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47. ACOL vs. PHIL Acol lost his credit card issued by respondent.

t. The same being contrary to public policy. Article 1306 of

COMM CREDIT He immediately informed the latter of such loss. the Civil Code prohibits contracting parties from
PhilComm advised him to put into writing the establishing stipulations contrary to public policy.
notice of loss and to submit it, together with the
extension cards of his wife and daughter, w/c
Acold did.

As petitioner points out, the effectivity of the cancellation

Acol’s card was used by somebody which of the lost card rests on an act entirely beyond the
amounted to P76,067.28. The accredited control of the cardholder. Worse, the phrase “after a
establishments reported the invoices for such reasonable time” gives the issuer the opportunity to
purchases to respondent which then billed actually profit from unauthorized charges despite receipt
petitioner for that amount. Acol refused to pay of immediate written notice from the cardholder.
but respondent said: that it was the most
“practicable procedure and policy of the
company.” It cited provision no. 1 of the “Terms
and Conditions Governing The Issuance and Use
of the Bankard” found at the back of the Under such a stipulation, petitioner could have
application form: theoretically done everything in his power to give
respondent the required written notice. But if respondent
took a “reasonable” time (which could be indefinite) to
xxx Holder’s responsibility for all charges include the card in its cancellation bulletin, it could still
made through the use of the card shall hold the cardholder liable for whatever unauthorized
continue until the expiration or its return charges were incurred within that span of time. This
to the Card Issuer or until a reasonable would have been truly iniquitous, considering the amount
time after receipt by the Card Issuer of respondent wanted to hold petitioner liable for.
written notice of loss of the Card and its
actual inclusion in the Cancellation
Bulletin. Xxx

W/N provision no. 1 of the Terms and

Conditions was valid and binding on the
petitioner, given that the contract was one
of adhesion. NO.

49. PNB vs. PADILLA Padilla was granted by PNB a credit line of Hence, even assuming that the P1.8M loan agreement
P1.8M, secured by a Real Estate Mortgage, for a between PNB and the private respondent gave PNB a
term of 2 years, with 18% interest per annum. license (although in fact there was none) to increase the
Private respondent executed in favor of the PNB interest rate at will during the term of the loan, that
a Credit Agreement, 2 Promissory Notes— license would have been null and void for being violative
P90,000 each, and a Real Estate Mortgage of the principle of mutuality essential in contracts. It
Contract. All these contracts contained a uniform would have invested the loan agreement with the
stipulation that PNB may increase the interest character of a contract of adhesion, where the parties do
whenever it may please. not bargain on equal footing, the weaker party’s (the
debtor) participation being reduced to the alternative “to
take it or leave it.” Such a contract is a veritable trap for
the weaker party whom the courts of justice must protect
W/N the creditor, PNB, may unilaterally against abuse and imposition.
change or increase the interest rate
stipulated at will and as often as it
pleased. NO.
PNB’s successive increase of the interest rate on the
private respondent’s loan, over the latter’s protest, were
arbitrary as they violated an express provision of the
The unilateral action of PNB in increasing the Credit Agreement—Sec. 9.01---that the terms “may be
interest rate on the private respondent’s loan amended only by instrument in writing signed by the
violated the mutuality of contracts ordained in party to be bound as burdened by such amendment.” The
Art. 1308: The contract must bind both increases imposed by PNB also contravene Art. 1956 of
contracting parties; its validity or compliance the Civil Code which provides that “no interest shall be
cannot be left to the will of one of them. due unless it has been expressly stipulated in writing.”

In order that obligations arising from contracts The debtor herein never agreed in writing to pay the
may have the force of law between the parties, interest increases fixed by the PNB beyond 24% per
there must be mutuality between the parties annum, hence he is not bound to pay a higher rate than
based on their essential equality. A contract that.
containing a condition which makes its
fulfillment dependent exclusively upon the
uncontrolled will of one of the contracting parties
is void.





56. CORONEL vs.


57. LAUDICIO vs.



59. ADELFA –jovits

60. SERRA vs. CA


62. VDA. DE APE vs. CA Fortunato De Ape—1 of the 11 heirs of deceased A contract of sale is a consensual contract, thus, it is
—allegedly sold his part of the inherited land to perfected by mere consent of the parties. For there to be
one Lumayno as evidenced by a RECEIPT. a perfected contract of sale, however, the following
Lumayno wanted to register the claimed sale elements must be present: consent, object, and price in
transaction, she demanded that Fortunato money or its equivalent.
execute the corresponding deed of sale and to
receive the balance of the consideration.

To be valid, consent must meet the following requisites:

Fortunato denied Lumayno’s claim and insisted • it should be intelligent, or with an exact
that what they had was an EXPIRED contract of notion of the matter to which it refers;
LEASE. He never sold his share in Lot-A to
Lumayno and that his signature appearing on • it should be free and it should be
the purported receipt was forged. spontaneous. Intelligence in consent is
vitiated by error; freedom by violence,
intimidation or undue influence;
Lumayno: when their lease contract was about spontaneity by fraud.
to expire they agreed instead to enter into a
contract of sale. Thereafter, she asked her
son-in-law Flores to prepare the aforementioned
RECEIPT. Flores read the document to In this jurisdiction, the GENERAL RULE is that he who
Fortunato and asked the latter whether he alleges fraud or mistake in a transaction must
had any objection thereto. Fortunato then substantiate his allegation as the presumption is that a
went on to affix his signature on the person takes ordinary care for his concerns and that
receipt. private dealings have been entered into fairly and
regularly. The EXCEPTION to this rule is provided for
under Article 1332 of the Civil Code which provides that
"[w]hen one of the parties is unable to read, or if the
W/N the receipt signed by Fortunato proves contract is in a language not understood by him, and
the existence of a contract of sale between mistake or fraud is alleged, the person enforcing the
him and Lumayno. NO. contract must show that the terms thereof have been
fully explained to the former."

Flores’ testimony: he was very much aware of Fortunato's

inability to read and write in the English language, he did
not bother to fully explain to the latter the substance of
the receipt. It is precisely in situations such as this when
the wisdom of Article 1332 of the Civil Code readily
becomes apparent which is "to protect a party to a
contract disadvantaged by illiteracy, ignorance, mental
weakness or some other handicap.

63. MAYOR vs. BELEN Mayor—seller—sold to Belen—buyer—a parcel of ART. 1338. There is fraud when, through insidious words
land for P18K. Belen had paid almost 2/3 of the or machinations of one of the contracting parties, the
price when she RESOLD the same to Mayor, other is induced to enter into a contract which, without
evidenced by Kasulatan ng Bilihang Tuluyan. them, he would not have agreed to.

FRAUD refers to all kinds of deception, whether through

insidious machination, manipulation, concealment or
Belen accepted the same land as security for misrepresentation to lead another party into error. The
Mayor’s loan from her in the amount of P12K, deceit employed must be serious. It must be sufficient to
evidenced by Kasulatan ng Sanglaan. impress or lead an ordinarily prudent person into error,
taking into account the circumstances of each case.
Belen then filed for ANNULMENT of these 2 Lourdes M. Belen had a limited educational attainment.
Kasulatans grounded on FRAUD. Mayor made Although the 2 Kasulatans executed in Tagalog, a close
her believe that the first sale to her (Belen) was scrutiny thereof shows that they are practically literal
void and that she might lose what she had translations of their English counterparts. Thus, the mere
already paid which amounted to 70% of the fact that the documents were executed in the vernacular
purchase price. neither clarified nor simplified matters for Lourdes who
admitted on cross-examination that she merely finished
Grade 3, could write a little, and understand a little of
the Tagalog language.
It turned out that the scheme was in fact a ruse
employed by Romulo and Andrea to re-acquire
the property, thus, Lourdes’s consent in the
execution of the Kasulatan ng Bilihang Tuluyan CA not in fault when it invoked Article 1332 of the Civil
and Kasulatan ng Sanglaan was obtained Code which states:
through fraud and undue influence.
When one of the parties is unable to read, or if the
W/N FRAUD attended the execution of the contract is in a language not understood by him, and
Kasulatan ng Bilihan and Kasulatan ng mistake or fraud is alleged, the person enforcing the
Sanglaan. YES. contract must show that the terms thereof have been
fully explained to the former.

As aptly pointed out by the CA, the principle that a party

is presumed to know the import of a document to which
he affixes his signature is modified by the foregoing
article. Under the said article, where a party is unable to
read or when the contract is in a language not understood
by a party and mistake or fraud is alleged, the obligation
to show that the terms of the contract had been fully
explained to said party who is unable to read or
understand the language of the contract devolves on the
party seeking to enforce it.

64. BAUTISTA vs. CA The deceased uncle of petitioner allegedly sold

The presumption of validity and regularity prevails over
and conveyed to the latter a land during the
allegations of forgery and fraud. As against direct
uncle’s lifetime, as evidenced by a DEED OF
evidence consisting of the testimony of a witness who
was physically present at the signing of the contract and
who had personal knowledge thereof, the testimony of an
expert witness constitutes indirect or circumstantial
Respondent claiming to be the illegitimate child evidence at best. Carmelita Marcelino, the witness to the
of the deceased instituted a complaint for the Deed of Absolute Sale, confirmed the genuineness,
declaration of nullity of sale and title with authenticity and due execution thereof. Having been
damages. he presented testimonies of expert physically present to see the decedent Cesar Morelos and
witnesses who claimed that the signature of petitioner Laura Bautista affix their signatures on the
Cesar Morelos on the Deed of Absolute Sale and
document, the weight of evidence preponderates in favor
the fingerprint appearing on his Residence
Certificate were not his. of petitioners.

w/n the DEED of ABSOLUTE SALE was As to the alleged insufficient consideration of the sale of
VALID. YES. the property, the mere inadequacy of the price does not
affect its validity when both parties are in a position to
form an independent judgment concerning the
transaction, unless fraud, mistake or undue influence
indicative of a defect in consent is present. A contract
may consequently be annulled on the ground of vitiated
consent and not due to the inadequacy of the price. In
the case at bar, however, no evidence to prove fraud,
mistake or undue influence indicative of vitiated consent
was presented other than the respondent's self-serving

65. DAUDEN-HERNAEZ Dauden-Hernaez, a motion picture actress, had

vs. HON. WALFRIDO DE filed a complaint against private respondents, to
LOS ANGELES recover P14,700.00 representing a balance To this general rule, the Code admits exceptions, set forth
allegedly due said petitioner for her services as in Article 1356 (2).
leading actress.

It is thus seen that to the general rule that the form (oral
It was dismissed because the "claim of plaintiff or written) is irrelevant to the binding effect inter parties
was not evidenced by any written document, of a contract that possesses the three validating elements
either public or private", and the complaint "was of consent, subject matter, and causa, Article 1356 of the
defective on its face" for violating Articles 1356 Code establishes only two exceptions, to wit:
and 1358 of the Civil Code.
a. Contracts for which the law itself requires that
they be in some particular form (writing) in order
Complaint was amended. Defendant argued to make them valid and enforceable (the so-
against it: called solemn contracts). Of these the typical
example is the donation of immovable property
amended complaint did not vary in that the law (Article 749) requires to be embodied
any material respect from the original in a public instrument in order "that the donation
complaint except in minor details, and may be valid", i.e., existing or binding. Other
suffers from the same vital defect of the instances are the donation of movables worth
original complaint", which is the violation more than P5,000.00 which must be in writing,
of Article 1356 of the Civil Code, in that "otherwise the donation shall be void" (Article
the contract sued upon was not alleged 748); contracts to pay interest on loans (mutuum)
to be in writing; that by Article 1358 the that must be "expressly stipulated in writing"
writing was absolute and indispensable, (Article 1956); and the agreements contemplated
because the amount involved exceeds by Article 1744, 1773, 1874 and 2134 of the
five hundred pesos. present Civil Code.

b. Contracts that the law requires to be proved by

some writing (memorandum) of its terms, as in
W/N the contract for personal services
those covered by the old Statute of Frauds, now
involving more than P500.00 was either
Article 1403(2) of the Civil Code. Their existence
invalid of unenforceable under Article
not being provable by mere oral testimony
1358, last par.
(unless wholly or partly executed), these
contracts are exceptional in requiring a writing
embodying the terms thereof for their
NO. THERE WAS A VALID AND ENFORCEABLE enforceability by action in court.
WRITING. Contracts are valid and binding from
their perfection regardless of form whether they
The contract sued upon by petitioner herein
be oral or written. This is plain from Articles
(compensation for services) does not come under either
1315 and 1356 of the present Civil Code.
exception. It is true that it appears included in Article
1358, last clause, providing that "all other contracts
where the amount involved exceeds five hundred pesos
The essential requisites of a contract are: (1) must appear in writing, even a private one." But Article
consent (2) proper subject matter, and (3) 1358 nowhere provides that the absence of written form
consideration or causa for the obligation in this case will make the agreement invalid or
assumed (Article 1318). So that once the three unenforceable. On the contrary, Article 1357 clearly
elements exist, the contract is generally valid indicates that contracts covered by Article 1358 are
and obligatory, regardless of the form, oral or binding and enforceable by action or suit despite the
written, in which they are couched. absence of writing.

66. CLAUDEL v. CA A lot was being claimed by two sets of heirs— However, in the event that a third party, as in this
Heirs of Cecilio Claudel (wife and children) and case, disputes the ownership of the property, the person
Siblings of Cecilio who claimed that several against whom that claim is brought can not present any
proof of such sale and hence has no means to enforce the
portions of the subject Lot had been purchased
contract. Thus the Statute of Frauds was precisely
by their parents from the deceased about 46 devised to protect the parties in a contract of sale of real
years earlier. The sale was VERBAL. property so that no such contract is enforceable unless
certain requisites, for purposes of proof, are met.

W/N the ORAL sale was valid. NO. The purpose of the Statute of Frauds is to prevent fraud
and perjury in the enforcement of obligations depending
for their evidence upon the unassisted memory of
witnesses by requiring certain enumerated contracts and
Rule of thumb: a sale of land, once
transactions to be evidenced in Writing.
consummated, is valid regardless of the form it
may have been entered into. For nowhere does
law or jurisprudence prescribe that the contract
of sale be put in writing before such contract can
validly cede or transmit rights over a certain real
property between the parties themselves.

67. BERMAN Cheng purchased 2 memorial lots—Lot 12 which Article 1370 of the New Civil Code provides that if the
MEMORIAL PARK, INC he upgraded to Lot 24. Cheng received a terms of a contract are clear and leave no doubt upon the
and LUISA CHONG vs. statement of account from BMPI showing that he intention of the contracting parties, the literal meaning of
FRANCISCO CHENG still had a balance of P32,375.00. Cheng its stipulation shall control. No amount of extrinsic aids
informed BMPI that he had, in fact, made an are required and no further extraneous sources are
overpayment of P77,375.00 for the two necessary in order to ascertain the parties’ intent,
lots. determinable as it is, from the contract itself. The records
are clear that the respondent understood the nature of
the contract he entered into.

Chong/BMI: the price of 24-Lot was

actually P350,000.00, but that the IMP had
agreed to sell the lot to Cheng for P250,000.00, If, indeed, the stipulations as embodied in the
less P110,000.00 of theP150,000.00 price aforementioned Pre-Need Purchase Agreement were not
of 12-Lot in accordance w/their agreement. the true intention of the parties, the respondent should
have filed the corresponding action for reformation of the
contract. But he did not.

How should the parties’ contract be

The hornbook rule on interpretation of contracts gives
primacy to the intention of the parties, which is the law
among them. Ultimately, their intention is to be
deciphered not from the unilateral post facto assertions of
one of the parties, but from the language used in the
contract. And when the terms of the agreement, as
expressed in such language, are clear, they are to be
understood literally, just as they appear on the face of the