09 Ponce de Leon vs. Rehabilitation Finance Corp

5/6/2017 SUPREMECOURTREPORTSANNOTATEDVOLUME036
VOL. 36, DECEMBER 18, 1970 289

Ponce de Leon vs. Rehabilitation Finance Corporation
No. L24571. December 18, 1970.
JOSE L. PONCE DE LEON, plaintiffappellant, vs.

REHABILITATION FINANCE CORPORATION,
defendantappellant and thirdparty defendantappellant,
ROSALINA SORIANO,TEOFILA SORIANO and
REV.FR.EUGENIO R. SORIANO, thirdparty plaintiffs
appellants.
Civil Law Mortgage Presumption of regularity of mortgage

deed.The mere oral unsupported testimony of an interested
party is not sufficient to overcome the legal presumption of the
regularity of the mortgage deed, a contract celebrated with all the
legal requisites under the safeguard of a notarial certificate
(Naval, et al. vs. Enriquez, 3 Phil. 670672). Such unsupported
testimony of the interested party is not that clear, strong and
convincing evidence beyond mere preponderance of evidence,
required to show the falsity or nullity of a notarial document.
(Sigue, et al. vs. Escaro, CA, 53 Q.C. 1161 Jocson vs. Ratacion,
G.R. No. 41687 Palanca vs. Chillanchin vs. Coquinco, G.R. No. L
1355 Robinson vs. Villafuerte, 18 Phil. 171).
Remedial Law Legal Redemption Sheriff's Sale Price in a
sheriffs sale.Where there is the right to redeem, inadequacy of
price should not be material, because the judgment debtor may re
acquire the property or else sell his right to redeem and thus
recover any loss he claims to have suffered by reason of the price
obtained at the execution sale. As the trial court had correctly
observed: Mere inadequacy of the price obtained at the sheriff's
sale unless shocking to the conscience will not be sufficient to set
aside the sale if there is no showing that, in the event of a regular
sale, and, in forced sales, low prices are usually offered. (I Moran's
Rules of Court, pp. 834835).
Same Same Redemption price where mortgagee is a banking
institution.As set forth in its title, Act No. 3135 was
promulgated "to regulate the sale of property under special
powers inserted in or annexed to real estate mortgages." Section 6
thereof provided that in all cases of "extrajudicial sale x x x
http://www.central.com.ph/sfsreader/session/0000015bdcfeb1bc83e94274003600fb002c009e/t/?o=False 1/104
290
290 SUPREME COURT REPORTS ANNOTATED
made under the special power hereinbefore referred to, "the

property sold may be redeemed within" one year from and after
the date of the sale x x x." Act No. 4118 amended Act No. 3135 by
merely adding thereto three (3) new sections. Upon the other
hand, Rep. Act No. 337, otherwise known as "The General
Banking Act," is entitled "An act Regulating Banks and Banking
Institutions and for other purposes." Section 78 thereof limits the
amount of the loans that may be given by banks and banking or
credit institutions on the basis of the appraised value of the
property given as security, as well as provides that, in the event of
foreclosure of a real estate mortgage to said banks or institutions,
the property sold may be redeemed "by paying the amount fixed
by the court in the order of execution," or the amount judicially
adjudicated to the creditor bank. This provision had the effect of
amending section 6 of Act No. 3135, insofar as the redemption
price is concerned, when the mortgagee is a bank or a banking or
credit institution, said section 6 of Act No. 3135 being, in this
respect, inconsistent with the abovequoted portion of section 78
of Rep. Act No. 337.
Statutory Construction Special law prevails.The conflict
between the two (2) laws (Act No. 3135 as amended and Rep. Act
No. 337) must be resolved in favor of Rep. Act No. 337, both as a
special and as the subsequent legislation.
Negotiable Instruments Law Promissory Notes Time for
payment not indicated in promissory note.When a promissory
note expresses "no time for payment," it is deemed "payable on
demand."
Civil Law Obligations and Contracts Debtor cannot avail of
Art. 1174, Civil Code, in an obligation to pay.The debtor's
obligation was merely generic, namely, to pay certain sums of
money to the RFC. As the trial judge had aptly put it: In the
instant case, there was an obligation on the part of the debtor to
pay his loan, independently of the purpose for which the money
loaned was intended to be used and this obligation to pay
continues to subsist notwithstanding the fact that it may have
become impossible for the debtor to use the money loaned for the
particular purpose that was intended (Milan vs. Rio y
Olabarrieta, 45 Phil. 718). There is hence no ground for declaring
the amortizations due on the principal loan since October, 1952 as
extinguished due to fortuitous event or to grant plaintiff a

reasonable time to pay the due amortizations.
Land Registration Act Original certificate of title does not
291
VOL. 36, DECEMBER 18, 1970 291
establish time of acquisition.The title to said property was not a

transfer certificate of title, but an original one, issued in
accordance with a decree which, pursuant to law, merely confirms
a preexisting title. Said original certificate of title does not
establish, therefore, the time of acquisition of the property of the
registered owner thereof.
Civil Law Conjugal Partnership Proof of acquisition during
marriage, a condition sine qua non.Article 160 of the Civil Code
must be construed in relation to Articles 153 to 159 of the same
Code, enumerating the properties "acquired x x x during the
marriage" that constitute the conjugal partnership. Consequently
therewith, the party who invokes this presumption must first
prove that the property in controversy was acquired during the
marriage. In other words, proof of acquisition during coverture is
a condition sine qua non for the operation of the presumption in
favor of conjugal partnership.
Same Estoppel Attempts to redeem constitute implied
admission of validity.Defendants, by their repeated requests for
time to redeem had impliedly admittedwere estopped to
questionthe validity and regularity of the sheriff's sale. (Tiaoqui
vs. Chaves, L10086, May 20, 1957, quoting from 59 C.J.S. p.
1372).
APPEAL from a decision of the Court of First Instance of

Rizal.
The facts are stated in the opinion of the Court.
CONCEPCION, C.J.:
Appeal from a decision of the Court of First Instance of

Rizal, the dispositive part of which reads:
"IN VIEW OF THE FOREGOING, the Court hereby renders

judgment dismissing plaintiff's complaint with costs against
plaintiff ordering plaintiff Jose Ponce de Leon to pay the
defendant RFC the amount of FIVE HUNDRED TWENTYNINE
THOUSAND TWO HUNDRED SIXTY FIVE PESOS AND FIFTY

FOUR (P529,265.54) CENTAVOS, with interest at six percent per
annum from November 24, 1954 until fully paid, the further sum
of ONE HUNDRED EIGHTY (P180.00) PESOS per month from
May 20, 1955 until plaintiff vacates the house and lot at Taft
Avenue, Pasay City, and FIVE THOUSAND (P5,000.00) PESOS
as damages for the injunction and costs.
292

"The Court declares the mortgage of onehalf of the lot covered by

Original transfer certificate of title No. 8094 of the lands records
of Rizal Province belonging to the thirdparty plaintiffs, namely
Rosalina Soriano, Rev. Fr. Eugenio Soriano and Teofila Soriano
del Rosario null and void and the sheriff's sale1 in favor of the RFC
of said onehalf share likewise null and void."
As correctly set forth in said decision, the main facts are:
"On August 14, 1945, herein plaintiff Jose L. Ponce de Leon and
Francisco Soriano, father of thirdparty plaintiffs Teofila Soriano
del Rosario, Rosalina Soriano and Rev. Fr. Eugenio Soriano,
obtained a loan for P10,000.00 from the Philippine National Bank
(PNB), Manila, mortgaging a parcel of land situated at Barrio
Ibayo, Municipality of Paraaque, Rizal, covered by original
certificate of title No. 8094 of the land records of Rizal Province in
the name of Francisco Soriano, married to Tomasa Rodriguez, as
security for the loan (Exhibit 15Soriano). On August 16, 1945,
Ponce de Leon gave P2,000.00 to Soriano from the proceeds of the
loan (Exhibit 'N'). The loan was subsequently increased to
P17,500.00 and an amendment to the real estate mortgage,
Exhibit '15Soriano,' was executed by Jose L. Ponce de Leon and
Francisco Soriano on March 13, 1946 (Exhibit '16Soriano').
"On May 4, 1951, Jose L. Ponce de Leon filed with the
Rehabilitation Finance Corporation (RFC for short) Manila, his
loan application, Exhibit '1RFC,' for an industrial loan, for
putting up a sawmill, in the amount of P800,000.00 offering as
security certain parcels of land, among which, was the parcel
which Ponce de Leon and Soriano mortgaged to the PNB. The
application stated that the properties offered for security for the
RFC loan are encumbered to the PNB, Bacolod, and to Cu Unjieng
Bros. The properties offered for security to the RFC were
inspected by the appraisers of the latter, who submitted the
following appraisals:
"1. Land ........................................................ P480,228.00

"2. Building ................................................... P 12,000.00
"3. Machinery & equipment .................... P 67,101.00
"4. Transportation equipment ................... P 14,000.00
Total ...................... P573,329.00
(Exh. '6aRFC')
"The application was approved for P495,000.00 and the mortgage

contract (Exhibit 'A', also '16RFC & '33Soriano')
_______________
1 Record on Appeal, p. 133.
293
VOL. 36, DECEMBER 18, 1970 293

was executed on October 8, 1951 by Jose L. Ponce de Leon, his

wife Carmelina Russel, and Francisco Soriano. The same parties
signed a promissory note (Exhibit 'A') for P495,000.00, with
interest at 6% per annum payable on installments every month
for P28,831.64 in connection with the mortgage deed. Before the
mortgage deed was signed, the Notary Public, Felipe Cuaderno,
Jr. before whom it was acknowledged, translated it in Tagalog to
Francisco Soriano, who thereafter affixed his signature to the
document. At the time that Francisco Soriano signed the
mortgage deed, Exhibit 'A', his spouse Tomasa Rodriguez was
already dead leaving as her heirs, her children namely, Rosalina,
Teofila and Rev. Fr. Eugenio Soriano, none of whom signed the
said mortgage deed or the promissory note.
"The mortgage deed specifically stipulated that the proceeds
thereof shall be used exclusively for the purchase of machinery
and equipment, construction of buildings and the payment of
obligations and that the release of the amounts loaned shall be at
the discretion of the RFC. In view of these conditions, the RFC
paid Ponce de Leon's obligations of P100,000.00 to the PNB
P30,000.00 to Cu Unjieng Bros. and P5,000.00 to Arturo
Colmenares. From the balance of P360,000.00, the sum of
P352,000.00 was released to Jose L. Ponce de Leon at various
amounts during the period from December, 1951 to July 1952.
The checks covering these releases were issued to Jose L. Ponce
de Leon in view of the authority given to him in writing by
Francisco Soriano and Carmelina Russel (Exhibit '33ASoriano,'
Exhibit 'A' and Exhibit '16RFC').
"On March 12, 1952, Jose L. Ponce de Leon and his wife
Carmelina Russel executed an addendum to the chattel mortgage
for machineries and equipments (Exhibit 'F').
"None of the amortization and interests which had become due
was paid and for this reason, the RFC took steps for the extra
judicial foreclosure of the mortgaged properties consisting of real
estates and the sawmill and its equipments of Ponce de Leon
situated in two places in Samar. The RFC was the purchaser of
all the mortgaged properties in the ensuing sheriff's sales, with
the exception of two parcels of land situated in Bacolod City
which were purchased by private individuals. Many items of the
mortgaged machineries and equipments could not be found. The
parcels of land mortgaged were sold as follows:
" 1 ) Nineparcels at Bacolod City .......... P78,800.00

"2) Two parcels acquired by private
individuals................................................ P 5,790.00
"3) Two parcels at Pasay City with
improvements . .............................. P15,000.00
294

"4) The land of Soriano at Paraaque, Rizal

......................................................... P10,000.00
"5) The Machineries & equipments that were
left ................. ............................ P 6,000.00
"The Sheriff sold the land covered by original certificate of Title

No. 8094 in the name of Francisco Soriano, married to Tomasa
Rodriguez, on June 15, 1954 and the deed of sale, dated April 19,
1955 was executed by the sheriff in favor of the purchaser thereof,
the RFC, including all the other properties sold (Exhibit '15RFC,'
also '54Soriano').
"Previous to the expiration of the oneyear period of
redemption, Francisco Soriano, through Teofila Soriano del
Rosario offered to repurchase the Soriano lot for P14,000.00 and
on June 14, 1955, the last day for the redemption of the lot,
Francisco Soriano, in company with his daughter, Rosalina and
Teofila, went to see Mr. Bernardo, Chief of the assets department
of the RFC, and offered to redeem said lot for P14,000.00 but the
offer was rejected and they were told to participate in the public
sale of the land to be conducted by the RFC. Jose L. Ponce de
Leon did not offer to redeem the mortgaged properties sold at
anytime before the expiration of the period of redemption.
"The RFC scheduled a public sale of the lot registered in the

name of Francisco Soriano and of the other lots which the RFC
acquired in the Sheriff's sale for February 20, 1956 in view of the
inability of Ponce de Leon or Soriano to legally redeem the
properties sold by the Sheriff within the one year period after the
sale.
"On February 18, 1956, Jose L. Ponce de Leon instituted the
present action alleging that there was delay in the releases of the
amount of the loan that the RFC withheld the amount of
P19,000.00 from the loan until it had verified whether Ponce de
Leon had still an unpaid indebtedness to the defunct Agricultural
and Industrial Bank, the RFC's predecessor, and this was paid
only after one year had passed that the typhoon in October and
November, 1952 had caused destructions to his sawmills and
hampered his operations for which reason, he asks, in his
complaint, that the amortizations on his obligations which
became due since October, 1952 be declared extinguished that
the sheriff's sales be declared null and void because the properties
were sold at grossly inadequate prices and that said sales were
not conducted in accordance with law that the RFC be compelled
to account for his machineries and equipments at his lumber mill
in Calbayog and to reimburse him for the value of the
unaccounted machineries and equipments that the RFC be
ordered to pay him actual and moral damages for P105,000.00
295
VOL. 36, DECEMBER 18, 1970 295

and costs. De Leon asked for the issuance of a writ of preliminary

injunction to restrain the RFC from carrying out its contemplated
public sale. The Court set the petition for injunction for hearing
but no one appeared for the RFC at the hearing thereof so that
the Court had to issue the preliminary injunction prayed for. De
Leon caused notice of lis pendens to be recorded in relation with
this case.
"The RFC filed its answer sustaining the legality of the
mortgage and Sheriff's sales and counterclaimed that Ponce de
Leon be ordered to pay the deficiency claim representing the
balance of the latter's indebtedness, rental of the lot and house at
Taft Avenue, Pasay City occupied by Ponce de Leon and damages.
"Subsequent to the filing of Ponce de Leon's complaint against
the RFC, Francisco Soriano wrote a letter, dated February 20,
1956, to the President asking the latter's intervention so that the
projected sale on the same date to be conducted by the RFC may
be suspended insofar as the lot in his name is concerned and that
he be allowed to redeem it (Exhibit '27Soriano'). This letter was
referred by the Executive Office to the RFC, which sent a letter,

Exhibit '29Soriano', to Francisco Soriano informing the latter
that he could redeem his former property, for not less than its
appraised value of P59,647.05, payable 20% down and the balance
in ten years, with 6% interest. Soriano did not redeem the lot
under the conditions of the RFC. He then filed a thirdparty
complaint in this case with the RFC and Jose L. Ponce de Leon as
the thirdparty defendants. Due to the death of Francisco Soriano,
he was substituted as thirdparty plaintiff by his children,
namely, Teofila Soriano del Rosario, Rosalina Soriano and Rev.
Fr. Eugenio Soriano.
"The Sorianos contend that the mortgage in favor of the RFC
and promissory note signed by Francisco Soriano lacked the
latter's consent and was without consideration insofar as
Francisco Soriano is concerned and hence null and void as to him
and his children that the lot covered by original certificate of title
No. 8094 in the name of Francisco Soriano belonged to the
conjugal partnership of the latter and his wife, Tomasa
Rodriguez, now deceased, and since the latter was already dead
when the mortgage was executed and her children who have thus
inherited her share have not signed the mortgage contract and
promissory note, at least, the onehalf share of the lot belonging
now to the Soriano sisters and brothers, the thirdparty plaintiffs,
have not been legally included in the mortgage to the RFC so that
the latter had not acquired said onehalf share in the sheriff's
sale. The Sorianos further ask that they be allowed to redeem the
remaining onehalf share, that which
296

the amount for which the RFC acquired the whole lot in the
sheriff's sale. The third partyplaintiffs also ask that Ponce de
Leon be ordered to reimburse them for whatever amount they
may use in redeeming the lot and expenses incident thereto and
that Ponce de Leon and the RFC be made to pay them moral
damages which their father suffered and attorney's fees.
"Answering the thirdparty complaint, the RFC and Ponce de
Leon affirm the legality of the mortgage deed insofar as Soriano is
concerned. The RFC further contends that the mortgage was
binding on the whole Soriano lot and that there was no valid
redemption of this lot.
"Ponce de Leon interposed a counterclaim for various sums of
money allegedly received from2 him by Francisco Soriano and the
present thirdparty plaintiffs."
In due course, the lower court rendered judgment the

dispositive part of which is quoted at the beginning of this
decision. Said court held that the typhoons in October and
November 1952 did not relieve the plaintiff from his
obligations under the promissory note and the deed of
mortgage in favor of the RFC that the sheriff's sale of the
mortgaged properties is valid that the RFC need not
account for the machineries and equipment of the sawmill
in Samar or reimburse the value of such machinery and
equipment as may be unaccounted for, they having become
property of the RFC, owing to plaintiff's failure to exercise
the right of redemption in accordance with law that
neither may he recover damages from the RFC for the
alleged delay in the releases made by the same, since their
contract stipulates that the proceeds of the loan shall be
released at the discretion of the Mortgagee and plaintiff's
offer of redemption came long after the expiration of the
period therefor, and was not for the full amount of
plaintiff's liability, which he, moreover, asked to be reduced
and wanted to pay in installments and that, accordingly,
plaintiff has no right to recover any damages.
Upon the other hand, the court found that plaintiff
should pay: (1) rentals for the use of the mortgaged
property (house and lot) at Pasay City, after the title
thereto had
_______________
2 Record on Appeal, pp. 103112
297
VOL. 36, DECEMBER 18, 1970 297

senting the balance of plaintiff's obligation in favor of the

RFCwhich, as of November 24, 1954, amounted to
P583,270.49, plus 10% thereof, as stipulated penalty, or
the aggregate sum of P641,597.54after deducting
therefrom the sum of P112,332.00 for which the mortgaged
properties had been sold, (3) apart from the sum of
P5,000.00, as damages for the injunction issued, at his
behest, and the costs.
As regards the third party complaint of the Sorianos, the
lower court: (1) overruled their claim to the effect that
Francisco Soriano had signed the promissory note and the
deed of mortgage in favor of the RFC without knowledge of
the contents thereof and without any consideration
therefor but (b) held that, being registered in the name of

"Francisco Soriano, married to Tomasa Rodriguez," the
property covered by original certificate of title No. 8094
hereinafter referred to as the Paraaque propertyis
presumed to belong to the conjugal partnership of said
spouses, and that, the RFC having failed to offset this
presumption, the mortgage on and the sale of the property
by the sheriff are null and void as to onehalf (1/2) thereof.
Moreover, the court declared: (a) that the RFC was
justified in rejecting the offer, made by the Sorianos, to
redeem said property for, pursuant to section 78 of
Republic Act No. 337, redemption could be effected "only by
paying the amount fixed in the order of execution" (b) that
plaintiff's counterclaim against the Sorianos is barred by
the statute of limitations (c) that neither may he recover
damages from the Sorianos, their alleged bad faith not
bound to pay damages to the RFC, the action of the former
against the latter not being altogether unjustified.
All of the partiesnamely, plaintiff, Jose Ponce de Leon,
defendant, Rehabilitation Finance Corporation, hereinafter
referred to as RFC (now Development Bank of the
Philippines), and Rosalina Soriano, Fr. Eugenio Soriano
and Teofila Soriano del Rosario, hereinafter referred to as
the Sorianoshave appealed from said decision. 297
298

Appeal of the Sorianos
The Sorianos maintain that the lower court erred: (1) in

holding that the promissory note and the deed of mortgage
executed by Francisco Soriano in favor of the RFC are valid
as regards onehalf of the Paraaque property (2) in ruling
that the extrajudicial sale thereof to the RFC is valid as to
the aforementioned onehalf of said property (3) in not
sentencing the RFC to allow the redemption of such half of
said property by the Sorianos, as heirs of the deceased
Francisco Soriano, for onehalf of the sum of P10,000 for
which the whole lot was sold to the RFC, or, at least, for
the whole sum of P10,000 (4) in not declaring that section
78 of Rep. Act No. 337 is unconstitutional and in holding
that the same, instead of Act No. 3135, as amended by Act
No. 4118, is the law applicable to the case (5) 3 in
considering that the case of Villar v. de Paderanga is
authoritative or controlling in the case at bar (6) in not
sentencing the plaintiff and the RFC to pay damages to the

Sorianos (7) in not ordering the RFC to return OCT No.
8094, covering the Paraaque property, to the Sorianos,
free from any lien or encumbrance: and (8) in denying the
motion for reconsideration of the Sorianos.
The latter's first assignment of error is predicated upon
the theory that, when the promissory note and the deed of
mortgage in question were executed by Francisco Soriano,
he was somewhat absentminded, owing to senility, he
being then a septuagenarian, apart from illiterate, for he
could write only his name that he was persuaded to sign
said promissory note and deed of mortgage thru fraud,
deceit and undue influence, and did not know the true
nature of these instruments when he affixed his signatures
thereon and that said instruments are also null and void
for lack of cause and consideration. In this connection, the
appealed decision has the following to say:
"The thirdparty plaintiffs ask that the mortgage deed and

promissory note be declared null and void with respect to
Francisco Soriano for lack of consent and consideration. It is
_______________
3 97 Phil. 604, 609.
299
VOL. 36, DECEMBER 18, 1970 299

claimed that Francisco Soriano was made to believe by Ponce de

Leon when he signed the mortgage deed and the promissory note
that these were documents releasing his land from the previous
mortgage in favor of the PNB and that Francisco Soriano did not
receive a single centavo out of the RFC loan.
"The principal witness on the above allegation of the thirdparty
plaintiffs is Rosalina Soriano, who testified that her father,
Francisco was an old man who was absentminded that in 1945,
Ponce de Leon merely borrowed her father's certificate of title on
the pretext that he would see if it were valid that she gave it to
Ponce de Leon who never returned the certificate and it turned
out that the latter mortgaged it to the PNB by deceiving her
father in signing the mortgage contract that in 1951, her father
received a sheriff's notice that the land would be foreclosed that
her father went to see Ponce de Leon in Negros but the latter
assured him that nothing would happen to his land that in
October, 1951, she and her father went to see Ponce de Leon that
when the latter told her father that the property was mortgaged
to the RFC, her father got angry at Ponce de Leon saying that the
latter fooled him but Ponce de Leon assured him that he would
redeem the land but he failed to do so.
"Ponce de Leon denied having deceived Francisco Soriano into
signing the mortgage deed covering his land, saying that the
transaction was with the full and complete knowledge and
understanding of Francisco Soriano. He was supported by Felipe
Cuaderno, Jr., the Notary Public, who notarized the mortgage
deed, who said that he explained and translated into Tagalog, a
language known and spoken by Francisco Soriano, the mortgage
deed.
"The fact that Francisco Soriano may have been absentminded
could not be said to have the effect of vitiating his consent to the
mortgage deed because the execution and signing of a contract is
not a matter that concerns past events in which absent
mindedness may be taken into account. Besides, the testimony of
Rosalina Soriano to the effect that her father told Ponce de Leon
that the latter fooled him shows that the old man Soriano could
remember past events, for if truly absentminded, Francisco would
not recollect what he claims to be what really took place at the
RFC office as testified to by Rosalina.
"Neither could Francisco Soriano be considered feebleminded if
we believe the testimony of Rosalina which shows Soriano's
determination to see to it that the wrong done him was righted
and that his property may not be taken away from him, for
according to Rosalina, he even went to Negros alone to see Ponce
de Leon he received the Sheriff's notice of fore
300

closure and as shown by his alleged going to see Ponce de Leon a

number of times about his land and of his enlisting the aid of
Ramon Lacson
"The Sorianos stress that, according to Felipe Cuaderno, Jr.,
the Notary Public, when the latter asked Francisco Soriano, after
he had translated the mortgage deed into Tagalog if he
(Francisco) understood it, it was Ponce de Leon who said that the
old man already (k)new it. But, granting that this was what
happened, yet, Francisco Soriano would certainly have protested
against the statement of Ponce de Leon if Francisco did not really
know what the transaction was about or he would have told
Cuaderno that the document was not in accordance with the
agreement between him and Ponce de Leon considering that the
document was already translated to the old man by Cuaderno in
the Tagalog language which Soriano understood.
"Besides, if Ponce de Leon really deceived Francisco Soriano

into signing the mortgage deed and promissory note so much so
that in October, 1951, the old man Soriano was so angry at Ponce
de Leon that he told the latter that he fooled him as testified to by
Rosalina Soriano, then why was it that Ponce de Leon was wade
one of the sponsors of the thanksgiving mass of the NeoPrysbeter
Rev. Fr. Eugenio Soriano, the old man's son and one of the
present thirdparty plaintiffs? The conduct of the Sorianos in
making Ponce de Leon one of the sponsors in the thanksgiving
mass of Rev. Fr. Eugenio Soriano in which Ponce de Leon spent a
considerable amount for the big feast that followed the mass is
inconsistent with the Sorianos' claim that Ponce de Leon had
hoodwinked Francisco Soriano into signing the mortgage
instrument and the promissory note.
"Moreover, the mere oral unsupported testimony of Rosalina
Soriano, an interested party and one of the plaintiffs herein, is not
sufficient to overcome the legal presumption of the regularity of
the mortgage deed, a contract celebrated with all the legal
requisites under the safeguard of a notarial certificate (Naval, et
al. v. Enriquez, 3 Phil. 67072). Such unsupported testimony of
the interested party Rosalina Soriano is not that clear, strong and
convincing evidence beyond mere preponderance of evidence,
required to show the falsity or nullity of a notarial document
(Sigue, et al. v. Escaro, CA, 53 Q.C. 1161 Jocson v. Ratacion, G.R.
No. 41687, Palanca v. Chillanchin v. Coquinco, G.R. No. L1355
Robinson v. Villafuerte, 18 Phil. 171).
"With reference to the contention that there was no
consideration received by Francisco Soriano out of the mortgage
contract and the promissory note executed in connection there
301
VOL. 36, DECEMBER 18, 1970 301

with, this is a matter which concerned merely Francisco Soriano

and Jose L. Ponce de Leon for Francisco Soriano had expressly in
writing (Exhibit '33aSoriano') authorized Jose L. Ponce de Leon
to have the check or checks covering the amount of the mortgage
issued in the name of said Jose L. Ponce de Leon. Whatever
arrangements the latter and Francisco Soriano may have had
with respect to the amounts thus given by the RFC on account of
the mortgage is not the concern of the RFC if Ponce de Leon did
not in fact give any portion of the amount to Francisco Soriano. At
any rate, there is ample evidence to show that Francisco Soriano
received part of the consideration of the loan from the RFC. It will
be recalled that part of this loan was paid for the obligation of
Francisco Soriano and Ponce de Leon to the Philippine National
Bank secured by a mortgage of the lot in the name of Francisco

Soriano. That Francisco Soriano received portions of this PNB
loan from Ponce de Leon is shown by the fact that on August 16,
1945, Francisco Soriano received the amount of P2,000.00 from
Ponce de Leon, evidenced by the receipt exhibit 'N', and this
amount must have been part of the P10,000.00 consideration of
the PNB mortgage because this mortgage was executed on August
11, 1945 or two days before Soriano received from Ponce de Leon
the amount of P2,000.00 on August 16, 1945. And two days
thereafter, on August 18, 1945, Francisco Soriano again received
from Ponce de Leon the amount of P350.00 as shown by the receipt
exhibit '03' and, on April 27, 1945, the amount of P1,000.00 was
received by Francisco Soriano from Ponce de Leon as shown by his
receipt exhibit '01' to pay the mortgage on his lot to Apolonio
Pascual. On March 12, 1952, Francisco Soriano received the
amount of P3,000.00 from de Leon as shown by the check exhibit
'X2' and on June 3, 1952 the amount of P50.00 as shown by the
check exhibit 'X6' and P200.00 on October 22, 1952 as shown by
the check exhibit 'X7'. Rosalina Soriano herself received P50.00
on March 30, 1952 from Ponce de Leon as shown by the check
marked Exhibit 'X3' and thirdparty plaintiff Rev. Eugenio
Soriano received P100.00 on March 3, 1952 as shown by the check
exhibit 'X1' and P50.00 on March 13, 1952 as shown by exhibit
'X4'. There is therefore no ground for declaring the mortgage
contract and promissory note invalid for lack of consideration
4
insofar as Francisco Soriano and his children are concerned."
The facts thus relied upon by His Honor, the Trial Judge,
are borne out by the record, and We are fully in accord with
the conclusions drawn therefrom.
_______________
4 Record on Appeal pp. 120127. Italics ours.
302

In support of their second assignment of error, the Sorianos

maintain that the sum of P10,000, for which the Paraaque
property was sold to the RFC, is ridiculously inadequate,
considering that said property had been assessed at
P59,647.05. This pretense is devoid of merit, for said
property was subject to redemption and:
"x x x where there is the right to redeem x x xinadequacy of

price should not be material, because the judgment debtor may re
acquire the property or else sell his right to redeem and thus
recover any loss he claims to have
5
suffered by reason of the price
obtained at the execution sale."
Then, again, as the trial court had correctly of served:
"But, mere inadequacy of the price obtained at the sheriff's sale

unless shocking to the conscience will not be sufficient to set aside
the sale if there is no showing that, in the event of a regular sale, a
better price can be obtained. The reason is that, generally, and, in
forced sales, low prices are usually offered (1 Moran's Rules of
Court, pp. 834835). Considering that in Gov't. of P.I. v. Sorna,
G.R. No. 32196, wherein property worth P120,000.00 was sold for
only P15,000.00, in Philippine National Bank v. Gonzales, 45
Phil. 693, wherein property valued at P45,000.00 was sold for
P15,000.00 and in Cu Unjieng & Sons v. Mabalacat Sugar Co., 58
Phil. 439, property worth P300,000.00 to P400,000.00 was sold for
P177,000.00, the Court cannot consider the sale of the Bacolod
properties, the Taft Avenue house and lot and the Paraaque
property of the Sorianos null and void for having been sold at
inadequate prices shocking to the conscience and there being no
showing that
6
in the event of a resale, better prices can be
obtained."
The third, fourth and fifth assignments of error of the

Sorianos refer to the amount for which they feel entitled to
redeem the aforementioned property.
It will be recalled that, before the expiration of the
redemption period, Teofila Soriano del Rosario offered to
repurchase said property for P14,000 that she and her
sister Rosalina reiterated the offer on the last day of said
period and that the offer was rejected by the RFC, whose
action was upheld by the lower court, inasmuch as sec. 78
of Rep. Act 337 provides that, "(i)n the event of foreclosure
xxx
_______________
5 Barrozo v. Macaraeg, 83 Phil. 378, 381. Italics ours.

6 Record on Appeal, pp. 115116. Italics ours.
303
VOL. 36, DECEMBER 18, 1970 303

the mortgagor or debtor whose real property has been sold

at public auction x x x for the x x x payment of an
obligation to any bank, banking, or credit institution, x x x
shall have the right x x x to redeem the property by paying
the amount fixed by the court in the order of execution, x x
x," not the amount for which it had been purchased by the
buyer at public auction. We have already declared that"
xxx (o)nly foreclosure of mortgages to banking institutions
(including the Rehabilitation Finance Corporation) and
those made extrajudicially are subject to legal
7
redemption,
by express provision of statute, x x x" and, although
neither an ordinary bank nor the RFC was involved in the
case in which this pronouncement had been made, the
same was relevant to the subjectmatter of said case and to
the issue raised therein. At any rate, We reiterate the
aforementioned pronouncement, it being in accordance
with law, for, pursuant to Rep. Act No. 337:
"x x x The terms 'banking institution' and 'bank', as used in this

Act, are synonymous and interchangeable and specifically include
banks, banking institutions, commercial banks, savings banks,
mortgage banks, trust companies, building and loan associations,
branches and agencies in the Philippines of foreign banks,
hereinafter called Philippine branches, and all other corporations,
companies, partnerships, and 8
associations performing banking
functions in the Philippines."
The Sorianos insist that the present case is governed, not

by Rep. Act No. 337, but by Act No. 3135, as amended by
Act No. 4118pursuant to which, in relation to section 465
of Act No. 190, the redemption may be made by "pairing
the purchaser the amount of his purchase," with interest
and taxesthe deed of real estate mortgage in favor of the
RFC having allegedly been executed and the
aforementioned property having been sold pursuant to said
Acts Nos. 3135 and 4118.
The conclusion drawn by the Sorianos from these facts is
untenable. As set forth in its title, Act No. 3135 was
promulgated "to regulate the sale of property under special
powers inserted in or annexed to real estate mortgages,"
_______________
7 Villar v. de Paderanga, 97 Phil. 64, 609.

8 Rep. Act No. 337, Sec. 2. Italics ours.
304

Section 6 thereof provides that in all cases of "extrajudicial

sale xxx made under the special power hereinbefore
referred to," the property sold may be redeemed within
"one year from and after the date of the sale x x x." Act No.
4118 amended Act No. 3185 by merely adding thereto three
(3) new sections. Upon the other hand, Rep. Act No. 337,
otherwise known as "The General Banking Act," is entitled
"An Act Regulating Banks and Banking Institutions and for
other purposes." Section 78 thereof limits the amount of the
loans that may be given by banks and banking or credit
institutions on the basis of the appraised value of the
property given as security, as well as provides that, in the
event of foreclosure of a real estate mortgage to said banks
or institutions, the property sold may be redeemed "by
paying the amount fixed by the court in the order of
execution," or the amount judicially adjudicated to the
creditor bank. This provision had the effect of amending
section 6 of Act No. 3135, insofar as the redemption price is
concerned, when the mortgagee is a bank or a banking or
credit institution, said section 6 of Act No. 3135 being, in
this respect, inconsistent with the abovequoted portion of
section 78 of Rep. Act No. 337. In short, the Paraaque
property was sold pursuant to said Act No. 3135, but the
sum for which it is redeemable shall be governed by Rep.
Act No. 337, which partakes of the nature of an amendment
to Act No. 3135, insofar as mortgages to banks or banking
or credit institutions are concerned, to which class the RFC
belongs. At any rate, the conflict between the two (2) laws
must be resolved in favor of Rep. Act No. 9
337, both as a
special and as the subsequent legislation.
The sixth, seventh and eighth assignments of error
made by the Sorianos are mere consequences of those
already disposed of. Hence, no further discussion thereof is
necessary.
Plaintiff's Appeal
Plaintiff Ponce de Leon alleges that the lower court has
_______________
9 Nepomuceno v. RFC (DBP), L14897, November 23, 1960.
305
VOL. 36, DECEMBER 18, 1970 305
erred: (1) "in not setting aside the foreclosure sales on the
mortgage contract dated October 8, 1951" (2) "in stating
that the proceeds of the foreclosure sales were
conscionable" (3) in not granting Ponce de Leon's claim for
adjustment and not "giving him a reasonable time to pay
whatever obligations he may have" (4) in not granting him
damages nor directing the return of his properties (5) "in
not ordering a new trial for the purpose of adjusting" his
"obligations and determining the terms and conditions of
his obligation" and (6) in not granting his claim against
the Sorianos.
With respect to his first assignment of error, plaintiff
maintains that his promissory note Exhibit A was not yet
overdue when the mortgage was foreclosed, because the
installments stipulated in said promissory note have "no
fixed or determined dates of payment," so that the note is
unenforceable and "the RFC should have first asked the
court to determine the terms, conditions and period of
maturity thereof."
In this connection, it should be noted that, pursuant to
Exhibit A, the total sum of P495,000 involved therein shall
be satisfied in quarterly installments of P28,831.64 each
representing interest and amortizationand that,
although the date of maturity of the first installment was
left blank, the promissory note states that the "date of
maturity (was) to be fixed as of the date of the last release,"
completing the delivery to the plaintiff of the sum of
P495,000 lent to him by the RFC. He now says that this
sum of P495,000 has not, as yet, been fully released by the
RFC. But this is contrary to the facts of record, for, during
the trial, his counsel, Atty. Jose Orozco, made the following
admission:
"Out of the loan of P495,000.00, the following were paid to the

creditors of Jose Ponce de Leon: P100,000.00 to the PNB,
P30,000.00 to Cu Unijeng Bros., P5,000.00 to Arturo Colmenares,
P1,000.00 to Lorenzo Balagtas. The total amount paid to the
creditors is P136,000.00 which were taken out of the proceeds of
P495,000,00.
10
The rest were all paid in the name of Jose Ponce de
Leon."
_______________
10 T.s.n., p. 45, hearing of Jan. 3, 1957. Italics ours.
306

In short, part of the sum of P495,000 had been delivered by

the RFC to the creditors of the plaintiff and Francisco
Soriano, as agreed upon by them, in payment of their
outstanding obligations, and the balance of said sum of
P495,000 was turned over to the plaintiff, with the written
authorization and conformity of Francisco Soriano. This is
borne out by the fact that, prior to the institution of this
case, plaintiff had not complained of failure of the RFC to
fully release the aforementioned sum of P495,000. Indeed,
in his own complaint herein, he merely alleged a "delay in
the release." Even so, he impliedly admitted that the first
installment was due in October 1952or, more specifically,
on October 24, 1952, this being the date given therefor in
the letterdemands of the RFC, the accuracy of which were
not questioned by the plaintiffso that the last release
made by the RFC to complete the sum of P495,000 must
have taken place on July 24, 1952, although, in answer to a
question propounded to him, by his own counsel, as regards
the date he "received the total amount granted by the
RFC," plaintiff saidon the witness standhe "believed
that it was in the last part or quarter of 1953." At this
juncture, it is noteworthy that plaintiff claims the right to a
suspension of payment or an extension of the period to pay
the RFC owing to the typhoons that had lashed his sawmill
in October and November 1952, thus indicating clearly that
the amount of the loan extended to him and Francisco
Soriano had then been fully released by the RFC three (3)
months before October 1952 and that the first installment
under the promissory note Exhibit A was due that month,
as claimed by the RFC.
At any rate, Annex A, in effect, authorized the RFC to
fix the date of maturity of the installments therein
stipulated,
11
which is allowed by the Negotiable Instruments
Law and when a promissory note expresses "no time for
_______________
11 SEC. 13. When date may be inserted.Where an instrument

expressed to be payable at a fixed period after date is issued undated, or
where the acceptance of an instrument payable at fixed period after sight
is undated, any holder may insert therein the true date of issue or
acceptance, and the instrument shall be payable accordingly. The
insertion of a wrong date does not avoid the instrument in the hands of a
subsequent holder
307
VOL. 36, DECEMBER 18, 1970 307

12
payment," it is deemed "payable ondemand."
Under his second assignment of error, plaintiff
maintains that the aggregate price of P112,332.00, for
which the mortgaged properties had been sold at public
auction, is unconscionable, said properties being allegedly
worth P1,202,976. This premise is inaccurate.
It should be noted that plaintiff and Francisco Soriano
were granted a P495,000 loan on the security, not only, of
the existing properties offered as guarantee, but, also, on
that of assetsappraised at P570,000yet to be acquired
by plaintiff, partly with money thus received from the RFC
and partly with his own funds. After obtaining said loan
and receiving the amount thereof, less the sum of P
136,000 applied to the payment of outstanding obligations,
plaintiff failed to purchase the machinery and equipment
he had promised to get, or to set up the constructions he
had undertaken to make. Moreover, the RFC found that
_______________
in due course but as to him the date so inserted is to be regarded as the

true date.
SEC. 14. Blanks, when may be filled.Where the instrument is
wanting in any material particular, the person in possession thereof has a
prima facie authority to complete it by filling up the blanks therein. And a
signature on a blank paper delivered by the person making the signature
in order that the paper may be converted into a negotiable instrument
operates as a prima facie authority to fill it up as such for any amount. In
order, however, that any such instrument, when completed, may be
enforced against any person who became a party thereto prior to its
completion, it must be filled up strictly in accordance with the authority
given and within a reasonable time. But if any such instrument after
completion, is negotiated to a holder in due course, it is valid and effectual
for all purposes in his hands, and he may enforce it as if it had been filled
up strictly in accordance with the authority given and within a reasonable
time.
12 SEC.7. When payable on demand.An instrument is payable on
demand
(a) Where it is expressed to be payable on demand, or at sight or on

presentation or
(b) In which no time for payment is expressed.
Where an instrument is issued, accepted, or indorsed when overdue, it

is, as regards the person so issuing, accepting, or indorsing it, payable on
demand.
308

were originally appraised at P492,288.00, were actually

worth P172,530.00 only. Again, a good part of the
machinery and equipment existing in one of the mortgaged
lands, when it was inspected before the granting of the
loan, were subsequently lost or missing, and those that
remained were, at the time of the sale to the RFC, in bad
shape, so that the appraised value thereof was then
estimated at P10,000 only. Under these circumstances, it is
clear that the lower court did not err in approving the sale
of the mortgaged properties for the aggregate sum of
P112,332.
As regards his third assignment of error, it is urged by
the plaintiff that he is entitled to a "suspension of
payment," or a postponement of the date of maturity of his
obligation to pay, in view of the typhoons that had
"practically wiped out" his sawmill in Samar during the
months of October and November 1952. This claim is
predicated upon Article 1174 of our Civil Code, reading:
"x x x Except in cases expressly specified by the law, or when it is

otherwise declared by stipulation, or when the nature of the
obligation requires the assumption of risk, no person shall be
responsible for those events which could not be foreseen, or which,
though foreseen, were inevitable.
Plaintiff cannot avail of the benefits of this provision since

he was not bound to deliver the aforementioned sawmill, or
any other specific thing damaged or destroyed by the
typhoons, to the RFC. His obligation was merely generic,
namely, to pay certain sums of money to the RFC, at stated
intervals. As His Honor, the Trial Judge, had aptly put it:
"x x x in the instant case, there was an obligation on the part of

the debtor to pay his loan, independently of the purpose for which
the money loaned was intended to be used and this obligation to
pay continues to subsist notwithstanding the fact that it may
have become impossible for the debtor to use the money loaned for
the particular purpose that was intended (Milan v. Rio y
Glabarrieta, 45 Phil. 718). There is hence no ground for declaring
the amortizations due on the principal loan since October, 1952 as

extinguished due to fortuitous event or
309
VOL. 36, DECEMBER 18, 1970 309

to grant plaintiff a reasonable time to pay the due

13
amortizations
as asked for by Ponce de Leon in his complaint."
Being mere corollaries to his first three assignments of

error, which cannot be sustained, plaintiff's fourth, fifth
and sixth assignments of error must have the same fate.
Defendant's Appeals
The RFC contends that the lower court erred: (1) in holding
that the Paraaque property is presumed to belong to the
conjugal partnership of Mr. and Mrs. Francisco Soriano (2)
in failing to give due weight to the testimony of Gregorio
Soriano, and in holding that the same is insufficient to
overcome the presumption in favor of the conjugal nature
of said property (3) in failing to consider that the Sorianos
are now estopped from questioning the validity of the
mortgage on and the foreclosure sale of said property (4) in
annulling the mortgage insofar as onehalf of said property
is concerned, despite the finding that part of the proceeds
of the RFC loan was paid to settle the PNB loan secured by
the same property and (5) in holding that the mortgage
thereon and the sheriff's sale thereof to the RFC are null
and void as regards onehalf of said property. These
assignments of error may be reduced to one, namely, that
the lower court erred in voiding the sale to the RFC of the
Paraaque property, upon the ground that the same
formed part of the conjugal partnership of Mr. and Mrs.
Francisco Soriano.
In this connection, it appears that the property was
registered in the name of "Francisco Soriano, married to
Tomasa Rodriguez," and that based upon this fact alone
without any proof establishing satisfactorily that the
property had been acquired during coverturethe lower
court presumed that it belongs to the conjugal partnership
of said spouses. We agree with the RFC that the lower
court has erred in applying said presumption.
We should not overlook the fact that the title to said
property was not a transfer certificate of title, but an
_______________
13 Record on Appeals, p. 114. Italics ours.
310

original one, issued in accordance with a decree which, 14

pursuant to law, merely confirms a preexisting title. Said
original certificate of title does not establish, therefore, the
time of acquisition of the Paraaque property by the
registered owner thereof.
Then, again, the lower court applied said presumption,
having in mind, presumably, Article 160 of our Civil Code,
which reads:
"x x x All property of the marriage is presumed to belong to the

conjugal partnership, unless it be proved that it pertains
exclusively to the husband or to the wife."
This provision must be construed in relation to Articles 153

to 159 of the same Code, enumerating the properties
"acquired x x x during the marriage" that constitute the
conjugal partnership. Consistently therewith, We have held
that "the party who invokes this presumption must first
prove that the property in controversy was acquired during
the marriage. In other words, proof of acquisition during
coverture is a condition sine qua non for the operation
15
of the
presumption in favor of 16
conjugal partnership." It had,
earlier, been declared, that "(t)he presumption under
Article 160 of the Civil Code refers to property acquired
during the marriage x x x." We even added that, there
being "no showing as to when the property in question was
acquired x x x the fact that the title is in the wife's name
alone is determinative." This is borne out by the fact17
that,
in the previous cases applying said presumption, it was
duly established that the property in question therein had
been acquired during coverture. Such
_______________
14 Section 38, Act 496 Maloles v. Director of Lands, 25 Phil. 548

Verzosa v. Nicolas, 29 Phil. 425 Government v. Trio, 50 Phil 708
Misamis Lumber Co. v. Director of Lands, 57 Phil. 881.
15 CobbPerez v. Lantin, L22320, May 22, 1968.
16 Maramba v. Lozano, L21533, June 29, 1967.
17 Flores v. Flores, 48 Phil. 288, 289290 Pratts v. Menzi, 53 Phil. 51,

53 Espiritu v. Bernardino, 58 Phil. 902 Benavides v. Tordilla, 5,9 Phil.
918 Reyes v. llano, 63 Phil. 629, 639, Commonwealth v. Sandiko, 72 Phil.
258, 259 Guinoo v. Court of Appeals, 97 Phil. 235, 238.
311
VOL. 36, DECEMBER 18, 1970 311

was, also, 18 the situation obtaining in Servidad v.

Alejandrino cited in the decision appealed from.
The case at bar is differently situated. The Sorianos
have not succeeded in proving that the Paraaque
propertywas acquired "during the marriage" of their
parents. What is more, there is substantial evidence to the
contrary.
Gregorio Soriano testified that his first cousin, Francisco
Soriano, had acquired said property from his parents, long
before he got married. In this connection, the lower court,
however, said that:
"x x x the credibility of this witness is subject to doubt for it was

shown that he had an improper motive in testifying against the
thirdparty plaintiffs because he had a niece19who was prosecuted
by the thirdparty plaintiffs for estafa, x x x."
This observation is, to our mind, hardly justifiable. To

begin with, when counsel for the Sorianos asked the
witness whether or not his grandchild or grandniece
Flordeliza Clemente had been accused of "estafa" by the
Sorianos, counsel for the RFC objected thereto, and the
court sustained the objection, upon the ground that the
question was "irrelevant". As a consequence, there is no
evidence of the prosecution of Flordeliza Clemente by the
Sorianos. What is more, the ruling of the court declaring
the matter "irrelevant" to the present case rendered it
unnecessary for the RFC to prove that said prosecutionif
it were a facthad nothing to do with the testimony of
Gregorio Soriano. It would, therefore, be less than fair to
the RFC to draw an inference adverse thereto resulting
from the absence of evidence to this effect. At any rate, said
prosecution does not necessarily warrant the conclusion
that Gregorio Soriano was impelled by an "improper
motive" in testifying as he did. After all, the Sorianos are,
likewise, nieces of Gregorio Soriano and he was not the
party allegedly accused by them.
Again, this witness testified in a straightforward

manner, and disclosed a good number of details bearing the
ear
_______________
18 52 O.G. 2031.
19 Record on Appeal, pp. 128129.
312

roborated, not only by Felipe Cuaderno, Jr. and OCT No.

8094, but, also, by the testimony of thirdparty plaintiff
Rosalina Soriano. Indeed, Felipe Cuaderno, Jr.an
assistant attorney and notary public of the RFC, before
whom the deed of mortgage was acknowledgedtestified
that, in a conference he had before the execution of the
promissory note and the deed of mortgage in favor of said
institution, Francisco Soriano assured him that the
Paraaque property was "his own separate property,
having acquired it from his deceased father by inheritance
and that his children have nothing to do with the property."
This was, in effect, confirmed by no less than Rosalina
Soriano, for she stated, on crossexamination, that her
father, Francisco Soriano, "was born and x x x raised" in
said property, so thatcontrary to her testimony in chief
he could not have told her that he and his wife had bought
it, as the Sorianos would have Us believe.
Needless to say, had the property been acquired by them
during coverture, it would have been registered, in the
name not of "Francisco Soriano, married to Tomasa
Rodriguez," but of the spouses "Francisco 20
Soriano and
Tomasa Rodriguez." In Litam v. Espiritu, We quoted with
approval the following observation made in the decision
under review therein:
"Further strong proofs that the properties in question are the

paraphernal properties of Marcosa Rivera, are the very Torrens
Titles covering said properties. All the said properties are
registered in the name of 'Marcosa Rivera, married to Rafael
Litam.' This circumstance indicates that the properties in
question belong to the registered owner, Marcosa Rivera, as her
paraphernal properties, for if they were conjugal, the titles
covering the same should have been issued in the names of Rafael
Litam and Marcosa Rivera. The words 'married to Rafael Litam'
written after the name of Marcosa Rivera, in each of the above

mentioned titles are merely descriptive of the civil status of
Marcosa Rivera, the registered owner of the properties covered by
said titles."
The records further show that on August 16, 1945or two

(2) days after the execution of the deed of mort
_______________
20 100 Phil. 364, 376. Italics ours.
313
VOL. 36, DECEMBER 18, 1970 313

gage for P10,000 in favor of the PNBFrancisco Soriano

received P2,000 from plaintiff herein that, early in 1951,
Francisco Soriano received a letter informing him that the
PNB mortgage on the Paraaque property would be
foreclosed, unless the debt guaranteed therewith were
settled that, accordingly, his children came to know of the
mortgage in favor of the PNB that on October 8, 1951, said
mortgage was transferred to the RFC that, thereafter, or
from March to October 1952, Francisco Soriano and his
children, Rosalina Soriano and Eugenio Soriano, received
several sums of money, aggregating P3,450, from plaintiff
herein that the latter, moreover, spent over P6,000 on the
occasion of the ordination of thirdparty plaintiff, Eugenio
Soriano, as a priest, on April 20, 1952 that plaintiff, also,
paid the bills of Francisco Soriano in the Singian Clinic
when he fell sick in 1953 and that the former had,
likewise, paid the real estate tax on the Paraaque
property from 1947 to 1952.
Under these circumstances, it is difficult to believe that
the Sorianos did not know then of the mortgage constituted
by Francisco Soriano, on October 8, 1951, in favor of the
RFC. In fact, Rosalina Soriano testified that when, that
month, Francisco Soriano and she conferred with the
plaintiff, he stated that the Paraaque property was
mortgaged to the RFC, whereupon her father got angry at
the plaintiff and said that he had fooled him (Francisco
Soriano). Being thus aware of said mortgage since October
1951, the Sorianos did not question its validityuntil
January 12, 1957, when they filed in this case their third
party complaint in interventionas regards, at least, one
half of the Paraaque property, which they now claim to be
their mother's share in the conjugal partnership. Worse

still, after the foreclosure sale in favor of the RFC, they
tried to redeem the property for P14,000, and, when the
RFC did not agree thereto, they even sought the help of the
Office of the President to effect said redemption.
Their aforementioned failure to contest the legality of
the mortgage for over five (5) years and these attempts to
redeem the property constitute further indicia that the
same belonged exclusively to Francisco Soriano, not to the
314

conjugal partnership with his deceased wife, Tomasa

Rodriguez. Apart from the fact that said attempts to
redeem the property constitute an implied admission of the
validity of its saleand, hence, of its mortgage to the RFC
there are authorities to the effect that they bar the
Sorianos from assailing the same.
"x x x defendants, by their repeated requests for time to redeem

had impliedly admittedand were estopped 21
to questionthe
validity and regularity of the Sheriff's sale."
"The petitioner himself believed that the company had a right
to cancel, because in March, 1932, i.e., after the cancellation, he
proposed the repurchase of the property, and the company agreed
to resell it to him x x x. Unluckily he could make no down
payment and the repurchase fell through. Wherefore, it is now too
late for him to question 22 the cancellation, inasmuch as he
practically ratified it, x x x."
"The fact that Mallorca failed to exercise her right of
redemption, which she sought to enforce in a judicial court, ends
her interest to the land she claims, and,23 doubtless, estops her from
denying PNB's mortgage lien thereon."
It is thus clear that the lower court erred in annulling the

RFC mortgage on the Paraaque property and its sale to
the RFC as regards onehalf of said property, and that the
decision appealed from should, accordingly, be modified, by
eliminating therefrom the second paragraph of its
dispositive part, quoted earlier in this decision.
With this modification and that of other pertinent parts
of the decision appealed from, the same is hereby affirmed
in all other respects, with the costs of this instance against
plaintiff, Jose L. Ponce de Leon and thirdparty plaintiffs,
Rosalina Soriano, Teofila Soriano del Rosario and Father

Eugenio Soriano. It is so ordered.
_______________
21 Tiaoqui v. Chaves, L10086, May 20, 1957, quoting from 59 C.J.S. p.

1372: "By claiming a right to redeem, or availing himself of a statutory
stay, or by seeking to impress a trust on the property in the hands of the
purchaser, one affims the validity of the sale and may not assail it x x x."
Italics ours.
22 Tolentino v. Philippine Land Improvement Co., Inc., L2469,
September 30, 1950 (Unreported) Italics ours.
23 Philippine National Bank v. Mallorca, L22538, October 31, 1967.
Italics ours.
315
VOL. 36, DECEMBER 18, 1970 315

Reyes, J.B.L., Makalintal, Zaldivar, Castro,

Fernando, Teehankee, Barredo and Villamor, JJ., concur.
Dizon and Makasiar, JJ., are on leave.
Decision affirmed with modification.
ANNOTATION
CONTRACTS
1. Subject Matter
Court's jurisdiction cannot be the object of contracts.A

probate court, or any other court of justice for that matter,
cannot and never does, enter into any contract or
agreement regarding its jurisdiction much less to barter it
away wholly or partially. Seifert vs. Bachrach, 79 Phil. 748.
Contract over political rights is void.We agree with the
lower court in adjudging the contract or agreement in
question 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, one'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 or surrendered for consideration by the

citizen nor unduly curtailed with impunity, for they are
conferred not for individual or private benefit advantage
but for the public good and interest. Saura vs. Sindico, 107
Phil. 336.
Qualifications for certain public offices may not be
enlarged or reduced by agreement.Constitutional and
statutory provisions fix the qualifications of persons who
may be eligible for certain elective public offices. Said
requirements may neither be enlarged nor reduced by mere
agreements between private parties. A voter possessing all
the
316

qualifications required to fill an office may, by himself or

through a political party or group, present his candidacy
without further limitations than those provided by law.
"Every voter has a right to be a candidate for public office if he

possesses the qualifications required to fill the office. It does not
necessarily follow that he can be the candidate of a particular
political party. The statute provides when and how one may be a
candidate of a political party. If he cannot fill the requirement so
as to be the candidate of the political party of his choice, he may
still be a candidate at the general election by petition. The right of
the voter to vote at the general election for whom he pleases cannot
be limited." (Roberts vs. Cleveland, Sec. of State of the State of
New Mexico, 48 NM 226, 149 P [2d] 120, 153 ALR 635, 637638)
(Italics supplied.)
In common law, certain agreements in consideration of the

withdrawal of candidates for office have invariably been
condemned by the courts as being against public policy, be
it a withdrawal from the race for nomination, or, after
nomination, from the race for election. (See notes in 37
LRA [N.S.] 289 and cases cited therein 18 Am. Jur. Sec.
352, pp. 399400).
In the case at hand, plaintiff complains on account of
defendant's alleged violation of the "pledge" in question by
filing her own certificate of candidacy for a seat in the
Congress of the Philippines and in openly and actively
campaigning for her election. In the face of the preceding
considerations, we certainly cannot entertain plaintiff's
action, which would result in limiting the choice of the
electors to only those persons selected by a small group or

by party bosses. Id.
When Pendleton and Monsale cases distinguished from
case at bar.The case of Pendleton vs. Pace, 9 S.W. (2nd)
437, cited by the appellant, is clearly inapplicable. The
court there only sanctioned the validity of an agreement by
the opposing candidates for nomination setting aside and
resubmitting the nomination for another primary election
on account of the protest or contest filed by the losing
candidate in the first primary election. To abandon the
contest proceedings, the candidates for nomination agreed
to submit again their nomination to the electors in a
subsequent primary.
317
VOL. 36, DECEMBER 18, 1970 317

Appellant likewise cites and quotes a portion of our ruling

in Monsale vs. Nico, G.R. No. L2539, May 28, 1949, to the
effect that it is not incompetent for a candidate to withdraw
or annul his certificate of candidacy. This is not in point,
for while we stated there that he may do so, there being no
legal prohibition against such a voluntary withdrawal, it
does not follow, nor did we imply any where in the decision,
that in case there is any agreement or consideration for
such a withdrawal, said agreement or consideration should
be held valid or given effect. Id.
Market stall as subject matter of contract.The
appellant finally argues that since appellee was only a
monthtomonth lessee of the market stall in question, and
in view of the provisions of Ordinance No. 6 of the
Municipality of Batangas prohibiting a person from
occupying and selling in any stall of the public market
without permission of the local market officers, the
occupancy of the stall could not be the subjectmatter of a
valid contract between parties, unless it was approved and
ratified by the municipal authorities. Held: This contention
might be meritorious if it were sought to enforce the
contract in question against the municipality, or over its
objection. But such is not the case. In the absence of protest
from the market officials, there is no reason why the
contract between the parties should not be carried out, as
agreed between them. The fact remains that the market
officials admitted the preferential right of the actual
occupants to a renewal of their leases, and it was the
waiver of this preference by the appellee that permitted
appellant to obtain possession of the stall. The contract in

question bound her to make a similar waiver upon demand
by the appellee. With this arrangement the market officials
had nothing to do. Mercado vs. Aguilar, L666, June 28,
1947.
Stipulation as to venue is valid.Last contention of the
plaintiff is that the clause regarding venue "is against
public policy and therefore illegal." This is plainly
unmeritorious. The Rules of Court expressly permit this
stipulation concerning venue (Sec. 4, Rule 5), which had
been approved in Central Azucarera vs. De Leon, 56 Phil.
169 and Navarro vs. Aguila, 66 Phil. 604. Barreros vs. Phil
318

ippine Engineering Corporation, L6500, Sept. 16, 1954, 95

Phil. 960 (unrep.)
Prohibition against impairment of contracts is not
absolute.The prohibition contained in constitutional
provisions against impairing obligation of contracts is not
an absolute one and is not to be read with literal exactness
like a mathematical formula. Such provisions are restricted
to contracts with respect to property, or some object of
value, and confer rights which may be asserted in a court of
justice, and have no application to statutes relating to
public subjects within the domain of the general legislative
powers of the State, and involving the public rights and
public welfare of the entire community affected by it. They
do not prevent a proper exercise by the State of its police
powers. By enacting regulations reasonably necessary to
secure the health, safety, morals, comfort or general
welfare of the community, even the contracts may thereby
be affected for such matter cannot be placed by contract
beyond the power of the State to regulate and control them.
(Ongsiako vs. Gamboa, 86 Phil. 50.) Ilusorio vs. Court of
Agrarian Relations, 17 SCRA 25 ZaballeroTady vs. Rural
Bank of Lucena, Inc., 18 SCRA 1073.
The inexistence of a contract is permanent and incurable
and cannot be the subject of prescription.Mapalo vs.
Mapalo, 17 SCRA 114.
Transaction is determined by its nature.A transaction
is determined by the nature thereof. The nature of the
agreement being inherent in the agreement itself, exists
from the very moment the transaction was entered into.
Thus, "except as to bona fide city purchasers without notice
and those standing in similar relations, on the reformation

of an instrument, the general rule is that it relates back to
and takes effect from the time of its original execution,
especially as between the parties themselves." (76 C.J.S.
par. 93) Cosio vs. Palileo, 17 SCRA 196 Air France vs.
Carrascoso, 18 SCRA 155.
The test as to whether a given agreement constitutes an
unlawful machination or a combination in restraint of
trade is whether, under the particular circumstances of the
case
319
VOL. 36, DECEMBER 18, 1970 319

and the nature of the particular contract involved in it, the

contract is, or is not, reasonable.Filipinas Cia. de Seguros
vs. Mandanas, 17 SCRA 391.
Termination of stevedoring contract.Where a shipping
company terminated its stevedoring contract with a union
because of the latter's inefficient service, it cannot be said
that the termination was in bad faith or as a retaliation for
the union's demand for a collective bargaining contract.
Nor can said termination be considered union interference.
Allied Free Workers' Union (PLUM) vs. Compaia
Maritima, 19 SCRA 258.
Articles 20 and 21 of the New Civil Code which justify a
creditor's claim for damages against the debtor and third
persons, who executed contracts intended to defraud the
creditors, have retroactive effect.People's Bank and Trust
Co. vs. Dahican Lumber Company, 20 SCRA 84.
When court should not fix the period for performing an
obligation.Where the issue raised in the pleadings was
whether the seller of the land was given in the contract of
sale a reasonable time within which to construct the streets
around the perimeter of the land sold, the court, in an
action for specific performance to compel the construction
of said streets or for recovery of damages, cannot fix a
period within which the seller should construct the streets.
The court should determine whether the parties had agreed
that the seller should have reasonable time to perform its
part of the bargain. If the contract so provided, then there
was a period fixed, a "reasonable time", and all that the
court should have done was to determine if that reasonable
time had already elapsed when the suit was filed. If it had
passed, then the court should declare that the petitioner
had breached the contract, as averred in the complaint, and
fix the resulting damages. On the other hand, if the

reasonable time had not yet elapsed, the court perforce was
bound to dismiss the action for being premature. But in no
case can it be logically held that, under the pleadings, the
intervention of the court to fix the period for performance
was warranted, for Article 1197 of the New Civil Code is
precisely predicated on the absence of any period
320

fixed by the parties. Gregorio Araneta, Inc, vs, Phil. Sugar

Estates Development Co., Ltd., 20 SCRA 330.
Power of court to fix period.Article 1197 of the New
Civil Code involves a twostep process. The court must first
determine that the obligation does not fix a period (or that
the period depends upon the debtor's will) and that the
intention of the parties, as may be inferred from the nature
and circumstances of the obligation, is to have a period for
its performance. The second step is to ascertain the period
probably contemplated by the parties. The court cannot
arbitrarily fix a period out of thin air. Id. Air France vs.
Carrascoso, 18 SCRA 155.
Alteration of the contract must be material in order that
surety may be released.For the purpose of releasing a
surety's obligation, there must be a material alteration of
the contract in connection with which the bond is given.
There must be a change which imposes new obligation on
the party promising or which takes away some obligation
already imposed, changing the legal effect of the original
contract and not merely the form thereof. A surety is not
released by a change in the contract which does not have
the effect of making its obligation more onerous. National
Shipyards & Steel Corp. vs. Torrento, 20 SCRA 427.
Acts showing ratification of contract for services.The
ratification of a contract may be express or implied.
Implied ratification may take diverse forms, such as by
silence or acquiescence by acts showing approval or
adoption of the contract or by acceptance and retention of
benefits flowing therefrom. Acua vs. Batac Producers
Cooperative Marketing Association, Inc., 20 SCRA 526.
Where allegations of complaint show ratification of
contract for services.A complaint should not be dismissed
on the ground that the contract for services, on which
plaintiff's action was based, was allegedly not ratified by
the Board of Directors of defendant corporation, where the
complaint contains sufficient allegations indicating

approval or subsequent ratification of said contract by the
Board. Id.
321
VOL. 36, DECEMBER 18, 1970 321

Charge of duress should be treated with caution.The

charge of duress in the execution of a conveyance of land
should be treated with caution. Duress, like fraud, is not to
be lightly laid at the door of a man already dead. Vda. de
Rodriguez vs. Rodriguez, 20 SCRA 908.
Simulated contracts.The characteristic of simulation is
the fact that the apparent contract is not really desired or
intended to produce legal effects or in any way alter the
juridical situation of the parties. Thus, where a person, in
order to place his property beyond the reach of his
creditors, simulates a transfer of it to another, he does not
really intend to divest himself of his title and control of the
property hence, the deed of transfer is but a sham. Id.
Simulated contracts distinguished from fraudulent
contracts.Simulated contracts are fictitious contracts.
Fraudulent contracts are serious, real and intended for the
attainment of a prohibited result. Simulation is intended to
hide the violation of the law. Id.
Bad faith, defined.Bad faith does not simply connote
bad judgment or negligence it imports a dishonest purpose
or some moral obliquity and conscious doing of wrong it
means breach of a known duty through some motive or
interest or illwill it partakes of the nature of fraud. Board
of Liquidators vs. Heirs of Maximo Kalaw, 20 SCRA 987.
Resolutory condition under Article 1308 of the New Civil
Code.Article 1308 of the Civil Code creates no
impediment to the insertion in a contract for personal
services of a resolutory condition permitting the
cancellation of the contract by one of the parties. Such a
stipulation does not make either the validity or the
fulfillment of the contract dependent upon the will of the
party to whom is conceded the privilege of cancellation for
where the contracting parties have agreed that such option
shall exist, the exercise of the option is as much in the
fulfillment of the contract as any other act which may have
been the subject of the agreement. Indeed, the cancellation
of a contract in accordance with conditions agreed upon
beforehand is fulfillment. Phil. Banking Corp. vs. Lui She,
21 SCRA 52.
322

A provision in a lease contract that the lessee, at any time

before he created any building on the land may rescind the
lease can hardly be regarded as a violation of Article 1308
of the Civil Code. Id.
When a lease contract to an alien is invalid.If an alien
is given not only a lease of, but also an option to buy, a
piece of land, by virtue of which the Filipino owner cannot
sell or otherwise dispose of his property, this to last for 50
years, then it becomes clear that the arrangement is a
virtual transfer of ownership whereby the owner divests
himself in stages not only of the right to enjoy the land (jus
possidendi, jus utendi, jus fruendi, and jus abutendi), but
also of the right to dispose of it (jus disponendi)rights the
sum total of which make up ownership. It is just as if today
the possession is transferred, tomorrow the use, the next
day the disposition, and so on, until ultimately all the
rights of which ownership is made up are consolidated in
an alien. If this can be done, then the constitutional ban
against alien landholding in the Philippines, as announced
in Krivenko vs. Register of Deeds (79 Phil. 461) is indeed in
grave peril. Id.
Exception to pari delicto doctrine.It does not follow
that because the parties are in pari delicto they will be left
where they are without relief. Article 1416 of the Civil Code
provides as an exception to the rule of in pari delicto that
"when the agreement is not illegal per se but is merely
prohibited, and the prohibition by law is designed for the
protection of the plaintiff, he may, if public policy is
thereby enhanced, recover what he had paid or delivered."
Id.
Courts are not bound by title or name given to contracts
by parties.To determine the nature of the contract, courts
do not have or are not bound to rely upon the name or title
given it by the contracting parties, should there be a
controversy as to what they really had intended to enter
into, but the way the contracting parties do or perform
their respective obligations stipulated or agreed upon be
shown and inquired into, and should such performance
conflict with the name or title given the contract by the
323
VOL. 36, DECEMBER 18, 1970 323

parties the former must prevail over the latter. Balbas vs.
Domingo, 21 SCRA 444.
2. Consideration
When P1 and other valuable consideration were held

sufficient.Where the two deeds of sale of mining claims
each mentions P1, and other valuable consideration, the
receipt whereof was acknowledged, to be the consideration.
That consideration was held sufficient. Dumaguin vs.
Reynolds, 92 Phil. 66.
Effect of false consideration.The expression of a false
cause or consideration in the contract does not make it
nonexistent, and it shall only be a ground for an action for
nullity as provided by Article 1276 and confirmed by
Article 1301 of the Old Civil Code. The effect of a false
consideration is limited to making the contract voidable.
Manresa cited in Concepcion vs. Sta. Ana, 87 Phil. 787.
Validity of survivorship agreement.The survivorship
agreement here involved is prima facie valid. It is an
aleatory contract supported by a lawful considerationthe
mutual agreement of the joint depositors permitting either
of them to withdraw the whole deposit during their
lifetime, and transferring the balance to the survivor upon
the death of one of them. It is covered by Article 1790 of the
Civil Code. Furthermore, it is well established that a bank
account may be so created that two persons shall be joint
owners thereof during their mutual lives, and the survivor
taking the whole on the death of the other. The right to
make such joint deposits has generally been held not to be
done away with by statutes abolishing joint tenancy and
survivorship generally as they existed at common law.
Rivera vs. People's Bank & Trust Co., 73 Phil. 546.
Pure liberality as consideration.Pure liberality is a
consideration recognized by the Civil Code. No other
consideration is entertained in donations. Seifert vs.
Bachrach, 79 Phil. 748.
Succession and administration.Conformity is consent.
According to a universal law, recognized in our Civil Code,
324

consent is the source of obligations. That a party has given

her conformity as an act "of pure liberality on her part,"
does not change the nature of the legal effect of the consent
given. Commitment so made with her conformity cannot be
dismissed on the ground that it was given as "pure
liberality" or for any other motive. Provided the consent
was freely given and regardless of the motive behind the
act, it gives rise to all proper legal effects. Id.
Right of owner to dispose of all her properties.The
conveyance or sale of the parcels of land to the defendant
was voluntarily made by the deceased to him. As the
deceased had no forced heir, she was free to dispose of all
her properties as absolute owner thereof, without further
limitations than those established by law, and the right to
dispose of a thing involves the right to give or convey it to
another without any consideration. The only limitation
established by law on her right to convey said properties to
the defendant without any consideration is, that she could
not dispose of or transfer her property to another in fraud
of her creditors. Concepcion vs. Sta. Ana, 87 Phil. 787.
Where the consideration is contrary to law, etc., the
contract is void and no cause of action arises.The first
assignment of error is untenable. If the consideration for
the promissory note upon which plaintiff's cause of action
relies were contrary to law, morals, good customs, public
policy or public order, the contract between the parties
thereto would legally be "inexistent and void from the
beginning." (Article 1409, par. 1, Civil Code of the
Philippines.) Inasmuch as the finding of the lower court, on
this point, was based upon petitioner's own evidence it was
proper to consider the same in the decision appealed from.
The petitioner could not be entitled to a judgment in his
favor if his own proof showed that he has no cause of
action, because the contractual relation upon which his
claim relies is inexistent, from a legal viewpoint. Garrido
vs. Cardenas, 103 Phil. 435.
When lack of demand indicative of payment.If Antonio
or Mercedes, as appellants now claim, has not paid his or
her share in the consideration, Don Mariano would have
also demanded from any one of them the resale of the
325
VOL. 36, DECEMBER 18, 1970 325

property, in the same way that Rosario was required. The

fact that Don Mariano did not do so shows that both paid
their shares to his full satisfaction. Cui vs. Cui, 100 Phil.
913.
Motive may be the consideration of the contract.
Appellant seeks to differentiate between the alleged
liberality of Lopez, as causa for the donation in her favor,
and his desire for cohabiting with appellant, as motives
that impelled him to make the donation, and quotes from
Manresa and the jurisprudence of this Court on the
distinction that must be maintained between causa and
motive (De Jesus vs. Urrutia and Co., 33 Phil. 171). It is
well to note, however, that Manresa himself (Vol. 8, pp.
641642), while maintaining the distinction and upholding
the inoperativeness of the motives of the parties to
determine the validity of the contract, expressly excepts
from the rule those contracts that are conditioned upon the
attainment of the motives of either party.
"*** distinctin importantsima, que impide anular el contrato por

la sola influencia de los motivos a no ser que se hubiera
subordinado al cumplimiento de estos como condiciones la eficacia
de aquel."
The same view is held by the Supreme Court of Spain, in

its decisions of February 4, 1941, and December 4, 1946,
holding that the motive may be regarded as causa when it
predetermines the purpose of the contract.
In the present case, it is scarcely disputable that Lopez
would not have conveyed the property in question had he
known that appellant would refuse to cohabit with him so
that the cohabitation was an implied condition to the
donation, and being unlawful, necessarily tainted the
donation itself. Liguez vs. Court of Appeals, 102 Phil. 577.
Cohabitation as an illicit causa in donation.Appellant
vigorously contends that the Court of First Instance as well
as the Court of Appeals erred in holding the donation void
for having an illicit causa or consideration. It is argued
that under Article 1274 of the Civil Code of 1889 (which
was the governing law in 1943, when the donation was
executed), "in contracts of pure beneficence the consid
326

eration is the liberality of the donor," and that liberality

per se can never be illegal, since it is neither against law or
morals or public policy.
The flaw in this argument lies in ignoring that under

Article 1274, liberality of the donor is deemed causa only in
those contracts that are of "pure" beneficence that is to
say, contracts designed solely and exclusively to procure
the welfare of the beneficiary, without any intent of
producing any satisfaction for the donor contracts, in other
words, in which the idea of selfinterest is totally absent on
the part of the transferor. For this very reason, the same
Article 1274 provides that in remuneratory contracts, the
consideration is the service or benefit for which the
remuneration is given, causa is not liberality in these cases
because the contract or conveyance is not made out of pure
beneficence, but "solvendi animo." In consonance with this
view, this Supreme Court in Philippine Long Distance
Telephone Co. vs. Jeturian, L7756, July 30, 1955, like the
Supreme Court of Spain in its decision of 16 February
1899, has ruled that bonuses granted to employees to excite
their zeal and efficiency, with consequent benefit for the
employer, do not constitute donation having liberality for a
consideration.
Here the facts as found by the Court of Appeals (and
which we can not vary) demonstrate that in making the
donation in question, the late Salvador P. Lopez was not
moved exclusively by the desire to benefit appellant
Conchita Liguez, but also to secure her cohabiting with
him, so that he could gratify his sexual impulses. This is
clear from the confession of Lopez to the witnesses
Rodriguez and Bagay, that he was in love with appellant,
but her parents would not agree unless he donated the land
in question to her. Actually, therefore, the donation was
but one part of an onerous transaction (at least with
appellant's parents) that must be viewed in its totality.
Thus considered, the conveyance was clearly predicated
upon an illicit causa. Liguez vs. Court of Appeals, 102 Phil.
577.
When consideration is not the dismissal of the criminal
case, contract valid.The case of Reyes vs. Gonzales (45
O.G. 831) refers to a deed of mortgage with a false causa
327
VOL. 36, DECEMBER 18, 1970 327

the true consideration for which was the release of the

accused in a criminal case or the dismissal of the same.
Besides it did not appear that said accused admitted either
the offense charged or their liability, and in consequence of
said contract, "the investigation was stifled." Precisely, this

Court refused to apply therein the view taken in Hibberd
vs. Rhode and McMillian (32 Phil. 476) because McMillian
the same manner as Camus, in the case at bar, but,
unlike the accused in the Gonzales casehad been
investigated and his obligation to pay the complainant was
admitted. Needless to say, the undisputed obligation of
Camus to refund to Garrido the sum of P2,000 is sufficient
consideration for the execution of Exhibit A, and, as
respondent's testimony suggests, was his only
consideration therefor. Garrido vs. Cardenas, 103 Phil. 435.
Contract in consideration of dismissal of criminal case.
The case of Hibberd vs. Rhode and McMillian (supra),
relied upon by appellant, is not in point. The amount of the
note involved in that case represented the value of
merchandise admittedly received by one McMillian from
Brand & Hibberd. The latter claimed that McMillian was a
mere depository of said goods and that he had
misappropriated the same. Even prior, therefore, to his
alleged misappropriation, McMillian was civilly liable for
the full amount of said note, there being no allegation that
goods had been lost or destroyed thru force majeure. In the
case under consideration, the liability of Ramirez is based
exclusively upon an alleged criminal actalthough the
same gave rise to two (2) liabilities, one criminal and
another civil, which were enforceable separately, and
independently of each other (Articles 30 and 33, Civil Code
of the Philippines)and the consideration for Exhibit B
was the dismissal of the corresponding criminal action
against him, thus seeking to defeat the administration of
justice. In the Hibberd case, this Court specifically found
that there had been "no agreement to interfere with the
due administration of criminal justice." Monterey vs.
Gomez, L11082, Oct. 31, 1958, 104 Phil. 1059 (unrep.).
Contract for payment of money in consideration of
dismissal of criminal case is void ab initio.Id.
328

Consideration in counterbond.It is evident that the

counterbond executed jointly by Raymundo Manalastas
with Laura Dinio, Exhibit "C", was executed by them in
order to secure the bond by the Philippine Guaranty Co.,
Inc. in favor of Laura Dinio. The fact that the bond was for
the benefit of Laura Dinio, and not for Raymundo
Manalastas, jointly or singly, does not mean that the

counterbond was executed by Manalastas without any
valuable consideration. The consideration in such case is
that which supports the principal debtor's obligation (Pyle
vs. Johnson, 9 Phil. 249). xxx (See also Enriquez de la
Cavada vs. Diaz, 37 Phil. 982 Acua vs. Veloso, 50 Phil.
241.)
The execution of the bond by the Philippine Guaranty
Co., Inc., petitioner herein, in favor of Laura Dinio, is
therefore, the consideration for the execution of the counter
bond by Raymundo Manalastas. It is not necessary that
such consideration, the execution of the bond by the
Philippine Guaranty Co., Inc., redound directly to the
benefit of Raymundo Manalastas, it is enough that it was
favorable to Laura Dinio. Philippine Guaranty Co., Inc. vs.
Dinio, 102 Phil. 991.
Where agreement was not in avoidance of criminal case.
While under paragraph 2 of the agreement the avoidance
of the criminal case appears to be the reason for one of the
defendants' entering into the agreement, under paragraph
3 the appellant merely bound himself to pay, jointly and
severally with the said defendant, the latter's accounts. It
is thus seen that appellant's assumption of a joint and
several liability cannot in any way be interpreted or based
upon the socalled illegal consideration of "stifling a
criminal prosecution" against the defendant. Basic Books
(Phil.), Inc. vs. Lopez, 16 SCRA 291.
Contracts without cause or consideration.The rule
under the Civil Code, be it the old or the new, is that
contracts without a causa or consideration produce no effect
whatsoever. (Art. 1275, Old Civil Code Art. 1352, New
Civil Code.) Nonetheless, under the Old Civil Code, the
statement of a false consideration renders the contract
voidable, unless it is proven that it is supported by another
real and
329
VOL. 36, DECEMBER 18, 1970 329

licit consideration. (Art. 1276, Old Civil Code) Mapalo vs.

Mapalo, 17 SCRA 114.
The action for annulment of a contract on the ground of
falsity of consideration shall last four years, the term to run
from the date of the consummation of the contract. (Art.
1301, Old Civil Code.)Id.
A contract that states a false consideration is one that

has in fact a real consideration but the same is not the one
stated in the document. (Manresa, Codigo Civil, Tomo VIII,
Vol. II, p. 354.)Id.
Where there was in fact no consideration, the statement
of one in the deed will not suffice to bring it under the rule
of Article 1276 of the Old Civil Code as stating a false
consideration.Id. Calderon vs. Medina, 18 SCRA 583.
A contract of purchase and sale is void and produces no
effect whatsoever where the same is without causa or
consideration in that the purchase price, which appears
thereon as paid, has in fact never been paid by the
purchaser to the vendor.Id.
The consideration need not pass from one party to the
other at the time a contract is executed because the promise
of one is the consideration for the other.Philippine
Banking Corporation vs. Lui She, 21 SCRA 52.
3. Consent
When duress is present.According to the Civil Code, there

is duress or intimidation when one of the contracting
parties is inspired by a rational and wellgrounded fear of
suffering an imminent and serious injury to his person or
property, or the person or property of his spouse,
descendants or ascendants. (Art. 1267, Civil Code.) Reyes
vs. Zaballero, L3561, May 23, 1951.
Error of law not vitiating consent.At any rate her
error, if any was an error of law which ordinarily does not
vitiate contractual consent. Vda. de Villacorte vs. Mariano,
89 Phil. 342.
330

Casual, not incidental, fraud vitiates consent.It must be

noted that fraud is manifested in illimitable number of
degrees or gradations, from the innocent praises of a
salesman about the excellence of his wares to those
malicious machinations and representations that the law
punishes as a crime. In consequence, article 1270 of the
Spanish Civil Code distinguishes two kinds of (civil) fraud,
the casual fraud, which may be a ground for the annulment
of a contract, and the incidental deceit, which only renders
the party who employs it liable for damages. This Court
has held that in order that fraud may vitiate consent, it
must be the casual (dolo causante) not merely the

incidental (dolo incidente), inducement to the making of the
contract. (Art. 1270, Spanish Civil Code Hill vs. Veloso, 31
Phil. 180.) Woodhouse vs. Halili, 93 Phil. 526.
Consent given out of pure liberality as binding.
Conformity is consent. According to a universal law,
recognized in our Civil Code, consent is the source of
obligations. That a party has given her conformity as an act
"of pure liberality on her part," does not change the nature
of the legal effect of the consent given. Commitment so
made with her conformity cannot be dismissed on the
ground that it was given as "pure liberality," or for any
other motive provided the consent was freely given and
regardless of the motives behind the act, it gives rise to all
proper legal effects. Seifert vs. Bachrach, 79 Phil. 748.
Acts of seller indicating that his consent was freely given.
The deed of sale Exhibit A was executed by Don Mariano
Cui, Antonio Cui and Mercedes Cui de Ramas on March 8,
1946 in the City of Cebu, and by Rosario Cui and her
husband Dr. Irineo Encarnacion in the City of Manila on
March 20, 1946. The consideration of the sale was P64,000
plus the reservation of the right in favor of Don Mariano
"to enjoy the fruits and rents of the same" as long as he
lives. It appears however that, while in said deed of sale it
is stated that Don Mariano has acknowledged receipt of
said consideration of P64,000, the same is not true with
regard to the share of Rosario Cui. So Don Mariano went to
Calapan, Mindoro in July, 1946 to collect from Rosario her
share of the purchase price amounting
331
VOL. 36, DECEMBER 18, 1970 331

to P20,000. Rosario then excused herself from going ahead

with the sale alleging as reason that she needed that
money she had to rehabilitate her electric plant in Calapan
and also because Cebu was very far from Mindoro where
they had already their permanent residence. Not being able
to pay her share in the consideration of the sale, Don
Mariano demanded from her the resale of her interest. This
was done when she went to Manila on October 11, 1946 to
execute the deed of resale in favor of Don Mariano. This
attitude of Don Mariano is very significant insofar as his
state of mind is concerned. It shows that he was fully
conscious of what was transpiring and of the transaction he
was executing so much so that he went to the extent of
demanding from Rosario the resale of her interest when

she failed to pay her share in the consideration of the sale.
Cui vs. Cui, 100 Phil. 913.
Weakness of mind not caused by insanity not a ground
for avoiding a contract.Id.
Contract signed thru fraud voidable.Citing the case of
Tan Tua vs. Yu Biao Sontua, 56 Phil. 707, plaintiff argues
that one who signs a contract is presumed to know its
contents and if he does not understand it, it is his duty to
secure the assistance of some reliable person to explain it
to him. It appears, however, that plaintiff took it upon
himself to explain the document to defendant so that the
latter, unaware that he was being induced to sign a
disadvantageous contract, could not have thought that the
situation called for outside assistance. The fact then
remains that, as the trial court has correctly found,
plaintiff by falsely representing that defendant was being
made to sign an agreement whose term or duration
coincided with his undertaking under clause 15 of the
lease, succeeded in having defendant sign a contract which
otherwise he would not have signed. Consent given through
mistake or fraud is void (Art. 1330, New Civil Code), and
there is fraud when through insidious words or
machinations of one of the contracting parties, the other is
induced to enter into a contract which, without them, he
would not have agreed to (Art. 1338, idem). In the
circumstances, We hold that the lower court rightly applied
the law when it avoided the
332

document in question. Lopez vs. Ong, L9021, May 31,

1957, 101 Phil. 1236 (unrep.).
Threat to withdraw further credit not sufficient to avoid
contract.Plaintiff also contends that the Bank had
intimated that it would not extend to him or his enterprises
further credit facilities unless he settles the former debt of
the Red Star Stores, Inc. Even if this were true, the same
cannot constitute duress that might invalidate the
settlement, for there is nothing improper for a bank to
decline further credit to any person or entity as a means to
enforce the collection of its accounts if such is necessary to
protect its investment. In fact, such is the practice followed
by most banking institutions for it goes a long way in the
determination of the paying capacity of those who deal with
them. Moreover, the banking business in the Philippines is

extremely competitive. There are other banks that are
opened for business whose facilities plaintiff may avail of in
case the threat is carried out and if plaintiff is a good
business risk he could certainly find accommodation in any
one of them if he so desires. The fact that plaintiff was then
under indictment for treason does not change the situation.
This is rather a further reason for defendant to adopt a
more stringent measure against plaintiff because of the
belief, grounded or otherwise, that collection of the account
might be frustrated. Such circumstance should not be
considered as a desire on the part of defendant to harass or
aggravate the alleged political or financial difficulties of
plaintiff.
Plaintiff likewise contends that the officials of the Bank
have threatened him with reprisals in the sense that
unless he settles his account they would make use of their
influence to prevent him from engaging in business in the
Philippines. Not only is this claim inherently untenable but
it was flatly denied by the officials of that Bank, certainly,
plaintiff has not been able to indicate in what manner does
defendant or its officials expect to carry out the threat
imputed to them. Berg vs. National City Bank of New York,
102 Phil. 309.
Threat to institute court action does not constitute
duress.With regard to the first charge, we see nothing
improper.
333
VOL. 36, DECEMBER 18, 1970 333

It is a practice followed not only by banks but even by

individuals to demand payment of their accounts with the
threat that upon failure to do so an action would be
instituted in court. Such a threat is proper within the
realm of the law as a means to enforce collection. Such a
threat cannot constitute duress even if the claim proves to
be unfounded so long as the creditor believes that it was his
right to do so. This charge has no legal basis. Id.
Vendee who spent the price is estopped from annulling a
sale executed under duress.Appellant's outstanding
obligations amounting to P100,000.00 had been paid out of
the purchase price, with the result that, even disregarding
the statement of Sieichi Tagawa, a mutual friend of
Hashiba and Imamura, that the appellant was constrained
to sell his house because of financial difficulties (Exh. C),
the fact remains that he actually reaped the benefits of the

transactions. As this Court had said: "A party that is able
to carry out an act redounding to its exclusive benefit
simultaneously with the assailed contract, cannot
successfully claim in the latter case to have acted
mechanically under the influence of violence or
intimidation (Reyes vs. Zaballero, L3561, May 23, 1951
Martinez vs. Hongkong & Shanghai Bank, 15 Phil. 252
Vales v. Villa, 35 Phil. 769)." And in the case of Fernandez
vs. Brownell, supra, the pronouncement was laid down that
"Even if we concede that the sale was executed through
threat and intimidation by Mori the action for annulment
was waived and the contract ratified by the plaintiff's
action in depositing the check for the purchase price and
withdrawing the money from time to time." Liboro vs.
Rogers, 106 Phil. 404.
General duress exercised by Japanese military forces
does not nullify certain contractual acts.Id.
Collective duress is not sufficient to annul contract of
sale.As a final argument in annulling the deed of sale in
question the lower court held that the transaction being
between the military occupant and inhabitant of the
occupied territory, over a property that was a war
necessity, duress may be presumed and no evidence of a
particular coercive act is necessary. In numerous cases
decided before this particularly Philippine Trust Co. vs.
Luis Ara
334

neta, 46 O.G. 4254 People vs. Bagalawis, 44 O.G. 2655

and People vs. Quilloy, L2313, Jan. 10, 1951, this Court
has already rejected the theory of "collective" or "general"
duress allegedly exercised by the Japanese military
occupant over the inhabitants of this country as a ground
to invalidate acts that would otherwise be valid and
voluntary if done in times of peace. Fernandez v. Mcgrath,
96 Phil. 411.
Fact of party negativing violence and intimidation.A
party that is able to carry out an act redounding to its
exclusive benefit simultaneously with the assailed contract,
can not successfully claim in the latter case to have acted
mechanically under the influence of violence or
intimidation destroying its free agency (Reyes vs.
Zaballero, L3561, May 23, 1951 Martinez vs. Hongkong &
Shanghai Bank, 15 Phil. 252 Vales vs. Villa, 35 Phil. 769.

Id.
Compulsory acceptance of military notes does not imply
duress.We have already said that Araneta, Inc. applied
for payment. Applying for payment implies voluntariness
which is incompatible with alleged duress and coercion.
But even if we consider the attitude of the Japanese
occupation authorities in viewing with disfavor, even
hostility, any act of rejecting of payment of obligations in
Japanese military notes, as influencing creditors in
accepting payment of debts in said notes, this Tribunal has
already held that payment of prewar obligations in
Japanese military notes and accepted by the creditors
though in compliance with the orders of the Japanese
military occupant enjoining acceptance of said military
notes under severe penalty for nonacceptance, cannot be
considered as made under collective and general duress
because an act done pursuant to the laws or orders of
competent authorities can never be regarded as executed
involuntarily, or under duress or illegitimate constraint or
compulsion that invalidates the act. (Phil. Trust Co. vs.
Luis Ma. Araneta, L3734, March 7, 1949.) Cia. General de
Tabacos vs. Araneta, L6650, Jan. 31, 1955.
Consent reluctantly given.We notice in this regard that
Acasio does not question his wife's authority to bind him by
her acts. He only argues that her payment of P100 as
335
VOL. 36, DECEMBER 18, 1970 335

found by the Court of Appeals did not constitute an

agreement of lease "for it was made under circumstances
that certainly negated consent" referring, obviously, to her
paying "with a certain degree of reluctance." Nevertheless,
as pointed out in appellee's brief, such reluctance did not
have the legal effect of preventing the formation of a
contract.
"There must, then, be a distinction to be made between a case

where a person gives his consent reluctantly and even against his
good sense and judgment, and where he, in reality, gives no
consent at all, as where he executes a contract or performs an act
against his will under a pressure which he cannot resist. It is
clear that one acts as voluntarily and independently in the eye of
the law when he acts reluctantly and with hesitation as when he
acts spontaneously and joyously. Legally speaking he acts as
voluntarily and freely when he acts wholly against his better

sense and judgment as when he acts in conformity with them.
Between the two acts there is no difference in law." (Vales vs.
Villa, 35 Phil. 789.)
Acasio vs. Corporacion de los PP. Dominicos de Filipinas,

100 Phil. 523.
Contract where consent is vitiated by fraud, etc., is
merely voidable.A contract where consent is vitiated by
mistake, violence or intimidation, is not void ab initio but is
merely voidable (Art. 1330, new Civil Code). More than
that, under the law, a contract entered into under those
circumstances is binding upon the parties unless annulled
by proper action in court. And the contract is even
susceptible of ratification (Art. 1390, Idem) Article 1330 of
the new Civil Code is merely based on Article 1265 of the
Spanish Civil Code while Article 1390 of the new Civil
Code was taken from Article 1330 of the Spanish Civil
Code. The new provisions simply clarify the law. Rio
Grande Rubber Estate Co., Inc. vs. Board of Liquidators,
104 Phil. 863.
Signing contract without fully knowing its stipulations
does not vitiate consent.Granting arguendo that
respondents signed the instrument in the belief and upon
the principal's misrepresentation that their liability
thereunder would only be for one year, such fact can not
also be favorably considered on their behalf. The disputed
indemnity agreement had been presented to respondents
for
336

their signature. They could have read it and been informed

that the nature and extent of the undertaking is not as
simple as the principal would put it, had they wanted to.
Instead, they chose to rely completely on the information
furnished by the principal and affixed their signatures to
the instrument without so much as knowing the exact
terms thereof. That they discovered too late their error can
hardly be blamed on anybody. Prudence would dictate a
man to acquaint himself first with the "fine prints" of a
contract before stamping his approval thereto. As it is, the
fact remains that respondents signed the agreement
binding themselves to indemnify the company for whatever
payment it may make under the original bond. Their
having signed the instrument without fully knowing its

contents, when they could have easily done so, cannot be
considered to have vitiated their consent and make their
act involuntary. Manila Surety & Fidelity Co., Inc. vs.
Villarama, 107 Phil. 891.
When the consent to a contract was fraudulently
obtained, the contract is voidable.Mapalo vs. Mapalo, 17
SCRA 114.
A contract between two persons cannot bind another not
a party thereto, merely because he is aware of such contract
and has acted with knowledge thereof.Manila Port
Service vs. Court of Appeals, 20 SCRA 1214.
4. Capacity of Parties
Contract entered into by person under guardianship.Even

in the execution of contracts, in the absence of a statute to
the contrary, the presumption of insanity and mental
incapacity is only prima facie and may be rebutted by
evidence and a person under guardianship for insanity
may still enter into a valid contract and even convey
property, provided it is proven that at the time of entering
into said contract, he was not insane or that his mental
defect, if mentally deranged, did not interfere with or affect
his capacity to appreciate the meaning and significance of
the transaction entered into by him. Dumaguin vs.
Reynolds, 92 Phil. 66.
337
VOL. 36, DECEMBER 18, 1970 337

Guardian of minor ratified contract of compromise.It is

said that the minors were not parties to Exhibit A.
However, it has been seen that through their duly
appointed guardian ad litem they ratified that compromise
in open court, when not only the guardian but the oldest
two of the children as well personally appeared and
expressed their conformity to the proposed sale. This
ratification validated the agreement as effectively as if the
minors or their guardian ad litem had signed it. Escoto vs.
Arcilla, 89 Phil. 199.
Contracts entered into by minors nearing majority who
pretend they are of age are valid.But plaintiff contends
that the need of cession executed by him jointly with Luz
Hermosa adjudicating to the latter the property in question
in order to facilitate its sale to the defendant is null and
void lor the reason that at the time it was executed by him
on November 18, 1947 he was still a minor and so the
cession did not have any legal effect. We fail to see how this
contention can be sustained it appearing that at the time
be and his aunt Luz executed said deed of cession, he was
almost of age, or was already 20 years, 11 months and 3
days old. As this Court said in the case of Mercado vs.
Espiritu, 37 Phil. 215: "The courts have laid down the rule
that the sale of real estate, effected by minors who have
already passed the ages of puberty and adolescence and are
near the adult age when they pretend to have already
reached their majority, while in fact they have not, is valid,
and they cannot be permitted afterwards to excuse
themselves from compliance with the obligations assumed
by them or to seek their annulment." Hermosa vs. Zobel,
104 Phil. 769.
Estoppel applied to contracts of minors nearing the age of
majority.Moreover, after he and his aunt Luz had
executed the aforesaid deed of cession, they filed a joint
petition with the probate court wherein they explained the
reason why the cession had to be made in favor of Luz
Hermosa and requested that said deed be approved. And
after considering the reasons advanced by them, the court
approved the cession in the following wise: "It having been
shown that for the best interest of the estate the deed
338

of cession executed by Luz Hermosa Nuez and Fernando

Hermosa, Jr. in favor of Luz Hermosa Nuez on November
18, 1947 in the City of Manila and acknowledged before a
Notary Public should be approved by the court upon
motion of the counsel for the heirs, the said cession is
hereby approved" (Exhibit 10). Plaintiff is therefore now
estopped from disputing the validity of said cession. As this
Court aptly said: "The circumstance that, about one month
after the date of the conveyance, the appellee informed the
appellants of his minority, is of one moment, because
appellee's previous misrepresentation had already estopped
him from disavowing the contract." (Suan vs. Alcantara, 47
O.G. 4561.) Hermosa vs. Zobel, 104 Phil. 769.
5. Perfection of Contract
Contract was perfected upon acceptance of offer.It can be

taken for granted, as contended by the defendants, that the
option contract was not valid for lack of consideration. But
it was, at least, an offer to sell, which was accepted by
letter, and of this acceptance the offeror had knowledge
before said offer was withdrawn. The concurrence of both
actsthe offer and the acceptancecould 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.) Atkins, Kroll & Co., Inc. vs. B. Cua Hian Tek, 102
Phil. 948.
Acceptance of offer to sell gives rise to bilateral contract
of sale.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 this case, however, upon accepting
herein petitioner's offer a bilateral promise to sell and to
buy ensued, and the respondent 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 is a bilateral contract of sale. Id.
Offer to buy or sell may be withdrawn before acceptance.
Ordinarily an offer to buy or sell may be with
339
VOL. 36, DECEMBER 18, 1970 339

drawn or countermanded before acceptance, even though

the offer provides that it will not be withdrawn or
countermanded, or allows the offeree a certain time within
which to accept it, unless such provision or agreement is
supported by an independent consideration. (77 CJS 636.)
Id.
Bilateral contract to sell and to buy created upon
acceptance.The argument manifestly assumes that only a
unilateral promise arose when the offeree accepted. Such
assumption is a mistake, because a bilateral contract to sell
and to buy was created upon acceptance. So much so that
B. Cua Hian Tek could be sued, had he backed out after
accepting, by refusing to get the sardines and/or to pay for
their price. Indeed, the word "option" is found neither in
the offer nor in the acceptance. On the contrary Exhibit B
accepted "the firm offer for the sale" and adds, "the
undersigned buyer has immediately filed an application for

import license x x x." Id.
Where party made four separate offers each one is
complete and separable from the others.With respect to
the first argument, it is worthy of notice that the proposal
submitted by petitioner consisted of several items, among
which are: (a) one for P389,980, for the "complete
construction of the office building" in question, "including
(1) all electrical installations and (2) all plumbing
installations" (b) another for P358,480, for the "complete
construction of the office building only," excluding,
therefrom, the electrical and plumbing installations (c) a
third one for P18,900, for the "electrical installations only,"
excluding, therefore, the building and its plumbling
installations and (d) a fourth item for P12,600, for the
"plumbing installations only," excluding therefore, the
building and its electrical installations.
Each one of these items was complete in itself, and, as
such, it was distinct, separate and independent from the
other items. The award in favor of petitioner herein,
implied, therefrom, neither a modification of his offer nor a
partial acceptance of the fourth item of his bid, which item
constituted a complete offer or proposal on the part of
petitioner herein. The effect of said acceptance was to
perfect a contract, upon notice of the award to petitioner
340

herein. Valencia vs. Rehabilitation Finance Corporation,

103 Phil. 444.
Construction contract is perfected upon contractor's
receipt of notice of the award.Petitioner's brief says that
he understood or believed that upon expiration of said
bond, on June 15, 1952, his bid, likewise, lapsed. This
allegation is refuted by petitioner's conduct. Upon receipt of
notice of the award in his favor, petitioner did not object
thereto upon any ground whatsoever. He did not even say
that his offer had expired already or had been modified. On
the contrary, he replied expressing his "thanks and
appreciation" for the award, although he stated, also, that
it would be "to the advantage" of respondent to award the
plumbing installations "to the contractor of the main
building." What is more, in his answer to respondent's
complaint, petitioner alleged, by way of special defense,
that, upon notice of the award in his favor, he "prepared all
the necessary equipment, materials and plumbers to do

and perform the plumbing installations" in question. For
this reason, he alleged, also, in his answer, that he "should
be the one entitled to damages" inasmuch as respondent
"Awarded to Sanchez & Antigua Engineering, x x x the
contract for plumbing installation x x x without prior
notice" to petitioner "who is the first awardee," and set up a
counterclaim for damages thus allegedly caused to him.
These acts of petitioner herein show, beyond doubt, that,
upon receipt of notice of the award of June 22, 1952, he
knew that the contract between him and respondent had
become perfected, and that he must have felt, accordingly,
that his bid was still good at that time. Id.
A sale is perfected from the moment the parties agree on
the price and subjectmatter.The fourth item of appellant
Fojas's counterclaim is for the amount of P4,000 as refund
due for alleged overpayment to the National Rice and Corn
Corporation on 400 sacks of C1 or "binlid" rice, stating
that while he bought such kind of rice at a price of P30 per
sack, the next day, the same kind of rice was sold to other
retailers and the public at P20.00 per sack. He now claims
the difference of P10.00 per sack. Aside from the fact that
this has not been satisfactorily established by evi
341
VOL. 36, DECEMBER 18, 1970 341

dence, there is no law which would sanction such a refund.

From the moment the parties agreed upon the kind of rice
and the price thereof, they are deemed to have entered into
a perfected contract of purchase and sale, the terms and
conditions of which may not be held to depend on
subsequent events or acts of the parties unless the contrary
is stipulated. The mere fact that the vendor thereafter sells
an object of the same kind to another at lesser price is no
ground for the previous vendee to be entitled to claim the
excess, his contract being independent of the others.
National Rice and Corn Corporation vs. Fojas, L11517,
April 3, 1958, 103 Phil. 1131 (unrep.).
Accepted offer constitutes perfected contract.The
Government, through the Quezon City Engineer has as late
as 1955 acknowledged the financial obligation of the
Government, and even offered to pay it, and what is more,
the offer was duly accepted by Herrera, thereby
constituting a contract, and a renewal of the obligation.
Herrera vs. Auditor General, 102 Phil. 875.
No perfected contract because offer was not accepted.

We understand that the main and decisive issue involved
in the appeal is whether the defendant definitely accepted
the offer of plaintiff for exchange. Examining the letter of
the supposed acceptance, we agree with the trial court that
the tenor of said letter cannot be construed as an
acceptance on the part of the defendant. Appellant
contends that the clause "we are willing to accept the
proposition, in which case please see our Mr. F.J.
Domantay, of the Property Department for possible
arrangement" implied acceptance. We disagree. We believe
that said clause does not in any manner show that
defendant had definitely accepted the offer. The phrase
"willing to accept" does not mean acceptance x x x the
defendant merely expressed active interest in the proposed
barter because perhaps it could make use of the sawmill
and that it had more surplus tractors than it had need for.
In other words, everything was indefinite and in a fluid
state, requiring further consideration, perhaps even
bargaining, and that is why the letter of May 5, 1952,
speaks merely "of a possible arrangement." This is
certainly far from the acceptance claimed by the
342

appellant. Meads vs. Land Settlement and Development

Corporation, 98 Phil. 119.
The notice of acceptance is not necessary when a contract
of guaranty becomes binding.Once a principal contract is
perfected, the subsidiary contract of guaranty becomes
effective and binding and no notice of acceptance by the
creditor to the guarantor is necessary for its validity.
Macondray & Co., Inc. vs. Fion, 2 SCRA 1109.
Contracts take effect only between the parties thereto.
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 which is known as a stipulation pour autrui or a
provision in favor of a third person not a party 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 to 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. Bonifacio

Bros., Inc. vs. Mora, 20 SCRA 261.
When contracts deemed consummated.Where a
complaint averred the sale of a house and land, that
consideration therefor was paid, and that by reason of such
sale, the vendee performed acts of ownership thereon, the
facts thus alleged are constitutive of a consummated
contract. Iigo vs. Estate of Adriana Maloto, 21 SCRA 246.
6. Validity and Effect
Laborers cannot be deprived of their rights by contracts.

The Philippine Labor Federation (with 185 members)
presented a petition to the BogoMedellin Milling Co.,
asking for increase of wages and better working conditions.
As no agreement was reached between the milling company
and the Federation, the question was submitted to the
Court of Industrial Relations. The LuyA Association (with
459 members) intervened in the case and moved that said
Court dismiss the petition of the Federation on the ground
343
VOL. 36, DECEMBER 18, 1970 343

that the milling company and LuyA Association had

already entered into a contract which excludes any other
contract that may be entered into with any other entity or
persons. Held: The LuyA Association and the milling
company, by excluding the members of said Federation who
were already working for the company, by said contract,
illegally deprived the members of the Federation of their
right to ask for higher wages and better working
conditions, which deprivation may, in some cases even
amount to expelling them from the company's service
without just cause for if their demands are ignored and
they have no recourse to the Court of Industrial Relations
and the courts of justice they may have to sever their
connections with the company. Our laws recognize and
protect the rights of laborers to petition for better
conditions, to resort to the courts, and even to strike in
proper cases. It is a part of the right to petition. Labor laws
have been enacted to protect the right of laborers to seek
better working conditions, creating the Court of Industrial
Relations to pass upon the petitions of laborers for that
purpose. This fundamental human right cannot be nullified
by contract, especially when the laborers concerned are not
parties to it. LuyA Allied Workers' Association vs. Court of

Industrial Relations, 88 Phil. 562.
Reduction of rate of exchange of military notes was held
contrary to public policy.By the contract in question the
parties reduced the rate of exchange between the two
currencies from par to one to ten. "This reduction is
contrary to the law or public policy promulgated by the
Japanese military authorities, or the Philippine Executive
Commission." Therefore, the consideration was false and
illicit and the contract was void ab initio, according to
Articles 1255, 1275, 1276 and 1278 of the Civil Code.
Tanda vs. Aldaya, 89 Phil. 497.
Lease of fishpond by a municipality.The leases here in
question were void for lack of approval by the provincial
governor as required by section 2196 of the Revised
Administrative Code. And even if the provincial governor
had approved these leases, they would still be void after
the first five years, because under sections 2323 and 2319
of the Revised Administrative Code, no municipality can
344

enter into any lease of fishponds for more than five years.
Acts executed contrary to the provisions of the law are void
except in cases where the law itself orders their validity. As
these leases were contrary to law, they were void.
Municipality of Hagonoy vs. Evangelista, 73 Phil. 586.
No estoppel attaches to validate a contract that in itself is
contrary to law.The purchaser acted undoubtedly under
the erroneous impression that legal redemption, as noted
by the sheriff on the deed, was valid, accepting thus the
deed without any objection whatsoever. But, as a general
rule, and under the circumstances of the case, no estoppel
attaches to validate a contract or any part thereof that in
itself is contrary to law. Abarro vs. De Guia, 72 Phil. 245.
Building contract exempting owner from payment of
wages is null and void.The fact that according to the
building contract, the owner of the building shall not
respond to any claim, for wages not paid, does not exempt
the owner of the building from the obligation to pay jointly
and severally the salary of the watchman, because such
contract is null and void for being contrary to the purpose
of Act No. 3959. Fernandez vs. Garcia, 92 Phil. 592.
Bona fide possessor of public land can be a landlord
thereof.Alfafara vs. Mapa, 95 Phil. 125.
No suit for performance of illegal contract."The

proposition is universal that no action arises, in equity or
at law, from an illegal contract no suit can be maintained
for its specific performance, or to recover the property
agreed to be sold or delivered, or the money agreed to be
paid, or damages for its violation. The rule has sometimes
been laid down as though it were equally universal, that
where the parties are in pari delicto, no affirmative relief of
any kind will be given to one against the other." (Pomeroy's
Equity Jurisprudence, Vol. 3, 5th ed., p. 728.) It is true that
this doctrine is subject to one important limitation, namely,
"whenever public policy is considered as advanced by
allowing either party to sue for relief
345
VOL. 36, DECEMBER 18, 1970 345

against the transaction" (Idem, p. 733). But not all

contracts which are illegal because opposed to public policy
come under this limitation. The cases in which this
limitation may apply only "include the class of contracts
which are intrinsically contrary to public policycontracts
in which the illegality itself consists in their opposition to
public policy, and any other species of illegal contracts in
which, from their particular circumstances, incidental and
collateral motives of public policy require relief." Examples
of this class of contracts are usurious contracts, marriage
brokerage contracts and gambling contracts. (Idem, pp.
735737.) Rellosa vs. Gaw Chee Hun, 93 Phil. 827.
Contract against the Constitution.It is illegal not
because it is against public policy but because it is against
the Constitution. Nor may it be contended that to apply the
doctrine of pari delicto would be tantamount to
contravening the fundamental policy embodied in the
constitutional prohibition in that it would allow an alien to
remain in the illegal possession of the land, because in this
case the remedy is lodged elsewhere. To adopt the contrary
view would be merely to benefit petitioner and not to
enhance public interest. Id.
Party to illegal contract cannot enforce his illegal object.
A party to an illegal contract cannot come into a court of
law and ask to have his illegal objects carried out. The law
will not aid either party to an illegal agreement it leaves
the parties where it finds them. The rule is expressed 'In
pari delicto potior est conditio defendentis.' (Bough and
Bough vs. Cantiveros and Hanopol, 40 Phil. 210, 216.) Id.
Invalid employment contract does not preclude recovery

of overtime pay.The argument that the nullity or
invalidity of the employment contract precludes recovery
by the laborers of any overtime pay is untenable. The
EightHour Labor Law, in providing that "any agreement
or contract between the employer and the laborer or
employee contrary to the provisions of this Act shall be null
and void ab initio," obviously intended said provision for
the benefit of the laborers or employees. The employer can
346

not, therefore, invoke any violation of the Act to exempt

him from liability for extra compensation. This conclusion
is further supported by the fact that the law makes only
the employer criminally liable for any violation. It cannot
be pretended that, for the employer to commit any violation
of the EightHour Labor Law, the participation or
acquiescence of the employee or laborer is indispensable,
because the latter in view of his need and desire to live,
cannot be considered as being on the same level with
employer when it comes to the question of applying for and
accepting an employment. Manila Terminal Co., Inc. vs.
Court of Industrial Relations, 91 Phil. 625.
Lawful tenancy contracts proposed by owner of land
must be respected.If the contracts of tenancy proposed by
the owners are not forbidden by specific provisions of the
Tenancy Law and are not injurious to the tenants, they
must be respected. And tenants' refusal to sign them is a
just cause for their dismissal. Bulasag vs. Ramos, 85 Phil.
330.
Sale vitiated by fraud is only voidable and not void ab
initio.Assuming that the consent of Ong Shu to the sale
in favor of Soto was obtained by the latter through fraud
and deceit, the contract was not thereby rendered void ab
initio, but only voidable by reason of the fraud, and Article
1390 expressly provides that:
"ART. 1390. The following contracts are voidable or annullable,

even though there may have been no damage to the contracting
parties:
(1) Those where one of the parties is incapable of giving

consent to a contract
(2) Those where the consent is vitiated by mistake, violence,

intimidation, undue influence or fraud.
These contracts are binding, unless they are annulled by a

proper action in court. They are susceptible of ratification." (Civil
Code.)
Agreeably to this provision, Article 1506 prescribes:
"ART. 1506. Where the seller of goods has a voidable title thereto,
but his title has not been avoided at the time of the sale, the
buyer acquires a good title to the goods, provided he
347
VOL. 36, DECEMBER 18, 1970 347

buys them in good faith, for value, and without notice of the
seller's defect of title." (Civil Code.)
Hence, until the contract of Ong Shu with Soto is set aside
by a competent court (assuming that the fraud is
established to its satisfaction), the validity of appellant's
claim to the property in question can not be disputed, and
his right of the possession thereof should be respected.
Chua Hai vs. Kapunan, Jr., 104 Phil. 110.
Court action is necessary to annul voidable contract.
Plaintiff's claim that the sale is inexistent or void ab initio
cannot be sustained, it appearing that out of its
consideration of P370,000.00 plaintiff applied the amount
of P93,928.56 to pay its prewar indebtedness to the
Agricultural and Industrial Bank and distributed the
balance of P276,071.44 among its stockholders. This is a
clear indication that the sale, even if vitiated, is merely
voidable and as such cannot have reversible effects unless
proper action is brought for its annulment. As this court
has aptly said:
"Had the plaintiff desired to set aside the contracts of conveyance

made by his father, he should have instituted a special action for
that purpose. (Arts. 1300 to 1314, Civil Code.) He can not have
said documents annulled in a subsidiary action. x x x . One who
desires to recover lands as the owner from another upon the
theory that the deeds held by the other are null and void, must
first ask that such alleged fraudulent deeds be set aside." (Llacer
vs. Muos de Bustillo and Achaval, 12 Phil. 328, 334).
Rio Grande Rubber Estate Co., Inc. vs. Board of

Liquidators, 104 Phil. 863.
Promise to pay prewar debt already paid in Japanese

war notes was held valid.The validity of the payments
made by plaintiff to the Bank of Taiwan, Ltd., in
settlement of its prewar obligation to the defendant Bank
is not denied or questioned by the latter, but as it did not in
fact receive any money thus paid by plaintiff to the Bank of
Taiwan, it naturally contends that it suffered thereby the
corresponding loss. Consequently, when plaintiff wanted to
renew commercial transactions with the defendant the
latter refused to grant to the former any
348

credit facilities unless and until plaintiff would indemnify

it for said loss. Of course, plaintiff did not like this but had
finally to yield to defendant's demand because that was the
only way to secure new credit facilities from defendant and
avoid the greater damage that would result from the
paralyzation of its business. We can infer from the
averments of the complaint that plaintiff preferred to lose
something in order to obtain further gains in his business
rather than lose everything by having said business
paralyzed. It is thus seen that the issuance of the
promissory notes for the payment of the aggregate sum of
P48,298.13 plus interests thereon, which amounted to
P3,238.78, or a total of P51,536.91, was for a licit and valid
consideration. Chiu Chiong & Co., Inc. vs. National City
Bank of New York, 99 Phil. 745.
Municipal contract not approved by governor as required
by law is merely voidable.Municipality of Camiling vs.
Lopez, 99 Phil. 187.
Mere lapse of time does not give efficacy to void contract.
Eugenio vs. Perdido, 97 Phil. 41.
Contract to work for approval of foreign exchange
application is contrary to public policy.Tee vs. Tacloban
Electric & Ice Plant Co., Inc., 105 Phil. 168.
Contracts detrimental to public interest are void.Sy
Suan vs. Regala, 105 Phil. 1024.
10% fee on dollar allocations is void.We find
undeniable that the contract in question sought to be
enforced by the respondent and assailed by petitioners as
null and void for being against public policy, is what is
commonly known as 10% contracts which the press decries
and the public condemns as inimical to public interest. We
can take judicial notice that this kind of contract sprouted
as a result of the controls imposed by the government on

imports and dollar allocations, despite the enunciated
government policy that applications for imports and foreign
exchange should be considered and acted upon strictly on
the basis of merit of each application and without the
intervention of intermediaries, which policy is revealed by
Sections 15 and 18 of Republic Act No. 650. Id.
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VOL. 36, DECEMBER 18, 1970 349

Unenforceable contract.Appellant may not insist on his

reinstatement simply because, as he claims, he agreed to
resign on the assurance that he would be taken back once
he was cured. That agreement, as already noted above, was
disapproved by defendant's general manager on the ground
that it stipulated something that was contrary to law.
which was that the appellant employee was thereby
waiving his right to compensation on account of his illness.
The attempted agreement was therefore unenforceable.
Robles vs. Visayan Estevedore Trans. Co., L10620, May 15,
1959, 105 Phil. 1312 (unrep.).
Municipal corporation is not estopped to assail contract
which is against public policy.San Diego vs. Municipality
of Naujan, 107 Phil. 118.
Tenancy contract which is contrary to Sec. 19 of Republic
Act No. 1199 is void.Philippine National Bank vs.
Ramirez, 109 Phil. 775.
Invalid stipulation in compromise agreement does not
render whole agreement void.The question that suggests
itself is whether the invalid provisions render void the
whole agreement. Held: The invalid stipulations are
independent of the rest of the terms of the agreement and
can easily be separated therefrom without doing violence to
the manifest intention of the parties. This being so, the
legal terms of the contract can be enforced (Art. 1420, New
Civil Code). Velayo vs. Court of Appeals, 107 Phil. 587.
A contract illegally dispossessing a tenant is voidDatu
vs. Cabangon, 108 Phil. 243.
Mortgagor bears the loss of goods mortgaged.As the
mortgagee does not become the owner of the property
mortgaged and the ownership thereof remains with the
mortgagor, therefore, under the maxim, res periit domino
suo, the mortgagorowner bears the loss of the thing
mortgaged. The principal obligation is not extinguished by
the loss of the mortgaged property. Warner, Barnes & Co.,

Ltd. vs. Flores, 1 SCRA 881.
When stockholders are liable for obligations contracted
350

by the corporation.Wherever the corporate entity is being

used as an alter ego or business conduit for the sole benefit
of the stockholders, or to defeat public convenience, justly
wrong, protect fraud, or defend crime, the individual
stockholders may be held liable for the obligations
contracted by the corporation. McConnel vs. Court of
Appeals, 1 SCRA 722.
A contract of guaranty is not a formal contract and is
valid in whatever form it may be.A contract of guaranty
is not a formal contract and is valid in whatever form it
may be, provided that it complies with the statute of
frauds. Macondray & Co., Inc. vs. Pion, 2 SCRA 1109.
Acceptance of unilateral promise to sell without
consideration.An accepted unilateral promise to sell, not
supported by any consideration distinct from the price,
does not produce a binding enforceable contract of sale. The
offer in this case, as well as the acceptance, both lack a
most essential elementthe manner of payment of the
purchase price. Hence, the offer to sell may be withdrawn
without the offeror committing any breach of contract.
Navarro vs. Sugar Producers Cooperative Marketing
Association, Inc., 1 SCRA 1180.
Validity as to form.Contracts are binding in whatever
form they may have been entered into. An exchange of land
is valid although not in writing. Nor is registration
necessary for the validity of the exchange if the rights of
innocent third parties or subsequent transferees are not
involved. Lopez vs. Auditor General, 20 SCRA 655.
Validity of lease or option to buy real estate to an alien.
A lease to an alien for a reasonable period is valid. So is an
option giving an alien the right to buy real property on
condition that he is granted Philippine citizenship. Aliens
are not completely excluded by the Constitution from the
use of lands for residential purposes. Since their residence
in the Philippines is temporary, they may be granted
temporary rights such as a lease contract which is not
forbidden by the Constitution. Should they desire to remain
here forever and share our fortune and misfortune, Fil
351
VOL. 36, DECEMBER 18, 1970 351

ipino citizenship is not impossible to acquire. Philippine

Banking Corporation vs. Lui She, 21 SCRA 52.
7. Compromise
An onerous compromise agreement should be interpreted in

favor of the greatest reciprocity of interests.Rodriguez vs.
Belgica, 1 SCRA 611.
When agreement to transmit onehalf of conjugal share is
a contract as to future inheritance.A document signed by
the testator's wife, promising that she would respect and
obey all the dispositions in the latter's will, and that she
would hold onehalf of her share in the conjugal assets in
trust for the heirs and legatees of her husband in his will,
with the obligation of conveying the same to such of his
heirs or legatees as she might choose in her last will and
testament, is a compromise and at the same time a contract
with sufficient cause or consideration. Blas vs. Santos, 1
SCRA 899.
8. Construction and Interpretation
AGenerally
Unwise or disastrous contracts.The plaintiff says in
another part of his lengthy brief that the use he was able to
make of the Japanese money paid him by defendant was
much less than he had expected. This complaint seems to
run counter to the plaintiff's vehement protest that the
Japanese war notes were illegally depreciated in the
contract. However, setting aside this apparent
inconsistency in the plaintiff's position, the plaintiff is not
entitled to a rescission or to a discount on the basis of the
benefit he actually derived from the purchase price. The
law does not relieve a party from the effects of an unwise,
foolish, or disastrous contract, entered into with all the
required legal formalities and with full awareness of what
he was doing. The trial court affirmatively found that no
fraud or deception had been perpetrated by the defendant
on the plaintiff. The welldemonstrated high intelligence of
the plaintiff, his legal acumen and good grasp of the
intricacies of law, precludes every possibility of his having
been duped. Tanda vs. Aldaya, 89 Phil. 497.
352

Interest is not presumed.Defendant has agreed to pay

interest only up to the date of maturity, or until March 31,
1934. As the contract is silent as to whether after that date,
in the event of nonpayment, the debtor would continue to
pay interest, no legal presumption as to such interest can
be indulged, for this would be imposing upon the debtor an
obligation the parties have not chosen to agree upon.
Article 1755 of the Civil Code provides that "interest shall
be due only when it has been expressly stipulated."
Jardenil vs. Solas, 73 Phil. 626.
Construction of stipulation regarding venue.The
contract sued on contains this stipulation: "It is hereby
expressly agreed that any legal action arising out of this
contract, or in connection with the property made the
subject hereof, may at the option of the Seller be brought in
the Courts of the City of Manila." The plaintiff argues that
such agreement refers only to suits brought or to be
brought by the Corporation, the seller, and not to suits
brought by the purchaser. We find the argument to be
unfounded. The stipulation refers to "any action," obviously
by either party to the contract. There is no valid reason
why it should only apply to actions by one side. Borreros vs.
Philippine Engineering Corporation, 95 Phil. 960 (unrep.).
Body of letter, not heading, is controlling.Plaintiff's
counsel makes capital out of the fact that defendant's
letter, Exhibit C, is given the heading of "Cancellation of
Dealer's Contract." The body of the letter, however, shows
that plaintiff has had no contract at all. The body of the
letter, not its title, governs. The counsel explained that the
heading was made by a "layman" and this seems to be
correct. Exconde vs. International Harvester Co. of the
Philippines, 92 Phil. 221.
Motive and cause in contracts distinguished.The
agreement cannot be declared void merely because
appellant's motive in assuming obligation thereunder was
to help save one of the defendants from a criminal case.
Particular motives of the parties in entering into a contract
are different from the cause thereof (Article 1351, New
Civil Code). Cause is the essential reason which moves the
353
VOL. 36, DECEMBER 18, 1970 353

contracting parties to enter into the contract (General

Enterprises, Inc. vs. Lianga Bay Logging Co., L18487,
August 31, 1964). It is the immediate, direct and proximate
reason which justifies the creation of an obligation through
the will of the contracting parties (3 Castan 4th ed., p. 347).
In the case at bar the cause of the agreement was the
existing account of one of the defendants with appellee. It
was mere liberality or gratuitousness that moved appellant
to oblige himself severally with the said defendant. Basic
Books (Phil.), Inc. vs. Lopez, 16 SCRA 291.
BWhere Terms are Clear
Contract, whose terms are clear, should be given full
force and effect.As the contract is clear and unmistakable
and the terms employed therein have not been shown to
belie or otherwise fail to express the true intention of the
parties, and that the deed has not been assailed on the
ground of mutual mistake which would require its
reformation, same should be given its full force and effect.
When a party sues on a written contract and no attempt is
made to show any vice therein, he cannot be allowed to lay
any claim more than what its clear stipulation accord. His
omission, to which the law attaches a definite meaning as
in the instant case, cannot by the courts be arbitrarily
supplied by what their own notions of justice or equity may
dictate. Jardenil vs. Solas, 73 Phil. 626.
CIntent of Parties
Presumption is that document expressed parties'
intention.The parties have the burden of proof to
overcome the strong presumption that the document she
and her cosellers signed expressed their true intention.
Vda. de Gonzales vs. Santos, 87 Phil. 471.
Intention of parties is indicated by what their words
express.Whether evidenced by a public instrument or a
private document, the contract is what the words of the
parties indicate. It will not avail the defendant to say, "but
my intention was not what my words express." Id.
354

Parol evidence bearing on collateral agreements is

admissible.Where the provisions of a written contract are
ambiguous, and there is sufficient evidence showing the

existence of other agreements collateral thereto, such parol
evidence is admissible to prove the real agreement of the
parties. Coscolluela vs. Valderrama, 2 SCRA 1095
Calderon vs. Medina, 18 SCRA 583.
Ambiguous provisions of a contract are construed against
the party who drafted the same.Where the provisions of a
contract are ambiguous, such ambiguity must be construed
against the party who drafted the same and it appearing
that the contract in question was drafted by appellant's
counsel, any ambiguity therein must be construed against
appellant. Coscolluela vs. Valderrama, 2 SCRA 1095.
Stipulation pour autrui.The question of whether a
third person has an enforceable 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. 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. Bonifacio Bros., Inc.
vs. Mora, 20 SCRA 261 Nielson & Company, Inc. vs.
Lepanto Consolidated Mining Company, 18 SCRA 1040.
DConsidering Other Agreement of Parties
Prior draft considered in determining intent of parties to
contract.The trial court did not consider this draft on the
principle of integration of jural acts. We find that the
principle invoked is inapplicable, since the purpose of
considering the prior draft is not to vary, alter, or modify
the agreement, but to discover the intent of the parties
thereto and the circumstances surrounding the execution of
the contract. The issue of fact is, did plaintiff represent to
defendant that he had an exclusive franchise? Certainly,
his acts or statements prior to the agreement are essential
and relevant to the determination of
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VOL. 36, DECEMBER 18, 1970 355

said issue. The act or statement of the plaintiff was not

sought to be introduced to change or alter the terms of the
agreement, but to prove how he induced the defendant to
enter into itto prove the representations or inducements,
or fraud, with which or by which he secured the other
party's consent thereto. These are expressly excluded from
the parol evidence rule. (Bough and Bough vs. Cantiveros

and Hanopol, 40 Phil. 209 Port Banga Lumber Co. vs.
Export & Import Lumber Co., 26 Phil. 602 III Moran 221,
1952 rev. ed.). Fraud and false representations are an
incident to the creation of a jural act, not to its integration,
and are not governed by the rules on integration. Where
parties prohibited from proving said representations or
inducements, on the ground that the agreement had
already been entered into, it would be impossible to prove
misrepresentation or fraud. Furthermore, the parol
evidence rule expressly allows the evidence to be
introduced when the validity of an instrument is put in
issue by the pleadings (Sec. 22, par. [a], Rule 123, Rules of
Court), as in this case. Woodhouse vs. Halili, 93 Phil. 526.
EStrict Liberal Construction
Pacto de retro sale construed as equitable mortgage.
There is no merit in petitioner's contention that the Court
of Appeals erred in ordering the sale of the land in case of
nonpayment of the judgment, on the ground that the
contract relied upon by the respondent, not having been
registered in accordance with the Land Registration Act,
cannot operate as a mortgage so as to justify its fore
closure. The contract, evidencing a pacto de retro sale
which is unquestionably more disadvantageous to the
petitioner, has been held to be an equitable mortgage and,
from its very nature, the lien thereby created ought not to
be defeated by requiring compliance with the formalities
necessary to the validity of a voluntary real estate
mortgage, as long as the land remains in the hands of the
petitioner and the rights of innocent third parties are not
affected. In the case of Correa vs. Mateo and Icasiano (55
Phil. 79), wherein an unrecorded pacto de retro sale was
construed as an equitable mortgage, it was hold that
356

the plaintiff had the right "within sixty days after final
judgment, for a failure to pay the amount due and owing
him, to foreclose his mortgage in a proper proceeding and
sell all or any part of the ten parcels of land to satisfy his
debt." Zubiri vs. Quijano, 74 Phil. 47.
Ownership of property conditionally transferred to
vendee upon execution.Where the contract conditionally
transfers ownership to the vendee upon its execution, the
property is not merely given as security for a loan and the
contract is not one of equitable mortgage but a sale subject

to a resolutory condition. Rodriguez, Sr. vs. Francisco, 2
SCRA 648.
FConsidering Situation of PartiesSurrounding
Circumstances
Where circumstances indicated sale of whole estate for a
lump sum.It seems plain from all the attending
circumstances that the dominant and paramount thought
in the minds of the parties during and at the end of the
negotiation was a sale of the entire property owned by the
sellers for a gross amount. x x x In a sale involving an
extensive agricultural estate containing undetermined lots
of different classes, unappraised improvements, barrio lots
and roads and standing crop, it was well nigh difficult, not
to say impossible, to conclude a transaction technically and
strictly by the hectare. Such form of sale would leave the
parties in uncertainty on the amount to be added to or
taken from the price in the ensuing readjustment in the
event of discrepancy in the assumed area. Such form of sale
would be fraught, as the parties ought to have realized,
with extreme difficulties and harassing controversies.
xxx The recital in the deed of sale, that the vendors
conveyed "todo su derecho, interes, y participacion en la
Hacienda Esperanza," literally and properly construed, was
a conveyance of the whole estate in the property in the
absence of any limitations denoting intent to convey a less
interest. Gonzales vs. Santos, 87 Phil. 471.
Interpretation of a clause in insurance contract regard
357
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ing repair of damaged vehicle.The clause in an insurance

policy, authorizing the owner of the damaged vehicle to
contract for its repair does not mean that the repairman is
entitled to collect the cost of repair out of the proceeds of
the insurance. It merely establishes the procedure that the
insured has to follow in order to be entitled to indemnity
for repair. Bonifacio Bros., Inc. vs. Mora, 20 SCRA 261.
GPractical Construction by Parties
Interpretation of clause regarding transportation costs.
We have the fact that the plaintiffs had voluntarily paid
this cost of transportation from Isabela to Hinigaran for a
period of at least ten years, without complaint or protest.
Assuming for a moment that the agreement of the parties
on the payment of this cost of transportation as evidenced
by clause 22 were not clear, the fact that defendant

company had been collecting and plaintiffs had been paying
voluntarily those charges, will show that the parties
understood the agreement in that manner. True, three of
the planters testified that at the beginning when the sugar
was transported in trucks to the port of San Gregorio, the
expenses for transportation was borne by the the planters
themselves and the trial court believed him and held that
his testimony is supported by the evidence. We are not in a
position to overrule and change that finding of the trial
court. Feria vs. Isabela Sugar Co., Inc., 92 Phil. 1065
(unrep.).
HConstrued as a Whole
Circumstances showing that contract is one of sale, not of
agency.In our opinion, the circumstances of record
sufficiently indicate a sale. First, no commission was paid.
Second, Exhibit 1 says that "if balance is not paid within 48
hours of notification, merchandise may be resold by the
Universal Trading Co. and the deposit forfeited." "Resold"
implies the goods had been sold to Chua Ngo. And
forfeiture of the deposit is incompatible with a contract of
agency. Third, immediately after executing Exhibit 1
wherein oranges were quoted at $6.30 per box, Universal
Trading Co. placed an order for purchase of the same with
358

Gabuardi Company at $6.00 per box. If Universal Trading

Co. was agent of Chua Ngo, it could not properly do that.
Inasmuch as good faith is to be presumed, We must hold
that Universal Trading Co. acted thus because it was not
acting as agent of Chua Ngo, but as independent purchaser
from Gabuardi Co. Fourth, the defendant charged the
plaintiff the sum of P218.87 for 3 1/2% sales tax, thereby
implying that their transaction was a sale. Fifth, if the
purchase of the oranges had been made on behalf of Chua
Ngo, all claims for losses thereof against the insurance
company and against the shipping company should have
been assigned to Chua Ngo. Instead, the defendant has
been pressing such claims for itself. Chua Ngo vs.
Universal Trading Co., 87 Phil. 331.
IConstruing Provisions of Contract
Where deed was construed as conveying whole property.
The recital in the deed of sale, that the vendors conveyed
"todo su derecho, interes y participatin en la Hacienda
Esperanza," literally and properly construed, was a

conveyance of the whole estate in the property in the
absence of any limitations denoting intent to convey a less
interest. Gonzales vs. Santos, 87 Phil. 471.
Real estate sold for lump sum.Upon the question of
law of whether upon a sale of real property in gross and for
a lump sum, the purchaser may be entitled to an equitable
reduction in the price in proportion to what is lacking in
the area as designated in the contract, the trial court
credited the defendant the sum of P3,824 upon the
evidence that the fishpond purchased by him was only
eight (8) hectares when it was described in the contract to
contain "una extencion superficial de once (11) hectares,
treinta y echo (38) areas, y setenta y siete (77) centiareas,
poco mas a menos." The question is controlled by Article
1471 of the Civil Code which provides that "in case of the
sale of real estate for a lump sum and not at the rate of a
specified price for each unit of measure or number there
shall be no increase or decrease of the price even if the area
or number be found to be more or less than that stated in
the contract." The transaction here in
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VOL. 36, DECEMBER 18, 1970 359

(Exh. D), one for a lump sum and not at a specified price for
each unit of measure, and therefore, no reduction can be
authorized although the area was less than what was
stated in the contract. There are instances in which
equitable relief may be granted to the purchaser, as where
the deficiency is very great, for, under such circumstances,
gross mistake may be inferred. (Asian vs. Jalandoni, 45
Phil. 296). But, in the instant case, were are satisfied that,
although the shortage amounts to practically onefourth of
the total area, the purchase clearly intended to take the
risk of quantity, and that the area has been mentioned in
the contract, merely for the purpose of description. From
the circumstances that the defendant, before her purchase
of the fishpond, had been in possession and control thereof
for two years as a lessee, she can rightly be presumed to
have acquired a good estimate of its value and area, and
her subsequent purchase thereof must have been premised
on the knowledge of such value and area. Accordingly, she
cannot now be heard to claim an equitable reduction in the
purchase price on the pretext that the property is much
less than she thought it was. Garcia vs. Velasco, 72 Phil.

248.
A clear stipulation does not need any construction.In
our opinion, the purpose of the parties in making that
stipulation is to defer the payment of the claim until after
the share of Fred M. Harden in the assets of the conjugal
partnership shall have been determined in order that said
defendant may not be burdened with the liability to pay it
during the pendency of the receivership. Be it as it may,
the fact remains that the terms of the stipulation are clear
and it is a well known rule of statutory construction that
when the terms of a contract are clear there is no room for
interpretation. Dalupan vs. Harden, 90 Phil. 417.
Management contract containing provisions which are in
the nature of stipulations "pour autrui" is binding to one not
a party thereto.Section 15 of the Arrastre Management
Contract containing provisions, which are in the nature of
stipulations "pour autrui," entered into by and be
360

tween the Manila Port Service and the Bureau of Customs

on 29 February 1956 pursuant to the provisions of Act No.
3002, as amended by Act No. 3851, Commonwealth Act No.
285 and Republic Act No. 140, limiting the former's liability
for loss, destruction or damage to any cargo while under its
custody or control to P500.00 for each package, unless the
value be otherwise specified or manifested and the
corresponding arrastre charges have been paid, is binding
upon the consignee who was not a party thereto or
signatory thereof. Smith, Bell & Co., Ltd. vs. Manila Port
Service, 1 SCRA 1007.
JProvision as to Time
Debtor cannot make payment before the time stipulated.
The only question is whether or not, under the terms of
the contract, the loan may be paid on or before March 31,
1948. The court rendered judgment holding the contract to
be unilateral, and that the period therein fixed for payment
of the loan is for the benefit of the debtor, who, for that
reason, may make payment before May 27, 1952. This
judgment is wrong. The contract of loan expressly
stipulates that payment shall be made on May 27, 1952.
Article 1127 of the Civil Code provides that"whenever a
term is fixed in obligations it is presumed as established for
the benefit of the creditor and the debtor, unless from their
tenor or some other circumstances, it should appear that it

has been established for the benefit of one or the other."
According to this provision, the term is presumed to be for
the benefit of both debtor and creditor, and, therefore,
debtor cannot make payment before the time stipulated,
without the consent of the creditor. The presumption, of
course, is rebuttable. Osorio vs. Salutillo, 87 Phil. 356.
KParticular Words and Phrases
When contract referred to whole lot, not to a part thereof.
The appellants have adopted the theory that the
expressions "where it is constructed," "wherein the house is
constructed," and "where it stands," found in conditions (a)
and (b) hereinbefore quoted, convey the idea that the
appellee was to remain in possession only of the portion
361
VOL. 36, DECEMBER 18, 1970 361

covered by his house. This is untenable, considering that, if

it was so intended, the parties would have employed the
term "portion" or "part," instead of the word "lot," especially
in view of the fact that the property which was the subject
matter of the decision of May 27, 1947, was a parcel of
residential land containing an area of about 409.62 square
meters, and in view of appellants' admission that, at the
time of the signing of the amicable settlement, said lot was
not subdivided. David vs. Castro, 89 Phil. 310.
Inclusion of "afteracquired properties."The stipulation
in a mortgage contract that properties, which the
mortgagor may acquire, construct, install, attach or use in
its lumber concession, shall be subject to the mortgage lien
is a common and logical provision in cases where the
original properties mortgaged are perishable or subject to
inevitable wear and tear or were intended to be sold or
used but with the understanding that they would be
replaced with others to be thereafter acquired by the
mortgagor. Such a stipulation is lawful and not immoral
and is intended to maintain, insofar as possible, the
original value of the properties given as security. People's
Bank and Trust Co. vs. Dahican Lumber Company, 20
SCRA 84.
LMiscellaneous
Contract for services referring to assessed value of
property is subject to litigation.Reyes vs. De la Cruz, L
12729, March 30, 1959.
Ambiguity in contract resolved against party causing

ambiguity.Another aspect of the case bears
consideration. It was the plaintiffappellant who prepared
the contract for services. Being a lawyer, he knew the
meaning and value of every word or phrase used in said
contract. If the parties, including himself, really had in
mind not the assessed value but the market value, it would
have been so easy for him to have used and inserted said
phrase, "market value," in order to remove and avoid all
ambiguity and uncertainty. We reproduce with favor what
the lower court said on this point:
362

"It has been proven that the plaintiff himself was the person who
prepared the document, Exhibit A. Therefore, if there is any
ambiguity or obscurity in the interpretation and meaning of said
contract, the same 'shall not favor the party who caused the
obscurity.' (Art. 1377 of the Civil Code corresponding to Art. 1288
of the Spanish Civil Code of 1889) Yatco vs. El Hogar Filipino, 67
Phil. 610 Calanoc vs. Phil.American Life Ins. Co., 52 O.G. 191,
192."
Reyes vs. De la Cruz, 105 Phil. 372.

Ambiguity in compromise agreement.There is, to be
sure, ambiguity in the provision of the compromise
agreement in question as a result of the explanatory clause
("that is, to make such real estate purchase and to course
the same to the plaintiff as realtor") inserted after the
phrase "should he fail thereof" which follows the statement
of appellee's obligation. But following the rule that
ambiguities or obscure clauses in contracts cannot favor
the one who has caused them (Art. 1377, New Civil Code)
and it appearing that the compromise agreement was
drawn by appellant through his counsel, with the
paragraph in dispute creating an obligation in his favor,
the ambiguity found therein must be construed in favor of
herein appellee. (H.E. Heacock Co. vs. Macondray & Co., 42
Phil. 205 Asturias Sugar Central vs. The Pure Cane
Molasses Co., 57 Phil. 519 Halili vs. Lloret, 50 O.G. 2493.)
Ildefonso vs. Sibal, 106 Phil. 287.
Ambiguity in bond construed against surety company.
If it should be argued that the stipulation could be
interpreted either as a condition precedent only, or as both
condition precedent and prescription, then we would hold:
it appearing that the bond was executed in a form prepared

by the surety company, any ambiguity in the document
must be interpreted against it (Art. 1288, C.C., Heacock vs.
Macondray, 42 Phil. 205). Pao Chuan Wei vs. Nomorosa,
103 Phil. 57.
When 3month period in surety bond was construed as
establishing a condition precedent, not a limitation of
action.Id.
Written agreement prevails over supposed
understanding.
363
VOL. 36, DECEMBER 18, 1970 363

In defendantappellant's first assignment of error, it is

claimed that the contemporaneous act of the defendant
appellant in paying the taxes under Section 142(d) of the
National Internal Revenue Code, showed that it was the
intention of the parties that defendantappellant should
only pay for such taxes. We find no merit in this contention
because the agreement expressly provides that the buyer
should pay any and all taxes for both denatured and
refined alcohol, which agreement is inconsistent with the
alleged understanding. Canlubang Sugar Estate vs.
Standard Alcohol Co. (Phil.), Inc., 103 Phil. 1113 (unrep.).
Interpretation of contract for sale of goods in mass.
Invoice No. 7770 of the Surplus Property Commission
dated 28 May 1948 (Appendix A, Exhibits C & 2) which
recites
"Sold to: MR. FERNANDO VILLAABRILLE 27 Victory, Manila

All movable goods located at CMD3 Area, Samar Naval Base,
Guiuan, Samar, consisting more or less of the following: 21
Revolving Cranes, etc."
could and can have no other meaning than that "all

movable goods located at CMD3 Area, Samar Naval Base,
Guiuan, Samar," were sold to the appellee VillaAbrille.
The phrase "consisting more or less of the following"
followed by enumeration of articles sold does not mean that
whatever excess article or articles not included in the
enumeration is not included in the sale to the appellee
VillaAbrille and may be sold to another bidder by the
Surplus Property Commission. This interpretation is in
consonance with article 6 of the terms and conditions of the
sale appearing at the back of Surplus Property Commission

Invoice No. 7770. Tomassi vs. VillaAbrille, 104 Phil. 310.
Interpretation of contract by Commissioner of Customs
has persuasive value.While the interpretation of the
agreement above given by the Commissioner of Customs is
not binding upon the courts, same has persuasive value.
Sun Bros. & Co. vs. Manila Port Service, 107 Phil. 988.
364

When words of contract appear contrary to evident intention

of parties, latter prevails.The mere mention of Lot No.
1357 in the contract to sell, the final deed of sale and the
certificate of title in favor of the herein petitioner is not
conclusive that the property sold to him is the lot located at
barrio Bagbag. For as has been elucidated, the parties
meant Lot 1155 at the poblacin. Article 1370 of the Civil
Code provides that if the words in a contract appear to be
contrary to the evident intention of the parties, the latter
prevails over the former. Bijis vs. Legaspi, 107 Phil. 512.
General description in chattel mortgage after
enumeration of specific articles construed.We may notice
in the agreement, moreover, that the phrase in question is
found after an enumeration of other specific articles. It can
thus be reasonably inferred therefrom that the "furniture,
fixtures and equipment" referred to are properties of like
nature, similarly situated or similarly used in the
restaurant of the mortgagor located in front of the San
Juan de Dios Hospital at Dewey Boulevard, Pasay City,
which articles can be definitely pointed out or ascertained
by simple inquiry at or about the premises. Note that the
limitation found in the last paragraph of Section 7 of the
Chattel Mortgage Law on "like or substituted properties"
makes reference to those "thereafter acquired by the
mortgagor and placed in the same depository as the
property originally mortgaged," not to those already
existing and originally included at the date of the
constitution of the chattel mortgage. A contrary view would
unduly impose a more rigid condition than what the law
prescribes, which is that the description be only such as to
enable identification after a reasonable inquiry and
investigation. Saldaa vs. Phil. Guaranty Co., Inc., 106
Phil. 919.
Exception on contract of sale in public instrument
equivalent to delivery.Here there has been not only actual
but constructive delivery of the property. Actual because,

as already said, when the contract of sale was entered into,
a portion of the building was already actually occupied by
defendant as lessee, which possession was converted
365
VOL. 36, DECEMBER 18, 1970 365

into that of owner from the date of the execution of the

sale. And, then, as the contract was made through a public
instrument, that is also equivalent to delivery of the
property, if from the contract the contrary does not appear.
Here not only nothing to the contrary appears, but it could
be inferred that the intention was to transfer the
ownership of the building immediately.
Thus, the law provides that the parties may stipulate
that the ownership of the thing shall not pass to the
purchaser until he has fully paid the stipulated price (Art.
1478, new Civil Code). Here no such stipulation appears in
the contract. The fact that it was agreed that the balance of
the purchase price shall be paid upon approval and release
of the facility loan to be applied from the ACCFA does not
evince a contrary intention. In the absence of such
stipulation, the general rule embodied in Article 1477
should apply. The exception shall be strictly construed
(Francisco, Statutory Construction, 1950 ed., p. 304 citing
69 CJ sec. 643, pp. 10921093). Tan Boon Diok vs. Aparri
Farmers' Cooperative Marketing Association, Inc., 108 Phil.
1181 (unrep.).
Proviso in arrastre contract construed.A proviso
(provided that such claim, etc.) refers to the clause or
distinct portion of the enactment which immediately
precedes it (82 CJS 887) and restricts the general operation
of the enacting part of the section to which it is attached or
of the matter which precedes it. (Sutherland Statutory
Construction, Vol. II, 3rd ed., pp. 469, 470 and 474.)
The matter which precedes the proviso here discussed is
the suit against the contractor, and the enacting part to
which it (proviso) is attached, directs that "the contractor
shall be released from x x x liability unless suit x x x is
brought within a period of one year etc." The proviso could
not have referred to "or from the date when the claim for
the value of such goods have been rejected," because that
portion is incomplete, expresses no directive, constitutes no
enactment to be restricted by such proviso. Consunji vs.
Manila Port Service, L15551, Nov. 29, 1960.
366

Literal meaning of stipulations in contract are controlling if

terms thereof are clear.The law provides that if the terms
of a contract are clear and leave no doubt regarding the
intention of the contracting parties, the literal meaning of
its stipulations shall control. (Art. 1370 of the New Civil
Code 1281 of the old Civil Code). The contract executed by
respondent Pacific Commercial Co. provides: "That for and
in consideration of the sum of Four Thousand Pesos
(P4,000.00) x x x the Pacific Commercial Company hereby
sells, transfers, conveys and quit claims unto Ramon
Lacson, x x x all its right, title to and interests in the
parcels of land described as follows x x x." Petitioner
however, argues that the insertion in the deed of sale of the
clause "That on or about August 23, 1939, the Pacific
Commercial Co. obtained a judgment in its favor and
against Ramon Lacson x x x in Civil Case No. 11525 of the
CFI of Iloilo x x x and that by virtue of the judgment in
Civil Case No. 11525 aforesaid writ of execution was issued
and the Provincial Sheriff levied upon the parcels of land
and on the sugar quota allocated to Hda. Sta. Maria x x x"
all that the judgment had decreed in favor of respondent
company in said Civil Case No. 11525 was included in said
transfer. We do not share the view taken by the petitioner.
The above clause was merely inserted in the deed to trace
the source of the rights, title to and interests in the parcels
of land. Lacson vs. Court of Appeals, 109 Phil. 462.
Clear terms of contract cannot be changed by
interpretation.These two instruments are very clear in
their terms, where duly signed by both parties in the
presence of two witnesses and acknowledged before a
notary public and recorded. We see no reason whatever for
varying the terms thereof. (60 Phil. 157). Belisario vs. Vda.
de Zulueta, 98 Phil. 990 (unrep.).
Where there is a clerical error.It seems clear to us that
the writing of the figure 15% in the above clause as the
percentage to be retained by the lessee is a plain clerical
mistake, the said 15% being therein described as the share
of the rent corresponding to the lessee as
367
VOL. 36, DECEMBER 18, 1970 367
coowner, and there is no question that as there were four

coowners, each should be entitled to 25% of the rent.
Nothing appears in the contract denoting any intention to
reduce Arencio Palacio's share to 15% in consideration of
the fact that the common property was leased to him, and
no plausible reason has been given why such reduction
should be made. We find no merit in the suggestion that
the said reduction may have been due to the fact that the
price of copra was high at the time the lease was made, for
no such idea is intimated in the contract and the contract
already provides for an automatic increase of rent to
specified figures in cases of rise in the price of copra. In
short, a reasonable interpretation of the clause demands
that the "15%" therein written should be read as "25%" this
being the true percentage to be retained by the lessee as
his share of the rent as coowner.
x x x We think it sufficient that two of the coowners and
lessors have concurred in the lessee's interpretation of the
clause in question that the amount the lessee was to retain
from the rental is "25%" the share corresponding to him as
coowner, and not 15% as erroneously written in the said
clause. This interpretation they have expressed not only in
their letter to the lessee but also in their answer filed by
them in court. Palacios vs. Palacios, 98 Phil. 991 (unrep.).
Ambiguous terms of insurance policy are construed
strictly against insurer.While, as a general rule, "the
parties may limit the coverage of the policy to certain
particular accidents and risks or causes of loss, and may
expressly except other risks or causes of loss therefrom" (45
C.J.S. 781782), however, it is to be desired that the terms
and phraseology of the exception clause be clearly
expressed so as to be within the easy grasp and
understanding of the insured, for if the terms are doubtful
or obscure the same must of necessity be interpreted or
resolved against the one who has caused the obscurity. (Art
1377, new Civil Code.) And so it has been generally held
that the "terms in an insurance policy, which are
ambiguous, equivocal or uncertain x x x are to be construed
strictly in favor of the
368

insured and most strongly against the insurer, and

liberally in favor of the insured so as to effect the dominant
purpose of indemnity or payment to the insured, especially
where a forfeiture is involved." (29 Am. Jur. 181) The
reason for this rule is that the "insured usually has no
voice in the selection or arrangement of the words
employed and that the language of the contract is selected
with great care and deliberation by experts and legal
advisers employed by, and acting exclusively in the interest
of the insurance company." (44 C.J.S. 1174.) Calanoc vs.
Court of Appeals, 98 Phil. 79.
Ambiguity of policy construction and interpretation.
By reason of the exclusive control of the insurance
company over the terms and phraseology of the contract,
the ambiguity must be held strictly against the insurer and
liberally in favor of the insured, specially to avoid a
forfeiture (44 C.J.S. 11661175 29 Am. Jur. 180).
"Insurance is, in its nature, complex and difficult for the
laymen to understand. Policies are prepared by experts
who know and can anticipate the bearing and possible
complications of every contingency. So long as insurance
companies insist upon the use of ambiguous, intricate and
technical provisions, which conceal rather than frankly
disclose, their own intentions, the courts must, in fairness
to those who purchase insurance, construe every ambiguity
in favor of the insured." (Algoe vs. Pacific Mut. L. Ins., 91
Wash. 324, L.R.A. 1917A, 1237) "An insurer should not be
allowed, by the use of obscure phrases and exceptions, to
defeat the very purpose for which the policy was procured."
(Moore vs. Aetna Life Ins. Co., L.R.A. 1915D, 264). Qua
Chee Gan vs. Law Union and Rock Insurance Co., Ltd., 98
Phil. 85.
Contractual limitations in insurance.We may state
that contractual limitations contained in insurance policies
are regarded with extreme jealousy by courts, and will be
strictly construed against the insurer and should not be
permitted to prevent a recovery when their just and honest
application would not produce that result (46 C.J.S. 273)
Eagle Star Insurance Co., Ltd. vs. Chia Yu, 96 Phil. 696.
369
VOL. 36, DECEMBER 18, 1970 369

Consideration of love and affection is not the criterion in

determining kind of donation.Howard vs. Padilla, 96
Phil. 983 (unrep.).
Donation mortis causa.Analyzing carefully the

provisions of the donation in question, we would at once
notice that the intention of the donor is not to transmit the
ownership of the property donated immediately to the
donee because of certain reservations and conditions
contained therein, while on the other hand, some of the
characteristics we have pointed above are clearly
discernible. Thus, we note that in the third paragraph of
the donation the donor employs the words "to take effect
after his death," while in paragraph one of the conditions
therein enumerated, we find the following: "This donation
shall produce effect only by and because of the death of the
donor, the property herein donated to pass title after the
donor's death." These phrases are very significant. They
connote only the thing: the intention to transfer ownership
after the death of the donor. As we have already stated,,
those words or phrases should be given their ordinary
meaning or connotation unless the donation contains some
qualifying and modifying provisions that may alter their
meaning, and here there is none. If at all what we find is
something which further strengthens our conclusion that
such is the unmistakable intent of the donor as shown by
the inclusion of a condition in the donation naming the
donee as his true and lawful attorney with express
authority to sell or otherwise dispose of the property "in the
name of the donor," this is a characteristic which negatives
any idea of immediate transfer of ownership. It evinces an
intention to retain the ownership of the property during
the lifetime of the donor. This is a clear indication that the
donation in question is mortis causa or one to take effect
after death. Id.
Determination of whether donation is inter vivos or
mortis causa.To our mind, the main consideration to be
borne in mind in determining if a donation is inter vivos or
mortis causa is: Did the donor intend to transfer the
ownership of the property donated upon the execution of
370

the donation? If this is so, as reflected from the provisions

contained in the donation, then it is inter vivos, otherwise it
is merely mortis causa, or one made to take effect after
death. In this connection, what this Court has said in a
recent case as to how a donation should be interpreted is
interesting (Heirs of Juan Bonsato, et al. vs. The Court of
Appeals, et al., L6600). There we said that if the donation

is mortis causa the document should reveal any or all of the
following characteristics: (1) Convey no title or ownership
to the transferee before the death of the transferor or,
what amounts to the same thing, that the transferor should
retain the ownership (full or naked) and control of the
property while alive (Vidal vs. Posadas, 58 Phil. 108
Guzman vs. Ibea, 67 Phil. 633) (2) That before his death,
the transfer should be revocable by the transferor at will,
ad nutum but revocability may be provided for indirectly
by means of a reserved power in the donor to dispose of the
properties conveyed (Bautista vs. Sabiniano, L4326,
November 18, 1952) (3) That the transfer should be void if
the transferor should survive the transferee.'' Id.
Increase of amount of rental.Paragraph 4 of Annex A
explicitly declares that "the price of the lease shall be
twelve (12%) percent annually net of the assessed value" of
the leased property. Consequently, the rental was meant to
bear said proportion to the assessed value, whether the
same was increased or reduced. The succeeding clause,
"which parcel of land is now assessed at P41,330, for the
year 1946," does not limit the above quoted sentence,
immediately preceding the same. The words "now" and "for
the year 1946" clearly imply that said clause merely
indicates the exact amount upon which the rental at the
beginning of the lease, in 1946 shall be computed. The
aforesaid clause does not propose to establish a fixed
rental, for, otherwise, it would have simply stated that, for
purposes of computation of the rental, the property leased
was assessed at P41,330. In fact, it would have been
unnecessaryif the lessee's theory were correct, and it isn't
to fix the basis for said computation. Instead, the par
371
VOL. 36, DECEMBER 18, 1970 371

ties would have stipulated specifically the exact amount of

the rental. Cacho Hermanos, Inc. vs. Prieto, 98 Phil. 980
(unrep.).
9. Form of Contract
Standard Specifications for Highways form part of
contract.Appellant maintains that said Article 98 of the
Standard Specifications for Highways and Bridges does not
form part of his contract with the Government (Exh. D).
This contention is not only groundless, but, also, contrary
to the express provisions of his aforementioned contract,
Exhibit D, Article 1 of which explicitly provides: "That the

advertisement, instructions to bidders, general conditions,
Commonwealth Act No. 138, R.A. No. 76 and Republic Act
No. 602, Specifications, Proposed and Letter of Acceptance
hereto attached, together with the plans relating thereto,
the original thereof are on file in the office of the Highway
District Engineer at Roxas City are hereby made, and
acknowledged by the parties hereto to a part of this
agreement."
Borda vs. Tabalon, 108 Phil. 278.
When contract is partly in writing and partly oral, it is
oral contract.It is generally recognized that to be a
written contract, all its terms must be in writing so that a
contract partly in writing and partly oral is, in legal effect,
an oral contract (Fey vs. Loose Wiles Biscuit Co., 75 P. 2d
810 People vs. Newcomer, et al., 157 NE 240 12 Am. Jur.
550). Manuel vs. Rodriguez, Sr., 108 Phil. 1.
Why statute of frauds is not applicable to executed
contracts.Where a parol contract of sale is adduced not
for the purpose of enforcing it, but as a basis of the
possession of the person claiming to be the owner of the
land, the statute of frauds is not applicable in the same
way that it does not apply to contracts which are either
totally or partially performed upon the theory that there is
a wide field for the commission of frauds in executory
contracts which can only be prevented by requiring them to
be in writing, a fact wihich is reduced to a minimum in
executed contracts because the intention of the parties
372

becomes apparent by their execution. Pascual vs. Realty

Investment, Inc., 91 Phil. 257.
Agreements invalid unless made in writing.The
appellee notes that Section 335 of the Code of Civil
Procedure which is the source of Section 21, Rule 123, has
the caption "Agreements invalid unless made in writing."
He argues that, by inference, the agreements mentioned
therein are valid if in writing. The caption is misleading, as
has been pointed out in Conlu vs. Araneta (15 Phil. 387),
Gallemit vs. Tabiliran (20 Phil. 241), and others, because
the section speaks of evidencenot validity. Anyway, the
caption of Section 21, Rule 123, is actually "agreements
which must be evidenced by writing" which represents the
true principle established by the rule. Now, as a contract
mentioned in the statute of frauds is not per se null and

void simply because it is not written (Conlu vs. Araneta
Gallemit vs. Tabiliran, etc.) it follows converso, that such
contract does not per se become valid simply because it is
written. Bas vs. De los Reyes, 87 Phil. 78.
Sale of land in private instrument is valid.The formal
objection to the deed of sale is of no moment. We agree with
the trial judge that had not this instrument been notarized
at all, the same would have been fully effective as between
the parties under Article 1261 of the Old Civil Code in force
at the time of the conveyance. All the elements of a valid
contract were present: subject matter, capacity and consent
of the parties, and lawful consideration. Soriano vs. Latoo,
87 Phil. 757.
Party who may invoke statute of frauds in a pacto de
retro sale of land.In the first place, the statute of frauds
or Rule 123, Section 21 of the Rules of Court apply only to
executory contracts and only to their enforcement. Both the
extensions of the period of repurchase and the extensions of
the lease contract are no longer executory, because they
have already been performed and consummated. What
plaintiffappellee seeks in this action is not to enforce these
extensions of the period to repurchase and the period of the
lease, but to compel defendantappellant to execute the
corresponding deed of sale by public instrument of the land
373
VOL. 36, DECEMBER 18, 1970 373

sold to her still with the right to repurchase up to 1949, so

that said instrument could be properly registered in the
office of the Register of Deeds, because she discovered that
since 1935 when Agripina received her certificate of title,
the land had become registered land under the provisions
of Act 496 and so all deeds of sale of the same to operate
must be duly recorded. Furthermore, it is for the vendee
and lessor of the property in question rather than for the
defendantappellant vendor and lessee to invoke the
provisions of the statute of frauds, because the former is
the one prejudiced by the extension of the period to
repurchase and the lease. If said vendeelessor chose to
deny or not to recognize the extensions of repurchase and
the lease, for the reason that they were not reduced to
writing, then the sale became absolute and a consolidation
of her title ensued when the defendantappellant vendor
failed to make the repurchase in 1935, 1939 and 1944 as
found by the trial court equally, the lease expired on those

dates when it was not renewed. So that, the appellee
became the absolute owner of the land and could recover
possession of the same from the appellant. For this reason,
we do not quite understand the legal import of the theory of
appellant, but one thing we are sure, that her invoking the
provisions of the statute of frauds is untenable. Cocjin vs.
Libo, 91 Phil. 777.
Where verbal agreement exists between joint tenants.
Here there was no transfer of the homestead or part
thereof at any time after the approval of the application
and before the issuance of the patent. It was a joint
tenancy and both the petitioner and the respondent
occupied, cleared and cultivated the homestead applied for
by the respondent since 1917 or at the latest since 1922. It
is not an alienation or encumbrance "from the date of the
approval of the application and for a term of five years from
and after the date of the issuance of the patent or grant,"
because the joint tenancy came into existence before the
filing of the application, the approval thereof and the
issuance of the grant or patent. It is unfair for the
respondent not to live up to the verbal understanding had
with the petitioner and confirmed by him and his wife
374

in a document executed on 28 January 1930. Gauiran vs.

Sahagun, 93 Phil. 227.
Proof of agreement in consideration of marriage.It will
be perceived that the statute of frauds merely provides for
rules of evidence referring to the form of contracts.
Whereas the above civil law articles (Arts. 1328 and 633)
concern the substantial validity of the contract or
transaction. In other words, by virtue of the statute of
frauds, the agreement in consideration of marriage could
be proved by the memorandum but the effect of such
private writing is governed by the Civil Code. Bas vs. De los
Reyes Vda. de Bas, 87 Phil. 78.
Contracts must appear in a public document.Acts and
contracts, which have for their object the creation,
transmission, modification or extinguishment of real rights
over immovable property, must appear in a public
document. Pornellosa vs. Land Tenure Administration, 1
SCRA 375.
10. Performance
Delay in the performance of reciprocal obligations.The

fact that the petitioner itself purchased various spare parts
both for the sawmill and the landing barges in order to
complete them is a clear admission on its part of its failure
to deliver the sawmill and the barges complete. The
obligation of the party of the first part to deliver the lumber
in exchange for the equipment was to accrue or become due
"thirty days after the installation of the sawmill." But the
delay in said installation is not attributable to the party of
the first part, but to the party of the second part, which
had not complied with its obligation to deliver the
equipment and machinery "in good running condition." The
responsibility for the resulting delay in the delivery of the
lumber may not, therefore, be laid at the door of the party
of the first part but at that of the party of the second part,
which had failed to live up to its obligation. This attempted
modification of the contract, by allowing the party of the
second part to accept surplus materials instead of the
lumber was, to a great extent, the cause
375
VOL. 36, DECEMBER 18, 1970 375

for the belated delivery of the lumber. Philippine

Operations, Inc. vs. Auditor General, 94 Phil. 868.
Impossibility of performing condition of bail bond.It is
the settled law of this class of cases that the bail will be
exonerated where the performance of the condition is
rendered impossible by the act of God, the act of the ob
ligee, or the act of law. People vs. De la Cruz, 93 Phil. 487.
Failure to deliver copra a generic thing due to alleged
force majeure is not excusable.Having this view in mind,
it is apparent that the copra which appellants claim to
have gathered and stored in a bodega at San Ramon,
Samar, sometime in December 1947, in fulfillment of their
contract, and which they claim was later destroyed by
storm, in the supposition that the claim is true, cannot be
deemed to be the one contemplated in the contract. It may
be the one chosen by appellants in the exercise of the
discretion given to them under the contract, which they
could exercise in a manner suitable to their interest and
convenience, but cannot certainly be considered as the
copra contemplated by the parties in the contract. And this
must be so because the copra contemplated in the contract
is generic and not specific. It appearing that the obligation

of appellants is to deliver copra in a generic sense, this
obligation cannot be deemed extinguished by the
destruction or disappearance of the copra stored in San
Ramon, Samar. Their obligation subsists as long as that
commodity is available. A generic obligation is not
extinguished by the loss of a thing belonging to a particular
genus. Genus nunquan perit. Manresa explains the
distinction between determinate and generic thing in his
comment on Article 1096 of the Civil Code of Spain, saying
that the first is a concrete, particularized object, indicated
by its own individuality, while a generic thing is one whose
determination is confined to that of its nature, to the genus
( genero) to which it pertains, such as a horse, a chair.
These definitions are in accord with the popular meaning of
the terms defined. Bunge Corp. vs. Camenforte & Co., 91
Phil. 861.
376

Alleged fortuitous cause is not an excuse for failure to

deliver generic thing.Id.
Where failure to deliver sugar was not excused.In the
case of Tu Tek & Co. vs. Gonzales, 29 Phil. 384, it appeared
that the plaintiff advanced P3,000.00 to defendant in
payment of 600 piculs of sugar. The contract in writing did
not specify that sugar was to come from the crop on
defendant's land which was destroyed. It was held that the
sugar to be sold not having been segregated, the sale was
not perfected and the loss of the crop, even though through
force majeure, did not extinguish defendant's obligation to
deliver the sugar. De Leon vs. Soriano, 87 Phil. 193.
Failure of crops due to Huk troubles is not an excuse for
the nondelivery of the palay stipulated in the contract.
The defendants averred that their failure to pay the exact
quantities of palay promised for 1944, 1945 and 1946 was
due to the "Huk troubles in Central Luzon which rendered
impossible full compliance with the terms of the
agreement" and it was contended that "inasmuch as the
obligations of the defendants to deliver the full amount of
the palay is depending upon the produce as this is in the
nature of an annuity, * * * the obligations of the defendants
have been fully fulfilled by delivery in good faith all that
could be possible under the circumstances." Except as to
quantity and quality, the first of which is itself generic, the
contract sets no bounds or limits to the palay to be paid,

nor was there even any stipulation that the cereal was to
be the produce of any particular land. Any palay of the
quality stipulated regardless of origin or however, acquired
(lawfully) would be obligatory on the part of the obligee to
receive and would discharge the obligation. It seems
therefore plain that the alleged failure of crops through
alleged fortuitous cause did not excuse performance. Id.
Failure to comply with contract of lease by reason of war.
It, therefore, appears that the failure of appellee to
comply with the terms of the contract not only for the
377
VOL. 36, DECEMBER 18, 1970 377

cropyear 19411942 but also for the other crop years

covered by the enemy occupation is due to war, or to its
effects, and to other factors which would not have been
foreseen or avoided by appellee, which in the light of the
authorities and precedents on the matter are deemed to be
sufficient cause to justify the nonfulfillment by the
appellee of the terms of his contract of lease with the
appellants, and to relieve him of all his responsibility
therefor. This is more so if we take into account the fact
that to produce or mill sugarcane at that time was contrary
to public policy as it would be giving aid and comfort to the
enemy and was in violation of a specific order emanating
from our legitimate government to forestall any help that
may be rendered to the enemy in his war effort, it being an
undisputed fact that sugar is essential not only to feed the
enemy but as raw material for fuel to bolster up his war
machine. De Castro vs. Longa, 89 Phil. 581.
Inherent impossibility of selling rental obligation during
wartime.The nonpayment of rent would not work to
rescind the contract. The failure of the lessee to pay rent
during the war was due to impossibility inherent in the
nature of the thing to be performed. In this aspect of the
contract the payment was the very thing promised by the
lessee, the very foundation, the sole consideration of the
contract for the lessor, and the lessee's failure to make good
the promise was due to causes over which it had no control
and for which it was in no manner at fault. The war led to
its officers' incarceration or interment and prevented them
from receiving cash from their principal or from working to
earn money. Reyes vs. Caltex Phil., Inc., 84 Phil. 654.
Failure of contractor to comply with building contract.

The petitioner argues that as the respondent had sold on
credit to the contractor, the principal debtor, construction
materials on a thirtyday basis thereby entering into
another contract with the latter without the surety's
consent, the surety may not presently be charged. There is
no merit to the contention. First, the thirtyday basis is not
378

an accepted fact. And second, as directly stated by the

Court of Appeals, "if the appellee (respondent) had supplied
construction materials and advanced money to appellant
contractor to pay labor and materials, it was to help him
fulfill his part on the contract. Appellant contractor did not
send the building materials and funds to pay the labor as
called for in the contracts. That failure on the part of
appellant contractor was a violation of the contracts, the
performance of which appellant surety company undertook
to guarantee by its bonds." Luzon Surety Co., Inc. vs.
Tamparong, L49161, Dec. 29, 1950.
Where vendee's alleged insolvency did not justify
vendor's default.Abeto and Flores, on the other hand,
contend that they were excused from delivering copra on
November 18, 1946, because the appellee was insolvent, in
that part of the purchase price of the 159,834 kilos of copra
delivered to the appellee remained unpaid, reliance being
placed on articles 1466 and 1467 of the Old Civil Code. The
contention is untenable, it appearing that there is no
conclusive proof showing that Abeto and Flores, in definite
terms, had warned the appellee that they would not deliver
the copra called for in their contract until they were sure of
being paid in accordance with said contract. Moreover, even
assuming that the appellee still owed Abeto and Flores
something upon account of the 159,834 kilos of copra
delivered before November 18, 1948, said fact is not a
positive evidence of insolvency, not to mention the
circumstance that the contract is essentially a cash
transaction, 95% of the purchase price being required to be
paid in cash and only 5% by an irrevocable letter of credit.
Of course, the appellee was not to be expected to tender
payment before the presentation of the documents called
for in the contract, namely commercial invoice, on board
bills of lading, and wage certificate and/or survey report.
Visayan Distributors, Inc. vs. Flores, 92 Phil. 145.
Where factual impossibility did not excuse non

performance.Recalling that the contracts provided for the
construction of a railroad "whenever the contour of the
land, the curves, and elevations permit the same," and that
such
379
VOL. 36, DECEMBER 18, 1970 379

then arises if the defendant can excuse itself on this

ground, or if the plaintiff can recover from the defendant
for damages for breach of contract, through inability to mill
cane. It is elemental that the law requires parties to do
what have agreed to do. If a party charges himself with an
obligation possible to be performed, he must abide by it
unless performance is rendered impossible by the act of
God, the law or the other party. A showing of more
inconvenience, expected impediments, or increased
expenses is not enough. Equity cannot relieve from bad
bargains simply because they are such. So one must
answer in damages where impossibility is only so in fact.
(Thoroborow vs. Whitacre, 2 Ld. Raym. [1164], 92 E.R. 270
Reid vs. Alaska Packing Co. [1903], 43 Or. 429 Columbus
Ry & Power Co. vs. Columbus [1919], 249 U.S. 399.) De
Castro vs. Longa, 89 Phil. 581.
Failure to sell five booklets.Under the contract, it was
the duty of the plaintiff to buy five booklets if she wanted
to win the award offered by the defendant prior to the
closing date of the sales of the tickets. She knew, as it is to
be expected, that the tickets may be sold out in no time and
must have taken the necessary precaution to insure herself
of the required number of tickets. This is her own lockout.
If she fails to take this precaution and the tickets are all
sold out before the closing date, she alone can be blamed.
This is the only reasonable interpretation that can be given
to the requirement of the contract that the agent must
purchase "no less than five booklets of tickets before the
close of sales of tickets each draw." Atienza vs. Philippine
Charity Sweepstakes, 90 Phil. 478.
Where vendor failed to prove that he could deliver the
stipulated copra.Abeto and Flores contend that they had
the copra called for in their contract with the appellee on
November 18, 1946, but that they refused to deliver the
same on the ground that the appellee was insolvent and
failed to guarantee the payment of the purchase price by a
letter of credit called for in the contract,a contention
380

also availed of by the Surety. It is very significant,

however, that Abeto and Flores had not made in their
answer even the slightest hint that they had copra in the
port of Romblon on November 18, 1946. Upon the other
hand, they merely invoked the defense that the contract of
November 9, 1946, was cancelled by another agreement
made on November 22, 1946, calling for the delivery of only
500 tons of copra, and that, at any rate, their failure to
comply with the contract of November 9, 1946, was excused
by force majeure (the abrogation of the copra trade
agreement between the U.S. and the Philippines). Even in
their letter to counsel for the appellee (Exhibit 1), Abeto
and Flores absolutely failed to mention the alleged fact
that they had the necessary quantity of copra on the date
specified in their contract. Visayan Distributors, Inc. vs.
Flores, 92 Phil. 145.
Period within which obligation to construct streets on
land occupied by squatters would be performed.Where
the seller obligated itself to construct streets around the
perimeter of the land sold (site of the Santo Domingo
Church in Quezon City) and the parties were aware that
the land, on which the streets would be constructed, was
occupied by squatters, the time for the performance of the
seller's obligation should be fixed at the date that all the
squatters on the affected areas are finally evicted
therefrom. While this solution would render the date of
performance indefinite, still the circumstance of the case
admit of no other reasonable view. This very indefiniteness
explains why the contract did not specify any exact period
of performance. The ruling that the obligation should be
performed within two years is not warranted. Gregorio
Araneta, Inc. vs. Phil. Sugar Estates Development Co., Ltd.,
20 SCRA 330.
11. Renewal and Extension
Tacit renewal of lease.Tacit renewal (tcita reconduccin)

is not a contract without term entered into by the parties,
but an implied renewal of a previous contract.
381
VOL. 36, DECEMBER 18, 1970 381

A tacit renewal takes place only if before the expiration of

fifteen days after the expiration of the term of a previous
contract of lease, no demand to recover the possession of
the property leased from the tenant has been made by the
landlord or lessor. There can not be a tacit renewal without
a prior contract. Ledesma vs. Pictain, 79 Phil. 95.
Renewal of stockbroker's bond.The surety of the brok
er in the present case informed the Director of Commerce
that "the term of said bond is hereby renewed for another
period of one year from October 26, 1935 to October 26,
1936." It is evident that the surety considered the renewal
an accomplished fact. The letter of the Director of
Commerce did not object to the renewal, but merely wanted
a compliance with the formal requisite, that is, that the
original and a duplicate be filed with his office. Held: That
these letters sufficiently complied with the legal requisites
for the continuance of the terms of the original bond. The
renewal was perfected through these letters. Form is
generally not necessary for the binding force of a contract,
a meeting of the minds being sufficient. In this case, the
bond need not be in a public instrument, but any writing is
sufficient. Director of Bureau of Commerce vs. Rodriguez,
74 Phil. 33.
Extension of contract of lease by court.But defendant
claims that the trial court should have at least extended
his contract of lease for a reasonable period as a matter of
equity to enable him to recover the losses he had sustained
through the fault of the plaintiffs. However, the trial court
cannot possibly grant the extension requested, first
because under the lease contract the period of lease can
only be renewed for another year upon mutual agreement
of the parties, which is sadly lacking here, and, second,
because defendant himself volunteered to return the Burke
Building to the plaintiffs, reserving to himself only that
portion which he was actually occupying. Desbarats vs. De
Vera, 88 Phil. 762.
12. Novation
Novation of contract.Appellant's suggestion that the
382

promissory note in question was novated in August 1948,

in that the appellee promised to pay in 1950 and to put up
securities, deserves no serious consideration. The
complaint is based on the note executed on August 16,
1939, and makes no mention whatsoever of the alleged
novation. The suggestion, made for the first time in
appellant's opposition to the motion to dismiss, is obviously
an afterthought. Aranzanso vs. Martinez, 88 Phil. 536.
Novation of contract of sale.Where the compromises
agreed upon by the parties failed to materialize because the
plaintiffs changed their mind and declined to accept the
sum agreed upon in the amicable settlement, the original
contract of sale of property subject to some conditions has
been novated and has ceased to be binding upon the
parties. Litton vs. Luzon Surety Co., Inc., 90 Phil. 783.
Where pacto de retro sale was novated.Our conclusion
that there was novation of the contract pacto de retro sale
in 1932 when plaintiffs secured the title to the property
and defendant acquiesced in such issuance of title, his right
being limited to an option to repurchase the property
within a fixed period, renders consideration of the errors
assigned unnecessary. If plaintiffs became owners of the
land in 1932 and defendant a mere lessee with option to
buy, certainly the provisions of the new Civil Code may not
be invoked in his favor. Cojuangco vs. Gonzales, 93 Phil.
718.
Novation does not require a special form.Id.
13. LiabilitiesPenalty, Interest, Etc.
Duty to minimize damages.An obligee is in duty bound to

minimize the damages for which he intends to hold any
obligor responsible. A party injured by a breach of contract
cannot recover damages for any loss which he might have
avoided with ordinary care. Coco Planters Investment Corp.
vs. Banayo, L8069, June 23, 1942.
Liability beyond the limit fixed in contract.The
doctrine of quasicontract invoked by the Court of Appeals
383
VOL. 36, DECEMBER 18, 1970 383

does not apply, for here there is an express contract by

which Mrs. Tangco has set a limit to her liability at
P45,000, later increased by P1,300 for extra work done at
her request. To extend her liability beyond this limit, some
thing more than what appears in the findings of fact of the

Court of Appeals would be necessary, such as, among other
things, Mrs. Tangco's consent to the doing of the extra work
and knowledge on her part that the contractor expected
payment for the same. Tangco vs. Court of Appeals, 89 Phil.
395.
Penal clause of contract strictly construed.As regards
the penal clause contained in the two deeds of mortgage
herein involved, we agree to the following finding of the
Court a quo: "The attempt made by the plaintiff to pay the
obligation before the arrival of the term fixed for the
purpose may be wrong but it may be attributed to an
honest belief that the term was not binding and not to a
desire to modify the contract." This penal clause should be
strictly construed. Ponce de Leon vs. Syjuco, Inc., 90 Phil.
311.
Forfeiture not favored in law or equity.It is hardly
reasonable to say that the appellant would be negligent in
making the deposit in court of the rental for the month of
May, knowing that by such neglect and under one view
entertained by some members of the Court, they were going
to lose not only the possession of the lot but also that of
their new seventyfivethousandpeso building, including
title thereto or, under the other view, that the (appellants)
would be ordered to tear the building down and remove the
materials, both of which alternative would be extremely
onerous. Besides the loss of the building in favor of the
appellees would be equivalent to a forfeiture, and
forfeitures are not favored either in law or in equity. A
forfeiture cannot be had on grounds other than those
specified in the contract. (17 C.J.S. Sec. 407, pp. 894896.)
Yu Phi Khim vs. Amparo, 86 Phil. 441.
Payment of interest must be expressly stipulated.No
interest is due unless it is expressly stipulated (Art. 1755,
384

Civil Code). As under the contract the lender took

possession of the lands and reaped the fruits thereof, it
must have been thought by the parties that it was unfair to
make the borrower pay interest in addition. Velez vs.
Balzanza, 73 Phil. 630.
Penalty takes place of interest.Where the penalty is to
be paid if and when the mortgagor pays the mortgage
before the expiration of the fouryear period provided in the
mortgage contract, the penalty is designed to take the place

of the interest which the creditor would be entitled to
collect if the duration of the mortgage has not been cut
short and from which interest the debtor has been relieved.
Gregorio Araneta, Inc. vs. De Paterno, 91 Phil. 787.
If principal obligation is void, then penal clause is also
void.The principal obligation being void, the accessory
obligation, namely, the penal clause sought to be enforced
by the plaintiff is void. The nullity of the principal
obligation carries with it that of the penal clause. The
penal clauses in question being void because of the
invalidity of the principal contract of lease, and considering
that the defendant cannot be held to have confirmed these
contracts because they were not susceptible of
confirmation, it is clear that the parties should be left
where they are. The courts will aid neither of them to
enforce any stipulation in these contracts. Municipality of
Hagonoy vs. Evangelista, 73 Phil. 586.
Indemnity for the violation of terms of the mortgage.
The aforementioned acts of the defendant have inured to
the benefit of the plaintiff, Ernest Berg. It is clear,
however, that such acts could not have been understood by
the parties to the deed of mortgage as a "violation" of the
rights of the mortgage. Hence, the special indemnity
stipulated in said deed, for the event of violation thereof,
could not have been intended to apply to a situation like
the one under consideration. Berg vs. Teus, 96 Phil. 102.
Where selling price of land was not unconscionable and
clause was enforced.Petitioners also contend that as the
385
VOL. 36, DECEMBER 18, 1970 385

assessed value of the land in 1939, when the contract was

celebrated, was P4,281, the selling price of P3,000, agreed
upon is unconscionable and therefore, the penal clause
should be considered as not written, and petitioners should
be allowed to exercise the right to repurchase on equitable
considerations. And in support of this contention, counsel
presented evidence to show that the market price of the
land in 1940, the year the period of redemption was
supposed to expire, was fourteen times more than the
money paid for it by respondent such that, if that should be
taken as basis, the value of the land would be P43,004.50.
While this contention may have some basis when
considered with reference to an absolute contract of sale, it
loses weight when applied to a contract of sale, with pacto

de retro, where the price is usually less than in absolute
sale for the reason that in a sale with pacto de retro the
vendor expects to reacquire or redeem the property sold.
Another flaw we find is that all the evidence presented
refers to sales which were executed in 1940 and 1941 and
none was presented pertaining to 1938, or its
neighborhood, when the contract in question was entered
into. And the main reason we find for not entertaining this
claim is that it involves a question of fact and as the Court
of Appeals has found that the price paid for the land is not
unreasonable as to justify the nullification of the sale, such
findings, in an appeal by certiorari, is final and conclusive
upon this court. Amigo vs. Teves, 96 Phil. 252.
Liability for risks not enumerated in the contract.The
failure of the defendant insurance company to include
death resulting from a boxing match or other sports among
the prohibitive risks leads to the conclusion that it did not
intend to limit or exempt itself from liability for such
death. (Brams vs. New York Life Ins. Co., 299 Pa. 11, 148
Atl. 855 Jolley vs. Jefferson Standard Life Ins. Co., 95
Wash. 683, 294 Pac. 585.) De la Cruz vs. Capital Ins. &
Surety Co., Inc., 17 SCRA 559.
386

14. Annulment and Rescission
AAnnulment
Parties in action for annulment of contract.Failure to

state a cause of action may be asserted at any stage of the
proceedings but not later than the trial. (Moran, Comments
on the Rules of Court, 3rd ed., Vol. 1, p. 172 citing De Jesus
vs. Manglapus, L527, May 28, 1948). It is here beyond
question that the defense of failure to state a cause of
action was not pleaded in any motion to dismiss, in the
answer filed in the trial court, or at any time during the
trial neither was it raised in the brief filed for respondent
Dimaguiba in the Court of Appeals, and the point was
brought up for the first time during the oral argument in
the Court of Appeals. By express mandate of Section 10 of
Rule 9, said defense was waived, and the Court of Appeals
therefore erred in basing its decision of affirmance upon
the fact that the petitioners are not the proper parties who
may seek the annulment of sales in question. Reyes vs.

Court of Appeals, 95 Phil. 952 (unrep.).
Who may bring an action for annulment.He who is not
a party to a contract, or an assignee thereunder, or does not
represent those who took part therein, has under Articles
1257 and 1302 of the Civil Code no legal capacity to
challenge the validity of such contract. Concepcion vs. Sta.
Ana, 87 Phil. 787.
Mistake of law does not render contract voidable.
Mistake of law does not make a contract voidable, because
ignorance of the law does not excuse anyone from its
compliance (Art. 2, Civil Code 8 Manresa, 646, 24 ed.).
That the petitioners did not know the prohibition against
partition of the conjugal partnership property during
marriage (Art. 1432, Civil Code), is no valid reason why
they should ask for the annulment of the sales made in
Exhibits C and D and recognized in Exhibit 1. De Luna vs.
Linatoc, 74 Phil. 15.
Where mistake did not vitiate sale.The defendant
387
VOL. 36, DECEMBER 18, 1970 387

bought a specific article and agreed to pay P3,200 for it.

The fact that the article is not as large as he thought it was
does not relieve him from the necessity of paying that price.
It was just such cases as this that Article 1471, paragraph
1 of the Civil Code was intended to cover. If the defendant
intended to buy a meter, he should have so stated in the
contract. (Goyena vs. Tambunting, 1 Phil. 490). Vda. de
Gonzales vs. Santos, 87 Phil. 471.
Evidence as to mistake of one of the parties.Contracts
solemnly and deliberately entered into may not be
overturned by inconclusive proof or by reason of mistakes
of one of the parties to which the other in no way has
contributed. Id.
At any rate, her error, if any, was an error of law which
ordinarily does not vitiate contractual consent.Vda. de
Villacorta vs. Mariano, 89 Phil. 342.
Where contract is void there is nothing to annul.It
appearing that the sale made by the deceased to the
defendant is alleged to be fictitious, with absolutely no
consideration, it should be regarded as a nonexistent, not
merely a null contract. And there being no contract
between the deceased and the defendants, there is in truth
nothing to annul by action. The action brought cannot thus
be for annulment of contract, but is one for recovery of a

fishpond, a real action that should be, as it has been
brought in Pampanga, where the property is located.
Pascual vs. Pascual, 73 Phil. 561.
Remedy under Rule 38 to set aside agreement.Where
the agreement to vacate the lot in question was entered
into by the petitioner against his will, he should have
availed himself of the remedy so provided by Rule 38 to
annul the same instead of resorting to petition for
certiorari and prohibition. Flores vs. Palacio, 83 Phil. 626.
Where there was a mere error, not a deliberate
misrepresentation in a contract of sale.Respondents'
allegation that the petitioner violated the contract of the
sale with the Philippine Shipping Administration on the
ground of
388

misrepresentation, petitioner having alleged in said

contract that his father was a naturalized Filipino, is
without merit. Such was not a deliberate misrepresentation
but an error which any person not versed in the law is
prone to commit. It is clear that petitioner merely meant
that his father was a Filipino citizen by operation of law
and not by birth. Chiongbian vs. De Leon, 82 Phil. 771.
Misrepresentation in the execution of contract of sale.
Pilar Bautista is admittedly an intelligent woman with
business experience, and it is fair to assume that she would
not sign the deed of sale covering her property of
considerable size and value without ascertaining its terms
and conditions. Indeed, there is enough evidence on record
to show that Pilar not only read the document herself but
called her daughter to read it aloud, even before the
signing of the contract in the office of the Register of Deeds
of Manila, but this assertion seems to be more unlikely
than the theory of the defendants, considering, as already
stated, her intelligence and business experience. At any
rate, as aptly pointed out by the defendants, the alleged
misrepresentation could not have been decisive in the
execution of the deed of sale, the material and important
factor undoubtedly being the adequacy of the price offered
and paid and there is no controversy on the latter point.
Bautista vs. Isabelo, 93 Phil. 843.
Fraud that would vitiate contract.It must be noted
that fraud is manifested in illimitable number of degrees or
gradations, from the innocent praises of a salesman about

the excellence of his wares to those malicious machinations
and representations that the law punishes as a crime. In
consequence, Article 1270 of the Spanish Civil Code
distinguishes two kinds of (civil) fraud, the causal fraud,
which may be a ground for the annulment of a contract,
and the incidental deceit, which only renders the party who
employs it liable, for damages. This court has held that in
order that fraud may vitiate consent, it must be the causal
(dolo causante), not merely the incidental (dolo incidente),
inducement to the making of the contract (Art.
389
VOL. 36, DECEMBER 18, 1970 389

1270, Spanish Civil Code Hill vs. Veloso, 31 Phil. 160).

Woodhouse vs. Halili, 93 Phil. 526.
False representation of a party.If he was guilty of a
false representation, this was not the causal consideration,
or the principal inducement, that led plaintiff to enter into
the partnership agreement. Id.
Fraud in execution of contract is incidental matter.Id.
Contract obtained thru fraud.There is no clear
evidence to show that said gifts and payments of money
had actually the effect of persuading Balbina Baguio to
sign a contract which she did not intend to execute, or the
contents of which she was not aware, nor are they of such a
nature that could vitiate a contract which is valid in every
other respect. Preston vs. Surigao Consolidated Mining Co.,
Inc., 92 Phil. 1070 (unrep.).
Action filed by brother to annul contract of sale executed
by his deceased sister.The deceased sister has not
transmitted to her brother any right arising from the
contract of conveyance or sale of her lands to the
defendants, and therefore the brother cannot file an action
to annul such contract as representative of the deceased.
Concepcion vs. Sta. Ana, 87 Phil. 787.
Annulment of contract may be brought only by real
parties in interest.We declared in Cook vs. McMicking (27
Phil. 10): "nullity of a deed or contract may be taken
advantage of only by persons who bear such relation to the
parties to the contract that it interferes with their rights
and interests." Hence, nullity of the extrajudicial partition
may only be invoked by Crispina Deenot by plaintiff. Lim
vs. Dee Hao Kim, 102 Phil. 1171 (unrep.).
Annulment of contract on the ground of duress or

intimidation.In order to cause the nullification of acts
executed during the occupation, the duress or intimidation
must be more than the "general feeling of fear" on the part
of the occupied over the show of might by the occupant.
There must be specific acts or instances of such nature and
magnitude as to have, of themselves caused fear
390

or terror upon the subject thereof, in order that his

execution of the questioned deed or act can not be
considered voluntary. Vda. de Lacson vs. Granada, 1 SCRA
876 De la Paz vs. Garcia, 18 SCRA 779 Armentia vs.
Patriarca, 18 SCRA 1253.
Stipulation whereby student cannot transfer to another
school without refunding scholarship in cash is null and
void.The stipulation in a contract, between a student and
the school, that the student's scholarship is good only if he
continues in the same school, and that he waives his right
to transfer to other school without refunding the equivalent
of his scholarship in cash, is contrary to public policy and,
hence, null and void, because scholarships are awarded in
recognition of merit and to help gifted students in whom
society has an established interest or a first lien, and not to
keep outstanding students in school to bolster its prestige
and increase its business potential. Cui vs. Arellano
University, 2 SCRA 205.
Action for annulment should be filed within four years
from discovery of fraud.The four years within which an
action to annul a contract on the ground of fraud may be
filed is counted from the discovery of the fraud and not
from the execution of the contract. Descutido vs. Baltazar, 1
SCRA 1174.
An action to set aside a contract which is void ab initio
does not prescribe.Trigal vs. Tobias, 2 SCRA 1154.
A resolutory condition in a contract for personal services
permitting the cancellation of the contract by one of the
contracting parties is valid.Allied Free Workers' Union
(PLUM) vs. Compaia Maritima, 19 SCRA 258.
Annulment of contract on the ground of intimidation.
An action to annul a contract on the ground of duress,
which is a mere vice or defect of consent, must be brought
within four years after it had ceased. Where the
intimidation ceased 28 years before the action for
annulment was filed and nine years had passed after the
person, who allegedly employed intimidation had died, the
action has prescribed.
391
VOL. 36, DECEMBER 18, 1970 391

Moreover the plaintiff had entered into a series of

subsequent transactions which confirmed the contracts,
which she is seeking to annul on the ground of duress. Her
action is clearly barred. Vda. de Rodriguez vs. Rodriguez,
20 SCRA 908 Armentia vs. Patriarca, 18 SCRA 1253.
BRescission
Rescission is not permissible for casual breach of contract.

It is a principle too wellknown that "rescission will be
permitted for a slight or casual breach of the contract, but
only for such breaches as are so substantial and
fundamental as to defeat the object of the parties in
making the agreement." (Song Fo Co. vs. Hawaiian
Philippines Co., 47 Phil. 821). Tuason vs. Tuason, Jr., 88
Phil. 428.
Right of owner to dispose of all her properties.The
conveyance or sale of parcels of land to the defendant was
voluntarily made by the deceased to him. As the deceased
had no forced heir, she was free to dispose of all her
properties as absolute owner thereof, without further
limitation than those established by law, and the right to
dispose of a thing involves the right to give or convey it to
another without any consideration. The only limitation
established by law on her right to convey said properties to
defendant without any consideration, is, that she could not
dispose of or transfer her property to another in fraud of
her creditors. Concepcion vs. Sta. Ana, 87 Phil. 787.
Action by forced heir to rescind contract.The forced
heir of the deceased had no right to institute as
representative of the decedent, an action of nullity of a
contract made by the decedent to defraud her creditors,
because such a contract being considered illicit under
Article 1305 of the Civil Code the deceased herself had no
right of action to annul it and recover the properties she
had conveyed to the defendant. But the forced heir could in
such case bring an action to rescind the contract under
Article 1291 (3) of the Civil Code. Id.
Where action for annulment of sale is secondary to action

to recover real property.The prayer for the annulment
392

or rescission of the sale does not operate to efface the

fundamental and prime objective and nature of the action,
which is to recover real property. The annulment of the
sale is only secondary. At any rate, being absolutely void,
entitled to no authority or respect, the sale may be
impeached in a collateral proceeding by any one with
whose rights and interests it conflicts. There is no
presumption of validity. Inton vs. Quintana, 81 Phil. 97.
Mutual return by contracting parties of what they
received under the contract does not refer to innocent third
parties.Dia vs. Finance & Mining Investment Corp., 83
Phil. 675.
When seller performs his obligations under contract of
sale, buyer cannot rescind it.Co Cho Chit vs. Hanson,
Orth & Stevenson, Inc., 103 Phil. 956.
After the vendor has delivered the thing chosen by the
vendee, the latter cannot rescind the sale.Id.
When action for rescission becomes a prejudicial
question.If the right of action for unlawful detainer would
be subordinated to the action for rescission of the
compromise agreement, then the latter would be a
prejudicial question and the proceedings in the former
would have been suspended until the final disposition of
the action for rescission. The summary nature of the
remedy of unlawful detainer would thus be completely
defeated or destroyed. The lawmaking body could not have
intended such result. Leonor vs. Sycip, 1 SCRA 1215.
Action for rescission is not required upon breach of
compromise.The party aggrieved by the breach of a
compromise agreement may, if he chooses, bring the suit
contemplated or involved in his original demand, as if there
had never been any compromise agreement, without
bringing an action for rescission, for he may regard the
compromise agreement as already "rescinded." Id.
Effect of failure to protest against notice of rescission.
The silence of one of the contracting parties, and his failure
to protest against the notice of rescission made by
393
VOL. 36, DECEMBER 18, 1970 393

the other, in which the grounds therefor were specified,

suggest admission of the veracity and validity of the latter's
claim. Pellicer vs. Ruiz, 2 SCRA 160.
Effect of debtor's failure to apply any portion of loan
obtained to payment of purchase price.The non
application to the payment or even amortization of the
balance of the purchase price of any portion of the
agricultural loans obtained by the debtor, as well as his
failure to apply his share of the crops to the payment of the
loan, sufficiently warrants the exercise, by the creditor, of
the right to rescind the contract. Id.
Rescission by judicial action may be granted only where
the breach complained of is so substantial.Philippine
Amusement Enterprises, Inc. vs. Natividad, 21 SCRA 284.
15. Reformation
Mutual mistake must be clearly proven.Relief by way of

reformation of a written agreement will not be granted
unless the proof of mutual mistake is of the clearest and
most satisfactory character. The amount of evidence
necessary to sustain a prayer for relief where it is sought to
impugn a fact in a document is always more than a mere
preponderance of the evidence. Vda. de Gonzales
Mondragon vs. Santos, 87 Phil. 471.
Reformation of lease instrument.It is also to be noted
that this is not a case in which a reasonable rental is to be
fixed in the discretion of the court. It is a case of
reformation of a contract voluntarily agreed into on the
ground that the rental agreed upon exceeds that fixed by
law. Here again it was the respondents who had the burden
of proof that the law was violated, as they hold the
affirmative of a proposition, i.e., that the rentals are
excessive. They must prove said affirmation. In this respect
also we believe that respondents have not adduced the
evidence necessary to overcome the evidence submitted by
the petitioner. Velasco vs. Court of Agrarian Relations, 109
Phil. 642.
The function of reformation is not to make a new con
394

tract for the parties, but only to make the instrument speak
their genuine intentionCosio vs. Palileo, 17 SCRA 196.
ATTY.MARIA LUISA MENDOZA and JOJO MA.LACSON.
Notes.(a) Inadequacy of price as ground for annulling

execution sale.A judicial sale under foreclosure is not to
be set aside for mere inadequacy of price unless the
inadequacy is so great as to shock the conscience, or unless
there are other circumstances making the sale unjust
(Warner, Barnes & Co. vs. Santos, 14 Phil. 446 National
Bank vs. Gonzalez, 45 Phil. 693 Navarro vs. Navarro, 76
Phil. 122 Bank of the Philippine Islands vs. Green, 52 Phil.
491).
Furthermore, in order to annul a judicial sale, conducted
regularly and confirmed by the court, upon ground of lesion
through inadequacy of price, it must appear from the
record that a higher price could be obtained for the
property or that there was fraud in the sale (La Urbana vs.
Belando, 54 Phil. 930 Guerrero vs. Guerrero, 57 Phil. 442).
But while inadequacy of price alone does not justify the
setting aside of a judicial sale, yet when such inadequacy is
very great and there are slight circumstances tending to
show that interested parties were misled or by accident or
mistake were prevented from attending the sale, or
preventing it, it may be set aside (Iturralde vs. Velasquez,
41 Phil. 886).
In Del Rosario vs. Villegas, 49 Phil. 634, it was held that
where a provincial sheriff, guided by a letter of the
attorneys for the judgment creditor and by data furnished
by certain merchants in order to fix prices for the execution
of a judgment, not subject to execution but also arrogated
to himself powers which belonged only to the court, his acts
were illegal and void and therefore the sale of the two
parcels of land in question, based upon sums resulting from
arbitrary and illegal estimate of prices, is also null and
void.
See also De Leon vs. Salvador, L30871, Dec. 28, 1970,
reported in this volume.
395
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5/6/2017 SUPREMECOURTREPORTSANNOTATEDVOLUME036

VOL. 36, DECEMBER 18, 1970 289

No. L24571. December 18, 1970.

JOSE L. PONCE DE LEON, plaintiffappellant, vs.

Civil Law Mortgage Presumption of regularity of mortgage

290 SUPREME COURT REPORTS ANNOTATED

Ponce de Leon vs. Rehabilitation Finance Corporation

made under the special power hereinbefore referred to, "the

extinguished due to fortuitous event or to grant plaintiff a

VOL. 36, DECEMBER 18, 1970 291

Ponce de Leon vs. Rehabilitation Finance Corporation

establish time of acquisition.The title to said property was not a

APPEAL from a decision of the Court of First Instance of

The facts are stated in the opinion of the Court.

Appeal from a decision of the Court of First Instance of

"IN VIEW OF THE FOREGOING, the Court hereby renders

THOUSAND TWO HUNDRED SIXTY FIVE PESOS AND FIFTY

292 SUPREME COURT REPORTS ANNOTATED

"The Court declares the mortgage of onehalf of the lot covered by

As correctly set forth in said decision, the main facts are:

"1. Land ........................................................ P480,228.00

"The application was approved for P495,000.00 and the mortgage

1 Record on Appeal, p. 133.

VOL. 36, DECEMBER 18, 1970 293

was executed on October 8, 1951 by Jose L. Ponce de Leon, his

" 1 ) Nineparcels at Bacolod City .......... P78,800.00

294 SUPREME COURT REPORTS ANNOTATED

"4) The land of Soriano at Paraaque, Rizal

"The Sheriff sold the land covered by original certificate of Title

"The RFC scheduled a public sale of the lot registered in the

VOL. 36, DECEMBER 18, 1970 295

and costs. De Leon asked for the issuance of a writ of preliminary

referred by the Executive Office to the RFC, which sent a letter,

296 SUPREME COURT REPORTS ANNOTATED

In due course, the lower court rendered judgment the

2 Record on Appeal, pp. 103112

VOL. 36, DECEMBER 18, 1970 297

senting the balance of plaintiff's obligation in favor of the

therefor but (b) held that, being registered in the name of

298 SUPREME COURT REPORTS ANNOTATED

Appeal of the Sorianos

The Sorianos maintain that the lower court erred: (1) in

sentencing the plaintiff and the RFC to pay damages to the

"The thirdparty plaintiffs ask that the mortgage deed and

3 97 Phil. 604, 609.

VOL. 36, DECEMBER 18, 1970 299

claimed that Francisco Soriano was made to believe by Ponce de

300 SUPREME COURT REPORTS ANNOTATED

closure and as shown by his alleged going to see Ponce de Leon a

"Besides, if Ponce de Leon really deceived Francisco Soriano

VOL. 36, DECEMBER 18, 1970 301

with, this is a matter which concerned merely Francisco Soriano

Bank secured by a mortgage of the lot in the name of Francisco

4 Record on Appeal pp. 120127. Italics ours.

302 SUPREME COURT REPORTS ANNOTATED

In support of their second assignment of error, the Sorianos

"x x x where there is the right to redeem x x xinadequacy of

Then, again, as the trial court had correctly of served:

"But, mere inadequacy of the price obtained at the sheriff's sale

The third, fourth and fifth assignments of error of the