Compiled Digests in ObliCon

Compilation of Cases in Obligations and Contracts Prepared by LLB 1-4 (2nd semester 09-10)

Article 1158 Manila Trading and Supply Co. vs. Santos Saez 66 Phil. 237 Facts: Manila Trading and Supply Co., the plaintiff sold to Santos Saez, the defendant a determinate equipment. There was an unpaid balance amounting to P2,200.00. Defendant executed 20 promissory notes, the first three installments for P150 each and the others for P100 payable on the 16th day of every month beginning November 16, 1933 and mortgage the said equiptment as a security.The defendant failed to pay any of the promissory notes, the plaintiff attached the chattel mortgage and was sold in public auction in accordance with Act No.1508 for P700.00 in favor of the plaintiff as the highest bidder. Defendant still owed the plaintiff for P1,897.55. The plaintiff filed an action for the payment of the unpaid balance. The defendant claimed that the plaintiff’s action will not prosper because it is contrary to Act No.4122. The lower court favored the plaintiff, hence this appeal was filed. Issue: Whether or not the plaintiff had a right to a deficiency in conformity with the Chattel Mortgage Law(Act No.4122)? RULING: The court held that Act No.4122 has no application with this case otherwise it would be given a retroactive effect. The said act is not applicable to this case for the reason that the mortgage which gave rise to the plaintiff’s requirements was executed on October 3, 1933 and the aforesaid act took effect on December 9, 1933. The action is the correlative of a right and is nothing more than a remedy conceded by law to protect. If the plaintiff was entitled to the deficiency, judgment under Act No 1508, this right already existed when Act No.4122 was approved and cannot be effected by the prohibition contained in the latter Act. The court did not err in declaring AAct No.4122 to be inapplicable and in ruling that the plaintiff is entitled to the deficiency jjudgment in accordance with Act No.1508.

Article 1159 Pichel vs. Alonzo 111 SCRA 341 Facts: This case originated in the lower Court as an action for the annulment of a "Deed of Sale" dated August 14, 1968 and executed by Prudencio Alonzo, as vendor, in favor of Luis Pichel, as vendee, involving property awarded to the former by the Philippine Government under Republic Act No. 477. That the sale of the coconut fruits are for all the fruits on the aforementioned parcel of land presently found therein as well as for future fruits to be produced on the said parcel of land during the years period; which shall commence to run as of SEPTEMBER 15,1968; up to JANUARY 1, 1976. Civil Law – Obligations and Contracts

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In July 1972, defendant for the first time since the execution of the deed of sale in his favor, caused the harvest of the fruit of the coconut trees in the land. Issue: Whether or not the agreement in question is denominated by the parties as a deed of sale of fruits of the coconut trees found in the vendor's land or it actually is, for all legal intents and purposes, a contract of lease of the land itself? Held: The Supreme Court ruled that construction or interpretation of the document in question is not called for. A perusal of the deed fails to disclose any ambiguity or obscurity in its provisions, nor is there doubt as to the real intention of the contracting parties. The terms of the agreement are clear and unequivocal, hence the literal and plain meaning thereof should be observed. Such is the mandate of the Civil Code of the Philippines which provides that: Art. 1370. If the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulation shall control ... . Pursuant to the afore-quoted legal provision, the first and fundamental duty of the courts is the application of the contract according to its express terms, interpretation being resorted to only when such literal application is impossible. 9 The provisions of the contract itself and its characteristics govern its nature. 4 Simply and directly stated, the "Deed of Sale dated August 14, 1968 is precisely what it purports to be. It is a document evidencing the agreement of herein parties for the sale of coconut fruits of Lot No. 21, and not for the lease of the land itself as found by the lower Court. In clear and express terms, the document defines the object of the contract thus: "the herein sale of the coconut fruits are for the fruits on the aforementioned parcel of land during the years (from) SEPTEMBER 15, 1968; up to JANUARY 1, 1976." Moreover, as petitioner correctly asserts, the document in question expresses a valid contract of sale. It has the essential elements of a contract of sale as defined under Article 1485 of the New Civil Code which provides thus: Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent.

William Ollendorf vs. Ira Abrahamson 38 Phil. 585 Facts: Herein plaintiff Ollendorf and defendant Abrahamson made and entered into Contract of Agreement. The first part hereby agrees to employ the defendant and the party of the Civil Law – Obligations and Contracts

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second obliges himself to work for the plaintiff within the period of two years. Defendant obligates and binds himself to devote his entire time, attention, energies and industry on the promotion of the furtherance of the business and interest of the party. Failure on the said duty shall entitle the plaintiff to discharge and dismiss the defendant. The second part of the contract further binds the party that he will not enter whether directly or indirectly to engage in a similar or competitive business. Under the term of this agreement, the plaintiff left the employment due to illness and went to U.S. After his departure, the defendant returns to Manila as the Manager of the Philippine Underwear Company. Defendant admits that both firms turn out the same class of goods and those they are exported to the same market. However, he alleged that the said contract with the plaintiff was void for it violates the right for free trade. Issue: Whether or not the contract is void due to the violation of the rights of trade. Held: No, the contract was not void as constituting an unreasonable restraint of trade. The rule is that the obligations created by contracts have the force of law between the contracting parties and must be enforce in accordance with their tenor. The only limitation upon the freedom of contractual agreement is that the facts established shall not contrary to law, morals or public order. The industry of counsel failed to discover direct expression of the legislative which will prohibits such.

Article 1161 Bernabe Castillo, et al. vs. The Honorable Court of Appeals, et al. 176 SCRA 591 Facts: This is a petition for review on certiorari where petitioners seek for the renewal of the Court of Appeals decision affirming the dismissal of the Court of First Instance of the complaint for damages filed by petitioners against the respondents Juanito Rosario and Cresencia Rosario. On May 2, 1965, petitioner Bernabe Castillo (in his own behalf, and in behalf of Serapion Castillo who has since then become deceased, and Eulogio Castillo, his minor child) and Generosa Galang Castillo figured in a vehicular accident with private respondents Juanito Rosario and Cresencia Rosario at Bagac, Villasis, Pangasinan causing injuries to their persons and damages to their respective vehicles. The parties have their own version of what actually happened on that fateful day. Each party is pointing to the negligence by the other as the proximate cause of the accident. While the case was pending in the Court of First Instance of Manila, the Provincial Fiscal of Pangasinan file an information dated September 29. 1965 against Juanito Rosario for double physical injuries, double less serious physical injuries, and damage to property thru reckless Civil Law – Obligations and Contracts

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imprudence in the Court of First Instance of Urdaneta. Rosario was prosecuted and convicted in the criminal case. Castillo then appealed to the Court of Appeals which rendered a decision acquitting him from the crime charged on the ground that his guilt has not been proved beyond reasonable doubt. On the other hand, the Court of First Instance of Manila rendered a decision on the basis of the testimonies and evidence submitted by the petitioners as well as the records of the case, dismissing the complain of the petitioners against private respondents as well as the counterclaim of private respondents against the petitioners. On January 24, 1973, petitioners appealed to the Court of Appeals which then affirmed the decision of the Court of First Instance of Manila as it found no negligence committed by Juanito Rosario to warrant an award of damages to the petitioners. Hence, the present petition for review on certiorari. Issue: Whether or not the judgement of acquittal extinguishes civil liability based on the same incident. Ruling: Yes. The Court of Appeals' findings that the collision was not due to the negligence of Juanito Rosario but Bernabe Castillo's own act of driving was actually the proximate cause of the collision. With such findings and citing the cases Corpus vs Paje, 28 SCRA 1062, 1064, 1067; Faraon vs Priela, 24 SCRA 582, 583; De Soriano vs Albornoz, 98 Phil. 785, 787788; Tan vs Standard Vacuum Oil Co., 91 Phil. 672, 675, the Court of Appeals exonerated Rosario from the civil liability on the ground that the alleged negligence did not exist. Petition denied. No pronouncement as to costs.

Article 1162 Padua vs. Robles 66 SCRA 485 Facts: The citation of the case was a negligent act, homicide through reckless imprudence filed to driver Romeo Punzalan and defendants - appellees as subsidiary liable, which give rise to two separate liabilities, namely (1) the civil liability arising from crime or culpa criminal and (2) the liability arising from civil negligence or so called culpa aquiliana. Issue:Whether or not that negligent act of Punzalan gives rise to the two separate and independent liabilities. Held: It is by now settled beyond all cavil as to dispense with the citation of jurisprudence, that a negligent act such as that committed by Punzalan gives rise to at least two separate and independent kinds of liabilities, (1) the civil liability arising from crime or culpa criminal and (2) the liability arising from civil negligence or the so-called culpa aquiliana. These two concepts of fault are so distinct from each other that exoneration from one does not result in exoneration from the other. Adjectively and substantively, they can be prosecuted separately Civil Law – Obligations and Contracts

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and independently of each other, although Article 2177 of the Civil Code precludes recovery of damages twice for the same negligent act or omission, which means that should there be varying amounts awarded in two separate cases, the plaintiff may recover, in effect, only the bigger amount. That is to say, if the plaintiff has already been ordered paid an amount in one case and in the other case the amount adjudged is bigger, he shall be entitled in the second case only to the excess over the one fixed in the first case, but if he has already been paid a bigger amount in the first case, he may not recover anymore in the second case. Thus, in the case at bar, inasmuch as Punzalan had already been sentenced to pay the herein petitioners the amounts above-stated, in the subsequent criminal case, he could not be adjudged to pay a higher amount.

Article 1163 - 1166 Agcaoili vs. GSIS 165 SCRA 1 Facts: In this case, appellant GSIS approved an application of the appellee Agcaoli for the purchase of a house and lot in the GSIS Housing Project at Nangka, Marikina, subject to the condition that the latter should forthwith occupy the house, a condition that Agcaoli tried to fulfill but could not because the house was absolutely uninhabitable. However, Agcaoli ask a homeless friend, a certain Villanueva, to stay in the premises as some sort of watchman, pending completion of the construction of the house. Agcaoli after paying the first installment and other fees, having thereafter refused to make further payment of other stipulated installments until GSIS had made the house habitable; and appellant having refused to do so, opting instead to cancel the award and demanded the vacation by Agcaoli of the premises; and the latter having sued the GSIS in the Court of First Instance of Manila for specific performance with damages and having obtained a favorable judgment, the cases was appealed by the GSIS. Issue: Whether or not Agcaoli is entitled for specific performance with damages. Held: Appeal of GSIS must fail. There was then a perfected contract of sale between the parties; there had been a meeting of minds upon the purchase by Agcaoli of a determinate house and lot from GSIS at a definite price which is payable in amortizations and from that moment the parties acquired the right to reciprocally demand performance. It was, to be sure, the duty of the GSIS, as seller, to deliver the thing soled in acondition suitable for its enjoyment by the buyer, in other words to deliver the house subject of the contract in a reasonably livable state. This it failed to do. Since GSIS failed to fulfill its obligation, and was not willing to put the house in a habitable state, it cannot invoke Agcaoli’s suspension of payment as cause to cancel the contract Civil Law – Obligations and Contracts

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between them. In recipient obligation, neither party incur in delay of the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. Nor may the GSIS succeed in justifying its cancellation of the award by the claim tha Agcaoli had not complied with the condition of occupying the house within three (3) days. The record shows that Agcaoli did try to fulfill the condition. Finally appellant having caused the ambiguity as the exact prestation of the agreement, the question of interpretation arising therefrom, should be resolved against it.

Francisco Guttierez Repide vs. Afzetius and Afzetius 39 Phil. 190 Facts: The subject of specific performance, with reference to its common law and civil law status, is to be considered on this appeal. The particular action is for the specific performance of a contract for the sale and purchase of seal estate. The plaintiff is the owner of a certain parcel of realty, the defendants made a proposition to the plaintiff for the purchase of this property. The property was to be mortgaged to the plaintiff to rescue the payment of this balance. The plaintiff proceeded to have survey made of the land and to prepare the deed and mortgage. Expenses where incurred for these purposes. The deed was ready when the defendants were notified to appear and sign the same but they failed to this and wrote a letter to plaintiff. Plaintiff was, and still is, willing to execute the deed in accordance with the terms agreed upon with the defendants. Accordingly, plaintiff, in his action in the court of First Instance of the City of Manila, asked judgment against the defendants condemning them to sign the deed and mortgage to the land in question, and to pay the purchase price stipulated with costs. Issue: Whether or not the defendants are able to perform the contract is a matter of defense, and there is no special defense on that subject in the answer. Ruling: The judgment then was in favor of the defendants, dismissing the plaintiff’s complaint, without prejudice to any other remedy which the plaintiff might have, and without any finding as to the costs. The plaintiff and appellant bases his argument or articles 1254, 1258, 1278, 1450, and 1279 of the Civil Code. The provisions of the five articles first cited and others that could be mentioned merely tend to corroborate what is self-evident, namely, the existence of a valid contract between the parties. Indisputably, there has been an offer and an acceptance, and all that remained to effectuate the contract was the execution of the deed and the mortgage. Here we have presented a good and valid contract, bilateral in character, and free from all taint of fraud. The stability or commercial transaction requires that the rights of the seller be Civil Law – Obligations and Contracts

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protected just as effectively as the right of the buyer. If this plaintiff had refused to comply with the contract, specific performance of the obligation could have been asked by the defendants. Just as surely should the plaintiff who has lived up to his bargain and who has been put to expense to do so, be permitted to coerce the defendant into going through with the contract. The excuse of the defendants is that they do not now have the money to pay the first installment. In other words, they plead impossibility of performance. The rule of equity jurisprudence in such a case is that mere pecuniary inability to fulfill an engagement does not discharge the obligation of the contract, nor does it constitute any defense to a decree for specific performance. Judgment reversed.

Pormellosa vs. Land Tenure Administration 1 SCRA 375 Facts: The lot in controversy is a part of the Santa Clara Estate on which many families have settled through the consent of its owner, each paid a rental. In May 1941, the said Estate was acquired by the Government & was entrusted to an office known as the Rural Progress Admin., which was later abolished & its functions was transferred to the Bureau of Lands. Recently, such duties was given to the Land Tenure Administration. The plaintiff acquired by purchase the right of occupation of the lot in question from Vicente San Jose, predecessor-in-interest. After the purchase of the Santa Clara Estate by the Government, the plaintiffs were allowed to make payments on account of the purchase price of the lot, as fenced, included two hundred (200) sq.m. Thereafter, the plaintiffs found out that the lot had been subdivided into two (2) smaller lots, No. 44 and 78. Lot No. 44 had been sold to Hermino Guzman. The plaintiffs then filed a complaint to compel the Director of Lands to execute a Deed of Sale in their favor & declare null and void the Deed of Sale of Lot No. 44, executed in favor of respondent Hemino. The trial court rendered judgment in favor of plaintiff, but was reversed by the Court of Appeals, dismissing the petitioner’s complaint. Hence, this petition. Issue: Whether or not the plaintiffs are entitled to purchase from the Government the lot, allegedly includes 200 sq.m. Held: The judgment under review was affirmed. The lot on which San Jose’s house stood had not been specified, nor had the boundaries thereof been mentioned. Significantly, the plaintiff cannot show a contract whereby the Rural Progress Admin., has sold or promised to sell them a lot of 200 sq.m. A party claiming a right

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granted or created by law must prove his claim by competent evidence. He must rely on the strength of his evidence and not on the weakness of that of his opponent. Moreover the Deed of Sale allegedly executed by Vicente San Jose in favor of Pornellosa is a mere private document and does not conclusively establish their right to the parcel of land. Acts and contracts which have for their subject the creation, transmission, modification or extinguishment of real rights over immovable property must appear in a public document.

Article 1167 -1168 Chaves vs. Rosales 32 SCRA 597 Facts: Chavez is an owner of a typewriter and he asked Gonzales to fix his typewriter for him. However, Gonzales was not able to accomplish his obligation of fixing the said typewriter. In accordance with this event, Chavez asked Gonzales to return the typewriter to him which the latter did wrapped in a package. However, Chavez discovered that there were missing parts of the typewriter. After this incident, Chavez asked another person to repair the typewriter for him and this time the typewiter was fixed and Chavez pad for the repair as well as for the missing parts of the typewriter. Issue: Whether or not Chavez can ask for the payment of the full price of the repair made by the other person as well payment for the missing parts. Held: The court held that under the law Chavez in entitled for reimbursement for the full price of the repair for the typewriter as well as for the missing parts. Under the law, in the obligation to do if the obligor fails to do his obligation; the creditor can ask for damages plus the price of the repair which the obligor failed to do. In the instant case at bar, the obligor Gonzales failed to do his obligation thus he is required by law to pay the full price of repair made by another person in the fulfillment of his supposed obligation plus the price of the missing parts of the typewriter. Hence, this court order Gonzales to pay the full price of the repair as well as the missing parts of the typewriter.

Article 1169 Rose Packing Co. vs. Court of Appeals 167 SCRA 309


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Facts: This is a petition for review on certiorari of the decision of the Court of Appeals in CAG.R. No. 431 98-12 promulgated on December 16, 1070. On December 12, 1962 respondent bank Philippine Commercial and Industrial Bank (PCIB) approved a letter request by petitioner for the reactivation of its overdraft line of P50,000.00, discounting line of P100,000.00 and a letter of credit-trust receipt line of P550,000.00 as well as an application for loan of P300,000.00 on fully secured real estate and chattel mortgage and on the further condition that respondent PCIB appoint its executive vice-president Roberto S. Benedicto as its representative in petitioner’s board of directors. On November 3, 1965 the National Investment and Development (NIDC), approved a P2.6 million loan application of petitioner with certain conditions. The NIDC released to petitioner the amount of P 100,000.00. Petitioner purchased five (5) parcels of land in Pasig, Rizal making down payment thereon. August 3, 1966 and October 5,, 1966, respondent PCIB approved additional accommodations to petitioner consisting of P 710,000.00 loan for the payment of the balance of the purchase price of those lots in Pasig. However, PCIB released only P 300,000.00 of the P 710,000.00 on approved loan for the payment of the Pasig lands and some P 300, 000.00 for operating capital. On June 29 1967, the Development Bank of the Philippines approved on application by petitioner for a loan of P 1,840,000.00 and a guarantee for $ 652,682.00 for the purchase of can making equipment. Petitioner advised respondent PCIB of the availability of P 800,000.00 to partially pay off its account and requested the release of the titles to the Pasig lots for delivery to the DBP. On January 5, 1968 respondent PCIB filed a complaint against petitioner and Rene Knecht, its president for the collection of petitioner’s indebtedness to respondent bank. The PCIB gave petitioner notice that it would cause the real estate mortgage to be foreclosed at an auction sale. Petitioner filed a complaint in the Court of First Instance of Rizal to enjoin respondents PCIB and the sheriff from the proceeding with the foreclosure sale, and to ask the lower court to fix a new period for the payment of the obligations of petitioner to PCIB. The lower court issued an order denying the petition. The petitioner filed with respondent Court of Appeals a petition for certiorari with application for restraining order and preliminary injunction. Hence, the petition is also denied. Issue: Whether or not private respondent have the right to the extra-judicial foreclosure sale of petitioner’s mortgaged properties before trial on the merits.


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Held: (1) The decision of the Court of Appeals is REVERSED insofar as it sustained (a) the lower court’s denial of petitioner’s application for preliminary injunction and (b) the validity of the foreclosure sale; (2) the lower court is ordered to proceed with the trial on the merits of the main case together with a determination of exactly how much are petitioner’s liabilities in favor of respondent bank PCIB so that proper measures may be taken for their eventual liquidation; (3) the preliminary Injunction issued by this Court on April 28, 1971 remains in force until the merits of the main case are resolved; and (4) the motion of respondent bank dated April 1, 1981, for leave to lease the real properties in custodia legis is denied. The loans of petitioner corporation from respondent bank were supposed to become due only at the time that if receives from the NIDC and PDCP the proceeds of the approved scheme. As it is, the conditions did not happen. For an obligation to become due there must generally a demand. Default generally begins from the moment the creditor demands the performance of the obligation. Without such demand, judicial or extra-judicial, the effects of default will not arise.

Bayla v. Silang Traffic Co. 73 Phil. 455 Facts: Petitioner (subscriber) entered into an agreement with respondent (seller) regarding the purchase of fifteen (15) shares of capital stock by the former from the latter for the sum of P1, 500.00. Said agreement has with it certain terms and conditions, among which are cases where the subscriber shall fail to pay the installments or to perform the conditions or if said shares shall be attached or levied upon by creditors of the subscriber, said shares are to be automatically reverted to the seller and the payments already made are to be forfeited in favor of the seller. On or before July 31, 1937, petitioners failed to pay the installment due that day resulting for the automatic forfeiture of the payments they already made. On the other hand, on August1, 1937, the respondent corporation issued a resolution was authorizing the refund of the installments already paid by their subscribers. Said resolution was issued by respondent for the purpose of terminating the pending civil case involving the validity of the shares in question which was subsequently dismissed. Based on the said resolution, the petitioners instituted an action for the recovery of the sum of money which they have paid severally to the corporation. The corporation set up a defense stating that said resolution was no longer applicable to the petitioners since their shares was already reverted in favor of the seller due to their failure to pay on the due date long before the resolution was issued. Moreover, another resolution was issued by the corporation on August 22, 2937 revoking and cancelling the earlier resolution. The trial court issued an order against the petitioners; and on appeal, the CA affirmed the Civil Law – Obligations and Contracts

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decision of the trial court with some modifications as to the cancellation of the petitioner’s subscription which was reversed by said appellate court. Hence, an appeal by both parties for certiorari. Issues: 1. WON the said contract is a subscription or a sale of stock 2. WON under the contract between the parties the failure of the purchaser to pay any of the quarterly installments on the purchase price automatically give rise to the forfeitures of the amount already paid and the reversions of the shares to the corporation. 3. WON the resolution of August 1, 1937 is valid. Held: Judgment against the defendant. Whether a particular contract is a subscription or a sale of stock is a matter of construction and depends upon its terms and the intention of the parties. It should be noted that the agreement entered into by the parties in this case is entitled “Agreement for Installment Sales of Shares in the Silang Traffic Company, Inc.” It also appears that in the civil case which was earlier dismissed, the CFI mentioned the right of the corporation to sell the shares of stock to the person named in the resolution, including the petitioner, was impugned by the petitioners in the said case, who claimed a preferred right to buy said shares. This shows that said contract is simply a contract of purchase and sale. A purchase is an independent agreement between individual and the corporation to buy shares of stock from it at a stipulated price; different from that of a subscription which is a mutual agreement of the subscribers to take and pay for the stock of the corporation. With regards to the second issue, the provision regarding interest on deferred payments would not have been inserted if it had been the intention of the parties to provide for automatic forfeiture and cancellation of the contract. Moreover, the contract did not specifically provide that the failure of the purchaser to pay any installments would give rise to forfeiture and cancellation without the necessity of any demand from the seller. Under article 1100 of the Civil Code (Now art. 1169 of the NCC) persons obliged to deliver or do something are not in default until the moment the creditor demands of them, judicially or extrajudicially, the fulfillment of their obligation, unless the law expressly provides that demand is no longer necessary in order that default may arise, or if the time of delivery or service is a controlling motive for the establishment of contract. As to the third issue, the resolution which was made for the good of the corporation and for the termination of the civil case benefited other petitioners. It would be an unjust discrimination to deny the same benefit to the herein petitioners. Article 1170 Arrieta, et al. vs. National Rice and Corn Corp. 10 SCRA 79 Civil Law – Obligations and Contracts

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Facts: This is a appeal of the defendant-appellant NARIC from the decision of the trial court, awarding to the plaintiffs-appellees the amount of $286,000.00 as damages for breach of contract and dismissing the counterclaim and third party complaint of the defendant-appellant NARIC. On May 19,1952, plaintiff-appellee participated in the public bidding called by the NARIC for the supply of 20,00 metric tons of Burmese rice. As her bid of $203.00 per metric ton was the lowest, she was awarded for the contract. Plaintiff-appellee Paz P. Arrieta and the appellant corporation entered into a contract of sale of rice, under the terms of which the former obligated herself to deliver the latter 20,000 metric tons of Burmese Rice at $203.00 per metric ton, CIF Manila. In turn, the defendant corporation committed itself to pay for the imported rice “by means of an irrevocable, confirmed and assignable letter of credit in U.S. currency in favor of the plaintiff-appellee and /or supplier in Burma, immediately.” Despite the commitments to pay immediately, it was only on July 30,1952, or afull month from the execution of the contract, that the defendant Corp. took the first step to open a letter of credit. On August 4, 1952, the bank informed the appellant corporation that its application, “for a letter of credit has been approved with the condition that 50% marginal cash deposit be paid and that drafts are to be paid upon presentment.” Furthermore, the Bank represent that it “will hold your application in abeyance pending compliance with the above stated requirement.” It turned out that the appellant corporation was not in any financial position to meet the condition, NARIC bluntly confessed to the appellee. Consequently, the credit instrument applied for was opened only on September 8, 1952. As a result of the delay, the allocation of the appellees supplier in Rangoon was cancelled. Issue: Whether or not the appellant failure to open immediately the letter of credit in dispute amounted to a breach of the contract of July 1, 1952 for which it may be held liable in damages. Ruling: it is clear upon the records that the sale and principal reason for the cancellation of the allocation contracted by the appellee herein in Rangoon, Burma, was the the failure of the letter of credit to be opened with the contemplated period. This failure must, therefore, be taken as the immediate cause for the consequent damage which resulted. Secondly, from the correspondence and communications which form part of the record of this case, 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 the appellant corporation to meet the condition imposed by the Bank for granting the same.


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The liability of the appellant, however stems not alone from the failure or inability to satisfy the requirements of the bank. Its culpability arises from its willful and deliberate assumption of contractual obligations even as it was well aware of its financial incapacity to undertake the presentation. Under the provision of Article 1170 of the Civil Code, not only debtors guilty of fraud, negligence or defaults in the performance of obligations are decreed liable; in general, every debtor who fails in the performance of his obligations is bound to indemnify for the losses and damages caused. The decision appealed from is hereby affirmed.

Meralco vs. Court of Appeals 157 SCRA 243 Facts: To recover the damages due to embarrassment, humiliation, hurt pride, and wounded feelings inflicted by the petitioner-appellant during the disconnection of the respondent’s electrical service; the latter filed a complaint at Court of First Instance of Manila. The court ordered the petitioner to rendered 10,000 pesos to the respondents as payment for damages. Hence, petitioner filed a petitioned in the Court of Appeals, but the court denied the petition. From the facts adopted by the Court of Appeals, it was found that the respondents are clients of the petitioner. The respondents stated that the petitioner did not provide any notice before the disconnection, that it must be compulsory to the plaintiff to issue disconnection notice. The petitioner disputed the respondents’ statement stating that it has the right to disconnect the electric service of the delinquent customer, for they formerly stated that the respondents failed to pay the bill in a given time. Issue: Whether or not Court of Appeals committed grave abuse of discretion in affirming the Trial Court’s decision. Held: There is no abuse of discretion in the part of the respondent court in affirming the assailed decision of the CFI Manila. The right to disconnect the electric service of a delinquent customer shall be accompanied by a given notice 48 hours in advances as provided for in Section 97 of the Revised Order No. 1 of the Public Service Commission. In accordance with the previous rulings, failure to give such prior notice amounts to a tort. And since, petitioner MERALCO in this particular case disregarded the rule on 48-hour notice prior to disconnection which is protected by law, petitioner is liable for damages according to Article 1170 of the civil code, therefore, the respondents are entitled to claim damages. Article 1170 states that, “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 for damages.” Civil Law – Obligations and Contracts

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Article 1174 University of Santo Thomas vs. Descals 38 Phil. 267 Facts: A house in Intramuros, was subjected, exclusive of the land on which it as erected, to a censo in favor of the University of Santo Thomas. The censo was created in a public document, duly registered, wherein the value of the capital was expressly stipulated, and the pension to paid on account thereof was fixed. One Salvador Farre bought the house and the land on which it stood, apparently in ignorance of the censo to which the house was subjected and refused to recognize the rights of the University in the premises. The University instituted an action, wherein, upon appeal to this court, the right of the University in and to the censo was maintained, and judgment was entered against Farer for the amount of the payments due thereunder. Issue: Whether or not the deterioration and decay in the materials of which a building is constructed, incident to the lapse of time, are causes embraced within the terms “force majeure or by a fortuitous event”. Held: The deterioration and decay in the materials of which a building is constructed, incident to the lapse of time, are causes embraced within the term “force majeure or fortuitous event” as those terms are used in article 1625 of the code, and in support of our ruling it will be sufficient to insert here some extracts from the commentaries upon this article of the code by the learned Spanish author Manresa. “By the words force majeure or fortuitous event used in the first paragraph of article 1625, as already stated, the law alludes to every cause independent of the will of the annuitant, of every fault on his part. There is nothing else to do but to so admit, not only because the code opposes to the annuitant no other defense except fortuitous event and fault, without making other distinctions, but also because in reality every cause foreign, if that term maybe used, to the annuitant, juridically and reasonably demands the same solution, and because all these causes can be reduced to a fortuitous event, or to force majeure. We conclude that the judgment entered in the court below should be affirmed, with the costs of this instance against the appellant. So ordered. Pacific Vegetable Oil Corporation vs Angel Singzon G.R. L-7917 Facts: Appeal from the decision of the CFI of Leyte dismissing the case holding that the plaintiff, a foreign corporation, had no personality to institute the present case even if it afterwards obtained a license to transact business because this belated act did not have the effect of curing the defect existed when the case was instituted. Civil Law – Obligations and Contracts

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Issue: Whether or not the CFI of Leyte committed a grave abuse of discretion in dismissing the case. Held: Yes. The judgment of the CFI is reversed and a new one will be entered ordering the appellee to pay the appellant the sum of P157,760.00 plus interest from the filing of the complaint, and the costs.

Article 1176 Hill vs. Veloso 31 Phil. 160 Facts: It is believed that defendant Maxima Ch. Veloso is indebted to Damasa Ricablanca, her sister-in-law and widow of Potenciano Ch. Veloso, with the amount of P8, 000. It is also believed that Domingo Franco, defendant’s son-in-law and minor child of Ricablanca, had the latter sign a blank document for the purpose of compelling her to execute a document regarding the acknowledgment of the abovementioned debt in his behalf. The guardian of Franco, named Levering, according to the latter, is the one who compelled the defendant to sign the said document on Franco’s behalf. Later on, the document that was signed by the defendant turned out to be a document containing a different tenor which states that the defendant had executed the said document for value of the goods that they received in La Cooperative Filipina which they (the defendant and her husband) are bound to pay jointly and severally to Michael and Co., for the sum of P6, 319.33. Levering, as the guardian of the minor children of Damasa Ricablanca, commenced proceedings against the defendant for the recovery of the sum of P8, 000. The defendant, in turn, pray for the annulment of the contract with Michael and Co. on the grounds of deceit and error committed by her son-in-law Franco who was then a deceased. Issue: Whether or not the alleged deceit caused by Franco may be a ground for the annulment of the contract. Ruling: The judgment is against defendant. The deceit, in order that it may annul the consent, must be that which the law defines as a cause. According to Article 1269 of the Civil Code (now Article 1338 of the New Civil Code), “there is deceit, when by words or insidious machinations on the part of one of the contracting parties, the other is induced to execute a contract which without them he would not have made.” Domingo Franco is not one of the contracting parties who may have deceitfully induced the other contracting party, Michael and Co., to execute the contract. The one and the other contracting parties, to whom the law refers, are the active and the passive subjects of the obligation, the party of the first part and the party of the second part who execute the contract. The active subject and the party of the first part of the promissory note in question is Michael Civil Law – Obligations and Contracts

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and Co., and the passive subject and the party of the second part are Maxima Ch. Veloso and Domingo Franco; two, or they be more, who are one single subject, one single party. Domingo Franco is not one contracting party with regard to Maxima Ch. Veloso as the other contracting party. They both are but one single contracting party in contractual relation with, Michael and Co. Domingo Franco, like any other person who might have been able to induce Maxima Ch. Veloso to act in the manner she is said to have done, under the influence of deceit, would be for this purpose, but a third person. There would then be not deceit on the part of the one of the contracting parties exercised upon the other contracting party, but deceit practiced by a third person.

Article 1178 Azzaraga vs. Rodriguez 9 Phil. 637 Facts: December 31, 1898, the defendant Rodriguez executed in favor of Regino Ramirez a document whereby he bound himself to pay the latter on the 15th of May, 1899, the a sum of money, which Fray Lesmes Perez owed the said Ramirez, who, in payment of a debt to the plaintiff. Azarraga, indorsed assigned to the latter the said document from the defendant, Rodriguez, for the above-stated sum, for account of his indebtedness. Issue: Whether the transfer of rights was valid. Held: The court held that the assignment or transfer of the credit in question, made by Ramirez, the creditor is valid, and notwithstanding the fact that the cause or consideration of the transfer is not stated in the indorsement, it must be presumed that one exists and that it is a lawful one, unless file debtor should prove the contrary which he has not done in this case.

Article 1179 Floriano vs Delgado 1 Phil 154 Facts: On January 20, 1907, Esteban Delgado and Regina Bertumen issued a promissory note to Urbano Floriano stating that they promise to pay the sum of 1,352.80 pesos for the balance standing with an interest of 10% per annum. Despite demands made by Floriano, the amount has not been paid, for which reason the plaintiff asked the court to enter judgment against defendants on 17th February 1907. The Court sentenced the defendants to pay the sum plus interest, with costs. The defendants appeared but did not answer the complaint. On the 22nd of March 1907, the defendants held to be in default and entered judgment ordering the defendants to pay the amount plus interests with costs. On 9th of April, defendant Delgado,


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alone and on behalf of his wife, appealed said judgment asking the court simply to exempt themselves from said judgment, hence this certiorari. Issue: Whether or not the judgment appealed from is in accordance with the law. Held: Yes. 1. As to the nature and character of the obligation: When an obligation is pure, simple and unconditional and no particular day had been fixed for its fulfillment of the same may be demanded ten days after it is contracted. The plaintiff filed his complaint 27 days after the obligation was executed. The payment had been demandable, and the debtors have no right to ask for further extension. The document of indebtedness is pure, simple and unconditional; there exists no reason that would exempt the debtors from compliance. 2. According to the mutual character of the obligation: Sentencing the debtors to pay their obligation jointly is in accordance with Article 1137 and 1138 of the Civil Code. 3. There’s no error charging only the husband in default. The plaintiff only made an error in his writing. Complaint was filed against both of them, and they were both summoned. The husband is the natural representative of his wife; therefore they are both in default. Judgment affirmed.

Testate Estate of Mota vs. Serra 47 Phil. 464 Facts: On February 1, 1919, Testate Estate of Lazaro Mota, deceased, et al., plaintiffs and Salvador Serra, defendant, entered into a contract of part partnership for construction and exploitation of railroad line from San Isidro and Palma Centrals to the place known as Nandong. The defendant entered into a contract of Sale with Venancio Concepcion, Phil. C. Whitaker and Eusebio R. Luzuriaga for the estate and central known as Palma covering all the property of the vendor. Before the delivery to the purchasers of the hacienda, Luzuriaga renounced all his rights in favor of his co-vendees. This gave rise to another deed of sale of Palma for P 1,695,961.90, of which defendant received P 945,861.90 and the balance was payable by installment and guaranteed by a especial mortgage upon the hacienda. On January 8,1921, Concepcion and Whitaker bought from the plaintiffs the one-half of the railroad line and formed an agreement that the partnership of Pal//ma and San Isidro be dissolved. Hacienda Palma became the property of Whitaker and Concepcion, however they failed to pay the defendant the unpaid balance. Serra foreclosed. Since the defendant failed to pay onehalf of the amount expended by the plaintiffs upon the construction of railroad line that is P 113,046.46 as well as the balance of the vendees, the


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plaintiffs instituted this action. The lower court favored the defendant and held that there was a novation. Plaintiffs have appealed from this judgment. Issue: Whether or not there was a novation of the contract by the substitution of the debtor with the consent of the creditor? Held: There was nothing to show the express consent, the manifest and deliberate intention of the plaintiffs to exempt the defendant from his obligations. The plaintiffs were not a party to the transfer of the defendant of his Hacienda to Whitaker and Concepcion. There is no record that would show any stipulation that the obligation of the defendant was novated with the consent of the creditor. The intention of the parties must clearly result from the terms of the agreement on by a full discharge of the original debt. Novation by substitution of a new debtor can take place without the consent of the debtor, but the delegation does not operate a novation unless the creditor has expressly declared that he intends to discharge with delegating debtor and the delegating debtor was not in open failure or insolvency at the time. The mere indication by a debtor of a person who is to pay in his place does not operate a novation. Thus, the judgment appealed from is reversed and defendant is hereby sentenced to pay the plaintiff P 113,046.06 with interest.

Article 1180 Patente vs Omega G.R. L-4433 Facts: On May 4, 1947, Roman Omega sold his agricultural land to Salud Patente, under a pacto de retro sale. On 24th of August 1949, Roman Omega executed a promissory note, promising to pay his indebtedness amounting to 1,600 pesos , to her, her heirs, assigns and successors as soon as possible or as soon as he has the money. That, he will pay the whole amount before he exercises his right of repurchase of his agricultural land. On the promissory note, no definite term is fixed and that its performance is left to the will of the debtor. Issue: Whether of not the court has jurisdiction to take cognizance of the case and to fix a definite term for the payment of the indebtedness. Held: Yes. Promissory notes are governed by Article 1128 of the Civil Code, because under the terms thereof the plaintiff intended to grant the defendant a period within which to pay his debts. As the promissory notes do not fix this period, it is for the court to fix the same.


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Article 1181 George L. Parks vs. Province of Tarlac 49 Phil. 142 Facts: On October 18, 1910, Conception Cirer and James Hill, the owners of parcel of land No. 2 referred to in the complaint, donated it perpetually to the Municipality of Tarlac, subject to the condition that it will be 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. The donation was accepted by Mr. Santiago de Jesus in the same document on behalf of the municipal council of Tarlac of which he was the municipal president and subsequently transferred the title to this property to the Province of Tarlac. On January 15, 1921, Conception Cirer and James Hill sold this parcel of land to herein plaintiff George L. Parks. The plaintiff alleging that the condition of the donation had not been complied with and invoking the sale of this parcel of land made by Corception Cirer and James Hill in his favor, brought this action against the Province of Tarlac, the Municipality of Tarlac, Corception Cirer and James Hill and prayed that he be declared the absolute owner entitled to the possession of this parcel of land. The Lower Court dismissed the complaint. Issue:Whether or not the plaintiff, George L. Parks, has a right of action to recover the parcel of land from the Province of Tarlac on the ground that the condition imposed is a suspensive or condition precedent and therefore, the said municipality had never acquired a right thereto since the condition was never performed. Held: The Supreme Court ruled that the contention of the appellant that a condition precedent having been imposed in the donation and the same not having been complied with, the donation never became effective is without merit and erroneous. The characteristic of a condition precedent is that the acquisition of the right is not effected while said condition is not complied with or is not deemed complied with. Meanwhile, nothing is acquired and there is only an expectancy of right. Consequently, when a condition is imposed, the compliance of which cannot be effected except when the right is deemed acquired, such a condition cannot be a condition precedent but a condition subsequent or resolutory condition. Natividad vs. Gabino 36 Phil. 663 Facts: The testator Salvador y Reyes contracted a valid and legal marriage with Anselma Nicasio, who died in 1868, leaving a daughter named Higinia who married Clemente Natividad. Higinia Salvador died in 1913, survived by two children Emilio and Purificacion, both surnamed Natividad y Salvador. Tiburcio Salvador disposed of all his property in the manner recorded in the will executed in legal form on November 9, 1914, instituting as sole Civil Law – Obligations and Contracts

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heirs his grandchildren Emilio and Purificacion, both surnamed Natividad y Salvador. In the sixth clause of this will the testator left to Basilia Gabino the legacy mentioned therein. Literally, this clause is as follows: I bequeath to Doña Basilia Gabino the ownership and dominion of the urban property, consisting of a house and lot situated on Calle Lavezares of the said district of San Nicolas and designated by No. 520, and in addition eleven meters by two meters of the lot designated by No. 419, situated on Calle Madrid. This portion shall be taken from that part of the lot which is adjacent to the rear of said property No. 520. If the said legatee should die, Lorenzo Salvador shall be obliged to deliver this house, together with the lot on which it stands, to my grandson Emilio Natividad, upon payment by the latter to the former of the sum of four thousand pesos (P4,000), Philippine currency. The executor of the estate of the decedent is the decedent's own heir, Emilio Natividad, who in due season and by counsel presented to the court for its approval a proposed partition of the property pertaining to the estate, stating that adjudication to the legatee (Basilia) a usufruct only of the property at No. 520 Calle Lavezares, and a general legacy in favor of Lorenzo Salvador of the sum of P4,000 whenever Basilia should die; but that the ownership of the property upon which this right and legacy are established belongs to the heir Emilio Natividad, which was questioned by Basilia, saying that ownership and dominion, instead of usufruct only, of said property be adjudicated to the objector-legatee, her. Judge of the Court of First Instance of Manila, interpreting the true wishes of the testator, expressed the opinion that the ownership and dominion of the property mentioned in clause 6 of the will should be awarded to Basilia Gabino, subject to the reservation made in behalf of Lorenzo Salvador and Emilio Natividad. Issue: What construction must be given to the above-quoted sixth clause of the will executed by Tiburcio Salvador? Held: A person is entirely free to make his will in such manner as may best please him, provided the testamentary provisions conform to law and meet its requirements. He may impose conditions, either with respect to the institution of heirs or to the designation of legatees, and, when the conditions imposed upon the former or the latter do not fall within the provisions of those articles of the Civil Code touching heirs and legatees, they shall be governed by the rules therein prescribed for conditional obligations. In the sixth clause of the will executed by the decedent Tiburcio Salvador y Reyes, he bequeathed to Basilia Gabino the ownership and dominion of the property therein specified as to its location and other circumstances, on condition that if the legatee should die Lorenzo Salvador would be obliged, upon the payment of P4,000 by the testator's grandson and heir Emilio Natividad, to hand over this property to the latter. The condition imposed by the testator in the double legacy mentioned depends upon the happening of the event constituting Civil Law – Obligations and Contracts

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the condition, to wit, the death of the legatee Basilia Gabino, a perfectly legal condition according to article 1114 of the Civil code, as it is not impossible of performance and is not contrary to law or public morals, as provided in article 1116 of said code. It cannot be understood that the legacy conveyed only the usufruct of the property because the plain and literal meaning of the words employed by the testator in the said clause sixth clearly shows beyond all doubt the express wished of the testator. It is constant rule or jurisprudence that in matters of last wills and testaments the testator's will is the law. Petition denied.

Lichauco vs. Figueras Hermanos 7 Phil. 339 Facts: This is an appeal from a judgment in favor of the plaintiff who brought an action to recover the hire for two lorchas calle the Chata and the Lolin for the month of August, 1905. The defendants admitted their responsibility for the rental of these lorchas for the days of that month upon which they were actual use — that is, for twenty-three and twenty-seven days, respectively — and on demand made formal tender of the amount of the rental claimed for those days; but they deny their responsibility for those days of the month during which they did not make use of lorchas and left them at the disposal of the plaintiff. The Quartermaster's Department of the Army of the United States advertises semiannually for proposals to furnish lighterage for its use in the port of Manila. The service required is divided into two classes, regular and emergency. The price paid for emergency service is naturally higher than that paid for regular service wherein the lorcha are steadily employed for the entire contract period of six months. The aggregate tonnage required by the department is so great that no single lorcha owner could fill the entire contract without the aid of other owners, and the defendants, who had at that time a bid for the contract for the semiannual period from July 1 to December 31, 1905, entered into a contract with the plaintiff on the 20th of April, 1905. Thereafter on the 29th of April, 1905, they entered into an amended contract. On the 1st of July the plaintiff lorchas Chata and Lolin were furnished to the quartermaster under the defendants' contract for the emergency service, and were thus employed in that service for the first twenty-three and twenty-seven days of August, when they were released by the quartermaster, and the plaintiff immediately notified by the defendants that they were at his disposal. Plaintiff claims that defendants made use of these lorchas, under the terms of the above set out contract of April 20, as amended by the contract of April 29, and therefore that defendants are responsible to him for hire of the lorchas for every day of the month at the per diem emergency rate paid by the quartermaster on the days when the boat was in use. Civil Law – Obligations and Contracts

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Issue: Whether or not defendants should pay those days of the month during which they did not make use of lorchas and left them at the disposal of the plaintiff. Held: We do not think that the plaintiff, on whom rests the burden of proof, succeeded in establishing this contention. The amendment to the contract between the plaintiff and defendant was expressly conditioned on defendants' being the successful bidders at the letting of May 2, 1905, and it cannot be doubted that the amendment became of no force or effect when the result of the letting was announced, for it is manifest that thereafter neither party could base a claim against the other on a failure to execute its terms, unless it was given new life by a new agreement, either express or implied. In conditional obligations, the acquisition of rights, as well as the extinction or loss of those already acquired, shall depend upon the event constituting the condition. (Art. 1114 of the Civil Code.) It is said, however, that even though the obligation of the conditional amendment was extinguished by defendants' failure to secure the entire lighterage contract or to secure it at the time specified in the condition, nevertheless the defendants, by taking and using these lorchas for the purpose of carrying out their contract with the quartermaster without any new agreement the obligation with the plaintiffs, impliedly and tacitly assumed the obligation of the original contract together with the amendment, so that their use of the lorcha was subject to its terms. We do not think we are entitled to draw such an inference from the use of these boats in the months of July and August. The judgment of the trial court should be and is hereby reversed, without special condemnation of costs in this instance, and after the expiration of twenty days the cause will be returned to the trial court wherein it originated.

Article 1182 Osmena v Rama 14 Phil. 99 Facts: On the 15th of November 1890, Cenona Rama executed a contract to Victoriano Osmena, which states that she owes Osmena the sum of 200 pesos, which she will pay in


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sugar plus interest. As a guarantee, Rama pledged as a security all her present and future property and as a special security her house in which she lives. ON the 27ht of October 1891, another contract was executed , for further loan amounting to 70 pesos, wherein she loaned 50 pesos to Penares, leaving her only 20 pesos. Osmena died sometime after the execution and delivery of the said contract. After the settlement and division of his estate, the said contract became the property of Agustina Rafols, his heir. On the 15th of March 1902, the plaintiff presented the contracts to defendant for payment and she acknowledged her responsibility, thus, executing another contract promising the plaintiff to pay, if her house is sold. On the 26th of June, 1906, the defendant failed to pay her obligations, the plaintiff filed a complaint in court. The defendant answered by filing a general denial and setting up the special defense of prescription. After the hearing of evidence, the court rendered its judgment in favor of the plaintiff. Ordering the defendant to pay 200 pesos plus interests and 20 pesos plus interests on both at the rate of 18 ¾ per annum. The defendant appealed. Issue: Whether of not the lower court erred in its judgment, as the appellant alleges, there’s insufficiency of evidences to support its findings. Held: No. In the acknowledgment of the indebtedness made by the defendant, she imposed the condition that she would pay the obligation if she sold her home. If the statement found in her acknowledgment of the indebtedness should be regarded as a condition, it was a condition which depended upon her exclusive will and is therefore void. The acknowledgment therefore was an absolute acknowledgment of the obligation and was sufficient to prevent the statute of limitation from barring the action upon the original contract.

Trillana vs Quezon College G.R. L-5245 Facts: Damasa Crisostomo subscribed 200 shares of capital stock with a par value of P100 each through a letter sent to the Board of Trustees of the Quezon College, enclosed with the letter are a sum of money as her initial payment and her assurance of full payment after she harvested fish. On October 26, 1948, Damasa Crisostomo passed away. As no payment appears to have been made on the subscription mentioned in the foregoing letter, the Quezon College, Inc. presented a claim before the CFI of Bulacan in her testate proceeding, for the collection of the sum of P20,000, representing the value of the subscription to the capital stock of the Quezon College, Inc. which was then opposed by the administrator of the estate. Issue: Whether or not the condition entered into by both parties are valid. Civil Law – Obligations and Contracts

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Held: No, Under article 1115 of the old Civil Code which provides as follows: "If the fulfillment of the condition should depend upon the exclusive will of the debtor, the conditional obligation shall be void.”

Article 1183 Luneta v Abad 67 Phil.236 Facts: The plaintiff sought to recover a sum of money plus interest and attorney’s fees for balance due on four promissory notes executed by the dependant. The complaint sued for a writ of attachment which was issued, Defendant petitioned that the attachment be lifted and to that effect a counterbond was tendered by the terms of which the sureties “jointly and severally bind themselves to answer for the defendants liability under the condition that: a) in case the plaintiff recovered judgment the defendant will on demand redeliver the attached properties to be applied to the payment of the judgment, or b) in default thereof that the defendant and sureties will on demand pay the plaintiff the full value of the released property. The lower court granted this petition and issued an order for the dissolution of the writ. Thereafter, dependant died, his attorney moved for the dismissal of the case. The trial court acceded to this motion and the plaintiff’s motion for reconsideration having been denied. The instant appeal was taken. Issues: 1. Whether or not the plaintiff has a cause of action 2. Whether of not Abad’s sureties are still bound. Held: 1. No more cause of action and the case was rightly dismissed in accordance with Section 119 of Act No. 190, the action being for money and pending when the defendant died. And the provision of Section 700 of Act No. 190 which reads: “ all actions commenced against the deceased person, for the recovery of money, debt or damages and pending at the time the committee are appointed, shall be discontinued and the property be discharged from the attachment. 2. No. Because the condition has became a legal impossibility because the plaintiff can never win the case having been dismissed.

Article 1187 Hermosa vs. Longara G.R. L-5267 Facts: This is an appeal by way of certiorari against a decision of the Court of Appeals, approving certain claims presented by Epifanio M. Longara against the testate estate of Civil Law – Obligations and Contracts

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Fernando Hermosa, Sr. The claims are of three kinds, namely, P 2,341.41 representing credit advances made to the intestate from 1932 to 1944, P 12,924.12 made to his son Francisco Hermosa, and P 3,772.00 made to his grandson, Fernando Hermosa Jr. from 1945 to 11947, after the death of the intestate, which occurred in December 1944. The claimant presented evidence and the Court of Appeals found, that the intestate had asked for the said credit advances for himself and for the members of his family “on condition that their payment should be made by Fernando Hermosa, Sr. as soon as he receives funds derived from the sale of his property in Spain “. Claimant had testified without opposition that the credit advances were to be “payable as soon as Fernando Hermosa. Sr.’s property in Spain was sold and he received money derived from the sale”. The Court of Appeals held that payment of the advances did not become due until administratix received the sum of P 20,000.00 from the buyer of the property. Issue: Whether or not the obligation contracted by the intestate was subject to a condition exclusively dependent upon the will of the debtor (a condicion potestativa) and therefore null and void. Held: The judgment appealed from is hereby affirmed in so far as it approves the claims of appellee in the amounts of P 2,341 and P 12,942.12, and reversed as to that P 3,772.00. The condition upon which payment of the sums advanced was made to depend. “as soon as he (intestate) receive funds derived from the sale of his property in Spain,” discloses the fact that the condition in question does not depend exclusively upon the will of the debtor, but also upon their circumstances beyond his power or control. The condition is suspensive condition, upon the happening of which the obligation to pay is made dependent and upon the happening of the condition, the debt became immediately due and demandable only when the house was sold and the proceeds received in the islands, the action to recover the same only accrued, within the meaning of the statute of limitations, on date the money became available here hence the action to recover the advances has not yet prescribed.

Enrique vs. Ramos 73 SCRA 116 Facts: This case is a direct appeal from an order of the Court of First Instance of Rizal (Quezon City), dated December 3, 1963, reversing its decision dated October 8, 1963 in favor of the plaintiffs-appellants in an action for foreclosure of real estate mortgage. Civil Law – Obligations and Contracts

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This is the second time that the herein party litigants have come to this Court on basically the same causes of action affecting the same deed of sale with real estate mortgage covenanted between them. The plaintiffs-appellant averred that on November 24, 1958 they sold to the defendantappellee Socorro Ramos a 20 subdivision lots in Quezon City for the sum of P 235,056 of which only P 35,056 had been paid. 'The balance of P200,000 was to be liquidated within two years from the date of the execution of the deed of sale, with interest at six percent for the first year and twelve percent thereafter until fully paid. To secure the payment of that balance, the defendant-appellee executed in the same document a deed of mortgage in favor of the vendors on several parcels of land variously situated in Quezon City, Pampanga and Bulacan. According to the plaintiffs-appellants, the defendant-appellee violated the terms of their agreement in the following respects: 1. Inspite of repeated demands, the defendant-appellee refused to pay the sum of P200,000 within the stipulated period; 2. The mortgage, on the Bulacan property was never registered and 3. The realty tax for 1959 on the lots mortgaged were not paid by the defendant-appellee. The court upheld the findings of the This Court upheld the findings and conclusions of the trial court which ruled that the actual price of the lots sold to the defendant-appellee was only P185,056 instead of P235,056, and that only if and when the roads shall have been constructed pursuant to the ordinances of Quezon City "may the period of two years specified in the contract begin to run." With reference to the non-payment of the 1959 realty tax and the non-registration of the mortgaged Bulacan estate, this Court held that "aside from being minor matters, the appear sufficient, explained in the brief of defendant- appellee." The defendant-appellee had stated that she applied her backpay certificates to the payment of her realty and income taxes but as she had not yet received said certificates the payment of the taxes was delayed. On the other hand the registration of the Bulacan property could not be Under taken because it was then still registered in both her name in the name of co-owner. The defendant-appellee promised that she would pay the taxes in due time and undertake the needed segregation and the annotation of the lien of the mortgage on the Bulacan property as soon as the vendors proceeded with the construction of the roads on the purchased lots. Now returning to the case at bar, the plaintiffs-appellants charged on May 4, 1963 before the Court of First Instance of Rizal (Quezon City) that the defendant-appellee has not yet paid the sum of P200,000 despite the fact that the roads on the questioned lots were completed on May


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9, 1960; that the mortgage on the Bulacan property has not yet been registered; and that the realty taxes corresponding to the years 1959 to 1963 on the mortgaged lots had not been paid. The defendant-appellee contended that even if the roads in question have already been constructed in accordance with the mentioned ordinance, still her obligation to pay the sum of P200,000 has not yet arisen as no previous notice and demand for payment has been made on her. Issue: Whether or not the lack of previous notice and demand for payment will not give rise the defendant-appellee's obligation of paying the sum of P 200,000. Held: The court held that as to the alleged lack of previous notice completion and demand for payment, the filing of the case below is sufficient notice to the defendant-appellee of the completion of the roads in question and of the plaintiffs-appellee's desire to be paid the purchase price of the questioned lots. The effect of such demand retroacts to the day of the constitution of the defendant-appellee's obligation. Thus, Article 1187 provides the "The effects of a conditional obligation to give, once the condition has been fulfilled, shall retroact to the day of the constitution obligation..." The contacted obligation of the defendant-appellee under the facts of the case at bar was to pay the balance of P200,000 within two years from the date the roads in question are completed. Accordingly the order of the court a quo dated December 3, 1963 is set aside, and judgment is hereby rendered ordering the defendant- appellee to pay to the plaintiffs-appellants, within ninety (90) days from the finality of this decision, the following : 1. The sum of P200,000 representing the unpaid balance of her contractual obligation; 2. Interest thereon, as stipulated in the deed of sale with mortgage, at the rate of 6% per annum from May 9, 1960 up to May 9, 1961, and, thereafter, 12% interest per annum until the principal amount shall have been fully paid; 3. An amount equivalent to 5% of the mortgage indebtedness of attorney's fees; and 4. The costs. Should the defendant-appellee fail to pay the aforementioned mortgage indebtedness within the period granted in this decision, and the properties mortgaged shall be sold at public auction and the proceeds thereof shall be applied to the satisfaction of this judgement and the costs of the auction sale. Costs against the defendant-appellee.

Article 1188 – 1191 Borromeo vs. Franco 5 Phil. 49 Civil Law – Obligations and Contracts

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Facts: An agreement to sell a property owned by defendants-appellees, namely frame houses with nipa roofs built upon lots, to plaintiff-appellant with the corresponding set of conditions wherein each party is set to fulfill. One of the conditions as provided for in the agreement is that plaintiff be given six months from the date of the execution of the instrument to complete the documents for said property. However, plaintiff failed to comply with the condition, hence, with liberty defendants disposed the property as they may deemed fit. Plaintiff instituted a complaint in the Court of First Instance praying that judgment be rendered in his favor and against the defendants. Defendants in their answer stated that the plaintiff has failed to comply with the conditions under which the promise to sell the property to him was made. Issue: Whether or not plaintiff has the right to compel the defendants to carry out their agreement to sell notwithstanding his failure to comply with the condition in the agreement. Held: Yes, plaintiff has the right to do so. The agreement on the part of plaintiff as set out in clause (c), to complete the title papers to the said property within the six months, is not a condition subsequent of the obligation to sell. It is only a mere incidental stipulation which the parties saw fit to include in the agreement. Being not contrary to law, public morals, or public policy, unable to complete the title papers of the said property does not prevent performance of sale. The stipulation is incidental and not inherent to the agreement or promise to sell. Also, The contract in question contains mutual obligations and is considered bilateral in nature. In this regard, the obligation to buy the property in question is correlative with the obligation to sell it. Plaintiff to perfect the papers to the property within six (6) months is not correlative to obligation to sell the property. Hence the stipulation in the agreement does not create reciprocal rights and therefore, defendants do not have the right to cancel the obligation. As state in the case, one obligation is entirely independent of the other. The latter obligation is not subordinate to nor does it depend upon the fulfillment of the obligation to perfect the title deeds to the property. Hence, the judgment of the lower court is REVERSED. Defendants are directed to sell to the plaintiff the two houses and lots upon which they stand under the terms and conditions as provided for in the agreement.

Cortez vs. Bibano and Beramo 41 Phil. 298 Facts: Petioner Anacleta Cortez acquired an hacienda from her deceased husband and applies for the registration of the hacienda in her name. several oppositors appeared among them were respondents Bibano and Beramo. The court rendered judgment decreeing the registration of the hacienda in the name of the petitioner and overruled the opposition of the respondents. Civil Law – Obligations and Contracts

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In the beginning this hacienda did not have the area the registration of which is now asked, but, it grew in extent due to the acquisition, by its original owners of the adjacent parcel, among which are those claimed by the oppositors herein respondents. With respect to the parcel claimed by Bibano, it appears from the evidence that Rodriguez and Ramirez purchased this parcel from Bibano for P500. Although in this document it is stated that Bibano received the price, the next day Ramirez signed another document, in which he stated that by agreement of the parties the price was not delivered to Bibano, but was paid to him when he needed it which was denied by Bibano and declared that what happened was that the day after the sale of his lands, he demanded the payment of the price, but instead of paying him, they give him a document. And the truth is that the purchase price has not yet been paid to the vendor. Held: Although the contract was perfect and produced the effect of transmitting to the purchaser the ownership of the land sold, this ownership, however was still dependent upon the payment of the price. As the obligation in a contract of purchase and sale is reciprocal, any of the contracting parties may, upon non-fulfillment by the other party of his part of the obligation, resolve the contract (Art. 1124, Civil Code). The agreed price not having as yet been paid to the vendor, the effect of the sale was still subject by express provision of law, to this resolutory condition. Hence, the ownership acquired by the purchasers is still limited by the right of Bibano to ask for the resolution of the sale. And this limitation upon the right of the petitioner is a charge susceptible of registration. The registration of this parcel in the name of the applicant is proper, but subject to this charge. Judgment modified.

Angeles vs. Calasanz 135 SCRA 323 Facts: Defendants-appellants Ursula Torres Calansanz and Tomas Calansanz and plaintiffappelles Buenaventura Angeles and Teofila Juani entered into a contract to sell a piece of land located in Cainta, Rizal for the amount of P3,920.00 plus 7% interest per annum. The latter paid the down payment of P392.00 upon the execution of the contract. They promised to pay the balance in monthly installments of P41.20 until fully paid, the installments being due and payable on the 19th day of each month. The payment already amounted to P4, 533.38. Defendants-appellants cancelled the said contract for failure of subsequent payments. Issue: Whether or not the contract to sell has been automatically and validly cancelled by the defendants-appellants.


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Held: The contract entered into by the parties has some characteristics of a contract of adhesion. Hence, it must be construed against the party causing it. Since the principal obligation under the contract is on P3,920.00 and the plaintiffs-appellees have already paid an aggregate amount of P4,533.38, the court should only order the payment of the few remaining installments but not uphold the cancellation of the contract.

Article 1192 Central Bank vs. CA 139 SCRA 46 Facts: Island Savings Bank upon favorable recommendation of its legal department approved the loan application for P80,000.00 of Sulpicio Tolentino, who as a security loan executed on the same day a real estate mortgage over his 100 hectare land. The approved loan application called for a lump sum P80,000.00 loan repayable in semi-annual installments for a period of 3 years with 12% interest. A mere P17,000.00 was made by the Bank. Tolentino and his wife Editha signed the promissory note for P17,000.00 at 12% interest payable within 3years from the date of execution of the contract at semi-annual installments. The Bank, thru its Vice President and Treasurer promised repeatedly the release of the P63,000.00 balance. The Monetary Board of the Central Bank after finding Island Savings Bank was suffering liquidity problem issued Resolution which prohibits the Bank from doing business in Philippines and instructed the Acting Superintendent Bank to take charge. Tolentino filed a petition with the Court of first Instance of Agusan but the court rendered its decision against petitioner while the Court of Appeal modified the said decision affirming on the dismissal of Tolentino’s petition. Hence, this petition for review is instituted. Issue: Whether or not the action of Tolentino’s petition would prosper. Held: Yes, Island Savings Bank was in default in not fulfilling the reciprocal obligation under the loan agreement. Tolentino under Article 1191 of the Civil Code may choose between specific performance or recission with damages in either case. But since Island Savings Bank is now prohibited from doing further business by Monetary Board Resolution, it cannot be granted said specific performance in favor of Tolentino. Rescission is the only alternative left. The rescission is only for the balance of 63,000.00 balance of 80,000.00 loan. The promissory note gave rise to Tolentino’s reciprocal obligation to pay 17,000.00. His failure to pay overdue amortization under the promissory note made him a party in default. Meanwhile, Art.1192 of the Civil Code provides that in case both parties have committed a breach in their reciprocal obligation the liability of the first infraction shall be equitable tempered by the court. Thus, the liability of Island Savings Bank for damages is offset by the liability of Tolentino in the form of penalties and sub charges for not paying his debts.


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Article 1193 Smith, Bell & Co. vs. Sotelo Matii 44 Phil. 874 Facts: In August, 1918, the plaintiff corporation and the defendant, Mr. Vicente Sotelo, entered into contracts whereby the former obligated itself to sell two steel tanks, two expellers, and two electric motors to the latter. As to the tanks, the agreement was that the delivery was to be made within three or four months, but the seller shall not be responsible for delays caused by fires, riots on land or on sea, strikes or other causes known as Force Majeure. With regard to the expellers, he contract says within the month of September, 1918, or as soon as possible. And with reference to the motors, approximate delivery within ninety days but not guaranteed. The tanks arrived at Manila on April, 1919; the expellers on October 26, 1918, and the motors of February 27, 1919. The plaintiff notified the defendant of the arrival of the said goods but the latter refused to receive them and pay the prices. This caused the plaintiff to file a suit against defendant. The defendant, in turn, denied the allegations of the plaintiff, stating that it was only on May, 1919 when plaintiff infirmed them that the tanks have arrived. The Trial court rendered a decision absolving the defendant insofar as the tanks and motors are concerned but it rendered a decision against the defendant with regards to the receiving of the goods. Hence, an appeal by both parties. Issue: Whether or not under the contracts entered into and the circumstances established in the record, the plaintiff has fulfilled, in due time, it obligation to bring the goods in question to Manila. Ruling: Judgment appealed from is modified and defendant is sentenced to accept the goods form the plaintiff. The obligation must be regarded as conditional. The fulfillment of the condition, in this case, depends not only upon the will of the plaintiff but also that of the third person. According to article 1125 of the Civil Code (now art. 1193 of the NCC), “Obligations for the performance of which a day certain has been fixed shall be demandable only when the day arrives; A day certain must be understood to be one which must necessarily arrive, even though its date be unknown; If the uncertainty should consists at the arrival or non-arrival of the day, the obligation is conditional..” Time is regarded as unessential in this kind of contract, though the delivery must be made within the reasonable time. Moreover, the obligor will be deemed to have sufficiently performed his part of the obligation, if he has done all that was in his power, even if the condition has not been fulfilled in reality.


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It is sufficient in the record that the plaintiff has made all the efforts it could possibly be expected to make under the circumstances, to bring the goods in question to Manila.

Ullman vs. Hernaez 20 Phil. 69 Facts: This is an APPEAL from a judgment of the Court of First Instance of Occidental Negros. The complaint has for its object the collection of a debt contracted by Vicente Hernaez in favor of Felix Ullman on April 5, 1900, amounting to 3,525 pesos Mexican currency, to be paid, says Hernaez, "as soon as I receive the portion that as an heir must come to me from the estate of Juana Espinosa, widow of Hernaez; without prejudice to paying on it, during the time that may elapse until I get possession of said property, interests at six per cent a year, but not, however, compound interest." That the defendant did on January 5, 1913, cede, alienate, and convey to Rosendo Hernaez for the sum of twentyfive thousand pesos (P25,000) Philippine currency, all his rights and rights of action in the property left by the deceased Juana Espinosa. The Court of First Instance of Occidental Negros decided the case by sentencing the defendant to pay to the plaintiff P3,525, with interest at 6 per cent a year from April 5, 1913. But on a rehearing requested by the plaintiff the court again rendered judgment, amending the portion relating to the interest, and sentenced the defendant to pay interest on the debt on the basis of 6 per cent a year from April 5, 1900, and the costs. Issue: When will the period of prescription start? Held: The right of action for nullity shall only last four years. The right of action was not exercised from April 5, 1905, until June 2, 1913, nor was any move made during this time. But a right of action that has not yet arisen cannot prescribe. In time obligations, as that at bar, to pay "as soon as I receive the portion that as an heir must come to me from the estate of Juana Espinosa," the right of action only arises when the date fixed has arrived; the obligation is enforcible only when the day comes. This day arrived on January 25, 1913, when the defendant sold to Rosendo Hernaez his right to inherit from Juana Espinosa and received from him P25,000, just as if he had received same from that estate.

National Bank vs. Lopez Vito 42 Phil.41 Facts: This action was brought for the recovery of a mortgage credit. On July 25, 1918, the defendant spouses, Flaviano Lopez and Maximina del Castillo mortgaged realty located inn the Province of Occidental Negros to secure the payment of a loan of P 24,000 granted by the plaintiff, the Philippine National Bank (PNB). The defendants bound themselves to pay the Civil Law – Obligations and Contracts

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loan with interest in ten annual installments of P 3,602.64 each payable on or before July 18th of each year from; the date of said contract. Defendants failed to pay the sums corresponding to the six yearly installments and interest thereon, hence, the plaintiff instituted this action. The trial court rendered judgment ordering the defendants to pay the plaintiff the sum of P 13,404.18 with 8% interest reserving to plaintiff the proper action on last installment and interest thereon. Issue: Whether or not the trial court committed an error in adding that the eight annual installment of P 2,884.88 is not yet demandable? Ruling: The defendants right to avail themselves of the periods was by the will of the contracting parties themselves made subject to the resolutory conditioned contained in paragraph 5 of the mortgage contract. It has resolutory effects, since its fulfillment resolves the period and leaves the creditor at liberty to demand the performance of the debtors obligations and to proud to foreclosure of mortgage. However, this court ruled that the mortgage installments in question have matured by the failure of the mortgagor to pay, the mortgagee may collect the uncle with law. Wherefore, the trial court erred and its judgment is hereby modified in favor of the plaintiff.

Article 1196 Sarmiento vs. Villasenor 43 Phil. 880 Facts: On August 28, 1991, the defendant loaned the plaintiffs the sum of P1,500 with interest at the rate of 25 per cent per annum for the term of one year. To guarantee this loan, the plaintiffs pledged certain jewelries, which the contracting parties appraised at P4,000. This loan is evidenced by two documents. The plaintiffs allege that at the maturity of this loan, August 31, 1912, the plaintiff Eusebio M. Villaseñor, being unable to pay the loan, obtained from the defendant an extension, with the condition that the loan was to continue, drawing interest at the rate of 25 per cent per annum, so long as the security given was sufficient to cover the capital and the accrued interest. In the month of August, 1919, the plaintiff Villaseñor, went to the house of the defendant and offered to pay the loan and redeem the jewels, taking with him, for this purpose, the sum of P11,000, but the defendant then informed them that the time for the redemption had already elapsed. The plaintiffs renewed their offer to redeem the jewelry by paying the loan, but met with the same reply. The defendant alleges, in his defense, that upon the maturity of the loan, August 31, 1912, he requested the plaintiff, Villaseñor, to secure the money, pay the loan and redeem the jewels; that one month thereafter, the plaintiff, Filomena Sarmiento, went to his house and offered to Civil Law – Obligations and Contracts

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sell him the jewels pledged for P3,000; Filomena Sarmiento, went back to the house of the defendant who then paid her the sum of P1,125, which was the balance remaining of the P3,000 after deducting the plaintiff's loan. Issue: Whether or not defendant is bound to return the jewels or their value (P12,000) to plaintiffs, and the plaintiffs have the right to demand the same upon the payment by them of the sum of P1,5000, plus the interest thereon at the rate of 25 per cent per annum Held: It appears that the defendant possessed these jewels originally, as a pledge to secure the payment of a loan stated in writing, the mere testimony of the defendant to the effect that later they were sold to him by the plaintiff, Sarmiento, against the positive testimony of the latter that she did not make any such sale, requires a strong corroboration to be accepted. Defendant has not sufficiently established, by his evidence, the fact of the purchase of the jewels, but also that there is a circumstance tending to show the contrary, which is the fact that up to the trial of this cause the defendant continued in possession of the documents, Exhibits A and 1, evidencing the loan and the pledge. If the defendant really bought these jewels, it seems natural that Filomena would have demanded the surrender of the documents evidencing the loan and the pledge, and the defendant would have returned them to plaintiff. From the foregoing it follows that, as the jewels in question were in the possession of the defendant to secure the payment of a loan and the defendant having subsequently extended the term of the loan indefinitely, and so long as the value of the jewels pledged was sufficient to secure the payment of the capital and the accrued interest, the defendant is bound to return the jewels or their value (P12,000) to plaintiffs, and the plaintiffs have the right to demand the same upon the payment by them of the sum of P1,5000, plus the interest thereon at the rate of 25 per cent per annum from August 28, 1911.

Ponce De Leon vs. Syjuco G.R. L-3316 Facts: The plaintiff obtained from defendant Syjuco on May 5, 1944, a loan of P200,000 and on July 31, 1944, another loan of P16,000, payable within one year from May 5, 1948." On November 15, 1944, the plaintiff offered to pay the entire indebtedness plus all the interest up to the date of maturity. Upon Syjuco's refusal to accept the tendered payment, the plaintiff deposited the amount with the clerk of the Court of First Instance of Manila and instituted the present action to compel Syjuco to accept payment. The records of the case were destroyed during the war, but they were duly reconstituted after the liberation. The trial court sentenced the plaintiff to pay Syjuco the 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, Civil Law – Obligations and Contracts

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1949, or total sum of P23,130, representing the whole indebtedness plus all the interest from August 6, 1944, to May 5, 1949, computed according to the Ballantyne scale of values, 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. From this judgment Syjuco has appealed, claiming his right to be paid the sum of P216,000, actual Philippine currency, plus P200,000, as penalty agreed upon in the contract. Issue: Whether or not the consignation made by the plaintiff valid in the light of the law and the stipulations agreed upon in the two promissory notes signed by the plaintiff? Held: The Supreme Court held in the negative. In order that consignation may be effective, the debtor must first comply with certain requirements prescribed by law. The debtor must show (1) that there was a debt due; (2) that the consignation of the obligation had been made because the creditor to whom tender of payment was made refused to accept it, or because he was absent for incapacitated, or because several persons claimed to be entitled to receive the amount due (Art. 1176, Civil Code); (3) that previous notice of the consignation have been given to the person interested in the performance of the obligation (Art. 1177, Civil Code); (4) that the amount due was placed at the disposal of the court (Art 1178, Civil Code); and (5) that after the consignation had been made the person interested was notified thereof (Art. 1178, Civil Code). 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 above requirements have not been complied with. Thus, it appears that 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. It also appears that the obligation was not yet due and demandable when the money was consigned, because, as already stated, by the very express provisions of the document evidencing the same, the obligation was to be paid within one year after May 5, 1948, and the consignation was made before this period matured. The failure of these two requirements is enough ground to render the consignation ineffective. And it cannot be contended that 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, because, under the law, in a monetary obligation contracted with a period, the presumption is that the same is deemed constituted in favor of both the creditor and the debtor unless from its tenor or from other circumstances it appears that the period has been established for the benefit of either one of them.

Article 1197 Civil Law – Obligations and Contracts

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Delgado and Figueroa v. Amenabar 16 Phil. 403 Facts: Some time prior to 11th of February, 1908, there had been various transactions carried on between the plaintiffs and the defendants whereby the defendant was indebted to the plaintiffs in various sums of the rent and use of a certain hacienda, the property of the plaintiffs. A settlement was made acknowledging the indebtedness in favor of the plaintiffs in the sum of P2, 261.00. Such obligation to pay is pure, simple and unconditional. No date was fixed for its fulfillment. However, a demand by the plaintiffs was made after May 5, 1908 when the obligatio0n was finally signed. Defendant failed to pay which resulted for an action which was instituted by the plaintiffs to recover the abovementioned sum of money from the defendant. The CFI of Negros Occidental rendered a judgment in favor of the plaintiffs. Defendant, in turn, appealed on the grounds that the action was prematurely brought and that promissory note which he have issued is null and void for the reason that the internal-revenue stamps are not affixed thereto, as required by section 58 of Act. No. 1189. Issue: 1. WON there was an implied intention of granting the defendant an extension of time to pay his debt. 2. WON failure to affix the required stamp in the document will render such document null and void. Held: The appealed judgment is affirmed. Under the provision of the Civil Code now in force, the plaintiffs could have demanded the payment of this obligation at once, inasmuch as it has not been shown, neither can it be inferred from the nature and circumstances of the obligation, that it was the intention of the plaintiffs to grant the defendant an extension of time. According to paragraphs 1, 2 and 11 of section 116 of Act. No. 1189, it was the duty of the defendant, as maker of the promissory note, to pay for the stamps and affix the same thereto at the time of the making and signing of the said note. The defendant failed to comply with this provision of law and he now seeks to take advantage of his own wrong by insisting that the said promissory note has no legal value.

Article 1198 Timbol vs. Martin G.R. L- 3469 Facts: In August, 1949, in the court of first instance of Manila, Bernardo P. Timbol sued the defendant spouses to recover the value of eight promissory notes, six executed on different dates in 1944 and two in January 1945. The first two were payable in April and July 1945, but Civil Law – Obligations and Contracts

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the rest were due "sixty days after the declaration of peace in the Philippines." Defendants were intending to dispose of their properties in the Philippines and thereafter return to America, the plaintiff obtained a writ of preliminary attachment. Invoking the moratorium orders, Republic Act No. 342 and several decisions of this Court, the defendants moved for dismissal of the complaint. The court dismissed the case, hence this appeal. Plaintiff's argument is the proposition that the period for the performance of defendants' obligation in the different promissory notes, or the "terms" thereof were superseded by the Moratorium Law, which in itself is a "term". This term for defendants,-plaintiff contends-has been lost to them, in accordance with the aforesaid article 1129 of the Civil Code (1. If, after contracting the obligation, it should appear that he is insolvent, unless he gives security for the debt * * *." ), for the reason that they became insolvent. Issue: Whether the debtors lost the benefit of the period. Held: The court held that the theory of waiver or forfeiture may not be properly sustained. Firstly, article 1129 obviously contemplates a period fixed by the contracting parties. The moratorium law was not so fixed. It was not even foreseen by the parties at the time they entered into the contract. Secondly, under article 1129 of the Civil Code the insolvency must be one occurring after the term was fixed. Here there is no proof that defendants became insolvent after the promulgation of the moratorium orders. Thirdly, the insolvency of the debtor could not rightly be pleaded in avoidance of the moratorium, because the general inability of debtors to satisfy their obligations, their temporary insolvency so to speak, was precisely the raison d'etre for the suspension of collection suits. And it would be plain inconsistency to declare that the debtor's financial difficulties deprive him automatically of the benefits of the moratorium statute. Article 1199 Agoncillo vs. Javier 38 Phil. 424 Facts: This action was brought on March 17, 1916, based on a document executed on February 27, 1904, in which the defendants promised to pay the plaintiffs the sum of P2, 730.50 within one year, with 12% interest per annum, and in case of insolvency of the debtors “we cede by virtue of these presents the said house and lot which is given in mortgage, transferring all our rights and ownership and possession of the lot”. This action is to compel the defendants to pay the debt, and if they fail to do so, to convey the house and lot. The defendants claim that the action is barred by prescription. Issue: Whether or not the action is barred by prescription.


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Held: Yes. The agreement to convey the house and lot at an appraised valuation in the event of failure to pay the debt in money at its maturity is perfectly valid. It is simply an undertaking that if the debt is not paid in money, it will be paid in another way. The contract is not susceptible of the interpretation that the title of the house and lot questioned was to be transferred to the creditor ipso facto upon mere failure of the debtors to pay the debt at its maturity. The obligations assumed by the debtors were alternative, and they have the right to elect which they would perform. It is quite clear therefore, that under the terms of the contract, the liability of the defendants as to the conveyance of the house and lot is subsidiary and conditional, being dependent upon their failure to pay the debt in money. It must follow therefore that if an action to recover the debt has prescribed, the action to compel a conveyance of the house and lot is likewise barred, as the agreement to make such conveyance was not an independent principal undertaking, but merely a subsidiary alternative pact relating to the method by which the debt might be paid.

Ong Guan Can vs. Century Insurance Co. 46 Phil. 592 Facts: The action was commenced in the Court of First Instance of the City of Iloilo on the 15th day of May, 1923. Its purpose was to recover an amount due on the policy of insurance issued by the defendant to the plaintiff. On the same day a copy of the complaint was served upon the defendant, through its duly authorized representative in the City of Iloilo, Messrs. Andrew & Co. The defendant filed its appearance with the clerk of the court on the 7th day of June, 1923. The notice of appearance, it is alleged and not denied, was mailed at the City of Manila on the 2d day of June, 1923. On the 5th day of June, 1923, the attorneys for the plaintiff presented a motion praying that a judgment by default be rendered against the defendant. Said motion was granted on the same day, and a judgment by default was duly entered. On the 8th day of June, 1923, the defendant, through its attorneys, filed a motion praying that the judge set aside said judgment by default and permit the defendant to answer. Said motion recited that the said notice of appearance was mailed at the City of Manila on the 2nd day of June, 1923, and that the steamship Vizcaya, carrying mails, including the letter containing the notice of appearance on the 2d day of June, did not arrive at Iloilo in the usual course until after the time had expired for filing its appearance, or on the 7th day of June, 1923, due to the fact that said ship encountered a storm at sea. The lower court denied said motion on the 11th day of June, 1923, to which order the defendant duly expected, and later presented another motion to the same effect, alleging and asserting that it had a valid and meritorious defense to the cause of action presented by the plaintiff. Later the second motion was also denied, to which the defendant also excepted. Some further proceedings were had in the lower court concerning the judgment by default, which have no importance in the consideration of the question presented.


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Issue: Whether or not the judgment by default rendered by the lower court should be set aside and annulled Held: From the judgment by default of the lower court the defendant appealed and now alleges that it committed an error in not granting the motions to set aside said judgment and permit the defendant to answer. It is admitted that the plaintiff and defendant resided in the same province. Under paragraph 2 of section 392 of Act No. 190 it became the duty of the defendant to appear within twenty days from the service of the summons. The summons was served on the 15th day of May. The twenty days within which the defendant was required to appear expired on the 5th day of June. No appearance was filed by the defendant until perhaps the 7th day of June. It is admitted that the defendant mailed its appearance in the City of Manila on the 2d day of June, 1923. It is also a fact that mail, in the ordinary course, will arrive at Iloilo from Manila in two days. The defendant mailed its appearance at a time when in the ordinary course of events it would have reached the hand of the clerk of the court on or before the expiration of the time within which it was obliged to make its appearance. The reason that the appearance did not reach its destination was due to a fact over which the defendant had no control. The failure to make the appearance within the time prescribed by law was due to no fault of the defendant. The defendant evidently made an honest effort to comply with the law. To render a judgment against it under these circumstances would be to render a judgment against it without giving it an opportunity to be heard. It has been frequently decided that, if pleadings or other papers essential to a case are entrusted to the mails in due season and under proper precaution and are lost or miscarried, it will be ground for vacating a judgment by default. A delay of mail, such as occurred in the present case, in our opinion amounts to accident or surprise for which judgments by default may be set aside, especially when the defendant shows by affidavit or otherwise that he has a valid and meritorious defense. The time fixed for filing papers in a cause is generally directory and the court always has it in its power, in the exercise of a proper discretion, to extend the time fixed by law whenever the ends of justice would seem to demand such an extension. Considering the causes which prevented the defendant from making its appearance within the time prescribed by subparagraph 2 of article 392 of Act No. 190 and considering its showing that, if permitted to answer, it has a meritorious defense, we are of the opinion, and so decide, that the judgment by default rendered by the lower court should be and is hereby set aside, and it is hereby ordered and decreed that the defendant's appearance be admitted and that it be given ten days in which to answer from notice of this decision.

Article 1200 Molina vs. Dela Riva 6 Phil. 122 Civil Law – Obligations and Contracts

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Facts:Parties to this suit made a contract by the terms of which the plaintiff agreed to sell to the defendant the business in which he was engaged. Being agreed that an inventory should at once be made for the purpose of determining what the property to be conveyed was and the price. The inventory having been made, the parties executed another contract by which the plaintiff sold to the defendant property which was described the agreement. The purchase price of the property which was described and the defendant paid to the plaintiff at the time of making the contract partial of it and agreed to pay the remainder with in one year. Dela Riva was insolvent and that there was a danger that the property would determine unless a receiver was appointed. It is alleged that the plaintiff by virtue of the said contract had a lien upon the property in question and that unless a receiver was appointed there was danger that the property would deteriorate. The plaintiff asked that a receiver be appointed in accordance with provision 1374. The court made an order appointing a receiver which gave rise to this petition. Issue: Whether or not there is valid action in appointing a receiver in relation with Article 1200 of the civil code. Held: No, The Court The contracts in question were simply contracts of purchase and sale. The ownership of the property described therein was completely transfered to the purchaser and the seller retained no interest therein nor lien thereon. In relation to this property he stood any other creditor of the purchaser so far as this kind of an action is concerned. Being a simple creditor of the defendant with no lien or interest upon any specific property of the debtor none of the provision in Section 174 of the civil Code relating to appointment of receivers apply.

Article 1201 Reyes vs Martinez 55 Phil. 492 Facts: This action was instituted on March 18, 1927, in the Court of First Instance of the Province of Laguna by Estanislao Reyes against the Martinez heirs upon four several causes of action in which the plaintiff seeks, first, to recover five parcels of land, containing approximately one thousand coconut trees and to obtain a declaration of ownership in his own favor as against the defendants with respect to said parcels; secondly, to recover from the defendants the sum of P9,377.50, being the alleged proceeds of some 1,860 coconut trees which, prior to July 31, 1926, had been applied to the benefit of said defendants; thirdly, to recover from the defendants the sum of P43,000, as the alleged value of the proceeds of the lands involved in the receivership in the case of Martinez vs. Graño, G. R. No. 27685, to which the plaintiff supposes himself to be entitled, but which have gone, so he claims, to the benefit of the defendants in said receivership; and fourthly, to recover the sum of P10,000


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from the defendants as damages resulting from their improper meddling in the administration of the receivership property. From this judgment both parties appealed. Issue: Whether or not the claim of the dependant can be conceded. Held: In view of the conclusion reached in Martinez vs. Graño (51 Phil., 287), as well as in view of the solution reached in the case now before us, the claim of the defendants, as appellants, to the interest on the sum of P8,000 from July 31, 1926, cannot be conceded, as the judgment itself bears interest at the lawful rate from the date the same was rendered.

Article 1207 – 1208 Agoncillo vs. Javier 38 Phil. 424 Facts: This action was brought on March 17, 1916, based on a document executed on February 27, 1904, in which the defendants promised to pay the plaintiffs the sum of P2, 730.50 within one year, with 12% interest per annum, and in case of insolvency of the debtors “we cede by virtue of these presents the said house and lot which is given in mortgage, transferring all our rights and ownership and possession of the lot”. This action is to compel the defendants to pay the debt, and if they fail to do so, to convey the house and lot. The defendants claim that the action is barred by prescription. Issue: Whether or not the action is barred by prescription. Held: Yes. The agreement to convey the house and lot at an appraised valuation in the event of failure to pay the debt in money at its maturity is perfectly valid. It is simply an undertaking that if the debt is not paid in money, it will be paid in another way. The contract is not susceptible of the interpretation that the title of the house and lot questioned was to be transferred to the creditor ipso facto upon mere failure of the debtors to pay the debt at its maturity. The obligations assumed by the debtors were alternative, and they have the right to elect which they would perform. It is quite clear therefore, that under the terms of the contract, the liability of the defendants as to the conveyance of the house and lot is subsidiary and conditional, being dependent upon their failure to pay the debt in money. It must follow therefore that if an action to recover the debt has prescribed, the action to compel a conveyance of the house and lot is likewise barred, as the agreement to make such conveyance was not an independent principal undertaking, but merely a subsidiary alternative pact relating to the method by which the debt might be paid.

Article 1211 Inchausti & Co. vs. Yulo 34 Phil. 978 Civil Law – Obligations and Contracts

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Facts: Teodoro Yulo, property owner of Iloilo, has been borrowing money from the firm of Inchausti & Company under specific conditions. This money has been used to cultivate his haciendas in Negros Occidental. Teodoro Yulo died testate and left his wife whom have died later and other legitimate children including the defendant as administrators of his estates. There remaining of the marriage the following legitimate children: Pedro, Francisco, Teodoro, Manuel, Gregorio, Mariano, Carmen, Concepcion, and Jose Yulo y Regalado. Of these children Concepcion and Jose were minors, while Teodoro was mentally incompetent. They held the property in common and have continued their current account with the plaintiff under the name Hijos de T. Yulo. On August 12, 1909, the defendant in representation of his brothers including his brother Manuel, and their own behalf Pedro, Francisco, Carmen and Concepcion, the latter being of age, ratified an instrument on their indebtedness towards plaintiff all the documents executed by them before. In this document, they have severally and jointly acknowledged and admitted their indebtedness to the plaintiff at the amount of P253,445.42 with an interest of ten percent per annum and payable within five installments. Payment begins on June 30, 19 and ends on June 30, 1914. Also part of the stipulation that the abovementioned instrument shall be ratified by their brother Mariano Yuko Regalado but failed to do so. Moreover, the brothers and sisters did not pay the first installment of the obligation. Hence, plaintiff instituted an action at CFI Iloilo against defendant for the payment of P253,445.42 plus interest. On May 12, 1911, Francisco, Manuel, and Carmen Yulo y Regalado executed in favor of plaintiff another instrument of indebtedness whereby the debt is reduce to P225,000 with an interest of 6 per centum per annum payable by eight installments starting on June 30, 1911 and ends at June 30, 1919. The trial court ruled in favor of defendant without prejudice to the plaintiff's bringing within the proper time another suit for his proportional part of the joint debt. Hence plaintiff appealed decision; one of the averments is that the court erred in considering the contract of May 12, 1911, as constituting a novation of that of August 12, 1909. Issue: a) Whether or not plaintiff can sue defendant alone and by doing that it lost its right by the second agreement executed; and, b) Whether or not the contract with the three aforesaid obligors constitutes novation of the first notarial instrument executed by 6 debtors being the subject matter of litigation. Held: As to the first issue, the law provides that obligations in solidum or in conjoint or solidary obligations, the creditor can bring an action against any solidary debtors to fulfill the obligation. And even so the plaintiff stipulated various installments and conditions as it did with the second instrument of May 12, 1911, the solidarity stipulated in the instrument of August 12, 1909 is not broken. Solidarity may exist even though the debtors are not bound in the same manner and for the same periods and under the same conditions (Art. 1140). With respect to the third issue, the contract of May 12, 1911, does not constitute a novation of the former one. In order that an obligation may be extinguished by another which substitutes it, it is necessary that it should be so expressly declared or that the old and the new be Civil Law – Obligations and Contracts

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incompatible in all points (Civil Code, article 1204). The contract of May 12, 1911 does not expressly provide for the substitution of the first. There also exist no incompatibility between the old and the new obligation. As provided for in the previous cases, “the legal doctrine that an obligation to pay a sum of money is not novated in a new instrument wherein the old is ratified, by changing only the term of payment and adding other obligations not incompatible with the old one”. Although, the contract of May 12, 1911 did not novate that of August 12, 1909, it has affected the case filed by plaintiff with respect to the payment for the sum of P253,445.42. Hence by virtue of remission, plaintiff can only recover the amount stated in the second contract granted to the granted to the three of the solidary debtors. As regards to the payment, he can pay only P112,500 of which is due or already matured. Hence, defendant cannot allege the prematurity of debt since when the lawsuit is instituted, the obligation for the first installment of the contract if August 12, 1909 has already matured and due to the solidarity of the obligation he is liable to pay the whole obligation. An exception would be the shares of Francisco, Manuel, and Carmen Yulo, none of the installments payable under their obligation, contracted later had yet matured. The personal defense of Francisco, Manuel, and Carmen Yulo "as to the part of the debt for which they were responsible" can be used by Gregorio Yulo as a defense for paying the whole obligation. The part of the debt for which these three are responsible is three-sixths of P225,000 or P112,500, which is not yet demandable due to the execution of the second contract. Hence, defendant can only pay the half portion of the obligation that is demandable at that time. This is in consonance with Art. 1448 which states that, “The solidary debtor may utilize against the claims of the creditor of the defenses arising from the nature of the obligation and those which are personal to him. Those personally pertaining to the others may be employed by him only with regard to the share of the debt for which the latter may be liable”. Therefore, defendant cannot be made to pay the whole obligation because he has been benefited by remission made by the plaintiff to three of his co debtors. The judgment appealed has been reversed.

Article 1217 Joseph vs. Bautista 170 SCRA 540 Facts: Petitioner prays in this appeal by certiorari for the annulment and setting aside the order, dated July 8, 1975, dismissing petitioner’s complaint, as well as the order dated August 22, 1975, denying his motion for reconsideration of said dismissal, both issued by respondent Judge Crispin V. Bautista of the former Court of First Instance of Bulacan, Branch 111.


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Respondent Patrocinio Perez is the owner of a cargo truck for conveying cargoes and passengers for a consideration from Dagupan City to Manila. On January 12 1973, said cargo truck driven by defendant Domingo Villa was on its way to Valenzuela, Bulacan from Pangasinan. Petitioner, with a cargo truck at Dagupan City after paying the sum of P 9.00 as one way fare to Valenzuela, Bulacan. Defendant Domingo Villa tried to over take a tricycle likewise proceeding in the same direction. At about the same time, a pick-up truck supposedly owned by respondent Lazaro Villanueva, tried to overtake the cargo truck which was on the process of overtaking the tricycle thereby forcing the cargo truck to veer towards the shoulder of the road and to ram a mango tree. As a result, petitioner sustained a bone fracture in one of his legs. Petitioner filed a complaint for damages against respondent Patrocinio Perez,a s owner of the cargo truck, based o the breach of contract of carriage, and against respondents Antonio Sioson and Lazaro Villanueva,a s owner and driver respectively, of the pick-up truck, based on quasi-delict. On September 27, 1974, respondents Lazaro Villanueva, Alberto Cardeno, Antonio Siason, and Jacinto Pagaringan, thru their insurer, Insurance Corporation of the Philippines, paid petitioner’s claim for injuries sustained in the amount of P 1,300.00. Petitioner executed a release of claim releasing from liability the following parties. On December 2 1974, respondents Lazaro Villanueva, Alberto Cardeno and their insurer, paid respondent Patrocinio Perez’ claim for damages to her cargo in the amount of P 7,420.61. Respondent Perez, filed Opposition Crossdefs and Counter Motion to dismiss considering that all the respondents are solidarity liable to herein petitioner. The respondent Judge issued the order dismissing the case and a motion for the reconsideration was denied. Issue: Whether or not the payment made by some of the solidary debtors and their subsequent release from liability results in the release from liability of the other solidary debtors. Held: The challenged orders of the respondent Judge are hereby AFFIRMED. The judgment on the compromise agreement under the cause of action based on quasi-delict is not a bar to cause of action for breach of contract of carriage, is untenable. The singleness of a cause of action lies in the singleness of the delict or wrong violating the rights of one person. If only one injury resulted from several wrongful acts only one cause of action arises. The respondents having been found to be solidary liable to petitioner, the full payment made by some of the solidary debtors and their subsequent release from any and all liability to petitioner.


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Article 1218 – 1222 The Chinese Chamber of Commerce vs. Pua Te Ching 16 Phil. 406 Facts: In the Court of First Instance of Manila, the plaintiff had prosecuted three suits against Pua Te Ching, all for the recovery of a sum of money. The court decided by them by judging that Pua Te Ching should pay the amounts claimed. Pua Te Ching, for the purpose of staying the execution of the judgment rendered, during the pendency of the appeal, presented as sureties in the three aforesaid cases, Pua Ti, of Calle Rosario No. 150, and Jose Temprado Yap Chatco, of Calle Sagasta, San Fernando, Pampanga, executed the proper bonds: In case No. 6347, for P3,784; in No. 6348, for P4.00; and in No. 6349, for P1,000, "for which payments well and truly made," the bond reads, "we, the appellant and the sureties, jointly and severally bind ourselves," it being expressly stipulated "that the appellant and the sureties are held and firmly bound to the appellee, jointly and severally, in the sum expressed in each bond, to secure the fulfillment and payment of the judgment so appealed, together with the costs, in case the same should be affirmed, in whole or in part, or in case the judgment should become effective on account of the appellant's having abandoned or withdrawn the appeal, or in case it should be dismissed or declared to be improperly allowed. The appeal having been heard by this court, which rendered a decision affirming the judgment of the lower court and, while the latter was about to proceed with the execution of the said judgment, the sureties Jose Tempardo Yap Chatco and Pua Ti set forth: That Pua Te Ching died intestate on September 2, 1909, and the decision of this court was rendered after his death; that the estate of the late Pua Te Ching was in the course of administration; and that, therefore, the decision of the Supreme Court was null and of no value, it having been pronounced against a person already dead, and that an execution thereof could not be issued against the said Pua Te Ching. The lower court decided that, notwithstanding the death of the principal surety, the sureties who subscribed the bond were liable for the amount of the judgment entered "that the judgment entered in these cases against the defendant Pua Te Ching and in favor of the plaintiff shall be extensive against the sureties who subscribed the bond, named Pua Ti and Jose Temprado Yap Chatco, jointly and severally, and execution shall issue on the said judgments. However, these sureties filed their appeal alleging error against the judgment and they invoke sections ections 119 and 448 of the Code of Civil Procedure, the provisions of which, especially those of sections 448, may be invoked by the sureties in their favor by virtue of the provisions of articles 1148 and 1853, in relation to article 1822, of the Civil Code.


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Issue: Whether or not the sureties Pua Ti and Yap Chatco have set up against the creditor any exception which pertains to the principal debtor, Pua Te Ching, and which may be inherent to the debt in accordance with article 1148 of the New Civil Code. Held: The court held that it is useless to allege the impropriety of an execution of a judgment against the estate of a person deceased when it is not a question of such an execution against the estate of a deceased person. The court also held that the provisions contained in articles 1148 and 1853 of the Civil Code do not apply to the sureties, the appellants; and the judgment of the trial court, which finds the sureties liable for the payment of the debt, put into execution by virtue of final decision, is entirely in accord with the law. Since the record does not show that it is question of the execution of a judgment entered after the death of the principal debtor and no proof whatsoever exists of this fact, nor even of the fact ofthe death of the principal debtor. Hence, this court decided that notwithstanding the death of the principal debtor, the sureties are compelled to pay the amount set forth in the judgment rendered. The judgment appealed from is affirmed, with the costs of this instance against the appellents. So ordered.

Inchausti and Co. vs. Yulo 34 Phil. 978 Facts: First: Of the nine children of T. Yulo, six executed the mortgage admitting a debt of P253,445.42 at 10% per annum and mortgaging six-ninth of their hereditary properties. Second: Of those six children, 3 executed the instrument wherein was obtained a reduction of the capital to 225,000 pesos and of the interest to 6%. Third: Other children of T. Yulo have not taken part in these instruments and not mortgaged their hereditary portions. Fourth: By the first instrument the maturity of the first installment was dated June 30, 1910, whereas by the second instrument Francisco, Manuel and Carmen had in their favor as the maturity of the first installment of their debt. Fifth: The action against Gregorio Yulo was already filled and judgment was pronounced when the whole debt was not yet due nor even the first installment of the same respecting the 3 aforesaid debtors, Francisco, Manuel and Carmen. Issues: 1) Whether the plaintiff can sue Gregorio Yulo alone, there being other obligor; if so, whether it lost this right by the fact of its having agreed with the other obligors in the reduction of the debt, the proroguing of the obligation and the extension of the time for payment, in accordance with the instrument of May 12, 1911; 2) Whether the contract with the said 3 obligors constitute a novation, entered into with the 6 debtors when assumed the payment of 250,000 and some odd pesos, the subject


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matter of the suit; if not so, whether it does have any effect at all in the action brought, and in this present suit. Held: It cannot be doubted that, the debtor having obligated themselves in solidum, the creditor can bring its action in toto against any one of them, inasmuch on this was surely its purpose in demanding that the obligation contracted in its favor should be solidary having in mind the principle of the law, civil code, article 1137 and 1144. And even though the creditor may have stipulated with some of the solidary debtor adverse in installment and condition as in this case, Inchausti and company did with its Manuel Francisco and Carmen Yulo though 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 broken, as we already know the law in article 1140 There can be also no doubt that the contract of May 12, 1911, does not constitutes a novation of the former one, with respect to the other debtor who executed this contract, or more concretely, with respect to the defendant Gregorio Yulo. Because in order that the obligation may be extinguished by another which substitutes it, it is necessary that it should be no expressly declared on that the old and the new were incompatible in all points”( civil code, article 1204); and the instrument of May 12, 1911, far from expressly declaring that the obligation of the three who executed it substitutes the former signed by Gregorio Yulo and the other debtors, expressly and clearly stated that the said obligation of Gregorio Yulo to pay the 250,000 and odd pesos sued for exists stipulating that the suit must continue its course and, if necessary, the three parties who executed the contract of May 12, 1911, would cooperate in order that the action against Gregorio Yulo might prosper, with other undertaking concerning the execution of the judgment which might be rendered against Gregorio Yulo in this same suit. It is necessary to state that it is the intention of the contracting parties to extinguish the former obligation by the new one. There exist no incompatibility between the old and the new obligation a will be demonstrated in the resolution of the last point, and for the present we will merely reiterate the legal doctrine than an obligation to pay a sum of some money is not novated in a new instrument wherein the old is ratified, by changing the term of payment and adding other obligation not incompatible with the old one. Therefore sentence to defendant Gregorio Yulo to pay the plaintiff Inchausti and company 112,500 pesos, with interest from the time it was claimed judicially in accordance with Article 1109 of the Civil Code, without any special finding as to costs. The judgment affirmed from is reversed. So Ordered.


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Article 1223 – 1225 Pasay City vs. CFI 132 SCRA 156 Facts: This is a petition for review on certiorari of the order rendered by the Court of First Instance of Manila, Branch X, presided by Honorable Judge Jose L. Moya on July 23, 1969. On August 12, 1964, respondent-appellee V.D. Isip, Sons & Associates represented by Vicente David Isip entered into a contract with the City of Pasay represented by the then Mayor Pablo Cuneta. The contract entitled "Contract and Agreement" was for the construction of a new Pasay City Hall at F.B. Harrison St., Pasay City. Pertinent provision of the said contract Pursuant to the aforesaid contract, the respondent-appellee proceeded with the construction of the new Pasay City Hall building as per duly approved plans and specifications. The respondent-appellee accomplished under various stages of construction the amount of work (including supplies and materials) equivalent to an estimated value of ONE MILLION SEVEN HUNDRED THIRTEEN THOUSAND NINETY-SIX PESOS (P1,713,096.00) of the total contract price of FOUR MILLION NINE HUNDRED FOURTEEN THOUSAND FIVE HUNDRED 80/100 PESOS (P4,914,500.80). The appellants paid only the total amount of ONE MILLION ONE HUNDRED THOUSAND PESOS (P1,100,000.00) to the respondent-appellee leaving an amount of SIX HUNDRED THIRTEEN THOUSAND NINETY SIX PESOS (P613,096.00) immediately due from the petitioner-appellants to the respondent-appellee. Notwithstanding demands for payment thereof, the petitioner-appellants failed to remit the aforesaid amount of P613,096.00 to the respondent-appellee. On May 16, 1968, respondent appellee filed an action for specific performance with damages against herein petitioners-appellants before the respondent Court. On May 23, 1968, the appellants filed a motion for the amendment of the complaint and for bin of particulars (p. 9, Appellant's Brief; p. 159, rec.). This was denied by the respondent Court. The appellants later filed a motion for reconsideration. This was likewise denied. On August 10, 1968, the appellants filed their answer. Issues: 1. Whether or not the contract was perfected. 2. Whether or not the respondent court erred in rendering its decision. Held: WE find no error in the order of the respondent Court dated July 23, 1969. From the reading of the premises and provisions of the contract and agreement which was "formally Civil Law – Obligations and Contracts

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confirmed and officially approved by the parties" in the compromise agreement later entered into by the same parties, subject only to the enumerated changes and/or modifications, it is obvious that the contracting parties envisioned a stage by stage construction (on the part of the respondent-appellee) and payment (on the part of the defendant-appellant). This is manifested in the contract and agreement, And, We note that in the Contract and Agreement, the respondent-appellee was allowed to file a performance bond of P222,250.00 which is but 5% of the total bid of P4,914,500.80. A security bond was likewise filed with an amount of P97,290.00. The sum total of bond then filed was P320,540.00 which is just 6.5% of the total Ibid. It is rather curious why all of a sudden the petitioners-appellants are insisting on a 20% performance bond of the entire unfinished work when they were quite content with a bond just 5% of the entire work. For Us to allow the petitioners-appellants to adamantly stick to the 20% performance bond would be tantamount to allowing them to evade their obligation in the compromise agreement. This cannot be allowed. The bond of a contractor for a public work should not be extended beyond the reasonable intent as gathered from the purpose and language of the instrument construed in connection with the proposals, plans and specifications, and contract (John L. Roper Lumber Co. vs. Lawson, 195 NC 840, 143 SE 847,67 ALR 984). The premium of the bond will be sizeable and will eat up the profit of the contractor, who is faced with the fluctuation of prices of materials due to inflation and devaluation. Right now, many contractors cannot proceed with the implementation of their contracts because of the extraordinary rise in cost of materials and labor. No contractor would be willing to bid for public works contracts under the oppressive interpretation by petitioners-appellants. Again, the respondent Court was correct in ruling that the submission of the bond was not a condition precedent to the payment of P613,096.00 to the plaintiff. Nowhere in the Contract and Agreement nor in the Compromise Agreement could be found the fact that payment by the petitioners- appellants of the amount of P613,096.00 was dependent upon the submission by the respondent-appellee of the performance bond. It cannot be argued that reciprocal obligation was created in the Compromise Agreement, for the obligation to pay on the part of the petitioners-appellants was established several years ago when the respondent-appellee finished some of the stages of construction. And, this argument is already moot and academic, for the amount of P613,096.00 has already been collected through execution and garnishment upon the funds of Pasay City with the Philippine National Bank.

Article 1226 Navarro vs. Mallari 45 Phil. 242


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Facts: This action was instituted in the Court of First Instance of Pampanga by Santiago Navarro, Sabas Magtoto, and Victorino Calara, as trustees (mandatarios) of the inhabitants of the barrio of San Vicente, in the municipality of Macabebe, to compel the defendants, Felix Mallari, as principal, and Leon Tolentino and Ignacio Tolentino, as sureties, to comply with the contract for the construction of a chapel to the patron saint of the barrio, or in the alternative to require the same defendants to return the sum of P12,000 paid to them, upon said contract, together with the sum of P4,000 as stipulated damages for failure to construct the chapel according to the specifications. Issue: Whether or not Felix Mallari is liable for damages. Held: Concurrently with the execution of said contract Leon Tolentino and Ignacio Tolentino, also residents of municipality of Macabebe, obligated themselves in collateral contract of guaranty to respond solidarily for the faithful and true performance of the contract on the part of Felix Mallari. Felix Mallari, it may be stated, is not a contractor or builder by profession and knows nothing about constructing houses. His son Jose, although he supposed himself to have some knowledge of the art, was but little better versed in such matters than his father; and he appears to have had but little skill even in the art of drafting. As might have been expected from the lack of technical knowledge on the part of the "contractor," a botch was made of the job. The chapel was indeed constructed somewhat in the external shape indicated in the design, but the work was done with complete want of knowledge of the art of construction and of the material employed. These words we take from the report of a competent engineer, Señor Emilio Maria de Moreta, of Manila, who made a special examination and careful report upon the condition of the structure. In concluding his report Señor Moreta says that the plans were drawn by a person completely ignorant not only of all knowledge of the resisting power of materials and of descriptive geometry, as well as of technical knowledge in general, but that he did not even possess sufficient instruction in the drawing of plans. Señor Moreta concludes his report with the observation that the building threatens ruin for want of proper foundation and that upon the slightest tremor of the earth it might come down. The photographs in evidence as prepare one for the conclusion stated in Señor Moreta's report. We do not encumber the opinion with the details stated of said report but will merely say that by that report and the testimony adduced at the trial, the case stated in the complaint is in our opinion completely demonstrated; and the plaintiffs are without doubt entitled to recover the stipulated damages for failure of the contracting parties to construct a chapel in conformity with the fundamental principles of the art of building and in accordance with the specifications of the contract. But the chapel, such as it is, appears to be in use for the purpose for which it was intended, and we are of the opinion that the plaintiffs are not entitled to confiscate the sum of P4,000 Civil Law – Obligations and Contracts

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which is as yet unpaid upon the purchase price and at the same time to claim the stipulated damages. The result is that the damages to which the plaintiffs are entitled under the last clause of the contract (Exhibit A) must be set off against the portion of the contract price which has been retained in the hands of the plaintiffs, with the result that neither party can recover anything of the other.

Pamintuan vs. CA 94 SCRA 556 Facts: Jose Valeriano commenced a civil case against Pedro D. Pamintuan, to eject him from a property of Valerians. In due course, said court rendered judgment sentencing Pamintuan to vacate said property and to pay a sum of money for its use, plus attorney's fees and costs. Soon later, however, Pamintuan reoccupied the property, allegedly by force. After appropriate proceedings, Pamintuan was, accordingly, adjudged guilty of contempt of court, and sentenced accordingly. Subsequently, on motion of Valeriano, the Municipal Judge ordered the issuance of an alias writ of execution directing the Sheriff to eject Pamintuan once more and to collect from him the amount of the money judgment. Therefore an appeal by certiorari from a decision of the Court of Appeals Pamintuan's prayed that 1. The defendants from proceeding with the said order of the Municipal Court ordering the herein plaintiff to vacate within four (4) days. 2. After trial making the injunction above-mentioned permanent and ordering the defendant not to eject the herein plaintiff without first filing a suit for ejectment based on the new contract created into between the herein plaintiff and the herein defendant; and3. Other relief that may be found just and equitable under the premises; Hon. Juan P. Enriquez, Judge, rendered judgment dismissing Pamintuan's complaint and sentencing him to pay P500 to Valeriano as attorney's fees and costs, and dissolving the writ of preliminary injunction aforementioned, as well as sentencing Pamintuan and his surety to pay Valeriano P500, as damages for the issuance of said writ. Pamintuan thereupon filed with the Court of Appeals a petition However, the Court of Appeals rendered a decision sustaining the view of Judge Barcelona and, consequently, dismissing Pamintuan's petition for certiorari and mandamus. A reconsideration of this decision of the Court of Appeals having been denied, Pamintuan now seeks a review thereof by certiorari. Issue: Whether or not the Court gravely abuse its discretion in resolving the case base on the nature of the case of action set forth. Held: Yes, Pamintuan merely relied in his complaint, upon a contract he allegedly had with Valeriano, after the rendition of the decision of the municipal court and the partial execution thereof, whereby Valeriano had agreed to re-let and to sell the property in question to Pamintuan.The complain stated that it was "for set forth in Pamintuan's complain was actually Civil Law – Obligations and Contracts

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one for injunction and so was the prayer in the said pleading regardless of whether or not the relief he should have applied for was certiorari so that he had 30days from the notice to asail on the said decision. The complaint could be considered as one either of injuction or of certiorari.

Ibarra vs Aveyro 37 Phil.273 Facts: On April 10, 1915, counsel for Alejandro Ibarra filed a complaint with the Court of First Instance of Tarlac against Leopoldo Aveyro and Emiliano Pre, for the purpose of recovering from them jointly and severally the sum of P465 as principal, besides such additional sum as might be found owing in accordance with the penal clause of the contract, at the rate of P5 a day from the date of the maturity of the obligation, which was December 5, 1914, until its complete payment, together with the costs of the trial, inasmuch as, on November 30, 1914, the defendants by means of a promissory note subscribed by both of them, borrowed from the plaintiff the sum of P465 under promise to return it to him on December 4th following, with the understanding that in a contrary case they should be obliged to pay him P5 for each day of delinquency in the payment of the said principal. The defendants deny all the allegations of the complaint, and as a special defense set forth that on March 28, 1914, the defendant Leopoldo Aveyro sold to the plaintiff a piece of land with the right of repurchase, for the sum of P450; that subsequently, this defendant borrowed from the plaintiff the title deed of the land sold, for the purpose of selling the property to another person at a better price, and afterwards returned the deed to the plaintiff as he had been unsuccessful in making such attempted second sale; that on November 30 of the same year the defendant Aveyro, feeling sure that this time he would be able to sell his land to another, borrowed from the plaintiff for the third time said deed of the land, and that then the latter required Aveyro to execute in the plaintiff's favor a promissory note, with the security of a solvent surety, for the same sum for which this defendant had to sold the land to the plaintiff, and with the aforementioned penal clause, to be effective in case of delinquency in the payment of said amount should the defendant succeed in selling the property, and with the condition that, if the sale should not be made, the borrowed deed should be returned; that as the defendant was unable to sell the land, he tried to return the deed to his creditor, requiring of course the return of the promissory note he had given in security for the deed, but that the plaintiff refused to accept the deed and return the promissory note. The court rendered a judgment, on August 18, 1915, by ordering Leopoldo Aveyro and Emiliano Pre to pay to the plaintiff jointly and severally the sum of P465 with legal interest thereon from December 5, 1915, until its complete payment; and by holding that the penal clause for the payment of P5 for each day's delinquency in the payment of the principal debt is null and void because it is immoral, pursuant to article 1255 of the Civil Code and to other legal provisions.


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Issue: whether the plaintiff has a right to demand that the defendants pay the penalty specified in the obligation to pay P5 per day from December 5, 1914, until complete reimbursement of the outstanding principal for delinquency in the payment of said principal to the plaintiff. Held: Notwithstanding the imprudence and temerity shown by the defendants by their execution of a ruinous engagement, assumed, as it appears, knowingly and voluntarily, morality, and justice cannot consent to and sanction a repugnant spoliation and an iniquitous deprivation of property, repulsive to the common sense of man; and therefore, as all acts performed against the provisions of law are null and void, and as the penal clause referred to, notwithstanding its being an ostensible violation of morals, was inserted in said promissory note, we must conclude that the contracting party favored by said penal clause totally lacks all right of action to enforce its fulfillment.

Article 1227 Navarro vs. Mallari 45 Phil. 242 Facts: This action was instituted in the Court of First Instance of Pampanga by Santiago Navarro, Sabas Magtoto, and Victorino Calara, as trustees (mandatarios) of the inhabitants of the barrio of San Vicente, in the municipality of Macabebe, to compel the defendants, Felix Mallari, as principal, and Leon Tolentino and Ignacio Tolentino, as sureties, to comply with the contract for the construction of a chapel to the patron saint of the barrio, or in the alternative to require the same defendants to return the sum of P12,000 paid to them, upon said contract, together with the sum of P4,000 as stipulated damages for failure to construct the chapel according to the specifications. The defendant Pedro Mercado appears to have been one of the four trustees or agents selected for the purposes of procuring the chapel to be built but as he refused to join with his associates in instituting the present action, he was impleaded as a defendant. The lower court held that the chapel had been built according to contract and that the defendants were entitled to recover the sum of P4,000 upon their counterclaim, the same being the balance due upon the contract price. Judgment was accordingly entered absolving the defendants from the complaint and requiring the plaintiffs to pay the sum of P4,000 to Felix Mallari and to pay the costs of proceedings. From this judgment the plaintiffs appealed. Issue: Whether or not the creditors has to right to confiscate the sum of P4,000 which is as yet unpaid upon the purchase price of the construction of the chapel and at the same time to claim the stipulated damages? Held: The Court held that the plaintiffs are without a doubt entitled to recover the stipulated damages for failure of the contracting parties to construct a chapel in conformity with the Civil Law – Obligations and Contracts

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fundamental principles of the art of building and in accordance with the specifications of the contract. But the chapel, such as it is, appears to be in use for the purpose for which it was intended, and in the Court’s opinion the plaintiffs are not entitled to confiscate the sum of P4,000 which is as yet unpaid upon the purchase price and at the same time to claim the stipulated damages. The result is that the damages to which the plaintiffs are entitled under the last clause of the contract (Exhibit A) must be set off against the portion of the contract price which has been retained in the hands of the plaintiffs, with the result that neither party can recover anything of the other. The judgment of the lower court is reverse and both parties are absolved from the complaint of the other.

Article 1228 – 1229 Laureano v. Kilayco and Lizares de Kilayco 32 Phil. 194 Facts: On February 20, 1913, the defendants obligated themselves to pay to the plaintiff the sum of P10, 200 as consideration of money lent by the former. The sum shall be paid in monthly installments of P500, payable on the fifteenth day of each month. By way of security for the loan, they executed a chattel mortgage upon a certain property. Additionally, they obligated themselves to pay interest at the rate of 15 percent on all such overdue and unpaid installments. Furthermore, should the plaintiff resort to the court for the recovery of the sum of P2, 000, such sum shall be considered as indemnification. At the time of the trial, it was alleged that there was still an unpaid sum of P3, 433,75.The defendants, there and then, offered to pay the total amount of P3, 433.75 which appeared to be due on account of unpaid installments under the contract, including interest at the rate of 15 per cent. The plaintiff, however, declined to the offer and the amount was deposited to the clerk of court until full payment. The trial court dismissed the plaintiff’s complaint, hence an appeal by the latter. Issue: Whether or not the defendants can be compelled to pay the amount stipulated in the contract which they have entered into. Held: Judgment of the court below is affirmed. The fixing of an increased rate of interest in the event of paying off the principal when the obligation becomes due should be construed as a penal clause. Under the provisions of Article 1154 of the Civil Code (now article 1229 of the NCC), the courts are authorized to modify in the sound exercise of their discretion when the principal obligation has been complied with by Civil Law – Obligations and Contracts

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the debtor either in part or irregularity. In any case wherein there has been a partial or irregular compliance with the provisions in a contract for special indemnification in the event of failure to comply with its terms, courts will rigidly apply the doctrine of strict construction against the enforcement of its entirety of the indemnification. A tender of payment after an action has been instituted was offered by the defendants to the plaintiff who declined to the offer. It may and as a general rule should relieve the defendants of all costs thereafter in the event that plaintiff declines to accept payment as tendered.

Bachrach vs. Golinco 39 Phil. 138 Facts: This is a case for recovery of sum of money for balance due to plaintiff on a promissory note. The note represents the purchase price for a truck which plaintiff sold to defendant. As security for the debt, plaintiff took a chattel mortgage. After maturity of the debt, the debt was foreclosed. The plaintiff himself bought the truck at the foreclosure sale. Issue: Whether the foreclosure sale was valid Held: It was invalid since it did not follow the requirements set in Section 14 of the Chattel Mortgage Law that it should be sold at the same place where the mortgagor lives or where the property is located. The truck was broken down upon the sale, therefore the defendant failed to prove any damage on his part by the irregular manner of sale.

Article 1231 – 1232 Aguilar vs Rubiato 40 Phil. 570 Facts: This is an appeal from a judgment of the Court of First Instance of Laguna. Juan Rubiato is a resident of the Municipality of Nagcarlan, Province of Laguna. He was the owner of various parcels of land having a pontential value approximately cause P 26, 000.00. Rubiato was desirous of obtaining a loan of not exceed P 1,000.00. being in this state of mind, two men, Manuel Gonzalez Vila and one Gregorio Azucena, and possibly another, one Marlo Encarnacion, came to the house of Rubiato and there induced him to sign the second page of a power of attorney in favor of Manuel Gonzalez Vila. By reason of the power thus given, Manuel Gonzalez Vila on April 29, 1915, formulated the document by which the lands of Rubiato were sold to Hilaria Aguilar of Manila, for the sum of P 800.00, with right of repurchase within one year. Rubiato to remain in the possession of the land as lessee and to pay P 120.00 every three months as lease rent. Manuel Gonzalez Vila received from Hilaria Aguilar the P 800.00 as the selling price of the land. Whether this Civil Law – Obligations and Contracts

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money was then passed on to Juan Rubiato is uncertain, although it is undeniable that Hilaria Aguilar has never been paid the money she advanced. The one year mentioned in the pacto de retro having expired without Hilaria Aguilar having received the principal nor any part of the lease rent, she began action against Juan Rubiato and Manuel Gonzalez Vila to consolidate the eight parcels of land in her name. The trial judge, the Hon. Manuel Camus, rendered a decision. The court found that the power of attorney only authorized Manuel Gonzalez Vila to obtain a loan subject to mortgage, and not to sell the property. The judgment was to the effect that the plaintiff Hilaria Aguilar recover from the defendant Juan Rubiato the sum of P 800.00 with interest at the rate of 6 per cent per annum from April 29, 1915 until May 1, 1916, and with interest at the rate of 12 per cent per annum from May 1, 1916 until the payment of the principal. Issue: Whether or not the defendant would only be liable for interest at the legal rate of 6 per cent per annum for a contract made prior to the enactment of Usuary Law. Held: Judgment is affirmed, with the sole modification that the plaintiff shall only recover interest at the rate of 6 per cent per annum on the sum of P 800.00 from April 29,, 1915 until paid. Where the inadequacy of the price in an agreement is so great that the mind revolts at it and is such as reasonable man would neither directly nor indirectly be likely to consent to, a strong reason exist for annulling a contract.

Article 1233 – 1236 Gonzaga vs. Garcia 27 Phil. 7 Facts: Del Rosario, a judgment creditor purchased at an execution sale the right to repurchase under a facto de retro sale of land of Francisco, his judgment debtor. The period for redemption of the interests thus sold in the execution, expired without Francisco having exercised his right of redemption. Del Rosario then sold his right to the herein plaintiff. Francisco in the meantime, paid the repurchase price under the facto de retro sale to the vendee who accepted it, and cancelled the annotation of the facto de retro sale in the registry of property. The plaintiff now seeks to register the property in his own name. Issue:Whether or not the plaintiff obtained the right to register the property in his own name. Held: No. The plaintiff did not acquire ownership of the land but merely the right to repurchase, which was the only interest sold in the execution sale. The payment of the judgment debtor of the repurchase price to the vendee, did not vest title in the judgment creditor. It did not constitute payment by a third person, under Article 1236 of the Civil Code. Civil Law – Obligations and Contracts

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Del Rosario was not a debtor. He was under no obligation to repurchase the land from the vendee. He had a right to do so, whether he exercised this right or not depended upon his own volition. Hence, Article 1236 of the Civil Code is not applicable in the case at bar.

Article 1241 – 1244 Hahn vs. Court of Appeals 179 SCRA 675 Facts: Santos received two diamond rings with a total value of P47,000 in 1966 from the petitioner. She issued separate receipts therefore in which she acknowledged that they had been delivered by Letty Hahn to her for sale on commission and that they would be returned upon demand if unsold. The rings were not sold nor were they returned when demanded by Hahn. Hahn sued for recovery of the rings or their value. While the civil case was pending, she also filed criminal action for estafa against Santos. Santos was acquitted on reasonable doubt. In the civil action, however, where she also pleaded that the contracts between her and Hahn were not of agency but also of sale, Santos did not fare as well.

Issue: Whether or not respondent erred in not allowing an upward adjustment of the original price of the 2 rings and in disallowing the moral and exemplary damages granted by the trial court. Held: There is no doubt that the petitioner could validly reject the private respondent’s offer to pay for the rings on installment because Hahn was entitled to payment in full. If such payment could not be made, Santos was obligated to return both of the rings and not one of the other only at her option – “upon demand”, under the separate receipts she had signed. According to Article 1233 of the Civil Code, “a debt shall not be understood to have been paid unless the thing or service in which the obligation consists has been completely delivered or rendered as the case may be.” As for the private respondent’s offer to return the solitaire ring, which was also referred, the pertinent rule is Article 1244, providing that, “the debtor of a thing cannot compel the creditor to receive a different one, although the latter may be of the same value as or more valuable than that which is due.” More so then is the care at bar if, as averred by the petitioner; the ring offered was less valuable than the one that was due. We cannot sustain the respondent court, however, on the moral and exemplary damages which it disallowed on the ground that “there was no clear showing of malice and bad faith on the part of the defendant.” The court thinks otherwise we hold that the moral and exemplary Civil Law – Obligations and Contracts

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damages should be restored in light of her dubious conduct as recounted in the petitioners brief and findings of the trial court with we have no reason to disturb. Petition Granted. Decision Modified.

Article 1245 Citizens Surety and Insurance Company vs. Court of Appeals G.R. No. L-48958 Facts: On December 4, 1959, the petitioner issued two surety bonds to the defendant to ensure the compliance of the latter while he entered a transaction with Singer Sewing Machine Co. The respondent also put up collaterals such as his lumber stock worth P400,000 and a second real estate mortgage to reimburse the cost paid by the petitioner in case that the respondent will not comply to the agreement. The respondent failed to comply with his obligations to Singer Sewing Machine Co. and the petitioner paid payments as a result of non-compliance of the respondent. The respondent failed to reimburse the petitioner due to the losses he encountered thereby the petitioner filed a claim of the sum of the money against the estate of the respondent. Respondent opposed the money claim by stating that the surety bonds and the indemnity agreements had been extinguished by the execution of the deed of assignment. Thus, after the trial, the lower declared that the collateral is jointly and severally liable to the petitioner, hereby, requiring respondent to pay the required amount with 10% interest per annum. The decision of the lower court was reversed by the Court of Appeals when the respondent appealed. Issue: Whether or not administrator’s obligation under the surety bonds agreements had been extinguished through execution of the deed of assignment. Held: Obligation under the surety bonds had not been extinguished by reason on the execution of “deed of assignment.” The “deed of assignment” was intended as a collateral security for the issuance of two (2) surety bonds by the petitioner towards respondent as evidenced by the latter’s subsequent acts. These are partial payments made by respondent after the execution the “deed of assignment” to pay his indebtedness. Moreover, with the execution of the second mortgage by respondent, it follows that there is no extinguishment of obligation since indemnity bonds still existed by virtue of its execution. Thus, upon the failure of the respondent to comply with its obligation under the contract if sale of goods towards Singer Sewing Machine Co., the petitioner is still adequately protected by the lumber collateral which worth P400,000, more than enough to guaranty the obligations. Here, the Supreme Court dismissed the appeal and money claim by the petitioner.


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Article 1249 Belisario vs. Natividad 60 Phil. 156 Facts: The plaintiff sold the said lands absolutely and without reservation to the defendant for the consideration of P37,000, which was duly paid, and the agreement on the part of the grantee to assume an indebtedness secured by a lien for 4, 500, which was likewise duly paid. The deed recites that the sale is absolute and in perpetuity and the grantor warrants to defend the title. The deed bears the date of April 29, 1927. On the same date the defendant executed and delivered in favor of the plaintiff Exhibit B which, after reciting that the defendant is the plaintiff an option to repurchase the lands on or before the end of May, 1931, for the sum of P37,000. These two instruments are very clear in their terms, were duly signed by both parties in the presence of two witnesses and acknowledge before a notary public and recorded. we see no reason whatever for varying the terms thereof. Then, on he 28th of May, 1931, the plaintiff appeared at the house of the defendant and offered to exercise his option of repurchase under said Exhibit B by tendering to the defendant a check in the sum of P37,000, drawn by Rosendo Santiago against his account in the Peoples Bank and Trust Company. the books of the disclosed that at the time said check was tendered to the defendant the drawer thereof had on deposit in the said bank subject to check the sum of P5.85. However, the defendant did not accept the abovementioned check. Issue: Whether or not the defendant can be compelled to accept the check from the plaintiff through his exerciseof his option of repurchase. Held: The court held that the defendant is not legally bound to accept the check because such check does not satisfy the requirements of a legal tender. WHEREFORE, the appeal is dismissed for lack of merit with cost against the defendant.

Article 1256 Llamas vs Abaya 60 Phil. 502 Facts: This is an appeal from a judgment of the Court of First Instance of Laguna in a Civil Case No. 5872, between the same parties, judgment was rendered giving preference to the entire credit of the plaintiffs and declaring it preferential to that of the defendant Eleazar, ordering Gonzalo Abaya to pay the Llamas brothers the sum of P 14,457.38, as principal with Civil Law – Obligations and Contracts

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accrued interest at 12 per cent per annum until November 30 1931 plus compound interest on said sum from December 1, 1931, until fully paid, also P 1 500 as attorney’s fees, and directing in case of failure of the debtor within ninety (90) days to deposit said amount or to pay it to the plaintiffs, that the mortgaged property be sold in conformity with the law. Eleazar appealed from that part of the judgment, claiming that said preference to the entire credit was only for the amount of P 5,933.30. On appeal, the judgment is reversed,, declaring that the preference enjoyed by the plaintiffs is only for the amount of P 5,933.30 with the stipulated interest thereon. On November 28, 1932, prior to the promulgation of the decision of the Court, Eleazar wrote the plaintiffs tendering payment of the sum of P 5, 933.30 with the accrued interest, stating that he formally made the offer in order to avoid payment of the stipulated interest subsequent to the date of his letter. The plaintiffs ignored said letter. On December 18, 1933, Eleazar deposited said sum of P 5, 933.30 with the clerk of Court, at the disposal of the plaintiffs. On the following day, the plaintiffs filed a motion alleging that the credit to date amounted to P 12,066.60 and praying that a writ execution for said amount be issued. Eleazar opposed the motion for the issuance of a writ of execution for the sum, maintained that he was bound to pay interest only up to November 28, 1932, the date on which he made a formal tender of payment of the principal and accrued interest up to that date. The court entered its resolution, after the hearing of the said motion in favor of the plaintiffs. From the resolution, this appeal was taken. Issue: Whether or not the defendant is bound to pay interest only up to November 28, 1932, the date on which he made a formal tender of payment of the principal and accrued interest up to that date. Held: The judgment is affirmed. The stipulated interest to which the plaintiffs are entitled is at the rate of 9 per cent per annum from March 6, 1929, the date on which they acquired the mortgage from the Philippine National Bank, up to December 18 1933, the date on which Eleazar deposited the sum of P 5,933.30, that said interest is compound and should be computed semi-annually in accordance with the contract. The principal and interest so computed should bear interest at the said rate from December 19, 1933, until fully paid. The stipulated interest should accrue, and be payable up to the date on which the principal is paid. The reason for this is that the written tender payment did not have the effect of suspending the interest and its accumulation.


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Article 1257 Valdellon vs. Tengco 141 SCRA 321 Facts: This case is a petition by way of certiorari directed against the decision of the Respondent Judge Hon. Ernesto Tengco; therein ordering defendant Lorenzo Valdellon to vacate the land in question and for the latter to pay all his rentals in arrears from March 1979 at the rate of P 200.00 a month until the possession of the said land shall have been surrendered to the plaintiff-spouses Geraldez; and to pay the palintiffs the amount of P 1,000.00 as attorney's fees, as well as the costs of suit. The record reveals that sometime in 1956, on a verbal agreement to pay a monthly rental to the original owner, defendant constructed his house on the lot in question located at No. 1331 Antonio Street, Sta. Cruz, Manila. After buying the lot in 1968, plaintiffs notified the defendant to remove his house and to vacate the premises because they want to build a threestorey building thereon. They also demanded the payment of P 200.00 a month from August 15, 1968 until defendant shall have actually vacated the land. Defendant refused to vacate the premises and this compelled plaintiffs to file the first ejectment case on September 28, 1968 docketed as Civil Case No. 174400 of the City Court of Manila. Civil case No. 174400 was decided by the City Court in favor of the plaintiffs and defendant appealed to this court. However this court upheld the decision of the City Court and the defendant appealed to the Court of Appeals but then again; the Court of Appeals ruled in favor of the plaintiffs with some modification. From the juddgment rendered by the Court of Appeals, the defendant appealed to the Supreme Court but the appeal was denied for lack of merit. This resolution became final. Meanwhile the defendant had been depositing his monthly rentals of P 200.00 with the Court of Appeals during the pendency of the case in that Court and in the Supreme Court. By reason of the finality of the decision of the Court of Appeals and the remand of the record of the case to this Court, plaintiffs wrote a letter to the defendant requesting the monthly rentals starting March, 1979 be paid directly at their residence at No. 20 Apo Street, Quezon City. This letter was sent by registered mail and appeared to have been received by the defendant. The Court of Appeals was also furnished a copy of the abovementioned letter. However, despite of receiving such letter; the defendant still deposited his rent for the month of March, 1979 with the Court of Appeals. Thus, the plaintiffs through their counsel sent a letter again to the defendant demanding the payment of all accrued rentals and to vacate the premises within ten (10) days after notice; otherwise an ejectment case will be filed against the defendant. The said letter was received by defendant's daughter.


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This time the defendant offered to make a payment to the rentals to the plaintiffs residence through his son Isagani, however the offer was rejected by the plaintiffs because the defendant already deposited the rentals for April, May and June, 1979 with the Court of Appeals who accepted the same. Issue: Whether the consignation done by the defendant Valdellon, herein plaintiff is valid and in accordance with law. Held: We sustain the ruling of the Court below that the deposits made by the petitioner in the Court of Appeals, the defendant in the unlawful detainer case, on March 19, 1979 and on June 13, 1979, without notice thereof to the private respondents and despite petitioner's receipt of said respondent's letter of February 19, 1979, cannot be considered as valid consignation as required and contemplated by law. Under Art. 1257 of our Civil Code, in order that consignation of the thing due may release the obligor, it must first be announced to the persons interested in the fulfillment of the obligation. The consignation shall be ineffectual if it is not made strictly in consonance with the provisions which regulate payment. In said Article 1258, it is further stated that the consignation having been made, the interested party shall also be notified thereof. Wherefore the petition is hereby dismissed for lack of merit, with cost against petitioner herein.

Soco vs. Militante 123 SCRA 160 Facts: It appears from the evidence that the plaintiff-appellee-Soco, for short-and the defendant-appellant Francisco, for brevity, entered into 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 P800.00 for a period of 10 years renewable for another 10 years at the option of the lessee. The terms of the contract are embodied in the Contract of Lease. [Exhibit "A" for Soco and Exhibit "2" for Francisco]. It can readily be discerned from Exhibit "A" that paragraphs 10 and 11 appear to have been cancelled while in Exhibit "2" only paragraph 10 has been cancelled. Claiming that paragraph 11 of the Contract of Lease was in fact not part of the contract because it was cancelled, Soco filed Civil Case No. R-16261 in the Court of First Instance of Cebu seeking the annulment and/or reformation of the Contract of Lease. Sometime before the filing of Civil Case No. R-16261, 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 [Exhibit "3"] which the latter received as shown in Exhibit "3-A". After Civil Law – Obligations and Contracts

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writing this letter, Francisco sent his payment for rentals by checks issued by the Commercial Bank and Trust Company. Obviously, these payments in checks were received because Soco admitted that prior to May, 1977, defendant had been religiously paying the rental. 1. 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 P3,000.00 which is definitely very much higher than what Francisco was paying to Soco under the Contract of Lease, the latter felt that she was on the losing end of the lease agreement so she tried to look for ways and means to terminate the contract. In view of this alleged non-payment of rental of the leased premises beginning May, 1977, Soco through her lawyer, sent a letter dated November 23, 1978 [Exhibit "B"] 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 [Exhibit "1"]. Despite this explanation, Soco filed this instant case of Illegal Detainer on January 8, 1979. 2. Pursuant to his letter dated February 7, 1975 [Exhibit"3"] and for reasons stated therein, Francisco paid his monthly rentals to Soco by issuing checks of the Commercial Bank and Trust Company where he had a checking account. On May 13, 1975, Francisco wrote the Vice-President of Comtrust, Cebu Branch [Exhibit "4"] requesting the latter to issue checks to Soco in the amount of P 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 [Exhibit "5"]. Obviously, these payments by checks through Comtrust were received by Soco from June, 1975 to April, 1977 because Soco admitted that an rentals due her were paid except the rentals beginning May, 1977. While Soco alleged in her direct examination that "since May, 1977, he [meaning Francisco] stopped paying the monthly rentals" [TSN, Palicte, p. 6; Hearing of October 24, 1979], yet on cross examination she admitted that before the filing of her complaint in the instant case, she knew that payments for monthly rentals were deposited with the Clerk of Court except rentals for the months of May, June, July and August, 1977. Pressing her point, Soco alleged that "we personally demanded from Engr. Francisco for the months of May, June, July and August, but Engr. Francisco did not pay for the reason that he had no funds available at that time." [TSN-Palicte, p. 28; Hearing October 24, 1979]. This allegation of Soco is denied by Francisco because per his instructions, the Commercial Bank and Trust Company, Cebu Branch, in fact, issued checks in favor of Soco representing payments for monthly rentals for the months of May, June, July and August, 1977 as shown in Debit Memorandum issued by Comtrust as follows: [a] Exhibit "6"-Debit Memo dated May 11, 1977 for P926.10 as payment for May, 1977; Civil Law – Obligations and Contracts

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[b] Exhibit"7"-Debit Memo dated June l5, 197 7for P926.10 as payment for June, 1977; [c] Exhibit "8"-Debit Memo dated July 11, 1977 for P1926.10 as payment for July, 1977; [d] Exhibit "9"-Debit Memo dated August 10, 1977 for P926. 10 as payment for August, 1977. These payments are further bolstered by the certification issued by Comtrust dated October 29, 1979 [Exhibit "13"]. Indeed the Court is convinced that payments for rentals for the months of May, June, July and August, 1977 were made by Francisco to Soco thru Comtrust and deposited with the Clerk of Court of the City Court of Cebu. There is no need to determine whether payments by consignation were made from September, 1977 up to the filing of the complaint in January, 1979 because as earlier stated, Soco admitted that the rentals for these months were deposited with the Clerk of Court. Taking into account the factual background setting of this case, the Court holds that there was in fact a tender of payment of the rentals made by Francisco to Soco through Comtrust and since these payments were not accepted by Soco evidently because of her intention to evict Francisco, by all means, culminating in the filing of Civil Case R-16261, Francisco was impelled to deposit the rentals with the Clerk of Court of the City Court of Cebu. Soco was notified of this deposit by virtue of the letter of Atty. Pampio Abarientos dated June 9, 1977 [Exhibit "10"] and the letter of Atty. Pampio Abarientos dated July 6. 1977 [Exhibit "12"] as well as in the answer of Francisco in Civil Case R-16261 [Exhibit "14"] particularly paragraph 7 of the Special and Affirmative Defenses. She was further notified of these payments by consignation in the letter of Atty. Menchavez dated November 28, 1978 [Exhibit "1"]. There was, therefore, substantial compliance of the requisites of consignation, hence his payments were valid and effective. Consequently, Francisco cannot be ejected from the leased premises for non-payment of rentals. As indicated earlier, the above decision of the Court of First Instance reversed the judgment of the City Court of Cebu, Branch 11, the dispositive portion of the latter reading as follows: WHEREFORE, judgment is hereby rendered in favor of the plaintiff, ordering the defendant, Regino Francisco, Jr.: [1] To vacate immediately the premises in question, consisting of a building located at Manalili St., Cebu City; [2] To pay to the plaintiff the sum of P40,490.46 for the rentals, covering the period from May, 1977 to August, 1980, and starting with the month of September, 1980, to pay to the plaintiff for one [1[ year a monthly rental of P l,072.076 and an additional amount of 5 per cent of said amount, and for so much amount every month thereafter equivalent to the rental of the month of every preceding year plus 5 percent of same monthly rental until the defendant Civil Law – Obligations and Contracts

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shall finally vacate said premises and possession thereof wholly restored to the plaintiff-all plus legal interest from date of filing of the complaint; [3] To pay to the plaintiff the sum of P9,000.00 for attorney's fee; [4] To pay to the plaintiff the sum of P5,000.00 for damages and incidental litigation expenses; Issue: Whether or not the payment made by Francisco, to the Commercial Bank and Trust Company constitutes valid consignation. Held: The Decision subject of the present Petition for Review holds the view that there was substantial compliance with the requisites of consignation and so ruled in favor of private respondent, Regino Francisco, Jr., lessee of the building owned by petitioner lessor, Soledad Soco, in the case for illegal detainer originally filed in the City Court of Cebu City, declaring the payments of the rentals valid and effective, dismissed the complaint and ordered the lessor to pay the lessee moral and exemplary damages in the amount of P10,000.00 and the further sum of P3,000.00 as attorney's fees. We do not agree with the questioned Decision. We hold that the essential requisites of a valid consignation must be complied with fully and strictly in accordance with the law, Articles 1256 to 1261, New Civil Code. That these Articles must be accorded a mandatory construction is clearly evident and plain from the very language of the codal provisions themselves which require absolute compliance with the essential requisites therein provided. Substantial compliance is not enough, for that would render only a directory construction to the law. The use of the words "shall" and "must" which are imperative, operating to impose a duty which may be enforced, positively indicate that all the essential requisites of a valid consignation must be complied with. The Civil Code Articles expressly and explicitly direct what must be essentially done in order that consignation shall be valid and effectual. Thus, the law provides: Art. 1257. In order that the consignation of the thing due may release the obligor, it must first be announced to the persons interested in the fulfillment of the obligation. The consignation shall be ineffectual if it is not made strictly in consonance with the provisions which regulate payment. Art. 1258. Consignation shall be made by depositing the things due at the disposal of judicial authority, before whom the tender of payment shall be proved, in a proper case, and the announcement of the consignation in other cases. The consignation having been made, the interested parties shall also be notified thereof.


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Art. 1249. The payment of debts in money shall be made in the currency stipulated, and if it is not possible to deliver such currency, then in the currency which is legal tender in the Philippines. The delivery of promissory notes payable to order, or bills of exchange or other mercantile documents shall produce the effect of payment only when they have been cashed, or when through the fault of the creditor they have been impaired. In the meantime, the action derived from the original obligation shall be held in abeyance. We have a long line of established precedents and doctrines that sustain the mandatory nature of the above provisions. The decision appealed from must, therefore, be reversed.

Article 1262 – 1265 Palacio vs. Sludario 7 Phil. 275 Facts: At an interview in which were present the defendant and three herdsmen, the plaintiff made an arrangement for the pasturing of eighty-one head of cattle, in return for which she has to give one-half of the calves that might be born and was to pay the defendant one-half peso for each calf branded. On demand for the whole, forty-eight head of cattle were afterwards returned to her and this action is brought to recover the remaining thirty-three. First defense that the arrangement was made between the plaintiff and the herdsmen, the defendant, who was president of the municipality, tendering his good offices only. Upon this question, the finding of the court below is conclusive in favor of the plaintiff and is fully justified by the proofs, especially by a letter of the defendant in reply to the demand for the cattle, in which he seeks to excuse himself for the loss of the missing animals. As a second defense it is claimed that the thirty-three cows either died of disease or were drowned in a flood. As to this point, on which the trial court has made no specific finding, the proof is conflicting in many particulars and indicates that at least some of these cattle were living at the time of the surrender of the forty-eight head. The defendant's witnesses swore that of the cows that perished, six died from overfeeding, and they failed to make clear the happening of any flood sufficient to destroy the others. Issue: Whether or not the defendant shall be held liable for the lost of the cattle. Held: Yes. The burden of explanation of the loss rested upon the depositary and under article 1769 the fault is presumed to be his. The defendant has not succeeded in showing that the loss occurred either without fault on his part or by reason of caso fortuito. If however, the contract be not one strictly of deposit but one in according to a local custom for the pasturing of cattle, the obligation of the parties remain the same.Thus, the court affirmed with the cost of both instances. Civil Law – Obligations and Contracts

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Article 1266 House vs dela Costa 68 Phil. 742 Facts: The petitioner, plaintiff in a civil case against C.P. Bush and George Upton for the recovery of a sum of money, obtained a preliminary attachment of certain properties of the latter. Three days thereafter, Bush and Upton secured the discharge of the attachment of these properties by filing a bond posted by Far Eastern Surety & Insurance Co., Inc., on August 25, 1934, for P2,000, the condition of the bond being that, should the plaintiff and petitioner House obtain a judgment against C.P. Bush, the latter would return to the Sheriff of Manila the properties discharged from attachment and, should he fail to do so, the Far Eastern Surety & Insurance Co., Inc., would pay the value thereof. On September 1st following, the petitioner House and C.P. Bush entered into an agreement, without the knowledge or consent of the Far Eastern Surety & Insurance Co., Inc., whereby Bush delivered to the petitioner, together with other properties, those discharged from attachment to be sold at public auction. The petitioner was the highest bidder in this sale and the properties were adjudicated to him. Eventually the petitioner obtained judgment against C.P .Bush for the amount of P2,000 and the same not having been satisfied, he asked for execution against Far Eastern Surety & Insurance Co., Inc., as surety of C.P Bush in the discharge of the properties from the attachment. The court denied this petition. Issue: Whether or not the court exceeded and abused its discretion in so ruling. Held: No. From the foregoing it appears that the petitioner and C.P. Bush, under the agreement of September 1st, substantially altered their judicial relations as to the properties discharged from attachment and for the delivery of which Far Eastern Surety & Insurance Co., Inc., was a surety, which alteration necessity released the latter from its obligations as such surety. The properties discharged from attachment having been turned over to the petitioner and thereafter publicly sold and adjudicated to him under the said agreement, the obligation of C.P. Bush to return the properties to the Sheriff, in satisfaction of the judgment in favor of the petitioner, was extinguished and compliance therewith became impossible by petitioner's own act, thereby resulting in the release of the surety from its obligation to pay the value of said properties.

Article 1267 – 1269 Urrutia & Co. vs. Baco 26 Phil. 632


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Facts: Early morning on the 8th day of April 1910, the steamship Nuestra Señora del Pilar, owned by the plaintiff and the schooner Manyan owned by the defendant, collided. The steamer sank and 8 lives were lost. The said vessel was considerably injured. An action was brought by the owner of the steamship to recover the value of the steamer and the damages caused by its destruction, alleging as a basis, the negligence of the vessel. The defendant denied and set up a counterclaim. Issue: Whether or not the sail vessel was negligent in continuing its course without variation up to the moment that it found itself in extremis. Held: There exist 3 divisions of times or zones: the first division covers all the time up to the moment when the risk of collision may be said to have begun. The second division covers the time between the moments of the risk of collision begins and the moment it has become a practical certainty. While the third division covers the time between the moments when collision has become a practical certainty and the moment of actual contact. It was during the time when the sail vessel was passing through the third zone that it changed its course to port in order to avoid, if possible, the collision. This act may be said to have been done in extremis, and even if wrong, the sailing vessel is not responsible for the result. Article 1305 Cagayan Fishing Development (CFD) vs. Sandiko 65 Phil.223 Facts: Manual Tabora is a registered owner of four parcels of land in barrio Linao, Appari. He mortgage in favor of PNB for P 8,000 and signed mortgage for additional P 7,000. And mortgaged favor of Severina Buzon to whom he is indebted for P 2900. Tabora executed a public document by virtue of which said lands wore sold to plaintiff company ( CFD) subject to mortgages in favor of PNB and Buzon and will not transfer the title until the later has fully paid its debt. A year after the plaintiff’s incorporation on October 22,1930, a board resolution was issued authorizing its president to sell the land to Teodoro Sandiko for P42, 000 and evidenced by deed of sale. The defendant having failed to pay the sum stated in promissory notes, brought a court’s action in Court of First Instance in Manila which this court absolved the defendant. Plaintiff filed a motion but was denied, hence, this appeal was made. PNB threatened Tabora to foreclose its mortgage, Tabora approached the defendant Sandiko and made him assume the payment of Tabora’s indebtedness. The promissory note was made payable to the plaintiff company so that the lands may not be attached by Tabora’s creditors. Issue: Whether or not there was a valid contract by transfer of four land by the plaintiff to the defendant?


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Held: The transfer from Tabora to CFD was subject to condition precedent. Part of the mortgage and that this condition not having compared with by CFD, the transfer was null and void because at the time was effected, the plaintiff corporation is non-existent. The transfer was effected May 31, 1930 and articles of incorporation was effected later October 22, 1930. In this case, it cannot be denied that the plaintiff was not yet incorporated when it entered into the contract of sale. Not even a de facto corp. not being in legal existence, it did not possess juridical capacity to enter into the contact.

Article 1306 Gabriel vs. Monte de Piedad 71 Phil.497 Facts: Petitioner Leoncio Gabriel was employed as appraiser of jewels in the pawnshop of Monte Piedad defendant from 1913-1933 on December 13, 1932, he executed a chattel mortgage to secure the part of deficiencies which resulted from his erroneous appraisal of jewels amounting to P 4,679.07 with interest and promised to pay the appellee the sum of P300 amount until the P 4,679.07 with interest is fully paid. And this was registered to become the a fore mentioned sum less what the balance of P11,345.75 and in case of default the Chattel Mortgage was based upon all non existing subtract matter as consideration and C.M was null and void. The lower court rendered judgment of lower court. Hence, this petition for review by certiorari. Issue: Whether or not there was a valid contract made? Held: There is a valid contract in this case. A contract is to be judged by its characteristics and courts will look to the substance. In the case at bar, the object of contract does not in anyway militate against public good. Neither does it contravene the policy of law as interest of society. There is sufficient consideration in this contract. A pre-existing admitted liability is a good consideration for a promise. It has satisfactorily established that it was executed voluntarily by the latter to guarantee the deficiencies resulting from his erroneous appraisals of the jewels. The exception to this rule is where the inadequacy by is gross as to amount to fraud, oppression /of undue influence as when statutes requires the consideration to be inadequate. We are not convinced that the instant case falls within the exception. Therefore, the petition is dismissed.

Jimeno vs. Gacilago 14 Phil. 16 Facts: On the 7th of June, 1905, Manuel Jimeno, Clara Jimeno, Emilio Jimeno, Filomena Jimeno and her husband, Salvador Trono, filed a complaint with the Court of First Instance of Occidental Negros, alleging: that by means of a public instrument which was attached to the complaint a contract for partition of property had been entered into between them and Lope Gacilogo; that the defendant, Gacilagao, is in possession of all the property described in the instrument of partition, but, with the exception of two cocoanuts groves described in clause 7 thereof, he refuses to deliver to the plaintiffs, as per agreement, the portion that pertains to them; that the defendant, Gacilago, refuses to comply with the terms of the said instrument, under the pretext that clause 2 thereof is slightly Civil Law – Obligations and Contracts

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obscure, the obscurity being due to erroneous data furnished by the defendant himself, consisting in the inverted placing of the words north and south used in said clause; and that, by reason of this act of the defendant, the plaintiffs have suffered loss and damages to the extent of P600, wherefore they prayed that judgment be entered against the defendant compelling him to comply with the terms of the attached instrument of partition, and that the plaintiffs be allowed damages, plus cost. The defendant answered in writing to the complaint and denied each and every one of its allegations with the exception of those contained in paragraphs 1 and 2 of the same, which he admitted as true and, as a defense, he alleged that the defendant had strictly complied with everything stipulated in the public instrument of partition to which the complaint referred. Issue: Whether in the preparation of the second clause of the instrument of partition of certain undivided property, dated August 29, 1904, an error was committed in the designation of the portions divided up with relation to two of the cardinal points of the horizon, and the true situation of the estate that is the subject of the division. Held: It appears stipulated in clause 2 of the said instrument that the hacienda Filomena de Payao should be divided into three parts between the plaintiffs and the defendant; the northern and southern part of the estate to go to the defendant, Gacilago, and the central part of the same, lying between the said hacienda road and the old road to the pueblo of Soledad, both of which run parallel from east to west through the central part of the property, to go to the plaintiffs. Allegations not duly substantiated by the record cannot prevail against the validity and efficiency of the stipulations contained in authentic documents, whether they be public or private, inasmuch as whatever may have been agreed to in a contract, where it does not violate the prohibitive provisions of the law or public morals, is binding upon the contracting parties. (Arts. 1254 and 1278, Civil Code.) When the terms of a written contract are clear and leave no doubt, the literal sense of its stipulations should be observed, and there should not be understood as included therein things and cases different from those with regard to which the persons interested intended to contract. (Arts. 1281 and 1283, Civil Code.) From the foregoing it is inferred that there was no just or lawful reason for failure to comply with the stipulations of the written contract in question; therefore, the party that failed to fulfill the agreement is responsible for the loss occasioned to the other party, and is obliged to indemnify him in accordance with the law and the principles of justice. Petition granted.

Tiangco vs. CFI 98 SCRA 26 FACTS: Under date of June 13, 1980, a Joint Motion for Judgment on Compromise Agreement was filed by the petitioners and respondents. JOINT MOTION FOR JUDGMENT ON COMPROMISE AGREEMENT Civil Law – Obligations and Contracts

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Now come the petitioners and respondents in the above-entitled cases, assisted by respective counsel and before the Honorable Supreme Court respectfully allege that they have arrived at and agreed to a settlement of their controversy in Civil Case No. Q-25435 entitled 'Dominador N. Venegas vs. Salvador T. Tiangco. et al., CFI of Rizal Quezon City, Branch IX, which gave rise to and resulted in the above-entitled cases before the Honorable Supreme Court, to wit: 1. That the parties have agreed to ask the Honorable Supreme Court to dismiss or order the Hon. Trial Court to dismiss Civil Case No. Q-25435 entitled 'Dominador N. Venegas vs. Salvador T. Tiangco, et al., CFI of Rizal Quezon City, Branch IX, including an claiming, counterclaim and interventions arising from and by reason of said case, and likewise to dismiss the above two said cases on the ground that the same have become moot and academic, which dismissals of Civil Case Q-25435 CFI of Rizal Quezon City, Branch IX and the said above two cases shall be with prejudice; 2. That the parties have also agreed that the Lions Clubs in District 301-D which have been placed in status quo will reorganize themselves in accordance with the Constitution and By-Laws of Lions International after said clubs shall have withdrawn and/or dismissed all cases filed by them, their officers or members against Lions International and/or its representatives, which cases are pending or on appeal in the courts. 3. That after the dismissal of the above-entitled cases by the Supreme Court and all other cases pending in the courts as listed above and the reorganizations, the parties have agreed to request Lions International to authorize as soon as possible the holding of elections to choose the District Governor of District 301-D for the fiscal year 1980-81 in accordance with the Constitution and By-Laws of Lions International, and further to recommend that said elections be conducted and supervised by the Council of governors. Finding the above-quoted Compromise Agreement to be in order, not contrary to law, public morals or public policy, the same is hereby approved. The parties are hereby enjoined to comply strictly and in good faith as well as with sincerity and honesty of purpose the terms, conditions and stipulations therein contained.

Puig vs. Sellner 45 Phil. 286 FACTS: This litigation arose from the non-payment of a promissory note signed by the defendants, which is as follows: On or before July 12, 1921, we promise to pay jointly and severally at Manila to the order of D. Andres Puig or his general attorney-in-fact, D. Ramon Salinas, the sum of forty seven thousand pesos (P47,000), Philippine currency, which we received on this date from said Mr. Salinas by way of loan at 10 per cent per annum; and we hereby guarantee our said obligation with five hundred seventy (570) preferred shares of the Manila Improvement Co. of the face value of one hundred pesos (P100) each, which will be issued within fifteen (15) days in the name of Mr. Puig, who shall hold them until we fulfill this obligation. In case we fail to make payment on July 12, 1921, the shares pledged shall become the property of D. Andres Puig. — Manila, July 12, 1920. Civil Law – Obligations and Contracts

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The Honorable Geo. R. Harvey, judge, rendered a carefully prepared decision, sentencing the defendants Geo. C. Sellner and B. A. Green to pay the plaintiff jointly and severally and ordering, moreover, in the event that the defendants should fail to pay the full amount of the judgment within three (3) months from the date thereof, that the sheriff of this city proceed to sell the five hundred seventy (570) shares pledged at public auction to the highest bidder. From this judgment the defendants have appealed, and in their brief they assign seven errors, which, to our mind, can be reduced to one, namely, that numbered 2, which is as follows: The trial court erred in not holding that the condition contained in the note, to wit, "In case we fail to make payment on July 12, 1921, the shares pledged shall become the property of D. Andres Puig," was valid and binding against the plaintiff, as well as against the defendants. ISSUE: Whether or not such stipulation of appropriating pledged shares by creditor to himself in case of non-compliance by debtor is valid. HELD: The question as to the validity of a stipulation, such as that now before us, was already decided by the supreme court of Spain in the negative. The law does not permit the making of stipulations contrary to law, morals or public order, one of which stipulations would be, according to the general language of article 1859, that wherein it is agreed that the debtor (creditor) may appropriate the thing pledged, as if it were sold to him, by the mere lapse of the term of the contract of loan, and said stipulation being void, under article 1884 of said Code. The creditor has no right to appropriate to himself the personal property and chattels pledged, nor he can he make payment by himself and to himself for his own credit with the value of the said property. However, the vice of nullity which vitiates the additional agreement entered into by the contracting parties authorizing the creditor to appropriate the property and effects pledged in payment of his credit does not affect substantially the principal contract of chattel mortgage with regard to its validity and efficacy. Judgment appealed from is affirmed.

Molina vs. Dela Riva 6 Phil. 12 FACTS: This is an action to recover a debt due upon a contract executed July 27, 1903, whereby plaintiff transferred to the defendant the abaca and coprax business theretofore carried on by him at various places in the Island of Catanduanes, with all the property and right pertaining to the said business, or the sum of 134,636 pesos and 12 cents, payable in Mexican currency or its equivalent in local currency. Defendant paid at the time of the execution of the contract, on account of the purchase price, the sum of P33,659 pesos and 3 cents, promising to pay the balance on three installments P33,659 pesos and 3 cents each, with interest at the rate of 5 per cent per annum from the date of the contract. The first installment became due July 27, 1904. It was for the recovery of this first installment that their action was brought in the Court of First Instance of the City of Manila.


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ISSUES: The appellant relies upon four assignments of error, to wit: (1) The court had no jurisdiction of the subject of the action. (2) The court erred in fixing in Philippine currency the sum which the appellee should recover, without hearing evidence as to the relative value of Mexican and Philippine currency. (3) The court erred in rendering judgment in a sum larger than that sought to be recovered in the complaint. (4) The court took into consideration as the basis of its judgment the contract in question, the same being null and void on the grounds that the contract did not bear the internal-revenue stamp required by Act No. 1045. HELD: First. The actual residence, and not that which the parties had four years, prior to the filing of the complaint, is the one that should govern the question as to the jurisdiction of the court. Both parties to this case being residents the city of Manila, it is apparent that the Court of First Instance of that city had jurisdiction to try and determine this action. . The jurisdiction of a court is filed by law and not by the will of the parties. As a matter of public policy, parties can only stipulate in regard to that which is expressly authorized by law. Second. Plaintiff's allegation must therefore be deemed admitted. Consequently it was not necessary for the court to hear evidence as to the relative value of Mexican and Philippine currency. There is no dispute between the parties as to the fact that the 33,659 pesos and 3 Cents, Mexican currency, referred to in the contract, were equal to 28,049 pesos and 19 centavos, Philippine currency, at the time of the filing of the complaint. The proof required by section 3 of Act No. 1045, cited by the appellant, should be received only when the parties disagree as to the relative value of the currency. He was rather favored thereby, since he was given an option to pay in whatever currency he might see fit. It is well known that in the case of an alternative obligation the debtor has the right to choose the method of meeting the obligation unless the creditor has expressly reserved that right to himself. Third. The court had no power to enter judgment in favor of the plaintiff for 30,052 pesos and 70 centavos, under Section 126 of the Code of Civil Procedure. We hold that this was error on the part of the trial court. The judgment of the court below should be modified in this respect. Finally, the contract under consideration was executed July 27, 1903. Such contract was not subject to the stamp tax provided in Act No. 1045. The penalty of nullity prescribed in section 10 of the act is not applicable to that contract. The court, therefore, committed no error in finding that the absence of revenue stamp did not render the contract void. Case remanded.

De Los Reyes vs. Alojado 16 Phil. 499 FACTS: On or about January 22, 1905, Veronica Alojado received, as a loan, from Benito de los Reyes that the sum P67 .60, for the purpose of paying a debt she owed to Olimpia Zaballa. It was Civil Law – Obligations and Contracts

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agreed between Alojado and Reyes that the debtor should remain as a servant in the house and in the service of her creditor, without any renumeration whatever, until she should find someone who would furnish her with the said sum where with to repeat the loan. The defendant, Veronica Alojado, afterwards left the house of the plaintiff, on March 12, 1906, without having paid him her debt, nor did she do so at any subsequent date, notwithstanding his demands. The plaintiff, therefore, filed suit against Veronica Alojado to recover the said sum or, in a contrary case, to compel her to return to his service. The trial court rendered judgment whereby he sentenced the defendant to pay to the plaintiff the sum claimed and declared that, in case the debtor should be insolvent, she should be obliged to fulfill the agreement between her and the plaintiff, which was reversed in favor of defendant. Hence, this appeal. The defendant appealed from the said judgment, denying all the allegations of the complaint and alleged that, although she had left the plaintiff's service, it was because the latter had paid her no sum whatever for the services she had rendered in his house. ISSUE: Whether or not the agreement entered into by both parties is valid. HELD: The duty to pay the said sum, as well as that of P11.97 delivered to the defendant in small amounts during the time that she was in the plaintiff's house, is unquestionable, inasmuch as it is a positive debt demandable of the defendant by her creditor. (Arts. 1754, 1170, Civil Code.) However, the reason alleged by the plaintiff as a basis for the loan is untenable, to wit, that the defendant was obliged to render service in his house as a servant without remuneration whatever and to remain therein so long as she had not paid her debt, inasmuch as this condition is contrary to law and morality. (Art. 1255, Civil Code.) Domestic services are always to be remunerated, and no agreement may subsist in law in which it is stipulated that any domestic service shall be absolutely gratuitous, unless it be admitted that slavery may be established in this country through a covenant entered into between the interested parties. Petition dismissed.

Ferrazzini vs. Gsel 34 Phil.493 Facts: This action was brought to recover damages for an alleged wrongful discharge of the plaintiff, who had been employed by the defendant for an indefinite time to work in the latter's industrial enterprises in the city of Manila. The defendant admitted that he discharged the plaintiff without giving him the "written advice of six months in advance" as provided in the contract, but alleged that the discharge was lawful on account of absence, unfaithfulness, and disobedience of orders. The defendant sought affirmative relief for a further alleged breach of the contract by the plaintiff after his discharge. According to the defendant, this act of the plaintiff was a technical violation of the provisions of the contract wherein he expressly agreed and obligated himself "not to enter into the employment of any enterprise in the Philippine Islands, whatever, save and except after obtaining special written permission therefor" from the defendant. The lower court ruled in favor of the plaintiff, hence, this appeal from the defendant. Civil Law – Obligations and Contracts

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Issue: Whether or not the provisions of the contract “not to enter into the employment of any enterprise in the Philippine Islands, whatever, save and except after obtaining special written permission therefor" from the defendant are valid and binding upon the plaintiff? Held: The Supreme Court ruled that he contract under consideration, tested by the law, rules and principles, is clearly one in undue or unreasonable restraint of trade and therefore against public policy. It is limited as to time and space but not as to trade. It is not necessary for the protection of the defendant, as this is provided for in another part of the clause. It would force the plaintiff to leave the Philippine Islands in order to obtain a livelihood in case the defendant declined to give him the written permission to work elsewhere in this country.

Article 1310 Garcia vs. Legarda 21 SCRA 555 Facts: On May 20, 1953 the petitioners instituted the civil case no. 1962 entitled “Maria A. Garcia, et al. vs. Rita Legarda, Inc., a corporation organized under Philippine laws, and is engaged in the sale and resale of residential lots in Manila and suburbs, against the respondent to have certain contracts numbered 322, 324, and 965 declared as existing and subsisting; to compel the respondent to accept payments tendered by them. In its answer to the complaint, the respondent averred that in relation to the Contracts to Sell, the petitioners, as of June 11, 1952, had failed to pay the stipulated monthly installments; that despite several demands for payment of arrears made between December, 1951 and June, 1952 by the respondent, the petitioners had failed to pay the amounts due; and that upon the expiration of the 90day grace period on June 11, 1952 stipulated in the sixth paragraph of the contracts, the respondent had cancelled them. The trial court rendered judgment declaring Contracts Nos. 322, 324 and 965 as existing and subsisting; ordering the respondent to accept the payments tendered by the petitioners and to pay attorney's fees in the sum of P1,500.00. But this was reversed by the Court of Appeals, hence, this appeal to the Supreme Court. Issue: Whether or not the contract that gives one party the right to cancel the contract should the other party becomes in default in the payment is valid? Held: The Supreme Court held that the stipulations in the contract that states that in case of default in the payment of installments by the vendee, he shall have (1) "a month of grace", and that (2) should said month of grace expire without the vendee paying his arrears, he shall have another "period of 90 days" to pay "all the amounts he should have paid", etc., then the vendor "has the right to declare this contract cancelled and of no effect" is valid. The above stipulation merely gives the vendor "the right to declare this contract cancelled and of no effect" upon fulfillment of the conditions therein set forth. It does not leave the validity or compliance of the contract entirely "to the will of one of the contracting parties". Civil Law – Obligations and Contracts

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Article 1308 of the New Civil Code reads as follows: The contract must bind both contracting parties; its validity or compliance cannot be left to the will of one of them. The contract expressly giving to one party the right to cancel, the same if a resolutory condition therein agreed upon — similar to the one under consideration — is not fulfilled, is valid, the reason being that when the contract is thus cancelled, the agreement of the parties is in reality being fulfilled. Indeed, the power thus granted cannot be said to be immoral, much less unlawful, for it could be exercised — not arbitrarily — but only upon the other contracting party committing the breach of contract of non-payment of the installments agreed upon.

Joaquin vs. Mitsumine 34 Phil. 858 Facts: On July 30, 1914, Attorney Leocadio Joaquin, in his own behalf, filed a written complaint in the Court of First Instance of Manila against the defendant, O. Mitsumine, alleging that on July 1, 1914, the plaintiff executed an instrument whereby he gave a chattel mortgage on certain apparatus for the manufacture of aerated water as security for the payment in two installments of the sum of P525; that the said mortgage deed was entirely null and void for the reason that it had been executed by the plaintiff by mistake, inasmuch as in May, 1914, he had instructed the defendant to acquire the said machine at the request of the plaintiff's client, Macario Vito, and that the latter was responsible for the payment of the said P525. On August 20, 1914, the defendant answered the above complaint, denying all the allegations therein contained except those that were expressly admitted in his answer and that after the defendant had ordered the machine from Japan and delivered it to the plaintiff to his entire satisfaction, plaintiff paid defendant P200 on account and agreed to pay the balance of P525 in two installments by signing two promissory notes and a mortgage deed. The court rendered the judgment absolving the defendant O. Mitsumine from the complaint, decreeing that the mortgage executed by the plaintiff Leocadio Joaquin to the defendant was valid, and ordering the plaintiff to pay to the defendant the sum of P525, plus P105 for the expenses of collection. Issue: Whether or not Leocadio Joaquin is liable for the two promissory notes and a mortgage deed executed in favor of O. Mitsumine for the purchase of a machine for the manufacture of Aerated Water? Held: The Court held that Leocadio Joaquin is liable for the two promissory notes and a mortgage deed executed in favor of O. Mitsumine as the record shows it to have been duly proven that on April 15, 1914, he signed and forwarded to the commercial establishment of the defendant, Mitsumine, named the Nippon Bazar, which was an order to procure a complete machine for the manufacture of aerated waters.


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The foregoing facts lead to the inevitable conclusion that the only person obliged to pay to the defendant the price of the machine imported from Japan is the plaintiff, for the reason that it was he who ordered and contracted for it. If, after a perfect and binding contract has been executed between the parties it occurs to one of them to allege some defect therein as a reason for annulling it, the alleged defect must be conclusively proven, since the validity and fulfillment of contracts can not be left to the will of one of the contracting parties.

Encarnacion v. Baldomar 77 Phil. 873 Facts: Vicente Singson Encarnacion, owner of the house, leased his house to Jacinta Baldomar and her son, Lefrado Fernando, for a month-to-month basis of monthly rental. After WWII, plaintiff notified the defendants to vacate the house above-mentioned on or before April 15, 1945, because plaintiff needed it for his offices as a result of the destruction of the building where said plaintiff had his offices. Defendants, however, refused to leave and insisted on continuing their occupancy. This caused the plaintiff to file an action before the Municipal Court of Manila which rendered a decision stating that there will be restitution and payment of rentals by the defendants from May 1, 1945, until they have completely vacated the house. Hence, an appeal by the defendants who contend that the contract authorized them to continue occupying indefinitely and as long as they pay the rentals. Issue: Whether or not the defendants’ contention id correct. Held: Judgment of the Municipal Court is affirmed. According to Article 1256 of the Civil Code (Now Art. 1308 of the New Civil Code), “the contracts must bind both contracting parties; its validity or compliance cannot be left to the will of one of them.” The aforesaid article, therefore, does not allow instances wherein the fulfillment of a contract would depend solely or exclusively upon one of the parties’ free and uncontrolled choice.

Taylor v. Piao and Liuan 43 Phil. 873 Facts: On December 12, 1918, the plaintiff contracted his services to Tan Liuan and Co., as superintendent of an oil factory which the latter contemplated establishing within the city. Among the stipulations inserted in the contract states that should the machinery to be installed in the said factory fail, for any reason, to arrive in the city of Manila within the period of six months within the period of six months from the date hereof, this contract may be cancelled by the party of the second part of its option, such cancellation, however, not to occur before the expiration of such six months. The machinery above-referred to did not arrive at the City of Manila within six months succeeding the making of the contract; nor was other equipment necessary for the establishment of the factory at any time provided by defendants. The defendants communicated in writing to the plaintiff that they decided to rescind the contract, effective June 30th then current, upon which date the latter was discharged. The plaintiff, then, instituted an action against the defendants based on Articles 1256 and Civil Law – Obligations and Contracts

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1119 of the Civil Code (Now Articles 1308 and 1186 of the New Civil Code). The lower court, however, rendered a decision against the plaintiff. Hence, an appeal. Issue: Whether or not in a contract for the prestation of service it is lawful for the parties to insert a provision giving to the employer the power to cancel the contract in a contingency which may be dominated by himself. Held: The judgment appealed from is modified and thus, affirmed. To restrict the words “for any reason,” as used in the contract, to mean “for any reason not having its origin in the will or acts of the defendants,’ would constitute an unjustifiable invasion of the power of the parties to establish the terms which they deem advisable, a right which is expressed in the Article 1255 of the Civil Code (Now Article 1306 of NCC). Contingency, thus, is lawfully within the control of the obligor-defendant. Furthermore, Articles 1115 and 1113 of the Civil Code (Now Articles 1182 and 1179 of NCC) provide that a condition at once facultative and resolutory may be valid even though the condition is made to depend upon the will of the obligor.

Article 1311 Mojica v. Fernandez 9 Phil. 403 Facts: Benito Mojica sold to Pedro Sanchez, three pieces of real estate, situated in the province of Bulacan and in Manila, for the sum of P15, 000.00. The sale was made con pacto de retro (with a condition as to repurchase) within a period of four years. However, the right of repurchase of Mojica expired without his having exercised this right. Thereafter, Sanchez made the necessary nota de consolidacion (consolidating entry) in the proper registries, and thus appears upon the land records as the absolute owner of the property in question. Sanchez and Mojica entered into a new agreement in writing in a private document whereby Sanchez leased the said real estate to Mojica for a period of ten years, for the sum of P1, 800 per annum, being the interest at 12 percent per annum on the sum of P15, 000, payable in installments of P150 monthly, and agreed that Mojica was to have the right of repurchase for the sum of P15, 000 at the expiration of the said period of ten years. However, Sanchez died, and Mojica continued to pay the rent to the widow of the former who became the administratix of Sanchez. The defendant administratix understood to increase the monthly rental to P350 per month and refused to receive P150 as therefore paid, although that amount was duly tendered. Hence, an action was brought up by Mojica praying that the fictitious alleged sale be considered as loan and that the private rental contract of the said land be registered as a public document. The trial court held in favor of plaintiff Mojica on the basis of Article 1280 of the Civil Code (Now article 1358 of the NCC) which states that contracts of rentals of real estate for a period of six or more years, when said contracts are to the prejudice of third persons, must be executed in public documents.


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Issue: Whether or not the defendant, being the spouse of the deceased Sanchez, can be considered as a third person. Held: The judgment of the trial court is reversed. Under Article 27 of the Mortgage Law, a third person is one who has taken part in the act or contract recorded. Under the Civil Code, the heirs, by virtue of the right of succession, are subrogated to all the rights and obligations of the deceased and cannot be regarded as third parties with respect to a contract to which the deceased was a party, touching the estate of the deceased. Other than Article 1280 of the Civil Code, there are no other limitations to the power of Pedro Sanchez, the owner of the estate, to enter into contract of September 1, 1901. Section 335 of the Code of Civil Procedure provides that an agreement for the leasing of real estate for the period longer than one year, or for the sale of the real property or of an interest therein, must be in writing, was not in force at the time when the contract was executed, and in any event, that contract, while not a public document, was in fact, made in writing.

Blossoms and Co. v. Manila Gas Corporation 48 Phil. 848 Facts: A judgment in a mortgage foreclosure proceeding was rendered against petitioner Blossom & Co. ordering the payment of P7, 794.65 to respondent Manila Gas Corporation, with interest thereon at the rate of 8 percent per annum, the judgment within ninety days from the time of notification of said judgment, the mortgage land should be sold by the sheriff at public auction and the proceeds of the sale applied towards the satisfaction of said judgment. Issue: Whether in the event a judgment for the plaintiff in a foreclosure proceeding is affirmed on appeal, the three months stay of execution allowed the defendant by section 256 of the Code of Civil Procedure is to be counted from the date of judgment of the lower court or whether it should be counted from the date of the final determination of the case by the appellate court. Held: Petition is granted. The second paragraph in question relates to the manner of executing the judgment and says nothing about the time. As to the time for the execution, Section144 of the Code Civil Procedure provides that, except by special order of the court, no execution shall issue upon a final judgment until after the period for perfecting a bill of exceptions has expired and that the filing of a bill of exceptions shall of itself stay execution until the final determination of the action, unless for special reasons stated in the bill of exceptions the court shall order the execution be not stayed. The purpose of three months stay of execution is very evidently to give the judgment debtor time and opportunity to make the necessary arrangements for the payment of the debt after it has been definitely determined that the debt is due and must be paid by him. Civil Law – Obligations and Contracts

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The running of said period is suspended during the appeal and as the case cannot be said to be finally determined on appeal while the record remains with the appellate court, it logically follows that the period does not begin to run until the remittitur of the record to the court below.

Araneta vs. Montelibano 14 Phil. 117 Facts: Aniceto Montelibano, on the 13th day of April, 1887, sold to Hermenegildo Araneta, for the sum of P6,000, the land in question, with the right to repurchase the same after a period of four years. Aniceto Montelibano remained in possession of said tract of land as a tenant of the said Araneta, paying the latter one-third of the crops. That Aniceto Montelibano died intestate upon the 20th day of December, 1898, leaving four minor children. Braulio Montelibano was duly appointed tutor. of the minor children of Aniceto Montelibano. Aniceto Montelibano, during his lifetime and within the four years prescribed by the contract, did not repurchase the land in question. The said contract of sale contained a provision that if the said Aniceto Montelibano did not repurchase the property in accordance with its terms, that he should then execute and deliver to Hermenegildo Araneta an absolute deed for the land in question. The original action was commenced by Felix Araneta, administrator of the estate of the said Hermenegildo Araneta. Felix Araneta having died and Agaton Araneta having been appointed as administrator of the said estate, he presented a motion in the Court of First Instance to be substituted as plaintiff in said cause for Felix Araneta, which motion was granted. Braulio Montelibano filed his answer alleging inter alia that the subject piece of land was no longer in his possession and was sold by the said Aniceto Montelibano during the life of the said Hermenegildo Araneta, and with his knowledge and consent, to one Leon Lopez, who was then (May 1, 1907) in possession of the said land. The defendant further alleged that an inventory had been made of the property left by the deceased Aniceto Montelibano, and that the said parcel of land was not included in the said inventory. Issue: Whether or not the court can compel Montelibano to produce the said land and execute the requested document. Held: The court held that all of the heirs of the said Aniceto Montelibano were not made parties in the present action, the judgment of the lower court is hereby revoked and the cause is hereby remanded to the lower court, with permission on the part of the plaintiff to amend his complaint. The plaintiff alleges in his complaint that Aniceto Montelibano died on the 20th of December, 1898, intestate, leaving four minor children, called Bibiana, Maria, Rosario, and Raymundo. In the present action, however, the plaintiff made defendants Braulio Montelibano, as tutor of said minor children, Rosario, Raymundo, and Bibiana. The record does not show why Maria was not made a party defendant. Until the contrary is shown, each of these heirs has an equal interest in the property in question.


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The heirs having succeeded to whatever interest their ancestry had in the land and contract in question, they may, by virtue of articles 1279 and 1280 of the Civil Code, be compelled in a proper action to execute the public instrument required under the contract between their ancestor and Araneta.

Ibanez vs. HSBC 22 Phil. 572 Facts: The plaintiffs are after an action of liquidation against the respondent corporation. The Hongkong and Shanghai Banking Corporation and Aldecoa & Co. entered into a contractual agreement whereby the said bank bound itself to open and maintain in behalf of Aldecoa & Co. a credit in account current up to the sum of P475,000, in accordance with the conditions and securities detailed in an instrument of the said date; that, subsequently, the contracting parties also agreed that, should certain shares of the concern, "The Pasay Estate Co. Ltd.," be declared to belong to Aldecoa & Co., in liquidation, the same should be by the latter turned over to the creditor bank, as security; and that, in view of the fact that the said shares had come into the ownership of Aldecoa & Co., in liquidation, the contracting parties had stipulated that Aldecoa & Co., in liquidation, represented by William Urquhart, should transfer and mortgage to The Hongkong and Shanghai Banking Corporation, as mortgage creditor, the said shares delivered to it for their custody and preservation, which mortgage was executed as an additional security to the said creditor bank for the payment of any sums which Aldecoa & Co. might be found to owe it, by reason of the aforesaid credit in account current or of any other sums which Aldecoa & Co., in liquidation, might owe it; that the creditor bank was authorized to collect and receive all the dividends, bonuses or other distribution of the capital and profits of the said concern, "The Pasay Estate Co. Ltd.," until a total settlement of the said debt should have been made, but that, should the mortgage debtor, its heirs, successors in interest, or administrators pay to the creditor bank all the amount owed, this obligation would thereby become null and void; that the right was reserved to Aldecoa & Co. to sell the said shares, provided that the product of their sale be devoted to the payment of its debt; that The Hongkong and Shanghai Banking Corporation acknowledged receipt of the said shares for their keeping and preservation, and that this instrument was held by the contracting parties to be additional to each and all of those already executed, on account of the debt of Aldecoa & Co., between the latter and The Hongkong and Shanghai Banking Corporation, which instruments were declared to be subsistent and in full force and effect. Before proceeding to examine the agreement referred to and contained in the instrument of August 30, 1907, and to ascertain whether or not it complies with the conditions required by law, or whether it bears vices and defects productive of nullity and such as substantially affect the validity and force of the contract therein stipulated, it becomes necessary to determine whether the plaintiffs, Zoilo, Joaquin, and Cecilia lbañez de Aldecoa, have or have not the personality and rights requisite to enable them to claim the nullification of the aforementioned agreement made and entered into, according to the instrument of August 30, 1907.


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Issue: Whether or not the agreement contained in the instrument executed on August 30, 1907, by and between the liquidator of the firm of Aldecoa & Co. and the manager of The Hongkong and Shanghai Banking Corporation, should be annulled. Held: One who has no interest in a contract has no right of action for nullifying the same, for the interest in a given contract is the determining factor that authorizes the party obligated either principally or subsidiarily to maintain said action. The courts have established that one who is not a party to a contract or who has neither cause nor representation for intervening therein lacks personality and right of action for impugning the validity thereof.

Florentino vs. Encarnacion 79 SCRA 192 Facts: On May 22, 1964, the petitioners-appellants Miguel Florentino, Rosario Encarnacion de Florentino, Manuel Arce, Jose Florentino, Victorino Florentino, Antonio Florentino, Remedios Encarnacion and Severina Encarnacion, and the petitioners-appelleed Salvador Encarnacion, Sr., Salvador Encarnacion, Jr. and Angel Encarnacion filed with the Court of First Instance of Ilocos Sur an application for the registration under Act 496 of a parcel of agricultural land located at Barrio Lubong, Dacquel, Cabugao, Ilocos Sur. After due notice and publication, the Court set the application for hearing. No opposition whatsoever was filed except that of the Director of Lands which was later withdrawn, thereby leaving the application unopposed. Thereupon, an order of general default was issued against the whole world. Upon application of the applicants, the Clerk of Court was commissioned and authorized to receive the evidence of the applicants and ordered to submit the same for the Court's proper resolution. The pivotal point of the case is a stipulation in the contract saying that the church shall benefit from the fruits of the property in question. Issue: Whether or not the stipulation benifiting a third person can be revoked by the parties at will. Held: The stipulation cannot be revoked by any of the stipulators at their own option. This must be so because of Article 1257, Civil Code and the cardinal rule of contracts that it has the force of law between the parties. While a stipulation in favor of a third person has no binding effect in itself before its acceptance by the party favored, the law does not provide when the third person must make his acceptance. As a rule, there is no time limit; such third person has all the time until the stipulation is revoked. Here, We find that the Church accepted the stipulation in its favor before it is sought to be revoked by some of the coowners, namely the petitioners-appellees herein. It is not disputed that from the time of the death of Doña Encarnacion Florentino in 1941, as had always been the case since time immemorial up to a year before the filing of their application in May 1964, the Church had been enjoying the benefits of the stipulation. The enjoyment of benefits flowing therefrom for almost seventeen years without question from any quarters can only be construed as an implied acceptance by the Church of the stipulation pour autrui before its revocation.


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Uy Tam vs. Leonard 30 Phil. 471 Facts: This is an action by a third person upon a bond executed between the individual defendants as obligors and the city of Manila as obligee. The bond was executed in connection with and to secure the performance of a contract entered into by Hosty and Brown, the principals of the bond, for furnishing crushed rock to the city of Manila for one year. The plaintiffs furnished the contractors with certain materials for use in the performance of said contract, having previously notified the defendants of the acceptance of the conditions of the bond relating to laborers ad materialmen. The contract’s contentious stipulation reads, "It is hereby stipulated, that suit on this bond way be brought in the courts of the Philippine Islands for the district in which the said contract is executed; and if at the time of the suit any of the obligors is found therein, service of process as to such obligors may be made by delivering a copy of the same to the clerk of said court, who is hereby appointed agent of the obligors for this purpose." This certain provision benifited the materialmen, a third person in the contract. Issue: Whether or not the stipulation in the contract benifiting the third person is valid. Held: Did the parties to the bond intend to secure the claims of materialmen? Did the city of Manila so demand, and did the sureties so promise? Or did the city only demand and the sureties only promise to secure the city of Manila in damages against such claims? These are the controlling questions upon which depend the plaintiffs' claim that the clause referring to the materialmen, etc., is a stipulation pour autrui. The materialmen and others mentioned in the controverted clause of the bond should have been included as obligees, on the bond had it had been desired to protect their claims thereby. If the contention of the appellants be true that the city had no interest to subserve in inserting the clause in question and if that were the view taken by the city officials, the city must be considered by all hands as a mere nominal obligee as to this clause. It is a rule of practically universal application that there must exist on the part of the original parties to the contract a clear intent to benefit the third party. But in the case at bar, the court ruled that there was no express intention of the parties to benefit third persons. Such a construction might seriously affect the interests of the city of Manila; and it is not to be inferred that the officials of the city would accept the bond which by its very terms might deprive the city of all protection thereunder.

Kauffman vs. Philippine National Bank 42 Phil. 182 Facts: George A. Kauffman, was the president of the Philippine Fiber and Produce Company. On February 5, 1918, the board of directors of said company, declared a dividend of P100,000 from its surplus earnings for the year 1917, of which the plaintiff was entitled to the sum of P98,000. This amount was accordingly placed to his credit on the books of the company, and so remained until in Civil Law – Obligations and Contracts

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October of the same year when an unsuccessful effort was made to transmit the whole, or a greater part thereof, to the plaintiff in New York City. Thereafter, George B. Wicks, treasurer of the said company went to the exchange department of the Philippine National Bank in Manila and requested that a telegraphic transfer of $45,000 should be made to the plaintiff in New York City, upon account of the Philippine Fiber and Produce Company. Upon receiving this telegraphic message, the bank's representative in New York sent a cable message in reply suggesting the advisability of withholding this money from Kauffman, in view of his reluctance to accept certain bills of the Philippine Fiber and Produce Company. The Philippine National Bank acquiesced in this and on October 11 dispatched to its New York agency another message to withhold the Kauffman payment as suggested. Kauffman presented himself at the office of the Philippine National Bank in New York City on October 15, 1918, and demanded the money. By this time, however, the message from the Philippine National Bank of October 11, directing the withholding of payment had been received in New York, and payment was therefore refused. Issue: Whether or not Kauffman is entitled to the amount. Held: The court held that yes, he is entitled to collect from the said bank. This is because in this case, there has been a stipulation pour autrui in the contract. The right of the plaintiff to maintain the present action is clear enough; for it is undeniable that the bank's promise to cause a definite sum of money to be paid to the plaintiff in New York City is a stipulation in his favor within the meaning of the paragraph above quoted; and the circumstances under which that promise was given disclose an evident intention on the part of the contracting parties that the plaintiff should have that money upon demand in New York City. The recognition of this unqualified right in the plaintiff to receive the money implies in our opinion the right in him to maintain an action to recover it; and indeed if the provision in question were not applicable to the facts now before us, it would be difficult to conceive of a case arising under it. A stipulation in favor of a third person cannot be revoked by the obligated party alone, without the conformity of the other contracting party.

Melecio Coquia vs. Fieldman’s Insurance Co., Inc. G. R. No. L-23276 Facts: In December 1, 1961, appellant Fieldman’s Insurance Company issued, in favor of the Manila Yellowcab Co., Inc., a common carrier accident insurance policy, covering the period from December 1, 1961 to December 1, 1962. It was stipulated in said policy that: The Company will, subject to the Limits of Liability and under the Terms of this Policy, indemnify the Insured in the event of accident caused by or arising out of the use of Motor Vehicle against all sums which the Insured will become legally liable to pay in respect of: 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. Civil Law – Obligations and Contracts

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While the policy was in force, or on February 10, 1962, a taxicab of the Insured driven by Carlito Coquia, met a vehicular accident, in consequence of which Carlito died. The Insured made a claim but offer to pay an amount instead by way of compromise but was declined by the claimant. The Company made a counter offer but then again the Company did not accept. Hence, the Insured and Carlito’s parents, referred to here as the Coquias, filed a complaint against the Company to collect the proceeds of the aforementioned policy. In its answer, the Company admitted the existence thereof, but pleaded lack of cause of action on the part of the plaintiffs. After appropriate proceedings, the trial court rendered a decision sentencing the Company to pay to the plaintiffs the sum of P4,000 and the costs. Hence, this appeal by the Company. Issues: The Company which contends that plaintiffs have no cause of action because: 1.

the Coquias have no contractual relation with the Company

2.

the Insured has not complied with the provisions of the policy concerning arbitration

Held: 1. As regards to the first defense, it should be noted that, 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 Article 1311 of the Civil Code of the Philippines, reading: If a contract should contain some stipulation in favor of a third person, he may demand its fulfillment provided he communicated his acceptance to the obligor before its revocation. A mere incidental benefit or interest of a person is not sufficient. The contracting parties mush have clearly and deliberately conferred a favor upon a third person. This is but the restatement of a well known principle concerning contracts pour autrui, the enforcement of which may b e 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? Yes, the policy under consideration is typical of contracts pour autrui, this character being made more manifest by the fact that the deceased driver paid fifty percent of the corresponding premiums, which were deducted form his weekly commissions. Under such conditions, it is clear that 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 by themselves , without the assistance of the Insured, it goes without saying that they could and did properly join the latter in filing the complaint herein. 2.

The second defense set up by the company is based upon Section 17 of the policy, reading:

If any difference or dispute shall arise with respect to the amount of the Company’s liability under this Policy, the same shall be referred to the decision of a single arbitrator to be agreed upon by both parties or failing such agreement of a single arbitrator, to the decision of two arbitrators, one to be appointed in writing by each of the parties within one calendar month after having been required in writing so to do by either of the parties and in case of disagreement between the arbitrators, to the Civil Law – Obligations and Contracts

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decision of an umpire who shall have been appointed in writing by the arbitrators before entering on the reference and the costs of and incident to the reference shall be dealt with in the Award. The record shows, however, that none of the parties to the contract invoked this section, or made any reference to arbitration, during the negotiations preceding the institution of the present case, In fact, counsel for both parties stipulated, in the trial court, that none of them had, at any time during said negotiation, as provided in said section. Their aforementioned acts or omissions had the effect of a waiver of their respective right to demand an arbitration.

Article 1314 Geo W. Daywalt vs. La Corporacion de los Padres Agustinos Recoletos G. R. No. L-13505 Facts: In the year 1902, Teodorica Endencia, an unmarried woman, resident in the province of Mindoro, executed a contract whereby she obligated herself to convey to Geo W. Daywalt, a tract of land situated in the barrio of Mangarin, municipality of Bulalacao, now San Jose. It was agreed that as soon as the title of the land already in the name of Endencia, but the Torrens certificate was not issued until later. The parties made a new contract with a view to carrying their original agreement into effect. This new contract was executed in the form of a deed of conveyance and dated August 16, 1906. The stipulated price was fixed at P4,000 and the area of the land was stated to be 452 hectares and a fraction. The second contract was not immediately carried into effect for the reason that the Torrens certificate was not yet obtainable and was not issued until the expiration of the contract. The parties entered into another contract, superseding the old. The Torrens certificate was in time issued. In view of some development during the proceeding relative to the registration of the land, Endencia became reluctant to transfer the whole tract to the purchaser. This attitude of hers led to litigation in which Daywalt finally succeeded, upon appeal to the Supreme Court, in obtaining a decree of specific performance, and Endencia was ordered to convey the entire tract of land to Daywalt. This decree appears to have become finally effective in the early part of the year 1914. The defendant, La Corporacion de los Recoletos, is a religious corporation, with its domicile in Manila. The same corporation is the owner of another estate adjacent to the land which Endencia had sold to Daywalt and for many years had maintained a large hers of cattle on the farms referred to. Their representative, charged with management of these farms, was Father Isidro Sanz, himself a member of the order. He has long been acquainted with 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. Father Sanz was fully aware of the existence of the contract of 1902 by which Endencia agreed to sell her land to the plaintiff. When the Torrens certificate was finally issued to Endencia, she gave it to the Corporation for safekeeping and was taken to Manila, until the delivery thereof to the plaintiff by reason of the decree of the Supreme Court in 1914. Civil Law – Obligations and Contracts

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When Endecia still retained her possession of the said property Father Sanz entered an arrangement with Endencia to pasture on said land the herds of cattle from June 1, 1900 to May 1, 1914. Under the first cause, the plaintiff seeks to recover from the defendant corporation the sum of P24,000, as damages for the use and occupation of the land in question by reason of the pasturing of the cattle thereon during the period stated. The trial court found that the corporation was liable and fixed the amount to be recovered at P2,497. The plaintiff appealed and insisting that damages should at least P24,000. The court said 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 and it is not clear that the whole of the land was used for pasturage at any time. In the second cause of action, the plaintiff seeks to recover from the defendant corporation a sum of P500,000, as damages, on the ground that the corporation unlawfully induced Endencia to refrain from the performance of her contract of sale of the land and to withhold delivery to the plaintiff of the Torrens title, and further, maliciously and without reasonable cause, maintained her in her defense to the action of specific performance which was finally decided in favor of the plaintiff. The cause of action here stated is based on liability derived from the wrongful interference of the defendant in the performance of the contract between the plaintiff and Endencia. Issues: 1. Whether a person who is not a party to a contract for the sale of land makes himself liable for damages to the vendee, beyond the value for the use and occupation, by colluding with the vendor and maintaining him in the effort to resist an action for specific performance. 2. Whether the damages which the plaintiff seeks to recover under this head are too remote and speculative to be the subject of recovery. Held: 1. Whatever may be the character of the liability which a stranger to a contract may incur by advising or assisting one of the parties to evade performance, there is one proposition upon which all must agree. This is, that the stranger cannot become more extensively liable in damages for the nonperformance of the contract than the party in whose behalf he intermeddles. To hold the stranger liable for damages in excess of those that could be recovered against the immediate party to the contract would lead to results at once grotesque and unjust. In the case at bar, as Endencia was the party directly bound by the contract, it is obvious that the liability of the defendant corporation, even admitting that it has made itself co participant in the breach of the contract, can in no even exceed hers. This leads us to consider at this point the extent of the liability of Endencia to the plaintiff by reason of her failure to surrender the certificate of title and to place the plaintiff in possession. 2. The court have considered the plaintiff’s right chiefly against Endencia, and what has been said suffices in our opinion to demonstrate that the damages laid under the second cause of action in the complaint could not be recovered from her, first, because the damages in question are special damages which were not within the contemplation of the parties when the contract was made, and secondly, because the said damages are too remote to be the subject of recovery. This conclusion is Civil Law – Obligations and Contracts

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also necessarily fatal to the right of the plaintiff to recover such damages from the defendant corporation, for, as already suggested, by advising Endencia not to perform the contract, said corporation could in no event render itself more extensively liable than the principal in the contract.

Article 1315 Avelino Baluran vs. Ricardo Navarro and Antonio Obendencio G. R. No. L-44428 Facts: Spouses Domingo Paraiso and Fidela Paraiso were the owners of a residential lot in Ilocos Norte. On or about February 2, 1964, the Paraisos executed an agreement entitle “BARTER” whereby as a party of the first part they agreed to “barter and exchange” with spouses Avelino and Benilda Baluran their residential lot with the latter’s unirrigated Riceland, without any permanent improvements, under the following conditions: That both the Party of the First Part and the Party of the Second Part shall enjoy the material possession of their respective properties, the Party of the First Part shall reap the fruits of the unirrigated Riceland and the Party of the Second Part shall have a right to build his own house in the residential lot. Nevertheless, in the event any of the children of Natividad Obencio, daughter of the First Part, shall choose to reside in this municipality and build his own house in the residential lot, the Party of the Second Part shall be obliged to return the lot such children with damages to be incurred. That neither the Party of the First Part nor the Party of the Second Part shall encumber, alienate or dispose of in any manner their respective properties as bartered without the consent of the other. That inasmuch as the bartered properties are not yet accordance with Act No. 496 or under the Spanish Mortgage Law, they finally agreed and covenant that this deed be registered in the Office of the Register of Deeds of Ilocos Norte pursuant to the provisions of Act No. 3344. On May 6, 1975 Antonio Obendencio filed with the Court of First Instance of Ilocos Norte the present complaint to recover the above-mentioned residential lot having acquired the same from his mother, Natividad Obedencio and that he needed the property for Purposes of constructing his house thereon inasmuch as he had taken residence in his native town. Answering the complaint, Baluran alleged inter alia 1) that the barter agreement transferred to him the ownership of the residential lot in exchange for the unirrigated riceland conveyed to the plaintiff’s predecessor in interest, Natividad Obedencio, who in fact is still on thereof and 2) that the plaintiff’s cause of action if any had prescribed. Decision was rendered, the plaintiff is hereby declared owner of the question, the defendant is hereby ordered to vacate the same with costs against the defendant. Baluran now seeks a review of that decision .


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Issues: 1. Whether or not the lower court erred in holding that the barter agreement did not transfer ownership of the lot in suit to the petitioner. 2. Whether or not the lower court erred in not holding that the right to re-barter or re-exchange by the statute of limitation. Held: 1. NO. The stipulations in said document are clear enough to indicate that there was no intention at all on the part of the signatories thereto to convey the ownership of their respective properties, all that was intended, and it was so provided in the agreement, the parties retained the right to alienate their respective properties which right is an element of ownership. When there is nothing contrary to law, morals and good customs or public policy in the stipulations of a contract, the agreement constitutes the law between the parties and the latter is bound by the terms thereof. Article 1306 of the Civil Code states: Art. 1306. The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided there are not contrary to law, morals, good customs, public policy or public order. Contracts which are the private laws of the contracting parties, should be fulfilled according to the literal sense of their stipulations, if their terms are clear and leave no room for doubt as to the intention of the contracting parties, for contracts are obligatory, no matter what their form may be, whatever the essential requisites for their validity are present. The trial court therefore correctly adjudged that Antonio Obedencio is entitled to recover the possession of the residential lot pursuant to the agreement of February 2, 1964 2. NO. Petitioner submits under the second assigned error that the causa, of action if any of respondent Obedencio had prescribed after the lapse of four years form the date of execution of the document of Febuary 2, 1964. It is argued that the remedy of plaintiff, now respondent, was to ask for re-barter or re-exchange of the properties subject of the agreement which could be exercised only within four years from the date of the contract under Art. 1606 of the Civil Code. The submission of petitioner is untenable. Article 1606 of the civil code refers to conventional redemption which petitioner would want to apply to the present situation. However, as we stated above, the agreement of the parties of February 2, 1964, is not one of barter, exchange or even sale with right to repurchase, but is none of or akin the other is the use or material ion or enjoyment of each other’s property. Wherefore, judgment is hereby rendered: 1) declaring the petitioner Avelino Baluran and respondent Antonio Obedencio the respective owners the unirrigated riceland and residential lot mentioned in the “Barter Agreement”, 2) ordering Baluran to vacate the residential lot and remove improvements built by thereon, provided, however, that he shall not be compelled to do so unless the unirrigated riceland shall five been restored to his possession either on volition of the party concerned or through judicial proceedings which he may institute for the purpose. Civil Law – Obligations and Contracts

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Article 1317 Badillo vs. Ferrer 152 SCRA 407 Facts: Macario Badillo died interstate in 1966, survived by his widow, Clarita Ferrer, and five minor children. He left a property valued at P7,500. In 1967, the surviving widow, in her own behalf and as a natural guardian of the minor plaintiffs, executed a Deed of Extrajudicial Partition and Sale of the Property to defendants-appellants, the spouses Gregorio Soromero and Eleuteria Rana. In 1968, Modesta Badillo, sister of Marcario, was able to obtain guardianship over the persons and properties of the minors- plaintiffs, without personal notice to their mother, who was alleged, could not be located inspite of the efforts exerted. In 1970, their guardian caused the minor plaintiffs to file a complaint for the annulment of the sale of their participation in the property to defendants-appellants and conceding the validity of the sale of the window’s participation in the property, they asked that, as co owners, they be allowed to exercise the right of legal redemption. The lower court promulgated the appealed judgment annulling the sale to defendants-appellants of the minor plaintiffs’ participation in the property, and allowing them to redeem the sold participation of their mother. The defendants-appellants appealed. Issues: 1. The court erred in finding that the period of thirty days provided for by Article 1623 of the New Civil Code for the plaintiffs to redeem the share of their mother in the property subject of their co-ownership sold by the latter to defendants has not yet elapsed. 2. The court erred in declaring the sale by Clarita Ferrer Badillo of the 5/12 share of his children on the property involved to defendants as null and void and relative thereto the court consequently erred in its failure to order plaintiffs minors to return to defendants the purchase price as well as the value of the improvements made by the defendants on the property. 3. The court erred in ordering the defendants to re-sell to plaintiffs the remaining 7/12 portion of the property in question in the amount of P4,375.00. Held: 1. When Clarita Ferrer Badillo signed and received on January 18, 1967, her copy of the Deed of Extrajudicial Partition and Sale, the document evidencing the transfer of the property in question to the appellants, she also in effect received the notice in writing required by Article 1623 in behalf of her children. Thus, the period of redemption began to toll from the time of that receipt. Since the required written notice was served on January 18, 1967 and the offer to redeem was only made after November 11, 1968, the legal redemption had already expired and the appellants cannot now be ordered to reconvey to the appellees that portion of the undivided property which originally belonged to Clarita Ferrer Badillo.


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2. The Deed of Extrajudicial Partition and Sale is not voidable or an annullable contract under Article 1390 of the New Civil Code. Article 1390 renders a contract voidable if one of the parties is incapable of giving consent to the contract or if the contracting party’s consent is vitiated by mistake, violence, intimidation, undue influence or fraud. In this case, however, the appellee minors are not even parties to the contract involved. Their names were merely dragged into the contract by their mother who claimed a right to represent them, purportedly in accordance with Article 320 of the New Civil Code. The Deed of Extrajudicial Partition and Sale is an enforceable or more specifically, an unauthorized contract under Article 1403(1) and 1317 of the New Civil Code. Clearly, Clarita Ferrer Badillo has no authority or has acted beyond her powers in conveying to the appellants that 5/12 undivided share of her minor children in the property involved in this case. The powers given to her by the laws as the natural guardian covers only matters of administration and cannot include the power of disposition. The appellee minors never ratified this Deed of Extrajudicial Partition and Sale. Hence, the contract remained unenforceable or unauthorized. No restitution may be ordered from the appellee minors either as to that portion of the purchase price which pertains to their share in the property or at least as to that portion which benefited them because the law does not sanction any. 3. The third error assigned need not be discussed further because of the pronouncement on the first assignment of error has rendered it academic, Suffice it to state that since the 30 day period for redemption had already lapsed, the appellants cannot be ordered to re-sell to the appellees the remaining 7/12 protion of the property in question.

Petronila Tacalinar vs. Lorenzo Corro y Manalili G. R. No 11040 Facts: Leoncio Alfon y Visitacion is the year 1895, was the exclusive owner of the Santo Nino Hacienda. This hacienda finally fell into the hands of Lorenzo Corro in 1898, by virtue of what according to the plaintiffs was a contract of lease, or according to the record found, it was a deed of sale executed in favor of the said Corro on February 18, 1898. He sold the property to Juan Perez y Gonzales for the sum of P3,500, as attested by the certified copy of the notarial instrument issued by the clerk of the Court of Land Registration. It is to be noted that before Juan Perez purchased the hacienda, and that as a result of the negotiations undertaken by Ferrer to convey the said estate, he arranged for its sale, on May 27, 1911, to Juan Perez Gonzales for the sum of P5,000, payable in the installments agreed upon in the deed of sale. The purchaser Gonzales had paid to the plaintiff-vendors P500 on account, saying that he had contracted for the purchase of the hacienda with the plaintiff’s attorney in fact as the latter had assured him that Corro had absolutely no rights in the said hacienda, but that, having subsequently discovered that the true owner of the estate was Corro, Gonzales discontinued making the partial payments agreed upon and renounced the payments he had already made in favor of the plaintiffs and even made them a present of P1,000 in addition because he was their relative. When Gonzales filed an application in the court of Land Registration for the registration of the hacienda had had purchased, his application was opposed by the widow and children of Alfon and the said court, by Civil Law – Obligations and Contracts

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decree of June 18, 1913, dismissed the proceedings for registration brought by Gonzales, until a final determination of the suit that the objecting heirs of Alfon might file against the applicat Perez in the Court of First Instance. It was for this reason these proceeding were commenced. The plaintiffs claim that the said hacienda was merely leased to Corro for P1,500 per annum for the period of five years, and that it was in no manner sold to the lessee. The hacienda was possessed by Corro as lessee only and this fact was also set forth by the plaintiffs in the power of attorney executed in behalf of Ferrer on April 24, 1911 and that the lessee had ceased to pay the rentals agreed upon. However, the defendant and his wife in their depositions made before a notary state that they acquired the said hacienda by purchase from the plaintiffs, Asuncion and Rufo Alfon, children of Leoncio Alfon, who assured the purchasers, the deponents, that their father had already died and even showed them a death certificate, that the deponents would not have decided to make the purchase, were it not that the said Asuncion and Rufo had also showed them a letter dated January 9, 1898 and signed by their mother, ordering them to sell the hacienda and instructing them to giver the preference to Corro and that by reason of the statements of these plaintiffs to the effect that their father had died on December 28, 1896, ant that they were authorized by their mother Tacalinar, widow of Leoncio, to sell the hacienda , the deponents executed the contract of purchase it on February 18,1918, for the sum of P3,500 of which amount they had a different occasions paid the sums of P530 and P1,470, that it was stipulated that the purchasers should give a promissory note for the balance of P1,500. This contract is subscribed by Asuncion and Rufo Alfon, with two witnesses. In compliance with one of the conditions of the sale, the purchaser, Corro, on February 22, 1898, executed a promissory note for the sum of P1,500 in favor of Tacalinar, widow of the deceased Alfon, in “consideration of the purchase made on the 18th of the present month and year, of the hacienda in the sum of P3,500.” It afterwards turned out that Leoncio Alfon, the owner of the hacienda, did not die until November 1912. The promissory note of P1,500 was collected in two installments by Leoncio Alfon, who was supposed to be dead. It was subsequently learned that the said promissory note had been given in partial payment of the purchase of the hacienda. Issue: Whether the contract executed in 1898 between Asuncion Alfon, daughter of former owners of the hacienda is question, and Lorenzo Corro, by virtue of which contract of lease, or whether on the contrary, as the defendants allege, it was a contract of absolute sale of the said hacienda to Corro. Held: Even if Leoncio Alfon had not known of or consented to the sale of the Hacienda at the time it was affected on February 18, 1989, yet the subsequent knowledge that he had of that sale and the two collections that he made on account of the promissory note of P1,500, a part of the price, are acts which show that he had afterwards confirmed and approved the said conveyance of his property, the more so because he had in his possession, had information and knowledge of, the consideration


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which give rise to the execution of the said promissory note for P1,500 and he only parted with the note by returning it to Lorenzo Corro after he had received the total sum it called for. Although Leoncio Alfon, the owner of the hacienda, may not have authorized any one, not even his wife and children, to sell his property, yet after he was informed of the said conveyance, if instead of demanding its annulment he proceeded to collect in installments the amount of the promissory note for P1,500, thus ratifying and approving the said sale, his action necessarily implies that he waived his right of action to avoid the contract, and consequently, it also implies the tacit, if not express, confirmation of the said sale effected by two of his children by his wife’s order. The supreme court of Spain, in applying the provisions of article 1259 of the Civil Code in a decision rendered on appeal on May 7, 1897, announced the following legal doctrines: The ratification or confirmation of a contract by the person in whose name the contract was made by a third party who had no authority therefore, validates the act from the moment of its celebration, not merely from the time of its confirmation, for the confirmation operates upon or applies to the act already performed. Furthermore, article 1313 of the Civil Code says: Confirmation purges the contract of all defects which it may have contained from the moment of its execution. Therefore, although there may have been some defects in the contract of sale, by virtue of which the defendants Corro and Samorro acquired the Hacienda, the subsequent approval made by its owner Leoncio Alfon purged the contract of such defect.

Gutierrez Hermanos vs. Orense 28 Phil 571 Facts: On March 5, 1913, counsel for Gutierrez Hermanos filed a complaint, afterwards amended, in the Court of First Instance of Albay against Engacio Orense, in which he set forth that on and before February 14, 1907, the defendant Orense had been the owner of a parcel of land, with the buildings and improvements thereon, situated in the pueblo of Guinobatan, Albay, the location, area and boundaries of which were specified in the complaint; that the said property has up to date been recorded in the new property registry in the name of the said Orense, according to certificate No. 5, with the boundaries therein given; that, on February 14, 1907, Jose Duran, a nephew of the defendant, with the latter's knowledge and consent, executed before a notary a public instrument whereby he sold and conveyed to the plaintiff company, for P1,500, the aforementioned property, the vendor Duran reserving to himself the right to repurchase it for the same price within a period of four years from the date of the said instrument; that the plaintiff company had not entered into possession of the purchased property, owing to its continued occupancy by the defendant and his nephew, Jose Duran, by virtue of a contract of lease executed by the plaintiff to Duran, which contract was in force up to February 14, 1911; that the said instrument of sale of the property, executed by Jose Duran, was publicly and freely confirmed and ratified by the defendant Orense; that, in order to perfect the title to the said property, but that the defendant Orense refused to do so, without any justifiable cause Civil Law – Obligations and Contracts

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or reason, wherefore he should be compelled to execute the said deed by an express order of the court, for Jose Duran is notoriously insolvent and cannot reimburse the plaintiff company for the price of the sale which he received, nor pay any sum whatever for the losses and damages occasioned by the said sale, aside from the fact that the plaintiff had suffered damage by losing the present value of the property, which was worth P3,000; that, unless such deed of final conveyance were executed in behalf of the plaintiff company, it would be injured by the fraud perpetrated by the vendor, Duran, in connivance with the defendant; that the latter had been occupying the said property since February 14, 1911, and refused to pay the rental thereof, notwithstanding the demand made upon him for its payment at the rate of P30 per month, the just and reasonable value for the occupancy of the said property, the possession of which the defendant likewise refused to deliver to the plaintiff company, in spite of the continuous demands made upon him, the defendant, with bad faith and to the prejudice of the firm of Gutierrez Hermanos, claiming to have rights of ownership and possession in the said property. Therefore it was prayed that judgment be rendered by holding that the land and improvements in question belong legitimately and exclusively to the plaintiff, and ordering the defendant to execute in the plaintiff's behalf the said instrument of transfer and conveyance of the property and of all the right, interest, title and share which the defendant has therein; that the defendant be sentenced to pay P30 per month for damages and rental of the property from February 14, 1911, and that, in case these remedies were not granted to the plaintiff, the defendant be sentenced to pay to it the sum of P3,000 as damages, together with interest thereon since the date of the institution of this suit, and to pay the costs and other legal expenses. Issues: 1. Whether or not the contract was perfected. 2. Whether or not the contract entered by third person is valid. Held: Article 1259 of the Civil Code prescribes: "No one can contract in the name of another without being authorized by him or without his legal representation according to law. A contract executed in the name of another by one who has neither his authorization nor legal representation shall be void, unless it should be ratified by the person in whose name it was executed before being revoked by the other contracting party. The sworn statement made by the defendant, Orense, while testifying as a witness at the trial of Duran for estafa, virtually confirms and ratifies the sale of his property effected by his nephew, Duran, and, pursuant to article 1313 of the Civil Code, remedies all defects which the contract may have contained from the moment of its execution. The sale of the said property made by Duran to Gutierrez Hermanos was indeed null and void in the beginning, but afterwards became perfectly valid and cured of the defect of nullity it bore at its execution by the confirmation solemnly made by the said owner upon his stating under oath to the judge that he himself consented to his nephew Jose Duran's making the said sale. Moreover, pursuant to article 1309 of the Code, the right of action for nullification that could have been brought became legally extinguished from the moment the contract was validly confirmed and ratified, and, in the


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present case, it is unquestionable that the defendant did confirm the said contract of sale and consent to its execution. On the testimony given by Engacio Orense at the trial of Duran for estafa, the latter was acquitted, and it would not be just that the said testimony, expressive of his consent to the sale of his property, which determined the acquittal of his nephew, Jose Duran, who then acted as his business manager, and which testimony wiped out the deception that in the beginning appeared to have been practiced by the said Duran, should not now serve in passing upon the conduct of Engracio Orense in relation to the firm of Gutierrez Hermanos in order to prove his consent to the sale of his property, for, had it not been for the consent admitted by the defendant Orense, the plaintiff would have been the victim of estafa. If the defendant Orense acknowledged and admitted under oath that he had consented to Jose Duran's selling the property in litigation to Gutierrez Hermanos, it is not just nor is it permissible for him afterward to deny that admission, to the prejudice of the purchaser, who gave P1,500 for the said property. he repeated and successive statements made by the defendant Orense in two actions, wherein he affirmed that he had given his consent to the sale of his property, meet the requirements of the law and legally excuse the lack of written authority, and, as they are a full ratification of the acts executed by his nephew Jose Duran, they produce the effects of an express power of agency. The judgment appealed from in harmony with the law and the merits of the case, and the errors assigned thereto have been duly refuted by the foregoing considerations, so it should be affirmed.

Article 1318 Lim vs. Sun Life Insurance 41 Phil. 263 Facts: On July 6, 1917, Luis Lim y Garcia of Zamboanga made application to the Sun Life Assurance Company of Canada for a policy of insurance on his life in the sum of P5,000. In his application Lim designated his wife, Pilar C. de Lim, the plaintiff herein, as the beneficiary. The first premium of P433 was paid by Lim, and upon such payment the company issued what was called a “provisional policy.”.should the the company not issue the said policythen this agreement should be null and void.A period of 4 months from the date of the application was also stated The instant action is brought by the beneficiary, Pilar C. de Lim, to recover from the Sun Life Assurance Company of Canada the sum of P5,000, the amount named in the provisional policy. Luis Lim y Garcia however died on August 23, 1917, after the issuance of the provisional policy but before approval of the application by the home office of the insurance company. Issue: Whether or not the contract has been perfected Held: Our duty in this case is to ascertain the correct meaning of the document above quoted. A perusal of the same many times by the writer and by other members of the court leaves a decided impression of vagueness in the mind. Apparently it is to be a provisional policy “for four months only from the date of this application.” We use the term “apparently” advisedly, because immediately following the words fixing the four months period comes the word “provided” which Civil Law – Obligations and Contracts

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has the meaning of “if.” Otherwise stated, the policy for four months is expressly made subjected to the affirmative condition that “the company shall confirm this agreement by issuing a policy on said application when the same shall be submitted to the head office in Montreal.” To 97einforce the same there follows the negative condition. It is of course a primary rule that a contract of insurance, like other contracts, must be assented to by both parties either in person or by their agents. So long as an application for insurance has not been either accepted or rejected, it is merely an offer or proposal to make a contract. The contract, to be binding from the date of the application, must have been a completed contract, one that leaves nothing to be done, nothing to be completed, nothing to be passed upon, or determined, before it shall take effect. There can be no contract of insurance unless the minds of the parties have met in agreement. Our view is, that a contract of insurance was not here consummated by the parties.

Article 1319 Zayco vs. Serra 44 Phil. 326 Facts: On November 7, 1918, the plaintiff, Lorenzo Zayco, and the defendant, Salvador Serra, entered into a contract On June 28, 1919, the plaintiff, Lorenzo Zayco, through his attorney, wrote a letter (Exhibit A) to the defendant, Salvador Serra, accepting the foregoing contract and placing at his disposal a cash order of the Bank of the Philippine Islands of Iloilo in the amount of P100,000, in part payment of the price of the Palma Central and Estate. In this letter, notice was also given to Serra that the Philippine National Bank agreed to transfer his long term loan of P600,000, to the account of Zayco and to hold the latter responsible for all the amounts had and received on account of this loan, Serra to be completely relieved from all responsibility arising therefrom. Offer was further made in this letter to give the bond required by the contract of November 7, 1918, to secure the payment of the balance of the price of the Palma Central and Estate. The letter ended with a demand by Zayco on Serra to execute the deed of sale. Serra had knowledge of this letter on June 30, 1919, as may be inferred from his answer bearing that date (Exhibit C). On the following 15th of July, Serra wrote to Zayco's attorney, stating that the option contract of November 7, 1918, was cancelled and annulled. On the same day, June 30, 1919, Zayco brought suit against Serra to compel him to execute the deed of sale and conveyance of the Palma Central and Estate and to pay, in addition, P500,000 as damages. he defendant filed his answer on February 27, 1920, containing a general and specific denial of all and each of the allegations of the complaint and a special defense consisting in that the contract of November 7, 1918, did not specify a sufficient consideration on the part of the plaintiff Zayco. On March 19, 1920, the plaintiff filed a supplemental complaint in which Philip Whitaker, Venancio Concepcion, and Eusebio R. de Luzuriaga were included as defendants, and it was alleged that, without the knowledge of the plaintiff Zayco, the defendant Serra sold the Palma Central and Estate to said Messrs. Philip Whitaker, Venancio Concepcion, and Eusebio R. de Luzuriaga on January 29, Civil Law – Obligations and Contracts

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1920, for the sum of P1,500,000 on the terms and conditions specified in said contract. It is prayed in this complaint that, at all events, the plaintiff Zayco be declared entitled to purchase from the defendant, Serra, the Palma Central and Estate on the same terms and conditions as those of the sale to Messrs. Whitaker, Concepcion, and Luzuriaga. Later Mr. Eusebio R. de Luzuriaga was excluded from this complaint. The plaintiff Zayco having assigned his rights to Dionisio Inza and Severino Lizarraga, these parties were admitted to intervene as plaintiffs. The cause having been tried, the court below rendered judgment absolving the defendants from the complaint. By the terms of the contract of November 7, 1918, Zayco was granted the right: (a) To purchase the Palma Central and Estate until June 30, 1919, and (b) have preference, after that date, over any other purchaser making the same terms. The court below holds that this contract of November 7, 1918, has no consideration and is, for this reason, null and void. This conclusion, however, is not supported by the evidence. Issues: 1. WON the contract executed on November 7 is null and void. 2. WON the contract was perfected Held: It should be noted that, according to the terms of the offer, in case the total of the agreed price of P1,000,000 could not be paid in cash, the balance was to be paid within a period not exceeding three years. This means that a part of this price was to be paid in cash. But the amount of this first payment was not determined. Consequently, when Zayco accepted the offer, tendering the sum of P100,000 as first payment, his acceptance involved a proposal, not contained in the offer, that this precisely, and not any other, should be the amount of the first payment. This proposal, in turn, required acceptance on the part of Serra. For this reason, Zayco's acceptance did not imply conformity with the offer of Serra, but only when the latter shall, in turn, have accepted his proposal that the amount to be paid in cash was P100,000. Not only was this not accepted by Serra, but Serra cancelled his offer on July 15, 1919. An attempt was made to prove the allegation contained in the last amended complaint to the effect that subsequent to the execution of the contract November 7, 1918, Zayco and Serra agreed, as a suppletory stipulation, that the amount of the first payment to be made in cash should be P100,000. It is said that this stipulation is contained in a letter sent by Serra to Zayco. This letter, however, was not introduced in evidence, but was alleged to have been lost, and secondary evidence of its contents was presented which consisted in the testimonies of Zayco, his son, Rafael, and Antonio Velez. Upon examination of the testimony of these witnesses, the same is found so uncertain and contradictory on many points affecting their veracity as not to be considered sufficient to prove either the loss of the alleged letter, or its existence and contents. Moreover, it is strange, if that stipulation ever existed, that Zayco, in accepting the offer, not only agreed to pay P100,000 in cash, but agreed also, as part of his acceptance, to assume Serra's obligations in connection with the credit of P600,000 given him by the National Bank. It is stranger still that this stipulation, being so important a part of the contract, was not alleged in the original complaint, and notwithstanding that Civil Law – Obligations and Contracts

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in the demurrer to this complaint attention was called to the fact that this stipulation was lacking, this allegation was not made in the two successive amended complaints but only in the fourth, after the court had sustained the demurrer filed on this ground. Our conclusion is that the acceptance made by Zayco of Serra's offer was not sufficient to give life to a contract and is no ground for compelling Serra to execute the sale offered. As to plaintiff's claim that they have preference over the defendants, Messrs. Venancio Concepcion and Phil. C. Whitaker in the purchase of the Palma Central, two members of this court and the writer of this opinion believe that the plaintiffs are entitled to this preference, but the majority of the court hold otherwise, for the reason that the plaintiffs have not formally offered to repay the defendant Concepcion and Whitaker incurred under the contract

Montinola vs. Victorias Milling Co. 54 Phil. 782 Facts: The Victoria’s Milling Co., operating a sugar central organized a contest for the most efficient production of sugar. Herein plaintiff, Montinola was the owner of four plantations. Before the awarding of winners, the manager of sugar central upon discovery of irregularities in the train reports covering cane deliveries from the plantation of plaintiff Montinola directed the chemist, Carlos Locsin to make an investigation. The result of the investigation lead to the decision of management that plaintiff be disqualified. The said decision disregarded the suggestion of the chemist that instead of disqualifying they may consider as one view of the fact that the said plantation were contagious to each other. Being disqualified, the plaintiff brought the action to the court. Issue: Whether or not the party committed fraud upon disqualifying herein plaintiff due to irregularities mentioned thereof. Held: No, there was no fraud, bad faith or misinterpretation on the final due to the fact that the cane from two or more plantations was in part commingled and such plantations were consequently barred from the entry into the final contest and from the participation by the owner in the distribution of the rewards.

Beaumont vs. Prieto 41 Phil. 670 Facts: Nagtajan Hacienda, and that Benito Valdes was his attorney in fact and had acted as such on the occasions reffered to in the complaint by virtue of a power of attorney duly executed under notarial seal and presented in the office of the register of deeds, a copy of which, marked as Exhibit A, was attached to the complaint; that on or above December 4, 1911, the defendant Benito Valdez gave to the plaintiff. The plaintiff in writing accepted the terms of said offer and requested of Valdes to be allowed to inspect the property, titles and other documents pertaining to the property, and offered to pay to the defendant, immediately and in cash as soon as a reasonable examination could be made of said property titles and other documents, the price stipulated in the contract for said hacienda which is also described in the complaint, as well as its value and the revenue annually Civil Law – Obligations and Contracts

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obtainable therefrom; that, in spite of the frequent demands made by the plaintiff, the defendants ha persistently refused to deliver to him the property titles and other documents relative to said property and to execute any instrument of conveyance thereof in his favor; that the plaintiff, on account of said refusal on the part of the defendant Valdes, based on instructions from the defendant Legarda, had suffered damages in the amount of P760,000, and, by the tardiness, failure and refusal of the defend to comply with his obligation, the plaintiff had incurred great expense and suffered great losses, whereby he was prejudiced in the mount of P80,000; that the plaintiff was and had been, on all occasions, willing to comply with the obligation imposed upon him to pay to the defendants the full stipulated price. Issue: Whether or not the offer of sale of the Nagtajan Hacienda, granted by letter of December 4, 1911, Exhibit E constitute a perfect contract and there can be obligation demandable in law by virtue of the stipulations contained in said document. Held: No. The letter of December 4, 1911, Exhibit E, contained, as aforesaid, an offer of sale or a proposal of sale on the partof the defendant Valdes to the plaintiff Borck, of the Nagtajan Hacienda, for the assessed valuation of the same, effective during the period of three months counting from the said date. Such proposal or offer was an expression of the will only of the defendant Valdes, manifested to the plaintiff Borck. In order that such a proposal might have the force of a contract, it was necessary that the plaintiff Borck's will should have been expressed in harmony with all the terms of the said proposal. Consent is shown by the concurrence of the offer and the acceptance of the thing and the cause which are to constitute the contract. (Art. 1262, Civil Code.) There is no contract unless, among other requisites, there is consent of the contracting parties. (Art. 1261, par. 1, of the same code.) Contracts are perfected by mere consent, and from that time they are binding, not only with regard to the fulfillment of what has been expressly stipulated, but also with regard to all the consequences which, according to their character, are in accordance with good faith, use, and law. (Art. 1258, Civil Code.) As the offer of sale of the Nagtajan Hacienda, made by Valdes to Borck, or the option of purchase thereof granted by the former to the latter by the letter of December 4, 1911, Exhibit E, did not constitute a perfect contract and, consequently, was not binding upon the defendants Valdes and Legarda or the plaintiff Borck, by reason of the lack of the mutual assent of the parties concerned therein, which is wholly in accordance with the terms of the said offer, there can be no obligation demandable in law by virtue of the stipulations contained in said document, and the action prosecuted by the plaintiff for that purpose in these proceedings in improper. For the foregoing reasons the judgment appealed from is reversed and we absolve the defendants from the complaint. The costs of the first instance shall be imposed upon the plaintiff.

Francisco vs. GSIS 117 Phil. 586


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Facts: Plaintiff, Trinidad Francisco in consideration of a loan in the amount of 400,000.00 out of which the sum of 336,000.00 was released to her, mortgaged in favor of the defendant GSIS a parcel of land payable with in ten years in monthly installments and with the interest compounded monthly. The system extra judicially foreclosed the mortgage on the ground that up to that date the plaintiffmortgagor was in arrears on her monthly installments. The system itself was the buyer of the property in the foreclosure sale. The plaintiff’s father Atty. Vicente Francisco sent a letter to the general manager of the defendant corporation requesting re redemption of foreclosed property of her daughter. The defendant received the amount of 30,000.00 and issued therefore a receipt in accordance with the letter of plaintiff’s father. However respondent sent a copy of letter to plaintiff asking for the payment of her indebtedness since according to them the one year period of redemption has expired. Plaintiff’s father sent a letter in reply, protesting against the system’s request. According to the defendant, the remittances previously made by plaintiff’s father were not sufficient. Hence, the plaintiff instituted this complain. Issue: Whether or not the contract telegram generated a contract is valid and binding upon partner. Held: Yes, the terms of the offer were clean and over the signature of defendant’s general manager was informed telegraphically that her proposal had been accepted. There ws nothing in the telegram that hinted at any anomaly or grave ground to suspect its veracity and the plaintiff can be blamed for relying upon it.

Laudico vs. Arias 43 Phil. 270 Facts: Defendant, Vicente Arias, who, with his codefendants, owned the building Nos. 205 to 221 on Carriedo Street, on his behalf and that of his coowners, wrote a letter to the plaintiff, Mamerto Laudico, giving him an option to lease the building to a third person, and transmitting to him for that purpose a tentative contract in writing containing the conditions upon which the proposed lease should be made. Later Mr. Laudico presented his coplaintiff, Mr. Fred. M. Harden, as the party desiring to lease the building. On one hand, other conditions were added to those originally contained in the tentative contract, and, on the other, counter-propositions were made and explanations requested on certain points in order to make them clear. Mr. Laudico, finally wrote a letter to Mr. Arias on March 6, 1919, advising him that all his propositions, as amended and supplemented, were accepted. It is admitted that this letter was received by Mr. Arias by special delivery at 2.53 p.m. of that day. On that same day, at 11.25 in the morning, Mr. Arias had, in turn, written a letter to the plaintiff, Mr. Laudico, withdrawing the offer to lease the building. Issue: Whether or not the plaintiff in this action is that the defendants be compelled to execute the contract of lease of the building. Held: No, under article 1262, paragraph 2, of the Civil Code, an acceptance by letter does not have any effect until it comes to the knowledge of the offerer. Therefore, before he learns of the acceptance, the latter is not yet bound by it and can still withdraw the offer. Consequently, when Mr. Arias wrote Mr. Laudico, withdrawing the offer, he had the right to do so, inasmuch as he had not yet receive notice of the acceptance. And when the notice of the acceptance was received by Mr. Civil Law – Obligations and Contracts

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Arias, it no longer had any effect, as the offer was not then in existence, the same having already been withdrawn. There was no meeting of the minds, through offer and acceptance, which is the essence of the contract. While there was an offer, there was no acceptance, and when the latter was made and could have a binding effect, the offer was then lacking. The judgment appealed from is reversed and the defendants are absolved from the complaint.

Article 1324 Sanchez vs. Rigos 45 SCRA 368 Facts: On 3 April 1961, Nicolas Sanchez and Severina Rigos executed an instrument, entitled “Option to Purchase,” whereby Mrs. Rigos “agreed, promised and committed . . . to sell” to Sanchez, for the sum of P1,510.00, a parcel of land situated in the barrios of Abar and Sibot, municipality of San Jose, province of Nueva Ecija, and more particularly described in TCT NT-12528 of said province, within two (2) years from said date with the understanding that said option shall be deemed “terminated and elapsed,” if “Sanchez shall fail to exercise his right to buy the property” within the stipulated period. Inasmuch as several tenders of payment of the sum of P1,510.00, made by Sanchez within said period, were rejected by Mrs. Rigos, on 12 March 1963, the former deposited said amount with the CFI Nueva Ecija and commenced against the latter the present action, for specific performance and damages. On 11 February 1964, after the filing of defendant’s answer, both parties, assisted by their respective counsel, jointly moved for a judgment on the pleadings. Accordingly, on 28 February 1964, the lower court rendered judgment for Sanchez, ordering Mrs. Rigos to accept the sum judicially consigned by him and to execute, in his favor, the requisite deed of conveyance. Mrs. Rigos was, likewise, sentenced to pay P200.00, as attorney’s fees, and the costs. Hence, the appeal by Mrs. Rigos to the Court of Appeals, which case was the certified by the latter court to the Supreme Court upon the ground that it involves a question purely of law. Issue: Whether or not the contract is valid and binding. Held: Option without consideration is a mere offer of a contract of sale, which is not binding until accepted If the option is given without a consideration, it is a mere offer of a contract of sale, which is not binding until accepted. If, however, acceptance is made before a withdrawal, it constitutes a binding contract of sale, even though the option was not supported by a sufficient consideration. . . . (77 Corpus Juris Secundum p. 652. See also 27 Ruling Case Law 339 and cases cited.) It can be taken for granted that the option contract was not valid for lack of consideration. But it was, at least, an offer to sell, which was accepted by latter, and of the acceptance the offerer had knowledge before said offer was withdrawn. The concurrence of both acts — the offer and the acceptance — could at all events have generated a contract, if none there was before (arts. 1254 and 1262 of the Civil Code; Zayco vs. Serra, 44 Phil. 331.) In other words, since there may be no valid contract without a cause or consideration, the promisor is not bound by his promise and may, accordingly, withdraw it. Pending notice of its withdrawal, his accepted promise partakes, however, of the nature of an offer to sell which, if accepted, results in a perfected contract of sale. Civil Law – Obligations and Contracts

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Article 1326 Leoquinco vs Postal Savings Bank 47 Phil. 670 Facts: Plaintiff alleged that he was the highest bidder at a public auction held by the defendants on March 31, 1924, for the sale of a piece or parcel of land belonging to the Bank, situated at Navotas, Province of Rizal, having offered P27,000 for said property; that in Resolution No. 31 of the board of directors of the Bank, authorizing the sale of said property at public auction, as well as in the public notice announcing said sale, the board of directors have expressly reserved to themselves the right to reject any and all bids; that as such highest bidder at said auction, he wrote a letter to the defendants on May 9, 1924, advising that he was ready to tender payment for the land as soon as the deed of sale of the same in his favor is executed and delivered by the defendants; that the defendants refused to execute the deed in spite of requests made therefor by him; that said refusal caused him damages in the sum of P25,000 more or less. Plaintiff prayed that said defendants be ordered to execute and deliver the deed of sale of said land in his favor, and to pay him damages amounting to P25,000, and the costs. The defendants answered, admitting the allegations of the complaint, except the conclusions of law therein set forth and the damages alleged to have been suffered by plaintiff. As a special defense, the defendants alleged that in Resolution No. 31 of the board of directors of the Postal Savings Bank, authorizing the sale at public auction of the property in question, as well as in the notice announcing said sale, the defendants expressly reserved to themselves "the right to reject any and all bids," and that they never accepted the bid or offer of the plaintiff. The defendants prayed for relief from the complaint, with costs against the plaintiff. Issue: Whether the bidding entered into by the parties are valid. Held: Yes. The conditions of a public sale announced by an auctioneer or the owner of the property at the time and place of the sale, are binding upon a purchaser, whether he knew them or not.

Article 1327 Hermosa vs Zobel 104 Phil. 769 Facts: Upon the death of Fernando Hermosa, Sr., his real estate situated in San Sebastian, Spain was left to his daughter Luz and grandson, Fernando Hermosa, Jr., his heirs. Lz was appointed administratrix. Luz sold the said estate to Alfonso Zobel in the amount of P80,000.00. Fernando Hermosa, Jr. questioned the validity of the contract noting that he was a minor when Luz executed the deed of sale in favor of Alfonso Zobel. Issue: Whether or not the contract is valid. Held: Yes. Plaintiff's contention that the deed of cession executed by him jointly with Luz H. adjudication to the latter the property in question in order to facilitate its sale to the defendant is null Civil Law – Obligations and Contracts

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and void for the reason that at the time it was executed by him, he was still a minor and so the cession did not have any legal effect is untenable. it appears that at the time he and Luz H. executed the said deed of cession he was almost of age, or was already 20 years 11 months and 3 days old.

Article 1329 Miguel vs Catalino 26 SCRA 234 Facts: On Jan. 22, 1962, appellants brought suit in the Court against Florendo Catalino for the recovery of a parcel of land, registered under Act 496. The plaintiffs are claiming to be the children and heirs of the original registered owner, and averred that defendant, without their knowledge or consent, had unlawfully taken possession of the land, gathered its produce and unlawfully excluded plaintiffs therefrom. Defendant answered pleading ownership and adverse possession for 30 years, and counterclaimed for attorney's fees. After trial the Court dismissed the complaint, declared defendant to be the rightful owner, and ordered the Register of Deeds to issue a transfer certificate in lieu of the original. Plaintiffs appealed directly to the Supreme Court. Issue: Whether or not the sale of land in 1928 is valid. Held: No. Appellants are likewise correct in claiming that the sale of land in 1928 by Bacaquio to Catalino Agyapao is null and void ab initio, for lack of executive approval.

Article 1331 Dumasug vs. Modelo 34 Phil. 252 Facts: This case is an appeal executed by counsel for the defendant from the judgment of the Court of First Instance of Cebu declaring the document in which the plaintiff sold the two parcels of land and her carabao to the defendant null and void since the plaintiff's consent thereto was obtained by means of fraud and deceit. On June 17, 1912, counsel for Andrea Dumasug filed a written complaint in the Court of First Instance of Cebu, in which he alleged that about the month of November, 1911, defendant persuaded plaintiff to sign a document by falsely and maliciously making her believe that it contained an engagement on plaintiff's part to pay defendant a certain sum of money as expresses occasioned the latter by reason of a lawsuit in which plaintiff Dumasug was one of the parties and was protected and aided by defendant; that this document, plaintiff, who does not know how to write, signed by affixing her mark thereto, believing in good faith that defendant had told her the truth and that said document referred to the expenses incurred by defendant; but that three months after the execution of said document, defendant took possession of a carabao belonging to plaintiff and also of two parcels of land, likewise belonging to her, situated in the barrio of Katang, pueblo of Argao, Cebu, the area and boundaries of which are specified in the complaint, and notified plaintiff that she had conveyed to him by absolute sale said parcels of land and the plow carabao; that in spite of plaintiff's opposition and protests, defendant took possession of said property and, up to the date of the Civil Law – Obligations and Contracts

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complaint, continued to hold possession thereof and to enjoy the products of the lands and of the labor of the carabao; and that, by reason of such acts, defendant had caused loss and damage to plaintiff in the sum of P1,000. Said counsel therefore prayed the court to render judgment by declaring null and void and of no value whatever the alleged contract of purchase and sale of the carabao and the two parcels of land described in the complaint, to order defendant to restore to plaintiff said work animal and lands, and, besides, to pay her the sum of P1,000 for the loss and damage caused her, in addition to the costs of the suit. The court favored the plaintiff's contention, to which the defendant excepted by written motion to asked for the reopening of the case and a new trial. However, this motion was denied, exception to this ruling was taken by the defendant and, upon presentation of the proper bill of exceptions, the same was approved and transmitted to the clerk of this court. Issue: Whether or not the instrument of purchase and sale of two parcels of land and a plow of carabao is null and void. Held: The court held that the consent given by plaintiff being null and void, thus the document signed by plaintiff is consequently also null, void, and of no value or effect. Article 1303 of the Civil Code is therefore, applicable, which prescribes that: "When the nullity of an obligation has been declared, the contracting parties shall restore to each other the things which have been the object of the contract with their fruits, and the value with its interest." In accordance with this legal provision defendant must return and deliver to plaintiff the two parcels of land in question with their fruits, the subject of the complaint, or the value thereof collected by him, which value was justly estimated by the trial judge at P75. With respect to the plow carabao that died while in defendant's possession, the value of which is P120, (record, p. 31) defendant is obliged pursuant to the provision of article 1307 of the same code (to pay and deliver to plaintiff the value of said animal, with interest as an indemnity for the detriment caused to its owner.) For the foregoing reasons, whereby the errors assigned to the judgment appealed from are deemed to have been refuted, said judgment should be as it is hereby, affirmed, with the costs of this instance against the appellant. So ordered.

Article 1332 Hermedes vs. CA 316 SCRA 349 Facts : Considering the factual antecedents and issues of the above-cases are the same, this court shall decide on the petitions jointly. This involves a question of ownership over an unregistered parcel of land, Lot No. 6, plan Psu111331, with an area of 21,773 square meters, siuated in Sala, Cabuyao,Laguna. This lot is originally owned by Jose Hemedes, father of Maxima ad Enrique Hemedes. The following is a chronological presentation of how the ownership/conveyance of said property was executed: Civil Law – Obligations and Contracts

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March 22, 1947 - Jose Hemedes executed document entitled "Donation Inter Vivos with Resolutory Conditions" where ownership of land, together with all its improvements, is conveyed to his third wife, Justa Kausapin, subject to certain conditions ( upon death or remarriage of the DONEE, the title o the property donated be reverted back to any of the children or heirs of the Donor expressly designated by the DONEE in a public document; in absence of such express designation, the title to the property shall automatically revert to the legal heirs of the DONOR in common). September 27, 1960 - "Deed of Conveyance of Unregistered Real Property by Reversion" was executed by Justa Kausapin conveying to Maxima Hemedes except that the possession and enjoyment of said property which shall remain vested to Kausapin during her lifetime, or widowhood and which upon her death or remarriage shall also automatically revert to and be transferred to designee Maxima Hemedes. June 8, 1962 - Original Certificate of Title (OCT) No. (0-941) 0-198 was issued in the name of Maxima Hemedes married to Raul Rodriguez by the Registry of Deeds of Laguna with the annotation that "Justa Kausapin shall have the usufructuary rights over the parcel of land during her lifetime or widowhood." June 2, 1964 - R & B Insurance claims that Maxima Hemedes and husband Raul Rodriguez constituted a real estate mortgage over the subject property in its favor o serve as security for a loan amounting to P6,000. August 2, 1964 - due date of loan amounting to P6,000 February 22, 1968 - R & B Insurance extra-judicially foreclosed the mortgage upon failure of Maxima Hemedes to pay the loan. May 3, 1968 - Land was sold at a public auction with R & B as the highest bidder and was issued a certificate of sale by the sheriff. May 27, 1971 - Justa Kausapin executed "Kasunduan" transferring the same land to stepson Enrique Hemedes pursuant to the deed of donation executed in her favor by her late husband Jose Hemedes. Since 1971 until 1979, Enrique Hemedes was the one who has been paying realty taxes. March 29, 1974 - R & B Insurance executed an Affidavit of Consolidation since Maxima Hemedes failed to redeem the property within the redemption period. September 8, 1974 to October 10, 1974 - Cadastral survey of Cabuyao, Laguna was conducted to which the property was assigned Cadastral No. 2990, Cad. 455-D, Cabuyao Cadastre, in the name of Enrique Hemedes. He is also the owner of the property in the records of the Ministry of Agrarian Reform Office, Calamba, Laguna. May 21, 1975 - Register of Deeds of Laguna cancelled OCT No. (0-941) 0-198 and issued Transfer Certificate of Title (TCT) No. 41985 in the name of R & B Insurance maintaining the annotation of usufruct in favor of Justa Kausapin. February 28, 1979 - Enrique Hemedes sold the property to Dominium Realty and Construction Corporation (Dominium) Civil Law – Obligations and Contracts

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April 10, 1981 - Justa Kausapin executed an affidavit affirming the conveyance of the subject property in favor of Enrique Hemedes asembodied in the "Kasunduan" and denying the conveyance made to Maxima Hemedes. May 14, 1981- Dominium leased the property to sister corporation Asia Brewery which constructed two warehouses made of steel costing P10M each even before signing the contract of lease. Upon learning of Asia Brewery's constructions, R & B Insurance sent a letter on March 16, 1981 informing the former of its ownership. They had a conference but failed to arrive at an amicable settlement. Maxima Hemedes, likewise, wrote Asia Brewery on Ma 8, 1981 asserting that she is the rightful owner of the property. August 27, 1981- Dominium and Enrique Hemedes filed a complaint before the CFI-Laguna for the annulment of TCT No. 41985 issued in favor of R& B Insurance and / or reconveyance to Dominium. CFI-Laguna rendered judgment declaring TCT No. 41985 null and void and ineffective and declaring Dominium as the absolute owner of the parcel of land. R & B Insurance and Maxima Hemedes appealed before the Court of Appeals where it affirmed the assailed decision in toto. Hence,this petition filed by Maxima Hemedes and R & B Insurance. Issue : Whether or not Justa Kausapin effectively conveyed or transferred ownership of said parcel of land to Enrique Hemedes. Ruling : No. Supreme Court rendered judgment that the assailed decision of public respondent and its resolution dated February 22, 1989 are REVERSED. The court also upholds petitioner R & B Insurance's assertion of ownership over the property in dispute, as evidenced by TCT No. 41985, subject to the usufructuary rights of Justa Kausapin as properly annotated upon said certificate of title.

Article 1338 Eguaras vs. Great Eastern Life Assurance Co. 33 Phil. 263 Facts:This is an action for the collection of the value of an insurance policy. Dominador Albay filed an application for insurance on his life with the defendant company. Since Albay was in poor health, the person who presented himself for medical examination to the company physician was Castor Garcia, who posed as Albay. As a result of a favorable report of the physician, the defendant company executed the contract of insurance. The insured died. The company contends that the contract should be annulled on the ground of fraud. Issue:Whether or not the contract should be annulled on the ground of fraud. Held: The fraud which gave rise to the mistaken consent given by the defendant company to the application for insurance made by Albay and to the execution of the contract through deceit, is plain and unquestionable. The fraud consisted in the substitution at the examination of Castor Garcia in Civil Law – Obligations and Contracts

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place of the insured Albay. The deceit practiced in the contract is of a serious nature, the same is also ipso facto void (voidable).

Article 1339 Strong vs. Gutierrez Repide 41 Phil. 947 Facts: Plaintiff is the owner of 800 shares of the capital stock of the Philippine Sugar Estates Development Company, Limited who wants to recover such shares from the defendant on the ground that the shares had been sold and delivered by the plaintiff’s agent to the agent of the defendant without the authority of the defendant. Also on the ground that defendant fraudulently concealed from plaintiffs agent, facts affecting the value of the stock so sold and delivered. Issue: Whether or not fraud exists in the purchasing and concealment of the stock. Held: The purchaser of corporate stock cannot escape liability for his fraud on concealing facts affecting its value which he was in good faith bound to disclose. On the theory that, because of the insistence of the seller that her agent was not authorized to make the sale, there had never been any consent on her part, obtained by fraud, or otherwise, where the court finds that the agent’s authority was sufficient, since, in legal effect, her consent will be deemed induced by the fraud.

Article 1340 Azzaraga vs. Gay 52 Phil. 599 Facts: By a public document, the plaintiff sold two parcels of land to the defendant for the lump sum of P47, 000.00, payable in installments. The conditions of the payment were: P5, 000.00 would be given at the time of signing the contract; P20, 000.00 upon delivery of the Torrens title to the first parcel described in the deed of sale; P10, 000.00 upon delivery of the Torrens title to the second parcel; and lastly the sum of P12, 000.00 one year after the delivery of the Torrens title to the second parcel. The defendant failed to pay the P10, 000.00 agreed upon when the plaintiff delivered the Torrens title of the second parcel, she also failed to pay the remaining P12, 000.00 after one year from the delivery of the title of the second parcel. It turned out that the two parcels differ in size, the second being smaller. Issue: Whether or not there was a false representation on the part of the vendor. Held: The defendant have ample opportunity to appraise herself of the condition of the land which she purchased, and the plaintiff did nothing to prevent her from making such investigation as she deemed fit. “When the purchaser proceeds to make investigations by himself, and the vendor does nothing to prevent such investigation from being complete as the former might wish, the purchaser cannot later allege that the vendor made false representation to him.” Civil Law – Obligations and Contracts

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Article 1341 Songco vs. Sellner 37 Phil. 254 Facts: The principal defense in this action for specific performance relates to the false representation which, it is claimed, was made by the plaintiff with respect to the quantity of uncut cane standing in the fields at the time the defendant became the purchaser. It is proved that Songco estimated that the crop would yield 3,000 piculs of sugar. As the crop turned out, it only produced 2,017 piculs of sugar. Issue: Whether or not the representation of the plaintiff-vendor is fraudulent which would invalidate the contract. Held: It is of course elementary that a misrepresentation upon a mere matter of opinion is not 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 one’s 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 seller’s statement, or dealer’s talk, and experience teaches that it is exceedingly risky to accept it as 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 a subject of a contract of sale, or in regard to its qualities and characteristics, are the usual and ordinary means used by sellers to obtain a high price and are always understood as affording to buyers no ground for omitting to make inquiries. A man who relies upon such affirmation made by a person whose interest might so readily prompt him to exaggerate the value of his property does so at his peril and must take the consequences of his own imprudence.

Article 1342 Rural Bank of Caloocan City vs. Court of Appeals 104 Phil. 151 Facts: Respondent Castro accompanied by Valencia applied for an industrial loan in the Rural Bank of Caloocan. Valencia then arranged everything about the loan. After the loan’s approval, Castro with the Valencia spouses signed a promissory note corresponding to the loan in favor of the bank. The Valencia spouses obtained from the bank an equal amount of loan for P3, 000.00 where they signed another promissory note also in favor of the bank, where Castro affixed her signature. The two loans were secured by a real-estate mortgage on Castro’s house and lot. The said house and lot was to be auctioned to satisfy the obligation of the two loans. It is then when Castro learned that the Civil Law – Obligations and Contracts

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mortgage contract which was an encumbrance on her property was for P6, 000.00 and not for P3, 000.00 and that she was made to sign as co-maker of the promissory note without her being informed. Castro made a consignation with the court. Issue: Whether or not the consignation made by Castro is valid. Held: It is contended that the consignation was made without prior offer or tender of payment to the bank, and it is therefore, not valid. In holding that there is a substantial compliance with the provision of Article 1256 of the Civil Code, respondent court considered the fact that the bank was holding Castro liable for the sum of P6, 000.00 plus 12% interest per annum, while the amount consigned was only P3, 000.00 plus 12% interest. That at the time of the consignation, the bank had long foreclosed the mortgage extrajudicially. The bank already knew of the deposit made by Castro but did not make any claim. Under the foregoing circumstances, the consignation made by Castro was valid, if not under the strict provision of the law, under the liberal considerations of equity.

Article 1344 Valdez vs. Sibal 46 Phil. 930 FACTS: The lower court render judgment against the defendant and in favor of the plaintiff for the sum of P15,187.12 with the interest thereon at the rate of 12.5% per annum from August 1, 1921, plus P3,839.12 as liquidated damages with the costs. Although the evidence tends to show that the contract was one of loan, yet if the parties have interpreted it in the sense that it was a contract of sale, as inferred from their declarations given at the trial, said interpretation is the one to be followed. As stated in the plaintiff’s complaint, the defendant failed to deliver what as been agreed upon by the both parties. As to the last error assigned by the defendant-appellant, the latter argues under the theory that the contract in question is one of loan, We have already seen that the dependant himself did not consider it so in his testimony and therefore the provisions of Section 8 of Act No. 255 are not applicable to this case. For all the foregoing reasons, the judgment appealed from is modified, and the defendant is sentenced o pay the plaintiff the sum of P13,407.61 with legal interest thereon from the date of the publication of this decision, plus the sum of P703.72 for his failure to deliver 175.93 piculs of sugar Civil Law – Obligations and Contracts

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and in addition thereto the sum of P2,000, which was stipulated to be paid in case of litigation, as is the present action. Judgment modified ISSUE: Whether or not contention of the plaintiff is tenable. HELD: Judgment favors plaintiff.

Article 1349 Osorio vs. Osorio 41 Phil. 531 FACTS: The plaintiff seeks to recover 610 shares of stock of “Ynchausti Steamship Co.” and the dividends corresponding to them, which were included in the inventory of the properties of the deceased Da. Maria Petrona Reyes, whose estate is administered by the defendant. The trial court rendered judgment in the case, declaring that the 610 shares of stock in dispute and their dividends belong to the plaintiff, and ordered the defendant Da. Tomasa Osorio, administratrix of the state of Da. Petrona Reyes, to exclude them from the inventory and her accounts, and ther other defendant. The case having been appealed, counsel for the defendant and appellant, in summing up their arguments in support of the errors assigned in their brief, maintain the two following propositions: “1. The donation made by Da. Petrona Reyes in favor of the plaintiff was no value and effect; and “2. That, supposing said donation valid, the 610 shares of stock, the value of which is P60 shares of stock, the value of which is P61,000, cannot be considered as included among them.” The evidence justifies the conclusion of the trial court that they are the profits or dividends accruing to the P94,000, which are adjudicated to the widow Da. Petrona Reyes in the distribution of the estate of the deceased Osorio and which were donated by her to he plaintiff, and as such profits they belong to the latter, upon the principle of the law that ownership of property gives right by accession to all that it produces, or is united or incorporated thereto, artificially or naturally. The judgment appealed from should be, as it hereby affirmed, with cost against the appellant. ISSUE :Whether or not contention of the plaintiff is tenable or not. HELD: Judgment in favor of the plaintiff.

Blas vs. Santos 1 SCRA 899 FACTS: This action was instituted by plaintiffs against the administratrix of the estate of Maxima Santos, to secure a judicial declaration that one-half of the the properties left by said Maxima Santos Vda. De Blas, the greater bulk of which are set forth and described in the project of partition Civil Law – Obligations and Contracts

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presented in the proceedings for the administration of the estate of the deceased Simeon Blas, had been promised by the deceased Maxima Santos to be delivered upon her death and in her will to the plaintiffs, and requesting the said properties so promised be adjudicated to the plaintiffs. Defendant, who, is the administratrix of the estate of the deceased Maxima Santos Vda. De Blas, filed an answer with a counterclaim, and later, an amended answer and a counterclaim. Trial of the case was conducted and, thereafter, the court, Hon. Gustavo Victoriano, presiding, rendered judgment dismissing the complaint, with costs against plaintiff, and dismissing also the counterclaim and cross-claim filed by the defendants. ISSUE:Whether or not Maxima Santos comply with the obligation stated in the documents. HELD: The judgment appealed reversed and the defendant-appellee administratrix of the estate of Maxima Santos, is ordered to convey and deliver one-half of the properties adjudicated to Maxima Santos as her share in the conjugal properties.

Article 1351 Fisher vs. Robb 69 Phil. 101 Facts: The defendant John C. Robb appeals to this Court from the judgment of the Court of First Instance of Manila, the dispositive part of which reads: Judgment is hereby rendered in favor of the plaintiff and against the defendant, who is ordered to pay to the former the sum of P2,000, with interest at the legal rate from March 11, 1938, until paid, plus costs.virtual law library In September, 1935, the board of directors of the Philippine Greyhound Club, Inc., told the herein defendant-appellant John C. Robb, to make a business trip to Shanghai to study the operation of a dog racing course. In Shanghai, the defendant-appellant stayed at the American Club where be became acquainted with the plaintiff-appellee, A. O. Fisher, through their mutual friends. In the course of a conversation, the defendant-appellant came to know that the plaintiff-appellee was the manager of a dog racing course. Upon knowing the purpose of the defendant-appellant's trip, the plaintiff-appellee showed great interest and invited him to his establishment and for several days gave him information about the business. It seems that the plaintiff became interested in the Philippine Greyhound Club, Inc., and asked the defendant if he could have a part therein as a stockholder. As the defendant-appellant answered in the affirmative, the plaintiff-appellee thereupon filled a subscription blank and, through his bank in Shanghai, sent to the Philippine Greyhound Club, Inc., in Manila telegraphic transfer for P3,000 in payment of the first installment of his subscription. Civil Law – Obligations and Contracts

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Later on the defendant-appellant returned to Manila from Shanghai.chanroblesvirtuallawlibrary chanrobles virtual law library Some months thereafter, when the board of directors of the Philippine Greyhound Club, Inc., issued a call for the payment of the second installment of the subscriptions, the defendant-appellant sent a radiogram to the plaintiff-appellee did so and sent P2,000 directly to the Philippine Greyhound Club, Inc., in payment of the said installment. Due to the manipulations of those who controlled the Philippine Greyhound Club, Inc., during the absence of the defendant-appellant undertook the organization of a company called The Philippine Racing Club, which now manages the race track of the Santa Ana park. The defendant immediately endeavored to save the investment of those who had subscribed to the Philippine Greyhound Club, Inc., by having the Philippine Racing Club acquire the remaining assets of the Philippine Greyhound Club, Inc. The defendant-appellant wrote a letter to the plaintiff-appellee in Shanghai explaining in detail the critical condition of the Philippine Greyhound Club, Inc., and outlining his plans to save the properties and assets of the plaintiff-appellee that he felt morally responsible to the stockholders who had paid their second installment (Exh. C). In answer to said letter, the plaintiff-appellee wrote the defendant-appellant requiring him to return the entire amount paid by him to the Philippine Greyhound Club, Inc., (exhibit E). Upon receiving this letter, the defendant-appellant answered the plaintiff-appellee for any loss which he might have suffered in connection with the Philippine Greyhound Club, Inc., in the same way that he could not expect anyone to reimburse him for his own losses which were much more than those of the plaintiff-appellee (Exh. B).chanroblesvirtuallawlibrary chanrobles virtual law library Issue: The principal question to be decided in this appeal is whether or not the trial court erred in holding that there was sufficient consideration to justify the promise made by the defendantappellant in his letters Exhibits B and C.chanroblesvirtuallawlibrary chanrobles virtual law library Ruling: In the fifth paragraph of the letter Exhibit B, dated March 16, 1936, addressed by the defendant-appellant to the plaintiff-appellee, the former said: "I feel a moral responsibility for these second payments, which were made in order to carry out my plan (not the first payments, as you have it in your letter), and Mr. Hilscher and I will see to it that stockholders who made second payments receive these amounts back as soon as possible, out of our own personal funds. "As it is, I have had to take my loss along with everyone else here, and so far as I can see that is what all of us must do. The corporation is finally flat, so it is out of the question to receive back any of your investment from that source; the only salvage will be the second payment that you made, and that will come from Hilscher and me personally, as I say, not because of any obligation, but simply because we have taken it on ourselves to do that. (And I wish I could find someone who would undertake to repay a part of my own losses in the enterprise!)" And in the seventh paragraph of the letter Exhibit C, dated February 21, 1936, addressed by the same defendant-appellant to the same plaintiff-appellee the former said the following: chanrobles virtual law library However, Mr. Fischer and I feel a personal responsibility to those few stockholders who made their second payments, including yourself, and it is our intention to personally repay the amounts of the second payments made by those few. . . . And, finally, paragraph 8 of the same letter Exhibit C states: "We are to receive a certain share of the new Philippine Racing Club for our services as promoters of that organization, and as soon as Civil Law – Obligations and Contracts

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this is received by us, we will be in a position to compensate you and the few others who made the second payments. That, as T have said, will come from us personally, in an effort to make things easier for those who were sportsmen enough to try to save the Greyhound organization by making second payments. Article 1254 of the Civil Code provides as follows: A contract exists from the moment one or more persons consent to be bound with respect to another or others to deliver something or to render some services. And article 1261 of the same Civil Code provides the following: chanrobles virtual law library ART. 1261. There is no contract unless the following requisites exists: 1. The consent of the contracting parties; chanrobles virtual law library 2. A definite object which is the subject-matter of the contract; chanrobles virtual law library 3. A consideration for the obligation established. In the present case, while the defendant-appellant told the plaintiff-appellee that he felt morally responsible for the second payments which had been made to carry out his plan, and that Mr. Hilscher and he would do everything possible so that the stockholders who had made second payments may receive the amount paid by them from their personal funds because they voluntarily assumed the responsibility to make such payment as soon as they receive from the Philippine racing Club certain shares for their services as promoters of said organization, it does not appear that the plaintiff-appellee had consented to said form of reimbursement of the P2,000 which he had directly paid to the Philippine Greyhound Club, Inc., in satisfaction of the second installment.chanroblesvirtuallawlibrary chanrobles virtual law library The first essential requisite, therefore, required by the cited article 1261 of the Civil Code for the existence of a contract, does not exists.chanroblesvirtuallawlibrary chanrobles virtual law library Wherefore, the appealed judgment is reversed and the costs to the plaintiff.

Article 1355 Carrantes vs. CA 76 Phil. 514 Facts: The citation of the case at bar was a contract or sale of a piece of land which has a consideration of one peso. As the Court od Appeals ruled that the deed of “Assignment of Right to Inheritance” is void ab initio and inexistent on the ground that there a consideration, which the one peso. The basic characteristic of simulation was the fact the contract was not desired or intended to produce legal effects. Therefore, the respondent court provides that the contract was inexistent and void from the beginning Issue: Whether or not the the subject contract is valid. Held: The Supreme Court declared that: Civil Law – Obligations and Contracts

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The respondents' action may not be considered as one to declare the inexistence of a contract for lack of consideration. It is the total lack of consideration that renders the contract void. The sum of one peso appears in the document as one of the consideration for the assignment of inheritance. In addition and of great legal import, the document recites the acknowledgment of rightful owner of the property.

Mactal vs. Melegrito 111 Phil. 363 Facts: This is an action to recover the sum of P1,777.00, plus P1,000.00 as moral damages and P500.00 as attorney's fees. Defendant, Filomeno Melegrito, filed an answer admitting some allegations of the complaint and denying other allegations thereof, and setting up some special defenses and a counterclaim. In due course, the Court of First Instance of Nueva Ecija rendered a decision dismissing the case with costs against plaintiff, Miguel Mactal, upon the ground that the consideration of the promissory note upon which the complaint is based was the dismissal of a criminal case for estafa against the defendant and, hence, illicit, immoral and contrary to public policy, as well as void ab initio. The case is before us on appeal taken by the plaintiff, who maintains that the lower court erred in holding that this action is based upon the aforementioned promissory note, and that the consideration thereof was the dismissal of the estafa case against the appellee.chanroblesvirtuallawlibrary chanrobles virtual law library It appears, and the lower court held, that, on or about February 5, 1953, Mactal delivered P1,777.00 to Melegrito, to be used by him in the purchase of palay for Mactal, with a ten (10%) per cent commission in his (Melegrito's) favor or returned to Mactal, within ten (10) days, should he (Melegrito) fail to buy palay. This obligation was set forth in a receipt signed by Melegrito, who neither bought palay nor returned said amount. Hence, Mactal accused him of estafa in the Justice of the Peace Court of Guimba, Nueva Ecija. When the case was about to be heard, on October 19, 1956, Florencio Piraso, then Chief of Police of Guimba, acting upon Melegrito's request, prevailed upon Mactal to move for the dismissal of the case and be contented with a promise on the part of Melegrito to pay, not later than January 1954, said P1,777.00, plus the sum of P7.00, balance of his account with Mactal in connection with another transaction. Accordingly, Melegrito signed a document (Exhibit A [also Exhibit 1]), prepared by Paraso in the Tagalog dialect, which translated into English, reads: I, FILOMENO MELEGRITO, married, of age, at present residing at barrio Cabaruan, Guimba, Nueva Ecija, this 15th day of October 1953, hereby certify to the following: chanrobles virtual law library That I am indebted to Mr. Miguel Mactal in the sum of P1,777.00, Philippine Currency, which I promise to pay him within the month of January, 1954.chanroblesvirtuallawlibrary chanrobles virtual law library IN WITNESS WHEREOF, I have hereunto affixed my name and surname in the presence of two (2) witnesses, this 19th day of October, 1953, in Guimba, Nueva Ecija.chanroblesvirtuallawlibrary chanrobles virtual law library Civil Law – Obligations and Contracts

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(SGD.) FILOMENO MELEGRITO Issue: Whether or not the promissory note was executed in consideration of the estafa. Held: The lower court specifically found that Melegrito had on February 5, 1953, received from Mactal P1,777.00 to be used in the purchase of palay for the latter, with the obligation to return said amount, within ten (10) days, if not spent for said purpose. In fact, Melegrito admitted, on the witness stand, that he is indebted to the plaintiff in the aggregate sum of P1,777.00, although he claims that his liability therefor was merely that of a guarantor, not principal debtor. So when the Chief of Police succeeded in persuading Mactal to withdraw the criminal case for estafa, Melegrito was only too willing to sign Exhibit A, in which he promised to pay the aforementioned amount in January, 1954. The consideration for this promises was, therefore, the aforesaid pre-existing debt of Melegrito, not the dismissal of the estafa case, which merely furnished the occasion for the execution of Exhibit A WHEREFORE, the decision appealed from is hereby reversed and another one shall be entered sentencing defendant Filomeno Melegrito to pay the plaintiff, Miguel Mactal, the sum of P1,777.00, with interest thereon at the legal rate, from January 26, 1955, as well as the costs of the proceedings. It is so ordered.chanroblesvirtuallawlibrary chanrobles virtual law library

Article 1390 Felipe vs. Heirs of Aldon 120 SCRA 514 Facts: Spouses sometime between 1948-1950, Maximo Aldon and Gimena Almosara bought pieces of lands in Masbate. These lands herein mentioned were divided into three parcels as follows; 1370, 1371, and 1415. A year later, Gimena Almosara, sold the land to spouses Eduardo and Hermogena all surnamed Felipe, the petitioners without the consent of her husband Maximino Aldon . In 1976, the widow Gimena Almosara and their children Sofia and Salvador Aldon, filed a complaint in the Court of First Instance of Masbate against the spouses Felipe claiming that they recovered the land via mortgage but Felipe spouses will not honor the redemption of the property. The Court favored the Felipe spouses stating that they are the lawful owner of the property, declaring that that the complaint in the present action to be without merit and ordered the case to be dismissed. Gimena Almosara and her children appealed the decision to the Court of Appeals and hereby the appeal was granted. The Court of Appeals reversed the decision in favor of Gimena Almosara and her children, stating that the conveyance of the property from Gimena Almosara to the Felipe Spouses was invalid due to the reason that Maximo Aldon has not issued his consent and that property in question is considered as conjugal in nature. The petitioners assailed the decision made by Court of Appeals. Issue: Whether or not the contract between Gimena Almosara and Felipe Spouses is null and void. Held: The Supreme Court affirmed the decision of the Court of Appeals in reversing the judgment made by the Court of First Instance of Masbate in favor of petitioners. The sale made by respondent Almosora is invalid, as articulated in the Articles 165 and 166 of the Civil Code “The husband is the administrator of the conjugal partnership…. Unless the wife has been declared a non compos mentis Civil Law – Obligations and Contracts

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or a spendthrift, or is under civil interdiction or is confined in a leprosarium, the husband cannot alienate or encumber any real property of the conjugal partnership without the wife's consent. If she refuses unreasonably to give her consent, the court may compel her to grant the same.” As stated in the facts, Gemina’s transaction was beyond the knowledge of her husband. Furthermore, the “Deed of Purchase”, considered as proof of transaction or contract, was identified as null and void as cited in Article 1390 (1) “The following contracts are voidable or annullable, even though there may have been no damage to the contracting parties: (1) Those where one of the parties is incapable of giving consent to a contract”. As the husband Maximo Aldon’s consent was not affixed on the sale, therefore invalidating the claim of the petitioner that they legally owned the property. Moreover, the Supreme Court further explained that the intention of the petitioners to claim the land is due to bad faith. The idea was taken in the petitioner’s Vicente Felipe’s statement in attempting to have Gimena Aldon sign the readymade document purporting to the self the disputed lots of the respondents. Thus, drawing a question that they already knew they don’t own the land but still they insisted that the document of sale is in their favor.

Article 1397 Ibanez vs. HSBC 22 Phil. 572 Facts: The plaintiffs are after an action of liquidation against the respondent corporation. The Hongkong and Shanghai Banking Corporation and Aldecoa & Co. entered into a contractual agreement whereby the said bank bound itself to open and maintain in behalf of Aldecoa & Co. a credit in account current up to the sum of P475,000, in accordance with the conditions and securities detailed in an instrument of the said date; that, subsequently, the contracting parties also agreed that, should certain shares of the concern, "The Pasay Estate Co. Ltd.," be declared to belong to Aldecoa & Co., in liquidation, the same should be by the latter turned over to the creditor bank, as security; and that, in view of the fact that the said shares had come into the ownership of Aldecoa & Co., in liquidation, the contracting parties had stipulated that Aldecoa & Co., in liquidation, represented by William Urquhart, should transfer and mortgage to The Hongkong and Shanghai Banking Corporation, as mortgage creditor, the said shares delivered to it for their custody and preservation, which mortgage was executed as an additional security to the said creditor bank for the payment of any sums which Aldecoa & Co. might be found to owe it, by reason of the aforesaid credit in account current or of any other sums which Aldecoa & Co., in liquidation, might owe it; that the creditor bank was authorized to collect and receive all the dividends, bonuses or other distribution of the capital and profits of the said concern, "The Pasay Estate Co. Ltd.," until a total settlement of the said debt should have been made, but that, should the mortgage debtor, its heirs, successors in interest, or administrators pay to the creditor bank all the amount owed, this obligation would thereby become null and void; that the right was reserved to Aldecoa & Co. to sell the said shares, provided that the product of their sale be devoted to the payment of its debt; that The Hongkong and Civil Law – Obligations and Contracts

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Shanghai Banking Corporation acknowledged receipt of the said shares for their keeping and preservation, and that this instrument was held by the contracting parties to be additional to each and all of those already executed, on account of the debt of Aldecoa & Co., between the latter and The Hongkong and Shanghai Banking Corporation, which instruments were declared to be subsistent and in full force and effect. Before proceeding to examine the agreement referred to and contained in the instrument of August 30, 1907, and to ascertain whether or not it complies with the conditions required by law, or whether it bears vices and defects productive of nullity and such as substantially affect the validity and force of the contract therein stipulated, it becomes necessary to determine whether the plaintiffs, Zoilo, Joaquin, and Cecilia lbañez de Aldecoa, have or have not the personality and rights requisite to enable them to claim the nullification of the aforementioned agreement made and entered into, according to the instrument of August 30, 1907. Issue: Whether or not the agreement contained in the instrument executed on August 30, 1907, by and between the liquidator of the firm of Aldecoa & Co. and the manager of The Hongkong and Shanghai Banking Corporation, should be annulled. Held: One who has no interest in a contract has no right of action for nullifying the same, for the interest in a given contract is the determining factor that authorizes the party obligated either principally or subsidiarily to maintain said action. The courts have established that one who is not a party to a contract or who has neither cause nor representation for intervening therein lacks personality and right of action for impugning the validity thereof.

Teves vs. People’s Homesite and Housing Corp. 23 SCRA 1141 Facts: Plaintiff filed a complaint for illegal acquisition of property of by defendant. The property being known as Lot 9, Block K-70 at the Diliman Estate Subdivision. In the plaintiff’s averment, she alleged that she and her late husband Celestino Teves originally own and occupied the aforementioned parcel of land, wherein, these couple have constructed a house with an assessed value of 3,250.00 Philippine Currency. Whereas, at that time the Diliman Estate Subdivision which was known as Quezon Memorial Grove was not intended for subdivision and distribution, Teves spouse together with other occupants sought the assistance of the Social Welfare Administration. The PHHC officials acceded the occupants’ petition and by the virtue of Resolution No. 21, Fiscal Year 1951-52 adopted on September 19, 1951, the estate was converted for distribution and sale to the actual occupants that are qualified to acquire the residential lots under rule of PHHC. After the investigation for qualification, PHHC identified the late husband of the plaintiff as actual occupant of the Lot-9, Block K-70 and therefore qualified to acquire the lot. After the death of her husband, the plaintiff filed an application in her own name to purchase of the mentioned lot. However, official of the PHHC disregarded her request and assisted another, in the person of the defendant in her application to purchase the lot. With the aid of an influential politician the latter was able to acquire the deed of sale and transfer certificate of the assailed property. In this case the plaintiff made an appeal to the higher court.


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Issue: Whether or not the plaintiff can institute an action for annulment of the Deed of Sale and Transfer of Certificate against defendant Melisenda L. Santos. Held: The case appealed was set aside and is remanded to the court a quo for further proceedings. Defendant’s contentions weighs on Article 1397 of the Civil Code states that, “The action for the annulment of contracts may be instituted by all who are thereby obliged principally or subsidiarily. However, persons who are capable cannot allege the incapacity of those with whom they contracted; nor can those who exerted intimidation, violence, or undue influence, or employed fraud, or caused mistake base their action upon these flaws of the contract.”. According to the defendants, plaintiff is not a party to the deed of sale which was executed between the PHHC and defendant Melisenda L. Santos hence; the plaintiff cannot maintain an action to annul the deed of sale. In the case at bar, the plaintiff is praying for the declaration of the nullity of the deed of sale not as a party in the deed, or because she is obliged principally or subsidiarily under the deed as stated in Article 1397. She is seeking for nullity of the contract for the reason that she has an interest that is affected by the acts of the defendants which is detrimental on her part. The abovementioned sentence is an exception to the general rule that annulment of contracts can only be maintained by those who are bound principally or subsidiarily. Hence, a person not obliged principally or subsidiarily may ask for the nullity of the contract if her rights are prejudiced by one of the contracting parties.

Article 1398 Dumasug vs. Modelo 34 Phil. 252 Facts: This case is an appeal executed by counsel for the defendant from the judgment of the Court of First Instance of Cebu declaring the document in which the plaintiff sold the two parcels of land and her carabao to the defendant null and void since the plaintiff's consent thereto was obtained by means of fraud and deceit. On June 17, 1912, counsel for Andrea Dumasug filed a written complaint in the Court of First Instance of Cebu, in which he alleged that about the month of November, 1911, defendant persuaded plaintiff to sign a document by falsely and maliciously making her believe that it contained an engagement on plaintiff's part to pay defendant a certain sum of money as expresses occasioned the latter by reason of a lawsuit in which plaintiff Dumasug was one of the parties and was protected and aided by defendant; that this document, plaintiff, who does not know how to write, signed by affixing her mark thereto, believing in good faith that defendant had told her the truth and that said document referred to the expenses incurred by defendant; but that three months after the execution of said document, defendant took possession of a carabao belonging to plaintiff and also of two parcels of land, likewise belonging to her, situated in the barrio of Katang, pueblo of Argao, Cebu, the area and boundaries of which are specified in the complaint, and notified plaintiff that she had conveyed to him by absolute sale said parcels of land and the plow carabao; that in spite of plaintiff's opposition and protests, defendant took possession of said property and, up to the date of the complaint, continued to hold possession thereof and to enjoy the products of the lands and of the labor of the carabao; and that, by reason of such acts, defendant had caused loss and damage to Civil Law – Obligations and Contracts

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plaintiff in the sum of P1,000. Said counsel therefore prayed the court to render judgment by declaring null and void and of no value whatever the alleged contract of purchase and sale of the carabao and the two parcels of land described in the complaint, to order defendant to restore to plaintiff said work animal and lands, and, besides, to pay her the sum of P1,000 for the loss and damage caused her, in addition to the costs of the suit. The court favored the plaintiff's contention, to which the defendant excepted by written motion to asked for the reopening of the case and a new trial. However, this motion was denied, exception to this ruling was taken by the defendant and, upon presentation of the proper bill of exceptions, the same was approved and transmitted to the clerk of this court. Issue: Whether or not the instrument of purchase and sale of two parcels of land and a plow of carabao is null and void. Held: The court held that the consent given by plaintiff being null and void, thus the document signed by plaintiff is consequently also null, void, and of no value or effect. Article 1303 of the Civil Code is therefore, applicable, which prescribes that: "When the nullity of an obligation has been declared, the contracting parties shall restore to each other the things which have been the object of the contract with their fruits, and the value with its interest." In accordance with this legal provision defendant must return and deliver to plaintiff the two parcels of land in question with their fruits, the subject of the complaint, or the value thereof collected by him, which value was justly estimated by the trial judge at P75. With respect to the plow carabao that died while in defendant's possession, the value of which is P120, (record, p. 31) defendant is obliged pursuant to the provision of article 1307 of the same code (to pay and deliver to plaintiff the value of said animal, with interest as an indemnity for the detriment caused to its owner.) For the foregoing reasons, whereby the errors assigned to the judgment appealed from are deemed to have been refuted, said judgment should be as it is hereby, affirmed, with the costs of this instance against the appellant. So ordered.

Article 1399 Uy Soo Lim vs. Tan Unchuan 38 Phil. 552 Facts: This is an appeal This is an appeal by plaintiff upon the law and the facts, from a judgment of the Court of First Instance of Cebu, dismissing on the merits his action for the annulment of a contract by the terms of which he sold to the defendant Francisca Pastrano all his interest in the estate of the late Santiago Pastrano Uy Toco. At about age thirteen, Santiago Pastrano Uy Toco, a Chinese, came from China to reside in the Philippines and then he married Candida Vivares, a Filipina woman. Of this marriage were born two(2) daughters, Francisca and Concepcion. At this time of marriage, Santiago Pastrano possessed


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very little property. The large estate left by him at his death was acquired by him during his marriage with Candida Vivares. Santiago Pastrano returned to China and entered into illicit relations with a Chinese woman, Chan Quieg, also referred as Chan Ni Yu. After staying a little less than a year in China, Santiago Pastrano returned to the Philippines where he remained till his death in Cebu, in March, 1901. He never saw Chan Quieg again, but received letters from her informing him that she had borne him a son, Uy Soo Lim, the present plaintiff. He died without ever having seen Uy Soo Lim, but under the belief that he was his only son, and it was in this belief that he dictated the provisions of his will. By the terms of the will, Santiago Pastrano attempted to dispose of the greater part of his estate in favor of the appellant, Uy Soo Lim. The will was duly probated in the Court of First Instance of Cebu, and the defendant Benito Tan Unchuan, husband of the defendant Francisca Pastrano, who was named in the will as executor, duly qualified as such on May 13, 1902. Basilio Uy Bundan, one of the defendants herein and brother of Santiago Pastrano, was named by the testator as guardian of Francisca Pastrano, Concepcion Pastrano, and Uy Soo Lim, who were all three minors at the time of the death of the testator, and duly qualified as such before the court on August 6, 1902. The guardian did not comply with this order at once, and, before the plan of the distribution called for by this order could be presented, objections against carrying into effect the provisions of the will were presented to this court, questioning right of Uy Soo Lim to seven-ninths of the property as left him by Santiago Pastrano in his will and even to put in question his right to receive anything at all. During the pendency of the case, the plaintiff executed a deed by which he relinquished and sold to Francisca Pastrano all his right, title and interest in the estate of the deceased Santiago Pastrano. Chan Quieg also executed a public document in which she gave her consent to the sale by Uy Soo Limof his right and interest in the said sale of estate. The guardians of the plaintiff also executed a public document giving their consent to the said sale of the estate to Francisca Pastrano. All documents mentioned above were presented to the lower court and the lower court declared Francisca Pastrano the sole owner of the property left by the deceased Santiago Pastrano. Hence, this present action by the plaintiff for the purpose of vacating the orders of the lower court and to rescind and annul the contract by which he had sold and transferred to Francisca Pastrano his interest in the estate of Santiago Pastrano. Issue:Whether or not the plaintiff- appellee, Uy Soo Lim has the right to rescind and annul the abovementioned contract in case of incapacity in his part during the execution of the contract. Held: The court held that the plaintiff cannot rescind and annul the executed contract since he already disposed the whole amount of P 85, 000 which was paid to him in the consideration of the execution of the contract at the time of reaching his majority age even though he receive some of the payments during his minority age. The important fact is not the time when he received the money, but the time when he disposed it. This is in accordance with article 1399 of the Civil Code which provides:


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The action for nullity of a contract shall also be extinguished when the thing which is the object thereof should be lost by fraud or fault of the person having the right to bring the action. If the cause of the action should be the incapacity of any of the contracting parties, the loss of the thing shall be no obstacle for the action to prevail, unless it has occurred by fraud or fault on the part of the plaintiff after having acquired capacity. For this reason, the judgment of the trial court is without error, and it is, therefore, affirmed, with the costs of both instances against the plaintiff-appellant.

Article 1403 Luna vs. Linatoc 74 Phil. 15 Facts: The wife of Agustin de Luna sold a parcel of lands together with those lands under her husband's name. After the sale, they bring an action to ask for annulment of the sales since according to article 1432, the wife could not sell her portions of those lands in the name of her husband because the partition is illegal and void as it was made during the marriage and there was no juducial order authorizing separation of property between husband and wife. Consequently, the character of these portions of lands as conjugal partnership assests. And the wife may bind the conjugal partnership with the consent of the husband, according to article 1614 of the Civil Code. The Court of Appeals upheld the validity of the three sales made since the instant case is one of recognition because the husband was not trying to cleanse the sales of all taint, such as fraud, violence or mistake, nor was it his purpose to confer authority to his wife, because he stated in Exhibit I: "when my wife sold said lands to J. L. she did so with my knowledge and consent. Thus the requirement in the statute of frauds that in a sale of real property the authority of the agent should be in writing, has been complied with. Therefore, she was only acting as his agent. Issue: Whether or not they can ask for the annulment of the sales of the aforementioned parcels of lands. Held: The Supreme Court held that they cannot examine the question whether or not the Court of Appeals is right when it concluded that there had been deceit. Thus, the decision made by the Court of Appeals is hereby affirmed.

Basa vs Raquel 45 Phil. 655 Facts: This is an appeal from an order of the Court of First Instance of Cavite, for the purpose of obtaining a declaration of nullity of a conveyance of certain property which had been sold by the corporation of Dominican Fathers to Gavina Raquel. The corporation had decided to sell the property in question, and it appears to have been understood that the plaintiff, who was occupying the property as a renter, would be given preference in the Civil Law – Obligations and Contracts

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matter of the purchase of the property. On March 14, 1922, one Julian Visencio, a clerk or employee in the office, sent a telegram to the plaintiff in Cavite, stating in words, to “come. Urgent to arrange purchase of house Sr. Chicote.” In response to this telegram the plaintiff provided himself with the sum of P11, 500.00, which was understood to be the amount of the purchase price. However, the plaintiff alleges that he did not succeed in getting admission at one to the office where transaction would have been consummated, and while he was waiting the defendant, Gavina Raquel, obtained admission and purchased the property for the sum stated. Issue: Whether or not the trial judge committed error in excluding the oral testimony. Held: The decision is affirmed. The plaintiff has no writing evidencing the agreement for the purchase of the land sufficient to satisfy the requirement of Section 335 of the Code of Civil Procedure. A telegram advising a person to whom a verbal promise for the sale of land had been previously made to come at once in order to complete the purchase,, but which telegram neither describes the property nor states the purchase price,a nd which is not signed by any person having authority to bind the seller, is not a sufficient memorandum of sale to satisfy the requirement of section 335 of the Code of Civil Procedure.

Reiss vs. Memije 15 Phil. 350 Facts: This is an appeal from judgment of the Court of First Instance. Defendant appellant entered into a contract with one Buenaventura Kabalsa for the repair of a house in the City of Manila. The contractor undertook to furnish the necessary materials, including a considerable amount of lumber, to be used in the repairs. The contractor being a man of no commercial standing in the community was unable to secure credit and was compelled to pay cash for all purchases. Having no money and no credit he was unable to continue the purchase of the necessary lumber, plaintiffs, with whom he was dealing, absolutely refusing to allow any lumber to leave their yard without payment in advance. The work on the house being delayed for the lack of the necessary materials, defendant accompanied the contractor to plaintiffs’ lumber yard, and after satisfying plaintiffs as to his own financial responsibility,, he was good for the amount of lumber needed in the repair of his house, he entered into an agreement with them whereby they were to deliver the necessary lumber to the contractor for use in the repair of his house. In pursuance of and in accordance with the directions of the defendant, plaintiffs delivered to Kabalsa a considerable amount of lumber which was used in the repairs upon defendant’s house, and judgment in this action was rendered in favor of the plaintiffs for the proven amount of the unpaid balance of the purchase price of this lumber.


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Defendant contention that the alleged promise merely guaranteed payment for the lumber and was not admissible in evidence and defendant was not bound thereby, under the provision of section 335 of the Code of Civil Procedure. Issues: 1. Whether or not the owner of the building was perform solely upon the credit of his promise, to be responsible and to pay for the materials and labor furnished. 2. Whether or not the promise of the defendant fall within the statute of fraud. Held: The judgment appealed affirmed. The credit for the lumber delivered by the plaintiffs to defendant’s contractor was extended solely and exclusively to the defendant under the verbal agreement had with him; therefore that the provisions of the statute did not require that it should be in writing. From the testimony of the contractor himself, it seems clear that when the agreement for the delivery of lumber was made, the credit was extended not the contractor but to the defendant. Under the provisions of section 355 of the Code of Civil Procedure, a special promise to answer for debt of another is not enforceable by action unless such promise or some note or memorandum thereof be in writing and subscribed by the party charged or by his authorized agent taking into consideration all the circumstances. In this case, the credit for the lumber sold and exclusively to the defendants himself, under the verbal agreement, and that, therefore, the case does not fall within the provisions of the statute requiring certain agreements to be made in writing.

Syquia vs . Court of Appeals 151 Phil. 507 Facts: This is a petition for certiorari to review the decision of the court of Appeals. Before Us is an appeal by certiorari from the split decision of a division of five of the Court of Appeals dated March 16, 1982 as well as that resolution of the Court of Appeals denying petitioner's Motion for Reconsideration. The instant action arose from an ejectment case against petitioner by Edward Litton based on the expiration of the Contract of Lease over the Dutch Inn Building originally owned by the Heirs of Doña Rosa Litton or the Litton co-ownership who leased it to Litton Finance and Investment Corporation. The latter sublet it to herein petitioner for a period commencing on February 1, 1970 and ending on January 31, 1979. On August 9, 1976, the Litton co-ownership was dissolved by partition and the ownership of the Dutch Inn Building and the lots on which it is built was adjudicated to herein private respondent Edward Litton. On December 1, 1976, the latter gave notice in writing that as the new owner of said properties; rentals of the same should be remitted to him starting January, 1977. Petitioner signified his conformity to this notice and accordingly paid his rentals directly private respondent.


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On December 1, 1978, petitioner wrote to respondent manifesting his willingness to renew the contract of lease upon its expiration on January 31, 1979 under such terms as may be agreeable to both of them respondents. A series of communications ensued between them, private respondent, thru counsel, consistently invoking the clear and unequivocal terms of the contract of lease especially the duration thereof which allegedly does not provide for renewal or extension. On December 15, 1978 and thereafter on January 4, 11 and 22, 1979, private respondent, thru counsel, asked petitioner in writing to vacate the premises on or before the expiration of the lease contract on January 31, 1979, and upon his failure to vacate the premises after the expiry date of the lease contract, he should pay the amount of P58, 685.00 per month as compensation for the use and occupation of the premises. Petitioner objected to the amount as not being fair and reasonable rental, petitioner invoking the huge investment he has put in the Dutch Inn Building from 1970 to 1979 and also the alleged verbal assurance by plaintiffapellee's predecessor-in-interest of petitioner's priority to renew the lease of the premises in question. Upon petitioner's refusal to vacate the premises upon written demand made by private respondent on February 1, 1979, private respondent filed the case for ejectment based on the expiration of the Contract of Lease. The City Court rendered a decision in favor of plaintiff Edward Litton (herein private respondent) and ordered defendant, Enrique Syquia (herein petitioner) to vacate the premises and to pay plaintiff Litton, P31,781.16 a month as the reasonable value of the use and occupation of the premises from February 1, 1979 until defendant Syquia vacates the premises, the amount of P3,000.00 as attorney's fees and the costs. On appeal to the RTC (then CFI), the judgment was slightly modified in that the monthly rental was reduced to P28,000.00, less any amount that defendant may have deposited with the court and withdrawn by the plaintiff and that defendant's counterclaim was dismissed for lack of merit. The case was elevated to the Court of Appeals by way of Petition for Review under Republic Act 6031, with Syquia assailing the aforementioned decision. The appellate court upon a split vote of four Justices concurring to one dissenting affirmed the decision of the lower court and dismissed the petition for review. Issues: with

1. Whether or not the respondent Court of Appeals has decided this case not in accord law as well as applicable decisions of the Supreme Court.

2. discretion in del the

Whether or not respondent Court of Appeals has committed grave abuse of its failure to extend petitioner's stay in the leased premises.

3. Whether or not the alleged verbal assurances of George Litton Sr. and Gloria Litton Rio be sufficient basis to vary the written contract and allow the defendant an extension of lease contract.

Held: The assailed decision is hereby AFFIRMED, with the modification that this case is hereby REMANDED to the Regional Trial Court involved for the determination of the parties rights under Art. 1678 of the Civil Code.


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In dismissing the petition of appellant Syquia, respondent Court of Appeals relied heavily on the findings of fact of the Regional Trial Court and concluded that there is It a lot more than substantial evidence supporting the court a quo's finding of fact and that the conclusions arrived at by his Honor are clearly not against the law and jurisprudence. The case involves unlawful detainer and respondent Court of Appeals correctly applied the "substantial evidence" rule as provided for under R.A. 6031, amending Section 45 Judiciary Law of 1948. The decision of the latter shall be final, provided, that the findings of facts contained in said decision are supported by substantial evidence as basis thereof, and the conclusions are not clearly against the law and jurisprudence. The contract of lease in question is with a definite period. Thus to extend the lease of petitioner would be completely devoid of legal basis. Inasmuch as the stipulated period of the contract between the parties had already expired and private respondent is unwilling to extend the same. There is no way therefore that herein petitioner can hold on to the property after January 31, 1979 without conformity of plaintiff-appellee. Applying the Parol Evidence Rule to the instant case, it is clear that there being a written agreement between the parties, the same should be controlling between them. Assuming for the sake of argument that there really was a verbal agreement or promise on the part of George Litton Sr. and Gloria del Rio to allow defendant to renew the contract of lease at its expiration, the court believes that such assurance or promise would not have any binding effect on the original lessor, the Litton Finance & Investment Corporation, considering that defendant did not adduce any evidence to show in what capacity George Litton Sr. and Gloria Litton del Rio gave that assurance and considering further that it was James Litton who signed the contract of lease, in representation of Litton Finance & Investment Corporation as its Director-Vice-President. Under the Corporation Law, corporation's acts are only valid if a board resolution authorizes said acts; otherwise, said unauthorized acts are not binding to it. The evidence does not show that the act of George Litton Sr. and Gloria Litton del Rio had been ratified.

Carbonnel vs. Poncio 103 Phil. 655 Facts: This is an appeal from an order of the Court of First Instance of Rizal. Plaintiff Rosario Carbonnel alleges in her second amended complaint,, filed with the Court of First of Rizal, that, on January 27, 1955, she purchased from defendant Jose Poncio, at P 9.50 a square meter. The plaintiff paid P 247.26 on account of the price and assumed Poncio’s obligation with the understanding that the balance would be payable upon execution of the corresponding deed of conveyance, that one of the condition of the sale was that Poncio would continue staying in land for one year. Poncio refuses to execute the corresponding deed of sale despite repeated demands. The plaintiff has thereby suffered damages in the sum of P 5,000.00 aside from attorney’s fees amounting to P 1,000.00, that Poncio has conveyed the same property to defendants Ramon R. Infante and Emma L. Infarte who knew of the first sale to plaintiff and that the Infantes had thereby caused damages to plaintiff in the sum of P 5,000.00


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Defendants moved to dismiss said complaint upon the ground that plaintiff’s claim is unenforceable under the Statute of Frauds, and that said pleading does not state facts sufficient to constitute a cause of action. The Infantes filed an answer denying most of the allegations of said complaint and alleged, by way of special defense, that they purchased the land in question in good faith, for value, and without knowledge of the alleged sale to plaintiff and that plaintiff’s claim is unenforceable under the Statute of Frauds. They likewise, set up counterclaims for damages. Poncio denied specifically some allegations of said complaint and alleged that he had no knowledge sufficient to form a belief as to the truth of the other averments. Pocio similarly set up a counterclaim for damages. The lower court issued an order dismissing plaintiff’s complaint, without costs, upon the ground that her cause of action is unenforceable under the Statute of Frauds. The counterclaims were also dismissed. Issue: Whether or not the Statute of Fraud is applicable in this case. Held: The order appealed from hereby set aside, and let this case be remanded to the lower court for further proceedings not inconsistent with this decision. The Statute of Frauds is applicable only to executory contracts, not to contracts that are totally or partially performed. The reason is simple. In executory contracts there is a wide field for fraud because, unless they be in writing there is no palpable evidence of the intention of the contracting parties. However, if a contract has been totally or partially performed, the exclusion of parol evidence would promote fraud or bad faith, for it would promote fraud or bad faith, for it would enable the defendant to keep the benefits already derived by him from the transaction in litigation, and, at the same time, evade the obligations, responsibilities or liabilities assumed or contracted by him thereby. So that when the party concerned has pleaded partial performance, such party is entitled to a reasonable chance to establish by parole evidence the truth of this allegation, as well as the contract itself. “The recognition of the exceptional effect of part performance in taking an oral contract out of the statute of frauds involves the principle that oral evidence is admissible in such cases to prove both contract and the part performance of the contract”.


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Compiled Digests in ObliCon

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