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G.R. No.

116792 March 29, 1996

On September 25, 1985, private respondent Edvin F. Reyes opened
Savings Account No. 3185-0172-56 at petitioner Bank of the Philippine
Islands (BPI) Cubao, Shopping Center Branch. It is a joint "AND/OR"
account with his wife, Sonia S. Reyes.
Private respondent also held a joint "AND/OR" Savings Account No. 31850128-82 with his grandmother, Emeteria M. Fernandez, opened on
February 11, 1986 at the same BPI branch. He regularly deposited in this
account the U.S. Treasury Warrants payable to the order of Emeteria M.
Fernandez as her monthly pension.
Emeteria M. Fernandez died on December 28, 1989 without the
knowledge of the U.S. Treasury Department. She was still sent U.S.
Treasury Warrant No. 21667302 dated January 1, 1990 in the amount of
U.S. $377.00 3 or P10,556.00. On January 4, 1990, private respondent
deposited the said U.S. treasury check of Fernandez in Savings Account
No. 3185-0128-82. The U.S. Veterans Administration Office in Manila
conditionally cleared the check. The check was then sent to the United
States for further clearing.
Two months after or on March 8, 1990, private respondent closed Savings
Account No. 3185-0128-82 and transferred its funds amounting to
P13,112.91 to Savings Account No. 3185-0172-56, the joint account with
his wife.
On January 16, 1991, U.S. Treasury Warrant No. 21667302 was
dishonored as it was discovered that Fernandez died three (3) days
prior to its issuance. The U.S. Department of Treasury requested petitioner
bank for a refund. For the first time petitioner bank came to know of the
death of Fernandez.
On February 19, 1991, private-respondent received a PT&T urgent
telegram from petitioner bank requesting him to contact Manager Grace
S. Romero or Assistant Manager Carmen Bernardo. When he called up the
bank, he was informed that the treasury check was the subject of a claim
by Citibank NA, correspondent of petitioner bank. He assured petitioners
that he would drop by the bank to look into the matter. He also verbally
authorized them to debit from his other joint account the amount stated
in the dishonored U.S. Treasury Warrant. On the same day, petitioner
bank debited the amount of P10,556.00 from private respondent's
Savings Account No. 3185-0172-56.
On February 21, 1991, private respondent with his lawyer Humphrey
Tumaneng visited the petitioner bank and the refund documents were
shown to them. Surprisingly, private respondent demanded from
petitioner bank restitution of the debited amount. He claimed that

because of the debit, he failed to withdraw his money when he needed

them. He then filed a suit for Damages against petitioners before the
Regional Trial Court of Quezon City, Branch 79.
Petitioners contested the complaint and counter claimed, for moral and
exemplary damages. By way of Special and Affirmative Defense, they
averred that private respondent gave them his express verbal
authorization to debit the questioned amount. They claimed that private
respondent later refused to execute a written authority.
In a Decision dated January 20, 1993, the trial court dismissed the
complaint of private respondent for lack of cause of action. Private
respondent appealed to the respondent Court of Appeals. However, the
respondent Court reversed the impugned decision.
ISSUE: Whether or not legal compensation is proper.
Compensation shall take place when two persons, in their own right,
are creditors and debtors of each other. Article 1290 of the Civil Code
provides that "when all the requisites mentioned in Article 1279 are
present,compensation takes effect by operation of law, and extinguishes
both debts to the concurrent amount, even though the creditors and debtors
are not aware of the compensation." Legal compensation operates even
against the will of the interested parties and even without the consent of
them. Since this compensation takes place ipso jure, its effects arise on the
very day on which all its requisites concur. When used as a defense, it
retroacts to the date when its requisites are fulfilled.
Article 1279 states that in order that compensation may be proper, it is
(1) That each one of the obligors be bound principally, and that he be at the
same time a principal creditor of the other;
(2) That both debts consist in a sum of money, or if the things due are
consumable, they be of the same kind, and also of the same quality if the
latter has been stated;
(3) That the two debts be due;
(4) That they be liquidated and demandable;
(5) That over neither of them there be any retention or controversy,
commenced by third persons and communicated in due time to the debtor.
The elements of legal compensation are all present in the case at bar. The
obligors bound principally are at the same time creditors of each other.
Petitioner bank stands as a debtor of the private respondent, a depositor. At
the same time, said bank is the creditor of the private respondent with
respect to the dishonored U.S. Treasury Warrant which the latter illegally
transferred to his joint account. The debts involved consist of a sum of

money. They are due, liquidated, and demandable. They are not claimed by a
third person.
It is true that the joint account of private respondent and his wife was
debited in the case at bar. We hold that the presence of private respondent's
wife does not negate the element of mutuality of parties, i.e., that they must
be creditors and debtors of each other in their own right. The wife of private
respondent is not a party in the case at bar. She never asserted any right to
the debited U.S. Treasury Warrant. Indeed, the right of the petitioner bank to
make the debit is clear and cannot be doubted. To frustrate the application of
legal compensation on the ground that the parties are not all mutually
obligated would result in unjust enrichment on the part of the private
respondent and his wife who herself out of honesty has not objected to the
debit. The rule as to mutuality is strictly applied at law. But not in
equity, where to allow the same would defeat a clear right or permit
irremediable injustice.

Heirs of Luis Bacus vs Court of Appeals, Spouses Faustino Duray and

G.R.No. 127695, 03December2001

On 1984 Luis Bacus leased to Faustino Duray a parcel of agricultural land
with total land area of 3,002 of square meters, in Cebu. The lease was for six
years ending in 1990, the contract contained an option to buy clause. Under
the said option, the lessee had the exclusive and irrevocable right to buy
2,000 square meters 5 years from a year after the effectivity of the contract,
at P200 per square meter. That rate shall be proportionately adjusted
depending on the peso rate against the US dollar, which at the time of the

Close to the expiration of the contract Luis Bacus died on 1989, after Duray
informed the heirs of Bacus that they are willing and ready to purchase the
property under the option to buy clause. The heirs refused to sell, thus Duray
filed a complaint for specific performance against the heirs of Bacus. He
showed that he is ready and able to meet his obligations under the contract
with Bacus. The RTC ruled in favor of the Durays and the CA later affirmed
Can the heirs of Luis Bacus be compelled to sell the portion of the lot under
- Yes, Obligations under an option to buy are reciprocal obligations.
The performance of one obligation is conditioned on the simultaneous
fulfillment of the other obligation. In other words, in an option to buy,
the payment of the purchase price by the creditor is contingent
upon the execution and delivery of the deed of sale by the debtor.
- When the Durays exercised their option to buy the property their obligation
was to advise the Bacus of their decision and readiness to pay the price,
they were not yet obliged to make the payment. Only upon the Bacus actual
execution and delivery of the deed of sale were they required to pay.
- The Durays did not incur in delay when they did not yet deliver the
payment nor make a consignation before the expiration of the contract. In
reciprocal obligations, neither party incurs in delay if the other
party does not comply or is not ready to comply in a proper manner
with what is incumbent upon him. Only from the moment one of the
parties fulfills his obligation, does delay by the other begin.
The petition is DENIED nad the decision of the Court of Appeals is AFFIRMED.




Reciprocal Obligations- Those which arise from the same cause, and in
which each party is a debtor and a creditor of the other, such that the
obligation of one is dependent upon the obligation of the other. They are to

be performed simultaneously such that the performance of one is

conditioned upon the simultaneous fulfillment of the other

COMELEC vs Quijano

Nature of the Case:Petition for review on certiorari of a decision of the TRC

of Quezon City.

Facts: Congress enacted RA 8189 or the Voters Registration Act of 1996,

this provided for the modernization and computerization of the voters
registration list, and appropriated funds therefor. Pursuant to the said RA,
COMELEC promulgated a Resolution approving the Voters Registration and
Identification Project (VRIS) which envisions a computerized database system
for the May 2004 elections. COMELEC issued invitations for bid and it was
awarded to PHOTOKINA Marketing Corporation, which received the highest
total weighted score and declared winning bidder. (BID was 6.58 B Pesos).
HOWEVER, RA 8760 provided that the budget appropriated by Congress for
the COMELECs modernization project was only 1B and actual available funds
under Certificate of Availability of Funds (CAF) was 1.2B. PHOTOKINA
requested the execution of the contract, but to no avail. PHOTOKINA filed a
petition with the RTC and was granted, it directed the Commissioners to
resume negotiations to formalize the execution of the contract for the VRIS
project. COMELEC filed a complaint against respondent judge.

Issue: May a successful bidder compel a government agency to formalize a

contract with it notwithstanding that its bid exceeds the amount
appropriated by Congress for the project?

Held: PHOTOKINA cannot compel COMELEC. Petition is GRANTED,

RESOLUTION issued by Judge Padilla are SET ASIDE.

Ratio: Enshrined in the 1987 Constitution is the mandate that no money

shall be paid out of the Treasury except in pursuance of an appropriation
made by law. In the execution of government contracts the precise import
of this constitutional restriction is to require the various agencies to limit
their expenditures within the appropriations made by law for each fiscal year.

Complementary to the constitutional injuction are the provisions (section 46

and 47, chapter of EO 292 or Administrative Code of 1987) which pertinent
provisions read:

Section 47. xxxno contract involving the expenditure of public funds by any
government agency shall be entered into or authorized unless the proper
accounting official of the agency concerned shall have certified to the officer
entering into the obligation that funds have been duly appropriated for the
purpose and that the amount necessary to cover the proposed contract for
the current calendar year is available for expenditure on account thereof xxx

Quite evident from the tenor of the language of the law that the existence of
appropriations and the availability of funds are indispensable pre-requisites
to or conditions sine qua non for the execution of government contracts. The
obvious intent is to impose such conditions as a priori requisites to the
validity of the proposed contract.

Court held in Metropolitan case that the effect of an unqualified acceptance

of the offer or proposal of the bidder is to perfect a contract, upon notice of

the award to the bidder HOWEVER, such statement would be

inconsequential in a government where the acceptance referred to is yet to
meet certain conditions. To hold otherwise is to allow a public officer to
execute a binding contract that would obligate the government in an amount
in excess of the appropriations for the purpose for which the contract was
attempted to be made.

Clearly the amount appropriated is insufficient to cover the cost of the entire
VRIS project. There is no way that the COMELEC could enter into a contract
with PHOTOKINA whose accepted bid was way beyond the amount
appropriated by law for the project.
The contract, as expressly declared by law, is inexistent and void ab initio.
Proposed contract is without force and effect from the very beginning, as if it
had never been entered into.



Odyssey Park v. CA
Bancom Development Corporation and Odyssey Park, Inc., entered into a
Contract to Sell, whereby the former agreed to sell to the latter the parcel of
land with an area of 8,499 square meters situated in Baguio City and the

structure constructed thereon identified as the Europa Clubhouse.

Subsequently, in a document entitled "Separate Deed of Conveyance",
Bancom confirmed and acknowledged that it has ceded, transferred and
conveyed in favor of Union Bank all the rights, title and interest it has over
the property.
The purchase price of P3,500,000.00 was, per Section 2 of the Contract
to Sell, with the agreement that
Sec. 5: In the event Odyssey fails to pay any portion of the purchase price of
the Property or the interest and service charge thereon as and when it falls
due, or otherwise fails to comply with or violate any of the provisions of this
Contract, Bancom may at its absolute discretion cancel and rescind this
Contract and declare the same as null, void and no further force and effect
by serving on Odyssey a written notice of cancellation and rescission thirty
(30) days in advance.
In the event this Contract is cancelled and rescinded as provided in this
Section, all the amounts which the Odyssey may have paid to Bancom
pursuant to and in accordance with this Contract shall be forfeited in favor of
Bancom as rentals for the use and occupancy of the Property and as penalty
for the breach and violation of this Contract. Furthermore, all the
improvements which Odyssey may have introduced on the Property shall
form part thereof and belong to Bancom without right of reimbursements to
Odyssey; Provided, that Bancom may at its absolute discretion instead
require Odyssey to remove such improvements from the Property at
expense of Odyssey.
Mr. Vicente A. Araneta, President of Europa Condominium Villas, Inc., wrote
Union Bank, a letter stating that the Europa Center was reported to
prospective buyers as well as government authorities as part of common
areas and amenities under the condominium concept of selling to the public
and for that reason wants to make it of record that Europa Condominium
Villas, Inc., questions the propriety of the contract to sell. Odyssey, through
its Chairman of the Board, Mr. Carmelito A. Montano, wrote Bancom a letter
stating that it acknowledges receipt of a copy of the letter-protest from the
Europa Condominium Villas, Inc., and that in the meantime that there is a
question on the propriety of the sale, it is stopping/withholding payments of
the amortization. On the same date Bancom, through its Senior VicePresident, wrote Europa Condominium Villas, Inc. a letter explaining that the
Europa Center and the parcel of land on which it is built are not part of the
EuropaCondominium Villas, Inc.Union Bank wrote Odyssey Park a
letter demanding payment of the overdue account of inclusive of interest
andservice charges, otherwise the contract to sell would be cancelled and
rescinded. Odyssey wrote Union Bank a letter proposing a manner of
settlement which Union Bank answered asking for more details of the
proposal. The series of communications led to the drafting of a Memorandum

of Agreement which was not, however, signed bythe parties. Union Bank,
through counsel, wrote Odyssey Park a letter formally rescinding and/or
cancelling the contract to sell and demanding that Odyssey vacate and
peaceably surrender possession of the premises.For failure of Odyssey to
vacate, Union Bank filed a case for illegal detainer and damages. Odyssey,
on the otherhand, filed this case for "Declaration of the Nullity of the
Rescission of the Contract to Sell With Damages"
LC: Contract to Sell have been properly rescinded; dismissing the complaint
for being frivolous and unfounded
CA: affirmed; MR denied

Whether or not the rescission of the contract to sell by private respondent
accords with the requirements of Republic Act (R.A.) No. 6552, also known
as An Act to Protect Buyers of Real Estate on Installment Payments which,
petitioner insists, requires a cancellation or rescission of the contract by
means of a notarial act.
Contract properly rescinded, RA 6552 does not apply. Unfortunately for
petitioner, the invocation of Republic Act No. 6552 is misplaced. This law,
which normally applies to the sale or financing of real estate on installment
payments, excludes industrial lots, commercial buildings, and sales to
tenants under R.A. No. 3844. The appellate court has thus aptly said:
While the law applies to all transactions or contracts involving the sale or
financing of real estate on installment payments, including residential
condominium apartments, excluded are industrial lots, commercial buildings
and sales to tenants under R.A. 3844 as amended. The property subject of
the contract to sell is not a residential condominium apartment. Even on the
basis of the letter of Mr. Vicente A. Araneta, Exhibit E, the building is merely
`part of common areas and amenities under the Condominium concept of
selling to the public. The property subject of the contract to sell is more of a
commercial building.





FACTS: Spouses Guillermo Nombre and Victoriana Cari-an died without issue in 1924
and 1938, respectively. Nombres heirs include his nephews and grandnephews.
Victoriana was succeeded by her late brothers son, Gregorio Cari-an.
After Gregorios death in 1971, his wife, Generosa Martinez and children (Rodolfo,
Carmen, Leonardo and Fredisminda) were adjudged as heirs by representation to
Victorianas estate. Leonardo passed away, leaving his widow, Nelly Chua vda. de Carian and minor Leonell as his heirs
2 parcels of land, denominated by Lot 1616 and 1617, formed part of the estate of
Guillermo Nombre and Victoriana Cari-an.
In 1978, Gregorios heirs executed a deed of sale of rights, interests and participation in
favor of Pedro Escanlar and Francisco Holgado over the undivided share of
Victoriana for P275,000 to be paid to the heirs, except the share of the minor Leonell
Cari-an which shall be deposited to the Municipal Treasurer. Said contract of sale will
be effective only upon approval of CFI
Escanlar and Holgado, the vendees, were concurrently the lessees of the subject
property. In a deed of agreement executed by both parties confirming and affirming the
contract of sale, they stipulated the following:
That the balance of the purchase price (P225,000) shall be paid on or before May 1979
Pending complete payment thereof, the vendees shall not assign, sell, lease or
mortgage the rights, interests and participation thereof

c. In the event of nonpayment of the balance of said purchase price, the sum of P50,000
(down payment) shall be deemed as damages
5. Escanlar and Holgado were unable to pay the individual shares of the Cari-an heirs,
amounting to P55,000 each, on the due date. However, said heirs received at least 12
installment payments from Escanlar and Holgado after May 1979. Rodolfo was fully
paid by June 1979, Generosa Martinez, Carmen and Fredisminda were likewise fully
compensated for their individual shares. The minors share was deposited with the RTC
in September 1982.
6. Being former lessees, Escanlar and Holgado continued in possession of Lots 1616 and
Lots 1617. Interestingly, they continued to pay rent based on their lease contract.
7. Subsequently, Escanlar and Holgado sought to intervene in the probate proceedings of
Guillermo and Victoriana as buyers of Victorianas share. In 1982, the probate court
approved the motion filed by the heirs of Guillermo and Victoriana to sell their respective
shares in the estate. Thereafter, the Cari-ans, sold their shares in 8 parcels of land
including lots 1616 and 1617 to spouses Chua for P1.85 million.
8. The Cari-ans instituted a case for cancellation of sale against Escanlar and Holgado
alleging the latters failure to pay the balance of the purchase price on the stipulated
date and that they only received a total of P132,551 in cash and goods.
9. Escanlar and Holgado averred that the Cari-ans, having been paid, had no right to resell
the subject lots and that the spouses Chua were purchasers in bad faith.
10. The trial court held in favor of the heirs of Cari-an citing that the sale between the
Cari-ans and Escanlar is void as it was not approved by the probate court which
was required in the deed of sale.
11. CA affirmed the same and cited that the questioned deed of sale of rights is a contract
to sell because it shall become effective only upon approval by the probate court and
upon full payment of the purchase price.
ISSUE: WON the non-happening of a condition affects the validity of the contract itself
HELD: No, the non-happening of a condition only affects the effectivity and not the
validity of the contract.
Under Art 1318 Civil Code, the essential requisites of a contract are: consent of the
contracting parties; object certain which is the subject matter of the contract and
cause of the obligation which is established. Absent one of the above, no
contract can arise. Conversely, where all are present, the result is a valid
contract. However, some parties introduce various kinds of restrictions or
modalities, the lack of which will not, however, affect the validity of the contract.
In the instant case, the Deed of Sale, complying as it does with the essential
requisites, is a valid one. However, it did not bear the stamp of approval of the
court. The contracts validity was not affected for in the words of the stipulation, this
Contract of Sale of rights, interests and participations shall become effective only upon
the approval by the Honorable Court In other words, only the effectivity and not
the validity of the contract is affected.

In contracts to sell, ownership is retained by the seller and is not to pass until the full
payment of the price. Such payment is a positive suspensive condition, the failure of
which is not a breach of contract but simply an event that prevented the obligation of the
vendor to convey title from acquiring binding force. To illustrate, although a deed of
conditional sale is denominated as such, absent a proviso that title to the property sold
is reserved in the vendor until full payment of the purchase price nor a stipulation giving
the vendor the right to unilaterally rescind the contract the moment the vendee fails to
pay within a fixed period, by its nature, it shall be declared a deed of absolute sale.
In a contract of sale, the non-payment of the price is a resolutory condition which
extinguishes the transaction that, for a time, existed and discharges the obligations
created thereunder. The remedy of an unpaid seller in a contract of sale is to seek either
specific performance or rescission.
In the case at bar, the sale of rights, interests and participation as to portion
pro indiviso of the 2 subject lots is a contract of sale for the reasons that (1) the
sellers did not reserve unto themselves the ownership of the property until full
payment of the unpaid balanceof P225,000.00; (2) there is no stipulation giving
the sellers the right to unilaterally rescind the contract the moment the buyer fails
to pay within the fixed period.
The need for approval by the probate court exists only where specific properties of the
estate are sold and not when only ideal and indivisible shares of an heir are disposed
of. In Dillena v. Court of Appeals, the Court declared that it is within the jurisdiction of
the probate court to approve the sale of properties of a deceased person by his
prospective heirs before final adjudication. The probate courts approval is necessary for
the validity of any disposition of the decedents estate. However, reference to judicial
approval cannot adversely affect the substantive rights of the heirs to dispose of their
ideal share in the co-heirship and/or co-ownership among the heirs. It must be recalled
that during the period of indivision of a decedents estate, each heir, being a co-owner,
has full ownership of his part and may therefore alienate it. But the effect of the
alienation with respect to the co-owners shall be limited to the portion which may be
allotted to him in the division upon the termination of the co-ownership.
As a general rule, the pertinent contractual stipulation (requiring court approval) should
be considered as the law between the parties. However, the presence of two factors
militates against this conclusion: (1) the evident intention of the parties appears to
be contrary to the mandatory character of said stipulation. Whoever crafted the
document of conveyance, must have been of the belief that the controversial
stipulation was a legal requirement for the validity of the sale. But the
contemporaneous and subsequent acts of the parties reveal that the original objective
of the parties was to give effect to the deed of sale even without court approval.

Receipt and acceptance of the numerous installments on the balance of the purchase
price by the Cari-ans, although the period to pay the balance of the purchase price
expired in May 1979, and leaving Escanlar and Holgado in possession of Lots 1616 and
1617 reveal their intention to effect the mutual transmission of rights and obligations.
The Cari-ans did not seek judicial relief until late 1982 or three years later; (2) the
requisite approval was virtually rendered impossible by the Cari-ans because
they opposed the motion for approval of the sale filed by Escanlar and Holgado,
and sued the latter for the cancellation of that sale. Having provided the obstacle
and the justification for the stipulated approval not to be granted, the Cari-ans should
not be allowed to cancel their first transaction with Escanlar and Holgado because of
lack of approval by the probate court, the lack of which is of their own making.

Case Digest: Islamic Directorate of the Philippines v. CA

COMMISSION, petitioners, vs.COURT OF APPEALS and IGLESIA NI CRISTO, respondents.
G.R. No. 117897, 14 May 1997.
1971, the ISLAMIC DIRECTORATE OF THE PHILIPPINES ("IDP"), was incorporated, the primary
purpose of which is to establish of a mosque, school, and other religious infrastructures in Quezon City.
IDP purchased a 49,652-square meter lot in Tandang Sora, QC, which was covered by TCT Nos. RT26520 (176616) and RT-26521 (170567).
When President Marcos declared martial law in 1972, most of the members of the 1971 Board of Trustees
("Tamano Group")flew to the Middle East to escape political persecution.
Thereafter, two contending groups claiming to be the IDP Board of Trustees sprung: the Carpizo group
and Abbas group.
In a suit between the two groups, SEC rendered a decision in 1986 declaring both groups to be null and

void. SEC recommeded that the a new by-laws be approved and a new election be conducted upon the
approval of the by-laws. However, the SEC recommendation was not heeded.
In 1989, the Carpizo group passed a Board Resolution authorizing the sale of the land to Iglesia Ni Cristo
("INC"), and a Deed of Sale was eventually executed.
In 1991, the Tamano Group filed a petition before the SEC questioning the sale.
Meanwhile, INC filed a suit for specific performance before RTC Branch 81 against the Carpizo group.
INC also moved to compel a certain Leticia Ligon (who is apparently the mortgagee of the lot) to
surrender the title.
The Tamano group sought to intervene, but the intervention was denied despite being informed of the
pending SEC case. In 1992, the Court subsequently ruled that the INC as the rightful owner of the land,
and ordered Ligon to surrender the titles for annotation. Ligon appealed to CA and SC, but her appeals
were denied.
In 1993, the SEC ruled that the sale was null and void . On appeal CA reversed the SEC ruling.
MAIN ISSUE: W/N the sale between the Carpizo group and INC is null and void.
Since the SEC has declared the Carpizo group as a void Board of Trustees, the sale it entered into with
INC is likewise void. Without a valid consent of a contracting party, there can be no valid contract.
In this case, the IDP, never gave its consent, through a legitimate Board of Trustees, to the disputed Deed
of Absolute Sale executed in favor of INC. Therefore, this is a case not only of vitiated consent, but one
where consent on the part of one of the supposed contracting parties is totally wanting. Ineluctably, the
subject sale is void and produces no effect whatsoever.
Further, the Carpizo group failed to comply with Section 40 of the Corporation Code, which provides that:
" ... a corporation may, by a majority vote of its board of directors or trustees, sell, lease, exchange,
mortgage, pledge or otherwise dispose of all or substantially all of its property and assets... when
authorized by the vote of the stockholders representing at least two-thirds (2/3) of the outstanding capital
stock; or in case of non-stock corporation, by the vote of at least two-thirds (2/3) of the members, in a
stockholders' or members' meeting duly called for the purpose...."
The subject lot constitutes the only property of IDP. Hence, its sale to a third-party is a sale or disposition
of all the corporate property and assets of IDP. For the sale to be valid, the majority vote of the legitimate
Board of Trustees, concurred in by the vote of at least 2/3 of the bona fide members of the corporation
should have been obtained. These twin requirements were not met in the case at bar.
ANCILLARY ISSUE: W/N The Ligon ruling constitutes res judicata.
Section 49(b), Rule 39 enunciates the first concept of res judicata known as "bar by prior judgment,"
whereas, Section 49(c), Rule 39 is referred to as "conclusiveness of judgment."
There is "bar by former judgment" when, between the first case where the judgment was rendered, and
the second case where such judgment is invoked, there is identity of parties, subject matter and cause of
action. When the three identities are present, the judgment on the merits rendered in the first constitutes
an absolute bar to the subsequent action. But where between the first case wherein judgment is rendered
and the second case wherein such judgment is invoked, there is only identity of parties but there is no
identity of cause of action, the judgment is conclusive in the second case, only as to those matters

actually and directly controverted and determined, and not as to matters merely involved therein. This is
what is termed "conclusiveness of judgment."
Neither applies to the case at bar. There is no "bar by former judgment" since while there may be identity
of subject matter (IDP property) in both cases, there is no identity of parties. The principal parties in the
first case were Ligon and the Iglesia Ni Cristo. The IDP can not be considered essentially a formal party
thereto for the simple reason that it was not duly represented by a legitimate Board of Trustees.
Res Judicata in the form of "conclusiveness of judgment" cannot likewise apply for the reason that the
primary issue in the first case is the possession of the titles, and not the sale of the land, as in this case.


G.R. No. 123892 May 2, 2001

Petitioner is a professional interior designer. In November 1986, her friend
Rosario Pardo asked her to talk to Nida Lopez, who was manager of the COMBANK
Ermita Branch for they were planning to renovate the branch offices. Even prior to
November 1986, petitioner and Nida Lopez knew each other because of Rosario
Pardo, the latters sister. During their meeting, petitioner was hesitant to accept the
job because of her many out of town commitments, and also considering that Ms.
Lopez was asking that the designs be submitted by December 1986, which was
such a short notice. Ms. Lopez insisted, however, because she really wanted
petitioner to do the design for renovation. Petitioner acceded to the request. Ms.
Lopez assured her that she would be compensated for her services. Petitioner even
told Ms. Lopez that her professional fee was P10,000.00, to which Ms. Lopez

During the November 1986 meeting between petitioner and Ms. Lopez, there
were discussions as to what was to be renovated. Ms. Lopez again assured
petitioner that the bank would pay her fees. After a few days, petitioner requested
for the blueprint of the building so that the proper design, plans and specifications
could be given to Ms. Lopez in time for the board meeting in December 1986.
Petitioner then asked her draftsman Jackie Barcelon to go to the jobsite to make the
proper measurements using the blue print. Petitioner also did her research on the
designs and individual drawings of what the bank wanted. Petitioner hired Engineer
Ortanez to make the electrical layout, architects Frison Cruz and De Mesa to do the
drafting. For the services rendered by these individuals, petitioner paid their
professional fees. Petitioner also contacted the suppliers of the wallpaper and the
sash makers for their quotation. So come December 1986, the lay out and the
design were submitted to Ms. Lopez. She even told petitioner that she liked the

Subsequently, petitioner repeatedly demanded payment for her services but

Ms. Lopez just ignored the demands. In February 1987, by chance petitioner and Ms.
Lopez saw each other in a concert at the Cultural Center of the Philippines.
Petitioner inquired about the payment for her services, Ms. Lopez curtly replied that
she was not entitled to it because her designs did not conform to the banks policy
of having a standard design, and that there was no agreement between her and the

Petitioner, through her lawyers, who wrote Ms. Lopez, demanding payment
for her professional fees in the amount of P10,000.00 which Ms. Lopez ignored. The
lawyers wrote Ms. Lopez once again demanding the return of the blueprint copies
petitioner submitted which Ms. Lopez refused to return. The petitioner then filed at
the trial court a complaint against COMBANK and Ms. Lopez for collection of
professional fees and damages.

In its answer, COMBANK stated that there was no contract between

COMBANK and petitioner; that Ms. Lopez merely invited petitioner to participate in a
bid for the renovation of the COMBANK Ermita Branch; that any proposal was still
subject to the approval of the COMBANKs head office.

The trial court rendered judgment in favor of plaintiff. On appeal, the Court of
Appeals reversed the decision. Hence, this petition.

Whether or not the Court of Appeals erred in ruling that there was no contract
between petitioner and respondents, in the absence of the element of consent.


A contract is a meeting of the minds between two persons whereby one binds
himself to give something or to render some service to bind himself to give
something to render some service to another for consideration. There is no contract
unless the following requisites concur: 1. Consent of the contracting parties; 2.
Object certain which is the subject matter of the contract; and 3. Cause of the
obligation which is established.

In the case at bar, there was a perfected oral contract. When Ms. Lopez and
petitioner met in November 1986, and discussed the details of the work, the first
stage of the contract commenced. When they agreed to the payment of the
P10,000.00 as professional fees of petitioner and that she should give the designs
before the December 1986 board meeting of the bank, the second stage of the
contract proceeded, and when finally petitioner gave the designs to Ms. Lopez, the
contract was consummated. Petitioner believed that once she submitted the
designs she would be paid her professional fees. Ms. Lopez assured petitioner that
she would be paid.

It is familiar doctrine that if a corporation knowingly permits one of its

officers, or any other agent, to act within the scope of an apparent authority, it
holds him out to the public as possessing the power to do those acts; and thus, the
corporation will, as against anyone who has in good faith dealt with it through such
agent, be estopped from denying the agents authority.
Also, petitioner may be paid on the basis of quantum meruit. "It is essential
for the proper operation of the principle that there is an acceptance of the benefits
by one sought to be charged for the services rendered under circumstances as
reasonably to notify him that the lawyer performing the task was expecting to be
paid compensation therefor. The doctrine of quantum meruit is a device to prevent
undue enrichment based on the equitable postulate that it is unjust for a person to
retain benefit without paying for it."
The designs petitioner submitted to Ms. Lopez were not returned. Ms. Lopez,
an officer of the bank as branch manager used such designs for presentation to the

board of the bank. Thus, the designs were in fact useful to Ms. Lopez for she did not
appear to the board without any designs at the time of the deadline set by the
Decision reversed and set aside. Decision of the trial court affirmed.