OBLIGATIONS AND

CONTRACTS

CASE DIGEST

Aunor, Leana May

Balastigue, Avril Nicole
Enriquez, Jhaycelle Neil
Estor, Josh Andrei
Malabanan, Charmaine Joy
Quita, Jasmine

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G.R. No. 84698​ February 4, 1992

PSBA vs. COURT OF APPEALS – QUASI-DELICTS AS SOURCE OF OBLIGATIONS

FACTS:

On August 30, 1985, Carlitos Bautista, a third-year commerce student at the

Philippine School of Business Administration (PSBA), was fatally stabbed on the
school's second floor by individuals who were not affiliated with the institution. His
parents filed a lawsuit for damages against PSBA and several of its officers, alleging
negligence and a lack of adequate security measures. The defendants filed a motion to
dismiss, arguing that academic institutions are not liable under Article 2180 of the Civil
Code. The Regional Trial Court denied this motion, and the Court of Appeals affirmed
the decision. The case was then elevated to the Supreme Court.

ISSUE:

1. Whether or not PSBA can be held liable under quasi-delict for the death of Carlitos
Bautista.

2. Whether the relationship between the school and the student is contractual, thereby
precluding the application of quasi-delict principles.

RULING:

The Supreme Court held that the relationship between PSBA and Carlitos
Bautista was contractual in nature. When an academic institution accepts a student for
enrollment, a contract is established, resulting in bilateral obligations. The school
undertakes to provide education and ensure a safe environment conducive to learning,
while the student agrees to abide by the school's rules and regulations. In this context,
the rules on quasi-delict do not apply, as obligations arising from quasi-delicts arise only
between parties not otherwise bound by contract. Therefore, any negligence on the part
of the school in providing proper security measures would constitute a breach of its
contractual obligation, not a quasi-delict. The case was remanded to the trial court to
determine whether PSBA breached its contract through negligence.

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G.R. No. 108346​ July 11, 2001

SPOUSES VELARDE vs. COURT OF APPEALS – SUBSTANTIAL BREACH;

RESCISSION OF OBLIGATION

FACTS:

David Raymundo owned a residential property in Dasmariñas Village, Makati,

which was mortgaged to the Bank of the Philippine Islands (BPI) for ₱1.8 million. On
August 8, 1986, he sold the property to Avelina Velarde for ₱800,000. As part of the
agreement, Velarde would assume the existing mortgage. Both parties executed an
"Undertaking" wherein it was agreed that if BPI disapproved the assumption of the
mortgage, Velarde would be required to pay the entire remaining balance directly to
Raymundo.

BPI later disapproved of Velarde's request to assume the mortgage.

Consequently, Velarde failed to pay the remaining balance. Instead, she proposed new
conditions for settling the balance, which included requiring Raymundo to deliver the
title of the property free from BPI's encumbrance and granting her possession of the
property. Raymundo, claiming Velarde’s noncompliance with their agreement, sent her a
notice of rescission of the contract.

In response, Velarde filed a complaint for specific performance, seeking to

enforce the contract. The trial court ruled in favor of Raymundo, stating that Velarde
failed to fulfill her obligation. The Court of Appeals affirmed this decision. Velarde
appealed the case to the Supreme Court.

ISSUE:

1. Whether Velarde violated her obligations under the contract by failing to pay the
remaining balance after BPI disapproved the mortgage assumption.

2. Whether Raymundo’s act of rescinding the contract was valid.

RULING:

The Supreme Court held that Velarde breached the contract by not paying the
balance upon BPI's disapproval of the mortgage assumption. The Court emphasized
that in reciprocal obligations, the failure of one party to perform justifies the other's right
to rescind the contract. However, rescission requires mutual restitution. Thus, while
Raymundo validly rescinded the contract, he was ordered to return the ₱874,150 paid
by Velarde, with legal interest from the date of rescission.

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G.R. No. 108253​ February 23, 1994

LYDIA L. GERALDEZ vs. HON. COURT OF APPEALS and KENSTAR TRAVEL

CORPORATION, - FRAUD; DOLO CAUSANTE OR DOLO INCIDENTE

FACTS:

Petitioner Lydia L. Geraldez filed a complaint for damages against Kenstar Travel
Corporation for an alleged breach in contract for a European travel package that
Geraldez purchased from the said company which she saw as an advertisement in a
newspaper. Under the VOLARE 3 package, she was promised a 22-day tour of the
continent for $2,290.00 or P190,000.00 in which she paid the total amount for both her
and her sister, Dolores.

As she was doing the tour, she was disappointed to see that some of the
promised inclusions of the package are not what they seem as there was not a
European Tour Manager for their group, hotel accommodation not being first-class, an
underwhelming tour of the UGC leather factory where it has already closed before they
could come inside and make discounted purchases, all while being accompanied by an
inexperienced tour guide named Rowena Zapanta who was in her first assignment.

Consequently, Geraldez sought a writ of preliminary attachment from Kenstar which was
granted by the court but was then lifted due to the latter posting a counterbond.
Furthermore, Kenstar was also meted out a fine by the Securities and Exchange
Commission and the Department of Tourism in which the respondent did not dispute
through the complaint of the petitioner to the respective councils.

The scales of the court tipped in favor of Petitioner Geraldez where Kenstar
Travel Corporation was ordered to pay P500,000.00 for moral damages, P200,000.00
as nominal damages, P300,000.00 as exemplary damages, and P50,000 as and for the
attorney’s fees and costs of the suit. However, Kenstar Travel Corporation appealed to
the ruling which then led to the dissolution of the moral and exemplary damages and the
reduction of nominal and attorney’s fees.

Furthermore, the Supreme Court clearly was not impressed with actions done by
Kenstar Travel Corporation such as assigning Zapanta as the tour guide which
disregard its assurances to the tour group and is a deliberate omission which is contrary
to the rules of good faith and fair play. Moreover, the court upholds the observations of
the lower courts regarding the subject of providing a European Tour Manager and Tour
Guides.

With arguments presented by the latter, the court was also not impressed by 1)
how the European Tour Manager in the supposed advertisement—presented as “he”
and not “it”—was misleading due to their argument of the manager being presented as
a juridical person and not a natural person which would not make sense; 2) Their
“substantial compliance” of the contract despite it not being true to its claim which is a
grave misrepresentation; and 3) No complaints from other tourists when the rule of res
inter alios acta would come in because this was a contract between Geraldez and KTC
where third parties cannot be involved.

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 Lastly, the fraud or dolo which is present in the case upon the perfection of the
contract may either be a dolo causante or dolo Incidente.

ISSUE:

1.​ Whether or not Kenstar acted in bad faith or with gross negligence in discharging
its obligations under the contract with Petitioner Geraldez under the VOLARE 3
package.
2.​ Whether or not Kenstar Travel Corporation committed Dolo Causante or Dolo
Incidente under the contract with Petitioner Geraldez

RULING:

The Supreme Court then agreed with the ruling of the trial and appellate courts,
wherein Kenstar Travel Corporation (KTC) committed fraudulent misrepresentations
amounting to bad faith, to the prejudice of petitioner and to the members enrolled in the
VOLARE 3 package.

In this case, the Supreme Court has stated that KTC can be faulted with fraud in
the inducement or dolo causante— which are deceptions or misrepresentations of a
serious character employed by one party and without which the other party would not
have entered into the contract—in which the contract will be nullified and KTC will be
issued with indemnification of the damages. The court also rejected the theory of KTC
that the promise it made in the tour brochure may be regarded only as “commendatory
trade talk.”

Consequently, the Supreme Court declared the appellate court’s decision be set
aside and have another one rendered where the previously dissolved award of
damages be reinstated, particularly the award for moral and exemplary damages,
amounting to P100,000.00 and P50,000.00 respectively with P20,000.00 as and for
attorney’s fees with costs against Kenstar Travel Corporation; with the award for
nominal damage deleted.

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G.R. No. 153004 ​ November 5, 2004

SANTOS VENTURA HOCORMA FOUNDATION, INC., vs. ERNESTO V. SANTOS and

RIVERLAND, INC. – DELAY

FACTS:
​ Santos Ventura Hocorma Foundation, Inc. (SVHFI) and Ernesto V. Santos were
parties to multiple cases which they settled through a Compromise Agreement executed
on October 26, 1990. Under the agreement, SVHFI agreed to pay Santos P14.5 million,
with an initial payment of P1.5 million and the remaining P13 million to be paid within
two years, either as lump sum or in installments at SVHFI’s discretion. The agreement
also provided that if SVHFI failed to pay the remaining balance. Payment would be
made through the conveyance of real property. The agreement also stipulated that any
failure to comply would entitle the aggrieved party to a writ of execution.

Santos complied with his part of the agreement by moving for the dismissal of all
pending civil cases and securing the lifting of lis pendens on SVHFI’s real properties.
After the agreement was judicially approved on September 30, 1991, SVHFI failed to
pay the remaining balance on time. During this time, SVHFI even sold portions of the
real estate that were previously subject to lis pendens. In response, Santos demanded
payment on October 28, 1992 but SVHFI did not respond.

Consequently, Santos sought writs of execution from the RTC which granted the
request. However, SVHFI persistently filed motions to block the execution, and the
matter even reached the Supreme Court. As a result, SVHFI’s properties were
auctioned with Riverland, Inc. being the highest bidder. Following the auctions, Santos
and Riverland, Inc. filed a Complaint for Declaratory Relief and Damages against
SVHFI, arguing that the delay in payment entitled them to legal interest, penalties,
attorney’s fees, and litigation costs. They also sought to bar SVHFI from exercising its
right of redemption, claiming that the sales should be declared final. SVHFI countered
that it had fully settled its obligation through public auctions and that it was not liable for
any additional interest because the compromise agreement did not explicitly provide for
it.

The Regional Trial Court ruled in favor of SVHFI, dismissing the complaint and
ordering Santos and Riverland, Inc. to pay attorney’s fees and exemplary damages.
However, on appeal, the Court of Appeals reversed the ruling, holding SVHFI liable for
legal interest at 12% per annum from the date of demand on October 28. 1992, until full
payment, as well as the P20,000 in attorney’s fees and costs of suit. SVHFI filed a
petition for review on certiorari before the Supreme Court.

ISSUE:

​ Whether or not SVHFI are entitled to legal interest.

RULING:

​ The Supreme Court affirmed the Court of Appeal’s ruling, holding SVHFI liable
for legal interest due to delay in performing its obligation. The Court clarified that

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contractual obligations must be complied with in good faith, and the two-year period for
payment began on October 26, 1990, not on its judicial approval. When Santos made
an extrajudicial demand on October 28, 1992, the obligation became due and
demandable. Since SVHFI did not pay on time and only settled its balance in 1995, it
was in default under Article 1169 of the Civil Code. Consequently, SVHFI was liable for
12% legal interest per annum, starting from the date of demand until full payment, as
compensation for the delay. The waiver clause did not apply to legal interest, as it
pertained only to prior claims arising from litigation. The obligation was monetary, and
the conversion to land was not voluntary but due to execution proceedings which meant
legal interest still applied.

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G.R. No. L-61594​ September 28, 1990

PAKISTAN INTERNATIONAL AIRLINES CORPORATION VS. BLAS F. OPLE, ET. AL. –

FREEDOM TO CONTRACT

FACTS:

On December 2, 1978, Pakistan International Airlines Corporation (PIA), a

foreign corporation authorized to operate in the Philippines, signed two separate
employment contracts in Manila with Ethelynne B. Farrales and Maria Moonyeen
Mamasig. These contracts, effective January 9, 1979, had a three-year term, outlined
conditions for termination, and stipulated that Pakistani law and Karachi courts would
govern disputes. After undergoing training in Pakistan, Farrales and Mamasig began
working as flight attendants, with assignments in the Middle East and Europe.

On August 2, 1980, a local PIA official informed Farrales and Mamasig that their
employment would be terminated effective September 1, 1980, citing a provision in their
contracts. In response, the two filed a complaint for illegal dismissal and non-payment of
benefits with the Ministry of Labor and Employment (MOLE) on September 9, 1980. On
January 22, 1981, Regional Director Francisco L. Estrella issued an order for their
reinstatement with full back wages or payment equivalent to the unexpired portion of
their contracts. PIA appealed to Deputy Minister Vicente Leogardo, Jr., who upheld
Estrella’s decision, excluding the option of monetary payment in lieu of reinstatement.

ISSUE:

Whether or not PIA, as a foreign state instrumentality, is immune from the

jurisdiction of Philippine labor authorities concerning employment disputes with Filipino
employees.

RULING:

The Supreme Court held that PIA is not immune from the jurisdiction of Philippine
labor authorities. The Court reasoned that while PIA is owned by the Government of
Pakistan, its activities in the Philippines—such as operating an office and entering into
employment contracts—are of a commercial nature (acts jure gestionis). Sovereign
immunity does not extend to acts that are commercial rather than governmental in
character.

Furthermore, the employment contracts of Ethelynne B. Farrales and Maria

Moonyeen Mamasig involved labor relations within the Philippines, and Philippine labor
laws apply to their case. The dismissal of the employees violated the laws protecting
workers' rights, and the orders for reinstatement with back wages were affirmed.

The Court concluded that PIA cannot invoke sovereign immunity to escape
liability for the wrongful termination of its Filipino employees.

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G.R. No. 126800​ November 29, 1999

NATALIA BUSTAMANTE VS. SPOUSES ROSEL – LIMITATIONS TO CONTRACTUAL

STIPULATIONS

FACTS:

On March 8, 1987, Natalia P. Bustamante borrowed ₱100,000 from Spouses

Rodito F. Rosel and Norma A. Rosel. The loan was subject to an 18% per annum
interest, and the amount was secured by a 70-square-meter portion of Bustamante's
property located along Congressional Avenue, Quezon City. The agreement included a
stipulation that in case of default, the Rosels had the option to purchase the collateral
for ₱200,000.

When the loan matured in 1989, the Rosels attempted to enforce their right to
purchase the collateral for the agreed amount of ₱200,000. However, Bustamante
refused to allow the sale and instead attempted to pay the loan and offered an
alternative property as installment. The Rosels rejected both and insisted on enforcing
the sale. When Bustamante tendered payment, it was refused, leading her to file for a
petition for consignation, while the respondents filed an action for specific performance.

Notably, the stipulation in the loan agreement created an obligation that, upon
failure to pay, would allow the creditor to acquire the ownership of the collateral or the
pactum commissorium. Bustamante claimed that the provision allowing the Rosels to
buy the property upon default was illegal and that it should be declared void.

The Regional Trial Court ruled in favor of Bustamante, recognizing her right to
pay off the loan rather than be forced to sell the collateral. However, the Court of
Appeals reversed the decision of the Regional Trial Court and ordered the sale to
proceed, ruling that contracts must be upheld as law between the parties. The petitioner
elevated the case to the Supreme Court, arguing that the loan was essentially an
equitable mortgage and the sale condition violated the prohibition against pactum
commissorium.

ISSUE:

Whether or not the stipulation granting Spouses Rosel the option to purchase the
collateral upon Bustamante’s default constitutes pactum commissorium and was
therefore invalid.

RULING:

The Supreme Court ruled in favor of the petitioner, reversing the decision of the
Court of Appeals and reinstating the Regional Trial Court’s ruling. It held that
Bustamante did not fail to pay the loan as she tendered the payment on the due date,
which the respondents refused. Since payment was validly consigned, the obligation
was deemed extinguished.

The Supreme Court further held that the stipulation allowing the respondents to
purchase the collateral upon default constituted a pactum commissorium, which is
prohibited under the Article 2088 of the Civil Code. This provision forbids the automatic

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appropriation of collateral by a creditor upon the debtor’s failure to pay. The Court
emphasized that contracts must be upheld unless they contravene public policy, and in
this case, the arrangement unjustly enriched respondents at petitioner’s expense.

Thus, the Supreme Court set aside the Court of Appeal’s ruling and dismissed
the respondents’ complaint for specific performance.

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G.R. No. 118248​ April 5, 2000

DKC HOLDINGS CORPORATION VS. COURT OF APPEALS, ET.AL. – PRIVITY OF

CONTRACTS

FACTS:

DKC Holdings see the 14,021 square meter land of Victor Bartolome’s deceased
mother Encarnacion as a potential warehouse site. DKC Holdings then entered into a
Contract of Lease with Option to buy with Encarnacion Bartolome. The contract
contained the following:

●​ DKC Holdings was given an option to lease or lease with purchase and should
be exercised within the period of 2 years from the signing of contract.
●​ DKC Holdings agreed to pay 3,000 a month as consideration for the reservation.
●​ Within the 2 year period, the petitioner should provide a formal written notice to
Ecarnacion Bartolome containing its desire for the option.
●​ If the DKC Holdings chose to lease the land, it may take possession but should
lease for 6 years, renewable for another 6 years and a monthly rental of 15K for
the first 6 years and 18k for the next 6 years in case of renewal.

DKC Holdings kept their end of the bargain and paid 3,000 monthly to
Encarnacion Bartolome until her death in January 1990, DKC Holdings then shifted the
payment to Victor Bartolome, sole heir of Encarnacion Bartolome. However, Victor
refused to accept these payments and later on filed an Affidavit of Self-Adjudication on
Ecarnacions properties including the subject land on January 10, 1990.

March 14, 1990, DKC Holdings sent a written notice to Victor, informing him to
exercise its option to lease and tendering 15K rental fee for March. Again, Victor
refused. DKC Holdings then opened a savings account under Victor Bartolome’s name
and deposited 15k rental fee for March and 6k for the reservation fee for the month of
February and March. DKC Holdings also tried to register and annotate the contract on
the title of Victor's property but the Register of Deed refused.

Because of the non compliance of Victor and refusal of Register of Deeds, DKC
Holdings filed a complaint against Victor Bartolome and Register of Deeds.
Consequently, Andres Lozano, a tenant-tiller of the subject property filed a Motion for
Intervention to Dismiss citing the Comprehensive Agrarian Reform Law to protect his
rights that will be affected between the parties of this case. The lower court referred the
case to the Department of Agrarian Reform, which then stated that referral was no
longer required, the lower court then issued another referral to the RTC of Valenzuela
but later denied the motion stating that Lanozo’s rights are for another proceeding.

Lastly, on January 4, 1993, RTC of Valenzuela dismissed the complaint and

ordered the petitioner to pay Victor 30,000 as atty’s fees. The Court of Appeals later on
affirmed this decision.

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ISSUE:

Whether or not the Contract of Lease with Option to Buy entered into by the late
Encarnacion Bartolome with petitioner was terminated upon her death or whether it
binds her sole heir, Victor, even after her demise.

RULING:

The Supreme Court granted the Petition for Review and set aside the decision of
both the Court of Appeals and Regional Trial Court. Under Art. 1311 of the Civil Code
and jurisprudence, Victor is bound to exercise the Contract of Lease with Option to Buy.
Additionally, DKC Holdings complied with the terms and conditions of the contract.
Further, the tenancy of Andres Lanozo was not the subject of this case, hence, not
included on Supreme Court's deliberations. As the lower court stated in its Order, the
alleged right of the tenant may well be discussed in another proceeding.

With that, private respondent, Victor Bartolome is ordered to:

(a) surrender and deliver possession of the subject land by way of lease to
petitioner and to perform all obligations of his predecessor-in-interest,
Encarnacion Bartolome, under the subject Contract of Lease with Option to Buy;
(b) surrender and deliver his copy of Transfer Certificate of Title No. V-14249 to
respondent Register of Deeds for registration and annotation thereon of the
subject Contract of Lease with Option to Buy;
(c) pay costs of suit.

Respondent Register of Deeds is ordered to register and annotate the subject

Contract of Lease with Option to Buy at the back of Transfer Certificate of Title No.
V-14249 upon submission by petitioner of a copy thereof to his office.

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G.R. No. 150179 ​ April 30, 2003

HEIRS OF WILLIAM SEVILLA VS. LEOPOLDO SEVILLA, ET. AL. – FRAUD AS VICE
OF CONSENT

FACTS:

On December 10, 1973 Filomina Almirol de Sevilla died, leaving 4 properties to

her 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. Parcel I, is a property co-owned by
Filomena and two sisters namely, Honorata and Felisa Almirol. When Honorata died her
share was divided with her heirs, Felisa and the heirs of Filomena Almirol de Sevilla,
now they have ½ share each. The Parcel II, III, and IV are conjugal properties of
Filomena and her late husband Andres Sevilla.

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. Before Felisa died in 1988 she prepared her last will and
testament, addressing her share to the spouses Leopoldo Sevilla and Belen Leyson, it
was later on 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, executed a Deed of Extra-judicial Partition, allocating
the shares of Honorata Almirol to the heirs of Filomena Almirol de Sevilla and to Felisa
Almirol. With this, respondents received the cancellation of the Transfer Certificate of
the Title Lot No. 653, however, it was left unsigned by the Register of the Deeds of
Dipolog City.

On June 21, 1990, Felipe Sevilla, Rosa Sevilla, and the heirs of William, Jimmy,
and Maria filed a petition for annulment of the Deed of Donation and the Deed of
Extra-judicial Partition. They argued that the Deed of Donation was tainted with fraud as
Felisa was not capable of making decisions at the time; and that the Deed of
Extra-judicial Partition is void because it was executed without their knowledge and
consent.

Respondents then denied the fraud accusation and argued that Felisa is capable
of making decisions on her own and that she freely and voluntarily ceded her undivided
share in Lot No. 653 in consideration of his relationship with Leopoldo's and his family.
Furthermore, respondents also request that Parcels II, III, and IV be divided among the
heirs of Filomena Almirol de Sevilla.

The Regional Trial Court supports the validity of the Deed of Donation and
declares the Deed of Extra-judicial Partition unenforceable due to lack of evidence.

Both parties appealed to the Court of Appeals. Petitioners contended that the
Deed of Donation should be declared void and that Lot No. 653 should be divided
equally among them. Respondents, on the other hand, argue that the trial court made a

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mistake in declaring the Deed of Extra-judicial Partition unenforceable against the other
heirs of Filomena Almirol de Sevilla who were not parties to said Deed.

The Court of Appeals affirmed the Regional Trial Court’s decision.

ISSUE:

1.​ Whether or not the Deed of Donation inter vivos is valid.

2.​ Whether or not the Deed of Extrajudicial Partition is valid.

RULING:

Donation is an act of liberality where a person gives a thing or right in favor of

another who accepts it. Under Article 737 of the Civil Code, the donor's capacity shall
be determined as of the time of the making of the donation.

The Supreme Court affirms the decision of the Regional Trial Court and Court of
Appeals, which supports the validity of the Deed of Donation as the transfer of the
subject lot was already made to Felisa Almirol way before the execution of the Deed of
Donation. Furthermore, in the case of fraud and undue influence, the Plaintiffs failed to
provide evidence backing their claim on the incapability of Felisa to make such a
decision.

Extra-judicial partition is not enforceable but rather void ab initio, citing Delos
Reyes v Court of Appeals and Art. 1318 of the Civil Code in which one of the requisites
of a valid contract is the consent and the capacity to give consent. To which Felisa does
not have any legal capabilities to make any arrangements as she was no longer the
owner of the subject lot nor the representative of respondent Leopoldo, considering that
she has no legal right, then she has no right to give such consent, making the contract
void and has no legal effect.

Nevertheless, the nullity of the deed of extra-judicial partition will not affect the
validity of the donation inter vivos ceding to respondent Leopoldo Sevilla the 1/2
undivided share of Felisa Almirol in Lot No. 653. Said lot should therefore be divided as
follows: half 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.

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G.R. No. 128338​ March 28, 2005

TINING RESUENA, ET. AL. VS. COURT OF APPEALS, ET. AL. – STATUTE OF
FRAUDS

FACTS:

Juanito Borromeo, Sr., and spouses Inocencio Bascon and Basilica Maneja
owned the lot's no. 2587 and 2592. The 6/8 of lot No. 2587 was owned by Mr. Borromeo
while the Spouses Bascon owned the 2/8. On the other hand, Lot No. 2592 was owned
by Mr. Borromeo and Nicolas Maneja, the heir, but it was undivided by the lower court.

Petitioners, namely Tining Resuena, Alejandra Garay, Lorna Resuena, Eleuterio

Resuena, and Unisima Resuena, occupied portions of Lot No. 2587 allegedly with the
consent of the Spouses Bascon. Meanwhile, petitioner Eutiquia Rosario occupied a
portion of Lot No. 2592 with alleged permission from the heirs of Nicolas Maneja.
Borromeo on the other hand, occupied portions of both lands for their beach resort; he
then desired to expand the resort and asked the petitioners to vacate but they refused.

On February 16, 1994, the respondent filed a complaint of ejectment but the
Metropolitan Trial Court dismissed it because it was not yet partitioned, so they didn’t
have any right to evict the petitioners. However, after the respondent gave testimony
that explained the agreement with the partition of the co-owners and also based on
Article 487 of the civil code which gives both co-owners the right for ejectment. The
Regional Trial Court reversed the judgment of MTC and directed the petitioners to
vacate the premises. The Court of Appeals also affirmed the ruling and decision of the
RTC.

ISSUE:

1.​ Whether or not, the verbal agreement regarding the property is enforceable
despite not being in writing.
2.​ Whether or not, the respondent Juanito Borromeo was estopped in filing the
ejectment case against the six petitioners

RULING:

The Court states that the respondents have the right to eject the petitioners
because they lack the authority to occupy the properties, they lack the evidence, a
document, that will give them the right of occupancy to the property which is an
important matter according to Article 1358 of the Civil Code and this was also supported
by article 487 of the civil code which gives any of the co-owners the right to bring an
action for ejectment. The petitioners also claimed their right to reimbursement for
necessary expenses. Still, the court opposed their claims because according to Article
546 of the Civil Code, only possessors in good faith have the right to full reimbursement,
but they do not. Lastly, the respondent is not stopped from filing an ejectment case;
estoppel was only considered applicable to those parties to the original agreement. The
Supreme Court denied the petition and affirmed the decision of the Court of Appeals.

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G.R. No. 93625​ November 8, 1993

VICENTE SANTI VS. COURT OF APPEALS, ET. AL. – PRIMACY OF INTENTION IN

INTERPRETATION OF CONTRACTS

FACTS:

Esperanza Jose owned Lot 3 Block 89, a 1,472-square-meter lot in Cavite city.
On July 12, 1957, she leased the lot to spouses Vitan and Francisco for 220 pesos per
month for 20 years, which is extendable for another 20 years. The spouses constructed
a cinema house on the lot; however, they sold all their rights, interests, and participation
in the cinema, including the leasehold rights to the lot, to Augusto A. Reyes Jr. The new
owner and Esperanza entered into a new contract that indicated that starting on April 1,
1962, they would pay 180 pesos for 20 years, which is also extendable for another 20
years but for 220 pesos per month.

Esperanza Jose sold all her rights and participation in the parcel of land to
Vicente J. Santi. The latter wrote a letter to Alexander Reyes for termination since the
lease had expired on February 23, 1982. However, Reyes refused because, according
to his lawyer, the contract stated that it was extendable for 20 years. The latter
proceeded to pay, but Santi refused to receive the payment, so Reyes deposited it with
the Clerk of Court of the Municipal Trial Court of Cavite City.

Plaintiff filed a routine report to Reyes with the office of the Barangay Captain but
there was no settlement, so, the Barangay Captain issued the Certificate to File Action.
The trial court's ruling ordered Alexander Reyes to turn over the possession of the
property and pay a monthly rental of P 1,000 from April 1, 1982, until they vacated and
turned over the property. They will also pay the attorney’s fees amounting to P 5,000
and the costs. The court also sided with the private respondents and mentioned that
there was no need for further negotiations because the document already contained the
necessary information for the extension.

ISSUES:

Whether or not, the contract for the lot leased by Alexander Santi was
automatically extendable for 20 years?

RULING:

The Supreme Court disagreed with the ruling of the lower court, they modified
and reinstated the ruling. The lease was not automatically extendable for 20 years
because it is not indicated that it was automatically extendable, which can be seen in
the contract between Esperanza and the spouses Vitan and Francisco. The Supreme
Court also questioned the order of the trial court, which stated that Reyes must pay
1,000 pesos from April 1, 1982, until they turn over the property, however, according to
Articles 1670 and 1687, if, after the lease contract, the parties continue to enjoy the
lease, an implied lease arises for the period mentioned in Article 1687, which means,
the amount of the leased property and the period must be the same as the original
contract.

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 The court granted the petition and ordered the private respondent to turn over the
property and pay a monthly rental of 220 pesos instead of 1,000 pesos starting from
April 1, 1982, until they vacated and turned over possession of the premises to the
petitioner. They would also pay a sum of P5,000 as attorney’s fees.

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G.R. No. 128991​ April 12, 2000

YOLANDA ROSELLO-BENTIR, ET. AL. VS. MATEO LEANDA, et. al. – REFORMATION
OF INSTRUMENTS

FACTS:

​ On May 5, 1968, Leyte Gulf Traders, Inc., which was the respondent, entered
into a lease agreement with Yolanda Rosello - Bentir, the petitioner, for a parcel of land
for 20 years, which was later extended by 4 years, ending in 1992. The respondent
claimed that there’s a verbal agreement granting it the right of first refusal if Bentir
decided to sell the property. On May 5, 1989, Bentir sold the property to spouses
Samuel and Charito Pormida without offering it first to Leyte Gulf Traders. The
respondent filed a complaint for reformation of the lease contract, claiming that its
lawyer inadvertently omitted the verbal agreement about the right of first refusal. It also
sought specific performance annulment of the sale, and damages. The petitioners
argued that the action for reformation was barred by the 10-year prescriptive period
under Article 1144 of the Civil Code, since the contract was executed in 1968. They also
claimed there was no agreement for a right of first refusal.

​ The Regional Trial Court dismissed the complaint on December 15, 1995, ruling
that the action for reformation had been prescribed. It held that the prescriptive period
for reformation of a written contract is 10 years from the date the contract was executed.
Since this was filed only after 24 years, hence, it was time-barred. The respondent filed
a motion for reconsideration, only then another judge reversed the dismissal ruling that
the prescriptive period should be counted from the lease extension which was the
supposed 4 year extension in 1988, making the filing timely. The Regional Trial Court
also issued a quo ante order preventing the petitioners from taking possession of the
property.

​ The petitioners elevated the case to the Court of Appeals, which upheld the
decision of the Regional Trial Court. The Court of Appeals also ruled that an implied
new lease revived the original terms of contract, including the right of first refusal.

ISSUES:

1.​ Whether or not the complaint for reformation filed by the respondent has been
prescribed.
2.​ Whether or not the contract is entitled to the remedy of reformation sought.

RULING:

​ The Supreme Court ruled in favor of the petitioners, granting the petition and
reinstating the Regional Trial Court’s order of dismissal. The Supreme Court ruled that
the action for reformation of the lease contract was time-barred, as the 10-year
prescriptive period began to run in 1968 when the contract was executed, and the
complaint was filed 24 years later in 1992. The alleged verbal agreement on the right of
first refusal was unenforceable because it was not reflected in the written lease contract,
and the alleged extension of the lease in 1988 did not revive any new or additional

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terms. The Court further clarified that an implied new lease under Article 1670 of the
Civil Code would only revive terms relevant to the lessee’s continued enjoyment of the
property and would not include unrelated provisions like the right of first refusal.
Accordingly, the Court reinstated the Regional Trial Court’s dismissal of the case.

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