JOSEPH ACE LAGURIN, CPA 1

Case 45 – PACIFIC MILLS, INC. vs. PHILIPPINE COTTON CORPORATION

FACTS:
This case involved four promissory notes executed by Pacific Mills in favor of PHILCOTTON. PHILCOTTON sued Pacific Mills
for collection of a sum of money. The Regional Trial Court rendered judgment in favor of PHILCOTTON. The judgment was
appealed to the Court of Appeals where petitioners were held liable to PHILCOTTON including interests, penalties, and
attorney's fees. However, after the rendition of the above decision, petitioners alleged that during the pendency of the
case before the Court of Appeals, a condonation had been effected by PHILCOTTON in their favor, whereby the interests
and penalties awarded by the Court were extinguished. Consequently, petitioners filed a motion for reconsideration with
the Court asking that the amount awarded to PHILCOTTON be reduced. The same was denied by the Supreme Court for
lack of merit.
During the hearing for the issuance of a writ of execution, petitioners claimed that they had already made partial
payments on the amount covered by the promissory notes and that the penalty charges on the loan had already been
condoned by PHILCOTTON. Petitioners alleged that these circumstances constituted supervening events that merited a
deduction in the amount payable by petitioners to PHILCOTTON.

ISSUE:
Whether or not the alleged condonation made by the defendant be given merit.

RULING:
No. The issue of condonation should have been brought to the attention of the Court of Appeals. The general rule is that
once a judgment becomes final and executory, said judgment can no longer be disturbed, altered, or modified. And
this rule applies regardless of any possible injustice in a particular case. As this Court has stated, "all litigation must at last
come to an end, however unjust the result of error may appear. Otherwise, litigation would become even more
intolerable than the wrong or injustice it is designed to correct.
Petitioners, however, asseverate that the instant case falls under one of the exceptions to the rule on immutability of
judgments, claiming that the fact of condonation constitutes a supervening event which, in the higher interest of justice,
calls for the modification of our previous judgment.
Attempts to frustrate or put off enforcement of an executory judgment on the basis of facts or events occurring before
the judgment became final cannot meet with success. Facts or events bearing on the substance of the obligation subject
of the action should ordinarily be alleged during the issue-formulation stage or otherwise by proper amendment, and
proved at the trial; if discovered after the case has been submitted but before the decision is rendered, proved after
obtaining a reopening of the case; and if discovered after judgment has been rendered but before it becomes final,
substantiated at a new trial which the court in its discretion may grant on the ground of newly discovered evidence. Once
the judgment becomes executory, the only other remedy left to attempt a material alteration thereof is that provided for
in Rule 38 of the Rules of Court (governing petitions for relief from judgments), or an action to set aside the judgment on
account of extrinsic, collateral fraud.
There is no other permissible mode of preventing or delaying execution on equitable grounds predicated on facts
occurring before finality of judgment. The alleged condonation purportedly having taken place before the judgment
became final; petitioners may not now claim the same as a supervening event that will justify modifying our previous
judgment in this case.

Condonation – a creditor gives up his right against the debtor, resulting to extinguishment of the obligation.
a. The debt must be existing and demandable
b. It must be gratuitous
c. The debtor must accept the remission
d. If made expressly, it must conform with the firms of donation

Case 46 - BERNARDINO RAMOS and ROSALIA OLI vs. CA, RODOLFO BAUTISTA and FELISA
LOPEZ
 JOSEPH ACE LAGURIN, CPA 2

FACTS:
Pedro Tolentino, claiming absolute ownership over Lot Nos. 572 and 579 separately sold said lots to petitioners, the
spouses Bernardino Ramos and Rosalia Oli. The conveyances were evidenced by two documents both entitled Escritura
de Compra Venta and acknowledged before a notary public. Subsequently, however, petitioners instituted an action for
reconveyance with damages alleging that while they were in continuous possession of the subject for not less than 50
years, they discovered that decrees of registration covering Lot Nos. 572 and 579 were already issued. They complained
further the subsequent issuance by the Register of Deeds in favor of Lucia Bautista since the latter allegedly neither laid
claim of ownership nor took possession of them. Petitioners claimed instead that they were the ones who acquired prior
ownership and possession over the lots. Thus, they concluded that the original certificates of title as well as Transfer
Certificates obtained by Rodolfo Bautista, as sole heir of Lucia Bautista were null and void. On the theory that they
already acquired the subject lots by acquisitive prescription, petitioners demanded their return but private respondents
refused to do so, hence, compelling them to file a complaint for reconveyance with damages.
On the other hand, Rodolfo Bautista and Felisa Lopez, likewise claimed absolute ownership of the lots. They alleged that
while the records of the Bureau of Lands showed that during the cadastral survey, Pedro Tolentino was a claimant over
lands in the cadastre, the same was only with respect to Lot No. 1399 which was eventually titled under his name. It just
happened that Lot No. 1399 was adjacent to Lot No. 572, a portion of which was occupied by petitioners upon the
tolerance of the original registrant Lucia Bautista.

ISSUE:
Whether or not the petitioners are the real owner of the lot.

RULING:
No. The two documents denominated as Escritura de Compra Venta would have well qualified as ancient documents
since they were already in existence for more than thirty years when the case for reconveyance was initially filed. The
original documents, however, were not presented in evidence as these had been apparently lost in the fire that gutted
the office of petitioners' counsel. Under the circumstances, when the original document has been lost or destroyed, or
cannot be produced in court, the offeror, upon proof of its execution or existence and the cause of its unavailability
without bad faith on his part, may prove its contents by a copy, or by a recital of its contents in some authentic
document, or by the testimony of witnesses in the order stated.
Furthermore, assuming arguendo that the existence of the documents was properly established, still, the documents
bound only the parties, namely Pedro Tolentino and the petitioners, because the latter failed to prove that these were
later registered as to operate against the whole world. They could not have bound third persons like Lucia Bautista
because of the basic civil law principle of relativity of contracts which provides that contracts can only bind the parties
who had entered into it, and it cannot favor or prejudice a third person. Act No. 496, as amended by P.D. No. 1529
unequivocably provides:
"No deed, mortgage, lease, or other voluntary instrument except a will, purporting to convey or affect registered land,
shall take effect as a conveyance or bind the land, but shall operate only as a contract between the parties and as
evidence of authority to the clerk or register of deeds to make registration. The act of registration shall be the operative
act to convey and affect the land, and in all cases under this Act the registration shall be made in the office of the
register of deeds for the province or provinces or city, where the land lies. "
Hence, petitioners' failure to register the Escritura de Compra Venta resulted in the sale being binding only between
them and the vendor, Pedro Tolentino. Under the circumstances of the case, they would only succeed upon sufficient
evidence to support their allegation that fraud attended the registration of the property in Lucia Bautista's name. In
contrast, Rodolfo Bautista's claim to the properties registered under the Torrens system which he traces to his aunt, Lucia
Bautista, appears incontrovertible.
The Land Registration Act provides that a decree of registration duly issued is subject to the right of any person deprived
of land or of any estate or interest therein by decree of registration obtained by fraud to file in the RTC a petition for
review within one year after entry of the decree, provided no innocent purchaser for value has acquired an interest.
Upon the expiration of the term of one year, every decree or certificate of title shall be imprescriptible.
 JOSEPH ACE LAGURIN, CPA 3

Under the law, an action for reconveyance of real property resulting from fraud prescribes in four (4) years from the
discovery of the fraud. Discovery of the fraud must be deemed to have taken place when Lucia Bautista was issued OCT
Nos. 178111 and 17812 because registration of real property is considered a "constructive notice to all persons" and it
shall be counted "from the time of such registering, filing or entering." An action based on implied or constructive trust
prescribes in 10 years. This means that petitioners should have enforced the trust within 10 years from the time of its
creation or upon the alleged fraudulent registration of the property. But as it is, petitioners failed to avail of any of the
aforementioned remedies within the prescribed periods. With no remedy in view, their claims should forever be
foreclosed.
Private respondents' inattention to the property from the time of Lucia Bautista's death until private respondent Rodolfo
Bautista's retirement from the military should not be construed as an abandonment thereof. Private respondents have in
their favor the law that protects holders of title under the Torrens System of land registration.

Case 47 – PHILIPP BROTHERS OCEANIC vs. CA, BANK OF THE PHILIPPINES ISLANDS & SAN
GRACE MINING CORPORATION
FACTS:
A contract was entered into between Philbro H.K. Sagramco. In the contract, referred to by the parties as Contract No.
930562-P, Sagramco agreed to sell and ship to Philbro H.K. at least 9,000 metric tons of chrome ore. In consideration for
the delivery, Philbro H.K. agreed to open a letter of credit in the sum of US$195,000 in BPI, under which Sagramco would
be allowed to withdraw advances to be charged against Sagramco's future deliveries of chrome ore and the full amount
of US$195,000 was drawn by Sagramco. Sagramco executed a chattel mortgage in favor of Philbro H.K. the former’s
personal properties. Aside from the dollar advance obtained from Philbro H.K., Sagramco separately received peso
advances from Philbro Oceanic, Philbro H.K.'s principal corporation.
Sagramco obtained from BPI a P300,000 loan and another loan in the amount of P700,000. The two loans were secured
by real estate mortgages. As further security, Sagramco executed a Deed of Assignment in favor of BPI, assigning the
proceeds of the letter of credit which Philbro H.K. opened with BPI, and trust receipts and quedans over the 1,800 metric
tons of chrome ore already produced and stockpiled in the warehouse of Philbro Oceanic.
Philbro H.K. assigned to Philbro Oceanic all its rights, interests and collectibles from Sagramco arising from Contract No.
930562-P and from the deed of chattel mortgage securing the same.
Of the US$195,000 advanced to Sagramco, US$108,426.36 were liquidated through the first delivery of 1,180 metric tons
of chrome ore shipped to Philbro H.K. Thereafter, Sagramco was able partially to liquidate the account through the local
sale of the 834.01 metric tons of chrome ore. The 1,800 metric tons of chrome ore, however, remained stockpiled inside
the warehouse of Philbro Oceanic and is the subject of the present controversy.
BPI sought to take possession of the 1,800 metric tons of chrome ore by filing with the RTC a complaint against Sagramco
for delivery of personal property with a prayer a for a writ of replevin.

Writ of replevin – a remedy to recover possession of real property

ISSUES:
1. Whether or not the proceeds of the chrome ore should be used to pay both the dollar and peso advances of.
Sagramco.
2. Whether or not the chattel mortgage was constituted to guarantee both the dollar and peso advances made by
Sagramco
3. Whether or not the filing of the replevin suit for the chrome ore bars the subsequent filing of the foreclosure
suit over the parcels of land.

RULINGS:
Philbro Oceanic and Philbro H.K. are two separate and distinct juridical entities from which Sagramco is obligated
separately under two different agreements. Philbro H.K. agreed to provide Sagramco with dollar advances under Contract
No. 930562 while Philbro Oceanic granted peso advances to Sagramco by virtue of their letter agreement. While Contract
 JOSEPH ACE LAGURIN, CPA 4

No. 930562-P contains a stipulation to liquidate the dollar advance, drawn on the letter of credit, with Sagramco's future
deliveries of chrome ore, no such stipulation was made in letter agreement. In fact, the letter of agreement reveals that
the peso advance was simply an unsecured and interest-bearing loan.
The rule is that contracts take effect only between the parties, their assigns and heirs. This is the principle of relativity
of contracts. In the case at bar, in the absence of any stipulation on the manner of payment for the peso advance in the
letter agreement, Philbro Oceanic cannot apply the stipulations contained in Contract No. 930562-P. The provisions in
Contract No. 930562-P refer only to the obligations of Sagramco to Philbro H.K. and consequently, should only apply to
the dollar advance owed to Philbro H.K. Contract No. 930562-P cannot be used to govern the payment of another
obligation owed by Sagramco to another entity. Philbro Oceanic was yet an assignee of Contract No. 930562-P at the time
the letter agreement was made. Hence, for all intents and purposes, Philbro Oceanic was merely a third party and could
not amend a contract.
Philbro Oceanic is likewise prevented from making use of the chattel mortgage, entered into exclusively by Philbro H.K.
and Sagramco, to secure its peso advance. Philbro Oceanic did not participate in the execution of the chattel mortgage
in its own right and was not an assignee of the chattel mortgage at the time the letter agreement was made. Since the
chattel mortgage can only be called upon to satisfy the dollar advance obtained from Philbro H.K., it is proper forthwith
to dismiss the foreclosure case. The chattel mortgage is a mere accessory contract. Hence, it should be deemed
automatically extinguished upon the satisfaction of the principal obligation. In the case at bar, the delivery of the chrome
ore to Philbro Oceanic has fully satisfied the principal obligation, and even resulted in an excess payment. Since there is
no more balance due on the dollar advance, there can no longer exist a mortgage to foreclose upon.
Sagramco claims that the replevin and foreclosure suits were both filed to enforce the collection of the two promissory
notes amounting to P1,000,000. Consequently, BPI had effectively split its cause of action and is guilty of forum shopping
because the two cases were evidently filed to collect on the same debt. The Court finds that one is not a bar to the other.
The trust receipts and the real estate mortgage issued in favor of BPI are two separate agreements. When BPI sued
separately upon these two agreements, it pleaded different causes of action and prayed for entirely different reliefs.
The replevin suit was filed by BPI on the ground that, under the trust receipts, it is the owner of the chrome ore and is
entitled to possession thereof. The replevin suit was therefore filed to recover possession of its alleged property. In
contrast, BPI filed the foreclosure case to enforce its rights as an unpaid creditor. BPI alleged that the two promissory
notes remained unpaid and that it is seeking to foreclose on the constituted security. This latter suit was filed to enforce
the payment of a debt.
While it is true that a court may grant relief to a party, even if the party awarded did not pray for it in his pleadings, the
filing by BPI of the foreclosure suit in Branch 17 of RTC of Misamis Oriental divested Branch 22 of the RTC of Misamis
Oriental, hearing the replevin suit, of jurisdiction to order the payment of the debt. The Regional Trial Courts of a
province or city, having the same or equal authority and exercising concurrent and coordinate jurisdiction bare not
permitted to interfere with their respective cases, much less with their orders or judgments by means of injunction. In
the case at bar, when BPI filed the foreclosure suit with Branch 17, jurisdiction over the subject matter of the debt vested
with that branch to the exclusion of all other courts. Branch 22 was therefore without jurisdiction to order Sagramco to
pay P1,000,000 to BPI and should have left it up to Branch 17 to decide on the issue of indebtedness.

Case 48 – BPI INVESTMENT CORP. vs. CA & ALS MANAGEMENT & DEVELOPMENT
CORPORATION
FACTS:
Frank Roa obtained a loan from Ayala Investment and Development Corporation (AIDC), the predecessor of petitioner
BPIIC, for the construction of a house on his lot in. Said house and lot were mortgaged to AIDC to secure the loan.
Sometime in 1980, Roa sold the house and lot to ALS and Antonio Litonjua for P850,000. They paid P350,000 in cash and
assumed the P500,000 balance of Roa's indebtedness with AIDC. The latter, however, was not willing to extend the old
interest rate to private respondents and proposed to grant them a new loan of P500,000 to be applied to Roa's debt and
secured by the same property, at an interest rate of 20% per annum and service fee of 1% per annum on the outstanding
principal balance payable within ten years. Consequently, in March 1981, private respondents executed a mortgage
deed containing the above stipulations with the provision that payment of the monthly amortization shall commence on
May 1, 1981.
 JOSEPH ACE LAGURIN, CPA 5

ALS and Litonjua updated Roa's arrearages by paying BPIIC the sum of P190,601.35. This reduced Roa's principal balance
to P457,204.90 which, in turn, was liquidated when BPIIC applied thereto the proceeds of private respondents' loan of
P500,000. On September 13, 1982, BPIIC released to private respondents P7,146.87, purporting to be what was left of
their loan after full payment of Roa's loan.
BPIIC instituted foreclosure proceedings against private respondents on the ground that they failed to pay the mortgage
indebtedness which from May 1, 1981 to June 30, 1984, amounted to P475,585.31.
ALS and Litonjua filed a case against BPIIC. They alleged that they were not in arrears in their payment, but in fact made
an overpayment. They maintained that they should not be made to pay amortization before the actual release of the
P500,000 loan in August and September 1982. Further, out of the P500,000 loan, only the total amount of P464,351.77
was released to private respondents. Hence, applying the effects of legal compensation, the balance of P35,648.23
should be applied to the initial monthly amortization for the loan.

ISSUES:
1. Whether or not a contract of loan is a consensual contract.
2. Whether or not BPI should be held liable for moral and exemplary damages and attorney's fees.

RULINGS:
A loan contract is not a consensual contract but a real contract. It is perfected only upon the delivery of the object of
the contract. A perfected consensual contract can give rise to an action for damages. However, said contract does not
constitute the real contract of loan which requires the delivery of the object of the contract for its perfection and which
gives rise to obligations only on the part of the borrower. In the present case, the loan contract between BPI, on the one
hand, and ALS and Litonjua, on the other, was perfected only on September 13, 1982, the date of the second release of
the loan. Following the intentions of the parties on the commencement of the monthly amortization, as found by the
Court of Appeals, private respondents' obligation to pay commenced only on October 13, 1982, a month after the
perfection of the contract.
A contract of loan involves a reciprocal obligation, wherein the obligation or promise of each party is the consideration
for that of the other. As averred by private respondents, the promise of BPIIC to extend and deliver the loan is upon the
consideration that ALS and Litonjua shall pay the monthly amortization commencing on May 1, 1981, one month after
the supposed release of the loan. It is a basic principle in reciprocal obligations that neither party incurs in delay, if the
other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. Only when a
party has performed his part of the contract can he demand that the other party also fulfills his own obligation and if the
latter fails, default sets in. Consequently, petitioner could only demand for the payment of the monthly amortization after
September 13, 1982 for it was only then when it complied with its obligation under the loan contract. Therefore, in
computing the amount due as of the date when BPIIC extrajudicially caused the foreclosure of the mortgage, the starting
date is October 13, 1982 and not May 1, 1981.
On the second issue, petitioner claims that it should not be held liable for moral and exemplary damages for it did not act
maliciously when it initiated the foreclosure proceedings. It merely exercised its right under the mortgage contract
because private respondents were irregular in their monthly amortization. Private respondents counter that BPIIC was
guilty of bad faith and should be liable for said damages because it insisted on the payment of amortization on the loan
even before it was released. Further, it did not make the corresponding deduction in the monthly amortization to
conform to the actual amount of loan released, and it immediately initiated foreclosure proceedings when private
respondents failed to make timely payment. But as admitted by private respondents themselves, they were irregular in
their payment of monthly amortization. We cannot properly declare BPIIC in bad faith. Consequently, we should rule
out the award of moral and exemplary damages.
However, in our view, BPIIC was negligent in relying merely on the entries found in the deed of mortgage, without
checking and correspondingly adjusting its records on the amount actually released to private respondents and the date
when it was released. Such negligence resulted in damage to private respondents, for which an award of nominal
damages should be given in recognition of their rights which were violated by BPIIC. For this purpose, the amount of
P25,000 is sufficient. Lastly, we sustain the award of P50,000 in favor of private respondents as attorney's fees.
 JOSEPH ACE LAGURIN, CPA 6

Case 49 – R. F. NAVARRO & CO. & HEIRS vs. VAILOCES, DE PANO JR., HOCACDAC JR. ETC.
FACTS:
Petitioners R.F. Navarro instituted an action for annulment of documents, titles or reconveyance against the heirs of
Eulogio Rodriguez, Sr. and Luzon Surety Co., Inc. The subject properties of the case are two adjacent lots and the building
and improvements thereon covered by TCT No. T-63345 in the Registry of Deeds in the name of private respondent Luzon
Surety Co., Inc.
In their complaint, petitioners alleged that they are the owners of said lots by virtue of TCT No. 61619 registered in the
name of Raymundo F. Navarro, married to Laura Navarro and R.F. Navarro & Company. They further alleged that
Raymundo Navarro entrusted subject property to Eulogio Rodriguez, Sr. Sometime after the death of Raymundo Navarro,
petitioners discovered that Rodriguez was able to transfer the property in his name and thereafter to his family
corporation the Luzon Surety Co., Inc. Petitioners claimed that the transfer of the property in the name of Rodriguez was
fraudulent as the same was done without any consideration and without the knowledge of the petitioners. Upon learning
of the fraudulent transfers, petitioners demanded from the private respondents the return of the property, which
demands the latter have refused.
In their answer, private respondents alleged that the transfer of the property was done by virtue of a Deed of Sale with
Assumption of Mortgage executed by Raymundo F. Navarro, Sr. in his personal capacity and as president of R.F. Navarro &
Co. in favor of Eulogio Rodriguez, Sr. As a consequence of said sale, TCT No. 61619 was cancelled and TCT No. 62411 of
the Register of Deeds of Manila was issued in the name of Eulogio Rodriguez, Sr. Later, Rodriguez executed a Deed of
Assignment with Transfer of Mortgage in favor of Luzon Surety Co., Inc. and TCT No. T-63345 was issued in the name of
the latter. Private respondents, likewise, raised as defense the fact that during his lifetime, Raymundo F. Navarro never
questioned the validity of the transfer and that the petitioners' cause of action had already prescribed and is barred by
laches.

ISSUE:
Whether or not the respondent is the real owner of the property.

RULING:
Petitioners allege that the filing before the Regional Trial Court of their Manifestation and Motion after they had filed
their Notice of Appeal, private respondents are deemed to have withdrawn or abandoned their appeal. We are not
persuaded. Under American Law, a motion for new trial does not work as a waiver of the appeal, unless there is a rule to
the contrary. Thus, both the motion for new trial and the appeal may be pursued at the same time. This ruling is of
persuasive effect on us considering the source of our rules on appeal and new trial. Hence, the Court of Appeals had
jurisdiction to entertain the appeal of the private respondents as there was no abandonment thereof.
Anent the other issue raised, a careful examination of the records reveals no irregularity in the transfer of the property
subject of this case from Raymundo F. Navarro, Sr. to Eulogio Rodriguez, Sr. with the annotation at the back of TCT No.
61619.
Petitioners, however, posit that the alleged sale was null and void because of the absence of consideration. Petitioners
argue that private respondents failed to produce any receipts for the payments issued by the seller. Such arguments are
specious. The Deed of Sale with Assumption of Mortgage is the evidence itself of the receipt by Raymundo F. Navarro of
the consideration of said sale. Petitioners, however, claim that the above deed of sale is spurious as the same was not
signed by Raymundo F. Navarro. The bare assertions on the part of Laura Navarro that the signature appearing on the
Deeds of Sale is not that of her husband is not enough. Forgery is not presumed; it must be proven by clear, positive and
convincing evidence.
Petitioners' assertion that Rodolfo Medina, whose name appears on the questioned Deeds of Sale as the Notary Public
was not a Notary Public in the City of Manila deserves scant consideration. As pointed out by the Court of Appeals, if the
same were true, then, petitioners cannot even claim ownership over said lots as the deed of sale of the property by
Alisson Gibbs to Raymundo F. Navarro was, likewise, notarized by Rodolfo M. Medina. Even if it were true that the Deeds
of Sale were notarized by one who was not a real notary public, the same does not affect the validity thereof. Moreover,
the records reveal that Raymundo F. Navarro and R.F. Navarro & Company, executed a notarial instrument whereby they
conceded and recognized the ownership of the Luzon Surety Co., Inc. of the property in question under TCT No. 63345
 JOSEPH ACE LAGURIN, CPA 7

and relinquished all claims on the building standing thereon. Petitioners have not questioned nor even cast a doubt as to
the authenticity of said document.
In any case, assuming, that the Deeds of Sale with Assumption of Mortgage were spurious, we agree with the appellate
court that petitioners are already barred by laches. Laches has been defined as the failure or neglect, for an
unreasonable and unexplained length of time, to do that which by exercising due diligence could or should have been
done earlier, it is negligence or omission to assert a right within a reasonable time, warranting a presumption that the
party entitled to assert it has either abandoned it or declined to assert it.

Case 50 – JARDINE DAVIES INC. & PUREFOODS CORP vs. CA and FAR EAST MILLS SUPPLY CORP.
FACTS:
Petitioner PURE FOODS CORP. decided to install two 1500 KW generators in its food processing plant. A bidding for the
supply and installation of the generators was held. Out of the eight prospective bidders who attended the pre-bidding
conference, PUREFOODS confirmed the award of the contract to FEMSCO. Immediately, FEMSCO submitted the required
performance bond and contractor's all-risk insurance policy. FEMSCO also made arrangements with its principal and
started the PUREFOODS project by purchasing the necessary materials. Later, however, PUREFOODS unilaterally cancelled
the award as "significant factors were uncovered and brought to their attention which dictate the cancellation and
warrant a total review and re-bid of the project." FEMSCO protested the cancellation of the award and sought a meeting
with PUREFOODS. However, PUREFOODS already awarded the project and entered into a contract with JARDINE NELL, a
division of Jardine Davies, Inc., which incidentally was not one of the bidders.
FEMSCO thus wrote PUREFOODS to honor its contract with the former, and to JARDINE to cease and desist from
delivering and installing the two (2) generators at PUREFOODS. Its demand letters unheeded, FEMSCO sued both
PUREFOODS and JARDINE. Trial ensued. After FEMSCO presented its evidence, JARDINE filed a Demurrer to Evidence. The
Regional Trial Court of Pasig granted JARDINE's Demurrer to Evidence. Meanwhile, trial proceeded as regards the case
against PUREFOODS.

ISSUES:
1. Whether there existed a perfected contract between PUREFOODS and FEMSCO.
2. Granting there existed a perfected contract, whether there is any showing that JARDINE induced or connived
with PUREFOODS to violate the latter's contract with FEMSCO.

RULINGS:
A contract binds both contracting parties and has the force of law between them. Contracts are perfected by mere
consent, upon the acceptance by the offeree of the offer made by the offeror. For a contract to arise, the acceptance
must be made known to the offeror. Accordingly, the acceptance can be withdrawn or revoked before it is made known
to the offeror. Since PUREFOODS started the process of entering into the contract by conducting a bidding, Art. 1326 of
the Civil Code, which provides that advertisements for bidders are simply invitations to make proposals. Accordingly, the
Terms and Conditions of the Bidding disseminated by petitioner PUREFOODS constitutes the "advertisement" to bid on
the project. The bid proposals or quotations submitted by the prospective suppliers including respondent FEMSCO, are
the offers. And, the reply of petitioner PUREFOODS, the acceptance or rejection of the respective offers.
Quite obviously, the letter of petitioner PUREFOODS to FEMSCO constituted acceptance of respondent FEMSCO's offer
as contemplated by law. The tenor of the letter, i.e., "This will confirm that Pure Foods has awarded to your firm
(FEMSCO) the project," could not be more categorical. While the same letter enumerated certain "basic terms and
conditions," these conditions were imposed on the performance of the obligation rather than on the perfection of the
contract. In fine, the enumerated "basic terms and conditions" were prescriptions on how the obligation was to be
performed and implemented. They were far from being conditions imposed on the perfection of the contract.
In Babasa v. Court of Appeals, we distinguished between a condition imposed on the perfection of a contract and a
condition imposed merely on the performance of an obligation. While failure to comply with the first condition results in
the failure of a contract, failure to comply with the second merely gives the other party options and/or remedies to
protect his interests.
 JOSEPH ACE LAGURIN, CPA 8

But even granting arguendo that the letter PUREFOODS constituted a "conditional counter-offer," FEMCO's submission of
the performance bond and contractor's all-risk insurance was an implied acceptance, if not a clear indication of its
acquiescence to, the "conditional counter-offer," which expressly stated that the performance bond and the contractor's
all-risk insurance should be given upon the commencement of the contract.
The discussion of the price of the project two months after can be deemed as nothing more than a pressure being
exerted by petitioner PUREFOODS on respondent FEMSCO to lower the price even after the contract had been perfected.
Indeed, from the facts, it can easily be surmised that petitioner PUREFOODS was haggling for a lower price even after
agreeing to the earlier quotation, and was threatening to unilaterally cancel the contract, which it eventually did.
Petitioner PUREFOODS also makes an issue out of the absence of a purchase order. PUREFOODS has acted with bad faith
and this was further aggravated by the subsequent inking of a contract between defendant Purefoods and erstwhile co-
defendant Jardine. It is very evident that Purefoods thought that by the expedient means of merely writing a letter would
automatically cancel or nullify the existing contract entered into by both parties after a process of bidding. This, to the
Court's mind, is a flagrant violation of the express provisions of the law and is contrary to fair and just dealings to which
every man is due.

CASE 51 – SALVADOR P. MALBAROSA vs. CA and S.E.A. DEVELOPMENT CORP.

FACTS:
Philtectic Corporation and Commonwealth Insurance Co. were two of the group of companies wholly-owned and
controlled by respondent S.E.A. Development Corporation (SEADC). The petitioner Salvador P. Malbarosa was the
president and general manager of Philtectic Corporation. The respondent assigned to the petitioner one of its vehicles for
his use. He was also issued membership certificates in the Architectural Center, Inc. Louis Da Costa was the president of
the respondent and Commonwealth Insurance Co., Inc., while Senen Valero was the Vice-Chairman of the Board of
Directors of the respondent and Vice-Chairman of the Board of Directors of Philtectic Corporation.
The petitioner intimated to Senen Valero his desire to retire from the SEADC group of companies and requested that his
incentive compensation be paid to him. Da Costa ventured that the petitioner would be entitled to an incentive
compensation in the amount of P395,000. The respondent, signed a letter-offer addressed to the petitioner stating that
petitioner's resignation had been accepted by the respondent, and that he was entitled to an incentive compensation in
the amount of P251,057.67, the Mitsubishi Super saloon car, the membership share in the Architectural Center, Inc.
Da Costa met with the petitioner and handed to him the original copy Letter-offer for his consideration and conformity.
The petitioner was dismayed when he read the letter and learned that he was being offered an incentive compensation
of only P251,057.67. The petitioner refused to sign the letter-offer. He received the original of the letter and wrote on the
duplicate copy of the letter-offer retained by Da Costa, the words: "Rec'd original for review purposes." Despite the
lapse of more than two weeks, the respondent had not received the original Letter-offer of the respondent with the
conformity of the petitioner. The respondent decided to withdraw its offer. The Board of Directors of the respondent
approved a resolution to demand from the petitioner for the return of the car and to take such action against the
petitioner.

ISSUES:
1. Whether or not there was a valid acceptance on his part of the letter-offer of the respondent.
2. Whether or not there was an effective withdrawal by the respondent of said letter-offer.

RULINGS:
The consent by a party is manifested by the meeting of the offer and the acceptance upon the thing and the cause which
are to constitute the contract. An offer that is not accepted does not give rise to a consent. To produce a contract, there
must be acceptance of the offer which may be express or implied but must not qualify the terms of the offer. The
acceptance must be absolute, unconditional and without variance of any sort from the offer.
The acceptance of an offer must be made known to the offeror. Unless the offeror knows of the acceptance, there is no
meeting of the minds of the parties, no real concurrence of offer and acceptance . The offeror may withdraw its offer
and revoke the same before acceptance thereof by the offeree. The contract is perfected only from the time an
 JOSEPH ACE LAGURIN, CPA 9

acceptance of an offer is made known to the offeror. If an offeror prescribes the exclusive manner in which acceptance
of his offer shall be indicated by the offeree, an acceptance of the offer in the manner prescribed will bind the offeror. On
the other hand, an attempt on the part of the offeree to accept the offer in a different manner does not bind the offeror
as the absence of the meeting of the minds on the altered type of acceptance. An offer made inter praesentes must be
accepted immediately. If the parties intended that there should be an express acceptance, the contract will be perfected
only upon knowledge by the offeror of the express acceptance by the offeree of the offer. An acceptance which is not
made in the manner prescribed by the offeror is not effective but constitutes a counter-offer which the offeror may
accept or reject. The contract is not perfected if the offeror revokes or withdraws its offer and the revocation or
withdrawal of the offeror is the first to reach the offeree. The acceptance by the offeree of the offer after knowledge of
the revocation or withdrawal of the offer is inefficacious.
In this case, when the letter-offer of the respondent was delivered to the petitioner, he did not accept or reject the same
for the reason that he needed time to decide whether to reject or accept the same. There was no contract perfected
between the petitioner and the respondent corporation. Although the petitioner claims that he had affixed his
conformity to the letter-offer, the petitioner failed to transmit the said copy to the respondent. It was only when the
petitioner appended to his letter to the respondent a copy of the said Letter-offer bearing his conformity that he notified
the respondent of his acceptance to said offer. But then, the respondent, had already withdrawn its offer and had already
notified the petitioner of said withdrawal. It must be underscored that there was no time frame fixed by the respondent
for the petitioner to accept or reject its offer. When the offeror has not fixed a period for the offeree to accept the offer,
and the offer is made to a person present, the acceptance must be made immediately.
On the second issue, the petitioner avers that Philtectic Corporation, although a wholly-owned and controlled subsidiary
of the respondent, had no authority to withdraw the offer of the respondent. We do not agree with the petitioner.
Implicit in the authority given to Philtectic Corporation to demand for and recover from the petitioner the subject car and
to institute the appropriate action against him to recover possession of the car is the authority to withdraw the
respondent's Letter-offer. It cannot be argued that respondent authorized Philtectic Corporation to demand and sue for
the recovery of the car and yet did not authorize it to withdraw its Letter-offer to the petitioner. Besides, when he
testified, Senen Valero stated that the letter of Philtectic Corporation to the petitioner was upon his instruction and
conformably with the aforesaid resolution of the Board of Directors of the respondent.

CASE 52 – VILLANUEVA vs. CENTRAL BANK OF THE PHILS, ONG, and PHILIPPINE VETERANS
BANK
FACTS:
Miguela Villanueva sought the help of one Jose Viudez, the Officer-in-Charge of the PVB if she could obtain a loan from
said bank. Viudez told Villanueva to surrender the titles of said lots as collaterals. And to further facilitate a bigger loan,
Viudez, in connivance with Andres Sebastian, swayed Villanueva to execute a deed of sale covering the two disputed lots,
which she did but without the signature of her husband Celestino. Miguela Villanueva, however, never got the loan she
was expecting. Villanueva found out that new titles over the two lots were already issued in the name of PVB. It appeared
upon inquiry from the Registry of Deeds that the original titles of these lots were canceled and new ones were issued to
Jose Viudez, which in turn were again cancelled and new titles issued in favor of Andres Sebastian, until finally new titles
were issued in the name of PNB [should be PVB] after the lots were foreclosed for failure to pay the loan. Miguela
Villanueva sought to repurchase the lots from the PVB after being informed that the lots were about to be sold at
auction.
Plaintiff-appellant Ong, on the other hand, expounds on his claim over the disputed lots. While appellant was still abroad,
PVB approved his subject offer. Among the conditions imposed by PVB is that: The purchase price shall be P110,000.00
(less deposit of P10,000.00) payable in cash within fifteen days from receipt of approval of the offer. Appellant returned
to the country. He immediately verified the status of his offer with the PVB, now under the control of CB, where he was
informed that the same had already been approved. Appellant formally informed CB of his desire to pay the subject
balance provided the bank should execute in his favor the corresponding deed of conveyance. The letter was not
answered. Plaintiff-appellant through his counsel, sent a letter to CB demanding for the latter to execute the
corresponding deed of conveyance in favor of appellant. CB did not bother to answer the same.
 JOSEPH ACE LAGURIN, CPA 10

Ong tendered the sum of P100,000.00 representing the balance of the purchase price of the litigated lots. An employee
of the PVB received the amount conditioned upon approval by the Central Bank liquidator. Upon learning that the PVB
had been placed under liquidation, the presiding judge ordered the transfer of the case to the liquidation court. The
Presiding Judge issued an order allowing the purchase of the two lots at the price of P150,000.00. The Central Bank
liquidator of the PVB moved for the reconsideration of the order asserting that it is contrary to law as the disposal of the
lots should be made through public auction.
Miguela Villanueva filed her claim with the liquidation court. She averred, among others, that she is the lawful and
registered owner of the subject lots which were mortgaged in favor of the PVB thru the falsification committed by Jose
Viudez, the manager of the PVB Makati Branch, in collusion with Andres Sebastian; that upon discovering this fraudulent
transaction, she offered to purchase the property from the bank.

ISSUE:
Whether or not the respondent was the rightful owner of the property.

RULING:
There is no doubt that the approval of Ong's offer constitutes an acceptance, the effect of which is to perfect the contract
of sale upon notice thereof to Ong. However, Ong did not receive any notice of the approval of his offer. It was only
sometime in mid-April when he returned from the United States and inquired about the status of his bid that he came to
know of the approval. It must be recalled that the PVB was placed under receivership pursuant to the MB Resolution
after a finding that it was insolvent, illiquid, and could not operate profitably, and that its continuance in business would
involve probable loss to its depositors and creditors. The PVB was then prohibited from doing business in the
Philippines, and the receiver appointed was directed to "immediately take charge of its assets and liabilities, as
expeditiously as possible collect and gather all the assets and administer the same for the benefit of its creditors,
exercising all the powers necessary for these purposes."
Under Article 1323 of the Civil Code, an offer becomes ineffective upon the death, civil interdiction, insanity, or
insolvency of either party before acceptance is conveyed. The reason for this is that the contract is not perfected except
by the concurrence of two wills which exist and continue until the moment that they occur. The contract is not yet
perfected at any time before acceptance is conveyed; hence, the disappearance of either party or his loss of capacity
before perfection prevents the contractual tie from being formed.
Upon the insolvency of a bank, a receiver therefore is appointed, the assets of the bank pass beyond its control into the
possession and control of the receiver whose duty it is to administer to assets for the benefit of the creditors of the bank.
Thus, the appointment of a receiver operates to suspend the authority of the bank and of its directors and officers over
its property and effects, such authority being reposed in the receiver, and in this respect, the receivership is equivalent to
an injunction to restrain the bank officers from intermeddling with the property of the bank in any way.
In a nutshell, the insolvency of a bank and the consequent appointment of a receiver restrict the bank's capacity to act,
especially in relation to its property. Ong's offer to purchase the subject lots became ineffective because the PVB
became insolvent before the bank's acceptance of the offer came to his knowledge. Hence, the purported contract of
sale between them did not reach the stage of perfection. Corollarily, he cannot invoke the resolution of the bank
approving his bid as basis for his alleged right to buy the disputed properties nor may the acceptance by an employee of
the PVB of Ong's payment of P100,000.00 benefit him since the receipt of the payment was made subject to the approval
by the Central Bank liquidator of the PVB.
The Court of Appeals, therefore, erred when it held that Ong had a better right than the petitioners to the purchase of
the disputed lots.

CASE 53 – METROPOLITAN WATERWORKS & SEWERAGE SYSTEM vs. CA, AYALA CORP.,
CAPITOL HILLS GOLF AND COUNTRY CLUB, SILHOUETTE TRADING CORP., & PABLO ROMAN JR.
FACTS:
Petitioner MWSS leased around 128 hectares of its land to respondent CHGCCI for 25 years and renewable for another 15
years, with the stipulation allowing the latter to exercise a right of first refusal should the subject property be made open
 JOSEPH ACE LAGURIN, CPA 11

for sale. The terms and conditions of respondent CHGCCI's purchase shall nonetheless be subject to presidential
approval. Pursuant to Letter of Instruction by then President Ferdinand Marcos directing petitioner MWSS to negotiate
the cancellation of the MWSS-CHGCCI lease agreement for the disposition of the subject property, MWSS informed
CHGCCI, through its president Pablo Roman, Jr., of its preferential right to buy the subject property which was up for sale.
Upon being informed that petitioner MWSS and CHGCCI had already agreed in principle on the purchase of the subject
property, President Marcos expressed his approval of the sale as shown in his marginal note on the letter. MWSS
thereafter passed Resolution, approving the sale of the subject property in favor of respondent SILHOUETTE, as assignee
of respondent CHGCCI, at the appraised value given by Asian Appraisal Co., Inc. The MWSS-SILHOUETTE sales agreement
eventually pushed through. Subsequently, SILHOUETTE, under a deed of sale, sold to respondent AYALA about 67
hectares of the subject property. Respondent AYALA developed the land it purchased into a prime residential area now
known as the Ayala Heights Subdivision.
Almost a decade later, petitioner MWSS filed an action against all herein named respondents before the Regional Trial
Court of seeking for the declaration of nullity of the MWSS-SILHOUETTE sales agreement and all subsequent conveyances
involving the subject property, and for the recovery thereof with damages.
Respondent AYALA filed its answer pleading the affirmative defenses of (1) prescription, (2) laches, (3)
waiver/estoppel/ratification, (4) no cause of action, (5) non-joinder of indispensable parties, and (6) non-jurisdiction of
the court for non-specification of amount of damages sought. The trial court issued an Order dismissing the complaint of
petitioner MWSS on grounds of prescription, laches, estoppel and non-joinder of indispensable parties.

ISSUES:
Whether or not the trial court erred in issuing an order dismissing the complaint of petitioner MWSS on grounds of
prescription, laches, estoppel and non-joinder of indispensable parties.

RULING:
Prescription
The very allegations in petitioner MWSS' complaint show that the subject property was sold through contracts which, at
most, can be considered only as voidable, and not void. As noted by both lower courts, petitioner MWSS admits that it
consented to the sale of the property, with the qualification that such consent was allegedly unduly influenced by the
President Marcos. Taking such allegation to be hypothetically true, such would have resulted in only voidable contracts
because all three elements of a contract, still obtained nonetheless. The alleged vitiation of MWSS' consent did not make
the sale null and void ab initio. Thus, a contract where consent is given through mistake, violence, intimidation, undue
influence or fraud, is voidable.
As the contracts were voidable at the most, the four-year prescriptive period under the New Civil Code will apply. This
article provides that the prescriptive period shall begin in the cases of intimidation, violence or undue influence, from
the time the defect of the consent ceases, and in case of mistake or fraud, from the time of the discovery of the same
time.
Laches
Even assuming, for argument's sake, that the allegations in the complaint establish the absolute nullity of the assailed
contracts and hence imprescriptible, the complaint can still be dismissed on the ground of laches which is different from
prescription. The defense of laches applies independently of prescription. Laches is different from the statute of
limitations. Prescription is concerned with the fact of delay, whereas laches is concerned with the effect of delay.
Prescription is a matter of time; laches is principally a question of inequity of permitting a claim to be enforced, this
inequity being founded on some change in the condition of the property or the relation of the parties. Prescription is
statutory; laches is not. Laches applies in inequity, whereas prescription applies at law. Prescription is based on fixed-
time; laches is not.
Thus, the prevailing doctrine is that the right to have a contract declared void ab initio may be barred by laches
although not barred by prescription. It has, for all its elements are present:
1) conduct on the part of the defendant, or one under whom he claims, giving rise to the situation that led to the
complaint and for which the complaint seeks a remedy;
 JOSEPH ACE LAGURIN, CPA 12

2) delay in asserting the complainant's rights, having had knowledge or notice of the defendant's conduct and
having been afforded an opportunity to institute a suit;
3) lack of knowledge or notice on the part of the defendant that the complainant would assert the right on which
he bases his suit; and
4) injury or prejudice to the defendant in the event relief is accorded to the complainant, or the suit is not held
barred.
There is no question on the presence of the first element. The main thrust of petitioner MWSS's complaint is to bring to
the fore what it claims as fraudulent and/or illegal acts of the respondents in the acquisition of the subject property. The
second element of delay is evident from the fact that petitioner tarried for almost 10 years from the conclusion of the
sale before formally laying claim to the subject property. The third element is present as can be deduced from the
allegations in the complaint that petitioner MWSS (a) demanded for a downpayment for no less than three times; (b)
accepted downpayment for P25 Million; and (c) accepted a letter of credit for the balance.
Ratification
Pertinent to this issue is the claim of petitioner MWSS that Mr. Ilustre was never given the authority by its Board of
Trustees to enter into the "initial agreement" and therefore, the sale of the subject property is invalid. The perceived
infirmity in the "initial agreement" can be cured by ratification. So settled is the precept that ratification can be made by
the corporate board either expressly or impliedly. Implied ratification may take various forms like silence or acquiescence;
by acts showing approval or adoption of the contract; or by acceptance and retention of benefits flowing therefrom. Both
modes of ratification have been made in this case.
There was express ratification made by the Board of petitioner MWSS when it passed Resolution No. 36-83 approving the
sale of the subject property to respondent SILHOUETTE and authorizing Mr. Ilustre, as General Manager, "to sign for and
in behalf of the MWSS the contract papers and other pertinent documents relative thereto." Implied ratification by
"silence or acquiescence" is revealed from the acts of petitioner MWSS in (a) sending three (3) demand letters for the
payment of the purchase price, (b) accepting P25 Million as downpayment, and (c) accepting a letter of credit for the
balance, as hereinbefore mentioned.
Non-joinder of indispensable parties
There is no denying that petitioner MWSS' action against herein respondents for the recovery of the subject property
now converted into a prime residential subdivision would ultimately affect the proprietary rights of the many lot owners
to whom the land has already been parceled out. They should have been included in the suit as parties-defendants, for
"it is well established that owners of property over which reconveyance is asserted are indispensable parties without
whom no relief is available and without whom the court can render no valid judgment." Being indispensable parties, the
absence of these lot-owners in the suit renders all subsequent actions of the trial court null and void for want of
authority to act, not only as to the absent parties but even as to those present.

Case 54 – ULIAN FRANCISCO & HEIRS vs. PASTOR HERRERA

FACTS:
Eligio Herrera, Sr., the father of respondent, was the owner of two parcels of land. Petitioner bought from said
landowner the two parcels of land for P1,000,000 and P750,000 respectively. Contending that the contract price for the
two parcels of land was grossly inadequate, the children of Eligio, Sr. and respondent Pastor Herrera, tried to negotiate
with petitioner to increase the purchase price. When petitioner refused, herein respondent then filed a complaint for
annulment of sale.
In his complaint, respondent claimed ownership over the second parcel. He likewise claimed that the first parcel covered
was subject to the co-ownership of the surviving heirs of Francisca A. Herrera, the wife of Eligio, Sr., considering that she
died intestate before the alleged sale to petitioner. Respondent also alleged that the sale of the two lots was null and
void on the ground that at the time of sale, Eligio, Sr. was already incapacitated to give consent to a contract because he
was already afflicted with dementia, characterized by deteriorating mental and physical condition including loss of
memory.

ISSUE:
 JOSEPH ACE LAGURIN, CPA 13

Whether or not the assailed contracts of sale void or merely voidable and hence capable of being ratified.

RULING:
The courts found that Eligio, Sr. was already suffering from senile dementia at the time he sold the lots in question. In
other words, he was already mentally incapacitated when he entered into the contracts of sale. Settled is the rule that
findings of fact of the trial court, when affirmed by the appellate court, are binding and conclusive upon the Supreme
Court.
A void or inexistent contract is one which has no force and effect from the very beginning . There are two types of void
contracts:
1) Those where one of the essential requisites of a valid contract as provided for by Article 1318 10 of the Civil
Code is totally wanting.
2) Those declared to be so under Article 1409 of the Civil Code
By contrast, a voidable or annullable contract is one in which the essential requisites for validity under Article 1318 are
present, but vitiated by want of capacity, error, violence, intimidation, undue influence, or deceit.
Article 1327 provides that insane or demented persons cannot give consent to a contract. But, if an insane or demented
person does enter into a contract, the legal effect is that the contract is voidable or annullable. In the present case, it
was established that the vendor Eligio, Sr. entered into an agreement with petitioner, but that the former's capacity to
consent was vitiated by senile dementia. Hence, we must rule that the assailed contracts are not void or inexistent per se;
rather, these are contracts that are valid and binding unless annulled through a proper action filed in court seasonably.
An annullable contract may be rendered perfectly valid by ratification, which can be express or implied . Implied
ratification may take the form of accepting and retaining the benefits of a contract. This is what happened in this case.
Respondent's contention that he merely received payments on behalf of his father merely to avoid their misuse and that
he did not intend to concur with the contracts is unconvincing. If he was not agreeable with the contracts, he could have
prevented petitioner from delivering the payments, or if this was impossible, he could have immediately instituted the
action for reconveyance and have the payments consigned with the court. None of these happened. As found by the
trial court and the Court of Appeals, upon learning of the sale, respondent negotiated for the increase of the purchase
price while receiving the installment payments. It was only when respondent failed to convince petitioner to increase the
price that the former instituted the complaint for reconveyance of the properties. Clearly, respondent was agreeable to
the contracts, only he wanted to get more. Further, there is no showing that respondent returned the payments or made
an offer to do so. This bolsters the view that indeed there was ratification.
Note that it was found by the courts that Eligio, Sr., was the "declared owner" of said lots. This finding is conclusive on us.
As declared owner of said parcels of land, it follows that Eligio, Sr., had the right to transfer the ownership thereof under
the principle of jus disponendi (the right to alienate, encumber, transform or even destroy the thing owned). Therefore,
the two contracts of sale covering lots are declared valid.

Case 55 - HEIRS OF WILLIAM & MARIA SEVILLA vs. LEOPOLDO SEVILLA, PETER SEVILLA, AND
LUZVILLA SEVILLA
FACTS:
Filomena Almirol de Sevilla died intestate leaving eight 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 four parcels of properties.
Felisa Almirol co-owned Lot No. 653 with her sisters Filomena Almirol de Sevilla, deceased, and Honorata Almirol. Her 1/3
undivided share in said lot was increased by 1/2 when she and Filomena inherited the 1/3 share of their sister Honorata
after the latter's death. Felisa died single and without issue.
Petitioners, heirs of Filomena, sought the annulment of the two deeds executed by Felisa during her lifetime. The first
deed was denominated as "Donation Inter Vivos" (donation out of pure generosity) whereby Felisa ceded to her nephew
respondent Leopoldo Sevilla, son of Filomena, her 1/2 undivided share in Lot 653, which was accepted by Leopoldo in the
 JOSEPH ACE LAGURIN, CPA 14

same document. The second document was denominated as the Deed of Extra-Judicial Partition dividing the share of
Honorata to Felisa and to the heirs of Filomena.
Petitioners alleged that the Deed of Donation was tainted with fraud because Felisa Almirol, who was then 81 years of
age, was seriously ill and of unsound mind at the time of execution thereof; and that the Deed of Extra-judicial Partition
was void because it was executed without their knowledge and consent. Respondents, however, denied petitioners'
allegations. The trial court upheld the validity of the Deed of Donation, but declared the Deed of Extra-judicial Partition
unenforceable. On appeal, the Court of Appeals affirmed in toto the assailed decision of the trial court.

ISSUE:
Whether or not the court erred in not holding as void ab initio the deed of donation executed by Felisa Almirol in favor of
respondent Leopoldo Sevilla ceding to him one half portion of Lot 653, it having been executed with fraud, undue
pressure and influence

RULING:
To resolve the issue, the validity of the donation inter vivos executed by Felisa in favor of Leopoldo Sevilla must first be
determined. Donation is an act of liberality whereby a person disposes gratuitously of a thing or right in favor of
another who accepts it. The donor's 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.
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. There are exceptional circumstances when findings of fact of
lower courts may be set aside but none is present in the case at bar.
Ei incumbit probatio qui dicit, non qui negat. He who asserts, not he who denies, must prove. 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 party's
consent must be established by full, clear and convincing evidence, otherwise, the latter's presumed consent to the
contract prevails. 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.
Anent the Deed of Extra-judicial Partition, we find that the same is void ab initio and not merely unenforceable. In the
case at bar, at the time Felisa executed the deed of extra-judicial partition dividing the share of her deceased sister
Honorata 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 donation inter vivos, as in the instant case, is immediately operative and final. As a mode of acquiring
ownership, it results in an effective transfer of title over the property from the donor to the donee and the donation is
perfected from the moment the donor knows of the acceptance by the donee. And once a donation is accepted, the
donee becomes the absolute owner of the property donated. Considering that she had no legal capacity to give consent
to the deed of partition, 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 void ab initio, hence, not susceptible of ratification.
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: 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.

CASE 56 - JOSEFA CHAVES-MAESTRADO & CARMEN CHAVES ABAYA vs. JESUS ROA JR., RAMON
CHAVES & NATIVIDAD SANTOS
FACTS:
 JOSEPH ACE LAGURIN, CPA 15

These consolidated cases involve the status of Lot No. 5872 and the rights of the contending parties thereto. The said lot
which is still registered in the name of the deceased spouses Ramon and Rosario Chaves. They were survived by the
following heirs, namely: Carmen Chaves-Abaya, Josefa Chaves-Maestrado, Angel Chaves, Amparo Chaves-Roa,
Concepcion Chaves-Sanvictores and Salvador Chaves.
To settle the estate of the said deceased spouses, Angel Chaves initiated intestate proceedings in the Court of First
Instance and was appointed administrator of said estates in the process. An inventory of the estates was made and
thereafter, the heirs agreed on a project of partition. Thus, they filed an action for partition. The court appointed
Hernando Roa, husband of Amparo Chaves-Roa, as receiver. The court rendered a decision approving the project of
partition. This notwithstanding, the estate was actually divided in this wise: (1) Lot No. 3046 was distributed equally
among four heirs, namely: (a) Concepcion Chaves-Sanvictores; (b) Angel Chaves; (c) Amparo Chaves-Roa; and (d) Ramon
Chaves, while (2) Lot Nos. 5925, 5934, 1327 and 5872 was distributed equally between petitioners (a) Josefa Chaves-
Maestrado; and (b) Carmen Chaves-Abaya.
Significantly, Lot No. 5872 was not included in the partition. Decedent Ramon Chaves acquired Lot No. 5872 from
Felomino Bautista, Sr. but he subsequently delivered it to the spouses Hernando Roa and Amparo Chaves-Roa. It was
thereafter delivered to petitioners during the actual partition, and petitioners have been in possession of the same since
then. For some reason, however, the actual partition of the estate conformed to the alleged oral agreement. Petitioners
claim that they failed to notice the non-inclusion of Lot No. 5872 in the court's order. In an effort to set things right,
petitioners prepared a quitclaim to confirm the alleged oral agreement. Angel, Concepcion and Ramon signed a notarized
quitclaim in favor of petitioners. Amparo was unable to sign because she had an accident and had passed away on the
following day. It was her heirs who signed the quitclaim.
Respondents dispute the voluntariness of their consent or the consent of their predecessors-in-interest to the quitclaims.
Ramon claims to have been betrayed by his lawyer, Francisco Velez, who is the son-in-law of petitioner Josefa Maestrado.
He allegedly signed the quitclaim without reading it because his lawyer had already read it. On the other hand, Angel
signed the quitclaim "out of respect" for petitioners. On the other hand, Concepcion signed because she was misled by
alleged misrepresentations in the "Whereas Clauses" of the quitclaim to the effect that the lot was inadvertently omitted
and not deliberately omitted due to doubts on its status.
Six years after the execution of the quitclaims, respondents discovered that Lot No. 5872 is still in the name of the
deceased spouses Ramon and Rosario Chaves. Thus, respondent Ramon Chaves Jr, sole heir of Salvador Chaves, and
respondent Jesus Roa, son of Amparo Chaves-Roa, wrote a letter to their uncle Angel Chaves to inform him that said
property, which they claim to belong to the estate of their deceased grandparents, has not yet been distributed to the
concerned heirs. Hence, they requested Angel Chaves to distribute and deliver it to the heirs. Angel Chaves transmitted
the said letters to petitioner Carmen Abaya and requested her to respond.
In response, petitioners filed an action for Quieting of Title against respondents in the Regional Trial Court of Cagayan de
Oro.

ISSUE:
Whether or not the action for quieting of title had already prescribed.

RULING:
Petitioners are proper parties to bring an action for quieting of title. Persons having legal as well as equitable title to or
interest in a real property may bring such action and "title" here does not necessarily denote a certificate of title issued in
favor of the person filing the suit. Moreover, if the plaintiff in an action for quieting of title is in possession of the
property being litigated, such action is imprescriptible. One who is in actual possession of a land, claiming to be the
owner thereof may wait until his possession is disturbed or his title is attacked before taking steps to vindicate his right.
Although prescription and laches are distinct concepts, we have held, nonetheless, that in some instances, the doctrine
of laches is inapplicable where the action was filed within the prescriptive period provided by law. Thus, laches does
not apply in this case because petitioners' possession of the subject lot has rendered their right to bring an action for
quieting of title imprescriptible and, hence, not barred by laches. Moreover, since laches is a creation of equity, acts or
conduct alleged to constitute the same must be intentional and unequivocal so as to avoid injustice. Laches operates not
really to penalize neglect or sleeping on one's rights, but rather to avoid recognizing a right when to do so would result in
a clearly inequitable situation. In the case at bench, the cloud on petitioners' title to the subject property came about
 JOSEPH ACE LAGURIN, CPA 16

only on December 1, 1983 when Angel Chaves transmitted respondents' letters to petitioners, while petitioners' action
was filed on December 22, 1983. Clearly, no laches could set in under the circumstances since petitioners were prompt
and vigilant in protecting their rights.
Lot No. 5872 is no longer common property of the heirs of the deceased spouses Ramon and Rosario Chaves.
Petitioners' ownership over said lot was acquired by reason of the oral partition agreed upon by the deceased spouses'
heirs. That oral agreement was confirmed by the notarized quitclaims executed by the said heirs. The existence of the
oral partition together with the said quitclaims is the bone of contention in this case. It appeared, however, that the
actual partition of the estate conformed to the alleged oral partition despite a contrary court order. Despite claims of
private respondents that Lot No. 5872 was mistakenly delivered to the petitioners, nothing was done to rectify it for a
period of 27 years.
Prior to the actual partition, petitioners were not in possession of Lot No. 5872 but for some reason or another, it was
delivered to them. Hence, we are convinced that there was indeed an oral agreement of partition among the said heirs
and the distribution of the properties was consistent with such oral agreement. A possessor of real estate property is
presumed to have title thereto unless the adverse claimant establishes a better right. In the instant case it is the
petitioners, being the possessors of Lot No. 5872, who have established a superior right thereto by virtue of the oral
partition which was also confirmed by the notarized quitclaims of the heirs.
Partition is the separation, division and assignment of a thing held in common among those to whom it may belong. It
may be effected extra-judicially by the heirs themselves through a public instrument filed before the register of deeds.
However, as between the parties, a public instrument is neither constitutive nor an inherent element of a contract of
partition. Since registration serves as constructive notice to third persons, an oral partition by the heirs is valid if no
creditors are affected. Moreover, even the requirement of a written memorandum under the statute of frauds does not
apply to partitions effected by the heirs where no creditors are involved considering that such transaction is not a
conveyance of property resulting in change of ownership but merely a designation and segregation of that part which
belongs to each heir. Hence, even without registration, the contract is still valid as between the parties. In fact, it has
been recently held and reiterated by this Court that neither a Transfer Certificate of Title nor a subdivision plan is
essential to the validity of an oral partition.
Finally, the said notarized quitclaims signed by the heirs in favor of petitioners are not vitiated by fraud. Hence, they are
valid. Since the oral partition has been duly established, the notarized quitclaims confirmed such prior oral agreement as
well as the petitioners' title of ownership over the subject Lot No. 5872.
The freedom to enter into contracts, such as the quitclaims in the instant case, is protected by law and the courts are not
quick to interfere with such freedom unless the contract is contrary to law, morals, good customs, public policy or public
order. Quitclaims, being contracts of waiver, involve the relinquishment of rights, with knowledge of their existence
and intent to relinquish them. The intent to waive rights must be clearly and convincingly shown. In the instant case, the
terms of the subject quitclaims are clear; and the heirs' signatures thereon have no other significance but their
conformity thereto resulting in a valid waiver of property rights. Herein respondents quite belatedly and vainly attempted
to invoke alleged fraud in the execution of the said quitclaims but we are not convinced. In other words, the said
quitclaims being duly notarized and acknowledged before a notary public, deserve full credence and are valid and
enforceable in the absence of overwhelming evidence to the contrary.
The instances of fraud allegedly committed in the case at bench are not the kind of fraud contemplated by law. On the
contrary, they constitute mere carelessness in the conduct of the affairs of the heirs concerned. We have consistently
denied relief to a party who seeks to avoid the performance of an obligation voluntarily assumed because they turned
out to be disastrous or unwise contracts, even if there was a mistake of law or fact.