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CIVIL LAW REVIEW 2 DIGESTS ON CONTRACTS #23 ODYSSEY PARK, INC vs.

HONORABLE COURT OF APPEALS and UNION BANK OF THE PHILIPPINES (Pearl) Facts of the Case Bancom Development Corporation and Odyssey Park, Inc., entered into a Contract to Sell, whereby the former agreed to sell to the latter the parcel of land with an area of 8,499 square meters situated in Baguio City and the structure constructed thereon identified as the Europa Clubhouse. Subsequently, in a document entitled "Separate Deed of Conveyance", Bancom confirmed and acknowledged that it has ceded, transferred and conveyed in favor of Union Bank all the rights, title and interest it has over the property. The purchase price of P3,500,000.00 was, per Section 2 of the Contract to Sell, with the agreement that Sec. 5: In the event Odyssey fails to pay any portion of the purchase price of the Property or the interest and service charge thereon as and when it falls due, or otherwise fails to comply with or violate any of the provisions of this Contract, Bancom may at its absolute discretion cancel and rescind this Contract and declare the same as null, void and no further force and effect by serving on Odyssey a written notice of cancellation and rescission thirty (30) days in advance. In the event this Contract is cancelled and rescinded as provided in this Section, all the amounts which the Odyssey may have paid to Bancom pursuant to and in accordance with this Contract shall be forfeited in favor of Bancom as rentals for the use and occupancy of the Property and as penalty for the breach and violation of this Contract. Furthermore, all the improvements which Odyssey may have introduced on the Property shall form part thereof and belong to Bancom without right of reimbursements to Odyssey; Provided, that Bancom may at its absolute discretion instead require Odyssey to remove such improvements from the Property at expense of Odyssey. Mr. Vicente A. Araneta, President of Europa Condominium Villas, Inc., wrote Union Bank, a letter stating that the Europa Center was reported to prospective buyers as well as government authorities as part of common areas and amenities under the condominium concept of selling to the public and for that reason wants to make it of record that Europa Condominium Villas, Inc., questions the propriety of the contract to sell. Odyssey, through its Chairman of the Board, Mr. Carmelito A. Montano, wrote Bancom a letter stating that it acknowledges receipt of a copy of the letter-protest from the Europa Condominium Villas, Inc., and that in the meantime that there is a question on the propriety of the sale, it is stopping/withholding payments of the amortization. On the same date Bancom, through its Senior Vice-President, wrote Europa Condominium Villas, Inc. a letter explaining that the Europa Center and the parcel of land on which it is built are not part of the Europa Condominium Villas, Inc. Union Bank wrote Odyssey Park a letter demanding payment of the overdue account of inclusive of interest and service charges, otherwise the contract to sell would be cancelled and rescinded. Odyssey wrote Union Bank a letter proposing a manner of settlement which Union Bank answered asking for more details of the proposal. The series of communications led to the drafting of a Memorandum of Agreement which was not, however, signed by the parties. Union Bank, through counsel, wrote Odyssey Park a letter formally rescinding and/or cancelling the contract to sell and demanding that Odyssey vacate and peaceably surrender possession of the premises. For failure of Odyssey to vacate, Union Bank filed a case for illegal detainer and damages. Odyssey, on the other hand, filed this case for "Declaration of the Nullity of the Rescission of the Contract to Sell With Damages" LC: Contract to Sell have been properly rescinded; dismissing the complaint for being frivolous and unfounded CA: affirmed; MR denied Issue: Whether or not the rescission of the contract to sell requires a cancellation or rescission of the contract by means of a notarial act. A mere letter, or short of such a notarial act, would be utterly deficient.

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CIVIL LAW REVIEW 2 DIGESTS ON CONTRACTS Held: Contract to Sell have been properly rescinded In a contract to sell, the payment of the purchase price is a positive suspensive condition, the failure of which is not a breach, casual or serious, but a situation that prevents the obligation of the vendor to convey title from acquiring an obligatory force. The breach contemplated in Article 1191 of the Code is the obligor's failure to comply with an obligation already extant, not a failure of a condition to render binding that obligation. In any event, the failure of petitioner to even complete the downpayment stipulated in the contract to sell puts Odyssey far from good stead in urging that there has been substantial compliance with the contract to sell within the meaning of Article 1191 of the Code. Art. 1592. In the sale of immovable property, even though it may have been stipulated that upon failure to pay the price at the time agreed upon the rescission of the contract shall of right take place, the vendee may pay, even after the expiration of the period, as long as no demand for rescission of the contract has been made upon him either judicially or by a notarial act. After the demand, the court may not grant him a new term. It is clear that the above provisions contemplate neither a conditional sale nor a contract to sell but an absolute sale. What must instead be held to rule in the case at bar is the agreement of the parties themselves. Section 5 of their contract to sell reads: Sec. 5: In the event Odyssey fails to pay any portion of the purchase price of the Property or the interest and service charge thereon as and when it falls due, or otherwise fails to comply with or violate any of the provisions of this Contract, Bancom may at its absolute discretion cancel and rescind this Contract and declare the same as null, void and no further force and effect by serving on Odyssey a written notice of cancellation and rescission thirty (30) days in advance. In the event this Contract is cancelled and rescinded as provided in this Section, all the amounts which the Odyssey may have paid to Bancom pursuant to and in accordance with this Contract shall be forfeited in favor of Bancom as rentals for the use and occupancy of the Property and as penalty for the breach and violation of this Contract. Furthermore, all the improvements which Odyssey may have introduced on the Property shall form part thereof and belong to Bancom without right of reimbursements to Odyssey; Provided, that Bancom may at its absolute discretion instead require Odyssey to remove such improvements from the Property at expense of Odyssey. It is a familiar doctrine in the law on contracts that the parties are bound by the stipulations, clauses, terms and conditions they have agreed to, the only limitation being that these stipulations, clauses, terms and conditions are not contrary to law, morals, public order or public policy. Not being repugnant to any legal proscription, the agreement entered into by the parties herein involved must be respected and held to be the law between them.

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CIVIL LAW REVIEW 2 DIGESTS ON CONTRACTS #24 GREGORIO FULE vs. CA, NINEVETCH CRUZ and JUAN BELARMINO G.R. No. 112212 March 2, 1998 (Karl) Facts of the Case Gregorio Fule, a banker by profession and a jeweler at the same time, acquired a 10-hectare property in Tanay, Rizal (hereinafter "Tanay property"), which is covered by a TCT formerly under the name of Fr. Antonio Jacobe. Fr. Jacobe mortgaged it earlier to the Rural Bank of Alaminos (the Bank), Laguna, Inc. to secure a loan in the amount of P10k, but was later foreclosed as he defaulted. Fule, as the Banks corporate secretary, asked Remelia Dichoso and Oliva Mendoza to look for a buyer who might be interested in the Tanay property and they found Dr. Ninevetch Cruz. Dr. Cruz owned a pair of emerald-cut diamond earrings which caught the interest of petitioner (as they were earlier appraised as genuine). Dr. Cruz, however, declined several of petitioner's offers to buy the jewelry at various amounts. Subsequently, however, negotiations for the barter of the jewelry and the Tanay property ensued. As Dr. Cruz had already agreed to the proposed barter, petitioner went to Prudential Bank once again to take a look at the jewelry. Petitioner met Atty. Belarmino at the latter's residence to prepare the documents of sale. Dr. Cruz herself was not around but Atty. Belarmino was aware that she and petitioner had previously agreed to exchange a pair of emerald-cut diamond earrings for the Tanay property. Atty. Belarmino accordingly caused the preparation of a deed of absolute sale while petitioner and Dr. Cruz attended to the safekeeping of the jewelry. The next day, petitioner, together with Dichoso and Mendoza, arrived at the residence of Atty. Belarmino to finally execute a deed of absolute sale. Petitioner signed the deed and gave Atty. Belarmino the amount of P13.7k for necessary expenses in the transfer of title over the Tanay property. Petitioner also issued a certification to the effect that the actual consideration of the sale was P200k and not P80k as indicated in the deed of absolute sale; which was aimed at minimizing capital gains tax. Since the jewelry was appraised only at P160k, the parties agreed that the balance of P40,000.00 would just be paid later in cash. Upon getting the jewelry at the bank, petitioner took the jewelry, went near the electric light at the bank's lobby, held the jewelry against the light and examined it for 10 to 15 minutes. After a while, Dr. Cruz asked, "Okay na ba iyan?" Petitioner expressed his satisfaction by nodding his head. However, at about 8 in the evening, petitioner went to Atty. Belarminos house complaining that the jewelry was fake; even using a tester to prove the same. The other two, Dichoso and Mendoza, went to the residence of Dr. Cruz to borrow her car so that, with Atty. Belarmino, they could register the Tanay property. As petitioner was in his house, Atty. Belarmino instructed Dichoso to go there. Believing that petitioner had finally agreed to give them half of the pair of earrings, as was earlier agreed upon, Dichoso went, only to find petitioner already demonstrating with a tester that the earrings were fake. Accused that they deceived the petitioner, Dichoso and Mendoza denied; and countered that he could not have been fooled because of his vast experience regarding jewelry. Petitioner nonetheless took back the US$300.00 and jewelry he had given them. Thereafter, the group went to the house of Macario Dimayuga, a jeweler, to have the earrings tested. Dimayuga, after taking one look at the earrings, immediately declared them counterfeit. At around 9:30 p.m., petitioner went to one Atty. Reynaldo Alcantara complaining about the fake jewelry; and upon advise of the latter, went to the police station to complain. Petitioner thus filed a complaint before the RTC-San Pablo against private respondents praying that the contract of sale over the Tanay property be declared null and void on the ground of fraud and deceit. The lower court ruled against petitioner, taking into account that Dr. Cruz indeed delivered the jewelries as consideration, the close inspection of the jewelry, the lapse of 2 hours before the fakery was complained of (which was considered as unreasonable delay), and that petitioner was engaged in the jewelry business. Further, the RTC ruled that all the elements of a valid contract under Article 1458 of the Civil Code were present, namely: (a) consent or meeting of the minds; (b) determinate subject matter, and (c) price certain in money or its equivalent. Even if principally a barter, the elements were present because of the simultaneous delivery of the land (through the deed of sale, which was symbolic delivery) and the jewelries. The RTC also found bad faith on the part of the petitioner and awarded damages. Upon appeal to the CA, the latter affirmed the decision of the RTC. Petitioner went to the SC.

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CIVIL LAW REVIEW 2 DIGESTS ON CONTRACTS Issue: WON the CA erred in upholding the validity of the contract of barter or sale. Ruling: NO! It did not. The Civil Code provides that contracts are perfected by mere consent. From this 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. A contract of sale is perfected at the moment there is a meeting of the minds upon the thing which is the object of the contract and upon the price. Being consensual, a contract of sale has the force of law between the contracting parties and they are expected to abide in good faith by their respective contractual commitments. Article 1358 of the Civil Code which requires the embodiment of certain contracts in a public instrument, is only for convenience, and registration of the instrument only adversely affects third parties; as they are merely formal requirements aimed at their protection. Non-compliance therewith does not adversely affect the validity of the contract; and neither does it affect the contractual rights and obligations of the parties thereunder. It is evident from the facts of the case that there was a meeting of the minds between petitioner and Dr. Cruz. As such, they are bound by the contract unless there are reasons or circumstances that warrant its nullification. Contracts that are voidable or annullable, even though there may have been no damage to the contracting parties are: (1) those where one of the parties is incapable of giving consent to a contract; and (2) those where the consent is vitiated by mistake, violence, intimidation, undue influence or fraud. Petitioner alleges fraud based on the purportedly counterfeit nature of the jewelry. There is fraud when, through the insidious words or machinations of one of the contracting parties, the other is induced to enter into a contract which, without them, he would not have agreed to. Here, no evidence was presented manifesting that private respondents employed such insidious words or machinations. On the contrary, Dr. Cruz did not initially accede to petitioner's proposal to buy the said jewelry. Rather, it appears that it was petitioner, through his agents, who led Dr. Cruz to believe that the Tanay property was worth exchanging for her jewelry as he represented that its value was P400,000.00 or more than double that of the jewelry which was valued only at P160,000.00. If indeed petitioner's property was truly worth that much, it was certainly contrary to the nature of a businessman-banker like him to have parted with his real estate for half its price. In short, it was in fact petitioner who resorted to machinations to convince Dr. Cruz to exchange her jewelry for the Tanay property. Mistake cannot be made a ground as it was not alleged. Even if there was mistake, mistake must refer to the substance of the thing that is the object of the contract, or to those conditions which have principally moved one or both parties to enter into the contract. An example of mistake as to the object of the contract is the substitution of a specific thing contemplated by the parties with another. Here, it was insinuated that the jewelries were of inferior quality, or that they had only Russian diamonds in it; which insinuation was, however, not proven. Moreover, he was a jeweler and a businessman. As such, he was unlikely to have caused such a mistake. Any mistake, therefore, was due to his negligence. The Civil Code provides: there is no mistake if the party alleging it knew the doubt, contingency or risk affecting the object of the contract. Furthermore, he was given ample time to examine the jewelry; and he also delayed in claiming that the jewelries were fake. All in all, there were no legal bases for the nullification of the contract of sale. Ownership transferred upon constructive delivery as there was no stipulation which reserves ownership until the full price is paid or a period within which payment should be made. Thus, non-payment of the full price of P400k was cannot invalidate the contract. WHEREFORE, the decision of the Court of Appeals dated October 20, 1992 is hereby AFFIRMED in toto. Dr. Cruz, however, is ordered to pay petitioner the balance of the purchase price of P400,000.00 within ten (10) days from the finality of this decision. Costs against petitioner. SO ORDERED. Spill: There were other issues relating to damages, interest, and malicious prosecution.

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CIVIL LAW REVIEW 2 DIGESTS ON CONTRACTS #25 Boston Bank Of The Philippines V. Manalo (Liz) Facts of the Case Xavierville Estate, Inc. (XEI) was the own land known as the Xavierville Estate Subdivision. XEI subdivided the property into residential lots and offered it for sale to individual lot buyers. XEI and Overseas Bank of Manila (OBM) executed a "Deed of Sale of Real Estate" over some residential lots in the subdivision XEI president Emerito Ramos, Jr. contracted the services of Engr. Carlos Manalo, Jr. to install water pump for him. Manalo then proposed to XEI, through Ramos, to purchase a lot in the Xavierville subdivision, and offered as part of the downpayment the P34,887.66 Ramos owed him. Ramos agreed. Manalo, Jr. informed Ramos that he and his wife Perla had chosen Lots 1 and 2 of Block 2. Ramos confirmed the reservation of the lots and pegged the price of the lots at P200.00/sq.m with a 20% down payment of the purchase price less the money owing from Ramos, payable on or Dember 1972. The corresponding Contract of Conditional Sale would then be signed on or before the same date, but if the selling operations of XEI resumed after December 31, 1972, the balance of the downpayment would fall due then, and the spouses would sign the aforesaid contract within 5 days from receipt of the notice of resumption of such selling operations. It was also stated in the letter that, in the meantime, the spouses may introduce improvements thereon subject to the rules and regulations imposed by XEI in the subdivision. Perla Manalo conformed to the letter agreement. The spouses Manalo took possession of the property, constructed a house and fenced the perimeter. The spouses Manalo were notified of the resumption of the selling operations of XEI. However, they did not pay the balance of the downpayment on the lots because Ramos failed to prepare a contract of conditional sale and transmit the same to Manalo for their signature. Manalo went to XEI office and requested that the payment of the balance be deffered which XEI rejected. A few months after, spouses Manalo received a statement of account for their unpaid balance plus the interests twice. Manalo still refused to pay because the conditional contract of sale was not transmitted to them yet. In 1976, Manalo constructed a business sign in the sidewalk near his house. XEI informed Manalo that business signs were not allowed along the sidewalk and demanded that he remove the same, on the ground that the sidewalk was not part of the land which he had purchased on installment basis from XEI.Manalo did not respond. XEI turned over its selling operations to OBM. OBM warned Manalo that "putting up of a business sign is specifically prohibited by their contract of conditional sale" and that his failure to comply with its demand would impel it to avail of the remedies as provided in their contract of conditional sale. In 1979, the Register of Deeds issued TCT over Lot 2, Block 2, in favor of the OBM. When Commercial Bank of Manila (CBM) acquired Xavierville Estate from OBM, CBM requested Perla Manalo to stop any on-going construction on the property since it (CBM) was the owner of the lot and she had no permission for such construction. She agreed to have a conference meeting with CBM officers where she informed them that her husband had a contract with OBM, through XEI, to purchase the property. When asked to prove her claim, she promised to send the documents to CBM. However, she failed to do so.CBM reiterated its demand that it be furnished with the documents promised, but Perla Manalo did not respond. CBM filed a complaint for unlawful detainer against the spouses with the MTC QC. Pending the case, the spouses wrote CBM to offer an amicable settlement, promising to abide by the purchase price of the property per agreement with XEI, through Ramos. However, they were not able to reach a settlement as CBM offfered 1,550/sqmeter. In the meantime, CBM was renamed the Boston Bank of the Philippines. After CBM filed its complaint against the spouses Manalo, the latter filed a complaint for specific performance and damages against the bank before RTC QC. Issue: Whether or not there is a perfected contract between petitioners and respondents

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CIVIL LAW REVIEW 2 DIGESTS ON CONTRACTS

Held: No! For a perfected contract of sale or contract to sell to exist in law, there must be an agreement of the parties not only on the price of the property sold but also on the manner the price is to be paid by the vendee. A contract of sale is perfected at the moment there is a meeting of the minds upon the thing which is the object of the contract and the price. From the averment of perfection, 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. On the other hand, when the contract of sale or to sell is not perfected, it cannot, as an independent source of obligation, serve as a binding juridical relation between the parties. Price is an essential element in the formation of a binding and enforceable contract of sale. The fixing of the price can never be left to the decision of one of the contracting parties. But a price fixed by one of the contracting parties, if accepted by the other, gives rise to a perfected sale.It is not enough for the parties to agree on the price of the property. In a contract to sell property by installments, it is not enough that the parties agree on the price as well as the amount of downpayment. The parties must, likewise, agree on the manner of payment of the balance of the purchase price and on the other terms and conditions relative to the sale. Even if the buyer makes a downpayment or portion thereof, such payment cannot be considered as sufficient proof of the perfection of any purchase and sale between the parties. In this case, petitioners admit that they and the respondent still had to meet and agree on how and when the down-payment and the installment payments were to be paid. This being the case, no definite and firm sales agreement between the parties had been perfected. A definite agreement on the manner of payment of the purchase price is an essential element in the formation of a binding and enforceable contract of sale. The fact that the petitioners delivered to the respondent the sum of P10k as part of the downpayment that they had to pay cannot be considered as sufficient proof of the perfection of any purchase and sale agreement between the parties herein under article 1482 of the New Civil Code, as the petitioners themselves admit that some essential matter s, such as the terms of payment still had to be agreed upon. Petitioner is correct in saying that there is no schedule of payment of the balance of the purchase price on the property. The parties confined sed on the SCs findings, the parties confined themselves to agreeing on the price of the property, the 20% downpayment of the purchase price, and credited respondents for the P34,887.00 owing from Ramos as part of downpayment. The timeline for the payment of the balance of the downpayment was also agreed upon, that is, on or before XEI resumed its selling operations on December 31, 1972, or within 5 days from written notice of such resumption of selling operations. The parties had also agreed to incorporate all the terms and conditions relating to the sale, inclusive of the terms of payment of the balance of the purchase price and the other substantial terms and conditions in the "corresponding contract of conditional sale," to be later signed by the parties, simultaneously with respondents settlement of the balance of the downpayment Jurisprudence is that if a material element of a contemplated contract is left for future negotiations, the same is too indefinite to be enforceable. And when an essential element of a contract is reserved for future agreement of the parties, no legal obligation arises until such future agreement is concluded. So long as an essential element entering into the proposed obligation of either of the parties remains to be determined by an agreement which . they are to make, the contract is incomplete and unenforceable The reason is that such a contract is lacking in the necessary qualities of definiteness, certainty and mutuality. There is no evidence on record to prove that XEI or OBM and the respondents had agreed, after December 31, 1972, on the terms of payment of the balance of the purchase price of the property and the other substantial terms and conditions relative to the sale. Indeed, the parties are in agreement that there had been no contract of conditional sale ever executed by XEI, OBM or petitioner, as vendor, and the respondents, as vendees.

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CIVIL LAW REVIEW 2 DIGESTS ON CONTRACTS #26 YASON vs. ARCIAGA (Maj) Facts of the Case Spouses Arciaga were owners of lots in Muntinlupa City covered by TCT in the Registry of Deeds of Makati City. They executed a Deed of Conditional Sale whereby said lot was sold for P265,000.00 to spouses Yason. Initial payment of P150,000.00 was made. Upon payment of the balance of P115,000.00, spouses Arciaga executed a Deed of Absolute Sale. That day, Claudia died and was survived by her spouse and 6 children. Petitioners had the Deed of Absolute Sale registered in the Registry of Deeds of Makati City. They entrusted its registration to Jesus Medina to whom they delivered the document of sale and the amount of P15,000.00 as payment for the capital gains tax. Without their knowledge, Medina falsified the Deed of Absolute Sale and had the document registered in the Registry of Deeds of Makati City. He made it appear that the sale took place on July 2, 1979, instead of April 19, 1983, and that the price of the lot was only P25,000.00, instead of P265,000.00. On the basis of the fabricated deed, TCT in the names of spouses Arciaga was cancelled and in lieu thereof, another TCT was issued in the names of petitioners. When spouses Arciagas children learned of the falsified document of sale, four of them caused the filing with the Office of the Provincial Prosecutor of Makati City a complaint for falsification of documents against petitioners. After the preliminary investigation, the Provincial Prosecutor dismissed the complaint for falsification for lack of probable cause. Undaunted, respondents filed with RTC of Makati City a complaint for annulment of the 13 land titles against petitioners alleging that the Deed of Absolute Sale is void ab initio considering that (1) Claudia Arciaga did not give her consent to the sale as she was then seriously ill, weak, and unable to talk and (2) Jesus Medina falsified the Deed of Absolute Sale; that without Claudias consent, the contract is void; and that the land titles are also void because a forged deed conveys no title. RTC dismissed respondents complaint and sustaining the validity of the Deed of Conditional Sale and the Deed of Absolute Sale. Initially, CA affirmed said ruling, but upon respondents MR, reconsidered its Decision. Hence, this petition for review on certiorari. Issue WON the Deed of Absolute Sale is void for lack of consent on the part of Claudia Arciaga and because the same document was forged by Medina. Held: NO! In determining whether the Deed of Absolute Sale is valid, it must contain the essential requisites of contracts, viz: (1) consent of the contracting parties; (2) object certain which is the subject matter of the contract; and (3) cause of the obligation which is established. A contract of sale is perfected at the moment there is a meeting of the minds upon the thing which is the object of the contract and upon the price. Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. To enter into a valid legal agreement, the parties must have the capacity to do so. The law presumes that every person is fully competent to enter into a contract until satisfactory proof to the contrary is presented. The burden of proof is on the individual asserting a lack of capacity to contract, and this burden has been characterized as requiring for its satisfaction clear and convincing evidence. The CA, in its Amended Decision, held that the Deed of Absolute Sale is void for lack of consent on the part of Claudia Arciaga who could not have affixed her thumbmark thereon since she was very ill then. In fact, she died a few hours thereafter. Thus, the basic issue for our resolution is whether Claudia Arciaga voluntarily affixed her thumbmark on the documents of sale. While it is true that Claudia was sick and bedridden, respondents failed to prove that she could no longer understand the terms of the contract and that she did not affix her thumbmark thereon. Unfortunately, they did not present the doctor or the nurse who attended to her to confirm that indeed she was mentally and physically incapable of entering into a contract. Mere weakness of mind alone, without imposition of fraud, is not a ground for vacating a contract. Only if there is unfairness in the transaction, such as gross inadequacy of consideration, the low degree of intellectual capacity of the party, may be taken into consideration for the purpose of showing such fraud as will afford a ground for annulling a contract. Hence, a person is not incapacitated to enter into a contract merely because of advanced years or by reason of

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CIVIL LAW REVIEW 2 DIGESTS ON CONTRACTS physical infirmities, unless such age and infirmities impair his mental faculties to the extent that he is unable to properly, intelligently and fairly understand the provisions of said contract. Respondents failed to show that Claudia was deprived of reason or that her condition hindered her from freely exercising her own will at the time of the execution of the Deed of Conditional Sale. Significantly, there is no evidence showing that Claudia was forced or coerced in affixing her thumbmark on the Deed of Conditional Sale. Records disclose, however, that when Atty. Fresnedi testified in court, 9 years had passed from the time he notarized the Deed of Absolute Sale. Considering the length of time that passed and the numerous documents he must have notarized, his failure to remember exactly where he notarized the contract of sale is understandable. In this regard, it bears emphasis that a notarized Deed of Absolute Sale has in its favor the presumption of regularity, and it carries the evidentiary weight conferred upon it with respect to its execution.

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CIVIL LAW REVIEW 2 DIGESTS ON CONTRACTS #27 Heirs of Jesus Mascunana v. CA (March) Facts of the Case Masunana bought a parcel of land from the Wuthrich siblings. Part of which Mascunana, he later sold to Sumilhig. The contract price is 4,690 with 3,690 as down payment. Their agreement says: That the balance of ONE THOUSAND PESOS (P1,000.00) shall be paid by the VENDEE unto the VENDOR as soon as the above-portions of Lot 124 shall have been surveyed in the name of the VENDEE and all papers pertinent and necessary to the issuance of a separate Certificate of Title in the name of the VENDEE shall have been prepared. Sumilhig later sold the same lot to Layumas. Years after, Layumas wrote to the heirs of Mascunana (since Mascunana died already) offering to pay the 1,000 balance of the purchase price of the property. The addressee, however, refused to receive the mail matter. Heirs Mascunana then filed a complaint for recovery of possession against Barte ( an individual whom Layumas allowed to stay on the subject property). Issue: WON the contract of alienation of the subject lot in favor of Sumilhig was a contract to sell or a contract of sale Held: Sale Article 1458 of the New Civil Code provides: By the contract of sale, one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. A contract of sale may be absolute or conditional. Thus, there are three essential elements of sale, to wit: a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price; b) Determinate subject matter; and c) Price certain in money or its equivalent. In this case, there was a meeting of the minds between the vendor and the vendee, when the vendor undertook to deliver and transfer ownership over the property covered by the deed of absolute sale to the vendee for the price of P4,690.00 of which P3,690.00 was paid by the vendee to the vendor as down payment. The vendor undertook to have the property sold, surveyed and segregated and a separate title therefor issued in the name of the vendee, upon which the latter would be obliged to pay the balance of P1,000.00. There was no stipulation in the deed that the title to the property remained with the vendor, or that the right to unilaterally resolve the contract upon the buyers failure to pay within a fixed period was given to such vendor. Patently, the contract executed by the parties is a deed of sale and not a contract to sell. As the Court ruled in a recent case: In Dignos v. Court of Appeals (158 SCRA 375), we have said that, although denominated a Deed of Conditional Sale, a sale is still absolute where the contract is devoid of any proviso that title is reserved or the right to unilaterally rescind is stipulated, e.g., until or unless the price is paid. Ownership will then be transferred to the buyer upon actual or constructive delivery (e.g. by the execution of a public document) of the property sold. Where the condition is imposed upon the perfection of the contract itself, the failure of the condition would prevent such perfection. If the condition is imposed on the obligation of a party which is not fulfilled, the other party may either waive the condition or refuse to proceed with the sale. (Art. 1545, Civil Code). Thus, in one case, when the sellers declared in a Receipt of Down Payment that they received an amount as purchase price for a house and lot without any reservation of title until full payment of the entire purchase price, the implication was that they sold their property. In Peoples Industrial and Commercial Corporation v. Court of Appeals, it was stated:.

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CIVIL LAW REVIEW 2 DIGESTS ON CONTRACTS A deed of sale is considered absolute in nature where there is neither a stipulation in the deed that title to the property sold is reserved in the seller until full payment of the price, nor one giving the vendor the right to unilaterally resolve the contract the moment the buyer fails to pay within a fixed period. Applying these principles to this case, it cannot be gainsaid that the contract of sale between the parties is absolute, not conditional. There is no reservation of ownership nor a stipulation providing for a unilateral rescission by either party. In fact, the sale was consummated upon the delivery of the lot to respondent. Thus, Art. 1477 provides that the ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof. The condition in the deed that the balance of P1,000.00 shall be paid to the vendor by the vendee as soon as the property sold shall have been surveyed in the name of the vendee and all papers pertinent and necessary to the issuance of a separate certificate of title in the name of the vendee shall have been prepared is not a condition which prevented the efficacy of the contract of sale. It merely provides the manner by which the total purchase price of the property is to be paid. The condition did not prevent the contract from being in full force and effect: The stipulation that the payment of the full consideration based on a survey shall be due and payable in five (5) years from the execution of a formal deed of sale is not a condition which affects the efficacy of the contract of sale. It merely provides the manner by which the full consideration is to be computed and the time within which the same is to be paid. But it does not affect in any manner the effectivity of the contract. In a contract to sell, ownership is retained by a seller and is not to be transferred to the vendee until full payment of the price. Such payment is a positive suspensive condition, the failure of which is not a breach of contract but simply an event that prevented the obligation from acquiring binding force. It bears stressing that in a contract of sale, the non-payment of the price is a resolutory condition which extinguishes the transaction that, for a time, existed and discharges the obligation created under the transaction. A seller cannot unilaterally and extrajudicially rescind a contract of sale unless there is an express stipulation authorizing it. In such case, the vendor may file an action for specific performance or judicial rescission. Article 1169 of the New Civil Code provides that in reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him; from the moment one of the parties fulfills his obligation, delay by the other begins. In this case, the vendor (Jesus Mascuana) failed to comply with his obligation of segregating Lot No. 124-B and the issuance of a Torrens title over the property in favor of the vendee, or the latters successors-in-interest, the respondents herein. Worse, petitioner Jose Mascuana was able to secure title over the property under the name of his deceased father.

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CIVIL LAW REVIEW 2 DIGESTS ON CONTRACTS #28 MANDARIN VILLA V. CA (Marcus) Facts of the Case Atty. De Jesus hosted a dinner at Mandarin Villa Seafood Village in Greenhills. He offered to pay the bill using his BANKARD which was accepted by Mandarins waiter. However, his card was denied by the swiping machine twice for being expired, even if the card showed on its face that it had not expired. After his friends joked about washing the dishes in order to pay the bill, he went to his car, got his BPI card and paid using the same. He then filed a suit against Mandarin and BANKARD for damages. The RTC ruled in favor of Atty. De Jesus. The CA affirmed the ruling against Mandarin but absolved BANKARD. Mandarin argues that it is not bound to accept payment through BANKARD, that it was not negligent in checking if Atty. De Jesus card was expired. Issue: WON Mandarin was bound to accept BANKARD payments; Held: YES! Mandarin argues that ATTYs offer to pay by means of credit card partook of the nature of a proposal to novate an existing obligation for which Mandarin, as creditor, must first give its consent otherwise there will be no binding contract between them. Mandarin is wrong. Mandarin is affiliated with BANKARD. In fact, an "Agreement" entered into by Mandarin and BANKARD provides that Mandarin shall honor validly issued BANKARD credit cards presented to it for payment. Thus, while ATTY may not be a party to the agreement, the agreement conferred a favor upon ATTY, a holder of credit card validly issued by BANKARD. This is a stipulation pour autri and under Article 1311 of the CC, ATTY may demand its fulfillment provided he communicated his acceptance to Mandarin before its revocation. In this case, ATTYs offer to pay by means of BANKARD constitutes not only an acceptance but also an explicit communication of his acceptance to the obligor. In addition, the record shows that Mandarin posted a logo stating that "BANKARD is accepted here." Mandarin was also negligent in denying the card for being expired when in fact, the card stated on its face that it was not. Mandarin should have referred the matter with BANKARD rather than denying payment altogether.

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CIVIL LAW REVIEW 2 DIGESTS ON CONTRACTS # 29 LAGON vs. COURT OF APPEALS and MENANDRO V. LAPUZ (Marlon) Facts of the Case Lagon purchased from the estate of Bai Tonina Sepi (Sepi), two parcels of land. A few months after the sale, Lapuz filed a complaint for torts and damages against Lagon before the RTC. In the complaint, Lapuz claimed that he entered into a contract of lease with the late Bai Tonina Sepi over three parcels of land which includes the land purchased by Lagon. One of the provisions agreed upon was for Lapuz to put up commercial buildings which would, in turn, be leased to new tenants. The rentals to be paid by those tenants would answer for the rent of Lapuz was obligated to pay Sepi for the lease. In 1974, the lease contract ended but since the construction of the commercial buildings had yet to be completed, the lease contract was allegedly renewed. After the death Lapuz remitted the rents to the administrator but it told him to stop collecting. Lapuz discovered that Lagon, representing himself as the new owner of the property, had been collecting rentals from the tenants. Lapuz filed a complaint against the , accusing Lagon of inducing the heirs of Sepi to sell the property to him, thereby violating his leasehold rights over it. Lagon denied that he induced the heirs of Sepi to sell the property to him, contending that the heirs were in dire need of money to pay off the obligations of the deceased. Lagon also denied interfering with Lapuzs leasehold rights as there was no lease contract covering the property when he purchased it; that his personal investigation and inquiry revealed no claims or encumbrances on the subject lots. The RTC ruled in favor of Lapuz and awarded damages. The CA modified but found Lagon liable for interference of contractual relation under Article 1314 of the New Civil Code. Issue: Whether the purchase by Lagon of the subject property, during the supposed existence of Lapuzs lease contract with the late Sepi, constituted tortuous interference for which Lagon should be held liable for damages. Held: No! The tort recognized in that provision is known as interference with contractual relations. The interference is penalized because it violates the property rights of a party in a contract to reap the benefits that should result therefrom. Elements of tortuous interference with contractual relations: (a) existence of a valid contract; (b) knowledge on the part of the third person of the existence of the contract and (c) interference of the third person without legal justification or excuse.
nd The 2 element requires that there be knowledge on the part of the interferer that the contract exists. Knowledge of the subsistence of the contract is an essential element to state a cause of action for tortuous interference. A defendant in such a case cannot be made liable for interfering with a contract he is unaware of. While it is not necessary to prove actual knowledge, he must nonetheless be aware of the facts which, if followed by a reasonable inquiry, will lead to a complete disclosure of the contractual relations and rights of the parties in the contract.

Lagon conducted his own personal investigation and inquiry, and unearthed no suspicious circumstance that would have made a cautious man probe deeper and watch out for any conflicting claim over the property. An examination of the entire propertys title bore no indication of the leasehold interest of Lapuz. Even the registry of property had no record of the same. Assuming ex gratia argumenti that Lagon knew of the contract, such knowledge alone was not sufficient to make him liable for tortuous interference. This brings us to the third element. According to our ruling in So Ping Bun, Lagon may be held liable only when there was no legal justification or excuse for his action or when his conduct was stirred by a wrongful motive. To sustain a case for tortuous interference, the defendant must have acted with malice or must have been driven by purely impious reasons to injure the plaintiff. In other words, his act of interference cannot be justified. Lagons purchase of the subject property was merely an advancement of his financial or economic interests, absent any proof that he was enthused by improper motives. A person is not a malicious interferer if his conduct is impelled by a proper business interest. In other words, a financial or profit motivation will not necessarily make a person an officious interferer liable for damages as long as there is no malice or bad faith involved. In sum, we

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CIVIL LAW REVIEW 2 DIGESTS ON CONTRACTS rule that, inasmuch as not all three elements to hold Lagon liable for tortuous interference are present, Lagon cannot be made to answer for Lapuzs losses. This case is one of damnun absque injuria or damage without injury. "Injury" is the legal invasion of a legal right while "damage" is the hurt, loss or harm which results from the injury.

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CIVIL LAW REVIEW 2 DIGESTS ON CONTRACTS #30 First Philippine Intl. Bank vs. CA (Mike) Facts of the Case First Philippine Intl. Bank (formerly Producer Bank of the Philippines) acquired six parcels of in Laguna. Demetrio Demetria and Jose Janolo, wanted to purchase the property and thus initiated negotiations for that purpose. Demetria and Janolo then met with Mercurio Rivera, manager of the property mgt dept of First Phil Bank. After this a series of exchanges through letters was made. Janolo made a formal offer of P3.5M to the bank. The bank, through Rivera made a counter offer of P5.5M. Janolo then offered P4.250M in cash. There was no reply to this last letter. However, a meeting was later held between Demetrio/Janolo and Luis Co, the Senior Vice-President of the bank. 2 days later, Janolo wrote the bank saying that pursuant to the meeting, he was accepting the banks offer to sell at P5.5M. However, Demetria was informed by the banks new acting conservator that their proposal to buy the lands was still being studied. Because of this, Demetria and Janolo demanded that the bank comply with the sale since, as they saw it, a perfected contract of sale had already transpired. The bank refused. Demetria and Janolo then made a formal demand letter and tendered the P5.5M. However, the bank refused to receive these and even advertised that the said lands were still for sale. Finally, the bank accepted the letter but made no response to it. A check for P5.5M was sent to the banks conservator but still no response was givern. Here, the bank repudiated the authority of Rivera and claimed that his dealings with the Demetria and Janolo, particularly his counter-offer of P5.5 Million are unauthorized or illegal. Because of this, a suit for specific performance with damages against the bank, its Manager Rivers and the Acting Conservator. The basis of the suit was that the transaction had with the bank resulted in a perfected contract of sale. The bank took the position that there was no such perfected sale because Rivera was not authorized to sell the property, and that there was no meeting of the minds as to the price. The RTC declared that a perfected contract of sale was made. This was affirmed by the CA. Issue: W/N a perfected contract of sale existed between First Phil and Demtria/Janolo Held: Yes! A perfected contract of sale existed between the parties. 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. Requisites 2 and 3 are evident. As regards requisite 1, the CA correctly found that the meeting between the parties was consistent with the authority and the duties of Rivera and the bank's internal procedure in the matter of the sale of bank's assets. Here, Rivera acted as the intermediary between the buyers and the bank Committee and Conservator. Thus, when the buyers offered P3.5M and addressed the offer to Rivera, there can be no other logical conclusion than that when Rivera informed the buyers by letter that banks counter offer was P5.5M, such counter-offer price had been determined by the Past Due Committee and approved by the Conservator after Rivera had duly presented the buyers offer for discussion by the Committee. In short, under the established facts, the price of P5.5 Million was, as clearly worded in Rivera's letter, the official and definitive price at which the bank was selling the property. The SC also noted that the banks argument that the Committee never discussed the P5.5M price was not credible for being self serving. At this stage, price was established. The bank also argued that by making a counter offer of P4.250M, the buyers in fact extinguished the banks proposal of P5.5M. However, it must be noted that in the buyers last letter (the one accepting the P5.5M proposal), what was being accepted was not the P5.5M offered in the letter but the P5.5M offered during

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CIVIL LAW REVIEW 2 DIGESTS ON CONTRACTS the meeting. Take note, the buyers began that letter by saying pursuant to the meeting, the buyers were accepting the banks offer to sell at P5.5M. At this stage, the offer was made by the bank and was accepted by the buyer. The bank also cant repudiate Riveras authority to give consent to the sale. The authority of a corporate officer in dealing with third persons may be actual or apparent. Here, the principal is liable for obligations contracted by the agent. The agent's apparent representation yields to the principal's true representation and the contract is considered as entered into between the principal and the third person. In this case, the facts clearly show that Rivera has apparent or implied authority to act for the Bank in the matter of selling its acquired assets. In its dealings, the bank portrayed that Rivera had the authority to transact with regard to the lands. In fact, it even named Rivera as the person in charge of such sales in its advertisements. Finally, the bank tries to hide behind the fact that there is no written embodiment of the contract. True, the banks letter re the price and the buyers acceptance of such price are not, in themselves, contracts of sale. They are however clear embodiments of the fact that a contract of sale was perfected between the parties, such contract being binding in whatever form it may have been entered into. Both letters, taken together, constitute in law a sufficient memorandum of a perfected contract of sale 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.

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CIVIL LAW REVIEW 2 DIGESTS ON CONTRACTS #31 Maria Cristina Fertilizer Corp. vs. CA (Nere) Facts of the Case This case involves litigations arising out of different transactions between the same parties but covering different parcels of land. Maria Christina Fertilizer Corp. (MCFC) and Marcelo Steel Corporation (MSC) failed to pay the balance of the purchase price of several parcels of land belonging to Ceferina Argallon-Jocson. The latter demanded reconveyance of the lot and such demand was construed to be acceded by the MSC and MCFC by virtue of the letter sent to Ceferina through Jose Marcelo. Dear Mrs. Jocson: This is in connection with your request for reconveyance of some properties covered by Operation Land Transfer which were already registered in the name of our corporation, and your proposal to offset the value of those claims already processed by the Land Bank with those still in the Field Office of the Ministry of Agrarian Reforms. Our corporation will accept your proposal provided the following conditions are complied with, to wit: 1. That the reconveyance shall be on a case to case basis; 2. That no reconveyance shall be effected unless, the value of the claim to offset the advances for the property to be reconveyed is accordingly approved by the Land Bank for payment; 3. That advances not applied to a particular claim which is outstanding in our records in the total amount of P147,000.00 shall first be liquidated or applied as against payment from the Land Bank. Meanwhile, we may start with the reconveyance of the property formerly owned by METRACO, and request your goodself to coordinate with us or Frank Dionisio on the matter. Upon failure of MSC and MCFC to reconvey the properties, Ceferina filed an action for reconveyance before the RTC of Isabela. It ruled in favor of Ceferina on the ground that contracts may be entered orally or in writing or parol in part and written it being needful merely that the essential requisites for their validity is present and that obligations arising from contracts have the force of law between the contracting parties should be complied w/ in good faith. Issue: Whether the letter of MCFC and MSC can be considered as a perfected agreement between the parties. Held: No. The letter cannot be considered as a perfected agreement between the parties. An offer must be clear and definite, while an acceptance must be unconditional and unbounded, in order that their concurrence can give rise to a perfected contract. Article 1319 provides:

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CIVIL LAW REVIEW 2 DIGESTS ON CONTRACTS Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute a contract. The offer must be certain and the acceptance absolute. A qualified acceptance constitutes a counter-offer. The various transactions instituted against MCFC and MSC have been due to their non payment of the balance of the purchase price, the court orders payment of the balance of the purchase price. Note: Mejo magulo talaga the facts of the case. But this is the best that I can digest it for you guys to understand

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CIVIL LAW REVIEW 2 DIGESTS ON CONTRACTS #32 Insular Life Assurance Co. Vs. Asset Builders Corp. (Nia) Facts of the Case Petitioner Insular Life invited construction companies to participate in the bidding of petitioners Insular Life building in Lucena. Petitioner distributed Bid Documents, Bid Proposal Forms and Instruction to Bidders, which include the following rules: (a) all bond proposal shall be accompanied with a bid bond from the Insular General Insurance Co. equivalent to ten percent of the bid or five percent of the bid in Managers or Cashiers check payable to Insular Life, (b) the bid shall be valid for 60 days after opening of bids, and (c) the bidder who had been deemed complying with the requirements shall be notified in writing to personally appear to execute the Contract Agreements within five days after receipt of notice of award, and that failure to execute the contract shall constitute a breach of the agreement, as effected by acceptance of the proposal, resulting in the nullification of the award, and that the bond offered by the winning bidder shall be retained by the owner as payment due for liquidated damages. Respondent Asset Builders, along with 4 other bidders, submitted their bid proposals. Respondent bound and obliged itself to enter into a Contract with the petitioner within 10 days from notice of the award, with good and sufficient securities for the faithful compliance thereof. Respondents bid turned out to the be lowest among the bidders, as found by AWIA, the designated project manager. Engineer Espiritu, project coordinator, recommended that respondent along with two other bidders, be subjected to post-qualification proceedings. Petitioner did, and they visited respondents main office and investigated its past and present projects. Torrijos, from petitioners real property department, recommended the approval by the BOD of the award of the general construction to respondent. Thus, a conference was held between petitioner and respondent, where respondent agreed to readjust the amount of the bid. Flores, the head of the Real Property department, signed a Notice to Proceed addressed to the respondent, where the respondent may start with the construction immediately pending execution of the Construction Agreement. On the same day Torrijos advised AWIA to inform respondent of a preconstruction meeting on March 22. Centeno, president of respondent was informed of the same pursuant to Engineer Sajordas memorandum (sorry, dami talaga cast members e). Pre-conference meeting was thus held, in which they agreed that the contract amount will be for P13M, to be completed within 210 days. A ground breaking ceremony was held attended by Centeno, Espiritu and Flores. A billboard announcing the construction of the building, as well as the name of the respondent as the contractor was erected on the site. However, the respondent did not affix its conformity to any Notice of Award, much less commence its construction of the project. It did not also execute any construction agreement. Respondent wrote the petitioners a letter informing them that the former could not undertake the project because the prerequisite paper work and attendant processing could not be fast-tracked and that, since the previous 2 weeks, prices has escalated, which rendered its bid unattractive. Petitioner wrote back, saying that due to the unjust withdrawal of the respondent from the project, despite the award of such project to them, the petitioner was impelled to engage the services of another contractor, without prejudice to further action against respondent for damages due to failure to execute the Contract, pursuant to the Instruction to Bidders. Petitioner filed a complaint against the respondent for damages with the RTC, but the latter dismissed the same, ordering petitioner to pay damages to the respondent instead. CA affirmed, saying that the failure of petitioner to prove that it gave respondent a written notice of the formers unqualified acceptance of the latters bid, as required in the Instruction to Bidders, did not give birth to consent. It explained that when the exact terms desired were not in the offer, any modification or variation therefrom would annul that offers. Issue: Was there a valid contract between petitioner and respondent? Held: NO! There are three distinct stages of a contract -- its "preparation or negotiation, its perfection, and finally, its consummation." Negotiation begins when the prospective contracting parties manifest their interest in the contract

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CIVIL LAW REVIEW 2 DIGESTS ON CONTRACTS and ends at the moment of their agreement. The perfection or birth of the contract occurs when they agree upon the essential elements thereof. The last stage is its consummation, wherein they "fulfill or perform the terms agreed upon in the contract, culminating in the extinguishment thereof." In the case at bar, the parties did not get past the negotiation stage. The events that transpired between them were indeed initiated by a formal offer, but this policitacin was merely an imperfect promise that could not be considered a binding commitment. At any time, either of the prospective contracting parties may stop the negotiation and withdraw the offer. In the present case, in fact, there was only an offer and a counteroffer that did not sum up to any final arrangement containing the elements of a contract. Clearly, no meeting of minds was established. First, only after the bid bond had lapsed were post-qualification proceedings, inspections, and credit investigations conducted. Second, the inter-office memoranda issued by petitioner, as well as other memoranda between it and its own project manager, were simply documents to which respondent was not privy. Third, petitioner proposed a counteroffer to adjust respondent's bid to accommodate the wage increase of December 3, 1993. In effect, the rule on the concurrence of the offer and its acceptance did not apply, because other matters or details -- in addition to the subject matter and the consideration -- would still be stipulated and agreed upon by the parties. While there was an initial offer made, there was no acceptance; but when there allegedly came an acceptance that could have had a binding effect, the offer was already lacking. The offer and its acceptance "did not meet to give birth to a contract." Moreover, the Civil Code provides that no contract shall arise unless its acceptance is communicated to the offeror. That is, the mere determination to accept the proposal of a bidder does not constitute a contract; that decision must be communicated to the bidder. Although consent may be either express or implied, the Instruction to Bidders prepared by petitioner itself expressly required (1) a formal acceptance and (2) a period within which such acceptance was to be made known to respondent. The effect of giving the Notice of Award to the latter would have been the perfection of the contract. No such acceptance was communicated to respondent; therefore, no consent was given. Without that express manifestation, as required by the terms of its proposal, there was no contract. The due execution of documents representing a contract is one thing, but its perfection is another. There is no issue as regards the subject of the contract or the cause of the obligation. The controversy lies in the consent -- whether there was an acceptance by petitioner of the offer made by respondent; and, if so, whether that acceptance was communicated to the latter, thereby perfecting the contract. The period given to the former within which to accept the offer was not itself founded upon or supported by any consideration. Therefore, under the law, respondent still had the freedom and the right to withdraw the offer by communicating such withdrawal to petitioner before the latter's acceptance of the offer; or, if the offer has been accepted, before the acceptance came to be known by respondent. Petitioner avers that an acceptance was made, but this allegation has not been proven. Respondent had no knowledge of such acceptance when it communicated its withdrawal to the former. Notably, this right to withdraw was not exercised whimsically or arbitrarily by respondent. It did send a formal letter on April 5, 1994, expressing and explaining its withdrawal. As of that date, the decision to award the contract had not been made according to the terms of the Instruction to Bidders. Besides, the subsequent acts between the parties did not even serve as a confirmation of that decision. The existence of a second proposal -- petitioner's request for an adjustment of the bid to accommodate the wage increase -- in fact belies the perfection of any contract arising from the first. To the Court's mind, there was indeed no acceptance of the offer made by respondent. Such failure to comply with a condition imposed for the perfection of a contract resulted in failure of the contract. Certainly, the "bid bond is an indispensable requirement for the validation of a bid proposal." This requisite ensures the good faith of bidders and binds them to enter into a contract with the owner, should their proposal be accepted. The Invitation to Bidders even provided that incomplete proposals might be sufficient cause for their

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CIVIL LAW REVIEW 2 DIGESTS ON CONTRACTS rejection. If mere insufficiency of a bond required of a bidder is a ground for rejection, a fortiori, all the more so is the total want thereof. The proposal of respondent was merely validated by its bid bond, which was considered by petitioner. The expiration of the bond on January 8, 1994, did not mean that the bid also lapsed on the same date. The bond, which was an accessory, merely guaranteed the performance of the principal obligation and could not exist without the latter. The former was given for the benefit of petitioner, which could legally waive it. The bid continued without a bond, but still no formal acceptance was made. Again, on that basis, no contract was perfected. In the interpretation of a contract, the literal meaning of its stipulations controls, if their terms are clear and leave no doubt as to the intention of the contracting parties. When "there is no ambiguity in the language of a contract, there is no room for construction, only compliance." This rule applies to the Instruction to Bidders, which provides that "failure to execute the Contract shall constitute a breach of agreement as effected by acceptance of the proposal." The language is clear and, like contracts in general, is the law between the parties. The contract must be fulfilled according to its literal sense.

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CIVIL LAW REVIEW 2 DIGESTS ON CONTRACTS #33 Serra vs. CA (Inah) Facts of the Case Petitioner Serra is the owner of a 374 square meter parcel of land in Masbate. Sometime in 1975, respondent bank, in its desire to put up a branch in Masbate, negotiated with petitioner for the purchase of the then unregistered property. In 1975, a contract of lease with option to buy was instead forged by the parties, where the monthly rental was P700, with the option to purchase said parcel of land within a period of 10 years from date of signing of contract at a price not greater than P210 / sqm. In 1984, the respondent bank informed petitioner through a letter of its intention to buy the property at the agreed price not greater than P210 / sqm or a total of P78,430. But to the surprise of respondent, petitioner replied that he is no longer selling the property. Hence, respondent filed a complaint for specific performance and damages. Petitioner contends that the option was not supported by any consideration distinct from the price and hence, not binding upon him; that the contract having been prepared and drawn by RCBC, it took undue advantage on him when it set lopsided terms; that extraordinary inflation supervened, resulting in unusual decrease in purchasing power of currency that could not be reasonably be foreseen or was manifestly beyond the contemplation of the parties at the time of the establishment of the obligation, thus rendering the terms of the contract unenforceable. The trial court dismissed the complaint, but on MR, it reversed itself. On appeal to CA, it affirmed the findings of the trial court. Hence, this petition. Issue: Whether the lease contract with option to buy is enforceable Held: Petition dismissed. There is no dispute that the contract is valid and existing between the parties, as found by both the trial court and the appellate court. A contract of adhesion is one wherein a party, usually a corporation, prepares the stipulations in the contract, while the other party merely affixes his signature or his adhesion thereto. These types of contacts are as binding as ordinary contracts. Because in reality, the party who adheres to the contract is free to reject it entirely. Although this Court will not hesitate to rule out blind adherence to terms where facts and circumstances will show that it is basically one-sided. We do not find the situation in the present case to be inequitable. Petitioner is a highly educated man, who at the time of the trial, was already a CPA Lawyer, and when he entered into a contract, was already a CPA, holding a respectable position with the Metropolitan Manila Commission. It is evident that a man of his stature should have been more cautious in transactions he enters into, particularly where it concerns valuable properties. He is amply equipped to drive a hard bargain if he would be so minded to. Article 1324 of the Civil Cod eprovides that when an offeror has allowed the offeree 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. On the other hand, Article 1479 of the Code provides that an accepted unilateral promise to buy and sell a determinate thing for a price certain is binding upon the promisor if the promise is supported by a consideration distinct from the price. In a unilateral promise to sell, where the debtor fails to withdraw the promise before the acceptance by the creditor, the transaction becomes a bilateral contract to sell and to buy, because upon acceptance by the creditor of the offer to sell by the debtor, there is already a meeting of the minds of the parties as to the thing which is determinate and the price which is certain. In which case, the parties may then reciprocally demand performance. In the present case, the consideration is even more onerous on the part of the lessee since it entails, transferring ot he building and / or improvements on property to petitioner, should respondent bank fail to exercise its option within the period stipulated. The bugging question is whether the price not greater than P210 is certain or definite. A price is considered certain if it is so with reference to another thing certain or when the determination thereof is left to the judgment of a specified person or persons. And generally, gross inadequacy of price does not affect a contract of sale. We find that the contract of lease with option to buy between petitioner and respondent bank is valid, effective and enforceable, the price being certain and that there was consideration distinct from the price to support the option given to the lessee.

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CIVIL LAW REVIEW 2 DIGESTS ON CONTRACTS #34 Suntay v. CA (Rhett) Facts of the Case Federico Suntay was a landowner in Bulacan. He applied as a miller-contractor with the then National Rice and Corn Corporation. This was denied due to his several unpaid loans. As a result of this, he executed a deed of sale in favor of his lawyer-nephew Rafael for P20,000. A 2nd deed of sale was executed by Rafael back to Federico for the same land for the same amount. However, as testified to by the lawyer who notarized the agreement, it was a real estate mortgage to secure a loan with the Hagonoy Rural Bank. Upon execution of the first deed, the TCT was canceled and issued in favor of Rafael. Federico then requested the delivery of a copy of the 2nd deed, so he can have the TCT registered back to his name. Upon refusal of Rafael, he filed a complaint for reconveyance and damages with the RTC. RTC: During the pendency of the proceedings in the RTC, Rafael filed petitions for certiorari with the CA and the SC for purposes of delay and pettiness. The SC ultimately dismissed his petition, just like the CA and ordered that the proceedings in the RTC be continued. In the end, the RTC ruled that the first sale was valid and that the second was simulated and without consideration. It said that the 2nd deed was not dated, not notarized and had no consideration. Therefore, Rafael was the rightful owner. However, there was no order for payment of back rentals since they found that Rafael simply allowed his uncle to keep possession with the understanding that Federico will repurchase the property. They both appealed. CA: First, affirmed the RTC with the modification that Federico surrender the property to Rafael. Then Rafael died and was substituted by his heirs. Upon MR, the CA reversed itself and held that the first deed was merely an accommodation arrangement executed without any consideration and is therefore simulated. They cited the fact that Rafael never exercised acts of ownership over the property. The second deed was likewise found to be simulated and void. Issue: Whether or not the deeds of sale are simulated and are therefore void and without legal effect. Held: YES! SC affirmed the CA in toto. First the relationship of trust, interdependence and intimacy is an unmistakable token of simulation. It has been observed that fraud is generally accompanied by trust. Also, the failure of the late Rafael to take possession is a clear badge of fraud. Since, there were no sales in this case, there was no property validly conveyed between the parties. Both deeds of sale are simulated and void. Simulated and void agreements are void, produce no legal effects and no obligations arise from the same.

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CIVIL LAW REVIEW 2 DIGESTS ON CONTRACTS #35 Spouses Santiago and Palabyab, Josefina Arcega vs. CA, Quirico Arcega (Tom) Topic: Art. 1409, Simulated sale Facts of the Case Paula Arcega was the registered owner of a parcel of land located in Marilao, Bulacan. She had a house built on such land which she used as her residence until 1970, wherein a strong typhhon destroyed such residence. In late 1970, Paula executed what appears to be a deed of conditional sale over the property in favor of spouses Santiago and Palabyab (spouses) and Josefina Arcega for a consideration of P20,000. The spouses and Josefina made a downpayment of P7,000, with the remaining P13,000 to be paid at a later date and to coincide with the execution of a deed of absolute sale covering the land. All the said transactions fell through and eventually the property was transferred to the name of the spouses and Josefina by the execution of a Kasulatan ng Bilihang Tuluyan ng Lupa (deed of sale). However, certain irregularities occurred even after the said sale. A house of 4 bedrooms with an area of 225 sq. meters was built on the said property, with the masters bedroom (with toilet and bath) being occupied by Paula, and the other 3 bedrooms (smaller than the masters bedroom) being occupied by the spouses and Josefina in turn. Later on, in 1985, Paula died and left her 2 brothers as her heirs, Narciso and respondent Quirico. A few months after Paulas death, Quirico filed a complaint with the RTC of Bulacan seeking for the annulment of such deed of sale over the parcel of land, stating that the said deed of sale was merely fictitious as there was no actual payment of the purchase price. The spouses and Josefina then answered that the said complaint was already barred by prescription, as more than 10 years had already lapsed from the deed of sale and the complaint (1971-1985), and that the said deed of sale was valid as payment was actually made. The trial court ruled in favor of Quirico, declaring the said deed of sale null and void and ordering the delivery of the property to Quirico along with the transfer of title under his name. The spouses and Josefina appealed the decision to the CA, which upheld the trial courts decision. Said decision was based on the trial courts finding that the alleged deed of sale was entered into only to enable Paula to obtain a loan from the SSS, whom the spouses and Josefina were members of. The said loan gave her P25,000. The subsequent construction of the house on the property in question was finished in 1983, at the cost of more than P100,000. And as stated above, Paula occupied the masters bedroom, while the spouses and Josefina the other smaller rooms. Also, testimony of Atty. Cuvin, who notarized the alleged deed of sale document, categorixally stated that no actual exchange of money ever took place. As such, the stated deed of sale was deemed fictitious and simulated only. Issue: W/N the aforementioned deed of sale was void for being merely fictitious; Held: Yes. The facts speak for themselves. Upon the execution of the deed of sale, Paula still lived on the said property and house, and at the masters bedroom at that. If the deed of sale was indeed valid and payment actually made, then the spouses and Josefina shouldve exerted their right of ownership over the property and house, which apparently they did not do as they lived in the 3 smaller rooms and did not demand of have Paula vacate the house and land. Such failure to take exclusive possession of the property or to at least collect rentals from Paula id contrary to the principle of ownership and renders the whole transaction void for Art. 1409 provides that absolutely simulated or fictitious contracts are deemed inexistent and void from the beginning. The fact that the said deed of sale was notarized doesnt make the said deed of sale a valid conveyance of property. The intention of the parties would always be the primary consideration in determining the true nature of the contract. In fact, Atty. Cuvin, the Notary Public who notarized the deed of sale, testified to the fact that there was no payment of the stipulated amount made to Paula, much less a downpayment. As such, the said deed of sale was merely simulated and of no effect whatsoever.

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CIVIL LAW REVIEW 2 DIGESTS ON CONTRACTS #36 Lim v. CA (Tommy) There are two sides of the story. Victoria Suarezs Version: Rosa Lim came who lived in Cebu received from Victoria Suarez a diamond ring and a bracelet to be sold on commission basis. Rosa Lim returned the bracelet but failed to return the ring. Victoria after making verbal demands wrote a demand letter to Rosa asking for the return of the ring. Rosa replied thru counsel alleging that both have been returned. Hence, Victoria filed a case for estafa. Rosa Lims Version: Rosa Lim claims to have arrived in Manila from Cebu together with Aurelia Nadera who introduced her to Victoria. Rosa claims that the contract entered into between the parties was not for commission. It was her intention of buying the jewelry for her own use. It was her argument that she did not sign the contract (which states that the transaction was for the sale on consignment basis) on the blank provided for but rather on the upper portion only of the document. Rosa claims that before she departed for Cebu she called Victoria and informed her that she was no longer interested and Victoria told her that she was busy and that she should hand over the jewelry to Aurelia Nadera who in turn gave them back to Victoria. Issue: WON the contract entered into between Rosa and Victoria is one for sale on commission or that of sale and whether the place where the signature was placed affects the contract. Held: NO, the parties did not execute a notarial will but a simple contract of agency to sell on commission basis, thus making the position of petitioner's signature thereto immaterial. Rosa Lim's signature indeed appears on the upper portion of the receipt immediately below the description of the items taken: We find that this fact does not have the effect of altering the terms of the transaction from a contract of agency to sell on commission basis to a contract of sale. Neither does it indicate absence or vitiation of consent thereto on the part of Rosa Lim which would make the contract void or voidable. The moment she affixed her signature thereon, petitioner became bound by all the terms stipulated in the receipt. She, thus, opened herself to all the legal obligations that may arise from their breach. This is clear from Article 1356 of the New Civil Code which provides: Contracts shall be obligatory in whatever form they may have been entered into, provided all the essential requisites for their validity are present. . . . However, there are some provisions of the law which require certain formalities for particular contracts. The first is when the form is required for the validity of the contract; the second is when it is required to make the contract effective as against third parties such as those mentioned in Articles 1357 and 1358; and the third is when the form is required for the purpose of proving the existence of the contract, such as those provided in the Statute of Frauds in article 1403. A contract of agency to sell on commission basis does not belong to any of these three categories, hence it is valid and enforceable in whatever form it may be entered into. Furthermore, there is only one type of legal instrument where the law strictly prescribes the location of the signature of the parties thereto. This is in the case of notarial wills found in Article 805 of the Civil Code, to wit: Every will, other than a holographic will, must be subscribed at the end thereof by the testator himself . . . . The testator or the person requested by him to write his name and the instrumental witnesses of the will, shall also sign, as aforesaid, each and every page thereof, except the last, on the left margin. . . .

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CIVIL LAW REVIEW 2 DIGESTS ON CONTRACTS In the case before us, the parties did not execute a notarial will but a simple contract of agency to sell on commission basis, thus making the position of petitioner's signature thereto immaterial. As to the charge of Estafa, the SC held that all the elements are present. 1. That money, goods, or other personal property be received by the offender in trust, or on commission, or for administration, or under any other obligation involving the duty to make delivery of, or to return, the same; 2. That there be misappropriation or conversion of such money or property by the offender or denial on his part of such receipt; 3. That such misappropriation or conversion or denial is to the prejudice of another; and 4. That there is a demand made by the offended party to the offender (Note: The 4th element is not necessary when there is evidence of misappropriation of the goods by the defendant)

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#37 Abella vs. CA (Barney) Topic: Interpretation of Contracts Facts of the Case Abella is the lessor while Colarina is the lessee and I am what I am. The lease contract is from July 1, 1987 to July 1, 1991. Monthly rent is P3000. Upon signing of the contract, Colarina paid P40,000 to Abella who gave a receipt stataing that the sum represents ADVANCE DEPOSIT TO ANSWER FOR ANY RENTAL WHICH COLARINA MAY FAIL TO PAY DURING THE TERM OF LEASE. This was also notaized. Coralina failed to pay rent from Nov 1987 to April 1988 despite the demands made by Abella. Abella gave notice of extrajudicial rescission pursuant to the lease contract. Abellla tool possession of the property and demolished all the improvements made by the lessee. Abella claims that the P40,000 was GOODWILL MONEY paid for the privilege of leasing the building space. Since it is goodwill money and not advance rent, Lessee is in default alredy. Issue: How to treat the P40,000? Held: Consider it as advance rent. It is a cardinal rule in the interpretation of contracts that if the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control. The receipt states it is advance rent. The oral testimony claiming it is goodwill money cannot be given greater weight. Thus, lessee is not in default and must be given back the possession. However, the lease term has already expired so lessee is entitled to damages instead and return of unused rent payments.

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CIVIL LAW REVIEW 2 DIGESTS ON CONTRACTS #38 Nool vs. Court of Appeals (Bea) Facts of the Case Victorino and Francisco Nool each owned a separate parcel of land. The 2 parcels of land were acquired by Spouses Conchitina Nool and Gaudencio Almojera (Spouses Almojera). When the Spouses were in need of money, they secured a real estate mortgage on the parcels of land which were still in the name of Victorino and Francisco Nool, from the Development Bank of the Philippines (DBP). The Spouses defaulted in payment of the loan and therefore the mortgage was foreclosed. DBP became the absolute owner of the two parcels of land. Anacleto, a younger brother of Conchita, negotiated with DBP and succeeded in buying the lands. Anacleto was able to redeem the properties and as a result, the titles of the 2 lots were transferred to him. As part of an arrangement, believing that Conchitina still had title to the land, he agreed to buy the 2 lands for a consideration of P100,000 from Conchitina. A receipt of agreement was entered into between Conchitina and Anacleto wherein Conchitina appear to have sold to Anacleto the parcels of land. A 2nd Agreement was entered wherein it states that Conchitina can acquire back or repurchase later when she has the money. Anacleto was able to pay the amount of P30,000, yet he failed to pay the remaining balance of P14,000 to Conchitina. Anacleto then agreed to return the lands. But despite repeated demands, he failed to return the properties. Conchitina Nool seeks recovery of the parcels of land from Anacleto on the strength of two private documentsAgreement. She invokes Article 1370 of the Civil Code which mandates that if the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control." She claims that she can exercise the right to repurchase the property after Anacleto had acquired it from DBP. Also, she argues that "when Anacleto Nool took the possession of the two lands, he cannot later on disclaim the terms or conditions agreed upon and his actuation is within the ambit of estoppels Lower Court ruled that the private writing entered into between Anacleto and Conchitina Nool as an option to sell is not binding and considered the same validly withdrawn by Anacleto for want of consideration. Court of Appeals affirmed the judgment of the lower court. The principal contract of sale and the auxiliary contract of repurchase are void. Issues: Whether the parties 2 agreements were valid and enforceable. Whether there was estoppel in impugning the validity of Void contracts. Held: 1. No! The sellers (Spouses Almojera) can no longer deliver the object of the sale to the buyer (Anacleto Nool), as the buyer have already acquired title and delivery thereof from the rightful owner, the DBP. Thus, such contract may be deemed to be inoperative and may fall, by analogy, under item no. 5 of Article 1409 of the Civil Code, "Those which contemplate an impossible service." Article 1459 of the Civil Code provides that "the vendor must have a right to transfer the ownership thereof [object of the sale] at the time it is delivered." Here, delivery of ownership is no longer possible. It has become impossible. A contract of repurchase arising out of a contract of sale where the seller did not have any title to the property sold is not valid. Since, nothing was sold, then there is also nothing to repurchase. Conchitinas contention of invoking Art. 1370 is untenable since Article 1370 of the Civil Code is applicable only to valid and enforceable contracts. Yet the principal and auxiliary agreements are void.

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CIVIL LAW REVIEW 2 DIGESTS ON CONTRACTS In the present case, it is clear that the sellers (Spouses Almojera) no longer had any title to the parcels of land at the time-of sale. The alleged contract of repurchase was dependent on the validity of contract of sale, which is itself void. A void contract cannot give rise to a valid one. " Article 1422 of the Civil Code provides that "a contract which is the direct result of a previous illegal contract, is also void and inexistent." A person can sell only what he owns or is authorized to sell; the buyer can as a consequence acquire no more than what the seller can legally transfer." No one can give what he does not have Contract of Repurchase One "repurchases" only what one has previously sold. In other words, the right to repurchase presupposes a valid contract of sale between the same parties. Undisputedly, Anacleto Nool acquired title to the property from DBP, and not from Spouses Almojera. Right to Repurchase Bassed on Homestead Conchitina also base their alleged right to repurchase on Sec. 119 of the Public Land Act 25 and an implied trust relation as "brother and sister." The Court notes that Victorino Nool and Francisco Nool mortgaged the land to DBP. The brothers, together with Conchita Nool and Anacleto Nool, were all siblings and heirs qualified to repurchase the two parcels of land under Sec. 119 of the Public Land Act which provides that "(e)very conveyance of land acquired under the free patent or homestead provisions, when proper, shall be subject to repurchase by the applicant, his widow or legal heirs, within a period of five years from the date of conveyance." Assuming the applicability of this statutory provision to the case at bar, it is indisputable that Anacleto Nool already repurchased from DBP the contested properties. Hence, there was no more right of repurchase that his sister Conchita or brothers Victorino and Francisco could exercise. 2. No estoppel. Anacleto Nool cannot be estopped from raising the defense of nullity of contract, specially in this case where they acted in good faith, believing ' that indeed Conchitina could sell the two parcels of land. Article 1410 of the Civil Code mandates that "the action or defense for the declaration of the inexistence of a contract does not prescribe." It is a well-settled doctrine that "as between parties to a contract, validity cannot be given to it by estoppel if it is prohibited by law or it is against public policy. Spouses Almojera has the obligation to return the P30,000 that Anacleto paid.

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CIVIL LAW REVIEW 2 DIGESTS ON CONTRACTS #39 Mendoza v. CA (1997) (Benjie)

Topic: Art 1374 (Acceleration Clause) Doctrine: The provisions of a contract must not be viewed in isolation, but must be harmonized with each other so as to give effect and meaning to the entire contract. Facts of the Case Petitioner and her husband signed a promissory note dated July 10, 1978, for US$35,000.00 in favor of private respondents Thomas and Nena Asuncion, in Los Angeles, California, U.S.A. The three contested statements in the promissory note are as follows: 1. For value received, the undersigned SERGIO E. MENDOZA and NATALIA S. MENDOZA, husband and wife, promise to pay THOMAS B. and NENA T. ASUNCION, husband and wife, the amount of $456.00 each month starting in April 1978 and 120 consecutive months thereafter." In April 1988, the entire balance of principal and accrued interest then remaining unpaid shall be due and payable. Should default be made in the payment of the interest and principal when due, the entire balance of principal and interest then remaining unpaid shall become immediately due at the option of the holder of this note.

2. 3.

From April, 1978 to December, 1981, petitioners made monthly payments on the promissory note to appellants in the amount of US$500.00 a month or a total of US$22,500.00. In addition, they made payments to respondents daughter in the amount of US$3,620.17. Also appellees made payments, apparently also for the benefit of appellants, in the total amount of US$1,560.00 to Regina Pangan and/or Teresita Angeles. The payments to Helen Asuncion in the amount of US$3,620.17 and to Regina Pangan and Teresita Angeles in the amount of US$1,560.00 or a total amount of US$5,180.17 paid to both, were apparently made during the year 1982. The amount of US$5,180.17 roughly equals a month payment of US$500.00 from January to October, 1982, a period of ten (10) months. In October, 1982, appellees stopped paying the monthly installments under the promissory note. After October 19, 1982, petitioners made additional payments in 1982. The respondents filed an action for the collection of the amount as stated in the PN. The RTC dismissed the case for lack of cause of action. The CA reversed the RTC, holding that the acceleration clause gave private respondents the right to collect the full amount of the promissory note. Petitioner contends that upon failing to pay the agreed amounts on the stipulated dates, she can invoke the second statement and, thus, justify the settlement of the unpaid principal and interest upon the maturity date in April 1988. Issue: Is petitioners reliance on the second sentence of the PN correct? Held: NO! Article 1374 of the Civil Code provides that the various stipulations of a contract shall be interpreted together, attributing to the doubtful ones that sense which may result from all of them taken jointly. As ordinarily understood, the first statement stipulates the month-to-month payment of the principal and the accrued interest. The second statement provides for the discretionary exercise of leniency by private respondents. However, a definite deadline is fixed - April 1988 - when all obligations then unpaid shall become due and payable. The third statement is solely for the benefit of the private respondents if ever they choose to accelerate the total amount of the obligations upon default in the payment of any of the installments. In short, the creditors are given by the promissory note two options in case of default by the debtor: one, to wait for April 1988 before collecting the unpaid installments; and two, to invoke the acceleration clause and collect the entire balance immediately without waiting for April 1988. The option is granted to the creditors (herein private respondents) and not to the debtor (herein petitioner).

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CIVIL LAW REVIEW 2 DIGESTS ON CONTRACTS

As correctly found by the CA, if petitioner were permitted to enforce only the second statement of the promissory note, the two other provisions dealing with the payment of monthly installment and optional acceleration clause would be rendered nugatory. Petitioners interpretation of the promissory note is one-sided and beyond what was clearly stipulated in the note. The second sentence can be properly understood only as granting the creditors herein private respondents - a right to waive or defer collection of the monthly payments when they become due; it cannot be construed as conferring on the debtor the right to default on the monthly payments. Furthermore, the Civil Code provides that subsequent or contemporaneous acts of the contracting parties shall be considered in judging their intention. It should be noted that every month from April 1978 until October 19, 1982, petitioner faithfully paid the amount of US$500.00. Such monthly payments show petitioners concurrence with her obligation stipulated in the first statement. She cannot later be permitted to renege on such obligation and to elect a new term of payment. Under the doctrine of estoppel, an admission or representation is rendered conclusive upon the person relying thereon. A party cannot be allowed to go back on his/her own acts and representations to the prejudice of the other party who, in good faith, relied upon them.

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CIVIL LAW REVIEW 2 DIGESTS ON CONTRACTS #40 GUZMAN, BOCALING & CO., petitioner vs. RAOUL S. V. BONNEVIE, respondent. G.R. No. 86150 March 2, 1992 (Farah) Facts of the Case Respondents Raoul S. Bonnevie and Christopher Bonnevie were lessors of a parcel of land with two buildings constructed thereon belongings to the Intestate estate of Jose L. Reynoso. In the said lease contracts, respondent lessees were given first priority "all things and conditions being equal." to purchase the same in case the lessor decides to sell the leased property. On November 3, 1976, administratrix Afria Valdez de Reynoso notified the private respondents by registered mail of her decision to sell the leased premises for P600.000.00 less a mortgage loan of P100,000.00 and the 30 day period from receipt of the letter within which respondents can exercise their right of first priority to purchase the subject property. Reynoso also notified that in the event that respondent did not exercise the said right she would expect them to vacate the property not later then March, 1977. On January 20, 1977, Reynoso sent another letter advising respondent that in view of their failure to exercise their right of first priority, she had already sold the property. Private respondents then wrote Reynoso informing that neither of them had received her letter. However, on March 7, 1977, the leased premises were formally sold to petitioner Guzman, Bocaling & Co. The Contract of Sale provided for immediate payment of P137,500.00 on the purchase price, the balance of P262,500.00 to be paid only when the premises were vacated. Thereafter, Reynoso wrote a letter to the private respondents demanding that they vacate the premises within 15 days for their failure to pay the rentals for four months. When they refuse, Reynoso filed a complaint for ejectment against them. On September 25, 1979, the parties submitted a Compromise Agreement, which provided the defendant Raoul S.V. Bonnevie shall vacate the premises subject of the Lease Contract, Voluntarily and Peacefully not later than October 31, 1979. However, as the private respondents failed to comply with the above-qouted stipulation, Reynoso filed a motion for execution of the judgment by compromise, which was granted on November 8, 1979. On November 12, 1979, private respondent Raoul S. Bonnevie filed a motion to set aside the decision of the City Court as well as the Compromise Agreement. The motion was denied and the case was elevated to the then CFI which remanded the case to the City Court of Manila for trial on the merits. While the ejectment case was pending in the City Court, the private respondents filed an action for annulment of the sale between Reynoso and petitioner Guzman, Bocaling & Co. and cancellation of the transfer certificate of title in the name of the latter. They also asked that Reynoso be required to sell the property to them under the same terms ands conditions agreed upon in the Contract of Sale which was docketed as civil case no 131461. On May 5, 1980, the City Court on the ejectment case ordered defendants to vacate the premises and to deliver possession thereof to the plaintiff, and to pay to the latter a sum of money as reasonable compensation for the continued unlawful use and occupation of said premises. Decision was appealed to the CFI and consolidated with civil case no 131461 CFI Ruling: (1) Ordered defendants Raoul S.V. Bonnevie and Christopher Bonnevie and all persons holding under them to vacate the premises and deliver possessions thereof to the plaintiff;

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CIVIL LAW REVIEW 2 DIGESTS ON CONTRACTS (2) Declared the deed of sale with mortgage executed by defendant Africa Valdez Vda. de Reynoso in favor of defendant Guzman and Bocaling null and void.; (3) Ordered cancellation of the Certificate of Title No. 125914 issued by the Register of Deeds of Manila in the name of Guzman and Bocaling & Co. (4) Ordered the defendant Africa Valdez Vda. de Reynoso to execute in favor of the plaintiff Raoul Bonnevie a deed of sale with mortgage over the property leased by him in the amount of P400,000.00 under the same terms and conditions should there be any other occupants or tenants in the premises CA Ruling affirmed the ruling of the CFI but reduced the amount of damages awarded. this petition. MR denied. Hence,

Issue: Whether or not CA erred in affirming the ruling of the CFI which ruled that grant of first priority to purchase the subject properties by the judicial administratrix needed no authority from the probate court; holding that the Contract of Sale was not voidable but rescissible; and in considering the petitioner as a buyer in bad faith ordering Reynoso to execute the deed of sale in favor of the respondent Bonnevie. Held: NO! Reynoso was guilty of violating Paragraph 20 of the Contract of Lease which specifically stated that the private respondents could exercise the right of first priority, "all things and conditions being equal." This means that there should be identity of the terms and conditions to be offered to the Bonnevies and all other prospective buyers, with the Bonnevies to enjoy the right of first priority. Hence, Reynoso could not sell it to another for a lower price and under more favorable terms and conditions. Only if the Bonnevies failed to exercise their right of first priority could Reynoso lawfully sell the subject property to others, and at that only under the same terms and conditions offered to the Bonnevies. Clearly, Reynoso violated the contract of lease when the selling price offered to and accepted by the petitioner was only P400,000.00 and only P137,500.00 was paid in cash while the balance of P272,500.00 was to be paid "when the property was cleared of tenants or occupants. The Court also agrees with the respondent court that it was not necessary to secure the approval by the probate court of the Contract of Lease because it did not involve an alienation of real property of the estate nor did the term of the lease exceed one year so as top make it fall under Article 1878(8) of the Civil Code. Only if Paragraph 20 of the Contract of Lease was activated and the said property was intended to be sold would it be required of the administratrix to secure the approval of the probate court pursuant to Rule 89 of the Rules of Court. The order authorizing the sale was duly issued by the probate court, which thereafter approved the Contract of Sale resulting in the eventual issuance of title in favor of the petitioner. That order was valid insofar as it recognized the existence of all the essential elements of a valid contract of sale, but without regard to the special provision in the Contract of Lease giving another party the right of first priority. Even if the order of the probate court was valid, the private respondents still had a right to rescind the Contract of Sale because of the failure of Reynoso to comply with her duty to give respondent the first opportunity to purchase the subject property. The respondent court correctly held that the Contract of Sale was not voidable but rescissible. Under Article 1380 to 1381 (3) of the Civil Code, a contract otherwise valid may nonetheless be subsequently rescinded by reason of injury to third persons, like creditors. The status of creditors could be validly accorded the Bonnevies for they had substantial interests that were prejudiced by the sale of the subject property to the petitioner without recognizing their right of first priority under the Contract of Lease. According to Tolentino, rescission is a remedy granted by law to the contracting parties and even to third persons, to secure reparation for damages caused to them by a contract, even if this should be valid, by means of the restoration of things to their condition at the moment prior to the celebration of said contract. It is a relief allowed for the protection of one of the contracting parties and even third persons from all injury and damage the contract may cause, or to protect some incompatible and preferent right created by the contract. Recission implies a contract which, even if initially valid, produces a lesion or pecuniary damage to someone that justifies its invalidation for reasons of equity.

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CIVIL LAW REVIEW 2 DIGESTS ON CONTRACTS It is true that the acquisition by a third person of the property subject of the contract is an obstacle to the action for its rescission where it is shown that such third person is in lawful possession of the subject of the contract and that he did not act in bad faith. However, this rule is not applicable in the case before us because the petitioner is not considered a third party in relation to the Contract of Sale nor may its possession of the subject property be regarded as acquired lawfully and in good faith. The petitioner cannot be deemed a purchaser in good faith for the record shows that it categorically admitted it was aware of the lease in favor of the Bonnevies, who were actually occupying the subject property at the time it was sold to it. Although the Contract of Lease was not annotated on the transfer certificate of title in the name of the late Jose Reynoso and Africa Reynoso, the petitioner cannot deny actual knowledge of such lease which was equivalent to and indeed more binding than presumed notice by registration. The petitioners contention that it was not aware of the right of first priority granted by the Contract of Lease is also unmeritorious since having known that the property it was buying was under lease, it behooved it as a prudent person to have required Reynoso or the broker to show to it the Contract of Lease in which Par. 20 is contained. Therefore, respondent court did not commit the errors imputed to it by the petitioner. WHEREFORE, the petition in DENIED.

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CIVIL LAW REVIEW 2 DIGESTS ON CONTRACTS #41 Jovan Land, Inc. vs. CA (Inah) Facts of the Case Petitioner Jovan Land is in the business of real estate. Its President and Chairman of the Board is Joseph Sy. Private respondent Eugenio Quesada is the owner of Q Building at the corner of Mayhaligue Street and Rizal Avenue, Sta. Cruz, Manila. Petitioner learned that private respondent was selling the property, so he made a written offer of P10.25 million. This was not accepted, so he sent a second written offer for the same price, but inclusive of the undertaking to pay the documentary stamp tax, transfer tax, registration fees and notarial charges, together with a P1million check as earnest money. This was rejected once again. He sent a third written offer for P12M with a similar check of P1M as earnest money. Annotated on the third letter was the phrase Received original, 9-4-89 beside which appears the signature of respondent Quesada. On the basis of this annotation, petitioner insists that it is proof that there already exists a vaclid, perfected agreement to sell the Mayhaligue property, so he filed a complaint for specific performance and collection fo sum of money with damages. Trial court dismissed petitioners complaint, so he filed an appeal with the CA, which was dismissed. Hence, this petition with SC. Issue: Whether there was a perfected contract between petitioner and respondent Held: Petition denied. It is a fundamental principle that before a contract of sale can be valid, the following elements must be present: a) consent or meeting of the minds; b) determinate subject matter; and, c) price certain in money or its equivalent. Until the contract of sale is perfected, it cannot, as an independent source of obligation, serve as a binding juridical relation between the parties. In the case at bench, petitioner anchors its main argument on the annotation on its third letter offer of the phrase Received original, 9-4-89 beside which appears the signature of Quesada. It also contends that the said annotation is evidence to show that there was already a perfected agreement to sell as respondent can be said to have accepted petitioners payment in the form of a check, which was enclosed in the third letter. Such an annotation by Quesada amounts to neither a written nor an implied acceptance of the offer of Joseph Sy. It is merely a memorandum of the receipt by the former of the latters offer. The requisites of a valid contract of sale are lacking in said receipt and therefore, the sale is neither valid nor enforceable. The alleged transaction is unenforceable as the requirements under the Statute of Frauds have not been complied with. Under the said provision, an agreement for the sale of real property or of an interest therein, to be enforceable, must be in writing and subscribed by the party charged or by an agent thereof.

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CIVIL LAW REVIEW 2 DIGESTS ON CONTRACTS #42 MARIA B. CHING vs. JOSEPH C. GOYANKO, JR., EVELYN GOYANKO, JERRY GOYANKO, IMELDA GOYANKO, JULIUS GOYANKO, MARY ELLEN GOYANKO AND JESS GOYANKO G.R. No. 165879 November 10, 2006 (Karl) Facts of the Case Joseph Goyanko (Goyanko) and Epifania dela Cruz (Epifania) were married, and the respondents are their children. Respondents claim that in 1961, their parents acquired a 661 sqm property in Cebu City. As they were Chinese citizens at the time, the property was registered in the name of their aunt, Sulpicia Ventura (Sulpicia). Sulpicia executed a deed of sale over the property in favor of Goyanko. In turn, Goyanko executed a deed of sale in favor of his common-law-wife Maria B. Ching. A TCT was thus issued in her name. After Goyankos death, respondents discovered the registration, and ownership, under the name of petitioner. Upon verification with the PNP Crime Lab, they found out that the signature of their father in the deed of sale was a forgery. Respondents thus filed with the RTC-Cebu a complaint for recovery of property and damages against petitioner, praying for the nullification of the deed of sale and of TCT as well as the issuance of a new one in favor of their father Goyanko (I dont know why they asked for this). In defense, petitioner claimed that she is the actual owner of the property as it was she who provided its purchase price. To disprove forgery, she presented a notary public who testified that Goyanko appeared and signed the document in his presence. The RTC dismissed the complaint holding that the signature was genuine and that the sale was valid because the money used in the purchase of the land was that of the petitioner. Being purchased for value, it cannot form part of the conjugal partnership. Moreover, it held that as there was a TCT in her name, the same is not subject to collateral, unless bad faith is shown on the part of the person appearing thereon as owner. Upon appeal to the CA, the latter reversed the RTC holding that the land is presumed to belong to conjugal partnership as there was no evidence presented to the contrary. Moreover, as the CA held, even if it be assumed that the property was not conjugal there was overwhelming evidence Goyanko and petitioner were living together as common-law husband and wife. Thus, Article 1352 of the Civil Code provides: Contracts without cause, or with unlawful cause, produce no effect whatsoever. The cause is unlawful if it is contrary to law, morals, good customs, public order or public policy. As such, the sale in favor of petitioner was void for being contrary to morals and public policy as it undermines the stability of the family, a basic social institution. Furthermore, the law prohibits spouses from selling property to each other because transfers or conveyances between spouses, if allowed during the marriage, would destroy the system of conjugal partnership, on account of undue influence. Petitioner went to the SC. Issue: WON the sale was void. Held: Yes! It was. In addition to Article 1352, Articles 1409 (void contracts) and 1490 (prohibition on sale between husband and wife) prohibit the sale. The proscription against sale of property between spouses applies even to common law relationships. It has been held that such a sale is null and void for being contrary to morals and public policy. A sale in favor of a concubine after abandonment of the family and after leaving the conjugal home where his wife and children lived and from whence they derived their support, is subversive of the stability of the family, a basic social institution which public policy cherishes and protects. Article 1409 states that: contracts whose cause, object, or purposes is contrary to law, morals, good customs, public order, or public policy are void and inexistent from the very beginning. On the other hand, Article 1352 states: Contracts without cause, or with unlawful cause, produce no effect whatsoever. The cause is unlawful if it is contrary to law, morals, good customs, public order, or public policy. Additionally, the law emphatically prohibits spouses from selling property to each other subject to certain exceptions. Similarly, donations between spouses during marriage are prohibited. And this is so because if transfers or conveyances between spouses were allowed during marriage, that would destroy the system of conjugal partnership, as it would give way to undue influence between the spouses. The prohibitions apply to a couple living as husband and wife without benefit of marriage, otherwise, the condition of those who incurred guilt would turn out to be better than those in legal union. As the conveyance in question was made by Goyangko in favor of his common- law-wife-herein petitioner, it was null and void.

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CIVIL LAW REVIEW 2 DIGESTS ON CONTRACTS

The argument that a trust relationship was created between Goyanko as trustee and her as beneficiary as provided in Articles 1448 and 1450, does not hold water because no trust was created. For petitioners testimony that it was she who provided the purchase price, the same is uncorroborated. That she may have been considered the breadwinner of the family and that there was proof that she earned a living do not conclusively clinch her claim. As to the change of theory by respondents from forgery of their fathers signature in the deed of sale to sale contrary to public policy, it does not persuade. Generally, a party in a litigation is not permitted to freely and substantially change the theory of his case so as not to put the other party to undue disadvantage by not accurately and timely apprising him of what he is up against, and to ensure that the latter is given the opportunity during trial to refute all allegations against him by presenting evidence to the contrary. In the present case, petitioner cannot be said to have been put to undue disadvantage and to have been denied the chance to refute all the allegations against her. For the nullification of the sale is anchored on its illegality per se, it being violative of the above-cited Articles 1352, 1409 and 1490 of the Civil Code. WHEREFORE, the petition is DENIED for lack of merit. Costs against petitioner. SO ORDERED

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