Professional Documents
Culture Documents
GSIS v Leuterio
petitioners conducted a lottery draw for the allocation of lots and housing units in GSIS Village;
respondent won and was issued a Certificate of Acknowledgment to purchase the subject house and
lot; they entered into a Deed of Conditional Sale evidencing the conveyance of the subject property
and all improvements thereon to the Leuterio spouses; after the land development and and housing
construction were completed petitioner’s Board increased the purchase price inficatred in the Deeds pf
Conditional Sale covering houses and lots therein; a final Deed of Sale was to be executed upon final
payment; the Conditional Deed contained a marginal notation “subject to adjustment pending approval
of the Board”; spoused alleged that this notation was not in the Deed when they signed the same;
private respondents informed petitioner that the payments for the property had been completed and
the execution of an absolute deed of sale was in order; no action on the matter was taken by petitioner
no agreement to the notation of adjustment (1) found that the appended words were inserted into the
document without the knowledge or consent of respondents (2) Answer or petitioner to the Complaint
of respondents admitted the non-existence of this notation at the time the Deed of Conditional Sale
was signed calling the omission honest mistake (3) confirmed by petitioner in the instant Petition for
Review on Certiorari that respondents were not required to sign a new contract but instead the words
were inserted (4) purchase price was mutually agreed upon by the parties and respondents did not
give consent for petitioner to make a unilateral upward adjustment of this price depending on the fine
cost of construction (5) illegal for petitioner to claim this prerogative as the fixing of the price can never
be left to the discretion of one of the contracting parties (6) estopped as petitioner cannot increase the
price of the subject house and lot after it failed through the years to protest against private
respondents amortization or to require the payment by them of bigger monthly installments (7)
petitioner failed to factor in the increase in the cost of constriction and have nobody to blame but itself
and it alone should suffer the loss (8) law on contract does not excuse a party from specifically
performing his obligation on the gourd that he made a bad business judgment
petiton for review on certiorari dismissed; sale valid
Manila Railroad v La Company Transatlantica (Relativity)
steamship belonging to respondent Transatlantica arrived at Manila with 2 locomotive boilers aboard
which are the property of petitioner; Steamship Company’s assistance was procured to discharge the
boilers who then employed Atlantic Company having probably the best equipment in the city; the
service to be performed by Atlantic Company consisted in bringing its floating crane alongside the
steamship, lifting the boilers and transferring them to a barge; the boiler was so damaged to had to be
reshipped and rebuilt in England costing the petitioners P22,343.29 for repairs, expenses, and loss of
the use; present action instituted to recover these damages; Steamship Company caused the Atlantic
Company to be brought in as a codefendant and insisted that whatever liability existed should be fixed
upon the Atlantic Company as an independent contractor
(1) contractual relations existed between the Railroad Company and Steamship regarding the carrying
and delivering of the boilers, and between the Steamship Company and Atlantic respecting the and
lifting and the transferring of the boilers (2) no contractual relation existed directly between the
Railroad Company and Atlantic Company
Steamship liable (1) contract to transport imports the duty to convey and deliver safely and securely
with reference to the degree of care which under the circumstances are required by the law and
custom applicable to the case (2) does not escape liability by reason of the fact that it employed a
competent independent contractor to discharge the boilers (3) Atlantic was no more than an employee
and it has never yet been held that the failure to comply with a contractual obligation can be excused
by showing that such delinquency was due to the negligence of one to whom the contracting party
had committed the performance of the contract
Atlantic liable not to petitioner but to Transatlantica (1) contract combined 2 features namely and
undertaking in the part of the Atlantic Company to use all due care combined with a reservation
concerning the company’s liability for damage (2) exemption from liability was not intended to absolve
the Atlantic Company from its duty to use due care but only had reference to disasters from some
inherent hidden defect in the lifting apparatus or other unforeseen occurrence not directly attributed to
the negligence of the company (3) absolute exemption from all responsibility from negligence is
inequitable (4) Atlantic is liable to Steamship for the damages by its failure to exercise due care in
discharging the boiler regardless of the fact that the damage was caused by the negligence of an
employee who was qualified for the work and who had been chosen with due care (5) as they
undertook to remove the boiler from the ship’s hold and for this purpose and took the property into its
power and control there arose a duty to the owner to use due care and this duty was in existence
before the negligent act was done which may be considered and act done in violation of this duty
ignoring the existence of the express contract between Atlantic and Steamship (6) Steamship informed
petitioner that it would be procuring the services of a contractor therefore it is to be assumed that
petitioner had in fact assented to the employment of a contractor to perform this service (7) cannot be
admitted that a person who contracts to do a service like that rendered by Atlantic incurs double
responsibility (8) the 2 liabilities cannot coexist as an implied contract (negotiorum gestio) never arises
where an express contract has been made (9) the contract made determines not only the character
and extent of the liability of the Atlantic Company but also the person or entity by whom the obligation
is exigible (10) had Atlantic refused to carry out its agreement to discharge the cargo the plaintiff could
not have enforced specific performance and could not have recovered damages for non-performance
(11) for lack of privity with the contract the petitioner can have no right of action to recover damages
from the Atlantic Company for the wrongful act as their rights can only be made effective through
Transatlantica with whom the contract of affreightment was made
CFI: in favor of plaintiff and against Atlantic Company but absolved the Steamship Company from the
complaint finding the mishap was due to the negligence of the foreman in charge and the accident is
therefore to be attributed to the failure of the latter to exercise the degree of care which an ordinarily
competent and prudent person would have exhibited under the circumstances
(1) Transatlantica liable to petitioner (2) Steamship liable (3) Atlantic liable to Transatlantica (4) Atlantic
liable to Steamship
DKG Holdings Corporation v Bartolome
a parcel of land was originally owner by private respondent’s deceased mother; petitioner saw this as
a potential warehouse site; petitioner entered into a Contract of Lease with Option to Buy with the
mother whereby petitioner was given the option to lease or lease with purchase the subject land which
must be exercised within 2 years; petitioner undertook to pay P3,000 monthly as consideration for the
reservation of its option; petitioner regularly paid the monthly P3,000 until the death of the mother and
thereafter coursed its payment to respondent Victor Bartolome being the sole heir; respondent
however refused to accept these payments executing an Affidavit of Self-Adjudication over all the
properties of the deceased including the subject lot; petitioner served upon respondent notice that it
was exercising its option to lease the property; upon respondent refusing to accept the tendered rental
fee and to surrender possession of the property petitioner opened a Savings Account in his name and
deposited the rental fee therein as well as reservation fees; petitioner also tried to register and
annotate the Contract on the title of Victor to the property which was refused although the required
fees were accepted; petitioner filed a Complaint for specific performance and damages against
respondent and the Register of Deeds
CA affirming RTC: dismissed the Complaint and ordered petitioner to pay Victor P30,000 as AF
bound by the Contract of Lease with Option to Buy (1) there is neither contractual stipulation nor legal
provision making the rights and obligations under the contract intransmissible and the nature of the
rights and obligations therein are by their nature transmissible (2) there is no personal act required from
the deceased mother thus the obligation to deliver possession of the subject property to petitioner
upon the exercise by the latter of its option to lease the same may very well be performed by
respondent (3) he who contracts does so for himself and his heirs thus the heirs cannot escape the
legal consequence of a transaction entered into by their predecessor-in-interest because they have
inherited the property subject to the liability affecting their common ancestor (4) futile for Victor to
insist he is not a party to the contract as their is privity of interest between him and his deceased
mother being an heir and only succeeds to what rights his mother had and what is valid and binding
against her is also valid and binding against him (5) death of a party does not excuse nonperformance
of a contract which involves a property right and the rights and obligations thereunder pass to the
personal representatives of the deceased (6) petitioner paid its monthly rent and reservation fees as
well as complied with its duty to inform the other party of its intention to exercise its option to lease
well within the 2yr period and it was appropriate for petitioner to address its letter to her heir
petitioner granted (1) surrender and deliver possession of the parcel of land (2) surrender and deliver
his copy of the Transfer Certificate (3) pay costs of the suit (4) Register of Deeds ordered to register
and annotate the subject Contract of Lease with Option to Buy
Gutierrez Hermanos v Orense
Gabriel v Monte de Piedad (Freedom to Contract: yes)
petitioner was employed as appraiser of jewels in the pawnshop of the respondent; he executed a
chattel mortgage to secure the payment of the deficiencies which resulted from his erroneous
appraisal of the jewels pawned to the appellee promising to pay to the appellee the sum of P300 a
month until the sum of P14,679.07, with interest is fully paid and such document was registered; an
action was instituted against the petitioner by the respondent for recovery of the sum less what had
been paid
chattel mortgage contract guaranteeing to pay deficiencies valid (1) a contract is to be judged by its
character and courts will look to the substance and not to the mere form of the transaction (2) freedom
of contract is both a constitutional and statutory right and to uphold this right courts should move with
all the necessary caution and prudence in holding contracts void (3) in general, a contract which is
neither prohibited by law nor condemned by judicial decision, nor contrary to public morals,
contravenes no public policy (4) the contract does not in any way militate against the public good
neither contravene the policy of the law nor the established interests of society (5) there is sufficient
consideration in this contract for it has been satisfactorily established that it was executed voluntarily
by the latter to guarantee the deficiencies resulting from his erroneous appraisals of the jewelry and
a preexisting admitted liability is a good consideration for a promise (6) case does not fall within the
exception where the inadequacy is so gross as to amount to fraud, oppression or undue influence (7)
there is substantial compliance with the requirements of the Chattel Mortgage Law
SC affirming CA & RTC: in favor of respondent against petitioner
Pakistan International Airlines v Ople (Freedom to contract: no)
petitioner executed 2 separate contracts of employment with each of the private respondents;
the agreement was for a period of 3 years which can be extended by mutual consent however it was
also stipulated that petitioner reserves the right to terminate the agreement at any time by giving the
employee notice in writing in advance and paying wages equivalent to 1 month’s salary; it also
stipulated that it shall be construed and governed under and by the laws of Pakistan and only the
Courts of Karachi, Pakistan shall have the jurisdiction; respondents then commenced training in
Pakistan and subsequently began discharging their job functions as flight attendants with base station
in Manila; roughly 1 year and 4 months prior to the expiration of the contracts they were advised
that they would be terminated; respondents jointly instituted a complaint for illegal dismissal and non-
payment of company benefits and bonuses with the Ministry of Labor and Employment;
petitioner submitted its position paper, without evidence claiming (1) both private respondents were
habitual absentees (2) both were in the habit of bringing in from abroad sizeable quantities of "personal
effects" (3) PIA personnel at the Manila International Airport had been discreetly warned by customs
officials to advise private respondents to discontinue that practice (4) the services of both private
respondents were terminated pursuant to the provisions of the employment contract
MOLE regional director and deputy minister (appeal): reinstated with full backwages or payment of
salaries corresponding to the unexpired portion of the contracts; private respondents had attained the
status of regular employees after rendering more than a year of continued service; that the stipulation
limiting the period of the employment contract to 3 years was null and void as violative of the
provisions of the Labor Code; and that the dismissal having been carried out without the requisite
clearance from the MOLE was illegal
illegally dismissed (1) Regional Director had jurisdiction over termination cases as Article 278 of the
Labor Code, as it then existed, forbade the termination of the services of employees with at least 1
year of service without prior clearance from the Department of Labor and Employment (2) in case of a
termination without the necessary clearance the Regional Director was authorized to order the
reinstatement of the employee concerned and the payment of backwages (3) the principle of party
autonomy in contracts is not an absolute principle|as counter-balancing the principle of autonomy of
contracting parties is the equally general rule that provisions of applicable law, especially provisions
relating to matters affected with public policy, are deemed written into the contract (4) parties may not
contract away applicable provisions of law especially peremptory provisions dealing with matters
heavily impressed with public interest such as the law relating to labor and employment (5) not at
liberty to insulate themselves and their relationships from the impact of labor laws and regulations by
simply contracting with each other (6) a contract providing for employment with a fixed period is not
necessarily unlawful and the critical consideration is the presence or absence of a substantial
indication that the period specified in an employment agreement was designed to circumvent the
security of tenure of regular employees (7) the period was in effect a facultative one at the option of
peittioner as they claim to be authorized to shorten the term at any time for any cause thus basically
employed at the pleasure of petitioner (8) considered intended to prevent any security of tenure from
accruing in favor of private respondents even during the limited period of 3 years (9) relationship is
much affected with public interest and the otherwise applicable Philippine laws and regulations cannot
be rendered illusory by the parties agreeing to some other law
(1) reinstated or paid separation fee equivalent to 1 months salary for every year of service including
the 3 years putatively rendered (2) 3 years backwages without qualification or deduction
Cui v Arellano (May not stipulate: waiver of right to transfer)
plaintiff finished his law studies in the defendant university up to and including the 1st sem of the 4th
year; plaintiff enrolled for the last semester in the defendant university but failed to pay his tuition;
plaintiff left the defendant’s law college and enrolled for the last semester in another university
graduating from the latter; plaintiff during all his time studying law in the defendant university was
awarded scholarship grants for scholastic merit; to secure permission to take the bar he needed the
transcripts of his records in defendant university; defendant refused until after he paid back the whole
amount of tuition fees paid by plaintiff to defendant and refunded to him by the latter totaling
P1,033.87; plaintiff paid to defendant the sum under protest; before he was awarded the scholarship
grants he was made to sign a contract whereby he waives his right to transfer to another school
without having refunded the equivalent of the scholarship cash;
RTC: although the contractual provision may be unethical it was more unethical for plaintiff to quit
studying with the defendant without good reason
stipulation contrary to public policy hence null and void (1) scholarships are awarded in recognition of
merit not to keep outstanding students in school to bolster its prestige otherwise the university
scholarships award becomes a business scheme to increase the business potential of an educational
institution (2) scholarships are not granted to attract and to keep brilliant students in school for their
propaganda value but to reward merit or help gifted. students in whom society has an established
interest or a first lien (3) other leading colleges and universities do not require scholars to reimburse the
corresponding value of the scholarships if they transfer to other schools (4) contracts void as against
public policy contravenes some established interest of society or is inconsistent with sound policy and
good morals
defendant to pay plaintiff P1,033.87 with interest + costs
Arroyo v Berwin (May not stipulate: stifling of prosecution)
defendant as procurador judicial represented Marcela Juaneza in the justice of the peace in a
proceeding for theft prosecuted by plaintiff; the case was decided against the accused who appealed
the the CFI; the defendant then requested the plaintiff to agree to dismiss the criminal proceeding and
in return Marcela would recognize plaintiff’s ownership in the land where Marcela ordered the cane cut
and which land and cut cane are referred to in the cause for theft; defendant also agreed that plaintiff
should obtain a Torrens title to the said land and that Marcela would not oppose the application for
registration to be filed by said applicant provided petitioner would dismiss the case for theft; plaintiff
complied with his part of the agreement regarding dismissal; defendant did not comply thus plaintiff
delivered to defendant for the signature of Marcela a written agreement attesting that she recognized
plaintiff’s ownership and would not oppose the application; defendant did not return the
written agreement despite demands; petitioner instituted a case praying defendant be ordered to
comply with the agreement ang get his client to sign the agreement
null agreement (1) an agreement by the owner of stolen goods to stifle the prosecution of the person
charged with the theft for a pecuniary or other valuable consideration is manifestly contrary to public
policy and the due administration of justice (2) it is if the utmost importance to the interest of the
public that criminals should be prosecuted and that all criminal proceedings should be instituted and
maintained in the form and manner prescribed by law (3) to permit an offender to escape the penalties
prescribed by law by the purchase of immunity from private individuals would result in a manifest
perversion of justice
SC affirming RTC: dismissed on the ground of illegality of the consideration of the alleged contract
Bustamante v Rosel (May not stipulate: pactum commissorium)
respondent entered into a loan agreement with petitioners to borrow P100,000; to guaranty payment
thereof they put up as collateral 70 sq meters of a parcel of land and in the event of failure to pay
respondents have the option to buy the collateral for P200,000 inclusive of the borrowed amount and
interest; as the loan was about to mature respondents proposed to buy at the pre-set price of
P200,000 which petitioner refused requesting for an extension and offering to sell another residential
lot with the principal loan plus interest to be used as down payment; respondents refused to extend
the payment as well as the lot; petitioners tendered payment of the loan which respondents refused
to accept insisting petitioner sign a prepared deed of absolute sale of the collateral; respondents filed
a complaint for specific performance with consignation; respondents sent a demand letter asking
petitioner to sell the collateral pursuant to the option to buy embodied in the loan agreement; petitioner
filed a petition for consignation and deposited P153,000 with the City Treasurer; respondents
consigned P47,500 which is the balance upon petitioner’s refusal to sell and failure of barangay
conciliation
pactum commissorium void(1) petitioner did not fail to pay the loan as they tendered payment
to settle the loan which respondents refused insisting on the sale of the collateral and upon refusal
petitioners consigned the amount (2) sale of the collateral is an obligation with a suspensive
condition dependent upon the happening of an event without which the obligation to sell does not
arise (2) since the event did not occur respondents do not have the right to demand fulfillment of
petitioner's obligation especially where the same would not only be disadvantageous to petitioner but
would also unjustly enrich respondents considering the inadequate consideration (3) scrutiny of the
stipulation of the parties reveals a subtle intention of the creditor to acquire the property given as
security for the loan and such is embraced in the concept of pactum commissorium which is
proscribed by law (4) as the debtor is obliged to dispose of the collateral at the pre-agreed
consideration amounting to practically the same amount as the loan in effect the creditor acquires the
collateral in the event of non-payment of the loan which is within the concept of pactum
commissorium (5) courts are duty bound to exercise caution in the interpretation and resolution of
contracts lest the lenders devour the borrowers like vultures do their prey
plaintiffs to pay the loan; respondents prayer for petitioners to execute the Deed of Sale to convey the
collateral denied
Dizon v Gaborro (Classification according to name)
petitioner was the owner of 3 parcels of land and constituted 2 mortgage liens to secure 2 loans
in favor of the Development Bank of the Philippines and the Philippine National Bank respectively;
petitioner defaulted in the payment of his debt thus the Development Bank of the Philippines
foreclosed the mortgage extrajudicially and the lands were sold to the DBP for an amount
which covered the loan, interest and expenses; the corresponding Certificate of Sale was executed
and petitioner executed the deed of sale which was recorded in the Office of the Register of Deeds;
prior to the execution of the deed of sale respondent became interested in the lands; petitioner
originally intended to lease to Gaborro the property which had been lying idle for some time but as it
was already sold they abandoned the projected lease; instead they entered into a Deed of Sale
with Assumption of Mortgage whereby respondent would assume the entire mortgage indebtedness
with both banks and petitioner would sell the properties; they also entered into an Option to Purchase
giving petitioner the option to repurchase within 4 years upon refund of the amount paid in the
previous agreement; respondent then took possession of the 3 parcels; the DBP BOG approved the
request of respondent to assume the mortgage and executed a conditional sale; petitioner
then assigned his right of redemption to respondent in an instrument whereby he transferred his right
to redeem the properties and relinquished any and all rights to said properties with respondent
assuming the obligation in favor of DBP; respondent made several payments to both banks and
introduced improvements on the lands and appropriated the produce to himself; petitioner informed
respondent that he is formally offering to reimburse respondent what he paid to the banks without
tendering any cash and demanded an accounting; respondent did not accede; petitioner filed a
complaint alleging the Deed of Sale and Option to Purchase did not express the true intention and
agreement between the parties contending they are a single transaction and that the real agreement
was not an absolute sale but merely an equitable mortgage or conveyance by way of security for the
reimbursement or refund by petitioner to respondent
innominate (1) true agreement is that defendant would assume and pay the indebtedness of the
plaintiff and in consideration would be given the possession and enjoyment of the properties until the
plaintiff reimburses fully the defendant (2) person having a lien on the property subsequent to the
mortgage or deed of trust under which the property is sold may redeem the same at any time within
the term or 1 year from and after the date of sale (3) the judgment debtor remains in possession of the
property foreclosed and sold during the period of redemption thus entitled to retain it and receive the
fruits, the purchaser not being entitled to such possession (4) right to redeem land sold under
execution is a property right and may be sold (5) the purchaser of land sold at public auction under a
writ of execution only has an inchoate right in the property, subject to be defeated and terminated
within the period of 12 months from the date of sale, by a redemption on the part of the owner (6) after
the extrajudicial foreclosure and sale of his properties petitioner retained the right to redeem the lands,
the possession, use and enjoyment of the same during the period of redemption and these are the
only rights that Dizon could legally transfer, cede and convey unto respondent (7) instrument cannot be
legally considered a real and unconditional sale of the parcels of land, firstly, because there was
absolutely no money consideration therefor and because the properties had already been previously
sold by the sheriff at the foreclosure sale, thereby divesting the petitioner of his full right as owner
thereof to dispose and sell the lands (8) respondent as transferee of these certain limited rights cannot
grant to petitioner more than said rights thus the only effect of the Option Deed is the grant of the right
to recover the properties upon reimbursement (9) the agreement between petitioner and respondent is
one of those innominate contracts whereby petitioner and respondent agreed "to give and to do"
certain rights and obligations respecting the lands and the mortgage debts of petitioner which would
be acceptable to the bank (10) mistake is a ground for reformation and it was a mistake for the parties
to execute the 2 contracts and stand on the literal meaning of the terms an stipulations used therein
SC (1) petitioner has the right of reconveyance by reimbursing respondent whatever amount the latter
has actually paid on the principal only (2) any outstanding balance on the principal shall be deducted
from the reconveyance price and will be paid by petitioner directly to the banks (3) respondent not to
account for the income from the products and petitioner not to pay any of the interest or any interests
or taxes paid by respondent (4) respondent to deliver possession of the properties to him
Florentino v Encarnacion (Stipulations pour autrui)
petitioners Miguel Florentino, Rosario Encarnacion de Florentino, Manuel Arce, Jose Florentino,
Victorino Florentino, Antonio Florentino, Remedios Encarnacion and Severina Encarnacion, and
the opposers Salvador Encarnacion, Sr., Salvador Encarnacion, Jr. and Angel Encarnacion filed an
application for the registration of a parcel of agricultural land; application alleged among other things
that the applicants are the common and pro-indiviso owners of the land with the improvements
existing thereon stipulating that to the best of their knowledge and belief there is no mortgage, lien or
encumbrance of any kind nor any other person having any estate or interest thereon; that said
applicants had acquired the aforesaid land thru and by inheritance from their predecessors in interest
and said land was adjudicated to them by virtue of the deed of extrajudicial partition; that applicants
Salvador Encarnacion, Jr. and Angel Encarnacion acquired their respective shares of the land thru
purchase from the original heirs; applicant Miguel Florentino asked the court to include a stipulation in
the deed of extrajudicial partition as an encumbrance on the land sought to be registered and cause
the entry of the same on the face of the title that will finally be issued; the stipulation provided that the
products of the land be used in answering for the payment of expenses for the religious functions
specified in the Deed of Extrajudicial Partition; opposers filed a manifestation seeking to withdraw their
application on their respective shares of the land sought to be registered
court: opposers motion to withdraw denied for lack of merit; confirmed title of property; the
arrangement can be revoked as in fact opposers did revoke it as shown by acts accompanying his
refusal to have the same appear as an encumbrance to the title; if viewed as a stipulation pour autrui it
cannot now be enforced because the Church in whose favor it was made has not communicated its
acceptance to the opposers before the latter revoked it
stipulation pour autrui (1) the stipulation is part of an extrajudicial partition duly agreed and signed by
the parties hence binding the contracting parties thereto taking effect between the parties, their
assigns and heirs and its validity or compliance cannot be left to the will of one of them (2) evidence on
record shows that the true intent of the parties is to confer a direct and material benefit upon the
Church as 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 (3) while a stipulation in
favor of a third person has no binding effect in itself before its acceptance by the party favored the law
does not provide when the third person must make his acceptance thus there is no time limit and such
third person has all the time until the stipulation is revoked (4) the Church accepted the stipulation in
its favor before it is sought to be revoked by some of the co-owners as it had been enjoying the
benefits of the stipulation for almost seventeen years which can only be construed as an implied
acceptance by the Church of the stipulation pour autrui before its revocation (5) the acceptance does
not have to be in any particular form (6) the stipulation cannot now be revoked by any of the stipulators
at their own option following the cardinal rule of contracts that it has the force of law between the
parties and the principle that there must be mutuality between the parties based on their essential
equality to which is repugnant to have one party bound by the contract leaving the other free
therefrom (7) consequently opposers must bear with the stipulation being a signatory to the Deed of
Extrajudicial Partition or being privies or successors in interest (8) furthermore they are shown to have
given their conformity to such agreement when they kept their peace having already bought their
respective shares without questioning the enforcement of the agreement as well as having knowledge
as admitted in a Deed of Real Mortgage (9) the annotation on the face of the title to be issued in this
case is merely a guarantee of the continued enforcement and fulfillment of the beneficial stipulation
opposers motion to withdraw denied for lack of merit; annotation allowed
Coquia v Fieldman’s Insurance (Stipulations pour autrui)
respondent issued in favor of Manila Yellow Taxicab Co a common carrier accident insurance policy
under which they will "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”;
a taxicab driven by Carlito Coquia met a vehicular accident which caused his death; the insured filed a
claim for P5,000 which was replied with an offer of P2,000; Insured counter-offered P4,000 which was
rejected; Coquias filed a complaint against the Company to collect the proceeds of the
aforementioned policy
direct cause of action (1) although in general only parties to a contract may bring an action based
thereon this rule is subject to exceptions one of which is stipulations pour autrui (2) the enforcement of
stipulations pour autrui may be demanded by a third party for whose benefit it was made before the
stipulation in his favor has been revoked by the contracting parties although not a party to the contract
(3) the policy under consideration is typical of contracts pour autrui this character being made more
manifest by the fact that the deceased driver paid 50% of the corresponding premiums which were
deducted from his weekly commissions (4) Coquias as sole heirs have a direct cause of action against
the Company (5) as 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 (6) both parties from the inception of their dispute proceeded in entire disregard of the
provisions of their contract relating arbitration thus their conduct was as effective a rejection of the
right to arbitrate
SC affirming RTC: respondents to pay P4,000 + costs
Universal Food Corporation v CA & Francisco (Rescission: yes || substantial and fundamental breach)
defendants instituted an action for rescission of a contract entitled “Bill of Assignment” against
petitioners; defendant invented a formula for the manufacture of a food seasoning derived from
banana fruit popularly known as Mafran sauce; petitioner registered the trademark but due to a lack of
sufficient capital to finance the expansion of his business he secured financial assistance from Tirso
Reyes who formed with the others defendant Universal Food Corporation eventually leading to the
execution of the subject Bill of Assignment; petitioner contends (1) respondent’s are not entitled to
rescission (2) trial court found that the respondents not only have failed to show that the petitioner has
been guilty of default in performing its contractual obligations but the record sufficiently reveals the
fact that it was plaintiff who had been remiss in the compliance of his contractual obligation to cede
and transfer the formula (3) nothing in the successive memoranda issued from which it can be implied
that the respondent patentee was being dismissed from his position as chief chemist
right to use only (1) one of the principal considerations of the Bill of Assignment is the payment of a
royalty and a royalty when employed in connection with a license under a patent means the
compensation paid for the use of a patented invention (2) in order to preserve the secrecy of the
Mafran formula and to prevent its unauthorized proliferation it is provided that defendant be appointed
chief chemist permanently and that in case of his death or disability then his heirs or assigns who may
have the necessary qualifications will be preferred to succeed thus the intention of the respondent
patentee at the time of the execution was to part not with the formula but with the use to preserve the
monopoly and to effectively prohibit anyone from availing of the invention (3) the Bill stipulated that
should dissolution of the petitioner corporation eventually the place the property rights and interests
over said trademark and formula shall automatically revert to the respondent patentee (4) in the
respondents complaint it is alleged that what was ceded and transferred is the use of the formula and
this incontrovertible fact is admitted without equivocation in petitioner’s answer (5) facts of the case
compellingly demonstrate continued possession of the sauce formula by the respondent patentee (6)
conveyance should be interpreted to effect the least transmission of rights thus what is allowed is only
the use of the formula without the transfer of ownership (7) as the Bill vested in the petitioner
corporation no title to the formula the finding by the trial court that respondent had been remiss is
without basis (8) the prevailing milieu when the rescission of the Bill was filed clearly prove that the
petitioner schemed and maneuvered to ease out, separate, and dismiss the respondent from the serve
in flagrant violation of the contract (9) the fact that a month after the institution of the action the
petitioner requested the patentee to report for duty is of no consequence as it was merely a recall to
place said plaintiff (10) no controversy that the Bill is reciprocal in nature and by termination
the services of respondent patentee without lawful and justifiable cause and without nay fault or
negligence on his part the petitioner substantially and fundamentally breached the Bill (11)
respondents were left with no choice but to file the present action for rescission and damages (12) the
provisions of the Bill are so interdependent that violation of one would result oil virtual nullification of
the rest (12) one of the considerations for the transfer of the use was the undertaking by petitioner to
employ respondent in a permanent status this cannot escape liability fro pay the private respondent
(13) rescission creates the obligation to return the things which were the object of the contract thus
petitioner has to return the use and the right to such use
(1) Bill of Assignment rescinded (2) corporation to return and restore the right t the use of his Mafran
sauce (3) corporation and all its assigns and successors are permanently enjoined from using in any
manner the such trademark and formula (4) pay his monthly salary and other costs
Oria Gonzales v McMiking (Badges of Fraud: all present)
Gutierrez Hermanos brought an action against Oria Hermanos for the recovery of P147,204.28; plaintiff
brought another action against the same defendant for the recovery of P12,318.57; members of the
company of Oria Hermanos on account of expiration of the time stated in their agreement this
dissolving their relations and entering into liquidation; Tomas Oria as managing partner entered into a
contract with plaintiff for the purpose of selling and transferring to the plaintiff in this action all of the
property of which the said Oria Hermanos was owner; among the goods transferred was the
steamship which his the subject of the litigation; the case was resolved in favor of Gutierres Hermanso
and the execution was issued theron; the sheriff demanded that Tomas Oria make payment of the said
judgment; he replied that there were no funds with which to pay the same; the sheriff levied upon the
said steamer and took possession of the same announcing its sale at public auction; the plaintiff
presented to the sheriff a written statement claiming to be the owner and to have the right of
possession by reason of the sale to him by Oria Hermanos of all the property belonging to said
company including the steamer; at the sale Gutierrez became the purchase being the highest bidder;
Guetierrez contended that (1) the sale is fraudulent against the creditors of Oria Hermanos (2) that the
transfer consummated of the steamship was void as to the creditor sand as to Gutierrez in particular;
plaintiffs contended that aside form the property included in the sale that it had sufficient other
property o pay the judgment of Gutierrez
(1) it is not sufficient that it is founded on good consideration or is made with bona fide intent as it
must have both elements thus if defective in either of these particulars the conveyance is voidable as
to the creditors (2) the case presents every one of the badges of fraud as the sale in the form in which
it was made leaves the creditors substantially without recourse (3) record shows there was no property
with which the judgment could be paid thus the defendants were obliged to resort to and levy upon
the steamer (4) lower court correct in finding the sale fraudulent and void as to Gutierrez in so far as
was necessary to permit the collection of its judgment (5) evidence failed to show that plaintiff was the
owner or entitled to the possession of the steamer in question at the time of the levy and sale
complained of or that he was damaged (6) defendant had the right tom make the sect and test the
validity of the sale in that way without first resorting to a direct action to annul the sale (7) the creditor
may annul the sale by ignoring it and seizing under his execution the property or any necessary portion
thereof which is the subject of he sale
Siguan v Lim (Rescission: no || dismissed accion pauliana due to lacking requisite and lack of fraud)
in August 1990 Lim issued 2 checks payable to cash; upon presentation by petitioner they were
dishonored for the reason that the account was closed; demands to make goos the checks proved
futile; petitioner filed a case for violation of BP 22; the court convicted Lim as charged; it was also
discovered that she was previously convicted in July 1990 of estafa but the decision was overturned
by the SC holding her only civilly liable; on July 2, 1990 a Deed of Donation conveying parcels of land
were purportedly executed by Lim in facie of he children which was registered; petitioner filed an
accion pauliana against Lim and her children to rescind the questioned deed and declare null and void
the new transfer certificates of title issued for the lots covered by the deed alleging (1) fraudulent
transfer of all her real property to her children in bad faith (2) in fraud of her creditors she conspired
and confederate with her children in antedating the Deed to the prejudice of her creditors (3) at the
time of the fraudulent conveyance, no sufficient properties were left tot pay her obligations; defendant
(1) denied any liability to petitioner (2) convictions in the criminal cases were erroneous (3) dded was
not antedated but made in food faith at a time when she had sufficient property (4) deed was
registered late as she was seriously ill
TC: rescinded the questioned documents (2) nullified the transfer certificates issued in the names of
her children (3) ordered the reinstatements of the previous title (4) defendants to pay petitioner
lacking requisites and no fraud (1) without any prior existing debt there can be neither injury nor fraud
as since the alleged debt was incurred in August 1990 while the dded of donation was executed on
August 1989 the first requisite is lacking (2) not proven that the deed was antedated to make it appear
that it was made prior to petitioner’s credit (3) deed of donation is a public document and as such is
evidence of the fact which gave rise to its execution and of its date (4) the fact that the questioned
deed was registered only on July 2, 1990 is not enough to overcome the presumption as to the
truthfulness of the statements of the date (5) essential that the party asking for the rescission prove
that he has exhausted all other legal means to obtain satisfaction of his claim and petitioner neither
alleged nor proved that she did so (6) for the presumption of fraud to be applied it must be established
that the donor did not leave adequate properties which creditors mights have recourse for the
collection of their credits existing before the execution of the donation (7) petitioner’s alleged credit
existed only a year after the deed was executed thus she cannot be said to have been prejudiced by
such alienation (8) in any case when she deed of donation was executed defendant still had properties
left thus it was not established that the properties left were insufficient to cover her debts existing
before the donation and the presumption of fraud will not come into play (9) petitioner failed to prove
the existence of any of the circumstances from which fraud may be inferred this since the
requirements for the rescission of a gratuitous contract are not present the action must fail (10) Suarez,
albeit a creditor prior to the questioned alienation, is not a party to this accion pauliana thus her credit
cannot be invoked to justify rescission of the subject deed of donation
SC affirming CA: reversed the decision of the trial court and dismissed the accion pauliana
Suntay v CA & Suntay (Badges of fraud: blood relationship, failure to take possession)
Federico Suntay was the registered owner of a parcel of land; he applied as a miller-contractor of the
Natl Rice and Corn Corporation; his application was disapproved as he had several unpaid loans; to
circumvent this he allowed Rafael to apply for him; Rafael prepared an absolute deed of sale whereby
Federico conveyed to Rafel said parcel of land for P20,000 and said deed was notarized; it was agreed
that at ny time plaintiff needed or desired that the tile be restored the defendant would
execute whatever deed and take whatever steps would be necessary to do so; Federico remained
in possession of the property notwithstanding the fact that Rafael became the titled owner; Rafael
never attempted to take possession thereof at any time while Federico continued to exercise the rights
of absolute ownership; less than 3 months later a counter sale was prepared and signed by Rafael
wherein the same parcel of land was sold by Rafael back to Federico for the same consideration of
P20,000; the document appeared to have been notarized but upon examination it was not the deed of
sale that was notarized; Federico claims that the sale was merely simulated and has been executed
only for purposes of accommodation and alleged that when Rafael delivered the second deed to him it
was neither dated nor notarized; Federico through his new counsel requested that Rafael deliver his
copy of the TCT so that the former may have the counter deed of sale registered in his name but the
request was turned down; Rafael alleged the second deed of sale was counterfeit or at least not a
public document which is sufficient to transfer real rights according to law; defendant never paid or
delivered and plaintiff never demanded or received the P20,000 since the Deed of Absolute Sale was
absolutely simulated intended solely to accommodate and assist defendant;
mere accommodation agreement (1) 2 instruments were executed closely one after the other
involving transferred re-transfer of the same property at exactly the same price (2) the existing close
relationship between the parties whose blood relation was the foundation of their professional and
business relationship and is an unmistakable token of simulation as it has been observed that fraud
is generally accompanied by trust (3) gross inadequacy of the stated contractual consideration
given the value and location of the property (4) not considered dacion en pago because Rafael
never informed defendant that he considered the transfer to be in consideration of his alleged unpaid
AF and illogical if it was a dation as he agreed to the repurchase pf the property 3
months thereafter (5) physical possession, enjoyment and use of the property in question
remained through the years up to the present in the hands of Federico (6) Rafael’s failure to
take possession of the property is a clear badge of fraud since he never assumed the benefits let alone
the burden of ownership and he did not even include the property in his statement of assets
and liabilities (7) Deed of Absolute sale is absolutely simulated and cannot be ratified as it was never
intended to produce the actual transfer of ownership and/or rights attached to ownership (8) the
counter deed of sale is also fictitious and is incapable of producing legal effects (9) as no property was
validly conveyed under the deed the second deed of sale executed is considered ineffective and
unavailing
heirs of Rafael Suntay ordered to reconvey the property to private respondent and surrender the
duplicate copy of the TCT
Singson v Isabella Sawmill (Who may and may not institute action for annulment)
defendants enters into a contract of partnership under the firm name Isabella Sawmill; plaintiff sold a
truck and 2 tractors to the partnership who then agreed to make arrangements with Intl Harvester so
that the latter would sell farm machinery to petitioner with the understanding that the price was to be
paid by the partnership; Intl Harvester has not been paid P1,288.89; defendants allege (1) the
partnership had been dissolved (2) the other defendants became the successors-in-interest and have
bound themselves to answer for any and all obligations of the defunct partnership (3) to secure the
performance of the obligations they constituted a chattel mortgage over the properties (4) the chattel
mortgage may no longer be annulled because it had been judicially approved and the same had been
ordered foreclosed
(1) where the basic issue is something other than the right to recover a sum of money this Court has
considered such actions as cases where the subject may not be estimated in terms of money and are
cognizable by CFI (2) the plaintiff’s cause of action springs from the alleged nullity of the judgment
based on one ground or another, particularly fraud, which fact affords the plaintiff rights to judicial
interference in his behalf (3) the cause of action is entirely different from that in the action which gave
rise to the judgment sought to be annulled thus there is no plausible reason why the venue of the
action to annul the judgment must necessary follow the venue of the previous judgment (4) a CFI or a
branch thereof has the authority and jurisdiction to take cognizance of and to act in a suit to annul final
and executory judgment or order rendered by another CFI by another branch of the same court (5)
dissolution of a partnership is cause by any partner ceasing to be associated in the carrying on of the
business however the partnership is not terminated but continues until the winding up of the business
(6) the partners did not terminate the business of the partnership instead they continued the business
still in the name of said partnership as it is expressly stipulated in the memo-agreement that the
remaining parties had constituted themselves as the partnership entity (7) there was no liquidation of
the assets of the partnership and the used the properties of said partnership as the properties they
mortgaged belonged to Isabela Sawmill (8) appellant was correctly held liable by the trial court
because she purchased at public auction the properties of the partnership which was mortgaged to
her (9) doesn’t appear that the withdrawal of one partner from the partnership was punished in the
newspaper thus the appellees and the public in general had a right to expect that the credit they
extended could be enforced against the properties of the partnership (10) the judicial foreclosure of the
chattel mortgage executed did not excuse Saldajeno from liability to the creditors of the partnership
and she cannot complain as she is partly to blame for not insisting on the liquidation of the partnership
(11) while it may be presumed that both parties acted in good faith the person who gave occasion to
the damage must bear the consequences where one must suffer (12) the parties were prejudiced in
their rights by the execution of the chattel mortgage over the properties of the partnership to Saldajeno
thus they have a right to file the action to nullify the chattel mortgage in question (13) no showing that
the appellants displayed a wanton disregard of the rights of the plaintiffs as they believed in good faith,
albeit erroneously, that they are not liable to pay the claims
defendants have a right to be reimbursed whatever amounts they shall pay the petitioners by their co-
defendants (2) blah blah blah
Cadwaller v Smith, Bell & Company and Peabody & Co (Mutual restitution)
petitioner sues for recovery of the difference between the amount turned over to the company on
account of a cargo of cedar piles consigned to the defendants as its agents and afterwards bought by
them, and the amount actually received by them on the subsequent sale thereof; Pacific shipped 581
piles to defendant Peabody on the sale of which they were to receive a commission of 1/2 of whatever
sum was obtained over $15 for each pile and 5% of the price of thr piles after storage; defendant
wrote a letter informing petitioner as the agent of Pacific that due to the lack of demand the piles
would have t be sold at considerably less than $15; petitioner directed them to make the bet possible
offer for the piles; it was discovered that Peabody had entered into negotiations with for the sale of the
piles for $20 as well as the sale of 213 piles for $19; in total they received $3,445.66 above the
amount paid by defendant to petitioner
(1) at the time the agents were buying from their principal the piles at $12 in the strength of their
representation that no better price was obtainable they had already sold a substantial part for $19 thus
they are consequently liable (2) in concealing from their principal the negotiations with the Government
and misrepresenting the condition of the market the agents committed a breach of duty from which
they should benefit (3) the contract of sale thereby induced was founded on fraud and was subject to
annulment by the aggrieved party
$4,541.98 to be entered in favor of the defendants (1) the defendants are not entitled to retain their
commission realized upon the piles included under the contract so annulled (2) they can keep the
commission the 213 piles already sold under the original agency at the time of making the contract
Velarde v CA & Raymundo (Mutual restitution: yes)
petitoners entered into a deed of sale with assumption of mortgage with private respondents paying a
dp of P800,000 and assuming the mortgage amount of P1.8M in favor of BPI; petitioner executed an
undertaking that during the pendency of the application for the assumption of the mortgage she would
continue paying said loan in accordance with the mortgage deed and that in the event of violation she
P800,000 dp would be forfeited and the deed of sale with assumption of mortgage shall be deemed
automatically cancelled without necessity of notice or judicial declaration; after payment for 3
months the bank denied the application for assumption of mortgage thus petitioners stopped
making payments; petitioners informed respondents that they are willing to pay the balance if (1)
deliver actual possession of the property (2) cause the release of title and mortgage and make it
available without any liens or encumbrances (3) execute an absolute deed of sale; notice of
cancellation/rescission was sent to petitioners for non-performance; petitioners filed a complaint for
specific performance, nullity of cancellation, writ of possession and damages
breach of performance on reciprocal obligation (1) assumption of the mortgage is part of the obligation
of petitioner under the contract as it was part of the consideration of the sale (2) non-payment of
mortgage and subsequently non-payment of agreed price results in substantial and
fundamental violation of the contract (3) having violated the contract petitioners lost their right to its
enforcement thus cannot avail of action for specific performance (4) payment of price may still be
allowed as long as no demand for rescission has been made judicially or by notarial act which in this
case was sent (5) conditional offer to pay cannot take the place of actual payment as the additional
burdens were not agreed upon in the original contract (6) private respondents already performed their
execution through the execution of the Deed of Sale which constructively delivered possession (7)
deed of sale violated not mortgage contract thus stipulation in the latter for forfeiture of dp does not
apply and Art 1191 governs (8) rescission abrogates the contract from its inception and requires a
mutual restitution of benefits received
mutual restitution; initial and mortgage payments to be returned lest there be unjust enrichment
PNB v Philippine Vegetable Oil Company v Whitaker (Unenforceable: Purpose of Statute: prevent fraud thus
should not be made an instrument furthering them)
respondent company was in debt and petitioner was its largest creditor; petitioner was secured
principally by a real and chattel mortgage; respondent executed another chattel mortgage in favor of
petitioner; Bankruptcy was imminent; respondent Whitaker was the general manager of the
respondent corporation and he pledged certain private properties to secure the creditors of the Oil
Company; at his instance but inspired to such action by the bank a receiver for the Company was
appointed by the CFI; petitioners then obtained from respondent a new mortgage on Feb 20; on Feb
28 the receivership was terminated; March 8 it was notarized and then registered on March 22; the
bank suspended the operation of respondent in May and definitely closed the plaint on August 14;
petitioner then instituted the action to foreclose the mortgage of respondent; respondent Whitaker
presented a complaint on intervention
mortgage had not been legally executed (1) the mortgage was executed by petitioner before the
termination of the receivership when it could not have been legally secured as the property was in
custodia legis thus the company was then absolutely inhibited from giving a mortgage on its property
(2) the receiver was not a party to the mortgage and the court would not have authorized the receiver
to consent to the execution as it would desire to protect the rights of all the creditors and not the rights
of one particular creditor (3) the mortgage could not have been executed without the dissolution of the
receivership and such was dissolved through representations made to the court that the bank would
continue to finance the company however less than two months after the mortgage the bank withdrew
its support if effect closing the company (4) the mortgage accomplished during a receivership is a
nullity and it was accomplished when the petitioner had a dominating influence in the affairs of the
company (5) unconscionable to allow the bank after the hands of the other creditors were tied to
virtually appropriate to itself all the property of the company (6) mortgage is clearly voidable whether
due to undue influence, deceit, or constructive fraud (7) PNB not left without security as the previous 3
mortgages remain in effect and may be foreclosed
no valid agreement by which PNB bound itself to finance respondent (1) Statute of Frauds applies only
to agreement not to be performed within a year from the making thereof and since it was enacted for
the purpose of preventing frauds it should not be made the instrument to further them (2) stipulated
that no contract entered into by the GM would be valid unless made with the advice and consent of its
BOD and there was no indication that it had consented to an agreement for practically unlimited
backing of the company or that it had ratified any such promise made by its GM (3) although a proxy
may have been procured at the instance of petitioner it obviously did not bind the officials of the bank
(4) despite testimony that respondent had evidently made good money in the past and that petitioner
contemplated financing the former to keep them out on insolvency this did not amount to a definite
agreement binding on the bank but a general intimation proffered by the GM of the bank (5) no binding
promise, tacit or express, made by petitioners to continue indefinitely backing respondent (6)
respondent Whitaker was in no way personally liable for any part of the obligations of the company but
he nevertheless signed the creditors agreement without making himself the successor in interest thus
he cannot recover from the company in the proceedings as sympathy cannot be transmuted into legal
authoritativeness
SC (1) plaintiff entitled to money judgment against respondent (2) mortgage has not been legally
executed and cannot be given effect but the prior mortgages can be foreclosed (3) PNB has a
preferred claim when the prior 3 mortgages are foreclosed and the remainder of the assets if any are to
be applied to the payment pro rata of the unsecured claims (Whitaker and unsecured portion of PNB
debt) (4) Whitaker failed to establish an agreement binding petitioner to finance petitioner thus not
entitled to recover damages nor can he recover from respondent company as he is not the legatee of
the assets of the company (5) no pronouncement as to Whitaker’s possible rights in connection with
the creditor’s agreement since it is not here in question and the parties thereto are not before the court
Rosencor & Joaquin v Inquing (Unenforceable: no because not under Statute || Purpose of statute: prevent
fraud and perjury due to unassisted memory)
respondents originally filed the case for annulment of the absolute deed of sale which was later
amended to one of rescission; respondents averred that they are the lessees of a residential
apartment; such lease was not covered by any contract; they allegedly were verbally granted by the
lessors the pre-emptive right to purchase the property if ever they decide to sell the same; upon the
death of the spouses Tiangco the management of the property were adjudicated to their heirs
represented by De Leon; they were allegedly promised the same pre-emptive right by the heirs;
lessees continued to stay in the premises and allegedly spent their own money for its upkeep which
were not deducted from the rentals which had increased from P150 to P1,000; lessees then received a
letter from Atty. Aguila demanding that they vacate the premises so that the demolition of the building
may be undertaken; respondents refused; De Leon refused to accept the lessee’s rental payment and
subsequently sent a letter offering to sell the property leased for P2,000,000; lessees countered with
P1,000,000 but no answer was received; petitioner Joaquin then came to the property introducing
himself as the new owner; lessees receive a letter from Atty. Aguila advising them that the heirs had
already sold the property to petitioner Rosencor; lessees questioned the disregard of their pre-emptive
right and requested a copy of the deed of sale which was refused; respondents tender of payment was
also refused; before demolition could take place the barangay interceded; the lessees were given a
copy of the deed and discovered that they were deceived as the sale took place on Sept 4, 1990 for
only P726,000 while De Leon only made them the offer for P2,000,000 in October 1990; the lessees
offered to reimburse De Leon for the P726,000 plus P274,000 to complete there P1M offer which was
refused thus the present action
RTC: dismissed as the right of redemption was merely oral thus cannot be enforced
CA: reversed as respondents had duly proven the right by reason of petitioner’s waiver of the
protection of the statute for failure to object to the presentation of oral evidence of the said right and
thus ordered the sale rescinded, the recoveyance of the premises and the respondents to be entitled
to first refusal
statute of frauds does not contemplate a right of first refusal thus need not be written to be
enforceable and may be proven by oral evidence (1) statute of frauds does not deprive the parties of
the right to contract but merely regulates the formalities of the contract necessary to render it
enforceable (2) purpose is to prevent fraud and perjury in the enforcement of obligations evidenced by
unassisted memory of witnesses by requiring certain enumerated contracts and transactions to be
evidenced in writing (3) the statute of frauds refers to specific transactions and cannot be applied to
others and it presupposes the existence of a perfected contract (4) not all agreements affecting land
must be put into writing to attain enforceability as these agreements are not among those enumerated
under Art. 1403 (5) a right of first refusal is not among those listed and is not by any means a perfected
contract as at most it is a contractual grant not of the sale but the right of first refusal over the property
sought to be sold (6) respondents adequately proved the existence of their right as they uniformly
testified of the promise and De Leon informed them of the receipt of the offer and offered to sell the
same to them which she would not have done if she did not recognize the right (7) no evidence to the
contrary thus the right was substantially proven
oral only and notice [bad faith] not proven (1) contract otherwise said may be rescinded by reason of
injury to 3rd persons who have substantial interests which were prejudiced by the sale without their
right of first refusal being recognized (2) contractual right of first option is a valid cause of action
enforceable by an action for specific performance and right of first refusal can only be exercised over
the property if the fraudulent sale is first rescinded (3) in this case however the right of first refusal was
an oral one thus constructive notice is inapplicable as it was never reduced into writing much less
registered as even the lease contract was oral (4) good faith is always presumed thus in order to hold
the petitioners guilty of bad faith there must be clear and convincing proof that petitioners were made
aware of the said right of first refusal (5) respondents failed to present any evidence that prior to the
sale of the property petitioners were aware or had notice of the oral right if first refusal (6) if there was
any indication of bad faith based on the evidence it is only on the part of De Leon as she was aware of
the right and proceeded to sell the property (7) bad faith on the part of De Leon does not mean the
petitioner acted in bad faith as it was shown that the latter was in lawful possession and acted in good
faith
SC: remedy for unjustified violation of their right of first refusal is an action for damages against the
heirs of spouse Tiangco not one for rescission
Carbonnel v Poncio (How ratified || executed thus exception to Statute of Frauds and oral evidence admissible)
petitioner purchased from respondent Poncio a parcel of land paying a an amount and assuming
respondent's obligation with the Republic Savings Bank with the understanding that the balance
would be payable upon execution of the deed of conveyance; one of the conditions was that
respondent would continue staying on the land for 1 year as stated on the document ordered executed
by the plaintiff in defendant’s dialect and signed by the latter; respondent refused to execute the
corresponding deed of sale despite repeated demands and conveyed the property to defendant
spouses Infante who knew of the sale to plaintiff; plaintiff thereby alleged she suffered damage filing
the complaint to annul the sale to Infantes; defendants allege (1) the claim is unforceable under the
Statute of Frauds
exception to Statute of frauds and oral evidence is admissible (1) well settled that the Statute is
applicable only to executory contracts not to contracts totally or partially performed as a sufficient part
performance by the purchaser under a parol contract removes the contract from its operation (2)
reason is that there is a wide field for fraud in executory contract as unless they be in writing there is
no palpable evidence of the intention of the parties thus the statute has been enacted precisely to
prevent fraud (3) if the contract has been partially or totally performed, the exclusion of parol evidence
would promote fraud or bad faith for it would enable the defendant to keep the benefits already
derived by him from the transaction in litigation and at the same time evade the obligations or liabilities
(4) it is not enough for a party to allege partial performance but neither is such party required to
establish such partial performance by documentary proof before he could have the opportunity to
introduce oral testimony as the rejection of testimonial evidence on partial performance would nullify
the rule that the Statute is inapplicable to contracts which have been partly executed and lead to the
very evils that the statute seeks to prevent (5) the principle is that oral evidence is admissible in such
cases to prove both the contract and its part performance and if the evidence fails to prove clearly that
there had been partial performance then the Court should apply the Stature otherwise it should not be
applied (6) respondent Poncio admitted that plaintiff had offered several times to purchase his land
and a document signed by him shows that he sold the property and that he would stay for one year
free of charge and if he cannot find a place to transfer he may remain in said lot (7) if Poncio had not
decided to sell the land there was no reason for him to get the permit to stay (8) if plaintiff intended to
mislead Poncio she would have caused the document to be written in English instead of troubling
herself to see to it that it was written in his native dialect (9) Poncio’s signature on the document
suggests that he is neither illiterate nor so ignorant as to sign a document without reading its contents
(10) clear that she is entitled legally as well as equitably to an opportunity t ointroduce parol evidencee
in support of the allegations of her second amended complaint
SC: cause to be remanded to the lower court for further proceedings; costs against defendants
Liguez v CA & Lopez (When the contract is illegal and one of the parties is incapable of giving consent: not in
pari delicto thus donation valid)
plaintiff averred to be the legal owner of a parcel of land pursuant to a deed of donation executed in
her favor by the late owner; the defense alleged that (1) the donation was null and void for having an
illicit cause or consideration which was plaintiff entering into marital relations with Lopez who was a
married man (2) the property had been adjudicated to them as heirs since 1949
SC (1) under Art 1274 liberality of the donor is deemed cause only in those contracts that are of “pure”
beneficence; in remunatory contracts the consideration is the service or benefit for which the
remuneration is given (2) motive may be regarded as cause when it predetermines the purposes of the
contract and the late Lopez was not moved solely by the desire to benefit petitioner but also to secure
her cohabiting with him so that he could gratify his sexual impulses (3) the donation was but one part
of an onerous transaction thus the conveyance was clearly predicate upon an illicit causa (4) motive
may be regarded as cause when it predetermines the purpose of the contract (5) Lopez would not
have conveyed the property in question had he known that appellant would refuse to cohabit with him
so the cohabitation was an implied condition to the donation and being unlawful necessarily tainted
the donation itself (6) not in pari delicto as the late Lopez was a man advanced in years and mature
experience while the appellant was a mere minor and there was no finding that she was fully aware of
the terms of the bargain entered into between Lopez and her parents (7) her acceptance in the deed of
donation did not necessarily imply knowledge of conditions and terms set forth (8) it was appellant
parent’s who were insisted on the donation before allowing her to live with Lopez suggesting seduction
more than immoral bargaining on the part of appellant (9) illegality is not presumed but must be duly
and adequately proved (10) the heirs cannot set up the plea of illegality to recover the disputed land as
Lopez would be barred from setting up that plea and the heirs can have no better rights than Lopez
himself (11) Lopez could not donate the entirety of the property in litigation to the prejudice of his wife
because said property was conjugal in character (12) the donation made by the husband in
contravention of law is not void in its entirety but only insofar as it prejudices the interest of the wife
and the law makes no distinction between gratuitous transfers and conveyances fora consideration
(13) the heirs are barred from invoking the illegality of the donation but their right to a legitimate out of
his estate is not affected as it is granted by the law itself hence the forced heirs are entitled to have the
donation set aside insofar as in officious (14) petitioner should be considered part of the donor’s estate
in computing the legitimes (15) a contract with an illegal cause may produce effects under certain
circumstances where the parties are not of equal guilt
petitioner declared entitled to so much of the donated property as may be found upon proper
liquidation not to prejudice the share of the widow in the conjugal partnership or the legitimes of the
forced heirs
Rellosa v Gaw Chee Hun (When the contract is illegal and one of the parties is incapable of giving consent:
Reversion or Escheat)
petitioner sold to respondent a parcel of land together with the house erected thereon; petitioner
remained in possession of the property under a contract of lease; petitioner alleged the sale was
executed subject to the condition that vendee being a Chinese citizen would obtain the approval of the
Japanese Military Administration in conformity with Seirei No. 6 which required approval before aliens
could acquire private land; as the approval had not been obtained and even if it were the sale would
be void under the Constitution the petitioner instructed the present action seeking the annulment of
the sale and praying that the property be returned
RTC & CA: both the sale and lease valid and dismissed the complaint
(1) the law that should govern is the Constitution as it was adopted Sept 1943 and the sale was
executed Feb 1944 (2) under the Constitution aliens may not acquire private or public agricultural land
including residential lands thus disposing of the question on the validity of the sale (3) even if petitioner
could invoke the Constitution they are prevented from doing so if their purpose is to recover the lands
that they have voluntarily parted with because of their guilty knowledge that it was violative of the
Constitution and they cannot escape the conclusion because they are presumed to know the law (4)
the law will not aid any party to an illegal agreement as when they are in pari delicto no affirmative
relief of any kind will be given to one against the other (5) the contract does not come under the
exception of advancement of public policy as it is not intrinsically contrary to public policy nor does
the illegality consist in its opposition to public policy as it is not illegal because it is against the
Constitution (6) application of the doctrine of in pari delicto does not contravene the fundamental
policy of the constitutional prohibition of aliens possessing land as the remedy is lodged elsewhere (7)
2 remedies available with is an action for reversion and escheat to the State [escheat imputes to the
government the ownership of all the lands and makes such government the original source of all
private titles thus reversion takes place when the title falls; reversion is the consequence of annulment
or cancellation when no one else could legitimately claim the property except its orginal owner- the
state] (8) thus possible to enforce the fundamental policy of the Constitution regarding natural
resources without doing violence to the principle of in pari delicto
SC: sale in question is null and void but plaintiff is barred from taking the present action under the
principle of in pari delicto
PBC (Justina Santos) v Lui She (Wong Heng) (Agreement is not illegal per se but is prohibited: exception to in
pari delicto if public policy is enhanced)
Justina Santos and her sister were the owners in common of a piece of land with 2 residential houses
thereon; the sisters lived in one of the houses while Wong Heng, a Chinese, lived with his family in the
other which was a restaurant; Justina became the owner of the entire property as her sister died; she
was 90 years old at the time and her only companions were her 17 dogs and 8 maids; Wong’s 4
children became the joy of her life and Wong’s himself was entrusted with the safekeeping of various
accounts including the rentals of the property he was leasing; Wong was also in charge of paying, on
her behalf, taxes, salaries and household expenses; in grateful acknowledgement Justina executed a
contract of lease in favor of Wong covering more land for 50 years giving him the right to withdraw at
any time; 10 days later the contract was amended to cover the entire property including the portion on
which her house stood; for his part Wong undertook to pay the food for her dogs and the salaries of
her maids; Justina then executed a contract giving Wong the option to buy the leased premises
conditioned in his obtaining Philippine citizenship; his petition pending in Rizal was withdrawn when it
was discovered that he was not a resident thereof; Justina then filed a petition to adopt him and his
children which was abandoned upon discovering the error in her belief that the adoption would confer
on them Philippine citizenship; she executed two contracts extending the lease to 99 years and fixing
the term of the option at 50 years
Justine them claimed that the various contracts were made by her because of machinations and
inducements and by taking advantage of her helplessness and that they were made to circumvent the
constitutional prohibition precluding aliens from acquiring lands in the Philippines and also of the Phil
Naturalization Laws
Wong (1) admitted that he enjoyed her trust and confidence but denied having taken advantage
thereof to secure the execution of the contracts in question (2) insisted that the various contracts were
freely and voluntarily entered into by the parties
LC: contracts declared null and void except the 1st lease contract
subsequent to the submission for decision to the CA both parties died and were substituted for the
current parties
PBC (1) annul lease contract as it lacks mutuality (2) it included a portion which was in custodia legis
at the time (3) the contract was obtained in violation of the fiduciary relations of the parties (4) consent
was vitiated (5) the lease contract is absolutely simulated like the rest of the contracts
the consent of Justina was given freely and voluntarily (1) where the contracting parties have agreed
that such option shall exist the exercise of the option is as much in the fulfillment of the contract as
any other act which may have been the subject of the contract (2) Justina became the owner of the
entire property upon the death of her sister hence when she else the property she did so already as
owner thereof and it was not in custodia legis (3) Wong was never an agent of Justina as the
relationship of the parties did not amount to an agency (4) Wong may have indeed supplied the data
which embodied the lease contract but this does not detract from the binding force of the contract as
it was fully explained to Justina by her own lawyer (5) the lawyer, in preparing in the lease contract,
tried to persuade her to modify the contract to a month-to-month basis but she remained firm and
unyielding (6) while her lawyer declared that he saw no money paid at the execution of the contract,
the consideration need not pass from one party to the other at the time of the execution because the
promise of one is the consideration for the other (7) the contracts considered collectively reveal an
insidious pattern to subvert by indirection the Constitution thus the illicit purpose became the illegal
cause rendering the contracts void (8) while a lease to an alien for a reasonable period and option
giving an alien the right to buy conditioned on his acquiring Phil citizenship are valid the arrangement
is clearly a virtual transfer of ownership whereby the owner divests himself of right the sum total of
which make up ownership consolidated in an alien (9) while the parties are in pari delicto there is still
relief as the original parties have since been instituted by their administrators to whom would be unjust
to impute their guilt (10) the exception to the rule is when the agreement is not illegal per se the plaintiff
may recover if public policy is thereby enhanced and the Constitutional provision is an expression of
public policy to conserve lands for the Filipinos (11) the policy would be defeated and its continued
violation sanctioned if instead of setting the contracts aside and ordering the restoration of the land to
the estate of Justina the Court applies the rule of in pari delicto (12) claims by Justina of rentals due
and Wong’s claims from liquidation of expenses are dismissed under Rule 69 Sec 123 of the Rules of
Proof whether the Court shall conclude there is neither deficit nor superavit and will let the matter rest
as in the ordinary course of things a person will live within his income
SC (1) contracts are set aside (2) land is ordered returned to the estate (3) respondent ordered to pay
the balance of his accounts and the amounts consigned shall be applied to the payment of rentals
until the premises are vacated
Frezel v Catitio (When the agreement is not illegal per se but is prohibited: applies only to contracts
merely prohibited to benefit private interest not those void ab initio)
petitioner is an Australian citizen who arrived in the Philippines and started engaging in business and
married a Filipino citizen; they legally separated (bed and board) without obtaining a divorce; petitioner
then arrived in Sydney and met respondent, a Filipino masseuse, who, unknown to petitioner, was
married to a German national; petitioner persuaded her to return to the Philippines telling her he was
eager to divorce his wife and marry her; defendant then proceeded to purchase various properties,
including one turned into a beauty parlor, all registered in the name of defendant; while he was abroad
he received a letter from defendants husband begging him to leave her alone; petitioner confronted her
and she admitted to being married but assured him that she would divorce him; petitioner then
continued purchasing properties, including a beach resort, and registered them in defendant’s name as
sole vendee; defendant’s petitions for divorce were denied as her husband opposed them wanting half
of all the property she owned in the Philippines before he would agree and threatening to file a
bigamy case; the parties agreed to put up a corporation but defendant changed her mind at the
last minute and was advised to insist on claiming ownership over the properties acquired during their
relationship; their relationship began deteriorating and petitioner decided to live separately and cut off
all contact; petitioner filed a complaint for recovery of real and personal properties and another
for specific performance, declaration of ownership, sum of money and damages
RTC Quezon: in favor of petitioner declaring him as owner
void ab ignition and in pari delicto favors respondent (1) the transactions are in violation of the
Constitution and are null and void and produces no legal effect at all (2) the petitioner being a party to
an illegal contract cannot ask to have his illegal objective carried out as one who loses money
by knowingly engaging in a contract or transaction which involves his own moral turpitude may
not maintain an action for his loses (3) equity follows the law and where the wrong of one party equals
that of the other the defendant is in the stronger position (4) the petitioner is charged with
the knowledge of the constitutional prohibition and it can be gleaned from the decision that the
petitioner was fully aware that he was disqualified thus he had the deeds placed in respondent’s name
as the sole vendee (5) the parties could not lawfully be wed and evidence on record shows petitioner
knew of respondent’s marriage but continued to purchase the subject properties and even if they
could be wed petitioner is still disqualified to own the properties in tandem with respondent (6) Art
1416 When the agreement is not illegal per se but merely prohibited the plaintiff may recover if public
policy is enhanced.. applies only to contracts which are merely prohibited to benefit private interests
not contracts void ab initio (7) the sales of the parcels of land in favor of petitioner are illegal per se as
they were entered into in violation of the Constitution (8) it may be unfair to bar petitioner from filing an
accion in rem verso for the properties or from recovering the money he paid but it is founded on
general principles of policy which the defendant has the advantage of contrary to the real justice as
between petitioner and respondent
SC affirming CA & RTC Davao: in favor of defendant (1) the parcels of land was purchased by
defendant based on documentary evidence (2) petitioner has no cause even if he was the buyer as he
is an alien disqualified from owning and acquiring lands (3) the sale to petitioner was null and void (4)
petitioner was precluded from recovering being in pari delicto (5) petitioner knowingly violated the
Constitution (6) allowing recovery would embolden aliens to violate the Constitution and defeat rather
than enhance policy
Fabian v Fabian (Implied trust: yes || if property is acquired through fraud there is an implied trust)
petitioners filed a complaint for reconveyance alleging their father bought from the govt a parcel
of land of the Friar Lands Estate; and when he died he was survived by his
children including the plaintiffs; defendants Silbina and Teodora, niece of te deceased, executed an
affidavit on the strength of which the lands were sold by the Director of Land, on behalf of the govt, to
them who took physical possession thereof and exercises all rights and obligations of ownership
including paying taxes and subdividing the lot into two equal parts; plaintiffs alleged that
the defendants acquired the property through fraud and that the affidavit they executed was a false
narration of facts becasue Sibling knew she was not the only daughter and heir and Teodora likewise
knew that as a mere niece she is precluded from inheriting in the presence of his 4 surviving daughters
thus the lot was not transferred to an innocent purchaser for value; defendants claim (1) Pablo
was not the owner of the lot at the time of his death as he had not fully paid the amortizations (2) they
are the absolute owners having purchased it from the government (3) they exercised all the attributes
of ownership and up to the present (4) the present action for reconveyance had already prescribed
LC: defendants had acquired a valid and complete title to the property by acquisitive prescription and
dismissed the complaint
(1) the lot was part of the friar lands estate governed by the Friar Lands Act thus title is reserved to the
government until the purchase makes full payment of all the required installments and interest thereon
however the govt retains no right as the owner as the reservation of title is made merely to protect the
interest of the govt so as to preclude or prevent the purchaser from encumbering or disposing of the
lot before full payment (2) the deed of conveyance and the certificate of title , at least in equity, retroact
thus pending the completion of the payment of the purchase price the purchaser is entitled to all the
benefits and advantages as well as losses which may accrue to the land (3) Pablo had paid five annual
installment to the govt and had been issued the sale certificate in his name at the title thus he was the
owner at the time of his death and his rights and interest over the property passed to his heirs upon his
demise (4) the assignment and sale of the lot to the defendants were therefore null and void as to the
portion sold to Teodora and as well as to that portion which lawfully devolved in favor of petitioners (5)
principle that if the property is acquired through fraud the person obtaining it is considered a trustee of
an implied trust for the benefit of the person from whom the property comes and in constructive trusts
the rule is that laches constitutes a bar to actions to enforce the trust and repudiation is not
required unless there is a concealment of the facts giving rise to the trust (6) the action was filed only
after 32 years and it was not shown that defendants concealed the facts going rise to the trust thus
the action should have been filed within 4 years from the discovery of the fraud which is deemed to
have taken place when the new certificate of title were issued exclusively in the names of defendants
(7) the statute of limitations operates from the moment such adverse title is asserted by the
possessor although generally actions for partition do not describe (8) not only had laches set in when
the petitioners instituted their action for reconveyance but their right to enforce the constructive trust
had already prescribed thus logically the acquisitive prescrioption has likewise operated to vest
absolute title in the defendants as they had exercised adverse possession
SC (1) dismissed as the motion to enforce the constructive trust had prescribed and full and complete
title has vested in the defendants by acquisitive prescription
Bueno v Reyes (Implied trust: yes || operation of law to prevent unjust enrichment)
petitioner filed an answer claiming a lot as property belonging to himself and to his 2 brothers; the
case was heard without opposition and the land was adjudicated to them; 23 years
thereafter petitioners filed an action for reconveyance alleging (1) the said lot originally belonged to
Jorge Bueno leaving the property to his children upon his death and that herein petitioner acquired the
same through intestate succession (2) defendant had the land declared in his name either in bad faith
or by mistake as he knew fully well that said land was never owner by them and has never been in
their possession (3) knowing further that said parcel belonged to and and was possessed by the wife
of defendant Francisco in conjunction with her siblings herein petitioners (4) the fact that defendants
were declared the owners has only bee discovered this year; defendants raised the defenses of laches,
imprescriptibility of title and prescription of action
(1) what was apparently designed to be an express trust for the filing of the answer in
the cadastral proceeding failed to materialize thus if any trust can be deduced it is an implied one
arising by operation of law to satisfy the demands of justice and to protect against unfair dealing of
downright fraud (2) registration of the property by one person in his name whether by mistake or fraud
impresses upon the title so acquired the character of a constructive trust for the real owner which
would justify the action for reconveyance (3) prescription supervenes where the trust is merely an
implied one where no fiduciary relationship exists and the trustee does not recognize the trust (4)
action for reconveyance is subject to prescription in 10 years but the constructive trust arose
by reason of the bad faith or mistake thus the cause of action is deemed to have accrued only upon
the discovery of such bad faith or mistake which is when they discovered that Francisco Reyes had
obtained registration of the property in violation of their agreement (5) the cadastral proceeding itself
was not constructive notice as the answer they had authorized him to file was not adverse to them
and neither may invoke the constructive notice rule on the basis of their own breach of the authority
given (6) the prescription period is to be reckoned from 1962 when the petitioners appeared on the
scened and tried to get possession wherein they discovered the mistaken or fraudulent registration (7)
more in keeping with justice to afford the plaintiffs as well as the defendants the opportunity to lay
their respective claims and defenses before the court in a full-blown litigation
SC: reversed order and the case is remanded for further proceedings
Tamayo v Callejo (Implied trust: no || express because created by the will of the parties)
petitioners owned a parcel of land and sold part of the northern portion to Fernando Domantay who
took possession thereof; sometime after thus sale Vicente Domantay died; his widow waived her rights
to the remaining portion of the original property in favor of her children, Mariano and Marcos, who
were then declared sole heirs of the deceased; the brothers then applied for registration of a parcel of
land alleging the they had thus inherited the same from their deceased father; they obtained
registration for a portion and acknowledged that the remaining portion thereof belonged to the estate
of Flor Mata; Domantay then sold the land he purchase to respondent who took possession;
Marcos sold his undivided share in the property to his brother herein petitioner; petitioner sold part of
the western portion of the property and upon the buyer’s request a surveyor went to the property
to prepare a subdivision plan and segregate the 7 hectares conveyed but such was not accomplished
as respondent refused entry to the portion he held and asked petitioner to exclude the same from
the transfer certificate held by the latter; petitioner refused thus respondent registered his adverse
claim over the land and had it annotated; petitioner claimed that respondent was outside the perimeter
of the area covered by the certificate and also pleaded the statute of limitations
land claimed by respondent is part of the land covered by the certificates of title and that it is held in
trust by petitioner (1) although the trust created may have had a constructive or implied nature, its
status was substantially affected by several circumstances such as when petitioner explicitly
acknowledged that his deceased parents has sold a portion to Domantay and that he us the absolute
owner of said land (2) the effect of such imparting is an express trust having been created by the will of
the parties (3) it expresses a continuing and subsisting trust not subject to the state of limitations until
repudiated in which case the period of prescription begins to run only from the time of the repudiation
(4) case at bar was filed on on June 25, 1952 when the period of prescription had barely begun to
run and the CA granted him affirmative relief (5) based on the records the portion bought by
respondent is persuasively shown to be that northern portion of the land of petitioner
SC affirming CA: (1) the action to enforce said trust does not prescribe (2) land is deemed reconveyed
to defendant after a survey defining with precision the metes and bounds of the area to be segregated
for respondent (3) case remanded to court of origin for preparation of a subdivision plan of the portion
to the segregated