Case Doctrines by Marvin De Leon

Batchelder vs. Central Bank

Issue: W/N Monetary Board resolutions create contracts between Central Bank and
dollar earner
Held: No. Monetary Board resolutions do not create contracts between Central
Bank and dollar earner. Considering the fundamental meaning of “contracts under the
Civil Law and the nature of the administrative authority of the Monetary Board to
promulgate rules and regulations governing the monetary and banking system of the
Philippines, the Monetary Board Resolutions Nos. 857 dated June 17, 1960 and 695
dated April 28, 1961 are not contracts that give rise to obligations which must be
fulfilled by the Central Bank in favor of affected parties. These resolutions merely lay
down a general policy on the utilization of the dollar earnings of Filipino and resident.
American contractors undertaking projects in U.S. military bases.
Decision: Decision of lower court is reversed.

Republic vs. Phil. Long Distance Telephone Co.

Issue: W/N PLDT may be coerced to enter into a contract with the Republic of the
Philippines.
Held: No. Parties cannot be coerced to enter into a contract where no agreement is
had between them as to the principal terms and conditions of the contract. Freedom
to stipulate such terms and conditions is of the essence of our contractual system,
and by express provision of the statute, a contract may be annulled if tainted by
violence, intimidation or undue influence (Articles 1306, 1336, 1337, Civil Code of
the Philippines). While the Republic may not compel the PLDT to celebrate a
contract with it, the Republic may, in the exercise of the sovereign power of eminent
domain, require the telephone company to permit interconnection of the government
telephone system and that of the PLDT, as the needs of the government service may
require, subject to the payment of just compensation to be determined by the court.
Decision: Affirmed.

Corpus vs. Court of Appeals

Issue: W/N petitioner Corpus is obliged to pay respondent David the attorney’s fees
despite absence of contract.
Held: Yes. The obligation of such a person to pay attorney’s fees is based on the law
of contracts’ concept of facio ut des (I do and you give). While there was no express
agreement between petitioner Corpus and respondent David as regards attorney’s
fees, the facts of the case support the position of respondent David that there was at
least an implied agreement for the payment of attorney’s fees. Petitioner s act of
giving the check for P2,000.00 through his aforestated April 18, 1962 letter to
respondent David indicates petitioner’s commitment to pay the former attorney’s
fees, which is stressed by expressing that “I wish I could give more but as you know
we were banking on a SC decision reinstating me and reimbursing my back salaries.’
This last sentiment constitutes a promise to pay more upon his reinstatement and
payment of his back salaries. Petitioner ended his letter that he was “looking forward
to a continuation of the case in the lower court”. Moreover, the payment of
attorney’s fees to respondent David may also be justified by virtue of the innominate
contract of facio ut des (I do and you give) which is based on the principle that “no
one shall unjustly enrich himself at the expense of another.” Innominate contracts
have been elevated to a codal provision in the New Civil Code by providing under
Article 1307 that such contracts shall be regulated by the stipulations of the parties,
by the general provisions or principles of obligations and contracts, by the rules
governing the most analogous nominate contracts, and by the customs of the people.
Decision: Corpus ordered to pay David 20,000.00

Cui v. Arellano University

Issue: W/N the stipulation in the scholarship contract where the petitioner waived
his right to transfer to another school without refunding to the respondent the
equivalent of his scholarship in cash is valid
Held: No. The contract 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 another 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. Memorandum No. 38 issued by the Director of Private Schools provides
that “When students are given full or partial scholarship, it is understood that such
scholarship are merited and earned. The amount in tuition and other fees
corresponding to These scholarship should not be subsequently charged to recipient
students when they decide to quit school or to transfer to another institution.
Scholarship should not be offered merely to attract and keep students in a school.
Decision: Reversed.

Saura v. Sindico
Issue: W/N right to present one’s candidacy in public office can be the object or
subject matter of a valid contract.
Held: No. 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 these 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 or unduly curtailed
with impunity, for they are conferred not for individual or private benefit or
advantage but for the public good and interest.
Decision: Affirmed.

Leal vs. Intermediate Appellate Court

Issue: W/N Prohibition to sell property to third parties which is indefinite and
unlimited as to time, which shall continue to be applicable even beyond the lifetime of
the original parties to the contract, is void.
Held: Yes. One such condition which is contrary to public policy is the present
prohibition to sell to third parties, because the same virtually amounts to a perpetual
restriction on the right of ownership, specifically the owner’s right to freely dispose
of his properties. Thus, we hold that any such prohibition, indefinite and unlimited as
to time, so much so that it shall continue to be applicable even beyond the lifetime of
the original parties to the contract, is, without doubt, a nullity. Contracts are
generally binding between the parties, their assigns and heirs; however, under Art.
1255 of the Civil Code of Spain, which is applicable in this instance, pacts, clauses, and
conditions which are contrary to public order are null and void, thus, without any
binding effect. Parenthetically, the equivalent provision in the Civil Code of the
Philippines is that of Art. 1306, which states: ‘That contracting parties may establish
such stipulations, clauses, terms and conditions as they may deem convenient,
provided they are not contrary to law, morals good customs, public order, or public
policy.” Public order signifies the public weal-public policy. Essentially, therefore,
public order and public policy mean one and the same thing. Public policy is simply
the English equivalent of “orden publico” in Art. 1255 of the Civil Code of Spain.
Decsion: Set Aside the decision of the respondent court.

Banco Filipino Savings & Mortgage Bank vs. Navarro

Issue: W/N the escalation clause on the contract where the petitioner is allowed to
increase the interest rate on the loan is valid
Held: Yes. The Court ruled that while an escalation clause like the one in question
can ordinarily be held valid, nevertheless, petitioner Banco Filipino cannot rely
thereon to raise the interest on the borrower's loan from 12% to 17% per annum
because Circular No. 494 of the Monetary Board was not the "law" contemplated by
the parties, nor should said Circular be held as applicable to loans secured by
registered real estate in the absence of any such specific indication and in
contravention of the policy behind the Usury Law. Some contracts contain what is
known as an 'escalator clause,' which is defined as one in which the contract fixes a
base price but contains a provision that in the event of specified cost increases, the
seller or contractor may raise the price up to a fixed percentage of the base. Attacks
on such a clause have usually been based on the claim that, because of the open price-
provision, the contract was too indefinite to be enforceable and did not evidence an
actual meeting of the minds of the parties, or that the arrangement left the price to
be determined arbitrarily by one party so that the contract lacked mutuality. In most
instances, however, these attacks have been unsuccessful. The Court further finds as
a matter of law that the cost of living index adjustment, or escalator clause, is not
substantively unconscionable.
Decision: Affirmed.
Notes: Escalation Clause to be valid must include de-escalation clause.—There can
be an increase in interest if increased by law or by the Monetary Board; and in order
for such stipulation to be valid, it must include a provision for reduction of the
stipulated interest "in the event that the applicable maximum rate of interest is
reduced by law or by the Monetary Board."

Florendo vs. Court of Appeals

Issue: W/N the unilateral determination and imposition of increased interest rates by
the herein respondent bank in mutual contract is valid.
Held: No. Escalation clauses are valid stipulations in commercial contracts to
maintain fiscal stability and to retain the value of money in long term contracts,
however, it will not be amiss to point out that the unilateral determination and
imposition of increased interest rates by the herein respondent bank is obviously
violative of the principle of mutuality of contracts ordained in Article 1308 of the Civil
Code.
Decision: The Court hereby REVERSES and SETS ASIDE the challenged Decision of
the Court of Appeals.

Velasco vs. Court of Appeals

Issue: W/N GSIS can be held liable even if it is not a direct party to the said contract.
Held: Yes. GSIS is a privy to the contract. At this juncture, We need to add only that
Article 1311 of the Civil Code which GSIS invokes is not applicable where the
situation contemplated in Article 1729 obtains. The intention of the latter provision is
to protect the laborers and the material men from being taken advantage of by
unscrupulous contractors and from possible connivance between owners and
contractors. Thus, a constructive vinculum or contractual privity is created by this
provision, by way of exception to the principle underlying Article 1311 between the
owner, on the one hand, and those who furnish labor and/or materials, on the other.
As a matter of fact, insofar as the laborers are concerned, by a special law, Act No.
3959, they are given added protection by requiring contractors to file bonds
guaranteeing payment to them. And under Article 2242 of the Civil Code, paragraphs
(3) and (4), claims of laborers and materialmen, respectively, enjoy preference among
the creditors of the owner in regard to specific immovable property.
Decision: Affirmed.

Kauffman vs. National Bank

Issue: W/N a stipulation in favor of a third person can be revoked by the obligated
party alone, without the conformity of the other contracting party.
Held: No. It is a stipulation pour autrui. Should the contract contain any stipulation
in favor of a third person, he may demand its fulfillment, provided he has given notice
of his acceptance to the person bound before the stipulation has been revoked. (Art.
1257, par. 2, Civ. Code.) In the light of the conclusion thus stated, the right of the
plaintiff to maintain the present action is clear enough; for it is undeniable that the
bank's promise to cause a definite sum of money to be paid to the plaintiff in NYC is
a stipulation in his favor within the meaning of the paragraph above quoted; and the
circumstances under which that promise was given disclose an evident intention on
the part of the contracting parties that the plaintiff should have the money upon
demand in NYC. The recognition of this unqualified right in the plaintiff to receive the
money implies in our opinion the right in him to maintain an action to recover it. It
will be noted that under the paragraph cited a third person seeking to enforce
compliance with a stipulation in his favor must signify his acceptance before it has
been revoked. In this case the plaintiff clearly signified his acceptance to the bank by
demanding payment; and although PNB had already directed its NY agency to
withhold payment when this demand was made, the rights of the plaintiff cannot be
considered to as there used, must be understood to imply revocation by the mutual
consent of the contracting parties, or at least by direction of the party purchasing he
exchange.
Decision: Affirmed.

Bonifacio Bros. v. Mora

Issue: W/N a third person who is not a party to the contract can have an
enforceable interest in the contract.
Held: Yes. 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 benef it granted to him by the terms of the
contract, provided that the contracting parties have clearly and deliberately conferred
a favor upon such person. Consequently, a third person, not a party to the contract,
has no action against the parties thereto, and cannot generally demand the
enforcement of the same. The question of whether a third person has an 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.
Decision: Affirmed.

Florentino v. Encarnacion
Issue: W/N a stipulation that the fruits of a parcel of land shall be used to defray
certain expenses connected with religious festivities or occasions is a valid stipulation
pour autrui.
Held: Yes. The second paragraph of Article 1311 above-quoted states the law on
stipulations pour autrui. Considering the nature and purpose of the stipulation. We
hold that said stipulation is a stipulation pour autrui. A stipulation pour autrui is a
stipulation in favor of a third person conferring a clear and deliberate favor upon him,
and which stipulation is merely a part of a contract entered into by the parties,
neither of whom acted as agent of the third person, and such third person may
demands its fulfillment provided that he communicates his acceptance to the obligor
before it is revoked. The requisites are: (1) that the application in favor of a third
person should be a part, not the whole, of the contract; (2) that the favorable
stipulation should not be conditioned or compensated by any kind of obligation
whatever; and (3) neither of the contracting parties bears the legal representation or
authorization of third party. The fairest test to determine whether the interest of
third person in a contract is a stipulation pour autrui or merely an incidental interest,
is to rely upon the intention of the parties as disclosed by their contract. In applying
this test, it matters not whether the stipulation is in the nature of a gift or whether
there is an obligation owing from the promisee to the third person. That no such
obligation exists may in some degree assist in determining whether the parties
intended to benefit a third person.
Decision: Affirmed with modification.
Notes: A stipulation pour autrui may be accepted any time before it is revoked.
Acceptance of a stipulation pour autrui need not be in any particular form and may be
inferred from the beneficiary’s enjoyment of the fruits flowing therefrom for a good
number of years.

Bank of America v. IAC

Issue: W/N contract between foreign bank and a local bank asking the latter to pay
an amount to a beneficiary is a stipulation pour autrui
Held: Yes. In Vargas Plow Factory, Inc. vs. Central Bank, it was held that “the
opening of a letter of credit in favor of the exporter becomes ultimately but the
result of a stipulation pour autrui” (27 SCRA 84 [1969]). Similarly, when KYOWA
asked BANKAMERICA to pay an amount to a beneficiary (either ACTC or Minami),
the contract was between KYOWA and BANKAMERICA and it had a stipulation
pour autrui. Absence of protest by the alleged true beneficiary means that the
beneficiary of the amount is correct; Identity of the beneficiary should be in
accordance with the identification by the foreign bank and cannot be questioned by
one not a party to the arrangement between the foreign bank and the local bank.
Decision: Reversed the decision of the respondent court.

Marimperio v. CA
Issue: W/N respondents have the legal capacity to bring the suit for specific
performance against petitioner based on the charter party.
Held: No. According to Article 1311 of the Civil Code, a contract takes effect
between the parties who made it, and also their assigns and heirs, except in cases
where the rights and obligations arising from the contract are not transmissible by
their nature, or by stipulation or by provision of law. Since a contract may be violated
only by the parties, thereto as against each other, in an action upon that contract, the
real parties in interest, either as plaintiff or as defendant, must be parties to said
contract. Therefore, a party who has not taken part in it cannot sue or be sued for
performance or for cancellation thereof, unless he shows that he has a real interest
affected thereby. While in the instant case, the true charterers of the vessel were the
private respondents herein and they chartered the vessel through an intermediary
which upon instructions from them did not disclose their names. Article 1883 cannot
help the private respondents because although they were the actual principals in the
charter of the vessel, the law does not allow them to bring any action against the
adverse party and viceversa.
Decision: Reversed and set aside.

Daywalt v. Corp de PP Agustinos

Issue: W/N Whether or not the private respondent who is not a party to a contract
for the sale of land makes himself liable for damages to the vendee, beyond the value
of the use and occupation, by colluding with the vendor not to comply with the
demands.
Held: No. Whatever may be the character of the liability, if any, which a stranger to
a contract may incur by advising or assisting one of the parties to evade performance,
he cannot become more extensively liable in damages for the nonperformance of the
contract than the party in whose behalf he intermeddles.
Decision: Affirmed.

Gilchrist v. Cuddy
Issue: W/N Whether or not the petitioner is entitled to damages against the
respondent and the stranger who induced the latter to enter into another contract
even if done without malice.
Held: Yes. In the case at bar the only motive for the interf erence with the Gilchrist-
Cuddy contract on the part of the appellants was a desire to make a profit by
exhibiting the film in their theater. There was no malice beyond this desire; but this
fact does not relieve them of the legal liability for interfering with that contract and
causing its breach. It is, therefore, clear, under the above authorities, that they were
liable to Gilchrist for the damages caused by their acts, unless they are relieved from
such liability by reason of the fact that they did not know at the time the identity of
the original lessee (Gilchrist) of the film. The liability of the appellants arises from
unlawful acts and not from contractual obligations, as they were under no such
obligations to induce Cuddy to violate his contract with Gilchrist. So that if the action
of Gilchrist had been one for damages, it would be governed by chapter 2, title 16,
book 4 of the Civil Code. Article 1902 of that code provides that a person who, by
act or omission. causes damage to another when there is fault or negligence, shall be
obliged to repair the damage so done. There is nothing in this article which requires
as a condition precedent to the liability of a tortfeasor that he must know the identity
of a person to whom he causes damage. In fact, the chapter wherein this article is
found clearly shows that no such knowledge is required in order that the injured
party may recover for the damage suffered.
Decision: Affirmed.
Estate of KH Hernady v Luzon Surety
Issue: W/N Whether or not the respondent can no longer claim from the estate of
the deceased, the latter being a guarantor to a contract, because the integrity
contemplated by Art. 2057 of the CC, is personal and cannot be transmitted to her
estate.
Held: Of the three exceptions fixed by Article 1311, the nature of the obligation of
the surety or guarantor does not warrant the conclusion that his peculiar individual
qualities are contemplated as a principal inducement for the contract. What did the
creditor Luzon Surety Co. expect of K. H. Hemady when it accepted the latter as
surety in the counterbonds? Nothing but the reimbursement of the moneys that the
Luzon Surety Co. might have to disburse on account of the obligations of the
principal debtors. This reimbursement is a payment of a sum of money, resulting from
an obligation to give; chan roblesvirtualawlibraryand to the Luzon Surety Co., it was
indifferent that the reimbursement should be made by Hemady himself or by some
one else in his behalf, so long as the money was paid to it.
Decision: The order appealed from is reversed.

So Ping Bun v. CA
Issue: W/N lack of malice relieve the interferer of the legal liability for entering into
contracts and causing breach of existing ones.
Held: No. While we do not encourage tort interferers seeking their economic
interest to intrude into existing contracts at the expense of others, however, we find
that the conduct herein complained of did not transcend the limits forbidding an
obligatory award for damages in the absence of any malice. The business desire is
there to make some gain to the detriment of the contracting parties. Lack of malice,
however, precludes damages. But it does not relieve petitioner of the legal liability for
entering into contracts and causing breach of existing ones. The respondent appellate
court correctly confirmed the permanent injunction and nullification of the lease
contracts between DCCSI and Trendsetter Marketing, without awarding damages.
The injunction saved the respondents from further damage or injury caused by
petitioner’s interference.
Decision: Decision of CA is affirmed with modification.

Sanchez v. Rigos
Issue: W/N unilateral promise to sell the land not supported by a consideration
distinct from the price bars the seller from withdrawing the offer to sell from the
buyer.
Held: No. In order that said unilateral promise may be “binding” upon the promisor,
Article 1479 requires the concurrence of a condition, namely, that the promise be
“supported by a consideration distinct from the price.” Accordingly, the promise
cannot compel the promisor to comply with the promise, unless the former
establishes the existence of said distinct consideration. In other words, the promise
has the burden of proving such consideration. In accepted unilateral promise to sell,
since there may be no valid contract without a cause or consideration, the promisor
is not bound by his promise and may, accordingly, withdraw it. Pending notice of its
withdrawal, his accepted promise partakes, however, of the nature of an offer to sell
which, if accepted, results in a perfected contract of sale.
Decision: Affirmed.

Tong Brothers Co. v. IAC

Issue: W/N there was a perfected contract between the petitioner and private
respondents regarding the repair of the vessel.
Held: No. The fact that the parties' previous contracts for the repair of the private
respondent's vessels were all oral and that the procedure consisted merely in the
vessels being drydocked at the petitioner's shipyard and after repair the petitioner
would just send the bill to the private respondent, does not necessarily result in a
conclusive presumption that all subsequent contracts between the parties of similar
or allied nature should also be oral and the procedure be the same. From the
exchange of telegrams between the two parties, there was not yet a meeting of the
minds as to the cause of the contract. Moreover, the proximate cause of the total
loss of Zamboanga-J was the negligence of the private respondent. Breach of contract
by the appellant could not have been the proximate cause as there was no perfected
contract between the parties to repair Zamboanga-J. Hence, the private respondent is
not entitled to recover damages against the private respondent.
Decision: The questioned decision is reversed and set aside.
Notes: A contract may be entered into in whatever form except where the law
requires a document or other special form as in the contracts enumerated in Article
1388 of the Civil Code.

Velasco v. CA
Issue: W/N there was a perfected contract of sale between Magdalena Estate and
Lorenzo Velasco evidenced by the sum of P10,000.00 as part of the down-payment.
Held: No. It is not difficult to glean from the aforequoted averments that the
petitioners themselves admit that they and the respondent still had to meet and agree
on how and when the down-payment and the installment payments were to be paid.
Such being the situation, it cannot, therefore, be said that a definite and firm sales
agreement between the parties had been perfected over the lot in question. Indeed,
this Court has already ruled before that a definite agreement on the manner of
payment of the purchase price is an essential element in the formation of a binding
and enforceable contract of sale. The fact, therefore, that the petitioners delivered to
the respondent the sum of P10,000.00 as part of the down-payment that they had to
pay cannot be considered as sufficient proof of the perfection of any purchase and
sale agreement between the parties under article 1482 of the new Civil Code.
Decsion: Affirmed.

Ong Yiu v. CA
Issue: W/N PAL should only pay P100.00 as stipulated at the back of the airline
ticket even if not signed by the petitioner.
Held: Yes. While it may be true that petitioner had not signed the plane ticket he is
nevertheless bound by the provisions thereof. “Such provisions have been held to be
a part of the contract of carriage, and valid and binding upon the passenger regardless
of the latter’s lack of knowledge or assent to the regulation”. It is what is known as a
contract of “adhesion”, in regards which it has been said that contracts of adhesion
wherein one party imposes a readymade form of contract on the other, as the plane
ticket in the case at bar, are contracts not entirely prohibited. “A contract limiting
liability upon an agreed valuation does not offend against the policy of the law
forbidding one from contracting against his own negligence.” Considering, therefore,
that petitioner had failed to declare a higher value for his baggage, he cannot be
permitted a recovery in excess of P100.00. Besides, passengers are advised not to
place valuable items inside their baggage but “to avail of our V-cargo service.” It is
likewise to be noted that there is nothing in the evidence to show the actual value of
the goods allegedly lost by petitioner.
Decision: Affirmed.

Weldon v. CA
Issue: W/N mere proposal for rendering service under a contract of supervision by
Weldon resulted to a perfected contract.
Held: No. There is absence of consent. Only an absolute or unqualified acceptance
of a definite offer manifests the consent necessary to perfect a contract (Article 1319,
New Civil Code). The first proposal submitted by Weldon Construction for
rendering service under a contract of supervision is simply that, a proposal. It never
attained perfection as the contract between the parties. The advance payment of
P10,000.00 Pesos was not an unqualified acceptance of the offer contained in the first
proposal as in fact an entirely new proposal was submitted by Weldon Construction
subsequently. If, as claimed by the petitioner, the parties had already agreed upon a
contract of supervision under Exhibit "A," why then was a second proposal made? Res
ipsa loquitur. The existence of the second proposal belies the perfection of any
contract arising from the first proposal.
Decision: Affirmed the decision of CA.
Notes: Once a contract is shown to have been consummated or fully performed by
the parties thereto, its existence and binding effect can no longer be disputed.

C & C Commercial Corp. v. Menor

Issue: W/N A reservation “to reject the bid of any bidder” make it obligatory for a
government agency to award its contract to the lowest bidder.
Held: No. The Nawasa was justified in not awarding the contract to C & C
Commercial Corporation because it had no tax clearance certificate. It had a pending
tax case in the Bureau of Internal Revenue. The award to C & C Commercial
Corporation would be in gross contravention of Administrative Order No. 66.
Moreover, it was not the ministerial duty of the Nawasa officials to award the
contract to C & C Commercial Corporation even if it was the lowest bidder. The
Nawasa in its addendum No. 1 to the invitation to bid dated July 6, 1966 reserved the
right “to reject the bid of any bidder”. Therefore, a bidder whose bid is rejected has
no cause for complaint nor a right to dispute the award to another bidder.
Decision: Affirmed.

Tang v. CA
Issue: W/N Art. 1332 of the New Civil Code is applicable in the case at bar even if
there’s no doubt that the grandmother of the petitioner deliberately concealed
material facts about her physical condition and history and/or conspired with
whoever assisted her.
Held: No. It should be noted that under Art. 1332 abovequoted, the obligation to
show that the terms of the contract had been fully explained to the party who is
unable to read or understand the language of the contract, when fraud or mistake is
alleged, devolves on the party seeking to enforce it. Here the insurance company is
not seeking to enforce the contracts; on the contrary, it is seeking to avoid their
performance. It is petitioner who is seeking to enforce them even as fraud or mistake
is not alleged. Accordingly, respondent company was under no obligation to prove
that the terms of the insurance contracts were fully explained to the other party.
Even if we were to say that the insurer is the one seeking the performance of the
contracts by avoiding paying the claim, it has to be noted as above stated that there
has been no imputation of mistake or fraud by the illiterate insured whose personality
is represented by her beneficiary the petitioner herein. In sum, Art. 1332 is
inapplicable to the case at bar. Considering the findings of both the CFI and Court of
Appeals that the insured was guilty of concealment as to her state of health, we have
to affirm.
Decision: Affirmed.
Notes: Art. 1332. When one of the parties is unable to read, or if the contract is in a
language not understood by him, and mistake or fraud is alleged, the person enforcing
the contract must show that the terms thereof have been fully explained to the
former.

Cariño v. CA
Issue: W/N the deed of sale executed is absolutely simulated, thus there is absence
of consent.
Held: Yes. This Court finds that there is substantial and convincing evidence that it
was a simulated deed of sale and transfer of rights, to warrant the affirmance of the
decision of the respondent Court of Appeals. The characteristic of simulation is the
fact that the apparent contract is not really desired or intended to produce legal
effects nor in any way alter the judicial situation of the parties. Under the
circumstances surrounding their transaction, the parties knew that the document was
at once fictitious and simulated where none of the parties intended to be bound
thereby. Contracts of sale are void and produce no effect whatsoever where the
price, which appears therein as paid, has in fact never been paid by the vendee to the
vendor. A sale of land without consideration, but intended merely to protect a party
to a joint venture for the cash advances he was to make for the realty subdivision that
the parties wanted to put up, is null and void.
Decision: Petition is hereby denied.

Lagunzad v. Gonzales
Issue: W/N parties are bound to comply with contracts entered into where
provisions thereof are not contrary to law, morals, good customs, public orders or
public policy.
Held: Yes. It is necessary to distinguish between real duress and the motive which is
present when one gives his consent reluctantly. A contract is valid even though one of
the parties entered into it against his own wish and desires, or even against his better
judgment. In legal effect, there is no difference between a contract wherein one of the
contracting parties exchanges one condition for another because he looks for greater
profit or gain by reason of such change, and an agreement wherein one of the
contracting parties agrees to accept the lesser of two disadvantages. In either case, he
makes a choice free and untramelled and must accordingly abide by it. The Licensing
Agreement has the force of law between the contracting parties and since its
provisions are not contrary to law, morals, good customs, public order or public
policy (Art. 1306, Civil Code), petitioner should comply with it in good faith.
Decision: Judgment appealed from hereby affirmed

Law v. Olympic Sawmill

Issue: W/N the amount of P6,000 obligation, added to the P10,000 principal
obligation after extension of payment of original obligation is illegal.
Held: No. Under Article 1354 of the Civil Code, in regards to the agreement of the
parties relative to the P6,000.00 obligation, “it is presumed that it exists and is lawful,
unless the debtor proves the contrary”. No evidentiary hearing having been held, it
has to be concluded that defendant’s had not proven that the P6,000.00 obligation
was illegal. Confirming the Trial Court’s finding, we view the P6,000.00 obligation as
liquidated damages suffered by plaintiff, as of March 17, 1960, representing loss of
interest income, attorney’s fees and incidentals.
Decsion: Affirmed.

Lao Sok v. Sabaysabay

Issue: W/N the oral contract concerning the employee’s separation pay could still be
enforced.
Held: Yes. Lao Sok made an offer which was duly accepted by the private
respondents. There was, therefore, a meeting of the minds between two parties
whereby one bound himself with respect to the other, to give something or to
render some service (Article 1305, Civil Code). By the unconditional acceptance of
the offer that they would be paid separation pay, a contract was therefore perfected.
As held in the case of Herrera v. Auditor General, (102 Phil. 875): x x x Contracts in
whatever form they may have been entered into are binding on the parties unless
form is essential for the validity and enforceability of that particular contract.
Decision: Affirmed.

Gallardo v. IAC
Issue: W/N Registration of a private deed of sale by the Register of Deeds even if
unauthorized lends to the validity of the defective private document of sale.
Held: No. True, as argued by appellants, a private conveyance of registered property
is valid as between the parties. However, the only right the vendee of registered
property in a private document is to compel through court processes the vendor to
execute a deed of conveyance sufficient in law for purposes of registration. Plaintiffs-
appellants’ reliance on Article 1356 of the Civil Code is unfortunate. The general rule
enunciated in said Art. 1356 is that contracts are obligatory, in whatever form they
may have been entered, provided all the essential requisites for their validity are
present. The next sentence provides the exception, requiring a contract to be in
some form when the law so requires for validity or enforceability. Said law is Section
127 of Act 496 which requires, among other things, that the conveyance be executed
‘before the judge of a court of record or clerk of a court record of a notary public or
a justice of the peace, who shall certify such acknowledgment substantially in form
next hereinafter stated.’ Such law was violated in this case. The action of the Register
of Deeds of Laguna in allowing the registration of the private deed of sale was
unauthorized and did not lend a bit of validity to the defective private document of
sale.”
Decision: Decision affirmed

Lim v. CA
Issue: W/N Whether or not the petitioner should be deemed to have already paid
his obligation to the private respondent, because the contract bears a stipulation
stating “Terms: Cash upon sign of this contract”
Held: No. Interpretation shall not favor the party who caused the ambiguity.
Considering the admitted fact that the contract of sale was prepared in the office of
respondent company by Generoso Bongato, Assistant to the Manager of the
company, upon instruction of General Manager Emiliano L. Abalos who is a lawyer,
and We are now confronted with the varying or conflicting interpretations of the
parties thereto, the respondent company contending that the stipulation “Terms:
Cash upon signing of this contract” does not mean that the agreement was a cash
transaction because no money was paid by the petitioner at the time of the signing
thereof whereas the petitioner insists that it was a cash transaction inasmuch as he
paid cash amounting to P142,975.00 upon the signing of the contract, the payment
having been made at around 1:30 in the afternoon of November 13, 1970 to the
cashier, Teodoro Garcia, and Manager Abalos although the sale was agreed to in the
morning of the same day, November 13, 1970, the conflicting interpretations have
shrouded the stipulation with ambiguity or vagueness. Then, the cardinal rule should
and must apply, which is that the interpretation shall not favor the party who caused
the ambiguity (Art. 1377, New Civil Code). We rule that in the instant case, the
interpretation to be taken shall not favor the respondent company since it is the
party who caused the ambiguity in its preparation.
Decision: Reversed and set aside.

Republic v. Castellvi
Issue: W/N the “taking” of the property by the Republic should retroact at the time
they occupied the same as they intended permanent occupation.
Held: No. Intention cannot prevail over the clear and express terms of the lease
contract. Intent is to be deduced from the language employed by the parties, and the
terms of the contract, when unambiguous, are conclusive in the absence of averment
and proof of mistake or fraud—the question being not what the intention was, but
what is expressed in the language used. Moreover, in order to judge the intention of
the contracting parties, their contemporaneous and subsequent acts shall be
principally considered. However general the terms of a contract may be, they shall
not be understood to comprehend things that are distinct and cases that are different
from those upon which the parties intended to agree.
Decision: Modified.

Eastern Shipping Lines v Maragarine-Verkaufs-Union

Issue: W/N the code of commerce should govern instead of the stipulation in the bill
of lading which provides the application of the York-Antwerp Rules.
Held: No. The Court finds no error and upholds the lower court's ruling sustaining
respondent's damage claim although the amount thereof did not exceed 5% of
respondent's interest in the cargo and would have been barred by the cited article of
the Commerce Code. We hold that the lower court correctly ruled the cited codal
article to be "not applicable in this particular case for the reason that the bill of lading
contains "an agreement to the contrary" for it is expressly provided in the last
sentence of the first paragraph that "In case of average, same shall be adjusted
according to York-Antwerp Rules of 1950." The insertion of said condition is
expressly authorized by Commonwealth Act No. 65 which has adopted in toto the
U.S. Carriage of Goods by Sea Act. There is a clear and irreconcilable inconsistency
between the York-Antwerp Rules expressly adopted by the parties as their contract
under the bill of lading which sustains respondent's claim and the codal article cited by
petitioner which would bar the same. Furthermore, as correctly contended by
respondent, what is here involved is a contract of adhesion as embodied in the
printed bill of lading issued by petitioner for the shipment to which respondent as the
consignee merely adhered, having no choice in the matter, and consequently, any
ambiguity therein must be construed against petitioner as the author.
Decision: Appealed judgment is hereby affirmed.
Cabaliw v. Sadorra
Issue: W/N the sale of a parcel of land seven months after a judgment was rendered
against the vendor for support is deemed fraudulent because it did not pay any part of
the judgment from the proceeds thereof.
Held: Yes. For the heart of the matter is that about seven months after a judgment
was rendered against him in Civil Case of the Court of First Instance of Manila and
without paying any part of that judgment, Benigno Sadorra sold the only two parcels
of land belonging to the conjugal partnership to his son-in-law. Such a sale even if
made for a valuable consideration is presumed to be in fraud of the judgment creditor
who in this case happens to be the offended wife. Furthermore, the presumption
established by the law in favor of petitioners is bolstered by other indicia of bad faith
on the part of the vendor and vendee. Thus (1) the vendee is the son-in-law of the
vendor. x x x close relationship between the vendor and the vendee is one of the
known badges of fraud. (2) At the time of the conveyance, the vendee, Sotero, was
living with his father-in-law, the vendor, and he knew that there was a judgment
directing the latter to give a monthly support to his wife Isidora and that his father-in-
law was avoiding payment and execution of the judgment. (3) It was known to the
vendee that his father-in-law had no properties other than those two parcels of land
which were being sold to him. The fact that a vendor transfers all of his property to a
third person when there is a judgment against him is a strong indication of a scheme
to defraud one who may have a valid interest over his properties.
Decision: Set aside the decision of the appellate court.

Hongkong & Shanghai Bank v. Pauli

Issue: W/N the action for annulment of the sale of the sale of the Hacienda to the
Garganeras has already prescribed.
Held: Yes. When a transaction involves registered land, the four-year period fixed in
Article 1391 within which to bring an action for annulment of the deed, shall be
computed from the registration of the conveyance (March 5, 1963) on the familiar
theory that the registration of the document is constructive notice of the conveyance
to the whole world. Nevertheless, as the plaintiff’s right of action in Civil Case No.
465 had already prescribed, the trial court did not err in dismissing the case.
Decision: Affirmed.

Felipe v. Heirs of Aldon ABAD SANTOS, J.:

Issue: W/N a contract of sale of land made by the wife without the husband’s
consent is voidable.
Held: Yes. The view that the contract made by Gimena is a voidable contract is
supported by the legal provision that contracts entered by the husband without the
consent of the wife when such consent is required, are annullable at her instance
during the marriage and within ten years from the transaction questioned.
Decision: Modified.
Notes: The voidable contract of Gimena was subject to annulment by her husband
only during the marriage because he was the victim who had an interest in the
contract. Gimena, who was the party responsible for the defect, could not ask for its
annulment. Their children could not likewise seek the annulment of the contract
while the marriage subsisted because they merely had an inchoate right to the lands
sold.

House Int’l. v. IAC CORTES, J.:

Issue: W/N the conditional sale is null and void for being ultra vires.
Held: No. The main thrust of the petitioner’s challenge on the validity of the
conditional sale is that the contract is ultra vires because the respondent
CENTERTOWN is not qualified to acquire properties under its Articles of
Incorporation. The petitioner has confused a void contract with an ultra vires
contract which is merely voidable. As bases for a declaration that the conditional sale
between GSIS and CENTERTOWN is null and void for being contrary to law or
public policy, the constitutional provisions are inapposite. Not one of those
provisions render unlawful the contract in question. Except for the prohibition against
the taking of private property for public use without just compensation, the other
provisions require implementing legislation to confer a legal right and impose a legal
duty which can be judicially invoked.
Decision: Denied.

Ortega v. Leonardo BENGZON, J.:

Issue: W/N the oral agreement concerning a sale of piece of land is unenforceable
even if there is already partial performance.
Held: No. Well known is the general rule in the Statute of Frauds precluding
enforcement of oral contracts for the sale of land. Not so well known is the
exception concerning partially executed contracts 1—at least our jurisprudence
offers few, if any, apposite illustrations. This appeal exemplifies such exception.
According to American Jurisprudence, "The continuance in possession by a purchaser
who is already in possession may, in a proper case, be sufficiently referable to the
parol contract of sale to constitute a part performance thereof. There may be
additional -acts or peculiar circumstances which sufficiently refer the possession to
the contract. * * * Continued possession under an oral contract of sale, by one
already in possession as a tenant, has been held a sufficient part performance. It
would appear that the complaint in this case described several circumstance indicating
partial performance: relinquishment of rights1 continued possession, building of
improvements, tender of payment plus the surveying of the lot at plaintiff's expense
and the payment of rentals, the combination of all of them amounted to partial
performance.
Decision: Reversed.

Carbonel v. Poncio CONCEPCIÓN, J.:

Issue: W/N Unenforceable contracts applies only to executory contracts.
Held: Yes. The Statute of Frauds is applicable only to executory contracts, not to
contracts that are totally or partially performed. The reason is simple. In executory
contracts there is a wide field for fraud because, unless they be in writing there is no
palpable evidence of the intention of the contracting parties. However, if a contract
has been totally or partially performed, the exclusion of parol evidence would
promote fraud or bad faith, for it would enable the defendant to keep the benefits
already derived by him from the transaction in litigation, and, at the same time, evade
the obligations, responsibilities or liabilities assumed or contracted by him thereby. So
that when the party concerned has pleaded partial performance, such party is entitled
to a reasonable chance to ,establish by parol evidence the truth of this allegation, as
well as the contract itself. "The recognition of the exceptional effect of part
performance in taking an oral contract out of the statute of frauds involves the
principle that oral evidence is admissible in such cases to prove both the contract and
the part performance of the contract" (49 Am. Jur. 927).
Decision: Appeal is set aside.
Babao v. Perez BAUTISTA ANGELO, J.:
Issue: W/N the oral agreement between Santiago and Celestina concerning the
conveyance of one half of a parcel of land is unenforceable as it fails to comply with
the statute of frauds.
Held: Yes. Contracts which by their terms are not to be performed within one year
may be taken out of the Statute of Frauds through perf ormance by one party
thereto. In order, however, that a partial performance of the contract may take the
case out of the operation of the statute, it must appear clear that the full
performance has been made by one party within one year, as otherwise the statute
would apply. It is not therefore correct to state that Santiago Babao has fully
complied with his part within the year from the alleged contract in question.
Furthermore, the promise of Celestina to convey the property is also incapable of
execution because she could not give and deliver one-half of the land if she was
already dead.
Decision: Reversed.
Notes: Where the contract is vague and ambiguous, the doctrine of part
performance cannot be invoked to take the case out of the operation of the statute
of frauds.
Cabague v. Auxilio Bengzon, J.:
Issue: W/N the promise to marry, being an oral agreement is an unenforceable
contract.
Held: No. It should be observed preliminarily that, under the former rules of
procedure, when the complaint did not state whether the contract sued on was in
writing or not, the statute of frauds could be no ground for demurrer. Under the
new Rules "defendant may now present a motion to dismiss on the ground that the
contract was not in writing, even if such fact is not apparent on the face of the
complaint. The fact may be proved by him." Felipe Cabague's action may not prosper,
because it is to enforce an agreement in consideration of marriage. Evidently as to
Felipe Cabague and Matias Auxilio this action could not be maintained on the theory
of "mutual promise to marry".3 Neither may it be regarded as action by Felipe against
Socorro "on a mutual promise to marry." Consequently, we declare that Geronimo
may continue his action against Socorro for such damages as may have resulted from
her failure to carry out their mutual matrimonial promises.
Decision: returned to the lower court for further proceedings.ù

Yuvienco v. Dacuycuy BARREDO, J.:

Issue: W/N mere unjustifiable refusal to proceed with the sale of the property in the
absence of any note or memorandum and signed agreement of sale is unenforceable.
Held: Yes. We hold that either way We view the situation, the conclusion is
inescapable that the claim of respondents that petitioners have unjustifiably refused to
proceed with the sale to them of the property in question is unenforceable under the
Statute of Frauds. It is nowhere alleged in said paragraphs 8 to 12 of the complaint
that there is any writing or memorandum, much less a duly signed agreement to the
effect that the price of P6,500,000 fixed by petitioners for the real property herein
involved was agreed to be paid not in cash but in installments as alleged by
respondents. To put it the other way, under the Statute of Frauds, the contents of
the note or memorandum, whether in one writing or in separate ones merely
indicative for an adequate understanding of all the essential elements of the entire
agreement, may be said to be the contract itself, except as to the form. In any sale of
real property on installments, the Statute of Frauds read together with the perfection
requirements of Article 1475 of the Civil Code must be applied such that payment on
installments of the sale must be in the requisite note or memorandum.
Decision: Set aside the decision of the lower court.

Clarin v. Rulona GUTIERREZ, JR., J.:

Issue: W/N Statute of Frauds cover partially executed contracts.
Held: No. Hence, it cannot be denied that there was a perfected contract of sale
between the parties and that such contract was already partially executed when the
petitioner received the initial payment of P800.00. The latter’s acceptance of the
payment clearly showed his consent to the contract thereby precluding him from
rejecting its binding effect. With the contract being partially executed, the same is no
longer covered by the requirements of the Statute of Frauds in order to be
enforceable. Therefore, with the contract being valid and enforceable, the petitioner
cannot avoid his obligation by interposing that contract is not a public document. On
the contrary, under Article 1357 of the Civil Code, the petitioner can even be
compelled by the respondent to execute a public document to embody their valid and
enforceable contract.
Decision: Affirmed.

Bisaya Land Transportation v. Sanchez PADILLA, J.:

Issue: W/N the contracts which Receiver Amor entered into with Sanchez, without
the approval of the court which appointed him receiver is unenforceable.
Held: Yes. Contracts necessarily imposed obligations and liabilities on the contracting
parties, thereby affecting the disposition of the assets and business of the company
under receivership. But a perusal of the Contracts in question would show that there
is nothing in their cause, object or purpose which renders them void. The purpose of
the Contracts was to create an agency for BISTRANCO with Marciano Sanchez as its
agent in Butuan City. Even as to the other provisions of the Contracts, there is
nothing in their cause or object which can be said as contrary to law, morals, good
customs, public order or public policy so as to render them void. On the other hand,
paragraph 1, Article 1403 of the Civil Code provides that contracts "entered into in
the name of another person by one who has been given no authority or legal
representation, or who has acted beyond his powers" are unenforceable, unless they
are ratified. In the case at bar, it is undisputed that Atty. Adolfo Amor was entrusted,
as receiver, with the administration of BISTRANCO and its business. But the act of
entering into a contract is one which requires the authorization of the court which
appointed him receiver. Consequently, the questioned Contracts can rightfully be
classified as unenforceable for having been entered into by one who had acted beyond
his powers, due to Receiver Amor's failure to secure the court's approval of said
Contracts.
Decision: Affirmed.

Hernandez v. CA NARVASA, J.:

Issue: W/N the agreement between the parties concerning the boundaries of their
estates should have been reduced into writing to be enforceable.
Held: No. The respondents’ reliance on the Statute of Frauds to secure a contrary
judgment is misplaced. The Statute of Frauds finds no application to this case. Not
every agreement “affecting land” must be put in writing to attain enforceability. Under
the Statute of Frauds, Article 1403(2) (e) of the Civil Code, such formality is only
required of contracts involving leases for longer than one year, or for the sale of real
property or of an interest therein. Hernandez’s testimony is thus admissible to
establish his agreement with Fr. Garcia as to the boundary of their estates.
Decision: Reversed.
Notes: There was evidence of fraud on the part of Fr. Garcia who ignored the
boundaries made by the surveyors, but this evidence was overlooked by the Court.
Thus, if taken into consideration, and that false designation of boundaries in an
advance plan submitted for land registration was reflected, the agreement therefore
should be void.

Rubias v. Batiller
(see digest of mariz)

Javier v. vda. De Cruz

(see digest of mariz)

Menil v. CA
(see digest of mariz)