GOLANGCO V. PCIBFacts: In 1989, William Golangco Construction
Corporation (WGCC) and the Philippine Commercial International Bank
(PCIB) entered into a contract for the construction of the
extension of PCIB Tower II. The project included, among others, the
application of a granitite wash-out finish on the exterior walls of
the building.
In a letter, PCIB, with the concurrence of its consultant TCGI
Engineers (TCGI), accepted the turnover of the completed work by
WGCC. To answer for any defect arising within a period of one year,
WGCC submitted a guarantee bond dated July 1, 1992 in compliance
with the construction contract (Defects liability period).
The controversy between the parties arose when portions of the
granitite wash-out finish of the exterior of the building began
peeling off and falling from the walls in 1993.WGCC made minor
repairs after PCIB requested it to rectify the construction
defects.
In 1994, PCIB entered into another contract with Brains and
Brawn Construction and Development Corporation to re-do the entire
granitite wash-out finish after WGCC manifested that it was "not in
a position to do the new finishing work," though it was willing to
share part of the cost. PCIB incurred expenses amounting to P11,
665,000 for the repair work.
PCIB filed a request for arbitration with the Construction
Industry Arbitration Commission (CIAC) for the reimbursement of its
expenses for the repairs made by another contractor. It complained
of WGCCs alleged non-compliance with their contractual terms on
materials and workmanship.
The CIAC declared WGCC liable for the construction defects in
the project.
On appeal, the CA affirmed the CIAC decision.
Hence, this present petition.
Issue: Whether or not petitioner WGCC is liable for defects in
the granitite wash-out finish that occurred after the lapse of the
one-year defects liability period provided in Art. XI of the
construction contract.
Held: No.
The controversy pivots on a provision in the construction
contract referred to as the defects liability period. Article XI of
the construction contract provides:
xxx
the CONTRACTOR hereby guarantees the work stipulated in this
Contract, and shall make good any defect in materials and
workmanship which becomes evident within one (1) year after the
final acceptance of the work.
Article 1306 of the Civil Code enunciates the autonomous nature
of contracts.
Article 1306. The contracting parties may establish such
stipulations, clauses, terms and conditions as they may deem
convenient, provided they are not contrary to law, morals, good
customs, public order, or public policy.
Obligations arising from contracts have the force of law between
the parties and should be complied with in good faith. In
characterizing the contract as having the force of law between the
parties, the law stresses the obligatory nature of a binding and
valid agreement.
In the present case, the provision in the construction contract
providing for a defects liability period was not shown as contrary
to law, morals, good customs, pubic order or public policy. By the
nature of the obligation in such contract, the provision limiting
liability for defects and fixing specific guaranty periods was not
only fair and equitable; it was also necessary. Without such
limitation, the contractor would be expected to make a perpetual
guarantee on all materials and workmanship.
The contract further did not specify a different period for
defects in the granitite wash-out finish; hence, any defect therein
should have been brought to WGCCs attention within the one-year
defects liability period in the contract.
We cannot countenance an interpretation that undermines a
contractual stipulation freely and validly agreed upon. The courts
will not relieve a party from the effects of an unwise or
unfavorable contract freely entered into.
Further, it must be noted that this kind of stipulation is of
particular importance to the contractor, for as a general rule,
after the lapse of the period agreed upon therein, he may no longer
be held accountable for whatever defects, deficiencies or
imperfections that may be discovered in the work executed by
him.
PNB V. CAFacts:
April 7, 1982- private respondents, as owners of a
NACIDA-registered enterprise, obtained a loan under the Cottage
Industry Guaranty Loan Fund (CIGLF) from petitioner, PNB, in the
amount of P50,000 as evidenced by a Credit Agreement. The loan was
to be amortized over a period of 3 years to end on March 20, 1985
at 12% interest annually. The said loan was secured by a Real
Estate Mortgage over an agricultural land and Chattel Mortgage over
a thermo plastic-forming machine.
The credit agreement provided that:
The BANK reserves the right to increase the interest rate within
the limits allowed by law at any time depending on whatever policy
it may adopt in the future; Provided, that the interest rate on
this accommodation shall be correspondingly decreased in the event
that the applicable maximum interest is reduced by law or by the
Monetary Board. In either case, the adjustment in the interest rate
agreed upon shall take effect on the effectivity date of the
increase or decrease in the maximum interest rate.
The promissory note, in turn, authorized PNB to raise the
interest, at any time without notice, beyond the stipulated rate of
12% but only within the limits allowed by law.
February 17, 183- private respondents were granted an additional
NACIDA loan of P50,000. PNB executed another promissory note which
is to mature on April 1, 1985. It contained the same terms
specified in the previous note. The parties also executed a new
Credit Agreement, changing the amount from P50,000 to P100,000,
with the same stipulations as the previous one.
August 1, 1984- petitioner sent a letter to respondents
informing them that the interest rate of their CIGLF loan account
was raised to 25% per annum plus a penalty of 6% per annum on past
dues. PNB further increased the interest rate to 30% and 42 % a few
months later.
Thereafter, private respondents exerted efforts to get PNB to
re-adopt the 12% interest and to condone the present interest and
penalties due, but to no avail.
December 15, 1987- private respondents filed a suit for specific
performance against petitioner PNB and NACIDA praying to release
the mortgage; pay damages and other relief which the court may find
just and equitable.
The trial court dismissed the case. CA reversed the decision in
favor of private respondents and disallowed the increases in
interest rates.
Petitioners Contention: The increase in interest rates is
authorized by the escalation clause specified in the Credit
Agreement.
Issue: Whether or not the increase in interest rates made by
petitioner is valid.
Held: No. The increase in interest rates made by petitioner is
invalid.
It is basic that there can be no contract in the true sense in
the absence of the element of agreement, or of mutual assent of the
parties. If this assent is wanting on the part of the one who
contracts, his act has no more efficacy than if it had been done
under duress or by a person of unsound mind.
Similarly, contract changes must be made with the consent of the
contracting parties. The minds of all the parties must meet as to
the proposed modification, especially when it affects an important
aspect of the agreement. In the case of loan contracts, it cannot
be gainsaid that the rate of interest is always a vital component,
for it can make or break a capital venture. Thus, any change must
be mutually agreed upon, otherwise, it is bereft of any binding
effect.
The Court disagrees with petitioners argument that the
escalation clause gives it the unbridled right to unilaterally
upwardly adjust the interest on private respondents' loan. That
would completely take away from private respondents the right to
assent to an important modification in their agreement, and would
negate the element of mutuality in contracts. In Philippine
National Bank v. Court of Appeals, et al., 196 SCRA 536, 544-545
(1991) the Court held
. . . The unilateral action of the PNB in increasing the
interest rate on the private respondent's loan violated the
mutuality of contracts ordained in Article 1308 of the Civil
Code:
Art. 1308. The contract must bind both contracting parties; its
validity or compliance cannot be left to the will of one of
them.
In order that obligations arising from contracts may have the
force or law between the parties, there must be mutuality between
the parties based on their essential equality. A contract
containing a condition which makes its fulfillment dependent
exclusively upon the uncontrolled will of one of the contracting
parties, is void . . . . Hence, even assuming that the . . . loan
agreement between the PNB and the private respondent gave the PNB a
license (although in fact there was none) to increase the interest
rate at will during the term of the loan, that license would have
been null and void for being violative of the principle of
mutuality essential in contracts. It would have invested the loan
agreement with the character of a contract of adhesion, where the
parties do not bargain on equal footing, the weaker party's (the
debtor) participation being reduced to the alternative "to take it
or leave it" . . . . Such a contract is a veritable trap for the
weaker party whom the courts of justice must protect against abuse
and imposition. (Citation omitted.)
Private respondents are not also estopped from assailing the
unilateral increases in interest rate made by petitioner bank. No
one receiving a proposal to change a contract to which he is a
party, is obliged to answer the proposal, and his silence per se
cannot be construed as an acceptance. In the case at bench, the
circumstances do not show that private respondents implicitly
agreed to the proposed increases in interest rate which by any
standard were too sudden and too stiff.
ALLIED BANKING V. CA
FACTS:
Spouses Filemon Tanqueco and Lucia Domingo-Tanqueco owned a
512-square meter lot located at No. 2 Sarmiento Street corner
Quirino Highway, Novaliches, Quezon City, covered by TCT No. 136779
in their name. On 30 June 1978 they leased the property to
petitioner Allied Banking Corporation (ALLIED) for a monthly rental
of P1,000.00 for the first three (3) years, adjustable by 25% every
three (3) years thereafter.1The lease contract specifically states
in its Provision No. 1 that "the term of this lease shall be
fourteen (14) years commencing from April 1, 1978 and may be
renewed for a like term at the option of the lessee."
Pursuant to their lease agreement, ALLIED introduced an
improvement on the property consisting of a concrete building with
a floor area of 340-square meters which it used as a branch office.
As stipulated, the ownership of the building would be transferred
to the lessors upon the expiration of the original term of the
lease.
Sometime in February 1988 the Tanqueco spouses executed a deed
of donation over the subject property in favor of their four (4)
children, namely, private respondents herein Oscar D. Tanqueco,
Lucia Tanqueco-Matias, Ruben D. Tanqueco and Nestor D. Tanqueco,
who accepted the donation in the same public instrument.
On 13 February 1991, a year before the expiration of the
contract of lease, the Tanquecos notified petitioner ALLIED that
they were no longer interested in renewing the lease.2ALLIED
replied that it was exercising its option to renew their lease
under the same terms with additional proposals.3Respondent Ruben D.
Tanqueco, acting in behalf of all the donee-lessors, made a
counter-proposal.4ALLIED however rejected the counter-proposal and
insisted on Provision No. 1 of their lease contract.
When the lease contract expired in 1992 private respondents
demanded that ALLIED vacate the premises. But the latter asserted
its sole option to renew the lease and enclosed in its reply letter
a cashier's check in the amount of P68,400.00 representing the
advance rental payments for six (6) months taking into account the
escalation clause. Private respondents however returned the check
to ALLIED, prompting the latter to consign the amount in court.
An action for ejectment was commenced before the Metropolitan
Trial Court of Quezon City. After trial, the MeTC-Br. 33 declared
Provision No. 1 of the lease contract void for being violative of
Art. 1308 of the Civil Code On appeal to the Regional Trial Court,
and later to the Court of Appeals, the assailed decision was
affirmed.5On 20 February 1993, while the case was pending in the
Court of Appeals ALLIED vacated the leased premises by reason of
the controversy.6ALLIED insists before us that Provision No. 1 of
the lease contract was mutually agreed upon hence valid and binding
on both parties, and the exercise by petitioner of its option to
renew the contract was part of their agreement and in pursuance
thereof.
ISSUE:
Whether a stipulation in a contract of lease to the effect that
the contract "may be renewed for a like term at the option of the
lessee" is void for being potestative or violative of the principle
of mutuality of contracts under Art. 1308 of the Civil Code?
Rule:
No. Decision of the Court of Appeals is REVERSED and SET
ASIDE.
Article 1308 of the Civil Code expresses what is known in law as
theprinciple of mutuality of contracts. It provides that "the
contract must bind both the contracting parties; its validity or
compliance cannot be left to the will of one of them." This binding
effect of a contract on both parties is based on the principle that
the obligations arising from the contracts have the force of law
between the contracting parties, and there must be mutuality
between them based essentially on their equality under which it is
repugnant to have one party bound by the contract while leaving the
other free therefrom. The ultimate purpose is to render void a
contract containing a condition which makes its fulfillment
dependent solely upon the uncontrolled will of one of the
contracting parties.
An express agreement which gives the lessee the sole option to
renew the lease is frequent and subject to statutory restrictions,
valid and binding on the parties. This option, which is provided in
the same lease agreement, is fundamentally part of the
consideration in the contract and is no different from any other
provision of the lease carrying an undertaking on the part of the
lessor to act conditioned on the performance by the lessee. It is a
purely executory contract and at most confers a right to obtain a
renewal if there is compliance with the conditions on which the
rights is made to depend. The right of renewal constitutes a part
of the lessee's interest in the land and forms a substantial and
integral part of the agreement.
The fact that such option is binding only on the lessor and can
be exercised only by the lessee does not render it void for lack of
mutuality. After all, the lessor is free to give or not to give the
option to the lessee. And while the lessee has a right to elect
whether to continue with the lease or not, once he exercises his
option to continue and the lessor accepts, both parties are
thereafter bound by the new lease agreement. Their rights and
obligations become mutually fixed, and the lessee is entitled to
retain possession of the property for the duration of the new
lease, and the lessor may hold him liable for the rent therefor.
The lessee cannot thereafter escape liability even if he should
subsequently decide to abandon the premises. Mutuality obtains in
such a contract and equality exists between the lessor and the
lessee since they remain with the same faculties in respect to
fulfillment.Fortunately for respondent lessors, ALLIED vacated the
premises on 20 February 1993 indicating its abandonment of whatever
rights it had under the renewal clause. Consequently, what remains
to be done is for ALLIED to pay rentals for the continued use of
premises until it vacated the same, computed from the expiration of
the original term of the contract on 31 March 1992 to the time it
actually left the premises on 20 February 1993, deducting therefrom
the amount of P68,400.00 consigned in court by ALLIED and any other
amount which it may have deposited or advanced in connection with
the lease. Since the old lease contract was deemed renewed under
the same terms and conditions upon the exercise by ALLIED of its
option, the basis of the computation of rentals should be the
rental rate provided for in the existing contract.
Considering that petitioner ALLIED BANKING CORPORATION already
vacated the leased premises as of 20 February 1993, the renewed
lease contract is deemed terminated as of that date. However,
petitioner is required to pay rentals to respondent lessors at the
rate provided in their existing contract, subject to computation in
view of the consignment in court of P68,400.00 by petitioner, and
of such other amounts it may have deposited or advanced in
connection with the lease.
What is the meaning of the clause maybe renewed for a like term
at the option of the lessee?
With respect to the meaning of the clause "may be renewed for a
like term at the option of the lessee," we sustain petitioner's
contention that its exercise of the option resulted in the
automatic extension of the contract of lease under the same terms
and conditions. The subject contract simply provides that "the term
of this lease shall be fourteen (14) years and may be renewed for a
like term at the option of the lessee." As we see it, the only term
on which there has been a clear agreement is the period of the new
contract,i.e., fourteen (14) years, which is evident from the
clause "may be renewed for a like term at the option of the
lessee," the phrase"for a like term"referring to the period. It is
silent as to what the specific terms and conditions of the renewed
lease shall be. Shall it be the same terms and conditions as in the
original contract, or shall it be under the terms and conditions as
may be mutually agreed upon by the parties after the expiration of
the existing lease?
BALUYOT V. CA
FACTS:
Petitioners in this case are residents and members of
Cruz-na-Ligas Homesite Association, Inc. at Diliman, Quezon
City.
Petitioners were contending that they have been in open,
peaceful, adverse and continuous possession in the concept of an
owner, for the rest of the land in Barrio Cruz-na-Ligas, consisting
at least 42 hectares.
Since Oct. 1972, the said land is actually subject of
quasi-judicial proceedings and administrative investigations by
different branches of government. In fact the Bureau of land and
the President of the RP issued endorsements confirming the rights
of the bona fide residents of barrio Cruz-na-Ligas to the parcel of
land.
In 1979, UP Board of Regents approved the donation of 9.2
hectares of the site that was endorsed by the President of RP. But
after several negotiations with the residents, the area was
increased to 15.8 hectares.
Due to the unreasonable demand of the residents for an area
bigger than 15.8 hectares, the execution of the legal instrument to
formalize the donation failed.
Later on, the association proposed to accept the offer of the UP
to donate 15.8 hectares. UP manifested in writing its consent to
the intended donation in favor with the association provided that
they will agree and comply with the terms and conditions of the
donation.
Defendant UP backed-out from the arrangement to donate directly
to the Association the said land, instead, the former decided to
negotiate the donation thru the Quezon City Govt under the terms
and conditions not favorable to the residents of the said
barrio.
The Association added to its cause of action in its petition the
specific performance aside from the exclusion from the technical
description of Certificate of Title of Defendant UP the 42 hectares
covering Barrio Cruz-na-Ligas.
The said association also filed a petition for writ of
preliminary injunction to restraint defendant UP from donating the
area to the Quezon City Government.
After the TCs decision, UP assured the residents through motion
of reconsideration that the donation of the 15.8 hectares to the
Quezon City Govt will be for the benefit of the residents of the
said barrio.
As the Quezon City Governments willing to comply with the terms
and conditions of the donation made by UP, President Jose Abueva
(UP), failed to deliver the certificate of title of the said land
which enabled the QC government to register the deed of
donation.
It reached the expiration period of 18 months, for the
non-compliance of the QC govt under par.16 of the terms and
conditions of the said donation.
President Abueva issued Administrative order No. 21 declaring
the deed of donation revoked.
RTC ordered that petitioners are not parties to the said deed of
donation.
CA set aside the TCs order and dismissed the case.
ISSUE: WON the petitioners has the cause of action and right to
seek the enforcement of the deed of donation though they were not
parties of such deed?
HELD: SC said Yes.
SC said that even if petitioners were not parties to the deed of
donation, they have the right to seek its enforcement upon their
allegation that they are intended beneficiaries of the donation to
the Quezon City Government.
Art. 1311 provides, 2nd par. of the CC provides that: If a
contract should contain some stipulation in favor of a third
person, he may demand its fulfillment provided he communicated his
acceptance to the obligor before its revocation. A mere incidental
benefit or interest of a person is not sufficient. The contracting
parties must have clearly and deliberately conferred a favor upon a
third person.
Following requisites must be present in order to have a
stipulation POUR AUTRUI:
There must be a stipulation in favor of a 3rd person.
The stipulation must be a part, not the whole of the
contract.
The contracting parties must have clearly and deliberately
conferred a favor upon a 3rd person, not a mere incidental benefit
or interest.
The 3rd person must have communicated his acceptance to the
obligor before its revocation.
Neither of the contracting parties bears the legal
representation of the 3rd party.
There was stipulation in the said deed of donation that QC govt
as the donee, is required to transfer to qualified residents, said
lots by way of donation.
The stipulation is part of the conditions imposed by UP.
Par. 15 and 16 that the intent of the parties to the deed of
donation was to favor petitioner by transferring the latter the
lots occupied by them.
Through conferences, petitioners accepted the said donation and
private respondents were aware of such acceptance.
Neither of private respondents acted in representation of the
other. Each of the private respondents had its own obligations, in
view of conferring a favor upon petitioners.
The trial courts decision about the donation has been revoked
and petitioner had no clear and legal right to be protected was
still tentative.
The SC ordered the decision of the CA be reversed and the case
was remanded to the RTC.
INTEGRATED PACKAGING V. CA
Nature of the case: This is a petition to review the decision of
the Court of Appeals rendered on April 20, 1994 reversing the
judgment of the Regional Trial Court of Caloocan City in an action
for recovery of sum of money filed by private respondent against
petitioner.
FACTS:
Petitioner and private respondent executed on May 5, 1978, an
order agreement whereby private respondent bound itself to deliver
to petitioner reams of printing paper, coated, 2 sides basis, short
grain in the following schedules: May and June 1978, August and
September 1978, January 1979, March 1979, July 1979 and March
1979.
In accordance with the standard operating practice of the
parties, the materials were to be paid within a minimum of thirty
days and maximum of ninety days from delivery.
Later, on June 7, 1978, petitioner entered into a contract with
Philippine Appliance Corporation (Philacor) to print three volumes
of "Philacor Cultural Books" Petitioner alleged it wrote private
respondent to immediately deliver the balance because further delay
would greatly prejudice petitioner.
From June 5, 1980 and until July 23, 1981, private respondent
delivered again to petitioner various quantities of printing paper
amounting to P766,101.70.
However, petitioner encountered difficulties paying private
respondent said amount.
Accordingly, private respondent made a formal demand upon
petitioner to settle the outstanding account.
Meanwhile, petitioner entered into an additional printing
contract with Philacor. Unfortunately, petitioner failed to fully
comply with its contract with Philacor for the printing of books
VIII, IX, X and XI.
Philacor demanded compensation from petitioner for the delay and
damage it suffered on account of petitioners failure.
On July 5, 1990, the trial court rendered judgment declaring
that petitioner should pay private respondent the sum of
P763,101.70 representing the value of printing paper delivered by
private respondent from June 5, 1980 to July 23, 1981.
On appeal, the respondent Court of Appeals reversed and set
aside the judgment of the trial court.
Petitioner filed this instant petition contending that the
appellate courts judgment is based on erroneous conclusions of
facts and law.
ISSUE: WON private respondent is liable for petitioners breach
of contract with Philacor
HELD:
Petitioners contention lacks factual and legal basis, hence,
bereft of merit.
The transaction between the parties is a contract of sale
whereby private respondent (seller) obligates itself to deliver
printing paper to petitioner (buyer) which, in turn, binds itself
to pay therefore a sum of money or its equivalent (price).
Clearly, petitioner did not fulfill its side of the contract as
its last payment in August 1981 could cover only materials covered
by delivery invoices dated September and October 1980.
There is no dispute that the agreement provides for the delivery
of printing paper on different dates and a separate price has been
agreed upon for each delivery.
As correctly held by the appellate court, private respondent
cannot be held liable under the contracts entered into by
petitioner with Philacor.
Private respondent is not a party to said agreements.
It is also not a contract pour autrui. Aforesaid contracts could
not affect third persons like private respondent because of the
basic civil law principle of relativity of contracts which provides
that contracts can only bind the parties who entered into it, and
it cannot favor or prejudice a third person, even if he is aware of
such contract and has acted with knowledge thereof.
Indeed, the order agreement entered into by petitioner and
private respondent has not been shown as having a direct bearing on
the contracts of petitioner with Philacor.
As pointed out by private respondent and not refuted by
petitioner, the paper specified in the order agreement between
petitioner and private respondent are markedly different from the
paper involved in the contracts of petitioner with Philacor.
Instant petition is DENIED.
A&C MINIMART V. VILLAREAL
FACTS: Petitioner leased the six stalls of the one-storey
commercial building from spouses Bonifacio under a lease agreement.
However, the ownership of the subject property is under dispute
between respondents Villareal and spouses Bonifacio. Spouses
Bonifacio claimed to have purchased the property from spouses
Sevilla, original owners of the disputed property.
On the other hand Respondents Villareal claimed ownership of the
same alleging that in a separate case, the said property is sold to
them at a public auction and they were adjudged as the sole and
highest bidder. The said property was sold to satisfy the damages
awarded to respondents Villareal against spouses Sevilla, original
owners of the disputed property, arising from the murder of Jose
Villareal.
Upon learning that the spouses Bonifacios claim of ownership
over the subject property had been seriously denied by the Makati
RTC, petitioner stopped paying its rentals on the subject property
on March 2, 1999, in violation of the renewed Lease Contract.
The appellate court ordered petitioner A & C Minimart to pay
respondents Villareal, a monthly interest of 3% on the total amount
of rental and other charges not paid on time, in addition to the
unpaid rental and other charges which the trial court ordered
petitioner to pay.
ISSUE: Whether or not petitioner Minimart is obligated to pay
the penalty interest of 3% per month to respondents Villareal
pursuant to the Contract of Lease.
HELD: No. Petitioner Minimart is not obligated to pay the
penalty interest because the Lease Contract, including the
stipulation for the 3% penalty interest, was bilateral between
petitioner and Teresita Bonifacio. So respondents cannot succeed to
any contractual rights which may accrue to the spouses Bonifacio.
Contracts produce an effect only between the parties who execute
them. A contract cannot be binding upon and cannot be enforced by
one who is not party to it.
Article 1311 of the Civil Code: Contracts take effect only
between the parties, their assigns and heirs, except in case where
the rights and obligations arising from the contract are not
transmissible by their nature, or by stipulation or by provision of
law. The heir is not liable beyond the value of the property he
received from the decedent.
Here, the Lease Contract was executed between the spouses
Bonifacio and petitioner. None of the respondents had taken part in
the contract in question nor entered into a contract with either
the lessee or the lessor, as to an assignment of any right under
the Lease Contract in question. Respondents claim ownership over
the subject property, but not as a successor-in-interest of the
spouses Bonifacios. They purchased the property in an execution
sale from the spouses Sevilla. Thus, respondents cannot succeed to
any contractual rights which may accrue to the spouses
Bonifacio.
Although the respondents were adjudged to be entitled to rentals
accruing from March 2, 1999, until the time the petitioner vacated
the premises, the obligation to pay rent was not derived from the
Lease Contract, but from a quasi-contract. In the present case, the
spouses Bonifacio, who were named as the lessors in the Lease
Contracts, are already adjudged not to be the real owners of the
subject property. In Civil Case, the Makati RTC declared that the
Deed of Sale, between the spouses Bonifacio and the spouses Sevilla
was a forgery and, hence, did not validly transfer ownership to the
spouses Bonifacio.
Since the spouses Bonifacio are not the owners of the subject
property, they cannot unjustly benefit from it by collecting rent
which should accrue to the rightful owners of the same. Hence, the
Makati RTC had set up a bank account where the rent due on the
subject property should be deposited and kept in trust for the real
owners thereto.
LLENADO V. LLENADO
Facts:
The subject of this controversy is a parcel of land consisting
of 1,554 sq. m. located in Barrio Malinta, Valenzula, Matro Manila
and registered under the names of Eduardo and Jorge LLenado. The
subject lot once formed part, owned by, and registered under the
name of their father Cornelio Llenado.
On Dec. 2, 1975, Cornelio leased the subject lot to his nephew
Romeo Llenado for a period of 5 yrs, renewable for another 5 yrs at
the option of Cornelio.
On march 31, 1978, Cornelio, Romeo, and the latters father
Orlando executed an agreement whereby Romeo assigned all his rights
to his father Orlando over the unexpired portion of the aforesaid
leased contract, and further agreed that Orlando shall have the
option to renew the contract for 3 yrs commencing from Dec. 3,
1980- 1983, renewable for another 4 yrs up to 1987. That during
that period the property cannot be sold, transferred, alienated or
conveyed in whatever manner to any 3rd party.
Shortly thereafter, Cornelio and Orlando entered into a
supplementary agreement. Orlando was given an additional option to
renew the contract for an aggregate period of 10 yrs at 5 yr
intervals. The provision was inserted in order to comply with the
requirements of Mobil Philippines Inc. for the operation of the
gasoline station subsequently built on the subject lot.
Upon the death of Orlando, his wife, Wenifreda, took over the
operation of the gasoline station. Meanwhile, Cornelio sold a lot
to his children through a deed of absolute sale denominated as
Kasulatan sa Ganap na Bilihan for 160,000. As earlier stated, the
subject lot was owned by Eduardo and Jorge. Several months
thereafter, Cornelio passed away.
Sometime in 1993, Eduardo informed Wenifreda of his desire to
take over the subject lot however the latter refused to vacate the
premises prompting Eduardo to file a complaint of unlawful
detainer. MTC rendered decision in favor of Eduardo however the RTC
reversed MTCs decision. On appeal, CA reinstated MTCs decision
hence this petition.
Issue: WON the sale of the subject lot by Cornelio is invalid
for violation the prohibitory clause.
Held: No.
Petitioner claims that when Cornelio sold the subject lot to
respondents Eduardo and Jorge, the Lease was in full force and
effect thus, the sale violated the prohibitory clause rendering it
invalid.
The petition lacks merit.
Under Art. 1311 of CC, the heirs are bound by the contract
entered into by their predecessors-in-interest except when the
rights and obligations are not transmissible by their nature, by
their stipulation, or by provisions of law.
In the instant case, the lease subsisited at the time of the
sale of the subject lot but when Orlando died on Nov 7, 1983, the
lease was set to expire 26 days later or on Dec. 3, 1983, unless
renewed by the heirs of Orlando. While the option to renew is an
enforceable right, it must necessarily be first exercised to be
given effect.
There is no dispute that the lessees were granted the option to
renew the lease for another 4yrs yet there was never any positive
act on the part of the petitioner before or after the termination
of the original period to show their exercise of such option. The
silence of the lessees cannot be taken to mean that they opted to
renew the contract. Neither can the exercise of the option to renew
can be inferred from their persistence to remain in the premises
despite respondents demand from them to vacate.
As a result, there was no obstacle to the sale of the subject
lot by Cornelio to respondents Eduardo and Jorge as the prohibitory
clause under the lease contract was no longer in force.
SOLER V. CA
FACTS:
1986, Soler, a professional interior designer, met with Nida
Lopez, manager of COMBANK Ermita, for plans to renovate branch
office
Soler agreed to render services, at a professional fee of
P10,000, assured by Lopez to be paid by the bank.
Soler asked for the blueprint of the building then paid a
draftsman, engineer, architects and suppliers for the layout,
quotation and measurements based on the design the bank wanted.
Soler submitted the drawings and designs to Lopez on time.
Subsequently, Soler demanded payment but Lopez ignored.
Contentions by the parties:
a. Lopez replied that she was not entitled to pay because the
designs did not conform to the banks standard.b. COMBANK replied
that there was no contract between Soler and COMBANK since Lopez
merely invited Soler to join a bid to renovate, subject to the
approval of the head office.
c. Soler contended that there was an offer and acceptance of
professional services.
Soler filed for collection of professional fees and damages.
RTC ruled in favor of Soler but the CA ruled in favor of Lopez,
saying COMBANK did not give its consent under Art 1318.
ISSUE:
WON there was a perfected contract between Soler and COMBANK
& Lopez?
HELD:
YES. SC REVERSED CA decision and REINSTATED RTC.
There was a PERFECTED contract between Soler and COMBANK.
a. Art 1305 states that a contract is a meeting of minds between
two persons whereby one binds himself, with respect to the other,
to give something or to render some service.
b. Art 1315 states that contracts are perfected by mere consent,
and from that moment the parties are bound not only to the
fulfillment of what has been expressly stipulated but also to all
the consequences, which according to their nature, may be in
keeping with good faith, usage and law.
c. Art 1318 states that there is no contract unless the
requisites of consent, object and cause are all present.
The STAGES of contract were complete The contract was commenced,
perfected and consummated when Soler and Lopez met to discuss the
details of the work, agreed to the professional fee of P10,000 for
the designs before the December 1986 board meetings and submitted
the designs.
There was a perfected oral or consensual contract which is the
second stage of a contract, which happens the moment the parties
agree on the terms of the contract.
Soler believed that she would be paid P10,000 upon submission of
the designs in due time.
Lopez had AUTHORITY to engage the services of Soler.
a. During their meeting in 1986, Lopez even gave Soler
specifications and blueprints of what were to be renovated in the
branch.
b. Lopez also insisted that the designs be rushed to present to
the bank.
c. COMBANK permitted Lopez to act within the scope of her
authority and is estopped from denying such authority when Soler,
in good faith, dealt with her as an officer of bank. (Art 1322)
d. Lopez also refused to return the submitted designs, which
means that these were useful to her for the board meetings.
COLLECTION of professional fees and damages
Soler may be paid based on quantum meruit which recovers the
reasonable value of services rendered to prevent unjust
enrichment.
Aside from P10,000, Soler is entitled to actual, compensatory
and exemplary damages for her expenses in hiring other
professionals.
C.F. SHARP V. PIONEER INSURANCE Facts:
On august 1990, Wilfredo and Hernando applied with CF sharp for
a job as sandblasters and painters in libya as advertised in a
newspaper.
After passing the interviews and submitting the requirements, a
Contract of Employment was executed between them. After which, they
were required to attends seminars, open a bank account and were
asked to return to CF sharp to ascertain the date of their
deployment.
After a month, wilfredo and hernando were yet to be deployed,
prompting them to request the release of the documents which CF
SHARP allegedly refused to do. This led the private respondents to
file a complaint before the POEA.
The poea issued an order finding the petitioner guilty for
violating the labor code when it withheld or denied travel document
to applicant workers before departure for monetary and financial
considerations other than those authorized in the code. The POEA
suspended the license of CF sharp until the return of the
documents.
On march 1995 filed a complaint for breach of contract before
the RTC. Pioneer insurance also filed a cross claim againt CF sharp
and its vice president, john rocha based on an indemnity agreement
that it would be jointly and severally liable for all the damages,
losses and costs that it would suffer as surety.
RTC rendered a judgment favouring the respondents .The trial
court ruled that there was a violation of the contract when C.F.
Sharp failed to deploy and release the papers and documents of
respondents, hence, they are entitled to damages. The trial court
likewise upheld the cause of action of respondents against Pioneer
Insurance, the former being the actual beneficiaries of the surety
bond.
The CA held that there is no breach of contract because no
contract of employment was perfected. However, it found petitioners
liable for damages pursuant to art 21 of the civil code. It also
limited the liability of pioneer insurance to 150,000.
Issue: whether there was a perfected contract of employment?
Held: YES. SC sustained the RTCs ruling.
The contract of employment entered into by the plaintiffs and
the defendant C.F. Sharp is an actionable document, the same
contract having the essential requisites for its validity. It is
worthy to note that there are three stages of a contract: (1)
preparation, conception, or generation which is the period of
negotiation and bargaining ending at the moment of agreement of the
parties. (2) Perfection or birth of the contract, which is the
moment when the parties come to agree on the terms of the contract.
(3) Consummation or death, which is the fulfillment or performance
of the terms agreed upon in the contract.
Under Article 1315 of the Civil Code, a contract is perfected by
mere consent and from that moment the parties are bound not only to
the fulfillment of what has been expressly stipulated but also to
all the consequences which, according to their nature, may be in
keeping with good faith, usage and law.10 An employment contract,
like any other contract, is perfected at the moment (1) the parties
come to agree upon its terms; and (2) concur in the essential
elements thereof: (a) consent of the contracting parties, (b)
object certain which is the subject matter of the contract and (c)
cause of the obligation. By the contract, C.F. Sharp, on behalf of
its principal, International Shipping Management, Inc., hired
respondents as Sandblaster/Painter for a 3-month contract, with a
basic monthly salary of US$450.00. Thus, the object of the contract
is the service to be rendered by respondents on board the vessel
while the cause of the contract is the monthly compensation they
expect to receive. These terms were embodied in the Contract of
Employment which was executed by the parties. The agreement upon
the terms of the contract was manifested by the consent freely
given by both parties through their signatures in the contract.
Neither parties disavow the consent they both voluntarily gave.
Thus, there is a perfected contract of employment.
GARCIA V. THIO FACTS
Sometime in February 1995, respondent Rica Marie S. Thio
received from petitioner Carolyn M. Garcia a crossed check4dated
February 24, 1995 in the amount of US$100,000 payable to the order
of a certain Marilou Santiago Thereafter, petitioner received from
respondent every month (specifically, on March 24, April 26, June
26 and July 26, all in 1995) the amount of US$3,0006andP76,5007on
July 26,8August 26, September 26 and October 26, 1995.
In June 1995, respondent received from petitioner another
crossed check9dated June 29, 1995 in the amount ofP500,000, also
payable to the order of Marilou Santiago.
Consequently, petitioner received from respondent the amount
ofP20,000 every month on August 5, September 5, October 5 and
November 5, 1995 According to petitioner, respondent failed to pay
the principal amounts of the loans (US$100,000 andP500,000) when
they fell due.
Thus, on February 22, 1996, petitioner filed a complaint for sum
of money and damages in the RTC of Makati City, against respondent,
seeking to collect the sums of US$100,000, with interest thereon at
3% a month from October 26, 1995 andP500,000, with interest thereon
at 4% a month from November 5, 1995, plus attorneys fees and actual
damages.
For both loans, no promissory note was executed since petitioner
and respondent were close friends at the time.15 Respondent denied
that she contracted the two loans with petitioner and countered
that it was Marilou Santiago to whom petitioner lent the money.
She claimed she was merely asked by petitioner to give the
crossed checks to Santiago She issued the checks forP76,000
andP20,000 not as payment of interest but to accommodate
petitioners request that respondent use her own checks instead of
Santiagos.
February 28, 1997, the RTC ruled in favor of petitioner It found
that respondent borrowed from petitioner the amounts of US$100,000
with monthly interest of 3% andP500,000 at a monthly interest of
4%:20 On appeal, the CA reversed the decision of the RTC and ruled
that there was no contract of loan between the parties:
A perusal of the record of the case shows that [petitioner]
failed to substantiate her claim that [respondent] indeed borrowed
money from her.
There is nothing in the record that shows that [respondent]
received money from [petitioner].
What is evident is the fact that [respondent] received a
MetroBank [crossed] check dated February 24, 1995 in the sum of
US$100,000.00, payable to the order of Marilou Santiago and a
CityTrust [crossed] check dated June 29, 1995 in the amount
ofP500,000.00, again payable to the order of Marilou Santiago, both
of which were issued by [petitioner]
The checks received by [respondent], being crossed, may not be
encashed but only deposited in the bank by the payee thereof, that
is, by Marilou Santiago herself. Consequently, the receipt of the
[crossed] check by [respondent] is not the issuance and delivery to
the payee in contemplation of law since the latter is not the
person who could take the checks as a holder, i.e., as a payee or
indorsee thereof, with intent to transfer title thereto.
Neither could she be deemed as an agent of Marilou Santiago with
respect to the checks because she was merely facilitating the
transactions between the former and [petitioner].
ISSUE:Whether or not there were contracts of loan?
RULING:
A loan is a real contract, not consensual, and as such is
perfected only upon the delivery of the object of the contract This
is evident in Art. 1934 of the Civil Code which provides:
An accepted promise to deliver something by way of commodatum or
simple loan is binding upon the parties, but the commodatum or
simpleloan itself shall not be perfected until the delivery of the
object of the contract. (Emphasis supplied)
Upon delivery of the object of the contract of loan (in this
case the money received by the debtor when the checks were
encashed) the debtor acquires ownership of such money or loan
proceeds and is bound to pay the creditor an equal amount.26 It is
undisputed that the checks were delivered to respondent. However,
these checks were crossed and payable not to the order of
respondent but to the order of a certain Marilou Santiago Thus the
main question to be answered is: who borrowed money from petitioner
respondent or Santiago?
Petitioner insists that it was upon respondents instruction that
both checks were made payable to Santiago She maintains that it was
also upon respondents instruction that both checks were delivered
to her (respondent) so that she could, in turn, deliver the same to
Santiago
Furthermore, she argues that once respondent received the
checks, the latter had possession and control of them such that she
had the choice to either forward them to Santiago (who was already
her debtor), to retain them or to return them to petitioner
Delivery is the act by which theresor substance thereof is
placed within the actual or constructive possession or control of
another Although respondent did not physically receive the proceeds
of the checks, these instruments were placed in her control and
possession under an arrangement. Hence according to SC in agreeing
with the contentions of the petitioner that there is perfected
contract of loan upon the receipt of the respondent of the 2
crossed checks issued and delivered by the petitioner.
PANGAN V. PERRERAS (Essential Requisites)FACTS:
Spouses Pangan were the owners of the lot and two-door apartment
(subject properties) On1989, Consuelo agreed to sell to the
respondents the subject properties for the price ofP540, 000.00.On
the same day, Consuelo receivedP20,000.00 from the respondents as
earnest money, evidenced by a receiptthat also included the terms
of the parties agreement. Three days later, or onJune 5, 1989, the
parties agreed to increase the purchase price fromP540, 000.00
toP580, 000.00.
In compliance with the agreement, the respondents issued two Far
East Bank and Trust Company checks payable to Consuelo in the
amounts ofP200, 000.00 andP250, 000.00.
OnJune 15, 1989. Consuelo, however, refused to accept the
checks.She justified her refusal by saying that her children (the
petitioners-heirs) co-owners of the subject properties did not want
to sell the subject properties. For the same reason, Consuelo
offered to return theP20,000.00 earnest money she received from the
respondents, but the latter rejected it. Thus, Consuelo filed a
complaint for consignation against the respondents.
FOR THE RESPONDENTS: They insisted on enforcing the agreement.
They sought to compel Consuelo and the petitioners-heirs (who were
subsequently impleaded as co-defendants) to execute a Deed of
Absolute Sale over the subject properties.
FOR CONSUELO: She was justified in backing out from the
agreement on the ground that the sale was subject to the consent of
the petitioners-heirs who became co-owners of the property upon the
death of her husband, Cayetano.Since the petitioners-heirs
disapproved of the sale, Consuelo claimed that the contract became
ineffective for lack of the requisite consent.
ISSUE:
Whether or not there was s perfected contract between the
parties.
HELD:
YES. There was a perfected contract between the parties. That a
thing is sold without the consent of all the co-owners does not
invalidate the sale or render it void. Article 1318 of the Civil
Code declares that no contract exists unless the following
requisites concur:
consent of the contracting parties;(Which is the requisite
involved in this case) object certain which is the subject matter
of the contract; and
cause of the obligation established.
Article 493 of the Civil Code recognizes the absolute right of a
co-owner to freely dispose of hispro indivisoshare as well as the
fruits and other benefits arising from that share, independently of
the other co-owners.Also, The explicit terms of the June 8, 1989
receiptprovide no occasion for any reading that the agreement is
subject to the petitioners-heirs favorable consent to the sale.
Thus, when Consuelo agreed to sell to the respondents the
subject properties, what she in fact sold was her undivided
interest that, as quantified by the RTC, consisted of one-half
interest, representing her conjugal share, and one-sixth interest,
representing her hereditary share.
The presence of Consuelos consent and, corollarily, the
existence of a perfected contract between the parties are further
evidenced by the payment and receipt ofP20,000.00, an earnest money
by the contracting parties common usage. The law on sales,
specifically Article 1482 of the Civil Code, provides thatwhenever
earnest money is given in a contract of sale, it shall be
considered as part of the price and proof of the perfection of the
contract.Although the presumption is not conclusive, as the parties
may treat the earnest money differently, there is nothing alleged
in the present case that would give rise to a contrary
presumption.
In sum, the case contains no element, factual or legal, that
negates the existence of a perfected contract between the
parties.
JARDINE DAVIS V. CA
Facts:In 1992, when the country was at the height of the power
crisis, petitioner Purefoods Corporation decided to install two (2)
1500 KW generators in its food processing plant in San Roque,
Marikina City to remedy and curtail further losses due to the
series of power failures.
A bidding for the supply and installation of the generators was
held wherein only three (3) bidders submitted bid proposals and
gave bid bonds equivalent to 5% of their respective bids, as
required. They are respondent FAR EAST MILLS SUPPLY CORPORATION
(FEMSCO), MONARK and ADVANCE POWER. Purefoods, in a letter
addressed to FEMSCO, confirmed the award of the contract to it.
Immediately, FEMSCO submitted the required performance bond and
contractors all-risk insurance policy which PUREFOODS through its
Vice President acknowledged in a letter. FEMSCO also made
arrangements with its principal and started the PUREFOODS project
by purchasing the necessary materials. PUREFOODS, on the other
hand, returned FEMSCOs Bidders Bond.
Later, however, PUREFOODS unilaterally canceled the award as
"significant factors were uncovered and brought to their attention
which dictate the cancellation and warrant a total review and
re-bid of the project." Consequently, FEMSCO protested the
cancellation of the award and sought a meeting with PUREFOODS.
However, before the matter could be resolved, PUREFOODS already
awarded the project and entered into a contract with JARDINE NELL,
a division of Jardine Davies, Inc. (JARDINE), which incidentally
was not one of the bidders.
FEMSCO thus wrote PUREFOODS to honor its contract with the
former, and to JARDINE to cease and desist from delivering and
installing the two (2) generators at PUREFOODS. Its demand letters
unheeded, FEMSCO sued both PUREFOODS and JARDINE: PUREFOODS for
reneging on its contract, and JARDINE for its unwarranted
interference and inducement.
The trial court rendered a decision ordering PUREFOODS to
indemnify FEMSCO. The Court of Appeals affirmed the decision of the
trial court. It also ordered JARDINE to pay FEMSCO damages for
inducing PUREFOODS to violate the latters contract with FEMSCO.
PUREFOODS argues that its letter to FEMSCO was not an acceptance
of the latter's bid proposal and award of the project but more of a
qualified acceptance constituting a counter-offer which required
FEMSCO's expressacceptance. Since PUREFOODS never received
FEMSCOsacceptance,PUREFOODS was very well within reason to revoke
its qualified acceptance or counter-offer. Hence, no contract was
perfected between PUREFOODS and FEMSCO.
JARDINE asserts that the records are bereft of any showing that
it had prior knowledge of the supposed contract between PUREFOODS
and FEMSCO, and that it induced PUREFOODS to violate the latters
alleged contract with FEMSCO.
ISSUE:
WON there existed a perfected contract between PUREFOODS and
FEMSCO
WON there is any showing that JARDINE induced or connived with
PUREFOODS to violate the latter's contract with FEMSCO.
HELD:
Issue 1 and 2.
There was a perfected contract between the parties and the
acceptance of the offer was communicated which perfected the
contract. There can be no contract unless the following requisites
concur: (a) consent of the contracting parties; (b) object certain
which is the subject matter of the contract; and, (c) cause of the
obligation which is established.A contract binds both contracting
parties and has the force of law between them.
Contracts are perfected by mere consent, upon the acceptance by
the offeree of the offer made by the offeror. From that moment, the
parties are bound not only to the fulfillment of what has been
expressly stipulated but also to all the consequences which,
according to their nature, may be in keeping with good faith, usage
and law.To produce a contract, the acceptance must not qualify the
terms of the offer. However, the acceptance may be express or
implied.For a contract to arise, the acceptance must be made known
to the offeror. Accordingly, the acceptance can be withdrawn or
revoked before it is made known to the offeror.
To resolve the dispute, there is a need to determine what
constituted the offer and the acceptance. Since petitioner
PUREFOODS started the process of entering into the contract by
conducting a bidding, Art. 1326 of the Civil Code, which provides
that "advertisements for bidders are simply invitations to make
proposals," applies. Accordingly, theTerms and Conditions of the
Bidding disseminated by petitioner PUREFOODS constitutes the
"advertisement" to bid on the project. The bid proposals or
quotations submitted by the prospective suppliers including
respondent FEMSCO, are the offers. And, the reply of petitioner
PUREFOODS, the acceptance or rejection of the respective
offers.
Quite obviously, the letter of petitioner PUREFOODS to FEMSCO
constituted acceptance of respondent FEMSCOs offer as contemplated
by law. The tenor of the letter,i.e.,"This will confirm that Pure
Foods has awarded to your firm (FEMSCO) the project," could not be
more categorical. While the same letter enumerated certain "basic
terms and conditions," these conditions were imposed on the
performance of the obligation rather than on the perfection of the
contract. In fine, the enumerated "basic terms and conditions" were
prescriptions on how the obligation was to be performed and
implemented. They were far from being conditions imposed on the
perfection of the contract.
The decision to award the contract has already been made. The
letter only serves as a confirmation of such decision. Hence, to
the Courts mind, there is already an acceptance made of the offer
received by Purefoods.
But even grantingarguendothat the letter of petitioner PUREFOODS
constituted a "conditional counter-offer," respondent FEMCO's
submission of the performance bond and contractor's all-risk
insurance was an implied acceptance, if not a clear indication of
its acquiescence to, the "conditional counter-offer," which
expressly stated that the performance bond and the contractor's
all-risk insurance should be given upon the commencement of the
contract.
Even the tenor of the subsequent letter of petitioner
PUREFOODS,i.e.,"Pure Foods Corporation is hereby canceling the
award to your company of the project," presupposes that the
contract has been perfected. For, there can be no cancellation if
the contract was not perfected in the first place.
Issue 3.
While it may seem that petitioners PUREFOODS and JARDINE
connived to deceive respondent FEMSCO, the court finds no specific
evidence on record to support such perception. Likewise, there is
no showing whatsoever that petitioner JARDINE induced petitioner
PUREFOODS. The similarity in the design submitted to petitioner
PUREFOODS by both petitioner JARDINE and respondent FEMSCO, and the
tender of a lower quotation by petitioner JARDINE are insufficient
to show that petitioner JARDINE indeed induced petitioner PUREFOODS
to violate its contract with respondent FEMSCO.
SAN MIGUEL PROPERTIES V. HUANG
FACTS:
Petitioner offered two of its properties for P52,140,000.00 in
cash. The offer was made to Atty. Helena M. Dauz who was acting for
respondent spouses as undisclosed principals. Atty. Dauz signified
her clients interest in purchasing the properties for the amount
for which they were offered by petitioner, under the following
terms: the sum of P500,000.00 would be given as earnest money and
the balance would be paid in eight equal monthly installments from
May to December, 1994. However, petitioner refused the
counter-offer.
On March 29, 1994, Atty. Dauz wrote another letter[3] proposing
the following terms for the purchase of the properties, viz:
This is to express our interest to buy your-above-mentioned
property with an area of 1, 738 sq. meters. For this purpose, we
are enclosing herewith the sum of P1,000,000.00 representing
earnest-deposit money, subject to the following conditions.
1. We will be given the exclusive option to purchase the
property within the 30 days from date of your acceptance of this
offer.
2. During said period, we will negotiate on the terms and
conditions of the purchase; SMPPI will secure the necessary
Management and Board approvals; and we initiate the documentation
if there is mutual agreement between us.
3. In the event that we do not come to an agreement on this
transaction, the said amount of P1,000,000.00 shall be refundable
to us in full upon demand. . . .
Isidro A. Sobrecarey, petitioners vice-president and operations
manager for corporate real estate, indicated his conformity to the
offer by affixing his signature to the letter and accepted the
"earnest-deposit" of P1 million. Upon request of respondent
spouses, Sobrecarey ordered the removal of the "FOR SALE" sign from
the properties.
Atty. Dauz and Sobrecarey then commenced negotiations. During
their meeting on April 8, 1994, Sobrecarey informed Atty. Dauz that
petitioner was willing to sell the subject properties on a 90-day
term. Atty. Dauz countered with an offer of six months within which
to pay.
On April 14, 1994, the parties again met during which Sobrecarey
informed Atty. Dauz that petitioner had not yet acted on her
counter-offer. This prompted Atty. Dauz to propose a four-month
period of amortization.
On April 25, 1994, Atty. Dauz asked for an extension of 45 days
from April 29, 1994 to June 13, 1994 within which to exercise her
option to purchase the property, adding that within that period,
"[we] hope to finalize [our] agreement on the matter."[4] Her
request was granted.
On July 7, 1994, petitioner, through its president and chief
executive officer, Federico Gonzales, wrote Atty. Dauz informing
her that because the parties failed to agree on the terms and
conditions of the sale despite the extension granted by petitioner,
the latter was returning the amount of P1 million given as
"earnest-deposit."[5]On July 20, 1994, respondent spouses, through
counsel, wrote petitioner demanding the execution within five days
of a deed of sale covering the properties. Respondents attempted to
return the "earnest-deposit" but petitioner refused on the ground
that respondents option to purchase had already expired.
On August 16, 1994, respondent spouses filed a complaint for
specific performance against .
Trial Court ruled in favor of petitioner. CA reversed the
decision contending that there was a perfected contract.
Issue : WON there was a perfected contract. NO
RULING: In holding that there is a perfected contract of sale,
the Court of Appeals relied on the following findings: (1) earnest
money was allegedly given by respondents and accepted by petitioner
through its vice-president and operations manager, Isidro A.
Sobrecarey; and (2) the documentary evidence in the records show
that there was a perfected contract of sale.
With regard to the alleged payment and acceptance of earnest
money, the Court holds that respondents did not give the P1 million
as "earnest money" as provided by Art. 1482 of the Civil Code. They
presented the amount merely as a deposit of what would eventually
become the earnest money or downpayment should a contract of sale
be made by them. The amount was thus given not as a part of the
purchase price and as proof of the perfection of the contract of
sale but only as a guarantee that respondents would not back out of
the sale.
The first condition for an option period of 30 days sufficiently
shows that a sale was never perfected. As petitioner correctly
points out, acceptance of this condition did not give rise to a
perfected sale but merely to an option or an accepted unilateral
promise on the part of respondents to buy the subject properties
within 30 days from the date of acceptance of the offer. Such
option giving respondents the exclusive right to buy the properties
within the period agreed upon is separate and distinct from the
contract of sale which the parties may enter. All that respondents
had was just the option to buy the properties which privilege was
not, however, exercised by them because there was a failure to
agree on the terms of payment. No contract of sale may thus be
enforced by respondents.
Furthermore, even the option secured by respondents from
petitioner was fatally defective. Under the second paragraph of
Art. 1479, an accepted unilateral promise to buy or sell a
determinate thing for a price certain is binding upon the promisor
only if the promise is supported by a distinct consideration.
Consideration in an option contract may be anything of value,
unlike in sale where it must be the price certain in money or its
equivalent. There is no showing here of any consideration for the
option. Lacking any proof of such consideration, the option is
unenforceable.
The parties never got past the negotiation stage. The alleged
"indubitable evidence" of a perfected sale was nothing more than
offers and counter-offers which did not amount to any final
arrangement containing the essential elements of a contract of
sale. While the parties already agreed on the real properties which
were the objects of the sale and on the purchase price, the fact
remains that they failed to arrive at mutually acceptable terms of
payment, despite the 45-day extension given by petitioner.
The manner of payment of the purchase price is an essential
element before a valid and binding contract of sale can exist.
Although the Civil Code does not expressly state that the minds of
the parties must also meet on the terms or manner of payment of the
price, the same is needed, otherwise there is no sale. Thus, it is
not the giving of earnest money, but the proof of the concurrence
of all the essential elements of the contract of sale which
establishes the existence of a perfected sale. Case is
Dismissed.
LIMSON V. CA
FACTS:
Petitioner Lourdes Limson filed a complaint before the RTC
alleging that in July 1978, respondent spouses De Vera, through
their agent Marcosa Sanchez, offered to sell to petitioner a parcel
of land in Barrio San Dionisio, Paraaque.
Respondent spouses informed her that they were the owners of the
property.
On July 31, 1978, petitioner agreed to buy the property and gave
P20,000 as earnest money.
Respondent spouses signed a receipt and gave her a 10-day option
period to purchase the property.
Respondent informed her that the subject property was mortgaged
to Emilio and Isidro Ramos and asked her to pay the purchase
price.
On Aug. 5, 1978, petitioner agreed to meet the Ramoses to
consummate the transaction, but due to failure of respondent and
Ramoses to appear, no transaction was formalized.
On Aug. 11, 1978, she claimed that she was willing and ready to
pay the balance of the purchase price, but the transaction did not
materialize as the spouses failed to pay the back taxes of the
property.
On Sept. 5, 1978, she was surprised to learn from the agent of
the spouses that the property was the subject of a negotiation for
the sale to Sunvar Realty Development Corporation.
In their answer, respondent spouses maintained that the option
to buy the property had long expired and that there was no
perfected contract to sell between them. They insisted that they
negotiated with Sunvar only after the expiration of the period
given to petitioner and her failure with her commitments
thereunder.
RTC ruled in favor of petitioner.
On appeal, CA reversed the decision of the RTC; hence, the
present appeal.
ISSUE: WON there was a perfected contract to sell between
petitioner Limson and respondent De Vera Spouses.
HELD: No.
A scrutiny of facts as well as the evidence of the parties
overwhelmingly leads to the conclusion that the agreement between
the parties was a CONTRACT of OPTION and not contract to sell.
An option is a continuing offer or contract by which the owner
stipulates with another that the latter shall have the right to buy
the property within a time certain or under, or in compliance with
certain terms and conditions or which gives to the owner of the
property the right to sell or demand a sale. It is sometimes called
unaccepted offer. An option is not itself a purchase, but merely
secures the privilege to buy.
A contract, like contract to sell, involves the meeting of minds
between 2 persons whereby one binds himself, with respect to the
other to give something or to render some service.
The Receipt provides:
Received from Lourdes Limson the sum of P20,000 xxx as earnest
money to purchase a parcel of land owned by Lorenzo de Vera xxx at
the price of 34.00 cash subject to condition and stipulation that
have been agreed upon by the buyer and me which will form part of
the receipt. Should transaction of the property not materialize not
on fault of the buyer, I obligate myself to return the full amount
of P20,000 earnest money with option to buy or forfeit on the fault
of the buyer. Xxx. This option to buy is good within 10 days xxx.
The receipt readily shows that the respondent and petitioner only
entered into a contract of option; a contract by which respondent
agreed with petitioner that the latter shall have the right to buy
the formers property at a fixed price of P34.00/m2 within 10 days
from July 31, 1978.
The consideration of P20,000 paid b petition was referred as
earnest money. However, a careful examination of words used
indicated that the money is not earnest money but OPTION MONEY.
EARNEST MONEY is part of the purchase price, while OPTION MONEY
is the money given as a distinct consideration for an option
contract.
EARNEST MONEY given only when there is already sale, while
OPTION MONEY applies to a sale not yet perfected.
When the EARNEST MONEY is given, the buyer is bound to pay the
balance, while when the would-be buyer gives OPTION MONEY, he is
not required to buy, but may even forfeit it depending on the terms
of the option.
There is nothing in the receipt which indicates that the P20,000
was part of the purchase price. Moreover, it was not shown that
there was a perfected sale between the parties where earnest money
was given.
Finally, when the petitioner gave the earnest money, the receipt
did not reveal that she was bound to pay the balance of the
purchase price.
The rule is that except where a formal acceptance is required,
although the acceptance must be affirmatively and clearly made and
evidenced by some acts or conduct communicated to the offeror, it
may be made either in a formal or informal manner. On or before
Aug. 10, 1978, the last day of the option period, no affirmative or
clear manifestation was made by petitioner to accept the offer.
Certainly, there was no concurrence of respondent spouses offer and
petitioners acceptance within the option period. Consequently,
there was no perfected contract to sell.
On Aug. 11, 1978, the option period expired and the exclusive
right to buy the property of the respondent spouses ceased.
According to petitioner: Respondent extended the option period
until Aug. 31, 1978 UNTENABLE because the extension must not be
implied, but categorical and must show the clear intention of the
parties. According to petitioner: When the respondent spouses sent
her telegram demanding full payment of the purchase price, it was
an acknowledgement of their contract to sell UNTENABLE because
there was no contract to sell between the petitioner and respondent
spouses to speak of. The option period having expired and
acceptance was not effectively made by petitioner, the purchase of
subject property by SUNVAR was perfectly valid and entered into in
good faith.
TAYAG V. LACSON
Nature: Petition for review on certiorari of the Decision and
the Resolution of respondent Court of Appeals in CA-G.R. SP No.
44883.Facts:
Respondents Angelica Tiotuyco Vda. de Lacson and her children
were the registered owners of three parcels of land located in
Mabalacat, Pampanga registered in the Register of Deeds of San
Fernando, Pampanga. The properties, which were tenanted
agricultural lands, were administered by Renato Espinosa for the
owner.
Mar. 17, 1996: A group of original farmers/tillers individually
executed in favor of the petitioner separate Deeds of Assignment in
which the assignees assigned to the petitioner their respective
rights as tenants/tillers of the landholdings possessed and tilled
by them for and in consideration of P50.00 per square meter. The
said amount was made payable "when the legal impediments to the
sale of the property to the petitioner no longer existed." The
petitioner was also granted the exclusive right to buy the property
if and when the respondents, with the concurrence of the
defendants-tenants, agreed to sell the property. In the interim,
the petitioner gave varied sums of money to the tenants as partial
payments, and the latter issued receipts for the said amounts.
July 24, 1996: Petitioner called a meeting of the
defendants-tenants to work out the implementation of the terms of
their separate agreements. However the defendants-tenants, through
Joven Mariano, wrote the petitioner stating that they were not
attending the meeting and instead gave notice of their collective
decision to sell all their rights and interests, as
tenants/lessees, over the landholding to the respondents.
Aug. 19, 1996: Petitioner filed a complaint with the RTC of San
Fernando, Pampanga, against the defendants-tenants, as well as the
respondents, for the court to fix a period within which to pay the
agreed purchase price of P50.00 per square meter to the defendants,
as provided for in the Deeds of Assignment. The petitioner also
prayed for a writ of preliminary injunction against the defendants
and the respondents therein.
Issue: WON there is a perfected Option Contract.
Held: No
SC does not agree with the contention of the petitioner that the
deeds of assignment executed by the defendants-tenants are
perfected option contracts.
An option is a contract by which the owner of the property
agrees with another person that he shall have the right to buy his
property at a fixed price within a certain time. It is a condition
offered or contract by which the owner stipulates with another that
the latter shall have the right to buy the property at a fixed
price within a certain time, or under, or in compliance with
certain terms and conditions, or which gives to the owner of the
property the right to sell or demand a sale. It imposes no binding
obligation on the person holding the option, aside from the
consideration for the offer. Until accepted, it is not, properly
speaking, treated as a contract. The second party gets in
praesenti, not lands, not an agreement that he shall have the
lands, but the right to call for and receive lands if he elects.An
option contract is a separate and distinct contract from which the
parties may enter into upon the conjunction of the option.
In this case, the defendants-tenants-subtenants, under the deeds
of assignment, granted to the petitioner not only an option but the
exclusive right to buy the landholding. But the grantors were
merely the defendants-tenants, and not the respondents, the
registered owners of the property. Not being the registered owners
of the property, the defendants-tenants could not legally grant to
the petitioner the option, much less the "exclusive right" to buy
the property. As the Latin saying goes, "NEMO DAT QUOD NON
HABET."
Petition is PARTIALLY GRANTED. Decision of the CA nullifying the
Orders of the RTC is AFFIRMED. The writ of injunction issued by the
CA permanently enjoining the RTC from further proceeding with Civil
Case No. 10910 is hereby LIFTED and SET ASIDE.
Note:
In praesenti at the present time
NEMO DAT QUOD NON HABET - "no one can give what he does not
have
FONTANA RESORT V. TAN
Facts:
In March 1997, respondent spouses Tan bought from petitioner RN
Development Corp. (RNDC) two class D shares of stock in petitioner
Fontana Resort and Country petitioner Fontana Resort and Country
Club, Inc. worth P387,300.
These bought stocks entail a promise that Fontana Resort would
construct a park with first-class leisure facilities in Clark
Field, Pampanga, to be called Fontana Leisure Park (FLP).
It was also promised that FLP would be fully developed and
operational by the first quarter of 1998 and that Fontana Resort
Class D shareholders would be admitted to one membership in the
country club, which entitled them to use park facilities and stay
at a two-bedroom villa for five (5) ordinary weekdays and two (2)
weekends every year for free.
Two years later, respondents filed before the Securities and
Exchange Commission a complaint for the refund of purchase price of
the bought stocks from the petitioners.
Respondents alleged that they had been deceived into buying
Fontana Resorts shares because of petitioners fraudulent
misrepresentations. That construction of FLP turned out to be still
unfinished and the policies, rules, and regulations of the country
club were obscure. But FLP said, at that time, most of the
amenities are operational.
The spouses narrated that they were able to book and avail
themselves of free accommodations at an FLP villa on a Saturday in
the month of September. They requested that an FLP Villa again be
reserved for their free use on another Saturday in October for
their daughters 18th Birthday, but were refused by the petitioners
saying that the petitioners could only avail of 5 ORDINARY DAYS, 1
SATURDAY and 1 SUNDAY, annually, and that respondents had consumed
their free Saturday pass for the said year.
Spouses Tan, on the other hand, said that they were not informed
of said rule regarding their free accommodation at FLP, and had
they known about it, they would not have availed themselves of the
free accommodations during Saturday last September. But this was
countered by Fontana Resort saying that the respondents were duly
informed of the privileges givent to them as seen in the
propmotional materials for the country club, the Articles of
Incorporation, and the By-Laws of FRCCI.
In January 1999, respondents attempted once more to book and
reserve an FLP villa for their free use on April 1, 1999, a
Thursday. Their reservation was confirmed by a certain Murphy
Magtoto, and that later, another employee called them that the said
reservation was cancelled because the FLP was already fully
booked.
FLP countered the said allegation by saying that there was no
confirmation to speak of because as early as the start of the year,
FLP is already fully booked, and that there was no reservation
number issued in favor of the Spouses Tan.
Hearing officer Bacalla of SEC ruled in favor of Spouses Tan by
stating that the respondents were induced to buy shares which
actually are empty promises. CA ruled by ordering Fontana Resort to
provide for a refund to the spouses, hence, this petition before
the SC.
Issue: WON there Fontana Resort committed fraud during the
selling of stocks which would warrant the annulment or recission of
the contract which the parties entered into?
RULING: Article 1390 of the Civil Code states that contracts are
voidable and annullable when the consent is vitiated by mistake,
violence, intimidation, undue influence or fraud. However, they are
susceptible of ratification.
Article 1191. The power to rescind obligations is implied in
reciprocal ones, in case one of the obligors should not comply with
what is incumbent upon him.
In this case respondents, in their complaint, cannot just simply
pray for refund of the purchase price they had paid for their
shares without specifically mentioning the annulment or recisision
of the sale of said shares.
There is fraud when one party is induced by the other to enter
into a contract, through and solely because of the latters
insidious words or machinations. But not all forms of fraud can
vitiate consent. Under Article 1330, fraud refers to dolo causante
or causal fraud, in which, prior to or simultaneous with the
execution of a contract, one party secures the consent of the other
by using deception, without which such consent would not have been
given. In simple words, the fraud must be the determining cause of
the contract, or must have cause the consent to be given.
The general rule is that he who alleges fraud or mistake in a
transaction must substantiate his allegation with full, creal, and
convincing evidence because the presumption is the contract is has
been entered into fairly and regularly.
In the case at bar, Spouses Tan have miserably failed to prove
how petitioners employed fraud to induce them to buy the subject
shares. It can only be expected that petitioners will advertise FLP
in the most positive light in order to attract investor-members.
There is no showing that in their sales talk to respondents,
petitioner actually used insidious words or machination which led
the respondents to buy the said shares. They appeared to be
literate could no be easily deceived into parting with a
substantial amount of money.
What is apparent to us is that respondents knowingly and
willingly consented to buying the shares and were later on
disappointed with the actual facilities and club membership
benefits.
Similarly, we find no evidence on record that petitioners
defaulted on any of their obligations that would have called for
the rescission of the sale of the FRCCI shares to respondents. As
to the issue of cancellation of the alleged confirmed reservation,
the SC concluded that there is mix-up in the reservation process of
petitioners. This demonstrates mere negligence on the part of the
petitioners but not willful intention to deprive the spouses of
their benefits. More so, it does not constitute default on the part
of FLP to warrant recission of the contract. At most, Spouses Tan
can only be awarded Nominal Damages as to the mix-up in the
reservation process.
Respondents complaint sufficiently alleged a cause of action for
the annulment of the contract. However, it was dismissed for lack
of merit since they were not able to establish by preponderance of
evidence that they are entitled to such annulment.
THE ROMAN CATHOLIC CHURCH V. PANTE (Sema)FELICIANO V. ZALDIVAR
(Duran)
SWIFT FOODS V. MATEO, JR.
Nature: Petition for Review of the CA Nov. 15 Decision
Facts:
Petitioner Swift Foods, Inc., a corporation engaged in the
manufacture, sale, and distribution of animal feeds entered a
Trucking Agreement in 1984 with spouse respondents Jose and Irene
Mateo, businessmen engaged in dealership in poultry and supply and
trucking business in San Jose Del Monte, Bulacan.
The trucking agreement stipulates that respondents trucks hauled
Swift feeds from its central office in Mandaluyong City to its
various warehouses in Luzon wherein respondents are to deposit cash
bonds of P100,000.00 per truck.
Several years after, only one truck remained in contract but
still petitioner maintained respondents case bond which the latter
requested the return of the excess but petitioner denied.
In 1995, same parties entered into a warehousing agreement
wherein petitioners feeds are to be stored in respondents
warehouses for a period of 2years. The agreement required
respondents to post bond to secure compliance with the obligation,
however, both parties proceeded with the enforcement of the
contract on July of same year without compliance of such
requirement.
For documenting and monitoring movements of the stocks, two
documents were issued: the Daily Warehouse Stock Report (DSWD) for
inventory of incoming stocks and Warehouse Issue Slip (WIS) which
serves as the receipt of released stocks. WIS contains signature of
the sales personnel as proof of receiving said stocks according to
the stipulation of such agreement. Petitioners National Sales
Manager would sometimes inspect the warehouses and such
documents.
By February 1996, respondents delivered three land titles to
petitioner as compliance of the warehousing agreement.
An inventory conducted by Swift personnels on May 9, 1996
revealed one missing bag which respondents paid on the same day. On
May 20, 1996 petitioner informed respondents that it was
terminating the contract effective May 13, 1996 due to the apparent
violations of the respondents of the warehousing agreement.
Under paragraph V of the Warehousing Agreement, petitioner
should only release stocks to Swifts sales personnel after they
present a clearance to withdraw said stocks to ensure that stocks
would only be released to authorized individuals and for payments
to be collected accordingly.
Contrary to said provisions, Petitioner released stocks without
necessary clearance as evidenced by the WIS which did not contain
signatures of said personnels. Absence of said clearance,
petitioner alleged that respondents have violated the contract.
Said unauthorized release cost Swift a shortage of 2Million which
respondents should be held accountable. Swift retained respondents
3 land titles pending full compliance citing paragraph XII of the
agreement which states that the bond shall answer for whatever
obligation the warehouse operator may have.
Respondents denied having violated the terms of the agreement as
proof they presented a hand written letter from the sales rep of
swift which instructed that the stocks be released directly to
customers. Respondents maintained that the sales rep should answer
for the cash shortages thereby demanding swift to return their
three land titles which swift denied causing the former to file a
complaint against the latter for the surrender of the certificates
of title with damages and alleged that the cash shortage is
attributable to petitioners own negligence in the supervision of
its sales personnel.
Petitioner answered that it falls upon the respondents to be
aware that the sales personnels acted violative of the procedure
set in the agreement.
RTC ruled in favour of petitioner and ordered respondents to
return the tittles and held that there was no breach as they merely
followed instructions of the sales rep and that as respondents were
first time warehouse operators, hence they could not have presumed
knowledge of the warehouse operating procedures and that it is
incumbent upon swift to conduct trainings and seminars for
respondents. Further, RTC ruled the payment of 100k as attys fees
and 200k as moral damages as well as costs of suit.
CA ruled no basis for the termination of the agreement and found
basis for the 200k but deleted the Attys fess for lack of
basis.
ISSUE: WON there was a breach of the contract committed by the
respondents.
HELD:
The contract stated that the petitioner to pay a monthly 18k
rental fee and in turn respondents are accountable for all the
stocks duly received and released by them. Further, it provided
procedures that respondents to observe. The contract is clear and
having respondents acted to the contrary is a clear violation of
the contract.
Respondents admitted that there were times when they released
stocks directly to customers and not to the sales rep, when asked
why, it further admitted that it did not read much less understand
the warehouse agreement and simply followed all the verbal
instructions given to him by the sales rep. such admittance clearly
is a violation.
The court further ruled that ones newness to the business is not
an excuse to violate clear terms of ones contract. A seasoned
businessman such as the respondents should have been alert to the
dangers of contravening the clear terms of a contract. Respondents
should not have deviated from the from the procedure provided in
the contract in the absence of any amendment therein as ordinary
diligence required him to inquire with the head office whether
changes being introduced were proper or authorized.
Respondents total reliance on the work of the petitioners sales
personnel, contrary to the contrary to the contract is a clear act
of negligence. The ruled reiterated that a contract is the law
between the parties and those who are guilty of negligence in the
performance of their obligations are liable for damages.
the reasoning of the respondents that it did not read nor
understand the contract is a total ignorance of the obligations
under the warehousing agreement and an abdication of his
duties.
The court further stated that unless a contracting party cannot
read or dos not understand the language in which the agreement was
written, he is presumed to know the import of his contract and is
bound thereby. Not having alleged any of the foregoing, respondent
has no excuse for his actions. It was his nonchalance to his
contractual duties and obligations, which facilitated the
malfeasance of petitioners personnel and exposed petitioner to
undue risks.
Ruled that respondents are liable for 150k as nominal damages
payable to petitioner, 1ook