KATIPUNAN V KATIPUNANSANDOVAL-GUTIERREZ; January 30, 2002

NATUREPetition for review on certiorari assailing the Decision of the Court of Appeals which set aside the Decision of the Regional Trial Court (RTC) of Manila, Branch 28, in Civil Case No. 87-39891 for annulment of a Deed of Absolute Sale.

FACTS- Respondent Braulio Katipunan, Jr. is the owner of a 203 square meter lot and a five-door apartment constructed thereon located at 385-F Matienza St., San Miguel, Manila. The lot is registered in his name under TCT No. 109193 of the Registry of Deeds of Manila. The apartment units are occupied by lessees.- On December 29, 1985, respondent, assisted by his brother, petitioner Miguel Katipunan, entered into a Deed of Absolute Sale with brothers Edgardo Balguma and Leopoldo Balguma, Jr. (co-petitioners), represented by their father Atty. Leopoldo Balguma, Sr., involving the subject property for a consideration of P187,000.00. Consequently, respondent’s title to the property was cancelled and in lieu thereof, TCT No. 168394 was registered and issued in the names of the Balguma brothers. In January, 1986, Atty. Balguma, then still alive, started collecting rentals from the lessees of the apartments.- On March 10, 1987, respondent filed with the RTC of Manila, Branch 21, a complaint for annulment of the Deed of Absolute Sale, docketed as Civil Case No. 87-39891.He averred that his brother Miguel, Atty. Balguma and Inocencio Valdez (defendants therein, now petitioners) convinced him to work abroad. They even brought him to the NBI and other government offices for the purpose of securing clearances and other documents which later turned out to be falsified. Through insidious words and machinations, they made him sign a document purportedly a contract of employment, which document turned out to be a Deed of Absolute Sale. By virtue of the said sale, brothers Edgardo and Leopoldo, Jr. (co-defendants), were able to register the title to the property in their names. Respondent further alleged that he did not receive the consideration stated in the contract. He was shocked when his sister Agueda Katipunan-Savellano told him that the Balguma brothers sent a letter to the lessees of the apartment informing them that they are the new owners. Finally, he claimed that the defendants, now petitioners, with evident bad faith, conspired with one another in taking advantage of his ignorance, he being only a third grader.- In their answer, petitioners denied the allegations in the complaint, alleging that respondent was aware of the contents of the Deed of Absolute Sale and that he received the consideration involved; that he also knew that the Balguma brothers have been collecting the rentals since December, 1985 but that he has not objected or confronted them; and that he filed the complaint because his sister, Agueda Savellano, urged him to do so.- Twice respondent moved to dismiss his complaint (which were granted) on the grounds that he was actually instigated by his sister to file the same; and that the parties have reached an amicable settlement after Atty. Balguma, Sr. paid him

P2,500.00 as full satisfaction of his claim. In granting his motions for reconsideration, the trial court was convinced that respondent did not sign the motions to dismiss voluntarily because of his poor comprehension, as shown by the medical report of Dr. Annette Revilla, a Resident Psychiatrist at the Philippine General Hospital. - The trial court noted that respondent was not assisted by counsel in signing the said motions, thus it is possible that he did not understand the consequences of his action.- The trial court set the case for pre-trial. The court likewise granted respondent’s motion to appoint Agueda Savellano as his guardian ad litem.- The trial court dismissed the complaint, holding that respondent failed to prove his causes of action since he admitted that: (1) he obtained loans from the Balgumas; (2) he signed the Deed of Absolute Sale; and (3) he acknowledged selling the property and that he stopped collecting the rentals.- Court of Appeals reversed

ISSUEWON the consent of Braulio Katipunan, Jr., in the sale of his property was vitiated rendering the Deed of Absolute sale voidable

HELDYES- A contract of sale is born from the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. This meeting of the minds speaks of the intent of the parties in entering into the contract respecting the subject matter and the consideration thereof. Thus, the elements of a contract of sale are consent, object, and price in money or its equivalent. Under Article 1330 of the Civil Code, consent may be vitiated by any of the following: (a) mistake, (2) violence, (3) intimidation, (4) undue influence, and (5) fraud. The presence of any of these vices renders the contract voidable.Respondent signed the deed without the remotest idea of what it was.The circumstances surrounding the execution of the contract manifest a vitiated consent on the part of respondent. Undue influence was exerted upon him by his brother Miguel and Inocencio Valdez (petitioners) and Atty. Balguma. It was his brother Miguel who negotiated with Atty. Balguma. However, they did not explain to him the nature and contents of the document. Worse, they deprived him of a reasonable freedom of choice. It bears stressing that he reached only grade three. Thus, it was impossible for him to understand the contents of the contract written in English and embellished in legal jargon. His lack of education, coupled with his mental affliction, placed him not only at a hopelessly disadvantageous position vis-à-vis petitioners to enter into a contract, but virtually rendered him incapable of giving rational consent. To be sure, his ignorance and weakness made him most vulnerable to the deceitful cajoling and intimidation of petitioners. - A contract where one of the parties is incapable of giving consent or where consent is vitiated by mistake, fraud, or intimidation is not void ab initio but only

voidable and is binding upon the parties unless annulled by proper Court action. The effect of annulment is to restore the parties to the status quo ante insofar as legally and equitably possible-- this much is dictated by Article 1398 of the Civil Code. As an exception however to the principle of mutual restitution, Article 1399 provides that when the defect of the contract consists in the incapacity of one of the parties, the incapacitated person is not obliged to make any restitution, except when he has been benefited by the things or price received by him. Thus, since the Deed of Absolute Sale between respondent and the Balguma brothers is voidable and hereby annulled, then the restitution of the property and its fruits to respondent is just and proper. Petitioners should turn over to respondent all the amounts they received starting January, 1986 up to the time the property shall have been returned to the latter.- Article 24 of the Civil Code enjoins courts to be vigilant for the protection of a party to a contract who is placed at a disadvantage on account of his ignorance, mental weakness or other handicap, like respondent herein. We give substance to this mandate.

MARTINEZ V HSBCMORELAND; February 19, 1910

NATUREAn action to annul a contract on the ground that plaintiff's consent thereto was obtained under duress

FACTS- Under the contract, she agreed to a conveyance of several properties to Aldecoa & Co. and the Hongkong and Shanghai Bank as settlement of their claims against her and her husband who in order to escape criminal charges had escaped to Macao, a territory no covered by any extradition treaty.- It was established at the trial that during the period of negotiation, representations were made to her by the defendants and concurred in by her lawyers, that if she assented to the requirements of the defendants, the civil suit against herself and her husband would be dismissed and the criminal charges against the latter withdrawn; but if she refused, her husband must either spend the rest of his life in Macao or be criminally prosecuted.

ISSUE WON there was duress, which would invalidate the contract

HELD- In order that this contract can be annulled it must be shown that the plaintiff never gave her consent to the execution thereof. It is however necessary to distinguish between real duress and the motive which is present when one gives his consent reluctantly. A contract is valid even though one of the parties entered into it against his wishes and desired or even against his better judgment.

Contracts are also valid even though they are entered into by one of the parties without hope of advantage or profit.- A contract whereby reparation is made by one party for injuries which he has willfully inflicted upon another is one which from its nature is entered into reluctantly by the party making the reparation. He is confronted with a situation in which he finds the necessity of making the reparation or of taking the consequences, civil or criminal, of his unlawful acts. He makes the contract of reparation with extreme reluctance and only by the compelling force of the punishment threatened. Nevertheless, such contract is binding and enforceable.- It is disputed that the attorneys for the plaintiff in this case advised her that, from the facts which they had before them, facts of which she was fully informed, her husband had been guilty of embezzlement and misappropriation in the management of the business of Aldecoa & Co. and that, in their judgment, if prosecuted therefore, he would be convicted. In other words, under the advice of her counsel, the situation was so presented to her that it was evident that in signng the agreement, she had all to gain and nothing tolose, whereas in refusing to sign said agreement, she had all to lose and nothing to gain. In the one case, she would lose her property to save her husband. In the other, she would lose her property and her husband, too. The argument this presented to her by her attorneys addressed itself to judgment and not to fear. If appealed to reason and not to passion. It asked her to be moved by common sense and not by love of family. It spoke to her own interests as much as to those of her husband. The argument went ot her financial interests as well as to those of the defendants. It spoke to her business judgment as well as to her wifely affections. - From the opinions of her attorneys as they were presented to her upon facts assumed by all to be true, the SC did not see how she could reasonably have reached a conclusion other than that which she did reach. It is of no consequence here whether, as a matter of law, she would have been deprived of her alleged interests in the properties mentioned in the manner described and advised by her attorneys. The important thing is that she believed and accepted their judgment and acted upon it. The question is not did she make a mistake; but did she consent; not was she wrongly advised, but was she coerced; not was she wise, but was she under duress. Disposition- From the whole case SC was of the opinion that the finding of the court below that the plaintiff executed the contract in suit of her own free will and choice and not from duress is fully sustained by the evidence.- The judgment of the court below was affirmed with cost against the appellant.

HILL V VELOSOARELLANO; July 24, 1915

NATURE Appeal from a judgment of the CFI absolving defendants from the complaint

FACTS - Defendant Veloso and Domingo Franco jointly and severally executed a promissory note in the amount of P6,319 on behalf of Michael & Co. for goods to be received by the former’s company, La Cooperativa Filipina- Goods were proven to have been delivered to La Cooperativa- P2,000 was already paid.- Promissory note was indorsed to Plaintiff Hill.- Hill brought the present suit to recover the P4,319 balance.- Veloso alleged that she was deceived by Franco into signing a blank sheet of paper by saying that it was for a promissory note to be executed by Veloso for P8,000 for the benefit of the minor children of one Ricablanca, mother and former guardian of said children- The new guardian is one Levering, to whom Veloso thought the obligation was due as guardian of the estate of the minor children.- Upon Franco’s death, Veloso alleged that she discovered that the former apparently used her signature to execute the contract with Michael & Co, now indorsed to Hill.- Therefore, she alleges that she has no transaction with Michael & Co. nor with the plaintiff, and as they had not received any kind of goods whatever from said firm.- During the pendency of the suit initiated by Hill, Levering commenced proceedings to recover the P8,000.- Veloso answered that her debt was to Ricablanca in her own right, and not in her capacity as guardian of her minor children.

ISSUEWON the promissory note is binding on the defendants

HELD NO Ratio There is no other signed document than the promissory note presented with the intention, on its being signed, of securing the payment of the goods sold to the La Cooperativa. And the facts constituting the consideration for the contract contained in the promissory note are fully proven.Reasoning - With regard to the P8,000, what is natural and logical is that Veloso would have refused to execute her obligation to Levering in the first instance (i.e. when she signed the blank sheet of paper thinking it was for the P8,000) as she did reject it in 1912 saying she did not consider herself in debt to the minors, but to their mother.- It is of no importance whether La Cooperativa exclusively belonged to Veloso or Franco, the obligation being joint. - Deceit alleged could not annul the consent of the contracting parties to the promissory note, nor exempt Veloso from the obligation incurred.

- There is deceit when by words or insidious machinations on the part of one of the contracting parties, the other is induced to execute a contract which without them he would not have made.- Franco is not one contracting party with regard to Veloso as the other. They are both but one single contracting party in a relation with or against Michael & Co.- Franco could be as a third person inducing deceit. But, there is no reason for making one of the parties suffer for the consequences of the act of a third person in whom the other contracting party may have reposed an imprudent confidence.- It has been fully proven that the goods, the consideration for the debt, were received by La Cooperativa. It was likewise proven that La Cooperativa belonged to the defendant, and that the goods came from Michael & Co.Disposition Judgment appealed from is reversed against defendant Veloso ordering the payment of the P4,319 with the stipulated interest.

TUASON V MARQUEZMALCOLM; November 3, 1923

NATUREPetition to review the decision of the CFI.

FACTS- On March 5, 1921, Crisanto Marquez, the owner of the electric light plan of Lucena Tayabas, called Sucesores del Lucena Electric, gave an option to Antonio Tuason for the purchase of the plant for P14,400. The option was taken advantage of by Mariano S. Tuason. - The agreement was, that Tuason was to pay Marquez a total of P14,400; P2,400 within sixty days, and the remainder, P12,000, within a year. The first installment was paid subsequent to the sixty-day period; the second installment has not been paid. - Tuason being once in possession of the electric light plant, it was run under the management of the Consolidated Electric Company for about sixteen months, that is, from March 20, 1921, to July 19, 1922. On the date last mentioned, the property was sold under execution by reason of a judgment. The purchaser at said sale was Gregorio Marquez, brother of Crisanto Marquez, who paid P5,501.57 for the property. - It appears that originally in either 1913 or 1914, a franchise for thirty-five years was granted the Lucena Electric Company. The rights of this company passed to Crisanto Marquez at a sheriff's sale on September 10, 1919. The company seems never to have functioned very efficiently either at that time or at any other time, as appears from the constant complaint of the municipal authorities of Lucena. Evidently, Marquez became disgusted with the business, with the result that on February 28, 1921, that is, prior to the accomplishment of the contract, he announced to the Public Utility Commissioner his intention to give up the franchise.

- On March 29, 1921, that is, subsequent to the accomplishment of the contract, the Public Utility Commissioner took action and declared cancelled the franchise acquired by Crisanto Marquez from the Lucena Electric Light, Ice & Water Company. - Tuason and his outfit were permitted to operate the company pursuant to a special license which was to continue until they obtained a new franchise. The new franchise was finally granted by the Public Utility Commissioner with certain conditions, which amounted to a renovation of the entire plant. It was then, following a knowledge of what was expected by the Government, and following the execution sale, that Tuason conceived the idea of bringing action against Marquez for a rescission of the contract. - In the complaint filed in the CFI of Manila, Tuason, the plaintiff, asked for judgment against Crisanto Marquez, defendant, for a total of P37,400. The answer and cross-complaint of the defendant asked for a dismissal of the action and for an allowance of a total of P12,654.50 from the plaintiff. The case was submitted on an agreed statement of facts in relation with certain telegrams of record. Judgment was rendered, absolving the defendant from the complaint and permitting the defendant to recover from the plaintiff P12,240, with legal interest from August 1, 1922. The P12,000 of this judgment represented the amount still due on the contract, and P240 represented rent which the plaintiff was expected to pay the defendant. - The plaintiff claims in effect that the contract should be rescinded and that he should be allowed his damages, on account of the misrepresentation and fraud perpetrated by the defendant in selling an electric light plan with a franchise, when the defendant had already given up his rights to that franchise.

ISSUEWON the sale may be rescinded on the ground of misrepresentation and fraud.

HELD- The contract in making mention of the property of the electric light company, merely renewed a previous inventory of the property. The franchise, therefore, was not the determining cause of the purchase. Indeed, the franchise was then in force and either party could easily have ascertained its status by applying at the office of the Public Utility Commissioner. The innocent non-disclosure of a fact does not effect the formation of the contract or operate to discharge the parties from their agreement. - The equitable doctrine termed with questionable propriety "estoppel by laches," has particular applicability to the facts before us. Inexcusable delay in asserting a right and acquiescene in existing conditions are a bar to legal action. The plaintiff operated the electric light plant for about sixteen months without question; he made the first payment on the contract without protest; he bestirred himself to secure what damages he could from the defendant only after the venture had proved disastrous and only after the property had passed into the hands of a third party.

- There is no proof of fraud on the part of the defendant and find the plaintiff is estopped to press his action. Disposition Judgment is affirmed.

RURAL BANK OF STA. MARIA V CAGONZAGA-REYES; September 14, 1999

NATUREConsolidated petitions for review on certiorari

FACTS- A parcel of land of about 49,969 m2 registered in the name of Manuel Behis and his wife, Cristina Behis was mortgaged in favor of the Bank in a real estate mortgage as security for loans.- On Jan. 2, 1985, Manuel sold the land to Rosario Rayandayan and Carmen Arceño (herein respondents) in a Deed of Absolute Sale with Assumption of Mortgage for P250K. This deed bore the signature of his wife which he took upon himself to sign. - On the same day, Rayandayan and Arceño, together with Manuel Behis executed another Agreement embodying the real consideration of the sale of the land in the sum of P2.4M to be paid in installments with P10K paid upon signing and in case of default in the installments, Manuel Behis shall have legal recourse to the portions of the land equivalent to the unpaid balance of the amounts in installments. The title to the land remained in the name of Manuel Behis however. - Pursuant to their two contracts with Manuel Behis, plaintiffs were only able to pay under P300K (which included hospitalization, medical and burial expenses until he died on June 21, 1985). - Thereafter, Rayandayan and Arceño negotiated with the principal stockholder of the Bank, Engr. Edilberto Natividad for the assumption of the indebtedness of Manuel Behis and the subsequent release of the mortgage on the property by the bank. Rayandayan and Arceño did not show to the bank the Agreement with Manuel Behis providing for the real consideration of P2.4M for the sale of the property to the former. Subsequently, the Bank consented to the substitution of respondents as mortgage debtors in place of Manuel Behis in a Memorandum of Agreement between private respondents and the Bank with restructured and liberalized terms for the payment of the mortgage debt. Instead of the bank foreclosing immediately for non-payment of the delinquent account, petitioner Bank agreed to receive only a partial payment of P 143K by installment on specified dates. After payment thereof, the bank agreed to release the mortgage of Manuel Behis; to give its consent to the transfer of title to the private respondents; and to the payment of the balance of P200K under new terms with a new mortgage to be executed by the private respondents over the same land. - The Bank failed to comply with its obligation and on Jan.7, 1986, which prompted respondents to demand that the Bank comply with its obligation under the Memorandum of Agreement to (1) release the mortgage of Manuel Behis, (2)

give its consent for the transfer of title in the their name, and (3) execute a new mortgage with plaintiffs for the balance of P200K over the same land. - On July 28, 1986, an Assignment of Mortgage was entered into between Halsema and The Bank in consideration of the total indebtedness of Manuel Behis. - Because of non-compliance with their MOA, Rayandayan and Arceño instituted an action for specific performance, declaration of nullity and/or annulment of assignment of mortgage and damages on Sept. 5, 1986. A judgment was rendered declaring that the deed of sale with assumption of mortgage be taken together valid until annulled or cancelled. As well as declaring the MOA as annulled due to the fraud of Rayandayan & Arceño. - In sum, the Court of Appeals in its assailed decision: (1) affirmed the validity of the Memorandum of Agreement between parties thereto; (2) reversed and set aside the finding of the trial court on the bad faith of Rayandayan and Arceño in concealing the real purchase price of the land sold to them by Manuel Behis during negotiations with the bank on the assumption of the mortgage debt; (3) modified the trial court's finding as to the damages due Rayandayan and Arceño from the bank by adding P229,135.00 as actual damages; (4) dismissed the counterclaim for damages by the bank and deleted the portion on the set-off of damages due between the bank on the one hand, and Rayandayan and Arceño on the other

ISSUES1. WON the private respondents’ withholding of material information from petitioner Bank would render their Memorandum of Agreement (MOA) voidable on the ground that its consent to enter the agreement was vitiated by fraud 2. WON the SC should modify the damages awarded by the lower court

HELD1. NOWe cannot see how the omission or concealment of the real purchase price could have induced the bank into giving its consent to the agreement; or that the bank would not have otherwise given its consent had it known of the real purchase priceRatio The kind of fraud that will vitiate a contract are those insidious words or machinations resorted to by one of the contracting parties to induce the other to enter into a contract which without them he would not have agreed to. The fraud must be the determining cause of the contract, or must have caused the consent to be given.Reasoning The consideration for the purchase of the land between Manuel Behis and herein private respondents Rayandayan and Arceño could not have been the determining cause for the petitioner bank to enter into the memorandum of agreement. To all intents and purposes, the bank entered into said agreement in order to effect payment on the indebtedness of Manuel Behis- The bank received payments due under the Memorandum of Agreement, even if delayed. It initially claimed that the sale with assumption of mortgage was

invalid not because of the concealment of the real consideration of P2,400,000.00 but because of the information given by Cristina Behis, the widow of the mortgagor Manuel Behis that her signature on the deed of absolute sale with assumption of mortgage was forged. Thus, the alleged nullity of the Memorandum of Agreement, of counterclaim only after it was sued.- Indeed, whether the consideration of the sale with assumption of mortgage was P250,000.00 as stated in Exhibit A, or P2,400,000.00 as stated in the Agreement, Exhibit 15, should not be of importance to the bank. Whether it was P 250, 000 or P 2,400,000, the bank's security remained unimpaired- Pursuant to Art.1339 of the Civil Code, silence or concealment, by itself, does not constitute fraud, unless there is a special duty to disclose certain facts, or unless according to good faith and the usages of commerce the communication should be made. Verily, private respondents Rayandayan and Arceño had no duty, and therefore did not act in bad faith, in failing to disclose the real consideration of the sale between them and Manuel Behis- The bank had other means and opportunity of verifying the financial capacity of private respondents and cannot avoid the contract on the ground that they were kept in the dark as to the financial capacity by the non-disclosure of the purchase price. As correctly pointed out by respondent court, the bank security remained unimpaired regardless of the consideration of the sale. Under the term of the Memorandum of Agreement, the property remains as security for the payment of the indebtedness, in case of default of payment. Thus, petitioner bank does not and can not even allege that the agreement was operating to its disadvantage. If fact, the bank admits that no damages has been suffered by it. 2. NOThe Court may no longer examine the amounts awarded by the trial court and affirmed by the appellate court. Reasoning Petitioner Bank does not question the actual damages awarded to private respondents in the amount of P 229,135 but only the moral damages, exemplary damages, atty’s fees, and litigation expenses. As petitioner Bank did not appeal from the decision of the trial court. It is well-settled that a party who does not appeal from a decision of the lower court may not obtain any affirmative relief from the appellate court other than what he has obtained from the lower court.- In addition, the Bank’s imputation of bad faith to private respondents, premised on the same non-disclosure of the real purchase price of the sale so as to preclude their entitlement to damages must necessarily be resolved in the negative. Disposition petition is denied & decision of the CA is affirmed

AZARRAGA V GAYVILLAMOR; December 29, 1928

FACTS

- January 17, 1921, the plaintiff sold two parcels of lands to the defendant for the lump sum of P47,000, payable in installments.- The conditions of the payment were: P5,000 at the time of signing the contract Exhibit A; P20,000 upon delivery by the vendor to the purchaser of the Torrens title to the first parcel described in the deed of sale, P10,000 upon delivery by the vendor to the purchaser of Torrens title to the second parcel; and lastly the sum of P12,000 one year after the delivery of the Torrens title to the second parcel.- The vendee paid P5,000 to the vendor when the contract was signed. The vendor delivered the Torrens title to the first parcel to the vendee who, pursuant to the agreement, paid him P20,000. In the month of March 1921, Torrens title to the second parcel was issued and forthwith delivered by the vendor to the vendee who, however, failed to pay the P10,000 as agreed, neither did she pay the remaining P12,000 one year after having received the Torrens title to the second parcel.- The plaintiff here claims the sum of P22,000, with legal interest from the month of April 1921 on the sum of P10,000, and from April 1922 on the sum of P12,000, until full payment of the amounts claimed.- Defendant admits that she purchased the two parcels of land referred to by plaintiff, but alleges in defense: (a) That the plaintiff knowing that the second parcels of land he sold had an area of 60 hectares, by misrepresentation lead the defendant to believe that said second parcel contained 98 hectares, and thus made it appear in the deed of sale and induced the vendee to bind herself to pay the price of P47,000 for the two parcels of land, which he represented contained an area of no less than 200 hectares, to which price the defendant would not have bound herself had she known that the real area of the second parcel was 60 hectares, and, consequently, she is entitled to a reduction in the price of the two parcels in proportion to the area lacking which ought to be reduced to P38,000- The lower court, having found no fraud when the parties agreed to the lump sum for the two parcels of land described in the deed Exhibit A, following article 1471 of the Civil Code, ordered the defendant to pay the plaintiff the sum of P19,300 with legal interest at 8 per cent per annum from April 30, 1921 on the sum of P7,300, and from April 30, 1922, on the sum of P12,000.

ISSUEWON there was fraud in the circumstances leading to the agreement in the contract

HELDNO- There is no evidence of record that the plaintiff made representation to the defendant as to the area of said second parcel, and even if he did make such false representations as are now imputed to him by the defendant, the latter accepted such representations at her own risk and she is the only one responsible for the consqunces of her inexcusable credulousness. In the case of Songco vs. Sellner (37 Phil., 254), the court said:

The law allows considerable latitude to seller's statements, or dealer's talk; and experience teaches that it as exceedingly risky to accept it at its face value. Assertions concerning the property which is the subject of a contract of sale, or in regard to its qualities and characteristics, are the usual and ordinary means used by sellers to obtain a high price and are always understood as affording to buyers no grund from omitting to make inquires. A man who relies upon such an affirmation made by a person whose interest might so readily prompt him to exaggerate the value of his property does so at his peril, and must take the consequences of his own imprudence. - The defendant had ample opportunity to appraise herself of the condition of the land which she purchased, and the plaintiff did nothing to prevent her from making such investigation as she deemed fit, and as was said in Songco vs. Sellner, supra, when the purchaser proceeds to make investigations by himself, and the vendor does nothing to prevent such investigation from being as complete as the former might wish, the purchaser cannot later allege that the vendor made false representations to him.- "One who contracts for the purchase of real estate in reliance on the representations and statements of the vendor as to its character and value, but after he has visited and examined it for himself, and has had the means and opportunity of verifying such statements, cannot avoid the contract on the ground that they were false or exaggerated."- She did not complain of the difference in the area of said second parcel until the year 1926.- More so, it appears that by the contract Exhibit A, the parties agreed to the sale of two parcels of land, the first one containing 102 hectares, 67 ares and 32 centares, and the second one containing about 98 hectares, for the lump sum of P47,000 payable partly in cash and partly in installments. Said two parcels are defind by means of the boundaries given in the instrument. Therefore, the case falls within the provision of article 1471 of the Civil Code, which reads as follows: ART. 1471. In case of the sale of real estate for a lump sum and not at the rate of a specified price for each unit of measure, there shall be no increase or decrease of the price even if the area be found to be more or less than that stated in the contract.- As the hectares were paid due to a lump sum and not based of a defined unit of measure – if the sale was made for a price per unit of measure or number, the consideration of the contract with respect to the vendee, is the number of such units, or, if you wish, the thing purchased as determined by the stipulated number of units. But if, on the other hand, the sale was made for a lump sum, the consideration of the contract is the object sold, independently of its number or measure, the thing as determined by the stipulated boundaries, which has been called in law a determinate object.- From all this, it follows that the provisions of article 1471 concerning the delivery of determinate objects had to be materially different from those governing the delivery of things sold a price per unit of measure or number.- The reason for the regulation is clear and no doubts can arise from its application. It is concerned with determinate objects. The consideration of the contract, and the thing to be delivered is a determinate object, and not the

number of units it contains. The price is determined with relation to it; hence, its greater or lesser area cannot influence the increase or decrease of the price agreed upon. We have just learned the reason for the regulation, bearing in mind that the Code has rightly considered an object as determinate for the purposes now treated, when it is a single realty as when it is two or more, so long as they are sold for a single price constituting a lump sum and not for a specified amount per unit of measure or number.

GERALDEZ V CAREGALADO; February 23, 1994

NATURE- Petition for review on Certiorari- This is an action for damages by reason of contractual breach filed by Lydia Geraldez against Kenstar Travel Corporation.

FACTS- Lydia came to know about the respondent through advertisements about tours in Europe and eventually availed of one of the packages they offered.- The package was “VOLARE 3” which covered 22-day tour of Europe for 190,000 Php which she paid for herself and her sister.- Her disappointments (because it was contrary to what was in the brochure) during the trip were:

There was no European tour manager for their group of tourists The hotels which she and the group were billeted were not first-

class The UGC Leather Factory, which was a highlight of the tour, was not visited The Filipino lady tour guide was performing said job for the first

time.- RTC: granted a writ of preliminary attachment against private respondent on the ground respondent committed fraud in contracting an obligation (as per petitioner’s motion) but said writ was also lifted upon filing a counterbond of Php 990k- Lydia also filed other complaints at the Department of Tourism and the Securities and Exchange Commission which fined the respondent Php 5k and Php 10k respectively.- RTC awarded moral damages, nominal damages, exemplary damages, and for attorney’s fees to Lydia Geraldez worth Php 500k, Php 200k, Php 300k and Php 50k respectively. Respondent also had to pay for the costs of the suit.- CA modified the RTC’s decision since they found no malice could be imputed against Kenstar Travel Corporation.

ISSUEWON private respondent acted in bad faith or with gross negligence in discharging its obligations under the contract.

HELDYes, Kenstar Travel Corporation did commit fraudulent misrepresentations amounting to bad faith to the prejudice of Lydia Geraldez and the members of the tour group.Reasoning- On respondent’s choice of tour guideBy providing the Volare 3 tourist group with an inexperienced and a first timer tour escort, KTC manifested its indifference to the convenience, satisfaction and peace of mind of its clients during the trip. Respondent should have selected an experienced European tour guide, or it could have allowed Zapanta (the lady guide) to go as an understudy under the guidance, control, and supervision of an experienced and competent European or Filipino tour guide who could’ve given her training. - The inability of the group to visit the leather factory is likewise reflective of the neglect and ineptness of Zapanta in attentively following the itinerary for the day. This incompetence must necessarily be traced to the lack of due diligence on the part of KTC in the selection of its employees. The UGC leather factory was one of the highlights of the tour and it was incumbent upon the organizers of the tour to take special efforts to ensure the same.- Clearly, KTC’s choice of Zapanta as tour guide is a manifest disregard of its specific assurances to the tour group, resulting in agitation and anxiety on their part, and which is contrary to the elementary rules of good faith and fair play.- On the European Tour ManagerKTC: the euro tour manager refers to an organization and not to an individual; Geraldez didn’t attend the pre-departure briefing, wherein we explained the concept of the euro tour managerSC: the advertisement reveals that the contemplated tour manager contemplated is a natural person not a juridical one as KTC asserts. Furthermore, the obligation to provide not only a European tour manager, but with local European tour guides were likewise never made available. Zapanta couldn’t even remember the name of the European guide with her supposedly. From the advertisement, it is beyond cavil that the import of the “he” is a natural and not a juridical person (in reference to the euro tour guide). There is no need for further interpretation when the wordings are clear. The meaning that will determine the legal effect of a contract is that which is arrived at by objective standards; One is bound not by what he subjectively intends, but by what he leads others reasonably to think he intends. KTC relies in the delimitation of its responsibility printed on the face of its brochure. (see page 330)SC:* CONTRACT OF ADHESION: contracts drafted by only one party (i.e. corporations); the only participation of the other party is the affixing of his signature or his “adhesion” thereto. Such a contract must be strictly construed against the one who drafted the same, especially where there are stipulations that are printed in fine letters and are hardly legible.

SC: Private respondents cannot rely on its defense of “substantial compliance” with the contract.

- On the First Class HotelsThe respondents likewise committed a grave misrepresentation when it assured in its Volare 3 tour package that the hotels it had chosen would provide the tourists complete amenities and were conveniently located along the way for the daily itineraries. It turned out that some of the hotels were not sufficiently equipped with even the basic facilities and were at a distance from the cities covered by the projected tour.- Even assuming arguendo that there is indeed a difference in classifications , it cannot be denied that a first-class hotel could at the very least provide basic necessities and sanitary accommodations.- if it could not provide the tour participants with first-class lodgings on the basis of the amount that they paid, it could and should have instead increased the price to enable it to arrange for the promised first-class accommodations.- DamagesMoral damages may be awarded in breaches of contract where the obligor acted fraudulently or in bad faith.- The fraud or dolo which is present or employed at the time of birth or perfection of a contract may either be dolo causante or dolo incidente.- Dolo Causante – causal fraud , referred to in Art. 1338,

- are those deceptions or misrepresentations of a serious character employed by one party - without which the other party would NOT have entered into the contract- essential cause of the consent- effects: nullity of the contract and indemnification of damages

- Dolo Incidente – incidental fraud, referred to in Art. 1334,- are those which are not serious in character -without which the other party would still have entered into the contract- some particular or accident of the obligation- effects: damages

- SC: KTC is responsible for damages whether it has committed either dolo causante or incidente.- Lydia joined the tour with the belief of a euro tour guide accompanying them; she suffered serious anxiety and distress when the group was unable to visit the leather factory and when she didn’t receive first-class accommodations in their lodgings. These entitle her to moral damages. - Exemplary damages are imposed by way of example or correction for the public good, in addition to moral, temperate, liquidated or compensatory damages. According to the Code Commission, exemplary damages are required by public policy, for wanton acts must be suppressed. - Under the present state of law, extraordinary diligence is not required in travel or tour contracts, such as that in the case at bar, the travel agency acting as tour operator must nevertheless be held to strict accounting for contracted services,

considering the public interest in tourism, whether in the local or in the international scene. Disposition MORAL DAMAGES –Php 100k, EXEMPLARY DAMAGES – Php 50k, ATTY’S FEES –Php 20k and costs against the respondent KTC. Award for nominal damages is deleted.Note Nominal damages are awarded when there the complainant suffered actual or substantial damage from the breach of contract.

Leonardo vs CA

FACTS:

In an action to declare the nullity of the extrajudicial settlement of the estate of Tomasina Paul and Jose Sebastian before Branch 57, RTC of San Carlos City, Pangasinan, petitioner alleged that, on June 24, 1988, at around 5:00 p.m., private respondent Corazon Sebastian and her niece Julieta Sebastian, and a certain Bitang, came to petitioner’s house to persuade her to sign a deed of extrajudicial partition of the estate of Tomasina Paul and Jose Sebastian. Before signing the document, petitioner allegedly insisted that they wait for her husband Jose Ramos so he could translate the document which was written in English. Petitioner, however, proceeded to sign the document even without her husband and without reading the document, on the assurance of private respondent Corazon Sebastian that petitioner’s share as a legitimate daughter of Tomasina Paul was provided for in the extrajudicial partition. Petitioner then asked private respondent Corazon and her companions to wait for her husband so he could read the document. When petitioner’s husband arrived, however, private respondent Corazon and her companions had left without leaving a copy of the document. It was only when petitioner hired a lawyer that they were able to secure a copy and read the contents thereof.

ISSUE:

whether the consent given by petitioner to the extrajudicial settlement of estate was given voluntarily.

HELD:

The essence of consent is the agreement of the parties on the terms of the contract, the acceptance by one of the offer made by the other. It is the concurrence of the minds of the parties on the object and the cause which constitutes the contract.9 The area of agreement must extend to all points that the parties deem material or there is no consent at all.10

To be valid, consent must meet the following requisites: (a) it should be intelligent, or with an exact notion of the matter to which it refers; (b) it should be

free and (c) it should be spontaneous. Intelligence in consent is vitiated by error; freedom by violence, intimidation or undue influence; and spontaneity by fraud.11

In determining the effect of an alleged error, the courts must consider both the objective and subjective aspects of the case which is the intellectual capacity of the person who committed the mistake.12

Mistake, on the other hand, in order to invalidate consent "should refer to the substance of the thing which is the object of the contract, or to those conditions which have principally moved one or both parties to enter into the contract."13

Lee vs CA

FACTS:At about 10:00 o'clock in the morning of June 20, 1984, the complainant Maria Pelagia Paulino de Chin, 23 years old, was fetched from her house at 112 BLISS Site, 8th Avenue, Caloocan City by Atanacio Lumba, a bank employee, upon the instruction of the petitioner Branch Manager Francis Lee of Pacific Banking Corporation (hereinafter referred to as bank). Upon arriving at the office of Pacific Banking Corporation located at Caloocan City, petitioner Francis Lee did not attend to her immediately. After an hour later, the petitioner confronted the complainant about a forged Midland National Bank Cashier Check No. 3526794, which the latter allegedly deposited in the account of Honorio Carpio. During the said confrontation, the petitioner Francis Lee was shouting at her with piercing looks and threatened to file charges against her unless and until she returned all the money equivalent of the subject cashier check. Accordingly, the complainant was caused to sign a prepared withdrawal slip, and later, an affidavit prepared by the bank's lawyer, where she was made to admit that she had swindled the bank and had return the money equivalent of the spurious check. During her stay at the said bank, the complainant, who was five (5) months in the family way, was watched by the bank's employees and security guards. It was about six o'clock in the afternoon of the same day when the complainant was able to leave the bank premises.

HELD:

here is a need to make a distinction between a case where a person gives his consent reluctantly and against his good sense and judgment and where he gives no consent at all, as where he acts against his will under a pressure he cannot resist. Thus, in Vales v. Villa (35 Phil. 769, 789), We ruled:

It is clear that one acts as voluntarily and independently in the eye of the law when he acts reluctantly and with hesitation as when he acts spontaneously and

joyously. Legally speaking he acts as voluntarily and freely when he acts wholly against his better sense and judgment as when he acts in conformity with them. Between the two acts there is no difference in law. But when his sense, judgment, and his will rebel and he refuses absolutely to act as requested, but is nevertheless overcome by force or intimidation to such an extent that he becomes a mere automaton and acts mechanically only, a new element enters, namely, a disappearance of the personality of the actor. He ceases to exist as an independent entity with faculties and judgment, and in his place is substituted another — the one exercising the force or making use of the intimidation. While his hand signs, the will which moves it is another's. While a contract is made, it has, in reality and in law, only one party to it; and, there being only one party, the one using the force or the intimidation, it is unenforceable for lack of a second party.

From these considerations it is clear that every case of alleged intimidation must be examined to determine within which class it falls. If it is within the first class it is not duress in law, if it falls in the second, it is.

The circumstances of this case reveal that the complainant, despite her protestations, indeed voluntarily, albeit reluctantly, consented to do all the aforesaid acts.

Sierra vs CA

FACTS:

On November 2, 1984, the petitioner filed a complaint against the private respondents in the Regional Trial Court of Dumaguete City. He sought recovery of a sum of money be allegedly lent them under the following promissory note In their separate answers, the private respondents denied under oath "the genuineness, due execution, legality and validity" of the promissory note. They alleged that the note was executed "under duress, fear and undue influence." As affirmative defenses, they claimed that they had been tacked into signing the note for P85,000.00 (and another note for P54,550.00, but not the subject of this suit) and that the amount owing to the petitioner was only P20,000.00. This represented the loan he had extended to Epifania Ebarle, mother of the other private respondents, Sol Ebarle and Ele Ebarle. They also counterclaimed for damages.

HELD:

The mere assertion of the private respondents that the notes were not notarized in their presence does not meet this standard of proof. In any event, a promissory note does not have to be notarized to be binding. The private respondents have

admitted signing the two notes and they have not succeeded in proving that they did so "under duress, fear and undue influence."

A promissory note is a solemn acknowledgment of a debt and a formal commitment to repay it on the date and under the conditions agreed upon by the borrower and the lender. A person who signs such an instrument is bound to honor it as a legitimate obligation duly assumed by him through the signature he affixes thereto as a token of his good faith. If he reneges on his promise without cause, he forfeits the sympathy and assistance of this Court and deserves instead its sharp repudiation. So must it be in the case at bar.