OBLICON Prefi Cases

Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-36821 June 22, 1978
JOSE P. DIZON, petitioner,
vs.
ALFREDO G. GABORRO (Substituted by PACITA
DE GUZMAN GABORRO as Judicial
Administratrix of the Estate of Alfredo G. Gaborro)
and the DEVELOPMENT BANK OF THE
PHILIPPINES, respondents.
judgment appealed therefrom is hereby

affirmed with modification that the plaintiffappellant has the right to refund or reimburse
the defendant- appellees he sum of P131,831.91
with interest at 8% per annum from October 6,
1959 until full payment, said right to be
exercised within one year from the date this
judgment becomes final, with the understanding
that, if he fails to do so within the said period,
then he is deemed to have lost his right over the
lands forever. With costs against the appellant. 2
aforesaid "Deed of Sale with Assumption of Mortgage."
MODIFIED.
Petitioner Dizon having defaulted in the payment of his

debt, the Development Bank of the Philippines
foreclosed the mortgage extrajudicially pursuant to the
provisions of Act No. 3135. On May 26, 1959, the hinds
were sold to the DBP for- P31,459.21, which amount
covered the loan, interest trial expenses, trial the
corresponding "Certificate of Sale," (Exhibit A-2,
Exhibit 1b was executed in favor of the said On
November 12, 1959, Dizon himself executed the deed of
sale (Exhibit Al over the properties in favor of the DBP
which deed was recorded in the Office of the Register of
Deeds on October 6, 1960.
Leonardo Abola for petitioner.

Carlos J. Antiporda for respondents.
GUERRERO, J.:
Petition for review on certiorari of the decision of the
Court Appeals 1 in CA-G.R. No. 46975-R entitled "Jose
P. Dizon, Plaintiff-Appellant, vs. Alfredo G. Gaborro
(substituted by Pacita de Guzman Gaborro as Judicial
Administratrix of the Estate of Alfredo G, Gaborro) trial
the Development Bank of the Philippines, DefendantsAppellees," affirming with modification the decision of
the Court of First Instance of Pampanga, Branch II in
Civil Case No. 2184.
The dispositive portion of the decision sought to be
reviewed reads:
IN
VIEW
OF
THE
FOREGOING,
the
The basic issue to be resolved in this case is whether the

'Deed of Sale with Assumption of Mortgage', trial
Option to Purchase Real Estate". two instruments
executed by trial between Petitioner Jose P. Dizon trial
Alfredo G. Gaborro (defendant below) on the same day,
October 6, 1959 constitute in truth trial in fact an
absolute sale of the three parcels of land therein
described or merely an equitable mortgage or
conveyance thereof by way of security for
reimbursement, refund or repayment by petitioner Jose
P. Dizon of any trial all sums which may have been paid
to the Development Bank of the Philippines trial the
Philippine National Bank by Alfredo G. Gaborro (later
substituted herein by his wife Pacita de Guzman
Gaborro as administratrix of the estate of Alfredo G.
Gaborro) who had died during the pendency of the case.
A supplementary issue raised is whether or not Gaborro
or the respondent administratrix of the estate should
account for all the fruits produced trial income received
by them from the lands mentioned trial described in the
The antecedent facts established in the record are not

disputed. Petitioner Jose P. Dizon was the owner of the
three (3) parcels of land, subject matter of this litigation,
situated in Mabalacat, Pampanga with an aggregate area
of 130.58 hectares, as evidenced by Transfer Certificate
of Title No. 15679. He constituted a first mortgage lien
in favor of the Develop. ment Bank of the Philippines in
order to secure a loan in the sum of P38,000.00 trial a
second mortgage lien in favor of the Philippine National
Bank to cure his indebtedness to said bank in the amount
of P93,831.91.
Sometime prior to October 6, 1959 Alfredo G. Gaborro

trial Jose P. Dizon met. Gaborro became interested in the
lands of Dizon. Dizon originally intended to lease to
Gaborro the property which had been lying idle for some
time. But as the mortgage was already foreclosed by the
DPB trial the bank in fact purchased the lands at the
foreclosure sale on May 26, 1959, they abandoned the
projected lease. They then entered into the following
contract on October 6, 1959 captioned trial quoted, to
wit:
DEED OF SALE WITH ASSUMPTION
OF MORTGAGE
KNOW ALL MEN BY THESE PRESENTS:
This DEED OF SALE WITH ASSUMPTION
OF MORTGAGE, made trial executed at the
City of Manila, Philippines, on this 6th day of
October, 1959 by trial between
JOSE P. DIZON, of legal age, Filipino, married
to Norberta Torres, with residence trial postal
address at Mabalacat, Pampanga, hereinafter
referred to as the VENDOR.
ALFREDO G. GABORRO, likewise of legal
age, Filipino, married to Pacita de Guzman,
with residence trial postal address at 46, 7th St.,
Gilmore Avenue, Quezon City, hereinafter
referred to as the VENDEE,
W I T N E S S E T H: That
WHEREAS, the VENDOR is the registered
owner of three (3) parcels of land covered by
Transfer Certificate of Title No. 15679 of the
land records of Pampanga. situated in the
Municipality of Mabalacat, Province of
Pampanga, trial more particularly described
trial bounded as follows:
1. A parcel of land (Lot No. 188 of the
Cadastral Survey of Mabalacat), with the
improvements thereon, situated in the
Municipality of Mabalacat, Bounded on the NE
by Lot No 187: on the SE., by Lots Nos. 183,
189, 191 trial 192; on the SW by Lot No. 192
trial on the NW by the unimproved provincial
road to Magalang. Containing an area of TWO
HUNDRED
AND
TWENTY
ONE
THOUSAND ONE HUNDRED SEVENTY

TWO SQUARE METERS (221,172), more or
less.
Municipality of Mabalacat. Bounded on the
NE., by a road trial Lots Nos. 569,570 trial 571;
on the SE., by Lot No. 571 trial the unimproved
road to Magalang, on the SW by a road; trial on
the NE., by a road trial the Sapang Pritil
Containing an area of NINE HUNDRED
SEVENTY EIGHT THOUSAND SEVEN
HUNDRED AND SEVENTEEN SQUARE
METERS (978,717), more or less.
Municipality of Mabalacat. Bounded on the
NE., by Lot No. 570, on the SE SW trial NW
by roads. Containing an area of ONE
HUNDRED FIVE THOUSAND NINE
HUNDRED AND TWENTY ONE SQUARE
METERS (105,921), more or less,
WHEREAS, the above-described properties are
presently mortgaged (first mortgage) to the
Development Bank of the Philippines
(,formerly Rehabilitation Finance Corporation)
to secure the payment of a loan, plus interest, of
THIRTY EIGHT THOUSAND PESOS ONLY
(P38,000.00), Philippine currency, as evidenced
by a deed of mortgage for- P... dated ... which
deed was ratified trial acknowledged before
Notary Public of Manila, Mr. ... as Doc. No.
Page No. Reg. No. Series of 196 ... ;
WHEREAS, the aforesaid properties are

likewise mortgage (second mortgage) to the
Philippine National Bank to secure the payment
of a loan of NINETY THREE THOUSAND
EIGHT HUNDRED THIRTY ONE PESOS &
91/100 (P93,831.91), Philippine Currency, plus
interest up to August 13, 1957, as evidenced by
deed
of
Mortgage
for
P.............
dated................... which deed was ratified trial
acknowledged before Notary Public of Manila,
Mr, I . I as Doc. No............ Page No.......... Reg.
No. Series of 196........... ; WHEREAS, the
VENDOR, has offered to sell trial the
VENDEE is willing to purchase the abovedescribed properties for ONE HUNDRED
THIRTY
ONE
THOUSAND
EIGHT
HUNDRED THIRTY ONE PESOS & 91 /100
(P131,831.91), Philippine Currency, under the
terms trial conditions herein below set forth;
NOW, THEREFORE, for- trial in consideration
of the above premises trial the amount of ONE
HUNDRED THIRTY ONE THOUSAND
EIGHT HUNDRED THIRTY ONE PESOS &
91/100 (P131,831.91), Philippine Currency, in
hand paid in cash by the VENDEE unto the
VENDOR, receipt whereof is hereby
acknowledged by the VENDOR to his entire
trial full satisfaction, trial the assumption by the
VENDEE of the entire mortgage indebtedness,
both with the Development Bank of the
Philippines trial the Philippine National Bank
above mentioned, the VENDOR does by these
presents, sell, transfer trial convey, as he had
sold, transferred, trial conveyed, by way of
absolute sale, perpetually trial forever, unto the
VENDEE, his heirs, successors trial assigns.
above-described properties, with all the
improvements thereon, free from all liens trial
encumbrances of whatever nature. except the

pre- existing mortgage obligations with the
Development Bank of the Philippines trial the
Philippine National Bank aforementioned. The
VENDOR does hereby warrant title, ownership
trial possession over the properties herein sold
trial conveyed, trial binds himself to defend the
same from any trial all claimants.
That the VENDEE, does by these presents,
assume as he has assumed, under the same
terms trial conditions of the mortgage contracts
dated ... and ... of the mortgage indebtedness of
the VENDOR in favor of the Development
Bank of the Philippines trial the Philippine
National Bank, respectively, as if the aforesaid
documents were personally executed by the
VENDEE trial states trial reiterates all the terms
trial conditions stipulated in said both
documents, making them to all intent trial
purposes, parts hereof by reference.
IN WITNESS WHEREOF, the VENDOR and
the VENDEE together with their instrumental
witnesses, have signed this deed of the place,
date, month trial year first above written.
(Sgd.) JOSE P. DIZON (Sgd.) ALFREDO G.
GABORRO
Vendor Vendee
Signed in the Presence of:
(Sgd.) (Illegible) (Sgd.) (Illegible)
(Acknowledgment Omitted)
The second contract executed the same day, October 6,
1959 is called Option to Purchase Real Estate, trial is in

the following wise trial manner:
OPTION TO PURCHASE REAL ESTATE
That 1, ALFREDO G. GABORRO, of legal
age, Filipino, married to Pacita de Guzman,
with residence trial postal address at 46, 7th St.,
Gilmore Ave., Quezon City, for- valuable
consideration, do hereby give to JOSE P.
DIZON, of legal age, Filipino, married to
Norberta Torres, resident of Mabalacat,
Pampanga, his heirs, successors and assigns, the
option of repurchasing the following described
properties:
TRANSFER CERTIFICATE OF TITLE
NO. 15679, PROVINCE OF PAMPANGA
1. A parcel of land (Lot No. 188 of Cadastral
Survey of Mabalacat, Pampanga containing an
area of (211,172) more or less.
Cadastral Survey of Mabalacat, Pampanga),
containing an area of (978,172) more or less.
Cadastral Survey of Mabalacat, Pampanga
containing an area of (105,921), more or less.
which I acquired from the said Jose P. Dizon by
purchase by virtue of that document entitled
"Deed of Sale with Assumption of Mortgage"
dated October 6, 1959, acknowledged by both
of us before Notary Public of Manila
GREGORIO SUMBILIO as DOC. No. 342,
Page No. 70, Reg. No. VII Series of 1959.

Said option shall be valid trial effective within
the period comprises from January, 1965 to
December 31, 1970, inclusive, upon payment of
the amount of ONE HUNDRED THIRTY ONE
THOUSAND EIGHT HUNDRED THIRTY
ONE PESOS & 91/100 (?131,831.91),
Philippine Currency, plus an interest of eight
per centum (8%) thereof, per annum. This is
without prejudice at any time to the payment by
Mr. Dizon of any partial amount to be applied
to the principal obligation, without any way
disturbing the possession and/or ownership of
the above properties since only full payment
can effect the necessary change.
In the event that Mr. Jose P. Dizon may be able
to find a purchaser for- the foregoing properties
on or the fifth year from the date the execution
of this document, the GRANTEE, Mr. JOSE P.
DIZON, may do so provided that the aggregate
amount which was Paid to Development Bank
of the Philippines trial to the Philippine
National Bank together with the interests
thereon at the rate of 8% shall be refunded to
the undersigned.
Furthermore, in case Mr. Jose P. Dizon shall be
able to find a purchaser for- the said properties,
it shall be his duty to first notify the
undersigned of the contemplated sale, naming
the price trial the purchaser therefor, trial
awarding the first preference in the sale hereof
to the undersigned.
IN WITNESS WHEREOF, I have hereunto
signed these presents at the City of Manila, on
this 6th day of October, 1959.
(Sgd.) ALFREDO G. GABORRO
your goodselves the total

indebtedness has shifted to me
amount
of
CONFORME:
(Sgd.) JOSE P. DIZON
SIGNED IN THE PRESENCE OF:
(Acknowledgment Omit)
The sum of P131,813.91 which purports to be the
consideration of the sale was not actually paid by
Alfredo G. Gaborro to the petitioner. The said amount
represents the aggregate debts of the petitioner with the
Development Bank of the Philippines trial the Philippine
National Bank.
After the execution of said contracts, Alfredo G.
Gaborro took possession of the three parcels of land in
question.
On October 7, 1959, Gaborro wrote the Development
Bank of the Philippines a letter (Exh. J), as follows:
Sir:
This is with reference to your mortgage lien of
P38,000.00 more or less over the properties
more particularly described in TCT No. 15679
of the land records of Pampanga in the name of
Jose P. Dizon. In this connection, we have the
honor to inform you that pursuant to a Deed of
Sale with Assumption of Mortgage executed on
October 6, 1959 by Jose P. Dizon in my favor,
copy of which is hereto attached, the ownership
of the same has been transferred to me subject
of course to your conformity to the assumption
of mortgage. As a consequence of the foregoing
document, the obligation therefore of paying
Considering that these agricultural properties

have not been under cultivation for- quite a long
time, I would therefore request that, on the
premise that the assumption of mortgage would
be agreeable to you, that I be allowed to pay the
outstanding obligation, under the same terms
trial conditions as embodied in the original
contract of mortgage within ten (10) years to be
divided in 10 equal annual amortizations. I am
enclosing herewith a check in the amount of
P3,609.95 representing 10% of the indebtedness
of Jose P. Dizon to show my honest intention in
assuming the mortgage obligation to you ...
The Board of Governors of the DBP, in its Resolution
No. 7066 dated October 21, 1959 approved the offer of
Gaborro but said Board required him to pay 20% of the
purchase price as initial payment, (Exh. D) Accordingly,
on July 11, 1960, the DBP trial Gaborro executed a
conditional sale of the properties in consideration of the
sum of P36,090.95 (Exh. C) payable 20% down trial the
balance in 10 years in the yearly amortization plan at 8%
per annum.
On January 7, 1960, Dizon assigned his right of
redemption Lo Gaborro in an instrument (Exh. 9)
entitled:
ASSIGNMENT OF RIGHT OF REDEMPTION
AND ASSUMPTION OF OBLIGATION
This instrument, made trial executed by trial
between JOSE P. DIZON, married to Norberta
P. Torres, Filipino, of legal age, with residence

trial postal address at Mabalacat, Pampanga.
hereinafter referred to as the ASSIGNOR trial
ALFREDO G. GABORRO, married to Pacita
de Guzman, likewise of legal age, Filipino, with
residence trial postal address at 46, 7th Street,
Gilmore Ave., Quezon City, hereinafter referred
to as the ASSIGNEE,
WITNESSETH:
WHEREAS, the Assignor is the owner trial
mortgagor of three (3) parcels agricultural land
together with all the improvements existing
thereon trial more particularly described trial
bounded as follows:
TRANSFER CERTIFICATE OF TITLE NO.
1567
PROVINCE OF PAMPANGA
Cadastral Survey of Mabalacat), with
the improvements thereon, situated in
the Municipality of Mabalacat.
Bounded on the NE by Lot No. 187: on
the SE. by Lots Nos. 183, 189, 191
trial 192; on the SW. by Lot No. 192;
trial on the NW by the unimproved
provincial road to Magalan. Containing
an area of two hundred twenty-one
thousand one hundred trial seventy two
square meters (221,172), more or less.
the Municipality of Mabalacat.
Bounded on the NE. by a road trial

Lots Nos. 569, 570 trial 571; on the
SE. by Lot No. 571 trial the
unimproved road to Magalan-, on the
SW. by a road; trial on the NW by a
road trial the Sapang Pritil Containing
an area of nine hundred seventy eight
thousand seven hundred and seven
hundred square meters (978,717), more
or less.
3. A parcel of Land (Lot No. 568 of the
the Municipality of Mabalacat,
Bounded on the NE. by Lot No. 570;
and on the SE., SW. and NW. by roads.
Containing an area of one hundred five
thousand nine hundred and twenty-one
square meters (105,921), more or less.
WHEREAS, the above described properties
were mortgaged with the Rehabilitation Finance
Corporation, now Development Bank of the
Philippines, which mortgage has been
foreclosed on May 26, 1959;
AND WHEREAS, the herein Assignor has still
the right to redeem the said properties from the
said Development Bank of the Philippines
within a period of one (1) year counted from the
date of foreclosure of the said mortgage.
NOW,
THEREFORE,
for ......................................... trial other
valuable considerations, receipt whereof is
hereby acknowledged by the Assignor from the
Assignee, The herein Assignor does hereby
transfer trial assign to the herein Assignee, his
heirs, successors trial assigns the aforesaid right

to redeem the aforementioned properties above
described.
That with this document the herein Assignor
relinquishes any and all rights to the said
properties including the improvements existing
thereon.
That the Assignee, by these presents, hereby
assumes the obligation in favor of the d
Development Bank of the Philippines, as
Paying whatever legal indebtedness the
Assignor has with the d B in connection with
the transaction regarding the hove mentioned
Properties subject to the file and conditions that
the said Bank may require and further
recognizes the second mortgage in favor Of the
Philippine National Bank.
IN WITNESS WHEREOF, the parties have
hereunto set their hands in the City of Manila,
Philippines this --------- day of - - - - - -1959.
(Sgd-) JOSE P. DIZON (Sgd.) ALFREDO G.
GABORRO
Assignor (Assignee)
(Acknowledgment Omitted)
After the execution of the conditional e to him Gaborro
made several payments to the DBP and PNB. He
introduced improvements, cultivated the kinds raised
sugarcane and other crops and appropriated the produce
to himself. He will paid the land taxes thereon.
On July 5, 1961, Jose P. Dizon through his lawyer, Atty.
Leonardo Abola, wrote a letter to Gaborro informing
him that he is formally offering reimburse Gaborro Of

what he paid to the banks but without, however,
tendering any cash, and demanding an accounting of the
income and of the pro contending that the transaction
they entered into was one of antichresis. Gaborro did not
accede to the demands of the petitioner, whereupon, on
JULY 30, 1962, Jose P. Dizon instituted a complaint in
the Court of First Instance of Pampanga, Gaborro,
alleging that the documents Deed of Sale With
Assumption of Mortgage and the Option to Purchase
Real Estate did not express the true intention and
agreement bet. between the parties. Petitioner Dizon, as
Plaintiff below, contended that the two deeds constitute
in fact a single transaction that their real agreement was
not an absolute e of the d of land but merely an equitable
mortgage or conveyance by way of security for the
reimbursement or refund by Dizon to Gaborro of any
and all sums which the latter may have paid on account
of the mortgage debts in favor of the DBP and the PNB.
Plaintiff prayed that defendant Gaborro be ordered to
accept plaintiff's offer to reimburse him of what he paid
to the banks; to surrender the possession of the lands to
plaintiff; to make an accounting of all the fruits,
produce, harvest and other income which he had
received from the three (3) parcels of land; and to pay
the plaintiff for the loss of two barns and for damages.
In its answer, the DBP specifically denied the material
averments of the complaint and stated that on October 6,
1959, the plaintiff Dizon was no longer the owner of the
land in question because the DBP acquired them at the
extrajudicial foreclosure sale held on May 26, 1959, and
that the only right which plaintiff possessed was a mere
right to redeem the lands under Act 3135 as amended.
Defendant Alfredo G. Gaborro also answer, denying the
material averments of the complaint, stating that the
"Deed of Sale with Assumption of Mortgage" expresses
the true agreement of the parties "fully, truthfully and
religiously" but the Option to Purchase Real Estate"

does not express the true intention of the parties because
it was made only to protect the reputation of the plaintiff
among his townmates, and even in the supposition that
said option is valid, the action is premature. He also
filed a counterclaim for damages, which plaintiff denied.
The issues having been joined, a pre-trial was held and
the following stipulation of facts admitted by the parties
was approved by the Court in the following order dated
February 22, 1963:
ORDER
At today's initial trial the following were
present: Mr. Leonardo Abola, for the plaintiff;
Mr. Carlos Antiporda, for the defendant Alfredo
Gaborro; and Mr. Virgillo Fugoso, for the
Development Bank of the Philippines:
The parties brave stipulated on the following
facts:
1. That Annex A attached to the complaint is
marked Exhibit
A- Stipulation. The parties have admitted the
due execution, authenticity and genuineness of
said Exhibit A-Stipulation. This fact has been
admitted by all the three parties.
Bank
of
the
Philippines,
formerly
Rehabilitation Finance Corporation, to secure
payment of a loan obtained by the plaintiff Jose
P. Dizon in the original sum of P38,000.00 plus
interest, which has been assumed by defendant
Gaborro by virtue of a document, Exhibit AStipulation, and also subject to a second
mortgage lien in favor of the Philippine
National Bank to secure the payment of a loan
in the sum of P93,831.91 plus interest up to
August 30, 1951, which mortgage liens were
duly annotated on TCT 15679. This fact has
been admitted by the plaintiff and defendant
Gaborro.
4. In respect to the foreclosure of the first
mortgage referred to above, it was admit that
the same was foreclosed on May 26, 1959, the
second mortgage has not been admitted nor
foreclosed.
5. That the Development Bank of the
Philippines admits that the first mortgage
referred to above was foreclosed on May 26,
1959 under the provision,,; of Public Act No3135, as amended.
2. That the defendant Gaborro executed Annex

B, which is marked Exhibit B-Stipulation. This
fact has been admitted only between plaintiff
and defendant Gaborro.
6. That subsequently the Development Bank

and the defendant Gaborro executed a
document entitled Conditional Sale over the
same parcels of land referred to in paragraph 3
of the complaint, and copy thereof will be
furnished by the Development Bank of the
Philippines and marked Exhibit C-Stipulation.
3. That the three parcels of land referred to in

paragraph 3 of the complaint, on or before
October 6, 1959, were subject to a first
mortgage lien in favor of the Development
7. That on or before October 6, 1960, TCT No.

15679 of the Register of D of Pampanga in the
name of Jose P. Dizon covering the three
parcels of land referred to in the complaint was
cancelled and in lieu thereof TCT NO. 24292 of

the Register of Deeds of Pampanga was issued
in the name of the Development Bank of the
Philippines. This fact has been admitted by all
the parties.
8. That after the execution of the deed of
conditional sale, certain payments were made
by the defendant Gaborro to the Development
Bank, the exact amount to be determined later
and receipts of payments to be also exhibited
later. This fact has been admitted by all the
three parties.
9. That since October 6, 1959, the defendant
Gaborro has made several payments to the PNB
in the amounts appearing on the receipts which
will be shown later, such payments being made
on account of the sum of P38,831.91. The
payment was assumed by said - defendant
Gaborro. This fact has been admitted by
plaintiff and defendant Gaborro only.
10. That since the execution of Exhibits A and
B-Stipulation, it,, defendant Gaborro has been
and still is in the actual possession f the three
parcels of land in question and he is actually
cultivating the same and that the land taxes
thereon have been paid by said defendant
Gaborro, the amounts of said taxes appearing
on the official receipts to be shown later. This
fact has been admitted by plaintiff and
defendant Gaborro only.
11. That since defendant Gaborro took
possession of the lands in question, he has been
appropriating all the fruits produced and income
of said lands without giving to the plaintiff any
share hereof. This fact has been admitted by
plaintiff and defendant Gaborro only.

Let a copy of this order be served upon the
plaintiff, defendant Gaborro and the
Development Bank of the Philippines with the
understanding that, if, within fifteen (15) days,
none of the parties questions the correctness of
The facts set forth above. this stipulation of
facts shall be conclusive upon the parties
interested in this case.
Set the trial on the controversial facts on April
18, 1963 at 13:00 clock in the morning.
Paragraphs 3 and 10 of the above quoted order were
deleted in an order dated July 26, 1963.
The records disclose that during the pendency of the
case in the trial court, motions were filed by the plaintiff
for the appointment of a receiver of the properties but all
were denied. plaintiff also reiterated the same motion
before the appellate court which, however, dismissed the
same, reserving to him the right to file in the trial court.
Plaintiff did file but with the same result. certiorari
proceedings were resorted to in the Court of Appeals in
CA-G.R. No. SP-01403 entitled "Jose P. Dizon vs. Hon.
Felipe Buencamino, et al." which the respondent court
denied.
After trial the court held that the true agreement between
Jose P. Dizon, the plaintiff therein, and the defendant
Alfredo G. Gaborro is that the defendant would assume
and pay the indebtedness of the plaintiff to the
Development Bank of the Philippines and the Philippine
National Bank, and in consideration therefor, the
defendant was given the possession and enjoyment of
the properties in question until the plaintiff shall have
reimbursed to defendant fully the amount of
P131,831.91 plus 8% interest per annum.
Accordingly, on March 14, 1970, the lower court

rendered judgment, the dispositive part of which reads:
IN VIEW OF THE FOREGOING, the
documents entitled 'Deed of Sale with
Assumption
of
Mortgage'(Exhibit
AStipulation) and 'Option to Purchase Real
Estate' (Exhibit B-Stipulation) are hereby
reformed to the extent indicated above.
However, since this action was filed before the
period allowed the plaintiff to redeem his
property, the prematurity of this action aside
from not being principally alleged in the
complaint, deters this Court from ordering
further reliefs and remedies. The counterclaim
of the defendant is dismissed.
The plaintiff's motion for new trial and for
reconsideration and motion for admission of
supplemental complaint having been denied for lack of
merit, on June 6, 1970, plaintiff appealed to the Court of
Appeals, which. however, affirmed the decision with the
modification that the plaintiff-appellant has the right to
refund or reimburse the defendant-appellee the sum of
P131,831.91 with interest at 8% per annum from
October 6, 1959 until full payment, said right to be
exercised within one (1) year from the date the judgment
becomes final, with the understanding that, if he fails to
do so within the said period, then he is deemed to have
lost his right over the lands forever.
Petitioner's motion for reconsideration and/or rehearing
having been denied by the Court of Appeals, hence the
present petition for review on certiorari. The petitioner
assigns the following errors, to wit:
I. The Court of Appeals, like the lower court,
erred in not holding that upon established facts
and undisputed documentary evidence, the deed
of sale with assumption of mortgage (Exhibit

A-Stipulation)
constitutes
an
equitable
mortgage or conveyance to secure petitioner's
obligation to reimburse or refund to defendant
Alfredo Gaborro any and all sums to the extent
of P131,831.91, paid by said defendant in total
or partial satisfaction of petitioner's mortgage
debts to the DBP and the PNB. In this
connection, the Court of Appeals erred:
(A) In not finding that the petitioner
was the lawful owner of the lands in
question:
(B) In not finding that the deed of sale
in question is not a real and
unconditional sale; and
(C) In not holding that the option to
purchase real estate (Exhibit BStipulation is conclusive evidence that
the transaction in question is in fact an
equitable mortgage.
II. The Court of Appeals also erred in finding
that the instrument entitled 'Assignment of
Right of Redemption and Assumption of
Obligation' is conclusive evidence that the real
transaction Evidenced by the 'Deed of Sale with
Assumption of Mortgage' is not an equitable
mortgage. In this connection the said court also
erred or at least committed a grave abuse of
discretion:
(A) In not finding that the said deed of
assignment is in fact a mere reiteration
of the terms and condition of the deed
of sale;
(B) In finding that the price or

consideration of The aforesaid
assignment. of right of redemption
consisted of 300 cavans of palay
delivered by Mrs. Gaborro to the
petitioner; and
(C) In finding that defendant Gaborro
purchased the lands in question by
virtue of the aforementioned deed of
assignment.
III. The, Court of Appeals, like the trial court,
also erred in not finding that the estate of
Alfredo G. Gaborro is under obligation to
render an accounting of all the produce, fruits
and other income of the lands in question from
October 6, 1959, and to reconvey the said lands
to the herein petitioner. In to connection, the
said court also erred:
(A) In not holding that as a mortgagee
in possession the Gaborro estate has
the obligation to either render an
accounting of the produce or fruits of
the lands, or to pay rentals for the
occupation of said lands;
(B) In not finding that the Gaborro
estate has the obligations to reconvey
the lands in controversy to the herein
petitioner, upon payment of the
balance due from him after deducting
either the net value of the produce or
fruits of the Said lands or the rentals
thereof,
(C) In not finding that further reliefs or
remedies may be granted the herein
petitioner; and
(D) In not ordering the admission of
herein
petitioners
'Supplemental
Complaint' dated April 30, 1970.
IV. The Court of Appeals finally erred in not
reversing the decision of the trial court, and in
not rendering judgment declaring that the deed
of sale with assumption of mortgage (Exhibit A
Stipulation) is in fact an equitable mortgage;
and in not ordering the Gaborro estate either to
render an accounting of all the produce or fruits
of the lands in question or to pay rentals for the
occupation thereof, from October 6, 1959; and
in not ordering the estate of Alfredo G. Gaborro
to reconvey, transfer and assign unto the
petitioner the aforementioned lands.
The two instruments sought to be reformed in this case
ap pear to stipulate rights and obligations between the
parties thereto Pertaining to and involving parcels of
land that had already beer foreclosed and sold
extrajudicially, and purchased by the mortgage creditor,
a degree party. It becomes, therefore, necessary to
determine the legality of said rights and obligation
arising from the foreclosure and e pro. proceedings only
between the two contracting parties to the instruments
executed between them but also in the so far a
agreement affects the rights of the degree panty, the
purchase Bank.
Act 3135, Section 6 as amended by Act 4118, under
which the Properties were extrajudicially foreclosed and
sold, provides that:
Sec. 6. In all cases in which an extrajudicial
rule is made under the special power
hereinbefore referred to, the debtor, his
successors in interest or any judicial creditor or

judgment creditor of e debtor, or any person
having a lien on the property subsequent to the
mortgage or deed of trust under which the
property is sold, may redeem the same at any
time within the term or one year from and after
the date of the sale; and such redemption shall
be governed by the provisions of sections four
hundred and sixty-four to four hundred and
sixty-six, inclusive, of the Code of Civil
Procedure, in so far as these are not consistent
with the provisions of this Act.
Under the Revised Rules of Court, Rule 39, Section 33,
the judgment debtor remains in possession of the
property foreclosed and sold, during the period of
redemption. If the judgment debtor is in possession of
the property sold, he is entitled to retain it and receive
the fruits, the purchaser not being entitled to such
possession. (Riosa v. Verzosa, 26 Phil. 86; Velasco v.
Rosenberg's Inc., 32 Phil. 72; Pabico v. Pauco 43 Phil.
572; Power v. PNB, 54 Phil. 54; Gorospe v. Gochangco
L-12735, Oct. 30, 1959).
A judgment debtor, whose property is levied on
execution, may transfer his right of redemption to any
one whom he may desire. The right to redeem land sold
under execution within 12 months is a property right and
may be sold voluntarily by its owner and may also be
attached and sold under execution (Magno v. Viola and
Sotto, 61 Phil. 80).
Upon foreclosure and sale, the purchaser is entitled to a
certificate of sale executed by the sheriff. (Section 27,
Revised Rules of Court) After the termination of the
period of redemption and no redemption having been
made, the purchaser is entitled to a deed of conveyance
and to the possession of the properties. (Section 35,
Revised Rules of Court). The weight of authority is to
the effect that the purchaser of land sold at public

auction under a writ of execution only has an inchoate
right in the property, subject to be defeated and
terminated within the period of 12 months from the date
of sale, by a redemption on the part of the owner.
Therefore, the judgment debtor in possession of the
property is entitled to remain therein during the period
allowed for redemption. (Riosa v. Verzosa. 26 Phil, 86;
89; Gonzales v. Calimbas, 51 Phil. 355.)
In the case before Us, after the extrajudicial foreclosure
and sale of his properties, petitioner Dizon retained the
right to redeem the lands, the possession, use and
enjoyment of the same during the period of redemption.
And these are the only rights that Dizon could legally
transfer, cede and convey unto respondent Gaborro
under the instrument captioned Deed of Sale with
Assumption of Mortgage (Exh. A-Stipulation), likewise
the same rights that said respondent could acquire in
consideration of the latter's promise to pay and assume
the loan of petitioner Dizon with DBP and PNB.
Such an instrument cannot be legally considered a real
and unconditional sale of the parcels of land, firstly,
because there was absolutely no money consideration
therefor, as admittedly stipulated the sum of
P131,831.91 mentioned in the document as the
consideration "receipt of which was acknowledged" was
not actually paid; and secondly, because the properties
had already been previously sold by the sheriff at the
foreclosure sale, thereby divesting the petitioner of his
full right as owner thereof to dispose and sell the lands.
In legal consequence thereby, respondent Gaborro as
transferee of these certain limited rights or interests
under Exh. A-Stipulation, cannot grant to petitioner
Dizon more that said rights, such ac the option Co
purchase the lands as stipulated in the document called
Option to Purchase Real Estate (Exhibit B-Stipulation),
This is necessarily so for the reason that respondent

Gaborro did not purchase or acquire the full title and
ownership of the properties by virtue of the Deed of Sale
With Assumption of Mortgage (Exh. A Stipulation),
earlier executed between them which We have ruled out
as an absolute sale. The only legal effect of this Option
Deed is the grant to petitioner the right to recover the
properties upon reimbursing respondent Gaborro of the
total sums of money that the latter may have paid to
DBP and PNB on account of the mortgage debts, the
said right to be exercised within the stipulated 5 years
period.
In the light of the foreclosure proceedings and sale of
the properties, a legal point of primary importance here,
as well as other relevant facts and circumstances, We
agree with the findings of the trial and appellate courts
that the true intention of the parties is that respondent
Gaborro would assume and pay the indebtedness of
petitioner Dizon to DBP and PNB, and in consideration
therefor, respondent Gaborro was given the possession,
the enjoyment and use of the lands until petitioner can
reimburse fully the respondent the amounts paid by the
latter to DBP and PNB, to accomplish the following
ends: (a) payment of the bank obligations; (b) make the
lands productive for the benefit of the possessor,
respondent Gaborro, (c) assure the return of the land to
the original owner, petitioner Dizon, thus rendering
equity and fairness to all parties concerned.
In view of all these considerations, the law and
Jurisprudence, and the facts established. We find that the
agreement between petitioner Dizon and respondent
Gaborro is one of those inanimate contracts under Art.
1307 of the New Civil Code whereby petitioner and
respondent agreed "to give and to do" certain rights and
obligations respecting the lands and the mortgage debts
of petitioner which would be acceptable to the bank. but
partaking of the nature of the antichresis insofar as the
principal parties, petitioner Dizon and respondent

Gaborro, are concerned.
Mistake is a ground for the reformation of an instrument
which there having been a meeting of the minds of The
parties o a contract, their true intention is not expressed
in the instrument purporting to embody the agreement,
and one of the parries may ask for such reformation to
the end that such true intention may be expressed. (Art.
1359, New Civil code). When a mutual mistake of the
parties causes the failure of the instrument to disclose
their real agreement, said instrument may be reformed.
(Art. 1361, New Civil Code.) It was a mistake for the
parties to execute the Deed of Sale With Assumption of
Mortgage and the Option to Purchase Real Estate and
stand on the literal meaning of the file and stipulations
used therein.
The instruments must, therefore, be reformed in
accordance with the intention and legal rights and
obligations of the parties the petitioner, the
respondent and the Banks. We agree with the
reformation decreed by the trial and appellate courts, but
in the sense that petitioner Jose P. Dizon has the right to
reacquire the three parcels of land within the one-year
period indicated below by refunding or reimbursing to
respondent Alfredo G. Gaborro or the Judicial
Administratrix of his Estate whatever amount the latter
has actually paid on account of the principal only, of the
loans of Dizon with the DBP and PNB, excluding the
interests and land taxes that may have been paid or may
have accrued, on duly certified financial statements
issued by the said banks.
On the issue of the accounting of the fruits, harvests and
other income received from the three parcels of land
from October 6, 1959 up to the present, prayed and
demanded by Dizon of Gaborro or the Judicial
Administratrix of the latter's estate, We hold that in
fairness and equity and in the interests of justice that

since We have ruled out the obligation of petitioner
Dizon to reimburse respondent Gaborro of any interests
and land taxes that have accrued or been paid by the
latter on the loans of Dizon with DBP and PNB,
petitioner Dizon in turn is not entitled to an accounting
of the fruits, harvests and other income received by
respondent Gaborro from the lands, for certainly,
petitioner cannot have both benefits and the two may be
said to offset each other.
By virtue of the Option to Purchase Real Estate (Exh. B
Stipulation) which on its face granted Dizon the option
to purchase the properties which must be exercise within
the period from January, 1960 to December 31, 1965 but
which We held to be simply the grant of the right to
petitioner Dizon to recover his properties within the said
period, although already expired by reasons and
circumstances beyond his control, petitioner is entitled
to a reconveyance of the properties within a reasonable
period The period of one year from the date of the
finality of this judgment as laid down by the Court of
Appeals for the exercise of such right by petitioner
Dizon appears fair and reasonable and We approve the
same.
exclusive of the interests that may have accrued

thereon or may have been paid by Gaborro, on
the basis of duly certified statements issued by
said banks;
(b) Any outstanding balance due on Dizon's
original principal loan of P38,000.00 with the
Development Bank of the Philippines assumed
by Gaborro and on Dizon's original principal
loan of 93,831.91 with the PNB shag be
deducted from the above-fixed reconveyance
price payable to Gaborro, in order to enable
Dizon to pay off the said mortgage loans
directly to the said banks, in accordance with
file mutually agreed upon with them by Dizon;
Since We are not informed of the status of Dizon's loan

of P93,831.91 with the Philippine National Bank which
appears to be on a subsisting basis, it is proper to
indicate here how petitioner Dizon may exercise the
right to a reconveyance of the properties as herein
affirmed, as follows:
(c) In other words, the maximum reconveyance

price that Dizon is obligated to pay is the total
sum of ?131,831.91 (the sum total of the
principals of his two original loans with the
DBP and PNB), and should the amounts due to
the said banks exceed this total of P131,831.91
(because of delinquent interests and other
charges), nothing shall be due Gaborro by way
of reimbursement and Dizon will thereupon
step into the shoes of Gaborro as ownermortgagor of the properties and directly arrange
with the banks for the settlement of the amounts
still due and payable to them, subject to the
right of Dizon to recover such amounts in
excess of P131,831.91 from Gaborro by writ of
execution in this case; and
(a) Dizon is granted the right to a reconveyance

of the properties by reimbursing Gaborro (or his
estate) whatever amounts) the latter has actually
paid on account of the principal only, of
Dizon's loans of P38,000.00 and P93,831.91
which the DBP and PNB, respectively,
(d) As already stated, Dizon is not entitled to an

accounting of the fruits, harvests and other
income received by Gaborro from the land
while Gaborro in turn is not entitled to the
payment of any interests on any amounts paid
by him on account of the principal loans to the
banks nor reimbursement of any interests paid

by him to the banks.
WHEREFORE, the judgment appealed from is hereby
affirmed with the modification that petitioner Dizon is
granted the right within one year from finality of this
decision to a reconveyance of the properties in litigation
upon payment and reimbursement to respondent estate
of o G. Gaborro of the amounts actually paid by Gaborro
or his estate on account of the principal only of Dizon's
original loans with the Development Bank of the
Philippines and Philippine National Bank in and up to
the total amount of P131,831.91, under the terms and
conditions set forth in the preceding paragraph with
subparagraphs (a) to (d), which are hereby incorporated
by reference as an integral part of this judgment, and
upon the exercise of such right, respondent estate shall
forthwith execute the corresponding deed of
reconveyance in favor of petitioner Dizon and deliver
possession of the properties to him. Without
pronouncement as to costs.
Teehankee (Chairman), Makasiar, Muoz Palma and
Fernandez, JJ., concur.
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-27696 September 30, 1977
MIGUEL FLORENTINO, ROSARIO
ENCARNACION de FLORENTINO, MANUEL
ARCE, JOSE FLORENTINO, VICTORINO
FLORENTINO, ANTONIO FLORENTINO,
REMEDION ENCARNACION and SEVERINA
ENCARNACION, petitioners-appellants,
vs.
SALVADOR ENCARNACION, SR., SALVADOR
ENCARNACION, JR., and ANGEL
ENCARNACION,oppositors to encumbrancepetitioners-appelles.
Jose F. Singson and Miguel Florentino for appellants.
Pedro Singson for appellees.
GUERRERO, J.:
Appeal from the decision of the Court of First Instance
of Ilocos Sur, acting as a land registration court, in Land
Registration case No. N-310.
On May 22, 1964, the petitioners-appellants Miguel
Florentino, Remedios Encarnacion de Florentino,
Manuel Arce, Jose Florentino, Victorino Florentino,
Antonio Florentino, Remedior, Encarnacion and
Severina Encamacion, and the Petitiners-appellees
Salvador Encamacion, Sr., Salvador Encamacion, Jr. and
Angel Encarnacion filed with the Court of First Instance
of ilocos Sur an application for the registration under
Act 496 of a parcel of agricultural land located at Barrio
Lubong Dacquel Cabugao Ilocos Sur.
The application alleged among other things that the
applicants are the common and pro-indiviso owners in
fee simple of the said land with the improvements
existing thereon; that to the best of their knowledge and
belief, there is no mortgage, lien or encumbrance of any
kind whatever affecting said land, nor any other person
having any estate or interest thereon, legal or equitable,
remainder, reservation or in expectancy; that said
applicants had acquired the aforesaid land thru and by
inheritance from their predecessors in interest, lately
from their aunt, Doa Encarnacion Florentino who died

in Vigan, Ilocos Sur in 1941, and for which the said land
was adjudicated to them by virtue of the deed of
extrajudicial partition dated August 24, 1947; that
applicants Salvador Encarnacion, Jr. and Angel
Encarnacion acquired their respective shares of the land
thru purchase from the original heirs, Jesus, Caridad,
Lourdes and Dolores surnamed Singson one hand and
from Asuncion Florentino on the other.
After due notice and publication, the Court set the
application for hearing. No Opposition whatsoever was
filed except that of the Director of Lands which was
later withdrawn, thereby leaving the option unopposed.
Thereupon, an order of general default was withdrawn
against the whole world. Upon application of the asets
the Clerk Of court was commission will and to have the
evidence of the agents and or to submit the for the
Court's for resolution.
The crucial point in controversy in this registration case
is centered in the stipulation marked Exhibit O-1
embodied in the deed of extrajudicial partition (Exhibit
O) dated August 24, 1947 which states:
Los productos de esta parcela de terreno situada
en el Barrio Lubong Dacquel Cabugao Ilocos
Sur, se destination para costear los tos de
procesio de la Tercera Caida celebration y
sermon de Siete Palbras Seis Estaciones de
Cuaresma, procesion del Nino Jesus, tilaracion
y conservacion de los mismos, construction le
union camarin en conde se depositan los carros
mesas y otras cosas que seven para lot leiracion
de Siete Palabras y otras cosas mas Lo que
sobra de lihos productos despues de
descontados todos los gastos se repartira
nosotros los herederos.
In his testimony during the trial, applicant Miguel

Florentino asked the court to include the said stipulation
(Exhibit O-1) as an encumbrance on the land sought to
be registered, and cause the entry of the same on the face
of the title that will finally be issued. Opposing its entry
on the title as an encumbrance, petitionersappellee
Salvador Encamacion, Sr., Salvador Encarnaciori, Jr.
and Angel Encarriacion filed on October 3, 1966 a
manifestation seeking to withdraw their application on
their respective shares of the land sought to be
registered. The withdrawal was opposed by the
petitioners-appellants.
The Court after hearing the motion for withdrawal and
the opposition thereto issued on November 17, 1966 an
order and for the purpose of ascertaining and implifying
the issues therein stated that all the applicants admit the
truth of the following;
(1) That just after the death of Encarnacion
FIorentino in 1941 up to last year and as had
always been the case since time immomorial
the products of the land made subiect matter of
this land has been used in answering for the
payment for the religious functions specified in
the Deed Extrajudicial Partition belated August
24, 1947:
(2) That this arrangement about the products
answering for the comment of experisence for
religions functions as mentioned above was not
registered in the office of the Register of Deeds
under Act No 3344, Act 496 or and, other
system of registration;
(3) That all the herein applicants know of the
existence of his arrangement as specified in the
Deed of Extra judicial Partition of A adjust 24,
1947;
(4) That the Deed of Extrajudicial Partition of

August 24, 194-, not signed by Angel
Encarnacion or Salvador Encarnacion, Jr,.
Antonio Florentino, of legal age, Filipino,

single and resident of Vigan, Ilocos Sur,
consisting of an undivided 17.5/297;
The court denied the petitioners-appellee

motion to withdraw for lack of merit, and
rendered a decision under date of November 29,
1966 confirming the title of the property in
favor of the f appoints with their respective
shares as follows:
Salvador Encarnacion, Sr., of legal age,

Filipino, married to Dolores Singson, consisting
of an undivided 8.25/297;
Spouses Miguel Florentino and Rosario

Encarnacion de Florentino, both of legal age,
Filipinos, and residents of Vigan, Ilocos Sur,
consisting of an undivided 31/297 and 8.25/297
portions, respectively;
Manuel Arce, of legal age, Filipino, married to
Remedios Pichay and resident of Vigan, Ilocos
Sur, consisting of an undivided 66/297 portion;
Salvador Encarnacion, Jr., of legal age, Filipino,
married to Angelita Nagar and resident of
Vigan, Ilocos Sur, consisting of an undivided
66/297; Jose Florentino, of legal age, Filipino,
married to Salvacion Florendo and resident of
16 South Ninth Diliman, Quezon City,
consisting of an undivided 33/297 portion;
Angel Encarnacion, of legal age, Filipino,
single and resident of 1514 Milagros St., Sta.
Cruz, Manila, consisting of an undivided
33/297 portion;
Victorino Florentino, of legal age, Filipino,
married to Mercedes L. Encarnacion and
resident of Vigan, Ilocos Sur, consisting of an
undivided 17.5/297 portion;
Remedios Encarnacion, of legal age, Filipino,

consisting of an undivided 8.25/297 portion;
and
arguments, and also attacking the junction of the

registration court to pass upon the validity or invalidity
of the agreement Exhibit O-1, alleging that such is
specified only in an ordinary action and not proper in a
land registration proceeding.
The Motion for Reconsideration and of New Trial was
denied on January 14, 1967 for lack of merit, but the
court modified its earlier decision of November 29,
1966, to wit:
In view of all these, therefore, and insofar as the

question of encumbrance is concerned, let the
religious expenses as herein specified be made
and entered on the undivided shares, interests
and participations of all the applicants in this
case, except that of Salvador Encarnacion, Sr.,
Salvador Encarnacion, Jr. and Angel
Encarnacion.
This Court believes, and so holds, that the

contention of the movants (proponents of the
encumbrance) is without merit because the
arrangement, stipulation or grant as embodied
in Exhibit O (Escritura de Particion
Extrajudicial), by whatever name it may be
(called, whether donation, usufruct or
ellemosynary gift, can be revoked as in fact the
oppositors Salvador Encarnacion, Sr., who is
the only one of the three oppositors who is a
party to said Exhibit O (the two others,
Salvador Encarnacion, Jr. and Angel
Encarnacion no parties to it) did revoke it as
shown by acts accompanying his refusal to have
the same appear as an encumbrance on the title
to be issued. In fact, legally, the same can also
be ignored or discararded by will the three
oppositors. The reasons are: First, if the said
stipulation is pour bodies in Exhibit O-1 is to be
viewed as a stipulation pour autrui the same
cannot now be enforced because the Church in
whose favor it was made has not communicated
its acceptance to the oppositors before the latter
revoked it. Says the 2nd par. of Art. 1311 of the
New Civil Code:
On January 3, 1967, petitioners-appellants filed their

Reply to the Opposition reiterating their previous
"If a contract should contain some stipulation in

favor of a third person he may demand its
Severina Encarnacion, of legal age, Filipino,

consisting of 8.25/297 undivided portion.
The court, after ruling "that the contention of the
proponents of encumbrance is without merit bemuse,
taking the self-imposed arrangement in favor of the
Church as a pure and simple donation, the same is void
for the that the donee here has riot accepted the donation
(Art. 745, Civil Code) and for the further that, in the
case of Salvador Encarnacion, Jr. and Angel
Encarnacion, they had made no oral or written grant at
all (Art. 748) as in fact they are even opposed to it," 1
held in the Positive portion, as follows:
fulfillment provided he communicated his

acceptance to the obligor before its revocation.
A mere incidental benefit or interest of a person
is not sufficient. The contracting parties must
have clearly and deliberately conferred a favor
upon a third person." No evide nee has ever
been submitted by the Church to show its clear
acceptance of the grant before its revocation by
the oppositor Salvador Encarnacion, Sr. (or of
the two other oppositors, Salvador Encarnacion,
Jr. and Angel Encarnacion, who didn't even
make any giant, in the first place), and so not
even the movants who have officiously taken
into themselves the right to enforce the grant
cannot now maintain any action to compel
compliance with it. (Bank of the P.I. v.
Concepcion y Hijos, Inc., 53 Phil. 806). Second,
the Church in whose favor the stipulation or
grant had apparently been made ought to be the
proper party to compel the herein three
oppositors to abide with the stipulation. But it
has not made any appearance nor registered its
opposition to the application even before Oct.
18, 1965 when an order of general default was
issued. Third, the movants are not, in the
contemplation of Section 2, Rule 3 of the Rules
of Court, the real party in interest to raise the
present issue; and Fourth, the movants having
once alleged in their application for registration
that the land is without encumbrance (par. 3
thereof), cannot now be alloted by the rules of
pleading to contradict said allegation of theirs.
(McDaniel v. Apacible, 44 Phil. 248)
SO ORDERED. 2
After Motions for Reconsideration were denied by the

court, the petitioners- appellants appealed directly to this
Court pursuant to Rule 4 1, Rules of Court, raising the
following assign of error:
I. The lower court erred in concluding that the
stipulation embodied in Exhibit O on religious
expenses is just an arrangement stipulation, or
grant revocable at the unilateral option of the
coowners.
II. The lower court erred in finding and
concluding that the encumbrance or religious
expenses embodied in Exhibit O, the
extrajudicial partition between the co-heirs, is
binding only on the appoints Miguel Florentino,
Rosario Encarnacion de Florentino, Manuel
Arce, Jose Florentino, Antonio Florentino,
Victorino Florentino, Remedios Encarnacion
and Severina Encarnacion.
III. The lower court as a registration court erred
in passing upon the merits of the encumbrance
(Exhibit O-1) as the sanie was never put to
issue and as the question involved is an
adjudication of rights of the parties.
We find the first and second assignments of error
impressed with merit and, therefore, tenable. The
stipulation embodied in Exhibit O-1 on religious
expenses is not revocable at the unilateral option of the
co-owners and neither is it binding only on the
petitioners-appellants Miguel Florentino, Rosario
Encarnacion de Florentino Manuel Arce, Jose
Florentino, Victorino Florentino Antonio Florentino,
Remedios Encarnacion and Severina E It is also binding
on the oppositors-appellees Angel Encarnacion,
The stipulation (Exhibit 411) in pan of an extrajudicial
partition (Exh. O) duly agreed and signed by the parties,

hence the sanie must bind the contracting parties thereto
and its validity or compliance cannot be left to the with
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 assign and heirs. The article provides:
Art. 1311. Contracts take effect only
between the parties, their assigns and heirs,
except in cases where the rights and obligations
arising from the contract are not transmissible
by their nature, or by stipulation or by provision
of law. The heir is not liable beyond the value
of the property he received from the decedent.
If a contract should contain a stipulation in
favor of a third person, he may demand its
acceptance to the obligor before its revocation.
A mere incidental benefit or interest of a person
is not sufficient. The contracting parties must
have clearly and deliberately conferred a favor
upon a third person.
The second paragraph of Article 1311 above-quoted
states the law on stipulations pour autrui. Consent the
nature and purpose of the motion (Exh. O-1), We hold
that said stipulation is a station pour autrui. A stipulation
pourautrui 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 and demand its
fulfillment provoked that he communicates his to the
obligor before it is revoked. 3 The requisites are: (1) that
the stipulation 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 bears the legal represented or authorization

of third person.
To constitute a valid stipulation pour autrui it must be
the purpose and intent of the stipulating parties to
benefit the third and it is not sufficient that the third
person may be incidentally benefited by the stipulation.
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 meters 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 obsorption exists may in some degree assist in
determining whether the parties intended to benefit a
third person.4
In the case at bar, the determining point is whether the
co-owners intended to benefit the Church when in their
extrajudicial partition of several parcels of land inherited
by them from Doa Encarnacion Florendo they agreed
that with respect to the land situated in Barrio Lubong
Dacquel Cabugao Ilocos Sur, the fruits thereof shall
serve to defray the religious expenses specified in
Exhibit O-1. The evidence on record shows that the true
intent of the parties is to confer a direct and material
benefit upon the Church. The fruits of the aforesaid land
were used thenceforth to defray the expenses of the
Church in the preparation and celebration of the Holy
Week, an annual Church function. Suffice it to say that
were it not for Exhibit O-1, the Church would have
necessarily expended for this religious occasion, the
annual relisgious procession during the Holy Wock and
also for the repair and preservation of all the statutes, for
the celebration of the Seven Last Word.
We find that the trial court erred in holding that the
stipulation, arrangement or grant (Exhibit O-1) is
revocable at the option of the co-owners. 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 at such
third person has after 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 petitionersappellants herein. It is not disputed that from the time of
the with of Doa Encarnacion Florentino in 1941, as had
always been the case since time immemorial up to a year
before the firing 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.
The acceptance does not have to be in any
particular form, even when the stipulation is for
the third person an act of liberality or
generosity on the part of the promisor or
promise. 5
It need not be made expressly and formally.

Notification of acceptance, other than such as is
involved in the making of demand, is
unnecessary. 6
A trust constituted between two contracting

parties for the benefit of a third person is not
subject to the rules governing donation of real
property. The beneficiary of a trust may demand
performance of the obligation without having

formally accepted the benefit of the this in a
public document, upon mere acquiescence in
the formation of the trust and acceptance under
the second paragraph of Art. 1257 of the Civil
Code. 7
Hence, the stipulation (Exhibit O-1) cannot now be

revoked by any of the stipulators at their own option.
This must be so because of Article 1257, Civil Code and
the cardinal rule of contracts that it has the force of law
between the parties. 8 Thus, this Court ruled in Garcia v.
Rita Legarda, Inc., 9 "Article 1309 is a virtual
reproduction of Article 1256 of the Civil Code, so
phrased to emphasize that the contract must bind both
parties, based on the principles (1) that obligation arising
from contracts have the force of law between the
contracting parties; and (2) that there must be mutuality
between the parties based on their principle equality, to
which is repugnant to have one party bound by the
contract leaving the other free therefrom."
Consequently, Salvador Encarnacion, Sr. must bear with
Exhibit O-1, being a signatory to the Deed of
Extrajudicial Partition embodying such beneficial
stipualtion. Likewise, with regards to Salvador, Jr. and
Angel Encarnacion, they too are bound to the agreement.
Being subsequent purchasers, they are privies or
successors in interest; it is axiomatic that contracts are
enforceable against the parties and their privies. 10
Furthermore, they are shown to have given their
conformity to such agreement when they kept their
peace in 1962 and 1963, having already bought their
respective shares of the subject land but did not question
the enforcement of the agreement as against them. They
are also shown to have knowledge of Exhibit O-1 as

they had admitted in a Deed of Real Mortgage executed
by them on March 8, 1962 involving their shares of the
subject land that, "This parcel of land is encumbered as
evidenced by the document No. 420, page 94, Book 1,
series 1947, executed by the heirs of the late
Encarnacion Florentino, on August 26, 1947, before M.
Francisco Ante, Notwy Public of Vigan, Ilocos Sur, in its
page 10 of the said document of partition, and also by
other documents."
IN VIEW OF THE FOREGOING, the decision of the

Court of First Instance of Ilocos Sur in Land
Registration Case No. N-310 is affirmed but modified to
allow the annotation of Exhibit O-1 as an encumbrance
on the face of the title to be finally issued in favor of all
the applications (herein appellants and herein appellees)
in the registration proceedings below.
The annotation of Exhibit O-1 on the face of the title to

be issued in this case is merely a guarantee of the
continued enforcement and fulfillment of the beneficial
stipulation. It is error for the lower court to rule that the
petitioners-appellants are not the real parties in interest,
but the Church. 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 provoked he had
communicated his acceptance thereof to the obligor
before the stipulation in his favor is revoked. 11
Santos, 102 Phil. 588 (1957); Cruz v. Tan, 93 Phil. 348

(1953); Gurbax Singh Pabla & Co. v. Reyes, 92 Phil.
177 (1952). From these cases, it may be gleaned and
gathered that the peculiarity of the exceptions is based
not only on the fact that Land Registration Courts are
likewise the same Courts of First Instance, but also the
following premises (1) Mutual consent of the parties or
their acquired in submitting the at aforesaid
determination by the court in the registration; (2) Full
opportunity given to the parties in the presentation of
their respective skies of the issues and of the evidence in
support thereto; (3) Consideration by the court that the
evidence already of record is sufficient and adequate for
rendering a decision upon these issues. 12 In the case at
bar, the records clearly show that the second and third
premism enumerated abow are fully mt. With regards to
first premise, the petioners-appellants cannot claim that
the issues anent Exhibit O-1 were not put in issue
because this is contrary to their stand before the lower
court where they took the initial step in praying for the
court's determination of the merits of Exhibit O-1 as an
encumbrance to be annotated on the title to be issued by
such court. On the other hand, the petitioners-appellees
who had the right to invoke the limited jurisdiction of
the registration court failed to do so but met the issues
head-on.
Petitioners-appellants' third assignment of error is not

well-taken. Firstly, the otherwise rigid rule that the
jurisdiction of the Land Registration Court, being
special and limited in character and proceedings thereon
summary in nature, does not extend to cases involving
issues properly litigable in other independent suits or
ordinary civil actions, has time and again been relaxed
in special and exceptional circumstances. (See
Government of the Phil. Islands v. Serafica, 61 Phil. 93
(1934); Caoibes v. Sison, 102 Phil. 19 (1957); Luna v.
Secondly, for this very special reason, We win uphold

the actuation of the lower court in determining the
conflicting interests of the parties in the registration
proceedings before it. This case has been languishing in
our courts for thirteen tong years. To require that it be
remanded to the lower court for another proceeding
under its general jurisdiction is not in consonance with
our avowed policy of speedy justice. It would not be
amiss to note that if this case be remanded to the lower
court, and should appeal again be made, the name issues
will once more be raised before us hence, Our decision
to resolve at once the issues in the instant petition.
Antonio de Venecia for plaintiffs-appellees.

Rufino Javier for defendant-appellant.
No pronouncement as to cost.
SO ORDERED.
SUPREME COURT
Manila
EN BANC
G.R. No. L-23276
November 29, 1968
MELECIO COQUIA, MARIA ESPANUEVA and

MANILA YELLOW TAXICAB CO., INC., plaintiffsappellees,
vs.
FIELDMEN'S INSURANCE CO., INC., defendantappellant.
CONCEPCION, C.J.:
This is an appeal from a decision of the Court of First
Instance of Manila, certified to us by the Court of
Appeals, only questions of law being involved therein.
Indeed, the pertinent facts have been stipulated and/or,
admitted by the parties at the hearing of the case in the
trial court, to dispense with the presentation of evidence
therein.
It appears that on December 1, 1961, appellant

Fieldmen's Insurance Company, Inc. hereinafter
referred to as the Company issued, in favor of the
Manila Yellow Taxicab Co., Inc. hereinafter referred
to as the Insured a common carrier accident insurance
policy, covering the period from December 1, 1961 to
December 1, 1962. It was stipulated in said policy that:
The Company will, subject to the Limits of Liability
and under the Terms of this Policy, indemnify the
Insured in the event of accident caused by or arising
out of the use of Motor Vehicle against all sums
which the Insured will become legally liable to pay
in respect of: Death or bodily injury to any farepaying passenger including the Driver, Conductor
and/or Inspector who is riding in the Motor Vehicle
insured at the time of accident or injury. 1
While the policy was in force, or on February 10, 1962,
a taxicab of the Insured, driven by Carlito Coquia, met a
vehicular accident at Mangaldan, Pangasinan, in
consequence of which Carlito died. The Insured filed
therefor a claim for P5,000.00 to which the Company
replied with an offer to pay P2,000.00, by way of
compromise. The Insured rejected the same and made a
counter-offer for P4,000.00, but the Company did not
accept it. Hence, on September 18, 1962, the Insured
and Carlito's parents, namely, Melecio Coquia and Maria
Espanueva hereinafter referred to as the Coquias
filed a complaint against the Company to collect the
proceeds of the aforementioned policy. In its answer, the
Company admitted the existence thereof, but pleaded
lack of cause of action on the part of the plaintiffs.
After appropriate proceedings, the trial court rendered a
decision sentencing the Company to pay to the plaintiffs
the sum of P4,000.00 and the costs. Hence, this appeal
by the Company, which contends that plaintiffs have no
cause of action because: 1) the Coquias have no
contractual relation with the Company; and 2) the

Insured has not complied with the provisions of the
policy concerning arbitration.
As regards the first defense, it should be noted that,
although, in general, only parties to a contract may bring
an action based thereon, this rule is subject to
exceptions, one of which is found in the second
paragraph of Article 1311 of the Civil Code of the
Philippines, reading:
If a contract should contain some stipulation in
favor of a third person, he may demand its
acceptance to the obligor before its revocation. A
mere incidental benefit or interest of a person is not
sufficient. The contracting parties must have clearly
and deliberately conferred a favor upon a third
person.2
This is but the restatement of a well-known principle
concerning contracts pour autrui, the enforcement of
which may be demanded by a third party for whose
benefit it was made, although not a party to the contract,
before the stipulation in his favor has been revoked by
the contracting parties. Does the policy in question
belong to such class of contracts pour autrui?
In this connection, said policy provides, inter alia:
Section I Liability to Passengers. 1. The
Company will, subject to the Limits of Liability and
under the Terms of this Policy, indemnify the
Insured in the event of accident caused by or arising
out of the use of Motor Vehicle against all sums
which the Insured will become legally liable to pay
in respect of: Death or bodily injury to any farepaying passenger including the Driver ... who is
riding in the Motor Vehicle insured at the time of
accident or injury.
Section II Liability to the Public
xxx
xxx
xxx
3. In terms of and subject to the limitations of and

for the purposes of this Section, the Company will
indemnify any authorized Driver who is driving the
Motor Vehicle....
Conditions
xxx
xxx
xxx
7. In the event of death of any person entitled to

indemnity under this Policy, the Company will, in
respect of the liability incurred by such person,
indemnify his personal representatives in terms of
and subject to the limitations of this Policy,
provided, that such representatives shall, as though
they were the Insured, observe, fulfill and be subject
to the Terms of this Policy insofar as they can apply.
8. The Company may, at its option, make indemnity
payable directly to the claimants or heirs of
claimants, with or without securing the consent of or
prior notification to the Insured, it being the true
intention of this Policy to protect, to the extent
herein specified and subject always to the Terms Of
this Policy, the liabilities of the Insured towards the
passengers of the Motor Vehicle and the Public.
Pursuant to these stipulations, the Company "will
indemnify any authorized Driver who is driving the
Motor Vehicle" of the Insured and, in the event of death
of said driver, the Company shall, likewise, "indemnify
his personal representatives." In fact, the Company
"may, at its option, make indemnity payable directly to
theclaimants or heirs of claimants ... it being the true

intention of this Policy to protect ... the liabilities of the
Insuredtowards the passengers of the Motor Vehicle and
the Public" in other words, third parties.
Thus, the policy under consideration is typical of
contracts pour autrui, this character being made more
manifest by the fact that the deceased driver paid fifty
percent (50%) of the corresponding premiums, which
were deducted from his weekly commissions. Under
these conditions, it is clear that the Coquias who,
admittedly, are the sole heirs of the deceased have a
direct cause of action against the Company,3 and, since
they could have maintained this action by themselves,
without the assistance of the Insured, it goes without
saying that they could and did properly join the latter in
filing the complaint herein.4
The second defense set up by the Company is based
upon Section 17 of the policy reading:
If any difference or dispute shall arise with respect
to the amount of the Company's liability under this
Policy, the same shall be referred to the decision of
a single arbitrator to be agreed upon by both parties
or failing such agreement of a single arbitrator, to
the decision of two arbitrators, one to be appointed
in writing by each of the parties within one calendar
month after having been required in writing so to do
by either of the parties and in case of disagreement
between the arbitrators, to the decision of an umpire
who shall have been appointed in writing by the
arbitrators before entering on the reference and the
costs of and incident to the reference shall be dealt
with in the Award. And it is hereby expressly
stipulated and declared that it shall be a condition
precedent to any right of action or suit upon this
Policy that the award by such arbitrator, arbitrators
or umpire of the amount of the Company's liability
hereunder if disputed shall be first obtained.

The record shows, however, that none of the parties to
the contract invoked this section, or made any reference
to arbitration, during the negotiations preceding the
institution of the present case. In fact, counsel for both
parties stipulated, in the trial court, that none of them
had, at any time during said negotiations, even
suggested the settlement of the issue between them by
arbitration, as provided in said section. Their
aforementioned acts or omissions had the effect of a
waiver of their respective right to demand an arbitration.
Thus, in Kahnweiler vs. Phenix Ins. Co. of Brooklyn, 5 it
was held:
Another well-settled rule for interpretation of all
contracts is that the court will lean to that
interpretation of a contract which will make it
reasonable and just. Bish. Cont. Sec. 400. Applying
these rules to the tenth clause of this policy, its
proper interpretation seems quite clear. When there
is a difference between the company and the insured
as to the amount of the loss the policy declares:
"The same shall then be submitted to competent and
impartial arbitrators, one to be selected by each
party ...". It will be observed that the obligation to
procure or demand an arbitration is not, by this
clause, in terms imposed on either party. It is not
said that either the company or the insured shall
take the initiative in setting the arbitration on foot.
The company has no more right to say the insured
must do it than the insured has to say the company
must do it. The contract in this respect is neither
unilateral nor self-executing. To procure a reference
to arbitrators, the joint and concurrent action of both
parties to the contract is indispensable. The right it
gives and the obligation it creates to refer the
differences between the parties to arbitrators are
mutual. One party to the contract cannot bring about
an arbitration. Each party is entitled to demand a

reference, but neither can compel it, and neither has
the right to insist that the other shall first demand it,
and shall forfeit any right by not doing so. If the
company demands it, and the insured refuses to
arbitrate, his right of action is suspended until he
consents to an arbitration; and if the insured
demands an arbitration, and the company refuses to
accede to the demand, the insured may maintain a
suit on the policy, notwithstanding the language of
the twelfth section of the policy, and, where neither
party demands an arbitration, both parties thereby
waive it.6
To the same effect was the decision of the Supreme
Court of Minnesota in Independent School Dist. No. 35,
St. Louis County vs. A. Hedenberg & Co., Inc. 7 from
which we quote:
This rule is not new in our state. In Meyer v.
Berlandi, 53 Minn. 59, 54 N.W. 937, decided in
1893, this court held that the parties to a
construction contract, having proceeded throughout
the entire course of their dealings with each other in
entire disregard of the provision of the contract
regarding the mode of determining by arbitration the
value of the extras, thereby waived such provision.
xxx
xxx
xxx
The test for determining whether there has been a

waiver in a particular case is stated by the author of
an exhaustive annotation in 117 A.L.R. p. 304, as
follows: "Any conduct of the parties inconsistent
with the notion that they treated the arbitration
provision as in effect, or any conduct which might
be reasonably construed as showing that they did
not intend to avail themselves of such provision,
may amount to a waiver thereof and estop the party
charged with such conduct from claiming its

benefits".
xxx
xxx
xxx
The decisive facts here are that both parties from the
inception of their dispute proceeded in entire
disregard of the provisions of the contract relating to
arbitration and that neither at any stage of such
dispute, either before or after commencement of the
action, demanded arbitration, either by oral or
written demand, pleading, or otherwise. Their
conduct was as effective a rejection of the right to
arbitrate as if, in the best Coolidge tradition, they
had said, "We do not choose to arbitrate". As
arbitration under the express provisions of article 40
was "at the choice of either party," and was chosen
by neither, a waiver by both of the right to
arbitration followed as a matter of law.
WHEREFORE, the decision appealed from should be as
it is hereby affirmed in toto, with costs against the herein
defendant-appellant, Fieldmen's Insurance Co., Inc. It is
so ordered.
Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez,
Castro, Fernando and Capistrano, JJ., concur.
Footnotes
SUPREME COURT
Manila
EN BANC
G.R. No. L-22404 May 31, 1971

PASTOR B. CONSTANTINO, plaintiff-appellant,
vs.
HERMINIA ESPIRITU, defendant-appellee.
David Guevara for plaintiff-appellant.
DIZON, J.:
This is a direct appeal on a question of law taken by
Pastor B. Constantino from an order of the Court of First
Instance of Rizal denying his motion for the admission
of his amended complaint in Civil Case No. 5924,
entitled "Pastor B. Constantine vs. Herminia Espiritu."
Appellant's complaint alleged, inter alia, that he had, by
a fictitious deed of absolute sale annexed thereto,
conveyed to appellee on October 30, 1953, for a
consideration of P8,000.00, the two-storey house and
four (4) subdivision lots covered by Transfer Certificate
of Title No. 20174 issued by the Register of Deeds of
Rizal, on October 25, 1950 in the name of Pastor B.
Constantino, married to Honorata Geukeko with the
understanding that appellee would hold the properties in
trust for their illegitimate son, Pastor Constantino, Jr.,
still unborn at the time of the conveyance; that thereafter
appellee mortgaged said properties to the Republic
Savings Bank of Manila twice to secure payment of two
loans, one of P3,000.00 and the other of P2,000.00, and
that thereafter she offered them for sale. The complaint
then prayed for the issuance of a writ of preliminary
injunction restraining appellee and her agents or
representatives from further alienating or disposing of
the properties, and for judgment ordering her to execute
a deed of absolute sale of said properties in favor of
Pastor B. Constantino, Jr., the beneficiary (who, at the
filing of said complaint, was about five years of age),

and to pay attorney's fees in the sum of P2,000.00.
As a result of the conveyance mentioned heretofore,
TCT No. 20714 in the name of plaintiff was partially
cancelled and in lieu thereof, TCT No. 32744 was issued
by the Register of Deeds of Rizal in the name of
appellee Herminia Espiritu.
On December 16, 1959, appellee moved to dismiss the
complaint on the ground that it stated no cause of action
because Pastor Constantino, Jr., the beneficiary of the
alleged trust, was not included as party-plaintiff, and on
the further ground that appellant's cause of action was
unenforceable under the Statute of Frauds.
In his opposition to said motion to dismiss, appellant
argued that the Statute of Frauds does not apply to
trustee and cestui que trust as in the case of appellee and
her illegitimate child, and that for this reason appellant
would not be barred from proving by parol evidence an
implied trust existing under Article 1453 of the Civil
Code. On the other hand, in her rejoinder to appellant's
opposition, appellee argued that what the former was
invoking in his complaint (Paragraph V, Complaint) was
an implied trust under Article 1453 of the Civil Code
and not an express trust under Section 3, Rule 3 of the
Revised Rules of Court. Finding the grounds alleged in
the motion to dismiss to be meritorious, the trial court
dismissed the complaint, with costs.
Immediately after receiving notice of said order of
dismissal, appellant filed a motion for the admission of
an amended complaint, attaching thereto a copy hereof,
the amendment consisting mainly of the inclusion of the
minor, Pastor Constantino, Jr. as co-plaintiff. The
amended complaint further prayed for the appointment
of appellant as said minor's guardian ad litem. An
opposition thereto was filed on the ground that the
amendment aforesaid was not an inclusion but a

substitution of the party plaintiff. As the latter had no
interest whatsoever in the subject matter of the case, it
was argued that the substitution was not allowed in this
jurisdiction. Appellant's answer to appellee's opposition
alleged that, as the ground relied upon in the said
opposition was purely technical, even the substitution of
the party plaintiff should be allowed under Section 2,
Rule 17 of the Rules of Court. Thereafter the lower court
issued the appealed order denying appellant's motion for
the admission of his amended complaint. Hence, the
instant direct appeal.
The original as well as the amended complaint
mentioned above allege that the sale made by appellant
Constantino in favor of appellee of the properties
described in said pleadings was subject to the agreement
that the vendee would hold them in trust for their at that
time already conceived but unborn illegitimate child;
that the vendee violated this agreement, firstly, by
subjecting them to two different contracts of mortgage,
and later by trying to sell them, this being not only in
violation of the aforesaid agreement but prejudicial to
the cestui que trust; that the action was commenced to
compel the vendee to comply with their agreement by
executing the corresponding deed of conveyance in
favor of their minor son, and to desist from further doing
any act prejudicial to the interests of the latter.
It appears then that, upon the facts alleged by appellant,
the contract between him and appellee was a
contractpour autrui, although couched in the form of a
deed of absolute sale, and that appellant's action was, in
effect, one for specific performance. That one of the
parties to a contract 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.
It appearing that the amended complaint submitted by
appellant to the lower court impleaded the beneficiary
under the contract as a party co-plaintiff, it seems clear
that the three parties concerned therewith would, as a
result, be before the court and the latter's adjudication
would be complete and binding upon them.
The ruling in the case of Echaus vs. Gan, 55 Phil. 527
involving facts similar to the ones before us is of
obvious application to the latter. We quote the following
pertinent portions of our decision in said case:
This action was instituted in the Court of First
Instance of Occidental Negros by Adoracion
Rosales de Echaus, assisted by her husband
Enrique Echaus, for the purpose of obtaining a
judicial order requiring the defendant Maria
Gan, as administratrix of the estate of her
deceased husband, Manuel Gay Yulingco, as
well as the heirs of said decedent, to execute in
due form a contract, with appropriate
description of the real property involved, in
conformity with the terms of an agreement
dated September 3, 1927, executed by the
deceased Manuel Gay Yulingco, in life, and
Enrique Echaus, one of the plaintiffs in the case
(Exhibit A). To this action the defendants
interposed a general answer and crosscomplaint, in the latter of which they sought a
decree annulling the contract Exhibit A as
excessively onerous and illegal. Upon hearing
the cause the trial court absolved the plaintiffs
from the cross-complaint and gave judgment in
favor of the plaintiffs upon the complaint,
requiring the defendants, within thirty days

from the date of the finality of the decision, to
execute before a notary public and deliver to the
plaintiffs a contract similar in terms to that
indicated in the Exhibit A but containing, in
addition, a description of the real property
involved, in such form as would enable the
plaintiffs to procure said contract to be
inscribed on the certificate of title
corresponding to said property, with costs
against the defendants. From this judgment the
defendants appealed.
xxx xxx xxx
The contract in question, Exhibit A, on which
this action is based, was executed by Manuel
Gay Yulingco and Enrique Echaus, and
although the contract binds Yulingco to pay to
Adoracion Rosales de Echaus, the wife of
Enrique Echaus, the sum of fifty centavos for
each picul of sugar that may be produced upon
the two haciendas covered by the contract
during the fourteen years beginning with the
crop for 1927-1928, nevertheless this action is
not instituted by the nominal beneficiary,
Adoracion Rosales de Echaus, directly for the
purpose of obtaining the benefit which said
contract purports to confer upon her. The
purpose of the action is to compel the
defendants to execute a contract pursuant to the
tenor of the contract Exhibit A, but containing
an adequate description of the property
contained in the two haciendas, for the purpose
of enabling Echaus to procure the annotation of
said contract on the Torrens certificates of title.
It is therefore evident that, technically speaking,
the proper person to bring this action is Enrique
Echaus, the person with whom the contract was
made by Yulingco. It is, nevertheless, equally

obvious that the wife of Enrique Echaus is a
party in interest, and she is certainly a proper, if
not an entirely necessary party to the action. It
results that there is really no improper joinder
of parties plaintiff.
Whether the contract of sale entered into between
appellant and appellee was as claimed and the
amended complaint subject to the agreement that
appellee would hold the properties in trust for their
unborn child is a question of fact that appellee may raise
in her answer for the lower court to determine after trial.
On the other hand, the contention that the contract in
question is not enforceable by action by reason of the
provisions of the Statute of Frauds does not appear to be
indubitable, it being clear upon the facts alleged in the
amended complaint that the contract between the parties
had already been partially performed by the execution of
the deed of sale, the action brought below being only for
the enforcement of another phase thereof, namely, the
execution by appellee of a deed of conveyance in favor
of beneficiary thereunder.
WHEREFORE, the appealed order is hereby set aside
and the case is remanded to the lower court for further
proceedings in accordance with law.
Concepcion, C.J., Reyes, J.B.L., Zaldivar, Castro,
Fernando, Teehankee, Villamor and Makasiar, JJ.,
concur.
Makalintal, J., concurs in the result.
SUPREME COURT
Manila
EN BANC
G.R. No. L-13505
February 4, 1919
GEO. W. DAYWALT, plaintiff-appellant,

vs.
LA CORPORACION DE LOS PADRES
AGUSTINOS RECOLETOS, ET AL., defendantsappellees.
C. C. Cohn and Thos. D. Aitken for appellant.
Crossfield & O'Brien for appellee.
STREET, J.:
In the year 1902, Teodorica Endencia, an unmarried
woman, resident in the Province of Mindoro, executed a
contract whereby she obligated herself to convey to Geo.
W. Daywalt, a tract of land situated in the barrio of
Mangarin, municipality of Bulalacao, now San Jose, in
said province. It was agreed that a deed should be
executed as soon as the title to the land should be
perfected by proceedings in the Court of Land
Registration and a Torrens certificate should be
produced therefore in the name of Teodorica Endencia.
A decree recognizing the right of Teodorica as owner
was entered in said court in August 1906, but the
Torrens certificate was not issued until later. The parties,
however, met immediately upon the entering of this
decree and made a new contract with a view to carrying
their original agreement into effect. This new contract
was executed in the form of a deed of conveyance and
bears date of August 16, 1906. The stipulated price was
fixed at P4,000, and the area of the land enclosed in the
boundaries defined in the contract was stated to be 452
hectares and a fraction.
The second contract was not immediately carried into
effect for the reason that the Torrens certificate was not
yet obtainable and in fact said certificate was not issued
until the period of performance contemplated in the
contract had expired. Accordingly, upon October 3,

1908, the parties entered into still another agreement,
superseding the old, by which Teodorica Endencia
agreed upon receiving the Torrens title to the land in
question, to deliver the same to the Hongkong and
Shanghai Bank in Manila, to be forwarded to the
Crocker National Bank in San Francisco, where it was to
be delivered to the plaintiff upon payment of a balance
of P3,100.
The Torrens certificate was in time issued to Teodorica
Endencia, but in the course of the proceedings relative to
the registration of the land, it was found by official
survey that the area of the tract inclosed in the
boundaries stated in the contract was about 1.248
hectares of 452 hectares as stated in the contract. In view
of this development Teodorica Endencia became
reluctant to transfer the whole tract to the purchaser,
asserting that she never intended to sell so large an
amount of land and that she had been misinformed as to
its area.
This attitude of hers led to litigation in which Daywalt
finally succeeded, upon appeal to the Supreme Court, in
obtaining a decree for specific performance; and
Teodorica Endencia was ordered to convey the entire
tract of land to Daywalt pursuant to the contract of
October 3, 1908, which contract was declared to be in
full force and effect. This decree appears to have
become finally effective in the early part of the year
1914.1
The defendant, La Corporacion de los Padres Recoletos,
is a religious corporation, with its domicile in the city of
Manila. Said corporation was formerly the owner of a
large tract of land, known as the San Jose Estate, on the
island of Mindoro, which was sold to the Government of
the Philippine Islands in the year 1909. The same
corporation was at this time also the owner of another
estate on the same island immediately adjacent to the

land which Teodorica Endencia had sold to Geo. W.
Daywalt; and for many years the Recoletos Fathers had
maintained large herds of cattle on the farms referred to.
Their representative, charged with management of these
farms, was father Isidoro Sanz, himself a members of
the order. Father Sanz had long been well acquainted
with Teodorica Endencia and exerted over her an
influence and ascendency due to his religious character
as well as to the personal friendship which existed
between them. Teodorica appears to be a woman of little
personal force, easily subject to influence, and upon all
the important matters of business was accustomed to
seek, and was given, the advice of father Sanz and other
members of his order with whom she came in contact.
Father Sanz was fully aware of the existence of the
contract of 1902 by which Teodorica Endencia agreed to
sell her land to the plaintiff as well as of the later
important developments connected with the history of
that contract and the contract substituted successively
for it; and in particular Father Sanz, as well as other
members of the defendant corporation, knew of the
existence of the contract of October 3, 1908, which, as
we have already seen finally fixed the rights of the
parties to the property in question. When the Torrens
certificate was finally issued in 1909 in favor of
Teodorica Endencia, she delivered it for safekeeping to
the defendant corporation, and it was then taken to
Manila where it remained in the custody and under the
control of P. Juan Labarga the procurador and chief
official of the defendant corporation, until the deliver
thereof to the plaintiff was made compulsory by reason
of the decree of the Supreme Court in 1914.
When the defendant corporation sold the San Jose
Estate, it was necessary to bring the cattle off of that
property; and, in the first half of 1909, some 2,368 head
were removed to the estate of the corporation
immediately adjacent to the property which the plaintiff

had purchased from Teodorica Endencia. As Teodorica
still retained possession of said property Father Sanz
entered into an arrangement with her whereby large
numbers of cattle belonging to the defendant corporation
were pastured upon said land during a period extending
from June 1, 1909, to May 1, 1914.
Under the first cause stated in the complaint in the
present action the plaintiff seeks to recover from the
defendant corporation the sum of P24,000, as damages
for the use and occupation of the land in question by
reason of the pasturing of cattle thereon during the
period stated. The trial court came to the conclusion that
the defendant corporation was liable for damages by
reason of the use and occupation of the premises in the
manner stated; and fixed the amount to be recovered at
P2,497. The plaintiff appealed and has assigned error to
this part of the judgment of the court below, insisting
that damages should have been awarded in a much
larger sum and at least to the full extent of P24,000, the
amount claimed in the complaint.
As the defendant did not appeal, the property of
allowing damages for the use and occupation of the land
to the extent o P2,497, the amount awarded, is not now
in question an the only thing here to be considered, in
connection with this branch of the case, is whether the
damages allowed under this head should be increased.
The trial court rightly ignored the fact that the defendant
corporation had paid Teodorica Endencia of ruse and
occupation of the same land during the period in
question at the rate of P425 per annum, inasmuch as the
final decree of this court in the action for specific
performance is conclusive against her right, and as the
defendant corporation had notice of the rights of the
plaintiff under this contract of purchase, it can not be
permitted that the corporation should escape liability in
this action by proving payment of rent to a person other
than the true owner.

With reference to the rate of which compensation should
be estimated the trial court came to the following
conclusion:
As to the rate of the compensation, the plaintiff
contends that the defendant corporation maintained
at leas one thousand head of cattle on the land and
that the pasturage was of the value of forty centavos
per head monthly, or P4,800 annually, for the whole
tract. The court can not accept this view. It is rather
improbable that 1,248 hectares of wild Mindoro
land would furnish sufficient pasturage for one
thousand head of cattle during the entire year, and,
considering the locality, the rate of forty centavos
per head monthly seems too high. The evidence
shows that after having recovered possession of the
land the plaintiff rented it to the defendant
corporation for fifty centavos per hectares annually,
the tenant to pay the taxes on the land, and this
appears to be a reasonable rent. There is no reason
to suppose that the land was worth more for grazing
purposes during the period from 1909 to 1913, than
it was at the later period. Upon this basis the
plaintiff is entitled to damages in the sum of p2,497,
and is under no obligation to reimburse the
defendants for the land taxes paid by either of them
during the period the land was occupied by the
defendant corporation. It may be mentioned in this
connection that the Lontok tract adjoining the land
in question and containing over three thousand
hectares appears to have been leased for only
P1,000 a year, plus the taxes.
From this it will be seen that the trial court estimated the
rental value of the land for grazing purposes at 50
centavos per hectare per annum, and roughly adopted
the period of four years as the time for which
compensation at that rate should be made. As the court

had already found that the defendant was liable for these
damages from June, 1, 1909, to May 1, 1914, or a period
of four years and eleven months, there seems some
ground for the contention made in the appellant's first
assignment of error that the court's computation was
erroneous, even accepting the rule upon which the
damages were assessed, as it is manifest that at the rate
of 50 centavos per hectare per annum, the damages for
four years and eleven months would be P3,090.
Notwithstanding this circumstance, we are of the
opinion that the damages assessed are sufficient to
compensate the plaintiff for the use and occupation of
the land during the whole time it was used. There is
evidence in the record strongly tending to show that the
wrongful use of the land by the defendant was not
continuous throughout the year but was confined mostly
to the reason when the forage obtainable on the land of
the defendant corporation was not sufficient to maintain
its cattle, for which reason it became necessary to allow
them to go over to pasture on the land in question; and it
is not clear that the whole of the land was used for
pasturage at any time. Considerations of this character
probably led the trial court to adopt four years as
roughly being the period during which compensation
should be allowed. But whether this was advertently
done or not, we see no sufficient reason, in the
uncertainty of the record with reference to the number of
the cattle grazed and the period when the land was used,
for substituting our guess for the estimate made by the
trial court.
In the second cause of action stated in the complaint the
plaintiff seeks to recover from the defendant corporation
the sum of P500,000, as damages, on the ground that
said corporation, for its own selfish purposes, unlawfully
induced Teodorica Endencia to refrain from the
performance of her contract for the sale of the land in
question and to withhold delivery to the plaintiff of the

Torrens title, and further, maliciously and without
reasonable cause, maintained her in her defense to the
action of specific performance which was finally
decided in favor of the plaintiff in this court. The cause
of action here stated is based on liability derived from
the wrongful interference of the defendant in the
performance of the contract between the plaintiff and
Teodorica Endencia; and the large damages laid in the
complaint were, according to the proof submitted by the
plaintiff, incurred as a result of a combination of
circumstances of the following nature: In 1911, it
appears, the plaintiff, as the owner of the land which he
had bought from Teodorica Endencia entered into a
contract (Exhibit C) with S. B. Wakefield, of San
Francisco, for the sale and disposal of said lands to a
sugar growing and milling enterprise, the successful
launching of which depended on the ability of Daywalt
to get possession of the land and the Torrens certificate
of title. In order to accomplish this end, the plaintiff
returned to the Philippine Islands, communicated his
arrangement to the defendant,, and made repeated efforts
to secure the registered title for delivery in compliance
with said agreement with Wakefield. Teodorica
Endencia seems to have yielded her consent to the
consummation of her contract, but the Torrens title was
then in the possession of Padre Juan Labarga in Manila,
who refused to deliver the document. Teodorica also was
in the end contract with the plaintiff, with the result that
the plaintiff was kept out of possession until the
Wakefield project for the establishment of a large sugar
growing and milling enterprise fell through. In the light
of what has happened in recent years in the sugar
industry, we feel justified in saying that the project
above referred to, if carried into effect, must inevitably
have proved a great success.
The determination of the issue presented in this second
cause of action requires a consideration of two points.
The first is whether a person who is not a party to a

contract for the sale of land makes himself liable for
damages to the vendee, beyond the value of the use and
occupation, by colluding with the vendor and
maintaining him in the effort to resist an action for
specific performance. The second is whether the
damages which the plaintiff seeks to recover under this
head are too remote and speculative to be the subject of
recovery.
As preliminary to a consideration of the first of these
questions, we deem it well it dispose of the contention
that the members of the defendants corporation, in
advising and prompting Teodorica Endencia not to
comply with the contract of sale, were actuated by
improper and malicious motives. The trial court found
that this contention was not sustained, observing that
while it was true that the circumstances pointed to an
entire sympathy on the part of the defendant corporation
with the efforts of Teodorica Endencia to defeat the
plaintiff's claim to the land, the fact that its officials may
have advised her not to carry the contract into effect
would not constitute actionable interference with such
contract. It may be added that when one considers the
hardship that the ultimate performance of that contract
entailed on the vendor, and the doubt in which the issue
was involved to the extent that the decision of the
Court of the First Instance was unfavorable to the
plaintiff and the Supreme Court itself was divided the
attitude of the defendant corporation, as exhibited in the
conduct of its procurador, Juan Labarga, and other
members of the order of the Recollect Fathers, is not
difficult to understand. To our mind a fair conclusion on
this feature of the case is that father Juan Labarga and
his associates believed in good faith that the contract
cold not be enforced and that Teodorica would be
wronged if it should be carried into effect. Any advice or
assistance which they may have given was, therefore,
prompted by no mean or improper motive. It is not, in
our opinion, to be denied that Teodorica would have

surrendered the documents of title and given possession
of the land but for the influence and promptings of
members of the defendants corporation. But we do not
credit the idea that they were in any degree influenced to
the giving of such advice by the desire to secure to
themselves the paltry privilege of grazing their cattle
upon the land in question to the prejudice of the just
rights of the plaintiff.
The attorney for the plaintiff maintains that, by
interfering in the performance of the contract in question
and obstructing the plaintiff in his efforts to secure the
certificate of tittle to the land, the defendant corporation
made itself a co-participant with Teodorica Endencia in
the breach of said contract; and inasmuch as father Juan
Labarga, at the time of said unlawful intervention
between the contracting parties, was fully aware of the
existence of the contract (Exhibit C) which the plaintiff
had made with S. B. Wakefield, of San Francisco, it is
insisted that the defendant corporation is liable for the
loss consequent upon the failure of the project outlined
in said contract.
In this connection reliance is placed by the plaintiff upon
certain American and English decisions in which it is
held that a person who is a stranger to contract may, by
an unjustifiable interference in the performance thereof,
render himself liable for the damages consequent upon
non-performance. It is said that the doctrine of these
cases was recognized by this court in Gilchrist vs.
Cuddy (29 Phil. Rep., 542); and we have been earnestly
pressed to extend the rule there enunciated to the
situation here presente.
Somewhat more than half a century ago the English
Court of the Queen's Bench saw its way clear to permit
an action for damages to be maintained against a
stranger to a contract wrongfully interfering in its
performance. The leading case on this subject is Lumley

vs. Gye ([1853], 2 El. & Bl., 216). It there appeared that
the plaintiff, as manager of a theatre, had entered into a
contract with Miss Johanna Wagner, an opera singer,,
whereby she bound herself for a period to sing in the
plaintiff's theatre and nowhere else. The defendant,
knowing of the existence of this contract, and, as the
declaration alleged, "maliciously intending to injure the
plaintiff," enticed and produced Miss Wagner to leave
the plaintiff's employment. It was held that the plaintiff
was entitled to recover damages. The right which was
here recognized had its origin in a rule, long familiar to
the courts of the common law, to the effect that any
person who entices a servant from his employment is
liable in damages to the master. The master's interest in
the service rendered by his employee is here considered
as a distinct subject of juridical right. It being thus
accepted that it is a legal wrong to break up a relation of
personal service, the question now arose whether it is
illegal for one person to interfere with any contract
relation subsisting between others. Prior to the decision
of Lumley vs. Gye [supra] it had been supposed that the
liability here under consideration was limited to the
cases of the enticement of menial servants, apprentices,
and others to whom the English Statutes of Laborers
were applicable. But in the case cited the majority of the
judges concurred in the opinion that the principle
extended to all cases of hiring. This doctrine was
followed by the Court of Appeal in Bowen vs. Hall
([1881], 6 Q. B., Div., 333); and in Temperton vs.
Russell ([1893], Q. B., 715), it was held that the right of
action for maliciously procuring a breach of contract is
not confined to contracts for personal services, but
extends to contracts in general. In that case the contract
which the defendant had procured to be breached was a
contract for the supply of building material.
Malice in some form is generally supposed to be an
essential ingredient in cases of interference with contract
relations. But upon the authorities it is enough if the

wrong-doer, having knowledge of the existence of the
contract relations, in bad faith sets about to break it up.
Whether his motive is to benefit himself or gratify his
spite by working mischief to the employer is immaterial.
Malice in the sense of ill-will or spite is not essential.
Upon the question as to what constitutes legal
justification, a good illustration was put in the leading
case. If a party enters into contract to go for another
upon a journey to a remote and unhealthful climate, and
a third person, with a bona fide purpose of benefiting the
one who is under contract to go, dissuades him from the
step, no action will lie. But if the advice is not
disinterested and the persuasion is used for "the indirect
purpose of benefiting the defendant at the expense of the
plaintiff," the intermedler is liable if his advice is taken
and the contract broken.
The doctrine embodied in the cases just cited has
sometimes been found useful, in the complicated
relations of modern industry, as a means of restraining
the activities of labor unions and industrial societies
when improperly engaged in the promotion of strikes.
An illustration of the application of the doctrine in
question in a case of this kind is found in South Wales
Miners Federation vs. Glamorgan Coal Co. ([1905]), A.
C., 239). It there appeared that certain miners employed
in the plaintiff's collieries, acting under the order of the
executive council of the defendant federation, violated
their contract with the plaintiff by abstaining from work
on certain days. The federation and council acted
without any actual malice or ill-will towards the
plaintiff, and the only object of the order in question was
that the price of coal might thereby be kept up, a factor
which affected the miner's wage scale. It was held that
no sufficient justification was shown and that the
federation was liable.
In the United States, the rule established in England by

Lumley vs. Gye [supra] and subsequent cases is
commonly accepted, though in a few of the States the
broad idea that a stranger to a contract can be held liable
upon its is rejected, and in these jurisdictions the
doctrine, if accepted at all, is limited to the situation
where the contract is strictly for personal service.
(Boyson vs. Thorn, 98 Cal., 578; Chambers & Marshall
vs. Baldwin 91 Ky., 121; Bourlier vs. Macauley, 91 Ky.,
135; Glencoe Land & Gravel Co. vs. Hudson Bros.
Com. Co., 138 Mo., 439.)
It should be observed in this connection that, according
to the English and American authorities, no question can
be made as to the liability to one who interferes with a
contract existing between others by means which, under
known legal cannons, can be denominated an unlawful
means. Thus, if performance is prevented by force,
intimidation, coercion, or threats, or by false or
defamatory statements, or by nuisance or riot, the person
using such unlawful means is, under all the authorities,
liable for the damage which ensues. And in jurisdictions
where the doctrine of Lumley vs. Gye [supra] is
rejected, no liability can arise from a meddlesome and
malicious interference with a contract relation unless
some such unlawful means as those just indicated are
used. (See cases last above cited.)
This brings us to the decision made by this court in
Gilchrist vs. Cuddy (29 Phil. Rep., 542). It there
appeared that one Cuddy, the owner of a
cinematographic film, let it under a rental contract to the
plaintiff Gilchrist for a specified period of time. In
violation of the terms of this agreement, Cuddy
proceeded to turn over the film also under a rental
contract, to the defendants Espejo and Zaldarriaga.
Gilchrist thereupon restored to the Court of First
Instance and produced an injunction restraining the
defendants from exhibiting the film in question in their
theater during the period specified in the contract of

Cuddy with Gilchrist. Upon appeal to this court it was in
effect held that the injunction was not improperly
granted, although the defendants did not, at the time
their contract was made, know the identity of the
plaintiff as the person holding the prior contract but did
know of the existence of a contract in favor of someone.
It was also said arguendo, that the defendants would
have been liable in damages under article 1902 of the
Civil Code, if the action had been brought by the
plaintiff to recover damages. The force of the opinion is,
we think, somewhat weakened by the criticism contain
in the concurring opinion, where it is said that the
question of breach of contract by inducement was not
really involved in the case. Taking the decision upon the
point which was rally decided, it is authority for the
proposition that one who buys something which he
knows has been sold to some other person can be
restrained from using that thing to the prejudice of the
person having the prior and better right.
Translated into terms applicable to the case at bar, the
decision in Gilchrist vs. Cuddy (29 Phil. Rep., 542),
indicates that the defendant corporation, having notice
of the sale of the land in question to Daywalt, might
have been enjoined by the latter from using the property
for grazing its cattle thereon. That the defendant
corporation is also liable in this action for the damage
resulting to the plaintiff from the wrongful use and
occupation of the property has also been already
determined. But it will be observed that in order to
sustain this liability it is not necessary to resort to any
subtle exegesis relative to the liability of a stranger to a
contract for unlawful interference in the performance
thereof. It is enough that defendant use the property with
notice that the plaintiff had a prior and better right.
Article 1902 of the Civil Code declares that any person
who by an act or omission, characterized by fault or
negligence, causes damage to another shall be liable for

the damage so done. Ignoring so much of this article as
relates to liability for negligence, we take the rule to be
that a person is liable for damage done to another by any
culpable act; and by "culpable act" we mean any act
which is blameworthy when judged by accepted legal
standards. The idea thus expressed is undoubtedly broad
enough to include any rational conception of liability for
the tortious acts likely to be developed in any society.
Thus considered, it cannot be said that the doctrine of
Lumley vs. Gye [supra] and related cases is repugnant to
the principles of the civil law.
Nevertheless, it must be admitted that the codes and
jurisprudence of the civil law furnish a somewhat
uncongenial field in which to propagate the idea that a
stranger to a contract may sued for the breach thereof.
Article 1257 of the Civil Code declares that contracts are
binding only between the parties and their privies. In
conformity with this it has been held that a stranger to a
contract has no right of action for the nonfulfillment of
the contract except in the case especially contemplated
in the second paragraph of the same article. (Uy Tam
and Uy Yet vs. Leonard, 30 Phil. Rep., 471.) As
observed by this court in Manila Railroad Co. vs.
Compaia Transatlantica, R. G. No. 11318 (38 Phil.
Rep., 875), a contract, when effectually entered into
between certain parties, determines not only the
character and extent of the liability of the contracting
parties but also the person or entity by whom the
obligation is exigible. The same idea should apparently
be applicable with respect to the person against whom
the obligation of the contract may be enforced; for it is
evident that there must be a certain mutuality in the
obligation, and if the stranger to a contract is not
permitted to sue to enforce it, he cannot consistently be
held liable upon it.
If the two antagonistic ideas which we have just brought
into juxtaposition are capable of reconciliation, the

process must be accomplished by distinguishing clearly
between the right of action arising from the improper
interference with the contract by a stranger thereto,
considered as an independent act generate of civil
liability, and the right of action ex contractu against a
party to the contract resulting from the breach thereof.
However, we do not propose here to pursue the matter
further, inasmuch as, for reasons presently to be stated,
we are of the opinion that neither the doctrine of Lumley
vs. Gye [supra] nor the application made of it by this
court in Gilchristvs. Cuddy (29 Phil. Rep., 542), affords
any basis for the recovery of the damages which the
plaintiff is supposed to have suffered by reason of his
inability to comply with the terms of the Wakefield
contract.
Whatever may be the character of the liability which a
stranger to a contract may incur by advising or assisting
one of the parties to evade performance, there is one
proposition upon which all must agree. This is, that the
stranger cannot become more extensively liable in
damages for the nonperformance of the contract than the
party in whose behalf he intermeddles. To hold the
stranger liable for damages in excess of those that could
be recovered against the immediate party to the contract
would lead to results at once grotesque and unjust. In the
case at bar, as Teodorica Endencia was the party directly
bound by the contract, it is obvious that the liability of
the defendant corporation, even admitting that it has
made itself coparticipant in the breach of the contract,
can in no even exceed hers. This leads us to consider at
this point the extent of the liability of Teodorica
Endencia to the plaintiff by reason of her failure to
surrender the certificate of title and to place the plaintiff
in possession.
It should in the first place be noted that the liability of
Teodorica Endencia for damages resulting from the
breach of her contract with Daywalt was a proper

subject for adjudication in the action for specific
performance which Daywalt instituted against her in
1909 and which was litigated by him to a successful
conclusion in this court, but without obtaining any
special adjudication with reference to damages.
Indemnification for damages resulting from the breach
of a contract is a right inseparably annexed to every
action for the fulfillment of the obligation (art. 1124,
Civil Code); and its is clear that if damages are not
sought or recovered in the action to enforce performance
they cannot be recovered in an independent action. As to
Teodorica Endencia, therefore, it should be considered
that the right of action to recover damages for the breach
of the contract in question was exhausted in the prior
suit. However, her attorneys have not seen fit to
interpose the defense of res judicata in her behalf; and
as the defendant corporation was not a party to that
action, and such defense could not in any event be of
any avail to it, we proceed to consider the question of
the liability of Teodorica Endencia for damages without
refernce to this point.
The most that can be said with refernce to the conduct of
Teodorica Endencia is that she refused to carry out a
contract for the sale of certain land and resisted to the
last an action for specific performance in court. The
result was that the plaintiff was prevented during a
period of several years from exerting that control over
the property which he was entitled to exert and was
meanwhile unable to dispose of the property
advantageously. Now, what is the measure of damages
for the wrongful detention of real property by the vender
after the time has come for him to place the purchaser in
possession?
The damages ordinarily and normally recoverable
against a vendor for failure to deliver land which he has
contracted to deliver is the value of the use and
occupation of the land for the time during which it is

wrongfully withheld. And of course where the purchaser
has not paid the purchaser money, a deduction may be
made in respect to the interest on the money which
constitutes the purchase price. Substantially the same
rule holds with respect to the liability of a landlord who
fails to put his tenant in possession pursuant to contract
of lease. The measure of damages is the value of the
leasehold interest, or use and occupation, less the
stipulated rent, where this has not been paid. The rule
that the measure of damages for the wrongful detention
of land is normally to be found in the value of use and
occupation is, we believe, one of the things that may be
considered certain in the law (39 cyc., 1630; 24 Cyc.,
1052 Sedgewick on Damages, Ninth ed., sec. 185.)
almost as wellsettled, indeed, as the rule that the
measure of damages for the wrongful detention of
money is to be found in the interest.
We recognize the possibility that more extensive
damages may be recovered where, at the time of the
creation of the contractual obligation, the vendor, or
lessor, is aware of the use to which the purchaser or
lessee desires to put the property which is the subject of
the contract, and the contract is made with the eyes of
the vendor or lessor open to the possibility of the
damage which may result to the other party from his
own failure to give possession. The case before us is not
this character, inasmuch as at the time when the rights of
the parties under the contract were determined, nothing
was known to any to them about the San Francisco
capitalist who would be willing to back the project
portrayed in Exhibit C.
The extent of the liability for the breach of a contract
must be determined in the light of the situation in
existence at the time the contract is made; and the
damages ordinarily recoverable are in all events limited
to such as might be reasonable are in all events limited
to such as might be reasonably foreseen in the light of

the facts then known to the contracting parties. Where
the purchaser desires to protect himself, in the
contingency of the failure of the vendor promptly to give
possession, from the possibility of incurring other
damages than such as the incident to the normal value of
the use and occupation, he should cause to be inserted in
the contract a clause providing for stipulated amount to
the paid upon failure of the vendor to give possession;
and not case has been called to our attention where, in
the absence of such a stipulation, damages have been
held to be recoverable by the purchaser in excess of the
normal value of use and occupation. On the contrary, the
most fundamental conceptions of the law relative to the
assessment of damages are inconsistent with such idea.
The principles governing this branch of the law were
profoundly considered in the case Hadley vs. Baxendale
(9 Exch., 341), decided in the English Court of
Exchequer in 1854; and a few words relative to the
principles governing will here be found instructive. The
decision in that case is considered a leading authority in
the jurisprudence of the common law. The plaintiffs in
that case were proprietors of a mill in Gloucester, which
was propelled by steam, and which was engaged in
grinding and supplying meal and flour to customers. The
shaft of the engine got broken, and it became necessarily
that the broken shaft be sent to an engineer or foundry
man at Greenwich, to serve as a model for casting or
manufacturing another that would fit into the machinery.
The broken shaft could be delivered at Greenwich on the
second day after its receipts by the carrier it. It was
delivered to the defendants, who were common carriers
engaged in that business between these points, and who
had told plaintiffs it would be delivered at Greenwich on
the second day after its delivery to them, if delivered at a
given hour. The carriers were informed that the mill was
stopped, but were not informed of the special purpose
for which the broken shaft was desired to forwarded,
They were not told the mill would remain idle until the
new shaft would be returned, or that the new shaft could
not be manufactured at Greenwich until the broken one
arrived to serve as a model. There was delay beyond the
two days in delivering the broken shaft at Greenwich,
and a corresponding delay in starting the mill. No
explanation of the delay was offered by the carriers. The
suit was brought to recover damages for the lost profits
of the mill, cause by the delay in delivering the broken
shaft. It was held that the plaintiff could not recover.
The discussion contained in the opinion of the court in
that case leads to the conclusion that the damages
recoverable in case of the breach of a contract are two
sorts, namely, (1) the ordinary, natural, and in a sense
necessary damage; and (2) special damages.
Ordinary damages is found in all breaches of contract
where the are no special circumstances to distinguish the
case specially from other contracts. The consideration
paid for an unperformed promise is an instance of this
sort of damage. In all such cases the damages
recoverable are such as naturally and generally would
result from such a breach, "according to the usual course
of things." In case involving only ordinary damage no
discussion is ever indulged as to whether that damage
was contemplated or not. This is conclusively presumed
from the immediateness and inevitableness of the
damage, and the recovery of such damage follows as a
necessary legal consequence of the breach. Ordinary
damage is assumed as a matter of law to be within the
contemplation of the parties.
Special damage, on the other hand, is such as follows
less directly from the breach than ordinary damage. It is
only found in case where some external condition, apart
from the actual terms to the contract exists or intervenes,
as it were, to give a turn to affairs and to increase
damage in a way that the promisor, without actual notice
of that external condition, could not reasonably be

expected to foresee. Concerning this sort of damage,
Hadley vs.Baxendale (1854) [supra] lays down the
definite and just rule that before such damage can be
recovered the plaintiff must show that the particular
condition which made the damage a possible and likely
consequence of the breach was known to the defendant
at the time the contract was made.
The statement that special damages may be recovered
where the likelihood of such damages flowing from the
breach of the contract is contemplated and foreseen by
the parties needs to be supplemented by a proposition
which, though not enunciated in Hadley vs. Baxendale,
is yet clearly to be drawn from subsequent cases. This is
that where the damage which a plaintiff seeks to recover
as special damage is so far speculative as to be in
contemplation of law remote, notification of the special
conditions which make that damage possible cannot
render the defendant liable therefor. To bring damages
which would ordinarily be treated as remote within the
category of recoverable special damages, it is necessary
that the condition should be made the subject of contract
in such sense as to become an express or implied term of
the engagement. Horne vs. Midland R. Co. (L. R., 8 C.
P., 131) is a case where the damage which was sought to
be recovered as special damage was really remote, and
some of the judges rightly places the disallowance of the
damage on the ground that to make such damage
recoverable, it must so far have been within the
contemplation of the parties as to form at least an
implied term of the contract. But others proceeded on
the idea that the notice given to the defendant was not
sufficiently full and definite. The result was the same in
either view. The facts in that case were as follows: The
plaintiffs, shoe manufacturers at K, were under contract
to supply by a certain day shoes to a firm in London for
the French government. They delivered the shoes to a
carrier in sufficient time for the goods to reach London
at the time stipulated in the contract and informed the

railroad agent that the shoes would be thrown back upon
their hands if they did not reach the destination in time.
The defendants negligently failed to forward the good in
due season. The sale was therefore lost, and the market
having fallen, the plaintiffs had to sell at a loss.
In the preceding discussion we have considered the
plaintiff's right chiefly against Teodorica Endencia; and
what has been said suffices in our opinion to
demonstrate that the damages laid under the second
cause of action in the complaint could not be recovered
from her, first, because the damages laid under the
second cause of action in the complaint could not be
recovered from her, first, because the damages in
question are special damages which were not within
contemplation of the parties when the contract was
made, and secondly, because said damages are too
remote to be the subject of recovery. This conclusion is
also necessarily fatal to the right of the plaintiff to
recover such damages from the defendant corporation,
for, as already suggested, by advising Teodorica not to
perform the contract, said corporation could in no event
render itself more extensively liable than the principle in
the contract.
Our conclusion is that the judgment of the trial court
should be affirmed, and it is so ordered, with costs
against the appellant.
G.R. No. 120554 September 21, 1999

SO PING BUN, petitioner,
vs.
COURT OF APPEALS, TEK HUA ENTERPRISES
CORP. and MANUEL C. TIONG, respondents.
QUISUMBING, J.:
This petition for certiorari challenges the Decision 1 of
the Court of Appeals dated October 10, 1994, and the
Resolution 2dated June 5, 1995, in CA-G.R. CV No.
38784. The appellate court affirmed the decision of the
Regional Trial Court of Manila, Branch 35, except for
the award of attorney's fees, as follows:
WHEREFORE, foregoing considered, the
appeal of respondent-appellant So Ping Bun for
lack of merit is DISMISSED. The appealed
decision dated April 20, 1992 of the court a quo
is modified by reducing the attorney's fees
awarded to plaintiff Tek Hua Enterprising
Corporation from P500,000.00 to P200,000.00.
3
Arellano, C.J., Torres, Carson, Araullo, Malcolm,

Avancea and Moir, JJ., concur.
SUPREME COURT
Manila
SECOND DIVISION
The facts are as follows:

In 1963, Tek Hua Trading Co, through its managing
partner, So Pek Giok, entered into lease agreements with
lessor Dee C. Chuan & Sons Inc. (DCCSI). Subjects of
four (4) lease contracts were premises located at Nos.
930, 930-Int., 924-B and 924-C, Soler Street, Binondo,

Manila. Tek Hua used the areas to store its textiles. The
contracts each had a one-year term. They provided that
should the lessee continue to occupy the premises after
the term, the lease shall be on a month-to-month basis.
When the contracts expired, the parties did not renew the
contracts, but Tek Hua continued to occupy the
premises. In 1976, Tek Hua Trading Co. was dissolved.
Later, the original members of Tek Hua Trading Co.
including Manuel C. Tiong, formed Tek Hua
Enterprising Corp., herein respondent corporation.
So Pek Giok, managing partner of Tek Hua Trading,
died in 1986. So Pek Giok's grandson, petitioner So Ping
Bun, occupied the warehouse for his own textile
business, Trendsetter Marketing.
On August 1, 1989, lessor DCCSI sent letters addressed
to Tek Hua Enterprises, informing the latter of the 25%
increase in rent effective September 1, 1989. The rent
increase was later on reduced to 20% effective January
1, 1990, upon other lessees' demand. Again on
December 1, 1990, the lessor implemented a 30% rent
increase. Enclosed in these letters were new lease
contracts for signing. DCCSI warned that failure of the
lessee to accomplish the contracts shall be deemed as
lack of interest on the lessee's part, and agreement to the
termination of the lease. Private respondents did not
answer any of these letters. Still, the lease contracts were
not rescinded.
On March 1, 1991, private respondent Tiong sent a letter
to petitioner which reads as follows:
March 1, 1991
Mr. So Ping Bun
930 Soler Street

Binondo, Manila
Dear Mr. So,
Due to my closed (sic) business associate (sic)
for three decades with your late grandfather Mr.
So Pek Giok and late father, Mr. So Chong Bon,
I allowed you temporarily to use the warehouse
of Tek Hua Enterprising Corp. for several years
to generate your personal business.
petitioner requested formal contracts of lease with

DCCSI in favor Trendsetter Marketing. So Ping Bun
claimed that after the death of his grandfather, So Pek
Giok, he had been occupying the premises for his textile
business and religiously paid rent. DCCSI acceded to
petitioner's request. The lease contracts in favor of
Trendsetter were executed.
In the suit for injunction, private respondents pressed for
the nullification of the lease contracts between DCCSI
and petitioner. They also claimed damages.
sum of P500,000.00,
attorney's fees;
for
4. Dismissing the complaint,

insofar as plaintiff Manuel C.
Tiong is concerned, and the
respective counterclaims of
the defendant;
5. Ordering defendant So Ping
Bun to pay the costs of this
lawsuit;
After trial, the trial court ruled:

Since I decided to go back into textile business,
I need a warehouse immediately for my stocks.
Therefore, please be advised to vacate all your
stocks in Tek Hua Enterprising Corp.
Warehouse. You are hereby given 14 days to
vacate the premises unless you have good
reasons that you have the right to stay.
Otherwise, I will be constrained to take
measure to protect my interest.
Please give this urgent matter your preferential
attention to avoid inconvenience on your part.
Very truly yours,
(Sgd) Manuel C. Tiong
MANUEL C. TIONG
President 4
Petitioner refused to vacate. On March 4, 1992,
WHEREFORE, judgment is rendered:

1.
Annulling
the
four
Contracts of Lease (Exhibits
A, A-1 to A-3, inclusive) all
dated March 11, 1991,
between defendant So Ping
Bun, doing business under the
name and style of "Trendsetter
Marketing", and defendant
Dee C. Chuan & Sons, Inc.
over the premises located at
Nos. 924-B, 924-C, 930 and
930, Int., respectively, Soler
Street, Binondo Manila;
2. Making permanent the writ
of preliminary injunction
issued by this Court on June
21, 1991;
3. Ordering defendant So Ping
Bun to pay the aggrieved
party, plaintiff Tek Hua
Enterprising Corporation, the
This judgment is without prejudice to the rights

of plaintiff Tek Hua Enterprising Corporation
and defendant Dee C. Chuan & Sons, Inc. to
negotiate for the renewal of their lease contracts
over the premises located at Nos. 930, 930-Int.,
924-B and 924-C Soler Street, Binondo,
Manila, under such terms and conditions as they
agree upon, provided they are not contrary to
law, public policy, public order, and morals.
SO ORDERED. 5
Petitioner's motion for reconsideration of the above

decision was denied.
On appeal by So Ping Bun, the Court of Appeals upheld
the trial court. On motion for reconsideration, the
appellate court modified the decision by reducing the
award of attorney's fees from five hundred thousand
(P500,000.00) pesos to two hundred thousand
(P200,000.00) pesos.
Petitioner is now before the Court raising the following

issues:
I. WHETHER THE APPELLATE
COURT ERRED IN AFFIRMING
THE
TRIAL
COURT'S
DECISION FINDING SO PING
BUN GUILTY OF TORTUOUS
INTERFERENCE
OF
CONTRACT?
II. WHETHER THE APPELLATE
COURT ERRED IN AWARDING
ATTORNEY'S
FEES
OF
P200,000.00 IN FAVOR OF
PRIVATE RESPONDENTS.
The foregoing issues involve, essentially, the correct
interpretation of the applicable law on tortuous conduct,
particularly unlawful interference with contract. We
have to begin, obviously, with certain fundamental
principles on torts and damages.
Damage is the loss, hurt, or harm which results from
injury, and damages are the recompense or
compensation awarded for the damage suffered. 6 One
becomes liable in an action for damages for a
nontrespassory invasion of another's interest in the
private use and enjoyment of asset if (a) the other has
property rights and privileges with respect to the use or
enjoyment interfered with, (b) the invasion is
substantial, (c) the defendant's conduct is a legal cause
of the invasion, and (d) the invasion is either intentional
and unreasonable or unintentional and actionable under
general negligence rules. 7
The elements of tort interference are: (1) existence of a
valid contract; (2) knowledge on the part of the third

person of the existence of contract; and (3) interference
of the third person is without legal justification or
excuse.8
A duty which the law of torts is concerned with is

respect for the property of others, and a cause of action
ex delicto may be predicated upon an unlawful
interference by one person of the enjoyment by the other
of his private
property. 9 This may pertain to a situation where a third
person induces a party to renege on or violate his
undertaking under a contract. In the case before us,
petitioner's Trendsetter Marketing asked DCCSI to
execute lease contracts in its favor, and as a result
petitioner deprived respondent corporation of the latter's
property right. Clearly, and as correctly viewed by the
appellate court, the three elements of tort interference
above-mentioned are present in the instant case.
Authorities debate on whether interference may be
justified where the defendant acts for the sole purpose of
furthering his own financial or economic interest. 10 One
view is that, as a general rule, justification for interfering
with the business relations of another exists where the
actor's motive is to benefit himself. Such justification
does not exist where his sole motive is to cause harm to
the other. Added to this, some authorities believe that it
is not necessary that the interferer's interest outweigh
that of the party whose rights are invaded, and that an
individual acts under an economic interest that is
substantial, not merely de minimis, such that wrongful
and malicious motives are negatived, for he acts in selfprotection. 11Moreover justification for protecting one's
financial position should not be made to depend on a
comparison of his economic interest in the subject
matter with that of others. 12 It is sufficient if the impetus
of his conduct lies in a proper business interest rather

than in wrongful motives. 13
As early as Gilchrist vs. Cuddy, 14 we held that where

there was no malice in the interference of a contract, and
the impulse behind one's 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. 15
In the instant case, it is clear that petitioner So Ping Bun

prevailed upon DCCSI to lease the warehouse to his
enterprise at the expense of respondent corporation.
Though petitioner took interest in the property of
respondent corporation and benefited from it, nothing on
record imputes deliberate wrongful motives or malice on
him.
Sec. 1314 of the Civil Code categorically provides also
that, "Any third person who induces another to violate
his contract shall be liable for damages to the other
contracting party." Petitioner argues that damage is an
essential element of tort interference, and since the trial
court and the appellate court ruled that private
respondents were not entitled to actual, moral or
exemplary damages, it follows that he ought to be
absolved of any liability, including attorney's fees.
It is true that the lower courts did not award damages,
but this was only because the extent of damages was not
quantifiable. We had a similar situation in Gilchrist,
where it was difficult or impossible to determine the
extent of damage and there was nothing on record to
serve as basis thereof. In that case we refrained from

awarding damages. We believe the same conclusion
applies in this case.
successful opponent would throw wide open the door of

temptation to the opposing party and his counsel to swell
the fees to undue proportions." 20
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 petitioner's interference.
Considering that the respondent corporation's lease

contract, at the time when the cause of action accrued,
ran only on a month-to-month basis whence before it
was on a yearly basis, we find even the reduced amount
of attorney's fees ordered by the Court of Appeals still
exorbitant in the light of prevailing jurisprudence.
21
Consequently, the amount of two hundred thousand
(P200,000.00) awarded by respondent appellate court
should be reduced to one hundred thousand
(P100,000.00) pesos as the reasonable award or
attorney's fees in favor of private respondent
corporation.
Lastly, the recovery of attorney's fees in the concept of

actual or compensatory damages, is allowed under the
circumstances provided for in Article 2208 of the Civil
Code. 16 One such occasion is when the defendant's act
or omission has compelled the plaintiff to litigate with
third persons or to incur expenses to protect his interest.
17
But we have consistently held that the award of
considerable damages should have clear factual and
legal bases. 18 In connection with attorney's fees, the
award should be commensurate to the benefits that
would have been derived from a favorable judgment.
Settled is the rule that fairness of the award of damages
by the trial court calls for appellate review such that the
award if far too excessive can be reduced. 19 This ruling
applies with equal force on the award of attorney's fees.
In a long line of cases we said, "It is not sound policy to
place in penalty on the right to litigate. To compel the
defeated party to pay the fees of counsel for his
WHEREFORE, the petition is hereby DENIED. The

assailed Decision and Resolution of the Court of
Appeals in CA-G.R. CV No. 38784 are hereby
AFFIRMED, with MODIFICATION that the award of
attorney's fees is reduced from two hundred thousand
(P200,000.00) to one hundred thousand (P100,000.00)
pesos. No pronouncement as to costs.1wphi1.nt
SO ORDERED.

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Republic of the Philippines

judgment appealed therefrom is hereby

aforesaid "Deed of Sale with Assumption of Mortgage."

Petitioner Dizon having defaulted in the payment of his

Leonardo Abola for petitioner.

The basic issue to be resolved in this case is whether the

The antecedent facts established in the record are not

Sometime prior to October 6, 1959 Alfredo G. Gaborro

THOUSAND ONE HUNDRED SEVENTY

WHEREAS, the aforesaid properties are

encumbrances of whatever nature. except the

1959 is called Option to Purchase Real Estate, trial is in

Page No. 70, Reg. No. VII Series of 1959.

(Sgd.) ALFREDO G. GABORRO

your goodselves the total

Considering that these agricultural properties

P. Torres, Filipino, of legal age, with residence

Bounded on the NE. by a road trial

heirs, successors trial assigns the aforesaid right

him that he is formally offering reimburse Gaborro Of

religiously" but the Option to Purchase Real Estate"

2. That the defendant Gaborro executed Annex

6. That subsequently the Development Bank

3. That the three parcels of land referred to in

7. That on or before October 6, 1960, TCT No.

cancelled and in lieu thereof TCT NO. 24292 of

plaintiff and defendant Gaborro only.

Accordingly, on March 14, 1970, the lower court

of sale with assumption of mortgage (Exhibit

(B) In finding that the price or

successors in interest or any judicial creditor or

the effect that the purchaser of land sold at public

This is necessarily so for the reason that respondent

principal parties, petitioner Dizon and respondent

fairness and equity and in the interests of justice that

exclusive of the interests that may have accrued

Since We are not informed of the status of Dizon's loan

(c) In other words, the maximum reconveyance

(a) Dizon is granted the right to a reconveyance

(d) As already stated, Dizon is not entitled to an

banks nor reimbursement of any interests paid

from their aunt, Doa Encarnacion Florentino who died

In his testimony during the trial, applicant Miguel

(4) That the Deed of Extrajudicial Partition of

Antonio Florentino, of legal age, Filipino,

The court denied the petitioners-appellee

Salvador Encarnacion, Sr., of legal age,

Spouses Miguel Florentino and Rosario

Remedios Encarnacion, of legal age, Filipino,

arguments, and also attacking the junction of the

In view of all these, therefore, and insofar as the

This Court believes, and so holds, that the

On January 3, 1967, petitioners-appellants filed their

"If a contract should contain some stipulation in

Severina Encarnacion, of legal age, Filipino,

fulfillment provided he communicated his

After Motions for Reconsideration were denied by the

partition (Exh. O) duly agreed and signed by the parties,

contracting bears the legal represented or authorization

revocable at the option of the co-owners. While a

It need not be made expressly and formally.

A trust constituted between two contracting

performance of the obligation without having

Hence, the stipulation (Exhibit O-1) cannot now be