BEL AIR. V.

DIONISIO

Dionisio is an owner of a lot located inside Bel-Air Village under TCT No. 81136 of the Register of Deeds of Rizal.
The TCT contained an annotation to the effect that the lot owner becomes an automatic member of Bel- Air Village
Association and must abide by such rules and regulation laid down by the Association in the interest of the sanitation,
security and the general welfare of the community. Under the powers granted by the By-laws of Bel-Air Village
Association, the board of governors may assess and collect a sum against every owner of the lot for the village’s
operations. Dionisio refused to pay his association dues amounting to a total of P2,100. Thus, Bel-Air Assoc. filed a
complaint against Dionisio for the collection of the association dues plus penalty of 12% per annum.

WON Dionisio is bound by the annotation found in the Transfer Certificate Title-- YES

SC held that when the petitioner voluntarily bought the subject parcel of land it was understood that he took the same
free of all encumbrances except notations at the back of the certificate of title, among them, that he automatically
becomes a member of the respondent association.

The SC agrees with the lower court’s findings that Dionisio’s contention that this lien collides with the constitutional
guarantee of freedom of association is not tenable. The transaction between the defendants and the original seller
(defendant's immediate predecessor) of the land covered by TCT No. 81136 is a sale and the conditions have been
validly imposed by the said vendor/the same not being contrary to law, morals and good customs and public policy.

DOCTRINE: Art. 1312. In contracts creating real rights, third persons who come into possession of the object of the
contract are bound thereby, subject to the provisions of the Mortgage Law and the Land Registration Laws.

Section 39 of Act 486 (The Land Registration Act) states:

Every person receiving a certificate of title in pursuance of a decree of registration, and every subsequent purchaser
of registered land who takes a certificate of title for value in good faith shall hold the same free of all encumbrances
except those noted on said certificate.

DAYWALT V. CORP. DE. PP. AGUSTINOS RECOLETOS

Endencia executed a contract obligating herself to convey a tract of land to Daywalt. When the Torrens title of the
said land was issued, it was found that the it measured 1248 hectares instead of 452 as initially believed. Endencia
then became reluctant to transfer the whole Tract to Daywalt. Daywalt filed an action for specific performance which
the Court upheld. Fr. Sanz, the representative of the Recoletos discouraged Endencia from conveying the entire tract.
Daywalt filed an action for damages against the Recoletos on the ground that it unlawfully induced Endencia to refrain
from the specific performance of her contract for the sale of the land in question and withhold the delivery of the
Torrens title which resulted to a failure to consummate a contract with another person for the sale of the property and
its conversion to a sugarmill.

WON the Recoletos is liable to Daywalt for damages. -NO

The Court held NO.

The damages claimed by the Daywalt from Endencia cannot be recovered from her, first, because these are special
damages which were not within the contemplation of the parties when the contract was made, and secondly, these
damages are too remote to the subject of recovery.
Since Endencia is not liable for damages to Daywalt, neither can the Recoletos be held liable. As already suggested,
by advising Endencia not to perform the contract, the Recoletos could in no event render itself more extensively liable
than the principal in the contract.
It is enough if the wrongdoer, having knowledge of the existence of the contract relation, in bad faith sets about to
break it up. Whether his motive is to benefit himself or gratify his spite by working mischief to the employer is
immaterial. Malice in the sense of ill-will or spite is not essential.
DOCTRINE: Whatever may be the character of the liability, if any, which a stranger to a contract may incur by
advising or assisting one of the parties to evade performance, he cannot become more extensively liable in damages
for the nonperformance of the contract than the party in whose behalf he inter meddles.

INOCENCIO V. HOSPICIO

Hospicio De San Jose leased a parcel of land to German Inocencio. A stipulation in the contract states that the contract
is non-transferable unless prior consent of the lessor is obtained. German constructed two buildings on said land and
he made Ramon, his son, as the administrator of the property. German subleased the buildings. When German died,
Ramon did not inform Hospicio of his father’s death and Ramon continued to collect rentals from sublessees, pay
rentals to Hospicio, and pay required taxes. In 2001, Hospicio sent a letter to Ramon that the lease contract will be
terminated on 31 Mar 2001 and that Hospicio acknowledges that since German’s death, there is an implied contract
between Hospicio and Ramon. Hospico also informed that the contract will not be renewed. Hospicio demanded that
Ramon vacate the premises. Hospicio filed a complaint for unlawful detainer. Hospicio claims that the lease contract
is terminated upon the death of German and that Ramon has no right to sublease the premises.

WON the death of German terminated the lease contract? – NO

WON the sublease contracts were invalid? – NO
WON there was tortious interference? – NO

The SC ruled that the contract stipulation on non-transferability only applies to transfers inter vivos and not mortis
causa. The lease contract was transferred to Ramon and he has the right to sublease the premises.

The death of German did not terminate the lease contract executed with HDSJ, but instead continued with
Ramon as the lessee. HDSJ recognized Ramon as its lessee in the letter.
Ramon had a right to sublease the premises since the lease contract did not contain any stipulation forbidding
subleasing.

Hospicio did not tortiously interfere.

Art. 1314. Any third person who induces another to violate his contract shall be liable for damages to the other
contracting party.
As correctly pointed out by the Inocencios, tortious interference has the following elements: (1) existence of a
valid contract; (2) knowledge on the part of the third person of the existence of the contract; and (3) interference
of the third person without legal justification or excuse.
The facts of the instant case show that there were valid sublease contracts which were known to HDSJ. However, we
find that the third element is lacking in this case.
There was no tortious interference if the intrusion was impelled by purely economic motives.

DOCTRINE: Art. 1311. Contracts take effect only between the parties, their assigns and heirs, except in case where
the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by
provision of law. The heir is not liable beyond the value of the property he received from the decedent.

Lease Contracts, by their nature, are not personal.

The general rule is lease contracts survive the death of the parties and continue to bind the heirs except if the contract
states otherwise

There was no tortious interference if the intrusion was impelled by purely economic motives.
Tortious interference has the following elements: (1) existence of a valid contract; (2) knowledge on the part of
the third person of the existence of the contract; and (3) interference of the third person without legal
justification or excuse.

OUANO VS. COURT OF APPEALS

Julius Ouano is the owner of a vessel named M/V Don Julio Ouano. On October 8, 1980, Ouano leased the said vessel
to respondent Rafols under a charter party. The hiring shall be paid with an amount of Php 60,000.00 a month. It was
also expressly stipulated that Rafols should operate the vessel for his own benefit and should not sub-charter the same
without the knowledge and written consent of Ouano. However, Rafols entered into another contract with Market
Developers, Inc (MADE) to transport bags of cement from Iligan City to General Santos City consigned to Supreme
Merchant Construction Supply, Inc (SMCI). The contract was consummated without the consent of Ouano and hence,
Ouano filed a petition in the RTC for damages against MADE, SMCI and Rafols alleging that Rafols committed a
breach of contract for leasing the vessel without his consent. RTC ruled in Ouano’s favor but CA reversed.

Whether or not MADE,SMCI and Rafols should all be held liable for quasi-delict and breach of contract for
the sub-lease of the vessel without the consent of Ouano – NO. Only Rafols is lable to Ouano.

SC affirmed the decision of CA, claiming that only Rafols is liable to Ouano pursuant to the first sentence of Article
1311 of the Civil Code. Only Rafols is liable, not MADE nor SMCI.

It is undisputed that the charter contract was entered into only by and between petitioner and respondent Rafols, and
the other private respondents were neither parties thereto nor were they aware of the provisions thereof. The aforesaid
allegations of petitioner that Rafols violated the prohibition in the contract against the sublease or sub-charter of the
vessel without his knowledge and written consent, even if true, does not give rise to a cause of action against the
supposed sublessee or sub-charterer.
The act of the charterer in sub-chartering the vessel, in spite of a categorical prohibition may be a violation of the
contract, but the owner's right of recourse is against the original charterer, either for rescission o fulfillment, with the
payment of damages in either case.

DOCTRINE: It is a basic principle in civil law that, with certain exceptions not obtaining in this case, a contract can
only bind the parties who had entered into it or their successors who assumed their personalities or their juridical
positions, and that, as a consequence, such contract can neither favor nor prejudice a third person. (see Art. 1311, Civil
Code) The obligation of contracts is limited to the parties making them and, ordinarily, only those who are parties to
contracts are liable for their breach. Parties to a contract cannot thereby impose any liability on one who, under its
terms, is a stranger to the contract, and, in any event, in order to bind a third person contractually, an expression of
agent by such person is necessary.

ONG YIU VS. COURT OF APPEALS

Ong Yiu was passenger of PAL Cebu to Butuan City wherein he was scheduled to attend a trial. He checked in one
piece of luggage. Upon arrival at Butuan City, his luggage could not be found. PAL Manila advised PAL Cebu that
the luggage has been over carried to Manila and that it would be forwarded to PAL Cebu that same day. PAL Cebu
then advised PAL Butuan that the luggage will be forwarded the following day, on scheduled morning flight. This
message was not received by PAL Butuan as all the personnel had already gone for the day. Meanwhile, Ong Yiu was
worried about the missing luggage because it contained vital documents needed for the trial the next day so he wired
PAL Cebu demanding delivery of his luggage before noon that next day or he would hold PAL liable for damages
based on gross negligence. Early morning, petitioner went to the Butuan Airport to inquire about the luggage but did
not wait for the arrival of the morning flight at 10am. which carried his luggage. Dagorro, a driver, who also used to
drive the petitioner volunteered to take the luggage to the petitioner. He revealed that the documents were lost. Ong
Yiu demanded from PAL Cebu actual and compensatory damages as an incident of breach of contract of carriage.
WON CA was correct in concluding that there was no gross negligence on the part of PAL and that it had not
acted fraudulently or in bad faith as to entitle petitioner to an award of moral and exemplary damages? -YES

SC held PAL had not acted in bad faith. It exercised due diligence in looking for petitioner’s luggage which had been
miscarried. Had petitioner waited or caused someone to wait at the airport for the arrival of the morning flight which
carried his luggage, he would have been able to retrieve his luggage sooner. In the absence of a wrongful act or
omission or fraud, the petitioner is not entitled to moral damages. Neither is he entitled to exemplary damages absent
any proof that the defendant acted in a wanton, fraudulent, reckless manner.

While it may be true that petitioner had not signed the plane ticket, he is nevertheless bound by the provisions
thereof. "Such provisions have been held to be a part of the contract of carriage, and valid and binding upon the
passenger regardless of the latter's lack of knowledge or assent to the regulation". It is what is known as a
contract of "adhesion", in regards which it has been said that contracts of adhesion wherein one party imposes a
ready made form of contract on the other, as the plane ticket in the case at bar, are contracts not entirely prohibited.
The one who adheres to the contract is in reality free to reject it entirely; if he adheres, he gives his consent. And as
held in previous cases, "a contract limiting liability upon an agreed valuation does not offend against the
policy of the law forbidding one from contracting against his own negligence

DOCTRINE:
A contract of "adhesion” is which wherein one party imposes a ready-made form of contract on the other are
contracts not entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely; if he
adheres, he gives his consent. And as held in previous cases, "a contract limiting liability upon an agreed valuation
does not offend against the policy of the law forbidding one from contracting against his own negligence.

Bad faith means a breach of a known duty through some motive of interest or ill will. In contracts, as provided for in
Article 2232 of the Civil Code, exemplary damages can be granted if the defendant acted in a wanton, fraudulent,
reckless, oppressive, or malevolent manner, which has not been proven in this case.

VELASCO v. CA

The property in question was leased by Velasco who indicated her desire to buy the property. Magdalena Estate also
showed its willingness to sell the property to Velasco. However, it can be said from the Velasco’s averments that there
was no agreement regarding the manner of payment. Velasco argues that the contract of sale was perfected since there
was evidence of earnest money given. Magdalena Estate argues that the sale was never consummated and the contract
of sale if unenforceable under the Statue of Fraud since there was never an agreement as to the manner of payment.

W/N the contract of sale was perfected – NO

The Court ruled in favor of Magdalena Estate. It is obvious from the Velasco’s averments that there was no agreement
or meeting of minds as to the manner of payment. A definite agreement on the manner of payment of the purchase
price is an essential element in the formation of a binding and enforceable contract of sale. Hence, the contract of sale
is unenforceable.

The court a quo agreed with the respondent's (defendant therein) contention that no contract of sale was perfected
because the minds of the parties did not meet "in regard to the manner of payment."
The material averments contained in the petitioners' complaint themselves disclose a lack of complete "agreement in
regard to the manner of payment" of the lot in question. The complaint states:
That the time within which the full down payment of the P30,000.00 was to be completed was not specified by
the parties but the defendant was duly compensated during the said time prior to completion of the down payment
of P30,000.00 by way of lease rentals on the house existing thereon which was earlier leased by defendant to the
plaintiff's sister-in-law, Socorro J. Velasco, and which were duly paid to the defendant by checks drawn by
plaintiff."
It is not difficult to glean from the aforequoted averments that the petitioners themselves admit that they and the
respondent still had to meet and agree on how and when the down-payment and the installment payments were to be
paid.

The fact, therefore, that the petitioners delivered to the respondent the sum of P10,000 as part of the down-payment
that they had to pay cannot be considered as sufficient proof of the perfection of any purchase and sale agreement
between the parties

DOCTRINE: A definite agreement on the manner of payment of the purchase price is an essential element in the
formation of a binding and enforceable contract of sale.