Batchelder vs.

Central Bank Issue: W/N Monetary Board resolutions create contracts between Central Bank and dollar earner Held: No. Monetary Board resolutions do not create contracts between Central Bank and dollar earner. Considering the fundamental meaning of contracts under the Civil Law and the nature of the administrative authority of the Monetary Board to promulgate rules and regulations governing the monetary and banking system of the Philippines, the Monetary Board Resolutions Nos. 857 dated June 17, 1960 and 695 dated April 28, 1961 are not contracts that give rise to obligations which must be fulfilled by the Central Bank in favor of affected parties. These resolutions merely lay down a general policy on the utilization of the dollar earnings of Filipino and resident. American contractors undertaking projects in U.S. military bases. Republic vs. Phil. Long Distance Telephone Co. Freedom of parties to stipulate; Grounds for annulment. Parties can not be coerced to enter into a contract where no agreement is had between them as to the principal terms and conditions of the contract. Freedom to stipulate such terms and conditions is of the essence of our contractual system, and by express provision of the statute, a contract may be annulled if tainted by violence, intimidation or undue influence (Articles 1306, 1336, 1337, Civil Code of the Philippines). Corpus vs. Court of Appeals Contracts; An attorney-client relationship can be created by implied agreement, as when the attorney actually rendered legal services for a person who is a close friend. The obligation of such a person to pay attorneys fees is based on the law of contracts concept of facio ut des (I do and you give). WE find respondent Davids position meritorious. While there was no express agreement between petitioner Corpus and respondent David as regards attorneys fees, the facts of the case support the position of respondent David that there was at least an implied agreement for the payment of attorneys fees. Petitioner s act of giving the check for P2,000.00 through his aforestated April 18, 1962 letter to respondent David indicates petitioners commitment to pay the former attorneys fees, which is stressed by expressing that I wish I could give more but as you know we were banking on a SC decision reinstating me and reimbursing my back salaries. This last sentiment constitutes a promise to pay more upon his reinstatement and payment of his back salaries. Petitioner ended his letter that he was looking forward to a continuation of the case in the lower court, x x x, to which the certiorari-mandamus-quo warranto case was remanded by the Supreme Court for further proceedings. Moreover, the payment of attorneys fees to respondent David may also be jus tified by virtue of the innominate contract of facio ut des (I do and you give) which is based on the principle that no one shall unjustly enrich himself at the expense of

another. Innominate contracts have been elevated to a codal provision in the New Civil Code by providing under Article 1307 that such contracts shall be regulated by the stipulations of the parties, by the general provisions or principles of obligations and contracts, by the rules governing the most analogous nominate contracts, and by the customs of the people. Cui v. Arellano University Students and educational institutions; Scholarships; Stipulation whereby student cannot transfer to another school without refunding scholarship cash null and void.The stipulation in a contract, between a student and the school, that the students scholarship is good only if he continues in the same school, and that he waives his right to transfer to another school without refunding the equivalent of his scholarship in cash is contrary to public policy and, hence, null and void because scholarships are awarded in recognition of merit and to help gifted students in whom society has an established interest or a first lien, and not to keep outstanding students in school to bolster its prestige and increase its business potential. Saura v. Sindico THE RIGHT TO PRESENT ONE'S CANDIDACY; PUBLIC OFFICE; NOT WITHIN COMMERCE OF MAN.Among those that may not be the subject matter (object) of contracts are certain rights of individuals, which the law and public policy have deemed wise to exclude from the commerce of man. Among these are the political rights conferred upon citizens, including, but not limited to one's right to vote, the right to present one's candidacy to the people and to be voted to public office, provided, however, that all the qualifications prescribed by law obtain. Such rights may not, therefore, be bargained away or surrendered for consideration by the citizen or unduly curtailed with impunity, for they are conferred not for individual or private benefit or advantage but for the public good and interest. Leal vs. Intermediate Appellate Court Contracts are generally binding between the parties, their assigns and heirs; Under Art 1255 of the Civil Code of Spain, parts, clauses and conditions which are contrary to public order are null and void. Contracts are generally binding between the parties, their assigns and heirs; however, under Art. 1255 of the Civil Code of Spain, which is applicable in this instance, pacts, clauses, and conditions which are contrary to public order are null and void, thus, without any binding effect. The equivalent provision in the Civil Code of the Philippines of Art. 1255 of the Civil Code of Spain is Art. 1306; Public order and public policy, interpreted. Parenthetically, the equivalent provision in the Civil Code of the Philippines is that of Art. 1306, which states: That contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals good customs, public order, or public policy. Public order signifies the public weal-public policy. Essentially, therefore, public order and public

policy mean one and the same thing. Public policy is simply the English equivalent of orden publico in Art. 1255 of the Civil Code of Spain. Prohibition to sell property to third parties which is indefinite and unlimited as to time, which shall continue to be applicable even beyond the lifetime of the original parties to the contract, is a nullity.One such condition which is contrary to public policy is the present prohibition to sell to third parties, because the same virtually amounts to a perpetual restriction on the right of ownership, specifically the owners right to freely dispose of his properties. Thus, we hold that any such prohibition, indefinite and unlimited as to time, so much so that it shall continue to be applicable even beyond the lifetime of the original parties to the contract, is, without doubt, a nullity. In the light of this pronouncement, we grant the petitioners prayer for the cancellation of the annotations of this prohibition at the back of their Transfer Certificates of Title. Banco Filipino Savings & Mortgage Bank vs. Navarro A contract which embodies an Escalation Clause authorizing automatic increase in interest rates in the event a law increasing the lawful rates of interest that may be charged, does not include a Central Bank Circular, which, altho', having the face and effect of law, is not strictly a statute or a law.The Escalation Clause reads as follows: "I/We hereby authorize Banco Filipino to correspondingly increase the interest rate stipulated in this contract without advance notice to me/us in the event a law increasing the lawful rates of interest that may be charged on this particular kind of loan." (Paragraphing and italics supplied) It is clear from the stipulation between the parties that the interest rate may be increased "in the event a law should be enacted increasing the lawful rate of interest that may be charged on this particular kind of loan." The Escalation Clause was dependent on an increase of rate made by "law" alone. CIRCULAR No. 494, although it has the effect of law, is not a law. "Although a circular duly issued is not strictly a statute or a law, it has, however, the force and effect of law." (Italics supplied). "An administrative regulation adopted pursuant to law has the force and effect of law." "That administrative rules and regulations have the force of law can no longer be questioned." The distinction between a law and an administrative regulation is recognized in the Monetary Board guidelines quoted in the letter to the BORROWER of Ms. Paderes of September 24, 1976 (supra). According to the guidelines, for a loan's interest to be subject to the increases provided in CIRCULAR No. 494, there must be an Escalation Clause allowing the increase "in the event that any law or Central Bank regulation is promulgated increasing the maximum interest rate for loans." The guidelines thus presuppose that a Central Bank regulation is not within the term "any law." The distinction is again recognized by P.D. No. 1684, promulgated on March 17, 1980, adding section 7-a to the Usury Law, providing that parties to an agreement pertaining to a loan could stipulate that the rate of interest agreed upon may be increased in the event that the applicable maximum rate of interest is increased "by law or by the Monetary Board." To quote: "Sec. 7-a. Parties

to an agreement pertaining to a loan or forbearance of money, goods or credits may stipulate that the rate of interest agreed upon may be increased in the event that the applicable maximum rate of interest is increased by law or by the Monetary Board: Provided, That such stipulation shall be valid only if there is also a stipulation in the agreement that the rate of interest agreed upon shall be reduced in the event that the applicable maximum rate of interest is reduced by law or by the Monetary Board; Provided, further, That the adjustment in the rate of interest agreed upon shall take effect on or after the effectivity of the increase or decrease in the maximum rate of interest." 2. Same; Escalation Clause to be valid must include de-escalation clause.There can be an increase in interest if increased by law or by the Monetary Board; and in order for such stipulation to be valid, it must include a provision for reduction of the stipulated interest "in the event that the applicable maximum rate of interest is reduced by law or by the Monetary Board."

Florendo vs. Court of Appeals Escalation clauses are valid stipulations in commercial contracts to maintain fiscal stability and to retain the value of money in long term contracts. In Banco Filipino Savings v. Mortgage Bank vs. Navarro, this Court in essence ruled that in general there is nothing inherently wrong with escalation clauses. In IBAA vs. Spouses Salazar, the Court reiterated the rule that escalation clauses are valid stipulations in commercial contracts to maintain fiscal stability and to retain the value of money in long term contracts. Usury; By virtue of CB Circular 905, the Usury Law has been rendered ineffective.We have already mentioned (and now reiterate our holding in several cases) that by virtue of CB Circular 905, the Usury Law has been rendered ineffective. Thus, petitioners' contention that the escalation clause is violative of the said law is bereft of any merit. The unilateral determination and imposition of increased interest rates by the herein respondent bank is obviously violative of the principle of mutuality of contracts.On the other hand, it will not be amiss to point out that the unilateral determination and imposition of increased interest rates by the herein respondent bank is obviously violative of the principle of mutuality of contracts ordained in Article 1308 of the Civil Code. Velasco vs. Court of Appeals Contracts; In the Deed of Quitclaim in question wherein Laigo Realty Corp. waived in favor of GSIS its rights in favor of the subdivision in question arising out of its development and assumed to pay the claims of any contractor, material furnisher, lot buyer, etc. having connection with said development, the GSIS was not relieved of any liability to petitioner for the cost of materials and labor the latter incurred in building the subdivision houses if Laigo Realty Corp. is unable to pay them. What

is more, the reliance of GSIS on the Deed of Quitclaim of May 7, 1970 is to Our mind misplaced. We have analyzed this document carefully, and We are of the considered view that it is actually evidence against GSIS. Even if what is unnatural in ordinary business or industrial experience were assumed, that is, that GSIS was unaware all along during the period of their construction of the work then being done by petitioners,albeit it is possible there was no express consent given thereto by and thru the aforementioned deed of quitclaim, GSIS agreed to receive and did actually receive the benefits of what petitioners had accomplished or would accomplish under their contracts with Laigo. So much so, that the dispositive portion of the quitclaim deed does not really relieve GSIS from liability to petitioners. Properly viewed, GSIS virtually assumed under said deed, liability in regard to claims like those of petitioners who might not be paid by Laigo albeit said liability has been made subject to the reservation that it could seek indemnity from Laigo. Upon the foregoing factual premises, the legal issue that arises is whether or not GSIS is liable to the petitioners for the cost of the materials and labor furnished by them in construction of the 63 houses now owned by the GSIS and for the construction of which no payment has been made on the balance due petitioners. Our considered view is and We so hold that even in equity alone, GSIS should pay the petitioners. After all, it admits it has not collected from the ones who appear to be the buyers thereof, albeit it must be collecting the installments on the lots. All it has to do then is to pass on to them what it has to pay petitioners. In all, GSIS is, under the peculiar circumstances of this case, the owner of said houses. Contracts; Obligations; Evidence; While, it is of judicial notice that the costs of labor and material have risen substantially since 1970, it is not fair to award petitioners four times the value of the cost of their construction, but only interest at 12% per annum since they filed their complaint.Coming now to the amount for which GSIS is liable, We reiterate that, to be sure, there is evidence in the record, uncontradicted at that, regarding the lower value of money at the time the demand upon GSIS was made compared to that when petitioners furnished the labor and materials in question. We are not, however, inclined to go along with the trial court that the amount demanded should be multiplied four times. We believe that it being a matter of judicial notice that the prices of labor and material have substantially risen since 1970, it would be fair enough to make respondent liable for interest on the amount of the demand, which is supported by evidence and not effectively disputed by GSIS in its answer, at the rate of 12% per annum from the time petitioners filed their complaint below on April 14, 1975. Kauffman vs. National Bank Stipulation in Favor of Third Person; Revocation of Such Stipulation. A stipulation in favor of a third person cannot be revoked by the obligated party alone, without the conformity of the other contracting party.

Bonifacio Bros. v. Mora Contracts; Contracts take effect only between the parties thereto; Exception. Contracts take effect only between the parties thereto, except in some specific instances provided by law where the contract contains some stipulation in favor of a third person which is known as a stipulation pour autrui or a provision in favor of a third person not a party to the contract. Under this doctrine, a third person is allowed to avail himself of a benef it granted to him by the terms of the contract, provided that the contracting parties have clearly and deliberately conferred a favor upon such person. Consequently, a third person, not a party to the contract, has no action against the parties thereto, and cannot generally demand the enforcement of the same. Same; Stipulation pour autrui; When a third person has an enforceable interest in the contract.The question of whether a third person has an enforceable interest in a contract must be settled by determining whether the contracting parties intended to tender him such an interest by deliberately inserting terms in their agreement with the avowed purpose of conferring a favor upon such third person. The fairest test to determine whether the interest of a third person in a contract is a stipulation pour autrui or merely an incidental interest, is to rely upon the intention of the parties as disclosed by their contract. Florentino v. Encarnacion Contracts; Extra-judicial partition; Land Registration; The validity of or compliance with a stipulation appearing in an extra-judicial partition cannot be left to the will of one of the parties.The stipulation (Exhibit 0-1) is part of an extra-judicial partition (Exh. 0) duly agreed and signed by the parties, hence the same must bind the contracting parties thereto and its validity or compliance cannot be left to the will of one of them (Art. 1308, N.C.C.). Under Art. 1311 of the New Civil Code, this stipulation takes effect between the parties, their assigns and heirs. Same; Same; Same; A stipulation that the fruits of a parcel of land shall be used to defray certain expenses connected with religious festivities or occasions is a stipulation pour autrui.The second paragraph of Article 1311 above-quoted states the law on stipulations pour autrui. Considering the nature and purpose of the stipulation (Exh. 0-1), We hold that said stipulation is a stipulation pour autrui. A stipulation pour autrui is a stipulation in favor of a third person conferring a clear and deliberate favor upon him, and which stipulation is merely a part of a contract entered into by the parties, neither of whom acted as agent of the third person, and such third person may demands its fulfillment provided that he communicates his acceptance to the obligor before it is revoked. The requisites are: (1) that the application in favor of a third person should be a part, not the whole, of the contract; (2) that the favorable stipulation should not be conditioned or compensated by any kind of obligation whatever; and (3) neither of the contracting parties bears the legal representation or authorization of third party.

Same; Same; Same; Test to be used in determining whether stipulation constitutes a valid stipulation pour autrui. The fairest test to determine whether the interest of third person in a contract is a stipulation pour autrui or merely an incidental interest, is to rely upon the intention of the parties as disclosed by their contract. In applying this test, it matters not whether the stipulation is in the nature of a gift or whether there is an obligation owing from the promisee to the third person. That no such obligation exists may in some degree assist in determining whether the parties intended to benefit a third person. A stipulation pour autrui may be accepted anytime before it is revoked. Acceptance of a stipulation pour autrui need not be in any particular form and may be inferred from the beneficiarys enjoyment of the fruits flowing therefrom for a good number of years.While a stipulation in favor of a third person has no binding effect in itself before its acceptance by the party favored, the law does not provide when the third person must make his acceptance. As a rule, there is no time limit; such third person has all the time until the stipulation is revoked. Here, We find that the Church accepted the stipulation in its favor before it is sought to be revoked by some of the co-owners, namely the petitioners-appellees herein. It is not disputed that from the time of the death of Dona Encarnacion Florentino in 1941, as had always been the case since time immemorial, up to a year before the filing of their application in May 1964, the Church had been enjoying the benefits of the stipulation. The enjoyment of benefits flowing therefrom for almost seventeen years without question from any quarters can only be construed as an implied acceptance by the Church of the stipulation pour autrui before its revocation. Same; Action; A party to a contract pour autrui may also bring an action for its enforcement in the same manner as the beneficiary thereof. That one of the parties to a contract pour autrui is entitled to bring an action for its enforcement or to prevent its breach is too clear to need any extensive discussion. Upon the other hand, that the contract involved contained a stipulation pour autrui amplifies this settled rule only in the sense that the third person for whose benefit the contract was entered into may also demand its fulfillment provided he had communicated his acceptance thereof to the obligor before the stipulation in his favor is revoked. Bank of America v. IAC No restitution of amount sent by a foreign bank thru telex with apatent ora latent ambiguity payable to another person where the person credited by the local bank is the proper beneficiary and the account number is correct. It is our considered opinion that, in the tested telex, considered either as a patent ambiguity or as a latent ambiguity, the beneficiary is Minami. The mention of Account No. 24506 017, as well as the name of Minami, has to be given more weight than the mention of the name of ACTC. BANKAMERICA could not have very well disregarded that account number. It could also be that the mention of ACTCs name was a further identification of Minami, to prevent payment to a possible another Toshiyuko

Minami who may not be connected with ACTC. On t he other hand, it should be difficult to concede that, in the tested telex, Account No. 24506017 was erroneously written and should be substituted by Account No. 19842 012 in the name of ACTC. Same; Same; Same; Stipulation pour autrui; Contract between foreign bank and a local bank asking the latter topay an amount to a beneficiary, is a stipulation pour autrui.In Vargas Plow Factory, Inc. vs. Central Bank, it was held that the opening of a letter of credit in favor of the exporter becomes ultimately but the result of a stipulation pour autrui (27 SCRA 84 [1969]). Similarly, when KYOWA asked BANKAMERICA to pay an amount to a beneficiary (either ACTC or Minami), the eontract was between KYOWA and BANKAMERICA and it had a stipulation pour autrui. Marimperio v. CA Civil Law; Contracts; Art. 1311 of Civil Code; A party who has not taken part in the contract, cannot sue or be sued for the performance or cancellation thereof, unless he has a real interest affected thereby.According to Article 1311 of the Civil Code, a contract takes effect between the parties who made it, and also their assigns and heirs, except in cases where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law. Since a contract may be violated only by the parties, thereto as against each other, in an action upon that contract, the real parties in interest, either as plaintiff or as defendant, must be parties to said contract. Therefore, a party who has not taken part in it cannot sue or be sued for performance or for cancellation thereof, unless he shows that he has a real interest affected thereby (Macias & Co. v. Warner Barnes & Co., 43 Phil. 155 [1922] and Salonga v. Warner Barnes & Co., Ltd., 88 Phil. 125 [1951]; Coquia v. Fieldmen's Insurance Co., Inc., 26 SCRA 178 [1968]). Same; Same; Lease; In a contract of sub-lease, the personality of the lessee does not disappear and the sub-lease generally does not have any direct action against the owner of the premises as lessor.In a sub-lease, there are two leases and two distinct judicial relations although intimately connected and related to each other, unlike in a case of assignment of lease, where the lessee transmits absolutely his right, and his personality disappears; there only remains in the juridical relation two persons, the lessor and the assignee who is converted into a lessee (Moreno, Philippine Law Dictionary, 2nd ed., p. 594). In other words, in a contract of sublease, the personality of the lessee does not disappear; he does not transmit absolutely his rights and obligations to the sub-lessee; and the sub-lessee generally does not have any direct action against the owner of the premises as lessor, to require the compliance of the obligations contracted with the plaintiff as lessee, or vice versa (10 Manresa, Spanish Civil Code, 438). Daywalt v. Corp de PP Agustinos

CONTRACTS; DAMAGES FOR BREACH; LIABILITY OF THIRD PARTY. Whatever may be the character of the liability, if any, which a stranger to a contract may incur by advising or assisting one of the parties to evade performance, he cannot become more extensively liable in damages for the nonperformance of the contract than the party in whose behalf he intermeddles. 2.ID.; ID.; MEASURE OF DAMAGES FOR BREACH OF CONTRACT.The damages recoverable upon breach of contract are, primarily, the ordinary, natural and in a sense the necessary damage resulting from the breach. Other damages, known as special damages, are recoverable where it appears that the particular conditions which made such damages a probable consequence of the breach were known to the delinquent party at the time the contract was made. This proposition must be understood with the qualification that, if the damages are in the legal sense remote or speculative, knowledge of the special conditions which render such damages possible will not make them recoverable. Special damages of this character cannot be recovered unless made the subject of special stipulation. Gilchrist v. Cuddy DAMAGES; INTERFERENCE WITH CONTRACTS BY STRANGERS.The interference with lawful contracts by strangers thereto gives rise to an action for damages in favor of the injured person. The law does not require that the responsible person shall have known the identity of the injured person. Estate of K.H. Hemady v. Luzon Surety So Ping Bun v. CA Where there was no malice in the interference of a contract, and the impulse behind ones conduct lies in a proper business interest rather than in wrongful motives, a party cannot be a malicious interferer.As early as Gilchrist vs. Cuddy, we held that where there was no malice in the interference of a contract, and the impulse behind ones conduct lies in a proper business interest rather than in wrongful motives, a party cannot be a malicious interferer. Where the alleged interferer is financially interested, and such interest motivates his conduct, it cannot be said that he is an officious or malicious intermeddler. Same; Same; Same; Same; Same; While lack of malice precludes damages, it does not relieve the interferer of the legal liability for entering into contracts and causing breach of existing ones.While we do not encourage tort interferers seeking their economic interest to intrude into existing contracts at the expense of others, however, we find that the conduct herein complained of did not transcend the limits forbidding an obligatory award for damages in the absence of any malice. The business desire is there to make some gain to the detriment of the contracting parties. Lack of malice, however, precludes damages. But it does not relieve petitioner of the legal liability for entering into contracts and causing breach of existing ones. The respondent

appellate court correctly confirmed the permanent injunction and nullification of the lease contracts between DCCSI and Trendsetter Marketing, without awarding damages. The injunction saved the respondents from further damage or injury caused by petitioners interference. Sanchez v. Rigos Offeror cannot withdraw offer arbitrarily,While the law permits the offeror to withdraw the offer at any time before acceptance even before the period has expired, some writers hold the view, that the offeror can not exercise this right in an arbitrary or capricious manner. This is upon the principle that an offer implies an obligation on the part of offeror to maintain it for such length of time as to permit the offeree to decide whether to accept or not, and therefore cannot arbitrarily revoke the offer without being liable for damage which the offeree may suffer. A contrary view would remove the stability and security of business transactions. Sales; Consideration not presumed in an accepted unilateral promise to buy or lo sell.Article 1354 of the Civil Code which presumes the existence of a consideration in every contract applies to contracts in general, whereas the second paragraph of Article 1479 thereof refers to sales in particular, and, more specifically, to an accepted unilateral promise to buy or to sell. It is Article 1479 that controls defendants unilateral promise to sell her property to the plaintiff. Same; Same; Same; Promisee in an accepted unilateral promise to sell must prove existence of consideration.In order that said unilateral promise may be binding upon the promisor, Article 1479 requires the concurrence of a condition, namely, that the promise be supported by a consideration distinct from the price. Accordingly, the promisee can not compel the promisor to comply with the promise, unless the former establishes the existence of said distinct consideration. In other words, the promisee has the burden of proving such consideration, Same; Same; Same; Accepted promise to sell is an offer to sell and when accepted becomes a contract of sale.In accepted unilateral promise to sell, since there may be no valid contract without a cause or consideration, the promisor is not bound by his promise and may, accordingly, withdraw it. Pending notice of its withdrawal, his accepted promise partakes, however, of the nature of an offer to sell which, if accepted, results in a perfected contract of sale. Tong Brothers Co. v. IAC Contracts; Form; The general rule is that a contract may be oral or written. A contract may be entered into in whatever form except where the law requires a document or other special form as in the contracts enumerated in Article 1388 of the Civil Code. The general rule, therefore, is that a contract may be oral or written. Same; Same; Fact that previous contracts were all oral does not necessarily mean that all subsequent contracts of similar or allied nature should also be oral and

procedure be the same.The fact that the parties' previous contracts for the repair of the private respondent's vessels were all oral and that the procedure consisted merely in the vessels being drydocked at the petitioner's shipyard and after repair the petitioner would just send the bill to the private respondent, does not necessarily result in a conclusive presumption that all subsequent contracts between the parties of similar or allied nature should also be oral and the procedure be the same. Velasco v. CA A definite agreement on manner of payment essential to a binding contract of sale. It is not difficult to glean from the aforequoted averments that the petitioners themselves admit that they and the respondent still had to meet and agree on how and when the down-payment and the installment payments were to be paid. Such being the situation, it cannot, therefore, be said that a definite and firm sales agreement between the parties had been perfected over the lot in question. Indeed, this Court has already ruled before that a definite agreement on the manner of payment of the purchase price is an essential element in the formation of a binding and enforceable contract of sale. The fact, therefore, that the petitioners delivered to the respondent the sum of P10,000.00 as part of the down-payment that they had to pay cannot be considered as sufficient proof of the perfection of any purchase and sale agreement between the parties under article 1482 of the new Civil Code. Ong Yiu v. CA Contracts of adhesion; Philippine Air Lines limited carriage liability of P100.00 for loss or delay of its passengers baggage held valid and binding absent higher value declared for luggage and actual value of goods lost.While it may be true that petitioner had not signed the plane ticket (Exh. 12), he is nevertheless bound by the provisions thereof. Such provisions have been held to be a part of the contract of carriage, and valid and binding upon the passenger regardless of the latters lack of knowledge or assent to the regulation. It is what is known as a contract of adhesion, in regards which it has been said that contracts of adhesion wherein one party imposes a ready made form of contract on the other, as the plane ticket in the case at bar, are contracts not entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely; if he adheres, he gives his consent. And as held in Randolph v. American Airlines, 103 Ohio App. 172, 144 N.E. 2d 878; Rosenchein vs. Trans World Airlines, Inc., 349 S.W. 2d 483, a contract limiting liability upon an agreed valuation does not offend against the policy of the law forbidding one from contracting against his own negligence. Considering, therefore, that petitioner had failed to declare a higher value for his baggage, he cannot be permitted a recovery in excess of P100.00. Besides, passengers are advised not to place valuable items inside their baggage but to avail of our V-cargo service (Exh. 1). It is likewise to be noted that there is nothing in the evidence to show the actual value of the goods allegedly lost by petitioner

Weldon v. CA Civil Law; Contracts; Only an absolute or unqualified acceptance of a definite offer manifests the consent necessary to perfect a contractThe first proposal submitted by Weldon Construction for rendering service under a contract of supervision (Exhibit "A") is simply that, a proposal. It never attained perfection as the contract between the parties. Only an absolute or unqualified acceptance of a definite offer manifests the consent necessary to perfect a contract (Article 1319, New Civil Code). The advance payment of P10,000.00 Pesos was not an unqualified acceptance of the offer contained in the first proposal (Exhibit "A") as in fact an entirely new proposal (Exhibit "4") was submitted by Weldon Construction subsequently. If, as claimed by the petitioner, the parties had already agreed upon a contract of supervision under Exhibit "A," why then was a second proposal made? Res ipsa loquitur. The existence of the second proposal belies the perfection of any contract arising from the first proposal. Same; Same; Once a contract is shown to have been consummated or fully performed by the parties thereto, its existence and binding effect can no longer be disputedPetitioner's position is untenable. Once a contract is shown to have been consummated or fully performed by the parties thereto, its existence and binding effect can no longer be disputed. It is irrelevant and immaterial to dispute the due execution of a contract. i.e. the date of signing by one of the parties, if both of them have in fact performed their obligations thereunder and their respective signatures and those of their witnesses appear upon the face of the document. Thus, even assuming that the Building Contract in Exhibit "5" was signed by the private respondent only after the Gay Theater building had been completed and the stipulated price of P600,000.00 Pesos fully paid, such fact can no longer negate the binding effect of that agreement if its existence and especially, its consummation can be established by other evidence, e.g by the contemporaneous acts of the parties and their having performed their respective obligations pursuant to the agreement. C & C Commercial Corp. v. Menor Taxation; Contracts; Government agency justified in refusing to avoid a contract to a bidder who had no tax clearance certificate as required by Adm. Order No. 66 dated June 26, 1967, 63 O.G. 6391.The Nawasa was justified in not awarding the contract to C & C Commercial Corporation because it had no tax clearance certificate. It had a pending tax case in the Bureau of Internal Revenue. The award to C & C Commercial Corporation would be in gross contravention of Administrative Order No. 66. Same; Same; Same.Under Administrative Order No. 66, the Nawasa officials would be subject to administrative disciplinary action if they awarded the contract to C & C Commercial Corporation in spite of its unsettled tax liabilities. Same; Same; Statutes; An administrative order requiring that bidders for government contract must have a tax clearance certificate is applicable even though it was issued

after the bidding, but before execution of the contract with the lowest bidder. It erred because Administrative Order No. 66 (promulgated after Judge Cloribel had rendered his decision of March 1, 1967) covers not only the bidding but also the execution of any contract with the lowest bidder. In this case, at the time the said order was issued, no award had as yet been made and when the award was to be made, the said order was already in force. A reservation to reject the bid of any bidder does not make it obligatory for a government agency to award its contract to the lowest bidder. Moreover, it was not the ministerial duty of the Nawasa officials to award the contract to C & C Commercial Corporation even if it was the lowest bidder. The Nawasa in its addendum No. 1 to the invitation to bid dated July 6, 1966 reserved the right to reject the bid of any bidder (p. 35, Record on Appeal). Therefore, a bidder whose bid is rejected has no cause for complaint nor a right to dispute the award to another bidder (Esguerra & Sons vs. Aytona, 114 Phil. 1189; Surigao Mineral Reservation Board vs. Cloribel, L-27072, July 31, 1968, 24 SCRA 491). Tang v. CA Contracts; Insurance Law; Evidence; Where the insurer sought to avoid payment of life insurance policy on the ground that insured concealed or misrepresented her state of health, said insurer is not obliged to show under Art. 1332 of the Civil Code that the English terms of the contract were read and explained to the insured, a Chinese. That duty devolves on the onesthe beneficiarieswho would like to enforce the insurance agreement.It should be noted that under Art. 1332 abovequoted, the obligation to show that the terms of the contract had been fully explained to the party who is unable to read or understand the language of the contract, when fraud or mistake is alleged, devolves on the party seeking to enforce it. Here the insurance company is not seeking to enforce the contracts; on the contrary, it is seeking to avoid their performance. It is petitioner who is seeking to enforce them even as fraud or mistake is not alleged. Accordingly, respondent company was under no obligation to prove that the terms of the insurance contracts were fully explained to the other party. Even if we were to say that the insurer is the one seeking the performance of the contracts by avoiding paying the claim, it has to be noted as above stated that there has been no imputation of mistake or fraud by the illiterate insured whose personality is represented by her beneficiary the petitioner herein. In sum, Art. 1332 is inapplicable to the case at bar. Considering the findings of both the CFI and Court of Appeals that the insured was guilty of concealment as to her state of health, we have to affirm. Contracts; Insurance Law; Evidence; Insurance contracts are contracts uberimae fidei. Insured must reveal all material facts within his knowledge.In a contract of insurance each party must communicate to the other, in good faith, all facts within his knowledge which are material to the contract, and which the other has not the means of ascertaining *** (Section 27, Act 2427, as amended. Italics supplied). As

a general rule, a failure by the insured to disclose conditions affecting the risk, of which he is aware makes the contract voidable at the option of the insurer (45 C.J.S. 153). The reason for this rule is that insurance policies are traditionally contracts uberimae fidei which means most abundant good faith; absolute and perfect candor or openness and honesty; the absence of any concealment or deception however slight. Cario v. CA Contracts; Contracts which are absolutely simulated or fictitious are inexistent and null and void ab initio.There is merit to the Encabos' claim that the simulated deed of sale in favor of the Carios was executed in order to protect the money Quesada invested in the purchase of the rights to the lot in question, which transfer of said lot to his name was later on disapproved by the LTA. As can be gleaned from the testimony of Josue Quesada, he did this by putting Cirila Vicencio as the vendee in the simulated Deed of Sale, when in fact, Encabo and Quesada meant her only as a dummy for the latter. To this effect Quesada testified, despite the warning given to him by the court that his statement might incriminate him. Such candor in the testimony of Quesada gives credibility to the Encabos' claim. Lagunzad v. Gonzales Contracts; Duties must comply with contracts entered into where provisions thereof are not contrary to law, morals, good customs, public orders or public policy. It is 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 own wish and desires, or even against his better judgment. In legal effect, there is no difference between a contract wherein one of the contracting parties exchanges one condition for another because he looks for greater profit or gain by reason of such change, and an agreement wherein one of the contracting parties agrees to accept the lesser of two disadvantages. In either case, he makes a choice free and untramelled and must accordingly abide by it. The Licensing Agreement has the force of law between the contracting parties and since its provisions are not contrary to law, morals, good customs, public order or public policy (Art. 1306, Civil Code), petitioner should comply with it in good faith. Law v. Olympic Sawmill Civil Law; Obligations; Damages; Liquidated damages, nature of; Presumption that the amount of P6,000 obligation, added to the P10,000 principal obligation after extension of payment of original obligation, exists and is lawful unless the debtor proves the contrary; P6,000 obligation considered as liquidated damages. Under Article 1354 of the Civil Code, in regards to the agreement of the parties relative to the P6,000.00 obligation, it is presumed that it exists and is lawful, unless the debtor proves the contrary. No evidentiary hearing having been held, it has to be concluded that defendants had not proven that the P6,000.00 obligation was illegal. Confirming the Trial Courts finding, we view the P6,000.00 obligation as liquidated

damages suffered by plaintiff, as of March 17, 1960, representing loss of interest income, attorneys fees and incidentals. Lao Sok v. Sabaysabay Same; Same; Same; Separation Pay; Perfected Contract; Where the employer offered the employees payment of separation pay which offer was unconditionally accepted a contract was perfected; Contracts, though orally made are binding on the parties. Lao Sok made an offer which was duly accepted by the private respondents. There was, therefore, a meeting of the minds between two parties whereby one bound himself with respect to the other, to give something or to render some service (Article 1305, Civil Code). By the unconditional acceptance of the offer that they would be paid separation pay, a contract was therefore perfected. As held in the case of Herrera v. Auditor General, (102 Phil. 875): x x x Contracts in whatever form they may have been entered into are binding on the parties unless form is essential for the validity and enforceability of that particular contract. (See Lopez v. Auditor General, 20 SCRA 655). Gallardo v. IAC Same; Same; Same; Same; Registration of a private deed of sale by the Register of Deeds is unauthorized and does not lend validity to the defective private document of sale; Right of a vendee of registered property in a private document. True, as argued by appellants, a private conveyance of registered property is valid as between the parties. However, the only right the vendee of registered property in a private document is to compel through court processes the vendor to execute a deed of conveyance sufficient in law for purposes of registration. Plaintiffs-appellants reliance on Article 1356 of the Civil Code is unfortunate. The general rule enunciated in said Art. 1356 is that contracts are obligatory, in whatever form they may have been entered, provided all the essential requisites for their validity are present. The next sentence provides the exception, requiring a contract to be in some form when the law so requires for validity or enforceability. Said law is Section 127 of Act 496 which requires, among other things, that the conveyance be executed before the judge of a court of record or clerk of a court record of a notary public or a justice of the peace, who shall certify such acknowledgment substantially in form next hereinafter stated. Such law was violated in this case. The action of the Register of Deeds of Laguna in allowing the registration of the private deed of sale was unauthorized and did not lend a bit of validity to the defective private document of sale. Lim v. CA Contracts; Interpretation shall not favor the party who caused the ambiguity. Thus, the one who prepared the contract which states: Terms: Cash upon signing of this contract, cannot deny that the agreement was not a cash transaction.Considering the admitted fact that the contract of sale (Exhibit A) was prepared in the office of respondent company by Generoso Bongato, Assistant to the Manager of the

company, upon instruction of General Manager Emiliano L. Abalos who is a lawyer, and We are now confronted with the varying or conflicting interpretations of the parties thereto, the respondent company contending that the stipulation Terms: Cash upon signing of this contract does not mean that the agreement was a cash transaction because no money was paid by the petitioner at the time of the signing thereof whereas the petitioner insists that it was a cash transaction inasmuch as he paid cash amounting to P142,975.00 upon the signing of the contract, the payment having been made at around 1:30 in the afternoon of November 13, 1970 to the cashier, Teodoro Garcia, and Manager Abalos although the sale was agreed to in the morning of the same day, November 13, 1970, the conflicting interpretations have shrouded the stipulation with ambiguity or vagueness. Then, the cardinal rule should and must apply, which is that the interpretation shall not favor the party who caused the ambiguity (Art. 1377, New Civil Code). We rule that in the instant case, the interpretation to be taken shall not favor the respondent company since it is the party who caused the ambiguity in its preparation. Same; Contemporaneous acts of the parties as indication of their contractual relation.The above facts show contemporaneous and subsequent acts of the parties in relation to the transaction between them as embodied in the Contract of Sale of Sugar (Exh. A) from which the intention of the contracting parties may be judged correctly. The trial court was correct in judging and deciding the intention of the parties from their actuations contemporaneous with and subsequent to the agreement for the sale of the sugar in question, and we sustain the trial court, applying Art. 1371, New Civil Code, supra. Republic v. Castellvi Contracts; Construction of; Intention cannot prevail over the clear and express terms of the contract.Intention cannot prevail over the clear and express terms of the lease contract. Intent is to be deduced from the language employed by the parties, and the terms of the contract, when unambiguous, are conclusive in the absence of averment and proof of mistake or fraudthe question being not what the intention was, but what is expressed in the language used. Moreover, in order to judge the intention of the contracting parties, their contemporaneous and subsequent acts shall be principally considered. Same; Same; General terms of contract cannot include things different from those intended by the parties.However general the terms of a contract may be, they shall not be understood to comprehend things that are distinct and cases that are different from those upon which the parties intended to agree. Eastern Shipping v. Margarina-Verkaufs-Union Cabaliw v. Sadorra

Sale; Contracts; A sale of a parcel of land by the husband is deemed fraudulent if made about seven months after a judgment was rendered against the vendor for support of his wife and the vendor has not paid any part of the judgment. For the heart of the matter is that about seven months after a judgment was rendered against him in Civil Case No. 43192 of the Court of First Instance of Manila and without paying any part of that judgment, Benigno Sadorra sold the only two parcels of land belonging to the conjugal partnership to his son-in-law. Such a sale even if made for a valuable consideration is presumed to be in fraud of the judgment creditor who in this case happens to be the offended wife. Same; Same; Circumstances indicating sale of a parcel of land belonging to conjugal partnership is void.Furthermore, the presumption established by the law in favor of petitioners is bolstered by other indicia of bad faith on the part of the vendor and vendee. Thus (1) the vendee is the son-in-law of the vendor. x x x close relationship between the vendor and the vendee is one of the known badges of fraud. (2) At the time of the conveyance, the vendee, Sotero, was living with his father-in-law, the vendor, and he knew that there was a judgment directing the latter to give a monthly support to his wife Isidora and that his father-in-law was avoiding payment and execution of the judgment. (3) It was known to the vendee that his father-in-law had no properties other than those two parcels of land which were being sold to him. The fact that a vendor transfers all of his property to a third person when there is a judgment against him is a strong indication of a scheme to defraud one who may have a valid interest over his properties. Same; Same; Fraud; Where sale of land is presumed fraudulent, transferee has burden of proving otherwise.On the part of the transferee, he did not present satisfactory and convincing evidence sufficient to overthrow the presumption and evidence of a fradulent transaction. His is the burden of rebutting the presumption of fraud established by law, and having failed to do so, the fraudulent nature of the conveyance in question prevails. Sale; Contracts; Conjugal assets; Wife may seek redress in courts for alienations prejudicial to her.The decision of the Court of Appeals makes mention of Art. 1413 of the old Civil Code which authorizes the husband as administrator to alienate and bind by onerous title the property of the conjugal partnership without the consent of the wife. x x x On this point, counsel for petitioners rightly claims that the lack of consent of the wife to the conveyances made by her husband was never invoked nor placed in issue before the trial court. What was claimed all along by plaintiffpetitioner was that the conveyances or deeds of sale were executed by her husband to avoid payment of the monthly support adjudged in her favor and to deprive her of the means to execute said judgment. In other words, petitioner seeks relief not so much as an aggrieved wife but more as a judgment creditor. Art. 1413 therefore is inapplicable; but even if it were, the result would be the same because the very

article reserves to the wife the right to seek redress in court for alienations which prejudice her or her heirs. Hongkong & Shanghai Bank v. Pauli Civil Law; Property; Actions; The four-year period to bring an action for annulment of deed of sale of lot is computed from the registration of the conveyance; Reason. When a transaction involves registered land, the four-year period fixed in Article 1391 within which to bring an action for annulment of the deed, shall be computed from the registration of the conveyance (March 5, 1963) on the familiar theory that the registration of the document is constructive notice of the conveyance to the whole world (Armentia vs. Patriarca, 18 SCRA 1253; Avecilla vs. Yatco, 103 Phil. 666). Same; Same; Same; Same; Land Titles; Effect if the four-year period commenced to run from the date when the bank obtained actual knowledge of the fraudulent sale of the land or that the 4-year period had not yet expired.Plaintiffs submission that the four-year period commenced to run from the date when the Bank obtained actual knowledge of the fraudulent sale of Paulis land to the Garganeras (sometime in 1969) and that hence the four-year period for bringing an action to annul the sale had not yet expired when it filed the action for annulment on February 17, 1971, is unacceptable. That theory would diminish public faith in the integrity of torrens titles and impair commercial transactions involving registered lands for it would render uncertain the computation of the period for the prescription of such actions. Felipe v. Heirs of Aldon A contract of sale of land made by the wife without the husbands consent is voidable.The view that the contract made by Gimena is a voidable contract is supported by the legal provision that contracts entered by the husband without the consent of the wife when such consent is required, are annullable at her instance during the marriage and within ten years from the transaction questioned. Wifes contract of sale can be annulled by the husband during the marriage, but not by the wife nor their children.The voidable contract of Gimena was subject to annulment by her husband only during the marriage because he was the victim who had an interest in the contract. Gimena, who was the party responsible for the defect, could not ask for its annulment. Their children could not likewise seek the annulment of the contract while the marriage subsisted because they merely had an inchoate right to the lands sold. House Intl. v. IAC As bases for a declaration that the conditional sale between GSIS and CENTERTOWN is null and void for being contrary to law or public policy, the constitutional provisions are inapposite. Not one of those provisions render unlawful the contract in question. Except for the prohibition against the taking of private

property for public use without just compensation, the other provisions require implementing legislation to confer a legal right and impose a legal duty which can be judicially invoked. Same; Same; Void contract, different from ultra vires contract, which is merely voidable.The main thrust of the petitioners challenge on the validity of the conditional sale is that the contract is ultra vires because the respondent CENTERTOWN is not qualified to acquire properties under its Articles of Incorporation. The petitioner has confused a void contract with an ultra vires contract which is merely voidable. Ortega v. Leonardo SALE; PAROL CONTRACT OF SALE OF REALTY UNENFORCEABLE ; DOCTRINE OF PART PERFORMANCE.While, as a general rule, an oral agreement to sell a piece of land is not provable, however, where there is partial performance of the sale contract, the principle excluding evidence of parol contracts for the sale of realty will not apply. 2.ID.; CIRCUMSTANCES INDICATING PARTIAL, PERFORMANCE. Some circumstances indicating partial performance of an oral contract of sale of realty are: relinquishment of rights, continued possession, building of improvements, tender of payment rendition of services, payment of taxes, surveying of the land at the vendee's expense, etc. Carbonel v. Poncio STATUTE OF FRAUDS; WHEN APPLICABLE; PART PERFORMANCE; ORAL EVIDENCE ADMISSIBLE TO PROVE BOTH CONTRACT AND PART PERFORMANCE.The Statute of Frauds is applicable only to executory contracts, not to contracts that are totally or partially performed. The reason is simple. In executory contracts there is a wide field for fraud because, unless they be in writing there is no palpable evidence of the intention of the contracting parties. However, if a contract has been totally or partially performed, the exclusion of parol evidence would promote fraud or bad faith, for it would enable the defendant to keep the benefits already derived by him from the transaction in litigation, and, at the same time, evade the obligations, responsibilities or liabilities assumed or contracted by him thereby. So that when the party concerned has pleaded partial performance, such party is entitled to a reasonable chance to ,establish by parol evidence the truth of this allegation, as well as the contract itself. "The recognition of the exceptional effect of part performance in taking an oral contract out of the statute of frauds involves the principle that oral evidence is admissible in such cases to prove both the contract and the part performance of the contract" (49 Am. Jur. 927). Babao v. Perez STATUTE OF FRAUDS; CONTRACTS WHICH ARE NOT TO BE PERFORMED WITHIN ONE YEAR; PARTIAL PERFORMANCE BY ONE PARTY, EFFECT

OF.Contracts which by their terms are not to be performed within one year may be taken out of the Statute of Frauds through perf ormance by one party thereto. In order, however, that a partial performance of the contract may take the case out of the operation of the statute, it must appear clear that the full performance has been made by one party within one year, as otherwise the statute would apply. 2.ID.; PAROL CONTRACT FOR THE SALE OF LAND; ENFORCEMENT OF CONTRACT ON THE GROUND OF PART PERFORMANCE.Where the contract is vague and ambiguous, the doctrine of part performance cannot be invoked to take the case out of the operation of the statute of frauds. Obviously, there can be no part performance until there is a definite and complete agreement between the parties. In order to warrant the specific enforcement of a parol contract for the sale of land, on the ground of part performance, all the essential terms of the contract must be established by competent proof, and shown to be definite, certain, clear and unambiguous. (Cuyugan vs. Santos, 34 Phil., 100, 101.) Cabague v. Auxilio Evidence; Statute of Frauds; Mutual Promise to Marry. For breach of a mutual promise to marry, the groom may sue the bride for damages, and evidence of such mutual promise is admissible. Yuvienco v. Dacuycuy Same; Same; Statute of Frauds; Mere claim that petitioners have unjustifiably refused to proceed with the sale of the property is unenforceable under the Statute of Frauds in the absence of any note or memorandum and signed agreement of sale. We hold that either way We view the situation, the conclusion is inescapable that the claim of respondents that petitioners have unjustifiably refused to proceed with the sale to them of the property in question is unenforceable under the Statute of Frauds. It is nowhere alleged in said paragraphs 8 to 12 of the complaint that there is any writing or memorandum, much less a duly signed agreement to the effect that the price of P6,500,000 fixed by petitioners for the real property herein involved was agreed to be paid not in cash but in installments as alleged by respondents. Same; Same; Same; In any sale of real property on installments, the Statute of Frauds read together with the perfection requirements of Article 1475 of the Civil Code must be applied such that payment on installments of the sale must be in the requisite note or memorandum.We hold that in any sale of real property on installments, the Statute of Frauds read together with the perfection requirements of Article 1475 of the Civil Code must be understood and applied in the sense that the idea of payment on installments must be in the requisite of a note or memorandum therein contemplated. Same; Same; Same; Under the Statute of Frauds, the contents of a note or memorandum is considered as the contract itself, except as to the form.To put it the other way, under the Statute of Frauds, the contents of the note or memorandum,

whether in one writing or in separate ones merely indicative for an adequate understanding of all the essential elements of the entire agreement, may be said to be the contract itself, except as to the form. Clarin v. Rulona Same; Same; Same; Payment; Acceptance of payment, an indication of partys consent to the contract; Statute of Frauds; Contract partially executed, not covered by Statute of Frauds.Hence, it cannot be denied that there was a perfected contract of sale between the parties and that such contract was already partially executed when the petitioner received the initial payment of P800.00. The latters acceptance of the payment clearly showed his consent to the contract thereby precluding him from rejecting its binding effect. (See Federation of United Namarco Distributors, Inc. v. National Marketing Corporation, 4 SCRA 884). With the contract being partially executed, the same is no longer covered by the requirements of the Statute of Frauds in order to be enforceable. (See Khan v. Asuncion, 19 SCRA 996). Therefore, with the contract being valid and enforceable, the petitioner cannot avoid his obligation by interposing that Exhibit A is not a public document. On the contrary, under Article 1357 of the Civil Code, the petitioner can even be compelled by the respondent to execute a public document to embody their valid and enforceable contract. Bisaya Land Transportation v. Sanchez Same; Same; Same; Status of contracts entered into without Court's approval. What then is the status of the Contracts which Receiver Amor entered into with Sanchez, without the approval of the court which appointed him receiver? Even the petitioners noticeably waver as to the exact status of these Contracts. The petitioners alleged in their Memorandum submitted to this Court that they are void contracts under Article 1409(1) of the Civil Code, whereas, in their Petition, they labelled the contracts as unenforceable under Article 1403(1) of the Civil Code. The determination, therefore, of whether the questioned contracts are void or merely unenforceable is important, because of the settled distinction that a void and inexistent contract can not be ratified and become enforceable, whereas, an unenforceable contract may still be ratified and, thereafter, enforced. The petitioners allege that the Contracts are void, citing Article 1409(1) of the Civil Code which provides that contracts whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy, are inexistent and void from the beginning. In the case at bar, the contracts of agency were entered into for the management and operation of BISTRANCO's business in Butuan City. Said Contracts necessarily imposed obligations and liabilities on the contracting parties, thereby affecting the disposition of the assets and business of the company under receivership. But a perusal of the Contracts in question would show that there is nothing in their cause, object or purpose which renders them void. The purpose of the Contracts was to create an agency for BISTRANCO with Marciano Sanchez as its agent in Butuan City. Even as to the other provisions of the Contracts, there is nothing in their cause or object which can be said as contrary to law, morals, good

customs, public order or public policy so as to render them void. On the other hand, paragraph 1, Article 1403 of the Civil Code provides that contracts "entered into in the name of another person by one who has been given no authority or legal representation, or who has acted beyond his powers" are unenforceable, unless they are ratified. In the case at bar, it is undisputed that Atty. Adolfo Amor was entrusted, as receiver, with the administration of BISTRANCO and its business. But the act of entering into a contract is one which requires the authorization of the court which appointed him receiver. Consequently, the questioned Contracts can rightfully be classified as unenforceable for having been entered into by one who had acted beyond his powers, due to Receiver Amor's failure to secure the court's approval of said Contracts. Same; Same; Same; Facts showing that the unenforceable contracts were nevertheless deemed ratified in the case at bar.Private respondent Sanchez filed his complaint in the lower court on 28 December 1979. But on 10 January 1980, copetitioner Benjamin G. Roa, as Executive Vice-President of BISTRANCO, still sent Sanchez three (3) separate letters with the following contents: (1) reducing his passage commission from 10%, as he used to receive in the previous years, to 7% "as stated in the agency contract dated 27 July 1976;" (2) advising Sanchez that in view of "his failure to post a bond or such other securities acceptable to the company in the sum of P5,000.00 pursuant to par. 8 of the Contract executed by Sanchez the plaintiff with BISTRANCO on 27 July 1976, we are recalling all unused passage tickets issued your agency" and reminding him (Sanchez) also that "pursuant to par. 2 of aforementioned Contract, solicitation of cargo and passengers shall be undertaken by you strictly in accordance with the scheduled rates of the Company"; and (3) informing Sanchez that "we (petitioners) are abiding strictly with the terms of the contracts executed between Marciano C. Sanchez and Atty. Adolfo V. Amor in behalf of BISTRANCO, etc. etc." The three (3) letters of Benjamin G. Roa in effect recognized and gave efficacy to the Contracts in question. The declaration of Benjamin G. Roa that BISTRANCO did not have any knowledge about the Contracts before the complaint was filed on 28 December 1979 is contradicted by his own testimony that, as early as 14 December 1979, he was already looking for the contract, after he saw Exhibit "NN", wherein Sanchez requested the company "to abide with the terms of the contract which will expire on July 1981". Besides, the pretended lack of knowledge of Benjamin G. Roa can not be equated with BISTRANCO's. It should be noted that Roa started to work for BISTRANCO only on 27 April 1979, whereas, the Contracts were executed in 1976. The people who were more in a position to know about the Contracts, like the company officers and members of the board of directors at the time the Contracts were entered into, especially Antonio V. Cuenco, were never presented as witnesses. Aside from this, the company cannot deny its ratification of the Contracts even before the time of Benjamin G. Roa, because when Atty. Fulveo Pelaez succeeded Atty. Adolfo Amor as Receiver, he was represented by BISTRANCO's shipping manager as having

taken cognizance of these Contracts and sanctioned the acts of Sanchez as shipping agent of BISTRANCO in Butuan City. This is shown by a letter, dated 15, February 1977, written by Capt. Federico Reyes, the shipping manager of BISTRANCO at that time. The letter states that "the Receiver (Atty. Fulveo Pelaez) maintains that the previous agency contract remains and (sic) basically the same except that the rates of the agency commission were modified". Furthermore, it is clear that BISTRANCO received material benefits from the contracts of agency of Sanchez, based upon the monthly statements of income of BISTRANCO upon which the commissions of Sanchez were based A perusal of the Contracts will also show that there is no single provision therein that can be said as prejudicial or not beneficial to BISTRANCO. Hernandez v. CA Civil Procedure: Statute of Frauds: Not every agreement affecting land must be put in writing to attain enforceability.The respondents reliance on the Statute of Frauds to secure a contrary judgment is misplaced. The Statute of Frauds finds no application to this case. Not every agreement affecting land must be put in writing to attain enforceability. Under the Statute of Frauds, Article 1403(2) (e) of the Civil Code, such formality is only required of contracts involving leases for longer than one year, or for the sale of real property or of an interest therein. Hernandezs testimony is thus admissible to establish his agreement with Fr. Garcia as to the boundary of their estates. Rubias v. Batiller Sales; Prohibition against purchase by lawyer of property in litigation from his client; Article 1491, paragraph (5) of the Philippine Civil Code construed. Article 1491 of the Civil Code of the Philippines (like Article 1459 of the Spanish Civil Code) prohibits in its six paragraphs certain persons, by reason of the relation of trust or their peculiar control either directly or indirectly and "even at a public or judicial auction," as follows: (1) guardians; (2) agents; (3) administrators; (4) public officers and employees; (5) judicial officers and employees, prosecuting attorneys, and lawyers; and (6) others specially disqualified by law. Same; Prohibited purchase void and produces no legal effect.Castan's rationale for his conclusion that fundamental considerations of public policy render void and inexistent such expressly prohibited purchases (e.g. by public officers and employees of government property intrusted to them and by justices, judges, fiscals and lawyers of property and rights in litigation submitted to or handled by them, under Article 1491, paragraphs (4) and (5) of the Civil Code of the Philippines) has been adopted in a new article of the Civil Code of the Philippines, viz, Article 1409 declaring such prohibited contracts as "inexistent and void from the beginning." Same; Nullity of such prohibited contracts cannot be cured by ratification. The nullity of such prohibited contracts is definite and permanent and cannot be cured by ratification. The public interest and public policy remain paramount and do not permit of compromise or ratification.

Same; Nullity of such prohibited contracts differentiated from the nullity of contracts of purchase by the guardians, agents and administrators.The permanent disqualification of public and judicial officers and lawyers grounded on public policy differs from the first three cases of guardians, agents and administrators (Article 1491, Civil Code), as to whose transactions, its has been opined, may be "ratified" by means of and "in the form of a new contract, in which case its validity shall be determined only by the circumstances at the time of execution of such new contract. The causes of nullity which have ceased to exist cannot impair the validity of the new contract. Thus, the object which was illegal at the time of the first contract, may have already become lawful at the time of ratification or second contract; or the service which was impossible may have become possible; or the intention which could not be ascertained may have been clarified by the parties. The ratification or second contract would then be valid from its execution; however, it does not retroact to the date of the first contract. Javier v. vda. De Cruz Contracts; Nullity of; Lack of consent and consideration; Where circumstances indicate that alleged vendor did not voluntarily affix his thumbmark on the deed of sale and did not receive any consideration for said sale; Case at bar. Eusebio Cruz could not talk, was very ill and was about to die when his thumbmark was affixed on the deed of sale. Delfin Cruz did not have any means of livelihood. He was only the houseboy of Eusebio Cruz. It is obvious that on January 17, 1941 Delfin Cruz could not have raised the amount of P700.00 as consideration of the land supposedly sold to him by Eusebio Cruz. Although the deed of sale purports to convey a parcel of land with an area of only 26,577 square meters, defendants, as heirs of Delfin Cruz, claim a much bigger land containing an area of 182,959 square meters assessed at P4,310.00. The consideration of P700.00 is not only grossly inadequate but is shocking to the conscience. No sane person would sell the land claimed by the defendants for only about P40.00 per hectare. In view of the foregoing, this Court finds that Eusebio Cruz did not voluntarily affix his thumbmark on the deed of sale and did not receive any consideration for said sale. Menil v. CA Civil Law; Contracts of sale; Homesteads; Contract of sale of homestead within the 5-year prohibitory period is void and sale cannot be confirmed nor ratified. It cannot be claimed that there are two contracts: One which is undisputably null and void, and another, having been executed after the lapse of the 5-year prohibitory period, which is valid. The second contract of sale executed on March 3, 1964 is admittedly a Confirmatory deed of sale. Even the petitioners concede this point. Inasmuch as the contract of sale executed on May 7, 1960 is void for it is expressly prohibited or declared void by law [CA 141, Section 118], it therefore cannot be confirmed nor ratified.

Same; Same; Same; Simulated contracts; The second contract of sale for the same homestead in favor of the same vendee for the same price is ample manifestations that the second sale is simulated and that no object or consideration in the second contract of sale has passed between the parties. Further, noteworthy is the fact that the second contract of sale over the said homestead in favor of the same vendee, petitioner Potenciano Menil, is for the same price of P415.00. Clearly, the unvarying term of the said contract is ample manifestation that the same is simulated and that no object or consideration passed between the parties to the contract. It is evident from the whole record of the case that the homestead had long been in the possession of the vendees upon the execution of the first contract of sale on May 7, 1960; likewise, the amount of P415.00 had long been paid to Agueda Garan on that same occasion. We find no evidence to the contrary. Director of Lands v. Alba Attorneys; Article 1491 of the New Civil Code prohibiting sale to lawyer of clients estate involved in a litigation applies only while litigation is pending. This contention is without merit. Article 1491 prohibits only the sale or assignment between the lawyer and his client, of property which is the subject of litigation. As WE have already stated: The prohibition in said article applies only to a sale or assignment to the lawyer by his client of the property which is the subject of litigation. In other words, for the prohibition to operate, the sale or assignment of the property must take place during the pendency of the litigation involving the property. Same; An agreement for payment of 1/2 of real property in litigation to a lawyer as attorneys fees in case the appeal prospers does not violate Art. 1491 of the New Civil Code.In the instant case, the attorneys fees of Atty. Fernandez, consisting of one half (1/2) of whatever Maximo Abarquez might recover from his share in the lots in question, is contingent upon the success of the appeal. Hence, the payment of the attorneys fees, that is, the transfer or assignment of one -half (1/2) of the property in litigation will take place only if the appeal prospers. Therefore, the transfer actually takes effect after the finality of a favorable judgment rendered on appeal and not during the pendency of the litigation involving the property in question. Consequently, the contract for a contingent fee is not covered by Article 1491.

of simulation was defined by this Court in the case of Rodriguez vs. Rodriguez, No. L-23002, July 31, 1967, 20 SCRA 908. Same; Nature of a contract void ab initio.A void or inexistent contract is one which has no force and effect from the very beginning, as if it had never been entered into, and which cannot be validated either by time or by ratification (p. 592, Civil Code of the Philippines, Vol. IV, Tolentino, 1973 Ed.). Same; Same.A void contract produces no effect whatsoever either against or in favor of anyone; hence, it does not create, modify or extinguish the juridical relation to which it refers (p. 594, Tolentino, supra). Same; Characteristics of a void ab initio contract.The following are the most fundamental characteristics of void or inexistent contracts: 1) As a general rule, they produce no legal effects whatsoever in accordance with the principle quod nullum est nullum producit effectum. 2) They are not susceptible of ratification. 3) The right to set up the defense of inexistence or absolute nullity cannot be waived or renounced. 4) The action or defense for the declaration of their inexistence or absolute nullity is imprescriptible. 5) The inexistence or absolute nullity of a contract cannot be invoked by a person whose interests are not directly affected (p. 444, Comments and Jurisprudence on Obligations and Contracts. Jurado, 1969 Ed.; italics supplied). Lita Enterprises v. IAC Civil Law; Transportation; Contracts; Illegal Contracts; Kabit system, concept of; Kabit system, contrary to public policy and void and inexistent; Court cannot allow either of the parties to enforce an illegal contract but leaves them both where it finds them.Unquestionably, the parties herein operated under an arrangement, commonly known as the kabit system, whereby a person who has been granted a certificate of convenience allows another person who owns motor vehicles to operate under such franchise for a fee. A certificate of public convenience is a special privilege conferred by the government. Abuse of this privilege by the grantees thereof cannot be countenanced. The kabit system has been identified as one of the root causes of the prevalence of graft and corruption in the government transportation offices. In the words of Chief Justice Makalintal, this is a pernicious system that cannot be too severely condemned. It constitutes an imposition upon the good faith of the government. Although not outrightly penalized a s a criminal offense, the kabit system is invariably recognized as being contrary to public policy and, therefore, void and inexistent under Article 1409 of the Civil Code. It is a fundamental principle that the court will not aid either party to enforce an illegal contract, but will leave them both where it finds them. Upon this premise, it was flagrant error on the part of both the trial and appellate courts to have accorded the parties relief from their predicament. Article 1412 of the Civil Code denies them such aid.

Tongoy v. CA Contracts; Nature of a simulated contract.The characteristic of simulation is the fact that the apparent contract is not really desired nor intended to produce legal effects nor in any way alter the juridical situation of the parties. Thus, where a person, in order to place his property beyond the reach of his creditors, simulates a transfer of it to another, he does not really intend to divest himself of his title and control of the property; hence, the deed of transfer is but a sham. This characteristic

Same; Same; Same; Same; Same; Parties who entered into an illegal contract cannot seek relief from the courts and each must bear the consequences of his acts. Ex pacto illicito non oritur actio [No action arises out of an illicit bargain ] is the timehonored maxim that must be applied to the parties in the case at bar. Having entered into an illegal contract, neither can seek relief from the courts, and each must bear the consequences of his acts. Same; Same; Same; Same; Defect of inexistence of contract permanent and incurable.The defect of inexistence of a contract is permanent and incurable, and cannot be cured by ratification or by prescription. As this Court said in Eugenio v. Perdido, the mere lapse of time cannot give efficacy to contracts that are null and void. In pari delicto rule, applicable in case at bar where parties entered into an illegal contract like the Kabit system. Arsenal v. IAC Public Lands; Contracts; Sale; A sale of homestead land within the prohibited period is void. A 3rd person affected by a void contract may set up its nullity. Being void, the foregoing principles and rulings are applicable. Thus, it was erroneous for the trial court to declare that the benefit of the prohibition in the Public Land Act doe s not inure to any third party. Such a sweeping declaration does not find support in the law or in precedents. A third person who is directly affected by a void contract may set up its nullity. In this case, it is precisely the petitioners interest in th e disputed land which is in question. Same; Same; Same; A sale of homestead land within the prohibited period cannot be confirmed or ratified later It remains void.As to whether or not the execution by the respondents Palaos and Suralta of another instrument in 1973 cured the defects in their previous contract, we reiterate the rule that an alienation or sale of a homestead executed within the five-year prohibitory period is void and cannot be confirmed or ratified. This Court has on several occasions ruled on the nature of a confirmatory sale and the public policy which proscribes it. Manotok Realty v. IAC Civil Law; Sales; Sale of the paraphernal property of the deceased wife by the husband who was neither an owner nor administrator of the property at the time of sale is void ab initio; Sale which is void cannot be subject of ratification by the company or the probate court.We are, therefore, led to the inevitable conclusion that the sale between Don Vicente Legarda and the private respondent is void ab initio, the former being neither an owner nor administrator of the subject property. Such being the case, the sale cannot be the subject of the ratification by the Philippine Trust Company or the probate court. Portugal v. IAC

Civil Law; Contracts; Property; Sale; Where the contract of sale is vitiated by the total absence of a valid cause or consideration, the contract is void or inexistent; Deed of sale is void ab initio or inexistent not merely voidable. More than these, the alleged contract of sale is vitiated by the total absence of a valid cause or consideration. The petitioners in their complaint, assert that they, particularly Cornelia, never knew of the existence of the questioned deed of sale. They claim that they came to know of the supposed sale only after the private respondent, upon their repeated entreaties to produce and return the owners duplicate copy of the transfer certificate of title covering the two parcels of land, showed to them the controversial deed. And their claim was immeasurably bolstered when the private respondents co defendant below, his brother Emiliano Portugal, who was allegedly his co-vendee in the transaction, disclaimed any knowledge or participation therein. If this is so, and this is not contradicted by the decisions of the courts below, the inevitable implication of the allegations is that contrary to the recitals found in the assailed deed, no consideration was ever paid at all by the private respondent. Applying the provisions of Articles 1350, 1352, and 1409 of the new Civil Code in relation to the indispensable requisite of a valid cause or consideration in any contract, and what constitutes a void or inexistent contract, we rule that the disputed deed of sale is void ab initio or inexistent, not merely voidable. Same; Same; Same; Same; Prescription; An action or defense for the declaration of the inexistence of a contract does not prescribe.And it is provided in Article 1410 of the Civil Code, that "(T)he action or defense for the declaration of the existence of a contract does not prescribe. Yanas v. Acaylar Civil Law; Sales; Badges of fraud and fictitiousness; Case at bar. We hold that the sale was fictitious and fraudulent. Among the badges of fraud and fictitiousness taken collectively are the following: (1) the fact that the sale is in English, the alleged vendor being illiterate; (2) the fact that his wife did not join in the sale and that her name is indicated in the deed as Maria S. Yanas when the truth is that her correct name is Maria Aglimot Yanas; (3) the obvious inadequacy of P200 as price for a 13-hectare land (P15.40 a hectare); (4) the notarization of the sale on the day following the alleged thumbmarking of the document; (5) the failure to state the boundaries of the lot sold; (6) the fact that the governor approved it more than two years after the alleged sale; (7) its registration more than three years later, and (8) the fact that the Acaylars were able to occupy only four hectares out of the 13 hectares and were eventually forcibly ousted therefrom by the children and agents of the vendor. It was not a fair and regular transaction done in the ordinary course of business. Barsobia v. Cuenco Civil Law; Sales; Sale of land to a Chinese citizen in 1936 renders sale inexistent and void from the beginning; Reason.There should be no question that the sale of the

land in question in 1936 by Epifania to Ong King Po was inexistent and void from the beginning (Art. 1409 [7], Civil Code) because it was a contract executed against the mandatory provision of the 1935 Constitution, which is an expression of public policy to conserve lands for the Filipinos. Same; Same; Same; Exception is, where land previously sold by the Filipino citizen to the Chinese, a disqualified vendee, was later sold by the Chinese to a qualified person, a naturalized Filipino citizen, Reason.But the factual set-up has changed. The litigated property is now in the hands of a naturalized Filipino. It is no longer owned by a disqualified vendee. Respondent, as a naturalized citizen, was constitutionally qualified to own the subject property. There would be no more public policy to be served in allowing petitioner Epifania to recover the land as it is already in the hands of a qualified person. Godinez v. Fong Land Registration; Property; Sales; Contracts; A parcel of land sold to a Chinese citizen which the latter subsequently sold to a Filipino Citizen can no longer be recovered by the vendor.The meaning of the 0above provision was fully discussed in Krivenko v. Register of Deeds of Manila (79 Phil. 461) which also detailed the evolution of the provision in the public land laws, Act No. 2874 and Commonwealth Act No. 141. The Krivenko ruling that under the Constitution aliens may not acquire private or agricultural lands, including residential lands is a declaration of an imperative constitutional policy. Consequently, prescription may never be invoked to defend that which the Constitution prohibits. However, we see no necessity from the facts of this case to pass upon the nature of the contract of sale executed by Jose Godinez and Fong Pak Luenwhether void ab initio, illegal per se, or merely prohibited.** It is enough to stress that insofar as the vendee is concerned, prescription is unavailing. But neither can the vendor or his heirs rely on an argument based on imprescriptibility because the land sold in 1941 is now in the hands of a Filipino citizen against whom the constitutional prescription was never intended to apply. The lower court erred in treating the case as one involving simply the application of the statute of limitations. Yap v. Grageda Civil Law; Sales; Constitutional Law; Sale of a residential lot to a Chinese national who had been a naturalized Filipino citizen for 15 years at time of sale, valid; Ban on aliens from acquiring agricultural and urban lands under the 1935 Constitution, not applicable; Reason; Case at bar.The rulings in Vasquez v. Li Seng Giap et al. (96 Phil. 447) and Sarosa Vda. de Bersabia v. Cuenco (113 SCRA 547) sustain the petitioners contentions. We stated in Sarosa Vda. de Bersabia: There should be no question that the sale of the land in question in 1936 by Epifania to Ong King Po was inexistent and void from the beginning (Art. 1409 [7], Civil Code) because it was a contract executed against the mandatory provision of the 1935 Constitution, which is an expression of public policy to conserve lands for the Filipinos. x x x But the

factual set-up has changed. The litigated property is now in the hands of a naturalized Filipino. It is no longer-owned by a disqualified vendee. Respondent, as a naturalized citizen, was constitutionally qualified to own the subject property. There would be no more public policy to be served in allowing petitioner Epifania to recover the land as it is already in the hands of a qualified person. Applying by analogy the ruling of this Court in Vasquez vs. Giap and Li Seng Giap & Sons: x x x if the ban on aliens from acquiring not only agricultural but also urban lands, as construed by this Court in the Krivenko case, is to preserve the nations lands for future generations of Filipinos, that aim or purpose would not be thwarted but achieved by making lawful the acquisition of real estate by aliens who became Filipino Citizens by naturalization. Pineda v. de la Rama Same; Same; Same; Civil Law; Obligations; Promissory note void ab initio where consideration for the note is to influence public officers in the performance of their duties.Whether or not the supposed cash advances reached their destination is of no moment. The consideration for the promissory note to influence public officers in the performance of their dutiesis contrary to law and public policy. The promissory note is void ab initio and no cause of action for the collection cases can arise from it. Liguez v. CA 1.DONATION; CAUSE OR CONSIDERATION; LIBERALITY OF DONOR WHEN DEEMED "CAUSA".Under Article 1274, of the Civil Code of 1889, liberality of the donor is deemed causa only in those contracts that are of "pure" beneficence; that is to say, contracts designed solely and exclusively to procure the welfare of the beneficiary, without any intent of producing any satisfaction for the donor; contracts, in other words, in which the idea of self-interest is totally absent on the part of the transferor. For this very reason, the same Article 1274 provides that in remuneratory contracts, the consideration is the service or benefit for which the remuneration is given; causa is not liberality in these cases because the contract or conveyance is not made out of pure beneficence, but "solvendi animo". DONATION OF CONJUGAL PROPERTY BY THE HUSBAND, EFFECT OF. The right of the husband to donate community property is strictly limited by law (Articles 1409, 1413, 1415, Civil Code of 1889; Baello vs. Villanueva, 54 Phil. 213). However, the donation made in contravention of the law is not void in its entirety, but only in so far as it prejudices the interest of the wife. The rule applies whether the donation is gratuitous or for a consideration. Philbanking v. Lui She Same; Validity of lease or option to buy real estate to an alien. A lease to an alien for a reasonable period is valid. So is an option giving an alien the right to buy real property on condition that he is granted Philippine citizenship. Aliens are not

completely excluded by the Constitution from the use of lands for residential purposes. Since their residence in the Philippines is temporary, they may be granted temporary rights such as a lease contract which is not forbidden by the Constitution. Should they desire to remain here forever and share our fortune and misfortune, Filipino citizenship is not impossible to acquire. Same; Same; When invalid.If an alien is given not only a lease of, but also an option to buy, a piece of land, by virtue of which the Filipino owner cannot sell or otherwise dispose of his property, this to last for 50 years, then it becomes clear that the arrangement is a virtual transfer of ownership whereby the owner divests himself in stages not only of the Avila v. CA Civil Law; Property; Sale at public auction, Where the property was purchased atpublic auction; the sale is void as thepurchase was prohibited under the Revised Administrative Code.While it is true that Marciana Avila, their mother and predecessor-in-interest, purchased the questioned property at a public auction conducted by the government; paid the purchase price; and was issued a final bill of sale after the expiration of the redemption period, it is however, undisputed that such purchase was prohibited under Section 579 of the Revised Administrative Code, as amended. x x x Thus, the sale to her of Lot 594 is void. Same; Same; Same; Contracts; Void contract is inexistent from the beginning and cannot be ratified and the right to set up the defense ofits illegality is not waived On the other hand, under Article 1409 of the Civil Code, a void contract is inexistent from the beginning. It cannot be ratified neither can the right to set up the defense of its illegality be waived. (Arsenal, et al. vs. The Intermediate Appellate Court, etal, G.R. No. 66696, July14,1986). Same; Same; Same; Same; A party to an illegal transaction cannot recover what she has given by reason ofthe contract orask forfulfillment of what has been promised her. Teja Marketing v. IAC Civil Law; Contracts; Maxim that no action arises out of illicit bargain; A party having entered into an illegal contract, neither of the parties can seek relief from the courts, and each must bear the consequences of his acts. " 'Ex pacto illicito' non oritur actio' (No action arises out of illicit bargain) is the time-honored maxim that must be applied to the parties in the case at bar. Having entered into an illegal contract, neither can seek relief from the courts, and each must bear the consequences of his acts." (Lita Enterprises vs. IAC, 129 SCRA 81.) Same; Same; Common Carriers; Kabit system, concept of; Kabit system, one of the root causes of the prevalence of graft and corruption in government transportation offices.Unquestionably, the parties herein operated under an arrangement,

commonly known as the "kabit system" whereby a person who has been granted a certificate of public convenience allows another person who owns motor vehicles to operate under such franchise for a fee. A certificate of public convenience is a special privilege conferred by the government. Abuse of this privilege by the grantees thereof cannot be countenanced. The "kabit system" has been identified as one of the root causes of the prevalence of graf t and corruption in the government transportation offices. Same; Same; Same; Same; Kabit system, although not outrightly penalized as a criminal offense, is contrary to public policy, and is void and inexistent; Principle that the court will not aid either party to enforce an illegal contract. Briones v. Cammayo Usury; Loan with usurious interest; Loan valid but usurious interest void; Right of creditor to recover his capital. To discourage stipulations on usurious interest, said stipulations are treated as wholly void, so that the loan becomes without stipulation as to payment of interest. It should not, however, be interpreted to mean forfeiture even of the principal, for this would unjustly enrich the borrower at the expense of the lender. Furthermore, penal sanctions are available against a usurious lender, as a further deterrence to usury. The principal debt remaining without stipulation for payment of interest can thus be recovered by judicial action. Same; Same; Divisibility of the contract.A contract of loan with usurious interest consists of principal and accessory stipulations; the principal one is to pay the debt; the accessory stipulation is to pay interest thereon. And said two stipulations are divisible in the sense that the former can still stand without the latter. In simple loan with stipulation of usurious interest, the prestation of the debtor to pay the principal debt, which is the cause of the contract, is not illegal. The illegality lies only as to the prestation to pay the stipulated interest; hence, being separable, the latter only should be deemed void, since it is the only one that is illegal. Same; Same; Loan and usurious interest void. In a contract which is tainted with usury, that is, with a stipulation (whether written or unwritten) to pay usurious interest, the prestation to pay such interest is an integral part of the cause of the contract. It is also the controlling cause, for a usurer lends his money not just to have it returned but indeed to acquire inordinate gain. Article 1957 of the Civil Code which declares the contract itselfnot merely the stipulation to pay usurious interestvoid, necessarily regards the prestation to pay such usurious interest as an integral part of the cause, making it illegal.