QUIZ #6

1. Martha expressly acknowledged, in favor of PIGGERY, Inc., all the

easements which PIGGERY, Inc. may consider convenient and
necessary for the passage of its trucks on the land belonging to
Martha. In the contract of November 1, 2016, the duration of the right
of way which Martha bound herself to impose upon her estate in favor
of the PIGGERY, INC. was twenty years, while in the contract of
September 29, 2020, that period was reduced to seven years. Is there
novation?

ANSWER:

Yes, there is novation. In this case, the duration of the right of way which
the defendant agreed to impose upon her estate on November 1, 2016 in
favor of the plaintiff was twenty years, while in the contract of September
29, 2020, that period was reduced to seven years.

Under ART. 1292, In order that an obligation may be extinguished by

another which substitutes it, it shall be necessary that it be so declared
expressly, or that the old new obligations be incompatible in every
respect.

As ruled by the court in Kabankalan v. Pacheco, a case with similar

circumstances as mentioned, there can be no doubt that the two
contracts, in so far as the duration of the right of way is concerned, are
incompatible with each other, for the second contract reduces the period
agreed upon in the first contract. Thus, there is novation since both
contracts cannot subsist at the same time. 

Therefore, the duration of the right of way is one of the principal

conditions of the first as well as of the second contract, and inasmuch as
said principal condition has been modified, the contract has, thus, been
novated.

2. Francis obtained a judgment for P10,508,000.04 against Yvonne. A writ

of execution was issued, thus a parcel of land belonging to Yvonne was
levied upon and its sale at public auction duly advertised. The sale
was, however, suspended as a result of an agreement between the
parties, by the terms of which the obligation under the judgment was
reduced to P10,200,000.00 payable in four installments, and to secure
the payment of this amount, the land levied upon with its
improvements was mortgaged to Francis with the condition that in the
event of Yvonne’s default in the payment of any installment, she would
pay 20% of any unpaid balance as attorney's fees as well as the
 difference between the full judgment credit and the reduced amount
thus agreed. Yvonne failed to comply with the terms of the settlement.

Francis sought the execution of the judgment, and by virtue of an alias

writ of execution, the land was sold at public auction, Francis being the
highest bidder, and a final deed was executed in his favor. Yvonne
refused, however, to vacate the land. Francis instituted an action for
recovery.

You are the court. Decide the case.

ANSWER:

As the judge, I will decide in favor of Yvonne and deny the action for
recovery.  I will rule that a new agreement has already been formed
between her and Francis, and as such, public auction cannot be upheld
because the new agreement specifically states that in the event of
default, the proper remedy is the payment of 20% of the unpaid
balance as attorney's fees as well as the difference between the full
judgment credit and the reduced amount.

As ruled by the courts under Fua v. Yap, a case with similar

circumstances, the subsequent agreement between the parties
regarding the same matter will lead to a novation of the prior
agreement, thus making the prior judgment without warrant. 

We can also find that in the case of City of Butuan v. Ortiz, when a
judgment or order has become final, the court cannot refuse to issue a
writ of execution, however this rule holds exceptions, one of which is
when the judgment has been novated by the parties. It would be
completely unfair for Francis to have the right to execute the land still
after already agreeing to completely different terms. 

3. Trump, 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 RCBC and requested to wire a
transfer of the money Trump was supposed to receive from the
company. RCBC agreed with additional charges for the transaction.
The treasurer issued a check to RCBC and it was accepted. The RCBC
representative in New York sent a message suggesting the advisability
of withholding this money from Trump, as he owed money to RCBC and
had been refusing to pay. RCBC Manila agreed and dispatched to its
NYC branch a message to withhold the Trump payment as suggested.
Meanwhile, the treasurer of the Philippine company informed Trump
that his dividends had been wired to his credit in the NYC branch of
RCBC. Trump demanded the money, however, he was refused
payment. Is Trump’ claim that RCBC and the Philippine Company had
executed a stipulation pour autrui in his favor valid?

ANSWER:

YES. In this case,  it is undeniable that the RCBC’s promise to cause a
definite sum of money to be paid to Trump in New York City is a
stipulation in his favor, and it is clear from the facts that Trump has the
right to demand such wired dividends due to the evident intention of
the parties. This is highlighted in the case of Kauffman v. PNB which
ruled that should a 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.

The demand of Trump for the wired money from RCBC already signifies
such acceptance to the stipulation in his favor, and even if there was
already an order to withhold such money, this cannot be seen as a
revocation done with the mutual consent of the parties. Thus, such
contention of Trump that a stipulation pour atrui was executed is in
fact valid.

4. Teah obligated herself to sell a parcel of land to James. It was

agreed that the final deed of sale will be executed when the land was
registered in Teah’s name. Subsequently, the Torrens Title for the land
was issued in her favor but in the course of the proceedings for
registration it was found that the land involved in the sale contained a
greater area than what Teah originally thought and she became
reluctant to consummate the sale of the land to James. This reluctance
was due to the advice of Honeylet which exercised a great moral
influence over Teah. When James filed suit, Honeylet claimed that in
advising Teah that she was not bound by her contract with James, she
was not actuated with improper motives but did so in good faith
believing that, under the circumstances, Teah was not really bound by
her contract with James. Resolve the case.

ANSWER:

I would resolve the case in favor of James. In this case, Teah is bound
under the contract insofar as the portion of the land earlier agreed
upon by the parties since it became a bilateral contract of sale upon
acceptance.
In the case of Sanchez v. Rigos, the court ruled that if the option is
given without a consideration, it is a mere offer of a contract of sale,
which is not binding until accepted. If, however, acceptance is made
before a withdrawal, it constitutes a binding contract of sale, even
though the option was not supported by a sufficient consideration.
Thus, the offer to sell made by Teah was later on converted to a
perfected contract of sale upon acceptance by James before Teah’s
withdrawal.

Going to the discussion on whether James can file an action against

Honeylet, I will rule that the same should also prosper.

Under Article 1314 of the New Civil Code provides “any third person
who induces another to violate his contract shall be liable for damages
to the other contracting party.”
 
The requisites for an action under Art. 1314 to prosper are as follows:
1. Existence of a valid contract;
2. Knowledge by the third person of the existence of the contract;
3. Interference by the third person in the contractual relation
without legal justification.

In this case, it is clear that there was in fact an existing valid contract
between James and Teah. It is also clear that Honeylet knew of the
existence of the contract and by reason of such knowledge, she
interfered in the contractual relation by advising Teah not to proceed
with the contract. Thus, Honeylet should be liable to James for
damages due to her interference and coercion with the latter’s
agreement with Teah.