Obligations and Contracts Prof. E.A.

Labitag AY 2009-2010
Barredo v. Garcia [Taxi carretela+ Barredos liability as owner of the taxi arises not from the felony but from his negligence in selection/supervision of employee. Quasi-delict is a separate legal institution under the Civil Code, and entirely distinct and independent from a crime under the RPC. Mendoza v. Arrieta [Truck-jeep-Mbenz] The filing of a civil action against the truck owner is not barred by res judicata, but the jeepney driver may not be sued in a civil case because of his acquittal in the criminal case. PSBA v. CA. A2180,CC: School is liable if damages are inflicted by its pupils while in its custody. Since assailants were outsiders, 2180 doesnt apply. However, the school and its student, upon enrollment are bound by contract where the school shall provide education and an environment conducive for learning while the student abides by the school rules. Since this case demonstrates such contractual obligation, the rules on quasidelict do not govern. Amadora v. CA. Even while the accused was in their custody at the time the crime happened, it was shown that the school observed due diligence. Song Fo v. Hawaiian Philippines [molasses] Hawaiian Phils. Had no legal right to rescind the contract of sale because of failure of Song Fo to pay for the molasses within the time agreed upon by the parties. The general rule is that rescission will not be permitted for a slight or casual breach of the contract. A delay in payment for a small quantity of molasses is only a casual breach. Velarde v. CA [mortgage] Not only did they fail to pay for the mortgage, they also failed to pay the balance for the purchase price. The rescission was valid. The failure of the petitioners to comply with their obligation to pay the balance of the purchase price is indubitably a violation of the very essence of reciprocity in the contract of sale. Such violation consequently gave rise to Raymundos right to rescind the contract in accordance with law. Woodhouse v. Halili. [franchise] In order that fraud may vitiate consent, it must be the dolo causante [without which a person would not have entered the contract] and not dolo incidente [inducement to making of contract]. The false representation was used by Woodhouse to get a share of 30% of the net profits. Despite this deceit, Halili would have entered into the contract anyway. Geraldez v. CA [Volare 3, European Tour]. Private respondent failed to comply faithfully with its commitment under the Volare 3 tour program. It did commit fraudulent misrepresentation amounting to bad faith, to the prejudice of Geraldez and the members of the tour group. ++ Dolo Causante determines or is the essential cause of the consent effect: nullity of contract + indemnification of damages. Gutierrez v. Gutierrez [car-truck collision] As to the private car driver, he was the 18-year old son of the owner. The guaranty given by the father at the time the son was gratned a license made the father responsible for his sons act *culpa aquiliana+. As to the truck owner and truck driver, the civil law liabilities rest on culpa contractual [contract of carriage] Vazquez v. de Borja. [cavans of rice, insolvent corporation]. It is the corporation that should be liable, Vasquez only acting in behalf of it. The fact that the corporation acting thru Vasqueaz as its manager, was guilty of negligence in the fulfillment of the contract did not make Vasquez principally or even subsidiarily liable for such negligence; Paras, dissent: Vasquez should be liable since he had full knowledge of the insolvency, yet still agreed to contract with de Borja. De Guia v. MERALCO. [wheels left track, physician injured]. The motorman of the derailed car ws negligent, and as a consequence, MERALCO is liable for the damages. The relationship between the parties was contractual in nature, and the duty of the carrier is to be determined with reference to contract law [Art 1258, CC] US v. Barias [2-year-old girl, hit and run] the thoroughfare on which the incident occurred was a public street in a densely populated section of the city. Under such conditions a motorman of n electric street car was clearly charged with a high degree of diligence in the performance of his duties. Sarmiento v. Cabrido [diamond earrings]. The dismounting of the diamond was part of the obligation assumed by private respondents under the contract of service, thus they should be liable for damages. Crisostomo v. CA [Jewels of Europe]. Respondent is not an entity engaged in the business of transporting. Its covenant with its customers is simply to make travel arrangements in their behalf. The nature of the contractual relation between parties is determinative of the degree of care required in the performance of the obligation. Cetus Development Corp. v. CA. [Payment of rentals, premises were sold to Cetus Development Inc., but petitioners were not able to pay rent because no collector came. Petitioners were asked to vacate premises, and afterwards, an ejection suit was brought against them.] Section 2, RoC, "Landlord to proceed against tenant only after demand." states that the right to bring an action of ejectment or unlawful detainer must be counted from the time the defendants failed to pay rent after the demand therefor. The demand required partakes of an extrajudicial remedy that must be pursued before resorting to judicial action so much so that when there is full compliance with the demand, there is no need for court action. -for purposes of bringing an ejectment suit, 2 requisites: 1) must be failure to pay rent/comply with conditions of lease, and 2) must be DEMAND to both pay or to comply and vacate. Santos-Ventura Foudnation v. Santos [compromise agreement]. When the petitioner failed to pay its due obligation after the demand was made, it incurred delay. Interest as damages is generally allowed as a matter of right. Santos has been deprived of funds to which he is entitled by virtue of their compromise agreement. The goal of compensation requires that the complainant be compensated for the loss of use of those funds. This compensation is in the form of interest. Article 1169 of the New Civil Code provides: Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extra-judicially demands from them the fulfillment of their obligation. In order for the debtor to be in default, it is necessary that the following requisites be present: (1) that the obligation be demandable and already liquidated; (2) that the debtor delays performance; and (3) that the creditor requires the performance judicially or extra-judicially. Vazquez v. Ayala Corp. Sps Vasquez entered into a Memorandum of Agreement with Ayala Corporation with Ayala buying from the spouses all of their shares of stock in Conduit Development, inc. Sps Vasquez demands Ayala to fulfill the terms of the agreement and sell four lands to them at the prevailing price in 1984. Ayala offered the prevailing price in 1990. Although the paragraph has a definite object, i.e., the sale of subject lots, the period within which they will be offered for sale to petitioners and, necessarily, the price for which the subject lots will be sold are not specified. The phrase at the prevailing market price at the time of the purchase connotes that there is no definite period within which AYALA Corporation is bound to reserve the subject lots for petitioners to exercise their privilege to purchase. Neither is there a fixed or determinable price at which the subject lots will be offered for sale. The price is considered certain if it may be determined with reference to another thing certain or if the determination thereof is left to the judgment of a specified person or persons. Abella v. Francisco [lots, plaintiff failed to pay on time]. The defendant wanted to sell those lots to the plaintiff in order to pay off certain obligations which fell due in Dec. 1928. The time fixed for the payment of the price was therefore essential. In accordance with A1124, defendant is entitled to resolve the contract for failure to pay within time specified. Vda. de Villaruel v. Manila [WWII, Fire] it is Villaruel who must be placed in default for refusing to accept the current rentals without qualification. Tengco v. CA and Cifra. Since the ownership of the premises was transferred to Cifra already, the person to whom her payment was offered had no authority to accept payment. The contract of lease between Tengco and the former owner was not in writing. Petitioner cannot claim ignorance of transfer of ownership, because evidence states otherwise. 1 Janz Hanna Ria A2013

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Central Bank v. CA. [bank only delivered 17,000 of 80,000 loan]. Tolentino should still paey for the 17,000 plus interest. In this case both parties were in default in the performance of their respective reciprocal obligations. For Tolentino, he is entitled to rescind only insofar as the 63,000 is concerned. Chavez v. Gonzales [Typewriter repair] it is clear that Gonzales contravened the tenor of his obligation, because not only did he not repair the typewriter, he actually returned it in worse condition. Telefast Comm v. Castro, Sr. *mom passed away, telegram never received+. Telefast undertook to send the telegram, but this it didnt do, despite payment of required charges by Sofia. Arrieta v. NARIC. [Burmese rice, Letters of credit]. It is clear upon the records that the sole and principal reason for the cancellation of the allocation was the failure of the letter of credit to be opened within the contemplated period. NARICs liability stems not alone from its failure to secure the LOCs, its culpability arises from its willful and deliberate assumption of contractual obligations even as it was aware of its financial incapacity to do so. Magat v. Medialdea [Subi taximeters and transceivers] Magat is entitled to damages dano emergente and lucro cesante Essential elements: (1) existence of a legal right; (2) correlative duty of defendant; (3) an act or omission in violation of ones rights. Tanguilig v. CA. [Windmill + deepwell] the installation of a deep well was not included in the proposals to construct a windmill. The collapse of the windmill, however, entitles Herce for damages, since there is failure to show that the collapse was due solely by fortuitous event. Khe Hong Cheng v. CA. [sunken ship] Requisites of Accion Pauliana: (1) exhaust properties of debtor through levying by attachment and execution upon all debtors property; (2) exercise all rights and actions of debtor, except those personal to him (accion subrogartoria); (3) seek rescission of contracts executed by debtor in fraud of their rights (accion pauliana). Important: credit of plaintiff antedates the fraudulent alienation by the debtor of his property. Siguan v. Lim. The deed of donation was made before the issuance of the bouncing checks. The general rule is that rescission requires the existence of creditors at the time the alleged fraudulent alienation, and this must be proved as one of the bases of the judicial pronouncement setting aside the contract. Juan F. Nakpil & Sons v. CA. [earthquake]. the general rule is that no person shall be responsible for events which could not be foreseen, or which, though foreseen, were inevitable (1174) . however, if upon the happening of a fortuitous event there concurs a corresponding fraud, negligence, delay or violation or contravention in any manner of the obligation (1170), which results in loss or damage, the obligor cannot escape liability. Republic v. Luzon Stevedoring, Inc. [barge hit bridge during storm]. Considering that the bridge was an immovable object and uncontrovertedly provided with openings for passage of water craft, it is undeniable that the unusual event that the barge hit the bridge raises a presumption of negligence on appellants part. It is not enouh that the event should not have been foreseen or antiocipated, but it must be one impossible to foresee or to avoid. Mere difficulty to foresee the happening is not impossibility to foresee the same. Dioquino v. Laureano [boy threw rock at car] what happened was clearly unforeseen. It was a fortuitous event resulting in a loss which must be borne by the owner of the car. An element of reasonableness in the law would be manifestly lacking if legal responsibility could be imputed to Laureano. Austria v. CA. [robbery, necklace taken was not hers] the robbery constitutes/satisfies all elements as would be classified as fortuitous. No need for conviction in criminal case to prove the crime in civil case. NPC v. CA. [Ipo-Bicti Tunnel, tyophoon, dam overflow]. The evidence preponderantly established the fact that the loss and destruction of the equipment was due to the negligent manner with which the spillway gates of Angat Dam were opened, and not entirely fortuitous. Yobido v. CA. [road accident, left front tire of bus exploded]. It was not a fortuitous event. There are human factors involved in the situation. An accident caused either by defects in the automobile or through negligence of its driver is not fortuitous. Moreover, there is a presumption against the due diligence exercised by the carrier. Bacolod-Muirci Milling Co. v. CA. [railroad, mill]. The closure of the railroad lines does not constitute force majeure. The terms of the contracts were clear. The closure of any portion of the railroad tracks in the event any of the owners decided not to renew the contract was foreseeable and inevitable. PHILCOMSAT v. GLOBE. The withdrawal of the US military personnel after termination of the MBA bases was a fortuitous event. The foregoing are either are unforeseeable, or foreseeable but beyond the control of the parties. Neither are in default. Eastern Shipping Lines v. CA [drums of riboflavin]. Law on matter of interest charged for damages: 12% when obligation is breached, and it consists in the payment of a sum of money, the interest due should be that which may have been stipulated in writing. Further, interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, interest shall be 12% per annum to be computed from time of default; 6% when an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of charges may be imposed at courts discretion at 6% per annum. No interest, however, shall be adjudged on unliquidated claims/damages excluding when or until demand can be established with reasonable certainty. When the judgment of the court awarding a sum of money becomes final and executor, the rate of legal interest, whether the case falls under 1 or 2, shall be 12% per annum from such finality until its satisfaction, this interim period to be by then an equivalent to a forbearance of credit. Crismina Garments v. CA [denim pants]. The interest rate should be computed at 6% per annum, computed from the time of the filing of complaint until the finality of judgment. If the adjudged principal and the interest remain unpaid thereafter, the interest shall be 12% per annum computed from the time the judgment becomes final and executor until it is satisfied. Keng Hua Paper Products v. CA. [bill of lading] Mere apprehension of violating customs, tariff and central bank laws without a clear demonstration that taking delivery of the shipment has become legally impossible cannot defeat the petitioners contractual obligation and liability under the bill of lading. The contract of carriage, as stipulated in the bill of lading, must be treated independently of the contract of sale between the seller and the buyer, and the contract for the issuance of a letter of credit between the buyer and the issuing bank. Any discrepancy between the amount of the goods described in the commercial invoice in the contract of sale and the amount allowed in the letter of credit will not affect the validity and enforceability of the contract of carriage as embodied in the bill of lading. Petitioners remedy in the case of overshipment lies against the seller/shipper, not against the carrier. The case involves an obligation not arising from a loan or forbearance of money, thus pursuant to Art. 2209 of the Civil Code the applicable interest rate is 6% per annum to be computed from the date of the trial courts decision. The rate of 12% per annum shall be charged on the total then outstanding from the time the judgment becomes final and executory until its satisfaction. NOTE: A bill of st nd lading serves 2 functions. 1 , it is a receipt for the goods shipped. 2 , it is a contract by which three parties, namely, the shipper, the carrier, and the consignee undertake specific responsibilities and assume stipulated obligations. Security Bank v. Makati RTC 61. [promissory note, 23% per annum] the 23% rate of interest is allowable because it was agreed upon by the parties freely. only in the absence of stipulation can the court impose the 12% interest.

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Almeda v. CA. [super high increase on interest rate]. PNB was not authorized to raise its interest rates under the credit assignment. 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 equality. The increases in the interest rate violated such principle of mutuality. First Metro investment Corp v. Este del Sol Mountain Reserve. [loan for sports/resort complex] the agreement was executed to conceal a usurious transaction. When a contract between 2 parties is evidenced by a written instrument, such document is ordinarily the best evidence of the terms. However, there is an exception to the rule. If from a construction of the whole transaction it becomes apparent that there exists a corrupt intention to violate the Usury Law, the courts should and will permit no scheme, however ingenious, to becloud the crime of usury. Gaite v. Fonacier [iron ores, surety bond not renewed] the shipment of the iron ore was not a suspensive condition to the payment of 65K but was only a suspensive period. What characterizes a conditional obligation is that its obligatory force is subordfinated to the happening of a future and uncertain event; if suspensive condition does not take place, the parties would stand as if the conditional obligation never existed. Gonzales v. Heirs of Cruz. The obtaining of a separate TCT was a condition precedent to the purchase of the property. It is a well-settled principle in law that one can give what one does not have. Condition has been defined as every future and uncertain event upon which an obligation or provision is made to depend. It is a future & uncertain event upon which the acquisition or resolution of rights is made to depend by those who execute the juridical act. Without it, the sale of the property under the contract cannot be perfected. Coronel v. CA. The contract was a conditional contract of sale. Upon the fulfillment of the suspensive condition [TCT], the sale becomes absolute and this will definitely affect the sellers title thereto. The agreement could not have been a contract to sell because the sellers made no express reservation of ownership or title to the property. Furthermore, the circumstance which prevented the parties from entering into an absolute contract of sale pertained to the sellers themselves [TCT not in their names] and not the full payment of the purchase price. Parks v. Province of Tarlac [donation, condition to build school]. The condition stipulated could not be complied with except after giving effect to the donation. The done could not do any work on the donated land if the donation had not really been effected, because it would have been an invasion of anothers title. Consequently, at the time of Parks purchase, Cirer and Hill were no longer owners of the land, hence contract is void. CPU v. CA [medschool not built after 50 years]. The donation was onerous, one executed fort a valuable consideration which is considered the equivalent of the donation itself. In this case, the condition imposed was not a suspensive but a resolutory one. If there was no fulfillment or compliance with the condition, the donation may now be revoked and all rights which done may have acquired under it shall be deemed lost and extinguished. Quijada v. CA [Donation of two-hectare land to the municipalty of talacogon, Agusan del Sur with the condition that the parcel of land shall be used solely and exclusively as part of the campus of the proposed provincial high school of the said municipality. The donor sold a part of the lot to a third person.] the sale of land to the third person was valid. Quijada retained an inchoate interest on the lots by virtue of the automatic reversion clause on the deed of donation. Even though the land was owned by the municipality at the time of purchase, perfection of a contract per se does not transfer ownership, which occurs upon delivery of the thing sold. A perfected contract of sale cannot be challenged on the ground of nonownership on the part of the seller at the time of its perfection Lao Lim v. CA and Dy [3-year lease contract+ the stipulation for as long as the defendant needed the premises and can meet and pay said increases" Is a purely potestative condition because it leaves the effectivity and enjoyment of leasehold rights to the sole and exclusive will of the lessee. It is likewise a suspensive, not a resolutory, condition, because the renewal depends upon said condition. The continuance, effectivity and fulfillment of a contract of lease cant be made to depend exclusively upon the free and uncontrolled choice of the lessee between continuing the payment of the rentals or not, completely depriving the owner of any say in the matter. Mutuality does not obtain in such a contract of lease and no equality exists between the lessor and lessee since the life of the contract is dictated solely by the lessee. NATELCO v. CA. the contreact is subkect to mixed conditions: they depend partly on the will of the debtor, and partly on chance, hazard, or the will of a third person [casual], which do not invalidate the provisions. Osmena v. Rama. *acknowledgment: if the house is sold, I will pay my indebtedness.+ the condition stipulated in the acknowledgement depended exclusively upon her will, and is therefore void. The acknowledgement itself, however, was an absolute acknowledgement of the obligation and was sufficient to prevent the statute of limitation from barring the action upon the original contract. Hermosa v. Longara. *payment = as soon as he receive funds deried from sale of property in Spain+ the condition in question is a mixed condition: depending partly on intestates will and partly upon chance, i.e., the presence of a buyer. Besides, it is also a suspensive condition, upon the happening of which the obligation to pay is made dependent. Taylor v. Uy Tieng Piao. The language conferring the right of cancellation upon the defendants is broad enough to cover any case of the non-arrival of the machinery, due to whatever cause. Defendants had right to cancel the contract in the contingency that occurred. 1256, CC creates no impediment to the insertion in a contract for personal service of a resolutory condition permitting the cancellation of contract by one of the parties. Smith, Bell & Co. v. Sotelo Matti. Under the stipulations in the contract, it cannot be said that any definite date was fixed for the delivery of goods. rd Such delivery was subject to a condition the fulfillment of which depended not only upon plaintiffs effort, but upon the will of 3 persons who could in no way be compeeled to fulfill the condition. In cases like this, the obligor will be deemed to have sufficiently performed his part of the obligation, if he has done all that was in his power, even of the condition has not been fulfilled in reality [condition uncertainty of arrival, but certain of period v. indefinite period arrival not guaranteed within a specific time frame] Rustan Pulp v. IAC. [paper mill] Stipulation that Rustan may legally exercise the right of stoppage should there be a glut of raw materials at its plant is inoperative for being potestative inasmuch as such condition is solely dependent on petitioners will. A purely potestative impoisition of this character must be obliterated from the face of the contract without affecting the rest of te stipulations considering that the condition relates to the fulfillment of an already existing obligation. Romero v. CA. [squatters] Vendor may not demand the rescission if a contract for a cause traceable to his own failure to have the squatters evicted within the contractually-stipulated period. The right of resolution of a party to an obligation under 1191 is predicated on a breach of faith by the other party that violates the reciprocity between them. Roman Catholic Archbishop of Manila v. CA. [100-year condition of donation]. 100-year condition constitutes an undue restriction on the rights arising from ownership of petitioner, and is, therefore, contrary to public policy. Herrera v. LP Leviste & Co. [Leviste had obtained a loan from the GSIS. As security therefore, Leviste mortgaged two (2) lots, one located at Paranaque and the other at Buendia with the 3-storey building thereon. Leviste sold to Herrera the Buendia property with the condition that he would assume Levistes indebtedness to the GSIS among others. Was not able to comply. Properties were foreclosed. Leviste assigned the right to redeem to Marcelo. Herrera contests the action as unjust enrichment to Marcelo.] Neither the GSIS, Marcelo nor Leviste benefited in any way at the expense of Herrera. They paid and received what is due them. Though Herrera actually suffered loss (amount he paid to Leviste, payment to GSIS less rentals received), but this loss are attributable to his fault in: (a) not being able to submit collateral to GSIS in substitution of Paranaque property, (b) not paying off the mortgage debt, and (c)not making earnest effort to redeem the property as possible redemptioner. 3 Janz Hanna Ria A2013

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Boysaw v. Interphil Promotions [Flash Elorde]. Boysaw was the one who violated the contract. The contract in question gave rise to reciprocal obligations. the power to rescind is given to the injured party. UP v. de los Angeles. [logging agreement, UP-ALUMCO] Up may treat the contract with Alumco as rescinded, and may disregard the same before any judicial pronouncement to that effect. De Erquiaga v. CA. [hacienda San Jose] there should be simultaneous mutual restitution of the principal object [shares] and of the consideration paid [410,000] this should not await the mutual restitution of fruits, i.e., legal interest and fruits of Hacienda. Angeles v. Calasanz. The right to rescind for non-performance is not absolute. The breach of contract by angeles is so slight and casual considering they have paid the downpayment plus the installments for 9 years. To sanction the rescission made will work injustice to the other party. Ong v. CA. [piggery] The contract may be validly rescinded by Robles spouses. The spouses bound themselves to deliver a deed of absolute sale upon full payment by ong of P2M. Ongs non-fulfillment of his obligation rendered the contract ineffective and without force and effect. Visayan Sawmill Co. Inc. v. CA. [scrap iron] The contract is a mere contract to sell. In the agreement in question, the seller bound and promised itself to sell the scrap iron upon the fulfillment by private respondent of his obligation to make/indorse an irrevocable and unconditional letter of credit in payment of the purchase. The contract is not one of sale where the buyer acquired ownership over the property subject to the resolutory condition that the purchase price would be paid after delivery. There was to be no actual sale until the opening, making or indorsing of the irrevocable and unconditional letter of credit. Deiparine, Jr. v. CA. [construction of 3-storey dorm, Deiparine deviated from specs+ Deiparines breach of the duty to comply with the prescribed compressive strength of the structure constituted a substantial violation of the contract correctible by judicial rescission. Iringan v. CA. Rescission not valid. 1592 is the applicable provision regarding sale of an immovable property. Such provision requires the rescinding party to serve judicial or notarial notice of his intent to resolve contract. THE OPERATIVE ACT WHICH PRODUCES THE RESOLUTION OF THE CONTRACT IS THE DECREE OF THE COURT AND NOT THE MERE ACT OF THE VENDOR. Vda. de Mystica v. Naguiat. The failure to pay in full the purchase price stipulated in a deed of sale does not ipso facto grant the seller the right to rescind the agreement. Unless otherwise stipulated by the parties, rescission is allowed only when the breach of the contract is substantial and fundamental to the fulfillment of the obligation. Ponce de Leion v. Syjuco. [Ponce tried to pay in advance Syjuco because he was being hunted down by the Japanese being a member of the guerilla force] the consignation was not valid. The obligation was not yet due and demandable when the money was consigned. PERIOD (presumption): presumption is that the period is deemed constituted in favor of both the creditor and the debtor unless from its tenor or from other circumstances it appears that the period has been established for the benefit of either one of them (Art. 1127, Civil Code). Creditor cannot be forced to accept payment contrary to the stipulation because he may (1) want to keep his money invested safely instead of having it in his hands, or (2) want to protect himself against sudden decline in the purchasing power of the currency loaned specially at a time when there are many factors that influence the fluctuation of the currency Buce v. CA. [Rentals; automatic renewal of the lease contract?] The phrase "subject to renewal for another ten (10) years" is unclear on whether the parties contemplated an automatic renewal or extension of the term, or just an option to renew the contract; and if what exists is the latter, who may exercise the same or for whose benefit it was stipulated. There is nothing in the stipulations in the contract and the parties' actuation that shows that the parties intended an automatic renewal or extension of the term of the contract. The fact that the lessee was allowed to introduce improvements on the property is not indicative of the intention of the lessors to automatically extend the contract. Neither the filing of the complaint a year before the expiration of the 15-year term nor private respondents' acceptance of the increased rentals has any bearing on the intention of the parties regarding renewal. Gregorio Araneta v. Phil. Sugar Estates Devt Co. PSED bought land from Araneta with condition that he will construct roads surrounding the future Sto. Domingo Church. Because of the squatters, Araneta has not complied with his end in constructing the roads. PSED asked that the court fix a period for which Araneta should comply. TC and CA fixed it to 2 years. PERIOD (court may fix): Article 1197 is predicated on the absence of any period fixed by the parties and it involves a two-step process. The court must first determine that the obligation does not fix a period (or that the period is made to depend upon the will of the debtor), but from the nature and the circumstances it can be inferred that a period was intended. The court must then proceed to the second step, and decide what period was probably contemplated by the parties. Here there was no date set probably because of the presence of the squatters and they know the construction of the roads will be predicated upon their eviction TF period set until squatters evicted not 2 years Inchausti v Yulo. An obligation to pay a sum of money is not novated in a new instrument wherein the old is ratified, by changing only the term of payment and adding other obligations not incompatible with the old one. Jaucian v. Querol. : deceased Rogero (represented by administrator Querol) thought he signed as surety for Dayadante but clear in contract that they are solidarily bound. Jaucian need not first exhaust the remedy against Dayndante before he may sue against Rogeros estate. Lafarge Cement Phil v. Continental Cement. The fact that the liability sought against respondent Continental Cement is solely for tort does not negate the solidary nature of their liability. RFC v. CA. Realty Invesmtents, Inc. can claim recovery of Dominguezs balance directly to RFC. While the amount sought to be recovered was originally owing from Dominguez, the obliogation of paying it has already been assumed by the RFC without any other dcondition except that title of the lot be first conveyed to Domignuez. st Quimobing v. CA. [Construction and Service Agreement whereby Nicencio Tan Quiombing and Dante Biscocho, as the 1 Party, jointly and nd severally bound themselves to construct a house for private respondents Francisco and Manuelita Saligo, as the 2 Party.] Quiombing may sue by himself alone for recovery of amount due to him and Bischocho without joining the klatter as co-plaintiff. It did not matter who as between them filed the complaint b/c the private respondents were liable to either of the 2 as a solidary creditor for the full amount of the debt. Full satisfaction of a judgment obtained against them by Quiombing would discharfe their obligation to Biscochom and vice versa; hence it was not necessary for both Quiombing and Biscocho to file the complaint. Inciong, Jr. v. CA. The promissory note expressly states three signatories as jointly and severally liable. Any one, some or all of them may be proceeded against for the entire obligation. The choice is left to the solidary creditor to determine against whom he will enforce collection Alipio v. CA. Jaring cannot sue the surviving spouse for a debt which is owed by the CPG. The proper remedy is to file a claim in the settkenebt of the estate of the deceased. When petitioner's husband died, their conjugal partnership was automatically dissolved[9] and debts chargeable against it are to be paid in the settlement of estate proceedings. Makati Development Corp. v. Empire Insurance Co. Penal clause in this case was inserted not to indemnify MDC for any damage it might suffer as a result of a breach of the contract but rather to compel performance of the so-called "special condition" and thus encourage home building among lot owners in the Urdaneta Village.

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Tan v. CA. The promissory note clearly makes the stipulation of payment of interest. Penalty clauses can be in the form of penalty or compensatory interest. It was through the fault of the defendant that said default had taken place. However, petitioner had made several payments and the continued monthly accrual of the 2% penalty was deemed unconscionable by the court, led to a reduction to 12% total. Country Bankers Insurance v. CA. [Lease Agreement involving the Avenue, Broadway and Capitol theaters] As a general rule, in obligations with a penal clause, the penalty shall substitute the indemnity for damages and the payment of interests in case of non-compliance. However, there are exceptions: (1) when there is a stipulation to the contrary; (2) when the obligor is sued fro refusal to pay the agreed penalty; (3) when the obligor is guilty of fraud. The forfeiture clause in the lease agreement would not unjustly enrich OVEC at expense of Sy and CBISCOcontrary to law, morals, good customs, public order or policy. A penal clause is an accessory obligation which the parties attach to a principal obligation for the purpose of insuring the performance thereof by imposing on the debtor a special prestation (generally consisting in the payment of a sum of money) in case the obligation is not fulfilled or is irregularly or inadequately fulfilled. In the case at bar, the penalty cannot substitute for the P100,000.00 supposed damage suffered by OVEC from opportunity cost. It represents the P10,000 per month in additional rental during the ten months of injunction period. Thus, it must be applied against the injunction bond. Kalalo v. Luz. The balance from Luz on the IRRI project should be paid on the basis of the rate of exchange of the US$ to the PhP at the time of payment of judgment. Even if the obligation assumed by the defendant was to pay the plaintiff a sum of money expressed in American currency, the indemnity to be allowed should be expressed in Phil. Currency at the rate of exchange prevailing on the date of defendants breach. St. Paul Fire & Marine Insurance Co. v. Macondra & Co, Inc. [Winthrop products shipped onboard SS Tai Ping, owned and operated by Wilhelm Wilhelmsen, 218 cartons and drums of drugs and medicine. The shipment was insured by St. Paul Fire and Marine Insurance Company. Insurance company paid Winthrop the amount of damage materials and became subrogated to the rights of Winthrop.] The liabilities of the defendantsappellees with respect to the lost or damaged shipments are expressly limited to the C.I.F. value of the goods as per contract of sea carriage embodied in the bill of lading. The plaintiff-appellant, as insurer, after paying the claim of the insured for damages under the insurance, is subrogated merely to the rights of the assured. As subrogee, it can recover only the amount that is recoverable by the latter. Since the right of the assured, in case of loss or damage to the goods, is limited or restricted by the provisions in the bill of lading, a suit by the insurer as subrogee necessarily is subject to like limitations and restrictions. The C.I.F. Manila value of the goods which were lost or damaged, according to the claim of the consignee dated September 26, 1960 is $226.37 and $324.3 or P456.14 and P653.53, respectively, in Philippine Currency. The peso equivalent was based by the consignee on the exchange rate of P2.015 to $1.00 which was the rate existing at that time. The trial court committed no error in adopting the aforesaid rate of exchange. Papa v. AU Valencia & Co. Inc. [check never encashed+ Petititioners assertion that he never encashed the check is not substantiated. After more than 10 years, the presumptuion is the the check had been encashed. Granting that it was never encashed, petitioners failure to do so for more than 10 years undoubtedly resulted in the impairment of the check through his unreasonable and unexplained delay. In harmony with 1249,CC: The acceptance of a check implies an undertaking of due diligence in presenting it for payment, and if he from whom it is received sustains loss by want of such diligence, it will be held to operate as actual payment of the debt or obligation for which it was given. It has likewise been held that if no presentment is made at all, the drawer cannot be held liable irrespective of loss or injury unless presentment is otherwise excused. PAL v. CA. Payment must be made by oblige himself to an agent having authority, express or implied, to receive particular payment (1240). PAL paid in checks top the sheriff. It is out of the ordinary that checks intended for a particular payee are made out in the name of another. Making the checks payable to the judgment creditor would have prevented the encashment or the taking of undue advantage by the sheriff. The issuance of the checks in the sheriffs name clearly made possible the misappropriation of funds that were withdrawn. Reparations Commission v. Universal Deep Sea Fishing. [Universal bought 6 ships from Reparations Commission schedule of payment in equal payments spread over 10 years]. First installments due & demandable at time of the action & payment of Universal of P10,000 shall be applied to surety company as guaranteed portion of the debt. Under Articles 1252-1254, application may be done by a persn owing several debts of the same kind to a single creditor. Obligation included payment. The 10,000 could not be construed in favour of the debt. Paculdo v. Regalado. [Nepa Qmart] If the debtor does not declare to which debts the payment is to be applied, no payment is to be made to a debt that is not yet due. All payments are to be made and applied to the Fairview Wet Market. Consent of the debtor must be clear and definite. That which is most onerous to the debtor must be applied to first. DBP v. CA. [appropriation of leasehold rights without foreclosure proceeding] On NOVATION: the said assignment merely complemented or supplemented the notes; both could stand together. The obligation to pay a sum of money remained, and the assignment merely served as security for the loans covered by the promissory notes. on CESSION: Article 1255 contemplates the existence of two or more creditors and involves the assignment of all the debtor's property, but in the case only DBP is the creditor. on DATION: The assignment, being in its essence a mortgage, was but a security and not a satisfaction of indebtedness so not Dation as defined in Article 1254 Filinvest Credit Corp v. Phil Acetylene. [vehicle mortgaged] The mere return of the mortgaged motor vehicle does not constitute a dacion en pago in the absence of the true intention of the parties. Dacion en pago is the transmission of the ownership of a thing by the debtor to the creditor as an accepted equivalent of the performance of an obligation. In dacion en pago the debtor offers another thing to the creditor who accepts it as equivalent payment of an outstanding debt. The evidence on record fails to show that the mortgage consented, or at least intended that the mere delivery to and acceptance by him, of the Chevrolet be construed as actual payment. De Guzman v. CA. [Sale of two parcel of land between de Guzman (seller) and Singh (buyer). Singh asked for a statement of account, Petitioner refused. Singh defaulted in payment. A Compromise Agreement was entered into. Singh allegedly did not deliver.] record shows that private respondent went to Judge Bautistas sala on the appointed day to make payment, but petitioners were not there to receive it. Petitioners counsel appeared, but told her that he cant accept payment. They went to petitioners house, but they werent there either. The deposit was made two days after the agreed payment datye, but it was due to petitioners fault. TLG Intl Continental Enterprising v. Flores. The courts may authorize the withdrawal of the deposits. In the case at bar, the case was dismissed before the amount deposited was either accepted by the creditor or a declaration by the Court approving such. The dismissal rendered the consignation ineffectual. (A1260, CC.) McLaughlin v. CA. [Compromise agreement wherein to pay in June and in December balance for sale of real property. In Oct 15, made a demand for payment of June installment. 17 days later, they complied. But, creditor wanted rescission of contract] There was substantial compliance with the compromise agreement because respondent made a valid tender of payment. But respondent failed to consign the the sum due with the court. He remains liable for payment of obligation after December 31, 1980 Meat Packing Corp of the Phils. V. Sandiganbayan. [PCGG terminated the lease-purchase agreement of MPCP, a corporation wholly owned by GSIS.] The Sandiganbayan already approved the consignation by the PCGG wherein consignation is the act of depositing the thing due with the court or judicial authorities whenever the creditor cannot accept or refuses to accept payment, and it generally requires a a prior tender of payment. Tender on the other hand is the antecedent of consignation, an act preparatory to the consignation, which is the principal, and from which are derived the immediate consequences which the debtor desires or seeks to obtain. Tender of payment maybe extrajudicial while 5 Janz Hanna Ria A2013

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consigning is necessarily judicial. The priority of tendering payment is to attempt to make a private settlement before proceeding to the solemnities of consignation. Both tender and consignation validly made produces the effect of payment and extinguishes the obligation. Pabugais v. Sahijwani. [Sale of 1.239 square meters along Jacaranda St., North Forbes Park] There is a valid tender of payment in an amount sufficient to extinguish the obligation, the consignation is valid. Occena v. Jabson. A1267: The civil code authorizes the release of an obligor when the service has become so difficult as to be manifestly veyond the contemplation of the parties but does not authorize the courts to modify or revise the subdivision contract vetween the parties or fix a different sharing rtation from that contractually stipulated with the force of law between the parties. NATELCO v. CA. 1267: The term service should be understood as referring to the performance of the obligation. Tolentino: 1267 states in our law the doctrine of unforeseen events, based on PILs rebus sic stantibus where parties stipulate in the light of certain prevailing conditions, and once these conditions cease to exist the contract also cease to exist PNCC v. CA. The suspensive condition of issuance of industrial clearanmce3 has already been fulfilled by the time the Temporary Use permit was issued. A1266 cannot be used by petitioner, since it is applicable only to obligations to do and not obligations to give. At any rate, the unforeseen event and causes mentioned by petitioner (EDSA Revolution) Are not the legal and physical impossibilities in 1266. The principle of rebus sic stantibus is not absolutely applied in 1267, because such would endanger the security of contractual relations. The parties to the contract must be presumed to have assumed the risk of unfavorable developments. It is therefore only in absolutely exceptional changes of circumstances that equity demands assistance for the debtor. Yam v. CA. (IGLF Loans) Art. 1270, par. 2 of the Civil Code provides that express condonation must comply with the forms of donation. Art. 748, par. 3 provides that the donation and acceptance of a movable, the value of which exceeds P5,000.00, must be made in writing, otherwise the same shall be void. In this connection, under Art. 417, par. 1, obligations, actually referring to credits, are considered movable property. In the case at bar, it is undisputed that the alleged agreement to condone P266,146.88 of the second IGLF loan was not reduced in writing. Gan Tion v. CA. Gan Tion claims legal compensation between the P500 attorneys fees and the P4,000 rent in arrears he needs to pay. The SC ruled that attorneys fees can be legally compensated as it is the litigant, not the lawyer, who is the judgment creditor. Silahis Marketing Corp v. IAC. Silahis asserts its unrealized commission of P22,200 for legal compensation. The SC ruled compensation is not proper where the claim of the person asserting the set-off against the other is not clear nor liquidated. BPI v. CA, Reyes. Reyes had joint accounts with his wife and with his grandma who later died. BPI deducted from deposit account. The SC ruled that compensation shall take place when two persons, in their own right, are creditors and debtors of each other. PNB v. CA, Sapphire Shipping. PNB applied Sapphire remittance to its double credit erroneously made on its account. The SC ruled that a local bank, while acting as local correspondent bank, does not have the right to intercept funds being coursed through it by its foreign counterpart for transmittal and deposit to the account of an individual with another local bank, and thereafter apply the said funds to certain obligations owed to it by the said individual. Mirasol v. CA. Spouses Mirasol claims legal compensation from PNB, financer of PHILEX, on the proceeds of the sale of their export sugar. The SC ruled that under PD 579, neither PNB nor PHILEX could retain any difference claimed by the Mirasols in the price of sugar sold by the 2 firms. Magdalena Estates inc. v. Rodriguez. Spouses Rodriguez claims novation because of payment by the surety. The SC ruled that the mere fact that the creditor receives a guaranty or accepts payments from a third person who has agreed to assume the obligation, when there is no agreement that the first debtor shall be released from responsibility, does not constitute a novation, and the creditor can still enforce the obligation against the original debtor. Reyes v. CA. It was found out that the loan given to BERMIC was the investments made by AFP-MBAI. The SC ruled that the mere circumstance of AFP-MBAI receiving payments from Eleazar, president of BERMIC, who acquiesced to assume the obligation of petitioner under the contract of sale of securities, when there is no clearly no agreement to release petitioner from her responsibility, does not constitute novation, but at most, codebtorship or suretyship. Cochingyan v. R&B Surety. The SC ruled that what the trust agreement did was, at most, merely bring in another person or persons the Trustors to assume the same obligation that R&B was bound to perform under the surety bond because the old debtors were not released. Broadway Centrum v. Tropical Hut. Broadway conceded to a provisional and temporary agreement with Tropical Hut. The latter invokes novation. The SC ruled that the agreement by its own terms was a provisional and temporary agreement to a reduction of Tropicals monthly rental. California Bus Line v. SIHI. California owes Delta, which in turn, owes SIHI. Delta assigned 5 promissory notes to SIHI but Delta later foreclosed Californias chattel mortgages pursuant to a new compromise agreement. California thus refused to pay the promissory notes. The SC ruled that the restructuring agreement merely provided for a schedule of payments and the compromise agreement is invalid as Delta already assigned the 5 PNs. (can stand together principle) Garcia v. Llamas. De Jesus issued a check, which bounced. Garcia contends Llamas acceptance of the bum check is novation. The SC ruled that De Jesus is a solidary obligor from the very beginning. The check was issued precisely for the obligation. Quinto v. People [jewelry] Quinto alleges that there is novation when the jewelry buyers paid directly to Cariaga to settle their liability. The SC ruled that there was no novation as the changes consists only in the manner of payment. Also, novation does not extinguish liability for estafa. Licaros v. Gatmaitan. Licaros entered into a MOA with Gatmaitan whereby the latter would pay for Licaros investment and in return be able to claim the investment proceeds from Anglo-Asean. The MOA was not approved by Anglo-Saxon. The SC ruled that this was a conventional subrogation requiring the consent of Anglo-Asean in order to be perfected. This was evinced by the stipulations contained therein requiring the banks conforme. Astro Electronics Corp. v. PhilGuarantee. Philguarantee paid 70% of Astros loan subject to the condition that it will be subrogated into the rights of the latters creditor. The SC ruled that Astros acquiescence is not necessary nor explicitly stating subrogation in the agreement as this is legal subrogation that occurs by operation of law, and without need of the debtors knowledge. GSIS v. CA. There was a marginal notation on the notarized Deed stating subject to adjustment pending approval of the Board of Trustees. The SC ruled that the respondent is not bound with the notation as the seller cannot unilaterally increase the purchase price previously agreed upon. Manila Railroad Co. v. Compania Transatlantica. There was a mishap in the discharging of the boilers from the steamship. Manila Railroad sued the steamship company, which in turn sued the Atlantic Co. The SC ruled that diligence of a good father of a family is not a defense as Atlantic Co.s obligation is contractual. Atlantic Co. is also not directly liable to Manila Road as an implied contract never arises where an express contract has been made. DKC Holdings Corp v. CA. Bartolome refuses to honor the option contract entered into by his deceased mother on the ground that he is not privy to it. The SC ruled that Art. 1311 clearly applies in this case and that being an heir of his mother, there is privity of interest between him and his deceased mother. What is binding against her is binding against him. 6 Janz Hanna Ria A2013

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Gutierrez Hermanos v. Orense. [public instrument of sale notarized by Orenses nephew confirmed and ratified by Orense in a verbal declaration] It having been proven that he gave his consent to the said sale, the principal must therefore fulfill all the obligations contracted by the agent, who acted within the scope of his authority. Even though Orense had not previously authorized the sale and the consent was given subsequent to the act, this subsequent ratification produced the effect of an express agency and so purified the contract of the flaws it contained at the time it was executed. Gabriel v. Monte de Piedad. [Gabriel a jewelry appraiser who executed a chattel mortgage to secure payment of his erroneous appraisal of jewelries pawned] Freedom to contract is both a constitutional; and statutory right and to uphold this right, courts should move with all the necessary caution and prudence in holding contracts void. Public policy is vague and uncertain; however, IN GENERAL, a contract which is neither prohibited by law nor condemned by judicial decision, nor contrary to public morals, contravenes no public policy. Consideration, legally, is some right, interest, benefit or advantage conferred upon by promisor to which he is Pakistan International Airlines v. Ople. [PIA employed Farrales and Mamasig, agreement is for 3 years. After 1 years, however PIA terminated the two]. The principle of party autonomy in contracts is not an absolute principle. The rule in 1306, CC is that the contracting parties may establish such stipulations that they deem convenient, provided there are not contrary to law, morals, good customs, public order and public policy. Thus, the governing principle is that parties may not contract away applicable provisions of law especially peremptory provisions dealing with matters heavily impressed with public interest. Labor and employment law is clearly such an area and parties are not at liberty to insulate themselves and their relationships from its impact by simply contracting with each other. It is necessary to appraise the contractual provisions invoked in terms of their consistency with applicable Philippine law and regulations. Cui v. Arrelano. [plaintiff is a scholar, transferred another school in last semester, when getting transcript, was refused until he refunds his scholarship cash+. The stipulation in a contract, between a student and the school, that the students scholarship is good only if he continues in the same school, and that he waives his right to transfer to another school without refunding the equivalent of his scholarship in cash, is contrary to public policy and hence, null and void, because scholarships are awarded in recognition of merit and to help gifted students in whom society has an established interest or a first lien, and not to keep outstanding students in school to bolster its prestige and increase its business potential. Arroyo v. Berwin. An agreement by the owner of stolen goods to stifle the prosecution of the person charged with theft, for a pecuniary or other valuable consideration, is manifestly contrary to public policy and the due administration of justice will not be enforced in a court of law. Filipinas Compania de Seguros v. Mandanas. [39 non-life insurance companies assails constitutionality of Art.22 of the Constitution of the Philippine Rating Bureau due restraint of trade+ The Articles purpose is not to eliminate competition, but to promote ethical practice s among non-life insurance companies, although incidentally, it may discharge, and hence eliminate unfair competition through underrating, which in itself, is eventually injurious to the public. Bustamante v. Rosel. [parties entered into loan agreement of 100,000, with a collateral of a portion of the parcel of land of plaintiffs; when loan was about to mature, respondents proposed to buy the collateral, but petitioners refused to sell] A scrutiny of the stipulation of the parties reveals a subtle intention of the creditor to acquire the property given as security for the loan pactum commissorium [proscribed by law]; elements: (1) there is a property mortgaged by way of security for payment of principal obligation; (2) there should be a stipulation for automatic appropriation by the creditor of the thing mortgaged in case of non-payment of the principal obligation within the stipulated period. Dizon v. Gaborro. The true intention of the parties is that respondent Gaborro would assume and pay the indebtedness of petitioner Dizon to DBP and PNB, and in consideration therefor, respondent Gaborro was given the possession, the enjoyment and use of the lands until petitioner can reimburse fully the respondent the amounts paid by the latter to DBP and PNB, to accomplish the following ends: (a) payment of the bank obligations; (b) make the lands productive for the benefit of the possessor, respondent Gaborro; (c) assure the return of the land to the original owner, petitioner Dizon, thus rendering equity and fairness to all parties concerned. In view of all these considerations, the agreement between petitioner Dizon and respondent Gaborro is one of those innominate contracts under Art. 1307 of the New Civil Code whereby petitioner and respondent agreed "to give and to do" certain rights and obligations respecting the lands and the mortgage debts of petitioner which would be acceptable to the bank, but partaking of the nature of the antichresis insofar as the principal parties, petitioner Dizon and respondent Gaborro, are concerned. Florentino v. Encarnacion. The stipulation is part of an extrajudicial partition duly agreed and signed by the parties, hence the same must bind the contracting parties thereto and its validity or compliance cannot be left to the will of one of them (A1311). The stipulation is a stipulation pour autrui a stipulation in favor of a third person conferring a clear and deliberate favor upon him, and which stipulation is merely a part of a contract entered into by the parties, neither of whom acted as agent of the third person, and such third person may demand its fulfillment provided that he communicates his acceptance to the obligor before it is revoked. The requisites are: (1) that the stipulation in favor of a third person should be a part, not the whole, of the contract; (2) that the favorable stipulation should not be conditioned or compensated by any kind of obligation whatever; and (3) neither of the contracting parties bears the legal representation or authorization of third party. To constitute a valid stipulation pour autrui, it must be the purpose and intent of the stipulating parties to benefit the third person, and it is not sufficient that the third person may be incidentally benefited by the stipulation. Coquia v. Fieldmens insurance Co. Although, in general, only parties to a contract may bring an action based thereon, this rule is subject to exceptions, one of which is found in the second paragraph of Article 1311 of the Civil Code of the Philippines, reading: "If a contract should contain some stipulation in favor of a third person, he may demand its fulfillment provided he communicated his acceptance of the obligor before its revocation. A mere incidental benefit or interest of a person is not sufficient. The contracting parties must have clearly and deliberately conferred a favor upon a third person." This is but the restatement of a well-known principle concerning contracts pour autrui, the enforcement of which may be demanded by a third party for whose benefit it was made, although not a party to the contract, before the stipulation in his favor has been revoked by the contracting parties. Constantino v. Espiritu. [Constantino issued a fictitious absolute deed of sale to Espiritu with the intention that she hold the properties in trust for their unborn child. Espiritu instead mortgaged and tried to sell it.] It appears then that, upon the facts alleged by appellant, the contract between him and appellee was a contract pour autrui, although couched in the form of a deed of absolute sale, and that appellant's action was, in effect, one for specific performance. That one of the parties to a contract is entitled to bring an action for its enforcement or to prevent its breach is too clear to need any extensive discussion. Upon the other hand, that the contract involved contained a stipulation pour autrui amplifies this settled rule only in the sense that the third person for whose benefit the contract was entered into may also demand its fulfillment provided he had communicated his acceptance thereof to the obligor before the stipulation in his favor is revoked. Integrated Packaging Corp. v. CA. [IPC failed to comply with its agreement with Philacor because Fil-Anchor incurred delay in delivering the reams of paper] The contract with Philacor is not a pour atrui. Fil-Anchor is not liable because of the principle of relativity of contracts which provides that contracts can only bind the parties who entered into it, and it cannot favor nor prejudice a third person, even if he is aware of such contract and has acted with knowledge thereof. 7 Janz Hanna Ria A2013

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Daywalt v. La Corporacion de los Padres Agustinos Recoletos v CA. [Daywalt accuses La Corporacion of maliciously advising Endencia not to comply with her contract of sale so the corporation can use her land for pasturage.] The stranger cannot become more liable in damages for the nonperformance of the contract than the party in whose behalf he intermeddles. Damages recoverable in case of the breach of a contract are two sorts namely: 1. the ordinary, natural, and in a sense necessary damage; and 2. special damages. Ordinary damages is found in all breaches of contract where there are no special circumstances to distinguish the case from other contracts. Special damages on the other hand is only found in case where some external condition, apart from the actual terms to the contract exists or intervenes, as it were, to give a turn to affairs and to increase damage in a way that the promisor, without actual notice of that external condition, could not reasonably be expected to foresee. So Ping Bun v. CA. [So Ping Bun asked lessor Dee C. Chuan & Sons, Inc. to execute lease contracts in its favor despite the facts that there is a subsisting lease contract between DCCSI and lessee Tek Hua Trading Corp. Where the alleged interferor is financially interested, and such interest motivates his conduct, it cannot be said that he is an officious or malicious intermeddler. Elements of tort interference: 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. Rosenstock v. Burke. *yacht+ The expression I am in position to entertain the purchase of the vessel does not mean a definite offer to purchase but merely an idea that a proposition be made to him which he would accept or refuse according to his deliberation. Malbarosa v. CA. [Malbarosa given a car by corporation; when separated, incentive compensation lessened with value of car; did not accept compensation until after it was already revoked] There was no valid acceptance as the offer was already revoked. Requirements of a valid acceptance: 1. express or implied; 2. absolute, unconditional, and without variance of any sort from the offer; 3. known to the offeror; and 4. made in the manner prescribed by the offeror. Jardine Davies, Inc. v. CA. [generator purchased by Purefoods from FEMSCO by means of bidding; contract revoked in light of Jardine Davies, which did not even bid] There was already a perfected contract between Pure Foods and FEMSCO when the former sent a letter to the latter by which there enumerated basic terms and conditions imposed on the performance rather than perfection of the contract. The letter is the acceptance to FEMSCOs bid offers. Sanchez v. Rigos *Sanchez and Rigos executed Option to Purchase whereby Rigos agreed, promised, and committed to sell to Sanchez the sum of P1,510 a parcel of land. When Rigos refused to accept the P1,510, Sanchez consigned it and filed for specific performance.] The SC decision ruled, putting it differently, that if the option is without a consideration, it is a mere offer to sell which is not binding until accepted. Art. 1324 and 1479 are reconciled. In this case, Sanchez has accepted the offer before revocation Adelfa Properties, Inc. v. CA. *Petitioner entered into an Exclusive Option to Purchase with respondents Jimenez. However, Adelfa put on hold its payment until the respondents could dispose of the civil suit brought against them. While the instrument they really executed is a contract to sell, Adelfa can no longer compel the respondents to sell them the land because of its delay in payment which precisely prompted the latter to rescind the contract. An option is a continuing offer or contract by which the owner stipulates with another that the latter shall have the right to buy the property at a fixed price within a certain time, or under, or in compliance with, certain terms and conditions, or which gives to the owner of the property the right to sell or demand a sale. It is also sometimes called an unaccepted offer. (Distinguish it with a contract to sell as to object of the sale, whether the offer is accepted or not, and whether consignation is necessary in the tender of payment.) Asiain v. Jalandoni [mistake in area of land + sugar produce] generally, if it is a contract of hazard, rescission will not lie. It would also depend whether the sale is one by acre or by description (called sales in gross). This case is not a contract of hazard. There was a mutual mistake as to the quantity of land sold and as to the amount of the standing crop. The use of the phrase more or less may relieve from exactness but not from gross deficiency. Theis v. CA. [Tagaytay lots, error in surveying thus errors in TCTs] The contract of sale may be annulled as mistake was committed by the respondent in selling parcel #4. Such mistake invalidated its consent, meaning the Theis spouses wouldnt have bought the parcel had they known that it wasnt the same parcel sold. rd Heirs of William Sevilla v. Sevilla [donation inter vivos of 3 wife to one stepson] fraud and undue influence that vitiated a partys consent must be established by full, clear and convincing evidence, otherwise, the latters presumed consent to the contract prevails. Ei incumbit probation qui dicit, non qui negat. He who asserts, not he who denies, must prove. Dumasug v. Modelo [no read no right woman convinced that what she was signing was pertaining to what she owed when in fact it was a deed of sale] It is null and void since the consent is null and void on the ground that it was given by mistake (or deceit). Hemedes v. CA. [Kausapin argues that the deed of conveyance in favor of stepdaughter Maxima was in English and that it was not explained to her.] Mere preponderance of evidence is not sufficient to overthrow a certificate of a notary public to the effect that the grantor executed a certain document and acknowledged the fact of its execution before him. Katipunan v. Katipunan [brother convinced mentally retarded brother to go abroad and sell property] the circumstances surrounding the execution of the contract manifest a vitiated consent on the part of the respondent. It was impossible for him to understand the contents of the contract written in English and embellished with legal jargon. Martinez v. HSBC. [Complainant asserts that she agreed to a conveyance of several properties as the defendants made representations that if she does not do it, her husband will spend the rest of his life in Macau or be criminally prosecuted.] Duress was not present as she was able to seek advice from counsel, friends and relatives, and even took advantage of the terms in the contract favorable to her. Hill v. Veloso. [Maximina claims that what she signed was a blank note and that the promissory note to Michael & Co. was filled in. She points to her co-debtor as the culprit.] Granting her defense to be true, what the law contemplates in referring to fraud are the active and passive subjects of the obligation. In this case, Maximina and the co-debtor are one single party against the creditor. The deceit is not one exercised upon the other party but one practiced by a third person. Tuason. v. Marquez. [Tuason bought from Marquez an electric light plant without the latter informing him that the franchise was subsequently canceled.] The SC ruled that there was no fraud as the franchise was not the determining cause of the purchase. It was also still in force and either of them could check its status at the Public Utility Commissioner s Office. Tuason in any case estopped by laches. Rural Bank of Sta Maria, Pangasinan v. CA. Behis executed a deed of Absolute Sale with Assumption of Mortgage in favor of Rayandyan & Arceo (RA) and another Agreement embodying the real consideration of P2.4 million still in favor of RA all in the same day. The Bank claims it would not have entered into an agreement with RA had it known the real consideration. The SC ruled that there was no fraud as such consideration could not have been the determining cause. The Bank entered into the agreement to effect payment on Behis indebtedness and that RA had no legal obligation to disclose the real consideration. Azarraga v. Gay. [Azarraga sold 2 parcels of land to Gay but it turned out that the second parcel was only 60 hectares instead of 98. Gay imputes misrepresentation.]There was no misrepresentation as Gay had ample opportunity to appraise herself of the condition of the land which she purchased. Moreover, Art. 1471 that if the sale is for a lump sum independent of the number or measure, there is no right to increase or decrease proportionately to the area difference as this is a determinate object. 8 Janz Hanna Ria A2013

Obligations and Contracts Prof. E.A. Labitag AY 2009-2010

Trinidad v. IAC. [Trinidad bought a house which turned out to be always flooded.] One who contracts for the purchase of real estate in reliance on the representations and statements of the vendor as to its character and value, but after he has visited and examined it for himself and has had the means and opportunity of verifying such statements, cannot avoid the contract on the ground that they were false and exaggerated. Songco v. Sellner. [Sellner accuses Songco of fraud for miscalculating sugar produce].The representation was only a mere opinion since the cane was still standing in the fields and such quantity could not be known with certainty until milled. Mercado v Espiritu. The appellants, when they entered into a contract of sale of estate with the appellee, actively misrepresented themselves as having reached the age of majority, when in fact they were still minors. Held: The sale of the estate is valid, and they cannot be permitted afterwards to excuse themselves from compliance with the obligation assumed by them or seek their annulment. Braganza v. de Villa Abrille. At the time that the transaction (loan) was made, two of the parties were minors. They did not make it appear in the promissory note that they were not yet of age. Held: Minors have no juridical duty to disclose their inability. In order for them to be liable, the fraud must be actual and not constructive. Mere silence when making a contract as to his age does not constitute fraud. Though not liable, minors should make restitution to the extent that they profited from the money they received (the money they got were used for their support during the Japanese occupation. Rodriguez v. Rodriguez. [Concepcion Felix conveyed ownership of 2 fishponds to her daughter by first marriage, who in turn transferred back the properties to her mother and stepfather making them conjugal. Concepcion now wants the transfer to them voided.] She cannot recover as the fact that prices were not paid does not make the sales inexistent for want of causa. If her purpose was to convert the property to conjugal thereby nd circumventing the prohibition against donations to spouses, then it follows that it was intended that half of the ownership be vested to her 2 husband. In any case, she cannot recover as she is in pari delicto. Suntay v. CA. Suntay sold his land to his nephew for the NARIC application with the condition that he will resell it back to him. His nephew instead mortgaged it. The contract of purchase and sale is void and produces no effect whatsoever where the same is without cause or consideration in that purchase price, which appears thereon as paid, has in fact never been paid. Blanco v. Quasha. *Blanco, special administrator of Elizaldes estate, wants a property disposed to Pares on a sale-lease-back on the ground that it was absolutely simulated to circumvent the ruling of Republic v Quasha which ruled on the Parity Amendment.] In order to determine whether or not the transaction is simulated, there is a need to look into the true intent or agreement of the parties. Blas v. Santos. Maxima Santos executed a document which stated that she would give of all the properties she would receive from her husband to the heirs and legatees named in the will of her husband when she makes her will. The SC ruled that this is valid as it is not a future inheritance, her share in the conjugal assets being already in existence. Future inheritance is any property or right not in existence or capable of determination at the time of the contract, that a person may in the future acquire by succession. Tanedo v. CA. Lazardo Tanedo executed a deed of absolute sale of his share in a certain property which is a future inheritance. The SC ruled that no contract may be entered into upon a future inheritance except in cases expressly authorized by law. The affidavit validating the sale is useless. Liguez v. CA. Salvador Lopez donated land to Conchita Liguez so that her parents would let them have sexual relations. The motive may be regarded as causa when it predetermines the purpose of the contract. The causa is illicit but Conchita is still entitled only up to the extent as it does not prejudice the interest of the wife. [Sir Labitag: should have been in pari delicto] Carantes v. CA [Other heirs contend that the deed of assignment made in favor of Mateo Cervantes is void because there was no consideration and that it was just for the purpose of transacting with the government for the Loakan Airport.] The SC ruled that total absence of consideration renders a contract void but in this case, there was P1.00. Also, if there was fraud, it would only mean that it is voidable and action has prescribed. Buenaventura v. CA. [Some children of Leonardo and Feliciana contend that the deed of sale made in favor of the rest of the children is void for failure to pay and if not, gross inadequacy of price.] The SC ruled that failure to pay the price is different from the lack of such. Moreover, gross inadequacy of price does not affect a contract but may only indicate defect in the consent. There is no requirement that the price be equal to the exact value of the subject matter. Hernaez v. de los Angeles. [Motion actress Marlene Hernaez sued Hollywood Far East Productions for the balance due to her but the latter contends that the law requires in writing for those exceeding P500.] The SC ruled that aside from the fact that the contracts shall be obligatory in whatever form, Art. 1357 states that the contracting parties may compel each other to observe the required form once the contract is perfected. Nowhere in Art. 1358 does it say that the absence of the written for would make the agreement invalid or unenforceable. [Sir: Even assuming that it is needed to be written, the other party has already done his obligation] Garcia v. Bisaya. [Garcia bought from Bisaya land which turned out to be registered in the name of Sandoval. Garcia now wants a reformation.] The court could not reform as Garcia did not allege his true intention. Furthermore, even if the courts do reform, the sale would be ineffective. The proper action is annulment. Bentir v. Leanda. [Leyte Gulf Traders, Inc. entered into a contract of lease with Bentir starting 1968. Leyte now wants a reformation.] The SC ruled that the action for reformation has prescribed. It started in 1968, and not on the alleged extension. Prescription is 10 years. Atilano v. Atilano. [Eulogio Atilano II wants the sale reformed as he discovered that Lot No. 535-E was designated in the contract as Lot No. 535-A which has a bigger area.] The SC ruled that there can be no reformation. When one buys real property, he buys it as he sees it, not by the lot number. The true intention was already followed. Remedy is deed of conveyance. Sarming v. Dy. [The lawyer Atty. Pinili, thinking that the delivered title (5734) was the correct one (4163), drafted the contract of sale using 5734. Upon discovery, the buyer wants reformation.] The SC ruled for reformation as there was a mistake in the designation of the land intended to be sold. Borromeo v. CA. [Villamor stated in a promissory note that he waives prescription and would pay even after 10 years.] The SC ruled that prescription should be counted excluding the first 10 years. The interest of justice and equity cannot be ignored. Kasilag v. Rodriguez. The mortgage of land and the improvements are valid but the antechresis verbally agreed upon is not as it is a real encumbrance which is prohibited by Act No.2874 stating that land acquired under homestead law cant be encumbered for 5 years from issue. The terms, clauses, and conditions contrary to law, morals and public order should be separated from the valid and legal contract and when such separation can be made because they are independent of the valid contract which expresses the will of the contracting parties. UFC v. CA. [Magdalo Franciso invented the Mafran sauce and let UFC to be the only one to use the formula. He got kicked out as Chief Chemist and now wants rescission.] The SC ruled for rescission. This is a substantial and fundamental breach and that what was meant to be returned is not the formula but the use and the right to use Oria v. Mcmicking. Oria Hermanos & Co. sold all its properties to the managers son and nephew to some, Manuel Gonzales, a student. The SC ruled that the transaction is fraudulent. Badges of fraud: (1) consideration fictitious or inadequate; (2) transfer after suit has begun or pending; (3) sale on credit to an insolvent debtor; (4) evidence of large indebtedness or complete insolvency; (5) transfer of all or nearly all of debtors property, esp. when he is insolvent or greatly embarrassed financially; (6) transfer is made between father and son, when there are present other of the above circumstances; (7) failure of vendee to take exclusive possession of all the property. 9 Janz Hanna Ria A2013

Obligations and Contracts Prof. E.A. Labitag AY 2009-2010

Siguan v. Lim. Lim executed a deed of donation in favor of her children. Siguan executes an accion pauliana. The SC ruled that rescission is a subsidiary remedy and in this case there was no proof that Siguan has exhausted all other means to obtain satisfaction of her claim. It does not appear also that the donor did not leave adequate property for the credits. Lims prior conviction of estafa on another case is not relevant as the petitioner there is not a party to this accion pauliana. Singsong v. Isabela Sawmill. Various creditors of Isabela Sawmill want the Assignment of Rights with Chattel Mortgage nullified on the ground of fraud. The SC ruled that as a rule, a contract cannot be assailed by one who is not a party thereto except when a contract prejudices the rights of a third person. In this case, they can annul the assignment. Cadwallader & Co. Smith, Bell & Co. Peabody told the Pacific that the best possible offer is $12 for the cedar piles when he sold it for $19. The SC ruled for annulment as there was fraud. Commission under annulled contract not allowed. Uy Soo Lim v. Tan Unchuan. Uy Soo Lim is an illegitimate son who received 7/9 of his fathers property. While a minor, he sold his share to his halfsister but 3 years after reaching majority, sought rescission. The SC ruled against rescission. Conditions: 1. election to rescind must be within a reasonable time after majority; and 2. all consideration in minors possession be returned. The disposal of any part of the consideration after the attainment of majority imports an affirmation of the contract. PNB v. Phil. Vegetable Oil Co. PNB entered into a mortgage with Phil. Vegetable Oil when the latter is under the formers receivership. The SC ruled that the mortgage is null. PNB could legally secure no new mortgage by the accomplishment of documents before its officials and the PVO officials while the property of the latter was in custodia legis. Limketkai Sons Milling Inc. v. CA. [BPI backed out from a sale to Limketkai as it turned out, they sold the land to National Book Store.] The SC ruled there was a perfected contract as there was a concurrence of offer and acceptance, on the object, and on the cause thereof. The fact that the deed of sale still had to be notarized does not mean that no contract had already been perfected. If the law requires a document or other special form, as in the sale of real property, the contracting parties may compel each other to observe that form, once the contract has been perfected. The cross-examination on the contract is deemed a waiver of the defense of the Statute of Frauds. Moreover, under Art. 1403, an exception to the unenforceability of contracts pursuant to the Statute of Frauds is the existence of a written note or memorandum evidencing the contract. The memo may be found in several writings, not necessarily in one document. The SC also said the badges of fraud is not exclusive. Swedish Match v. CA. [Swedish Match had a series of communications with ALS Corp. The communications mainly consisted of Swedish Match recommending a comprehensive review of the Phimco shares.] The SC ruled that the memos are not evidence of a sale. The letter does not indicate the price or the mode of payment. To satisfy the Statute of Frauds, the note must be complete in itself and cannot rest partly in writing and partly in parol. The note or memo must contain the names of the parties, the terms and conditions of the contract, and a description of the property sufficient to render it capable of identification.xxxThe Statute simply provides the method by which the contracts enumerated therein may be proved but does not declare them invalid because they are not reduced to writing.xxxThe Statute is not applicable to those which have been consummated either totally or partially. Carbonnel v. Poncio. [Poncio refused to execute conveyance pursuant to a sale. Carbonnel alleges partial consummation which would not bring the case within the Statute of Frauds but the TC still dismissed.] The SC ruled that when the party concerned has pleaded partial performance, such party is entitled to a reasonable chance to establish by parol evidence the truth of the allegation, as well as the contract itself. Ubarra v. Mapalad. [Judge Mapalad dismissed a criminal case 90-4056 because they were in pari delicto.] The SC ruled that this is a doctrine in civil law and to apply it to criminal cases would be to establish a dangerous doctrine which would irreparably weaken the very foundations of the criminal justice system and frustrate the administration of justice. Modina v. CA. [Modina questioned the apparent sale between spouses Ramon and Merlinda and contended that they are in pari delicto. Merlinda contended that Ramon used fraudulent means to obtain the lands title.] The SC ruled that an exception to the in pari delicto rule is when it is invoked with respect to inexistent contract. Since one of the characteristics of a void contract is that it does not produce any affect, Merlinda can recover the property who never acquired title thereto (except of course if purchaser is a buyer in good faith). A purchaser in good faith is one who buys the property of another w/o notice that some other person has a right to or interest in such property and pays a full and fair price at the time of the purchase or before he has notice of the claim or interest of some other person in the property. Rellosa v. Gaw Cheen Hum. [Rellosa sold land to Chinese national Gaw Chee contrary Japanese Military Admin. Serei No. 6 and the Constitution.] The SC ruled they are in pari delicto. They knew or presumed to knew that what they did was contrary to law. Phil. Banking Corp. v. Lui She. [Lessee Wong took care of lessor Justina and in gratitude, the latter expanded the area of lease and lease period to 99 years. Her will ordered her heirs to respect the lease.] The SC that although there was nothing necessarily illegal, collectively they reveal a pattern to circumvent what the Constitution directly prohibits (transfer to alien). Even if they are in pari delicto, Art. 1416 allows the recovery of the property. Frenzel v. Catito. Australian Frenzel had an amorous relationship with Catito and bought properties in the latters name because of the prohibition against aliens to own such. He later however wanted to recover the contract. The SC ruled they are in pari delicto. The sale to Frenzel is illegal per se. Villaroel v. Estrada. [Heir Juan executed note in 1930 owning up his parents debt despite prescription.] The SC ruled he is liable as the action is not based on the original obligation but on that which he contracted in 1930. Consideration of moral obligation is sufficient. Fisher v. Robb. *Robb felt morally responsible for the second payments in Philippine Greyhound Club. Fisher wants all his money from him.+ The SC ruled mere moral obligations/conscientious duties arising wholly from ethical motives will not furnish a consideration for an executory promise. Essential element of consideration lacking. Manila Lodge 761 v. CA. Tarlac Development Corp. filed a case when the City of Manila exercised its right to repurchase but the trial court ruled that the land was of public domain, TDC in bad faith, and both are in estoppel. The SC ruled that the government is never estopped by the mistakes of its agents. Estoppel does not operate/apply to validate a contract that is prohibited by law or against public policy. Miguel v. Catalino. [The SC ruled that while the sale of Bacaquio to Catalino Agyapao is null and void for lack of executive approval, the land should remain with Catalino as the inaction of the heirs of Bacaquio for 34 years justifies the defendants equitable defense of laches. Salao v. Salao. There was allegation that the fishpond was held in trust by Ambrosia as the share of Benitas father in the joint venture. The SC ruled that there was no trust as not a scintilla of documentary evidence was presented. Parol evidence cannot be used to prove an express trust concerning realty. Fabian v. Fabian. The SC stated that if the property is acquired through fraud, the person obtaining it is considered a trustee of an implied trust for the benefit of the person from whom the property comes. In constructive trusts the rule is that laches constitute a bar to actions to enforce the trust, and repudiation is not required, unless there is a concealment of the facts giving rise to the trust. Bueno v. Reyes. The appellants in this case aver that the trust was not implied but express and that even if implied, implied trusts are imprescriptable. The SC ruled that an action for reconveyance prescribes and that it starts from the discovery of the bad faith or mistake. 10 Janz Hanna Ria A2013

Obligations and Contracts Prof. E.A. Labitag AY 2009-2010

Tamayo v. Callejo. The SC ruled that where an implied trust was created in favor of Domantay by the erroneous inclusion in the Tamayo brothers' certificate of title of the parcel of land formerly sold by their parents to Domantay (who in turn sold it to Aurelio Callejo) and on June 28, 1918, Mariano Tamayo, on his behalf and that of his brother Marcos, expressly recognized the said previous sale by their parents to Domantay, such express recognition had the effect of imparting to the aforementioned trust the nature of an express trust which is not subject to the statute of limitations, at least, until repudiated, in which event the period of prescription begins to run only from the time of the repudiation. In the instant case, repudiation took place only in early June, 1952, when Mariano Tamayo rejected Callejo's demand that the disputed portion be excluded from TCT No. 5486 in the former's name. When the instant case for reconveyance was filed on June 25, 1952, the period of prescription had barely begun to run.

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