LONDRES v.
CA be embodied in a public instrument, is
MISTAKE IN THE DESIGNATION OF LOT
NUMBER WILL NOT VITIATE THE
CONSENT OF THE PARTIES AS LONG AS
THEIR TRUE INTENTIONS ARE EVIDENT.
— In resolving the similar case of Atilano
vs. Atilano, where there was also a
mistake in the designation of the lot
number sold, the Court took into account
facts and circumstances to uncover the
true intentions of the parties. The Court
held that when one sells or buys real
property, one sells or buys the property
as he sees it, in its actual setting and by its
physical metes and bounds, and not by
the mere lot number assigned to it in the
certificate of title. As long as the true
intentions of the parties are evident, the
mistake will not vitiate the consent of the
parties, or affect the validity and binding
effect of the contract between them. In
this case, the evidence shows that the
designation of the second parcel of land
sold as Lot 2034 was merely an oversight
or a typographical error. The intention of
the parties to the Absolute Sale became
unmistakably clear when private
respondents, as vendees, took possession
of Lots 1320 and 1333 in the concept of
owners without the objection of
Filomena, the vendor.
7. ID.; CONTRACTS; NON-COMPLIANCE
WITH FORMAL REQUIREMENTS DOES
NOT ADVERSELY AFFECT THE VALIDITY
OF THE CONTRACT. — A contract of sale
is perfected at the moment there is a
meeting of the minds upon the thing
which is the object of the contract and
upon the price. Being consensual, a
contract of sale has the force of law
between the contracting parties and they
are expected to abide in good faith with
their respective contractual
commitments. Article 1358 of the Civil
Code, which requires certain contracts to
only for convenience, and registration of
the instrument is needed only to
adversely affect third parties. Formal
requirements are, therefore, for the
purpose of binding or informing third
parties. Non-compliance with formal
requirements does not adversely affect
the validity of the contract or the
contractual rights and obligations of the
parties.
CONTANTINO V. SANDIGANBAYAN
The elementary principle is that it is
perfectly legitimate for a bilateral
contract to be embodied in two or
more separate writings, and that in
such an event the writings should be
read and interpreted together in such
a way as to eliminate seeming
inconsistencies and render the
intention of the parties effectual. In
construing a written contract, the reason
behind and the circumstances
surrounding its execution are of
paramount importance to place the
interpreter in the situation occupied by
the parties concerned at the time the
writing was executed. Construction of the
terms of a contract, which would amount
to impairment or loss of right, is not
favored. Conservation and
preservation, not waiver,
abandonment or forfeiture of a right, is
the rule. In case of doubts in contracts,
the same should be settled in favor of
the greatest reciprocity of interests.
ESCANO v. ORTIGAS
There is no argument to support
petitioners' position on the import of the
phrase "made to pay" in the Undertaking,
other than an unduly literalist reading
that is clearly inconsistent with the thrust
of the document. Under the Civil Code, the
various stipulations of a contract shall be
interpreted together, attributing to the
doubtful ones that sense which may result
from all of them taken jointly. 30 Likewise
applicable is the provision that if some
stipulation of any contract should admit
of several meanings, it shall be
understood as bearing that import which
is most adequate to render it effectual. 31
As a means to effect the general intent of
the document to relieve Ortigas from
liability to PDCP, it is his interpretation,
not that of petitioners, that holds sway
with this Court.
ALMIRA v. CA
CIVIL LAW; CONTRACTS;
INTERPRETATION; RULE WHEN
STIPULATIONS ARE CLEAR AND WHEN
AMBIGUOUS. — It is basic in the
interpretation and construction of
contracts that the literal meaning of the
stipulations shall control if the terms of
the contract are clear and leave no doubt
on the intention of the contracting parties.
However, if the terms of the agreement
are ambiguous, resort is made to contract
interpretation which is the determination
of the meaning attached to written or
spoken words that make the contract. To
ascertain the true intention of the parties,
their subsequent or contemporaneous
actions must be principally considered.
AMBIGUITY CONSTRUED AGAINST THE
PARTY WHO CAUSED THE SAME; NOT
APPLICABLE WHERE INTENTION OF
PARTIES ARE CLEAR. — Petitioners insist
that it was respondent's counsel who
prepared the Kasunduan and any
ambiguity therein should be construed
against respondent pursuant to Article
1377 of the Civil Code which states that
the interpretation of obscure words or
stipulations in a contract shall not favor
the party who caused the obscurity. We
find no reason to apply Article 1377 of the
Civil Code in this case where the evident
intention of the parties can be readily
discerned by their subsequent and
contemporaneous acts. While it is true
that the Kasunduan was prepared by the
counsel of respondent, there is no
indication that respondent took unfair
advantage of petitioners when he had the
terms of the Kasunduan drawn by his
counsel. Petitioners freely assented to the
Kasunduan which is written entirely in a
language spoken and understood by both
parties. That petitioners were fully aware
of the terms of the Kasunduan is
evidenced by their attempts to comply
with their obligation by securing a
subdivision plan and technical description
of the property subject of sale. Having
ruled that the kaukulang titulo ng lupang
nabanggit refers to a separate title in the
name of Julio Garcia, we proceed to the
issue as to whether petitioners may
rescind the Kasunduan pursuant to
Article 1191 of the Civil Code for failure of
respondent to give full payment of the
balance of the purchase price.
The power to rescind is only given to
the injured party. The injured party is
the party who has faithfully fulfilled
his obligation or is ready and willing to
perform with his obligation.
TANAY RECREATION v. FAUSTO
When a lease contract
contains a right of first
refusal, the lessor is under a
legal duty to the lessee not to
sell to anybody at any price
until after he has made an
offer to sell to the latter at a
certain price and the lessee
has failed to accept it. The
lessee has a right that the
lessor's first offer shall be in
his favor. 18 Petitioner's right
of first refusal is an integral
and indivisible part of the
contract of lease and is
inseparable from the whole
contract. The consideration
for the lease includes the
consideration for the right of
first refusal 19 and is built
into the reciprocal
obligations of the parties.
The rule is that a sale made in
violation of a right of first
refusal is valid. However, it
may be rescinded, or, as in
this case, may be the subject
of an action for specific
performance.
The prevailing doctrine
therefore, is that a right of
first refusal means identity of
terms and conditions to be
offered to the lessee and all
other prospective buyers and
a contract of sale entered into
in violation of a right of first
refusal of another person,
while valid, is rescissible.
RIVIERA FILIPINA v. CA
where the Court held that a
lease with a proviso granting
the lessee the right of first
priority "all things and
conditions being equal" meant
that there should be identity of
the terms and conditions to be
offered to the lessee and all
other prospective buyers, with
the lessee to enjoy the right of
first priority. A deed of sale
executed in favor of a third
party who cannot be deemed a
purchaser in good faith, and
which is in violation of a right
of first refusal granted to the
lessee is not voidable under the
Statute of Frauds but
rescissible under Articles 1380
to 1381 (3) of the New Civil
Code.
in order to have full
compliance with the
contractual right granting
petitioner the first option to
purchase, the sale of the
properties for the price for
which they were finally sold to
a third person should have
likewise been first offered to
the former. Further, there
should be identity of terms and
conditions to be offered to the
buyer holding a right of first
refusal if such right is not to be
rendered illusory. Lastly, the
basis of the right of first refusal
must be the current offer to sell
of the seller or offer to
purchase of any prospective
buyer.
INTERPRETATION OF
CONTRACTS; INTENTION OF
THE PARTIES SHALL BE
ACCORDED PRIMORDIAL
CONSIDERATION. — [T]he
cardinal rule in the
interpretation of contracts
that the intention of the
parties shall be accorded
primordial consideration and
in case of doubt, their
contemporaneous and
subsequent acts shall be
principally considered.
Where the parties to a
contract have given it a
practical construction by
their conduct as by acts in
partial performance, such
construction may be
considered by the court in
construing the contract,
determining its meaning and
ascertaining the mutual
intention of the parties at the
time for contracting. The
parties' practical
construction of their contract
has been characterized as a
clue or index to, or as
evidence of, their intention or
meaning and as an important,
significant, convincing,
persuasive, or influential
factor in determining the
proper construction of the
contract.
CANNU v. GALANG
The subsidiary character of
the action for rescission
applies to contracts
enumerated in Article 1381
48 of the Civil Code. The
contract involved in the case
before us is not one of those
mentioned therein. The
provision that applies in the
case at bar is Article 1191.
The rescission on account of
breach of stipulations is not
predicated on injury to
economic interests of the party
plaintiff but on the breach of
faith by the defendant, that
violates the reciprocity
between the parties. It is not a
subsidiary action, and Article
1191 may be scanned without
disclosing anywhere that the
action for rescission
thereunder is subordinated to
anything other than the
culpable breach of his
obligations by the defendant.
This rescission is a principal
action retaliatory in character,
it being unjust that a party be
held bound to fulfill his
promises when the other
violates his. As expressed in the
old Latin aphorism: "Non
servanti fidem, non est fides
servanda." Hence, the
reparation of damages for the
breach is purely secondary.
On the contrary, in the
rescission by reason of lesion
or economic prejudice, the
cause of action is subordinated
to the existence of that
prejudice, because it is the
raison d être as well as the
measure of the right to rescind.
Hence, where the defendant
makes good the damages
caused, the action cannot be
maintained or continued, as
expressly provided in Articles
1383 and 1384. But the
operation of these two articles
is limited to the cases of
rescission for lesion
enumerated in Article 1381 of
the Civil Code of the
Philippines, and does not apply
to cases under Article 1191.
MANILABANKING v.
SILVERIO
An absolutely simulated
contract, under Article 1346
of the Civil Code, is void. It
takes place when the parties
do not intend to be bound at
all. The characteristic of
simulation is the fact that the
apparent contract is not
really desired or intended to
produce legal effects or in
any way alter the juridical
situation of the parties. Thus,
where a person, in order to
place his property beyond
the reach of his creditors,
simulates a transfer of it to
another, he does not really
intend to divest himself of his
title and control of the
property; hence, the deed of
transfer is but a sham.
Lacking, therefore, in a
fictitious and simulated
contract is consent which is
essential to a valid and
enforceable contract.
CAUSE OF CONTRACTS;
ABSENCE THEREOF
RENDERS THE CONTRACT
VOID AB INITIO. — A deed of
sale in which the stated
consideration has not in fact
been paid is a false contract
that is void ab initio.
Likewise, "a contract of
purchase and sale is null and
void and produces no effect
whatsoever where it appears
that [the] same is without
cause or consideration which
should have been the motive
thereof, or the purchase price
appears thereon as paid but
which in fact has never been
paid by the purchaser to the
vendor.”
When a contract is void, the
right to set-up its nullity or
non-existence is available to
third persons whose
interests are directly affected
thereby. The material
interest of TMBC need not be
belabored. Suffice it to say
that as judgment creditor of
Ricardo, Sr., it has the right to
protect its lien acquired
through a writ of preliminary
attachment as security for
the satisfaction of any
judgment in its favor.
DIFFERENT FROM
RESCISSIBLE CONTRACTS;
ACCION PAULIANA;
AVAILABLE WHEN SUBJECT
MATTER IS A CONVEYANCE,
OTHERWISE VALID,
UNDERTAKEN IN FRAUD OF
CREDITORS. — The remedy
of accion pauliana is available
when the subject matter is a
conveyance, otherwise valid,
undertaken in fraud of
creditors. Such a contract is
governed by the rules on
rescission which prescribe,
under Art. 1383 of the Civil
Code, that such action can be
instituted only when the
party suffering damage has
no other legal means to
obtain reparation for the
same. The contract of sale
before us, albeit undertaken
as well in fraud of creditors,
is not merely rescissible but
is void ab initio for lack of
consent of the parties to be
bound thereby. A void or
inexistent contract is one
which has no force and effect
from the very beginning, as if
it had never been entered
into; it produces no effect
whatsoever either against or
in favor of anyone.
Rescissible contracts, on the
other hand, are not void ab
initio, and the principle,
"quod nullum est nullum
producit effectum," in void
and inexistent contracts is
inapplicable. Until set aside
in an appropriate action,
rescissible contracts are
respected as being legally
valid, binding and in force.
Tolentino, a noted civilist,
distinguished between these
two types of contracts
entered into in fraud of
creditors, thus: Absolute
simulation implies that there
is no existing contract, no
real act executed; while
fraudulent alienation means
that there is a true and
existing transfer or contract.
The former can be attacked
by any creditor, including one
subsequent to the contract;
while the latter can be
assailed only by the creditors
before the alienation. In
absolute simulation, the
insolvency of the debtor
making the simulated
transfer is not a prerequisite
to the nullity of the contract;
while in fraudulent
alienation, the action to
rescind, or accion pauliana,
requires that the creditor
cannot recover in any other
manner what is due him.
Finally, the action to declare
a contract absolutely
simulated does not prescribe
(Articles 1409 and 1410);
while the accion pauliana to
rescind a fraudulent
alienation prescribes in four
years (Article 1389).

MWSS v. CA