ALEJANDRO V.

TANKEH
vs.
DEVELOPMENT BANK OF THE PHILIPPINES, STERLING SHIPPING LINES, INC.,
RUPERTO V. TANKEH, VICENTE ARENAS, and ASSET PRIVATIZATION TRUST
(G.R. No. 171428) Article (1338-1344)

FACTS:
Respondent Ruperto V. Tankeh is the President of Sterling Shipping Lines who applied a loan from
Development Bank of the Philippines for the partial financing of M/V Golden Lilac (now as M/V
Sterling Ace).

Petitioner Dr. Alejandro V. Tankeh alleged that his younger brother, Ruperto approached and
informed him that the latter was operating a new shipping line business and offered him (Dr.) 1,000
shares to be the director of the business worth 1M Pesos.

In 1981, petitioner signed the Assignment of Shares of Stock with Voting Rights and the promissory
note. The loan was then approved by DBP. Sometime in 1987, DBP sold the M/V Sterling Ace in
Singapore. Petitioner filed several Complaints and that the promissory note he signed in 1981 be
declared null and void on the ground that he was fraudulently deceive into signing the contract.

ISSUE:
Whether the fraud contemplated serious enough to render a contract voidable.

HELD:
Ruperto V. Tankeh was liable for the commission of incidental fraud for refusing to allow petitioner to
participate in the management of the business. Although there was no fraud that had been undertaken
to obtain petitioner’s consent, there was fraud in the performance of the contract. The records showed
that petitioner had been unjustly excluded from participating in the management of the affairs of the
corporation. This exclusion from the management in the affairs of Sterling Shipping Lines, Inc.
constituted fraud incidental to the performance of the obligation.There are two types of fraud
contemplated in the performance of contracts: dolo incidente or incidental fraud and dolo causante or
fraud serious enough to render a contract voidable.

Dolo Causante or causal fraud (Art.1338)

 are those deceptions or misrepresentations of a serious character employed by one party and
without which the other party would not have entered into the contract.
 Dolo causante determines or is the essential cause of the consent.
 The effects of dolo causante are the nullity of the contract and the indemnification of damages.
Dolo incidente, or incidental fraud (Art. 1344)
 are those which are not serious in character and without which the other party would still have
entered into the contract.
 refers only to some particular or accident of the obligation. and
 dolo incidente obliges the person employing it to pay damages.

Prepared by: Marjorie Escuadro

 MARIA B. CHING v. JOSEPH C. GOYANKO, JR., et al.

G.R. No. 165879 November 10, 2006 (1352, 1409, 1448, 1450)

In line with the policy of the State, the law emphatically prohibits the sale of properties between
spouses.

Facts:

Respondents Joseph Goyanko et al. filed with the Regional Trial Court of Cebu City a complaint for
recovery of property and damages against Maria Ching, praying for the nullification of the deed of
sale and of transfer certificate and the issuance of a new one. Goyanko et al. aver that they are the real
owners of the property involved. They further contend that it was after their father‘s death that they
found out that a contract of sale involving the same property has been executed by their father and
common-law wife Ching. However, Ching claimed that she is the actual owner of the property as it was
she who provided its purchase price. The RTC dismissed the complaint against Ching, declaring that
there is no valid and sufficient ground to declare the sale as null and void, fictitious and simulated.

On appeal, the Court of Appeals reversed the decision of the trial court and declarednull and void the
questioned deed of sale and TCT No. 138405.

ISSUES:

Whether or not the contract of sale and TCT No. 138405, in favor of the Maria Ching, was null and
void for being contrary to morals and public policy

HELD:

The subject property having been acquired during the existence of a valid marriage between Joseph Sr.
and Epifania dela Cruz-Goyanko, is presumed to belong to the conjugal partnership. Moreover, while
this presumption in favor of conjugality is rebuttable with clear and convincing proof to the contrary,
the court find no evidence on record to conclude otherwise. The record shows that while Joseph Sr. and
his wife Epifania have been estranged for years and that he and defendant-appellant Maria Ching, have
in fact been living together as common-law husband and wife, there has never been a judicial decree
declaring the dissolution of his marriage to Epifania nor their conjugal partnership. It is therefore
undeniable that the property located at Cebu City belongs to the conjugal partnership. Assuming that
the subject property was not conjugal, still the court cannot sustain the validity of the sale of the
property by Joseph, Sr. to defendant-appellant Maria Ching, there being overwhelming evidence on
records that they have been living together as common-law husband and wife.

The court therefore finds the contract of sale in favor of the defendant-appellant Maria Ching null and
void for being contrary to morals and public policy. The purported sale, having been made by Joseph
Sr. in favor of his concubine, undermines the stability of the family, a basic social institution which
public policy vigilantly protects.

Prepared By: ALDRIAN JOHN AÑANA

ALEJANDRO V. TANKEH
vs.
DEVELOPMENT BANK OF THE PHILIPPINES, STERLING SHIPPING LINES, INC.,
RUPERTO V. TANKEH, VICENTE ARENAS, and ASSET PRIVATIZATION TRUST
(G.R. No. 171428) Article (1338-1344)

Facts:

Sometime in 1980, Alejandro was approached by his brother, Ruperto ( president of SSL)
informing him that the latter was operating a new shipping line business and offered him 1000 shares
worth P1M to be a director of the business. Alejandro accepted the offer based on the promise that he
be part of the admin staff so that he can oversee the operation of the business plus his son, who is a
practicing lawyer would be given a position in the company.

A loan was applied from DBP for financing of an ocean-going vessel with the condition that
the first mortgage obtained over the vessel, the future earnings of the mortgage including proceeds
should be assigned to DBP and DBP assigned to no less than 67% of the voting shares of the company.
Alejandro signed the Assignment of Shares of Stock with Voting Rights and the Promissory note
making him liable jointly and severally for the amount of the loan. After the vessel is acquired, a deed
of assignment was executed in favour of DBP. On 1983, upon realizing that he was only being made a
tool to realize the purpose of Ruperto, Alejandro officially informed the company by means of letter
that he has severed his connection with the company and asking the board to pass a resolution to release
him from his liabilities with DBP and notify the latter about this.

On 1986, the account of SSL in the DBP were transferred to Asset Privatization Trust by virtue
of Presidential Proclamation No. 50. The asset including loan in favor of DBP were ordered to be
transferred to the national Government. Despite the assignment and cash equity contribution of SSL to
cover part of the acquisition cost of the vessel and the like, the promissory note still subsisted. Hence,
Alejandro is still bound as a debtor because of the promissory note.

Alejandro’s Contention: The promissory note must be declared as null and void and he be absolved
from any liability. Rupersto exercised deceit and fraud in causing him to bind himself jointly and
severally to pay DBP the amount of the mortgage loan. All the money supposedly invested by him were
put by Ruperto, hence he had never invested any money. He was invited to attend the board meeting
only once and he was never compensated by SSL for being called director and stockholder. None of the
promises of Ruperto was complied with.

ISSUE: WON the fraud perpetrated by Ruperto is serious enough to warrant the annulment of the
contract?

RULING:

NO. Only incidental fraud exists in this case. Therefore it is not sufficient to warrant the
annulment of the contracts petitioner entered into but respondent Ruperto is liable to pay him damages.
The distinction between the fraud as a ground for rendering a contract voidable or as basis for an award
of damages is provided in Article 1344: In order that fraud may make a contract voidable, it should be
serious and should not have been employed by both contracting parties. Incidental Fraud only obliges
the person employing it to pay damages.

There are two types of fraud contemplated in the performance of contracts: dolo incidente or
incidental fraud and dolo causante or fraud serious enough to render a contract voidable. If there is fraud
in the performance of the contract, then this fraud will give rise to damages. If the fraud did not compel
the imputing party to give his or her consent, it may not serve as the basis to annul the contract which
exhibits dolo causente. However, the party alleging the existence of fraud may prove the existence of
dolo incidente. This may make the party against whom fraud is alleged liable for damages. Article 1340
of the Civil Code recognizes the reality of some exaggerations in trade which negated fraud. It reads:
The usual exaggerations in trade, when the other party had an opportunity to know facts are not in
themselves fraudulent.

Given the standing and stature of the petitioner, he was in a position to ascertain more
information about the contract. The following facts show that petitioner was fully aware of the
magnitude of his undertaking. First, petitioner was fully aware of the financial reverses that SSL had
been undergoing, and he took great pains to release himself from the obligation. Second, his background
as a doctor, as a bank organizer, and as a businessman with experience in the textile business and real
estate should have apprised him of the irregularity in the contract that he would be undertaking. This
meant that at the time petitioner gave his consent to become a part of the corporation, he had been fully
aware of the circumstances and the risks of his participation. Intent is determined by the acts. Finally,
the records showed that petitioner had been fully aware of the effect of his signing the promissory note.
The bare assertion that he was not privy to the record cannot counteract the fact that petitioner himself
had admitted that after he had severed ties with his brother, he had written a letter seeking to reach an
amicable settlement with respondent Rupert. Petitioner’s actions defied his claim of a complete lack of
awareness regarding the circumstances and the contract he had been entering.

The required standard of proof – clear and convincing evidence- was not met. There was no
dolo causente or fraud used to obtain the petitioner’s consent to enter into the contract. Petitioner had
the opportunity to become aware of the facts that attended the signing of the promissory note. He even
admitted that he has a lawyer-son who the petitioner had hoped would assist him in the administration
of Sterling Shipping Lines, Inc the totality of the facts on record belies petitioner’s claim that fraud was
used to obtain his consent to the contract given his personal circumstance and the applicable law.

However, in refusing to allow petitioner to participate in the management of the business,

respondent Ruperto V. Tankeh was liable for the commission of incidental fraud. In Geraldez, the Court
defined incidental fraud as “those which are not serious in character and without which the other party
would still have entered into the contract. Although there was no fraud that had been undertaken to
obtain petitioner’s consent, there was fraud in the performance of the contract.

Prepared by: MARJORIE ESCUADRO