SAMSON VS COURT OF APPEALS, SANTOS & SONS INC.
, ANGEL SANTOS
G.R No. 108245, November 25, 1994
FACTS:
Respondent Angel Santos owner of a haberdashery store Santos & Sons, Inc., occupied a
commercial unit at the Madrigal Bldg. owned by Susana Realty Corp. for twenty years under a
lease contract renewable yearly. hus, the contract in force between the partes provided that
the term of the lease shall be one (1) year, startng on August 1, 1983 untl July 31, 1984. On
June 28, 1984, the lessor informed respondents that lease contract expiring on July 31, 1984
would not be renewed. one the less,respondent/s lease contract was extended untl December
31, 1984 and contnued to occupy the leased premises beyond the extended term.
On February 5, 1985 respondent received a leter from the lessor, through its Accountant Jane F.
Bartolome, informing him of rental increase, retroactve to January 1985, pending renewal of
his contract untl the arrival of Ms. Ma. Rosa Madrigal (one of the owners of Susana Realty).
On February 15, 1985, pettoner Manolo Samson agreed to buy respondent's rights to Madrigal
Bldg.,provided that pettoner will acquire all shares of Santos & Sons, Inc. to avoid breach of
contract with Madrigal. Respondent also informed pettoner that his lease contract with
Madrigal was impliedly renewed and will be formally renewed when Tanya Madrigal arrives.
On February 20, 1985, pettoner paid P 150,000.00 to respondent representng the value of
improvements in the Santos & Sons store. The balance of P 150,000.00 shall be paid upon
formal renewal of lease contract between respondent and Susana Realty, a conditon precedent
to transfer of leasehold right of respondent to pettoner. March 1985, pettoner occupied
Santos & Sons store. In July 1985, however, pettoner received a notce from Susana Realty,
addressed to Santos & Sons, Inc., directng the later to vacate the leased premises on or before
July 15, 1985 because respondent failed to renew his lease pettoner was forced to vacate the
same on July 16, 1985.
Pettoner fled an acton for damages. He imputed fraud and bad faith against respondent when
the later stated in his leter-proposal that his lease contract with Susana Realty has been
impliedly renewed. Pettoner claimed that this misrepresention induced him to purchase the
store and the leasehold right. On November 29, 1990, the trial court rendered a decision in
favor of pettoner.
Respondent appealed to the Court of Appeals and on November 27, 1992, the appellate
court modifed the decision of the trial court afer fnding that private respondent did not
exercise fraud or bad faith.
ISSUES:
Whether or not private respondent Angel Santos commited fraud or bad faith in representng
to pettoner that his contract of lease over the subject premises has been impliedly renewed by
Susana Realty.
RULING:
Appealed decision is AFFIRMED in to.
Bad faith is essentally a state of mind afrmatvely operatng with furtve design or with some
motve of ill-will. It does not simply connote bad judgement or negligence. It imports a
dishonest purpose or some moral obliquity and conscious doing of wrong. Bad faith is thus
synonymous with fraud and involves a design to mislead or deceive another, not prompted by
an honest mistake as to one's rights or dutes, but by some interested or sinister motve. In
contracts, the kind of fraud that will vitate consent is one where, through insidious words or
machinatons of one of the contractng partes, the other is induced to enter into a contract
which, without them, he would not have agreed to. This is known as dolo causante or causal
fraud which is basically a decepton employed by one party prior to or simultaneous to the
contract in order to secure the consent of the other.
Respondent was neither guilty of fraud nor bad faith in claiming that there was implied renewal
of his contract of lease with Susana Realty. The notce from Susana Realty Accountant led
private respondent to believe and conclude that his lease contract was impliedly renewed and
that formal renewal thereof would be made upon the arrival of Tanya Madrigal.Thus, from
the start, it wasknown to both partes that, insofar as the agreement regarding the transfer of
private respondent's leasehold right to pettoner was concerned, the object thereof relates to a
future right. It is a conditonal contract recognized in civil law, the efcacy of which depends
upon an expectancy - the formal renewal of the lease contract between private respondent and
Susana Realty.
What part it is in voidable contract?
The contract is voidable that has a defect violaton of fraud because whether or not
private respondent Angel Santos commited fraud or bad faith in representng to
pettoner that his contract of lease over the subject premises has been impliedly
renewed by Susana Realty. According to Artcle 1338 of the Civil Code, there is fraud
when one of the contractng partes, through insidious words or machinatons, induces
the other to enter into the contract that, without the inducement, he would not have
agreed to. Yet, fraud, to vitate consent, must be the causal (dolo causante), not merely
the incidental (dolo incidente), inducement to the making of the contract. In Samson vs.
Court of Appeals, causal fraud is defned as "a decepton employed by one party prior to
or simultaneous to the contract in order to secure the consent of the other."
