KATRINA CALUGAY

B. Sta. Rita & Co. Inc. vs. Gueco- August 28, 2013 NOT A CIV CASE (REM CASE)
San Miguel Properties Inc. vs. Secretary Hernando Perez- September 4, 2013- OBLI (pilit)
Yoshizaki vs. Joy Training Center of Aurora- September 11, 2013 (AGENCY; SPA)
Heirs of Margarita Prodon vs. Heirs of Alvarez- September 2, 2013 (EVIDENCE CASE)
Inocencio vs. Hospicio de San Jose- September 25, 2013- LEASE CONTRACT
Cruz vs. Manila International Airport Authority- September 9, 2013 (REM CASE)
Philippine Reclamation Authority vs. Romago Inc. - September 18, 2013 (NOVATION)
Remulla vs. Maliksi- September 18, 2013- NOT A CIV CASE (EXPROPRIATION; Legal
Standing)
Alpha Insurance and Surety Co. vs. Castor- September 2, 2013 INTERPRETATION OF
CONTRACTS
Planters Development Bank vs Spouses Lopez October 23, 2013- RESCISSION OF
CONTRACTS
San Fernando vs Cargill Industries October 9, 2013 BREACH OF OBLIGATION TO
DELIVER
Eds Manufacturing vs Healthcheck International October 9, 2013- RESCISSION
Constantino vs Heirs of Constantino October 2, 2013- PRIVITY OF CONTRACTS
Tankeh vs DBP November 11, 2013- Fraud

OBLIGATIONS AND CONTRACTS

NAME OF THE CASE
San Miguel Properties vs. Perez

Eds Manufacturing vs.

Healthcheck International

DATE/ G.R. NO.

G.R. No. 166836, September 4,
2013
G.R. No. 201787, September 25,
2013
G.R. No. 174665, September 18,
2013
G.R. No. 198174, September 2,
2013
G.R. No. 186332, October 23,
2013
G.R. No. 178008, October 9,
2013
G.R. No. 162802, October 9,
2013

Constantino vs. Heirs of

Constantino

G.R. No. 181508, October 2,

2013

Inocencio vs. Hospicio de San

Jose
PRC vs. Romago Incorporated
Alpha Insurance vs. Castor
Planters Development Bank vs.
Spouses Lopez
San Fernando vs. Cargil

SAN MIGUEL PROPERTIES, INC. Petitioner

TOPIC
Specific Performance as a
Prejudicial Question
Lease Contracts bind hears;
parties to a contract
Novation; Need for consent
substituted parties
Interpretation of Contracts
Rescission of Contracts
Breach of Obligation to Deliver
Rescission of Contracts;
Requirements
Privity of Contract

vs.
SEC. HERNANDO B. PEREZ, Respondent
G.R. No. 166836, September 4, 2013
Bersamin, J.
Facts of the Case:
San Miguel Properties bought parcels of land from B.F. Homes, Inc., represented by
Securities and Exchange Commission duly authorized rehabilitation receiver Atty. Florencio
Orendain. The transactions were embodied in three separate deeds of sale. The TCTs covering
the lots bought under the first and second deeds were fully delivered to San Miguel Properties,
but 20 TCTs covering 20 of the 41 parcels of land with a total area of 15,565 square meters
purchased under the third deed of sale, executed in April 1993 and for which San Miguel
Properties paid the full price of P39,122,627.00, were not delivered to San Miguel Properties. BF
claims that they refused to deliver the 20 TCTs despite demands made by San Miguel because
Atty. Orendain did not have the authority to sell the 130 lots in 1992 and 1993 since he was
replaced as BF Homes rehabilitation receiver by the SEC. San Miguel thus sued BF Homes
charging BF Homes directors and officers for citing violations under P.D. 957 for non-delivery
of title before the Las Pinas Office of the City Prosecutor of Las Pinas.
At that time, San Miguel also sued BF Homes for specific performance before the
Housing and Land Use Regulatory Board to compel the latter to release the 20 TCTs in its favor.
San Miguel eventually moved to suspend the proceedings before the prosecutor, citing
the pendency of the HLURB case being a prejudicial question. This motion was opposed by the
BF Homes. To them, the administrative determination is a logical antecedent of the resolution of
the criminal charges based on non-delivery of the TCTs.
Issue of the Case:
Is the criminal case for violations of P.D. 957 for non-delivery of title prejudicial to the
HLURB case?
Decision of the Court:
Yes.
XXX
There is no dispute that aside from the instant complaint for violation of PD 957, there is
still pending with the Housing and Land Use Resulatory Board (HLURB, for short) a complaint
for specific performance where the HLURB is called upon to inquire into, and rule on, the
validity of the sales transactions involving the lots in question and entered into by Atty. Orendain
for and in behalf of BF Homes.
XXX
The said ruling simply means that unless and until the HLURB rules on the validity of the
transactions involving the lands in question with specific reference to the capacity of Atty.
Orendain to bind BF Homes in the said transactions, there is as yet no basis to charge criminally
respondents for non-delivery of the subject land titles. In other words, complainant cannot
invoke the penal provision of PD 957 until such time that the HLURB shall have ruled and
decided on the validity of the transactions involving the lots in question.
ANACLETO INOCENCIO, Petitioner

Vs.
HOSPICIO DE SAN JOSE, Respondent
G.R. No. 201787, September 25, 2013
Carpio, J.
Facts of the Case:
Hospicio de San Jose is the owner of a parcel of land in Pasay City. It leased this land to
Inocencio effective for a period of one year and was renewed for one-year periods several times.
Buildings were constructed on the land which he subleased which were administered by Ramon,
his son. Inocencio passed away in 1997 thus the rentals are now being collected by Ramon.
Ramon received a notice from Hospicios property administrator stating that they
acknowledge the implied contract of lease between the two parties. However, since there is no
stipulation as to the period of the contract and the Ramon is paying a monthly rental to Hospicio,
the period of lease is on a month-to-month basis. Thus, as of the notice date, the contract is
considered expired or terminated.
Ramon replied and suggesting the renewal of the lease contract for the welfare of the
sublessees occupying the land. Tender of payment of rentals were however refused by Hospicio.
A complaint was filed by Hospicio, stating among others that Ramon and his sublessees
have been illegally occupying the leased premises. To this Ramon contends that there is no
prohibition against subleasing in the lease contract and that Hospicio recognized the contract of
lease between them as the lease contract was transmitted to Ramon as Inocencios heir.
Issue of the Case:
Is the lease contract transmitted to Ramon as Inoncencios heir?
Decision of the Court:
Yes. The court also recognized Ramons right to sublease. However it ordered the return
of the property to Hospicio.
XXX
We have previously ruled that lease contracts, by their nature, are not personal. The
general rule, therefore, is lease contracts survive the death of the parties and continue to bind the
heirs except if the contract states otherwise.
XXX
A lease contract is not essentially personal in character. Thus, the rights and obligations
therein are transmissible to the heirs. The general rule, therefore, is that 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) provision of law.
In the subject Contract of Lease, not only were there no stipulations prohibiting any transmission
of rights, but its very terms and conditions explicitly provided for the transmission of the rights
of the lessor and of the lessee to their respective heirs and successors. The contract is the law
between the parties. The 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 successors or
representatives of the deceased. Similarly, 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.
XXX

Section 6 of the lease contract requires written consent of the lessor before the lease may
be assigned or transferred. XXX
In the case of cession or assignment of lease rights on real property, there is a novation by
the substitution of the person of one of the parties the lessee. The personality of the lessee,
who dissociates from the lease, disappears; only two persons remain in the juridical relation
the lessor and the assignee who is converted into the new lessee. XXX
Ramon had a right to sublease the premises since the lease contract did not contain any
stipulation forbidding subleasing.
Despite this, the court ordered Ramon to vacate the property as the contract has already
been validly terminated.

PHILIPPINE RECLAMATION AUTHORITY, Petitioner

Vs.
ROMAGO INCORPORATED, Respondent
G.R. No. 174665, September 18, 2013
Abad, J.
Facts of the Case:
In 1992, the Congress enacted R.A. 7227 creating the Bases Conversion and
Development Authority (BCDA). Pursuant to this, E.O. 40 was issued, setting aside portions of
Fort Bonifacio in Taguig for the Heritage Park Project. This aimed to convert a 105- hectare land
into a world class memorial park for the purpose of generating funds for the BCDA. Meanwhile,
the parties to the PFTA organized the Heritage Park Management Corporation (HPMC) to take
over the management of the project
BCDA entered into an agreement with the Philippine Reclamation Authority (PRA)
designating the latter as the project manager. A bidding was conducted for the outdoor electrical
and lighting works for the park. PRC granted the project to Romago, Inc. Romago immediately
began its constructions.
In 2000, the Chairman of HPMC sent a notice of termination of PRAs management and
requested the turnover the project to it. PRA lost no time in informing Romago of the consequent
termination of its services. It stated in a letter that by virtue of the assignment, all the contractual
functions, responsibilities and liabilities, if any, as well as any cause of action for or against PRA
shall accrue to the assignee, which is HPMC.
Because HPMC refused to recognize PRAs contract with it, it filed a complaint seeking
to collect its claims totaling P24, 467, 621.64 plus interests. To this claim, PRA contends that it
can no longer be held liable since its contract with Romago had been extinguished by novation
when it assigned all its obligations to the HPMC.
Issue of the Case:
Is the contract between PRC and Romago already extinguished because of novation?
Decision of the Court:
No.

XXX
In novation, a subsequent obligation extinguishes a previous one through substitution
either by changing the object or principal conditions, by substituting another in place of the
debtor, or by subrogating a third person into the rights of the creditor. Novation requires (a) the
existence of a previous valid obligation; (b) the agreement of all parties to the new contract; (c)
the extinguishment of the old contract; and (d) the validity of the new one.
There cannot be novation in this case since the proposed substituted parties did not agree to the
PRAs supposed assignment of its obligations under the contract for the electrical and light works
at Heritage Park to the HPMC. The latter definitely and clearly rejected the PRAs assignment of
its liability under that contract to the HPMC. Romago tried to follow up its claims with the
HPMC, not because of any new contract it entered into with the latter, but simply because the
PRA told it that the HPMC would henceforth assume the PRAs liability under its contract with
Romago.
ALPHA INSURANCE AND SURETY CO., Petitioner
Vs.
ARSENIA SONIA CASTOR, Respondent
G.R. No. 198174, September 2, 2013
Peralta, J.
Facts of the Case:
Arsenia Castor entered into a contract of insurance with Alpha Insurance for his Toyota
Revo. In 2007, Arsenia instructed her driver to bring the Revo to a nearby auto-shop for a tuneup. However, the driver no longer returned the motor vehicle. She promptly reported the incident
to the police and demanded payment from Alpha for the loss in the total sum of P630,000.00.
Alpha denied the insurance claim, stating that the insurance policy provides that the
company shall not be liable for any malicious damage caused by the insured, any member of his
family or by a person in the insureds services. Since the driver is Arsenias employee, such
clause validly applies. It takes exception and argued that the word damage under the clause
means loss as in theft. Thus, it asserts that the loss of Arsenias vehicle as a result of being
stolen by her driver is excluded from the policy.
Issue of the Case:
Is Alphas interpretation correct, thus negating its liability to Arsenia?
Decision of the Court:
No.
XXX Contracts of insurance, like other contracts, are to be construed according to the
sense and meaning of the terms which the parties themselves have used. If such terms are clear
and unambiguous, they must be taken and understood in their plain, ordinary and popular
sense.Accordingly, in interpreting the exclusions in an insurance contract, the terms used
specifying the excluded classes therein are to be given their meaning as understood in common
speech.
Adverse to petitioners claim, the words loss and damage mean different things in
common ordinary usage. The word loss refers to the act or fact of losing, or failure to keep
possession, while the word damage means deterioration or injury to property.

Therefore, petitioner cannot exclude the loss of respondents vehicle under the insurance
policy under paragraph 4 of Exceptions to Section III, since the same refers only to malicious
damage, or more specifically, injury to the motor vehicle caused by a person under the
insureds service. Paragraph 4 clearly does not contemplate loss of property, as what happened
in the instant case. XXX

PLANTERS DEVELOPMENT BANK, Petitioner

Vs.
SPOUSES LOPEZ, Respondent
G.R. No. 186332, October 23, 2013
Brion, J.
Facts of the Case:
Spouses Ernesto and Florentina Lopez applied for and obtained a real estate loan in the
amount of P3,000,000.00 from Planters Bank to finance the construction of the four story
concrete dormitory building. The parties signed several loan agreements after their first. Spouses
Lopez obtained additional loan amounting to P1, 200,000.00 due to the increasing price of labor
and construction materials.
Spouses Lopez eventually failed to avail of the full amount of the loan because Planters
Bank refused to release the amount of P700,000.00. As a result, they filed a complaint for
rescission of the loan agreements and for damages against Planters Bank.
Planters Bank argued that the Spouses have no cause of action. The refusal, according to
it was a result of their violations of the loan agreement, namely the non-submission of
accomplishment reports and the construction of a six-story building, instead of four. They also
contend that they already foreclosed Spouses Lopez property because of their inability to pay.
Issue of the Case:
Is rescission of the loan agreement proper?
Decision of the Court:
No.
XXX
Its refusal to release the remaining balance, however, was merely a slight or casual breach
as shown below. In other words, its breach was not sufficiently fundamental to defeat the object
of the parties in entering into the loan agreement. The well-settled rule is that rescission will not
be permitted for a slight or casual breach of the contract. The question of whether a breach of
contract is substantial depends upon the attending circumstances.
The factual circumstances of this case lead us to the conclusion that Planters Bank
substantially complied with its obligation. To reiterate, Planters Bank released P3,500,000.00 of
the P4,200,000.00 loan. Only the amount ofP700,000.00 was not released. This constitutes
16.66% of the entire loan. Moreover, the progress report dated May 30, 1984 states that 85% of
the six-story building was already completed by the spouses Lopez. XXX

It is also erroneous to solely impute the non-completion of the building to Planters Bank.
Planters Bank is not an insurer of the buildings construction. External factors, such as the steep
price of the materials and the cost of labor, affected the erection of the building. More
importantly, the spouses Lopez took the risk that the project would not be finished when they
constructed a six-story building instead of four-story structure.
Even assuming that Planters Bank substantially breached its obligation, the fourth
paragraph of Article 1191 of the Civil Code expressly provides that rescission is without
prejudice to the rights of third persons who have acquired the thing, in accordance with Article
1385 of the Civil Code. In turn, Article 1385 states that rescission cannot take place when the
things which are the object of the contract are legally in the possession of third persons who did
not act in bad faith. XXX
SAN FERNANDO REGALA TRADING, INC., Petitioner
Vs.
CARGILL PHILIPPINES, INC., Respondent
G.R. No. 178008, October 9, 2013
Abad, J.
Facts of the Case:
Cargill Philippines, Inc. (Cargill) and San Fernando Regala Trading, Inc. (San Fernando)
were cane molasses traders that did business with each other for sometime. In 1996, Cargill
agreed to deliver the molasses within the months of April to May 1997 at the wharf of Union
Ajinomoto, Inc.(Ajinomoto) along the Pasig River, Metro Manila. San Fernando had a deal with
Ajinomoto for the supply of these molasses.
Cargill alleged that it offered to deliver the 4000 mt of molasses but San Fernando
accepted only 951 mt, refusing to accept the rest. The barge according to Cargill stayed at the
wharf of Ajinomoto for 71 days, waiting for San Fernandos unloading order. Because of the
delay, the owner of the barges charged Cargill with demurrage amounting to P920,000.00.
Damages by way of unrealized profits were also suffered by Cargill because it had to sell the
cargo to another buyer at a loss.
San Fernando pointed out that except for 951 mt of molasses, no other further deliveries
were made. In fact, Cargill sent a letter dated May 14 1997 proposing to change a change in the
delivery period for that contract from April to May to May to June of the same year. San
Fernando rejected it since it already contracted to sell the molasses to Ajinomoto.
The lower court ruled that Cargill was not guilty of breach of obligation to deliver and
ordered San Fernando to reimburse the demurrage paid plus interest.
To this, San Fernando appealed, thus this petition.
Issue of the Case:
Is Cargill guilty of breach of obligation to deliver?
Decision of the Court:
Yes. Cargill, of course, claimed that it had sufficient inventories of molasses to complete
its deliveries, implying that had San Fernando accepted its initial delivery of 1,174 mt it would
have continued delivering the rest. But it is not enough for a seller to show that he is capable of

delivering the goods on the date he agreed to make the delivery. He has to bring his goods and
deliver them at the place their agreement called for, i.e., at the Ajinomoto Pasig River wharf.
A stipulation designating the place and manner of delivery is controlling on the contracting
parties.The thing sold can only be understood as delivered to the buyer when it is placed in the
buyers control and possession at the agreed place of delivery. Cargill presented no evidence that
it attempted to make other deliveries to complete the balance of Contract 5026.
he CA correctly ruled that Cargill was in breach of Contract 5047 which provided for delivery of
the molasses within the months of October, November, and December 1996. Thus, when Cargill
wrote San Fernando on May 14, 1997 proposing to move the delivery dates of this contract to
May, June, and July, 1997, it was already in default. San Fernandos refusal to signify its
conformity at the proper space on Cargills letter-proposal regarding Contract 5047 signifies that
it was not amenable to the change.
San Fernando had good reason for this: it had already agreed to supply Ajinomoto the
molasses covered by Contract 5047 at the rate of P4,950.00 per mt. Consequently, Cargills
failure to deliver the 5,000 mt of molasses on "October-November-December 1996" makes it
liable to San Fernando for P11,000,000.00 in unrealized profits.
EDS MANUFACTURING, INC., Petitioner
Vs.
HEALTHCHECK INTERNATIONAL, INC., Respondent
G.R. No. 162802, October 9, 2013
Peralta, J.
Facts of the Case:
Healthcheck Inc., a prepaid health and medical insurance provider entered into a 1-year
contract with Eds Manufacturing, Inc. (EMI) for the insurance coverage of the latters 5000
employees. Two months after, Healthcheck informed EMI that its accreditation with De La Salle
University Medical Center was suspended. They entered into an agreement, one of which states
that in case there be another suspension of services, there would be no renewal of contract.
Complaints from EMI employees and workers increased as their cards were not being
honored by hospitals and physicians. EMI formally notified Healthcheck that it was rescinding
their agreement on account of serious and repeated breach of its undertaking. It demanded the
return of the premium for the unused period.
Healthcheck contends that EMI employees are still using the cards beyond the
pretermination date. It asked EMI to surrender the cards so it could process the termination and
finalize the reconciliation of accounts.
Without responding to Healthcheck, EMI sent two letters, stating that 2/3 portion of the
premium paid remained unutilized after their agreement was rescinded.
Healthcheck eventually instituted an action for the unlawful pretermination of the
contract and failure of EMI to submit a reconciliation of accounts. It claimed that Healtcheck has
not properly rescinded the contract and the accounting of the unutilized premiums cannot be
done as EMI has not submitted any utilization reports mentioned in their agreement.
Issue of the Case:
Was there a valid rescission of the agreement between the parties?

Decision of the Court:

There was none.
XXX
In the present case, it is apparent that HCI violated its contract with EMI to provide
medical service to its employees in a substantial way. As aptly found by the CA, the various
reports made by the EMI employees from July to August 1998 are living testaments to the gross
denial of services to them at a time when the delivery was crucial to their health and lives.
However, although a ground exists to validly rescind the contract between the parties, it appears
that EMI failed to judicially rescind the same. XXX
XXX In the absence of a stipulation, a party cannot unilaterally and extrajudicially
rescind a contract. A judicial or notarial act is necessary before a valid rescission (or resolution)
can take place.
XXX
Clearly, a judicial or notarial act is necessary before a valid rescission can take place,
whether or not automatic rescission has been stipulated. It is to be noted that the law uses the
phrase "even though" emphasizing that when no stipulation is found on automatic rescission, the
judicial or notarial requirement still applies.
XXX
Consequently, even if the right to rescind is made available to the injured
party, the obligation is not ipso facto erased by the failure of the other party to
comply with what is incumbent upon him.

The party entitled to rescind should apply to the court for a decree of rescission. Their right
cannot be exercised solely on a partys own judgment that the other committed a breach of the
obligation. The operative act which produces the resolution of the contract is the decree of the
court and not the mere act of the vendor. Since a judicial or notarial act is required by law for a
valid rescission to take place, the letter written by respondent declaring his intention to rescind
did not operate to validly rescind the contract
The court ruled that EMI had not rescinded the contract at all as it failed to surrender the
cards of employees although this was required in their agreement and allowed them to continue
using it even beyond the date of rescission.

AGENCY, TRUST AND PARTNERSHIP

NAME OF THE CASE
Yoshizaki vs. Joy Training Center
of Aurora, Inc.

DATE/ G.R. NO.

G.R. No. 174978, July 31, 2013

TOPIC
Agency couched in general terms;
Need for a specific power of
attorney in conveying real
property.

SALLY YOSHIZAKI, Petitioner

vs.
JOY TRAINING CENTER OF AURORA, INC., Respondent
G.R. No. 174978, July 31, 2013
Brion, J.
Facts of the Case:
Joy Training Center of Aurora City, Inc. is the registered owner of parcels of land located
in Baler Aurora. Sometime in 1998, spouses Richard and Linda Johnson sold these real
properties, a Wrangler jeep and other personal properties to Sally and Yoshio Yoshizaki. A TCT
was issued in the name of spouses Yoshizaki as a result of the sale.
On the same year, Joy Training, represented by its Acting Chairperson Reuben Rubio
filed an action for the Cancellation of Sales and Damages against spouses Johnson alleging that
spouses Johnson sold the properties without the requisite authority from the board of directors. It
also assailed the validity of the board resolution presented by the spouses which purportedly
granted them the authority to sell the properties.
The spouses contend that there is a contract of agency between them and Joy Training. It
was stated in the board resolution that they were given the full authority for all signatory
purposes for the corporation on any and all matters and decisions regarding the properties.
Issue of the Case:
Is there a contract of agency based on the resolutions presented by the parties?
Decision of the Court:
There is none.
XXX
The above documents do not convince us of the existence of the contract of agency to sell
the real properties. TCT No. T-25334 merely states that Joy Training is represented by the
spouses Johnson. The title does not explicitly confer to the spouses Johnson the authority to sell
the parcel of land and the building thereon. Moreover, the phrase Rep. by Sps. Richard A.
Johnson and LINDA S. JOHNSON only means that the spouses Johnson represented Joy
Training in land registration.
XXX
As a general rule, a contract of agency may be oral. However, it must be written when the
law requires a specific form. Specifically, Article 1874 of the Civil Code provides that the
contract of agency must be written for the validity of the sale of a piece of land or any interest
therein. Otherwise, the sale shall be void. A related provision, Article 1878 of the Civil Code,
states that special powers of attorney are necessary to convey real rights over immovable
properties.
The special power of attorney mandated by law must be one that expressly mentions a
sale or that includes a sale as a necessary ingredient of the authorized act. Xxx a special power of
attorney must express the powers of the agent in clear and unmistakable language for the

principal to confer the right upon an agent to sell real estate. When there is any reasonable doubt
that the language so used conveys such power, no such construction shall be given the document.
The purpose of the law in requiring a special power of attorney in the disposition of immovable
property is to protect the interest of an unsuspecting owner from being prejudiced by the
unwarranted act of another and to caution the buyer to assure himself of the specific
authorization of the putative agent.
XXX
Necessarily, the absence of a contract of agency renders the contract of sale
unenforceable; Joy Training effectively did not enter into a valid contract of sale with the spouses
Yoshizaki. Sally cannot also claim that she was a buyer in good faith. She misapprehended the
rule that persons dealing with a registered land have the legal right to rely on the face of the title
and to dispense with the need to inquire further, except when the party concerned has actual
knowledge of facts and circumstances that would impel a reasonably cautious man to make such
inquiry. This rule applies when the ownership of a parcel of land is disputed and not when the
fact of agency is contested.
XXX
Moreover, the certification is a mere general power of attorney which comprises all of
Joy Trainings business. Article 1877 of the Civil Code clearly states that [a]n agency couched
in general terms comprises only acts of administration, even if the principal should state that he
withholds no power or that the agent may execute such acts as he may consider appropriate, or
even though the agency should authorize a general and unlimited management.
CONSTANTINO, Petitioner
vs.
HEIRS OF CONSTANTINO, Respondent
G.R. No. 181508, October 2, 2013
Perez, J.
Facts of the Case:
Pedro Constantino Sr., the ancestor of Oscar Constantino and the other petitioners, owned
seven parcels of land. Respondents on the other hand are great grandchildren of Pedro. The latter
filed a complaint alleging that they were excluded in the Pagmamana sa Labas ng Hukuman.
They found out about the said extrajudicial partition when a tax declaration was issued in the
name of Oscar Constantino and a certain cousin.
The petitioners on the other hand contend that the Extrajudicial Settlement with Waiver
binds them as it was signed and agreed by Maria Laquindanum. Thus, this binds the latters heirs
including the respondents.
Issue of Case:
Is the Pagmamana sa Labas ng Hukuman binding on the part of the respondents?
Decision of the Court:
Yes.
XXX

We agree with the trial court that respondents are privies to Maria Laquindanum. By
the term privies is meant those between whom an action is deemed binding although they are
not literally parties to the said action. XXX
Privity in estate denotes the privity between assignor and assignee, donor and donee,
grantor and grantee, joint tenant for life and remainderman or reversioner and their respective
assignees, vendor by deed of warranty and a remote vendee or assignee. A privy in estate is one,
it has been said, who derives his title to the property in question by purchase; one who takes by
conveyance. In fine, respondents, as successors-in-interest, derive their right from and are in the
same position as their predecessor in whose shoes they now stand. As such successors,
respondents situation is analogous to that of a transferee pendente lite.XXX
Thus, any condition attached to the property or any agreement precipitating the execution
of the Deed of Extrajudicial Settlement with Waiver which was binding upon Maria
Laquindanum is applicable to respondents who merely succeeded Maria.
Despite this, the Deed of Extrajudicial Settlement with Waiver was declared void as not
all heirs were represented.
ALEJANDRO V. TANKEH, Petitioner
Vs.
DEVELOPMENT BANK OF THE PHILIPPINES, STERLING SHIPPING LINES, INC.,
RUPERTO TANKEH , VICENTE ARENAS and ASSET PRIVATIZATION TRUST,
Respondents
G.R. No. 171428, November 11, 2013
Leonen, J.
Facts of the Case:
Alejandro Tankeh was approached by his brother Ruperto Tankeh and was promised 1000
shares with par value of P1 Million with all the perks and privileges of being stockholder and
director of Sterling Shipping Lines, Inc. (SSLI), a new international shipping line. He was also
promised that his son, a lawyer will be in it too. Ruperto further told his brother that they need a
ship, so there is a need for them to secure a loan from the Development Bank of the Philippines
(DBP). Because of this, he signed a mortgage contract and deed of assignment. The loan was
approved by DBP and a vessel was acquired later on. The accounts of SSLI were transferred to
Asset Privatization Trust sometime in 1986. Despite the transfer, the loan continued to bind
Alejandro.
He subsequently filed a petition praying that the promissory note be declared null and
void and that he be absolved from any liability from the mortgage of the vessel and the note in
question. He further alleged that his younger brother Ruperto exercised deceit and fraud in
causing him to bind himself jointly and severally in the amount of the mortgage loan. His son
was not made part of the company and he was not notified of any board meeting except only
once.
On the other hand, Ruperto contends that there is no fraud. Alejandro is a doctor and a
businessman who understands the import of the documents that he signs. Thus he knows that
being an officer of SSLI, his signing of the promissory note together with the other officers
means that he will be held liable to it and is bound to comply with it.
Issue of the Case:

Is there fraud on the part of Ruperto in making Alejandro sign the mortgage contract?
Held:
There is no causal fraud, only incidental fraud on the part of Ruperto, thus should be held
liable for damages.
XXX To annul a contract on the basis of dolo causante, the following must
happen: First, the deceit must be serious or sufficient to impress and lead an
ordinarily prudent person to error. If the allegedly fraudulent actions do not deceive
a prudent person, given the circumstances, the deceit here cannot be considered
sufficient basis to nullify the contract. In order for the deceit to be considered
serious, it is necessary and essential to obtain the consent of the party imputing
fraud. To determine whether a person may be sufficiently deceived, the personal
conditions and other factual circumstances need to be considered.

Second, the standard of proof required is clear and convincing evidence. This standard of
proof is derived from American common law. It is less than proof beyond reasonable doubt (for
criminal cases) but greater than preponderance of evidence (for civil cases). The degree of
believability is higher than that of an ordinary civil case. Civil cases only require a
preponderance of evidence to meet the required burden of proof. However, when fraud is alleged
in an ordinary civil case involving contractual relations, an entirely different standard of proof
needs to be satisfied. The imputation of fraud in a civil case requires the presentation of clear and
convincing evidence. Mere allegations will not suffice to sustain the existence of fraud. The
burden of evidence rests on the part of the plaintiff or the party alleging fraud. The quantum of
evidence is such that fraud must be clearly and convincingly shown.
XXX
An assessment of the allegations in the pleadings and the findings of fact of both the trial
court and appellate court based on the evidence on record led to the conclusion that there had
been no dolo causante committed against the petitioner by Ruperto V. Tankeh.
The petitioner had given his consent to become a shareholder of the company without
contributing a single peso to pay for the shares of stock given to him by Ruperto V. Tankeh.
XXX The following facts show that petitioner was fully aware of the magnitude of his
undertaking:
First, petitioner was fully aware of the financial reverses that Sterling Shipping Lines,
Inc. had been undergoing, and he took great pains to release himself from the obligation.
Second, his background as a doctor, as a bank organizer, and as a businessman with
experience in the textile business and real estate should have apprised him of the irregularity in
the contract that he would be undertaking. This meant that at the time petitioner gave his consent
to become a part of the corporation, he had been fully aware of the circumstances and the risks of
his participation. Intent is determined by the acts.
Finally, the records showed that petitioner had been fully aware of the effect of his
signing the promissory note. The bare assertion that he was not privy to the records cannot
counteract the fact that petitioner himself had admitted that after he had severed ties with his
brother, he had written a letter seeking to reach an amicable settlement with respondent Rupert V.
Tankeh. Petitioners actions defied his claim of a complete lack of awareness regarding the
circumstances and the contract he had been entering.XXX
The required standard of proof clear and convincing evidence was not met.
However, in refusing to allow petitioner to participate in the management of the business,
respondent Ruperto V. Tankeh was liable for the commission of incidental fraud. In Geraldez,

this Court defined incidental fraud as "those which are not serious in character and without
which the other party would still have entered into the contract.
Thus, Ruperto was ordered to pay moral and exemplary damages to Alejandro.