QUIZ NO.

17
Outline: Contracts – Object [Art. 1347-1349]; Cause [Art. 1350-
1355]); Form [Art. 1356-1358]; Reformation [Art. 1359-1369];
and Interpretation [Art. 1370-1379])
April 17, 2018 (Tuesday)

Cases:
1. Ong vs. Ong, G.R. No. 67888, October 8, 1985
De leon 1354
Cause presumed to exist and lawful.
It is not necessary that the cause be expressly stated in the
contract. The presumption is that the cause exists and is lawful
unless the debtor proves the contrary. (Zayco vs. Serra, 44 Phil.
326 [1923]; Lim vs. Lim Chu Kao, 51 Phil. 476 [1928]; Papa and
Delgado vs. Montenegro, 54 Phil. 331 [1930].)
This presumption is in accord with the natural order of
things. Ordinarily, a person will not part with his property
unless there is a consideration. It is only prima facie and must
yield to contrary evidence. (Castro vs. Escutin, 90 SCRA 349
[1979]; San Luis vs. Negrete, 98 SCRA 82 [1980]; see Ong vs.
Ong, 139 SCRA 133 [1985].) The presumption that a contract
has a suffi cient consideration cannot be overthrown by a mere
assertion that it has no consideration. (Fernandez vs.
Fernandez, 153 SCAD 787, 363 SCRA 811 [2001].) To overcome
the presumption, the alleged lack of consideration must be
shown by preponderance of evidence. (Saguid vs. Security
Finance, Inc., 477 SCRA 256 [2006]; Surtida vs. Rural Bank of
Malinao, 511 SCRA 507 [2006].)

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Paras 1350
Ong v. Ong
GR 67888, Oct. 8, 1985
In deeds of conveyance that adhere to the Anglo-Saxon
practice, it is not unusual to state that the consideration given
is P1, although the actual consideration may be more. A one
peso consideration may be suspicious; this alone does not justify
one to infer that the buyers are not buyers in good faith and for
value. Neither does such inference warrant one to conclude
that the sale is void ab initio. Bad faith and inadequacy of
monetary consideration do not render a conveyance inexistent.
The assignor’s liberality could be a sufficient cause for a valid
contract.

Albano
In a contract of sale of a car between A and B, they agreed
that the consideration is P1.00 and other considerations. Is the
contract valid? Why?
ANS: Yes, because P1.00 and other considerations is a valid and
sufficient consideration. The rule is that the gross inadequacy
of the price does not invalidate a contract of sale (Art. 1470,
NCC), especially so with the presumption of consideration in
the law. (See Ong vs. Ong, G.R. No. 67888, October 8, 1985).

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 2. Velez vs. Ramas, 40 Phil. 787
De Leon 1352
Effect of illegality of cause.
Illegality of cause implies that there is a cause but the same
is unlawful or illegal.
The cause is unlawful if it is contrary to law, morals, good
customs public order, or public policy. (see Art. 1306.)
Contracts with unlawful cause are also null and void. (Arts.
1353, 1409[1]; see Arts. 1411, 1412, 1414, 1416-1422.)
A contract whereby a person accused of a crime obliges
himself to give a sum of money in consideration of the promise
on the part of the obligee to refrain from testifying against him
is void because the purpose is to stifle criminal prosecution and
this is against public policy. (Velez vs. Ramas, 40 Phil. 787
[1920]; Arroyo vs. Bernin, 36 Phil. 386 [1917].)

Paras 1352
FACTS: An employee in a pawnshop named Restituta Quirante
embezzled a sum of money from said pawnshop, and in order
that she would not be prosecuted, her father and her husband
signed a promissory note to pay the amount embezzled, with
interest to the victim. When they did not pay, the victim
instituted this action to recover the said amount.
Issue: Can recovery be made?
HELD: No recovery can be made because the cause of
consideration is illicit, namely, to prevent a prosecution for a
crime. This was clearly the purpose of the father, and also the

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purpose of the husband. And even if the victim were to claim
that even without that purpose the husband’s intention was
merely to pay that which he owes, as a member of the conjugal
partnership, for his wife’s act, still since the wife was not made
a defendant in the instant case, the husband’s liability cannot
be enforced in the present proceeding.

Jurado
W, wife of H and daughter of F, while employed in a
pawnshop owned by P, embezzled P2,000 belonging to said
pawnshop. In order to prevent her criminal prosecution for
estafa, H and F signed a document obligating themselves jointly
and severally to pay to P the amount embezzled including
interest. Because of their failure to comply with their promise,
the latter brought an action against them for collection. Will
the action prosper? Reasons. (2000)

ANS:
The action will not prosper. The consideration for the
agreement is clearly illicit, which fact is apparent on the face of
the contract, and the case is accordingly governed by Art. 1352
of the NCC.
There has been no period since contract law reached the
state of consciousness, when the maxim ex turpi causa non
oritur action was not recognized. A contract based upon an
unlawful object is and always has been void ab initio by the
common law, by the civil law, moral law, and all laws
whatsoever. It is immaterial whether the illegal character is
revealed in the matter of the consideration, in the promise as
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expressed in the agreement or in the purpose which the
agreement, though legal in expression, is intended to
accomplish. If the illegality lurks in any element, or even
subsists exclusively in the purpose of the parties, it is fatal to
the validity of the contract.
By the universal consensus of judicial opinion in all ages it
has been considered contrary to public policy to allow parties
to make an agreement designed to prevent or stifle prosecution
for crime. (Velez vs. Ramas, 40 Phil. 787.)

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 3. Mactal vs. Melegrito, 111 Phil. 363
De Leon 1352
Consideration of a promissory note was a pre-existing debt.
Facts: For failure of A (agent) to return the P1,000.00 which P
(principal) gave to A for the purchase of palay, within 10 days,
if not spent for said purpose, P accused A of estafa. Later, P
agreed to the dismissal of the estafa case in consideration of the
execution by A of a promissory note for the amount involved.
A still failed to pay the note. P brought action for the recovery
of P1,000.00. A contends that the note is void because the
consideration is the dismissal of the estafa case.
Issue: Is the contention of A tenable?
Held: No. A received P1,000.00 from P for the purchase of
palay. The cause or consideration, therefor, for the promise of
A was his pre-existing debt, not the dismissal of the estafa case,
which merely furnished the occasion for the execution of the
promissory note. (Mactal vs. Melegrito, 1 SCRA 763 [1961]; see
Basic Books, Inc. vs. Lopez, 16 SCRA 291 [1966].)

Paras 1350
FACTS: Mactal gave Melegrito P1,770 for the purchase of palay
in behalf of the former, with the obligation of returning the
amount within 10 days, if not spent for said purpose. The agent
neither bought the palay nor returned the money. Mactal thus
accused him of estafa. Melegrito persuaded Mactal to drop the
case, and in turn he (Melegrito) executed a promissory note in
favor of the other for the amount involved.
Issue: Is the promissory note valid?
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HELD: Yes, for its cause or consideration was not the dismissal
of the estafa case, but the pre-existing debt of Melegrito — the
amount that had been given to him.

Jurado
A gave to B P2,000, to be used in the purchase of palay,
with the obligation to return said amount within 10 days, if not
spent for said purpose. B neither bought palay nor returned said
amount. As a result, A accused him of estafa. When the case
was about to be heard, X, a common friend, acting upon B’s
request prevailed upon A to move for the dismissal of the case
and be contented with a promissory note to be executed by B.
The note was executed, and accordingly, the criminal case was
dismissed. B, however, was unable to comply with his promise
despite repeated demands. Subsequently, A brought an action
against B for the recovery of the P2,000. B, however, contends
that the promissory note is void because the consideration
thereof is the dismissal of the estafa case which is certainly
contrary to public policy. Is this correct?
ANS: This is not correct. It is admitted that B had received
P2,000 from A to be used in the purchase of palay. The cause
or consideration, therefore, for the promise was this pre-
existing debts of B, not the dismissal of the estafa case, which
merely furnished the occasion for title execution of the
promissory note. (Mactal vs. Melegrito, 111 Phil. 363 )

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 4. Dauden-Hernaez vs. De los Angeles, 27 SCRA 1276
Paras 1356
FACTS: Marlene Dauden-Hernaez, a movie actress, sued a
movie company (the Hollywood Far East Productions, Inc.)
and its President and General Manager (Ramon Valenzuela), to
recover P14,700 representing a balance allegedly due her for
her services as a star in two movies, and to recover damages.
The contract was an ORAL one. The lower court dismissed the
case on the ground that under Art. 1358 of the Civil Code, since
the contract price exceeded P500, the same should have been
evidenced by a written instrument:
Issue: Was the dismissal proper?
HELD: No, the dismissal was not proper. Generally, under Art.
1356 all contracts are valid, regardless of form. There are only
two exceptions — fi rst, when the contractual form is needed
for VALIDITY as in the case of a donation of real property
which needs a public instrument; secondly, when form is
needed for ENFORCEABILITY under the Statute of Frauds.
The contract for her services falls under neither exception. The
contracts covered by Art. 1358 (such as her contract) are
binding and enforceable by action or suit despite the absence
of any writing because said article nowhere provides that the
absence of written form will make the agreement invalid or
unenforceable. In the matter of form, the contractual system of
our Civil Code still follows that of the Spanish Civil Code of
1889 and of the “Ordenamiento de Alcala” of upholding the
spirit and intent of the parties over formalities; hence,
generally, oral contracts are valid and enforceable.

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Jurado
Marlene Dauden, a movie star, filed a complaint against X
Co. to recover P14,700 representing the balance of her
compensation as leading actress in two (2) motion pictures
produced by the company. Upon motion of defendant, the
lower court dismissed the complaint because “the claim of
plaintiff was not evidenced by any written document, either
public or private” in violation of Art. 1358 of the NCC. Is this
order of dismissal in accordance with law? Reasons.
ANS: The lower court’s orders of dismissal is not in accordance
with law. In the matter of formalities, in general, contracts are
valid and binding from their perfection regardless of form,
whether they be oral or written. This is plain from Arts. 1315
and 1356 of the present NCC. Consequently, so long as the
three (3) elements (consent, object and cause) exist, the
contract is generally valid and obligatory. To this rule, the Code
admits the following exceptions: (a) Contracts for which the
law itself requires that they be in a particular form in order to
make them valid and enforceable (the so-called solemn
contracts); and (b) contracts that the law requires to be proved
by some writing of its terms as in those covered by the Statute
of Frauds. The contract sued upon by plaintiff in the case at bar
does not fall under either exception. It is true that it is covered
by the last clause of Art. 1358, but Art: 1357 clearly indicates
that contracts covered by Art. 1358 are binding and enforceable
by action or suit despite the absence of writing. Hence, this case
must be remanded to the lower court for further proceedings
not at variance with this decision. (Daudeh-Hernaez vs. De los
Angeles, 27 SCRA 1276.)

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ULEP
Facts: Marlene Dauden, an actress, filed an action to collect her
talent fees in the amount of P14,700.00 in 1969 against
Hollywood Far East Productions. The Trial Court dismissed the
case since her claim is not evidenced by any written document.
Is this correct?
Held: No. As a general rule, the form of contract of contract
(whether written or oral) is irrelevant. There are two
exceptions: (1) Contracts for which the law itself requires that
they be in some particular form (also known as solemn
contracts). Example: Donation of immovable property. (2)
Contracts that the law requires to be proved by some writing
(memorandum) of its terms. Example: Those covered by the
Statute of Frauds – Art. 1403(2).

Albano
Marlene Dauden, a movie actress, filed a complaint against
A Co. seeking to recover the amount P14,700.00 representing
the balance of her fee as leading actress in two movies produced
by A Co. The company filed a motion to dismiss on the ground
that the claim was not evidenced by any written document,
public or private. It violated Art. 1358, NCC. The lower court
granted the motion. Was the order dismissing the complaint
proper? Why?
ANS: No, because contracts are binding between the parties in
whatever form they may be, whether oral or written. (Arts.
1315 and 1356, NCC; Dauden-Hernaez vs. De los Angeles, 27
SCRA 1276; Renato Cenido, etc. vs Sps. Sta. Ana, G.R. No.
132474, November 19, 1999).
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5. Renato Cenido, etc. vs. Sps. Sta. Ana, G.R. No. 132474,
November 19, 1999

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 6. NIA vs. Gamit, et. al., G.R. No. 85869, Nov. 6, 1992
De Leon
As a general rule, parol evidence is not admissible for the
purpose of varying the terms of a contract. However, when the
issue that a contract does not express the intention of the
parties, and the proper foundation is laid therefor, the court
should hear the evidence for the purpose of ascertaining the
true intention of the parties. Thus, where the complaint raises
the issue that a contract of lease does not express the true
intention of the parties due to the mistake on the part of the
plaintiff and fraud on the part of the defendant, the court
should conduct a trial and receive evidence of the parties for
the purpose of ascertaining such intention when they executed
the instrument in question. (National Irrigation Administration
vs. Gamit, 215 SCRA 436 [1992]; Huibonhoa vs. Court of
Appeals, 320 SCRA 625 [1999]; Sabio vs. International
Corporate Bank, Inc., 364 SCRA 385 [2001].)

Albano
What are the requirements before an action for
reformation of instruments may prosper?
ANS: They are:
(1) There must have been a meeting of the minds of the
parties to the contract;
(2) The instrument does not express the true intention of the
parties; and
(3) The failure of the instrument to express the true
intention of the parties is due to mistake, fraud,
inequitable conduct, or accident.
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(NIA vs Gamit, et. al., G.R. No. 85869, November 6, 1992).

Jurado
Reformation is that remedy in equity by means of which
the instrument is amended to conform to the real intention of
the parties. (NIA vs. Gamit, et al., 215 SCRA 436; Conde vs.
Cuenva, 99 Phil. 1056; Sarming vs. Dy, supra.)

ULEP
The aim of the interpretation of contracts is to ascertain
the true intention of the parties. However, interpretation is not
equivalent to reformation. (National Irrigation Administration
v. Gamit, 215 SCRA 436)

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 7. Uy vs. CA, G.R. No. 120465, September 9, 1999
De Leon 1351
Cause distinguished from motive.
In other words, cause is the essential reason which moves
the contracting parties to enter into it and justifi es the creation
of an obligation through their will. While cause is the essential
reason for the contract, motive is the particular reason of a
contracting party which does not affect the other party. (Uy vs.
Court of Appeals, 314 SCRA 69 [1999].)

De Leon 1351
Cancellation was justified. — “In this case, it is clear, and
petitioners do not dispute, that NHA would not have entered
into the contract were the lands not suitable for housing. In
other words, the quality of the lands was an implied condition
for the NHA to enter into the contract. On the part of the NHA,
therefore, the motive was the cause for its being a party to the
sale. x x x
According, we hold that the NHA was justifi ed in
cancelling the contract. The realization of the mistake as
regards the quality of the land resulted in the negation of the
motive/cause thus rendering the contract inexistent. (see Art.
1318.) The contract is also voidable under Article 1331.’’ (Uy
vs. Court of Appeals, 314 SCRA 69 [1999].)

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 8. Santi vs. CA, G.R. No. 93625, November 8, 1993
De Leon 1370
Automatic extension of lease not intended in second lease
contract. —
“The same could not be said in the case at bar. The phrase
automatically extended did not appear and was not used in the
lease contract subsequently entered into by Esperanza Jose and
Augusto Reyes, Jr. for the simple reason that the lessor does not
want to be bound by the stipulation of automatic extension as
provided in the previous lease contract.
To our mind, the stipulation ‘said period of lease being
extendable for another period of twenty (20) years x x x’ is clear
that the lessor’s intention is not to automatically extend the
lease contract but to give her time to ponder and think whether
to extend the lease. If she decides to do so, then a new contract
shall be entered into between the lessor and lessee for a term of
another twenty (20) years and a monthly rental of P220.00.
This must be so, for twenty (20) years is rather a long period of
time and the lessor may have other plans for her property.
If the intention of the parties were to provide for an
automatic extension of the lease contract, then they could have
easily provided for a straight forty (40) years contract instead
of twenty.’’ (Santi vs. Court of Appeals, 227 SCRA 541 [1993].)

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 9. Juan Serrano vs. Federico Miave, et. al., L-14678, March 31,
1965
Paras 1352
Bar Problem
On Jan. 5, A sold and delivered his truck together with the
corresponding certificate of public convenience to B for the
sum of P1.6 million, payable within 60 days. Two weeks after
the sale, and while the certificate of public convenience was
still in the name of A, the certificate was revoked by the Land
Transportation Commission thru no fault of A. Upon the
expiration of the 60-day period, A demanded payment of the
price from B. B refused to pay, alleging that the certificate of
public convenience which was the main consideration of the
sale no longer existed. Is the contention of B tenable?
ANS.: No, for the certificate was in existence at the time of the
perfection of the contract. Its subsequent revocation is of no
consequence insofar as the validity of the contract is
concerned. Besides, B was negligent in not having caused the
immediate transfer of the certificate to his name. After all, it
had already been delivered to him. (See Juan Serrano v.
Federico Miave, et al., L-14678, Mar. 31, 1965).

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