Woodhouse v.

Halili
G.R. No. L-4811, 31 July 1953

FACTS:

On November 29, 1947, plaintiff Woodhouse entered into a written agreement with defendant
Halili stating among others that: 1) that they shall organize a partnership for the bottling and distribution
of Missionsoft drinks, plaintiff to act as industrial partner or manager, and the defendant as a capitalist,
furnishing the capital necessary therefore; 2) that plaintiff was to secure the Mission Soft Drinks franchise
for and in behalf of the proposed partnership and 3) that the plaintiff was to receive 30 per cent of the
net profits of the business. Prior to entering into this agreement, plaintiff had informed the Mission Dry
Corporation of Los Angeles, California, that he had interested a prominent financier (defendant herein) in
the business, who was willing to invest half a milliondollars in the bottling and distribution of the said
beverages, and requested, in order that he may close the deal with him, that the right to bottle and
distribute be granted him for a limited time under the condition that it will finally be transferred to the
corporation. Pursuant to this request, plaintiff was given “a thirty days’ option on exclusive bottling and
distribution rights for the Philippines”. The contract was finally signed by plaintiff on December 3, 1947.

When the bottling plant was already in operation, plaintiff demanded of defendant that the said
partnership papers be executed. Defendant Halili gave excuses and would not execute said agreement,
thus the complaint by the plaintiff. Plaintiff prays for the : 1.execution of the contract of partnership; 2)
accounting of profits and 3)share thereof of 30 percent with 4) damages in the amount of P200,000. The
Defendant on the other hand claims that: 1) the defendant’s consent to the agreement, was secured by
the representation of plaintiff that he was the owner, or was about to become owner of an exclusive
bottling franchise, which representation was false, and that plaintiff did not secure the franchise but was
given to defendant himself 2) that defendant did not fail to carry out his undertakings, but that it was
plaintiff who failed and 3)that plaintiff agreed to contribute to the exclusive franchise to the partnership,
but plaintiff failed to do so with a 4) counterclaim for P200,00 as damages.

The CFI ruling: 1) accounting of profits and to pay plaintiff 15 % of the profits and that the 2)
execution of contract cannot be enforced upon parties. Lastly, the 3) fraud was not proved.

ISSUE:

Whether or Not plaintiff falsely represented that he had an exclusive franchise to bottle Mission
beverages.

Whether or Not false representation, if it existed, annuls the agreement to form the partnership.
RULING:

Plaintiff did make false representation and this can be seen through his letter to Mission Dry
Corporation asking for the latter to grant him temporary franchise so he could settle the agreement with
defendant. The trial court reasoned, and the plaintiff on this appeal argues, that plaintiff only undertook
in the agreement “to secure the Mission Dry franchise for and in behalf of the proposed partnership.” The
existence of this provision in the final agreement does not militate against plaintiff having represented
that he had the exclusive franchise; it rather strengthens belief that he did actually make the
representation. The defendant believed, or was made to believe, that plaintiff was the grantee of an
exclusive franchise. Thus it is that it was also agreed upon that the franchise was to be transferred to the
name of the partnership, and that, upon its dissolution or termination, the same shall be reassigned to
the plaintiff. Again, the immediate reaction of defendant, when in California he learned that plaintiff did
not have the exclusive franchise, was to reduce, as he himself testified, plaintiff’s participation in the net
profits to one half of that agreed upon. He could not have had such a feeling had not plaintiff actually
made him believe that he (plaintiff) was the exclusive grantee of the franchise.

In consequence, Article 1270 of the Spanish Civil Code distinguishes two kinds of (civil) fraud the causal
fraud, which may be ground for the annulment of a contract, and the incidental deceit, which only renders
the party who employs it liable for damages only. The Supreme 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. The record abounds with circumstances indicative of the fact
that the principal consideration, the main cause that induced defendant to enter into the partnership
agreement with plaintiff, was the ability of plaintiff to get the exclusive franchise to bottle and distribute
for the defendant or for the partnership. The original draft prepared by defendant’s counsel was to the
effect that plaintiff obligated himself to secure a franchise for the defendant. But if plaintiff 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. On the other hand, this supposed ownership of an exclusive
franchise was actually the consideration or price plaintiff gave in exchange for the share of 30 per cent
granted him in the net profits of the partnership business. Defendant agreed to give plaintiff 30 per cent
share in the net profits because he was transferring his exclusive franchise to the partnership.

Having arrived at the conclusion that the contract cannot be declared null and voidmay the agreement be
carried out or executed? The SC finds no merit in the claim of plaintiff that the partnership was already a
fait accompli from the time of the operation of the plant, as it is evident from the very language of the
agreement that the parties intended that the execution of the agreement to form a partnership was to
be carried out at a later date. , The defendant may not be compelled against his will to carry out the
agreement nor execute the partnership papers. The law recognizes the individual’s freedom or liberty to
do an act he has promised to do, or not to do it, as he pleases.
 HSBC v. Spouses Broqueza
G.R. No. 178610, November 17, 2010

FACTS:

Petitioners Gerong and Broqueza are employees of Hongkong and Shanghai Banking Corporation
(HSBC). They are also members of respondent Hongkong Shanghai Banking Corporation, Ltd. Staff
Retirement Plan.

In October 1990, petitioner Broqueza obtained a car loan in the amount of Php 175,000.00. In December
1991, she again applied and was granted an appliance loan in the amount of Php 24,000.00.

In 1993, a labor dispute arose between HSBC and its employees. Majority of HSBCs employees were
terminated, among whom are petitioners Editha Broqueza and Fe Gerong.

ISSUE:

Whether or not the claim was premature as the loan obligations have not yet matured

RULING:

No. The Court affirms the findings of the lower courts that there is no date of payment indicated
in the Promissory Notes. The RTC is correct in ruling that since the Promissory Notes do not contain a
period, HSBCL-SRP has the right to demand immediate payment. Article 1179 of the Civil Code applies:
Every obligation whose performance does not depend upon a future or uncertain event, or upon a past
event unknown to the parties, is demandable at once. The spouses Broquezas obligation to pay HSBCL-
SRP is a pure obligation. The fact that HSBCL-SRP was content with the prior monthly check-off from Editha
Broquezas salary is of no moment. Once Editha Broqueza defaulted in her monthly payment, HSBCL-SRP
made a demand to enforce e a pure obligation.
 Solante v. COA
G.R. No. 207348, 19 August 2014

FACTS:

The City of Mandaue and F.F. Cruz Inc. entered into a Contract of Reclamation with land-sharing
agreement to be undertaken by the latter. The project was estimated to be completed within six (6) years
as stipulated in the contract. The parties executed an MOA wherein all improvements by the F.F. Cruz on
the City’s portion of the land shall belong to the latter after project completion. The project was not
completed within 6 years. Thereafter, the DPWH contracted with F.F. Cruz to demolish improvements on
the City’s parcel of land for a road-widening project. Petitioner Solante, prepared disbursement vouchers
in favor of F.F. Cruz as payment for the demolished improvements. COA disallowed the disbursement,
stating that the failure of FF. Cruz to finish the project within 6 years means the project is deemed
completed and that the City now owns the rights to the demolished improvements, hence, F.F. Cruz
cannot collect payments from the demolition of the same.

ISSUE:

WON F.F. Cruz owned the improvements demolished.

RULING:

Yes. F.F. Cruz owned said properties and can collect the payments for their demolition.

SC ruled that a mere estimate of a period of project completion does not fall under the definition
of a fixed period or day certain as defined in law. Art. 1193 of the Civil Code provides that: “Obligations
for whose fulfillment a day certain has been fixed, shall be demandable only when that day comes;
Obligations with a resolutory period take effect at once, but terminate upon arrival of the day certain; A
day certain is understood to be that which must necessarily come, although it may not be known when;
If the uncertainty consists in whether the day will come or not, the obligation is conditional, and it shall
be regulated by the rules of the preceding Section.”

The lapse of the estimated 6-year period did not deem the project completed much less bring
about the fulfillment of the condition stipulated in the MOA (on the shift of ownership over the
demolished properties). As it were, the Mandaue-F.F.Cruz MOA states that the structures built by F .F.
Cruz on the property of the city will belong to the latter only upon the completion of the project. Clearly,
the completion of the project is a suspensive condition that has yet to be fulfilled. Until the condition
arises, ownership of the structures properly pertains to F.F. Cruz. Petition is granted.
 Metrobank v. Rural Bank of Gerona
G.R. No. 159057, 5 July 2010

FACTS:

The Central Bank and the RBG entered into an agreement providing that RBG shall facilitate the
loan applications of farmers-borrowers. The agreement required RBG to open a separate bank account
where the IBRD loan proceeds shall be deposited. The RBG accordingly opened a special savings account
with Metrobanks Tarlac Branch. As the depository bank of RBG, Metrobank was designated to receive the
credit advice released by the Central Bank representing the proceeds of the IBRD loan of the farmers-
borrowers; Metrobank, in turn, credited the proceeds to RBGs special savings account for the latter’s
release to the farmers-borrowers.

The Central Bank released a credit advice in Metrobanks favor and accordingly credited
Metrobanks demand deposit account in the amount of P178,652.00, for the account of RBG. The Central
Bank approved the loan application of another farmer-borrower and credited the amount to Metrobanks
demand deposit account. Metrobank, in turn, credited RBGs special savings account. Metrobank claims
that the RBG also withdrew the entire credited amount from its account. The Central Bank approved
another loan application. As with the two other IBRD loans, the amount was credited to Metrobanks
demand deposit account, which amount Metrobank later credited in favor of RBGs special savings
account.

More than a month after RBG had made the above withdrawals from its account with Metrobank,
the Central Bank issued debit advices, reversing all the approved IBRD loans. The Central Bank
implemented the reversal by debiting from Metrobanks demand deposit account the amount
corresponding to all three IBRD loans.Upon receipt of debit advices, Metrobank, in turn, debited the
amounts from RBGs special savings account but however, Metrobank claimed that these amounts were
insufficient to cover all the credit advices that were reversed by the Central Bank. It demanded payment
from RBG which could make partial payments. To collect this amount, it filed a complaint for collection of
sum of money against RBG before the RTC.

ISSUE:

Whether or not there was legal subrogation that took place in the case.
RULING:

Yes. The Terms and Conditions of the IBRD 4th Rural Credit Project executed by the Central Bank
and the RBG shows that the farmers-borrowers to whom credits have been extended, are primarily liable
for the payment of the borrowed amounts. The loans were extended through the RBG which also took
care of the collection and of the remittance of the collection to the Central Bank. RBG, however, was not
a mere conduit and collector. While the farmers-borrowers were the principal debtors, RBG assumed
liability under the Project Terms and Conditions by solidarily binding itself with the principal debtors to
fulfill the obligation.

The Central Bank was further authorized to deduct the amount due from RBGs demand deposit
reserve should the latter become delinquent in payment. Based on these arrangements, the Central Banks
immediate recourse, therefore should have been against the farmers-borrowers and the RBG; thus, it
erred when it deducted the amounts covered by the debit advices from Metrobanks demand deposit
account. Metrobank had no responsibility over the proceeds of the IBRD loans other than serving as a
conduit for their transfer from the Central Bank to the RBG once credit advice has been issued. The
agreement governed only the parties involved the Central Bank and the RBG. Metrobank was simply an
outsider to the agreement. Our disagreement with the appellate court is in its conclusion that no legal
subrogation took place; the present case, in fact, exemplifies the circumstance contemplated under
paragraph 2, of Article 1302 of the Civil Code which provides:

Art. 1302. It is presumed that there is legal subrogation:

(1) When a creditor pays another creditor who is preferred, even without the debtors knowledge;

(2) When a third person, not interested in the obligation, pays with the express or tacit approval of the
debtor;

(3) When, even without the knowledge of the debtor, a person interested in the fulfillment of the
obligation pays, without prejudice to the effects of confusion as to the latter’s share.

Metrobank was a third party to the Central Bank-RBG agreement, had no interest except as a conduit, and
was not legally answerable for the IBRD loans. Despite this, it was Metrobanks demand deposit account,
instead of RBGs, which the Central Bank proceeded against, on the assumption perhaps that this was the
most convenient means of recovering the cancelled loans. That Metrobanks payment was involuntarily
made does not change the reality that it was Metrobank which effectively answered for RBGs obligations.
After Metrobank received the Central Banks debit advices, it (Metrobank) accordingly debited the
amounts it could from RBGs special savings account without any objection from RBG. RBGs President and
Manager, Dr. Aquiles Abellar, even wrote Metrobank with proposals regarding possible means of settling
the amounts debited by Central Bank from Metrobank’s demand deposit account. These instances are all
indicative of RBGs approval of Metrobank’s payment of the IBRD loans. That RBGs tacit approval came
after payment had been made does not completely negate the legal subrogation that had taken place.

Article 1303 of the Civil Code states that subrogation transfers to the person subrogated the credit with
all the rights thereto appertaining, either against the debtor or against third persons. As the entity against
which the collection was enforced, Metrobank was subrogated to the rights of Central Bank and has a
cause of action to recover from RBG the amounts it paid to the Central Bank.
 Loyola v. CA
G.R. No. 115734, 23 February 2000

FACTS:

Gaudencia Zarraga allegedly sold to private respondents her share in Lot 115-A-1. The sale was
evidenced by a notarized document denominated as “Bilihang Tuluyan ng Kalahati (1/2) ng Isang Lagay na
Lupa.”

Private respondents, are the children of Mariano Zarraga, the brother of Gaudencia, alleged that they
were the lawful owners of Lot 115-A-1, the one-half share inherited by their father and the other half
purchased from their deceased aunt, Gaudencia.

Petitioners, all surnamed Loyola, are first cousins of private respondents, assailed the validity of the deed
of absolute sale citing that it is a simulated contract since the notary public who prepared the questioned
Bilihan did not personally know Gaudencia, thus, the deed of sale is questionable.

ISSUE:

Whether fraud or undue influence was exercised to obtain Gaudencia’s consent to the sale.

RULING:

Article 1337 of the Civil Code states: There is undue influence when a person takes improper
advantage of his power over the will of another, depriving the latter of a reasonable freedom of choice.
The following circumstances shall be considered: confidential, family, spiritual, and other relations
between the parties, or the fact that the person alleged to have been unduly influenced was suffering
from mental weakness, or was ignorant or in financial distress.

For undue influence to be established to justify the cancellation of an instrument, three elements must
be present: a person who can be influenced; the fact that improper influence was exerted; submission to
the overwhelming effect of such unlawful conduct.

To prove a confidential relationship from which undue influence may arise, the relationship must reflect
a dominant, overmastering influence which controls over the dependent person. In the present case,
petitioners failed to show that Romana used her aunt’s reliance upon her to take advantage or dominate
her and dictate that she sell her land. Undue influence is not to be inferred from age, sickness, or debility
of body, if sufficient intelligence remains.

The Deed of Absolute Sale is valid.

FACTS:

The subject of this action is Lot 17, Block 5 of the Ayala Alabang Village, Muntinlupa, Metro-
Manila,with an area of 569 square meters and covered by TCT No. S-79773. The above parcel of land
waspurchased by the Salvador spouses from the developers of Ayala Alabang subject, among others, to
thefollowing conditions:–“It is part of the condition of buying a lot in Ayala Alabang Village (a) that the lot
buyer shall deposit withAyala Corporation a cash bond (about P17,000.00 for the Salvadors) which shall
be refunded to him if he builds a residence thereon within two (2) years of purchase, otherwise the
deposit shall be forfeited, (b)architectural plans for any improvement shall be approved by Ayala
Corporation, and (c) no lot may be resold by the buyer unless a residential house has been constructed
thereon (Ayala Corporation keeps theTorrens Title in their [sic] possession). Salvadors sold the parcel of
land to Bernabe spouses. Salvadors executed a special power of attorneyauthorizing the Bernabes to
construct a residential house on the lot and to transfer the title in their names.Bernabes, on the other
hand, without making any improvement, contracted to sell the parcel of land to Torcuator spouses.
Confronted by the Ayala Alabang restrictions, the parties agreed to cause the sale between the Salvadors
and the Bernabes cancelled, in favor of (a) a new deed of sale from the Salvadors directly to the
Torcuators; (b) a new Irrevocable Special Power of Attorney executed by the Salvadors tothe Torcuators
in order for the latter to build a house on the land in question; and (c) an IrrevocableSpecial Power of
Attorney from the Salvadors to the Bernabes authorizing the latter to sell, transfer andconvey, with power
of substitution, the subject lot.The deed of sale was never consummated nor was payment on the said
sale ever effected. Subsequently,Bernabes sold to Angeles, a brother-in-law, however the document was
not notarized. Torcuators filed anaction against the Bernabes and Salvadors for Specific Performance or
Rescission with Damages. TCdismissed petition. CA also dismissed the appeal, ruling that the sale between
the Bernabes and theTorcuators was tainted with serious irregularities and bad faith.

ISSUE:

WON the agreement is a contract to sell or a contract of sale.

RULING:

The agreement is a contract to sell.Contract of sale- title passes to the buyer upon delivery of the
thing sold; Non-payment of the price is anegative resolutory condition.Contract to sell- ownership is
reserved in the seller and is not to pass until the full payment of the purchase price is made; Full payment
is a positive suspensive condition.
The agreement imposed upon petitioners the obligation to fully pay the agreed purchase price for the
property; that ownership shall not pass to petitioners until they have fully paid the price is implicit in the
agreement. Salvadors did not execute a deed of sale in favor of Torcuator, but a special power of attorney
authorizing the Bernabes to sell the property on their behalf, in order to afford the latter a measure of
protection that would guarantee full payment of the purchase price before any deed of sale in favor of
Torcuator was executed.Ayala Corporation retained title to the property and the Salvador spouses were
precluded from selling itunless a residence had been constructed thereon. Had the agreement been a
contract of sale, the special power of attorney would have been entirely unnecessary as petitioners would
have had the right to compel the Salvadors to transfer ownership to them.The special power of attorney
does not contain the essential elements of the purported contract and, more tellingly, does not even refer
to any agreement for the sale of the property. In any case, it was rendered virtually inoperable as a
consequence of the Salvadors’ adamant refusal to part with their title to the property.Petition denied.