VALDEZ, ERNEST AARON P. DAYWALT v.

SO PING BUN

1-F

2012-78777

Obligations and Contracts

FACTS: On 1902, Teodorica Endencia executed a contracted where she obligated herself to convey to petitioner Geo W. Daywalt a tract of land in San Jose, Mindoro, as soon as (1) the title to the land be perfected by proceedings in the Court of Land Registration, and (2) a Torrens certificate be produced in Teodorias name. Both parties agreed that soon as Teodorica obtains the Torrens title, she is to deliver the same to Hongkong and Shanghai Bank in Manila, which will then forward it to the Crocker National Bank in San Francisco; petitioner, in turn, will pay a balance of P3,100. It was found that Teodorica delivered the Torrens title to defendant corporation, specifically with Father Juan Labarga. Defendant corporation owned the San Jose Estate, as well as another tract of land adjacent to the land subject to the deed of conveyance. When defendant sold the San Jose Estate, it was necessary that they rid the property of cattle, which they transferred to Teodoricas estate. Father Sanz and Teodorica entered into an agreement whereby large numbers of cattle were pastured on Teodoricas land. The plaintiff seeks to recover from defendant P24,000 as damages, for the use and occupation of the land in question. RTC: defendant corporation is liable for damages, and fixed damages at P2,497. ISSUE: Whether or not defendant corporation is liable to pay P500,000 as damages, on the ground that it unlawfully induced Teodorica to refrain from the performance of her contract for the sale of the land in question and to withhold delivery to the plaintiff of the Torrens title Whether or not a person who is not a party to a contract for sale of the land makes himslef liable for damages to the vendee, beyond the value of the use and occupation, by colluding with the vendor and maintaining him in effort to resist an action for specific performance Whether the damages which plaintiff seeks to recover are too remote and speculative to be the subject of recovery HELD: RTC decision AFFIRMED The cause of action is based on liability derived from wrongful interference of the defendant in the performance of the contract between plaintiff and Teodorica. The contention that defendants advised and prompted Teodorica not to comply with the contract of sale, were actuated by improper and malicious motives, is not sustained, because the officials may have advised her not to carry the contract into effect would not constitute actionable interference with such contract. Father Juan Labarga and his associates believed in good faith that the contract could not be enforced and that Teodorica would be wronged if it should be carried into effect. The advice was not prompted by improper motive. PLAINTIFF: Defendant made itself a co-participant with Teodorica in the breach of the contract inasmuch as Fr. Labarga aas fully aware of the existence of the contract GILCHRIST v. CUDDY COURT:

 Lumley v. Gye: common law; any person who entices a servant from his employment is liable in damages to the master masters interest in the service rendered by his employee is considered as a distinct subject of juridical right Temperton v. Russell: right of action for maliciously procuring a breach of contract is not confined to contracts for personal services, but extends to contracts in general It is enough if the wrong-doer, having knowledge of the existence of the contract relations, in bad faith sets about to break it up. The Court makes mention of legal justification, wherein if a party enters into a contract that may harm him, and a third person, with a bona fide person of benefiting the one who is under contract to go, dissuades him from performing his obligation or giving the prestation. Court applied Gilchrist in such way that it is enough that defendant use the property with notice that the plaintiff had a prior and better right. Art. 1902: Any person who, by act or omission, characterized by fault or negligence, causes damage to another shall be liable for the damage done. However... Art. 1257: Contracts are binding only between the parties and their privies. A stranger to a contract has no right of action for the nonfulfillment of the contract except in the case especially contemplated in the second paragraph of the same article. Manila Railroad Co.: a contract, when effectially entered into between certain parties, determines not only the character and extent of the liability of the contracting parties but also the person or entity by whome the oblifation is exigible. The stranger cannot become more extensively liable for damages in excess of those that could be recovered against the immediate party to the contract would lead to results at once grotesque and unjust. Gilchrist, Lumley, do not apply. Extent of liability for the breach of a contract must be determined in light of the situation in existence at the time the contract is made, and the damages ordinarily recoverable are in all events limited to such as might be reasonably foreseen, in light of the facts then known to the contracting parties Hadley v. Baxendale: difference between ordinary damages & special damages Ordinary: found in ALL breaches of contract where there are no special circumstances to distinguish the case specially from all other contracts; presumed from the immediateness and inevitableness of the damage, and the recovery of such damage follows as a necessary legal consequence of the breach SPECIAL: found in case where some external condition, apart from the actual terms to the contract exists or intervenes, as it were, to give a turn to affairs and to increase damage in a way that the promisor, without actual notice of that external condition, could not reasonably expected to foresee RULE: Before special damages can be recovered , plaintiff must show that the particular condition which made the damage possible and likely consequence of the breach was known to the defendant when the contract was made. This rule is supplemented by the proposition that where the damage which a plaintiff seeks to recover as a special damage is so far speculative as to be in contemplation of law remote, notification of the special conditions which make that damage possible cannot render the defendant liable therefor. Such condition must be made the subject of a contract in such sense as to become an express or implied term of the engagement. SO PING BUN v. Court of Appeals

FACTS: In 1963, Tek Hua Trading Co., through its managing partner, So Pek Giok, entered into (4) contracts of lease with Dee C. Chuan& Sons, Inc. (DCCSI) over (4) lots in Binondo, Manila. Contract stipulated that they were for (1) year; rent to be paid monthly after that. Tek Hua used it as a warehouse for textiles. Contracts expired and were not renewed. Tek Hua was dissolved in 1976, and Manuel Tiong formed Tek Hua Enterprises Co, while So Pek Gioks grandson, So Ping Bun, occupied the warehouse for his own textile business, Trendsetter Marketing. On 8/1/1989, DCCSI sent various letters to Tek Hua Enterprises informing them of the increases in rent, as well as a notice that failure to accomplish said contracts will indicate lack of interest on lessees part. Private respondents did not answer any of the letters but contracts were not rescinded. On 3/1/1991, Tiong wrote So Ping Bun, asking him to vacate the premises as he will use the same as a warehouse for his own textile business. Petitioner refused to vacate and demanded the contracts from DCCSI. Tek Hua filed for a nullification of the lease contracts between DCCSI and petitioner. RTC: ruled in favor of Tek Hua, and ordered So Ping Bun to pay P500,000 as attorneys fees, as well as costs CA: affirmed the RTC and modified the decision by reducing the P500,000 to P200,000 ISSUE: Whether or not the Court of Appeals erred in affirming the RTC decision finding So Ping Bun guilty of tortuous interference of contract HELD: Petition DENIED; CA decision AFFIRMED with MODIFICATION that attorneys fees are reduced to P100,000 One becomes liable in an action for damages for a nontrespassory invasion of anothers interest in the private use and enjoyment of asset if (a) The other has property rights and privileges with respect to the use and enjoyment interfered with; (b) The invasion is substantial (c) Defendants conduct is a legal cause of the invasion; and (d) Invasion is either intentional and unreasonable or unintentional and actionable under general negligence rules Elements of tort interference: (1) Existence of a valid contract (2) Knowledge on the part of the 3rd person of the existence of contract (3) Interference of 3rd person is without legal justification or excuse In torts, cause of action ex delicto may be predicated upon an unlawful interference by one person of the enjoyment by the other of his private property. Trendsetter asked DCCSI to issue contracts in its favor, prejudicing Tek Huas property rights. Three elements of tort interference are present. Gilchrist: when the impulse behind ones business conduct lies in a proper business interest rather than wrongful motives, a party cannot be a malicious interferer

CC Sec. 1314: Any third person who induces another to violate his contract shall be liable for damages to the other contracting party. PETITIONER: damage is an essential element of tort interference, and the RTC & CA did not award such COURT: lower courts did not award such damages because they were not quantifiable LAGON v. CA FACTS: On 6/23/1982, Jose Lagon purchased two parcels of land from the estate of Bai Tonina Sepi. Private respondent Menandro Lapuz filed a complaint for torts and damages against petitioner, after finding out the latter represented himself as the new owner of the property and collected rentals from the tenants. Lapuz had entered into a contract of lease with Bai Tonina Sepi Mengelen Guiabar over the (3) parcels of land, and it was agreed upon that Lapuz would put up commercial buildings which would be leased to new tenants. Petitioner avers that he did not induce the heirs of Bai Tonina to sell the property to him, because the heirs were in dire need of money to pay off the obligations of the deceased. He also denied interfering with private respondents leasehold rights as there was no lease contract covering the property when he purchased it. Personal investigation and inquiry revealed no claims of encumbrances on the said lots. He claimed that he went to the lawyer who notarized the lease contract, and the latter furnished (4) lease contracts which were unsigned. Petitioner said he only knew of the alleged lease contract when he was informed that private respondent was collecting rent from the buldings tenants. RTC: declared that the Contract of Lease executed by Bai Tonina Sepi was in favor of private respondent, and that the latter the lawful owner of the commercial buildings found on the aforesaid lots. It also asked private respondent to pay the rentals of the commercial buildings on the lots covered by the Contract of Lease to plaintiff, as well as moral, actual, exemplary, temperate, and nominal damages, with attorneys fees and interest. CA: deleted damages, reduced attorneys fees to P30,000, ordered petitioner to pay actual damages the sum of P178,425 as actual damages, minus P42,700, representing rentals due the defendant computed at P700/month from August 1978 to August 1983 ISSUE: Whether or not the purchase by petitioner of the subject property, during the supposed existence of private respondents lease contract with the late Bai Tonina Sepi, constituted tortuous interference for which petitioner should be held liable for damages HELD: Petition is GRANTED, CA decision REVERSED and SET ASIDE Article 1315: any person who induces another to violate his contract shall be liable for damages to the other contracting party. This is tort interference, and is penalized because it violates the property rights of a party in a contract to reap the benefits that should result therefrom So Ping Bun: the elements of tort interference are: (a.) Existence of a valid contract private respondent presented in court a notarized copy of the purported lease renewal, but the notarization only proved its due execution and delivery, but NOT the veracity of its contents

Knowledge on the part of the third person of the existence of the contract personal investigation and inquirt unearthed no suspicious circumstance that would have made a cautios man probe deeper and watch out for any conflicting claim over the property. The entire propertys title bore NO indication of the leasehold interest of private respondent. Registry of property had no record of the same. (c.) Interference of the third person without legal justification or excuse the records did not support the allegation of private respondent that petitioner induced the heirs of Bai Tonina Sepi to sell the property to him. The decision of the heirs of the late Bai Tonina Sepi to sell the property was completely of their own volition and that petitioner did absolutely nothing to influence their judgment. Private respondent did not proffer any evidence to support his claim. Even assuming that private respondent was able to prove the renewal of his lease contract with Bai Tonina Sepi, he was unable to probe malice or bad faith on the party of petitioner purchasing the property, and thus the tortuous interefence was never established. So Ping Bun: justification for interfering with the business relations of another exists where the actors motive is to benefit himself. Such justification does not exist where the actors motive is to cause harm to the other. It is not necessary that the interferers interest outweight that of the party whose rights are invaded, and that an individual acts under an economic interest that is substantial, not merely de minimis, such that wrongful and malicious motives are negatived, for he acts in self-protection The case is one of damnun absque injuria (damage without injury). There can be damage without injury where the loss or harm is not the result of a violation of a legal duty. The consequences must be borne by the injured person alone since the law affords no remedy for damages resulting from an act which does not amount to legal injurt or wrong. GSIS v. CA FACTS: On 1965, petitioner and private respondent entered into a Deed of Conditional Sale, after the latter won a lottery draw conducted by the former, which allocated lots and housing units in Project 8-C of Village. The Deed of Conditional Sale stipulated that the purchase price was at P19,470, payable over a 15-year period in 180 equal monthly installments at P168.53 each. Three years elapsed before the deeds were notarized and given to private respondents. In 1966, after the land development and housing construction over the subject lots were completed, petitioners Board of Trustees increased the purchase price indicated in the Deed of Conditional Sale based on the alleged final cost of the construction of the GSIS Village. The Leuterio spouses alleged that this notation was not in the deed when they signed the same on 1965. The RTC found that the appended words were inserted into the document without the knowledge of consent of the Leuterio spouses. In the early 1970s, respondent and parties who were affected by such insertion brought suit against petitioner, questioning the increase in purchase price. They wrote A Plea For Justice to then President Ferdinand E. Marcos, requesting for a directive to petitioners management to accept payments of amortization installments on the original amounts stated in the Deed(s) of Conditional Sale. The Office of the President created an Ad Hoc committee, which found that the final cost of the Village justified a higher price range for the houses and lots in the prohect. Petitioner increased the purchase prices of the houses and lots in the GSIS Village.

(b.)

The private respondents, after paying off the monthly amortizations and real estate taxes, informed petitioner and compelled the same to execute the final Deed of Sale over the subject property in private respondents favvor. RTC: decided in favor of the Leuterios CA: upheld the RTC on the basis of the estoppel ISSUE: Whether or not the spouses Leuterio agreed to the notation subject to adjustment pending approval of the Board of Trustees HELD: Petition dismissed The trial court was correct when it found that the purchase price agreed upon by the parties was P19,470 and this agreement was not made subject to any posterior event or condition. The finding of fact was based on the explicit testimony of private respondent Raul Leuterio that when he and his wife signed the Deed of Conditional Sale in 1965, the notation was not in the deed. Answer of petitioner to the Complaint of private responded also admitted the nonexistence of such notation at the time of signing. The spouses did not givew their consent to make a unilateral upward adjustment of this purchase price depending on the final cost of the construction of the subject house and lot. Art. 1473: The fixing of the price can never be left to the discretion of one of the contracting parties...

PROFESSIONAL ACADEMIC PLANS, INC. V. DINNAH CRISOSTOMO FACTS: Respondent was the District Manager for PAPI. She did not receive salary but was entitled to a franchise commission equivalent to 10% of the payments on remittances of clients whose contracts or agreements had been negotiated by her, for, and in behalf of PAPI. She was promoted as regional manager. Petitioner wrote the AFP Savings and Loan Association, Inc., offering an Academic Assistance Program for its members, their children, and dependents. On 11/9/1988, AFPSLAI and PAPI executed a MOA in connection with scholarship funding agreements to be entered into by PAPI and AFPSLAI members. The Agreement shall embody the provisions of the Professional Academic Program Agreement. Commission was offered to respondent. PAPI asked for the reduction of respondents franchise commission to 2% for operational expenses, to respondent agreed, provided it was stipulated into writing. On 2/7/1991, petitioner Dino (of PAPI) signed a Memorandum which stipulated respondents 2% franchise commission, provided she maintains her connection with the company. Petitioner received her commission until 10/91, until Col. Victor M. Punzalan and decided to review the 1988 MOA. The AFPSLAI resumed its remittances of the installment payments of its members to PAP in June 1992, but respondent was not given her commission. The AFPs InterOffice Memorandum terminated her franchise commission for the following reasons: The new AFPSLAI management cancelled the 10/1991 MOA due to various anomalies and misrepresentations committed by PAPIs sales force

 New MOA is largely due to managements effort; Franchise guidelines as per the 11/1988 MOA prescribed thati n order to maintain her franchise, 100 new paid plans shoud be completed; respondent was not able to meet such parameter from 11/1991 to 5/1992. Respondent proposed that she (1) settle for P5M and sever her ties with PAPI; or (2) PAPI retains her 2% franchise commission even if and when she is no longer connected with PAPI, for as long as AFPSLAI is still doing business with PAPI. Respondent was placed under preventive suspension in order to abort any untoward reaction resulting from the denial of her request. Respondent filed a complaint for sum of money and damages against petitioners. Petitioners: (1) she was not entitled to the franchise commission because she did not participate in the execution of the 1988 MOA; (2) she was unable to meet the 100 new paid plans requirement from 11/1991 to 5/1992; and (3) AFPSLAI did not resume payments in 1992 but entered into a new MOA RTC: decided in favor of Crisostomo CA: affirmed the RTC the letter of Col. Punzalan did not indicate any intention to abrogate the first MOA, but merely suspended the acceptance of the application for pre-need plans while a thorough review of the terms and conditions of the first MOA was being made there was no incompatibility with the 1st MOA that would extinguish it. What was issued in 1992 was a mere modification of the 1st MOA fact that military and political support intervend in facilitating the revival of the AFPSLAI account was of no moment requirement of completing 100 new plans monthly as a condition for respondent to be entitled to the commission was superseded by the 2/7/1991 Memorandum, which slashed petitioners commissioner to 2% ISSUE: Whether or not respondent is entitled to her franchis commission HELD: Petition DENIED, CA decision AFFIRMED with MODIFICATION as to the deletion of moral and exemplary damages, as well as attorneys fees The letter of Col. Punzalan to PAPI indicates that it merely signified the suspension of the acceptance of new applications under the 1st MOA, until such time that a thorough study was undertaken, and a new agreement mutually beneficial to both parties was entered into. Petitioners failed to adduce evidence to prove that AFPSLAI agreed to rescind the 1st MOA. Parties merely made substantial modifications to the first MOA, and agreed that only those provisions inconsistent with those of the second were considered rescinded, modified, or superseded. The franchise commission hinged on two conditions only: (1) that respondent remain connected wdith the company (2) that it is non-transferable Art. 1308: once a contract is entered into, no party can renounce it unilaterally or without the consent of the other MANILA RAILROAD CO. v. LA COMPANIA TRANSATLANTICA and THE ATLANTIC GULF & PACIFIC CO. FACTS:

In 1914, the steamship Alicante, belonging to Compania, arrived at Manila with two locomotive boilers, property of Manila Railroad. The equipment of Compania was not sufficiently strong to discharge the boilers, and they had to contract assistance from Atlantic. A certain Leyden was put in charge of supervising the transfer of the boilers. In the process of discharging the boilers, the sling of the crane was unfortunately adjusted near the middle of the boiler, and was raised in a nearly horizontal position. A mishap ensued which caused the boiler to fall. The boiler and the crane were damaged, and the former had to be returned to London for repairs. The Railroad Company suffered damages which cost P23,343.29. The Railroad Company instituted a suit to recover against the Steamship Company, and the latter caused Atlantic to be brought in as co-defendant. The Steamship Company insisted that liability be shifted to Atlantic, because it undertook to discharge the boilers and was responsible for the damage. CFI: in favor of the plaintiff and against ATLANTIC, and absolved Steamship The lower court found that Leyden was grossly negligent, failing to exercise the degree of care which an ordinarily competent and prudent person would have exhibited under the circumstances which then confronted him ISSUE(s): Whether or not the steamship company liable to the plaintiff by reason of having delivered the boiler in question in a damaged condition There are (2) contracts for consideration: (1) The contract between the railroad and the steamship companies; and (2) The contract between the steamship and the atlantic companies In the 1st contract, the steamship company is liable for all the damages the boiler sustained while it was being delivered from the ship. Citing Article 1258, the steamship company had the obligation to transport the boiler, and that obligation necessarily involved the duty to convey and deliver it in a proper condition according to its nature, and conformably with good faith, custom, and the law. This was not complied with. The steamship company cannot escape liability even if it contracted the help of a third party. As regards the 2nd contract in question, the atlantic company interposes the defense that (1) the terms of the engagement in accordance with which the atlantic company agreed to render the service, all risk incident to the discharge of the boilers was assumed by the steamship company; and (2) it should be absolved under Article 1903, because it used due care in the selection of the employee whose negligent act caused the damage in question. The contract entered into stipulated that (1) Atlantic Company apply due care; and (2) that there be a reservation concerning the companys liability for damage. Atlantic wrote the steamship company some letters, to which the intention of the atlantic company was ascertained: that the Atlantic company recognized its duty to exercise due supervisory care, and that there be an exemption from liability due to some unforeseen defect in the lifting apparatus or other unforeseen occurrence not directly attributable to the negligence of the company in lifting operations. The contract, however, does not cover this exemption. Art. 1596 the contractor is responsible for the work executed by persons whom he employs in its performance

Art. 1103 liability resulting from negligence is demandable in the fulfillment of all kinds of obligations A person may stipulate against liabilit yfor the consequences of negligence, at least in those cases where the negligence is not gross or willful, but the contract conferring such exemption must be so clear as to leave no room for the operation of ordinary rules of liability consecrated by experience and sanctioned by the express provisions of law. It can be gleaned upon that the contract will allow the atlantic company to perform its tasks in any manner and fashion it may please, and to hold it harmless from the consequences. That the atlantic company is bound to exercise due care must also be given legal effect. Whether or not the Atlantic company is liable to be made to respond to the steamship company for the amount the latter may be required to pay to the plaintiff for the damage done As for the issue whether the atlantic company should be absolved, because it had exercised the due care and diligence needed, has no merit, because the obligation was created by a contract, and Article 1903 does not apply, because the provision in question applies only in cases where negligence arises in the absence of agreement. Whether or not the Atlantic company is directly liable to the plaintiff The Railroad Company has no right to recover from the Atlantic Company. The Atlantic Company cannot incur a double responsibility upon performance, namely, a responsibility to the party with whom he contracted, and another responsibility to the owner, based on an implied contract/quasi-contract. These liabilities cannot co-exist. An implied contract never arises where an express contract has been made. The contract made was determinative of the character, extent of liability, and the persons or entities by whom the obligation is eligible. DKC Holdings Corp. v. Court of Appeals FACTS: On 3/16/1988, petitioner entered into a Contract of Lease with option to by with Encarnacion Bartolome. Petitioner was given the option to lease or lease with purchase the subject land, an option which must be exercised within (3) years from the signing of the contract; petitioner undertook to pay P3,000/month as consideration for the reservation of option. Petitioner shall serve formal written notice upon the lessor of its desire to exercise such option. Contract provided that in case petitioner chose to lease the property, it may take actual possession of the premises.; in such an event, the lease shall be for (6) years, with 15k/month for 1st 6 years and P18k the next 6 years. Petitioner payed P3k to Encarnacion until her death, and then paid her sole heir, Victor Bartolome, who refused to accept such payments. On 1/10/90, Victor executed an Affidavit of Self-Adjudication over all the properties of Encarnacion, including the subject lot. The Registry of Deeds cancelled the TCT for DKC and issued a TCT in Victors name. After Victor refused to receive payments on 3/14/90, petitioner opened a savings account for Victor Bartolome in China Savings Bank, and deposited the P15k rental as well as 2 months worth of reservation fees. Petitioner tried to register and annotate the Contract on the Title of Victor to the property, but the Registry of Deeds refused to register or annotate the same. On 4/23/90, petitioner filed a complaint for specific performance and damages against Victor. One Andres Lanozo filed a Motion for Intervention with Motion to Dismiss, who claimed he has

been a tenant-tiller of the subject land for 45 years already, and invoked the Comprehensive Agrarian Reform Law to protect his rights that would be affected by the case. RTC: referred case to the DAR, who referred it to the Valenzuela RTC. It dismissed Lanozos Motion for Intervention, dismissed the complaint, and ordered Victor to pay P30k. CA: ISSUES: Whether or not the Contract of Lease with Option to Buy entered into by the late Encarnacion Bartolome with petitioner was terminated upon her death or whether it binds her sole heir, Victor, even after her demise HELD: Petition GRANTED, CA decision SET ASIDE Art. 1311: Contracts take effect only between the parties, their assigns, and heirs, except in cases where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation, or by provision of law. The heir is not liable beyond the value of the property he received from the decedent. GENERAL RULE: Heirs are bound by contracts entered into by their predecessors-in-interest EXCEPT when the rights and obligations arising therefrom are not transmissible by (1) their NATURE, (2) STIPULATION, or (3) PROVISIONS of LAW. There is neither contractual stipulation nor legal provision making the rights and obligations under the contract instransmissible. The nature of the rights and obligations therein are, by their nature, transmissible. Another GOOD MEASURE: may the promissors personal representative perform the obligation? If not, obligation is discharged by death There is no personal act required from the Encarnacion. The only obligation was to deliver possession of the subject property to petitioner upon execise by the latter of its option to lease, and this can be performed by Victor. Victor cannot insist that he is not a party to the contract because of the clear provision of Article 1311 of the Civil Code. The subject matter of the contract is a lease, a property right, and death of a party does not excuse nonperformance of a contract which involves a property right, and the rights and obligations thereunder pass to the personal representatives of the decease. Nonperformance is not excused by the death of the party when the other party has a property interest in the subject matter of the contract. Whether petitioner had complied with its obligations under the contract and with the requisites to exercise its option YES The petitioner paid the reservation fees during the two-year period within which it had the option to lease or purchase the property. These were also admitted by Victor in the transcripts. Petitioner paid its rent, and complied with its duty to inform the other party of its intention to exercise its option to lease throught its 3/12/1990 letter within the period that their contract allowed. HERMANOS v. ORENSE FACTS: On 3/5/1913, petitioner filed a complaint against defendant over a parcel of land in Guinobatan, Albay, after the latters nephew Jose Duran sold, without the latters consent, executed a notarial instrument whereby he sold the subject land to the former for P1,500, with a right to repurchase within a period of 4 years. Defendant refused to ratify the pinstrument. Duran was insolvent, and could not reimburse plaintiff of the amount borrowed and the damages occasioned by the

sale. Defendant refused to deliver the property to the plaintiff, in spite of continuous demands made upon him. Plaintiff prayed that the land and improvements in question belong legitimately and exclusively to the plaintiff, and the execution of the said instrument of transfer and conveyance of the property and of a ll the right, interest, title and share which the defendant has therein, among others. Defendant interposed that (1) the facts set forth in the complaint, with respect to the execution of the deed, did not constitute a cause of action, and (2), that defendant was the lawful owner of the property claimed in the complaint, as his ownership was recorded in the property resgistry, and since his title had been registered under proceedings in rem prescribed by Act No, 496, the rights acquired by Jose Duran prior to such registration could not now prevail. Defendant asseverated that he had not executed any written power of attorney nor given any verbal authority to Duran to sell the property to the plaintiff, and that his knowledge of the sale was acquired long after the execution of the contract of sale between Duran and plaintiff, and that he did not intentionally and deliberately perform any act such as might have induced plaintiff to believe that Duran was empowered and authorized by the defendant. Defendant refused to deliver the property to the purchases after four years, as well as pay the rent stipulated. Defendant refuses because he had been and was the owner of the said property, which was registered in his name in the property registry. Neither did he verbally authorize Duran nor perform no such act such as might have induced plaintiff to believe Duran was empowered and authorized by defendant to effect said sale. Plaintiff filed a case of estafa against Duran. Orense, as a witness, testified he consented. RTC: ACQUITTED Duran based on Orenses testimony ISSUE(S): Whether Orense should convey the subject land to Hermanos, given that the former gave his nephew the power of agency to do so HELD: RTC judgment AFFIRMED Orense must deliver the land to Hermanos because he consented to the said sale, verbally and impliedly conferring the power of agency to his nephew. He approved of his nephews action, and produced an express authorization to make the said sale. Article 1259: No one can contract in the name of another without being authorized by him or without his legal representation according to law. Orenses sworn statement virtually confirmed and ratified the sale of his property effected by his nephew, and pursuant to Article 131, remedies all defects which the contract may have contained from the moment of its execution. Sale of the property was null and void at the beginning, but became cured of the defect of the validity after Orense stated that he conferred the power of agency under oath. The right of action for nullification under Article 1309 became extinguished as well. Orense is now put on estoppel to deny that admission, to the prejudice of Hermanos, who gave P1,500 for the property. Duran also showed the contract of sale executed in a public instrument, which shows that Orense gave his consent to such. FLORENTINO v. ENCARNACION FACTS:

On 5/22/1964m petitioners-appellants and petitioners-appellees filed with the CFI of Ilocos Sur an application for the registration under Act 496 of a parcel of agricultural land located in Ilocos Sur. The application alleged among other things that the applicants are the common and proindiviso owners of the said land and that there is no mortgage, lien, or encumbrance of any kind whatever affecting said land, nor any other person having any estate or interest thereon, kegak ir equitable, and that said applicants had acquired the land through inheritance from their aunt, Dona Encarnacion Florentino. However, the deed of extrajudicial partition stipulated pour autrui that the products of the parcel of land will be used to defray the destination of the carts of several religious entities; whatever will be left will be given to the heirs. Applicant Miguel Florentino asked the court to include said stipulation, but petitionersappellees opposed such entry manifesting to withdraw their application on their respective shares of the land sought to be registered. Petioners-appellants opposed such withdrawal. The applicants admitted that (1) the products of the land have been used in defraying payments for the religious functions specified in the deed; (2) such arrangements was not registered in the office of the Register of Deeds; (3) all applicants know of the existence of this arrangement; and (4) the deed of extrajudicial partition was not signed by Angel Encarnacion or Salvador Encarnacion. CFI: dejied petitioners-appelles motion to withdraw for lack of merit; found that petitionerappellees proposition of encumbrance is without merit because the arrangement was a pure and simple donation, and is void because the Church has not accepted the donation; also held that Salvador Jr. and Angel had made no oral or written grants at all The Escritura de Particion Extrajudicial can be revoked as in fact the oppositors did revoke such by acts accompanying their refusal to have the same appear as an encumbrance on the title to be issued; that, if the stipulation is a stipulation pour autrui, it cannot be enforced because the Church has not communicated its acceptance ISSUE(S): Whether or not the lower court erred in concluding that the stipulation embodied in the Escritura de Particion Extrajudicial is just an arrangement stipulation, or grant revocable at the unlateral option o the coowners Whether or not the lower court in finding and concluding that the encumbrance or religious expenses embodied in such stipulation is binding only on plaintiff-appellees Whether or not the lower court, as a registration court, erred in passing upon the merits of the encumbrance as the same was never put to issue as the question involved is an adjudication of rights of the parties HELD: CFI decision AFFIRMED with MODIFICATION to allow the annotation of Exhibit O-1 as an encumbrance on the face of the title to be finally issued in favor of all the applications in the registration proceedings Exhibit O was duly agreed and signed by the parties, and must bind the contracting parties thereto, and its validity or compliance cannot be left to the will of one of them. Art. 1311, paragraph 2: If a contract should contain a stipulation in favor of a third person, he may demand its fulfillment provided he communicated his accpetance to the obligor before its revocation. A mere incidental benefit or interest of a person is not sufficient. The contracting parties must have clearly and deliberately conferred a favor upon a third person.

A stipulation pour autrui is a stipulation in favor of a third person conferring a clear and deliberate favor upon him, and which stipulation in favor of a third person conferring a clear and deliberate favor upon him, and which stipulation is merely a part of a contract entered into by the parties, neither of whom acted as agent of the third person, and such third person and can demand its fulfillment provided he communicates this to the obligor before it is revoked. Requisites of a stipulation pour autrui: (1) Stipulation pour autrui should be a part, not the whole, of the contract (2) That the favorable stipulation should not be conditioned or compensated by any kind of obligation whatever (3) Neither of the contracting parties bears the legal representation or authorization of the 3rd person To constitute a valud stipulation pour autrui, it must be the purpose and intent of the stipulating parties to benefit the third, and it is not sufficient that the third person may be incidentally benefited by the stipulation. The fairest test to determine whether the interest of the third person in a contract is a stipulation pour autriui or merely an incidental interest is to determine the intention of the parties as disclosed by their contract. Evidence on record that the true intent of the parties is to confer a direct and material benefit upon the Church. The fruits of he aforesaid land were used to defray the expenses of the Church in preparation and celebration of the Holy Week, an annual Church function. The trial court erred in holding that the stipulation, arrangement or grant is revocable at the option of the coowners. The Church accepted the stipulation in its favor before it is sought to be revoked by some of the co-owners. The Church has been enjoying the benefits of such stipulation even before Dona Encarnacion died. Encarnacion, must bear being a signatory to the Deed of Extrajudicial Partition embodying such beneficial stipulation. Angel and Salvador Jr. are also bound to the agreement, being subsequent purchasors, privies, and successors interest. COQUIA v. FIELDMENs INSURANCE CO., INC. FACTS: On 12/1/1961, appellant issued a common carrier accident insurance policy in favor of Manila Yellow Taxicab. The policy stipulated that the insurer will indemnify the insured in the event of accident caused by or arising out of the use of Motor Vehicles in respect of death of bodily injury to any fare-paying passenger including the driver, the conductor, and/or inspector who is riding the motor vehicle at the time of the accident or injury. On 2/10/1962, a taxicab of the Insured, driven by Carlito Coquia, met a vehiculat accident in Pangasinan, in consequence of which Carlito died. The Insured filed a claim for P5,000, to which the appellant interposed with an offer of P2,000 by way of compromise. The Insured rejected the offer and made a counter-offer for P4,000, which appellant did not accept. The insureds parents filed a complaint against appellant to collect the proceeds of the afrementioned policy. The Company admitted the existence of the policy, but pleaded lack of cause of action on the part of the plaintiffs. RTC: rendered decision in favor of plaintiffs ISSUE(S):

Whether or not the Coquias have a contractual relation with the Company Whether or not the Insured has not complied with the provisions of the policy concerning arbitration HELD: Only parties to a contract may bring an action based thereon. This rule is subject to exceptions, one of which is found in the second paragraph of Article 1311 of the Civil Code: If a contract should contain some stipulation in favor of a 3rd person, he may demand its fulfillment provided he communicated his acceptance to the obligor before its revocation. A mere incidental benefit or interest of a person is not sufficient. The contracting parties must have clearly and deliberately conferred a favor upon a third person. The contract is a typical contract pour autrui. The policy provides that the company will indemnify the insured in the event of accident caused by or arising out of the use of Motor Vehicle, in cases of death or bodily injury to any fare-paying passenger, including the driver, who is riding the motor vehicle insured at the time of accident or injury. The conditions of such policy also state the same, and can provide an option to make indemnity payable directly to the claimants or heirs of claimants, with or without securing the consent of or prior notification to the Insured, it being the true intention of the policy to protect the liabilities of the insured towards the passengers of the motor vehicle and the public. Further, the deceased driver paid 50% of the corresponding premiums, deducted from his weekly commissions. The Coquias have a direct cause of action, as sole heirs of the deceased. They could properly join Manila Yellow Taxicab in filing the complaint. As to the defense regarding arbitration, none of the parties to the contract invoked Section 17, which pertained to a decision of a single arbitrator, or two arbitrators, with respect to the amount of the Companys liability. St. Louis County v. A. Hedenberg: the test for determining whether there has been a waiver in a particular case is stated by...: Any conduct of the parties inconsistent with the notion that they treated the arbitration provision as in effect, or any conduct which might be reasonably construed as showing that theu did not intend to avail themselves of such provision, may amount to a waiver thereof and estop the party charged with such conduct from claiming its benefits. CONSTANTINO v. ESPIRITU FACTS: Appellant filed a complaint, alleging that he had, by a fictitious deed of absolute sale annexed thereto, conveyed to appelle on 10/30/1953 (4) subdivision lots and a (2)-storey house for a consideration of P80,000. The understanding was that appellee would hold the properties in trust for their illegitimate son, Pastor Constantino Jr., still unborn at the time of the conveyance. Appellee mortgaged said properties to the Republic Savings Bank of Manila twice to secure payment of (2) loans, one of P3,000 and the other of P,2000. The transfer certificate of title in the name of plaintiff was partially cancelled. On 12/16/1959, appellee moved to dismiss the complaint on the ground that it stated no cause of action because appellants unborn son, the beneficiary of the alleged trust, was not included as a party plaintiff, so appellants cause of action was unenforceable under the Statute of Frauds.

Appellant argued that the Statute of Frauds does not apply to the trustee and cestui que trust as in the case of appellee and her illegitimate child, and appellant would not be barred from proving by parol evidence an implied trust existing under Art. 1453 of the Civil Code. Appellee argued that appellant was invoking an implied trust and not an expressed trust. Appellant filed for a motion for the admission of an amended complaint, consisting mainly the inclusion of the minor as co-plaintiff, and appellants appointment as minors guardian ad litem. Appelle filed an opposition on the ground that such amendment was not an inclusion but a substitution of the party plaintiff, which was not allowed in this jurisdiction. RTC: found appellees motion to dismiss meritorious; complaint dismissed ISSUE(S): Whether or not petitioners illegitimate, unborn child can be included as a co-plaintiff for the suit to prosper HELD: Appealed order is set aside, case remanded to the lower court The contract between appellant and appellee was a contract pour autrui, and although couched in the form of a deed of absolute sale, appellants action was, in efect, one for specific performance. The contract involved contained a stipulation in favor of a third party which amplified the settled rule that the third person for whose benefit the contract was entered into may also demand its fukfillment provided he had communicated his acceptance thereof to the obligor before the stipulation in his favor is revoked. Only the third person for whose benefit the contract was entered into may also demand its fulfillment provided he had communicated his acceptance thereof to the obligor before the stipulation in his favor is revoked. YOUNG v. CA FACTS: Defendant is the former owner of a piece of land in Sta. Cruz, Manila, as well as a two-storey building erected thereon, consisting six units, occupied by petitioner, among others. Defendant secured an order from the City Engineer of Manila to demolish the building. Petitioner, along with other occupants, submitted a Compromise Agreement on 9/24/1981, which provided that the occupants and all persons claiming rights under them bind themselves to voluntarily and peacefully vacate the premises which they were occupying as lessees, and that, if sold, the occupants have the right of first refusal. On 9/17/1981, defendant sold the property to PH Credit Corporation, which divided the lot into two separate parcels, hence two (2) separate TCTs. PH Credit then sold to the Blessed Land Development Corporation, represented by Antonio Young, a former occupant of the parcel of land and petitioners father, the property worth 241.71 sq. m. The other parcel was sold to spouses Fong Yook Lu and Ellen Yee Fong. Petitioner, along with her co-plaintiffs, filed for the annulment of the sale, alleging that defendant and Francisco Villaroman sold the property without affording them the right of first refusal to purchase that portion of the property which they are renting. RTC: dismissed the complaint together with defendants counterclaims; grounds of which are: (1) That she was not a party to the case wherein the subject compromise agreement was submitted and approved by the trial court, she did not even affix her signature to the said compromise agreement

(2) Petitioner had failed to present any evidence to show that she had demanded from the defendants-owners, observance of her right of first refusal before the said owners sold the subject units (3) Even assuming that her supposed right of first refusal is a stipulation for the benefit of a third person, she did not inform the obligor of her acceptance as required by the second paragraph of Art. 1311 CA: dismissed for lack of merit ISSUE(S): Whether or not petitioner can enforce a compromise agreement to which she was not a party HELD: Petition DENIED for lack of merit J.M. Tuason & Co.: a person who is not party to a case is not entitled to enforce a compromise agreement to which he was not a party; a contracts effectivity is limited to the parties thereto and those mentioned in the exhibits Terms of the compromise agreement set forth that (1) Rebecca Young shall be impleaded in the action; and (2) she shall signify her written conformity thereto. The conditions were not complied with. Parties did not implead Rebecca, nor did Rebecca submit a written conformity as to the agreement. Nor did Rebecca Young affix her signature above her printed name in the Compromise Agreement, nor on the left margin of each and every page thereof. Requisites of a stipulation pour autrui: (1) a stipulation in favor of a third person; (2) stipulation must be part, not whole of the contract; (3) contracting parties must have clearly and deliberately conferred a favor upon a third person, not a mere incidental benefit or interest; (4) third person must have communicated his acceptance to the obligor before its revocation; (5) neither of the contracting parties bears the legal representation or authorization of the third party. Petitioner did NOT communicate her acceptance, whether expressly or impliedly. Although the stipulation has not yet been revoked, the argument is pointless, considering that the sale of the subject property to some other person or entity constitutes in effect a revocation of the grant of the right of first refusal to Rebecca Young. MARMONT v. GUIANG FACTS: On 5/2/1975, Maris Trading and petitioner executed a MOA wherein the former undertook to drill for water and to provide all equipment necessary to install and complete a water supply facility to service petitioner Marmont Resort Hotel in Olongapo for P40,000. Maris drilled a well and installed a water pump on a portion of a parcel of land occupied by respondent spouses Federico and Aurora Guiang. Five months later, Maris Trading and the Guiang spouses executed a 2nd MOA. The seconf agreement stipulated that Maris Trading will acquire all possessory rights, interest, and claims over the lot wherein the water source is located for P1,500. The water supply of Marmont became inadequate to meet the hotels water requirements. Petitioner secured the services of another contractor, who suggested that in addition to the existing water pump, a submersible pump be installed to increase the pressure and improve the flow of water to the hotel. The manager of Marmont sought permission from the Guiang spouses

to inspect the water pump on their land previously occupied by the spouses, but the permission was not granted. On 5/2/1980, petitioner filed a complaint against the spouses Guiang for damages resulting from their refusal to allow representative of petitioner and the 2nd contractor firm entry into the water facility site. The Guiangs denied having had any previous knowledge of the first MOA and asseverated that the 2nd MOA was invalid for not having been executed in accordance of law. On 1/1/1980, the Guiang spouses moved to dismiss, alleging that the subject matter of the 2nd MOA involved conjugal property alienated by Aurora Guiang without the marital consent of her husband, Federico. They also averred that the land upon which the hotels water supply facility was installed formed part of the public domain and was then still the subject of a Miscellaneous Sales Application submitted by Federico Guiang. The Guiang spouses did not adduce evidence. RTC: Complaint dismissed; Aurora Guiang validly alienated her rights over the disputed portion of land to Maris, but evidence failed to show Maris transferred such rights to Marmon CA: affirmed RTC ISSUE(S): Whether or not the CA erred in not considering the MOA of 5/2/1975 and 10/8/1975 as the same were already admitted in the pre-trial order Whether or not the CA erred in deciding that ownership belongs to Maris Trading, hence private respondent Guiang can prohibit Marmont from entering the land HELD: Petition GRANTED, RTC and CA decisions REVERSED Both MOAs are admissible, and such is not controvertible, as their admission in the pre-trial order constituted a judicial admission. Respondents are in estoppel to deny such. The pre-trial order had already admitted the existence of those (2) agreements, the admission of which constituted a judicial admission, the veracity of which requires no further proof and may be controverted only upon a clear showing that such stipulation had been entered into through palpable mistake. There has been no showing and respondent spouses do not claim that palpable mistake: had intervened. The argument that the 2nd MOA was invalid for having been executed by Aurora Guiang without the marital consent of Federico, is contrary to Articles 165 and 172 of the Civil Code. It was shown that Federico Guiang himself consented, as he was present during the execution of the agreement and he appended his signature to the document as a witness. The Miscellaneous Sales Application over said land is also of no moment, as the spouses enjoyed possessory and other rights over the same which could validly be assigned or transferred in favor of third persons. They chose to transfer these rights to Maris Tradings. They are not proper parties to raise the issue of invalidity, as they and Maris Trading are in pari delicto; only the government may raise that issue. Marmont had a valid cause against respondents. The second and third paragraphs of the 2nd MOA discloses that the 1st MOA, including the obligations imposed thereunder upon Maris Trading, had been acknowledged, and it was established that the work performed under the 2nd MOA was in accordance with the terms and conditions stipulated in the first MOA. It thus partakes the nature of stipulations pour autrui. Evven if Marmont was not a party to the 2nd MOA, the respondent spouses could not have prevented Maris Trading from entering the property, as Maris Trading had already acquired possessory rights over the property; physical possession of that land is of no moment. Even if the 2nd MOA did not constitute a stipulation pour autrui, the respondent spouses acted contrary to principles of honesty, good faith, and fair

dealing when they refused petitioner access to the water facility to inspect and repair the same and to increase its capacity and benefit from it. MANDARIN VILLA v. CA FACTS: On 10/19/1989, private respondent Clodualdo de Jesus dined with this friends in the Mandarin Villa Seafoods Village. To pay for their meal, private respondent handed over his Bankard credit card, to pay their P2,658.50 bill. The waiter returned the card twice, as the cashier verified that the card was expired. Private respondent averred that it could not have been so, as the card was set to expire on September 1990. One of de Jesus guests asked if they had to wash the plates to pay for their bill. Private respondent paid with another credit card. Private respondent filed a suit for damages against petitioner and Bankard. RTC: found in favor of petitioner; rendered judgment directing petitioner and BANKARD to pay respondent damages CA: found petitioner solely liable for damages; reduced damages ISSUE(S): Whether or not petitioner is bound to accept payment by means of credit card Whether or not petitioner is negligent under the circumstances obtaining in this case Whether or not such negligence is the proximate cause of private respondents damage HELD: Petition DISMISSED (1) The stipulation that Mandarin Villa is affiliated with Bankard conferred a favor upon private respondent, a holder of credit card validly issued by Bankard. The Agreement between petitioner and Mandarin Villa provides that Mandarin Villa shall honor validly issued PCCCI credit cards presented by their corresponding holders provided that card has not expired. Private respondent may demand the fulfillment of such, provided he communicated his acceptance to the petitioner before its revocation. Petitioner also had a logo inside their establishment stating that Bankard is accepted there. Petitioner cannot disclaim its obligation to accept private respondents credit card without violating the equitable principle of estoppel. (2) Test for negligence: Did the defendant, in doing the alleged negligent act, use the reasonable care and caution which an ordinary prudent person would have used in the same situation? Petitioner did not follow the Point of Sale Guidelines which outlined the steps that petitioner should have followed under such circumstances. Private respondents card has not expired, but petitioner still dishonored such. (3) Even if private respondent had sufficient cash on hand, this does not constitute negligence, and neither was it the proximate cause of his damage. Professor Lirags remark was a result of petitioners dishonoring private respondents credit card. SANCHEZ v. RIGOS FACTS: On 4/3/1961, plaintiff and defendant executed an instrument entitled Option to Purchase, whereby defendant agreed, promised, and committed to sell to Sanchez a parcel of land in San Jose, Nueva Ecija, for P1,510, within two years from said date, after which the option shall be deemed terminated and elapsed if Sanchez fails to exercise his right to buy the property. The offers made by Sanchez were repeatedly rejected by Mrs. Rigos. On 3/12/1963, Sanchez consigned the amount with the CFI of Nueva Eciha and commenced an action for specific

performance and damages against the latter. Defendant interposed that the contract between the parties is a unilateral promise to sell, and the same being unsupported by any valuable consideration, by force of the NCC, was null and void. RTC: found for plaintiff, ordering defendant to accept the sum judicially consigned by him, and to execute the deed of conveyance in Sanchezs favor ISSUE(S): Whether or not defendants interpretation of Article 1479 squarely applies to the case, wherein her withdrawal of the offer was valid HELD: RTC decision AFFIRMED Art. 1479: A promise to buy and sell a determinate thing for a price certain is reciprocally demandable. An accepted unilateral promise to buy or 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. The court adopted the decision in Atkins, Kroll, and Co., wherein it was held that the option contract was not valid for lack of consideration, but it was an offer to sell, which was accepted by the appellant, and the acceptance of which was made before the offer was withdrawn. Appelle was correct in contending that, even granting that the offer of option was not supported by any consideration, the option became binding on appellant when the appelle gave notice of its acceptance, and after having accepted that offer, the latter cannot be withdrawn, and any withdrawal is ineffective. Appellee is correct in invoking Article 1324. Article 1324: When the offerer has allowed the offeree a certain period to accept, the offer maybe withdrawn any time before acceptance by communicating such withdrawal, except when the option is founded upon consideration as something paid or promised. It is true that the offer may be withdrawn before acceptance, but this general rule is interpreted as modified by Article 1479, which applies to a promise to buy and sell specifically. ROSENSTOCK v. BURKE FACTS: Plaintiff and defendant negotiated for the purchase of the latters motor yacht, Bronzewing, as the former wanted to open a yacht club and then sell the subject yacht for P120,000, P20,000 of which was to be retained by him as commission and the remaining P100,000 to be paid to defendant. The defendant obtained from the plaintiff an option in writing that the offer to buy Bronzewing for P120,000 is valid for 30 days. The yacht needed some repairs which the plaintiff shouldered, which cost P6,972.21 including the purchase of a new engine, which cost P20,000. On 3/31, plaintiff wrote defendant informing him that he was not disposed to purchase the vessel for more than P70,000. The plaintiff addressed a letter to the defendant indicating that ...I am in a position and am willing to entertain the purchase.... However, on the 5th of the same month, the plaintiff wrote the defendant again, and informed him that it was impossible for him to take charge of the boat, and returned the boat to defendant. Defendant answered the plaintiff that, as he had accepted, with the consent of the Asia Banking Corporation, the offer for the purchase of the yacht made by plaintiff. Plaintiff filed an action against defendant to recover P6,139.28, the value of the repairs made on the yacht which he had paid for. Defendant interposes that the agreement he had with plaintiff about these repairs was that the lettwe was to pay for them for his own account in exchange of the gratuitous use of the yacht, and prays that he be absolved from the complaint. He prays that plaintiff be compelled to pay him half of the price of the canvas used in the repair of the yacht. He also prays for the performance of the contract, in accordance with his letter of April 3, 1922. The Cooper Company

was admitted to intervene and claims in turn its credit of P1,730.84 for the repairs made on the yacht. RTC: sentenced defendant to pay plaintiff P6,139.28 with legal interest, and to pay the intervenor for the repairs made on the yachtl sentenced plaintiff to comply in all its parts with the contract for the purchase of the yacht ISSUE(S): Whether or not the 4/3/1922 letter is a contract of sale valid and binding against the plaintiff HELD: NO The plaintiff wrote that he was in a position and am willing to entertain the purchase of the yacht. The word entertain applied to an act does not mean the resolution to perform said act, but simply a position to deliberate for deciding to perform said act. The letter of the plaintiff cannot be interpreted as a definite offer to purchase the yacht, but simply a position to deliberate whether or not he would purchase the yacht. It was but a mere INVITATION to a proposal being made to him. Other circumstances point to the fact that plaintiff did not intend to make a definite offer. Plaintiff never thought of acquiring the yacht, but instead, wanted to obtain some gain from the transaction. He also thought it necessary to replace the engine with a new one. The resolution of the plaintiff depended upon the plaintiff being successful in obtaining P20,000. He was not in a financial position to do so. Defendant was also present in the writing of the subject letter, wherein it was written by a stenographer in both parties presence. Defendant moved to remove the word entertain and the substitution of a definite offer, but plaintiff said he was not in a position to make a definite offer. As to who was to pay for the repairs, the financial burden should shift to petitioner, who commissioned to have these repairs made. He was also not obliged to pay anything for the use of the yacht. His testimony cannot be considered as a sufficient evidence to establish the defendants obligation to pay for the repair of the yacht. It was not determined which repairs were to be done, and it is unconscionable to leave such determination to the behest of the plaintiff. MALBAROSA v. CA FACTS: Petitioner was the president and general manager of Philtectic Corporation, one of two companies wholly owned by respondent. Respondent assigned petitioner a 1982 Mitsubishi Gallant Super Saloon, as well as membership certificates in the Architectural Center. Louis Da Costa was president of Commonwealth Insurance, while Senen Valero was Vice-Chairman of the Board of Directors of the respondent and Vice-Chairman of Philtectic. On 1/1990, petitioner indicated his desire to retire from SEADC, and requested that his 1989 incentive compensation as president of Philtectic be paid to him. Da Costa met with petitioner, and intimated that petitioner would be entitled to an incentive compensation around P395,000. Respondent signed a letter-offer addressed to petitioner, stating that the latter is entitled to an incentive compensation in the amount of P251,057.67, proposing that the maount be satisfied by the car assigned to him and a membership share in Tradestar International, their subsidiary. Agreement to the offer required petitioners signature on the space provided in the letter. Petitioner was dismayed at the offer and wanted P395,000. He refused to sign the letter, and wrote on the duplicate copy of the letter-offer Recd original for review purposes. Petitioner did not return the original after two weeks, and respondent decided to withdraw its March 14,1990 offer. On 4/3/1996, respondent asked Valero to demand the return of the car and to instute an action in court to recover the vehicle. Philtectic demanded the car, but petitioner

refiused to return such, saying he accepted their offer when he affixed his signature on the letter-offer on March 28, 1990. Respondent filed a complaint against petitioner for recovery of personal property with replevin with damages and attorneys fees. RTC: issued an order for the issuance of a writ of replevin; ordered plaintiff to deliver the car, or pay its value in case delivery cannot be made; ordered Malbarosa to pay lease rentals for the car CA: affirmed RTC decision that the rentals shall be from the time the decision becomes final until actual delivery is made to SEADC ISSUE(S): Whether or not there was a valid acceptance on his part of the 3/14/1990 letter-offer of respondent Whether or not there was an effective withdrawal by respondent of said letter-offer HELD: Petition DISMISSED 1. There was no valid acceptance on the part of petitioner, as he did not sign the letter-offer on 3/14/1990. Under Art. 1319 of the New Civil Code, the consent by a party is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. The respondent required petitioner to accept the offer by affixing his signature on the space provided in said letter-offer and writing the date of said acceptance. Petitioner did not accept or reject the offer for the reason that he needed time to devide whether to reject or accept such offer. As the offer was made inter praesentes, it must be accepted immediately; petitioner did not accept. Petitioner was given more than two weeks to mull the offer over. 2. Philtectic had the authority to demand for and recover from the petitioner the subject car and to institute the appropriate action against him to recover the car. Senen Valero was upon instruction of the Board of Directors of respondent. SEADC used Philtectic as an agent to communicate the offer to petitioner. SAN LORENZO DEVELOPMENT CORPORATION v. CA FACTS: On 8/20/1986, the Spouses Lu sold (2) parcels of land to Babasanta for P15/sq.m. Babasanta made a downpayment of P50,000, evidenced by a memorandum receipt issued by Lu. Babasanta made the corresponding payments of P200,000. On May 1989, Babasanta demanded the execution of a final deed of sale in his favor, after receiving word that the spouses sold the property without his knowledge and consent. Pacita Lu informed Babasanta that although they agreed to such price as indicated above, Babasanta asked for a price reduction which she refused, and that Babasanta backed out of the sail. She also claimed that she returned his P50,000 through Eugenio Oya. Babasanta filed a complaint for specific performance and damages against his co-respondents. On their Answer, the Spouses Lu alleged that they received only P200,000, not P260,000 and that they refused to Babasantas desired price reduction. They furnished him a check for P200,000 to reimburse the money that Babasanta gave them. On 1/19/1990, petitioner filed a motion for intervention, alleging it was a buyer in good faith. It averred it paid an option money of P316,160 of the P1,264,640.00 of the amount indicated in a Deed of Absolute Sale with Mortgage in its favor. The TCTs delivered by the Spouses Lu to petitioner were free of any adverse claims of notices of lis pendens. None of Babasantas claims were annotated on the certificates of title at the time the lands were sold to it. RTC: upheld the sale to SLDC, and ordered the Spouses Lu to pay Babasanta his P200,000 with legal interest plus P50,000 for attorneys fees; asseverated that since both Babasanta and SLDC

did not register the respective sales in their favor, ownership of the property should pertain to the buyer who first acquired possession of the property CA: set aside RTC decision; declared the sale between the Spouses Lu and Babasanta was valid and subsisting, and ordered the spouses to execute the necessary deed of conveyance in favor of Babasanta ISSUE(S): Whether or not Babasanta has a better right over the two parcels of land subject of the instant case in view of the successive transactions executed bythe Spouses Lu HELD: NO, SLDC has a better right over the two parcels of land The agreement between the Spouses Lu and Babasanta was a contract to sell, not a contract of sale. The receipt signed by pacita Lu merely states that she accepted the sum of P50,000 from Babasanta as partial payment of 3.6 hectares of farm lot in Laguna. The Spouses Lu never intended to transfer ownership to Babasanta except upon full payment of the purchase price. The Spouses Lu did not transfer the title to him simultaneously with their acceptance of the partial payment, but they did not. Babasanta did not make the proper tender or consignation of the price in court as required by law. His mere sending of a letter indicating his intention to pay without the accompanying payment is not considered a valid tender of payment. The essential elements of a contract to sale are (1) consent or meeting of the minds; (2) object certain which is the subject matter of the contract; and (3) cause of the obligation which is established. The perfection of a contract of sale is different from its consummation; sale is not a mode, but merely a title. The most that a sale does is to create the obligation to transfer ownership. Delivery is what actually transfers ownership. Babasanta did not acquire ownership by the mere execution of the receipt by Pacita Lu acknowledging the receipt of partial payment for the property. The agreement was not embodied in a public instrument; no constructive delivery was effected. Babasanta also did not take actual possession of the property, nor exert acts of dominon over it despite his assertion that he was the rightful owner of the lands. There was no delivery to Babasanta, actual or constructive. In cases of a double sale, Article 1544 provides that if the same thing should have been sold to different vendors, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property. Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. SLDC satisfied the principle of primus tempore, potior jure, when it registered the sale with the Registry of Deeds, after having knowledge of Babasantas claim. SLDC is likewise a buyer in good faith, having no knowledge of Babasantas claim prior to the transaction. MMDA v. JANCOM FACTS: In 1994, then President Ramos issued Presidential Memorandum Order No, 202 creating the Executive Committee to oversee the BOT Implementation of Solid Waste Management Projects, headed by the MMDA Chairman and the Cabinet Officer for Regional Development NCR Region (CORD-NCR). The Execom was to oversee and develop waste-to-energy prohects provided that its proponents should have the capability to establish municipal solid waste thermal plants using incineration technology. The Pre-qualification, Bids and Awards Committee (PBAC) recommended three proponents, one of which was Jancom. Jancom, after entering into a partnership with Asea Brown Boveri (ABB) to form Jancom Environmental

Corporation, tendered bid proposals for the San Mateo site were found to be complete and responsive, and the bid successful. On 2/27/97, then-MMDA chairman Prospero Oreta informed Jancoms chief executive Jay Alparslan via a letter that the execom had approved the PBAC recommendation to award to Jancom the San Mateo Waste-To-Energy Prohect on the basis of the bidding. The letter also notified that the Execom had created a negotiating tea to work out and finalize the contract award. After a series of meetings and consultations, a draft bot contract was prepared and presented to the Presidential Task Force on Solid Waste Management. On 12/19/1997, the BOT contract for the waste-to-energy prohect was signed between Jancom and the PH government. On 3/5/1998, the contract was submitted to Pres. Ramos for approval, but the signing was too close to the end of his term, which expired without him signing the contract. He, however, endorsed the contract to incoming President Joseph Estrada. The change of administration, as well as the passage of the Clean Air Act of 1999, caused the closure of the San Mateo Landfill. The BOT contract was not pursued, and Alparslan was informed that the changes in policy and economic environment affected their negotiations. On 2/22/2000, the MMDA caused the publication in a newspaper of an invitation to pre-qualift and to submit proposals for solid waste management projects in Metro Manila. Hence, the rpesent action. RTC: declared judgment in favor of petitioners; rendered the disregard of petitioners BOT contract and the calling for bids and authorizing a new contract illegal and void CA: dismissed MMDAs petition ISSUE(S): Whether or not there is a valid and binding contract between the Republic of the Philippines and respondents because (a) the BOT contract does not bear the singature of the President of the Philippines; and (b) the conditions precedent in the contract were not complied with; and (c) there was no valid notice of award HELD: Petition DISMISSED Article 1315 of the Civil Code provides that a contract is perfected by mere consent, which is manifested by the meeting of the offer and the aceptance upon the thing and the cause which are to constitute the contract. The signing and execution of the contract by the parties clearly show that there was a concurrence of offer and acceptance with respect to the material details of the contract, which led to the contracts perfection. Upon acceptance of private respondents bid proposal, there was a meeting of the minds upon the waste management project (object) and the BOT scheme (cause). City of Cebu v. Heirs of Candido Rubi: the effect of an unqualified acceptance of the offer or proposal of the bidder is to perfect a contract, upon notice of the award to the bidder The fact that Chairman Oretas letter informed Jancom that it was the sole winning bidder for the San Mateo project impresses that the project was being awarded to provate respondents. Even if the notice of award was not given, private respondents cannot be faulted as it is not their duty to issue such, The presidents signature is required only in infrastructure contracts involving amounts exceeding the ceilings set in Sec. 58 of EO No. 292. The contract has not started to run, but the contract has already been perfected.

ASIAIN v. JALANDONI FACTS: Petitioner offered to respondent a portion of his hacienda for P55,000, stating that the subject parcel of land contained between 25-30 hectares, and that the crop of sugar then planted would produce not less than 2,000 piculs. Asiain wrote the apprehensive Jalandoni, saying he would agree to a payment of half the price, and assuring him that the land spans more than 20 hectares and produces 2,000 piculs, which he would compensate if it does not yield such amount. Jalandoni had the sugar cane ground and found that it yielded only 800 piculs. He also hired a surveyor who found out that the area contained only 18 hectares, 54 ares, and 22 centiares. Asiain began an action in the CFI of Negros Occdiental for the remaining sum of P25,000, but defendant asked to be absolved from the complaint and that the contract be annulled, aside from P3,600 annually as damages. CFI: declared the contract null and void, absolved defendant from paying the remainder of the sum, and ordered defendant to return the tract of land with its certificate of title ISSUE(S): Whether or not the sale of the subject tract of land must be upheld HELD: CFI judgment AFFIRMED The principle of Article 1471 is that if land shall be sold within boundaries with an expression of the area and if the area is grossly deficient, the vendee has an option, either to have the price reduced proportionately or to ask for the rescission of the contract. Manresa emphasizes the importance of the intention of the parties and the option on the part of the purchaser to rescind the contract: in case the vendor cannot deliver all that is within the boundaries stated although it may exceed the area or number expressed in the contract, the purchaser shall have the right to reduce the price proportionately to what is lacking of the area or number, or rescind the contract at his option. Since the memorandum-agreement between Asiain and Jalandoni contains the phrase more or less, it is the general view that this phrase can only be considered as covering inconsiderable or small differences one way of the other, and do not in themselves determine the character of the sale as one in gross or by the acre. Mutual mistake of the contracting parties to a sale in regard to the subject-matter of the sale which is so material as to go to the essence of the contract is a ground for relief and rescission. The contract in question was a contract of sale in gross in which there was a mutual mistake as to the quantity of the land sold and as to the amount of the standing crop. The mistake with reference to the subject-matter of the contract is such that, at the option of the purchaser, it is rescindable, Without such mistake the agreement would not have been made, and since this is true, the agreement is inoperative and void. It is akin to a bilateral mistake for which relief should be granted. HEIRS of WILLIAM SEVILLA v. LEOPOLDO SEVILLA FACTS: On 12/10/1973, Filomena Almirol de Sevilla died intestate, leaving her eight children (4) parcels of residential land in Dipolog City. The first parcel is a paraphernal property of Filomena which she co-owned with Honorata and Felisa, who were both single and without issue. Honorata died and left each if her 1/3 parcel to her sisters. Felisa and Honorata lived in the house of Filomena during their lifetime, together with respondent Leopoldo. Leopoldo attended to the needs of all three sisters. When Felisa died on 7/6/1988, she executed a last will and testament, devising her share in the paraphernal property to Leopoldo Sevilla and his wife. On 8/8/1986, Felisa executed an donation inter vivos ceding to Leopoldo her share in the paraphernal property, which was accepted by Leopoldo. On 9/3/1986, Felisa and Peter Sevilla executed a

Deed of Extrajudicial Partition, adjudicating Honoratas share to the heirs of Filomena. Respondents Leopoldo, Peter, and Luzvilla obtained the cancellation ofthe TCT over Parcel I, and the issuance of the corresponding titles to Felisa and the heirs of Filomena. These requested titles were left unsigned pending submission by Peter of a Special Power of Attorney authorizing him to represent the other heirs of Filomena. On 6/21/1990, all the other Sevillas filed the instant case against respondent for annulment of the Deed of Donation and the Deed of Extrajudicial Partition, Accounting, Damages, with prayer for receivership and for partition of the properties of the late Filomena. They alleged that the Deed of Donation is tainted with fraud because Felisa, who was 81 years of age, was seriously ill and of unsound mind at the time of the execution thereof, and that the Deed of Extrajudicial Partition is void because it was executed without their knowledge and consent. Respondents, however, denied that there was fraud or undue pressure in the execution of the questioned documents, and that Felisa was of sound mind when she executed the Deed of Donation in consideration of Leopoldos and his familys love, affection, and services rendered in the past. RTC: upheld Deed of Donation; declared Deed of Extrajudicial Partition unenforceable CA: affirmed RTC decision in toto ISSUE(S): Whether or not the CA erred in not holding the Deed of Donation void ab initio, it having been executed with fraud, undue pressure, and influence Whether or not the CA erred in not ordering the partition of Lot 653 HELD: CA decision AFFIRMED with MODIFICATION that the deed of extrajudicial partition is VOID The contention that respondent Leopoldo employed fraud and undue influence on the person of the donor involves appreciation of evidence, but no evidence was proffered by petitioners. It was shown that Leopoldo accompanied her in the Office of Atty. Vic Lacaya for the purpose of executing her last will and testament, and that he had consulted a lawyer as to how he will be able to own the land. Upon the advice of the clerk of court of the Zamboanga RTC, Felisa executed a Deed of Donation The maxim Ei incumbit probatio qui dicit, non qui negat was not fulfilled when the petitioners failed to prove their assertion that Leopoldo employed fraud. Fraud and undue influence that vitiated a partys consent must be established by full, clear, and convincing evidence; otherwise, the latters presumed consent to the contract prevails. Neither the fact that the donation preceded the partition constitute fraud, because what was donated to Leopoldo was the undivided share of Felisa. As to the extrajudicial partition, the lower courts were correct in sustaining the invalidity of such, because Felisa was no longe the owner of the subject land after having donated it to Leopoldo. Felisa had no capacity to consent or to execute because she was neither the owner nor the authorized representative of Leopoldo whom she donated the parcel of land to. ANDRES v. MANUFACTURERS HANOVER & TRUST CO. FACTS: Petitioner, doing business under Irenes Wearing Apparel, was engaged in the manufacture of ladies garments, childrens wear, mens apparel, and linens for local and foreign buyers. Facets Funwear, Inc., a US-based corporation, is one of petitioners foreign buyers. On August 1980, FACETS instructed the First National State Bank of New Jersey to transfer $10,000 to petitioner via the Sta. Cruz Branch of PNB. FNSB instructed respondent to effect the transfer through its facilities and to charge said amount against FNSBs account. The payment was not effected immediately because the payee in the telex was designated as Wearing Apparel. Upon query by PNB, private respondent sent PNB another telex, wherein payment was made to Irenes

Wearing Apparel. On 8/28/1980, petitioner received the remittance of $10,000. On 8/25/1980, however, after learning of the delay in remittance of the money to petitioner, FACETS informed FNSB about the situation, unaware that petitioner had already received the remittance, and another $10,000 was sent to petitioner via PCIP, instead of PNB. FNSB discovered that private respondent made a duplication of the remittance and asked for a recredit, to which private respondent complied with. Private respondent asked petitioner for the 2nd remittance, to which petitioner refused, saying that she had applied the payment to FACETS outstanding debt, and that the payment was due to petitioners negligence. RTC: found in favor of petitioner; Art. 2154 was not applicable because remittance was due to petitioners negligence CA: reversed RTC decision ISSUE(S): Whether or not the private respondent has the right to recover the second $10,000 it had delivered to petitioner HELD: Petition DENIED, CA decision AFFIRMED Art. 2154: If something received when there is no right to demand it, and it was unduly delivered through mistake, the obligation to restore it arises. Requisites of solutio indebiti: (1) That he who paid was not under obligation to do so; (2) That payment was made by reason of an essential mistake of fact The contract of petitioner was with FACETS, and private respondent was not indebted to petitioner. The contract of transmittal of dollars is between private respondent and FNSB. Petitioner, although named as payee, was not privy to the contract of remittance of dollars. Private respondent was not a party to the contract of sale between petitioner and FACETS. Petitioner has no right to apply the 2nd $10,000 remittance to the outstanding account of FACETS. Further, the principles of equity cannot be applied if there is a provision of law specifically applicable to a case. Art. 2154 squarely applies to the case, and the common law principle invoked by petitioner does not lie. SPOUSES THEIS v. CA FACTS: Calsons Development Corporation owns (3) adjacent parels of land in Tagaytay. In 1985, private respondent constructed a two-storey house on parcel no. 3, while the two other parcels remained idle. In an erratic survey in 1985, parcel no. 3 was mistakenly covered by parcel 1, while the real parcels 1 & 2 where located on parcel no. 4, which was not owned by respondent. On 10/26/1987, private respondent sold parcel 4 to petitioners. Petitioners did not immediately occupy the parcels of land, and went to Germany. Upon their return, they discovered that parcel no. 4 was owned by anotehr person, and that the parcel sold to to them were parcel nos. 2 and 3. Parcel no. 3 could not have been sold to them, as it contained a two-storey house, the construction cost of which exceeded the price paid by petitioners. They insisted that they wanted parcel no. 4, which could not have been sold to them because private respondent did not own parcel no. 4. Private respondent offered parcels 1 and 2, but rejected the offer, and insisted on taking parcel 3. Private respondent doulbed the price paid by petitioners, but to no avail. Private respondent filed an action for annulment of dded of sale and reconveyance of the properties.

RTC: in favor of private respondent; found that the contract between petitioners and private respondent was executed on the mistake; annulled contract of sale CA: affirmed RTC decision ISSUE(S): Whether or not the contract between petitioners and private respondents was voidable on the ground of mistake HELD: RTC/CA decision AFFIRMED Material to the case is the intent of the parties when the sale was consummated. In the instant case, the real intent of the purchasers was to buy the lot right next to parcel no. 3, which was outside the commerce of private respondnet, the property not being his. The dictates of logic and common sense could not push a person to sell to another, a property which the former does not own in the first place, for fear of adverse consequences. The testimony of Betty Theis herself confirmed that they wanted to buy the adjacent lot to Parcel No. 3. Defendants themselves knew right from the beginning that what they intended to buy was that vacant lot. The mistake was made on the part of plaintiffs representative when the latter mistook the vacant lot on the right side of plaintiffs house as its vacant parcels of land. Defendants did not intend to buy the parcel of land where plaintiffs house stood. The mistake or error on the subject of the sale in question appears to be substantial as the object of the same transaction is different from that intended by the parties. A reformation of the sale could have settled the fiasco. The CA was right in holding that there was an honest mistake on the part of the plaintiff in the sale of Parcel No. 4 to the defendants-appellants. Art. 1390: The following contracts are voidable or annullable, even though there may have been no damage to the contracting parties: (2) Those where the consent is vitiated by mistake, violence, intimidation, undue influence, or fraud Art. 1331: In order that mistake may invalidate consent, it should refer to the substance of the thing which is the object of the contract, or to those conditions which have principally moved one or both parties to enter into the contract.. To allow petitioners to take parcel no. 3 would be to countenance unjust enrichment, as the value of the house exceeds the price that petitioners paid to private respondent. DUMASUG v. MODELO FACTS: On 6/17/1912, counsel for petitioner filed a written complaint , alleging at that about the month of 11/1911, defendant falsely and maliciously made her sign a document by making her believe that it contained an engagement on plaintiffs part to pay defendant a sum of money by reason of a lawsuit in which plaintiff was one of the parties and was protected and aided by defendant. This caused defendant to take possession of a carabao and (2) parcels of land belonging to plaintiff. Defendant did not return the carabao and the land despite repeated demands. Plaintiff prayed for the nullity of the contract. Defendant asseverated that his possession of the property was borne out of the sale between him and plaintiff, and showed the public instrument executed and signed of plaintiff. CFI: document was null and void; ordered defendant to restore and deliver both the carabao and the land ISSUE(S): Whether or not the instrument of purchase andsale of two parcels of land and a plow carabao is null and void HELD: RTC judgment AFFIRMED

The consent given by Dumasug to such document was null and void, as it was given through mistake. This error INVALIDATES the contract; if Dumasug truly understood the contents of the document, she would not have signed the same. The consent being null and void, it follows that she was document was also null and void. Defendant was not entitled to the carabao and the parcels of land, as he took no part in the case instituted by Dumasug in the peace court of Argao against Rosales Albarracin and Gaudencio Saniel. Defendant is neither an attorney or a procurador judicial, or a friend if Dumasug; the most he did was to advise plaintiff to bring the matter before the authorities, and to introduce Atty. Andres Jayme to represent her in the CFI. It is unconceivable that she would incur a debt of P333 to defray attorneys fees, as well as travel expenses to Cebu, is absurd, as it would, at most, cost her only P101, together with fees for Atty. Jaymes services at P80 or P90. If she were to pay such amount, it would have been more sensible to keep the land in possession of the deforciant. Art. 1303: When the nullity of an obligation has been declared, the contracting oarties shall restore to each other the things which have been the object of the contract with their fruits, and the value with its interest. HEMEDES v. R&B INSURANCE FACTS: On 322/1947, Jose Hemedes donated inter vivos ownership of a parcel of land worth 21,773 sq. m. in favor of his wife Justa Kausapin, subject to (2) resolutory conditions: (a) Upon the death of the donee, the title of property shall revert to any of the children, or their heirs, of the donor expressly designated by the donee in a public document conveying the property to the latter; or (b) in absence of such express designation made by the donee before her death or remarriage contained in a public instrument as above provided, the property shall automatically rever to the legal heirs of the donor in common. Kausapin executed a Deed of Conveyance of Unregistered Real Property by Reversion conveying to Maxima Hemedes, with the same terms. Maxima, through her counsel, applied for registration and confirmation of title over the land, and it was registered with the annotation that Kausapin shall have usufruactuary rights over the parcel of land during her lifetime or widowhood. Respondent claimed that on 6/2/1964, petitioner and her husband constituted a real estate mortgage over the subject property to serve as security for a loan which they obtained for P6,000. The property was extrajudicially foreclosed since Maxima failed to pay the loan even after it became due on 8/2/1964. The land was sold at a public auction on 5/3/1968, a bidding which R&B won, and a certificate of sale was issued in respondents favor. However, Justa Kausapin executed a Kasunduan on 5/27/1971, transferring the sam land to her stepson Enrique Hemedes, pursuant to the resolutory condition in the deed of donation. Enrique has been paying the realty taxes from the time the porperty was conveyed to him. The cadastral surveys and the records of the Ministry of Agrarian Reform office in Laguna also named Enrique as the owner. On 2/28/1979, Enrique sold the property to Dominum Realty and Construction Corporation. Dominion leased it to sister corporation Asia Brewery, who constructed two warehouses at P10,000,000 each, before the signing of the contract of lease. R&B sent a letter to Asia Brewery informing them that it owned the property and that they had a right to appropriate the constructions as Asia Brewery was a builder in bad faith. Maxima also wrote Asia Brewery asserting that she is the rightful owner of the subject property, and that she has the right to appropriate Asia Brewerys constructions, to demand its demolition, or to compel Asia Brewery to purchase the land. Dominium and Enrique filed a complaint for the annulment of the TCT issued in favor of R&B,

RTC: in favor of plaintiffs, declaring the TCT with R&B null and void; and that Dominium is the absolute owner and possessor of the parcel of land described in the complaint CA: affirmed RTC decision in toto ISSUE(S): Whether the conveyance in favor of Maxima Hemedes effectively transferred ownership over the subject land HELD: CA decision REVERSED The Deed of Conveyance of Unregistered Real Property by Reversion, in favor of Maxima Hemedes, is valid, for the following reasons: (1) Justa Kausapin is a biased witness, as it was shown that she was dependent upon Enrique Hemedes for her daily subsistence, and was probably influenced by Enrique to execute the Kasunduan in his favor; her dependence on Enrique was attested to by the merits of her own testimony. Kausapin was already 80 years old, and could have easily been swayed by Enruqye The Donation Jose in favor Kausapin was in English and she did not attest that she understood the contents of such. Kausapin also failed that it was not her thumbmark on the deed of conveyance in favor of Maxima, and Enruque and Dominium objected to the request of Maximas counsel to obtain a specimen thumbmark of Kausapin. The defense could easily have produced such evidence. (2) That Kausapin asserts that it was the first time she had seen the Deed of Conveyance of Unregistered Real Property by Reversion was of no moment as she could not affixed her thumbmark thereto. Article 1332 could not have been applicable to determine whether or not Kausapin was induced to execute said deed of conveyance by means of fraud, when she herself avers that it was the first time she saw the document. Article 1332: When one of the parties is unable to read, or if the contract is in a language not understood by him, and mistake or fraud is alleged, the person enforcing the contract must show that the terms thereof have been explained to the former. Enrique and his transferee did not acquire any rights over the subject property, and the donation in favor of him was null and void because the object of donation did not exist at the time of the transfer. The certificate of title in Maximas possession trumps his payment of realty taxes, and his designation as owner of the subject property in the cadastral surveys and in the records of the Ministry of Agrarian Reform office in Laguna. LUSTAN v. CA FACTS: On 2/25/1969, petitioner leased a 10.0057-hectare property to private respondent Nicolas Parangan for a term of (10) years and an annual rent of P1,000. During the period of lease, Parangan regularly extended loans in small amounts to petitioner to defray her daily expenses and to to finance her daughters education. On 7/29/1970, petitioner executed a Special Power of Attorney in favor if Parangan to secure an an agricultural loan from PNB to serve as a collateral. On 2/18/1972, a 2nd Special Power of Attorney was executed by petitioner, which Parangas used to secure (4) additional loans, which totaled P125,600, the last (3) loans made without the knowledge of petitioner, and the proceeds of which were used for his own benefit. On 4/16/1973, petitioner signed a Deed of Pacto de Retro Sale in favor of Parangan, superseded by a Deed of Definite Sale dated 5/4/1979, which petitioner signed upon Parangans representation that the same merely evidences the loans extended by him unto the former, Out of fear that her property might be prejudiced by Parangans continued borrowing, petitioner demanded the return of her certificate of title, but Parangan refused, asserting his rights over the property which allegedly became his by virtue of the Deed of Definite Sale. Such document

indicated that petitioner conveyed the subject property and all the improvements thereon unto Parangan for P75,000. Petitioner filed an action for cancellation of liens, quieting of title, recovery of possession, and damages against Parangan and PNB in the Iloilo RTC. RTC: ordered the cancellation of the liens, encumbrances, and unauthorized loans on Lustans certificate of title; declared the Deed of Pacto de Retro Sale null and void, as the same is a Deed of Equitable Mortgage; ordered Parangan to pay all the loans he secured from PNB and to return the land in question CA: reversed the RTC decision ISSUE(S): Whether or not the Deed of Definite Sale is in reality an equitable mortgage Whether or not petitioners property is liable to PNB for the loans contracted by Parangan by virtue of the special power of attorney HELD: (1) The Deed of Definite Sale was an equitable mortgage, the intention of which was not known to petitioner. Petitioner had no knowledge that the contract she signed is a deed of sale, as the contents of the same were not read nor explained to her so that she may intelligibly formulate in her mind the consequences of her conduct. Petitioner is illiterate and she had to rely on Parangans assurance that the contract only evidences her indebtedness to the latter. When one of the contracting parties is unable to read, or if the contract is in a language not understood by him, and mistake or fraud is alleged, the person enforcing the contract must show that the terms thereof have been fully explained to the former. Where a party to a contract is illiterate or cannot read or cannot understand the language in which the contract is written, the burden is on the party interested in enforcing the contract to prove that the terms thereof are fully explained to the former in a language understood by him. This was not done by Parangan. Also, it was held to be an equitable mortgage. because the intention of the parties was one of a loan secured by petitioners land. The evidence warrants that a finding that petitioner and Parangan merely intended to consolidate the formers indebtedness to the latter in a single instrument and to secure the same with the subject property. Article 1602: The contract shall be presumed to be an equitable mortgage in any of the following cases: (1) when the price of a sale with right to repurchase is unusually inadequate; (2) When the vendor remains in possession as lessor or otherwise; (3) When upon or after the expiration of the right to repurchase, another instrument extending the period of redemption or granting a new period is executed; (4) when the vendor binds himself to pay the taxes on the thing sold (5) when the purchases retains for himself a part of the purchase price; (6) In any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other obligation. However, the outstanding mortagages on the property can be enforced against petitioner. The Special Power of Attorney she executed in favor of private respondent was a continuing one, and absent a valid revocation furnished to the mortgagee, continues to have force and effect against such persons who had no knowledge of such lack of authority.

KATIPUNAN v. KATIPUNAN FACTS: Respondent owns a 203 sq. m. lot and a five-door apartment located in San Miguel, Manila. The apartment units are occupied by lessees. On 12/29/1985, respondent, assisted his brother, petitioner, entered into a Deed of Absolute Sale with the brothers Balguma, represented by their father, Atty. Leopoldo Balguma, Sr., for a consideration of P187,000. Respondents title to the property was cancelled. In 1/1986, Atty. Balguma started collecting rentals from the lessees of the apartments. On 3/10/1987, respondent filed a complaint for annulment of the Deed of Basolute Sale, averring that his brother, the Balgumas, and Inocencio Valdez, in bad faith, all induced him to work abroad, bringing him to various offices to secure falsified documents. They misrepresented the Deed of Sale as a contract of employment, by virtue of which the bBalgumas were able to register the property to their names. Respondent alleged he did not receive the consideration, and found out from his sister that the Balguma brothers sent a letter tot he lessees informing them they are the new owners. Petitioners denied the allegations, alleging that Braulio was aware of the contents of the aforementioned Deed and that he received the consideration. They averred that the Balgumas have been collecting the rentals since 12/1985, but that he has not or objected or confrented them, and that the suit was filed upon the urging of Agueda Savellano. It appeared that respondent moved to dimiss his complaint on the ground that (1) he was forced by his sister to file such cases; and (2) Atty. Balguma paid him P25,000. RTC: dismissed the complaint; respondent failed to prove his causes of action since he admitted that (1) he obtained the loan from the Balgumas; (2) he signed the Deed of Absolute Sale; (3) he acknowledged selling the property and he estopped collecting rentals CA: reversed RTC decision; annulled the Deed of Sale as it was null and void and of no force and effect, because the certification issued by respondents psychiatrist explained that plaintiffappellant has a very low IQ ISSUE(S): Whether or not respondents signature expressed his consent, given that he was mentally incompetent HELD: CA decision AFFIRMED with MODIFICATION Respondent is mentally incompetent to understand the Deed of Sale; had he been a person of adequate mental capability, he would undoubtedly have not consented to the sale. His consent was vitiated, after the Balgumas and his brother exerted undue influence upon him, and hence, the contract is void ab initio. The expert testimony of the psychiatrist, as well as the fact that petitioner reached only Grade 3 due to his very low IQ, point to the conclusion that Braulio is an incompetent, and cannot be considered as fully capacitated as to have consented to the Deed of Sale. Art. 1390 finds application in the case. Art. 1390: The following contracts are voidable or annullable, even though there may have been no damage to the contracting parties: (1) Those where one of the parties is incapable of giving consent to a contract; (2) Those where the consent is vitiated by mistake, violence, intimidation, undue influence or fraud A contract of sale is born from the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. According to Art. 1330, consent may be vitiated by (a) mistake, (b) violence, (c) intimidation, (d) undue influence, and (5) fraud. The presence of any of these vices renders the contract voidable.

Upon examination, respondent stated that he did not know what document he was signing, and that undue influence , intimidation, and fraud was employed , as respondent revealed that Atty. Balguma told him that something would happen if he did not sign such. Although Miguel admitted that he and Braulio received the considerations of sale, it was revealed that Braulio received scant amounts in coins. It was not indicated what portion went to each other of them. Miguel should not receive any consideration, as he was not a co-owner of the property. LEONARDO v. CA FACTS: Petitioner is hte only legitimate child of the late spouses Tomasina Paul and Balbino Leonardo. Private respondents are the illegitimate children of Tomasina with Jose Sebastian, after she separated from Balbino Leonardo. In an action to declare the nullity of the extrajudicial settlement of the estate of Tomasina Paul and Jose Sebastian, rpivate respondent Corazon Sebastian, along with companions, came to petitioners house to persuade her to sign a deed of extrajudicial partition of the estate of Tomasina Paul and Jose Sebastian on 6/24/1988. Petitioner insisted they wait for her husband, as he can translate the document for her, because she could not understand English. She proceeded to sign the document without reading it, on the assurance of Corazon that she would get her share as a legitimate daughter of Tomasina Paul. When petitioners husband arrived, Corazon and her companions were not to be found. Petitioner refuted private respondents legitimacy as children as sole heirs of Jose Sebastian and Tomasina Paul, as Tomasina remained Balbinos lawful wife even after their separation, and that no joint settlement of the estate of Sebastian and Paul could be effected because it was a coownership, not a conjugal partnership. Private crespondents raised the defense of lack of cause of action, insisting that the document in question was valid and binding as between the parties, because they commissioned Judge Austria of the Urbiztondo MTC to read and explain the contents of the document to all of them , including petitioner, who voluntarily signed. They also asseverated that their declaration that they were legitimate children of Sebastian and Paul did not affect the validity of the extrajudicial partition. The acto f signing estopped her to deny or question its validity. RTC: dismissed the complaint, because the element of duress or fraud that vitiates consent was not established and the proper action was the reformation of the instrument, not the declaration of nullity of the extrajudicial settlement of estate; p petitioner was entitled to of Pauls estate CA: affirmed RTC decision ISSUE(S): Whether or not the consent given by petitioner to the extrajudicial settlement of estate was given voluntarily HELD: CA decision REVERSED The consent given by petitioner was not given voluntarily. It can be gleaned from the facts that petitioner was unable to understand English, the language which explained the contents of the document in question. In case one of the parties to a contract is unable to read and fraud is alleged, the person enforcing the contract must show that the terms thereof have been fully explained to former. Where a party is unable to read, and he expressly pleads in his reply that he signed the voucher in question without knowing its contents which have not been explained to him, this plea is tantamount to one of mistake or fraud in the execution of the voucher or receipt in question and the burden is shifted to the other party to show that the former fully understood the contents of the document, and if he fails to prove this, the presumption of mistake (if not fraud) stands unrebutted and controlling.

Contracts where consent is given by mistake or because of violence, intimidation, undue influence, or fraud are voidable. These cricumstances are defects of the will and vitiate the consent, as they impair the freedom, intelligence, spontaneity, and voluntariness of the party in giving consent to the agreement. Art. 1332: there exists a presumption of mistake or error accorded by law to those who have not had the benefit of a good education, one and one who alleges any defect or the lack of valid consent to a contract must establish the same by full, clear, and convincing evidence, not merely by preponderance of evidence. This presumption was not rebutted by private respondents Petitioner finished only until grade 3, and the contents of the document had to be explained to her in Pangasinense. When petitioners husband read the extrajudicial partition agreement, he found out that petitioner deprived her of her full legitime, which should have been of her mothers estate. The claim that Judge Austria explained the contents of the agreement to them did not reflect that he explained such in a dialect or language which petitioner recognized. Said judge was not even certain if the parties to the agreement were present during the notarization of the document. The requisites of valid consent are: (a) It should be intelligent, or with an exact notion of the matter to which it refers; (b) It should be free (c) It should be spontaneous Intelligence in consent is vitiated by error, freedom, initmidation or undue influence, and spontaneity by fraud. Rural Bank of Caloocan v. CA: a contract may be annulled on the ground of vitiated consent, even if the act complained of is committed by a third party without the connivance or complicity of one of the contracting parties Remalante v. Tibe: misrepresentation to an illiterate woman who did not know how to read an dwrite, nor understand English, is fraudulent