of price as ground for annulling
execution sale.A judicial sale under foreclosure is not to
be set aside for mere inadequacy of price unless the
inadequacy is so great as to shock the conscience, or unless
there are other circumstances making the sale unjust
(Warner, Barnes & Co. vs. Santos, 14 Phil. 446; National
Bank vs. Gonzalez, 45 Phil. 693; Navarro vs. Navarro, 76
Phil. 122; Bank of the Philippine Islands vs. Green, 52 Phil.
491).
Furthermore, in order to annul a judicial sale, conducted
regularly and confirmed by the court, upon ground of lesion
through inadequacy of price, it must appear from the
record that a higher price could be obtained for the
property or that there was fraud in the sale (La Urbana vs.
Belando, 54 Phil. 930; Guerrero vs. Guerrero, 57 Phil. 442).
But while inadequacy of price alone does not justify the
setting aside of a judicial sale, yet when such inadequacy is
very great and there are slight circumstances tending to
show that interested parties were misled or by accident or
mistake were prevented from attending the sale, or
preventing it, it may be set aside (Iturralde vs. Velasquez,
41 Phil. 886).
In Del Rosario vs. Villegas, 49 Phil. 634, it was held that
where a provincial sheriff, guided by a letter of the
attorneys for the judgment creditor and by data furnished
by certain merchants in order to fix prices for the execution
of a judgment, not subject to execution but also arrogated
to himself powers which belonged only to the court, his acts
were illegal and void; and therefore the sale of the two
parcels of land in question, based upon sums resulting from
arbitrary and illegal estimate of prices, is also null and
void.
See also De Leon vs. Salvador, L30871, Dec. 28, 1970,
reported in this volume.
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