Amina A. Makintan CASE# 75 of Obligation and contract DEPARTMENT OF HEALTH vs HTMC ENGINEERS COMPANY, G.R. No. 146120, January 27, 2006 Article 1308 FACTS: Petitioner Department of Health (DOH) entered into four Owner–Consultant Agreements with respondent HTMC Engineers Company involving various infrastructure projects. All four consultancy agreements for the hospitals were similarly- worded, indicating therein that said contracts were intended for the preparation of architectural and engineering (A & E) design plans and bid documents/requirements, and for construction supervision (CS). Sometime in 1996, respondent was able to complete the A & E services for all four hospitals and the necessary documents were submitted to petitioner in accordance with the consultancy agreements. Petitioner requested the amendments to the consultancy agreements which are to divide the scope of works under the original contracts into two (2) separate contracts. It would seem, however, that no clear settlement had been reached by the parties in connection with petitioner’s proposed amendments to the consultancy agreements, thus, the DOH refused to issue the necessary notices to proceed with the construction supervision in favor of HTMC. Petitioner filed a complaint and contended that HTMC’s refusal to accede to the former’s request for amendment of the consultancy contracts resulted in the rescission of the original agreements, and that such rescission gave the DOH and its personnel the right to take over the construction supervision of the projects and to refuse the payment of any amount due HTMC under the agreements. ISSUE: Whether or Not HTMC’s refusal to accede to the DOH’s request for amendment of the consultancy contracts resulted in the rescission of the original agreements.
Transcript
Amina A. Makintan
CASE# 75 of Obligation and contract
DEPARTMENT OF HEALTH vs HTMC ENGINEERS COMPANY,G.R. No. 146120, January 27, 2006Article 1308FACTS:
Petitioner Department of Health (DOH) entered into four Owner–Consultant Agreements with respondent HTMC Engineers Company involving various infrastructure projects. All four consultancy agreements for the hospitals were similarly-worded, indicating therein that said contracts were intended for the preparation of architectural and engineering (A & E) design plans and bid documents/requirements, and for construction supervision (CS). Sometime in 1996, respondent was able to complete the A & E services for all four hospitals and the necessary documents were submitted to petitioner in accordance with the consultancy agreements. Petitioner requested the amendments to the consultancy agreements which are to divide the scope of works under the original contracts into two (2) separate contracts. It would seem, however, that no clear settlement had been reached by the parties in connection with petitioner’s proposed amendments to the consultancy agreements, thus, the DOH refused to issue the necessary notices to proceed with the construction supervision in favor of HTMC.
Petitioner filed a complaint and contended that HTMC’s refusal to accede to the former’s request for amendment of the consultancy contracts resulted in the rescission of the original agreements, and that such rescission gave the DOH and its personnel the right to take over the construction supervision of the projects and to refuse the payment of any amount due HTMC under the agreements.
ISSUE: Whether or Not HTMC’s refusal to accede to the DOH’s request for
amendment of the consultancy contracts resulted in the rescission of the original agreements.
HELD: HTMC’s failure to accept the amendment proposed by the DOH did not, in any way, affect the validity and the subsistence of the four consultancy contracts which bound both parties upon its perfection. A contract properly executed between parties continue to be the law between said parties and should be complied with in good faith. There being a perfected contract, DOH cannot revoke or renounce the same without the consent of the other party. Just as nobody can be forced to enter into a contract, in the same manner, once a contract is entered into, no party can renounce it unilaterally or without the consent of the other. It is a general principle of law that no one may be permitted to change his mind or disavow and go back upon his own acts, or to proceed contrary thereto, to the prejudice of the other party. As no
revision to the original agreement was ever arrived at, the terms of the original contract shall continue to govern over both the HTMC and the DOH with respect to the infrastructure projects as if no amendments were ever initiated. In the absence of a new perfected contract between HTMC and DOH, both parties shall continue to be bound by the stipulations of the original contract and all its natural effects
DIOSCORO E. SALE
GF EQUITY, INC. vs. VALENZONA462 SCRA 466 (2005)
FACTS:
GF Equity hired Arturo Valenzona (Valenzona) as head basketball coach of Alaska team. As head coach, Valenzona was required to comply to his duties such as coaching at all practices and games scheduled for the team. Under their contract, Valenzona would receive P 35,000.00 monthly and GF Equity will provide him with a service vehicle and gasoline allowance. Under paragraph 3 of the same contract it was stipulated there that;“If at any time during the contract, the COACH, in the sole opinion of the CORPORATION, fails to exhibit sufficient skill or competitive ability to coach the team, the CORPORATION may terminate this contract.”
Subsequently, Valenzona was terminated. GF equity invoked paragraph 3 of the said contract. Counsel of Valenzona demands for compensation arising from arbitrary and unilateral termination of his employment. However, GF equity refused it. Valenzona filed a complaint before the Regional Trial Court (RTC) of Manila against GF Equity for breach of contract. Valenzona contends that the condition in paragraph 3 violates Article 1308 of New Civil Code (NCC). But the RTC dismissed the complaint and affirmed the validity of paragraph 3 on the grounds that Valenzona was fully aware of entering into a bad bargain.On appeal, the Court of Appeals (CA) held that the questioned provision in the contract ―merely confers upon GF Equity the right to fire its coach upon a finding of inefficiency, a valid reason within the ambit of its management prerogatives, subject to limitations imposed by law, although not expressly stated in the clause‖; and ―the right granted in the contract can neither be said to be immoral, unlawful, or contrary to public policy. It concluded, however, that while ―the mutuality of the clause‖ is evident, GF Equity ―abused its right by arbitrarily terminating Valenzona‘s employment and opened itself to a charge of bad faith.
ISSUE:Whether or not paragraph 3 of the contract is violative of the principle of mutuality of contracts
HELD:
The ultimate purpose of the mutuality principle is thus to nullify a contract containing a condition which makes its fulfillment or pre-termination dependent exclusively upon the uncontrolled will of one of the contracting parties.
The contract incorporates in paragraph 3 the right of GF Equity to pre-terminate the contract — that ―if the coach, in the sole opinion of the corporation, fails to exhibit sufficient skill or competitive ability to coach the team, the corporation may terminate the contract.‖ The assailed condition clearly transgresses the principle of mutuality of contracts. It leaves the determination of whether Valenzona failed to exhibit sufficient skill or competitive ability to coach Alaska team solely to the opinion of GF Equity. Whether Valenzona indeed failed to exhibit the required skill or competitive ability depended exclusively on the judgment of GF Equity. In other words, GF Equity was given an unbridled prerogative to pre-terminate the contract irrespective of the soundness, fairness or reasonableness, or even lack of basis of its opinion.To sustain the validity of the assailed paragraph would open the gate for arbitrary and illegal dismissals, for void contractual stipulations would be used as justification therefor. The nullity of the stipulation notwithstanding, GF Equity was not precluded from the right to pre-terminate the contract. The pre-termination must have legal basis, however, if it is to be declared justified
Mohamad CymmerPHILIPPINE NATIONAL BANK v. SPOUSES ROCAMORAG.R. No. 164549September 18, 2009Articl 1308Facts: Respondent Spouses Rocamora obtained a loan from Philippine National Bank (PNB) secured by deeds of real estate mortgage and of chattel mortgage. Both the promissory note and the real estate mortgage deed contained an escalation clause that allowed PNB to increase the 12% interest rate at any time without notice, within the limits allowed by law, When respondents defaulted in their payment, foreclosure proceedings followed. However, the recovered proceeds were insufficient to cover the entire loan obligations of respondents, hence a complaint for deficiency judgment was initiated by PNB. ISSUE: WON The PNB’s unilateral increase of interest rates violated the principle of mutuality of contractsHELD: YES Any increase in the rate of interest made pursuant to an escalation clause must be the result of an agreement between the parties.Thus, any change must be mutually agreed upon, otherwise, the change carries no binding effect. the stipulation goes against the principle of mutuality of contract under Article 1308 of the Civil Code no matter how elaborately worded, an unconsented increase in interest rates is ineffective if it transgresses the principle of mutuality of contracts.
SOLIDBANK CORPORATION vs. PERMANENT HOMES, INCORPORATED G.R. No. 171925/ July 23, 2010
FACTSThe records disclose that PERMANENT HOMES is a real estate
development company, and to finance its housing project known as the “Buena Vida Townhome” located within Merville Subdivision, Parañaque City, it applied and was subsequently granted by SOLIDBANK with an “Omnibus Line” credit facility in the total amount of SIXTY MILLION PESOS. Of the entire loan, FIFTY NINE MILLION as time loan for a term of up to three hundred sixty (360) days, with interest thereon at prevailing market rates, and subject to monthly repricing. The remaining ONE MILLION was available for domestic bills purchase. To secure the aforesaid loan, PERMANENT HOMES initially mortgaged three (3) townhouse units within the Buena Vida project in Parañaque. At the time, however, the instant complaint was filed against SOLIDBANK, a total of thirty six (36) townhouse units were mortgaged with said bank. Of the 60 million available to PERMANENT HOMES, it availed of a total of 41.5 million pesos covered by three (3) promissory notes. There was a standing agreement by the parties that any increase or decrease in interest rates shall be subject to the mutual agreement of the parties. For the three loan availments that PERMANENT HOMES obtained, the herein respondent argued that SOLIDBANK unilaterally and arbitrarily accelerated the interest rates without any declared basis of such increases, of which PERMANENT HOMES had not agreed to, or at the very least, been informed of. On July 5, 2002, the trial court promulgated its Decision in favor of Solid bank. Permanent then filed an appeal before the appellate court which was granted; in which reversed and set aside the assailed decision dated July 5, 2002. Hence, the present petition.ISSUES
(1)WON the Honorable Court of Appeals was correct in ruling that the increases in the interest rates on Permanent’s loans are void for having been unilaterally imposed without basis.
(2)WON the Honorable Court of Appeals was correct in ordering the parties to enter into annex press agreement regarding the applicable interest rates on Permanent’s loan availments subsequent to the initial thirty-day (30) period.RULING
(1) Yes. Although interest rates are no longer subject to a ceiling, the lender still does not have an unbridled license to impose increased interest rates. The lender and the borrower should agree on the imposed rate, and such imposed rate should be in writing of which was not provided by petitioner.
(2) Yes. In order that obligations arising from contracts may have the force of law between the parties, there must be mutuality between the parties based on their essential quality. A contract containing a condition
which makes its fulfillment dependent exclusively upon the uncontrolled will of one of the contracting parties is void. There was no showing that either Solidbank or Permanent coerced each other to enter into the loan agreements. The terms of the Omnibus Line Agreement and the promissory notes were mutually and freely agreed upon by the parties
MARK Y NATIVIDAD
Leal vs IAC
155 SCRA 394G.R. No. L-65425 November 5, 1987Article 1306.
Facts: On March 21, 1941, a document entitled "Compraventa," written entirely in the Spanish language, involving three parcels of land, was executed by the private respondent's predecessors-in-interest, Vicente Santiago and his brother, Luis Santiago, in favor of Cirilio Leal the deceased father of some of the petitioners. In the document, it is stated: “En caso de venta, no podran vender a otros dichos tres lotes de terreno sino al aqui vendedor Vicente Santiago, o los herederos o sucesores de este por el niismo precio de CINCO MIL SEISCIENTOS PESOS (P5,600.00) siempre y cuando estos ultimos pueden hacer la compra. “ Which is admitted by both parties that the phrase "they shall not sell to others these three lots but only to the seller Vicente Santiago or to his heirs or successors" is an express prohibition against the sale of the lots described in the "Compraventa" to third persons or strangers to the contract.
Cirilo Leal immediately took possession and exercised ownership over the said lands. When Cirilo died on December 10, 1959, the subject lands were inherited by his six children, who are among the petitioners, and who caused the consolidation and subdivision of the properties among themselves.
Sometime before 1966-1967, Vicente Santiago approached the petitioners and offered re- repurchase the subject properties. Petitioners, however, refused the offer. Consequently, Vicente Santiago instituted a complaint for specific performance before the then Court of First Instance of Quezon City on August 2, 1967.
All the trial, the court a quo rendered its decision,-dismissing the complaint on the ground that the same was still premature considering that there was, as yet, no sale nor any alienation equivalent to a sale. Not satisfied with this decision, the respondent appealed and the Intermediate Appellate Court reversed the decision ordering the petitioners to allow the respondent for the re-purchase.
Issue:
Whether or not the clause for repurchase in the document “Compraventa” is contrary to law, morals, good customs, public order, or public policy.
Held: Yes. One such condition which is contrary to public policy is the present prohibition to self to third parties, because the same virtually amounts to a perpetual restriction to the right of ownership, specifically the owner's right to freely dispose of his properties. This, we hold that any such prohibition, indefinite and stated as to time, so much so that it shall continue to be applicable even beyond the lifetime of the original parties to the contract, is, without doubt, a nullity.
WHEREFORE, in view of the foregoing, the Resolution dated September 27, 1983, of the respondent court is SET ASIDE and the Decision promulgated on June 28, 1978 is hereby REINSTATED.
Name: Saddam L. PacioG.R. No. 163512 February 28, 2007 DAISY B. TIU,Petitioner vs.PLATINUM PLANS PHIL., INC.,Respondent.
FACTS: Respondent Platinum Plans Philippines, Inc. is a domestic corporation engaged in the pre-need industry. From 1987 to 1989, petitioner Daisy B. Tiu was its Division Marketing Director. On January 1, 1993, respondent re-hired petitioner as Senior Assistant Vice-President and Territorial Operations Head in charge of its Hongkong and Asean operations. The parties executed a contract of employment valid for five years.
On September 16, 1995, petitioner stopped reporting for work. In November 1995, she became the Vice-President for Sales of Professional Pension Plans, Inc., a corporation engaged also in the pre-need industry.Consequently, respondent sued petitioner for damages before the RTC of Pasig City,Branch 261. Respondent alleged, among others, that petitioner’s employment withProfessional Pension Plans, Inc. violated the non-involvement clause in her contract of employment,which prohibits the employee for two years in case of separation, whether voluntary or for cause, to engage in or be involve with any pre-need corporation. In upholding the validity of the non-involvement clause, the trial court ruled that contract in restraint of trade is valid provided that there is a limitation upon either time or place. In the case of the pre-need industry, the trial court found the two-year restriction to be valid and reasonable. On appeal, the Court of Appeals affirmed the trial court’s ruling. It reasoned that petitioner entered into the contract on her own will and volition. Thus, she bound herself to fulfill not only what was expressly stipulated in the contract, but also all its consequences that were not against good faith, usage, and law. The appellate court also ruled that the stipulation prohibiting non-employment for two years was valid and enforceable considering the natureof respondent’s business. Petitioner moved for reconsideration but was denied.
ISSUE: Plainly stated, the core issue is whether the non-involvement clause is valid.
HELD: YES, Conformably then with the aforementioned pronouncements, a non-involvement clause is not necessarily void for being in restraint of trade as long as there are reasonable limitations as to time, trade, and place. In
this case, the non-involvement clause has a time limit: two years from the time petitioner’s employment with respondent ends. It is also limited as to trade, since it only prohibits petitioner from engaging in any pre-need business akin to respondent’s. More significantly, since petitioner was the Senior Assistant Vice-President and Territorial Operations Head in charge of respondent’s Hongkong and Asean operations, she had been privy to confidential and highly sensitive marketing strategies. This case is connected to article 1306 of Civil Code which says “The contracting parties may establish such stipulation, clauses, terms, or conditions, as they may deem convenient, provided they are not contrary to laws, morals, good customs, public order or public policy”.
SAHILLIA S. ASADILLLB-ID
G.R. No. 171586 January 25, 2010NATIONAL POWER CORPORATION, Petitioner, vs.PROVINCE OF QUEZON and MUNICIPALITY OF PAGBILAO, Respondent.
FACTS:
The Province of Quezon assessed Mirant Pagbilao Corporation (Mirant) for unpaid real property taxes in the amount of P1.5 Billion for the machineries located in its power plant in Pagbilao, Quezon. Napocor, which entered into a Build-Operate-Transfer (BOT) Agreement (entitled Energy Conversion Agreement) with Mirant, was furnished a copy of the tax assessment. Napocor protested the assessment before the Local Board of Assessment Appeals (LBAA), claiming entitlement to the tax exemptions provided under Section 234 of the Local Government Code (LGC).The Court’s ruled that Napocor is not entitled to any of these claimed tax exemptions and privileges on the basis primarily of the defective protest filed by the Napocor. Napocor filed a Motion to Refer the Case to the Court En Banc considering that "the issues raised have far-reaching consequences in the power industry, the country’s economy and the daily lives of the Filipino people, and since it involves the application of real property tax provision of the LGC against Napocor, an exempt government instrumentality."
ISSUE:Whether Napocor has sufficient legal interest to protest the tax assessment because without the requisite interest, the tax assessment stands, and no claim of exemption or privilege can prevail. HELD:
A BOT agreement is not a mere financing arrangement. Under this concept, it is the project proponent who constructs the project at its own cost and subsequently operates and manages it. The proponent secures the return on its investments from those using the project’s facilities through appropriate tolls, fees, rentals, and charges not exceeding those proposed in its bid or as negotiated. At the end of the fixed term agreed upon, the project proponent transfers the ownership of the facility to the government agency. Thus, the government is able to put up projects and provide immediate services without the burden of the heavy expenditures that a project start up requires. A reading of the provisions of the parties’ BOT Agreement shows that it fully conforms to this concept. By its express terms, BPPC has complete ownership – both legal and beneficial – of
the project, including the machineries and equipment used, subject only to the transfer of these properties without cost to NAPOCOR after the lapse of the period agreed upon. As agreed upon, BPPC provided the funds for the construction of the power plant, including the machineries and equipment needed for power generation; thereafter, it actually operated and still operates the power plant, uses its machineries and equipment, and receives payment for these activities and the electricity generated under a defined compensation scheme. Notably, BPPC – as owner-user – is responsible for any defect in the machineries and equipment. If the BOT Agreement under consideration departs at all from the concept of a BOT project as defined by law, it is only in the way BPPC’s cost recovery is achieved; instead of selling to facility users or to the general public at large, the generated electricity is purchased by NAPOCOR which then resells it to power distribution companies. This deviation, however, is dictated, more than anything else, by the structure and usages of the power industry and does not change the BOT nature of the transaction between the parties. Consistent with the BOT concept and as implemented, BPPC – the owner-manager-operator of the project – is the actual user of its machineries and equipment. BPPC’s ownership and use of the machineries and equipment are actual, direct, and immediate, while NAPOCOR’s is contingent and, at this stage of the BOT Agreement, not sufficient to support its claim for tax exemption. Thus, the CTA committed no reversible error in denying NAPOCOR’s claim for tax exemption. Given the special nature of a BOT agreement as discussed in the cited case, we find Article 1503 inapplicable to define the contract between Napocor and Mirant, as it refers only to ordinary contracts of sale. For the foregoing reasons, we DENY the petitioner’s motion for reconsideration.
Name title: TAYAG vs. LACSONSCRA/G.R. No./Date: G.R. No. 134971 March 25, 2004Article involved: Art. 1314. Any third person who induces another to violate his contract shall be liable for damages to the other contracting party.
Facts: Respondents Angelica Tiotuyco Vda. de Lacson and her children were the registered owners of three parcels of land located in Mabalacat, Pampanga. The properties, which were tenanted agricultural lands. On March 17, 1996, a group of original farmers individually executed in favor of the petitioner separate Deeds of Assignment in which the assignees assigned to the petitioner their respective rights as tenants/tillers of the landholdings possessed and tilled by them for and in consideration of P50.00 per square meter. On July 24, 1996, the petitioner called a meeting of the defendants-tenants but on August 8, 1996, the defendants-tenants wrote the petitioner stating that they were not attending the meeting and instead gave notice of their collective decision to sell all their rights and interests, as tenants/ lessees, over the landholding to the respondents.
On August 19, 1996, the petitioner filed a complaint with the Regional Trial Court of San Fernando, Pampanga. The petitioner also prayed for a writ of preliminary injunction against the defendants and the respondents therein. The respondents, thereafter, filed a Motion to dismiss/deny the petitioner’s plea for injunctive relief, there petitioner opposed the motion, contending that it was premature for the trial court to resolve his plea for injunctive relief. On February 13, 1997, the court issued an Order19 denying the motion of the respondents for being premature. It directed the hearing to proceed for the respondents to adduce their evidence. The court ruled that the petitioner, on the basis of the material allegations of the complaint, was entitled to injunctive relief.
Issue: whether or not the tiller contracted to sell to the respondent the land promised to the petitioner is an act of fraud.
Held: In fine, one who is not a party to a contract and who interferes thereon is not necessarily an officious or malicious intermeddler. The only evidence adduced by the petitioner to prove his claim is the letter from the defendants-tenants informing him that they had decided to sell their rights and interests over the landholding to the respondents, instead of honoring their obligation under the deeds of assignment because, according to them, the petitioner harassed those tenants who did not want to execute deeds of assignment in his favor, and because the said defendants-tenants did not want to have any problem with the respondents who could cause their eviction for executing with the petitioner the deeds of assignment as the said deeds are in violation of P.D. No. 27 and Rep. Act No. 6657.
G.R. No. L-9356 February 18, 1915Lessons Applicable: Interference with Contractual Relations (Torts and Damages)Laws Applicable: Article 1902 (old law)
FACTS:Cuddy was the owner of the film Zigomar April 24: He rented it to C. S. Gilchrist for a week for P125 A few days to the date of delivery, Cuddy sent the money back to GilchristCuddy rented the film to Espejo and his partner Zaldarriaga P350 for the week knowing that it was rented to someone else and that Cuddy accepted it because he was paying about three times as much as he had contracted with Gilchrist but they didn't know the identity of the other partyGilchrist filed for injunction against these partiesTrial Court and CA: granted - there is a contract between Gilchrist and CuddyISSUE: W/N Espejo and his partner Zaldarriaga should be liable for damages though they do not know the identity of Gilchrist
HELD: YES. judgment is affirmedThat Cuddy was liable in an action for damages for the breach of that contract, there can be no doubt.the mere right to compete could not justify the appellants in intentionally inducing Cuddy to take away the appellee's contractual rightsEveryone has a right to enjoy the fruits and advantages of his own enterprise, industry, skill and credit. He has no right to be free from malicious and wanton interference, disturbance or annoyance. If disturbance or loss come as a result of competition, or theexercise of like rights by others, it is damnum absque injuria(loss without injury), unless some superior right by contract or otherwise is interfered withCuddy contract on the part of the appellants was a desire to make a profit by exhibiting the film in their theater. There was no malice beyond this desire; but this fact does not relieve them of the legal liability for interfering with that contract and causing its breach.liability of the appellants arises from unlawful acts and not from contractual obligations, as they were under no such obligations to induce Cuddy to violate his contract with GilchristSo that if the action of Gilchrist had been one for damages, it would be governed by chapter 2, title 16, book 4 of the Civil Code. Article 1902 of that code provides that a person who, by act or omission, causes damagesto another when there is fault or negligence, shall be obliged to repair the damage do done
There is nothing in this article which requires as a condition precedent to the liability of a tort-feasor that he must know the identity of a person to whom he causes damagesAn injunction is a "special remedy" which was there issued by the authority and under the seal of a court of equity, and limited, as in order cases where equitable relief is sought, to cases where there is no "plain, adequate, and complete remedy at law," which "will not be granted while the rights between the parties are undetermined, except in extraordinary cases where material and irreparable injury will be done," which cannot be compensated indamages, and where there will be no adequate remedy, and which will not, as a rule, be granted, to take property out of the possession of one party and put it into that of another whose title has not been established by lawirreparable injury not meant such injury as is beyond the possibility of repair, or beyond possible compensation in damages, nor necessarily great injury or great damage, but that species of injury, whether great or small, that ought not to be submitted to on the one hand or inflicted on the other; and, because it is so large on the one hand, or so small on the other, is of such constant and frequent recurrence that no fair or reasonable redress can be had therefor in a court of lawGilchrist was facing the immediate prospect of diminished profits by reason of the fact that the appellants had induced Cuddy to rent to them the film Gilchrist had counted upon as his feature film
So Ping Bun v. CAFacts:In 1963, Tek Hua Trading Co. entered into lease agreements with lessor Dee C. Chuan and Sons, Inc. involving four (4) premises in Binondo, which the former used to store textiles. The agreements were for one (1) year, with provisions for month-to-month rental should the lessee continue to occupy the properties after the term. In 1976, Tek Hua Trading Co. was dissolved, and the former members formed Tek Hua Enterprises Corp., herein respondent. So Pek Giok, managing partner of the defunct company, died in 1986. Petitioner So Ping Bun, his grandson, occupied the warehouse for his own textile business, Trendsetter Marketing. On March 1, 1991, private respondent Tiong sent a letter to petitioner, demanding that the latter vacate the premises. Petitioner refused, and on March 4, 1992, he requested formal contracts of lease with DCCSI. The contracts were executed. Private respondents moved for the nullification of the contract and claimed damages. The petition was granted by the trial court, and eventually by the Court of Appeals.Issue:(1) Whether So Ping Bun is guilty of tortuous interference of contract(2) Whether private respondents are entitled to attorney’s feesHeld:(1) Damage is the loss, hurt, or harm which results from injury, and damages are the recompense or compensation awarded for the damage suffered. One becomes liable in an action for damages for a nontrespassory invasion of another's interest in the private use and enjoyment of asset if (a) the other has property rights and privileges with respect to the use or enjoyment interfered with, (b) the invasion is substantial, (c) the defendant's conduct is a legal cause of the invasion, and (d) the invasion is either intentional and unreasonable or unintentional and actionable under general negligence rules. The 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. Petitioner's Trendsetter Marketing asked DCCSI to execute lease contracts in its favor, and as a result petitioner deprived respondent corporation of the latter's property right. Clearly, and as correctly viewed by the appellate court, the three elements of tort interference above-mentioned are present in the instant case.In the instant case, it is clear that petitioner So Ping Bun prevailed upon DCCSI to lease the warehouse to his enterprise at the expense of respondent corporation. Though petitioner took interest in the property of respondent corporation and benefited from it, nothing on record imputes deliberate wrongful motives or malice on him. Petitioner argues that damage is an essential element of tort interference, and since the trial court and the appellate court ruled that private respondents were not entitled to actual, moral or exemplary damages, it follows that he ought to be absolved of any liability, including attorney's fees.
G.R. No. 119107 March 18, 2005 JOSE V. LAGON,petitioner,vs.HONORABLE COURT OF APPEALS and MENANDRO V. LAPUZ,respondents.FACTS:On June 23, 1982, petitioner Jose Lagon purchased two parcels of land located at Tacurong, Sultan Kudarat from theestate of Bai Tonina Sepi. A few months after the sale, private respondent Menandro Lapuz filed a complaint for torts and damages against petitioner before the Regional Trial Court (RTC) of Sultan Kudarat.Private respondent claimed that he entered into a contract of lease with the late Bai Tonina Sepi over three parcels of land in Sultan Kudarat, Maguindanao beginning 1964. It was agreed upon that private respondent will put upcommercial buildings which would, in turn, be leased to new tenants. The rentals to be paid by those tenants wouldanswer for the rent private respondent was obligated to pay Bai Tonina Sepi for the lease of the land. In 1974, thelease contract ended but was allegedly renewed.When Bai Tonina Sepi died, private respondent started remitting his rent to the court-appointed administrator of her estate. But when the administrator advised him to stop collecting rentals from the tenants of the buildings heconstructed, he discovered that petitioner, representing himself as the new owner of the property, had beencollecting rentals from the tenants. He thus filed a complaint against the latter, accusing petitioner of inducing theheirs of Bai Tonina Sepi to sell the property to him, thereby violating his leasehold rights over it.Petitioner denied the allegation, thus contending that the heirs were in dire need of money to pay off the obligationsof the deceased. He also denied interfering with private respondent's leasehold rights as there was no lease contractcovering the property when he purchased it; that his personal investigation and inquiry revealed no claims or encumbrances on the subject lots.On July 29, 1986, the RTC decided in favor of the private respondent.Petitioner appealed the judgment to the Court of Appeals. The appellate court affirmed the ruling of the trial courtwith modification.ISSUE:Whether or not the purchase by petitioner of the subject property, during the supposed existence of privaterespondent's lease contract with the late Bai Tonina Sepi, constituted tortuous interference for which petitioner should be held liable for damages.HELD:The Supreme Court affirmed the petition and sets aside the decision of the appellate court.Before the appellate court, petitioner disclaimed knowledge of any lease contract between the late Bai Tonina Sepiand private respondent. On the other hand, private respondent insisted that it was impossible for petitioner not toknow about the contract since the latter was aware that he was collecting rentals from the tenants of the building.While
the appellate court disbelieved the contentions of both parties, it nevertheless held that, for petitioner to become liable for damages, he must have known of the lease contract and must have also acted with malice or badfaith when he bought the subject parcels of land.Article 1314 of the Civil Code provides that any third person who induces another to violate his contract shall beliable for damages to the other contracting party.The Court, in the case of So Ping Bun v. Court of Appeals, laid down the elements of tortuous interference withcontractual relations: (a) existence of a valid contract; (b) knowledge on the part of the third person of the existenceof the contract and (c) interference of the third person without legal justification or excuse.Private respondent presented in court a notarized copy of the purported lease renewal to show the existence of avalid contract. While the contract appeared as duly notarized, the notarization thereof, however, only proved its dueexecution and delivery but not the veracity of its contents. Nonetheless, after undergoing the rigid scrutiny of petitioner's counsel and after the trial court declared it to be valid and subsisting, the notarized copy of the leasecontract presented in court appeared to be incontestable proof that private respondent and the late Bai Tonina Sepiactually renewed their lease contract.The second element, on the other hand, in this case, petitioner claims that he had no knowledge of the lease contract.His sellers (the heirs of Bai Tonina Sepi) likewise allegedly did not inform him of any existing lease contract. Eventhe registry of property had no record of the same.To sustain a case for tortuous interference, the defendant must have acted with malice or must have been driven by purely impious reasons to injure the plaintiff. In other words, his act of interference cannot be justified.Furthermore, the records do not support the allegation of private respondent that petitioner induced the heirs of BaiTonina Sepi to sell the property to him. The records show that the decision of the heirs of the late Bai Tonina Sepi tosell the property was completely of their own volition and that petitioner did absolutely nothing to influence their judgment. Private respondent himself did not proffer any evidence to support his claim.Petitioner's purchase of the subject property was merely an advancement of his financial or economic interests,absent any proof that he was enthused by improper motives.In sum, inasmuch as not all three elements to hold petitioner liable for tortuous interference are present, petitioner cannot be made to answer for private respondent's losses.This case is one of damnun absque injuria or damage without injury.
SAHILLIA S. ASADILLLB-IDLIMITLESS POTENTIALS, INC., petitioner, vs. THE HON. REINATO G. QUILALA, respondents.[G.R. No. 157391. July 15, 2005]FACTS:On October 20, 1987, the Roman Catholic Archbishop of Manila (RCAM), as lessor, and Limitless Potentials, Inc. (LPI), as lessee, executed a Contract of Lease for advertising purposes over certain areas, including Lot 28-B, in the property covered by TCT No. 328187where the Our Lady of Guadalupe Minor Seminary Compound and the San Carlos Seminary Compound are located.LPI bound and obliged itself to pay a monthly rental of P11,000.00, with a 10% increase every two years. Due to a pending case between RCAM and Advertising Associates, LPI was unable to take possession of the premises. Thus, on November 14, 1989, RCAM and LPI executed an “Amendment to an Agreement,” fixing the period for the lease of the premises from February 1, 1990 to March 1, 1997, with a monthly rental of P12,000.00, to be increased by 10% every year.In the meantime, other advertising agencies, including ASTRO Advertising, Inc. (ASTRO), applied to RCAM for the putting up of neon signs/billboards in the leased premises. RCAM referred the applications to LPI.LPI wrote RCAM that it would execute the appropriate contracts with the applicants, and oversee the installation and operation of neon advertising signs; the overlapping of signboards would be avoided and the area would not be rendered unsightly and unmanageable. It also stated that the monthly rentals from the agencies shall go to the church to enable it to earn more. RCAM agreed.On January 18, 1990, LPI, as sublessor, and ASTRO, as sublessee, executed an agreement (Sublease Agreement) in which LPI sublet Lot 28-B for a period of five (5) years from February 1, 1990 to February 1, 1995. Under the agreement, ASTRO was to remit the rentals for the property directly to RCAM. RCAM, through a representative, was one of the two witnesses to the deed.LPI paid the rentals to RCAM until August 1993. ASTRO also paid to RCAM the rentals due under the Sublease Agreement from February 1, 1990 to July 1, 1993 totaling P832,920.00; LPI, however, was not credited the rental payments made by ASTRO.On September 28, 1993, RCAM and LPI executed a Memorandum of Agreement (MOA) in which RCAM leased to LPI the areas/spaces subject of the lease agreement, including those sublet to ASTRO for a period of four (4) years, from August 1, 1993 to July 31, 1997. LPI agreed to pay RCAM monthly rentals in the amount of P60,783.96 payable within the first five (5) days of the month, with ten (10%) percent annual interest. This MOA expressly cancelled the prior agreements of the parties. It was, likewise, agreed upon that if the lease were to be extended after the four-
year period, LPI would pay a monthly rental of P97,084.15, payable within the first five (5) days of the month, with 12% annual increment.When the sublease to ASTRO expired in February 1995, RCAM did not turn over to LPI the possession of the sublet advertising spaces/areas; instead, the said areas were leased to Macgraphics Carranz International Corporation (MCIC) which erected its own billboards and advertising signs thereon. In a Letter dated February 11, 1997, LPI informed MCIC that it was the lessee of the premises previously sublet to ASTRO, and demanded that the said billboards be removed within 24 hours. MCIC ignored the letter, but LPI did not file any action against RCAM or MCIC.On October 12, 1995, LPI received a letter from RCAM, informing it that it violated the MOA, to wit:1. Non-payment of rentals since March 1995.2. The misuse of the property since November 1994.3. The causing of inconvenience, disturbance or nuisance.RCAM, likewise, declared that it considered the MOA rescinded as of October 31, 1995 and demanded payment of the alleged back rentals from ASTRO, as well as increments thereof from March to October 1995 and attorney’s fees; and that LPI vacate the property and remove its billboards or non-permanent structures by October 31, 1995, otherwise, RCAM would dismantle the same. On October 19, 1995, LPI filed a Complaint against RCAM with the Regional Trial Court (RTC) of Makati City, for consignation of the amount of P300,000.00 corresponding to the rentals from March to October 1995, with a plea for a writ of preliminary injunction and temporary restraining order. LPI posited that during the second period (from August 1, 1993 to February 1, 1995 when the sublease expired), ASTRO’s payments to RCAM had been credited to LPI. Hence, there was no reason why ASTRO’s rental payments during the first period should not likewise be credited to it.Issues: (a) whether or not LPI had overpaid RCAM for rentals due up to February 1, 1995 (insofar as the sublet spaces are concerned) and October 5, 1995 (insofar as the rest of the leased premises are concerned), and if so, how much LPI had overpaid; (b) whether or not LPI had the right to continue to possess the property from the time RCAM rescinded the MOA, until the expiration of the two-year period; and (c) whether the amended decision of the RTC ordering RCAM to restore possession of the property to LPI was immediately executory.HELD:On the first issue, the Court agrees with RCAM that LPI was obliged to continue paying the rentals for the leased premises (except those previously sublet to ASTRO) from March 1995 until October 1995 and up to its eviction there from on October 5, 1996. This is so because LPI continued to possess and use the same until October 6, 1996 despite the unilateral rescission of the MOA by RCAM. However, the Court rejects the contention of RCAM that LPI is obliged to pay rentals for the areas/spaces sublet to ASTRO after
February 1995. It bears stressing that, after the expiration of the sublease agreement between LPI and ASTRO in February 1995, RCAM did not turn over the said areas/spaces to LPI; instead, it leased the said areas/spaces to MCIC, in violation of its MOA with LPI. RCAM even dismantled the billboards of LPI on October 6, 1996.Art. 1311. Contracts take effect only between the parties, their assigns and heirs, except in cases where the rights and obligations arising from the contracts 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.On the second issue, the appellate court reversed the ruling of the RTC ordering RCAM to restore possession of the leased property to LPI for a period of 21 months corresponding to the alleged unused portion of the period set in the MOA: from October 31, 1995 when RCAM unilaterally rescinded the MOA, to July 31, 1997. On the last issue, the Court finds and so holds that the RTC did not commit any grave abuse of discretion in denying LPI’s motion for execution of that portion of the amended decision ordering RCAM to place it in possession of the subject areas/spaces. The execution of the judgment pending appeal is proper only if the judgment is in favor of the plaintiff and against the defendant, and not vice versa.
PELAYO vs. PEREZG.R. No. 141323 / June 8, 2005
Article 1319
FACTSDavid Pelayo (Pelayo),by a Deed of Absolute Sale executed on January
11, 1988, conveyed to Melki Perez (Perez) two parcels of agricultural land (the lots) situated in Panabo, Davao which are portions of Lot 4192, Cad. 276 covered by OCT P-16873.
Loreza Pelayo (Loreza), wife of Pelayo, and another one whose signature is illegible witnessed the execution of the deed.
Loreza, however, signed only on the third page in the space provided for witnesses on account of which Perez’ application for registration of the deed with the Office of the Register of Deeds in Tagum, Davao was denied.
Perez thereupon asked Loreza to sign on the first and second pages of the deed but she refused.
ISSUEWhether or not the deed of sale is null and void?
RULING
The failure of respondent to register the instrument was not due to his fault or negligence but can be attributed to Lorenza’s unjustified refusal to sign two pages of the deed despite several requests of respondent; and that therefore, the CA ruled that the deed of sale subject of this case is valid under R.A. No. 6657.Respondent further maintains that the CA correctly held in its assailed Decision that there was consideration for the contract and that Lorenza is deemed to have given her consent to the deed of sale.
CA interpreted Section 4, in relation to Section 70 of R.A. No. 6657, to mean thus: The proper interpretation of both sections is that under R.A. No. 6657, the sale or transfer of a private agricultural land is allowed only when said land area constitutes or is a part of the landowner-seller retained area and only when the total landholdings of the purchaser-transferee, including the property sold does not exceed five (5) hectares.
Aside from declaring that the failure of respondent to register the deed was not of his own fault or negligence, the CA ruled that respondent’s failure to register the deed of sale within three months after effectivity of The Comprehensive Agrarian Reform Law did not invalidate the deed of sale as "the transaction over said property is not proscribed by R.A. No. 6657."
Thus, under the principle of law of the case, said ruling of the CA is now binding on petitioners. Such principle was elucidated in Cucueco vs. Court of Appeals, to wit:Law of the case has been defined as the opinion delivered on a former appeal. It is a term applied to an established rule that when an appellate court passes on a question and remands the case to the lower court for
further proceedings, the question there settled becomes the law of the case upon subsequent appeal. It means that whatever is once irrevocably established as the controlling legal rule or decision between the same parties in the same case continues to be the law of the case, whether correct on general principles or not, so long as the facts on which such decision was predicated continue to be the facts of the case before the court.
Villanueva v. CA, 244 SCRA 395Facts:
The disputed lots were originally owned by the spouses Celestino Villanueva and Miguela Villanueva, acquired by the latter during her husband's sojourn in the United States since 1968. Sometime in 1975, Miguela Villanueva sought the help of one Jose Viudez, the then Officer-in-Charge of the PVB branch in Makati if she could obtain a loan from said bank. Jose Viudez told Miguela Villanueva to surrender the titles of said lots as collaterals. And to further facilitate a bigger loan, Viudez, in connivance with one Andres Sebastian, swayed Miguela Villanueva to execute a deed of sale covering the two (2) disputed lots, which she did but without the signature of her husband Celestino. Miguela Villanueva, however, never got the loan she was expecting. Subsequent attempts to contact Jose Viudez proved futile, until Miguela Villanueva thereafter found out that new titles over the two (2) lots were already issued in the name of the PVB. It appeared upon inquiry from the Registry of Deeds that the original titles of these lots were canceled and new ones were issued to Jose Viudez, which in turn were again canceled and new titles issued in favor of Andres Sebastian, until finally new titles were issued in the name of PNB [should be PVB] after the lots were foreclosed for failure to pay the loan granted in the name of Andres Sebastian.
Miguela Villanueva sought to repurchase the lots from the PVB after being informed that the lots were about to be sold at auction. The PVB told her that she can redeem the lots for the price of P110,416.00. Negotiations for the repurchase of the lots nevertheless were stalled by the filing of liquidation proceedings against the PVB on August of 1985.Issue:
Do petitioners have a better right than private respondent Ildefonso Ong to purchase from the Philippine Veterans Bank (PVB) the two parcels of land described as Lot No. 210-D-1 and Lot No. 210-D-2 situated at Muntinglupa, Metro Manila, containing an area of 529 and 300 square meters, respectively?Held:
Under Article 1323 of the Civil Code, an offer becomes ineffective upon the death, civil interdiction, insanity, or insolvency of either party before acceptance is conveyed. The reason for this is that: [T]he contract is not perfected except by the concurrence of two wills which exist and continue until the moment that they occur. The contract is not yet perfected at any time before acceptance is conveyed; hence, the disappearance of either party or his loss of capacity before perfection prevents the contractual tie from being formed.
It has been said that where upon the insolvency of a bank a receiver therefor is appointed, the assets of the bank pass beyond its control into the possession and control of the receiver whose duty it is to administer the assets for the benefit of the creditors of the bank. Thus, the appointment of a receiver operates to suspend the authority of the bank and of its directors
and officers over its property and effects, such authority being reposed in the receiver, and in this respect, the receivership is equivalent to an injunction to restrain the bank officers from intermeddling with the property of the bank in any way.
In a nutshell, the insolvency of a bank and the consequent appointment of a receiver restrict the bank's capacity to act, especially in relation to its property, applying Article 1323 of the Civil Code, Ong's offer to purchase the subject lots became ineffective because the PVB became insolvent before the bank's acceptance of the offer came to his knowledge. Hence, the purported contract of sale between them did not reach the stage of perfection. Corollarily, he cannot invoke the resolution of the bank approving his bid as basis for his alleged right to buy the disputed properties.
Husnida AsaninOBAÑA vs. CAVOL. 135, MARCH 29, 1985No. L-36249.
FACTS: On 11/21/1964 Sandoval (owner of Sandoval’s and Sons Rice Mill) was approached by a certain Chan Lin who offered to purchase from him 170 cavans of rice at 37.25 per cavan. Both parties verbally agreed and the following day, the 170 cavans of rice was delivered to La Union to Petitioner ObaÑa. The driver of the truck, who was employed by respondent request for the payment of the rice but Petitioner refused to pay alleging that he had already paid the said amount to Mr. Chan Lin. Further demands having met with refusal, respondent filed a suit for Replevin against petitioner. During the trial investigation showed that although Petitioner had already paid the purchase price to Chan Lin, the latter returned the money to the petitioner. ISSUE: WON there is a perfected Contract of Sale.HELD: Article 1475 of the Civil Code lays down the general rule that there is perfection when there is consent upon the subject matter and price, even if neither is delivered. There is already a perfected Sale between Chan Lin and respondent.Inasmuch as Chan Lin had repaid Obaña the sum of P5,600.00 regarding the rice sold by the former to the latter but which Chan Lin had not yet returned to respondent the original seller, petitioner cannot be permitted to unjustly enriched himself by keeping that money and the rice too. Respondent is entitled to recover the rice, or the value thereof since he was not paid the price thereof.
ADELFA PROPERTIES, INC vs. CA et alG.R. No. 111238January 25, 1995FACTS: Private respondents and their brothers Jose and Dominador were the registered CO-OWNERS of a parcel of land in Las Pinas, covered by a TCT.Jose and Dominador sold their share (eastern portion of the land) to Adelfa. Thereafter, Adelfa expressed interest in buying the western portion of the property from private respondents herein. Accordingly, an “exclusive Option to Purchase” was executed between Adelfa and Private respondents and an option money of 50,000 was given to the latter.A new owner’s copy of the certificate of title was issued (as the copy with respondent Salud was lost) was issued but was kept by Adelfa’s counsel, Atty. Bernardo.Before Adelfa could make payments, it received summons as a case was filed (RTC Makati) against Jose and Dominador and Adelfa, because of a complaint in a civil case by the nephews and nieces of private respondents herein. As a consequence, Adelfa, through a letter, informed the private respondents that it would hold payment of the full purchase price and suggested that they settle the case with their said nephews and nieces. Salud did not heed the suggestion; respondent’s informed Atty. Bernardo that they are canceling the transaction. Atty Bernardo made offers but they were all rejected.RTC Makati dismissed the civil case. A few days after, private respondents executed a Deed of Conditional Sale in favor of Chua, over the same parcel of land.Atty Bernardo wrote private respondents informing them that in view of the dismissal of the case, Adelfa is willing to pay the purchase price, and requested that the corresponding deed of Absolute Sale be executed. This was ignored by private respondents.Private respondents sent a letter to Adelfa enclosing therein a check representing the refund of half the option money paid under the exclusive option to purchase, and requested Adelfa to return the owner’s duplicate copy of Salud. Adelfa failed to surrender the certificate of title, hence the private respondents filed a civil case before the RTC Pasay, for annulment of contract with damages. The trial court directed the cancellation of the exclusive option to purchase. On appeal, respondent CA affirmed in toto the decision of the RTC hence this petition.ISSUE:WON the agreement between Adelfa and Private respondents was strictly an option contractWON Article 1590 applies in this case, thereby justifiying the refusal by Adelfa to pay the balance of the purchase priceWON Private respondents could unilaterraly and prematurely terminate the option period, if indeed it is a option contract, as the option period has not lapsed yet.HELD: The judgement of the CA is AFFIRMED
1. NO. The agreement between the parties is a contract to sell, and not an option contract or a contract of sale.Contract to SELL- by agreement the ownership is reserved in the vendor and is not to pass until the full payment of the price- title is retained by the vendor until the full payment of the price, such payment being a positive Contract of SALE- the title passes to the vendee upon the delivery of the thing sold- the vendor has lost and cannot recover ownership until and unless the contract is resolved or rescinded There are two features which convince us that the parties never intended to transfer ownership to petitioner except upon the full payment of the purchase price.(1) the exclusive option to purchase, although it provided for automatic rescission of the contract and partial forfeiture of the amount already paid in case of default, does not mention that petitioner is obliged to return possession or ownership of the property as a consequence of non-payment. There is no stipulation anent reversion or reconveyance of the property to herein private respondents in the event that petitioner does not comply with its obligation. With the absence of such a stipulation, although there is a provision on the remedies available to the parties in case of breach, it may legally be inferred that the parties never intended to transfer ownership to the petitioner to completion of payment of the purchase price.
TAYAG vs. LACSONSCRA/G.R. No./Date: G.R. No. 134971 March 25, 2004Article involved: Art. 1314. Any third person who induces another to violate his contract shall be liable for damages to the other contracting party.
Facts: Respondents Angelica Tiotuyco Vda. de Lacson and her children were the registered owners of three parcels of land located in Mabalacat, Pampanga. The properties, which were tenanted agricultural lands. On March 17, 1996, a group of original farmers individually executed in favor of the petitioner separate Deeds of Assignment in which the assignees assigned to the petitioner their respective rights as tenants/tillers of the landholdings possessed and tilled by them for and in consideration of P50.00 per square meter. On July 24, 1996, the petitioner called a meeting of the defendants-tenants but on August 8, 1996, the defendants-tenants wrote the petitioner stating that they were not attending the meeting and instead gave notice of their collective decision to sell all their rights and interests, as tenants/ lessees, over the landholding to the respondents.
On August 19, 1996, the petitioner filed a complaint with the Regional Trial Court of San Fernando, Pampanga. The petitioner also prayed for a writ of preliminary injunction against the defendants and the respondents therein. The respondents, thereafter, filed a Motion to dismiss/deny the petitioner’s plea for injunctive relief, there petitioner opposed the motion, contending that it was premature for the trial court to resolve his plea for injunctive relief. On February 13, 1997, the court issued an Order19 denying the motion of the respondents for being premature. It directed the hearing to proceed for the respondents to adduce their evidence. The court ruled that the petitioner, on the basis of the material allegations of the complaint, was entitled to injunctive relief.
Issue: whether or not the tiller contracted to sell to the respondent the land promised to the petitioner is an act of fraud.
Held: In fine, one who is not a party to a contract and who interferes thereon is not necessarily an officious or malicious intermeddler. The only evidence adduced by the petitioner to prove his claim is the letter from the defendants-tenants informing him that they had decided to sell their rights and interests over the landholding to the respondents, instead of honoring their obligation under the deeds of assignment because, according to them, the petitioner harassed those tenants who did not want to execute deeds of assignment in his favor, and because the said defendants-tenants did not want to have any problem with the respondents who could cause their eviction for executing with the petitioner the deeds of assignment as the said deeds are in violation of P.D. No. 27 and Rep. Act No. 6657.
Ann Kristine MacansantosAng Yu vs. CAGr No. 109125 238 SCRA 602Article 1319 FACTS:
Ang Yu and Keh Tiong are tenants of a residential and commercial building owned by the private respondents Bobby and Rose Ujieng and Jose Tan. They are occupying said space since 1935 and they are paying their obligation religiously, sometime in October 9, 1986, private respondents told them that they are selling offering to sell the premises and that they are given the priority to acquire the same.
The defendants offered to them 6million as a selling price, but the plaintiffs made a counter offer of 5 million instead. They were ordered to submit letter of request stating their counter offer which they we able to comply with. The defendants replied and told them to include the letter with terms and conditions on how they will settle said amount. Plaintiffs did the same but received no response from them, later on they sent the same letter but sometime in 1987 they found out that defendants are about to sell the property to prospect buyer.ISSUE:
WON defendants are obliged to sell the property to the plaintiffs aloneHELD:
If they decided to sell the property in the amount of 11 million below, plaintiff has the option to purchase it or on the first refusal, defendants need not to offer the property to them if the price is above 11 million. Since plaintiffs were able to make counter offer and complied with what was asked from them, defendants are ordered to issue deed deed of sale in favor of the plaintiffs with the consideration of 15 million in view of plaintiffs’ right of first refusal.
Dioscoro Sale
EQUATORIAL vs. MAYFAIR G.R. No. 106063/November 21, 1996
FACTS:
Carmelo entered into a contract with respondent for the latter to lease a portion of the 2nd Floor of a 2-storey with a floor area of 1,610 square meters and the 2nd floor and mezzanine of the two-storey building with a floor area of 150 square meters. The contract is set for the next 20 years.
Stipulated in the contract was; That if the LESSOR should desire to sell the leased premises, the LESSEE shall be given 30-days exclusive option to purchase the same.
In the event, however, that the leased premises is sold to someone other than the LESSEE, the LESSOR is bound and obligated, as it hereby binds and obligates itself, to stipulate in the Deed of Sale hereof that the purchaser shall recognize this lease and be bound by all the terms and conditions thereof.
Sometime in 1974, Carmelo through Mr. Pascal by a telephone call told the respondent that it is contemplating to sell the said property and that a certain Jose Araneta is willing to buy the same for US$1,200,000. It also asked the respondent if it’s willing to the property for six to seven million pesos. Respondent through Mr. Yang told the petitioner that it would respond once a decision was made.
Four years later, on July 30, 1978, Carmelo sold its entire land and building, which included the leased premises housing the "Maxim" and "Miramar" theatres, to Equatorial by virtue of a Deed of Absolute Sale, for the total sum of P11,300,000.00.
Mayfair instituted the action a quo for specific performance and annulment of the sale of the leased premises to Equatorial. Carmelo’s defense; as special and affirmative defense (a) that it had informed Mayfair of its desire to sell the entire property and offered the same to Mayfair, but the latter answered that it was interested only in buying the areas under lease, which was impossible since the property was not a condominium; and (b) that the option to purchase invoked by Mayfair is null and void for lack of consideration.
ISSUE:
Whether or not the OPTION CLAUSE IN THE CONTRACTS OF LEASE IS ACTUALLY A RIGHT OF FIRST REFUSAL PROVISO
HELD:
The SC agreed with the CA that the aforecited contractual stipulation provides for a right of first refusal in favor of Mayfair. It is not an option clause or an option contract. It is a contract of a right of first refusal.
In his Law Dictionary, edition of 1897, Bouvier defines an option as a contract, in the following language:A contract by virtue of which A, in consideration of the payment of a certain sum to B, acquires the privilege of buying from, or selling to B, certain securities or properties within a limited time at a specified price.
The rule so early established in this jurisdiction is that the deed of option or the option clause in a contract, in order to be valid and enforceable, must, among other things, indicate the definite price at which the person granting the option, is willing to sell
Bible Baptist Church vs CASubject: SalesDoctrine: Option ContractFacts:
petitioner Bible Baptist Church entered into a contract of lease with respondents Mr. & Mrs. Elmer Tito Medina Villanueva who own the subject property, The pertinent stipulations in the lease contract were: That the lease shall take effect on June 7, 1985 and shall be for the period of Fifteen (15)years.That upon signing of the LEASE AGREEMENT, the LESSEE shall pay the sum ofEighty Four Thousand Pesos (P84,000.00) Philippine Currency. Said sum is to bepaid directly to the Rural Bank, Valenzuela, Bulacan for the purpose of redemption ofsaid property which is mortgaged by the LESSOR. That the LESSEE has the option to buy the leased premises during the Fifteen (15) years of the lease. If the LESSEE decides to purchase the premises the terms will be:
A) A selling Price of One Million Eight Hundred Thousand Pesos (P1.8 million),Philippine Currency. B) A down payment agreed upon by both parties. C) Thebalance of the selling price may be paid at the rate of One Hundred TwentyThousand Pesos (P120,000.00), Philippine Currency, per year.Petitioner seeks to buy the leased premises from the spouses Villanueva, under the option given to them. Petitioners claim that they (Baptist Church) agreed to advance the large amount needed for the rescue of the property but, in exchange, it asked the Villanuevas to grant it a long term lease and an option to buy the property for P1.8 million. However, the respondents did not agree saying that there is no separate consideration.In this hand, the petitioners argue that there is a consideration — the consideration supporting the option was their agreement to pay off the Villanuevas P84,000 loan with the bank, thereby freeing the subject property from the mortgage encumbrance. That they would not have agreed to advance such a large amount as it did to rescue the property from bank foreclosure had it not been given an enforceable option to buy that went with the lease agreement.The Baptist Church states that [t]rue, the Baptist Church did not pay a separate and specific sum of money to cover the option alone. But the P84,000 it paid the Villanuevas in advance should be deemed consideration for the one contract they entered into the lease with option to buy. Petitioners further insist that a consideration need not be a separate sum of money. They posit that their act of advancing the money to rescue the property from mortgage and impending foreclosure, should be enough consideration to support the option.On the other hand, Respondents argue that the amount of P84,000 has been
fully exhausted and utilized by their occupation of the premises and there is no separate consideration to speak of which could support the option.The RTC and CA agree with the respondent.ISSUE: WON there is a separate consideration that would render the option contract valid and binding.HELD:NO, An option contract, to be valid and binding, needs to be supported by a separate consideration. The consideration need not be monetary but could consist of other things or undertakings. However, if the consideration is not monetary, these must be things or undertakings of value, in view of the onerous nature of the contract of option. Furthermore, when a consideration for an option contract is not monetary, said consideration must be clearly specified as such in the option contract or clause.Petitioners cannot insist that the P84,000 they paid in order to release the Villanuevas property from the mortgage should be deemed the separate consideration to support the contract of option. It must be pointed out that said amount was in fact apportioned into monthly rentals spread over a period of one year, at P7,000 per month. Thus, for the entire period of June 1985 to May 1986, petitioner Baptist Churchs monthly rent had already been paid for, such that it only again commenced paying the rentals in June 1986. This is shown by the testimony of petitioner Pastor Belmonte where he states that the P84,000 was advance rental equivalent to monthly rent of P7,000 for one year, such that for the entire year from 1985 to 1986 the Baptist Church did not pay monthly rent.First, this Court cannot find that petitioner Baptist Church parted with anything of value, aside from the amount of P84,000 which was in fact eventually utilized as rental payments. Second, there is no document that contains an agreement between the parties that petitioner Baptist Churchs supposed rescue of the mortgaged property was the consideration which the parties contemplated in support of the option clause in the contract. As previously stated, the amount advanced had been fully utilized as rental payments over a period of one year. While the Villanuevas may have them to thank for extending the payment at a time of need, this is not the separate consideration contemplated by law.This Court also notes that in the present case both the Regional Trial Court and the Court of Appeals agree that the option was not founded upon a separate and distinct consideration and that, hence, respondents Villanuevas cannot be compelled to sell their property to petitioner Baptist Church.Having found that the option to buy granted to the petitioner Baptist Church was not founded upon a separate consideration, and hence, not enforceable against respondents, this Court finds no need to discuss whether a price certain had been fixed as the purchase price.
Public Estates vs. BolinaoG.R. No. 158812, 472 SCRA 165, October 5, 2005Topic: Article 1326
Facts: On February 1, 1990, the PEA, a government corporation, entered into a Contract for Security Services with Bolinao Security and Investigation Services, Inc. (Bolinao Security), to secure and protect PEA’s properties, personnel and premises at Villa Porta Vaga Subdivision, Cavite City. The contract was effective February 1, 1990 until January 31, 1991, extendible at the option of PEA.
In December 1990, PEA published in several newspapers an Invitation to Bid, inviting interested bidders to participate in the public bidding for Security Services of PEA. In the invitation to bid, it is stated that “PEA reserves the right to reject any proposal or waive any defects or formality, impose additional terms and conditions and accept the proposal most advantageous to the Government.”
After the contract with Bolinao Security expired on January 31, 1991, it was extended monthly by PEA up to July 29, 1991.
On April 10, 1991, the bids were opened. After bidding, PEA’s Prequalification Bids and Awards Committee (PBAC) issued a Bid evaluation report. The report, noting that Integrated Security submitted the highest bid in terms of liquidated damages but had no SSS clearance and Bolinao Security submitted the next highest bid but had no current license to operate, recommended that Masada Security which proffered the third highest bid be considered the winning bidder.
Heeding the PBAC’s recommendation, PEA awarded the contract to Masada Security effective September 1, 1991 up to April 30, 1993. Bolinao Security refused to turn over the PEA properties in Cavite City, however, to Masada Security, prompting PEA to send a demand letter to Bolinao Security to turn over the property to Masada Security.
Bolinao Security insisted to PEA, however, that it should be declared the winning bidder. On September 16, 1991, Bolinao Security filed with the Regional Trial Court of Makati a complaint for annulment of bid award, damages, injunction with special prayer for the issuance of a temporary restraining order against PEA, averring that, among other things, the attempt of Masada Security to take over the Cavite City premises from it based on the result of the bidding was improper, illegal, criminal and violative of the provisions of the Anti-Graft and Corrupt Practices Act.
Issue: Whether or not Bolinao Security and Investigation Service, Inc. is a qualified bidder despite its non-compliance with the bidding requirements.
Held:PEA’s granting of extensions to Bolinao Security after its license expired cannot be interpreted as a waiver of the requirement of a current license. Extension of the effectivity of the security service contract cannot be interpreted as an extension of the effectivity of license to operate a security agency.
In Bureau Veritas v. Office of the President, this Court through the erudite expatiation of Justice Melencio-Herrera discussed profoundly the legal implications of the “right to reject any or all bids” in an invitation to bid, viz: “the government has made its choice and unless an unfairness or injustice is shown, the losing bidders have no cause to complain nor right to dispute that choice. This is a well-settled doctrine in this jurisdiction and elsewhere. This discretion to accept or reject a bid and award contracts is vested in the Government agencies entrusted with that function. The discretion given to the authorities on this matter is of such wide latitude that the Courts will not interfere therewith, unless it is apparent that it is used as a shield to a fraudulent award.”
Similarly, in National Power Corporation v. Philipp Brothers Oceanic, Inc., the Supreme Court declared that where the right to reject is so reserved, the lowest bid or any bid for that matter may be rejected on a mere technicality.
So must Bolinao Security be disqualified.
G.R. No. 75120 April 28, 1994POLICARPIO CAYABYAB, petitioner, vs.THE HONORABLE INTERMEDIATE, APPELLATE COURT, FAUSTINO, GABRIEL, SOLEDAD & FRANCISCA, and all surnamed LANDINGIN and AMPARO FRANCISCO, Facts:
Respondents Gabriel, Soledad and Francisca, all surnamed Landingin, are children of respondent Faustino Landingin and the late Agapita Ferrer. Petitioner is the son of Agapita Ferrer by her first husband, Ludovico Cayabyab, while respondent Amparo Francisco is petitioner's niece, being the daughter of his sister, Nieves Cayabyab.In their second amended complaint filed against petitioner before Branch VII of the Court of First Instance of Pangasinan docketed as Civil Case No. D-5101, private respondents asked for the annulment of the deeds of sale and the recovery of possession of four parcels of land with damages. Two of the parcels of land (Lots [a] and [d]) are situated in Dagupan City while the other two (Lots [b] and [c]) are situated in Barrio Botao, Sta. Barbara, Pangasinan.Issue:
WON consent was attained through fraud?Held:
Petitioner's evidence show that: the one-third portion comprising 1,806 square meters each of Lots (b) and (c) were sold on March 21, 1973 by the spouses to petitioner for a consideration of P1,000.00 (Exh. "O"; Exh. "10"); the remaining two-thirds portion of the same lots comprising 3,612 square meters each were sold to petitioner on April 21, 1977 for a total consideration of P3,612.00 (Exh. "P"; Exh. "9"); and, on the same date, the spouses also sold Lot (d) to petitioner for a consideration of P5,000.00 (Exh. "N"; Exh. 2). All these transactions were evidenced by deeds of sale signed by respondent Faustino Landingin and thumbmarked by Agapita Ferrer, which were witnessed by two persons and acknowledged by the vendors before a notary public.
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. This rule is especially applied when fraud or mistake is alleged to annul notarial documents which are clothed with the prima facie presumption of regularity and due execution (Revised Rules on Evidence, Rule 132 [B], Sec. 30).
Nevertheless, the general rule admits of exceptions, one of which is Article 1332 of the Civil Code which provides:
When one of the parties is unable to read, or if the contract is in a language not understood by him, and mistake or fraud is alleged, the person enforcing the contract must show that the terms thereof have been fully explained to the former.
Under the foregoing provision, where a party to a contract is illiterate, or can not read nor understand the language in which the contract is written, the burden is on the party interested in enforcing the contract to prove that the terms thereof are fully explained to the former in a language understood by him
Yason v. Arciaga 449 SCRA 458Facts:
Spouses Emilio and Claudia Arciaga were owners of Lot No. 303-B situated in Barangay Putatan, Muntinlupa City, with an area of 5,274 square meters covered by TCT No. 40913 of the Registry of Deeds of Makati City. On March 28, 1983, they executed a Deed of Conditional Sale whereby they sold Lot No. 303-B for P265,000.00 to spouses Dr. Jose and Aida Yason, petitioners. They tendered an initial payment of P150,000.00. On April 19, 1983, upon payment of the balance of P115,000.00, spouses Emilio and Claudia Arciaga executed a Deed of Absolute Sale. That day, Claudia died. She was survived by her spouse and their six (6) children, namely: Faustino, Felipe Neri, Domingo, Rogelio, Virginia, and Juanita.
Petitioners had the Deed of Absolute Sale registered in the Registry of Deeds of Makati City. They entrusted its registration to one Jesus Medina to whom they delivered the document of sale and the amount of P15,000.00 as payment for the capital gains tax. Without their knowledge, Medina falsified the Deed of Absolute Sale and had the document registered in the Registry of Deeds of Makati City. He made it appear that the sale took place on July 2, 1979, instead of April 19, 1983, and that the price of the lot was only P25,000.00, instead of P265,000.00. On the basis of the fabricated deed, TCT No. 40913 in the names of spouses Arciaga was cancelled and in lieu thereof, TCT No. 120869 was issued in the names of petitioners.
Subsequently, petitioners had Lot No. 303-B subdivided into 23 smaller lots. Thus, TCT No. 120869 was cancelled and in lieu thereof, TCT Nos. 132942 to 132964 were issued. Petitioners then sold several lots to third persons, except the 13 lots covered by TCT Nos. 132942, 132943, 132945, 132946, 132948, 132950, 132951, 132953, 132954, 132955, 132958, 132962 and 132963, which they retained.
Sometime in April 1989, spouses Arciaga’s children learned of the falsified document of sale. Four of them, namely: Faustino, Felipe Neri, Domingo and Rogelio, herein respondents, caused the filing with the Office of the Provincial Prosecutor of Makati City a complaint for falsification of documents against petitioners, docketed as I.S No. 89-1966. It was only after receiving the subpoena in April 1989 when they learned that the Deed of Absolute Sale was falsified. However, after the preliminary investigation, the Provincial Prosecutor dismissed the complaint for falsification for lack of probable cause.
Undaunted, respondents, on October 12, 1989, filed with the Regional Trial Court (RTC), Branch 62, Makati City, a complaint for annulment of the 13 land titles, mentioned earlier, against petitioners. Respondents alleged inter alia that the Deed of Absolute Sale is void ab initio considering that (1) Claudia Arciaga did not give her consent to the sale as she was then seriously ill, weak, and unable to talk and (2) Jesus Medina falsified the Deed of Absolute Sale; that without Claudia’s consent, the contract is void; and that the 13 land titles are also void because a forged deed conveys no title.
In their answer, petitioners specifically denied the allegations in the complaint and averred that they validly acquired the property by virtue of the notarized Deed of Conditional Sale and the Deed of Absolute Sale executed by spouses Emilio and Claudia Arciaga, respondents’ parents. The Deed of Absolute Sale was duly signed by the parties in the morning of April 19, 1983 when Claudia was still alive. It was in the evening of the same day when she died. Hence, the contract of sale is valid. Furthermore, they have no participation in the falsification of the Deed of Absolute Sale by Medina. In fact, they exerted efforts to locate him but to no avail.Issue:
Whether or not the Deed of Absolute Sale dated April 19, 1983 is valid.Held:
Mere weakness of mind alone, without imposition of fraud, is not a ground for vacating a contract. Only if there is unfairness in the transaction, such as gross inadequacy of consideration, the low degree of intellectual capacity of the party, may be taken into consideration for the purpose of showing such fraud as will afford a ground for annulling a contract. Hence, a person is not incapacitated to enter into a contract merely because of advanced years or by reason of physical infirmities, unless such age and infirmities impair his mental faculties to the extent that he is unable to properly, intelligently and fairly understand the provisions of said contract. Respondents failed to show that Claudia was deprived of reason or that her condition hindered her from freely exercising her own will at the time of the execution of the Deed of Conditional Sale.
It is of no moment that Claudia merely affixed her thumbmark on the document. The signature may be made by a person’s cross or mark even though he is able to read and write and is valid if the deed is in all other respects a valid one.
In Chilianchin vs. Coquinco, this Court held that a notarial document must be sustained in full force and effect so long as he who impugns it does not present strong, complete, and conclusive proof of its falsity or nullity on account of some flaws or defects provided by law. Here, respondents failed to present such proof.
It bears emphasis that a notarized Deed of Absolute Sale has in its favor the presumption of regularity, and it carries the evidentiary weight conferred upon it with respect to its execution.
Husnida AsaninDela Cruz vs. SisonG.R. No. 163770. February 17, 2005
FACTS: The herein petitioner claimed that in 1992 she discovered that her rice land in Pangasinan was transferred and registered in the name of her nephew Eduardo Sison, herein respondent, without her knowledge and consent. She therefore filed a complaint to declare the Deed Null and Void. She alleged that respondent tricked her into signing the Deed of Sale. Respondent denied the allegations and claimed that they purchased it from petitioner for P20,000.00. The MTC ruled in favor of petitioner but the Court of Appeals reversed it.
ISSUE: WON there was treachery in the Sale of the Land.
Held: The issue of whether fraud attended the execution of a contract is factual in nature. Normally, this Court is bound by the appellate court’s findings, unless they are contrary to those of the trial court, in which case we may wade into the factual dispute to settle it with finality. After a careful perusal of the records, we sustain the Court of Appeals’ ruling that the Deed of Absolute Sale dated November 24, 1989 is valid. The party who alleges a fact has the burden of proving it.Although Art. 1330 of the Civil Code states that, a contract where consent is given through mistake, fraud, violence, intimidation, undue influence and fraud is voidable; but because of the overwhelming documentary evidence presented by respondents really proves that they brought the said property. The documents are too varied from each other to have been accomplished by means of trickery and fraud. Therefore, the rulings of the CA is hereby affirmed.
Name Title: Paragas vs Heirs of Balacanos 31 August 2005
Article involved: Article 1327 of the Civil Code..Other Incapacitated persons such as married women of age in cases prohibited by law, persons suffering from civil interdiction, and incompetents who are under guardianship. With regard to incompetents under under guardianship, it must be noted that the mere fact that a person is classified as an “incompetent” in accordance with the New Rules of Court does not necessarily mean that he cannot give his consent to a contract, nor does mere that he cannot give his under guardianship necessarily mean that he can give his consent to a contract. Under Sec. 2 of the Rule of 92 of the New Rules of Court, the “Incompetent” includes: (1) persons suffering from civil interdictions; (2) hospitalized lepers; (3) prodigals (4) deaf and dumb who are unable to read and write; (3) those who are of unsound mind, even though they have lucid intervals; and (6) those who by reason of age, weak mind, and other similar causes, cannot, without outside aid, take care of themselves and manage their property becoming thereby an easy prey for deceit and exploitation.
FACTS:Gregorio and Lorenza had three (3) children: Domingo, Catalino and
Alfredo. Gregorio died on July 29, 1996. Prior to his death, Gregorio Balacanos was admitted at the Veterans General Hospital in Bayombong, Nueva Vizcaya and was subsequently transferred to the Veterans Memorial Hospital in Quezon City where he was confined until his death. Gregorio purportedly sold on July 22, 1996, a weed prior to his death, a portion of lot 1175-E and the whole Lot 1175-F to Paragas spouses. The Paragas spouses then sold on October 17 1996 a portion of Lot 1175-E to Catalino Balacano (one of Gregorio’s sons) for a consideration of P60,000.00. Domingo’s children and Alfredo filed a complaint for annulment of sale and partition against Catalino and the spouses Paragas.
ISSUE:Whether or not the sale by Gregorio to the spouses Paragas was valid?
HELD:The sale was Null and Void. A person is not incapacitated to enter into
a contract merely because of advanced years or by reason of physical infirmities, unless such age and infirmities impair his mental faculties to the extent that he is unable to properly, intelligently and fairly understand the provisions of said contract.
The case at bar, given that Gregorio purportedly executed a deed during the last stages of his battle against his disease, seriously doubt whether Gregorio could have read or fully understood the contents of the documents he signed or of the consequence of his act. That Gregorio was
brought to the Veterans Hospital at Quezon City because of his condition had worsened on or about the time the deed was allegedly signed.
Mark y. Natividad
Manila Bank vs Silverio : 132887 : August 11, 2005THE MANILA BANKING CORPORATION, petitioner, vs. EDMUNDO S. SILVERIO and THE COURT OF APPEALS, respondents.Article 1346.Facts:On 16 April 1979, Purificacion Ver sold the properties to Ricardo C. Silverio, Sr.On 22 February 1990, herein petitioner, The Manila Banking Corporation (TMBC), filed a complaint with the RTC of Makati City for the collection of a sum of money with application for the issuance of a writ of preliminary attachment against Ricardo, Sr. On 02 July 1990, by virtue of an Order of Branch 62 of the RTC of Makati City, notice of levy on attachment of real property and writ of attachment. On 29 March 1993, the trial court rendered its Decision in favor of TMBC and against Ricardo, Sr. The Decision was brought up to the Court of Appeals for review.In the meantime, on 22 July 1993, herein private respondent, Edmundo S. Silverio (Edmundo), the nephew of judgment debtor Ricardo, Sr., requested TMBC to have the annotations on the subject properties cancelled as the properties were no longer owned by Ricardo, Sr.Edmundo alleged that as early as 11 September 1989, the properties, subject matter of the case, were already sold to him by Ricardo, Sr. As such, these properties could not be levied upon on 02 July 1990 to answer for the debt of Ricardo, Sr. who was no longer the owner thereof.
Issues:1. Whether or not properties were validly transferred to Edmundo before the levy thereof then cancellation of the annotation is in order.2. Whether or not the sale between Ricardo, Sr. and his nephew, Edmundo, was void for being absolutely simulated.
Held:In herein case, badges of fraud and simulation permeate the whole transaction, thus, we cannot but refuse to give the sale validity and legitimacy. Consider the following circumstances:1) There is no proof that the said sale took place prior to the date of the attachment. The notarized deed of sale, which would have served as the best evidence of the transaction, did not materialize until 22 July 1993, or three (3) years after TMBC caused the annotation of its lien on the titles subject matter of the alleged sale.2) Edmundo, to say the least, was very evasive when questioned regarding details of the alleged sale.
An absolutely simulated contract, under Article 1346 of the Civil Code, is
void.The characteristic of simulation is the fact that the apparent contract is not really desired or intended to produce legal effects or in any way alter the juridical situation of the parties. where a person, in order to place his property beyond the reach of his creditors, simulates a transfer of it to another, he does not really intend to divest himself of his title and control of the property; hence, the deed of transfer is but a sham.
WHEREFORE, premises considered, the Decision of the Court of Appeals dated 17 October 1997 and its Resolution dated 25 February 1998 are hereby REVERSED and SET ASIDE. The Decision of the Regional Trial Court of Makati City, Branch 145, dated 02 May 1995, is REINSTATED, dismissing the petition for Cancellation of Notice of Levy on Attachment and Writ of Attachment.
HEIRS OF THE LATE SPOUSES AURELIO AND ESPERANZA BALITE; Namely, ANTONIO T. BALITE, FLOR T. BALITE-ZAMAR, VISITACION T. BALITE-DIFUNTORUM, PEDRO T. BALITE, PABLO T. BALITE, GASPAR T. BALITE, CRISTETA T. BALITE and AURELIO T. BALITE JR., All Represented by GASPAR T. BALITE, petitioners, vs. RODRIGO N. LIM, respondent.
FACTS:The spouses Aurelio x x x and Esperanza Balite were the owners of a
parcel of land, located [at] Poblacion (Barangay Molave), Catarman, Northern Samar, with an area of seventeen thousand five hundred fifty-one (17,551) square meters, [and] covered by Original Certificate of Title [OCT] No. 10824. When Aurelio died intestate [in 1985, his wife], Esperanza Balite, and their children, x x x [petitioners] Antonio Balite, Flor Balite-Zamar, Visitacion Balite-Difuntorum, Pedro Balite, Pablo Balite, Gaspar Balite, Cristeta (Tita) Balite and Aurelio Balite, Jr., inherited the [subject] property and became co-owners thereof, with Esperanza x x x inheriting an undivided [share] of [9,751] square meters.[They] also executed, on the same day, a “Joint Affidavit” under which they declared that the real price of the property was P1,000,000.00, payable to Esperanza x x x, by installments, as follows:1. P30,000.00 – upon signing today of the document of sale.
2. P170,000.00 – payable upon completion of the actual relocation survey of the land sold by a Geodetic Engineer.
3. P200,000.00 – payable on or before May 15, 1996.4. P200,000.00 – payable on or before July 15, 1996.5. P200,000.00 – payable on or before September 15, 1996.6. P200,000.00 – payable on or before December 15, 1996.“The [petitioners] had a “Notice of Lis Pendens”, dated June 23, 1997, annotated, on June 27, 1997, at the dorsal portion of OCT No. 10824.“In the meantime, the RD cancelled, on July 10, 1997, OCT No. 10824 and issued Transfer Certificate of Title [TCT] No. 6683 to and under the name of
Rodrigo over Lot 243. The “Notice of Lis Pendens” x x x was carried over in TCT No. 6683.ISSUE:
WON Deed of Absolute Sale dated April 16, 1996 is null and void on the grounds that it is falsified; it has an unlawful cause; and it is contrary to law and/or public policy.HELD:
We have before us an example of a simulated contract. 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.”[8] 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 dated October 23, 1996[10] 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.
Dioscoro Sale
Cruz vs Bancom Fianance G.R. No. 147788/March 19, 2002
FACTS:
The petitioners are the registered owners of an agricultural land. Candelaria Sanchez introduced the petitioner to Norma Sulit who offered to buy the petitioner’s lot. The asking price for the property is P7000,000 but Norma only has P25,000 which the petitioner accepted as an earnest money with agreement that the title will be transferred in the name of Norma after she pays the remaining balance. Norma failed to pay the balance but negotiated to transfer the title in her name which the petitioner refused. However, through Candelaria Sanchez the title was transferred to Norma upon the execution of a deed of sale made by the petitioner in favor of Sanchez who obtained a bank loan using the petitioner’s land as collateral. She then executed on the same day another deed of sale in favor of Norma. Both deed of sales reflect the amount of only P150,000.00. Using the deed of sale Norma was able to register the property in her name. Norma obtained a loan from Bancom while mortgaging the land title. Meanwhile, a special agreement was entered into by petitioner and Norma. When Norma failed to pay the remaining balance stipulated in their special agreement, the petitioner filed a complaint for the reconveyance of the land. Bancom claimed priority as mortgagee in good faith. Norma defaulted payment with the bank and the property was foreclosed and auctioned with Bancom as the highest bidder.
ISSUES:
Whether or not the sale and mortgage are valid?Whether or not the respondent is an innocent mortgagee in good faith?
HELD:
As a general rule, if the terms of the contract are clear and unambiguous its stipulations shall control but when its words contravene with the intention of the parties, the intention shall prevail over the words of the contract. Simulation of contract takes place when the parties do not want the express words of the contract to have its legal effect. It may be absolute or relative. When parties do not intend to be bound at all it is absolute simulated contract and considered void. When the parties conceal their true agreement, it is a relative simulated contract and binds the parties when it does not prejudice third persons and is not contrary to law, morals, good custom, public order, and public policy. It was shown that although a deed of absolute sale was executed in the amount of P150,000 no consideration was
involved as no exchange of money took place between them. Norma and Candelaria also did not assert their right to ownership over the property. It was clear that the deed of sale was simulated in order to facilitate the bank loan to be secured by Candelaria using the property as collateral. The fact that Norma obtained registration of the property in her name does not entitle her to ownership since the simulated deed of sale produced no legal effect. A simulated contract is not a recognized mode of transferring ownership.
With the contention of Bancom that it is a mortgagee in good faith, the court ruled otherwise pointing out that it is a mortgagee-bank thus is expected to exercise greater care and prudence when dealing with registered lands. Failure to observe due diligence was shown with judicial notice that the bank did not conduct an ocular inspection on the property and did not send a representative to investigate the ownership of the land, these being a standard procedure before approving loans. It is also aware of the adverse claim because of the notice of lis pendens annotated to the title. Because it was established that the two deeds of sale were simulated thus null and void, it does not convey any right that may ripen into a valid title. The mortgage was also null and void because Norma was not the owner of the property. The property cannot be validly foreclosed by the respondent. The court declares the petitioner to remain as the valid owner of the property.
Razon vs Phil portsCase # 109Cardoza, Levi J.Petitioner E. Razon, Inc., also known as Metro Port Service, Inc. (MPSI), is a Philippine corporation organized on June 21, 1962 for the main purpose of bidding for the contract to manage all the piers in South Harbor, Manila. Co-petitioner Enrique Razon was allegedly the 100% equity owner, having paid for the subscriptions of the other incorporators who were mere nominees.After a public bidding, petitioner ERI was awarded in 1966 a five-year contract to operate the arrastre service for Piers 3 and 5 at the South Harbor. Thereafter, it allegedly invested millions of pesos in acquiring port-handling equipment upon assurance from the government that its contract would be renewed without public bidding. Thus, when the Bureau of Customs informed petitioner ERI in 1971 of its decision to call for a new bidding and accordingly issued an invitation to bid for the operation of the arrastre service for any and all piers in South Harbor, including Piers 3 and 5, petitioner ERI instituted a special civil action for certiorari, prohibition, mandamus and injunction with preliminary and mandatory injunction and/or restraining order before the then Court of First Instance of Manila against the Secretary of Finance, Commissioner of Customs and members of the Bidding Committee to enjoin them from proceeding with the bidding and to compel them to renew petitioner ERI's contract. The Court of First Instance, presided by Judge Juan Bocar, issued the writ prayed for, whereupon then Secretary of Finance Cesar Virata elevated the case before this Court in G.R. No. 33426 entitled.In a resolution dated May 13, 1971, this Court ordered the holding of a public bidding for all the piers, conditioned that no final award should be given until further orders from the court.ISSUE: Whether or not the bureau of customs has acted with unlawful cause for calling a new bidding despite of their arrangements with Razon.HELD: Yes. The court held that the petitioners are hereby directed to make the final award in favor of E. Razon, Inc., as the best and most advantageous bidder of the contract to operate the arrastre service for all the piers in the Manila South Harbor.
Uy vs CA314 SCRA 69September 9, 1999
WILLIAM UY and RODEL ROXAS, petitioners, vs. COURT OF APPEALS, HON. ROBERT BALAO and NATIONAL HOUSING AUTHORITY, respondents.
Article 1355
Facts:
Petitioners William Uy and Rodel Roxas are agents authorized to sell 8 parcels of land. Petitioners offered to sell the land to NHA for a housing project. On February 14, 1989, NHA passed a resolution approving the acquisition of said lands, and pursuant to this the parties executed Deeds of Absolute Sale. However, only 5 out of 8 lands were paid for by NHA because of a report from DENR that the remaining area is located at an active landslide area and are therefore not conducive for housing. On November 22, 1991, NHA issued a resolution canceling the sale of the remaining lands and offered P1.225 million to the landowners as daños perjuicios. On March 9, 1992, petitioners filed a complaint for damages against NHA and its general manager Robert Balao. The RTC declared the cancellation to be justified, but awarded the amount offered by NHA. The Court of Appeals affirmed the decision, but deleted the award.
Issue:
Whether or not the cancellation is justified
.
Held: The cancellation was not a rescission. Rather, the cancellation was based on the negation of the cause arising from the realization that the lands, which were the object of the sale, were not suitable for housing. Cause is the essential reason which moves the contracting parties to enter into it. In other words, the cause is the immediate, direct and proximate reason which justifies the creation of an obligation through the will of the contracting parties.We hold that the NHA was justified in canceling the contract. The realization of the mistake as regards the quality of the land resulted in the negation of the motive/cause thus rendering the contract inexistent.
Case no. 111 Art. 1359Clarin vs. Rulona127 scra 512/G.R. No. L-30786/ February 20, 1984,
FACTS: Clarin owned a 10 hectare land in Carmen, Bohol, said to be his share
from the other co-owners. In 1959, he executed a Contract of Sale with Rulona as he was selling the said land. The agreed purchase price was P2500.00. A down payment would be P1000.00 and the remaining balance would be paid monthly at P100.00 per month. Rulona paid the down payment as well as the 1st installment but then later on Clarin returned the P1,100.00 against Rulona’s will. Clarin said he could not convince the other co-owners, which are his sisters in selling of his share. Clarin also said there was no perfected sale between him and Rulona as he said that the sale was subject to the condition that the other co-owners should give their consent to the sale.
ISSUE: Whether or not there was a perfected contract of sale.
HELD: Yes, there was. For a contract of sale is perfected at the moment there
is meeting of minds upon the thing which is the object of the contract and upon the price. Such contract is binding in whatever form it may have been entered into.
During trial there were 3 documents shown. Exhibit A showed that upon payment of P800.00 by Rulona, a survey of the land was authorized. Exhibit B showed that P200.00, part of the down payment was paid to Clarin and that the 1st installment of P100.00 was also made. Clarin agreed to sell and Rulona agreed to buy a definite object, that is a 10 hectares of land which is part and parcel of Lot 20 PLD No. 4, owned in common by the Clarin and his sisters although the boundaries of the 10 hectares would be delineated at a later date. There was also an agreement of a definite price which is P2,500.00. Exhibit B further showed that Clarin had received from Rulona as the amount of P800.00 as initial payment. It cannot be denied that there was a perfected contract of sale between the parties and that such contract was already partially executed when the petitioner received the initial payment of P800.00. Clarin’s acceptance of the payment from Rulona clearly showed his consent to the contract thereby precluding him from rejecting its binding effect. Though these exhibits are not the Contract of Sale, it showed that there was a contract of sale between them.
With the contract being partially executed, the same is no longer covered by the requirements of the Statute of Frauds in order to be enforceable. Therefore, with the contract being valid and enforceable, the petitioner cannot avoid his obligation by interposing that Exhibit A is not a public document. On the contrary, under Article 1357 of the Civil Code, the
petitioner can even be compelled by the respondent to execute a public document to embody their valid and enforceable contract.
Husnida AsaninNIA vs. GAMITG.R. No. 85869.November 6, 1992.
ISSUE: On June 5, 1975, herein plaintiff and defendant, entered into a CONTRACT OF LEASE and a RIGHT TO REPURCHASED, over plaintiff’s urban parcel of land. Defendant acted fraudulently and inequitably, taking advantage of the financial distress of herein plaintiff, when it caused the unlawful insertion of the stipulation fixing of the price of the land to be purchased and that upon payment of the rental amount of P25,000.00, herein plaintiff shall be deemed to have conveyed the property to the defendant.On 23 January 1985, the plaintiff Estanislao Gamit (private respondent herein) filed with the RTC of Roxas, Isabela, Branch XXIII, a complaint1
against the defendant National Irrigation Administration (petitioner herein) for reformation of contract, recovery of possession and damages.ISSUE: WON reformation of contract can be applied in the case at bar.HELD: Article 1362 of the Civil Code, provides: “If one party was mistaken and the other acted fraudulently or inequitably in such a way that the instrument does not show their true intention, the former may ask for the reformation of the instrument. Equity orders the reformation of an instrument in order that the true intention of the contracting parties may be expressed. The courts do not attempt to make another contract for the parties. The rationale of the doctrine of reformation is that it would be unjust and inequitable to allow the enforcement of a written instrument which does not reflect or disclose the real meeting of the minds of the parties. The rigor of the legalistic rule that a written instrument should be the final and inflexible criterion and measure of the rights and obligations of the contracting parties is thus tempered, to forestall the effect of mistake, fraud, inequitable conduct or accident.
OMER REMOHuibonhoa v. CA 320 SCRA 625Facts:
On June 8, 1983, Florencia T. Huibonhoa entered into a memorandum of agreement with siblings Rufina Gojocco Lim, Severino Gojocco and Loreta Gojocco Chua stipulating that Florencia T. Huibonhoa would lease from them (Gojoccos) three (3) adjacent commercial lots at Ilaya Street, Binondo, Manila, described as lot nos. 26-A, 26-B and 26-C, covered by Transfer Certificates of Title Nos. 76098, 80728 and 155450, all in their (Gojoccos') names.
On June 30, 1983, pursuant to the said memorandum of agreement, the parties inked a contract of lease of the same three lots for a period of fifteen (15) years commencing on July 1, 1983 and renewable upon agreement of the parties. Subject contract was to enable the lessee, Florencia T. Huibonhoa, to construct a "four-storey reinforced concrete building with concrete roof deck, according to plans and specifications approved by the City Engineer's Office." The parties agreed that the lessee could let/sublease the building and/or its spaces to interested parties under such terms and conditions as the lessee would determine and that all amounts collected as rents or income from the property would belong exclusively to the lessee. The lessee undertook to complete construction of the building "within eight (8) months from the date of the execution of the contract of lease." The contract further provided as follows:
5. Good will Money and Rate of Monthly Rental: Upon the signing of this Contract of Lease, LESSEE shall pay to each of the LESSOR the sum of P300,000.00 each or a total sum of P900,000.00, as goodwill money.LESSEE shall pay to each of the LESSOR the sum of P15,000.00 each or a total amount of P45,000.00 as monthly rental for the leased premises, within the first five (5) days of each calendar month, at the office of the LESSOR or their authorized agent; Provided, however, that LESSEE's obligation to pay the rental shall start only upon completion of the building, but if it is not completed within eight (8) months from date hereof as provided for in par. 4 above, the monthly rental shall already accrue and shall be paid by LESSEE to LESSOR. In other words, during the period of construction, no monthly rental shall be collected from LESSEE; Provided, Finally, that the monthly rental shall be adjusted/increased upon the corresponding increase in the rental of sub-leasees (sic) using the percentage increase in the totality of rentals of the sub-leasees (sic) as basis for the percentage increase of monthly rental that LESSEE will pay to LESSOR.
The parties also agreed that upon the termination of the lease, the ownership and title to the building thus constructed on the said lots would automatically transfer to the lessor, even without any
implementing document therefor. Real estate taxes on the land would be borne by the lessor while that on the building, by the lessee, but the latter was authorized to advance the money needed to meet the lessors' obligations such as the payment of real estate taxes on their lots. The lessors would deduct from the monthly rental due all such advances made by the lessee.After the execution of the contract, the Gojoccos executed a power of
attorney granting Huibonhoa the authority to obtain "credit facilities" in order that the three lots could be mortgaged for a limited one-year period from July 1983. 1 Hence, on September 12, 1983, Huibonhoa obtained from China Banking Corporation "credit facilities" not exceeding One Million (P1,000.000.00) Pesos. Simultaneously, she mortgaged the three lots to the creditor bank. Fifteen days later or on September 27, 1983, to be precise, Huibonhoa signed a contract amending the real estate mortgage in favor of China Banking Corporation whereby the "credit facilities" were increased to the principal sum of Three Million (P3,000,000.00) Pesos.
During the construction of the building which later became known as Poulex Merchandise Center, former Senator Benigno Aquino, Jr. was assassinated. The incident must have affected the country's political and economic stability. The consequent hoarding of construction materials and increase in interest rates allegedly affected adversely the construction of the building such that Huibonhoa failed to complete the same within the stipulated eight-month period from July 1, 1983. Projected to be finished on February 29, 1984, the construction was completed only in September 1984 or seven (7) months later.
Under the contract, Huibonhoa was supposed to start paying rental in March 1984 but she failed to do so. Consequently, the Gojoccos made several verbal demands upon Huibonhoa for the payment of rental arrearages and, for her to vacate the leased premises. On December 19, 1984, lessors sent lessee a final letter of demand to pay the rental arrearages and to vacate the leased premises. The former also notified the latter of their intention to terminate the contract of lease.Issue:
Whether or not the reformation of the lease contract by Huibonhoa is valid.Held:
Once the minds of the contacting parties meet, a valid contract exists, whether it is reduced to writing or not. When the terms of an agreement have been reduced to writing, it is considered as containing all the terms agreed upon. As such, there can be, between the parties and their successors in interest, no evidence of such terms other than the contents of the written agreement, except when it fails to express the true intent and agreement of the parties. In such an exception, one of the parties may bring an action for the reformation of the instrument to the end that their true intention may be expressed.
Reformation is that remedy in equity by means of which a written instrument is made or construed so as to express or conform to the real intention of the parties. As to its nature, in Toyota Motor Philippines Corporation v. Court of Appeals, the Court said: An action for reformation is in personam, not in rem, . . . even when real estate is involved. . . . It is merely an equitable relief granted to the parties where through mistake or fraud, the instrument failed to express the real agreement or intention of the parties. While it is a recognized remedy afforded by courts of equity it may not be applied if it is contrary to well-settled principles or rules. It is a long-standing principle that equity follows the law. It is applied in the absence of and never against statutory law. . . . Courts are bound by rules of law and have no arbitrary discretion to disregard them. . . . Courts of equity must proceed with outmost caution especially when rights of third parties may intervene. . . . .
Art. 1359 of the Civil Code provides that "(w)hen, there having been a meeting of the minds 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 or accident, one of the parties may ask for the reformation of the instrument to the end that such intention may be expressed. . . . "An action for reformation of instrument under this provision of law may prosper only upon the concurrence of the following requisites: (1) there must have been a meeting of the minds of the parties to the contact; (2) the instrument does not express the true intention of the parties; and (3) the failure of the instrument to express the true intention of the parties is due to mistake, fraud, inequitable conduct or accident.
Jose Levi S EndinoObliCon, LlB- ID
NAGA TELEPHONE CO. VS. CAG.R. No. 107112 February 24, 1994
FACTS: NATELCO: telephone company rendering local and long distance services in Naga entered into contract with Camarines Sur II Electric Cooperative (electrice power service): “For the use in operation of its telephone service, electric light posts of CASURECO II”. Period: as long as NATELCO needs electric light posts, CASURECO understands that contract will terminate when they are forced to stop, abandon operation and remove lightposts.
CASURECO after 10 years filed for reformation of contract with damages, not conforming to guidelines of National Electrification Administration (NEA)- reasonable compensation for use of posts. Compensation is P10/posts but consumption of telephone cables costs P2630. NATELCO used 319 posts without any contract at P10.00, refused to pay. Poor servicing- damage not less than P100,000. NATELCO: Compensation:
i. No cause of action for reformation of contract. ii. Barred by prescription (10 years execution of contract) iii. Barred by estoppel. iv. Utilization could not have cause deterioration because
already used for 11 years. v. Value of expenses been equal to use of telephone lines.
TRIAL COURT ORDERED REFORMATION OF AGREEMENT:
NATELCO to pay for electric polls sum of P10/pole from January 1989.
1. Contract eventually became unfair due to increase in volume of subscribers without increase of telephone connections which are free of charge to CASURECO.
2. REFORMATION OF CONTACT: cannot make another contract but abolish inequities.
3. Contract does not mention use of posts outside Naga City. Contract should be reformed including provision that for the use posts outside Naga. ISSUE: WON Article 1267 is applicable,and has the filing of reformation of contract prescribed and is the period of contract, “as long as the party of the first part has need for electrive light posts…” potestative?
HELD: ARTICLE 1267, EVEN THOUGH NEVER RAISED BEFORE, IS APPLICABLE. Art. 1267. 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. PRESCRIPTION HAS NOT YET LAPSED,What is reformed is not the contract itself, but the instrument embodying the contract. It follows that whether the contract is disadvantageous or not is irrelevant to reformation and therefore, cannot be an element in the determination of the period for prescription of the action to reform.
UY TONG vs. MARIO R. SILVA, assignee, EDUARDO LOPEZ , G.R. No. L-28377 October 1, 1984
Direct appeal on a pure question of law from the orders of the then Court of First Instance of Manila, Branch XXI, sitting as an insolvency court in Special Proceedings No. 29835, entitled "In Re: Petition for Voluntary Insolvency of Uy Tong alias Teodoro Uy," declaring as duly proved the indebtedness of insolvent Uy Tong in favor of herein appellants, claimants Eduardo Lopez, et al., in the amount of P100,575.00 with legal interest from August 10, 1954; but denying the set-off of such amount against the indebtedness of said claimants to insolvent Uy Tong amounting to P55,000.00 with legal interest from February 24, 1954, until the preferred claims shall have been fully satisfied.Unquestionably, the principle of compensation or set-off as recognized both in Article 1279 of the Civil Code 1 and Section 58 of the Insolvency Law 2 is applicable to the case at bar. However, the amount which claimants Eduardo Lopez, et al., may set off against their indebtedness in favor of insolvent Uy Tong is limited only to the rentals of the Benavides Building due from the latter for the period from February 28, 1955 up to May 25, 1955, the date when the petition for voluntary in solvency was filed, and not the whole amount representing rentals from February 28, 1955 to June 16, 1961. It is a settled principle that "a debt of the bankrupt arising prior to the bankruptcy cannot be set off against installments of rent falling due after bankruptcy, although the installments are payable under a written lease in effect before the bankruptcy." 3 Upon this premise, the conclusion is easily reached that the debt of claimants which arose prior to bankruptcy cannot be set-off against the installments of rent falling due from the insolvent after bankruptcy. The reason therefor is quite evident: with respect to the difference between the debt of claimants Eduardo Lopez, et al., in the amount of P55,000.00 plus interest, and the rentals corresponding to the period from February 28 to May 25, 1955, retention or controversy had been effectively commenced by third persons upon their filing of claims in the insolvency proceedings of which claimants Lopez, et al., had due notice. For compensation to take place, it is necessary, among other legal requisites, "that over neither of them (the two debts) there be any retention or controversy, commenced by third persons and communicated in due time to the debtor." ISSUE:
WON compensation is qualified in this case.4 This essential element of compensation being absent, the same cannot take
place. Besides, to allow compensation to the concurrent amount of the mutual debts and credits would in effect give claimants Lopez, et al., undue preference over other creditors, as such set-off will totally deplete the estate of the insolvent, a situation entirely contrary to the purpose of insolvency proceedings, which is to effect an equitable distribution of the insolvent's estate among his creditors.
WHEREFORE, the orders appealed from are hereby modified in the sense that claimants Eduardo Lopez, et al., are allowed to set off from their indebtedness of P55,000.00 plus interest, whatever amount was due from insolvent Uy Tong as rentals of the Benavidez Building from February 28 to May 25, 1955. The difference shall be paid pro rata with other unpreferred claims, but only after the preferred claims, if any, shall have been satisfied.
Union Bank vs. OngG.R. No. 152347, 491 SCRA 581, June 21, 2006Topic: Article 1387
Facts: Spouses Alfredo and Susana Ong own the majority capital stock of Baliwag Mahogany Corporation (BMC). On October 10, 1990, the spouses executed a Continuing Surety Agreement in favor of Union Bank to secure aP40, 000,000.00-credit line facility made available to BMC. The agreement expressly stipulated a solidary liability undertaking. On October 22, 1991, the spouses Ong, for P12,500,000.00, sold their 974-square meter lot located in Greenhills, San Juan, Metro Manila, together with the house and other improvements standing thereon, to their co-respondent, Jackson Lee. The following day, Lee registered the sale and was then issued Transfer Certificate of Title (TCT) No. 4746-R. At about this time, BMC had already availed itself of the credit facilities, and had in fact executed a total of twenty-two (22) promissory notes in favor of Union Bank. On November 22, 1991, BMC filed a Petition for Rehabilitation and for Declaration of Suspension of Payments with the Securities and Exchange Commission (SEC). To protect its interest, Union Bank lost no time in filing with the RTC of Pasig City an action for rescission of the sale between the spouses Ong and Jackson Lee for purportedly being in fraud of creditors.
Issue: Whether or not the Ong-Lee contract of sale partakes of a conveyance to defraud Union Bank
Held: The Ong-Lee contract of sale partakes a conveyance of bona fide transaction and not a trick to defeat creditors. Contracts in fraud of creditors are those executed with the intention to prejudice the rights of creditors. They should not be confused with those entered into without such mal-intent, even if, as a direct consequence hereof, the creditor may suffer some damage. In the present case, respondent spouses Ong, had sufficiently established the legitimacy of the sale. It was supported by sufficient consideration. The disparity between the price and the real value of the property was not as gross to support a conclusion of fraud. Furthermore, there was no evidence to prove that the spouses Ong and Lee were conniving cheats. Even if the spouses Ong did not leave the premises immediately after the sale, such action was supported by a valid contract of lease. It could not also be contended that Lee was not financially capable of purchasing the property, since mere income for a specific year is not sufficient to establish his incapacity.
It is true that respondent spouses, as surety for BMC, bound themselves to answer for the latter’s debt.
Nonetheless, for purposes of recovering what the eventually insolvent BMC owed the bank, it behooved the petitioner to show that it had exhausted all the properties of the spouses Ong. UB failed to show that it has no other legal recourse to obtain satisfaction for its claim; hence, it is not entitled to the rescission asked. On a final note, the Insolvency Law cannot be applied in this case. First, the spouses Ong had not filed a petition for a declaration of their own insolvency; neither has one been filed against
them. Second, the real debtor of petitioner bank in this case is BMC. Third, the twin elements of good faith and valuable and sufficient consideration have been duly established, giving no occasion to apply Section 70 of the Insolvency Law, which considers transfers made within a month after the date of cleavage void, except those made in good faith and for valuable pecuniary consideration.
WHEREFORE, the instant petition is DENIED and the assailed decision of the Court of Appeals is AFFIRMED.
SAHILLIA S. ASADILLLB-IDTHE MANILA BANKING CORPORATION, petitioner, vs. EDMUNDO S. SILVERIO and THE COURT OF APPEALS, respondents.G.R. No. 132887. August 11, 2005]Facts:Purificacion Ver sold the properties to Ricardo C. Silverio, Sr. (Ricardo, Sr.) for P1,036,475.00. The absolute deed of sale evidencing the transaction was not registered; hence, title remained with the seller, Purificacion Ver.On 22 February 1990, herein petitioner, The Manila Banking Corporation (TMBC), filed a complaint with the RTC of Makati City for the collection of a sum of money with application for the issuance of a writ of preliminary attachment against Ricardo, Sr. and the Delta Motors Corporation docketed as Civil Case No. 90-513. On 02 July 1990, by virtue of an Order of Branch 62 of the RTC of Makati City, notice of levy on attachment of real property and writ of attachment were inscribed. On 29 March 1993, the trial court rendered its Decision in favor of TMBC and against Ricardo, Sr. and the Delta Motors Corporation. The Decision was brought up to the Court of Appeals for review. The herein private respondent, Edmundo S. Silverio (Edmundo), the nephew of judgment debtor Ricardo, Sr., requested TMBC to have the annotations on the subject properties cancelled as the properties were no longer owned by Ricardo, Sr. This letter was referred to the Bangko Sentral Ng Pilipinas, TMBC’s statutory receiver. No steps were taken to have the annotations cancelled. Thus, on 17 December 1993, Edmundo filed in the RTC of Makati City a case for “Cancellation of Notice of Levy on Attachment and Writ of Attachment on Transfer Certificates of Title.” In his petition, Edmundo alleged that as early as 11 September 1989, the properties, subject matter of the case, were already sold to him by Ricardo, Sr. As such, these properties could not be levied upon on 02 July 1990 to answer for the debt of Ricardo, Sr. who was no longer the owner thereof. In its Answer with Compulsory Counterclaim, TMBC alleged, among other things, that the sale in favor of Edmundo was void, therefore, the properties levied upon were still owned by Ricardo, Sr., the debtor.On 02 May 1995, after trial on the merits, the lower court rendered its Decision dismissing Edmundo’s petition. TMBC’s counterclaim was likewise dismissed for lack of sufficient merit.
IssueWhether or not the contract is simulated or real is factual in nature, and the Court eschews factual examination in a petition for review under Rule 45 of the Rules of Court. Held:This rule, however, is not without exceptions, one of which is when there exists a conflict between the factual findings of the trial court and of the appellate court, as in the case at bar.The validity of the contract of sale being the focal point in the two court’s decision, we begin our analysis into the matter with two veritable presumptions: first, that there was sufficient consideration of the contract and, second, that it was the result of a fair and regular private transaction. Between the disparate positions of the trial court and the Court of Appeals, we find those of the trial court to be more in accord with the evidence on hand and the laws applicable thereto.An absolutely simulated contract, under Article 1346 of the Civil Code, is void. It takes place when the parties do not intend to be bound at all. The characteristic of simulation is the fact that the apparent contract is not really desired or intended to produce legal effects or in any way alter the juridical situation of the parties. Thus, where a person, in order to place his property beyond the reach of his creditors, simulates a transfer of it to another, he does not really intend to divest himself of his title and control of the property; hence, the deed of transfer is but a sham. Lacking, therefore, in a fictitious and simulated contract is consent which is essential to a valid and enforceable contract. Article 117 of the New Civil Code is very explicit that the right or remedy of the creditor to impugn the acts which the debtor may have done to defraud them is subsidiary in nature. It can only be availed of in the absence of any other legal remedy to obtain reparation for the injury. Otherwise stated, the right of accion pauliana can be availed of only AFTER the creditor have exhausted all the properties of the debtor not exempt from executions.This fact is not present in this case. Not a single proof was offered to show that oppositor-appellee had exhausted all the properties of Ricardo Silverio before it tried to question the validity of the contract of sale. In fact, oppositor-appellee never alleged in its pleadings that it had exhausted all the properties of Ricardo Silverio before it impugned the validity of the sale made by Ricardo Silverio to petitioner-appellant.This being the case, oppositor-appellee cannot and is not in the proper position to question the validity of the sale of the subject properties by Ricardo Silverio to petitioner-appellant. Oppositor-appellee has not shown that it has the material interest to question the sale. Art. 1383 of the Civil Code, that such action can be instituted only when the party suffering damage has no other legal means to obtain reparation for the same. The contract of sale before us, albeit undertaken as well in fraud of creditors, is not merely rescissible but is void ab initio for lack of consent of the parties to be bound thereby. A void or inexistent contract is one which
has no force and effect from the very beginning, as if it had never been entered into; it produces no effect whatsoever either against or in favor of anyone.
ISABEL RUBIO ALCASID, assisted by her husband DOMINGO A. ALCASID, petitioners,
vs.THE HONORABLE COURT OF APPEALS and RUFINA L.
LIM, respondents.G.R. No. 104751/October 7, 1994
Article 1390
FACTSPetitioner is one of the co-owners of two parcels of land located in
Calamba, Laguna. Private respondent offered to purchase from petitioner and her co-owners the abovementioned property. Petitioner was willing to sell her share for P4, 500,000.00 and only if all her co-owners would sell their respective shares of the said land.
Petitioner engaged the services of Atty. Antonio A. Fernandez for the purpose of negotiating the sale, without knowing that he was also representing private respondent.
Atty. Fernandez confirmed to petitioner that all her co-owners were already amenable to sell their shares for P1, 500,000.00. Petitioner signed a Deed of Sale drafted by Atty. Fernandez. Subsequently, petitioner learned that the other co-owners did not agree to sell their shares over the subject property.ISSUE
Whether or not private respondent is liable for the wrongful act of Atty. Antonio A. Fernandez?RULING
The finding of the Court of Appeals that petitioner executed the contract of her own free will and choice and not from duress is fully supported by the evidence. Such finding should not be disturbed.
Private respondent did not commit any wrongful act or omission which violated the primary right of petitioner. Hence, petitioner did not have a cause of action
Petitioner could have avoided the alleged mistake had she exerted efforts to verify from her co-owners if they really consented to sell their respective shares.
SAHILLIA S. ASADILLLB-IDSPOUSES HEINZRICH THEIS AND BETTY THEIS, petitioners, vs. HONORABLE COURT OF APPEALS Facts:Private respondent Calsons Development Corporation is the owner of three (3) adjacent parcels of land. In 1985, private respondent constructed a two-storey house on parcel no. 3. The lots covered which are parcel no. 1 and parcel no. 2, respectively, remained idle.However, in a survey conducted in 1985, parcel no. 3, where the two-storey house stands, was erroneously indicated to be covered not by TCT No. 15684 but by TCT No. 15515, while the two idle lands (parcel nos. 1 and 2) were mistakenly surveyed to be located on parcel no. 4 instead (which was not owned by private respondent) and covered by TCT Nos. 15516 and 15684.Unaware of the mistake by which private respondent appeared to be the owner of parcel no. 4 as indicated in the erroneous survey, and based on the erroneous information given by the surveyor that parcel no. 4 is covered by TCT No. 15516 and 15684, private respondent, through its authorized representative, one Atty. Tarcisio S. Calilung, sold said parcel no. 4 to petitioners.Upon execution of the Deed of Sale, private respondent delivered TCT Nos. 15516 and 15684 to petitioners who, on October 28, 1987, immediately registered the same with the Registry of Deeds of Tagaytay City. Thus, TCT Nos. 17041 and 17042 in the names of the petitioners were issued.Indicated on the Deed of Sale as purchase price was the amount of P130,000.00. The actual price agreed upon and paid, however, was P486,000.00. This amount was not immediately paid to private respondent; rather, it was deposited in escrow in an interest-bearing account in its favor with the United Coconut Planters Bank in Makati City. The P486,000.00 in escrow was released to, and received by, private respondent on December 4, 1987.Thereafter, petitioners did not immediately occupy and take possession of the two (2) idle parcels of land purchased from private respondent. Instead, petitioners went to Germany.In the early part of 1990, petitioners returned to the Philippines. When they went to Tagaytay to look over the vacant lots and to plan the construction of their house thereon, they discovered that parcel no. 4 was owned by another person. They also discovered that the lots actually sold to them were parcel nos. 2 and 3 covered by TCT Nos. 15516 and 15684, respectively. Parcel no. 3, however, could not have been sold to the petitioners by the private respondents as a two-storey house, the construction cost of which far exceeded the price paid by the petitioners, had already been built thereon even prior to the execution of the contract between the disputing parties.Petitioners insisted that they wanted parcel no. 4, which is the idle lot adjacent to parcel no. 3, and persisted in claiming that it was parcel no. 4 that private respondent sold to them. However, private respondent could not
have possibly sold the same to them for it did not own parcel no. 4 in the first place.ISSUE:Whether or not there is voidable contract of sale between petitioners and private respondent on the ground of mistakeHELD:The law itself explicitly recognizes that consent of the parties is one of the essential elements to the validity of the contract and where consent is given through mistake, the validity of the contractual relations between the parties is legally impaired."Art. 1390. The following contracts are voidable or annullable, even though there may have been no damage to the contracting parties: (2) Those where the consent is vitiated by mistake, violence, intimidation, undue influence, or fraud.In the case at bar, the private respondent obviously committed an honest mistake in selling parcel no. 4. As correctly noted by the Court of Appeals, it is quite impossible for said private respondent to sell the lot in question as the same is not owned by it. The good faith of the private respondent is evident in the fact that when the mistake was discovered, it immediately offered two other vacant lots to the petitioners or to reimburse them with twice the amount paid. That petitioners refused either option left the private respondent with no other choice but to file an action for the annulment of the deed of sale on the ground of mistake. "Art. 1331. 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 one or both parties to enter into the contract."The petitioners cannot be justified in their insistence that parcel no. 3, upon which private respondent constructed a two-storey house, be given to them in lieu of parcel no. 4. The cost of construction in 1985 for the said house (P1,500,000.00) far exceeds the amount paid by the petitioners to the private respondent (P486,000.00).
NIDO VS. ALCANTARAFACTS: Revelen is the owner of an unregistered land with an area of 1,939 square meters located in Cardona, Rizal. Sometime in March 1984, respondent (Revelen’s father) accepted the offer of petitioners to purchase a 200-square meter portion of Revelen’s lot (lot) at P200 per square meter. Petitioners paid P3,000 as downpayment and the balance was payable on installment. Petitioners constructed their houses in 1985. By 1987, petitioners had already paid P17,5005 before petitioners defaulted on their installment payments.On 11 May 1994, respondent, acting as administrator and attorney-in-fact of Revelen, filed a complaint for recovery of possession with damages against petitioners with the RTC declaring the contract to sell orally agreed by the plaintiff Brigida Nido, in her capacity as representative or agent of her daughter Revelen Nido Srivastava, VOID and UNENFORCEABLE.ISSUE: WON there is a valid contract.HELD: Art. 1874 When a sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void.The sale of the lot by respondent who did not have a written authority from Revelen is void. A void contract produces no effect either against or in favor of anyone and cannot be ratified. A special power of attorney is also necessary to enter into any contract by which the ownership of an immovable is transmitted or acquired for a valuable consideration. Without an authority in writing, respondent cannot validly sell the lot to petitioners. Hence, any “sale” in favor of the petitioners is void.
Orduña, et al. v. Fuentebella, et al.Makati Sports Club, Inc. v. Cheng, et. al.Vazquez v. Ayala CorporationSpouses Serrano, et. al. v. Caguiat
Statute of FraudsORDUÑA, ET AL. v. FUENTEBELLA, ET AL.
G.R. No. 176841 June 29, 2010Velasco, Jr., J.:
FACTS:Anton ita Orduña purchased a res ident ia l lot f rom Gabr ie l
Sr .payable in instal lments but no deed of sa le was executed. The installments were paid to Gabriel Sr. and later to Gabriel Jr. after t h e d e a t h o f t h e f o r m e r . I m p r o v e m e n t s w e r e t h e r e a f t e r introduced by petitioner and the latter even paid its real propertyt a x s i n c e 1 9 7 9 . U n k n o w n t o O r d u ñ a , t h e p r o p e r t y h a s b e e n s u b j e c t t o f u r t h e r a l i e n a t i o n s u n t il t h e s a m e w a s c e d e d t o respondent , Fuentebi l la , J r . Orduña, af ter being demanded byFuentebilla to vacate the disputed land, then filed a Complaint forAnnulment of Sale , T i t le , Reconveyance with Damages with aprayer to acquire ownership over the subject lot upon payment of their remaining balance. The Regional Trial Court dismissed thepetition because the verbal sale between Gabriel Sr. and Orduñawas unenforceable under the Statute of Frauds. This was lateraffirmed by the Court of Appeals
.ISSUE:W h e t h e r o r n o t t h e s a l e o f t h e s u b j e c t l o t b y G a b r i e l
S r . t o Antonita is unenforceable under the Statute of Frauds
HELD:N o . I t i s a w e l l s e t t l e d r u l e t h a t t h e S t a t u t e o f
F r a u d s a s expressed in Article 1403, par. (2), of the Civil Code is applicableonly to pure ly executory contracts and not to contracts whichhave already been executed either totally or partially. Here, theverbal contract of sale has been partially executed through thepartial payments made by Orduña duly received by both Gabriel J r . a n d h i s f a t h e r . T h e p u r p o s e o f t h e S t a t u t e o f F r a u d i s prevent ion f raud and per jury in the enforcement of obl igat ionsd e p e n d i n g f o r t h e i r e v i d e n c e o n t h e u n a s s i s t e d m e m o r y o f witnesses, by requi r ing some contracts and transact ions to beevidenced by a writing signed by the party to be charged. Sincethere is a l ready rat ificat ion of the
verbal contract through theacceptance of benefits through the part ia l payments, i t i s thuswithdrawn from the purview of the Statute of Frauds.
SPOUSES MARIO AND ELIZABETH TORCUATOR, petitioners, vs. SPOUSES REMEGIO AND GLORIA BERNABE and SPOUSES DIOSDADO and LOURDES SALVADOR, respondents.
Facts:Evidences on record further reveal that on December 18, 1980, the Salvadors
sold the parcel of land to the spouses Remigio and Gloria Bernabe (Bernabes, for expediency). Given the above restrictions, the Salvadors concomitantly executed a special power of attorney authorizing the Bernabes to construct a residential house on the lot and to transfer the title of the property in their names.The Bernabes, on the other hand, without making any improvement, contracted to sell the parcel of land to the spouses Mario and Elizabeth Torcuator sometime in September of 1986. Then again, confronted by the Ayala Alabang restrictions, the parties agreed to cause the sale between the Salvadors and the Bernabes cancelled , in favor of (a) a new deed of sale from the Salvadors directly to the Torcuators; (b) a new Irrevocable Special Power of Attorney executed by the Salvadors to the Torcuators in order for the latter to build a house on the land in question; and (c) an Irrevocable Special Power of Attorney from the Salvadors to the Bernabes authorizing the latter to sell, transfer and convey, with power of substitution, the subject lot.The Torcuators thereafter had the plans of their house prepared and offered to pay the Bernabes for the land upon delivery of the sale contract. For one reason or another, the deed of sale was never consummated nor was payment on the said sale ever effected. Subseuqently, the Bernabes sold the subject land to Leonardo Angeles, a brother-in-law.Issue:
WON contract agreed upon is valid.Held:
In order to declare the agreement void for being contrary to good customs and morals, it must first be shown that the object, cause or purpose thereof contravenes the generally accepted principles of morality which have received some kind of social and practical confirmation
ROSENCOR DEVELOPMENT CORPORATION and RENE JOAQUIN, petitioners,
FERNANDO MAGBANUA and LIZZA TIANGCO, respondents.G.R. No. 140479/ March 8, 2001
FACTSA two-story residential apartment located at No. 150 Tomas Morato
Ave., Quezon City covered by TCT No. 96161 and owned by spouses Faustino and Cresencia Tiangco. The lease was not covered by any contract. The lessees were renting the premises then for P150.00 a month and were allegedly verbally granted by the lessors the pre-emptive right to purchase the property if ever they decide to sell the same.
Upon the death of the spouses Tiangcos in 1975, the management of the property was adjudicated to their heirs who were represented by Eufrocina de Leon. The lessees were allegedly promised the same pre-emptive right by the heirs of Tiangcos since the latter had knowledge that this right was extended to the former by the late spouses Tiangcos.
The lessees offered to buy the property from de Leon for the amount of P1,000,000.00. De Leon told them that she will be submitting the offer to the other heirs. Since then, no answer was given by de Leon as to their offer to buy the property. However, in November 1990, Rene Joaquin came to the leased premises introducing himself as its new owner. The lessees received a letter from de Leon advising them that the heirs of the late spouses Tiangcos have already sold the property to Rosencor.ISSUE
1. Whether or not respondents have satisfactorily proven their right of first refusal over the property subject of the Deed of Absolute Sale dated September 4, 1990 between petitioner Rosencor and Eufrocina de Leon?
RULING1. Respondents have adequately proven the existence of their right of
first refusal. Federico Bantugan, Irene Guillermo, and Paterno Inquing uniformly testified that they were promised by the late spouses Faustino and Crescencia Tiangco and, later on, by their heirs a right of first refusal over the property they were currently leasing should they decide to sell the same. Moreover, respondents presented a letter[20] dated October 9, 1990 where Eufrocina de Leon, the representative of the heirs of the spouses Tiangco, informed them that they had received an offer to buy the disputed property for P2,000,000.00 and offered to sell the same to the respondents at the same price if they were interested. Verily, if Eufrocina de Leon did not recognize respondents’ right of first refusal over the property they were leasing, then she would not have bothered to offer the property for sale to the respondents.
WHEREFORE, premises considered, the decision of the Court of Appeals dated June 25, 1999 is REVERSED and SET ASIDE. The Decision dated May 13, 1996 of the Quezon City Regional Trial Court, Branch 217 is hereby REINSTATED insofar as it dismisses the action for rescission of the Deed of Absolute Sale dated September 4, 1990 and orders the payment of monthly rentals of P1,000.00 per month reckoned from May 1990 up to the time respondents leave the premises.
THIRD DIVISION[G.R. No. 153201. January 26, 2005]
JOSE MENCHAVEZ, JUAN MENCHAVEZ JR., SIMEON MENCHAVEZ, RODOLFO MENCHAVEZ, CESAR MENCHAVEZ, REYNALDO, MENCHAVEZ, ALMA MENCHAVEZ, ELMA MENCHAVEZ, CHARITO M. MAGA, FE M. POTOT, THELMA M. REROMA, MYRNA M. YBAÑEZ, and SARAH M. VILLABER, petitioners, vs. FLORENTINO TEVES JR., respondent.
Article 1412 FACTS:
On February 28, 1986, a “Contract of Lease” was executed by Jose S. Menchavez, Juan S. Menchavez Sr., Juan S. Menchavez Jr., Rodolfo Menchavez, Simeon Menchavez, Reynaldo Menchavez, Cesar Menchavez, Charito M. Maga, Fe M. Potot, Thelma R. Reroma, Myrna Ybañez, Sonia S. Menchavez, Sarah Villaver, Alma S. Menchavez, and Elma S. Menchavez, as lessors; and Florentino Teves Jr. as lessee.
On June 2, 1988, Cebu RTC Sheriffs Gumersindo Gimenez and Arturo Cabigon demolished the fishpond dikes constructed by respondent and delivered possession of the subject property to other parties.[6] As a result, he filed a Complaint for damages with application for preliminary attachment against petitioners. In his Complaint, he alleged that the lessors had violated their Contract of Lease, specifically the peaceful and adequate enjoyment of the property for the entire duration of the Contract. He claimed P157,184.40 as consequential damages for the demolition of the fishpond dikes, P395,390.00 as unearned income, and an amount not less than P100,000.00 for rentals paid.[7]
Issue:WON the contract of lease between Teves and the petitioners is valid.
On the ground that it was contracted with fraud.Held:
‘Lease of fishponds-Public lands available for fishpond development including those earmarked for family-size fishponds and not yet leased prior to November 9, 1972 shall be leased only to qualified persons, associations, cooperatives or corporations,
Held:The parties do not dispute the finding of the trial and the appellate courts
that the Contract of Lease was void.[17] Indeed, the RTC correctly held that it was the State, not petitioners, that owned the fishpond. The 1987 Constitution specifically declares that all lands of the public domain, waters, fisheries and other natural resources belong to the State. Included here are fishponds, which may not be alienated but only leased.] Possession thereof, no matter how long, cannot ripen into ownership.
Being merely applicants for the lease of the fishponds, petitioners had no transferable right over them. And even if the State were to grant their application, the law expressly disallowed sublease of the fishponds to respondent.[21] Void are all contracts in which the cause, object or purpose is contrary to law, public order or public policy.[22]
A void contract is equivalent to nothing; it produces no civil effect.[23] It does not create, modify or extinguish a juridical relation.[24] Parties to a void agreement cannot expect the aid of the law; the courts leave them as they are, because they are deemed in pari delicto or “in equal fault.”[25] To this rule, however, there are exceptions that permit the return of that which may have been given under a void contract.[26] One of the exceptions is found in Article 1412 of the Civil Code, which states:
On this premise, respondent contends that he can recover from petitioners, because he is an innocent party to the Contract of Lease.[27] Petitioners allegedly induced him to enter into it through serious misrepresentation.[28]
Finding of In Pari Delicto: A Question of Fact
The issue of whether respondent was at fault or whether the parties were in pari delicto is a question of fact not normally taken up in a petition for review on certiorari under Rule 45 of the Rules of Court. [29] The present case, however, falls under two recognized exceptions to this rule.[30] This Court is compelled to review the facts, since the CA’s factual findings are (1) contrary to those of the trial court;[31] and (2) premised on an absence of evidence, a presumption that is contradicted by the evidence on record.[32]
Unquestionably, petitioners leased out a property that did not belong to them, one that they had no authority to sublease. The trial court correctly observed that petitioners still had a pending lease application with the State at the time they entered into the Contract with respondent.[33]
Respondent, on the other hand, claims that petitioners misled him into executing the Contract.[34] He insists that he relied on their assertions regarding their ownership of the property. His own evidence, however, rebuts his contention that he did not know that they lacked ownership. At the very least, he had notice of their doubtful ownership of the fishpond.
As explained earlier, the applicable law in the present factual milieu is Article 1412 of the Civil Code. This law merely allows innocent parties to recover what they have given without any obligation to comply with their prestation. No damages may be recovered on the basis of a void contract;
being nonexistent, the agreement produces no juridical tie between the parties involved. Since there is no contract, the injured party may only recover through other sources of obligations such as a law or a quasi-contract.[47] A party recovering through these other sources of obligations may not claim liquidated damages, which is an obligation arising from a contract.
WHEREFORE, the Petition is GRANTED and the assailed Decision and Resolution SET ASIDE. The Decision of the trial court is hereby REINSTATED.
Lopez vs. CADate: June 29, 1982Petitioner: Benito LopezRespondents: CA and Philippine American General Insurance Co Inc
Ponente: Guerrero
Facts Benito Lopez obtained a loan for P20,000 from Prudential Bank. He
executed a promissory note for the same amount. He also executed a surety bond in which he and Philamgen bound themselves to repay prudential. Lopez also executed an indemnity agreement in favor of Philamgen. He executed a deed of assignment of 4,000 shares of the Baguio Military Institution entitled "Stock Assignment Separate from Certificate." With the execution of this deed of assignment, Lopez endorsed and delivered it to Philamgen. Lopez, Emilio Abello (AVP of Philamgen) and Atty. Timoteo Sumawang (AVP of Bonding Dept) that if he could not pay the loan, Abello and Pio Pedrosa (Prudential Bank) would buy the shares of stocks and out of the proceeds thereof, the loan would be paid to the Prudential Bank.Lopez’ obligation matured without being settled. Prudential Bank filed a case against Lopez and Philamgen. Atty. Sumawang confronted Abello and Pedrosa regarding their commitment to buy the shares. Abello then instructed Sumawang to transfer the shares to Philamgen and he made a commitment that they will buy the shares so the proceeds could be paid to the bank.The complaint was dismissed and later refilled. Lopez sent a letter to Philamgen inquiring about the former’s shares of stock, pledged to Philamgen. Philamgen was then forced to pay Prudential Bank P27, 785.89. Prudential executed a subrogation receipt on the same day. Philamgen brought an action against Lopez before the CIF of Manila. The court dismissed the complaint as Lopez already transferred to Philamgen the shares and the certificate of stock was already issued under the name of Philamgen. It is noteworthy that the transfer of stocks was initiated by the plaintiff’s officers. To go after Lopez again would amount to double payment. The CA reversed and declared that the stock assignment was a mere pledge; that the transfer of the stocks to Philamgen was not intended to make it the owner; that assuming that Philamgen had appropriated the stocks, this appropriation is null and void as a stipulation authorizing it is a pactum commissorium; and that pending payment, Philamgen is merely holding the stock as a security for the payment of Lopez' obligation.
Issue: WON Philamgen can still recover from Lopez
Held:Ratio: Considering the explicit terms of the deed denominated
"Stock Assignment Separate from Certificate”, Lopez sold, assigned and transferred unto Philamgen the stocks involved "for and in consideration of the obligations undertaken" by Philamgen "under the terms and conditions of the surety bond executed by it in favor of the Prudential Bank" and "for value received". On its face, it is neither pledge nor dation in payment. The document speaks of an outright sale as there is a complete and unconditional divestiture of the incorporeal property consisting of stocks from Lopez to Philamgen. The transfer appears to have been an absolute conveyance of the stocks to Philamgen whether or not Lopez defaults in the payment of P20, 000.00 to Prudential Bank. While it is conveyance in consideration of a contingent obligation, it is not itself a conditional conveyance. It is true that if Lopez should "well and truly perform and fulfill all the undertakings, covenants, terms, conditions, and agreements stipulated" in his promissory note to Prudential Bank, the obligation of Philamgen under the surety bond would become null and void. Corollarily, the stock assignment, which is predicated on the obligation of Philamgen under the surety bond, would necessarily become null and void likewise, for want of cause or consideration under Article 1352 CC. But this is not the case here because aside from the obligations undertaken by Philamgen under the surety bond, the stock assignment had other considerations referred to therein as "value received". Hence, based on the manifest terms thereof, it is an absolute transfer. Notwithstanding the express terms of the "Stock Assignment Separate from Certificate", however, we hold and rule that the transaction should not be regarded as an absolute conveyance in view of the circumstances obtaining at the time of the execution thereof. The indemnity agreement and the stock assignment must be considered together as related transactions because in order to judge the intention of the contracting parties, their contemporaneous and subsequent acts shall be principally considered. (Article1371 CC). Thus, considering that the indemnity agreement connotes a continuing obligation of Lopez towards Philamgen while the stock assignment indicates a complete discharge of the same obligation, the existence of the indemnity agreement whereby Lopez had to pay a premium of P1,000.00 for a period of one year and agreed at all times to indemnify Philamgen of any and all kinds of losses which the latter might sustain by reason of it becoming a surety, is inconsistent with the theory of an absolute sale for and inconsideration of the same undertaking of Philamgen. There would have been no necessity for the execution of the indemnity agreement if the stock assignment was really intended as an absolute conveyance. Hence, there are strong and cogent reasons to Conclude that the parties intended said stock assignment to complement the indemnity agreement and thereby sufficiently guarantee the indemnification of Philamgen should it be required to pay Lopez' loan to Prudential Bank. The
stock assignment is in truth and in fact, a pledge. Indeed, the facts and circumstances leading to the execution of the stock assignment and the admission of Lopez prove that it is in fact a pledge. According to Article 1245 of the New Civil Code, dation in payment, whereby property is alienated to the creditor in satisfaction of a debt in money, shall be governed by the law of sales. Assignment of property by the debtor to his creditors, provided for in article 1255, is similar to dation in payment in that both are substitute forms of performance of an obligation. Unlike the assignment for the benefit of creditors, however, dation in payment does not involve plurality of creditors, or the whole of the property of the debtor. It does not suppose a situation of financial difficulties, for it may be made even by a person who incompletely solvent. It merely involves a change of the object of the obligation by agreement of the parties and at the same time fulfilling the same voluntarily. "In this kind of novation, it is not enough to extend the juridical relation to a third person; it is necessary that the old debtor be released from the obligation and the third person or new debtor takes his place in the relation. Without such release, there is no novation; the third person who has assumed the obligation of the debtor merely becomes a co-debtor or a surety. If there is no agreement as to solidarity, the first and the new debtor are considered obligated jointly.”
That for and in consideration of the obligations undertaken by the ASSIGNEE-SURETY COMPANY under the terms and conditions of SURETY BOND NO. 14164, issued on behalf of said BENITO H. LOPEZ and in favor of the PRUDENTIAL BANK & TRUST COMPANY, Manila, Philippines, in the amount of TWENTY THOUSAND PESOS ONLY(P20,000.00), Philippine Currency, and for value received, the ASSIGNOR hereby sells, assigns, and transfers unto THE PHILIPPINE AMERICAN GENERAL INSURANCECO., INC., Four Thousand (4,000) shares of the Baguio military Institute, Inc. standing in the name of said Assignor on the books of said Baguio Military Institute, Inc. represented by Certificate No. 44 herewith and do hereby irrevocably constitutes and appoints THE PHILIPPINE AMERICAN GENERAL INSURANCE CO., INC. as attorney to transfer the said stock on the books of the within named military institute with full power of substitution in the premises.
Tala Realty vs CAG.R. No.130088, April 7, 2009Topic: Title V. - Trust
Facts: Banco Filipino‘s complaints commonly alleged that in 1979, expansion of its operations required the purchase of real properties for the purpose of acquiring sites for more branches; that as Sections 25(a) and 34 of the General Banking Act limit a bank‘s allowable investments in real estate to 50% of its capital assets, its board of directors decided to warehouse some of its existing properties and branch sites. Thus, Nancy L. Ty, a major stockholder and director, persuaded Pedro Aguirre and his brother Tomas Aguirre, both major stockholders of Banco Filipino, to organize and incorporate Tala Realty to hold and purchase real properties in trust for Banco Filipino; that after the transfer of Banco Filipino properties to Tala Realty, the Aguirres‘ sister Remedios prodded her brother Tomas to, as he did, endorse to her his shares in Tala Realty and registered them in the name of her controlled corporation, Add International.Thus, Nancy, Remedios, and Pedro Aguirre controlled Tala Realty, with Nancy exercising control through her nominees Pilar, Cynthia, and Dolly, while Remedios exercised control through Add International and her nominee Elizabeth. Pedro Aguirre exercised control through his own nominees, the latest being Tala Realty‘s president, Rubencito del Mundo.
In the course of the implementation of their trust agreement, Banco Filipino sold to Tala Realty some of its properties. Tala Realty simultaneously leased to Banco Filipino the properties for 20 years, renewable for another 20 years at the option of Banco Filipino with a right of first refusal in the event Tala Realty decided to sell them.
Tala Realty repudiated the trust, claimed the titles for itself, and demanded payment of rentals, deposits, and goodwill, with a threat to eject Banco Filipino. Thus arose Banco Filipino‘s 17 complaints for reconveyance against Tala Realty.
Issue: Whether or not the trust agreement is void.
Held:Yes. The Court held that an implied trust could not have been formed between the Bank and Tala as the Court has held that “where the purchase is made in violation of an existing statute and in evasion of its express provision, no trust can result in favor of the party who is guilty of the fraud.”
The bank cannot use the defense of nor seek enforcement of its alleged implied trust with Tala since its purpose was contrary to law. As admitted by the Bank, it “warehoused” its branch site holdings to Tala to enable it to pursue its expansion program and purchase new branch sites including its main branch in Makati, and at the same time avoid the real property
holdings limit under Sections 25(a) and 34 of the General Banking Act which it had already reached.
Clearly, the Bank was well aware of the limitations on its real estate holdings under the General Banking Act and that its “warehousing agreement” with Tala was a scheme to circumvent the limitation. Thus, the Bank opted not to put the agreement in writing and call a spade a spade, but instead phrased its right to reconveyance of the subject property at any time as a “first preference to buy” at the “same transfer price.” This agreement which the Bank claims to be an implied trust is contrary to law. Thus, while the Court finds the sale and lease of the subject property genuine and binding upon the parties, the Court cannot enforce the implied trust even assuming the parties intended to create it. In the words of the Court in the Ramos case, “the courts will not assist the payor in achieving his improper purpose by enforcing a resultant trust for him in accordance with the clean hands’ doctrine.” The Bank cannot thus demand reconveyance of the property based on its alleged implied trust relationship with Tala.
RINGOR vs. RINGORG.R. No. 147863. August 13, 2004FACTS:
The controversy involves lands in San Fabian, Pangasinan, owned by the late Jacobo Ringor. By his first wife, Gavina Laranang, he had two children, Juan and Catalina. He did not have offsprings by his second and third wives. Catalina predeceased her father Jacobo who died sometime in 1935, leaving Juan his lone heir.
Juan married Gavina Marcella. They had seven (7) children, namely: Jose (the father and predecessor-in-interest of herein petitioners), Genoveva, Felipa, Concordia, Agapito, Emeteria and Espirita. Genoveva and Agapito are represented in this case by Teofilo Abalos and Marcelina Ringor, their respective children. Espirita is represented by her children, Avelina, Cresencia and Felimon Almasen.
Jacobo applied for the registration of his lands under the Torrens system. He filed three land registration cases alone, with his son Juan, or his grandson Jose, applying jointly with him.
While trial of the case was in progress, Julio Monsis, alleging he was the only child of Macaria Discipulo and Jacobo, filed a Complaint in Intervention. So did Leocadia Ringor, alleging she was the only child of Jacobo with Marcelina Gimeno. When Julio died on February 3, 1977, he was survived by his wife Felipa and their legitimate children Maria, Federico, Eusebio, Paciencia, Panfilo and Fermin, all surnamed Monsis. On July 8, 1982, herein respondents filed anAmendment to their Amended Complaint impleading as additional party-defendants, the Heirs of Jose M. Ringor, Inc.[31]
Now before us the petitioners, in their Memorandum, raise the following issues:
1. WHETHER OR NOT THERE IS A DOCUMENT, INSTRUMENT, DEED OR ANY WRITING CREATING AN EXPRESS TRUST AND FORMING PART OF THE EVIDENCE ON RECORD WHICH SUPPORTS THE FINDINGS OF THE TRIAL COURT, AS THE SAME WAS AFFIRMED BY THE COURT A QUO, THAT AN EXPRESS TRUST WAS ESTABLISHED BY THE LATE JACOBO RINGOR OVER THE PARCELS OF LAND IN QUESTION IN FAVOR OF THE RESPONDENTS AS THE BENEFICIARIES, WITH JOSE RINGOR AS THE TRUSTEE THEREOF (AND CO-BENEFICIARY AT THE SAME TIME).
HELD:Respondents, for their part, argue that Jacobo created an express trust.
Respondents cite the three applications for registration of the lands referred to the Expedientes 241, 244 and 4449 and the three Compraventas as documentary proofs that an express trust was created by Jacobo. According to them, this conclusion can be gleaned clearly when Jacobo exercised acts of ownership over all the disputed lands even after the alleged donation and deeds of sale in favor of Jose, and when Jacobo religiously gave shares of the income and produce of the disputed lands to the respondents, a practice Jose continued until three years before his death.
Express trusts, sometimes referred to as direct trusts, are intentionally created by the direct and positive acts of the settlor or the trustor – by some writing, deed, or will, or oral declaration.[45] It is created not necessarily by some written words, but by the direct and positive acts of the parties. No particular words are required, it being sufficient that a trust was clearly intended.[46] Unless required by a statutory provision, such as the Statute of Frauds, a writing is not a requisite for the creation of a trust.[47] Such a statute providing that no instruments concerning lands shall be “created” or declared unless by written instruments signed by the party creating the trust, or by his attorney, is not to be construed as precluding a creation of a trust by oral agreement, but merely as rendering such a trust unenforceable.[48] Contrary to the claim of petitioners, oral testimony is allowed to prove that a trust exists. It is not error for the court to rely on parol evidence, - - i.e., the oral testimonies of witnesses Emeteria Ringor, Julio Monsis and Teofilo Abalos - - which the appellate court also relied on to arrive at the conclusion that an express trust exists. What is crucial is the intention to create a trust. While oftentimes the intention is manifested by the trustor in express or explicit language, such intention may be manifested by inference from what the trustor has said or done, from the nature of the transaction, or from the circumstances surrounding the creation of the purported trust.[49]
From all these premises and the fact that Jose did not repudiate the claim of his co-heirs, it can be concluded that as far as the lands covered by Expediente Nos. 241 and 4449 are concerned, when Jacobo transferred these lands to Jose, in what the lower court said were simulated or falsified sales, Jacobo’s intention impressed upon the titles of Jose a trust in favor of the true party-beneficiaries, including herein respondents.
Oco vs Limbring
Facts The pertinent facts are not disputed. Sometime in 1996, Sabas
Limbaring subdivided his Lot 2325-D, covered by Transfer Certificate of Title (TCT) No. 5268, into two lots denominated as Lot Nos. 2325-D-1 and 2325-D-2.[5] He then executed in favor of Jennifer Limbaring a Deed of Sale for Lot 2325-D-2 for P60,000; and, in favor of Sarah Jane Limbaring, another Deed for Lot 2325-D-1 for P14,440. Accordingly, TCT No. 5268 was cancelled and TCT Nos. T-21921 and T-21920 were issued in the names of Jennifer and Sarah Jane, respectively.[6]
Sensing some irregularities in the transaction, Percita Oco, the
daughter of Sabas Limbaring, left Puerto Princesa City and went to Ozamis City.[7] She then filed a case of perjury and falsification of documents against respondent, her uncle who was the father of Jennifer and Sarah Jane. During the pre-litigation conference called by City Prosecutor Luzminda Uy on July 1, 1996, the parties agreed that the two parcels of land should be reconveyed to Percita, who was to pay respondent all the expenses that had been and would be incurred to transfer the titles to her name.[8]
ISSUE: whether respondent, who was the plaintiff in the trial court, was a real party in interest in the suit to rescind the Deeds of Reconveyance.
HELD:
Petitioners contend that respondent was not a trustor, and therefore
not the real party in interest and had no legal right to institute the suit.[27] The real parties in interest were Jennifer and Sarah Jane, to whom the subject properties had been given as gifts.[28]
The controversy centers on Rule 3 of the Rules of Court, specifically an elementary rule in remedial law, which is quoted as follows:
“Sec. 2. Parties in interest. – A real party in interest is the
party who stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit. Unless otherwise authorized by law or these Rules, every action must be prosecuted or defended in the name of the real party in interest.”
As applied to the present case, this provision has two requirements: 1) to institute an action, the plaintiff must be the real party in interest; and 2) the action must be prosecuted in the name of the real party in interest.[29] Necessarily, the purposes of this provision are 1) to prevent the prosecution of actions by persons without any right, title or interest in the case; 2) to require that the actual party entitled to legal relief be the one to prosecute the action; 3) to avoid a multiplicity of suits; and 4) to discourage litigation and keep it within certain bounds, pursuant to sound public policy.On this point, the Civil Code states as follows:
“ART. 1448. There is an implied trust when property is
sold, and the legal estate is granted to one party but the price is paid by another for the purpose of having the beneficial interest of the property. The former is the trustee, while the latter is the beneficiary. However, if the person to whom the title is conveyed is a child, legitimate or illegitimate, of the one paying the price of the sale, no trust is implied by law, it being disputably presumed that there is a gift in favor of the child.”
Having found that respondent is not a real party in interest, this Court deems it no longer necessary to rule on the other issues raised by petitioner.
Husnida AsaninAZNAR vs AYINGVOL. 458, MAY 16, 2005G.R. No. 144773
FACTS: The disputed property is Lot No. 4399 located at Lapu-Lapu City. Crisanta Maloloy-on petitioned for the issuance of a cadastral decree in her favor over said parcel of land. After her death in 1930, the Cadastral Court issued a Decision directing the issuance of a decree in the name of Crisanta Maloloy-on’s eight children, namely: Juan, Celedonio, Emiliano, Francisco, Simeon, Bernabe, Roberta and Fausta, all surnamed Aying. The certificate of title was, however, lost during the war. Subsequently, all the heirs of the Aying siblings executed an Extrajudicial Partition of Real Estate with Deed of Absolute Sale dated March 3, 1964, conveying the subject parcel of land to herein petitioner Aznar Brothers Realty Company. Said deed was registered with the Register of Deeds of Lapu-Lapu and since then, petitioner had been religiously paying real property taxes on said property.In 1991, petitioner, claiming to be the rightful owner of the subject property, sent out notices to vacate, addressed to persons occupying the property. Unheeded, petitioner then filed a complaint for ejectment against the occupants before the Metropolitan Trial Court (MTC), Lapu-Lapu City.On February 1, 1994, the MTC ordered the occupants to vacate the property.Meanwhile, herein respondents, along with other persons claiming to be descendants of the eight Aying siblings, all in all numbering around 220 persons, had filed a complaint for cancellation of the Extrajudicial Partition with Absolute Sale, recovery of ownership, injunction and damages with the RTC of Lapu-Lapu City. The complaint was dismissed twice without prejudice.MTC and Court of Appeals ruled in favor of Petitioner.ISSUE: WON the Extrajudicial Partition of Real Estate with Deed of Absolute Sale is valid.HELD: ART. 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes.Respondents alleged in their amended complaint that not all the co-owners of the land in question signed or executed the document conveying ownership thereof to petitioner and made the conclusion that said document is null and void. We agree with the ruling of the RTC and the CA that the Extrajudicial Partition of Real Estate with Deed of Absolute Sale is valid and binding only as to the heirs who participated in the execution thereof, hence, the heirs of Emiliano, Simeon and Roberta Aying, who undisputedly did not participate therein, cannot be bound by said document.The amended complaint of the heirs of Roberta Aying is DISMISSED on the ground of prescription. However, the heirs of Emiliano Aying and Simeon Aying, having instituted the action for reconveyance within the prescriptive period, are hereby DECLARED as the LAWFUL OWNERS of a 2/8 portion of the parcel of land covered by Certificate of Title No. RO-2856.
THE MANILA BANKING CORPORATION, plaintiff-appellee, vs.ANASTACIO TEODORO, JR. and GRACE ANNA TEODORO, defendants-appellants.FACTS:
On April 25, 1966, defendants, together with Anastacio Teodoro, Sr., jointly and severally, executed in favor of plaintiff a Promissory Note (No. 11487) for the sum of P10,420.00 payable in 120 days, or on August 25, 1966, at 12% interest per annum. Defendants failed to pay the said amount inspire of repeated demands and the obligation as of September 30, 1969 stood at P 15,137.11 including accrued interest and service charge.
On May 3, 1966 and June 20, 1966, defendants Anastacio Teodoro, Sr. (Father) and Anastacio Teodoro, Jr. (Son) executed in favor of plaintiff two Promissory Notes (Nos. 11515 and 11699) for P8,000.00 and P1,000.00 respectively, payable in 120 days at 12% interest per annum. Father and Son made a partial payment on the May 3, 1966 promissory Note but none on the June 20, 1966 Promissory Note, leaving still an unpaid balance of P8,934.74 as of September 30, 1969 including accrued interest and service charge.
The three Promissory Notes stipulated that any interest due if not paid at the end of every month shall be added to the total amount then due, the whole amount to bear interest at the rate of 12% per annum until fully paid; and in case of collection through an attorney-at-law, the makers shall, jointly and severally, pay 10% of the amount over-due as attorney's fees, which in no case shall be leas than P200.00.ISSUE: WON the deed of assignment is considered as dation or payment.HELD:
The Deed of Assignment provided that it was for and in consideration of certain credits, loans, overdrafts, and their credit accommodations in the sum of P10,000.00 extended to appellants by appellee bank, and as security for the payment of said sum and the interest thereon; that appellants as assignors, remise, release, and quitclaim to assignee bank all their rights, title and interest in and to the accounts receivable assigned (lst paragraph). Definitely, the assignment of the receivables did not result from a sale transaction. It cannot be said to have been constituted by virtue of a dation in payment for appellants' loans with the bank evidenced by promissory note Nos. 11487, 11515 and 11699 which are the subject of the suit for collection in Civil Case No. 78178. At the time the deed of assignment was executed, said loans were non-existent yet. The deed of assignment was executed on January 24, 1964 (Exh. "G"), while promissory note it was a dation in payment for P10,000.00, the amount of credit from appellee bank indicated in the deed of assignment. At the time the assignment was executed, there was no obligation to be extinguished except the amount of P10,000.00. Moreover, in order that an obligation may be extinguished by another which substitutes the same, it is imperative that it be so declared in unequivocal
terms, or that the old and the new obligations be on every point incompatible with each other (Article 1292, New Civil Code).Obviously, the deed of assignment was intended as collateral security for the bank loans of appellants, as a continuing guaranty for whatever sums would be owing by defendants to plaintiff, as stated in stipulation No. 9 of the deed.In case of doubt as to whether a transaction is a pledge or a dation in payment, the presumption is in favor of pledge, the latter being the lesser transmission of rights and interests (Lopez v. Court of Appeals, supra).
Tan vs Ramirez
Facts: On August 11, 1998, the petitioner, representing her parents (spouses
Crispo and Nicomedesa P. Alumbro), filed with the Municipal Circuit Trial Court (MCTC) of Hindang-Inopacan, Leyte a complaint for the recovery of ownership and possession and/or quieting of title of a one-half portion of the subject property against the respondents. The petitioner alleged that her great-grandfather Catalino Jaca Valenzona was the owner of the subject property under a 1915 Tax Declaration (TD) No. 2724. Catalino had four children: Gliceria,[5] Valentina, Tomasa, and Julian; Gliceria inherited the subject property when Catalino died; Gliceria married Gavino Oyao, but their union bore no children; when Gliceria died on April 25, 1952, Gavino inherited a one-half portion of the subject property, while Nicomedesa acquired the other half through inheritance, in representation of her mother, Valentina, who had predeceased Gliceria, and through her purchase of the shares of her brothers and sisters. In 1961, Nicomedesa constituted Roberto as tenant of her half of the subject property; on June 30, 1965, Nicomedesa bought Gavino’s one-half portion of the subject property from the latter’s heirs, Ronito and Wilfredo Oyao,[6] evidenced by a Deed of Absolute Sale of Agricultural Land;[7] on August 3, 1965, Nicomedesa sold to Roberto this one-half portion in a Deed of Absolute Sale of Agricultural Land;[8] and in 1997, Nicomedesa discovered that since 1974, Roberto had been reflecting the subject property solely in his name under TD No. 4193.
ISSUE:WON respondents owns the property in good faithPrescription, as a mode of acquiring ownership and other real rights
over immovable property,] is concerned with lapse of time in the manner and under conditions laid down by law, namely, that the possession should be in the concept of an owner, public, peaceful, uninterrupted, and adverse.] The party who asserts ownership by adverse possession must prove the presence of the essential elements of acquisitive prescription.]
Acquisitive prescription of real rights may be ordinary or extraordinary.] Ordinary acquisitive prescription requires possession in good faith and with just title for ten years.] In extraordinary prescription, ownership and other real rights over immovable property are acquired through uninterrupted adverse possession for thirty years without need of title or of good faith[]
Possession “in good faith” consists in the reasonable belief that the person from whom the thing is received has been the owner thereof, and could transmit his ownership.] There is “just title” when the adverse claimant came into possession of the property through one of the modes recognized
by law for the acquisition of ownership or other real rights, but the grantor was not the owner or could not transmit any right.]
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