JMCRUZ Reviewer in CIV REV 2 ATTY.

TLC – MIDTERMS CASE DOCTRINES

OBLIGATIONS
CASE DOCTRINE
RCPI v. VERCHEZ Article 1170 of the Civil Code provides: Those who in the performance of their
obligations are guilty of fraud, negligence, or delay, and those who in any manner
contravene the tenor thereof, are liable for damages.

In culpa contractual x x x the mere proof of the existence of the contract and the failure
of its compliance justify, prima facie, a corresponding right of relief. The law,
recognizing the obligatory force of contracts, will not permit a party to be set free from
liability for any kind of misperformance of the contractual undertaking or a
contravention of the tenor thereof. A breach upon the contract confers upon the injured
party a valid cause for recovering that which may have been lost or suffered.

The effect of every infraction is to create a new duty, that is, to make recompense to
the one who has been injured by the failure of another to observe his contractual
obligation unless he can show extenuating circumstances, like proof of his exercise of
due diligence x x x or of the attendance of fortuitous event, to excuse him from his
ensuing liability. For defense of force majeure to prosper, it is necessary that one has
committed no negligence or misconduct that may have occasioned the loss. In other
words, there must be an exclusion of human intervention from the cause of injury or
loss.

In the case at bar, RCPI bound itself to deliver the telegram within the shortest possible
time. It took 25 days, however, for RCPI to deliver it. Assuming arguendo that fortuitous
circumstances prevented RCPI from delivering the telegram at the soonest possible
time, it should have at least informed Grace of the non-transmission and the non-
delivery so that she could have taken steps to remedy the situation. But it did not.
There lies the fault or negligence.

Hence, RCPI shall be liable for damages.

BARZAGA v. CA An assiduous scrutiny of the record convinces us that respondent Angelito Alviar was
negligent and incurred in delay in the performance of his contractual obligation. This
sufficiently entitles petitioner Ignacio Barzaga to be indemnified for the damage he
suffered as a consequence of delay or a contractual breach. The law expressly
provides that those who in the performance of their obligation are guilty of fraud,
negligence, or delay and those who in any manner contravene the tenor thereof, are
liable for damages.

This case is clearly one of non-performance of a reciprocal obligation. In their contract

of purchase and sale, petitioner had already complied fully with what was required of
him as purchaser, i.e., the payment of the purchase price of P2,110.00. It was
incumbent upon respondent to immediately fulfill his obligation to deliver the goods
otherwise delay would attach.

SELEGNA v. UCPB It is a settled rule of law that foreclosure is proper when the debtors are in default of
the payment of their obligation. In fact, the parties stipulated in their credit agreements,
mortgage contracts and promissory notes that respondent was authorized to foreclose
on the mortgages, in case of a default by petitioners. Mora solvendi, or debtor’s default,
is defined as a delay49 in the fulfillment of an obligation, by reason of a cause
imputable to the debtor.

There are three requisites necessary for a finding of default.

First, the obligation is demandable and liquidated;
second, the debtor delays performance;
third, the creditor judicially or extrajudicially requires the debtor’s performance.

Here, considering that the contract is the law between the parties, respondent is
justified in invoking the acceleration clause declaring the entire obligation immediately
due and payable. That clause obliged petitioners to pay the entire loan on January 29,
1999, the date fixed by respondent. Petitioners’ failure to pay on that date set into
effect Article IX of the Real Estate Mortgage.

Thus, upon the nonpayment of the loan, which was secured by the mortgage, the
mortgaged property is properly subject to a foreclosure sale.

GEN. MILLING CORP. v. SPS. RAMOS Foreclosure is valid only when the debtor is in default in the payment of his obligation.

There are three requisites necessary for a finding of default.

First, the obligation is demandable and liquidated;
second, the debtor delays performance; and
third, the creditor judicially or extrajudicially requires the debtor’s perfor­mance.

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 JMCRUZ Reviewer in CIV REV 2 ATTY. TLC – MIDTERMS CASE DOCTRINES
SOLIDBANK v. SPS. TAN
PHIL. COM SAT. v. GLOBE TELECOME
FIL-ESTATE PROPERTIES v. SPS. RONQUILLO
Here, however, as the contract in the instant case carries no such provision on demand
not being necessary for delay to exist, We agree with the appellate court that GMC
should have first made a demand on the spouses before proceeding to foreclose the
real estate mortgage.
Hence, the foreclosure proceedings is invalid.
In citing the different provisions of the Civil Code on common carriers, the trial court
merely made reference to the kind of diligence that petitioner should have performed
under the circumstances. In other words, like a common carrier whose business is
also imbued with public interest, petitioner should have exercised extraordinary
diligence to negate its liability to respondents.
The degree of diligence required of banks is more than that of a good father of a family
in keeping with their responsibility to exercise the necessary care and prudence in
handling their clients’ money. We find no compelling reason to disallow the application
of the provisions on common carriers to this case if only to emphasize the fact that
banking institutions (like petitioner) have the duty to exercise the highest degree of
diligence when trans acting with the public. By the nature of their business, they are
required to observe the highest standards of integrity and performance, and utmost
assiduousness as well.
Here, Solidbank failed to carry out its responsibility and to account for respondents’
lost check.
Thus, an award of exemplary damages is proper.
Except in cases specified by the law, or when it is otherwise declared by stipulation,
or when the nature of the obligation requires the assumption of risk, no person shall
be responsible for those events which, could not be foreseen, or which, though
foreseen were inevitable.
Requisites in order that the obligor may be exempt from performing his obligation:
(1) the event must be independent of the human will;
(2) the occurrence must render it impossible for the debtor to fulfill the obligation in a
normal manner; and
(3) the obligor must be free of participation in, or aggravation of, the injury to the
creditor.
Here, the Court agrees with the Court of Appeals and the trial court that the
abovementioned requisites are present in the instant case. Philcomsat and Globe had
no control over the non-renewal of the term of the RP-US Military Bases Agreement
when the same expired in 1991, because the prerogative to ratify the treaty extending
the life thereof belonged to the Senate. Neither did the parties have control over the
subsequent withdrawal of the US military forces and personnel from Cubi Point in
December 1992.
The Court of Appeals was thus correct in ruling that the happening of such fortuitous
events rendered Globe exempt from payment of rentals for the remainder of the term
of the Agreement.
The Court held that the 1997 Asian financial crisis did not constitute a valid justification
to renege on obligations. The Court expounded: Also, we cannot generalize that the
Asian financial crisis in 1997 was unforeseeable and beyond the control of a business
corporation. It is unfortunate that petitioner apparently met with considerable difficulty
e.g., increase cost of materials and labor, even before the scheduled commencement
of its real estate project as early as 1995. However, a real estate enterprise engaged
in the pre-selling of condominium units is concededly a master in projections on
commodities and currency movements and business risks. The fluctuating movement
of the Philippine peso in the foreign exchange market is an everyday occurrence, and
fluctuations in currency exchange rates happen everyday, thus, not an instance of
caso fortuito.
Here, the company reneged on its obligation to respondents therein by failing to
develop the condominium project despite substantial payment of the contract price.
Fil-Estate advanced the same argument that the 1997 Asian financial crisis is a
fortuitous event which justifies the delay of the construction project.
Consequently, the power to rescind obligations is implied in reciprocal ones, in case
one of the obligors should not comply with what is incumbent upon him. The injured
party may choose between the fulfillment and the rescission of the obligation, with
payment of damages in either case. He may also seek rescission, even after he has
chosen fulfillment, if the latter should become impossible.
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 JMCRUZ Reviewer in CIV REV 2 ATTY. TLC – MIDTERMS CASE DOCTRINES
MANLAR RICE MILL v. DEYTO
TRAVELLER’S INSURANCE v. CA
SUBIC BAY v. FERNANDEZ
PCI BANK v. FRANCO
Furthermore, Sec. 23 of PD 957 provides that after due notice to the owner or
developer, desists from further payment due to the failure of the owner or developer
to develop the subdivision or condominium project according to the approved plans
and within the time limit for complying with the same. Such buyer may, at his option,
be reimbursed the total amount paid including amortization interests but excluding
delinquency interests, with interest thereon at the legal rate.
Hence, respondents are entitled to rescind the contract and demand reimbursement
for the payments they had made to petitioners.
Well-entrenched is the rule that solidary obligation cannot lightly be inferred. There is
a solidary liability only when the obligation expressly so states, when the law so
provides or when the nature of the obligation so requires.
The allegations that Deyto guaranteed Ang’s checks and that she consented to be
held solidarily liable with Ang under the latter’s rice supply contract with Manlar are
hardly credible. Pua in fact admitted that this was not in writing, just a verbal
assurance. But this will not suffice.
Furthermore, it is a basic principle in law that contracts can bind only the parties who
had entered into it; it cannot favor or prejudice a third person.
Thus, Manlar may sue Ang, but not Deyto, who the Court finds to be not a party to the
rice supply contract.
While it is true that where the insurance contract provides for indemnity against liability
to third persons, such third persons can directly sue the insurer, however, the direct
liability of the insurer under indemnity contracts against third-party liability does not
mean that the insurer can be held solidarily liable with the insured and/or the other
parties found at fault. The liability of the insurer is based on contract; that of the insured
is based on tort.
As such, an insurer can only be liable in an amount not exceeding the amount of
coverage in the vehicle insurance policies.
Here, all three were found solidarily liable by the trial court.
Hence, the trial court committed GADALEJ.
Though casino chips do not constitute legal tender, there is no law which prohibits
their use or trade outside of the casino which issues them. In any case, it is not unusual
— nor is it unlikely — that respondent could be paid by his Chinese client at the
former’s car shop with the casino chips in question; said transaction, if not common,
is nonetheless not unlawful. These chips are paid for anyway; petitioner would not
have parted with the same if their corresponding representative equivalent — in legal
tender, goodwill, or otherwise — was not received by it in return or exchange.
Given this premise — that casino chips are considered to have been exchanged with
their corresponding representative value — it is with more reason that this Court
should require petitioner to prove convincingly and persuasively that the chips it
confiscated from Ludwin and Deoven were indeed stolen from it; if so, any Tom, Dick
or Harry in possession of genuine casino chips is presumed to have paid for their
representative value in exchange therefor. If petitioner cannot prove its loss, then
Article 559 cannot apply; the presumption that the chips were exchanged for value
remains.
Article 559. The possession of movable property acquired in good faith is equivalent
to a title. Nevertheless, one who has lost any movable or has been unlawfully deprived
thereof, may recover it from the person in possession of the same. If the possessor of
a movable lost or of which the owner has been unlawfully deprived, has acquired it in
good faith at a public sale, the owner cannot obtain its return without reimbursing the
price paid therefor.
Jurisprudence abounds that, in civil cases, one who pleads payment has the burden
of proving it. Even where the plaintiff must allege non-payment, the general rule is that
the burden rests on the defendant to prove payment, rather than on the plaintiff to
prove nonpayment. When the creditor is in possession of the document of credit, he
need not prove non-payment for it is presumed. The creditor’s possession of the
evidence of debt is proof that the debt has not been discharged by payment.
In this case, respondent’s possession of the original copies of the subject (trust receipt
certificates) TICs strongly supports his claim that petitioner Bank’s obligation to return
the principal plus interest of the money placement has not been extinguished. The
TICs in the hands of respondent is a proof of indebtedness and a prima facie evidence
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 JMCRUZ Reviewer in CIV REV 2 ATTY. TLC – MIDTERMS CASE DOCTRINES
SPS. CACAYORIN v. AFPMBAI
SPS. BARREDO v. LEANO
BPI v. CA
that they have not been paid. Petitioner Bank could have easily presented
documentary evidence to dispute the claim, but it did not. In its omission, it may be
reasonably deduced that no evidence to that effect really exist. Worse, the testimonies
of petitioner Bank’s own witnesses, reinforce, rather than belie, respondent’s
allegations of nonpayment.
Under Article 1256 of the Civil Code, the debtor shall be released from responsibility
by the consignation of the thing or sum due, without need of prior tender of payment,
when the creditor is absent or unknown, or when he is incapacitated to receive the
payment at the time it is due, or when two or more persons claim the same right to
collect, or when the title to the obligation has been lost.
Applying Article 1256 to the petitioners’ case as shaped by the allegations in their
Complaint, the Court finds that a case for consignation has been made out, as it now
appears that there are two entities which petitioners must deal with in order to fully
secure their title to the property: 1) the Rural Bank (through PDIC), which is the
apparent creditor under the July 4, 1994 Loan and Mortgage Agreement; and 2)
AFPMBAI, which is currently in possession of the loan documents and the certificate
of title, and the one making demands upon petitioners to pay.
Clearly, the allegations in the Complaint present a situation where the creditor is
unknown, or that two or more enti ties appear to possess the same right to collect from
petitioners. Whatever transpired between the Rural Bank or PDIC and AFPMBAI in
respect of petitioners’ loan account, if any, such that AFPMBAI came into possession
of the loan documents and TCT No. 37017, it appears that petitioners were not
informed thereof, nor made privy thereto.
Hence, consignation is valid even without need of prior tender of payment.
When the language of the contract is clear, it requires no interpretations and its terms
should not be disturbed.—Thus, par. 3 of the agreement provides that the Leaño
Spouses “bind themselves to assume as they hereby assume beginning on July 1,
1987, the payment of the unpaid balance x x x x” Hence, the Leaño Spouses merely
bound themselves to assume, which they actually did upon the signing of the
agreement, the obligations of the Barredo Spouses with the SSS and Apex. Nowhere
in the agreement was it stipulated that the sale was conditioned upon their full payment
of the loans with SSS and Apex.
But even if we consider the payment of the mortgage amortizations to the SSS and
Apex as a condition on which the sale is based on, still rescission would not be
available since non-compliance with such condition would just be a minor or casual
breach thereof as it does not defeat the very object of the parties in entering into the
contract. It is when substantial and fundamental breach as would defeat the very
object of the parties in making the agreement that would permit rescission of contract.
Besides, in ordering rescission, the trial court should have likewise ordered the
Barredo Spouses to return the P200,000.00 they received as purchase price plus
interests. Art. 1385 of the Civil Code provides that “[r]escission creates the obligation
to return the things which were the object of the contract, together with their fruits, and
the price with its interest.” The vendor is therefore obliged to return the purchase price
paid to him by the buyer if the latter rescinds the sale. Thus, where a contract is
rescinded, it is the duty of the court to require both parties to surrender that which they
have respectively received and place each other as far as practicable in his original
situation.
Article 1279 states that in order that compensation may be proper, it is necessary:
“(1) That each one of the obligors be bound principally, and that he be at the same
time a principal creditor of the other;
(2) That both debts consist in a sum of money, or if the things due are consumable,
they be of the same kind, and also of the same quality if the latter has been stated;
(3) That the two debts be due;
(4) That they be liquidated and demandable;
(5) That over neither of them there be any retention or controversy, commenced by
third persons and communicated in due time to the debtor.
The elements of legal compensation are all present in the case at bar. The obligors
bound principally are at the same time creditors of each other. Petitioner bank stands
as a debtor of the private respondent, a depositor. At the same time, said bank is the
creditor of the private respondent with respect to the dishonored U.S. Treasury
Warrant which the latter illegally transferred to his joint account. The debts involved
consist of a sum of money. They are due, liquidated, and demandable. They are not
claimed by a third person.
Hence, legal compensation is proper.
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GO SINCO v. CA Obligations are extinguished, among others, by payment or performance, the mode
most relevant to the factual situation in the present case. Under Article 1232 of the
Civil Code, payment means not only the delivery of money but also the performance,
in any other manner, of an obligation. Article 1233 of the Civil Code states that “a debt
shall not be understood to have been paid unless the thing or service in which the
obligation consists has been completely delivered or rendered, as the case may be.”
In contracts of loan, the debtor is expected to deliver the sum of money due the
creditor. These provisions must be read in relation with the other rules on payment
under the Civil Code, which rules impliedly require acceptance by the creditor of the
payment in order to extinguish an obligation.

A refusal without just cause is not equivalent to payment, to have the effect of payment
and consequent extinguishment of the obligation to pay, the law requires the
companion acts of tender of payment and consignation.

But since payment was available and was unjustifiably refused, justice and equity
demand that petitioners be freed from obligation to pay interest on the outstanding
amount from the time the unjust refusal took place, they would not have been liable
for any interest from the time tender of payment was made if the payment had only
been accepted.

DALTON v. FGR REALTY & DEV’T CORP.
The Court enumerated the requisites of a valid consignation:
(1) a debt due;
(2) the creditor to whom tender of payment was made refused without just cause to
accept the payment, or the creditor was absent, unknown or incapacitated, or
several persons claimed the same right to collect, or the title of the obligation was
lost;
(3) the person interested in the performance of the obligation was given notice
before consignation was made;
(4) the amount was placed at the disposal of the court; and
(5) the person interested in the performance of the obligation was given notice after
the consignation was made.

The giving of notice to the persons interested in the performance of the obligation is
mandatory. Failure to notify the persons interested in the performance of the obligation
will render the consignation void.

LAND BANK v. ONG Four essential requisites of a valid novation:

(1) a previous valid obligation;
(2) an agreement of all parties concerned to a new contract;
(3) the extinguishment of the old obligation; and
(4) the birth of a valid new obligation.

In this case, the conflicting intention and acts of the parties underscore the absence
of any express disclosure or circumstances with which to deduce a clear and
unequivocal intent by the parties to novate the old agreement.

SPS. REYES v. BPI with respect to obligations to pay a sum of money, the obligation is not novated by an
instrument that expressly recognizes the old, changes only the terms of payment, adds
other obligations not incompatible with the old ones, or the new contract merely
supplements the old one.

BPI-FSB and Transbuilders only extended the repayment term of the loan from one
year to twenty quarterly installments at 18% interest per annum. There was absolutely
no intention by the parties to supersede or abrogate the old loan contract secured by
the real estate mortgage executed by petitioners in favor of BPI-FSB. In fact, the
intention of the new agreement was precisely to revive the old obligation after the
original period expired and the loan remained unpaid. The novation of a contract
cannot be presumed. In the absence of an express agreement, novation takes place
only when the old and the new obligations are incompatible on every point.

CONTRACTS
ODYSSEY PARK v. CA Law on contracts that the parties are bound by the stipulations, clauses, terms and
conditions they have agreed to,8 the only limitation being that these stipulations,
clauses, terms and conditions are not contrary to law, morals, public order or public
policy. Not being repugnant to any legal proscription, the agreement entered into by
the parties herein involved must be respected and held to be the law between them.

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SM INVESTMENT v. POSADAS
The stages of a contract, thus: In general, contracts undergo three distinct stages, to
wit: negotiation; perfection or birth; and consummation.
Negotiation begins from the time the prospective contracting parties manifest their
interest in the contract and ends at the moment of agreement of the parties.
Perfection or birth of the contract takes place when the parties agree upon the
essential elements of the contract. It is basic in this jurisdiction that a contract is
perfected by mere consent of the parties.
Consummation occurs when the parties fulfill or perform the terms agreed upon in the
contract, culminating in the extinguishment thereof.

Here, first, the Letter of 08 August 1995 embodies a complete offer on the part of SMIC
in that it contained an object certain, which is the joint venture for the development of
the Subject Property, and a specific cause and/or consideration therefor, which are
the goodwill money in the amount of P70 Million, plus a 60/40 sharing, in favor of
respondents of the said development.
Second, the Letter dated 18 August 1995 in return embodies a complete counteroffer
on the part of respondents in that they conveyed their acceptance of the joint venture
subject only to the counterproposal to increase the goodwill money from P70 Million
to P80 Million.
Third, the Letter dated 24 August 1995 contains an unqualified acceptance on the part
of SMIC of the above mentioned counterproposal of respondents, again on the aspect
of the goodwill money alone.

Hence, there was a perfected contract of joint venture.

BOSTON BANK v. MANALO For a perfected contract of sale or contract to sell to exist in law, there must be an
agreement of the parties, not only on the price of the property sold, but also on the
manner the price is to be paid by the vendee.

A definite agreement as to the price is an essential element of a binding agreement to

sell personal or real property because it seriously affects the rights and obligations of
the parties; The parties must agree on the manner of payment of the price of the
property to give rise to a binding and enforceable contract of sale or contract to sell.

In a contract to sell property by installments, it is not enough that the parties agree on
the price as well as the amount of downpayment. The parties must, likewise, agree on
the manner of payment of the balance of the purchase price and on the other terms
and conditions relative to the sale. Even if the buyer makes a downpayment or portion
thereof, such payment cannot be considered as sufficient proof of the perfection of
any purchase and sale between the parties.

When an essential element of a contract is reserved for future agreement of the

parties, no legal obligation arises until such future agreement is concluded. So long as
an essential element entering into the proposed obligation of either of the parties
remains to be determined by an agreement which they are to make, the contract is
incomplete and unenforceable. The reason is that such a contract is lacking in the
necessary qualities of definiteness, certainty and mutuality.

Here, in its letter to the respondents dated June 17, 1976, or almost three years from
the execution by the parties of their August 22, 1972 letter agreement, XEI stated, in
part, that respondents had purchased the property “on installment basis.” However, in
the said letter, XEI failed to state a specific amount for each installment, and whether
such payments were to be made monthly, semi-annually, or annually.

Hence, no perfected contract.

YASON v. ARCIAGA 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.

Here, 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.

Hence, the DCS is valid.

MANDARIN VILLA v. CA We note that Mandarin Villa Seafood Village is affiliated with BANKARD. In fact, an
“Agreement”6 entered into by petitioner and BANKARD.

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BPI EXPRESS v. ARMOVIT
ECE REALTY & DEV’T CORP. v. MANDAP
While private respondent may not be a party to the said agreement, the above-quoted
stipulation conferred a favor upon the private respondent, a holder of credit card validly
issued by BANKARD. This stipulation is a stipulation pour autri and under Article 1311
of the Civil Code private respondent may demand its fulfillment provided he
communicated his acceptance to the petitioner before its revocation.8 In this case,
private respondent’s offer to pay by means of his BANKARD credit card constitutes
not only an acceptance of the said stipulation but also an explicit communication of his
acceptance to the obligor.
The relationship between the credit card issuer and the credit card holder is a
contractual one that is governed by the terms and conditions found in the card
membership agreement. Such terms and conditions constitute the law between the
parties. In case of their breach, moral damages may be recovered where the
defendant is shown to have acted fraudulently or in bad faith. Malice or bad faith
implies a conscious and intentional design to do a wrongful act for a dishonest purpose
or moral obliquity. However, a conscious or intentional design need not always be
present because negligence may occasionally be so gross as to amount to malice or
bad faith. Hence, bad faith in the context of Article 2220 of the Civil Code includes
gross negligence.
Here, a review of such terms and conditions did not reveal that Armovit needed to
submit her new application as the antecedent condition for her credit card to be taken
out of the list of suspended cards but BPI still refused to reactivate the same.
We hold that the CA rightly sustained the award of P100,000.00 as moral damages.
To us, too, that amount was fair and reasonable under the circumstances. Similarly,
the grant of exemplary damages was warranted under Article 2232 of the New Civil
Code because BPI Express Credit acted in a reckless and oppressive manner. Finally,
with Armovit having been forced to litigate in order to protect her rights and interests,
she was entitled to recover attorney’s fees and expenses of litigation.
Article 1338 of the Civil Code provides that “[t]here is fraud when through insidious
words or machinations of one of the contracting parties, the other is induced to enter
into a contract which, without them, he would not have agreed to.” In addition, under
Article 1390 of the same Code, a contract is voidable or annullable “where the consent
is vitiated by mistake, violence, intimidation, undue influence or fraud.” Also, Article
1344 of the same Code provides that “[i]n order that fraud may make a contract
voidable, it should be serious and should not have been employed by both contracting
parties.”
Jurisprudence has shown that in order to constitute fraud that provides basis to annul
contracts, it must fulfill two conditions.
First, the fraud must be dolo causante or it must be fraud in obtaining the consent of
the party. This is referred to as causal fraud. The deceit must be serious. The fraud is
serious when it is sufficient to impress, or to lead an ordinarily prudent person into
error; that which cannot deceive a prudent person cannot be a ground for nullity. The
circumstances of each case should be considered, taking into account the personal
conditions of the victim.
Second, the fraud must be proven by clear and convincing evidence and not merely
by a preponderance thereof.
Here, however, insofar as the present case is concerned, the Court agrees with the
Housing and Land Use Arbiter, the HLURB Board of Commissioners, and the Office
of the President, that the misrepresentation made by petitioner in its advertisements
does not constitute causal fraud which would have been a valid basis in annulling the
Contract to Sell between petitioner and respondent. In his decision, the Housing and
Land Use Arbiter found that respondent failed to show that “the essential and/or
moving factor that led the [respondent] to give her consent and agree to buy the unit
was precisely the project’s advantageous or unique location in Makati [City] — to the
exclusion of other places or city x x x.” Both the HLURB Board of Commissioners and
the Office of the President affirmed the finding of the Arbiter and unanimously held that
respondent failed to prove that the location of the said project was the causal
consideration or the principal inducement which led her into buying her unit in the said
condominium project. The Court finds no cogent reason to depart from the foregoing
findings and conclusion of the above agencies.
If she had a problem with the property’s location, she should not have signed the
Contract to Sell and, instead, immediately raised this issue with petitioner. But she did
not. As correctly observed by the Office of the President, it took respondent more than
two years from the execution of the Contract to Sell to demand the return of the amount
she paid on the ground that she was misled into believing that the subject property is
located in Makati City. In the meantime, she continued to make payments.
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Thus, the Court directs petitioner and respondent to resume the fulfillment of their
sales contract.

INSULAR LIFE v. ASSET BUILDERS CORP. There there was only an offer and a counteroffer that did not sum up to any final
arrangement containing the elements of a contract, there clearly was no meeting of
minds established.

In the case at bar, the parties did not get past the negotiation stage. The events that
transpired between them were indeed initiated by a formal offer, but this policitación
was merely an imperfect promise that could not be considered a binding commitment.
At any time, either of the prospective contracting parties may stop the negotiation and
withdraw the offer. In the present case, in fact, there was only an offer and a
counteroffer that did not sum up to any final arrangement containing the elements of
a contract.

Clearly, no meeting of minds was established. First, only after the bid bond had lapsed
were post-qualification proceedings, inspections, and credit investigations conducted.
Second, the inter-office memoranda issued by petitioner, as well as other memoranda
between it and its own project manager, were simply documents to which respondent
was not privy. Third, petitioner proposed a counteroffer to adjust respondent’s bid to
accommodate the wage increase of December 3, 1993. In effect, the rule on the
concurrence of the offer and its acceptance did not apply, because other matters or
details—in addition to the subject matter and the consideration—would still be
stipulated and agreed upon by the parties. While there was an initial offer made, there
was no acceptance; but when there allegedly came an acceptance that could have
had a binding effect, the offer was already lacking.

SERRA v. CA Article 1479 of the Code provides that an accepted unilateral promise to buy and sell
a determinate thing for a price certain is binding upon the promisor if the promise is
supported by a consideration distinct from the price.

In a unilateral promise to sell, where the debtor fails to withdraw the promise before
the acceptance by the creditor, the transaction becomes a bilateral contract to sell and
to buy, because upon acceptance by the creditor of the offer to sell by the debtor, there
is already a meeting of the minds of the parties as to the thing which is determinate
and the price which is certain. In which case, the parties may then reciprocally demand
performance. Jurisprudence has taught us that an optional contract is a privilege
existing only in one party—the buyer. For a separate consideration paid, he is given
the right to decide to purchase or not, a certain merchandise or property, at any time
within the agreed period, at a fixed price. This being his prerogative, he may not be
compelled to exercise the option to buy before the time expires. A price is considered
certain if it is so with reference to another thing certain or when the determination
thereof is left to the judgment of a specified person or persons.

In the present dispute, there is evidence to show that the intention of the parties is to
peg the price of P210 per square meter. This was confirmed by petitioner himself in
his testimony. Moreover, by his subsequent acts of having the land titled under the
Torrens System, and in pursuing the bank manager to effect the sale immediately,
means that he understood perfectly well the terms of the contract. He even had the
same property mortgaged to the respondent bank sometime in 1979, without the
slightest hint of wanting to abandon his offer to sell the property at the agreed price of
P210 per square meter.

The price “not greater than TWO HUNDRED PESOS” in the Contract of Lease with
Option to Buy is, under the circumstances of the case, certain and definite.

SPS. SANTIAGO v. CA The conceded fact that subject deed of absolute sale executed by Paula Arcega in
favor of petitioners is a notarized document does not justify the petitioners’ desired
conclusion that said sale is undoubtedly a true conveyance to which the parties thereto
are irrevocably and undeniably bound. To be considered with great significance is the
fact that Atty. Luis Cuvin who notarized the deed disclaimed the truthfulness of the
document when he testified that “NO MONEY WAS INVOLVED IN THE
TRANSACTION.” Furthermore, though the notarization of the deed of sale in question
vests in its favor the presumption of regularity, it is not the intention nor the function of
the notary public to validate and make binding an instrument never, in the first place,
intended to have any binding legal effect upon the parties thereto. The intention of the
parties still is and always will be the primary consideration in determining the true
nature of a contract. Here, the parties to the “Kasulatan ng Bilihang Tuluyan ng Lupa,”
as shown by the evidence and accompanying circumstances, never intended to
convey the property thereto from one party to the other for valuable consideration.
Rather, the transaction was merely used to facilitate a loan with the SSS with
petitioners-mortgagors using the property in question, the title to which they were able
to register in their names through the simulated sale, as collateral.

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Hence, the sale is void.

REYES v. ASUNCION The primary consideration in determining whether a contract is simulated is the
intention of the parties as manifested by the express terms of the agreement itself, as
well as the contemporaneous and subsequent actions of the parties. The most striking
index of simulation is not the filial relationship between the purported seller and buyer,
but the complete absence of any attempt in any manner on the part of the latter to
assert rights of dominion over the disputed property.

The burden of proving the alleged simulation of a contract falls on those who impugn
its regularity and validity.

Here, the contract by its very terms and conditions, on June 15, 1993, appellant simply
intended to transfer the subject land to appellee. It is a cardinal rule that if the terms
of a contract are clear and leave no doubt as to the intention of the contracting parties,
the literal meaning of its stipulation shall control.

LIM v. CA Rosa Lim’s signature indeed appears on the upper portion of the receipt immediately
below the description of the items taken. We find that this fact does not have the effect
of altering the terms of the transaction from a contract of agency to sell on commission
basis to a contract of sale. Neither does it indicate absence or vitiation of consent
thereto on the part of Rosa Lim which would make the contract void or voidable. The
moment she affixed her signature thereon, petitioner became bound by all the terms
stipulated in the receipt. She, thus, opened herself to all the legal obligations that may
arise from their breach.

A contract of agency to sell on commission basis does not belong to any of the three
categories, hence it is valid and enforceable in whatever form it may be entered into.-
However, there are some provisions of the law which require certain formalities for
particular contracts. The first is when the form is required for the validity of the contract;
the second is when it is required to make the contract effective as against third parties
such as those mentioned in Articles 1357 and 1358; and the third is when the form is
required for the purpose of proving the existence of the contract, such as those
provided in the Statute of Frauds in Article 1403. A contract of agency to sell on
commission basis does not belong to any of these three categories, hence it is valid
and enforceable in whatever form it may be entered into.

GUZMAN, BOCALING CO. v. BONNEVIE
The respondent court correctly held that the Contract of Sale was not voidable but
rescissible. Under Article 1380 to 1381(3) of the Civil Code, a contract otherwise valid
may nonetheless be subsequently rescinded by reason of injury to third persons, like
creditors. The status of creditors could be validly accorded the Bonnevies for they had
substantial interests that were prejudiced by the sale of the subject property to the
petitioner without recognizing their right of first priority under the Contract of Lease.

Moreover, the petitioner cannot tenably claim to be a buyer in good faith as it had
notice of the lease of the property by the Bonnevies and such knowledge should have
cautioned it to look deeper into the agreement to determine if it involved stipulations
that would prejudice its own interests.

JOVAN LAND v. CA Before a contract of sale can be valid, the following elements must be present, viz: (a)
consent or meeting of the minds; (b) determinate subject matter; (3) price certain in
money or its equivalent. Until the contract of sale is perfected, it cannot, as an
independent source of obligation, serve as a binding juridical relation between the
parties.

Clearly then, a punctilious examination of the receipt reveals that the same can neither
be regarded as a contract of sale nor a promise to sell. Such an annotation by Conrado
Quesada amounts to neither a written nor an implied acceptance of the offer of Joseph
Sy. It is merely a memorandum of the receipt by the former of the latter’s offer. The
requisites of a valid contract of sale are lacking in said receipt and therefore the “sale”
is neither valid nor enforceable.

CHING v. GOYANKO The proscription against sale of property between spouses applies even to common
law relationships.

So this Court ruled in Calimlim-Canullas v. Hon. Fortun, etc., et al., 129 SCRA 675
(1984): Anent the second issue, we find that the contract of sale was null and void for
being contrary to morals and public policy. The sale was made by a husband in favor
of a concubine after he had abandoned his family and left the conjugal home where
his wife and children lived and from whence they derived their support. The sale was
subversive of the stability of the family, a basic social institution which public policy
cherishes and protects. Article 1409 of the Civil Code states inter alia that: contracts
whose cause, object, or purposes is contrary to law, morals, good customs, public
order, or public policy are void and inexistent from the very beginning. Article 1352
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SACOBIA v. TY
ACE FOODS v. MICROPACIFIC
HEIRS OF SARILI v. LAGROSA
also provides that: “Contracts without cause, or with unlawful cause, produce no effect
whatsoever. The cause is unlawful if it is contrary to law, morals, good customs, public
order, or public policy.”
Additionally, the law emphatically prohibits the spouses from selling property to each
other subject to certain exceptions. Similarly, donations between spouses during
marriage are prohibited. And this is so because if transfers or conveyances between
spouses were allowed during marriage, that would destroy the system of conjugal
partnership, a basic policy in civil law. It was also designed to prevent the exercise of
undue influence by one spouse over the other, as well as to protect the institution of
marriage, which is the cornerstone of family law. The prohibitions apply to a couple
living as husband and wife without benefit of marriage, otherwise, “the condition of
those who incurred guilt would turn out to be better than those in legal union.” Those
provisions are dictated by public interest and their criterion must be imposed upon the
will of the parties.
SALES
In a contract to sell, the payment of purchase price is a positive suspensive condition,
the failure of which is not a breach, casual or serious, but a situation which prevents
the obligation of the vendor to convey title from acquiring an obligatory force; Upon
fulfillment of the suspensive condition, ownership will not automatically transfer to the
buyer although the property may have been previously delivered to him—the
prospective seller still has to convey title to the prospective buyer by entering into a
contract of absolute sale.
A contract of sale is classified as a consensual contract, which means that the sale is
perfected by mere consent. No particular form is required for its validity. Upon
perfection of the contract, the parties may reciprocally demand performance, i.e., the
vendee may compel transfer of ownership of the object of the sale, and the vendor
may require the vendee to pay the thing sold. In contrast, a contract to sell is defined
as a bilateral contract whereby the prospective seller, while expressly reserving the
ownership of the property despite delivery thereof to the prospective buyer, binds
himself to sell the property exclusively to the prospective buyer upon fulfillment of the
condition agreed upon, i.e., the full payment of the purchase price. A contract to sell
may not even be considered as a conditional contract of sale where the seller may
likewise reserve title to the property subject of the sale until the fulfillment of a
suspensive condition, because in a conditional contract of sale, the first element of
consent is present, although it is conditioned upon the happening of a contingent event
which may or may not occur.
Furthermore, novation is never presumed, and the animus novandi, whether totally or
partially, must appear by express agreement of the parties, or by their acts that are
too clear and unequivocal to be mistaken.
Here, the Court must dispel the notion that the stipulation anent MTCL’s reservation
of ownership of the subject products as reflected in the Invoice Receipt, i.e., the title
reservation stipulation, changed the complexion of the transaction from a contract of
sale into a contract to sell. Records are bereft of any showing that the said stipulation
novated the contract of sale between the parties which, to repeat, already existed at
the precise moment ACE Foods accepted MTCL’s proposal. To be sure, novation, in
its broad concept, may either be extinctive or modificatory. It is extinctive when an old
obligation is terminated by the creation of a new obligation that takes the place of the
former; it is merely modificatory when the old obligation subsists to the extent it
remains compatible with the amendatory agreement.
It is well-settled that even if the procurement of a certificate of title was tainted with
fraud and misrepresentation, such defective title may be the source of a completely
legal and valid title in the hands of an innocent purchaser for value. Where innocent
third persons, relying on the correctness of the certificate of title thus issued, acquire
rights over the property, the court cannot disregard such rights and order the total
cancellation of the certificate. The effect of such an outright cancellation would be to
impair public confidence in the certificate of title, for everyone dealing with property
registered under the Torrens system would have to inquire in every instance whether
the title has been regularly or irregularly issued. This is contrary to the evident purpose
of the law.
The general rule is that every person dealing with registered land may safely rely on
the correctness of the certificate of title issued therefor and the law will in no way oblige
him to go beyond the certificate to determine the condition of the property. Where there
is nothing in the certificate of title to indicate any cloud or vice in the ownership of the
property, or any encumbrance thereon, the purchaser is not required to explore further
than what the Torrens Title upon its face indicates in quest for any hidden defects or
inchoate right that may subsequently defeat his right thereto.
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SPS. SUNTAY v. KEYSER MERCANTILE
LEONG v. SEE
GATCHALIAN REALTY v. ANGELES
ALFARO v. SPS. DUMALAGAN
A higher degree of prudence is required from one who buys from a person who is not
the registered owner, although the land object of the transaction is registered. In such
a case, the buyer is expected to examine not only the certificate of title but all factual
circumstances necessary for him to determine if there are any flaws in the title of the
transferor. The buyer also has the duty to ascertain the identity of the person with
whom he is dealing with and the latter’s legal authority to convey the property. The
strength of the buyer’s inquiry on the seller’s capacity or legal authority to sell depends
on the proof of capacity of the seller. If the proof of capacity consists of a special power
of attorney duly notarized, mere inspection of the face of such public document already
constitutes sufficient inquiry. If no such special power of attorney is provided or there
is one but there appears to be flaws in its notarial acknowledgment, mere inspection
of the document will not do; the buyer must show that his investigation went beyond
the document and into the circumstances of its execution.
Any buyer or mortgagee of realty covered by a Torrens certificate of title, in the
absence of any suspicion, is not obligated to look beyond the certificate to investigate
the title of the seller appearing on the face of the certificate. And, he is charged with
notice only of such burdens and claims as are annotated on the title.
An innocent purchaser for value refers to someone who “buys the property of another
without notice that some other person has a right to or interest in it, and who pays a
full and fair price at the time of the purchase or before receiving any notice of another
person’s claim.” One claiming to be an innocent purchaser for value has the burden of
proving such status. The protection of innocent purchasers in good faith for value
grounds on the social interest embedded in the legal concept granting indefeasibility
of titles. Between the third party and the owner, the latter would be more familiar with
the history and status of the titled property. Consequently, an owner would incur less
costs to discover alleged invalidities relating to the property compared to a third party.
Such costs are, thus, better borne by the owner to mitigate costs for the economy,
lessen delays in transactions, and achieve a less optimal welfare level for the entire
society.
Republic Act No. 6552, also known as the Maceda Law, or the Realty Installment
Buyer Protection Act, has the declared public policy of “protect[ing] buyers of real
estate on installment payments against onerous and oppressive conditions.” Section
3 of R.A. 6552 provides for the rights of a buyer who has paid at least two years of
installments but defaults in the payment of succeeding installments.
Section 3(a) of R.A. 6552 provides that the total grace period corresponds to one
month for every one year of installment payments made, provided that the buyer may
exercise this right only once in every five years of the life of the contract and its
extensions. The buyer’s failure to pay the installments due at the expiration of the
grace period allows the seller to cancel the contract after 30 days from the buyer’s
receipt of the notice of cancellation or demand for rescission of the contract by a
notarial act.
This Court has been consistent in ruling that a valid and effective cancellation under
R.A. 6552 must comply with the mandatory twin requirements of a notarized notice of
cancellation and a refund of the cash surrender value. In Olympia Housing, Inc. v.
Panasiatic Travel Corp., 395 SCRA 298 (2003), we ruled that the notarial act of
rescission must be accompanied by the refund of the cash surrender value. x x x The
actual cancellation of the contract can only be deemed to take place upon the expiry
of a 30-day period following the receipt by the buyer of the notice of cancellation or
demand for rescission by a notarial act and the full payment of the cash surrender
value.
Article 1544 of the Civil Code provides: If the same thing should have been sold to
different vendees, the ownership shall be transferred to the person who may have first
taken possession thereof in good faith, if it should be movable property. Should it be
immovable property, the ownership shall belong to the person acquiring it who in good
faith first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good
faith was first in the possession; and, in the absence thereof, to the person who
presents the oldest title, provided there is good faith. The aforesaid provision clearly
states that the rule on double or multiple sales applies only when all the purchasers
are in good faith.
In detail, Art. 1544 requires that before the second buyer can obtain priority over the
first, he must show that he acted in good faith throughout, i.e., in ignorance of the first
sale and of the first buyer’s rights, from the time of acquisition until the title is
transferred to him by registration or failing registration, by delivery of possession.
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SPS. SOLITARIOS v. SPS. JAQUE
LOPEZ v. FAJARDO
A purchaser in good faith is one who buys the property of another without notice that
some other person has a right to, or an interest in such property, and pays a full and
fair price for the same at the time of such purchase, or before he has notice of some
other person’s claim or interest in the property. The petitioners are not such purchaser.
Petitioners had prior knowledge of the previous sales by installment of portions of the
property to several purchasers. Moreover, petitioners had prior knowledge of
respondents’ possession over the subject property. Hence, the rule on double sale is
inapplicable in the case at bar. As correctly held by the appellate court, petitioners’
prior registration of the subject property, with prior knowledge of respondents’ claim of
ownership and possession, cannot confer ownership or better right over the subject
property.
Article 1602 in relation to Article 1604 of the Civil Code enumerates several
instances when a contract, purporting to be, and in fact styled as, an absolute sale,
is presumed to be an equitable mortgage, thus:
Art. 1602. The contract shall be presumed to be an equitable mortgage, in any of
the following cases:
(1) When the price of a sale with right to repurchase is unusually inadequate;
(2) When the vendor remains in possession as lessee or otherwise;
(3) When upon or after the expiration of the right to repurchase another instrument
extending the period of redemption or granting a new period is executed;
(4) When the purchaser retains for himself a part of the purchase price;
(5) When the vendor binds himself to pay the taxes on the thing sold;
(6) In any other case where it may be fairly inferred that the real intention of the
parties is that the transaction shall secure the payment of a debt or the performance
of any other obligation.
In any of the foregoing cases, any money, fruits, or other benefit to be received by
the vendee as rent or otherwise shall be considered as interest which shall be
subject to the usury laws.
Art. 1604. The provisions of Article 1602 shall also apply to a contract purporting to
be an absolute sale.
As evident from Article 1602 itself, the presence of any of the circumstances set forth
therein suffices for a contract to be deemed an equitable mortgage. No concurrence
or an overwhelming number is needed.
With the foregoing in mind, We thus declare that the transaction between the parties
of the present case is actually one of equitable mortgage pursuant to the foregoing
provisions of the Civil Code. It has never denied by respondents that the petitioners,
the spouses Solitarios, have remained in possession of the subject property and
exercised acts of ownership over the said lot even after the purported absolute sale of
Lot 4089. This fact is immediately apparent from the testimonies of the parties and the
evidence extant on record, showing that the real intention of the parties was for the
transaction to secure the payment of a debt. Nothing more.
During the period material to the present controversy, the petitioners, spouses
Solitarios, retained actual possession of the property. This was never disputed. If the
transaction had really been one of sale, as the Jaques claim, they should have
asserted their rights for the immediate delivery and possession of the lot instead of
allowing the spouses Solitarios to freely stay in the premises for almost seventeen (17)
years from the time of the purported sale until their filing of the complaint. Human
conduct and experience reveal that an actual owner of a productive land will not allow
the passage of a long period of time, as in this case, without asserting his rights of
ownership.
It is further established that when doubt exists as to the true nature of the parties’
transaction, courts must construe such transaction purporting to be a sale as an
equitable mortgage, as the latter involves a lesser transmission of rights and interests
over the property in controversy. Thus, in several cases, the Court has not hesitated
to declare a purported contract of sale to be an equitable mortgage based solely on
one of the enumerated circumstances under Article 1602. So it should be in the
present case.
The essence of pactum commissorium is that ownership of the security will pass to
the creditor by the mere default of the debtor. The Supreme Court (SC) has repeatedly
declared such arrangements as contrary to morals and public policy.
LEASE
A month-to-month lease under Article 1687 is a lease with a definite period and expires
after the last day of any given thirty-day period, upon proper demand and notice by
the lessor to vacate. Under the Rent Control Law, the prohibition against the ejectment
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MALAYAN REALTY v. UY HAN HONG
HEIRS OF LIM v. LIM
TOCAO AND BELO v. CA
HEIRS OF TAN ENG KEE v. CA
of a lessee by his lessor is not absolute. There are exceptions expressly provided by
law, which include the expiration of a lease for a definite period.
In the instant case, it was noted that the rentals were paid on a month-to-month basis.
Thus, the lease could be validly terminated at the end of any given month upon prior
notice to that effect on the lessee. After all, when the rentals are paid monthly, the
lease is deemed to be for a definite period, i.e., it expires at the end of every month.
When petitioner then sent the August 18, 2000 letter to respondent informing her that
the lease would be terminated effective at the end of the same month, it was well within
his rights.
In the case at bar, the lease period was not agreed upon by the parties. Rental was
paid monthly, and respondent has been occupying the premises since 1958. As earlier
stated, a written notice was served upon respondent on January 17, 2001 terminating
the lease effective August 31, 2001. As respondent was notified of the expiration of
the lease, effectively his right to stay in the premises had come to an end on August
31, 2001. The 2nd paragraph of Article 1687 provides, however, that in the event that
the lessee has occupied the leased premises for over a year, the courts may fix a
longer term for the lease. The power of the courts to establish a grace period is
potestative or discretionary, depending on the particular circumstances of the case.
Thus, a longer term may be granted where equities come into play, and may be denied
where none appears, always with due deference to the parties’ freedom to contract.
Where a petitioner has been deprived of its possession over the leased premises for
so long a time, and it is shown that, indeed, the respondent was the recipient of
substantial benefits while the petitioner was unable to have the full use and enjoyment
of a considerable portion of its property, such militates against further deprivation by
fixing a period of extension.
PARTNERSHIP
A partnership exists when two or more persons agree to place their money, effects,
labor, and skill in lawful commerce or business, with the understanding that there shall
be a proportionate sharing of the profits and losses among them. A contract of
partnership is defined by the Civil Code as one where two or more persons bind
themselves to contribute money, property, or industry to a common fund, with the
intention of dividing the profits among themselves.
By virtue of Art. 1769, the following circumstances tend to prove that Elfledo was
himself the partner of Jimmy and Norberto: 1) Cresencia testified that Jose gave
Elfledo P50,000.00, as share in the partnership, on a date that coincided with the
payment of the initial capital in the partnership;15 (2) Elfledo ran the affairs of the
partnership, wielding absolute control, power and authority, without any intervention
or opposition whatsoever from any of petitioners herein;16 (3) all of the properties,
particularly the nine trucks of the partnership, were registered in the name of Elfledo;
(4) Jimmy testified that Elfledo did not receive wages or salaries from the partnership,
indicating that what he actually received were shares of the profits of the business;17
and (5) none of the petitioners, as heirs of Jose, the alleged partner, demanded
periodic accounting from Elfledo during his lifetime. As repeatedly stressed in Heirs of
Tan Eng Kee, a demand for periodic accounting is evidence of a partnership.
Furthermore, petitioners failed to adduce any evidence to show that the real and
personal properties acquired and registered in the names of Elfledo and respondent
formed part of the estate of Jose, having been derived from Jose’s alleged partnership
with Jimmy and Norberto. They failed to refute respondent’s claim that Elfledo and
respondent engaged in other businesses. Edison even admitted that Elfledo also sold
Interwood lumber as a sideline.19 Petitioners could not offer any credible evidence
other than their bare assertions. Thus, we apply the basic rule of evidence that
between documentary and oral evidence, the former carries more weight.
The business venture operated under Geminesse Enterprise did not result in an
employer-employee relationship between petitioners and private respondent. While it
is true that the receipt of a percentage of net profits constitutes only prima facie
evidence that the recipient is a partner in the business, the evidence in the case at bar
controverts an employer-employee relationship between the parties. In the first place,
private respondent had a voice in the management of the affairs of the cookware
distributorship, including selection of people who would constitute the administrative
staff and the sales force. Secondly, petitioner Tocao’s admissions militate against an
employer-employee relationship. She admitted that, like her who owned Geminesse
Enterprise, private respondent received only commissions and transportation and
representation allowances and not a fixed salary.
A particular partnership is distinguished from a joint adventure, to wit: (a) A joint
adventure (an American concept similar to our joint accounts ) is a sort of informal
partnership, with no firm name and no legal personality. In a joint account, the
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participating merchants can transact business under their own name, and can be
individually liable therefor, (b) Usually, but not necessarily a joint adventure is limited
to a SINGLE TRANSACTION, although the business of pursuing to a successful
termination may continue for a number of years; a partnership generally relates to a
continuing business of various transactions of a certain kind.

The Supreme Court has however recognized a distinction between these two business
forms, and has held that although a corporation cannot enter into a partnership
contract, it may however engage in a joint venture with others.

SY v. CA Article 1767 of the Civil Code states that in a contract of partnership two or more
persons bind themselves to contribute money, property or industry to a common fund,
with the intention of dividing the profits among themselves.22 Not one of these
circumstances is present in this case. No written agreement exists to prove the
partnership between the parties. Private respondent did not contribute money,
property or industry for the purpose of engaging in the supposed business. There is
no proof that he was receiving a share in the profits as a matter of course, during the
period when the trucking business was under operation. Neither is there any proof that
he had actively participated in the management, administration and adoption of
policies of the business. Thus, the NLRC and the CA did not err in reversing the finding
of the Labor Arbiter that private respondent was an industrial partner from 1958 to
1994.

On this point, we affirm the findings of the appellate court and the NLRC. Private
respondent Jaime Sahot was not an industrial partner but an employee of petitioners
from 1958 to 1994. The existence of an employer-employee relationship is ultimately
a question of fact23 and the findings thereon by the NLRC, as affirmed by the Court
of Appeals, deserve not only respect but finality when supported by substantial
evidence. Substantial evidence is such amount of relevant evidence which a
reasonable mind might accept as adequate to justify a conclusion.

Time and again this Court has said that “if doubt exists between the evidence
presented by the employer and the employee, the scales of justice must be tilted in
favor of the latter.”25 Here, we entertain no doubt. Private respondent since the
beginning was an employee of, not an industrial partner in, the trucking business.

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