Cases- Article 1217-article 1319.pdf 3v5x16

ARTICLE 1217: PAYMENT

RECOVERY

IN

CASE

obligation, he cannot demand reimbursement because his payment is less than his actual debt.

OF 

1. REPUBLIC GLASS CORP VS. QUA FACTS 

Republic Glass, Gervel shareholders of Ladtek



Ladtek obtained loans from Metrobank and Private Dev’t Corp of the Phils (PD)



They entered into agreement that in case of default in payment of Ladtek loans, the parties will reimburse each other the proportionate shares of any sum that any might pay to creditors



and

Qua

were

Since they only made partial payments, RGC and GC should clearly and convincingly show that their payments to Metro bank and PD exceeded their proportionate shares in the obligations before they can seek reimbursement from Qua. RGC and GC failed to do this, thus they cannot seek reimbursement from Qua

On the second issue:

Ladtek defaulted on its obligation to Metrobank and PD



Republic Glass Corp and Gervel Corp payed Metrobank 7M (not full payment of the amount due)



Republic Glass and Gervel demanded to Qua reimbursement of the total amount that RGC and GC paid to Metrobank



There was no novation of the agreements. The parties did not constitute new obligations to substitute the agreements. The and conditions of the agreement remains the same.



Novation extinguishes obligation by 1) changing the object or principal conditions; 2) substituting the person of the debtor and 3) subrogating a third person in the rights of the creditor

ARTICLE 1240: TO WHOM PAYMENT SHALL BE MADE 1. BPI VS. COURT OF APPEALS



Qua refused to pay

FACTS:



Qua filed a complaint for injunction with damages with application for TRO

Private respondents Eastern Plywood Corporation and Benigno Lim as officer of the corporation, had an “AND/OR” t with Commercial Bank and Trust Co (CBTC), the predecessor-in-interest of petitioner Bank of the Philippine Islands. Lim withdraw funds from such and used it to open a t checking (an “AND” ) with Mariano Velasco. When Velasco died in 1977, said t checking had P662,522.87. By virtue of an Indemnity Undertaking executed by Lim and as President and General Manager of Eastern withdrew one half of this amount and deposited it to one of the s of Eastern with CBTC.

ISSUES 

W/N payment of the entire obligation is an essential condition for reimbursement?



W/N there was novation of agreements as held by CA (that there was implied novation)

RULING On the first issue: 

Contrary to RGC and GC’s claim, payment of any amount will not automatically result in reimbursement. If a solidary debtor pays the obligation in part, he can recover reimbursement from the co-debtors only in so far his payment exceeded his share in the obligation. This is precisely because if solidary debtor pays an amount equal to his proportionate share in the obligation, then he in effects pay only what is due to him. If the debtor pays less than his share in the

Eastern obtained a loan of P73,000.00 from CBTC which was not secured. However, Eastern and CBTC executed a Holdout Agreement providing that the loan was secured by the “Holdout of the C/A No. 2310-001-42” referring to the t checking of Velasco and Lim. Meanwhile, a judicial settlement of the estate of Velasco ordered the withdrawal of the balance of the of Velasco and Lim.

1

Asserting that the Holdout Agreement provides for the security of the loan obtained by Eastern and that it is the duty of CBTC to debit the of respondents to set off the amount of P73,000 covered by the promissory note, BPI filed the instant petition for recovery. Private respondents Eastern and Lim, however, assert that the amount deposited in the t of Velasco and Lim came from Eastern and therefore rightfully belong to Eastern and/or Lim. Since the Holdout Agreement covers the loan of P73,000, then petitioner can only hold that amount against the t checking and must return the rest.

liquidation receipts). Francisco testified that he made the foregoing payments to an SMC supervisor who came in an SMC van. He was then showed of list of customer's abilities which included his . The defendant in good faith, then paid to the said liquidation receipts (dated Apr 19-30,1983).SMC in its part submitted a publisher's a²davit to prove that the entire booklet of receipts was reportedJuly 9, 1983.

ISSUE:

HELD:

Whether BPI can demand the payment of the loan despite the existence of the Holdout Agreement and whether BPI is still liable to the private respondents on the subject of the withdrawal by the heirs of Velasco.

No, the court found out that:The receipts given were included in the respondents lost booklet which was duly d in the newspaper.There was something amiss in the way the receipts were issued as one receipt bearing a higher serial number was issued ahead of another bearing a lower serial number.The supervisor's name was invariably left blank in the name of the supposed impostor who received the payment. Payment is a mode of extinguishing an obligation under Art.1240, provides that payment shall be made to the person in whose favor the obligation has been constituted or his successor in-interest or any person authorized to received it. In this case, the payments were purportedly made to a supervisor of the private respondent who was clad in SMC to accept payments as he showed a list of customer’s Unfortunately, Francisco Culaba did not ascertain the Petitioner relied solely on the man's representation, thus, the payments made were not to discharged their obligation to the private respondent. The most prudent thing that authority of the person who collected their payments. Failing this, the petitioners cannot claim that they acted in good faith when they made such payment. Their claim by its consequences.

RULING: Yes, for both issues. Regarding the first, the Holdout Agreement conferred on CBTC the power, not the duty, to set off the loan from the subject of the Agreement. When BPI demanded payment of the loan from Eastern, it exercised its right to collect payment based on the promissory note, and disregarded its option under the Holdout Agreement. Therefore, its demand was in the correct order. Regarding the second issue, BPI was the debtor and Eastern was the creditor with respect to the t checking . Therefore, BPI was obliged to return the amount of the said only to the creditor. When it allowed the withdrawal of the balance of the by the heirs of Velasco, it made the payment to the wrong party. The law provides that payment made by the debtor to the wrong party does not extinguish its obligation to the creditor who is without fault or negligence. Therefore, BPI was still liable to the true creditor, Eastern. 2. CULABA VS. COURT OF APPEALS FACTS: SMC sold beer products on credit to the Culaba spouses in the amount of P28,650.00. Thereafter, the Culaba spouses made a partial payment of P3,740.00leaving an unpaid balance of P24,910.00.As they failed to pay despite repeated demands, SMC Fled an action for collection before the RTC.The spouses denied any liability claiming that they had already paid full on four separate occasions (evidence of temporary charge sales

ISSUES: WON the payment of petitioner's obligation was properly made to extinguish the obligation? NO

3. DELA CRUZ VS. CONCEPCION FACTS: On March 25, 1996, petitioners entered into a Contract to Sell with respondent involving a house and lot in Antipolo City for a 2 million consideration. Respondent made the following payments, to wit: (1)500,000 by way of downpayment; (2)500,000 on May 30, 1996; (3)500,000 paid on January 22, 1997; and (4)500,000 bounced check dated June 30, 1997 which was 2

replaced. Thus, Respondent was able to pay the 2 million total obligation.

ARTICLE 1245: DATION IN PAYMENT 1. CALTEX INC. VS. IAC FACTS:

Before respondent issued the 500,000 replacement check, she told petitioners that based on the computation of her ant as of July 6, 1997, her unpaid obligation which includes interests and penalties was only 200,000. Petitioners agreed with respondent. Despite repeated demands, petitioners failed to collect the amounts they claimed. Hence, the complaint for sum of money with damages filed with the RTC of Antipolo Rizal. In her answer with Compulsory counterclaim and during the presentation of evidence, respondent presented a receipt purportedly indicating payment of the remaining balance of 200,000 to Losloso who allegedly received the same on behalf of petitioners. On March 8, 2014, the RTC rendered a decision in favor of respondent. On appeal, the CA affirmed the decision with modification by deleting the award of moral damages and attorney's fees in favor of respondent. Aggrieved, petitioners come before the Court in this petition for review on certiorari under Rule 45. ISSUE: Whether it was proper to dismiss the complaint based on the ground that the defendant fully paid the claims of plaintiff HELD: Yes. When the issue is tried without the objection of the parties, it should be treated with all respects as if it had been raised in the pleadings. On the other hand, when there is an objection, the evidence may be itted where its ission will not prejudice him. Thus, while respondent judicially itted in her answer that she only paid 2 million and that she still owed petitioners 200,000, respondent claimed later and in fact, submitted an evidence to show that she already paid the whole amount of her unpaid obligation. It is noteworthy what when respondent presented evidence of payment, petitioners did not object thereto. To be sure, petitioners were given ample opportunity to refute the fact of and present evidence to prove payment.

On January 12, 1978, private respondent Asia Pacific Airways Inc. entered into an agreement with petitioner Caltex (Philippines) Inc., whereby petitioner agreed to supply private respondent's aviation fuel requirements for two (2) years, covering the period from January 1, 1978 until December 31, 1979. Pursuant thereto, petitioner supplied private respondent's fuel supply requirements. As of June 30, 1980, private respondent had an outstanding obligation to petitioner in the total amount of P4,072,682.13, representing the unpaid price of the fuel supplied. To settle this outstanding obligation, private respondent executed a Deed of Assignment dated July 31, 1980, wherein it assigned to petitioner its receivables or refunds of Special Fund Import Payments from the National Treasury of the Philippines to be applied as payment of the amount of P4,072,683.13 which private respondent owed to petitioner. On February 12, 1981, pursuant to the Deed of Assignment, Treasury Warrant No. B04708613 in the amount of P5,475,294.00 representing the refund to respondent of Special Fund Import Payment on its fuel purchases was issued by the National Treasury in favor of petitioner. Four days later, on February 16, 1981, private respondent, having learned that the amount remitted to petitioner exceeded the amount covered by the Deed of Assignment, wrote a letter to petitioner, requesting a refund of said excess. Petitioner, acting on said request, made a refund in the amount of P900,000.00 plus in favor of private respondent. The latter, believing that it was entitled to a larger amount by way of refund, wrote petitioner anew, demanding the refund of the remaining amount. In response thereto, petitioner informed private respondent that the amount not returned (P510,550.63) represented interest and service charges at the rate of 18% per annum on the unpaid and overdue of respondent from June 1, 1980 to July 31, 1981. Thus, on September 13, 1982, private respondent filed a complaint against petitioner in the Regional Trial Court of Manila, to collect the sum of P510,550.63.00. Petitioner (defendant in the trial court) filed its answer, reiterating that the amount not returned represented interest and service charges on the unpaid and overdue at the rate of 18% per annum. It was further 3

alleged that the collection of said interest and service charges is sanctioned by law, and is in accordance with the and conditions of the sale of petroleum products to respondent, which was made with the conformity of said private respondent who had accepted the validity of said interest and service charges. On November 7, 1983, the trial court rendered its decision dismissing the complaint, as well as the counterclaim filed by defendant therein. Private respondent (plaintiff) appealed to the Intermediate Appellate Court (IAC). On August 27, 1985, a decision was rendered by the said appellate court reversing the decision of the trial court, and ordering petitioner to return the amount of P510,550.63 to private respondent. ISSUE: Whether or not there is a valid dation in payment in this case. RULING: The Supreme Court ruled that the Deed of Assignment executed by the parties on July 31, 1980 is not a dation in payment and did not totally extinguish respondent's obligations as stated therein. The then Intermediate Appellate Court ruled that the three (3) requisites of dacion en pago are all present in the instant case, and concluded that the Deed of Assignment of July 31, 1980) constitutes a dacion in payment provided for in Article 1245 of the Civil Code which has the effect of extinguishing the obligation, thus ing the claim of private respondent for the return of the amount retained by petitioner. The Supreme Court, speaking of the concept of dation in payment, in the case of Lopez vs. Court of Appeals, among others, stated: "'The dation in payment extinguishes the obligation to the extent of the value of the thing delivered, either as agreed upon by the parties or as may be proved, unless the parties by agreement, express or implied, or by their silence, consider the thing as equivalent to the obligation, in which case the obligation is totally extinguished." From the above, it is clear that a dation in payment does not necessarily mean total extinguishment of the obligation. The obligation is totally extinguished only when the parties, by agreement, express or implied, or by their silence, consider the thing as equivalent to the obligation. In the instant case, the then Intermediate

Appellate Court failed to take into the express recitals of the Deed of Assignment. "That Whereas, ASSIGNOR has an outstanding obligation with ASSIGNEE in the amount of P4,072,682.13 as of June 30, 1980, plus any applicable interest on overdue . Now therefore in consideration of the foregoing premises, ASSIGNOR by virtue of these presents, does hereby irrevocably assign and transfer unto ASSIGNEE any and all funds and/or Refund of Special Fund Payments, including all its rights and benefits accruing out of the same, that ASSIGNOR might be entitled to, by virtue of and pursuant to the decision in BOE Case No. 80-123, in payment of ASSIGNOR's outstanding obligation plus any applicable interest charges on overdue and other avturbo fuel lifting and deliveries that ASSIGNOR may from time to time receive from the ASSIGNEE, and ASSIGNEE does hereby accepts such assignment in its favor." Hence, it could easily be seen that the Deed of Assignment speaks of three (3) obligations (1) the outstanding obligation of P4,072,682.13 as of June 30, 1980; (2) the applicable interest charges on overdue s; and (3) the other avturbo fuel lifting and deliveries that assignor (private respondent) may from time to time receive from assignee (Petitioner). As aptly argued by petitioner, if it were the intention of the parties to limit or fix respondent's obligation to P4,072.682.13, they should have so stated and there would have been no need for them to qualify the statement of said amount with the clause "as of June 30, 1980 plus any applicable interest charges on overdue " and the clause "and other avturbo fuel lifting and deliveries that ASSIGNOR may from time to time receive from the ASSIGNEE". The of the Deed of Assignment being clear, the literal meaning of its stipulations should control. In the construction of an instrument where there are several provisions or particulars, such a construction is, if possible, to be adopted as will give effect to all. Likewise, the then Intermediate Appellate Court failed to take into consideration the subsequent acts of the parties which clearly show that they did not intend the Deed of Assignment to totally extinguish the obligation: (1) After the execution of the Deed of Assignment on July 31, 1980, petitioner continued to charge respondent with interest on its overdue up to January 31, 1981. This was pursuant to the Deed of Assignment which provides for respondent's obligation for "applicable interest charges on overdue ". The charges for 4

interest were made every month and not once did respondent question or take exception to the interest; and (2) In its letter of February 16, 1981, respondent addressed the following request to petitioner: In order to judge the intention of the contracting parties, their contemporaneous and subsequent acts shall be principally considered (Art. 1253, Civil Code). The foregoing subsequent acts of the parties clearly show that they did not intend the Deed of Assignment to have the effect of totally extinguishing the obligations of private respondent without payment of the applicable interest charges on the overdue . Finally, the payment of applicable interest charges on overdue , separate from the principal obligation of P4,072,682.13 was expressly stipulated in the Deed of Assignment. The law provides that "if the debt produces interest, payment of the principal shall not be deemed to have been made until the interests have been covered." (Art. 1253, Civil Code).

On July 18, 1975, PNB filed a petition for extrajudicial foreclosure of the real estate mortgage over the La Vista property as well as the mortgaged properties located at Isabela, Negros Occidental and covered by OCT No. RT 1615. At the auction sale, PNB was the highest bidder with a bid price of P1,000,001.00. However, when said property was about to be awarded to PNB, the representative of the mortgagor-spouses objected and demanded from the PNB the difference between the bid price of P1,000,001.00 and the indebtedness of P499,060.25 of the Arroyo spouses on their personal . It was the contention of the spouses Arroyo's representative that the foreclosure proceedings referred only to the personal of the mortgagor spouses without reference to the of TCC. ISSUE:

2. PNB VS. PINEDA

Was TCC's liability extinguished by the repossession of PNB of the imported cement plant machinery and equipment?

FACTS:

HELD:

In 1963, the Arroyo Spouses, obtained a loan of P580,000.00 from petitioner bank to purchase 60% of the subscribed capital stock and thereby acquire the controlling interest of private respondent Tayabas Cement Company, Inc. (TCC). As security for said loan, the spouses Arroyo executed a real estate mortgage over a parcel of land known as the La Vista property.

No. PNB's possession of the subject machinery and equipment being precisely as a form of security for the advances given to TCC under the Letter of Credit, said possession by itself cannot be considered payment of the secured loan. Payment would legally result only after PNB had foreclosed on said securities, sold the same, and applied the proceeds thereof to TCC's loan obligation. Mere possession does not amount to foreclosure for foreclosure denotes the procedure adopted by the mortgagee to terminate the rights of the mortgagor on the property and includes the sale itself.

TCC filed with petitioner bank an application and agreement for the establishment of an eight (8) year deferred letter of credit (L/C) for $7,000,000.00 in favor of Toyo Menka Kaisha, Ltd. of Tokyo, Japan, to cover the importation of a cement plant machinery and equipment. Upon approval of said application, the Arroyo spouses executed a Surety Agreement dated August 5, 1964 3 and Covenant dated August 6, 1964 to secure the loan. The imported cement plant machinery and equipment arrived from Japan and were released to TCC under a trust receipt agreement. Subsequently, Toyo Menka Kaisha, Ltd. made the corresponding drawings against the L/C as scheduled, but TCC failed to remit and/or pay the corresponding amount covered by the drawings. Thus, pursuant to the agreement, PNB repossessed the imported machinery and equipment for failure of TCC to settle its obligations under the L/C.

Neither can said repossession amount to dacion en pago. Dation in payment takes place when property is alienated to the creditor in satisfaction of a debt in money and the same is governed by sales. Dation in payment is the delivery and transmission of ownership of a thing by the debtor to the creditor as an accepted equivalent of the performance of the obligation. As aforesaid, the repossession of the machinery and equipment in question was merely to secure the payment of TCC's loan obligation and not for the purpose of transferring ownership thereof to PNB in satisfaction of said loan. Thus, no dacion en pago was ever accomplished.

5

ARTICLE 1249: RA 8183; FORM OF PAYMENT 1. TIBAJIA VS COURT OF APPEALS FACTS 

A suit for collection of a sum of money filed by Eden Tan against the Tibajia spouses



A writ of attachment was issued by the trial court



The Deputy Sheriff filed a return stating that a deposit made by the Tibajia spouses had been garnished by him.



Tibajia spouses delivered to Deputy Sheriff Eduardo Bolima the total money judgment in check



Private respondent refused to accept the payment made by the Tibajia spouses and instead insisted that the garnished funds deposited be withdrawn to satisfy the judgment obligation.



Petitioners filed a motion to lift the writ of execution on the ground that the judgment debt had already been paid



Sec. 1. Every provision contained in, or made with respect to, any obligation which purports to give the obligee the right to require payment in gold or in any particular kind of coin or currency other than Philippine currency or in an amount of money of the Philippines measured thereby, shall be as it is hereby declared against public policy null and void, and of no effect, and no such provision shall be contained in, or made with respect to, any obligation thereafter incurred. Every obligation heretofore and hereafter incurred, whether or not any such provision as to payment is contained therein or made with respect thereto, shall be discharged upon payment in any coin or currency which at the time of payment is legal tender for public and private debts Section 63 of Republic Act No. 265, as amended (Central Bank Act) which provides:

Motion was denied by the trial court on the ground that payment in cashier's check is not payment in legal tender and that payment was made by a third party other than the defendant

WHETHER OR NOT THE BPI CASHIER'S CHECK TENDERED BY PETITIONERS FOR PAYMENT OF THE JUDGMENT DEBT, IS "LEGAL TENDER"

In the recent cases of Philippine Airlines, Inc. vs. Court of Appeals 4 and Roman Catholic Bishop of Malolos, Inc. vs. Intermediate Appellate Court, 5 this Court held that —

RULING 

b. Section 1 of Republic Act No. 529, as amended, which provides:

Sec. 63. Legal character — Checks representing deposit money do not have legal tender power and their acceptance in the payment of debts, both public and private, is at the option of the creditor: Provided, however, that a check which has been cleared and credited to the of the creditor shall be equivalent to a delivery to the creditor of cash in an amount equal to the amount credited to his .

ISSUE 

In the meantime, the action derived from the original obligation shall be held in abeyance.;

The provisions of law applicable to the case at bar are the following: a. Article 1249 of the Civil Code which provides:

Art. 1249. The payment of debts in money shall be made in the currency stipulated, and if it is not possible to deliver such currency, then in the currency which is legal tender in the Philippines. The delivery of promissory notes payable to order, or bills of exchange or other mercantile documents shall produce the effect of payment only when they have been cashed, or when through the fault of the creditor they have been impaired.

A check, whether a manager's check or ordinary check, is not legal tender, and an offer of a check in payment of a debt is not a valid tender of payment and may be refused receipt by the obligee or creditor. ANOTHER VERSION: FACTS: A suit of collection of sum of money was filed by Eden Tan against the spouses. A writ of attachment was issued, the Deputy Sheriff filed a return stating that a deposit made by Tibajia in the amount of P442,750 in another case, had been garnished by him. RTC ruled in favor of Eden Tan and ordered the spouses to pay her an amount in excess of P3,000,000. Court of Appeals modified the decision by reducing the amount for damages. Tibajia Spouses delivered to Sheriff Bolima the total money judgment of P398483.70. Tan refused to 6

accept the payment and insisted that the garnished funds be withdrawn to satisfy the judgment obligation.

ARTICLE 1250: EXTRAORDINARY INFLATION AND DEFLATION

ISSUE: Whether or not payment by means of check is considered payment in legal tender

1. FILIPINO PIPE AND FOUNDRY CORP VS. NAWASA

RULING: The ruling applies the statutory provisions which lay down the rule that a check is not legal tender and that a creditor may validly refuse payment by check, whether it be a manager’s check, cashier’s or personal check. The decision of the court of Appeals is affirmed.

FACTS 

NAWASA entered into a contract with the plaintiff FPFC for the latter to supply iron pressure pipes worth P270,187.50 to be used in the construction of the Anonoy Waterworks in Masbate and the Barrio San Andres-Villareal Waterworks in Samar.



NAWASA paid in installments on various dates, a total of P134,680.00 leaving a balance of P135,507.50 excluding interest.



FPFC demanded payment from NAWASA of the unpaid balance of the price with interest in accordance with the of their contract



NAWASA failed to pay, plaintiff filed a collection suit



RTC rendered judgment ordered NAWASA to pay the unpaid balance in NAWASA negotiable bonds



NAWASA did not deliver the bonds to the judgment creditor



FPFC filed another complaint seeking an adjustment of the unpaid balance in accordance with the value of the Philippine peso



FPFC presented voluminous records and statistics showing that a spiralling inflation has marked the progress of the country from 1962 up to the present. There is no denying that the price index of commodities, which is the usual evidence of the value of the currency has been rising.

2. PAPA VS. VALENCIA & CO, INC. FACTS: Myron Papa is the of the estate of Angela Butte. In 1973, he sold a portion of said estate to Felix Peñarroyo through A.U. Valencia and Co., Inc. Peñarroyo gave Papa P5,000.00 plus a check worth P40,000.00. However, Papa was not able to deliver the certificate of title to Peñarroyo. A litigation ensued and ten years after, Papa argued that the sale between him and Peñarroyo was never consummated because he did not encash the P40,000.00 check and that the P5,000.00 cash was merely earnest money. ISSUE: Whether or not Papa is correct. HELD: No. After more than ten (10) years from the payment in part by cash and in part by check, the presumption is that the check had been encashed. Granting that Papa had never encashed the check, his failure to do so for more than ten (10) years undoubtedly resulted in the impairment of the check through his unreasonable and unexplained delay. While it is true that the delivery of a check produces the effect of payment only when it is cashed, pursuant to Article 1249 of the Civil Code, the rule is otherwise if the debtor (Peñarroyo) is prejudiced by the creditor’s (Papa’s) unreasonable delay in presentment. 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.

ISSUE W/N there exists an extraordinary inflation of the currency justifying an adjustment of NAWASA's unpaid judgment obligation to FPFC. RULING Article 1250 of the Civil Code provides: In case an extraordinary inflation or deflation of the currency stipulated should supervene, the value of the 7

currency at the time of the establishment of the obligation shall be the basis of payment, unless there is an agreement to the contrary.. 



Extraordinary inflation exists "when there is a decrease or increase in the purchasing power of the Philippine currency which is unusual or beyond the common fluctuation in the value said currency, and such decrease or increase could not have reasonably foreseen or was manifestly beyond contemplation the the parties at the time of the establishment of the obligation. (Tolentino Commentaries and Jurisprudence on the Civil Code Vol. IV, p. 284.) While appellant's voluminous records and statistics proved that there has been a decline in the purchasing power of the Philippine peso, this downward fall of the currency cannot be considered "extraordinary." It is simply a universal trend that has not spared our country.

allowed to pay the principal amount of P100,000 in 3 equal installments of 6 months each with the 1st installment and the accrued interest of P24,000 to be paid immediately upon approval 

July 29, 1975: Bishop through its counsel, Atty. Carmelo Fernandez, formally denied the request but granted a grace period of 5 days from the receipt of the denial to pay the total balance of P124,000



August 4, 1975: private respondent, through its president, Atty. Francisco, wrote the counsel of the petitioner requesting an extension of 30 days from to fully settle its . - denied



RTC: favored Bishop declaring the down payment as forfeited

ISSUE: W/N there is tender of payment by issuance of a certified check HELD: NO. RTC reinstated.

ARTICLE 1256: TENDER OF PAYMENT AND CONSIGNATION 1. ROMAN CATHOLIC MALOLOS VS. IAC

ARCHBISHOP



OF

FACTS: 

July 7, 1971: A contract over the land was executed between the Roman Catholic Bishop of Malolos (bishop) as vendor and the through its then president, Mr. Carlos F. Robes, as vendee, stipulating for a downpayment of P23,930 and the balance of P100,000 plus 12% interest per annum to be paid within 4 years from execution of the contract. 









July 17, 1975: after the expiration of the stipulated period for payment, Atty. Francisco wrote the formal request that her company be

tender of payment cannot be presumed by a mere inference from surrounding circumstances

sheer proof of sufficient available funds to meet more than the total obligation within the grace period - NOT sufficient 

The contract likewise provides for cancellation, forfeiture of previous payments, and reconveyance of the land in case of failure to pay within the period

March 12, 1973: private respondent, through its new president, Atty. Adalia Francisco, addressed a letter 6 to Father Vasquez, parish priest of San Jose Del Monte, Bulacan, requesting to be furnished with a copy of the subject contract and the ing documents

Tender of payment involves a positive and unconditional act by the obligor of offering legal tender currency as payment to the obligee for the former’s obligation and demanding that the latter accept the same.

On the contrary, the respondent court finds itself remiss in overlooking or taking lightly the more important findings of fact made by the trial court which are entitled to great weight on appeal and should be accorded full consideration and respect and should not be disturbed unless for strong and cogent reasons



certified personal check which is not legal tender nor the currency stipulated, and therefore, can not constitute valid tender of payment



Since a negotiable instrument is only a substitute for money and not money, the delivery of such an instrument does not, by itself, operate as payment 8

ROMAN CATHOLIC OF MALOLOS VS. IAC

From a perusal of the foregoing facts, we find that both the contending parties have conflicting versions on the main question of tender of payment.

FACTS:

According to the trial court:

ANOTHER VERSION:

The property subject matter of the contract consists of a parcel of land in the Province of Bulacan, issued and ed in the name of the petitioner which it sold to the private respondent. On July 7, 1971, the subject contract over the land in question was executed between the petitioner as vendor and the private respondent through its then president, Mr. Carlos F. Robes, as vendee, stipulating for a downpayment of P23,930.00 and the balance of P100,000.00 plus 12% interest per annum to be paid within four (4) years from execution of the contract. The contract likewise provides for cancellation, forfeiture of previous payments, and reconveyance of the land in question in case the private respondent would fail to complete payment within the said period. After the expiration of the stipulated period for payment, Atty. Adalia Francisco (president of the company who bought land) wrote the petitioner a formal request that her company be allowed to pay the principal amount of P100,000.00 in three (3) equal installments of six (6) months each with the first installment and the accrued interest of P24,000.00 to be paid immediately upon approval of the said request. The petitioner formally denied the said request of the private respondent, but granted the latter a grace period of five (5) days from the receipt of the denial to pay the total balance of P124,000.00. The private respondent wrote the petitioner requesting an extension of 30 days from said date to fully settle its but this was still denied. Consequently, Atty. Francisco wrote a letter directly addressed to the petitioner, protesting the alleged refusal of the latter to accept tender of payment made by the former on the last day of the grace period. But the private respondent demanded the execution of a deed of absolute sale over the land in question Atty. Fernandez, wrote a reply to the private respondent stating the refusal of his client to execute the deed of absolute sale so the petitioner cancelled the contract and considered all previous payments forfeited and the land as ipso facto reconveyed.

. . . What made Atty. Francisco suddenly decide to pay plaintiff’s obligation on tender her payment, when her request to extend the grace period has not yet been acted upon? Atty. Francisco’s claim that she made a tender of payment is not worthy of credence. The trial court considered as fatal the failure of Atty. Francisco to present in court the certified personal check allegedly tendered as payment or, at least, its xerox copy, or even bank records thereof. Not satisfied with the said decision, the private respondent appealed to the IAC. The IAC reversed the decision of the trial court. The IAC, in finding that the private respondent had sufficient available funds, ipso facto concluded that the latter had tendered payment. ISSUE: Whether or not the finding of the IAC that Atty. Francisco had sufficient available funds did tender payment for the said obligation. Whether or not an offer of a check is a valid tender of payment of an obligation under a contract which stipulates that the consideration of the sale is in Philippine Currency. HELD: 1. No. Tender of payment involves a positive and unconditional act by the obligor of offering legal tender currency as payment to the obligee for the former’s obligation and demanding that the latter accept the same. Thus, tender of payment cannot be presumed by a mere inference from surrounding circumstances. At most, sufficiency of available funds is only affirmative of the capacity or ability of the obligor to fulfill his part of the bargain. The respondent court was therefore in error. 2. No. In the case of Philippine Airlines v. Court of Appeals: Since a negotiable instrument is only a substitute for money and not money, the delivery of such an instrument does not, by itself, operate as payment. A check, whether a manager’s check or ordinary check, is not legal tender, and an offer of a check in payment of a debt is not a valid tender of payment and may be refused receipt by the 9

obligee or creditor. The tender of payment by the private respondent was not valid for failure to comply with the requisite payment in legal tender or currency stipulated within the grace period The DECISION of the IAC is hereby SET ASIDE and ANNULLED and the DECISION of the trial court is REINSTATED. 2. RAYOS VS. REYES FACTS: 3 parcels of uned land in Pangasinan were formerly owned by the spouses Tazal who on 1 September 1957 sold them to respondents’ predecessor-in-interest, Reyes, with right to repurchase within two 2 years from date thereof by paying to the vendee the purchase price and all expenses incident to their reconveyance. After the sale the vendee a retro took physical possession of the properties and paid the taxes thereon. The otherwise inconsequential sale became controversial when 2 of the 3 parcels were again sold by Tazal in favor of petitioners’ predecessor-in-interest Rayos without first availing of his right to repurchase the properties. In the meantime, the conventional right of redemption in favor of spouses Tazal expired without the right being exercised by either the Tazal spouses or the vendee Rayos. After the expiration of the redemption period, Tazal attempted to repurchase the properties from Reyes by asserting that the 1 September 1957 deed of sale with right of repurchase was actually an equitable mortgage and offering the amount of P724.00 to pay for the alleged debt. (consignation) But Reyes refused the tender of payment and vigorously claimed that their agreement was not an equitable mortgage.3 On 9 May 1960 Francisco Tazal filed a complaint with the CFI Reyes for the declaration of the 1 September 1957 transaction as a contract of equitable mortgage. He also prayed for an order requiring defendant Mamerto Reyes to accept the amount of P724.00 which he had deposited with the trial court as full payment for his debt, and canceling the supposed mortgage on the three (3) parcels of land with the execution of the corresponding documents of reconveyance in his favor. The trial court in the Civil Case rejected the contention of Tazal that the deed of sale executed on 1 September 1957 was an equitable mortgage but held that Tazal could nonetheless redeem the three (3) parcels of land within thirty (30) days from finality of judgment by paying to

Reyes the purchase price and all expenses to execute the reconveyance. Reyes appealed the Decision to the CA which in turn elevated the appeal to this Court since only questions of law were involved. When Reyes died, petitioner-spouses Rayos wrested physical possession of the disputed properties from Reyes’s heirs. This Court considered the case closed and terminated for failure of the parties therein to manifest their interest to further prosecute the case. The judgment in the Civil Case became final and executory. Subsequent to the finality of judgment in the Civil Case petitioner-spouses did nothing to repurchase the three (3) parcels of land within the thirty (30) – day grace period from finality of judgment. Respondents as heirs of Reyes executed an affidavit adjudicating to themselves the ownership of the parcels of land and declared the properties in their names for assessment and collection of real estate taxes. The respondents ed the 1 September 1957 deed of sale with right of repurchase with the RD. Respondents filed a complaint for damages and recovery of ownership and possession of the 3 parcels of land in dispute against herein petitioner-spouses Rayos and the thereof before the RTC. It was respondents’ theory that neither petitioners nor their predecessors-ininterest Tazal and Rayos repurchased the properties before buying them or when the judgment in the Civil Case became final and executory, hence the sale of the three (3) parcels of land to petitioner-spouses did not transfer ownership thereof to them. Petitioners argued on the other hand that the consignation of P724.00 in Civil Case No. A-245 had the full effect of redeeming the properties from respondents and their predecessor-in-interest, and that respondents were guilty of estoppel and laches since Reyes as their predecessorin-interest did not oppose the sale to Rayos and to petitioner-spouses Rayos. The parties then filed their respective memoranda after which the case was submitted for decision. The trial court promulgated its Decision in the Civil Case void the separate deeds of absolute sale thereof executed by Tazal in favor of Rayos and to spouses Rayos and by Rayos to the same spouses, and ordered herein petitioners and Francisco Tazal to vacate and reconvey the lands to respondents as heirs of Reyes and to pay damages. Petitioners appealed the Decision to the CA. 10

The appellate court promulgated its Decision affirming in toto the judgment appealed from. Hence, the instant petition for review. ISSUE: 1. WON the consignation is valid 2. WON the respondents are barred by estoppel and laches 3. Won the petitioners are in good faith HELD: 1. In order that consignation may be effective the debtor must show that: (a) there was a debt due; (b) the consignation of the obligation had been made because the creditor to whom a valid tender of payment was made refused to accept it; (c) previous notice of the consignation had been given to the person interested in the performance of the obligation; (d) the amount due was placed at the disposal of the court; and, (e) after the consignation had been made the person interested was notified thereof In the instant case, petitioners failed, first, to offer a valid and unconditional tender of payment; second, to notify respondents of the intention to deposit the amount with the court; and third, to show the acceptance by the creditor of the amount deposited as full settlement of the obligation, or in the alternative, a declaration by the court of the validity of the consignation. The failure of petitioners to comply with any of these requirements rendered the consignation ineffective. Consignation and tender of payment must not be encumbered by conditions if they are to produce the intended result of fulfilling the obligation. In the instant case, the tender of payment of P724.00 was conditional and void as it was predicated upon the argument of Tazal that he was paying a debt which he could do at any time allegedly because the 1 September 1957 transaction was a contract of equitable mortgage and not a deed of sale with right to repurchase. The ostensible purposes of offering the amount in connection with a purported outstanding debt were to evade the stipulated redemption

period in the deed of sale which had already expired when the tender of payment was made and the Civil Case was instituted, and as a corollary, to avail of the thirty (30)day grace period under Art. 1606 of the Civil Code within which to exercise the right to repurchase. Reyes was therefore within his right to refuse the tender of payment offered by petitioners because it was conditional upon his waiver of the two (2)-year redemption period stipulated in the deed of sale with right to repurchase. Moreover, petitioners failed to prove in the Civil Cases that any form of notice regarding their intention to deposit the amount of P724.00 with the CFI had been served upon respondents. This requirement is not fulfilled by the notice which could have ensued from the filing of the complaint in the civil case or the stipulation made between Tazal and Reyes regarding the consignation of P724.00. The latter constitutes the second notice required by law as it already concerns the actual deposit or consignation of the amount and is different from the first notice that makes known the debtor’s intention to deposit the amount, a requirement missing in the instant case. Without any announcement of the intention to resort to consignation first being made to the persons interested in the fulfillment of the obligation, the consignation as a means of payment is void. It is also futile to argue that the deposit of P724.00 with the Court of First Instance could have perfected the redemption of the three (3) parcels of land because it was not approved by the trial court, much less accepted by Mamerto Reyes or his heirs, herein respondents. The dispositive portion of the Decision in Civil Case No. A245, which reads “x x x x the Court, hereby renders judgment declaring the contract x x x entered into by the plaintiffs and the defendant and captioned ‘Deed of Sale with Right to Repurchase’ as a true sale with right to repurchase x x x and not an equitable mortgage x x x and declaring the plaintiffs entitled to repurchase the property in question within thirty (30) days from finality of this decision x x x x” plainly rejected the complaint for lack of merit and necessarily also the consignation done pursuant thereto. This conclusion is buttressed by the directive of the trial court in the body of the Decision that Francisco Tazal “may still exercise the right to repurchase the property in question by returning to the [Mamerto Reyes] the purchase price of P724.00 plus all expenses incident to the reconveyance within the period of thirty (30)-days from the time this decision becomes final x x x x“21 The obvious reference of this statement was the stipulation made by the parties therein that “the defendant 11

[Mamerto Reyes] has been paying the taxes on said properties from 1958 to 1969 x x x x“22 where the taxes paid constituted necessary expenses that petitioners had to reimburse to respondents’ predecessor-in-interest aside from the P724.00 earlier deposited by Tazal. To be sure, while it has been held that approval of the court or the obligee’s acceptance of the deposit is not necessary where the obligor has performed all acts necessary to a valid consignation such that court approval thereof cannot be doubted, Sia v. Court of Appeals23 clearly advises that this ruling is applicable only where there is unmistakable evidence on record that the prerequisites of a valid consignation are present, especially the conformity of the proffered payment to the of the obligation which is to be paid.24 In the instant case, since there is no clear and preponderant evidence that the consignation of P724.00 satisfied all the requirements for validity and enforceability, and since Mamerto Reyes vehemently contested the propriety of the consignation, petitioners cannot rely upon sheer speculation and unfounded inference to construe the Decision of the Court of First Instance as one impliedly approving the consignation of P724.00 and perfecting the redemption of the three (3) parcels of land. It should be recalled that one of the requisites of consignation is the filing of the complaint by the debtor against the creditor. Hence it is the judgment on the complaint where the court declares that the consignation has been properly made that will release the debtor from liability. Should the consignation be disapproved by the court and the case dismissed, there is no payment and the debtor is in mora and he shall be liable for the expenses and bear the risk of loss of the thing.25 To sanction the argument of petitioners and in the process excuse them from their responsibility of securing from the trial court in Civil Case No. A-245 a categorical declaration that the consignation of P724.00 had complied with all the essential elements for its validity would only dilute the rule requiring absolute compliance with the requisites of consignation.26 It also disturbs a steady and stable status of proprietary rights, i.e., “x x x el acreedor tan solo, y no el juez, puede autorizar la variacion que para los derechos de aquel suponga la que se intente en el objeto, cuantia o forma de las obligaciones,”27 since parties are left guessing on whether the repurchase of the properties had been effected. In a broader sense, this uncertain state will only depress the market value of the land and virtually paralyze efforts of the landowner to

meet his needs and obligations and realize the full value of his land. Moreover, we do not think that respondents’ causes of action in Civil Case No. A-2032 are now barred by estoppel and laches. The essence of estoppel and laches is the failure or neglect for an unreasonable and unexplained length of time to do that which by exercising due diligence could or should have been done earlier; it is the negligence or omission to assert a right within a reasonable time warranting a presumption that the party entitled to assert it either has abandoned or declined to assert it although there is no absolute rule as to what constitutes staleness of demand as each case is to be determined according to its particular circumstances.28 In the instant case, it was prudent and discerning for respondents and their predecessor-in-interest Mamerto Reyes that they deferred any action against petitioners, i.e., Civil Case No. A-2032, to recover ownership and possession of the three (3) pieces of real estate, until the finality of judgment in Civil Case No. A-245. For patiently electing not to inundate our courts of justice with cases the outcome of which may well depend upon the then pending civil suit, respondents cannot now be penalized by barring their complaint in Civil Case No. A2032 on the equitable grounds of estoppel and laches. We also find no reason to disturb our findings upon petitioners’ assertion that they were purchasers of the three (3) parcels of land in good faith and for value. As we held in David v. Bandin, “the issue of good faith or bad faith of the buyer is relevant only where the subject of the sale is ed land and the purchaser is buying the same from the ed owner whose title to the land is clean x x x in such case the purchaser who relies on the clean title of the ed owner is protected if he is a purchaser in good faith for value.”29 Since the properties in question are uned lands, petitioners as subsequent buyers thereof did so at their peril. Their claim of having bought the land in good faith, i.e., without notice that some other person has a right to or interest in the property, would not protect them if it turns out, as it actually did in this case, that their seller did not own the property at the time of the sale. At any rate, petitioners failed to discharge their burden of proof that they were purchasers of the three (3) parcels of land in good faith. For, as we ruled in Embrado v. Court of Appeals,30 the burden of proving the status of a purchaser in good faith and for value lies upon him who asserts that status, which is not discharged by simply 12

invoking the ordinary presumption of good faith, i.e., that everyone is presumed to act in good faith, since the good faith that is here essential is integral with the very status which must be established. In the proceedings a quo, what is evident is the itted fact of payment made by Mamerto Reyes as respondents’ predecessor-in-interest of the taxes on the properties prior to and at the time when the contracts of sale in favor of petitioner-spouses were perfected, which undoubtedly confirms the precedence of respondents’ possession of the parcels of land in question. This situation should have compelled petitioners to investigate the right of respondents over the properties before buying them, and in the absence of such inquiry, the rule is settled that a buyer in the same circumstances herein involved cannot claim to be a purchaser in good faith. The absence of good faith on the part of petitionerspouses Teofilo and Simeona Rayos in purchasing the three (3) parcels of uned land precludes the application of the rule on double sales enunciated in Art. 1544 of the Civil Code.31 In any event, even if we apply Art. 1544, the facts would nonetheless show that respondents and their predecessor-in-interest ed first the source of their ownership and possession, i.e., the 1 September 1957 deed of sale with right to repurchase, held the oldest title, and possessed the real properties at the earliest time. Applying the doctrine of “priority in time, priority in rights” or “prius tempore, potior jure,” respondents are entitled to the ownership and possession of the parcels of land in dispute. The instant Petition for Review is DENIED. The assailed Decision of the CA is AFFIRMED with MODIFICATION concerning the damages. There is no evidence to prove that petitioners paid at any time the repurchase price for the three (3) parcels of land in dispute except for the deposit of P724.00 in the Court of First Instance which however fell short of all the acts necessary for a valid consignation and discharge of their obligation to respondents. In order that consignation may be effective the debtor must show that (a) there was a debt due; (b) the consignation of the obligation had been made because the creditor to whom a valid tender of payment was made refused to accept it; (c) previous notice of the consignation had been given to the person interested in the performance of the obligation; (d) the amount due was placed at the disposal of the court; and, (e) after the

consignation had been made the person interested was notified thereof. NOTES: No evidence to prove actual damages was offered in Civil Case No. A-2032 since the parties therein submitted the case for decision on the basis of their respective memoranda, hence no actual damages can be awarded.32 In the same manner, there is no clear and convincing showing that petitioners acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner to warrant the imposition of exemplary damages in respondents’ favor.33 In any event, exemplary damages cannot be adjudicated in the instant case since there is no award of moral, temperate or compensatory damages. It is appropriate to stress that the mere filing of a complaint does not ipso facto entitle a party to attorney’s fees since this act is a means sanctioned by law to protect rights and interests even if found subsequently to be unmeritorious. 3. DALTON VS. FGR REALTY DEVELOPMENT CORPORATION

AND

FACTS: Dalton was renting a property of Dayrit. Dayrit sold the property to FGR realty. FGR realty wanted the lease terminated and so did not collect rental from Dalton. Dalton, without informing FGR consigned his rents to RTC. After consignation, Dalton did not also inform FGR. When FGR learned of the consignation he withdrew the rentals reserving his right to question consignation. RTC ordered Dalton to vacate because Dalton did not inform FGR realty of the consignation before and after the same was made. C.A. affirmed. ISSUE: was consignation valid? No. Dalton did not comply strictly with the requirements of consignation. Dalton argues that the issue as to whether consignation was valid or not is already moot because FGR already withdrew the amount consigned. Is his argument valid? No because FGR expressly reserved the right to question the validity of the consignation. SAID THE COURT: “The Court is not impressed. First, in withdrawing the amounts consigned, Dayrit and FGR expressly reserved 13

the right to question the validity of the consignation. In Riesenbeck v. Court of Appeals,15 the Court held that:

any of the requisites will render the consignation void. Substantial compliance is not enough.

A sensu contrario, when the creditor’s acceptance of the money consigned is conditional and with reservations, he is not deemed to have waived the claims he reserved against his debtor. Thus, when the amount consigned does not cover the entire obligation, the creditor may accept it, reserving his right to the balance (Tolentino, Civil Code of the Phil., Vol. IV, 1973 Ed., p. 317, citing 3 Llerena 263). The same factual milieu obtains here because the respondent creditor accepted with reservation the amount consigned in court by the petitioner-debtor. Therefore, the creditor is not barred from raising his other claims, as he did in his answer with special defenses and counterclaim against petitioner-debtor.

In Insular Life Assurance Company, Ltd. v. Toyota BelAir, Inc.,17 the Court enumerated the requisites of a valid consignation: (1) a debt due; (2) the creditor to whom tender of payment was made refused without just cause to accept the payment, or the creditor was absent, unknown or incapacitated, or several persons claimed the same right to collect, or the title of the obligation was lost; (3) the person interested in the performance of the obligation was given notice before consignation was made; (4) the amount was placed at the disposal of the court; and (5) the person interested in the performance of the obligation was given notice after the consignation was made.

As respondent-creditor’s acceptance of the amount consigned was with reservations, it did not completely extinguish the entire indebtedness of the petitionerdebtor. It is apposite to note here that consignation is completed at the time the creditor accepts the same without objections, or, if he objects, at the time the court declares that it has been validly made in accordance with law.16 (Emphasis supplied) WHAT ARE THE CONSIGNATION?.

REQUIREMENTS

OF

RTC ENNUMERATED THEM, THUS: The requisites of consignation are as follows: 1.

The existence of a valid debt.

2.

Valid prior tender, unless tender is excuse [sic];

3.

Prior notice of consignation (before deposit)

4.

Actual consignation (deposit);

5.

Subsequent notice of consignation;

DALTON CLAIMS CONSIGNATION IS PROPER BECAUSE HE HAS COMPLIED WITH OTHER REQUIREMENTS OF CONSIGNATION AND THUS THERE WAS SUBSTANTIAL COMPLIANCE. IS THIS CORRECT? NO. STRICT COMPLIANCE IS MANDATORY. SAID THE COURT: Second, compliance with the requisites of a valid consignation is mandatory. Failure to comply strictly with

Articles 1257 and 1258 of the Civil Code state, respectively: Art. 1257. In order that the consignation of the thing due may release the obligor, it must first be announced to the persons interested in the fulfillment of the obligation. The consignation shall be ineffectual if it is not made strictly in consonance with the provisions which regulate payment. Art. 1258. Consignation shall be made by depositing the things due at the disposal of judicial authority, before whom the tender of payment shall be proved, in a proper case, and the announcement of the consignation in other cases. The consignation having been made, the interested parties shall also be notified thereof. (Emphasis supplied) The giving of notice to the persons interested in the performance of the obligation is mandatory. Failure to notify the persons interested in the performance of the obligation will render the consignation void. In Ramos v. Sarao,18 the Court held that, “All interested parties are to be notified of the consignation. Compliance with [this requisite] is mandatory.”19 In Valdellon v. Tengco,20 the Court held that: Under Art. 1257 of our Civil Code, in order that consignation of the thing due may release the obligor, it must first be announced to the persons interested in the fulfillment of the obligation. The consignation shall be ineffectual if it is not made strictly in consonance with the provisions which regulate payment. In said Article 1258, it is further stated that the consignation having been made, the interested party shall also be notified thereof.21 (Emphasis supplied) 14

In Soco v. Militante, et al.,22 the Court held that: We hold that the essential requisites of a valid consignation must be complied with fully and strictly in accordance with the law, Articles 1256 to 1261, New Civil Code. That these Articles must be accorded a mandatory construction is clearly evident and plain from the very language of the codal provisions themselves which require absolute compliance with the essential requisites therein provided. Substantial compliance is not enough for that would render only a directory construction to the law. The use of the words “shall” and “must” which are imperative, operating to impose a duty which may be enforced, positively indicate that all the essential requisites of a valid consignation must be complied with. The Civil Code Articles expressly and explicitly direct what must be essentially done in order that consignation shall be valid and effectual.23 (Emphasis supplied)

grounded on speculation; (3) when the inference made is manifestly mistaken; (4) when the judgment of the Court of Appeals is based on a misapprehension of facts; (5) when the factual findings are conflicting; (6) when the Court of Appeals went beyond the issues of the case and its findings are contrary to the issions of the parties; (7) when the Court of Appeals overlooked undisputed facts which, if properly considered, would justify a different conclusion; (8) when the facts set forth by the petitioner are not disputed by the respondent; and (9) when the findings of the Court of Appeals are premised on the absence of evidence and are contradicted by the evidence on record.26 Dalton did not show that any of these circumstances is present.

DALTON SAID THE CA ERRED IN RULING SHE FAILED TO PAY RENT. CAN SC REVIEW CA FINDINGS? NO, BECAUSE FINDINGS OF FACTS OF LOWER COURTS ARE BINDING ON SC. Dalton claims that the Court of Appeals erred in ruling that she failed to pay rent. The Court is not impressed. Section 1, Rule 45 of the Rules of Court states that petitions for review on certiorari “shall raise only questions of law which must be distinctly set forth.” In Pagsibigan v. People,24 the Court held that: A petition for review under Rule 45 of the Rules of Court should cover only questions of law. Questions of fact are not reviewable. A question of law exists when the doubt centers on what the law is on a certain set of facts. A question of fact exists when the doubt centers on the truth or falsity of the alleged facts. There is a question of law if the issue raised is capable of being resolved without need of reviewing the probative value of the evidence. The issue to be resolved must be limited to determining what the law is on a certain set of facts. Once the issue invites a review of the evidence, the question posed is one of fact.25 Whether Dalton failed to pay rent is a question of fact. It is not reviewable. The factual findings of the lower courts are binding on the Court. The exceptions to this rule are (1) when there is grave abuse of discretion; (2) when the findings are 15

Presidential Decree No. 957(PD 957). It added that since no prior valid tender of payment was made by petitioners, the consignation case was fatally defective and susceptible to dismissal. ISSUE: Whether or not the case falls within the exclusive jurisdiction of the HLURB. RULING: No. Unlike tender of payment which is extrajudicial, consignation is necessarily judicial; hence, jurisdiction lies with the RTC, not with the HLURB. Under Article 1256 of the Civil Code, the debtor shall be released from responsibility by the consignation of the thing or sum due, without need of prior tender of payment, when the creditor is absent or unknown, or when he is incapacitated to receive the payment at the time it is due, or when two or more persons claim the same right to collect, or when the title to the obligation has been lost. The said provision clearly precludes consignation in venues other than the courts. ARTICLE 1279: LEGAL COMPENSATION 4. SPOUSES CACAYORIN VS. AFP-MBAI

1. INTERNATIONAL CORP BANK VS. IAC

FACTS:

2. FRANCIA VS. IAC

Oscar Cacayorin filed an application with AFPMBAI to purchase a property which the latter owned through a loan facility. Oscar and his wife, Thelma, and the Rural Bank of San Teodoro executed a Loan and Mortgage Agreement with the former as borrowers and the Rural Bank as lender, under the auspices of PAG-IBIG. On the basis of the Rural Bank's letter of guaranty, AFPMBAI executed in petitioners' favor a Deed of Absolute Sale, and a new title was issued in their name. Then, the PAG-IBIG loan facility did not push through and the Rural Bank closed. Meanwhile, AFPMBAI somehow was able to take possession of petitioners' loan documents and the TCT, while petitioners were unable to pay the loan for the property. AFPMBAI made written demands for petitioners to pay the loan for the property. Then, petitioners filed with the RTC a complaint for consignation of loan payment, recovery of title and cancellation of mortgage annotation against AFPMBAI, PDIC and the of Deeds of Puerto Princesa City. AFPMBAI filed a motion to dismiss claiming that petitioners' Complaint falls within the jurisdiction of the Housing and Land Use Regulatory Board (HLURB), as it was filed by petitioners in their capacity as buyers of a subdivision lot and it prays for specific performance of contractual and legal obligations decreed under

FACTS Engracio Francia was the owner of a 328 square meter land in Pasay City. In October 1977, a portion of his land (125 square meter) was expropriated by the government for P4,116.00. The expropriation was made to give way to the expansion of a nearby road. It also appears that Francia failed to pay his real estate taxes since 1963 amounting to P2,400.00. So in December 1977, the remaining 203 square meters of his land was sold at a public auction (after due notice was given him). The highest bidder was a certain Ho Fernandez who paid the purchase price of P2,400.00 (which was lesser than the price of the portion of his land that was expropriated). Later, Francia filed a complaint to annul the auction sale on the ground that the selling price was grossly inadequate. He further argued that his land should have never been auctioned because the P2,400.00 he owed the government in taxes should have been set-off by the debt the government owed him (legal compensation). He alleged that he was not paid by the government for the expropriated portion of his land because though he knew that the payment therefor was deposited in the Philippine National Bank, he never withdrew it. 16

ISSUE: Whether or not the tax owed by Francia should be set-off by the “debt” owed him by the government. HELD: No. As a rule, set-off of taxes is not allowed. There is no legal basis for the contention. By legal compensation, obligations of persons, who in their own right are reciprocally debtors and creditors of each other, are extinguished (Art. 1278, Civil Code). This is not applicable in taxes. There can be no off-setting of taxes against the claims that the taxpayer may have against the government. A person cannot refuse to pay a tax on the ground that the government owes him an amount equal to or greater than the tax being collected. The collection of a tax cannot await the results of a lawsuit against the government. The Supreme Court emphasized: A claim for taxes is not such a debt, demand, contract or judgment as is allowed to be set-off under the statutes of set-off, which are construed uniformly, in the light of public policy, to exclude the remedy in an action or any indebtedness of the state or municipality to one who is liable to the state or municipality for taxes. Neither are they a proper subject of recoupment since they do not arise out of the contract or transaction sued on. Further, the government already Francia. All he has to do was to withdraw the money. Had he done that, he could have paid his tax obligations even before the auction sale or could have exercised his right to redeem – which he did not do. Anent the issue that the selling price of P2,400.00 was grossly inadequate, the same is not tenable. The Supreme Court said: “alleged gross inadequacy of price is not material when the law gives the owner the right to redeem as when a sale is made at public auction, upon the theory that the lesser the price, the easier it is for the owner to effect redemption.” If mere inadequacy of price is held to be a valid objection to a sale for taxes, the collection of taxes in this manner would be greatly embarrassed, if not rendered altogether impracticable. “Where land is sold for taxes, the inadequacy of the price given is not a valid objection to the sale.” This rule arises from necessity, for, if a fair price for the land were essential to the sale, it would be useless to offer the property. Indeed, it is notorious that the prices habitually paid by purchasers at tax sales are grossly out of proportion to the value of the land.

4. MONTEMAYOR VS. MILLORA ARTICLE 1291: NOVATION 1. ILOILO TRADERS VS. HEIRS OF SORIANO FACTS: Respondents executed two promissory notes secured by real property mortgages in favor of petitioner. The respondents defaulted and petitioner moved for extrajudicial foreclosure of the mortgages. Respondent filed a complaint against petitioner. The parties later entered into “amicable settlement” and submitted it to the trial court for approval. The trial court required the parties to give some clarifications on several issues that were not complied. The amicable settlement was disapproved and the court proceeded. Respondents withdrew the case and filed a (new) case for novation and specific performance which was decided favorably for the respondents. The Court of Appeals affirmed the judgment. ISSUE: Whether or not the amicable settlement entered into between parties has novated the original obligation. RULING: NO. The parties entered into the agreement basically to put an end to Civil Case No. 14007 then pending before the Regional Trial Court. Concededly, the provisions of the settlement were beneficial to the respondent couple. The compromise extended the of payment and implicitly deferred the extrajudicial foreclosure of the mortgaged property. It was well to the interest of respondent spouses to ensure its judicial approval; instead, they went to ignore the order of the trial court and virtually failed to make any further appearance in court. This conduct on the part of respondent spouses gave petitioner the correct impression that the Sorianos did not intend to be bound by the compromise settlement, and its non-materialization negated the very purpose for which it was executed. The decision of the court of the Court of Appeals affirming that of the trial court was reversed and set aside. 2. AJAX MARKETING & DEVELOPMENT CORP VS. CA

3. MONDRAGON PERSONAL SALES, INC. VS. VICTORIANO S. SOLA JR. 17

3. CALIFORNIA BUS INVESTMENT HOUSE

LINES

VS.

STATE

ARTICLE 1292: NOVATION

REAL

OR

FACTS:

1. PNB VS. LILIAN S. SORIANO

Delta Motors Corporation applied for financial assistance from respondent State Investment House, Inc., a domestic corporation engaged in the business of quasibanking. SIHI agreed to extend a credit line to Delta which eventually became indebted to SIHI. Meanwhile, petitioner purchased on installment basis several buses to Delta. To secure the payment of the obligation petitioner executed promissory notes in favor of Delta. When petitioner defaulted on the payments of the debts, it entered into an agreement with delta to cover its due obligations. However, petitioner still had trouble meeting its obligations with delta. Pursuant to the memorandum of agreement delta executed a deed of sale asg to respondent, the promissory notes from petitioner. Respondent subsequently sent a demand letter to petitioner requiring remitting payments due on the promissory notes. Petitioner replied informing respondent of the fact that delta had taken over its management and operations.

FACTS OF THE CASE:

ISSUE: Whether the Restructuring Agreement dated October 7, 1981, between petitioner CBLI and Delta Motors, Corp. novated the five promissory notes Delta Motors, Corp. assigned to respondent SIHI, HELD: The attendant facts do not make out a case of novation. The restructuring agreement between Delta and CBLI executed on October 7, 1981, shows that the parties did not expressly stipulate that the restructuring agreement novated the promissory notes. Absent an unequivocal declaration of extinguishment of the pre-existing obligation, only a showing of complete incompatibility between the old and the new obligation would sustain a finding of novation by implication. 59 However, our review of its yields no incompatibility between the promissory notes and the restructuring agreement.

OBJECTIVE

Lisam Enterprises, Inc. [LISAM], a family-owned and controlled corporation that maintains Current No. 445830099-8 with petitioner PNB avail a Floor Stock Line (FSL) in the increased amount of Thirty Million Pesos (30 Million), Soriano as the chairman and president of LISAM and the authorized signatory in all LISAMs Transactions with [PNB]. For each availment, LISAM through [Soriano], executed 52 Trust Receipts (TRs). In addition to the promissory notes, showing its receipt of the items in trust with the duty to turn-over the proceeds of the sale thereof to [PNB]. PNBs authorized personnel conducted an actual physical inventory of LISAMs motor vehicles and motorcycles and found that only four (4) units covered by the TRs remained unsold. Total availments on the line covered by TRs, [LISAM] should have remitted to PNB, Twenty Nine Million Four Hundred Eighty Seven Thousand Eight Hundred Forty Four Pesos and Fifty Five Centavos (₱29,487,844.55). Despite several formal demands, respondent Soriano failed and refused to turn over the said amount to the prejudice of PNB. PNB, as previously adverted to, filed a complaintaffidavit before the Office of the City Prosecutor of Naga City charging Soriano with fifty two (52) counts of violation of the Trust Receipts Law, in relation to Article 315, paragraph 1(b) of the Revised Penal Code. In refutation, Soriano filed a counter-affidavit asserting that: 1. LISAM submitted proposals to PNB for the restructuring of all of LISAMs credit facilities. PNB LISAM informing PNBs lack of objection to LISAMs proposal of restructuring all its obligations; and 2. PNB Boards minutes of meeting informed that the Board of Directors of PNB has approved the conversion of LISAMs existing credit facilities at PNB. PNB filed a reply-affidavit maintaining Sorianos criminal liability under the TRs: 18

While it is true that said restructuring was approved, the same was never implemented because [LISAM] failed to comply with the conditions of approval stated in B/R No. 6, such as the payment of the interest and other charges and the submission of the title of the 283 sq. m. of vacant residential lot, x x x Tandang Sora, Quezon City.

it be so declared in unequivocal , or that the old and the new obligations be on every point incompatible with each other. contemplates two kinds of novation: express or implied. The extinguishment of the old obligation by the new one is a necessary element of novation, which may be effected either expressly or impliedly.

The DOJ, in a Resolution dated 25 June 2002, reversed and set aside the earlier resolution of the Naga City Prosecutor and hereby directed to move, with leave of court for the withdrawal of the informations for estafa against Lilian S. Soriano in Criminal Case Nos. 20010641 to 0693.PNB filed a petition for certiorari before the Court of Appeals. The appellate court did not find grave abuse of discretion in the questioned resolution of the DOJ, and dismissed PNBs petition for certiorari.

In order for novation to take place, the concurrence of the following requisites is indispensable:

ISSUE: Whether or not the Court of Appeals gravely erred in concurring with the finding of the DOJ that the approval by PNB of [LISAMs] restructuring proposal of its with PNB had changed the status of [LISAMs] obligations secured by Trust Receipts to one of an ordinary loan, non-payment of which does not give rise to a criminal liability.

(4) There must be the validity of the new contract.

Petitioner file an appeal by certiorari. HELD: Respondent Soriano, despite several opportunities to do so, failed to file a Memorandum as required in the Court Resolution dated 16 January 2008. Thus, on 8 July 2009, the Court resolved to dispense with the filing of Soriano’s Memorandum. LISAM failed to comply with the conditions precedent for its effectivity, specifically, the payment of interest and other charges, and the submission of the titles to the real properties in Tandang Sora, Quezon City. PNB is adamant that the events concerning the restructuring of LISAMs loan did not affect the TR security, thus, Sorianos criminal liability there under subsists. The Court did not subscribe to the appellate courts reasoning. The DOJ Secretarys and the Court of Appeals holding that, the supposed restructuring novated the loan agreement between the parties is myopic. The purported restructuring of the loan agreement did not constitute novation. Article 1292 of the Civil Code which provides: Art. 1292. In order that an obligation may be extinguished by another which substitutes the same, it is imperative that

(1) There must be a previous valid obligation; (2) There must be an agreement of the parties concerned to a new contract; (3) There must be the extinguishment of the old contract; and

In this case, without a written contract stating in unequivocal that the parties were novating the original loan agreement, thus undoubtedly eliminating an express novation. The approval of LISAMs restructuring proposal is not the bone of contention in this case. The pitch of the issue lies in whether, assuming a restructuring was effected, it extinguished the criminal liability on the loan obligation secured by trust receipts, by extinguishing the entrusterentrustee relationship and substituting it with that of an ordinary creditor-debtor relationship. The Court look to whether there is an incompatibility between the Floor Stock Line secured by TRs and the subsequent restructured Omnibus Line which was supposedly approved by PNB. The test of incompatibility is whether the two obligations can stand together, each one having its independent existence. If they cannot, they are incompatible and the latter obligation novates the first. The Court have scoured the records and found no incompatibility between the Floor Stock Line and the purported restructured Omnibus Line. While the restructuring was approved in principle, the effectivity thereof was subject to conditions precedent such as the payment of interest and other charges, and the submission of the titles to the real properties in Tandang Sora, Quezon City. Moreover, as asserted by Soriano in her counteraffidavit, the waiver pertains to penalty charges on the Floor Stock Line. There is no showing that the waiver extinguished Sorianos obligation to "sell the merchandise for cash for LISAMs and to deliver the proceeds thereof to PNB to be applied against its acceptance on LISAMs . “Soriano further agreed to hold the 19

"vehicles and proceeds of the sale thereof in Trust for the payment of said acceptance and of any of its other indebtedness to PNB." Well-settled is the rule that, with respect to obligations to pay a sum of money, the obligation is not novated by an instrument that expressly recognizes the old, changes only the of payment, adds other obligations not incompatible with the old ones, or the new contract merely supplements the old one. Besides, novation does not extinguish criminal liability. It stands to reason therefore, that Sorianos criminal liability under the TRs subsists considering that the civil obligations under the Floor Stock Line secured by TRs were not extinguished by the purported restructured Omnibus Line. Based on all the foregoing, we find grave error in the Court of Appeals dismissal of PNBs petition for certiorari. Certainly, while the determination of probable cause to indict a respondent for a crime lies with the prosecutor, the discretion must not be exercised in a whimsical or despotic manner tantamount to grave abuse of discretion. WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals in CA-G.R. SP No. 76243 finding no grave abuse of discretion on the part of the Secretary of Justice is REVERSED and SET ASIDE. ARTICLE 1293: SUBJECT NOVATION 1. S.C. MEGAWORLD CONSTRUCTION VS. PARADA FACTS: S.C. Megaworld Construction and Development Corporation (Megaworld) bought electrical lighting materials from Gentile Industries, a sole proprietorship owned by Engineer Luis U. Parada. Megaworld was unable to pay for the above purchase on due date, but blamed it on its failure to collect under its sub-contract with the Enviro KleenTechnologies, Inc. (Enviro Kleen). It was however able to persuade Enviro Kleen to agree to settle its above purchase, but after paying the respondent P250,000.00 once, Enviro Kleen stopped making further payments, leaving an outstanding balance of P816,627.00. It also ignored the various demands of the Parada, who then filed a suit in the RTC, to collect from the petitioner the said balance, plus damages, costs and expenses. Megaworld denied liability by saying that it was released from its indebtedness to the Parada due to the novation of their contract, which. There was allegedly novation when the Parada accepted the partial payment of Enviro Kleen

in its behalf, and thereby acquiesced to the substitution of Enviro Kleen as the new debtor in Megaworld’s place. The Regional Trial Court ruled in favor of Parada. On appeal, Megaworld argued that the trial court should have dismissed the complaint for failure of the respondent to implead Genlite Industries as "a proper party in interest." The sales invoices and receipts show that the respondent is the sole proprietor of Genlite Industries, and therefore the real party. On the issue of novation, the Court of Appeals ruled that by retaining his option to seek satisfaction from the petitioner, any acquiescence which the respondent had made was limited to merely accepting Enviro Kleen as an additional debtor from whom he could demand payment, but without releasing the petitioner as the principal debtor from its debt to him. ISSUE: W/N Genlite Industries should have been impleaded as a party-plaintiff.

RULING: No. Only natural or juridical persons or entities authorized by law may be parties in a civil case. A sole proprietorship has no juridical personality separate and distinct from that of its owner, and need not be impleaded as a party-plaintiff in a civil case. Genlite Industries is merely the DTI-ed trade name or style of Parada by which he conducted his business. As such, it does not exist as a separate entity apart from its owner, and therefore it has no separate juridical personality to sue or be sued. As the sole proprietor of Genlite Industries, there is no question that the Parada is the real party in interest who stood to be directly benefited or injured by the judgment in the complaint below. There is then no necessity for Genlite Industries to be impleaded as a party-plaintiff, since the complaint was already filed in the name of its proprietor, Engr. Luis U. Parada. To heed the Megaworld’s sophistic reasoning is to permit a dubious technicality to frustrate the ends of substantial justice. ISSUE: W/N there is novation of the contract. RULING: None. 20

Novation is a mode of extinguishing an obligation by changing its objects or principal obligations, by substituting a new debtor in place of the old one, or by subrogating a third person to the rights of the creditor. It is "the substitution of a new contract, debt, or obligation for an existing one between the same or different parties."

charges, attorney's fees, all legal fees and expens e o

The settled rule is that novation is never presumed, but must be clearly and unequivocally shown. In order for a new agreement to supersede the old one, the parties to a contract must expressly agree that they are abrogating their old contract in favor of a new one.

Failed to redeem in the 1-year period

-

Respondents filed case for Reformation of Instruments, Declaration of Nullity of Notarial Foreclosure Pr oceedings and Certificate of Sale, Cancellation of Annotations

-

RTC:

The trial court found that the respondent never agreed to release the petitioner from its obligation, and this conclusion was upheld by the CA. ARTICLE 1305: STAGES OF A CONTRACT

o

The increases are unreasonable, and arbitrary

o

Refund plaintiffs amount in excess of 17% p.a.

o

Foreclosure void ab initio

1. ROBERN DEVELOPMENT CORPORATION VS. PEOPLE’S LANDLESS ASSOCIATION

o

Damages to PSB

ARTICLE 1308: MUTUALITY OF CONTRACTS

o

In MR, increased rate to 24%

-

1. PHILIPPINE SAVINGS BANK VS, CASTILLO

CA: o

The increases are unreasonable, and arbitrary

Spouses Castillo and Spouses Capati are lot owners in Tondo, Manila

o

Refund plaintiffs amount in excess of 17% p.a

Obtained a loan secured by mortgage from Phil Savings Bank (2.5M)

o

Foreclosure valid

o

Reduced damages to PSB

FACTS -

o

Solidarily bound

o

17% p.a. interest

RATIO

o

Rate subject to adjustment every 90 days

1.

-

1997-1999 – interest was adjusted from 15.529%

-

Notices were given in writing. Respondents did not confirm or formally question.

-

However, Castillo sent numerous letters requesting for reduction of interest rates, which were denied

-

2000- extrajudicial foreclosure sale, and winner and only bidder was PSB

-

petitioner no longer paid the said amount but rat her credited it to the loan amortizations and arrears, past due interest, penalty

-

The unilateral determination and imposition of t he increased rates is violative of the principle of mutuality of contracts under Arti cle 1308 of the Civil Code,

-

A perusal of the Promissory Note will readily show that th e increase or decrease of

-

interest rates hinges solely on the discretion of p etitioner.

-

It does not require the conformity of the maker before a new interes t rate could be enforced.

-

Any contract which appears to be heavily weighed in 21

o

favor of one of the parties so as to lead to an unconscionable result, thus parta king of the nature of a contract of adhesion, is void. Any stipulation re garding the validity or compliance of the contract left solely to the will of one of the parties is likewise invalid

Similarly, contract changes must be mad e with the consent of the contracting parties. Th e minds of all the parties must meet as to the proposed modification, especial ly when it affects an important aspect of the agreement.

2. -

Petitioner contends that respondents acquiesced t o the imposition of the modified interest rates; thus, there was no violati on of the principle of mutuality of contracts. o

-

Moreover, respondents' assent to the modificatio ns in the interest rates cannot be implied from their lack of response to the m emos sent by petitioner, informing them of the amendments. o

o

-

The said memos were in the nature of a proposal to change the contract with res pect to one of its significant components, i.e., the interest rates. As we have held, no one receiving a proposal to change a contract is oblige d to answer the proposal

We likewise disagree with petitioner's assertion t hat respondents recognized the legality of the imposed interest rates through the letters requesting for the reduction of the rates. o

-

Conformity letter signed by them does not pertain to the modification of the interest rates, but rat her only to the amendment of the interest rate review period from 90 days to 30 days.

The request for reduction of the interest does not translate to consent thereto.

Basic is the rule that there can be no contract in i ts true sense without the mutual assent of the parties. If this consent is abs ent on the part of one who contracts, the act has no more efficacy than if it had been done under duress or by a person of unsound mind.



In the case of loan contracts, the interest rate is undeniably always a vital component



Any change must be mutually a greed upon, otherwise, it produc es no binding effect.

HELD: Affirmed Damages deleted ARTICLE 1311: STIPULATION IN FAVOR OF THIRD PERSONS 1. MAMARIL VS. THE BOY SCOUT OF THE PHILIPPINES 1ST DIGEST: FACTS: Spouses Benjamin C. Mamaril and Sonia P. Mamaril (Spouses Mamaril) are jeepney operators. They park their enger jeepneys every night at the Boy Scout of the Philippines (BSP) for a fee per month for each unit. As usual, all these vehicles were parked inside the BSP compound one evening. However, the following morning, one of the vehicles was missing and was never recovered. According to the security guards CesarioPe (Pe) and Vicente Gaddi (Gaddi) of AIB Security Agency, Inc. (AIB) with whom BSP had contracted (Guard Service Contract) for its security and protection, a male person who looked familiar to them took the subject vehicle out of the compound. ISSUE: Whether or not BSP is liable based on the Guard Service Contract and the parking ticket it issued. HELD:

The

petition

lacks

merit.

CIVIL LAW: Principle of Relativity of Contracts; Lease 22

With respect to Guard Service Contract, it is undisputed that Spouses Mamaril are not parties therein. Neither did the subject agreement contain any stipulation pour autrui. And even if there was, Spouses Mamaril did not convey any acceptance thereof. Thus, under the principle of relativity of contracts, they cannot validly claim any rights or favor under the said agreement. With respect to the parking ticket, it has been held that the act of parking a vehicle in a garage, upon payment of a fixed amount, is a lease. A lessor-lessee relationship existed between Spouses Mamaril and BSP. Article 1664 of the same Code states that [t]he lessor is not obliged to answer for a mere act of tres which a third person may cause on the use of the thing leased; but the lessee shall have a direct action against the intruder. Here, BSP was not remiss in its obligation to provide Spouses Mamaril a suitable parking space for their jeepneys as it even hired security guards to secure the premises; hence, it should not be held liable for the loss suffered by Spouses Mamaril. DENIED. 2nd DIGEST: FACTS: PUJ operators Sps. Mamaril would park their 6 enger jeepneys every night at BSP’s compound in Malate, Manila for a fee of P300.00 per month for each unit. One day, one of the vehicles was missing and was never recovered. According to the security guards Peña and Gaddi of AIB Security Agency with whom BSP had contracted for its security and protection, a male person who looked familiar to them took the subject vehicle out of the compound. Sps. Mamaril prayed that Peña and Gaddi, together with AIB and BSP, be held liable for: (a) the value of the subject vehicle; (b) amount representing daily loss of income/boundary reckoned from the day the vehicle was lost; (c) exemplary damages; (d) moral damages; (e) attorney's fees; and (f) cost of suit. BSP denied any liability contending that not only did Sps. Mamaril directly deal with AIB with respect to the manner by which the parked vehicles would be handled, but the parking ticket itself expressly stated that the "Management shall not be responsible for loss of vehicle or any of its accessories or article left therein." It also claimed that Sps. Mamaril erroneously relied on the Guard Service Contract. Apart from not being parties

thereto, its provisions cover only the protection of BSP's properties, its officers, and employees. ISSUE: Whether or not BSP may be held liable for the loss of the vehicle caused by the negligence of its security guards. HELD: The proximate cause of the loss of Sps. Mamaril's vehicle was the negligent act of security guards Peña and Gaddi in allowing an unidentified person to drive out the subject vehicle. The records are bereft of any finding of negligence on the part of BSP. Neither will the vicarious liability of an employer under Article 2180 of the Civil Code apply in this case. Peña and Gaddi were assigned as security guards by AIB to BSP pursuant to the Guard Service Contract. No employer-employee relationship existed between BSP and the security guards assigned in its premises. Sps. Mamaril are not parties to the Guard Service Contract. Guard Service Contract between defendant-appellant BSP and defendant AIB Security Agency is purely between the parties therein. Contracts take effect only between the parties, their assigns and heirs, except in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law. The heir is not liable beyond the value of the property he received from the decedent. If a contract should contain some stipulation in favor of a third person, he may demand its fulfillment provided he communicated his acceptance to 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. Thus, in order that a third person benefited by the second paragraph of Article 1311, referred to as a stipulation pour autrui, may demand its fulfillment, the following requisites must concur: (1) There is a stipulation in favor of a third person; (2) The stipulation is a part, not the whole, of the contract; (3) The contracting parties clearly and deliberately conferred a favor to the third person - the favor is not merely incidental; (4) The favor is unconditional and uncompensated; (5) The third person communicated his or her acceptance of the favor before its revocation; and (6) The contracting parties do not represent, or are not authorized, by the third party. However, none of the foregoing elements obtains in this case.There is absolutely nothing in the said contract 23

that would indicate any obligation and/or liability on the part of the parties therein in favor of third persons such as herein plaintiffs-appellees. Moreover, the Court concurs with the finding of the CA that the contract between the parties herein was one of lease as defined under Article 1643 of the Civil Code. It has been held that the act of parking a vehicle in a garage, upon payment of a fixed amount, is a lease. The agreement with respect to the ingress and egress of Sps. Mamaril's vehicles were coordinated only with AIB and its security guards, without the knowledge and consent of BSP. Accordingly, the mishandling of the parked vehicles that resulted in herein complained loss should be recovered only from the tort feasors (Peña and Gaddi) and their employer, AIB; and not against the lessor, BSP. 2. COQUIA VS. FIELDMEN’S INSURANCE CO,. INC

event of death of said driver, the Company shall, likewise, "indemnify his personal representatives." 

typical of contracts pour autrui, this character being made more manifest by the fact that the deceased driver paid 50% of the corresponding s, which were deducted from his weekly commissions



expressly stipulated and declared that it shall be a condition precedent to any right of action or suit upon this Policy that the award by such arbitrator, arbitrators or umpire of the amount of the Company's liability hereunder if disputed shall be first obtained



both parties from the inception of their dispute proceeded in entire disregard of the provisions of the contract relating to arbitration

1ST DIGEST:

o

FACTS: 

December 1, 1961: Fieldmen's Insurance Company, Inc. issued in favor of the Manila Yellow Taxicab Co., Inc. (Manila) from December 1, 1961 to December 1, 1962



February 10, 1962: A taxicab of Manila driven by Carlito Coquia, met a vehicular accident at Mangaldan, Pangasinana and died



The insured filed a claim for P5,000 in which Fieldmen's replied with an offer to pay P2,000 by way of compromise



The insured rejected it and countered with P4,000



September 18, 1962: Carlito's parents filed a complaint against the Company for collection o



The company pleaded lack of cause of action

RTC: ordered to pay the parents

ISSUE: W/N there is a stipulation pour autrui that exempts the general rule that the parents are not a party to the contract

conduct was as effective a rejection of the right to arbitrate

2ND DIGEST: FACTS: > On Dec. 1, 1961, Fieldmen’s Insurance co. Issued in favor of the Manila Yellow Taxicab a common carrier insurance policy with a stipulation that the company shall indemnify the insured of the sums which the latter wmy be held liable for with respect to “death or bodily injury to any faire-paying enger including the driver and conductor”. > The policy also stated that in “the event of the death of the driver, the Company shall indemnify his personal representatives and at the Company’s option may make indemnity payable directly to the claimants or heirs of the claimants.” > During the policy’s lifetime, a taxicab of the insured driven by Coquia met an accident and Coquia died. > When the company refused to pay the only heirs of Coquia, his parents, they institued this complaint. The company contends that plaintiffs have no cause of action since the Coquias have no contractual relationship with the company.

HELD: YES. RTC affirmed. 

ISSUE: There is a stipulation that the Company "will indemnify any authorized Driver who is driving the Motor Vehicle" of the Insured and, in the

Whether or not plaintiffs have the right to collect on the policy. 24

Gilchrist but they didn't know the identity of the other party

HELD: YES. Athough, 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 to 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



Gilchrist filed for injunction against these parties



Trial Court and CA: granted - there is a contract between Gilchrist and Cuddy

ISSUE: W/N Espejo and his partner Zaldarriaga should be liable for damages though they do not know the identity of Gilchrist HELD: YES. judgment is affirmed 

That Cuddy was liable in an action for damages for the breach of that contract, there can be no doubt.



the mere right to compete could not justify the appellants in intentionally inducing Cuddy to take away the appellee's contractual rights

In the case at bar, the policy under consideration is typical of contracts pour autrui this character being made more manifest by the fact that the deceased driver paid fifty percent (50%) of the corresponding s, which were deducted from his weekly commissions. Under these conditions, it is clear that the Coquias — who, ittedly, are the sole heirs of the deceased — have a direct cause of action against the Company, and, since they could have maintained this action by themselves, without the assistance of the insured it goes without saying that they could and did properly the latter in filing the complaint herein.

o

Everyone has a right to enjoy the fruits and advantages of his own enterprise, industry, skill and credit. He has no right to be free from malicious and wanton interference, disturbance or annoyance. If disturbance or loss come as a result of competition, or the exercise of like rights by others, it is damnum absque injuria(loss without injury), unless some superior right by contract or otherwise is interfered with

o

Cuddy contract on the part of the appellants was a desire to make a profit by exhibiting the film in their theater. There was no malice beyond this desire; but this fact does not relieve them of the legal liability for interfering with that contract and causing its breach.

ARTICLE 1314: UNLAWFUL INTERFERENCE 1. GILCHRIST VS. CUDDY FACTS: 

Cuddy was the owner of the film Zigomar



April 24: He rented it to C. S. Gilchrist for a week for P125



A few days to the date of delivery, Cuddy sent the money back to Gilchrist



Cuddy rented the film to Espejo and his partner Zaldarriaga P350 for the week knowing that it was rented to someone else and that Cuddy accepted it because he was paying about three times as much as he had contracted with



liability of the appellants arises from unlawful acts and not from contractual obligations, as they were under no such obligations to induce Cuddy to violate his contract with Gilchrist



So that if the action of Gilchrist had been one for damages, it would be governed by chapter 2, title 16, book 4 of the Civil Code. o

Article 1902 of that code provides that a person who, by act or omission, causes damages to another when there is fault or 25

negligence, shall be obliged to repair the damage do done o





the remedy by injunction cannot be used to restrain a legitimate competition, though such competition would involve the violation of a contract

2. YU VS. UNISIA MERCHANDISING

irreparable injury 



So far as the preliminary injunction issued against the appellants is concerned, which prohibited them from exhibiting the Zigomar during the week which Gilchrist desired to exhibit it, we are of the opinion that the circumstances justified the issuance of that injunction in the discretion of the court

There is nothing in this article which requires as a condition precedent to the liability of a tort-feasor that he must know the identity of a person to whom he causes damages

An injunction is a "special remedy" which was there issued by the authority and under the seal of a court of equity, and limited, as in order cases where equitable relief is sought, to cases where there is no "plain, adequate, and complete remedy at law," which "will not be granted while the rights between the parties are undetermined, except in extraordinary cases where material and irreparable injury will be done," which cannot be compensated in damages, and where there will be no adequate remedy, and which will not, as a rule, be granted, to take property out of the possession of one party and put it into that of another whose title has not been established by law o



not meant such injury as is beyond the possibility of repair, or beyond possible compensation in damages, nor necessarily great injury or great damage, but that species of injury, whether great or small, that ought not to be submitted to on the one hand or inflicted on the other; and, because it is so large on the one hand, or so small on the other, is of such constant and frequent recurrence that no fair or reasonable redress can be had therefor in a court of law

Gilchrist was facing the immediate prospect of diminished profits by reason of the fact that the appellants had induced Cuddy to rent to them the film Gilchrist had counted upon as his feature film o

It is quite apparent that to estimate with any decree of accuracy the damages which Gilchrist would likely suffer from such an event would be quite difficult if not impossible 26

bidder. On February 8, 1983, the Certificate of Sale issued to Home Bankers. With the failure of Ignacio to redeem the foreclosed properties within one year from such registration, the titles were consolidated in favor of Home Bankers. Despite the lapse of the redemption period and consolidation of title in Home Bankers, Ignacio offered to repurchase the properties. While Home Bankers considered Ignacios offer to repurchase, there was no repurchase contract executed. Home Bankers made several dispositions of the foreclosed properties already titled in its name. In a letter addressed to Home Bankers dated July 25, 1989, Ignacio expressed his willingness to pay the amount of P600,000.00 in full, as balance of the repurchase price, and requested Home Bankers to release to him the remaining parcels of land. Home Bankers turned down his request. Then, Home Bankers sold the properties to herein respondents. The RTC rendered judgment in favor of Ignacio and found that Home Bankers deliberately disregarded petitioners substantial payments on the total repurchase consideration.

ARTICLE 1315: CONSENSUAL CONTRACTS; EFFECTS 1. C.F. SHARP & CO. INC. VS. PIONEER INSURANCE & SURETY CORPORATION ARTICLE 1319: CONSENT AND ACCEPTANCE; HOW MANIFESTED 1. HEIRS OF FAUSTO C IGNACIO VS. HOME BANKERS SAVINGS AND TRUST COMPANY

Home Bankers appealed to the CA. The CA reversed the trial court and found that Ignacio modified the of the offer contained in the March 22, 1984 letter of Home Bankers. There was also no written conformity by Home Bankers officers to the amended conditions for repurchase which were unilaterally inserted by Ignacio. Consequently, no contract of repurchase was perfected and Home Bankers acted well within its rights when it sold the subject properties to herein respondents. ISSUE: Whether or not a contract for the repurchase of the foreclosed properties was perfected between petitioner and respondent bank?

FACTS: HELD: Court of Appeals decision is sustained. Petitioner Fausto C. Ignacio (Ignacio), during his lifetime, mortgaged two parcels of land located in Cabuyao, Laguna to respondent Home Bankers Savings and Trust Company (Home Bankers), as security for the P500,000.00 loan. When Ignacio defaulted in the payment of his loan obligation, Home Bankers proceeded to foreclose the real estate mortgage where it was the highest

CIVIL

LAW:

acceptance

of

counter-offer

Contracts are perfected by mere consent, which is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the 27

contract. In Palattao v. Court of Appeals, G.R. No. 131726, the Court held that if the acceptance of the offer was not absolute, such acceptance is insufficient to generate consent that would perfect a contract. The acceptance must be identical in all respects with that of the offer so as to produce consent or meeting of the minds. Where a party sets a different purchase price than the amount of the offer, such acceptance was qualified which can be at most considered as a counter-offer; a perfected contract would have arisen only if the other party had accepted this counteroffer. While it is impossible to expect the acceptance to echo every nuance of the offer, it is imperative that it assents to those points in the offer which, under the operative facts of each contract, are not only material but motivating as well. Anything short of that level of mutuality produces not a contract but a mere counter-offer awaiting acceptance. More particularly on the matter of the consideration of the contract, the offer and its acceptance must be unanimous both on the rate of the payment and on its term. An acceptance of an offer which agrees to the rate but varies the term is ineffective. (Villanueva v. Philippine National Bank, G.R. No. 154493) In a letter dated March 22, 1984, Ignacio set a different repurchase price and also modified the of payment, which even contained a unilateral condition for payment of the balance (P600,000), that is, depending on petitioners financial position. However, there was no evidence of any document or writing showing the conformity of respondent banks officers to this counterproposal. A contract of sale is consensual in nature and is perfected upon mere meeting of the minds. When there is merely an offer by one party without acceptance of the other, there is no contract. When the contract of sale is not perfected, it cannot, as an independent source of obligation, serve as a binding juridical relation between the parties. MERCANTILE LAW: authority of board of directors/ officers Even assuming that the bank officer or employee whom Ignacio claimed he had talked to regarding the March 22, 1984 letter had acceded to his own modified for the repurchase, their supposed verbal exchange did not bind Home Bankers in view of its corporate nature. There was no evidence that it was authorized by Home Bankers

Board of Directors to accept Ignacios counter-proposal to repurchase the foreclosed properties at the price and other than those communicated in the March 22, 1984 letter. Section 23 of the Corporation Code expressly provides that the corporate powers of all corporations shall be exercised by the board of directors. Just as a natural person may authorize another to do certain acts in his behalf, so may the board of directors of a corporation validly delegate some of its functions to individual officers or agents appointed by it. Thus, contracts or acts of a corporation must be made either by the board of directors or by a corporate agent duly authorized by the board. Absent such valid delegation/authorization, the rule is that the declarations of an individual director relating to the affairs of the corporation, but not in the course of, or connected with, the performance of authorized duties of such director, are held not binding on the corporation. (AF Realty & Development, Inc. v. Dieselman Freight Services, Co., 424 Phil. 446). DENIED. 2.

LAUDICO V. ARIAS (43 PHIL. 270)

On February 5, 1919, the defendant, Vicente Arias, who, with his codefendants, owned the building Nos. 205 to 221 on Carriedo Street, on his behalf and that of his coowners, wrote a letter to the plaintiff, Mamerto Laudico, giving him an option to lease the building to a third person, and transmitting to him for that purpose a tentative contract in writing containing the conditions upon which the proposed lease should be made. Later Mr. Laudico presented his coplaintiff, Mr. Fred. M. Harden, as the party desiring to lease the building. On one hand, other conditions were added to those originally contained in the tentative contract, and, on the other, counterpropositions were made and explanations requested on certain points in order to make them clear. These negotiations were carried on by correspondence and verbally at interviews held with Mr. Vicente Arias, no definite agreement having been arrived at until the plaintiff, Mr. Laudico, finally wrote a letter to Mr. Arias on March 6, 1919, advising him that all his propositions, as amended and supplemented, were accepted. It is itted that this letter was received by Mr. Arias by special delivery at 2.53 p.m. of that day. On that same day, at 11.25 in the morning, Mr. Arias had, in turn, written a letter to the plaintiff, Mr. Laudico, withdrawing the offer to lease the building. 28

The chief prayer of the plaintiff in this action is that the defendants be compelled to execute the contract of lease of the building in question. It thus results that when Arias sent his letter of withdrawal to Laudico, he had not yet received the letter of acceptance, and when it reached him, he had already sent his letter of withdrawal. Under these facts we believe that no contract was perfected between the plaintiffs and the defendants. The parties agree that the circumstances under which that offer was made were such that the offer could be withdrawn at any time before acceptance. Under article 1262, paragraph 2, of the Civil Code, an acceptance by letter does not have any effect until it comes to the knowledge of the offerer. Therefore, before he learns of the acceptance, the latter is not yet bound by it and can still withdraw the offer. Consequently, when Mr. Arias wrote Mr. Laudico, withdrawing the offer, he had the right to do so, inasmuch as he had not yet receive notice of the acceptance. And when the notice of the acceptance was received by Mr. Arias, it no longer had any effect, as the offer was not then in existence, the same having already been withdrawn. There was no meeting of the minds, through offer and acceptance, which is the essence of the contract. While there was an offer, there was no acceptance, and when the latter was made and could have a binding effect, the offer was then lacking. Though both the offer and the acceptance existed, they did not meet to give birth to a contract. Our attention has been called to a doctrine laid down in some decisions to the effect that ordinarily notice of the revocation of an offer must be given to avoid an acceptance which may convert in into a binding contract, and that no such notice can be deemed to have been given to the person to whom the offer was made unless the revocation was in fact brought home to his knowledge. This, however, has no application in the instant case, because when Arias received the letter of acceptance, his letter of revocation had already been received. The latter was sent through a messenger at 11.25 in the morning directly to the office of Laudico and should have been received immediately on that same morning, or at least, before Arias received the letter of acceptance. On this point we do not give any credence to the testimony of Laudico that he received this letter of revocation at 3.30 in the afternoon of that day. Laudico is interested in destroying the effect of this revocation so that the acceptance may be valid, which is the principal ground of his complaint.

But even supposing Laudico's testimony to be true, still the doctrine invoked has no application here. With regard to contracts between absent persons there are two principal theories, to wit, one holding that an acceptance by letter of an offer has no effect until it comes to the knowledge of the offerer, and the other maintaining that it is effective from the time the letter is sent. The Civil Code, in paragraph 2 of article 1262, has adopted the first theory and, according to its most eminent commentators, it means that, before the acceptance is known, the offer can be revoked, it not being necessary, in order for the revocation to have the effect of impeding the perfection of the contract, that it be known by the acceptant. Q. Mucius Scaevola says apropros: "To our mind, the power to revoke is implied in the criterion that no contract exists until the acceptance is known. As the tie or bond springs from the meeting or concurrence of the minds, since up to that moment there exists only a unilateral act, it is evident that he who makes it must have the power to revoke it by withdrawing his proposition, although with the obligation to pay such damages as may have been sustained by the person or persons to whom the offer was made and by whom it was accepted, if he in turn failed to give them notice of the withdrawal of the offer. This view is confirmed by the provision of article 1257, paragraph 2, concerning the case where a stipulation is made in favor of a third person, which provision authorizes the contracting parties to revoke the stipulation before the notice of its acceptance. That case is quite similar to that under comment, as said stipulation in favor of a third person (who, for the very reason of being a third person, is not a contracting party) is tantamount to an offer made by the makers of the contract which may or may not be accepted by him, and which does not have any effect until the obligor is notified, and may, before it is accepted, be revoked by those who have made it; therefore, the case being similar, the same rule applies." Under the second theory, the doctrine invoked by the plaintiffs is sound, because if the sending of the letter of acceptance in itself really perfects the contract, the revocation of the offer, in order to prevent it, must be known to the acceptor. But this consideration has no place in the first theory under which the forwarding of the letter of acceptance, in itself, does not have any effect until the acceptance is known by the person who has made the offer. The judgment appealed from is reversed and the defendants are absolved from the complaint, without special finding as to costs. So ordered. 29

ART. 1324: OPTION CONTRACT



August 30, 1991: the RTC ordered the Cu Unjiengs to execute the necessary Deed of Sale of the property in litigation in favor of plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur Go for the consideration of P15 Million pesos in recognition of petitioners’ right of first refusal and that a new Transfer Certificate of Title be issued in favor of the buyer. The court also set aside the title issued to Buen Realty Corporation for having been executed in bad faith. On September 22, 1991, the Judge issued a writ of execution.



The CA reversed the RTC ruling.

1. ANG YU ASUNCION V. CA (238 SCRA 602) FACTS: July 29, 1987: An amended Complaint for Specific Performance was filed by petitioners Ang Yu Asuncion and others against Bobby Cu Unjieng, Rose Cu Unjieng and Jose Tan before RTC. 

Petitioners (Ang Yu) alleged that:

- they are the tenants or lessees of residential and commercial spaces owned by Bobby Unijeng and others located in Binondo, Manila (since 1935) that on several occasions before October 9, 1986, the lessors informed the lessees (petitioners) that they are offering to sell the premises and are giving them priority to acquire the same; - that during the negotiations, Bobby Cu Unjieng offered a price of P6-million while they made a counter offer of P5-million; - that they wrote them on October 24, 1986 asking that they specify the and conditions of the offer to sell; that when plaintiffs did not receive any reply, they sent another letter dated January 28, 1987 with the same request; 





The RTC found that Cu Unjiengs’ offer to sell was never accepted by the petitioners (Ang Yu) for the reason that they did not agree upon the and conditions of the proposed sale, hence, there was no contract of sale at all. The Court of Appeals affirmed the decision of the lower court. This decision was brought to the Supreme Court by petition for review on certiorari which subsequently denied the appeal on May 6, 1991 “for insufficiency in form and substance”. (Referring to the first case filed by Ang Yu) November 15, 1990: While the case was pending consideration by this Court, the Cu Unjieng spouses executed a Deed of Sale transferring the subject petitioner to petitioner Buen Realty and Development Corporation. Petitioner Buen Realty and Development Corporation, as the new owner of the subject property, wrote a letter to the lessees demanding that the latter vacate the premises.

ISSUE: WON Buen Realty can be bound by the writ of execution by virtue of the notice of lis pendens, carried over on TCT No. 195816 issued in the name of Buen Realty, at the time of the latter’s purchase of the property on 15 November 1991 from the Cu Unjiengs. RULING: No. Right of first refusal is not a perfected contract of sale under Article 1458 of the Civil Code In the law on sales, the so-called “right of first refusal” is an innovative juridical relation. Needless to point out, it cannot be deemed a perfected contract of sale under Article 1458 of the Civil Code. In a right of first refusal, while the object might be made determinate, the exercise of the right, however, would be dependent not only on the grantor’s eventual intention to enter into a binding juridical relation with another but also on , including the price, that obviously are yet to be later firmed up. Prior thereto, it can at best be so described as merely belonging to a class of preparatory juridical relations governed not by contracts (since the essential elements to establish the vinculum juris would still be indefinite and inconclusive) but by, among other laws of general application, the pertinent scattered provisions of the Civil Code on human conduct. The proper action for violation of the right of first refysal is to file an action for damages and NOT writ of execution The final judgment in Civil Case No. 87-41058, it must be stressed, has merely accorded a “right of first refusal” in favor of petitioners (Ang Yu et. al). The consequence of such a declaration entails no more than what has heretofore been said. In fine, if, as it is here so conveyed 30

to us, petitioners are aggrieved by the failure of private respondents to honor the right of first refusal, the remedy is not a writ of execution on the judgment, since there is none to execute, but an action for damages in a proper forum for the purpose.

ART. 1335: VITIATION INTIMIDATION

Unconditional mutual promise to buy vs. Accepted unilateral promise

ABC needed from XYZ an original copy of a deed of extrajudicial settlement. XYZ told ABC that he will sign only if ABC will give him the additional money he promised as his share in the estate in the amount of P1,000,000.00. XYZ bargained until the reduced amount of P600,000.00was agreed. Since XYZ has no money at that time, he executed a promissory note. When the due date came, XYZ refused to pay. ABC sued. The defense of XYZ was there was no consent since he was just forced to sign the promissory note and there was no consideration. RTC ruled in favor of ABC. Court of Appeals reversed the RTC decision on the ground that there was indeed no consent and consideration in the execution of the promissory note.

An unconditional mutual promise to buy and sell, as long as the object is made determinate and the price is fixed, can be obligatory on the parties, and compliance therewith may accordingly be exacted. An accepted unilateral promise which specifies the thing to be sold and the price to be paid, when coupled with a valuable consideration distinct and separate from the price, is what may properly be termed a perfected contract of option. This contract is legally binding, and in sales, it conforms with the second paragraph of Article 1479 of the Civil Code, viz: Art. 1479. . . . An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the promise is ed by a consideration distinct from the price. (1451a) Observe, however, that the option is not the contract of sale itself. The optionee has the right, but not the obligation, to buy. Once the option is exercised timely, i.e., the offer is accepted before a breach of the option, a bilateral promise to sell and to buy ensues and both parties are then reciprocally bound to comply with their respective undertakings. Buen Realty cannot be ousted from the ownership and possession of the property Furthermore, whether private respondent Buen Realty Development Corporation, the alleged purchaser of the property, has acted in good faith or bad faith and whether or not it should, in any case, be considered bound to respect the registration of the lis pendens in Civil Case No. 87-41058 are matters that must be independently addressed in appropriate proceedings. Buen Realty, not having been impleaded in Civil Case No. 87-41058, cannot be held subject to the writ of execution issued by respondent Judge, let alone ousted from the ownership and possession of the property, without first being duly afforded its day in court.

OF

CONSENT;

1. MANGAHAS V. BROBIO (634 SCRA 351) FACTS:

ISSUE: Was the promissory note void for lack of consent and consideration? RULING: When XYZ signed the promissory note there was consent and consideration. As to the matter of consent, the Court ruled as follows: Contracts are voidable where consent thereto is given through mistake, violence, intimidation, undue influence, or fraud. In determining whether consent is vitiated by any of these circumstances, courts are given a wide latitude in weighing the facts or circumstances in a given case and in deciding in favor of what they believe actually occurred, considering the age, physical infirmity, intelligence, relationship, and conduct of the parties at the time of the execution of the contract and subsequent thereto, irrespective of whether the contract is in a public or private writing.[1][14] Nowhere is it alleged that mistake, violence, fraud, or intimidation attended the execution of the promissory note. Still, respondent insists that she was “forced” into g the promissory note because petitioner would not sign the document required by the BIR. In one case, the Court – in characterizing a similar argument by respondents therein – held that such allegation is tantamount to saying that the other party exerted undue influence upon them. However, the Court said that the fact that respondents were “forced” to sign the documents does not amount to vitiated consent.[2][15] 31

There is undue influence when a person takes improper advantage of his power over the will of another, depriving the latter of a reasonable freedom of choice.[3][16] For undue influence to be present, the influence exerted must have so overpowered or subjugated the mind of a contracting party as to destroy his free agency, making him express the will of another rather than his own.[4][17] Respondent may have desperately needed petitioner’s signature on the Deed, but there is no showing that she was deprived of free agency when she signed the promissory note. Being forced into a situation does not amount to vitiated consent where it is not shown that the party is deprived of free will and choice. Respondent still had a choice: she could have refused to execute the promissory note and resorted to judicial means to obtain petitioner’s signature. Instead, respondent chose to execute the promissory note to obtain petitioner’s signature, thereby agreeing to pay the amount demanded by petitioner. The fact that respondent may have felt compelled, under the circumstances, to execute the promissory note will not negate the voluntariness of the act. As rightly observed by the trial court, the execution of the promissory note in the amount of P600,000.00 was, in fact, the product of a negotiation between the parties. Contrary to the CA’s findings, the situation did not amount to intimidation that vitiated consent. There is intimidation when one of the contracting parties is compelled to give his consent by a reasonable and wellgrounded fear of an imminent and grave evil upon his person or property, or upon the person or property of his spouse, descendants, or ascendants.[5][19] Certainly, the payment of penalties for delayed payment of taxes would not qualify as a “reasonable and well-grounded fear of an imminent and grave evil.” We the RTC in holding that courts will not set aside contracts merely because solicitation, importunity, argument, persuasion, or appeal to affection was used to obtain the consent of the other party. Influence obtained by persuasion or argument or by appeal to affection is not prohibited either in law or morals and is not obnoxious even in courts of equity.[6][20] As to the matter of consideration, the court ruled as follows: On the issue that the promissory note is void for not being ed by a consideration, we likewise disagree with the CA.

A contract is presumed to be ed by cause or consideration.[7][21] The presumption that a contract has sufficient consideration cannot be overthrown by a mere assertion that it has no consideration. To overcome the presumption, the alleged lack of consideration must be shown by preponderance of evidence.[8][22] The burden to prove lack of consideration rests upon whoever alleges it, which, in the present case, is respondent. Respondent failed to prove that the promissory note was not ed by any consideration. From her testimony and her assertions in the pleadings, it is clear that the promissory note was issued for a cause or consideration, which, at the very least, was petitioner’s signature on the document. It may very well be argued that if such was the consideration, it was inadequate. Nonetheless, even if the consideration is inadequate, the contract would not be invalidated, unless there has been fraud, mistake, or undue influence.[9][23] As previously stated, none of these grounds had been proven present in this case. ARTS. 2345 CONTRACTS

&

1346:

SIMULATION

OF

1. HEIRS OF DR. INTAC V. CA (584 SCRA 88) FACTS: Ireneo Mendoza (Ireneo), married to Salvacion Fermin (Salvacion), was the owner of the subject property, presently covered by TCT No. 242655 of the Registry of Deeds of Quezon City and situated at No. 36, Road 8, Bagong Pag-asa, Quezon City, which he purchased in 1954. Ireneo had two children: respondents Josefina and Martina (respondents), Salvacion being their stepmother. When he was still alive, Ireneo, also took care of his niece, Angelina, since she was three years old until she got married. The property was then covered by TCT No. 106530 of the Registry of Deeds of Quezon City. On October 25, 1977, Ireneo, with the consent of Salvacion, executed a deed of absolute sale of the property in favor of Angelina and her husband, Mario (Spouses Intac). Despite the sale, Ireneo and his family, including the respondents, continued staying in the premises and paying the realty taxes. After Ireneo died intestate in 1982, his widow and the respondents remained in the premises. After Salvacion died, respondents still maintained their residence there. Up to the present, they are in the premises, paying the real estate 32

taxes thereon, leasing out portions of the property, and collecting the rentals. On February 22, 1994, respondents filed the Complaint for Cancellation of Transfer Certificate of Title (TCT) No. 2426555 against Spouses Intac before the RTC. The complaint prayed not only for the cancellation of the title, but also for its reconveyance to them. Pending litigation, Mario died on May 20, 1995 and was substituted by his heirs, his surviving spouse, Angelina, and their children, namely, Rafael, Kristina, Ma. Tricia Margarita, Mario, and Pocholo, all surnamed Intac (petitioners). On April 30, 2002, the RTC rendered judgment in favor of respondents and against Spouses Intac. The RTC ruled, among others, that the sale between Ireneo and Salvacion, on one hand, and Spouses Intac was null and void for being a simulated one considering that the said parties had no intention of binding themselves at all. It explained that the questioned deed did not reflect the true intention of the parties and construed the said document to be an equitable mortgage on the following grounds: 1. The signed document did not express the real intention of the contracting parties because Ireneo signed the said document only because he was in urgent need of funds; 2. The amount of ₱60,000.00 in 1977 was too inadequate for a purchase price of a 240-square meter lot located in Quezon City; 3. Josefina and Martina continued to be in possession of the subject property from 1954 and even after the alleged sale took place in 1977 until this case was filed in 1994; and 4. The Spouses Intac started paying real estate taxes only in 1999. The RTC added that the Spouses Intac were guilty of fraud because they effected the registration of the subject property even though the execution of the deed was not really intended to transfer the ownership of the subject property. On appeal, the CA modified the decision of the RTC. The CA ruled that the RTC erred in first declaring the deed of absolute sale as null and void and then interpreting it to be an equitable mortgage. The CA believed that Ireneo agreed to have the title transferred in the name of the Spouses Intac to enable them to facilitate the processing of the mortgage and to obtain a loan. This was the exact reason why the deed of absolute sale was

executed. Marietto testified that Ireneo never intended to sell the subject property to the Spouses Intac and that the deed of sale was executed to enable them to borrow from a bank. This fact was confirmed by Angelina herself when she testified that she and her husband mortgaged the subject property sometime in July 1978 to finance the construction of a small hospital in Sta. Cruz, Laguna. ISSUES: 1. Whether or not the subject deed of sale was a valid and binding contract. 2. Whether or not the action to annul the deed of absolute sale had already prescribed. RULING: A contract, as defined in the Civil Code, is a meeting of minds, with respect to the other, to give something or to render some service. Accordingly, for a contract to be valid, it must have three essential elements: (1) consent of the contracting parties; (2) object certain which is the subject matter of the contract; and (3) cause of the obligation which is established. In the case at bench, the Court is one with the lower courts that no valid sale of the subject property actually took place between the alleged vendors, Ireneo and Salvacion; and the alleged vendees, Spouses Intac. There was simply no consideration and no intent to sell it. The questioned contract of sale was only for the purpose of lending the title of the property to Spouses Intac to enable them to secure a loan. Their arrangement was only temporary and could not give rise to a valid sale. Where there is no consideration, the sale is null and void ab initio. Consideration and consent are essential elements in a contract of sale. Where a party’s consent to a contract of sale is vitiated or where there is lack of consideration due to a simulated price, the contract is null and void ab initio. More importantly, Ireneo and his family continued to be in physical possession of the subject property after the sale in 1977 and up to the present. They even went as far as leasing the same and collecting rentals. One of the most striking badges of absolute simulation is the complete absence of any attempt on the part of a vendee to assert his right of dominion over the property. On another aspect, Spouses Intac failed to show that they had been paying the real estate taxes of the subject property. The primary consideration in determining the true nature of a contract is the intention of the parties. If the words of a contract appear to contravene the evident intention of 33

the parties, the latter shall prevail. Such intention is determined not only from the express of their agreement, but also from the contemporaneous and subsequent acts of the parties. As heretofore shown, the contemporaneous and subsequent acts of both parties in this case, point to the fact that the intention of Ireneo was just to lend the title to the Spouses Intac to enable them to borrow money and put up a hospital in Sta. Cruz, Laguna. Clearly, the subject contract was absolutely simulated and, therefore, void.

his undisturbed possession gives him the continuing right to seek the aid of a court of equity to ascertain the nature of the adverse claim of a third party and its effect on his title, which right can be claimed only by one who is in possession. Thus, considering that Lucia continuously possessed the subject lot, her right to institute a suit to clear the cloud over her title cannot he barred by the statute of limitations.

As a logical consequence, petitioners did not become the owners of the subject property even after a TCT had been issued in their names. After all, registration does not vest title. Certificates of title merely confirm or record title already existing and vested. They cannot be used to protect a usurper from the true owner, nor can they be used as a shield for the commission of fraud, or to permit one to enrich oneself at the expense of others. Hence, reconveyance of the subject property is warranted.

ARTS. 1356, 1357 & 1358: FORM OF CONTRACTS

The Court does not find acceptable either the argument of the Spouses Intac that respondents’ action for cancellation of TCT No. 242655 and the reconveyance of the subject property is already barred by the Statute of Limitations. The reason is that the respondents are still in actual possession of the subject property. It is a well-settled doctrine that "if the person claiming to be the owner of the property is in actual possession thereof, the right to seek reconveyance, which in effect seeks to quiet title to the property, does not prescribe."

1. DAUDEN-HERNAEZ V. DE LOS ANGELES (27 SCRA 1276) FACTS: Marlene Dauden-Hernaez, a movie actress, filed a case against Hollywood Far East Productions its President and General Manager, Ramon Valenzuela, to recover P14,700 allegedly the balance due for her services as leading actress in two motion pictures. The complaint was dismissed by Judge De Los Angeles mainly because her claim was not ed by an written document, public or private in violation of Articles 1356 and 1358 of the Civil Code. Upon a motion for reconsideration, the respondent judged dismissed the same because the allegations were the same as the first motion. According to Judge De Los Angeles, the contract sued upon was not alleged to be in writing when Article 1358 requires it to be so because the amount involved exceeds P500. ISSUE:

It is well-settled that an action for reconveyance prescribes in 10 years, the reckoning point of which is the date of registration of the deed or the date of issuance of the certificate of title over the property. In an action for reconveyance, the decree of registration is highly regarded as incontrovertible. What is sought instead is the transfer of the property or its title, which has been erroneously or wrongfully ed in another person's name, to its rightful or legal owner or to one who has a better right. However, in a number of cases in the past, the Court has consistently ruled that if the person claiming to he the owner of the property is in actual possession thereof, the right to seek reconveyance, which in effect seeks to quiet title to the property, does not prescribe. The reason for this is that one who is in actual possession of a piece of land claiming to be the owner thereof may wait until his possession is disturbed or his title is attacked before taking steps to vindicate his right. The reason being, that

Whether or not a contract for personal services involving more than P500.00 was either invalid or unenforceable under the last paragraph of Article 1358? RULING: No. The order dismissing the complaint is set aside and the case is remanded to the CFI. RATIO Consistent with the Spanish Civil Code in upholding spirit and intent of the parties over formalities, in general, contracts are valid and binding from their perfection regardless of whether they are oral or written. However, as provided in the 2nd sentence of Art. 1356: ART. 1356. Contracts shall be obligatory in whatever form they may have been entered into, provided all the essential requisites for their validity are present. 34

However, when the law requires that a contract be in some form in order that it may be valid or enforceable, or that a contract be proved ina certain way, that requirement is absolute and indispensable.... Thus, the two exceptions to the general rule that the form is irrelevant to the binding effect of a contract are: (a) Solemn Contracts - contracts which the law requires to be in some particular form (writing) in order to make them valid and enforceable. Examples:1. Donation of immovable property (Art. 749) which must be in a public instrument to be valid. in order "that the donation maybe valid", i.e., existing or binding.2. Donation of movables worth more than P5,000 (Art. 748)which must be in writing otherwise they are void.(b) Contracts that the law requires to be proved by some writing(memorandum) of its , i.e. those covered by the old Statute of Frauds, now Article 1403(2) of the Civil Code. For the latter example, their existence are not provable by mere oral testimony (unless wholly or partly executed) and are required to be in writing to be enforceable by action in court. However, the contract sued upon (compensation for services)does not come under either exception. While the last clause of Article1358 provides that "all other contracts where the amount involved exceeds five hundred pesos must appear in writing, even a private one." Said Article does not provide that the absence of a written form in this case will make the agreement invalid or unenforceable. On the contrary, Article 1357 clearly indicates that contracts covered by Article 1358 are binding and enforceable by action or suit despite the absence of writing. ART. 1403: UNENFORCEABLE CONTRACTS; STATUTE OF FRAUDS 1. ORDUNA V. FUENTEBELLA (622 SCRA 146) FACTS: Antonita Orduña purchased a residential lot from Gabriel Sr.payable in installments but no deed of sale was executed. Theinstallments were paid to Gabriel Sr. and later to Gabriel Jr. after the death of the former. Improvements were thereafterintroduced by petitioner and the latter even paid its real propertytax since 1979. Unknown to Orduña, the property has beensubject to further alienations until the same was ceded torespondent, Fuentebilla, Jr. Orduña, after being demanded by Fuentebilla to vacate the disputed land, then filed a Complaint forAnnulment of Sale, Title, Reconveyance

with Damages with aprayer to acquire ownership over the subject lot upon payment of their remaining balance. The Regional Trial Court dismissed thepetition because the verbal sale between Gabriel Sr. and Orduñawas unenforceable under the Statute of Frauds. This was lateraffirmed by the Court of Appeals. ISSUE: Whether or not the sale of the subject lot by Gabriel Sr. to Antonita is unenforceable under the Statute of Frauds RULING: No. It is a well-settled rule that the Statute of Frauds asexpressed in Article 1403, par. (2), of the Civil Code is applicable only to purely executory contracts and not to contracts which have already been executed either totally or partially. Here, theverbal contract of sale has been partially executed through thepartial payments made by Orduña duly received by both Gabriel Jr. and his father. The purpose of the Statute of Fraud is prevention fraud and perjury in the enforcement of obligations depending for their evidence on the unassisted memory of witnesses, by requiring some contracts and transactions to be evidenced by a writing signed by the party to be charged. Since there is already ratification of the verbal contract through the acceptance of benefits through the partial payments, it is thus withdrawn from the purview of the Statute of Frauds. Sale of Shares of Stock in relation to Articles 14611462of the New Civil Code 2. HERNANDEZ V. CA (160 SCRA 821) NARVASA, J.: To those prevented by fraud from proving their title to land subject of registration proceedings in another's name, the law affords the remedy of review of the decree of registration by petition in the land registration court within one year from its issuance of the order. 1 This was the remedy availed of by Victorino Hernandez, but as he could convince neither the Court of First Instance of Rizal nor the Court of Appellants 2 of the merits of his petition, he failed in his bid to reopen and correct the decree in Land Registration Case No. N-2488 Fr. Lucio V. Garcia the absolute owner of three parcels of land in Parañaque. 3 This Court however finds that upon the recorded facts, the petitioner is entitled to the relief sought. Fr. Garcia 4 applied in 1959 for the registration in his name of Lots 1-A, 1-B, and 2 of Plan Psu-172410-B in Bo. San Dionisio, Parañaque. His property aded that 35

of Hernandez, and since both estates were once owned by one Andres San Buenaventura, 5 no dividing boundaries existed thereon until cadastral surveyors from the Bureau of Lands laid down official monuments to mark the separation of the lots. These monuments were set along a line which the landowners had previously agreed upon as representing the correct boundary between their estates. This was in 1956. 6

thus fraudulently giving the false impression to petitioner that no alteration has actually been made in originally agreed-upon boundaries in the course of the preparation of (the) Plan." Thus having been "misled to believe that no encroachment has been made by applicant," and "conscious of the previous agreement and the fact that the Bureau of Lands monuments have not been altered." Hernandez had put up no objection to the application. 10

Unknown to Hernandez, the Advance Plan Psu-172410B submitted in Fr. Garcia's behalf to the land registration court in 1959 included 220 square meters of land now disputed — Lots ABC and 4057-A of Lot 1-B. This area fell beyond the stipulated boundaries of Fr. Garcia's land and encroached pro tanto on the land of Hernandez (on which, it should be mentioned, his tenants had been living for many years [decades, in fact] before the date of Fr. Garcia's application). 7 Allegedly lulled into complacency by the recentness of their agreement as to the limits of their respective properties, and confident that the visible landmarks installed by the government surveyors precluded any overstepping of those limits, Hernandez proffered no opposition to Fr. Garcia's application, leaving the heirs of Andres San Buenaventura as the only oppositors thereto.

As stated at the outset, the trial court dismissed Hernandez's petition, 11 and the appellate court gave his appeal short shrift. 12 Both courts were of the view essentially that the evidence did not bear out the claim of fraud; that under the Statute of Frauds, the parties' covenant as to their properties' metes and bounds was unenforceable since it was not reduced to writing; and that Hernandez's parents and predecessors-in13 interest, Victorino and Tranquilino, acquired title by purchase from San Buenaventura to only 516 square meters of land, which could not have included the disputed property. 14

It was not until the court had already ordered the registration of the lots in Fr. Garcia's name that Hernandez discovered the anomaly in the application. He at once filed a petition for review of the decree, but in view of the new trial ordered by the court upon motion of the heirsoppositors, the petition was dismissed on the ground of prematurity. 8The court thereafter adjudged Fr. Garcia as the owner of Lots 1-A and 2 and the heirs-oppositors as owners of Lot 1-B. On appeal, however, the Court of Appeals declared Fr. Garcia absolute owner, by acquisitive prescription, of an the lots. This judgment became final on December 9, 1970; Decree No. 132620 was issued by the CFI of Rizal, and the of Deeds issued OCT No. 8664 in Fr. Garcia's name. 9 Hernandez promptly refiled his petition for the reopening of the decree. He argued that the decree covered a substantial portion of his land to which Fr. Garcia could claim no title. He averred anew that the Advance Plan ing the application was "irregular, because it disregarded the existing Bureau of Lands monuments designating the actual possessions of the petitioner and the applicant" and "falsely designates (other) ... boundaries ... not actually marked by any ... monuments,

Ordinarily, the Appellate Court's factual conclusions are not reviewable by this Court, 15and since here those conclusions are decidedly adverse to Hernandez, the application of the rule should result in a verdict against him. The rule its of exceptions, however, as when facts of substance were overlooked by the appellate court which, if correctly considered, might have changed the outcome of the case. 16 In this case there are several pivotal facts — about which there is no controversy whatever, it may be added — which clearly should have been weighed by the court a quoin Hernandez's favor, but inexplicably were not. It is of record, to begin with, that concrete monuments or "majones" were laid out by government surveyors in 1956 between the properties of Hernandez and Fr. Garcia. Hernandez avows that these structures were purposely installed to mark the limits of their estates; his opponents could only let this statement with telling silence. Neither did they seriously dispute that these "mojones" were installed along the line agreed upon by the parties as marking their properties' boundaries. All they averred in their defense is that the agreement did not bind them. Lastly, they freely conceded the presence of a fence along this line, but were quick to point out that they had merely "permitted" Hernandez to put up this "temporary" structure "to stop the public (from) using ... this place as a common madden shed." The excuse is lamentably feeble. 36

Hernandez argues that if indeed the Advance Plan, basis of Fr. Garcia's application, was prepared without regard to the boundary indicated by the fence and the surveyors markers, and worse, "falsely designate(d) as boundaries the lines marked by ... corners not actually marked by any Bureau of Lands monuments" which purposely left the mistaken impression that the exact limits of the ading estates had been faithfully drawn, then he was truly a victim of fraud, deftly cheated of the chance to vindicate his claim to the land. The respondents again did not care to refute the premises on which the argument is predicated. In any event, the argument is entirely in accord with the evidence and the norms of logic. Lastly, the Appellate Court may have been convinced of the impossibility of the inclusion of the disputes lot in the 516 square meters stated as sold to Hernandez's parents in the deed of sale in their favor, 17 but only because the Court missed sight of the fact that the ading lots sold to the spouses and to Fr. Garcia were uned and unsurveyed at the time of the transfer. This explains the discrepancy between the area of the land purportedly conveyed to the Hernandezes in the instrument (516 square meters) and the actual area falling within the boundaries described in the same document, which, after the survey, was found to be 716 square meters. The respondents cannot hold Hernandez to the approximate area fixed in the deed and claim ownership over the excess. All the land embraced within the stated boundaries was sold. 18 If the respondent insist on the figures named in the deeds of sale, then they themselves stand to lose 736 square meters of land. San Buenaventura had only sold 1,545 square meters to Fr. Garcia, 19 but the estate was later found to be actually 2,328 square meters in area. 20 Given the weight they deserve, the recorded facts prove Hernandez's entitlement to the relief sought. The respondents' reliance on the Statute of Frauds to secure a contrary judgment is misplaced. The Statute of Frauds finds no application to this case. Not every agreement "affecting land" must be put in writing to attain enforceability. Under the Statute of Frauds, Article 1403(2) (e) of the Civil Code, such formality is only required of contracts involving leases for longer than one year, or for the sale of real property or of an interest therein. Hernandez's testimony is thus issible to establish his agreement with Fr. Garcia as to the boundary of their estates. It is also to be noted that the presence of Hernandez's tenants on the land within his side of the

border, were this to be reckoned from the "mojones," further buttresses his claim. The foregoing considerations demonstrate more than adequately that the inclusion of the 220-square-meter area in the Original Certificate of Title No. 8664 of the of Deeds of Rizal is null and void. ACCORDINGLY, the appealed decision of the Court of Appeals is hereby REVERSED and set aside and another one entered, ordering the of Deeds of Rizal to the 220 square meters in question in favor of petitioner Victorino Hernandez; and to cancel Original Certificate of Title No. 8664 and issue a new one in favor of the private respondents excluding said 220-squaremeter area belonging to the petitioner. No pronouncement as to costs. 3. FERNANDEZ V. CA (166 SCRA 577) 4. VDA. DE ESPINA V. ABAYA (196 SCRA 312) FACTS: Marcos Espina died on February 14, 1953 and was survived by his spouses, Simprosa Vda. de Espina and their children namely, Recaredo, Timoteo, Celia, Gaudiosa, Necifora, Sora and Jose, all surnamed Espina. Decedent's estate comprises of 4 parcels of land located in Surigao del Sur. In 1973, an action for partition of the land was filed by petitioners Simprosa and her children Recaredo, Timoteo, Celia, Gaudencia and Necifora. The complaint alleges that parcel No. 1 is the exclusive property of the deceased, hence the same is owned in common by petitioners and private respondents in eight (8) equal parts, while the other 3 parcels of land being conjugal properties, are also owned in common, one-half (1/2) belongs to the widow Simprosa and the other half is owned by her and her children in eight (8) equal parts. Petitioners have several times demanded the partition of the properties, but notwithstanding such demands private respondents refused to accede. Private respondents alleged in their answer that in or about April, 1951, the late Marcos Espina and his widow, Simprosa, together with their children made a temporary verbal division and assignment of shares among their children. After the death of Marcos, the temporary division was finalized by the heirs. Thereafter the heirs took immediate possession of their respective shares on April 20, 1952. Private respondents took actual physical 37

possession of their respective shares including the portions ceded to them by Simprosa. Private respondents filed a motion to dismiss the complaint alleging that the CAUSE OF ACTION IS BARRED BY STATUTE OF LIMITATIONS. RTC Trial court granted petition. Petitioner’s Contention Petitioners contended that the present action is not for reconveyance but one for partition. Hence, the rule insisted by the private respondents on prescriptibility of an action for reconcile conveyance of real property based on an implied trust is not applicable in the case at bar. They also argued that private respondents cannot set up the defense of prescription or laches because their possession of the property no matter how long cannot ripen into ownership.

2. YES. "An agreement of partition may be made orally or in writing. An oral agreement for the partition of the property owned in common is valid and enforceable upon the parties. The Statute of Frauds has no operation in this kind of agreements, for partition is not a conveyance of property but simply a segregation and designation of the part of the property which belong to the coowners." (Tolentino, Commentaries and Jurisprudence on the Civil Code of the Philippines, Vol. II, 1983 Edition, 182183 citing Hernandez v. Andal, et. al., G.R. No. L275, March 29, 1957

The petitioners claim that the alleged oral partition is invalid and strictly under the coverage of the statute of Frauds. ISSUE: 1. WoN imprescriptibility of partition applies in the case - NO 2. WoN oral partition is valid – YES RULING: 1. NO. We already ruled in Lebrilla, et al. v. Intermediate Appellate Court (G.R. No. 72623, December 18, 1989, 180 SCRA 188; 192) that an action for partition is imprescriptible. However, an action for partition among co-heirs ceases to be such, and becomes one for title where the defendants allege exclusive ownership. In the case at bar, the imprescriptibility of the action for partition cannot be invoked because two of the co-heirs, namely private respondents Sora and Jose Espina possessed the property as exclusive owners and their possession for a period of twenty one (21) years is sufficient to acquire it by prescription. Hence, from the moment these co-heirs claim that they are the absolute and exclusive owners of the properties and deny the others any share therein, the question involved is no longer one of partition but of ownership. 38