Group I

Badillo v. Ferrer
GR 51369, Jul. 29, 1987

FACTS: Macario died intestate in 1966, survived by his widow, Clarita, and
five minor children. He left a parcel of land. In 1967, Clarita, in her own
behalf and as natural guardian of the minor plaintiffs, executed a deed of
extrajudicial partition and sale of the property through which she sold the
property to Gregorio. In 1968, Modesta, a sister of Macario, was able to
obtain guardianship over the property and persons of the minor children. In
1970, the guardian caused the minor children to file a complaint to annul the
sale of their participation in the property and asked that as co-owners they
be allowed to exercise the right of legal redemption with respect to Clarita’s
participation therein. The trial court annulled the sale to Gregorio of the
minor children’s participation in the property and allowed them to redeem
the participation of their mother therein.
HELD: The Supreme Court sustained the annulment of the sale with respect
to the children’s participation. The deed of extrajudicial partition is
unenforceable, or more specifically, an unauthorized contract under Arts.
1403[1] and 1317 of the New Civil Code. Clarita has no authority, i.e., she
acted beyond her powers in conveying to Gregorio the undivided share of
her minor children in the property. The powers given to her by the
law as the natural guardian cover only matters of administration and cannot
include the power of disposition. The children never ratified the deed of
partition and sale. Hence, the contract remained unenforceable or
unauthorized. No restitution may be ordered from the minors either as to
that portion of the purchase price which pertains to their share in the
property or at least as to that portion which benefited them because the law
does not sanction any.
Group III
A donated land to B in a private instrument. B accepted in the same private
instrument. B then wanted to have
the donation registered but registration requires a public instrument. So B
requested A to put down the donation in
a public instrument. But A refused. B then sued to compel A to observe the
necessary form. Decide.

ANS.: A cannot be compelled under Art. 1357 because the donation is not
valid.

(b) Same as problem (a) except that the land has already been actually
delivered to B. May A be compelled to execute the needed public
instrument?

ANS.: Again the answer is NO, for the simple reason that the donation is null
and void.

(c) A sold to B in a private instrument his land. Later B wanted to have the
sale registered, but registration requires a
public instrument. May B compel A to execute the needed public instrument?

ANS.: Yes, because the contract is both valid and enforceable under the
Statute of Frauds.

(d) Same as (c) except that the sale was made orally. May B compel A to
execute the needed public instrument?

ANS.: It depends:
1) If the contract is still executory — NO because the contract is not
enforceable under the Statute of Frauds,
which requires sales of real property to be in writing
to be enforceable by court action.
2) If the price has been paid, or the land has been delivered — YES, because
here the contract is both valid and enforceable.
Group IV
Example:
A brought an action against B, his debtor. A won. After judgment, B sold his
property to C. X, another creditor of B, wants to rescind this sale to C. Both
C and B claim that X does not have the right to interfere because, after all, it
was A, not X, who had won a judgment against B. Are C and B justified?

ANS.: No, C and B are not justified. It is true that it was A, not X, who won
the judgment, but this is immaterial since the law says that the decision
need not have been obtained by the party seeking the rescission. (2nd
sentence, second paragraph, Art. 1387, Civil Code).

(e) Another example:

In a case, A’s house at 11 Leveriza Street was attached by the court. A sold
his house at 22 San Miguel Street to B, after the attachment on the first
house had been made. C, a creditor of A, now says that the sale is presumed
fraudulent. A counters by saying that there is no such presumption because
after all the house which had been attached was not the one sold to B. Is A
justified?

Art. 1387 CIVIL CODE OF THE PHILIPPINES 753

ANS.: No, A is not justified. It is true that the house he sold had not been
levied upon or attached, but the fact remains that A is a person against
whom some writ of attachment has been issued. The law says that the
attachment need not refer to the property alienated. (2nd
sentence, 2nd paragraph, Art. 1387, Civil Code).
Group VI
Atkins, Kroll, and Co. v. Cua Hian Tek
L-9871, Jan. 31, 1958

FACTS: On Sept. 13, 1951, Atkins, Kroll and Co., Incorporated offered to sell
to B. Cua Hian Tek 1000 cartons of sardines subject to reply by Sept. 23,
1951. The respondent offeree accepted the offer unconditionally and
delivered his letter of acceptance on Sept. 21, 1951. In view however of the
shortage of the catch of sardines by the California packers, Atkins, Kroll,
and Co. failed to deliver the commodities it had offered for sale.
Offeree now claims that acceptance of the offer only created an
option to buy which, lacking consideration distinct from the price, had no
obligatory force.

HELD: The offerer is wrong. The argument is untenable, because acceptance

of the offer to sell by showing the intention to buy for a price certain creates
bilateral contract to sell and buy. The offeree, upon acceptance, ipso facto
assumes the obligation of a buyer, so much so that he can be sued should
he back out after acceptance, by either refusing to get the thing sold or
refusing to receive the price agreed upon. Upon the other hand,
the offerer would be liable for damages, if he fails to deliver the
thing he had offered for sale. Even granting that an option is granted which
is not binding for lack of consideration, the authorities hold that “if the
option is given without a consideration, it is a mere offer of a
contract of sale, which is not binding until accepted.” If however
acceptance (of the sale, as distinguished from the acceptance
merely of the option) is made before a withdrawal, it constitutes
a binding contract of sale, even if the option was not supported
by a sufficient consideration.”
Group V

Question No. 2:

C.N. Hodges v. Matias C. Rey

L-12554, Feb. 28, 1961

FACTS: Rey borrowed from Hodges the sum of P3,000. Three days after the
loan was contracted, Rey by means of a letter, authorized the Phil. Nat.
Bank to pay his indebtedness to Hodges out of whatever crop loan might be
granted to him by said bank. On the same date, the Bank agreed. But the
Bank paid Hodges only P2,000. On the date of maturity, Hodges sued the
Bank and Rey for the remaining P1,000.
Issue: Is the Bank liable to Rey?

HELD: No, for the Bank did NOT assume Rey’s indebtedness. The fact that it
paid P2,000 does not bind the Bank for the remainder of P1,000, for what it
did was to merely make available to the creditor what it could lend to Rey.

Group VIII
Braganza vs. Villa Abrille
105 Phil. 456

On Oct. 20, 1944, Rosario de Braganza and her two minor sons, Rodolfo and
Guillermo, who were then 18 and 16 years old respectively, borrowed from
Villa Abrille P70,000 in Japanese military notes, promising to pay the latter
solidarily P10,000 “in legal currency of the Philippines, two years after the
cessation of present hostilities or as soon as International Exchange has
been established in the Philippines,’’ plus 2% interest per annum.
For failure to pay, Villa Abrille sued them in March, 1949. Defendants,
however, have interposed the minority of Rodolfo and Guillermo de Braganza
at the time when they signed the note as a defense. Consequently, the
principal questions to be decided are: first, whether or not the minority of
her co-signers has any effect upon the liability of Mrs. Braganza; and
second, whether or not such co-signers can be held liable.

The Supreme Court held:

“Mrs. Braganza is liable because the minority of her cosigners does not
release her from liability, since it is a personal defense of the minors.
However, she can avail herself of the defense but such defense will benefit
her only as regards that part of the debt for which the minors are
responsible. (Art. 1148, now Art. 1222, Civil Code.) Therefore, she shall pay
1/3 of P10,000 or P3,333.33, plus 2% interest from October, 1944.
“On the other hand, the Court of Appeals found the minors liable because
they did not state in the promissory note that they are not yet of legal age
and ‘when minors pretended to be of legal age, when in fact they were not,
they will not later on be permitted to excuse themselves from the fulfillment
of the obligation contracted by them, or to have it annulled.’ (Mercado,
et al. vs. Espiritu, 37 Phil. 15.) However, the Mercado case is different
because the document signed therein by the minors specifically stated that
they were of age, here, the promissory note contained no such statement. In
other words, in the Mercado case, the minors were guilty of active
misrepresentation; whereas in this case, the minors are guilty of passive or
constructive misrepresentation. From the minor’s failure to disclose their
minority, it does not follow, as a legal proposition, that they will not be
permitted there after to assert it. According to Corpus Juris Secundum (43,
p. 206), ‘mere silence when making a contract as to his age does not
constitute a fraud which can be made the basis of an action for deceit. In
order to hold the infant liable, the fraud must be actual and not
constructive.’ Therefore, the minors in the case at bar cannot be legally
bound by their signatures in the promissory note.
“They cannot, however, be absolved entirely from monetary responsibility.
Under the Civil Code, even if their written contract is voidable because of
non-age, they shall make restitution to the extent that they may have
profited by the money they received. (Art. 1304, now Art. 1399, Civil Code.)
There is testimony that the funds were used for their support during the
Japanese occupation. Such being the case, it is but fair to hold that they had
profited to the extent of the value of such money, which value has been
established in the Ballantyne Schedule. In October, 1944, P40 Japanese
military notes were equivalent to P1.00 of current Philippine money. Hence,
they shall pay jointly P1,666.67, plus 6% interest beginning March 7, 1949,
when the complaint was filed.
Group X
Carbonnel vs. Poncio, et al.
103 Phil. 655

The records show that plaintiff purchased from defendant Poncio a parcel of
land; that she paid part of the agreed price with the understanding that she
will pay the balance upon the execution of the deed of conveyance; that
defendant refused to execute the deed in spite of repeated demands; and
that defendant sold the land to his co-defendants who knew of the
first sale. Defendants, however, contend that plaintiff’s claim is
unenforceable under the Statute of Frauds.

Held: “It is well settled in this jurisdiction that the Statute of Frauds is
applicable only to executory contracts (Facturan vs. Sabanal, 81 Phil. 512),
not to contracts that are totally or partially performed. (Almirol, et al. vs.
Monserrat, 48 Phil. 67, 70; Robles vs. Lizarraga Hermanos, 50 Phil. 387;
Diana vs. Macalibo, 74 Phil. 70) The reason is simple. In executory
contracts there is a wide field for fraud because unless they be in writing
there is no palpable evidence of the intention of the contracting parties. The
statute has precisely been enacted to prevent fraud. (Moran, Comments on
the Rules of Court, Vol. III, 1957 ed., p. 178) However, if a contract has
been totally or partially performed, the exclusion of parol evidence would
promote fraud or bad faith, for it would enable the defendant to keep the
benefits already derived by him from the transaction in litigation, and, at the
same time, evade the obligations, responsibilities or liabilities assumed or
contracted by him thereby. So that when the party concerned has pleaded
partial performance, such party is entitled to a reasonable chance to
establish by parol evidence the truth of his allegation, as well as the contract
itself.
Group IX
Salvador Lopez, a married man of mature years, donated a parcel of land
belonging to the conjugal partnership to Conchita Liguez, a minor of sixteen,
subject to the condition that the latter shall become his mistress. The
donation was duly accepted. After the perfection of the donation, Conchita
became the mistress of Lopez. When Lopez died, his widow and heirs took
possession of the land. Subsequently, Conchita commenced an action for the
recovery of the property. The widow and heirs of the deceased now maintain
that since the cause of the contract is illegal or immoral, consequently, it is
inexistent, and therefore, can produce no effect whatsoever; hence, they are
entitled to the property donated. Plaintiff, on the other hand, contends that
what is illegal is the motive of the donor and not the cause, since the
contract in this case is one of pure beneficence. Hence, the principal
questions to be resolved are: (1) What is the character of the contract —
valid, void or inexistent? (2) Assuming that the contract is either void or
inexistent, what are its effects, if any?
The decision of the Supreme Court:
The contract is onerous in character. Here the facts clearly demonstrate that
in making the donation, the donor was not moved exclusively by the desire
to benefit the donee, but also to gratify his sexual impulse. While it is true
that we must not confuse the causa of a contract with the motives of the
contracting parties, there is an exception. The motive may be regarded as
causa when it pre-determines the purpose of the contract. In other words,
we must except from the rule those contracts that are conditioned upon the
attainment of the motives of either party. In the present case, it is scarcely
disputable that the donor would not have conveyed the property in question
had the donee refused to accept the condition that she will cohabit with him.
Hence, the cohabitation was an implied condition of the donation, and being
unlawful, necessarily tainted the donation.

Because of the illegality of the causa, according to the defendants, the

contract is inexistent. Again this contention is untenable. The contract here
is void, not inexistent. A void contract is different from an inexistent
contract. The first refers to those contracts where all of the requisites of a
contract are present, but the cause, object or purpose is contrary to law,
morals, good customs, public order or public policy, or the contract itself is
prohibited or declared by law to be void, while the second refers to those
contracts where one or some of those requisites which are essential for
validity are absolutely lacking.
(2) Since the contract is void by reason of the illegality of the cause, the
provisions of Art. 1412 of the Civil Code are, therefore, applicable. It must
be noted, however, that the principle of in pari delicto is not applicable here.
Plaintiff was only a minor of 16 at the time of the donation, while the donor
was a married man of mature years and experience. It is well known that
minors occupy a privileged position under our law. As a matter of fact, the
law’s tender care for them is now emphasized in Art. 1415 of the Civil
Code. Consequently, the two parties are not in pari delicto. At any rate, even
if they were in pari delicto the same rules would still apply. Under Arts. 1411
and 1412 of the Code, nullity of contracts due to illegal cause or object,
when executed (and not merely executory) will produce the effect of barring
any action by a guilty party to recover what he has already given under the
contract. These articles make it plain that, as far as the guilty party is
concerned, his act of conveying property pursuant to an illicit contract
operates to divest him of the ownership of the property, and to bar him from
recovering it from his transferee, just as if the transfer were through a
bargain legal from its inception. Although repugnant, “the law deems it
more repugnant that a party should invoke his own guilt as a reason for
relief from a situation which he has deliberately entered. This serves to
explain why the tainted conveyance to the extent that it has been carried
out becomes conclusive as between the guilty parties, even if without effect
against strangers without notice; and why a guilty party may not ask the
courts for a restoration to the status quo ante.” The same reasons can also
be applied to the case of the successors or heirs of the guilty party. They
cannot attack the validity of the donation in their quality as successors or
heirs of the donor, since it is undeniable that they cannot be placed in a
better position than their predecessor.

It must be observed, however, that the property donated is conjugal. Does

that mean that the donation made by Lopez to the plaintiff shall not be given
any effect with respect to the share of the widow? The answer is simple.
Since the donation was made under the old law, the Civil Code of 1889 shall
apply. The second paragraph of Art. 1419 of the old Code considers the
donation as merely fraudulent, subject to collation upon liquidation of the
conjugal partnership and deduction of its value from the donor’s
share in the conjugal profits.
Therefore, the plaintiff is entitled to so much of the donated property as may
be found upon proper liquidation not to prejudice the share of the widow or
the legitimes of the compulsory heirs

Group VII

Salao, et al. v. Salao

L-26699, Mar. 16, 1976

FACTS: Ambrosia Salao and Juan Salao (sister and brother) purchased from
the heirs of Engracio Santiago the Calunuran fishpond, and were granted a
Torrens Title over said property in 1917. After Ambrosia’s death, the heirs of
Valentin Salao, the nephew of the two co-owners, sued in 1952 for
reconveyance of the fishpond which they claimed had been held in trust for
their father by the two registered co-owners. But no documentary evidence
was presented to prove the existence of an express trust. All that they
presented was oral testimony to the effect that in the partition of his
(Valentin’s) grandfather’s estate, said fishpond had been assigned to him.
Issues: (1) Was there an express trust? (2) Was there an implied trust? (3)
Assuming there was an implied trust, has the action for reconveyance
prescribed?

HELD: (1) There was no express trust. Oral or parol evidence cannot
prove an express trust. (Art. 1443, Civil Code).
(2) There was no implied trust, whether resulting trust or constructive trust.
There was no resulting trust for there was never any intention to create a
trust and there was no constructive trust, because the registration of the
fishpond under the Torrens system was not initiated by fraud or
mistake. (3) Assuming that there was an implied trust, the action is
already barred by prescription or laches. (See Varsity Hills, Inc. v. Navarro,
43 SCRA 503 and Alzona v. Capunitan & Reyes, 114 Phil. 377). The action
was filed only in 1952 or forty-one (41) years after the registration. The
plaintiffs, and their predecessor in interest (Valentin Salao), slept
on their rights, if they had any rights at all. Vigilanti prospiciunt jura (“The
law protects him who is watchful of his rights”). Further, there was laches or
unreasonable delay in trying to enforce a right. If there be laches, this
is not only persuasive of a want of merit, but may, according to the
circumstances, be destructive of the right itself.
[NOTE: However, although prescription and laches may defeat an implied
trust, there is one exception to the rule. Movables acquired thru a crime
cannot be acquired by the offender thru prescription. (Art. 1133, Civil
Code).]

[NOTE: While Art. 1456 is not retroactive in character,

still it merely expresses a rule already recognized by our Courts even prior
to the promulgation of the New Civil Code. (Diaz v. Garricho & Agriado,
supra.).]