MANUEL ORIA Y GONZALES, plaintiff-appellant, vs. JOSE McMICKING, as sheriff of the city of Manila, GUTIERREZ HERMANOS, MIGUEL GUTIERREZ DE CELIS, DANIEL PEREZ, and LEOPOLDO CRIADO, defendants-appellees. (1912, Moreland)FACTS: Gutierrez Hermanos brought two actions against Oria Hermanos & Co. to court for the recovery of P147,204.28 (1st action) and P12,318.57 (2nd action) Prior to this, Oria Hermanos & Co., on account of the expiration of the time stated in their agreement of copartnership, dissolved their relations and entered into liquidation. Tomas Oria y Balbas, as managing partner in liquidation, acting for himself and on behalf of his other coowners entered into a contract with Manuel Orio Gonzales (plaintiff), which said contract was for the purpose of selling and transferring to Manuel all of the property of which the said Oria Hermanos & Co. was owner, instrument stated: Purchase Price: P274K, to be paid in installments w/in 12 yrs. Payment must not be less than P10K per yr, w/ the balance settled at the end of the 12 yr period. During the last 6 yrs, Manuel will pay an interest of 3% per annum, on the price stipulated (part thereof unpaid at such time), provided that there is a mutual obligation and interest payable annually. Manuel will pay the 3 partners P150 per month while they remain in the Philippines Manuel can't sell, alienate, transfer, or mortgage, wholly or partially the vessels, real estate and branch stores properties w/o written authorization of Tomas as liquidator of the firm while the sale is not fully satisfied Manuel cedes gratuitously a dwelling house in Laoang to be used by Tomas as a liqudation office for 2 yrs Tomas and Adolfo engage and undertake to place their personal services at disposal of Manuel in the management and conduct of the property and business sold during the time that they are in the Philippines and for a maximum period of 12 yrs. The second case (2nd action) was decided ordering Oria Hermanos & Co. to pay Gutierrez Hermanos. Sheriff demanded that Tomas, as liquidator, make the payment of the said judgement. Since there were no more funds to pay the same, the sheriff levied upon steamer Serantes and announced its sale at public auction. Manuel wrote a letter 3 daysbefore the sale claiming that he was the rightful owner of the steamer w/c was sold by him to Oria Hermanos & Co. Sheriff proceeded w/ the sale where in Gutierrez Hermanos subsequently bought the steamer, thus Manuel instituted this action to stop the sale TC: Case was dismissed, judgement in favor of defendants, thus appeal.

ISSUE: WoN the sale from Oria Hermanos & Co. to Manuel Oria y Gonzalez as against the creditors of said company is valid HELD: NO. At the time of the sale, the value of the assets of Oria Hermanos was P274K, when the sale was made, actions were pending against Oria Hermanos by one single creditor for the aggregate sum of P 160K. The buyer was Tomas' son and nephew of the other partners. The plaintiff is a young man of 25 years old and has no property before the said selling. Sale was w/o consideration considering that it was sold to a penniless and vocationless youth who knew nothing about the business he received and whose management skills was unknown, w/o a penny being paid down and w/o any security whatsoever. It is an unusual proceeding devoid of care and caution, and outside the well-defined lines of ordinary business transactions as to startle any person interested in the concern.

Oria Hermanos would not have made a similar contract w/ a stranger. Prohibition in the contract against the sale of certain properties by Manuel offers no protection whatsoever to the creditors of Oria Hermanos, it was not a security since the parties can waive and release it at pleasure. A sale must be founded on good consideration and made w/ a bona fide intent, defect in either would make it voidable as to the creditors, and in this case all 7 badges of fraud are present: 1) consideration of conveyance is fictitious; 2) transfer was made while the suit against him (Tomas Oria y Balbas) was pending; 3) sale by insolvent debtor; 4) evidence of insolvency; 5) transfer of all properties; 6) the sale was made between father and son; 7) and the failure of the vendee to take exclusive possession of the property. The case at bar shows every one of the badges of fraud.

The sale left the creditors w/o recourse w/ nothing to satisfy their claims at the end of the long wait. Declaring sale fraudulent and void as to Gutierrez Hermanos was proper in so far as necessary to permit the collection of its judgment. There was no proof that Manuel was the owner of the steamer at the time of the levy and sale or that he suffered damages, thus, Gutierrez Hermanos had the right to make the levy and test the validity of the sale in that way w/o first restoring a direct action to annul the sale. The creditor may attack the sale by ignoring it and seizing under his execution the property (or necessary portion thereof). Lower Court judgement affirmed.

MARIA ANTONIA SIGUAN, vs. ROSA LIM, LINDE LIM, INGRID LIM and NEIL LIM (1999, Davide Jr.)FACTS: Rosa Lim (Lim) issued two Metrobank checks in the sums of P300,000 and P241,668, respectively, payable to cash. Upon presentment by petitioner Siguan with the drawee bank, the checks were dishonored for the reason account closed. Demands to make good the checks proved futile. Lim was charged w/ estafa, and found guilty. CA affirmed this decision on appeal. However on appeal to the SC, Lim was acquitted, though her civilly liable in the amount of P169,000, as actual damages, plus legal interest, was retained. While these proceedings were happening, Lim executed a Deed of Donation (DoD) conveying the following parcels of land in favor of her children, registered with the Office of the Register of Deeds of Cebu City. New transfer certificates of title were thereafter issued in the names of the donees. Siguan filed an accion pauliana against Lim and her children before in RTC Cebu City to rescind the DoD and to declare as null and void the new TCTs issued for the lots covered by the questioned deed. Petitioner claimed that through the DoD, Lim had fraudulently transferred all her real property to her children in bad faith and in fraud of creditors, including her. She further alleged that Lim confederated with her children in antedating the DoD to petitioners and other creditors prejudice; and that Lim, at the time of the fraudulent conveyance, left no sufficient properties to pay her obligations. Lim denied any liability to petitioner. She maintained that the DoD was not antedated but was made in good faith at a time when she had sufficient property. She alleged that the Deed of Donation was registered only on 2 July 1991 because she was seriously ill. TC: ordered the rescission of the DoD, declared TCTs void, Lims to pay Siguan P10,000 as moral damages; P10,000 as attorneys fees; and P5,000 as expenses of litigation CA: reversed decision, thus appeal. Petitioner's argument: CA decision contrary to Oria vs McMicking ruling, w/c enumerated circumstances for existence of fraud. They also contended that CA misapplied the Rules of Court, and that they overlooked NCC Art 759 w/c provides: The donation is always presumed to be in fraud of creditors when at the time of the execution thereof the donor did not reserve sufficient property to pay his debts prior to the donation. In this case, Lim made no reservation of sufficient property to pay her creditors prior to the execution of the DoD. Respondents argue that (a) having agreed on the law and requisites of accion pauliana, petitioner cannot take shelter under a different law; (b) petitioner cannot invoke the credit of Victoria Suarez, who is not a party to this case, to support her accion pauliana; (c) CA correctly applied or interpreted Section 23 of Rule 132 of the Rules of Court; (d) petitioner failed to present convincing evidence that the DoD was antedated and executed in fraud of petitioner; and (e) CA correctly struck down the awards of damages, attorneys fees and expenses of litigation because there is no factual basis therefor in the body of the TCs decision.

ISSUE: WoN the Deed of Donation executed by respondent Rosa Lim in favor of her children can be rescinded for being in fraud of her alleged creditor, petitioner Siguan?HELD: NO. For accion pauliana to prosper, the ff. requisites must be present: (1) the plaintiff asking for rescission has a credit prior to the alienation, although demandable later; (2) the debtor has made a subsequent contract conveying a patrimonial benefit to a third person; (3) the creditor has no other legal remedy to satisfy his claim; (4) the act being impugned is fraudulent; (5) the third person who received the property conveyed, if it is by onerous title, has been an accomplice in the fraud. The general rule is that rescission requires the existence of creditors at the time of the alleged fraudulent alienation, and this must be proved as one of the bases of the judicial pronouncement setting aside the contract. W/o any prior existing debt, there can neither be injury nor fraud. However, while it is necessary that the credit of the plaintiff in the accion pauliana must exist prior to the fraudulent alienation, the date of the judgment enforcing it is immaterial. Even if the judgment be subsequent to the alienation, it is merely declaratory, with retroactive effect to the date when the credit was constituted. In the instant case, the alleged debt of Lim in favor of petitioner was incurred in August 1990, while the deed of donation was purportedly executed on 10 August 1989. SC disagreed w/ the allegation of the petitioner that the questioned deed was antedated to make it appear that it was made prior to petitioners credit. Notably, that deed is a public document, it having been acknowledged before a notary public As such, it is evidence of the fact which gave rise to its execution and of its date, pursuant to Section 23, Rule 132 of the Rules of Court. Petitioners contention that the public documents referred to in said Section 23 are only those entries in public records made in the performance of a duty by a public officer does not hold water. The petitioner's contentions are not enough to overcome the presumption as to the truthfulness of the statement of the date in the questioned deed, which is 10 August 1989. Petitioners claim against Lim was constituted only in August 1990, or a year after the questioned alienation, making the first two requisites for the rescission of contracts are absent. For the presumption of fraud to apply, it must be established that the donor did not leave adequate properties which creditors might have recourse for the collection of their credits existing before the execution of the donation. Since petitioners alleged credit existed only a year after the deed of donation was executed, she be said to have been prejudiced or defrauded by such alienation. Further, petitioner did not present evidence that would indicate the actual market value of Lim's properties. It was not, therefore, sufficiently established that the properties left behind by Lim were not sufficient to cover her debts existing before the donation was made. Hence, the presumption of fraud will not come into play. The seven badges of fraud mentioned in Oria vs McMicking is not an exclusive list, circumstances evidencing fraud are as varied as the men who perpetrate the fraud in each case. But in this case the petitioner failed to discharge the burden of proving any of the circumstances enumerated above or any other circumstance from which fraud can be inferred. Accordingly, since the four requirements for the rescission of a gratuitous contract are not present in this case, petitioners action must fail. In any case it is essential that the party asking for rescission under accion pauliana to prove that he has exhausted all other legal means to obtain satisfaction of his claim. Petitioner neither alleged nor proved that she did so. On this score, her action for the rescission of the questioned deed is not maintainable even if the fraud charged actually did exist.

PETITION DISMISSED, CA decision affirmed.UNIVERSAL FOOD CORPORATION, petitioner, vs. CA , MAGDALO V. FRANCISCO, SR., and VICTORIANO N. FRANCISCO, respondents. (1970, Castro)FACTS: In 1938, plaintiff Magdalo V. Francisco, Sr. discovered a formula for the manufacture of a food seasoning (sauce) derived from banana fruits popularly known as MAFRAN sauce. It was used commercially since 1942, and in the same year plaintiff registered his trademark in his name as owner and inventor with the Bureau of Patents. Due to lack of sufficient capital to finance the expansion of the business, in 1960, said plaintiff secured the financial assistance of Tirso T. Reyes who, after a series of negotiations, formed with others defendant Universal Food Corporation eventually leading to the execution on May 11, 1960 of the aforequoted "Bill of Assignment" (Exhibit A or 1). On May 31, 1960, Magdalo Francisco entered into contract with UFC stipulating among other things that he be the Chief Chemist and Second Vice-President of UFC and shall have absolute control and supervision over the laboratory assistants and personnel and in the purchase and safekeeping of the chemicals used in the preparation of said Mafran sauce and that said positions are permanent in nature. In line with the terms and conditions of the Bill of Assignment, Magdalo Francisco was appointed Chief Chemist with a salary of P300.00 a month. Magdalo Francisco kept the formula of the Mafran sauce secret to himself. Thereafter, however, due to the alleged scarcity and high prices of raw materials, on November 28, 1960, Secretary-Treasurer Ciriaco L. de Guzman of UFC issued a Memorandum duly approved by the President and General Manager Tirso T. Reyes that only Supervisor Ricardo Francisco should be retained in the factory and that the salary of plaintiff Magdalo V. Francisco, Sr., should be stopped for the time being until the corporation should resume its operation. On December 3, 1960, President and General Manager Tirso T. Reyes, issued a memorandum to Victoriano Francisco ordering him to report to the factory and produce "Mafran Sauce" at the rate of not less than 100 cases a day so as to cope with the orders of the corporation's various distributors and dealers, and with instructions to take only the necessary daily employees without employing permanent employees. Again, on December 6, 1961, another memorandum was issued by the same President and General Manager instructing the Assistant Chief Chemist Ricardo Francisco, to recall all daily employees who are connected in the production of Mafran Sauce and also some additional daily employees for the production of Porky Pops. On December 29, 1960, another memorandum was issued by the President and General Manager instructing Ricardo Francisco, as Chief Chemist, and Porfirio Zarraga, as Acting Superintendent, to produce Mafran Sauce and Porky Pops in full swing starting January 2, 1961 with further instructions to hire daily laborers in order to cope with the full blast operation. Magdalo V. Francisco, Sr. received his salary as Chief Chemist in the amount of P300.00 a month only until his services were terminated on November 30, 1960. On January 9 and 16, 1961, UFC, acting thru its President and General Manager, authorized Porfirio Zarraga and Paula de Bacula to look for a buyer of the corporation including its trademarks, formula and assets at a price of not less than P300,000.00. Due to these successive memoranda, without plaintiff Magdalo V. Francisco, Sr. being recalled back to work, he filed the present action on February 14, 1961. Then in a letter dated March 20, 1961, UFC requested said plaintiff to report for duty, but the latter declined the request because the present action was already filed in court. TC: Respondents not only have failed to show that the petitioner has been guilty of default in performing its contractual obligations "but the record sufficiently reveals the fact that it was the plaintiff Magdalo V. Francisco who had been remiss in the compliance of his contractual obligation to cede and transfer to the defendant the formula for Mafran sauce;" the Bill of Assignment was rescinded, and UFC was ordered to return to Magdalo Francisco his Mafran sauce trademark and to pay his monthly salary of P300.00 from Dec. 1, 1960 until the return to him of said trademark and formula. CA affirmed TC decision.

ISSUES:1. WoN the Bill of Assignment really one that involves transfer of the formula for Mafran sauce itself?--NO 2. Was petitioners contention that Magdalo Francisco is not entitled to rescission valid? --NO

HELD:1. NO. Certain provisions of the bill would lead one to believe that the formula itself was transferred. To quote, the respondent patentee "assign, transfer and convey all its property rights and interest over said Mafran trademark and formula for MAFRAN SAUCE unto the Party of the Second Part," and the last paragraph states that such "assignment, transfer and conveyance is absolute and irrevocable (and) in no case shall the PARTY OF THE First Part ask, demand or sue for the surrender of its rights and interest over said MAFRAN trademark and mafran formula.

However, a perceptive analysis of the entire instrument and the language employed therein would lead one to the conclusion that what was actually ceded and transferred was only the use of the Mafran sauce formula. This was the precise intention of the parties.

The SC had the following reasons to back up the above conclusion. First, royalty was paid by UFC to Magdalo Francisco. Second, the formula of said Mafran sauce was never disclosed to anybody else. Third, the Bill acknowledged the fact that upon dissolution of said Corporation, the patentee rights and interests of said trademark shall automatically revert back to Magdalo Francisco. Fourth, paragraph 3 of the Bill declared only the transfer of the use of the Mafran sauce and not the formula itself which was admitted by UFC in its answer. Fifth, the facts of the case undeniably show that what was transferred was only the use. Finally, our Civil Code allows only the least transmission of right, hence, what better way is there to show the least transmission of right of the transfer of the use of the transfer of the formula itself.

2. NO. Petitioners contention that Magdalo Franciscos petition for rescission should be denied because under Article 1383 of the Civil Code of the Philippines rescission can not be demanded except when the party suffering damage has no other legal means to obtain reparation, was of no merit because it is predicated on a failure to distinguish between a rescission for breach of contract under Article 1191 of the Civil Code and a rescission by reason of lesion or economic prejudice, under Article 1381, et seq. This was a case of reciprocal obligation. Article 1191 may be scanned without disclosing anywhere that the action for rescission thereunder was subordinated to anything other than the culpable breach of his obligations by the defendant. Hence, the reparation of damages for the breach was purely secondary. Simply put, unlike Art. 1383, Art. 1191 allows both the rescission and the payment for damages. Rescission is not given to the party as a last resort, hence, it is not subsidiary in nature.

MANUEL SINGSONG, OPPEN, ESTEBAN v ISABELLA SAWMILL, SALDAJENO, GARIBAY, TUBUNGBUNUA28 Feb 1979 (Ponente: Fernandez, J.)DOCTRINE: If a person is obliged to do something and fails to do it, the same shall be executed at his cost

FACTS1. 1951 Garibay, Tubungbanua and Saldajeno made Isabella sawmill2. 1956 plaintiffs sold tractor to respondents for 20k, with respondents making arrangements with Intl Harvester Company to pay plaintiffs3. Intl Harvest only paid 19k4. Saldajeno withdrew from Isabella (plaintiffs claim this was a dissolution of Isabella), but Garibay and Tubungbanua continued to operate under the company name and did not divide its assets, even executing a chattel mortgage in favor of Saldajeno to pay off its debts5. Court approved chattel mortgage and the foreclosure of property which was bought by Saldajeno at a public auction6. 1959 plaintiffs filed against respondents and the sheriff of Negros Occidental a complaint for writ of preliminary injunction to stop sheriff from auctioning trucks, tractors, machinery, to pay petitioners damages and interests, and to nullify the chattel mortgage instituted by respondent Garibay and Tubungbanua to respondent Saldajeno7. Defense: a. Isabella Sawmill has been dissolved, Tubungbanua and Garibay became successors-in-interest, bound themselves to pay debts b. T and G executed chattel mortgages to pay debts of Isabella, c. petitioners are creditors of T and G and not of Isabellad. Petitioners gave T and G cash advances, gasoline, motor oil, rice and nipa despite notice that Isabella had been dissolved

LOWER COURTRTC: For plaintiffsCA: For respondents, annulling chattel mortgage

ISSUE: WON chattel mortgage may be anulled

RULINGYES. The remaining partners did not terminate the business of the partnership "Isabela Sawmill". Instead of winding up the business of the partnership, they continued the business still in the name of said partnership. It does not appear that the withdrawal of Margarita G. Saldajeno from the partnership was published in the newspapers.As a rule, a contract cannot be assailed by one who is not a party thereto. However, when a contract prejudices the rights of a third person, he may file an action to annul the contract. Here, the plaintiffs rights as preferred buyers of the tractors and machinery were prejudiced when they were mortgaged and sold at public auction.This Court has held that a person, who is not a party obliged principally or subsidiarily under a contract, may exercised an action for nullity of the contract if he is prejudiced in his rights with respect to one of the contracting parties, and can show detriment which would positively result to him from the contract in which he has no intervention.21***The portion of the decision appealed from ordering the appellants to pay attorney's fees to the plaintiffs-appellees cannot be sustained. There is no showing that the appellants displayed a wanton disregard of the rights of the plaintiffs. Indeed, the appellants believed in good faith, albeit erroneously, that they are not liable to pay the claims.CADWALLADER & CO. v SMITH, BELL & CO and HENRY PEABODY & CO. 1907, Tracey J.FACTS1. 1902 Pacific Export Lumber shipped 581 piles of lumber aboard the Quito2. Peabody & Co were to sell each pile of lumber at over $15 dollars for a commission half of price over $153. Peabody & Co told Pacific Export that there was no demand and that the lumber would have to be sold at less than $15 the two parties agreed on selling them at $124. Peabody & Co had a deal with Insular Purchasing Agent of the Govt to sell the piles at $20 amounting to $10k total sales

LOWER COURT: Defendants guilty, should pay plaintiffs 1kRULINGthe agents committed a breach of duty from which they should benefit. The contract of sale to themselves thereby induced was founded on their fraud and was subject to annulment by the aggrieved party. (Civil Code, articles 1265 and 1269.) Upon annulment the parties should be restored to their original position by mutual restitution. (Article 1303 and 1306.) Therefore the defendants are not entitled to retain their commission realized upon the piles included under the contract so annulled. Defendants to pay $4kMARIANO and AVELINA VELARDE v CA, DAVID and GEORGE RAYMUNDO 2001, Panganiban, J.

FACTS8. David owned land and improvements in Dasmarinas Village, which was negotiated by his father George for sale to appellants9. Land was mortgaged to BPI as security for 1.8M loan10. 1986 Deed of sale with assumption of mortgage (800k)a. When violated, downpayment of 800k and all payments made by appellants to BPI for the mortgage shall be forfeited11. December 1986 appellants advised that application to assume mortgage was not approved, they thus stopped making payments in favor of David Raymundo12. David claimed this was non-performance, but appellants wrote a letter which moved to pay them the amount of the mortgage instead as long as respondents delivered the title of the land and gave appellants delivered actual possession of the land13. David moved to rescind the contract14. Appellants moved to rescind the cancellation of the contract as well as to force specific performance

LOWER COURTRTC: Ordered Raymundos to continue with the saleCA: Dismissed the complaint The disapproval by BPI of the application for assumption of mortgage cannot be used as an excuse for Velardes non-payment of the balance of the purchase price.As borne out by the evidence, Velarde had to pay in full in case of BPIs disapproval of the application for assumption of mortgage.What Velarde should have done was to pay the balance ofP1.8 million.Instead, Velarde sent Raymundo a letter In said letter, Velarde registered their willingness to pay the balance in cash but enumerated 3 new conditions. These are mere offers or, at most, an attempt to novate.But then again, there can be no novation because there was no agreement of all the parties to the new contract ISSUES1. WON there was a breach of contract - YES2. WON rescission of contract by respondents justified - YES

RULING1. There was a breach of contract it was stated that should assumption of mortgage be denied, the appellants should pay the respondents 1.8 million, instead they stopped payment and wrote a letter which stated that they were willing to pay 1.8 million given certain conditions contrary to original contract2. While appellants contend that breach was not substantial to warrant rescission, what they did amounted to non-performance of the contract and in such cases, the parties to a contract have a right to rescind the contract in reciprocal obligations

Respondents to return 800k + 47k paid for mortgage by appellants (when contract in a reciprocal obligation is rescinded, restitution should be enacted to bring parties to original state)

October 23, 1923 LUIS ASIAIN,plaintiff-appellant,vs. BENJAMIN JALANDONI,defendant-appellee.

Facts:

Luis Asiain is the owner of thehaciendaknown as "Maria" situated in the municipality of La Carlota, Province of Occidental Negros, containing about 106 hectares. Benjamin Jalandoni, the defendant-appellee, is the owner of anotherhaciendaadjoining of Asiain.

May, 1920- Asiain said to Jalandoni that he was willing to sell a portion of hishaciendafor the sum of P55,000. With a wave of his hand, Asiain indicated the tract of land in question, affirming that it contained between 25 and 30 hectares, and that the crop of sugar cane then planted would produce not less than 2k piculs of sugar. But Jalandoni was doubtful as to the extent of the land and as to the amount of crop on it. Petitioner wrote respondent, assuring him that there are 2k piculs and that in case the sugar does not amount to 2k piculs, he will pay the necessary amount. Conversely, in case of excess over 2k piculs, it would be his.

Sometime in July of the same year, Asiain and Jalandoni met in Iloilo and prepared and signed the memorandum-agreement (pertinent part here):Purchase of land of Mr. Luis Asiain and his wife Maria Cadenas, by B. Jalandoni, containing 25 hectares more or less of land bounded by property of the purchaser, with its corresponding crop, estimated at 2,000 piculs, the total value of which is 55k. The price is to be paid by paying 30k at the signing of the document, and 25k within one year, with interest at the rate of 10%.

During all of the period of negotiations, Jalandoni remained a doubting Thomas and was continually suggesting that the amount of the land and of the crop was overestimated. Asiain on his part always gave assurances in conformity with the letter which he had written intended to convince Jalandoni that the latter was in error in his opinion. As a result, the parties executed another agreementof purchase and sale.

Once in possession of the land, Jalandoni did two things. He had the sugar cane ground in La Carlota Sugar Central with the result that it gave and output of P800 piculs and 23 cates of centrifugal sugar. Then he secured the certificate of title of Asiain and produced a surveyor to survey the land. According to his survey, the parcel in question contained an area of 118 hectares, 54 ares, and 22 centiares.Of the purchase price of P55,000, Jalandoni had paid P30,000, leaving a balance unpaid of P25,000. To recover the sum of P25,000 from Jalandoni or to obtain the certificate of title and the rent from him, action was begun by Asiain in CFI.

CFI ruled in favor of respondent. Judge declared null the document of purchase and its related memorandum; absolved the defendant from the payment of P25,000; ordered the plaintiff to return to the defendant the sum of P30,000 with legal interest from July 12, 1920; ordered the defendant to turn over to the plaintiff the tract of land and the certificate of title No. 468, all without special finding as to the costs.

Issue: WoN the contract can be rescinded due to mistake.

Held: Yes. (Court goes into lengthy discussion about American jurisprudence and Spanish commentators re mistakes in sale of land. Only including what I *think* matters re the SCs decision)

From Ruling Case Law (US): A mutual mistake as to the quantity of the land sold may afford ground for equitable relief. As has been said, if, through gross and palpable mistake, more or less land should be conveyed than was in the contemplation of the seller to part with or the purchaser to receive, the injured party would be entitled to relief in like manner as he would be for an injury produced by a similar cause in a contract of any other species. And when it is evident that there has been a gross mistake as to quantity, and the complaining party has not been guilty of any fraud or culpable negligence, nor has he otherwise impaired the equity resulting from the mistake, he may be entitled to relief from the technical or legal effect of his contract, whether it be executed or only executory. It has also been held that where there is a very great difference between the actual and the estimated quantity of acres of land sold in gross, relief may be granted on the ground of gross mistake. Relief, however, will not be granted as general rule where it appears that the parties intended a contract of hazard.

The memorandum-agreement between Asiain and Jalandoni contains the phrase or "more or less." It is the general view that this phrase or others of like import, added to a statement of quantity, can only be considered as covering inconsiderable or small differences one way or the other, and do not in themselves determine the character of the sale as one in gross or by the acre. The use of this phrase in designating quantity covers only a reasonable excess or deficiency. Such words may indeed relieve from exactness but not from gross deficiency.

Equity will rescind a contract for the sale of land for mutual mistake as to the quantity of land which the boundaries given in the contract contained, where the deficiency is material. "More or less," used in the contract in connection with the statement of the quantity, will not prevent the granting of such relief.

Coordinating more closely the law and the facts in the instant case, we reach the following conclusions: This was not a contract of hazard. It was a sale in gross* in which there was a mutual mistake as to the quantity of land sold and as to the amount of the standing crop. The mistake of fact as disclosed not alone by the terms of the contract but by the attendant circumstances, which it is proper to consider in order to throw light upon the intention of the parties, is, as it is sometimes expressed, the efficient cause of the concoction. The mistake with reference to the subject-matter of the contract is such that, at the option of the purchaser, it is rescindable. Without such mistake the agreement would not have been made and since this is true, the agreement is inoperative and void. It is not exactly a case of over reaching on the plaintiff's part, or of misrepresentation and deception, or of fraud, but is more nearly akin to a bilateral mistake for which relief should be granted. Specific performance of the contract can therefore not be allowed at the instance of the vendor.

The ultimate result is to put the parties back in exactly their respective positions before they became involved in the negotiations and before accomplishment of the agreement. This was the decision of the trial judge and we think that decision conforms to the facts, the law, and the principles of equity.Judgment is affirmed, without prejudice to the right of the plaintiff to establish in this action in the lower court the amount of the rent of the land pursuant to the terms of the complaint during the time the land was in the possession of the defendant, and to obtain judgment against the defendant for that amount, with costs against the appellant.

*sale in gross for the purpose of equitable relief may be divided into 4 classifications (mentioning the 2 impt ones here)--(3)sales in which it is evident, from extraneous circumstancesof locality, value, price, time,and the conduct and conversations of the parties, that they did not contemplate or intend to risk more than the usual rates of excess or deficit in similar cases, or than such as might reasonably be calculated on as within the range of ordinary contingency; (4) sales which, though technically deemed and denominated sales in gross, are in fact sales by the acre, and so understood by the parties. In contracts belonging to this third or fourth kind, an unreasonable surplus or deficit may entitle the injured party to equitable relief, unless he has, by his conduct, waived or forfeited his equity. . . .

February 12, 1997

SPOUSES HEINZRICH THEIS AND BETTY THEIS,petitioners, vs.HONORABLE COURT OF APPEALS, HONORABLE ELEUTERIO GUERRERO, ACTING PRESIDING JUDGE, BRANCH XVIII, REGIONAL TRIAL COURT, TAGAYTAY CITY, CALSONS DEVELOPMENT CORPORATION,respondents.

Facts:

Private respondent Calsons Development Corporation is the owner of three (3) adjacent parcels of land (parcel nos.1, 2 and 3). All three parcels of land are situated in Tagaytay City. Adjacent to parcel no.3 is a vacant lot denominated as parcel no. 4. In 1985, Private respondent constructed a two-srorey house on parcel no. 3 and the two other lots remained idle.

In a survey conducted in 1985, parcel no. 3 was erroneously indicated to be covered by the TCT of parcel no. 1, while the parcel no. 1 and parcel no. 2 were mistakenly surveyed to be located on parcel no. 4 instead. Unaware of the mistake private respondent sold said parcel no. 4 to petitioners on October 26, 1987.

Upon execution of the Deed of Sale, private respondent delivered TCTs to petitioners who, on October 28, 1987, immediately registered the same with the Registry of Deeds of Tagaytay City.

Indicated on the Deed of Sale as purchase price was the amount ofP130,000.00. The actual price agreed upon and paid, however, was P486,000.00. This amount was not immediately paid to private respondent; rather, it was deposited in escrow in an interest-bearing account in its favor with the United Coconut Planters Bank in Makati City. TheP486,000.00 in escrow was released to, and received by, private respondent on December 4, 1987.

Thereafter, petitioners did not immediately occupy and take possession of the two (2) idle parcels of land purchased from private respondent. Instead, petitioners went to Germany.In 1990, petitioners discovered that parcel no. 4 was owned by another person. They also discovered that the lots actually sold to them were parcel nos. 2 and 3. To remedy the mistake, private respondent offered parcel nos. 1 and 2 as these two were precisely the two vacant lots which private respondent owned and intended to sell. Petitioners rejected the good faith offer. Private respondent made another offer, this time the return of an amount double the price paid by petitioners. Petitioners still refused. Private respondent was then compelled to file an action for annulment of deed of sale and reconveyance of the properties subject thereof.

RTC and CA ruled in favor of Calsons Development.

RTC: Going by the facts established by defendants' evidence, it is clear thatdefendants did not intend to buy the parcel of land where plaintiff's house stood as defendant Betty Theis declared in her testimony that they wanted to buy the parcel at the right side of plaintiff's house where she and her husband would construct their house. The law itself explicitly recognizes that consent of the parties is one of the essential elements to the validity of the contract and where consent is given through mistake, the validity of the contractual relations between the parties is legally impaired.In other words,the mistake or error on the subject of the sale in question appears to be substantial as the object of the same transaction is different from that intended by the parties. Thisfiascocould have been cured and the pain and travails of this litigation avoided, had parties agreed to reformation of the deed of sale. But, as shown by the sequence of events occurring after the sale was consummated, and the mistake was discovered, the defendants refused, insisting that they wanted the vacant lots on the right side of plaintiff's house, which was impossible for plaintiff to do, as said vacant lots were not of its own dominion.

Issue: WoN the deed of sale can be annulled.Held: Yes. Art. 1390 of the New Civil Code provides:"Art. 1390. The following contracts are voidable or annullable, even though there may have been no damage to the contracting parties: (2) Those where the consent is vitiated by mistake, violence, intimidation, undue influence, or fraud.In the case at bar, the private respondent obviously committed an honest mistake in selling parcel no. 4. As correctly noted by the Court of Appeals, it is quite impossible for said private respondent to sell the lot in question as the same is not owned by it. The good faith of the private respondent is evident in the fact that when the mistake was discovered, it immediately offered two other vacant lots to the petitioners or to reimburse them with twice the amount paid. That petitioners refused either option left the private respondent with no other choice but to file an action for the annulment of the deed of sale on the ground of mistake. Art. 1331 of the New Civil Code provides for the situations whereby mistake may invalidate consent. It states:"Art. 1331.In order that mistake may invalidate consent, it should refer to the substance of the thing which is the object of the contract, or to those conditions which have principally moved one or both parties to enter into the contract."Tolentinoexplains that the concept of error in this article must include both ignorance, which is the absence of knowledge with respect to a thing, and mistake properly speaking, which is a wrong conception about said thing, or a belief in the existence of some circumstance, fact, or event, which in reality does not exist. In both cases, there is a lack of full and correct knowledge about the thing. The mistake committed by the private respondent in selling parcel no. 4 to the petitioners falls within the second type. Verily, such mistake invalidated its consent and as such, annulment of the deed of sale is proper.The petitioners cannot be justified in their insistence that parcel no. 3, upon which private respondent constructed a two-storey house, be given to them in lieu of parcel no. 4. The cost of construction in 1985 for the said house (P1,500,000.00) far exceeds the amount paid by the petitioners to the private respondent (P486,000.00). Moreover, the trial court, in questioning private respondent's witness, Atty. Tarciso Calilung (who is also its authorized representative) clarified that parcel no. 4, the lot mistakenly sold, was a vacant lot.Thus, to allow the petitioners to take parcel no. 3 would be to countenance unjust enrichment. Considering that petitioners intended at the outset to purchase a vacant lot, their refusal to accept the offer of the private respondent to give them two other vacant lots in exchange, as well as their insistence on parcel no. 3, which is a house and lot, is manifestly unreasonable.HEIRS OF WILLIAM SEVILLA, NAMELY: WILFREDO SEVILLA, WILSON SEVILLA, WILMA SEVILLA, WILLINGTON SEVILLA, AND WILLIAM SEVILLA, JR., HEIRS OF MARIA SEVILLA, NAMELY: AMADOR SEVILLA, JENO CORTES, VICTOR CORTES, MARICEL CORTES, ALELEI*CORTES AND ANJEICORTES,petitioners,vs. LEOPOLDO SEVILLA, PETER SEVILLA, AND LUZVILLA SEVILLA,respondents. (April 2003)Facts:

On December 10, 1973, Filomena Almirol de Sevilla died intestate leaving 8 children, namely: William, Peter, Leopoldo, Felipe, Rosa, Maria, Luzvilla, and Jimmy, all surnamed Sevilla.William, Jimmy and Maria are now deceased and are survived by their respective spouses and children. Filomena Almirol de Sevilla left 4 parcels of land in Dipolog City.

Parcel I, Lot No. 653, is the paraphernal property of Filomena Almirol de Sevilla which she co-owned with her sisters, Honorata Almirol and Felisa Almirol, who were both single and without issue.Parcels II, II and IV are conjugal properties of Filomena Almirol de Sevilla and her late husband Andres Sevilla.When Honorata died in 1982, her 1/3 undivided share in Lot No. 653 was transmitted to her heirs, Felisa Almirol and the heirs of Filomena Almirol de Sevilla, who thereby acquired the property in the proportion of one-half share each.

During the lifetime of Felisa and Honorata Almirol, they lived in the house of Filomena Almirol de Sevilla, together with their nephew, respondent Leopoldo Sevilla and his family.Leopoldo attended to the needs of his mother, Filomena, and his two aunts, Honorata and Felisa.

Felisa died on July 6, 1988.Previous thereto, on November 25, 1985, she executed a last will and testament devising her 1/2 share in Lot No. 653 to the spouses Leopoldo Sevilla and Belen Leyson.On August 8, 1986, Felisa executed another document denominated as Donation Inter Vivos ceding to Leopoldo Sevilla her 1/2 undivided share in Lot No. 653, which was accepted by Leopoldo in the same document.

On September 3, 1986, Felisa Almirol and Peter Sevilla, in his own behalf and in behalf of the heirs of Filomena Almirol de Sevilla, executed a Deed of Extra-judicial Partition, identifying and adjudicating the 1/3 share of Honorata Almirol to the heirs of Filomena Almirol de Sevilla and to Felisa Almirol.Thereafter, respondents Leopoldo, Peter and Luzvilla Sevilla obtained the cancellation of TCT over Lot No. 653, and the issuance of the corresponding titles to Felisa Almirol and the heirs of Filomena Almirol de Sevilla.However, the requested titles for Lot Nos. 653-A and 653-B, were left unsigned by the Register of Deeds of Dipolog City, pending submission by Peter Sevilla of a Special Power of Attorney authorizing him to represent the other heirs of Filomena Almirol de Sevilla.

On June 21, 1990, Felipe Sevilla, Rosa Sevilla, and the heirs of William, Jimmy and Maria, all surnamed Sevilla, filed the instant case against respondents Leopoldo Sevilla, Peter Sevilla and Luzvilla Sevilla, for annulment of the Deed of Donation and the Deed of Extrajudicial Partition, Accounting, Damages, with prayer for Receivership and for Partition of the properties of the late Filomena Almirol de Sevilla. They alleged that the Deed of Donation is tainted with fraud because Felisa Almirol, who was then 81 years of age, was seriously ill and of unsound mind at the time of the execution thereof; and that the Deed of Extra-judicial Partition is void because it was executed without their knowledge and consent.In their answer,respondents denied that there was fraud or undue pressure in the execution of the questioned documents.They alleged that Felisa was of sound mind at the time of the execution of the assailed deeds and that she freely and voluntarily ceded her undivided share in Lot No. 653 in consideration of Leopoldos and his familys love, affection, and services rendered in the past.Respondents further prayed that Parcels II, III, and IV be partitioned among the heirs of Filomena Almirol de Sevilla in accordance with the law on intestate succession.

RTC and CA upheld the validity of the Deed of Donation and declaring the Deed of Extra-judicial Partition unenforceable.

Issue: 1. WoN the Deed of Donation is valid and binding on the parties.2. WoN the Deed of Extra-judicial Partition should be void ab inito.

Held: 1. Yes. Donation is an act of liberality whereby a person disposes gratuitously of a thing or right in favor of another who accepts it.Under Article 737 of the Civil Code, the donors capacity shall be determined as of the time of the making of the donation.Like any other contract, an agreement of the parties is essential, and the attendance of a vice of consent renders the donation voidable.In the case at bar, there is no question that at the time Felisa Almirol executed the deed of donation she was already the owner of 1/2 undivided portion of Lot No. 653.Her 1/3 undivided share therein was increased by 1/2 when she and Filomena inherited the 1/3 share of their sister Honorata after the latters death.Hence, the 1/2 undivided share of Felisa in Lot No. 653 is considered a present property which she can validly dispose of at the time of the execution of the deed of donation.Petitioners, however, insist that respondent Leopoldo Sevilla employed fraud and undue influence on the person of the donor.This argument involves appreciation of the evidence.The settled rule is that factual findings of the trial court, if affirmed by the Court of Appeals, are entitled to great respect. Indeed, neither fraud nor undue influence can be inferred from the following circumstance alleged by the petitioners--A.That Felisa Almirol lived with respondent Leopoldo Sevilla in the residential house owned by petitioners and respondents;B.That the old woman Felisa Almirol was being supported out of the rentals derived from the building constructed on the land which was a common fund.C.That when Felisa Almirol was already 82 years old, he [Leopoldo Sevilla] accompanied her in the Office of Atty. Vic T. Lacaya, Sr., for the purpose of executing her last will and testamentD.That in the last will and testament executed by Felisa Almirol, she had devised in favor of respondent Leopoldo Sevilla one-half of the land in question;E.That respondent Leopoldo Sevilla not contented with the execution by Felisa Almirol of her last will and testament, had consulted a lawyer as to how he will be able to own the land immediately;F.That upon the advice of Atty. Helen Angeles, Clerk of Court of the Regional Trial Court of Zamboanga del Norte, Dipolog City, Felisa Almirol executed a Deed of Donation, hence, the questioned Deed of Donation executed in his favoretc.etc.

There is fraud when, through the insidious words or machinations of one of the contracting parties, the other is induced to enter into a contract which, without them, he would not have agreed to. There is undue influence when a person takes improper advantage of his power over the will of another, depriving the latter of a reasonable freedom of choice. In the instant case, the self-serving testimony of the petitioners are vague on what acts of Leopoldo Sevilla constituted fraud and undue influence and on how these acts vitiated the consent of Felisa Almirol.Fraud and undue influence that vitiated a partys consent must be established by full, clear and convincing evidence, otherwise, the latters presumed consent to the contract prevails. Neither does the fact that the donation preceded the partition constitute fraud.It is not necessary that partition should first be had because what was donated to Leopoldo was the 1/2 undivided share of Felisa in Lot No. 653.Moreover, petitioners failed to show proof why Felisa should be held incapable of exercising sufficient judgment in ceding her share to respondent Leopoldo.As testified by the notary public who notarized the Deed of Donation, Felisa confirmed to him her intention to donate her share in Lot No. 653 to Leopoldo.He stressed that though the donor was old, she was of sound mind and could talk sensibly.Significantly, there is nothing in the record that discloses even an attempt by petitioners to rebut said declaration of the notary public.

Clearly, therefore, the courts below did not err in sustaining the validity of the deed of donation.

2. Yes, the Deed of Extra-judicial Partition is voidab initioand not merely unenforceable.One of the requisites of a valid contract under Article 1318 of the Civil Code is the consent and the capacity to give consent of the parties to the contract. Legal consent presupposes capacity. Thus, there is said to beno consent, and consequently,no contractwhen the agreement is entered into by one in behalf of another who has never given him authorization therefor unless he has by law a right to represent the latter.In the case at bar, at the time Felisa executed the deed of extra-judicial partition dividing the share of her deceased sister Honarata between her and the heirs of Filomena Almirol de Sevilla, she was no longer the owner of the 1/2 undivided portion of Lot No. 653, having previously donated the same to respondent Leopoldo Sevilla who accepted the donation in the same deed.A donationinter vivos, as in the instant case, is immediately operative and final.

Evidently, Felisa did not possess the capacity to give consent to or execute the deed of partition inasmuch as she was neither the owner nor the authorized representative of respondent Leopoldo to whom she previously transmitted ownership of her undivided share in Lot No. 653.Considering that she had no legal capacity, it follows that there is no consent given to the execution of the deed, and therefore, there is no contract to speak of.As such, the deed of partition is voidab initio,hence, not susceptible of ratification.

Nevertheless, the nullity of the deed of extra-judicial partition will not affect the validity of the donationinter vivosceding to respondent Leopoldo Sevilla the 1/2 undivided share of Felisa Almirol in Lot No. 653.Said lot should therefore be divided as follows: 1/2 shall go to respondent Leopoldo Sevilla by virtue of the deed of donation, while the other half shall be divided equally among the heirs of Filomena Almirol de Sevilla including Leopoldo Sevilla, following the rules on intestate succession.

Andre Dumasug v Felix ModeloF:1910- Andrea Dumasug had another case against Rosales Albarracin and Gaudencio Saiel for the recovery of a parcel of land belonging to her measuring two gantas. Felix Modelo, was asked by Andrea Dumasug regarding the infringement of her rights by Albarracin and Saiel. He advised her to bring the matter before the authorities (he is not a lawyer or a procurador judicial). 1911- Felix Modelo asked Dumasug to sign a document conveying the parcels of land and a carabao to him in payment of her debt amounting to 333.49 pesos which allegedly according to him, she contracted because of his help with the cases abovementioned. Said amount was for the attorney's fees, traveling expenses for herself and her witnesses and their expenses while in Cebu.Said document is a contract of sale, whereby Dumasug sets forth that she received the sum of 333.49 in consideration of the carabao and the 2 parcels of land she would convey to Modelo. It was also signed by two witnesses, Mariano Abear and Apolinar Miosa and was notarized on the same date it was executed. 3 months after said transaction, Modelo took possession of the properties of Dumasug. 1912- Andrea Dumasug filed a complaint with the CFI of Cebu for the annulment of the document, to order Modelo to restore to plaintiff said work animal and parcels of land and to pay her 1,000 pesos for the damages she suffered. Said document, Exhibit 1, as claimed by Felix Modelo was executed for the sale of Andrea's 2 parcels of land and a carabao.Dumasug admitted that on the date the document was executed, Modelo asked her to sign a document while inside the latter's house acknowledging that she owed him 101 pesos for the work he had performed in her behalf in the two actions she had to recover her other lands. She further admitted that she signed said document by mark in the presence of the defendant while they were alone and without any attesting witness.Further, she added that she had never sold her lands or her carabao and that she neither offered to sell them to defendant nor did the latter offer to buy her two parcels of land and her carabao. It must be noted that Dumasug does not know how to write. Thus, she just affixed her mark thereto, believing in good faith that Modelo had told her the truth and that said document referred to expenses incurred by him for the help he provided in Andrea's cases. Modelo countered by denying all the facts alleged in the complaint and prayed for the declaration by the court that the property was lawfully obtained by him through a contract of sale. CFI of Cebu held the document to be null and void. It gave credence to the testimony of Andrea Dumasug. It also ordered Modelo to deliver and restore the property to Dumasug and to pay her damages and the costs of suit.

I: WON the document is null and void?

Dumasug: Document is null and void as her consent thereto was obtained by means of fraud and deceit.

Yes. It is obvious that the document which the plaintiff signed on the month of November 1911 related to the sum of 101 pesos and not the 333.49 pesos which Modelo presented to the court to show that she indeed conveyed her properties. Clearly, it is evident that Exhibit 1, is not the instrument of debt which Andrea Dumasug had signed and if its the same one, its contents were not duly and faithfully explained to plaintiff in the act of its execution. The consent said to have been given by Andre Dumasug in said document is null and void as it was given by mistake. Such error invalidates the contract as it goes to the very substance of the thing which was the subject matter of said contract.Art. 1303 of the Old Civil Code provides "When the nullity of an obligation has been declared, the contracting parties shall restore to each other the things which have been the object of the contract with their fruits and the value with its interest".

Petition denied. Modelo should deliver the 2 parcels of land and must pay 120 pesos for the carabao which died while on his possession to Dumasug.

Notes: Why did not the Court pronounce judgment for the reimbursement of the money Modelo used to help Dumasug? Modelo did not make any claim for the reimbursement of the sum of money which he paid to Atty. Andres Jayme for defending plaintiff in CFI Cebu.

Maxima Hemedes v CA

F:Jose Hemedes, father of Maxima and Enrique, executed a document entitled Donation Inter Vivos With Resolutory Conditions conveying ownership a parcel of land, in favor of his third wife, Justa Kauapin, subject to the resolutory condition that upon the latters death or remarriage, the title to the property dshall revert to any of the children, or heirs, of the DONOR expressly designated by the DONEE.

Pursuant to said condition, Justa Kausapin executed a Deed of Conveyance of Unregistered Real Property by Reversion conveying to Maxima Hemedes the subject property. A new title was issued in favor of Maxima with an annotation that Justa Kausapin shall enjoy the usufructuary rights of the parcel of land.

Maxima constituted a real estate mortgage over the property for 6,000 pesos in favor of R&B Insurance Company. Maxima failed to pay when the debt became due. R&B foreclosed the property, which it later on bought through a public auction. A new title in favor R&B was reissued while maintaining the annotation in favor of Justa in the said title.

In 1971, however, Justa executed a Kasunduan whereby the land previously conveyed to Maxima was transferred to her stepson Enrique Hemedes. Enrique has been paying the realty taxes on the property from the time Justa Kausapin conveyed the property to him.

Enrique then sold the property to Dominium Realty and Construction Corporation (Dominium). Dominium leased the property to its sister corporation Asia Brewery, Inc. (Asia Brewery) who made two warehouses therein.

Upon learning of Asia Brewerys constructions, R & B Insurance sent it a letter informing the former of its ownership of the property. A conference was held between R & B Insurance and Asia Brewery but they failed to arrive at an amicable settlement. Maxima Hemedes also wrote a letter addressed to Asia Brewery asserting that she is the rightful owner of the subject property and denying the execution of any real estate mortgage in favor of R&B.

Dominium and Enrique D. Hemedes filed a complaint with the CFI for the annulment of TCT issued in favor of R & B Insurance. Both Enrique and Dominium alleged that the latter is the rightful owner of the land. Plaintiffs asserted that Justa never transferred the land to Maxima and that Enrique had no knowledge of the registration proceedings initiated by Maxima.

The trial court ruled in favor of Dominium and Enrique Hemedes. CA affirmed in toto. It held that the deed is a sham and has no evidentiary value. It based its ruling on the affidavit issued by Justa repudiating such deed of conveyance in favor of Maxima and affirming the authenticity of the Kasunduan executed in favor of Enrique.

Further, the Deed was executed in English and Justa could not have understood the same as she does not know how to speak English. Maxima also failed to discharge her burden, pursuant to NCC 1332, to ensure that the terms of the contract are fully explained to the other party.

Maxima countered the abovementioned arguments: Justa understood the document. The Donation executed by her father was also in English, why did she not also allege that she did not understand said document? Secondly, Justa failed to prove that it was not her thumbmark that was on the Deed of Conveyance.

I: 1) WON the Donation Inter Vivos With Resolutory Conditions executed by Justa in favor of Maxima is null and void?2) WON the Kasunduan executed in favor of Enrique is null and void? 3) WON R&B Insurance should be considered as a possessor in good faith?

H: 1) No. Justas argument are grounded upon mere denial. They failed to disprove the validity of the Deed of Conveyance executed in favor of Maxima. There are also strong indications that she is a biased witness. The trial court found that Justa was dependent upon Enrique for financial assistance. when asked why did she donate the property to Enrique, she answered: Because I was in serious condition and he was the one supporting me financially.

CA and RTC erred when it used NCC 1332 as basis for holding that the Deed was void. NCC Art. 1332 was intended for the protection of a party to a contract who is at a disadvantage due to his illiteracy, ignorance, mental weakness or other handicap, and contemplates a situation wherein a contract has been entered into but the consent of one of the parties is vitiated by mistake or fraud committed by the other contracting party.

Fraud on the other hand is the use of words or machinations so that one is induced to enter into a contract which without them he would not have agreed to.

2) Yes. The purported object of the said contract did not exist at the time the document was executed. The parcel of land has long been transferred to Maxima.

3) Yes. Every person dealing with registered land may safely rely on the correctness of the title issued and the law will in no way oblige him to go behind the certificate to determine the condition of the property.

Besides, a land encumbered under a usufructuary can still be sold as the latter does not entail the power to encumber, transform and even destroy the same. A usufruct may still enjoy the benefits of the usufructuary although the ownership has been transferred to another person.

CA order reversed and set aside.

Miguel Katipunan v Braulio KatipunanF:

Braulio Katipunan is the registered owner of a 203 sq. m lot located at San Miguel, Manila.

Dec. 1985- Braulio, assisted by Miguel and brothers Edgardo and Leopoldo Balguma as represented by their father Atty. Leopoldo Balguma entered into a contract of sale concerning said parcel of land for a consideration of 187,000 pesos.

Jan. 1986- Balguma took possession of the land and start collecting the rents.

March 10, 1987- Braulio filed a complaint with the RTC for the annulment of the Deed of Sale. He contends that through the insidious words and machinations of his brother and Balguma, they made him sign a document purportedly a contract of employment which turned out to be a Deed of Absolute Sale. Furthermore, it is clear that with evident bad faith, Miguel and the Balgumas conspired with one another in taking advantage of his ignorance, he being only a third grader.

Petitioners denied the allegations in the complaint. They alleged that Braulio was aware of the contents of the Deed of Sale when he affixed his signature and that he received the consideration involved.

RTC dismissed the complaint at first but granted the motion for reconsideration for a re-trial after it had been shown by Braulio that he had poor comprehension, him having a mental age of a 6 year old. It later on dismissed the complaint based on the merits.

CA reversed the decision. Annulling the Deed of Absolute Sale basing such decision on the ground that the RTC committed a mistake by not giving weight to the testimony of Dr. Ana Revilla, a psychiatrist who was presented as an expert witness. Dr. Revilla established that Braulio has a very low IQ (he only have a mental age of a 6 year old). It was also proven that Braulio is illiterate and there is no showing that the contract were read and or explained to Braulio nor translated in a language he understood as prescribed by Art. 1332 of the NCC.

Besides, Braulio can be considered an incapacitated person because of his mental age. Secondly, the consent was also vitiated by mistake or fraud because Braulio didn't know that he was actually affixing his signature on a deed of absolute sale. Such makes the contract voidable.

Miguel and Balguma appealled to the SC contending that the CA should not have disturbed the findings of fact of the RTC.

I: WON contract should be annulled?

H: Yes. SC affirmed the decision of the CA. Findings of fact by the trial courts can be disturbed when the trial court had overlooked, misunderstood or misapplied some fact or circumstance.

Art. 1330- Consent maybe vitiated by mistake, violence, intimidation, undue influence and fraud.

Based on the records of the case, it was clearly shown that Braulio signed the deed without the remotest idea of what it was --> they relied on the testimony of Braulio in Court. He was asked if he knew the document he was signing, he said he doesn't know and nobody informed him what it was.

It was impossible for him to understand the contents of the contract written in English and embelished in legal jargon because he only reached grade three and has a very low IQ.

Based also on the testimony of Braulio, the SC was convinced that he did not receive the purchase price. He was only given "barya-barya". They concluded that it was his brother Miguel who really wanted to go abroad and needed the money for it.

SC ordered restitution of the parcels of land and of the rentals. As to Braulio, they took note of Art. 1399 exempting incapacitated persons to make any restitution except when he has been benefited by the things or price received by him. Petition denied.

Mercedes Martinez, et al. v. HSBC, et al. GR No. L-5496, February 19, 1910

Nature: Action to set aside a contract on the ground that plaintiffs consent thereto was given under duress and undue influence

Facts: Alejandro Macleod, husband of plaintiff, was managing partner of the house of Aldecoa & Co. He withdrew from management when Aldecoa went into liquidation in 1906. April 1907: Aldecoas creditor, HSBC filed a civil case against Macleod, his wife, Aldecoa, and another firm, Viuda de Hijos de Escao. HSBC alleged that a certain undertaking in favor of Aldecoa had been hypothecated to the bank to secure indebtedness of Aldecoa, but this obligation has been wrongfully transferred by Macleod in favor of his wife to the prejudice of the bank. May 1907: Aldecoa began civil action against Macleod for recovery of shares of stock worth P161,000.00 and damages. Macleod and wife engaged services of lawyers to represent and defend them. While negotiations were pending, Aldecoa claimed they made discoveries of many frauds which Macleod perpetrated against the company during his management. July 13: Macleod went to Macao because it became apparent that criminal proceedings would be instituted against him. July 17: Aldecoa filed case for falsification of commercial document. CFI issued an arrest warrant, but Portuguese government denied request for extradition Attorneys negotiated for settlement and compromise August 4: A long list of (criminal and civil) claims against Macleod was exhibited to plaintiff and her counsel August 7: Kingcome, son-in-law of Macleod, was told by Mr. Stephen, manager of HSBC, and his friend, to advise plaintiff to act reasonably, otherwise additional mortifying misfortunes would fall upon their family August 9: 2nd complaint against Macleod for embezzlement and causing warrants of extraditions to issue because they heard Macleod wanted to leave for Europe August 11: a long conference was held between plaintiff, her attorney, Kingcome, and William Macleod (attorney-in-fact) where she was informed that if she assented to the requirements of Aldecoa and the bank, the civil suits against them would be dismissed and the criminal charges against her husband would be withdrawn. If she refused, her husband must either spend the rest of his life in Macao or be criminally prosecuted. August 12: Plaintiff acceded to the terms proposed by HSBC + Aldecoa and authorized William to execute the contract of settlement on her behalf. August 14: Settlement was accepted After Aldecoa + HSBC had taken possession of their property, the civil suits were dismissed and the criminal charges were withdrawn. Macleod returned to Manila. Plaintiff had a surveyor divide the Malate property and negotiated for the partition of land December 3: plaintiff filed present complaint CFI: in favor of defendents. Motion for new trial was denied so plaintiff appealed to SC.

Issue: WoN the contract of settlement is void for being obtained by duress or undue influence

Held: No, the elements of duress are lacking. The fact that Martinez loathingly relinquished rights upon considerations and conditions does not destroy the obligatory effect and force of her consent. In order to annul a contract, the influence must have deprived her of free will and choice and she must have acted from fear and not from judgment.1. First offers of compromise were made BY PLAINTIFF through representatives2. No direct personal relations or communications between parties. Offers, prepositions, and threats (if any) were made by defendants filtered to the plaintiff by her attorneys and relatives3. Plaintiff was engaged partly in the settlement of her own suits and controversies4. Plaintiff never stood alone in the negotiations. She had the assistance of legal learning and business intelligence and experience, and careful and thoughtful advice of family5. Plaintiff took advantage of the contract after its execution and requested the complete fulfilling of every one of its provisions favorable to herself

She acted according to the dictates of good business judgment rather than from duress and due influence. Due influence, obtained by persuasion or argument or by appeals to the affections, are not prohibited. Advice of counsel: in signing agreement, she had all to gain, nothing to lose; in refusing to sign the agreement, she had all to lose and nothing to gain. In one case, she would lose her property and save her husband. In another, she would lose her property and her husband too. The argument presented to her addressed itself to judgment and not to fear. It appealed to reason and not to passion. It asked her to be moved by common sense and not by love of family. It spoke to her business judgment as well as to her wifely affections.

The judgment of the court below is affirmed.

Lamberto Songco v. George SellnerGR No. L-11513, December 4, 1917

Nature: Action to recover the third PN turned into appeal

Facts: December 1915: Sellner was a farm owner at Floridablanca, Pampanga, contiguous to the farm owned by Songco. Both properties had considerable quantity of sugar cane ready to be cut. Sellner desired to mill his cane at nearby Dinalupijan, but the owners of the central were not sure if they could mill his cane, but they were going to mill Soncgos cane. Learning this, he conceived of buying the cane of Songco to run his own cane the same time the other should be milled and to get a right of way over Songcos land for converting his own sugar to the central. Sellner bought Songcos cane for P12,000 and executed 3 PNs of P4k each. Only 2 PNs were paid so Songco instituted an action to recover the 3rd PN. CFI: in favor of Songco. Sellner appealed, alleging that the PNs were obtained by fraudulent representations. Songco misrepresented the quantity of uncut sugar cane standing in the fields, estimating 3k piculs of sugar, but there were only 2,017 gross.

Issue: WoN the execution of the PNs were obtained through fraud, relieving Sellner from paying

Held: No, Sellner had no right to rely upon such representation. The statement of Songco may not have reflected his true opinion however it is not a ground for relieving the purchaser from contract and paying the price agreed upon. Songco knew he was greatly exaggerating (he knew what the same fields were producing over long periods of years) Misrepresentation upon a mere matter of opinion is not an actionable deceit nor a sufficient ground for avoiding a contract as fraudulent A man who relies upon an affirmation made b y a person whose interest might readily prompt him to exaggerate the value of his property does so AT HIS OWN PERIL. And must take consequences of his own imprudence. It is exceedingly risky to accept sellers statements and talk at face value. It would have been different if the seller had fraudulently induced him to forbear inquiries or examination which he would otherwise have made.

The judgment of the court below is affirmed

Leodegario Azarraga v. Maria GayGR No. L-29449, December 29, 1928

Nature: Action to recover sum of money

Facts: January 17, 1921: In a public document (Exh. A) Azarraga sold 2 parcels of land to Gay for P47,000.00. Conditions: P5k DP, P20k upon delivery of title 1, P10k upon delivery of title 2, P12k one year after delivery of title 2. Gay paid P5k DP and P20k after the delivery of title 1. March 1921: Title 2 was issued and delivered, by Gay failed to pay P10k + P12k Azarraga claims the sum of P22k with legal interest until full payment of the amounts claimed. Gay: admits she purchased the 2 parcels, but alleges in defense: Azarraga knowing parcel 2 had an area of 60 hectares, by misrepresentation led her to believe that it contained 98 hectares and thus made it appear in the DoS and induced her to bind herself to pay the price of P47k for 2 parcels of land which contained an area of no less than 200 hectares, to which price she would not have bound herself had she had known the real area of parcel 2; price should be reduced to P38k She paid other sums amounting to P4k She did not refuse to pay the justly reduced price, but Azarraga refused to receive the just amount of the debt Cross-complaint for damages Azarraga: the CoS was made only for the lump sum of P47k, and not at the rate of so much per hectare. CFI: ordered Gay to pay P19,300 with legal interest. Cross complaint dismissed. Neither party gave importance to the land area. No fraud. Motion for new trial denied, so case brought to SC through bill of exceptions

Issue: WoN Azarraga indueced defendant by deceit

Held: No, there is no evidence that Azarraga made representation to the defendant as to the area of parcel 2. Even if he did make such false representation, Gay accepted such representations at her own risk and she is the only one responsible for the consequences of her inexcusable credulousness. Gay had ample opportunity to appraise herself of the condition of the land which she purchased. Azarraga did nothing to prevent her from making such investigation as she deemed fit. (Songco v. Sellner: when the purchaser proceeds to make investigations by himself, and the vendor does nothing to prevent such investigation from being as complete as the former might wish, the purchaser cannot later allege that the vendor made false representations to him) Misrepresentations by a vendor of real property with reference to its area is not actionably where a description of the property is in the deed Gay knew the area; she and her lawyer read the contents of Exh. 4 (deed by which plaintiff acquired from original owner) before signing Exh. A. Gays letters to Azarraga from 1921-1925 had no reference to complaint of the area, only to extension of payment. She only complained in 1926 Azarraga: Gay is not entitled for reduction of price because of CC 1471 (delivery of determinate object) LONG MANRESA COMMENTS In the delivery of a determinate object, says the author, two cases may arise; either the determinate object is delivered as stipulated, that is, delivering everything included within the boundaries, inasmuch as it is the entirety thereof that distinguishes the determinate object; or that such entirely is impaired in the delivery by failing to deliver to the purchaser something included within the boundaries. For the first case, Manresa gives the following rule: "Whether or not the object of the sale be one realty for a lump sum, or two or more for a single price also a lump sum, and, consequently, not for so much per unit of measure or number, there shall be no increase or decrease in the price even if the area be found to be more or less than that stated in the contract." And for the second case, this other: "Whether or not the object of the sale one realty for a lump sum, or two or more for a single price also a lump sum, and, consequently, not at the rate a specified price for each unit of measure or number, the vendor shall be bound to deliver everything that is included within the boundaries stated, although it may exceed the area or number expressed in the contract; in case he cannot deliver it, the purchaser shall have the right either to reduce the price proportionately to what is lacking of the area or number, or to rescind the contract, at his option." ANYWAY CC 1471 not applicable because all the land within the boundaries were delivered in its entirety

Judgment appealed from is affirmed

G.R. No. L-65922December 3, 1991LAURETA TRINIDAD, petitioner, vs. INTERMEDIATE APPELLATE COURT and VICENTE J. FRANCISCO, respondent.

FACTS: 1) Laureta Trinidad (petitioner) bought house of Vicente Francisco (Bungalow No. 17 Commonwealth QC). The purchase price was P70,000.00.2) New neighbors of Trinidad said that two buyers had previously vacated the property because it was subject to flooding. She says she talked to Francisco about this matter and that he told her everything had been fixed and the house would never be flooded again. Trinidad paid downpayment. 3) Trinidad paid for 1970 and 1971 installments. However, she says she eventually decided not to continue paying the amortizations because the house was flooded again on July 18, 21, and 30, 1972, the waters rising to as high as five feet on July 21. 4) January 10, 1973: Trinidad filed her complaint against Francisco alleging that she was induced to enter into the contract of sale because of his misrepresentations. She asked that the agreement be annulled and her payments refunded to her, together with the actual expenses she had incurred for the "annexes and decorations" she had made on the house.

DEFENSE: Francisco stressed that Trinidad had thoroughly inspected the property before she decided to buy it. The claimed creek was a drainage lot, and the floods complained of were not uncommon in the village and indeed even in the Greater Manila area if not the entire Luzon. In any event, the floods were fortuitous events not imputable to him. He asked for the rescission of the contract (as well HAHA) and the forfeiture of payments made by Trinidad.

CFI RIZAL: in favor of TrinidadIAC: decision of CFI Rizal is reversed. Francisco died, substituted by heirs.

ISSUES: Whether or not there was misrepresentation on the part of Francisco to justify the rescission of the sale and the award damages to Trinidad

HELD: There is no fraud. Court rules in favor of Francisco.1) It was Trinidad who approached Francisco, who never advertised the property nor offered it for sale to her.2) Trinidad had full opportunity to inspect the premises, including the drainage canals indicated in the vicinity map that was furnished her, before she entered into the contract of conditional sale.3) It is assumed that she made her appraisal of the property not with the untrained eye of the ordinary prospective buyer but with the experience and even expertise of the licensed real estate broker that she was. If she minimized the presence of the drainage canals, she has only her own negligence to blame.4) Seeing that the lot was depressed and there was a drainage lot abutting it, she cannot say she was not forewarned of the possibility that the place might be flooded. Notwithstanding the obvious condition of the property, she still decided to buy it.5) There is no evidence except her own testimony that two previous owners of the property had vacated it because of the floods and that Francisco assured her that the house would not be flooded again. Francisco himself denied having made the alleged assurance.6) The petitioner paid the 1970 and 1971 amortizations even if "since 1969 said lot had been under floods of about one (1) foot deep," 10 and despite the floods of September and November 1970.7) It is also curious that notwithstanding the said floods, the petitioner still "made annexes and decorations on the house," all of a permanent nature.

It has not been satisfactorily established that the private respondent inveigled the petitioner through false representation to buy the subject property. Assuming that he did make such representations, as the petitioner contends, she is deemed to have accepted them at her own risk and must therefore be responsible for the consequences of her careless credulousness.

However, to make Trinidad forfeit the payments already made by her and at the same time return the property to the private respondents for standing up to what she considered her right would, in our view, be unfair and unconsionable. Justice demands that we moderate the harsh effects of the stipulation. Accordingly, in the exercise of our equity jurisdiction, we hereby rule that the Contract of Conditional Sale shall be maintained between the parties except that the petitioner shall not return the house to the private respondents. However, she will have to pay them the balance of the purchase price in the sum of P52,500.00, ** with 12% annual interest from July 1, 1972, until full payment.

CA decision affirmed.

G.R. No. L-11872 December 1, 1917DOMINGO MERCADO and JOSEFA MERCADO, plaintiffs-appellants, vs.JOSE ESPIRITU, administrator of the estate of the deceased Luis Espiritu, defendant-appellee.FACTS:1) Complaint directed against Jose Espiritu in his capacity of his administrator of the estate of the deceased Luis Espiritu. Domingo and Josefa alleged that they and their sisters Concepcion and Paz are the children and sole heirs of Margarita Espiritu, a sister of the deceased Luis Espiritu2) Margarita Espiritu died in 1897, leaving as her paraphernal property a tract of land of 48 hectares in Calumpit, Bulacan. Administrator is their father Wenceslao Mercado, husband of Margarita Espiritu3) 1910: Luis Espiritu, by means of cajolery, induced, and fraudulently succeeded in getting the plaintiffs Domingo and Josefa Mercado to sign a deed of sale of the land left by their mother, for the sum of P400, notwithstanding the fact that said land, according to its assessment, was valued at P3,795 (they say they were still minors when they executed the deed of sale!)4) Luis Espiritu had received the produced rice from 1901 until the time of his death. Plaintiffs prayed that contract be declared null and void and that Espiritu be ordered to deliver and restore to the plaintiffs the shares of the land

DEFENSE: Margarita, with the due authorization of her husband Wenceslao sold to Luis for the sum of P2,000 a portion of said land. Subsequently, Wenceslao, in his capacity as administrator of the property of his children sold under pacto de retro to Luis at the price of P375 the remainder of the said land to meet the expenses of the maintenance of his (Wenceslao's) children. The amount being still insufficient Wenceslao successively borrowed from Luis other sums of money aggregating a total of P600. Later, on May 17,1910, the plaintiffs (children), alleging themselves to be of legal age, executed the notarial instrument ratifying said sale under pacto de retro of the land. They sold absolutely and perpetually to Luis, in consideration of P400, the property.

LC: in favor of Espiritu

ISSUE: W/n there was fraud

HELD: No.

Luis Espiritu was, during his lifetime, and now, after his death, his testate or intestate estate is in lawful possession of the parcel of land by virtue of the title of conveyance of ownership by plaintiffs. The plaintiffs' father, Wenceslao Mercado, recognizing it to be perfectly true that his wife Margarita Espiritu sold said parcel of land, at the request of his brother-in-law Luis Espiritu he had no objection to give the testimony recorded in said notarial instrument.

The principal defect attributed consists in that when it was executed that they signed it, they were minors (not yet 21 yo). The sale of real estate, made by minors who pretend to be of legal age, when in fact they are not, is valid, and they will not be permitted to excuse themselves from the fulfillment of the obligations contracted by them, or to have them annulled in pursuance of the provisions of Law.

Aside from the foregoing, it cannot be concluded that the plaintiffs, who claim to have minors when they executed the notarial instrument, have suffered positive and actual losses and damages in their rights and interests as a result of the execution of said document, inasmuch as the sale effected by the plaintiffs' mother, Margarita Espiritu. And that they received through their father, the benefit which must have accrued to them from the sums of money received as loans.

Decision affirmed.

G.R. No. L-12471 April 13, 1959ROSARIO L. DE BRAGANZA, ET AL., petitioners, vs. FERNANDO F. DE VILLA ABRILLE, respondent.FACTS:1) Rosario L. de Braganza and her sons Rodolfo and Guillermo received from Villa Abrille, as a loan, on P70,000 in Japanese war notes and in consideration thereof, promised in writing to pay him P10,000 "in legal currency of the P. I. two years after the cessation of the present hostilities or as soon as International Exchange has been established in the Philippines", plus 2 % per annum.2) Because payment had not been made, Villa Abrille sued them in March 1949.3) Petitioners claimed to have received P40,000 only instead of P70,000. They also averred that Guillermo and Rodolfo were minors when they signed the promissory note.

LC and CA in favor of Villa Abrille.

ISSUE: W/N the defense of minority will release Rodolfo and Guillermo from liability

HELD: There can be no question about the responsibility of Mrs. Rosario L. Braganza because the minority of her consigners does not release her from liability since it is a personal defense of the minors. However, such defense will benefit her to the extent of the shares for which such minors may be responsible. (Guillermo and Rodolfo Braganza were minors-16 and 18 respectively).

The minors' failure to disclose their minority in the same promissory note they signed, it does not follow as a legal proposition, that they will not be permitted thereafter to assert it. They had no juridical duty to disclose their inability. 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

Rodolfo and Guillermo Braganza could not be legally bound by their signatures.

Upon the other hand, these minors may not be entirely absolved from monetary responsibility. In accordance with the provisions of Civil Code, even if their written contact is unenforceable because of non-age, they shall make restitution to the extent that they have profited by the money they received. (Art. 1340) There is testimony that the funds delivered to them by Villa Abrille were used for their support during the Japanese occupation. Such being the case, it is but fair to hold that they had profited to the extent of the value of such money, which value has been authoritatively established in the so-called Ballantine Schedule: in October 1944, P40.00 Japanese notes were equivalent to P1 of current Philippine money.

MARIANO S. TUASON v. CRISANTO MARQUEZ; Ponente: Malcolm, J.; November 3, 1923

FACTS:1. March 5, 1921: Crisanto Marquez, the owner of the electric light plan of Lucena Tayabas, called Sucesores del Lucena Electric, gave an option to Antonio Tuason for the purchase of the plant for P14,400. The option was taken advantage of by Mariano S. Tuason.

2. Terms of the agreement: a. Tuason was to pay Marquez a total of P14,400; P2,400 within sixty days, b. The remainder, P12,000, within a year.

3. The 1ST installment was paid subsequent to the 60-day period; the 2ND installment has not been paid.

4. Tuason, being once in possession of the electric light plant, it was run under the management of the Consolidated Electric Company for about 16 months (from March 20, 1921, to July 19, 1922). On the date last mentioned, the property was sold under execution by reason of a judgment. The purchaser at said sale was Gregorio Marquez, brother of Crisanto Marquez, who paid P5,501.57 for the property.

It appears that originally in either 1913 or 1914, a franchise for 35 years was granted the Lucena Electric Company. The rights of this company passed to Crisanto Marquez at a sheriff's sale on September 10, 1919. The company seems never to have functioned very efficiently either at that time or at any other time, as appears from the constant complaint of the municipal authorities of Lucena.

5. Evidently, Marquez became disgusted with the business, with the result that on February 28, 1921, that is, prior to the accomplishment of the contract, he announced to the Public Utility Commissioner his intention to give up the franchise.

6. On March 29, 1921, after he accomplished the contract, the Public Utility Commissioner took action and declared cancelled the franchise acquired by Crisanto Marquez from the Lucena Electric Light, Ice & Water Company.

7. Tuason and his outfit were permitted to operate the company pursuant to a special license which was to continue until they obtained a new franchise. The new franchise was finally granted by the Public Utility Commissioner with certain conditions, which amounted to a renovation of the entire plant. It was then, following knowledge of what was expected by the Government, and following the execution sale, that Tuason conceived the idea of bringing action against Marquez for a rescission of the contract.

8. Complaint filed in the CFI of Manila: Tuason, the plaintiff, asked for judgment against Crisanto Marquez, defendant, for a total of P37, 400. The answer and cross-complaint of the defendant asked for a dismissal of the action and for an allowance of a total of P12, 654.50 from the plaintiff. The case was submitted on an agreed statement of facts in relation with certain telegrams of record.

9. CFI: Marque