Secret Society Crabs 2

THE SECRET SOCIETY OF CRABS
FLORENTINO V. ENCARNACION, SR.

NO. L-27696, SEPT. 30, 1977
GUERRERO, J.
Facts:
● On May 22, 1964, the petitioners-appellants Miguel Florentino, Remedios Encarnacion de Florentino, Manuel
Arce, Jose Florentino, Victorino Florentino, Antonio Florentino, Remedior, Encarnacion and Severina
Encamacion, and the Petitioners-appellees (hereinafter respondents) Salvador Encamacion, Sr., Salvador
Encamacion, Jr. and Angel Encarnacion filed with the Court of First Instance of ilocos Sur an application for the
registration under Act 496 of a parcel of agricultural land located at Barrio Lubong Dacquel Cabugao Ilocos Sur.
● The applicants (the parties in this case) were common and pro-indiviso owners in fee simple of the said land with
improvements existing thereon
● It is of their knowledge that the land was not under any encumbrance or lien
● The land was inherited from their predecessors in interest, Dona (as in Spanish Donya) Encarnacion Florentino
who died in Vigan
○ Thus, the land in this case was adjudicated to the parties in this case by virtue of a deed of extrajudicial
partition
● Respondents Encarnacion, Jr. and Angel Encarnacion acquired their respective shares thru purchase from the
original heirs Singsons and from Asuncion Florentino
● After due notice and publication, the Court set the application for hearing and no opposition was filed
○ Except by the Director of Lands who later withdrew
● The crucial point in controversy in this registration case is centered in the stipulation marked Exhibit O-1 which
stated (in spanish):
○ That the land was made subject matter of the land registration case had been used in answering for the
payment of expenses for religious functions
● Miguel Florentino (petitioner) asked the court to include Exhibit O-1 as an encumbrance on the land sought to be
registered and cause the entry of the same on the face of the title
● This was opposed by the respondents and sought to withdraw their application on their respective shares of the
land sought to be registered
○ This withdrawal was opposed by the petitioners
● The court denied the respondents’ motion to withdraw for lack of merit and rendered shares of the land to the
respective applicants
● The court, with regard to the alleged encumbrance ruled that it was without merit and considered the same as a
self-imposed donation
○ That this donation was void for not having been accepted by the donee
○ Furthermore, the fact that the respondents did not make and oral or written grant at all and even opposed
to the said “encumbrance”
● Petitioners opposed this ruling by the court (with regard to the non-inclusion of Exhibit O-1 as encumbrance)
stating that the issue was not under the court’s jurisdiction since the proper action must be in an ordinary action
and not in a land registration proceeding
○ But this was denied by the court
● The court further added that the said Exhibit O-1 can be considered as a stipulation pour autrui which could not
be enforced since the Church, in whose favor it was made, has not communicated its acceptance before the
oppositors (respondents) revoked it
○ The fact that respondents has opposed to recognize the exhibit is a sign of revocation
○ The Church also did not present its clear acceptance to the grant before its revocation
● Petitioners now contend that the lower court erred in passing upon the merits of the encumbrance (Exhibit O-1) as
the same was never put to issue and as a question involved is an adjudication of rights of the parties
Issue:
● WON Exhibit O-1 is a stipulation pour autrui?
Ruling:
● Yes. considering the nature and purpose of the stipulation, it is.
● A stipulation pour autrui is a stipulation in favor of a third person conferring a clear and deliberate favor upon him,
and which stipulation is merely a part of a contract entered into by the parties, neither of whom acted as agent of
the third person, and such third person and demand its fulfillment provoked that he communicates his to the
obligor before it is revoked. 3
● The requisites are:
○ (1) that the stipulation in favor of a third person should be a part, not the whole, of the contract;
○ (2) that the favorable stipulation should not be conditioned or compensated by any kind of obligation
whatever; and
○ (3) neither of the contracting bears the legal represented or authorization of third person.
● To be valid, it must be the purpose and intent of the stipulating parties to benefit the third person and not merely
accidental
● The fairest test to determine whether the interest of third person in a contract is a stipulation pour autrui or merely
an incidental interest, is to rely upon the intention of the parties as disclosed by their contract.
○ In applying this test, it matters not whether the stipulation is in the nature of a gift or whether there is an
obligation owing from the promisee to the third person. That no such obligation exists may in some
degree assist in determining whether the parties intended to benefit a third person.
● In this case, the determining point is whether the co-owners intended to benefit the Church
● The evidence shows that the true intent of the parties is to confer a direct and material benefit upon the Church
since the fruits of the aforesaid land were used to defray the expenses of the Church in the preparation for the
Holy week
● Therefore, the court erred in holding that the stipulation is revocable at the option of the co-owners
● Since the church already made an acceptance even before the death of Dona Encarnacion since it (the
church) was already in use of the land since time immemorial (implied acceptance)
○ Specifically 17 years
● The time for acceptance in cases of stipulation pour autrui is also not limited by time as long as it is made before
the stipulation is revoked
● Therefore, it cannot now be revoked since it has acquired a force of law between the parties
○ Especially that respondents had kept their peace in 1962 (had knowledge of the encumbrance fromthis
year) and 1963
● Therefore, the party in the stipulation pour autrui may demand its fulfillment
Bank of America v IAC
G.R. No. 74521 November 11, 1986
Melencio-Herrera, J
Facts:
Plaintiff Air Cargo and Travel Corporation (ACTC) is the owner of an account with defendant Bank of America. Defendant
Toshiyuki Minami, President of ACTC in Japan, is also an owner of an account with Bank America.
In1981, the Bank received a tested telex advise from Kyowa Bank of Japan stating,
ADVISE PAY USDLS 23,595. — TO YOUR A/C NBR 24506-01-7 OF A. C. TRAVEL CORPORATION MR. TOSHIYUKO
MINAMI.
(Note: a "tested" telex advice is a message signed in "code". It may be explained that the "tested" telex advice is a
message signed in "code". Evidently, there was a previous contractual agreement between Kyowa Bank of Japan and
Bank America that, from time to time, KYOWA can ask BANKAMERICA to pay amounts to a third party (beneficiary) with
BANKAMERICA afterwards billing KYOWA the indicated amount given to the beneficiary. To assure itself that an Order
received from KYOWA really comes from KYOWA, it is usually agreed that KYOWA's signature will be in accordance with
a confidential code.)
Bank America thus credited the amount to the account of Minami and Minami thereafter withdrew the said amount.
However, according to ACTC in its Comment, it was Tokyo Tourist Corporation in Japan which applied with Kyowa Bank,
Ltd. for telegraphic transfer of the sum of US$23,595.00 payable to ACTC's account with BANKAMERICA, Manila.
Thus, ACTC claimed that the amount should have been credited to its account and demanded restitution, but
BANKAMERICA refused.
ACTC then filed suit for damages against BANKAMERICA and Minami before the Trial Court in Pasig
● Trial Court ordered Bank America and Minami to pay $23k plus damages in favor of ACTC.
● ·CA affirmed in toto, ruling that there was gross negligence on the part of Bank America since the Senior Clerk
who received the tested telex noted its patent ambiguity. The processor then checked the account number stated
therein which corresponded to the bank account of Minami and accordingly credited the amount to the said
account. The CA ruled that having noticed the ambiguity, the Senior Clerk should have consulted higher officials
of Bank America before crediting the amount.
Issue: whether or not Bank America should be made liable for the $23k and damages
Held: NO
It is our considered opinion that, in the tested telex, considered either as a patent ambiguity or as a latent ambiguity, the
beneficiary is Minami.
● The mention of Account No. 24506-01-7 (Minami’s acct #), as well as the name of Minami, has to be given more
weight than the mention of the name of ACTC. BANKAMERICA could not have very well disregarded that account
number.
● It could also be that the mention of ACTC's name was a further identification of Minami, to prevent payment to a
possible another "Toshiyuko Minami" who may not be connected with ACTC.
● On the other hand, it should be difficult to concede that, in the tested telex, Account No. 24506-01-7 was
erroneously written and should be substituted by Account No. 19842-01-2 in the name of ACTC.
The opening of a letter of credit in favor of the exporter becomes ultimately but the result of a stipulation pour autrui.
Similarly, when KYOWA asked BANK-AMERICA to pay an amount to a beneficiary (either ACTC or Minami), the contract
was between KYOWA and BANK-AMERICA and it had a stipulation pour autrui.
It should be recalled that the tested telex originated from KYOWA at the behest of Tokyo Tourist Corporation with whom
ACTC had business dealings. Minami, on the other hand, was the liaison officer of ACTC in Japan.
As the entity responsible for the tested telex was Tokyo Tourist Corporation, it can reasonably be concluded that if it had
intended that the US$23,595.00 should be credited to ACTC, upon learning that the amount was credited to Minami, it
should have gone, together with the representatives of ACTC, in protest to KYOWA and lodged a protest. Since that was
not done, it could well be that Tokyo Tourist Corporation had really intended its remittance to be credited to Minami.
The identity of the beneficiary should be in accordance with the identification made by KYOWA, and ACTC cannot
question that identification as it is not a party to the arrangement between KYOWA and BANKAMERICA. Hence, the CA
decision was reversed insofar as Bank of America was concerned.
Marimperio Compana Naveria S.A v CA
GR NO. L-40234
December 14,1987
Paras J.: (Sorry mahaba nilagay ko na yung provisions)
FACTS:
In 1964 Philippine Traders Corporation and Union Import and Export Corporation entered into a joint business venture
for the purchase of copra from Indonesia for sale in Europe.
● James Liu, President and General Manager of the Union took charge of the European market and the chartering
of a vessel to take the copra to Europe.
● Peter Yap of Philippine Traders on the other hand, found one P.T. Karkam in Dumai Sumatra who had around
4,000 tons of copra for sale.
● Exequiel Toeg of Interocean was commissioned to look for a vessel and he found the vessel "SS Paxoi" of
Marimperio available.
● Philippine Traders and Union authorized Toeg to negotiate for its charter but with instructions to keep
confidential the fact that they are the real charterers.
On March 21, 1965, in London England, a "Uniform Time Charter" for the hire of vessel "Paxoi" was entered into by
the owner, Marimperio Compania Naviera, S.A. through its agents N. & J. Vlassopulos Ltd. and Matthews Wrightson,
Burbridge, Ltd. to be referred to simply as Matthews, representing Interocean Shipping Corporation, which was made to
appear as charterer, although it merely acted in behalf of the real charterers, private respondents herein.
The pertinent provisions or clauses of the Charter Party read:

1. The owners let, and the Charterers hire the Vessel for a period of 1 (one) trip via safe port or ports Hong Kong, Philippine Islands
and/or INDONESIA from the time the Vessel is delivered and placed at the disposal of the Charterers on sailing HSINKANG ... .
6. The Charterers to pay as hire s.21 (Twenty-one Shillings per deadweights ton per 30 days or pro rata commencing in accordance
with Clause 1 until her redelivery to the owners.
Payment of hire to be made in cash as per Clause 40 without discount, every 15 days in advance.
In default of payment of the Owners to have the right of withdrawing the vessel from the services of the Charterers, without noting any
protest and without interference by any court or any formality whatsoever and without prejudice the Owners may otherwise have on the
Charterers under the Charter.
20. The Charterers to have the option of subletting the Vessel, giving due notice to the Owners, but the original Charterers always to
remain responsible to the Owners for due performance of the Charter.
In view of the aforesaid Charter, on March 30, 1965 plaintiff Charterer cabled a firm offer to P.T. Karkam to buy the 4,000
tons of copra for U.S.$180.00 per ton, the same to be loaded either in April or May, 1965. The offer was accepted and
plaintiffs opened two irrevocable letters of Credit in favor of P.T. Karkam.
The Charterer was however twice in default in its payments which were supposed to have been done in advance
despite of follow ups, payments were made on a latter periods. On April 14, 1965 upon representation of Toeg, the
Esso Standard Oil (Hongkong) Company supplied the vessel with 400 tons of bunker oil.
Although the late payments for the charter of the vessel were received and acknowledged by Vlassopulos without
comment or protest, said agent notified Matthews, by telex on April 23, 1965 that
● the shipowners in accordance with Clause 6 of the Charter Party were withdrawing the vessel from Charterer's
service and holding said Charterer responsible for unpaid hirings and all legal claims.
On April 29, 1965, the shipowners entered into another charter agreement with another Charterer, the Nederlansche
Stoomvart of Amsterdam, the delivery date of which was around May 3, 1965 for a trip via Indonesia to Antwep/Hamburg
at an increase charter cost.
Meanwhile, the original Charterer again remitted on April 30, 1965, the amount corresponding to the 3rd 15-day hire of the
vessel "PAXOI" but this time the remittance was refused.
Respondents Union Import and Export Corporation and Philippine Traders Corporation filed a complaint with the Court of
First Instance of Manila against the Unknown Owners of the Vessel "SS Paxoi" for specific performance with prayer for
preliminary attachment, alleging, among other things:
● That the defendants (Marimperio Compania Naviera) through their duly authorized agent in London, the N & J
Vlassopulos Ltd., ship brokers, entered into a contract of Uniform Time-Charter with the Interocean Shipping
Company of Manila through the latter's duly authorized broker, the Overseas Steamship Co., Inc., for the Charter
of the vessel SS PAXOI'
● that, immediately thereafter, the Interocean Shipping Company sublet the said vessel to the plaintiff Union
Import & Export, Corporation which in turn sublet the same to the other plaintiff, the Philippine Traders
Corporation.
In answer to the complaint, defendant (petitioner herein) alleged among others that:
● the Charter Party covering its vessel "SS PAXOI" was entered into by defendant with Interocean Shipping Co.
which is not a party in the complaint;
● that defendant has no agreement or relationship whatsoever with the plaintiffs; that plaintiffs are
unknown to defendant;
● that the charter party entered into by defendant with the Interocean Shipping Co. over the vessel "SS PAXOI"
does not authorize a sub-charter of said vessel to other parties;
● and that at any rate, any such sub-charter was without the knowledge or consent of defendant or defendant's
agent, and therefore, has no effect and/or is not binding upon defendant.
On March 16, 1966, respondent Interocean Shipping Corporation filed a complaint-in-intervention to collect what
it claims to be its loss of income by way of commission and expenses. In its amended answer to the complaint-in-
intervention petitioner, by way of special defenses alleged that
● the plaintiff-in-intervention, being the charterer, did not notify the defendant shipowner, petitioner, herein, about
any alleged sub-charter of the vessel "SS PAXOI" to the plaintiffs; consequently, there is no privity of contract
between defendant and plaintiffs and it follows that plaintiff-in-intervention, as charterer, is responsible for
defendant shipowner for the proper performance of the charter party;
● that the charterer violated the contract
● and the full hiring fee due the shipowner was not paid in accordance with the terms and conditions of the charter
party.
CFI rules in favor of Marimperio Compania Naviera, S.A. and against plaintiffs Union Import and Export Corporation and
Philippine Traders Corporation.
Plaintiffs filed a Motion for Reconsideration, the trial court reversed its stand in its amended decision.
CA affirmed the amended decision of the lower court except the portion granting commission to the intervenor-
appellee, which it reversed thereby dismissing the complaint-in- intervention.
● ISSUE: WON respondents have the legal capacity to bring the suit for specific performance against petitioner
based on the charter party
HELD:
According to Article 1311 of the Civil Code, a contract takes effect between the parties who made it, and also their assigns
and heirs, except in cases where the rights and obligations arising from the contract are not transmissible by their nature,
or by stipulation or by provision of law.
● Since a contract may be violated only by the parties, thereto as against each other, in an action upon that
contract, the real parties in interest, either as plaintiff or as defendant, must be parties to said contract.
● Therefore, a party who has not taken part in it cannot sue or be sued for performance or for cancellation thereof,
unless he shows that he has a real interest affected thereby.
It is undisputed that the charter party, was entered into between petitioner Marimperio., through its duly authorized agent
in London, the N & J Vlassopulos Ltd., and the Interocean Shipping Company of Manila through the latter's duly
authorized broker, the Overseas Steamship Co., Inc., represented by Matthews, Wrightson Burbridge Ltd., for the Charter
of the 'SS PAXOI'. It is also alleged in both the Complaint and the Amended Complaint that the Interocean Shipping
Company sublet the said vessel to respondent Union Import and Export Corporation which in turn sublet the same to
respondent Philippine Traders Corporation.
It is admitted by respondents that the charterer is the Interocean Shipping Company. Even paragraph 3 of the complaint-
in-intervention alleges that respondents were given the use of the vessel "pursuant to paragraph 20 of the Uniform Time
Charter ..." which precisely provides for the subletting of the vessel by the charterer.
· Article 652 of the Code of Commerce provides that the charter party shall contain, among others, the name, surname, and
domicile of the charterer, and if he states that he is acting by commission, that of the person for whose account he makes the contract.
It is obvious from the disclosure made in the charter party by the authorized broker, the Overseas Steamship Co., Inc., that the real
charterer is the Interocean Shipping Company (which sublet the vessel to Union Import and Export Corporation which in turn sublet it to
Philippine Traders Corporation).
In a contract of sub-lease, the personality of the lessee does not disappear; he does not transmit absolutely his
rights and obligations to the sub-lessee; and the sub-lessee generally does not have any direct action against the
owner of the premises as lessor, to require the compliance of the obligations contracted with the plaintiff as
lessee, or vice versa.
However, there are at least two instances in the Civil Code which allow the lessor to bring an action directly (accion
directa) against the sub-lessee (use and preservation of the premises under Art. 1651, and rentals under Article 1652).
Art. 1651 reads:

Without prejudice to his obligation toward the sub-lessor, the sub-lessee is bound to the lessor for all acts which refer to the use and
preservation of the thing leased in the manner stipulated between the lessor and the lessee.
Article 1652 reads:
The sub-lessee is subsidiarily liable to the lessor for any rent due from the lessee. However, the sub-lessee shall not be responsible
beyond the amount of rent due from him, in accordance with the terms of the sub-lease, at the time of the extra-judicial demand by the
lessor.
Payments of rent in advance by the sub-lessee shall be deemed not to have been made, so far as the lessor's claim is concerned,
unless said payments were effected in virtue of the custom of the place.
In the two Articles it is not the sub-lessee, but the lessor, who can bring the action. In the instant case, it is clear
that the sub-lessee as such cannot maintain the suit they filed with the trial court.
In the law of agency "with an undisclosed principa”l, the Civil Code in Article 1883 reads:
If an agent acts in his own name, the principal has no right of action against the persons with whom the agent
has contracted; neither have such persons against the principal.
In such case the agent is the one directly bound in favor of the person with whom he has contracted, as if the transaction
were his own, except when the contract involves things belonging to the principal.
While in the instant case, the true charterers of the vessel were the private respondents herein and they chartered the
vessel through an intermediary which upon instructions from them did not disclose their names. Article 1883 cannot help
the private respondents, because although they were the actual principals in the charter of the vessel, the law does not
allow them to bring any action against the adverse party and vice, versa.
CAPITAL INSURANCE & SURETY CO., INC. V. CENTRAL AZUCARERA DEL DANAO
TALISAY-SILAY MILLING CO AS THIRD PARTY DEFENDANT
GR. NO. 30770, APRIL 7, 1993
ROMERO, J.
Facts:
● A compromise agreement has been entered into for the termination of the pending suits and countersuits between
PNB as bank creditor and del Danao as debtor
● The agreement involves a transfer and conveyance of stock ownership, with PNB exchanging its shares of stocks
in Bacolod Muricia Milling Co. Inc. and in Ma-ao Sugar Central Co. for the controlling shares of Talisay-Silay
Milling Co. Inc. in del Danao consisting of not less than 93% of del Danao’s paid-up capital stock
○ This transfer was done to forestall the intended foreclosure by PNB of del Danao
● Since PNB heard of rumors that del Danao had fraudulently incurred money claims and did not want to assume
liability over the same, they added paragraphs 9 and 10:
○ "9) That all obligations of Central Azucarera del Danao incurred before the date of this agreement but
not those incurred by the Bank during the period when the Central Azucarera of Danao was under the
management of the BANK in favor of trade creditors for supplies, equipment, fuel and spare parts,
outstanding in the books of Danao shall be listed and itemized and only such items as are approved and
acknowledged by the BANK shall be considered as legitimately incurred and due for payment by Danao;
This provision, however, shall not apply to Central Azucarera del Danao’s account with the Philippine
National Bank and the Development Bank of the Philippines (formerly R. F. C.) full responsibility for which
shall remain with Central Azucarera del Danao;chanrobles.com.ph : virtual law library
○ 10) That any or all obligations purporting to be of Central Azucarera del Danao but not
appearing in the books thereof nor acknowledged as in paragraph 9 above shall be borne and
paid for by Talisay-Silay Central and/or Mr. J. Amado Araneta.
● After this agreement (between PNB and del Danao) a complaint was filed by the petitioner against respondent
alleging that from 1954 to 1961, del Danao secured from Capital Insurance different fire and marine cargo
insurance policies with the premiums remaining to be unsatisfied
● Respondent denied liability claiming that it should be Talisay-Silay who must be held liable as stated in
paragraphs 9 and 10 of the agreement
○ Since liabilities before PNB’s swap of Talisay shares with del Danao must be borne by Talisay as stated
in the agreement (par. 9 and 10)
● Because of this, Talisay was impleaded as a third party defendant by the respondent herein
● Talisay denies liability and contends that paragraphs 9 and 10 are inapplicable in this case since this was not the
obligation contemplated under the assailed paragraphs
○ Talisay contends that the paragraph limits its liability to claims from creditors for supplies, equipment, fuel
and spare parts
○ Further they contend that their liability is limited to those not appearing in the books of the respondent
● Respondent later admitted its debt of unpaid premiums with the petitioner
● TRIAL COURT FOR PETITIONER and its claim agasint Talisay was DISMISSED
Issue:
● WON Respondent’s contention that it is now Talisay who is liable to the petitioner is true?
Ruling:
● No. The SC held that Talisay is NOT the new debtor of petiitoner
● Paragraph 9 of the agreement is limited only to supplies, equipment, fuel and spare parts
● Paragraph 10 is explained as to include those obligations by respondent but not appearing in the books thereof
AND NOT acknowledged
○ Since respondent admitted its obligation with petitioner, paragraph 10 cannot apply
● The agreement of PNB and respondent does not extend to those not parties in the contract (such as Talisay)
○ Therefore, respondent cannot escape liability by passing the obligation to Talisay
● Petitioner cannot be prejudiced by the terms of the agreement
● However, this does not mean that respondent cannot be indemnified by Talisay
● According to Central Azucarera del Danao, common to both disputed paragraphs is the condition precedent
requiring approval by PNB of the accounts and obligations incurred by it before PNB’s management thereof, prior
to making itself liable. Consequently, contrary to the lower court’s opinion mere entry in its books is not enough to
bind Central Azucarera del Danao, for had it been so intended, PNB would not have insisted on including in
paragraph 10, the phrase "such as in paragraph 9", which qualifies the kind of acknowledgment or acceptance
required before any unpaid account could be borne by Central Azucarera del Danao.
● We find Central Azucarera del Danao’s interpretation correct and convincing. In so holding, this Court finds
support in Article 1370 of the Civil Code, the provisions of which are explicit on the correct interpretation of a
contract
Barfel Development Corp v CA
G.R. No. 98177 June 8, 1993
Padilla, J
Facts:
The Barfel Development Corp and Sps Barrio (defendants), as sellers, and Reginas Industries and Development Corp
(plaintiff corporation) as buyer, represented by its President plaintiff Zaragoza entered into an agreement to Buy and Sell
two parcels of land with two houses erected thereon.
● Said agreement bears a stipulation that “ the seller will apply the payment of the cash portion of the purchase
price to the removal of any and all liens on the properties”
● plaintiff paid a downpayment upon signing of the aforesaid agreement; during the negotiation and conclusion of
the agreement, the defendant repeatedly warranted that except for a mortgage in favor of BPI and the deeds of
restriction annotated at the back of the title.
Sometime on June 1987, plaintiffs found out that defendants made a blatant misrepresentation, it was discovered that the
subject properties have a second mortgage with the PISO/Central Bank for 2.5milion;
● having informed of this discovery defendant Barrios advised plaintiff that the second mortgage obligation is
reduced to only 54k and gave assurance that he will submit the necessary documents to support the same so that
a valid and acceptable arrangement could be worked out by the Central Bank for the released of the second
mortgage;
PSB gave notice that it has approved Regina’s application for the loan with which to pay subject properties under the
agreement subject to a condition that the loan must be secured by a mortgage over the properties; the PSB sent a
separate letter suggesting a workable arrangement whereby new titles to the subject properties would be transferred to
the plaintiff corporation and the mortgage in favor of PSB to be annotated thereon. PSB then will directly pay BPI and pay
Barfel the balance of the purchase price.
Barfel expressed their conformity to the aforesaid agreement. However, Regina received information that Barfel had been
negotiating to other parties; subsequently Barfel failed and refused to comply with their contractual transaction of securing
the release of the second mortgage.
Thus, Regina filed a complaint for specific performance against Barfel. During the presentation of evidence, Regina filed a
motion for leave to file an amended complaint in order to implead PISO bank and compel it to accept payment of the
existing second mortgage. Allegedly, no complete relief can be had unless the second mortgage in favor of PISO bank is
released.
TC: admitted the amended complaint, as affirmed by CA.
Thus, Barfel instituted the instant case, contending that PISO Bank is NOT an indispensable party and its inclusion would
substantially alter their cause of action, contrary to the Rules of Court.
Issue: Whether an amendment to the complaint pleading a cause of action against a new or additional party can be
allowed after the private respondents (as plaintiff) had rested its case and petitioner (as defecndants) had commenced the
presentation of their evidence.
Held: NO
PISO bank is not a party to the three (3) contracts which are the subject of the action for specific performance and
damages between the private respondents and petitioners. The bank which is not a party to the transaction is not an
indispensable party.
● PISO is a second mortgagee, whatever the outcome of the litigation between the petitioners and the private
respondents would be. Its second mortgage lien attaches to the property.
● Perhaps, herein private respondents have confused the possible liability of petitioner Barrios for allegedly
withholding information on the said second mortgage as another cause of action against him arising from the
executed contracts.
● But title to the disputed properties can still be delivered by petitioners to herein respondents, by way of specific
performance with damages, encumbered of course by the second mortgage in favor of PISO but the release of
such encumbrance can be obtained independently of this case.
To compel PISO to accept payment cannot be allowed in an action for specific performance with damages between other
parties. These are two (2) different causes. A second mortgagee like PISO has several options. It may neither:
1. foreclose the second mortgage for non-payment.
2. pay off the first mortgagee (BPI in this instance) and be subrogated to its rights thereby becoming the sole lien holder.
3. collect on the loan without foreclosing on the mortgage.
In any event private respondents (as plaintiffs below) cannot compel PISO to accept payment as it is not even a party to
the mortgage contract (with PISO).
● Besides, if the principal mortgagee, BPI, is not even impleaded why should the second mortgagee PISO be so
impleaded, when it is a stranger to the transaction between petitioners and private respondents?
According to Article 1311 of the Civil Code a contract takes effect between the parties who made it, and also their assigns
and heirs, with certain exceptions provided therein.
● Since a contract may be violated only by the parties, thereto as against each other, in an action upon that
contract, the real parties in interest, either as plaintiff or as defendant, must be parties to said contract.
● Therefore, a party who has not taken part in it cannot sue or be sued for performance or for cancellation thereof,
unless he shows that he has a real interest affected thereby.
A real interest has been defined as a present substantial interest, as distinguished from a mere expectancy or a future,
contigent, subordinate or consequential interest.
As earlier stated, complete relief by private respondents against petitioners may be had even if PISO/Central Bank were
not impleaded as party defendant in the original case. PISO is not an indispensable or necessary party without whom no
final determination can be had of the action for specific performance with damages.
Moreover, the amendment sought by private respondents, which is to include a new party defendant at a late stage in the
proceeding, is not a formal but a substantial one. Private respondents will have to present additional evidence on the
PISO second mortgage. The effect would be to start trial anew with the parties recasting their theories of the case. The
correct amount of the second mortgage owed by petitioners to PISO bank, would have to be litigated and this could be
time consuming. Hence, lower court and CA decision were reversed and set aside, and the case was remanded to the
court of origin for further proceedings.
Mandarin Villa vs. CA
G.R. No. 119850 | June 20, 1996
Francisco, J.:
FACTS
• On October 19,1989 Private respondent, Clodualdo de Jesus, hosted dinner for his friends at
the petitioner’s restaurant, the Mandarin Villa Seafoods Village, Greenhills, Mandaluyong.
• After dinner, waiter handed him the bill in the amount of P2,658.50 where he offered to pay through his credit card
issued by Phil CommercialCredit Card, Inc (BANKARD).
• Waiter accepted but ten minutes later, he returned and informed private respondent that his credit card had
expired.However, the card was yet to expire on Sept 1990. As embossed on its face .
• Private respondents and his two guests approached the cashier and the
same information was produced : card expired.
• Professor Lirag, another guest, uttered “Clody, may problem aba? Baka
kailangang maghugas na kami ng pinggan?”
• Private respondent used his BPI Express Credit Card to pay. This was
accepted and honored by the cashier after verification.
• This triggered the filing of a suit for damages by private respondent.
❖ TC: directed petitioner and BANKARD to pay jointly and severally the private respondents
❖ CA: modified decision; Mandarin solely liable and Bankard absolved form responsibility
ISSUE:
WON petitioner is negligent under the circumstances and hence could be held liable for dishonoring the card–
Yes
HELD:
Petitioner contends that it cannot be faulted for its cashier’s refusal to accept private respondent’s BANKARD credit
card, the same not being a legal tender. It also argues that private respondent’s offer to pay by means of a credit card
partook of a nature of a proposal to novate an existing obligation for which petitioner, as creditor, must first give its
consent otherwise there will be no binding contract between them.
Court:
Petitioner cannot disclaim its obligation to accept private respondent’s BANKARD credit card without violating the
equitable principle of estoppel. Miranda Villa Seafood Village is affiliated with BANKARD. In fact, they had an “Agreement”
wherein merchant shall honor validly PCCCI Credit cards presented provided card is not expired, etc. While private
respondent may not be a party to the said agreement, the stipulation conferred in favor of private respondent, a holder of
credit card validly issued by BANKARD. This stipulation is a stipulation pour autri.
Under Art 1311, private respondent may demand its fulfillment provided he communicated his acceptance to the petitioner
before its revocation.
In this case, private respondent’s offer to pay by means of his BANKARD credit card constitutes not only an acceptance of
the said stipulation but also an explicit communication of his acceptance to the obligor.In addition, petitioner posted a logo
inside Mandarin that “Bankard is accepted here” This representation is conclusive upon petitioner which it cannot deny or
disprove as against the private respondent.
Petitioner contends that since the verification machine flashed an information that the credit card is expired, petitioner
could not be expected to honor the same much less be adjudged negligent for dishonoring it.
Court :
The Point of Sale Guidelines outlined the steps that petitioner must follow under the circumstances.
a) Check expiry date on card.
b) If unexpired, refer to CB.
c) If valid, honor up to maximum of SPL only.
d) If in CB as Lost, do procedures 2a to 2e.,

e) If in CB as Suspended/Cancelled, do not honor card.
f) If expired, do not honor card."
In this case, private respondent’s BANKARD credit card has an embossed expiry date of Sept 1990. Clearly it has not yet
expired and it was wrongfully dishonored by the petitioner. Petitioner did not use reasonable care and caution which an
ordinary prudent person would have used in the same situation, hence liable for negligence.
SUMMA INSURANCE CORPORATION V. CA & METRO PORT SERVICE, INC.
GR. NO. 84680, FEB. 5, 1996
PANGANIBAN, J.
Facts:
● S/S Galleon Sapphire (owned by National Galleon Shipping Corp.NGSC) arrived in Manila carrying shipment
consigned to the order of Caterpillar Far East Ltd. with Semirara as notify party
● The shipment including a bundle of PC 8 U blades was covered by a marine insurance issued by the petitioner
and a bill of lading
● The shipment was discharged from the vessel to the custody of Private Respondent (PR) as arrastre operator
○ Three good order cargo receipts were issued by NGSC and duly signed by the checker of the PR
● The forwarder, Sterling International Brokerage Corporation, later withdrew the shipment from the pier and loaded
it on the barge
● When it arrived and inspected at Semirara’s warehouse, it was discovered that the bundle of PC8U blades was
missing
● PR then issued a short-landed certificate stating that the said bundle was already missing when it received the
shipment from NGSC
● Semirara then filed a claim against petitioner, PR and NGSC a claim for the value of the bundle lost
● Petitioner paid Semirara for the value of the lost shipment and was subrogated to the rights of Semirara which
later filed its claims with NGSC and PR but was unsuccessful
● Petitioner then filed a complaint with the RTC against NGSC and PR for sum of money, damages and attys fees
● TRIAL COURT ABSOLVED NGSC BUT FOUND PR LIABLE
● CA AFFIRMED WITH MODIFICATIONS OF LIABILITY
Issue:
● WON PR is (1) liable for the loss of the shipment? (2) To what extent?
Ruling:
● (1) Yes. Since the petitioner was subrogated to the rights of Semirara (as consignee), it must be first determined
the relation between the consignee and the arrastre operator
● The arrastre operator should observe the same degree of diligence as that required of a common carrier and a
warehouseman
● Being the custodian of goods, it is its duty to take good care of the goods and turn them over to the party entitled
to their possession
● Therefore, PR is liable for the loss
● (2) An arrastre operator is bound by the management contract which is a sort of a stipulation pour autrui
○ Therefore, it is also binding on a consignee because it is incorporated in the gate pass and delivery
receipt which must be presented by consignee before delivery can be effected to it
● The insurer is also bound by the management contract as a successor in interest
● Upon taking a delivery, the consignee tacitly accepts the provisions of the management contract including those
which are intended to limit the liability of one of the contracting parties, the arrastre operator
● BUT a consignee who does not avail the services of an arrastre operator is not bound by the management
contract. This is however not applicable here since the consignee in fact accepted the delivery of the
cargo from the arrastre operator
● The management contract provided that:
○ CONTRACTOR shall be solely responsible as an independent CONTRACTOR, and hereby agrees to
accept liability and to promptly pay to the steamship company, consignee, consignor or other interested
party or parties for the loss, damage, or non-delivery of cargoes to the extent of the actual invoice
value of each package which in no case shall be more than Three Thousand Five Hundred Pesos
(P3,500.00) for each package unless the value of the importation is otherwise specified or
manifested or communicated in writing together with the invoice value and supported by a
certified packing list to the CONTRACTOR by the interested party or parties before the discharge
of the goods, as well as all damage that may be suffered on account of loss, damage, or destruction of
any merchandise while in custody or under the control of the CONTRACTOR in any pier, shed,
warehouse, facility or other designated place under the supervision of the BUREAU
Baluyot vs. CA
G.R. No. 122947 July 22, 1999
Mendoza, J
Facts: Anonymous Ifrit

● Petitioners Baluyot and others and the Association have been in open, peaceful, adverse and continuous
possession in the concept of an owner since memory can no longer recall of that parcel of riceland known as Sitio
Libis, Barrio Cruz-na-Ligas, Quezon City (now Diliman, Quezon City).
● Upon advise of counsel and close study of the said offer of defendant UP to Donate 15.8379 hectares, plaintiff
Association proposed to accept and the defendant UP manifested in writing its consent to the intended donation
directly to the plaintiff Association.
● However, UP backed-out from the arrangement to Donate directly to the plaintiff Association for the benefit of the
qualified residents and high-handedly resumed to negotiate the donation thru the defendant Quezon City
Government.
● After negotiations, UP executed that Deed of Donation, in favor of the defendant Quezon City Government for the
benefit of the qualified residents of Cruz-na-Ligas.
● However, UP had continuously and unlawfully refused, despite requests and several conferences made, to
comply with their reciprocal duty, to deliver the certificate of title to enable the Donee, the defendant Quezon City
Government, to register the ownership so that the defendant Quezon City Government can legally and fully
comply with their obligations under the said deed of donation (development of the area, construction of road and
drainage networks etc)
● For alleged non-compliance of the defendant Quezon City Government with terms and conditions, UP issued
Administrative Order No. 21 declaring the deed of donation revoked and the Donated property be reverted to it.
● The plaintiffs then filed a complaint for specific performance against UP for the enforcement of the Deed of
Donation. It also petitioned for a writ of injunction to restrain UP from ejecting plaintiffs. UP filed a motion to
dismiss alleging that not being a party to the Deed of Donation, the plaintiffs have no cause of action.
● RTC: since the Donation had already been revoked, plaintiffs had no cause of action for specific performance.
Nevertheless, it denied UP’s motion to dismiss ruling that UP was barred from contesting petitioners’ right to
remain in possession the ground of laches.
●
● CA reversed, and ordered the dismissal of the action ruling that petitioners’ complaint did not allege any claim of
annulment of UP’s title over the portion of land concerned.
●
Issue: Whether the complaint states a cause of action for specific performance?
Held: YES
The trial court held that inasmuch as the donation made by UP to the Quezon City government had already been revoked,
petitioners, for whose benefit the donation had been made, had no cause of action for specific performance.
Nevertheless, it denied respondents’ joint motion to dismiss petitioners’ action on the ground that respondent UP was
barred from contesting petitioners’ right to remain in possession on the ground of laches.
This is error. While prescription does not run against registered lands, nonetheless a registered owner’s action to recover
possession of his land may be barred by laches.
But UP is not suing in this case. It is petitioners who are, and their suit is mainly to seek enforcement of the deed of
donation made by UP in favor of the Quezon City government. The appellate court therefore correctly overruled the trial
court on this point. If at all, they are claiming ownership by prescription which, as already stated, is untenable considering
that the land in question is a registered land. Nor can petitioners question the validity of UP’s title to the land. For as the
Court of Appeals correctly held, this constitutes a collateral attack on registered title which is not permitted.
On the other hand, we think that the Court of Appeals erred in dismissing petitioners’ complaint for failure to
state a cause of action. A cause of action exists if the following elements are present, namely:
(1) a right in favor of the plaintiff by whatever means and under whatever law it arises or is created;
(2) an obligation on the part of the defendant to respect or not to violate such right; and
(3) an act or omission on the part of such defendant in violation of the right of the plaintiff or constituting a breach of the
obligations of the defendant to the plaintiff for which the latter may maintain an action for recovery of damages.
We find all the elements of a cause of action contained in the amended complaint of petitioners. While, admittedly,
petitioners were not parties to the deed of donation, they anchor their right to seek its enforcement upon their allegation
that they are intended beneficiaries of the donation to the Quezon City government.
Art. 1311, second paragraph, of the Civil Code provides:

If a contract should contain some stipulation in favor of a third person, he may demand its fulfillment provided he
communicated his acceptance to the obliger before its revocation. A mere incidental benefit or interest of a person is not
sufficient. The contracting parties must have clearly and deliberately conferred a favor upon a third person.
Under this provision of the Civil Code, the following requisites must be present in order to have a stipulation pour autrui:
(1) there must be a stipulation in favor of a third person;
(2) the stipulation must be a part, not the whole of the contract;
(3) the contracting parties must have clearly and deliberately conferred a favor upon a third person, not a mere incidental
benefit or interest;
(4) the third person must have communicated his acceptance to the obliger before its revocation; and
(5) neither of the contracting parties bears the legal representation or authorization of the third party.
The allegations in the following paragraphs of the amended complaint are sufficient to bring petitioners' action within the
purview of the second paragraph of Art. 1311 on stipulations pour autrui:
1. the deed of donation contains a stipulation that the Quezon City government, as donee, is required to transfer to
qualified residents of Cruz-na-Ligas, by way of donations, the lots occupied by them;
2. this stipulation is part of conditions and obligations imposed by UP, as donor, upon the Quezon City government, as
donee;
3. the intent of the parties to the deed of donation was to confer a favor upon petitioners by transferring to the latter the
lots occupied by them;
4. that conferences were held between the parties to convince UP to surrender the certificates of title to the city
government, implying that the donation had been accepted by petitioners by demanding fulfillment thereof and that private
respondents were aware of such acceptance; and
5. All the allegations considered together from which it can be fairly inferred that neither of private respondents acted in
representation of the other; each of the private respondents had its own obligations, in view of conferring a favor upon
petitioners.
For the purpose of determining the sufficiency of petitioners' cause of action, these allegations of the amended complaint
must be deemed to be hypothetically true. So assuming the truth of the allegations, we hold that petitioners have a cause
of action against UP.
Thus, the CA decision was reversed and the case was remanded to the RTC for trial on the merits.
WILLIAM UY and RODEL ROXAS, petitioners, vs. COURT OF APPEALS, HON. ROBERT BALAO and NATIONAL HOUSING
AUTHORITY, respondents.
GR NO 120465|| SEPTEMBER 9,1999
KAPUNAN J:.
FACTS:
Petitioners Uy and Roxas are agents authorized to sell eight parcels of land by the owners thereof. By virtue of such authority,
petitioners offered to sell the lands located in Benguet to respondent NHA to be utilized and developed as a housing project. On
February 14, 1989, the NHA Board approved the acquisition of said lands, at the cost of P23.87M, pursuant to which the parties
executed a series of Deeds of Absolute Sale covering the subject lands. Of the eight parcels, however, only five were paid for by the
NHA because of the report it received from the Land Geosciences Bureau of the DENR that the remaining area is located at an active
landslide area and therefore, not suitable for development into a housing project.
In 1991, the NHA cancelled the sale of the 3 parcels of land and subsequently offered the amount of P1.225 million to the landowners
as daños perjuicios. On 9 March 1992, petitioners filed before the QC RTC a Complaint for Damages.
The RTC declared that the cancellation of the contract to be justified. The trial court nevertheless awarded damages to plaintiffs in the
same amount offered by NHA to petitioners as damages.
CA held that since there was "sufficient justifiable basis" in cancelling the sale, "it saw no reason" for the award of damages.
ISSUES and HELD

(1) Were the petitioners allowed to lodge a complaint as agents?-- No.
Petitioners are not parties, heirs, assignees, or beneficiaries of a stipulation pour autrui under the contracts of sale, they do not, under
substantive law, possess the right they seek to enforce.
● Sec. 2, Rule 3 of the Rules of Court requires that every action must be prosecuted and defended in the name of the real party-
in-interest. An action shall be prosecuted in the name of the party who, by the substantive law, has the right sought to be
enforced.
Do petitioners, under substantive law, possess such right? No.

● According Article 1311 of the Civil Code Contracts take effect only between the parties, their assigns, and heirs, except in case
where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation, or by provision
of law. .
● If a contract should contain some stipulation in favor of a third person, he may demand its fulfillment provided he
communicated his acceptance to the obligor before its revocation. A mere incidental benefit or interest of a person is not
sufficient.
Petitioners are mere agents of the owners of the land subject of the sale. As agents, they only render some service or do something in
representation or on behalf of their principals.
● The rendering of such service did not make them parties to the contracts of sale executed in behalf of the latter.
● An agent, in his own behalf, may bring as an assignee of such contract. Section 372 (1) of the Restatement of the Law
on Agency. Petitioners, however, were not able to show that they were assignees of their principal.
● They were not able to establish any agreement granting them "the right to receive payment and out of the proceeds to
reimburse [themselves] for advances and commissions before turning the balance over to the principal[s]."
Finally, it did not appear that petitioners were beneficiaries of a stipulation pour autrui under the second paragraph of Article
1311 of the Civil Code. That petitioners did not obtain their commissions or recoup their advances because of the non-performance of
the contract did not entitle them to file the action against respondent NHA. Section 372 (2) of the Restatement of the Law on Agency
(Second).
(2)Was there a legal basis for the rescission of the sale of the 3 parcels of land? And granting arguendo that NHA has legal
basis to rescind, does the petitioner have the right to claim for damages?
There was no “rescission” per se. What is involved is a cancellation based on the negation of the cause of the contract.
● Petitioners confuse the cancellation of the contract by the NHA as a rescission of the contract under Art. 1191.
● The right of rescission or, more accurately, resolution, is predicated on a breach of faith by the other party.
● NHA did not have the right to rescind for the other parties to the contract, the vendors, did not commit any breach of their
obligation.
● The cancellation was based on the negation of the cause arising from the realization that the lands, which were the
object of the sale, were not suitable for housing.
● Cause, which is the essential reason for the contract, should be distinguished from motive, which is the particular reason of a
party which does not affect the other party.
In a contract of sale of a piece of land, such as in this case, the cause of the vendor in entering into the contract is to obtain the
price. For the vendee, NHA, it is the acquisition of the land. The motive of the NHA, on the other hand, is to use said lands for
housing.
Ordinarily, a party's motives for entering into the contract do not affect the contract. However, when the motive predetermines the
cause, the motive may be regarded as the cause.
● In this case, it is clear, and petitioners do not dispute, that NHA would not have entered into the contract were the lands not
suitable for housing. In other words, the quality of the land was an implied condition for the NHA to enter into the
contract. On NHA’s part, therefore, the motive was the cause for its being a party to the sale. The findings of the Land
Geosciences Bureau were sufficient for the cancellation of the sale
NHA was justified in canceling the contract. The realization of the mistake as regards the quality of the land resulted in the negation of
the motive/cause thus rendering the contract inexistent. Article 1318 of the Civil Code enumerates the essential requisites of a
contract: (1) Consent of the parties; (2) Subject matter; and (3) Cause of the obligation which is established. Therefore, assuming that
petitioners are parties, assignees or beneficiaries to the contract of sale, they would not be entitled to any award of damages.
MAMARIL V. THE BOY SCOUT OF THE PHILIPPINES
GR. NO. 179832, JAN. 14, 2013
PERLAS-BERNABE, J.
Facts:
● Sps. Mamaril are jeepney operators and would park their 6 jeepneys every night at the BSP Compound in Malate
for 300 pesos per month for each unit (TOTAL: 1800 per month)
● Sometime May, one of the jeepneys was found to be missing and was never recovered
● According to the security guards Pena and Gaddi of AIB Security Agency whom BSP contracted for its security, a
male person who looked familiar took the vehicle out of the compound
● The petitioners then filed a complaint for damages before the RTC against BSP, AIB, Pena and GAddi
○ Attributing the loss to the negligence of the security guards
● Pena and Gaddi admitted negligence during the investigation
● BSP denied liability contending that not only did petitioners directly deal with AIB but also the parking ticket stated
that the management shall not be liable for any loss of vehicle
○ BSP also contend that the petitioners cannot use the Guard Service Contract since they were not parties
to it
● RTC FOR PETITIONERS
● CA AFFIRMED
Issue:
● WON the petitioners can use the Guard Service Contract between BSP and AIB as their basis for liability?
Ruling:
● No. Firsly, vicarious liability of an employer cannot be applied in this case since BSP is not the employer of the
security guards
○ Pena and Gaddi is assigned by AIB, their employer, to BSP under the Guard Service Contract
● Secondly, the spouses cannot use the Guard SErvice Contract since it is not a party to it
○ It is a contract between respondent and AIB
● The said contract did not contain any stipulation pour autrui
● For a stipulation pour autrui to be valid, the following must concur:
○ (1) There is a stipulation in favor of a third person;
○ (2) The stipulation is a part, not the whole, of the contract;
○ (3) The contracting parties clearly and deliberately conferred a favor to the third person - the favor is not
merely incidental;
○ (4) The favor is unconditional and uncompensated;
○ (5) The third person communicated his or her acceptance of the favor before its revocation; and
○ (6) The contracting parties do not represent, or are not authorized, by the third party. 22
● However, none of the foregoing elements obtains in this case.
● What the contract between Respondent and AIB is only limited to its premises and employees and nothing
reflecting a stipulation with regard to third persons
● The contract between the parties herein is considered to be one of lease
○ And BSP was not remiss in its duty to provide for a parking space and this, should not be held liable
Bel Air Village Association, Inc. vs Virgilio Dionisio
G.R. L-383454 June 30, 1989
Gutierrez, J
Facts:
The Transfer Certificate of Title covering the subject parcel of land issued in the name of Virgilio Dionisio, the petitioner,
contains an annotation to the effect that the lot owner becomes an automatic member of Bel-Air Village Association, the
respondent, and must abide by such rules and regulations laid down by the Association in the interest of the sanitation,
security and the general welfare of the community.
When Bel-Air demanded and assessed the association fees that are due from Dionisio in the amount of Php2,100, he
protested and refused to pay the same.
The petitioner questioned the collection of the dues on the following grounds:
1. the questioned assessment is a property tax outside the corporate power of the association;
2. the association has no power to compel the petitioner to pay the assessment for lack of privity of contract;
3. the questioned assessment should not be enforced for being unreasonable, arbitrary, oppressive, confiscatory and
discriminatory;
4. the respondent association is exercising governmental powers which should not be sanctioned.
Hence, Bel-Air filed a complaint against Dionisio before the Municipal Court of Makati for the collection of the said amount
plus penalty of 12% per annum, per Bel-Air Village’s by-laws. MTC ruled in favor of Bel-Air.
Issue:
Whether or not Dionisio is bound by the annotations on the TCT
Held: YES
According to the Land Registration Act, and as previously held by the SC, purchasers of a registered land are bound by
the annotations found at the back of the certificate of title covering the subject parcel of land.
The petitioner’s contention that he has no privity with the respondent association is not persuasive.
● When the petitioner voluntarily bought the subject parcel of land it was understood that he took the same free of
all encumbrances except annotations at the back of the certificate of title, among them, that he automatically
becomes a member of the respondent association. One of the obligations of a member is to pay certain amounts
for the operation and activities of the association.
The mode of payment as well as the purposes for which the dues are intended clearly indicates that the dues are not in
the concept of a property tax as claimed by the petitioner. They are shares in the common expenses for necessary
services.
● A property tax is assessed according to the value of the property but the basis of the sharing in this case is the
area of the lot.
● The dues are fees which a member of the respondent association is required in hiring security guards, cleaning
and maintaining streets, street lights and other community projects for the benefit of all residents within the Bel-Air
Village. T
● hese expenses are necessary, valid and reasonable for the particular community involved.
The limitations upon the ownership of the petitioner do not contravene provisions of laws, morals, good customs, public
order or public policy.
● Since these limitations have been imposed upon the contract of sale as admitted in the stipulation of facts, it I
obvious that the annotation of said lien and encumbrance that the defendant automatically becomes a member of
the association is binding and enforceable.
Further, the constitutional proscription than no person can be compelled to be a member of an association against his will
applies only to governmental acts and not to private transactions like the one in question.
The petitioner cannot legally maintain that he is compelled to be a member of the association against his will because the
limitation is imposed upon his ownership of property. If he does not desire to comply with the annotation or lien in
question, he can at any time exercise his inviolable freedom of disposing of the property and free himself from the burden
of becoming a member of the association. The limitation is not imposed upon him personally but upon ownership of the
property.
Even assuming that defendant's ownership and enjoyment of the lot covered by TCT No. 81136 is limited because of the
burden of being a member of plaintiff association the goals and objectives of the association are far greater because they
apply to and affect the community at large. It can be justified on legal grounds that a person's enjoyment of ownership
may be restricted and limited if to do so the welfare of the community of which he is a member is promoted and attained.
These benefits in which the defendant participates more than offset the burden and inconvenience that he may suffer.
DAYWALT VS CORPORACION DE PP. AGUSTINOS RECOLETOS
GR NO. 13505 || FEBRUARY 4,1919
STREET J:.
FACTS:
Teodorica obligated herself to convey a tract of land to Daywalt.
● 1902 contract: A deed should be executed as soon as Endencia’s title to the land should be perfected.
● A decree recognizing the right of Teodorica as owner was entered in Court of Land registration but the Torrens
certificate was not issued until later.
● 1908 contract: Upon receiving the Torrens title to the land, Teodorica will deliver the same to the Hongkong and
Shanghai Bank in Manila, to be forwarded to the Crocker National Bank in San Francisco, where it was to be
delivered to the plaintiff upon payment of balance.
The Torrens certificate was issued to Teodorica, but it was found by official survey that the area of the tract inclosed in the
boundaries stated in the contract was about 1.248 hectares of 452 hectares as stated in the contract.
● Because of this, Teodorica became reluctant to transfer the whole tract to the purchaser.
● This attitude of hers led to litigation in which Daywalt finally succeeded in obtaining a decree for specific performance.
● La Corporacion de los Padres Recoletos, is a religious corporation. It was the owner of another estate on the same island
immediately adjacent to the land which Teodorica had sold to Daywalt. Their representative, Fr. Sanz, had long been well
acquainted with Teodorica and exerted over her an influence and ascendency due to his religious character
● Father Sanz was fully aware of the existence of the contract of 1902 contract and 1908 contract.
● When the Torrens certificate was finally issued in 1909 in favor of Teodorica, she delivered it for safekeeping to the defendant
corporation and it was taken to Manila where it remained in custody of P. Juan Labarga the procurator and chief official of
defendant corporationAs Teodorica still retained possession of said property Father Sanz entered into an arrangement with
her whereby large numbers of cattle belonging to the defendant corporation were pastured upon said land during 1909 to
1914.
In the first cause of action Plaintiff, Daywalt seeks to recover from the defendant corporation the sum of P24,000 as damages for the use and
occupation of the land in question by reason of pasturing cattle thereon.
● TC ruled that Defendant corporation was liable for damages for the amount of P2,497.
In a second cause of action,plaintiff seeks to recover P500,000, as damages, on the ground that said corporation, for its own
selfish purposes, unlawfully induced Teodorica to refrain from the performance of her contract for the sale of the land in
question and to withhold delivery to the plaintiff of the Torrens title.
The cause of action here stated is based on liability derived from the wrongful interference of the defendant in the performa nce of the
contract between the plaintiff and Teodorica Endencia; and the large damages laid in the complaint were, according to the proof
submitted by the plaintiff, incurred as a result of a combination of circumstances of the following nature:
❖ In 1911, it appears, the plaintiff, as the owner of the land which he had bought from Teodorica Endencia entered into a
contract with S. B. Wakefield, of San Francisco, for the sale and disposal of said lands to a sugar growing and milling
enterprise, the successful launching of which depended on the ability of Daywalt to get possession of the land and the Torrens
certificate of title.
❖ Teodorica Endencia seems to have yielded her consent to the consummation of her contract, but the Torrens title was then in
the possession of Padre Juan Labarga in Manila, who refused to deliver the document.
❖ Teodorica also was in the end contract with the plaintiff, with the result that the plaintiff was kept out of possession until the
Wakefield project for the establishment of a large sugar growing and milling enterprise fell through.
ISSUES & HELD:
1. WON a person who is not a party to a contract for the sale of land makes himself liable for damages to the vendee,
beyond the value of the use and occupation, by colluding with the vendor and maintaining him in the effort to resist an action
for specific performance. ---NO
While it was true that the circumstances pointed to an entire sympathy on the part of the defendant corporation with the
efforts of Teodorica Endencia to defeat the plaintiff's claim to the land, the fact that its officials may have advised her not
to carry the contract into effect would not constitute actionable interference with such contract.
According to the English and American authorities, no question can be made as to the liability to one who interferes with a
contract existing between others by means which, under known legal cannons, can be denominated an unlawful means.
Thus, if performance is prevented by force, intimidation, coercion, or threats, or by false or defamatory statements, or by
nuisance or riot, the person using such unlawful means is, under all the authorities, liable for the damage which ensues.
(Lumley v. Gye)
Translated into terms applicable to the case at bar, the decision in Gilchrist vs. Cuddy (29 Phil. Rep., 542), indicates that
the defendant corporation, having notice of the sale of the land in question to Daywalt, might have been enjoined
by the latter from using the property for grazing its cattle thereon. That the defendant corporation is also liable in this
action for the damage resulting to the plaintiff from the wrongful use and occupation of the property has also been already
determined. But it will be observed that in order to sustain this liability it is not necessary to resort to any subtle exegesis
relative to the liability of a stranger to a contract for unlawful interference in the performance thereof. It is enough that
defendant use the property with notice that the plaintiff had a prior and better right.
Article 1902 of the Civil Code declares that any person who by an act or omission, characterized by fault or negligence,
causes damage to another shall be liable for the damage so done. Ignoring so much of this article as relates to liability for
negligence, we take the rule to be that a person is liable for damage done to another by any culpable act; and by
"culpable act" we mean any act which is blameworthy when judged by accepted legal standards. The idea thus expressed
is undoubtedly broad enough to include any rational conception of liability for the tortious acts likely to be developed in
any society.
Article 1257 of the Civil Code declares that contracts are binding only between the parties and their privies. In
conformity with this it has been held that a stranger to a contract has no right of action for the non fulfillment of the
contract except in the case especially contemplated in the second paragraph of the same article.
Whatever may be the character of the liability which a stranger to a contract may incur by advising or assisting one of the
parties to evade performance, there is one proposition upon which all must agree.
● This is, that the stranger cannot become more extensively liable in damages for the nonperformance of the
contract than the party in whose behalf he intermeddles.
● To hold the stranger liable for damages in excess of those that could be recovered against the immediate party to
the contract would lead to results at once grotesque and unjust. In the case at bar, as Teodorica Endencia was
the party directly bound by the contract, it is obvious that the liability of the defendant corporation, even admitting
that it has made itself coparticipant in the breach of the contract, can in no even exceed hers.
Liability of Endencia for damages resulting from breach of contract with Daywalt was a proper subject for adjudication.
Endencia refused to carry out a contract of sale of certain land and registered to the last an action for specific
performance in court resulting to plainfiff being prevented during a period of several years from exerting control over
property which he was entitled to exert and was meanwhile unable to dispose of the property advantageously..
2. WON the damages which the plaintiff seeks to recover under this head are too remote and speculative to be the subject
of recovery. YES
● The extent of the liability for the breach of a contract must be determined in the light of the situation in existence
at the time the contract is made; and the damages ordinarily recoverable are in all events limited to such as might
be reasonable are in all events limited to such as might be reasonably foreseen in the light of the facts then
known to the contracting parties.
● Ordinary damages is found in all breaches of contract where the are no special circumstances to distinguish the
case specially from other contracts. In all such cases the damages recoverable are such as naturally and
generally would result from such a breach, "according to the usual course of things."
● Special damage, on the other hand, is such as follows less directly from the breach than ordinary damage. It is
only found in case where some external condition, apart from the actual terms to the contract exists or intervenes,
as it were, to give a turn to affairs and to increase damage in a way that the promisor, without actual notice of that
external condition, could not reasonably be expected to foresee.
● Where the damage which a plaintiff seeks to recover as special damage is so far speculative as to be in
contemplation of law remote, notification of the special conditions which make that damage possible cannot
render the defendant liable therefor.
● To bring damages which would ordinarily be treated as remote within the category of recoverable special
damages, it is necessary that the condition should be made the subject of contract in such sense as to become
an express or implied term of the engagement.
INOCENCIO V. HOSPICIO DE SAN JOSE

GR. NO. 201787, SEPT. 25, 2013
CARPIO, J.
Facts:
● Hospicio de San Jose (HDSJ) leased a parcel of land located in Pasay City to German Inocencio (German).
● The lease contract was effective for a period of one year, and was renewed for one-year periods several times.
● The last written contract was executed on 31 May 1951.
● Section 6 of the lease contract provides:
○ This contract is nontransferable unless prior consent of the lessor is obtained in writing.
● German constructed two buildings on the parcel of land which he subleased. He also designated his son Ramon
Inocencio (Ramon)to administer the said property.
● German then received a letter from HDSJ informing him that the increased rentals shall take effect in November
1990 instead of August 1990, "to give him ample time to make the necessary rental adjustments with his
sublessees."
● When German passed away, Ramon did not notify HSDJ
○ Ramon then collected rentals from the sublessees and paid the rentals to resp.
● HDSJ’s property administrator Five Star Multi-services, Inc then notified Ramon that HSDJ is terminating the
lease contract
● There were negotiations to extend the lease but this was not acceded by the respondent because of the sublease
by Ramon without the consent and knowledge of lessor. HDSJ then refused to accept the tender of payment of
rentals from Ramon
● HDSJ sent a letter to Ramon: (1) reiterating its stand that the lease contract was terminated effective 31 March
2001;(2) demanding payment of ₱756,449.26 as unrealized fruits; and (3) giving him 30 days to vacate the
property.
○ The sublessees were notified to vacate within 30 days. HDSJ also posted a Patalastas stating that it is
willing to work out an amicable arrangement with the sublessees, although the latter are not considered
as legal occupants or tenants of the property. Because of this, some of the sublessees refused to pay
rentals to Ramon.
● HDSJ also entered into lease contracts with other parties
● Later Resp. filed a complaint for unlawful detainer by Ramon and his sublessees
● Petitioner now contends that resp. Cannot now raise the issue of non-transferability of the lease contract because
it admitted in its letter to ramon that there is an existing agreement between the parties
● MeTC FOR RESPONDENT, RTC AFFIRMED, CA AFFIRMED
Issue:
● WON the contract of German and HDSJ is binding to the petitioner?
Ruling:
● Yes. The case was remanded to the MeTC to determine the amount of the improvements which should be
reimbursed to petitioners
● Since lease contracts are not personal, it survives the death of the parties and continue to bind the heirs except
when the contract provides otherwise
● Sec. 6 of the contract provided that it is non transferable unless prior consent of the lessor is obtained in writing
● In this case, HDSJ acknowledged that Ramon is its month-to month lessee and thus, the death of German did not
terminate the lease contract. Since the month has already expired, Ramon must now leave the premises
● Further, Ramon had the authority to sublease the property since it was not prohibited in the contract
● HDSJ also did not commit tortious interference
● As correctly pointed out by the Inocencios, tortious interference has the following elements:
○ (1) existence of a valid contract;
○ (2) knowledge on the part of the third person of the existence of the contract; and
○ (3) interference of the third person without legal justification or excuse
● The facts of the instant case show that there were valid sublease contracts which were known to HDSJ.
○ However, we find that the third element is lacking in this case.
Ouano v CA
G.R. No. 95900 July 23, 1992
Regalado, J
Facts:
● Petitioner Oano is the owner and operator of M/V Don Julio Ouano. Petitioner leased said vessel to respondent
Rafols under a charter party for P60,000 a month. It was also stated in the charter contract that the charterer
should operate the vessel for his own benefit and should not sublet or sub-charter the same without the
knowledge or consent of the owner.
● Thereafter, Rafols contracted with Market Developers Inc (MADE) under a “Fixture Note” to transport 13,000 bags
of cement to General Santos, consigned to Supreme Merchant Construction Supply Inc (SMCSI) for a freightage
of P46,150. The fixture note did not contain any consent of Ouano.
● Ouano filed a complaint with Cebu RTC against MADE as shipper, SMCSI as consignee and Rafols as charterer
seeking payment of P23,000 for freight charges. RTC ruled in favor of Ouano and held MADE, SMCSI and
Rafols solidarily liable fo the freight charges and damges.
● The CA however reversed the decision on the ground that Ouano has no cause of action against MADE and
SMCSI but only against Rafols.
● Hence in the instant case, Ouano argues that the CA erred in not holding MADE and SMCSI liable for damages
for quasi-delict, let alone inducement to violation contract under Art 1314 of the Civil Code.
ISSUE: WON MADE SHOULD BE LIABLE FOR PAYMENT OF FREIGHT CHARGES TO OUANO
HELD: NO
In the first place, Rafols did not violate the terms of the contract by entering into a contract of transportation of cement
cargo with MADE since it did not sublet nor sub-charter the same to the latter. The possession, operation and
management of the vessel remained with Rafols as the charterer.
Further, it is a basic principle in civil law that with certain exceptions, a contract can only bind the parties who had entered
into it or by their successors who had assumed their personalities or juridical position and as a consequence, such a
contract can neither favor nor prejudice a third person.
● It is undisputed that the charter contract was entered into only by Ouano and Rafols and MADE and SMCSI were
not parties thereto nor were they aware of the provisions thereof.
● Even if the petitioner’s allegation that Rafols subleased the vessel to MADE, it does not give Ouano any cause of
action against the supposed sublessee as his right of recourse is against the original charterer.
The obligation of contracts is limited to the parties making them and ordinarily, only those who are parties to contracts are
liable for their breach. Parties to a contract cannot thereby impose any liability on one who, under its terms, is a stranger
to the contract, and, in any event, in order to bind a third person contractually, an expression of assent by such person is
necessary.
We likewise reject the contention of petitioner that MADE and Chua should be held liable for damages for a quasi-delict
under Article 2176 of the Civil Code for having failed to obtain his consent before entering into an agreement with Rafols,
and under Article 1314 of the same Code for inducing Rafols to violate the charter party.
The obligation to obtain the written consent of petitioner before subleasing or sub-chartering the vessel was on Rafols and
not on MADE, hence the latter cannot be held liable for the supposed non-compliance therewith.
Moreover, we cannot conceive of how MADE and Chua could be guilty of inducing Rafols to violate the original charter
party.
● Firstly, there is no evidence on record to show that said respondents had knowledge of the prohibition imposed in
the original charter party to sublease or sub-charter the vessel.
● Secondly, at the time the fixture note was entered into between Rafols and MADE, a written authorization signed
by the wife of petitioner in his behalf, authorizing Rafols to execute contracts, negotiate for cargoes and receive
freight payments, was shown by the former to the latter. Although the said authorization may have been made by
the wife, the same, however, can evidently be proof of good faith on the part of MADE and Chua who merely
relied thereon.
● Thirdly, as stated in the fixture note, the agreement between Rafols and MADE was for the former to transport the
cement of the latter using either the "M/V Don Julio Ouano or substitute vessel at his discretion."
● Hence, the decision to use the M/V Don Julio Ouano in transporting the cargo of MADE was solely that of Rafols.
Also, herein petitioner is deemed to have ratified the supposed sub-charter contract entered into by MADE and Rafols
when he demanded the payment of the second freight installment as provided in the agreement and, later, received the
same by virtue of the CFI decision.
Now, even on petitioner's theory that there was a sublease, it must be stressed that in a sublease arrangement, the basic
principles of which are applicable in the present case, there are two distinct leases involved, that is, the principal lease
and the sublease.
● There are two juridical relationships which co-exist and are intimately related to each other, but which are
nonetheless distinct one from the other.
● In such arrangement, the personality of the lessee qua lessee does not disappear; his rights and obligations vis-a-
vis the lessor are not passed on to nor acquired by the sublessee.
● The lessor is, in the main and except only in the instances specified in the Civil Code, a stranger to the
relationship between the lessee-sublessor and the sublessee.
● MADE was, therefore, under no obligation to pay petitioner since the freightage was payable to Rafols.
BA VS IAC 145 SCRA 419 (1986)
FACTS: Air Cargo and Travel Corporation (ACTC) has a bank account with Bank of America (BA) with account number
19842-01-2. Minami, president of ACTC in Japan has an account with BA with account number 24506-01-7. In March
1981, BA received a telex advice from Kyowa Bank to pay $23,595 to Minami’s account but the bank deposited the
amount to account number 24506-07-1 (Minami).
BA and Kyowa Bank had a prior agreement on from time to time, it can ask BA to pay amounts to a third party
(beneficiary) with BA afterwards billing Kyowa Bank the amount given to the beneficiary. It was agreed that said note
should indicate Kyowa’s signature and a confidential code.
According to ACTC, it was Tokyo Tourist Corporation who applied with Kyowa Bank to transfer $23,595 payable to
ACTC’s account with BA. ACTC alleged that the amount should be credited to its account and demanded restitution but
BA refused.
ACTC filed a case for restitution before Pasig RTC. RTC held in favor of ACTC.
ISSUE: W/N ACTC’s demand for restitution against BA is valid and proper
HELD: In the tested telex, considered either as a patent ambiguity or as a latent ambiguity, the beneficiary is Minami. It is
highly unlikely that the intended recipient of the amount should be ACTC given that the account number and the name
clearly indicate Minami as the beneficiary.
In Vargas Plow Factory vs. Central Bank, it was held that “the opening of a letter in favor of the exporter becomes
ultimately but the result of a stipulation pour atrui.” Similarly when Kyowa Bank asked BA to pay a beneficiary the contract
was between Kyowa and BA and it had a stipulation pour atrui.
It should be recalled that the tested telex originated from Kyowa at the behest of Tokyo Tourist Corporation with whom
ACTC had business dealings. Minami was the liaison officer of ACTC Japan. If Tokyo Tourist had actually intended to
credit the amount to ACTC, it should have, upon finding out that it was deposited to Minami’s account, filed a complaint
against Kyowa Bank. Since that was not done, it can be sufficiently concluded that Tokyo Tourist really intended the
remittance to be credited to Minami.
ROYAL LINES VS CA 143 SCRA 608 (1986)
FACTS: Royal Lines and National Shipyards and Steel Corp (NASSCO) entered into a written contract for the conversion
of Royal Lines’ yacht into a passenger and cargo vessel for P121,980. For additional work, NASSCO demanded
additional payment which totaled to P196,245.37. Royal Lines rejected the demand, claiming that it had not authorized
the additional work. Trial court held in favor of NASSCO.
Petitioner argues that it cannot be held liable for the additional work since it did not issue any written authorization
therefor.
ISSUE: W/N ROYAL LINES IS LIABLE FOR PAYMENT OF THE ADDITIONAL WORK DONE BY NASSCO IN THE
ABSENCE OF A WRITTEN CONTRACT
HELD: A contract is a meeting of minds between the parties and is perfected by mere consent except in the case of
certain agreements like deposit, pledge and commodatum. It may be entered into whatever form save where the law
requires a document or other special form as in the contracts enumerated in Art. 1388 NCC. As a general rule, the
contract may be oral or written.
In the instant case, the original contract of services was in writing. However, it does not follow that all supplements of the
written contract should be written as well. Art. IV of the contract stipulates: “During the performance of the work required
on the vessel at the Bataan National Shipyard, the owner, at his option may send an authorized representative o be
present while the work is being performed. In the event that the owner requests for any modification, change and/or extra
work to be performed on the vessel, which are not otherwise specified herein and which have not been included in the
Specifications submitted by the Builder to the owner, the same shall be subject of another contract between the parties
thereto.”
In stipulating such, the contracting parties did not necessarily or explicitly agree that the second contract should be in
writing. The second contract could be verbal and will be binding upon both parties as long as it represented a meeting
minds between them.
VILLANUEVA VS CA 244 SCRA 395 (1995)

FACTS: Spouses Celestino and Miguela Villanueva owned two parcels of land. Sometime in 1979, Miguela made a loan
with Philippine Veterans Bank (PVB) and presented the titles of said properties as collateral. To acquire a bigger loan,
Miguela executed a deed of sale for both properties but without her husband’s consent. However, Miguela never received
the loan she was expecting. Upon inquiry with the Registry of Deeds, Miguela found out that the original titles of the said
lots were cancelled and new ones were issued in favor of PVB after the lots were foreclosed for non-payment of the loan
granted in the name of Andres Sebastian.
Miguela sought to repurchase said lots but her offers were rejected by the bank. PVB was then placed under receivership
under Monetary Board resolution no. 334 due to insolvency.
Ong claimed that he offered to purchase said lots which were acquired by PVB through foreclosure and deposited
P10,000 as earnest money. PVB approved his offer under the conditions: that the purchase price shall be P110,000 (less
P10,000 deposited earlier) within 15 days from receipt of approval.
Ong alleged that he has better right to the said lots since PVB approved his offer and accepted his P10,000
ISSUE: W/N PVB’s approval of Ong’s offer for the subject properties is valid
HELD: Under Art. 1323 NCC, an offer becomes ineffective upon the death, civil interdiction, insanity or insolvency of
either party before acceptance is conveyed. The reason for this is that the contract is not perfected except by the
concurrence of two wills which exist and continue until the moment they occur. The contract is not yet perfected at any
time before acceptance is conveyed; hence, the disappearance of either party or his capacity before perfection prevents
the contractual tie from being formed.
The insolvency of a bank and the consequent appointment of a receiver restrict the banks capacity to act, especially in the
case of property, which is the case here. Applying Art. 1323 Ong’s offer to purchase the lots became ineffective because
the PVB became insolvent before the bank’s acceptance of the offer came to his knowledge. Hence, the purported
contract of sale between Ong and PVB did nto reach perfection. As such, he cannot invoke the resolution of the bank
approving his bid as basis for his alleged right to buy the disputed properties.
OBANA VS CA 135 SCRA 557 (1985)

FACTS: Sandoval is the owner and manager of Sandoval and Sons Rice Mill and is engaged in buying and selling palay.
Sandoval was approached by a Chan Lin who offered to purchase 170 cavans of wagwag rice at P37.25 per cavan, to be
delivered the following day at Obana’s store with payment to be made upon delivery.
As agreed, 170 cavans of rice were transported to Obana’s store the following day; Chan Lin accompanied the shipment.
When the driver tried to collect payment, Chan Lin was nowhere to be found. The driver tried to collect from Obana but
he refused stating that he had purchased the goods from Chan Lin at P33.
Sandoval filed a suit for replevin against Obana. Municipal Trial Court ordered Obana to pay half of the cost of the rice
(P2,805). Obana appealed, CFI held in favor of Obana and dismissed the complaint.
On appeal with CA, CA ruled in favor of Sandoval ordering Obana to pay full price of the rice at P37.25.
ISSUE: W/N OBANA IS LIABLE TO PAY SANDOVAL AT P37.25 PER CAVAN
HELD: It is clear that Chan had intentions of swindling both Sandoval and Obana by purchasing from Sandoval the
cavans of rice at P37.25 and offering the same to Obana at a much lower price. His purpose in entering into said contract
with Sandoval was to gain physical possession of the goods and pass them to Obana on the pretext that he is the owner
thereof. Premises considered, Chan Lin cannot be considered as the owner of the goods at the time the same was said
to have been sold to Obana. Considering that Obana acquired the 170 cavans from someone who is not the owner,
therefore he acquired no greater right than his predecessor-in-interest. Based on the principle of equity, it is but proper
that Sandoval be allowed to recover 170 cavans of rice or its value.
Based on the facts, there was a perfected sale. Art. 1475 NCC states that there is perfection when consent upon the
subject matter and price even if neither is delivered.
Art. 1475: The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object
of the contract and upon the price.
Ownership of the rice was transferred to the vendee, Chan Lin upon its delivery to him at the place stipulated pursuant to
Art. 1477 and 1496.
At the very least, Chan Lin had a rescissible title to the goods for the non-payment of the purchase price but it was not
rescinded at the time of sale to the petitioner.
But the petitioner’s testimony proves that there was voluntary rescission considering that Chan Lin returned the money
Obana paid. As such, he should return the rice to Chan Lin or Sandoval. If the rice had indeed been returned by Obana
as he claimed, then Sandoval would have withdrawn the case which did not happen. Obana cannot be allowed to unjustly
enrich himself at the expense of another by holding on to property no longer belonging to him. In law and in equity,
Sandoval is entitled to recover the rice or its value since Obana has not paid the price for it.
SERRA VS CA, 229 SCRA 60 (1994)
FACTS: Petitioner Serra and respondent bank RCBC entered into a contract of lease with option to buy a parcel of land
in Masbate, under the following terms and conditions:
1. Subject property will be leased by RCBC from Serra for 25 years from June 1975 to 2000. RCBC, however, will
have the option to purchase the said land within 10 years from the signing of the contract at a price not greater than P
210/square meter
2. Subject property shall be registered under Torrens system; failure to do so would result in the lessor paying the
lessee the market value of the building and improvements
3. Lessee will pay a monthly rental of P 700 per month
4. If RCBC fails to exercise the option to buy, all the accessions in the subject property shall become the property
of the lessor after the lease period
Serra processed the Torrens registration within 3 years however it was only in 1984 (9 years) that RCBC informed the
former of its intention to purchase the subject property for the amount of P 78, 430 (P 210 per square meter). However,
Serra informed the bank he is no longer selling the property.
Serra argued that the contract drawn by RCBC, being a contract of adhesion, took undue advantage on him when it set
unfair terms. Moreover, the extraordinary inflation caused an unusual decrease in the purchasing power of the Peso
which could not be foreseen thus resulting to undue enrichment of RCBC
RTC held in favor of Serra but CA reversed the decision.
ISSUE: W/N the contract of lease with option to buy was binding upon serra
HELD: The contract is valid. Serra cannot argue to have been taken advantage of as he is an educated man and his
actions do not belie the fact that he was eager to too sell his property to RCBC.
As to the price of P 210/square meter, it is clear from the contract that the agreed price was such. The contract, when
valid, is the law between the parties and if there is a need for some changes, both parties could by themselves negotiate
for the amendment of the contract.
Art. 1324 NCC provides that when a offeror has allowed the offeree a certain period to accept, the offer may be withdrawn
anytime before acceptance by communicating such withdrawal, except when the option is founded upon consideration, as
something paid or promised. On the other hand Art. 1479 NCC provides that an accepted unilateral promise to buy and
sell a determinate thing for a specific price is binding upon the promisor if the promise is supported by a consideration
distinct from the price.
In a unilateral promise to sell, where the debtor fails to withdraw the promise before the acceptance of the creditor, the
transaction becomes a bilateral contract to sell and to buy because upon acceptance by the creditor of the offer to sell by
the debtor, there is already a meeting of minds of the parties as to the thing which is determinate and the price which is
certain. In such case, the parties may demand reciprocal performance. Jurisprudence has taught us that an optional
contract is a privilege existing only in one party—the buyer. For a separate consideration paid, he is given the right to
decide to purchase or not, a certain merchandise or property, at any time within the agreed period, at a fixed price. This
being his prerogative, he may not be compelled to exercise the option to buy before the time expires.
In the present case, the consideration is even more onerous on the part of the lessee since it entails a transfer of the
building and/or improvements on the property to the petitioner should the Bank fail to exercise its option within the period
stipulated.
CF SHARP & CO INC VS PIONEER INSURANCE AND SURETY CORPORATION

GR NO 17949|| FEBRUARY 15,2012
PEREZ J:.
FACTS:
Agustin and Minimo applied with C.F Sarp in 1990. Passing the interview, they submitted the required passports, seaman’s book, NBI
clearance, employment certificate and other documents. A contract of employment was subsequently executed between respondents
and C.F , they were further required to attend various seminars, open bank accounts and attend the pre-departure orientation.
After a month, respondents were yet to be deployed prompting them to request for release of said documents. C.F allegedly refused to
surrender the documents which led to the filing of complaint before the POEA.
POEA held that CF was guilty for violating Art 34(k) of the Labor Code which makes it unlawful for an entity to withhold or deny travel
documents from applicant workers before departure for monetary or financial considerations other than those authorized under this
code and its IRR.(Since POEA cannot with its jurisdiction award for monetary claims, respondents filed before the RTC)
Respondents filed a Complaint for breach of contract and damages against C.F. Sharp and its surety, (Pioneer Insurance), before the
RTC. Respondents claimed that C.F. Sharp falsely assured them of deployment and that its refusal to release the disputed documents
on the ground that they were already bound by reason of the Contract of Employment, denied respondents of employment opportunities
abroad and a guaranteed income. Respondents also prayed for damages. Pioneer Insurance filed a cross claim against C.F. Sharp and
John J. Rocha, the executive vice-president of C.F. Sharp, based on an Indemnity Agreement which substantially provides that the duo
shall jointly and severally indemnify Pioneer Insurance for damages, losses, and costs which the latter may incur as surety.
RTC :there was a violation of the contract when C.F. failed to deploy and release the papers and documents of respondents, hence,
they are entitled to damages. The trial court likewise upheld the cause of action of respondents against Pioneer Insurance, the former
being the actual beneficiaries of the surety bond.
CA: No perfect employment contract between parties. However CF is liable for damages by virtue of Art 21 of the Civil Code
ISSUE:
WON LOCAL EMPLOYMENT AGENCY MAY BE HELD LIABLE FOR BREACH FOR FAILURE TO DEPLOY A SEAFARER
HELD:
Contracts undergo 3 distinct stages:
1. Negotiation--begins from the time prospective contracting parties manifest their interest i the contract and ends the moment of
agreement of parties
2. Perfection or birth of the contract-- takes place when the parties agree upon the essential elements of the contract
3. Consummation--occurs when the parties fulfill or perform the terms agreed upon in the contract, culminating in the
extinguishment thereof.
Under Article 1315 of the Civil Code, a contract is perfected by mere consent and from that moment the parties are bound not only to
the fulfillment of what has been expressly stipulated but also to all the consequences which, according to their nature, may be in
keeping with good faith, usage and law
● An employment contract, like any other contract, is perfected at the moment (1) the parties come to agree upon its terms; and
(2) concur in the essential elements thereof: (a) consent of the contracting parties, (b) object certain which is the subject
matter of the contract and (c) cause of the obligation.
By the contract, C.F. Sharp, on behalf of its principal, International Shipping Management, Inc.,
● hired respondents as Sandblaster/Painter for a 3-month contract, with a basic monthly salary of US$450.00.
● Thus, the object of the contract is the service to be rendered by respondents on board the vessel while the cause of the
contract is the monthly compensation they expect to receive.
● These terms were embodied in the Contract of Employment which was executed by the parties. The agreement upon the
terms of the contract was manifested by the consent freely given by both parties through their signatures in the contract.
Neither parties disavow the consent they both voluntarily gave. Thus, there is a perfected contract of employment.
The Court of Appeals agreed with the submission of C.F. Sharp that the perfection and effectivity of the Contract of Employment
depend upon the actual deployment of respondents. It based its conclusion that there was no perfected contract based on the following
rationale:
● The commencement of the employer-employee relationship between plaintiffs-appellees and the foreign employer, as correctly represented by
C.F. Sharp requires that conditions under Sec. D be met. The Contract of Employment was duly Verified and approved by the POEA.
Regrettably, We have painfully scrutinized the Records and find no evidence that plaintiffs-appellees were cleared for travel and departure to
their port of embarkation overseas by government authorities. Consequently, non-fulfillment of this condition negates the commencement and
existence of employer-employee relationship between the plaintiffs-appellees and C.F. Sharp. Accordingly, no contract between them was
perfected that will give rise to plaintiffs-appellees right of action
The commencement of an employer-employee relationship must be treated separately from the perfection of an employment contract.
● Despite the fact that the employer-employee relationship has not commenced due to the failure to deploy respondents in this
case, respondents are entitled to rights arising from the perfected Contract of Employment, such as the right to demand
performance by C.F. Sharp of its obligation under the contract.
STARBRIGHT SALES ENTERPRISES, INC. V. PHILIPPINE REALTY CORPORATION (PRC)
GR. NO. 177936, JAN. 18, 2012
ABAD, J.
Facts:
● Ramon Licup wrote Msgr. Cirilos offering to buy 3 contiguous parcels of land in Paranaque that the Holy See and
Respondent owned for 1, 240 pesos per sqm.
● Licup also accepted responsibility for removing the illegal settlers on the land and enclosed a 100k check to close
the transaction
○ He undertook to pay the balance of the purchase price upon presentation of the title for transfer and once
the property has been cleared of its occupants
● Msgr. Cerilos, representing the Holy See and PRC signed his name on the conforme portion of the letter and
accepted the check
○ But the check could not be encashed due to Licup’s stop order payment
● Licup later asked the Msgr. to just transfer the land to petitioner instead
○ A new check was enclosed for the same amount but SSE representatives did not sign the letter
● Msgr. Cirilos then wrote petitioner to remove the occupants or should it decide not to do this, the check will just be
returned
● Petitioner replied with an updated proposal that the land shall be bought if it will be sold on a lower price of 1,150
pesos per sqm.
● Msgr. Cirilos wrote back rejecting the proposal stating that there are other buyers willing to buy it as it is and gave
petitioner 7 days to buy the property
○ The Msgr. returned the check
● Petitioner then contend that they already had a perfected contract and that the msgr. Cannot impose additional
amendments such as the removal of the occupants at the expense of the petitioner
● SSE did not receive any demand when later it found out that the land had already been sold to Tropicana
Properties
○ SSE demanded rescission of the sale
○ Tropicana later sold the land to Standard Realty
● SSE then filed a complaint for damages and annulment of sale agasint the Holy See, Msgr. Cerilos, Tropicana
and Standard Realty
● RTC DISMISSED CASE FOR HOLY SEE
● RTC FOR PETITIONERS THAT THERE WAS ALREADY A PERFECTED CONTRACT
● CA REVERSED
● Petitioner now uses the agreement between Licup and Msgr. Cerilos to contend that there was already a
perfected contract
Issue:
● WON the perfected contract between Licup and Cirilos is applicable to SSE?
Ruling:
● No. While Cirilos had a perfected contract with Licup, when the latter proposed the transfer the same to SSE. a
subjective novation took place
● Therefore, a new debtor was placed
● SE cannot revert to the original terms stated in Licups letter to Msgr. Cirilos dated April 17, 1988 since it was not
privy to such contract.
● The parties to it were Licup and Msgr. Cirilos. Under the principle of relativity of contracts, contracts can only bind
the parties who entered into it.
○ It cannot favor or prejudice a third person.
● Petitioner SSE cannot, therefore, impose the terms Licup stated in his April 17, 1988 letter upon the owners.
VICENTE MANZANO, JR., Petitioner, v. MARCELINO GARCIA, Respondent.
G.R. No. 179323 ||November 28, 2011
LEONARDO-DE CASTRO, J.:
FACTS:
This case involves a parcel of land covered by Transfer Certificate of Title (TCT) No. T-25464, issued in the name of
respondent Garcia. The property was the subject of a deed of pacto de retro sale dated May 26, 1992 allegedly executed
by Garcia in favor of Constancio Manzano, the predecessor-in-interest and brother of petitioner Vicente Manzano, Jr.
(Vicente) for the amount of eighty thousand five hundred pesos (P80,500.00).
● Under said contract, Garcia purportedly reserved the right to repurchase the subject property for the same price
within three months from the date of the instrument.
On July 12, 1992, Constancio Manzano passed away. His properties, including the subject of this case, were adjudicated
to his heirs by virtue of a deed of extrajudicial partition with special power of attorney executed by them. Vicente was
named the administrator of the intestate estate of Constancio Manzano.
Garcia did not redeem the subject property within the three-month period. Consequently, Vicente instituted a
petition for consolidation of ownership over the property, docketed as Civil Case No. 93-610.
● Garcia filed an opposition and answer, alleging that the document evidencing the pacto de retro sale was
a forgery.
● He claimed that he and his wife were in the United States of America (USA) from June 1, 1988 to November 14,
1992, and therefore could not have possibly executed the said pacto de retro sale on May 26, 1992.
During the trial, Vicente presented TCT No. T-25464 and Tax Declaration No. 41672 to prove the due execution of the
pacto de retro sale, which was recorded in the office of the Register of Deeds of Cagayan de Oro City.
On the other hand, Garcia testified that he went to the USA on November 7, 1987. A few months later, he returned to the
Philippines. He went back to the USA on June 1, 1988. His three children were left in the Philippines, while the titles to his
properties were left in the office of his business establishment in Tablon, Cagayan de Oro City with two of their children.
Garcia testified that the signatures appearing in the pacto de retro sale were not his and his wife. He presented his
passport and drivers license, both of which bear an entirely different signature than what appeared in the pacto de retro
sale document.
Atty. Mediante, the person who notarized the deed of conveyance in question, and Perla Babano, one of the witnesses
to the execution of the pacto de retro sale, testified that the Marcelino Garcia who appeared in his office and who
executed the pacto de retro sale is not the same Marcelino Garcia who was in court during the trial of the case.
TC: Garcia failed to prove that his signature in the pacto de retro sale was forged.
CA:REVERSED
● No rule requiring expert testimony to determine the genuineness of a signature appearing on a document. Since
it was plainly obvious from the evidence on record that the signature appearing on the pacto de retro sale is far
different from the customary signature of Garcia that appeared in his passport and driver's license, the testimony
of Garcia that the signature was not his is sufficient evidence of the forgery pursuant to Section 50, Rule 130[15]
of the Rules of Court. On the basis of Atty. Mediante's testimony, the presumption of regularity in the execution of
the public document has been sufficiently destroyed and overcome.
● Pacto de retro sale is void ab initio pursuant to Article 1409 in relation to Article 1505 of the Civil Code.
ISSUE:
WON the pacto de retro sale between the parties was valid
HELD:SC AFFIRMED CA RULING

From an assiduous examination of the records of the case, it is plainly apparent to this Court that the alleged signature of
Garcia in the pacto de retro sale is utterly dissimilar from his customary signature appearing in the evidence on
record, as well as in the verifications of the pleadings before this Court and the courts a quo. From this circumstance
alone, we are constrained to affirm the ruling of the Court of Appeals finding that the pacto de retro sale was forged and,
therefore, void ab initio.
● The variance in the alleged signature of Garcia in the pacto de retro sale, on one hand, and in the evidence on
record and in the verifications of the pleadings before this Court and the courts a quo, on the other hand, was
enormous and obvious, such that this Court can readily conclude that the pacto de retro sale was in all likelihood
made by someone who has not even seen the customary signature of Garcia.
● Furthermore, the falsity of the signature on the pacto de retro sale was affirmed by two persons present when the
instrument was signed, one of which is the very person who notarized the same.
Petitioner likewise argues that the Court of Appeals erred in failing to appreciate that the notarized deed of pacto de retro
sale was entitled to the presumption of regularity and should be given great weight. It is settled that while a notarized
document enjoys this presumption, "the fact that a deed is notarized is not a guarantee of the validity of its contents." The
"presumption of regularity of notarized documents is not absolute and may be rebutted by clear and convincing evidence
to the contrary."
Irregularities in the notarization of the document may be established by oral evidence of persons present in said
proceeding. Here, the presumption of regularity of the notarized deed of pacto de retro sale was sufficiently overcome by
the testimony of Atty. Mediante.
At this point, however, we should clarify that the proper basis for the nullity of the forged pacto de retro sale is
not Article 1409 (enumerates examples of void contracts) in relation to Article 1505 (refers to an unenforceable
contract and is applicable only to goods) of the Civil Code as stated by the Court of Appeals, but Article 1318 of
the Civil Code, which enumerates the essential requisites of a valid contract:
Article 1318. There is no contract unless the following requisites concur:
(1) Consent of the contracting parties;
(2) Object certain which is the subject matter of the contract;
(3) Cause of the obligation which is established.
There are two types of void contracts: (1) those where one of the essential requisites of a valid contract as provided for by
Article 1318 of the Civil Code is totally wanting; and (2) those declared to be so under Article 1409 of the Civil
Code"Conveyances by virtue of a forged signature x x x are void ab initio. The absence of the essential requisites of
consent and cause or consideration in these cases rendered the contract inexistent. x x x.
WHEREFORE, the Petition is DENIED. The Decision of the Court of Appeals in CA-G.R. CV No. 55408 dated September
26, 2006 and its Resolution dated August 9, 2007 are hereby AFFIRMED.

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THE SECRET SOCIETY OF CRABS

FLORENTINO V. ENCARNACION, SR.

The pertinent provisions or clauses of the Charter Party read:

Art. 1651 reads:

TC: admitted the amended complaint, as affirmed by CA.

d) If in CB as Lost, do procedures 2a to 2e.,

Facts: Anonymous Ifrit

Art. 1311, second paragraph, of the Civil Code provides:

ISSUES and HELD

Do petitioners, under substantive law, possess such right? No.

INOCENCIO V. HOSPICIO DE SAN JOSE

BA VS IAC 145 SCRA 419 (1986)

ROYAL LINES VS CA 143 SCRA 608 (1986)

VILLANUEVA VS CA 244 SCRA 395 (1995)

OBANA VS CA 135 SCRA 557 (1985)

ISSUE: W/N OBANA IS LIABLE TO PAY SANDOVAL AT P37.25 PER CAVAN

SERRA VS CA, 229 SCRA 60 (1994)

RTC held in favor of Serra but CA reversed the decision.

CF SHARP & CO INC VS PIONEER INSURANCE AND SURETY CORPORATION

HELD:SC AFFIRMED CA RULING

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