1. DEIPARINE v. CA and Trinidad.

In addition, the Deiparine Construction Firm is not a very able firm since
221 SCRA 503/ APRIL 23, 1993/ CRUZ, J /EVISITACION none of them is an engineer except one who only visited the construction site two months
PETITIONERS Ernesto Deiparine, Jr after the commencement of the construction.
RESPONDENTS Hon. Courts of Appeals, Cesario Carunga and Engineer Nicanor
Trinidad There are two sets of specifications in the contract:
(1) list of the materials to be used;
SUMMARY (2) the required structural compressive strength of 3,000 psi.
Respondent Carungay entered to a construction contract with the Petitioner Deiparine, who is
a contractor. However, it came to the knowledge of Carungay, through Trinidad (his engineer Deiparine eventually recognized that there really are specifications but contested that the
in charge for the construction), that Deiparine is not following the specifications they agreed minimum compressive strength of 3,000 psi is unnecessary for buildings since 3,000 psi is
on for the building and the structure lacks strength and not safe for its future occupants. only required for roads. According to him, 2,500 psi is enough for buildings.
Carungay moved to rescind the contract. CA ruled in favor of Carungay. SC affirmed.
The explicit deviance to the specifications, in his initial refusal to undergo core testing,
DOCTRINE. and his preference to his personal profit than that of the proper execution of the contract,
There can be rescission if the injured party is left without other recourse but to rescind the shows bad faith.
contract.
The court sees no reason to disturb the ruling of CA that Deiparine did not deal with the
FACTS. Carungays in good faith. His breach of this duty constituted a substantial violation of the
contract correctible by judicial rescission. When the structure failed under this test, the
1. Respondent Carungay entered to a construction contract with Petitioner Deiparine respondents were left with no other recourse than to rescind their contract.
(a contractor) for the construction of a three-storey dormitory in Cebu City.
2. Carungay agreed to pay P970,000 inclusive of contractor’s fee, and Deiparine Carungay won! Contract rescinded
bound himself to erect the said building “in strict accordance to plans and DECISION Judgment affirmed
specifications.”
3. The Plan specified that the building must have 3,000 psi (pounds per square inch)
as the acceptable minimum compressive strength.
4. Through Engr. Trinidad, it came to the knowledge of the respondents that Deiparine
is not following the plans and that the “construction works are faulty and
haphazardly” in order to maximize his personal profit.
5. Carungay sent memorandums to Deiparine complaining about the work done by the
latter, but the same were ignored.
6. Carungay asked for a core testing to examine the compressive strength of the
building. Deiparine eventually agreed to undertake such test. The result was against
Deiparine, the building failed to bear the minimum 3,000 psi compressive
strength.
7. Carungay move to rescind the contract.

RULING.
RTC – ruled in the favor of the respondents.
CA – affirmed. Hence this case. The petitioners are claiming that the specification of 3,000 psi
is not included in their contract thus not a valid ground for rescission.

ISSUES & RATIO.

WON Carungay is entitled to rescission? YES!

The contention of the petitioner that the specification was not included in their contract is
untenable. It is true that there was no real specification included in the contract but the same
was intended to be followed after the signing and before the commencement of the
construction.

Also, the petitioner’s own project manager admitted that Deiparine was actually instructing
them (the construction people) to ignore the specific orders or instructions of Carungay

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 2. PRYCE v. PAGCOR restitution of benefits received. The consequences of termination may be anticipated and
G.R. No. 157480/May 6, 2005/Panganiban, J./NGARCIA provided for by the contract. As long as the terms of the contract are not contrary to law,
NATURE Certiorari morals, good customs, public order or public policy, they shall be respected by courts. The
Petitioner Pryce Corporation (formerly Pryce Philippines Corporation) judiciary is not authorized to make or modify contracts; neither may it rescue parties from
Respondent Philippine Amusement and Gaming Corporation disadvantageous stipulations. Courts, however, are empowered to reduce iniquitous or
unconscionable liquidated damages, indemnities and penalties agreed upon by the parties.
Future rentals cannot be claimed as compensation for the use or enjoyment of another's
SUMMARY Pryce and PAGCOR entered into a contract of lease of the Pryce’s hotel property after the termination of a contract. We stress that by abrogating the Contract in the
ballroom. Sangguniang Panlunsod passed two resolutions prohibiting casinos. Pryce present case, Pryce released PAGCOR from the latter's future obligations, which included the
terminated the contract. Not rescission, therefore, Pryce entitled to future rental payments. payment of rentals. To grant that right to the former is to unjustly enrich it at the latter's
expense.
DOCTRINE. Rescission may be effected by both parties by mutual agreement; or unilaterally
by one of them declaring a rescission of contract without the consent of the other, if a legally
sufficient ground exists or if a decree of rescission is applied for before the courts. DECISION.
Petition GRANTED. Respondent ordered to pay for penalties and advance rentals
FACTS.
1. Sometime in 1992, representatives from Pryce Properties Corporation made NOTES.
representations with PAGCOR on the possibility of setting up a casino in Pryce
Plaza Hotel in Cagayan de Oro City.
2. The parties executed a Contract of Lease involving the ballroom of the Hotel for a
period of 3 years starting from Dec. 1, 1992 until Nov. 30, 1995. PAGCOR
advertised the start of their casino operations on Dec. 18, 1992.
3. Way back in 1990, the Sangguniang Panlungsod of CDO passed two resolutions
declaring as a matter of public policy to prohibit the establishment of a gambling
casino in CDO and providing a penalty for violation thereof.
4. Before the actual opening of the casino operations, rallies ensued.
5. As per verbal advice from the Office of the President, PAGCOR decided to stop its
casino operations in CDO.
6. Pryce decided to collect the full rentals from PAGCOR in case of pre-termination of
the lease. PAGCOR refused to pay in full citing unforeseen legal and other
circumstances which prevented it from complying with obligations.
7. PAGCOR asked Pryce to refund them the total of P1.4M+ representing rental
deposits and improvements made in the hotel.
8. Pryce filed an action for collection of sum of money and informed PAGCOR that it
was terminating the contract for breach of contract on the part of PAGCOR.
9. Trial court reduced to 50% the amount that Pryce was entitled to.

ISSUE/S and RULING.

W/N there was only termination and not rescission thereby entitling Pryce to future
rentals or lease payments for the unexpired period of the contract—YES.

The actions and pleadings of Pryce show that it never intended to rescind the Lease Contract
from the beginning. This fact was evident when it first sought to collect the accrued rentals
from September to November 1993 because, as previously stated, it actually demanded the
enforcement of the Lease Contract prior to termination. Any intent to rescind was not shown,
even when it abrogated the Contract on November 25, 1993, because such abrogation was not
the rescission provided for under Article 1659.

The termination of a contract is not equivalent to its rescission. When an agreement is

terminated, it is deemed valid at inception. Prior to termination, the contract binds the parties,
who are thus obliged to observe its provisions. However, when it is rescinded, it is deemed
inexistent, and the parties are returned to their status quo ante. Hence, there is mutual

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 3. REGALADO v. LUCHSINGER & CO. maintained if the debtor has other property with which to pay the debt; but in this case
G.R. No. 2250/FEB 17, 1906/WILLARD, J./CONTRACTS/CSY we agree with the court below that the evidence shows that the father had no such other
NATURE Appeal from CFI Judgment property, either at the time the sale was made or at the time this action was tried out of
PLAINTIFF Pedro Regalado which the defendants could have collected this debt. The only property which it is said he
DEFENDANTS Luchsinger & Co. had consisted of various debts owing to him, as he claimed, from third persons.

SUMMARY. Plaintiff Pedro Regalado’s father, José, was charged with estafa because he 3. WON the parties in the criminal case are the same parties in the present case – NO.
allegedly sold to him [Pedro] fraudulently a warehouse. It was allegedly fraudulent because
the said warehouse was said to have been encumbered by the attachment which Defendants In order that the judgment in the criminal case upon this point should be binding and
Luchsinger secured. The Court ruled that the said contract may be rescinded because Jose had conclusive upon the parties, it was necessary for the plaintiff here to show that the parties in
no other property to be attached, where the defendants could claim their obligation. that case were the same as the parties in this case. This was not done. In that case the only
DOCTRINE. Art. 1381. The following contracts are rescissible: persons who could possibly be called parties were the father, José Regalado, the
(1) Those which are entered into by guardians whenever the wards whom they represent suffer defendants Luchsinger & Co., and the Government. The plaintiff, Pedro Regalado, who
lesion by more than one-fourth of the value of the things which are the object thereof; seeks the benefit of that judgment, was not a party to that proceeding, and does not claim
(2) Those agreed upon in representation of absentees, if the latter suffer the lesion stated in the under any one of the parties by a title subsequent to the commencement thereof. He therefore
preceding number; does not come within the provisions of section 306, and that judgment is not a conclusive
(3) Those undertaken in fraud of creditors when the latter cannot in any other manner adjudication in his favor in this case.
collect the claims due them;
(4) Those which refer to things under litigation if they have been entered into by the defendant DECISION.
without the knowledge and approval of the litigants or of competent judicial authority;
(5) All other contracts specially declared by law to be subject to rescission. The judgment of the court below is affirmed, with the costs of this instance against the
appellant. After the expiration of twenty days judgment should be entered in accordance
FACTS. herewith and the case remanded to the lower court for execution.
1. Plaintiff’s father José Regalado was prosecuted for estafa alleged to have been committed
in the sale of the warehouse to his son plaintiff Pedro. NOTES.
2. José represented the warehouse to be free from encumbrance when in fact it was DEFENDANTS WON.
encumbered by the attachment which the defendants Luchsinger secured in the present
case.
3. In the criminal case, José was acquitted because there was no evidence presented that the
said attachment had been recorded in the Office of the Registrar of Property. Thus, no
encumbrance actually existed because of this.
4. Plaintiffs argue that the decision in the criminal case that there had been no record of the
attachment is conclusive in the present case and against the defendants.
5. The Court in the present case found that the attachment had been recorded, however, no
such finding was made in the criminal case.

ISSUES & RATIO.

1. WON the sale of the warehouse by José, the father to Pedro, the son was fraudulent as
to the defendants Luchsinger – YES.

The sale by the father to the son, therefore, is presumed to have been fraudulent. That
presumption of fraud has not been overcome by the evidence which has been presented in this
case. A large amount of testimony was introduced as to the value of the warehouse in 1900,
when the sale was made. The court below, after considering that evidence, decided that it was
worth at least 25,000 pesos, 10,000 more than the amount claimed by the plaintiff to have been
paid by him for it.

2. WON the contract entered into may be rescinded – YES.

By the terms of article 1291[A. 1381, NCC] it is true that an action to set aside the contract
on the ground that it is fraudulent as to creditors is subsidiary, and can not be

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 4. GATCHALIAN v. MANALO
46207/OCT 10, 1939/LAUREL J./RESCISSION/GVALERA
PETITIONER: VICTORIANO GATCHALIAN
RESPONDENT: MAMERTO MANALO ET AL

DOCTRINE: an action for rescission will not lie when the subject matter of the contract is
legally in the possession of third persons acting in good faith, and this can only mean that a
showing of good faith on the part of a purchaser is sufficient to avoid rescission

FACTS:
1. House no. 1125 Int.Kusang-Loob, Manila is the property of Sps. Juan Domingo and
Ignacio Maigui
2. The Sps. Defaulted in paying the rents for the land which their house was built.
3. Respondent instituted a case in Municipal court of Manila and rendered a decision to wit:
Sps shall pay Respondent P175
4. Thereafter: Sps. deeded the house to Petitioner which the latter inquired about the house
from the city hall and the then owner, Calixto Torres and bought it
5. The petitioner is not related to his vendors and only knew them a few days before the
sale.
6. From the time the house was conveyed to the Petitioner, he was paying the estate tax and
the rents for the land and made improvements amounting to P400
7. The house was levied in relation to #3
8. Petitioner filed a 3rd party complaint

ISSUE/RULING:
WON rescission is proper? NO
When an alienation is made, as in this case, after a judgment has been rendered
against the person alienating, there arises the legal presumption that the alienation is
fraudulent (art. 1297, Civil Code) and the alienation may be rescinded (art. 1291,
Civil Code); and the only question raised in this instance is one of law, namely,
whether or not this presumption is disputable and will yield to proof to the contrary.
This court has already held that the presumption established in article 1297 "is not
conclusive and may be rebutted, by means of satisfactory and convincing evidence
If the legal presumption of fraud is rebuttable as against the judgment debtor, the
presumption should likewise be rebuttable as against a purchaser from him.
Moreover, by express mandate of article 1295 of the Civil Code, an action for
rescission will not lie when the subject matter of the contract is legally in the
possession of third persons acting in good faith, and this can only mean that a
showing of good faith on the part of a purchaser is sufficient to avoid rescission

NOTES.

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 5. CABALIW v. SADORRA show or prove that the conveyances made by Benigno Sadorra in favor of his son- in-law were
G.R. No. L-30056/ JUN 11, 1975/MUNOZ PALMA, J. /JTRINIDAD fraudulent. For the heart of the matter is that about seven months after a judgment was
NATURE Appeal rendered against him in Civil Case No. 43192 of the Court of First Instance of Manila and
PETITIONERS Isidora Cabaliw and Soledad Sadorra without paying any part of that judgment, Benigno Sadorra sold the only two parcels of land
RESPONDENTS Sotera Sadorra et al, belonging to the conjugal partnership to his son-in-law. Such a sale even if made for a
valuable consideration is presumed to be in fraud of the judgment creditor who in this case
DOCTRINE. “Art. 1387. All contracts by virtue of which the debtor alienates property by happens to be the offended wife.
gratuitous title are presumed to have been entered into in fraud of creditors, when the donor
did not reserve sufficient property to pay all debts contracted before the donation. Article 1297(now 1387 see doctrine) of the old Civil Code which was the law in force at the
time of the transaction provides:
“Alienations by onerous title are also presumed fraudulent when made by persons against
whom some judgment has been rendered in any instance or some writ of attachment has been “Contracts by virtue of which the debtor alienates property by gratuitous title are
issued. The decision or attachment need not refer to the property alienated, and need not have presumed to be made in fraud of creditors.
been obtained by the party seeking the rescission. “Alienations by onerous title are also presumed fraudulent when made by persons
against whom some judgment has been rendered in any instance or some writ of
“In addition to these presumptions, the design to defraud creditors may be proved in any other attachment has been issued. The decision or attachment need not refer to the
manner recognized by the law of evidence.” Can also read 1297 property alienated and need not have been obtained by the party seeking rescission.”

FACTS. The above-quoted legal provision was totally disregarded by the appellate court, and
1. Petitioner Isidora is the wife oe Benigno Sadorra by his second marriage before a judge in there lies its basic error. We agree with petitioners that the parties here do not stand in
Pangasinan equipoise, for the petitioners have in their favor, by a specific provision of law, the
2. They had a daughter named Solded, also herein petitioner. presumption of a fraudulent transaction which is not overcome by the mere fact that the
3. They acquired 2 parcels of land. One which was 14 hectars which was acquired by a sales deeds of sale in question were in the nature of public instruments.
patent and the other 1.5 hectars and was secured through purchase.
4. Having abandoned by her husband Isidora, petitioner, instituted an action for support with Furthermore, the presumption of fraud established by the law in favor of petitioners is
the CFI of manila. Which she got 75 pesos a month for support. bolstered by other indicia of bad faith on the part of the vendor and vendee. Thus (1) the
5. Unknown to petitioners, Benigno executed 2 deeds of sale over the 2 parcels of land in vendee is the son-in-law of the vendor. In the early case of Regalado vs. Luchsinger & Co., 5
favor of his son in law, herein respondent, who was married to Encarnacion. A daughter of Phil. 625, this Court held that the close relationship between the vendor and the vendee is
benigno from the first marriage. one of the known badges of fraud..(2) At the time of the conveyance, the vendee, Sotero,
6. Due to the failure to give support CFI authorized petitioner to take possession of the was living with his father-in-law, the vendor, and he knew that there was a judgment
conjugal property and administer the same and to avail herself of the fruits as payment of directing the latter to give a monthly support to his wife Isidora and that his
support. father-in-law was avoiding payment and execution of the judgment. (3) It was known to
7. When petitioner went to take hold of the properties, she discovered that they were sold to the vendee that his father- in-law had no properties other than those two parcels of land
respondent. which were being sold to him.
8. Petitioner filed with the CFI for the recovery on the ground the sale was FICTITIOUS.
Then a notice of lis pendens was filed. The fact that a vendor transfers all of his property to a third person when there is a
9. Benigno died in 1940. judgment against him is a strong indication of a scheme to defraud one who may have a
10. On 1948 the notice of lis pendens was cancelled upon the filing of respondent valid interest over his properties.
claiming that the case has been decided in his favor.
11. 1954, petitioners then filed again for recovery. Added to the above circumstances is the undisputed fact respondent secured the cancellation
12. LC: declared the sale fictitious; recognized and upheld the rights of the intervenor- of the lis pendens and the issuance of a transfer certificate in his favor by executing an
purchasers who acquired portions prior to the registration of the notice of lis pendens but affidavit wherein Isidora as the ‘LATE CABALIW’ when he knew that she was alive.he also
dismissed the claims of intervenors who bought subsequently of notice; ordered partition alleged that the civil case was decided in his favor which were not true because the
between petitioners, defendants and the children by the first marriage of Benigno proceedings were interrupted by the war. Such conduct of Sotero Sadorra reveals, as stated by
13. CA: reversed. They were in a public instrument thus valid and presumed by law to the lower court, an “utter lack of sincerity and truthfulness” and belies his pretensions of
have be legal. Presumed that defendant to have acted in good faith. good faith.
On the part of the transferee, he did not present satisfactory and convincing evidence sufficient
ISSUES & RATIO. to overthrow the presumption and evidence of a fraudulent transaction. His is the burden of
1. WON there is a presumption of fraud – YES. rebutting the presumption of fraud established by law, and having failed to do so, the
The judgment of the Court of Appeals cannot be sustained. fraudulent nature of the conveyance in question prevails.

The facts narrated in the first portion of this Decision which are not disputed, convincingly DECISION. PETITION GRANED. PETITIONERS WON

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 6. PROVINCIAL SHERIFF OF PAMPANGA v. CA In the present case, the finding of the Court of Appeals, which is factual and therefore not
GR No. L-25152 / FEBRUARY 26, 1968/ BENGZON, JP /EVISITACION proper for us to alter in this appeal, is that the store of Marciano Agustin is a new and
different one from that of Elpidio Agustin.
NATURE Action for recovery of a sum of money
PETITIONERS THE PROVINCIAL SHERIFF OF PAMPANGA, CIRILO D. True, Marciano Agustin testified that "Modern Furniture Store" was transferred, verbally to
CABRAL and ZACARIAS PELAEZ him by Elpidio Agustin on February 20, 1961. As the Court of Appeals found, however, this
RESPONDENTS HON. COURT OF APPEALS and MARCIANO AGUSTIN referred to the business name and style, not to the store or its contents, as the store and
contents were completely new, coming from the capital of Marciano Agustin, whereas
DOCTRINE. Elpidio's store and its contents of furniture were destroyed totally by the fire of January
Art. 1387 (see notes) applies only when there has in fact been an alienation or transfer, 9, 1961.
whether gratuitously or by onerous title.
DECISION Marciano Agustin won!
FACTS. WHEREFORE, the appealed judgment of the Court of Appeals is hereby affirmed, with costs
1. An action for recovery of a sum of money was filed on June 4, 1960, by Cirilo D. against appellants. So ordered.
Cabral and Zacarias Perez (both are the petitioners) against Elpidio Agustin and
Manuel Flores in the Court of First Instance of Bulacan. NOTES
2. Elpidio has a business, the cleverly titled “Modern Furniture Store” Art. 1387. All contracts by virtue of which the debtor alienates property by gratuitous title are
3. On January 9, 1961 a fire broke out, destroyed Elpidio’s store. presumed to have been entered into in fraud of creditors, when the donor did not reserve
4. On January 12, 1961 Elpidio surrendered his license to operate to the municipal sufficient property to pay all debts contracted before the donation.
treasury.
5. Not long thereafter, Elpidio’s brother, Marciano (respondent), erected a store in Alienations by onerous title are also presumed fraudulent when made by persons against
the same site where Elpidio’s store burned down, whom some judgment has been issued. The decision or attachment need not refer to the
6. Marciano named his store “MODERN FURNITURE STORE” property alienated, and need not have been obtained by the party seeking the rescission.
7. On February 20, 1961, for business purposes, Marciano secured a new license and
privilege tax to operate the store. And on the same date, Elpidio verbally In addition to these presumptions, the design to defraud creditors may be proved in any other
transferred "Modern Furniture Store" to his brother Marciano. manner recognized by the law of evidence.
8. July 13, 1961. The Court of First Instance of Bulacan, in the aforementioned case,
rendered judgment against Elpidio (who had confessed judgment) and Manuel
Flores jointly and severally, for P10,685.15 plus interest and P500.00 attorney's fees.
9. CA affirmed the decision.
10. Provincial Sheriff levied some of the pieces of furniture found in "Modern
Furniture Store." Stating that said properties do not belong to Elpidio Agustin but
to him
11. Marciano filed a third party claim with the sheriff. An indemnity bond, however,
was posted by the judgment creditors (Cabral and Perez) in the sheriff's favor
12. Marciano filed in the Court of First Instance of Pampanga the present action,
against judgment creditors Cabral and Perez and the sheriff, to be declared
owner of the pieces of furniture levied upon, with preliminary injunction and
damages. A writ of preliminary injunction was issued enjoining the sheriff from
proceeding with the sale.
13. The Court of First Instance dismissed the complaint but the CA reversed the
decision of the lower court and claimed that Marciano is the owner.
14. Appeal therefrom was taken by defendants, invoking Art. 1387 of the CC (see
notes), claiming fraud on the part of the Marciano Agustin

ISSUES & RATIO. WON Article 1387 of the Civil Code on presumption of fraud apply?
NO!

The provision in question applies only when there has in fact been an alienation or transfer,
whether gratuitously or by onerous title.

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 7. AIR FRANCE v. CA An action for rescission may not be raised or set up in a summary proceeding through a
G.R. No. 104234/June 30, 1995/Romero, J./NGARCIA motion, but in an independent civil action and only after a full-blown trial.
NATURE Certiorari
Petitioner Air France
Respondents The Court of Appeals, Iolani Dionisio, Multinational Travel DECISION.
Corporation of the Phil., Fiorello and Vicki Panopio. Petition DENIED. PRIVATE RESPONDENTS WON

NOTES.
DOCTRINE.

An independent action is necessary to prove the contract is rescissible.

Regarding contracts undertaken in fraud of creditors, the existence of the intention to prejudice
the same should be determined either by the presumption established by Art. 1387 or by
proofs presented in the trial of the case.

FACTS.
1. Petitioner Air France filed a complaint for sum of money and damages against
private respondents Multinational Travel, Fiorello Panopio and Vicky Panopio
before RTC.
2. Judgment rendered in favor of Air France and Multinational Travel, Fiorello
Panopio and Vicky Panopio were held jointly and severally liable. However,
judgment was unsatisfied, thus, Air France FILED A MOTION for the issuance of
an alias writ of execution and further alleged that the private respondent spouses
sold a property to a certain Iolani Dionisio registered in the name of Multinational
Food and Catering Corporation where the private respondent spouses were said to
own 91% of its share, thus viewed as made to defraud the creditors.
3. Private respondent spouses opposed, arguing that, respondent court had no
jurisdiction because the alleged buyer in the person of Iolani Dionisio is not a party
in the case, and that the proper remedy is an independent civil action where
indispensable are to be impleaded to afford them to answer and/or refute charges.

ISSUE/S and RULING.

W/N the motion of the petitioner to have the contract between Multinational Food and
Iolani Dionisio rescinded shall prosper—NO.

First, the subject property is registered with the Register of Deeds of Quezon City in the name
of the Multinational Food and Catering Corporation and not in the name of either the
Multinational Travel Corporation of the Philippines or of the spouses Fiorello and Vicky
Panopio who are the judgment debtors.

It is a well settled rule that the power of the court in the execution of judgments extends only
over properties unquestionably belonging to the judgment debtor. Here, the property in
question was sold to private respondent Iolani Dionisio who was not a party to the case subject
of execution.

Multinational Food and Iolani Dionisio, not being parties to the case, the property covered by
TCT No. 353935 may not be levied upon to satisfy the obligations of private respondent
spouses and the Multinational Travel Corporation. Petitioner’s contrary claim that the property
belongs to private respondent spouses, if true, requires a rescissory action which cannot be
done in the same case, but through the filing of a separate action.

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 8. BRAGANZA v. DE VILLA ABRILLE statement. In other words, in the Mercado case, the minor was guilty of active
G.R. No. L-12471/APR 13, 1959/BENGZON, J./ANNULMENT OF THE CONTRACT/CSY misrepresentation; whereas in this case, if the minors were guilty at all, which we doubt it is
NATURE Petition for review by Certiorary of a CA Decision of passive (or constructive) misrepresentation. indeed, there is a growing sentiment in favor of
PETITIONERS Rosario L. De Braganza, Et. Al. limiting the scope of the application of the Mercado ruling, what with the consideration that
RESPONDENT Fernando F. De Villa Abrille the very minority which incapacitated minors from contracting should likewise exempt them
from the results of misrepresentation.
SUMMARY. The Petitioners executed a P/N when they were minors. The Respondent sued
for nonpayment. The Court ruled that the minors were not legally bound to the contract and We hold, on this point, that being minors, Rodolfo and Guillermo Braganza could not be
that the defense of minority was personal for them, thus their mother Rosario is still bound to legally bound by their signatures in Exhibit A.

pay for 1/3 of the obligation.
DOCTRINE. Art. 1390 (1) The ff. contracts are voidable or annullable even though there may 2. WON the period to rescind the contract had already lapsed – NO.
have been no damage to the contracting parties:
(1) Those where one of the parties is incapable of giving consent to a contract; The parties do not specify the exact date of Rodolfo's birth. It is undenied, however, that in
(2) Those where the consent is vitiated by mistake, violence, intimidation, undue influence, or October 1944, he was 18 years old. On the basis of such datum, it should be held that in
fraud. October 1947, he was 21 years old, and in October 1951, he was 25 years old. So that when
These contracts are binding unless they are annulled by a proper action in court. They are this defense was interposed in June 1951, four years had not yet completely elapsed from
susceptible to ratification. October 1947.

FACTS. DECISION.
1. [Oct 30, 1944] Rosario de Braganza and her sons Rodolfo [18y] and Guillermo [16y]
allegedly received as loan from Villa Abrille, P70, 000 in Japanese War Notes and in The appealed decision should be modified in the sense that Rosario Braganza shall pay 1/3 of
consideration, executed a P/N, to pay him P10, 000 in the legal currency of the P10,000 i.e., P3,333.33 plus 2% interest from October 1944; and Rodolfo and Guillermo
Philippines, two years after the war has passed, plus 2% per annum. Braganza shall pay jointly to the same creditor the total amount of P1,166.67 plus 6% interest
2. [Mar 1949] Villa Abrille sued for nonpayment. beginning March 7, 1949, when the complaint was filed.
3. Defendants Villa Abrille claimed to have received only P40, 000 instead of P70, 000.
They also averred that Guillermo and Rodolfo were minors when they signed the P/N. NOTES.
4. TC rendered the decision that Braganza and her sons were required to solidarily pay the PETITIONERS WON.
sum of P10, 000. Appellate Court affirmed.
5. Mrs. Braganza is not released from her liability because the defense of minority is
personal to the minors, and it will not benefit her to the extent of her shares.
6. However, the CA found that the minors did not make it appear in the P/N that they were
not yet of legal age – if they were really fair to their creditor, they should have apprised
him on their incapacity.
7. SC does not believe in the CA’s conclusions. The minors’ failure to disclose their
minority in the same P/N does not follow as a legal proposition that they will not be
permitted thereafter to assert it. The minors had not juridical duty to disclose their
inability.

ISSUES & RATIO.

1. WON the minors could be legally bound by their signatures in the P/N – NO.

In order to hold the infant liable, however, the fraud must be actual and not constructive. It
has been held that his mere silence when making a contract as to his age does not constitute a
fraud which can be made the basis of an action of deceit"

"The fraud of which an infant may be held liable to one who contracts with him in the belief
that he is of full age must be actual not constructive, and mere failure of the infant to disclose
his age is not sufficient."

The Mercado case cited in the decision under review is different because the document signed
therein by the minor specifically stated he was of age; here Exhibit A contained no such

OBLICON G06 / ATTY. AMPIL / NGARCIA. CSY. GVALERA. JTRINIDAD. EVISITACION / 2017 8
 9. FRANCISCO VS. HERRERA An annulable contract may be rendered perfectly valid by RATIFICATION, which can be
GR.139982/NOV.2,2002/QUISUMBING./VOID&VOIDABLE CONRACTS/GVALERA implied or express. Implied ratification may take the form of accepting and retaining the
benefits of a contract
PETITIONER: ULIAN FRANCISCO (Substituted by his Heirs, namely: CARLOS ALTEA
FRANCISCO; the heirs of late ARCADIO FRANCISCO, namely: CONCHITA In the case at bar, the respondent accepted the payment and even negotiated to increase the
SALANGSANG FRANCISCO (surviving spouse), and his children namely: TEODULO S. price thus, an implied ratification.
FRANCISCO, EMILIANO S. FRANCISCO, MARIA THERESA S. FRANCISCO,
PAULINA S. FRANCISCO, THOMAS S. FRANCISCO; PEDRO ALTEA FRANCISCO; NOTES.
CARINA FRANCISCOALCANTARA; EFREN ALTEA FRANCISCO; DOMINGA LEA PETIONER WINS!!!!
FRANCISCOREGONDON; BENEDICTO ALTEA FRANCISCO and ANTONIO ALTEA both contracts are valid
FRANCISCO)
RESPONDENT: PASTOR HERRERA

DOCTRINE: An annulable contract may be rendered perfectly valid by RATIFICATION,

which can be implied or express

FACTS:
1. Eligio Herrera (father of respondent) was the owner of 2 parcels of land at San Andres,
Cainta, Rizal
2. Petitioner bought the 1st land for P1m, Paid in instalments from Nov 1990-Aug 1991.
3. Petitioner bought the 2nd land for P750k on March 12m 1991
4. The children on Eligio contends that the purchase price was inadequate and ask to
increase both purchase price
5. Petitioner refused.
6. Respondent claimed ownership over the 2nd property bu virtue of sale
7. Respondent claimed ownership over the 1st property since the wife of Eligio died
INTESTATE
8. Respondent aver that the BOTH sale was null and void since Eligio was already
incapacitated to give consent because he was afflicted with senile dementia.
9. Petitioner defense: respondent was estopped and he ratified both contract of sales by
receiving the consideration offered in each transaction.

ISSUE/RULING:
WON the contracts of sale are void or voidable? VOIDABLE
A void or inexistent contract is one which has no force and effect from the very beginning,
Hence, it is as if it has never been entered into and cannot be validated either by the passage of
time or by ratification.

There are 2 types of void contracts:

1. Wanting of essential requisites of a valid contract

2. Those declared under art. 1409 of cc

a voidable or annullable contract is one in which the essential requisites for validity under
Article 1318 are present, but vitiated by want of capacity, error, violence, intimidation, undue
influence, or deceit.

In the case at bar, the contract was entered with vitiated consent since Eligio was suffering
from senile dementia. Since the consent was vitiated, it is valid and binding until annulled.

OBLICON G06 / ATTY. AMPIL / NGARCIA. CSY. GVALERA. JTRINIDAD. EVISITACION / 2017 9
 10. THEIS v. CA Art. 1390 of the New Civil Code provides:
G.R. No. 126013/ FEB 12, 1997/HERMOSISIMA, J. /JTRINIDAD
NATURE Appeal “Art. 1390. The following contracts are voidable or annullable, even though there may
PETITIONERS Spouses Heinzrich Theis and Betty Theis have been no damage to the contracting parties:
RESPONDENTS Court of Appeals, Eleuterio Geurrero Tagaytay Judge RTC and Calsons
Development corp (1) x x x

DOCTRINE. A contract may be annulled where the consent of one of the contracting parties (2) Those where the consent is vitiated by mistake, violence, intimidation, undue
was procured by mistake, fraud, intimidation, violence, or undue influence
influence, or fraud.
 x x x”
FACTS.
In the case at bar, the private respondent obviously committed an honest mistake in selling
1. Private respondent Calson Development Corp owns 3 parcels of land situated in
parcel no. 4. As correctly noted by the Court of Appeals, it is quite impossible for said private
Tagaytay.
respondent to sell the lot in question as the same is not owned by it. The good faith of the
a. Parcel 1TCT 15515
private respondent is evident in the fact that when the mistake was discovered, it immediately
b. Parcel 2 TCT 11516
offered two other vacant lots to the petitioners or to reimburse them with twice the amount
c. Parcel 3 TCT 15684
paid. That petitioners refused either option left the private respondent with no other choice but
2. Adjacent to parcel 3 is a vacant lot denominated as parcel 4.
to file an action for the annulment of the deed of sale on the ground of mistake.
3. In 1985 respondent constructed a 2 story house on parcel 3, while 1 and 2 remained idle.
4. However in a survey conducted in 1985 parcel 3 was erroneously indicated to be covered
not by 15684 but by 15515 while the 2 idle lands 1 and 2 were mistakenly surveyed to be As enunciated in the case of Mariano vs. Court of Appeals:
located on parcel 4 instead (which was not owned by private respondent). (Parcel 3 became
parcel 1 then 1 and 2 became parcel 4) “A contract may be annulled where the consent of one of the contracting parties was
5. On 1987, unaware of the mistake by which respondent appeared to be the owner of parcel 4 procured by mistake, fraud, intimidation, violence, or undue influence.”
indicated in the erroneous survey and based on erroneous information that parcel 4 is
covered by TCT 15516 and 15684, sold parcel 4 through its authorized representative to Art. 1331 of the New Civil Code provides for the situations whereby mistake may invalidate
petitioners. consent. It states:
6. According to the Deed of Sale the purchase price was 130k but the actual price agreed upon
was 486l “Art. 1331. In order that mistake may invalidate consent, it should refer to the
7. Upon payment after deposing in escrow, petitioners did not occupy said lot and left for substance of the thing which is the object of the contract, or to those conditions
Germany. which have principally moved one or both parties to enter into the contract.
8. Petitioners returned in 1990 and discovered that parcel 4 was owned by another person and
they also discovered that the lots actually sold to them was parcel 2 and 3. Tolentino explains that the concept of error in this article must include both ignorance, which
9. Parcel 3 could not have been sold to petitioners as a 2-story house had already been built is the absence of knowledge with respect to a thing, and mistake properly speaking, which is a
thereon prior to the sale. wrong conception about said thing, or a belief in the existence of some circumstances, fact, or
10. Petitioners insisted they wanted parcel 4 which is the lot beside parcel 3. event, which in reality does not exist. In both cases, there is a lack of full and correct
11. However, respondent could not have sold them parcel 4 since they did not own it in knowledge about the thing. The mistake committed by the private respondent in selling parcel
the first place. no. 4 to the petitioners falls within the second type. Verily, such mistake invalidated its
12. To remedy, respondent offered parcel 1 and 2 which were the lots it intended to sell consent and as such, annulment of the deed of sale is proper.
in the first place. Which was refused. They made another offer wherein respondent would
return the amount paid by the, doubled. Still refused. THEY STILL WANTED parcel 2 and
The petitioners cannot be justified in their insistence that parcel no. 3, upon which private
3 since new TCT’s were issued in their name when they bought it.
respondent constructed a two-storey house, be given to them in lieu of parcel no. 4. The cost
13. Respondent filed a annulment of sale and reconveyance.
of construction in 1985 for the said house (P1,500,000.00) far exceeds the amount paid by the
14. TC: favor of respondent and annulled it on the ground of mistake
petitioners to the private respondent (P486,000.00).
15. CA: affirmed.

ISSUES & RATIO. To allow the petitioners to take parcel no. 3 would be to countenance unjust enrichment.
2. WON respondent may seek the annulment of the deed of sale – YES.

We find that respondent court correctly affirmed the findings and conclusions of the trial court DECISION. DISMISSED
in annulling the deed of sale as the former are supported by evidence and the latter are in
accordance with existing law and jurisprudence.

OBLICON G06 / ATTY. AMPIL / NGARCIA. CSY. GVALERA. JTRINIDAD. EVISITACION / 2017 10
 11. DE LEON v. CA As such, any agreement or obligations based on such unlawful consideration and which is
186 SCRA 345/ JUNE 6, 1990/ MEDIALDEA, J/EVISITACION contrary to public policy should be deemed null and void pursuant to Art. 1409 of the CC
(see doctrine)
NATURE Petition for Review on Certiorai ... the agreement nevertheless is void because it contravenes the following provisions of the
PETITIONERS SYLVIA LICHAUCO DE LEON Civil Code:
RESPONDENTS HON. COURT OF APPEALS, MACARIA DE LEON AND JOSE Art. 221. The following shall be void and of no effect:
VICENTE DE LEON 1. Any contract for personal separation between husband and wife;
2. Every extra-judicial agreement, during marriage, for the dissolution of the conjugal partnership of gains or of
the absolute community of property between husband and wife
DOCTRINE. Article 1414 of the Civil Code, which is an exception to the pari delicto rule, is the proper law to be applied. It
Art. 1392 Ratification extinguishes the action to annul a voidable contract provides:
When money is paid or property delivered for an illegal purpose, the contract may be repudiated by one of the parties
before the purpose has been accomplished, or before any damage has been caused to a third person. In such case, the
FACTS. courts may, if the public interest thus be subserved, allow the party repudiating the contract to recover the money
1. On October 18, 1969, private respondent Jose Vicente De Leon and petitioner or property.
Sylvia Lichauco De Leon were united in wedlock before the Municipal Mayor of
Binangonan, Rizal. On August 28, 1971, a child named Susana L. De Leon was Since the Letter-Agreement was repudiated before the purpose has been accomplished
born from this union. and to adhere to the pari delicto rule in this case is to put a premium to the circumvention of
2. Sometime in October, 1972, a de facto separation between the spouses occurred the laws, positive relief should be granted to Macaria. Justice would be served by allowing
due to irreconcilable marital differences, with Sylvia leaving the conjugal home. her to be placed in the position in which she was before the transaction was entered into.
3. Sometime in March, 1973, Sylvia went to the United States where she obtained
American citizenship. DECISION Macaria won! Sylvia lost as she was not able to claim the properties since the
4. On November 23, 1973, Sylvia filed with the Superior Court of California, County letter agreement was invalid.
of San Francisco, a petition for dissolution of marriage against Jose Vicente. In ACCORDINGLY, the petition is hereby DENIED. The decision of the respondent Court of
the said divorce proceedings, Sylvia also filed claims for support and distribution Appeals dated June 30, 1987 and its resolution dated November 24, 1987 are AFFIRMED.
of properties. It appears, however, that since Jose Vicente was then a Philippine
resident and did not have any assets in the United States, Sylvia chose to hold NOTES
in abeyance the divorce proceedings, and in the meantime, concentrated her As to the claim of intimidation (applying Art. 1335)
efforts to obtain some sort of property settlements with Jose Vicente in the Applying the foregoing to the present case, the claim of Macaria that Sylvia threatened her to
Philippines. bring Jose Vicente to court for support, to scandalize their family by baseless suits and that
Sylvia would pardon Jose Vicente for possible crimes of adultery and/or concubinage subject
5. On March 16, 1977, Sylvia succeeded in entering into a Letter-Agreement with
to the transfer of certain properties to her, is obviously not the intimidation referred to by
her mother-in-law, private respondent Macaria De Leon
law. In order that intimidation may vitiate consent and render the contract invalid, the
6. On the same date, Macaria made cash payments to Sylvia in the amount of
following requisites must concur:
P100,000 and US$35,000.00 or P280,000.00, in compliance with her obligations
(1) that the intimidation must be the determining cause of the contract, or must have caused
as stipulated in the aforestated Letter-Agreement.
the consent to be given;
7. On March 30, 1977, Sylvia and Jose Vicente filed before the then Court of First
(2) that the threatened act be unjust or unlawful;
Instance of Rizal a joint petition for judicial approval of dissolution of their
(3) that the threat be real and serious, there being an evident disproportion between the evil
conjugal partnership
and the resistance which all men can offer, leading to the choice of the contract as the lesser
8. RTC – It is hereby declared that the conjugal partnership of the Spouses is dissolved
evil; and
(4) that it produces a reasonable and well-grounded fear from the fact that the person from
ISSUES & RATIO. WON the Letter-Agreement is valid? NO!
whom it comes has the necessary means or ability to inflict the threatened injury.
The letter-agreement is invalid.

The cause or consideration for the intervenor Macaria De Leon in having executed the
agreement (Exh E) was the termination of the marital relationship between her son Jose
Vicente De Leon and Sylvia Lichauco de Leon.

Intervenor's undertaking premised on the termination of marital relationship is not only

contrary to law but contrary to Filipino morals and public policy.

OBLICON G06 / ATTY. AMPIL / NGARCIA. CSY. GVALERA. JTRINIDAD. EVISITACION / 2017 11
 12. LAPERAL v. ROGERS It is of common knowledge that, during WW2, the Japanese Army of occupation in the PH did
G.R. No. L-16590/January 30, 1965/Dizon, J./NGARCIA occupy and take private properties in the City of Manila and elsewhere in the country without
NATURE Appeal the consent of their respective owners, for their use in the prosecution of the war, resorting in
Plaintiff Roberto Laperal some cases to the expedient of making the owners execute deeds of sale or contracts of lease.
Defendant Hon. William P. Rogers as Attorney General of the United States Plaintiff, at the time of the execution of the questioned sale, was a very rich man with
extensive real estate holdings in Manila. Records show that he had not disposed of a single
property by sale. If he had been in need of money at all, he would probably have sold some
SUMMARY other much less desirable property. The P500,000 consideration paid for the property was
Plaintiff executed a deed of sale in favor of the occupation Republic during Japanese grossly inadequate. Evidence on record shows that the pre-war assessed value of the property
occupation. Contract nullified because it was held that plaintiff was forced to execute such in question was P92,995 which, if reduced to its equivalent value in terms of Japanese Military
deed. Plaintiff could not have ratified the sale because no sufficient evidence was presented by Notes would have amounted to around P1,300,000.
the defendant.

DOCTRINE. W/N the plaintiff had ratified the sale by making use of the records (see notes)—NO.
Art. 1390 – The following contracts are voidable or annullable even though there may have
been no damage to the contracting parties: Since the records are incomplete and not entirely liable, the trial judge questioned the witness
(1) Those where one of the parties is incapable of giving consent to a contract; presented by defendants to identify said exhibit. It turned out, that the witness presented had
(2) Those where the consent is vitiated by mistake, violence, intimidation, undue no further knowledge on the records besides bringing them to court. As a consequence, the
influence or fraud. trial court ruled that the evidence presented had no probative value at all.
These contracts are binding, unless they are annulled by a proper action in court. They are
susceptible of ratification. DECISION.
Judgment AFFIRMED. PLAINTIFF WON.
or
NOTES.
Art. 1393 – Ratification may be effected expressly or tacitly. It is understood that there is a
tacit ratification if, with knowledge of the reason which renders the contract voidable and such Ø Defendants had presented as evidence records of plaintiff’s transactions with
reason having ceased, the person who has a right to invoke it should execute an act which PNB during the JAPANESE OCCUPATION ONLY. The records show that
necessarily implies an intention to waive his right. plaintiff had deposited the P500,000 and made subsequent withdrawals from
said deposit.
FACTS.
1. In 1944, Plaintiff executed a deed of sale in favor the occupation Republic of the
Philippines for P500,000 in Japanese Military War Notes.
2. The Alien Property Custodian of the US, acting under authority of the Trading With
the Enemy Act, as well as EO 9095, after finding that the occupation Republic was
an instrumentality of the Japanese Army of occupation during the war, issued
Vesting Order No P-28 divesting the occupation Republic of its title to the
aforementioned property.
3. However, pursuant to EO 9818 of the President of the US, the property was
transferred to the Philippine Alien Property Administrator, to be held, used,
administered, liquidated, sold or otherwise dealt with by the latter.
4. Plaintiff filed a claim for the return of the property before the Property Claims
Committee of the Philippine Alien Property Administrator which failed to decide on
his claim.
5. Plaintiff alleged that he executed the deed of sale in favor of the occupation
Republic under duress and due to the threats employed by the representatives of the
Japanese Military Administration, and that the P500,000 in Japanese Military Notes
were grossly inadequate.
6. CFI ruled in favor of Laperal

ISSUE/S and RULING.

W/N the deed of sale was executed under duress and is thus annullable—YES.

OBLICON G06 / ATTY. AMPIL / NGARCIA. CSY. GVALERA. JTRINIDAD. EVISITACION / 2017 12
 13. RIVERO v. CA WHEREFORE, the amended decision of the Court of Appeals promulgated on May 4, 1973 in
G.R. No. L-37159/NOV 29, 1977/FERNANDEZ, J./ANNULMENT OF CONTRACT/CSY CA-G.R. No. 44488-R is hereby reversed and the decision of the trial court is affirmed in toto,
NATURE Appeal from CA Decision with costs against the private respondent Jaime Rivero.
PETITIONER Luisa Rivero, in substitution of her deceased mother, Lucia Origen
RESPONDENTS Court of Appeals [Sp. Division of 5 Justices] & Jaime Rivero NOTES.
PETITIONERS WON.
SUMMARY. The petitioners filed an action to declare the deed of sale by the defendant of a
parcel of land to be null and void for being acquired through fraud and misrepresentation. The
Court ruled that the consent of the owner of the land who died thinking that she signed a deed
of mortgage but in truth was a deed of sale was obtained through fraud, thus the deed of sale is
declared null and void.
DOCTRINE. Annulment of the contract may be a proper action when the consent was
obtained through fraud.

FACTS.
1. A certain Ana Concepcion (Ana) who died on Apr 18, 1965 was formerly the registered
owner of a parcel of land at Barrio Tagalag, Valenzuela, Bulacan.
2. The plaintiffs are some of the legal heirs of the deceased Ana, who died intestate.
3. On Mar 15, 1965, Ana decided to mortgage the property for P5, 000 in order to pay an
existing obligation to a Filomena Jusayan in the amount of P3, 000 and spend for her
recovery from illness (pulmonary tuberculosis).
4. Ana entrusted the title of the property to the defendant nephew Jaime Rivero, trusting that
he would facilitate the mortgage.
5. The defendant Jaime did not mortgage the property. Through fraud and
misrepresentation, he manifested that the certain documents were supposed to be deeds of
mortgage, and through violence and undue influence on Ana, effected the signing of the
documents, which were in reality a deed of absolute sale and an affidavit of alienation.
6. The defendant did not give any consideration to Ana, and Ana died without even paying
her debt to Filomena.
7. The defendant registered the property in his name and was issued a TCT.
8. The present plaintiffs filed a complaint to declare the said deed of sale null and void.
9. The Trial Court rendered a decision declaring the deed of sale null and void.
10. Initially, the CA affirmed in toto the TC’s decision. In a M/R, the CA reversed the TC
and declared the deed of sale valid and subsisting, Jaime Rivero as the rightful owner of
the property.

ISSUES & RATIO.

WON the deed of sale was valid – NO.

If she signed the deed of sale and subsequent affidavit, it was under the false belief that she
was only mortgaging the property. The sale is therefore voidable, because the consent of Ana
Concepcion was obtained thru the fraudulent misrepresentation of Rivero that the contract she
was signing was one of mortgage.

The undisputed facts of record support the finding of the trial court that the consent of Ana
Concepcion to the deed of sale was obtained through the fraudulent misrepresentation of Jaime
Rivero that the contract she was signing was one of mortgage.

DECISION.

OBLICON G06 / ATTY. AMPIL / NGARCIA. CSY. GVALERA. JTRINIDAD. EVISITACION / 2017 13
 14. ASKAY v. COSALAN NOTES.
NO. 21943/SEPT. 15, 1924/MALCOLM J./GVALERA Respndent wins!
PETITIONER: ASKAY Case was dismissed!
RESPONDENT: FERNANDO A. COSALAN
DOCTRINE: Fraud must be both alleged and proved. WON the court has jurisdiction over the case? YES
1. Section 11 of the Administrative Code provides: "A statute passed by the Philippine
FACTS: Legislature shall, in the absence of special provision, take effect at the beginning of
1. Petitioner is an Igorrote, Illiterate, 70-80 yrs of age, in tublay, Province of benguet and at the fifteenth day after the completion of the publication of the statute in the Official
various times, the owner of mining property. Gazette, the date of issue being excluded." Act No. 3107, amendatory of section 155
2. Respondent is nephew by marriage of petitioner of the Administrative Code, authorizing a Judge of First Instance to be detailed by
3. Petitioner obtained title to the Pet Kel Mineral Claim (PKMC)at Tublay, Benguet. the Secretary of Justice to temporary duty, for a period which shall in no case exceed
4. Respondent’s claim: Respondent sold this claim to Cosalan, 9 yrs after, Respondent filed six months, in a district or province other than his own, for the purpose of trying all
a case to declare the sale of PKMC null and void. kinds of cases, excepting criminal and election cases, was made to take effect on its
approval, and the Act was approved on March 17, 1923. Held: That as there is a
ISSUE/RULING: special provision in Act No. 3107, it applies to the exclusion of the general provision
WON the contract should be cancelled? NO contained in the Administrative Code. Held, further: That as Act No. 3107 went into
effect on March 17, 1923, and that as it was subsequent thereto, on April 16, 1923,
Plaintiff: the sale of the PKMC was accomplished through fraud and deceit on the part of the that Judge of First Instance Harvey was authorized to hold court at Baguio beginning
defendant. Plaintiff may be right but in our judgment he has failed to establish his claim. with May 2, 1923, Judge Harvey had jurisdiction to try the case of Askay vs.
Fraud must be both alleged and proved. Cosalan.

One fact exists in plaintiff's favor, and this is the age and ignorance of the plaintiff who could
be easily duped by the defendant, a man of greater intelligence. Another fact is the inadequacy
of the consideration for the transfer which, according to the conveyance, consisted of P1 and
other valuable consideration, and which, according to the oral testimony, in reality consisted
of P107 in cash, a bill fold, one sheet, one cow, and two carabaos. Gross inadequacy naturally
suggests fraud and is some evidence thereof, so that it may be sufficient to show it when taken
in connection with other circumstances, such as ignorance or the fact that one of the parties
has an advantage over the other. But the fact that the bargain was a hard one, coupled with
mere inadequacy of price when both parties are in a position to form an independent judgment
concerning the transaction, is not a sufficient ground for the cancellation of a contract.

Against the plaintiff and in favor of the defendant, we have the document itself executed in the
presence of witnesses and before a notary public and filed with the mining recorder. The
notary public, Nicanor Sison, and one of. the attesting witnesses, Apolonio Ramos, testified to
the effect that in the presence of the plaintiff and the defendant and of the notary public and
the subscribing witnesses, the deed of sale was interpreted to the plaintiff and that thereupon
he placed his thumb mark on the document. Two finger print experts, Dr. Charles S. Banks
and A. Simkus, have declared in depositions that the thumb mark on Exhibit 1 is that of
Askay. No less than four other

witnesses testified that at various times Askay had admitted to them that he had sold the
PKMC to Fernando A. Cosalan.

Having in mind all of these circumstances, how can the plaintiff expect the courts to nullify
the deed of sale on mere suspicion? Having waited nine years from the date when the deed
was executed, nine years from the time Fernando A. Cosalan started developing the mine, nine
years from the time Askay himself had been deprived of the possession of the mine, and nine
years permitting of a third party to obtain a contract of lease from Cosalan, how can this court
overlook plaintiff's silent acquiescence in the legal rights of the defendant? On the facts of
record, the trial judge could have done nothing less than dismiss the action.

OBLICON G06 / ATTY. AMPIL / NGARCIA. CSY. GVALERA. JTRINIDAD. EVISITACION / 2017 14
 15. SAMSON v. CA
G.R. No. 108245/ NOV 25, 1994/PUNO, J. /JTRINIDAD ISSUES & RATIO.
NATURE Appeal 3. WON respondent committed fraud or bad faith in representing to petitioner that his
PETITIONERS Manolo Samson contract of lease over the premises has been implied renewed – NO.
RESPONDENTS Court of Appeals, Santos and Sons inc. and Angel Santos
We find the petition devoid of merit.
 Bad faith is essentially a state of mind affirmatively
DOCTRINE. Causal fraud or bad faith on the part of one of the contracting parties which operating with furtive design or with some motive of ill- will. It does not simply connote bad
allegedly induced the other to enter into a contract must be proved by clear and convincing judgment or negligence. It imports a dishonest purpose or some moral obliquity and conscious
evidence. doing of wrong. Bad faith is thus synonymous with fraud and involves a design to mislead or
deceive another, not prompted by an honest mistake as to one’s rights or duties, but by some
FACTS. interested or sinister motive.
1. Petitioner prays for the reversal of the decision of the CA where in it modified the
decision of the RTC absolving private respondent Angel Santos from liability for the In contracts, the kind of fraud that will vitiate consent is one where, through insidious words
damages sustained by petitioner. or machinations of one of the contracting parties, the other is induced to enter into a contract
2. Subject matter of this case is a commercial unit at madrigal building. which, without them, he would not have agreed to. This is known as dolo causante or causal
3. The building is owned by Susana Realty Corp and the premises was leased to respondent fraud which is basically a deception employed by one party prior to or simultaneous to the
Angel Santos. contract in order to secure the consent of the other.
4. The haberdashery store of Santos and Sons owned by respondent, occupied the premises for
almost 20 years on a yearly basis. After carefully examining the records, we sustain the finding of public respondent Court of
5. They were informed before the expiration of the lease on July 1984 that Susana has no Appeals that private respondent was neither guilty of fraud nor bad faith in claiming that there
intention of renewing. was implied renewal of his contract of lease with Susana Realty. The records will bear that the
6. But it was extended up to dec 31 1984. Respondent continued to occupy the leased premises original contract of lease between the lessor Susana Realty and the lessee private respondent
beyond the extended term was for a period of one year, commencing on August 1, 1983 until July 31, 1984.
7. On feb 1985, respondent received a letter from the lessor through its real estate accountant Subsequently, however, private respondent’s lease was extended until December 31, 1984. At
that there is an increased of rentals retroactive to January 1985 pending approval of his this point, it was clear that the lessor had no intention to renew the lease contract of private
contract. respondent for another year. However, on February 5, 1985, the lessor, thru its Real Estate
8. 4 days later, petitioner Samson, offered to buy the haberdashery and his right to lease the Accountant, sent petitioner a letter of even date, worded as follows:
premises.
9. After a week, petitioner returned wherein he was presented with a counter offer (see notes) “February 5, 1985
10. Petitioner accepted and agreed the consideration to be 300k. Mr. Angel Santos
 1609-1613 C.M. Recto Avenue Sta. Cruz, Manila
11. Petitioner first paid half then agreed the other half to be paid when there is a formal
renewal of the lease contract between respondent and lessor. Dear Mr. Santos:
12. Petitioner occupied the store in March 1985
13. In july, however, petitioner received noticed directing them to vacate the premises This is to notify you that the rentals for the 1609-1613 C.M. Recto Avenue, Sta. Cruz, Manila,
on or be july 15. which you are leasing with (sic) us has been increased from P77.81 to P100.00 per square
14. Respondent failed to renew his lease over the premises and petitioner was forced to meter retroactive January 1985 (as you have not vacated the place) pending renewal of your
vacate. contract until the arrival of Miss Ma. Rosa A.S. Madrigal.
15. Petitioner filed for damages against respondent. He imputed bad faith and fraud
when respondent stated in his proposal that his lease has been impliedly renewed. Thus, your new rate will be PESOS: FOURTEEN THOUSAND TWO HUNDRED FIFTY
16. Further, his misrepresentation induced him to purchase the store and leasehold right ONLY (P14,250.00) since you are occupying One Hundred Forty Two and 50/100 square
of respondent. meters.
17. Respondent in his defense alleged that their agreement was to the effect that
consideration of 300k Please note that we are charging the same for everybody and they all agreed to pay the new
a. 150k for the improvements in the store rate.
b. 150k for the sale and leasehold right over the store and premises We do expect your full cooperation with regards (sic) to this matter.
c. balance shall be paid only after the formal renewal of the lease contract and its
actual transfer to petitioner Very truly yours,
18. TC rendered judgement in favor of petitioner. (Sgd) JANE F. BARTOLOME Accountant-Real Estate”
19. CA: modified after finding that respondent did not exercise fraud or bad faith in its
dealings. Clearly, this letter led private respondent to believe and conclude that his lease contract was
impliedly renewed and that formal renewal thereof would be made upon the arrival of Tanya
Madrigal. This much was admitted by petitioner himself when he testified during

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cross-examination that private respondent initially told him of the fact that his lease contract
with Susana Realty has already expired but he was anticipating its formal renewal upon the
arrival of Madrigal. Thus, from the start, it was known to both parties that, insofar as the
agreement regarding the transfer of private respondent’s leasehold right to petitioner was
concerned, the object thereof relates to a future right. It is a conditional contract recognized in
civil law, the efficacy of which depends upon an expectancy— the formal renewal of the lease
contract between private respondent and Susana Realty.

Moreover, public respondent Court of Appeals was correct when it faulted petitioner for
failing to exercise sufficient diligence in verifying first the status of private respondent’s lease.

In sum, we hold that under the facts proved, private respondent cannot be held guilty of fraud
or bad faith when he entered into the subject contract with petitioner. Causal fraud or bad faith
on the part of one of the contracting parties which allegedly induced the other to enter into a
contract must be proved by clear and convincing evidence. This petitioner failed to do.

DECISION. AFFIRMED. Respondent won

NOTES.
“MANOLO SAMSON Marikina, Metro Manila

Sir:

In line with our negotiation to sell our rights in the Madrigal building at Recto, Rizal Avenue,
I propose the following:

1. The lease contract between Santos and Sons, Inc. and Madrigal was impliedly renewed. It
will be formally renewed this monthly (sic) when Tanya Madrigal arrives. 


2. To avoid breach of contract with Madrigal, I suggest that you acquire all our shares in
Santos and Sons, Inc. 


3. I will answer and pay all obligations of Santos and Sons, Inc. as of February 28, 1985.

 Very truly yours, Angel C. Santos” 


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