RURAL BANK OF PARAQUE VS REMOLADO

GR No. L-62051.
March 18, 1985
FACTS:
This case is about the repurchase of mortgage property after the period of redemption and had expired.
Isidra Remolado, 64, a widow, and resident of Makati, Rizal, owned a lot with an area of 308 square meters,
with a bungalow thereon, which was leased to Beatriz Cabagnot. On April 17, 1971 she mortgaged it again to
petitioner. She eventually secured loans totalling P18,000 (Exh. At D). the loans become overdue. The bank
foreclosed the mortagage on July 21, 1972 and bought the property at the foreclosure sale for P22,192.70. The
one-year period of redemption was to expire on August 21, 1973.
On August 9, 1973 or 14 days before the expiration of the one-year redemption period, the bank gave
her a statement showing that she should pay P25,491.96 for the redemption of the property on August 23. No
redemption was made on that date. On September 3, 1973 the bank consolidated its ownership over the
property. Remolado's title was cancelled. Remolado was offered a period until October 31, 1973 from which she
could repurchase the lot. She only exercised that option on November 5. Remolado then filed an action for
reconveyance which the lower courts granted her.
ISSUE: Is Remolado entitled to reconveyance?
RULING:
There was no binding agreement for its repurchase. Even on the assumption that the bank should be
bound by its commitment to allow repurchase on or before October 31, 1973, still Remolado had no cause of
action because she did not repurchase the property on that date.
Justice is done according to law. As a rule, equity follows the law. There may be a moral obligation,
often regarded as an equitable consideration (meaning compassion), but if there is no enforceable legal duty, the
action must fail although the disadvantaged party deserves commiseration or sympathy.
In the instant case, the bank acted within its legal rights when it refused to give Remolado any extension
to repurchase after October 31, 1973. It had given her about two years to liquidate her obligation. She failed to
do so. The decision of the CA affirming the decision of the RTC was reversed.

ZULUETA VS. MARIANO

111 SCRA 206
FACTS: Petitioner Zulueta was the owner of a house and lot in Antonio Subdivision, Pasig Rizal, while private
respondent is a movie director. They entered into a Contract to Sell the said property of petitioner for P75,000
payable in 20 years with respondent buyer assuming to pay a down payment of P5,000 and a monthly
installment of P630 payable in advance before the 5th day of the corresponding month, starting with December,
1964.
One of their stipulations was that upon failure of the buyer to fulfill any of the conditions being stipulated,
the buyer automatically and irrevocably authorizes owner to recover extra-judicially, physical possession of the
land, building and other improvements, which were the subject of the said contract, and to take possession also
extra-judicially whatever personal properties may be found within the aforesaid premises from the date of said
failure to answer for whatever unfulfilled monetary obligations buyer may have with owner.
Demand was also waived.
On the allegation that private respondent failed to comply with the monthly amortizations stipulated in the
contract, despite demands to pay and to vacate the premises, and that thereby the contract was converted into
one of lease, petitioner commenced an Ejectment suit against respondent before the Municipal Court of Pasig,
praying that judgment be rendered ordering respondent to 1) vacate the premises; 2) pay petitioner the sum of

P11, 751.30 representing respondents balance owing as of May, 1966; 3) pay petitioner the sum of P630 every
month a"er May, 1966, and costs.
Private respondent contended that the Municipal Court had no jurisdiction over the nature of the action as it
involved the interpretation and/or rescission of the contract.
ISSUE: Was the action before the Municipal Court essentially one for rescission or annulment of a contract?
RULING: Yes.
According to the Supreme Court, ...proof of violation is a condition precedent to resolution or rescission.
It is only when the violation has been established that the contract can be declared resolved or rescinded.
Upon such rescission in turn, hinges a pronouncement that possession of the realty has become unlawful.
The Supreme Court, in Nera vs. Vacante (3 SCRA 505), also said, A violation by a party of any of the
stipulations of a contract on agreement to sell real property would entitle the other party to resolved or rescind
it. Also, according to the book of Tolentino, Civil Code of the Phil., Vol. IV, 1962 ed. P. 168, citing Magdalena
Estate vs. Myrick, 71 Phil. 344 (1941), extra-judicial rescission has legal e!ect when the parties does not oppose
it. If it is objected to, judicial determination of the issue is still necessary.
With regards to the jurisdictions of inferior courts, the Supreme Court said that the CFI correctly ruled that
the Municipal Court had no jurisdiction over the case and correctly dismissed the appeal. However, the CFI
erred in assuming original jurisdiction, in the face of the objection interposed by petitioner.
Sanchez v. Rigos
No. L-25494, June 14, 1972
Facts: Nicolas Sanchez and Severina Rigos executed an instrument entitled Option to Purchase wherein Mrs.
Rigos agreed, promised and committed to sell to Mr. Sanchez a parcel of land for the amount of P1,510 within
two years from the date of the instrument, with the understanding that the said option shall be deemed
terminated and elapsed if Mr. Sanchez shall fail to exercise his right to buy the property within the stipulated
period.
Mrs. Rigos agreed and committed to sell and Mr. Sanchez agreed and committed to buy. But there is nothing in
the contract to indicate that her agreement, promise and undertaking is supported by a consideration distinct
from the price stipulated for the sale of the land.
Mr. Sanchez has made several tenders of payment in the said amount within the period before any withdrawal
from the contract has been made by Mrs. Rigos, but were rejected nevertheless.
Issue: Can an accepted unilateral promise to sell without consideration distinct from the price be withdrawn
arbitrarily?
Held: No. An accepted promise to sell is an offer to sell when accepted becomes a contract of sale.
Rationale: The instrument executed in 1961 is not a "contract to buy and sell," but merely granted SANCHEZ
an option to buy, as indicated by its own title "Option to Purchase." The option did not impose upon Sanchez
the obligation to purchase Rigos' property. Rigos "agreed, promised and committed" herself to sell the land to
Sanchez, but there is nothing in the contract to indicate that her aforementioned agreement, promise and
undertaking is supported by a consideration "distinct from the price" stipulated for the sale of the land.
Article 1479 refers to "an accepted unilateral promise to buy or to sell." Since there may be no valid contract
without a cause or consideration, the promisor is not bound by his promise and may, accordingly, withdraw it.

Pending notice of its withdrawal, his accepted promise partakes, however, of the nature of an offer to sell which,
if accepted, results in a perfected contract of sale.
Since there may be no valid contract without a cause or consideration, the promisor is not bound by his promise
and may, accordingly, withdraw it. Pending notice of its withdrawal, his accepted promise partakes, however, of
the nature of an offer to sell which, if accepted, results in a perfected contract of sale.
This view has the advantage of avoiding a conflict between Articles 1324 on the general principles on
contracts and 1479 on sales of the Civil Code.
Article 1324. When the offeror has allowed the offeree a certain period to accept, the offer may be withdrawn at
any time before acceptance by communicating such withdrawal, except when the option is founded upon
consideration, as something paid or promised.
Article 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the
promissory if the promise is supported by a consideration distinct from the price.
The Court is of the considered opinion that it should, as it hereby reiterates the doctrine laid down in the Atkins,
Kroll and Co. case, and that, insofar as inconsistent therewith, the view adhered to in the Southwestern Sugar &
Molasses Co. case should be deemed abandoned or modified.
Bonifacio Bros., Inc. V. Mora (1967)
G.R. No. L-20853
Lessons Applicable: stipulation pour autrui (Insurance)
FACTS:
Enrique Mora, owner of Oldsmobile sedan model 1956, mortgaged it to H.S. Reyes, Inc., with the
condition that they would be the beneficiary of its insurance
June 23, 1959: The sedan was insured with State Bonding & Insurance Co., Inc
During the period of effectivity, the sedan met an accident and it was appraised by Bayne Adjustment
Co. and repaired it with Bonifacio Bros. and the parts were supplied by Ayala Auto Parts Co. This was
all done without the knowledge of H.S. Reyes. Enrique was billed P2,102.73 through Bayne. The
insurance company drew a check deducting P100 for franchise and entrusted it to Bayne payable to
Enrique or H.S. Reyes.
Still unpaid, the sedan was delivered to Enrique without the Knowledge of H.S. Reyes
Bonifacio Bros and Ayala Auto filed in the MTC on the theory that the insurance proceeds should be
paid directly to them
CFI affirmed MTC: H.S. Reyes, Inc. as having a better right
ISSUE: W/N there is privity between Bonifacio Bro and Ayala Auto against the insurance company
HELD:
NO. Judgment affirmed
GR: contracts take effect only between the parties thereto
EX: some specific instances provided by law where the contract contains some stipulation in favor of a
third person - stipulation pour autrui
o provision in favor of a third person not a party to the contract
o third person is allowed to avail himself of a benefit granted to him by the terms of the contract,

provided that the contracting parties have clearly and deliberately conferred a favor upon such
person
stipulation pour autrui must be clearly expressed - none here
o "loss payable" clause of the insurance policy stipulates that "Loss, if any, is payable to H.S.
Reyes, Inc." indicating that it was only the H.S. Reyes, Inc. which they intended to benefit.
o stipulation merely establishes the procedure that the insured has to follow in order to be entitled
to indemnity for repair
o a policy of insurance is a distinct and independent contract between the insured and insurer, and
third persons have no right either in a court of equity, or in a court of law, to the proceeds of it,
unless there be some contract of trust, expressed or implied between the insured and third person
"loss" in insurance law embraces injury or damage
The injury or damage sustained by the insured in consequence of the happening of one or more of the
accidents or misfortune against which the insurer, in consideration of the premium, has undertaken to
indemnify the insured

The appellants seek to recover the insurance proceeds, and for this purpose, they rely upon paragraph 4 of the
insurance contract document executed by and between the State Bonding & Insurance Company, Inc. and
Enrique Mora. The appellants are not mentioned in the contract as parties thereto nor is there any clause or
provision thereof from which we can infer that there is an obligation on the part of the insurance company to
pay the cost of repairs directly to them. It is fundamental that contracts take effect only between the parties
thereto, except in some specific instances provided by law where the contract contains some stipulation in favor
of a third person. Such stipulation is known as stipulation pour autrui or a provision in favor of a third person
not a pay to the contract. Under this doctrine, a third person is allowed to avail himself of a benefit granted to
him by the terms of the contract, provided that the contracting parties have clearly and deliberately conferred a
favor upon such person. Consequently, a third person not a party to the contract has no action against the parties
thereto, and cannot generally demand the enforcement of the same. The question of whether a third person has
an enforcible interest in a contract, must be settled by determining whether the contracting parties intended to
tender him such an interest by deliberately inserting terms in their agreement with the avowed purpose of
conferring a favor upon such third person. In this connection, this Court has laid down the rule that the fairest
test to determine whether the interest of a third person in a contract is a stipulation pour autrui or merely an
incidental interest, is to rely upon the intention of the parties as disclosed by their contract. In the instant case
the insurance contract does not contain any words or clauses to disclose an intent to give any benefit to any
repairmen or materialmen in case of repair of the car in question. The parties to the insurance contract omitted
such stipulation, which is a circumstance that supports the said conclusion. On the other hand, the "loss
payable" clause of the insurance policy stipulates that "Loss, if any, is payable to H.S. Reyes, Inc." indicating
that it was only the H.S. Reyes, Inc. which they intended to benefit.
Another cogent reason for not recognizing a right of action by the appellants against the insurance company is
that "a policy of insurance is a distinct and independent contract between the insured and insurer, and third
persons have no right either in a court of equity, or in a court of law, to the proceeds of it, unless there be some
contract of trust, expressed or implied between the insured and third person." In this case, no contract of trust,
expressed or implied exists. We, therefore, agree with the trial court that no cause of action exists in favor of the
appellants in so far as the proceeds of insurance are concerned. The appellants' claim, if at all, is merely
equitable in nature and must be made effective through Enrique Mora who entered into a contract with the
Bonifacio Bros. Inc.
Facts: Mora mortgaged his car to H.S Reyes with a condition that Mora would insure the car with H.S. Reyes
Inc. as the beneficiary. State Bonding & Company insured the car and a motor car insurance policy was issued
to Mora. Right after, the car met an accident. The insurance company then assigned the accident to the Bayne
Adjustment Co. for investigation and appraisal of the damage. Mora, without the consent and knowledge of
H.S. Reyes Inc., authorized Bonifacio Brothers Inc. to fix the car. For the cost of labor and materials, Enrique
Mora was billed at P2,102.73 through the H.H. Bayne Adjustment Co. The insurance company after claiming a

franchise in the amount of P100, drew a check in the amount of P2,002.73, as proceeds of the insurance policy,
payable to the order of Enrique Mora or H.S. Reyes,. Inc., and entrusted the check to the H.H. Bayne
Adjustment Co. for disposition and delivery to the proper party. In the meantime, the car was delivered to
Enrique Mora without the consent of the H.S. Reyes, Inc., and without payment to the Bonifacio Bros. Inc. of
the cost of repairs and materials. Upon the theory that the insurance proceeds should be paid directly to them,
the Bonifacio Bros. Inc filed a complaint against Mora and the State Bonding & Insurance Co., Inc. for the
collection of the sum of P2,002.73
Kauffman vs. PNB
Lessons Applicable: contracts; stipulation pour autrui
FACTS: Kauffman, based in NYC, was the president of a Philippine Company; he was entitled to receive a
dividend so the treasurer of the company went to the exchange department of PNB and requested to that a
telegraphic transfer of the money Kauffman was supposed to receive from the company. The PNB agreed with
additional charges for the transaction. The treasurer issued a check to PNB and it was accepted. The PNBs
representative in New York sent a message suggesting the advisability of withholding this money from
Kauffman, in view of his reluctance to accept certain bills of the company. PNB acquiesced in this and
dispatched to its NY agency a message to withhold the Kauffman payment as suggested. Meanwhile, Wicks
then he informed Kauffman that his dividends had been wired to his credit in the NY agency of PNB. So
Kauffman went to PNB office in NYC and demanded the money, however, he was refused payment. So he filed
this complaint.
ISSUE: Does Kauffman have a right of action against PNB?
HELD: Yes; it is a stipulation pour autrui.Should the contract contain any stipulation in favor of a third person,
he may demand its fulfillment, provided he has given notice of his acceptance to the person bound before the
stipulation has been revoked. (Art. 1257, par. 2, Civ. Code.) In the light of the conclusion thus stated, the right
of the plaintiff to maintain the present action is clear enough; for it is undeniable that the bank's promise to
cause a definite sum of money to be paid to the plaintiff in NYC is a stipulation in his favor within the meaning
of the paragraph above quoted; and the circumstances under which that promise was given disclose an evident
intention on the part of the contracting parties that the plaintiff should have the money upon demand in NYC.
The recognition of this unqualified right in the plaintiff to receive the money implies in our opinion the right in
him to maintain an action to recover it.It will be noted that under the paragraph cited a third person seeking to
enforce compliance with a stipulation in his favor must signify his acceptance before it has been revoked. In this
case the plaintiff clearly signified his acceptance to the bank by demanding payment; and although PNB had
already directed its NY agency to withhold payment when this demand was made, the rights of the plaintiff
cannot be considered to as there used, must be understood to imply revocation by the mutual consent of the
contracting parties, or at least by direction of the party purchasing he exchange.
Note: Legniti vs. Mechanics, etc. Bank (130 N.E. Rep., 597), decided by CA of NYC on March 1, 1921, it was
held that, by selling a cable transfer of funds on a foreign country in ordinary course, a bank incurs a simple
contractual obligation, and cannot be considered as holding the money which was paid for the transfer in the
character of a specific trust. Thus, it was said, "Cable transfers, therefore, mean a method of transmitting money
by cable wherein the seller engages that he has the balance at the point on which the payment is ordered and
that on receipt of the cable directing the transfer his correspondent at such point will make payment to the
beneficiary described in the cable. All these transaction are matters of purchase and sale create no trust
relationship."

Saura vs. Sindico

Lessons Applicable: contracts; contrary to public policy
FACTS: Saura and Sindico were contesting for nomination as the official candidate of the Nacionalista. On
August 23, 1957, the parties entered into a written agreement bearing the same date, containing among other
matters stated therein, a pledge thatEach aspirant shall respect the result of the aforesaid convention, i.e., no one
of us shall either run as a rebel or independent candidate after losing in said convention.Saura was elected and
proclaimed the Party's official congressional candidate for the aforesaid district of Pangasinan. Nonetheless,
Sindico filed her certificate of candidacy for election. Saura commenced this suit for the recovery of damages.
RTC dismissed the complaint on the basis that the agreement sued upon is null and void, in that (1) the subject
matter of the contract, being a public office, is not within the commerce of man; and (2) the "pledge" was in
curtailment of the free exercise of elective franchise and therefore against public policy
ISSUE: W/N THE AGREEMENT IS VOID
HELD: Contract or agreement is a nullity. Among those that may not be the subject matter (object) of contracts
are certain rights of individuals, which the law and public policy have deemed wise to exclude from the
commerce of man. Among them are the political rights conferred upon citizens, including, but not limited to,
once's right to vote, the right to present one's candidacy to the people and to be voted to public office, provided,
however, that all the qualifications prescribed by law obtain. Such rights may not, therefore, be bargained away
curtailed with impunity, for they are conferred not for individual or private benefit or advantage but for the
public good and interest.
EMETERIO CUI vs. ARELLANO UNIVERSITY CONCEPCION
FACTS:
Emeterio Cui enrolled in the defendant university where plaintiff finished his law studies in the up to and
including the first semester of the fourth year. During all the school years in which plaintiff was studying law in
defendant Law College, he was awarded scholarship grants and his semestral tuition fees were returned to him
after ends of the semester. Plaintiff left the defendant's law college and enrolled for the last semester of his
fourth year law in the college of law of the Abad Santos University graduating from the college of law of the
latter university. He applied to take the bar examination in which he needed the transcripts of his records in
defendant Arellano University. The defendant refused until after he had paid back the P1,033 87, noting the
contract that he signed which stated that in consideration of the scholarship granted to him by the University, he
waives his right to transfer to another school without having refunded to the defendant the equivalent of the
scholarship cash and followed by Memorandum No. 38 that the Director of Private Schools issued.
ISSUE: Whether or not the contract between Cui and the respondent university, whereby the former waives his
right to transfer to another school without having refunded to the defendant the equivalent of the scholarship
cash valid or not?
HELD: The contract of waiver between the plaintiff and respondent on September 10, 1951, is a direct
violation of Memorandum No. 38 and hence null and void. The contract was contrary to sound policy and civic
honesty. The policy enunciated in Memorandum No. 38, s. 1949 is sound policy. When students are given full
or partial scholarships, it is understood that such scholarships are merited and earned. The amount in tuition and
other fees corresponding to these scholarships should not be subsequently charged to the recipient students
when they decide to quit school or to transfer to another institution. Scholarships should not be offered merely
to attract and keep students in a school.

The memorandum of the Director of Private Schools is not a law where the provision set therein was advisory
and not mandatory in nature. Moreover, the stipulation in question, asking previous students to pay back the
scholarship grant if they transfer before graduation, is contrary to public policy, sound policy and good morals
or tends clearly to undermine the security of individual rights and hence, null and void.
The court sentenced the defendant to pay Cui the sum of P1,033.87 with interest thereon at the legal rate from
Sept.1, 1954, date of the institution of this case as well as the costs and dismissing defendants counterclaim.
Republic v PLDT
FACTS: PLDT and RCA Communications Inc (which is not a party to this case but has contractual relations
with e parties) entered into an agreement where telephone messages, coming from the US and received by
RCA's domestic station could automatically be transferred to the lines of PLDT and vice versa.
The Bureau of Telecommunications set up its own Government Telephone System (GTS) by renting the trunk
lines of PLDT to enable government offices to call private parties. One of the many rules prohibits the use of
the service for his private use.
Republic of the Philippines entered into an agreement with RCA for a joint overseas telephone service where
the Bureau would convey radio-telephone overseas calls received by the RCA's station to and from local
residents.
PLDT complained that the Bureau was violating the conditions for using the trunk lines not only for the use of
government offices but even to serve private persons or the general public. PLDT gave a notice that if violations
were not stopped, PLDT would sever the connections -which PLDT did.
Republic sued PLDT commanding PLDT to execute a contract, through the Bureau, for the use of the facilities
of defendant's telephone system throughout the Philippines under such terms and conditions as the court finds it
reasonable.
ISSUE: Whether or not Republic can command PLDT to execute the contract.
HELD:
No. The Bureau was created in pursuance of a state policy reorganizing the government offices to meet the
exigencies attendant upon the establishment of a free Gov't of the Phil.
When the Bureau subscribed to the trunk lines, defendant knew or should have known that their use by the
subscriber was more or less public and all embracing in nature.
The acceptance by the defendant of the payment of rentals, despite its knowledge that the plaintiff had extended
the use of the trunk lines to commercial purposes, implies assent by the defendant to such extended use. Since
this relationship has been maintained for a long time and the public has patronized both telephone systems, and
their interconnection is to the public convenience, it is too late for the defendant to claim misuse of its facilities,
and it is not now at liberty to unilaterally sever the physical connection of the trunk lines.
To uphold PLDT's contention is to subordinate the needs of the general public.

GEORGE W. BATCHELDER vs. THE CENTRAL BANK OF THE PHILIPPINES

G.R. No. L-25071 March 29, 1972
Facts: Monetary Board Resolution No. 857 requires Filipino and American resident contractors for
constructions in U.S. military bases in the Philippines to surrender to the Central Bank their dollar earnings
under their respective contracts but were entitled to utilize 90% of their surrendered dollars for importation at
the preferred rate of commodities for use within or outside said U.S. military bases. Resolution 695 moreover,
denies their right to reacquire at the preferred rate ninety per cent (90%) of the foreign exchange the sold or
surrendered earnings to Central Bank for the purpose of determining whether the imports against proceeds of
contracts entered into prior to April 25, 1960 are classified as dollar-to-dollar transactions or not.
George Batchelder, an American Citizen permanently residing in the Philippines who is engaged in the
Construction Business, surrendered to the Central Bank his dollar earnings amounting to U.S. $199,966.00. He
compels Central Bank of the Philippines to resell to him $170,210.60 at the preferred rate of exchange of two
Philippine pesos for one American dollar, more specifically P2.00375 which was denied by the court.
He then contended that said decision failed to consider that if there was no contract obligating the bank to resell
to him at the preferred rate, the judgment of the lower court can and should nevertheless be sustained on the
basis of there being such an obligation arising from law.
Issue: Whether or not Central Bank has the obligation arising from law to resell the US$154,094.56 to
Batchelder at the preferred rate.
Held: Central Bank was intended to attain basic objectives in the field of currency and finance. It shall be the
responsibility of the Central Bank of the Philippines to administer the monetary and banking system of the
Republic. It shall be the duty of the Central Bank to use the powers granted to it under this Act to achieve the
following objectives: (a) to maintain monetary stability in the Philippines; (b) to preserve the international value
of the peso and the convertibility of the peso into other freely convertible currencies; and (c) to promote a rising
level of production, employment and real income in the Philippines."
It is, of course, true that obligations arise from 1) law; 2) contracts; 3) quasi-contracts; 4) acts or omissions
punished by law and 5) quasi-delicts. One of the sources an obligation then is a law. A legal norm could so
require that a particular party be chargeable with a prestation or undertaking to give or to deliver or to do or to
render some service. It is an indispensable requisite though that such a provision, thus in fact exists. There must
be a showing to that effect. As early as 1909 in Pelayo v. Lauron, Court through Justice Torres, categorically
declared: "Obligation arising from law are not presumed." For in the language of Justice Street in Leung Ben v.
O'Brien, a 1918 decision, such an obligation is "a creation of the positive law." They are ordinarily traceable to
code or statute. It is true though, as noted in the motion for reconsideration following People v. Que Po Lay,
that a Central Bank circular may have the force and effect of law, especially when issued in pursuance of its
quasi-legislative power. That of itself, however, is no justification to conclude that it has thereby assumed an
obligation.
NPC vs. Dayrit
FACTS: Daniel Roxas sued NPC to compel the NPC to restore the contract of Roxas for security services
which the former had terminated. However, they reached a compromise agreement, and the court approved it.
One of the stipulations of the agreement was that the parties shall continue with the contract of security services
under the same terms and conditions as the previous contract effective upon the signing thereof. Parties entered
into another contract for security services but NPC refused to implement the new contract for which Daniel
filed a Motion for Execution. The NPC assails the Order on the ground that it directs execution of a contract
which had been novated by that of the new contracts. NPC contends there was novation because they executed
the second contract with Josefina Roxas; therefore there was a change of party. Upon the other hand, Roxas

claims that said contract was executed precisely to implement the compromise agreement for which reason
there was no novation.
HELD: It is elementary that novation is never presumed; it must be explicitly stated or there must be manifest
incompatibility between the old and the new obligations in every aspect. Thus the Civil Code provides:Art.
1292. In order that an obligation may be extinguished by another which substitutes the same, it is imperative
that it be so declared in unequivocal terms, or that the old and the new obligations be on every point
incompatible with each other.
In the case at bar there is nothing in the May 14, 1982, agreement which supports the petitioner's contention.
There is neither explicit novation nor incompatibility on every point between the "old" and the "new"
agreements.
Carlos Sandico,Sr. and Teopisto Timbol vs. The Honorable Minerva Inocencio Piguing and
Desiderio Paras
Facts:
On April 16, 1960 the spouses Carlos Sandico and Enrica Timbol, and Teopisto P. Timbol, administrator of the
estate of the late Sixta Paras, obtained a judgment in their favor against Desiderio Paras (hereinafter referred to
as the respondent) in civil case 1554, an action for easement and damages in the Court of First Instance of
Pampanga. On appeal, the Court of Appeals affirmed and modified the judgment, as follows: IN VIEW
WHEREOF, judgment affirmed and modified; as a consequence, defendant is condemned to recognize the
easement which is held binding as to him; he is sentenced to pay plaintiffs the sums of P5,000.00 actual, and
P500.00 exemplary damages, and P500.00 attorneys fees; plus costs in both instances. Judgment is hereby
rendered, (1) declaring that the respondent judge did not act in excess of jurisdiction or with grave abuse of
discretion in issuing the order dated February 3, 1966 (granting the respondents motion to set aside
the alias writ of execution, and recalling and guashing the said alias writ) and the order dated March 30, 1966
(denying the petitioners motion for reconsideration, of the order dated February 3, 1966) ; and (2) remanding
the case to the court a quo with instructions that the respondent court (a) conduct an ocular inspection of the
irrigation canal passing through the respondents land to determine whether or not the said canal has been
rebuilt in accordance with its original dimensions; (b) in the event that the said canal fails to meet the
measurements of the original one, order the respondent to reconstruct the same to its former condition; and (3)
in the event of the respondents further refusal or failure to do so, appoint some other person to reconstruct the
canal in accordance with its original dimensions, at the cost of the said respondent, pursuant to section 10 of
Rule 39 of the Rules of Court. Without pronouncement as to costs.
Issue: Whether or not is there novation on this case?
Ruling: No, the reduction of money is not amount to novation because the concept of novation is the
substitution or change of an obligation by another and not by reduction.
DAYWALT v LA CORPORACION DE LOS PADRES AGUSTINOS RECOLETOS
FACTS: In 1902, Teodorica Endencia executed a contract whereby she obligated herself to convey to Geo W.
Daywalt a 452-hectare parcel of land for P 4000. They agreed that a deed should be executed as soon as
Endencias title to the land was perfected in the Court of Land Registration and a Torrens title issued in her
name. When the Torrens title was issued, Endencia found out that the property measured 1248 hectares instead
of 452 hectares, as she initially believed. Because of this, she became reluctant to transfer the whole tract to
Daywalt, claiming that she never intended to sell so large an amount and that she had been misinformed as to its
area. Daywalt filed an action for specific performance. The SC ordered Endencia to convey the entire tract to
Daywalt.

Meanwhile, La Corporacion de los Padres Agustinos Recoletos (Recoletos), was a religious corp., w/c
owned an estate immediately adjacent to the property sold by Endencia to Daywalt. It also happened that Fr.
Sanz, the representative of the Recoletos, exerted some influence and ascendancy over Endencia, who was a
woman of little force and easily subject to the influence of other people. Fr. Sanz knew of the existence of the
contracts with Daywalt and discouraged her from conveying the entire tract.
Daywalt filed an action for damages against the Recoletos on the ground that it unlawfully induced
Endencia to refrain from the performance of her contract for the sale of the land in question and to withhold
delivery of the Torrens title. Daywalts claim for damages against the Recoletos was for the huge sum of P
500000 [in the year 1919], since he claims that because of the interference of the Recoletos, he failed to
consummate a contract with another person for the sale of the property and its conversion into a sugar mill.
ISSUES:
1. Whether a person who is not a party to a contract for the sale of land makes himself liable for
damages to the vendee, beyond the value of the use and occupation, by colluding with the vendor
and maintaining him in the effort to resist an action for specific performance. NO
2. Whether the damages which the plaintiff seeks to recover under this head are too remote and speculative
to be the subject of recovery. YES
RATIO:
1st issue
While it was true that the circumstances pointed to an entire sympathy on the part of the defendant
corporation with the efforts of Teodorica Endencia to defeat the plaintiff's claim to the land, the fact that
its officials may have advised her not to carry the contract into effect would not constitute actionable
interference with such contract.
According to the English and American authorities, no question can be made as to the liability to one
who interferes with a contract existing between others by means which, under known legal cannons, can
be denominated an unlawful means. Thus, if performance is prevented by force, intimidation, coercion,
or threats, or by false or defamatory statements, or by nuisance or riot, the person using such unlawful
means is, under all the authorities, liable for the damage which ensues. (Doctrine under Lumley v. Gye)
Translated into terms applicable to the case at bar, the decision in Gilchrist vs. Cuddy (29 Phil. Rep.,
542), indicates that the defendant corporation, having notice of the sale of the land in question to
Daywalt, might have been enjoined by the latter from using the property for grazing its cattle thereon.
That the defendant corporation is also liable in this action for the damage resulting to the plaintiff from
the wrongful use and occupation of the property has also been already determined. But it will be
observed that in order to sustain this liability it is not necessary to resort to any subtle exegesis relative
to the liability of a stranger to a contract for unlawful interference in the performance thereof. It is
enough that defendant use the property with notice that the plaintiff had a prior and better right.
Article 1902 of the Civil Code declares that any person who by an act or omission, characterized by
fault or negligence, causes damage to another shall be liable for the damage so done. Ignoring so much
of this article as relates to liability for negligence, we take the rule to be that a person is liable for
damage done to another by any culpable act; and by "culpable act" we mean any act which is
blameworthy when judged by accepted legal standards. The idea thus expressed is undoubtedly
broad enough to include any rational conception of liability for the tortious acts likely to be developed in
any society.
Article 1257 of the Civil Code declares that contracts are binding only between the parties and their
privies. In conformity with this it has been held that 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.
If the two antagonistic ideas which we have just brought into juxtaposition are capable of
reconciliation, the process must be accomplished by distinguishing clearly between the right of
action arising from the improper interference with the contract by a stranger thereto, considered

as an independent act generate of civil liability, and the right of action ex contractu against a party
to the contract resulting from the breach thereof.
Whatever may be the character of the liability which a stranger to a contract may incur by advising or
assisting one of the parties to evade performance, there is one proposition upon which all must agree.
This is, that the stranger cannot become more extensively liable in damages for the
nonperformance of the contract than the party in whose behalf he intermeddles. To hold the
stranger 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. In the case at bar, as Teodorica Endencia was
the party directly bound by the contract, it is obvious that the liability of the defendant corporation, even
admitting that it has made itself coparticipant in the breach of the contract, can in no even exceed hers.
2nd issue:
The extent of the liability for the breach of a contract must be determined in the 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 reasonable are in all events limited to such as might be reasonably foreseen
in the light of the facts then known to the contracting parties.
Ordinary damages is found in all breaches of contract where the are no special circumstances to
distinguish the case specially from other contracts. In all such cases the damages recoverable are such as
naturally and generally would result from such a breach, "according to the usual course of things."
Special damage, on the other hand, is such as follows less directly from the breach than ordinary
damage. It is only 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 be expected to foresee.
Where the damage which a plaintiff seeks to recover as 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.
To bring damages which would ordinarily be treated as remote within the category of recoverable
special damages, it is necessary that the condition should be made the subject of contract in such sense
as to become an express or implied term of the engagement.
In the preceding discussion we have considered the plaintiff's right chiefly against Teodorica Endencia;
and what has been said suffices in our opinion to demonstrate that the damages laid under the second
cause of action in the complaint could not be recovered from her:
o first, because the damages in question are special damages which were not within contemplation
of the parties when the contract was made, and
o secondly, because said damages are too remote to be the subject of recovery. This conclusion is
also necessarily fatal to the right of the plaintiff to recover such damages from the defendant
corporation, for, as already suggested, by advising Teodorica not to perform the contract, said
corporation could in no event render itself more extensively liable than the principle in the
contract.
Millar vs. CA (novation)
FACTS: Millar obtained a favorable condemning Antonio P. Gabriel to pay him the sum of P1,746.98 with
interest at 12% per annum from the date of the filing of the complaint, the sum of P400 as attorney's fees, and
the costs of suit. The lower court issued the writ of execution on the basis of which the sheriff seized the
respondent's Willy's Ford jeep. The respondent, however, pleaded with the petitioner to release the jeep under an
arrangement whereby the respondent, to secure the payment of the judgment debt, agreed to mortgage the
vehicle in favor of the petitioner. The petitioner agreed to the arrangement; thus, the parties executed a chattel
mortgage on the jeep. Resolution of the controversy posed by the petition at bar hinges entirely on a
determination of whether or not the subsequent agreement of the parties as embodied in the deed of chattel
mortgage impliedly novated the judgment obligation.

HELD: No substantial incompatibility between the mortgage obligation and the judgment liability of the
respondent sufficient to justify a conclusion of implied novation. The stipulation for the payment of the
obligation under the terms of the deed of chattel mortgage serves only to provide an express and specific
method for its extinguishment payment in two equal installments. The chattel mortgage simply gave the
respondent a method and more time to enable him to fully satisfy the judgment indebtedness. The chattel
mortgage agreement in no manner introduced any substantial modification or alteration of the judgment. Instead
of extinguishing the obligation of the respondent arising from the judgment, the deed of chattel mortgage
expressly ratified and confirmed the existence of the same, amplifying only the mode and period for compliance
by the respondent.
The defense of implied novation requires clear and convincing proof of complete incompatibility between the
two obligations. The law requires no specific form for an effective novation by implication. The test is whether
the two obligations can stand together. If they cannot, incompatibility arises, and the second obligation novates
the first. If they can stand together, no incompatibility results and novation does not take place.