----------------------------------------Oblicon Top 50 ----------------------------------------M 1. Barredo v. Garcia 2. Song Fo v. Hawaiian 3. Velarde v. CA 4. Woodhouse v. Halili 5. De Guia v. Manila Electric 6. Chavez .

Gonzales 7. Arrieta v. NARIC 8. Nakpil and Sons v. CA 9. Republic v. Luzon Stevedoring 10. Eastern Shipping Lines v. CA 11. Almeda v. CA 12. Gaite v. Fonacier 13. Parks v. Province of Tarlac 14. CPU v. CA 15. Osmena v. Rama 16. Hermosa v. Longora 17. Taylor v. Uy Teng Piao gbuyuyy18. Rustan Pulp v. IAC 19. Roman Catholic v. CA 20. Boysaw v. Interphil 21. UP v. Delos Angeles 22. De Erquiaga v. CA 23. Ong v. CA 24. Lachica v. Araneta 25. Ponce v. Syjuco 26. Araneta v. Phil Sugar 27. Inchausti v. Yulo 28. Jaucian v. Querol 29. RFC v. CA 30. Inciong v. CA 31. Kalalo v. Luz 32. Reparations v. Universal Fishing 33. McLaughlin v. CA 34. Soco v. Militante 45. Occena v. CA 36. Naga Telephone v. CA 37. Gabriel v. Monte de Piedad 38. Daywalt v. Corp 39. Rosenstock v. Burke 40. Malbarosa v. CA 41. Coquia v. Fieldren's 42. Asiain v. Jalandoni 43. Dumasug v. Modelo 44. Martinez v. HSBC 45. Mercadio v. Espiritu 46. Braganza v. Villa Abrille 47. Suntay v. CA 48. Songco v. Sellner 49. Oria v. McMicking 50. Liguez v. CA

Page 1 of 51 BARREDO V. GARCIA AND ALMARIO JULY 8, 1942 Petition for review on certiorari. (This case comes up from the Court of Appeals which held petitioner Faustino Barredo, liable in damages for the death of Faustino Garcia caused by the negligence of Pedro Fontanilla, a taxi driver employed by Barredo) FACTS (Bocobo, J.) At about 1:30am on May 3, 1936, on the road between Malabon and Navotas, Province of Rizal, there was a head-on collision between a taxi of the Malate-Taxicab driven by Pedro Fontanilla and a carretela guided by Pedro Dimapilis. The carretela was overturned, and one of its passengers, a 16-year-old boy Faustino Garcia, suffered injuries from which he died 2 days later. A criminal action was filed against Fontanilla in the Court of First Instance of Rizal. Fontanilla was convicted and sentenced to an indeterminate sentence of 1 year and 1 day to 2 years of prision correccional. The court in the criminal case granted the petition that the right to bring a separate civil action be reserved. CA affirmed the sentence of the lower court in the criminal case. Severino Garcia and Timotea Almario, parents of the deceased, on March 7, 1939, brought an action in the CFI of Manila against Fausto Barredo as the sole proprietor of the Malate Taxicab and employer of Pedro Fontanilla. On July 8, 1939, the CFI of Manila awarded damages in favor of the plaintiffs for P2,000 plus legal interest from the date of the complaint. This decision was modified by the CA by reducing the damages to P1,000 with legal interest from the time the action was instituted. It is undisputed that Fontanillas negligence was the cause of the mishap, as he was driving on the wrong side of the road, and at high speed. Fontanilla has not been sued in a civil action and his property has not been exhausted. The main theory of the defense is that the liability of Barredo is governed by the Revised Penal Code; hence his liability is only subsidiary. And as there has been no civil action against Fontanilla (the person criminally liable), Barredo cannot be held responsible. ISSUE WON the plaintiffs may bring a separate civil action against Barredo, thus making him primarily and directly responsible under article 1903 of the Civil Code as an employer of Fontanilla. HELD/RATIO YES. A quasi-delict or culpa aquiliana is a separate legal institution under the Civil Code, with a substantivity all its own, and individuality that is entirely apart and independent from a delict or crime. Upon this principle, and on the wording and spirit of article 1903 of the Civil Code, the primary and direct responsibility of employers may be safely anchored.

Crimes (Penal Code) vs. Culpa Aquiliana or Cuasi-Delito (Civil Code). The same negligent act causing damages may produce civil liability arising from a crime under article 100 of the RPC, or create an action for cuasi-delito or culpa extra-contractual under articles 1902-1910 of the Civil Code. Plaintiffs were free to choose which remedy to enforce. The taxi driver was found guilty of criminal negligence, so that if he had even been sued for his civil responsibility arising from the crime, he would have been held primarily liable for civil damages, and Barredo would have been held subsidiarily liable for the same. But the plaintiffs are directly suing Barredo, on his primary responsibility because of his own presumed negligence---which he did not overcomeunder art. 1903 of the CC.

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Page 2 of 51 Thus, there were 2 liabilities of Barredo: 1) subsidiary one because of the civil liability of the taxi driver I. The lower court erred in finding that the appellant had agreed to sell to the appellee 400,000, and not only arising from the latters criminal negligence; and 2) Barredos primary liability as an employer under article 300,000, gallons of molasses. II. The lower court erred in finding that the appellant rescinded without sufficient cause the contract 1903. for the sale of molasses executed by it and the appellee. Since the plaintiffs were free to choose between the 2, the plaintiffs preferred the 2nd remedy. III. The lower court erred in rendering judgment in favor of the appellee and not in favor of the appellant in The 2nd remedy was more expeditious and effective because Fontanilla was either in prison, or had just been accordance with the prayer of its answer and cross-complaint. IV. The lower court erred in denying appellant's motion for a new trial. released, and besides, he was probably without property which might be seized for the damages. An employer, under art. 1903 of the Civil Code, is primarily and directly responsible for the negligent acts of Issue: 1. WON Hawaiian had sufficient cause to rescind the contract. his employee. Held/Ratio: Art. 1903 of the Civil Code XXX Owners or directors of an establishment or business are equally liable for any damages caused by their NO. The general rule is that rescission will not be permitted for a slight or casual breach of the contract, but only employees while engaged in the branch of the service in which employed, or on occasion of the performance of for such breaches as are so substantial and fundamental as to defeat the object of the parties in making the agreement. A delay in payment for a small quantity of molasses for some twenty days is not such a violation of their duties. an essential condition of the contract as warrants rescission for non-performance. Not only this, but the XXX The liability imposed by this article shall cease in case the persons mentioned therein prove that they Hawaiian-Philippine Co. waived this condition when it arose by accepting payment of the overdue accounts and continuing with the contract. Thereafter, Song Fo & Company was not in default in payment so that the exercised all the diligence of a good father of a family to prevent the damage. Hawaiian-Philippine Co. had in reality no excuse for writing its letter of April 2, 1923, canceling the contract. CA found no proof that Barredo exercised the diligence of a good father of a family to prevent the damage. In fact, it is shown that Barredo was careless in employing Fontanilla who had been caught several times for violation of the Automobile Law and speedingviolations which appeared in the records of the Bureau of VELARDE V. CA Public Works available to the public and to himself. Avelina and Mariano Velarde, petitioners Therefore, he must indemnify plaintiffs under the provisions of article 1903 of the Civil Code. David and George Raymundo, respondents The RPC punishes not only reckless but also simple negligence; if it should be held that articles 1902-1910 NATURE: Petition for review on certiorari of a decision of the Court of Appeals. of the Civil Code apply only to negligence not punishable by law, culpa aquiliana would have very little FACTS: David Raymundo was the absolute and registered owner of a parcel of land located in Dasmarias application in actual life. (o legal method ulitspirit of the law over the literal meaningThe literal meaning Village, Makati which was under lease (mortgaged to Bank of the Philippine Islands). of the law will not be used to smother a principle of such ancient origin and such full-grown development as George Raymundo, Davids father, negotiated with the spouses Velarde (Mariano and Avelina) for the culpa aquiliana.) sale of said property. There are numerous cases of criminal negligence which can not be shown beyond reasonable doubt, but can On August 8, 1986, a Deed of Sale with Assumption of Mortgage was executed by David Raymundo in be proved by preponderance of evidence. In such cases, defendant can and should be made responsible in a favor of Avelina Velarde. civil action under art. 1902-1910 of CC. The terms and conditions of the Deed of Sale with Assumption of Mortgage included, The primary and direct responsibility of employer under art. 1903 of CC, is more likely to facilitate remedy (1) Velarde shall pay Php 800,000 for the land and all the improvements on it ; for civil wrongs. (2) Velarde shall assume the mortgage obligations amounting to Php 1,800,000.00 in favor of BPI Such primary and direct responsibility of employers is calculated to protect society. Avelina Avelarde, with the consent of her husband, then executed an Undertaking, stipulating among others; SONG FO V. HAWAIIAN (1) that pending BPIs approval of the application for assumption of the mortgage obligations made by Avelina As stated in a letter by Hawaiian to Song Fo, Mr. Song Heng, the manager of Song Fo & Company, Velarde, she would pay the mortgage obligations, including interests and other charges, in the name of David representing the same, made arrangements for the delivery of 300,000 gallons of molasses by Hawaiian to Song Raymundo Fo. Mr. Song Heng also requested an additional 100,000 gallons to which Hawaiian agreed to do its best (2) that any violation of the terms and conditions of the Deed of Real Estate Mortgage shall forfeit the down payment to supply. In response to said letter, Song Fo confirmed the arrangements made and added that the molasses made plus all payments made on the mortgage loan in favor of David Raymundo, David will resume total and should be at the same price and in the same condition as the previous year; after which, Song Fo proceeded to complete possession and ownership of the property sold, and the contract of Deed of Sale with Assumption of quote the old contract. Mortgage shall be deemed automatically cancelled and be of no further force or effect. On April 2, Hawaiian wrote to Song Fo stating that it was rescinding the contract for failure of Pursuant to the agreements made, the spouses Velarde dutifully paid the monthly interest on the loan the latter to pay on time which the former claims is a breach of contract. secured by the aforementioned mortgage for three months. Song Fo & Company, presented a complaint in the Court of First Instance of Iloilo, with two On December 15, 1986, plaintiffs, the Velardes, were advised that their Application for Assumption of causes of action for breach of contract against the Hawaiian-Philippine Co., 1.) that Hawaiian had agreed to sell Mortgage with BPU has not been approved. The Velardes then stopped making further payments for the to the Song Fo 400,000 not 300,000 gallons of molasses; 2.) that Hawaiian rescinded without sufficient cause mortgage. the contract for the sale of molasses On January 5, 1987, defendants, the Raymundos, wrote thru counsel that the petioners non-payment to CFI Iloilo ordered defendant to pay the plaintiff a total of P35,317.93, with legal interest from the mortgage bank constituted non-performance of their obligation. the date of the presentation of the complaint, and with costs. Plaintiffs responded through a letter indicating their willingness to pay the balance in cash subject to From the judgment of the Court of First Instance the defendant only has appealed. It has made certain conditions, (1) that the property be delivered not later than January 15, 1987 for immediate the following assignment of errors: occupancy; (2) that the Raymundos cause the release of title and mortgage from the bank and make Uplawb2008group1 (carrie,elson,ia,izzy,mac,mel,sanne,varz)

ISSUES: (1) WON the non-payment of the mortgage obligation resulted in a breach of contract. (2) WON the rescission of the contract by private respondents is justified. 3) WON the petitioners letter giving 3 new conditions constitute mere offers or attempt to novate necessitating a new agreement between the parties. RULING/RATIO: Yes. The disapproval of the Application for Assumption of Mortgage, petitioners claim, ended their obligation to pay the mortgage obligation and the obligation devolved upon the private respondents again. However, the parties agreed that upon disapproval of said application, the petitioners are then mandated to pay the purchase price balance of Php 1,800,000 (mortgage value now considered as part of the purchase price). The petitioners should have paid the Php 1.8 million balance instead of sending a letter to private respondent stipulating conditions for their payment of the balance originally not agreed upon. A contract of sale obligates the seller to transfer ownership and deliver a determinate thing and the buyer to pay a price certain in money or its equivalent. Private respondents have already performed their obligation through the execution of the Deed of Sale which effectively transferred ownership. Prior physical delivery or possession is not legally required. Petitioners, on the other hand, did not perform their correlative obligation of paying the contract price in the manner agreed upon. Yes. Petitioners failure to pay the remaining balance of Php 1,800,000.00 gave the private respondents the right to rescind the contract by virtue of Article 1191 of the Civil Code 1. The right of rescission of a party to an obligation under Article 1191 is predicated on a breach of faith by the other party who violates the reciprocity between them. The petitioners violated the very essence of reciprocity of the contract of sale. When the obligor cannot comply with what is incumbent upon it, the oblige may seek rescission, and, in the absence of any just cause for the court to determine the period of compliance, the court shall decree the rescission. Petitioners contend that the breach they committed was merely slight or casual as would preclude the exercise of the right to rescind. Although the petitioners expressed their willingness to pay the balance of the purchase price after one month, this was not equivalent to actual payment as would constitute a faithful compliance of their reciprocal obligation. Moreover, the offer to pay was conditioned on the performance by private respondents of additional burdens that had not been agreed upon in the original contract. Thus, it cannot be said that the breach was merely slight or casual. The facts of the cases relied on by the petitioners are not analogous with the present case as the cases involved delays in payment for reasons not involving additional conditions imposed by the buyer to the seller. The letter of the Velardes imposed upon private respondents new obligations as preconditions to the

the title free from any encumbrances and liens; (3) that the Raymundos execute another deed of sale free from any encumbrances or liens On January 8, 1987, the Raymundos sent the Velardes a notarial notice of cancellation/rescission of the intended sale based on the latters failure to comply with the terms and conditions of the Deed of Sale with Assumption of Mortgage and the Undertaking. Consequently, the Velardes filed a Complaint against private respondents for specific performance, (3) The nullity of cancellation, writ of possession and damages. Judge Ynares-Santiago dismissed the Complaint. Petitioners then filed a Motion of Reconsideration. Judge Yanres-Santiago was promoted to the Court of Appeals and was replaced by Judge Abad Santos who granted the Motion for Reconsideration and directed the parties to proceed with the sale ordering petitioners to pay 1.8 million pesos to respondents and the respondents, in turn to execute a deed of absolute sale and to surrender possession of disputed property. Private Respondents appealed to CA. CA set aside the Order of Judge Abad Santos and upheld the validity of the rescission made by private respondents. Petitioners appealed to the SC.

Page 3 of 51 performance of their own obligation. In effect, the qualified offer to pay was repudiation of an existing obligation which was legally due and demandable. However, the rescission is based on Article 1191 of the Civil Code and not on the terms and conditions of the mortgage contract. Therefore, the automatic rescission and forfeiture clause of the contract does not apply instead Civil Code provisions shall prevail. Mutual restitution is required to bring back parties to their original situation prior to the inception of the contract. court found it no longer necessary to discuss the third issue. Assailed decision is affirmed with the modification that private respondents are ordered to return to petitioners any amount the latter paid as consequence of the rescinded contract. WOODHOUSE V. HALILI NATURE: Appeal of both parties from judgment of CFI of Manila FACTS: On November 29, 1947, the plaintiff entered into a written agreement with the defendant, the most important provisions of which are (1) they shall organize a partnership for the bottling and distribution of Mission soft drinks, plaintiff to act as industrial partner or manager, and the defendant as a capitalist, furnishing the capital necessary therefore (2) the defendant was to decide matters of general policy regarding the business while the plaintiff was to attend to the operation and development of the bottling plant (3) the plaintiff was to secure the Mission Soft Drinks franchise for and in behalf of proposed partnership and (4) the plaintiff was to receive was to receive 30 percent of the net profits of the business. Prior to entering into this agreement, the plaintiff had informed the Mission Dry Corporation of Los Angeles, California U.S.A., through a letter, that he had interested a prominent financier (defendant herein) in the business, who was willing to invest half a million dollars in the bottling and distribution of the said beverages, and requested, in order that he may close the deal with him, that the right to bottle and distribute be granted him for a limited time under the condition that it will finally be transferred to the corporation. Pursuant to his request, the plaintiff was given by the Mission Dry Corporation a 30-day option of exclusive bottling and distribution rights for the Philippines. The contract was finally signed by plaintiff on December 3, 1947. On that day, plaintiff and defendant went to the United States, and on December 10, 1947, a franchise agreement was entered into between the Mission Dry Corporation and Fortunato F. Halili and/or Charles F. Woodhouse, granting defendant the exclusive right, license and authority to produce, bottle, distribute and sell Mission beverages in the Philippines. When the defendant learned that the plaintiff did not have exclusive franchise, his spontaneous reaction was to reduce the plaintiffs share to 15 per cent When the bottling plant was already in operation, plaintiff demanded of defendant that the partnership papers be executed. At first defendant excused himself, saying there was no hurry. Then he promised to do so after the sales of the products had been increased to P50,000. As nothing definite was forthcoming, after this condition was attained, and as defendant refused to give further allowances to plaintiff, the latter caused his attorneys to take up the matter with defendant with a view to a possible statement. As none could be arrived at, the present action was instituted. In his compliant, plaintiff asks for the execution of the contract of partnership, an accounting of the profits and a share thereof of 30 percent as well as damages in the amount of P200, 000. In his answer, defendant alleges by way of defense (1) that defendants consent to the agreement was secured by the representation of plaintiff that he was the owner, or was about to become owner of an exclusive bottling franchise, which representation was false and that the plaintiff did not secure the franchise, but was given to defendant himself (2) that defendant did not fail to carry out his undertakings, but it was plaintiff who failed (3) that plaintiff agreed to contribute the exclusive franchise to the partnership, but plaintiff failed to do so. He also presented a counterclaim for P200, 000 as damages.

Article 1191, CC. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. The injured party may choose between fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission even after he has chosen fulfillment, if the latter should become impossible.

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Page 4 of 51 The first draft of the written agreement was used by defendant as evidence that the plaintiff Plaintiff is entitled under the terms of agreement 30 per cent of the net profits of the business. The damage the defendant suffered by the plaintiffs misrepresentation must be set off fraudulently represented himself to have exclusive bottling franchise over the Philippines. When the defendant learned that the plaintiff did not have exclusive franchise, his spontaneous reaction The Court of First Instance rendered judgment ordering defendant to render an accounting of the was to reduce the plaintiffs share to 15 per cent, to which reduction plaintiff appears to have already given his profits of the bottling and distribution business, subject of the action, and to pay plaintiff 15 percent thereof. assent. It held that the execution of the contract of partnership could not be enforced upon the parties. The court can do no better than follow such the appraisal of the damages as the parties themselves But it also held that the defense of fraud was not proved. have adopted. Against this judgment, both parties have appealed ISSUES: 1) Whether defendant had falsely represented that he had an exclusive franchise to bottle Mission DE GUIA V. MANILA ELECTRIC Nature of the Case: beverages yes Appeal prosecuted both by plaintiff and defendant from a judgment of the CFI of Manila, whereby the plaintiff 2) Whether this false representation of fraud, if it existed, annuls the agreement to form the partnership - was awarded the sum of P6,100, with interest and costs, as damages incurred by him in consequence of physical no injuries sustained while riding on one of the defendant's car. RATIO: Facts: 1.) On September 4, 1915, at about 8 o'clock p.m., Manuel de Guia, a physician residing in The first draft of the written agreement expressly states that plaintiff had the exclusive franchise. Caloocan, boarded a car at the end of the street-car line with the intention of coming to the city. The trial court did not consider this draft on the principle of integration of jural acts (the contents of the At about 30 meters from the starting point the car entered a switch, the plaintiff remaining on initial draft are already integrated onto the final written agreement). We find that the principle invoked is the back platform holding the handle of the right-hand door. Upon coming out of the switch, the small wheels of inapplicable, since the purpose of considering the prior draft is not to vary, alter or modify the agreement, but to the rear truck left the track, ran for a short distance and struck a concrete post. The post was shattered; and the discover the intent of the parties thereto and the circumstances surrounding the execution of the contract. plaintiff was thrown against the door with some violence, receiving bruises and possibly certain internal injuries. Plaintiff represented to defendant that he had an exclusive franchise. The trial court found that the motorman of the derailed car was negligent in having maintained His acts or statements prior to the agreement are essential and relevant to the determination of said too rapid a speed. This inference appears to be based chiefly upon the results of the shock, involving the issue. shattering of the post and the bending of the kingpost of the car. Plaintiff had already represented to defendant and the latter had already believed in, the existence of plaintiffs exclusive franchise before the formal negotiations. It is insisted for the defendant company that the derailment was due to the presence of a In reality, Mission Dry Corporation only gave the plaintiff the option of exclusive bottling rights, and this stone, somewhat larger than a goose egg, which had become accidentally lodged between the rails at the period already expired at the time the contract was signed; hence, the plaintiff misrepresented himself to the juncture of the switch and which was unobserved by the motorman. In this view the derailment of the car is defendant that he had exclusive bottling rights as can be deduced form his acts prior to the signing of the supposed to be due to casus fortuitos and not chargeable to the negligence of the motorman. contract (i.e. the first draft of the contract and plaintiffs letter to the corporation). Issue: Fraud and false representation are an incident to the creation of a jural act, not its integration, and are WON The Manila Electric Railroad and Light Company is liable for damages for the negligence of its employee. not governed by the rules on integration. Held/Ratio: Furthermore, the parole evidence rule expressly allows the evidence to be introduced when the validity YES. The plaintiff had boarded the car as a passenger for the city of Manila and the company undertook to of an instrument is put in issue by the pleadings. convey him for hire. The relation between the parties was, therefore, of a contractual nature, and the duty of the 2.) carrier is to be determined with reference to the principles of contract law, that is, the company was bound to Article 1270 of the Spanish Civil Code distinguishes two kinds of civil fraud, the casual fraud, which may convey and deliver the plaintiff safely and securely with reference to the degree of care which, under the be a ground for the annulment of a contract, and the incidental deceit which only renders the party who employs circumstances, is required by law and custom applicable to the case (art. 1258, Civil Code now 1315). Upon it liable for damages. failure to comply with that obligation the company incurred the liability defined in articles 1103-1107 (now In order that fraud may vitiate consent, it must be the causal (dolo causante), not merely incidental 1172 - 1174) of the Civil Code. (dolo incidente) inducement for the making of the contract. Even if the derailment of the car was due to the accidental presence of such a stone, the existence of The main cause that induced the defendant to enter into the partnership agreement with plaintiff was negligence is not disproved. The finding of negligence in the operation of the car must be sustained, not so much the ability of the plaintiff to get the exclusive franchise to bottle and distribute for the defendant or for the because of excessive speed as because of the distance which the car was allowed to run with the front wheels of partnership, the false representation of the plaintiff was not causal representation, or the principal inducement, the rear truck derailed. An experienced and attentive motorman should have discovered that something was wrong and would have stopped before he had driven the car over the entire distance (40 meters) from the point that led the defendant to enter into the partnership. While the representation that plaintiff had the exclusive franchise did not vitiate defendants consent to where the wheels left the track to the place where the post was struck. From the nature of the liability thus incurred, it is clear that the defendant company can not avail itself the contract, it was used by plaintiff to get from defendant a share of 30 per cent of the net profits, this is dolo incidente, because it was used to used to get the other partys consent to a big share in the profits, an incidental of the last paragraph of article 1903 of the Civil Code (now 2180), since that provision has reference to liability incurred by negligence in the absence of contractual relation, that is, to the culpa aquiliana of the civil law. It was matter in the agreement. therefore irrelevant for the defendant company to prove, as it did, that the company had exercised due care in The agreement to organize a partnership may not be declared null and void the selection and instruction of the motorman who was in charge of its car and that he was in fact an Under the Spanish Civil Code, the defendant has an obligation to do, not to give. experienced and reliable servant. The law recognizes the individuals liberty to do an act he has promised to do as he pleases. This is a very personal act (acto personalisimo) of which courts may not compel compliance. Uplawb2008group1 (carrie,elson,ia,izzy,mac,mel,sanne,varz)

(Article 2180 is applicable only when there is no contractual relation between the parties. Example: Taxi hits a pedestrian no contractual relation because the pedestrian is not the taxis passenger. If the taxi operator exercised due diligence in choosing its drivers, then it will not be liable. Liability will instead be incurred solely by the driver. However, this defense is not available in the present case because the injured party had a contractual relationship with the railroad company. The motorman would seem to be a mere extension of the company and any fault or negligence on the part of the former is directly attributable to the latter.)

CHAVEZ V. GONZALES July 1963 plaintiff delivered to defendant (typewriter repairer) a portable typewriter for routing cleaning and servicing After some time, despite repeated demands from the plaintiff, defendant was unable to finish the job and merely gave assurances to finish the same October 1963 defendant asked from the plaintiff P6 for the purchase of spare parts which amount the plaintiff gave to the defendant October 26, 1963 after getting exasperated with the delay, plaintiff went to the house and demanded for the return of the typewriter which the latter delivered in a wrapped package Upon reaching home, plaintiff examined the typewriter and found it in shambles with the interior cover of the typewriter and some parts and screws missing October 29, 1963 plaintiff sent a letter to the defendant demanding the return of P6 and some missing parts which the letter returned the following day August 1964 plaintiff had his typewriter repaired by FBM for the amount of P89.95 including labor materials August 1965 plaintiff filed the suit for the recovery of the repair expenses and damages Issues: WON tc erred in awarding only the value of the missing parts of the typewriter instead of the whole cost of the labor and materials that went into the repair of the machines; WON there are remedies available to plaintiff Held: it is clear that defendant contravened the tenor of the obligation because he did not only repair the typewriter but returned it in shambles 1. Defendant is liable under art 1170 of the CC for the cost of the missing parts. Claims as to the damages and attorneys fees are rejected since the same must be pleaded and the existence of it in actual must be proved. Award was increased to P89.95 with legal rate of interest from filing of complaint 2. defendant is liable under art 1167 of the CC for the cost of executing the obligation in the proper manner. (cost of labor / service expended in the repair of the typewriter because the obligation or contract was to repair it. ARRIETA V. NARIC NATURE: Appeal of defendant-appellant NARIC from the decision of trial court awarding plaintiff-appellants damages for breach of contract and dismissing counter-claim of NARIC FACTS: On May 19, 1952 plaintiff-appellee Paz P. Atrieta won the public bidding called by the NAtional RIce and Corn administration (NARIC) for the supply of P20,000 metric tons of Burmese Rice as her bid of $203 per metric ton was the lowest. The defendant corporation committed itself to pay for the imported rice by means of an irrevocable, confirmed and assignable letter of credit in US currency in favor of the plaintiff-appllee and/or supplier in Burma, immediately. It was only on July 30, 1952, or a full month after from the execution of the contract, that the defendant NARIC took the first step to open a letter of credit by forwarding to the Philippine National Bank (PNB) its Application for Commercial Letter of Credit with a transmittal letter which read: In view of the fact that we do

Page 5 of 51 not have sufficient deposit with your institution with to cover the amount required to be deposited as a condition for the opening of letters of credit, we will appreciate it if this application could be considered a special case On the same day, Paz P. Arieta advised the appellant corporation of the extreme necessity for the immediate opening of the letter of credit since she had by then made a tender to her supplier in Rangoon, Burma, equivalent to 5% of the F.O.B. price of 20,000 tons at $180.70 and in compliance with the regulation in Rangoon; this 5% will be confiscated if the required letter of credit is not received by them before August 4, 1952 PNB informed the appellant corporation of the extreme necessity for the immediate opening of the letter of credit for $3,614,000 in favor of Thiri Setkya has been approved with the condition that 50% marginal cash deposit be paid and that drafts are to be paid upon presentment. PNB will hold NARICs application in abeyance pending compliance with the requirement However, NARIC was not in a financial position to meet the condition. NARIC bluntly confessed to the appellee this dilemma through a letter. The credit instrument applied for was opened only of September 8, 1952 in favor of Thiri Setkya, Rangoon, Burma, and/or assignee for $3,614,000 (which is more than two months from the execution of the contract) As a result of the delay, the allocation of appellees supplier in Rangoon was cancelled and the 5% deposit, amounting to 524,000 Kyats or approximately P200,000 was forfeited The appellee endeavored, but failed, to restore the cancelled Burmese rice allocation. When the futility of reinstating the same became apparent, Paz offered to substitute Thailand rice instead to the defendant NARIC. This offer of substitution, however, was rejected by appellant in a resolution. On the foregoing, the appellee sent a letter to the appellant, demanding compensation for the damages caused her in the sum of $286,000 US currency, representing unrealized profit. The demand having been rejected, she instituted this case now on appeal, alleging that NARICs failure to open immediately the letter of credit in dispute amounted to a breach of the contract of July 1, 1952. Appellant corporation disclaims responsibility for the delay and insists that the fault lies with the appellee. NARIC contends that the disputed negotiable instrument was not promptly secured because the Paz failed to seasonable furnish data necessary and required for opening the same, namely: (1) the amount of the letter of credit, (2) the person, company or corporation in whose favor it is to be opened, and (3) the place and bank where it may be negotiated NARIC also argues that the subsequent offer of appellant Paz to substitute Thailand rice for the originally contracted Burmese rice amounted to a waiver of whatever rights she might have derived from the alleged breach of contract. Appellant NARIC also filed a counter-claim asserting that it has suffered, likewise by way of unrealized profit, damages in the sum of $406,000 from the failure of the projected contract to materialize. ISSUES: 1.) WON appellants failure to open immediately the letter of credit in dispute amounted to a breach of the contract of July 1, 1952 2.) WON the subsequent offer of appellant Paz to substitute Thailand rice for the originally contracted Burmese rice amounted to a waiver of whatever rights she might have derived from the alleged breach of contract 3.) WON appellants counter-claim is valid HELD: 1.) YES 2.) NO 3.) NO RATIO: 1.) It is clear upon the records that the sole and principal reason for the cancellation of the allocation contracted by the appellee herein in Rangoon, Burma, was the failure of the letter of credit to be opened with the contemplated period. This failure, must, therefore, be the immediate cause of for the consequent damage which resulted.

Uplawb2008group1 (carrie,elson,ia,izzy,mac,mel,sanne,varz)

Appellants defense has no merit. First, the appellants defense reaches into an area of the proceedings which the court is not at liberty to encroach. Appellants defense refers to a question of fact, for the court is denied to disturb questions of fact, consonant to the time-honored tradition to hold that trial judges are better situated to make conclusions on questions of fact. Second, It is clear that what singularly delayed the opening of the stipulated letter of credit and which, in turn, caused the cancellation of the allocation in Burma, was the inability of appellant NARIC to meet the condition imposed by PNB for granting the same. NARICs defense does not hold for even if appellant Paz furnished the necessary data for opening the letter of credit, NARIC would still not be in the position to meet the condition of PNB. The liability of NARIC arises from its willful and deliberate assumption of contractual obligations even as it was well aware of its financial incapacity to undertake the prestation. Despite awareness that it was financially incompetent to open a letter of credit immediately, appellant agreed in its contract with Paz to pay immediately by means of an irrevocable, confirmed and assignable letter of credit Article 1170 of the Civil Code: Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those who in any manner contravene the tenor thereof, are liable in damages. Under this provision, not only debtors are guilty of fraud, negligence or default in the performance of obligations are decreed liable; in general, every debtor who fails in the performance of his obligations I bound to indemnify for the losses and damages caused thereby. The phrase in any manner contravene the tenor of the obligation includes any illicit act which impairs the strict and fulfillment of the obligation, or every kind of defective performance. NARIC executed such a defective performance by agreeing to sign its contract with Paz despite its awareness that it was financially incompetent to open a letter of credit. The decision appealed from is affirmed, with the minor sole modification that the award should be converted into the Philippine peso at the rat of exchange prevailing at the time of the obligation. 2.) Waivers are not presumed, but must be clearly and convincingly shown, either by express stipulation or acts admitting no other reasonable explanation (Ramirez v. CA). In the case at bar, no such intent has been established. 3.) NARICs unrealized profit was realizable by it despite a number of expenses which the appellee, under contract, did not have to incur. Thus, banking and unloading charges were to be shouldered by NARIC. Such charges, if shouldered by NARIC, would still leave NARIC with profit over P400,000 NAKPIL AND SONS V. CA NATURE: Petitions for certiorari to review the decision of the Court of Appeals. FACTS The plaintiff, Philippine Bar Association, a civic-non-profit association, incorporated under the Corporation Law, decided to construct an office building on its 840 square meters lot located at the comer of Aduana and Arzobispo Streets, Intramuros, Manila. The construction was undertaken by the United Construction, Inc. on an "administration" basis, on the suggestion of Juan J. Carlos, the president and general manager of said corporation. The proposal was approved by plaintiff's board of directors and signed by its president Roman Ozaeta, a third-party defendant in this case. The plans and specifications for the building were prepared by the other third-party defendants Juan F. Nakpil & Sons. The building was completed in June, 1966. In the early morning of August 2, 1968 an unusually strong earthquake hit Manila and its environs and the building in question sustained major damage. The front columns of the building buckled, causing the building to tilt forward dangerously. The tenants vacated the building in view of its precarious condition.

Page 6 of 51 As a temporary remedial measure, the building was shored up by United Construction, Inc. at the cost of P13,661.28. On November 29, 1968, the plaintiff commenced this action for the recovery of damages arising from the partial collapse of the building against United Construction, Inc. and its President and General Manager Juan J. Carlos as defendants. Plaintiff alleges that the collapse of the building was accused by defects in the construction, the failure of the contractors to follow plans and specifications and violations by the defendants of the terms of the contract. Defendants in turn filed a third-party complaint against the architects who prepared the plans and specifications, alleging in essence that the collapse of the building was due to the defects in the said plans and specifications. Roman Ozaeta, the then president of the plaintiff Bar Association was included as a third-party defendant for damages for having included Juan J. Carlos, President of the United Construction Co., Inc. as party defendant. A pre-trial was conducted on March 7, 1969, during which among others, the parties agreed to refer the technical issues involved in the case to a Commissioner. ISSUE WON an act of God--an unusually strong earthquake--which caused the failure of the building, exempts from liability, parties who are otherwise liable because of their negligence. HELD/RATIO The negligent parties are not exempt from liability.

The general rule is that no person shall be responsible for events which could not be foreseen or which though foreseen, were inevitable (Article 1174, New Civil Code). An act of God has been defined as an accident, due directly and exclusively to natural causes without human intervention, which by no amount of foresight, pains or care, reasonably to have been expected, could have been prevented. (1 Corpus Juris 1174). There is no dispute that the earthquake of August 2, 1968 is a fortuitous event or an act of God. To exempt the obligor from liability under Article 1174 of the Civil Code, for a breach of an obligation due to an "act of God," the following must concur: (a) the cause of the breach of the obligation must be independent of the will of the debtor; (b) the event must be either unforseeable or unavoidable; (c) the event must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner; and (d) the debtor must be free from any participation in, or aggravation of the injury to the creditor. When the negligence of a person concurs with an act of God in producing a loss, such person is not exempt from liability by showing that the immediate cause of the damage was the act of God. To be exempt from liability for loss because of an act of God, he must be free from any previous negligence or misconduct by which that loss or damage may have been occasioned. The negligence of the defendant and the third-party defendants petitioners was established beyond dispute both in the lower court and in the Intermediate Appellate Court. Defendant United Construction Co., Inc. was found to have made substantial deviations from the plans and specifications, and to have failed to observe the requisite workmanship in the construction as well as to exercise the requisite degree of supervision; While the third-party defendants were found to have inadequacies or defects in the plans and specifications prepared by them. Spirals in column A5, ground floor were cut. The proper way is to produce correct spirals down from the top of the main column bars. The proper placing of the main reinforcements and spirals in column A5, ground floor, is the responsibility of the general contractor which is the UCCI. The defendants should be held responsible for the consequences arising from the loss of strength or ductility in column A5 which may have contributed to the damages sustained by the building.

Uplawb2008group1 (carrie,elson,ia,izzy,mac,mel,sanne,varz)

Page 7 of 51 As correctly assessed by both courts, the defects in the construction and in the plans and specifications were The very measures adopted by appellant prove that the possibility of danger was not only the proximate causes that rendered the PBA building unable to withstand the earthquake of August 2, 1968. foreseeable, but actually foreseen, and was not caso fortuito. For this reason the defendant and third-party defendants cannot claim exemption from liability. The appellant, knowing and appreciating the perils posed by the swollen stream and its swift current, voluntarily entered into a situation involving obvious danger While it is not possible to state with certainty that the building would not have collapsed were those defects not present, the fact remains that several buildings in the same area withstood the earthquake to which the It therefore assumed the risk, and can not shed responsibility merely because the precautions it building of the plaintiff was similarly subjected, cannot be ignored. adopted turned out to be insufficient One who negligently creates a dangerous condition cannot escape liability for the natural and probable The appellant, whose barges and tugs travel up and down the river everyday, could not safely ignore consequences thereof, although the act of a third person, or an act of God for which he is not responsible, the danger posed by these allegedly improper constructions that had been erected and, in place, for intervenes to precipitate the loss. years The destruction was not purely an act of God. The architect and contractor are solidarily liable. RULING: Decision modified. EASTERN SHIPPING LINES V. CA July 12, 1994 REPUBLIC V. LUZON STEVEDORING VITUG, J.: o December 4, 1981 - two fiber drums of riboflavin were shipped from Yokohama, Japan for delivery vessel "SS 21 SCRA 279 (1967) Nature :Appeal from decision of CFI Manila EASTERN COMET" owned by defendant Eastern Shipping Lines under Bill of Lading No. YMA-8. Facts o The shipment was insured under plaintiff's Marine Insurance Policy No. 81/01177 for P36,382,466.38. In the early afternoon of August 17, 1960, barge L-1892, owned by the Luzon Stevedoring Corporation December 12, 1981 upon arrival of shipment, it was discharged unto the custody of defendant Metro Port o was being towed down the Pasig river by tugboats "Bangus" and "Barbero," 1 also belonging to the Service, Inc. (The latter excepted to one drum, said to be in bad order, which damage was unknown to plaintiff.) same corporation, when the barge rammed against one of the wooden piles of the Nagtahan bailey January 7, 1982 - defendant Allied Brokerage Corporation received the shipment from defendant Metro Port o bridge, smashing the posts and causing the bridge to list Service, Inc., one drum opened and without seal The river, at the time, was swollen and the current swift, on account of the heavy downpour in Manila January 8 and 14, 1982 - defendant Allied Brokerage Corporation made deliveries of the shipment to the o and the surrounding provinces on August 15 and 16, 1960. consignee's warehouse. The latter excepted to one drum which contained spillages, while the rest of the contents Sued by plaintiff, defendant disclaimed liability, on the grounds that it had exercised due diligence in the was adulterated/fake. selection of its employees, that the damages to the bridge were caused by force majeure, that plaintiff Arguments: o has no capacity to sue and that the bailey bridge is an obstruction to navigation = Plaintiff: CFI held that defendant is liable and ordered it to pay plaintiff the actual cost of the bridge which due to the losses/damage sustained by said drum, the consignee suffered losses totaling P19,032.95, due to the o amounted to P192,561.72 with legal interest thereon from the date of the filing of the complaint fault and negligence of defendants. (Claims were presented against defendants who failed and refused to pay the ISSUE: WON the collision of appellant's barge with the supports or piers of the Nagtahan bridge was in law same) caused by fortuitous event or force majeure o As a consequence of the losses sustained, plaintiff was compelled to pay the consignee P19,032.95 under the HELD/RATIO aforestated marine insurance policy, so that it became subrogated to all the rights of action of said consignee No. against defendants Considering that the Nagtahan bridge was an immovable and stationary object and uncontrovertedly = Defendants: provided with adequate openings for the passage of water craft, including barges like of appellant's, it o As for defendant Eastern Shipping it alleged that the shipment was discharged in good order from the vessel is undeniable that the unusual event that the barge, exclusively controlled by appellant, rammed the unto the custody of Metro Port Service so that any damage/losses incurred after the shipment was incurred after bridge supports raises a presumption of negligence on the part of appellant or its employees manning the shipment was turned over to the latter, is no longer its liability; the barge or the tugs that towed it o Metroport averred that although subject shipment was discharged unto its custody, portion of the same was For in the ordinary course of events, such a thing does not happen if proper care is used already in bad order; The appellant strongly stresses the precautions taken by it on the day in question: that it assigned two o Allied Brokerage alleged that plaintiff has no cause of action against it, not having negligent or at fault for the of its most powerful tugboats to tow down river its barge L-1892; that it assigned to the task the more competent and experienced among its patrons, had the towlines, engines and equipment double- shipment was already in damage and bad order condition when received by it, but nonetheless, it still exercised checked and inspected; that it instructed its patrons to take extra precautions; and concludes that it extra ordinary care and diligence in the handling/delivery of the cargo to consignee in the same condition had done all it was called to do, and that the accident, therefore, should be held due to force majeure shipment was received by it. = Trial Court: or fortuitous event o Defendants to pay plaintiff, jointly and severally: 1) The amount of P19,032.95, with the present legal interest These very precautions, however, completely destroy the appellant's defense For caso fortuito or force majeure (which in law are identical in so far as they exempt an of 12% per annum from October 1, 1982, the date of filing of this complaints, until fully paid (the liability of obligor from liability) by definition, are extraordinary events not forseeable or avoidable, defendant Eastern Shipping, Inc. shall not exceed US$500 per case or the CIF value of the loss, whichever is lesser, while the liability of defendant Metro Port Service, Inc. shall be to the extent of the actual invoice value of "events that could not be foreseen, or which, though foreseen, were inevitable" (Art. 1174) It is therefore, not enough that the event should not have been foreseen or anticipated, as is each package, crate box or container in no case to exceed P5,000.00 each, pursuant to Section 6.01 of the commonly believed but it must be one impossible to foresee or to avoid. The mere difficulty Management Contract); 2) P3,000.00 as attorney's fees, and 3) Costs. o Dismissed the counterclaims and crossclaim of defendant/cross-claimant Allied Brokerage Corporation. to foresee the happening is not impossibility to foresee the same Uplawb2008group1 (carrie,elson,ia,izzy,mac,mel,sanne,varz)

= CA affirmed the decision in toto WON: (1) a claim for damage sustained on a shipment of goods can be a solidary, or joint and several, liability of the common carrier, the arrastre operator and the customs broker o The common carrier's duty to observe the requisite diligence in the shipment of goods lasts from the time the articles are surrendered to or unconditionally placed in the possession of, and received by, the carrier for transportation until delivered to, or until the lapse of a reasonable time for their acceptance by, the person entitled to receive them (Arts. 1736-1738, Civil Code; Ganzon vs. Court of Appeals, 161 SCRA 646; Kui Bai vs. Dollar Steamship Lines, 52 Phil. 863). o When the goods shipped either are lost or arrive in damaged condition, a presumption arises against the carrier of its failure to observe that diligence, and there need not be an express finding of negligence to hold it liable (Art. 1735, Civil Code; Philippine National Railways vs. Court of Appeals, 139 SCRA 87; Metro Port Service vs. Court of Appeals, 131 SCRA 365). o There are, of course, exceptional cases when such presumption of fault is not observed but these cases, enumerated in Article 1734 of the Civil Code, are exclusive, not one of which can be applied to this case. o The question of charging both the carrier and the arrastre operator with the obligation of properly delivering the goods to the consignee has, too, been passed upon by the Court. In Fireman's Fund Insurance vs. Metro Port Services (182 SCRA 455) o Since it is the duty of the ARRASTRE to take good care of the goods that are in its custody and to deliver them in good condition to the consignee, such responsibility also devolves upon the CARRIER. Both the ARRASTRE and the CARRIER are therefore charged with the obligation to deliver the goods in good condition to the consignee. o We do not, of course, imply by the above pronouncement that the arrastre operator and the customs broker are themselves always and necessarily liable solidarily with the carrier, or vice-versa, nor that attendant facts in a given case may not vary the rule. o The instant petition has been brought solely by Eastern Shipping Lines, which, being the carrier and not having been able to rebut the presumption of fault, is, in any event, to be held liable in this particular case. A factual finding of both the court a quo and the appellate court, we take note, is that "there is sufficient evidence that the shipment sustained damage while in the successive possession of appellants" (the herein petitioner among them). o Accordingly, the liability imposed on Eastern Shipping Lines, Inc., sole petitioner in this case, is inevitable regardless of whether there are others solidarily liable with it. WON: (2) payment of legal interest on an award for loss or damage is to be computed from the time the complaint is filed or from the date the decision appealed from is rendered o The date of the decision of the court a quo (kindly refer to dispositive portion of the case below) WON: (3) whether the applicable rate of interest, referred to above, is twelve percent (12%) or six percent (6%) o Art. 2209. If the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the indemnity for damages, there being no stipulation to the contrary, shall be the payment of interest agreed upon, and in the absence of stipulation, the legal interest which is six percent per annum. (this was upheld in a number of cases. Kindly check original text) o The ostensible discord is not difficult to explain. The factual circumstances may have called for different applications, guided by the rule that the courts are vested with discretion, depending on the equities of each case, on the award of interest. Nonetheless, it may not be unwise, by way of clarification and reconciliation, to suggest the following rules of thumb for future guidance. o When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts 18 is breached, the contravenor can be held liable for damages. 19 The provisions under Title XVIII on "Damages" of the Civil Code govern in determining the measure of recoverable damages

Page 8 of 51 With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows: 1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code. 2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged. 3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit. WHEREFORE, the petition is partly GRANTED. The appealed decision is AFFIRMED with the MODIFICATION that the legal interest to be paid is SIX PERCENT (6%) on the amount due computed from the decision, dated 03 February 1988, of the court a quo. A TWELVE PERCENT (12%) interest, in lieu of SIX PERCENT (6%), shall be imposed on such amount upon finality of this decision until the payment thereof. o ALMEDA V. CA Petition for review on certiorari of a decision of the CA FACTS: 1981: PNB granted to petitioners (spouses Almeda) several loan/credit accommodations totaling P18M payable in a period of 6 years at an interest rate of 21% per annum. To secure the loan, the Almedas executed a Real Estate Mortgage Contract covering a 3,500 sq.m. parcel of land, together with the building erected thereon (the Marvin Plaza). A credit agreement with the terms and conditions was executed between the parties. The agreement stipulated the said 21% interest rate, semi-annual payment in arrears, with the first interest payment to become due and payable 6 months from the date of initial release of the loan. Also in the agreement was the condition that the bank reserve the right to increase the interest rate within the limits allowed by law at any time in the future, provided that the interest rate shall be correspondingly decreased in the event that the applicable maximum interest rate is reduced by law or by the Monetary Board. In either case, the adjustment in the interest rate agreed upon shall take effect on the effectivity date of the increase or decrease of the maximum interest rate. Between 1981 and 1984, the Almedas made several partial payments on the loan totaling P7,735,004.66, a substantial portion of which was applied to accrued interest. On March 31, 1984, PNB, over the Almedas protests, raised the interest rate to 28%, allegedly pursuant to Section III-c (1) of its credit agreement.

Said interest rate thereupon increased from an intial 21% to a high of 68% between March 1984 to September 1986. Petitioners protested the increase to no avail. Before the loan was to mature in March 1988, the Almedas filed a petition for declaratory relief with prayer for a writ of preliminary injunction and temporary restraining order with the RTC Makati.

Uplawb2008group1 (carrie,elson,ia,izzy,mac,mel,sanne,varz)

In the petition, they sought clarification as to whether or not PNB could unilaterally raise interest rates on the loan pursuant to the agreements escalation clause, and in relation to Central Bank Circular No. 905. As a preliminary measure, the RTC issued a writ of preliminary injunction enjoining PNB from enforcing an interest rate above the 21% stipulated in the agreement. By this time the spouses were already in deficit of their loan obligations. Invoking the Law on Mandatory Foreclosure (Act 3135, as amended and PD 385), the PNB countered by ordering the extrajudicial foreclosure of petitioners mortgaged properties and scheduled an auction sale. Upon motion by petitioners however, the RTC granted a supplemental writ of preliminary injunction staying the public auction of the mortgaged property. Upon the posting of a counterbond of the PNB, RTC dissolved the writ of preliminary injunction. Petitioners filed a motion for reconsideration, while PNB once more set a new date for the foreclosure sale of the Marvin Plaza. However, prior to the scheduled date, petitioners tendered to PNB the amount of P40,142,518.00, consisting of the principal (18M) and accrued interest calculated at the originally stipulated rate of 21%. PNB refused to accept the payment. As a result of PNBs refusal, petitioners formally consigned the said amount with the RTC in Civil Case No. 90-663, wherein they prayed for a writ of preliminary injunction with TRO. PNB sought the dismissal of the case. March 30, 1990, Judge Guadiz granting the writ of preliminary injunction enjoining the foreclosure sale of Marvin Plaza. PNB filed a motion for reconsideration. Thereafter, the civil case was transferred to Judge Eriberto Rosario who issued an order consolidating said case with Civil Case 18872. For Judge Capulongs (first case) refusal to lift the writ of preliminary injunction, PNB filed a petition for Certiorari, Prohibition and Mandamus with CA, assailing the orders of the RTC which were unfavorable to PNB. CA rendered its decision setting aside the assailed orders and upholding PNBs right to foreclose the mortgaged property pursuant to Act 3135 as amended by PD 385. Petitioners Motion for Reconsideration and Supplemental Motion for Reconsideration were denied by them. ISSUES: (1) WON PNB was authorized to raise its interest rates from 21% to 68% under the credit agreement NO. The binding effect of any agreement between parties to a contract is premised on 2 principles: o That any obligation arising from contract has the force of law between the parties; and o That there must be mutuality between the parties based on their essential equality. Any contract which appears to be heavily weighed in favor of one of the parties so as to lead to an unconscionable result is void. Any stipulation regarding the validity or compliance of the contract which is left solely to the will of one of the parties is likewise invalid. It is obvious that PNB unilaterally altered the terms of its contract by increasing the interest rates on the loan without the prior assent of the latter. The manner of agreement is itself explicitly stipulated by CC in Art. 1956 that No interest shall be due unless it has been expressly stipulated in writing. What has been stipulated in writing is that petitioners were bound merely to pay 21% interest subject to a possible escalation or de-escalation when: o Circumstances warrant such escalation or de-escalation; o Within the limits allowed by law; and o Upon agreement. The use of the phrase interest rate agreed upon in the credit agreement proves that it was the 21% stipulated in the interest provision that the parties agreed upon. In PNB vs. CA, the SC disauthorized PNB from unilaterally raising the interest rate in the borrowers loan from 18% to 32%, 41% and 48% partly because the increases violated the principle of mutuality of contracts expressed in Art. 1308 CC.

Page 9 of 51 PNbs reliance on Central Banks Circular No. 905, Series of 1982 did not authorize the bank to progressively increase interest rates on borrowings to an extent which would have made it virtually impossible for debtors to comply with their own obligations. Although it is true that escalation clauses in credit agreements are perfectly valid and do not contravene public policy, they are nonetheless still subject to laws and provisions governing agreements between parties. Consequently, while the Usury Law ceiling on interest rates was lifted by CB Circular 905, nothing in said circular could be read as granting PNB authority to raise interest rates to such levels. Apart from violating the principle of mutuality of contracts, there is authority for disallowing the interest rates imposed by PNB, because the credit agreement specifically requires that the increase be within the limits allowed by law. In PNB vs. CA, SC already emphasized that CB Circular No. 905 could not be invoked to justify the escalation clauses of such contracts. Furthermore, the escalation clause of the credit agreement requires that the same be made within the limits allowed by law, obviously referring specifically to legislative enactments not administrative circulars. The phrase limits imposed by the law refers only to the escalation clause. However, the same agreement allows reduction on the basis of law or the Monetary Board. Had the parties intended the word law to refer to both legislative enactments and administrative circulars and issuances, the agreement would not have gone as far as making a distinction between law or the Monetary Board Circulars in referring to mutually agreed upon reductions in interest rates. (2) WON PNB is granted the authority to foreclose the Marvin Plaza under the mandatory foreclosure provisions of PD 385. NO. PD 385 was issued principally to guarantee that government financial institutions would not be denied substantial cash inflows necessary to finance the governments development projects by large borrowers who resort to litigation to prevent or delay collection of their debts and loans. In facilitating collection of debts through automatic foreclosure provisions, the government is however, not exempted from observing basic principles of law, and ordinary fairness and decency under the due process clause of the Constitution. Because of the dispute regarding the interest rate, the exact amount of obligations could not be determined. The foreclosure provisions of PD 385 could be validly invoked by PNB only after settlement of the question involving the interest rate, and only after spouses refused to meet their obligations following such determination. Petitioners made a valid consignation of what they, in good faith and in compliance with the letter of the Credit Agreement, honestly believed to be the real amount of their obligations. PNB could not therefore claim that there was no honest-to-goodness attempt on the part of the spouses to settle their obligations. PNBs rush to inequitably invoke the foreclosing provisions of PD 385 was obviously made in bad faith, to gain upper hand over petitioners. SC held that the increases imposed by PNB were null and void. GAITE V. FONACIER

Isabelo Fonacier was the owner and/or holder, either by himself or in a representative capacity, of 11 iron lode mineral claims, known as the Dawahan Group, situated in the municipality of Jose Panganiban, province of Camarines Norte. September 29, 1952. Fonacier appointed Fernando A. Gaite as his attorney-in-fact to find any individual or juridical person for the exploration and development of the mining claims on a royalty basis of not less than P0.50/ton of ore that might be extracted March 19, 1954. Gaite conveyed the development and exploitation of said mining claims unto Larap Iron Mines, a single proprietorship owned solely by him, on the same royalty basis provided.

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Page 10 of 51 Gaite developed and exploited the mining claims, opening and paving roads, making other improvements Only 7,573 tons of the estimated 24,000 tons of iron ore sold to him by Gaite was actually delivered, and and installing facilities for use in the development of the mines, and in time extracted what he claimed and counterclaimed for more than P200,000 damages. estimated to be approximately 24,000 metric tons of iron ore. Held/Ratio: The shipment or local sale of the iron ore not a condition precedent For some reason or another, Isabelo Fonacier decided to revoke Gaites authority to exploit and develop payment of the balance of P65,000, but was only is suspensive period or term.(or suspensive) to the a What characterizes a the mining claims, and Gaite assented subject to certain conditions. conditional obligation is the fact that its efficacy or obligatory force (as distinguished from its December 8, 1954. A document entitled "Revocation of Power of Attorney and Contract" was executed demandability) is subordinated to the happening of a future and uncertain event; so that if the on, wherein Gaite transferred to Fonacier, for the consideration of P20,000, plus 10% of the royalties that suspensive condition does not take place, the parties would stand as if the conditional obligation had Fonacier would receive from the mining claims, all his rights and interests on all the roads, improvements, never existed. That the parties to the contract did not intend any such state of things to prevail is and facilities, the right to use the business name "Larap Iron Mines" and its goodwill, and all the records and supported by several circumstances: 1) The words of the contract express no contingency in the buyer's obligation to pay: "The balance of Sixty-Five documents relative to the mines. paid out of the first letter first of iron ore . . In the same document, Gaite transferred to Fonacier all his rights and interests over the "24,000 tons of Thousand Pesos (P65,000) will be the payment will have to of credit covering thelater;shipment undetermined ." etc. There is no uncertainty that be made sooner or what is is iron ore, more or less" that the former had already extracted from the mineral claims, in consideration of the merely the exact date at which it will be made. By the very terms of the contract, therefore, the existence of the sum of P75,000, P10,000 of which was paid upon the signing of the agreement. obligation to pay is recognized; only its maturity or demandability is deferred. The balance of SIXTY-FIVE "THOUSAND PESOS (P65,000) will be paid from and out of the first letter of 2) A contract of sale is normally commutative and onerous: not only does each one of the parties assume a credit covering the first shipment of iron ores and or the first amount derived from the local sale of iron ore correlative obligation (the seller to deliver and transfer ownership of the thing sold and the buyer to pay the price), but each party anticipates performance by the other from the very start. While in a sale the obligation of made by the Larap Mines & Smelting Co., Inc. lawfully subordinated to an uncertain event, so that the other understands that he assumes the December 8, 1954. To secure the payment of the said balance, Fonacier delivered to Gaite two surety one party can benothing for what he gives (as in the case of a sale of hopes or expectations, emptio spei), it is risk of receiving bonds the first one was with himself and the Larap Mines and Smelting Co. and its stockholders as principal not in the usual course of business to do so; hence, the contingent character of the obligation must clearly and the second (required by Gaite as additional surety), with the Far Eastern Surety and Insurance Co. as appear. Nothing is found in the record to evidence that Gaite desired or assumed to run the risk of losing his principal. rights over the ore without getting paid for it, or that Fonacier understood that Gaite assumed any such risk. This The second surety, however, provided that the liability of the surety company would attach only when is proved by the fact that Gaite insisted on a bond to guarantee payment of the P65,000, and not only upon a there had been 1.) an actual sale of iron ore by the Larap Mines & Smelting Co. for an amount of not less bond by Fonacier, the Larap Mines & Smelting Co., and the company's stockholders, but also on one by a surety than P65,000, and 2.) that the liability of said surety company would automatically expire on December 8, company; and the fact that appellants did put up such bonds indicates that they admitted the definite existence of their obligation to pay the balance of P65,000. 1955. the obligation remaining P65,000 to the sale or shipment a condition On the same day, Fonacier entered into a "Contract of Mining Operation", ceding, transferring, and 3) To subordinatebe tantamount to pay the the payment at the discretion of the debtor, of the ore asor shipment precedent, would to leaving for the sale conveying unto the Larap Mines and Smelting Co., Inc. the right to develop, exploit, and explore the mining could not be made unless the appellants took steps to sell the ore. claims in question, together with the improvements therein and the use of the name "Larap Iron Mines" and Appellants would thus be able to postpone payment indefinitely. The desirability of avoiding such a construction its goodwill, in consideration of certain royalties. Fonacier likewise transferred, in the same document, the of the contract Exhibit "A" needs no stressing. complete title to the approximately 24,000 tons of iron ore which he acquired from Gaite, to the Larap Mines 4) Assuming that there could be doubt whether by the wording of the contract the parties intended a suspensive & Smelting Co., in consideration for the signing by the company and its stockholders of the surety bonds condition or a suspensive period (dies ad quem) for the payment of the P65,000, the rules of interpretation delivered by Fonacier to Gaite. would incline the scales in favor of "the greatest reciprocity of interests", since sale is essentially onerous. The December 8, 1955. Bond of Far Eastern Surety and Insurance Company expired; 24,000 tons of iron Civil Code of the Philippines, Article 1378, paragraph 1, in fine, provides: "if the contract is onerous, the doubt shall be settled in favor of the greatest reciprocity of interests." ore still unsold; P65,000 balance of the price still unpaid. and there can be no question that greater reciprocity obtains if the buyer's obligation is deemed to be actually Whereupon, Gaite demanded from Fonacier and his sureties payment of said amount, on the theory that existing, with only its maturity (due date) postponed or deferred, than if such obligation were viewed as nonthey had lost every right to make use of the period given them when their bond automatically expired. existent or not binding until the ore was sold. Issue No. 1: The only rational view that can be taken is that the sale of the ore to Fonacier was a sale on credit, and not an WON the obligation to pay the P65,000 balance was one with a condition or one with a period/term. aleatory contract where the transferor, Gaite, would assume the risk of not being paid at all; and that the Defense: previous sale or shipment of the ore was not a suspensive condition for the payment of the balance of the agreed All defendants except Francisco Dante set up the uniform defense that the obligation was subject to a price, but was intended merely to fix the future date of the payment. condition that the amount of P65,000 would be payable out of the first letter of credit covering the first Issue No. 2 WON Fonacier and his sureties, still have the right to insist that Gaite should wait for the sale or shipment of iron ore and/or the first amount derived from the local sale of the iron ore by the Larap Mines & shipment of the ore before receiving payment; or, in other words, whether or not they are entitled to Smelting Co., Inc.: -- that up to the time of the filing of the complaint, no sale of the iron ore had been made, hence the take full advantage of the period granted them for making the payment. Held/Ratio: condition had not yet been fulfilled; No. The appellants have forfeited the right to compel Gaite to wait for the sale of the ore before -- that consequently, the obligation was not yet due and demandable. receiving payment of the balance of P65,000, because of their failure to renew the bond of the Far Eastern Uplawb2008group1 (carrie,elson,ia,izzy,mac,mel,sanne,varz)

Surety Company or else replace it with an equivalent guarantee. The expiration of the bonding company's undertaking on December 8, 1955 substantially reduced the security of the vendor's rights as creditor for the unpaid P65,000, a security that Gaite considered essential and upon which he had insisted when he executed the deed of sale of the ore to Fonacier. The case squarely comes under paragraphs 2 and 3 of Article 1198 of the Civil Code of the Philippines: (1) . . . (2) When he does not furnish to the creditor the guaranties or securities which he has promised. (3) When by his own acts he has impaired said guaranties or securities after their establishment, and when through fortuitous event they disappear, unless he immediately gives new ones equally satisfactory." Appellants' failure to renew or extend the surety company's bond upon its expiration plainly impaired the securities given to the creditor (appellee Gaite), unless immediately renewed or replaced. There is no merit in appellants' argument that Gaite's acceptance of the surety company's bond with full knowledge that on its face it would automatically expire within one year was a waiver of its renewal after the expiration date. No such waiver could have been intended, for Gaite stood to lose and had nothing to gain thereby; and if there was any, it could be rationally explained only if the appellants had agreed to sell the ore and pay Gaite before the surety company's bond expired on December 8, 1955. But in the latter case the defendants- appellants' obligation to pay became absolute after one year from the transfer of the ore to Fonacier by virtue of the deed Exhibit "A." All the alternatives, therefore, lead to the same result: that Gaite acted within his rights in demanding payment and instituting this action one year from and after the contract (Exhibit "A") was executed, either because the appellant debtors had impaired the securities originally given and thereby forfeited any further time within which to pay; or because the term of payment was originally of no more than one year, and the balance of P65,000 became due and payable thereafter.

Page 11 of 51 graduate of the Universities of Nevada and California, with almost 22 years of experience in the Bureau of Mines placed the tonnage factor of every cubic meter of iron ore at between 3 metric tons as minimum to 5 metric tons as maximum -- This estimate closely corresponds to the average tonnage factor of 3.3 adopted by engineer Nemesio Gamatero, who was sent by the Bureau of Mines -- The estimate of 6,609 cubic meters of ore multiplied by the average tonnage factor of 3.3 tons to a cubic meter, the product is 21,809.7 tons which is close enough to the estimate of 24,000 tons considering actual measurement is impossible and there should be allowance for error. There was, consequently, no short-delivery in this case as would entitle appellants to the payment of damages, nor could Gaite have been guilty of any fraud in making any misrepresentation to appellants as to the total quantity of ore in the stockpiles of the mining claims in question, as charged by appellants since Gaite's estimate appears to be substantially correct.

PARKS V. PROVINCE OF TARLAC On October 18, 1910, Concepcion Cirer and James Hill, the owners of a parcel of land, donated it perpetually to the municipality of Tarlac, Province of Tarlac, under certain conditions specified in thepublic document in which they made this donation. The land donated was later registered in the name of the donee, the municipality of Tarlac. The condition imposed that one of the parcels donated was to be used absolutely and exclusively for the erection of a central school and the other for a public park, the work to commence in both cases within the period of six months from the date of the ratification by the parties of the document evidencing the donation. On January 15, 1921, Concepcion Cirer and James Hill sold this parcel to the herein plaintiff George L. Parks. On August 24, 1923, the municipality of Tarlac transferred the parcel to Province of Tarlac which, by Additional Issue: (Defense ksi to, bka itanong ni sir.) reason of this transfer, applied for and obtained the registration thereof in its name, the corresponding WON there were really 24,000 tons of iron ore in the stockpiles and if there had been a short-delivery, WON they certificate of title having been issued to it. are entitled to damages. Appellant contends that a condition precedent having been imposed in the donation and the same not Held/Ratio: having been complied with, the donation never became effective and hence the spouses were still the YES, approximately, there was. This is a case of a sale of a specific mass of fungible goods for a single owners of the land when they sold it to him. price or a lump sum, the quantity of "24,000 tons of iron ore, more or less", stated in the contract, being a mere The plaintiff, George L. Parks, alleging that the conditions of the donation had not been complied with estimate by the parties of the total tonnage weight of the mass; and neither of the parties had actually measured and invoking the sale of this parcel of land made by Concepcion Cirer and James Hill in his favor, or weighed the mass, so that they both tried to arrive at the total quantity by making an estimate of the volume brought this action against the Province of Tarlac, the municipality of Tarlac, Concepcion Cirer and thereof in cubic meters and then multiplying it by the estimated weight per ton of each cubic meter. James Hill and prayed that: The sale between the parties is a sale of a specific mass of iron ore because no provision was made in o he be declared the absolute owner entitled to the possession of the parcel of land their contract for the measuring or weighing of the ore sold in order to complete or perfect the sale, nor was the o the transfer of the same by the municipality of Tarlac to the Province of Tarlac be annulled price of P75,000 agreed upon by the parties based upon any such measurement (see Art. 1480, second par., New Civil Code). The subject-matter of the sale is, therefore, a determinate object, the mass, and not the actual o the transfer certificate issued to the Province of Tarlac cancelled. number of units or tons contained therein, so that all that was required of the seller Gaite was to deliver in good The lower court dismissed the complaint, hence this appeal. faith to his buyer all of the ore found in the mass, notwithstanding that the quantity delivered is less than the ISSUES: amount estimated by them. 1.) WON the donation can be annulled because the donors conditions have not been complied with. NO. There was no short delivery because neither of the parties had actually measured or weighed the whole 2.) WON the plaintiff has right of action. NO. mass of ore cubic meter by cubic meter, or ton by ton. Both parties predicate their respective claims only upon HELD: an estimated number of cubic meters of ore multiplied by the average tonnage factor per cubic meter. 1.) NO -- Gaite asserts a total of 7,375 cubic meters in the stockpiles of ore while Fonacier contends that by It is true that this condition has not been complied with. The allegation, however, that it is a condition actual measurement, their witness Cipriano Manlagit found the total volume of ore in the stockpiles to be only precedent is erroneous. 6,609 cubic meters. The characteristic of a condition precedent is that the acquisition of the right is not effected while said -- As to the average weight in tons per cubic meter, the parties are again in disagreement, with condition is not complied with or is not deemed complied with. appellants claiming the correct tonnage factor to be 2.18 tons to a cubic meter, while appellee Gaite claims that Meanwhile nothing is acquired and there is only an expectancy of right. the correct tonnage factor is about 3.7. Consequently, when a condition is imposed, the compliance of which cannot be effected except when -- Estimate of the tonnage factor of iron ore made by Leopoldo F. Abad, chief of the Mines and the right is deemed acquired, such condition cannot be a condition precedent. Metallurgical Division of the Bureau of Mines, a government pensionado to the States and a mining engineering Uplawb2008group1 (carrie,elson,ia,izzy,mac,mel,sanne,varz)

In the present case the condition could not be complied with except after giving effect to the donation. o The donee could not do any work on the donated land if the donation had not really been effected, because it would be an invasion of another's title, for the land would have continued to belong to the donor so long as the condition imposed was not complied with. o The appellant also contends that, in any event, the condition not having been complied with, even supposing that it was not a condition precedent but subsequent, the non-compliance thereof is sufficient cause for the revocation of the donation. This is correct. o But the period for bringing an action for the revocation of the donation has prescribed. The o law itself recognizes the prescriptibility of the action for the revocation of a donation, providing a special o period of five years for the revocation by the subsequent birth of children (art. 646, Civil Code), and one year for the revocation by reason of ingratitude. If no special period is provided for the prescription of o the action for revocation for non-compliance of the conditions of the donation (art. 647, Civil Code), it is because in this respect the donation is considered onerous and is governed by the law of contracts and o o the general rules of prescription. Under the laws in force (sec. 43, Code of Civ. Proc.), the period of prescription of this class of action is ten years. The action for the revocation of the donation for this cause arose or April 19, 1911, that is, six months o after the ratification of the instrument of donation of October 18, 1910. The complaint in this action was presented July 5, 1924, more than ten years after this cause accrued. o The plaintiff has no right of action. If he has any, it is only by virtue of the sale of this parcel made by Concepcion Cirer and James Hill in his favor an January 15, 1921, but that sale cannot have any effect. This parcel having been donated by Concepcion Cirer and James Hill to the municipality of Tarlac, whicho donation was accepted by the latter, the title to the property was transferred to the municipality of Tarlac. The spouses did not have the power to sell the land to plaintiff because they were no longer the owners of the land at the time of the alleged sale because the land has already been donated to the Municipality of Tarlac. The court had a lengthy discussion why such donation was never revoked, even though none of the parties alleged such and none of the parties ever claimed such (nag-uulyanin na siguro yung Justice).

2.) NO

NOTE:

CPU V. CA July 17, 1995 BELLOSILLO, J.: 1939 - the late Don Ramon Lopez, Sr., who was then a member of the Board of Trustees of the Central Philippine College (now Central Philippine University [CPU]), executed a deed of donation in favor of the latter of a parcel of land identified as Lot No. 3174-B-1 of the subdivision plan Psd-1144, then a portion of Lot No. 3174-B, for which Transfer Certificate of Title No. T-3910-A was issued in the name of the donee CPU with the following annotations copied from the deed of donation 1. The land described shall be utilized by the CPU exclusively for the establishment and use of a medical college with all its buildings as part of the curriculum; 2. The said college shall not sell, transfer or convey to any third party nor in any way encumber said land; 3. The said land shall be called "RAMON LOPEZ CAMPUS", and the said college shall be under obligation to erect a cornerstone bearing that name. Any net income from the land or any of its parks shall be put in a fund to be known as the "RAMON LOPEZ CAMPUS FUND" to be used for improvements of said campus and erection of a building thereon. 31 May 1989, private respondents, heirs of Don Ramon Lopez, Sr., filed an action for annulment of donation, reconveyance and damages against CPU Arguments:

Page 12 of 51 = Private respondents alleging that since 1939 up to the time the action was filed the latter had not complied with the conditions of the donation. also argued that petitioner had in fact negotiated with the National Housing Authority (NHA) to exchange the donated property with another land owned by the latter. = petitioner right of private respondents to file the action had prescribed it did not violate any of the conditions in the deed of donation because it never used the donated property for any other purpose than that for which it was intended it did not sell, transfer or convey it to any third party. = trial court petitioner failed to comply with the conditions of the donation donation is declared it null and void directed petitioner to execute a deed of the reconveyance of the property in favor of the heirs of the donor, namely, private respondents herein = CA the annotations at the back of petitioner's certificate of title were resolutory conditions breach of which should terminate the rights of the donee thus making the donation revocable. while the first condition mandated petitioner to utilize the donated property for the establishment of a medical school, the donor did not fix a period within which the condition must be fulfilled, hence, until a period was fixed for the fulfillment of the condition, petitioner could not be considered as having failed to comply with its part of the bargain reversing the appealed decision and remanding the case to the court of origin for the determination of the time within which petitioner should comply with the first condition annotated in the certificate of title. WON: (1) quoted annotations in the certificate of title of petitioner are onerous obligations and resolutory conditions of the donation which must be fulfilled non-compliance of which would render the donation revocable - YES o A clear perusal of the conditions set forth in the deed of donation executed by Don Ramon Lopez, Sr., gives us no alternative but to conclude that his donation was onerous, one executed for a valuable consideration which is considered the equivalent of the donation itself, e.g., when a donation imposes a burden equivalent to the value of the donation. o where Don Ramon Lopez donated the subject parcel of land to petitioner but imposed an obligation upon the latter to establish a medical college thereon, the donation must be for an onerous consideration. o Art. 1181 of the Civil Code, on conditional obligations, the acquisition of rights, as well as the extinguishment or loss of those already acquired, shall depend upon the happening of the event which constitutes the condition. o when a person donates land to another on the condition that the latter would build upon the land a school, the condition imposed was not a condition precedent or a suspensive condition but a resolutory one. o If there was no fulfillment or compliance with the condition, such as what obtains in the instant case, the donation may now be revoked and all rights which the donee may have acquired under it shall be deemed lost and extinguished. WON: (2) prescription does not deserve "disquisition" - NO o The condition imposed by the donor depended upon the exclusive will of the donee as to when this condition shall be fulfilled. When petitioner accepted the donation, it bound itself to comply with the condition thereof. o Since the time within which the condition should be fulfilled depended upon the exclusive will of the petitioner, it has been held that its absolute acceptance and the acknowledgment of its obligation

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provided in the deed of donation were sufficient to prevent the statute of limitations from barring the action of private respondents upon the original contract which was the deed of donation. o Moreover, the time from which the cause of action accrued for the revocation of the donation and recovery of the property donated cannot be specifically determined in the instant case. o In cases where there is no special provision for such computation, recourse must be had to the rule that the period must be counted from the day on which the corresponding action could have been instituted. In this case, the starting point begins with the expiration of a reasonable period and opportunity for petitioner to fulfill what has been charged upon it by the donor. o when the obligation does not fix a period but from its nature and circumstances it can be inferred that a period was intended, the general rule provided in Art. 1197 of the Civil Code applies, which provides that the courts may fix the duration thereof because the fulfillment of the obligation itself cannot be demanded until after the court has fixed the period for compliance therewith and such period has arrived. o More than a reasonable period of fifty (50) years has already been allowed petitioner to avail of the opportunity to comply with the condition even if it be burdensome, to make the donation in its favor forever valid. But, unfortunately, it failed to do so. Hence, there is no more need to fix the duration of a term of the obligation when such procedure would be a mere technicality and formality and would serve no purpose than to delay or lead to an unnecessary and expensive multiplication of suits. o Art. 1191 of the Civil Code - when one of the obligors cannot comply with what is incumbent upon him, the obligee may seek rescission and the court shall decree the same unless there is just cause authorizing the fixing of a period. In the absence of any just cause for the court to determine the period of the compliance, there is no more obstacle for the court to decree the rescission claimed. WON: (3) case was properly remanded to the trial court for the fixing of the period within which petitioner would establish a medical college. o Finally, since the questioned deed of donation herein is basically a gratuitous one, doubts referring to incidental circumstances of a gratuitous contract should be resolved in favor of the least transmission of rights and interests. o Hence, it is only just and equitable now to declare the subject donation already ineffective and, for all purposes, revoked so that petitioner as donee should now return the donated property to the heirs of the donor, private respondents herein, by means of reconveyance. WHEREFORE, the decision of the Regional Trial Court of Iloilo, Br. 34, of 31 May 1991 is REINSTATED and AFFIRMED, and the decision of the Court of Appeals of 18 June 1993 is accordingly MODIFIED. Consequently, petitioner is directed to reconvey to private respondents Lot No. 3174-B-1 of the subdivision plan Psd-1144 covered by Transfer Certificate of Title No. T-3910-A within thirty (30) days from the finality of this judgment. Costs against petitioner. Separate Opinions DAVIDE, JR., J., dissenting: I agree with the view in the majority opinion that the donation in question is onerous considering the conditions imposed by the donor on the donee which created reciprocal obligations upon both parties. Beyond that, I beg to disagree. First of all, may I point out an inconsistency in the majority opinion's description of the donation in question. In one part, it says that the donation in question is onerous. Second, the discussion on conditional obligations is unnecessary. There is no conditional obligation to speak of in this case. It seems that the "conditions" imposed by the donor and as the word is used in the law of donations is confused with "conditions" as used in the law of obligations. In his annotation of Article 764 of the Civil Code on Donations, Arturo M. Tolentino, citing the well-known civilists such as Castan, Perez Gonzalez and Alguer, and Colin & Capitant, states clearly the context within which the term "conditions" is used in the law of donations. Third, I cannot subscribe to the view that the provisions of Article 1197 cannot be applied here. The conditions/obligations imposed by the donor herein are subject to a period. I draw this conclusion based on our previous ruling which, although made almost 90 years ago, still finds application in the present case.

Page 13 of 51 For the reasons expressed above, I register my dissent. Accordingly, the decision of the Court of Appeals must be upheld, except its ruling that the conditions of the donation are resolutory. OSMENA V. RAMA Facts: -The defendant issued two promissory notes payable to Victoriano Osmena in 1881 and 1882. -Sometime after the execution and delivery of the aforementioned contracts, Victoriano Osmena died. -In the settlement and division of his estate, the above contracts became the property of Agustina Rafols, who later ceded to the present plaintiff all her right and interest in said contract -On March 15, 1902, the plaintiff presented the contracts to the defendant for payment. The defendant acknowledged her responsibility and made the following indorsement thereon: On this date I hereby promise that, if the house of strong materials in which I live is sold, I will pay my indebtedness to plaintiff as set forth in the documents -However, no payment have been made. -The plaintiff commenced the present action on June 1906, 10 years after the cause of action accrued Issue: WON the indorsment made by the defendant renew the period of prescription? Held: No Ratio: -If the statement found in the acknowledgement should be regarded as a condition, it was a condition dependent upon the exclusive will of the debtor, and is, therefore void. A condition imposed upon a contract by the promisor, the performance of which depends upon his exclusive will, is void, based on the provisions of article 11152 CC. -The acknowledgement, therefore, is an absolute acknowledgement of the obligation and was sufficient to prevent the statute of limitations from barring the action upon the original contract HERMOSA V. LONGARA PETITION FOR REVIEW ON CERTIORARI Defendant presented certain claims against the intestate estate of Fernando Hermosa sr Claims are of 3 kinds: 1) P2,341.41 (representing credit advances made to the intestate from 1932 to 1944), 2) P12,924.12 (made to Fernando hermoso srs son), and 3) P3,772 (made to his grandson from 1945 to 1947, after the death of Fernando hermoso sr, which occurred in dec 1944 Fernando hermosa sr asked for the credit advances for himself and for the members of his family on the condition that their payment should be made by Fernando Hermosa sr as soon as the funds received derived from the sale of his property in Spain Claimant longara testified, without opposition, that the credit advances were to be payable as soon as Fernando Hermosa srs property in spain be sold and he received money derived from the sale. Won the obligation contracted by the intestate was subject to a condition exclusively dependent upon the will of the debtor, and is therefore null and void The will to sell on the part of the debtor was present in fact, or presumed legally to exist, although the price and other conditions thereof were still within his consideration and final approval But in addition to this acceptability of the sale to him (obligor), there were still other conditions that had to concur to effect the sale, mainly that of the presence of the buyer, ready, able, and willing to purchase the property under the conditions demanded by the vendor Without such a buyer, the proceeds could not be carried out or the proceeds thereof sent to the islands The condition therefore does not depend exclusively upon the will of the debtor but also upon other circumstances beyond his power or control

Article 1182 of the New Civil Code

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The condition of the obligation was not a purely potestative one depending solely upon the will of the obligor, but a mixed one, depending partly upon chance The obligation governed by art 1182 par 2 of the CC.

TAYLOR V. UY TENG PIAO 43 Phil 873 (1922) Nature: Appeal from judgment of CFI Manila Facts Plaintiff contracted his services to Tan Liuan & Co., as superintendent of an oil factory which the latter contemplated establishing in this city The period of the contract extended over two years from the date mentioned; and the salary was to be at the rate of P600 per month during the first year and P700 per month during the second, with electric light and water for domestic consumption, and a residence to live in, or in lieu thereof P60 per month At the time the agreement was made, the machinery for the factory had not been acquired, although 10 expellers had been ordered from the US

Among the stipulations of the contract is the provision which states : "It is understood and agreed that should the machinery to be installed in the said factory fail, for any reason, to arrive in the city of Manila within a period of six months from date hereof, this contract may be cancelled by the party of the second part at its option, such cancellation, however, not to occur before the 'expiration of such six months." The machinery referred to did not arrive in Manila within the 6 months succeeding the making of the contract; nor was other equipment necessary for the establishment of the factory at any time provided by the defendants The reason for this does not appear with certainty, but a preponderance of the evidence is to the effect that the defendants, in the first months of 1919, seeing that the oil business no longer promised large returns, either cancelled the order for the machinery from choice or were unable to supply the capital necessary to finance the project On June 28, 1919, availing themselves in part of the option given by the clause, the defendants communicated in writing to the plaintiff the fact that they had decided to rescind the contract, effective June 30 then current, upon which date he was discharged The plaintiff thereupon instituted this action to recover damages in the amount of P13,000, covering salary and perquisites due and to become due under the contract Plaintiff contends that the stipulation applies only to nonarrival due to causes not having their origin in the will or act of the defendants as delays caused by strikes or unfavorable conditions of transportation by land or sea

It is urged that the right to cancel cannot be admitted unless the defendants affirmatively show that the failure of the machinery to arrive was due tocauses of that character, and that it did not have its origin in their own act or volition Plaintiff relies on Art 1256 of the CC, which is to the effect that the validity and fulfillment of contracts cannot be left to the will of one of the contracting parties Plaintiff relies also on Art 1119, which says that a condition shall be deemed fulfilled if the obligor intentionally impedes its fulfillment ISSUE : WON the defendants have the right to cancel based on the fact that the machinery did not arrive HELD/RATIO Yes. It will be noted that the language conferring the right of cancellation upon the defendants is broad enough to cover any case of the nonarrival of the machinery, due to whatever cause; and the stress in RUSTAN PULP V. IAC the expression "for any reason" should evidently fall upon the word "any." 1966 - pet established a pulp and paper mill in Lanao del Norte Uplawb2008group1 (carrie,elson,ia,izzy,mac,mel,sanne,varz)

Page 14 of 51 It must follow of necessity that the defendants had the right to cancel the contract in the contingency that occurred, unless some clear and sufficient reason can be adduced for limiting the operation of the words conferring the right of cancellation Upon this point it is our opinion that the language used in the stipulation should be given effect in its ordinary sense, without technicality or circumvention; and in this sense it is believed that the parties to the contract must have understood it Article 1256 of the Civil Code creates no impediment to the insertion in a contract for personal service of a resolutory condition permitting the cancellation of the contract by one of the parties. Such a stipulation, as can be readily seen, does not make either the validity or the fulfillment of the contract dependent upon the will of the party to whom is conceded the privilege of cancellation The exercise of the option is as much in the fulfillment of the contract as any other act which may have been the subject of agreement The cancellation of a contract in accordance with conditions agreed upon beforehand is fulfillment Manresa said that "It is entirely licit to leave fulfillment to the will of either of the parties in the negative form of rescission, a case frequent in certain contracts (the letting of service for hire, the supplying of electrical energy, etc.), for in such supposed case neither is the article infringed, nor is there any lack of equality between the persons contracting, since they remain with the same faculties in respect to fulfillment." Hall vs Hardaker does not control because in the present case, there was no breach of contract by the defendants; and the argument to the contrary apparently suffers from the logical defect of assuming the very point at issue It will be said that the question is not so much one concerning the legality of the clause referred to as I one concerning the interpretation of the resolutory clause as written, the idea being that the court should adjust its interpretation of said clause to the supposed precepts of article 1256, by restricting its operation exclusively to cases where the nonarrival of the machinery may be due to extraneous causes not referable to the will or act of the defendants But even when the question is viewed in this aspect the result is the same, because the argument for the restrictive interpretation evidently proceeds on the assumption that the clause in question is illegal in so far as it purports to concede to the defendants the broad right to cancel the contract upon nonarrival of the machinery due to any cause To impose this interpretation upon those words would in our opinion constitute an unjustifiable invasion of the power of the parties to establish the terms which they deem advisable, a right which is expressed in article 1255 of the Civil Code and constitutes one of the most fundamental conceptions of contract right enshrined in the Code The other article relied upon by Taylor (Art 1119) can have no application to an external contingency which, like that involved in this case, is lawfully within the control of the obligor Said article can have no application to the resolutory condition, the validity of which is recognized in article 1113 of the Civil Code. In other words, a condition at once facultative and resolutory may be valid even though the condition is made to depend upon the will of the obligor If the defendants were under a positive obligation to cause the machinery to arrive in Manila, they would be liable, in the absence of affirmative proof showing the nonarrival was due to some cause not having its origin in their own act or will The contract does not contain any such positive obligation and its existence cannot be implied in the face of stipulation, defining the conditions under which the defendants can cancel the contract The lower court did not err in rejecting the claim for damages

1967 Lluch, a holder of a forest products license, wrote to Rustan for the supply of materials to the latter 1968 a contract of sale was executed whereby pet promised to pay the price of P30 per cubic meter of pulp wood raw materials to be delivered at the buyers plant in Lanao

Significant stipulations of the contract: 3. That the BUYER shall have the option to buy from other SELLERS who are equally qualified and holder of appropriate government authority or license to sell or dispose, that BUYER shall not buy from any other SELLER whole pulp woods being sold shall have been established to have emanated from the sellers lumber and/or firewood concession And that SELLER has the priority to supply the pulp wood materials requirement of the BUYER 7. That the BUYER shall have the right to stop the delivery of said raw materials by the SELLER covered by this contract when supply of the same shall have become sufficient until such time when the needed raw materials shall have become necessary, provided, however, that the SELLER is given sufficient notice. In the installation of the plant facilities, technical staff of the pet recommended the acceptance of deliveries from other suppliers of the pulp wood materials for which the corresponding deliveries will be made During the test run of the pulp mill, the machinery line had major defects while deliveries piled up which prompted the Japanese supplier of the machinery to recommend the stoppage of the deliveries 1968 pet wrote Lluch informing the latter to stop delivery within 30 days as supply of raw materials shall have become sufficient Lluch sought to clarify the tenor of the letter as to whether stoppage delivery or termination of the contract was intended, but the query was intended by petitioners. After a series of talks between resident manager of rustan pulp and lluch, the customer supplied deliveries 1969 complaint for contractual breach was filed but was dismissed by the tc. On appeal, petitioner was directed to pay private respondents P30,000 as moral damages and P15,000 as attorneys fees Won the contractual provisions mentioned above as regards the stoppage of delivery when there is sufficient supply of raw materials are valid - no The SCs simple understanding of the literal import of par 7 of the obligation in question is that petitioners can stop delivery of pulp wood from private respondents if supply at the plant is sufficient as ascertained by petitioners, subject to redelivery when the need arises as determined likewise by petitioners This is a potestative imposition in the contract which must be obliterated for being invalid as it is purely dependent upon the will of one party Though it is a legal truism that a condition which is both potestative and resolutory may be valid even though that saving clause is left entirely to the will of the obligor, the same cannot be said to apply in the present case. Petitioners contend that they are within the right stoppage guaranteed by par 7 But what diminished the legal efficacy of such right is the condition attached to it which is dependent exclusively on the will of the petitioner

Page 15 of 51 Florencio and Soledad C. Ignao and the Roman Catholic Bishop of Imus, Cavite, together with the Roman Catholic Archbishop of Manila In their complaint, private respondents alleged that on August 23, 1930, the spouses Eusebio de Castro and Martina Rieta, now both deceased, executed a deed of donation in favor of therein defendant Roman Catholic Archbishop of Manila covering a parcel of land The deed of donation allegedly provides that the donee shall not dispose or sell the property within a period of one hundred (100) years from the execution of the deed of donation, otherwise a violation of such condition would render ipso facto null and void the deed of donation and the property would revert to the estate of the donors. Respondents allege that on or about June 30, 1980, and while still within the prohibitive period to dispose of the property, petitioner Roman Catholic Bishop of Imus, in whose administration all properties within the province of Cavite owned by the Archdiocese of Manila was allegedly transferred on April 26, 1962, executed a deed of absolute sale of the property subject of the donation in favor of petitioners Florencio and SoledadC. Ignao inconsideration of the sum of P114,000.00. It is the contention of petitioners that the cause of action of herein private respondents has already prescribed, invoking Article 764 of the Civil Code which provides that "When donation shall be revoked at the instance of the donor, when the donee fails to comply with any of the conditions which the former imposed upon the latter," and that "his action shall prescribe after four years from the non-compliance with the condition, may be transmitted to the heirs of the donor, and may be exercised against the donee's heirs."

ISSUES: 1.) WON the deed of donation is ipso facto null due to violation of the donors condition (respondents contention). NO. 2.) WON the action has already prescribed (petitioners contention). NO. 3.) WON respondents have cause of action (not a contention of either parties but resolved by court to arrive at a just decision). NO. HELD: 1.) NO The deed of donation involved herein expressly provides for automatic reversion of the property donated in case of violation of the condition therein, hence a judicial declaration revoking the same is not necessary. As aptly stated by the Court of Appeals: o "By the very express provision in the deed of donation itself that the violation of the condition thereof would render ipso facto null and void the deed of donation, WE are of the opinion that there would be no legal necessity anymore to have the donation judicially declared null and void for the reason that the very deed of donation itself declares it so. There is nothing in the law that prohibits the parties from entering into an agreement that a violation of the terms of the contract would cause its cancellation even without court intervention, and that it is not always necessary for the injured party to resort to court for rescission of the contract. A judicial action is proper only when there is absence of a special provision granting the power of cancellation. The contract in question Article 732 of the Civil Code provides that donations inter vivos shall be governed by the general provisions on contracts and obligations in all that is not determined in Title III, Book III on donations. Nowhere in Title III prohibits an agreement which provides for cancellation of the contract even without a judicial declaration. The validity of such a stipulation in the deed of donation providing for the automatic reversion of the donated property to the donor upon non-compliance of the condition was upheld in the recent case of ROMAN CATHOLIC V. CA De Luna, et al. vs. Abrigo, el al." It was held therein that said stipulation is in the nature of an FACTS: agreement granting a party the right to rescind a contract unilaterally in case of breach, without need of On November 29, 1984, private respondents as plaintiffs, filed a complaint for nullification of deed of going to court, and that, upon the happening of the resolutory condition or non-compliance with the donation, rescission of contract and reconvoyance of real property with damages against petitioners conditions of the contract, the donation is automatically revoked without need of a judicial declaration to that effect. While what was the subject of that case was an onerous donation which, under Article 733 Uplawb2008group1 (carrie,elson,ia,izzy,mac,mel,sanne,varz)

of the Civil Code is governed by the rules on contracts, since the donation in the case at bar is also subject to the same rules because of its provision on automatic revocation upon the violation of a resolutory condition, from parity of reasons said pronouncements in De Luna pertinently apply. In contracts providing for automatic revocation, judical intervention is necessary not for purposes of obtaining a judicial declaration rescinding a contract already deemed rescinded by virtue of an agreement providing for rescission even without judicial intervention, but in order to determine whether or not the rescission was proper. When a deed of donation, as in this case, expressly provides for automatic revocation and reversion of the property donated, the rules on contract and the general rules on prescription should apply, and not Article 764 of the Civil Code. Since Article 1306 of said Code authorizes the parties to a contract to establish such stipulations, clauses, terms and conditions not contrary to law, morals, good customs, public order or public policy, we are of the opinion that, at the very least, that stipulation of the parties providing for automatic revocation of the deed of donation, without prior judicial action for that purpose, is valid subject to the determination of the propriety of the rescission sought. Where such propriety is sustained, the decision of the court will be merely declaratory of the revocation, but it is not in itself the revocatory act. Article 764 was intended to provide a judicial remedy in case of non-fulfillment or contravention of conditions specified in the deed of donation if and when the parties have not agreed on the automatic revocation of such donation upon the occurrence of the contingency contemplated therein. That is not the situation in the case at bar. Although it is true that under Article 764 of the Civil Code an action for the revocation of a donation must be brought within four (4) years from the non-compliance of the conditions of the donation, the same is not applicable in the case at bar since no condition of the donation has been violated. The cause of action of herein private respondents has not yet prescribed since an action to enforce a written contract prescribes in ten years. Nonetheless, we find that although the action filed by private respondents may not be dismissed by reason of prescription, the same should be dismissed on the ground that private respondents have no cause of action against petitioners. WON the respondents have cause of action is not an issue raised by the petitioners; however, the Court is clothed with ample authority to review matters, even if they are not assigned as errors on appeal, if it finds that their consideration is necessary in arriving at a just decision of the case. The cause of action of private respondents is based on the alleged breach by petitioners of the resolutory condition in the deed of donation that the property donated should not be sold within a period of one hundred (100) years from the date of execution of the deed of donation. Said condition, in our opinion, constitutes an undue restriction on the rights arising from ownership of petitioners and is, therefore, contrary to public policy. The condition imposed in the deed of donation in the case before us constitutes a patently unreasonable and undue restriction on the right of the donee to dispose of the property donated, which right is an indispensable attribute of ownerhsip. Such a prohibition against alienation, in order to be valid, must not be perpetual or for an unreasonable period of time. The prohibition in the deed of donation against the alienation of the property for an entire century, being an unreasonable emasculation and denial of an integral attribute of ownership, should be declared as an illegal or impossible condition within the contemplation of Article 727 of the Civil Code. Consequently, as specifically stated in said statutory provision, such condition shall be considered as not imposed. No reliance may accordingly be placed on said prohibitory paragraph in the deed of donation. The net result is that, absent said proscription, the deed of sale supposedly constitutive of the cause of action for the nullification of the deed of donation is not in truth violative of the latter hence, for lack of cause of action, the case for private respondents must fail.

Page 16 of 51 It may be argued that the validity of such prohibitory provision in the deed of donation was not specifically put in issue in the pleadings of the parties. That may be true, but such oversight or inaction does not prevent this Court from passing upon and resolving the same. BOYSAW V. INTERRPHIL Ponente: J. Fernan Facts: On May 1, 1961, Solomon Boysaw and his then manager Willie Ketchum signed with Interphil Promotions, Inc., represented by Lope Sarreal, Sr., a contract to engage Gabriel Flash Elorde in a boxing contest for the junior lightweight champion of the world The match, as stipulated, would be held at the Rizal Memorial Stadium in Manila on September 30, 1961 or not later than 30 days thereafter should a postponement be mutually agreed upon It was also stipulated that Boysaw should not, prior to the date of the boxing contest, engage in any other such contest without the written consent of Interphil Promotions, Inc. On May 3, 1961, a supplemental agreement on certain details not covered by the principal contract was entered into by Ketchum and Interphil. Thereafter, Interphil signed Gabriel Flash Elorde to a similar agreement On June 19, 1961, Boysaw fought and defeated Louis Avila in a ten-round non-title bout held in Las Vegas, Nevada On July 2, 1961, Ketchum, on his own behalf and on behalf of his associate Frank Ruskay, assigned to J. Amado Araneta the managerial rights over Solomon Boysaw Presumably in preparation for his engagement with Interphil, Boysaw arrived in the Philippines on July 31, 1961 On September 1, 1961, J. Amado Araneta assigned to Alfred Yulo, Jr. the managerial rights over Boysaw that he earlier acquired from Ketchum and Ruskay The next day, Boysaw wrote to Lope Sarreal, Sr. informing him of is arrival On September 5, 1961 Alfredo Yulo, Jr. wrote to Sarreal, informing him of his acquisition of the managerial rights over Boysaw and indicating his and Boysaws readiness to comply with the boxing contract of May 1, 1961 On the same date, on behalf of Interphil, Sarreal wrote a letter to the Games and Amusement Board (GAB) expressing concern over reports that there had been a switch of managers in the case of Boysaw, of which he had not been formally notified, and requesting that Boysaw be called to an inquiry to clarify the situation The GAB called a series of conferences of the parties concerned culminating in the issuance of its decision to schedule the Elorde-Boysaw fight for Nov. 4, 1961. The National Boxing Association, which ahs the supervisory control of all world title fights, approved the date set by the GAB Yulo, Jr. refused to accept the change in the fight date, maintaining his refusal even after Sarreal, on Sept. 26, 1961, offered to advance the fight date to October 28, 1961, which was within the 30-day period of allowable postponements Early in October 1961, Yulo, Jr. exchanged communications with one Mamerto Besa, a local boxing promoter, for a possible promotion of the projected Elorde-Boysaw title bout. Yulo informed Besa that he was willing to approve the fight date of Nov. 4 provided the same was promoted by Besa While an Elorde-Boysaw fight was eventually staged, the fight never materialized As a result, On October 12, 1961, Boysaw and Yulo, Jr. sued Interphil, Sarreal, Sr. and Manuel Nieto, Jr., in the CFI of Rizal for damages allegedly occasioned by the refusal of Interphil and Sarreal, aided and abetted by Nieto, Jr., then GAB chairman, to honor their commitments under the boxing contract of May 1, 1961 After the lower court rendered its judgment dismissing the plaintiffs complaint, the plaintiffs moved for a new trail. The motion was denied, hence this appeal Issue: WON there was a violation of the fight contract of May 1, 1961; and if there was, who was guilty of such violation

2.) NO 3.) NO

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Held/Ratio: 1. Yes. Evidence established that the contract was violated by the appellant Boysaw himself, when without the approval or consent of Interphil, fought Louis Avila on June 19, 1961 in Las Vegas, Nevada. Appellant Yulo admitted this fact during the trial. While the contract imposed no penalty for such violation, this does not grant any of the parties the unbridled liberty to breach it with impunity. Our law on contracts recognizes the principle that actionable injury inheres in every contractual breach (see Article 1170, CC). Also, Article 1191, CC states that the power to rescind obligations is implied, in reciprocal ones in case one of the obligors could not comply with what is incumbent upon him. There is no doubt that the contract in question gave rise to reciprocal obligations. The power to rescind is given to the injured party. Another violation in the contract in question was the assignment and transfer (first to J. Amado Araneta, and subsequently, to appellant Yulo, J.) of the managerial rights over Boysaw without the knowledge or consent of Interphil. The assignments should have been consented to by Interphil. Novation may be made even without the knowledge or against the will of the latter, but not without the consent of the creditor. That appellant Yulo, through a letter, advised Interphil of his acquisition of the managerial rights over Boysaw cannot change the fact that such acquisition, and the prior acquisition of such rights by Araneta, were done without the consent of Interphil. There is no showing that Interphil, upon the receipt of Yulos letter, acceded to the substitution by Yulo of the principle obligor, who is Ketchum. Under the law when a contract is unlawfully novated by an applicable and unilateral substitution of the obligor by another, the aggrieved creditor I not bound to deal with the substitution From the evidence, it is clear that the appellees, instead of availing themselves of the options given to them by law of rescission or refusal to recognize the substitute obligor Yulo, really wanted to postpone the fight date owing to an injury that Elorde sustained in a recent bout. Under the circumstances, the appellees desire to postpone the fight date could neither be unlawful or unreasonable. The refusal of appellants to accept a postponement without any other reason but the implementation of the terms of the original boxing contract entirely overlooks the fact that by virtue of the violations they have committed of the terms thereof, they have forfeited any rights to its enforcement. UP V. DE LOS ANGELES Reyes, J.B.L., J. Nature : petition for certiorari and prohibition, to annul 3 orders of CFI Rizal (Quezon City) FACTS There are 3 orders of the CFI Rizal which is sought to be annulled in this petition The first order, dated 25 February 1966, enjoined UP from awarding logging rights over its timber concession (or Land Grant), situated al the Lubayat areas in the provinces of Laguna and Quezon The second order, dated 14 January 1967, adjudged UP in contempt of court, and directed Sta Clara Lumber Company, Inc. to refrain from exercising logging rights or conducting logging operations on the concession The third order dated 12 December 1967, denied reconsideration of the order of contempt An writ of preliminary injunction, as prayed for in the petition, was granted against the 3 aforementioned orders It was alleged in the petition that the above-mentioned Land Grant was segregated from the public domain and given as an endowment to UP, an institution of higher learning, to be operated and developed for the purpose of raising additional income for its support. pursuant to Act 3608 Also, UP and ALUMCO entered into a logging agreement under which the latter was granted exclusive authority, for a period starting from the date of the agreement to 31 December 1965, extendible for a further period of five (5) years by mutual agreement, to cut, collect and remove timber from the Land Grant, in consideration of payment to UP of royalties, forest fees, etc

Page 17 of 51 ALUMCO cut and removed timber therefrom but, as of 8 December 1964, it had incurred an unpaid account of P219,362.94, which, despite repeated demands, it had failed to pay After it had received notice that UP would rescind or terminate the logging agrrement, ALUMCO executed an instrument, entitled "Acknowledgment of Debt and Proposed Mariner of Payments," dated 9 December 1964, which was approved by the president of UP The said instrument stipulated that : "3. In the event that the payments called for in Nos. 1 and 2 of this paragraph are not sufficient to liquidate the foregoing indebtedness of the DEBTOR in favor of the CREDITOR, the balance outstanding after the said payments have been applied shall be paid by the DEBTOR in full no later than June 30, 1965 It further stipulated that : "5. In the event that the DEBTOR fails to comply with any of its promises or undertakings in this document, the DEBTOR agrees without reservation that the CREDITOR shall have the right and the power to consider the Logging Agreement dated December 2, 1960 as rescinded without the necessity of any judicial suit, and the CREDITOR shall be entitled as a matter of right to Fifty Thousand Pesos (P50,000.00) by way of and for liquidated damages" ALUMCO continued its logging operations, but again incurred an unpaid account, for the period from 9 December 1964 to 15 July 1965, in the amount of P61,133.74, in addition to the indebtedness that it had previously acknowledged On 19 July 1965, petitioner informed ALUMCO that as of that date, it had considered rescinded and of no further legal effect the logging agreement they entered into in 1960 on 7 September 1965, UP filed a complaint against ALUMCO, which was docketed as Civil Case No. 9435 of the Court of First Instance of Rizal (Quezon City), for the collection or payment of the herein beforestated sums of money and alleging the facts hereinbefore specified, together with other allegations UP obtained an order, dated 30 September 1965, for preliminary attachment and preliminary injunction restraining ALUMCO from continuing its logging operations in the Land Grant Before the issuance of the aforesaid preliminary injunction UP had taken steps to have another concessionaire take over the logging operation, by advertising an invitation to bid; that bidding was conducted, and the concession was awarded to Sta. Clara Lumber Company, Inc., the logging contract was signed on 16 February 1966. ALUMCO filed several motions to discharge the writs of attachment but was denied On 12 Nov 1965, ALUMCO filed a petition to enjoin petitioner University from conducting the bidding; on 27 Nov 1965, it filed a second petition for preliminary injunction on 25 Feb 1966, respondent judge issued the first of the questioned orders, enjoining UP from awarding logging rights over the concession to any other party When UP received the order, it had concluded its contract with Sta Clara and said company had started logging operation ALUMCO, in its answer did not deny these allegations, but it corrected itself by saying that their logging agreement was for 7 years, not 5 years It reiterated its defenses, which were blaming its former general manager, Cesar Guy, in not turning over management of ALUMCO, thereby rendering it unable to pay the sum of P219,382.94; Another defense was that it failed to pursue the manner of payments, as stipulated in the "Acknowledgment of Debt and Proposed Manner of Payments" because the logs that it had cut turned out to be rotten arid could not be sold to Sta. Clara Lumber Company, Inc., under its contract "to buy and sell" with said firm, and which contract was referred and annexed to the 'Acknowledgment of Debt and Proposed Manner of Payments";

It further claimed that UP's unilateral rescission of the logging contract, without a court order, was invalid, that petitioner's supervisor refused to allow respondent to cut new logs unless the logs previously cut during the management of Cesar Guy be first sold, that respondent was permitted to cut Uplawb2008group1 (carrie,elson,ia,izzy,mac,mel,sanne,varz)

logs in the middle of June, 1965 but petitioner's supervisor stopped all logging operations on 15 July 1965 Finally, ALUMCO said in its answer that that it had made several offers to petitioner for respondent to resume logging operations but respondent received no reply

Page 18 of 51 November 4, 1968 Erquiaga entered into an Agreement with Jose L. Reynoso to sell to the latter his 3,100 shares (or 100%) of for P900T payable in installments on definite dates fixed in the contract but not later than November 30, 1968. Reynoso failed to pay the 2nd and 3rd installments on time, so the total price of the sale was later increased to P971,371.70 payable on or before December 17, 1969. The difference of P71,371.70 represented brokers commission and interest. As of December 17, 1968, Reynoso was able to pay the total sum of P410T to Erquiaga who thereupon transferred all his shares (3100 paid-up shares) in EDC to Reynoso, as well as the possession of Hacienda San Jose, the only asset of the corporation. However, as provided in paragraph 3, subparagraph ( c ) of the contract to sell, Reynoso pledged 1,500 shares in favor of Erquiaga as security for the balance of his obligation. Reynoso failed to pay the balance of P561,321.70 on or before December 17, 1969, as provided in the promissory notes he delivered to Erquiaga. March 2, 1970 Erquiaga, through counsel formally informed Reynoso that he was rescinding the sale of his shares in the EDC. March 30, 1970 private respondent de Erquiaga filed a complaint for rescission with preliminary injunction against Reynoso and EDC in the CFI Sorsogon. TC rendered judgment in favor of de Erquiaga on September 30, 1972 o Rescinding the sale of 3,100 paid-up shares of stock of the EDC which now stand in his name in the books of the corporation o Ordering the defendant to render a full accounting of the fruits he received by virtue of said P3,100 paid-up shares of stock of the EDC, as well as to return said fruits received by him to de Erquiaga; o Ordering plaintiff to return to the defendant the amount of P100T plus legal interest from November 4, 1968, and the amount of P310T plus legal interest from Dec. 17, 1968 until paid; o Ordering the defendant to pay the plaintiff as actual damages the amount of P12T; o Ordering the defendant to pay the plaintiff the amount of P50T as attorneys fees as well as the costs of suit and expenses of litigation. The parties did not appeal therefrom and it became final and executory. March 21, 1973 CFI Sorsogon issued an order which stipulated that: o The courts find merit in the contention of the plaintiff that the payment to the defendant of the total sum of P410T plus interest, should be held in abeyance pending rendition of the accounting by the defendant of the fruits received by him on account of the 3,100 shares of capital stock of EDC. o It is reasonable to suppose as contended by the plaintiff, that when such accounting is made and the accounting, as urged by the plaintiff, should refer not only to the dividends due from the shares of stock but to the products of the hacienda which is the only asset of the EDC, certain sums may be found due to the plaintiff from the defendant which may partially or entirely off set the amount adjudged against him in the decision. o CFI also appointed a receiver upon the filing of a bond in the amount of P100T because the matter of accounting of the fruits received by defendant will take time; and in order to preserve the Hacienda which has been mismanaged by defendant to a point where the amortization of the loan with DBP has been neglected and arrears in payments have risen to the amount of P503,510.70, and that there is danger that DBP will foreclose such to the damage and prejudice of the plaintiff. April 26, 1973 Reynoso died and was substituted by his spouse Africa and his children, as party defendants. Defendants filed a petition for certiorari with a prayer for a writ of preliminary injunction seeking the annulment of the aforementioned Order of March 21, 1973. June 28, 1973 CA rendered judgment dismissing the appeal with costs against petitioners, ruling that the said order is valid and CA did not commit any grave abuse of discretion.

ISSUE WON petitioner U. P. can treat its contract with ALUMCO rescinded, and may disregard the same before any judicial pronouncement to that effect YES Respondent ALUMCO contended, and the lower court, in issuing the injunction order of 25 February 1966 that it is only after a final court decree declaring the contract rescinded for violation of its terms that U. P. could disregard ALUMCO's rights under the contract and treat the agreement as breached and of no force or effect That position is untenable; UP and ALUMCO had expressly stipulated in the "Acknowledgment of Debt and Proposed Manner of Payments" that, upon default by the debtor ALUMCO, the creditor (UP) has "the right and the power to consider the Logging Agreement dated 2 December 1960 as rescinded without the necessity of any judicial suit."

In Froilan v. Pan Oriental Shipping, the Court ruled that there is nothing in the law that prohibits the parties from entering into agreement that violation of the terms of the contract would cause cancellation thereof, even without court intervention; If the other party denies that rescission is justified, it is free to resort to judicial action in its own behalf, and bring the matter to court. Then, should the court, after due hearing, decide that the resolution of the contract was not warranted, the responsible party will be sentenced to damages, in the contrary case, the resolution will be affirmed, and the consequent indemnity awarded to the party prejudiced. There is no conflict between Froilan and the previous rulings invoked by respondent which declare judicial action as necessary for the resolution of a reciprocal obligation, since in every case where the extrajudicial resolution is contested only the final award of the court of competent jurisdiction can conclusively settle whether the resolution was proper or not It is in this sense that judicial action will be necessary, as without it, the extrajudicial resolution will remain contestable and subject to judicial invalidation, unless attack thereon should become barred by acquiescence, estoppel or prescription The other party is not barred from questioning in court such abuse or error, the practical effect of the stipulation being merely to transfer to the defaulter the initiative of instituting suit, instead of the rescinder The Supreme Court of Spain, in construing the effect of Article 1124 of the Spanish Civil Code (of which Article 1191 of our own Civil Code is practically a reproduction), has repeatedly held that a resolution of reciprocal or synallagmatic contracts may be made extrajudicially unless successfully impugned in court Considering that tire complaint of petitioner University made out a prima facie case of breach of contract and defaults in payment by respondent ALUMCO, to the extent that the court below issued a writ of preliminary injunction stopping ALUMCO's logging operations, and repeatedly denied its motions to lift the injunction, and that respondent had profited from its operations previous to the 5 Dec 1964 agreement, and the excuses in the answer are insufficient for non-payment, the injunction must be set aside

DE ERQUIAGA V. CA (Grino-Aquino, J.) Petition to review the decision of the CA Santiago de Erquiaga was the owner of 100% or 3,100 paid-up shares of stock of the Erquiaga Development Corporation (EDC) which owns the Hacienda San Jose in Irosin, Sorsogon.

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Petitioners (party defendants) brought the case to the SC on a petition for review on certiorari which was denied by them in a resolution dated February 5, 1974. Their motion for reconsideration was likewise denied. Upon the motion of de Erquiaga, the CFI issued an order on February 12, 1975, dissolving the receivership and ordering the delivery of the possession of the Hacienda to Erquiaga, the filing of bond by said Erquiaga in the amount of P410T conditioned to the payment of whatever may be due to the substituted heirs of deceased defendant Reynoso after the approval of the accounting report submitted by Reynoso. March 3, 1975 CFI approved the P410T bond submitted by Erquiaga and the possession, management and control of the hacienda were turned over to him. The Reynosos filed their motion for reconsideration which the CFI denied in an order dated June 23, 1975 October 9, 1975 CFI issued an order which: o Directed the defendants to deliver to the plaintiff within 5 days from receipt of the order the 1600 shares of stock of the EDC which are in their possession. Should the defendants refuse or delay in delivering such shares of stock, the plaintiff is authorized: To call and hold a special meeting of the stockholders of the EDC to elect members of the Board of Directors; In said meeting the plaintiff is authorized to vote not only the 1500 shares of stocks in his name but also the 1600 shares in the name and possession of the defendants; The question as to who shall be elected members of the Board of Directors and officers of the board is left to the discretion of the plaintiff; The members of the board and the officers who are elected are authorized to execute any and all contracts or agreements under such conditions as may be required by the DBP for the purpose of restructuring the loan of the EDC with said bank. o The defendants prayer to strike out all expenses allegedly incurred by the defendants in the production of the fruits of the hacienda and declaring the obligation of the plaintiff to pay the sum of P410T with interest as fully compensated by the fruits earned by the defendants from the property, as well as the issuance of a writ of execution against the defendants to pay the plaintiffs P62T under pars. E and D and costs of litigation under par. F of the Sept. 30, 1972 judgment is denied. Hence, defendants instituted a petition for certiorari, prohibition and mandamus instituted by the substituted defendants, heirs of the deceased Jose Reynoso against the CFI Sorsogon and Santiago de Erquiaga in the CA. May 31, 1976 CA rendered judgment holding that: o TC acted with grave abuse of discretion or in excess of jurisdiction in issuing the assailed order of October 9, 1975 insofar only as that part of the order Giving private respondent voting rights on the 3100 shares of stock of the EDC without first divesting petitioners of their title thereto and ordering the registration of the same in the corporation books in the name of private respondent; Authorizing corporate meetings and election of members of the Board of Directors of said corporation; and Refusing to order the reimbursement of the purchase price of 3,100 shares of stock in the amount of P410T plus interest awarded in the September 30, 1972 and the set-offs therewith in the amount of P62T as damages and attorneys fees in favor of herein private respondent are concerned. o Writs of certiorari and prohibition were issued against the aforesaid acts, and the writ of preliminary injunction heretofore issued was made permanent insofar as the said acts were concerned. o To put an end to the much protracted litigation and for the best interest of the parties, a writ of mandamus was issued, commanding the respondent judge to order: The clerk of Court of CFI to execute the necessary deed of conveyance to effect the transfer of ownership of the entire 3100 shares of stock of the EDC to private respondent Erquiaga in case of failure of petitioners to comply with the Order of October 9, 1975

Page 19 of 51 insofar as the delivery of the 1600 shares of stock to private respondent is concerned, within 5 days from receipt hereof; and Upon delivery by petitioners or transfer by the Clerk of Court of said shares stock to private respondent, to issue a writ of execution ordering private respondent to pay petitioners the amount of P410T plus interests in accordance with the final judgment in September 30, 1972, setting-off therewith the amount of P62T adjudged in favor of private respondent, and against petitioners predecessor-in-interest, Jose L. Reynoso, in the same decision, as damages and attorneys fees. Under review of the SC, only the ff. have been done by the parties in compliance with the final judgment in the main case: o The hacienda was returned to Erquiaga on March 3, 1975 upon approval of Erquiagas surety bond of P410T in favor of Reynoso; o Reynoso has returned to Erquiaga only the pledged 1500 shares of stock of the EDC, instead of 3100 shares, as ordered. The requirements which have not yet been complied with are: o Return the remaining 1600 shares of stock to Erquiaga as ordered; o Reynoso has not rendered a full accounting of the fruits he has received from the hacienda by virtue of the 3100 shares of stock of the EDC delivered to him under the sale, as ordered; o Erquiaga has not returned the sum of P100T paid by Reynoso on the sale, with legal interest from November 4, 1968 and P310T plus legal interest from December 17, 1968, until paid (P410T) as ordered in paragraph c of the decision; o Reynoso has not paid the judgment of P12T as actual damages in favor of Erquiaga; o Reynoso has not paid the sum of P50T as attorneys fees to Erquiaga; o Reynoso has not paid the costs of suit and expenses of litigation. ISSUES: (1) WON the decision of the CA requiring the petitioner to pay the private respondents the sum of P410T plus interest, without first awaiting Reynosos accounting of the fruits of the Hacienda, violates the law of the case and Art. 1385 CC, alters the final order dated February 12, 1975 of the TC, and is iniquitous NO. SC held that the CA decision is not yet final. The entry of judgment was improvident for the CA, in its resolution of Dec. 13, 1976, suspended the proceedings before it pending parties settlement negotiations as prayed for in their joint motion. Without giving them an ultimatum or setting a deadline for the submission of their compromise agreement, the CA issued a resolution ordering the Judgment Section of that Court to enter final judgment in the case. Such directive was precipitate and premature. SC held that there was no reversible error committed by the CA in their decision directing the clerk of court to execute a deed of conveyance of the 1600 shares of stock of the EDC still in Reynosos name and possession. The order of CA which directed Erquiaga to return the sum of P410T as the price paid by Reynoso for the shares of stock, with legal rate of interest, and the return by Reynoso of Erquiagas 3100 shares with the fruits (construed to mean not only dividends but also fruits of the hacienda) is in full accord with Art. 1385 CC which provides that: Rescission creates the obligation to return the things which were the object of the contract, together with their fruits, and the price with its interest; consequently, it can be carried out only when he who demands rescission can return whatever he may be obliged to restore (2) WON CA erroneously applied the Corporation Law NO. CA did not err in annulling the TCs order which allowed Erquiaga to vote the 3100 shares of EDC without having effected the transfer of those shares in his name in the corporate books, and allowing Erquiaga to call a special meeting of the stockholders of the EDC and to vote the 3100 shares, without the pre-requisite registration of the shares in his name.

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Page 20 of 51 It is a fundamental rule in Corporation Law that a stockholder acquires voting rights only when the shares of Pursuant to the contract they executed, petitioner paid respondent spouses the sum of P103,499.912 by stock to be voted are registered in his name in the corporate books. depositing it with the United Coconut Planters Bank. Subsequently, petitioner deposited sums of money (3) WON CA erred in ordering entry of its judgment - YES. with the Bank of Philippine Islands (BPI), in accordance with their stipulation that petitioner pay the loan of respondents with BPI. The hacienda and 1500 shares of stock have already been returned to Erquiaga. Hence, Erquiaga should return to Reynoso the price of P410T which the latter paid for those shares. To answer for his balance of P1,400,000.00 petitioner issued four post-dated Metro Bank checks payable to respondent spouses. Pursuant to the rescission decreed in the final judgment, there should be simultaneous mutual restitution of the principal object of the contract to sell and of the consideration paid. When presented for payment, however, the checks were dishonored due to insufficient funds. Petitioner promised to replace the checks but failed to do so. To make matters worse, out of the P496,500.00 loan This should not await the mutual restitution of the fruits, namely: the legal interest earned by Reynosos of respondent spouses with the Bank of the Philippine Islands, which petitioner, as per agreement, P410T while in the possession of Erquiaga, and its counterpart: the fruits of the hacienda which Reynoso should have paid, petitioner only managed to dole out no more than P393,679.60. received from the time the hacienda was delivered to him until it was placed under receivership by the court. On August 2, 1985, respondent spouses, through counsel, sent petitioner a demand letter asking for the Since Reynoso has not yet given an accounting of those fruits, it is only fair that Erquiagas return of the properties. Their demand was left unheeded, so, on September 2, 1985, they filed a obligation to deliver to Reynoso the legal interest earned by his money, should await the complaint for rescission of contract and recovery of properties with damages. rendition of the CA should be modified. While the case was still pending with the trial court, petitioner introduced major improvements on the It would be iniquitous and oppressive to require Erquiaga to pay the legal interest earned by Reynosos subject properties by constructing a complete fence made of hollow blocks and expanding the piggery. P410T since 1968 or for the past 20 years without first requiring Reynoso to account for the fruits of Erquiagas hacienda which he allegedly squandered while it was in his possession from November 1968 up to These prompted the respondent spouses to ask for a writ of preliminary injunction. TC granted the March 3, 1975. application and enjoined petitioner from introducing improvements on the properties except for repairs. Petition for review granted. The payment of legal interest by Erquiaga to Reynoso on the price of P410T TC rescinded the contract. paid by Reynoso for Erquiagas 3100 shares of stock of the EDC should be computed as provided in the final CA affirmed the decision noting that the failure of petitioner to completely pay the purchase price is a judgment in Civil Case 2446 up to Sept. 30, 1972. substantial breach of his obligation which entitles the private respondents to rescind their contract under Since Reynosos judgment liability to Erquiaga for attorneys fees and damages in the total sum of P62T Article 1191 of the New Civil Code. Hence, the instant petition. should be set off against the price of P410T that Erquiaga is obligated to return, the balance of the judgment ISSUES: in favor of Reynoso would earn legal rate of interest after September 30, 1972. 1.) WON the contract entered into by the parties may be validly rescinded under Article 1191 of the New Civil Code. NO. However, the payment of said interest by Erquiaga should await Reynosos accounting of the fruits received 2.) WON the parties had novated their original contract as to the time and manner of payment. NO. by him from the Hacienda. HELD: Upon payment of P348T by Erquiaga to Reynoso, Erquiagas P410T surety bond shall be deemed cancelled. 1.) NO In all other respects, the decision of the CA is affirmed. Petitioner contends that Article 1191 of the New Civil Code is not applicable since he has already paid respondent spouses a considerable sum and has therefore substantially complied with his obligation. He ONG V. CA cites Article 1383 instead, to the effect that where specific performance is available as a remedy, On May 10, 1983, petitioner Jaime Ong, on the one hand, and respondent spouses Miguel K. Robles and rescission may not be resorted to. Alejandra Robles, on the other hand, executed an "Agreement of Purchase and Sale" respecting two A discussion of the aforesaid articles is in order. parcels of land situated at Barrio Puri, San Antonio, Quezon. Rescission, as contemplated in Articles 1380, et seq., of the New Civil Code, is a remedy granted by law The terms and conditions of the contract provide that the mode and manner of payment of the agreed to the contracting parties and even to third persons, to secure the reparation of damages caused to purchase price of two million pesos is as follows: them by a contract, even if this should be valid, by restoration of things to their condition at the o The initial payment of six hundred thousand pesos shall be broken down as follows: moment prior to the celebration of the contract. It implies a contract, which even if initially valid, P103,499.91 shall be paid, and as already paid by the BUYER to the SELLERS on produces a lesion or a pecuniary damage to someone. March 22, 1983 On the other hand, Article 1191 of the New Civil Code refers to rescission applicable to reciprocal P496,500.09 shall be paid directly by the BUYER to the Bank of Philippine Islands to obligations. Reciprocal obligations are those which arise from the same cause, and in which each party answer for the loan of the SELLERS is a debtor and a creditor of the other, such that the obligation of one is dependent upon the obligation o The balance of one million four hundred thousand pesos shall be paid by the BUYER to the of the other. They are to be performed simultaneously such that the performance of one is conditioned SELLERS in four (4) equal quarterly instalments of three hundred fifty thousand pesos, by upon the simultaneous fulfillment of the other. Rescission of reciprocal obligations under Article 1191 of these presents promise to sell to said BUYER the two parcels of agricultural land including the the New Civil Code should be distinguished from rescission of contracts under Article 1383. Although rice mill and the piggery which are the most notable improvements thereon, situated at both presuppose contracts validly entered into and subsisting and both require mutual restitution when Barangay Puri, San Antonio Quezon proper, they are not entirely identical. o Immediately upon the execution of this document, the SELLERS shall deliver, surrender and While Article 1191 uses the term "rescission," the original term which was used in the old Civil Code, transfer possession of the said parcels of land including all the improvements that may be from which the article was based, was "resolution." Resolution is a principal action which is based on found thereon, to the BUYER, and the latter shall take over from the SELLER the possession, breach of a party, while rescission under Article 1383 is a subsidiary action limited to cases of rescission operation, control and management of the RICEMILL and PIGGERY found on the aforesaid for lesion under Article 1381 of the New Civil Code, which expressly enumerates the following rescissible parcels of land. contracts: On May 15, 1983, petitioner Ong took possession of the subject parcels of land together with the piggery, building, ricemill, residential house and other improvements thereon. Uplawb2008group1 (carrie,elson,ia,izzy,mac,mel,sanne,varz)

Those which are entered into by guardians whenever the wards whom they represent suffer lesion by more than one fourth of the value of the things which are the object thereof; o Those agreed upon in representation of absentees, if the latter suffer the lesion stated in the preceding number; o Those undertaken in fraud of creditors when the latter cannot in any manner collect the claims due them; o Those which refer to things under litigation if they have been entered into by the defendant without the knowledge and approval of the litigants or of competent judicial authority; o All other contracts specially declared by law to be subject to rescission. Obviously, the contract entered into by the parties in the case at bar does not fall under any of those mentioned by Article 1381. Consequently, Article 1383 is inapplicable. A careful reading of the parties' "Agreement of Purchase and Sale" shows that it is in the nature of a contract to sell, as distinguished from a contract of sale. In a contract of sale, the title to the property passes to the vendee upon the delivery of the thing sold While in a contract to sell, ownership is, by agreement, reserved in the vendor and is not to pass to the vendee until full payment of the purchase price. In a contract to sell, the payment of the purchase price is a positive suspensive condition, the failure of which is not a breach, casual or serious, but a situation that prevents the obligation of the vendor to convey title from acquiring an obligatory force. Respondents in the case at bar bound themselves to deliver a deed of absolute sale and clean title covering the two parcels of land upon full payment by the buyer of the purchase price of P2,000,000.00. This promise to sell was subject to the fulfillment of the suspensive condition of full payment of the purchase price by the petitioner. Petitioner, however, failed to complete payment of the purchase price. The non-fulfillment of the condition of full payment rendered the contract to sell ineffective and without force and effect. It must be stressed that the breach contemplated in Article 1191 of the New Civil Code is the obligor's failure to comply with an obligation already extant, not a failure of a condition to render binding that obligation. Failure to pay, in this instance, is not even a breach but merely an event which prevents the vendor's obligation to convey title from acquiring binding force. Hence, the agreement of the parties in the case at bench may be set aside, but not because of a breach on the part of petitioner for failure to complete payment of the purchase price. Rather, his failure to do so brought about a situation which prevented the obligation of respondent spouses to convey title from acquiring an obligatory force. o

Page 21 of 51 In order for novation to take place, the concurrence of the following requisites is indispensable: (1) there must be a previous valid obligation; (2) there must be an agreement of the parties concerned to a new contract; (3) there must be the extinguishment of the old contract; and (4) there must be the validity of the new contract. The aforesaid requisites are not found in the case at bench. The subsequent acts of the parties hardly demonstrate their intent to dissolve the old obligation as a consideration for the emergence of the new one.

2.) NO

LACHICA V. ARANETA August 19, 1949 No. 2964-R Paredes, J.: o Early part of July 1943 defendant Araneta,Inc. offered for a sale of a parcel of land with improvements thereon (TCT No. 14841, Land Records of Manila) o First week of July 1943 RICs fieldman Navarro informed Sadang of the offer to sell the property by the defendant o Rizal Investment Corp (RIC; where plaintiff Sadang was at that time the Sales Manager) acted as defendants agent in the sale of such property o July 12, 1943 (morning) Sadang submitted to Jose Araneta (pres of defendant corp) a letter of the same date addressed by RIC to the defendant, containing a proposal of the buyer: *** Proposal I (Exhibit E; this was rejected by Araneta) (1) to purchase property for P18,000 (2) with a down payment of P7,500 (3) the balance to be paid anytime between now and within 90 days after signing the peace of treaty between the warring nations o July 12, 1943 (afternoon) - Sadang submitted another proposal to Jose Araneta addressed by RIC to the defendant, containing a proposal of the buyer: ***Proposal II (Exhibit F; Araneta told Sadang to return after 2 days -- he wanted to consider other offers and to select amongst them that with a bigger downpayment and with the fastest mode of settlement) (1) purchase price: P20,000 (2) down payment of P7,500 (3) the balance to be paid anytime between now and within 90 days after signing the peace of treaty between the warring nations o July 14, 1943 after further negotiations, a letter addressed to RIC, signed by Araneta in behalf of the Article 1292 of the New Civil Code states that, "In order that an obligation may be extinguished by defendant corp (delivered to Sadang, accompanied by Flores, RIC President and Manager): another which substitutes the same, it is imperative that it be so declared in unequivocal terms, or that ***RIC letter (Exhibit A; product of negotiations) the old and the new obligations be on every point incompatible with each other." (1) purchase price: P20,000 Novation is never presumed, it must be proven as a fact either by express stipulation of the parties or (2) P8,000 of purchase price to be paid in cash by implication derived from an irreconcilable incompatibility between the old and the new obligation. (3) P12,000 of purchase price to be paid in installments: Records show that the parties never even intended to novate their previous agreement. (a) P1,000 on or before Dec 31, 1943 It should be noted that while it was agreed that part of the purchase price in the sum of P496,500.00 (b) P1,000 on or before Dec 31, 1944 would be directly deposited by petitioner to the Bank of Philippine Islands to answer for the loan of (c) P10,000 (balance) on or before Dec 31, 1945 respondent spouses, petitioner only managed to deposit P393,679.60. When the bank threatened to (4) this same property will be mortgaged to us to guarantee the unpaid balance; foreclose the properties, petitioner apparently could not even raise the sum needed to forestall any (5) and the same will bear an interest of 8% per annum; action on the part of the bank. Consequently, he authorized respondent spouses to sell the three (3) (6) said interest to be paid monthly in advance transformers. However, although the parties agreed to credit the proceeds from the sale of the o July 15, 1943 pursuant to par 7 of the provisions of the RIC letter, plaintiffs deposited with defendant transformers to petitioner's obligation, he was supposed to reimburse the same later to respondent corp a sum of P1,000 as good faith money spouses. This can only mean that there was never an intention on the part of either of the parties to o July 16, 1943 (noon): novate petitioner's manner of payment. ***Deed of Sale with Mortgage (Exhibit C) While petitioner might have wanted to novate the original agreement as to his manner of payment, the (1) parties records are bereft of evidence that respondent spouses willingly agreed to modify their previous (a) VENDEE-MORTGAGOR: plaintiff Lachica with concurrence of husband Sadang arrangement. (b) VENDOR-MORTGAGEE: Gregorio Araneta, Inc Uplawb2008group1 (carrie,elson,ia,izzy,mac,mel,sanne,varz)

(2) conditions: (a) form and manner of the payment of the P12,000 balance (as stated in RIC letter, Exhibit A); (b) P12,000 balance shall bear interest of 8% per annum; (c) interest payable in advance within the first 5 days of each month; (d) interest, while not paid, shall be paid liquidated and accumulated monthly and added to the capital until the vendee has brought payments up-to-date (periods of payment agreed for the benefit of both vendor and vendee) (e) should the vendee be in default in payment of any amount due, either for capital or interest, the whole balance shall automatically become due and payable and the vendor shall have the right to foreclose the mortgage in its entirety o Payments by plaintiff to defendant: *** P1,000 July 15, 1943 (deposit) *** P7,000 upon execution of deed of sale with mortgage *** P80 Aug 16 (interest) *** P80 Sep 16 (interest) *** P80 Oct 18 (interest) *** P80 Nov 15 (interest) *** P80 Dec 16 (interest) *** P1,000 Jan 15, 1944 (on account of principal) *** P73.33 Jan 15(interest) *** P73.33 Feb 19 (interest) *** P73.33 Mar 15 (interest) *** P5,000 April 10 (on account of principal) *** P73.33 April 13 (interest) *** P146.66 June 17 (interest) *** P219.99 Aug 31 (interest) o Anent the P5000 (April 10, 1944) payment, Pres Araneta wrote to Lachica, returning the check covering the payment because it is not in accord with what was stated in the contract o Lachica returned said check to defendant (April 12, 1944) stating that she acknowledges her being forced to assume an obligation which I could now very well pay o April 12, 1944 Araneta wrote back to Lachica stating that besides the interest you have to pay us for the balance of P6,000 at the rate of 8% per annum, we will also charge you the interest in accordance with the terms of the contract, which interest represents P317.80 on P5,000 (March 16 Dec 30, 1944) and P320 on P4,000 (Dec 31, 1944 Dec 31, 1945) o April 1944 lachica wrote Araneta another letter asking for the computations to be madefor the period April 15, 1944 Dec 31, 1945 (enclosing PNB Check No. 37255-K for P73.33 to cover the payment of interests on P11,000 for March 16 April 15, 1944) o Defendant corporation thereafter applied the P5000 sum to the payment of indebtedness of the plaintiff, and received paymentson interest charges, so that as of Sep 15, 1944, plaintiffs account with the defendant under the mortgage contract was P6000 unpaid balance of the principal o Sep 5, 1944 plaintiff Sadang went to Araneta to pay the entire balance (including interest) and to ask the cancellation of the mortgage but Araneta refused to accept the tender of the payment then made o Sep 5, 1944 afternoon Sadang said Atty Salazar to intervene in the case but Araneta persisted in his denial o Sep 6, 1944 Atty Quisumbing, in behalf of the plaintiffs, tendered to Araneta the sum of P7,060.03 in satisfaction of the balance of the mortgage indebtedness (including interests not yet due, which the defendant would have earned were the payments made on Dec 31, 1945) but Araneta reasoned that his non-acceptance was due to the payments inaccordance with the terms of the deed of sale with mortgage o Atty Salazar gave notice of plaintiffs intention to consign the sum of P7,060.03 as he did in effect deposit the sum of P7,061 on Sep 6, 1944 with the Manila CFI by way of consignation, and at the same time presented the complaint

Page 22 of 51 o Sep 11, 1944 counsel for plaintiffs notified the defendant in writing of the fact of consignation WON: (1) TC erred in holding that the plaintiffs had a right to pay the remaining principal of P6,000 (balance of their obligation) before Dec 31, 1945 (date of maturity) NO = which document expresses the true agreement of the parties with respect to the times of payment of the purchase price of the property? - Deed of Sale with Mortgage (Ex C) o Plaintiffs did not appeal from the TC findings that the Deed of Sale with Mortgage is the contract that defines the duties and obligations of the parties o Proposal I (Exhibit E), Proposal II (Exhibit F), verbal negotiations, and RIC Letter (Exhibit A) were merely among the stepstaken in the transactions leading to the formulation of the Deed of Sale with Mortgage o While the RIC letter may be a skeleton of the contract, it should be reduced into a public document sufficient in form, so that it may be recorded in the corresponding office of the register of deeds, for the purposes of transfer under the Torrens system o Theory of Integration opf Jural Acts a written contract merges all prior and contemporaneous negotiations in connection with the same subject, and all agreementsverbal or written, made at, or before the time of the execution of that contractare to be considered as merged and integrated in the sane written instrument = was the RIC letter novated by the formal deed of sale with mortgage? yes but this is immaterial o While diligence and erudiation were displayed by plaintiffs counsel in their dissertation on the question of novation, the materiality of this cannot be seen in the present issues o All that may be conceded for the RIC letter is that it may explain the intention of the parties in having entered into the contract of the deed of sale with mortgage = did Sadang and Lachica sign the deed of sale with mortgage without reading the contents thereof? no o We believe that the plaintiffs had read the deed of sale with mortgage before signing it, considering that Sadang was a USAFFE captain and that he was a licensed real estate man and manager of RIC. o The testimony of the defendants attorney also attested to the fact that plaintiffs first read the said document before it was signed. o It is by legal presumption that a person takes ordinary care and precaution of his business. o It is however reasonable to conclude that although they read the contents of the Deed of Sale with Mortgage (Ex C) due to the mistaken belief that the RIC letter (Ex A) was reproduced in toto in the Deed of Sale with Mortgage, for in fact, all of the terms of both exhibits are the same except: (2) the omission of the word or before in the Deed of Sale with Mortgage for the time of the payment (2) insertion of the equally technical clause these periods of payment have been agreed for the benefit of both vendor and vendee o Plaintiffs might not have noticed the change, or if they had, they might not have attached much importance to it o If to trained legalists, such terms had caused a great divergence of opinions, how much more to an ordinary layman, unassisted by a lawyer in the execution of a contract who had not been apprised of such clause by the attorney who had prepared the the Deed of Sale with Mortgage o In the realm of reality, how many persons stamp their signatures on documents because of the representations of people who command great respect, fiath and truth in their fellow beings o There is a case where plaintiffs construed the contract according to the way they understood it contrary to the construction made by defendant because it did not make its position clear to the other party on or before December 31, 1943/December 31, 1944/December 31, 1945 this proposition was accepted by the plaintiffs as shown by the fact that they had deposited the sum of P1,000 with the defendant corporation as good faith money the plaintiffs (as revealed by records) understood these terms as conveying the simple meaning which they plainly express that these installments might be paid on or before the due dates

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as in the RIC letter (Ex A), the plaintiffs did not have intervention in the preparation of the Deed of Sale with Mortgage, and the attorney who prepared it did not explain or call the attention of the plaintiffs to the changes made and effect of such changes o the construction by plaintiffs as to the terms of the agreement should prevail (When the terms of an agreement have been intended in a different sense by the different parties to it, that sense to prevail against either party in which he supposed the other understood it.) = discussion of the legal imports of Exhibit C through the circumstances leading to the Deeds execution o such payment may be made on or before the date specified defendant alleges that the payment must be made on the date specified and not before contract does not prohibit if payment is done before due dates a term is fixed and it is presumed to have been established for the benefit of the creditor as well as that of the debtor, unless from its tenor or other circumstances it should appear that the term was established for the benefit of one or the other. (Art 1127, CC) Deed of Sale with Mortgage: these periods of payment have been agreed for the benefit of the vendor and vendee Mutual benefit has been interpreted to consist of the time granted a debtor to find means to comply with his obligation, and the fruits of such interest accruing to the creditor The only impediment to a debtor making payment before the term is fixed, is the denial of the creditor of the benefits, such as the interests, accruing to the latter by reason of the fixed term (inferred from the SC decision on Villaseor v. Javellana) To uphold defendants claim would be virtually compelling an obligor to assume an obligation later when he offers to, and could very well, discharge it earlier The law should not be so interpreted as to compel a debtor to remain so, when he is in a position to release himself o The parties could not have contemplated payments of the last installment on Dec 31, 1945, in good Philippine currency because at the execution of the contract, they did not expect such depreciation of currency as would render the interest on a loan barely sufficient to cover the depreciation of the military notes if such depreciation occurred and the performance of the obligation had become more burdensome in its operation than was anticipated, then the parties should not complain the rights of the parties must be measured by the contract which they themselves made, and the courts can not alter them because they work a hardship the fact that the Americans were already in the Islands on December 31, 1945 and the placing of that date as the maturity date of the last installment of P10,000 constitutes a mere coincidence the contentions of the appellant (Araneta et al) are not well-taken ~ the rule to the effect that the benefit which would be derived by the creditor from the fixing of a term for the performance of an obligation to pay money is the stipulated interest for the prescribed term, is true under normal circumstances; ~ but Deed of Sale with Mortgage, executed during the Japanese occupation, the benefit which it was to derive consisted of the receipt of the last installment of P10,000 in good Philippine money, and not in Japanese military notes; ~ the real benefit thereto was foreseen and contemplated by the parties conditions when Deed was executed (July 16, 1943, when Japanese invaders were lords of the pacific) were comparatively normal (Ballantine schedule: 1 war peso =

Page 23 of 51 P1.40 japanese military notes) and at that time, few would prophesy in whose favor the world war would end, and when it would end it would be presumptuous to say that on Dec 31, 1945 (stipulated date), the American liberation would be here, and the parties fixed purposely this particular date for the payment of the last installment of P10,000 ~ when macArthur promised return, he did not say when ~ when Americans landed in Leyte on October 1944, many remarked that it was sooner than expected ~ were it not for the great naval battle at the Sibuyan Sea, the war would have been prolonged for another year more or at least beyond Dec 31, 1945 o benefit which defendant (Araneta) wanted to reap by the insertion of the disputed clause, was the payment of the interest, more than anything else in the letter of April 12, 1944 the defendant meant that besides the interest that would have to be paid for the balance of P6,000 at the rate of 8% per annum, the defendant shall also charge the interest in accordance with the terms of the contract which interest represents: ~ P317.80 on P5,000 (March 16 - Dec 30, 1944) ~ P320 on P4,000 (Dec 31, 1944 Dec 30, 1945) defendant credited the plaintiffs with the sum of P5,000 notwithstanding that: 1) the acceptance of the payment was made under protest; and 2) payment was made under protest the refusal of the defendant to follow this construction on Sep 5, 1944 (the balnce of P6,000 and interests of the unexpired period was tendered to it) was because the Japanese notes had then greatly depreciated While the acceleration clause is a standard one contained in most mortgage deeds, we cannot escape the conclusion dervied from the clause itself that the payments may be made by the vendee before the dates stated in the contract. ~ the mortgage loan is payable in several installments ~ Deed of Sale with Mortgage Acceleration Clause: in the event of defaults in the payment of any amount due, either for capital or interest, the whole balance shall automatically become due and payable, and the vendor shall have the right the foreclose the mortgage in its entirety o Even if it were true that the appellees could not be sure of their ability to pay during the Japanese occupation, they, as any businessman of ordinary foresight, would not have agreed to a stipulation which would prohibit them from paying, even if they had the money with which to pay the same. contentions of appellant were not tenable ~ with the Deed containing an acceleration clause, it could practically be sure that the plaintiffs would pay the installments on time, since failure to do so would have made the balance due and payable ~ this was one contingency which said plaintiffs would have naturally desired to avoid, since it appears that their income was only P2,500 a month which was not big enough, considering its purchase power during the Japanese occupation appellees were precisely looking for investments and not for obligations ~ plaintiff Sadang was then engaged in real estate business ~ Sadangs wife was engaged in jewelry business ~ it could not have been probable that plaintiffs would agree to prohibition of payment it does not necessarily imply with appellees expectation to receive his back pay as a USAFFE after the liberation of the Philippines that he would have agreed to a prohibition of payment before due dates ~ expected back pay was merely in the nature of a guaranty or inducement that even if the worst should happen, he would still be able to pay the obligation the appellees offers to buy (Proposals I and II or Exhibits E and F) provides for the settlement of the balance: at any time between now and within 90 days after the signing of the peace treaty between the warring nations

Uplawb2008group1 (carrie,elson,ia,izzy,mac,mel,sanne,varz)

~ this indicates the spirit guiding the parties then was the desire to permit the plaintiffs to pay within a specified period, an on a specified date. WON: (2) TC erred in holding that the plaintiffs made a valid tender of payment to defendant NO o appellant did not refuse payment by check as tendered, for insufficiency of funds in the bank, or on account of the medium in which the payment was made,but because it believed that it could not be forced to accept the paayment prior to the date specified in the contract o general rule: an objection to tender must, to be available to the creditor, be made in good time and that the grounds for objection must be specified, and that an objection to a tender on one ground is waiver of all other objections which could have been made at that time. to afford the debtor an opportunity to secure the specific money which the law prescribes shall be accepted in payment of debts non-observance of this duty would mislead the debtor and might inflict a loss which could be avoided if the creditor had objected to the form and character of the tender by the mere fact of the drawing of the check, the plaintiffs engaged that on due presentment, they would honor it, or if dishonored, they would pay the amount thereof to the holder presumption that they have the sufficient funds in bank to cover the amount of said check, was not rebutted by the appellant upon which the burden of proving that there were no funds in the bank falls where the great bulk of business is transacted through the medium of checks, drafts, and negotiable instruments, it would be a dangerous rule, which could be easily turned into an engine of oppression, that a tender of payment, especially where it involves the maturing of obligations not then due (as in this case), could not be made by check where no question was raised as to the value of the check tendered o it is ordinarily required of one to whom payment is offered in the form of check that he make his objection at the time, to the offer of a check, instead of an offer of payment. o Payment by check has been generally so recognized as acceptable in business transactions that it has been held that omission to make objection to a check as tender of payment is regarded as a waiver of right to demand payment in money o Allegation, that appellees did not introduce to show that the president of the appellant corp to whom the alleged tender was made was not shown so as to have given him the opportunity to object, runs counter to the facts of the case as found by the TC o If president had not seen the check, he could not have refused the tender of payment o And as stated, the president reasoned that his non-acceptance was due to his opinion that such payment was not in accordance with the terms of the deed of sale. WON: (3) TC erred in dismissing defendants counterclaim NO o counterclaim was predicated on the theory that the tender of payment and subsequent consignation were not valid o in view of the positive resolution of the second issue, dismissal of counterclaim was fully justified o moreover, as stated by the appellant, this assignment of error is made as a mere formality The judgment appealed from is, therefore, affirmed, with costs against the defendant-appellant.

PONCE V. SYJUCO (Oct. 31, 1951) NATURE: This is an appeal from a decision of the Court of First Instance of Manila absolving defendant Santiago Syjuco, Inc. of the complaint and condemning the plaintiff to pay to said defendant the sum of P18,000 as principal and the further sum of P5,130 as interest thereon from August 6, 1944, to May 5, 1949, or a total of P23,130, Philippine currency, with interest thereon at the rate of 6% per annum from May 6, 1949, until said amount is paid in full, with costs against the plaintiff. FACTS

Page 24 of 51 The appellee, Philippine National Bank, was the owner of 2 parcels of land known as Lots 871 and 872 of the Murcia Cadastre, Negros Occidental. On March 9, 1936 the Bank executed a contract to sell the said properties to the plaintiff, Jose Ponce de Leon, the total price of P26,300, payable as follows: (a) P2,630 upon the execution of the said deed; and (b) the balance P23,670 in 10 annual amortizations, the first amortization to fall due one year after the execution of the said contract. On May 5, 1944, Ponce de Leon obtained a loan from Santiago Syjuco, Inc., in the amount of P200,000 in Japanese Military Notes, payable within one (1) year from May 5, 1948. It was also provided in said promissory note that the promisor (Ponce de Leon) could not pay, and the payee (Syjuco) could not demand, the payment of said note except within the aforementioned period. To secure the payment of said obligation, Ponce de Leon mortgaged in favor of Syjuco the parcels of land which he agreed to purchase from the Bank. On May 6, 1944, Ponce de Leon paid the Bank of the balance of the purchase price amounting to P23,670 in Japanese Military notes and, on the same date, the Bank executed in favor of Ponce de Leon, a deed of absolute sale of the aforementioned parcels of land. The deed of sale executed by the Bank in favor of Ponce de Leon and the deed of mortgage executed by Ponce de Leon in favor of Syjuco were registered in the Office of the Register of Deeds. On July 31, 1944, Ponce de Leon obtained an additional loan from Syjuco in the amount of P16,000 in Japanese Military notes and executed in the latter's favor of promissory note of the same tenor as the one had previously executed. On several occasions in October, 1944, Ponce de Leon tendered to Syjuco the amount of P254,880 in Japanese military notes in full payment of his indebtedness to Syjuco. The amount tendered included not only the interest up to the time of the tender, but also all the interest up to May 5, 1948. Ponce de Leon also wrote to Syjuco a letter tendering the payment of his indebtedness, including interests up to May 5, 1948. Syjuco, however, refused to accept such repeated tenders. During the trial, Ponce de Leon explained that he wanted to settle his obligations because as a member of the guerilla forces he was being hunted by the Japanese and he was afraid of getting caught and killed. In view of Syjuco's refusal to accept the payment tendered by Ponce de Leon, the latter deposited with the Clerk of Court P254,880. On November 4, 1944, Ponce de Leon filed a complaint consigning the amount so deposited to Syjuco. On May 15, 1946, Ponce de Leon filed a petition for the reconstitution of transfer Certificates of Titles Nos. 17175 and 17176 in the name of the Bank. The Court ordered the reconstitution of said titles. On August 16, 1946, Ponce de Leon obtained an overdraft account from the Bank in an amount not exceeding P135,000. Ponce de Leon executed a mortgage of the two parcels of land covered by the reconstituted Transfer Certificates of in favor of the said Bank to secure the payment of any amount which he may obtain from the Bank under aforementioned overdraft account. The overdraft account was granted by the Bank to Ponce de Leon in good faith, said Bank not being aware of the mortgage which Ponce de Leon had executed in favor of Syjuco and the said Bank believing that the said properties had no lien or encumbrance. Syjuco claimed that Ponce de Leon had violated the conditions of the mortgage which Ponce de Leon has executed in its favor. Syjuco prayed that the mortgage executed by Ponce de Leon in favor of the Bank be declared null and void. The lower court absolved Syjuco from Ponce de Leon's complaint and condemned Ponce de Leon to pay Syjuco the total amount of P23,130 with interest at the legal rate from May 6, 1949, until fully paid.

Uplawb2008group1 (carrie,elson,ia,izzy,mac,mel,sanne,varz)

ISSUE 1: WON the consignation made by the plaintiff is valid in the light of the law and the stipulations agreed upon in the two promissory notes signed by the plaintiff - NO. The consignation is invalid, and, therefore, did not have the effect of relieving him of his obligation.

Page 25 of 51

The parties stipulated, among others, in the contract of purchase and sale with mortgage, that the buyer will -"Build on the parcel of land the Sto Domingo church and convent; "while the seller for its part will----"Construct streets on the NE and NW and SW sides of the land herein sold so that the latter will be a block surrounded by streets on all four sides; and the street on the NE side shall be named 'Sto. Domingo Avenue';" The buyer, Philippine Sugar Estates Development Co.'. Ltd., finished the construction of Sto. Domingo Church and Convent, but the seller, Gregorio Araneta, Inc., which began constructing the streets, is unable to finish the construction of the street in the Northeast side (named Sto. Domingo Avenue) because a certain third party, by the name of Manuel Abundo, who has been physically occupying a middle part thereof, refused to vacate the same on May 7, 1958, Philippine Sugar Estates Development Co., Ltd., filed its complaint against J. M. Tuason & Co., Inc., and Gregorio Araneta, Inc. in the CFI Manila, seeking to compel the latter to comply with their obligation, as stipulated in the above-mentioned deed of sale, and/or to pay damages in the event they failed or refused to perform said obligation

In the 2 promissory notes, it was expressly agreed upon that plaintiff shall pay the loans "within one year from May 5, 1948, . . . peso for peso in the coin or currency of the Government of the Philippines that, at the time of payment above fixed it is the legal tender for public and private debts, with interests at the rate of 6% per annum, payable in advance for the first year, and semi-annually in advance during the succeeding years". And that, the period above set forth having been established for the mutual benefit of the debtor and creditor, the former binds himself to pay, and the latter not to demand the payment of, the loans except within the period above mentioned. In order that consignation may be effective, the debtor must first comply with certain requirements. In the instant case, while it is admitted a debt existed, that the consignation was made because of the refusal of the creditor to accept it, and the filing of the complaint to compel its acceptance on the part of the creditor can be considered sufficient notice of the consignation to the creditor, nevertheless, it appears that at least two of the requirements have not been complied with. The plaintiff, before making the consignation with the clerk of the court, failed to give previous notice thereof to the person interested in the performance of the obligation. The obligation was not yet due and demandable when the money was consigned, because the obligation was to be paid within one year after May 5, 1948. The consignation was made before this period matured. The failure of these two requirements is enough ground to render the consignation ineffective. ISSUE 2: WON the plaintiff is justified in accelerating the payment of the obligation because he was willing to pay the interests due up to the date of its maturity - NO.

Both defendants (petitioners) answered the complaint, the latter particularly setting up the principal defense that the action was premature since its obligation to construct the streets in question was without a definite period which needs to be fixed first by the court in a proper suit for that purpose before a complaint for specific performance will prosper CFI dismissed Philippine Sugar Estates complaint, and the latter moved to reconsider and modify the above decision, praying that the court fix a period within which defendants will comply with their obligation to construct the streets in question Araneta opposed saying that plaintiff's complaint did not expressly or impliedly allege and pray for the fixing of a period to comply with its obligation and that the evidence presented at the trial was Under the law, in a monetary obligation contracted with a period, the presumption is that the same is insufficient to warrant the fixing of such a period deemed constituted in favor of both the creditor and the debtor unless from its tenor or from CFI granted the motion, fixing a period of 2 years within which Araneta should comply with the other circumstances it appears that the period has been established for the benefit of either one obligation of them (Art. 1127, Civil Code). In the appeal to the CA, Araneta contended mainly that the relief granted, i.e., fixing of a period, under Here no such exception or circumstance exists. the amendatory decision of July 16, 1960, was not justified by the pleadings and not supported by the It may be argued that the creditor has nothing to lose but everything to gain by the acceleration of payment facts submitted at the trial of the case in the court below and that the relief granted in effect allowed a of the obligation because the debtor has offered to pay all the interests up to the date it would become due. change of theory after the submission of the case for decision But this argument loses force if we consider that the payment of interests is not the only reason why a CA affirmed the CFI decision, since Araneta, Inc. itself squarely placed said issue by alleging in creditor cannot be forced to accept payment contrary to the stipulation. paragraph 7 of the affirmative defenses contained in its answer which reads- "7. Under the Deed of Sale There are other reasons why this cannot be done. One of them is that the creditor may want to keep his with Mortgage of July 29, 1950, herein defendant has a reasonable time within which to comply with its money invested safely instead of having it in his hands, or that the creditor by fixing a period protects obligations to construct and complete the streets on the NE, NW and SW sides of the lot in question; himself against sudden decline in the purchasing power of the currency loaned specially at a time when that under the circumstances, said reasonable time has not elapsed there are many factors that influence the fluctuation of the currency. ISSUE: WON the CA erred in fixing the 2-year period - YES Unless the creditor consents, the debtor has no right to accelerate the time of payment even if the We agree with the petitioner that the decision of the Court of Appeals, affirming that of the Court of premature tender included an offer to pay principal and interest in full. First Instance is legally untenable The fixing of a period by the courts under Article 1197 of the Civil Code of the Philippines is sought to be ARANETA V. PHIL SUGAR justified on the basis that petitioner (defendant below) placed the absence of a period in issue by Reyes, J.B.L., J. pleading in its answer that the contract with respondent Philippine Sugar Estates, Development Co., Nature : Petition for certiorari to review judgment of CA Ltd., gave petitioner Gregorio Araneta, Inc. "reasonable time within which to comply with its obligation FACTS to construct and complete the streets." J. M. Tuason & Co., Inc. is the owner of a big tract of land situated in Quezon City, otherwise known as What the answer put in issue was not whether the court should fix the time of performance, but the Sta. Mesa Heights Subdivision, and covered by a Torrens title in its name whether or not the parties agreed that the petitioner should have reasonable time to perform its part of On July 28, 1950, through Gregorio Araneta, Inc., it (Tuason & Co.) sold a portion thereof with an area the bargain of 43,034.4 square meters, more or less, for the sum of P430,514.00, to Philippine Sugar Estates If the contract so provided, then there was a period fixed, a "reasonable time"; and all that Development Co., Ltd the court should have done was to determine if that reasonable time had already elapsed Uplawb2008group1 (carrie,elson,ia,izzy,mac,mel,sanne,varz)

Page 26 of 51 Issue #1: Yes, plaintiff can sue Gregorio Yulo alone. It cannot be doubted that, the debtor, having obliged themselves in solidum, the creditor can bring its action in toto against any one of them, inasmuch as this was surely its purpose in demanding that the obligation contracted in its favor should be solidary, and even though the creditor may have stipulated with some of the solidary debtors diverse installments and conditions, as in this case, Inchausti & Co. did with its debtors Manuel, Francisco and Carmen Yulo through the instrument of May 12, 1911 this does not lead to the conclusion that the solidarity stipulated in the instrument of August 12, 1909, is the law provides that the solidarity may exist even though Even on the assumption that the court should have found that no reasonable time or no period at all broken,inas we already knowand for the same periods and under the same conditions. Art.the debtors are not bound the same manner 1140, Civil Code had been fixed (and the trial court's amended decision nowhere declared any such fact) still, the now Art. 1211, New Civil Code). complaint not having sought that the Court should set a period, the court could not proceed Issue #2: With respect to the question involving the effect of the partial remission, the obligation being to do so unless the complaint was first amended solidary, the remission of any part of the debt made by the creditior in favor of one or more of the solidary Granting, however, that it lay within the Court's power to fix the period of performance, still the debtors necessarily benefits the others, and therefore, there can be no doubt that, in accordance with the amended decision is defective in that no basis is stated to support Ltd. the conclusion that the period provision of Article 1143 (now Art. 1215) of the Civil Code, the defendant has the right to enjoy the benefits of should be set at two years after finality of the judgement the partial remission of the debt granted by the creditor. The last paragraph of Article 1197 is clear that the period can not be set arbitrarily. The law Wherefore, we hold that although the contract of May 12, 1911, has not novated that the August 12, 1909, it expressly prescribes that "the courts shall determine such period as may under the has affected the contract and the outcome of the suit brought against Gregorio Yulo alone for the sum of circumstance have been probably contemplated by the parties." P253,445.42 and in consequence thereof, the amount stated in the contract of may 12, 1911, by virtue of the The amended decision of the CFI insufficiently explained how the 2year period was arrived at remission granted to the three of the solidary debtors in this instrument, in conformity with what is provided in Article 1197 of the Civil Code involves a twostep process. The Court must first determine that "the Article 1143 (now Article 1215), Civil Code, cited by the creditor himself. obligation does not fix a period" (or that the period is made to depend upon the will of the Issue #3: With respect to the question involving the effect of the extension of time for the payment granted to debtor), "but from the nature and the circumstances it can be inferred that a period was the other solidary debtors, Gregorio Yulo cannot allege as a defense to the action that it is premature. When the intended" (Art. 1197, pars. 1 and 2). This preliminary point settled, the Court must then suit was brought on March 27, 1911, the first installment of the obligation had already matured on June 30, proceed to the second step, and decide what period was "probably contemplated by the 1910, and with the maturity of this installment, the first not having been paid, the whole debt had matured, according to the express agreement of the parties. Neither could he invoke a like exception for the shares of parties" solidary co-debtors Pedro and Concepcion Yulo, they being in identical condition as he. But as regards Francisco, It looks like the CFI pulled out the 2 year period out of thin air In this connection, it is to be borne in mind that the contract shows that the parties were fully aware Manuel and Carmen Yulo, none of the installment payable under their obligation, contacted later, had as yet that the land described therein was occupied by squatters, because the fact is expressly mentioned matured. The first payment, as already stated, was to mature on June 30, 1912. This exception or personal defense of Francisco, Manuel and Carmen Yulo as to that part of the debt for which they were responsible can therein As the parties must have known that they could not take the law into their own hands, but must resort be set up by Gregorio Yulo as partial defense to the action. The part of the debt for which these three are to legal processes in evicting the squatters, they must have realized that the duration of the suits to be responsible is three-sixths of P225,000, or P112,500, so that Gregorio Yulo may claim that, even acknowledging that the debt for which he is liable is P225,000, nevertheless not all of it can now be demanded of him, for that brought would not be under their control nor could the same be determined in advance The conclusion is thus forced that the parties must have intended to defer the performance of of which pertains to his co-debtors is not yet due, a state of affairs which not only prevents any action against the persons who were granted the term which has not yet matured, but also against the other solidary debtors the obligations under the contract until the squatters were duly evicted who being ordered to pay could not now sue for a contribution, and for this reason the action will be only as to P1125000. INCHAUSTI V. YULO It has been said in the brief of the appellee that the prematurity of the action is one of the defenses derived from Facts: On August 12, 1909, six brothers and sisters, defendant among them, executed an instrument admitting the nature of the obligation, according to the opinion of the commentator of the Civil Code, Mucius Scaevola, and their solidary indebtedness to the plaintiff for P253,445.42 at 10% interest per annum, payable in five annual consequently, the defendant Gregorio Yulo may make use of its accordance with Article 1146 (now Art. 1222) of installments, the first installment to be paid on June 13, 1909. Because of default in the payment of the first the Civil code. It may be so and yet, taken in that light, the effect would not be different from that already stated installment, plaintiff, in accordance with the acceleration clause expressedly agreed upon, brought this action on in third decision; Gregorio Yulo could not be freed from making any payment whatever but only from the March 27, 1911, against Gregorio Yulo for the payment of the entire indebtedness plus interests. Subsequently, payment of the part of the debt which corresponds to his co-debtors Francisco, Manuel and Carmen. The same on May 12, 1911, three of the debtors, Francisco, Manuel and Carme, entered in an agreement with plaintiff, author, considering the case of the opposing contention of two solidary debtors as to one of whom the obligation evidenced by a notarial instrument, by virtue of which the amount of the indebtedness was reduced to P225,000 is pure and unconditional and as to the other it is conditional and is not yet demandable, and comparing the at 6% interest per annum, payable in eight annual installments, the first installment to be paid on June 30, disadvantages which must flow from holding that the obligation is demandable with those which must follow if 1912. the contrary view is adopted, favors this solution of the problem: "There is a middle ground, (he says), from which we can safely set out, to wit, that the creditor may of course, Issues/Questions: 1) WON the plaintiff can sue Gregorio Yulo alone, considering that there were other demand the payment of his credit against the debtor not favored by any condition or extension of time." And debtors; 2) What is the effect of the partial remission of the debt made by the creditor in favor of three of the further on, he decides the question as to whether the whole debt may be recovered or only that part creditors? 3) What is the effect of the extension time for payment granted by the creditor to the three of the unconditionally owing or which has already matured, saying, "Without failing to proceed with juridical rigor, but debtors? without falling into extravagances or monstrosities, we believe that the solution of the difficulty is perfectly Held/Ratio: possible. How? By limiting the right of the creditor to the recovery of the amount owed by the debtors bound unconditionally or as to whom the obligation has matured, and leaving in suspense the right to demand the Uplawb2008group1 (carrie,elson,ia,izzy,mac,mel,sanne,varz) when suit was filed; if such time had passed, then a breach should be declared, and damages should be fixed If the reasonable time had not yet elapsed, the court perforce was bound to dismiss the action for being premature. But in no case can it be logically held that under the plea above quoted, the intervention of the court to fix the period for performance was warranted, for Article 1197 is precisely predicated on the absence of any period fixed by the parties

payment of the remainder until the expiration of the term of the fulfillment of the condition. But what then is the effect of solidarity? How can this restriction of right be reconciled with the duty imposed upon each one of the debtors to answer for the whole obligation? Simply this, by recognizing in the creditor the power, upon the performance of the condition or the expiration of the term of claiming from any one or all of the debtors that part of the obligation affected by those conditions." (Scaevola, Civil Code, 19, 800 and 801.) It has been said also by the trial judge in his decision that if a judgment be entered against Gregorio Yulo for the whole debt of P253,445.42, he cannot recover from Francisco, Manuel, and Carmen Yulo that part of the amount which is owed by them because they are obliged to pay only 225,000 pesos and this in eight installments none of which was due. For this reason he was of the opinion that he (Gregorio Yulo) cannot be obliged to pay his part of the debt before the contract of May 12, 1911, may be enforced, and "consequently he decided the case in favor of the defendant, without prejudice to the plaintiff proceeding in due time against him for his proportional part of the joint debt." JAUCIAN V. QUEROL In October, 1908, Lino Dayandante and Hermenegilda Rogero executed a private writing in which they acknowledged themselves to be indebted to Roman Jaucian in the sum of P13,332.33. Hermenegilda Rogero signed this document in the capacity of surety for Lino Dayandante; but as clearly appears from the instrument itself both debtors bound themselves jointly and severally to the creditor There is nothing in the terms of the obligation itself to show that the relation between the two debtors was that of principal and surety. In November, 1909, Hermenegilda Rogero brought an action in the Court of First Instance of Albay against Jaucian, asking that the document in question be cancelled as to her upon the ground that her signature was obtained by means of fraud. In his answer to the complaint, Jaucian, by way of cross-complaint, asked for judgment against the plaintiff for the amount due upon the obligation, which appears to have matured at that time. While the case was pending in the Supreme Court, Hermenegilda Rogero died and the administrator of her estate was substituted as the party plaintiff and appellee. On November 25, 1913, the Supreme Court rendered its decision reversing the judgment of the trial court and holding that the disputed claim was valid. During the pendency of the appeal, proceedings were had in the Court of First Instance of Albay for the administration of the estate of Hermenegilda Rogero; Francisco Querol was named administrator; and a committee was appointed to pass upon claims against the estate. This committee made its report on September 3, 1912. On March 24, 1914, or about a year and a half after the filing of the report of the committee on claims against the Rogero estate, Jaucian entered an appearance in the estate proceedings, and filed with the court a petition in which he averred the execution of the document of October, 1908, by the deceased, the failure of her cobligor Dayandante, to pay any part of the debt, except P100 received from him in March, 1914, and the complete insolvency of Dayandante (note: 1918 pa ito kaya mahal na ang P100). Upon these facts Jaucian prayed the court for an order directing the administrator of the Rogero estate to pay him the principal sum plus its interest. CFI held that: "Hermenegilda Rogero having been simply surety for Lino Dayandante, the administrator has a right to require that Roman Jaucian produce a judgment for his claim against Lino Dayandante, in order that the said administrator may be subrogated to the rights of Jaucian against Dayandante. The simple affidavit of the principal debtor that he had no property except P100 worth of property which he has ceded to the creditor is not sufficient for the court to order the surety to pay the debt of the principal. When this action shall have been taken against Lino Dayandante and an execution returned 'no effects,' then the claim of Jaucian against the estate will be ordered paid or any balance that may be due to him." Acting upon the suggestions contained in this order Jaucian brought an action against Dayandante and recovered a judgment against him for the full amount of the obligation evidenced by the document of

Page 27 of 51 October 24, 1908. Execution was issued upon this judgment, but was returned by the sheriff wholly unsatisfied, no property of the judgment debtor having been found.

On October 28, 1914, counsel for Jaucian filed another petition in the proceedings upon the estate of Hermenegilda Rogero, in which they averred, upon the grounds last stated, that Dayandante was insolvent, and renewed the prayer of the original petition. It was contended that the court, by, its order of April 13, 1914, had "admitted the claim" of Dayadante that he had no property left. CFI, after hearing argument, entered an order refusing to grant Jaucian's petition. To this ruling the appellant excepted and moved for a rehearing. On December 11, 1914, the judge a quo entered an order denying the rehearing and setting forth at length, the reasons upon which he based his denial of the petition. In this court the appellant contends that the trial judge erred (a) in refusing to give effect to the order made by the CFI, dated April 13, 1914; and (b), in refusing to order the administrator of the estate of Hermenegilda, Rogero to pay the appellant the amount demanded by him. The contention with regard to the order of April 13, 1914, is that no appeal from it having been taken, it became final. An examination of the order in question, however, leads us to conclude that it was not a final order, and therefore it was not appealable. In effect, it held that whatever rights Jaucian might have against the estate of Rogero were subject to the performance of a condition precedent, namely, that he should first exhaust this remedy against Dayandante. The court regarded Dayandante as the principal debtor, and the deceased as a surety only liable for such deficiency as might result after the exhaustion of the assets of the principal cobligor. The pivotal fact upon which the order was based was the failure of appellant to show that he had exhausted his remedy against Dayandante, and this failure the court regarded as a complete bar to the granting of the petition at that time.

ISSUES:

WON the order of April 13, 1914 is final and hence appealable. NO. 2.) WON Hermenegilda Rogeros liability was that of principal, though she was only a surety for Lino Dayadante. YES. 3.) WON the HELD: 1.) NO The court made no order requiring the appellee to make any payment whatever, and that part of the opinion, upon which the order was based, which contained statements of what the court intended to do when the petition should be renewed, was not binding upon him or any other judge by whom he might be succeeded.

1.)

2.) YES

It is quite clear from what we have stated that the order of April 13, 1914, required no action by the administrator at that time, was not final, and therefore was not appealable. We therefore conclude that no rights were conferred by the said order of April 13, 1914, and that it did not preclude the administrator from making opposition to the petition of the appellant when it was renewed. Bearing in mind that the deceased Hermenegilda Rogero, though surety for Lino Dayandante, was nevertheless bound jointly and severally with him in the obligation, the following provisions of the Old Civil Code are here pertinent: o Art 1822: By security a person binds himself to pay or perform for a third person in case the latter should fail to do so. If the surety binds himself jointly with the principal debtor, the provisions of section fourth, chapter third, title first, of this book shall be observed." o Arti1144: "A creditor may sue any of the joint and several (solidarios) debtors or all of them simultaneously. The claims instituted against one shall not be an obstacle for those that may

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be later presented against the others, as long as it does not appear that the debt has been collected in full." o Art 1830: "The surety can not be compelled to pay a creditor until application has been previously made of all the property of the debtor." o Art 1831: "This application can not take place . If he has jointly bound himself with the debtor " The foregoing articles of the Civil Code make it clear that Hermenegilda Rogero was liable absolutely and unconditionally for the full amount of the obligation without any right to demand the exhaustion of the property of the principal debtor previous to its payment. Her position so far as the creditor was concerned was exactly the same as if she had been the principal debtor. The absolute character of the claim and the duty of the committee to have allowed it in full as such against the estate of Hermenegilda Rogero had it been opportunely presented and found to be a valid claim is further established by section 698 of the Code of Civil Procedure, which provides: o "When two or more persons are indebted on a joint contract, or upon a judgment founded on a joint contract, and either of them dies, his estate shall be liable therefor, and it shall be allowed by the committee as if the contract had been with him alone or the judgment against him alone. But the estate shall have the right to recover contribution from the other joint debtor." In the official Spanish translation of the Code of Civil Procedure, the sense of the English word "joint," as used in two places in the section above quoted, is rendered by the Spanish word "mancomunadamente." This is incorrect. The sense of the word "joint," as here used, would be more properly translated in Spanish by the word "solidaria," though even this word does not express the meaning of the English with entire fidelity. o The section quoted, it should be explained, was originally taken by the author, or compiler, of our Code of Civil Procedure from the statutes of the State of Vermont; and the word "joint" is, therefore, here used in the sense which attaches to it in the common law. In the common law system there is no conception of obligation corresponding to the divisible joint obligation contemplated in article 1138 of the Civil Code. o This article declares in effect that, if not otherwise expressly determined, every obligation in which there are numerous debtors--we here ignore plurality of creditors-shall be considered divided into as many parts as there are debtors, and each part shall be deemed to be the distinct obligation of one of the respective debtors. In other words, the obligation is apportionable among the debtors; and in case of the simple joint contract neither debtor can be required to satisfy more than his aliquot part. In the common law system every debtor in a joint obligation is liable in solidum for the whole; and the only legal peculiarity worthy of remark concerning the "joint" contract at common law is that the creditor is required to sue all the debtors at once. To avoid the inconvenience of this procedural requirement and to permit the creditor in a joint contract to do what the creditor in a solidary obligation can do under article 1144 of the Civil Code, it is not unusual for the parties to a common law contract to stipulate that the debtors shall be "jointly and severally" liable. The force of this expression is to enable the creditor to sue any one of the debtors or all together at pleasure. The joint contract of the common law is and always has been a solidary obligation so far as the extent of the debtor's liability is concerned. Hermenegilda Rogero, and her estate after her death, was liable absolutely for the whole obligation, under section 698 of the Code of Civil Procedure; and if the claim had been duly presented to the committee for allowance it should have been allowed, just as if the contract had been with her alone. There is no force, in our judgment, in the contention that the pendency of the suit was a bar to the presentation of the claim against the estate. The fact that the lower court had declared the document void was not conclusive, as its judgment was not final, and even assuming that if the claim had been presented to the committee for allowance, it would have been rejected and that the decision of the

Page 28 of 51 committee would have been sustained by the CFI, the rights of the creditor could have been protected by an appeal from that decision. Furthermore, even had Jaucian, in his appeal from the decision in the cancellation suit, endeavored to obtain judgment on his crosscomplaint, the death of the debtor would probably have required the discontinuance of the action presented by cross-complaint or counterclaim, under section 703. The only concrete illustration of a contingent claim given in section 746 of the Code of Civil Procedure is the case where a person is liable as surety for the deceased, that is, where the principal debtor is dead. In the case before us, it is the surety who is dead. In the illustration put in section 746-where the principal debtor is dead and the surety is the party preferring the claim against the estate of the deceased-it is obvious that the surety has no claim against the estate of the principal debtor, unless he himself satisfies the obligation in whole or in part upon which both are bound. It is at this moment, and not before, that the obligation of the principal to indemnify the surety arises (art. 1838, Civil Code); and by virtue of such payment the surety is subrogated in all the rights which the creditor had against the debtor (art. 1839, same Code). It is possible that "contingency," in the cases contemplated in section 746, may depend upon other facts than those which relate to the creation or inception of liability. It may be, for instance, that the circumstance that a liability is subsidiary, and the execution has to be postponed after judgment is obtained until the exhaustion of the assets of the person or entity primarily liable, makes a claim contingent within the meaning of said section; but upon this point it is unnecessary to express an opinion. It is enough to say that where, as in the case now before us, liability extends unconditionally to the entire amount stated in the obligation, or, in other words, where the debtor is liable in solidum and without postponement of execution, the liability is not contingent but absolute. For the reasons stated, the decision of the trial court denying appellant's petition and his motion for a new trial was correct and must be affirmed.

RFC V. CA REYES, A., J.: o June 17, 1948 - Delfin Dominguez signed a contract with Realty Investments, Inc. = to purchase a registered lot belonging to the latter, making a down payment of P39.98 = promising to play the balance of the stipulated price in 119 monthly installments. o Some three months thereafter, to finance the improvement of a house Dominguez had built on the lot the RFC agreed to loan him, P10,000 on the security of a mortgage upon said house and lot, and, at his instance, wrote Realty Investments a letter, dated September 17, 1948, requesting: = that the necessary documents for the transfer of title of the vendee be executed so that the same could be registered together with mortgage, = with the assurance that as soon as title to the lot had been issued in the name of Dominguez and the mortgage in favor of the RFC registered as first lien on the lot and the building thereon, the RFC would pay Realty, Investments the balance of the purchase price of the lot in the amount of P3,086.98." o Complying with RFC's request and relying on its assurance of payment, Realty Investments, on the 20th of that same month, deeded over the lot to Dominguez "free of all liens and incumbrances" o the mortgage deed, which Dominguez had executed in favor of o RFC three days before, was recorded in the Registry of Deeds for' the City of Manila as first lien on the lot and the building thereon. o once the mortgage was registered, the RFC let Dominguez have P6,500 out of the proceeds of his loan = but that the remainder, of the loan was never released because Dominguez defaulted in the payment of the amortizations due on the amount he had already received, = as a consequence the RFC foreclosed the mortgage, bought the mortgaged' property in the foreclosure sale, and obtained title thereto upon failure of the mortgagor to exercise his right, of redemption. o Required to make good its promise to pay Realty Investments the balance of the purchase price of the lot, RFC refused

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Page 29 of 51 Plaintiff was induced to part with his title to a peice of real property upon RFC's assurance that it would itself pay the balance of the purchase price due from the purchaser after its mortgage lien thereon had been registered. o Lulled by that assurance, plaintiff thereafter looked to the RFC, instead of the purchaser, for payment. o It is true that plaintiff later expressed willingness to have the payment made at a later date, when so it was informed by the buyer-"the second release of proceeds of his loan" would take place. o But it is evident that this period of grace was granted by plaintiff in the belief that the information furnished by the buyer was true, and, as found by the Court of Appeals (and this finding is conclusive upon this Court), RFC never made plaintiff know that said information was not correct. o In those circumstances, we do not think it fair to construe plaintiff's letter to be anything more than a mere assent to a deferment of payment, and such assent should not be taken as willingness on its part to have the payment made only if and when there was to be second release of proceeds of the loan. It would be unreasonable to suppose that the creditor, already assured of payment by the RFC itself, would want to create uncertainty by making such payment dependent upon a contingency. IN VIEW OF THE FOREGOING, THE DECISION APPEALED FROM IS AFFIRMED, WITH COSTS AGAINST o Realty Investments commenced the present action in the Court of First Instance of Manila for the THE RFC. recovery of the said balance from either Delfin Dominguz or the RFC. o TC: allowed recovery from Dominguez, but absolved the RFC from the complaint. INCIONG V. CA o Court of Appeals reversed that verdict (1996) = judgment against Dominguez void for having been rendered after his exclusion from the case, NATURE: This is a petition for review on certiorari of the decision of the Court of Appeals affirming that of the = sentenced the RFC to pay plaintiff the amount claimed together with interests and costs. = "As narrated in the statement of the case, both Dominguez and the appellee kept appellant ignorant on the Regional Trial Court of Misamis Oriental, Branch 18, which disposed of Civil Case No. 10507 for collection of a terms and conditions of their agreement concerning the loan of P10,000 and of the manner that sum was to be sum of money and damages. released, and in such circumstances plaintiff's letter of September 20, 1948, cannot be construed in the manner FACTS Petitioner's liability resulted from the promissory note in the amount of P50,000.00 which he signed with contended by appellee and sustained by the court, for plaintiff merely said in substance and effect that it was Rene C. Naybe and Gregorio D. Pantanosas on February 3, 1983, holding themselves jointly and severally agreeable to have the balance of P3,086.98 of the account of Delfin Dominguez paid to it 'at the second release liable to private respondent Philippine Bank of Communications, Cagayan de Oro City branch. of proceeds of his loan, which he (Dominguez) informs us will be on or about October 15, 1948.' The promissory note was due on May 5, 1983. = Defendant-appellee should know that it would be absurd for the plaintiff to waive appellee's guaranty Said due date expired without the promissors having paid their obligation. contained in its letter of September 17, 1948, wherein Governor E. Ealdama bound the Rehabilitation Finance Corporation to pay the unpaid balance of the purchase price of the lot in question after title thereof was Consequently, on November 14, 1983 and on June 8, 1984, private respondent sent petitioner telegrams transferred in the name of Dominguez free from any incumbrance. demanding payment thereof. = If the Rehabilitation Finance Corporation was not to make any further release of funds on the loan, or if such On December 11, 1984 private respondent also sent by registered mail a final letter of demand to Rene C. release was to be subject to future developments, it was, the duty of the Rehabilitation Finance Corporation to Naybe. answer the latter's letter of September 20, 1948, and to inform appellant of the terms and conditions of the loan, Since both obligors did not respond to the demands made, private respondent filed on January 24, 1986 a but the officers of the appellee failed to do this. complaint for collection of the sum of P50,000.00 against the three obligors. = For this reason, appellee's contention in this respect is most unfair and cannot be upheld by the courts of On January 27, 1987, the lower court dismissed the case against defendant Pantanosas as prayed for by the justice. private respondent herein. = It was the Rehabilitation Finance Corporation that induced plaintiff to issue title to the lot free from all Meanwhile, only the summons addressed to petitioner was served as the sheriff learned that defendant encumbrances to Dominguez on its guaranty, and it cannot now without any fault of the plaintiff keep the lot in Naybe had gone to Saudi Arabia. question and Dominguez' building without paying anything to the plaintiff. Petitioner alleged that sometime in January 1983, he was approached by his friend, Rudy Campos, who told = Under the circumstance of the case, appellant was not under any obligation of assuming Dominguez' right of him that he was a partner of Pio Tio, the branch manager of private respondent in Cagayan de Oro City, in redemption of the property foreclosed just to save said lot, payment for which was guaranteed by the the falcata logs operation business. Rehabilitation Finance Corporation." Campos also intimated to him that Naybe was interested in the business and would contribute a chainsaw to o RFC has appealed to this Court. the venture. He added that, although Naybe had no money to buy the equipment, Pio Tio had assured Naybe WON (1) CA erred in not absolving RFC from the complaint - NO of the approval of a loan he would make with private respondent. o While the amount sought to be recovered by plaintiff was originally owing from Dominguez, being the Campos then persuaded petitioner to act as a "co-maker" in the said loan. balance of the purchase price of the lot he had agreed to buy, the obligation of paying it to plaintiff has Petitioner allegedly acceded but with the understanding that he would only be a co-maker for the loan of already been assumed by the RFC with no other condition than that title to the lot be first conveyed to P50,000.00. Dominguez and RFC's mortgage lien thereon registered, and that condition has already been fulfilled. Petitioner alleged further that five (5) copies of a blank promissory note were brought to him by Campos at WON (2) CA erred in not taking consideration the plaintiffs letter on Sept 20 1948 that shall be the his office. He affixed his signature thereto but in one copy, he indicated that he bound himself only for the basis for the modification, if not, extinguishment, of the obligation of RFC - NO RFC: its obligation to pay "has been modified, if not extinguished" by plaintiff's letter of September 20, 1948, which reads as follows: "The R. F. C. Manila SIRS: In connection with your guarantee to pay us the balance of P3,086.98 of the account of Mr. Delfin Dominguez for the purchase of lot No. 15, block 7 of our Riverside Subdivision, which lot has been conveyed to him on the strength of your guaranty to us the said balance, we want to inform you that, at the request of Mr. Dominguez, we are agreeable to have that amount paid us at the second release of proceeds of his loan, which he informs us will be on or about October 15, 1948. Yours truly, REALTY INVESTMENTS, INC. C. M. HOSKINS & CO., INC. Managing Agents By: (Sgd.) A. B. AQUINO" o o Uplawb2008group1 (carrie,elson,ia,izzy,mac,mel,sanne,varz)

Page 30 of 51 amount of P5,000.00. Thus, it was by trickery, fraud and misrepresentation that he was made liable for the Because the promissory note involved in this case expressly states that the three signatories amount of P50,000.00. therein are jointly and severally liable, any one, some or all of them may be proceeded against In the decision of the lower court, it noted that the typewritten figure "-- 50,000 --" clearly appears directly for the entire obligation. below the admitted signature of the petitioner in the promissory note. The choice is left to the solidary creditor to determine against whom he will enforce collection. Hence, the latter's uncorroborated testimony on his limited liability cannot prevail over the presumed regularity and fairness of the transaction, under Sec. 5 (q) of Rule 131. Consequently, the dismissal of the case against Judge Pontanosas may not be deemed as having The lower court added that it was "rather odd" for petitioner to have indicated in a copy and not in the discharged petitioner from liability as well. As regards Naybe, suffice it to say that the court never original, of the promissory note, his supposed obligation in the amount of P5,000.00 only. acquired jurisdiction over him. Petitioner, therefore, may only have recourse against his co-makers, as Finally, the lower court held that, even granting that said limited amount had actually been agreed upon, the provided by law. same would have been merely collateral between him and Naybe and, therefore, not binding upon the RULING: Petition review on certiorari denied. private respondent as creditor-bank. The lower court also noted that petitioner was a holder of a Bachelor of Laws degree and a labor consultant KALALO V. LUZ who was supposed to take due care of his concerns. FACTS: After the rendition of the decision of the lower court, an affidavit was executed by Gregorio Pantanosas, Jr., On November 17, 1959, appellee Octavio A. Kalalo, a licensed civil engineer doing business under the an MTCC judge and petitioner's co-maker in the promissory note. It supports petitioner's allegation that they firm name of O. A. Kalalo and Associates. entered into an agreement with appellant Alfredo J. Luz, a were induced to sign the promissory note on the belief that it was only for P5,000.00, adding that it was licensed architect, doing business under the firm name of AJ. Luz and Associates, whereby the former Campos who caused the amount of the loan to be increased to P50,000.00. was to render engineering design services to the latter for fees, as stipulated in the agreement. Petitioner argues that the dismissal of the complaint against Naybe, the principal debtor, and against The services included: Pantanosas, his co-maker, constituted a release of his obligation, especially because the dismissal of the o design computation and sketches case against Pantanosas was upon the motion of private respondent itself. o contract drawing and technical specifications of all engineering phases of the project designed Petitioner cites as basis for his argument, Article 2080 of the Civil Code which provides that: by O.A. Kalalo and Associates The guarantors, even though they be solidary, are released from their obligation whenever by some act of the o bill of quantities and cost estimate creditor, they cannot be subrogated to the rights, mortgages, and preferences of the latter. o consultation and advice during construction relative to the work. ISSUE: WON petitioner is released of his obligation. - NO It is to be noted that petitioner signed the promissory note as a solidary co-maker and not as a guarantor. The fees agreed upon were percentages of the architect's fee, to wit: structural engineering, 12-1/2 % electrical engineering. 2 %; mechanical engineering, 2 %, and sanitary engineering, 2-1/2%. This is patent even from the first sentence of the promissory note which states as follows: Ninety one (91) days after date, for value received, I/we, JOINTLY and SEVERALLY promise to pay to the The agreement was subsequently supplemented by a "clarification to letter-proposal" which provided, PHILIPPINE BANK OF COMMUNICATIONS at its office in the City of Cagayan de Oro, Philippines the sum of FIFTY among other things, that "the schedule of engineering fees in this agreement does not cover the THOUSAND ONLY (P50,000.00) Pesos, Philippine Currency, together with interest . . . at the rate of SIXTEEN following: Foundation soil exploration, testing and evaluation; Projects that are principally engineering (16) per cent per annum until fully paid. works such as industrial plants, and "O.A. Kalalo and Associates reserve the right to increase fees on projects which cost less than P100,000" Pursuant to said agreement, appellee rendered engineering A solidary or joint and several obligation is one in which each debtor is liable for the entire obligation, and services to appellant in the various projects. each creditor is entitled to demand the whole obligation. On December 11, 1961, appellee sent to appellant a statement of account to which was attached an On the other hand, Article 2047 of the Civil Code states: itemized statement of defendant-appellant's account, according to which the total engineering fee asked By guaranty a person, called the guarantor, binds himself to the creditor to fulfill the obligation of the principal by appellee for services rendered amounted to P116,565.00 from which sum was to be deducted the debtor in case the latter should fail to do so. previous payments made in the amount of P57,000.00, thus leaving a balance due in the amount of If a person binds himself solidarily with the principal debtor, the provisions of Section 4, Chapter 3, Title I of this P59,565.00. Book shall be observed. In such a case the contract is called a suretyship. On May 18, 1962 appellant sent appellee a resume of fees due to the latter. Said fees, according to While a guarantor may bind himself solidarily with the principal debtor, the liability of a guarantor is different appellant, amounted to P10,861.08 instead of the amount claimed by the appellee. from that of a solidary debtor. Thus, Tolentino explains: A guarantor who binds himself in solidum with the principal debtor under the provisions of the second paragraph On June 14, 1962 appellant sent appellee a check for said amount, which appellee refused to accept as does not become a solidary co-debtor to all intents and purposes. There is a difference between a solidary cofull payment of the balance of the fees due him. debtor and a fiador in solidum (surety). The latter, outside of the liability he assumes to pay the debt before the On August 10, 1962, appellee filed a complaint against appellant, containing four causes of action. property of the principal debtor has been exhausted, retains all the other rights, actions and benefits which In all actions, appellee alleged that he was not fully paid by the appellant in the various projects he was pertain to him by reason of the fiansa; while a solidary co-debtor has no other rights than those bestowed upon contracted for. him in Section 4, Chapter 3, Title I, Book IV of the Civil Code. In his answer, appellant admitted that appellee rendered engineering services, as alleged in the first Section 4, Chapter 3, Title I, Book IV of the Civil Code states the law on joint and several obligations. Under cause of action, but averred that some of appellee's services were not in accordance with the agreement Art. 1207 thereof, when there are two or more debtors in one and the same obligation, the presumption is and appellee's claims were not justified by the services actually rendered, and that the aggregate that the obligation is joint so that each of the debtors is liable only for a proportionate part of the debt. amount actually due to appellee was only P80,336.29, of which P69,475.21 had already been paid, thus There is a solidary liability only when the obligation expressly so states, when the law so provides or when leaving a balance of only P10,861.08. the nature of the obligation so requires. Appellant denied liability for any damage claimed by appellee to have suffered, as alleged in the second, third and fourth causes of action. Appellant set up affirmative and special defenses, alleging that Uplawb2008group1 (carrie,elson,ia,izzy,mac,mel,sanne,varz)

appellee had no cause of action, that appellee was in estoppel because of certain acts, representations, admissions and/or silence, which led appellant to believe certain facts to exist and to act upon said facts, that appellee's claim regarding the Menzi project was premature because appellant had not yet been paid for said project, and that appellee's services were not complete or were performed in violation of the agreement and/or otherwise unsatisfactory

ISSUES: 1.) WON the doctrine of estoppel would apply 2.) WON the recommendation in the Commissioners Report that the payment of the amount due to the plaintiff in dollars was legally permissible, and if not, at what rate of exchange it should be paid in pesos HELD: 1.) YES The statement of accounts could not estop appellee, because appellant did not rely thereon as found by the Commissioner, from whose Report we read: "While it is true that plaintiff vacillated in his claim, yet, defendant did not in anyway rely or believe in 2.) the different claims asserted by the plaintiff and instead insisted on a claim that plaintiff was only entitled to P 10,861.09 as per a separate resume of fees he sent to the plaintiff on May 18, 1962 The foregoing finding of the Commissioner, not disputed by appellant, was adopted by the trial court in its decision. Under Article 1431 of the Civil Code, in order that estoppel may apply the person, to whom representations have been made and who claims the estoppel in his favor must have relied or acted on such representations. Said article provides: "Art. 1431. Through estoppel an admission or representation is rendered conclusive upon the person making it, and cannot be denied or disproved as against the person relying thereon." An essential element of estoppel is that the person invoking it has been influenced and has relied on the representations or conduct of the person sought to be estopped, and this element is wanting in the instant case. Estoppel cannot be sustained by mere argument or doubtful inference; it must be clearly proved in all its essential elements by clear, convincing and satisfactory evidence. 9 No party should be precluded from making out his case according to its truth unless by force of some positive principle of law, and, consequently, estoppel in pais must be applied strictly and should not be enforced unless substantiated in every particular. As related to the party to be estopped, the essential elements are: o conduct amounting to false representation or concealment of material facts, or at least calculated to convey the impression that the facts are otherwise than, and inconsistent with, those which the party subsequently attempts to assert o intent, or at least expectation that this conduct shall be acted upon by, or at least influence, the other party o knowledge, actual or constructive, of the real facts. As related to the party claiming the estoppel, the essential elements are: o lack of knowledge and of the means of knowledge of the truth as to the facts in question o reliance, in good faith, upon the conduct or statements of the party to be estopped o action or inaction based thereon of such character as to change the position or status of the party claiming the estoppel, to his injury, detriment or prejudice.

Inasmuch as the pleadings showed that the appellee's right to certain fees for services rendered was not denied, the only question being the assessment of the proper fees and the balance due to appellee after deducting the admitted payments made by appellant, the trial court, upon agreement of the parties, authorized the case to be heard before a Commissioner. The Commissioner rendered a report which, in resume, states that the amount due to appellee was $28,000.00 (U.S.) as his fee in the International Research Institute Project which was twenty per cent (20%) of the $140,000.00 that was paid to appellant, and P51,539.91 for the other projects, less the sum of P69,475.46 which was already paid by the appellant.

Page 31 of 51 The first essential element in relation to the party sought to be estopped does not obtain in the instant case, for, as appears in the Report of the Commissioner, appellee testified "that when he wrote Exhibit I and prepared Exhibit 1-A, he had not yet consulted the services of his counsel and it was only upon advice of counsel that the terms of the contract were interpreted to him resulting in his subsequent letters to the defendant demanding payments of his fees pursuant to the contract Exhibit A." Anent this matter, it has been held that if an act, conduct or misrepresentation of the party sought to be estopped is due to ignorance founded on innocent mistake, estoppel will not arise. Regarding the essential elements of estoppel in relation to the party claiming the estoppel, the first element does not obtain in the instant case, for it cannot be said that appellant did not know, or at least did not have the means of knowing, the services rendered to him by appellee and the fees due thereon. The second element is also wanting, for, as adverted to, appellant did not rely on Exhibit 1-A but consistently denied the accounts stated therein, Neither does the third element obtain, for appellant did not act on the basis of the representations in Exhibit 1-A, and there was no change in his position, to his own injury or prejudice. "An account stated or settled is a mere admission that the account is correct. It is not an estoppel. The account is still open to impeachment for mistakes or errors. Its effect is to establish, prima facie, the accuracy of the items without other proof', and the party seeking to impeach it is bound to show affirmatively the mistake or error alleged. The force of the admission and the strength of the evidence necessary to overcome it will depend upon the circumstances of the case." In the instant case, it is Our view that the ignorance or mistake that attended the writing of Exhibit 1-A by appellee was sufficient to overcome the prima facie evidence of correctness and accuracy of said Exhibit 1-A. Appellee argues that notwithstanding Republic Act 529, appellant can be compelled to pay the appellee in dollars in view of the fact that appellant received his fees in dollars, and appellee's fee is 20% of appellant's fees; and that if said amount is to be converted into Philippine Currency, the rate of exchange should be that at the time of the execution of the judgment. 20 We have taken note of the fact that on August 25, 1961, the date when appellant said his obligation to pay appellee's fees became due, there were two rates of exchange, to wit: the preferred rate of P2.00 to $1.00, and the free market rate. It was so provided in Circular No. 121 of the Central Bank of the Philippines, dated March 2, 1961, amending an earlier Circular No. 117, and in force until January 21, 1962 when it was amended by Circular No. 133, thus: Central Bank of the Philippines Circular No. 121 (as amended by Circular No. 133): All foreign exchange receipts shall be surrendered to the Central Bank. Those authorized to deal in foreign exchange: o Export Proceeds, U.S. Government Expenditures and invisibles other than: Foreign Investments, Gold Proceeds, Tourists and Inward Remittances of Veterans and Filipino Citizens, and Personal Expenses of Diplomatic Personnel The amount of $140,000.00 received by appellant for the International Rice Research Institute project is not within the scope of Circular No. 121. Appellant has not shown that 25% of said amount had to be surrendered to the Central Bank at the preferred rate because it was either export proceeds, or U.S. Government expenditures, or invisibles not included in those enumerated in Circular No. 121. Hence, it cannot be said that the trial court erred in presuming that appellant converted said amount at the free market rate. It is hard to believe that a person possessing dollars would exchange his dollars at the preferred rate of P2.00 to $1.00 when he is not obligated to do so, rather than at the free market rate which is much higher. A person is presumed to take ordinary care of his concerns, and that the ordinary course of business has been followed. Under the agreement, Exhibit A, appellee was entitled to 20% of $140,000.00, or the amount of $28,000.00. Appellee, however, cannot oblige the appellant to pay him in dollars, even if appellant himself had received his fee for the IRRI project in dollars. This payment in dollars is prohibited by Republic Act 529 which was enacted on June 16, 1950. Said act provides as follows:

Uplawb2008group1 (carrie,elson,ia,izzy,mac,mel,sanne,varz)

"SECTION 1. Every provision contained in, or made with respect to, any obligation which provision purports to give the obligee the right to require payment in gold or in a particular kind of coin or currency other than Philippine currency or in an amount of money of the Philippines measured thereby, be as it is hereby declared against public policy, and null, void and of no effect, and no such provision shall be contained in, or made with respect to, any obligation hereafter incurred. Every obligation heretofore or hereafter incurred, whether or not any such provision as to payment is contained therein or made with respect thereto, shall be discharged upon payment in any coin or currency which at the time of payment is legal tender for public and private debts: Provided, That, (a) if the obligation was incurred prior to the enactment of this Act and required payment in a particular kind of coin or currency other than Philippine currency, it shall be discharged in Philippine currency measured at the prevailing rate of exchange at the time the obligation was incurred, (b) except in case of a loan made in a foreign currency stipulated to be payable in the same currency in which case the rate of exchange prevailing at the time of the stipulated date of payment shall prevail. All coin and currency, including Central Bank notes, heretofore or hereafter issued and declared by the Government of the Philippines shall be legal tender for all debts, public and private." Under the above-quoted provision of Republic Act 529, if the obligation was incurred prior to the enactment of the Act and require payment in a particular kind of coin or currency other than the Philippine currency the same shall be discharged in Philippine currency measured at the prevailing rate of exchange at the time the obligation was incurred. As the Court has adverted to, Republic Act 529 was enacted on June 16, 1950. In the present case, the obligation of appellant to pay appellee the 20% of $140,000.00, or the sum of $28,000.00, accrued on August 25, 1961, or after the enactment of Republic Act 529. It follows that the provision of Republic Act 529 which requires payment at the prevailing rate of exchange when the obligation was incurred cannot be applied. Republic Act 529 does not provide for the rate of exchange for the payment of obligation incurred after the enactment of said Act. The logical conclusion, therefore, is that the rate of exchange should be that prevailing at the time of payment. o

Page 32 of 51 To guarantee the faithful compliance with the obligations under said contract, a performance bond in the amount of P53,643.00, with UNIVERSAL as principal and the Manila Surety & Fidelity Co., Inc., as surety, was executed in favor of the Reparations Commission. A corresponding indemnity agreement was executed to indemnify the surety company for any damage, loss charges, etc., which it may sustain or incur as a consequence of having become a surety upon the performance bond.

REPARATIONS V. UNIVERSAL FISHING (June 27, 1978) NATURE: Appeal of the defendant Universal Deep-Sea Fishing Corporation, defendant and third-party plaintiff Manila Surety and Fidelity Co., Inc., and third-party defendant Pablo Sarmiento from the decision of the Court of First Instance of Manila. FACTS The Universal Deep-Sea Fishing Corporation was awarded 6 trawl boats by the Reparations Commission as end-user of reparations goods. These fishing boats, christened the M/S UNIFISH 1, M/S UNIFISH 2. M/S UNIFISH 3. M/S UNIFISH 4, M/S UNIFISH 5, and M/S UNIFISH 6. were delivered to UNIVERSAL two at a time, f.o.b. Japanese port. The M/S UNIFISH 1 and M/S UNIFISH 2, with an aggregate purchase price of P536,428.44, were delivered to UNIVERSAL on November 20,1958. The contract of Conditional Purchase and Sale of Reparations Goods, executed by and between the parties on February 12, 1960, provided among others, that "the first installment representing 10% of the amount or P53,642.84 shall be paid within 24 months from the date of complete delivery thereof, the balance shall be paid in the manner stated as shown in the Schedule of Payments. TOTAL F.O.B. COST P536,428.44 AMOUNT OF 1st INSTALLMENT (10% OF F.O.B. COST) P53,642.84 DUE DATE OF 1st INSTALLMENT May 8, 1961 TERM: Ten (10) EQUAL YEARLY INSTALLMENTS RATE OF INTEREST: THREE PERCENT (3%) PER ANNUM

The M/S UNIFISH 3 and M/S UNIFISH 4, with a total purchase price of P687,777.76 were delivered to UNIVERSAL on April 20, 1959 and the Contract of Conditional Purchase and Sale Reparations Goods, dated November 25, 1959, provided that "the first installment representing 10% of the amount or P68, 777.77 shall be paid within 24 months from the date of complete delivery thereof, the balance shall be paid in the manner herein stated as shown in the Schedule of Payments. TOTAL F.O.B. COSTS P687,777.76 AMOUNT OF 1st INSTALLMENT (10% of F.O.B. COST) P68,777.77 DUE DATE OF 1st INSTALLMENT July, 1961 TERM: Ten (10) EQUAL YEARLY INSTALLMENTS RATE OF INTEREST: THREE PERCENT (3%) PER ANNUM A performance bond in the amount of P68,777.77, issued by the Manila Surety & Fidelity Co., Inc., was also submitted to guarantee the faithful compliance with the obligations set forth in the contract. An indemnity agreement was executed in favor of the surety company in consideration of the said bond. The delivery of the M/S UNIFISH 5 and M/S UNIFISH 6 is covered by a contract for the Utilization of Reparations Goods (M/S "UNIFISH 5" and M/S "UNIFISH 6") executed by the parties on February 12, 1960, and the Schedule of Payments provided: AMOUNT OF 1st INSTALLMENT (10% of F.O.B. COST) P54,500.00 DUE DATE OF 1st INSTALLMENT Oct. 17, 1961 TERM: TEN (10) EQUAL YEARLY INSTALLMENTS RATE OF INTEREST: THREE PERCENT (3%) PER ANNUM A performance bond in the amount of P54,500.00 issued by Manila Surety & Fidelity Co., Inc., was submitted, and an indemnity agreement was executed by UNIVERSAL in favor of surety company. On August 10, 1962, Reparations Commission instituted present action against UNIVERSAL and surety company to recover various amounts of money due under these contracts. In answer, UNIVERSAL claimed that amounts of money sought to be collected are not yet due and demandable. The surety company also contended that action is premature, but set up a cross-claim against UNIVERSAL for reimbursement of whatever amount of money it may have to pay plaintiff by reason of complaint, including interest, and for collection of accumulated and unpaid premiums on with interest thereon. With leave of courts first obtained, surety company filed a third-party complaint against Pablo S. Sarmiento, one of the indemnitors in the indemnity agreements. The third-party defendant Pablo S. Sarmiento denied personal liability claiming that he signed indemnity agreements in question in his capacity as acting general manager of UNIVERSAL. ISSUE WON trial court erred in not applying amount of P10,000.00, paid as down payment by UNIVERSAL to Reparations Commission, to guaranteed indebtedness. HELD/RATIO: No error was committed in holding surety company to full extent of its undertaking.

According to surety company, under Article 1254 of the Civil Code, where there is no imputation of payment made by either debtor or creditor, the debt which is the most onerous to the debtor shall be deemed to have been satisfied, so that the amount of P10,000.00 paid by UNIVERSAL as down payment on the purchase of M/S UNIFISH 1 and M/S UNIFISH 2 should be applied to the guaranteed portion of the debt, this releasing part of the liability hence the obligation of the surety company shall be only P43,643.00, instead of P53,643.00.

Uplawb2008group1 (carrie,elson,ia,izzy,mac,mel,sanne,varz)

The rules contained in Articles 1252 to 1254 of judgment, Civil Code apply to a person owing several debts of judgment, same kind to a single creditor. They cannot be made applicable to a person whose obligation as a mere surety is both contingent and singular, which in this case is the full and faithful compliance with the terms of the contract of conditional purchase and sale of reparations goods. ISSUES: The obligation included the payment, not only of the first installment in the amount of P53,643.00, but also 1.) WON contract should be rescinded. NO. of the 10 equal yearly installments of P56,597.20 per annum. 2.) WON respondent is liable for the P76,059.71 he attempted to pay to the petitioner but the petitioner did The amount of P10,000.00 was, indeed, deducted from the amount of P53,643.00, but then first of 10 equal not accept (even though the 30-day period provided by R.A. 6552 has not yet expired) YES. yearly installments had also accrued, hence, no error was committed in holding judgment, surety company HELD: to judgment, full extent of its undertaking. 1.) NO SC agrees with the appellate court that it would be inequitable to cancel the contract of conditional sale MCLAUGHLIN V. CA and to have the amount of P101,550.00 (P148,126.97 according to private respondent in his brief) FACTS: already paid by him under said contract, excluding the monthly rentals paid, forfeited in favor of On February 28, 1977, petitioner Luisa F. McLaughlin and private respondent Ramon Flores entered into petitioner, particularly after private respondent had tendered the amount of P76,059.71 in full payment a contract of conditional sale of real property. Paragraph one of the deed of conditional sale fixed the of his obligation. total purchase price of P140,000.00 payable as follows: a) P26,550.00 upon the execution of the deed; Private respondent had substantially complied with the terms and conditions of the and b) the balance of P113,450.00 to be paid not later than May 31, 1977. The parties also agreed that compromise agreement. the balance shall bear interest at the rate of 1% per month to commence from December 1, 1976, until Section 4 of Republic Act No. 6552 which took effect on September 14, 1972 provides as follows: the full purchase price was paid. o "In case where less than two years of installments were paid, the seller shall give the buyer a On June 19, 1979, petitioner filed a complaint for the rescission of the deed of conditional sale due to grace period of not less than sixty days from the date the installment became due. If the buyer the failure of private respondent to pay the balance due on May 31, 1977. fails to pay the installments due at the expiration of the grace period, the seller may cancel the On December 27, 1979, the parties submitted a Compromise Agreement on the basis of which the court contract after thirty days from receipt by the buyer of the notice of the cancellation or the rendered a decision on January 22, 1980. In said compromise agreement, private respondent demand for rescission of the contract by a notarial act." acknowledged his indebtedness to petitioner under the deed of conditional sale in the amount of Section 7 of said law provides as follows: P119,050.71, and the parties agreed that said amount would be payable as follows: a) P50,000.00 upon o "Any stipulation in any contract hereafter entered into contrary to the provisions of Sections 3, signing of the agreement; and b) the balance of P69,059.71 in two equal installments on June 30, 1980 4, 5 and 6, shall be null and void." and December 31, 1980. As agreed upon, private respondent paid P50,000.00 upon the signing of the agreement and in addition Under the terms of the compromise agreement, the December 31, 1980 installment was due and he also paid an "escalation cost" of P25,000.00. payable when on October 15, 1980, petitioner demanded payment of the balance of P69,059.71 on or Under paragraph 3 of the Compromise Agreement, private respondent agreed to pay one thousand before October 31, 1980, petitioner could cancel the contract after thirty days from receipt by private (P1,000.00) pesos monthly rental beginning December 5, 1979 until the obligation is duly paid, for the respondent of the notice of cancellation. Considering petitioner's motion for execution filed on November use of the property subject matter of the deed of conditional sale. 7, 1980 as a notice of cancellation, petitioner could cancel the contract of conditional sale after thirty Paragraphs 6 and 7 of the Compromise Agreement further state: days from receipt by private respondent of said motion. Private respondent's tender of payment of the o "That the parties are agreed that in the event the defendant (private respondent) fails to amount of P76,059.71 together with his motion for reconsideration on November 17, 1980 was, comply with his obligations herein provided, the plaintiff (petitioner) will be entitled to the therefore, well within the thirty-day period granted by R.A.6552. issuance of a writ of execution rescinding the Deed of Conditional Sale of Real Property. In such 2.) YES eventuality, defendant (private respondent) hereby waives his right to appeal to (from) the The tender made by private respondent of a certified bank manager's check payable to petitioner was a Order of Rescission and the Writ of Execution which the Court shall render in accordance with valid tender of payment. The certified check covered not only the balance of the purchase price in the the stipulations herein provided for. amount of P69,059.71, but also the arrears in the rental payments from June to December, 1980 in the o "That in the event of execution all payments made by defendant (private respondent) will be amount of P7,000.00, or a total of P76,059.71. forfeited in favor of the plaintiff (petitioner) as liquidated damages." Section 49, Rule 130 of the Revised Rules of Court provides that: On October 15, 1980, petitioner wrote to private respondent demanding that the latter pay the balance o "An offer in writing to pay a particular sum of money or to deliver a written instrument or of P69,059.71 on or before October 31, 1980. This demand included not only the installment due on specific property is, if rejected, equivalent to the actual production and tender of the money, June 30, 1980 but also the installment due on December 31, 1980. instrument, or property." On October 30, 1980, private respondent sent a letter to petitioner signifying his willingness and However, although private respondent had made a valid tender of payment which preserved his rights intention to pay the full balance of P69,059.71 as a vendee in the contract of conditional sale of real property, respondent did not follow it with a On November 7, 1980, petitioner filed a Motion for Writ of Execution alleging that private respondent consignation or deposit of the sum due with the court. failed to pay the installment due on June 1980 and that since June 1980 he had failed to pay the On September 1, 1986, the Court issued the following resolution: monthly rental of P1,000.00. Petitioner prayed that a) the deed of conditional sale of real property be o "Considering the allegation in petitioner's reply brief that the Manager's Check tendered by private respondent on November 17, 1980 was subsequently cancelled and converted into Uplawb2008group1 (carrie,elson,ia,izzy,mac,mel,sanne,varz)

Page 33 of 51 declared rescinded with forfeiture of all payments as liquidated damages; and b) the court order the payment of P1,000.00 back rentals since June 1980 and the eviction of private respondent. TC granted the motion for writ of execution. CA held that the Song Fo Ruling is applicable in the case at bar recission will not be permitted for slight breach of contract.

cash, the Court RESOLVED to REQUIRE the parties within ten (10) days from notice to inform the Court whether or not the amount thereof was deposited in court and whether or not private respondent continued paying the monthly rental of P1,000.00 stipulated in the Compromise Agreement." In compliance with this resolution, both parties submitted their respective manifestations which confirm that the Manager's Check in question was subsequently withdrawn and replaced by cash, but the cash was not deposited with the court. According to Article 1256 of the Civil Code of the Philippines, if the creditor to whom tender of payment has been made refuses without just cause to accept it, the debtor shall be released from responsibility by the consignation of the thing or sum due, and that consignation alone shall produce the same effect in the five cases enumerated therein; Article 1257 provides that in order that the consignation of the thing (or sum) due may release the obligor, it must first be announced to the persons interested in the fulfillment of the obligation; and Article 1258 provides that consignation shall be made by depositing the thing (or sum) due at the disposal of the judicial authority and that the interested parties shall also be notified thereof. Soco vs. Militante: o "Tender of payment must be distinguished from consignation. Tender is the antecedent of consignation, that is, an act preparatory to the consignation, which is the principal, and from which are derived the immediate consequences which the debtor desires or seeks to obtain. Tender of payment may be extrajudicial, while consignation is necessarily judicial, and the priority of the first is the attempt to make a private settlement before proceeding to the solemnities of consignation. Although private respondent had preserved his rights as a vendee in the contract of conditional sale of real property by a timely valid tender of payment of the balance of his obligation which was not accepted by petitioner, he remains liable for the payment of his obligation because of his failure to deposit the amount due with the court. In his manifestation dated September 19, 1986, private respondent states that on September 16, 1980, he purchased a Metrobank Cashier's Check No. CC 004233 in favor of petitioner Luisa F. McLaughlin in the amount of P76,059.71, a photocopy of which was enclosed and marked as Annex "A-1;" but that he did not continue paying the monthly rental of P1,000.00 because, pursuant to the decision of the appellate court, petitioner herein was ordered to accept the aforesaid amount in full payment of herein respondent's obligation under the contract subject matter thereof. However, inasmuch as petitioner did not accept the aforesaid amount, it was incumbent on private respondent to deposit the same with the court in order to be released from responsibility. Since private respondent did not deposit said amount with the court, his obligation was not paid and he is liable in addition for the payment of the monthly rental of P1,000.00 from January 1, 1981 until said obligation is duly paid, in accordance with paragraph 3 of the Compromise Agreement. Upon full payment of the amount of P76,059.71 and the rentals in arrears, private respondent shall be entitled to a deed of absolute sale in his favor of the real property in question. WHEREFORE, the decision of the Court of Appeals is AFFIRMED with the following modifications: (a) Petitioner is ordered to accept from private respondent the Metrobank Cashier's Check No. CC 004233 in her favor in the amount of P76,059.71 or another certified check of a reputable bank drawn in her favor in the same amount; (b) Private respondent is ordered to pay petitioner, within sixty (60) days from the finality of this decision, the rentals in arrears of P1,000.00 a month from January 1, 1981 until full payment thereof; and (c) Petitioner is ordered to execute a deed of absolute sale in favor of private respondent over the real property in question upon full payment of the amounts as provided in paragraphs (a) and (b) above. No costs.

Page 34 of 51 SOCO V. MILITANTE Soledad Soco, petitioner Hon. Francis Militante, Incumbent Presiding Judge of the Court of First Instance of Cebu and Regino Franciso, Jr., respondents NATURE: Petition to review the decision of the Court of First Instance of Cebu FACTS: Soco and Francisco entered a contract of lease on January 17, 1973 whereby Soco leased her commercial building and lot situated at Manalili Street, Cebu City, to Francisco for a monthly rental of Php 800.00 for a period of 10 years renewable for another 10 years at the option of the lessee. Sometime later, Francisco noticed that Soco did not anymore send her collector for the payment of rentals and at times there were payments made but no receipts were issued. This situation prompted Francisco to write Soco, the letter dated February 7, 1975 which the latter received. On May 13, 1975, Francisco wrote the Vice-President of Comtrust, Cebu Branch requesting the latter to issue checks to Soco in the amount of Php 840.00 every 10th of the month, obviously for payment of his monthly rentals. This request of Francisco was complied with by Comtrust in its letter dated June 4, 1975. Pursuant to his letter dated February 7, 1975, Francisco paid his monthly rentals to Soco by issuing checks of the Commercial Bank and Trust Company where he had a checking account. These payments in checks were received because Soco admitted that prior to May 1977 defendant Francisco had been religiously paying the rental. The factual background setting of this case clearly indicates that soon after Soco learned that Francisco sub-leased a portion of the building to NACIDA, at a monthly rental of more than Php 3,000.00 which is much higher than what Francisco was paying to Soco, the latter felt that she was on the losing end so she tried to look for ways and means to terminate the contract. In view of the alleged non-payment of rental of the leased premises from May, 1977, Soco, through her lawyer, sent a letter dated November 23, 1978 to Francisco serving notice to the latter to vacate the premises leased. In answer to this letter, Francisco through his lawyer informed Soco and her lawyer that all payments of rental due her were in fact paid by Commercial Bank and Trust Company through the Clerk of Court of the City Court of Cebu. Despite this explanation, Soco filed this instant case of Illegal Detainer on January 8, 1979. Pressing her point, Soco alleged that she personally demanded form Francisco the May, June, July and August rentals but Francisco did not pay for the reason that he had no funds available at that time. This allegation of Soco was denied by Francisco because per his instructions, the Commercial Bank and Trust Company issued checks in favor of Soco representing payments for monthly rentals for the months of May, June, July, August, 1977 as shown in Debit Memorandum issued by Comtrust. These payments are further bolstered by the certification issued by Comtrust dated October 29, 1979. Soco was informed of the deposits made to the Clerk of Court through a letter of Atty. Pampio Abarientos dated June 9, 1977 (requesting Soco to claim the rental payment from Franciscos office otherwise the latter would be constrained to make a consignation) and July 6, 1977 (informing Soco that Francisco has consigned rental payment for May and June, 1977 to the Clerk of Court of City Court of Cebu) as well as in the answer of Francisco in Civil Case R-16261. She was further notified of these payments by consignation in the letter of Atty. Menchavez dated November 28, 1978 (answer to Socos letter alleging non-payment; the letter proved Franciscos payment for November, 1978 as deposited in the Clerk of Court). The City Court of Cebu ruled that the consignation was not valid and ordered Francisco to vacate immediately the leased premises, pay the rentals due, pay the plaintiffs attorneys fee, pay for damages and incidental litigation expenses and pay the costs. The Court of First Instance reversed this judgment and found the consignation to be valid. Hence, this appeal. ISSUE:

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Page 35 of 51 (1) WON the lessee failed to pay the monthly rentals beginning May, 1977 up to the time the complaint for prove payment of rentals or deposits in court. These debit memorandums are merely internal banking practices eviction was filed on January 8, 1979. (WON lessee made a valid tender of payment) or office procedures involving the bank and its depositor which is not binding upon a third person such as the (2) WON the consignation of the rentals was valid. lessor. What is important is whether the checks were picked up by the lessee as per the arrangement, wherein RULING/RATIO: the lessee shall pick up the check issued by the bank to tender the same to the lessor. The lessee failed to prove (1) Yes (No). The June and July, 1977 letters may be proof of tender of payment but only for the months that he complied with the arrangement. they refer to. They are not proof of tender of payment of other or subsequent monthly rentals. The November, 1978 letter likewise is not a proof of tender of payment for the said month. It merely proves rental deposit for OCCENA V. CA the particular month of November, 1978 and no other. FACTS Furthermore, there is no factual basis for the lower courts finding that the lessee had tendered payment On February 25, 1975 private respondent Tropical Homes, Inc. filed a complaint for modification of the of the monthly rentals, thru his bank, citing the lessees letter requesting the bank to issue checks in favor of terms and conditions of its subdivision contract with petitioners (landowners of a 55,330 square meter parcel Soco in the amount of Php840.00 every 10th of each month and to deduct the full amount and service fee from of land in Davao City), making the following allegations: his current account. It must be noted that the letter also requested said bank to notify them every time the "That due to the increase in price of oil and its derivatives and the concomitant worldwide spiraling of prices, check is ready so they may send somebody to get it. Evidently, it was the lessees duty to send someone to get which are not within the control of plaintiff, of all commodities including basic raw materials required for such the cashiers check from the bank and logically, the lessee has the obligation to make and tender the check to development work, the cost of development has risen to levels which are unanticipated, unimagined and not the lessor. This the lessee failed to do. within the remotest contemplation of the parties at the time said agreement was entered into and to such a Tender of payment must be made in lawful currency. While payment in check by the debtor may be degree that the conditions and factors which formed the original basis of said contract have been totally acceptable as valid, if no prompt objection to said payment is made the fact that in previous years payment in changed; check was accepted does not place its creditor in estoppel from requiring the debtor to pay his obligation in cash. That further performance by the plaintiff under the contract will result in a situation where defendants would be Thus, tender of a check to pay for an obligation is not a valid tender of payment thereof. unjustly enriched at the expense of the plaintiff; will cause an inequitous distribution of proceeds from the sales (2) No. For a consignation to be valid, its essential requisites must be complied with fully and strictly in of subdivided lots in manifest actually result in the unjust and intolerable exposure of plaintiff to implacable accordance with the law, Articles 1256 to 1261, new Civil Code. That these articles must be accorded a losses, all such situations resulting in an unconscionable, unjust and immoral situation contrary to and in mandatory construction is clearly evident from the very language of the codal provisions themselves which violation of the primordial concepts of good faith, fairness and equity which should pervade all human relations. require absolute compliance with the essential requisites therein provided. Under the subdivision contract, respondent "guaranteed (petitioners as landowners) as the latter's fixed and Consignation is the act of depositing the thing due with the court or judicial authorities whenever the sole share and participation an amount equivalent to forty (40%) percent of all cash receipts from the sale creditor cannot accept or refuses to accept payment and it generally requires a prior tender of payment. of the subdivision lots" In order that consignation may be effective, the debtor must first comply with certain requirements Respondent pray to the Rizal court of first instance that "after due trial, this Honorable Court render prescribed by laws. The debtor must show, judgment modifying the terms and conditions of the contract ... by fixing the proper shares that should (a) that there was a debt due; pertain to the herein parties out of the gross proceeds from the sales of subdivided lots of subjects that the consignation of the obligation had been made because the creditor to whom tender of payment was subdivision". made refused to accept it, or because he was absent or incapacitated, or because several persons claimed to be Petitioners moved to dismiss the complaint principally for lack of cause of action, and upon denial thereof entitled to receive the amount due, Article 1176; and of reconsideration by the lower court elevated the matter on certiorari to respondent Court of Appeals. that previous notice of the consignation had been given to the person interested in the performance of the Respondent court in its questioned resolution of June 28, 1976 set aside the preliminary injunction obligation, Article 1177; previously issued by it and dismissed petition on the ground that under Article 1267 of the Civil Code which (d) that the amount due was placed at the disposal of the court, Article 1178; provides that that after the consignation had been made the person interested was notified thereof, Article 1178. Failure in any ART. 1267. When the service has become so difficult as to be manifestly beyond the contemplation of the of these requirements is enough ground to render a consignation ineffective. Furthermore, without notice first parties, the obligor may also be released therefrom, in whole or in part. announced to the persons interested in the fulfillment of the obligation, the consignation as payment is void. ... a positive right is created in favor of the obligor to be released from the performance of an obligation in full or In the case at bar, respondent Francisco failed to prove the following requisites of a valid consignation, in part when its performance 'has become so difficult as to be manifestly beyond the contemplation of the tender of payment of the monthly rentals to the lesser except that indicated in the June, 1977 letter (tender of parties. payment already discussed above); ISSUE: respondent lessee failed to prove the first notice to the lessor prior to consignation, except payment referred to in WON worldwide increase in prices cited by respondent constitutes a sufficient cause of action for modification of the June, 1977 letter. The lessee must give prior notice of consignation for each monthly rental; the subdivision contract. respondent lessee likewise failed to prove the second notice, that is after consignation has been made, to the HELD/RATIO: lessor except the consignation referred to in the May and June cashiers check. The lessee should give a notice NO. of consignation of each deposit every monthly rental. The bank did not send notice to Soco that checks will be If respondent's complaint were to be released from having to comply with the subdivision contract, assuming deposited and have actually been deposited in consignation with the Clerk of Court because no instructions were it could show at the trial that the service undertaken contractually by it had "become so difficult as to be given by its depositor; manifestly beyond the contemplation of the parties", then respondent court's upholding of respondent's (d) the respondent failed to prove actual deposit or consignation of the monthly rentals except the two cashiers complaint and dismissal of the petition would be justifiable under the cited codal article. checks previously mentioned. Not a single copy of the official receipts issued by the Clerk of Court was Without said article, respondent would remain bound by its contract under the theretofore prevailing presented at the trial of the case to prove actual deposit or consignation. The official receipts are the best proof doctrine that performance therewith is not excused "by the fact that the contract turns out to be hard and of actual consignation. The court also found that the tenant only made the deposits due in court two years later and after the filing of the complaint for illegal detainer. The debit memorandums presented as evidence does not Uplawb2008group1 (carrie,elson,ia,izzy,mac,mel,sanne,varz)

Issue: WON private respondents action for reformation of contract will prospire for the reason that said contract had become disadvantageous and unfair to said respondent because of subsequent events and conditions - yes Ratio: Article 1267 speaks of "service" which has become so difficult. Taking into consideration the rationale behind this provision, the term "service" should be understood as referring to the "performance" of the obligation. In the present case, the obligation of private respondent consists in allowing petitioners to use its posts in Naga City, which is the service contemplated in said article. Furthermore, a bare reading of this article reveals that it is not a requirement thereunder that the contract be for future service with future unusual change. According to Senator Arturo M. Tolentino, 10 Article 1267 states in our law the doctrine of unforeseen events. NAGA TELEPHONE V. CA Petitioner Naga Telephone Co., Inc. (NATELCO) is a telephone company rendering local as well as long distance This is said to be based on the discredited theory of rebus sic stantibus in public international law; under this service in Naga City while private respondent Camarines Sur II Electric Cooperative, Inc. (CASURECO II) is a theory, the parties stipulate in the light of certain prevailing conditions, and once these conditions cease to exist the contract also ceases to exist. Considering practical needs and the demands of equity and good faith, private corporation established for the purpose of operating an electric power service in the same city. the disappearance of the basis of a contract gives rise to a right to relief in favor of the party On November 1, 1977, the parties entered into a contract for the use by petitioners in the operation of its prejudiced. telephone service the electric light posts of private respondent in Naga City. In consideration therefor, petitioners agreed to install, free of charge, ten (10) telephone connections for the use by private respondent in the In a nutshell, private respondent in the Occea case filed a complaint against petitioner before the trial court praying for modification of the terms and conditions of the contract that they entered into by fixing the proper following places: shares that should pertain to them out of the gross proceeds from the sales of subdivided lots. We ordered the "(a) 3 units The Main Office of (private respondent); (b) 2 Units The Warehouse of (private respondent); dismissal of the complaint therein for failure to state a sufficient cause of action. We rationalized that the Court (c) 1 Unit The Sub-Station of (private respondent) at Concepcion Pequea; of Appeals misapplied Article 1267 because: (d) 1 Unit The Residence of (private respondent's) President;
(e) (f) 1 Unit The Residence of (private respondent's) Acting General Manager; & 2 Units To be determined by the General Manager. 3

improvident, unprofitable, or unexpectedly burdensome", since in case a party desires to be excuse from performance in the event of such contingencies arising, it is his duty to provide therefor in the contract. But respondent's complaint seeks not release from the subdivision contract but that the court "render judgment modifying the terms and conditions of the contract by fixing the proper shares that should pertain to the herein parties out of the gross proceed., from the sales of subdivided lots of subject subdivision". The cited article does not grant the courts this authority to remake, modify or revise the contract or to fix the division of shares between the parties as contractually stipulated with the force of law between the parties, so as to substitute its own terms for those covenanted by the parties themselves. Respondent's complaint for modification of contract manifestly has no basis in law and therefore states no cause of action.

Page 36 of 51 And as third cause of action, private respondent complained about the poor servicing by petitioners of the ten (10) telephone units which had caused it great inconvenience and damages to the tune of not less than P100,000.00

Said contract also provided: "(a) That the term or period of this contract shall be as long as the party of the first part has need for the electric light posts of the party of the second part it being understood that this contract shall terminate when for any reason whatsoever, the party of the second part is forced to stop, abandoned [sic] its operation as a public service and it becomes necessary to remove the electric lightpost;" (sic) 4 It was prepared by or with the assistance of the other petitioner, Atty. Luciano M. Maggay, then a member of the Board of Directors of private respondent and at the same time the legal counsel of petitioner. After the contract had been enforced for over ten (10) years, private respondent filed on January 2, 1989 with the RTC of Naga City against petitioners for reformation of the contract with damages, on the ground that it is too one-sided in favor of petitioners; that it is not in conformity with the guidelines of the National Electrification Administration (NEA) which direct that the reasonable compensation for the use of the posts is P10.00 per post, per month; that after eleven (11) years of petitioners' use of the posts, the telephone cables strung by them thereon have become much heavier with the increase in the volume of their subscribers, worsened by the fact that their linemen bore holes through the posts at which points those posts were broken during typhoons; that a post now costs as much as P2,630.00; so that justice and equity demand that the contract be reformed to abolish the inequities thereon. As second cause of action, private respondent alleged that starting with the year 1981, petitioners have used 319 posts in the towns of Pili, Canaman, Magarao and Milaor, Camarines Sur, all outside Naga City, without any contract with it; that at the rate of P10.00 per post, petitioners should pay private respondent for the use thereof the total amount of P267,960.00 from 1981 up to the filing of its complaint; and that petitioners had refused to pay private respondent said amount despite demands.

". . . respondent's complaint seeks not release from the subdivision contract but that the court 'render judgment modifying the terms and conditions of the contract . . . by fixing the proper shares that should pertain to the herein parties out of the gross proceeds from the sales of subdivided lots of subject subdivision'. The cited article (Article 1267) does not grant the courts (the) authority to remake, modify or revise the contract or to fix the division of shares between the parties as contractually stipulated with the force of law between the parties, so as to substitute its own terms for those covenanted by the parties themselves. Respondent's complaint for modification of contract manifestly has no basis in law and therefore states no cause of action. Under the particular allegations of respondent's complaint and the circumstances therein averred, the courts cannot even in equity the relief sought." The ruling in the Occea case is not applicable because we agree with respondent court that the allegations in private respondent's complaint and the evidence it has presented sufficiently made out a cause of action under Article 1267. We, therefore, release the parties from their correlative obligations under the contract. However, our disposition of the present controversy does not end here. We have to take into account the possible consequences of merely releasing the parties therefrom: petitioners will remove the telephone wires/cables in the posts of private respondent, resulting in disruption of their essential service to the public; while private respondent, in consonance with the contract 12 will return all the telephone units to petitioners, causing prejudice to its business. We shall not allow such eventuality. Rather, we require, as ordered by the trial court: 1) petitioners to pay private respondent for the use of its posts in Naga City and in the towns of Milaor, Canaman, Magarao and Pili, Camarines Sur and in other places where petitioners use private respondent's posts, the sum of ten (P10.00) pesos per post, per month, beginning January, 1989; and 2) private respondent to pay petitioner the monthly dues of all its telephones at the same rate being paid by the public beginning January, 1989. The peculiar circumstances of the present case, as distinguished further from the Occea case, necessitates exercise of our equity jurisdiction. 13 By way of emphasis, we reiterate the rationalization of respondent court that:
". . . In affirming said ruling, we are not making a new contract for the parties herein, but we find it necessary to do so in order not to disrupt the basic and essential services being rendered by both parties herein to the public and to avoid unjust enrichment by appellant at the expense of plaintiff . . . .

Uplawb2008group1 (carrie,elson,ia,izzy,mac,mel,sanne,varz)

GABRIEL V. MONTE DE PIEDAD PETITION for review on certiorari. LAUREL, J.:

1913 up to May, 1933 - herein petitioner was employed as appraiser of jewels in the pawnshop of the Monte de Piedad. December 13, 1932, he executed a chattel mortgage to secure the payment of the deficiencies which resulted from his erroneous appraisal of the jewels pawned to the appellee, amounting to P14,679.07, with six per cent (6%) interest from said date. In this chattel mortgage, the appellant promised to pay to the appellee the sum of P300 a month until the sum of P14,679.07, with interest is fully paid. Dec 22, 1932 - document was registered To recover the aforementioned sum less what had been paid, amounting to P3,333.25 or the balance of P11,345.75 and in case of default to effectuate the chattel mortgage, an action was instituted against the petitioner by the respondent Monte de Piedad in the Court of First Instance of Manila (civil case No. 50847). The petitioner answered, denying generally and specifically all the specifications therein, and also denied under oath the genuiness of the execution of the alleged chattel mortgage attached thereto.

By way of special defense, he alleged: (1) that the chattel mortgage was a part of a scheme on the part of the management of the Monte de Piedad to cover up supposed losses incurred in its pawnshop department; (2) that a criminal action had been instituted at the instance of the plaintiff against him wherein said chattel mortgage was presented by the prosecution with regard to his supposed responsibility as expert appraiser of jewels of the plaintiff entity but he was therein acquitted; and (3) that said acquittal constituted a bar to the civil case.

By way of cross-complaint, the petitioner alleged: (1) that the chattel mortgage was entered into by E. Marco for and in behalf of the Monte de Piedad without being duly authorized to do so by the latter; (2) that the defendant was induced, through false representation, to sign said chattel mortgage against his will; (3) that the chattel mortgage was based upon all nonexisting subject matter and nonexisting consideration; and (4) that the chattel mortgage was null and void ab initio. By way of counterclaim, the petitioner alleged (1) that the payments made by him for the account of the chattel mortgage amounting to P3,333.25 were made through deceit and without his consent and consisted of P300 monthly deductions from his salary, printing job DAYWALT V. CORP for plaintiff done by him in his printing press, and reimbursement made from the pocket of E. Marco; Nature : Appeal from judgment of CFI Manila (2) that he has received P356.25 a month as expert appraiser of the plaintiff and that he was separated In 1902, Teodorica Endencia, an unmarried woman, resident in the Province of Mindoro, executed a arbitrarily at the end of the month of May 1933, from the plaintiff entity without lawful cause and one month contract whereby she obligated herself to convey to Geo. W. Daywalt, a tract of land situated in the notice and plaintiff failed to pay him his salary for the month of May, 1933 and the month of June, 1933, in barrio of Mangarin, municipality of Bulalacao, now San Jose, in said province accordance with law; and It was agreed upon that a deed should be executed as soon as the title is perfected in the proceedings (3) that due to the malicious and systematic prosecution brought in criminal case No. 49078 and in the present of the Court of Land Registration and a Torrens title procured therefore in Endencias name case, he suffered damages and losses both materially and in his reputation in the amount of at least P15,000. A decree recognizing the right of Teodorica as owner was entered in said court in August 1906, but the Wherefore, petitioner, among others, prayed that the Monte de Piedad be ordered to return the unlawful Torrens certificate was not issued until later deductions from his monthly remuneration, to pay his salary for the months of May and June, 1933, and The parties, however, met immediately upon the entering of this decree and made a new contract with damages and losses he suffered amounting to P15,000. a view to carrying their original agreement into effect; this new contract was executed in the form of The lower court rendered judgment in favor of the Monte de Piedad against the herein petitioner. Petitioner deed of conveyance and is dated 16 Aug 1906 brought the case on appeal to the Court of Appeals, which affirmed the judgment of the lower court in a The price is P4,000 and the area of the land enclosed in the boundaries is 452 hectares and a fraction decision rendered May 29, 1940. The second contract was not immediately carried into effect for the reason that the Torrens certificate Hence, this petition for review by certiorari. was not yet obtainable and in fact said certificate was not issued until the period of performance WON PROVISIONS OF THE CHATTEL MORTGAGE CONTRACT BY WHICH HE GUARANTEED TO PAY THE contemplated in the contract had expired DEFICIENCIES AMOUNTING TO P14,679.07 ARE CONTRARY TO LAW, MORALS AND PUBLIC POLICY, Uplawb2008group1 (carrie,elson,ia,izzy,mac,mel,sanne,varz)

Page 37 of 51 AND HENCE, THE CHATTEL MORTGAGE CONTRACT IS INEFFECTIVE AND THE PRINCIPAL OBLIGATION SECURED BY IT IS VOID. NO A contract is to be judged by its character, and courts will look to the substance and not to the mere form of the transaction. The freedom of contract is both a constitutional and statutory right and to uphold this right, courts should move with all the necessary caution and prudence in holding contracts void. (People vs. Pomar, 46 Phil., 440; Ferrazzini vs. Gsell, 34 Phil., 697.) Courts should not rashly extend the rule which holds that a contract is void as against public policy. The term "public policy" is vague and uncertain in meaning, floating and changeable in connotation. It may be said, however, that, in general, a contract which is neither prohibited by law nor condemned by judicial decision, nor contrary to public morals, contravenes no public policy. In the absence of express legislation or constitutional prohibition, a court, in order to declare a contract void as against public policy, must find that the contract as to the consideration or thing to be done, has a tendency to injure the public, is against the public good, or contravenes some established interests of society, or is inconsistent with sound policy and good morals, or tends clearly to undermine the security of individual rights, whether of personal liability or of private property. Examining the contract at bar, we are of the opinion that it does not in anyway militate against the public good. Neither does it contravene the policy of the law nor the established interests of society. A consideration, in the legal sense of the word is some right, interest, benefit, or advantage conferred upon the promisor, to which he is otherwise not lawfully entitled, or any detriment, prejudice, loss, or disadvantage suffered or undertaken by the promisee other than to such as he is at the time of consent bound to suffer. We think that there is sufficient consideration in this contract, for, according to the Court of Appeals, "it has been satisfactorily established that it was executed voluntarily by the latter to guarantee the deficiencies resulting from his erroneous appraisals of the jewels." A preexisting admitted liability is a good consideration for a promise. The fact that the bargain is a hard one will not deprive it of validity. The exception to this rule in modern legislation is where the inadequacy is so grow as to amount to fraud, oppression or undue influence, or when statutes require the consideration to be adequate. We are not convinced that the instant case falls within the exception. Statutory requirements as to forms or words of the affidavits in chattel mortgage contracts must be substantially, but need not be literally, complied with.

On 3 Oct 1908, the parties entered into another agreement, replacing the old; said agreement bound Endencia to deliver the land, upon receiving the Torrens title, to the Hongkong and Shanghai Bank in Manila, to be forwarded to the Crocker National Bank in San Francisco, where it was to be delivered to the plaintiff upon payment of a balance of P3,100 The Torrens certificate was in time issued to Teodorica Endencia, but in the course of the proceedings relative to the registration of the land, it was found by official survey that the area of the tract inclosed in the boundaries stated in the contract was about 1,248 hectares instead of 452 hectares as stated in the contract Due to this, Endencia became reluctant to transfer the whole tract to the purchaser Daywalt; this led to litigation which upon appeal to the SC, Daywalt obtained a decree for specific performance; such decree appears to have become finally effective in early 1914 The defendant, La Corporacion de los Padres Recoletos, is a religious corporation, with its domicile in the city of Manila Said corporation was formerly the owner of a large tract of land, known as the San Jose Estate, on the island of Mindoro, which was sold to the Government of the Philippine Islands in the year 1909 The same corporation was at this time also the owner of another estate on the same island immediately adjacent to the land which Endencia had sold to Daywalt Its representative, Fr. Sanz, had long been well acquainted with Teodorica Endencia and exerted over her an influence and ascendency due to his religious character as well as to the personal friendship which existed between them Teodorica appears to be a woman of little personal force, easily subject to influence, and upon all the important matters of business was accustomed to seek, and was given the advice of Father Sanz and other members of his order with whom she came in contact

Page 38 of 51 However, the Torrens title was still in Labargas hands, the latter having refused to turn said title over to Endencia; thus, the contract could not be consummated

ISSUES WON damages in the 1st cause of action should be increased (1st cause of action) NO The trial court rightly ignored the fact that the defendant corporation had paid Teodorica Endencia for use and occupation of the same land during the period in question at the rate of P425 per annum, inasmuch as the final decree of this court in the action for specific performance is conclusive against her right And as the defendant corporation had notice of the rights of the plaintiff under his contract of purchase, it can not be permitted that the corporation should escape liability in this action by proving payment of rent to a person other than the true owner From this it will be seen that the trial court estimated the rental value of the land for grazing purposes at 50 centavos per hectare per annum, and roughly adopted the period of four years as the time for which compensation at that rate should be made. As the court had already found that the defendant was liable for these damages from June, 1, 1909, to May 1, 1914, or a period of four years and eleven months, there seems some ground for the contention made in the appellant's first assignment of error that the court's computation was erroneous Notwithstanding this circumstance, we are of the opinion that the damages assessed are sufficient to compensate the plaintiff for the use and occupation of the land during the whole time it was used

There is evidence in the record strongly tending to show that the wrongful use of the land by the defendant was not continuous throughout the year but was confined mostly to the season when the forage obtainable on the land of the defendant was not sufficient to maintain its cattle, for which reason it became necessary to allow them to go over to pasture on the land in question Sanz was aware of the contract of 1902 (first contract to sell); the other members as well as Sanz also WON a person who is not a party to a contract of 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 knew about the 2nd contract executed in 1903 resist an action for specific performance When the Torrens certificate was finally issued in 1909 in favor of Teodorica Endencia, she delivered it NO for safekeeping to the defendant corporation, and it was then taken to Manila where it remained in the To our mind a fair conclusion on this feature of the case is that father Juan Labarga and his associates custody and under the control of P. Juan Labarga believed in good faith that the contract could not be enforced and that Teodorica would be wronged if it When defendant sold the San Jose Estate in 1909, some 2,368 head of cattle were removed to the should be carried into effect estate of the corporation immediately adjacent to the property which the plaintiff had purchased from The attorney for the plaintiff maintains that, by interfering in the performance of the contract in Teodorica Endencia question and obstructing the plaintiff in his efforts to secure the certificate of title to the land, the As Teodorica still retained possession of said property Father Sanz entered into an arrangement with her defendant corporation made itself a co-participant with Teodorica Endencia in the breach of said whereby large numbers of cattle belonging to the defendant corporation were pastured upon said land contract during a period extending from June 1, 1909, to May 1, 1914 and inasmuch as Labarga, at the time of said unlawful intervention between the contracting parties was Plaintiff seeks to recover from corporation P24000 as damages for the use and occupation of the land by fully aware of the existence of the contract (Exhibit C) which the plaintiff had made with S. B. reason of pasturing the cattle during the said period Wakefield, of San Francisco, it is insisted that the defendant corporation is liable for the loss consequent TC fixed damages at P2497 upon the failure of the project outlined in said contract Plaintiff appealed for higher damages; defendant did not question the fact of awarding damages per se Plaintiff relies on English and US decisions which have ruled that a person who is a stranger to a in the first cause of action contract may, by an unjustifiable interference in the performance thereof, render himself liable for the In the 2nd cause of action plaintiff seeks to recover from defendant P500,000, as damages on the damages consequent upon non-performance, as recognized in Gilchrist v Cuddy ground that said corporation, for its own selfish purposes, unlawfully induced Teodorica Endencia to Upon the said authorities it is enough if the wrongdoer having knowledge of the existence of the refrain from the performance of her contract for the sale of the land in question and to withhold delivery contract relation in bad faith sets about to break it up. Whether his motive is to benefit himself or to the plaintiff of the Torrens title, and further, maliciously and without reasonable cause, maintained gratify his spite by working mischief to the employer is immaterial her in her defense to the action of specific performance which was finally decided in favor of the plaintiff If a party enters into contract to go for another upon a journey to a remote and unhealthful climate, and in this court a third person with a bona fide purpose of benefiting the one who is under contract to go dissuades him In 1911, it appears, the plaintiff, as the owner of the land which he had bought from Endencia entered from the step, no action will lie into a contract (Exhibit C) with S. B. Wakefield, of San Francisco, for the sale and disposal of said lands to a sugar growing and milling enterprise the successful launching of which depended on the ability of Daywalt to get possession of the land and the Torrens certificate of title Uplawb2008group1 (carrie,elson,ia,izzy,mac,mel,sanne,varz)

But if the advice is not disinterested and the persuasion is used for "the indirect purpose of benefiting the defendant at the expense of the plaintiff," the intermedler is liable if his advice is taken and the contract broken no question can be made as to the liability of one who interferes with a contract existing between others by means which under known legal canons 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 It is authority for the proposition that one who buys something which he knows has been sold to some other person can be restrained from using that thing to the prejudice of the person having the prior and better right 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. 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 The SC takes the rule to mean 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 Nevertheless, it must be admitted that the codes and jurisprudence of the civil law furnish a somewhat uncongenial field in which to propagate the idea that a stranger to a contract may be sued for the breach thereof 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 generative of civil liability, and the right of action ex- contractu against a party to the contract resulting from the breach thereof we are of the opinion that neither the doctrine of Lumley vs. Gye nor the application made of it by this court in Gilchrist vs. Cuddy, affords any basis for the recovery of the damages which the plaintiff is supposed to have suffered by reason of his inability to comply with the terms of the Wakefield contract 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 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; the defendants liability cannot exceed Endencias (Court proceeds to determine Endencias liability) Indemnification for damages resulting from the breach of a contract is a right inseparably annexed to every action for the fulfillment of the obligation (art. 1124) and it is clear that if damages are not sought or recovered in the action to enforce performance they cannot be recovered in an independent action The right of action for damages was exhausted in the prior suit for performance; however, her attorneys did not interpose res judicata, and that the defendants were not parties of the previous action The damages ordinarily and normally recoverable against a vendor for failure to deliver land which he has contracted to deliver is the value of the use and occupation of the land for the time during which it is wrongfully withheld

Page 39 of 51 And of course where the purchaser has not paid the purchase money, a deduction may be made in respect to the interest on the money which constitutes the purchase price 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 reasonably foreseen in the light of the facts then known to the contracting parties Where the purchaser desires to protect himself, in the contingency of the failure of the vendor promptly to give possession from the possibility of incurring other damages than such as are incident to the normal value of the use and occupation, he should cause to be inserted in the contract a clause providing for stipulated amount to be paid upon failure of the vendor to give possession no case has been called to our attention where in the absence of such a stipulation, damages have been held to be recoverable by the purchaser in excess of the normal value of use and occupation The discusion contained in the opinion of the court in that case leads to the conclusion that the damages recoverable in case of the breach of a contract are two sorts, namely, (1) the ordinary, natural, and in a sense necessary damage; and (2) special damages Ordinary damages is found in all breaches of contract where there are no special circumstances to distinguish the case specially from other contracts. The consideration paid for an unperformed promise is an instance of this sort of damage 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." The statement that special damages may be recovered where the likelihood of such damages flowing from the breach of the contract is contemplated and foreseen by the parties needs to be supplemented by a proposition which though not enunciated in Hadley vs. Baxendale, is yet clearly to be drawn from subsequent cases This is that 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 therefore 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 the damages laid under the second cause of action in the complaint could not be recovered from her, first, because the damages in question are special damages which were not within contemplation of the parties when the contract was made, and 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 principal in the contract

ROSENSTOCK V. BURKE (September 26, 1924) Ponente: Avancea FACTS The defendant Edwin Burke owned a motor yacht, known as Bronzewing, which he acquired in Australia in the year 1920 for the purpose of selling it here. This yacht was purely for recreation and as no purchaser presented himself, it had been moored for several months until the plaintiff H. W. Elser, at the beginning of the year 1922, began negotiations with the defendant for the purchase thereof. At the time this yacht was mortgaged to the Asia Banking Corporation to secure the payment of a debt of P100,000 which was due and unpaid since one year prior thereto, contracted by the defendant in favor of said bank of which Mr. Avery was then the manager.

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The plan of the plaintiff was to organize a yacht club and sell it afterwards the yacht for P120,000, of which P20,000 was to be retained by him as commission and the remaining P100,000 to be paid to the defendant. To carry out his plan, the plaintiff proposed to the defendant to make a voyage on board the yacht to the south, with prominent business men for the purpose, undoubtedly, of making an advantageous sale. But as the yacht needed some repairs to make it seaworthy for this voyage, and as, on the other hand, the defendant said that he had no funds to make said repairs, the plaintiff paid almost all their amount. It has been stipulated that the plaintiff was not to pay anything for the use of the yacht. The cost of those repairs was P6,972.21, which was already paid by the plaintiff, plus P1,730.84 due to the Cooper Company which still remains unpaid, plus P832.93, due to the plaintiff, which also remains unpaid. Once the yacht was repaired, the plaintiff gave receptions on board, and on March 6, 1922, made his pleasure voyage to the south, coming back on the 23d of the same month. The plaintiff never accepted the offer of the defendant for the purchase of the yacht contained in the letter of option of February 12, 1922. The plaintiff believed, in view of the result of that voyage, that it was convenient to replace the engine of the yacht with a new one which would cost P20,000. In this connection the plaintiff had negotiated with Mr. Avery for another loan of P20,000 with which to purchase this new engine. On the 31st of that month of March the plaintiff wrote the defendant a letter informing him, among other things, that after he had tried to obtain from Mr. Avery said new loan of P20,000 for the purchase of the engine, and that he was not disposed to purchase the vessel for more than P70,000, Mr. Avery had told him that he was not in position to give one cent more. In this letter the plaintiff suggested to the defendant that he should speak with Mr. Avery about the matter. The defendant, after an interview with Mr. Avery held on the same day, answered the plaintiff that he had arrived at an agreement with Mr. Avery about the sale of the yacht to the plaintiff for P80,000 payable as follows: P5,000 each month during the first six months and P10,000 thereafter until full payment of the price, the yacht to be mortgaged to secure payment thereof. On the first of April next, the plaintiff informed the defendant that he was not inclined to accept this proposition. On the morning of the 3rd of the same month, the defendant called at the office of the plaintiff to speak with him about the matter and as a result of the interview held between them, the plaintiff in the presence of the defendant wrote a letter addressed to the latter which is literally as follows:

Page 40 of 51 the yacht, it was impossible for him to take charge of the boat and he made delivery thereof to the defendant. On the 8th of the same month of April the defendant answered the plaintiff that as he had accepted, with the consent of the Asia Banking Corporation, through Mr. Avery, the offer for the purchase of the yacht made by the plaintiff in his letter of the 3rd of April , he made demand on him for the performance thereof.

ISSUE 1 WON the letter was a definite offer to purchase. And the same having been accepted by the defendant with the consent of Mr. Avery on behalf of the Asia Banking Corporation, WON it is a contract of sale valid and binding against the plaintiff. HELD/RATIO 1: No to both. The letter of the plaintiff of April 3, 1922, was not a definite offer; hence, it is not a contract of sale binding against the plaintiff.

As was seen, this letter begins as follows: "In connection with the yacht Bronzewing, I am in position and am willing to entertain the purchase of it under the following terms . . . .". To convey the idea of a resolution to purchase, a man of ordinary intelligence and common culture would use these clear and simple words, I offer to purchase, I want to purchase, I am in position to purchase. And the stronger is the reason why the plaintiff should have expressed his intention in the same way, because, according to the defendant, he was a prosperous and progressive merchant. It must be presumed that a man in his transactions in good faith uses the best means of expressing his mind that his intelligence and culture permit so as to convey his will faithfully and unequivocally. But the plaintiff instead of using a language of easy and unequivocal meaning, used this other, I am in position and am willing to entertain the purchase of the yacht. The word "entertain" applied to an act does not mean the resolution to perform said act, but simply a position to deliberate for deciding to perform or not to perform said act. The intention has to be considered based on the circumstances. Taking into account only the literal and technical meaning of the word "entertain," the letter of the plaintiff cannot be interpreted as a definite offer to purchase the yacht, but simply a position to deliberate whether or not he would purchase the yacht. It was but a mere invitation to a proposal being made to him, which might be accepted by him or not. Also, the plaintiff never thought of acquiring the yacht for his personal use, but for the purpose of selling it to another or to acquire it for another, thereby obtaining some gain from the transaction, and it can be said that the only thing the plaintiff wanted in connection with this yacht was that the defendant should procure its sale, naturally with some profit for himself. For this reason the original idea of the plaintiff was to organize a yacht club that would afterwards acquire the yacht through him, realizing some gain from the sale. This is clearly stated in the letter containing the option that the defendant gave him on February 12, 1922. This accounts for the fact that the plaintiff was not in a position to make a definite offer to purchase, he being sure to be able to resell the yacht to another, and this explains why he did not say in his letter of the 3rd of April that he was in position to purchase the yacht, but only to entertain this purchase. The resolution of the plaintiff to acquire the yacht depended upon him being able to replace the engine, and this, in turn, depended upon the plaintiff being successful in obtaining the P20,000 (from Mr. Avery) that the new engine was to cost. This accounts also for the fact that the plaintiff was not in position to make a definite offer. The letter was written by his stenographer Mr. Parkins in his office and in the presence of the defendant who has been there precisely for the purpose of speaking about this purchase. According to the plaintiff when he was dictating that part wherein he said that he was in position to entertain the purchase of the yacht, the defendant interrupted him and suggested the elimination of the word entertain and the substitution therefor

MY DEAR MR. BURKE:

In connection with the yacht Bronzewing, I am in position and am willing to entertain the purchase of it under the following terms: (a) The purchase price to be P80,000, Philippine currency. (b) Initial payment of P10,000 to be made within sixty (60) days. (c) Payment of the balance to be made in installments of P5,000 per month, with interest on deferred payments at 9 per cent payable semiannually. (d) As security for the above, I am to deposit with you P80,000, in stock of the J. K. Pickering Co., commercial value P400,000, book value P600,000. Statement covering this will be furnished you on request. The defendant took this letter and went to the Asia Banking Corporation and after holding an interview with Mr. Avery, both of them signed at the bottom of the letter of Mr. Elser, as appear there. On the 5th of the same month of April the plaintiff sent the defendant another letter, telling him that in view of the attitude of Mr. Avery as to the loan of P20,000 in connection with the installation of a new engine in

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of a definite offer, but after a discussion between them, during which the plaintiff clearly said that he was not in position to make a definite offer, the word entertain now appearing in the letter was preserved. A proposition may be acceptable in itself, but its acceptance may depend on other circumstances; thus one may say that a determinate proposition is acceptable, and yet he may not be in a position to accept the same at the moment. The acceptance of the defendant placed at the bottom of this letter has not other meaning than that of accepting the proposition to make this offer. ISSUE 2 Who must pay the repairs made on the yacht? HELD/RATIO 2: The plaintiff is bound to pay the amount of the repairs of the yacht in exchange for the use thereof. The plaintiff was the one who directly and personally ordered these repairs. Nothing was agreed upon about the kind of the repairs to be made on the yacht and there was no limit to said repairs. It seems strange that the defendant should accept liability for the amount of these repairs, leaving their extent entirely to the discretion of the plaintiff. RULING: Judgment reversed. SEPARATE OPINIONS JOHNS, J., concurring and dissenting: Upon all other matters, I agree with the opinion of Justice Avancea. But in the reversal of the judgment in favor of Burke and against Elser, I vigorously dissent. Elser did not object to the price of P80,000, and that his only objection was to the terms of payment of P5,000 monthly for the first six months, and P10,000 a month until the balance is paid. The record is conclusive that Elser remained silent for 2 whole days when he wrote Burke that because of the attitude of Mr. Avery regarding the advance to him of P20,000, "that he would not assume liability" or make the purchase. In other words, after a lapse of 2days, and because of the attitude of Avery, and for no other or different reason, Elser declined to make the purchase. It will be noted that the letter is unconditional, and that the proposition is not made contingent on the attitude of Avery or anything else. In one letter Elser says in legal effect that "I am not in position to accept the proposition of Mr. Avery," and 2 days later, he says: "I am in position." The use of the words "I am not in position" on April 1, and the use of the words "I am in position, 2 days later are, indeed; very significant. Yet, in the face of those letters, on April 6, he declined to make the purchase solely on account of the attitude of Avery, and for no other or different reason. When the purpose and intent with which the letter was written, and the language used in the previous letters and the subsequent letter of April 6 are considered, the meaning of the word "entertain" is very apparent. The minds of the parties had met. They had agreed upon the price, the terms and conditions of the sale, and the security to be given, all of which was reduced to writing, and signed by the respective parties, and when that is done, under the authorities above cited, it constitutes a valid and binding contract. MALBAROSA V. CA G.R. No. 125761 April 30, 2003 CALLEJO, SR., J.: o Parties to the case: Philtectic Corporation and Commonwealth Insurance Co., Inc. were only two of the group of companies wholly-owned and controlled by respondent S.E.A. Development Corporation (SEADC). The petitioner Salvador P. Malbarosa was the president and general manager of Philtectic Corporation, and an officer of other corporations belonging to the SEADC group of companies. The respondent assigned to the petitioner one of its vehicles covered by Cert of Reg No. 04275865 described as a 1982 model Mitsubishi Gallant Super Saloon, with plate number PCA 180 for his use.

Page 41 of 51 Respondent was also issued membership certificates in the Architectural Center, Inc. Louis Da Costa was the president of the respondent and Commonwealth Insurance Co., Inc. Senen Valero was the Vice-Chairman of the Board of Directors of the respondent and ViceChairman of the Board of Directors of Philtectic Corporation. o first week of January 1990 - petitioner intimated to Senen Valero his desire to retire from the SEADC group of companies and requested that his 1989 incentive compensation as president of Philtectic Corporation be paid to him. o January 8, 1990 - the petitioner sent a letter to Senen Valero tendering his resignation, effective February 28, 1990 from all his positions in the SEADC group of companies, and reiterating therein his request for the payment of his incentive compensation for 1989. o Louis Da Costa met with the petitioner on two occasions: February 5, 1990 to discuss the amount of the 1989 incentive compensation petitioner was entitled to, and the mode of payment thereof; Da Costa ventured that the petitioner would be entitled to an incentive compensation in the amount of P395,000. March 14, 1990, the respondent, through Senen Valero, signed a letter-offer addressed to the petitioner stating therein that petitioner's resignation from all the positions in the SEADC group of companies had been accepted by the respondent, and that he was entitled to an incentive compensation in the amount of P251,057.67, and proposing that the amount be satisfied, thus: - The 1982 Mitsubishi Super saloon car assigned to you by the company shall be transferred to you at a value of P220,000.00. (Although you have indicated a value of P180,000.00, our survey in the market indicates that P220,000.00 is a reasonable reflection of the value of the car.) - The membership share of our subsidiary, Tradestar International, Inc. in the Architectural Center, Inc. will be transferred to you. (Although we do not as yet have full information as to the value of these shares, we have been informed that the shares have traded recently in the vicinity of P60,000.00.) - The respondent required that if the petitioner agreed to the offer, he had to affix his conformity on the space provided therefor and the date thereof on the right bottom portion of the letter. o March 16, 1990 - Da Costa met with the petitioner and handed to him the original copy of the March 14, 1990 Letter-offer for his consideration and conformity. o The petitioner was dismayed when he read the letter and learned that he was being offered an incentive compensation of only P251,057.67. o He told Da Costa that he was entitled to no less than P395,000 as incentive compensation. o The petitioner refused to sign the letter-offer on the space provided therefor. o He received the original of the letter and wrote on the duplicate copy of the letter-offer retained by Da Costa, the words: "Rec'd original for review purposes." o Despite the lapse of more than two weeks, the respondent had not received the original of the March 14, 1990 Letter-offer of the respondent with the conformity of the petitioner on the space provided therefor. o The respondent decided to withdraw its March 14, 1990 Offer. o April 3, 1996 - the Board of Directors of the respondent approved a resolution authorizing the Philtectic Corporation and/or Senen Valero to demand from the petitioner for the return of the car and to take such action against the petitioner, including the institution of an action in court against the petitioner for the recovery of the motor vehicle. o April 4, 1990 - Philtectic Corporation, through its counsel, wrote the petitioner withdrawing the March 14, 1990 Letter-offer of the respondent and demanding that the petitioner return the car and his membership certificate in the Architectural Center, Inc. within 24 hours from his receipt thereof. o The petitioner received the original copy of the letter on the same day. o April 7, 1990 - the petitioner wrote the counsel of Philtectic Corporation informing the latter that he cannot comply with said demand as he already accepted the March 14, 1990 Letter-offer of the respondent when he affixed on March 28, 1990 his signature on the original copy of the letter-offer.

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The petitioner enclosed a xerox copy of the original copy of the March 14, 1990 Letter-offer of the respondent, bearing his signature on the space provided therefore dated March 28, 1990. o With the refusal of the petitioner to return the vehicle, the respondent, as plaintiff, filed a complaint against the petitioner, as defendant, praying: (1) Before hearing and upon approval of plaintiff's bond, a writ be issued immediately for the seizure of the vehicle described in paragraph 3 hereof, wherever it may be found, and for its delivery to plaintiff; (2) After trial of the issues, judgment be rendered adjudging that plaintiff has the right to the possession of the said motor vehicle, and, in the alternative, that defendant must deliver such motor vehicle to plaintiff or pay to plaintiff the value thereof in case delivery cannot be made; (3) After trial, hold the defendant liable to plaintiff for the use of the motor vehicle in the amount of P1,000.00 per day from date of demand until the motor vehicle is returned to plaintiff. (4) After trial, hold the defendant liable to plaintiff for attorney's fees and costs of litigation in the amount of P100,000.00. Plaintiffs likewise prays for such other reliefs as are just and equitable under the circumstances. o April 30, 1990 - TC issued an order for the issuance of a writ of replevin o May 8, 1990 the writ of replevin was issued o May 11, 1990 - the Sheriff served the writ on the petitioner and was able to take possession of the vehicle in question. o May 15, 1990 - the petitioner was able to recover the possession of the vehicle upon his filing of the counter-bond. o In his Answer to the complaint, the petitioner, as defendant therein, alleged that: (1) he had already agreed on March 28, 1990 to the March 14, 1990 Letter-offer of the respondent, the plaintiff therein, and (2) he had notified the said plaintiff of his acceptance; (3) hence, he had the right to the possession of the car. (4) Philtectic Corporation had no right to withdraw the offer of the respondent SEADC. (5) The petitioner testified that after conferring with his counsel, he had decided to accept the offer of the respondent, and had affixed his signature on the space below the word "Agree" in the March 14, 1990 Letter-offer (6) The petitioner adduced evidence that on March 9, 1990, he had written Senen Valero that he was agreeable to an incentive compensation of P218,000 to be settled by the respondent by transferring the car to the petitioner valued at P180,000 and P38,000 worth of shares of the Architectural Center, Inc. on the claim of Da Costa that respondent was almost bankrupt. (7) However, the petitioner learned that the respondent was financially sound; hence, he had decided to receive his incentive compensation of P395,000 in cash. (8) On March 29, 1990, the petitioner called up the office of Louis Da Costa to inform the latter of his acceptance of the letter-offer of the respondent. (9) However, the petitioner was told by Liwayway Dinglasan, the telephone receptionist of Commonwealth Insurance Co., that Da Costa was out of the office. T (10)he petitioner asked Liwayway to inform Da Costa that he had called him up and that he had already accepted the letter-offer. Liwayway promised to relay the message to Da Costa. (11)Liwayway testified that she had relayed the petitioner's message to Da Costa and that the latter merely nodded his head. o July 28, 1992 TC rendered decision ordering the defendant: o

Page 42 of 51 notify the respondent of his acceptance of said letter-offer before the respondent withdrew the same. o The respondent filed a motion for the amendment of the decision of the trial court, praying that the petitioner should be ordered to pay to the respondent reasonable rentals for the car. o October 10, 1992 - the court a quo issued an order, granting plaintiff's motion and amending the dispositive portion of its July 28, 1992 Decision: (1) Ordering defendant to pay to plaintiff lease rentals for the use of the motor vehicle at the rate of P1,000.00 per Day from May 8, 1990 up to the date of actual delivery to the plaintiff of the motor vehicle; and (2) Ordering First Integrated Bonding & Insurance Co. to make good on its obligations to plaintiff under the Counterbond issued pursuant to this case. o The petitioner appealed from the decision and the order of the court a quo to the Court of Appeals. o February 8, 1996 - CA rendered its Decision, affirming the decision of the TC with the MODIFICATION that the period of payment of rentals at the rate of P1,000.00 per day shall be from the time this decision becomes final until actual delivery of the motor vehicle to plaintiffappellee is made. Costs against the defendant-appellant. o CA stated that the petitioner had not accepted the respondent's March 14, 1990 Letter-offer before the respondent withdrew said offer on April 4, 1990. o The petitioner filed a petition for review on certiorari of the decision of the CA. WON: (1) there was a valid acceptance on his part of the March 14, 1990 Letter-offer of the respondent - NO = petitioner o respondent had given him a reasonable time from March 14, 1990 within which to accept or reject its March 14, 1990 Letter-offer. o already accepted the offer of the respondent when he affixed his conformity thereto on the space provided therefor on March 28, 1990 o had sent to the respondent corporation on April 7, 1990 a copy of said March 14, 1990 Letter-offer bearing his conformity to the offer of the respondent o hence, the respondent can no longer demand the return of the vehicle in question. o had already impliedly accepted the offer when after said respondent's offer, he retained possession of the car. = respondent o the issues raised by the petitioner are factual. o The jurisdiction of the Court under Rule 45 of the Rules of Court, as amended, is limited to revising and correcting errors of law of the CA. o As concluded by the Court of Appeals, there had been no acceptance by the petitioner of its March 14, 1990 Letter-offer. o The receipt by the petitioner of the original of the March 14, 1990 Letter-offer for review purposes amounted merely to a counter-offer of the petitioner. o The findings of the Court of Appeals are binding on the petitioner. o The petitioner adduced no proof that the respondent had granted him a period within which to accept its offer. o The latter deemed its offer as not accepted by the petitioner in light of petitioner's ambivalence and (1) To deliver the motor vehicle prescribed [sic] in the complaint to plaintiff SEADC, or pay its value of indecision on March 16, 1990 when he received the letter-offer of respondent. P220,000 in case delivery cannot be made; = Court (2) pay plaintiff SEADC P50,000 as and for attorney's fees; and o Under Article 1318 of the Civil Code, the essential requisites of a contract are as follows: (3) Cost of litigation. o The trial court stated that there existed no perfected contract between the petitioner and the *** Art. 1318. There is no contract unless the following requisites concur: respondent on the latter's March 14, 1990 Letter-offer for failure of the petitioner to effectively (1) Consent of the contracting parties; (2) Object certain which is the subject matter of the contract; Uplawb2008group1 (carrie,elson,ia,izzy,mac,mel,sanne,varz)

(3) Cause of the obligation which is established. o Under Article 1319 of the New Civil Code, the consent by a party is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. o An offer may be reached at any time until it is accepted. An offer that is not accepted does not give rise to a consent. o The contract does not come into existence.

o
o o o o o o o

o
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o o o o

To produce a contract, there must be acceptance of the offer which may be express or implied but must not qualify the terms of the offer. The acceptance must be absolute, unconditional and without variance of any sort from the offer. The acceptance of an offer must be made known to the offeror. Unless the offeror knows of the acceptance, there is no meeting of the minds of the parties, no real concurrence of offer and acceptance. The offeror may withdraw its offer and revoke the same before acceptance thereof by the offeree. The contract is perfected only from the time an acceptance of an offer is made known to the offeror. If an offeror prescribes the exclusive manner in which acceptance of his offer shall be indicated by the offeree, an acceptance of the offer in the manner prescribed will bind the offeror. On the other hand, an attempt on the part of the offeree to accept the offer in a different manner does not bind the offeror as the absence of the meeting of the minds on the altered type of acceptance. An offer made inter praesentes must be accepted immediately. If the parties intended that there should be an express acceptance, the contract will be perfected only upon knowledge by the offeror of the express acceptance by the offeree of the offer. An acceptance which is not made in the manner prescribed by the offeror is not effective but constitutes a counter-offer which the offeror may accept or reject. The contract is not perfected if the offeror revokes or withdraws its offer and the revocation or withdrawal of the offeror is the first to reach the offeree. The acceptance by the offeree of the offer after knowledge of the revocation or withdrawal of the offer is inefficacious. The termination of the contract when the negotiations of the parties terminate and the offer and acceptance concur, is largely a question of fact to be determined by the trial court. In this case, there was no contract perfected between the petitioner and the respondent corporation. Although the petitioner claims that he had affixed his conformity to the letter-offer on March 28, 1990, the petitioner failed to transmit the said copy to the respondent. It was only on April 7, 1990 when the petitioner appended to his letter to the respondent a copy of the said March 14, 1990 Letter-offer bearing his conformity that he notified the respondent of his acceptance to said offer. But then, the respondent, through Philtectic Corporation, had already withdrawn its offer and had already notified the petitioner of said withdrawal via respondent's letter dated April 4, 1990 which was delivered to the petitioner on the same day. Indubitably, there was no contract perfected by the parties on the March 14, 1990 Letter-offer of the respondent. The petitioner's plaint that he was not accorded by the respondent reasonable time to accept or reject its offer does not persuade. It must be underscored that there was no time frame fixed by the respondent for the petitioner to accept or reject its offer. When the offeror has not fixed a period for the offeree to accept the offer, and the offer is made to a person present, the acceptance must be made immediately. In this case, the respondent made its offer to the petitioner when Da Costa handed over on March 16, 1990 to the petitioner its March 14, 1990 Letter-offer but that the petitioner did not accept the offer. The respondent, thus, had the option to withdraw or revoke the offer, which the respondent did on April 4, 1990. Even if it is assumed that the petitioner was given a reasonable period to accept or reject the offer of the respondent, the evidence on record shows that from March 16, 1990 to April 3, 1990, the petitioner

Page 43 of 51 had more than two weeks which was more than sufficient for the petitioner to accept the offer of the respondent. o Although the petitioner avers that he had accepted the offer of the respondent on March 28, 1990, however, he failed to transmit to the respondent the copy of the March 14, 1990 Letter-offer bearing his conformity thereto. o Unless and until the respondent received said copy of the letter-offer, it cannot be argued that a contract had already been perfected between the petitioner and the respondent. WON: (2) there was an effective withdrawal by the respondent of said letter-offer - YES = petitioner o Philtectic Corporation, although a wholly-owned and controlled subsidiary of the respondent, had no authority to withdraw the offer of the respondent. o resolution of the respondent authorizing Philtectic Corporation to take such action against the petitioner including the institution of an action against him for the recovery of the subject car does not authorize Philtectic Corporation to withdraw the March 14, 1990 Letter-offer of the respondent. o withdrawal by Philtectic Corporation on April 4, 1990 of the offer of the respondent was ineffective insofar as the petitioner was concerned. = respondent o petitioner had failed to put in issue the matter of lack of authority of Philtectic Corporation to withdraw for and in behalf of the respondent its March 14, 1990 Letter-offer. o the authority of Philtectic Corporation to take such action including the institution of an action against the petitioner for the recovery of the car necessarily included the authority to withdraw the respondent's offer. o Even then, there was no need for the respondent to withdraw its offer because the petitioner had already rejected the respondent's offer on March 16, 1990 when the petitioner received the original of the March 14, 1990 Letter-offer of the respondent without the petitioner affixing his signature on the space therefor. = Court o Implicit in the authority given to Philtectic Corporation to demand for and recover from the petitioner the subject car and to institute the appropriate action against him to recover possession of the car is the authority to withdraw the respondent's March 14, 1990 Letter-offer. o It cannot be argued that respondent authorized Philtectic Corporation to demand and sue for the recovery of the car and yet did not authorize it to withdraw its March 14, 1990 Letter-offer to the petitioner. o Besides, when he testified, Senen Valero stated that the April 4, 1990 letter of Philtectic Corporation to the petitioner was upon his instruction and conformably with the aforesaid resolution of the Board of Directors of the respondent IN LIGHT OF ALL THE FOREGOING, the petition is dismissed. The Decision of the Court of Appeals is AFFIRMED. COQUIA V. FIELDREN'S Facts: On Dec. 1, 1961, The Fieldmens Insurance Co. issued in favor of the Manila Yellow Taxicab Co. a common carrier accident insurance policy, covering the period from Dec. 1, 1961 to Dec. 1, 1962. It was stipulated in said policy that the Company will indemnify the Insured in the event of accident against all sums which the Insured will become legally liable to pay for the death or bodily injury to any fare-paying passenger including the driver, conductor and/or inspector who is riding in the motor vehicle insured at the time of accident or injury. On Feb. 10, 1962, as a result of a vehicular accident, Carlito Coquia, driver of one of the vehicles covered by said policy, was killed. Because of the failure of the Company and the Insured to agree with respect to the amount to be paid to the heirs of the driver, the Insured and the parents of Carlito, the Coquias, finally brought this action against the Company to collect the proceeds of the aforementioned policy. Issue: WON the Coquias have no cause of action because they have no contractual relation with the Company.

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Held: No. The Coquias have a cause of action Ratio: Although in general, only parties to a contract may bring an action based thereon, this rule is subject to exceptions, one of which is found in the second paragraph of Art. 1311 of the Civil Code of the Philippines. This is but a restatement of a well-known principle concerning contracts pour autrui, the enforcement of which may be demanded by a third party for whose benefit it was made, although not a party to the contract, before the stipulation in his favor has been revoked by the contracting parties. Does the policy in question belong to such class of contracts pour autrui? The policy provides, inter alia, that the Company will indemnify any authorized driver who is driving the motor vehicle of the Insured and, in the event of death of said driver, the Company shall, likewise, indemnify his personal representatives. Thus, the policy is typical of contracts pour autrui, this characteristic being made more manifest by the fact that the deceased driver, paid fifty percent of the premiums, which were deducted from his weekly commissions. Under these conditions, the Coquias who, admittedly are the sole heirs of the deceased have a direct cause of action against the Company, and, since they could have maintained this action themselves, without the assistance of the Insured, it goes without saying that they could and did properly join the latter in filing the complaint hereon. ASIAIN V. JALANDONI Facts: The record show that the plaintiff offered to sell to the defendant a certain hacienda for P55, 000. During the negotiation, he told the defendant that it contained between 25 and 30 hectares and that the cane then planted would produce 2, 000 piculs of sugar. Although doubtful of the extent of the land, the defendant finally accepted the offer, paid P30, 000 of the purchase price and took possession of the land. While thus in possession, he discovered that the land was only about 18 hectares and the cane only about 800 piculs of sugar. Because of this discovery, he refused to pay the balance of the purchase price. As a consequence, plaintiff commenced this action to recover the said balance. To the complaint, defendant filed an answer and a counter complaint, asking the contract be annulled. Issue: WON the specific performance of the contract can be allowed at the instance of the (vendor) Held: No Ratio: Coordinating more closely the law and the facts in the instant case, we reach the following conclusions: This was not a contract of hazard. It was a sale in gross in which there was mutual mistake as to the quantity of land sold as to the amount of the standing crop. The mistake of fact as disclosed not alone by the terms of the contract but by the attendant circumstances, which it is proper to consider in order to throw light upon the intention of the parties, is, as it is sometimes expressed, the efficient cause of the concoction. The mistake with reference to the subject matter of the contract is such that, at the option of the purchaser, the contract is rescissible (voidable). Without such mistake the agreement would not have made and since this is true, the agreement is inoperative. It is not deception but is more nearly akin to bilateral mistake for which relief should be granted. Specific performance of the contract can therefore not be allowed at the instance of the vendor. The ultimate result is to put the parties back in exactly their respective positions before they become involved in the negotiation and before accomplishment of the agreement. This was the decision of the trial judge and we think that decision conforms to the facts and principles of equality.

Page 44 of 51 Damasug, through her attorney, Andres Jaime, appeared in said court and demurred the complaint. It must be noted that defendant Modelo neither acted as an attorney or procurador judicial in said cases not is he a friend of Damasug. Defendant in this case, Felix Modelo, alleges that plaintiff Modelo owes him Php 333.49 which the latter used to maintain the two actions against Albarracin and Saiel. The amount covered expenses for attorneys fees, traveling and other expenses while Modelo was in Cebu. He further alleges that the document in question in this case, the document of sale of Damasugs parcels of land and carabao to defendant Damasug, was executed as payment for the Php 333.49 Damasug owes him. Damasug, supposedly knew of the nature and contents of the document and signed it. Plaintiff Damasug, on the other hand, maintains that she only owes Modelo Php101.00. And that some time on November, 1911, Modelo sent for her and after she was inside his house he told her to sign a document acknowledging that she owed him the sum of Php 101.00 for the work her had performed in her behalf in the two actions she had brought to recover her land. Damasug, who does not know how to write, signed by affixing her mark to the document believing in good faith that defendant had told her the truth. Three months later, Modelo took possession of two parcels of land and a carabao belonging to Damasug and notified the plaintiff that she had conveyed to him by absolute sale said properties. Damasug then instituted an action in the Court of First Instance of Cebu praying for the declaration of nullity of the alleged contract of purchase and sale on the basis that her consent to the contract was falsely and maliciously obtained. That defendant, seeming to have taken advantage of her illiteracy, lied about the real contents of the contract. The court ruled in favor of the plaintiff. ISSUE: WON the instrument of purchase and sale is null and void. RULING/RATIO: Yes. A written contract is null and void where one of the contracting parties gives his assent by a mistake which went to the very substance or essence of the subject matter of the contract, and where, had he been aware of the true context thereof, he would neither have accepted nor authenticated it with his signature or mark. (Arts 1256 and 1266, Civil Code) If the consent given by one of the contracting parties in a contract is null and void, the document in which such contract was set forth is also null, void, and without force or effect, and, therefore, when the nullity of the obligation has been declared, the contracting parties shall each restore the things which were the object of the contract, with the fruits thereof and the price with the interest thereon. ***The court found the plaintiffs version of events more realistic and her testimony more reliable.

MARTINEZ V. HSBC Facts: This is an action to annul a contract on the ground that plaintiffs consent thereto was obtained under duress. Under this contract, she agreed to a conveyance of several properties to Aldecoa & Co. and the Hongkong and Shanghai Bank as settlement of their claims against her and her husband who in order to escape criminal charges, had escaped to Macao, a territory not covered by any extradition treaty. It was established at the trial that during the period of negotiation, representations were made to her by the defendants and concurred in by her lawyers, that if she assented to the requirements of the defendants, the DUMASUG V. MODELO civil suit against herself and her husband would be dismissed and the criminal charges against the latter NATURE: Appeal from judgment of the court of First Instance of Cebu withdrawn, but if she refused, her husband must wither spend the rest of his life in Macao or be criminally FACTS: prosecuted. On October 12, 1910, Andrea Damasug filed suit in the justice of peace court of Argao against Rosales Issue: WON there was duress which would invalidate the contract? Albarracin and Gaudencio Saiel, for the recovery of a parcel of land belonging to her. Held: No Judgment was rendered in favor of Damasug. Ratio: In order that this contract can be annulled it must be shown that the plaintiff never gave her consent to Subsequently on March 2, 1911, Albaraccin and Saiel commenced proceedings in the Court of First the execution thereof. It is however necessary to distinguish between real duress and the motive which is Instance of Cebu praying for the annulment of judgment rendered in the court of the justice of peace of present when one gives his consent reluctantly. A contract is valid even though one of the parties entered Argao. Uplawb2008group1 (carrie,elson,ia,izzy,mac,mel,sanne,varz)

into it against his wishes and desires or even against his better judgment. Contracts are also valid even though they are entered into by one of the parties without hope of advantage or profit. A contract whereby reparation is made by one party for injuries which he has willfully inflicted upon another is one which from its inherent nature is entered into reluctantly by the party making the reparation. He is confronted with a situation in which he finds the necessity of making the reparation or of taking the consequences, civil or criminal, of his unlawful acts. He makes the contract of reparation with extreme reluctance and only by the compelling force of the punishment threatened. Nevertheless, such contract is binding and enforceable. It is undisputed that the attorneys for the plaintiff in this case advised her that, from the facts which they had before them, facts of which she was fully informed, her husband had been guilty of embezzlement and misappropriation in the management of the business of Aldecoa & Co. and that, in their judgment, if prosecuted therefore, he would be convicted. In other words, under the advice of her counsel, the situation was so presented to her that it was evident that in signing the agreement, she had all to gain and nothing to lose, whereas, in refusing to sign said agreement, she had all to lose and nothing to gain. In the one case, she would lose her property and save her husband. In the other, she would lose her property and her husband too. The argument thus presented to her by her attorneys addressed itself to judgment and not to fear. It appealed to reason and not to passion. It asked her to be moved by common sense and not by love of family. It spoke to her own interests as much as to those of her husband. The argument went to her financial interests as well as to those of the defendants. It spoke to her business judgment as well as to her wifely affections. From the opinions of her attorneys as they were presented to her upon facts assumed by all to be true, we do not well see how she could reasonably have reached a conclusion other than that which she did reach. It is of no consequence here whether, as a matter of law, she would have been deprived of her alleged interests in the properties mentioned in the manner described and advised by her attorneys. The important thing is that she believed and accepted their judgment and acted upon it. The question is not did she make a mistake, but did she consent; not was she wrongly advised, be she was she coerced; not was she wise, but was she duressed.

MERCADO V. ESPIRITU Torres,J. FACTS The plaintiffs alleged that they and their sisters Concepcion and Paz, all surnamed Mercado, were the children and sole heirs of Margarita Espiritu, a sister of the deceased Luis Espiritu; that Margarita Espiritu died in 1897, leaving as her paraphernal property a tract of land of 48 hectares in area situated in the barrio of Panducot, which hereditary portion had since then been held by the plaintiffs and their sisters, through their father Wenceslao Mercado, husband of Margarita Espiritu; that, about the year 1910, said Luis Espiritu, by means of cajolery, induced, and fraudulently succeeded in getting the plaintiffs Domingo and Josefa Mercado to sign a deed of sale of the land left by their mother, for the sum of P400, which amount was divided among the two plaintiffs and their sisters Concepcion and Paz, notwithstanding the fact that said land, according to its assessment, was valued at P3,795; that one-half of the land in question belonged to Margarita Espiritu, and one-half of this share, that is, onefourth of said land, to the plaintiffs, and the other one-fourth, to their two sisters Concepcion and Paz; that the part of the land belonging to the two plaintiffs could produce 180 cavanes of rice per annum, which, at P2.50 per cavanes was equivalent to P450 per annum; and that Luis Espiritu had received said products from 1901 until the time of his death. The defendant administrator denied each and all of the allegations and in special defense alleged that the BRAGANZA V. VILLA ABRILLE land, the subject-matter of the complaint, had an area of only 21 cavanes of seed rice; G.R. No. L-12471 that, on May 25, 1894, its owner, the deceased Margarita Espiritu y Yutoc, the plaintiffs' mother, with the April 13, 1959 due authorization of her husband Wenceslao Mercado y Arnedo Cruz sold to Luis Espiritu for the sum of BENGZON, J.: a. Petitioners (defendants) Rosario L. de Braganza and her sons Rodolfo and Guillermo received P2,000 a portion of said land, to wit, an area such as is usually required for fifteen cavanes of seed; from Villa Abrille, as a loan, on October 30, 1944 P70,000 in Japanese war notes and in That subsequently, on May 14, 1901, Wenceslao Mercado y Aredo Cruz, the plaintiffs' father, in his capacity Uplawb2008group1 (carrie,elson,ia,izzy,mac,mel,sanne,varz)

Page 45 of 51 as administrator of the property of his children sold under pacto de retro to the same Luis Espiritu at the price of P375 the remainder of said land, to wit, an area covered by six cavanes of seed to meet the expenses of the maintenance of his (Wenceslao's) children, and this amount being still insufficient he successively borrowed from said Luis Espiritu other sums of money aggregating a total of P600; but that later, on May 17, 1910, the plaintiffs, alleging themselves to be of legal age, executed, with their sisters Maria del Consejo and Maria de la Paz, the notarial instrument, by which instrument, ratifying said sale under pacto de retro of the land that had belonged to their mother Margarita Espiritu, effected by their father Wenceslao Mercado in favor of Luis Espiritu for the sum of P2,600, they sold absolutely and perpetually to said Luis Espiritu, in consideration of P400, the property that had belonged to their deceased mother and which they acknowledged having received from the aforementioned purchaser. Plaintiffs seek the annulment of the deed of sale on the ground that on the date of its execution they were minors without legal capacity to contract, and for the further reason that the deceased purchaser Luis Espiritu availed himself of deceit and fraud in obtaining their consent for the execution of said deed. ISSUE WON a person who is really and truly a minor and, notwithstanding, attests that he is of legal age, can, after the execution of the deed and within the legal period, ask for the annulment of the instrument executed by him so that he may obtain the restitution of the land sold. HELD No. The sale is valid. RATIO When the instrument of purchase and sale was executed the plaintiffs must have been, respectively, 19 and 18 years of age. Patricio Tanjucto, the notary before whom the deed was ratified, testified that the instrument was drawn up by him at the request of the plaintiff Josefa Mercado; that the grantors of the instrument assured him that they were all of legal age; that said document was signed by the plaintiffs and the other contracting parties, after it had been read to them and had been translated into the Pampangan dialect. The evidence adduced at the trial does not show that the purchaser Luis Espiritu employed fraud, deceit, violence or intimidation, in order to effect the sale. In this document the vendors, the brother and sisters Domingo, Maria del Consejo, Paz, and Josefa, attested the certainty of the previous sale which their mother, during her lifetime, had made in behalf of said purchaser Luis Espiritu, her brother, with the consent of her husband Wenceslao Mercado, father of the vendors of the portion of land; The plaintiffs have absolutely no right whatever to recover said first parcel of land, as its ownership was conveyed to the purchaser by means of a singular title of purchase and sale; Even in the doubt whether they certainly were of legal age on the date referred to, it cannot be gainsaid that in the document they stated that they were of legal age at the time they executed and signed it, and on that account the sale mentioned in said notarial deed is perfectly valid. The courts, in their interpretation of the law, have laid down the rule that the sale of real estate, made by minors who pretend to be of legal age, when in fact they are not, is valid, and they will not be permitted to excuse themselves from the fulfillment of the obligations contracted by them, or to have them annulled. With respect to the true age of the plaintiffs, no proof was adduced of the fact that it was Luis Espiritu who took out Domingo Mercado's personal registration certificate on April 13, 1910, causing the age of 23 years to be entered therein in order to corroborate the date of the notarial instrument.

Page 46 of 51 consideration thereof, promised in writing (Exhibit A) to pay him P10,000 "in legal currency of m. In the Mercado case, the minor was guilty of active misrepresentation; whereas in this case, if the P. I. two years after the cessation of the present hostilities or as soon as International the minors were guilty at all, which we doubt it is of passive (or constructive) Exchange has been established in the Philippines", plus 2 % per annum. misrepresentation. b. Because payment had not been made, Villa Abrille sued them in March 1949. n. Indeed, there is a growing sentiment in favor of limiting the scope of the application of the c. In their answer before the Manila CFI, defendants claimed to have received P40,000 only Mercado ruling, what with the consideration that the very minority which incapacitated from instead of P70,000 as plaintiff asserted. They also averred that Guillermo and Rodolfo were contracting should likewise exempt them from the results of misrepresentation. minors when they signed the promissory note. o. We hold, on this point, that being minors, Rodolfo and Guillermo Braganza could not be legally d. After hearing the parties and their evidence, said court rendered judgment, which the appellate bound by their signatures in the promissory note. court affirmed. WON: (3) petitioners action was already barred as petitioner argues that 4 years had already lapsed e. Defendants appeal for review decision of Court of Appeal's decision whereby they were required from Rodolfos emancipation - NO solidarily to pay Fernando F. de Villa Abrille the sum of P10,000 plus 2 % interest from October p. Article 1301 of the Civil Code are quoted to the effect that "an action to annul a contract by 30, 1944. reason of majority must be filed within 4 years" after the minor has reached majority age. These two appellants did not make it appear in the promissory note that they were not yet of legal age. q. The parties do not specify the exact date of Rodolfo's birth. It is undenied, however, that in October 1944, he was 18 years old. If they were really to their creditor, they should have appraised him on their incapacity, and if the former, in r. On the basis of such datum, it should be held that in October 1947, he was 21 years old, and in spite of the information relative to their age, parted with his money, then he should be contended with the October 1951, he was 25 years old. consequence of his act. But, that was not the case. s. So that when this defense was interposed in June 1951, four years had not yet completely Perhaps defendants in their desire to acquire much needed money, they readily and willingly signed the elapsed from October 1947. promissory note, without disclosing the legal impediment with respect to Guillermo and Rodolfo.

t. Furthermore, there is reason to doubt the pertinency of the 4-years period fixed by Article When minor, like in the instant case, pretended to be of legal age, in fact they were not, they will not later on be 1301 of the Civil Code where minority is set up only as a defense to an action, without the permitted to excuse themselves from the fulfillment of the obligation contracted by them or to have it annulled. minors asking for any positive relief from the contract. For one thing, they have not filed in this (Mercado, et al. vs. Espiritu, 37 Phil., 215.) case an action for annulment. f. There can be no question about the responsibility of Mrs. Rosario L. Braganza because the u. They merely interposed an excuse from liability. minority of her consigners note release her from liability; since it is a personal defense of the WON: (4) petitioners are required to pay solidarily Fernando F. de Villa Abrille the sum of P10,000 minors. g. However, such defense will benefit her to the extent of the shares for which such minors may plus 2 % interest from October 30, 1944 v. these minors may not be entirely absolved from monetary responsibility. In accordance with be responsible, (Art. 1148, Civil Code). the provisions of Civil Code, even if their written contact is unenforceable because of non-age, h. It is not denied that at the time of signing the promissory note, Guillermo and Rodolfo they shall make restitution to the extent that they have profited by the money they received. Braganza were minors-16 and 18 respectively. (Art. 1340) WON: (1) herein minor petitioners, after their failure to disclose their minority in the same w. There is testimony that the funds delivered to them by Villa Abrille were used for their support promissory note they signed, will not be permitted thereafter to assert it NO i. it does not follow as a legal proposition, that they will not be permitted thereafter to assert it. during the Japanese occupation. They had no juridical duty to disclose their inability. x. Such being the case, it is but fair to hold that they had profited to the extent of the value of such money, which value has been authoritatively established in the so-called Ballantine j. . . . . Some authorities consider that a false representation as to age including a contract as Schedule: in October 1944, P40.00 Japanese notes were equivalent to P1 of current Philippine part of the contract and accordingly hold that it cannot be the basis of an action in tort. Other money. authorities hold that such misrepresentation may be the basis of such an action, on the theory y. Wherefore, as the share of these minors was 2/3 of P70,000 of P46,666.66, they should now that such misrepresentation is not a part of, and does not grow out of, the contract, or that the return P1,166.67. enforcement of liability for such misrepresentation as tort does not constitute an indirect of z. Their promise to pay P10,000 in Philippine currency, can not be enforced, as already stated, enforcing liability on the contract. In order to hold infant liable, however, the fraud must be since they were minors incapable of binding themselves. Their liability, to repeat, is presently actual and not constructure. It has been held that his mere silence when making a contract as declared without regard of said promissory note, but solely in pursuance of Article 1304 of the to age does not constitute a fraud which can be made the basis of an action of decit. (Corpuz Civil Code. Juris Secundum, 43 p. 206) Accordingly, the appealed decision should be modified in the sense that Rosario Braganza shall pay k. The fraud of which an infant may be held liable to one who contracts with him in the belief that 1/3 of P10,000 i.e., P3,333.334 plus 2% interest from October 1944; and Rodolfo and Guillermo he is of full age must be actual not constructive, and mere failure of the infant to disclose his Braganza shall pay jointly5 to the same creditor the total amount of P1,166.67 plus 6% in/terest age is not sufficient. (27 American Jurisprudence, p. 819.) beginning March 7, 1949, when the complaint was filed. No costs in this instance. WON: (2) the Mercado Doctrine (being minors, Rodolfo and Guillermo Braganza could not be legally bound by their signatures) was properly upheld at bar - NO l. The Mecado case cited in the decision under review is different because the document signed SUNTAY V. CA JR., J: HERMOSISIMA, therein by the minor specifically stated he was of age; here the promissory note contained no PETITION FOR CERTIORARI such statement.
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Page 47 of 51 Respondent Federico Suntay was the registered 4 owner of a parcel of land with an area of 5,118 square meters, more or less, situated in Sto. Nino, Hagonoy, Bulacan. On the land may be found: a rice mill, a warehouse, and other improvements. A rice miller, Federico, in a letter, dated September 30, 1960, applied as a miller-contractor of the then National Rice and Corn Corporation (NARIC).

He informed the NARIC that he had a daily rice mill output of 400 cavans of palay and warehouse storage capacity of 150,000 cavans of palay. His application, although prepared by his nephew-lawyer, petitioner Rafael Suntay, was disapproved, obviously because at that time he was tied up with several unpaid loans. For purposes of circumvention, he had thought of allowing Rafael to make the application for him. Rafael prepared 8 an absolute deed of sale 9 whereby Federico, for and in consideration of P20,000.00 conveyed to Rafael said parcel of land with all its existing structures.

Said deed was notarized as Document No. 57 and recorded on Page 13 of Book 1, Series of 1962, of the Notarial Register of Atty. Herminio V. Flores. 10 Less than three months after this conveyance, a counter sale 11 was prepared 12 and signed 13 by Rafael who also caused its delivery to Federico. Through this counter conveyance, the same parcel of land with all its existing structures was sold by Rafael back to Federico for the same consideration of P20,000.00. 15 Although on its face, this second deed appears to have been notarized as Document No. 56 and recorded on Page 15 of Book 1, Series of 1962, 16 of the notarial register of Atty. Herminio V. Flores, an examination thereof will show that, recorded as Document No. 56 on Page 13, is not the said deed of sale but a certain "real estate mortgage of a parcel of land with TCT No. 16157 to secure a loan of P3,500.00 in favor of the Hagonoy Rural Bank."

At the initial hearing on April 7, 1971, Federico took the stand and, when asked why title to the property was no longer in his name, Rafael's counsel objected thereto upon the ground that Federico, in the petition wherein he asked Rafael to surrender his owner's duplicate of TCT No. T-36714, had alleged that he sold the land to Rafael, which allegation, Rafael contends, constitutes as a judicial admission which may not be subject to contradiction, unless previously shown to have been made through palpable mistake. Rafael's counsel, in effect, was assailing the admissibility of Federico's anticipated answer which would most likely tend to establish the simulated nature of the sale executed by Federico in favor of Rafael. Judge Emmanuel Munoz overruled the objection and reset the case for hearing on June 9, 1971. June 7, 1971, Rafael, obviously for the purpose of delay on account of its pettiness, instituted certiorari proceedings in the Court of Appeals in order to have the aforecited ruling nullified and set aside. Rafael was naturally rebuffed by the Appellate Court. Considering that the petition for Rafael to surrender his owner's duplicate of TCT No. T-36714 had been withdrawn upon motion of Federico, the alleged admission of Federico as to the questioned deed's validity in effect disappeared from the record and had ceased to have any standing as a judicial admission. 33 TC decided:
"WHEREFORE, a decision is hereby rendered: 1. Dismissing this complaint filed by the plaintiff against herein defendant; 2. Declaring the Deed of Absolute Sale (Exh. A) executed by the plaintiff in favor of the defendant of a parcel of land covered by OCT No. 02015-Bulacan Registry as a genuine and valid document; 3. Ordering the defendant to pay the Government of the Republic of the Philippines thru the Office of the Register of Deeds of Bulacan the true and correct registration fees for the Deed of Absolute Sale (Exh. A) on the basis of the true consideration of the sale as admitted by the defendant which is P20,000.00 as stated in the document plus his unpaid attorney's fees in the sum of P114,000.00 within fifteen (15) days from the finality of this decision; 4. Declaring the Deed of Sale (Exh. B) executed by the defendant in favor of the plaintiff of a parcel of land covered by TCT No. T-36714 Bulacan Registry as null and void ab initio; 5. The prayer for P500.00/month rental from May, 1962 is hereby denied for lack of merit; 6. With costs against the plaintiff." 39

Nowhere on page 13 of the same notarial register could be found any entry pertaining to Rafael's deed of sale. Testifying on this irregularity, Atty. Flores admitted that he failed to submit to the Clerk of Court a copy of the second deed. Neither was he able to enter the same in his notarial register. Even Federico himself alleged in his Complaint that, when Rafael delivered the second deed to him, it was neither dated nor notarized. Upon the execution and registration of the first deed, Certificate of Title No. 0-2015 in the name of Federico was cancelled and in lieu thereof, TCT No. T-36714 was issued in the name of Rafael. Even after the execution of the deed, Federico remained in possession of the property sold in concept of owner. Significantly, notwithstanding the fact that Rafael became the titled owner of said land and rice mill, he never made any attempt to take possession thereof at any time, while Federico continued to exercise rights of absolute ownership over the property. In a letter, 22 dated August 14, 1969, Federico, through his new counsel, Agrava & Agrava, requested that Rafael deliver his copy of TCT No. T-36714 so that Federico could have the counter deed of sale in his favor registered in his name.

From the aforecited decision of the trial court, both Federico and Rafael appealed. Before the Court of Appeals both pleaded invariably the same arguments which they had raised before the trial court. On January 27, 1993, the Court of Appeals rendered judgment in affirmance of the trial court's decision, with a modification. Federico was ordered to surrender the possession of the disputed property to Rafael. 40 On December 15, 1993, the Court of Appeals reversed itself and rendered an amended judgment ISSUES: 1) Under what showing may the sale be deemed susceptible of nullification for being simulated? 2) Do we thereby abandon every reverence we have hitherto reposed on instruments notarized before notaries public? We necessarily begin with two veritable legal presumptions: first, that there was sufficient consideration for the contract 45 and, second, that it was the result of a fair and regular private transaction. 46 These presumptions if shown to hold, infer prima facie the transaction's validity, except that it must yield to the evidence adduced. 47 In the aggregate, the evidence on record demonstrate a combination of circumstances from which may be reasonably inferred certain badges of simulation that attach themselves to the deed of sale in question. The late Rafael Suntay and private respondent Federico Suntay were relatives, undisputedly, whose blood relation was the foundation of their professional and business relationship. The late Rafael testified that he had completely trusted Federico and so he signed and delivered the counter-deed of sale even without prior payment of the alleged repurchase price of P20,000.00. Federico had such faith and confidence in the late Rafael, as nephew and counsel, that he blindly signed and executed the sale in question. He had recommended Rafael as legal counsel and corporate secretary of the Hagonoy Rural Bank of which he was founder and once President.

The request having been obviously turned down, Agrava & Agrava filed a petition 23 with the Court of First Instance of Bulacan 24 asking Rafael to surrender his owner's duplicate certificate of TCT No. T-36714. In opposition thereto, Rafael chronicled the discrepancy in the notarization of the second deed of sale upon which said petition was premised and ultimately concluded that said deed was a counterfeit or "at least not a I public document which is sufficient to transfer real rights according to law." 25 On September 8, 1969, Agrava & Agrava filed a motion 26 to withdraw said petition, and, on September 13, 1969, the Court granted the same. On July 8, 1970, Federico filed a complaint 28 for reconveyance and damages against Rafael. In his answer, Rafael scoffed at the attack against the validity and genuineness of the sale to him of Federico's land and rice mill. Rafael insisted that said property was "absolutely sold and conveyed . . . for a consideration of P20,000.00, Philippine currency, and for other valuable consideration.

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 He had entrusted to Rafael many of his business documents and personal papers, the return of which he did not demand even upon termination of their professional relationship. It was precisely because of this relationship that Federico consented to what he alleged as a loan of title over his land and rice mill in favor of the late Rafael. We are all too familiar with the practice in the typical Filipino family where the patriarch with the capital and business standing takes into his fold the young, upcoming, inexperienced but brilliant and brashly ambitious son, nephew or godchild who, in turn, becomes to his father, uncle, or godparent, the jack of all trades, trouble shooter and most trusted liaison officer cum adviser. He wittingly serves his patron without the security of a formal contract and without clarifying the matter of compensation. The record is replete with circumstances that establish the closeness, mutual trust and business and professional interdependence between the late Rafael and private respondent. When their relationship turned sour, the late Rafael, in all probability knew where to hit Federico where it really hurt because he had been privy to most of Federico's business and personal dealings and transactions. The documentary evidence alone proffered by the late Rafael showed the extent of Rafael's knowledge and involvement in both the business and private affairs of Federico, his wife, his son, and even his wife's relatives. Rafael admitted in open court that he had come to the possession thereof in the course of rendering legal services to his uncle. These documents on record and the testimonies of the late Rafael and private respondent establish the existence of, not only the facts therein stated, but also the circumstance pertaining to the nature of the relationship between the late Rafael and private respondent was indeed a badge of simulation. The history and relationship of trust, interdependence and intimacy between the late Rafael and Federico is an unmistakable token of simulation. It has been observed that fraud is generally accompanied by trust. 49 Hardly is it inconsistent with practical experience, especially in the context of the Filipino family's way of life, that Federico, the uncle, would almost naively lend his land title to his nephew and agree to its cancellation in his nephew's favor because Federico, in the first place, trusted his nephew; was well aware of his power over him as uncle, client, and patron; and was actually in possession of the land and rice mill. No one could even conceive of the possibility of ejecting Federico therefrom on the basis of the sham transaction. The late Rafael never attempted to physically dispossess his uncle or actually take over the rice mill during his lifetime. II The late Rafael insisted that the sale to him of his uncle's property was in fact a "dacion en pago" in satisfaction of Federico's unpaid attorney's fees. 50 What prominently stands out from the mass of records, however, is the fact that this claim of the late Rafael was only raised in 1976 when he testified on direct examination. The answer that he filed in 1970 in response to Federico's complaint never mentioned nor even alluded to any standing liability on the part of Federico as regards unpaid attorney's fees. Neither did the late Rafael deny or refute Federico's testimony that they did not have a clear-cut compensation scheme and that Federico gave him money at times, which compensation enabled the late Rafael to purchase his first car. The late Rafael even affirmed Federico's testimony respecting his appointment as the legal counsel and corporate secretary of the Hagonoy Rural Bank for which he received compensation as well. Equally significant is the admission of the late Rafael that he did not inform Federico that he considered the transfer to be in consideration of his alleged unpaid attorney's fees. 51 Apparently, it is true, as Federico claimed, that no accounting was undertaken between uncle-client and nephew-lawyer in order to arrive at the definite amount of the alleged unpaid attorney's fees. Strange and irregular as this matter seems to be, the same may only become comprehensible when considered as a grave symptom of simulation III Indeed the most protuberant index of simulation is the complete absence of an attempt in any manner on the part of the late Rafael to assert his rights of ownership over the land and rice mill in question. After

IV The late Rafael, at the very outset, made much of an uproar over the alleged admissions made by Federico in several documents executed by him or in his behalf. On the whole, it was the late Rafael's inflexible stand that Federico admitted in various documents that he had absolutely sold his land and rice mill to him and could not, thus, subsequently deny or attack that sale. Upon our examination of such documents, however, we find that neither the letter of Agrava & Agrava, nor the petition to compel delivery of the owner's duplicate of title and the notice of adverse claim, supports the late Rafael's posture. Nowhere is it stated in the aforesaid petition and notice of adverse claim that Federico sold the subject property to the late Rafael. What was alleged was that Rafael resold to Federico the said property, and not the other way around, precisely because both documents were assertions of remedies resorted to by Federico upon the refusal by the late Rafael to tender his owner's duplicate title. V Neither does the undisputed fact that the deed of sale executed by Federico in favor of the late Rafael, is a notarized document, justify the conclusion that said sale is undoubtedly a true conveyance to which the parties thereto are irrevocably and undeniably bound. "Conduct, to be given jural effects, must be jural in its subject x x x i.e. must concern jural relations, not relations of friendship or other non jural relations The father who promises to bring home a box of tools for his boy is not bound in contract, though the same promise to his neighbor may be binding. The friend who invites one with an offer of a dinner is not legally liable, though he who agrees with a restaurant-keeper for a banquet to be spread there is under contract of liability. . . . In all such cases, therefore, the conduct is jurally ineffective, or void. In the traditional phraseology of the parole evidence rule, then, it my always be shown that the transaction was understood by the parties not to have jural effect. Ordinarily, the bearing of this principle is plain enough on the circumstances. It has been judicially applied to household services rendered by a member of the family, and to a writing representing merely a family understanding. . . ..

Page 48 of 51 the sale, he should have entered the land and occupied the premises thereof. He did not even attempt to. If he stood as owner, he would have collected rentals from Federico for the use and occupation of the land and its improvements. All that the late Rafael had was a title in his name. "It is to be emphasized that the private respondents never parted with the ownership and possession of that portion of Lot No 785 x x x nor did the petitioners ever enter into possession thereof as earlier stated, the issuance of TCT No. T-1346 did not operate to vest upon the latter ownership over the private respondents' property. That act has never been recognized as a mode of acquiring ownership. As a matter of fact, even the original registration of immovable property does not vest title thereto; it is merely evidence of such title over a particular property. The Torrens system of land registration should not be used as a means to perpetrate fraud against the rightful owner of real property." 52 The failure of the late Rafael to take exclusive possession of the property allegedly sold to him is a clear badge of fraud. 53 The fact that, notwithstanding the title transfer, Federico remained in actual possession, cultivation and occupation of the disputed lot from the time the deed of sale was executed until the present, is a circumstance which is unmistakably added proof of the fictitiousness of the said transfer, 54 the same being contrary to the principle of ownership. 55 Of course, according to the late Rafael, he allowed Federico to remain in the premises and enjoy the fruits thereof because of their understanding that Federico may subsequently repurchase the property. Contrary to what Rafael thought, this in fact is added reason for simulation. The idea of allowing a repurchase goes along the same lines posed by the theory of Federico. If it were true that the first sale transaction was actually a "dacion en pago" in satisfaction of Federico's alleged unpaid attorney's fees, it does strain the logical mind that Rafael had agreed to allow the repurchase of the property three months thereafter. Federico was obviously financially liquid. Had he intended to pay attorney's fees, he would have paid Rafael in cash and not part with valuable income-producing real property.

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Page 49 of 51 Held: Yes Ratio: It is of course elementary that a misrepresentation upon a mere matter of opinion is not an actionable deceit nor is it a sufficient ground for avoiding a contract as fraudulent. We are aware that statements may be found in the books to the effect that there is a difference between giving an honest opinion and making a false representation as to what ones real opinion is. We do not think, however, that this is a case where any such distinction should be drawn. The law allows considerable latitude to sellers statement, or dealers talk; and experience teaches that it is exceedingly risky to accept it at its face value. The refusal of the seller to warrant his estimate should have admonished the purchaser that such estimate was put forth as a mere opinion; and we will not now hold the seller to a liability equal to that which would have been created by a warranty, if one had been given. Assertions concerning the property which is the subject of a contract of sale, or in regard to its qualities VI While the late Rafael vehemently upholds the validity and effectiveness of the deed of sale in question, and characteristics, are the usual and ordinary means used by sellers to obtain a high price and are always this posture is eroded by his admission on cross-examination during trial that he never declared his understood as affording to buyers no ground for omitting to make inquiries. A man who relies upon such an affirmation made by a person whose interest might so readily prompt his to exaggerate the value of his property ownership of the subject property in his annual Statement of Assets and Liabilities. The fact that the late Rafael denied both intention and knowledge involving the sham sale and firmly does so at his peril and must take the consequences of his imprudence. maintained the validity and genuineness thereof has become incongruous because it is irreconcilable with the circumstance that he apparently never considered the disputed property as one of his assets over which ORIA V. MCMICKING he had rights of absolute ownership. G.R. No. L-7003 The allegation of Rafael that the lapse of seven (7) years before Federico sought the issuance of a new January 18, 1912 title in his name necessarily makes Federico's claim stale and unenforceable does not hold water. Federico's MORELAND, J.: title was not in the hands of a stranger or mere acquaintance; it was in the possession of his nephew who, o August, 1909 - Gutierrez Hermanos brought an action Oria Hermanos & Co. for the recovery of being his lawyer, had served him faithfully for many years. P147,204.28 (No. 7289, Manila CFI) Federico had been all the while in possession of the land covered by his title and so there was no o March 1910 - plaintiff began another action against the same defendant for the recovery of P12,318.57 pressing reason for Federico to have a title in his name issued. Even when the relationship between the late (No. 7719, Manila CFI). Rafael and Federico deteriorated, and eventually ended, it is not at all strange for Federico to have been o April 30, 1910 - members of the company of Oria Hermanos & Co., on account of the expiration of the complacent and unconcerned about the status of his title over the disputed property since he has been time stated in their agreement of copartnership, dissolved their relations and entered into liquidation possessing the same actually, openly, and adversely, to the exclusion of Rafael. It was only when Federico o June 1, 1910 - Tomas Oria y Balbas, as managing partner in liquidation, acting for himself and on behalf needed the title in order to obtain a collaterized loan 57 that Federico began to attend to the task of of his other coowners Casimiro Oria y Balbas and Adolfo Fuster Robles, entered into a contract with the obtaining a title in his name over the subject land and rice mill. plaintiff in this case, Manuel Orio Gonzales, which said contract was for the purpose of selling and We, therefore, hold that the deed of sale executed by Federico in favor of his now deceased transferring to the plaintiff in this action all of the property of which the said Oria Hermanos & Co. was nephew, Rafael, is absolutely simulated and fictitious and, hence, null and void, said parties owner. (PERTINENT CLAUSES) having entered into a sale transaction to which they did not intend to be legally bound. As no (5.1) Tomas Oria y Balbas, do further state declare that I have agreed with the other party hereto, Don Manuel property was validly conveyed under the deed, the second deed of sale executed by the late Oria Gonzales, to sell all the property I have mentioned, which is specified more in detail in the general inventory Rafael in favor of his uncle, should be considered ineffective and unavailing. of Orio Hermanos & Co., for the price and under the conditions hereinafter expressed; and in order to carry into WHEREFORE, the Amended Decision promulgated by the Court of Appeals on December 15, 1993 in effect such agreement made by me with the said Don Manuel Orio Gonzales, in my own right and also in CA-G.R. CV No. 08179 is hereby AFFIRMED IN TOTO. Petitioners, the heirs of Rafael G. Suntay, are representation of my partners, Don Casimiro Oria and Don Adolfo Fuster, I do hereby stipulate and agree: hereby ordered to reconvey to private respondent Federico C. Suntay the property described in (6) As managing partner and liquidator of Oria Hermanos & Co., and further in my own right and in the name paragraph 2.1 of the complaint, within ten (10) days from the finality of this Decision, and to and representation of Don Casimiro Oria y Balbas and Don Adolfo Fuster y Robles, personally and as partners in surrender to him within the same period the owner's duplicate copy of Transfer Certificate of Title Oria Hermanos & Co., in consideration of the sum of two hundred seventy-four thousand pesos (P274,000), No. T-36714 of the Registry of Deeds of the Province of Bulacan. In the event that the petitioners fail which the said Don Manuel Oria y Gonzales undertakes and engages to pay to the firm of Oria Hermanos & Co., or refuse to execute the necessary deed of reconveyance as herein directed, the Clerk of Court of the in liquidation, or to us the parties hereto, myself and the persons I represent, as partners in Oria Hermanos & Regional Trial Court of Bulacan is hereby ordered to execute the same at the expense of the aforesaid Co., which whom shall be paid in installments, in the manner and under the conditions hereinafter set forth. I heirs. Costs against petitioners. hereby sell, cede and transfer absolutely and forever to the said Don Manuel Oria y Gonzales, his heirs and his assigns, all and every part of the property mentioned in the fourth section hereof and more specially described in SONGCO V. SELLNER the general inventory of Oria Hermosa & Co.; under the following mutual conditions: Facts: The principal defense in this action for specific performance relates to the false representation which, it is (a) Don Manuel Oria y Gonzales engages and undertakes to pay and to settle the sum agreed upon for this sale, claimed, was made by the plaintiff Songco with respect to the quantity of uncut cane standing in the fields at the cession and transfer within a period of twelve (12) years, further engaging and undertaking to pay each year a time the defendant Sellner became the purchaser thereof. It is proved that Songco estimated that the crop would sum of not less than ten thousand (10,000) pesos and at the end of the said period to settle the balance of said yield 3,999 piculs of sugar. As the crop turned out, it produced only 2017 piculs of sugar. price. Issue: WON such representation of the plaintiff-vendor is fraudulent, which, under Art 1338, would invalidate (b) After the first six (6) years of the period for the payment of the stipulated price, that is, during the last six the contract. years of said period, Don Manuel Oria y Gonzales engages and undertakes to pay the interest at 3 per cent a When the document is to serve the purpose of a mere sham, this principle in strictness exonerates the makers. . . . ." 56 The cumulative effect of the evidence on record as chronicled aforesaid identified badges of simulation proving that the sale by Federico to his deceased nephew of his land and rice mill, was not intended to have any legal effect between them. Though the notarization of the deed of sale in question vests in its favor the presumption of regularity, it is not the intention nor the function of the notary public to validate and make binding an instrument never, in the first place, intended to have any binding legal effect upon the parties thereto. The intention of the parties still and always is the primary consideration in determining the true nature of a contract. Uplawb2008group1 (carrie,elson,ia,izzy,mac,mel,sanne,varz)

Page 50 of 51 year on the price stipulated or the part thereof unpaid at such time; provided, that this is mutual obligation and (1) issuance of a preliminary injunction to prevent the sale of the steamship; interest payable annually. (2) declaration that the plaintiff is the owner of said steamship and is entitled to the possession of the (c) Don Manuel Oria y Gonzales further engages and undertakes to pay Don Tomas Oria, Don Casimiro Oria and same, and that the defendant be required to restore the same to the plaintiff and to pay P10,000 Don Adolfo Fuster during the time that they remain in the Philippines and do not reside abroad, the sum of one damages for its detention. hundred and fifty (150) pesos monthly; which obligation shall be understood to be contracted individually with o Oct 21, 1910 - sheriff levied upon the said steamer Serantes, took possession of the same, and each of the said parties; and the amounts so paid to each and all of them shall be charged to the account of Oria announced it for sale at public auction Hermanos & Co., in liquidation, in discharge of the stipulated consideration and the installments thereof and o Upon the trial judgment was found in favor of the defendant and against the plaintiff, and the complaint interest thereon when due. was dismissed upon the merits with costs. (d) Don Manuel Oria y Gonzales engages and undertakes not to sell, alienate, transfer or mortgage, either wholly o From that judgment this appeal is taken. or in part, the property hereby sold to him, without the written authorization of Don Tomas Oria as liquidator of WON the sale from Oria Hermanos & Co. to Manuel Oria y Gonzalez as against the creditors of said the firm of Oria Hermanos & Co., so long as the consideration of this sale is not fully satisfied, to guarantee company is fraudulent, and therefore void - YES which this restriction is imposed: provided, that this restriction applies only to the vessels, real estate and branch o In determining whether or not the sale in question was fraudulent as against creditors, these facts must stores in the towns mentioned in the fourth section of this instrument, not to the rest of the property. be kept in mind: (e) Don Manuel Oria y Gonzales engages and undertakes to cede gratuitously in the dwelling-house in the town (1) At the time of said sale the value of the assets of Oria Hermanos & Co., as stated by the partners of Laoag, hereby sold, the use of the same or the portion thereof that may be necessary for Don Tomas Oria to themselves, was P274,000. establish therein the liquidation office of Oria Hermanos & Co.; provided, that this cession is made for a period of (2) That at the time of said sale actions were pending against said company by one single creditor for sums only two (2) years. aggregating in amount nearly P160,000. ( f ) Don Tomas Oria y Balbas and Don Adolfo Fuster engage and undertake to place their personal services at (3) The vendee of said sale was a son of Tomas Oria y Balbas and a nephew of the other two persons the disposal of Don Manuel Oria y Gonzales in everything relating to his instruction in the management and heretofore mentioned which said three brothers together constituted all of the members of said conduct of the property and business hereby sold; provided, that this obligation and promise shall be binding company. upon Don Adolfo Fuster only for the time he may reside in the Philippines and upon both parties only for a (4) Nothing of value seems to have been delivered by the plaintiff in consideration of said sale and no maximum period of 12 months. security whatsoever was given for the payments therein provided for. (7. I) Manuel Oria y Gonzales, being informed of the foregoing action and contract executed by Don Tomas Oria (5) The plaintiff is a young man twenty-five years of age. There is no pretense whatsoever that he owned y Balbas, do on my part stipulated and agree: that I accept the sale, cession and transfer hereby made by him in any property or had any business at the time of the sale. On the contrary it appears without my favor and engage and undertake to pay Oria Hermanos & Co., either in liquidation, or if necessary to the contradiction that, when the sale took place, he was merely a student without assets and without partners of Oria Hermanos & Co., the price of said sale, cession and transfer, that is, the sum of P274,000 within gainful occupation. a period of 12 years, in the manner and under the conditions set forth by him in the preceding section, and (6) Plaintiff, at the time of the sale, was fully aware of the two suits that have already been begun against especially engaged not to sell, alienate, transfer or mortgage the property involved in this sale which is specified the company whose assets he was purchasing and well knew that if said suits should terminate in favor in paragraph (d) of the preceding section, without the previous written authorization of the vendor, Oria of the plaintiffs therein the judgments in which they terminated would have to be paid out of the Hermanos & Co., such property being so exempted as a guaranty for the payment of the purchase price of this property which he was then taking over or they would not be paid at all. sale. (7) Under all the circumstances the sale in question was, so far as the creditors were concerned, without Among the goods transferred by this instrument was the steamship Serantes, which is the subject of consideration. To turn over a business worth P274,000 to an "impecunious and vocationless youth" who litigation. knew absolutely nothing about the business he received, and whose adaptability to the management of o September 17, 1910 - case No. 7719 was resolved by CFI in favor of Gutierrez Hermanos and against that business was entirely unknown, without a penny being paid down, without any security Oria Hermanos & Co. for the sum demanded in the complaint. whatsoever, is a proceeding so unusual, so devoid of care and caution, and so wholly outside of the well o The cause was appealed to the SC and, the judgment therein having been affirmed, execution was defined lines of ordinary business transactions, as to startle any person interested in the concern. issued thereon and placed in the hands of the sheriff of Manila. (8) It is certain that the members of the company of Oria Hermanos & Co. would never have made a similar o The sheriff immediately demanded that Tomas Oria y Balbas, as liquidator of the firm of Oria Hermanos contract or executed a similar instrument with a stranger. & Co. make payment of the said judgment, to which he replied that there were no funds with which to (9) The prohibition in the contract against the sale of certain portions of the property by the plaintiff offers pay the same. no protection whatever to the creditors. Such prohibitions is not security. The parties who made the original transfer can waive and release it at pleasure. Such restrictions is of no value to the creditors of o Oct 18, 1910 - plaintiff in this action presented to the sheriff a written statement claiming to be the the company. They can not utilize it for the reduction of their claims or in any other beneficial ways. owner of the said steamship, and to have the right of possession of the same by reason of the sale to o In determining whether or not a certain conveyance is fraudulent the question in every case is him by Oria Hermanos & Co. of all of the property belonging to said company, including the said steamer Serantes, a shown by the instrument above referred to the quoted. whether conveyance was a bona fide transaction or a trick and contrivance to defeat creditors, o The sheriff thereupon required Gutierrez Hermanos to present a bond for his protection, which having or whether it conserves to debtor a special right. been done, the sheriff proceeded to the sale of the steamship. o It is not sufficient that it is founded on good consideration or is made with bona fide intent: it o At the sale Gutierrez Hermanos became the purchaser, said company being the highest bidder, and sum must have both elements. which it paid being the highest sum bidden for the same. o If defective in either of these particulars, although good between the parties, it is voidable as o Oct 19, 1910 - the plaintiff began the present action, which has for its object, as shown by the prayer of to creditors. the complaint o The rule is universal both at law and in equity that whatever fraud creates justice will destroy. 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The test as to whether or not a conveyance is fraudulent is, does it prejudice the rights of creditors? o In the consideration of whether or not certain transfers were fraudulent, courts have laid down certain rules by which the fraudulent character of the transaction may be determined. The following are some of the circumstances attending sales which have been dominated by the courts badges of fraud: (1) The fact that the consideration of the conveyance is fictitious or is inadequate. (2) A transfer made by a debtor after suit has been begun and while it is pending against him. (3) A sale upon credit by an insolvent debtor. (4) Evidence of large indebtedness or complete insolvency. (5) The transfer of all or nearly all of his property by a debtor, especially when he is insolvent or greatly embarrassed financially. (6) The fact that the transfer is made between father and son, when there are present other of the above circumstances. (7) The failure of the vendee to take exclusive possession of all the property. o The case at bar presents every one of the badges of fraud above enumerated. Tested by the inquiry, does the sale prejudice the rights of the creditors, the result is clear. o The sale in the form in which it was made leaves the creditors substantially without recourse. o The property of the company is gone, its income is gone, the business itself is likely to fail, the property is being dissipated, and is depreciating in value. o As a result, even if the claims of the creditors should live twelve years and the creditors themselves wait that long, it more than likely that nothing would be found to satisfy their claim at the end of the long wait. (Regalado vs. Luchsinger & Co., 5 Phil. Rep., 625; art. 1297, CC, par. 1; Manresa's Commentaries, vol. 8, pp. 713-719.) o Since the records shows that there was no property with which the judgment in question could be paid, the defendants were obliged to resort to and levy upon the steamer in suit. o The court below was correct in finding the sale fraudulent and void as to Gutierrez Hermanos in so far as was necessary to permit the collection of its judgment. o As a corollary, the court below found that the evidence failed to show that the plaintiff was the owner or entitled to the possession of the steamer in question at the time of the levy and sale complained of, or that he was damaged thereby. o Defendant had the right to make the levy and test the validity of the sale in that way, without first resorting to a direct action to annul the sale. o The creditor may attack the sale by ignoring it and seizing under his execution the property, or any necessary portion thereof, which is the subject of the sale. For these reasons the judgment is affirmed, without special finding as to costs. So ordered. o LIGUEZ V. CA Reyes, JBL: This is an action commenced by Conchita Liguez against the widow and heirs of Salvador Lopez to recover a parcel of land in their possession. The records show that Salvador Lopez, a married man of mature years, donated the land to Conchita, who was then a minor of 16, subject to the condition that she will cohabit with him as his mistress. The donation was accepted and Conchita became the donors mistress until his death. Because defendance have advanced the defense of the nullity of the contract by virtue of the illegality of the cause or consideration, Conchita Liguez now contends that since the contract is of pure beneficence, the cause is actually the liberality of the donor; hence, what is illicit or illegal is the motive of such donor and not the cause of the contract, since liberality per se can never be illegal. Held: The flaw in this argument lies in ignoring the fact that the liberality of the donor is deemed causa only in contracts of pure beneficence; that is to say, contracts in which the idea of self interest is totally absent on the

Page 51 of 51 part of the transferor. Here the facts demonstrate that in making the donation, the donor was not moved exclusively by the desire to benefit Conchita Liguez, but also to gratify his sexual impulse. Actually, therefore, the donation was but one part of an onerous transaction that must be viewed in its totality. Thus considered, the conveyance was clearly predicated upon an illicit causa. With respect to a appellants contention regarding the distinction between causa and motive, it is well to note that Manresa himself (Vol. 8, pp.1641-642), while maintaining the distinction, expressedly excepts from the rule those contracts that are conditioned upon the attainment of the motives of either party. The same view is held by the Supreme Court of Spain in its decisions of Feb. 4, 1941, and Dec. 4, 1946, holding that he motive maybe regarded as causa when it predetermines the purpose of the contract. In the present case, it is scarcely disputable that Lopez would not have conveyed the property in question had he known the appellant would refuse to cohabit with him; so that the cohabitation was an implied condition to the donation and being unlawful, necessarily tainted the donation itself. However, since the rule that parties to an illegal contract, if equally guilty, will not be aided by the law but will both be left where It finds them, has been interpreted as barring the party from leading the illegality of the bargain as a cause of action or as a defense, appellant is, therefore, entitled to so much of the donated property as may be found upon proper liquidation not to prejudice the share of the widow or the legitimes of the forced heirs.

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