APPLICATION OF PAYMENTS

1. REPARATIONS Surety company, under Article 1254 of judgment, Civil Code, where
COMMISSION VS there is no imputation of payment made by either judgment, debtor
UNIVERSAL or creditor, The debt which is the most onerous to the debtor shall be
DEEP-SEA deemed to have been satisfied, hence the obligation of the surety
SURETY AND company shall be only P43,643.00, instead of P53,643.00. Thus the
FIDELITY CO. - 4 surety( resp. responsible only for the principal obligation not the
10,000)

(basta hinde liable ang mga sureties/ guarantors in application of

payment- but their obligation to their principal na i subsidize
yung whole amount agreed[between their principal]) -because it
must be 1 debtor and 1 creditor with many debts due and
demandable is only between them.

Since in the case the first “installment “ of the 10,000 was agreed to
pa paid within 24 months it cannot be considered to be a part of those
due, it is a separate consideration from those payments in
installments.

The rules contained in Articles 1252 to 1254 of judgment, Civil Code

apply to a person owing several debts of judgment, same kind to a
single creditor. They cannot be made applicable to a person
whose obligation as a mere surety is both contingent and
singular, which in this case is the full and faithful compliance with the
terms of the contract of conditional purchase and sale of reparations
goods. The obligation included the payment, not only of the first
installment but also of the ten (10) equal yearly installments. The
amount of P10,000.00 was, indeed, deducted from judgment.

1254- if legal application is made and it is still insufficient it must

be applied to the most onerous debt (pinaka burdensome), if it
cannot be determined like in this case it must be by pro rata
(proportionate).

2. PACULDO VS As provided in Article 1252 of the Civil Code, the right to specify
REGALADO - 5 which among his various obligations to the same creditor is to
be satisfied first rests with the debtor.
 In the case at bar, at the time petitioner made the payment, he made
it clear to respondent that they were to be applied to his rental
obligations on the Fairview wet market property. Though he entered
into various contracts and obligations with respondent, all the
payments made, about P11,000,000.00 were to be applied to rental
and security deposit on the Fairview wet market property. However,
respondent applied a big portion of the amount paid by petitioner to
the satisfaction of an obligation which was not yet due and
demandable- the payment of the eight heavy equipments.

Under the law, if the debtor did not declare at the time he made the
payment to which of his debts with the creditor the payment is to be
applied, the law provided the guideline — no payment is to be made
to a debt that is not yet due and the payment has to be applied first
to the debt most onerous to the debtor. In the instant case, the
purchase price of the eight (8) heavy equipment was not yet due at
the time the payment was made, for there was no date set for such
payment. Neither was there a demand by the creditor to make the
obligation to pay the purchase price due and demandable. Hence,
the application made by respondent is contrary to the provision of
the law. The lease over the Fairview wet market property is the most
onerous among all the obligations of petitioner to respondent. It was
established that the wet market is a going-concern and that petitioner
has invested about P35,000,000.00, in the form of improvements, on
the property. Hence, petitioner would stand to lose more if the lease
would be rescinded, than if the contract of sale of heavy equipment
would not proceed.|||

DATION IN PAYMENT

3. DBP VS CA- janelle Like in all contracts, the intention of the parties to the dation in
payment is paramount and controlling. The contractual intention
determines whether the property subject of the dation will be
considered as the full equivalent of the debt and will therefore serve
as full satisfaction for the debt. "The dation in payment extinguishes
the obligation to the extent of the value of the thing delivered, either
as agreed upon by the parties or as may be proved, unless the
parties by agreement, express or implied, or by their silence,
 consider the thing as equivalent to the obligation, in which case the
obligation is totally extinguished
4. FILINVEST CREDIT No dacion en pago here since there’s nothing in the evidence to show
CORP VS PHILIPPINE that Filinvest consented or intended that the mere delivery to and
ACETYLENE CO - 3 acceptance by him of the vehicle be construed as actual payment or
more specifically, dacion en pago. The mere return of the mortgaged
motor vehicle by the mortgagor (herein appellant) to the mortgagee,
(appellee), does not constitute dation in payment or dacion en pago
in the absence, express or implied of the true intention of the parties.
Dacion en pago, (according to Manresa) is the transmission of the
ownership of a thing by the debtor to the creditor as an accepted
equivalent of the performance of obligation. In dacion en pago, as a
special mode of payment, the debtor offers another thing to the
creditor who accepts it as equivalent of payment of an outstanding
debt. The undertaking really partakes in one sense of the nature of
sale, that is, the creditor is really buying the thing or property of the
debtor, payment for which is to be charged against the debtor's debt.
As such, the essential elements of a contract of sale, namely,
consent, object certain, and cause or consideration must be present.
In its modern concept, what actually takes place in dacion en pago is
an objective novation of the obligation where the thing offered as an
accepted equivalent of the performance of an obligation is
considered as the object of the contract of sale, while the debt is
considered as the purchase price. In any case, common consent is
an essential prerequisite, be it sale or innovation to have the effect of
totally extinguishing the debt or obligation.

TENDER OF PAYMENT

5. DE GUZMAN VS On November 29, 1977, the trial court rendered a decision approving
CA - 4 a compromise between Pilar de Guzman, Rolando Gestuvo, and
Minerva Gestuvo, as sellers, and Leonida P. Singh, the buyer. Singh
agreed to pay de Guzman and the Gestuvos, now petitioners,
P250,000 for two lots located at Cementina Street, Pasay City at ten
o’clock in the morning of January 27, 1978, in the courtroom of Judge
Bautista of Pasay City. In case no payment was made, then the
 petitioners would be immediately entitled to a writ of execution for the
possession of the said lots.

Ben Restrivera, in behalf of Singh, on January 24, 1978, deposited

P220,000 with the clerk of court. Restrivera on January 27, 1978, tried
to deliver to Antonio G. Barredo, petitioners’ counsel, P5,000 cash and
P25,000 in postdated checks, or P30,000 to complete the price of
P250,000. Barredo refused to accept that payment. On January 30,
1978 (3 days after the deadline) Singh deposited with the clerk of court
cash of P30,000.

On that same day, January 30, the petitioners filed a motion for
execution. It was opposed by Singh. Judge Bautista in his order of
March 27, 1978, denied the motion and ordered the petitioners to
execute the corresponding deed of sale. He ordered the clerk of court
to release the P250,000 to them.

(Check facts)
The private respondent had substantially complied with the terms
and conditions of the compromise agreement. Her failure to deliver
to the petitioners the full amount on January 27, 1978, was not her
fault. The blame lies with the petitioners. The deposit of the balance
of the purchase price was made in good faith and that the failure of
the private respondent to deposit the purchase price on the date
specified was due to the petitioners who also make no claim that
they had sustained damages because of the two days delay, there
was substantial compliance with the terms and conditions of the
compromise agreement.

6. TLG VS FLORES- There is no question that in cases of consignation the debtor is entitled
5 as a matter of right to withdraw the deposit made with the court,
before the consignation is accepted by the creditor or prior to the
judicial approval of such consignation. This is explicit from the second
paragraph of Article 1260 of the new Civil Code which states that:
"Before the creditor has accepted the consignation, or before a judicial
declaration that the consignation has been properly made, the debtor
may withdraw the thing or the sum deposited, allowing the obligation
to remain in force".
 In the case at bar, the case was dismissed before the amount
deposited was either accepted by the creditor or a declaration made
by the Court approving such consignation. Such dismissal rendered
the consignation ineffectual. Under such circumstances it was
incumbent upon Respondent to have allowed the withdrawal by
petitioner of the sums of money deposited by it with the Court.

7. MCLAUGHLIN VS Tender of payment must be distinguished from consignation. Tender

CA - 1 is the antecedent of consignation, that is, an act preparatory to the
consignation, which is the principal, and from which are derived the
immediate consequences which the debtor desires or seeks to
obtain. Tender of payment may be extrajudicial, while consignation is
necessarily judicial, and the priority of the first is the attempt to make
a private settlement before proceeding to the solemnities of
consignation. (8 Manresa 325). (123 SCRA 160,173)
HE still remains liable because tender of payment is not equivalent to
consignation- he should have consigned the amount in court.
8. SOCO VS The issue in this case is whether or not the consignation of the
MILITANTE - 2 rentals was valid or not to discharge effectively the lessee’s obli to
pay. Here, the essential requisites for a valid consignation must be
complied with fully and strictly in accordance with Articles 1256 to
1261.

Art. 1261- if the creditor to whom tender of payment has been made
refuses w/o just cause to accept it, the debtor shall be released the
responsibility by the consignation of the thing or sum due.
Consignation alone shall produce the same effect in the following
cases: 1) When the creditor is absent or unknown or does not appear
at the place of payment; 2) when he is incapacitated to receive the
payment at the time it is due; 3) when, without just cause, he refuses
to give a receipt; 4) when two or more persons claim the same right
to collect; 5) when the title of the obli has been lost.
9. SOTTO VS Did the court act with authority and in the judicious exercise of its
MIJARES - 3 discretion in ordering the defendants to make the deposit but without
the condition they had stated? Whether or not to deposit at all the
amount of an admitted indebtedness, or to do so under certain
conditions, is a right which belongs to the debtor exclusively. If he
refuses he may not be compelled to do so, and the creditor must fall
back on the proper coercive processes provided by law to secure or
satisfy his credit, as by attachment, judgment and execution. From the
 viewpoint of the debtor a deposit such as the one involved here is in
the nature of consignation, and consignation is a facultative remedy
which he may or may not avail of. If made by the debtor, the creditor
merely accepts it, if he wishes; or the court declares that it has been
properly made, in either of which events the obligation is ordered
cancelled. Indeed, the law says that "before the creditor has accepted
the consignation or before a judicial declaration that the consignation
has been properly made, the debtor may withdraw the thing or the
sum deposited, allowing the obligation to remain in force." If the
debtor has such right of withdrawal, he surely has the right to refuse
to make the deposit in the first place. For the court to compel him to
do so was a grave abuse of discretion amounting to excess of
jurisdiction.
10. MEAT Consignation is the act of depositing the thing due with the court or
PACKAGING CORP judicial authorities whenever the creditor cannot accept or refuses to
VS accept payment, and it generally requires a prior tender of payment.
SANDIGANBAYAN - Tender is the antecedent of consignation. Tender of payment may be
4 extrajudicial, while consignation is necessarily judicial, and the priority
of the first is the attempt to make a private settlement before
proceeding to the solemnities of consignation. Tender and
consignation, where validly made, produces the effect of payment and
extinguishes the obligation.

Article 1256. If the creditor to whom tender of payment has been made
refuses without just cause to accept it, the debtor shall be released
from responsibility by the consignation of the thing or sum due.

There was prior tender by PCGG for payment of the rentals in arrears.
MPCP’s refusal to accept the same on the ground merely that its
lease-purchase agreement with PIMECO had been rescinded was
unjustified. PIMECO paid, and GSIS/MPCP received several amounts
due under the lease-purchase agreement. Certainly, the acceptance
by MPCP and GSIS of such payments negates any rescission of the
lease-purchase agreement. Under the terms of the lease-purchase
agreement, the amount of arrears in rentals or amortizations must be
equivalent to the cumulative sum of three annual installments, in order
to warrant the rescission of the contract.
11. TEDDY While it is true that in general, a manager’s check is not legal tender,
PABUGAIS VS DAVE the creditor has the option of refusing or accepting it. Payment in
SAHIJWANI - 5 check by the debtor may be acceptable as valid, if no prompt
objection to said payment is made. Consequently, petitioner’s tender
of payment in the form of manager’s check is valid. There being a valid
tender of payment in an amount sufficient to extinguish the obligation,
the consignation is valid.

As regards petitioner’s right to withdraw the amount consigned,

reliance on Article 1260 of the Civil Code is misplaced. The said Article
provides –
Art. 1260. Once the consignation has been duly made, the debtor may
ask the judge to order the cancellation of the obligation.

Before the creditor has accepted the consignation, or before a judicial

confirmation that the consignation has been properly made, the
debtor may withdraw the thing or the sum deposited, allowing the
obligation to remain in force.

The amount consigned with the trial court can no longer be withdrawn
by petitioner because respondent’s prayer in his answer that the
amount consigned be awarded to him is equivalent to an acceptance
of the consignation, which has the effect of extinguishing petitioner’s
obligation.

LOSS OR IMPOSSIBILITY

12. OCCENA VS The general rule is that impossibility of performance releases the
JABSON- janelle obligor. However, it is submitted that when the service has become
so difficult as to be manifestly beyond the contemplation of the
parties, the court should be authorized to release the obligor in
whole or in part. The intention of the parties should govern and if it
appears that the service turns out to be so difficult as have been
beyond their contemplation, it would be doing violence to that
intention to hold the obligor still responsible.
But respondent's complaint seeks not release from the subdivision
contract but that the court "render judgment I modifying the terms
and Conditions of the Contract by fixing the proper shares that
should pertain to the herein parties out of the gross proceed., from
the sales of subdivided lots of subject subdivision". The cited article
 does not grant the courts this authority to remake, modify or revise
the contract or to fix the division of shares between the parties as
contractually stipulated with the force of law between the parties, so
as to substitute its own terms for those covenanted by the parties
themselves.

13. NAGA Art 1267 - equitable remedy of reformation of instruments us bec

TELEPHONE CO VS equity dictates reformation. The courts by reformation do not
CA -2 attempt to make a new contract for the parties, but to make the
instrument express their real agreement. here, plaintiff did not allege
in its complaint that there was a mistake on its part or mutual
mistake when they entered into agreement and that bec of this
mistake, said agreement failed to express their true intention.

rebus sic stantibus - parties stipulate in the light of certain prevailing

conditions and once these conditions cease to exist in the contract
also ceases to exist
14. PHIL NATIONAL The petitioner cannot take refuge of the said article. Article 1267 of
CONSTRUCTION the New Civil Code provides that when the service has become so
CORP VS CA -3 difficult as to manifestly beyond the contemplation of the parties, the
obligor may also be released therefrom, in whole or in part. This
article, which enunciates the doctrine of unforeseen events, is not,
however an absolute application of the principle of rebus sic
stantibus, which would endanger the security of contractual relations.
The parties to the contract must be presumed to have assumed the
risks of unfavorable developments. It is therefore only in absolutely
exceptional chances of circumstances that equity demands
assistance for the debtor. The principle of rebus sic stantibus neither
fits in with the facts of the case. Under this theory, the parties stipulate
in the light of certain prevailing conditions, and once these conditions
cease to exist, the contract also ceases to exist.

In this case, petitioner averred that three (3) abrupt change in the
political climate of the country after the EDSA Revolution and its poor
financial condition rendered the performance of the lease contract
impractical and inimical to the corporate survival of the petitioner.
However, as held in Central Bank v. CA, mere pecuniary inability to
fulfill an engagement does not discharge a contractual obligation, nor
does it constitute a defense of an action for specific performance.
15. ETPI VS ETEV -5 “The Company confirms that the 14th, 15th and 16th month bonuses
(other than the 13th month pay) are granted.”

A reading of the above provision reveals that the same provides for
the giving of 14th, 15th and 16th month bonuses without qualification.

From a legal point of view, a bonus is a gratuity or act of liberality of

the giver which the recipient has no right to demand as a matter of
right.The grant of a bonus is basically a management prerogative
which cannot be forced upon the employer who may not be obliged
to assume the onerous burden of granting bonuses or other benefits
aside from the employee’s basic salaries or wages.A bonus, however,
becomes a demandable or enforceable obligation when it is made
part of the wage or salary or compensation of the employee.

Article 1267 which states that when the service has become so
difficult as to be manifestly beyond the contemplation of the parties,
the obligor may also be released therefrom, in whole or in part - not
applicable

ETPI appears to be well aware of its deteriorating financial condition

when it entered into the 2001-2004 CBA Side Agreement with ETEU
and obliged itself to pay bonuses to the members of ETEU.

CONDONATION OR REMISSION

16. VICTOR YAM VS Art. 1270, par. 2 of the Civil Code provides that express
CA - 1 condonation must comply with the forms of donation Art. 748, par.
3 provides that the donation and acceptance of a movable, the
value of which exceeds P5,000,00, must be made in writing,
otherwise the same shall be void. In this connection, under Art.
417, par. 1, obligations, actually referring to credits, l3 are
considered movable property. In the case at bar, it is undisputed
than the alleged agreement to condone P266,196.88 of the second
IGLF loan was not reduced in writing.

COMPENSATION
17. GAN TION VS CA the opinion of said court, the requisites of legal compensation,
- janelle namely, that the parties must be creditors and debtors of each other
in their own right (Art. 1278, Civil Code) and that each one of them
must be bound principally and at the same time be a principal
creditor of the other (Art. 1279), are not present in the instant case,
since the real creditor with respect to the sum of P500 was the
defendant's counsel.
Atty’s fee may be subject to compesnation vecause quantum meruit
18. SILAHIS VS IAC - Issue: Whether or not respondent is liable to the petitioner for the
2 commission for the direct sale which the respondent consummated
with DOLE without coursing the same through petitioner.

Held: No. Compensation takes place when two persons in their own
right, are creditors and debtors of each other. Here, there is no
evidence that there was any agreement between petitioner and
respondent prohibiting respondent from selling directly to DOLE.
The debit memo was not a contract binding bet. the parties that the
respondent shall pay any commission to petitioner involving sale to
DOLE.
19. BPI VS CA - 3
20. PNB VS CA - 2 The trial court correctly ruled that the petitioner and the private
respondent are not debtors and creditors of each other. Article 1279
of the Civil Code provides:

In order that compensation may prosper, it is necessary:

That each one of the obligors be bound principally, and that he be

at the same time a principal creditor of the other;
That both debts consist in a sum of money, or if the things due are
consumable, they are of the same kind, and also of the same quality
if the latter has been stated;
That the two debts be due;
That they are liquidated and demandable;
That over neither of them there by any retention or controversy
commenced by third persons and communicated in due time to the
debtor.
As to the relationship created by the telexed fund transfers from
abroad: A contract between a foreign bank and local bank asking
the latter to pay an amount to a beneficiary is a stipulation pour
autrui. the parties are not both principally bound with respect to the
 $2,627.11 from Jeddah; neither are they at the same time principal
creditor of the other. Therefore, as matters stand, the parties’
obligations are not subject to compensation or set off under Art.
1279 of the Civil Code, for the reason that the defendant is not a
principal debtor nor, is the plaintiff a principal creditor insofar as the
amount of $2,627.11 is concerned. They are debtor and creditor
only with respect to the double payments; but are trustee-
beneficiary as to the fund transfer of $2,627.11.
21. MIRASOL VS CA - For legal compensation to take place, the requirements set forth in
5 Articles 1278 and 1279:

"Art. 1278. Compensation shall take place when two persons, in their
own right, are creditors and debtors of each other.

Art. 1279. In order that compensation may be proper, it is necessary:

(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 are 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."

In the present case, set-off or compensation cannot take place

between the parties because:
First, neither of the parties are mutually creditors and debtors of each
other. Under P.D. No. 579, neither PNB nor PHILEX could retain any
difference claimed by the Mirasols in the price of sugar sold by the
two firms. P.D. No. 579 prescribed where the profits from the sales
are to be paid
Second, compensation cannot take place where one claim, as in the
instant case, is still the subject of litigation, as the same cannot be
deemed liquidated
22. MONTEMAYOR Vicente is entitled to attorney’s fees which is equivalent to whatever
VS MILLORA janelle amount recoverable from him by Jesus. Therefore, whatever amount
due to Jesus as payment of Vicente’s debt is equivalent to the
amount awarded to the latter as his attorney’s fees. Legal
 compensation or set-off then takes place between Jesus and
Vicente and both parties are on even terms such that there is
actually nothing left to execute and satisfy in favor of either party.
For legal compensation to take place, the requirements set forth in
Articles 1278 and 1279 of the Civil Code, quoted below, must be
present.
ARTICLE 1278. Compensation shall take place when two persons, in
their own right, are creditors and debtors of each other.
ARTICLE 1279. In order that compensation may be proper, it is
necessary:
(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.

NOVATION

23. DORMITORIO VS Petition was dismissed. There was no novation in this case. The
FERNANDEZ -2 compromise agreement in this case created new rights and
obligations between the parties which naturally superseded the
judgment of the municipal court. The judge properly set aside the
writ of execution mistakenly issued.
24. MAGDALENA The rule is well settled that novation by presumption has never been
ESTATES VS favored. To be sustained, it needs to be established that the old and
RODRIGUEZ -3 new contracts are incompatible in all points, or that the will to novate
appears by express agreement of the parties or in acts of similar
import. An obligation to pay a sum of money is not novated in a new
instrument wherein the old is ratiDed, by changing only the terms of
payment and adding other obligations, not incompatible with the old
ones, or wherein the old contract is merely supplemented by the new
one.
 The mere fact that the creditor receives a guaranty or accepts
payments from a third person who has agreed to assume the
obligation, when there is no agreement that the Drst debtor shall be
released from responsibility, does not constitute novation, and the
creditor can still enforce the obligation against the original debtor.
25. REYES VS CA - 5 Requisites of Novation:
1. there must be a previous valid obligation,
2. there must be an agreement of the parties concerned to a
new contract,
3. there must be the extinguishment of the old contract, and
4. there must be the validity of the new contract.

Upon the facts shown in the record, there is no doubt that the last
three essential requisites of novation are wanting in the instant case.
No new agreement for substitution of creditor war forged among the
parties concerned which would take the place of the preceding
contract. The absence of a new contract extinguishing the old one
destroys any possibility of novation by conventional subrogation

The fact that respondent Eleazar made payments to AFP-MBAI and

the latter accepted them does not ipso factoresult in novation. There
must be an express intention to novate — animus novandi.

No hard evidence was presented which would expressly and

unequivocably demonstrate the intention of respondent AFP-MBAI
to release petitioner from her obligation to pay under the contract of
sale of securities. It is a rule that novation by substitution of debtor
must always be made with the consent of the creditor. At most, it
only creates a juridical relation of co-debtorship or suretyship on the
part of respondent Eleazar to the contractual obligation of petitioner
to AFP-MBAI and the latter can still enforce the obligation against the
petitioner.

26. COCHINGYAN VS absent an unequivocal declaration of extinguishment of a pre-

R AND B SURETY - 1 existing obligation, a showing of complete incompatibility between
the old and the new obligation (and nothing else) would sustain a
finding of novation by implication. But where, as in this case, the
parties to the new obligation expressly recognize the continuing
existence and validity of the old one, where, in other words, the
parties expressly negated the lapsing of the old obligation, there
 can be no novation. The issue of implied novation is not reached at
all.
27. BROADWAY Issue: Whether or not the agreement (1982) had novated the
CENTRUM VS contract of lease (1980)?
TROPICAL HUT -2
Held: No. If objective novation is to take place, it is essential that
the new obli expressly declared that the old obli to be extinguished
or that the new obli be on every point incompatible with the old
one. Novation is never presumed.
28. CALIFORNIA BUS With respect to obligations to pay a sum of money, this Court has
LINES VS STATE consistently applied the well-settled rule that the obligation is not
INVESTMENT HOUSE novated by an instrument that expressly recognizes the old, changes
-3 only the terms of payment, and adds other obligations not
incompatible with the old ones, or where the new contract merely
supplements the old one. This Court has ruled that an agreement
subsequently executed between a seller and a buyer that provided
for a different schedule and manner of payment, to restructure the
mode of payments by the buyer so that it could settle its outstanding
obligation in spite of its delinquency in payment, is not tantamount
to novation.
29. SIME DARBY PH the consent of the creditor is essential before the substitution of
VS GOOD YEAR PH - another debtor is proper
5
An extinctive novation results either by changing the object or
principal conditions (objective or real), or by substituting the person
of the debtor or subrogating a third person in the rights of the
creditor (subjective or personal). Under this mode, novation would
have dual functions—one to extinguish an existing obligation, the
other to substitute a new one in its place. This requires a conflux of
four essential requisites: (1) a previous valid obligation; (2) an
agreement of all parties concerned to a new contract; (3) the
extinguishment of the old obligation; and (4) the birth of a valid new
obligation.

No consent from micrographics assignment of lease agreement

30. GARCIA VS In general, there are two modes of substituting the person of the
LLAMAS -1 debtor: (1) expromision and (2) delegacion.

In expromision, the initiative for the change does not come from —
and may even be made without the knowledge of — the debtor, since
 it consists of a third person's assumption of the obligation. As such,
it logically requires the consent of the third person and the creditor.

In delegacion, the debtor offers, and the creditor accepts, a third

person who consents to the substitution and assumes the obligation;
thus, the consent of these three persons are necessary.

Both modes of substitution by the debtor require the consent of

the creditor.

*no novation took place.

The parties did not unequivocally declare that the old obligation had
been extinguished by the issuance and the acceptance of the check,
or that the check would take the place of the note. There is no
incompatibility between the promissory note and the check. The
check had been issued precisely to answer for the obligation. On the
one hand, the note evidences the loan obligation; and on the other,
the check answers for it. Verily, the two can stand together.

Moreover, it must be noted that for novation to be valid and legal, the
law requires that the creditor expressly consent to the substitution of
a new debtor. Since novation implies a waiver of the right the creditor
had before the novation, such waiver must be express.
31. QUINTO VS The extinguishment of the old obligation y the new one is a necessary
PEOPLE -2 element of novation which may be effected either expressly or
impliedly. The term “expressly” means that the contracting parties
inconvertibly disclose that their object in executing the new contract
is to extinguish the old one.
32. LICAROS VS An assignment of credit has been defined as the process of
GATMAITAN - 3 transferring the right of the assignor to the assignee who would then
have the right to proceed against the debtor. Legal subrogation is
that which takes place without agreement but by operation of law
because of certain acts. Conventional subrogation is that which
takes place by agreement of parties.

With respect to the argument of petitioner that respondent himself

allegedly admitted in open court that an assignment of credit was
intended, it is enough to say that respondent apparently used the
word "assignment" in his testimony in the general sense.
 Respondent is not a lawyer and as such, he is not so well versed in
law that he would be able to distinguish between the concepts of
conventional subrogation and of assignment of credit. Moreover,
even assuming that there was an admission on his part, such
admission is not conclusive on this court as the nature and
interpretation of the Memorandum of Agreement is a question of law
which may not be the subject of stipulations and admissions.
33. ASTRO In signing his name aside from being the President of Astro, Roxas
ELECTRONICS VS PH became a co-maker of the promissory notes and cannot escape any
EXPORT - 5 liability arising from it. Under the Negotiable Instruments Law,
persons who write their names on the face of promissory notes are
makers, promising that they will pay to the order of the payee or any
holder according to its tenor.

Thus, even without the phrase "personal capacity," Roxas will still
be primarily liable as a joint and several debtor under the notes
considering that his intention to be liable as such is manifested by
the fact that he affixed his signature on each of the promissory notes
twice which necessarily would imply that he is undertaking the
obligation in two different capacities, official and personal

Subrogation is the transfer of all the rights of the creditor to a third

person, who substitutes him in all his rights. It may either be legal or
conventional. Legal subrogation is that which takes place without
agreement but by operation of law because of certain acts. Instances
of legal subrogation are those provided in Article 1302 of the Civil
Code. Conventional subrogation, on the other hand, is that which
takes place by agreement of the parties

Roxas' acquiescence is not necessary for subrogation to take place

because the instant case is one of legal subrogation that occurs by
operation of law, and without need of the debtor's knowledge.

TITLE TWO: CONTRACTS

CHARACTERISTICS

34. PAKISTAN PIA invokes paragraphs 5 and 6 of its contract of employment with
INTERNATIONAL private respondents Farrales and Mamasig, arguing that its
AIRLINES VS OPLE -2
 relationship with them was governed by the provisions of its
contract rather than by the general provisions of the Labor Code.
A contract freely entered into should, of course, be respected, as
PIA argues, since a contract is the law between the parties. The
principle of party autonomy in contracts is not, however, an
absolute principle. The rule in Article 1306, of our Civil Code is that
the contracting parties may establish such stipulations as they may
deem convenient, “provided they are not contrary to law, morals,
good customs, public order or public policy.” Thus, counter-
balancing the principle of autonomy of contracting parties is the
equally general rule that provisions of applicable law, especially
provisions relating to matters affected with public policy, are
deemed written into the contract. Put a little differently, the
governing principle is that parties may not contract away
applicable provisions of law especially peremptory provisions
dealing with matters heavily impressed with public interest. The
law relating to labor and employment is clearly such an area
and parties are not at liberty to insulate themselves and their
relationships from the impact of labor laws and regulations by
simply contracting with each other. It is thus necessary to
appraise the contractual provisions invoked by petitioner PIA in
terms of their consistency with applicable Philippine law and
regulations.
35. CUI VS ARELLANO void due to public policy-the school cannot compel the student to
-1 stay with them if he wants to transfer
"In consideration of the scholarship granted to me by the
University, I hereby waive my right to transfer to another school
without having refunded to the University (defendant) the
equivalent of my scholarship cash
36. AVON VS LUNA -2 Agreements in violation of public policy must be considered as
those which conflict with law, whether properly, strictly and wholly
a public law (derecho) or whether a law of the person, but law
which in certain respects affects the interest of society. Plainly put,
public policy is that principle of the law which holds that no subject
or citizen can lawfully do that which has a tendency to be injurious
to the public or against the public good. As applied to contracts, in
the absence of express legislation or constitutional prohibition, a
court, in order to declare a contract void as against public policy,
must find that the contract as to the consideration or thing to be
done, has a tendency to injure the public, is against the public
good, or contravenes some established interests of society, or is
inconsistent with sound policy and good morals, or tends clearly to
undermine the security of individual rights, whether of personal
liability or of private property.

Here, there is nothing invalid or contrary to public policy either in

the objectives sought to be attained by paragraph 5, i.e., the
exclusivity clause, in prohibiting respondent Luna, and all other
Avon supervisors, from selling products other than those
manufactured by petitioner Avon.

Having held that the “exclusivity clause” as embodied in paragraph

5 of the Supervisor’s Agreement is valid and not against public
policy, we now pass to a consideration of respondent Luna’s
objections to the validity of her termination as provided for under
paragraph 6 of the Supervisor’s Agreement giving petitioner Avon
the right to terminate or cancel such contract. The paragraph 6 or
the “termination clause” therein expressly provides that:

The Company and the Supervisor mutually agree:

6) Either party may terminate this agreement at will, with or without

cause, at any time upon notice to the other.

In the case at bar, the termination clause of the Supervisor’s

Agreement clearly provides for two ways of terminating and/or
canceling the contract. One mode does not exclude the other. The
contract provided that it can be terminated or cancelled for cause,
it also stated that it can be terminated without cause, both at any
time and after written notice. Thus, whether or not the termination
or cancellation of the Supervisor’s Agreement was “for cause,” is
immaterial. The only requirement is that of notice to the other party.
When petitioner Avon chose to terminate the contract, for cause,
respondent Luna was duly notified thereof.

Worth stressing is that the right to unilaterally terminate or cancel

the Supervisor’s Agreement with or without cause is equally
available to respondent Luna, subject to the same notice
requirement. Obviously, no advantage is taken against each other
by the contracting parties.
37. BUSTAMANTE VS The elements of pactum commissorium are as follows: (1) there
ROSEL -3 should be a property mortgaged by way of security for the payment
of the principal obligation, and (2) there should be a stipulation for
automatic appropriation by the creditor of the thing mortgaged in
case of non-payment of the principal obligation within the stipulated
period.

A significant task in contract interpretation is the ascertainment of

the intention of the parties and looking into the words used by the
parties to project that intention. In this case, the intent to appropriate
the property given as collateral in favor of the creditor appears to be
evident, for the debtor is obliged to dispose of the collateral at the
pre-agreed consideration amounting to practically the same amount
as the loan. In effect, the creditor acquires the collateral in the event
of non-payment of the loan. This is within the concept of pactum
commissorium. Such stipulation is void.
38. MAGBANUA VS A compromise agreement is a contract whereby the parties make
UY - 5 reciprocal concessions in order to resolve their differences and thus
avoid or put an end to a lawsuit.|

A compromise must not be contrary to law, morals, good customs

and public policy; and must have been freely and intelligently
executed by and between the parties. To have the force of law
between the parties, it must comply with the requisites and
principles of contracts.|||

When a compromise agreement is given judicial approval, it

becomes more than a contract binding upon the parties. Having
been sanctioned by the court, it is entered as a determination of a
controversy and has the force and effect of a judgment. It is
immediately executory and not appealable, except for vices of
consent or forgery.|||

As provided by the law on contracts, a valid compromise must have

the following elements:
(1) the consent of the parties to the compromise,
(2) an object certain that is the subject matter of the compromise,
and
(3) the cause of the obligation that is established. |||
39. PS BANK VS Basic is the rule that there can be no contract in its true sense
SPOUSES CASTILLO - without the mutual assent of the parties. If this consent is absent on
3 the part of one who contracts, the act has no more efficacy than if it
had been done under duress or by a person of unsound mind.
Similarly, contract changes must be made with the consent of the
contracting parties. The minds of all the parties must meet as to the
proposed modification, especially when it affects an important
aspect of the agreement. In the case of loan contracts, the interest
rate is undeniably always a vital component, for it can make or break
a capital venture. Thus, any change must be mutually agreed upon,
otherwise, it produces no binding effect.

Escalation clauses are generally valid and do not contravene public

policy. They are common in credit agreements as means of
maintaining Bscal stability and retaining the value of money on long-
term contracts. To prevent any one-sidedness that these clauses
may cause, there should be a corresponding de-escalation clause
that would authorize a reduction in the interest rates corresponding
to downward changes made by law or by the Monetary Board. As
can be gleaned from the parties' loan agreement, a de-escalation
clause is provided, by virtue of which, petitioner had lowered its
interest rates. Nevertheless, the validity of the escalation clause did
not give petitioner the unbridled right to unilaterally adjust interest
rates. The adjustment should have still been subjected to the mutual
agreement of the contracting parties. In light of the absence of
consent on the part of respondents to the modifications in the
interest rates, the adjusted rates cannot bind them notwithstanding
the inclusion of a de-escalation clause in the loan agreement.
40. DKC HOLDINGS The general rule is that heirs are bound by contracts entered into by
CORP VS CA - 5 their predecessors-in-interest except when the rights and
obligations arising therefrom are not transmissible by
(1) their nature,
(2) stipulation or
(3) provision of law.

In the case at bar, there is neither contractual stipulation nor legal

provision making the rights and obligations under the contract
intransmissible. More importantly, the nature of the rights and
obligations therein are, by their nature, transmissible.
 The nature of intransmissible rights as explained by Arturo Tolentino,
is as follows: "Among contracts which are intransmissible are those
which are purely personal, either by provision of law, such as in
cases of partnerships and agency, or by the very nature of the
obligations arising therefrom, such as those requiring special
personal qualifications of the obligor. It may also be stated that
contracts for the payment of money debts are not transmitted to the
heirs of a party, but constitute a charge against his estate. Thus,
where the client in a contract for professional services of a lawyer
died, leaving minor heirs, and the lawyer, instead of presenting his
claim for professional services under the contract to the probate
court, substituted the minors as parties for his client, it was held that
the contact could not be enforced against the minors; the lawyer
was limited to a recovery on the basis of quantum meruit."

In American jurisprudence, "(W)here acts stipulated in a contract

require the exercise of special knowledge, genius, skill, taste, ability,
experience, judgment, discretion, integrity, or other personal
qualification of one or both parties, the agreement is of a personal
nature, and terminates on the death of the party who is required to
render such service."

Where the service or act is of such a character that it may as well be

performed by another, or where the contract, by its terms, shows
that performance by others was contemplated, death does not
terminate the contract or excuse nonperformance. In the case at bar,
there is no personal act required from the late Encarnacion
Bartolome. Rather, the obligation of Encarnacion in the contract to
deliver possession of the subject property to petitioner upon the
exercise by the latter of its option to lease the same may very well
be performed by her heir Victor.||
41. FLORENTINO VS The acceptance does not have to be in any particular form, even
ENCARNACION -1 when the stipulation is for the third person an act of liberality or
generosity on the part of the promisor or promise.

It need not be made expressly and formally. Notification of

acceptance, other than such as is involved in the making of demand,
is unnecessary.
 A trust constituted between two contracting parties for the benefit
of a third person is not subject to the rules governing donation of
real property. The beneficiary of a trust may demand performance
of the obligation without having formally accepted the benefit of the
this in a public document, upon mere acquiescence in the formation
of the trust and acceptance under the second paragraph of Art. 1257
of the Civil Code.

Hence, the stipulation (Exhibit O-1) cannot now be revoked by any

of the stipulators at their own option. This must be so because of
Article 1257, Civil Code and the cardinal rule of contracts that it has
the force of law between the parties. 8 Thus, this Court ruled in
Garcia v. Rita Legarda, Inc., "

Article 1309 is a virtual reproduction of Article 1256 of the Civil Code,

so phrased to emphasize that the contract must bind both parties,
based on the principles:
(1) that obligation arising from contracts have the force of law
between the contracting parties; and
(2) that there must be mutuality between the parties based on their
principle equality, to which is repugnant to have one party bound by
the contract leaving the other free therefrom."
42. COQUIA VS Issue: Whether or not the company is liable for the death of the
FIELDMEN’S driver.
INSURANCE - 2
Held: Yes.Art. 1311 refers to contracts pour autrui.
Contracts take effect only in between the parties, their assigns and
heirs, except in case where the rights and obligations arising from
the contract are not transmissible by their nature, or by stipulation
or by provision of law. The heir is not liable beyond the value of
the property he received from the decedent.
If a contract should contain some stipulation in favor of a third
person, he may demand its fulfillment provided he communicated
his acceptance to the obligor before its revocation. A mere
incidental benefit or interest of a person is not sufficient. The
contracting parties must have clearly deliberately conferred a favor
upon a third person.

Here, the deceased driver paid 50% of the corresponding

premiums, which were deducted from his weekly commissions.
 Coquias as sole heirs of the deceased, have a direct cause of
action against the company.

43. CONSTANTINO VS That one of the parties to a contract is entitled to bring an action for
ESPIRITU - 3 its enforcement or to prevent its breach is too clear to need any
extensive discussion. Upon the other hand, that the contract
involved contained a stipulation pour atrui amplifies this settled rule
only in the sense that the third person for whose benefit the contract
was entered into may also demand its ful:llment provided he had
communicated his acceptance thereof to the obligor before the
stipulation in his favor is revoked.

The contention that the contract in question is not enforceable by

action by reason of the provisions of the Statute of Frauds does not
appear to be indubitable, it being clear upon the facts alleged in the
amended complaint that the contract between the parties had
already been partially performed by the execution of the deed of
sale, the action brought below being only for the enforcement of
another phase thereof, namely, the execution by appellee of a deed
of conveyance in favor of the beneficiary thereunder.
44. SPOUSES Article 1311(par 2) of the Civil Code states:
MAMARIL VS BSP - 5
If a contract should contain some stipulation in favor of a third
person, he may demand its fulfillment provided he communicated his
acceptance to the obligor before its revocation. A mere incidental
benefit or interest of a person is not sufficient. The contracting parties
must have clearly and deliberately conferred a favor upon a third
person.

Requisites of pour autrui:

(1) There is a stipulation in favor of a third person;

(2) The stipulation is a part, not the whole, of the contract;

(3) The contracting parties clearly and deliberately conferred a favor

to the third person — the favor is not merely incidental;

(4) The favor is unconditional and uncompensated;

(5) The third person communicated his or her acceptance of the

favor before its revocation; and
 (6) The contracting parties do not represent, or are not authorized,
by the third party.

None of the foregoing elements obtains in this case.

It is undisputed that Sps. Mamaril are not parties to the

Guard Service Contract. Neither did the subject agreement contain
any stipulation pour autrui. And even if there was, Sps. Mamaril did
not convey any acceptance thereof. Thus, under the principle of
relativity of contracts, they cannot validly claim any rights or favor
under the said agreement.

||| It bears to reiterate that the subject loss was caused by the
negligence of the security guards in allowing a stranger to drive out
plaintiffs-appellants' vehicle despite the latter's instructions that
only their authorized drivers may do so.|||
45. SPS PADERES VS Under Article 1318 of the Civil Code, there are three essential
SPS BERGARDO - requisites which must concur in order to give rise to a binding
janelle contract: (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. "Consent" is further defined in
Article 1319 of the Code as follows:

Art. 1319. Consent is manifested by the meeting of the offer and

the acceptance upon the thing and the cause which are to
constitute the contract. The offer must be certain and the
acceptance absolute. A qualified acceptance constitutes a
counter-offer.

Acceptance made by letter or telegram does not bind the offerer

except from the time it came to his knowledge. The contract, in such
a case, is presumed to have been entered into in the place where
the offer was made.

By "offer" is meant a unilateral proposition which one party makes

to the other for the celebration of the contract. There is an "offer" in
the context of Article 1319 only if the contract can come into
existence by the mere acceptance of the offeree, without any further
act on the part of the offeror. Hence, the "offer" must be definite,
complete and intentional.

With regard to the "acceptance," a learned authority notes that:

To produce a contract, the acceptance must not qualify the
terms of the offer. There is no acceptance sufficient to produce
consent, when a condition in the offer is removed, or a pure offer is
accepted with a condition, or when a term is established, or
changed, in the acceptance, or when a simple obligation is
converted by the acceptance into an alternative one; in other
words, when something is desired which is not exactly what is
proposed in the offer. It is necessary that the acceptance be
unequivocal and unconditional, and the acceptance and the
proposition shall be without any variation whatsoever; and any
modification or variation from the terms of the offer annuls the
latter and frees the offeror.

A reading of the above-quoted correspondence reveals the

absence of both a definite offer and an absolute acceptance of any
definite offer by any of the parties.

The letter dated October 25, 1996 signed by Luz Dacasin, Assistant
Vice-President of Banco Filipino, merely invited petitioners to
engage in further negotiations and does not contain a recognition of
petitioners’ claimed right of redemption or a definite offer to sell the
subject properties back to them.

Petitioners emphasize that in item no. 3 of their letter dated November

8, 1996 they committed to "subject the properties (house and lot) to a
real-estate mortgage with the bank so that the amount to be loaned
will be used as payment of the properties to be redeemed." It is clear
from item no. 1 of the same letter, however, that petitioners did not
accept Banco Filipino’s valuation of the properties at ₱7,500.00 per
square meter and intended to "have the amount [renegotiated]."

Moreover, while purporting to be a memorandum of the matters

taken up in the conference between petitioners and Banco Filipino
Vice-President Dacasin, petitioners’ letter of November 8, 1996 does
not contain the concurrence of Ms. Dacasin or any other authorized
agent of Banco Filipino. Where the alleged contract document was
signed by only one party and the record shows that the other party
did not execute or sign the same, there is no perfected contract.
46. SO PING BUN VS Interference with Contractual Relations (Torts and Damages) Sec.
CA - 4 1314 of the Civil Code: Any third person who induces another to
violate his contract shall be liable for damages to the other
contracting party.

■ elements of tort interference are:

■ (1) existence of a valid contract;
■ (2) knowledge on the part of the third person of
the existence of contract; and
■ (3) interference of the third person is without
legal justification or excuse
■ So Ping Bun asked DCCSI to execute lease contracts in
its favor, and as a result deprived DCCSI's property
right
■ damage is NOT an essential element of tort interference
■ Lack of malice precludes damages. But it does not relieve
petitioner of the legal liability for entering into contracts and
causing breach of existing ones.

STAGES

47. LIMETKAI SONS There was already a perfected contract of sale because both
VS CA -4 parties already agreed to the sale of P1000/sq.m. Even if Lim tried
to negotiate for a payment in terms, it is clear that if it be
disapproved, the payment will be made in cash.

Aside from this there was the earlier agreement between petitioner
and the authorized broker. There was a concurrence of offer and
acceptance, on the object, and on the cause thereof.

It is true that an acceptance may contain a request for certain

changes in the terms of the
offer and yet be a binding acceptance. So long as it is clear
that the meaning of the acceptance is
positively and unequivocally to accept the offer, whether such
request is granted or not, a
contract is formed.
 The phases that a contract goes through may be summarized as
follows:
a. preparation, conception or generation, which is the period of
negotiation and bargaining, ending at the moment of agreement of
the parties;
b. perfection or birth of the contract, which is the moment when the
parties come to agree on the terms of the contract; and
c. consummation or death, which is the fulfillment or performance
of the terms agreed upon in the contract

Respondent’s contention is that there was no perfected contract

because petitioner’s
request to pay on terms constituted a COUNTER-OFFER and that
negotiations were still in progress at that point. However, there was
a mutual agreement that “if the proposed
payment on terms will not be approved by our trust committee,
LIMKETKAI should pay in cash, the amount
was NO LONGER subject to the approval or disapproval of the
committee, it is only the terms.

48. SWEDISH MATCH There was no perfected contract of sale since Litonjua’s letter of
VS CA - 4 proposing acquisition of the Phimco shares for US$36M was merely
an offer. Consent in a contract of sale should be manifested by the
meeting of the offer and acceptance upon the thing and the cause
which are to constitute the contract. The lack of a definite offer on
the part of respondents could not possibly serve as the basis of their
claim that the sale of the Phimco shares in their favor was perfected,
for one essential element of a contract of sale was obviously wanting
the price certain in money or its equivalent. The price must be
certain, otherwise there is no true consent between the parties.
Respondents’ failure to submit their final bid on the deadline set by
petitioners prevented the perfection of the contract of sale. It was
not perfected due to the absence of one essential element which
was the price certain in money or its equivalent.

CLASSIFICATION
49. CAOIBES VS The law does not require that the application for registration be
CAOIBES-PANTOJA- amended by substituting the "buyer" or the "person to whom the
janelle property has been conveyed" for the applicant. Neither does it
require that the "buyer" or the "person to whom the property has
been conveyed" be a party to the case.

ESSENTIAL REQUISITES OF CONTRACTS

CONSENT

50. MALABROSA VS CA - 4 ● · Under Article 1319 of the New

Civil Code, the consent by a party is
manifested by the meeting of the
offer and the acceptance upon the
thing and the cause which are to
constitute the contract. An offer may
be reached at any time until it is
accepted. An offer that is not
accepted does not give rise to a
consent. To produce a contract, there
must be acceptance of the offer which
may be express or implied but must
not qualify the terms of the offer. The
acceptance must be absolute,
unconditional and without variance
of any sort from the offer. The
acceptance of an offer must be made
known to the offeror. Unless the
offeror knows of the acceptance, there
is no meeting of the minds of the
parties, no real concurrence of offer
and acceptance.
● The offeror may withdraw its offer and
revoke the same before acceptance
thereof by the offeree. The contract is
perfected only from the time an
acceptance of an offer is made known
to the offeror.
● The contract is not perfected if the
offeror revokes or withdraws its
offer and the revocation or
 withdrawal of the offeror is the first
to reach the offeree.
● In the case at bar, the respondent
made its offer through its VP. On
March 16, the officer handed over the
original letter-offer to petitioner. The
respondent required the petitioner to
accept by affixing his signature and
the date in the letter offer, thus
foreclosing an implied acceptance or
any other mode of acceptance. And it
is for a fact that the petitioner did not
accept or reject the offer for he
needed time to decide whether to
accept or reject.

51. SANCHEZ VS RIGOS - 4 Can an accepted unilateral promise to sell

without consideration distinct from the price
be withdrawn arbitrarily?

No. An accepted promise to sell is an offer to

sell when accepted becomes a contract of
sale.

Article 1479 must be read in relation to

Article 1324
ART. 1479. A promise to buy and sell a
determinate thing for a price certain is
reciprocally demandable.
An accepted unilateral promise to buy or sell
a determinate thing for a price certain is
binding upon the promisor if the promise is
supported by a consideration distinct from the
price.

ART. 1324. When the offerer has allowed the

offeree a certain period to accept, the offer
may be withdrawn any time before
acceptance by communicating such
withdrawal, except when the option is

52.ADELFA PROPERTIES VS CA - 4
53. MERCADO VS ESPIRITU - 4
founded upon consideration as something
paid or promised.
since there may be no valid contract without
a cause or consideration, the promisor is not
bound by his promise and may, accordingly,
withdraw it.
Option Contract v Contract to Sell
The contract between the parties is a
contract to sell and not an option contract
nor a contract of sale.
Two features which convince that parties
never intended to transfer ownership except
upon full payment of purchase price: (1) the
exclusive option to purchase does not
mention that petitioner is obliged to return
possession or ownership of property as
consequence of non-payment; and (2) no
delivery, actual or constructive, was made to
petitioner; option to purchase was not
included in a public instrument which would
have effect of delivery. Neither did petitioner
take actual, physical possession of the
property at any given time. With this regard,
there was an implied agreement that
ownership shall not pass to the purchaser
until he had fully paid the price. Also, the
alleged option money was actually earnest
money(included in the payment) since the
amount was not distinct from the cause or
consideration for the sale of the property,
but was itself a part thereof.
Open Implied Act that the Minors are of
Age binding by Estoppel:
Whenever a party has, by its own
declaration, act or omission, intentionally
and deliberately led another party to
believe a particular thing to be true, and to
act upon such belief, he cannot, in any

54. BRAGANZA VS DE VILLA ABRILLE
55. PARAGAS VS HEIRS OF DOMINADOR
litigation arising out of such declaration,
cannot be permitted to falsify it.
Furthermore, the sale of real estate made by
a minor who pretend to be of legal age, when
in fact he is not, is VALID, and he will not be
permitted to excuse himself from the
fulfillment of the obligations contracted by
him or to have it annulled. The judgment that
holds such sale to be valid and absolves the
purchaser from the complaint filed against
him does not violate the laws relative to the
sale of minor’s property, nor the judicial rules
established in consonance therewith.
In the given case, annulment of the sale
cannot be invoked on the ground of
minority, since at the time of the perfection
of the contract; Domingo and Josefa
presented themselves to be of legal age.
(Representation by including minors in the
agreement but the minors were merely
silent when it was executed) Non-appraisal
of their age in the promissory note did not
constitute a fraudulent act of pretending to be
of legal age when in fact they were not. The
fraud/misrepresentation must be actual and
active. Mere silence or failure of the minor to
disclose his age is not sufficient to be the
basis of an actual deceit. However, since the
minors benefited from the loan, they are liable
to return such amount.
Senile, elderly, physical infimities and
illitarates - Art. 1332
The general rule is that a person is not
incompetent to contract merely because of
advanced years or by reason of physical
infirmities. However, when such age or
 infirmities have impaired the mental faculties
so as to prevent the person from properly,
intelligently, and firmly protecting her property
rights then she is undeniably incapacitated.

The Deed of Sale was allegedly signed by

Gregorio on his death bed in the hospital.
Gregorio was an octogenarian at the time of
the alleged execution of the contract and
suffering from liver cirrhosis at that -
circumstances which raise grave doubts on
his physical and mental capacity to freely
consent to the contract.
56. FRANCISCO VS HERRERA Doctrine Re: Consent:
Article 1318 of the Civil Code states that no
contract exists unless there is a concurrence
of consent of the parties, object certain as
subject matter, and cause of the obligation
established. Article 1327 provides that
insane or demented persons cannot give
consent to a contract. But, if an insane or
demented person does enter into a contract,
the legal effect is that the contract is
voidable or annullable as specifically
provided in Article 1390.

In the present case, it was established that

the vendor Eligio, Sr. entered into an
agreement with petitioner, but that the
formers capacity to consent was vitiated by
senile dementia. Hence, we must rule that
the assailed contracts are not void or
inexistent per se; rather, these are contracts
that are valid and binding unless annulled
through a proper action filed in court
seasonably.

Additional: (Re: Voidable Contract)

An annullable contract may be rendered
perfectly valid by ratification, which can be
 express or implied. Implied ratification may
take the form of accepting and retaining the
benefits of a contract.13 This is what
happened in this case. Respondents
contention that he merely received payments
on behalf of his father merely to avoid their
misuse and that he did not intend to concur
with the contracts is unconvincing. If he was
not agreeable with the contracts, he could
have prevented petitioner from delivering the
payments, or if this was impossible, he could
have immediately instituted the action for
reconveyance and have the payments
consigned with the court. None of these
happened. As found by the trial court and the
Court of Appeals, upon learning of the sale,
respondent negotiated for the increase of the
purchase price while receiving the
installment payments. It was only when
respondent failed to convince petitioner to
increase the price that the former instituted
the complaint for reconveyance of the
properties. Clearly, respondent was
agreeable to the contracts, only he wanted to
get more. Further, there is no showing that
respondent returned the payments or made
an offer to do so. This bolsters the view that
indeed there was ratification. One cannot
negotiate for an increase in the price in one
breath and in the same breath contend that
the contract of sale is void.
57. HEMEDES VS CA A party to a contract cannot just evade
compliance by the simple expedient denying
of the execution of the contract. In order that
mistake may invalidate consent, it should
refer to the substance of the thing which is
the object of the contract or to those
conditions which have principally moved the
parties to enter into contract.
 Art 1332 is intended to protect a party who is
at a disadvantage by reason of illiteracy,
mental weakness, etc and contemplates a
situation wherein a contract has been
entered into but the consent of one of the
parties is vitiated by mistake or fraud.
58. KATIPUNAN VS KATIPUNAN The elements of a contract of sale are
consent, object and price in money or its
equivalent. Under Article 1330 of the Civil
Code, consent may be vitiated by any of the
followingfi (a) mistake, (2) violence, (3)
intimidation, (4) undue influence, and (5) fraud.
17 The presence of any of these vices renders
the contract voidable.
The circumstances surrounding the execution
of the contract manifest a vitiated consent on
the part of respondent. Undue influence was
exerted upon him by his brother Miguel and
Inocencio Valdez and Atty. Balguma. It was
his brother Miguel who negotiated with Atty.
Balguma. However, they did not explain to
him the nature and contents of the document.
Worse, they deprived him of a reasonable
freedom of choice. It bears stressing that he
reached only grade three. Thus, it was
impossible for him to understand the contents
of the contract written in English and
embellished in legal jargon. Also, according to
Dr. Revilla, respondent has a very low IQ and
a mind of a six-year old child. Thus, his lack
of education, coupled with his mental
affliction, placed him not only at a hopelessly
disadvantageous position vis-a-vis petitioner.

As an exception however to the principle of

mutual restitution, Article 1399 provides that
when the defect of the contract consists in the
incapacity of one of the parties, the
incapacitated person is not obliged to make

59. MARTINEZ VS HONGKONG AND
SHANGHAI BANK
any restitution, except when he has been
benefited by the things or price received by
him. Thus, since the Deed of Absolute Sale
between respondent and the Balguma
brothers is voidable and hereby annulled, then
the restitution of the property and its fruits to
respondent is just and proper. Petitioners
should turn over to respondent all the
amounts they received starting January, 1986
up to the time the property shall have been
returned to the latter.
> Relevant Provisions:
ART. 1265. Consent given under error,
violence, intimidation, or deceit shall be null.
ART. 1267. There is violence when, inorder to
obtain the consent, irresistible force is used.
There is intimidation when one of the
contracting parties gives his consent on
account of a reasonable and well-grounded
fear of suffering an imminent and serious
injury to his person or property, or to the
person or property of his spouse,
descendants, or ascendants. In determining
whether or not there is intimidation the age,
sex, and status of the person intimidated must
be considered. Fear of displeasing the
persons to whom obedience and respect are
due shall not annul the contract.
ART. 1268. Violence or intimidation shall
annul the obligation, even though such
violence or intimidation shall have been used
by a third person who did not take part in the
contract.
>> RATIONALE: Contracts Void due to Fraud,
Duress or Undue Influence > Because there
was No Consent at all > Party never really
gave consent thereto > BUT if a competent
 person has once assented to a contract freely
and fairly, he is bound by it
>> Real duress > Not undue influence:
Solicitation, importunity, argument,
persuasion, appeals to the affection
>> Motive > Reluctance is not sufficient >
VALID CONTRACT: Consenting against one’s
wishes and desires or even against his better
judgment, or without hope of advantage or
profit
>> Contract of Reparation > VALID even if
Inherently entered into with extreme
reluctance and only by the compelling force of
the punishment threatened and against the
strong desires of the party making the
reparation ~ situation where in one
necessarily makes reparation or else, take the
consequences, civil or criminal, of his
unlawful acts
>> Contract for the purpose of gain > Made
with pleasure and its terms complied with
gladly
>> Contracts by Wife, conveying exclusive
property, for the sole consideration of
obtaining her husband immunity from criminal
prosecution ~ Suspicious
60. WOODHOUSE VS HALILI Fraud is manifested in illimitable number of
degrees or gradations, from the innocent
praises of a salesman about the excellence
of his wares to those malicious machinations
and representations that the law punishes as
a crime. In consequence, article 1270 of the
Spanish Civil Code distinguishes two kinds
of (civil) fraud, the causal fraud, which may
be a ground for the annulment of a contract,
and the incidental deceit, which only renders
the party who employs it liable for damages.
This Court had held that in order that fraud
may vitiate consent, it must be the causal
(dolo causante), not merely the incidental
 (dolo causante), inducement to the
making of the contract. In the case at bar,
inasmuch as the principal consideration, the
main cause that induced defendant to enter
into partnership agreement, was the ability of
the plaintiff to get the exclusive franchise to
bottle and distribute for the defendant or for
the partnership, the false representation
made by the plaintiff was not the casual
consideration, or the principal inducement,
that led defendant to enter into the
partnership agreement.
61. TANKEH VS DBP Fraud or Dolo - Art. 1338- 1341

There was no dolo causante or fraud used to

obtain the petitioner’s consent to enter into
the contract. Petitioner had the opportunity to
become aware of the facts that attended the
signing of the promissory note. He even
admitted that he has a lawyer-son who the
petitioner had hoped would assist him in the
administration of Sterling Shipping Lines, Inc.
The totality of the facts on record belies
petitioner’s claim that fraud was used to
obtain his consent to the contract given his
personal circumstances and the applicable
law.
Although there was no fraud that had been
undertaken to obtain petitioner’s consent,
there was fraud in the performance of the
contract. The records showed that petitioner
had been unjustly excluded from participating
in the management of the affairs of the
corporation. This exclusion from the
management in the affairs of Sterling Shipping
Lines, Inc. constituted fraud incidental to the
performance of the obligation.
62. TUASON VS MARQUEZ The innocent non-disclosure of a fact does it
necessarily affect the formation of a contract
or operate to discharge the parties from their
 agreement. In this case, the allegedly “non-
disclosed” detail can be ascertained with the
appropriate government office.
63. RURAL BANK VS CA The kind of fraud that will vitiate a contract
refers to those insidious words or
machinations resorted to by one of the
contracting parties to induce the other to
enter into a contract which without them he
would not have agreed to. Simply stated, the
fraud must be the determining cause of the
contract, or must have caused the consent to
be given. It is believed that the non-disclosure
to the bank of the purchase price of the sale
of the land between private respondents and
Manuel Behis cannot be the "fraud"
contemplated by Article 1338 of the Civil
Code. From the sole reason submitted by the
petitioner bank that it was kept in the dark as
to the financial capacity of private
respondents, we cannot see how the
omission or concealment of the real purchase
price could have induced the bank into giving
its consent to the agreement; or that the bank
would not have otherwise given its consent
had it known of the real purchase price The
consideration for the purchase of the land
between Manuel Behis and herein private
respondents Rayandayan and Arceño could
not have been the determining cause for the
petitioner bank to enter into the memorandum
of agreement. To all intents and purposes, the
bank entered into said agreement in order to
effect payment on the indebtedness of
Manuel Behis. Pursuant to Article 1339 of the
Civil Code, silence or concealment, by itself,
does not constitute fraud, unless there is a
special duty to disclose certain facts, or
unless according to good faith and the usages
of commerce the communication should be
made. Verily, private respondents
 Rayandayan and Arceño had no duty, and
therefore did not act in bad faith, in failing to
disclose the real consideration of the sale
between them and Manuel Behis.

Consequently, not all the elements of fraud

vitiating consent for purposes of annulling a
contract concur, to wit: (a) It was employed by
a contracting party upon the other; (b) It
induced the other party to enter into the
contract; (c) It was serious; and, (d) It resulted
in damages and injury to the party seeking
annulment. Petitioner bank has not
sufficiently shown that it was induced to enter
into the agreement by the non-disclosure of
the purchase price, and that the same
resulted in damages to the bank. Indeed, the
general rule is that whosoever alleges fraud or
mistake in any transaction must substantiate
his allegation, since it is presumed that a
person takes ordinary care for his concerns
and that private transactions have been fair
and regular. Petitioner bank's allegation of
fraud and deceit have not been established
sufficiently and competently to rebut the
presumption of regularity and due execution
of the agreement.

64. AZARRAGA VS GAY > ART. 1471 DOES NOT APPLY:

In case of the sale of real estate for a lump
sum and not at the rate of a specified price for
each unit of measure, there shall be no
increase or decrease of the price even if the
area be found to be more or less than that
stated in the contract.
The same rule shall apply when two or more
estates are sold for a single price; but, if in
addition to a statement of the boundaries,
which is indispensable in every conveyance of
real estate, the area of the estate should be
designated in the contract, the vendor shall be
obliged to deliver all that is included with such
boundaries, even should it exceed the area
specified in the contract; and, should he not
be able to do so, he shall suffer a reduction of
the price in proportion to what is lacking of the
area, unless the contract be annulled by
reason of the vendee's refusal to accept
anything other than that which was stipulated.
~ 2nd parcel, in its entirety, had already been
delivered to Maria
>> : Exceedingly risky to accept seller's
statements or dealer's> assertions
concerning the property which is the subject
of
a contract of sale, or in regard to its qualities
and characteristics, are the usual and ordinary
means used by sellers to obtain a high price ~
He who relies upon such an affirmation made
by a person whose interest might so readily
prompt him to exaggerate the value of his
property does so at his peril, and must take
the consequences of his own imprudence >
HENCE, Misrepresentation by a vendor of real
property with reference to its area are not
actionable, where a correct description of the
property was given in the deed and recorded
chain of
title, which the purchaser's agent undertook
to investigate and report upon, and the
vendor made on effort to prevent a full
investigation ~ One who contracts for the
purchase of real estate in reliance on the
representations and statements of the vendor
as to its character and value, but after he has
visited and examined it for himself, and has
had the means and opportunity of verifying
such statements, cannot avoid the contract
on the ground that they were false or
exaggerated.
65. TRINIDAD VS IAC It has not been satisfactorily established that
the private respondent inveigled the petitioner
through false representation to buy the
subject property. Assuming that he did make
such representations, as the petitioner
contends, she is deemed to have accepted
them at her own risk and must therefore be
responsible for the consequences of her
careless credulousness.

We also held that the "one who contracts for

the purchase of real estate in reliance on the
representations and statements of the vendor
as to its character and value, but after he has
visited and examined it for himself and has
had the means and opportunity of verifying
such statements, cannot avoid the contract
on the ground that they were false and
exaggerated."
66. SUNTAY VS CA The history and relationship of trust,
interdependence and intimacy between the
late Rafael and Federico is an unmistakable
token of simulation. It has been observed
that fraud is generally accompanied by trust.
Hardly is it inconsistent with practical
experience, especially in the context of the
Filipino family’s way of life, that Federico, the
uncle, would almost naively lend his land title
to his nephew and agree to its cancellation in
his nephew’s favor because Federico, in the
first place, trusted his nephew; was well
aware of his power over him as uncle, client,
and patron; and was actually in possession
of the land and rice mill. No one could even
conceive of the possibility of ejecting
Federico therefrom on the basis of the sham
transaction. The late Rafael never attempted
to physically dispossess his uncle or actually
take over the rice mill during his lifetime.
Indeed the most protuberant index of
simulation is the complete absence of an
attempt in any manner on the part of the late
Rafael to assert his rights of ownership over
the land and rice mill in question. After the
sale, he should have entered the land and
occupied the premises thereof. He did not
even attempt to. If he stood as owner, he
would have collected rentals from Federico
for the use and occupation of the land and
its improvements. All that the late Rafael had
was a title in his name. The failure of the late
Rafael to take exclusive possession of the
property allegedly sold to him is a clear
badge of fraud. The fact that,
notwithstanding the title transfer, Federico
remained in actual possession, cultivation
and occupation of the disputed lot from the
time the deed of sale was executed until the
present, is a circumstance which is
unmistakably added proof of the
fictitiousness of the said transfer, the same
being contrary to the principle of ownership.

The cumulative effect of the evidence on

record as chronicled aforesaid identified
badges of simulation proving that the sale by
Federico to his deceased nephew of his land
and rice mill, was not intended to have any
legal effect between them. The Court held
that the deed of sale executed by Federico in
favor of his now deceased nephew, Rafael, is
absolutely simulated and fictitious and,
hence, null and void, said parties having
entered into a sale transaction to which they
did not intend to be legally bound. As no
property was validly conveyed under the
deed, the second deed of sale executed by

67. JR BLANCO VS QUASHA
OBJECT OF CONTRACTS
68. BLAS VS SANTOS
69. TANEDO VS CA
CAUSE OF CONTRACTS
70. SAN MIGUEL VS SPS HUANG
the late Rafael in favor of his uncle, should
be considered ineffective and unavailing.
The simulation of contracts may either be
absolute (when the parties do not intend to
be bound at all) or relative (when the parties
conceal their true agreement).
Art. 1347 that “No contract may be entered
into upon future inheritance except in cases
expressly authorized by law.”. In this case the
contract was authorized by law because the
promised made by Maxima to their heirs
before she died is a valid reason and it should
be enforceable upon her death and her heirs
can now acquire the succession of the
properties in issue.
Pursuant to Article 1347 of the Civil Code,
"(n)o contract may be entered into upon a
future inheritance except in cases expressly
authorized by law." Consequently, said
contract made in 1962 conveying one hectare
of his future inheritance is not valid and
cannot be the source of any right nor the
creator of any obligation between the parties.
Hence, the "a􀁅davit of conformity" dated
February 28, 1980, insofar as it sought to
validate or ratify the 1962 sale, is also useless
and, in the words of the respondent Court,
"suffers from the same infirmity." Even private
respondents in their memorandum concede
this.
In Navarro v. Sugar Producers Cooperative
Marketing Association, Inc., we laid down the
rule that the manner of payment of the
purchase price is an essential element before
a valid and binding contract of sale can exist.
Although the Civil Code does not expressly
state that the minds of the parties must also
meet on the terms or manner of payment of
the price, the same is needed, otherwise
there is no sale. As held in Toyota Shaw, Inc.
v. Court of Appeals, agreement on the
manner of payment goes into the price such
that a disagreement on the manner of
payment is tantamount to a failure to agree
on the price.

In Velasco v. Court of Appeals, the parties to

a proposed sale had already agreed on the
object of sale and on the purchase price. By
the buyer’s own admission, however, the
parties still had to agree on how and when
the downpayment and the installments were
to be paid. It was held that, ". . . such being
the situation, it can not, therefore. be said a
definite and firm sales agreement between
the parties had been perfected over the lot in
question. Indeed, this Court has already
ruled before that a definite agreement on the
manner of payment of the purchase price is
an essential element in the formation of a
binding and enforceable contract of sale. The
fact, therefore, that the petitioners delivered
to the respondent the sum of P10,000 as
part of the down-payment that they had to
pay cannot be considered as sufficient proof
of the perfection of any purchase and sale
agreement between the parties herein under
Art. 1482 of the new Civil Code, as the
petitioners themselves admit that some
essential matter — the terms of the payment
— still had to be mutually covenanted."
 Thus, it is not the giving of earnest money,
but the proof of the concurrence of all the
essential elements of the contract of sale
which establishes the existence of a
perfected sale.
71. YU BUN GUANG VS ONG ● If there is no price to support a contract of
sale, then it is void for lack of cause or
consideration.

● A contract of purchase and sale is null and

null and void and produces no effect
whatsoever where the same is without cause
or consideration in that the purchase price
which appears thereon as paid has in fact
never been paid by the purchaser to vendor.

● When the price is simulated because

neither party to the deed of sale had any
intention whatsoever that the amount will be
paid, the sale is void. (Yu Bun Guan vs Ong,
G.R. No. 144735, October 18, 2001)
72. HEIRS OF BALITE VS LIM Article 1345 of the Civil Code provides that
the simulation of a contract may either be
absolute or relative. In absolute simulation,
there is a colorable contract but without any
substance, because the parties have no
intention to be bound by it. An absolutely
simulated contract is void, and the parties
may recover from each other what they may
have given under the "contract." On the other
hand, if the parties state a false cause in the
contract to conceal their real agreement, such
a contract is relatively simulated. Here, the
parties' real agreement binds them. In the
present case, the parties intended to be
bound by the Contract, even if it did not reflect
the actual purchase price of the property. That
the parties intended the agreement to
produce legal effect is revealed by the letter
of Esperanza Balite to respondent and
 petitioners' admission that there was a partial
payment of P320,000 made on the basis of
the Deed of Absolute Sale. There was an
intention to transfer the ownership of over
10,000 square meters of the property. Clear
from the letter is the fact that the objections of
her children prompted Esperanza to
unilaterally withdraw from the transaction.
Since the Deed of Absolute Sale was merely
relatively simulated, it remains valid and
enforceable.

All the essential requisites prescribed by law

for the validity and perfection of contracts are
present. The juridical nature of the Contract
remained the same. What was concealed was
merely the actual price. Where the essential
requisites are present and the simulation
refers only to the content or terms of the
contract, the agreement is absolutely binding
and enforceable between the parties and their
successors in interest. Petitioners cannot be
permitted to unmake the Contract voluntarily
entered into by their predecessor, even if the
stated consideration was included therein for
an unlawful purpose. The motives of the
contracting parties for lowering the price of
the sale — in the present case, the reduction
of capital gains tax liability — should not be
confused with the consideration. Although
illegal, the motives neither determine nor take
the place of the consideration.
73. BUENAVENTURA VS CA (1) Consideration is plainly stated in the Deeds
of Sale > No proof that it was absolutely
simulated > Vendee/Siblings had financial
capacity to buy the lots;
(2) Consideration is not grossly inadequate >
(a) No requirement that the price be equal to
the exact value of the subject matter of sale;
(b) No proof of fraud, mistake, or undue
 influence (Art.1355) or defect in consent (Art.
1470) to invalidate the Deeds;
(3) Actual Payment does not affect a
contract’s validity > Testimony of Emma that
their father told her that he would transfer a lot
to her through a deed of sale without need for
her payment of the purchase price > BUT
Contract of Sale becomes perfected and
binding upon the meeting of minds as to the
price
> Non-payment only gives the right to
demand the fulfillment or cancellation of the
obligation under an existing valid contract; it
does not result to nullity > ALSO,
Vendee/Siblings
(4) > Children had no legal right to the
properties sold ~ No substantial interest but a
mere expectancy or inchoate, future,
contingent, subordinate, or consequential
interest that vests only upon their parents’
death > Parents are still alive and can validly
sell the properties > Sale did not even
prejudice their share in the estate because
cash of equivalent value replaced the lots
taken from the estate
>> Contract Void if
mistake, or undue influence ( ) or defect in
consent (there is fraud, )

FORM OF CONTRACTS

74. DAUDEN-HERNAEZ VS DE LOS Formalities for convenience/ efficacy

ANGELES 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.

ART. 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 the
contract.

It thus becomes inevitable to conclude that

both the court a quo as well as the private
respondents herein were grossly mistaken in
holding that because petitioner Dauden's
contract for services was not in writing the
same could not be sued upon, or that her
complaint should be dismissed for failure to
state a cause of action because it did not
plead any written agreement.
75. MENESES VS VENTUROZO The necessity of a public document for
contracts which transmit or extinguish real
rights over immovable property, as
mandated by Article 1358 of the Civil Code,
is only for convenience; it is not essential for
validity or enforceability.

As notarized documents, Deeds of Absolute

Sale carry evidentiary weight conferred upon
them with respect to their due execution and
enjoy the presumption of regularity which
may only be rebutted by evidence so clear,
strong and convincing as to exclude all
controversy as to falsity. The presumptions
 that attach to notarized documents can be
affirmed only so long as it is beyond dispute
that the notarization was regular.

A defective notarization will strip the

document of its public character and reduce
it to a private instrument. Consequently,
when there is a defect in the notarization of a
document, the clear and convincing
evidentiary standard normally attached to a
duly-notarized document is dispensed with,
and the measure to test the validity of such
document is preponderance of evidence. In
this case, it should be pointed out that
contrary to the finding of the Court of
Appeals, the Deed of Sale dated June 20,
1966 did not comply with the formalities
required by law.
76. SABITSANA VS MUERTEGUI The notarization of contracts is only for
convenience and not validity or
enforceability. In this case, the first buyer has
a better right to the land than the second
buyer, even if the first buyer has an
unnotarized document and the second
buyer’s is notarized.

REFORMATION OF INSTRUMENTS

77. GARCIA VS BISAYA 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 assert right under them as
reformed.
Perhaps appellant's real grievance is that he
has been led to enter into the contract of
sale through fraud or misrepresentation on
the part of the vendor or in the mistaken
belief that, as stated in the deed, the
property he was buying was unregistered
land. But if that be the case, article 1359 of
the new Civil Code expressly provides that
"the proper remedy is not reformation of the
instrument but annulment of the contract."
78. ROSELLO VS LEANDA >> Reformation > principle of equity where, in
order to express the true intention of the
contracting parties, an instrument already
executed is allowed by law to be reformed
when some error or mistake has been
committed > rationale that it would be unjust
and unequitable to allow the enforcement of a
written instrument which does not reflect or
disclose the real meeting of the minds of the
parties ~ that equity treats as done that which
ought to be done
> Right vs Rule on Evidence where it is
necessarily an invasion or limitation of the
parol evidence rule since,
~ HENCE, must be decided sparingly and with
great caution and zealous care
> Action for the reformation of an instrument
is instituted as a special civil action for
declaratory relief (Section 1, Rule 64, New
Rules of Court) > purpose 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
>> Prescription is intended to suppress stale
and fraudulent claims arising from
transactions which facts had become so
obscure from the lapse of time or defective
memory

79. ATILANO VS ATILANO Cases where no reformation is allowed

From all the facts and circumstances we are

convinced that the object thereof, as intended
and understood by the parties, was that
specific portion where the vendee was then
already residing, where he reconstructed his
house at the end of the war, and where his
heirs, the plaintiffs herein, continued to reside
thereafter: namely, lot No. 535-A; and that its
designation as lot No. 535-E in the deed of
sale was simple mistake in the drafting of the
document.1âwphi1.ñet The mistake did not
vitiate the consent of the parties, or affect the
validity and binding effect of the contract
between them. The new Civil Code provides a
remedy for such a situation by means of
reformation of the instrument. This remedy is
available when, there having been a meeting
of the funds of the parties to a contract, their
true intention is not expressed in the
instrument purporting to embody the
agreement by reason of mistake, fraud,
inequitable conduct on accident (Art. 1359, et
seq.) In this case, the deed of sale executed
in 1920 need no longer reformed. The parties
have retained possession of their respective
properties conformably to the real intention of
the parties to that sale, and all they should do
is to execute mutual deeds of conveyance.
80. CARANTES VS CA In her brief filed with this Court, the petitioner
argues that the private respondents' action is
not actually one for annulment of the deed of
"Assignment of Right to Inheritance" but for
the reformation thereof, hence, the said
action has prescribed long before the filing of
the complaint.

The petitioner's theory that the private

respondents' action is for reformation of an
instrument is a new one, adopted by the
petitioner for the first time on appeal to this
Court. Her husband did not raise it as a
defense in his answer filed with the trial
court, where, consequently, trial proceeded
on the theory that the action sought the
declaration of nullity of the deed of
assignment. When the case reached the
respondent court the petitioner likewise did
not raise this issue, although in truth, even
had she done so, it would have been a
belated and futile exercise. She cannot be
allowed to change her theory of the case at
this stage of the proceedings.

The settled rule is that defenses not pleaded

in the answer may not be raised for the first
time on appeal. A party cannot, on appeal,
change fundamentally the nature of the issue
in the case. When a party deliberately adopts
a certain theory and the case is decided
upon that theory in the court below, he will
not be permitted to change the same on
appeal, because to permit him to do so
would be unfair to the adverse party.

Consequently, we have to disregard the

petitioner's theory that the action is for
reformation of an instrument, and must
proceed on the basis of the issues properly
raised and ventilated before the trial court.
INTERPRETATION OF CONTRACTS

81. BORROMEO VS CA Contracts must be interpreted according to

the ordinary meaning of the terms unless it
results to an interpretation contrary to the
evident intention of the parties. Void terms
must also be separated from the valid ones if
possible.

RESCISSIBLE CONTRACTS

82. ADA VS BAYLON Rescission is a remedy granted by law to the

contracting parties and even to third persons,
to secure the reparation of damages caused
to them by a contract, even if it should be
valid, by means of the restoration of things to
their condition at the moment prior to the
celebration of said contract. It is a remedy to
make ineffective a contract, validly entered
into and therefore obligatory under normal
conditions, by reason of external causes
resulting in a pecuniary prejudice to one of the
contracting parties or their creditors.

Contracts which are rescissible are valid

contracts having all the essential requisites of
a contract, but by reason of injury or damage
caused to either of the parties therein or to
third persons are considered defective and,
thus, may be rescinded. The kinds of
rescissible contracts, according to the reason
for their susceptibility to rescission, are the
following: first, those which are rescissible
because of lesion or prejudice; second, those
which are rescissible on account of fraud or
bad faith; and third, those which, by special
provisions of law, are susceptible to
rescission.
Contracts which are rescissible due to fraud
or bad faith include those which involve things
under litigation, if they have been entered into
by the defendant without the knowledge and
approval of the litigants or of competent
judicial authority. The rescission of a contract
under Article 1381 (4) of the Civil Code only
requires the concurrence of the following:
first, the defendant, during the pendency of
the case, enters into a contract which refers
to the thing subject of litigation; and second,
the said contract was entered into without the
knowledge and approval of the litigants or of
a competent judicial authority. As long as the
foregoing requisites concur, it becomes the
duty of the court to order the rescission of the
said contract. Article 1381 (4) seeks to remedy
the presence of bad faith among the parties
to a case and/or any fraudulent act which they
may commit with respect to the thing subject
of litigation.

Article 1381 (4) of the Civil Code requires that

any contract entered into by a defendant in a
case which refers to things under litigation
should be with the knowledge and approval of
the litigants or of a competent judicial
authority. Further, any disposition of the thing
subject of litigation or any act which tends to
render inutile the court's impending
disposition in such case, sans the knowledge
and approval of the litigants or of the court, is
unmistakably and irrefutably indicative of bad
faith. Such acts undermine the authority of the
court to lay down the respective rights of the
parties in a case relative to the thing subject
of litigation and bind them to such
determination. It should be stressed, though,
that the defendant in such a case is not
 absolutely proscribed from entering into a
contract which refer to things under litigation.

It bears stressing that the right to ask for the

rescission of a contract under Article 1381 (4)
of the Civil Code is not contingent upon the
final determination of the ownership of the
thing subject of litigation. The primordial
purpose of Article 1381 (4) of the Civil Code is
to secure the possible effectivity of the
impending judgment by a court with respect
to the thing subject of litigation. It seeks to
protect the binding effect of a court's
impending adjudication vis-à-vis the thing
subject of litigation regardless of which
among the contending claims therein would
subsequently be upheld. Accordingly, a
definitive judicial determination with respect
to the thing subject of litigation is not a
condition sine qua non before the the
rescissory action contemplated under Article
1381 (4) of the Civil Code may be instituted.|||

83. DEIPARINE VS CA As distinguished from rescission under

Art. 1191

The petitioner challenges the application by

the lower court of Article 1191 of the Civil
Code in rescinding the construction
agreement. His position is that the applicable
rules are Articles 1385 and 1725 of the Civil
Code . . . Article 1385, upon which Deiparine
relies, deals with the rescission of the
contracts enumerated above, which do not
include the construction agreement in
question.

The construction contract falls squarely under

the coverage of Article 1191 because it
imposes upon Deiparine the obligation to
 build the structure and upon the Carungays
the obligation to pay for the project upon its
completion. Article 1191, unlike Article 1385,
is not predicated on economic prejudice to
one of the parties but on breach of faith by
one of them that violates the reciprocity
between them. The violation of reciprocity
between Deiparine and the Carungay
spouses, to wit, the breach caused by
Deiparine's failure to follow the stipulated
plans and specifications, has given the
Carungay spouses the right to rescind or
cancel the contract. Article 1725 cannot
support the petitioner's position either, for this
contemplates a voluntary withdrawal by the
owner without fault on the part of the
contractor, who is therefore entitled to
indemnity, and even damages, for the work he
has already commenced. There is no such
voluntary withdrawal in the case at bar.
84. EDS MANUFACTURING It is probable that the petitioner’s confusion
arose from the defective technique of the
new Code that terms both instances as
"rescission" without distinction between
them; unlike the previous Spanish Code of
1889 that differentiated between "resolution"
for breach of stipulations from "rescission"
by reason of lesion or damage. But the
terminological vagueness does not justify
confusing one case with the other,
considering the patent difference in causes
and results of either action. Relevantly, it has
been pointed out that resolution was
originally used in Article 1124 of the old Civil
Code, and that the term became the basis
for rescission under Article 1191 (and
conformably, also Article 1659).

Thus, the rescission referred to in Article

1191, more appropriately referred to as

85. HEIRS OF SOFIA QUIRONG VS DBP
86. ORIA VS MCMICKING
resolution, is on the breach of faith by one of
the parties which is violative of the
reciprocity between them. In the present
case, it is apparent that HCI violated its
contract with EMI to provide medical service
to its employees in a substantial way.
Rescission under Art. 1191 is applicable.
The rescission of a reciprocal obligation is
different from the rescission of contracts.
The former only arises when one party fails
to perform his duty when the other has
already performed his. The latter arises in
case of economic damage to third parties to
the contract.
TEST OF FRAUD
> OF VALIDITY: It is founded on good
consideration AND is made with > Whether
the conveyance was a bona fide > Bad faith
and lack of valuable consideration must be
proven by party seeking rescission; he who
alleges must prove > Can you prove either or
must prove BOTH? BOTH! > transaction or a
trick and contrivance to defeat creditors ~
MUST NOT prejudice the rights of creditors
> BADGES OF FRAUD:
1. The fact that the consideration of the
conveyance is fictitious or is inadequate. 2. A
transfer made by a debtor after suit has been
begun and while it is pending against him.
3. A sale upon credit by an insolvent debtor.
4. Evidence of large indebtedness or
complete insolvency.
5. The transfer of all or nearly all of his
property by a debtor, especially when he is
insolvent or greatly embarrassed financially.
6. The fact that the transfer is made between
father and son, when there are present other
of the above circumstances.
7. The failure of the vendee to take exclusive
possession of all the property.
 > ACTION OF CREDITORS > Can test the
validity of the sale without first resorting to a
direct action to annul the sale > creditor may
attack the sale by ignoring it and seizing under
his execution the property, or any necessary
portion thereof, which is the subject of the
sale
87. SIGUAN VS LIM Presumption of Fraud

In the instant case, the alleged debt of LIM in

favor of petitioner was incurred in August
1990, while the deed of donation was
purportedly executed on 10 August 1989. We
are not convinced with the allegation of the
petitioner that the questioned deed was
antedated to make it appear that it was made
prior to petitioner's credit.

Art. 1387, first paragraph, of the Civil Code

provides: "All contracts by virtue of which the
debtor alienates property by gratuitous title
are presumed to have been entered into in
fraud of creditors when the donor did not
reserve sufficient property to pay all debts
contracted before the donation. Likewise,
Article 759 of the same Code, second
paragraph, states that the donation is always
presumed to be in fraud of creditors when at
the time thereof the donor did not reserve
sufficient property to pay his debts prior to the
donation.

For this presumption of fraud to apply, it must

be established that the donor did not leave
adequate properties which creditors might
have recourse for the collection of their
credits existing before the execution of the
donation.

88. SUNTAY VS CA
VOIDABLE OR ANNULABLE CONTRACTS
89. CADWALLER AND CO VS SMITH
As earlier discussed, petitioner's alleged
credit existed only a year after the deed of
donation was executed. She cannot,
therefore, be said to have been prejudiced or
defrauded by such alienation.
See first Suntay. Since absolutely simulated
yung contract nila - hndi valid ung sale.
> ANNULMENT of Sale between PELC and
Henry:
(1) FRAUD > Concealment from PELC of the
negotiations with the Government >
Misrepresentation of the condition of the
market > Buying the piles at $12 but Selling
them at $19;
(2) Restoration of the parties’ original
position by mutual restitution > Henry
entitled to the commission of the August 5
sale to the Government (still under the
original agency) but not to the commission of
the sale with PELC
> COMPUTATION:
(a) To PELC:
$1,760.88 (Remaining Piles purchased by
Henry minus its commission) +
$331.17 (Commission of Henry, disallowed
due to annulment)
+
$359.77 (Interest rewarded by Court)
$2,241.82 (TOTAL AMOUNT DUE to PELC)
(b) To Henry:
$6,993.80 (Granted counterclaim of Henry) -
$2,241.82 (Amount due to PELC)
$4,541.98 or P9,083.96
> Payment of $4,541.98 or P9,083.96 by
PELC to Henry
> Fraud that allows annulment is
before/during contract because it would

90. VELARDE VS CA
UNCENFORCEABLE CONTRACTS
91. PNB VS PHIL VEGETABLE OIL CO
92. LIMETKAI SONS MILLING VS CA
vitiate consent > Incidental Fraud only and
hence, only claim for damages (Not rescind)
The breach committed by petitioners was the
nonperformance of a reciprocal obligation,
not a violation of the terms and conditions of
the mortgage contract. Therefore, the
automatic rescission and forfeiture of
payment clauses stipulated in the contract
does not apply. Instead, Civil Code
provisions shall govern and regulate the
resolution of this controversy.
Rescission creates the obligation to return
the object of the contract. It can be carried
out only when the one who demands
rescission can return whatever he may be
obliged to restore. To rescind is to declare a
contract void at its inception and to put an
end to it as though it never was. It is not
merely to terminate it and release the parties
from further obligations to each other, but to
abrogate it from the beginning and restore
the parties to their relative positions as if no
contract has been made.
>The Statute of Frauds applies only to
agreements not to be performed on either
side within one year from the making thereof.
Agreements fully performed by one side
within one year are not covered.
>In this case, both parties to the contract are
not authorized to represent and enter
agreements in behalf of the companies.
Repeated case
Under Art. 1403, an exception to the
unenforceability of contracts pursuant to the
Statute of Frauds is the existence
 of a written note or memorandum evidencing
the contract. The memorandum may be
found in several writings, not necessarily in
one document. The memorandum/a is/are
written evidence that such a contract was
entered into.
No particular form of language or instrument
is necessary to constitute a memorandum or
note in writing under the statute of
frauds; any document or writing, formal or
informal, written either for the purpose of
furnishing evidence of the contract or for
another purpose, which satisfies all the
requirements of the statute as to contents
and signature, is a sufficient memorandum or
note.

93. ORDUNA VS FUENTEBELLA Statute of Frauds inapplicable to partially

executed contracts
•
It merely regulates the formalities of the
contract necessary to render it enforceable.

•
The Statute of Frauds in Article 140, par. 2,
329 of the Civil Code applies only to
executory contracts, i.e., those
where no performance has yet been made.
•
The legal consequence of non-compliance
with the Statute does not come into play
where the contract in question is completed,
executed, or partially consummated.

94. SWEDISH MATCH VS CA Contrary to the Court of Appeals’

conclusion, the exchange of
correspondence between the parties
hardly constitutes the note or
memorandum within the context of Article
 1403 of the Civil Code. Rossi’s letter dated
11 June 1990, heavily relied upon by
respondents, is not complete in itself. First, it
does not indicate at what price the shares
were being sold. In paragraph (5) of the letter,
respondents were supposed to submit their
final offer in U.S. dollar terms, at that after the
completion of the due diligence process. The
paragraph undoubtedly proves that there was
as yet no definite agreement as to the price.
Second, the letter does not state the mode
of payment of the price. In fact, Litonjua was
supposed to indicate in his final offer how and
where payment for the shares was planned to
be made.30
Evidently, the trial court’s dismissal of the
complaint on the ground of
unenforceability under the Statute of
Frauds is warranted.31
Even if we were to consider the letters
between the parties as a sufficient
memorandum for purposes of taking the case
out of the operation of the Statute the action
for specific performance would still fail.

95. CARBONELL VS PONCIO It is well settled in this jurisdiction that the

Statute of Frauds is applicable only to
executory contracts not to contracts that are
totally or partially performed e. In executory
contracts there is a wide field for fraud
because unless they be in writing there is no
palpable evidence of the intention of the
contracting parties. The statute has precisely
been enacted to prevent fraud. However, if a
contract has been totally or partially
performed, the exclusion of parol evidence
would promote fraud or bad faith, for it would
enable the defendant to keep the benefits
already derived by him from the transaction in

VOID OR INEXISTENT CONTRACTS
96. MANZANO VS GARCIA
97. UBARRA VS MAPALAD
litigation, and, at the same time, evade the
obligations, responsibilities or liabilities
assumed or contracted by him thereby.
For obvious reasons, it is not enough for a
party to allege partial performance in order to
hold that there has been such performance
and to render a decision declaring that the
Statute of Frauds is inapplicable. But neither
is such party required to establish such partial
performance by documentary proof before he
could have the opportunity to introduce oral
testimony on the transaction. Indeed, such
oral testimony would usually be unnecessary
if there were documents proving partial
performance. Thus, the rejection of any and
all testimonial evidence on partial
performance, would nullify the rule that the
Statute of Frauds is inapplicable to contracts
which have been partly executed, and lead to
the very evils that the statute seeks to prevent.
When the party concerned has pleaded partial
performance, such party is entitled to a
reasonable chance to establish by parol
evidence the truth of this allegation, as well as
the contract itself
Notarization gives a document a rebuttable
presumption of validity. A forged signature
however makes a conveyance void.
We find the application of the pari delicto
theory in a criminal case to be strange, to say
the least. In the first place, the rule on pari
delictois a rule in civil law. It is principally
governed by Articles 1411 and 1412 of the
Civil Code under the Chapter on Void or
Inexistent Contracts, and presupposes a
situation where the parties are in culpability
similarly situated, i.e., in eodem loco. That
 this rule can by no means apply in a criminal
case is evidenced by the aforesaid Article
1411 which provides in part that "[W]hen the
nullity proceeds from the illegality of the cause
or object of the contract, and the act
constitutes a criminal offense, both parties
being in pari delicto, they shall have no action
against each other, and both shall be
prosecuted." Secondly, in view of the broader
grounds of public policy, the rule may not be
invoked against the State. Thirdly, in the
prosecution of public crimes, the complainant
is the State while the private offended party is
but a complaining witness. Any criminal act
perpetrated by the latter on the occasion of
the commission of the crime, or which may
have given rise to the criminal act imputed to
the accused is not the act or conduct of the
State and can by no means bind it under the
doctrine of pari delicto. To rule otherwise
would be to establish a dangerous doctrine
which would irreparably weaken the very
foundations of the criminal justice system and
frustrate the administration of justice.
Whatever wrongful act may have been
committed by the offended party may only be
invoked to justify the accused's own act or
mitigate his liability.
In spite of all this, however, the respondent
may not necessarily be liable for rendering an
unjust judgment as there is no convincing
evidence on record to show that she knew
such judgment to be unjust and that she
rendered the same with the conscious and
deliberate intent to commit an injustice. She
could only be as she is hereby found, guilty of
gross ignorance of the law.

98. MODINA VS CA Art. 1490. The husband and the wife cannot
sell property to each other, except:
(1) when a separation of property was agreed
upon in the marriage settlements; or
(2) when there has been a judicial separation
of property under Art. 191.
The exceptions laid down did not exist with
respect to the property relations of Chiang
and Merlinda. Therefore, the
sale in question is invalid for being prohibited
by law. Not being the owner of subject
properties, Ramon Chiang could
not have validly sold the same to plaintiff
Serafin Modina.
The sale by Ramon Chiang in favor of
Serafin Modina is, likewise, void and
inexistent.
Furthermore, the court found no sufficient
evidence declaring there was fault on the part
of MERLINDA, therefore, the principle of in
pari delicto is inapplicable and the sale was
void for want of consideration. In effect,
MERLINDA can
recover the lots sold by her husband to
petitioner MODINA.
----The principle of in pari delicto denies all
recovery to the guilty parties inter se. It
applies to cases where the nullity
arises from the illegality of the
consideration or the purpose of the
contract. When two persons are equally at
fault, the law does not relieve them. The
exception to this general rule is when the
principle is invoked with respect to
inexistent contracts.----
The Court debunked petitioner’s theory that
MERLINDA intentionally gave away the bulk
of her and her late husband’s estate to
defendant CHIANG. Because Records show
that when Merlinda filed a complaint-in-
intervention, she did not put up Article 1490
as a defense because that would be
 inconsistent to her claim that the sale was
inexistent. Instead she denied the existence
of the Deed of Sale in favor of her husband
and claimed no consideration in that deed of
sale.

99. LIGUEZ VS CA Yes. Conchita Liguez entitled to so much of

the donated property as may be found, upon
proper liquidation, not to prejudice the share
of the widow Maria Ngo in the conjugal
partnership or the legitimes of Salvador’s
forced heirs. Under the cited Art. 1274,
liberality of the donor is deemed causa only in
contracts that are of “pure” beneficence, or
contracts designed solely and exclusively to
procure the welfare of the beneficiary, without
any intent of producing any satisfaction for
the donor.

In this case, Salvador was not moved

exclusively by the desire to benefit Conchita,
but also to secure her cohabiting with him,
and so that he could gratify his sexual
impulses. This is clear from Salvador’s
confession to two witnesses that he was in
love with her but her parents would not agree
unless he donated the land in question to her.
Actually, therefore, the donation was but one
part of an onerous transaction (at least with
Conchita’s parents) that must be viewed in its
totality. Thus considered, the conveyance
was clearly predicated upon an illicit causa.
Lopez would not have conveyed the property
in question had he known that Conchita
would refuse to cohabit with him. The
cohabitation was an implied condition to the
donation and being unlawful, necessarily
tainted the donation.

100. RELLOSA VS GAW CHEE HUN
Moreover, the CA erred in applying the pari
delicto rule. It cannot be said that both parties
had equal guilt. Salvador was a man
advanced in years and mature experience,
and Conchita was only 16 when the donation
was made.
The phrase "private agricultural land"
employed in said Constitution includes
residential lands. But the vendor in a sale of
residential land executed in Feb. 1944 cannot
have the sale declared nll and void nor rescind
the contract and recover the property,
because both vendor and vendee are in pari
delicto.
The in pari delicto subject to one important
limitation, namely, "whenever public policy is
considered as advanced by allowing either
party to sue for relief against the transaction".
But not all contracts which are illegal because
opposed to public policy come under this
limitation. The cases in which this limitation
may apply only "include the class of contracts
which are intrinsically contrary to public
policy, contracts in which the illegality itself
consists in their opposition to public policy,
and any other species of illegal contracts in
which, from their particular circumstances,
incidental and collateral motives of public
policy require relief." Examples of this class of
contracts are usurious contracts, marriage-
brokerage contracts and gambling contracts.
A sale of residential land executed during the
Japanese military occupation wherein both
parties are in pari delicto does not come
under to this exception because it is not
intrinsically contrary to public policy nor one
 where the illegality itself consists in its
opposition to public policy. It is illegal not
because it is in contrary to public policy but to
the Constitution.
101. PHILIPPINE BANKING CORP VS LUI The consideration need not pass from one
SHE party to another to the other at the time the
contract is executed because the promise of
one is the consideration of the other.
A lease to an alien for a reasonable period is
valid — their temporary stay grants them
temporary rights. However, an option to buy
and a period of more than 50 years is invalid
because it deprives the owner of the right to
dispose of and use the land. (There is a
constitutional prohibition against aliens
owning real property)
102. ALFRED FRITZ FRETZEL VS EDERLINA Even if, as claimed by the petitioner, the sales
CATITO in question were entered into by him as the
real vendee, the said transactions are in
violation of the Constitution; hence, are null
and void ab initio. A contract that violates the
Constitution and the law, is null and void and
vests no rights and creates no obligations. It
produces no legal effect at all. The petitioner,
being a party to an illegal contract, cannot
come into a court of law and ask to have his
illegal objective carried out. One who loses his
money or property by knowingly engaging in
a contract or transaction which involves his
own moral turpitude may not maintain an
action for his losses. To him who moves in
deliberation and premeditation, the law is
unyielding. The law will not aid either party to
an illegal contract or agreement; it leaves the
parties where it finds them. Under Article
1412 of the New Civil Code, the petitioner
cannot have the subject properties deeded to
him or allow him to recover the money he had
spent for the purchase thereof. Equity as a
rule will follow the law and will not permit that
 to be done indirectly which, because of public
policy, cannot be done directly. Where the
wrong of one party equals that of the other,
the defendant is in the stronger position . . . it
signifies that in such a situation, neither a
court of equity nor a court of law will
administer a remedy. The rule is expressed in
the maxims EX DOLO ORITUR ACTIO and IN
PARI DELICTO POTIOR EST CONDITIO
DEFENDENTIS.
The petitioner cannot feign ignorance of the
constitutional proscription, nor claim that he
acted in good faith, let alone assert that he is
less guilty than the respondent. The petitioner
is charged with knowledge of the
constitutional prohibition. As can be gleaned
from the decision of the trial court, the
petitioner was fully aware that he was
disqualified from acquiring and owning lands
under Philippine law even before he
purchased the properties in question; and, to
skirt the constitutional prohibition, the
petitioner had the deed of sale placed under
the respondent's name as the sole vendee
thereof.

NATURAL OBLIGATIONS

103. JUAN VILLAROEL VS BERNARDINO > Already no debt to speak of due to

ESTRADA prescription (death, 7y), Villaroel voluntarily
paid
> PAYMENT necessary in Natural Obligation!
(that Natural Obligation arises only when there
was payment because the obligation is to
retain what had been given)
* Facts + Law = Resolution

104. A.O. FISHER VS ROBB NO. Defendant, although morally responsible

because of the failure of the enterprise, is not
 a consideration under Article 1261 of the
Civil Code as an essential element for the
legal existence for an onerous contract
which could bind the promisor to comply
with his promise.

Article 1261 states, “there is no contract

unless the following requisites exists:
consent of the contracting parties; definite
object; consideration.” In the present case, it
does not appear that plaintiff consented to
the said form of reimbursement. The first
requisite of 1261 is lacking.

With regards of the third requisite, it is now a

well-established rule that a mere moral
obligation arising from wholly ethical motives
not connected with any legal obligation will
not furnish a consideration from an
executory promise.

ESTOPPEL

105. KALALO VS LUZ An essential element of estoppel is that the

person invoking it has been influenced and
has relied on the representations or conduct
of the person sought to be estopped, and
this element is wanting in the instant case. In
Cristobal vs. Gomez, this Court held that no
estoppel based on a document can be
invoked by one who has not been mislead by
the false statements contained therein. And
in Republic of the Philippines vs. Garcia, et
al., this Court ruled that there is no estoppel
when the statement or action invoked as its
basis did not mislead the adverse party-
Estoppel has been characterized as harsh or
odious and not favored in law. When
misapplied, estoppel becomes a most
effective weapon to accomplish an injustice,
inasmuch as it shuts a man's mouth from
speaking the truth and debars the truth in a
particular case. Estoppel cannot be
sustained by mere argument or doubtful
inference: it must be clearly proved in all its
essential elements by clear, convincing and
satisfactory evidence. No party should be
precluded from making out his case
according to its truth unless by force of some
positive principle of law, and, consequently,
estoppel in pains must be applied strictly
and should not be enforced unless
substantiated in every particular.

The essential elements of estoppel in pais

may be considered in relation to the party
sought to be estopped, and in relation to the
party invoking the estoppel in his favor. As
related to the party to be estopped, the
essential elements are: (1) conduct
amounting to false representation or
concealment of material facts or at least
calculated to convey the impression that the
facts are otherwise than, and inconsistent
with, those which the party subsequently
attempts to assert; (2) intent, or at least
expectation that his conduct shall be acted
upon by, or at least influence, the other
party; and (3) knowledge, actual or
constructive, of the real facts. As related to
the party claiming the estoppel, the essential
elements are (1) lack of knowledge and of
the means of knowledge of the truth as the
facts in questions; (2) (reliance, in good faith,
upon the conduct or statements of the party
to be estopped; (3) action or inaction based
thereon of such character as To change the
position or status of the party claiming the
estoppel, to his injury, detriment or prejudice.
106. TORBELA VS SPS ROSANO
107. HOJAS VS PH AMONAH BANK
108.MANILA LODGE NO 61 VS CA
Laches are the failure or neglect, for
unreasonable and unexplained length of
time, to do that which by exercising due
diligence could or should have been done
earlier. They do not apply if a prescriptive
period has been provided.
Through estoppel, an admission or
representation is rendered conclusive upon
the person making it, and cannot be denied or
disproved as against the person relying on it.
This doctrine is based on the grounds of
public policy, fair dealing, good faith, and
justice and its purpose is to forbid one to
speak against his own act, representations or
commitments to the injury of one to whom
they were directed and who reasonably relied
on it. Thus, in order for this doctrine to
operate, a representation must have been
made to the detriment of another who relied
on it. In other words, estoppel would not lie
against one who, in the first place, did not
make any representation.
> Reclaimed Area (Portion Sold) is > Cannot
be Alienated > Even if TDC is buyer in Good
Faith,
(1) Reclaimed Area is > (i) Purpose of , by
which Manila is authorized to reclaim, was to
extend Luneta which is a park or plaza and
hence reclaimed area must be of the same
nature or character as the old Luneta; (ii)
Manila Bay is part of public domain; (iii)
Sufficient that Property is intended for Public
Use where it was to be paid by Manila City;
(iv) Could have alienated the Portion Reserved
as Hotel Site (where title would revert to City
if PUBLIC
No Estoppel against State
Public Property
Act No. 1360
hotel fails) Manila had
Portion Sold was not Hotel Site but Other End
> , the area and HENCE
;
BUT
no authority/power TO SELL
HENCE
Sale is VOID for Lack of Subject Matter
from questioning the validity of the sale >
EVEN > does not apply to a municipal
corporation to
against Republic policy > OTHERWISE ,
tantamount to enabling it to do indirectly what
it could not do directly;
(3) Voidness of Sale can be used against
Anyone who asserts a right arising from it, not
only against the first vendee, BPOE, but also
against all its successors, including the TDC