Tuazon, Patricia Marie D.

1 JD

GR. No. L-27796 , 70 SCRA 122

St. Paul Fire and Marine Insurance vs. Macondray

FACTS:

The shipment insured by the herein petitioner, on August 7, 1960, was discharged
complete and in good order with the exception of one (1) drum and several cartons which
were in bad order condition. Petitioner instituted an action for the recovery of damages and
costs.
After due trial, the lower court rendered judgement ordering the defendants to pay
P1,109.67 representing costs, insurance and freight (C.I.F.) and the bill of lading of the said
shipments.
The plaintiff subsequently contends, in a Motion for Reconsideration, that it should
recover the amount of P3.90 instead of P2.00 per dollar which represents the value of the
damaged shipment at the date of the judgement (March 10, 1965).

ISSUE:

Whether or not the basis for the claim was at the date of the discharge, as represented by
the bill of lading.

RULING:

Yes. The purpose of the bill of lading is to provide for the rights and liabilities of the
parties in reference to the contract to carry. The stipulation in the bill of lading limiting the
common carrier’s liability to the value of the goods appearing in the bill, unless the shipper
or owner declares a greater value, is valid and binding.
A stipulation fixing or limiting the sum that may be recovered from the carrier on the
loss or deterioration of the goods is valid, provided it is (a) reasonable and just under the
circumstances, and (b) has been fairly and freely agreed upon.

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1 JD

181 SCRA 557 G.R. No. 49188

PAL vs. CA

FACTS:

Upon due trial, CA rendered judgement affirming the decision of the trail court to
direct PAL to pay damages to Amelia Tan. Such execution of judgement was referred to
Deputy Sheriff, Emilio Reyes.
Months later, Tan moved for the issuance of writ of execution stating that judgement
remained unsatisfied. PAL countered arguing that it had already fully paid its obligation to
plaintiff through the deputy sheriff of the respondent court, Emilio Z. Reyes, as evidenced
by cash vouchers properly signed and received by said Emilio Z. Reyes. However, the
order could not be served upon Deputy Sheriff Reyes who had absconded or disappeared.
Thereafter, the trial court directed Special Sheriff Del Rosario to levy execution of the
judgement; and served a notice of garnishment on the depository bank of PAL. Hence, this
petition.

ISSUE:

Whether or not the payment of PAL through Sheriff Reyes constitutes payment to the
Plaintiff Amelia Tan.

RULING:

No. Ms. Tan has not seen a centavo of what the courts have solemnly declared as
rightfully hers. Through absolutely no fault of her own, Ms. Tan has been deprived of what
she should have been paid from the start, before 1967, without need of her going to court to
enforce her rights. And all because PAL did not issue the checks intended for her, in her
name.
Under the peculiar circumstances of this case, the payment to the absconding sheriff
by check in his name did not operate as a satisfaction of the judgment debt.
In general, a payment, in order to be effective to discharge an obligation, must be
made to the proper person. Article 1240 of the Civil Code provides:
“Payment shall be made to the person in whose favor the obligation has been
constituted, or his successor in interest, or any person authorized to receive it.”
Thus, payment must be made to the obligee himself or to an agent having authority,
express or implied, to receive the particular payment.

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1 JD

345 SCRA 134 (2000)

PACULDO VS REGALADO

FACTS:

Petitioner Nereo J. Paculdo and respondent Bonifacio C. Regalado entered into a

contract of lease over a 16,478 square meter parcel of land with a wet market building. The
contract was for twenty-five (25) years, commencing on January 1, 1991 and ending on
December 31, 2015. For the first five (5) years of the contract beginning December 27,
1990, Nereo would pay a monthly rental of P450,000.00, payable within the first five (5)
days of each month at Bonifacio’s office, with a 2% penalty for every month of late
payment. Aside from the above lease, petitioner leased eleven (11) other properties from
respondent.

Petitioners failed to pay P361,895.55 in rental for the month of May, 1992,
and the monthly rental of P450,000.00 for the months of June and July 1992, on July 6,
1992, respondent sent a demand letter to petitioner demanding payment of the back
rentals, and if no payment was made within fifteen (15) days from receipt of the letter, it
would cause the cancellation of the lease contract. Another demand letter sent, reiterating
the demand for payment and for petitioner to vacate the subject premises. Without the
knowledge of petitioner, on August 3, 1992, respondent mortgaged the land subject of the
lease contract, including the improvements which petitioner introduced into the land
amounting to P35,000,000.00, to Monte de Piedad Savings Bank, as security for a loan in
the amount of P20,000,000.00. subsequent dates thereafter, respondent refused to accept
petitioner’s daily rental payments.

Petitioner filed RTC an action for injunction and damages seeking to enjoin
respondent from disturbing his possession of the property subject of the lease contract. And
on the same day respondent also filed with Metropolitan Trial Court a complaint for
ejectment against petitioner.

ISSUE:

Whether or not petitioner was in arrears in the payment of rentals on the subject property at
the time of the filing of the complaint for ejectment.

RULING:

No. The right to specify which among his various obligations to the same creditor is
to be satisfied first rests with the debtor, as provided by law Article 1252 of the Civil Code.

At the time petitioner made the payments, he made it clear to respondent that they
were to be applied to his rental obligations on the Fairview wet market property. Though he
entered into various contracts and obligations with respondent all the payments made,
about P11, 000,000.00, were to be applied to rental and security deposit on the Fairview
wet market property. There was no clear assent by petitioner to the change in the manner
of application of payment.1The petitioner’s silence as regards the application of payment by
respondent cannot mean that he consented thereto. There was no meeting of the minds.
Though an offer may be made, the acceptance of such offer must be unconditional and

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1 JD

unbounded in order that concurrence can give rise to a perfected contract. Hence,
petitioner could not be in estoppel.
G.R. No. 118342
DBP VS CA

FACTS:

A complaint against the Development Bank of the Philippines filed by Lydia

Cuba.The said complaint sought (1) the declaration of nullity of DBP's appropriation of
CUBA's rights, title, and interests over a 44-hectares fishpond located in Bolinao,
Pangasinan, for being violative of Article 2088 of the Civil Code; (2) the annulment of the
Deed of Conditional Sale executed in her favor by DBP; (3) the annulment of DBP's sale of
the subject fishpond to Caperal; (4) the restoration of her rights, title, and interests over the
fishpond; and (5) the recovery of damages, attorney's fees, and expenses of litigation.

Lydia Cuba is a grantee of a Fishpond Lease Agreement and obtain loans from DBP.
As security for said loans, she executed two Deeds of Assignment of her Leasehold Rights.
After sometime, she failed to pay her loan on the scheduled dates.Without foreclosure
proceedings, whether judicial or extra-judicial, defendant DBP appropriated the Leasehold
Rights of plaintiff over the fishpond in question. defendant DBP, in turn, executed a Deed of
Conditional Sale of the Leasehold Rights in favor of plaintiff Lydia Cuba over the same
fishpond in question. After the Deed of Conditional Sale was executed in favor of plaintiff, a
new Fishpond Lease Agreement was issued in favor of Lydia Cuba.

Plaintiff Lydia Cuba failed to pay the amortizations.defendant DBP took possession
of the Leasehold Rights of the fishpond in question. thereafter executed a Deed of
Conditional Sale in favor of defendant Agripina Caperal.The trial court resolved the issue in
favor of CUBA by declaring that DBP's taking possession and ownership of the property
without foreclosure was plainly violative of Article 2088.

As to damages, the trial court found "ample evidence on record" that the
representatives of DBP ejected CUBA and her caretakers not only from the fishpond area
but also from the adjoining big house; and that when CUBA's son and caretaker went there
they found the said house unoccupied and destroyed and CUBA's personal belongings,
machineries, equipment, tools, and other articles used in fishpond operation which were
kept in the house were missing.
ISSUE:
Whether or not the act of DBP in appropriating to itself CUBA's leasehold rights over the
fishpond in question without foreclosure proceedings was invalid.

RULING:

We find no merit in DBP's contention that the assignment novated the promissory
notes in that the obligation to pay a sum of money the loans (under the promissory notes)
was substituted by the assignment of the rights over the fishpond (under the deed of
assignment). As correctly pointed out by CUBA, the said assignment merely complemented
or supplemented the notes; both could stand together. The former was only an accessory to
the latter. Contrary to DBP's submission, the obligation to pay a sum of money remained,
and the assignment merely served as security for the loans covered by the promissory
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1 JD

notes. Significantly, both the deeds of assignment and the promissory notes were executed
on the same dates the loans were granted. Also, the last paragraph of the assignment
stated: "The assignor further reiterates and states all terms, covenants, and conditions
stipulated in the promissory note or notes covering the proceeds of this loan, making said
promissory note or notes, to all intent and purposes, an integral part hereof."

Neither did the assignment amount to payment by cession under Article 1255 of the
Civil Code for the plain and simple reason that there was only one creditor, the DBP. Article
1255 contemplates the existence of two or more creditors and involves the assignment of
all the debtor's property. Nor did the assignment constitute dation in payment under Article
1245 of the civil Code.

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1 JD

G.R. L-56350
Occeña v. CA

FACTS:

Samuel Occena and Ramon Gonzales both members of the Philippine Bar and former
delegates to the 1971 Constitutional Convention that created the current Constitution, are
suing as taxpayers against the validity of three Batasang Pambansa Resolutions:

Resolution No. 1 proposes a change that would let a person who was born in the
Philippines but became a citizen of a different country to own a small piece of land for living
on.

Resolution No. 2 is about the Presidency, the Prime Minister, the Cabinet, and the National
Assembly.

Resolution No. 3 proposes amendment of the Article establishing the Election Commission

ISSUE:

WON the proposed amendments are so extensive in character that it goes far beyond the
limits of the authority conferred on the Interim Batasang Pambansa.

RULING:

No, the proposed changes don't go beyond what the Interim Batasang Pambansa
can do with the power it has been given. It doesn't matter if the Constitutional Convention
only proposes changes to the Constitution or if it completely rewrites the current
Constitution and proposes a new Constitution based on an ideology that doesn't fit with the
democratic system. Either way, the people will have to approve it.

Once the sovereign people have agreed that the new Constitution is valid, there is
no more room for debate. The fact that the current Constitution can be changed and
replaced with a new one is not an argument against the law's validity, because an
'amendment' always includes 'revision,' which means a complete rewrite of the whole
Constitution.

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1 JD

G.R. No. 116896

PNCC vs. CA

FACTS:
The Philippine National Construction Corporation signed a lease agreement with
private respondents. The agreement said that the rent for using the land would be P 20,000
per month, payable a year in advance. The petitioner plans to build a rock crushing plant on
that land. The lease is for five years, starting on the date that the Ministry of Human
Settlements gives an industrial clearance.

PNCC meanwhile got a Temporary Use Permit for the rock crushing project from the
Ministry and after nine days, private respondents wrote to PNCC and asked for the first
annual rental.

PNCC replied arguing that the contract must start on the date that the Ministry gives
them an industrial clearance and that it wanted to end the contract it had made with
respondents because of "financial and technical problems.

Respondents didn't agree to PNCC's request for early termination, so PNCC filed a
lawsuit for specific performance with damages against them.

The trial court sided with the respondents and told PNCC to pay rent for two years,
plus legal fees and interest.

When PNCC took the case to the Court of Appeals, the trial court's decision was
upheld, hence this case.

ISSUE:

WON the said contract commenced on the date of issuance of clearance by Ministry

RULING:
No, PNCC’s petition is yet again denied. According to the Supreme Court, the
corporation is estopped from claiming that Lease Contract commences on the date of
issuance of clearance by the Ministry, because in its letter to respondents, PNCC
recognized its obligation to pay rentals counted from the date the temporary permit was
issued.

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1 JD

G.R. No. 104726

VICTOR YAM & YEK SUN LENT vs. THE COURT OF APPEALS and MANPHIL
INVESTMENT CORPORATION

FACTS:

Victor Yam and Yek Sun Lent obtained a loan of P300,000 denominated as
Industrial Guarantee and Loan Fund (IGLF) from Manphil Investment Corporation.

On April 2, 1985, Manphil was placed under receivership by the Central Bank. Yam
and Sun paid on July 31, 1986, which was received by Central Bank. It contained a notation
on the voucher that there was already a full payment of IGLF loan.

Manphil filed a collection case against the two after they failed to pay the remaining
balance. The two contended that through Manphil’s president, it was agreed to condone the
penalties and service charges.

The Regional Trial Court ruled in favor of Manphil, which was sustained by the Court
of Appeals. Hence, this petition.

ISSUE:

May the Manphil Investment Corporation, through its president, condone penalties and
charges after it had been placed under receivership?

RULING:

No. As held in Villanueva v. CA the appointment of a receiver operates to suspend

the authority of a corporation and of its directors and officers over its property and effects,
such authority being reposed in the receiver. Thus, its president had no authority to
condone the debt.

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1 JD

G.R. No. L-22490

GAN TION, petitioner, vs. HON. COURT OF APPEALS

FACTS:
In 1961, Gan Tion filed an ejectment case against Ong Wan, contending that the
latter was in default of 2 months of rentals at Php 180/month, for a total of Php 360. Ong
Wan denied the allegation and said that the agreed monthly rental was only P160, and that
he tried to pay Gan Tion but was refused.

The municipal court ruled in favor of Gan Tion. On appeal, the CFI reversed the
judgment and dismissed the complaint, awarding Ong Wan the sum of P500 as attorney's
fees.

On October 1963, Gan Tion served notice on Ong Wan that he was increasing the
rent to P180 a month, effective November 1st, and at the same time, demanded the rents in
arrears at the old rate in the aggregate amount of P4,320.00, corresponding to a period
from August 1961 to October 1963. Ong Wan was able to obtain a writ of execution of the
judgment for attorney's fees in his favor.

Gan Tion went on certiorari to the Court of Appeals, where he pleaded legal
compensation, claiming that Ong Wan Sieng was indebted to him in the sum of P4,320 for
unpaid rents.CA ruled against Gan Tion, holding that although "respondent Ong is indebted
to Gan Tiong for unpaid rentals in an amount of more than P4,000.00," the sum of
P500could not be the subject of legal compensation, it being a "trust fund for the
benefit of the lawyer, which would have to be turned over by the client to his counsel."

According to the CA, the requisites of legal compensation, namely, that the parties
must be creditors and debtors of each other in their own right (Art. 1278, Civil Code) and
that each one of them must be bound principally and at the same time be a principal
creditor of the other (Art. 1279), are not present in the instant case, since the real creditor
with respect to the sum of P500 was the defendant's counsel.

ISSUE:
WON the award for attorney’s fees may be the subject of legal compensation?

RULING:
Yes, the award for attorney's fees is made in favor of the litigant, not of
his counsel, and is justified by way of indemnity for damages recoverable by the former in
the cases enumerated in Article 2208 of the Civil Code. It is the litigant, not his counsel,
who is the judgment creditor and who may enforce the judgment by execution. Such credit

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1 JD

may properly be the subject of legal compensation. Quite obviously it would be unjust to
compel petitioner to pay his debt for P500 when admittedly his creditor is indebted to him
for more than P4,000.

G.R. No. 116792

BPI vs Reyes

FACTS:
On September 25, 1985, private respondent Edvin F. Reyes opened Savings
Account No. 3 185-0172-56 at petitioner Bank of the Philippine Islands (BPI) Cubao,
Shopping Center Branch. It is a joint "AND/OR" account with his wife, Sonia S. Reyes. He
regularly deposited in this account the U.S. Treasury Warrants payable to the order of
Emeteria M. Fernandez as her monthly pension.
Emeteria M. Fernandez died on December 28, 1989 without the knowledge of the
U.S. Treasury Department. She was still sent U.S. Treasury in the amount of U.S.
$377.00 or P10,556.00. On March 8, 1990, private respondent closed Savings Account No.
3185-0128-82 and transferred its funds amounting to P13,112.91 to Savings Account No.
3185-0172-56, the joint account with his wife.
On January 16, 1991, U.S. Treasury Warrant No. 21667302 was dishonored as it
was discovered that Fernandez died three (3) days prior to its issuance.
On February 19, 1991, private-respondent received a PT&T urgent telegram from
petitioner bank requesting him to contact Manager Grace S. Romero or Assistant Manager
Carmen Bernardo. He was informed that the treasury check was the subject of a claim by
Citibank NA. He assured petitioners that he would drop by the bank to look into the matter.
He also verbally authorized them to debit from his other joint account the amount stated in
the dishonored U.S. Treasury Warrant. On the same day, petitioner bank debited the
amount of P10,556.00.
On February 21, 1991, private respondent with his lawyer Humphrey Tumaneng
visited the petitioner bank and the refund documents were shown to them. Surprisingly,
private respondent demanded from petitioner bank restitution of the debited amount. He
claimed that because of the debit, he failed to withdraw his money when he needed them.

ISSUE:
WON the BPI has the legal right to apply the deposit to the outstanding obligation under the
principle of “legal compensation”.

RULING:
Yes, the Supreme Court ruled that applying legal compensation is proper.
Compensation shall take place when two persons, in their own right, are creditors
and debtors of each other. Article 1290 of the Civil Code provides that “when all the

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1 JD

requisites mentioned in Article 1279 are present, compensation takes effect by operation of
law, and extinguishes both debts to the concurrent amount, even though the creditors and
debtors are not aware of the compensation.” Legal compensation operates even against
the will of the interested parties and even without the consent of them. Since this
compensation takes place ipso jure, its effects arise on the very day on which all its
requisites concur. When used as a defense, it retroacts to the date when its requisites are
fulfilled.
Article 1279 states that in order that compensation may be proper, it is necessary:
1. That each one of the obligors be bound principally, and that he be at the same
time a principal creditor of the other;
(2) That both debts consist in a sum of money, or if the things due are
consumable, they be of the same kind, and also of the same quality if the latter has
been stated;
(3) That the two debts be due;
(4) That they be liquidated and demandable;
(5) That over neither of them there be any retention or controversy, commenced
by third persons and communicated in due time to the debtor.
The elements of legal compensation are all present in the case at bar. The
obligors bound principally are at the same time creditors of each other. Petitioner bank
stands as a debtor of the private respondent, a depositor. At the same time, said bank is
the creditor of the private respondent with respect to the dishonored U.S. Treasury
Warrant which the latter illegally transferred to his joint account. The debts involved
consist of a sum of money. They are due, liquidated, and demandable. They are not
claimed by a third person.

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1 JD

G.R. No. L-29981

Millar vs. Fonacier

FACTS:
Respondent was directed in civil case 27116 to pay petitioner P1,746.98 plus
interest at the rate of 12% per year from the date of the complaint's filing, P400 in attorney's
fees, and the costs of action. The respondent then pleaded with the petitioner to enter a
deed of chattel mortgage under which he agreed to pay the petitioner P1,700.00 in two
payments secured by a mortgage. Respondent, however, failed to make the installment
payments, and the sheriff levied some of his assets for execution sale. The respondent filed
an emergency application to halt the execution sale, and the Trial Court determined that the
parties' subsequent agreement impliedly novated the judgment obligation in civil case
27116.

ISSUE:
WON the subsequent agreement novated the judgment obligation

RULING:
No. The argument of implicit novation necessitates strong and persuasive
demonstration of the two responsibilities' total incompatibility. There is no precise form
required by law for a successful novation by implication. The test is whether the two
commitments can coexist. If they are unable to do so, incompatibility occurs, and the
second responsibility supersedes the first. If they can stand together, there is no
incompatibility and no novation. The clear contents of the chattel mortgage deed disclose
that the parties purposefully formed the chattel mortgage to ensure the payment of the
respondent's then-existing debt emanating from the decision against him in civil case
27116. The chattel mortgage arrangement had no significant effect on the respondent's
obligations as a security for the payment of the judgment obligation. Where the new duty
simply reiterates or ratifies the old obligation, even if the former results in tiny revisions or
slight modifications to the cause, object, or circumstances of the latter, such changes do not
result in any serious incompatibility between the two duties. Only those important and main
changes brought about by the new duty that alter or modify the nature of the previous
obligation result in implicit novation.

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1 JD

G.R. No. 136780

Molino vs. Security Diners International

FACTS:
On 24 July 1987, Jeanette Molino acted as a surety for her brother-in-law, Danilo
Alto, in his application for a local credit card (P10,000.00 credit limit) with the Security
Diners International Corporation (SDIC). A Surety Undertaking was signed by Jeanette
which states that she found herself jointly and severally with Danilo to pay SDIC all
obligations and charges in the use of the credit card; and she declared that "any change or
novation in the Agreement shall not release her from the Surety Undertaking," it being
understood that said Undertaking is a continuing one and shall subsist and bind her until all
such obligations, charges, and fees have been fully paid and satisfied.

The application of Danilo was approved by SDIC. On 8 February 1988, he requested

SDIC to upgrade his Regular Card to Diamond Card (no credit limit). As a requirement,
Danilo secured the approval of Jeanette who then signed a note indicating her approval to
the said request. On 01 October 1988, Danilo defaulted in the payment of P166,408.31.
SDIC filed an action for collection against Danilo and Jeanette before the RTC of Makati.
Jeanette claimed that the Surety Undertaking only applies to the original agreement
covering the Regular Card first issued to Danilo and incurred no liability under the Diamond
Card because she did not expressly give her consent to be a surety thereto; and the
upgrading of the card extinguishes her obligation under the original agreement and Surety
Undertaking.

ISSUE:
Whether the upgrading of the card constituted a novation that will extinguish Jeanette’s
obligation under the original agreement and Surety Undertaking

RULING:
The upgrading was a novation because it was committed with the intent of canceling
and replacing the first card. However, the novation did not serve to release petitioner from
her surety obligations because in the Surety Undertaking, she expressly waived discharge
in case of change or novation in the agreement governing the use of the first credit card.
The extent of a surety’s liability is determined by the language of the suretyship contract or
bond itself. The Surety Undertaking Expressly provides that petitioner’s liability is solidary.
A surety is considered in law as being the same party as the debtor in relation to whatever
is adjudged touching the obligation of the latter, and their liabilities are interwoven as to be
inseparable. Although the contract of a surety is in essence secondary only to a valid
principal obligation, his liability to the creditor is direct, primary and absolute; he becomes
liable for the debt and duty of another although he possesses no direct or personal interest
over the obligations nor does he receive any benefit therefrom.

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1 JD

G.R. 147950
California Bus Line vs State Investment

FACTS:
The Court of Appeals held petitioner California Bus Lines, Inc., liable for the value of
five... promissory notes assigned to respondent State Investment House, Inc.

Sometime in 1979, Delta Motors Corporation--M.A.N. Division (Delta) applied for

financial assistance from respondent State Investment House, Inc. (hereafter SIHI), a
domestic corporation engaged in the business of quasi-banking. SIHI agreed to extend a
credit line to Delta... for P25,000,000.00 in three separate credit agreements dated May 11,
June 19, and August 22, 1979.

When CBLI defaulted on all payments due, it entered into a restructuring agreement
with Delta on October 7, 1981, to cover its overdue obligations under the promissory notes.

ISSUE:
whether the Restructuring Agreement dated October 7, 1981, between petitioner CBLI and
Delta Motors, Corp. novated the five promissory notes Delta Motors, Corp. assigned to
respondent SIH.

RULING:
Novation has been defined as the extinguishment of an obligation by the substitution
or change of the obligation by a subsequent one which terminates the first, either by
changing the object or principal conditions, or by substituting the person of the debtor, or
subrogating a... third person in the rights of the creditor.

It is extinct when an old obligation is terminated by the creation of a new obligation

that takes the place of the former; it is merely modificatory when the old obligation...
subsists to the extent it remains compatible with the amendatory agreement. An extinctive
novation results either by changing the object or principal conditions (objective or real), or
by substituting the person of the debtor or subrogating a third... person in the rights of the
creditor (subjective or personal). Novation has two functions: one to extinguish an existing
obligation, the other to substitute a new one in its place. For novation to take place, four...
essential requisites have to be met, namely, a previous valid obligation; an agreement of all
parties concerned to a new contract; the extinguishment of the old obligation; and the birth
of a valid new obligation.

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1 JD

417 SCRA 292

Garcia vs. Llamas
FACTS:
Petitioner and Eduardo De Jesus borrowed P400,000.00 from respondent. Both
executed a promissory note wherein they bound themselves jointly and severally to pay the
loan on or before 23 January 1997 with a 5% interest per month. The loan has long been
overdue and, despite repeated demands, both have failed and refused to pay it. Hence, a
complaint was filed against both.

Resisting the complaint, Garcia averred that he assumed no liability because he

signed merely as an accommodation party for De Jesus; and that he is relieved from any
liability arising from the note inasmuch as the loan had been paid by De Jesus by means of
a check dated 17 April 1997; and that, in any event, the issuance of the check and
respondent's acceptance thereof novated or superseded the note.

ISSUE:
WON the petitioner is free from liability on the promissory note as an accommodation party.

RULING:
No. The note was made payable to a specific person rather than to the bearer or to
order - a requisite for negotiability under the Negotiable Instruments Law (NIL). Hence, the
petitioner cannot avail himself of the NIL's provisions on the liabilities and defenses of an
accommodation party.

Even granting arguendo that the NIL was applicable. Still, the petitioner would be
liable for the promissory note. Under Article 29 of the NIL, an accommodation party is liable
for the instrument to a holder for value even if, at the time of its taking, the latter knew the
former to be only an accommodation party. The relation between an accommodation party
and the party
accommodated is, in effect, one of principal and surety - the accommodation party
being the surety. It is a settled rule that a surety is bound equally and absolutely with the
principal and is deemed an original promissory and debtor from the beginning.

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1 JD

G.R. No. 142838

Licaros vs. Gatmaitan

FACTS:
Abelardo Licaros, a Filipino businessman, invested money with Anglo-Asean Bank
and Trust Limited, a private bank registered in Vanuatu but not in the Philippines. He had
difficulty retrieving the investment and interests, so he sought the counsel of Antonio
Gatmaitan. They agreed that Gatmaitan would assume the payment of Anglo-Asean's
indebtedness and executed a Memorandum of Agreement and a promissory note.
However, when they presented the memorandum, there was no action taken, so Gatmaitan
did not pay the amount. Licaros demanded that Gatmaitan pay the obligations under the
promissory note, but he did not comply. Licaros filed a complaint to recover the principal
obligation of P3.5 million plus interests. The trial court ruled in Licaros's favor, but the Court
of Appeals reversed the decision, stating that Gatmaitan was not obligated to pay Licaros.
Licaros then filed a petition.

ISSUE:
WON the Memorandum of Agreement between the petitioner and respondent is one of the
assignments of credit or one of conventional subrogation

RULING:
The court affirms the Court of Appeals' finding that the Memorandum of Agreement
in question was a conventional subrogation which requires the debtor's, Anglo-Asean Bank,
consent for its validity. The provision "WITH OUR CONFORME" on the signature page,
taken together with the preambulatory clause, suggests that the parties intended for Anglo-
Asean Bank to signify its agreement and conformity to the contractual arrangement. Since
the debtor did not give its consent, the agreement is inoperative, as the consent of the
debtor is necessary in the subrogation of a third person to the creditor's rights.

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1 JD

G.R. No. 136729

ASTRO ELECTRONICS CORP. and PETER ROXAS v. PHILIPPINE EXPORT AND
FOREIGN LOAN GUARANTEE CORPORATION

FACTS:

Astro was granted several loans by the Philippine Trust Company (Philtrust)
amounting to P3,000,000.00 with interest and secured by three promissory notes. In each
of these promissory notes, it appears that petitioner Roxas signed twice, as President of
Astro and in his personal capacity. Roxas also signed a Continuing Suretyship Agreement
in favor of Philtrust Bank, as President of Astro and as surety.

Thereafter, Philguarantee, with the consent of Astro, guaranteed in favor of Philtrust

the payment of 70% of Astro’s loan, subject to the condition that upon payment by
Philguarantee of said amount, it shall be proportionally subrogated to the rights of Philtrust
against Astro.

As a result of Astro’s failure to pay its loan obligations, despite demands,

Philguarantee paid 70% of the guaranteed loan to Philtrust. Subsequently, Philguarantee
filed a complaint against Astro and Roxas for a sum of money with the RTC of Makati.

In his Answer, Roxas disclaims any liability on the instruments, alleging, inter alia,
that he merely signed the same in blank and the phrases "in his personal capacity" and "in
his official capacity" were fraudulently inserted without his knowledge.

The trial court observed that if Roxas really intended to sign the instruments merely
in his capacity as President of Astro, then he should have signed only once in the
promissory note.

ISSUE:

Whether or not Roxas should be jointly and severally liable (solidary) with Astro for the sum
awarded by the RTC.

RULING:

The answer is in the affirmative.

In signing his name aside from being the President of Astro, Roxas became a co-
maker of the promissory notes and cannot escape any liability arising from it. Under the
Negotiable Instruments Law, persons who write their names on the face of promissory
notes are makers, promising that they will pay to the order of the payee or any holder
according to its tenor. Thus, even without the phrase "personal capacity," Roxas will still be
primarily liable as a joint and several debtors under the notes considering that his intention
to be liable as such is manifested by the fact that he affixed his signature on each of the
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1 JD

promissory notes twice which necessarily would imply that he is undertaking the obligation
in two different capacities, official and personal.

G.R. No. 195567

GOVERNMENT SERVICE INSURANCE SYSTEM (GSIS), vs. HONORABLE COURT OF

APPEALS and SPOUSES RAUL and ESPERANZA LEUTERIO

FACTS:

The petitioner GSIS conducted a lottery draw for the allocation of lots and housing
units. Private respondent Esperanza Leuterio won and was issued a Certificate of
Acknowledgement to purchase the subject house and lot. The parties entered into a Deed
of Conditional Sale evidencing the conveyance of the subject property and all
improvements thereon to the Leuterio. Three years elapsed before the Deed was notarized,
and a copy of the same was given to the private respondents.

After the land development and housing construction were completed, petitioner's
Board of Trustees increased the purchase price indicated in the Deed of Conditional Sale
covering houses and lots therein. It is noted that, on the face of the Leuterio's Conditional
Deed of Sale is the marginal notation "subject to adjustment pending approval of the Board
of Trustees." The Leuterio spouses alleged that this notation was not in the Deed when they
signed. Resolving this factual issue, the trial court found that the appended words were
inserted into the document without the knowledge or consent of the Leuterio spouses.

As a result, the Office of the President created a three-man Ad Hoc committee,

composed of representatives of the Office of the President, the petitioner System, and the
GSIS Village Association. The committee found that the final cost of the Village justified a
higher price range for the houses and lots in the project.

Based on the ad hoc committee's findings, the petitioner System, with the approval
of its Board of Trustees, increased the purchase prices of the houses and lots in the GSIS
Village.

ISSUE:

Whether or not the spouses Leuterio agreed to the notation "subject to adjustment pending
approval of the Board of Trustees" appearing on the margin of the parties' Conditional Deed
of Sale.

RULING:

The Court found no merit to the petition.

The Answer of petitioner to the Complaint of the private respondents admitted the
non-existence of this notation at the time the Deed of Conditional Sale was signed, albeit, it
called the omission an honest mistake.This was also confirmed by the petitioner in the
instant Petition for Review on Certiorari where it is alleged that ". . . the respondents-
spouses Leuterio were not required to sign a new contract as provided in Resolution No.

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1 JD

966 but instead, the words 'subject to adjustment pending approval of the Board of
Trustees' were inserted in the Deed of Conditional Sale executed in 1965."

The spouses Leuterio did not give their consent for petitioner to make a unilateral
upward adjustment of this purchase price depending on the final cost of construction of the
subject house and lot. It is illegal for petitioner to claim this prerogative, for Article 1473 of
the Civil Code provides that "the fixing of the price can never be left to the discretion of one
of the contracting parties.”

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Tuazon, Patricia Marie D.
1 JD

G.R. No. 11318

Manila Railroad vs. La Compaña Transatlantica, 83 Phil 875

FACTS:

The steamship Alicante, belonging to the Compania Trasatlantica de Barcelona

arrived in Manila on March, 1994 aboard two locomotive boilers owned by The Manila
Railroad Company. The steamship hired Atlantic company hire Atlantic Company since
their equipment or discharging heavy cargo is not strong enough to handle the two
locomotive boilers.

The transfer of the locomotive boilers was supervised by Layden. Unfortunately,

before the boilers were completely discharged, they had fell to the bottom of the ship’s hold
which badly damaged said boiler that it had to be reshipped to England where it was rebuilt.

The Manila Railroad Company filed a claim for the expenses and loss caused by the
damage of the broilers. The Court of First Instance ruled in favor of the plaintiff against
Atlantic Company, but absolved the Steamship company from the complaint. Thus, this
petition.

ISSUE:
Whether or not (1) the Steamship Company is liable to the plaintiff by reason of having
delivered the boiler in question in a damaged condition? (2) the Atlantic Company is liable
to be made to respond to the steamship company for the amount the latter may be required
to pay to the plaintiff for the damage done? (3) the Atlantic Company is directly liable to the
plaintiff.

RULING:
The judgment entered in the Court of First Instance must, therefore, be reversed not
only with respect to the judgment entered in favor of the plaintiff directly against the Atlantic
Company but also with respect to the absolution of the Steamship Company and the further
failure of the court to enter judgment in favor of the latter against the Atlantic Company. The
Compañia Trasatlantica de Barcelona should be and is hereby adjudged to pay to the
Manila Railroad Company the sum of twenty two thousand three hundred forty three pesos
and twenty nine centavos (P22,343.29), with interest from May 11, 1914, until paid; and
when this judgment is satisfied, the Compañia Trasatlantica de Barcelona is declared to be
entitled to recover the same amount from the Atlantic Gulf & Pacific Company, against
whom judgment is to this end hereby rendered in favor of the Compañia Trasatlantica de
Barcelona. No express adjudication of costs of either instance will be made.

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1 JD

G.R. No. 9188

Gutierrez Hermanos vs. Orense, 28 Phil 571

FACTS:
February 14, 1907, Jose Duran, nephew of Respondent Orense, sold parcel of land
to Petitioner Gutierrez Hermanos which contained a provision giving Duran the right to
repurchase the said land for the same prince within a period of 4 years. Said sale is with the
knowledge and consent of Orense, was executed before a notary public instrument. Orense
and Duran continued to occupy the land by virtue of a contract to lease executed by
Gutierrez Hermanos to Duran which was to end by Feb. 14, 1911. After the lapse of 4 years
from the Feb. 1907 sale, Gutierrez Hermanos asked Orense to deliver the property and pay
their rentals for their occupation. Orense refused and claimed that the sale was void. He
claims that it was done without his authority and that Duran acted without his consent.
Gutierrez Hermanos then charged Duran with estafa for having fraudulently represented
himself in the deed of sale. However, when Orense testified as a witness for Duran, he
claimed that he did in fact consented to the sale. Court of Instance then acquitted Duran.
Gutierrez Hermanos then filed suit against Orense pointing the validity and efficacy of the
sale of the parcel of land. Lower court favored Gutierrez.

ISSUE:
Whether or not Orense is bound by Duran’s act of selling the property in question?

RULING:
Yes. During the trial, it was proven that Orense had knowledge and consented to the
sale. By doing so, he gave Duran the power to act and to enter into the contract of sale.
Since the agent did what he was supposed to do, the principal must fulfill all the
agreements made by the agent.

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1 JD

G.R. No. L-47806

Gabriel vs. Monte de Piedad
FACTS:
Petitioner Leoncio Gabriel was employed as an appraiser of jewels in the pawnshop
of Monte de Piedad from 1913 up to May 1933.
On December 31, 1932, he executed a chattel mortgage to secure the payment of
the deficiencies which resulted from his erroneous appraisal of the jewels pawned to the
appellee, amounting to P14,679.07, with 6%interest. Gabriel averred that the chattel
mortgage was a part of a chemeon the part of Monte de Piedad to cover up supposed
losses incurred inits pawnshop department and that it was based upon all non-existing
subject matter and non-existing consideration. With these, Gabriel Contended that the
provisions of the chattel mortgage contract were contrary to law, morals and public policy,
and hence, such contract was ineffective and the principal obligation secured by it is void.
Respondent Monte de Piedad filed a complaint in the Court of First Instance to
recover the aforementioned sum less what had been paid amounting to P3,333.25 and in
case of default, to effectuate the chattel mortgage.
Petitioners appealed to the Supreme Court by way of certiorari.
ISSUE:
1.Is the chattel mortgage void on the ground that it is contrary to law, morals and public
policy?

2.Does the chattel mortgage have a valid consideration?

RULING:
1. NO. Examining the contract at bar, the Court is of the opinion that it does not in any
way militate against the public good, nor does it contravene the policy of the law nor
the established interests of society.

A contract is to be judged by its character, and courts will look to the substance and
not to the mere form of the transaction. The freedom of contract is both a
constitutional and statutory right and to uphold this right, courts should move with all
the necessary caution and prudence in holding contracts void. A contract contrary to
public policy is one that has a tendency to injure the public, is against the public
good, or contravenes some established interests of society, or is inconsistent with
sound policy and good morals, or tends clearly to undermine the security of
individual rights, whether of personal liability of private property.

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1 JD

2. YES. There is a sufficient consideration in the contract as it was satisfactorily

established that it was executed voluntarily by Gabriel to guarantee the deficiencies
resulting from his erroneous appraisals of the jewels.

A consideration, in the legal sense of the word, is some right, interest, benefit, or
advantage conferred upon the promisor, to which he is otherwise not lawfully
entitled, or any detriment, prejudice, loss, or disadvantage suffered or undertaken by
the promise other than to such as he is at the time of consent bound to suffer. We
think that there is sufficient consideration in this contract, for, according to the Court
of Appeals, "it has been... satisfactorily established that it was executed voluntarily
by the latter to guarantee the deficiencies resulting from his erroneous appraisals of
the jewels." A preexisting admitted liability is a good consideration for a promise. The
fact that the bargain is a hard one will... not deprive it of validity.

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1 JD

G.R. No. 61594

Pakistan International Airlines vs. Ople

FACTS:
On 2 December 1978, petitioner Pakistan International Airlines Corporation (PIA), a
foreign corporation licensed to do business in the Philippines, executed in Manila two (2)
separate contracts of employment, one with private respondent Ethelynne B. Farrales and
the other with private respondent Ma. M.C. Mamasig. The contracts became effective on 9
January 1979 and provided for the duration of employment and penalty, termination and the
applicable law which is of Pakistan’s. They were trained in Pakistan and worked as flight
attendants with a base station in Manila and flying assignments to different parts of the
Middle East and Europe.
A year and four (4) months prior to the expiration of the contracts of employment,
they received separate letters informing them that their services would be terminated.
Private respondents Farrales and Mamasig jointly instituted a complaint for illegal
dismissal and non-payment of company benefits and bonuses, against PIA with the then
Ministry of Labor and Employment. Several attempts at conciliation were not fruitful.

ISSUE:
1. WON MOLE had jurisdiction over the case.
2. 2. WON PIA’s rt to procedural process was violated

RULING:

1. WON MOLE had jurisdiction over the case.

YES. Labor Code Art. 278: termination of the services of employees w/at least 1 yr of
service can’t be done w/o prior clearance from the DOLE. Rule XIV, Book No. 5 of
the Labor Code Implementing Rules & Regulations (IRR) provides that if the
termination was done w/o the necessary clearance, the REGIONAL DIRECTOR was
authorized to order the reinstatement & payment of backwages. This is
likewise provided for in Policy Instruction No. 14 issued by the Sec. Of Labor.
2. WON PIA’s rt to procedural process was violated.
NO. MOLE was ordered to submit a position paper & to present evidence in its favor.
But it only chose to comply with the first order.

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1 JD

G.R. L-15127
CUI VS. ARELLANO UNIVERSITY

FACTS:
Emeterio Cui was a law student at Arellano University from 1948-1949. He received
a scholarship for scholastic merit, but had to sign a waiver of his right to transfer to another
school. On August 16, 1949, the Director of Private Schools issued Memorandum No. 38,
stating that scholarships should be given for excellence in scholarship or leadership in
extra-curricular activities. Cui left Arellano and enrolled in Abad Santos University, but when
he needed the transcripts from Arellano, the latter would not give it to him unless he paid
the sum Php1,033.87. Cui had no choice but to pay the same so he could take the bar
exam.

ISSUE:
Whether or not the provision of the contract between plaintiff and the defendant,
whereby the former waived his right to transfer to another school without refunding to the
latter the equivalent of his scholarships in cash, is valid or not.

RULING:
The provision is not valid. Arellano University should have understood the true
essence of scholarships and not entered into a contract of waiver with Cui, which was
repugnant to sound morality and civic honesty. In Gabriel vs. Monte de Piedad, in order to
declare a contract, void as against public policy, a court must find that the contract as to
consideration or the thing to be done, contravenes some established interest of society, or
is inconsistent with sound policy and good morals or tends clearly to undermine the security
of individual rights.

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1 JD

G. R. No. 126800
Bustamante vs. Rose

FACTS:
The Respondent, Rosel entered into a loan agreement with petitioner spouses
Bustamante wherein the latter borrowed P100,000 payable in 2 years. To guarantee
payment, the spouses put as collateral 70 sq m of their lot inclusive of the apartment
therein. When the loan was about to mature, respondents proposed to buy the said portion
at the pre-set price. Petitioners refused and requested for extension of time to pay the loan.
On March 4, 1989, respondents sent a demand letter asking petitioner to sell the collateral
pursuant to the option to buy embodied in the loan agreement. Petitioners filed an action for
specific performance in February.

ISSUE:
Whether or not the respondent justified in compelling petitioners to sell the portion of
the lot pursuant to the stipulation in the loan.

RULING:
No. as doing so is tantamount to pactum commissorium.

Pactum commissorium is the concept of a property mortgaged by way of security for

the payment of the principal obligation, and a stipulation for automatic appropriation by the
creditor of the thing mortgaged in case of non-payment. In this case, the debtor is obliged to
dispose of the collateral at the pre-agreed consideration amounting to the same amount as
the loan, meaning that the creditor acquires the collateral in the event of nonpayment of the
loan. Such a stipulation is void.

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1 JD

G.R. No. 119107

Jose Lagon vs CA

FACTS:
The petitioner Jose Lagon purchased from the estate of Bai Tonina Sepi Mengelen
Guiabar two parcels of land located at Tacurong, Sultan Kudarat. Private respondent
Menandro Lapuz filed a complaint for torts and damages against petitioner after he
discovered that petitioner had been collecting rentals from the tenants. Petitioner claimed
that before he bought the property, he went to Atty. Benjamin Fajardo to verify if the parties
renewed the lease contract after it expired in 1974, but Fajardo showed him four copies of
the lease renewal but these were all unsigned.

ISSUE:
W/N the purchase by petitioner of the property during the existence of respondent’s
lease contract constituted tortuous interference for which petitioner should be held liable for
damages.

RULING:
No, not all three elements to hold petitioner liable for tortuous interference are
present.

The Court in So Ping Bun v. Court of Appeals laid down the elements of tortuous
interference with contractual relations: existence of a valid contract, knowledge of the
contract, and interference of the third person without legal justification or excuse. Petitioner
conducted his own investigation and inquiry, and found no suspicious circumstance. An
examination of the entire property's title bore no indication of the leasehold interest of
private respondent, and the registry of property had no record of the same.

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1 JD

GR No. 125761
Malbarosa vs. CA

FACTS:
Salvador Malbarosa, petitioner, was the president and general manager of Philtectic
Corporation, and an officer of other corporations belonging to the SEADC group of
companies. Sometime in January 1990, he tendered his resignation to Valero. Following his
resignation, Valero sent a letter-offer to petitioner stating therein acceptance of petitioner's
resignation and advised him that he was entitled to P251k as his incentive compensation. In
the same letter, the VP proposed the satisfaction of his incentive by giving him the car the
company issued and the membership in the Architectural Center will be transferred to him,
instead of cash. The petitioner was dismayed when he re ad the letter and learned that he
was being offered an incentive compensation of only P251,057.67. The petitioner refused to
sign the letter-offer on the space provided. He received the original of the letter and wrote
on the duplicate copy of the letter-offer retained by Da Costa, the words: Recd original for
review purposes. Despite the lapse of more than two weeks, the respondent had not
received the original of the March 14, 1990 Letter-offer of the respondent with the
conformity of the petitioner on the space provided. SEADC demanded the return the car
and turn over the membership in the Architectural Center.

ISSUE:
Whether or not there was a valid acceptance by Salvador Malbarosa of the March 14, 1990
Letter-offer of the respondent SEADC?

RULING:
No. Under Article 1319 of the New Civil Code, the consent by a party is manifested
by the meeting of the offer and the acceptance upon the thing and the cause which are to
constitute the contract. An offer may be reached at any time until it is accepted. An offer
that is not accepted does not give rise to a consent. The contract does not come into
existence. Notably, acceptance of an offer must be made known to the offeror. The contract
is perfected only from the time an acceptance of an offer is made known to the offeror.

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1 JD

G.R. L-25494
Sanchez vs. Rigos

FACTS:
Nicolas Sanchez and Severina Rigos executed an instrument entitled "Option to
Purchase' " wherein Mrs. Rigos agreed, promised and committed to sell to Mr. Sanchez a
parcel of land for the amount of P1,510 within two ycars from the date of the instrument,
with the understanding that the said option shall be deemed terminated and clapsed if Mr.
Sanchez shall fail to excreise his right to buy the property within the stipulated period Mrs.
Rigos agreed and committed to sell and Mr. Sanchez agreed and committed to buy. But
there is nothing in the contract to indicate that her agreement, promise and undertaking is
supported by a consideration distinct from the price stipulated for the sale of the land. Mr.
Sanchez has made several tenders of payment in the said amount within the period before
any withdrawal from the contract has been made by Mr. Rigos, but were rejected
nevertheless.

ISSUE:
Can an accepted unilateral promise to sell without consideration distinct from the price be
withdrawn arbitrarily?

RULING:
No. An accepted promise to sell is an offer to sell when accepted becomes a
contract of sale Rationale: Since there may be no valid contract without a cause or
consideration, the promisor is not bound by his promise and may, accordingly, withdraw it.
Pending notice of its withdrawal, his accepted promise partakes, however, of the nature of
an offer to sell which, if accepted, results in a perfected contract of sale. This view has the
advantage of avoiding a conflict between Articles 1324 - on the general principles on
contracts - and 1479 - on sales - of the Civil Code. Article 1324. When the offeror has
allowed the offerce a certain period to accept, the offer may be withdrawn at any time
before acceptance by communicating such withdrawal, except when the option is founded
upon consideration, as something paid or promised.

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1 JD

G.R. No. 118509

Limetkai Sons vs CA

FACTS:
On June 23, 1988, Pedro Revilla, Jr., a licensed real estate broker was given formal
authority by BPIto sell the lot for P1,000.00 per square meter. The owners of the Philippine
Remnants concurred this arrangement. Broker Revilla contacted Alfonso Lim of petitioner
company who agreed to buy the land.On July 9, 1988, Revilla formally informed BPI that he
had procured a buyer, herein petitioner. On July 11,1988, petitioner's officials, Alfonso Lim
and Albino Limketkai, went to BPI to confirm the sale. Vice-President Merlin Albano and
Asst. Vice-President Aromin entertained them. The parties agreed that the lot would be sold
at P1,000.00 per square meter to be paid in cash. The authority to sell was on a first come,
first served and non-exclusive basis; there is no dispute over petitioner's being the first
comer and the buyer to be first served. Alfonso Lim then asked if it was possible to pay on
terms. The bank officials stated that there was no harm in trying to ask for payment on
terms because in previous transactions, the same had been allowed. It was the
understanding, however, that should the term payment be disapproved, then the price shall
be paid in cash. Two or three days later, petitioner learned that its offer to pay on terms had
been frozen. Alfonso Lim went to BPI on July 18, 1988 and tendered the full payment of
P33,056,000.00 to Albano. The payment was refused because Albano stated that the
authority to sell that particular piece of property in Pasig had been withdrawn from his unit.
The same check was tendered to BPI Vice-President Nelson Bona who also refused to
receive payment. An action for specific performance with damages was thereupon filed on
August 25, 1988 by petitioner against BPI. In the course of the trial, BPI informed the trial
court that it had sold the property under litigation to NBS on July 14, 1989.

ISSUE:
Whether or not such contract is covered by the statute of frauds.

RULING:
In the case at bench, the allegation that there was no concurrence of the offer and the
acceptance upon the cause of the contract is belied by the testimony of the very BPI official
with whom the contract was perfected. Aromin and Albano concluded the sale for BPI. The
fact that the deed of sale still had to be signed and notarized does not mean that no
contract had already been perfected. A sale of land is valid regardless of the form it may
have been entered into. The requisite form under Article 1458 of the CivilCode is merely for
greater efficacy or convenience and the failure to comply does not affect the validity and
binding effect of the act between parties. Therefore, such a contract that was made

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1 JD

constituted fraud and is covered by the statute of frauds. BPI should be held liable and can
be sued for damages.

G.R. No. L-28028

Ysmael vs. Barreto

FACTS:
In this case, a domestic corporation filed a lawsuit seeking compensation for four cases of
merchandise that were delivered to a steamship but never reached the intended consignee
or returned to the plaintiff. The defendants denied receiving the merchandise and invoked
contractual provisions on the bill of lading to argue that the plaintiff's right to bring the action
was time-barred. The court found that there was evidence supporting the delivery of the
merchandise and ruled that the contractual provisions were unreasonable and not binding
on the plaintiff. Additionally, the court rejected a limitation of liability clause that would have
severely undervalued the silk cargo, deeming it unconscionable and against public policy.
As a result, the court rendered judgment in favor of the plaintiff.

ISSUE:
Whether or not the lower court erred in ruling in favor of the plaintiff and disregarded the
stipulation limiting the value of the defendants’ liability under clause 12 in the Bill of Lading

RULING:
NO. The lower court erred in ruling in favor of the plaintiff and disregarding the stipulation
limiting the value of the defendants' liability under clause 12 in the Bill of Lading. The court
found that the defendants received 164 cases of merchandise from the plaintiff but
delivered only 160 cases, failing to deliver the remaining four cases. However, the court
held that the provision in clause 12 of the bill of lading, which limits the defendants' liability
to P300 for any single package of silk, is unreasonable and void as against public policy.

The court considered that the limitation of value imposed by clause 12 would allow the
defendants to take the entire cargo of 164 cases of silk at a valuation of P300 per case,
which is significantly less than their actual value. Such a limitation was deemed
unconscionable and not in line with public policy. Therefore, the court concluded that the
defendants should be held liable for the full amount of the plaintiff's claim, which is
P9,940.95.

In summary, the court ruled against the defendants' arguments based on the limitation of
liability under clause 12 of the bill of lading, finding it unreasonable and unenforceable. The
court upheld the lower court's judgment in favor of the plaintiff, awarding them the full
amount of their claim.

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1 JD

G.R. No. L-10712

Ferrazzini vs. Gsell

FACTS:
Ferrazzini filed a lawsuit against Gsell for wrongful discharge. Gsell admitted to firing
Ferrazzini without providing the required six months' written notice as stated in the contract
but claimed it was lawful due to Ferrazzini's absence, unfaithfulness, and disobedience of
orders. Ferrazzini made derogatory remarks about Gsell in the presence of coworkers. He
also had a habit of leaving the factory for drinks, which was disputed between Ferrazzini
and Gsell/Bender. After being fired, Ferrazzini started working for Mr. Whalen on
construction work without Gsell's consent, which violated the contract's provision of
obtaining written permission before joining another enterprise in the Philippines.

ISSUE:
Whether or not these provisions are valid and binding upon Ferrazzini and whether or not it
is against public policy?

RULING:
NO, these are not valid and binding because it is against public policy. The contract under
consideration, tested by the law, rules and principles above set forth, is clearly one in undue
or unreasonable restraint of trade and therefore against public policy. It is limited as to time
and space but not as to trade. It is not necessary for the protection of the defendant, as this
is provided for in another part of the clause. It would force the plaintiff to leave the
Philippine Islands in order to obtain a livelihood in case the defendant declined to give him
the written permission to work elsewhere in this country.

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1 JD

G.R. L-21127
Del Castillo vs. Richmond

FACTS:

The plaintiff claims that the provisions and conditions contained in the third
paragraph of their contract constitute an illegal and unreasonable restriction upon his liberty
to contract, are against public policy, and are unnecessary in order to constitute a just and
reasonable protection to the defendant; and he asked that the same be declared null and
void and of no effect. The defendant has denied these allegations. Both a broad and a
specific defense were presented by the defendant. During the time that the plaintiff was
working for the defendant, the defendant's special defense states that he "obtained
knowledge of his trade and professional secrets and came to know and became acquainted
and established friendly relations with his customers so that to now annul the contract and
permit plaintiff to establish a competing drugstore in the town of Legaspi, as plaintiff has
announced his intention to do, would be extremely prejudicial to defendant's interest."
"During the time that plaintiff was working for the defendant, the defendant's special
defense states that the defendant further asserts, in an amended answer, that because this
action was not initiated within four years of the time that the contract referred to in the
complaint was executed, the contract has "prescribed," which means that it is no longer
enforceable.

ISSUE:

WON the validity of the contract, as well as whether or not the independence of contracts
should be respected

RULING:

Taking into consideration the nature of the business in which the defendant is
engaged, in relation with the limitation placed upon the plaintiff both as to time and place,
The Court is of the opinion, and so decide, that such limitation is legal and reasonable and
not contrary to public policy. Otherwise, the autonomy of the contract will be subverted.
Considering the nature of the business in which the defendant is engaged. Considering the
limitation placed upon the plaintiff both as to time and place.

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Tuazon, Patricia Marie D.
1 JD

G.R. 163512
Tiu vs. Platinum Plans

FACTS:
Respondent Platinum Plans Philippines, Inc. is a Philippine-based company that
operates in the pre-need business sector. Petitioner Daisy B. Tiu served as the Division
Marketing Director for the company from 1987 through 1989.

Petitioner was rehired by respondent on January 1, 1993, in the capacity of Senior

Assistant Vice-President and Territorial Activities Head, with responsibility for the
company's operations in Hong Kong and the Asean region. The parties agreed to and
signed a contract for employment that would be valid for a period of five years. Petitioner
failed to show up for work for the last time on September 16, 1995. It was in November of
1995 when she was promoted to the position of Vice President for Sales at Professional
Pension Plans, Inc., a company that was also active in the pre-need business.

The respondent filed a complaint against the petitioner for damages with the
Regional Trial Court of Pasig City Branch 261, alleging that the petitioner's job with
Professional Pension Plans, Inc. was in violation of the non-involvement clause in her
employment contract. The trial court declared that a contract in restriction of commerce is
acceptable provided that there is a limitation upon either time or location. In the context of
the pre-need sector, the trial court determined that the two-year restriction was lawful and
appropriate. The appeal court decided that the stipulation that prohibited non-employment
for a period of two years was lawful and enforceable.
ISSUE:
WON the Court of Appeals made a mistake when it upheld the non-involvement clause's
constitutionality
RULING:
In this particular instance, the non-involvement provision is subject to a time
restriction, which is specified as two years beginning on the day when the petitioner's
employment with the respondent comes to an end. It is also restricted in terms of
commerce since it only prevents the petitioner from engaging in any pre-need business that
is comparable to the business of the respondent. More importantly, because the petitioner
held the position of Senior Assistant Vice President and Territorial Operations Head in

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1 JD

charge of the respondent's Hongkong and Asean operations, she was privy to the
highly sensitive and confidential marketing strategies that the respondent's company
employed. If respondent were to let her to start working for a competitor shortly after she
left the company, this would put respondent's trade secrets at risk, particularly in a very
competitive marketing climate. In conclusion, the court has decided that the non-
involvement provision is not harmful to the general public welfare and is not more
restrictive than is required to provide respondent with a just and acceptable level of
protection. As a result, the restriction is legal, and the clause in question takes precedence.

511 SCRA 376

Avon Cosmetics vs. Lerma

Facts:
Luna started working for Beautifont, Inc. in 1972, eventually becoming a supervisor.
In 1978, Avon Cosmetics, Inc. took over Beautifont's operations, but Luna continued
working for the company. In 1985, Luna and Avon entered into a Supervisor's Agreement,
which included clauses regarding exclusive product promotion and termination at will.
However, Avon terminated Luna's agreement in 1988 due to her involvement with another
company and alleged contract violations. Luna filed a complaint for damages and both the
RTC and CA ruled in her favor.

Issue:
Whether or not paragraph 5 and 6 of the Supervisor’s Agreement is void for being contrary
to law and public policy

Ruling:
No. The exclusivity clause in paragraph 5 of the Supervisor's Agreement is valid and
not against public policy. Its purpose is to protect the network established by Avon over the
years and does not aim to eliminate competition or hinder new market entrants. Both Avon
and Sandré employ direct selling methods, which allow them to control product prices
without intermediaries. The exclusivity limitation does not impact the public but serves as a
means for Avon to safeguard its investment. The termination clause in the agreement
provides two ways to end the contract, with or without cause, as long as written notice is
given. Therefore, whether the termination was for cause or not is irrelevant as long as
proper notice was provided to Luna.

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1 JD

105 Phil 1024

Sy Suan Vs. Regala

Facts:
Sy Suan, the president and general manager of Price Incorporated, granted the
plaintiff a special power of attorney to handle import license applications. Prior to this
agreement, they verbally agreed that the plaintiff's services in obtaining the licenses would
be compensated with a ten percent commission based on the approved amounts. The
petitioners argue that the commission awarded by the Court of Appeals goes against public
policy as it raises the production costs of the candies they manufacture.

Issue:
Whether or not the parole contract of remuneration is contravening public policy and
interest, and thus, is null and void ab initio.

Whether or not the parole contract of remuneration is contravening public policy and
interest, and thus, is null and void ab initio.

Ruling:
In the present case, the provisions of Republic Act 650, specifically Sections 15 and
18, reveal the policy at hand. It is unnecessary and unwarranted for intermediaries, such as
the respondent in this case, to intervene. Such intervention would not transform an
unworthy application into a worthy one or make undeserving applications worthy. Instead, it
would only serve to potentially influence or corrupt the decision-making process of public
officials involved in issuing import licenses or quota allocations, which the legislation aims
to prevent. An arrangement is considered against public policy if it harms the public interest,
violates existing societal interests or laws, goes against good morality, interferes with public
welfare or culture, or contradicts prevailing societal values and morals.

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Tuazon, Patricia Marie D.
1 JD

G.R. No. L-27010 April 30, 1969

MARLENE DAUDEN-HERNAEZ, petitioner,

vs.
HON. WALFRIDO DE LOS ANGELES, Judge of the Court of First Instance of Quezon
City, HOLLYWOOD FAR EAST PRODUCTIONS, INC., and RAMON
VALENZUELA, respondents.

FACTS:

Petitioner Marlene Dauden-Hernaez, a motion picture actress, had filed a complaint against
herein private respondents, Hollywood Far East Productions, Inc., and its President and
General Manager, Ramon Valenzuela, to recover P14,700.00 representing a balance
allegedly due said petitioner for her services as leading actress in two motion pictures
produced by the company, and to recover damages. Upon motion of defendants, the
respondent court (Judge Walfrido de los Angeles presiding) ordered the complaint
dismissed, mainly because the "claim of plaintiff was not evidenced by any written
document, either public or private", and the complaint "was defective on its face" for
violating Articles 1356 and 1358 of the Civil, Code of the Philippines, as well as for
containing defective allege, petitions. Plaintiff sought reconsideration of the dismissal and
for admission of an amended complaint, attached to the motion. The court denied
reconsideration and the leave to amend; whereupon, a second motion for reconsideration
was filed. Nevertheless, the court also denied it for being pro forma, as its allegations "are,
more or less, the same as the first motion", and for not being accompanied by an affidavit of
merits, and further declared the dismissal final and unappealable. In view of the attitude of
the Court of First Instance, plaintiff resorted to this Court.

ISSUE:

Whether or not the lower court erred in not admitting their amended complaint and in
holding that their action had already prescribed.

RULING:

Yes.The Court hold that there was abuse, since the ruling herein contested betrays a basic
and lamentable misunderstanding of the role of the written form in contracts, as ordained in
the present Civil Code.

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Tuazon, Patricia Marie D.
1 JD

In the matter of formalities, the contractual system of our Civil Code still follows that of the
Spanish Civil Code of 1889 and of the "Ordenamiento de Alcala" of upholding the spirit and
intent of the parties over formalities: hence, in general, contracts are valid and binding from
their perfection regardless of form whether they be oral or written. This is plain from Articles
1315 and 1356 of the present Civil Code. Thus, the first cited provision prescribes:

ART. 1315. Contracts are 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. (Emphasis supplied)

Concordantly, the first part of Article 1356 of the Code Provides:

ART. 1356. Contracts shall be obligatory in whatever form they may have been
entered into, provided all the essential requisites for their validity are present....
(Emphasis supplied)

These essential requisites last mentioned are normally (1) consent (2) proper subject
matter, and (3) consideration or causa for the obligation assumed (Article 1318). 3 So that
once the three elements exist, the contract is generally valid and obligatory, regardless of
the form, oral or written, in which they are couched.

It thus becomes inevitable to conclude that both the court a quo as well as the private
respondents herein were grossly mistaken in holding that because petitioner Dauden's
contract for services was not in writing the same could not be sued upon, or that her
complaint should be dismissed for failure to state a cause of action because it did not plead
any written agreement.

The basic error in the court's decision lies in overlooking that in our contractual system it is
not enough that the law should require that the contract be in writing, as it does in Article
1358. The law must further prescribe that without the writing the contract is not valid or not
enforceable by action.

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Tuazon, Patricia Marie D.
1 JD

G.R. No. 182349 July 24, 2013

REMAN RECIO, Petitioner,

vs.
HEIRS OF THE SPOUSES AGUEDO and MARIA ALTAMIRANO, namely: ALEJANDRO,
ADELAIDA, CATALINA, ALFREDO, FRANCISCO, all surnamed ALTAMIRANO;
VIOLETAALTAMIRANO OLFATO, and LORETAALTAMIRANO VDA. DE MARALIT and
SPOUSES LAURO and MARCELINA LAJARCA, Respondents.

FACTS:

In the 1950’s, Nena Recio (Nena), the mother of Reman Recio (petitioner), leased from the
respondents Alejandro, Adelaida, Catalina, Alfredo, Francisco, all surnamed Altamirano,
Violeta Altamirano Olfato, and Loreto Altamirano Vda. De Maralit (referred to as the
Altamiranos) a parcel of land with improvements. The Altamiranos inherited the subject land
from their deceased parents, the spouses Aguedo Altamirano and Maria Valduvia.

Nena used the ground floor of the subject property as a retail store for grains and the upper
floor as the family’s residence. The petitioner claimed that in 1988, the Altamiranos offered
to sell the subject property to Nena, the latter accepted such offer, which prompted the
Altamiranos to waive the rentals for the subject property. However, the sale did not
materialize at that time due to the fault of the Altamiranos. Nonetheless, Nena continued to
occupy and use the property with the consent of the Altamiranos.5

In the latter part of 1994, the petitioner renewed Nena’s option to buy the subject property.
After the said negotiations, the Altamiranos through Alejandro entered into an oral contract
of sale with the petitioner over the subject property. In January 1995, in view of the said oral
contract of sale, the petitioner made partial payments to the Altamiranos. On April 14, 1995,
the petitioner made another payment in the amount of Fifty Thousand Pesos (₱50,000.00),
which Alejandro again received and acknowledged through a receipt of the same date.
Subsequently, the petitioner offered in many instances to pay the remaining balance of the
agreed purchase price of the subject property in the amount of Three Hundred Forty
Thousand Pesos (₱340,000.00), but Alejandro kept on avoiding the petitioner. Because of
this, the petitioner demanded from the Altamiranos, through Alejandro, the execution of a
Deed of Absolute Sale in exchange for the full payment of the agreed price.

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1 JD

Thus, on February 24, 1997, the petitioner filed a complaint for Specific Performance with
Damages. On March 14, 1997, the petitioner also caused to annotate on the TCT No. T-
102563 a Notice of Lis Pendens.

Pending the return of service of summons to the Altamiranos, the petitioner discovered that
the subject property has been subsequently sold to respondents Lauro and Marcelina
Lajarca (Spouses Lajarca). TCT No. T-102563 was cancelled and a new title, TCT No.
112727, was issued in the name of the Spouses Lajarca by virtue of a Deed of Sale
executed by the latter and the Altamiranos on February 26, 1998. Thus, the petitioner filed
an Amended Complaint impleading the Spouses Lajarca and adding as a cause of action
the annulment of the sale between the Altamiranos and the Spouses Lajarca.

ISSUE:

Whether or not the CA gravely and seriously erred in modifying the RTC decision.

RULING:

The petition has no merit.

At the core of the present petition is the validity of the verbal contract of sale between
Alejandro and the petitioner; and the Deed of Absolute Sale between the Altamiranos and
the Spouses Lajarca involving the subject property.

A valid contract of sale requires: (a) a meeting of minds of the parties to transfer ownership
of the thing sold in exchange for a price; (b) the subject matter, which must be a possible
thing; and (c) the price certain in money or its equivalent.

In the instant case, all these elements are present. The records disclose that the
Altamiranos were the ones who offered to sell the property to Nena but the transaction did
not push through due to the fault of the respondents. Thereafter, the petitioner renewed
Nena’s option to purchase the property to which Alejandro, as the representative of the
Altamiranos verbally agreed. The determinate subject matter is Lot No. 3, which is covered
under TCT No. T-102563 and located at No. 39 10 de Julio Street (now Esteban Mayo
Street), Lipa City, Batangas. The price agreed for the sale of the property was Five
Hundred Thousand Pesos (₱500,000.00). It cannot be denied that the oral contract of sale
entered into between the petitioner and Alejandro was valid.

However, the CA found that it was only Alejandro who agreed to the sale.There is no
evidence to show that the other co-owners consented to Alejandro’s sale transaction with
the petitioner. Hence, for want of authority to sell Lot No. 3, the CA ruled that Alejandro only
sold his aliquot share of the subject property to the petitioner.

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Tuazon, Patricia Marie D.
1 JD

G.R. No. 120105

BF Corporation vs. Court of Appeals

FACTS:
BF Corporation and respondent Shangri-La Properties, Inc. (Shang) entered into the 1st
agreement whereby Shang engaged BF to construct the main structure of the EDSA Plaza
Project – the EDSA Shangri-La Mall in Mandaluyong City.

While the construction work was in progress Shang once again hired BF for the expansion
of the project, the 2nd agreement.

BF incurred delay in the construction work that SPI considered as serious and substantial.
BF contended that they had faithfully complied with the first agreement until a fire broke out
on Nov 30, 1990 damaging phase 1 of the project, Hence SPI proposed the renegotiation of
the agreement between them.

Parties entered into another agreement named “Agreement for the Execution of Builders
Work for the EDSA Plaza Project” (3rd agreement) that would cover the construction work
on said project as of [May 1, 1991] until its eventual completion.

BF filed with the RTC of Pasig a complaint for the collection of the balance due under the
construction agreement. Named Defendants therein were Shang and members of its board
of directors – A. Ramos, Colayco, Obles, Lanuza Jr., Licauco & B.Ramos.

Shang and its co-defendants filed a motion to suspend proceedings instead of filing an
answer.

Motion was anchored on the defendants' allegation that the formal trade contract of the
construction project provided for a clause requiring prior resort to arbitration before judicial
intervention.

Shang submitted a copy of the condition of the contract containing an arbitration clause that
it failed to attach its motion to suspend proceedings.

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Tuazon, Patricia Marie D.
1 JD

BF opposed said motion stating that there was no formal contract between the parties
although they entered into an agreement. They emphasized that the agreement did not
provide for an arbitration thus cannot deprive the court of its jurisdiction.

Shang insisted that there was an arbitration clause in the existing contract between them. It
alleged that the suspension would not deprive the court of its jurisdiction and would
expedite the settlement proceedings rather than delay it.

In a rejoinder, BF reiterated that there was no arbitration clause in the contract between the
parties. It averred that if there was an arbitration clause, suspension of the proceedings was
no longer proper and that defendants should be declared in default for failure to answer
within the reglementary period.

In its sur-rejoinder, Shang pointed out the significance of the petitioner's admission of the
due execution of the Articles of Agreement. It was shown that the Signature of Colayco
(Shang President) and Bayani Fernando (BF President) was in such agreement and was
even duly notarized.

ISSUE:
WON the parties entered into an arbitrary agreement

RULING:
Yes, according to Sec 4 of R.A. 876 a contract to arbitrate a controversy thereafter arising
between the parties, as well as a submission to arbitrate an existing controversy, shall be in
writing and subscribed by the party sought to be charged, or by his lawful agent.

The making of a contract or submission for arbitration described in section two hereof,
providing for arbitration of any controversy, shall be deemed a consent of the parties of the
province or city where any of the parties resides, to enforce such contract of submission.

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Tuazon, Patricia Marie D.
1 JD

G.R. No. L-27010

Dauden-Hernaez vs. De los Angeles

FACTS:
Marlene Dauden-Hernaez, a movie actress, filed a case against Hollywood Far East
Productions its President and General Manager, Ramon Valenzuela, to recover P14,700
allegedly the balance due for her services as leading actress in two motion pictures. The
complaint was dismissed by Judge De Los Angeles mainly because her claim was not
supported by any written document, public or private, in violation of Articles 1356 and 1358
of the Civil Code. Upon a motion for reconsideration, the respondent dismissed the same
because the allegations were the same as the first motion.

According to Judge De Los Angeles, the contract sued upon was not alleged to be in writing
when Article 1358 requires it to be so because the amount involved exceeds P500.

ISSUE:
WON a contract for personal services involving more than P500.00 was either invalid or
unenforceable under the last paragraph of Article 1358

RULING:
No, the order dismissing the complaint is set aside and the case is remanded to the CFI.

Consistent with the Spanish Civil Code in upholding spirit and intent of the parties over
formalities, in general, contracts are valid and binding from their perfection regardless of
whether they are oral or written.

However, as provided in the 2nd sentence of Art. 1356: Contracts shall be obligatory in
whatever form they may have been entered into, provided all the essential requisites for
their validity are present. However, when the law requires that a contract be in some form in
order that it may be valid or enforceable, or that a contract be proved in a certain way, that
requirement is absolute and indispensable.

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Tuazon, Patricia Marie D.
1 JD

GR 158901
Quiroz vs. Arizona

FACTS:
Petitioners Proceso Quiros and Leonarda Villegas filed a complaint for the recovery of
ownership and possession of a parcel of land against their uncle Marcelo Arjona in Labney,
San Jacinto, Pangasinan. The land in question was their rightful inheritance from their late
grandmother. After negotiations, an amicable settlement was reached, resulting in Arjona
signing a document agreeing to give the petitioners the 1-hectare land inherited from his
mother. Additionally, another document was executed by Jose Banda, stating that he
cultivated the land belonging to the Arjona family and would willingly surrender it if the
petitioners acquired it. Seeking the execution of the compromise agreement, the petitioners
filed a complaint with the MCTC, but it was denied due to the uncertainty surrounding the
subject property. The RTC later reversed this decision, but the respondents appealed to the
CA, which ultimately overturned the trial court's ruling.

ISSUE:
Whether the amicable settlement between the parties is valid and enforceable.

RULING:
No. The Court recognized that while amicable settlements generally attain finality,
exceptions exist when special circumstances render their execution unjust. In this case,
issuing a writ of execution would be unjust due to the uncertainty surrounding the subject of
the agreement. Upon examining the two documents, it became apparent that the referred
lands were different from each other, making it impossible to determine which parcel of land
the respondent intended to convey. Amicable settlements are treated as contracts and are
subject to the same legal provisions for validity and enforcement. The documents in
question were found to have met the requisites of validity, including the presence of mutual
consent, a 1-hectare parcel of land as the object, and the delivery of the petitioner's share
in the inheritance as the cause of the contract.

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1 JD

GR No. 128338
Resuena vs. CA

FACTS:
Juanito Borromeo, Sr. is a co-owner and overseer of parcels of land in Talisay, Cebu. The
proportion of undivided shares among the co-owners was not determined. Petitioners
initially resided in a portion of the land under the alleged acquiescence of the Spouses
Bascon and their heir, while another petitioner occupied a portion with permission from the
heirs of Nicolas Maneja. Respondent demanded that petitioners vacate the property for his
resort development plans. The MTC ruled in favor of the petitioners, stating that respondent
had no right to evict them since the land had not been partitioned. However, the RTC and
Court of Appeals reversed the decision, invoking Article 487 of the Civil Code, which allows
any co-owner to bring an action in ejectment for the benefit of all co-owners.

ISSUE:
Whether or not respondent is estopped in filing this ejectment case against petitioners.

RULING:
The petition cannot prosper. Article 487 of the Civil Code grants the authority to a co-owner
to bring an action for ejectment against other occupants of the property. This departs from
the previous ruling that all co-owners must jointly bring the action. The action for ejectment
brought by the respondent is considered to be for the benefit of all co-owners, as petitioners
failed to prove their authority to occupy the land. Petitioners' occupation of the property
based on tolerance or permission is not sufficient to establish a legal right to continue
occupying it. The courts have determined that petitioners' occupancy is by mere tolerance,
and therefore they are not entitled to reimbursement for expenses incurred in constructing
their houses on the land.

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1 JD

97 Phil 609
Garcia vs Bisaya

FACTS:
On May 20, 1952, Garcia filed a complaint against Bisaya, claiming that Bisaya had
executed a deed of sale on November 12, 1938, for a parcel of land that was registered to
Sandoval, not Bisaya. Garcia alleged that despite his demand for correction, Bisaya refused
to rectify the error in the deed. Garcia sought a judgment compelling Bisaya to correct and
reform the deed of sale. Bisaya denied executing the deed of sale and raised prescription
as a defense, arguing that Garcia's action had already been prescribed under the 10-year
statute of limitations for written contracts. The lower court dismissed the case on the ground
of prescription. Garcia appealed, contending that the case should not be dismissed based
on prescription because he had only recently discovered the error in the deed of sale.

ISSUE:
WON the case should be dismissed on the ground of prescription

RULING:
No. Garcia could not have instituted his action to correct an error in the deed until that error
was discovered. It was not proven that the error was discovered more than ten years before
the action was filed. Hence, it should not be dismissed due to prescription.

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Tuazon, Patricia Marie D.
1 JD

G.R. No. L-22487

ASUNCION ATILANO v. LADISLAO ATILANO

FACTS:
Eulogio Atilano Ihad his land subdivided into five parts. After the subdivision had
been effected, he executed a deed of sale covering lot No. 535-E in favor of his brother
Eulogio Atilano II.Eulogio Atilano II and his children became coownersover lot No. 535-E.
Later they had the land resurveyed; and it was then discovered that the land they were
actually occupying on the strength of the deed of sale executed in 1920 was lot No. 535-A
and not lot 535-E, as referred to in the deed, while the land which remained in the
possession of the vendor, Eulogio Atilano Iwas lot No. 535-E and not lot No. 535-A.The
heirs of Eulogio Atilano IIfiled the present action in the Court of First Instance of
Zamboanga, alleging, inter alia, that they had offered to surrender to the defendants the
possession of lot No. 535-A and demanded in return the possession of lot No. 535-E, but
that the defendants had refused to accept the exchange. The plaintiffs' insistence is quite
understandable, since lot No. 535-E has an area of 2,612 square meters, as compared to
the 1,808 square-meter area of lot No. 535-A. The defendants alleged error in the deed of
sale of May 18, 1920.

ISSUE:
Whether the Deed of Sale prevails over the intention of the parties to a contract of sale.

RULING:
NO. When one sells or buys real property —a piece of land, for example —one sells
or buys the property as he sees it, in its actual setting and by its physical metes and
bounds, and not by the mere lot number assigned to it in the certificate of title. In the
particular case before us, the portion correctly referred to as lot No. 535-A was already in
the possession of the vendee, Eulogio Atilano II, who had constructed his residence
therein, even before the sale in his favor even before the subdivision of the entire lot No.
535 at the instance of its owner, Eulogio Atillano I. In like manner the latter had his house
on the portion correctly identified, after the subdivision, as lot No. 535-E, even adding to the
area thereof by purchasing a portion of an adjoining property belonging to a different owner.

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1 JD

The two brothers continued in possession of the respective portions the rest of their lives,
obviously ignorant of the initial mistake in the designation of the lot subject of the 1920 until
1959, when the mistake was discovered for the first time.

GR No. 158901
Quiroz vs. Arjona

FACTS:
Petitioners Proceso Quiros and Leonarda Villegas filed a complaint for the recovery of
ownership and possession of a parcel of land against their uncle Marcelo Arjona. The
parties later reached an amicable settlement, resulting in Arjona agreeing to give the
petitioners the land he inherited from his mother, and another agreement stating that Jose
Banda would surrender the land he was cultivating if the petitioners obtained it. The MCTC
denied the execution of the compromise agreement due to uncertainty regarding the
subject property, but the RTC reversed this decision. However, on appeal, the CA reversed
the trial court's decision.

ISSUE:
WON the amicable settlement between the parties is valid and enforceable.

RULING:
YES. The Court acknowledged that while amicable settlements generally achieve finality
and should be enforced, exceptions exist when circumstances arise that render execution
unjust. In this case, the uncertainty surrounding the specific parcel of land mentioned in the
settlement documents prevented the issuance of a writ of execution. Amicable settlements
are considered contracts subject to the same legal provisions, and in this case, the
presence of consent, a defined object (a one-hectare inherited land), and a cause (delivery
of the petitioners' share) were established. However, due to the lack of certainty regarding
the subject land, the execution of the settlement was deemed impractical.

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Tuazon, Patricia Marie D.
1 JD

G.R. 119255
Chua VS CA
FACTS:
Roberto Chua lived out of wedlock with private respondent Vallejo and they begot two sons.
Roberto Chua died intestate in Davao City. Upon the death of Roberto, Vallejo filed with
the RTC of Cotabato City a petition for the guardianship and administration over the
persons and properties of the two minors. Herein petitioner Antonietta Garcia Vda. de Chua
(petitioner Chua), representing to be the surviving spouse of Roberto Chua, filed a Motion
to Dismiss on the grounds of improper venue. Petitioner Chua alleged that at the time of the
decedent's death Davao City was his residence, hence, RTC of Davao City is the proper
forum. In support of petitioner’s allegation, petitioner presented, among others, a photocopy
of the marriage contract. Petitioner failed to submit the original copy of the marriage
contract. Vallejo contends that Antonietta Chua is not the surviving spouse of the late
Roberto Chua but a pretender to the estate of the latter since the deceased never
contracted marriage with any woman until he died. RTC ruled that petitioner has no
personality to file the motion since she failed to establish the validity of marriage. The Order
was appealed to the CA, but it decided in favor of the respondents.

ISSUE:
Whether or not petitioner Chua has a legal standing to file the motion to dismiss.

RULING:
NO. Section 4 of the Rules of Court provide that only an interested person may oppose the
petition for issuance of letters of administration. An interested person is one who would be
benefited by the estate such as an heir, or one who has a claim against the estate, such as
a creditor; his interest is material and direct, and not one that is only indirect or contingent.

In the present case, petitioner was not able to prove her status as the surviving wife of the
decedent. The best evidence of marriage is a valid marriage contract which petitioner Chua
failed to produce. The photostat copy of the marriage certificate which the petitioner

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1 JD

presented cannot be considered since this would be a violation of the best evidence rule.
Hence petitioner Chua has no legal standing since she is not considered an interested
person for not being able to prove that she is the wife of the decedent.

GR Nos. 85962-63
Gacos vs. CA

FACTS:
Eladio Gacos verbally divided his unregistered land in Sorsogon among his
three daughters: Petrona, Fortunata, and Lucia. Petrona immediately occupied
her share, while Fortunata and Lucia took possession after their father's death.
Petrona later sold part of her share to Marcial Olaybal in 1948. After Petrona's
death, Lucia sold a portion of the land for funeral expenses as per Petrona's
wish. The land eventually ended up in the hands of Rosario Gacos, who
consolidated it with other parcels and sold it to Arnulfo Prieto in 1973.

In 1975, the children of Petrona Gacos filed a lawsuit (Civil Case No. 1008) to
recover the remaining portion of the land. They claimed that Rosario Gacos
had unlawfully taken possession of the land after their aunt Lucia's death and
sold it to Arnulfo Prieto. The defendants argued that Petrona Gacos had sold
her entire share to Marcial Olaybal in 1948, leaving no remnant for the
plaintiffs.

The parties agreed to hire a licensed geodetic engineer to determine the

boundaries of the land as part of the pre-trial proceedings.

ISSUE:
WON that the contract of sale "Escritura de Venta Absoluta" dated March 18,
1948 from Petrona Gacos to Marcial Olaybal clearly indicates that the property
conveyed is not a portion of her hereditary share but her entire share in the
inheritance of her father Eladio Gacos

RULING:
The court ruled that the contract between Petrona Gacos and Marcial Olaybal
conveyed only a portion of her hereditary share, not the entire share, based on
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1 JD

the provisions of the Civil Code. The court rejected the argument of the
petitioners that their possession of the disputed property for 27 years had
ripened into ownership, stating that it must be under claim of title or adverse.
The court also considered previous transactions and recognized the
ownership of certain portions by other parties. Additionally, the court
acknowledged the alterations to the land and emphasized the need for a
geodetic engineer to determine the actual boundaries.

33 SCRA 1
Universal Food Corp vs. CA

FACTS:
Magdalo Francisco discovered and invented a food seasoning sauce called "Mafran sauce"
in 1938. He commercially sold the product in 1942 and registered the trademark in his
name. In 1960, due to financial constraints, he secured the financial assistance of Tirso
Reyes, which led to the formation of Universal Food Corp. Through a contract called the
"Bill of Assignment," Magdalo became the Chief Chemist of Universal Food Corp. He
insisted on keeping the secret formula to himself but expressed willingness to share it if
placed in a locked vault. However, this condition was not met. In 1960, Magdalo's salary
was stopped, and his services were terminated. He filed a lawsuit seeking to rescind the Bill
of Assignment and declare that Universal Food Corp. had no right to use the Mafran
trademark and formula. The trial court dismissed his complaint, but the Court of Appeals
ruled in his favor. Universal Food Corp. has now filed a petition appealing the decision of
the Court of Appeals.

ISSUE:
WON respondent Magdalo is properly entitled to a rescission of the Bill of Assignment.

RULING:
YES. The Court ruled in favor of respondent Magdalo, affirming his entitlement to rescission
of the Bill of Assignment. The Court determined that the provisions of the Bill of Assignment
were reciprocal in nature, and Universal Food Corp. had violated certain provisions by
terminating Magdalo's services without justifiable cause. The Court considered the
dismissal as a substantial breach that defeated the purpose of the agreement. Magdalo had
no other recourse but to seek rescission and damages. The Court emphasized that the
terms of the Bill of Assignment, including Magdalo's appointment as Chief Chemist and his
control over the laboratory, were interdependent, and the violation of one provision
rendered the rest nullified.

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1 JD

G.R. No. 133879. November 21, 2001

EQUATORIAL REALTY DEVELOPMENT, Inc vs. MAYFAIR THEATER, Inc.

Facts:
Carmelo & Bauermann, Inc. ("Camelo") used to own a parcel of land, together with
two 2-storey buildings constructed thereon, located at Claro M. Recto Avenue, Manila, and
covered by TCT No. 18529 issued in its name by the Register of Deeds of Manila.

On June 1, 1967, Carmelo entered into a Contract of Lease with Mayfair Theater
Inc. ("Mayfair") for a period of 20 years. The lease covered a portion of the second floor and
mezzanine of a two-storey building with about 1,610 square meters of floor area, which
respondent used as a movie house known as Maxim Theater.

Two years later, on March 31, 1969, Mayfair entered into a second Contract of
Lease with Carmelo for the lease of another portion of the latter’s property — namely, a part
of the second floor of the two-storey building, with a floor area of about 1,064 square
meters; and two store spaces on the ground floor and the mezzanine, with a combined floor
area of about 300 square meters. In that space, Mayfair put up another movie house known
as Miramar Theater. The Contract of Lease was likewise for a period of 20 years.

Both leases contained a provision granting Mayfair a right of first refusal to purchase
the subject properties. However, on July 30, 1978 — within the 20-year-lease term — the
subject properties were sold by Carmelo to Equatorial Realty Development, Inc.
("Equatorial") for the total sum of P11,300,000, without their first being offered to Mayfair.

Meanwhile, on September 18, 1997 — barely five months after Mayfair had
submitted its Motion for Execution before the RTC of Manila, Branch 7 — Equatorial filed
with the Regional Trial Court of Manila, Branch 8, an action for the collection of a sum of
money against Mayfair, claiming payment of rentals or reasonable compensation for the
defendant’s use of the subject premises after its lease contracts had expired. This action
was the progenitor of the present case.

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In its Complaint, Equatorial alleged among other things that the Lease Contract
covering the premises occupied by Maxim Theater expired on May 31, 1987, while the
Lease Contract covering the premises occupied by Miramar Theater lapsed on March 31,
1989. 10 Representing itself as the owner of the subject premises by reason of the Contract
of Sale on July 30, 1978, it claimed rentals arising from Mayfair’s occupation thereof.

The trial court dismissed the Complaint via the herein assailed Order and denied the
Motion for Reconsideration filed by Equatorial.

The lower court debunked the claim of petitioner for unpaid back rentals, holding
that the rescission of the Deed of Absolute Sale in the mother case did not confer on
Equatorial any vested or residual proprietary rights, even in expectancy.

In granting the Motion to Dismiss, the court a quo held that the critical issue was
whether Equatorial was the owner of the subject property and could thus enjoy the fruits or
rentals therefrom. It declared the rescinded Deed of Absolute Sale as avoid at its inception
as though it did not happen."

ISSUE:

The Regional Trial Court likewise erred in holding that the aforesaid Deed of
Absolute Sale, dated July 31, 1978, having been ‘deemed rescinded’ by the Supreme Court
in G.R. No. 106063, petitioner ‘is not the owner and does not have any right to demand
backrentals from the subject property,’ and that the rescission of the Deed of Absolute Sale
by the Supreme Court does not confer to petitioner ‘any vested right nor any residual
proprietary rights even in expectancy.

RULING:

The Petition is not meritorious.

Article 1385 of the Civil Code answers this question in the negative, because"
[r]escission creates the obligation to return the things which were the object of the contract,
together with their fruits, and the price with its interest; . . ." Not only the land and building
sold, but also the rental payments paid, if any, had to be returned by the buyer.

The rental payments made by Mayfair should not be construed as a recognition of

Equatorial as the new owner. They were made merely to avoid imminent eviction. It is in
this context that one should understand the aforequoted factual statements in the ponencia
in the mother case, as well as the Separate Opinion of Mr. Justice Padilla and the Separate
Concurring Opinion of the herein ponente.

At bottom, it may be conceded that, theoretically, a rescissible contract is valid until

rescinded. However, this general principle is not decisive to the issue of whether Equatorial
ever acquired the right to collect rentals. What is decisive is the civil law rule that ownership
is acquired, not by mere agreement, but by tradition or delivery. Under the factual
environment of this controversy as found by this Court in the mother case, Equatorial was
never put in actual and effective control or possession of the property because of Mayfair’s
timely objection.

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1 JD

In short, the sale to Equatorial may have been valid from inception, but it was
judicially rescinded before it could be consummated. Petitioner never acquired ownership,
not because the sale was void, as erroneously claimed by the trial court, but because the
sale was not consummated by a legally effective delivery of the property sold.

G.R. No. 100319 August 8, 1996

THE UNION INSURANCE SOCIETY OF CANTON vs. THE COURT OF APPEALS and FAR
EAST CHEMCO LEASING AND FINANCING CORPORATIONS

FACTS:

Upon being served summons on March 5, 1984, the defendant, through counsel, filed a
motion for extension of time to file its answer which was granted by the Court giving the defendant
an extension of 15 days from March 20, 1984 within which to file its answer. However, despite the
said extension it prayed for and granted by the Court, the defendant failed to file an answer thereby
prompting the plaintiff to move that the defendant be declared in default which the Court granted
and at the same time authorizing the plaintiff to present its evidence ex parte.

Subsequently, the defendant filed a motion to set aside the order of default and the plaintiff
filed an opposition thereto. However, at the scheduled hearing of the said motion on June 1, 1984,
the defendant's counsel instead manifested that the defendant will submit a proposal for an
amicable settlement of the case with the plaintiff for which reason the hearing of the defendant's
motion was reset to June 29, 1984, at 2:00 p.m., but when the motion was called for hearing the
defendant's counsel failed to appear despite previous notice in open Court. Having found the
grounds of the said motion unmeritorious, the Court resolved to deny the same.

It appears that on March 11, 1976, the Union Insurance Society of Canton, Ltd., through its
general agent, Ker & Co., as insurer subrogee of Litton Mills, Inc. (Consignee), filed a complaint for
damages with the former Court of First Instance of Manila docketed therein as Civil Case No.
101598 against the Philippine Tugs, Inc., a corporation engaged in carrying goods on lighters from
vessels anchored in Manila Bay to any part of the Philippines. On July 19, 1977, the said Court
rendered judgment in favor of the plaintiff and against Philippine Tugs, Inc. ordering the latter to
reimburse to the plaintiff as subrogee the amount of P1,849,044.23 with legal interest from the date
of the filing of the complaint until full payment thereof plus costs.

ISSUE:

Whether or not the trial court erred in declaring respondent liable to petitioner for the value of the
subject vessels despite the fact that petitioner's claim is based on a lien.

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1 JD

RULING:

No. While Far East Chemco, as a buyer of the vessels purchased the same at its own risk,
the assumed risk pertains only to the possibility of the sale being rescinded. It is error to make
private respondent pay petitioner the value of the three (3) vessels or to order the return of the
vessels to petitioner without the sale first being rescinded.

The vessels are no longer owned by private respondent. When petitioner filed the complaint
on February 21, 1984, it was already aware that the vessels have been sold by private respondent
to Peninsula Tourist Shipping Corporation on May 27, 1980. Yet petitioner did not implead
Peninsula Tourist Shipping Corporation as a co-defendant of Far East Chemco.

Petitioner Union Insurance contends that technicalities have no place in the administration of
justice. But petitioner, who did not cause the attachment of PTI's properties to forestall its sale,
cannot be given its justice at the expense of others, namely: 1.) Peninsula Tourist Shipping
Corporation who cannot be bound by an adverse decision in a case where it was not given a
chance to defend itself and 2.) private respondent who should not be made to pay another's
indebtedness in the absence of showing that PTI, the judgment debtor, has not paid petitioner or
that PTI has no other properties to answer for its liabilities to the petitioner. To order private
respondent to pay petitioner the value of the vessels is one without legal basis and could result in
unjust enrichment of petitioner.

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1 JD

G.R. No. 133879. November 21, 2001

MARIA ANTONIA SIGUAN, petitioner, vs. ROSA LIM, LINDE LIM, INGRID LIM and NEIL
LIM, respondents

Facts:
Rosa Lim (respondent, LIM) issued two Metrobank checks on August 25 and 26, 1990, to
satisfy her indebtedness to Maria Antonia Siguan (petitioner, SIGUAN). The checks were
dishonored after SIGUAN presented them to the drawee bank for the reason that the
account was closed. SIGUAN filed a criminal lawsuit against LIM for violating BP 22. On
December 29, 1992, the RTC found LIM guilty as charged. This Court is currently reviewing
the matter. LIM completed a Deed of Donation in favor of her children on August 10, 1989,
and it was registered with the Office of the Register of Deeds on July 2, 1991. SIGUAN filed
an accion pauliana against LIM and her children on June 23, 1993, seeking to annul the
contested Deed of Donation and to declare the new transfer certificates of title null and
void.

Issues:
Whether or not the questioned Deed of Donation was made in fraud of petitioner and,
therefore,
rescissible?

Ruling:

The Petition is not meritorious.

NO. The court held that the general rule is that rescission requires the existence of creditors
at the time of the alleged fraudulent alienation, and this must be proved as one of the bases
of the judicial pronouncement setting aside the contract. 16 Without any prior existing debt,
there can neither be injury nor fraud. While it is necessary that the credit of the plaintiff in
the accion pauliana must exist prior to the fraudulent alienation, the date of the judgment
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1 JD

enforcing it is immaterial. Even if the judgment be subsequent to the alienation, it is merely

declaratory, with retroactive effect to the date when the credit was constituted.

In the instant case, the alleged debt of LIM in favor of petitioner was incurred in August
1990, while the deed of donation was purportedly executed on 10 August 1989.

G.R. No. L-60174 February 16, 1983

EDUARDO FELIPE, HERMOGENA V. FELIPE AND VICENTE V. FELIPE, petitioners,

vs.
HEIRS OF MAXIMO ALDON, NAMELY: GIMENA ALMOSARA, SOFIA ALDON,
SALVADOR ALDON, AND THE HONORABLE COURT OF APPEALS, respondents.

Facts:
In 1936, Maximo Aldon married Gimena Almosara. In 1948-1950, the spouses purchased
various parcels of land. The aforementioned lands were divided into three lots between
1960 and 1962. The wife then sold the property to the petitioners without her husband's
approval in 1951. On April 26, 1976, Aldon's heirs (wife and children) filed a case against
the petitioners, saying that they orally mortgaged the aforementioned properties to the
Felipes and that an option to redeem the assets was offered, but they rejected. The RTC
found in Felipe's favor, stating that they were the rightful owners of the parcels at issue. The
CA overturned the verdict on the grounds that the wife's sale was illegal because the
properties were conjugal in nature and the sale was conducted without the husband's
agreement.

Issues:
Whether or not the sale of properties in question was valid without the consent of the
husband?

Ruling:
NO, the court ruled that the sale was invalid. (Art. 165 NCC) The husband is the
administrator of the conjugal relationship. Subject to specific limitations, the husband may
not dispose or encumber the conjugal partnership's real property without the wife's consent
(Art. 166 NCC). And, save in instances permitted by law (Art. 172 NCC), the wife cannot
bind the conjugal property without the approval of the husband. In this scenario, the clause
"except in cases provided by law" does not apply to the wife's sale.

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1 JD

G.R. No. L-27343

Singsong vs. Isabela Sawmill, 88 SCRA 623 (1979)

FACTS:
On June 5, 1959, Manuel G. Singsong, Jose Belzunce, Agustin E. Tonsay, Jose L.
Espinos, Bacolod Southern Lumber Yard, and Oppen, Esteban, Inc. filed a complaint
against the Provincial Sheriff of Negros Occidental, Margarita G. Saldajeno, Leon Garibay,
Timoteo Tubungbanua, and the Provincial Sheriff of Negros Occidental. The complaint
requested a writ of preliminary injunction, permanent payment of the defendant partnership,
declaration of the Chattel Mortgage executed by Garibay and Tubungbanua in favor of
Saldajeno, and the sale of the assets of the defendant partnership if the latter fails to pay
the judgment they may recover. The plaintiffs also requested joint liability for any unpaid
deficiency after the proceeds of the sale are supplied in payment of the judgment they may
recover. The plaintiffs also requested all other remedies the Honorable Court may find them
entitled to, with costs to the defendants.

ISSUE:
Whether or not the Court A Quo erred in holding defendant-appellant Margarita G.
Saldajeno liable for the obligations of Mssrs. Leon Garibay and Timoteo Tubungbanua,
incurred by the latter as partners in the new “Isabela Sawmill, after the dissolution of the old
partnership in which said Margarita G. Saldajeno was a partner.

RULING:
It is true that the dissolution of a partnership is caused by any partner ceasing to be
associated in the carrying on of the business. However, on dissolution, the partnership is
not terminated but continues until the winding up of the business.
Where the remaining partners instead of winding up the business did not terminate but
continued the business in the name of the partnership, and used the properties of said
partnership, the withdrawing to whom the properties were mortgaged and sold at public
auction is liable to the creditors of the partnership.

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Where the creditors of a partnership were prejudiced in their rights by the execution of the
chattel mortgage over the properties of the partnership in favor of a withdrawing partner by
the remaining partners, the creditors have a right to file the action to nullify the chattel
mortgage in question.

Where one of two innocent persons must suffer, that person who gave occasion for the
damages to be caused must bear the consequences.

G.R. No. 158314

Samahan ng Magsasaka sa San Jose vs. Valisno

FACTS:
In 1994, Dominador Maglalang filed a petition on behalf of SMSP for the subject
landholding to be covered under the CARL, but it was dismissed. Later, the SMSJ,
represented by Dominador Maglalang, opposed the Consolidated Application for Retention,
specifically objecting to the award given to the Grandchildren-Awardees due to their lack of
direct involvement in tilling or managing the land. Petitioners filed a motion for
reconsideration, challenging the retention right of the four Redemptioner-Grandchildren
over the 12-hectare property and requesting that it be included in the CARP. Subsequently,
the 12-hectare portion was foreclosed and sold at auction, with four grandchildren of Dr.
Nicolas Valisno redeeming the property. On September 25, 1997, the Valisno heirs filed a
Consolidated Application for Retention and Award. The respondent heirs filed a petition for
review, arguing that the Secretary of Agrarian Reform erred by disallowing the award of one
hectare to each of the seven Grandchildren-Awardees and by not recognizing the
redemption made by the four grandchildren over the 12-hectare riceland mortgaged to
Renato and Angelito Banting.

ISSUE:
Whether or not the contract entered into by the minors is void.

RULING:

NO, the relevant laws governing the minors’ redemption in 1973 are the general Civil Code
provisions on legal capacity to enter into contractual relations, wherein Article 1327 of the
Civil Code provides that minors are incapable of giving consent to acontract and Article
1390 provides that a contract where one of the parties is incapable of giving consent is
voidable or

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annullable. Thus, the redemption made by the minors in 1973 was merely voidable or
annullable, and was not void ab initio, as petitioners argue.

Any action for the annulment of the contracts thus entered into by the minors would require
that: (1) the plaintiff must have an interest in the contract; and (2) the action must be
brought by the victim and not the party responsible for the defect. Article 1397 of the Civil
Code provides in part that "[t]he actions for the annulment of contracts may be instituted by
all who are thereby obliged principally or subsidiarily; persons who are capable cannot
allege the incapacity of those with whom they contracted." The action to annul the minors’
redemption in 1973, therefore, was one that could only have been initiated by the minors
themselves, as the victims or the aggrieved parties in whom the law itself vests the right to
file suit and this action was never initiated by minors.

G.R. No. 3246 February 9, 1907

Cadwaller & Co. vs. Smith, Bell & Co, 7 Phil 461 (1907)

FACTS:

The plaintiff seeks $3,486, US currency, for the difference between the amount turned over
to the Pacific Export Lumber Company and the amount bought by the defendants. The
defendants allowed a counterclaim of $6,993.80, deducting $2,063.16 from the plaintiffs'
claim. The balance in favor of the defendants was $4,930.64, for equipment. The plaintiff's
counsel argued the contention was limited to the defendants' commissions on selling the
piles.

ISSUE:

Is the contract between plaintiff, CADWALLADER & COMPANY, and the defendants,
SMITH, BELL & COMPANY and HENRY W. PEABODY & COMPANY, valid,

RULING:

YES. The plaintiff claims that the agents committed a breach of duty by concealing
negotiations with the government and misrepresenting market conditions, leading to a sale
of piles at 19 pesos each. The contract was induced by their fraud and subject to annulment
by the aggrieved party. The defendants are not entitled to retain their commission on the
annulled piles. The court found the net amount due to the plaintiff for the Quito piles was
$1,760.88, with interest at 6% from March 1, 1903. The plaintiff's claim is deducted from the
defendants' counterclaim of $6,993.80, leaving a balance of $4,541.98, equivalent to
9,083.96 pesos.

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1 JD

G.R. No. L-33360 April 25, 1977

Carantes vs CA (76 SCRA 514)

FACTS:

Mateo Carantes, the original owner of Lot No. 44 in Loakan, Baguio City, died in 1913. In
1930, the government subdivided the land into lots 44-A, 44-B, 44-C, 44-D, and 44-E. In
1939, a deed was executed by his children and heirs, assigning their inheritance rights. In
1940, the Court of First Instance of Baguio City cancelled O.C.T. No. 3, and a Transfer
Certificate of Title No. 2533 was issued in his name. The plaintiffs filed a complaint alleging
the deed was null and void, and the defendants filed a motion to dismiss. The trial court
denied the motion, stating the fraud was discovered on March 16, 1940, when the deed of
assignment was registered.

Plaintiffs appealed to the Court of Appeals, which reversed the trial court's judgment,
allowing them to seek reconsideration.

ISSUE:

Did the respondent court rule correctly that the "Assignment of Right to Inheritance" deed is
void ab initio due to lack of real consent and shocking consideration of P1.00.

RULING:

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1 JD

YES. Article 1409 (2) of the new Civil Code states that contracts that are simulated or
fictitious are considered inexistent and void from the beginning. This is because the
apparent contract is not intended to produce legal effects or alter the parties' juridical
situation. In the case at bar, consideration was not absent, as the sum of P1.00 appears as
one of the considerations for inheritance assignment. The decedent, Mateo Carantes,
expressed that the property rightly and exclusively belonged to the petitioner, which
constitutes valuable consideration for the contract.

The action to annul a contract on fraud grounds has a prescriptive period of four years from
discovery. The question remains whether fraud was discovered in February 1958 or when
the "Assignment of Right to Inheritance" was registered in 1940. The private respondents
filed the action on September 4, 1958, which is barred by the statute of limitations.

G.R. No. 132415

Katipunan vs. Katipunan

FACTS:
Respondent Braulio Katipunan, Jr. is the owner of a 203 square meter lot and a five-door
apartment constructed thereon located at 385-F Matienza St., San Miquel, Manila, The lot
is registered in his name under TCT No. 109193 of the Registry of Deeds of Manila. The
apartment units are occupied by lessees. On December 29, 1985, respondent, assisted by
his brother, petitioner Miquel Katipunan, entered into a Deed of Absolute Salewith brothers
Edgardo Balguma and Leopoldo Balguma, Jr. (co-petitioners), represented by their father
Atty. Leopoldo Balquma, Sr., involving the subject property for a consiereratian cancelled
and in neu insecuentEr Nos p on sent 'wast Penistered and issued in the names of the
Balguma brothers. In January. 1986, Atty. Balguma, then still alive, started collecting rentals
from the lessees of the apartments. On March 10, 1987, respondent filed with the RTC of
Manila, Branch 21. complaint for annulment of the Deed of Absolute Sale. He averred that
his brother Miquel, Atty. Balquma and Inocencio Valdez (defendants therein, now
petitioners) convinced him to work abroad. They even brought him to the NBI and other
qovernment offices for the purpose of securinq clearances and other documents which later
turned out to be falsified. Through insidious words and machinations, they made him sign a
document purportedly a contract of employment, which document turned out to De a Deed
or Absolute Sale. By virtue of the said sale, brothers Edgardo and Leopoldo, Ir. (co-
defendants), were able to register the title to the property in their names Respondent further
alleged that he did not receive the consideration stated in the contract. He was shocked
when his sister Agueda Katipunan-Savellano told him that the Balguma brothers sent a
letter to the lessees of the apartment informing them that they are the new owners. Finally,

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1 JD

he claimed that the defendants, now petitioners, with evident bad faith, conspired with one
another in taking advantage of his ignorance, he being only a third grader. After hearing,
the trial court dismissed the complaint, holding that respondent failed to prove his causes of
action since he admitted that: (1) he obtained loans from the Balgumas; (2) he signed the
Deed of Absolute Sale; and (3) he acknowledged selling the property and that he stopped
collecting the rentals. Upon appeal by respondent, the Court of Appeals reversed said
decision of the RTC

ISSUE:
Is subject contract void ab initio or voidable on the ground that one mister
partiesisincapabletio,giving consent or where consent is vitiated by

RULING:
A contract of sale is born from the moment there is meeting of minds upon the thing which
is the object of the contract and upon the price. This meeting of minds speaks of the intent
of the parties in entering into the contract respecting the subject matter and the
consideration thereof. Thus, the elements of a contract of sale are consent, object, and
price in money or its equivalent. Under Article 1330 of the Civil Code, consent may be
vitiated by any of the following: (a) mistake; (b) violence; (c) intimidation; (d) undue
influence; and (e) fraud. The presence of any of these vices renders the contract voidable.

G.R. No. 12605

Uy Soo Lim vs. Tan Unchuan, 38 Phil 552 (1918)

FACTS:
Santiago Pastrano Uy Toco, 13 years old, Chinese, came to the Philippines August 2 1882:
He married Candida Vivares, a Filipina woman, at Mambajao, Cagayan. They had 2
daughters, Francisca and Concepcion. Francisca is a defendant in this suit and is the wife
of the co-defendant, Benito Tan Unchuan. At the time of this marriage, Santiago Pastrano
possessed very little property, a tienda worth about P2k. However, when he died, his wealth
amassed to a large estate that he acquired with Candida. 1892: Santiago stayed in China
for less than a year and he had an affair with Chan Quieng or Chan Ni Yu (who later claims
that what they did in China was equivalent to a marriage in Chinese law and customs).
Santiago and Quieng never saw each other again but she wrote him letters that she bore
him a son, plaintiff y Soo Lim. Believing this, Santiago allegedly dedicated to him a large
amount in his will-7/9 to be exact. Oct 21, 1904: CFI Cebu ordered Benito Tan Unchuan,
the executor of the testamentary estate of Santiago Pastrano to deliver to Basilio y Bundan
(brother of Santiago), guardian of Francisca Pastrano, Concepcion Pastrano, and y Soo
Lim, the property to which they were entitled under the Santiago's will order was complied
with and the administration of the testamentary estate declared closed. Oct 18, 1910, the
court, issued an order on to Basilio to already present a plan of distribution of the estate in
accordance with the will since Francisca has already reached majority, Concepcion will in a
few months and Uy So Lim already got married in 1910-> But Basilio didn't readily comply
with the order and before the plan of distribution, objections re: implementing the provisions

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1 JD

of the will were brought to this court. Thus, motions were raised In Court: May 25. 1991:
Candida's motion-She claimed the right to 1⁄2 of the estate as the legitimate widow of
Santiago. She also asked that the administration of said estate reopened and the rights of
the persons re-adjudged and determined according to law.

A motion of similar purport was filed by her in the matter of the guardianship of Uy So Lim
et al. June 5, 1911: Francisca and Concepcion's motion- re: guardianship of Uy Soo Lim et
al., in which they opposed the distribution of the estate of Santiago in accordance with the
terms of his will, alleging that y Soo Lim was not entitled under the law to the amount of the
estate assigned him in the will since the alleged marriage of their dad to his mom was null
and void. They also claimed that Uy 50o Lim was not à son, legitimate or illegitimate of their
dad. Thus, they asked for a suspension or the distribution and a reopening or the matter
orino res ramentary es.d. of Santiago Pastrano and that the rights or all persons in interest
be read and determined according to l Gianne Karla Gianne Karla Marucut - Bernardo Oct.
7, 1911: Chan Quieng's motion and asked that she be declared entitled to * of the estate on
account that she was the legitimate wife of Santiago according to laws and customs
orchina. What's with all the fuss?; If Uy Soo Lim was illegitimate: he's only entitled to 1/3 of
Santiago's ½ share in the conjugal estate or 1/6 total not 7/9. (THOU SHALT NOT GET A
LION'S SHARE ILLEGITIMATE CHILDDDDD)

March 13, 1911: Uy Soo Lim goes to Manila because he gets paranoid will all the protests
regarding his inheritance which by the way he was expecting. He even already withdrew
from the estate amounts worth P26,800 for his personal use. At the end, an agreement was
reached between Choa Tex Hee and the plaintiff, of the one part, and Tan Unchuan and
Del Rosario, an attorney of Cebu, representing the interest of Candida, Francisca and
Concepcion, on the other, to submit the entire matter in dispute to the judgment of three
respectable Chinese merchants/lawyers designated 12. These advisers came to the
conclusion that the sum of P82, 500 should be accepted by plaintiff in full satisfaction and
relinquishment of all his right, title. and interest in and to the estate of the deceased
Santiago, and this recommendation was accepted by Cho Tek Hee and plaintiff and by Tan
Unchuan and Del Rosario. 13. Candida and Concepcion later sold their shares to
Francisca. But after the agreed amount was paid in installments by Francisca and after the
plaintiff spent most of it. Uy Soo Lim, 3 years after attaining the age of majority.
commenced this present action to rescind and annul the contract by which he had sold and
transferred to Francisca Pastrano his interest in the estate of Santiago Pastrano 14. TC: Uv
Soo Um was a minor at the time of the execution of the contract in question, but that he not
only failed to repudiate it promptly upon reaching his majority but tacitly ratified it by
disposing of the greater part of the proceeds after he became of age and after he had full
knowledge of the facts upon which he now socks to disaffirm the agreement.

ISSUE:
WON the plaintiff might have the right to rescind this contract on the ground of minority

RULING:
NO. The right of the minor to rescind, upon attaining his majority, a contract entered into his
minority is subject to the conditions that the election to rescind must be made within a
reasonable time after majority and (2) that all of the consideration which was in the minor's
possession upon As reaching the majority must be returned. The disposal of any part of the
consideration after the attainment of majority imports an affirmance of the contract.
Because, with full knowledge of his rights in the premises, he failed to disaffirm his contract

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1 JD

within a reasonable time after reaching majority; and he not only failed to tender, or offer, to
produce and pay the consideration when he reached majority and when he filed his action.
Such events, to demand, collect and dispose of such consideration, when according to his
own statement under oath he had no other funds with which to make reimbursement.

G.R. No. 130913

OLIVERIO LAPERAL and FILIPINAS GOLF & COUNTRY CLUB
INC., Petitioners, v. SOLID HOMES, INC., Respondent.

FACTS:
On June 6, 1981, Filipinas Golf Sales and Development Corporation (FGSDC),
predecessor-in-interest of petitioner Filipinas Golf and Country Club, Inc.
(FGCCI), represented by its then President, the other petitioner herein, Oliverio
Laperal, entered into a Development and Management Agreement (Agreement, for short)
with herein respondent Solid Homes, Inc., a registered subdivision developer, involving
several parcels of land owned by Laperal and FGSDC with an aggregate area of
approximately 42 hectares and located at Bo. San Antonio, San Pedro, Laguna.
Under the terms and conditions of the aforementioned Agreement and
the Supplement thereto dated January 19, 1982, respondent Solid Homes, Inc., undertook
to convert at its own expense the land subject of the agreement into a first-class residential
subdivision, in consideration of which respondent will get 45% of the lot titles of the saleable
area in the entire project.
The aforementioned Agreement was canceled by the parties, and, in lieu thereof, two (2)
contracts identically denominated Revised Development and Management

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1 JD

Agreement (Revised Agreements, for short) were entered into by respondent with the two
(2) successors-in-interest of FGSDC, to wit: (1) one, with petitioner Oliverio Laperal as
owner of the 181,075-square meter area of the subject land; and (2) another, with
petitioner FGCCI as owner of the 399,075-square meter area thereof.
Unlike the original agreement both Revised Agreements omitted the obligation of petitioners
Laperal and FGCCI to make available to respondent Solid Homes, Inc. the owner’s
duplicate copies of the titles covering the subject parcels of land. It appears, however, that
even as the Revised Agreements already provided for the non-surrender of the owner’s
duplicate copies of the title, respondent persisted in its request for the delivery thereof.
Then, petitioners served on respondent recission of the Revised Agreements with a
demand to vacate subject properties and yield possession thereof to them.

ISSUE:
Whether or not the termination of the Revised Agreement and Addendum, because of the
contractual breach committed by respondent Solid Homes, carried with it the effect
provided under Article 1385 of the New Civil Code.
RULING:
Mutual restitution is required in cases involving rescission under Article 1191. Considering
that the rescission of the contract is based on Article 1191 of the Civil Code, mutual
restitution is required to bring back the parties to their original situation prior to the
inception of the contract. Accordingly, the initial payment of P800,000 and the
corresponding mortgage payments in the amounts of P27,225, P23,000 and P23,925
(totaling P874,150.00) advanced by petitioners should be returned by private respondents,
lest the latter unjustly enrich themselves at the expense of the former.
Rescission creates the obligation to return the object of the contract. It can be carried out
only when the one who demands rescission can return whatever he may be obliged to
restore (citing Co v. Court of Appeals, 312 SCRA 528, August 17, 1999; and
Vitug, Compendium of Civil Law and Jurisprudence, 1993 revised ed., p. 556). To rescind is
to declare a contract void at its inception and to put an end to it as though it never was. It is
not merely to terminate it and release the parties from further obligations to each other, but
to abrogate it from the beginning and restore the parties to their relative positions as if no
contract has been made (citing Ocampo v. Court of Appeals, 233 SCRA 551, June 30,
1994).
Article 1191 of the Civil Code provides:
Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the
obligors should not comply with what is incumbent upon him.
The injured party may choose between the fulfillment and the rescission of the obligation,
with the payment of damages in either case. He may also seek rescission, even after he
has chosen fulfillment, if the latter should become impossible.
The court shall decree the rescission claimed unless there be just cause authorizing the
fixing of the period.

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1 JD

"ART. 1385. Rescission creates the obligation to return the things which were the object of
the contract, together with their fruits, and the price with its interest; consequently, it can be
carried out only when he who demands rescission can return whatever he may be obliged
to restore.
"Neither shall rescission take place when the things which are the object of the contract are
legally in the possession of third persons who did not act in bad faith.
"In this case, indemnity for damages may be demanded from the person causing the loss."

G.R. No. L-25650

ISIDORA L. CABALIW and SOLEDAD SADORRA, petitioners,
vs.
SOTERO SADORRA, ENCARNACION SADORRA, EMILIO ANTONIO, ESPERANZA
RANJO, ANSELMO RALA, BASION VELASCO, IGNACIO SALMAZAN, and THE
HONORABLE COURT OF APPEALS, respondents.

FACTS:
Cabaliw was the second wife of Benigno. During their marriage, they bought 2 parcels of
land. They had a daughter Soledad. Benigno abandoned his wife Cabaliw, thus the latter
filed an action in court for support. The Court ordered Benigno to pay her P75 a
month. However, Benigno did not pay and instead sold their property to his son-in-law
Soterro. The transaction was done without Isidora’s consent. Prior to the sale, Soterro
already knew that there was a judgment rendered against his father-in-law but proceeded to
buy the property anyway. When Cabaliw found out, she instituted an action along with her
daughter to recover the properties.
ISSUE:

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1 JD

Whether or not the Court of Appeals gravely erred in holding that the fraud could not be
presumed in the transfer of the lots in question by the late Benigno Sadorra to his son in
law Sotero Sadorra.
RULING:
Yes, the facts narrated in the first portion of this Decision which are not disputed,
convincingly show, or prove that the conveyances made by Benigno Sadorra in favor of his
son-in-law were fraudulent. For the heart of the matter is that about seven months after a
judgment was rendered against him in Civil Case No. 43192 of the Court of First Instance of
Manila and without paying any part of that judgment, Benigno Sadorra sold the only two
parcels of land belonging to the conjugal partnership to his son-in-law. Such a sale even if
made for a valuable consideration is presumed to be in fraud of the judgment creditor who
in this case happens to be the offended wife.
Article 1297 of the old Civil Code which was the law in force at the time of the transaction
provides:
Contracts by virtue of which the debtor alienates property by gratuitous title are presumed
to be made in fraud of creditors.
Alienations by onerous title are also presumed fraudulent when made by persons against
whom some judgment has been rendered in any instance or some writ of attachment has
been issued. The decision or attachment need not refer to the property alienated and need
not have been obtained by the party seeking rescission.
The above-quoted legal provision was totally disregarded by the appellate court, and there
lies its basic error.
Furthermore, the presumption of fraud established by the law in favor of petitioners is
bolstered by other indicia of bad faith on the part of the vendor and vendee. Thus (1) the
vendee is the son-in-law of the vendor. In the early case of Regalado vs. Luchsinger & Co.,
5 Phil. 625, this Court held that the close relationship between the vendor and the vendee is
one of the known badges of fraud. (2) At the time of the conveyance, the vendee, Sotero,
was living with his father-in-law, the vendor, and he knew that there was a judgment
directing the latter to give a monthly support to his wife Isidora and that his father-in-law
was avoiding payment and execution of the judgment. (3) It was known to the vendee that
his father-in-law had no properties other than those two parcels of land which were being
sold to him.7 The fact that a vendor transfers all of his property to a third person when there
is a judgment against him is a strong indication of a scheme to defraud one who may have
a valid interest over his properties.

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1 JD

G.R. No. 118509

Limketkai Sons Milling, Inc. vs. Court of Appeals

FACTS:
The facts of the case involve a contract for the sale of a lot between Pedro Revilla, Jr., a
licensed real estate broker, and BPI (Bank of the Philippine Islands). Revilla had the
authority from BPI to sell the lot on a first-come, first-served basis. Alfonso Lim of the
petitioner company expressed interest in buying the land and agreed on the purchase price.
Lim requested to pay on terms, which was initially approved by Merlin Albano, a BPI Vice
President. However, shortly after, Lim was informed that the offer to pay on terms was no
longer valid, and when he attempted to make full payment, it was rejected because BPI had
withdrawn the authority to sell. The petitioner filed a specific performance case, claiming
that the property was subsequently sold to National Book Store. The trial court ruled in
favor of the petitioner, but the Court of Appeals reversed the decision and dismissed the
complaint, leading to the current petition.

ISSUE:
Whether or not there was a perfected contract?

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1 JD

RULING:
YES. In this case, the Court rejected National Book Store's argument that there was no
valid contract due to the absence of a signed and notarized deed of sale. The testimony of
the Bank of the Philippine Islands (BPI) official involved in the transaction confirmed that the
sale had been concluded. The court emphasized that the formality required by law for the
sale of real property is for greater efficacy or convenience, and the lack of compliance does
not affect the validity and binding effect of the contract. Once a contract is perfected, the
parties may compel each other to observe the required form, and their rights can be
enforced simultaneously with the action based on the contract.

G.R. No. 107624

Villanueva vs. CA

FACTS:
Petitioners Gamaliel and Irene Villanueva expressed interest in purchasing a property
owned by private respondents Jose dela Cruz. As a step towards the sale, Jose authorized
Irene to inspect the property and requested her to contribute a certain amount to pay the
outstanding realty taxes. Irene provided a total of 10,000 pesos, which they agreed would
be part of the sale price of 550,000 pesos. Later, Jose approached Irene with another
buyer, Mr. Sabio, and asked for permission to sell half of the property to Sabio while the
Villanuevas would purchase the other half. A Deed of Assignment was executed in favor of
the co-defendants, the Pile family, purportedly as full payment for a debt owed to them. The
Villanuevas filed a complaint, asserting that a contract of sale had been perfected and that
the 10,000 pesos formed part of the purchase price. The private respondents argued that
the 10,000 pesos was primarily intended for the payment of realty taxes and that no clear
agreement had been reached on the actual consideration.

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1 JD

ISSUE:
Whether or not there was a perfected contract of sale?

RULING:
NO. The court ruled that the essential elements for a valid contract were lacking in this
case. Although the draft deed of sale was mentioned, it was not signed and therefore held
no probative value. The price of the leased land was not fixed, and without a definite price,
the contract could not be enforced. The court emphasized that the price must be certain,
real, and not fictitious, and the parties must have a meeting of minds regarding the price. In
this case, there was no clear agreement on the price, either expressed or implied, making it
impossible to enforce the sale.

G.R. No. 25400

PNB vs. Phil Vegetable Oil Co.

FACTS:
In 1920, the Vegetable Oil Co found itself in financial straits. It was in debt of approximately
P30M. PNB was the largest creditor, owing the bank P17M. PNB was secured principally by
a real and chattel mortgage for P3.5M. The Vegetable Oil Co executed another chattel
mortgage in favor of the bank on its vessels Tankerville and HS Everette to guarantee the
payment of sums not to exceed P4M.

Mr. Phil C. Whitaker, the General Manager of the Vegetable Oil Co., made his first offer to
pledge certain private properties to secure the creditors of the Oil Company. At the instance
of Mr. Whitaker but inspired to action by the PNB, a receiver for the Oil Company was
appointed by the CFI Manila.

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1 JD

During the period when a receiver was in control of the Oil Company, Creditors transferred
to Mr. Whitaker a part of their claims against the Oil Company via an agreement. PNB was
not a direct party to the agreement although its officials had full knowledge of its
accomplishment and its general manager placed his OK at the end of the final draft. PNB
then obtained a new mortgage from the Oil Company. Shortly thereafter, the receivership
for the Oil Company was terminated (Feb 1922). The bank suspended the operations of the
Company, and closed the plant.

PNB Bank filed an action to foreclose its mortgage on the property of the Vegetable Oil
Company. The Vegetable Oil Company on its part countered with certain special defenses
with a counterclaim for P6,000,000. Phil. C. Whitaker presented a complaint in intervention.
The judgment rendered was in favor of the PNB and against the defendant which was
ordered to pay the sum of P15,787,454.54, representing the liquidation between the plaintiff
and the defendant, with legal interest. The counterclaim and the complaint in intervention
were dismissed.
ISSUE:
WON the PNB ever made any contract binding the bank to provide the
necessary operating capital to the Vegetable Oil Co.
RULING:
The issue relates to the applicability or non-applicability of the Statue of Frauds. The broad
view is that the Statute of Frauds applies only to agreements not to be performed on either
side within a year from the making thereof. Mr. Whitaker has entirely performed his part of
the agreement, equity would argue that all evidence be admitted to prove the alleged
agreement.

Portions of the minutes of the Board of Directors disclose that the Board
authorized advances to the Oil Company to the extent of more than P1M. No contract
entered into by the General Manager of the Bank would be valid unless made with the
advice and consent of its Board of Directors. What the Board had decreed was that the Oil
Company be financed under the receivership to the extent of P500,000. No indication that
the Board had ever consented to an agreement for practically unlimited backing of the Oil
Company, or that it had ratified any such promise made by the General Manager.

No definite agreement binding on the bank but only a general intimation

proffered by the General Manager of the Bank in conference that his bank contemplated
financing the operations of the Oil Company.

Case remanded to the lower court for entry of judgment and further proceedings.

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1 JD

G.R. No. 115849

First Philippine International Bank vs. CA

FACTS:
The Bank has been under conservatorship since 1984. It is the owner of 6 parcels of land.
The Bank had an agreement with Demetria to purchase the parcels of land. The said
agreement was made by Demetria with the Bank’s manager, Rivera. Thereafter, they had a
series of letters consisting of offers, counter-offers and acceptance of the counter- offer by
Demetria. Later however, the Bank, through its conservator, Encarnacion, sought the
repudiation of the agreement as it alleged that Rivera was not authorized to enter into such
an agreement. Hence there was no valid contract of sale. Subsequently, Demetria sued the
Bank. The RTC ruled in favor of Demetria. The Bank filed an appeal with the Court of
Appeals.

Meanwhile, Henry Co, who holds 80% shares of stocks with the said Bank, filed a motion
for intervention with the trial court which was denied since the trial has been concluded
already and the case is now pending appeal. Subsequently, Henry Co, filed a separate civil

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1 JD

case against Ejercito as successor-in-interest (assignee) of Demetria seeking to have the

purported contract of sale be declared unenforceable against the Bank. Ejercito argued that
the second case constitutes forum shopping since it was barred by litis pendentia by virtue
of the case then pending in the Court of Appeals. But petitioners explain that there is no
forum-shopping because in the “First Case” from which this proceeding arose, the Bank
was impleaded as a defendant, whereas in the “Second Case” it was the plaintiff.

The Bank also argued the following: (1) that there contract of sale was not yet perfected
since it lacks cosent since the Bank did not make a counter-offer; (2) that the contract is
unenforceable since there is no note, memorandum or writing subscribed by the Bank to
evidence such contract; (3) that the conservator has the power to revoke or overrule actions
of the management or the board of directors of a bank under Section 28-A of Republic Act
No. 265 hence the conservator can revoke the said contract between the Bank and
Demetria; and (4) that respondent Court's Decision as "fraught with findings and
conclusions which were not only contrary to the evidence on record but have no bases at
all" hence questions of fact must be reviewed by SC.
ISSUE:
1) WON there is forum shopping.
2) WON there was a perfected contract.
3) WON the contract is enforceable
4) WON the conservator may revoke a perfected and enforceable contract.
5) WON SC should review questions of fact
RULING:
1) YES. Forum-shopping is whenever, as a result of an adverse opinion in one forum, a
party seeks a favorable opinion (other than by appeal or certiorari) in another. Forum
shopping exists where the elements of litis pendentia are present namely: (1) identity of
parties, or at least such parties as represent the same interests in both actions, as well as
(2) identity of rights asserted and relief prayed for, (3) the relief being founded on the same
facts, and the (4) identity on the two preceding particulars is such that any judgment
rendered in the other action, will, regardless of which party is successful, amount to res
adjudicata in the action under consideration.

In the instant case, there is forum shopping because there exist identity of parties or
interests represented, identity of rights or causes and identity of reliefs sought between the
first case and the second case. There is identity of parties even though the first case is in
the name of the bank as defendant, and the second case is in the name of Henry Co as
plaintiff since the rule applies even if the the defendant in the first case becomes the plaintiff
in the second case. Furthermore, allegations of the complaint in the Second Case show
that the stockholders are bringing a "derivative suit". Being a derivative suit would mean
that Henry Co in filing the case is really representing the Bank. So, whether they sued
"derivatively" or directly, there is undeniably an identity of interests/entity represented.
There is also identity of relief being sought since both cases seeks to enable the petitioner
Bank to escape from the obligation to sell the property to respondent.

2) YES. Article 1318 of the Civil Code enumerates the requisites of a valid and perfected
contract as follows: "(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."

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1 JD

In this case, there is consent since there was meeting of the minds between the parties as
shown by the fact that the bank made a counter-offer after the Demetria made an offer to
them. This counter-offer was accepted by Demetria. The object of the subject contract is
the 6 parcels of land. The cause of the obligation for the petitioner bank is the Php 5.5M
that Demetria will pay for the land while the cause of the obligation for Demetria is the
capacity to own the subject land.

3) YES. A contract of sale is binding in whatever form it may have been entered into.
Hence, the letters constitute sufficient memoranda — since they include the names of the
parties, the terms and conditions of the contract, the price and a description of the property
as the object of the contract.

4) NO. Section 28-A of Republic Act No. 265 (otherwise known as the Central Bank Act)
merely gives the conservator power to revoke contracts that are, under existing law,
deemed to be defective — i.e., void, voidable, unenforceable or rescissible. The contract in
this case is a calid one. Hence he cannot simply repudiate valid obligations of the Bank.

Furthermore, the conservator’s powers must be related to the "(preservation of) the assets
of the bank, (the reorganization of) the management thereof and (the restoration of) its
viability." Such powers cannot extend to the post-facto repudiation of perfected
transactions, otherwise they would infringe against the non-impairment clause of the
Constitution. Hence, the conservator must exercise his powers without violating the non-
impariment clause in the constitution. If the conservator in this case would revoke the valid
contract between the Bank and Demetria then such act of the conservator would consist as
a violation of the non-impairment clause in the Constitution.

5) NO. The general rule is that the Supreme Court can only review questions of law. This is
provided under Rule 45 of the Rules of Court. The exceptions to this rule are as follows:
finding grounded entirely on speculation, surmises or conjectures; when the inference made
is manifestly absurd, mistaken or impossible; when there is grave abuse of discretion in the
appreciation of facts; when the judgment is premised on a misapprehension of facts; when
the findings went beyond the issues of the case and the same are contrary to the
admissions of both appellant and appellee.

In the instant case, it is quite evident that the legal conclusions arrived at from the findings
of fact by the lower courts are valid and correct. Hence this Court cannot disturb these
findings to fit the conclusion the petitioner Bank is espousing.

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1 JD

123 SCRA 99
Tongoy vs CA

FACTS:

This case involves a request for the return of two land parcels in Bacolod City. The first
parcel, known as Hacienda Pulo, was registered under the name of Luis D. Tongoy, while
the second parcel, known as Cuaycong property, was transferred to Luis D. Tongoy. In
1936, these properties were mortgaged by Luis D. Tongoy for a 15-year period. The
mortgage obligations to the PNB were fully settled on April 17, 1956, and the release of the
mortgage was officially recorded on May 5, 1958. The request for reconveyance was filed in
the trial court on June 2, 1966.

ISSUE:

Whether or not the rights of herein respondents over subject properties, which were the
subjects of simulated or fictitious transactions, have already prescribed.

RULING:

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1 JD

The deeds of transfer in favor of Luis Tongoy were found to be simulated or fictitious,
created solely to restructure the mortgage on the properties and prevent foreclosure.
According to Articles 1409 and 1410 of the New Civil Code, the action for reconveyance
based on these simulated transfers cannot be barred by prescription. The transfers were
null and void from the beginning, generating no implied trust or rights for Luis Tongoy or his
heirs. While the respondents were minors at the time the mortgages were constituted, they
were unable to assert their rights due to the plan to save the properties from foreclosure.
The prescriptive period for the action started on May 5, 1958, the date of recording the
release of mortgage in the Registry of Deeds.

291 SCRA 372

Guiang vs. CA

FACTS:

Spouses Gilda and Judie Corpuz bought a parcel of land and sold half to the petitioners.
Gilda objected to Judie's plan to sell the remaining half without her consent, but their
daughter informed the petitioners instead of Judie. Judie proceeded with the sale to
Luzviminda Guiang. Gilda returned home and stayed in the house, leading to a trespassing
complaint. An "amicable settlement" was signed, but Gilda's request to annul it was
disregarded, and she continued to reside in the house.

ISSUE:

Whether or not the assailed Deed of Transfer of Rights was validly executed.

RULING:

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1 JD

The Deed of Transfer of Rights was deemed invalid and not properly executed. It falls under
the scope of Article 124 of the Family Code, rendering the disposition void. The absence of
the wife's consent for the sale of their conjugal property, as well as the lack of court
authorization, renders the contract voidable under Article 166 of the Civil Code. However,
the provision in Article 173 of the Civil Code, which establishes a 10-year prescriptive
period for annulling the alienation by the offended spouse, was not carried over to the
Family Code. Consequently, any alienation of conjugal property after the enactment of the
Family Code is considered null and void. Therefore, the consent of both the husband and
wife is crucial for a valid contract of sale, along with the agreement on the cause and object,
which is absent in this case.

G.R. No. 153201 January 26, 2005

MENCHAVEZ v. TEVES

FACTS:
Menchavez and Florentino Teves Jr. executed a contract of lease in 1986. In 1988, Cebu
RTC Sheriffs demolished the fishpond dikes constructed by the respondent and delivered
the possession of the subject property to the plaintiffs. The respondent filed a complaint for
damages and RTC declared the contract of lease as void ab initio. CA disagreed with RTC's
finding that petitioners and respondent were in pari delicto, arguing that while there was
negligence on the part of the respondent, there was no evidence that he had knowledge of
petitiones' lack of ownership.

ISSUE:
Whether or not the subject property (fishponds) can be leased by the petitioners.

RULING:

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1 JD

No. The 1987 Constitution declares that all lands of the public domain, waters, fisheries and
other natural resources belong to the State. Petitioners had no transferable right over the
fishponds, and even if the State granted their application, the law explicitly disallowed
sublease of the fishponds to respondent. The contract of lease is void ab initio, and no
damages may be recovered from a void contract.

GR No. 143958 July 11, 2003

FRENZEL v. CATITO

FACTS:
Alfred Fritz Frenzel is an Australian citizen of German descent who was married to Teresita
Santos, a Filipino citizen. He works as a pilot for New Guinea Airlines. Private respondent
Ederlina P. Catito was married to Klaus Muller, a German national. When she returned to
the Philippines, Alfred gave her money to put up a beauty salon and purchase a house and
lot in San Francisco del Monte, Quezon City. They also opened two bank accounts with the
Hong Kong and Shanghai Banking Corporation in Kowloon, Hong Kong. Alfred filed a
complaint before the RTC of Davao City for recovery of real and personal properties, but
the complaint was dismissed by the RTC. On appeal, the Court of Appeals affirmed the
decision of the RTC.

ISSUE:
Whether or not Alfred is entitled to recover the said properties.

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1 JD

RULING:
No. The contention of petitioner Frenzel that to bar him from recovering the properties
would be in violation of Article 22 of the Civil Code on unjust enrichment holds no water. It
must be remembered that a contract which violates the Constitution and the laws is void
and vests no rights and creates no obligations. Alfred knew all along that he was
disqualified from purchasing lands and his contention that he entered into the transaction
because he was expecting that he and Ederlina will get married in the future is not valid. He
also knew that he cannot get married to Ederlina because he still had a valid existing
marriage with Teresita Santos.

G.R. No. 148376

Acabal vs. Acabal

FACTS:
Alejandro Acabal and Felicidad Balasabas, owned a parcel of land situated in Barrio
Tanglad, Manjuyod, Negros Oriental, containing an area of 18.15 hectares more or less,
described in Tax Declaration No. 15856. By a Deed of Absolute Sale dated July 6, 1971,
his parents transferred for P2,000.00 ownership of the said land to [Villaner Acabal], who
was then married to Justiniana Lipajan.

On April 19, 1990, Villaner executed the deed in question, by which the lot was transferred
to his nephew and godson Leonardo Acabal, who later sold it to Ramon Nicolas. On
October 11, 1993 Villaner filed a case for annulment of the sale to Leonardo and to Nicolas.
Villaner claimed that he did not know the contents of the deed he signed, which he claimed
was a Deed of Sale which is earlier in the proceedings he said it was a Lease Contract.

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The RTC dismissed the complaint. Villaner appealed to the CA, who reversed the RTC and
held that the deed in question was simulated and fictitious. Leonardo and Ramon thus
appealed to the SC on certiorari.

ISSUE:
WON the deed issued is valid.

RULING:
YES, the failure to deny the genuineness and due execution of an actionable document
does not preclude a party from arguing against it by evidence of fraud, mistake,
compromise, payment, statute of limitations, estoppel, and want of consideration. It is a
basic rule in evidence that the burden of proof lies on the party who makes the allegations.
If he claims a right granted by law, he must prove it by competent evidence, relying on the
strength of his own evidence and not upon the weakness of that of his opponent.

Villaner failed to prove his allegations for he failed to adduce evidence to support his claims
of simulation and lack of knowledge as to the nature of the deed. Leonardo’s witness (the
drafter of the actual deed) on the other hand was able to prove that the deed was duly
drafted, read and signed by Villaner.

G.R. No. No. L-33360

Carantes vs. Court of Appeals

FACTS:
Mateo Carantes was the original owner of a land in Baguio City, who later died survived by
his widow Ogasia and six children, a portion of the land was needed for the construction of
the Loakan Airport which the government instituted expropriation proceedings. The lot was
subdivided and the portion expropriated was Lot No. 44-A.

Maximino Carrantes was appointed the judicial administrator of the estate of Mateo.

A deed of denominated “Assignment of Right to Inheritance” was executed by four of

Mateo’s children, and the heirs of Apung Carantes, assigning to Maximino Carantes their
rights to the inheritance of the land. The stated monetary consideration for the assignment
was P1.00.

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The document contains a recital to the effect that the said lots, "by agreement of all the
direct heirs and heirs by representation of the deceased Mateo Carantes as expressed and
conveyed verbally by him during his lifetime, rightly and exclusively belonging to the
particular heir, Maximino Carantes, now and in the past in the exclusive, continuous,
peaceful and notorious possession of the same for more than ten years."

Maximino registered the Assignment of Right to Inheritance and a transfer certificate of title
was issued in favor of Maximino. The title of the remaining lots (Lots 44-D and E) were
issued in the name of Maximino as well.

A complaint was filed by three children of the late Mateo and by the surviving heirs of
Apung and Sianang, Complaints praying that the deed of "Assignment of Right to
Inheritance"
be declared null and void.

Complainants alleged that they were made to believe by the defendant Maximo that the
said instrument merely authorized Maximo to convey portions of Lot-44 to the government
in
their behalf to minimize the expenses and facilitate the transaction.

They also alleged that real consent was wanting and the consideration of P1.00 is so
shocking to the conscience that there was in fact no consideration, hence, the action for
the
declaration of the contract's inexistence does not prescribe pursuant to article 1410 of the
new Civil Code.

ISSUE:
WON contract is invalid due to lesion or inadequacy of cause

RULING:
No, it is the total absence of cause or consideration that renders a contract absolutely void
and inexistent.

In the case at bar consideration was not absent. The sum of P1.00 appears in the
document as one of the considerations for the assignment of inheritance.

In addition — and this of great legal import — the document recites that the decedent
Mateo Carantes had, during his lifetime, expressed to the signatories to the contract that
the
property subject-matter thereof rightly and exclusively belonged to the petitioner Maximino
Carantes.

This acknowledgment by the signatories definitely constitutes valuable consideration for the
contract.

Fraud or deceit does not render contract void ab initio and can only be a ground for
rendering the contract voidable or annullable pursuant to Art 1390 of the New Civil Code by
a proper action in court.

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23 SCRA 1141
Teves vs. People’s Homesite

FACTS:
The complaint states that the plaintiff and her husband had been occupying Lot 9, Block K-
70 of the Diliman Estate Subdivision since October 1950 and had built their residential
house there. The plaintiff's husband was found qualified to purchase the land, and it was
recommended that the lot be sold to him. However, he passed away before the sale was
finalized. The plaintiff, as the successor in interest, applied to purchase the lot herself but
faced delays and ignored requests from the officials of the PHHC (Public Housing and
Home Finance Corporation). Without notifying the plaintiff, the PHHC sold the lot to

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defendant Melisenda L. Santos, who applied for it later through an agent. A deed of sale
was executed and a transfer certificate of title was issued in favor of the defendant. The
complaint alleges that the plaintiff was fraudulently deprived of her preferential right to buy
the lot, and the defendant's application was approved with the help of an influential
politician.

ISSUE:
Whether or not the plaintiff has a cause of action to annul the contract.

RULING:
Yes. Upon reviewing the complaint, it is evident that the plaintiff asserts her position against
the defendants as follows: she had acquired a right in accordance with the policy
established by the defendant PHHC; her right was unjustly taken away when the PHHC
sold the lot to defendant Melisenda L. Santos, who was not an occupant of the lot and
applied to purchase it much later; the sale to Santos occurred without the plaintiff's
knowledge or consent, violating the PHHC's policy, thus rendering the sale invalid. The
plaintiff seeks a declaration of the nullity of the deed of sale, not because she is a party
bound by the deed, but because her interests are affected by it. It has been established that
a person who is not directly involved in a contract may pursue a claim for nullity if their
rights are harmed by one of the parties involved and can demonstrate the detriment, they
would suffer from a contract in which they had no participation.

GR 148116
Litonjua vs. Fernandez

FACTS:
Mrs. Lourdes Alimario and Agapito Fisico, acting as brokers, offered to sell parcels of land
to the petitioners. They claimed to have authorization from respondent Fernandez to sell
the property. The parties agreed that the petitioners would purchase the property, and the
owners would be responsible for the capital gains tax, transfer tax, and documentation
expenses. A meeting was scheduled to finalize the sale, during which respondent
Fernandez was supposed to present a Special Power of Attorney (SPA) from the property

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owners authorizing her to sell the property and execute a deed of absolute sale. However,
only Agapito Fisico attended the meeting and explained that respondent Fernandez was
facing issues with the tenants and attempting to reach a settlement. After a few weeks of
waiting, the petitioners sent letters to respondent Fernandez, demanding the execution of
the Deed of Absolute Sale and the turnover of the properties within a specified timeframe,
or else legal action would be pursued.

In response, respondent Fernandez rejected the petitioners' claims. The petitioners then
filed a Complaint for specific performance with damages against respondent Fernandez
and the registered owners of the property. The trial court ruled in favor of the petitioners,
but the appellate court reversed the decision, dismissing the complaint and the
counterclaim of the respondents.

ISSUE:
Whether the lower court erred in not holding that a special power of attorney was required
in order that defendant-appellant Fernandez could negotiate the sale on behalf of the other
registered co-owners of the two lots.

RULING:
No. The petitioners failed to provide documentary evidence showing that respondent
Fernandez had specific authorization from the owners to sell the properties. According to
the New Civil Code, a special power of attorney is required for any transaction involving the
sale or conveyance of immovable property. Without written authority from the owners, any
sale made by an agent claiming to represent the registered owner is considered null and
void. The petitioners' claim that respondent Fernandez was authorized by the owners was
contradicted by her testimony.

It is the responsibility of persons dealing with an agent to ascertain the agent's authority
and the nature of that authority. In this case, the burden of proof was on the petitioners to
establish that respondent Fernandez had the necessary authorization. Respondent
Fernandez explicitly denied having the authority to sell the properties, both in her response
to the complaint and during her testimony. The letter relied upon by the petitioners, dated
January 16, 1996, was signed by respondent Fernandez alone and did not have the
approval of the owners. There is no evidence of ratification by the owners regarding the
actions taken by respondent Fernandez in her dealings with the petitioners. Therefore, the
letter does not bind the owners of the properties

71 Phil 589
Atienza vs. Castillo

FACTS:
In this case, the plaintiff, Lope Atienza, filed a lawsuit against Maximino Castillo, Eulogia
Giga, and Juana Castillo, seeking to recover damages in the amount of P1,836. Atienza
claimed that Maximino Castillo and Eulogia Giga breached an agreement between the
parties, which stipulated that Juana Castillo, their daughter, would marry the plaintiff. During
the trial, Atienza attempted to prove the existence of the agreement through testimonial
evidence, but the defendants objected, citing the provision of the Civil Procedure Code that

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prohibits the proof of agreements in consideration of marriage through testimonies. The

lower court sustained the objection and dismissed the case, leading to this appeal. The
Court of Appeals reviewed the case and upheld the dismissal, stating that the action did not
seek to enforce a marriage agreement but rather claimed damages.

ISSUE:
WON the plaintiff's claim for damages based on an alleged breach of an agreement for the
marriage between the plaintiff and the defendant's daughter is valid

RULING:
No. The plaintiff's claim is not valid. The court held that the action presented by the plaintiff
was not to enforce any agreement or promise to marry the defendant's daughter. Instead, it
was a claim for damages allegedly incurred by the plaintiff for services rendered in
consideration of the promised marriage. The court found that the case fell within the
prohibition of the Statute of Frauds, which requires certain contracts, including those not to
be performed within one year, to be proved through documentary evidence. Since the
alleged agreement in this case was claimed to be fulfilled four years after its formation, it
should have been proven through documentary evidence rather than testimonial evidence.
Therefore, the court upheld the lower court's decision to dismiss the case.

160 SCRA 821

Hernandez vs. CA

FACTS:
The case involves a dispute over the registration of lots between Fr. Garcia and Hernandez.
Fr. Garcia applied for registration of Lots 1-A, 1-B, and 2 in his name, which adjoined
Hernandez's property. The properties were previously owned by San Buenaventura, and
the boundary between them was established through official monuments set by cadastral
surveyors. Hernandez initially did not oppose the application, but later discovered an
anomaly and filed a petition for review. The Court of First Instance ruled in favor of Fr.

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Garcia for Lots 1-A and 2, while the heirs of Buenaventura were recognized as owners of
Lot 1-B. The Court of Appeals, however, declared Fr. Garcia as the absolute owner through
acquisitive prescription. Hernandez filed a petition to open the decree, arguing that the
application disregarded the existing boundary monuments agreed upon. The trial court and
the Court of Appeals dismissed the petition, citing the unenforceability of the agreement
regarding boundaries under the Statute of Frauds.

ISSUE:
WON Hernandez is entitled to the relief sought.

RULING:
The appealed decision of the Court of Appeals was reversed and set aside and another one
entered, ordering the Register of Deeds of Rizal to register the 220 square meters in
question in favor of petitioner Victorino Hernandez; and to cancel Original Certificate of Title
No. 8664 and issue a new one in favor of the private respondents excluding said 220-
square- meter area belonging to the petitioner. No pronouncement as to cost.

G.R. No. L-24384

Inigo VS State of Maloto

FACTS:
Inigo paid Maloto the purchase price for the house and lot which is the object of the contract
of sale. No deed of sale was executed nor receipt printed. Inigo filed suit to compel the
heirs of Maloto to execute the deed of sale as she was rejected in her demands.

ISSUE:

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Whether or not the contract of sale is unenforceable.

RULING:
Under the civil code, a verbal agreement of sale is unenforceable unless ratified. However,
this rule is only applicable to fully executory contracts not to contracts which are totally or
practically performed. In this case, Inigo paid the purchase price and performed acts of
ownership over the property (house and lot). This shows that the contract was already
consummated. Therefore, the contract of sale is not within the ambit of statute of frauds and
it does not matter whether the receipt or the sale was in writing.

G.R. No. 139495

Mactan Intl Airport Vs. CA

FACTS:
Likewise, defendants Ricardo Inocian filed their separate motions... to dismiss. The RTC
dismissed the complaint on the grounds that the respondents had no cause of action, and
that the action was barred by prescription and laches. Respondents argue that the
properties which were expropriated in connection with the operation of the Lahug Airport
should be reconveyed to the real owners considering that the purpose for which the

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properties were expropriated is no longer relevant in view of the closure of the Lahug
Airport.

ISSUE:
Whether respondents have a right to recover the ownership of the subject properties.
whether their action is barred by prescription or laches.

RULING:
A cause of action is an act or omission of one party in violation of the legal right of the
other. Even assuming that respondents have a right to the subject properties being the
heirs of the alleged real owner Ysabel Limbaga, they still do not have a cause of action
against the petitioner because such right has been foreclosed by prescription, if not by
laches. Respondents' action in the court below is one for reconnaissance based on fraud
committed by Isabel Limbaga in reconstituting the titles to her name. It was filed 38 years
after the trial court... granted the expropriation an action for reconveyance is a legal remedy
granted to a landowner whose property has been wrongfully or erroneously registered in
another's name.

However, such action must be filed within 10 years from the issuance of the title since the...
issuance operates as a constructive notice. Thus, the cause of action which respondents
may have against the petitioner is definitely barred by prescription. trial courts have
authority and discretion to dismiss an action on the ground of prescription when the parties'
pleadings or other facts on record show it to be indeed time-barred In the instant case,
although the complaint did not state the date when the alleged fraud in the reconstitution of
titles was perpetuated, it is however clear from the allegations in the complaint that the
properties sought to be recovered were acquired by the petitioner in Civil Case No. Clearly,
the filing of the action in 1999 is way beyond the ten 10-year prescriptive period.

135 SCRA 645

Aguinaldo vs. Esteban

FACTS:
Plaintiff Juan Aguinaldo, represented by his children Marina and Primitivo Aguinaldo, filed a
complaint against defendants Jose Esteban and Francisca Sarmiento, alleging fraud, deceit, and
misrepresentations, as well as undue pressure, influence, and advantage. The defendants were

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accused of causing the cancellation of Tax Declaration No. 4004, Rizal (1948) in the name of Jose
Aguinaldo and obtaining Tax Declaration No. 10725-Rizal in their own names. The plaintiff claimed
to be the sole successor-in-interest and legal heir of Jose Aguinaldo, who died intestate in October
1960. The plaintiff argued that the defendants had no right to own or possess the disputed property.
The plaintiff also contended that the document in question, a contract titled "Sanglaan ng Isang
Lupa-Canaveral na Patuluyan Ipaaari," bearing Jose Aguinaldo's thumb mark, was not genuine and
contained a forged signature. Furthermore, the plaintiff argued that the contract contained terms
resembling a "pacto comisario," rendering it null and void. The document did not specify a payment
period for the loan nor indicate the duration of the mortgage. The defendants, by withholding
possession of the property and claiming absolute ownership upon the death of Jose Aguinaldo,
asserted that the document was a sale contract rather than a mortgage agreement.

GR 140417
Aznar Brothers Realty vs. Heirs of Aniceto Augusto

FACTS:
This case revolves around Lot No. 4397 originally owned by Aniceto Augusto and Petrona
Calipan. After Aniceto's death, the property remained undivided, as indicated by Tax
Declaration No. 026794 issued to Petrona Calipan. However, this tax declaration was

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subsequently canceled, and new certificates were issued to various individuals, including
Filomeno Augusto, Ciriaco Icoy, Felipe Aying, Zacarias Augusto, Abdon Augusto,
Teoderica Augusto, Pedro Tampus, and Anacleto Augusto. These individuals later sold the
property to Aznar Brothers Realty Company (Aznar Realty) through a Deed of Sale. In
response, the heirs of Aniceto Augusto filed a civil case against Aznar Realty, seeking the
recovery of Lot No. 4397, the nullification of the Deed of Sale, the recognition of their rights
as heirs, the cancellation of the title issued to Aznar Realty, and the issuance of a
restraining order or preliminary injunction. Aznar Realty raised defenses of lack of cause of
action and prescription. The trial court granted a preliminary hearing on these defenses.

ISSUE:
WON the action was barred by prescription?

RULING:
No. The petition is without merit and the claim for reconveyance is imprescriptible, meaning
it is not subject to prescription. The respondents based their action on the nullity of the
Deed of Sale, arguing that the sellers were not the true owners of the land and that their
consent was absent. The trial court should not have dismissed the complaint without
examining the validity of the sale. In cases where the conveyance is claimed to be null and
void from the beginning, prescription does not apply. The doctrine of laches also does not
apply in this case. The Court emphasizes that the imperscriptibility of actions for the
declaration of the inexistence of a contract, as mandated by the Civil Code, prevails over
arguments based solely on equity. The respondents filed their complaint within a
reasonable period of time after being evicted from their land, so they cannot be deemed to
have slept on their rights. The Court of Appeals did not err in setting aside the trial court's
decision and ordering a remand for trial.

G.R. No. L-11240 December 18, 1957

CONCHITA LIGUEZ, petitioner,
vs.
THE HONORABLE COURT OF APPEALS, MARIA NGO VDA. DE LOPEZ, ET AL.,
respondents.

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FACTS:
The case began upon complaint filed by petitioner-appellant against the widow and heirs of
the late Salvador P. Lopez to recover a parcel of 51.84 hectares of land, situated in barrio
Bogac-Linot, of the municipality of Mati, Province of Davao. Plaintiff averred to be its legal
owner, pursuant to a deed of donation of said land, executed in her favor by the late owner,
Salvador P. Lopez, on 18 May 1943. The defense interposed was that the donation was
null and void for having an illicit causa or consideration, which was the plaintiff's entering
into marital relations with Salvador P. Lopez, a married man; and that the property had
been adjudicated to the appellees as heirs of Lopez by the court of First Instance, since
1949.
the Court of Appeals found that when the donation was made, Lopez had been living with
the parents of appellant for barely a month; that the donation was made in view of the
desire of Salvador P. Lopez, a man of mature years, to have sexual relations with appellant
Conchita Liguez; that Lopez had confessed to his love for appellant to the instrumental
witnesses, with the remark that her parents would not allow Lopez to live with her unless he
first donated the land in question; that after the donation, Conchita Liguez and Salvador P.
Lopez lived together in the house that was built upon the latter's orders, until Lopez was
killed on July 1st, 1943, by some guerrillas who believed him to be pro-Japanese.

It was also ascertained by the Court of Appeals that the donated land originally belonged to
the conjugal partnership of Salvador P. Lopez and his wife, Maria Ngo; that the latter had
met and berated Conchita for living maritally with her husband, sometime during June of
1943; that the widow and children of Lopez were in possession of the land and made
improvements thereon; that the land was assessed in the tax rolls first in the name of Lopez
and later in that of his widow.; and that the deed of donation was never recorded.

Upon these facts, the Court of Appeals held that the deed of donation was inoperative, and
null and void (1) because the husband, Lopez, had no right to donate conjugal property to
the plaintiff appellant; and (2) because the donation was tainted with illegal cause or
consideration, of which donor and donee were participants.

ISSUE:
Whether or not the Court of First Instance as well as the Court of Appeals erred in holding
the appellant guilty.

RULING:
Yes. The Court of Appeals erred in applying to the present case the pari delicto rule. First,
because it can not be said that both parties here had equal guilt when we consider that as
against the deceased Salvador P. Lopez, who was a man advanced in years and mature
experience, the appellant was a mere minor, 16 years of age, when the donation was
made; that there is no finding made by the Court of Appeals that she was fully aware of the
terms of the bargain entered into by and Lopez and her parents; that, her acceptance in the
deed of donation (which was authorized by Article 626 of the Old Civil Code) did not
necessarily imply knowledge of conditions and terms not set forth therein; and that the
substance of the testimony of the instrumental witnesses is that it was the appellant's
parents who insisted on the donation before allowing her to live with Lopez. These facts are
more suggestive of seduction than of immoral bargaining on the part of appellant. It must
not be forgotten that illegality is not presumed, but must be duly and adequately proved.
In the second place, the rule that parties to an illegal contract, if equally guilty, will not be
aided by the law but will both be left where it finds them, has been interpreted by this Court

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as barring the party from pleading the illegality of the bargain either as a cause of action or
as a defense.

The situation of the children and forced heirs of Lopez approximates that of the widow. As
privies of their parent, they are barred from invoking the illegality of the donation. But their
right to a legitime out of his estate is not thereby affected, since the legitime is granted them
by the law itself, over and above the wishes of the deceased. Hence, the forced heirs are
entitled to have the donation set aside in so far as in officious: i.e., in excess of the portion
of free disposal (Civil Code of 1889, Articles 636, 654) computed as provided in Articles 818
and 819, and bearing in mind that "collationable gifts" under Article 818 should include gifts
made not only in favor of the forced heirs, but even those made in favor of strangers, as
decided by the Supreme Court of Spain in its decisions of 4 May 1899 and 16 June 1902.
So that in computing the legitimes, the value of the property to herein appellant, Conchita
Liguez, should be considered part of the donor's estate. Once again, only the court of origin
has the requisite date to determine whether the donation is inofficious or not.

With regard to the improvements in the land in question, the same should be governed by
the rules of accession and possession in good faith, it being undisputed that the widow and
heirs of Lopez were unaware of the donation in favor of the appellant when the
improvements were made.

G.R. No. L-27841 October 20, 1978

MARIA ENCARNACION CASTILLO, ELISEA GALVAN, and PATROCINIO GALVAN,

plaintiffs-appellants,

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vs.
JOSEFA GALVAN, EMILIO SAMSON, and NATIVIDAD GALVAN, defendants-appellees.

FACTS:

The plaintiffs therein alleged that Paulino Galvan, during his lifetime, was the registered
owner of an undivided one- half (1/2) interest over two parcels of land, known as Lot Nos.
4541 and 4542 of the Dagupan Cadastre and covered by OCT Nos. 38131 and 39317.
respectively, of the Register of Deeds of Dagupan City. The other undivided half is owned
by his two daughters by a first marriage. herein defendants Josefa Galvan and Natividad
Galvan. On these lots, which are contiguous, is built the family home. On February 10,
1961, Paulino Galvan.

In the office of the Register of Deeds of Dagupan City, they were surprised to find a deed of
sale, signed by the late Paulino Galvan and the plaintiff, Maria Encarnacion Castillo,
whereby they had purportedly the one-half undivided portion of Paulino Galvan over said
lots in favor of defendants. When apprised of the existence of a deed of sale, plaintiff Maria
Encarnacion Castillo remembered that way back in 1953, she and her husband Paulino
Galvan were made to sign a certain document by Josefa Galvan "upon the fraudulent
misrepresentation that the said document was only for the purpose of enabling them, the
co-owners of the parcels of land in question, to have their separate tax declarations for the
respective portions owned by them so that they can pay their respective real estate taxes
separately, the said spouses not knowing that the said document is a deed of sale for which
no consideration was even paid."

ISSUE:

Whether or not the trial court erred in admitting the amended answer which incorporated a
defense of prescription not heretofore pleaded in the original answer.

RULING:

Yes. The plaintiffs have apparently ignored the rule that a party may amend his pleading
once as a matter of course at any time before a responsive pleading is served, or, if the
pleading is one to which no responsive pleading is permitted and the action has not been
placed upon the trial calendar, he may so amend it at any time within ten (10) days after it is
served. After the case is set for hearing, substantial amendments may be made only upon
leave of court. But such leave may be refused if it appears to the court that the motion was
made with intent to delay the action or that the cause of action or defense is substantially
altered.

The allegations of the complaint show, however, that the plaintiffs' action is to declare void
and inexistent the deed of sale executed by Paulino Galvan and Encarnacion Castillo on
August 3. 1955 in favor of Josefa and Natividad Galvan, upon the grounds that (a) there is
fraud in securing the signatures of the vendors in said deed of sale: and (b) there was no
consideration given at the time of the transaction. In other words, the plaintiffs are seeking a
judicial declaration that the deed of sale in question is void ab initio, which action is
inprescriptible. The trial court erred, therefore, in dismissing the complaint for the reasons
stated.

G.R. No. 165088, March 17, 2006

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POTENCIANO RAMIREZ, Petitioner vs. MA. CECILIA RAMIREZ, Respondent

Facts:
Petitioner Potenciano Ramirez sued respondent Ma. Cecilia Ramirez for the revocation of a
Deed of Donation, a Waiver of Possessory Rights, and of TCT Nos. T-5618 and T-5617.
Petitioner claimed that the Deed of Donation and Waiver of Possessory Rights gave
respondent ownership of TCT Nos. T-4575 and T-4576's land and improvements.
Respondent utilized the Deed of Donation to have TCT Nos. T-4575 and T-4576 cancelled
and TCT Nos. T-5618 and T-5617 issued in her name. On January 29, 1993 and October
24, 1995, petitioner and his wife Dolores Ramirez reportedly signed the Deed of Donation
and Waiver of Possessory Rights. Dolores died on April 5, 1991, thus she couldn't have
signed the challenged papers. Petitioner disputed the other signatures on the supposedly
his papers and said he didn't want to transfer the assets to respondent. Respondent said in
her Answer that her father, petitioner, would not have sued if he hadn't remarried at 84. The
Deed of Donation and Waiver of Possessory Rights was her father's idea to save money on
publication and inheritance taxes. The RTC found Dolores' Deed of Donation signature to
be faked but her Waiver of Possessory Rights signature to be genuine. The petitioner's
signatures on both papers were authentic, too.

Issues:
Whether or not the petitioner and respondent are in pari delicto.?

Ruling:
YES. The court held both petitioner and respondent are, therefore, in pari delicto. Neither
one may expect positive relief from the courts from their illegal acts and transactions. As
one of the modes of acquiring ownership, donations are governed by Title 3, Book III, of the
Civil Code. Donations inter vivos are additionally governed by the general provisions on
obligations and contracts in all that is not determined by the title governing donations.5
Hence, the rule on pari delicto under the general provisions of contracts is applicable to the
present case.

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G.R. No. 47362. December 19, 1940

Villaroel vs. Estrada, 71 Phil 140 (1940)

Facts:
Alejandra F. Callao, the mother of the defendant-appellant Juan F. Villaroel (Juan),
obtained a loan of PhP 1,000.00 from spouses Mariano and Severina Estrada, the sole heir
of whom is the plaintiff-appellee Bernardino Estrada (Bernardino). Alejandra F. Callao, as
well as her husband’s Mariano and Severina Estrada, died, leaving Juan and Bernardino as
their heirs. Juan signed a contract on August 9, 1930, eighteen (18) years later, agreeing to
pay Bernardino PhP 1,000.00 with 12% interest each year. The amount of PhP 1,000.00 for
which this obligation was constituted was recognized as the same debt that had previously
been dictated from Juan's mother (original debtor) to Bernardino's parents (original
creditor). The Laguna Court of First Instance (CFI) ruled that Juan must pay Bernardino the
sought amount plus legal interest at the rate of 12% per year beginning August 9, 1930 until
the case is resolved. This decision was appealed.

Issues:
Whether Estrada has the right to collect even though the initial debt has already been
prescribed?

Ruling:
YES. In general, once a debt has already been prescribed, it cannot be recovered. In the
instance at hand, however, there was already a novation when Villarroel decided to restart
his mother-in-law's responsibility. As a result, he can no longer use prescription as a
defense.

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Tuazon, Patricia Marie D.
1 JD

G.R. No. 6274

Fisher vs. Robb

FACTS:
Defendant John C. Robb was told by the board of directors of the Philippine Greyhound
Club, Inc. to make a business trip to Shanghai to study the operation of a dog racing
course. In Shanghai, defendant met plaintiff A.O. Fisher who was a manager of a dog
racing course. Plaintiff upon knowing defendant’s purpose of his trip, became interested in
the Philippine Greyhound Club and asked defendant if he could be one of the stockholders.

Defendant answered in affirmative which thereupon filed a blank subscription and sent
Greyhound Club Php3,000 in payment of the first installment of his subscription. Upon
receiving a call from the said club, he paid the second installment amounting to Php2,000.
Due to manipulations of those who control the said club and during defendant’s absence,
the company was changed to “Philippine Racing Club.” Defendant endeavored the
investments of those who subscribed, particularly of that of plaintiff. Defendant, through
sending a letter, assured plaintiff for any loss which he might suffer in connection with
Philippine Greyhound Club in the same that he could not expect anyone to reimburse him
for his own losses which were more than that of plaintiff.

ISSUE:
WON moral obligation will sustain an express executory promise.

RULING:
NO. Defendant, although morally responsible because of the failure of the enterprise, is not
a consideration under Article 1261 of the Civil Code as an essential element for the legal
existence for an onerous contract which could bind the promisor to comply with his promise.

Article 1261 states, “there is no contract unless the following requisites exists: consent of
the contracting parties; definite object; consideration.” In the present case, it does not
appear that plaintiff consented to the said form of reimbursement. The first requisite of 1261
is lacking.

With regards of the third requisite, it is now a well-established rule that a mere moral
obligation arising from wholly ethical motives not connected with any legal obligation will not
furnish a consideration from an executory promise.

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Tuazon, Patricia Marie D.
1 JD

34 SCRA 337

Kalalo vs. Luz

FACTS:

On November 17, 1959, Octavio Kalalo and Alfredo Luz entered into an agreement for
engineering design services in exchange for a fee. Kalalo sent Luz a statement of account
on December 11, 1961, indicating a balance of P59,505 for the services rendered. Luz
responded on May 18, 1962, providing a summary of the fees owed and a check for
P10,861.08. However, Kalalo rejected the check, considering it insufficient to settle the
remaining balance. Subsequently, on August 10, 1962, Kalalo filed a complaint with four
causes of action, including the outstanding fees, damages, and attorney's fees. The trial
court ruled in favor of Kalalo, and Luz appealed directly to the Supreme Court, focusing
solely on questions of law.

ISSUE:

Whether or not the rate of exchange of dollar to peso are those at the time of the payment
of the judgment or at the time when the research institute project became due and
demandable.

RULING:

Luz became obligated to pay Kalalo the amount of US$28,000 on August 25, 1961, which
was after the implementation of RA 529 on June 16, 1950. Therefore, the provision in the
law that stipulates payment at the prevailing exchange rate at the time of incurring the
obligation cannot be applied. RA 529 does not specify the exchange rate for obligations
incurred after its enactment, thus the applicable exchange rate should be the one prevailing
at the time of payment. This perspective is supported by the Court's decision in Engel vs.
Velasco & Co. The trial court made no mistake in determining that the exchange rate should
be based on the prevailing rate at the time of payment.

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Tuazon, Patricia Marie D.
1 JD

Manila Lodge No. 761 vs CA, 73 SCRA 168 (1976)

G. R. No. L-41001 September 30, 1976

FACTS:

In 1905, Act No. l360 authorized the City of Manila to reclaim a portion of Manila Bay for a
hotel site. The area was leased to a responsible person or corporation for ninety-nine years.
In 1911, the City applied for registration, but registration was subject to incumbrances and
contracts. On July 13, 1911, the City of Manila cancelled 5,543.07 square meters of the
reclaimed area to Manila Lodge No. 761, Benevolent and Protective Order of Elks of the
U.S.A., resulting in TCT No. 2195 2. Manila Lodge No. 761 claims trial court errors in
holding property not patrimonial City of Manila property, while Tarlac Development
Corporation argues it was erred in finding the property a public park.

ISSUE:

Whether the City of Manila is estopped from questioning the validity of the sale it executed
conveying the subject property to the Manila Lodge No. 761, BPOE.

RULING:

Manila Lodge No. 761, BPOE, claims that Act No. 1360 and Act No. 1657 did not grant the
City of Manila the authority to sell the property at the south end of the reclaimed area. The
Court of Appeals argues that Act No. 1360 authorized the City of Manila to construct the
Luneta extension, which was converted into patrimonial property. The property was not
included in Luneta Park under Plan No. 30 or considered part of Luneta National Park by
President Ramon Magsaysay or President Ferdinand E. Marcos. Tarlac Development
Corporation argues it was erred in finding the property a public park, nullifying sale, and not
holding the plaintiff-appellant entitled to recover damages.

Courts must interpret a statute's general legislative intent by considering its four corners.
Act No. 1360, enacted in 1905 and amended in 1907, authorized the construction of
bulkheads or sea walls for an extension to the Luneta. It also adopted Architect D. H.
Burnham's general outline for the Luneta's improvement. The City of Manila was authorized
to lease reclaimed land for a hotel, with the Municipal Board advertising for sale. The
construction was funded by the City of Manila, but the area would be filled with material
dredged from Manila Bay at the expense of the Insular Government.

The reclaimed area, an extension of the Luneta, is declared property of the City of Manila. It
can be public or private ownership. Act No. 1360 requires authorization for setting aside a
hotel site and leasing it, preventing the City from leasing or selling the northern portion. The
northern portion is considered patrimonial property, and the title reverts if the grantee fails
to comply.

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Tuazon, Patricia Marie D.
1 JD

G.R. No. L-23072. November 29, 1968

Miguel vs. Catalino, 26 SCRA 234 (1969)

FACTS:
In 1962, Simeon, Emilia, and Marcelina Miguel sued Florendo Catalino for the recovery of
land in question. The plaintiffs claimed they were the children and heirs of the original
registered owner and claimed the defendant unlawfully took possession without their
knowledge or consent. The court dismissed the complaint and declared the defendant the
rightful owner. The Supreme Court is required to review the findings of fact, and the
appellant’s second and third assignments of error are dismissed.

The appellants challenge the admissibility of Exhibit “3” in a judicial proceeding, arguing
that it is ultra vires due to the lack of judicial powers of barrio councils. The exhibit is argued
to be unconstitutional and cannot be used as evidence for ascertaining ownership and
possession.

ISSUE:
Whether the suit was barred by laches.

RULING:

YES. The appellants argue that the 1928 sale of land by Bacaquio to Catalino Agyapao, the
defendant's father, is null and void due to lack of executive approval. However, the Public
Land Act does not nullify the transaction, as there is no finding or evidence that the land
was acquired from the public domain. The sale was technically invalid, and Bacaquio
remained the land owner until his death in 1943, when his title passed on to his heirs.

The judgment in favor of defendant-appellee Florendo Catalino must be sustained, as the

appellants remained inactive for over 34 years, despite the invalidity of their sale to their
father, Catalino Agyapao. The court held that the plaintiffs-appellants' action must be
considered barred, as courts cannot favor parties who intentionally induce others to spend
time, effort, and expense on land, only to claim title when the possessor's efforts and land
values offer an opportunity to make easy profit. The court found that the equitable defense
of laches lies in favor of the defendant, as the original owner's right to recover possession
of the property and title has been converted into a stale demand.

The appellant argues that laches applies independently of prescription, as prescription

focuses on delay and time, while laches is a question of inequity of allowing a claim to be
enforced. Laches applies in equity, while prescription is based on fixed time. The appellant,
Grace Ventura, faces even worse circumstances than her co-heirs and co-plaintiffs due to
her affidavit of transfer and lower Court's finding that she was paid P300.00 for the land in
1949. This sale, which was a quitclaim, cannot be contested as it does not show Grace
Ventura is a non-christian inhabitant like her father.

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Tuazon, Patricia Marie D.
1 JD

G.R. L-27088
Heirs of Lacamen vs. Heirs of Laruan

FACTS:

Petition for review by certiorari of a decision of the Honorable Court of Appeals. "...
declaring the contract of sale between Lacamen and Laruan null and void [for lack of
approval of the Director of the Bureau of Non-Christian Tribes)….." Petitioners-appellants
are the surviving heirs of Batiog Latamen, while respondents-appellants are the heirs of
Laruan. Laruan executed a Deed of Sale in favor of Batiog Lacamen. Laruan delivered the
certificate of title to Lacamen. Thereupon, Lacamen entered in possession and occupancy
of the land without first securing the corresponding transfer certiticate of title in his name.
He introduced various improvements and paid the proper taxes. His possession was open,
continuous, peacetul, and adverse Later on, after the death of Laruan, his heirs discovered
that Laruan's heirs were able to obtain a new owner's certificate of title. Hence, they sued
Laruan's heirs for reconveyance. The Trial Court rendered a decision in favor of the heirs of
Laruan whose decision was affirmed by the CA.

ISSUE:

WON estoppel by laches applies?

RULING:

Laruan's sale of the subject lot to Lacamen could have been valid were it not for the sole
fact that it lacked the approval of the Bureau of Non-Christian Tribes considering that there
was impressed upon its face full faith and credit after it was notarized. However,
notwithstanding the invalidity of the sale, the fact that when the Lacamens succeeded to the
estate of their father, the Larans kept silent, never claiming that the lot is their own. Even
granting that no prescription lies against their father's record title, their inaction for almost 30
years commands the imposition of laches. Hence, the Lacamens were declared as the
owners of the land

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Tuazon, Patricia Marie D.
1 JD

G.R. No. L-20449

Favian vs. Fabian

FACTS:

Pablo Fabian bought from the Philippine Government lot 164 of the Friar Lands Estate in
Muntinlupa, Rizal, of an area 1 hectare, 42 acres and 80 centares, for the sum of
P112payable in installments. By virtue of this purchase, he was issued sale certificate 547.
Hedied on August 2, 1928, survived by four children, namely, Esperanza, Benita I, Benita II,
1and Silbina. Fabian, married to Feliciano Landrito, and to Teodora Fabian, married to
Francisco del Monte, for the sum of P120. The vendees spouses forthwith in 1929 took
physical possession thereof, cultivated it, and appropriated the produce therefrom (and
concededly have up to the present been appropriating the fruits from the land exclusively
for themselves).On the basis of a partial stipulation of facts together with annexes, the
lower court rendered judgment on June 28, 1962, declaring that the defendants spouses
had acquired a valid and complete title to the property by acquisitive prescription, and
accordingly dismissed the complaint, with costs against the plaintiffs.

ISSUE:
Whether or not may laches constitute a bar to an action to enforce a constructive trust?

RULING:
Upon the undisputed facts in the case at bar, not only had laches set in when the
appellants instituted their action for, reconveyance in 1960, but as well their right to enforce
the constructive trust had already prescribed. When respondents executed the
aforementioned deed of extra-judicial settlement stating therein that they are the sole heirs
of the late Marcelo de Guzman, and secured new transfer certificates of title in their own
name, they thereby excluded the petitioners from the estate of the deceased,
and consequently, set up a title adverse to them. And this is why petitioners have brought
this action for the annulment of said deed upon the ground that the same is tainted with
fraud. Article 1456 of the new Civil Code, while not retroactive in character, merely
expresses a rule already recognized by our courts prior to the Code’s promulgation. The
express trusts disable the trustee from acquiring for his own benefit the property
committed to his management or custody, at least while he does not openly repudiate the
trust, and makes such repudiation known to the beneficiary orcestuique trust.

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Tuazon, Patricia Marie D.
1 JD

G.R. No. L-36359

FELIX BUCTON AND NICANORA GABAR BUCTON, Petitioners, v. ZOSIMO GABAR,
JOSEFINA LLAMOSO GABAR AND THE HONORABLE COURT OF
APPEALS, Respondents.

FACTS:
This action for specific performance prays, inter-alia, that defendants-spouses be ordered
to execute in favor of plaintiffs a deed of sale of the western half of a parcel of land having
an area of 728 sq. m. covered by TCT No. II (from OCT No. 6337) of the office of the
Register of Deeds of Misamis Oriental.

Plaintiffs' evidence tends to show that sometime in 1946 defendant Josefina Llamoso
Gabar bought the above-mentioned land from the spouses Villarin on installment basis, to
wit, P500 down, the balance payable in installments. Josefina entered into a verbal
agreement with her sister-in-law, plaintiff Nicanora Gabar Bucton, that the latter would pay
one-half of the price (P3,000) and would then own one-half of the land. Pursuant to this
understanding Nicanora on January 19, 1946 gave her sister-in-law Josefina the initial
amount of P1,000, for which the latter signed a receipt marked as Exhibit A.

Subsequently, on May 2, 1948, Nicanora gave Josefina P400. She later signed a receipt
marked as Exhibit B.

On July 30, 1951 plaintiffs gave defendants P1,000 in concept of loan, for which defendant
Zosimo Gabar signed a receipt marked as Exhibit E.

In January, 1947 the spouses Villarin executed the deed of sale of the land above
mentioned in favor of defendant Josefina Llamoso Gabar, Exhibit I, to whom was issued on
June 20, 1947 TCT No. II, canceling OCT No. 6337. Exhibit D.

Plaintiffs then sought to obtain a separate title for their portion of the land in question.
Defendants repeatedly declined to accommodate plaintiffs. Their excuse: the entire land
was still mortgaged with the Philippine National Bank as guarantee for defendants' loan of
P3,500 contracted on June 16, 1947: Exhibit D-1.

Plaintiffs continued enjoying their portion of the land, planting fruit trees and receiving the
rentals of their buildings. In 1953, with the consent of defendants (who were living on their
portion), plaintiffs had the entire land surveyed and subdivided preparatory to obtaining their
separate title to their portion. After the survey and the planting of the concrete monument’s
defendants erected a fence from point 2 to point 4 of the plans, Exhibit I, which is the
dividing line between the portion pertaining to defendants, Exhibit I-1, and that pertaining to
plaintiffs, Exhibit I-2.

ISSUE:
Whether or not the action to quiet the title is imprescriptible.
RULING:

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Tuazon, Patricia Marie D.
1 JD

No, the real and ultimate basis of petitioners' action is their ownership of one-half of the lot
coupled with their possession thereof, which entitles them to a conveyance of the property.
In Sapto, et al. v. Fabiana,3 this Court, speaking thru Mr. Justice J.B.L. Reyes, explained
that, under the circumstances no enforcement of the contract is needed, since the delivery
of possession of the land sold had consummated the sale and transferred title to the
purchaser, and that, actually, the action for conveyance is one to quiet title, i.e., to remove
the cloud upon the appellee's ownership by the refusal of the appellants to recognize the
sale made by their predecessors. We held therein that "... it is an established rule of
American jurisprudence (made applicable in this jurisdiction by Art. 480 of the New Civil
Code) that actions to quiet title to property in the possession of the plaintiff are
imprescriptible (44 Am. Jur. p. 47; Cooper vs. Rhea, 20 L.R.A. 930; Inland Empire Land
Co. vs. Grant County, 138 Wash. 439, 245 Pac. 14).
The prevailing rule is that the right of a plaintiff to have his title to land quieted, as against
one who is asserting some adverse claim or lien thereon, is not barred while the plaintiff or
his grantors remain in actual possession of the land, claiming to be owners thereof, the
reason for this rule being that while the owner in fee continues liable to an action,
proceeding, or suit upon the adverse claim, he has a continuing right to the aid of a court of
equity to ascertain and determine the nature of such claim and its effect on his title, or to
assert any superior equity in his favor. He may wait until his possession is disturbed or his
title in attacked before taking steps to vindicate his right. But the rule that the statute of
limitations is not available as a defense to an action to remove a cloud from title can only be
invoked by a complainant when he is in possession. One who claims property which is in
the possession of another must, it seems, invoke remedy within the statutory period. (44
Am. Jur., p. 47)

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