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OBLICON April 6, 2018

Jurado Cases
1. De Jesus v Urutia & Co, 33 Phil 171 (Untalan)

FACTS
● Diego Liñan, the son-in-law of the appellant, executed a mortgage to the defendant
company, appellee, on certain lands then belonging to the mortgagor to secure the payment
of the sum of P12,591.35
● The mortgage was not paid and judgment of foreclosure was obtained on July 5, 1911, the
principal, interest and costs amounting, on that date, to P14,224.53. The property was duly
sold pursuant to the judgment of foreclosure, there resulting a deficiency of P7,874.97, for
which the mortgagee was given a judgment.
● The appellant, claiming to be the owner of the lands levied on, presented to the sheriff, who
made the levy, a claim in pursuance of section 451 of the Code of Civil Procedure. The
appellee insisted on the sale of said lands and gave the bond required in that section. The
sheriff thereupon proceeded with the execution of the judgment and sold the land for the sum
of P4,700. This action was thereupon begun for the recovery of the land so sold.
● Trial Court Ruling – in favor of defendant
○ Diego Liñan, well knowing that the property mortgaged to G. Urrutia & Co. was insu
cient to pay the mortgage debt, and with the intention and for the purpose of
defrauding the said G. Urrutia & Co., showed himself to be insolvent by executing the
conveyances marked Exhibits A, B, C and D, which together appeared to be a sale of
the lands in question to his father-in-law, which, with the same fraudulent intent, he
caused to be registered in the registry of property of the Province of Ambos
Camarines.
○ The said conveyances were stimulated and ctitious and without any consideration
and pursuant to a conspiracy between Diego Liñan and his father-in-law to place said
lands beyond the reach of G. Urrutia & Co. and thereby defraud them by preventing
the collection of the debt which said company held against said Liñan

ISSUE
Whether or not the transfers made by Liñan to De Jesus were simulated

RULING – in favor of plaintiff


NO. The findings of the trial court were not supported by a preponderance of evidence. There was no
active fraud at by Liñan to the appellant at the time the mortgage was executed or when the land was
sold by Liñan to De Jesus.

While the conveyances by which the lands in controversy were transferred to the plaintiff were not
acknowledged before a notary public, they were in fact executed and delivered before the existence of
the mortgage. Moreover, it is clearly established by the evidence that, at the time the mortgage was
executed in favor of appellee, Liñan was the owner of a considerable number of parcels of land in
addition to those mortgaged; and that the mortgagor and the mortgagee mutually agreed on the lands
which should be encumbered; and that it was believed at the time by both parties to the instrument that
the lands so hypothecated would be sufficient on sale to cover the mortgage debt and interest.

Nor do we believe the evidence sufficient to sustain the finding that the conveyances which are the object
of this controversy were without consideration. During the trial, the appellant testified that, prior to the
sales in controversy, Liñan had borrowed of him a considerable sum of money, to pay which he
made the transfers referred to. This testimony was corroborated and supported by that of Rosario
de Jesus, another witness for the appellee, who testified that the transfers of the land in question
were made to the plaintiff to satisfy a preexisting obligation arising from money loaned. It thus
appears from appellee's own evidence that there was a valuable consideration for the sales in suit
and that, consequently, there was neither fraud nor intention to defraud.

The motives which impel one to a sale or purchase are not always the consideration of the
contract as that term is understood in law. One may purchase an article not because it is cheap, for in
fact it may be dear, but because he may have some particular use to which it may be put, because of a
particular quality which that article has, or the relation which it will bear to other articles with which it will
be associated. These circumstances may constitute the motive which induces the purchase, but
the real consideration of the purchase is the money which passed. Whatever may have been the
motive which impelled Liñan to transfer the properties in question to appellant, the consideration
of the sale was a debt due and owing from him to the former. With one's motives the law cannot
deal in actions of this character; while with the consideration the law is always concerned.

The judgment appealed from is reversed and the cause remanded to the court whence it came with
instructions to enter a judgment declaring appellant to be the owner of the lands in question and annulling
the levy made thereon under the deficiency judgment. Without costs in this instance. So ordered.

1. Enriguez de Cavada v Diaz, 37 Phil 982 (Bercasio)


FACTS:

Parties entered into a “contract of option” which involves a hacienda at Pitogo consisting of 100 and odd
hectares, owned by respondent. The said contract stipulated how the price of the property will be paid; for
which the petitioner herein may pay him either the sum of thirty thousand pesos (P30,000), Philippine
currency, in cash, or within the period of six (6) years, beginning with the date of the purchase, the sum of
forty thousand pesos (P40,000), Philippine currency, at six per cent interest per annum.

After the execution of the contract, defendant filed a petition with the Court of Land Registration in order
to obtain the registration of a part of the hacienda, which was granted.

Later, and pretending to comply with the terms of said contract, the defendant offered to transfer to the
plaintiff one of said parcels only, which was a part of said "hacienda." The plaintiff refused to accept said
certificate for a part only of said "hacienda" upon the ground (a) that it was only a part of the "Hacienda de
Pitogo," and (b) under the contract (Exhibits A and B) he was entitled to a transfer to him all said
"hacienda."

The theory of the defendant is that the contract of sale of said "Hacienda de Pitogo" included only 100
hectares, more or less, of said "hacienda," and that by offering to convey to the plaintiff a portion of said
"hacienda" composed of "100 hectares, more or less," he thereby complied with the terms of the contract.

Lower Court ruled in favor of Petitioner.

ISSUE:
Whether or not the defendant was obliged to convey to the plaintiff all of said "hacienda."

HELD:
A promise made by one party, if made in accordance with the forms required by the law, may be a good
consideration (causa) for a promise made by another party. (Art. 1274, Civil Code.) In other words, the
consideration (causa) need not pass from one to the other at the time the contract is entered into.

The said contract (Exhibits A and B) was not, in fact, an "optional contract" as that phrase is generally
used. Reading the said contract from its four corners it is clearly as absolute promise to sell a definite
parcel of land for a fixed price upon definite conditions. The defendant promised to convey to the plaintiff
the land in question as soon as the same was registered under the Torrens system, and the plaintiff
promised to pay to the defendant the sum of P70,000, under the conditions named, upon the happening
of that event. The contract was not, in fact, what is generally known as a "contract of option."

An optional contract is a privilege existing in one person, for which he had paid a consideration, which
gives him the right to buy, for example, certain merchandise of certain specified property, from another
person, if he chooses, at any time within the agreed period, at a fixed price. The contract of option is a
separate and distinct contract from the contract which the parties may enter into upon the consummation
of the option.

A contract of option is a contract by virtue of the terms of which the parties thereto promise and obligate
themselves to enter into contract at a future time, upon the happening of certain events, or the fulfillment
of certain conditions.

1. General Enterprises Inc v Lianga Bay Co, 11 SCRA 733 (Layug)


Topic: Cause in Onerous Contracts. p 468

FACTS

- On May 25, 1959, Lianga Bay Logging Company, Inc., a corporation duly organized under the
laws of the Philippines, and General Enterprises, Inc, another corporation, entered into a
contract.

- Liangga Bay Logging Company, a producer of logs from a timber concession at Lianga,
Surigao, designated General Enterprises as distributor of a portion of its log production to Korea
and Europe on condition that it would pay the distributor a commission of 13% of the gross f.o.b.
value of the logs exported.

- In the agreement, the Lianga Bay Logging Company, Inc. was named as Producer and the
General Enterprises, Inc. as Distributor.

- The parties immediately began implementing the provisions of the contract by having the
Distributor (Gen. Enterprises) deliver to the Producer (Lianga Bay) the tractor it agreed to
deliver and by having the Producer deliver logs to the Distributor for export as agreed upon.
- On October 27, 1959, the Producer sent a notice to the Distributor stating that after the
November shipment there will no longer be logs available for export to Korea and Europe
"unless the price of such logs become comparable to what we may expect to receive in the way
of returns from lumber and veneer of barterable and export grades"

NOTE: reasons: the needed additional logging machinery which they had agreed to buy had
been sold to another purchaser under rather peculiar circumstances and they have decided that
we must take advantage of the situation and use their lumber for barter offered by a U.S Firm
which net result will be that they will not have logs for the sales area of the distributor.

- The Producer (Lianga Bay) thereafter stopped supplying logs for export, whereupon the
Distributor reminded the Producer (Gen Enterprises) that it had a contract to fulfill relative to its
log production as otherwise it would be held responsible for the consequences of the breach
that may ensue, but the Producer did not heed this reminder causing the Distributor to initiate
the present action before the Court of First Instance of Rizal alleging breach of contract and
praying for damages both actual and compensatory.

- RTC rendered decision in favor of the plaintiff and against the defendant.This is an appeal
from said decision.

ISSUE: W/N agreement (Annex A) in the contract is valid?

RULING: YES

- Lianga Bay claims that the agreement Annex A on which the complaint is based is null and
void on the ground that it has no cause or consideration or that it was secured thru fraud or
misrepresentation. (NOTE: Basis of the alleged fraud and misrepresentation is the claim that
Mr. Freider, president of General Enterprises, led Lianga Bay to believe that he could secure for
said Lianga Bay a certain Surigao logging equipment on which General Enterprises had a
second mortgage and that he would place at the disposal of Lianga Bay at any time the sum of
P95,000.00 by way of loan to enable it to purchase the needed logging equipment, when
General Enterprises knew well that it did not have such money nor could secure the Surigao
logging equipment)

- The court ruled that the claim of fraud has no basis, for while Mr. Freider stated in his
testimony that the Distributor could take steps to secure the Surigao logging equipment for the
use of Lianga Bay no assurance was given that such equipment would be acquired as a
necessary incident of their contract.

- Neither can the court attribute fraud to General Enterprises’ failure to grant Lianga Bay the
loan of P95,000.00 for the purchase of logging equipment, for the evidence shows that Lianga
Bay did not make any demand for it.

- We also find untenable the claim that the agreement has no cause or consideration
considering that the same imposes reciprocal obligations. A perusal of the agreement
would show that Lianga Bay designated General Enterprises as its distributor to export logs to
Korea and Europe at the best market price obtainable on condition that it would pay General
Enterprises a commission of 13% of the gross value of the logs. The cause of a contract is the
essential reason which moves the contracting parties to enter into it. In other words, the cause
is the immediate, direct and proximate reason which justifies the creation of an
obligation thru the will of the contracting parties. Such being the case, it is clear that for
Lianga Bay the cause of the agreement is the distribution of its logs in the areas agreed upon
which General Enterprises undertook to accomplish, whereas for General Enterprises the cause
is its commitment to sell or export the logs for onerous consideration.

- The contention that the essential reason which induced Lianga Bay to enter into the contract is
the promise of General Enterprises to secure for it the Surigao logging equipment and to make
available the loan of P95,000.00 likewise has no merit.

- Finally, no weight can be given to the claim that because it was not explicitly expressed in the
agreement that Gen Enterprises has the corresponding obligation to sell and export the
additional 2,000,000 board feet Lianga Bay agreed to make available for export beginning
September, 1959, that portion of the agreement has no consideration, for such could clearly be
inferred from a mere perusal of the whole paragraph 5 of the agreement.

- It is explicit therein that General Enterprises bound itself to export abroad whatever may be
produced in the form of logs by Lianga Bay during the first months of the agreement, as well as
those that may be produced thereafter, and it should not be forgotten that the term of the
agreement is two years beginning June 1, 1959 (paragraph 9)

- Indeed, there is no point for Lianga Bay to agree to make available additional 2,000,000 board
feet beginning September, 1959 if General Enterprises should not be given the corresponding
commitment to export under the same terms agreed upon in connection with previous
production. A contrary interpretation would be irrational and absurd.

1. National Bank v Maza, 48 Phil 207 (Hung)

1. Fisher v Robb, 69 Phil 101 (Digested)

1. Villaroel v Estrada, 71 Phil 14 (Digested)

1. Ocejo, Perez & Co. v Flores, 40 Phil 921 (Baclao)

FACTS:

Buyer: Chua Teng Chong

Seller: Ocejo, Perez and Co


On March, 1914, Chua Teng Chong gave a promissory note to International Banking Corporation in
exchange for Php 20k. 5000 piculs of sugar, located in a warehouse in Calle Toneleros, was put up as
security for the note.

It seems that at the end of March, Ocejo, Perez and Co. entered into contract with Chua Teng Chong for
the sale of some sugar. The sugar was brought to Manila in the month of April, and 5,000 piculs were
delivered by to Chua Teng Chong whereupon it was stored in the a warehouse at No. 119, Muelle de la
Industria. The next day, petitioners attempted to collect the purchase price of the sugar, but the buyer
refused to make payment. In the written contract between them, nothing was said concerning the time
and place for payment.

When the promissory note executed had fallen due and was unpaid, the bank made the effort to exercise
active ownership over the sugar (Coincidentally, on the same day it was delivered to Chua Teng Chong
by March, Ocejo, Perez and Co), it discovered that the amount of sugar in his warehouse was less than
the 5,000 piculs mentioned in the contract. Chua Teng Chong said that the rest of the sugar was in a
warehouse at No. 119, Muelle de la Industria. The bank’s representatives then went to this warehouse
and upon arrival there found some 3,200 piculs which they immediately seized, closing the warehouse
with the bank's padlocks.

Ocejo demand the bank to return the sugar, which the latter refused. Petitioners filed a complaint, with
the bank as defendant, alleging that the bank was unlawfully holding the property of the plaintiff firm. By
agreement of the parties, the sugar was sold and the proceeds of the sale deposited in the bank, subject
to the order of the court upon the final disposition.

Chua Seco, the assignee of now insolvent Chua Teng Chong, asserts a preferential right proceeds of its
sale, upon the ground that the delivery of the sugar by plaintiff, by virtue of which it passed into the
possession and control of Chua Teng Chong, indicates that the sugar is the property of the insolvent
estate represented by him.

The lower court rendered judgment in favor of Ocejo, Perez & Co and from this decision appeals have
been taken by the bank and by the intervener.

ISSUES/DECISION:

(a) Did title to the sugar pass to the buyer upon its delivery to him? Yes
(b) Assuming that the title passed to the buyer, did his failure to pay the purchase price authorize the
seller to rescind the sale? Yes
(c) Was the commencement of a replevin suit by the seller equivalent to the rescission of the sale? No

Seller argues: Despite the fact that no term was stipulated within which the payment should be made, he
was entitled to demand payment at any time after delivery, and further that until such payment was in fact
made, title to the sugar did not pass to the buyer.

HELD

a) The obligation of the seller to make delivery of the thing sold was not subject to the condition that the
buyer was to pay the price before delivery. The sugar was delivered to the buyer on April 16, 1914. The
seller delivered it into the buyer's warehouse, leaving it entirely subject to his control. Article 1462 of the
Civil Code provides that the thing sold is deemed to be delivered "when it passes into the possession and
control of the buyer.”

According to Manresa, tradition is a true mode of acquiring ownership "which effects the passage of title
and the birth of the right in rem. Therefore, the delivery of the thing . . . signifies that title has passed from
the seller to the buyer."

The Transaction is not a like a cash sale in which delivery and payment are to be made simultaneously.
When no term for payment is stipulated, the seller is not bound to deliver the thing sold until the buyer has
paid the price; But if delivery is consummated, he in fact grants a term of credit to the buyer, however
short and indeterminate it may be, and waives his right to insist upon payment in advance or
simultaneously with delivery. But he does become entitled to payment upon demand made upon the
buyer.

The fact that the price of the property has not yet been paid in full is not, nor can it be, an obstacle to the
acquisition of the ownership thereof by the plaintiff, because as such a condition was not stipulated in the
contract, the latter immediately produced its natural effects in law, the principal and most important of
which being the conveyance of the ownership by means of the delivery of the thing old to the purchaser,
without prejudice, of the course, to the right of the vendor to claim payment of any sum still due.

In Gonzalez vs. Rojas: . . . ownership of things is not transferred by mere contract but by delivery.
Contracts only constitute titles or rights to the transfer or acquisition of ownership, while delivery or
tradition is the method of accomplishing the same, the title and the method of acquiring it being different
in our law."

Therefore, the effect of the delivery was to transmit the title of the sugar to the buyer.

b-c) Article 1124 of the Civil Code states that reciprocal obligations are rescindable when one of the
parties bound should fail to perform that which is incumbent upon him. In the contract of the sale the
obligation to pay the price is correlative to the obligation to deliver the thing sold. Nonperformance by one
of the parties authorizes the other to exercise the right to demand the performance of the obligation or its
rescission. But the right to rescind the sale for nonperformance on the part of the buyer is not absolute;
the law subordinates it to the rights of third persons in good faith. The bank argues this principle, alleging
that the sugar was pledged to it, after its delivery to the buyer.

However, the sugar pledged is not the same as that here in dispute. The pledge was for the sugar in the
Calle Toneleros warehouse, not the one in Muelle de la Industria. The sugar in question could not be
possibly have been the subject matter of the contract of pledge which was formed in March as it was not
the property of the defendant at the time.

Even if an attempt was made to pledge the sugar when it was delivered, it would be void as against third
persons since it was not recorded in a public instrument. Therefore, the pledge asserted by the
International Bank is inefficacious.

The mere will of the plaintiff will not produce the rescission of the sale. Although the right to rescind a
sale, is established by article 1506 and 1124 and such right so conferred is not an absolute one. The
same article provides that "the court shall decree the rescission demanded, unless there are causes
which justify him in allowing a term."
1. De Belen v Collector. Of Customs, 46 Phil 241 (Montenegro)

DOCTRINE: Where the transfer of properties is simulated without any cause, such as when the purpose
of the grantor is to defraud his creditors and prevent the attachment of his property, it shall shall not
produce any effect.

FACTS:
Timoteo Tienzo is a customs broker in the City of Manila who is also operating a number of trucks for the
purpose of conveying merchandise arriving at the port of Manila to various consignees.

Tienzo procured a permit from the Insular Collector for the withdrawal of 12,500 sacks of flour from one of
the piers for delivery to one Chua Soco, then a merchant in the City of Manila. The bill of lading for said
flour was not produced by Tienzo at the time he procured the delivery permit, and in order to get
possession of the flour he obligated himself to have the bill of lading “to follow” in due time.
Note: Bill of Lading - a detailed list of a shipment of goods in the form of a receipt given by the carrier to
the person consigning the goods.

Said bill of lading, however, was never produced by Tienzo or his principal, Chua Soco, with the result
that the collector of customs caused an action of replevin to be begun in the name of the Government to
recover the flour which had been delivered as aforesaid, or in case the flour itself could not be secured, to
recover judgment for the value thereof in the amount of P47,816.32. For Tienzo’s non-compliance, the
Sheriff levied seven trucks owned and operated by Tienzo.

After the sheriff had taken the trucks into custody, the plaintiff in this case, Leopoldo de Belen, a brother-
in-law of Tienzo, made claim to the trucks, relying on a document of transfer (Exhibit A) which states that
Tienzo purports to convey to Belen all of the trucks involved in this controversy.

The consideration stated in this instrument is the sum of P25,000, said to have been advanced upon
previous occasions to Tienzo by Belen as payments for the said trucks.

The sheriff ignored the claim of Belen to the ownership of the trucks, thus, this present action of replevin
instituted by Belen against the Collector of Customs and the sheriff for the recovery of the trucks and
compensation for the unlawful detention of the same.
Note: Writ of Replevin - issued to recover an item of personal property wrongfully taken

ISSUE: Whether petitioner de Belen is the rightful owner of the trucks levied by the sheriff.

HELD: No. The document referred to (Exhibit A) was evidently a fictitious transfer, conceived and
executed for the purpose of placing the trucks in question beyond the reach of the creditors of Tienzo,
and he held said instrument to be completely without effect. The court finds sufficient the testimony of a
witness, Gerardo Garcia who stated that in a conversation between himself and the present plaintiff soon
after the service of the complaint, the latter said that Tienzo was owner of the trucks and that he (Belen)
was merely an instrument of Tienzo. This admission of the plaintiff, in connection with the relation of the
parties and the financial difficulties then impending over Tienzo, establish a strong presumption that the
transfer referred to was made for the purpose of placing the trucks beyond the reach of legal process
directed against Tienzo. Therefore, said transfer of ownership to petitioner produces no effect.

1. Puato v Mendoza, 64 Phil 457 (Untalan)


PARTIES
Plaintiff-appellee: GUILLERMO PUATO Y CONSTANTINO
defendant-appellants: FILOMENO MENDOZA and VALENTIN DAVID

FACTS
● The land described in the complaint has been legally mortgaged to the plaintiff as property
of the defendants to answer for the sum of P37,500 forming a part of the P39,000 for which
said land was sold to the defendants by the plaintiff; that of said sum of P37,500 the
defendants have paid only P12,700 to date.
● Plaintiff’s contention:
○ When the defendants mortgaged said land to him, palay was quoted at P4 a cavan,
and when he filed his complaint for foreclosure of mortgage, about the month of
November, 1932, palay was quoted at P1.50 a cavan; that from the year 1926 to
1928, when the plaintiff was in possession of the land, he never saw it and he leased
it by parcels to several persons, receiving as rental a total of 400 cavans; that it was
the defendants who approached him, proposing to purchase it; that the land is partly
clean and partly uncultivated and produces from 50 to 55 cavans a hectare; that he
became acquainted with the defendants only when they voluntarily went to his house
to see him.
● Defendant’s contention:
○ The plaintiff called at their house offering to sell them his said land but the defendant
Filomeno Mendoza told him that he had no money; that on the 28th of said month
and year, an agent of the plaintiff took said defendant to the barrio of Maquibang,
Baliwag, Bulacan, where the plaintiff again offered to sell him his said land for the
sum of P39,000, making a cash payment of only P1,500 and the balance of P37,500
in four annual installments; that said defendant Filomeno Mendoza agreed and the
corresponding deed was executed, the defendant delivering to the plaintiff the sum of
P1,500 which he had with him; that said defendant told the plaintiff that as he had not
yet seen the land he could not place tenants thereon until the following year.
● The defendants decided to purchase the land because the plaintiff told them that it was good
and promised to help them by not pressing them for payment of the installments and by not
attaching the land; that they did not visit the land before buying it because they had no time
and because they relied on what the plaintiff had told them; that after the land shall have
been cleaned, it would only be considered as fourth class rice land.
● Trial Court Ruling – in favor of the plaintiff

ISSUE
Whether or not the deeds of sale should be declared null and void for lack of cause or consideration.

RULING – in favor of plaintiff


NO. The deed of sale states that the land referred to therein is sold and conveyed in consideration of the
sum of P39,000, and in the deed, it is stated that said land is mortgaged to secure payment of the sum of
P37,500, the unpaid balance of the selling price of P39,000, after deducting the sum of P1,500 paid upon
the execution of the deed of sale in question.

The failure of the defendants to fully pay for the land purchased by them from the plaintiff does
not constitute lack of cause or consideration, which consists in the stipulated price of P39,000
that induced the plaintiff to sell his land to the defendants and in the transfer of the title of
ownership thereof that induced said defendants to part with their money, it not being essential for
its existence that full payment be made at the time of the execution of the contract.

Neither was there deceit in obtaining the consent of the defendant in the contract. In stating that the land
is good, the plaintiff undoubtedly based his opinion upon the rental he received and the production per
hectare his previous tenants gave him. One of the witnesses for the defendants, who also wished to
purchase the land, testified that if the entire land were cleaned and made arable, it would be second
class, contrary to the defendants’ contentions.

Wherefore, there being no error in the appealed judgment, it is affirmed in toto, with the costs to
the appellants. So ordered.

1. Azarraga v Rodriguez, 9 Phil 637 (Lipana)

FACTS:
· Jose Rodriguez executed in favor of Regino Ramirez a document whereby he bound himself to
pay Ramirez the amount of P400.25 on May 15, 1899. This was in payment of Fray Lesmes Perez’
debt to Ramirez.
· Rodriguez owed Perez P1,983.75 that is why he assumed Perez’ obligation to Ramirez.
· Subsequently, the document was endorsed by Ramirez in favor of Azarraga as payment of debt.
Azarraga wrote a letter to Rodriguez requesting payment of P400.25 as a consequence of the
indorsement in Azarraga’s favor.
· Rodriguez wrote a letter acknowledging his indebtedness and obligation and engaging to pay the
same.
· Despite several requests for payment, Rodriguez did not pay Azarraga, and instead asked for
several extensions.
· Thus, Azurraga decided to file a complaint against Rodriguez. CFI ruled that Rodriguez is liable
for the amount.

ISSUES: WON the assignment or transfer of credit is valid even if the cause or consideration is not stated
in the contract?

Held: Yes. The assignment or transfer of the credit in question, made by Ramirez, the creditor, is
perfectly valid, and notwithstanding the fact that the cause or consideration for the transfer is not stated in
the indorsement, it must be presumed that one exists and that it is a lawful one, unless the debtor should
prove the contrary, which he has not done in this case.

1. Bhen, Meyer & Co v Davis, 37 Phil 431 (Bercasio)

1. Mulet v People, 73 Phil 63 (Montenegro)


DOCTRINE: Where the cause or consideration for the sale of a property is no other than the accumulated
usurious interests which the vendor-debtor has not yet paid, the sale is void because of the illegality of
the cause or consideration.
FACTS:
● Anastacio Cuizon secured from petitioner Miguel Mulet a loan of P200 at 30 percent interest per
annum and to that effect signed a receipt for P260.
● For Cuizon’s failure to pay upon maturity, petitioner made Cuizon sign a deed of sale, with pacto
de retro, of the latter’s house and lot assessed at P1,500 and P130, respectively, with the sum of
P260 as the apparent consideration thereon.
● Upon Cuizon’s failure again to pay the sum of P260 one year thereafter, a new deed of sale of the
same properties was executed, this time reciting the sum of P390 as its consideration.
● This amount represented the sum of P260 and one year’s interest thereon at 50 per cent, or P130.
At the maturity of this renewed obligation on September 26, 1931, Cuizon paid the interest of P130,
and another deed was again executed reciting the same consideration of P390.
● On this amount, Cuizon was charged again 50 per cent per annum, or P195, but having paid, at its
maturity on September 26, 1932, the sum of P105 on account of interest, another document of sale,
with the right of repurchase for two years, was executed, this time reciting a consideration of P480,
representing the original amount of P390 and the unpaid interest of P90.
● Shortly before September, 1934, Petitioner, at Cuizon’s remonstrance, reduced the interest on the
new amount of P480 to 25 per cent, or P240 for two years, of which Cuizon paid P170, leaving a
balance of P70 on the interest.
● Another deed of pacto de retro sale was thereupon executed reciting now a consideration of P550
which represents the amount of P480 and the unpaid interest of P70.
● For failure of Cuizon to pay the interest at the maturity of this new obligation, petitioner finally
consolidated in himself the ownership of the lot and house, and on July 3, 1936, conveyed the same
to one Ricardo D. Omega for P580.
● On the same date, however, Ricardo D. Omega executed in favor of Anastacio Cuizon another
deed, wherein he obligated himself to resell the properties to Anastacio Cuizon within five years for
the sum of P580, adding thereto the value of repairs and other expenses which Omega might have
made thereon.
● Prosecuted on November 18, 1936, for the violation of the Usury Law, petitioner was convicted in
the trial court and the decision was affirmed by the Court of Appeals. A motion for reconsideration of
the affirmatory judgment having been denied, defendant took the instant appeal.

ISSUE: Whether the petitioner extended a usurious loan to Cuizon which constitute an unlawful cause to
the contract.

HELD: YES. Considering that Cuizon had already paid P405 on petitioner’s original loan to him of P200;
that the obligation has been renewed from year to year with the usurious interests on the original loan
capitalized accordingly, the consideration sustaining the last deed of sale could be no other than the
accumulated usurious interests, and, as such is illicit and renders the contract null and void. (Art. 1275,
Civil Code.) The offended party may recover from appellant whatever he has given, including the fruits or
interests thereof. A reserved right to institute a separate civil action for the recovery of the properties from
Ricardo D. Omega is therefore, unnecessary and the Court of Appeals should have ordered the accused
to return to the offended party the house and lot described in the documents Exhibits H and I, or the value
thereof of P1,630, with interest thereon. appellant, instead of paying to the offended party the sum of
P589, is hereby ordered to return to him the house and lot described in Exhibits H and I within thirty (30)
days from notice of this judgment, or, in default thereof, to pay the sum of P1,630, which is the assessed
value of the house and lot aforementioned, with legal interest thereon from the date of the complaint.

1. Arroyo v Berwin, 36 Phil 386 (Untalan)


PARTIES
IGNACIO ARROYO, plaintiff-appellant
ALFRED BERWIN, defendant- appellee.
FACTS
● That the defendant, as procurador judicial, represented Marcela Juaneza in the justice of the
peace court of Iloilo in proceeding for theft prosecuted by the plaintiff Ignacio Arroyo; that said
cause was decided by the said justice of the peace against the accused, and the latter
appealed to the Court of First Instance of Iloilo.
● The defendant requested the plaintiff to agree to dismiss the said criminal proceeding, and
stipulated with the plaintiff the following:
○ That his client Marcela Juaneza would recognize the plaintiff's ownership in the land
situated on Calle San Juan, suburb of Molo, municipality of Iloilo, Province of Iloilo,
where his said client ordered the cane cut, which land and which cut cane are
referred to in the cause for theft above-mentioned
○ That the plaintiff should obtain a Torrens title to the said land during the next term of
the court for the trial of cadastral cases, and that the defendant's client, Marcela
Juaneza, would not oppose the application for registration to be led by the said
applicant; provided that the plaintiff would ask the prosecuting attorney to dismiss the
said proceedings led against Marcela Juaneza and Alejandro Castro for the crime of
theft
● The plaintiff, having done his part in the agreement with the defendant, now prays the court
to render judgment ordering the defendant to comply with the agreement by causing the
latter’s said client to sign the document.
● Trial Court Ruling – in favor of defendant
○ Cause of the agreement is illegal

ISSUE
Whether or not the cause of the agreement between the parties is illegal

RULING – in favor of defendant


YES. An agreement by the owner of stolen goods to stifle the prosecution of the person charged
with the theft, for a pecuniary or other valuable consideration, is manifestly contrary to public
policy and the due administration of justice. In the interest of the public it is if the utmost
importance that criminals should be prosecuted, and that all criminal proceedings should be
instituted and maintained in the form and manner prescribed by law; and to permit an offender to
escape the penalties prescribed by law by the purchase of immunity from private individuals
would result in a manifest perversion of justice.

The order entered in the court below should, therefore, be affirmed, with the costs of this instance
against the appellant. So ordered.

1. Mactal v Melegrito, 111 Phil 363 (Hung)

1. Gutierrez Hnos v Orense, 28 Phil 571 (Lipana)

FACTS:
Engracio Orense had been the owner of a parcel of land in Guinobatan, Albay. On February 14, 1907,
Jose Duran, a nephew of Orense, sold the property for P1,500 to Gutierrez Hermanos, with Orense’s
knowledge and consent, executed before a notary a public instrument. The said public instrument
contained a provision giving Duran the right to repurchase it for the same price within a period of four
years from the date of the said instrument.

Orense continued occupying the land by virtue of a contract of lease. After the lapse of four years,
Gutierrez asked Orense to deliver the property to the company and to pay rentals for the use of the
property.

Orense refused to do so. He claimed that the sale was void because it was done without his authority and
that he did not authorize his nephew to enter into such contract.

Gutierrez Hermanos then charged Duran with Estafa, for having represented himself in the said
deed of sale to be the absolute owner of the land. During trial, Orense was presented as witness of the
defense. Because of this, the court acquitted Duran for charge of Estafa. On Mar 5, 1913 Gutierrez
Hermanos then filed a complaint in the CFI Albay against Engracio Orense.

Issue: Whether or not Orense is bound by Duran’s act of selling plaintiff’s property.

Held: Yes. It having been proven at the trial that he gave his consent to the said sale, it follows that the
defendant conferred verbal, or at least implied, power of agency upon his nephew Duran, who accepted it
in the same way by selling the said property. The principal must therefore fulfill all the obligations
contracted by the agent, who acted within the scope of his authority. (Civil Code, arts. 1709, 1710 and
1727) Article 1259 of the Civil Code prescribes: "No one can contract in the name of another without
being authorized by him or without his legal representation according to law. A contract executed in the
name of another by one who has neither his authorization nor legal representation shall be void, unless it
should be ratified by the person in whose name it was executed before being revoked by the other
contracting party.”- The sworn statement made by the defendant, Orense, while testifying as a witness at
the trial of Duran for Estafa, virtually confirms and ratifies the sale of his property effected by his nephew,
Duran, and, pursuant to article 1313 of the Civil Code, remedies all defects which the contract may have
contained from the moment of its execution.

1. Thunga Chui v Que Bentec, 2 Phil 261 (Layug)

1. Peyer v Peyer, 77 Phil 366 (Baclao)

1. Dauden-Hernaez v De los Angeles, 27 SCRA 1276 (Untalan)


PARTIES
MARLENE DAUDEN-HERNAEZ, petitioner
HON. WALFRIDO DELOS ANGELES, Judge of the Court of First Instance of Quezon City,
HOLLYWOOD FAR EAST PRODUCTIONS, INC., AND RAMON VALENZUELA, respondents

FACTS
● Petitioner Marlene Dauden Hernaez, a motion picture actress, had filed a complaint against
herein private respondents, Hollywood Far East Productions, Inc., and its President and
General Manager, Ramon Valenzuela, to recover P14,700.00 representing a balance
allegedly due said petitioner for her services as leading actress in two motion pictures
produced by the company, and to recover damages.
● Defense: the contract sued upon was not alleged to be in writing; that by Article 1358 the
writing was absolute and indispensable, because the amount involved exceeds five hundred
pesos; and that the second motion for reconsideration did not interrupt the period for appeal,
because it was not served on three days' notice.
● Trial Court Ruling – in favor of defendant
○ Claim of plaintiff was not evidenced by any written document, either public or
private" and the complaint "was defective on its face" for violating Articles 1356 and
1358 of the Civil Code of the Philippines.

ISSUE
Whether or not the contract should have been in writing for it to be valid

RULING – in favor of petitioner


NO. In general, contracts are valid and binding from their perfection regardless or form, whether
they be oral or written.

Article 1356 of the Code establishes only two exceptions, to wit:

a) Contracts for which the law itself requires that they be in some particular form (writing) in order to
make them valid and enforceable (the so-called solemn contracts). Of these typical example is the
donation of immovable property that the law (Article 749) requires to be embodied in a public
instrument in order "that the donation may be valid.”

b) Contracts that the law requires to be proved by some writing (memorandum) of its terms, as in
those covered by the old Statute of Frauds, now Article 1403(2) of the Civil Code. Their existence not
being provable by mere oral testimony (unless wholly or partly executed), these contracts are
exceptional in requiring a writing embodying the terms thereof for their enforceability by action in
court.

The contract sued upon by petitioner herein (compensation for services) does not come under either
exception. It is true that it appears included in Article 1358, last clause, providing that "all other contracts
where the amount involved exceeds five hundred pesos must appear in writing, even a private one." But
Article 1358 nowhere provides that the absence of written form in this case will make the agreement
invalid or unenforceable. On the contrary, Article 1357 clearly indicates that contracts covered by Article
1358 are binding and enforceable by action or suit despite the absence of writing.

ARTICLE 1357 If the law requires a document or other special form, as in the acts and contracts
enumerated in the following article, the contracting parties may compel each other to observe that
form, once the contract has been perfected. This right may be exercised simultaneously with the
action upon the contract.

The basic error in the lower court's decision lies in overlooking that in our contractual system it is
not enough that the law should require that the contract be in writing, as it does in Article 1358.
The law must further prescribe that without the writing the contract is not valid or not enforceable
by action.

WHEREFORE, the order dismissing the complaint is set aside, and the case is ordered remanded
to the court of origin for further proceedings not at variance with this decision. Costs to be
solidarily paid by private respondents Hollywood Far Fast Productions, Inc., and Ramon
Valenzuela.

1. Garcia v Bisaya, 97 Phil 609 (Layug)

FACTS

- On May 20, 1952, plaintiff filed a complaint against the defendants in the Court of First Instance of
Oriental Mindoro, alleging that: On November 12, 1938, defendants executed in favor of plaintiff a deed of
sale covering a parcel of land therein described.

- That the said land "was erroneously designated by the parties in the deed of sale as an unregistered
land (not registered under Act 496, nor under the Spanish Mortgage Law) when in truth and in fact said
land is a portion of a big mass of land registered under Original Certificate of Title No. 6579 in the Office
of the Register of Deeds of Oriental Mindoro"

- That despite persistent demand from plaintiff to have the error corrected, defendants have refused to do
so. Plaintiff, therefore, prayed for judgment ordering defendants to make the aforesaid correction in the
deed of sale.

- Defendants denied having executed the alleged deed of sale and pleaded prescription as a defense
 -
Without trial on the merits and merely upon motion, the lower court dismissed the case on the ground that
plaintiff's action had already prescribed. From this order plaintiff has appealed directly to the SC

ISSUES

1. WON the action for reformation of instruments has already prescribed

2. WON the action for reformation of instruments may prosper

HELD

1. NO
 - Both appellant and appellees apparently regard the present action as one for the reformation of
an instrument under Chapter 4, Title II, Book IV of the new Civil Code. Specifically, the object sought is
the correction of an alleged mistake in a deed of sale covering a piece of land. The action. being upon a
written contract, it should prescribe in ten years counted from the day it could have been instituted.
Obviously, appellant could not have instituted his action to correct an error in a deed until that error was
discovered. There being nothing in the pleadings to show that the error was discovered more than ten
years before the present action was filed on May 20, 1952, while, on the other hand, there is allegation
that the error was discovered "only recently", we think the action should not have been dismissed as
having already prescribed before the factual basis for prescription had been established and clarified by
evidence.

2. NO
 - Appellant's complaint states no cause of action, for it fails to allege that the instrument to the
reformed does not express the real agreement or intention of the parties. Such allegation is essential
since the object sought in an action for reformation is to make an instrument conform to the real
agreement or intention of the parties. But the complaint does not even allege what the real agreement or
intention was. Moreover, courts do not reform instruments merely for the sake of reforming them, but only
to enable some party to asserts right under them as reformed.


 Disposition Order of dismissal is affirmed not because of prescription but because of failure to state the
cause of action

1. Ayala Corporation v Ray Burton Development Corp, 294 SCRA 48 (Lipana)

FACTS: Petitioner Ayala Corporation (AYALA) is the owner of the Ayala estate located in Makati City.
The said estate was originally a raw land which was subdivided for sale into different lots devoted for
residential, commercial and industrial purposes.

On March 20, 1984, Karamfil Import-Export Company Ltd. (KARAMFIL) bought from AYALA a piece
of land consisting of 1,188 square meters, located at Salcedo Village, Makati City. The said land, which
is now the subject of this case.

[1]
The transaction was documented in a Deed of Sale which provides, among others, that the
vendee would comply with certain special conditions and restrictions on the use or occupancy of the land,
among which are -

[2]
Deed Restrictions:

a) The total height of the building to be constructed on the lot shall not be more than forty-two (42)
meters, nor shall it have a total gross floor area of more than five (5) times the lot area; and
b) The sewage disposal must be by means of connection into the sewerage system servicing the area.

[3]
Special Conditions:

a) The vendee must obtain final approval from AYALA of the building plans and specifications of the
proposed structures that shall be constructed on the land;
b) The lot shall not be sold without the building having been completed; and
c) Any breach of the stipulations and restrictions entitles AYALA to rescission of the contract.

On February 18, 1988, KARAMFIL sold the lot to Palmcrest Development and Realty Corporation
(PALMCREST). This deed was submitted to AYALA for approval in order to obtain the latter’s waiver of
the special condition prohibiting the resale of the lot until after KARAMFIL shall have constructed a
building thereon. AYALA gave its written conformity to the sale but reflecting in its approval the same
special conditions/restrictions as in the previous sale. PALMCREST did not object to the stipulated
[7]
conditions and restrictions.

PALMCREST in turn sold the lot to Ray Burton Development Corporation (RBDC), now respondent,
on April 11, 1988, with the agreement that AYALA retains possession of the Owner’s Duplicate copy of
the title until a building is erected on said parcel of land in accordance with the requirements and/or
[8]
restrictions of AYALA. AYALA gave its conformity to the sale, subject to RBDC’s compliance with the
special conditions/restrictions which were annotated in the deed of sale.

[12]
Like PALMCREST, RBDC was not also averse to the aforesaid conditions and restrictions.

Meanwhile, on November 28, 1989, RBDC, together with the Makati Developers Association, Inc.
(MADAI), of which RBDC is a member, and other lot owners, filed a complaint against AYALA before the
Housing and Land Use Regulatory Board (HLRB). The complaint sought the nullification of the very
same Deed Restrictions incorporated in the deeds of sale of the lots purchased by the complainants from
AYALA and annotated on their certificates of title, on the grounds, inter alia, that said restrictions
purportedly: (a) place unreasonable control over the lots sold by AYALA, thereby depriving the vendees
of the full enjoyment of the lots they bought, in violation of Article 428 of the Civil Code; (b) have been
superseded by Presidential Decree No. 1096 (the National Building Code) and Metro Manila Commission
Zoning Ordinance No. 81-01; (c) violate the constitutional provision on equal protection of the laws, since
the restrictions are imposed without regard to reasonable standards or classifications; and (d) are
[15]
contracts of adhesion since AYALA would not sell the lots unless the buyers agree to the deed
restrictions.

ISSUE: Whether the Deed of Restriction was a contract of adhesion.

HELD: NO. A contract of adhesion in itself is not an invalid agreement. This type of contract is as binding
as a mutually executed transaction. We have emphatically ruled in the case of Ong Yiu vs. Court of
[50]
Appeals, et. al. that “contracts of adhesion wherein one party imposes a ready-made form of contract
on the other x x x are contracts not entirely prohibited. The one who adheres to the contract is in reality
free to reject it entirely; if he adheres he gives his consent.” Thus, the validity and/or enforceability of a
contract of adhesion will have to be determined by the peculiar circumstances obtaining in each case and
the situation of the parties concerned.

In the instant case, the stipulations in the Deed Restrictions and Special Conditions are plain and
unambiguous which leave no room for interpretation. Moreover, there was even no attempt on the part of
RBDC to prove that, in the execution of the Deed of Sale on the subject lot, it was a weaker or a
disadvantaged party on account of its moral dependence, ignorance, mental weakness or other handicap.
On the contrary, as testified to by Edwin Ngo, President of RBDC, the latter is a realty firm and has been
[54] [55]
engaged in realty business, and that he, a businessman for 30 years, represented RBDC in the
[56]
negotiations and in the eventual purchase of the subject lot from PALMCREST. Edwin Ngo's
testimony proves that RBDC was not an unwary party in the subject transaction. Instead, Edwin Ngo has
portrayed RBDC as a knowledgeable realty firm experienced in real estate business.

1. Spouses Ermitano v CA, GR No. 127246 (Montenegro)

FACTS:
· Luis applied for a credit card from BPI Express Card Corp. (BECC), with Manuelita, Luis’ wife,
as extension cardholder, with credit limit of Php 10k per day. They often exceed this but
BECC didn't protest.
· Manuelita's bag was snatched, including the card, on August 29; thereafter, she called BECC
to inform it of the loss. After the call, she wrote a letter to BECC the following day;
surrendered Luis’ card and asked for replacement cards.
· On August 30, they were charged for purchases they didn't do (thru the lost card). Manuelita
wrote BECC again. BECC renewed card until March 1991.
· BECC continued to hold Luis liable for the unauthorized charges on the ground that there is a
stipulation in their contract that says: “In the event the card is lost or stolen, the cardholder
agrees to immediately report its loss or theft in writing to BECC . . . purchases made/incurred
arising from the use of the lost/stolen card shall be for the exclusive account of the cardholder
and the cardholder continues to be liable for the purchases made through the use of the
lost/stolen BPI Express Card until after such notice has been given to BECC and the latter
has communicated such loss/theft to its member establishments.”
· When Luis used his card at Caltex, it was dishonored ('cos the unauthorized charges were
added to his balance so he reached his credit limit). Luis insisted that purchases were made
after they reported the card loss. BECC cancelled their cards and told spouses to pay
immediately or else they will be sued for collection of money. Spouses sued BECC for
damages. RTC ruled in their favor. CA reversed the decision.

ISSUE: Should a cardholder pay for the unauthorized purchases made after he reported the card’s loss to
the bank?

RULING: NO. In the instant case, the spouses should not be held liable for the unauthorized charges and
must be awarded damages.

Prompt notice by the cardholder to the credit card company of the loss or theft of his card should be
enough to relieve the former of any liability occasioned by the unauthorized use of his lost or stolen card.
The questioned stipulation in this case, which still requires the cardholder to wait until the credit card
company has notified all its member-establishments, puts the cardholder at the mercy of the credit card
company which may delay indefinitely the notification of its members to minimize if not to eliminate the
possibility of incurring any loss from unauthorized purchases. Or, as in this case, the credit card company
may for some reason fail to promptly notify its members through absolutely no fault of the card-holder. To
require the cardholder to still pay for unauthorized purchases after he has given prompt notice of the loss
or theft of his card to the credit card company would simply be unfair and unjust. The Court cannot give
its assent to such a stipulation which could clearly run against public policy.

On the matter of the damages petitioners are seeking, we must delete the award of exemplary damages,
absent any clear showing that BECC acted in a wanton, fraudulent, reckless, oppressive, or malevolent
manner, as required by Article 2232 of the Civil Code. [The Court] likewise reduce the amount of moral
damages to P50,000.00, considering the circumstances of the parties to the case.

Syllabus cases
1. Hernaez v De los Angeles, 27 SCRA 1276 (Repeated)

1. Zamora v Miranda, GR No 162930 (Bercasio)


FACTS
● Petitioner – widow of the Fernando Zamora, son of the Alberto Zamora.
● Respondent (Beatriz Miranda) - cousin of Alberto Zamora; Beatriz was the registered owner
of a parcel of land. She is the daughter of Beatriz.
● PETITIONER
○ P’s father-in-law, Alberto Zamora, through Eduardo Cecilio (encargado) was in
possession of the property in question.
○ 1952 – P was designated by Alberto Zamora as his assistant in land matters. The
property was turned over to her and she was introduced to Cacilio.
○ Alberto told her that the property was owned by Beatriz whose family was residing in
Manila.
○ Oct 1972 – P claimed that she went to the residence of Beatriz and they talked
about the property and she drew a sketch depicting the location of the property.
○ Thereafter, P alleged that Beatriz sold to her the property for P50k. An
acknowledgement receipt was prepared, which Beatriz signed. There was a notation
“Documents for Agdao Property follows”.
○ P prepared the document relative to the Agdao property. She likewise claimed that
after 1972, she rented out portions of the property in question.
○ Cecilio allegedly continued to be her encargado as there were squatters on the
property.
○ Jan 1996 – the tenants reported to her that there were two men who went to the
property in question.
○ Feb 1996 – P met Atty. Cabebe and Mr. Joe Ang. She informed them that she was
the owner of the property in question as she bought it in 1972.
○ Sometime after, P learned that the occupants of the property in question were being
harassed and were told to vacate. P went to Manila and confronted Beatriz, and told
her that she would file a case in court.
○ P filed with the RTC an action for specific performance and annulment of sale.
● RESPONDENT
○ Her mother left Davao City in 1942 and resided in Manila, and she went to Davao
City for vacation only. Her mother owned the property in question.
○ When her mother (Beatriz) left Davao City, she did not appoint anyone to administer
or take care of her property. She (Rose Marie) disputed the claim of petitioner that
the latter visited her mother in 1972.
○ 26 Jun 1972 – she gave birth to her first child and that she and her mother, Beatriz,
took care of her child. She declared that the signature on the receipt dated October
9
23, 1972 was not the signature of her mother.
○ She identified the genuine signatures of her mother (Beatriz) which were reflected
on several IDs
● After examination by NBI people, it was found that the signatures were written by different
persons.
● TC: dismissed the complaint.

ISSUE: WON the receipt evidencing sale of real property be used as a basis of claim of ownership.

HELD: No.

RATIO:
● Article 1358 of the Civil Code provides that acts and contracts which have for their object the
transmission of real rights over immovable property or the sale of real property must appear
in a public document. If the law requires a document or other special form, the contracting
parties may compel each other to observe that form, once the contract has been perfected.
● Fule v. Court of Appeals – the embodiment of certain contracts in a public instrument, is only
for convenience, and registration of the instrument only adversely affects third parties. Formal
requirements are, therefore, for the benefit of third parties. Non-compliance therewith does
not adversely affect the validity of the contract nor the contractual rights and obligations of the
parties thereunder.
● However, in this case, the trial court dismissed petitioner's complaint on the ground that the
receipt dated October 23, 1972 (Exhibit "B") is a worthless piece of paper, which cannot be
made the basis of petitioner’s claim of ownership over the property as Mr. Arcadio Ramos, an
NBI handwriting expert, established that the signature appearing on the said receipt is not the
signature of respondent Beatriz Miranda.
● The receipt dated October 23, 1972 cannot prove ownership over the subject property as
respondent Beatriz Miranda's signature on the receipt, as vendor, has been found to be
forged by the NBI handwriting expert, the trial court and the Court of Appeals.
● As the receipt dated October 23, 1972 has no evidentiary value to prove petitioner's claim of
ownership over the property in question, there is no need to discuss the other issues. raised
by petitioner based on the assumption that she has a valid claim over the subject property.

FALLO: WHEREFORE, the petition is DENIED. The Court of Appeals' Decision dated September 17,
2003 in CA-G.R. CV No. 74156, and its Resolution dated February 9, 2004, are hereby AFFIRMED.

1. SMPI v BF Homes, GR No 169343 (Hung)

1. WT Construction Inc v Province of Cebu, GR No 208984 (Baclao)

FACTS:

In 2005, the Province of Cebu was chosen to host the 12th Association of Southeast Asian Nations
(ASEAN) Summit scheduled on December 10, 2006. To cater to the event, it decided to construct the
Cebu International Convention Center (CICC or the project), which would serve as venue for the ASEAN
Summit.

The Province of Cebu conducted a public bidding for the project and WTCI emerged as the winning
bidder for the construction of Phase I thereof which consists of the substructure of CICC. On July 26,
2006, after completing Phase I and receiving payment therefor, WTCI again won the bidding for Phase II
of the project involving the adjacent works on CICC.

As Phase II neared completion, the Province of Cebu caused WTCI to perform additional works on the
project. Cognizant of the need to complete the project in time for the ASEAN Summit, and with the
repeated assurances that it would be promptly paid, WTCI agreed to perform the additional works
notwithstanding the lack of public bidding.

In November 2006, weeks before the scheduled ASEAN Summit, WTCI completed the project, including
the additional works and, accordingly, demanded payment therefor. WTCI billed the Province of Cebu the
amount of P175,951,478.69 corresponding to the added cost for the site development and extended
structural and architectural works. In a separate letter WTCI billed the Province of Cebu the amount of
P85,266,407.97 representing the cost for the additional electrical and plumbing works. The Province of
Cebu, however, refused to pay thereby prompting WTCI to send a Final Billing dated February 21, 2007
where it demanded payment of the aggregate sum of P261,217,886.66.

WTCI reiterated its demand for payment but the Province of Cebu still refused to pay. Thus, WTCI filed a
complaint for collection of sum of money before the RTC. For its defense, the Province of Cebu admitted
the existence of the additional works but maintained that there was no contract between it and WTCI
therefor. It also claimed that the additional works did not undergo public bidding as required by Republic
Act No. (RA) 9184, otherwise known as the "Government Procurement Reform Act.”

The RTC ruled in favor of WTCI and ordered the Province of Cebu to pay P257,413,911.73 with legal
interest at the rate of 12% per annum. The RTC found that there was a perfected oral contract between
the parties for the additional works on CICC, and that WTCI must be duly compensated therefor under
the doctrine of quantum meruit; otherwise, the Province of Cebu would be unjustly enriched.

The CA affirmed the RTC's Order however The CA pointed reduced the interest rate from 12% to 6% per
annum is warranted given that the liability of the Province of Cebu did not arise from a loan or
forbearance of money but from the non¬payment of services rendered by WTCI.

WTCI maintained that the obligation is one for forbearance of money since its performance of the
additional works was a mere financial accommodation to the Province of Cebu, thereby warranting the
imposition of legal interest at the rate of 12% per annum, as originally decreed by the RTC.

ISSUE: Whether or not the liability of the Province of Cebu is in the nature of a loan or forbearance of
money.

HELD:

What is at issue is whether the liability of the Province of Cebu involves a forbearance of money, based
on WTCI's claim that it merely advanced the cost of the additional works. The term "forbearance," within
the context of usury law, has been described as a contractual obligation of a lender or creditor to refrain,
during a given period of time, from requiring the borrower or debtor to repay the loan or debt then due and
payable.

Forbearance of money, goods, or credit refers to arrangements other than loan agreements where a
person acquiesces to the temporary use of his money, goods or credits pending the happening of certain
events or fulfillment of certain conditions such that if these conditions are breached, the said person is
entitled not only to the return of the principal amount given, but also to compensation for the use of his
money equivalent to the legal interest since the use or deprivation of funds is akin to a loan.

Applying the foregoing standards to the case at hand, the Court finds that the liability of the Province of
Cebu to WTCI is not in the nature of a forbearance of money as it does not involve an acquiescence to
the temporary use of WTCI's money, goods or credits. Rather, this case involves WTCI's performance of
a particular service, i.e., the performance of additional works on CICC, consisting of site development,
additional structural, architectural, plumbing, and electrical works thereon.

Verily, the Court has repeatedly recognized that liabilities arising from construction contracts do not
partake of loans or forbearance of money but are in the nature of contracts of service. The liability arising
from the non-payment for the construction works, do not partake of a loan or forbearance of money but is
more in the nature of a contract of service.

The Court, therefore, sustains the CA's ruling that the rate of legal interest imposable on the liability of the
Province of Cebu to WTCI is 6% per annum.

When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the
absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from
judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.

When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the
amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum.

No interest, however, shall be adjudged on unliquidated claims or damages except when or until the
demand can be established with reasonable certainty. Accordingly, where the demand is established with
reasonable certainty, the interest shall begin to run from the time the claim is made judicially or
extrajudicially but when such certainty cannot be so reasonably established at the time the demand is
made, the interest shall begin to run only from the date the judgment of the court is made. The actual
base for the computation of legal interest shall, in any case, be on the amount finally adjudged.

1. Tinsay v Yusay, 47 Phil 639 (Layug)


Topic: Classification of Contacts according to name (b) Innominate, NCC 1307

Those which are not given any names or designations are innominate contracts.
innominate contracts shall be governed by the following:

· Stipulations of the parties


· Provisions of Obligations and Contracts in the Civil Code

· Rules governing the most analogues nominate contracts

· Customs of the Place

FACTS:
(Guys, please read the case, 4 pages lang siya masyado kasing detailed yung proceedings need talaga
basahin para magets yung facts na nilagay ko general overview lang lacks details cause important lahat)

- Juan Yusay died leaving a widow, Juana Servando. After his death his descendants (5 children:
Candido, Numeriana, Jovito, Jovita and Petra) made a partition by a private instrument of certain lands,
community property of his marriage to Juana.

- Though Juana took no part in the partition her interest in the land was nevertheless distributed among
the descendants (5 children). On the strength of the partition the descendants, among them, Jovita and
Petra, went into possession of the respective portions allotted to them in said partition.
- Some years later the portions of Jovita and Petra from the lands were registered in their names in a
cadastral proceeding.

- Upon the subsequent death of the widow Juana, the appellant as heirs of the widow claimed a share of
her interest in the land.

ISSUE: W/N The attempt to partition Juana’s land among her heirs, constituting a partition of a future
inheritance is valid

Held: NO.
The court ruled
(a) That, Juana not being a party to the partition agreement, the agreement standing alone was
ineffective as to her interest in the property partitioned;
(b) that the partition of her interest among her heirs before her death constituted a partition of a
future inheritance and was therefore invalid under the second paragraph of article 1271 of the
Civil Code;
(c) that, nevertheless, if the appellants have accepted the benefit of the partition agreement to the
prejudice of the other heirs and refuse to make restitution of the property received by them by virtue of
said agreement, they are estopped from repudiating the agreement and from claiming an interest in the
property allotted to the other heirs.

1. Dizon v Gaborro, 83 SCRA 688 (Lipana)

Facts:
Petitioner, Jose P. Dizon, was the owner of the three parcels of land, situated in Mabalacat, Pampanga.
He constituted a first mortgage to DBP to secure a loan of P38,000.00 and a second mortgage to PNB
amounting P93,831.91.

Petitioner defaulted in the payment of his debt, therefore, the Development Bank of the Philippines
foreclosed the mortgage extrajudicially. Gaborro became interested in the lands of Dizon. But since the
property was already foreclosed by the DPB. They then entered into a contract captioned as “Deed of
sale with assumption of mortgage” and the second contract executed the same day, is called “Option to
Purchase Real Estate” The sum of P131,813.91 which purports to be the consideration of the sale was
not actually paid by Alfredo G. Gaborro to the petitioner. The said amount represents the aggregate debts
of the petitioner with the Development Bank of the Philippines trial the Philippine National Bank.

After the execution of said contracts, Alfredo G. Gaborro took possession of the three parcels of land.
Gaborro made several payments to the DBP and PNB. He improved, cultivated the kinds raised
sugarcane and other crops produce.

Jose P. Dizon through his lawyer, wrote a letter to Gaborro informing him that he is formally offering
reimburse Gaborro of what he paid to the banks. Gaborro did not agree to the demands of the petitioner,
hence, Jose P. Dizon instituted a complaint in the Court of First Instance of Pampanga, alleging that the
documents Deed of Sale With Assumption of Mortgage and the Option to Purchase Real Estate did not
express the true intention and agreement between the parties. Petitioner, contended that the two deeds
constitute in fact a single transaction that their real agreement was not an absolute sale of the land but
merely an equitable mortgage or conveyance by way of security for the reimbursement or refund by Dizon
to Gaborro of any and all sums which the latter may have paid on account of the mortgage debts in favor
of the DBP and the PNB.

Issue: Whether or not the contract showed the true agreement between the parties.

Held:
No. In the light of the foreclosure proceedings and sale of the properties, a legal point of primary
importance here, as well as other relevant facts and circumstances, We agree with the findings of the trial
and appellate courts that the true intention of the parties is that respondent Gaborro would assume and
pay the indebtedness of petitioner Dizon to DBP and PNB, and in consideration therefor, respondent
Gaborro was given the possession, the enjoyment and use of the lands until petitioner can reimburse fully
the respondent the amounts paid by the latter to DBP and PNB, to accomplish the following ends: (a)
payment of the bank obligations; (b) make the lands productive for the benefit of the possessor,
respondent Gaborro, (c) assure the return of the land to the original owner, petitioner Dizon, thus
rendering equity and fairness to all parties concerned.
In view of all these considerations, the law and Jurisprudence, and the facts established. We find that the
agreement between petitioner Dizon and respondent Gaborro is one of those innominate contracts under
Art. 1307 of the New Civil Code whereby petitioner and respondent agreed "to give and to do" certain
rights and obligations respecting the lands and the mortgage debts of petitioner which would be
acceptable to the bank. but partaking of the nature of the antichresis insofar as the principal parties,
petitioner Dizon and respondent Gaborro, are concerned.

1. Garcia v Bisaya, 97 Phil 609 (Repeated)

1. Bentir v Leande, 330 SCRA 591 (Untalan)


PARTIES
YOLANDA ROSELLO-BENTIR, SAMUEL PORMIDA and CHARITO PORMIDA, petitioners
HONORABLE MATEO M. LEANDA, in his capacity as Presiding Judge of RTC, Tacloban City, Branch 8,
and LEYTE GULF TRADERS, INC., respondents

FACTS
● On May 15, 1992, respondent Leyte Gulf Traders, Inc. (herein referred to as respondent
corporation) filed a complaint for reformation of instrument against petitioners Yolanda
Rosello-Bentir and the spouses Samuel and Charito Pormida.
● Respondent corporation alleged that it entered into a contract of lease of a parcel of land
with petitioner Bentir for a period of twenty (20) years starting May 5, 1968. The lease was
extended for another four (4) years or until May 31, 1992.
● On May 5, 1989, petitioner Bentir sold the leased premises to petitioner spouses Samuel
Pormada and Charito Pormada.
● Respondent corporation questioned the sale alleging that it had a right of first refusal. It
sought the reformation of the expired contract of lease on the ground that its lawyer
inadvertently omitted to incorporate in the contract of lease executed in 1968, the verbal
agreement or understanding between the parties that in the event petitioner Bentir leases or
sells the lot after the expiration of the lease, respondent corporation has the right to equal the
highest offer.
● RTC ruling – in favor of petitioners
■ The RTC first dismissed the case, saying that the action for reformation had
already prescribed.
■ On appeal, the respondent judge reversed the order of dismissal:
● Included in said covenant of lease is the verbal understanding and
agreement between the contracting parties, that when the defendant
(as lessor) will sell the subject property, the plaintiff as (lessee) has
the "right of first refusal", that is, the right to equal the offer of any
other prospective third-party buyer. This agreement (sic) is made
apparent by paragraph 4 of the lease agreement stating:
● 4. IMPROVEMENT. The lessee shall have the right to erect on the
leased premises any building or structure that it may desire without
the consent or approval of the Lessor . . . provided that any
improvements existing at the termination of the lease shall remain as
the property of the Lessor without right to reimbursement to the
Lessee of the cost or value thereof."
● That the foregoing provision has been included in the lease
agreement if only to convince the defendant-lessor that plaintiff
desired a priority right to acquire the property (by purchase, upon
expiration of the effectivity of the deed of lease.
● CA – affirmed RTC decision

ISSUE
Whether or not the contract may be reformed

RULING – in favor of respondents


NO. The right of reformation is necessarily an invasion or limitation of the parol evidence rule since, when
a writing is reformed, the result is that an oral agreement is by court decree made legally effective.
Consequently, the courts, as the agencies authorized by law to exercise the power to reform an
instrument, must necessarily exercise that power sparingly and with great caution and zealous care.
Moreover, the remedy, being an extraordinary one, must be subject to limitations as may be provided by
law. Our law and jurisprudence set such limitations, among which is laches. A suit for reformation of an
instrument may be barred by lapse of time. The prescriptive period for actions based upon a written
contract and for reformation of an instrument is ten (10) years under Article 1144 of the Civil Code.
Prescription is intended to suppress stale and fraudulent claims arising from transactions like the one at
bar which facts had become so obscure from the lapse of time or defective memory. In the case at bar,
respondent corporation had ten (10) years from 1968, the time when the contract of lease was
executed, to file an action for reformation. Sadly, it did so only on May 15, 1992 or twenty-four (24)
years after the cause of action accrued, hence, its cause of action has become stale, hence, time-
barred.

Since the purpose of an action for declaratory relief is to secure an authoritative statement of the
rights and obligations of the parties for their guidance in the enforcement thereof, or compliance
therewith, and not to settle issues arising from an alleged breach thereof, it may be entertained
only before the breach or violation of the law or contract to which it refers. Here, respondent
corporation brought the present action for reformation after an alleged breach or violation of the
contract was already committed by petitioner Bentir. Consequently, the remedy of reformation no
longer lies.
WHEREFORE, the petition is hereby GRANTED. The Decision of the Court of Appeals dated
January 17, 1997 is REVERSED and SET ASIDE. The Order of the Regional Trial Court of Tacloban
City, Branch 7, dated December 15, 1995 dismissing the action for reformation is REINSTATED.

1. Sarming v Dy, 383 SCRA 131 (Bercasio)


FACTS:
● Petitioners are the successors-in-interest of Silveria (defendant)
● Respondents Cresencio Dy and Ludivina Dy-Chan are the successors-in-interest of Delfino
(plaintiff)) – he is the buyer of one of the lots subject of this case. They were joined in this
petition by the successors-in-interest of Isabel, Juan, Hilario, Ruperto, Tomasa, and Luisa
and Trinidad who are the descendants of Venancio and Jose, the brothers of Silveria.
● Dy alleged that they, with the exception of Alejandra Delfino, are the heirs of Valentina Unto
Flores, who owned several lots located at Dumaguete City.
● After the death of Valentina Unto Flores, her three children, namely: Jose, Venancio, and
Silveria, took possession of Lot 5734 with each occupying a one-third portion. Upon their
death, their children and grandchildren took possession of their respective shares. The other
parcel, Lot 4163 which is solely registered under the name of Silveria, was sub-divided
between Silveria and Jose. Two rows of coconut trees planted in the middle of this lot serves
as boundary line.
● In January 1956, Luisa, Trinidad, Ruperto and Tomasa, grandchildren of Jose and now
owners of one-half of Lot 4163, entered into a contract with plaintiff Alejandra Delfino, for the
sale of one-half share of Lot 4163 after offering the same to their co-owner, Silveria, who
declined for lack of money. Silveria did not object to the sale of said portion to Alejandra
Delfino.
● Before preparing the document of sale, the late Atty. Deogracias Pinili, Alejandras lawyer,
called Silveria and the heirs of Venancio to a conference where Silveria declared that she
owned half of the lot while the other half belonged to the vendors; and that she was selling
her three coconut trees found in the half portion offered to Alejandra Delfino for P15. When
Pinili asked for the title of the land, Silveria Flores, through her daughter, Cristita Corsame,
delivered Original Certificate of Title No. 4918-A, covering Lot No. 5734, and not the correct
title covering Lot 4163. At that time, the parties knew the location of Lot 4163 but not the OCT
Number corresponding to said lot.
● Believing that OCT No. 4918-A was the correct title corresponding to Lot 4163, Pinili
prepared a notarized Settlement of Estate and Sale (hereinafter deed) duly signed by the
parties on January 19, 1956.As a result, OCT No. 4918-A was cancelled and in lieu thereof,
TCT No. 5078 was issued in the names of Silveria Flores and Alejandra Delfino, with one-half
share each. Silveria Flores was present during the preparation and signing of the deed and
she stated that the title presented covered Lot No. 4163.
● Alejandra Delfino immediately took possession and introduced improvements on the
purchased lot, which was actually one-half of Lot 4163 instead of Lot 5734 as designated in
the deed.
● Two years later, when Alejandra Delfino purchased the adjoining portion of the lot she had
been occupying, she discovered that what was designated in the deed, Lot 5734, was the
wrong lot. She sought the assistance of Pinili who approached Silveria and together they
inquired from the Registry of Deeds about the status of Lot 4163. They found out that OCT
No. 3129-A covering Lot 4163 was still on file.Alejandra Delfino paid the necessary fees so
that the title to Lot 4163 could be released to Silveria Flores, who promised to turn it over to
Pinili for the reformation of the deed of sale. However, despite repeated demands, Silveria
did not do so, prompting Alejandra and the vendors to file a complaint against Silveria for
reformation of the deed of sale with damages before the Regional Trial Court of Negros
Oriental, Branch 41, docketed as Civil Case No. 3457.
● In her answer, Silveria Flores claimed that she was the sole owner of Lot 4163 as shown by
OCT No. 3129-A and consequently, respondents had no right to sell the lot. According to her,
the contract of sale clearly stated that the property being sold was Lot 5734, not Lot 4163.
She also claimed that respondents illegally took possession of one-half of Lot 4163. She thus
prayed that she be declared the sole owner of Lot 4163 and be immediately placed in
possession thereof. She also asked for compensatory, moral, and exemplary damages and
attorneys fees.
● TC: ordered for the reformation of the contract.
● CA: affirmed.
ISSUE
● WON there is a cause of action for reformation of the deed.
● WON the reformation of the deed is proper.

HELD:

DOCTRINE: Reformation is that remedy in equity by means of which a written instrument is made or
construed so as to express or conform to the real intention of the parties. As provided in Article 1359 of
the Civil Code. An action for reformation of instrument under this provision of law may prosper only upon
the concurrence of the following requisites: (1) there must have been a meeting of the minds of the
parties to the contact; (2) the instrument does not express the true intention of the parties; and (3) the
failure of the instrument to express the true intention of the parties is due to mistake, fraud, inequitable
conduct or accident.

RATIO:
PETITIONERS: absence of cause of action against Flores because they were not parties to the contract
sought to be reformed.
1.) The SC held that a close perusal of the deed showed that Flores was a party to the
contract. She was not only the seller but also one of the heirs of entitled to the estate of
Venancio and Maxima. Her name did not appear as one of the sellers of one-half lot to
Delfino because she never sold her share. What was sold was the one-half share of
Jose. It is also established that it was Silveria herself who delivered the subject lot to the
vendee Delfino.
PETITIONER: respondents failed to show a cause of action for the reformation of the instrument in
question.
1.) All of the requisites for the reformation of an instrument are present in this case.
2.) There was a meeting of the minds between the parties to the contract but the deed did
not express the true intention of the parties due to mistake in the designation of the lot
subject of the deed. There is no dispute as to the intention of the parties to sell the land
to Alejandra Delfino but there was a mistake as to the designation of the lot intended to
be sold as stated in the Settlement of Estate and Sale.
3.) While intentions involve a state of mind which may sometimes be difficult to decipher,
subsequent and contemporaneous acts of the parties as well as the evidentiary facts as
proved and admitted can be reflective of ones intention. – The totality of the evidence
clearly indicates that what was intended to be sold to Delfino was Lot 4163 and not Lot
5734. As found by both courts below, there are enough bases to support such
conclusion. We particularly note that one of the stipulated facts during the pre-trial is that
one-half of Lot 4163 is in the possession of plaintiff Alejandra Delfino since 1956 up to
the present.] Now, why would Alejandra occupy and possess one-half of said lot if it was
not the parcel of land which was the object of the sale to her? Besides, as found by the
Court of Appeals, if it were true that Silveria Flores was the sole owner of Lot 4163, then
she should have objected when Alejandra Delfino took possession of one-half thereof
immediately after the sale. Additionally, we find no cogent reason to depart from the
conclusion of both the Court of Appeals and the trial court, based on the evidence on
record, that Silveria Flores owns only one-half of Lot 4163. The other half belongs to her
brother Jose, represented now by his grandchildren successors-in-interest. As such, the
latter could rightfully sell the land to Alejandra Delfino.
4.) Furthermore, on record, it has been shown that a spot investigation conducted by a duly
licensed surveyor revealed that Lot 4163 is subdivided into two portions, one belonging
to Silveria Flores and the other to the heirs of Jose Flores. As found by the trial court, if
indeed it was Lot 5734 that was sold, then Silveria Flores was occupying more than her
share of the inherited lot.
5.) As a matter of fact, the trial court also found that in spite of her title over Lot 4163,
Silveria recognized the right of Joses grandchildren over one-half portion of the property.
The trial court gave credence to the testimony of Trinidad Flores, one of the
grandchildren, who testified.

FALLO
WHEREFORE, the decision of the Court of Appeals in CA-G.R. CV No. 39401 is AFFIRMED with
MODIFICATION. It is hereby ordered that the document entitled Settlement of Estate and Sale be
reformed by changing the phrase Lot 5734 to Lot 4163 found in the sixth paragraph of the deed, thereby
ceding in favor of respondents one-half portion of Lot 4163 instead of Lot 5734. The award to
respondents of attorneys fees in the amount of P2,000 is affirmed. However, the award of actual
damages in the amount of P5,000 and of moral damages in the amount of P10,000 are both SET ASIDE.
No pronouncement as to costs

1. Cosio v Palileo, 14 SCRA 170 (Baclao)

11. Emilio v Rapal, 617 SCRA 199 (Montenegro)

FACTS:

Petitioner, by virtue of a grant from the National Housing Authority (NHA), became the registered owner
of a parcel of land situated in Caloocan City. Respondent, on the other hand, had been leasing a portion
of the house situated therein.

Atty. Balao-Ga of the Public Attorneys Office notarized a document entitled Sale and Transfer of Rights
over a Portion of a Parcel of Land executed by petitioner whereby she sold to respondent 27 sq. m. of her
lot, together with the house constructed thereon, for a consideration of P90,000.00.

Afterwards, the petitioner filed a case in the RTC claiming the reformation of the said document for the
reason that she did not understand its text and her true intention was not reflected.

RTC ruled in favor of the petitioner. However, the CA reversed the decision of the trial court stating that
the she failed to prove her reason and the absence of proof of illiteracy.
ISSUE: Whether or not the reformation of the deed of sale and transfer of rights between the parties at
bar can be reformed.

HELD:
No. Petitioner having admitted the existence and execution of the instrument, what remains to be
resolved is whether the contract expressed the true intention of the parties; if not, whether it was due to
mistake, fraud, inequitable conduct or accident. However, the petitioner failed to establish the burden of
proving the same. It is to be noted that Notarized documents, like the deed in question, enjoy the
presumption of regularity which can be overturned only by clear, convincing and more than merely
preponderant evidence.