TANKEH v.
DEVT BANK OF THE PHILIPPINES *it is essential that such insidious words or machinations
[Topic] Fraud: Requisites
DOCTRINE:
Art. 1338. There is fraud when, through insidioua words or
machinations of one of the contracting parties, the other is
induced to enter into a contract which, without them, he
would not have agreed to.
Ar t. 13 44 . In order that fraud may make a contract
voidable, it should be serious and should not have been
employed by both contracting parties. Incidental fraud only
obliges the person employing it to pay damages.
*1338 fraud in performance of a contract ! employed by a
party to the contract in securing the consent of the other
party
*11"# ! fraud in performance of an obligation ! employed by
the obligor in the performance of a pree$isting obligation.
Kind !" Fr#$d
D! %! C # $ #n t & ' refers to those deceptions or
misrepresentations of a serious character employed by one
party and without which the party would not have entered
into the contract.
D!%! In( id&nt& ' deceptions or misrepresentations which
are not serious in character and without which the other
party would still have entered into the contract.
R&)$iit&:
%1& 'raud or insidious words or machinations must have
been employed by one of the contracting parties(
%)& The fraud or insidious words must have been serious(
%3& The fraud or insidious words must have indu ced the
other party to enter into the contract( and
%& The fraud should not have been employed by both of
the contracting parties or by third persons.
must be prior to or contemporaneous with the birt h or
perfection of a contract
VOCAB*LAR+:
Fr#$d 'will render the contract voidable(
SHORT ANS,ERS:
1. ,-! # (-#in/ -!: +leandro Tankeh was chasing
-uperto Tankeh
0. ,-&r& did t-& r!2%& t#rt: hen +leandro Tankeh
wrote a letter to -uperto Tankeh saying that he was severing
all ties and terminating his involvement with /terling
/hipping
3. ,-#t0ines
i t- & (! ntr#(t in )$&ti !n :+ssignment of
/hares of /tock with oting -ights
FACTS:
/ometime in 128#, +leandro was approached by his
brother, -uperto %president of //0& informing him that the
latter was operating a new shipping line business and
oered him 1### shares worth 415 to be a director of the
business. +leandro acce pted the oer base d on the
promised that he be part of the admin sta so that he can
oversee the operation of the business plus his son, who is a
practicing lawyer would be given a position in the company.
+ loan was appl ied from 674 for nancing of an
oceangoing vessel with the conditions that the rst
mortgage is obtained over the vessel, the future earnings of
the mortgage including proceeds should be assigned to 674
and 674 is assigned to no less than 9": of the voting
shares of the company. +leandro signed the +ssignment of
/hares of /tock with oting -ights and the promissory note
making him liable ointly and severally for the amount of the
loan. +fter the vessel is ac;uired, a deed of assignment was
e$ecuted in favor of 674. <n 1283, upon reali=ing that he
was only being made a tool to reali=e the purposes of
-uperto, +leandro o>cially informed the company by
means of letter that he has severed his connection with the
company and askin g the board to pass a resolution to
released him from his liabilities with 674 and notify the
latter about this.
<n 1289, the account of //0 in the 674 were
transferred to +sset 4rivati=ation Trust by virtue of
4residential 4roclamation ?o. @#. The asset including loan in
favor of 674 were ordered to be transferred to the national
government. 6espite the assignment and cash e;ui ty
contribution of //0 to cover part of the ac;uisition cost of
the vessel and the like, the promissory note still subsisted.
Aence, +leandro is still bound as a debtor because of the
promissory note.
A%&#ndr! (!nt&nti !n:The promisorry note must be usual e$aggerations in trade, when the other party had an
declared as null and void and he be absolved from any
liability
to bind. himself
-uperto e$ercised deceit and
to fraud
in causing him
ointly and severally pay 674 the amount
of the mortgage loan. +ll the money supposedly invested by
him were put by -uperto, hence he had never invested any
money. Ae was invited to attend the board meeting only
once and he was never compensated by //0 for being called
director and stockholder. ?one of the promises of -uperto
was complied with.
ISS*E:
<? the fraud perpetrated by -uperto is serious enough to
warrant annulment of the contractB
HELD:
?o. <nly incidental fraud e$ists in this case. Therefore it is
not su>cient to warrant the annulment of the contracts
petitioner entered into but respondent -uperto is liable to
pay him damages. The distinction between fraud as a
ground for rendering a contract voidable or as basis for an
award of damages is provided in +rticle 13C In order that
fraud may make a contract voidable, it should be serious
and should not have been employed by both contracting
parties. Incidental fraud only obliges the person employing it
to pay damages.
There are two types of fraud contemplated in the
performance of contractsC dolo incidente or incidental fraud
and dolo causante or fraud serious enough to render a
contract voidable. If there is fraud in the performance of the
contract, then this fraud will give rise to damages. If the
fraud did not compel the imputing party to give his or her
consent, it may not serve as the basis to annul the contract,
which e$hibits dolo causante. Aowever, the party alleging
the e$istence of fraud may prove the e$istence of dolo
incidente. This may make the party against whom fraud is
alleged liable for damages.
+rticle 13# of the Divil Dode recogni=es the reality of some
e$aggerations in trade which negates fraud. It readsC The
opportunity to know the facts, are not in themselves
fraudulent.
Eiven the standing and stature of the petitioner, he was in a
position to ascertain more information about the contract.
The following facts show that petitioner was fully aware of
the magnitude of his undertakingC Firt, petitioner was fully
aware of the nancial reverses that //0 had been
undergoing, and he took great pains to release himself from
the obligation. S&(!nd, his background as a doctor, as a
bank organi=er, and as a businessman with e$perience in
the te$tile business and real estate should have apprised
him of the irregularity in the contract that he would be
undertaking. This meant that at the time petitioner gave his
consent to become a part of the corporation, he had been
fully aware of the circumstances and the risks of his
participation. Intent is determined by the acts. Fin#%%5, the
records showed that petitioner had been fully aware of the
eect of his signing the promissory note. The bare assertion
that he was not privy to the records cannot counteract the
fact that petitioner himself had admitted that after he had
severed ties with his brother, he had written a letter seeking
to reach an amicable settlement with respondent -upert.
4etitionerFs actions deed his claim of a complete lack of
awareness regarding the circumstances and the contract he
had been entering.
The re;uired standard of proof ! clear and convincing
evidence ! was not met. There was no dolo causante or
fraud used to obtain the petitionerFs consent to enter into
the contract. 4etitioner had the opportunity to become
aware of the facts that attended the signing of the
promissory note. Ae even admitted that he has a lawyerson
who the petitioner had hope d would assist him in the
administration of /terling /hipping 0ines, Inc. The totality of
the facts on record belies petitionerFs claim that fraud was
used to obtain his consent to the contract given his personal
circumstances and the applicable law.
Aowever, in refusing to allow petitioner to participate in the
management of the business, respondent -uperto . Tankeh
was liab le for the commi ssion of incidental frau d. In
Eeralde=, this Dourt dened incidental fraud as Gthose which
are not serious in character and without which the other
party would still have entered into the contract. +lthough
there was no fraud that had been undertaken to obtain
petitionerFs consent, there was fraud in the performance of
the contract.