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oblicon finals

NPC vs. Dayrit (novation)

Held: It is elementary that novation is never presumed; it must be explicitly stated or there must be manifest incompatibility between the old and the new obligations in every aspect. Thus the Civil Code provides:
Art. 1292. In order that an obligation may be extinguished by another which substitutes the same, it is imperative that it be so declared in unequivocal terms, or that the old and the new obligations be on every point incompatible with each other.

In the case at bar there is nothing in the May 14, 1982, agreement which supports the petitioner's contention. There is neither explicit novation nor incompatibility on every point between the "old" and the "new" agreements.

Facts: Daniel Roxas sued NPC to compel the NPC to restore the contract of Roxas for security services which the former had terminated. However, they reached a compromise agreement, and the court approved it. One of the stipulations of the agreement was that the parties shall continue with the contract of security services under the same terms and conditions as the previous contract effective upon the signing thereof. Parties entered into another contract for security services but NPC refused to implement the new contract for which Daniel filed a Motion for Execution. The NPC assails the Order on the ground that it directs execution of a contract which had been novated by that of the new contracts. NPC contends there was novation because they executed the second contract with Josefina Roxas; therefore there was a change of party. Upon the other hand, Roxas claims that said contract was executed precisely to implement the compromise agreement for which reason there was no novation.

Inchausti vs. Yulo (novation)

The contract of May 12, 1911 does not constitute a novation of the former one of Aug.12, 1909, with respect to the other debtors who executed this contract. First, “in order that an obligation may be extinguished by another which substitutes it, it is necessary that it should be so expressly declared or that the old and the new be incompatible in all points(art. 1292). It is always necessary to state that it is the intentionof the contracting parties to extinguish the former obligation by the new one.” The obligation to pay a sum of money is not novated in a new instrument wherein the old is ratified, by changing only the term of payment and adding other obligations not incompatible with the old one.

The obligation being solidary, the remission of any part of the debt made by a creditor in favor of one or more of the solidary debtors necessarily benefits the others, and therefore there can be no doubt that, in accordance with the provision of Art. 1215, 1222, the defendant has the right to enjoy the benefits of the partial remission. At present judgment can be rendered only as to P112,500.

Facts: This suit is brought for the recovery of a certain sum of money, the balance of a current account opened by the firm of Inchausti & Company with Teodor Yulo and after his death continued by Gregorio Yulo as principal representative of his children. On Aug.12, 1909, Gregorio Yulo, in representation of his 3 siblings, executed a notarial instrument, ratifying all the contents of the prior document of Jan.26, 1908, severally and joint acknowledged their indebtedness for P253,445.42, 10 % per annum, 5 installments. Plaintiff brought an action againsta Gregorio for the payment of the said balance due. But on May 12, 1911, 3 siblings executed another instrument in recognition of the debt, reduced to P225,000, interest reduced to 6% per annum, installments increased to 8.

Kabankalan Sugar Co. vs. Pacheco (novation)

Held: When an easement of right way is one of the principal conditions of a contract, and the duration of said easement is specified, the reduction of said period in a subsequent contract, wherein the same obligation is one of the principal conditions, constitutes a novation and to that extent extinguishes the former contractual obligation.

In the contract of November 1, 1920, the duration of the right of way which the defendant bound herself to impose upon her estate in favor of the plaintiff was twenty years, while in the contract of September 29, 1922, that period was reduced to seven crops which is equivalent to seven years. There can be no doubt that these two contracts, in so far as the duration of the right of way is concerned, are incompatible with each other, for the second contract reduces the period agreed upon in the first contract, and so both contracts cannot subsist at the same time. The duration of the right of way is one of the principal conditions of the first as well as of the second contract, and inasmuch as said principal condition has been modified, the contract has been novated, in accordance with the provision quoted above.

Facts: Josefa Pacheco binds herself to acknowledge in favor of the Kabankalan Sugar Co., Inc., all the easements which the Kabankalan may consider convenient and necessary for its railroad on the Hilabañgan estate belonging to the Pacheco; the only differences being that the term of the contract of November 1, 1920, is twenty years, while that of the contract entered into on September 29, 1922, is seven crops (one of the stipulations of the contract).

Fua vs. Yap (novation)

Held: We concur in the theory that appellants liability under the judgment in civil case No. 42125 had been extinguished by the settlement evidenced by the mortgage executed by them in favor of the appellee on December 16, 1933. Although said mortgage did not expressly cancel the old obligation, this was impliedly novated by reason of incompatibly resulting from the fact that, whereas the judgment was for P1,538.04 payable at one time, did not provide for attorney's fees, and was not secured, the new obligation is or P1,200 payable in installments, stipulated for attorney's fees, and is secured by a mortgage.

Facts: By virtue of a judgment for P1,538.04 which Fua obtained against Yap, a writ of execution was issued in pursuance of which a parcel of land belonging to Yap was levied upon and its sale at public auction duly advertised. The sale was, however, suspended as a result of an agreement between the parties, by the terms of which the obligation under the judgment was reduced to P1,200 payable in four installments, and to secure the payment of this amount, the land levied upon with its improvement was mortgaged to appellee with the condition that in the event of appellants' default in the payment of any installment, they would pay 10 per cent of any unpaid balance as attorney's fees as well as the difference between the full judgment credit and the reduced amount thus agreed. Appellants failed to comply with the terms of the settlement, whereupon, appellee sought the execution of the judgment, and by virtue of an alias writ of execution, the land was sold at public auction to appellee and a final deed was executed in his favor. Appellants refused, however, to vacate the land and to recognize appellee's title thereto; hence, the latter instituted the present action for recovery.

Millar vs. CA (novation)

Held: No substantial incompatibility between the mortgage obligation and the judgment liability of the respondent sufficient to justify a conclusion of implied novation. The stipulation for the payment of the obligation under the terms of the deed of chattel mortgage serves only to provide an express and specific method for its extinguishment — payment in two equal installments. The chattel mortgage simply gave the respondent a method and more time to enable him to fully satisfy the judgment indebtedness. The chattel mortgage agreement in no manner introduced any substantial modification or alteration of the judgment. Instead of extinguishing the obligation of the respondent arising from the judgment, the deed of chattel mortgage expressly ratified and confirmed the existence of the same, amplifying only the mode and period for compliance by the respondent.

The defense of implied novation requires clear and convincing proof of complete incompatibility between the two obligations. The law requires no specific form for an effective novation by implication. The test is whether the two obligations can stand together. If they cannot, incompatibility arises, and the second obligation novates the first. If they can stand together, no incompatibility results and novation does not take place.

Facts: Millar obtained a favorable condemning Antonio P. Gabriel to pay him the sum of P1,746.98 with interest at 12% per annum from the date of the filing of the complaint, the sum of P400 as attorney's fees, and the costs of suit. The lower court issued the writ of execution on the basis of which the sheriff seized the respondent's Willy's Ford jeep. The respondent, however, pleaded with the petitioner to release the jeep under an arrangement whereby the respondent, to secure the payment of the judgment debt, agreed to mortgage the vehicle in favor of the petitioner. The petitioner agreed to the arrangement; thus, the parties executed a chattel mortgage on the jeep. Resolution of the controversy posed by the petition at bar hinges entirely on a determination of whether or not the subsequent agreement of the parties as embodied in the deed of chattel mortgage impliedly novated the judgment obligation.

Sandico vs. Piguing (novation)

Held: Reduction of the amount of money to be paid does not amount to novation. The payment by the respondent of the lesser amount of P4,000, accepted by the petitioners without any protest or objection and acknowledged by them as "in full satisfaction of the money judgment", completely extinguished the judgment debt and released the respondent from his pecuniary liability.

In the case at hand, we fail to see what new or modified obligation arose out of the payment by the respondent of the reduced amount of P4,000 and substitute the monetary liability for P6,000 of the said respondent under the appellate court's judgment. Additionally, to sustain novation necessitates that the same be so declared in unequivocal terms — clearly and unmistakably shown by the express agreement of the parties or by acts of equivalent import — or that there is complete and substantial incompatibility between the two obligations. 5

Facts: The appellate court's judgment obliges the respondent to do two things: (1) to recognize the easement, and (2) to pay the petitioners the sums of P5,000 actual and P500 exemplary damages and P500 attorney's fees, or a total of P6,000. The full satisfaction of the said judgment requires specific performance and payment of a sum of money by the respondent. The parties entered into an agreement reducing the payment to P4000, and was subsequently paid by respondent. Was there a novation?

Cui vs. Arellano University (contracts; contrary to public policy)

Held: The waiver signed by Cui was void as it was contrary to public policy; it was null and void.

Facts: Cui was a law scholar at the Arellano University; he paid the tuition fees but it was returned to him at the end of every semester. Before Arellano awarded the scholarship grant, Cui was made to sign a contract covenant and agreement saying that he waives his right to transfer to another school in consideration of the scholarship grant and if he transfers, he shall pay the tuition fees awarded to him while being a scholar. He transferred to another school to finish his last term in law school. When he was about to take the Bar, his TOR at Arellano was not issued unless he pays the amount of the tuition fees that were returned to him when he was still their scholar. He paid under protest.

RP vs. PLDT (contracts; autonomy of will)

Held: We agree with the court below that parties can not be coerced to enter into a contract where no agreement is had between them as to the principal terms and conditions of the contract. Freedom to stipulate such terms and conditions is of the essence of our contractual system, and by express provision of the statute, a contract may be annulled if tainted by violence, intimidation, or undue influence. But the court a quo has apparently overlooked that while the Republic may not compel the PLDT to celebrate a contract with it, the Republic may, in the exercise of the sovereign power of eminent domain, require the telephone company to permit interconnection of the government telephone system and that of the PLDT, as the needs of the government service may require, subject to the payment of just compensation to be determined by the court. Nominally, of course, the power of eminent domain results in the taking or appropriation of title to, and possession of, the expropriated property; but no cogent reason appears why the said power may not be availed of to impose only a burden upon the owner of condemned property, without loss of title and possession. It is unquestionable that real property may, through expropriation, be subjected to an easement of right of way. The use of the PLDT's lines and services to allow inter-service connection between both telephone systems is not much different. In either case private property is subjected to a burden for public use and benefit. If, under section 6, Article XIII, of the Constitution, the State may, in the interest of national welfare, transfer utilities to public ownership upon payment of just compensation, there is no reason why the State may not require a public utility to render services in the general interest, provided just compensation is paid therefor. Ultimately, the beneficiary of the interconnecting service would be the users of both telephone systems, so that the condemnation would be for public use.

Facts: The Bureau of Telecommunications had a contract with PLDT; that the Bureau would pay PLDT for the use the trunk lines of PLDT to establish phone lines in all government offices in the country. However, after sometime, the Bureau extended its services for commercial use as PLDT could not cope with the demands of the public for phone line connections. PLDT knew about the actuations of the Bureau but it took PLDT a long time to file a complaint for the Bureau’s act.

Saura vs. Sindico (contracts; contrary to public policy)

Held: Contract or agreement is a nullity. Among those that may not be the subject matter (object) of contracts are certain rights of individuals, which the law and public policy have deemed wise to exclude from the commerce of man. Among them are the political rights conferred upon citizens, including, but not limited to, once's right to vote, the right to present one's candidacy to the people and to be voted to public office, provided, however, that all the qualifications prescribed by law obtain. Such rights may not, therefore, be bargained away curtailed with impunity, for they are conferred not for individual or private benefit or advantage but for the public good and interest.

Facts: Saura and Sindico were contesting for nomination as the official candidate of the Nacionalista. On August 23, 1957, the parties entered into a written agreement bearing the same date, containing among other matters stated therein, a pledge that
Each aspirant shall respect the result of the aforesaid convention, i.e., no one of us shall either run as a rebel or independent candidate after losing in said convention.
Saura was elected and proclaimed the Party's official congressional candidate for the aforesaid district of Pangasinan. Nonetheless, Sindico filed her certificate of candidacy for election. Saura commenced this suit for the recovery of damages. RTC dismissed the complaint on the basis that the agreement sued upon is null and void, in that (1) the subject matter of the contract, being a public office, is not within the commerce of man; and (2) the "pledge" was in curtailment of the free exercise of elective franchise and therefore against public policy

Kauffman vs. PNB (contracts; stipulation pour autrui)

Held: Yes; it is a stipulation pour autrui.
Should the contract contain any stipulation in favor of a third person, he may demand its fulfillment, provided he has given notice of his acceptance to the person bound before the stipulation has been revoked. (Art. 1257, par. 2, Civ. Code.) In the light of the conclusion thus stated, the right of the plaintiff to maintain the present action is clear enough; for it is undeniable that the bank's promise to cause a definite sum of money to be paid to the plaintiff in NYC is a stipulation in his favor within the meaning of the paragraph above quoted; and the circumstances under which that promise was given disclose an evident intention on the part of the contracting parties that the plaintiff should have the money upon demand in NYC. The recognition of this unqualified right in the plaintiff to receive the money implies in our opinion the right in him to maintain an action to recover it.
It will be noted that under the paragraph cited a third person seeking to enforce compliance with a stipulation in his favor must signify his acceptance before it has been revoked. In this case the plaintiff clearly signified his acceptance to the bank by demanding payment; and although PNB had already directed its NY agency to withhold payment when this demand was made, the rights of the plaintiff cannot be considered to as there used, must be understood to imply revocation by the mutual consent of the contracting parties, or at least by direction of the party purchasing he exchange.
Note: Legniti vs. Mechanics, etc. Bank (130 N.E. Rep., 597), decided by CA of NYC on March 1, 1921, it was held that, by selling a cable transfer of funds on a foreign country in ordinary course, a bank incurs a simple contractual obligation, and cannot be considered as holding the money which was paid for the transfer in the character of a specific trust. Thus, it was said, "Cable transfers, therefore, mean a method of transmitting money by cable wherein the seller engages that he has the balance at the point on which the payment is ordered and that on receipt of the cable directing the transfer his correspondent at such point will make payment to the beneficiary described in the cable. All these transaction are matters of purchase and sale create no trust relationship."
Facts: Kauffman, based in NYC, was the president of a Philippine Company; he was entitled to receive a dividend so the treasurer of the company went to the exchange department of PNB and requested to that a telegraphic transfer of the money Kauffman was supposed to receive from the company. The PNB agreed with additional charges for the transaction. The treasurer issued a check to PNB and it was accepted. The PNB’s representative in New York sent a message suggesting the advisability of withholding this money from Kauffman, in view of his reluctance to accept certain bills of the company. PNB acquiesced in this and dispatched to its NY agency a message to withhold the Kauffman payment as suggested. Meanwhile, Wicks then he informed Kauffman that his dividends had been wired to his credit in the NY agency of PNB. So Kauffman went to PNB office in NYC and demanded the money, however, he was refused payment. So he filed this complaint. Does Kauffman have a right of action against PNB?

Florentino vs. Encarnacion (contracts; stipulation pour autrui)

Held: The stipulation embodied on religious expenses is not revocable at the unilateral option of the co-owners and neither is it binding to both parties
The stipulation in part of an extrajudicial partition duly agreed and signed by the parties, hence the sanie must bind the contracting parties thereto and its validity or compliance cannot be left to the will of one of them (Art. 1308, N.C.C.). Under Art 1311 of the New Civil Code, this stipulation takes effect between the parties, their assign and heirs. The article provides:
Art. 1311. — Contracts take effect only between the parties, their assigns and heirs, except in cases 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 a 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.
In the case at bar, the determining point is whether the co-owners intended to benefit the Church when in their extrajudicial partition of several parcels of land inherited by them from Doña Encarnacion Florendo they agreed that with respect to the land, the fruits thereof shall serve to defray the religious expenses. The evidence on record shows that the true intent of the parties is to confer a direct and material benefit upon the Church. The fruits of the aforesaid land were used thenceforth to defray the expenses of the Church in the preparation and celebration of the Holy Week.
We find that the trial court erred in holding that the stipulation, arrangement or grant is revocable at the option of the co-owners. While a stipulation in favor of a third person has no binding effect in itself before its acceptance by the party favored, the law does not provide when the third person must make his acceptance. As a rule, there is no time at such third person has after the time until the stipulation is revoked. Here, We find that the Church accepted the stipulation in its favor before it is sought to be revoked by some of the co-owners, namely the petitioners-appellants herein. It is not disputed that from the time of the will of Doña Encarnacion Florentino in 1941, as had always been the case since time immemorial up to a year before the filing of their application in May 1964, the Church had been enjoying the benefits of the stipulation. The enjoyment of benefits flowing therefrom for almost seventeen years without question from any quarters can only be construed as an implied acceptance by the Church of the stipulation pour autrui before its revocation.
The acceptance does not have to be in any particular form, even when the stipulation is for the third person an act of liberality or generosity on the part of the promisor or promise.
It need not be made expressly and formally. Notification of acceptance, other than such as is involved in the making of demand, is unnecessary.
A trust constituted between two contracting parties for the benefit of a third person is not subject to the rules governing donation of real property. The beneficiary of a trust may demand performance of the obligation without having formally accepted the benefit of the this in a public document, upon mere acquiescence in the formation of the trust and acceptance under the second paragraph of Art. 1257 of the Civil Code.

Bonifacio vs. Mora (contracts; stipulation pour autrui)

Held: The appellants seek to recover the insurance proceeds, and for this purpose, they rely upon paragraph 4 of the insurance contract document executed by and between the State Bonding & Insurance Company, Inc. and Enrique Mora. The appellants are not mentioned in the contract as parties thereto nor is there any clause or provision thereof from which we can infer that there is an obligation on the part of the insurance company to pay the cost of repairs directly to them. It is fundamental that contracts take effect only between the parties thereto, except in some specific instances provided by law where the contract contains some stipulation in favor of a third person. Such stipulation is known as stipulation pour autrui or a provision in favor of a third person not a pay to the contract. Under this doctrine, a third person is allowed to avail himself of a benefit granted to him by the terms of the contract, provided that the contracting parties have clearly and deliberately conferred a favor upon such person. Consequently, a third person not a party to the contract has no action against the parties thereto, and cannot generally demand the enforcement of the same. The question of whether a third person has an enforcible interest in a contract, must be settled by determining whether the contracting parties intended to tender him such an interest by deliberately inserting terms in their agreement with the avowed purpose of conferring a favor upon such third person. In this connection, this Court has laid down the rule that the fairest test to determine whether the interest of a third person in a contract is a stipulation pour autrui or merely an incidental interest, is to rely upon the intention of the parties as disclosed by their contract. In the instant case the insurance contract does not contain any words or clauses to disclose an intent to give any benefit to any repairmen or materialmen in case of repair of the car in question. The parties to the insurance contract omitted such stipulation, which is a circumstance that supports the said conclusion. On the other hand, the "loss payable" clause of the insurance policy stipulates that "Loss, if any, is payable to H.S. Reyes, Inc." indicating that it was only the H.S. Reyes, Inc. which they intended to benefit.

Another cogent reason for not recognizing a right of action by the appellants against the insurance company is that "a policy of insurance is a distinct and independent contract between the insured and insurer, and third persons have no right either in a court of equity, or in a court of law, to the proceeds of it, unless there be some contract of trust, expressed or implied between the insured and third person." In this case, no contract of trust, expressed or implied exists. We, therefore, agree with the trial court that no cause of action exists in favor of the appellants in so far as the proceeds of insurance are concerned. The appellants' claim, if at all, is merely equitable in nature and must be made effective through Enrique Mora who entered into a contract with the Bonifacio Bros. Inc.

Facts: Mora mortgaged his car to H.S Reyes with a condition that Mora would insure the car with H.S. Reyes Inc. as the beneficiary. State Bonding & Company insured the car and a motor car insurance policy was issued to Mora. Right after, the car met an accident. The insurance company then assigned the accident to the Bayne Adjustment Co. for investigation and appraisal of the damage. Mora, without the consent and knowledge of H.S. Reyes Inc., authorized Bonifacio Brothers Inc. to fix the car. For the cost of labor and materials, Enrique Mora was billed at P2,102.73 through the H.H. Bayne Adjustment Co. The insurance company after claiming a franchise in the amount of P100, drew a check in the amount of P2,002.73, as proceeds of the insurance policy, payable to the order of Enrique Mora or H.S. Reyes,. Inc., and entrusted the check to the H.H. Bayne Adjustment Co. for disposition and delivery to the proper party. In the meantime, the car was delivered to Enrique Mora without the consent of the H.S. Reyes, Inc., and without payment to the Bonifacio Bros. Inc. of the cost of repairs and materials. Upon the theory that the insurance proceeds should be paid directly to them, the Bonifacio Bros. Inc filed a complaint against Mora and the State Bonding & Insurance Co., Inc. for the collection of the sum of P2,002.73

Corpus vs. CA (innominate contracts)

Held: While there was no express agreement between petitioner Corpus and respondent David as regards attorney's fees, the facts of the case support the position of respondent David that there was at least an implied agreement for the payment of attorney's fees.

Payment of attorney's fees to respondent David may be justified by virtue of the innominate contract of facio ut des (I do and you give which is based on the principle that "no one shall unjustly enrich himself at the expense of another." Innominate contracts have been elevated to a codal provision in the New Civil Code by providing under Article 1307 that such contracts shall be regulated by the stipulations of the parties, by the general provisions or principles of obligations and contracts, by the rules governing the most analogous nominate contracts, and by the customs of the people.
WE reiterated this rule in Pacific Merchandising Corp. vs. Consolacion Insurance & Surety Co., Inc. (73 SCRA 564 [1976]) citing the case of Perez v. Pomar, supra thus:
Where one has rendered services to another, and these services are accepted by the latter, in the absence of proof that the service was rendered gratuitously, it is but just that he should pay a reasonable remuneration therefor because 'it is a well-known principle of law, that no one should be permitted to enrich himself to the damage of another.
Facts: David accepted the case of Corpus though there was no express agreement regarding attorney’s fees.
Corpus was administratively charged. He employed the services of David. David won the administrative case
For Copuz. Corpus gave a check to David, but was returned by David with the intention of getting paid after
the case is ruled with finality by the SC and Corpus gets his back salaries and wages. (Your appreciation of the
efforts I have invested in your case is enough compensation therefor, however, when you shall have obtained a
decision which would have finally resolved the case in your favor, remembering me then will make me happy.
In the meantime, you will make me happier by just keeping the check) David continued to fight for Corpus’
case and got a favorable judgment. Corpus refused to pay David contending that since David refused the first
check given by him, he gave his services gratuitously.

Daywalt vs. La Corporation de los Padres Agustinos Recoletos (Art 1314)

Held: “The most that can be said with reference to the conduct of Teodorica Endencia is that she refused to carry out a contract for the sale of certain land and resisted to the last an action for specific performance in court. The result was that the plaintiff was prevented during a period of several years from exerting that control over the property which he was entitled to exert and was meanwhile unable to dispose of the property advantageously. “The extent of the liability for the breach of a contract must be determined in the light of the situation in existence at the time the contract is made; and the damages ordinarily recoverable in all events limited to such as might be reasonably foreseen in the light of the facts then known to the contracting parties. Where the purchaser desires to protect himself, in the contingency of the failure of the vendor promptly to give possession, from the possibility of incurring other damages than such as are incident to the normal value of the use and occupation, he should cause to be inserted in the contract a clause providing for stipulated amount to be paid upon failure of the vendor to give possession; and no case has been called to our attention where, in the absence of such a stipulation, damages have been held to be recoverable by the purchase in excess of the normal value of use and occupation.

The damages recoverable in case of the breach of a contract are two sorts, namely, (1) the ordinary, natural, and in a sense, necessary damage; and (2) special damages. “Ordinary damages is found in all breaches of contract where there are no special circumstances to distinguish the case especially from other contracts. The consideration paid for an unperformed promise is an instance of this sort of damage. In all such cases the damages recoverable are such as naturally and generally would result from such a breach, “according to the usual course of things”. In cases involving only ordinary damage, it is conclusively presumed from the immediateness and inevitableness of the damage, and the recovery of such damage follows as a necessary legal consequence of the breach. Ordinary damage is assumed as a matter of law to be within the contemplation of the parties. “Special damage, on the other hand, is such as follows less directly from the breach than ordinary damage. It is only found in cases where some external condition, apart from the actual terms of the contract exists or intervenes, as it were, to give a turn to affairs and to increase damage in a way that the promissor, without actual notice of the external condition, could not reasonably be expected to foresee.

Plaintiff’s right chiefly as against Teodorica Endencia; and what has been said suffices in our opinion to demonstrate that the damages laid under the second cause of action in the complaint could not be recovered from her, first, because the damages in question are special damages which were not within contemplation of the parties when the contract was made, and secondly, because said damages are too remote to be subject of recovery. This conclusion is also necessarily fatal to the right of the plaintiff to recover such damages from the defendant corporation for, as already suggested, by advising Teodorica Endencia not to perform the contract, said corporation could in no event render itself more extensively liable than the principal in the contract. “Our conclusion is that the judgment of the trial court should be affirmed, and it is so ordered, with costs against the appellant.”

Facts: Teodorica Endencia obligated herself to sell a parcel of land to the plaintiff. It was agreed that the final deed of sale will be executed when the land was registered in Endencia’s name. Subsequently, the Torrens Title for the land was issued in her favor but in the course of the proceedings for registration it was found that the land involved in the sale contained a greater area than what Endencia originally thought and she became reluctant to consummate the sale of the land to the plaintiff. This reluctance was due to the advice of the defendant which exercised a great moral influence over her. However, in advising Endencia that she was not bound by her contract with the plaintiff, the defendant was not actuated with improper motives but did so in good faith believing that, under the circumstances, Endencia was not really bound by her contract with the plaintiff. In view of Endencia’s refusal to make the conveyance, the plaintiff instituted a complaint for specific performance against her and, upon appeal, the Supreme Court held that she was bound by the contract and she was ordered to make the conveyance of the land in question to the plaintiff. The plaintiff then instituted an action against the defendant to recover the following damages: (a) The amount of Pesos 24,000.00 for the use and occupation of the land in question by reason of the pasturing of cattle therein during the period that the land was not conveyed by Endencia to the plaintiff; (b) The amount of Pesos 500,000.00 for plaintiff’s failure to sell the land in question to a sugar growing and milling enterprise, the successful launching of which depended on the ability of Daywalt to get possession of the land and the Torrens Title. The lower court held that the defendant was liable to the plaintiff for the use and occupation of the land in question and condemned the defendant to pay the plaintiff Pesos 2,497.00 as damages. The Supreme Court affirmed this adjudication of the lower court. With respect to the claim of Pesos 500,000.00 damages, the Supreme Court.

Ong Yiu vs. CA (contracts of Adhesion)

Held: PAL did not act in bad faith therefore Petitioner is not granted moral and exemplary damages; liability if PAL is limited to P100 as stipulated in the ticket.

We agree with the foregoing finding. The pertinent Condition of Carriage printed at the back of the plane ticket reads:
8. BAGGAGE LIABILITY ... The total liability of the Carrier for lost or damaged baggage of the passenger is LIMITED TO P100.00 for each ticket unless a passenger declares a higher valuation in excess of P100.00, but not in excess, however, of a total valuation of P1,000.00 and additional charges are paid pursuant to Carrier's tariffs.

There is no dispute that petitioner did not declare any higher value for his luggage, much less did he pay any additional transportation charge.

But petitioner argues that there is nothing in the evidence to show that he had actually entered into a contract with PAL limiting the latter's liability for loss or delay of the baggage of its passengers, and that Article 1750 of the Civil Code has not been complied with.

While it may be true that petitioner had not signed the plane ticket, he is nevertheless bound by the provisions thereof. "Such provisions have been held to be a part of the contract of carriage, and valid and binding upon the passenger regardless of the latter's lack of knowledge or assent to the regulation". 5 It is what is known as a contract of "adhesion", in regards which it has been said that contracts of adhesion wherein one party imposes a ready made form of contract on the other, as the plane ticket in the case at bar, are contracts not entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely; if he adheres, he gives his consent. "A contract limiting liability upon an agreed valuation does not offend against the policy of the law forbidding one from contracting against his own negligence.

Facts: Petitioner was a frequent passenger of PAL. He travelled from Cebu to Butuan for a case bringing his luggage that contained his documents for the case. It was loaded to the wrong plane. Petitioner demanded the return of his luggage and PAL complied accordingly. It was delivered to him the next day but it was allegedly opened already and his case documents missing. Petitioner sued for damages contending that PAL acted in bad faith. RTC gave petitioner a favorable judgment but he appealed to CA for more damages. However, CA only granted him P100 as damages finding that PAL acted without bad faith and petitioner not being able to declare the contents and value of his luggage as stipulated in the PAL ticket.

Velasco vs. CA (Elements)
HELD: It is not difficult to glean from the aforequoted averments that the petitioners themselves admit that they and the respondent still had to meet and agree on how and when the down-payment and the installment payments were to be paid. Such being the situation, it cannot, therefore, be said that a definite and firm sales agreement between the parties had been perfected over the lot in question. Indeed, this Court has already ruled before that a definite agreement on the manner of payment of the purchase price is an essential element in the formation of a binding and unforceable contract of sale. 3 The fact, therefore, that the petitioners delivered to the respondent the sum of P10,000 as part of the down-payment that they had to pay cannot be considered as sufficient proof of the perfection of any purchase and sale agreement between the parties herein under article 1482 of the new Civil Code, as the petitioners themselves admit that some essential matter — the terms of payment — still had to be mutually covenanted.
Sir Mik: The manner of payment is NOT an essential element of a contract.

Bienvenido Babao vs. Florencio Perez (Article 1324; statute of fraud)

Held: Contracts which by their terms are not to be performed within one year, may be taken out of the statute through performance by one party thereto. All that is required in such case is complete performance within the year by one party, however many tears may have to elapse before the agreement is performed by the other party. But nothing less than full performance by one party will suffice, and it has been held that, if anything remains to be done after the expiration of the year besides the mere payment of money, the statute will apply. It is not therefore correct to state that Santiago Babao has fully complied with his part within the year from the alleged contract in question.

Having reached the conclusion that all the parol evidence of appellee was submitted in violation of the Statute of Frauds, or of the rule which prohibits testimony against deceased persons, we find unnecessary to discuss the other issues raised in appellants' brief.

The case is dismissed, with costs against appellee.

Facts: Santiago Babao married the niece of Celestina Perez. 1924, Santi and Celestina allegedly had a verbal agreement where Santi was bound to improve the land of Celestina by leveling, clearing, planting fruits and other crops; that he will act as the administrator of the land; that all expenses for labor and materials will be at his cost, in consideration of which Celestina in turn bound herself to convey to Santi or his wife ½ of the land,, with all the improvements after the death of Celestina. But, shortly before Celestina’s death, she sold the land to another part. Thus, Santi filed this complaint alleging the sale of the land as fraudulent and fictitious and prays to recover the ½ land or the expenses he incurred in improving the land.

Issue: whether or not the verbal agreement falls within the Stature of Frauds

Sanchez vs. Rigos (contracts;acceptance)
Held: The SC affirmed the decision appealed from, with costs against Severina Rigos.
1. Option to purchase not a contract to buy and sell
The option did not impose upon Sanchez the obligation to purchase Rigos’ property. The contract denominated as “Option to Purchase” is not a “contract to buy and sell,” it merely granted Sanchez an “option” to buy, and both parties so understood it, as indicated by the caption given by them to said instrument. Under the provisions thereof, Rigos “agreed, promised and committed” herself to sell the land therein described to Sanchez for P1,510.00, but there is nothing in the contract to indicate that her aforementioned agreement, promise and undertaking is supported by a consideration “distinct from the price” stipulated for the sale of the land.
2. Article 1354 applicable to contracts in general, Article 1479 refers to sales in particular
Relying upon Article 1354 of the Civil Code, which provides that “when the offerer has allowed the offeree a certain period to accept, the offer may be withdrawn at any time before acceptance by communicating such withdrawal, except when the option is founded upon consideration, as something paid or promised,” the lower court presumed the existence of a consideration distinct from the price. It must be noted however that Article 1354 applies to contracts in general, whereas the second paragraph of Article 1479 refers to “sales” in particular, and, more specifically, to “an accepted unilateral promise to buy or to sell.” In other words, Article 1479 is controlling in the present case. Article 1479 provides that “A promise to buy and sell a determinate thing for a price certain is reciprocally demandable. 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 supported by a consideration distinct from the price.”
3. Article 1479 imposes condition for a unilateral promise to be binding; Burden of proof
In order that a unilateral promise may be “binding” upon the promisor, Article 1479 requires the concurrence of a condition, namely, that the promise be “supported by a consideration distinct from the price.” Accordingly, the promisee can not compel the promisor to comply with the promise, unless the former establishes the existence of said distinct consideration. In other words, the promisee has the burden of proving such consideration. In the present case, Sanchez has not even alleged the existence thereof in his complaint.
4. Implied admission of the truth of the other party’s averment if party joins in the petition for a judgment based on the pleadings without introducing evidence
In the case of Bauermann v. Casas (14 March 1908), it was held that “one who prays for judgment on the pleadings without offering proof as to the truth of hie own allegations, and without giving the opposing party an opportunity to introduce evidence, must be understood to admit the truth of all the material and relevant allegations of the opposing party, and to rest his motion for judgment on those allegations taken together with such of his own as are admitted in the pleading. (La Yebana Company vs. Sevilla, 9 Phil. 210).” This view was reiterated in Evangelista V. De la Rosa and Mercy’s Incorporated v. Herminia Verde. In the present case, Rigos explicitly averred in her answer, and pleaded as a special defense, the absence of said consideration for her promise to sell and, by joining in the petition for a judgment on the pleadings, Sanchez has impliedly admitted the truth of said averment in Rigos’ answer.
5. Southwestern Sugar & Molasses Co. v. Atlantic Gulf & Pacific Co. case
The Court in the Southwestern Sugar case held that “under article 1479 of the new Civil Code ‘an option to sell,’ or ‘a promise to buy or to sell,’ as used in said article, to be valid must be ’supported by a consideration distinct from the price.’ This is clearly inferred from the context of said article that a unilateral promise to buy or to sell, even if accepted, is only binding if supported by a consideration. In other words, ‘an accepted unilateral promise’ can only have a binding effect if supported by a consideration, which means that the option can still be withdrawn, even if accepted, if the same is not supported by any consideration. Here it is not disputed that the option is without consideration. It can therefore be withdrawn notwithstanding the acceptance made of it by appellee. The Court held that the general rule regarding offer and acceptance under Article 1324 must be interpreted as modified by the provision of article 1479, which applies to ‘a promise to buy and sell’ specifically. In short, the rule requires that a promise to sell to be valid must be supported by a consideration distinct from the price.
6. Atkins, Kroll and Co. v. Cua Hian Tek
In the case of Atkins, Kroll and Co., Inc. v. Cua Hian Tek, decided later than Southwestern Sugar & Molasses Co. v. Atlantic Gulf & Pacific Co., the Court saw no distinction between Articles 1324 and 1479 of the Civil Code and applied the former where a unilateral promise to sell similar to the one sued upon here was involved, treating such promise as an option which, although not binding as a contract in itself for lack of a separate consideration, nevertheless generated a bilateral contract of purchase and sale upon acceptance.
7. Option is unilateral
Furthermore, an option is unilateral: a promise to sell at the price fixed whenever the offeree should decide to exercise his option within the specified time. After accepting the promise and before he exercises his option, the holder of the option is not bound to buy. He is free either to buy or not to buy later. In the present case, however, upon accepting Rigos’ offer a bilateral promise to sell and to buy ensued, and Sanchez ipso facto assumed the obligation of a purchaser. He did not just get the right subsequently to buy or not to buy. It was not a mere option then; it was bilateral contract of sale.
8. Option without consideration is a mere offer of a contract of sale, which is not binding until accepted
If the option is given without a consideration, it is a mere offer of a contract of sale, which is not binding until accepted. If, however, acceptance is made before a withdrawal, it constitutes a binding contract of sale, even though the option was not supported by a sufficient consideration. . . . (77 Corpus Juris Secundum p. 652. See also 27 Ruling Case Law 339 and cases cited.) It can be taken for granted that the option contract was not valid for lack of consideration. But it was, at least, an offer to sell, which was accepted by latter, and of the acceptance the offerer had knowledge before said offer was withdrawn. The concurrence of both acts — the offer and the acceptance — could at all events have generated a contract, if none there was before (arts. 1254 and 1262 of the Civil Code; Zayco vs. Serra, 44 Phil. 331.) In other words, since there may be no valid contract without a cause or consideration, the promisor is not bound by his promise and may, accordingly, withdraw it. Pending notice of its withdrawal, his accepted promise partakes, however, of the nature of an offer to sell which, if accepted, results in a perfected contract of sale.
9. Proper construction of conflicting provisions of the same law; Harmonize to implement the same principle rather than to create exceptions
In line with the cardinal rule of statutory construction that, in construing different provisions of one and the same law or code, such interpretation should be favored as will reconcile or harmonize said provisions and avoid a conflict between the same. Indeed, the presumption is that, in the process of drafting the Code, its author has maintained a consistent philosophy or position. Moreover, the decision in Southwestern Sugar & Molasses Co. v. Atlantic Gulf & pacific Co., holding that Art. 1324 (on the general principles on contracts) is modified by Art. 1479 (on sales) of the Civil Code, in effect, considers the latter as an exception to the former, and exceptions are not favored, unless the intention to the contrary is clear, and it is not so, insofar as said 2 articles are concerned. What is more, the reference, in both the second paragraph of Art. 1479 and Art. 1324, to an option or promise supported by or founded upon a consideration, strongly suggests that the 2 provisions intended to enforce or implement the same principle.
10. Atkins, Kroll & Co. case modifies or abandons Southwestern Sugar case insofar as to inconsistencies
Upon mature deliberation, the Court is of the considered opinion that it should, as it hereby reiterates the doctrine laid down in the Atkins, Kroll & Co. case, and that, insofar all inconsistent therewith, the view adhered to in the South western Sugar & Molasses Co. case should be deemed abandoned or modified.
Facts: On 3 April 1961, Nicolas Sanchez and Severina Rigos executed an instrument, entitled “Option to Purchase,” whereby Mrs. Rigos “agreed, promised and committed . . . to sell” to Sanchez, for the sum of P1,510.00, a parcel of land situated in the barrios of Abar and Sibot, municipality of San Jose, province of Nueva Ecija, and more particularly described in TCT NT-12528 of said province, within two (2) years from said date with the understanding that said option shall be deemed “terminated and elapsed,” if “Sanchez shall fail to exercise his right to buy the property” within the stipulated period. Inasmuch as several tenders of payment of the sum of P1,510.00, made by Sanchez within said period, were rejected by Mrs. Rigos, on 12 March 1963, the former deposited said amount with the CFI Nueva Ecija and commenced against the latter the present action, for specific performance and damages. On 11 February 1964, after the filing of defendant’s answer, both parties, assisted by their respective counsel, jointly moved for a judgment on the pleadings. Accordingly, on 28 February 1964, the lower court rendered judgment for Sanchez, ordering Mrs. Rigos to accept the sum judicially consigned by him and to execute, in his favor, the requisite deed of conveyance. Mrs. Rigos was, likewise, sentenced to pay P200.00, as attorney’s fees, and the costs. Hence, the appeal by Mrs. Rigos to the Court of Appeals, which case was the certified by the latter court to the Supreme Court upon the ground that it involves a question purely of law.

Liguez vs. CA (void contracts)

Held: CA erred in applying to the present case the pari delicto rule. First, because it can not be said that both parties here had equal guilt when we consider that as against the deceased Salvador P. Lopez, who was a man advanced in years and mature experience, the appellant was a mere minor, 16 yrs of age, when the donation was made; that there is no finding made by CA that she was fully aware of the terms of the bargain entered into by and Lopez and her parents; that, her acceptance in the deed of donation (Art. 741) did not necessarily imply knowledge of conditions and terms not set forth therein; and that the substance of the testimony of the instrumental witnesses is that it was the appellant's parents who insisted on the donation before allowing her to live with Lopez. These facts are more suggestive of seduction than of immoral bargaining on the part of appellant. It must not be forgotten that illegality is not presumed, but must be duly and adequately proved. Second, the rule that parties to an illegal contract, if equally guilty, will not be aided by the law but will both be left where it finds them, has been interpreted by this Court as barring the party from pleading the illegality of the bargain either as a cause of action or as a defense.

CA correctly held that Lopez could not donate the entirety of the property in litigation, to the prejudice of his wife Maria Ngo, because said property was conjugal in character and the right of the husband to donate community property is strictly limited by law

ART. 1409. The conjugal partnership shall also be chargeable with anything which may have been given or promised by the husband alone to the children born of the marriage in order to obtain employment for them or give then, a profession or by both spouses by common consent, should they not have stipulated that such expenditures should be borne in whole or in part by the separate property of one of them.".
ART. 1415. The husband may dispose of the property of the conjugal partnership for the purposes mentioned in Article 1409.)
ART. 1413. In addition to his powers as manager the husband may for a valuable consideration alienate and encumber the property of the conjugal partnership without the consent of the wife.
The text of the articles makes it plain that the donation made by the husband in contravention of law is not void in its entirety, but only in so far as it prejudices the interest of the wife. In this regard, as Manresa points out the law asks no distinction between gratuitous transfers and conveyances for a consideration. To determine the prejudice to the widow, it must be shown that the value of her share in the property donated can not be paid out of the husband's share of the community profits. The requisite data, however, are not available to us and necessitate a remand of the records to the court of origin that settled the estate of the late Salvador P. Lopez.
The decisions appealed from are reversed and set aside, and the appellant Conchita Liguez declared entitled to so much of the donated property as may be found, upon proper liquidation, not to prejudice the share of the widow Maria Ngo in the conjugal partnership with Salvador P. Lopez or the legitimes of the forced heirs of the latter.

Plaintiff averred to be a legal owner, pursuant to a deed of donation of a land, executed in her favor by the late owner, Salvador P. Lopez, on 18 May 1943. The defense interposed was that the donation was null and void for having an illicit causa or consideration, which was the plaintiff's entering into marital relations with Salvador P. Lopez, a married man; and that the property had been adjudicated to the appellees as heirs of Lopez by the court of First Instance, since 1949.
The Court of Appeals rejected the appellant's claim on the basis of the well- known rule "in pari delicto non oritur actio" as embodied in Article 1306 of 1889 (reproduced in Article 1412 of the new Civil Code):
ART. 1412. If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense, the following rules shall be observed:
(1) When the fault is on the part of both contracting parties, neither may recover what he has given by virtue of the contract, or demand the performance of the other's undertaking;
(2) When only one of the contracting parties is at fault, he cannot recover, what he has given by reason of the contract, or ask for fulfillment of what has been promised him. The other, who is not at fault, may demand the return of what he has given without any obligation to comply with his promise.


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