OBLIGATIONS-CONTRACTS-CASE-UPDATES-2005to2014

TABLEOFCONTENTS OBLIGATIONSANDCONTRACTS

OBLIGATIONS

GENERALPROVISIONS

ErnestoUypitching,etal.v.ErnestoQuiamco 10

LourdesDelaCruzv.CourtofAppeals 10

DepartmentofHealthv.HTMCEngineersCo. 10

InternationalFinanceCorporationv.ImperialTextileMils,Inc. 11

SebastianSiga-Anv.AliciaVilanueva 11

MakatiStockExchange,Inc.,etal.v.MiguelV.Campos,substitutedByJuliaOrtigasVda.De

Campos 12

SpousesPatricioandMyrnaBernalesv.HeirsOfJulianSambaan 12

VitarichCorporationv.ChonaLosin 13

CBKPowerCompanyLimitedvs.CommissionerofInternalRevenue 13

NATUREANDEFFECTOFOBLIGATIONS

Cortesv.CourtofAppeals 13

WinifredaUrsalv.CourtofAppeals,TheRuralBankofLarena(Siquijor),Inc.andSpousesJesus

MonesetandCristitaMoneset 14

PrudentialBankv.ChonneyLim 14

YHTRealtyCorporation,ErlindaLainezandAniciaPayam v.CourtofAppealsandMaurice

Mcloughlin 14

SchimtzTransportandBrokerageCorporationv.TransportVentureInc. 15

LapreciosisimaCagungun,et.al.v.PlantersDevelopmentBank 15

RadioCommunicationofthePhilippinesvs.AlfonsoVerchez,etal. 15

CrisostomoAlcarazv.CourtofAppeals 16

MetropolitanBankandTrustCompanyvs.RenatoD.Cabilzo 16

Ma.ElizabethKindandMaryAnnKingv.MegaworldPropertiesandHoldings,Inc. 16

AutocorpGroupv.IntraStrataAssuranceCorporation 16

JPlusAsiaDevelopmentCorporationv.UtilityAssuranceCorporation 17

PoloS.Pantaleonv.AmericanExpressInternational,Inc. 18

Sps.Guaniov.MakatiShangri-LaHotel 18

Marquesv.FarEastBank 18

PhilippineRealtyandHoldingCorp.v.LeyConst.andDev.Corp. 19

GilatSateliteNetworks,Ltd.v.UnitedCoconutPlantersBankGeneralInsuranceCo.,Inc. 19

1


CarloF.Sungav.VirjenShippingCorporation,NisshoOdysseyShipManagementPte.Ltd.,

And/OrCapt.AngelZambrano 20

DIFFERENTKINDSOFOBLIGATIONS

PUREANDCONDITIONALOBLIGATIONS

SacobiaHilsDevelopmentCorporationvs.AlanTy 20

Carascosov.CourtofAppeals 21

SpousesWiliam AndJeaneteYaov.CarlomagnoB.Matela 21

SpousesJaimeBenosAndMarinaBenosv.SpousesGregorioLawilaoAndJaniceGailLawilao

21

DarelCordero,etal.vs.F.S.ManagementandDevelopmentCorporation 22

Yamamotov.NishinoLeatherIndustries,Inc. 22

SpousesJoseT.ValenzuelaandGloriaValenzuelav.KalayaanDevelopment&Industrial

Corporation 22

SolarHarvest,Inc.v.DavaoCorugatedCartonCorporation 23

Republicv.HolyTrinityRealtyDevelopmentCorporation 24

SubicBayMetropolitanAuthorityv.CourtofAppeals 24

Sps.FernandoandLourdesViloriavs.ContinentalAirlines,Inc. 24

JOINTANDSOLIDARYOBLIGATIONS

StrongholdInsuranceCompany,Inc.v.Republic-AsahiGlassCorporation 25

PetronCorporationvs.Sps.CesarJoveroandErmaF.Cudila,etal. 25

PhilippineCommercialInternationalBankv.CA 25

Crystalv.BankofthePhilippineIslands 26

TheHeirsofGeorgeY.Poevs.MalayanInsuranceCompany,Inc., 26

Albav.Yupangco 26

Sps.RodolfoBerotv.FelipeSiapno 27

TradeandInvestmentDevelopmentCorp.ofthePhilippinesv.AsiaPacesCorp. 27

OlongapoCity,V.SubicWaterAndSewerageCo.,Inc., 27

OBLIGATIONSWITHAPENALCLAUSE

FirstFil-SinLendingCorporationv.GloriaD.Padilo 28

2


FilinvestLand,Inc.vs.Hon.CourtofAppeals,PhilippineAmericanGeneralInsuranceCompany

andPacificEquipmentCorporation 28

DevelopmentBankofthePhilippinesv.FamilyFoodsManufacturingCo.Ltd.,andSpouses

JuliancoandCatalinaCenteno 28

IleanaDr.Macalinaov.BankofthePhilippineIslands 29

EXTINGUISHMENTOFOBLIGATIONS

PAYMENTORPERFORMANCE

JaimeBianav.GeorgeGimenez 29

G&M(Phil.),Inc.vs.WilieBatomalaque 29

AbacusSecuritiesCorporationv.RubenU.Ampil 30

Almedav.BathalaMarketingIndustries,Inc. 30

ASJCorporationv.Evangelista 30

InsularLifeAssuranceCompany,Ltd.v.ToyotaBel-Air,Inc. 31

DaoHengBank,Inc.(NowBancoDeOroUniversalBank)v.Laigo 31

RoyalCargoCorporationv.DFSSportsUnlimited,Inc. 32

AlandaleSportsline,Inc.v.TheGoodDevelopmentCorporation 32

AnnabeleDelaPeñaandAdrianVilarealv.TheCourtofAppealsandRuralBankofBolinao,Inc.

32

D.B.T.Mar-BayConstruction,Incorporatedv.RicaredoPanesetal. 33

RockvileExcelInternationalExim Corporationv.SpousesOligarioCulaandBernarditaMiranda

33

PremiereDevelopmentBankv.CentralSurety&InsuranceCompany,Inc. 33

CecilevileRealtyandServiceCorporationv.Acuña 34

DBTMar-BayConstruction,Inc.vs.Panes 34

ManuelGoCincoandAraceliS.GoCincov.CourtOfAppeals,EsterServacioandMaasin

TradersLendingCorporation 35

LandBankofthePhilippinesvs.AlfredoOng 35

Republicv.ThiThuThuyT.DeGuzman 35

Daltonvs.FGRRealtyandDevelopmentCorp 36

ElizabethDelCarmenv.Sps.Sabordo 36

ErlindaGajudo,FernandoGajudo,Jr.,EstelitaGajudo,BaltazarGajudoAndDaniloArahanChuav.

TradersRoyalBank 36

LuzonDevelopmentBankv.Enriquez 37

TelengtanBrothers&Sons,Inc.v.UnitedStatesLines,Inc.andtheCourtofAppeals 37

SimplicioA.Palancav.UlyssisGuides 37

3


LOSSOFTHETHINGDUE

AyalaConstructionandDevelopmentCorporationv.PhilippineCommercialInternationalBank

38

RaymundoS.DeLeonvs.BenitaT.Ong 38

CONDONATIONORREMISSIONOFTHEDEBT

RubenReynaV.COA 38

CONFUSIONORMERGEROFRIGHTS

CecilevileRealtyandServiceCorporationvs.SpousesTitoAcuñaandOfeliaB.Acuña 39

Sps.DominadorR.NarvaezandLiliaW.Narvaezvs.Sps.RoseOgasAlcisoandAntonioAlciso

39

COMPENSATION

Mavest(USA)Inc.andMavestManilaLiaisonOficevs.SampaguitaGarmentCorporation 39

ManuelB.Aloriav.EstrelitaB.Clemente 40

PremiereDevelopmentBankv.Flores 40

Sorianov.People 40

UnitedPlantersSugarMilingCo.,Inc.,(UPSUMCO)vs.CourtofAppeals,etal. 41

Laov.SpecialPlans,Inc. 41

TradersRoyalBankvs.NorbertoCastañaresandMilagrosCastañares 42

CesarV.ArezaandLolitaB.Arezav.ExpressSavingsBank,Inc. 42

MondragonPersonalSales,Inc.v.VictorianoS.Sola,Jr. 42

NOVATION

PhilippineSavingsBankv.Sps.RodelfoMalanacJr. 43

IsaisasF.FabrigasandMarcelinaR.Fabrigasv.SanFranciscodelMonte,Inc. 43

Sps.FranciscoandRubyReyesv.BPIFamilySavingsBank,Inc.,AndMagdalenaL.Lometilo,in

hercapacityasEx-OficioProvincialSherifforIloilo 44

GammonPhilippines,Inc.v.MetroRailTransitDevelopmentCorporation 44

EkLeeSteelWorksCorporationv.ManilaCastorOilCorporation 45

Suenov.LandBankofthePhilippines 45

S.C.MegaworldConstructionAndDevelopmentCorporationv.Parado 45

FoundationSpecialists,Inc.,vs.BetonvalReadyConcrete,Inc.andStrongholdInsuranceCo.,Inc.

46

4


CarolinaHernandez-Nieverav.WilfredoHernandez 47

SimeDarbyPilipinas,Inc.v.GoodyearPhilippines,Inc. 47

HeirsofServandoFrancov.Sps.Gonzales 47

RobertoR.Davidvs.EduardoC.David 48

FirstUnitedConstructorsCorporationvs.BayanihanAutomotiv 48

CONTRACTS

GENERALPROVISIONS

AsianConstructionandDevelopmentCorporationv.Tulabut 48

TanayRecreationCenterandDevelopmentCorp.v.CatalinaMatienzoFaustoandAnunciacion

FaustoPacunayen 49

Litonjuav.Litonjua 49

Bortikeyv.AFPRetirementandSeparationBenefitsSystem 49

GFEquity,Inc.vs.ArturoValenzona 50


FaustoPacunayen 50


FaustoPacunayen 51

SunaceInternationalvs.NLRC 51

GreaterMetropolitanManilaSolidWasteManagementCommiteev.Jancom Environmental

Corporation 51

Roxasv.Zuzuaregui,Jr. 51

BonifacioNakpilv.ManilaTowersDevelopmentCorp. 52

Xaviervile IHomeownersAssociation,Inc.,v.XaviervileIiHomeownersAssociation,Inc., 52

Wiliam GolangcoConstructionCorporationv.PhilippineCommercialInternationalBank 53

SpousesAnthonyandPercitaOcov.VictorLimbaring 53

RolandoLimpov.CourtofAppeals 53

Caltex(Philippines),Inc.,v.PNOCShippingandTransportCorporation 54

Mr.&Mrs.GeorgeR.Tanv.G.V.TEngineeringServices,ActingthroughitsOwner/Manager

GerinoV.Tactaquin 54

Wiliam OngGenatovs.BenjaminBayhonetal. 54

VicentaCantemprateetal.vs.CRSRealtyDevelopmentCorporationetal. 54

NationalPowerCorporationvs.PremierShippingLines,Inc. 55

PatriciaHalagueñaetal.vs.PhilippineAirlinesIncorporated 55

Sta.LuciaRealty&Development,Inc.vs.SPOUSESFrancisco&EmeliaBuenaventura 55

Sps.IsaganiCastroandDiosdadaCastrov.AngelinaDeLeonTan,et.al., 56

5


Narvaezvs.Alciso 56

HeraldBlackDacasinvs.SharonDelMundoDacasin 56

PNCCSkywayTraficManagementandSecurityDivisionWorkersOrganization(PSTMSDWO)

vs.PNCCSkywayCorporation 57

HeirsofMarioPacres,vs.HeirsofCeciliaYgoña 57

HeirsofFaustoC.Ignaciov.HomeBankersSavingsandTrustCompany 57

SpousesIgnacioF.JuicoandAliceP.Juicov.ChinaBankingCorporation 58

Sps.BenjaminMamarilv.TheBoyScoutofthePhilippines 58

StarTwo(SPV-AMC),Inc.v.PaperCityCorporationofthePhilippines 58

LandBankofthePhilippinesvs.HeirsofSpousesJorjaRigor-SorianoandMaginSoriano 59

RodolfoG.CruzandEsperanzaIbiasv.Aty.DelfinGruspe 59

PhilippineNationalBankvs.SpousesEnriqueManaloandRosalindaJacinto,etal. 59

ESSENTIALREQUISITESOFCONTRACTS

SpousesAzaroM.ZuluetaandPerlaSucayan-Zuluetav.JoseWong,etal. 59

PauloBalesterosv.RolandoAbion 60

EstateofOrlandoLlenadoetal.vs.EduardoLlenadoetal. 60

CONSENT

Dandoyv.Tongson 60

NavotasIndustrialCorporationV.Cruz,etal. 61

EpifaniaDelaCruz,substitutedbyLaureanaV.Albertov.Sps.EduardoC.SisonandEufemiaS.

Sison 61

Perpetuavda.deApev.CourtofAppealsandGenorosaCawitVda.DeLumayno 62

ReynaldoVilanuevavs.PhilippineNationalBank 62

GaudencioValerioet.alv.VicentaRefrescaet.al. 62

HeirsofCayetanoPanganvs.SpousesRogelioPererasandPriscilaPereras 62

CorneliaBaladadvs.SergioA.RublicoandSpousesLaureanoF.Yupano 63

FranciscoLandichoetal.vs.FelixSia 63

XYSTCorp.v.DMCUrbanPropertiesDevelopmentInc. 63

GloriaOcampoandTeresitaTanv.LandBankofthePhilippinesetal. 64

GovernmentServiceInsuranceSystem vs.Abraham Lopez 64

Sps.RamonLequinandVirginiaLequinvs.Sps.RaymundoVizcondeandSalomeLequin

Vizconde 65

SpousesExequielLopezandEusebiaLopezv.SpousesEduardoLopezandMarcelinaLopez65

6


HeirsOfDr.MarioS.Intacv.CourtofAppeals 65

KoreanAirCo.,Ltd.V.Yuson 66

DoñaRosanaRealtyandDevelopmentCorporationvs.MolaveDevelopmentCorporation 66

JocelynM.Toledovs.MarilouM.Hyden 66

ECERealtyandDevelopmentInc.v.RachelG.Mandap 67

OBJECTOFCONTRACTS

Aty.PedroM.Ferervs.SpousesAlfredoDiazandImeldaDiaz 67

CAUSEOFCONTRACTS

J.L.T.AgroInc.v.Balansag 68

Alvarezv.PICOPResources 68

FORM OFCONTRACTS

ManuelMalariandMilieMalariv.RebeccaAlsol 69

SerafinNaranjaetal.vs.CourtofAppeals 69

REFORMATIONOFINSTRUMENTS

BennyGov.EliodoroBacaron 69

INTERPRETATIONOFCONTRACTS

HolyCrossofDavaoColege,Inc.vs.HolyCrossofDavaoFacultyUnion–Kampi 70

Agasvs.Sabico 70

BermanMemorialPark,Inc.andLuisaChongv.FranciscoCheng 70

RosalinaTaglev.CourtofAppeals,FastInternationalCorporationand/orKuoTungYuHuang71

MarthaR.Horiganv.TroikaCommercial,Inc. 71

AurelioP.AlonzoandTeresitaA.Sisonv.JaimeandPerlitaSanJuan 71

VicenteGov.PuraKalaw,Inc. 72

Sps.Alvarov.Sps.Returban 72

AyalaInc.v.RayBurtonCorp 72

LaureanoT.Angelesv.PhilippineNationalRailways(PNR)AndRodolfoFlores 73

ElenitaIshidaandContinentJapanCo.,Inc.v.AntusadeMesa-Magno,FirmodeMesaet.al. 73

7


HeirsoftheDeceasedCarmenCruz-Zamorav.MultiwoodInternational,Inc. 73

AntipoloPropertiesv.Nuyda 74

AdriaticoConsortium,Inc.,etal.vs.LandBankofthePhilippines 74

ManilaInternationalAirportAuthorityv.AviaFilipinasInternational,Inc., 74

RESCISSIBLECONTRACTS

OliverioLaperalandFilipinasGolf&CountryClub,Inc.v.SolidHomes,Inc. 75

C-JYulo&Sons,Inc.v.RomanCatholicBishopofSanPablo,Inc. 75

SpousesFelipeandLeticiaCannuv.SpousesGilAndFernandinaGalangandNationalHome

MortgageFinanceCorporation 75

BienvenidoM.CasinoJr.v.CourtofAppeals 76

PryceCorporation(FormerlyPrycePropertiesCorporation),v.PhilippineAmusementAnd

GamingCorporation 76

CoastalPacificTradingInc.,v.SouthernRolingMils,Co.,Inc.etal. 77

PanPacificIndustrialSalesCo.,v.CourtofAppeals 77

LaurencioRamel,et.al.v.DanielAquinoandGuadaluperAbalahin 77

UnionBankofthePhilippinesv.Sps.Ong 77

PhilippineLeisureandRetirementAuthorityv.CourtofAppeals 78

UniwideHoldings,Inc.v.JandecsTransportationCo.,Inc. 78

Bonrostrov.Luna 79

ArmandO.Raquel-SantosandAnnalissaMalariv.CourtofAppealsandFinvestSecuritiesCo.,

Inc. 79

HeirsofSofiaQuirongv.DevelopmentBankofthePhilippines 79

“G”Holdings,Inc.,v.NationalMinesandAliedWorkersUnionLocal103(NAMAWU) 80

VOIDABLECONTRACTS

JorgeGonzalesv.ClimaxMiningLtd. 80

FelicitasAsycongandTeresaPolanv.CourtofAppealsandMolerLendingInvestor 80

DevelopmentBankofthePhilippinesandPrivatizationandManagementOficev.CA 80

BarcelizaP.Capistranovs.DarylLimcuandoandFeS.Sumiran 81

Hernania“Lani”Lopezvs.GloriaUmale-Cosme 81

FirstPhilippineHoldingsCorporationvs.TransMiddleEast(Phils.)Equities,Inc. 82

ECERealtyAndDevelopmentInc.v.RachelG.Mandap 82

8


UNENFORCEABLECONTRACTS

SpousesMarioandElizabethTorcuatorv.SpousesRemigioandGloriaBernabeandSpouses

DiosdadoandLourdesSalvador 82

BancoFilipinoSavingsv.Diaz 83

LinaPeñalbervs.QuirinoRamosetal. 83

Orduña,etal.v.Fuentebela,etal. 83

MunicipalityofHagonoy,Bulacanvs.Dumdum,Jr. 84

RogelioDantis,v.JulioMaghinang,Jr. 84

VOIDORINEXISTENT

Menchavezvs.Teves 84

DepartmentofHealthv.C.V.Canchela&Associates,Architects(CVCAA),inAssociationWith

MCSEngineersCo.,andA.O.MansuetoIV–ElectricalEngineeringServices,andLuisAlina,

SherifIV,RTC,Manila 85

TheManilaBankingCorporationv.EdmundoS.SilverioandTheCourtofAppeals, 85

La’ov.RepublicofthePhilippinesandtheGovernmentServiceInsuranceSystem 86

PotencianoRamirezv.Ma.CeciliaRamirez 86

JoaquinVilegasandEmmaM.Vilegasv.RuralBankofTanjayInc. 86

LandBankofthePhilippinesv.EduardoM.Cacayuran 87

Queensland-TokyoCommodities,Inc.vs.George 87

AnuelO.FuentesandLeticiaL.Fuentesvs.ConradoG.Roca 87

DomingoGonzalovs.JohnTarnate,Jr. 87

9

CASEDOCTRINES OBLIGATIONSANDCONTRACTS

OBLIGATIONS

CHAPTER1.GENERALPROVISIONS

ErnestoUypitching,etal.v.ErnestoQuiamco

GRNo.146322,December6,2006

Corona,J.

ISSUE:Cananobligationtopaydamagesarisefrom anabuseofarightwhichis

exercisedtotheprejudiceorinjuryofanotherpersonaswhenacorporationseizeda

motorcyclewiththeassistanceofpolicemenwithoutasearchwarantororder?

DOCTRINE:Ablatantdisregardforthelawfulprocedurefortheenforcementofitsright,

to the prejudice ofrespondentviolated the law as welas public morals,and

transgressedthepropernormsofhumanrelations.Article19,alsoknownasthe

“principleofabuseofright,”prescribesthatapersonshouldnotusehisrightunjustlyor

contrarytohonestyandgoodfaith,otherwiseheopenshimselftoliability.Thereisan

abuseofrightwhenitisexercisedsolelytoprejudiceorinjureanother.Theexerciseof

arightmustbeinaccordancewiththepurposeforwhichitwasestablishedandmust

notbeexcessiveorundulyharsh;theremustbenointentiontoharm another.Otherwise,

liabilityfordamagestotheinjuredpartywilatach.

LourdesDelaCruzv.CourtofAppeals

G.RNo.139442,December6,2006

Velasco,Jr.J.:

ISSUE:Canapersonunderacontractofleasepossesssuchlandbytoleranceeven

aftertheexpirationofthecontractofleaseandafterademandtovacate.

DOCTRINE:Obligationsarisingfrom contractshavetheforceoflaw betweenthe

contractingpartiesandshouldbecompliedwithingoodfaith.Thus,initialypetitioner

aslesseeisthelegalpossessorofthesubjectlotbyvirtueofacontractoflease.When

firedestroyedherhouse,theReyesesconsideredtheleaseterminated.Ithasbeenheld

thatapersonwhooccupiesthelandofanotheratthelater’stoleranceorpermission,

withoutanycontractbetweenthem,isnecessarilyboundbyanimpliedpromisethathe

wilvacateupondemand,failingwhichasummaryactionforejectmentistheproper

remedyagainstthem.

DepartmentofHealthv.HTMCEngineersCo.

G.R.No.146120.January27,2006

Chico-Nazario,J.

ISSUE:Canaperfectedcontractberenouncedunilateraly?

DOCTRINE:No.Acontractproperlyexecutedbetweenpartiescontinuestobethelaw

betweensaidpartiesandshouldbecompliedwithingoodfaith.Therebeingaperfected

contract,DOH cannot revoke orrenounce the same withoutthe consentofthe

otherparty.Justasnobodycanbeforcedtoenterintoacontract,inthesamemanner,

onceacontractisenteredinto,nopartycanrenounceitunilateralyorwithoutthe

consentoftheother.Itisageneralprincipleoflaw thatnoonemaybepermitedto

changehis mind ordisavow and go back upon his own acts,ortoproceed

contrary thereto,to the prejudice of the other party.As no revision to the

10


originalagreementwaseverarivedat,thetermsoftheoriginalcontractshalcontinue

togovernoverboththeHTMCandtheDOHwithrespecttotheinfrastructureprojects

as ifno amendments were everinitiated.In the absence ofa new perfected

contractbetweenHTMC andDOH,bothpartiesshalcontinuetobeboundbythe

stipulationsoftheoriginalcontractandalitsnaturalefects.

InternationalFinanceCorporationv.ImperialTextileMils,Inc.

G.R.No.160324;November15,2005

Panganiban,J.:

ISSUES:

(1)Whatisthenatureofthecontractenteredintobetweenthepartiesdenominatedas

GuaranteeAgreement?

(2)UnderSuretyship,whataretheobligationsofthepartiesunderthecontract?

DOCTRINES:

(1) Thetermsofacontractgoverntherightsandobligationsofthecontracting

parties.Whentheobligorundertakestobe"jointlyandseveraly"liable,itmeansthatthe

obligation is solidary.Ifsolidaryliabilitywas instituted to "guarantee"a principal

obligation,thelawdeemsthecontracttobeoneofsuretyship.

ThecreditorinthepresentPetitionwasabletoshow convincinglythat,although

denominated as a "Guarantee Agreement,"the Contractwas actualy a surety.

Notwithstandingtheuseofthewords"guarantee"and"guarantor,"thesubjectContract

wasindeedasurety,becauseitstermswereclearandleftnodoubtastotheintention

oftheparties.

Theobligationsoftheguarantorsaremeticulouslyexpressedinthefolowingprovision:

"Section2.01.TheGuarantorsjointlyandseveraly,irevocably,absolutelyand

unconditionalyguarantee,asprimaryobligorsandnotassuretiesmerely,the

dueandpunctualpaymentoftheprincipalof,andinterestandcommitment

chargeon,theLoan,andtheprincipalof,andintereston,theNotes,whetherat

statedmaturityoruponprematuring,alassetforthintheLoanAgreementand

intheNotes."

TheAgreementuses"guarantee"and"guarantors,"promptingITM tobaseitsargument

onthosewords.ThisCourtisnotconvincedthattheuseofthetwowordslimitsthe

Contracttoamereguaranty.ThespecificstipulationsintheContractshowotherwise.

(2)WhilereferingtoITM asaguarantor,theAgreementspecificalystatedthatthe

corporationwas"jointlyandseveraly"liable.Toputemphasisonthenatureofthat

liability,theContractfurtherstatedthatITM wasaprimaryobligor,notameresurety.

Thosestipulationsmeantonlyonething:thatatbotom,andtoallegalintentsand

purposes,itwasasurety.

Indubitablytherefore,ITM bounditselftobesolidarilyliablewithPPICforthelater’s

obligationsundertheLoanAgreementwithIFC.ITM therebybroughtitselftothelevel

ofPPICandcouldnotbedeemedmerelysecondarilyliable.

SebastianSiga-Anv.AliciaVilanueva

G.R.No.173227,January20,2009

Chico-NazarioJ.:

ISSUE:Whethersolutioindebitiappliestosituationswhereintherewasawrongful

paymentofinterest?

11


DOCTRINE:Yes.UnderArticle1960oftheCivilCode,iftheborowerofloanpays

interestwhentherehasbeennostipulationtherefor,theprovisionsoftheCivilCode

concerningsolutioindebitishalbeapplied.Article2154oftheCivilCodeexplainsthe

principleofsolutioindebiti.Saidprovisionprovidesthatifsomethingisreceivedwhen

thereisno rightto demand it,and itwasundulydelivered throughmistake,the

obligationtoreturnitarises.Insuchacase,acreditor-debtorrelationshipiscreated

underaquasi-contractwherebythepayorbecomesthecreditorwhothenhastheright

todemandthereturnofpaymentmadebymistake,andthepersonwhohasnorightto

receivesuchpaymentbecomesobligatedtoreturnthesame.Thequasi-contractof

solutioindebitiharksbacktotheancientprinciplethatnooneshalenrichhimself

unjustlyattheexpenseofanother.Theprincipleofsolutioindebitiapplieswhere(1)a

paymentismadewhenthereexistsnobindingrelationbetweenthepayor,whohasno

dutytopay,andthepersonwhoreceivedthepayment;and(2)thepaymentismade

throughmistake,andnotthroughliberalityorsomeothercause.Wehaveheldthatthe

principleofsolutioindebitiappliesincaseoferoneouspaymentofundueinterest.

MakatiStockExchange,Inc.,etal.v.MiguelV.Campos,substitutedByJuliaOrtigas

Vda.DeCampos

G.R.No.138814,April16,2009

Chico-Nazario,J.:

ISSUE:Whethertheclaim ofarightoranobligationmaybemadeevenwithout

identifyingitssource.

DOCTRINE:No.Rightandobligationarelegaltermswithspecificlegalmeaning.Aright

isaclaim ortitletoaninterestinanythingwhatsoeverthatisenforceablebylaw.An

obligationisdefinedintheCivilCodeasajuridicalnecessitytogive,todoornottodo.

Foreveryrightenjoyedbyanyperson,thereisacorespondingobligationonthepartof

anotherpersontorespectsuchright.Thus,JusticeJ.B.L.Reyesofersthedefinition

givenbyAriasRamosasamorecompletedefinition:

Anobligationisajuridicalrelationwherebyaperson(caledthecreditor)

maydemand from another(caled the debtor)the observance ofa

determinativeconduct(thegiving,doingornotdoing),andincaseof

breach,maydemandsatisfactionfrom theassetsofthelater.

Therefore,anobligationimposedonaperson,andthecorespondingrightgrantedto

another,mustberootedinatleastoneofthesefivesources.Themereassertionofa

rightandclaim ofanobligationinaninitiatorypleading,whetheraComplaintorPetition,

withoutidentifyingthebasisorsourcethereof,ismerelyaconclusionoffactandlaw.A

pleadingshouldstatetheultimatefactsessentialtotherightsofactionordefense

asserted,asdistinguishedfrom mereconclusionsoffactorconclusionsoflaw.Thus,a

ComplaintorPetitionfiledbyapersonclaimingarighttotheOficeofthePresidentof

thisRepublic,butwithoutstatingthesourceofhispurportedright,cannotbesaidto

havesuficientlystatedacauseofaction.Also,apersonclaimingtobetheownerofa

parceloflandcannotmerelystatethathehasarighttotheownershipthereof,butmust

likewiseassertintheComplainteitheramodeofacquisitionofownershiporatleasta

certificateoftitleinhisname.

SpousesPatricioandMyrnaBernalesv.HeirsOfJulianSambaan

G.R.No.163271,January15,2010

DelCastilo,J.:

ISSUE:Whethertitletothesubjectparceloflandwastransferedbyvirtueofaforged

deedofabsolutesalealegedlyexecutedbythelateJulianandGuilermaSambaanin

favorofMyrnaBernalesandherhusband.

12


DOCTRINE:No.Withthepresentationoftheforgeddeed,evenifaccompaniedbythe

owner’sduplicatecertificateoftitle,theregisteredownerdidnottherebylosehistitle,

andneitherdoestheassigneeintheforgeddeedacquireanyrightortitletothesaid

property.ThevalidexecutionoftheDeedofAbsoluteSalewilconveyandtransfer

ownershipinfavorofappelantstitlebasedontherulethatbythecontractofsaleone

ofthecontractingpartiesobligateshimselftotransferownershipofandtodelivera

determinatething,andtheothertopaythereforasum certaininmoneyoritsequivalent.

ThefactthattheassailedDeedwasnotsignedbyJulianandthesignaturesofJulian

andGuilermawereforgedperfindingsoftheNBISeniorDocumentExaminer,itcan

thereforebeinferedthatthesubsequentissuanceofTransferCertificateofTitleNo.T-

14204hasnobasisatalsinceownershipwasnotconveyedtoappelantsbyreasonof

theforgedDeed.

VitarichCorporationv.ChonaLosin

G.R.No.181560,November15,2010

Mendoza,J.:

ISSUE:WhetherVitarichshouldbeheldliablefortheconductofitsemployee,Dericto,in

takingoutdressedchickensfrom thebodegaofVitarichandreceivingthesamebut

chargingitasChargeSalesInvoiceagainstitsclient,Losin.

DOCTRINE:No.Pursuantto Article2180 oftheCivilCode,thatvicariousliability

atachesonlytoanemployerwhenthetortuousconductoftheemployeerelatesto,or

isinthecourseof,hisemployment.Thequestiontoaskshouldbewhetheratthetime

ofthedamageorinjury,theemployeeisengagedintheafairsorconcernsofthe

employeror,independently,inthatofhisown?Vitarichincurednoliabilitywhen

Directo’sconduct,actoromissionwentbeyondtherangeofhisemployment.

CBKPowerCompanyLimitedvs.CommissionerofInternalRevenue

G.R.Nos.198729-30January15,2014

Sereno,C.J.:

ISSUE:Whethertheprincipleofsolutioindebitiappliesinaclaim fortheissuanceofa

taxcreditcertificaterepresentingthelater'salegedunutilizedinputtaxesonlocal

purchasesofgoodsandservicesatributabletoefectivelyzero-ratedsalestoNational

PowerCorporation(NPC)forthesecondandthirdquartersof2005.

DOCTRINE:No.Devoidofmeritistheapplicabilityoftheprincipleofsolutioindebitito

thepresentcase.Accordingtothisprinciple,ifsomethingisreceivedwhenthereisno

righttodemandit,anditwasundulydeliveredthroughmistake,theobligationtoreturn

itarises.Inthatsituation,acreditor-debtorrelationshipiscreatedunderaquasicontract,wherebythepayorbecomesthecreditorwhothenhastherighttodemandthe

returnofpaymentmadebymistake,andthepersonwhohasnorighttoreceivethe

paymentbecomesobligatedtoreturnit.Thequasi-contractofsolutioindebitiisbased

ontheancientprinciplethatnooneshalenrichoneselfunjustlyattheexpenseof

another.Thereissolutioindebitiwhen:(1)Paymentismadewhenthereexistsno

bindingrelationbetweenthepayor,whohasnodutytopay,andthepersonwho

receivedthepayment;and(2)Paymentismadethroughmistake,andnotthrough

liberalityorsomeothercause.Thoughtheprincipleofsolutioindebitimaybeapplicable

tosomeinstancesofclaimsforarefund,theelementsthereofarewantinginthiscase.

First,thereexistsabindingrelationbetweenpetitionerandtheCIR,theformerbeinga

taxpayerobligatedtopayVAT.Second,thepaymentofinputtaxwasnotmadethrough

13


mistake,sincepetitionerwaslegalyobligatedtopayforthatliability.Theentitlementto

arefundorcreditofexcessinputtaxissolelybasedonthedistinctivenatureoftheVAT

system.AtthetimeofpaymentoftheinputVAT,theamountpaidwascorectand

proper.

CHAPTER2.NATUREANDEFFECTOFOBLIGATIONS

Cortesv.CourtofAppeals

GRNo.126083.July12,2006

Ynares-Santiago,J.

ISSUES:Whatistheefectifbothpartiesincurindelayinareciprocalobligation?

DOCTRINE:Consideringthatbothpartieswereindelayandthattheirobligationwas

reciprocal,performancethereofmustbesimultaneous.ThemutualinactionofCortes

andtheCorporationthereforegaverisetoacompensatiomoraeordefaultonthepart

ofbothpartiesbecauseneitherhascompletedtheirpartintheirreciprocalobligation.

Thismutualdelayofthepartiescancelsouttheefectsofdefaultsuchthatitisasifno

oneisguiltyofdelay.

WinifredaUrsalv.CourtofAppeals,TheRuralBankofLarena(Siquijor),Inc.and

SpousesJesusMonesetandCristitaMoneset

GRNo.142411.October14,2005

Austria-Martinez,J.:

ISSUE:Isthevendorliablefordamagesinreciprocalobligations?

DOCTRINE:Wherethevendeeinthecontracttoselalsotookpossessionofthe

property,thesubsequentmortgageconstitutedbytheowneroversaidpropertyinfavor

ofanotherpersonwasvalidsincethevendeeretainedabsoluteownershipoverthe

property.Atmost,thevendeeinthecontracttoselwasentitledonlytodamages

pursuanttoArt.1169oftheCivilCodeonreciprocalobligations.

PrudentialBankv.ChonneyLim

G.R.No.136371November11,2005

Tinga,J.:

ISSUE:Whetherthefailureofthebank’semployeestocreditthedeposittorespondent’s

savingsaccountconstitutesactionablenegligenceinlaw.

DOCTRINE:Article1172oftheCivilCodeordainsthatresponsibilityarisingfrom

negligenceintheperformanceofanobligationisdemandable.Thefailureofthebank’s

employees to creditthe amountofP34,000.00 to respondent’s savings account,

resulting asitdid in thedishonorofrespondent’schecks,constitutesactionable

negligenceinlaw.

From anotherperspective,thenegligenceofthebankconstitutesabreachofdutytoits

client.Itisworthyofnotethatthebankingindustryisimpressedwithpublicinterest.As

such,itmustobserveahighdegreeofdiligenceandobserveloftystandardsofintegrity

andperformance.Bythenatureofitsfunctions,abankisunderobligationtotreatthe

accountsofitsdepositorswithmeticulouscareandalwaysto haveinmindthe

fiduciarynatureofitsrelationshipwiththem.

14


YHTRealtyCorporation,ErlindaLainezandAniciaPayam v.CourtofAppealsand

MauriceMcloughlin

G.R.No.126780.February17,2005

Tinga,J.:

ISSUE:Whenwilthehotelkeepers/innkeepersliablefortheefectsoftheirguests?

DOCTRINE:Article2003iscontroling,thus:

Art.2003.Thehotel-keepercannotfreehimselffrom responsibilityby

postingnoticestotheefectthatheisnotliableforthearticlesbroughtby

theguest.Anystipulationbetweenthehotel-keeperandtheguestwhereby

theresponsibilityoftheformerassetforthinArticles1998to2001is

suppressedordiminishedshalbevoid.

Article2003wasincorporatedintheNewCivilCodeasanexpressionofpublicpolicy

preciselytoapplytosituationssuchasthatpresentedinthiscase.Thehotelbusiness

likethecommoncarier'sbusinessisimbuedwithpublicinterest.Cateringtothepublic,

hotelkeepersareboundtoprovidenotonlylodgingforhotelguestsandsecuritytotheir

personsandbelongings.Thetwindutyconstitutestheessenceofthebusiness.Thelaw

inturndoesnotalowsuchdutytothepublictobenegatedordilutedbyanycontrary

stipulationinso-caled"undertakings"thatordinarilyappearinpreparedformsimposed

byhotelkeepersonguestsfortheirsignature.

Inanearlycaseitwasruledthattoholdhotelkeepersorinnkeeperliablefortheefects

oftheirguests,itisnotnecessarythattheybeactualydeliveredtotheinnkeepersor

theiremployees.Itisenoughthatsuchefectsarewithinthehotelorinn.Withgreater

reasonshouldtheliabilityofthehotelkeeperbeenforcedwhenthemissingitemsare

takenwithouttheguest'sknowledgeandconsentfrom asafetydepositboxprovidedby

thehotelitself,asinthiscase.

SchimtzTransportandBrokerageCorporationv.TransportVentureInc.

G.R.No.150255,April22,2005

Carpio-MoralesJ:

ISSUE:Howmusttheliabilityofthecommoncarier,ononehand,andanindependent

contractor,ontheotherhand,bedescribed?

DOCTRINE:Itwouldbesolidary.Acontractualobligationcanbebreachedbytortand

whenthesameactoromissioncausestheinjury,oneresultinginculpacontractualand

theotherinculpaaquiliana,Article2194oftheCivilCodecanwelapply.Infine,a

liabilityfortortmayariseevenunderacontract,wheretortisthatwhichbreachesthe

contract.Stateddiferently,whenanactwhichconstitutesabreachofcontractwould

haveitselfconstitutedthesourceofaquasi-delictualliabilityhadnocontractexisted

betweentheparties,thecontractcanbesaidtohavebeenbreachedbytort,thereby

alowingtherulesontorttoapply.

AsforBlackSea,itsdutyasacommoncarierextendedonlyfrom thetimethegoods

were surendered orunconditionaly placed in its possession and received for

transportationuntiltheyweredeliveredactualyorconstructivelytoconsigneeLitle

Giant.

Partiestoacontractofcariagemay,however,agreeuponadefinitionofdeliverythat

extendstheservicesrenderedbythecarier.Inthecaseatbar,BilofLadingNo.2

coveringtheshipmentprovidesthatdeliverybemade“totheportofdischargeorso

neartheretoasshemaysafelyget,alwaysafloat.”Thedeliveryofthegoodstothe

consigneewasnotfrom “piertopier”butfrom theshipsideof“M/VAlexanderSaveliev”

15


andintobarges,forwhichreasontheconsigneecontractedtheservicesofpetitioner.

SinceBlackSea had constructivelydelivered thecargoesto LitleGiant,through

petitioner,ithaddischargeditsduty.Infine,noliabilitymaythusatachtoBlackSea.

LapreciosisimaCagungun,et.al.v.PlantersDevelopmentBank


Chico-Nazario,J.:

ISSUE:Whatisthedegreeofdiligencerequiredintheperformanceofanobligation?

DOCTRINE:Thefiduciarynatureofbankingrequiresbankstoassumeadegreeof

diligencehigherthanthatofagoodfatherofafamily.Article1172oftheNew Civil

Codestatesthatthedegreeofdiligencerequiredofanobligoristhatprescribedbylaw

orcontract,andabsentsuchstipulationthenthediligenceofafamily.Ineverycase,the

depositorexpectsthebanktotreathisaccountwithutmostfidelity,whethersuch

accountsconsistsonlyofafewhundredpesosorofmilionsofpesos.

RadioCommunicationofthePhilippinesvs.AlfonsoVerchez,etal.

G.R.No.164349.January31,2006

CarpioMorales,J.:

ISSUE:Mustacausalconnectionbetweenthedelayoftherespondentinthe

performanceofitsdutyandtheinjurysuferedbytheplaintifsbeprovedinculpa

contractual?

DOCTRINE:No.Inculpacontractual,themereproofoftheexistenceofthecontractand

thefailureofitscompliancejustify,primafacie,acorespondingrightofrelief.Thelaw,

recognizingtheobligatoryforceofcontracts,wilnotpermitapartytobesetfreefrom

liability for any kind of misperformance of the contractualundertaking or a

contraventionofthetenorthereof.Abreachuponthecontractconfersupontheinjured

partyavalidcauseforrecoveringthatwhichmayhavebeenlostorsufered.

CrisostomoAlcarazv.CourtofAppeals

G.R.No.152202.July28,2006

Puno,J.:

ISSUE:Isacreditcardholderliabletopaytheinterestsandsurchargesimposedbythe

bankfornon-paymentofhisobligationsabsentanystipulationforsuchpayment?

DOCTRINE:No.Absenceofanyproofthatthetermsandconditionsofthecreditcard

usehasbeenshownto itsclient,and failureto byrespondentto show thatan

application form ordocumentpriorto theissuanceofthecreditcard hasbeen

submitedorsignedbythesame,theclientshouldnotbecondemnedtopaythe

interestandchargesprovidedunderitstermsandconditions.

MetropolitanBankandTrustCompanyvs.RenatoD.Cabilzo

GRNo.154469.December6,2006

Chico-Nazario,J:

ISSUE:CanaBankingInstitutionWhoReliedToAnotherBank’sindorsementofacheck

evadeliabilitybyfailingtodetectalterationsmadeinacheck.

DOCTRINE:No.Thepointisthatasabusinessafectedwithpublicinterestand

16


becauseofthenatureofitsfunctions,thebankisunderobligationtotreattheaccounts

ofitsdepositorswithmeticulouscare,alwayshavinginmindthefiduciarynatureof

theirrelationship.Theappropriatedegreeofdiligencerequiredofabankmustbeahigh

degreeofdiligence,ifnottheutmostdiligence.Ineverycase,thedepositorexpectsthe

banktotreathisaccountwiththeutmostfidelity,whethersuchaccountconsistsonlyof

afewhundredpesosorofmilions.

Ma.ElizabethKindandMaryAnnKingv.MegaworldPropertiesandHoldings,Inc.

G.R.No.162895.August16,2006

Quisumbing,J.:

ISSUE:Isrefundaremedyincasethereisadefectintheobjectoftheobligation?

DOCTRINE:Thereisnothingonrecordtoshowthattheoriginalstructurewasunstable.

Onewhoalegesafacthastheburdenofprovingit.Asidefrom thepicturesandvideos

ofthecrackedperimeterfence,petitionersdidnotpresentanyotherevidence.These

picturesandvideosareinsuficienttoshow thatthetownhouse’sfoundationwas

structuralydefective. Thecrackscouldbemerelysuperficial. Otherthanthat,the

presumptionisthattherewasnoiregularityregardingtheapprovalofthebuildingplan.

Moreover,respondentpresentedanafidavitofastructuralengineeratestingthatthe

cracksandleaksontheperimeterfencedonotafectthestructuralintegrityofthe

townhouse. Absentanyshowingthatthetownhousestructurewasunstableand

unsafeforhabitation,petitionersarenotentitledtoarefund.

AutocorpGroupv.IntraStrataAssuranceCorporation

G.R.No.166662,556SCRA250

ISSUES:

(1)Isdemandnecessarytomakeanobligationbecomedueanddemandable?

(2)AredefensesagainsttheBureauofCustomscompletelyavailableagainstISAC,

sincetherightofthelatertoseekindemnityfrom petitionerdependsontherightofthe

BOCtoproceedagainstthebonds?

DOCTRINE:

(1)Demand,whetherjudicialorextrajudicial,is notrequired before an obligation

becomesdueanddemandable-ademandisonlynecessaryinordertoputanobligorin

adueanddemandableobligationindelay,whichinturnisforthepurposeofmakingthe

obligorliableforinterestsordamagesfortheperiodofdelay.

(2)ISAC’srighttoseekindemnityfrom petitionersdoesnotconstitutesubrogation

undertheCivilCode,consideringthattherehasbeennopaymentyetbyISACtothe

BOC. ThereareindeedcasesintheaforementionedArticle2071oftheCivilCode

whereintheguarantororsurety,evenbeforehavingpaid,mayproceedagainstthe

principaldebtor,butinalthesecases,Article2071oftheCivilCodemerelygrantsthe

guarantororsuretyanaction“toobtainreleasefrom theguaranty,ortodemanda

securitythatshalprotecthim from anyproceedingsbythecreditorandfrom the

dangerofinsolvencyofthedebtor.”Thebenefitofsubrogation,anextinctivesubjective

novationbyachangeofcreditor,which“transferstothepersonsubrogated,thecredit

and althe rightsthereto appertaining,eitheragainstthe debtororagainstthird

persons,”isgrantedbytheArticle2067oftheCivilCodeonlytothe“guarantor(or

surety)whopays.”

ISACcannotbesaidtohavesteppedintotheshoesoftheBOC,becausetheBOCstil

retainssaidrightsuntilitispaid.ISAC’srighttofileCivilCaseNo.95-1584isbasedon

theexpressprovisionoftheIndemnityAgreementsmakingpetitionersliabletoISACat

the verymomentISAC’s bonds become due and demandable forthe liabilityof

17


AutocorpGrouptotheBOC,withoutneedforactualpaymentbyISACtotheBOC.Butit

isstilcorecttosaythatalthedefensesavailabletopetitionersagainsttheBOCcan

likewisebeinvokedagainstISAC becausethelater’scontractualrighttoproceed

againstpetitionersonlyariseswhentheAutocorpGroupbecomesliabletotheBOCfor

non-compliancewithitsundertakings.Indeed,theargumentsandevidencepetitioners

canpresentagainsttheBOCtoprovethatAutocorpGroup’sliabilitytotheBOCisnot

yetdueanddemandablewouldalsoestablishthatpetitioners’liabilitytoISACunderthe

IndemnityAgreementshasnotyetarisen.

JPlusAsiaDevelopmentCorporationv.UtilityAssuranceCorporation

G.R.No.199650,700SCRA134

ISSUE:Candelaytakeplaceeveniftheobligationtoperform orcompletetheproject

wasnotyetdemandablebecausetheagreedcompletiondateisyettocome?

DOCTRINE:Defaultormoraonthepartofthedebtoristhedelayinthefulfilmentofthe

prestationbyreasonofacauseimputabletotheformer.Itisthenon-fulfilmentofan

obligationwithrespecttotime.

Inthisjurisdiction,thefolowingrequisitesmustbepresentinorderthatthedebtormay

beindefault:(1)thattheobligationbedemandableandalreadyliquidated;(2)thatthe

debtordelaysperformance;and(3)thatthecreditorrequirestheperformancejudicialy

orextrajudicialy.

Sincethepartiescontemplateddelayinthecompletionoftheentireprojectascanbe

seenintheConstructionAgreement,theCAconcludedthatthefailureofthecontractor

tocatchupwithscheduleofworkactivitiesdidnotconstitutedelaygivingrisetothe

contractor’sliabilityfordamages.

Article1374oftheCivilCoderequiresthatthevariousstipulationsofacontractshalbe

interpretedtogether,atributingtothedoubtfulonesthatsensewhichmayresultfrom

alofthem takenjointly.Here,theworkscheduleapprovedbypetitionerwasintended,

notonlytoserveasitsbasisforthepaymentofmonthlyprogressbilings,butalsofor

evaluationoftheprogressofworkbythecontractor.Article13.01(g)(i)ofthe

ConstructionAgreementprovidesthatthecontractorshalbedeemedindefaultif,

amongothers,ithaddelayedwithoutjustifiablecausethecompletionoftheproject"by

morethanthirty(30)calendardaysbasedonoficialworkscheduledulyapprovedby

theOWNER."

Whereapartytoabuildingconstructioncontractfailstocomplywiththedutyimposed

bythetermsofthecontract,abreachresultsforwhichanactionmaybemaintainedto

recoverthedamagessustainedthereby,andofcourse,abreachoccurswherethe

contractorinexcusablyfailstoperform substantialyinaccordancewiththetermsof

thecontract.

PoloS.Pantaleonv.AmericanExpressInternational,Inc.

G.R.No.174269,May8,2009

Tinga,J.:

ISSUE:Whetherdelaybyitselfgivesrisetomoraldamages.

DOCTRINE:No.Itshouldbeemphasizedthatthereasonwhypetitionerisentitledto

damagesisnotsimplybecauserespondentincureddelay,butbecausethedelay,for

whichculpabilityliesunderArticle1170,ledtotheparticularinjuriesunderArticle2217

18


oftheCivilCodeforwhichmoraldamagesareremunerative.Moraldamagesdonot

availtosoothetheplaintsofthesimplyimpatient,sothisdecisionshouldnotbecause

forreliefforthose who time the length oftheircreditcard transactionswith a

stopwatch.ThesomewhatunusualatendingcircumstancestothepurchaseatCoster

–thattherewasadeadlineforthecompletionofthatpurchasebypetitionerbeforeany

delaywouldredoundtotheinjuryofhisseveraltravelingcompanions–gaverisetothe

moralshock,mentalanguish,seriousanxiety,woundedfeelingsandsocialhumiliation

sustainedbythepetitioner,asconcludedbytheRTC.Thosecircumstancesarefairly

unusual,andshouldnotgiverisetoageneralentitlementfordamagesunderamore

mundanesetoffacts.

Sps.Guaniov.MakatiShangri-LaHotel

GRNo.190601,February7,2011

ISSUE:Whetherthedoctrineofproximatecauseisapplicabletoabreachofcontract.

DOCTRINE:No.TheCourtfindsthatsincepetitioners’complaintarosefrom acontract,

thedoctrineofproximatecausefindsnoapplicationtoit,thelaterapplicableonlyto

actionsforquasi-delicts,notinactionsinvolvingbreachofcontract.Breachofcontract

isdefinedasthefailurewithoutlegalreasontocomplywiththetermsofacontract.The

appelatecourt,andeventhetrialcourt,observedthatpetitionerswereremissintheir

obligationtoinform respondentofthechangeintheexpectednumberofguests.

Petitioners’failuretodischargesuchobligationthusexcusedrespondentfrom liability

for“anydamageorinconvenience”occasionedthereby.

WhatappliesinthepresentcaseisArticle1170oftheCivilCodewhichreads:

Art.1170.Thosewhointheperformanceoftheirobligationsareguiltyof

fraud,negligenceordelay,andthosewhoinanymannercontravenethe

tenorthereof,areliablefordamages.

Inculpacontractualthemereproofoftheexistenceofthecontractandthefailureofits

compliancejustify,primafacie,acorespondingrightofrelief.Thelaw,recognizingthe

obligatoryforceofcontracts,wilnotpermitapartytobesetfreefrom liabilityforany

kindofmisperformanceofthecontractualundertakingoracontraventionofthetenor

thereof.Abreachuponthecontractconfersupontheinjuredpartyavalidcausefor

recoveringthatwhichmayhavebeenlostorsufered.Theremedyservestopreserve

theinterestsofthepromisseethatmayincludehis“expectationinterest,”whichishis

interestinhavingthebenefitofhisbargainbybeingputinasgoodapositionashe

wouldhavebeeninhadthecontractbeenperformed,orhis“relianceinterest,”whichis

hisinterestinbeingreimbursedforlosscausedbyrelianceonthecontractbybeingput

inasgoodapositionashewouldhavebeeninhadthecontractnotbeenmade;or

his“restitutioninterest,”whichishisinterestinhavingrestoredtohim anybenefitthat

hehasconferedontheotherparty.

Marquesv.FarEastBank

G.R.No.171379;January10,2011

ISSUE:WhetherFEBTCisestoppedfrom claimingthattheinsurancepremium inthe

contracthasbeenpaid,makingitliablefordamages.

DOCTRINE:Yes.Inestoppel,apartycreatinganappearanceoffact,whichisfalse,is

boundbythatappearanceasagainstanotherpersonwhoactedingoodfaithonit.

InSantiagoSyjuco,Inc.v.Castro,theCourtstatedthat“estoppelmayarisefrom silence

aswelasfrom words.”‘Estoppelbysilence’ariseswhereaperson,whobyforceof

circumstancesisobligedtoanothertospeak,refrainsfrom doingsoandthereby

inducestheothertobelieveintheexistenceofastateoffactsinrelianceonwhichhe

19


actstohisprejudice.

Asaconsequenceofitsnegligence,FEBTCmustbeheldliablefordamagespursuantto

Article1172inrelationtoArticle2176oftheCivilCodewhichstates“whoeverbyactor

omissioncausesdamagetoanother,therebeingfaultornegligence,isobligedtopay

forthedamagedone.”Indisputably,hadtheinsurancepremium beenpaid,throughthe

automaticdebitarangementwithFEBTC,Maxilite’sfirelossclaim wouldhavebeen

approved.

MondragonLeisureandResortsCorporationv.CourtofAppealsetal.

G.R.No.154188,June15,2005

Quisumbing,J.:

ISSUE:In 1997,the Asian Financialcrisis occured.Is this a fortuitous event

contemplatedunderArticle1174suchthatadebtorcannotbeheldindefaultundera

loanagreement?

DOCTRINE:No.Toexempttheobligorfrom liabilityforabreachofanobligationby

reasonofafortuitousevent,thefolowingrequisitesmustconcur:(a)thecauseofthe

breachoftheobligationmustbeindependentofthewilofthedebtor;(b)theevent

mustbeeitherunforeseeableorunavoidable;(c)theeventmustbesuchastorenderit

impossibleforthedebtortofulfilhisobligationinanormalmanner;and(d)thedebtor

mustbefreefrom anyparticipationin,oraggravationoftheinjurytothecreditor.The

folowingareexceptedfrom therule:(1)whenthelawexpresslysospecifies;(2)when

itisotherwisedeclaredbytheparties;and(3)whenthenatureoftheobligationrequires

the assumption of risks.Every business venture involves risks.Risks are not

unforeseeable;theyareinherentinbusiness.Hence,acorporationthatentersintoa

loanagreement,beingawareoftheeconomicenvironmentatthetimeitenteredinto

suchagreement,canbedeclaredindefaultdespiteeventssuchastheAsianfinancial

crisis.Itisnotafortuitouseventsoastoexonerateapartyfrom itsobligation.

PhilippineRealtyandHoldingCorp.v.LeyConst.andDev.Corp.

G.R.No.165548,June13,2011

ISSUE:Whetherthereisafortuitouseventthatwilexempttheobligorfrom liabilityfor

thebreachofanobligation.

DOCTRINE:Yes.UnderArticle1174oftheCivilCode,toexempttheobligorfrom liability

forabreachofanobligationduetoan"actofGod"orforcemajeure,thefolowingmust

concur:(a)thecauseofthebreachoftheobligationmustbeindependentofthewilof

thedebtor;(b)theeventmustbeeitherunforeseeableorunavoidable;(c)theevent

mustbesuchastorenderitimpossibleforthedebtortofulfilhisobligationinanormal

manner;and(d)thedebtormustbefreefrom anyparticipationin,oraggravationofthe

injurytothecreditor.Theshortageinsuppliesandcementmaybecharacterizedas

forcemajeure.Inthepresentcase,hardwarestoresdidnothaveenoughcement

availableintheirsuppliesorstocksatthetimeoftheconstructioninthe1990s.

Likewise,typhoons,powerfailuresandinteruptionsofwatersupplyalclearlyfalunder

forcemajeure.SinceLCDCcouldnotpossiblycontinueconstructingthebuildingunder

thecircumstancesprevailing,itcannotbeheldliableforanydelaythatresultedfrom the

causesaforementioned.

GilatSateliteNetworks,Ltd.v.UnitedCoconutPlantersBankGeneralInsuranceCo.,

Inc.

G.R.No.189563;April7,2014

Sereno,CJ:

20


ISSUE:Whetherthedelaystartedtorunfrom thetimeitdemandedthefulfilmentof

respondent’sobligationunderthesuretyshipcontract.

DOCTRINE:Yes.Astotheissueofwheninterestmustaccrue,theCivilCodeisexplicit

instatingthatitaccruesfrom thetimejudicialorextrajudicialdemandismadeonthe

surety.ThisrulingisinaccordancewiththeprovisionsofArticle1169oftheCivilCode

andofthesetledrulethatwheretherehasbeenanextra-judicialdemandbeforean

actionforperformancewasfiled,interestontheamountduebeginstorun,notfrom the

dateofthefilingofthecomplaint,butfrom thedateofthatextra-judicialdemand.60

Consideringthatrespondentfailedtopayitsobligationon30May2000inaccordance

withthePurchaseAgreement,andthattheextrajudicialdemandofpetitionerwassent

on5June2000,61weagreewiththelaterthatinterestmuststarttorunfrom thetime

petitionersentitsfirstdemandleter(5June2000),becausetheobligationwasalready

dueanddemandableatthattime.

CarloF.Sungav.VirjenShippingCorporation,NisshoOdysseyShipManagementPte.

Ltd.,And/OrCapt.AngelZambrano

Grno.198640;April23,2014

Brion,J.:

ISSUE:WhetherSunga’sinjurywasaresultofanaccident.

DOCTRINE:Yes.InJarcoMarketingCorporation,etal.,v.CourtofAppeals,SCruledthat

anaccidentpertainstoanunforeseeneventinwhichnofaultornegligenceatachesto

thedefendant.Itis"afortuitouscircumstance,eventorhappening;aneventhappening

withoutanyhumanagency,orifhappeningwholyorpartlythroughhumanagency,an

eventwhichunderthecircumstancesisunusualorunexpectedbythepersontowhom

ithappens."Inthepresentcase,Sungadidnotincurtheinjurywhilesolelyperforming

hisregularduties;aninterveningeventtranspiredwhichbroughtupontheinjury.To

repeat,thetwootheroilerswhoweresupposedtohelpcarytheweightofthe200-

kilogram globevalvelosttheirgraspoftheglobevalve.Asaresult,Sunga’sback

snappedwhentheentireweightoftheitem feluponhim.Thesheerweightoftheitem

isdesignednottobecariedbyjustoneperson,butaswasobserved,meanttobe

undertakenbyseveralmenandexpectedlygreatlyoverwhelmedthephysicallimitsof

anaverageperson.Notably,thisincidentcannotbeconsideredasforeseeable,norcan

itbereasonablyanticipated.Sunga’sdutyasafiterinvolvedchangingthevalve,notto

routinelycarya 200-kilogram globevalvesinglehandedly.Thelossofhisfelow

workers’groupwasalsounforeseeninsofarasSungawasconcerned.

CHAPTER3.DIFFERENTKINDSOFOBLIGATIONS

SECTION1.PUREANDCONDITIONALOBLIGATIONS

SacobiaHilsDevelopmentCorporationvs.AlanTy

G.R.No.165889.September20,2005

Ynares-Santiago,J.:

ISSUE:Cananon-existentobligationbethesubjectofrescission?

DOCTRINE:No.Tydidnotpaythefulpurchasepricewhichishisobligationunderthe

contracttosel,therefore,itcannotbesaidthatSacobiabreacheditsobligation.No

21


obligationsaroseonitspartbecauserespondent’snon-fulfilmentofthesuspensive

conditionrenderedthecontracttoselinefectiveandunperfected.Indeed,therecanbe

norescissionunderArticle1191oftheCivilCodebecauseuntilthehappeningofthe

condition,i.e.fulpaymentofthecontractprice,Sacobia’sobligationtodeliverthetitle

andobjectofthesaleisnotyetextant.Anon-existentobligationcannotbesubjectof

rescission.Article1191speaksofobligationsalreadyexisting,whichmayberescinded

incaseoneoftheobligorsfailstocomplywithwhatisincumbentuponhim.

Carascosov.CourtofAppeals

G.R.No.123672.December14,2005

CarpioMorales,J.:

ISSUE:Maythepartialyunpaidselerrescindthesaleforfailureofthebuyertopaythe

balanceofthepurchasepriceofthepropertyinthemannerandwithintheperiod

agreedupon?

DOCTRINE:Yes.Reciprocalobligationsarethosewhicharisefrom thesamecause,and

inwhicheachpartyisadebtorandacreditoroftheother,suchthattheobligationof

oneisdependentupontheobligationoftheother.Theyaretobeperformed

simultaneouslysuchthattheperformanceofoneisconditioneduponthesimultaneous

fulfilmentoftheother.TherightofrescissionofapartytoanobligationunderArticle

1191oftheNewCivilCodeispredicatedonabreachoffaithbytheotherpartywho

violatesthereciprocitybetweenthem.

Acontractofsaleisareciprocalobligation.Theselerobligatesitselftotransferthe

ownershipofanddeliveradeterminatething,andthebuyerobligatesitselftopay

thereforapricecertaininmoneyoritsequivalentThenon-paymentofthepricebythe

buyerisaresolutoryconditionwhichextinguishesthetransactionthatforatimeexisted,

anddischargestheobligationscreatedthereunder.Suchfailuretopaythepriceinthe

mannerprescribedbythecontractofsaleentitlestheunpaidselertosueforcolection

ortorescindthecontract.

SpousesWiliam AndJeaneteYaov.CarlomagnoB.Matela

G.R.No.167767.August29,2006

Ynares-Santiago,J.:

ISSUE:Mayacourtannulacontractonthegroundthatitsobjectisadisastrousdealor

anunwiseinvestment?Whatistheroleofthecourtindeterminingtheliabilityofthe

contractingpartieswhoarebothguiltyofviolatingthetermstherein?

DOCTRINE:Thewel-entrencheddoctrineisthatthelawdoesnotrelieveapartyfrom

theefectsofanunwise,foolishordisastrouscontract,enteredintowithfulawareness

ofwhathewasdoingandenteredintoandcariedoutingoodfaith.Suchacontract

wilnotbediscardedeveniftherewasamistakeoflaw orfact.Courtshaveno

jurisdictiontolookintothewisdom ofthecontractenteredintobyandbetweenthe

partiesortorenderadecisiondiferenttherefrom.Theyhavenopowertorelieveparties

from obligationvoluntarilyassumed,simplybecausetheircontractsturnedouttobe

disastrousdealsorunwise investments.However,in situationssuch asthe one

discussedabove,whereitcannotbeconclusivelydeterminedwhichofthepartiesfirst

violatedthecontract,equitycalsandjusticedemandsthatweapplythesolution

providedinArticle1192oftheCivilCode.

SpousesJaimeBenosAndMarinaBenosv.SpousesGregorioLawilaoAndJaniceGail

22


Lawilao

G.R.No.172259,December5,2006

Ynares-Santiago,J.:

ISSUE:Inreciprocalobligationsinapactoderetrosale,isthevendeeprecludedtopay

evenafterthedateagreeduponduetoacross-claim foundintheanswer?

DOCTRINE:Yes.WhilethevendorsdidnotrescindthePactodeRetroSalethrougha

notarialact,theyneverthelessrescindedthesameintheirAnswerwithCounterclaim.

Even a cross-claim found in the Answercould constitute a judicialdemand for

rescissionthatsatisfiestherequirementofthelaw.Thecounterclaim ofthevendorsin

theiranswersatisfiedtherequisitesforthejudicialrescissionofthesubjectPactode

RetroSale

DarelCordero,etal.vs.F.S.ManagementandDevelopmentCorporation

G.R.No.167213.October31,2006

CarpioMorales,J.:

ISSUE:Maythecontractberescindedincaseoffailureofapartytocomplywithits

obligationsunderacontract,suchastheobligationtopaythedownpaymentofthe

purchasepriceinacontracttosel?

DOCTRINE:No.Acontracttoselisnotacontractofsale.Article1191appliesonlyin

reciprocalcontracts.Acontracttoselisnotareciprocalcontract.Underacontractto

sel,theselerretainstitletothethingtobesolduntilthepurchaserfulypaysthe

agreedpurchaseprice.Thefulpaymentisapositivesuspensivecondition,thenonfulfilmentofwhichisnotabreachofcontractbutmerelyaneventthatpreventsthe

selerfrom conveyingtitletothepurchaser.Thenon-paymentofthepurchaseprice

rendersthecontracttoselinefectiveandwithoutforceandefect.Nevertheless,while

rescissiondoesnotapplyinthiscase,petitionersmaycancelthecontracttosel,their

obligationnothavingarisen.

Yamamotov.NishinoLeatherIndustries,Inc.

G.R.No.150283,551SCRA447

ISSUE:WilanofertoastockholdertothathecouldtakeouttheMachineryinthe

corporationifhewantedtoso,providedthatthevalueofsaidmachineswouldbe

deductedfrom hiscapitalcontribution,giverisetoanobligationtothecorporationto

deliversaidpropertiestotheprior?

DOCTRINE:Withoutacceptance,amereoferproducesnoobligation.Thus,under

Article1181oftheCivilCode,"inconditionalobligations,theacquisitionofrights,as

welastheextinguishmentorlossofthosealreadyacquired,shaldependuponthe

happeningoftheeventwhichconstitutesthecondition."Inthecaseatbar,thereisno

showing ofcompliance with the condition foralowing Yamamoto to take the

machineriesandequipment,namely,hisagreementtothedeductionoftheirvaluefrom

hiscapitalcontributionduehim inthebuy-outofhisinterestsinthecorporation.

Yamamoto’salegationthatheagreedtotheconditionremainedjustthat,noproof

thereofhavingbeenpresented.

Themachineriesandequipment,whichcomprisedYamamoto’sinvestmentinNLI,thus

23


remainedpartofthecapitalpropertyofthecorporation.

Spouses Jose T.Valenzuela and Gloria Valenzuela v.Kalayaan Development&

IndustrialCorporation

G.R.No.163244,June22,2009

Peralta,J.:

ISSUE:Whethertherecanbearescissionofcontractifapositivesuspensivecondition

underacontracttoselhasnotbeencompliedwith.

DOCTRINE:No.Underacontracttosel,theselerretainstitletothethingtobesold

untilthepurchaserfulypaystheagreedpurchaseprice.Thefulpaymentisapositive

suspensivecondition,thenon-fulfilmentofwhichisnotabreachofcontract,but

merelyaneventthatpreventstheselerfrom conveyingtitletothepurchaser.Thenonpaymentofthepurchasepricerendersthecontracttoselinefectiveandwithoutforce

andefect.

Sincetheobligationofrespondentdidnotarisebecauseofthefailureofpetitionersto

fulypaythepurchaseprice,Article1191oftheCivilCodewouldhavenoapplication.

Thenon-fulfilmentbytherespondentofhisobligationtopay,whichisasuspensive

conditiontotheobligationofthepetitionerstoselanddeliverthetitletotheproperty,

renderedthecontracttoselinefectiveandwithoutforceandefect.Thepartiesstand

asiftheconditionalobligationhadneverexisted.Article1191oftheNewCivilCodewil

notapplybecauseitpresupposesan obligation alreadyextant.Therecan beno

rescissionofanobligationthatisstilnon-existing,thesuspensiveconditionnothaving

happened.

SolarHarvest,Inc.v.DavaoCorugatedCartonCorporation

G.R.No.176868July26,2010

Nachura,J.:

ISSUE:Whetherpetitionerfailedtoestablishacauseofactionforrescissionitbeing

shownthatrespondentdidnotcommitanybreachofitscontractualobligation.

DOCTRINE:Yes,inreciprocalobligations,asinacontractofsale,thegeneralruleisthat

nodemandisgeneralynecessarybecause,onceapartyfulfilshisobligationandthe

otherpartydoesnotfulfilhis,thelaterautomaticalyincursindelay.Butwhen

diferentdatesforperformanceoftheobligationsarefixedtheotherpartywouldincur

indelayonlyfrom themomenttheotherpartydemandsfulfilmentoftheformer’s

obligation.Evidentfrom therecordsandevenfrom thealegationsinthecomplaintwas

thelackofdemandbypetitioneruponrespondenttofulfilitsobligationtomanufacture

anddelivertheboxes.TheComplaintonlyalegedthatpetitionermadea“folow-up”

uponrespondent,which,however,wouldnotqualifyasademandforthefulfilmentof

theobligation.Petitioner’switnessalsotestifiedthattheymadeafolow-upofthe

boxes,butnotademand.Withoutapreviousdemandforthefulfilmentoftheobligation,

petitionerwouldnothaveacauseofactionforrescissionagainstrespondentasthe

laterwouldnotyetbeconsideredinbreachofitscontractualobligation.

InternationalHotelCorporation,v.FranciscoJoaquin,Jr.andRafaelSuarez

G.R.No.158361.April10,2013

Bersamin,J.:

ISSUES:

(1)Wiltheabsenceofintentonthepartoftheobligortopre-emptthefulfilmentofthe

conditionwaranttheapplicationofArt.1186?

24


(2)WilsubstantialcompliancewaranttheapplicationofArt.1234?

DOCTRINE:

(1) No.This provision refers to the constructive fulfilment of a suspensive

condition,whoseapplicationcalsfortworequisites,namely:(a)theintentoftheobligor

topreventthefulfilmentofthecondition,and(b)theactualpreventionofthefulfilment.

Sincethedebtorhadnointenttopreventthefulfilmentofthecondition,Art.1186

cannotbeapplied.

(2)Generaly,yes.Art.1234 applies onlywhen an obligoradmits breaching the

contractafterhonestlyand faithfulyperforming althe materialelementsthereof

exceptforsometechnicalaspectsthatcausenoseriousharm totheobligee.However,

ifincompleteperformanceamountstoamaterialbreachofthecontract,thesameshal

nolongerbeapplicable.

Inorderthattheremaybesubstantialperformanceofanobligation,theremusthave

beenanatemptingoodfaithtoperform,withoutanywilfulorintentionaldeparture

therefrom.Thedeviationfrom theobligationmustbeslight,andtheomissionordefect

mustbetechnicalandunimportant,andmustnotpervadethewholeorbesomaterial

thattheobjectwhichthepartiesintendedtoaccomplishinaparticularmannerisnot

atained.The non-performance ofa materialpartofa contractwilpreventthe

performancefrom amountingtoasubstantialcompliance.

Conversely,the principle ofsubstantialperformance is inappropriate when the

incompleteperformanceconstitutesamaterialbreachofthecontract.Acontractual

breachismaterialifitwiladverselyafectthenatureoftheobligationthattheobligor

promised to deliver,the benefits thatthe obligee expects to receive afterful

compliance,andtheextentthatthenon-performancedefeatedthepurposesofthe

contract.

Republicv.HolyTrinityRealtyDevelopmentCorporation

G.R.No.172410,551SCRA303

ISSUE:Wiltheefectsofthefulfilmentofaconditionretroacttothedateofthe

constitutionoftheobligation?

DOCTRINE:Theefectsofaconditionalobligationtogive,oncetheconditionhasbeen

fulfiled,shalretroacttothedayoftheconstitutionoftheobligation.Hence,when

HTRDCcompliedwiththegivenconditions,asdeterminedbytheRTCinitsOrderdated

April21,2003,theefectsoftheconstructivedeliveryretroactedtotheactualdateof

thedepositoftheamountintheexpropriationaccountofDPWH.

SubicBayMetropolitanAuthorityv.CourtofAppeals

G.R.No.192885,July4,2012.

ISSUE:WhetherSBMA isentitledtoreceiveservicefeespursuanttothecontract

despitefailingtorendertheservicesrequiredfrom them?

.

DOCTRINE:No.Reciprocalobligationsarethosewhicharisefrom thesamecause,and

inwhicheachpartyisadebtorandacreditoroftheother,suchthattheobligationof

one is dependentupon the obligation ofthe other.They are to be performed

simultaneouslysuchthattheperformanceofoneisconditioneduponthesimultaneous

fulfilmentoftheother.Foronepartytodemandtheperformanceoftheobligationof

theotherparty,theformermustalsoperform itsownobligation.Accordingly,petitioner,

25


nothavingprovidedtheservicesthatwouldrequirethepaymentofservicefeesas

stipulatedintheLeaseDevelopmentAgreement,isnotentitledtocolectthesame.

The records show thatpetitionerdid notactualyprovide mostofthe services

enumeratedintheLeaseandDevelopmentAgreementandthattheobligationinvolved

intheagreementwasreciprocalinnature;therefore,privaterespondent'sobligationto

paywasdependentuponpetitioner'sperformanceofitsreciprocaldutytoprovidethe

agreedservice,andsincepetitionerfailedtoperform itspartofthedeal,itcannotexact

compliancefrom privaterespondentofitsdutytopay.

Sps.FernandoandLourdesViloriavs.ContinentalAirlines,Inc.

G.R.No.188288.January16,2012.

ISSUE:WhetherannulmentinArt1390isthesameasrescissionunderArt.1191.

DOCTRINE:No.Annulmentandrescissionaretwoinconsistentremedies.Inresolution,

altheelementstomakethecontractvalidarepresent;inannulment,oneofthe

essentialelementsto a formation ofa contract,which isconsent,isabsent.In

resolution,thedefectisintheconsummationstageofthecontractwhenthepartiesare

intheprocessofperformingtheirrespectiveobligations;inannulment,thedefectis

alreadypresentatthetimeofthenegotiationandperfectionstagesofthecontract.

Accordingly,bypursuingtheremedyofrescissionunderArticle1191,therewasimplied

admissionofthevalidityofthesubjectcontracts,forfeitingtheirrighttodemandtheir

annulment.Apartycannotrelyonthecontractandclaim rightsorobligationsunderit

andatthesametimeimpugnitsexistenceorvalidity.Indeed,litigantsareenjoinedfrom

takinginconsistentpositions.

Therighttorescindacontractfornon-performanceofitsstipulationsisnotabsolute.

Thegeneralruleisthatrescissionofacontractwilnotbepermitedforaslightor

casualbreach,butonlyforsuchsubstantialandfundamentalviolationsaswoulddefeat

theveryobjectofthepartiesinmakingtheagreement.Whetherabreachissubstantial

islargelydeterminedbytheatendantcircumstances.

UnderArticle1192,incasebothpartieshavecommitedabreachoftheobligation,the

liabilityofthefirstinfractorshalbeequitablytemperedbythecourts.Ifitcannotbe

determinedwhichofthepartiesfirstviolatedthecontract,thesameshalbedeemed

extinguished,andeachshalbearhisowndamages.

SECTION4.JOINTANDSOLIDARYOBLIGATIONS

StrongholdInsuranceCompany,Inc.v.Republic-AsahiGlassCorporation

G.R.No.147561.June22,2006

Panganiban,C.J.

ISSUE:Isasurety’sliabilityunderaperformancebondautomaticalyextinguishedbythe

deathoftheprincipal?

DOCTRINE:No.Asuretycompany’sliabilityundertheperformancebonditissuesis

solidary.Thedeathoftheprincipalobligordoesnot,asarule,extinguishtheobligation

andthesolidarynatureofthatliability.Asageneralrule,thedeathofeitherthecreditor

orthedebtordoesnotextinguishtheobligation.Obligationsaretransmissibletothe

heirs,exceptwhenthetransmissionispreventedbythelaw,thestipulationsofthe

parties,orthenatureoftheobligation.Onlyobligationsthatarepersonalorare

identifiedwiththepersonsthemselvesareextinguishedbydeath.

Section5ofRule86oftheRulesofCourtexpresslyalowstheprosecutionofmoney

26


claimsarisingfrom acontractagainsttheestateofadeceaseddebtor.Evidently,those

claimsarenotactualyextinguished.Whatisextinguishedisonlytheobligee’sactionor

suitfiledbeforethecourt,whichisnotthenactingasaprobatecourt.

Thedeathoftheprincipaldebtorwilnotworktoconvert,decreaseornulifythe

substantiverightofthesolidarycreditor.Evidently,despitethedeathoftheprincipal

debtor,[theobligee]maystilsuepetitioneralone,inaccordancewiththesolidary

natureofthelater’sliabilityundertheperformancebond.

PetronCorporationvs.Sps.CesarJoveroandErmaF.Cudila,etal.

G.R.No.151038.January18,2012

ISSUE:Whetherpaymentmadebyoneofthesolidarydebtorisenoughtoextinguishthe

liabilityofaltheco-debtors.

DOCTRINE:AccordingtoArticle1217oftheCivilCode,paymentmadebyoneofthe

solidarydebtorsextinguishestheobligation.Iftwoormoresolidarydebtorsofertopay,

thecreditormaychoosewhichofertoaccept.Thedebtorwhomadethepaymentmay

claim from hisco-debtorsonlythesharewhichcorespondstoeach,withtheinterest

forthepaymentalreadymade.Ifthepaymentismadebeforethedebtisduehowever,

nointerestfortheinterveningperiodmaybedemanded.

Article1208providesfortheshareofsolidarydebtorswhichstatesthatiffrom thelaw,

orthenatureofthewordingoftheobligationstowhichtheprecedingarticlerefersthe

contrarydoesnotappear,thecreditofdebtshalbepresumedtobedividedintoas

manyequalsharesastherearecreditorsordebtors,thecreditsordebtsbeing

considereddistinctfrom oneanother,subjecttotheRulesofCourtgoverningthe

multiplicityofsuits.

PhilippineCommercialInternationalBankv.CA

G.R.No.121989.January31,2006

Tinga,J.:

ISSUE: In the absence ofstipulation,how should the debtor(Atlas)satisfyhis

obligationwithtwosolidarycreditors(PCIBandMCB)?

DOCTRINE:Article1208oftheCivilCodemandatestheequalsharingofcreditorsinthe

paymentofdebtintheabsenceofanylaw orstipulationtothecontrary.Thus,Atlas

maysatisfyhisobligationbygivingthepaymenttothetwosolidarycreditors,asjoint

payees.Whatevershareasolidarydebtorfailedtoreceiveisaninternalmatertobe

resolvedbythesolidarydebtorsthemselves.

Crystalv.BankofthePhilippineIslands

G.R.No.172428,572SCRA697

ISSUE:Doesapartywhobindhimselfsolidarilyas‘guarantor’onlybecomesecondarily

liabletothecreditor?

DOCTRINE:Asolidaryobligationisoneinwhicheachofthedebtorsisliableforthe

entireobligation,andeachofthecreditorsisentitledtodemandthesatisfactionofthe

wholeobligationfrom anyoralofthedebtors.Aliabilityissolidary“onlywhenthe

obligationexpresslysostates, when the lawsoprovidesorwhenthenatureofthe

obligationsorequires.”Thus,whentheobligorundertakestobe“jointlyandseveraly”

liable,itmeansthattheobligationissolidary,suchasinthiscase.

Ifsolidaryliabilitieswereinstitutedto“guarantee”aprincipalobligation,thelawdeems

27


thecontracttobeoneofsuretyship;thesuretyisdirectlyandequalyboundwiththe

principal.

TheHeirsofGeorgeY.Poevs.MalayanInsuranceCompany,Inc.,

G.R.No.156302,April7,2009

Chico-Nazario,J.:

ISSUE:Whetherasolidaryobligationmustbeexpresslystatedtoholdapartyliablefor

theobligation.

DOCTRINE:Asolidaryorjointandseveralobligationisoneinwhicheachdebtorisliable

fortheentireobligation,andeachcreditorisentitledtodemandthewholeobligation.In

ajointobligation,eachobligoranswersonlyforapartofthewholeliabilityandtoeach

obligeebelongsonlyapartofthecorelativerights.Wel-entrenchedistherulethat

solidaryobligationcannotlightlybeinfered.Thereissolidaryliabilityonlywhenthe

obligationexpresslysostates,whenthelaw soprovidesorwhenthenatureofthe

obligationsorequires.

Albav.Yupangco

G.R.No.188233

CarpioMorales,J:

ISSUE:Whethertherespondenthassolidaryliabilitywithobligor-corporationdespitethe

decisionoftheLaborArbiterbeingsilentastothemater.

DOCTRINE:No,thereissolidaryliabilityonlywhentheobligationexpresslysostates,

whenthelawsoprovides,orwhenthenatureoftheobligationsorequires.MAM Realty

DevelopmentCorporationv.NLRC onsolidaryliabilityofcorporateoficersinlabor

disputes,enlightens:Acorporationbeingajuridicalentity,mayactonlythroughits

directors,oficersand employees. Obligationsincured bythem,acting assuch

corporateagentsarenottheirsbutthedirectaccountabilitiesofthecorporationthey

represent.Truesolidaryliabilitiesmayattimesbeincuredbutonlywhenexceptional

circumstanceswarantsuchas,generaly,inthefolowingcases:1.Whendirectorsand

trusteesor,inappropriatecases,theoficersofacorporation:(a)votefororassentto

patentlyunlawfulactsofthecorporation;(b)actinbadfaithorwithgrossnegligencein

directingthecorporateafairs.

AssetBuildersCorporationv.StrongholdInsuranceCompany,Incorporated

G.R.No.187116,October18,2010

Mendoza,J.:

ISSUE:Whetheraguarantorwhobindshimselftothecreditortofulfiltheobligationof

theprincipaldebtorincasethelatershouldfailtodosoisasolidarydebtor?

DOCTRINE:Yes,ifapersonbindshimselfsolidarilywiththeprincipaldebtor,the

provisionsofSection4,Chapter3,TitleIofthisBookshalbeobserved.Insuchcase

thecontractiscaledasuretyship.AsprovidedinArticle2047,thesuretyundertakesto

be bound solidarily with the principalobligor.Thatundertaking makes a surety

agreementanancilarycontractasitpresupposestheexistenceofaprincipalcontract.

Althoughthecontractofasuretyisinessencesecondaryonlytoavalidprincipal

obligation,thesuretybecomesliableforthedebtordutyofanotheralthough it

possessesnodirectorpersonalinterestovertheobligationsnordoesitreceiveany

benefittherefrom.

Sps.RodolfoBerotv.FelipeSiapno

G.R.No.188944;July9,2014

28


ISSUE:Whetherthemortgagemaybeconsideredsolidarydespitetheabsenceof

expresstermsmakingtheobligationsolidary.

DOCTRINE:No.UnderArticle1207oftheCivilCodeofthePhilippines,thegeneralrule

isthatwhenthereisaconcurenceoftwoormoredebtorsunderasingleobligation,the

obligationispresumedtobejoint. Thelaw furtherprovidesthattoconsiderthe

obligationassolidaryinnature,itmustexpresslybestatedassuch,orthelaworthe

natureoftheobligationitselfmustrequiresolidarity.Uponexaminationofthecontents

oftherealestatemortgage,theCourtfoundnoindicationintheplainwordingsofthe

instrumentthatthe debtors had expressly intended to make theirobligation to

respondentsolidary in nature.Absentfrom the mortgage are the express and

indubitabletermscharacterizingtheobligationassolidary.Respondentwasnotableto

provebyapreponderanceofevidencethatpetitioners'obligationtohim wassolidary.

Hence,applicabletothiscaseisthepresumptionunderthelawthatthenatureofthe

obligationhereincanonlybeconsideredasjoint.Itisincumbentuponthepartyaleging

otherwisetoprovewithapreponderanceofevidencethatpetitioners'obligationunder

theloancontractisindeedsolidaryincharacter.

TradeandInvestmentDevelopmentCorp.ofthePhilippinesv.AsiaPacesCorp.

G.R.No.187403,February12,2014

Perlas-Bernabe,J.

ISSUE:Wilanextensionofpaymentgrantedtoathirdpartyextinguishthesuretyshipin

whichonethepartiesisalsoaprincipaldebtortosaidthirdparty?

DOCTRINE:No.ThetheorybehindArticle2079isthatanextensionoftimegiventothe

principaldebtorbythecreditorwithoutthesurety’sconsentwoulddeprivethesuretyof

hisrighttopaythecreditorandtobeimmediatelysubrogatedtothecreditor’sremedies

againsttheprincipaldebtoruponthematuritydate.Thesuretyissaidtobeentitledto

protecthimselfagainstthecontingencyoftheprincipaldebtorortheindemnitors

becominginsolventduringtheextendedperiod.

Article2079oftheCivilCodereferstoapaymentextensiongrantedbythecreditorto

theprincipaldebtorwithouttheconsentoftheguarantororsurety.Itwilnotapplyin

caseswherethesuretyshipwasenteredtoinsureadebttransactiondistinctand

separatefrom thetransactionuponwhichtheextensionforpaymentwasmade.The

twosetsoftransactionsshouldbetreatedseparatelyanddistinctlyfrom oneanother

folowingthecivillawprincipleofrelativityofcontracts"whichprovidesthatcontracts

canonlybindthepartieswhoenteredintoit,anditcannotfavororprejudiceathird

person,evenifheisawareofsuchcontractandhasactedwithknowledgethereof.

OlongapoCity,V.SubicWaterAndSewerageCo.,Inc.,

G.R.No.171626,August06,2014

ISSUE:CantheSubicWater,whowasnotapartyinthecase,stilbesubjectedtoawrit

ofexecution,sinceitwasidentifiedasOCWD’sco-makerandsuccessor-in-interestin

thecompromiseagreement?

DOCTRINE:No.Solidaryliabilitymustbeexpresslystated;itisnotpresumed.Art.1207

oftheCivilCodeprovides,“Thereisasolidaryliabilityonlywhentheobligationexpressly

sostates,orwhenthelaworthenatureoftheobligationrequiressolidarity.”

InPalmaresv.CourtofAppeals,theCourtdidnothesitatetorulethatalthoughaparty

toapromissorynotewasonlylabeledasaco-maker,hisliabilitywasthatofasurety,

sincetheinstrumentexpresslyprovided forhisjointand severalliabilitywith the

29

principal.


Thelaw explicitlystatesthatsolidaryliabilityisnotpresumedandmustbeexpressly

providedfor.Notbeingasurety,SubicWaterisnotaninsurerofOCWD’sobligations

underthecompromiseagreement.Atbest,SubicWaterwasmerelyaguarantoragainst

whom petitionercanclaim,provideditwasfirstshownthat:a)petitionerhadalready

proceededafterthepropertiesofOCWD,theprincipaldebtor;b)anddespitethis,the

obligationunderthecompromiseagreement,remainstobenotfulysatisfied.

SECTION6.OBLIGATIONSWITHAPENALCLAUSE

FirstFil-SinLendingCorporationv.GloriaD.Padilo

G.R.No.160533.January12,2005

Ynares-Santiago,J.:

ISSUE:Whetherthepenaltychargesof1%perdayofdelayisunconscionable.

DOCTRINE:Asregardsthepenaltycharges,theCourtagreeswiththeCourtofAppeals

inrulingthatthe1%penaltyperdayofdelayishighlyunconscionable.ApplyingArticle

1229oftheCivilCode,courtsshalequitablyreducethepenaltywhentheprincipal

obligation has been partly oriregularly complied with,orifitis iniquitous or

unconscionable.

FilinvestLand,Inc.vs.Hon.CourtofAppeals,PhilippineAmericanGeneralInsurance

CompanyandPacificEquipmentCorporation


Chico-Nazario,J.:

ISSUE:Isthereadiferencebetweenpenaltyandliquidateddamagesincaseswhere

therehasbeenpartialoriregularcompliance?

DOCTRINE:None.Courtsmayequitablyreduceastipulatedpenaltyinthecontractin

twoinstances:(1)iftheprincipalobligationhasbeenpartlyoriregularlycomplied;and

(2)eveniftherehasbeennocomplianceifthepenaltyisiniquitousorunconscionable

inaccordancewithArticle1229oftheCivilCode.Incaseswheretherehasbeenpartial

oriregularcompliance,asinthiscase,therewilbenosubstantialdiferencebetweena

penaltyandliquidateddamagesinsofaraslegalresultsareconcernedandthateither

mayberecoveredwithoutthenecessityofprovingactualdamagesandbothmaybe

reducedwhenproper.

DevelopmentBankofthePhilippinesv.FamilyFoodsManufacturingCo.Ltd.,and

SpousesJuliancoandCatalinaCenteno

G.R.No.180458;July30,2009

Nachura,J.:

ISSUE:Whetherthestipulatedpenaltychargeof8% perannum andinterestratesof

18%and22%perannum areunreasonable,iniquitousandunconscionable.

DOCTRINE:No.Respondents’ownevidenceshowsthattheyagreedonthestipulated

interestratesof18% and22%,andonthepenaltychargeof8%,ineachpromissory

note.Itisabasicprincipleincivillawthatpartiesareboundbythestipulationsinthe

contractsvoluntarilyenteredintobythem.Partiesarefreetostipulatetermsand

conditionsthattheydeem convenient,providedthesearenotcontrarytolaw,morals,

goodcustoms,publicorder,orpublicpolicy.Thereisnothingintherecords,andinfact,

30


thereisnoalegation,showingthatrespondentswerevictimsoffraudwhentheysigned

thepromissorynotes.Neitheristhereashowingthatintheircontractualrelationswith

DBP,respondentswereatadisadvantageonaccountoftheirmoraldependence,

mentalweakness,tenderageorotherhandicap,whichwouldentitlethem tothevigilant

protectionofthecourtsasmandatedbyArticle24oftheCivilCode.

IleanaDr.Macalinaov.BankofthePhilippineIslands

G.R.No.175490,September17,2009

Velasco,Jr.,J.:

ISSUE:Whetherthereductionofinterestrateshouldbeupheldsincethestipulatedrate

ofinterestwasunconscionableandiniquitous,andthusilegal.

DOCTRINE:Yes.Theinterestrateandpenaltychargeof3% permonthshouldbe

equitablyreducedto2% permonthor24% perannum.Indeed,intheTermsand

ConditionsGoverning theIssuanceand UseoftheBPICreditCard,therewasa

stipulationonthe3%interestrate.Nevertheless,itshouldbenotedthatthisisnotthe

firsttimethatthisCourthasconsidered theinterestrateof36% perannum as

excessiveandunconscionable.ItwasheldinChuavs.Timan:Thestipulatedinterest

ratesof7% and5% permonthimposedonrespondents’loansmustbeequitably

reducedto1%permonthor12%perannum.Weneednotunsetletheprinciplewehad

afirmedinaplethoraofcasesthatstipulatedinterestratesof3%permonthandhigher

areexcessive,iniquitous,unconscionableandexorbitant.Suchstipulationsarevoidfor

beingcontrarytomorals,ifnotagainstthelaw.Sincethestipulationontheinterestrate

isvoid,itisasiftherewasnoexpresscontractthereon.Hence,courtsmayreducethe

interestrateasreasonandequitydemand.Thus,underthecircumstances,theCourt

findsitequitabletoreducetheinterestratepeggedbytheCAat1.5%monthlyto1%

monthlyandpenaltychargefixedbytheCAat1.5%monthlyto1%monthlyoratotalof

2% permonthor24% perannum inlinewiththeprevailingjurisprudenceandin

accordancewithArt.1229oftheCivilCode.

CHAPTER4.EXTINGUISHMENTOFOBLIGATIONS

SECTION1.PAYMENTORPERFORMANCE

A.APPLICATIONOFPAYMENTS

B.PAYMENTBYCESSION

C.TENDEROFPAYMENTANDCONSIGNATION

JaimeBianav.GeorgeGimenez


Garcia,J.:

ISSUE:Mayredemptionbemadethroughtenderofpostdatedchecks?

DOCTRINE:Yes.Acheckmaybeusedfortheexerciseoftherightofredemption,the

samebeingarightandnotanobligation.Thetenderofacheckissuficienttocompel

redemptionbutitisnotinitselfapaymentthatrelievestheredemptionerfrom his

liabilitytopaytheredemptionprice.Art.1249maynotbeapplied.

G&M (Phil.),Inc.vs.WilieBatomalaque

G.R.No.151849June23,2005

CarpioMorales,J.

31


ISSUE:Whohastheburdenofshowingwithlegalcertaintythattheobligationhasbeen

dischargedbypayment?

DOCTRINE:Debtor.Itissetledthatasageneralrule,apartywhoalegespaymentasa

defensehastheburdenofprovingit.Onrepeatedoccasions,thisCourtruledthatthe

debtorhastheburdenofshowingwithlegalcertaintythattheobligationhasbeen

dischargedbypayment.Todischargemeanstoextinguishanobligation,andincontract

law dischargeoccurseitherwhenthepartieshaveperformedtheirobligationsinthe

contract,orwhenaneventtheconductoftheparties,ortheoperationoflawreleases

thepartiesfrom performing.Thus,apartywhoalegesthatanobligationhasbeen

extinguishedmustprovefactsoractsgivingrisetotheextinction.

Thefactofunderpaymentdoesnotshifttheburdenofevidencetotheplaintif-herein

respondentbecausepartialpaymentdoesnotextinguishtheobligation.Onlywhenthe

debtorintroducesevidencethattheobligationhasbeenextinguisheddoestheburden

ofevidenceshifttothecreditorwhoisthenunderadutyofproducingevidencetoshow

whypaymentdoesnotextinguishtheobligation.

AbacusSecuritiesCorporationv.RubenU.Ampil

Gr.No.160016.February27,2006

Panganiban,CJ.:

ISSUE:Whatisthedutyoftheprincipalfortheadvancepaymentsmadebythebrokerin

accordancewiththeformer’sinstructions?

DOCTRINE:UnderArticle1236oftheCivilCode,hecandemandfrom theprincipalwhat

hehaspaid,exceptthatifhepaidwithouttheknowledgeoragainstthewilofthe

debtor,hecanrecoveronlyinsofarasthepaymenthasbeenbeneficialtothedebtor.

Almedav.BathalaMarketingIndustries,Inc.

G.R.No.150806,542SCRA470

ISSUE:CanthecontinuouserosionofthevalueofthePhilippinespesoforthreetofour

yearsamounttoextra-ordinaryinflationascontemplatedbyArticle1250oftheCivil

Code?

DOCTRINE:TheerosionofthevalueofthePhilippinepesointhepastthreeorfour

decades,starting inthemid-sixties,ischaracteristicofmostcurencies-whilethe

SupremeCourtmaytakejudicialnoticeofthedeclineinthepurchasingpowerofthe

Philippinecurencyinthespanoftime,suchdownwardtrendofthepesocannotbe

consideredastheextraordinaryphenomenoncontemplatedbyArticle1250oftheCivil

Code;Absentanoficialpronouncementordeclarationbycompetentauthoritiesofthe

existenceofextraordinaryinflationduringagivenperiod,theefectsofextraordinary

inflationarenottobeapplied.

ASJCorporationv.Evangelista

G.R.No.158086,545SCRA300

ISSUE:WasASJ’sretentionofthegoodstobedeliveredonaccountofEvangelista’s

failuretopaythefulamountplusservicefeesunjustified?

DOCTRINE:To beginwith,ASJ’sobligationto deliverthechicksand by-products

corespondstothreedates:thedateofhatching,thedelivery/pick-updateandthedate

ofrespondents’payment.Onseveralsetingreports,respondentsmadedelaysontheir

payments, but petitioners tolerated such delay.When Evangelista’s accounts

32


accumulatedbecauseoftheirsuccessivefailuretopayonseveralsetingreports,

petitionersoptedtodemandthefulsetlementofrespondents’accountsasacondition

precedenttothedelivery.However,Evangelistawasunabletofulysetletheiraccounts.

Evangelista’sofertopartialysatisfytheiraccountsisnotenoughtoextinguishtheir

obligation.UnderArticle1248oftheCivilCode,thecreditorcannotbecompeledto

acceptpartialpaymentsfrom thedebtor,unlessthereisanexpressstipulationtothat

efect.Moreso,respondentscannotsubstituteorapplyastheirpaymentthevalueof

thechicksandby-productstheyexpecttoderivebecauseitisnecessarythatalthe

debtsbeforthesamekind,generalyofamonetarycharacter.Needlesstosay,there

wasnovalidapplicationofpaymentinthiscase.

Furthermore,itwasEvangelista who violated the very essence ofreciprocity in

contracts,consequentlygivingrisetoASJ’srightofretention.Thiscaseisclearlyone

among the species of non-performance of a reciprocalobligation.Reciprocal

obligationsarethosewhicharisefrom thesamecause,whereineachpartyisadebtor

andacreditoroftheother,suchthattheperformanceofoneisconditioneduponthe

simultaneousfulfilmentoftheother-from themomentoneofthepartiesfulfilshis

obligation,delaybytheotherpartybegins.

InsularLifeAssuranceCompany,Ltd.v.ToyotaBel-Air,Inc.

G.R.No.137884,550SCRA70

ISSUES:

(1)Ispossessionofthepropertyasuficientjustificationtograntthemotiontoconsign

therentsdue?

(2)Wilaparty’snon-compliancetosomeofthesuspensiveconditionsinanagreement

resulttoextinguishmentoftheobligationoftheotherparty?

DOCTRINES:

(1)Consignation istheactofdepositing thething duewith thecourtorjudicial

authoritieswheneverthecreditorcannotacceptorrefusestoacceptpaymentandit

generalyrequiresapriortenderofpayment.Inorderthatconsignationmaybeefective,

thedebtormustshow that:(1)therewasadebtdue;(2)theconsignationofthe

obligationwasmadebecausethecreditortowhom tenderofpaymenthadbeenmade

refusedtoacceptitorwasabsentorincapacitated,orbecauseseveralpersonsclaimed

tobeentitledtoreceivetheamountdue,orbecausethetitletotheobligationwaslost;

(3)previousnoticeoftheconsignationwasgiventothepersoninterestedinthe

performanceoftheobligation;(4)theamountduewasplacedatthedisposalofthe

court;and(5)aftertheconsignationhadbeenmade,thepersoninterestedwasnotified

thereof.Failureinanyoftheserequirementsisenoughgroundtorenderaconsignation

inefective.

Inthepresentcase,Toyotafailedtoalege(2)and(3)above,muchlessprovethatany

oftherequirementswaspresent.ThemerefactthatToyotahadbeeninpossessionof

thepropertysinceJuly3,1998,isnotasuficientjustificationtograntthemotionto

consigntherentsdue.

(2)Whenacontractissubjecttoasuspensivecondition,itsbirthorefectivitycantake

placeonlyifandwhentheeventwhichconstitutestheconditionhappensorisfulfiled,

andifthesuspensiveconditiondoesnottakeplace,thepartieswouldstandasifthe

conditionalobligationhasneverexisted.SinceToyotawasunabletocomplywiththe

lasttwoconditionsoftheagreement,whichweresuspensiveconditions,InsularLife

cannotbecompeledtocomplywithitsobligationtoendthepresentlitigation.Noright

infavorofToyotaaroseandnoobligationonthepartofInsularLifewascreated.

33


DaoHengBank,Inc.(NowBancoDeOroUniversalBank)v.Laigo

G.R.No.173856,571SCRA434

ISSUE:Isaseparatewritencontractnecessarytomakeadacionenpagobindingupon

theparties?

DOCTRINE:Dacionenpagoasamodeofextinguishinganexistingobligationand

partakes ofthe nature ofsale wherebypropertyis alienated to the creditorin

satisfactionofadebtinmoney.

Dacionenpagoisanobjectivenovationoftheobligation,hence,commonconsentof

thepartiesisrequiredinordertoextinguishtheobligation.Beinglikenedtothatofa

contractofsale,dacionenpagoisgovernedbythelawonsales.Thepartialexecution

ofacontractofsaletakesthetransactionoutoftheprovisionsoftheStatuteofFrauds

solongastheessentialrequisitesofconsentofthecontractingparties,objectand

causeoftheobligationconcurandareclearlyestablishedtobepresent.

RoyalCargoCorporationv.DFSSportsUnlimited,Inc.

G.R.No.158621,573SCRA414

ISSUE:Towhom doestheburdenofevidencelieinordertoprovethatpaymenthas

beenmade?

DOCTRINE:Astothefirstissueraised,thesetledruleisthatonewhopleadspayment

hastheburdenofprovingit.Evenwherethecreditoralegesnon-payment,thegeneral

ruleisthattheonusrestsonthedebtortoprovepayment,ratherthanonthecreditorto

provenon-payment.Thedebtorhastheburdenofshowingwithlegalcertaintythatthe

obligation has been discharged bypayment.Where the debtorintroduces some

evidenceofpayment,theburdenofgoingforwardwiththeevidence–asdistinctfrom

thegeneralburdenofproof– shiftstothecreditor,whoisthenunderadutyof

producingsomeevidencetoshownon-payment.

Sincerespondentclaimsthatithadalreadypaidpetitionerfortheservicesrenderedby

thelater,itfolowsthattheformercariestheburdenofprovingsuchpayment.

AlandaleSportsline,Inc.v.TheGoodDevelopmentCorporation

G.R.No.164521,574SCRA625

ISSUE:Istenderofpaymentaloneandtheotherparty’srefusaltoacceptthesame

suficienttodischargetheotherfrom theirobligation?

DOCTRINE:Tenderofpayment,withoutmore,producesnoefect-itmustbefolowedby

avalidconsignationinordertoproducetheefectofpaymentandextinguishan

obligation.

Consignationhasthefolowingmandatoryrequirements:(1)therewasadebtdue;(2)

theconsignationoftheobligationhadbeenmadebecausethecreditortowhom tender

ofpaymentwasmaderefusedtoacceptit,orbecausehewasabsentorincapacitated,

orbecauseseveralpersonsclaim tobeentitledtoreceivetheamountdue,orbecause

thetitletotheobligationhasbeenlost;(3)previousnoticeoftheconsignationhadbeen

giventothepersoninterestedintheperformanceoftheobligation;(4)theamountdue

wasplacedatthedisposalofthecourt;and(5)aftertheconsignationhadbeenmade,

thepersoninterestedwasnotifiedthereof.

34


Petitionersdidnotalegeorprovethataftertheirtenderofpaymentwasrefusedby

respondents,theyatemptedorpursuedconsignationofthepaymentwiththeproper

court. Theirtenderofpaymentnothavingbeenfolowedbyavalidconsignation,it

producednoefectwhatsoever,leastofaltheextinguishmentoftheloanobligation.

Therefore,thefirstissueofthevalidityorinvalidityoftheirtenderofpaymentis

completelymootandacademic,foreitherwaythediscussionwilgo,itwilleadtono

otherconclusionbutthat,withoutanaccompanyingvalidconsignation,thetenderof

paymentdidnotresultinthepaymentandextinguishmentoftheloanobligation.The

Courtcannottakecognizanceofsuchapurelyhypotheticalissue.

AnnabeleDelaPeñaandAdrianVilarealv.TheCourtofAppealsandRuralBankof

Bolinao,Inc.


Nachura,J.:

ISSUE:Whethertheburdenofprovingthefactofpaymentliesonthepersonalegingit.

DOCTRINE:Yes.Jurisprudenceisrepletewithrulingsthatincivilcases,thepartywho

alegesafacthastheburdenofprovingit.Burdenofproofisthedutyofapartyto

presentevidenceofthefactsinissuenecessarytoprovethetruthofhisclaim or

defensebytheamountofevidencerequiredbylaw.Thus,apartywhopleadspayment

asadefensehastheburdenofprovingthatsuchpaymenthas,infact,beenmade.

Whentheplaintifalegesnonpayment,stil,thegeneralruleisthattheburdenrestson

thedefendanttoprovepayment,ratherthanontheplaintiftoprovenonpayment.

D.B.T.Mar-BayConstruction,Incorporatedv.RicaredoPanesetal.

G.R.No.167232,July31,2009

Nachura,J.

ISSUE:Whetheraninnocentpurchaserforvalueandgoodfaithwhich,throughadacion

enpago,acquireownershipovertheproperty.

DOCTRINE:Yes.DBTisaninnocentpurchaserforvalueandgoodfaithwhich,througha

dacionenpagodulyenteredintowithB.C.Regalado,acquiredownershipoverthe

subjectproperty,andwhoserightsmustbeprotectedunderSection32ofP.D.No.1529.

Dacionenpagoisthedeliveryandtransmissionofownershipofathingbythedebtorto

thecreditorasanacceptedequivalentoftheperformanceoftheobligation.Itisa

specialmodeofpaymentwherethedebtorofersanotherthingtothecreditor,who

acceptsitasanequivalentofthepaymentofanoutstandingdebt.Initsmodern

concept,whatactualytakesplaceindacionenpagoisanobjectivenovationofthe

obligationwherethethingoferedasanacceptedequivalentoftheperformanceofan

obligation isconsidered astheobjectofthecontractofsale,whilethedebtis

consideredasthepurchaseprice.

Itmustalsobenotedthatportionsofthesubjectpropertyhadalreadybeensoldtothird

personswho,likeDBT,areinnocentpurchasersingoodfaithandforvalue,relyingon

thecertificatesoftitleshowntothem,andwhohadnoknowledgeofanydefectinthe

titleofthevendor,oroffactssuficienttoinduceareasonablyprudentmantoinquire

intothestatusofthesubjectproperty.

Rockvile ExcelInternationalExim Corporation v.Spouses Oligario Cula and

BernarditaMiranda

G.R.No.155716,October2,2009

35

Brion,J.


ISSUE:Whetherthegrantofextensionsofthetimetopaytheloanbeliedthecontention

thattheyhadintendedadacionenpago.

DOCTRINE:Yes.Dacionenpagoisthedeliveryandtransmissionofownershipofa

thingbythedebtortothecreditorasanacceptedequivalentoftheperformanceofan

existingobligation.Itisaspecialmodeofpaymentwherethedebtorofersanother

thingtothecreditorwhoacceptsitasequivalenttothepaymentofanoutstandingdebt.

Fordacionenpagotoexist,thefolowingelementsmustconcur:(a)existenceofa

moneyobligation;(b)thealienationtothecreditorofapropertybythedebtorwiththe

consentoftheformer;and(c)satisfactionofthemoneyobligationofthedebtor.

IfthepartieshadtrulyintendedadacionenpagotransactiontoextinguishtheSps.

Cula’sP2,000,000.00loanandOligariohadsoldthepropertyinpaymentforthisdebt,it

madenosenseforhim tocontinuetoaskforextensionsofthetimetopaytheloan.

Moreimportantly,RockvilewouldnothavegrantedtherequestedextensionstoOligario

ifpaymentthroughadacionenpagohadtakenplace.ThatRockvilegrantedthe

extensionssimplybelieditscontentionthattheyhadintendedadacionenpago.

Thus,weagreewiththefactualfindingsoftheRTCandtheCAthatnoagreementof

salewasperfectedbetweenRockvileandtheSps.Cula.Onthecontrary,whatthey

denominatedasaDeedofAbsoluteSalewasinfactanequitablemortgage.

PremiereDevelopmentBankv.CentralSurety&InsuranceCompany,Inc.


Nachura,J.:

ISSUE:Whetherthedebtormaychooseamonghisobligationsinwhichhemayapply

hispaymentandwhethersuchrightmaybewaivedinfavorofthecreditor.

DOCTRINE:Yes.Thedebtor’srighttoapplypaymentisnotmandatory.Thisisclear

from theuseoftheword"may"ratherthantheword"shal"intheprovisionwhichreads:

"Hewhohasvariousdebtsofthesamekindinfavorofoneandthesamecreditor,may

declareatthetimeofmakingthepayment,towhichofthesamemustbeapplied."

Indeed,thedebtor’srighttoapplypaymenthasbeenconsideredmerelydirectory,and

notmandatory,folowing this Court’s earlierpronouncementthat"the ordinary

acceptationoftheterms‘may’and‘shal’mayberesortedtoasguidesinascertaining

themandatoryordirectorycharacterofstatutoryprovisions."

Article1252givestherighttothedebtortochoosetowhichofseveralobligationsto

applyaparticularpaymentthathetenderstothecreditor.Butlikewisegrantedinthe

sameprovisionistherightofthecreditortoapplysuchpaymentincasethedebtorfails

todirectitsapplication.ThisisobviousinArt.1252,par.2,viz.:"Ifthedebtoraccepts

from thecreditorareceiptinwhichanapplicationofpaymentismade,theformer

cannotcomplainofthesame."Itisthedirectorynatureofthisrightandthesubsidiary

rightofthecreditortoapplypaymentswhenthedebtordoesnotelecttodosothat

makethisright,likeanyotherright,waivable.

A debtor,inmaking avoluntarypayment,mayatthetimeofpaymentdirectan

applicationofittowhateveraccounthechooses,unlesshehasassignedorwaivedthat

right.Ifthedebtordoesnotdoso,therightpassestothecreditor,whomaymakesuch

applicationashechooses.Butifneitherpartyhasexerciseditsoption,thecourtwil

applythe paymentaccording to the justice and equityofthe case,taking into

considerationalitscircumstances.Verily,thedebtor’srighttoapplypaymentcanbe

36


waivedandevengrantedtothecreditorifthedebtorsoagrees.

CecilevileRealtyandServiceCorporationv.Acuña

G.R.No.162074;July13,2009

Carpio,J.

ISSUE:WhetherCecilevileRealtyandServiceCorporationisentitledtoreimbursement

from theAcuñaspouses

DOCTRINE:YesCecilevilepaidthedebtoftheAcuñaspousestoPrudentialasan

interestedthirdparty.ThesecondparagraphofArticle1236oftheCivilCodereads:

Whoeverpaysforanothermaydemandfrom thedebtorwhathehaspaid,exceptthatif

hepaidwithouttheknowledgeoragainstthewilofthedebtor,hecanrecoveronly

insofarasthepaymenthasbeenbeneficialtothedebtor.EveniftheAcuñaspouses

insistthatCecilevile’spaymenttoPrudentialwaswithouttheirknowledgeoragainst

theirwil,Article1302(3)oftheCivilCodestatesthatCecilevilestilhasarightto

reimbursement,thus:When,even withouttheknowledgeofthedebtor,a person

interestedinthefulfilmentoftheobligationpays,withoutprejudicetotheefectsof

confusionastothelater’sshare.

DBTMar-BayConstruction,Inc.vs.Panes

G.R.No.167232;July31,2009

Nachura,J.

ISSUE:WhetherDBT,asaninnocentpurchaserforvalueandgoodfaithwhich,through

adacionenpagoduly entered intowith B.C.Regalado,acquiredownershipoverthe

subjectproperty.

DOCTRINE:Yes.Dacionenpagoisthedeliveryandtransmissionofownershipofa

thingbythedebtortothecreditorasanacceptedequivalentoftheperformanceofthe

obligation.Itisaspecialmodeofpaymentwherethedebtorofersanotherthingtothe

creditor,whoacceptsitasanequivalentofthepaymentofanoutstandingdebt.Inits

modernconcept,whatactualytakesplaceindacionenpagoisanobjectivenovationof

theobligationwherethethingoferedasanacceptedequivalentoftheperformanceof

anobligationisconsideredastheobjectofthecontractofsale,whilethedebtis

consideredasthepurchaseprice.

Itmustalsobenotedthatportionsofthesubjectpropertyhadalreadybeensoldtothird

personswho,likeDBT,areinnocentpurchasersingoodfaithandforvalue,relyingon

thecertificatesoftitleshowntothem,andwhohadnoknowledgeofanydefectinthe

titleofthevendor,oroffactssuficienttoinduceareasonablyprudentmantoinquire

intothestatusofthesubjectproperty.Todisregardthesecircumstancessimplyonthe

basisofalegedcontinuousandadversepossessionofrespondentswouldnotonlybe

inimicaltotherightsoftheaforementionedtitleholders,butwouldultimatelywreak

havoconthestabilityoftheTorenssystem ofregistration.

ManuelGoCincoandAraceliS.GoCincov.CourtOfAppeals,EsterServacioand

MaasinTradersLendingCorporation

G.R.No.151903,October9,2009

Brion,J.:

ISSE:Whetherunjustrefusalofcreditortoacceptpaymentisequivalenttopayment.

DOCTRINE:No.Refusalwithoutjustcauseisnotequivalenttopayment;tohavethe

efectofpaymentandtheconsequentextinguishmentoftheobligationtopay,thelaw

requiresthecompanionactsoftenderofpaymentandconsignation.

37


Tenderofpayment,asdefinedinFarEastBankandTrustCompanyv.DiazRealty,Inc.,

isthedefinitiveactofoferingthecreditorwhatisduehim orher,togetherwiththe

demandthatthecreditoracceptthesame.Whenacreditorrefusesthedebtor’stender

ofpayment,thelawalowstheconsignationofthethingorthesum due.Tenderand

consignationhavetheefectofpayment,asbyconsignation,thethingdueisdeposited

andplacedatthedisposalofthejudicialauthoritiesforthecreditortocolect.

LandBankofthePhilippinesvs.AlfredoOng

G.R.No.190755November24,2010

Velasco,Jr.,J.:

ISSUE:WhetherArt.1236makesacreditor(LandBank)boundtoacceptpaymentfrom

athirdpersonhavingnointerestinthefulfilmentoftheobligationandWhetherathird

person(Alfredo)maydemandfrom thedebtor(SpousesSy)whathehaspaid.

DOCTRINE:No.LandBankwasnotboundtoacceptAlfredo’spayment,sinceasfaras

theformerwasconcerned,hedidnothaveaninterestinthepaymentoftheloanofthe

SpousesSy.

No.AlfredowasnotmakingpaymenttofulfiltheobligationoftheSpousesSy.Alfredo,

asathirdperson,didnot,therefore,haveaninterestinthefulfilmentoftheobligation

oftheSpousesSy,sincehisinteresthingedonLandBank’sapprovalofhisapplication,

whichwasdenied.AsAlfredomadethepaymentforhisowninterestandnotonbehalf

oftheSpousesSy,recourseisnotagainstthelater.He,thus,madepaymentnotasa

debtorbutasaprospectivemortgagor.AndasAlfredowasnotpayingforanother,he

cannotdemandfrom thedebtors,theSpousesSy,whathehaspaid.

Republicv.ThiThuThuyT.DeGuzman

G.R.No.175021;June15,2011

ISSUE:Isthepaymentmadetoapersonotherthanthecreditorextinguishesthe

obligation?

DOCTRINE:No.Ingeneral,apaymentinordertobeefectivetodischargeanobligation,

mustbemadetotheproperperson.Thus,paymentmustbemadetotheobligee

himselfortoanagenthavingauthority,expressorimplied,toreceivetheparticular

payment.Paymentmadetoonehavingapparentauthoritytoreceivethemoneywil,as

arule,betreatedasthoughactualauthorityhadbeengivenforitsreceipt.Likewise,if

paymentismadetoonewhobylawisauthorizedtoactforthecreditor,itwilworka

discharge.Thereceiptofmoneydueonajudgmentbyanoficerauthorizedbylawto

acceptitwil,therefore,satisfythedebt.Therespondentwasabletoestablishthatthe

LBPcheckwasnotreceivedbyherorbyherauthorizedpersonnel.

Daltonvs.FGRRealtyandDevelopmentCorp

G.R.No.172577;January19,2011

ISSUE:Whethertheconsignationmadebytheplaintif-appelantwasvoidforfailureto

givenoticeto thedefendants-appeleesofherintention to so consign herrental

payments.

DOCTRINE:NO.Compliancewiththerequisitesofavalidconsignationismandatory.

Failuretocomplystrictlywithanyoftherequisiteswilrendertheconsignationvoid.

Substantialcomplianceisnotenough.Therequisitesofavalidconsignation:(1)adebt

due;(2)thecreditortowhom tenderofpaymentwasmaderefusedwithoutjustcause

toacceptthepayment,orthecreditorwasabsent,unknownorincapacitated,orseveral

38


personsclaimedthesamerighttocolect,orthetitleoftheobligationwaslost;(3)the

person interested in the performance ofthe obligation was given notice before

consignationwasmade;(4)theamountwasplacedatthedisposalofthecourt;and(5)

thepersoninterestedintheperformanceoftheobligationwasgivennoticeafterthe

consignationwasmade.Theconsignationhavingbeenmade,theinterestedparties

shalalsobenotifiedthereof.

Thegivingofnoticetothepersonsinterestedintheperformanceoftheobligationis

mandatory.Failuretonotifythepersonsinterestedintheperformanceoftheobligation

wilrendertheconsignationvoid.InRamosv.Sarao,theCourtheldthat,"Alinterested

partiesaretobenotifiedoftheconsignation.Compliancewith[thisrequisite]is

mandatory.

ElizabethDelCarmenv.Sps.Sabordo

G.R.No.181723,August11,2014

ISSUE:Whetherthejudicialdepositorconsignationofthemoneywasvalidandbinding

tothepartiesandproducedtheefectofpaymentofthepurchasepriceofthesubject

lots.

DOCTRINE:NO.Consignationistheactofdepositingthethingduewiththecourtor

judicialauthoritieswheneverthecreditorcannotacceptorrefusestoacceptpayment,

anditgeneralyrequiresapriortenderofpayment.Itshouldbedistinguishedfrom

tenderofpaymentwhichisthemanifestationbythedebtortothecreditorofhisdesire

tocomplywithhisobligation,withtheoferofimmediateperformance.Tenderisthe

antecedentofconsignation,thatis,anactpreparatorytotheconsignation,whichisthe

principal,andfrom whicharederivedtheimmediateconsequenceswhichthedebtor

desiresorseekstoobtain.Tenderofpaymentmaybeextrajudicial,whileconsignation

isnecessarilyjudicial,andthepriorityofthefirstistheatempttomakeaprivate

setlement before proceeding to the solemnities of consignation.Tender and

consignation,wherevalidlymade,producestheefectofpaymentandextinguishesthe

obligation.

Itissetledthatcompliancewiththerequisitesofavalidconsignationismandatory.

Failuretocomplystrictlywithanyoftherequisiteswilrendertheconsignationvoid.

Oneoftheserequisitesisavalidpriortenderofpayment.

ErlindaGajudo,FernandoGajudo,Jr.,EstelitaGajudo,BaltazarGajudoAndDanilo

ArahanChuav.TradersRoyalBank

G.R.No.151098.March21,2006

Panganiban,C.J.:

ISSUE:Whatisameansofprovingafirm commitmenttopaytheredemptionpriceona

fixedperiod,whichisessentialinconventionalredemption?

DOCTRINE:OtherthantheInterbankcheckmarked"fordeposit"byrespondentbank,no

otherevidencewaspresentedtoestablishthatpetitionershadoferedtopaythe

alegedredemptionpriceofP40,135.53onafixeddate.Forthatmater,petitionershave

notshownthattheytenderedpaymentofthebalanceand/orconsignedthepaymentto

thecourt,inordertofulfiltheirpartofthepurportedagreement.Theseremediesare

availabletoanaggrieveddebtorunderArticle1256oftheCivilCode,whenthecreditor

unjustlyrefusestoacceptthepaymentofanobligation.

LuzonDevelopmentBankv.Enriquez

G.R.No.168646;January12,2011

39


ISSUE:Whetherthedacionenpagoextinguishedtheloanobligation,suchthatDELTA

hasnomoreobligationstotheBANK.

DOCTRINE:Thecontractualintentiondetermineswhetherthepropertysubjectofthe

dationwilbeconsideredasthefulequivalentofthedebtandwilthereforeserveas

fulsatisfactionforthedebt."Thedationinpaymentextinguishestheobligationtothe

extentofthevalueofthethingdelivered,eitherasagreeduponbythepartiesorasmay

beproved,unlessthepartiesbyagreement,expressorimplied,orbytheirsilence,

considerthethingasequivalenttotheobligation,inwhichcasetheobligationistotaly

extinguished."

TelengtanBrothers&Sons,Inc.v.UnitedStatesLines,Inc.andtheCourtofAppeals

Gr.No.132284.February28,2006

Garcia,J.:

ISSUE:Whencantherebeextraordinaryinflationordeflationofthecurencystipulated

soastojustifytheapplicationofpaymentunderArticle1250?

DOCTRINE:Extraordinaryinflationordeflation,asthecasemaybe,existswhenthereis

anunusualincreaseordecreaseinthepurchasingpowerofthePhilippinepesowhichis

beyondthecommonfluctuationinthevalueofsaidcurency,andsuchincreaseor

decreasecouldnothavebeenreasonablyforeseenorwasmanifestlybeyondthe

contemplationofthepartiesatthetimeoftheestablishmentoftheobligation.

Evenifthepriceindexofgoodsandservicesmayhaverisenduringtheintervening

period,thisincrease,withoutmore,cannotbeconsideredasresultingto"extraordinary

inflation"astojustifytheapplicationofArticle1250.Theerosionofthevalueofthe

Philippinepesointhepastthreeorfourdecades,startinginthemid-sixties,is,asthe

CourtobservedinSingsonvs.Caltex(Phil),Inc.,characteristicsofmostcurencies.And

whiletheCourtmaytakejudicialnoticeofthedeclineinthepurchasingpowerofthe

Philippinecurencyinthatspanoftime,suchdownwardtrendofthepesocannotbe

consideredastheextraordinaryphenomenoncontemplatedbyArticle1250oftheCivil

Code.Furthermore,absentanoficialpronouncementordeclarationbycompetent

authoritiesoftheexistenceofextraordinaryinflationduringagivenperiod,ashere,the

efectsofextraordinaryinflation,ifthatbethecase,arenottobeapplied.

Extraordinaryinflationcanneverbeassumed;hewhoalegestheexistenceofsuch

phenomenonmustprovethesame.

SimplicioA.Palancav.UlyssisGuides


Tinga,J.:

ISSUE:Whatistheefectofacceptanceofpaymentwithoutqualificationonthepartof

thecreditor?

DOCTRINE:Art.1235oftheCivilCodeprovidesthat“Whentheobligeeacceptsthe

performance,knowingitsincompletenessoriregularity,andwithoutexpressingany

protestorobjection,the obligation is deemed fulycomplied with.”Thus,when

petitioneracceptedrespondent’sinstalmentpaymentsdespitethealegedcharges

incuredbythelater,andwithoutanyshowingthatheprotestedtheiregularityofsuch

payment,nordemandedthepaymentofthealegedcharges,respondent’sliability,ifany

forsaidcharges,isdeemedfulysatisfied.

40


SECTION2.LOSSOFTHETHINGDUE

Ayala Construction and Development Corporation v. Philippine Commercial

InternationalBank

G.R.No.153827.April25,2006.

Garcia,J.:

ISSUE:Inanobligationtogivewilapartybereleasedfrom itsobligationwhenthe

prestationbecomeslegalyofphysicalyimpossible?

DOCTRINE:No.Itisafundamentalrulethatcontracts,onceperfected,bindboth

contractingparties,andobligationsarisingtherefrom havetheforceoflawbetweenthe

partiesandshouldbecompliedwithingoodfaith.Butthelawrecognizesexceptionsto

theprincipleoftheobligatoryforceofcontracts.OneexceptionislaiddowninArticle

1266oftheCivilCode,whichreads:‘Thedebtorinobligationstodoshalalsobe

releasedwhentheprestationbecomeslegalyorphysicalyimpossiblewithoutthefault

oftheobligor.

Petitionercannot,however,successfulytakerefugeinthesaidarticle,sinceitis

applicableonlytoobligations“todo,”andnotobligations“togive.”Anobligation“todo”

includesalkindsofworkorservice;whileanobligation“togive”isaprestationwhich

consistsinthedeliveryofamovableoranimmovablethinginordertocreateareal

right,orfortheuseoftherecipient,orforitssimplepossession,orinordertoreturnit

toitsowner.

RaymundoS.DeLeonvs.BenitaT.Ong


Corona,J.:

ISSUE:Whethertherespondentapurchaseringoodfaith.

DOCTRINE:YES.Article1266oftheCivilCodeprovides:Article1266.Thedebtorin

obligationstodoshalbereleasedwhentheprestationbecomelegalyorphysicaly

impossiblewithoutthefaultoftheobligor.

Sincerespondent’sobligationtoassumepetitioner’soutstandingbalancewithRSLAI

becameimpossiblewithoutherfault,shewasreleased from thesaid obligation.

Moreover,becausepetitionerhimselfwilfulypreventedtheconditionvis-à-visthe

paymentoftheremainderofthepurchaseprice,thesaidconditionisconsidered

fulfiled pursuantto Article 1186 ofthe CivilCode.Forpurposes,therefore,of

determiningwhetherrespondentwasapurchaseringoodfaith,sheisdeemedtohave

fulycompliedwiththeconditionofthepaymentoftheremainderofthepurchaseprice.

SECTION3.CONDONATIONORREMISSIONOFTHEDEBT

RubenReynaV.COA

G.R.No.167219;February8,2011

ISSUE:Whetherthewritingofofaloanisconsideredascondonationwhichreleasesa

debtbythecreditor.

41


DOCTRINE:NO.This Courtrules thatwriting-ofa loan does notequate to a

condonationorreleaseofadebtbythecreditor.Write-ofisnotoneofthelegal

groundsforextinguishinganobligationundertheCivilCode.Itisnotacompromiseof

liability.Neitherisitacondonation,sinceincondonationgratuityonthepartofthe

obligeeandacceptancebytheobligorarerequired.Inmakingthewrite-of,onlythe

creditortakesactionbyremovingtheuncolectibleaccountfrom itsbooksevenwithout

theapprovalorparticipationofthedebtor.

SECTION4.CONFUSIONORMERGEROFRIGHTS

CecilevileRealtyandServiceCorporationvs.SpousesTitoAcuñaandOfeliaB.Acuña

G.R.No.162074,July13,2009

Carpio,J.

ISSUE:Whetherathird-partyaccommodationmortgagorinarealestatemortgagewho

paidthemortgageddebtinfavoroftheprincipalmortgagorwithouthisknowledgehas

therighttoreimbursefrom thelater.

DOCTRINE:Yes.When,evenwithouttheknowledgeofthedebtor,apersoninterestedin

thefulfilmentoftheobligationpays,withoutprejudicetotheefectsofconfusionasto

thelater’sshare.

Cecilevileclearlyhasaninterestinthefulfilmentoftheobligationbecauseitownsthe

propertiesmortgagedtosecuretheAcuñaspouses’loan.Whenaninterestedparty

paystheobligation,heissubrogatedintherightsofthecreditor.Becauseofits

paymentoftheAcuñaspouses’loan,Cecilevileactualystepsintotheshoesof

Prudentialandbecomesentitled,notonlytorecoverwhatithaspaid,butalsoto

exercisealtherightswhichPrudentialcouldhaveexercised.Thereis,insuchcases,

notarealextinguishmentoftheobligation,butachangeintheactivesubject.

Sps.DominadorR.NarvaezandLiliaW.Narvaezvs.Sps.RoseOgasAlcisoand

AntonioAlciso

G.R.No.165907,July27,2009

Carpio,J.

ISSUE:Whethertherecouldbeastipulationinfavorofathirdperson.

DOCTRINE:Yes.InLimitless Potentials,Inc.v.Quilala,the Courtlaid down the

requisitesofastipulationpourautrui:(1)thereisastipulationinfavorofathirdperson;

(2)thestipulationisapart,notthewhole,ofthecontract;(3)thecontractingparties

clearlyanddeliberatelyconferedafavortothethirdperson— thefavorisnotan

incidentalbenefit;(4)thefavorisunconditionalanduncompensated;(5)thethird

personcommunicatedhisorheracceptanceofthefavorbeforeitsrevocation;and(6)

thecontractingpartiesdonotrepresent,orarenotauthorizedby,thethirdparty.

Altherequisitesarepresentintheinstantcase:(1)thereisastipulationinfavorof

Alciso;(2)thestipulationisapart,notthewhole,ofthecontract;(3)Bateandthe

SpousesNarvaezclearlyanddeliberatelyconferedafavortoAlciso;(4)thefavoris

unconditionalanduncompensated;(5)Alcisocommunicatedheracceptanceofthe

favorbeforeitsrevocation— shedemandedthatastipulationbeincludedinthe14

August1981DeedofSaleofRealtyalowinghertorepurchasethepropertyfrom the

Spouses Narvaez,and she informed the Spouses Narvaez thatshe wanted to

repurchasetheproperty;and(6)BateandtheSpousesNarvaezdidnotrepresent,and

werenotauthorizedby,Alciso.

42


SECTION5.COMPENSATION

Mavest(USA)Inc.and MavestManila Liaison Ofice vs.Sampaguita Garment

Corporation


Garcia,J.:

ISSUE:Incompensation,dotherightsofcreditorsorobligationsofdebtorsneedto

springfrom oneandthesamecontract?

DOCTRINE:No.Forcompensation to validlytakeplace,thegoverning CivilCode

provisions require the concurence ofwel-defined conditions.Atits minimum,

compensationpresupposestwopersonswho,intheirownrightandasprincipals,are

mutualy indebted to each otherrespecting equaly demandable and liquidated

obligations over any of which no retention or controversy commenced and

communicatedinduetimetothedebtorexists.Butwhilecompensation,beitlegalor

conventional,requirestheconfluenceinthepartiesofthecharactersofmutualdebtors

andcreditors,theirrightsassuchcreditors,ortheirobligationsassuchdebtors,need

notspringfrom oneandthesamecontractortransaction.

ManuelB.Aloriav.EstrelitaB.Clemente


CarpioMorales,J.:

ISSUE:Cantherebecompensationfortheamountofexpensesduetoapossessorin

badfaithasagainsttherentalsduefrom him tothelawfulpossessor?

DOCTRINE:Yes.The amountofreimbursable orrefundable expenses due to a

possessorinbadfaithunderArticles443and546canbecompensatedunderArticle

1278whichreads:Compensationshaltakeplacewhentwopersons,intheirownright,

arecreditorsanddebtorsofeachother.

PremiereDevelopmentBankv.Flores

G.R.No.175339,574SCRA66

ISSUE:Musttheprinciplesofcompensationorset-ofbeappliedinacasewherethere

isforeclosureofmortgagedpropertysinceforeclosuredoesnotprecludethecreditor

from filinganactiontorecoveranydeficiencyfrom respondentcorporations’loan?

DOCTRINE:TheCourtcannotgiveduecoursetoPremiereDevelopmentBank’sclaim of

compensationorset-ofonaccountofthependingCivilCaseNo.MC03-2202before

theRTCofMandaluyongCity.Forcompensationtoapply,amongotherrequisites,the

twodebtsmustbeliquidatedanddemandablealready.

Adistinctionmustbemadebetweenadebtandamereclaim.Adebtisanamount

actualyascertained.Itisaclaim whichhasbeenformalypasseduponbythecourtsor

quasi-judicialbodiestowhichitcaninlawbesubmitedandhasbeendeclaredtobea

debt.Aclaim,ontheotherhand,isadebtinembryo.Itismereevidenceofadebtand

mustpassthrutheprocessprescribedbylawbeforeitdevelopsintowhatisproperly

caledadebt.Absent,however,anysuchcategoricaladmissionbyanobligororfinal

adjudication,nolegalcompensationorof-setcantakeplace.Unlessadmitedbya

debtorhimself,theconclusionthatheisintruthindebtedtoanothercannotbedefinitely

andfinalypronounced,nomaterhowconvincedhemaybefrom theexaminationof

thepertinentrecordsofthevalidityofthatconclusiontheindebtednessmustbeone

thatisadmitedbythealegeddebtororpronouncedbyfinaljudgmentofacompetent

43


court.Atbest,whatPremiereDevelopmentBankhasagainstrespondentcorporations

isjustaclaim,notadebt.Atworst,itisaspeculativeclaim.

Sorianov.People

G.R.No.181692,703SCRA536

ISSUE:Cantherebecompensationfordebtcomprisingofthedebtor’sharvest?

DOCTRINE:Compensationisamodeofextinguishingtotheconcurentamount,the

debtsofpersonswhointheirownrightarecreditorsanddebtorsofeachother.

Article1279oftheCivilCodeprovidesfortherequisitesforcompensationtotakeefect:

(1)Thateachoneoftheobligorsbeboundprincipaly,andthathebeatthesametimea

principalcreditoroftheother;

(2)Thatbothdebtsconsistinasum ofmoney,orifthethingsdueareconsumable,they

beofthesamekind,andalsoofthesamequalityifthelaterhasbeenstated;

(3)Thatthetwodebtsbedue;

(4)Thattheybeliquidatedanddemandable;

(5)Thatoverneitherofthem therebeanyretentionorcontroversy,commencedbythird

personsandcommunicatedinduetimetothedebtor.

Harvestduetopetitionerasprovidedinthecontractofloan,thesamecannotbe

consideredinthelegalcompensationofthedebtsofthepartiessinceitdoesnot

consistinasum ofmoney,saidsharebeingintheform ofharvests.

UnitedPlantersSugarMilingCo.,Inc.,(UPSUMCO)vs.CourtofAppeals,etal.

G.R.No.126890,April2,2009

Tinga,J.:

ISSUE:Whethertheabsenceofamutualcreditor-debtorrelationbetweentheparties

preventsthem from extinguishingtheirobligationsthroughcompensation.

DOCTRINE:No.Itmightseem thatAPThasnorighttoset-ofpaymentswithUPSUMCO

forunderArticle1279(1),itisnecessaryforcompensationthattheobligors"bebound

principaly,andthathebeatthesametimeaprincipalcreditoroftheother."Thereis,

concededly,nomutualcreditor-debtorrelationbetweenAPTandUPSUMCO.However,

werecognizetheconceptofconventionalcompensation,definedasoccuring"when

thepartiesagreetocompensatetheirmutualobligationsevenifsomerequisiteis

lacking,suchasthatprovidedinArticle1282."Itisintendedtoeliminateorovercome

obstacles which prevent ipso jure extinguishment of their obligations. Legal

compensationtakesplacebyoperationoflaw whenaltherequisitesarepresent,as

opposedtoconventionalcompensationwhichtakesplacewhenthepartiesagreeto

compensatetheirmutualobligationsevenintheabsenceofsomerequisites.Theonly

requisitesofconventionalcompensationare(1)thateachofthepartiescandisposeof

the credithe seeks to compensate,and (2) thatthey agree to the mutual

extinguishmentoftheircredits.

TherightofPNB to set-ofpaymentsfrom UPSUMCO aroseoutofconventional

compensationratherthanlegalcompensation,eventhoughaloftherequisitesforlegal

compensationwerepresentasbetweenthosetwoparties.Thedeterminativefactoris

themutualagreementbetweenPNBandUPSUMCOtoset-ofpayments.Evenwithout

anexpressagreementstipulatingcompensation,PNBandUPSUMCOwouldhavebeen

entitledtoset-ofofpayments,asthelegalrequisitesforcompensationunderArticle

1279werepresent.

44


AssoonasPNBassigneditscredittoAPT,themutualcreditor-debtorrelationbetween

PNBandUPSUMCOceasedtoexist.However,PNBandUPSUMCOhadagreedtoa

conventionalcompensation,arelationshipwhichdoesnotrequirethepresenceofal

therequisitesunderArticle1279.AndPNBtoohadassignedalitsrightsascreditorto

APT,includingitsrightsunderconventionalcompensation.Theabsenceofthemutual

creditor-debtorrelationbetweenthenewcreditorAPTandUPSUMCOcannotnegatethe

conventionalcompensation.Accordingly,APT,astheassigneeofcreditofPNB,hadthe

righttoset-oftheoutstandingobligationsofUPSUMCOonthebasisofconventional

compensationbeforethecondonationtookefecton3September1987.

Laov.SpecialPlans,Inc.

G.R.No.164791

DelCastilo,J.

ISSUE:Whetherlegalcompensationshaltakeplacewherethepartiesaremutual

creditorsanddebtorsofeachother?

DOCTRINE:No,Article1279oftheNew CivilCodeprovidesthatcompensationshal

takeplacewhentwopersons,intheirownright,arecreditorsanddebtorsofeachother.

Inorderforcompensationtobeproper,itisnecessarythat:

1.Eachoneoftheobligorsbeboundprincipalyandthathebeatthesametimea


2.Bothdebtsconsistinasum ofmoney,orifthethingsdueareconsumable,theybeof

thesamekind,andalsoofthesamequalityifthelaterhasbeenstated;

3.Thetwodebtsaredue:

4.Thedebtsareliquidatedanddemandable;

5.Overneitherofthem beanyretentionorcontroversy,commencedbythirdpartiesand

communicatedinduetimetothedebtor.

Petitioners failed to properlydischarge theirburden to show thatthe debts are

liquidatedanddemandable.Consequently,legalcompensationisinapplicable.

TradersRoyalBankvs.NorbertoCastañaresandMilagrosCastañares

G.R.No.172020December6,2010

Vilarama,Jr.,J.:

ISSUE:Whetherpetitionerhasarightbywayofset-ofthetelegraphictransferinthe

sum of$4,220.00againsttheunpaidloanaccountofprivaterespondents,bothbeing

boundasprincipalsanddebtorsofeachother,thedebtsconsistingofasum ofmoney

anddue,liquidatedanddemandable,andarenotclaimedbyathirdperson.

DOCTRINE:Yes.Agreementsforcompensationofdebtsoranyobligationswhenthe

partiesaremutualycreditorsanddebtorsarealowedunderArt.1282oftheCivilCode

eventhoughnotalthelegalrequisitesforlegalcompensationarepresent.Voluntaryor

conventionalcompensationisnotlimitedtoobligationswhicharenotyetdue.Theonly

requirementsforconventionalcompensationare(1)thateachofthepartiescanfuly

dispose ofthe credithe seeks to compensate,and (2)thattheyagree to the

extinguishmentoftheirmutualcredits.Consequently,noerorwascommitedbythe

trialcourtin holding thatpetitionervalidlyapplied,bywayofcompensation,the

$4,220.00 telegraphictransferremited byrespondents’foreign clientthrough the

petitioner.

CesarV.ArezaandLolitaB.Arezav.ExpressSavingsBank,Inc.


ISSUE:WhethertheBankcanset-oftheamountitpaidtoEquitable-PCIBankwith

petitioner’ssavingsaccount.

45


DOCTRINE:No.UnderArt.1278oftheNewCivilCode,compensationshaltakeplace

whentwopersons,intheirownright,arecreditorsanddebtorsofeachother.Andthe

requisitesforlegalcompensationare:

Art.1279.Inorderthatcompensationmaybeproper,itisnecessary:









Itis wel-setled thatthe relationship ofthe depositors and the Bankorsimilar

institutionisthatofcreditor-debtor.Article1980oftheNewCivilCodeprovidesthat

fixed,savingsandcurentdepositsofmoneyinbanksandsimilarinstitutionsshalbe

governedbytheprovisionsconcerningsimpleloans.Thebankisthedebtorandthe

depositoristhecreditor.Thedepositorlendsthebankmoneyandthebankagreesto

paythedepositorondemand.Thesavingsdepositagreementbetweenthebankand

the depositoris the contractthatdetermines the rights and obligations ofthe

parties.33cralawred

MondragonPersonalSales,Inc.v.VictorianoS.Sola,Jr.

G.R.No.174882.January21,2013

Peralta,J.:

ISSUE:Ispetitioner'sactofwithholding respondent'sservice feesand thereafter

applyingthem aspartialpaymenttotheobligationofrespondent'swifewithpetitioner

unlawful?

DOCTRINE:No.Petitioner’sactofwithholdingrespondent'sservicefees/commissions

andapplyingthem tothelater'soutstandingobligationwiththeformerismerelyan

acknowledgmentofthelegalcompensationthatoccuredbyoperationoflawbetween

theparties.Compensationisamodeofextinguishingtotheconcurentamountthe

obligationsofpersonswhointheirownrightandasprincipalsarereciprocalydebtors

andcreditorsofeachother.Legalcompensationtakesplacebyoperationoflawwhen

altherequisitesarepresent,asopposedtoconventionalcompensationwhichtakes

placewhenthepartiesagreetocompensatetheirmutualobligationseveninthe

absenceofsomerequisites.

Legalcompensationrequirestheconcurenceofthefolowingconditions:









SECTION6.NOVATION

PhilippineSavingsBankv.Sps.RodelfoMalanacJr.

46


G.R.No.145441,April26,2005

Ynares-SantiagoJ:

ISSUE:Ismoraldamagesproperincaseabankmisrepresentsthattheywouldaccepta

requestofapartyandthendoesanactthatislegalunderthecircumstances?

DOCTRINE:Yes.Whilethebankhadthelegalbasistowithholdthereleaseofthe

mortgagedproperties,nevertheless,itwasnotforthrightandwaslackingincandorin

dealingwithMañalac.InacceptingthePCIBCheck,thebankknewfulywelthatthe

paymentwasconditionedonitscommitmenttoreleasethespecifiedproperties.Atthe

firstinstance,thebankshouldnothaveacceptedthecheckorreturnedthesamehadit

intendedbeforehandnottohonortherequestofMañalac.Inacceptingthecheckand

applyingtheproceedsthereoftotheloanaccountsofMañalacandGalicia,theformer

wereledtobelievethatthebankwasfavorablyactingontheirrequest.Injustifyingthe

awardofmoraldamages,theCourtofAppealscorectlyobservedthat“thereisthe

unjustifiedrefusaloftheappelantbanktomakeadefinitecommitmentwhileprofiting

from theproceedsofthecheckbyapplyingittotheprincipalandtheinterestofthe

Galiciasandplaintif-appelants.”

IsaisasF.FabrigasandMarcelinaR.Fabrigasv.SanFranciscodelMonte,Inc.

G.R.No.152346.November25,2005

Tinga,J.:

ISSUE:Isthereanovationwhenatfirst,thereisacontracttoselwhichwasrescinded

butsubsequentlyasecondcontracttoselwascreatedtoreplacethefirstcontract?

DOCTRINE:Novation,initsbroadconcept,mayeitherbeextinctiveormodificatory.Itis

extinctivewhenanoldobligationisterminatedbythecreationofanewobligationthat

takestheplaceoftheformer;itismerelymodificatorywhentheoldobligationsubsists

totheextentitremainscompatiblewiththeamendatoryagreement.Anextinctive

novationresultseitherbychangingtheobjectorprincipalconditions(objectiveorreal),

orbysubstitutingthepersonofthedebtororsubrogatingathirdpersonintherightsof

thecreditor(subjectiveorpersonal).Underthismode,novation would havedual

functions—onetoextinguishanexistingobligation,theothertosubstituteanewonein

itsplace—requiringaconfluxoffouressentialrequisites:(1)apreviousvalidobligation;

(2)anagreementofalpartiesconcernedtoanewcontract;(3)theextinguishmentof

theoldobligation;and(4)thebirthofavalidnewobligation.

Notwithstandingtheimproperrescission,thefactsofthecaseshow thatContractto

SelNo.2482-Vwas subsequently novated byContractto SelNo.2491-V.The

execution ofContractto SelNo.2491-Vaccompanied an upward change in the

contractprice,whichconstitutesachangeintheobjectorprincipalconditionsofthe

contract.InenteringintoContracttoSelNo.2491-V,thepartieswereimpeledby

causesdiferentfrom thoseobtainingunderContracttoSelNo.2482-V.Onthepartof

petitioners,theyagreedtothetermsandconditionsofContracttoSelNo.2491-Vnot

onlytoacquireownershipoverthesubjectpropertybutalsotoavoidtheconsequences

oftheirdefaultunderContractNo.2482-V.OnDelMonte’send,theupwardchangein

pricewastheconsiderationforenteringintoContracttoSelNo.2491-V.

Inorderthatanobligationmaybeextinguishedbyanotherwhichsubstitutesthesame,

itisimperativethatitbesodeclaredinunequivocalterms,orthattheoldandthenew

obligationsbeoneverypointincompatiblewitheachother.Thetestofincompatibilityis

Whetherthetwoobligationscanstandtogether,eachonehavingitsindependent

existence.Iftheycannot,theyareincompatibleandthelaterobligationnovatesthe

first.TheexecutionofContracttoSelNo.2491-Vcreatednew obligationsinlieuof

thoseunderContracttoSelNo.2482-V,whicharealreadyconsideredextinguished

47


upontheexecutionofthesecondcontract.Thetwocontractsdonothaveindependent

existencefortoholdotherwisewouldpresentanabsurdsituationwheretheparties

wouldbeliableundereachcontracthavingonlyonesubjectmater.

Sps.FranciscoandRubyReyesv.BPIFamilySavingsBank,Inc.,AndMagdalenaL.

Lometilo,inhercapacityasEx-OficioProvincialSherifforIloilo

G.R.Nos.149840-41.March31,2006

Corona,J.:

ISSUE:Doesnovationresultwhenthecreditorreconstructstheloanandchangesit

termsandthedebtorissuesapromissorynoteforthesame?

DOCTRINE:Nothereisnonovation.Novationistheextinguishmentofanobligationby

thesubstitutionorchangeoftheobligationbyasubsequentonewhichterminatesthe

first,eitherbychangingtheobjectorprincipalconditions,orbysubstitutingtheperson

ofthedebtor,orsubrogatingathirdpersonintherightsofthecreditor.

Thecancelationoftheoldobligationbythenewoneisanecessaryelementofnovation

whichmaybeefectedeitherexpresslyorimpliedly.Whilethereisrealynohardand

fastruletodeterminewhatmightconstitutesuficientchangeresultinginnovation,the

touchstone,however,isireconcilableincompatibilitybetweentheoldandthenew

obligations.Thenovationofacontractcannotbepresumed.Intheabsenceofan

expressagreement,novationtakesplaceonlywhentheoldandthenewobligationsare

incompatibleoneverypoint.

GammonPhilippines,Inc.v.MetroRailTransitDevelopmentCorporation

G.R.No.144792.January31,2006

Tinga,J.

ISSUE:Isthereanovationwhenasubsequentagreementisenteredintobytheparties

changingtheagreedpriceinthepreviouscontract?

DOCTRINE:No.Novationcannotbepresumed.Theanimusnovandi,whetherpartialor

total,mustappearbytheexpressagreementoftheparties,orbytheiractsthataretoo

clearand unequivocalto bemistaken.Thus,in orderthan an obligation maybe

extinguishedbyanotherwhichsubstitutesthesame,itisimperativethatitbeso

declaredinunequivocalterms,orthattheoldandthenewobligationsbeoneverypoint

incompatiblewitheachother.

EkLeeSteelWorksCorporationv.ManilaCastorOilCorporation

G.R.No.119033,557SCRA339

ISSUES:

(1)Doesanagreementsetingforthanew periodforthecompletionofanalready

delayedobligationamounttonovationofthepreviousobligation?

(2)Doesfailureofonepartytocomplywithhispartinareciprocalobligationamountto

delay?

DOCTRINE:

(1)TheCourtfindsnonovationofthepreviousagreementsbetweentheparties.Onthe

contrary,itexpresslyrecognizedtheparties’reciprocalobligations.Thus,whilethe16

May1988leterdidnotextinguishtheparties’obligationsundertheirpreviouscontracts,

ithowevermodifiedthemannerofpaymentfrom thesystem ofprogressbilingstoa

specificscheduleofpayments

48


(2)Petitionerfailedtocomplywithitsundertakingtocompletethewholeprojecton15

June1988.Consequently,respondent’sobligationtopaytheP200,000didnotarise.

Respondentcouldnotbeconsideredindelaywhenitfailedtopaypetitioneratthattime.

Accordingto thelastparagraphofArticle1169oftheCivilCode,“[i]nreciprocal

obligations,neitherpartyincursindelayiftheotherdoesnotcomplyorisnotreadyto

complyinapropermannerwithwhatisincumbentuponhim.From themomentoneof

thepartiesfulfilshisobligation,delaybytheotherbegins.

Suenov.LandBankofthePhilippines

G.R.No.174711,565SCRA611

ISSUE:Isthereavalidnovationenteredbypartiesfortheextensionoftheredemption

period?

DOCTRINE:Theelementsofnovationclearlydonotexistintheinstantcase.Whileitis

truethatthereisapreviousvalidobligation(i.e.,theobligationofLBPtohonorSueno’s

righttoredeem thesubjectpropertywithinaperiodofoneyear),suchobligationexpired

atthesametimeastheredemptionperiodon6March2001.Thereis,however,no

clearagreementbetweenthepartiestoanewcontract,againimposinguponLBPthe

obligation ofhonoring Sueno’s rightto redeem the subjectproperties within an

extendedperiodofsixmonths.Withoutanew contract,theoldcontractcannotbe

consideredextinguished.

TheconditionofLBP fortheextensionoftheredemptionperiod forthesubject

propertieswasplainandsimple,thatSuenopayaninitialamountofP115,000.00forthe

extensionoftheredemptionperiod.SuenotenderedacheckforP50,000.00inpartial

paymentoftheamountdemandedbyLBP. Byacceptingthecheckpayment,LBP

merelyacceptedpartialcomplianceofSuenowithitsdemand,butitdoesnotmeanthat

LBPhadconcededtotheextensionoftheredemptionperiodforsuchreducedamount.

Infact,LBPpromptlysentSuenoaleterdated6March2001,whichwasdulyreceived

bythe later,explicitlyand consistentlyrequiring paymentofthe fulamountof

P115,000.00fortheextensionoftheredemptionperiod.ItiswithoutdoubtthatLBP

wasstilexpectingSuenotopaythebalanceofP65,000.00. Hence,notuntilful

paymentoftheamountitdemanded,forLBPhadnotyetagreedtoextendtheperiodfor

redemptionofthesubjectproperties.

TheconsentofLBPtoanextensionoftheperiodtoredeem issubjecttothesuspensive

conditionthatSuenoshalpaytheinitialamountofP115,000.00inful.WithSueno’s

failuretoremitthebalanceofP65,000.00toLBP,thenthereisnon-perfectionofanew

contract.

Novationisneverpresumed,andtheanimusnovandi,whethertotalyorpartialy,must

appearbyexpressagreementoftheparties,orbytheiractsthataretooclearand

unmistakable.

S.C.MegaworldConstructionAndDevelopmentCorporationv.Parado

G.R.No.183804,705SCRA584

ISSUE:Cantherebeavalidnovationevenwithouttheconsentofthecreditor?

DOCTRINE:Novationisamodeofextinguishinganobligationbychangingitsobjectsor

principalobligations,bysubstitutinganew debtorinplaceoftheoldone,orby

subrogatingathirdpersontotherightsofthecreditor.Itis"thesubstitutionofanew

contract,debt,orobligationforanexistingonebetweenthesameordiferentparties."

Article1293oftheCivilCodedefinesnovationaswhichconsistsinsubstitutinganew

debtorintheplaceoftheoriginalone,maybemadeevenwithouttheknowledgeor

49


againstthewilofthelater,butnotwithouttheconsentofthecreditor.Paymentbythe

newdebtorgiveshim rightsmentionedinArticles1236and1237.

Thus,inordertochangethepersonofthedebtor,theformerdebtormustbeexpressly

releasedfrom theobligation,andthethirdpersonornew debtormustassumethe

former’splaceinthecontractualrelation.Article1293speaksofsubstitutionofthe

debtor,whichmayeitherbeintheform ofexpromisionordelegacion,asseemstobe

thecasehere.Inbothcases,theolddebtormustbereleasedfrom theobligation,

otherwise,thereisnovalidnovation.

In general,there are two modes ofsubstituting the person ofthe debtor:(1)

expromisionand(2)delegacion.Inexpromision,theinitiativeforthechangedoesnot

comefrom—andmayevenbemadewithouttheknowledgeof—thedebtor,sinceit

consistsofathirdperson’sassumptionoftheobligation.Assuch,itlogicalyrequires

theconsentofthethirdpersonandthecreditor.Indelegacion,thedebtorofers,andthe

creditoraccepts,athirdpersonwhoconsentstothesubstitutionandassumesthe

obligation;thus,theconsentofthesethreepersonsarenecessary.Bothmodesof

substitutionbythedebtorrequiretheconsentofthecreditor.

Foundation Specialists,Inc.,vs.BetonvalReady Concrete,Inc.and Stronghold

InsuranceCo.,Inc.

G.R.No.170674August24,2009

Corona,J.

ISSUE:Whetherextinctivenovationcanbepresumed.

DOCTRINE:No.Novationisoneofthemodesofextinguishinganobligation. 21 Itisdone

bythesubstitutionorchangeoftheobligationbyasubsequentonewhichextinguishes

thefirst,eitherbychangingtheobjectorprincipalconditions,orbysubstitutingthe

personofthedebtor,orbysubrogatingathirdpersonintherightsofthecreditor.

Novationmay:

Eitherbeextinctiveormodificatory,muchbeingdependentonthenatureofthechange

andtheintentionoftheparties.Extinctivenovationisneverpresumed;theremustbean

expressintentiontonovate;incaseswhereitisimplied,theactsofthepartiesmust

clearly demonstrate theirintentto dissolve the old obligation as the moving

considerationfortheemergenceofthenewone.Impliednovationnecessitatesthatthe

incompatibilitybetweentheoldandnewobligationbetotaloneverypointsuchthatthe

oldobligationiscompletelysupersededbythenewone.Thetestofincompatibilityis

whethertheycanstandtogether,eachonehavinganindependentexistence;ifthey

cannotandareireconcilable,thesubsequentobligationwouldalsoextinguishthefirst.

TherecanbenootherconclusionbutthatBetonvalhadreducedtheimposableinterest

ratefrom 30%to24%p.a.andthisreducedinterestratewasaccepted,albeitimpliedly,

byFSIwhenitproposedanew scheduleofpaymentsand,infact,actualymade

paymentstoBetonvalwith24% p.a.interest.Byitsownactions,therefore,FSIis

estoppedfrom questioningtheimposablerateofinterest.

Salazarv.J.Y.BrothersMarketingCorporation

G.R.No.171998,October20,2010

Peralta,J.:

ISSUE:Whetheracceptanceofanew checkinreplacementofthepreviousoneisa

novation?

DOCTRINE:No,theobligationtopayasum ofmoneyisnotnovatedbyaninstrument

50


thatexpresslyrecognizestheold,changesonlythetermsofpayment,addsother

obligationsnotincompatiblewiththeoldonesorthenewcontractmerelysupplements

theoldone.Intheinstantcase,therewasnoexpressagreementthatBAFinance's

acceptanceoftheSBTC checkwildischargeNycofrom liability.Neitheristhere

incompatibility because both checks were given precisely to terminate a single

obligationarisingfrom Nyco'ssaleofcredittoBAFinance.Asnovationspeaksoftwo

distinctobligations,suchisinapplicabletothiscase.

LourdesAzarconvs.PeopleofthePhilippinesandMarcosGonzales

G.R.No.185906.June29,2010

CarpioMorales,J.:

ISSUE:Whetherpetitioner’sobligationsunderthevariouscheckshadbeenreleased,

supersededandnovatedbyherhusband’sassumptionofherliabilities?

DOCTRINE:No.Thenovationwhichpetitionersuggestsashavingtakenplace,whereby

Manuelwassupposedtoassumeherobligationsasdebtor,isneitherexpressnor

implied.ThereisnoshowingofMarcosaexplicitlyagreeingtosuchasubstitution,nor

ofanyactofherfrom whichaninferencemaybedrawnthatshehadagreedtoabsolve

petitionerfrom herfinancialobligationsandtoinsteadholdManuelfulyaccountable.

CarolinaHernandez-Nieverav.WilfredoHernandez

GRNo.171165;February14,2011

ISSUE:WhethertheMemorandum ofAgreementtodeliveroptionmoneyandagreetoa

moreflexibleterm byagreeinginsteadtoreceivesharesofstockresultedtonovationof

PMRDC’sintegralobligations.

DOCTRINE:Yes.Therearetwowayswhichcouldindicate,infine,thepresenceof

novationandtherebyproducetheefectofextinguishinganobligationbyanotherwhich

substitutesthesame.Thefirstiswhennovationhasbeenexplicitlystatedanddeclared

in unequivocalterms.Thesecond iswhen theold and thenew obligationsare

incompatibleoneverypoint.Thetestofincompatibilityiswhetherthetwoobligations

canstandtogether,eachonehavingitsindependentexistence.Iftheycannot,theyare

incompatible,andthelaterobligationnovatesthefirst.

SimeDarbyPilipinas,Inc.v.GoodyearPhilippines,Inc.

GRNo.182148;June8,2011

ISSUE:Whetherthelesseecanassigntheleasewithouttheconsentofthelessor.

DOCTRINE:NO.Inanassignmentofalease,thereisanovationbythesubstitutionof

thepersonofoneoftheparties– thelessee.Thepersonalityofthelessee,who

dissociatesfrom the lease,disappears.Thereafter,a new juridicalrelation arises

betweenthetwopersonswhoremain–thelessorandtheassigneewhoisconverted

intothenewlessee.Theobjectiveofthelawinprohibitingtheassignmentofthelease

withoutthelessor’sconsentistoprotecttheownerorlessoroftheleasedproperty.

Broadly,anovationmayeitherbeextinctiveormodificatory.Itisextinctivewhenanold

obligationisterminatedbythecreationofanewobligationthattakestheplaceofthe

former;itismerelymodificatorywhentheoldobligationsubsiststotheextentit

remainscompatiblewiththeamendatoryagreement.Anextinctivenovationresults

eitherbychangingtheobjectorprincipalconditions(objectiveorreal),orbysubstituting

thepersonofthedebtororsubrogatingathirdpersonintherightsofthecreditor

(subjectiveorpersonal).

51


HeirsofServandoFrancov.Sps.Gonzales

G.R.159709;June27,2012

ISSUE:Whetherireconcilableincompatibilitybetweentheoldandthenewobligationis

essentialforavalidnovationtobeefected.

DOCTRINE: YES.Foravalidnovationtotakeplace,theremustbe,therefore:(a)a

previousvalidobligation;(b)anagreementofthepartiestomakeanewcontract;(c)an

extinguishmentoftheoldcontract;and(d)avalidnew contract.Inshort,thenew

obligationextinguishestheprioragreementonlywhenthesubstitutionisunequivocaly

declared,orthe old and the new obligations are incompatible on everypoint.A

compromiseofafinaljudgmentoperatesasanovationofthejudgmentobligationupon

compliancewitheitherofthesetwoconditions.A novationariseswhenthereisa

substitutionofanobligationbyasubsequentonethatextinguishesthefirst,eitherby

changingtheobjectortheprincipalconditions,orbysubstitutingthepersonofthe

debtor,orbysubrogatingathirdpersonintherightsofthecreditor.

RobertoR.Davidvs.EduardoC.David

G.R.No.162365January15,2014

Bersamin,J.

ISSUE:WhethertherewasnovationoftheDeedofSalewithassumptionofmortgage

whenthepartiesexecutedamemorandum ofAgreementforthesaleofthesubject

houseandlotand,thereaftersoldthesaidpropertytothirdpersons.

DOCTRINE:No.Theissueofnovationinvolvesaquestionoffact,asitnecessarily

requiresthefactualdeterminationoftheexistenceofthevariousrequisitesofnovation,

namely:(a)theremustbeapreviousvalidobligation;(b)thepartiesconcernedmust

agreetoanewcontract;(c)theoldcontractmustbeextinguished;and(d)theremust

beavalidnewcontract.WithboththeRTCandtheCAconcludingthattheMOAwas

consistentwiththedeedofsale,novationwherebythedeedofsalewasextinguished

didnotoccur.

FirstUnitedConstructorsCorporationvs.BayanihanAutomotiv

G.R.No.164985January15,2014

Bersamin,J.

ISSUE:Whetherlegalcompensationwasproperinthecasewhenthepetitioners’

expensesfortherepairofthedumptruckbeingalreadyestablishedanddetermined

withcertaintybythelowercourts.

DOCTRINE:Yes.Adebtisliquidatedwhenitsexistenceandamountaredetermined.

Accordingly,anunliquidatedclaim setupasacounterclaim byadefendantcanbeset

ofagainsttheplaintif’sclaim from themomentitisliquidatedbyjudgment.Article

1290oftheCivilCodeprovidesthatwhenaltherequisitesmentionedinArticle1279of

the CivilCode are present,compensation takes efectbyoperation oflaw,and

extinguishesbothdebtstotheconcurentamount.Withpetitioners’expensesforthe

repairofthedumptruckbeingalreadyestablishedanddeterminedwithcertaintybythe

lowercourts,itfolowsthatlegalcompensationcouldtakeplacebecausealthe

requirementswerepresent.

CONTRACTS

52


CHAPTER1.GENERALPROVISIONS

AsianConstructionandDevelopmentCorporationv.Tulabut

G.R.No.161904.April26,2005

Calejo,Sr.,J.

ISSUE:Maytheprincipleofestoppelbeappliedindeterminingwhethertheobligation

contemplatedinthecontracthadalreadybeencompleted?

DOCTRINE:Yes.Theapplicationoftheprincipleofestoppelisproperandtimelyin

headingofplaintif’sshrewdefortsatrenouncinghispreviousactstotheprejudiceof

partieswhohaddealtwithhim honestlyandingoodfaithtisprovided,asoneofthe

conclusivepresumptionsunderRule131,Section3(a),oftheRulesofCourtthat,

“Wheneverapartyhas,byhisowndeclaration,actoromission,intentionalyand

deliberatelyledanothertobelieveaparticularthingtobetrue,andtoactuponsuch

belief,hecannot,inanylitigationarisingoutofsuchdeclaration,actoromission,be

permitedtofalsifyit.”Hence,whentheappelantcorporationmanifesteditsapprovalin

thepurchaseordersandprogressbilingsitcannot,thereafter,refutesuchactorrenege

ontheefectsofthesametotheprejudiceoftheappeleewhomerelyreliedonit.

Thetermsandconditionsofthecontractbetweenthepetitionerandtherespondent

unequivocalyexpressedinthepurchaseordersandprogressbilingsmustgovernthe

contractualrelationoftheparties,fortheseserveasthetermsoftheagreement,which

arebindingandconclusivebetweenthem.Whenthewordsofthecontractareclear

andreadilyunderstandable,thereisnoroom forconstruction.Thecontractisthelaw

betweentheparties.

TanayRecreationCenterandDevelopmentCorp.v.CatalinaMatienzoFaustoand

AnunciacionFaustoPacunayen

GRNo.140182.April12,2005


ISSUE:Istheruleoftransmissibilityofrightsandobligationsapplicableinalease

contractenteredintobythedecedent?

DOCTRINE:Aleasecontractisnotessentialypersonalincharacter.ApplyingArticle

1311oftheNew CivilCode,therightsandobligationsaretransmissibletotheheirs.

Thegeneralruleisthatheirsareboundbycontractsenteredintobytheirpredecessorsin-interest

except when the rights and obligations arising therefrom are not

transmissibleby:(1)theirnature;(2)stipulation;or(3)provisionoflaw.Whateverrights

andobligationsthedecedenthadovertheproperty,includinghisobligationunderthe

leasecontract,weretransmitedtohisheirsbywayofsuccession,amodeofacquiring

theproperty,rightsandobligationofthedecedenttotheextentofthevalueofthe

inheritanceoftheheirs.

Litonjuav.Litonjua

G.R.Nos.166299-300.December13,2005

Garcia,J.:

ISSUE:Cananactionabledocumentcreateademandablerightinfavorofapersonwho

filedasuitforspecificperformanceandaccountinginajointventure/partnership

arangement(innominatecontract)?

DOCTRINE:No.Acomplaintfordeliveryandaccountingofpartnershippropertybased

53


onsuchvoidorlegalynon-existentactionabledocumentisdismissibleforfailureto

stateofaction.Whethertheactionabledocumentcreatesapartnership,jointventure,or

whatever,isalegalmater.Whatusdeterminativeforpurposesofsuficiencyofone’s

alegations,iswhethertheactionabledocumentbearsoutanactionablecontract–beit

apartnershipajointventureorwhateverorsomeinnominatecontract(Article1307,

NewCivilCode).Itmaybenotedthatonekindofinnominatecontractiswhatisknown

asduutfacias(Igivethatyoumaydo).

Bortikeyv.AFPRetirementandSeparationBenefitsSystem


Corona,J.:

ISSUE:Givenastatementinacontracttoselthat,“Incaseoffailureonthepartofthe

BUYERtopaytheamortizationdueonthespecifiedmaturitydate,theBuyershalbe

givenaseven-daygraceperiodxxx.However,intheeventthattheBUYERfailstopay

withintheseven-daygraceperiod,heshalbechargedapenaltyof24%perannum tobe

reckonedfrom thefirstdayofdefault”,maythebuyersaythatthe24%annualinterest

stipulatedinthecontractwascontrarytolawandpublicmorals?

DOCTRINE:No.Basicistheprinciplethatcontractingpartiesmayestablishsuch

stipulations,clauses,termsandconditionsastheymaydeem convenient,provided

thesearenotcontrarytolaw,morals,goodcustoms,publicorderorpublicpolicy

(Article1306,NewCivilCode).Obligationsarisingfrom contractshavetheforceoflaw

betweenthecontractingpartiesandshouldbecompliedwithingoodfaith(Article1159,

NewCivilCode).Petitionerwasfreetodecideonthemannerofpayment,eitherincash

orinstalment.Sinceheoptedtopurchasethelandoninstalmentbasis,heconsented

totheimpositionofinterestonthecontractprice.Hecannotnowunilateralywithdraw

from itbydisavowingtheobligationcreatedbythestipulationinthecontract.Therefore,

thestipulated24% annualinterestonthepriceoftheparceloflandpurchasedby

petitionerfrom respondentoninstalmentbasisisherebydeclaredvalidandbinding.

GFEquity,Inc.vs.ArturoValenzona

G.R.No.156841June30,2005

Carpio-Morales,J.

ISSUE:Whatistheprincipleofmutualityofcontracts?

DOCTRINE:Mutuality is one ofthe characteristics ofa contract,its validity or

performanceorcomplianceofwhichcannotbelefttothewilofonlyoneofthe

parties.ThisisenshrinedinArticle1308oftheNew CivilCode,whichstates“The

contractmustbindbothcontractingparties;itsvalidityorcompliancecannotbeleftto

thewilofoneofthem.”ThestatedlegalprovisionisavirtualreproductionofArticle

1256oftheoldCivilCodebutitwassophrasedastoemphasizetheprinciplethatthe

contractmustbindbothparties.This,ofcourseisbasedfirstly,ontheprinciplethat

obligationsarisingfrom contractshavetheforceoflawbetweenthecontractingparties

andsecondly,thattheremustbemutualitybetweenthepartiesbasedontheiressential

equalitytowhichisrepugnanttohaveonepartyboundbythecontractleavingtheother

freetherefrom.Itsultimatepurposeistorendervoidacontractcontainingacondition,

whichmakesitsfulfilmentdependentexclusivelyupontheuncontroledwilofoneof

thecontractingparties.

Theultimatepurposeofthemutualityprincipleisthustonulifyacontractcontaininga

condition which makes its fulfilment or pre-termination dependent

exclusivelyupontheuncontroledwilofoneofthecontractingparties.Notalcontracts

thoughwhichvesttoonepartytheirdeterminationofvalidityorcomplianceortheright

to terminate the same are void forbeing violative ofthe mutuality principle.

54


JurisprudenceisrepletewithinstancesofcaseswherethisCourtupheldthelegalityof

contracts,whichlefttheirfulfilmentorimplementationtothewilofeitherofthe

parties.Inthesecases,however,therewasafindingofthepresenceofessential

equalityofthepartiestothecontracts,thuspreventingtheperpetrationofinjusticeon

theweakerparty.



G.R.No.140182.April12,2005















GRNo.140182.April12,2005













SunaceInternationalvs.NLRC

G.R.No.161757.January25,2006

CarpioMorales,J.

ISSUE:Cananemploymentcontractextensionbindacompanywhohasnotconsented

thereto?

DOCTRINE:No.TherebeingnosubstantialproofthatSunaceknewofandconsentedto

beboundunderthe2-yearemploymentcontractextension,itcannotbesaidtobeprivy

thereto.Assuch,itandits“owner”cannotbeheldsolidarilyliableforanyofDivina’s

claimsarisingfrom the2-yearemploymentextension.Art.1311providesthatcontracts

takeefectonlybetweentheparties,theirassigns,andheirs,exceptincasewherethe

rightsandobligationsarisingfrom thecontractarenottransmissiblebytheirnature,or

bystipulationorbyprovisionoflaw.

55


Greater Metropolitan Manila Solid Waste ManagementCommitee v.Jancom

EnvironmentalCorporation

GRNo.163663.June30,2006

CarpioMorales,J.:

ISSUE:Canapartyrevokeaperfectedcontractwithouttheconsentoftheother?

DOCTRINE:No.From themomentofperfection,thepartiesareboundnotonlytothe

fulfilmentofwhathasbeenexpresslystipulatedbutalsotoaltheconsequenceswhich,

accordingtotheirnature,maybeinkeepingwithgoodfaith,usage,andlaw.The

contracthastheforceoflaw betweenthepartiesandtheyareexpectedtoabidein

goodfaithbytheirrespectivecontractualcommitments,notweaseloutofthem.Just

asnobodycanbeforcedtoenterintoacontract,inthesamemanner,onceacontractis

enteredinto,nopartycanrenounceitunilateralyorwithouttheconsentoftheother.

Roxasv.Zuzuaregui,Jr.

G.R.No.152072,January31,2006

Chico-Nazario,J.:

ISSUE:Inthecontract,thepetitionersoferedtobethelegalrepresentativesofthe

petitionerintheexpropriationproceeding.Inreturn,contingencyfeesshalbepaid.Is

thereavalidandbindingcontractbetweentheparties?

DOCTRINE:UnderArticle1318oftheCivilCode,therearethreeessentialrequisites

whichmustconcurinordertogiverisetoabindingcontract:(1)consentofthe

contractingparties;(2)objectcertainwhichisthesubjectmaterofthecontract;and(3)

causeoftheobligationwhichisestablished.

AltheserequisiteswerepresentintheexecutionoftheLeter-Agreement.

Consentismanifestedbythemeetingoftheoferandtheacceptanceuponthething

andthecausewhicharetoconstitutethecontract.TheZuzuareguis,inenteringinto

the Leter-Agreement,fulygave theirconsentthereto.In fact,itwas them (the

Zuzuareguis)whosentthesaidletertoAtys.RoxasandPastor,forthepurposeof

confirmingalthematerswhichtheyhadagreeduponpreviously.Thereisabsolutely

noevidencetoshowthatanybodywasforcedintoenteringintotheLeter-Agreement.

Verily,itsexistence,dueexecutionandcontentswereadmitedbytheZuzuareguis

themselves.

Thesecondrequisiteistheobjectcertain.Theobjectsinthiscasearetwofold.Oneis

themoneythatwilgototheZuzuareguis(P17.00persquaremeter),andtwo,the

moneythatwilgotoAtys.RoxasandPastor(anyandalamountinexcessofP17.00

persquaremeter).TherewascertaintyastotheamountthatwilgototheZuzuareguis,

andtherewaslikewisecertaintyastowhatamountwilgotoAtys.RoxasandPastor.

ThecauseisthelegalservicethatwasprovidedbyAtys.RoxasandPastor.Ingeneral,

causeisthewhyofthecontractortheessentialreasonwhichmovesthecontracting

partiestoenterintothecontract.

BonifacioNakpilv.ManilaTowersDevelopmentCorp.

GRNo.160867.September20,2006

Calejo,Sr.,J.:

ISSUE:Whatisabreachofcontract?Whatistheextentofliabilityofanobligorwho

performedabreachofcontract?

56


DOCTRINE:Breachofcontractisthefailurewithoutlegalreasontocomplywiththe

termsofacontract.Itisalsodefinedasthefailure,withoutlegalexcuse,toperform any

promisewhichformsthewholeorpartofthecontract.Thereisnofactualandlegal

basisforanyawardfordamagestorespondent.

Incontracts,theobligorwhoactedingoodfaithisliablefordamagesthatarethe

materialandprobableconsequenceofthebreachoftheobligationandwhichthe

partieshaveforeseenorcouldhavereasonablyforeseenatthetimetheobligationwas

contracted.Incaseoffraud,badfaith,maliceorwantonatitude,heshalberesponsible

foraldamageswhichmaybereasonablyatributedtothenon-performanceofthe

obligation.

Xaviervile IHomeownersAssociation,Inc.,v.XaviervileIiHomeownersAssociation,

Inc.,

G.R.No. 170092.December6,2006

CarpioMorales,J.:

ISSUE:Whatisthelegalefectofenteringintoacompromiseagreement?

DOCTRINE:UnderArticle1306oftheCivilCode,contractingpartiesmayestablishsuch

stipulations,clauses,termsandconditionsastheymaydeem convenient,providedthey

arenotcontrarytolaw,morals,goodcustoms,publicorder,orpublicpolicy.Thus,a

compromiseagreementwherebythepartiesmakereciprocalconcessionstoresolve

theirdiferencestotherebyputanendtolitigationisbindingonthecontractingparties

andisexpresslyacknowledgedasajuridicalagreementbetweenthem.Tohavethe

forceofresjudicata,however,thecompromiseagreementmustbeapprovedbyfinal

orderofthecourt.

Wiliam GolangcoConstructionCorporationv.PhilippineCommercialInternational

Bank

G.R.No.142830.March24,2006

Corona,J.:

ISSUE:Istheconstructioncompanyliablefordefectsthatoccuredafterthelapseof

theone-yeardefectsliabilityperiodstipulatedinthecontract?

DOCTRINE:No,theconstructioncompanyisnotliablefordefectsthatoccuredafter

the lapse ofthe one-yeardefects liabilityperiod stipulated in the contract.The

autonomousnatureofcontractsisenunciated in Article1306 oftheCivilCode.

Obligationsarisingfrom contractshavetheforceoflawbetweenthepartiesandshould

becompliedwithingoodfaith.Incharacterizingthecontractashavingtheforceoflaw

betweentheparties,thelaw stressestheobligatorynatureofabindingandvalid

agreement.

Theprovisionintheconstructioncontractprovidingforadefectsliabilityperiodwasnot

shownascontrarytolaw,morals,goodcustoms,pubicorderorpublicpolicy.Bythe

natureoftheobligationinsuchcontract,theprovisionlimitingliabilityfordefectsand

fixingspecificguarantyperiodswasnotonlyfairandequitable;itwasalsonecessary.

The Courtcannotcountenance an interpretation thatundermines a contractual

stipulationfreelyandvalidlyagreedupon.Thecourtswilnotrelieveapartyfrom the

57


efectsofanunwiseorunfavorablecontractfreelyenteredinto.

SpousesAnthonyandPercitaOcov.VictorLimbaring

G.R.No.161298.January31,2006

Panganiban,C.J.:

ISSUE:Canapersonwhodidnottakepartinacontractshowthathehasarealinterest

afectedbyitsperformanceorannulment?

DOCTRINE:Yes.Asarule,thepartiestoacontractaretherealpartiesininterestinan

action upon it.Onlythecontracting partiesarebound bythestipulationsin the

contract;theyaretheoneswhowouldbenefitfrom andcouldviolateit.Thus,onewho

isnotapartytoacontract,andforwhosebenefititwasnotexpresslymade,cannot

maintainanactiononit.Onecannotdoso,evenifthecontractperformedbythe

contractingpartieswouldincidentalyinuretoone’sbenefit.

Asanexception,partieswhohavenottakenpartinacontractmayshowthattheyhave

arealinterestafectedbyitsperformanceorannulment.Inotherwords,thosewhoare

notprincipalyorsubsidiarilyobligatedinacontract,inwhichtheyhadnointervention,

mayshowtheirdetrimentthatcouldresultfrom it.Contractspourautruiarecoveredby

thisexception.Inthislaterinstance,thelawrequiresthatthe“contractingpartiesmust

haveclearlyanddeliberatelyconferedafavoruponathirdperson.”A“mereincidental

benefitisnotenough.”

RolandoLimpov.CourtofAppeals


Azcuna,J.:

ISSUE:WhetheraCompromiseAgreementbindsapersonwhodidnottakepartinits

execution.

DOCTRINE:No.Itissetledthatacompromiseagreementcannotbindpersonswhoare

notpartiestoit. 3 ThisruleisbasedonArticle1311(1)oftheCivilCodewhichprovides

that"contractstakeefectonlybetweentheparties,theirassignsandheirsxxx."The

soundreasonfortheexclusionofnon-partiestoanagreementistheabsenceof

avinculum orjuridicaltiewhichistheeficientcausefortheestablishmentofan

obligation.IntheCompromiseAgreementthatwaspresentedtothetrialcourt,thereis

no questionthatonlythespousesUyandtheBankwereparties.Limpo didnot

participateinitsexecutionandtherewasnoreferencetohim inanyofitsprovisions.

HecannotbeboundbytheCompromiseAgreement.

Caltex(Philippines),Inc.,v.PNOCShippingandTransportCorporation

G.R.No.150711.August10,2006

Carpio,J.:

ISSUE:Mayacreditorfileacaseforrescissionorexecutionagainstathirdpartywho

hasassumedtheobligationsofthedebtor?

DOCTRINE:Article1313oftheCivilCodeprovidesthat“[c]reditorsareprotectedin

casesofcontractsintendedtodefraudthem.”Further,Article1381oftheCivilCode

providesthatcontractsenteredintoinfraudofcreditorsmayberescindedwhenthe

creditorscannotinanymannercolecttheclaimsduethem.Article1381appliesto

contractswherethecreditorsarenotparties,forsuchcontractsareusualymade

withouttheirknowledge.Thus,acreditorwhoisnotapartytoacontractcansueto

58


rescindthecontracttopreventfrauduponhim.Or,thesamecreditorcaninstead

choosetoenforcethecontractifaspecificprovisioninthecontractalowshim to

colecthisclaim,andthusprotecthim from fraud.

Mr.& Mrs.George R.Tan v.G.V.T Engineering Services,Acting through its

Owner/ManagerGerinoV.Tactaquin

G.R.No.153057.August7,2006


ISSUE:Mayanobligorbeheldliablefordamagesincaseofbreachofcontract?

DOCTRINE:Article1313oftheCivilCodeprovidesthat“creditorsareprotectedincases

ofcontractsintendedtodefraudthem.”Further,Article1381oftheCivilCodeprovides

thatcontractsenteredintoinfraudofcreditorsmayberescindedwhenthecreditors

cannotinanymannercolecttheclaimsduethem.Article1381appliestocontracts

wherethecreditorsarenotparties,forsuchcontractsareusualymadewithouttheir

knowledge.Thus,acreditorwhoisnotapartytoacontractcansuetorescindthe

contracttopreventfrauduponhim.Or,thesamecreditorcaninsteadchoosetoenforce

thecontractifaspecificprovisioninthecontractalowshim tocolecthisclaim,and

thusprotecthim from fraud.

Wiliam OngGenatovs.BenjaminBayhonetal.

G.R.No.171035August24,2009

Puno,C.J.:

ISSUE:Whetheraparty’scontractualrightsandobligationaretransmissibletothe

successors.

DOCTRINE:Yes.Theruleisaconsequenceoftheprogressive"depersonalization"of

patrimonialrightsanddutiesthat,asobservedbyVictorioPolacco,hascharacterized

thehistoryoftheseinstitutions.From theRomanconceptofarelationfrom personto

person,theobligationhasevolvedintoarelationfrom patrimonytopatrimony,withthe

personsoccupyingonlyarepresentativeposition,baringthoserarecaseswherethe

obligationisstrictlypersonal,i.e.,iscontractedintuitupersonae,inconsiderationofits

performancebyaspecificpersonandbynoother.Thetransitionismarkedbythe

disappearanceoftheimprisonmentfordebt.

Theloaninthiscasewascontractedbyrespondent.Hediedwhilethecasewas

pendingbeforetheCourtofAppeals.Whilehemaynolongerbecompeledtopaythe

loan,thedebtsubsistsagainsthisestate.Nopropertyorportionoftheinheritancemay

betransmitedtohisheirsunlessthedebthasfirstbeensatisfied.

VicentaCantemprateetal.vs.CRSRealtyDevelopmentCorporationetal.

G.R.No.171399,May8,2009

Tinga,J.:

ISSUE:Whetherrescissionofacontractgivesrisetomutualrestitution.

DOCTRINE:Rescissioncreatestheobligationtoreturntheobjectofthecontract.Itcan

becariedoutonlywhentheonewhodemandsrescissioncanreturnwhateverhemay

beobligedtorestore.Rescissionabrogatesthecontractfrom itsinceptionandrequires

amutualrestitutionofthebenefitsreceived.

NationalPowerCorporationvs.PremierShippingLines,Inc.

G.RNo.179103;September17,2009

59


ISSUE:Whetherthetermscontainedinthecontractarethelawbetweentheparties.

DOCTRINE:Yes.Itisbasicthatacontractisthelaw betweentheparties,andthe

stipulationstherein -providedthattheyarenotcontrarytolaw,morals,goodcustoms,

publicorderorpublicpolicy -shalbebindingasbetweentheparties.Incontractual

relations,thelawalowsthepartiesmuchleewayandconsiderstheiragreementtobe

thelawbetweenthem.Thisisbecause"courtscannotfolowoneeverystepofhislife

andextricatehim from badbargainsxxxrelievehim from one-sidedcontracts,orannul

theefectsoffoolishacts.TheCourtsareobligedtogiveefecttotheagreementand

enforcethecontracttotheleter.

Inthecaseatbar,thepartiesenteredintoacontractforthehaulinganddeliveryof

woodpoles.Byreasonofachangeinoneofthedeliverypoints,theyexecuteda

supplementalcontractthatembodiedsaidchange.Thetermsandconditionswereclear.

Inbothcontracts,thepartiesvoluntarilyandfreelyafixedtheirsignaturesthereto

withoutobjection.Thus,thetermscontainedthereinarethelawbetweenthem.

PatriciaHalagueñaetal.vs.PhilippineAirlinesIncorporated

G.R.No.172013.October2,2009

Ynares-Santiago,J.,

ISSUE:Whethertheprincipleofautonomyofcontractsisabsolute.

DOCTRINE:No.Theprincipleofpartyautonomyincontractsisnot,however,an

absoluteprinciple.TheruleinArticle1306,ofourCivilCodeisthatthecontracting

partiesmayestablishsuchstipulationsastheymaydeem convenient,“providedthey

arenotcontrarytolaw,morals,goodcustoms,publicorderorpublicpolicy.”Thus,

counter-balancingtheprincipleofautonomyofcontractingpartiesistheequalygeneral

rulethatprovisionsofapplicablelaw,especialyprovisionsrelatingtomatersafected

withpublicpolicy,aredeemedwritenintothecontract.Putalitlediferently,the

governingprincipleisthatpartiesmaynotcontractawayapplicableprovisionsoflaw

especialyperemptoryprovisionsdealingwithmatersheavilyimpressedwithpublic

interest.Thelawrelatingtolaborandemploymentisclearlysuchanareaandparties

arenotatlibertytoinsulatethemselvesandtheirrelationshipsfrom theimpactoflabor

lawsandregulationsbysimplycontractingwitheachother.

Sta.LuciaRealty&Development,Inc.vs.SPOUSESFrancisco&EmeliaBuenaventura

G.R.No.177113.October2,2009

Ynares-Santiago,J.

ISSUE:Whetherrightsandobligationsarisingfrom acontractmaybetransmited.

DOCTRINE:Yes.Article1311oftheNewCivilCodestatesthat,“contractstakeefect

onlybetweentheparties,theirassignsandheirs,exceptincasewheretherightsand

obligationsarising from thecontractarenottransmissiblebytheirnature,orby

stipulationorbyprovisionoflaw.”Inthiscase,therightsandobligationsbetween

petitionerand Alfonso aretransmissible.Therewasno mention ofa contractual

stipulationorprovisionoflawthatmakestherightsandobligationsundertheoriginal

salescontractforLot3,Block4,PhaseIintransmissible.Hence,Alfonsocantransfer

herownershipoverthesaidlottorespondentsandpetitionerisboundtohonorits

corespondingobligationstothetransfereeornewlotownerinitssubdivisionproject.

HavingtransferedalrightsandobligationsoverLot3,Block4,andPhase Ito

respondents,Alfonsocouldnolongerbeconsideredasanindispensableparty.Contrary

topetitioner’sclaim,Alfonsonolongerhasaninterestonthesubjectmaterorthe

presentcontroversy,havingalreadysoldherrightsandinterestsonLot3,Block4,

60


PhaseItohereinrespondents.

Sps.IsaganiCastroandDiosdadaCastrov.AngelinaDeLeonTan,et.al.,


DelCastilo,J.

ISSUE:Whetherfreedom ofcontractisabsolute.

DOCTRINE:No.Freedom ofcontractisnotabsolute.Thesameisunderstoodtobe

subjecttoreasonablelegislativeregulationaimedatthepromotionofpublichealth,

morals,safetyandwelfare.OnesuchlegislativeregulationisfoundinArticle1306of

theCivilCodewhichalowsthecontractingpartiesto"establishsuchstipulations,

clauses,termsandconditionsastheymaydeem convenient,providedtheyarenot

contrarytolaw,morals,goodcustoms,publicorderorpublicpolicy."Toreiterate,we

fulyagreewiththeCourtofAppealsinholdingthatthecompoundedinterestrateof5%

permonth,isiniquitousandunconscionable.Beingavoidstipulation,itisdeemed

inexistentfrom thebeginning.Thedebtistobeconsideredwithoutthestipulationof

theiniquitousandunconscionableinterestrate.

Narvaezvs.Alciso

G.R.No.165907;July27,2009

Carpio,J.

ISSUE:Whetherthe spouses Narvaezwere rightin claiming thatAlciso did not

communicateheracceptanceofthefavorcontainedinthestipulationpourautrui,thus,

shecouldnotrepurchasetheproperty.

DOCTRINE:No.Article 1311,paragraph 2,ofthe CivilCode states the rule on

stipulationspourautrui:Ifacontractshouldcontainsomestipulationinfavorofathird

person,hemaydemanditsfulfilmentprovidedhecommunicatedhisacceptancetothe

obligorbeforeitsrevocation.Amereincidentalbenefitorinterestofapersonisnot

suficient.Thecontractingpartiesmusthaveclearlyanddeliberatelyconferedafavor

uponathirdperson.Altherequisitesarepresentintheinstantcase:(1)thereisa

stipulationinfavorofAlciso;(2)thestipulationisapart,notthewhole,ofthecontract;

(3)BateandtheSpousesNarvaezclearlyanddeliberatelyconferedafavortoAlciso;(4)

the favor is unconditionaland uncompensated;(5) Alciso communicated her

acceptanceofthefavorbeforeitsrevocation— shedemandedthatastipulationbe

includedinthe14August1981DeedofSaleofRealtyalowinghertorepurchasethe

propertyfrom theSpousesNarvaez,andsheinformedtheSpousesNarvaezthatshe

wantedtorepurchasetheproperty;and(6)BateandtheSpousesNarvaezdidnot

represent,andwerenotauthorizedby,Alciso.

TheRTC statedthat:RoseAlcisocommunicatedheracceptanceofsuchfavorable

stipulationwhenshewenttoseedefendantLilia[sic]Narvaezintheirhouse.

HeraldBlackDacasinvs.SharonDelMundoDacasin


Carpio,J.:

ISSUE:WhethertheAgreement,theobjectofwhichwastoestablishapost-divorcejoint

custodyregimebetweenrespondentandpetitionerovertheirchildundersevenyears

oldcontravenesPhilippinelaw.

DOCTRINE:YES.Inthisjurisdiction,partiestoacontractarefreetostipulatetheterms

ofagreementsubjecttotheminimum banonstipulationscontrarytolaw,morals,good

customs,publicorder,orpublicpolicy.Otherwise,thecontractisdeniedlegalexistence,

61


deemed“inexistentandvoidfrom thebeginning.”

PNCC Skyway Trafic Managementand Security Division Workers Organization

(PSTMSDWO)vs.PNCCSkywayCorporation


Peralta,J.

ISSUE:Whethertherulethatacontractfreelyenteredintobetweenthepartiesshould

berespectedsinceacontractisthelawbetweenthepartiesisabsolute.

DOCTRINE:No.Therearecertainexceptionstotherule,specificalyArticle1306ofthe

CivilCode,whichprovides:“Thecontractingpartiesmayestablishsuchstipulations,

clauses,termsandconditionsastheymaydeem convenient,providedtheyarenot

contrarytolaw,morals,goodcustoms,publicorder,orpublicpolicy.”

Moreover,therelationsbetweencapitalandlaborarenotmerelycontractual."Theyare

soimpressedwithpublicinterestthatlaborcontractsmustyieldtothecommongood."

Thesupremacyofthelawovercontractsisexplainedbythefactthatlaborcontracts

arenotordinarycontracts;theyareimbuedwithpublicinterestandthereforeare

subjecttothepolicepowerofthestate.However,itshouldnotbetakentomeanthat

provisionsagreeduponintheCBAareabsolutelybeyondtheambitofjudicialreview

andnulification.IftheprovisionsintheCBAruncontrarytolaw,publicmorals,orpublic

policy,suchprovisionsmayverywelbevoided.

HeirsofMarioPacres,vs.HeirsofCeciliaYgoña

G.R.No.174719. May5,2010.

DelCastilo, J.:

ISSUE:Whetherthirdpartiesmaysuefortheenforcementofthesupposedobligations

arisingfrom saidcontractspursuanttostipulationpourautri.

DOCTRINE:NO.UnderArticle1311oftheCivilCode,contractstakeefectonlybetween

theparties,theirassignsandheirs(subjecttoexceptionsnotapplicablehere).Thus,

onlyapartytothecontractcanmaintainanactiontoenforcetheobligationsarising

undersaidcontract.Itistruethatthirdpartiesmayseekenforcementofacontract

underthesecondparagraphofArticle1311,whichprovidesthat“ifacontractshould

containsomestipulationinfavorofathirdperson,hemaydemanditsfulfilment.”This

referstostipulationspourautrui,orstipulationsforthebenefitofthirdparties.However,

thewritencontractsofsaleinthiscasecontainnosuchstipulationinfavorofthe

petitioners.

HeirsofFaustoC.Ignaciov.HomeBankersSavingsandTrustCompany

G.R.No.177783.January23,2013

VilaramaJr.,J.

ISSUE:Whenisacontractdeemedperfected?

DOCTRINE:Contracts thatare consensualin nature,like a contractofsale,are

perfecteduponmeremeetingoftheminds.Oncethereisconcurencebetweenthe

oferandtheacceptanceuponthesubjectmater,consideration,andtermsofpayment,

acontractisproduced.Theofermustbecertain.Toconverttheoferintoacontract,

theacceptancemustbeabsoluteandmustnotqualifythetermsoftheofer;itmustbe

plain,unequivocal,unconditional,andwithoutvarianceofanysortfrom theproposal.A

qualifiedacceptance,oronethatinvolvesanewproposal,constitutesacounter-ofer

andisarejectionoftheoriginalofer.Consequently,whensomethingisdesiredwhich

isnotexactlywhatisproposedintheofer,suchacceptanceisnotsuficientto

62


generateconsentbecauseanymodificationorvariationfrom thetermsoftheofer

annulstheofer.

SpousesIgnacioF.JuicoandAliceP.Juicov.ChinaBankingCorporation

G.R.No.187678.April10,2013

Vilarama,Jr.,J.:

ISSUE:Whetherthe interestrates imposed byvirtue ofescalation clause in the

promissorynotes upon them byrespondentviolate the principle ofmutualityof

contracts?

DIOCTRINE:Escalationclausesrefertostipulationsalowinganincreaseintheinterest

rateagreeduponbythecontractingparties.ThisCourthaslongrecognizedthatthereis

nothing inherently wrong with escalation clauses which are valid stipulations in

commercialcontractstomaintainfiscalstabilityandtoretainthevalueofmoneyin

longterm contracts.Hence,suchstipulationsarenotvoidperse.

Nevertheless,anescalationclause"whichgrantsthecreditoranunbridledrightto

adjusttheinterestindependentlyandupwardly,completelydeprivingthedebtorofthe

righttoassenttoanimportantmodificationintheagreement"isvoid.Astipulationof

suchnatureviolatestheprincipleofmutualityofcontracts.Thus,thisCourthas

previouslynulifiedtheunilateraldeterminationandimpositionbycreditorbanksof

increasesintherateofinterestprovidedinloancontracts.

Thereisnoindicationthatpetitionerswerecoercedintoagreeingwiththeforegoing

provisionsofthepromissorynotes.Infact,petitionerIgnacio,aphysicianengagedin

themedicalsupplybusiness,admitedhavingunderstoodhisobligationsbeforesigning

them.Atnotimedidpetitionersprotestthenewratesimposedontheirloanevenwhen

theirpropertywasforeclosedbyrespondent.

Thisnotwithstanding,weholdthattheescalationclauseisstilvoidbecauseitgrants

respondentthepowertoimposeanincreasedrateofinterestwithoutawritennoticeto

petitioners and theirwriten consent.Respondent’s monthly telephone cals to

petitionersadvisingthem oftheprevailinginterestrateswouldnotsufice.Adetailed

bilingstatementbasedonthenewimposedinterestwithcorespondingcomputation

ofthetotaldebtshouldhavebeenprovidedbytherespondenttoenablepetitionersto

makeaninformeddecision.Anappropriateform mustalsobesignedbythepetitioners

toindicatetheirconformitytothenew rates.Compliancewiththeserequisitesis

essentialtopreservethemutualityofcontracts.Forindeed,one-sidedimpositionsdo

nothavetheforceoflawbetweentheparties,becausesuchimpositionsarenotbased

ontheparties’essentialequality.

Sps.BenjaminMamarilv.TheBoyScoutofthePhilippines

G.R.No.179382.January14,2013

Perlas-Bernabe,J.

ISSUE:Whencanathirdpersonbenefitfrom astipulationpourautrui?

DOCTRINE:Thefolowingrequisitesmustconcur:(1)Thereisastipulationinfavorofa

thirdperson;(2)Thestipulationisapart,notthewhole,ofthecontract;(3)The

contractingpartiesclearlyanddeliberatelyconferedafavortothethirdperson-the

favorisnotmerelyincidental;(4)Thefavorisunconditionalanduncompensated;(5)

63


Thethirdpersoncommunicatedhisorheracceptanceofthefavorbeforeitsrevocation;

and(6)Thecontractingpartiesdonotrepresent,orarenotauthorized,bythethird

party.22However,noneoftheforegoingelementsobtainsinthiscase.

StarTwo(SPV-AMC),Inc.v.PaperCityCorporationofthePhilippines

GRNo.169211.March6,2013

Perez,J.

ISSUE:Whetherthemachineriesshouldbeincludedintheforeclosureoftherealestate

mortgage?

DOCTRINE:Yes.Repeatedly,thepartiesstipulatedthatthepropertiesmortgagedby

PaperCitytoRCBCarevariousparcelsoflandincludingthebuildingsandexisting

improvementsthereonaswelasthemachineriesandequipment,whichasstatedin

thegrantingclauseoftheoriginalmortgage,are"moreparticularlydescribedandlisted

thatistosay,therealandpersonalpropertieslistedinAnnexes'A'and'B'...ofwhich

the[PaperCity]isthelawfulandregisteredowner."Significantly,Annexes"A"and"B"

areitemizedlistingsofthebuildings,machineriesandequipmenttypedsinglespacedin

twenty-sevenpagesofthedocumentmadepartoftherecords.AsheldinGateway

ElectronicsCorp.v.LandBankofthePhilippines,theruleinthisjurisdictionisthatthe

contractingpartiesmayestablishanyagreement,term,andconditiontheymaydeem

advisable,providedtheyarenotcontrarytolaw,moralsorpublicpolicy.Therightto

enterinto lawfulcontracts constitutes one ofthe liberties guaranteed by the

Constitution.

LandBankofthePhilippinesvs.HeirsofSpousesJorjaRigor-SorianoandMagin

Soriano

G.R.No.178312.January30,2013

Bersamin,J:

ISSUE:Whenisacompromisevalid?

DOCTRINE:Thevalidityofacompromiseisdependentuponitscompliancewiththe

requisitesandprinciplesofcontractsdictatedbylaw.Also,thetermsandconditionsof

acompromisemustnotbecontrarytolaw,morals,goodcustoms,publicpolicyand

publicorder.

RodolfoG.CruzandEsperanzaIbiasv.Aty.DelfinGruspe

GRNo.191431.March13,2013

Brion,J.

ISSUE:Isajointafidavitconsideredacontractandbindingupontheparties?

DOCTRINE:Yes.Contractsareobligatorynomaterwhattheirformsmaybe,whenever

theessentialrequisitesfortheirvalidityarepresent.Indeterminingwhetheradocument

isanafidavitoracontract,theCourtlooksbeyondthetitleofthedocument,sincethe

denominationortitlegivenbythepartiesintheirdocumentisnotconclusiveofthe

natureofitscontents.Intheconstructionorinterpretationofaninstrument,the

intentionofthepartiesisprimordialandistobepursued.Ifthetermsofthedocument

areclearandleavenodoubtontheintentionofthecontractingparties,theliteral

meaningofitsstipulationsshalcontrol.Ifthewordsappeartobecontrarytothe

parties'evidentintention,thelatershalprevailovertheformer.Asimplereadingofthe

termsoftheJointAfidavitofUndertakingreadilydisclosesthatitcontainsstipulations

characteristicofacontract.

PhilippineNationalBankvs.SpousesEnriqueManaloandRosalindaJacinto,etal.

64


G.R.No.174433;February24,2014

Bersamin,J.

ISSUE:Whetherthecreditagreementwhichstipulatedthattheloanwouldbesubjected

tointerestatarate"determinedbytheBanktobeitsprimerateplusapplicablespread,

prevailingatthecurentmonth"contravenedtheprincipleofmutualityofcontracts.

DOCTRINE:Yes.Theunilateraldeterminationandimpositionoftheincreasedratesis

violativeoftheprincipleofmutualityofcontractsunderArticle1308oftheCivilCode,

whichprovidesthat‘[t]hecontractmustbindbothcontractingparties;itsvalidityor

compliancecannotbelefttothewilofoneofthem.’AperusalofthePromissoryNote

wilreadilyshow thattheincreaseordecreaseofinterestrateshingessolelyonthe

discretionofpetitioner.Itdoesnotrequiretheconformityofthemakerbeforeanew

interestratecouldbeenforced.Anycontractwhichappearstobeheavilyweighedin

favorofoneofthepartiessoastoleadtoanunconscionableresult,thuspartakingof

thenatureofacontractofadhesion,isvoid.Anystipulationregardingthevalidityor

complianceofthecontractleftsolelytothewilofoneofthepartiesislikewiseinvalid.

CHAPTER2.ESSENTIALREQUISITESOFCONTRACTS

SpousesAzaroM.ZuluetaandPerlaSucayan-Zuluetav.JoseWong,etal.

G.R.No.153514,June8,2005

Calejo,Sr.,J.:

ISSUE:Whatisthedistinctionbetweenfailuretopaytheconsiderationandlackof

consideration?Whatisthestatusofadeedofsalewherethepurchasepricehasbeen

paidbutinfacthasneverbeenpaid?

DOCTRINE:Failuretopaytheconsiderationresultsinarighttodemandthefulfilment

orcancelationoftheobligationunderanexistingcontract,whilelackofconsideration

preventstheexistenceofavalidcontract.Wheretherewasnopriceorconsideration

forthesaleandinfacthadnotreceivedanyconsiderationforthesaidsale,itisnuland

voidabinitioforlackofconsideration.

PauloBalesterosv.RolandoAbion


Corona,J.:

ISSUE:Mayacontract,theobjectofwhichwasalreadytransferedtoathirdpersonat

thetimeitwasentered,bevalidatedandremainenforceableifoneofthepartythereto

hasnoknowledgeofthefactofitstransfer?

DOCTRINE:No.UnderArts.1318and1409(3)oftheCivilCode,contractsthecauseor

objectofwhichdidnotexistatthetimeofthetransactionareinexistentandvoidab

initio.

Thegoodfaithofapartyinenteringintoacontractisimmaterialindeterminingwhether

itisvalidornot.Goodfaith,notbeinganessentialelementofacontract,hasnobearing

onitsvalidity.Noamountofgoodfaithcanvalidateanagreementwhichisotherwise

void.Acontractwhichthelawdenouncesasvoidisnecessarilynocontractataland

noefortoractofthepartiestocreateonecanbringaboutachangeinitslegalstatus.

EstateofOrlandoLlenadoetal.vs.EduardoLlenadoetal.

G.R.No.145736. March4,2009.

65


Ynares-Santiago,J.

ISSUE:Whethertheheirsareboundbythecontractsenteredintobytheirpredecessors

ininterest.

DOCTRINE:Yes.UnderArticle1311oftheCivilCode,theheirsareboundbythe

contractsenteredintobytheirpredecessors-in-interestexceptwhentherightsand

obligationsthereinarenottransmissiblebytheirnature,bystipulationorbyprovisionof

law.Acontractofleaseis,therefore,generalytransmissibletotheheirsofthelessoror

lessee.Itinvolvesapropertyrightand,assuch,thedeathofapartydoesnotexcuse

non-performanceofthecontract.Therightsandobligationspasstotheheirsofthe

deceasedandtheheirofthedeceasedlessorisboundtorespecttheperiodofthe

lease.Thesameprincipleappliestotheoptiontorenew thelease.Asageneralrule,

covenantstorenewaleasearenotpersonalbutwilrunwiththeland.Consequently,the

successors-in-interestofthelesseeareentitledtothebenefits,whilethatofthelessor

areburdenedwiththedutiesandobligations,whichsaidcovenantsconferedand

imposedontheoriginalparties.

SECTION1.CONSENT

Dandoyv.Tongson


Austria-Martinez,J.

ISSUE:Mayacontracttotransferrightsbenulandvoidforfailuretoobtaintheconsent

ofthegovernment?

DOCTRINE:Yes.Section29oftheCommonwealthAct141orthePublicLandAct

providesinpart:“Afterthecultivationofthelandhasbeenbegun,thepurchaser,with

theapprovaloftheSecretaryofAgricultureandCommerce,mayconveyorencumber

hisrightstoanyperson,corporation,orassociationlegalyqualifiedunderthisActto

purchaseagriculturalpubliclands,providedsuchconveyanceorencumbrancedoesnot

afectanyrightorinterestoftheGovernmentintheland:Andprovided,further,Thatthe

transferorisnotdelinquentinthepaymentofanyinstalmentdueandpayable.Anysale

andencumbrancemadewithoutthepreviousapprovaloftheSecretaryofAgriculture

andCommerceshalbenulandvoidandshalproducetheefectofannulingthe

acquisition and reverting thepropertyand alrightsthereto to theState,and al

paymentsonthepurchasepricetheretoforemadetotheGovernmentshalbeforfeited.

Saidprovisioncontemplatesasaleandencumbrancethatapurchasermaydesireto

makeduringthependencyofhisapplicationandbeforehiscompliancewiththe

requirementsofthelaw.Thereasonforthepriorapprovalisobvious.Sincethe

applicationisstilpendingconsiderationandtherightsoftheapplicanthavenotyet

beendetermined,hecannotmakeanytransferthatmayafectthelandwithoutthe

approvaloftheGovernment.Suchapprovalisnecessarytoprotecttheinterestofthe

Government.Thus,thelawalowsanapplicantafterthecultivationofthelandhasbeen

beguntoconveyorencumberhisrightstoanypersonprovidedsuchconveyanceor

encumbrancedoesnotafectanyrightorinterestoftheGovernmentontheland.And

tosafeguardsuchrightorinterestpreviousapprovaloftheSecretaryisrequired.

Giventhatthe"TransferofSalesRights"from whichrespondentsbasetheircapacityto

enterinto the contractsisnuland void,respondentshave no legaljustification

whatsoevertoenterintotheseagriculturalleaseholdcontracts,thusrenderingthe

contractsinvalid.

66


NavotasIndustrialCorporationV.Cruz,etal.


Calejo,Sr.,J.:

ISSUE:Isthereavalidoptioncontractinaleaseagreementprovidingforanoptionto

buypropertybutwithoutstatingtheperiodforitsexercise?

DOCTRINE:No.Anoptioncontractisapreparatorycontractinwhichonepartygrants

totheother,forafixedperiodandunderspecifiedconditions,thepowertodecide

Whethertoenterintoaprincipalcontract.

EpifaniaDelaCruz,substitutedbyLaureanaV.Albertov.Sps.EduardoC.Sisonand

EufemiaS.Sison


Ynares-Santiago,J.:

ISSUE:Whetherthepersonassailingthateitherheisunabletoread,orthecontractisin

alanguagenotunderstoodbyhim orthattherehasbeenfraudormistakeinthe

contractexecutedmustprovethefactsclaimedbyhim indeterminingwhetherArticle

1332applies–thepersonassertingthecontracthasfulfiledhisdutytoexplainthe

termsofthecontracttotheotherparty?

DOCTRINE:ART.1332.Whenoneofthepartiesisunabletoread,orifthecontractisin

alanguagenotunderstoodbyhim,andmistakeorfraudisaleged,thepersonenforcing

thecontractmustshowthatthetermsthereofhavebeenfulyexplainedtotheformer.

ThecontradictorystatementsdonotestablishthefactthatEpifaniawasunabletoread

andunderstandtheEnglishlanguage.Therebeingnoevidenceadducedtosupporther

barealegations,thus,Epifaniafailedtosatisfactorilyestablishherinabilitytoreadand

understandtheEnglishlanguage.Itiswelsetledthatapartywhoalegesafacthas

theburdenofprovingit.Consequently,theprovisionsofArticle1332doesnotapply.

Perpetuavda.deApev.CourtofAppealsandGenorosaCawitVda.DeLumayno

GRNo.133638.April15,2005

Chico-Nazario,J.:

ISSUE:Whetherapersonenforcingacontractofsalehastheburdenofprovingthatthe

termsoftheagreementwerefulyexplainedtotheotherparty,whowasaniliterate?

DOCTRINE:Asageneralrule,hewhoalegesfraudormistakeinatransactionmust

substantiatehisalegationasthepresumptionisthatapersontakesordinarycarefor

hisconcernsandthatprivatedealingshavebeenenteredintofairlyandregularly.The

exceptiontothisruleisprovidedforunderArticle1332oftheCivilCodewhichprovides

that“[w]henoneofthepartiesisunabletoread,orifthecontractisinalanguagenot

understoodbyhim,andmistakeorfraudisaleged,thepersonenforcingthecontract

mustshowthatthetermsthereofhavebeenfulyexplainedtotheformer.

ReynaldoVilanuevavs.PhilippineNationalBank



67


ISSUE:Whatistheefectofmakingaqualifiedacceptanceofanofer?

DOCTRINE:Aqualifiedacceptance,oronethatinvolvesanewproposal,constitutesa

counter-oferandarejectionoftheoriginalofer(Art.1319,id.).Consequently,when

something is desired which is notexactlywhatis proposed in the ofer,such

acceptanceisnotsuficienttogenerateconsentbecauseanymodificationorvariation

from thetermsoftheoferannulstheofer.

GaudencioValerioet.alv.VicentaRefrescaet.al.

G.R.No.163687.March28,2006

Puno,J.:

ISSUE:WhetheraDeedofSalewithno monetaryconsiderationinvolvedmaybe

consideredasanabsolutelysimulatedorfictitiouscontractwhichproducesnolegal

efect.

DOCTRINE:Article1345oftheCivilCodeprovidesthatthesimulationofacontractmay

eitherbeabsoluteorrelative.Inabsolutesimulation,thereisacolorablecontractbutit

hasno substanceasthepartieshaveno intention to bebound byit.Themain

characteristicofanabsolutesimulationisthattheapparentcontractisnotrealy

desiredorintendedtoproducelegalefectorinanywayalterthejuridicalsituationof

theparties.Asaresult,anabsolutelysimulatedorfictitiouscontractisvoid,andthe

parties may recover from each other what they may have given under the

contract.However,ifthepartiesstateafalsecauseinthecontracttoconcealtheirreal

agreement,thecontractisrelativelysimulatedandthepartiesarestilboundbytheir

realagreement.Hence,wheretheessentialrequisitesofacontractarepresentandthe

simulation refersonlyto thecontentortermsofthecontract,theagreementis

absolutelybindingandenforceablebetweenthepartiesandtheirsuccessorsininterest.

HeirsofCayetanoPanganvs.SpousesRogelioPererasandPriscilaPereras

G.R.No.157374August27,2009

Brion,J.

ISSUE:Whethertherewasaperfectedcontractofsaleofoneoftheco-ownersofhis

sharedespitethenoconsentoftheotherownerstosuchsale.

DOCTRINE:Yes.Therewasaperfectedcontractbetweenthepartiessincealthe

essentialrequisitesofacontractwerepresent.

Article1318oftheCivilCodedeclaresthatnocontractexistsunlessthefolowing

requisitesconcur:(1)consentofthecontractingparties;(2)objectcertainwhichisthe

subjectmaterofthecontract;and(3)causeoftheobligationestablished.Sincethe

objectoftheparties’agreementinvolvespropertiesco-ownedbyConsueloandher

children,thepetitioners-heirsinsistthattheirapprovalofthesaleinitiatedbytheir

mother,Consuelo,wasessentialtoitsperfection.Accordingly,theirrefusalamountedto

theabsenceoftherequiredelementofconsent.

Thatathingissoldwithouttheconsentofaltheco-ownersdoesnotinvalidatethesale

orrenderitvoid.Article493oftheCivilCode 8 recognizestheabsoluterightofacoownertofreelydisposeofhisproindivisoshareaswelasthefruitsandotherbenefits

arisingfrom thatshare,independentlyoftheotherco-owners.Thus,whenConsuelo

agreedtoseltotherespondentsthesubjectproperties,whatsheinfactsoldwasher

undivided interestthat,as quantified bythe RTC,consisted ofone-halfinterest,

representingherconjugalshare,andone-sixthinterest,representingherhereditary

share.

68


CorneliaBaladadvs.SergioA.RublicoandSpousesLaureanoF.Yupano

G.R.No.160743August4,2009

Nachura,J.

ISSUE:WhetheracontractofabsolutesaleinanExtrajudicialSetlementofEstatewith

AbsoluteSaleexecutedbypartiesthroughtheiratorney-in-factwasvalid.

DOCTRINE:Yes.Whilecontainedinonedocument,thetwoareseverableandeachcan

stand on its own.Hence,forits validity,each mustcomplywith the requisites

prescribedinArticle1318oftheCivilCode,namely(1)consentofthecontracting

parties;(2)objectcertain,whichisthesubjectmaterofthecontract;and(3)causeof

theobligationwhichisestablished.

And,mostimportantofalisthefactthatthesubjectdeedis,onitsface,unambiguous.

Whenthetermsofacontractarelawful,clearandunambiguous,facialchalenge

cannotbealowed.Weshouldnotgobeyondtheprovisionsofaclearandunambiguous

contracttodeterminetheintentofthepartiesthereto,becausewewilruntheriskof

substitutingourowninterpretationforthetrueintentoftheparties.

ItisimmaterialthatCornelia’ssignaturedoesnotappearontheExtrajudicialSetlement

ofEstatewithAbsoluteSale.Acontractofsaleisperfectedthemomentthereisa

meetingofthemindsuponthethingwhichistheobjectofthecontractanduponthe

price. 29 ThefactthatitwasCorneliaherselfwhobroughtAty.FranciscotoCorazon’s

housetonotarizethedeedshowsthatshehadpreviouslygivenherconsenttothesale

ofthetwolotsinherfavor.Hersubsequentactofexercisingdominionoverthesubject

propertiesfurtherstrengthensthisassumption.

FranciscoLandichoetal.vs.FelixSia

G.R.No.169472. January20,2009.

PunoC.J.:

ISSUE:Whetheroldageandiliteracyincapacitatesapersontoexecuteacontract.

DOCTRINE:No.Thepetitionersalsofailedtosupporttheirclaim thattheAragonstook

advantageofFrancisco’soldageandiliteracyandemployedfraudulentschemesin

ordertodeceivehim intosigningtheKasulatan.Ithasbeenheldthat“[a]personisnot

incapacitatedtocontractmerelybecauseofadvancedyearsorbyreasonofphysical

infirmities.Itisonlywhensuchageorinfirmitiesimpairthementalfacultiestosuch

extentastopreventonefrom properly,inteligently,andfairlyprotectingherproperty

rights,issheconsideredincapacitated.”

XYSTCorp.v.DMCUrbanPropertiesDevelopmentInc.

G.R.No.171968;July31,2009

Quisumbing,J.

ISSUE:Whetherthereexistsaperfectedcontractofsalebetweenthepartiesdespite

theterms,conditionsandamendmentswhichtheoferortriedtoimposeupontheother.

DOCTRINE:No.Byintroducingamendmentstothecontract,XYSTpresentedacounterofertowhichDMCdidnotagree.Clearly,therewasonlyanoferandacounter-ofer

thatdidnotsum uptoanyfinalarangementcontainingtheelementsofacontract.No

meetingofthemindswasestablished.Theruleontheconcurenceoftheoferandits

acceptancedidnotapplybecauseothermatersordetails–inadditiontothesubject

materandtheconsideration–wouldstilbestipulatedandagreeduponbytheparties.

Therefore,sincetheelementofconsentisabsent,thereisnocontracttospeakof.

Where the parties merelyexchanged ofers and counter-ofers,no agreementor

69


contractisperfected.

GloriaOcampoandTeresitaTanv.LandBankofthePhilippinesetal.

G.R.No.164968;July3,2009

Peralta,J.

ISSUE:Whetherthedeceitemployedmustbeserious.

DOCTRINE:Yes.Verily,fraud refersto alkindsofdeception -whetherthrough

insidiousmachination,manipulation,concealmentormisrepresentation -thatwould

leadanordinarilyprudentpersonintoeroraftertakingthecircumstancesintoaccount.

Thedeceitemployedmustbeserious.Itmustbesuficienttoimpressorleadan

ordinarilyprudentpersonintoeror,takingintoaccountthecircumstancesofeachcase.

Unfortunately,OcampowasunabletoestablishclearlyandpreciselyhowtheLandBank

commitedthealegedfraud.ShefailedtoconvinceUsthatshewasdeceived,through

misrepresentationsand/orinsidiousactions,intosigningablankform foruseas

securitytoherpreviousloan.

Granting,forthesakeofargument,thatappelantbankdidnotapprisetheappeleesof

the real nature of the real estate mortgage, such stratagem, deceit or

misrepresentationsemployedbydefendantbankarefactsconstitutiveoffraudwhichis

definedinArticle1338oftheCivilCodeasthatinsidiouswordsormachinationsofone

ofthecontractingparties,bywhichtheotherisinducedtoenterintoacontractwhich

withoutthem,hewouldnothaveagreedto.Whenfraudisemployedtoobtainthe

consentoftheotherpartytoenterintoacontract,theresultingcontractismerelya

voidablecontractthatisavalidandsubsistingcontractuntilannuledorsetasidebya

competentcourt.Itmustberememberedthatanactiontodeclareacontractnuland

voidonthegroundoffraudmustbeinstitutedwithinfouryearsfrom thedateof

discoveryoffraud.Inthiscase,itispresumedthattheappeleesmusthavediscovered

thealegedfraudsince1991atthetimewhentherealestatemortgagewasregistered

withtheRegisterofDeedsofLingayen,Pangasinan.Theappeleescannotnow feign

ignoranceabouttheexecutionoftherealestatemortgage.

GovernmentServiceInsuranceSystem vs.Abraham Lopez

G.R.No.165568;July13,2009

Carpio,J.:

ISSUE:Whetherwhenthereismerelyanoferbyonepartywithoutacceptancebythe

other,thereisnocontractofsale.

DOCTRINE:Yes.Inthepresentcase,thepartiesnevergotpastthenegotiationstage.

Nothingshowsthatthepartieshadagreedonanyfinalarangementcontainingthe

essentialelementsofacontractofsale,namely,(1)consentorthemeetingofthe

mindsoftheparties;(2)objectorsubjectmaterofthecontract;and(3)priceor

considerationofthesale.The2August1988leteroftheGSIScannotbeclassifiedasa

perfectedcontractofsalewhichbindstheparties.TheleterwasinreplytoLopez’s

ofertorepurchasetheproperty.BoththetrialandappelatecourtsfoundthatLopez’s

ofertorepurchasethepropertywassubjecttotheapprovaloftheBoardofTrusteesof

theGSIS,asexplicitlystatedinthe2August1988GSIS’leter.Nosuchapproval

appearsintherecords.Whenthereismerelyanoferbyonepartywithoutacceptance

bytheother,thereisnocontractofsale.SincetherewasnoacceptancebyGSIS,which

canvalidlyactonlythroughitsBoardofTrustees,ofLopez’sofertorepurchasethe

property,therewasnoperfectedcontractofsale.

70


Sps.RamonLequinandVirginiaLequinvs. Sps.RaymundoVizcondeandSalome

LequinVizconde

G.R.No.177710.October12,2009

Velasco,Jr.,J.:

ISSUE:Whetherwhenconsentisgiventhroughfraudwouldmakethecontractvoidable.

DOCTRINE:Yes.Article(Art.)1330oftheCivilCodeprovidesthatwhenconsentisgiven

throughfraud,thecontractisvoidable.

Tolentinodefinesfraudas“everykindofdeceptionwhetherintheform ofinsidious

machinations,manipulations,concealmentsormisrepresentations,forthepurposeof

leading anotherpartyinto erorand thus execute a particularact.”Fraud has a

“determininginfluence”ontheconsentoftheprejudicedparty,asheismisledbyafalse

appearanceoffacts,therebyproducingeroronhispartindecidingWhethertoagreeto

theofer.

Oneform offraudismisrepresentationthroughinsidiouswordsormachinations.Under

Art.1338 ofthe CivilCode,there is fraud when,through insidious words or

machinationsofoneofthecontractingparties,theotherisinducedtoenterintoa

contractwhich withoutthem he would nothave agreed to.Insidious words or

machinationsconstitutingdeceitarethosethatensnare,entrap,trick,ormisleadthe

otherpartywhowasinducedtogiveconsentwhichheorshewouldnototherwisehave

given.

Deceitisalsopresentwhenoneparty,bymeansofconcealingoromitingtostate

materialfacts,withintenttodeceive,obtainsconsentoftheotherpartywithoutwhich,

consentcouldnothavebeengiven.Art.1339oftheCivilCodeisexplicitthatfailureto

disclosefactswhenthereisadutytorevealthem,aswhenthepartiesareboundby

confidentialrelations,constitutesfraud.

SpousesExequielLopezandEusebiaLopezv.SpousesEduardoLopezandMarcelina

Lopez


Nachura,J.

ISSUE:Whetherwheretheessentialrequisitesofacontractarepresentand the

simulation refersonlyto thecontentortermsofthecontract,theagreementis

absolutelybindingandenforceablebetweenthepartiesandtheirsuccessorsininterest.

DOCTRINE:Yes.Simulationtakesplacewhenthepartiesdonotrealywantthecontract

theyhaveexecutedtoproducethelegalefectsexpressedbyitswordings.Article1345

oftheCivilCodeprovidesthatthesimulationofacontractmayeitherbeabsoluteor

relative.Inabsolutesimulation,thereisacolorablecontractbutithasnosubstanceas

thepartieshavenointentiontobeboundbyit.Themaincharacteristicofanabsolute

simulationisthattheapparentcontractisnotrealydesiredorintendedtoproducelegal

efectorinanywayalterthejuridicalsituationoftheparties.Asaresult,anabsolutely

simulatedorfictitiouscontractisvoid,andthepartiesmayrecoverfrom eachother

whattheymayhavegivenunderthecontract.However,ifthepartiesstateafalsecause

inthecontracttoconcealtheirrealagreement,thecontractisrelativelysimulatedand

thepartiesarestilboundbytheirrealagreement.Hence,wheretheessentialrequisites

ofacontractarepresentandthesimulationrefersonlytothecontentortermsofthe

contract,theagreementisabsolutelybindingandenforceablebetweenthepartiesand

theirsuccessorsininterest.

HeirsOfDr.MarioS.Intacv.CourtofAppeals

71


G.R.No.173211;October11,2012

ISSUE:WhetherthedeedofsaleexecutedbyIreneoandSalvacionwasabsolutely

simulatedforlackofconsiderationandcauseand,therefore,void.

DOCTRINE:NO.Article1345providesthatsimulationofacontractmaybeabsoluteor

relative.Theformertakesplacewhenthepartiesdonotintendtobeboundatal;the

later,whenthepartiesconcealtheirtrueagreement.

WhileArticle1346statesthatanabsolutelysimulatedorfictitiouscontractisvoid.A

relativesimulation,whenitdoesnotprejudiceathirdpersonandisnotintendedforany

purposecontrarytolaw,morals,goodcustoms,publicorderorpublicpolicybindsthe

partiestotheirrealagreement.Ifthepartiesstateafalsecauseinthecontractto

concealtheirrealagreement,thecontractisonlyrelativelysimulatedandthepartiesare

stilboundbytheirrealagreement.Hence,wheretheessentialrequisitesofacontract

arepresentandthesimulationrefersonlytothecontentortermsofthecontract,the

agreementis absolutely binding and enforceable between the parties and their

successorsininterest.Inabsolutesimulation,thereisacolorablecontractbutithasno

substanceasthepartieshavenointentiontobeboundbyit.Themaincharacteristicof

anabsolutesimulationisthattheapparentcontractisnotrealydesiredorintendedto

producelegalefectorinanywayalterthejuridicalsituationoftheparties.Asaresult,

anabsolutelysimulatedorfictitiouscontractisvoid,andthepartiesmayrecoverfrom

eachotherwhattheymayhavegivenunderthecontract."

KoreanAirCo.,Ltd.V.Yuson

G.R.No.170369

Carpio,J.

ISSUE:WhethertheoferofMNLSM Managementisequivalenttoanoferingofsaid

earlyretirementprogram toitsstafwascertain.

DOCTRINE:No,theofermustbedefinite,completeandintentional.Thereisan‘ofer’in

thecontextofArticle1319onlyifthecontractcancomeintoexistencebythemere

acceptanceoftheoferee,withoutanyfurtheractonthepartoftheoferor.Hence,the

‘ofer’mustbedefinite,completeandintentional.Inthepresentcase,theoferisnot

certain since (1)the 21 August2001 memorandum clearlystatesthat,“MNLSM

Management,onitsdiscretion,isherebyoferingthesaidearlyretirementprogram to

itsstaf.

Doña Rosana Realty and Development Corporation vs. Molave Development

Corporation

G.R.No.180523;March26,2010

Abad,J.

ISSUE:WhetherconsentofthebuyerisvitiatedwhenthePresidentofbuyer-corporation

executedadocumentacknowledgingthereceiptofPhP1.3milionasconsiderationfor

thecancelationofitscontracttoselbyreasonoftheactuationoftheseler’slawyer

thatthecheckwouldnotbereleasedwithoutsuchdocument.

DOCTRINE:No,thePresidentofbuyer-corporationassertedthatshesignedtheabove

receiptbecauseseler’slawyerwouldnothavereleasedthechecktoher.Butthisisnot

avalidgroundforclaimingthatconsentisvitiated.Ifshedidnotwanttoagreetothe

cancelation,shehadnobusinesssigningthereceiptandacceptingthecheck.She

couldverywelhavestoodhergroundandpressedforcompleteperformanceofthe

contracttosel.HavingreceivedtheP1.3milion,thebuyer-corporation’sremaining

remedywastopursueaclaim forthebalanceofP1milionthatitpaidtheselerupon

72


theexecutionofthecontracttosel.

JocelynM.Toledovs.MarilouM.Hyden


DelCastilo,J.:

ISSUE:Whetherthe"AcknowledgmentofDebt"isaninexistentcontractrenderingitvoid

from theverybeginningpursuanttoArticle1409oftheNewCivilCode.

DOCTRINE:No,the"AcknowledgmentofDebt"isvalidandbindingcontract.Evenif

therewasindeedsuchthreatmadebyMarilou,thesameisnotconsideredasthatkind

ofthreatthatwouldvitiateconsent.Article1335oftheNewCivilCodeisveryspecific

onthismater.Itprovides:"Art.1335.Thereisviolencewheninordertowrestconsent,

seriousoriresistibleforceisemployed.xxxxAthreattoenforceone’sclaim through

competentauthority,iftheclaim isjustorlegal,doesnotvitiateconsent.

Here,itisuncontestedthatpetitionerhadinfactsignedthe"AcknowledgmentofDebt"

inApril1998andtwoofhersubordinatesservedaswitnessestoitsexecution,knowing

fulywelthenatureofthecontractshewasenteringinto.Next,petitionerissuedfive

checksinfavorofrespondentrepresentingrenewalpaymentofherloansamountingto

P290,000.00.InJune1998,sheaskedtorecalCheckNo.0010761intheamountof

P30,000.00andreplacedthesamewithsixchecks,instaggeredamounts.Altheseare

indiciathatJocelyntreatedthe"AcknowledgmentofDebt"asavalidandbinding

contract.

ECERealtyandDevelopmentInc.v.RachelG.Mandap


ISSUE:Whetherfraudatendedtheperfectionofthecontractwhichshouldbeaground

toinvalidatethecontract.

DOCTRINE:YES.Article1338oftheCivilCodeprovidesthat“[t]hereisfraudwhen

throughinsidiouswordsormachinationsofoneofthecontractingparties,theotheris

inducedtoenterintoacontractwhich,withoutthem,hewouldnothaveagreedto.”In

addition,underArticle1390ofthesameCode,acontractisvoidableorannulable

“wheretheconsentisvitiatedbymistake,violence,intimidation,undueinfluenceor

fraud.”

Jurisprudencehasshownthatinordertoconstitutefraudthatprovidesbasistoannul

contracts,itmustfulfiltwoconditions.First,thefraudmustbedolocausanteoritmust

befraudinobtainingtheconsentoftheparty.Thisisreferedtoascausalfraud.The

deceitmustbeserious. Second,thefraudmustbeprovenbyclearandconvincing

evidenceandnotmerelybyapreponderancethereof.insofarasthepresentcaseis

concerned,theCourtagreesthatthemisrepresentation madebypetitionerin its

advertisementsdoesnotconstitutecausalfraudwhichwouldhavebeenavalidbasisin

annulingtheContracttoSelbetweenpetitionerandrespondent.

SECTION2.OBJECTOFCONTRACTS

Aty.PedroM.Ferervs.SpousesAlfredoDiazandImeldaDiaz

G.R.No.165300. April23,2010

DelCastilo, J.:

ISSUE:Whetherawaiverofhereditaryrightsinfavorofanotherexecutedbyafuture

73


heirwhiletheparentsarestillivingvalid.

DOCTRINE:No.PursuanttothesecondparagraphofArticle1347oftheCivilCode,no

contractmaybeenteredintouponafutureinheritanceexceptincasesexpressly

authorizedbylaw.Fortheinheritancetobeconsidered“future,”thesuccessionmust

nothavebeenopenedatthetimeofthecontract.Acontractmaybeclassifiedasa

contractuponfutureinheritance,prohibitedunderthesecondparagraphofArticle1347,

wherethefolowingrequisitesconcur:(1)Thatthesuccessionhasnotyetbeenopened;

(2)Thattheobjectofthecontractformspartoftheinheritance;and,(3)Thatthe

promissorhas,withrespecttotheobject,anexpectancyofarightwhichispurely

hereditaryinnature.

SECTION3.CAUSEOFCONTRACTS

J.L.T.AgroInc.v.Balansag

G.R.No.141882.March11,2005

Tinga,J.:

ISSUE:Whatwilbetheefectonthecontractifitwasenteredintowithoutcauseor

withunlawfulcause?

DOCTRINE:Article1318oftheNew CivilCodeenumeratestherequisitesofavalid

contract,namely:(1)consentofthecontractingparties;(2)objectcertainwhichisthe

subjectmaterofthecontract;and(3)Causeoftheobligationwhichisestablished.

Thus,Article1352 declaresthatcontractswithoutcause,orwith unlawfulcause

producenoefectwhatsoever.Thosecontractslackanessentialelementandtheyare

notonlyvoidablebutvoidorinexistentpursuanttoArticle1409,paragraph(2).The

absenceoftheusualrecitalofconsiderationinatransactionwhichnormalyshouldbe

supportedbyaconsiderationsuchastheassignmentmadebyDonJulianofal

nineteen(19)lotshestilhadatthetime,coupledwiththefactthattheassigneeisa

corporationofwhichDonJulianhimselfwasalsothePresidentandDirector,forecloses

theapplicationofthepresumptionofexistenceofconsiderationestablishedbylaw.

Alvarezv.PICOPResources


ISSUE:Whetherinonerouscontractsthecauseisunderstoodtobe,foreach

contractingparty,theprestationorpromiseofathingorservicebytheother.

DOCTRINE:Yes.AccordingtoArticle1350oftheCivilCode,"(i)nonerouscontractsthe

causeisunderstoodtobe,foreachcontractingparty,theprestationorpromiseofa

thingorservicebytheother."Privateinvestmentsforone’sbusinesses,whileindeed

eventualybeneficialtothecountryanddeservingtobegivenincentives,arestil

principalyand predominantlyforthebenefitoftheinvestors.Thus,the"mutual"

contractconsiderationsbybothpartiestothisalegedcontractwouldbebothforthe

benefitofoneofthepartiesthereto,BBLCI,whichisnotobligated bythe1969

Documenttosurenderashareinitsproceedsanymorethanitisalreadyrequiredbyits

TLAandbythetaxlaws.

74


PICOP’sargumentthatitsinvestmentscanbeconsideredascontractconsideration

derogatestherulethat"alicenseorapermitisnotacontractbetweenthesovereignty

andthelicenseeorpermitee,andisnotapropertyintheconstitutionalsense,asto

whichtheconstitutionalproscriptionagainsttheimpairmentofcontractsmayextend."

Allicenseesobviouslyputupinvestments,whethertheyareassmalasatricycleunit

oras big as those putup bymulti-bilion-peso corporations.To construe these

investmentsascontractconsiderationswouldbetoabandontheforegoingrule,which

wouldmeanthattheStatewouldbeboundtoallicensees,andloseitspowertorevoke

oramendtheselicenseswhenpublicinterestsodictates.

Thepowertoissuelicensesspringsfrom theState’spolicepower,knownas"themost

essential,insistentandleastlimitableofpowers,extendingasitdoestoalthegreat

publicneeds."Businessesafectingthepublicinterest,suchastheoperationofpublic

utilitiesandthoseinvolvingtheexploitationofnaturalresources,aremandatedbylaw

toacquirelicenses.ThisissoinorderthattheStatecanregulatetheiroperationsand

therebyprotectthepublicinterest.Thus,whiletheselicensescomeintheform of

"agreements,"e.g.,"TimberLicenseAgreements,"theycannotbeconsideredcontracts

underthenon-impairmentclause.

CHAPTER3.FORM OFCONTRACTS

ManuelMalariandMilieMalariv.RebeccaAlsol

G.R.No.150866.March6,2006

Carpio,J.:

ISSUE:Wiladefectinthenotarizationofaprivatedocumentnulifythetransactionof

thepartiesindicatedtherein?

DOCTRINE:Notarizationconvertsaprivatedocumentintoapublicdocument.However,

thenon-appearanceofthepartiesbeforethenotarypublicwhonotarizedthedocument

doesnotnecessarilynulifynorrendertheparties’transactionvoidabinitio.

SerafinNaranjaetal.vs.CourtofAppeals

G.R.No.160132.April17,2009.

NachuraJ.:

ISSUE:Whetheracontractofsaleshouldfolowaparticularform.

DOCTRINE:No.TheCourtdoesnotagreewithpetitioners’contentionthatadeedof

salemustcontainatechnicaldescriptionofthesubjectpropertyinordertobevalid.

PetitionersanchortheirtheoryonSection127ofActNo.496,whichprovidesasample

form ofadeedofsalethatincludes,inparticular,atechnicaldescriptionofthesubject

property.Tobevalid,acontractofsaleneednotcontainatechnicaldescriptionofthe

subjectproperty.Contractsofsaleofrealpropertyhavenoprescribedform fortheir

validity;theyfolow thegeneralruleoncontractsthattheymaybeenteredintoin

whateverform,providedaltheessentialrequisitesfortheirvalidityarepresent.The

requisitesofavalidcontractofsaleunderArticle1458oftheCivilCodeare:(1)consent

ormeetingoftheminds;(2)determinatesubjectmater;and(3)pricecertaininmoney

oritsequivalent.

75


CHAPTER4.REFORMATIONOFINSTRUMENTS

BennyGov.EliodoroBacaron


Panganiban,J.:

ISSUE:Whatistheproperremedyofthepartieswhentheyfailedtoexpresstheirtrue

intentionsinthecontract?

DOCTRINE:Ultimately,itistheintentionofthepartiesthatdetermineswhethera

contractisoneofsaleorofmortgage.Inthepresentcase,oneofthepartiestothe

contractraisesasanissuethefactthattheirtrueintentionoragreementisnot

reflectedintheinstrument.UnderArticle1605oftheNew CivilCode,thesupposed

vendormayaskforthereformationoftheinstrument,shouldthecasebeamongthose

mentionedinArticles1602and1604.Becauserespondenthasmorethansuficiently

establishedthattheassailedContractisinfactanequitablemortgageratherthanan

absolutesale,heisalowedtoavailhimselfoftheremedyofreformationofcontracts

asprovidedinArticle1359oftheNewCivilCode.

CHAPTER5.INTERPRETATIONOFCONTRACTS

HolyCrossofDavaoColege,Inc.vs.HolyCrossofDavaoFacultyUnion–Kampi

G.R.No.156098June27,2005

Sandoval-Gutierez,J.

ISSUE:Howarenon-ambiguouscontractstobeinterpreted?

DOCTRINE:Contracts,whicharenotambiguousaretobeinterpretedaccordingtotheir

literalmeaningandnotbeyondtheirobviousintendment.WhentheprovisionsofaCBA

statethatacademicteachingpersonnelasrecipientofascholarshipgrantareentitled

to aleave ofabsence with a grant-in-aid equivalentto theirmonthlysalaryand

alowance,providedsuchgrantistopromotetheirprofessionalgrowthortoenhance

theirstudiesininstitutionsofhigherlearning.Suchprovisionsneednointerpretationfor

theyareclear.

InMactanWorkersUnionvs.Aboitiz,thecourtheldthat"thetermsandconditionsofa

colectivebargainingcontractconstitutethelaw betweentheparties.Thosewhoare

entitledtoitsbenefitscaninvokeitsprovisions.Intheeventthatanobligationtherein

imposedisnotfulfiled,theaggrievedpartyhastherighttogotocourtforredress."

Agasvs.Sabico

G.R.No.156447.April26,2005

Calejo,Sr.,J.

76


ISSUE:MaytheCourtdeclareadeedofsaletobeadeedofabsolutemortgage,taking

intoconsiderationthecircumstancesatendantinacertaincase?

DOCTRINE:Yes.Indeterminingthenatureofacontract,courtsarenotboundbythe

titleornamegivenbytheparties.Thedecisivefactorinevaluatingsuchagreementis

theintentionoftheparties,asshownnotnecessarilybytheterminologyusedinthe

contractbutbytheirconduct,words,actionsanddeedspriorto,duringandimmediately

afterexecutingtheagreement.Assuch,therefore,documentaryandparolevidence

maybe submited and admited to prove such intention.Ifboth partiesofera

conflictinginterpretationofacontractorseveralcontracts,thenjudicialdetermination

oftheintentionoftheparties’intentionisinevitable.

A contractmaybeembodiedintwoormoreseparatewritings,inwhicheventthe

writingsshouldbereadandinterpretedtogetherinsuchawayastoeliminateseeming

inconsistenciesand renderthe parties’intention efectual.In construing a writen

contract,thereasonbehindandthecircumstancessuroundingitsexecutionareof

paramountimportancetoplacetheinterpreterinthesituationoccupiedbytheparties

concernedatthetimethewritingwasexecuted.Constructionofthetermsofacontract,

whichwouldamounttoimpairmentorlossofright,isnotfavored.Conservationand

preservation,notwaiver,abandonmentorforfeitureofaright,istherule.Incaseof

doubtsincontracts,thesameshouldbesetledinfavorofthegreatestreciprocityof

interests.Moreover,suchdoubtsmustberesolvedagainstthepersonwhodraftedthe

deedandwhoisresponsiblefortheambiguitiesinthedeed.

Further,thenotarypublicwhonotarizedthesaiddeedmerelyaskedtherespondentif

the laterknew the contents ofthe deed ofabsolute sale,and the respondent

purportedlyrepliedintheafirmative.Thenotarypublicneverevenbotheredtoexplain

totherespondentthenatureandtherightsandobligationsofthepartiesunderthe

deed,asmandatedbyArticle1332oftheNewCivilCode

BermanMemorialPark,Inc.andLuisaChongv.FranciscoCheng

G.R.No.154630.May6,2005

Calejo,Sr.,J.:

ISSUE:Dothestipulationsembodiedinanagreementreflectthetrueagreementofthe

parties?

DOCTRINE:Yes.Article1370oftheNew CivilCodeprovidesthatifthetermsofa

contractareclearandleavenodoubtupontheintentionofthecontractingparties,the

literalmeaningofitsstipulationshalcontrol.Noamountofextrinsicaidsarerequired

andnofurtherextraneoussourcesarenecessaryinordertoascertaintheparties’intent,

determinableasitis,from thecontractitself.Therecordsareclearthattherespondent

understoodthenatureofthecontractheenteredinto.

If,indeed,theagreementwerenotthetrueintentionoftheparties,thepartyshouldfilea

corespondingactionforreformationofthecontract.

Thehornbookruleoninterpretationofcontractsgivesprimacytotheintentionofthe

parties,whichisthelawamongthem.Ultimately,theirintentionistobedecipherednot

from theunilateralpostfactoassertionsofoneoftheparties,butfrom thelanguage

usedinthecontract.Andwhenthetermsoftheagreement,asexpressedinsuch

language,areclear,theyaretobeunderstoodliteraly,justastheyappearonthefaceof

thecontract.

RosalinaTaglev.CourtofAppeals,FastInternationalCorporationand/orKuoTungYu

Huang

77


G.R.No.148235.August11,2005

CarpioMorales,J.:

ISSUE:Canawidow whofiledaclaim fordeathbenefitsbeentitledtotheadditional

laborinsurance she is entitled to as provided forin herdeceased husband’s

employmentcontracton compensation and benefits which explicitly states that

“Benefits...includecompensationfor...deathinaccordancewithsocialinsurance

lawsandotherpertinentprovisionsoftheTaiwanLaborLaw...AdditionalLabor

InsuranceshalbeprovidedtotheFishermanwithalimitofNT$300,000.00perperson

(oritsequivalent)foraccidentinsurancecoveringfishermanregardlessofwhether

accidentoccurswithinand/orbeyondworkhours”?

DOCTRINE:No.Deathisdefinedas“lossofliferesultingfrom injuryorsickness.Death

could bearesultofaccident,butaccidentdoesnotnecessarilyresultto death.

Compensationbenefitsforilness,death,accidentwhichdoesnotresulttodeath,and

partialortotaldisabilityare treated separately and diferently in the 3-paragraph

provisionofArticleI,Section10oftheemploymentcontract.Thesaidprovisioninthe

employmentcontractbeingclearandunambiguous,itsliteralmeaningcontrols(Article

1370,NewCivilCode).Toupholdpetitioner’sclaim foradditionalinsuranceforaccident,

assumingthatoneforthepurposewassecured,afterreceivinginsurancebenefits

fordeatharisingfrom accident,wouldviolatetheclearprovisionofArticleI,Section10

oftheemploymentcontract,thelawbetweentheparties.Anditwouldtriflewiththe

Release,WaiverandQuitclaim,anothercontractbetweentheparties,baringpetitioner

from claimingotheroradditionalbenefitsarisingfrom petitioner’shusband’sdeathbasisofthereleaseoftheinsuranceproceedstoher.

MarthaR.Horiganv.TroikaCommercial,Inc.

G.R.No.148411.November29,2005

Sandoval-Gutierez,J.:

ISSUE:Whobearstheresponsibilityforcausingobscuritiesinacontract?

DOCTRINE:Thepartywhodrawsupthecontract,inwhichobscurewordsorphrases

appear,bearstheresponsibilityforcausingtheambiguityorobscurity,andhence,these

mustbeconstruedagainsthim. Inthiscase,itwaspetitioner’sspousewhoprepared

thesub-leasecontractinquestion. Consequently,theambiguitymustbeconstrued

againsthereinpetitionerassheispresumedtohave

AurelioP.AlonzoandTeresitaA.Sisonv.JaimeandPerlitaSanJuan


Chico-Nazario,J.:

ISSUE:Howconflictingstipulationsinacompromiseagreementmustbeinterpreted?

DOCTRINE:Article1374oftheCivilCoderequiresthatthevariousstipulationsofa

contractshalbeinterpretedtogether,atributingtothedoubtfulonesthatsensewhich

mayresultfrom alofthem takenjointly.

Inthiscase,wefinditwaseroronthepartofthetrialcourttohaveinterpretedthe

compromiseagreementinthemannerithasdoneso.

Applyingtherulethatthevariousstipulationsofacontractshouldbetakentogether,

thetrialcourtshouldhaveinterpretedparagraph10,inrelationtoparagraphs11and12.

Ifweweretofolowtheinterpretationofthetrialcourt,therespondentswouldonlyhave

todefaultinthepaymentoftheirobligationandthecontractwouldberenderednuland

voidtotheirbenefitandadvantageleavingthepetitionerswithoutanyrecourseatal.

78


Thissurelywasnotwhatwasenvisionedwhenthepartiesenteredintothecompromise.

TheCourtitselfwouldnothaveapprovedthesameforbeingcontrarytolaw,morals

andpublicpolicy.Certainly,tosustaintheinterpretationofthetrialcourtwouldbeto

sanctionanabsurdityasitwouldgoagainsttheveryrationaleofenteringintoa

CompromiseAgreement,i.e.,toputanendtolitigation. Ifweweretofolow the

argumentofthetrialcourttoitslogicalconclusion,thenitwouldmeanthattheparties

wouldhavetogobacktosquareoneandre-litigatewhattheyhadalreadyputtorest

whentheyenteredintothesubjectCompromiseAgreement

VicenteGov.PuraKalaw,Inc.

G.R.No.131408.July31,2006

Sandoval-Gutierez,J.

ISSUE:Howshouldagreementsinacontractbeinterpreted?

DOCTRINE: Article1370oftheCivilCodegovernstheinterpretationofthetermsof

agreementinawritencontract.Simplyput,theliteralmeaningofthestipulationsshal

controltheintentionoftheparties,to bedecipherednotfrom theunilateralpost

factoassertionsofoneoftheparties,butfrom thelanguageusedinthecontract.The

languageistobeunderstoodliteraly,justasitsoappearsinthecontract.

Sps.Alvarov.Sps.Returban

G.R.No.166183.January20,2006

Ynares-Santiago,J.:

ISSUE:Isthenomenclatureusedbythepartiesdecisiveintheinterpretationofa

contract?

DOCTRINE:No.The nomenclature used bythe contracting partiesto describe a

contractdoesnotdetermineitsnature.Thedecisivefactoristheintentionoftheparties

tothecontract–asshownbytheirconduct,words,actionsanddeeds–priorto,during

andafterexecutingtheagreement.

AyalaInc.v.RayBurtonCorp

GRNo.163075.January23,2006.

Sandoval-Gutierez,J.:

ISSUE:Isthenamegivenbythepartiestoacontractconclusive?

DOCTRINE:No.Therealnatureofacontractmaybedeterminedfrom theexpress

termsofthewritenagreementandfrom thecontemporaneousandsubsequentactsof

thecontractingparties.Intheconstructionorinterpretationofaninstrument,the

intentionofthepartiesisprimordialandistobepursued.Ifthetermsofthecontract

areclearandleavenodoubtupontheintentionofthecontractingparties,theliteral

meaningofitsstipulationsshalcontrol.Ifthewordsappeartobecontrarytothe

evidentintention ofthe parties,the latershalprevailoverthe former.The

denominationortitlegivenbythepartiesintheircontractisnotconclusiveofthenature

ofitscontents.

SanDiegov.Evangelista

G.R.No.163680.January24,2006

CarpioMorales,J.

ISSUE:Whatistheefectifthetermsofthecontractareclear?

DOCTRINE:ParagraphNo.1ofthecontractrelieduponbypetitionerisclearlyworded.

79


Itprovidesthat“anagriculturalleaseholdrelationiscreatedonafarm lotwhichisa

portionofaparcelofland”coveredbyatransfercertificateoftitleconsistingofthree

hectares,clearlyreferingtorespondent’sfather’sTCTNo.98.728(M)containingthree

hectares.Art.1370oftheNew CivilCodewhichprovidesthatifthetermsofthe

contractareclearandleavenodoubtupontheintentionofthecontractingparties,the

literalmeaningofitsstipulationsshalcontrol.

LaureanoT.Angelesv.PhilippineNationalRailways(PNR)AndRodolfoFlores

G.R.No.150128.August31,2006

Garcia,J.:

ISSUE:Whatistheprobativevalueoftheactsofacontractingpartyifthereisdoubtas

tothelanguageusedinthecontractorastotheintentionofsuchpartyinenteringinto

thesaidcontract?

DOCTRINE:Article1374oftheCivilCodeprovidesthatthevariousstipulationsofa

contractshalbereadandinterpretedtogether,atributingtothedoubtfulonesthat

sensewhichmayresultfrom alofthem takenjointly.Infine,therealintentionofthe

partiesisprimarilytobedeterminedfrom thelanguageusedandgatheredfrom the

wholeinstrument.

Article1371oftheCivilCodeprovidesthattojudgetheintentionofthecontracting

parties,theircontemporaneousandsubsequentactsshalbeprincipalyconsidered.In

otherwords,incaseofdoubt,resortmaybemadetothesituation,suroundings,and

relationsoftheparties.

ElenitaIshidaandContinentJapanCo.,Inc.v.AntusadeMesa-Magno,FirmodeMesa

et.al.

G.R.No.136260.July28,2006

Garcia,J.:

ISSUE:Isadeclarationofnulityofacontractwarantedwherethepartiesexecutedan

addendum toaDeedofSalewithMortgageexcludingcertainpropertieswithinthearea

oftherealpropertiessubjectofthesale?

DOCTRINE: To waranta declaration ofnulityofthe contract,the doubts or

obscuritiesmustbecastupontheprincipalobjectofthecontract(whichinthiscase

arethreeparcelsofland)insuchawaythatthetrueintentionofthepartiescannotbe

known.(Par.2,Art.1378oftheCivilCode)

Suchconfusionmerelyledtothefailureofthepartiestoexpressinthecontractthetrue

intentionoftheiragreement,theproperremedyofwhichisreformationofthecontact

underChapter4,Title2,BookIV(ObligationsandContracts)oftheCivilCode.

HeirsoftheDeceasedCarmenCruz-Zamorav.MultiwoodInternational,Inc.

G.R.No.146428. January19,2009.

Leonardo-DeCastro,J.:

ISSUE:Whetherclearandexplicittermsincontractswarantcourtinterpretation.

DOCTRINE:No.Whenthetermsoftheagreementareclearandexplicit,suchthatthey

donotjustifyanatempttoreadintothem anyalegedintentionoftheparties,theterms

aretobeunderstoodliteralyjustastheyappearonthefaceofthecontract.Itisonlyin

instanceswhenthelanguageofacontractisambiguousorobscurethatcourtsought

toapplycertainestablishedrulesofconstructioninordertoascertainthesupposed

intentoftheparties.However,theseruleswilnotbeusedtomakeanewcontractfor

80


thepartiesortorewritetheoldone,evenifthecontractisinequitableorharsh.Theyare

appliedbythecourtmerelytoresolvedoubtsandambiguitieswithintheframeworkof

theagreement.

AntipoloPropertiesv.Nuyda

G.R.No.171832;October12,2009

ISSUE:Whethercontemporaneousandsubsequentactsshalbeprincipalyconsidered

inknowingtheintentionofthecontractingparties.

DOCTRINE:Yes.Petitionermoreoverunequivocalyobligateditselftoextendthesaid

benefitstorespondent.Rudimentaryistheprinciplethatacontractisthelawbetween

thecontractingparties.Further,whenthelanguageofthecontractisclearandplainor

readily understandable by any ordinary reader,there is absolutely no room for

interpretationorconstructionandtheliteralmeaningofitsstipulationsshalcontrol.

TheCourtthenfulyagreeswiththeCA’sdeclarationthatthecontract"leavesnoother

recourseforthecourtsthantoenforcethecontractualstipulationstherein,intheexact

manneragreeduponandwriten.

AdriaticoConsortium,Inc.,etal.vs.LandBankofthePhilippines

G.R.No.187838;December23,2009

Velasco,Jr.,J.

ISSUE:Whethertheliteralmeaningofacontract’sstipulationsshalcontroliftheterms

areclearandleavenodoubtupontheintentionofthecontractingparties.

DOCTRINE:Yes.Thecardinalruleintheinterpretationofcontractsisembodiedinthe

firstparagraphofArticle1370oftheCivilCode:“[i]fthetermsofacontractareclear

andleavenodoubtupontheintentionofthecontractingparties,theliteralmeaningof

itsstipulationsshalcontrol.”

Inthecaseatbar,theword“action”shouldbedefinedaccordingtoitsplainand

ordinarymeaning,i.e.,astheprocessofdoingsomething;conductorbehavior;athing

done.Itisnotlimitedtoactionsbeforeacourtorajudicialproceeding.Therefore,the

onlylogicalconclusionthatcanbederivedfrom theuseoftheword“action”inSec.5of

theagreementisthatthepartiesintentionalyuseditinitsplainandordinarysenseand

didnotlimitittomeananyspecificlegalterm.Moreover,acompromiseagreement

compromisesnotonlythoseobjectsdefinitelystatedinit,butalsothose,whichby

necessaryimplication,shouldbedeemedtohavebeenincludedinit.Ergo,theterm

“action”includesthesaleofthereceivablesasanecessaryimplication.Furthermore,

Sec.5ofthePartialCompromiseAgreementspeaksofcooperationbetweentheparties

todeterminethepersonorpersonsultimatelyliable.Itstates,“xxxuntilitisfinaly

adjudgedanddeterminedwhoarethepartiesliablethereto;towardthisend,theparties

hereinagreetocooperatewitheachotherinorderforrespondentLandBankofthe

Philippinestorecoverthesameasagainsttheperson/sliablethereon.”

Inotherwords,thepartiesagreedtocooperateandcolaboratewitheachotherinorder

todeterminethepersonorpersonswhoareultimatelyliable.Byselingthereceivables,

LandBankdidnotcooperatewithpetitioners.

ManilaInternationalAirportAuthorityv.AviaFilipinasInternational,Inc.,

G.R.No.180168;February272012

ISSUE:Whetherthestipulationsofthecontract,incaseofdoubt,shouldbereadinits

entirety?

81


DOCTRINE:Yes.Article1374 oftheCivilCodeclearlyprovidesthat“thevarious

stipulationsofacontractshalbeinterpretedtogether,atributingtothedoubtfulones

thatsensewhichmayresultfrom alofthem takenjointly.”Indeed,inconstruinga

contract,theprovisionsthereofshouldnotbereadinisolation,butinrelationtoeach

otherandintheirentiretysoastorenderthem efective,havinginmindtheintentionof

thepartiesandthepurposetobeachieved. 7 Inotherwords,thestipulationsina

contractandothercontractdocumentsshouldbeinterpretedtogetherwiththeendin

viewofgivingefecttoal.

CHAPTER6.RESCISSIBLECONTRACTS

OliverioLaperalandFilipinasGolf&CountryClub,Inc.v.SolidHomes,Inc.

G.R.No.130913.June21,2005

Garcia,J.:

ISSUE:IsmutualrestitutionunderArticle1385properwhereonepartysuccessfuly

rescindsacontractunderArticle1191?

DOCTRINE:Yes.TherighttorescindunderArticle1191oftheCivilCodecarieswithit

the coresponding obligation forrestitution.Itis notcorectto saythatmutual

restitutionunderArticle1385appliesonlyiftherescissionismadeundertheinstances

enumeratedinArticle1381.Mutualrestitutionisrequiredincasesinvolvingrescission

underArticle1191.Rescissioncreatestheobligationtoreturntheobjectofthecontract.

Itissorequiredtobringbackthepartiestotheiroriginalsituationpriortotheinception

ofthecontract.

C-JYulo&Sons,Inc.v.RomanCatholicBishopofSanPablo,Inc.

G.R.No.133705.March31,2005

Garcia,J.:

ISSUE:Whatshouldbethenatureofthebreachofcontractbeforearescissionmaybe

alowed?

DOCTRINE:Theviolationsoftheconditionsofthedonationcommitedbythedonee

weremerelycasualbreachesoftheconditionsofthedonationanddidnotdetractfrom

thepurposebywhichthedonationwasmade,i.e.,fortheestablishmentofahomefor

theagedandtheinfirm.Inorderforacontractwhichimposesareciprocalobligation,

whichistheonerousdonationinthiscasewhereinthedonorisobligatedtodonatea

41,117squaremeterpropertyinCanlubang,Calamba,Lagunaonwhichpropertythe

doneeisobligatedtoestablishahomefortheagedandtheinfirm (ExhibitC),maybe

rescindedperArticle1191oftheNewCivilCode,thebreachoftheconditionsthereof

mustbesubstantialastodefeatthepurposeforwhichthecontractwasperfectedThe

righttorescindthecontractfornon-performanceofoneofitsstipulationsisnot

absolute.

Thegeneralruleisthatrescissionofacontractwilnotbepermitedforaslightor

casualbreach,butonlyforsuchsubstantialandfundamentalbreachaswoulddefeat

theveryobjectofthepartiesinmakingtheagreement.Thequestionofwhethera

breachofacontractissubstantialdependsupontheatendantcircumstances.

SpousesFelipeandLeticiaCannuv.SpousesGilAndFernandinaGalangandNational

HomeMortgageFinanceCorporation

G.R.No.139523.May26,2005

82


Chico-Nazario,J.:

ISSUE:Doesfailuretopaythebalanceofthepurchasepriceconstituteasubstantial

breachoftheobligation?

DOCTRINE:Yes.Setledistherulethatrescissionor,moreaccurately,resolution,ofa

partytoanobligationunderArticle1191ispredicatedonabreachoffaithbytheother

partythatviolatesthereciprocitybetweenthem.Rescissionwilnotbepermitedfora

slightorcasualbreachofthecontract.Rescissionmaybehadonlyforsuchbreaches

thataresubstantialandfundamentalastodefeattheobjectofthepartiesinmakingthe

agreement.Thequestionofwhetherabreachofcontractissubstantialdependsupon

theatendingcircumstancesandnotmerelyonthepercentageoftheamountnotpaid.

BienvenidoM.CasinoJr.v.CourtofAppeals


Garcia,J.:

ISSUE:Mayapartywhodeemsthecontractviolatedconsideritresolvedorrescinded,

andactaccordingly,withoutpreviouscourtaction?

HELD:Yesbutheproceedsathisownrisk.Itisonlythefinaljudgmentofthe

corespondingcourtthatwilconclusivelyandfinalysetlewhethertheactiontaken

wasorwasnotcorectin law.Butthelaw definitelydoesnotrequirethatthe

contractingpartywhobelievesitselfinjuredmustfirstfilesuitandwaitforajudgment

beforetakingextrajudicialstepstoprotectitsinterest.Otherwise,thepartyinjuredby

theother’sbreachwilhavetopassivelysitandwatchitsdamagesaccumulateduring

thependencyofthesuituntilthefinaljudgmentofrescissionisrenderedwhenthelaw

itselfrequiresthatheshouldexerciseduediligencetominimizeitsowndamages.

PryceCorporation(FormerlyPrycePropertiesCorporation),v.PhilippineAmusement

AndGamingCorporation

G.R.No.157480.May6,2005

Panganiban,J.:

ISSUE:Isthereadiferencebetweentheterms“termination”and“rescission”?

DOCTRINE:Yes.Theterm “rescission”isfoundin1)Article1191oftheCivilCode,the

generalprovision on rescission ofreciprocalobligations;2)Article 1659,which

authorizesrescissionasanalternativeremedy,insofarastherightsandobligationsof

thelessorandthelesseeincontractsofleaseareconcerned;and3)Article1380with

regardtotherescissionofcontracts.

Thereisadistinctioninlaw betweencancelationofacontractanditsrescission.To

rescindistodeclareacontractvoidinitsinceptionandtoputanendtoitasthoughit

neverwere.Itisnotmerelytoterminateitandreleasepartiesfrom furtherobligations

toeachotherbuttoabrogateitfrom thebeginningandrestorethepartiestorelative

positionswhichtheywouldhaveoccupiedhadnocontracteverbeenmade.

Rescissionhaslikewisebeendefinedasthe“unmakingofacontract,oritsundoing

from thebeginning,andnotmerelyitstermination.”Rescissionmaybeefectedbyboth

partiesbymutualagreement;orunilateralybyoneofthem declaringarescissionof

contractwithouttheconsentoftheother,ifalegalysuficientgroundexistsorifa

decree of rescission is applied for before the courts.On the other

hand,terminationrefers to an “end in time orexistence;a close,cessation or

conclusion.”Withrespecttoaleaseorcontract,itmeansanending,usualybeforethe

endoftheanticipatedterm ofsuchleaseorcontract,thatmaybeefectedbymutual

83


agreementorbyonepartyexercisingoneofitsremediesasaconsequenceofthe

defaultoftheother.

Thus,mutualrestitutionisrequiredinarescission(orresolution),inordertobringback

thepartiestotheiroriginalsituationpriortotheinceptionofthecontract.

Incontrast,thepartiesinacaseofterminationarenotrestoredtotheiroriginal

situation;neitheristhecontracttreatedasifitneverexisted.Priortoitstermination,

thepartiesareobliged to complywiththeircontractualobligations.Onlyafterthe

contracthasbeencanceledwiltheybereleasedfrom theirobligations.

CoastalPacificTradingInc.,v.SouthernRolingMils,Co.,Inc.etal.

G.R.No.118692.July28,2006

Panganiban,CJ:

ISSUE:Whetherrespondentconsortium banksdisposedofVISCO’sassetsinfraudof

thecreditors?

DOCTRINE:Yes.Directoroweloyaltyandfidelitytothecorporationtheyserveandtoits

creditors.Whenthesedirectorssitontheboardasrepresentativesofshareholderswho

arealsomajorcreditors,theycannotbealowedtousetheiroficestosecureundue

advantageforthoseshareholders,infraudofothercreditorswhodonothavesimilar

representationintheboardofdirectors.

PanPacificIndustrialSalesCo.,v.CourtofAppeals


Tinga,J:

ISSUE:Whetherrescissioncanbeavailedofwhenonepartydeniestheexistenceofa

contract.

DOCTRINE:Anon-existentcontractneednotbecanceled.Inaskingfor"rescission,"

underArticle1191oftheCivilCodeprovidesthatthe"powertorescind,"realymeansto

resolveorcancel,isimpliedinreciprocalobligations"incaseoneoftheobligorsshould

notcomplywithwhatisincumbentuponhim."Whenapartyasksfortheresolutionor

cancelationofacontractitisimpliedthatherecognizesitsexistence.

LaurencioRamel,et.al.v.DanielAquinoandGuadaluperAbalahin

G.R.No.133208.July31,2006

Puno,J.:

ISSUE:Whenapartyfailstopaythemortgageobligation,istheotherpartyentitledtoa

rescissionofthecontract?

DOCTRINE: Violationofanagreementgivesentitlestheotherpartytorescindthe

contractunderArt.1191oftheCivilCode.Non-paymentofthemortgageobligation

assumedbypetitionersinthiscaseconstitutesubstantial,notmerelycasualandslight

breach,thatentitlestherespondentstorescindthecontract.

UnionBankofthePhilippinesv.Sps.Ong

G.R.No.152347.June21,2006

Garcia,J.:

84


ISSUE:Doesmerefactofinjurytothecreditormeanthatacontractisrescissiblefor

havingbeenenteredintotodefraudthecreditor?

DOCTRINE:No.Contractsinfraudofcreditorsarethoseexecutedwiththeintentionto

prejudicetherightsofcreditors.Theyshouldnotbeconfusedwiththoseenteredinto

withoutsuchmal-intent,evenif,asadirectconsequencethereof,thecreditormay

sufersomedamage.Indeterminingwhetheracertainconveyingcontractisfraudulent,

whatcomestomindfirstisthequestionofwhethertheconveyancewasabona

fidetransactionoratrickandcontrivancetodefeatcreditors.Tocreditorsseeking

contractrescissiononthegroundoffraudulentconveyanceresttheonusofprovingby

competentevidencetheexistenceofsuchfraudulentintentonthepartofthedebtor,

albeittheymayfalbackonthedisputablepresumptions,ifproper,establishedunder

Article1387oftheCode.

Theexistenceoffraudortheintenttodefraudcreditorscannotplausiblybepresumed

from thefactthatthepricepaidforapieceofrealestateisperceivedtobeslightly

lower,ifthatrealybethecase,thanitsmarketvalue.Tobesure,itislogical,even

expected,forcontractingminds,eachhavinganinteresttoprotect,tonegotiateonthe

priceandotherconditionsbeforeclosingasaleofavaluablepieceofland.The

negotiatingareascouldcovervariousitems.Thepurchaseprice,whileundeniablyan

importantconsideration,isdoubtlessonlyoneofthem.

Itmaybestressedthat,whenthevalidityofsalescontractisinissue,twoveritable

presumptionsarerelevant:first,thattherewassuficientconsiderationofthecontract;

and,second,thatitwastheresultofafairandregularprivatetransaction.Ifshownto

hold,thesepresumptionsinferprimafaciethetransaction'svalidity,exceptthatitmust

yieldtotheevidenceadducedwhichthepartydisputingsuchpresumptivevalidityhas

theburdenofovercoming.

Parentheticaly,the rescissoryaction to setaside contractsin fraud ofcreditors

isaccionpauliana,essentialyasubsidiaryremedyaccordedunderArticle1383ofthe

CivilCodewhichthepartysuferingdamagecanavailofonlywhenhehasnoother

legalmeanstoobtainreparationforthesame.Innetefect,theprovisionappliesonly

whenthecreditorcannotrecoverinanyothermannerwhatisduehim.

Foracontracttoberescindedforbeinginfraudofcreditors,bothcontractingparties

mustbeshowntohaveactedmaliciouslysoastoprejudicethecreditorswhowere

preventedfrom colectingtheirclaims.

PhilippineLeisureandRetirementAuthorityv.CourtofAppeals

G.R.No.156303,541SCRA85

ISSUE:Mayapartybealowedtounilateralyrescindacontractabsentanyprovisionin

thecontractprovidingforarighttorescind?

DOCTRINE:Thepowertorescindobligationsisimpliedinreciprocalones,incaseone

oftheobligorsshouldnotcomplywithwhatisincumbentuponhim.

The injured partymaychoose between the fulfilmentand the rescission ofthe

obligation,withthepaymentofdamagesineithercase.Hemayalsoseekrescission,

evenafterhehaschosenfulfilment,ifthelatershouldbecomeimpossible.

Thecourtshaldecreetherescissionclaimed,unlesstherebejustcauseauthorizingthe

fixingofaperiod.

85


Therefore,evenifaprovisionprovidingforarighttorescindisnotinagreement,aparty

maystilrescindacontractshouldoneobligorfailtocomplywithitsobligations.

UniwideHoldings,Inc.v.JandecsTransportationCo.,Inc.

G.R.No.168522,541SCRA158

ISSUE:Doesmerefailureofapartyinareciprocalobligationtodeliverhisendofthe

contractwaranttheotherpartytorescindthecontractevenifthelaterhasalready

deliveredhispartofsaidobligation?

DOCTRINE:Therightofrescissionisimpliedineveryreciprocalobligationwhereone

partyfailstoperform whatisincumbentuponhim whiletheotheriswilingandreadyto

comply.Certainly,petitioner'sfailuretodelivertheunitsonthecommencementdateof

theleaseonOctober1,1997gaverespondenttherighttorescindthecontractafterthe

laterhadalreadypaidthecontractpriceinful.

Furthermore,respondent'srighttorescindthecontractcannotbepreventedbythefact

thatpetitionerhadtheoptiontosubstitutethestals.Evenifpetitionerhadthatoption,it

didnot,however,meanthatitcouldinsistonthecontinuanceofthecontractbyforcing

respondenttoacceptthesubstitution.Neitherdiditmeanthatitspreviousdefaulthad

beenobliteratedcompletelybytheexerciseofthatoption.

Bonrostrov.Luna

G.R.No.172346,702SCRA1

ISSUE:WhetherthefailureofspousesBonrostrotopaytheinstalmentsofP300,000.00

onApril30,1993andP330,000.00onJuly31,1993isasubstantialbreachoftheir

obligationunderthecontractastowaranttherescissionofthesame.

DOCTRINE:Thedefendants’delayinthepaymentofthetwoinstalmentsisnotso

substantialastowarantrescissionofcontract.Although,thedefendantfailedtopay

thetwoinstalmentsinduetime,shewasabletocommunicatewiththeplaintifs

throughletersrequestingforanextensionoftwomonthswithinwhichtopaythe

instalments.Infact,onNovember24,1993defendantinformedAty.ArleneCarbon

thatshewasreadytopaytheinstalmentsandthemoneyisreadyforpick-up.However,

plaintifdidnotbothertogetorpick-upthemoneywithoutanyvalidreason.Itwouldbe

veryprejudicialonthepartofthedefendantifthecontractto selberescinded

considering thatshe made a downpaymentofP200,000.00 and made partial

amortizationtotheBlissDevelopmentCorporation.Infact,thedefendanttestifiedthat

sheiswilingandreadytopaythebalanceincludingtheinterestonNovember24,1993.

TheCourtisoftheopinionthatthedelayinthepaymentofthebalanceofthepurchase

priceofthehouseandlotisnotsosubstantialastowaranttherescissionofthe

contracttosel.Thequestionofwhetherabreachofcontractissubstantialdepends

upontheatendantcircumstance.

ArmandO.Raquel-SantosandAnnalissaMalariv.CourtofAppealsandFinvest

SecuritiesCo.,Inc.

G.R.No.174986July7,2009

Nachura,J.:

ISSUE:Whetherrescissionofacontractgivesrisetomutualrestitution.

DOCTRINE:Yes.Rescissioncreatestheobligationtoreturntheobjectofthecontract.

Torescindistodeclareacontractvoidatitsinceptionandtoputanendtoitasthough

86


itneverwas.Rescissiondoesnotmerelyterminatethecontractandreleasetheparties

from furtherobligationstoeachother,butabrogatesitfrom thebeginningandrestores

thepartiestotheirrelativepositionsasifnocontracthasbeenmade.

HeirsofSofiaQuirongv.DevelopmentBankofthePhilippines


Abad,J.

ISSUE:Whethertheactiontoclaim rescissionmustbecommencedwithinfouryears.

DOCTRINE:Yes.Thenextquestionthatneedstoberesolvedistheapplicableperiodof

prescription.TheDBPclaimsthatitshouldbefouryearsasprovidedunderArticle1389

oftheCivilCode. 16 Article1389providesthat"theactiontoclaim rescissionmustbe

commencedwithinfouryears."TheQuirongheirs,ontheotherhand,claim thatit

shouldbe10yearsasprovidedunderArticle1144whichstatesthatactions"upona

writencontract"mustbebrought"within10yearsfrom thedatetherightofaction

accrues."

Now,wastheactionoftheQuirongheirs"forrescission"or"uponawritencontract"?

Thereisnoquestionthattheiractionwasforrescission,sincetheircomplaintinCivil

CaseCV-98-02399-DaskedfortherescissionofthecontractofsalebetweenSofia

Quirong,theirpredecessor,and the DBP and the reimbursementofthe price of

P78,000.00thatSofiaQuirongpaidthebankplusdamages.Theprescriptiveperiodfor

rescissionisfouryears.

Here,the Quirong heirsaleged in theircomplaintthattheywere entitled to the

rescissionofthecontractofsaleofthelotbetweentheDBPandSofiaQuirongbecause

thedecisioninCivilCaseD-7159deprivedherheirsofnearlythewholeofthatlot.But

whatwasthestatusofthatcontractatthetimeofthefilingoftheactionforrescission?

Apparently,thatcontractofsalehadalreadybeenfulyperformedwhenSofiaQuirong

paidthefulpriceforthelotandwhen,inexchange,theDBPexecutedthedeedof

absolutesaleinherfavor.Therewasaturnoverofcontrolofthepropertyfrom DBPto

SofiaQuirongsincesheassumedundertheircontract,"theejectmentofsquaters

and/oroccupants"onthelot,atherownexpense.

“G”Holdings,Inc.,v.NationalMinesandAliedWorkersUnionLocal103(NAMAWU)

G.R.No.160236;October16,2009

Nachura,J.:

ISSUE:Whetherthereispresumptionoffraudinaninvoluntaryalienation

DOCTRINE:No.WealsocannotagreethatthepresumptionoffraudinArticle1387of

theCivilCoderelativetopropertyconveyances,whentherewasalreadyajudgment

renderedorawritofatachmentissued,authorizespiercingtheveilofcorporate

identityinthiscase.WefindthatArticle1387findslessapplicationtoaninvoluntary

alienationsuchastheforeclosureofmortgagemadebeforeanyfinaljudgmentofa

court.Wethusholdthatwhenthealienationisinvoluntary,andtheforeclosureisnot

fraudulentbecausethemortgagedeedhasbeenpreviouslyexecutedinaccordance

withformalitiesoflaw,andtheforeclosureisresortedtoinordertoliquidateabona

fidedebt,itisnotthealienationbyoneroustitlecontemplatedinArticle1387oftheCivil

Codewhereinfraudispresumed.

CHAPTER7.VOIDABLECONTRACTS

87


JorgeGonzalesv.ClimaxMiningLtd.


Tinga,J.:

ISSUE:Whodeterminesthevalidityofcontracts?

DOCTRINE:Thequestionifwhetheracontractisvoidorvoidablecontractsisajudicial

question.Itmay,insomeinstances,involvequestionsoffactespecialywithregardto

thedeterminationofthecircumstancesoftheexecutionofthecontracts. Butthe

resolutionofthevalidityorvoidnessofthecontractsremainsalegalorjudicialquestion

asitrequirestheexerciseofjudicialfunction.Itrequirestheascertainmentofwhat

lawsareapplicabletothedispute,theinterpretationandapplicationofthoselaws,and

therenderingofajudgmentbasedthereon.Itisessentialyjudicial.

FelicitasAsycongandTeresaPolanv.CourtofAppealsandMolerLendingInvestor

GRNo.153758.February22,2006

Carpio,J.:

ISSUE:Whatistheefectofavoidablecontractwheretheconsentisvitiatedby

intimidation?

DOCTRINE:Contractswheretheconsentisvitiatedbymistake,violence,intimidation,

undueinfluenceorfraudarevoidable.Thesecontractsarebinding,unlesstheyare

annuledbyaproperactionincourt.Theyaresusceptibleofratification.

DevelopmentBankofthePhilippinesandPrivatizationandManagementOficev.CA

G.R.No.138703.June30,2006

Azcuna,J.:

ISSUE:Whatis“undueinfluence”?Whenmayitbeconsideredtoexist?Canthefactthat

apartyhadno“choice”buttosignacontractmaybeinterpretedthattheotherparty

exertedundueinfluence.

DOCTRINE:Thereisundueinfluencewhenapersontakesimproperadvantageofhis

poweroverthewilofanother,deprivingthelaterfreasonablefreedom ofchoice.The

folowingcircumstancesshalbeconsidered:theconfidential,family,spiritualandother

relationsbetweenthepartiesorthefactthatthepersonalegedtohavebeenunduly

influencedwassuferingfrom mentalweakness,orwasignorantorinfinancialdistress.

Forundueinfluencetobepresent,theinfluenceexertedmusthavesooverpoweredor

subjugatedthemindofacontractingpartyastodestroythelater’sfreeagency,making

suchpartyexpressthewilofanotherratherthanitsown.Thealegedlingeringfinancial

woesofadebtorpersecannotbeequatedwiththepresenceofundueinfluence.

Yes.Thelawgrantsanaggrievedpartytherighttoobtaintheannulmentofacontract

onaccountoffactorssuchasmistake,violence,intimidation,undueinfluenceandfraud

whichvitiateconsent.However,thefactthatrespondentswere“forced”tosignthe

promissorynotesandmortgagecontractsinordertohaverespondents’originalloans

restructuredandtopreventtheforeclosureoftheirpropertiesdoesnotamountto

vitiatedconsent.Thefinancialconditionofrespondentsmayhavemotivatedthem to

contractwithDBP,butundueinfluencecannotbeatributedtoDBPsimplybecausethe

laterhadlentmoney.Whilerespondentswerepurportedlyfinancialydistressed,there

isnoclearshowingthatthoseactingontheirbehalfhadbeendeprivedoftheirfree

agencywhentheyexecutedthepromissorynotesrepresentingrespondents’refinanced

obligationstoDBP.

88


BarcelizaP.Capistranovs.DarylLimcuandoandFeS.Sumiran

G.R.No.152413February13,2009

Leonardo-DeCastro,J.

ISSUE:Whetherthepersonwhocausedfraudcanannulthecontract.

DOCTRINE:No.Wesimplycannotupholdpetitioner’scontentionthatthedeedofsale

sheexecutedinfavorofrespondentsshouldbedeclarednulandvoidonthebasisof

thepreviousdeedofsalewithrightofrepurchasepetitionerexecutedinfavorthe

spousesZuasolaandSubida.Ostensibly,whenpetitionersoldthesubjectpropertyto

hereinrespondents,shenolongerhadanyrighttodosoforhavingpreviouslysoldthe

samepropertytoothervendees.However,itiselementarythathewhocomestocourt

mustdosowithcleanhands.Beingthevendorinbothsales,petitionerknewperfectly

welthatwhensheoferedthesubjectpropertyforsaletorespondentsshehadalready

previouslysold itto thespousesZuasolaand Subida.Itisundeniablethen that

petitionerfraudulentlyobtainedtheconsentofrespondentsintheexecutionofthe

assaileddeedofsale.Sheevenadmitsherconvictionofthecrimeofestafaforthe

deceptionsheperpetratedonrespondentsbyvirtueofthedoublesale.

Certainly,petitioner’sactionforannulmentofthesubjectdeedshouldbedismissed

basedonArticle1397oftheCivilCodewhichprovidesthatthepersonwhoemployed

fraudcannotbasehisactionfortheannulmentofcontractsuponsuchflaw ofthe

contract,thus:

Art.1397.Theactionfortheannulmentofcontractsmaybeinstitutedby

alwhoaretherebyobligedprincipalyorsubsidiarily.However,persons

whoarecapablecannotalegetheincapacityofthosewithwhom they

contracted;norcanthosewhoexertedintimidation,violence,orundue

influence,oremployedfraud,orcausedmistakebasetheiractionupon

theseflawsofthecontract.

Onewhohascausedthegroundtoannulacontractsuchasfraudisprecludedfrom

seekingtheannulmentofthesaidcontract.

Hernania“Lani”Lopezvs.GloriaUmale-Cosme

G.R.No.171891. February24,2009.

Puno,C.J.:

ISSUE:Whethertheoralagreementhasforceandefectoflawbetweenthepartiesas

inthecaseofacontract.

DOCTRINE:Itiswel-setledthatwhereacontractofleaseisverbalandonamonthly

basis,theleaseisonewithadefiniteperiodwhichexpiresafterthelastdayofanygiven

thirty-dayperiod.IntherecentcaseofWeev.DeCastro,562SCRA695(2008),where

theleasecontractbetweenthepartiesdidnotstipulateafixedperiod.

FirstPhilippineHoldingsCorporationvs.TransMiddleEast(Phils.)Equities,Inc.

G.R.No.179505;December4,2009

ISSUE:Whethercontractswhereconsentisgiventhroughfraudarevoid.

DOCTRINE:No.Thesecircumstancessuroundingthequestionedtransactionfitinwith

whatArticle1390oftheCivilCodecontemplatesasvoidablecontracts,viz:Art.1390.

Thefolowingcontractsarevoidableorannulable,eventhoughtheremayhavebeenno

damagetothecontractingparties:xxxx(2)Thosewheretheconsentisvitiatedby

mistake,violence,intimidation,undueinfluence,orfraud.Thus,contractswhereconsent

89


isgiventhroughfraud,arevoidableorannulable.Thesearenotvoidabinitiosince

voidableorannulablecontractsareexistent,valid,andbinding,althoughtheycanbe

annuledbecauseofwantofcapacityorthevitiatedconsentofoneoftheparties.

However,beforesuchannulment,theyareconsideredefectiveandobligatorybetween

parties.

ECERealtyAndDevelopmentInc.v.RachelG.Mandap


ISSUE:Whetherthefalserepresentationsmadewereratifiedbythesignatureofthe

respondent.

DOCTRINE:Yes.Respondent'sactofafixinghersignaturetothesaidContract,after

havingacquiredknowledgeoftheproperty'sactuallocation,canbeconstruedasan

impliedratificationthereof.RatificationofavoidablecontractunderArticle1393ofthe

CivilCodemaybeefectedexpresslyortacitly.Itisunderstoodthatthereisatacit

ratificationif,withknowledgeofthereasonwhichrendersthecontractvoidableand

suchreasonhavingceased,thepersonwhohasarighttoinvokeitshouldexecutean

actwhichnecessarilyimpliesanintentiontowaivehisright.

CHAPTER8.UNENFORCEABLECONTRACTS

SpousesMarioandElizabethTorcuatorv.SpousesRemigioandGloriaBernabeand

SpousesDiosdadoandLourdesSalvador

G.R.No.134219.June08,2005

Tinga,J.:

ISSUE:WhatisthepurposeoftheStatuteofFrauds?

Doctrine:Theterm "StatuteofFrauds"isdescriptiveofstatuteswhichrequirecertain

classesofcontracts,suchasagreementsforthesaleofrealproperty,tobeinwriting.It

doesnotdeprivethepartiestherighttocontractwithrespecttothematerstherein

involved,butmerelyregulatestheformalitiesofthecontractnecessarytorenderit

enforceable.The purpose ofthe statute is to preventfraud and perjuryin the

enforcementofobligationsdependingfortheirevidenceontheunassistedmemoryof

witnessesbyrequiringcertainenumeratedcontractsandtransactionstobeevidenced

byawritingsignedbythepartytobecharged.Thewritennoteormemorandum,as

contemplatedbyArticle1403oftheCivilCode,shouldembodytheessentialsofthe

contract.

BancoFilipinoSavingsv.Diaz

G.R.No.153134.June27,2006

Calejo,Sr.,J.:

ISSUE:Cantheobligor(s)withdrawtheamountpreviouslyconsignedwiththeregional

trialcourtafterahighercourt(courtofappeals)hasdeclaredtheconsignmentas

invalid?

90


DOCTRINE:Yes.Beforetheconsignationhasbeenacceptedbythecreditororjudicialy

declared asproperlymade,thedebtorisstiltheownerofthething oramount

deposited,and,therefore,theotherpartiesliablefortheobligationhavenorightto

opposehiswithdrawalofsuchthingoramount.Thedebtormerelyuseshisright,and

unlessthelaw expresslylimitsthatuseofhisright,itcannotbepreventedbythe

objectionsofanyone.Ourlawgrantstothedebtortherighttowithdraw,withoutany

limitation,andweshouldnotreadanon-existinglimitationintothelaw.Althoughthe

otherpartiesliablefortheobligationwouldhavebeenbenefitediftheconsignationhad

beenalowedtobecomeefective,beforethatmomenttheyhavenotacquiredsuchan

interestaswouldgivethem arighttoopposetheexerciseoftherightofthedebtorto

withdrawtheconsignation.

Thus,underArticle1260oftheCivilCode,thedebtormaywithdraw,asamaterofright,

thethingoramountdepositedonconsignationinthefolowinginstances:

(1)Beforethecreditorhasacceptedtheconsignation;or

(2)Beforeajudicialdeclarationthattheconsignationhasbeenproperlymade.

LinaPeñalbervs.QuirinoRamosetal.

G.R.No.178645. January30,2009.

Chico-NazarioJ.:

ISSUE:Whetherstatuteoffraudsdeprivethepartiesoftherighttocontractwithrespect

tothematersthereininvolved.

DOCTRINE:WesubscribetotherulingoftheRTCinitsOrderdated17July2000that

saidspousesweredeemedtohavewaivedtheirobjectiontotheparolevidenceasthey

failedtotimelyobjectwhenpetitionertestifiedonthesaidverbalagreement.The

requirementinArticle1443thattheexpresstrustconcerninganimmovableoran

interestthereinbeinwritingismerelyforpurposesofproof,notforthevalidityofthe

trustagreement.Therefore,thesaidarticleisinthenatureofastatuteoffrauds.The

term statuteoffraudsisdescriptiveofstatuteswhichrequirecertainclassesof

contractstobeinwriting.Thestatutedoesnotdeprivethepartiesoftherightto

contractwith respectto the maters therein involved,butmerely regulates the

formalitiesofthecontractnecessaryto renderitenforceable.Theefectofnoncomplianceissimplythatnoactioncanbeprovedunlesstherequirementiscomplied

with.Oralevidenceofthecontractwilbeexcludedupontimelyobjection.Butifthe

partiestotheaction,duringthetrial,makenoobjectiontotheadmissibilityoftheoral

evidencetosupportthecontractcoveredbythestatute,andtherebypermitsuch

contracttobeprovedoraly,itwilbejustasbindinguponthepartiesasifithadbeen

reducedtowriting.

Orduña,etal.v.Fuentebela,etal.

G.R.No.176841June29,2010

Velasco,Jr.,J.

ISSUE:WhethertheStatuteofFraudsisinapplicabletopartialyexecutedcontracts.

DOCTRINE:Yes.StatuteofFraudsexpressedinArticle1403,par.(2),oftheCivilCode

appliesonlytoexecutorycontracts,i.e.,thosewherenoperformancehasyetbeen

made.Statedabitdiferently,thelegalconsequenceofnon-compliancewiththeStatute

doesnotcomeinto playwherethecontractin question iscompleted,executed,

orpartialyconsummated.TheStatuteofFrauds,incontext,providesthatacontractfor

thesaleofrealpropertyorofaninterestthereinshalbeunenforceableunlessthesale

orsomenoteormemorandum thereofisinwritingandsubscribedbythepartyorhis

agent.However,wheretheverbalcontractofsalehasbeenpartialyexecutedthrough

thepartialpaymentsmadebyonepartydulyreceivedbythevendor,asinthepresent

91


case,thecontractistakenoutofthescopeoftheStatute.

MunicipalityofHagonoy,Bulacanvs.Dumdum,Jr.

G.R.No.168289;March22,2010

Peralta,J.

ISSUE:Whetherthecourtcandeclareareciprocalcontractunenforceableunderthe

StatuteofFraudsifthereisanalegationwhereoneofthepartiesperformedhis

obligation?

DOCTRINE:No,ithasbeenobligee'sconsistentstand,sincetheinceptionoftheinstant

casethatshehasenteredintoacontractwiththeobligors.Asfarassheisconcerned,

she has already performed herpartofthe obligation underthe agreementby

undertakingthedeliveryofthe21motorvehiclescontractedforbytheobligorinthe

nameofpetitionermunicipality.Thisclaim iswelsubstantiated—atleastfortheinitial

purposeofsetingoutavalidcauseofactionagainsttheobligors— bycopiesofthe

bilsofladingatachedtothecomplaint,namingpetitionermunicipalityasconsigneeof

theshipment.Obligorshavenotatanytimeexpresslydeniedthisalegationand,hence,

thesameisbindingonthetrialcourtforthepurposeofrulingonthemotiontodismiss.

Inotherwords,sincethereexistsanindicationbywayofalegationthattherehasbeen

performanceoftheobligationonthepartoftheobligee,thecaseisexcludedfrom the

coverageoftheruleondismissalsbasedonunenforceabilityunderthestatuteoffrauds,

andeitherpartymaythenenforceitsclaimsagainsttheother.

RogelioDantis,v.JulioMaghinang,Jr.

G.R.No.191696.April10,2013

Mendoza,J.:

ISSUE:IstheStatuteofFraudsapplicableintheabsenceofaperfectedcontract?

DOCTRINE:No.TheapplicationoftheStatuteofFraudspresupposestheexistenceofa

perfectedcontract.Intheabsencethereof,thereisnobasisfortheapplicationofthe

StatuteofFrauds.

CHAPTER9.VOIDORINEXISTENTCONTRACTS

Menchavezvs.Teves

G.R.No.153201.January26,2005

Panganiban,J.

ISSUES:

(1)MaypartiestoavoidcontractbedeclaredtobeinparidelictobytheCourt?

(2)Maypartiestoavoidcontractbeentitledtodamages?

DOCTRINE:

(1)Yes.Voidarealcontractsinwhichthecause,objectorpurposeiscontrarytolaw,

publicorderorpublicpolicy.Itisdeemedlegalynonexistentandproducesnolegal

efect.Asageneralrule,courtsleavepartiestosuchacontractastheyare,because

theyareinparidelictoorequalyatfault.Neitherpartyisentitledtolegalprotection.To

thisrule,however,thereareexceptionsthatpermitthereturnofthatwhichmayhave

beengivenunderavoidcontract.OneoftheexceptionsisfoundinArticle1412ofthe

CivilCode.

92


Inthiscase,thedefendantsoughttohaveknownthattheycannotleasewhatdoesnot

belongtothem forasamateroffact,theythemselvesarestilapplyingforaleaseof

thesubjectfishpond(which,underthe1987Constitution,belongstotheState)under

litigation from thegovernment.On theotherhand,Teves,being fulyawarethat

defendantswerenotyettheowners,hadassumedtherisksandundertheprinciple

of“VOLENTINONFITINJURIANEQUESDOLUS”-Hewhovoluntarilyassumesarisk,

does notsuferdamages thereby. As a consequence,when plaintifleased the

fishpondareafrom defendants-whoweremereholdersorpossessorsthereof,hetook

theriskthatitmayturnoutlaterthathisapplicationforleasemaynotbeapproved.“IN

PARIDELICTONONORITORACTIO”(Wherebothareatfault,noonecanfoundaclaim).

(2)No.Article1412oftheCivilCodemerelyalowsinnocentpartiestorecoverwhat

theyhavegivenwithoutanyobligationtocomplywiththeirprestation.Nodamages

mayberecoveredonthebasisofavoidcontract;beingnonexistent,theagreement

producesnojuridicaltiebetweenthepartiesinvolved.Sincethereisnocontract,the

injuredpartymayonlyrecoverthroughothersourcesofobligationssuchasalawora

quasi-contract.

DepartmentofHealth v.C.V.Canchela & Associates,Architects (CVCAA),in

AssociationWithMCSEngineersCo.,andA.O.MansuetoIV–ElectricalEngineering

Services,andLuisAlina,SherifIV,RTC,Manila

G.R.Nos.151373-74.November17,2005

Carpio-Morales,J.:

ISSUE:IstheSoleArbitrator’sDecisionmaynulifiedonthelightthatitdidnotcomply

withrequirementsofthelaw?

DOCTRINE:AninquiryintothefundamentalissueofnulityoftheAgreementsisthen

warantedtodetermineifpetitionerdulyobservedtheconstitutionalprescriptionforthe

prevention and disalowance ofiregular,unnecessary,excessive,extravagant,or

unconscionableexpenditures,orusesofpublicfundsandproperties.

TheAgreements,itbearsnoting,expresslystatedthatpaymentsarisingtherefrom shal

be "subjectto the usualaccounting and auditing rules and regulations.Being

governmentcontracts,theyaregovernedandregulatedbyspeciallaws,failureto

complywithwhichrendersthem void.

TheilegalityofthesubjectAgreementsproceeds,itbearsemphasis,from anexpress

declaration orprohibition by law,notfrom any intrinsic ilegality.As such,the

Agreementsarenotilegalperseandthepartyclaimingthereundermayrecoverwhat

hadbeenpaidordelivered.

TheManilaBankingCorporationv.EdmundoS.SilverioandTheCourtofAppeals,

G.R.No.132887.August11,2005

Chico-Nazario,J.:

ISSUE:Isthecontractvoidifbadgesoffraudandsimulationpermeatethewhole

transaction?

DOCTRINE:Yes.Anabsolutelysimulatedcontract,underArticle1346oftheCivilCode,

is void.Ittakes place when the parties do notintend to be bound atal.The

characteristicofsimulationisthefactthattheapparentcontractisnotrealydesiredor

intendedtoproducelegalefectsorinanywayalterthejuridicalsituationofthe

parties.Thus,whereaperson,inordertoplacehispropertybeyondthereachofhis

creditors,simulatesatransferofittoanother,hedoesnotrealyintendtodivesthimself

ofhistitleandcontroloftheproperty;hence,thedeedoftransferisbutasham.Lacking,

93


therefore,inafictitiousandsimulatedcontractisconsentwhichisessentialtoavalid

andenforceablecontract.

Suchfailureisaclearbadgeofsimulationthatrendersthewholetransactionvoid

pursuanttoArticle1409oftheCivilCode.Whenacontractisvoid,therighttoset-upits

nulityornon-existence isavailable to third personswhose interestsare directly

afectedthereby.

Theremedyofaccionpaulianaisavailablewhenthesubjectmaterisaconveyance,

otherwisevalid¸undertakeninfraudofcreditors.Suchacontractisgovernedbythe

rulesonrescissionwhichprescribe,underArt.1383oftheCivilCode,thatsuchaction

canbeinstitutedonlywhenthepartysuferingdamagehasnootherlegalmeansto

obtainreparationforthesame.

A voidorinexistentcontractisonewhichhasnoforceandefectfrom thevery

beginning,asifithadneverbeenenteredinto;itproducesnoefectwhatsoevereither

againstorinfavorofanyone.Rescissiblecontracts,ontheotherhand,arenotvoidab

initio,and the principle,“quod nulum estnulum producitefectum,”in void and

inexistentcontractsisinapplicable.Untilsetasideinanappropriateaction,rescissible

contractsarerespectedasbeinglegalyvalid,bindingandinforce.

Absolutesimulationimpliesthatthereisnoexistingcontract,norealactexecuted;

whilefraudulentalienationmeansthatthereisatrueandexistingtransferorcontract.

Theformercanbeatackedbyanycreditor,includingonesubsequenttothecontract;

whilethelatercanbeassailedonlybythecreditorsbeforethealienation.Inabsolute

simulation,the insolvencyofthe debtormaking the simulated transferis nota

prerequisitetothenulityofthecontract;whileinfraudulentalienation,theactionto

rescind,oraccionpauliana,requiresthatthecreditorcannotrecoverinanyother

mannerwhatisduehim.Finaly,theactiontodeclareacontractabsolutelysimulated

doesnotprescribe(Articles1409and1410);whiletheaccionpaulianatorescinda

fraudulentalienationprescribesinfouryears(Article1389).

La’ov.RepublicofthePhilippinesandtheGovernmentServiceInsuranceSystem

GRNo.166183.January23,2006

Corona,J.:

ISSUE:IsacontractenteredintoinviolationoftheAnti-GraftandCoruptPracticesact

void?

DOCTRINE:Yes.Art.1409 ofthe CivilCode provides,among others,thatthose

expresslyprohibitedordeclaredvoidbylawareinexistentandvoidfrom thebeginning.

Theforegoingclearlyshowsthatthesecondcontractcausedundueinjurytothe

government,gavepetitionerunwarantedbenefitsandwasgrosslydisadvantageousto

thegovernment.Theactofenteringintothecontractwasacoruptpracticeandwas

thereforeunlawful.ItwasacontractexpresslyprohibitedbyRA3019.Asaresult,itwas

nulandvoidfrom thebeginningunderArt.1409(7)oftheCivilCode.

PotencianoRamirezv.Ma.CeciliaRamirez

G.R.No.165088.March17,2006

Azcuna,J.:

ISSUE:WhatisthediferencebetweenArticle1411andArticle1412withrespecttothe

inparidelictorule?

DOCTRINE:Article1412oftheCivilCodereferstoasituationwherethecauseofthe

contractisunlawfulorforbiddenbutdoesnotconstituteaviolationofthecriminallaws.

UnderArticle1411,itmustbeshownthatthenulityofthecontractproceedsfrom an

94


ilegalcauseorobject,andtheactofexecutingsaidcontractconstitutesacriminal

ofense.Objectandcausearetwoseparateelementsofadonationandtheilegalityof

eitherelementgivesrisetotheapplicationofthedoctrineofparidelicto.Objectisthe

subjectmaterofthedonation,whilecauseistheessentialreasonwhichmovesthe

partiestoenterintothetransaction.

JoaquinVilegasandEmmaM.Vilegasv.RuralBankofTanjayInc.

G.R.No.161407;June5,2009

Nachura,J.

ISSUE:Whetherpartieswhoareinparidelictocanobtainrelieffrom thecourt.

DOCTRINE:Evenassumingbothpartieswereguiltyoftheviolation,itdoesnotalways

folow thatbothparties,being inparidelicto,should beleftwheretheyare.We

recognizedasanexceptionasituationwhencourtsmustinterfereandgrantreliefto

oneofthepartiesbecausepublicpolicyrequirestheirintervention,evenifitwilresultin

abenefitderivedbyaplaintifwhoisinequalguiltwithdefendant.

LandBankofthePhilippinesv.EduardoM.Cacayuran

G.R.No.191667.April17,2013

Perlas-BernabeJ.

ISSUE:Mayapublicplazabethesubjectofaprivateredevelopmentplan?

DOCTRINE:Article1409(1)oftheCivilCodeprovidesthatacontractwhosepurposeis

contrarytolaw,morals,goodcustoms,publicorderorpublicpolicyisconsideredvoid

andassuch,createsnorightsorobligationsoranyjuridicalrelations.Consequently,

given the unlawfulpurpose behind the Subject Loans which is to fund the

commercializationoftheAgooPlazapursuanttotheRedevelopmentPlan,theyare

consideredasultraviresintheprimarysensethus,renderingthem voidandinefect,

non-bindingontheMunicipality.

Queensland-TokyoCommodities,Inc.vs.George

G.R.No.172727;September8,2010

Nachura,J.

ISSUE:Whetherrespondentmayrecoverinavoidcontract.

DOCTRINE:Yes,itissetledthatavoidcontractisequivalenttonothing;itproducesno

civilefect.Itdoesnotcreate,modify,orextinguishajuridicalrelation.Partiestoavoid

agreementcannotexpecttheaidofthelaw;thecourtsleavethem astheyare,because

theyaredeemedinparidelictoorinequalfault.Thisrule,however,isnotabsolute.

Article1412oftheCivilCodeprovidesanexception,andpermitsthereturnofthat

whichmayhavebeengivenunderavoidcontract.Theevidenceonrecordestablished

thatpetitionersindeedpermitedanunlicensedtraderandsalesman,likeMendoza,to

handlerespondent’saccount.Ontheotherhand,therecordisbereftofproofthat

respondenthadknowledgethatthepersonhandlinghisaccountwasnotalicensed

trader.Respondentcan,therefore,recovertheamounthehadgivenunderthecontract.

AnuelO.FuentesandLeticiaL.Fuentesvs.ConradoG.Roca

G.R.No.178902.April21,2010

AbadJ.

ISSUE:Whethertheactionforthedeclarationofnulityofthesaletothespouses

alreadyprescribed.

95


DOCTRINE:NO.UndertheprovisionsoftheCivilCodegoverningcontracts,avoidor

inexistentcontracthasnoforceandefectfrom theverybeginning.Andthisrule

appliestocontractsthataredeclaredvoidbypositiveprovisionoflaw,asinthecaseof

asaleofconjugalpropertywithouttheotherspouse’swritenconsent.Avoidcontract

isequivalenttonothingandisabsolutelywantingincivilefects.Itcannotbevalidated

eitherbyratificationorprescription.But,althoughavoidcontracthasnolegalefects

evenifnoactionistakentosetitaside,whenanyofitstermshavebeenperformed,an

actiontodeclareitsinexistenceisnecessarytoalowrestitutionofwhathasbeengiven

underit.Thisaction,accordingtoArticle1410oftheCivilCodedoesnotprescribe.

DomingoGonzalovs.JohnTarnate,Jr.

G.R.No.160600;January15,2014

Bersamin,J.

ISSUE:Whethertherespondentmayrecovereventhoughbothpartiesareinparidelicto.

DOCTRINE:Yes.AccordingtoArticle1412(1)oftheCivilCode,theguiltypartiestoan

ilegalcontractcannotrecoverfrom oneanotherandarenotentitledtoanafirmative

reliefbecausetheyareinparidelictoorinequalfault.Thedoctrineofinparidelictoisa

universaldoctrinethatholdsthatnoactionarises,inequityoratlaw,from anilegal

contract;nosuitcanbemaintainedforitsspecificperformance,ortorecoverthe

propertyagreedtobesoldordelivered,orthemoneyagreedtobepaid,ordamagesfor

itsviolation;andwherethepartiesareinparidelicto,noafirmativereliefofanykindwil

begiventooneagainsttheother.

Nonetheless,theapplicationofthedoctrineofinparidelictoisnotalwaysrigid.An

acceptedexceptionariseswhenitsapplicationcontraveneswel-establishedpublic

policy.Inthisjurisdiction,publicpolicyhasbeendefinedas"thatprincipleofthelaw

whichholdsthatnosubjectorcitizencanlawfulydothatwhichhasatendencytobe

injurioustothepublicoragainstthepublicgood."

96

OBLIGATIONS-CONTRACTS-CASE-UPDATES-2005to2014

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?