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The Facts

In May 1992, Gotto offered to purchase from the Spouses Mali Bog Cla their
364-square meter parcel of land, situated in Davao City and covered by
Transfer Certificate of Title (TCT) No. 143020, for P3,000,000. Finding the
offer acceptable, the Spouses executed with Gotto a Memorandum of
Agreement dated 8 May 1992.
On 2 December 1992, Gottos lawyer Atty. Mali Bog Rin prepared a Deed of
Absolute Sale indicating the consideration as only P400,000. When Mrs. Mali
Bog Cla noticed that the consideration was very low, she [complained] and
called the attention of Gotto but the latter told her not to worry as he would
be the one to pay for the taxes and she would receive the net amount
of P3,000,000."
To conform with the consideration stated in the Deed of Absolute Sale, the
parties executed another Memorandum of Agreement, which allegedly
replaced the first Memorandum of Agreement, showing that the selling price
of the land was only P400,000.
Upon signing the Deed of Absolute Sale, Gotto paid P200,000 in cash to the
Spouses and issued a postdated Philippine National Bank (PNB) check in the
amount of P2,800,000, representing the remaining balance of the purchase
price of the subject property. Thereafter, TCT No. 143020 was cancelled and
TCT No. T-186128 was issued in the name of EPBI.
When presented for payment, the PNB check was dishonored for the reason
"Drawn Against Insufficient Funds." Despite the Spousesrepeated demands
to either pay the full value of the check or to return the subject parcel of
land, Gotto failed to do either. Left with no other recourse, the Spouses filed
with the Regional Trial Court, Branch 16, Davao City a Complaint for
Annulment of Contract and Damages with a Prayer for the Issuance of a
Temporary Restraining Order and a Writ of Preliminary Injunction.
In their Answer, Gotto countered that he had already delivered to the
Spouses the amount ofP2,800,000 representing the face value of the PNB
check, as evidenced by a receipt issued by the Spouses. Gotto pointed out
that the Spouses never returned the PNB check claiming that it was
misplaced. Gotto asserted that the payment they made rendered the filing of
the complaint baseless.
At the pre-trial, Gotto admitted, among others, issuing the postdated PNB
check in the sum of P2,800,000. The Spouses, on the other hand, admitted
issuing a receipt which showed that they received the PNB check from Gotto.
Thereafter, trial ensued.

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The Issues
1. WHETHER OR NOT FRAUD WAS EMPLOYED IN THE CONTRACT OF
SALE SUBJECT MATTER OF THE INSTANT CASE; and
2. WHETHER OR NOT THE FRAUD EMPLOYED CAN BE CHARACTERIZED
AS DOLO CAUSANTE OR DOLO INCIDENTE WITHIN THE MEANING OF
THE CIVIL CODE OF THE PHILIPPINES.

DECIDE.
LEGALLY EXPLAIN.
CITE YOUR LEGAL BASIS/SES.

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