PHILIPPINE NATIONAL BANK, Petitioner, v.

TERESITA TAN
DEE, ANTIPOLO PROPERTIES, INC., (now PRIME EAST
PROPERTIES, INC.) and AFP-RSBS, INC., Respondents.
G.R. No. 182128 : February 19, 2014

FACTS:

Some time in July 1994, respondent Teresita Tan Dee (Dee)

bought from respondent Prime East Properties Inc. (PEPI) ) on an
installment basis a residential lot located in Binangonan, Rizal.
Subsequently, PEPI assigned its rights over a 213,093-sq m
property on August 1996 to respondent Armed Forces of the
Philippines-Retirement and Separation Benefits System, Inc. (AFP-
RSBS), which included the property purchased by Dee. Thereafter,
or on September 10, 1996, PEPI obtained aP205,000,000.00 loan
from petitioner Philippine National Bank (petitioner), secured by a
mortgage over several properties, including Dees property.

After Dees full payment of the purchase price, a deed of sale was
executed by respondents PEPI and AFP-RSBS on July 1998 in Dees
favor. Consequently, Dee sought from the petitioner the delivery
of the owners duplicate title but latter refused. As a result, Dee
filed with Housing and Land Use Regulatory Board (HLURB) a case
for specific performance to compel the delivery of the title by the
petitioner, PEPI and AFP- RSBS. HLURB ruled in favor of Dee and
directed the petitioner to cancel/ release the mortgage over the
lot and ordered that PEPI and AFP- RSBS to deliver the title to of
the lot in the name of Dee, free from all liens and encumbrances.
The HLURB decision was affirmed by its Board of Commissioners
and by the OP, hence the petitioner filed a petition for review with
the CA which also affirmed the OP decision.

Petitioner maintains that it cannot be compelled to cancel the

mortgage until the mortgagor (PEPI and AFP RSBS) has settled its
obligation.

ISSUE: Whether or not petitioner may be compelled to

cancel/ release the mortgage

HELD: YES. Petition Denied

CIVIL LAW: Obligations of the parties in a contract of sale

There are two phases involved in the transactions between
respondents PEPI and Dee the first phase is the contract to sell,
which eventually became the second phase, the absolute sale,
after Dees full payment of the purchase price. In a contract of
sale, the parties obligations are plain and simple. The law obliges
the vendor to transfer the ownership of and to deliver the thing
that is the object of sale. On the other hand, the principal
obligation of a vendee is to pay the full purchase price at the
agreed time. The obligation of PEPI, as owners and vendors of Lot
12, Block 21-A, Village East Executive Homes, is to transfer the
ownership of and to deliver Lot 12, Block 21-A to Dee, who, in
turn, shall pay, and has in fact paid, the full purchase price of the
property. There is nothing in the decision of the HLURB, as
affirmed by the OP and the CA, which shows that the petitioner is
being ordered to assume the obligation of any of the respondents.
There is also nothing in the HLURB decision, which validates the
petitioners claim that the mortgage has been nullified.The order
of cancellation/release of the mortgage is simply a consequence
of Dees full payment of the purchase price.
MERCANTILE LAW: Mortgage contract a mere accessory
contract

The mortgage contract between PEPI and the petitioner is merely

an accessory contract to the principal three-year loan takeout
from the petitioner by PEPI for its expansion project. It need not
be belaboured that a mortgage is an accessory undertaking to
secure the fulfilment of a principal obligation and it does not
affect the ownership of the property as it is nothing more than a
lien thereon serving as security for a debt.

Note that at the time PEPI mortgaged the property to the

petitioner, the prevailing contract between respondents PEPI and
Dee was still the Contract to sell, as Dee was yet to fully pay the
purchase price of the property. On this point, PEPI was acting fully
well within its right when it mortgaged the property to the
petitioner, for in a contract to sell, ownership is retained by the
seller and is not to pass until full payment of the purchase price.

Nevertheless, despite the apparent validity of the mortgage

between the petitioner and PEPI, the former is still bound to
respect the transactions between respondents PEPI and Dee. The
petitioner was well aware that the properties mortgaged by PEPI
were also the subject of existing contracts to sell with other
buyers. While it may be that the petitioner is protected by Act No.
3135, as amended, it cannot claim any superior right as against
the installment buyers. This is because the contract between the
respondents is protected by P.D. No. 957, a social justice measure
enacted primarily to protect innocent lot buyers.
Stipulation Pour Autrui

Artex Development Co., Inc v Wellington Insurance Co., Inc

GR No. L-29508, 27 June 1973

FACTS:

The defendant, Wellington Insurance Co., Inc. insured for

P24,346,509.00 the buildings, stocks and machinery of plaintiff
Artex Development Co., Inc., against loss or damage by fire or
lighting upon payment by plaintiff of the corresponding
premiums. On August 2, 1963, said properties were insured for an
additional sum of P883,034.00. On May 12, 1963 defendant
insured plaintiff against business interruption (use and
occupancy) for P5,200,000.00. On September 22, 1963, the
buildings, stocks and machineries of plaintiff's spinning
department were burned. The notice of the loss and damage was
given the defendant, and the loss was referred to the H. H. Bayne
Adjustment Co. and the Allied Adjustment Co. As per report of the
adjusters, the total property loss of the plaintiff was the sum of
P10,106,554.40 and the total business interruption loss was
P3,000,000.00; that defendant has paid to the plaintiff the sum of
P6,481,870.07 of the property loss suffered by plaintiff and
P1,864,134.08 on its business interruption loss, leaving a balance
of P3,624,683.43 and P1,748,460.00, respectively. The lower
court ordered defendant-insurer to pay plaintiff-insured the
balance of the insured's property loss of P3,624,683.43 and its
ascertained business interruption loss of P1,748,460.00 with
interest and 15% attorney's fees. Defendant-appellant contends
that the lower court should have ruled instead "that plaintiff-
appellee's cause of action (as insured) should have been directed
against the reinsurers and not against defendant-appellant.

ISSUE:

Whether or not the third party may sue for the enforcement of the
contract.

HELD:

No. Defendant’s contention is manifestly untenable since there is

no privity of contract between the insured and the reinsurers.
Plaintiff-appellee as insured can only move for enforcement of its
insurance contract with its insurer, the defendant appellant.
Unless there is a specific grant in, or assignment of, the
reinsurance contract in favor of the insured or a manifest
intention of the contracting parties to the reinsurance contract to
grant such benefit or favor to the insured, the insured, not being
privy to the reinsurance contract, has no cause of action against
the reinsurer. A third party not privy to a contract that contains no
stipulations pour autrui in its favor may not sue for enforcement
of the contract. Article 1311 of our Civil Code expresses the
universal rule that "Contracts take effect only between the
parties, their assigns and heirs" and provides for the exception of
stipulations pour autrui or in favor of a third person not a party to
the contract. Plaintiff-insured, not being a party or privy to
defendant insurer's reinsurance contracts, therefore, could not
directly demand enforcement of such reinsurance contracts.

FLORENTINO VS.ENCARNACION, SR.GUERRERO, September

30,1977

FACTS
On May 22, 1964, the petitioners-appellants and the petitioners-
appelleed filed with CFI an application for the registration under
Act 496 of a parcel of agricultural land located at Cabugao, Ilocos
Sur. The application alleged among other things that the
applicants are the common and pro-indiviso owners in fee simple
of the said land with the improvements existing thereon; that to
the best of the knowledge and belief, there is no mortgage, hen
or encumbrance of any kind whatsoever affecting said land, nor
any other person having any estate or interest thereon, legal or
equitable, remainder, reservation at in expectancy; that said
applicants had acquired the aforesaid land thru and by
inheritance from their predecessors in interest, their aunt, Doña
Encarnacion Florentino, and Angel Encarnacion acquired their
respective shares of the land thru purchase from the original
heirs, Jesus, Caridad, Lourdes and Dolores, all surnamed Singson,
on one hand and from Asuncion Florentino on the other.-After due
notice and publication, the Court set the application for hearing.
Only the Director of Lands filed an opposition but was later
withdrawn soan order of general default was issued. Upon
application of the applicants, the Clerk of Court was
commissioned and authorized to receive the evidence of the
applicants and ordered to submit the same for the Court's proper
resolution.-Exhibit O-1 embodied in the deed of extrajudicial
partition (Exhibit O),which states that with respect to the land
situated in Barrio Lubong, Dacquel, Cabugao, Ilocos Sur, the fruits
thereof shall serve to defray the religious expenses, was the
source of contention in this case (Spanish text).Florentino wanted
to include ExhibitO-1 on the title but the Encarnacions opposed
and subsequently withdrawn their application on their shares,
which was opposed by the former.-The Court after hearing the
motion for withdrawal and the opposition issued an order and for
the purpose of ascertaining and implifying that the products of
the land made subject matter of this land registration case had
been used in answering for the payment of expenses for the
religious functions specified in the Deed of Extrajudicial Partition
which was no registered in the office of the Register of Deeds
from time immemorial; andthat the applicants knew of this
arrangement and the Deed of Extrajudicial Partition of August
24,1947, was not signed by AngelEncarnacion or Salvador
Encarnacion, Jr.-CFI: The self-imposed arrangement infavor of the
Church is a simpledonation, but is void since the doneehas not
accepted the donation andSalvador Encarnacion, Jr. and Angel
Encarnacion had not made any oral orwritten grant at all so the
courtallowed the religious expenses to bemade and entered on
the undividedshares, interests and participations of all the
applicants in this case, exceptthat of Salvador Encarnacion,
Sr.,Salvador Encarnacion, Jr. and Angel Encarnacion."-the
petitioners-appellants filed their Reply to the Opposition
reiterating their previous arguments, and also attacking the
jurisdiction of the registration court to pass upon the validity or
invalidity of the agreement Exhibit O-1, alleging that such is
litigable only in an ordinary action and not proper in a land
registration proceeding.-The Motion for Reconsideration andof
New Trial was denied for lack of merit, but the court modified
inhighlighting that the donee Church has not showed its clear
acceptance of the donation, and is the real party of this case, not
the petitioners-appellants
ISSUES
1. Whether or not the lower own erred in concluding that the
stipulation embodied in Exhibit O on religious expenses is
just an arrangement stipulation, or grant revocable at the
unilateral option of the co-owners

2. Whether or not the lower court erred inholding that rule

that the petitioners-appellants are not the real parties in
interest, but the Church3. WON the lower court as a
registration court erred in passing upon the merits of the
encumbrance(Exhibit O-1) as the same was never put to
issue and as the question involved is an adjudication of
rights of the parties
HELD:
1. YES, the court erred in concluding that the stipulation is just an
arrangement stipulation. It cannot be revoked unilaterally.
Ratio
The contract must bind both parties, based on the principles
(1)that obligation wising from contractshave the force of law
between thecontracting parties; and (2) that themmust be
mutuality between theparties band on their essentialequality, to
which is repugnant tohave one party bound by the
contractleaving the other free therefrom.
Reasoning
The stipulation (Exhibit O-1) is part of an extrajudicial
partition(Exh. O) duly agreed and signed by the parties, hence the
same must bindthe contracting parties thereto and itsvalidity or
compliance cannot be leftto the will of one of them- The said
stipulation is a
stipulationpour autrui.
A
stipulation pourautrui
is a stipulation in favor of athird person conferring a clear
anddeliberate favor upon him, and whichstipulation is merely a
part of acontract entered into by the parties,neither of whom
acted as agent of thethird person, and such third personmay
demand its fulfillment providedthat he communicates his
acceptanceto the obligor before it is revoked.-
Requisites
: (1) that the stipulation infavor of a third person should be apart,
not the whole, of the contract,(2) that the favorable
stipulationshould not be conditioned orcompensated by any kind
of obligationwhatever; and (3) neither of thecontracting parties
bears the legalrepresentation or authorization of third party.-
Valid stipulation pour autrui
: itmust be the purpose and intent of thestipulating parties to
benefit the thirdperson, and it is not sufficient that thethird
person may be incidentallybenefited by the stipulation.
Theintention of the parties may bedisclosed by their contract. It
mattersnot whether the stipulation is in thenature of a gift or
whether there is anobligation owing from the promise tothe third
person. That no suchobligation exists may in some degreeassist in
determining whether theparties intended to benefit a
thirdperson.-The evidence on record shows thatthe true intent of
the parties is toconfer a direct and material benefitupon the
Church.- While a stipulation in favor of a thirdperson has no
binding effect in itself before its acceptance by the partyfavored,
the law does not providewhen the third person must make
hisacceptance. As a rule, there is no timelimit; such third person
has all thetime until the stipulation is revoked.Here, We find that
the Churchaccepted (implicitly) the stipulation inits favor before it
is sought to berevoked by some of the coowners.

REBECCA C. YOUNG ET. AL VS CA (GR 79518 JAN. 13, 1989

FACTS:
The Defendant Philippine Holding, Inc. is the former owner of
a piece of land located at Soler St., Sta. Cruz, Manila, and a two
storey building erected thereon, consisting of six units. The
owner Philippine Holding, Inc. secured an order from the
City Engineer of Manila to demolish the building. Antonio
Young, then a tenant of said Unit 1352, filed an action to
annul the City Engineer's demolition As an incident in said
case, the parties submitted a Compromise Agreement to the
Court. Paragraph 3 of said agreement provides that
plaintiff (Antonio S. Young) and Rebecca Young and all
persons claiming rights under them bind themselves to
voluntarily and peacefully vacate the premises which they
were occupying as lessees which are the subject of the
condemnation and demolition order and to surrender possession.
A case was filed to the RTC and Young contended that even
assuming that her supposed right of first refusal is a stipulation
for the benefit of a third person, she did not inform the obligor
of her acceptance as required by the second paragraph of
Article 1311 of the Civil Code. they be allowed to exercise her
right of first refusal to purchase subject property (Rollo, p. 50).
The lower court decided in favor of the defendants and
against the plaintiffs, thus dismissing the complaint together
with defendants' counterclaims (Rollo, p. 15)On the other
hand, the claim of Rebecca C. Young was similarly
rejected by the trial court on the following grounds: (1) that
she was not a party in the Civil Case No. 123883, wherein
subject compromise agreement was submitted and approved by
the trial court apart from the fact that she did not even affix her
signature to the said compromise agreement; (2) that
Rebecca Young had failed to present any evidence to show
that she had demanded from the defendants-owners, observance
of her right of first refusal before the said owners sold units
1356, 1358 and 1360; (3) that even assuming that her supposed
right of first refusal is a stipulation for the benefit of a third
person, she did not inform the obligor of her acceptance as
required by the second paragraph of Article 1311 of the Civil
Code. Chui Wan and Felisa Tan Yu and Rebecca C. Young,
assisted by her husband, appealed to the Court of Appeals
which dismissed the same on August 7, 1987, for lack of merit.
ISSUE:
 Whether or not Rebecca Young can enforce the
stipulation in her favor in the compromise agreement
as she is not a party therein?

RULING:
The stipulation that young gave may be a stipulation pour
autrui but it is unrebutted that she did not communicate her
acceptance whether expressly or impliedly. This issue has
already been squarely settled by this Court in the negative
inJ.M. Tuason& Co., Inc. v. Cadampog(7 SCRA 808 [1963])where it
was ruled that appellant is not entitled to enforce a
compromise agreement to which he was not a party and that
as to its effect and scope, it has been determined in the
sense that its effectivity if at all, is limited to the parties
thereto and those mentioned in the exhibits (J.M. Tuason&
Co., Inc. v. Aguirre, 7 SCRA 112 [1963]).
It was reiterated later that a compromise agreement
cannot bind persons who are not parties thereto.From the
terms of this agreement, the conditions are very clear, such as:
(1) that Rebecca C. Young shall be impleaded in the
action and (2) that she shall signify her written conformity
thereto.For unknown reasons, the above conditions were
not complied with. The parties did not make any move to
implead Rebecca as necessary party in the case. Neither did
her written conformity appear in said agreement. While there
is the printed name of Rebecca C. Young appearing at the
end of the joint motion for approval of the Compromise
Agreement, she did not affix her signature above her
printed name, nor on the left margin of each and every page
thereof.The requisites of a stipulation pour autrui or a
stipulation in favor of a third person are the following: (1)
there mus tbe a stipulation in favor of a third person (2) the
stipulation must be a part, not the whole of the contract
(3) the contracting parties must have clearly and
deliberately conferred a favor upon a third person, not a mere
incidental benefit or interest (4) the third person must have
communicated his acceptance to the obligor before its
revocation. (5) neither of the contracting parties bears the
legal representation or authorization of thethird party. The
argument is pointless, considering that the sale of subject
property to some other person or entity constitutes in
effect a revocation of the grant of the right of first refusal to
Rebecca C. Young.155. Associated Bank vsCA (GR 123793
June 29, 1998).
ASSOCIATED BANK vs. COURT OF APPEALS AND LORENZO
SARMIENTO Jr., G.R. No. 123793 June 29, 1998

FACTS:
Associated Banking Corporation and Citizens Bank and Trust
Company merged to form just one banking corporation known as
Associated Citizens Bank... the Associated Citizens Bank changed
its... corporate name to Associated Bank... defendant executed in
favor of Associated Bank a promissory note whereby the former
undertook to pay the latter the sum of P2,500,000.00 payable on
or before March 6,... 1978.

Defendant agreed to pay interest at 14% per annum, 3% per

annum in the form of liquidated damages, compounded interests,
and attorney's fees, in case of litigation equivalent to 10% of the
amount due.

Despite repeated demands the defendant failed to pay the

amount due.

Defendant denied all the pertinent allegations... alleged... that the

complaint states no valid cause of action; that the plaintiff is not
the proper party in interest because the promissory note was
executed... in favor of Citizens Bank and Trust Company; that the
promissory note does not accurately reflect the true intention and
agreement of the parties; that terms and conditions of the
promissory note are onerous and must be construed against the
creditor-payee bank; that several... partial payments made in the
promissory note are not properly applied; that the present action
is premature;

Based on the evidence presented by petitioner, the trial court

ordered Respondent Sarmiento to pay the bank his remaining
balance plus interests and attorney's fees.

Associated Bank had no cause of action against Lorenzo

Sarmiento Jr., since said bank was not privy to the promissory
note executed by Sarmiento in favor of Citizens Bank and Trust
Company (CBTC).

ISSUES:
Associated Bank Assumed All Rights of CBTC Contract Pour Autrui

RULING:

Ordinarily, in the merger of two or more existing

corporations, one of the combining corporations survives and
continues the combined business, while the rest are dissolved and
all their rights, properties and liabilities are acquired by the
surviving corporation.
The merger, however, does not become effective upon the
mere agreement of the constituent corporations. The procedure
to be followed is prescribed under the Corporation Code.
Said Code requires the approval by the Securities and
Exchange Commission (SEC) of the articles of merger which, in
turn, must have been duly approved by a majority of the
respective stockholders of the constituent corporations.
The effectivity date of the merger is crucial for determining
when the merged or absorbed corporation ceases to exist; and
when its rights, privileges, properties as well as liabilities pass on
to the surviving corporation.

The records do not show when the SEC approved the merger.
Private respondent's theory is that it took effect on the date of the
execution of the agreement itself, which was September 16,
1975.

Private respondent contends that, since he issued the promissory

note to CBTC on September 7, 1977 -- two years after the merger
agreement had been executed -- CBTC could not have conveyed
or transferred to petitioner its interest in the said note, which was
not yet in existence at the time of the merger.

Assuming that the effectivity date of the merger was the date of
its execution, we still cannot agree that petitioner no longer has
any interest in the promissory note.

The agreement itself clearly provides that all contracts --

irrespective of the date of execution -- entered into in the name of
CBTC shall be... understood as pertaining to the surviving bank,
herein petitioner.
Thus, although the subject promissory note names CBTC as the
payee, the reference to CBTC in the note shall be construed,
under the very provisions of the merger agreement, as a
reference to petitioner bank, "as if such reference [was a] direct
reference to" the latter "for... all intents and purposes."... The
Court holds that petitioner has a valid cause of action against
private respondent.

No Contract

Pour Autrui

An incidental benefit or interest, which another person gains, is

not sufficient. The contracting parties must have clearly and
deliberately conferred a favor upon a third person.

We carefully and thoroughly perused the promissory note, but

found no stipulation at all that would even resemble a provision in
consideration of a third person. The instrument itself does not
disclose the purpose of the loan contract. It merely lays down the
terms of payment... and the penalties incurred for failure to pay
upon maturity.

It is patently devoid of any indication that a benefit or interest

was thereby created in favor of a person other than the
contracting parties. In fact, in no part of the instrument is there
any mention of a third party at all.

At any rate, if indeed the loan actually benefited a third person

who undertook to repay the bank, private... respondent could
have availed himself of the legal remedy of a third-party
complaint. That he made no effort to implead such third person
proves the hollowness of his arguments.

SOUTH PACHEM DEVELOPMENT vs. HONORABLE COURT OF

APPEALS AND MAKATI COMMERCIAL ESTATE
ASSOCIATION, INC., December 16, 2004

FACTS:
 Makati Commercial Estate Association, Inc. (formerly Ayala
Commercial Estate Association), the respondent, is an association
of all real estate owners and long-term lessees of parcels of land
located in the Makati Commercial Area. Pursuant to its Articles of
Incorporation, the members are assessed association dues
annually, subject to penalty and interest in case of default.
Petitioner, South Pachem Development, Inc. purchased from
Ayala Corp two adjoining lots. The deed of restrictions which was
duly annotated in the titles of the property and annexed to the
two deeds provides that: “The owner of this lot or his successor-
in-interest is required to be and is automatically a member of the
Makati Commercial Estate Association, Inc. or any other
Association which may be formed or to which the area may be
affiliated got the purpose, and must abide by the rules and
regulations laid down by the association in the interest of
security, maintenance, beautification and the general welfare of
the area. The association will also provide for and collect
assessments which will constitute a lien on the property xxxx”
The petitioner stopped paying its association dues including
the interest and penalty to private respondent. It questioned the
legality of the deed of restrictions for being contrary to morals,
public policy, good customs, and the Constitution, as it
constituted a perpetual burden on the property and the purchaser
would be deprived of the use of the property without due process
of law.

ISSUE:

Whether or not the deed of restrictions annotated in the titles of

the property unconstitutional

RULING:

The provision in the deed of restrictions which requires a

purchaser of a parcel of land located in the Makati area to pay
association fees is a valid stipulation. The court ruled that an
annotation to the effect that the lot owner becomes an automatic
member of the village association and must abide by such rules
and regulations laid down by said association was a valid restraint
on one’s ownership over the property as the same was for the
interest of the sanitation, security and the general welfare of the
community.
 LIMITLESS POTENTIALS, INC. vs. THE HON. REINATO G.
QUILALA, In His Capacity As Presiding Judge Of The
Regional Trial Court, Branch 57, City Of Makati And The
Roman Catholic Archbishop Of Manila, G.R. No. 157391,
July 15, 2005
FACTS:

On October 20, 1987, the Roman Catholic Archbishop of Manila

(RCAM), as lessor, and Limitless Potentials, Inc. (LPI), as lessee,
executed a Contract of Lease for advertising purposes over
certain areas, including Lot 28-B, in the property covered by TCT
No.

LPI bound and obliged itself to pay a monthly rental of

P11,000.00, with a 10% increase every two years.

Due to a pending case between RCAM and Advertising Associates,

LPI was unable to take possession of the premises. Thus, on
November 14, 1989, RCAM and LPI... executed an "Amendment to
an Agreement," fixing the period for the lease of the premises
from February 1, 1990 to March 1, 1997, with a monthly rental of
P12,000.00, to be increased by 10% every year.

LPI paid the rentals to RCAM until August 1993. ASTRO also paid
to RCAM the rentals due under the Sublease Agreement from
February 1, 1990 to July 1, 1993 totaling P832,920.00; LPI,
however, was not credited the rental payments made by ASTRO.

On September 28, 1993, RCAM and LPI executed a Memorandum

of Agreement (MOA)[4] in which RCAM leased to LPI the
areas/spaces subject of the lease agreement, including those
sublet to ASTRO for a period of four (4) years, from August 1,
1993 to July 31, 1997.

RCAM, likewise, declared that it considered the MOA rescinded as

of October 31, 1995 and demanded payment of the alleged back
rentals from ASTRO, as well as increments thereof from March to
October 1995 and attorney's fees; and that LPI vacate the
property and remove its... billboards or non-permanent structures
by October 31, 1995, otherwise, RCAM would dismantle the same.
[9]
RCAM filed a Complaint for unlawful detainer against LPI before
the Metropolitan Trial Court of Makati (MTC) on November 13,
1995

ISSUES:

Whether or not LPI had the right to continue to possess the

property from the time RCAM rescinded the MOA, until the
expiration of the two-year period;

RULING:

We agree with the ruling of the CA that the sublease contract

between LPI and ASTRO contains a stipulation pour autrui in favor
of RCAM, which the latter had accepted long before LPI filed its
complaint in Civil Case No. 96-949.

Central to the issue is Article 1311 of the New Civil Code, which
provides:

Art. 1311. Contracts take effect only between the parties, their
assigns and heirs, except in cases where the rights and
obligations arising from the contracts are not transmissible by
their nature, or by stipulation or by provision of law. The heir is
not... liable beyond the value of the property he received from the
decedent.

If a contract should contain some stipulation in favor of a third

person, he may demand its fulfillment provided he communicated
his acceptance to the obligor before its revocation. A mere
incidental benefit or interest of a person is not sufficient. The
contracting parties must have clearly and deliberately conferred a
favor upon a third person.

The definition of a stipulation pour autrui is set forth in the second

paragraph of the above provision. The requisites for such
stipulation are the following: (a) the stipulation in favor of a third
person, the third-party beneficiary which should be a part, not...
the whole, of the contract; (b) the contracting parties must have
clearly and deliberately conferred a favor upon a third person, not
a mere incidental benefit or interest; (c) the favorable stipulations
should not be conditioned or compensated by any kind of
obligation... whatsoever; (d) the third person must have
communicated his acceptance to the obligor before its revocation;
and (e) neither of the contracting parties bear the legal
representation or authorization of the third party.[35]

The third-party may be (a) a donee beneficiary; (b) a creditor

beneficiary; or (c) an incidental beneficiary. A donee beneficiary
is regarded as such only if it appears from the terms of the
promisee, in view of the accompanying circumstances, that the
purpose of the... promisee in obtaining the promise of and/or part
of the performance thereof is to make a gift to the beneficiary or
to confer upon him a right against the promisee to secure
performance neither due nor supposed or asserted to be due from
the promisee to the... beneficiary.

IN LIGHT OF ALL THE FOREGOING, the Court renders judgment as

follows:

1. The Petition in G.R. No. 157391 is DENIED for lack of merit.

2. The Petitions in G.R. Nos. 160749 and 160816 are PARTIALLY

GRANTED. The Decision of the Court of Appeals is SET
ASIDE. The Decision and Amended Decision of the RTC are
AFFIRMED WITH MODIFICATIONS, thus:... a) The records are
REMANDED to the MTC for it to determine, after hearing the
parties, the precise amount to be refunded by the Roman
Catholic Archbishop of Manila to Limitless Potentials, Inc., if
any, in light of the Court's decision;... b) The Roman Catholic
Archbishop of Manila is ORDERED to deliver possession of
the areas/spaces leased to Limitless Potentials, Inc., covered
by the Memorandum of Agreement dated September 28,
1993, except those areas now leased to MCIC; Limitless
Potentials, Inc. shall be entitled to remain in possession of
the property for the remaining period of the lease, with the
corresponding rental rate as provided for in the
Memorandum of Agreement dated September 28, 1993.

Sps. Dominador R. Narvaez And Lilia W. Narvaez vs. Sps.

Rose Ogas Alciso And Antonio Alciso, G.R. No. 165907, July
27, 2009
FACTS:

Larry Ogas owned a parcel of land, and a portion was subject

to a 30-year lease agreement with Esso standard eastern, Inc.
Ogas sold the property to his daughter Rose Alciso. Rose later
sold the property to Jaime Sansano, repurchased the property
then sold it again to Celso Bate. I the deed of sale, it stated that it
recognizes the lease over the property in favor of ESSO, upon
sale, the rights over the land as lessor and seller were likewise
transfers in full to Bate. The TCT was then cancelled and new TCT
was issued in the name of Bate.
Bate then sold the property to Narvaez. Alciso demanded a
stipulation be made in the deed of sale allowing her to repurchase
the property from the Narvaez. Upon repurchasing the property,
Narvaez and Alciso did not reach an agreement for the price.

Alciso filed a complaint claiming that the intention of the

parties was to enter into a contract of real estate mortgage and
not a contract of sale with right of repurchase.

RTC held that (1) the 25 August 1979 Deed of Sale with
Right to Repurchase became functus officio when Alciso
repurchased the property; (2) the action to annul the 28 March
1980 Deed of Absolute Sale had prescribed; (3) Alciso had no
legal personality to annul the 14 August 1981 Deed of Sale of
Realty; (4) the 14 August 1981 Deed of Sale of Realty contained a
stipulation pour autrui in favor of Alciso — Alciso could repurchase
the property; (5) Alciso communicated to the Spouses Narvaez
her acceptance of the favor contained in the stipulation pour
autrui; (6) the repurchase price was P80,000; (7) Alciso could
either appropriate the commercial building after payment of the
indemnity equivalent to one-half of its market value when
constructed or sell the land to the Spouses Narvaez; and (8)
Alciso was entitled to P100,000 attorney’s fees and P20,000
nominal damages.

Spouses Narvaez appealed to the CA claiming that (1) the 14

August 1981 Deed of Sale of Realty did not contain a stipulation
pour autrui — not all requisites were present; (2) the RTC erred in
setting the repurchase price at P80,000; (3) they were purchasers
for value and in good faith; and (4) they were builders in good
faith.
 Court of Appeals held that (1) the 14 August 1981 Deed of
Sale of Realty contained a stipulation pour autrui; (2) Alciso
accepted the favor contained in the stipulation pour autrui; (3)
the RTC erred in setting the repurchase price at P80,000; (4) the
14 August 1981 Deed of Sale of Realty involved a contract of sale
with right of repurchase and not real estate mortgage; (5) the
Spouses Narvaez were builders in good faith; and (6) Alciso could
either appropriate the commercial building after payment of the
indemnity or oblige the Spouses Narvaez to pay the price of the
land, unless the price was considerably more than that of the
building. The Court of Appeals remanded the case to the RTC for
determination of the property’s reasonable repurchase price.

ISSUE:
Narvaez claimed that Alciso did not communicate her acceptance
of the favor contained in the stipulation pour autrui; thus, she
could not repurchase the property.

HELD:

The petition is unmeritorious.

Article 1311, paragraph 2, of the Civil Code states the rule on
stipulations pour autrui:
If a contract should contain some stipulation in favor of a
third person, he may demand its fulfillment provided he
communicated his acceptance to the obligor before its revocation.
A mere incidental benefit or interest of a person is not sufficient.
The contracting parties must have clearly and deliberately
conferred a favor upon a third person.

The requisites of a stipulation pour autrui: (1) there is a

stipulation in favor of a third person; (2) the stipulation is a part,
not the whole, of the contract; (3) the contracting parties clearly
and deliberately conferred a favor to the third person — the favor
is not an incidental benefit; (4) the favor is unconditional and
uncompensated; (5) the third person communicated his or her
acceptance of the favor before its revocation; and (6) the
contracting parties do not represent, or are not authorized by, the
third party.

All the requisites are present in the instant case: (1) there is
a stipulation in favor of Alciso; (2) the stipulation is a part, not the
whole, of the contract; (3) Bate and the Spouses Narvaez clearly
and deliberately conferred a favor to Alciso; (4) the favor is
unconditional and uncompensated; (5) Alciso communicated her
acceptance of the favor before its revocation — she demanded
that a stipulation be included in the 14 August 1981 Deed of Sale
of Realty allowing her to repurchase the property from the
Spouses Narvaez, and she informed the Spouses Narvaez that she
wanted to repurchase the property; and (6) Bate and the Spouses
Narvaez did not represent, and were not authorized by, Alciso.

SPOUSES BENJAMIN C. MAMARIL AND SONIA P. MAMARIL

vs. THE BOY SCOUT OF THE PHILIPPINES, AIB SECURITY,
Inc., Cesario Peña, And Vicente Gaddi, G.R. No. 179382,
January 14, 2013

FACTS:
Spouses Benjamin C. Mamaril and Sonia P. Mamaril (Spouses
Mamaril) are jeepney operators. They park their passenger
jeepneys every night at the Boy Scout of the Philippines (BSP) for
a fee per month for each unit.

As usual, all these vehicles were parked inside the BSP compound
one evening. However, the following morning, one of the vehicles
was missing and was never recovered. According to the security
guards CesarioPe (Pe) and Vicente Gaddi (Gaddi) of AIB Security
Agency, Inc. (AIB) with whom BSP had contracted (Guard Service
Contract) for its security and protection, a male person who
looked familiar to them took the subject vehicle out of the
compound.

ISSUE:
Whether or not BSP is liable based on the Guard Service Contract
and the parking ticket it issued.

HELD: The petition lacks merit.

CIVIL LAW: Principle of Relativity of Contracts; Lease

With respect to Guard Service Contract, it is undisputed that

Spouses Mamaril are not parties therein. Neither did the
subject agreement contain any stipulation pour autrui. And
even if there was, Spouses Mamaril did not convey any
acceptance thereof. Thus, under the principle of relativity of
contracts, they cannot validly claim any rights or favor under
the said agreement.

Perfection of Contracts

MALBAROSSA vs. CA, 402 SCRA 266

Doctrine:
Consent is manifested by meeting of the offer and the acceptance
upon the thing and the cause which are to constitute the contract.
Such acceptance must be absolute, unconditional, and without
variance of any sort from the offer when made known to the
offeror. An acceptance not made in the manner prescribed is not
effective but constitutes a counter-offer.

FACTS:
Philtectic Corporation and Commonwealth Insurance Co. was a
wholly owned subsidiary of S.E.A. Development Corporation.
Malbarosa was president and general manager of Philtectic while
an officer in SEADC’s other group of companies
Philtectic assigned to Malbarosa a Mitsubishi vehicle and
membership certificates with Architectural Center, Inc. during his
employment with the former.
January 1990: Malbarosa intimated to Valero,Vice-Chairman of the
Board of Directors for SEADC and Philtectic, his desire to retire
and requested that his incentive compensation for 1989 be given
to him. Per Da Costa, President of SEADC and Commonwealth
Insurance, Malbarosa is entitled to P395,000. However, they later
only offered him P251k net through a letter-offer dated March 14,
1990.
Due to alleged bankruptcy of the Company, the compensation
package given to him only amounted to P251k to be satisfied via:
(a). Mitsubishi car (b) Membership share of subsidiary Tradestar
International Inc. in Architectural Center Inc.
If Malbarosa conforms to the letter-offer, he must sign on the
space provided. But because he was dismayed as he eventually
learned that the company was financially sound, he insisted to be
paid P395k in cash and he merely indicated on the duplicate
“received original for review purposes” (on March 16) , taking the
original with him.
More than 2 weeks passed and nothing was heard from
Malbarosa. SEADC decided to withdraw its offer.
April 3, 1990: SEADC issued a board resolution authorizing
Phitectic and/or Valero to demand the return of the car and to
take court action for the same
April 4, 1990: Demand letter was sent to Malbarosa regarding the
withdrawal of the offer and the demand for the car’s return.
Malbarosa responded that he already accepted the offer and
included a photocopy of the original wherein he allegedly signed
the letter-offer on March 28, 1990.
Malbarosa argued that he did call Da Costa on March 29 to inform
him of his acceptance, but since he was not around, the
receptionist relayed the message to which Da Costa merely
nodded his head.
TC stated that there existed no perfected contract between the
petitioner and the respondent on the latters March 14, 1990
Letter-offer for failure of the petitioner to effectively notify the
respondent of his acceptance of said letter-offer before the
respondent withdrew the same. This was reversed on a motion for
amended and TC amended: (1) Ordering defendant to pay to
plaintiff lease rentals for the use of the motor vehicle at the rate
of P1,000.00 per Day from May 8, 1990 up to the date of actual
delivery; and (2) Ordering First Integrated Bonding & Insurance
Co. to make good on its obligations to plaintiff under the
Counterbond issued pursuant to this case. CA Affirmed.

ISSUES:
1. Whether or not there was a valid letter offer?
2. Whether or not there was an effective withdrawal of the
letter? Yes.

HELD:

1. No. There was no valid acceptance in the case at bar.

The receipt by the petitioner of the original of the March 14, 1990
Letter-offer for review purposes amounted merely to a counter-
offer of the petitioner.

The petitioner adduced no proof that the respondent had granted

him a period within which to accept its offer. The latter deemed
its offer as not accepted by the petitioner in light of petitioners
ambivalence and indecision on March 16, 1990 when he received
the letter-offer of respondent.
 2. Yes. There was effective withdrawal – no meeting of the
minds between the parties.
Art. 1318 on the essential requisites of a contract: requires
(1)consent, (2) object certain, and (3)cause of the obligation.
Consent is manifested by meeting of the offer and the acceptance
upon the thing and the cause which are to constitute the contract.

Acceptance must be absolute, unconditional, and without

variance of any sort from theoffer when made known to the
offeror. An acceptance not made in the manner prescribed is not
effective but constitutes a counter-offer.

The offer was made through Valero – Malbarosa neither accepted

nor rejected the letter-offer. He indeed affixed his signature but
failed to transmit the same before the company decided to
withdraw its offer.

Malbarosa’s complaint that he was not given reasonable time

cannot stand. There was no time frame fixed to accept or reject. If
an offer is made to a person present, acceptance must be made
immediately. Even if it is assumed that the petitioner was given a
reasonable period to accept or reject the offer of the respondent,
the petitioner had more than two weeks which was more than
sufficient for the petitioner to accept the offer of the respondent.
Unless and until the respondent received said copy of the letter-
offer, it cannot be argued that a contract had already been
perfected between the petitioner and the respondent.

People’s Homesite & Housing Corp. vs. CA, G.R. No. 61623,
Dec. 20, 1984.