VOIDABLE CONTRACT

Art. 1390- 1402

JOEL G. AYON
Obligation and Contract
Meaning of Voidable Contracts
Voidable or Annullable Contracts – are
those which possess all the essential
requisites of a valid contract but one of the
parties is incapable of giving consent, or
consent is vitiated by mistake, violence,
intimidation, undue influence, or fraud.

BINDING FORCE OF VOIDABLE CONTRACTS

They are valid and binding between the

parties unless annulled by a proper action in
court by the injured party. Once ratified , they
become absolutely valid and can no longer
be annulled.
Kinds of Voidable Contracts

1. Legal incapacity to give consent,

where one of the parties is incapable of
giving consent to the contract; or

2. Violation of consent , where the

vitiation is done by mistake, violation,
intimidation, undue influence, or fraud.
Meaning of Annullment

Annulment is a remedy provided by law,

for reason of public interest, for the
declaration of the inefficacy of a contract
based on a defect or vice in the consent of
one of the contracting parties in order to
restore them to their original position in
which they were before the contract was
executed.
Art. 1390.
The following contracts are voidable or
annullable, even though there may have been
no damage to the contracting parties:

• (1) Those where one of the parties is

incapable of giving consent to a contract;
• (2) Those where the consent is vitiated by
mistake, violence, intimidation, undue
influence or fraud.

• These contracts are binding, unless they are

annulled by a proper action in court. They are
susceptible of ratification.
 Case: Katipunan vs. Katipunan, Jr. (375 SCRA 199)
PETITIONER: Miguel Katipunan, Inocencio Valdez, Edgardo Balguma and
Leopoldo Balguma, Jr.
RESPONDENT: Braulio Katipunan, Jr.
FACTS:
Annulment of a Deed of Absolute Sale.

Braulio Katipunan, Jr. owns a 203 square meter lot and a five-door apartment in
San Miguel, Manila and is registered under his name in the Registry of Deeds in
Manila.

Braulio, herein respondent, was assisted by his brother, petitioner – Miguel

Katipunan, into entering a Deed of Absolute Sale with brothers Edgardo Balguma,
Leopoldo Balguma, Jr., represented by Atty. Leopoldo Balguma, Sr. – for the
subject property for a consideration of 187,000PHP.
 Case: Katipunan vs. Katipunan, Jr. (375 SCRA 199)

Respondent filed a complaint for the annulment of the Deed of Absolute Sale and
averred that the petitioners convinced him to work abroad and that through
insidious words and machinations, they made him sign a document that he
thought was a contract of employment. This document turned out to be the Deed
of Absolute Sale. He also claimed that he did not receive the consideration stated
in the contract. He argued that the petitioners, with evident bad faith, conspired
with one another in taking advantage of his ignorance. The RTC dismissed this
complaint on grounds that the respondent failed to prove his causes of action
since he admitted that he obtained loans from the Balgumas, he signed the Deed
of Absolute sale and he acknowledged selling the property and that he stopped
collecting rentals.

On the other hand, the CA gave credit to the testimony of Dr. Ana Marie Revilla, a
psychiatrist at the UP-PGH, as an expert witness – explaining that the respondent
is slow in comprehension and has a very low IQ. They ruled that the contract
entered into by respondent and petitioners was voidable pursuant to the
provisions of Article 1390 of the NCC. The petitioners filed a MFR but was denied.
Hence, this petition.
 Case: Katipunan vs. Katipunan, Jr. (375 SCRA 199)
ISSUE:
Whether the contract entered into by Braulio Katipunan, Jr. and Atty Leopoldo
Balguma, Jr. is voidable.

HELD:

Yes. The contract entered into by respondent and petitioners was voidable
pursuant to the provisions of Article 1390 of the NCC.
A contract of sale is born from the moment there is a meeting of minds upon the
thing which is the object of the contract and upon the price. This meeting of the
minds speaks of the intent of the parties in entering into the contract respecting
the subject matter and the consideration thereof. Thus, the elements of a
contract of sale are consent, object, and price in money or its equivalent. Under
Article 1330 of the Civil Code, consent may be vitiated by any of the following:
(a) mistake, (2) violence, (3) intimidation, (4) undue influence, and (5) fraud.
The presence of any of these vices renders the contract voidable.
 Case: Katipunan vs. Katipunan, Jr. (375 SCRA 199)

The circumstances surrounding the execution of the contract

manifest a vitiated consent on the part of respondent. Undue
influence was exerted upon him by his brother Miguel and
Inocencio Valdez (petitioners) and Atty. Balguma. It was his
brother Miguel who negotiated with Atty. Balguma. However, they
did not explain to him the nature and contents of the document.
Worse, they deprived him of a reasonable freedom of choice. It
bears stressing that he reached only grade three. Thus, it was
impossible for him to understand the contents of the contract
written in English and embellished in legal jargon.
Art. 1391.
The action for annulment shall be
brought within four years.

• This period shall begin:

• In cases of intimidation, violence or undue
influence, from the time the defect of the
consent ceases. In case of mistake or fraud,
from the time of the discovery of the same.
• And when the action refers to contracts
entered into by minors or other incapacitated
persons, from the time the guardianship
ceases. (1301a)
 FELIX ULLMAN, plaintiff-appellee,
vs.
VICENTE HERNAEZ, defendant-appellant.
FACTS:

Vicente Hernaez contracted a debt in favor of Felix Ullman on April 5, 1900,

amounting to 3,525 pesos Mexican currency, to be paid says Hernaez, “as soon
as I receive the portion that as an heir must come to me from the estate of
Juana Espinosa, widow of Hernaez: without prejudice to paying on it, during the
time that may elapse until I get possession of said property, interest at six per
cent a year, but not, however, compound interest.”
On June 2, 1913, Ullman filed suit against Vicente Hernaez, alleging therrein,
as the fifth fact:

‘That the defendant did on January 5, 1913, cede, alienate, and convey to
Rosendo Hernaez for the sum of twenty-five thousand pesos (P25,000)
Philippine currency, all his rights and rights of action in the property left by the
deceased Juana EspiAnosa.
This fact was expressly admitted by the defendant in the agreement of facts.
Moreover, the instrument of indebtedness was inserted in the complaint and
has not been denied under oath in the reply.
 FELIX ULLMAN, plaintiff-appellee,
vs.
VICENTE HERNAEZ, defendant-appellant.

ISSUES: Can the right of action for nullity of the defendant prosper?

HELD:

No. True it is that the defendant lacked three months and fifteen days when
he executed the note for the sum stated, the price of some jewelry he had
bought from the plaintiff; but the attained his majority on July 20 of the same
year 1900, and he did not then nor in the four years following attempt to
enforce the nullity that he now assigns as a ground of error.
The right of action for nullity shall only last four years . . . When it refers to
contracts executed by minors or incompetents, from the date when they
were released from guardianship. (Civil Code, art. 1301.)
Art. 1392 Ratification extinguishes the
action to annul a voidable contract.
(1309a).

MEANING AND EFFECT OF RATIFICATION

1.) Ratification means that one voluntary

adopts or approves some defective or
unauthorized act or contract which, which
without his subsequent approval or consent,
would not be binding on him. It indicates an
intention on the part of the ratifier to be
bound to the provisions of the contract.
MEANING AND EFFECT OF RATIFICATION

2.) Ratification cleanses the contract from

all its defects from the moment it was
constituted. (Art. 1396.) The contract thus
becomes valid. (Art. 1390.) Hence, the action
to annul is extinguished. (Art. 1392).
Art. 1393.

Ratification may be effected expressly

or tacitly. It is understood that there is a tacit
ratification if, with knowledge of the reason
which renders the contract voidable and such
reason having ceased, the person who has a
right to invoke it should execute an act which
necessarily implies an intention to waive his
right. (1311a)
Kinds of Ratification

A.) Express – when the ratification is

manifested in words or in writing; or

B.) Implied or Tacit - it may take diverse

forms, such as by silence or acquiescence;
by acts showing adoption or approval of the
contract; or by acceptance and retention of
benefits from flowing therefrom.
Requisites of Ratification

A.) The requisites for implied ratification are

the following:

a.) There must be knowledge of the

reason which renders the contract voidable;

b.) Such reason must have ceased; and

c.) The injured party must have

executed an act which necessarily implies an
intention to waive his right.
EXAMPLES:

1.) S, a minor, sold his land to B. Upon

reaching the age of majority, S with full
knowledge of his rights in the premises,
instead of repudiating the contract, disposed
of the greater part of the proceeds, or
collected the unpaid balance of the purchase
price from B.

In this case, there is tacit ratification by S.

EXAMPLES:

2.) In an action for annulment of a contract to

sale , S alleged that the sale was executed by
him through the threat and intimidation of B.
It appears, however, that S deposited the
check for the purchase price and withdrew
the money from time to time.

THE CONTRACT IS DEEMED RATIFIED.

B. The requisites for express ratification are the

same as those for implied ratification except
that the former is effected expressly.
 Petrona Tacalinar plaintiffs-appellants,
Lorenzo Corro Y Manalili, Defendant- appellees, defendant-
appellee
FACTS:

On July 9, 1913, counsel for the widow and children of Leoncio Alfon y
Visitacion filed a written complaint in the Court of First Instance of Occidental
Negros alleging as a cause of action that Leoncio Alfon, during his lifetime, was
the owner in fee simple of an estate known as the “Santo Niño Hacienda ,”
situated in Guadalupe, Calatrava, now pueblo of San Carlos, Occidental
Negros, (together with a steam engine, grist mill and certain dwelling houses for
laborers) the metes and bounds of which estate are set forth in paragraph 3 of
the complaint; that in the year 1897 Leoncio Alfon, through his daughter
Asuncion Alfon, leased the said Santo Niño Hacienda to Lorenzo Corro y
Manalili for the sum of P1,500, the lessee Corro taking possession of the said
leased property in that year and holding the same until 1909 when he unlawfully
sold it to his codefendant Juan Perez

.
 Petrona Tacalinar plaintiffs-appellants,
Lorenzo Corro Y Manalili, Defendant- appellees, defendant-
appellee
that year and holding the same until 1909 when he unlawfully sold it to his
codefendant Juan Perez who was in possession thereof at the time of the filing
of the complaint; that the lessee Lorenzo Corro had paid only the sum of
P1,500 as the rent for the first year, and had not paid the rent for the
subsequent years, notwithstanding the demands made upon him by the
plaintiffs; that the latter had suffered damages in the amount of P10,000, as
rents unpaid by the said lessee during the last seven years of the lease; and
that the present possessor of the said hacienda , Juan Perez, refused to deliver
to the plaintiffs the possession thereof and to pay them the amount of damages,
P6,000, which by his conduct he had caused to the plaintiffs. The latter’s
counsel therefore prayed the court to render a judgment restoring the
ownership and possession of the Santo Niño Hacienda to the plaintiffs and
ordering Juan Perez y Gonzalez to deliver and to return the possession of the
said hacienda , in addition to the payment of the damages demanded; and
ordering Lorenzo Corro to pay to the plaintiffs the sum of P10,000 as damages.

.
 Petrona Tacalinar plaintiffs-appellants,
Lorenzo Corro Y Manalili, Defendant- appellees, defendant-
appellee

defendant, Juan Perez y Gonzalez, denied each and all of the allegations of the
foregoing complaint and in special defense set forth that the Santo Niño
Hacienda , measuring 40 hectares, as part of other conjugal partnership
property, belonged to Lorenzo Alfon and his wife, Petrona Tacalinar, the first of
whom about the year 1898 had broken in jail and was a fugitive from justice;
that in the said year 1898 his wife, Petrona Tacalinar, through her daughter
Asuncion whom she duly authorized for the purpose, sold the said hacienda to
Lorenzo Corro for the sum of P3,500; that the said Corro paid P2,000 in cash
and gave the vendor his promissory note for the balance of P1,500; that
subsequently, on April 27, 1899, the fugitive husband Leoncio Alfon approved
and ratified the sale, collected from the wife of the purchaser the sum of P800
on account of the promissory note for P1,500 and later on obtained the balance
of P700 in a draft drawn on the Compania General de Tabacos de Filipinas,
which sums were received by the said Leoncio Alfon, as attested by the
receipts issued by him,
 Petrona Tacalinar plaintiffs-appellants,
Lorenzo Corro Y Manalili, Defendant- appellees, defendant-
appellee

LAWS

Article 1393 Ratification may be effected expressly or tacitly. It is understood

that there is a tacit ratification if, with knowledge of the reason which render the
contract voidable and such reason having ceased , the person who has a right
to invoke it should execute an act which necessarily implies an intention to
waive his rights.
 Petrona Tacalinar plaintiffs-appellants,
Lorenzo Corro Y Manalili, Defendant- appellees, defendant-
appellee

HELD:

1. Although there may have been some defect in the contract of sale, by virtue
of which the defendants Corro and Samorro acquired the Santo Niño
Hacienda , the subsequent approval made by its owner Leoncio Alfon purged
the contract of such defect.
2. The owner of the hacienda in question, may not have authorized any one,
not even his wife and children, to sell his property, yet after he was informed of
the said conveyance, if instead of demanding its annulment he proceeded to
collect in installments the amount of the promissory note for P1,500,
3. The ratification or confirmation of a contract by the person in whose name
the contract was made by a third party who had no authority therefor, validates
the act from the moment of its celebration, not merely from the time of its
confirmation, for the confirmation operates upon or applies to the act already
performed.
Art. 1394.

Ratification may be effected by the

guardian of the incapacitated person. (n)

WHO MAY RATIFY:

1.) A contract entered into by an

incapacitated person may be ratified by:

a.) the guardian; or

b.) the injured party himself provided he is
already capacitated.
WHO MAY RATIFY:

2.) In case the contact is voidable on the

ground of mistake, etc., ratification can be
made by the party whose consent is vitiated.
 Marciano Escoto-plaintiff-appellant vs.
Benito M. Arcilla Et al – Defendants -appellees

FACTS:

a.) May 2, 1932, in a document (Exhibit 5) termed “Escrotora de Venta cen Pacto de retro”, Manuel
Tangcungco(deceased) purported to convey two parcels of land situated in Angeles, Pampanga to
Jacinto Hilario in Consideration of P3,500.
b.) The contract provide that the vendor would remain in possession of the parcels and could
purchase them in two years and that in the meanwhile he was to pay as lessee in the sum P420 a
year.
c.) May 5, Tancungco conveyed to Amada Hilario of another parcel, residential under the same
terms as the except that he purchase price was P2,000 and the rent was P240 yearly.
d.)October 18, 1939, Amada Hilario died, leaving as heirs her husband and children who are now
defendants and appellees .
e.) Having failed to purchase the lands, Tangcungco continued in the possession thereof paying the
agreed amounts for their use and occupation.
g.) July 18, 1940, Benito M. Arcilla and his children brought a possessory action in justice of the
peace of court of Angeles for unlawful detainer.
h.) July 19, the parties submitted a compromise agreement whereby that the plaintiff allowed the
defendants the right to repurchased the lands in question for the sum of P700 within 2 years from
the date of said agreement, on condition that Tangcungco would pay them P500 within six months.
i.) February 10, 1941, tangcungco did not pay either the sum of P7,000 or P500 within the period
stipulated, the parties renewed their agreement known as exhibit A.
 Marciano Escoto-plaintiff-appellant vs.
Benito M. Arcilla Et al – Defendants -appellees

j.) March 24, 1941, Arcilla appointed as administrator of his wife estate and named guardian for the
minors on April 2, 1941.
k.) August 2, 1941, Arcilla filed motion in the intestate proceeding.
l.) August 11, 1941, judge Pedro Magsalin said that he could not sanction the sale becouse
Tancungco was a chinese citizen and so denied the request.
m.) August 18, 1941, Arcilla demanded on September 9, 1941 that Tancungco vacate the properties
with a wishing that will be charged monthly rent of P 150 instead of P55 beginning October.
n.) Manuel Tancungco died May 12, 1943, his widow was appointed administratrix of his estate.
o.) December 6, 1943, the court (judge Pablo Angeles David) authorized Arcilla as administrator of
his wife’s estate to sell the lands under consideration to tancungco’s widow within the period of ten
days for the sum of P6,750 Arcilla paid.
p.) February 29, 1944, the honorable made a preemptory direction to Arcilla to execute a deed of
conveyance in favor of Tancungco’s estate.
q.) Arcilla instituted certiorari proceedings before the S.C. attaching their validity on the grounds that
the heirs of A manda Hilario had not been notified the propose sale required by the Rule of Court
and granted by S.C..
r.) April 16, 1947, Tancungco’s widow commenced action against Benito M. Arcilla to compel to get
from the court authority to sell the lands for P6,750.00.
s.) July 18, 1948, the complaint was amended by including Amada Hilario’s children as Arcilla’s co-
defendant.
t.) The court dismissed the action and ordered the plaintiff to deliver the possession of the disputed
lots to Arcilla with costs.
 Marciano Escoto-plaintiff-appellant vs.
Benito M. Arcilla Et al – Defendants -appellees
ISSUE:

Whether or not that the plaintiff can represent as guardian of the children
agreeable to the projected side to defendant.?

HELD:
Yes, Our (S.C.) considered opinion is that the trial court took a strict too
legalistic view of exhibit A, entirely overlooking its antecedents. The view that in
our judgment , best accords with good conscience and with the intention of
parties is that this compromise was a part of the original contract of “pacto de
retro” sale. It directly stemmed from the original sale and was executed in
consideration of Tancungco’s recognized equities in the lands. Exhibit “A” and
the compromise agreement in the justice of the peace court were in point of fact
and in spirit an extension and continuation of the period of repurchase provided
in the initial contract. The fact that period had expired was no legal obstacle to
the granting to the seller; if the purchaser so wished of renewed opportunity to
redeem or repurchase the subject matter of the sale, so long as the combined
period did not exceed ten years.
 Marciano Escoto-plaintiff-appellant vs.
Benito M. Arcilla Et al – Defendants -appellees

HELD:

It is said that the minors were not parties to exhibit A, however it has been seen
that through their duly appointed guardian “ad litem” they ratified that the
compromised in open court, when not only the guardian but the oldest two of
the children as well personally appeared and expressed their conformity to the
proposed sale. This ratification validate the agreement effectively as if the
minors or their guardian ad litem had signed it. Lastly it said that Tancungco
sold his right to the lands in litigation to Dr. Bundalian and that he or his heirs no
longer have any share or interest in his properties.
The judgment of the CFI of pampanga is reversed, on the defendant are
ordered to execute a deed of conveyance covering the lost described in the
complaint in favor of the plaintiff upon payment by her of P6,750.00 which she
shall make within 30 days from the date this decision becomes final and pay the
cost.
Art. 1395.

Ratification does not require the

conformity of the contracting party who has
no right to bring the action for annulment.
(1312)
CONFORMITY OF GUILTY PARTY
TO RATIFICATION NOT REQUIRED

Ratification is unilateral act by which a

party waives the defect in his consent. The
consent of the guilty party is not required ;
otherwise; he can conveniently disregard his
contract by the simple expedient of refusing
to give his conformity.
Art. 1396.

Ratification cleanses the contract from

all its defects from the moment it was
constituted. (1313)

EFFECT OF RATIFICATION RETROACTIVE

Ratification cleanses the contract from all

its defects(Art. 1390) from the moment it was
executed. It extinguishes the right of action to
annul. (Art. 1392.) In other words, the effect of
ratification is to make the contract valid from
the inception subject to the prior rights of
third persons.
EXAMPLE:

1.) B forced S to sell the latter’s horse.

Later, the horse gave birth to a colt. If S
should ratify the contract after the birth of the
colt , who is entitled to the colt?
EXAMPLE:

S, because, ratification has a retroactive

effect. It validates the contract from the date
of its execution.

If the horse had been sold by B to C who

acted in good faith, the subsequent
ratification by S of the sale to B cannot
prejudice C.
 TANG AH CHAN and his wife KWONG KAM KOON, plaintiffs-appellants,
vs.
EDUARDO B. GONZALEZ, HELEN DAHLKE and her husband A.H.
DAHLKE, defendants-appellees.
FACTS:

On July 28,1924, Eduardo B. Gonzalez, as the result of negotiations conducted by

the broker, Mrs. Helen Dahlke, conveyed to Tang Ah Chan and his wife Kwong
Kam Koon three parcels of land contiguous to each other of an aggregate area of
5,635.40 square meters for the sum of P106,000. Of this amount, Tang Ah Chan
paid P6,000 in cash. To secure the payment of the balance of P100,000, Tang Ah
Chan mortgaged to Gonzales the land thus conveyed and another property
located on Calle Echague in the City of Manila. The interest on the mortgage was
paid up to and including December, 1924, but since that time Tang Ah Chan has
been in default.

.
 TANG AH CHAN and his wife KWONG KAM KOON, plaintiffs-appellants,
vs.
EDUARDO B. GONZALEZ, HELEN DAHLKE and her husband A.H.
DAHLKE, defendants-appellees.

The broker Dahlke delivered to Tang Ah Chan at the beginning of the

negotiations a blueprint plan of the land with the border cut off so that Tang
Ah Chan would not know who the owner was, and this plan showed the
property to be at the mouth of the Estero San Antonio Abad and some
distance from Fort San Antonio Abad. This is admitted by all the parties and
is inconsistent with the theory of fraud.

Mr. Tang Ah Chan asked Emilio Pacheco why he did not prolong the line
which is marked by point 2 that is to say, the monument No. 2 of the land
and line 3 of lot 1, why it was not prolonged parallel to the water of the sea.
Pacheco told Chan that that portion enclosed by that line of the point 3 of lot
1, 13 of lot 3, and 5 of lot 3, the portion between those points and the sea
was not included in his property and for that reason I could not include it in
that location.

.
 TANG AH CHAN and his wife KWONG KAM KOON, plaintiffs-appellants,
vs.
EDUARDO B. GONZALEZ, HELEN DAHLKE and her husband A.H.
DAHLKE, defendants-appellees.
ISSUES: Can the action for the rescission of the contract on the ground of deceit
prosper?

HELD: No. The case comes squarely within the purview of the provisions of the Civil
Code under the subject of Nullity of Contracts which pertain to ratification. Codal
article 1309 provides: “The action of nullity is extinguished from the moment the
contract may have been validly ratified.” Article 1311 following provides: “Ratification
may be either express or implied. It shall be deemed that there is an implied
ratification when a person entitled to avail himself of any ground for the annulment of
the contract should, with knowledge of its existence and after it has ceased, do
anything which necessarily implies an intention to waive such right.” Finally comes
article 1313 which provides: “Ratification purges the contract of all defects to
which it may have been subject as from the moment it was entered into.” It
results, therefore, that after a contract is validly ratified, no action to annul the same
can be maintained based upon defects relating to its original validity. (Gutierrez
Hermanos vs. Orese [1914], 28 Phil., 571; Vales vs. Villa [1916], 35 Phil., 769.) With
this state of the facts and the law, the case is essentially different from Gomez
Marino vs. Linton ([1924], 45 Phil., 652),

.
 TANG AH CHAN and his wife KWONG KAM KOON, plaintiffs-appellants,
vs.
EDUARDO B. GONZALEZ, HELEN DAHLKE and her husband A.H.
DAHLKE, defendants-appellees.

,for while in the latter case the defendants were deceived as to the true boundaries
of the land, it also appeared that the plaintiff could not make a good title to all of the
land within the proposed boundaries, while the defendants never ratified the sale.
The present case is more nearly akin in principle to Tacalinar vs. Corro ([1916], 34
Phil., 898), and Ruhl vs. Mott ([1898], 120 CAl., 668).
Before the sale was made, the purchaser had every opportunity to inform himself as
to the true location of the property. But with the plan of the land in his possession, the
purchaser was content to accept this information as sufficient. His failure to check
the truth of the manifestations made by the broker and the vendor which might
readily have been ascertained by ordinary care and attention, discloses either
acquiescence or negligence. Any acts evincive of an intent to abide by the contract,
and in this instance there are a number of such acts, are evidence of the affirmance
of the contract and of a waiver of the right of rescission. There is ratification of the
contract where, with the knowledge of the true nature of the transaction before him or
with means available to obtain that knowledge, the party alleged to be defrauded
performs his part of the contract. That terminates the right to rescind.

.
Art. 1397.

The action for the annulment of

contracts may be instituted by all who are
thereby obliged principally or subsidiarily.
However, persons who are capable cannot
allege the incapacity of those with whom they
contracted; nor can those who exerted
intimidation, violence, or undue influence, or
employed fraud, or caused mistake base their
action upon these flaws of the contract.
(1302a)
Party Entitled to bring an action to
annul

Requisites for the exercise of

annulment of contract:

1.) Plaintiff has an interest in the contract (see

Art. 1311.), and

2.)The victim must be the one to seek

annulment.
RIGHTS OF STRANGERS TO BRING
AN ACTION

Strangers have no rights or personality

to bring the action for they are not obliged by
the contract principally or subsidiarily,
unless they can show detriment which would
positively result to them from the contract in
which they had no intervention or
participation.
EXAMPLES:

1.) S sold a parcel of land to B. The

consent of S was vitiated by fraud.
Subsequently, S sold the same lot to C.

In this case, C can bring an action to

annul the sale.
Art. 1398.

An obligation having been annulled, the

contracting parties shall restore to each
other the things which have been the subject
matter of the contract, with their fruits, and
the price with its interest, except in cases
provided by law.

• In obligations to render service, the value

thereof shall be the basis for damages.
(1303a)
DUTY OF MUTUAL RESTITUTION UPON
ANNULLMENT

1.) If the contact is annulled, the parties,

as a general rule, must restore to each other (a)
subject matter of the contract with its fruits and
(b) the price thereof with legal interest.

2.) In personal obligations where the

service had already been rendered, the value
thereof with the corresponding interest, is the
basis for damages recoverable from the party
benefited the service.
 THE MUNICIPALITY OF CAVITE, plaintiff-appellant, (Art 1398 JN Robillon)
vs.
HILARIA ROJAS and her husband TIUNG SIUKO, alias SIWA, defendants-
appellees.

FACTS:

March 14, 1912, the provincial fiscal of Cavite, representing the

municipality of that name, filed a complaint in the Court of First Instance of
said province alleging that the plaintiff municipal corporation, duly
organized and constituted in accordance with Act No. 82, and as the
successor to the rights s aid entity had under the late Spanish
government, and by virtue of Act No. 1039, had exclusive right, control
and administration over the streets, lanes, plazas, and public places of the
municipality of Cavite; that the defendants, by virtue of a lease secured
from the plaintiff municipality, occupy a parcel of land 93 square meters in
area that forms part o the public plaza known under the name of Soledad,
belonging to the municipality of Cavite.

.
 THE MUNICIPALITY OF CAVITE, plaintiff-appellant, (Art 1398 JN Robillon)
vs.
HILARIA ROJAS and her husband TIUNG SIUKO, alias SIWA, defendants-
appellees.

. The defendants having constructed thereon a house, through payment to the plaintiff
for occupation thereof of a rental of P5,58 a quarter in advance, said defendants being
furthermore obligated to vacate the leased land within sixty days subsequent to plaintiff’s
demand to that effect; that the defendants have been required by the municipality to
vacate and deliver possession of the said land, but more than the sixty days within which
they having done so to date; that the lease secured from the municipality of Cavite, by
virtue whereof the defendants occupy the land that is the subject matter of the
complaint, is ultra vires and therefore ipso facto null and void and of no force or effect,
for the said land is an integral portion of a public plaza of public domain and use, and the
municipal council of Cavite has never at any time had any power or authority to withdraw
it from public use, and to lease it to a private party for his own use, and so the
defendants have never had any right or occupy or to retain the said land under
leasehold, or in any other way, their occupation of the parcel being furthermore illegal;
and therefore prayed that judgment be rendered declaring that possession of the sad
land lies with the plaintiff and ordering the defendants to vacate the land and deliver
possession thereof to said plaintiff, with the costs against the defendants.
 THE MUNICIPALITY OF CAVITE, plaintiff-appellant, (Art 1398 JN Robillon)
vs.
HILARIA ROJAS and her husband TIUNG SIUKO, alias SIWA, defendants-
appellees.

Duly proven in the record that, upon presentation of an application by Hilaria

Rojas, he municipal council of Cavite by resolution No. 10, dated July 3, 107,
leased to the said Rojas some 70 or 80 square meters of Plaza Soledad, on
condition that she pay rent quarterly in advance according to the schedule fixed
in Ordinance No. 43, land within sixty days subsequent to notification to that
effect. The record shows that she has paid the land tax on the house erected on
the lot.

The said Plaza Soledad being a promenade for public use, the municipal
council of Cavite could not in 1907 withdraw or exclude from public use a
portion thereof in order to lease it for the sole benefit of the defendant Hilaria
Rojas. In leasing a portion of said plaza or public place to the defendant for
private use the plaintiff municipality exceeded its authority in the exercise of its
powers by executing a contract over a thing of which it could not dispose, nor is
it empowered so to do.
.
 THE MUNICIPALITY OF CAVITE, plaintiff-appellant, (Art 1398 JN Robillon)
vs.
HILARIA ROJAS and her husband TIUNG SIUKO, alias SIWA, defendants-
appellees.

ISSUE:

LAWS

Article 1398 The obligation having been annulled the contracting parties shall
restore to each other the things which have been the subject matter of the
contract, with their fruit, and the price with its, except in cases provided by law.
In obligations to render service, the value thereof shall be the basis for
damages.
 THE MUNICIPALITY OF CAVITE, plaintiff-appellant, (Art 1398 JN Robillon)
vs.
HILARIA ROJAS and her husband TIUNG SIUKO, alias SIWA, defendants-
appellees.
HELD:

1 Reverse the judgment appealed from and declare, as we do declare, that the
land occupied by Hilaria Rojas forms part of the public plaza called Soledad,
and as the lease of said parcel of land is null and void, we order the defendant
to vacate it and release the land in question within thirty days, leaving it cleared
as it was before hr occupation. There is no ground for the indemnity sought in
the nature of damages, but the municipality must in its turn to the defendant the
rentals collected; without finding as to the costs. .
2. The contract, whereby he municipality of Cavite leased to Hilaria Rojas a
portion of the Plaza Soledad is null and void and of no force or effect, because
it is contrary to the law and the thing leased cannot be the object of a contract.
3. The Civil Code, articles 1271, prescribes that everything which is not outside
he commerce of man may be the object of a contract, and plazas and streets
are outside of this commerce, as was decided by the supreme court of Spain in
its decision of February 12, 195, which says: “Communal things that cannot be
soud because they are by their very nature outside of commerce are those for
public use, such as the plazas, streets, common lands, rivers, fountains, etc.”
Art. 1399.
When the defect of the contract
consists in the incapacity of one of the
parties, the incapacitated person is not
obliged to make any restitution except
insofar as he has been benefited by the thing
or price received by him. (1304)
Art. 1399.
This provision is an exception to the
general rule of mutual restitution under the
preceding article. The incapacitated person
is obliged to make restitution only to the
extent that he was benefited by the thing or
price received by him. It results, therefore
that if he was not benefited, he is not obliged
to restore what he had received but the other
contracting party is still bound to return what
he had received, whether he was benefited or
not.
 The Government of the Phil. Islands- plaintiff- appellee vs.
El Monte De Piedad Y Caja De Ahorros De Manila- defendant -Appellant

FACTS:

a.) July 8, 1880, Monte De Piedad Y Caja De Ahorros De Manila is an institution

organized in accordance with the canon law, having been created by the royal
order of the King of Spain, made under the royal patronate powers then existing in
the Crown of Spain.
b.) The royal order , an institution for the safe investment of the savings of the
poor classes and to assist the needy by loaning such savings to the them at a low
rate of interest. Its statutes and by laws are subject to the will of the catholic
Arcbishop of Manila and may be changed by him of his pleasure and provide 4%
to the depositors.
c.) During the tax litigation assesment, defendant had a place of business in
Manila City where credits were opened by the deposit or collection of money or
currency subject to be paid by order.

.
 The Government of the Phil. Islands- plaintiff- appellee vs.
El Monte De Piedad Y Caja De Ahorros De Manila- defendant -Appellant

. d.) Tax to be collected is that the defendant institution is a bank base on

Section 110 of Act no. 1189, known as the internal revenue law and that it
is subject to a tax of one eighteenth of one percentum each month upon
the average amount of deposits money, payment by check or draft,
certificate of deposits, or payable on demand, imposed by par. 4, sect. 111
and to further tax of one -twentyfourth of one percentum each month upon
capital by defendant in banking.

e.) The defendant seek to escape the tax payment on its deposit by a
claim that it is savings bank denied by exception in par. 4 of section 111.

f.) P549,912.52- capital employed by any bank.

 The Government of the Phil. Islands- plaintiff- appellee vs.
El Monte De Piedad Y Caja De Ahorros De Manila- defendant -Appellant

ISSUE:

Whether or not that the defendant is liable for tax payment or can claim an
exemption as subjected by tax revenue law.?
 The Government of the Phil. Islands- plaintiff- appellee vs.
El Monte De Piedad Y Caja De Ahorros De Manila- defendant -Appellant

HELD:

Even though the complaint in this regard were well founded, it would have little learning
on the result of the litigation when we take into consideration the universal rule that he
who claims an exemption from his share of the commom burden of taxation must justify
his claim by showing that the legislature intended to exempt him by words too plain to be
mistaken. It being undisputed in this case that the defendant is a bank engaged in the
banking business as it is immediately fall within the imposing clause of the statute
placing taxes on banks and institutions doing a banking business. To escape that
imposition the defendant must produce an act of the legislature showing an intention to
exempt it from the operation of the imposing clause by words too plain to be mistaken.
That being the case matters little whether we say that the admission of the defendant
that is engaged in banking business carries with it the presumption that it is liable to pay
the taxes which the law imposes on all person engaged in that business which the
defendant must overcome.

Judgment appealed from is affirmed with cost against the appellant.

Art. 1400.
Whenever the person obliged by the
decree of annulment to return the thing can
not do so because it has been lost through
his fault, he shall return the fruits received
and the value of the thing at the time of the
loss, with interest from the same date.
(1307a)
EFFECT OF LOSS THING TO BE
RETURNED
1.) If the thing to be returned is lost
without the fault of the person obliged to
make restitution (defendant), there is no more
obligation to return such thing. But in such a
case, the other cannot be compelled to
restore what in virtue of the decree of
annulment he is bound to return.
2.) If it lost through, his obligation is
not extinguished but is converted into an
indemnity for damages consisting of the
value of the thing at the time of the loss with
interest from the same date and the fruits
received from the time the thing was given to
him of its loss.
EXAMPLE:

S sold his plow and carabao to B. On the

petition of S, the contract was annulled by
the court. But the carabao died in the
possession of B through his fault.

Under Art. 1400, B must pay the value of

the carabao at the time of its death, with
interest from the same date. If the carabao
had given birth , the young must also be
delivered as the fruit of the said animal.
Art. 1401.
The action for annulment of contracts
shall be extinguished when the thing which is
the object thereof is lost through the fraud or
fault of the person who has a right to institute
the proceedings.

• If the right of action is based upon the

incapacity of any one of the contracting
parties, the loss of the thing shall not be an
obstacle to the success of the action, unless
said loss took place through the fraud or fault
of the plaintiff. (1314a)
Extinguishment of Action for
Annulment
1.) If the person who has a right to
institute for annulment (Art. 1397.), will not be
able to restore the thing which he may be
obliged to return in case the contract is
annulled because such thing is lost through his
fraud or fault, his right to have the contract
annulled is extinguished. If the loss is not due
to his fault or fraud, Art. 1402 applies.
The action for annulment shall be
extinguished only if the loss is through the fault
or fraud of the plaintiff.
Extinguishment of Action for
Annulment
2.) Under the second paragraph, the right
of action is based upon the incapacity of any of
the contracting parties. Whether the right of
action is based upon incapacity or not, the rule
is the same.
Art. 1402.

As long as one of the contracting

parties does not restore what in virtue of the
decree of annulment he is bound to return,
the other cannot be compelled to comply with
what is incumbent upon him. (1308)
Effect where the party cannot restore
what he is bound to return.

When a contract is annulled, a reciprocal

obligation of restitution is created. The
return by one party of what he is obliged to
restore by the decree of annulment may be
regarded as a condition to the fulfillment by
the other of what is incumbent upon him

In effect, there will be no annulment if the

party cannot restore what he is bound to
return. This is true even if the loss is due to a
fortuitous event.
EXAMPLE:

B forced S to sell the latter’s horse. The

contract was annulled by the court at the
instance of S.

If the horse died through the fault of B,

Article 1400 governs. If the horse died due to
a fortuitous event, S can refuse to return the
purchase price. With or without the fault of
B, S, as injured party has the right to demand
the value of the horse with damages.
THANK YOU