GEORGE W.

BATCHELDER
vs.
THE CENTRAL BANK OF THE PHILIPPINESG.R. No. L-25071 March 29, 1972Facts:
Monetary Board Resolution No. 857 requires Filipino and American resident contractorsfor constructions
in U.S. military bases in the Philippines to surrender to the Central Bank theirdollar earnings under their
respective contracts but were entitled to utilize 90% of theirsurrendered dollars for importation at the
preferred rate of commodities for use within oroutside said U.S. military bases. Resolution 695 moreover,
denies their right to reacquire at the preferred rate ninety per cent (90%) of the foreign exchange the sold or
surrendered earningsto Central Bank for the purpose of determining whether the imports against
proceeds of contracts entered into prior to April 25, 1960 are classified as dollar-to-dollar transactions
ornot.George Batchelder, an American Citizen permanently residing in the Philippines who isengaged in
the Construction Business, surrendered to the Central Bank his dollar earningsamounting to U.S.
$199,966.00. He compels Central Bank of the Philippines to resell to him$170,210.60 at the preferred
rate of exchange of two Philippine pesos for one American dollar,more specifically P2.00375 which was
denied by the court.He then contended that said decision failed to consider that if there was no
contract obligating the bank to resell to him at the preferred rate, the judgment of the lower court canand
should nevertheless be sustained on the basis of there being such an obligation arising fromlaw.
Issue:
Whether or not Central Bank has the obligation arising from law to resell theUS$154,094.56 to Batchelder
at the preferred rate.
Held:
Central Bank was intended to attain basic objectives in the field of currency and finance.
It shall be the responsibility of the Central Bank of the Philippines to administer the monetary
and banking system of the Republic. It shall be the duty of the Central Bank to use the powersgranted to it
under this Act to achieve the following objectives: (a) to maintain monetarystability in the Philippines; (b)
to preserve the international value of the peso and theconvertibility of the peso into other freely
convertible currencies; and (c) to promote a risinglevel of production, employment and real income in the
Philippines."It is, of course, true that obligations arise from 1) law; 2) contracts; 3) quasi-contracts;4) acts
or omissions punished by law and 5) quasi-delicts. One of the sources an obligation thenis a law. A legal
norm could so require that a particular party be chargeable with a prestation orundertaking to give or to
deliver or to do or to render some service. It is an indispensablerequisite though that such a provision,
thus in fact exists. There must be a showing to that effect.As early as 1909 in Pelayo v. Lauron, Court
through Justice Torres, categorically declared:"Obligation arising from law are not presumed." For in the
language of Justice Street in LeungBen v. O'Brien, a 1918 decision, such an obligation is "a creation of the
positive law." They areordinarily traceable to code or statute. It is true though, as noted in the motion
forreconsideration following People v. Que Po Lay, that a Central Bank circular may have the forceand
effect of law, especially when issued in pursuance of its quasi-legislative power. That of itself, however, is
no justification to conclude that it has thereby assumed an obligation.

RP vs. PLDT (contracts; autonomy of will)

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

Corpus vs. CA (innominate contracts)

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

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

Ejercito v. Oriental Assurance Corporation, G.R. No. 192099, July 8, 2015

Ignorance of the contents of an instrument does not ordinarily affect the liability of the one who signs it

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

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

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

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

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

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

Banco Filipino Savings vs Navarro

Apparent then is that the separate treatment for the two classes of loans was maintained. Yet, CIRCULAR
No. 494 makes no distinction as to the types of loans that it is applicable to unlike Circular No. 586 dated
January 1, 1978 and Circular No. 705 dated December 1, 1979, which fix the effective rate of interest on
loan transactions with maturities of more than 730 days to not exceeding 19% per annum (Circular No.
586) and not exceeding 21% per annum (Circular No. 705) "on both secured and unsecured loans as
defined by the Usury Law, as amended."

In the absence of any indication in CIRCULAR No. 494 as to which particular type of loan was meant by
the Monetary Board, the more equitable construction is to limit CIRCULAR No. 494 to loans guaranteed
by securities other than mortgage upon registered realty.

WHEREFORE, the Court rules 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. The judgment appealed from is, therefore, hereby affirmed in so far as it orders
petitioner Banco Filipino to desist from enforcing the increased rate of interest on petitioner's loan.

Del Rosario vs. Shell Company of the Phils. LimitedNo. L-28776. August 19, 1988.SIMEON DEL
ROSARIO, plaintiff-appellant, vs. THE SHELL COMPANY OF THEPHILIPPINES LIMITED, defendant-
appellee.Facts:1. The parties herein entered into a Lease Agreement at a monthly rental of TwoHundred
Fifty Pesos (P250.00). Paragraph 14 of said contract of lease provides: In theevent of an official
devaluation or appreciation of the Philippine cannot the rentalspecified herein shall be adjusted in
accordance with the provisions of any law ordecree declaring such devaluation or appreciation as may
specifically apply to rentals."2. On November 6, 1965, President Diosdado Macapagal promulgated
Executive OrderNo. 195 1 titled "Changing the Par Value of the Peso from US$0.50 to US$0.2564103.By
reason of this Executive Order No. 195, plaintiff Simeon Del Rosario demanded fromthe defendant
company alleged increase in the monthly rentals from P250.00 a monthto P487.50 a month. Defendant
company fertilize to pay the increased monthly rentals,hence a complaint was filed by Simeon.3. The trial
court in dismissed the complaint stating said Executive Order No. 195,contrary to the contention of the
plaintiff, has not officially devalued the Philippine pesobut merely modified the par value of the peso.
Petitioner contended that beneficientExecutive Order No. 195 in effect decreased the worth or value of
our currency, therehas taken place a "devaluation" or "depreciation" which would justify the
proportionateincrease of rent.Issue: W/N there has been dimunition of purchasing power of peso after the
issuance ofExecutive Order No. 195, thus entitling the petioner an increase in rentals.Held: Yes. In the
case at bar, while no express reference has been made to metalliccontent, there nonetheless is a
reduction in par value or in the purchasing power ofPhilippine currency. Even assuming there has been
no official devaluation as the term istechnically understood, the fact is that there has been a diminution or
lessening in thepurchasing power of the peso, thus, there has been a "depreciation" (opposite
of"appreciation"). Moreover, when laymen unskilled in the semantics of economics usethe terms
"devaluation" or "depreciation" they certainly mean them in their ordinarysignification decrease in
value. Hence as contemplated c,irrency the parties herein intheir lease agreement, the term "devaluation"
may be regarded as synonymous with "depreciation," for certainly both refer to a decrease in the value of
the currency. Therentals should therefore by their agreement be proportionately increased.Decision:
Reversed.

G.R. No. 184041 : October 13, 2010ANICETO G. SALUDO, JR., vs

. SECURITY BANK CORPORATION,
FACTS:
On May 30, 1996, Booklight was extended an omnibus line credit facility by SBS in the amount of 10,000,000.00.
Said loan was covered by a Credit Agreement and Continuing Suretyship with theherein petitioner as surety, both
documents dated August 1, 1996 to secure full payment andperformance of the obligations arising from the credit
accommodation.Booklight drew several availments of the approved credit facility from 1996 to 1997 and
faithfullycomplied with the terms of the loan. On October 30, 1997, SBC approved the renewal of the creditfacility
of Booklight in the amount of 10,000,000.00 under the prevailing security lending rate. FromAugust 3-14, 1998
Booklight executed 9 promissory notes in favor of SBC in the aggregate amount of 9,652,725.00. As of May 15,
2000 the obligation of Booklight stood at 10,487,875.41, inclusive of interest past due and penalty.On June 16,
2000, SBC filed against Booklight and herein petitioner an action for collection of sum of money with the RTC. On
March 7, 2005 Booklight was declared in default.
ISSUE:
WON petitioner should be held soldarily liable for the second credit facility extended toBooklight.
RULING:
Yes. There is no doubt that Booklight was extended two credit facilities, each with one-year term, bySBC. Booklight
availed of these two credit lines. While Booklight was able to comply with its obligationunder the first credit line, it
defaulted in the payment of the loan obligation amounting to

9,652,725.00under the second credit line. The first credit line was covered by a Continuing
Suretyship with peitioneracting as the surety. It is concluded that the liability of the petitioner did not expire
upon thetermination of the first credit facility.It cannot be gainsaid that the second credit facility was renewed for
another one-year term by SBC. Thisvery renewal is explicitly covered by the guaranteed obligation of
the Continuing Surety.It is the first credit facility that expired and not the Credit Agreement. There was a
second loan pursuantto the same credit agreement. The terms and conditions under the Credit Agreement continue to
applyand the Continuing Suretyship continues to guarantee the Credit Agreement.

Metrobank vs Reynado and Adrandea

 Even if the instant case is viewed from the standpoint of the law on contracts, the disposition absolving the respondents
from criminal liability because of novation is still erroneous.

Under Article 1311 of the Civil Code, contracts take effect only between the parties, their assigns and heirs, except in
case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by
provision of law. The civil law principle of relativity of contracts provides that contracts can only bind the parties who entered
into it, and it cannot favor or prejudice a third person, even if he is aware of such contract and has acted with knowledge thereof.
[41]

In the case at bar, it is beyond cavil that respondents are not parties to the agreement. The intention of the parties thereto
not to include them is evident either in the onerous or in the beneficent provisions of said agreement. They are not assigns or
heirs of either of the parties. Not being parties to the agreement, respondents cannot take refuge therefrom to bar their anticipated
trial for the crime they committed. It may do well for respondents to remember that the criminal action commenced by petitioner
had its genesis from the alleged fraud, unfaithfulness, and abuse of confidence perpetrated by them in relation to their positions as
responsible bank officers. It did not arise from a contractual dispute or matters strictly between petitioner and Universal. This
being so, respondents cannot rely on subject settlement agreement to preclude prosecution of the offense already committed to
the end of extinguishing their criminal liability or prevent the incipience of any liability that may arise from the criminal
offense. This only demonstrates that the execution of the agreement between petitioner and Universal has no bearing on the
innocence or guilt of the respondents.

Velasco vs. CA (Elements)

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

Kauffman vs. PNB (contracts; stipulation pour autrui)

Held: Yes; it is a stipulation pour autrui.

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

Bonifacio vs. Mora (contracts; stipulation pour autrui)

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

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

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

Florentino vs. Encarnacion (contracts; stipulation pour autrui)

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

Bank of America vs IAC

Same Same Same Stipulation pour autrui Contractbetween foreign bank and a local bank asking the latter topay
anamount to a beneficiary, is a stipulation pour autrui.
In VargasPlow Factory, Inc. vs. Central Bank, it was held that the openingof a letter of credit in favor of the
exporter becomes ultimately butthe result of a stipulation
pour autrui
(27 SCRA 84 [1969]).Similarly, when KYOWA asked BANKAMERICA to pay anamount to a beneficiary (either
ACTC or Minami), the eontractwas between KYOWA and BANKAMERICA and it had astipulation pour autrui.

MARIMPERIO COMPAIA NAVIERA, S.A., petitioner,

vs.
COURT OF APPE ALS and UNION IMPORT & EXPORTCORPORATION and PHILIN TRADERS
CORPORATION,respondents.
Civil Law Contracts Art. 1311 of Civil Code A party who hasnot taken part in the contract, cannot sue or be sued
for the performance or cancellation thereof, unless he has a real interestaffected thereby.
According to Article 1311 of the Civil Code, acontract takes effect between the parties who made it, and alsotheir
assigns and heirs, except in cases where the rights andobligations arising from the contract are not transmissible
bytheir nature, or by stipulation or by provision of law. Since acontract may be violated only by the parties, thereto
as againsteach other, in an action upon that contract, the real parties ininterest, either as plaintiff or as defendant,
must be parties tosaid contract. Therefore, a party who has not taken part in itcannot sue or be sued for performance
or for cancellation thereof,unless he shows that he has a real interest affected thereby(Macias & Co. v. Warner
Barnes & Co., 43 Phil. 155 [1922] andSalonga v. Warner Barnes & Co., Ltd., 88 Phil. 125 [1951] Coquiav.
Fieldmen's Insurance Co., Inc., 26 SCRA 178 [1968]).
Same Same Lease In a contract of sub-lease, the personalityof the lessee does not disappear and the sub-lease
generally doesnot have any direct action against the owner of the premises aslessor.
In a sub-lease, there are two leases and two
distinct judicial relations although intimately connected and related toeach other, unlike in a case of assignment of
lease, where thelessee transmits absolutely his right, and his personalitydisappears there only remains in the
juridical relation twopersons, the lessor and the assignee who is converted into a lessee(Moreno, Philippine Law
Dictionary, 2nd ed., p. 594). In other words, in a contract of sublease, the personality of the lessee
does not disappear he does not transmit absolutely his rights and obligations to the sub-
lessee and the sublessee generally does not have any direct action against the owner of the
premises as lessor, to require the compliance of the obligations contracted with the plaintiff
as lessee, or vice versa (10 Manresa, Spanish Civil Code, 438).
Gilchrist vs. Cuddy
29 Phil. 542
FACTS:
Cuddy leased a cinematograph film Zigomar to Gilchrist who owned a theater inIloilo for one week
beginning May 26, 1913 at an agreed rental of P125.00. DefendantsEspejo and Zaldariaga induced their
co-defendant Cuddy to break his contract of leasewith plaintiff Gilchrist by offering Cuddy a rental of P350.00.

Ratio and Held: please check Uribe Notes.

Estate of K.H. Hemady vs Luzon Surety Co., Inc.

Luzon Surety Co. filed a claim against the Estate based on 20 different indemnity agreements, or
counterbonds, each subscribed by a distinct principal and by the deceased K. H. Hemady, a surety
solidaryguarantor.Luzon Surety Co., prayed for allowance, as a contingent claim, of the value of the 20
bonds it executed inconsideration of the counterbonds, and asked for judgment for the unpaid premiums
and documentarystamps affixed to the bonds, with 12 % interest thereon. CFI dismissed the claims
of Luzon Surety Co.,on failure to state the cause of action.
ISSUE
: what obligations are transmissible upon the death of the decedent? Are contingent claimschargeable
against the estate?Under the present Civil Code (Art. 1311),
Contracts take effect only as between the parties, their assigns and heirs,
except in the case where the rights and obligations arising from the contract are not transmissible by their nature, or
by stipulation or by provision of law
.

While in our successional system the responsibility of the heirs for the debts of their decedent
cannotexceed the value of the inheritance they receive from him, the principle remains intact that these
heirssucceed not only to the rights of the deceased but also to his obligations. Articles 774 &
776,NCC,provides, thereby confirming Art. 1311.
ART. 774.
Succession is a mode of acquisition by virtue of which the property, rights and obligations to the extent of the value
of the inheritance, of a person are transmitted through his death to another
or others either by his will or by operation of law. ART. 776.
The inheritance includes all the property, rights and obligations
of a person which are not extinguished by his death.

The binding effect of contracts upon the heirs of the deceased party is not altered by the provision in
ourRules of Court that money debts of a deceased must be liquidated and paid from his estate before
theresidue is distributed among said heirs (Rule 89). The reason is that whatever payment is made from
theestate is ultimately a payment by the heirs and distributees, since the amount of the paid claim in
factdiminishes or reduces the shares that the heirs would have been entitled to receive.The gene
ral rule is that a partys contractual rights and obligations are transmissible to the
successors.The rule is a consequence of the progressive depersonalization of patrimonial
rights and duties.
Of the 3 exceptions fixed by Art 1311, the nature of obligation of the surety or guarantor does not
warrantthe conclusion that his peculiar individual qualities are contemplated as a principal inducement for
thecontract.Creditor Luzon Surety Co. expects from Hemady when it accepted the latter as surety in
thecounterbonds was the reimbursement of the moneys that the Luzon Surety Co. might have to disburse
onaccount of the obligations of the principal debtors. This reimbursement is a payment of a sum of
money,resulting from an obligation to give; and to the Luzon Surety Co., it was indifferent that
thereimbursement should be made by Hemady himself or by some one else in his behalf, so long as
themoney was paid to it.The 2
nd
exception of Art. 1311, is intransmissibility by stipulation of the parties. Being exceptional andcontrary to
the general rule, this intransmissibility should not be easily implied, but must be expresslyestablished, or
at the very least, clearly inferable from the provisions of the contract itself, and the text ofthe agreements
sued upon nowhere indicate that they are non-transferable.The 3
rd
exception to the transmissibility of obligations under Art.
1311 exists when they are nottransmissible by operation of law. The provision makes
reference
to those cases where the lawexpresses that the rights or obligations are extinguished by death: legal
support, parental authority,usufruct, contracts for a piece of work, partnership & agency. By contract, the
articles of the Civil Code

that regulate guaranty or suretyship (Art 2047 to 2084) contain no provision that the guaranty
isextinguished upon the death of the guarantor or the surety.The contracts of suretyship entered into by
Hemady in favor of Luzon Surety Co. not being renderedintransmissible due to the nature of the
undertaking, nor by the stipulations of the contracts themselves,nor by provision of law, his eventual
liability thereunder necessarily passed upon his death to his heirs.The contracts give rise to contingent
claims provable against his estate under sec. 5, Rule 87.
The most common example of the contigent claim is that which arises when a person is
bound as surety
or guarantor for a principal who is insolvent or dead. Under the ordinary contract of suretyship the
suretyhas no claim whatever against his principal until he himself pays something by way of satisfaction
uponthe obligation which is secured. When he does this, there instantly arises in favor of the surety the
right tocompel the principal to exonerate the surety. But until the surety has contributed something to
thepayment of the debt, or has performed the secured obligation in whole or in part, he has no right of
actionagainst anybody

no claim that could be reduced to judgment.Our conclusion is that the

solidary guarantors liability is not extinguished by his death, and that in such
event, the Luzon Surety Co., had the right to file against the estate a contingent claim for
reimbursement.Wherefore, the order appealed from is reversed, and the records are ordered remanded
to the court oforigin. Costs against the Administratrix-
Appellee
.

So Ping Bun vs Court of Appeals 314 SCRA 752, September 21, 1999

Tek Hua Trading Co. entered into lease agreement with the lessor Dee C. Chuan and Sons Inc. (DCCSI).
When Tek Hua Trading Co. was later dissolved and the original members built Tek Hua Trading Corp. The
grandson of the partners named So Ping Bun, after the death of his grandfather, continued occupying the
warehouse for his own textile business.

In a letter to petitioner, the owner of Tek Hua Trading Corp. informed the petitioner to vacate the
warehouse. Petitioner refused and requested formal contracts of lease with DCCSI to which it acceded
and a new lease of contract in favor of Trendsetter was executed.

Tek Hua Enterprises Corp. then petitioned the court for injuction, nullification of the lease contract
between DCCSI and So Ping Bun and damages, to which the Regional Trial Court of Manila Branch 35
granted and was affirmed by the Court of Appeals.

G.R. L-25494 June 14, 1972NICOLAS SANCHEZvs.SEVERINA-RIGOSDoctrine: If the option is given

without aconsideration, it is a mere offer to sell, whichis not binding until accepted.
If, however,acceptance is made before a withdrawal, itconstitutes a binding contract of sale.
Theconcurrence of both acts

the offer and theacceptance

could in such event generate acontract.

Mrs. Rigos agreed and committed to sell and Mr. Sanchez agreed and committed to buy. But there is nothing in the
contract to indicate that her agreement, promise andundertaking is supported by a consideration distinct from the
price stipulated for thesale of the land.Mr. Sanchez has made several tenders of payment in the said amount within
the period before any withdrawal from the contract has been made by Mrs. Rigos, butwere rejected nevertheless.
Issue:
Can an accepted unilateral promise to sell without consideration distinct from the price be withdrawn arbitrarily?
Held:
No. An accepted promise to sell is an offer to sell when accepted becomes a contractof sale.
Rationale:
Since there may be no valid contract without a cause or consideration, the promisor isnot bound by his promise and
may, accordingly, withdraw it. Pending notice of itswithdrawal, his accepted promise partakes, however, of the
nature of an offer to sellwhich, if accepted, results in a perfected contract of sale.This view has the advantage of
avoiding a conflict between Articles 1324 on thegeneral principles on contracts and 1479 on sales of the
Civil Code.Article 1324. When the offeror has allowed the offeree a certain period toaccept, the offer may be
withdrawn at any time before acceptance bycommunicating such withdrawal, except when the option is founded
uponconsideration, as something paid or promised.

Article 1479. A promise to buy and sell a determinate thing for a price certainis reciprocally demandable.An
accepted unilateral promise to buy or to sell a determinate thing for a pricecertain is binding upon the promissory if
the promise is supported by aconsideration distinct from the price.The Court is of the considered opinion that it
should, as it hereby reiterates thedoctrine laid down in the Atkins, Kroll and Co. case, and that, insofar as
inconsistenttherewith, the view adhered to in the Southwestern Sugar & Molasses Co. case should be deemed
abandoned or modified.
J. Antonio concurring
I fully agree with the abandonment of the view previously adhered to in SouthwesternSugar & Molasses Co. vs.
Atlantic Gulf and Pacific Co. (97 Phil 249) which hold thatan option to sell can still be withdrawn, even if accepted,
if the same is not supported by any consideration, and the reaffirmance of the doctrine in Atkins, Kroll & Co., Inc.v.
Cua Hian Tek (102 Phil 948), holding that an option implies xxx the legalobligation to keep the offer (to sell) open
for the time specified that it could bewithdrawn before acceptance, if there was no consideration for the option, but
oncethe offer to sell is accepted, a bilateral promise to sell and to buy ensues, and theofferee
ipso facto
assumes the obligations of a purchaser. In other words, if the optionis given without a consideration, it is a mere
offer to sell, which is not binding untilaccepted. If, however, acceptance is made before a withdrawal, it constitutes
a binding contract of sale. The concurrence of both acts the offer and the acceptance could in such event generate
a contract.While the law permits the offerror to withdraw the offer at any time before acceptanceeven before the
period has expired, some writers hold the view, that the offeror cannotexercise this right in an arbitrary or capricious
manner. This is upon the principle thatan offer implies an obligation on the part of the offeror to maintain it for such
lengthof time as to permit the offeree to decide whether to accept or not, and thereforecannot arbitrarily revoke the
offer without being liable for damages which the offereemay suffer. A contrary view would remove the stability and
security of business transactions.

Tong Brothers Co. v. Intermediate Appellate Court, G.R. No. L-73918, December 21,
1987, 156 SCRA 726

The decisive issue is whether or not there was a perfected contract between the petitioner and the private
respondent to repair the vessel Zamboanga-J.

As can be gleaned 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. The cause of a contract has been defined "as the essential
reason which moves the contracting parties to enter into it (8 Manresa, 5th Edition, p. 450). In other
words, the cause is the immediate, direct and proximate reason which justifies the creation of an
obligation thru the will of the contracting parties (3 Castan, 4th Edition, p. 347)." (General Enterprises, Inc.
v. Lianga Bay Logging Co., Inc., 11 SCRA 733, 739). For the private respondent, the cause of the contract
was the repair of its vessel Zamboanga-J while for the petitioner the cause would be its commitment to
repair the vessel and make it seaworthy. The telegrams dated January 17, January 20, and January 28,
1975 sent by the petitioner to the private respondent, however, indicate that the former had not accepted
the repair of Zamboanga-J, the reason being that the extent of the repair to be made necessitated a major
expense so that the petitioner insisted on the presence of the private respondent for evaluation before it
accepted the repair of the wooden vessel. That the petitioner had not yet consented to the contract is
evident when on January 28, 1975, it sent a telegram stating: "... NO AGREEMENT AS TO THE EX
TENT OF REPAIRS AND PAYMENT WILL UNDOCK VESSEL." The fact that the private respondent who
received this telegram ignored it, confirms that there was no perfected contract to repair Zamboanga-J.
Under the circumstances, we rule that 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.

The cause is the immediate, direct and proximate reason which justifies the creation of an
obligation through the will of the contracting parties (Tong Brothers Co. v. Intermediate
Appellate Court, G.R. No. L-73918, December 21, 1987, 156 SCRA 726).

Velasco vs. CA (Elements)

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

Ong Yiu vs. CA (contracts of Adhesion)

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

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

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

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

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

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

Weldon vs. CAFACTS:

Petitioner drafted plans for a theater building which private respondent Canciointended to
put up. He submitted a proposal for the supervision of the constructionon commission basis which private
respondent never signed. Included is a setting upa revolving fund of P10K for the costs replenished by
Cancio and the payment topetitioner of a 10% of total costs as commission. Upon payment
of the P10K,petitioner sent another proposal stipulating a price of P600K for the constructionentitled
Building Contract. Subsequent payments were made by Cancio as per accomplishment until he fully
paid the P600K. However, petitioner still demandedpayment of the commission which Cancio refused
to pay. Hence, petitioner initiateda suit for the recovery of the 10% of the total cost of construction as
commission.CFI ruled that the agreement was a contract of supervision of construction
andordered in favor of the Petitioner, ordering Cancio to pay the commission which theCA reversed.
ISSUES:
Whether or not parties are bound by the first proposal or by the second proposal?
Parties are bound by the second proposal, Building Contract, as the firstproposal
containing the provision on commission was never perfected.Subsequent
payments were only made after the signing of the secondproposal; thus it
was the intention of the parties to enforce such contract.DECISION:
The first proposal is simply a proposal as it was never perfected as a contract. Onlyan absolute
acceptance of a definite offer manifests consent necessary to perfect acontract. The mere payment of
P10K was not an unqualified acceptance of the offerof the first proposal. The second proposal, signed by
the contracting parties, hasalready been consummated when the building was completed. Therefore, its
validityand binding effect cannot be disputed by the contracting parties. The subsequentpayments made
by Cancio only after the signing of the Building Contract prove thatit was the second proposal that was
intended to be fulfilled. It cannot be said thatthese amounts are mere replenishments in accordance to the
first proposal. Since itis fully paid, there is no basis for the petitioners demand for the commission.
Toallow such payment would be equivalent to changing the terms of the contract which
needed the consent of the owner of the building.

C & C Commercial vs. MenorFACTS:

Justice Cloribel of CFI of Manila ordered the GM of NAWASA to allow petitioner toparticipate as a bidder
for the supply of asbestos cement pipes wherein it was thelowest bidder. Menor, the GM of Nawasa,
required petitioner to submit tax clearancecertificate pursuant to Presidential Administrative Order
68. Long after Cloribels judgment when he had no more jurisdiction to amend it, petitioner filed a
motionwherein it prayed that Nawasa officials award the contract for the supply of asbestosto petitioner
which Cloribel granted. Subsequently, petitioner filed in LC a petitionfor mandamus praying that
Nawasa and Menor be restrained from awarding the contract to another bidder and be ordered to
award the same to petitioner whichwas denied.Nawasa awarded the contract to Regal
Trading as the lowest complying bidderwhich was approved by
the President. Petitioner asked this court to enjoin theimplementation of the said contract.
ISSUE:
Whether the order of Judge Cloribel compelling Nawasa to award the said contract topetitioner was
binding in the part of Nawasa?
No. Judge Cloribel did not just
actw i t h o u t j u r i s d i c t i o n b u t r e f u s a l o f N a w a s a t o g r a n t t h e c o n t r a c
t t o petitioner was likewise justified as it failed to comply with the requirementof
a tax clearance certificate. Also, what was delivered to petitioner wasmerely an
advertisement for a bidding which does not bind the advertiserto accept the
bids.DECISION:
Judge Cloribel acted without jurisdiction in issuing his order thus the order is void.Nawasa was likewise
justified in not awarding the contract to petitioner because ithad not tax clearance certificate since it had a
pending tax case in the BIR. It is notthe duty of Nawasa to award the contract to petitioner even
if it was the lowestbidder, as according to its Addendum no. 1 it reserved the right to reject the bid
of any bidder; thus, petitioner has no cause to dispute the award as it was rejected byNawasa.
Advertisements for bidders are simply invitation to make proposals and theadvertiser is not bound to
accept the lowest or highest bidder unless the contraryappears.

Tang vs. CAFACTS:

Lee See Guat, a woman who spoke only Chinese and was illitrate, applied for a lifeinsurance
with respondent Philippine American Life Insurance. It was written inEnglish. She again
applied for an additional insurance and because her firstapplication has just
been approved, no further medical examination was made. Thereafter, she died of lung cancer
and her nephew, the beneficiary, claimed fortheir face value which respondent refused to pay on ground
that insured was guiltyof concealment and misrepresentation at the time she applied for the
insurancepolicies. The case filed by the beneficiary was denied by LC whose decision wasaffirmed by
CA on ground that the insured deliberately concealed material factsabout her condition. Petitioner avers
that because insured spoke only Chinese andwas illiterate, she could not be held guilty of concealment
because insurer has notproved that the terms had been fully explained to her.
 DECISION:
The obligation to show that the terms of the contract had been fully explained devolves on
the party seeking to enforce it. Case at bar, the company is not seekingto enforce the contract; hence it
was under no obligation to prove that the termswere fully explained. Thus, Art 1332
is inapplicable in the case at bar and theinsured was guilty of concealment.

CARIO vs. COURT OF APPEALS, G.R. NO. L-47661, July 31, 1987

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.

Carino vs. CAFACTS:

Pablo Encabo applied with the Bureau of Lands to purchase a parcel of land whichwas part of the Tuason
Estate purchased by the Government for resale to tenants qualified to own public land in the Philippines.
Encabo, through an agent, came to anagreement with Quesada, transferring rights over the lot to the
latter, conditionedon approval by the Land Tenure Administration (LTA). LTA, unaware of the transferof
rights to Quesada, adjudicated the lot in favor of Encabo evidenced by anAgreement to Sell.
Upon knowledge of the transfer of rights of Encabo to Quesada,LTA disapproved the same on ground that
the Quesada was unqualified to acquirethe lot as he is already a lot owner. Notwithstanding,
Quesada entered intopossession of the lot and allowed his agent, the wife of petitioner, to
occupy thesame.Encabo executed a Deed of Sale of house and Transfer of rights, allegedly
conveyingto petitioner his rights over the lot subject to approval of LTA. However, Encabo andQuesada
executed a document wherein the latter alleged;y resold to Encabo thehouse and rights over the lot.
Petitioner filed a petition with LTA seeking theapproval of the transfer of rights pursuant to the
Deed of sale of house and transferof Rights to which Encabo objected. Essentially, Encabo and
petitioners claimed theright to purchase the lot to which LTA ruled that status quo should be
maintained. The Office of the President affirmed the same. Thereafter, the Encabos filed with CFI an
acitionto declare them the owners of thelot which the TC granted which CA affirmed. Hence, this petition.
ISSUE:
Whether the Deed of Sale of house and Transfer of Right, on which petitioners havebased their
application over the lot, is simulated and therefore an inexistent deed of sale?
Yes. The inconsistencies in the testimonies of petitioner regardingthe documents,
failure to produce receipts evidencing the payment to LTA,absence of the name
of the petitioners as transferee of the rights over thelot in the application filed
with LTA indicates that the agreement wasindeed simulated; therefore is
inexistent.DECISION:
The parties knew that the Deed of Sale of House and Transfer of Rights was fictitiousand simulated
where none of the parties intended to be bound thereby. First, thetestimony
of petitioner during direct examination was inconsistent with hertestimony before LTA (e.g.
amount of payment to Encabos, place of the signing of the
Deed); hence it shows that no actual sale took place between the Encabos andpetitioners. Second, since
petitioners could not produce the receipts evidencing thepayment they made to LTA for the lots nor the
Agreement to sell indicates that theagreement was indeed simulated. Third, the names of the petitioner
were nevermentioned as transferees in the two application with the LTA filed
by Encabo.Fourth, the document was executed in November 1958 while petitioners asked LTAto
approve the transfer of Encabos rights only on 1960. Lastly, the petitioners were,as admitted by
Encabo and Quesada, meant only to be dummies to protect the money invested by Quesada to
purchase the rights.

LAGUNZAD vs. VDA. DE GONZALES, G.R. NO. L-32066 August 6, 1979

Petitioner takes the position that he was pressured into signing the Agreement because of private
respondent's demand, for payment for the "exploitation" of the life story of Moises Padilla,
otherwise, she would "call a press conference declaring the whole picture as a fake, fraud and a
hoax and would denounce the whole thing in the press, radio, television and that they were going
to Court to stop the picture." It is necessary to distinguish between real duress and the motive
which is present when one gives his consent reluctantly because 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.

Liam Law vs. Olympic SawmillFACTS:

Plaintiff loaned P10K to defendant. When it was due, defendants failed to pay theloan and the debtors
asked for an extension of three months. Subsequently, theparties executed another loan
and the payment of P10K was extended but theobligation was increased by
P6K. defendants again failed to pay, thus plaintiff instituted
a collection case. Defendant, however, claimed that the addition P6K constitutes usurious
interest. TC ruled in favor of plaintiff ordering defendants to paytP10K plus the sum of P6K.
DECISION:
Regarding the agreement of the parties, the payment of P6K is presumed valid, unless the
debtor proves the contrary. Since, defendants failed to prove that the P6K obligation was illegal; the sum
binds the defendants, representing loss of interestincome, attorneys fees and incidentals. Regarding to
the defense that the sum of P6K is a usurious interest, Usury Law which states the recovery of
the usuriousinterest paid, is not applicable to a case, as in the present case, where it is
thedefendant and not the plaintiff who is alleging usury.

LAO SOK vs. SABAYSABAY, G.R. NO. L-61898 August 9, 1985

Petitioner Lao Sok promised to give his employees their separation pay, as soon as he receives
the insurance proceeds for his burned building, but contends that the contract was orally made
hence unenforceable since it does not comply with the Statute of Frauds. 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.

Paredes v EspinoDate:
March 13, 1968
Ponente:
Reyes, JBL
Facts:

Paredes filed an action to compel (i.e. specific performance and damages) Espino
to execute adeed of sale and to pay damages. The complaint alleged that Espino had entered into the
sale toParedes of Lot. 67 of the Puerto Princesa Cadastre at P4.00 a square
meter. According toParedes, said deal had been closed by letter and telegram but the actual execution
of the deed of sale and payment of the price were deferred to the arrival of Espino at Puerto Prinsesa.
However,upon Espinos arrival, he refused and to execute the deed of sale. As a result,
Paredes lostexpected profits from a resale of the property.
o
Exhibit A: Letter from Espino accepting Paredes offer re: purchase price of P4.00 a square
meter
o
Exhbit B: Telegram from Espino advising Paredes of his arrival by boat

 Espino filed a MD on the ground that the complaint stated no cause of
a c t i o n a n d w a s unenforceable under the Statute of Frauds.

CFI: Dismissed complaint there being no written contract (CC 1403).
Issue:
WON enforcement pleaded in the complaint is barred by the Statute of Frauds;
t h e r e f o r e , unenforceable
Held
: No.
Ratio:

Article 1403 (2) unless the same, or some note of memorandum thereof, be in writing,
andsubscribed by the party charged, or by his agent; evidence, therefore, of the agreement cannot
bereceived without the writing, or a secondary evidence of its contents.

Exhibits A and B constitute an adequate memorandum of the transaction. All essential terms of
thecontract are present; hence, they satisfy the requirements of the Statue of Frauds
o
Signed by Espino
o
Refered to property sold as Lot. 67 covered by TCT No. 62
o
Stipulated its area as 1826 square meters
o
Purchase price payable in cash

Berg v Magdalena Estate
:
a sufficient memorandum may be contained in two or more documents.

Shaffer v Palma:

whether the agreement is in writing or not, is a question of evidence; and the authenticity of
the writing need not be established until the trial is held. Paredes having allegedthat the contract is
backed by letter and telegram, and the same being a sufficient memorandum,his cause of action is
thereby established, especially since Espino has not denied the letters in question. At any
rate, if the Court below entertained any doubts about the existence of the writtenmemorandum, it should
have called for a preliminary hearing on that point, and not dismissed thecomplaint.
Dispositive:
Appealed order is set aside and the case remanded to the Court of origin for trial and decision.

ART 1356
GALLARDO vs.HONORABLE INTERMEDIATE APPELLATE COURT,
G.R. NO. L-67742 October 29, 1987

The issue here is whether or not the unnotarized deed of sale can be considered as a valid
instrument for effecting the alienation by way of sale of a parcel of land registerd under the
Torrens System.

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,
except when the law so requires requiring a contract to be in some form for validity or
enforceability.
CABALIW vs. SADORRA, G.R. NO. L-25650 June 11, 1975

The conveyances made by Sadorra in favor of his son-in-law were fraudulent since about seven
months after a judgment was rendered against him in and without paying any part of that
judgment, Sadorra sold the only two parcels of land belonging to the conjugal partnership to his
son-in-law. Contracts by virtue of which the debtor alienates property by gratuitous title or
alienations by onerous title when made by persons against whom some judgment has been
rendered in any instance or some writ of attachment has been issued, are presumed to be made
in fraud of creditors, and the decision or attachment need not refer to the property alienated and
need not have been obtained by the party seeking rescission.

CABALIW V. SADORRA G.R. NO. 25650

Facts:

Cabaliw was the second wife of Benigno. During their marriage, they bought 2 parcels of land. They had a
daughter Soledad. Benigno abandoned his wife Cabaliw, thus the latter filed an action in court for
support. The Court ordered Benigno to pay her P75 a month. However, Benigno did not pay and instead
sold their property to his son-in-law Soterro. The transaction was done without Isidoras consent. Prior to
the sale, Soterro already knew that there was a judgment rendered against his father-in-law but
proceeded to buy the property anyway. When Cabaliw found out, she instituted an action along with her
daughter to recover the properties.

Issue:

Is there a presumption of fraud?

Held:

Yes. Alienations by onerous title are presumed fraudulent when made by persons against whome some
judgment has been rendered or some writ of attachment has been issued. Benigno was ordered by the
Court to pay Cabaliw support and he failed to do so. Instead, he sold his properties to his son-in-law. The
close relationship between Benigno and Soterro is a badge of fraud. Soterro knew about the judgment
against Benigno but proceeded to purchase the properties anyway. He cannot be said to be a purchaser
in good faith. The presumption of fraud is not overcome by the fact that the transactions were all made in
the nature of public instruments between Soterro and Benigno. The properties sold were conjugal
properties. These cannot be sold without Cabaliws consent.

G.R. No. L-38303 May 30, 1988

HONGKONG & SHANGHAI BANKING CORPORATION, plaintiff-appellant,

vs.
RALPH PAULI and SPOUSES SALLY P. GARGANERA and MATEO GARGANERA, defendants-
appellees.
 Has the action for annulment of the sale of Lot 693 to the Garganeras prescribed? Did prescription of the
action commence to run from the registration of the sale, or from the discovery of the transaction by the
Bank?

When a transaction involves registered land, the four-year period fixed in Article 1391 within winch 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 (Armentia vs. Patriarca, 18 SCRA 1253; Avecilla vs. Yatco, 103 Phil. 666).

Plaintiff's submission that the four-year period commenced to run from the date when the Bank obtained
actual knowledge of the fraudulent sale of Pauli's land to the Garganeras (sometime in 1969) and that
hence the four-year period for bringing an action to annul the sale had not yet expired when it filed the
action for annullment on February 17, 1971, is unacceptable. That theory would diminish public faith in
the integrity of torrens titles and impair commercial transactions involving registered lands for it would
render uncertain the computation of the period for the prescription of such actions.

Civil Case No. 465, the action for annulment of the Sale is not barred by res judicata, specifically, the prior
judgment in Civil Case No. 75319, for revival of the judgment in the collection suit, Civil Case No. 32799,
for the subject matter and causes of action in the two cases are different. The three (3) Identities required
for the application of the bar by prior judgment: Identity of parties, of subject matter and causes of action,
are lacking.

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.

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

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

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

The case is dismissed, with costs against appellee.

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

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

CABAGUE v AUXILIO
Facts:
 I n t h e j u s t i c e o f t h e p e a c e c o u r t o f B a s u d , C a m a r i n e s N o r t e , F e l i p e Cabague and
his son Geronimo sued the defendant Matias Auxilio and hisdaughter Socorro to recover damages
resulting from defendants' refusal tocarry out the previously agreed marriage between Socorro and
Geronimo. T h e c o m p l a i n t a l l e g e d , i n s h o r t : (
a
) t h a t d e f e n d a n t s p r o m i s e d s u c h marriage to plaintiffs, provided the latter would improve the
defendants'house in Basud and spend for the wedding feast and the needs of the bride; (
b
) that relying upon such promises plaintiffs made the improvementand spent P700; and (
c
) that without cause defendants refused to honortheir pledged word. The defendants moved
to dismiss, arguing that the contract was oral,unenforceable under the rule of evidence
hereinbefore mentioned. And thecourt dismissed the case. On appeal to the Court of
First Instance, theplaintiffs reproduced
their complaint and defendants reiterated theirmotion to dismiss. From an order of dismissal this
appeal was perfected indue time and
form.I t s h o u l d b e o b s e r v e d p r e l i m i n a r i l y t h a t , u n d e r t h e f o r m e r r u l e s o f procedure,
when the complaint did not state whether the contract sued onw a s i n w r i t i n g o r n o t , t h e s t a t u t e
o f f r a u d s c o u l d b e n o g r o u n d f o r demurrer. Under the new Rules "defendant may now present a
motion todismiss 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 provedby him." (Moran Rules of Court 2d ed. p.
139 Vol. I.)
Issue:
According to the Rules of Court parol evidence is not admissible to provean agreement made upon
the consideration of marriage other than amutual promise to marry.

This litigation calls for application of that rule.

Courts Ruling:
There is no question here that the transaction was not in writing. The onlyissue is whether it may be
proved in court.
Wherefore this expediente will be returned to the lower court for furtherproceedings in accordance with
this opinion. So ordered.
Rationale:
The understanding between the plaintiffs on one side and the defendantson the other, really involves two
kinds of agreement. One, the agreementbetween Felipe Cabague and the
defendants in consideration of themarriage of Socorro and Geronimo. Another, the agreement
between thetwo lovers, as "a mutual promise to marry". For breach of that mutualpromise to
marry, Geronimo may sue Socorro for damages. This is such action, and evidence of such
mutual promise is admissible.

However FelipeCabague's action may not prosper, because it is to enforce an agreementin consideration
of marriage. Evidently as to Felipe Cabague and MatiasAuxilio this action could not
be maintained on the theory of "mutualpromise to marry". Neither may it be regarded as action by
Felipe againstSocorro "on a mutual promise to marry."Consequently, we declare that Geronimo may
continue his action againstSocorro for such damages as may have resulted from her failure to carryout
their mutual matrimonial promises.

Liguez vs. CA (void contracts)

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

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

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

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