party in whose favor the provision was made.
RULE 130: RULES OF ADMISSIBILITY — PAROL EVIDENCE RULE 
Section  9. Evidence of wri en agreements. — When the terms of an agreement have been
reduced to wri ng, it is considered as containing all the terms agreed upon and there can be,
between the par es and their successors in interest, no evidence of such terms other than the
contents of the wri en agreement.
However, a party may present evidence to modify, explain or add to the terms of wri en
agreement if he puts in issue in his pleading:
a. An intrinsic ambiguity, mistake or imperfec on in the wri en agreement;
b. The failure of the wri en agreement to express the true intent and agreement of the
par es thereto;
c. The validity of the wri en agreement; or
d. The existence of other terms agreed to by the par es or their successors in interest
a er the execu on of the wri en agreement. The term "agreement" includes wills.
INTERPRETATION OF DOCUMENTS  the leading lady in 2 of their mo on pictures. However, the lower court denied the pe on on
Section 10. Interpretation of a writing according to its legal meaning. — The language of a wri ng is
to be interpreted according to the legal meaning it bears in the place of its execu on, unless
the par es intended otherwise.
Section  11. Instrument  construed  so  as  to  give  effect  to  all  provisions. — In the construc on of an
instrument, where there are several provisions or par culars, such a construc on is, if possible,
to be adopted as will give effect to all.
Section  12. Interpretation  according  to  intention; general  and  particular  provisions. — In the
construc on of an instrument, the inten on of the par es is to be pursued; and when a
general and a par cular provision are inconsistent, the la er is paramount to the former. So a
par cular intent will control a general one that is inconsistent with it.
Section  13. Interpretation  according  to  circumstances. — For the proper construc on of an
instrument, the circumstances under which it was made, including the situa on of the subject
thereof and of the par es to it, may be shown, so that the judge may be placed in the posi on
of those who language he is to interpret.
Section  14. Peculiar  signification  of  terms. — The terms of a wri ng are presumed to have been
used in their primary and general accepta on, but evidence is admissible to show that they
have a local, technical, or otherwise peculiar significa on, and were so used and understood in
the par cular instance, in which case the agreement must be construed accordingly.
Section  15. Written  words  control  printed. — When an instrument consists partly of wri en
words and partly of a printed form, and the two are inconsistent, the former controls the la er.
Section  16. Experts  and  interpreters  to  be  used  in  explaining  certain  writings. — When the
characters in which an instrument is wri en are difficult to be deciphered, or the language is
not understood by the court, the evidence of persons skilled in deciphering the characters, or
who understand the language, is admissible to declare the characters or the meaning of the
language.
Section 17. Of Two constructions, which preferred. — When the terms of an agreement have been
intended in a different sense by the different par es to it, that sense is to prevail against either
party in which he supposed the other understood it, and when different construc ons of a
provision are otherwise equally proper, that is to be taken which is the most favorable to the
Section  18. Construction in favor of natural right. — When an instrument is equally suscep ble of
two interpreta ons, one in favor of natural right and the other against it, the former is to be
adopted.
Section  19. Interpretation  according  to  usage. — An instrument may be construed according to
usage, in order to determine its true character.
 
MARLENE DAUDEN-HERNAEZ v. Hon. WALFRIDO DE LOS ANGELES, 
Hollywood Far East Produc ons Inc., and Ramon Valenzuela
Topic: Form of contracts; reforma on of contracts; interpreta on of contracts
April 30, 1969 | Reyes JBL, acting CJ.
RECIT-READY/SUMMARY:  Hernaez filed for a collec on suit against her employer since she was
the basis that there was no wri en form of their contract and that by applying the provisions of
the civil code, such contract which contains P500.00 and above should have a wri en contract or
it will be rendered void. The Supreme Court ruled on the contrary since the lower court was
wrong in applying the provisions since such amount can s ll be recovered provided that it can be
proven over a suit or ac on which Hernaez did so in the first place.
FACTS:  Marlene Dauden Hernaez is a movie actress who was currently working with Hollywood
Far East Produc ons and their president named Ramon Valenzuela. Marlene filed a case against
her employer in order to recover P14,700.00 which was allegedly the balance of her services for
being the leading actress in two mo on pictures.
The case was brought before Judge De Los Angeles who dismissed the case on the basis that Art.
1357 & Art. 1358 specifically provides that in contracts involving an amount of P500.00 and
above, it is necessary for that contract to be in wri en form. Since both par es agreed through
the form of oral contract, both ar cles apply in this scenario. The mo on for reconsidera on was
denied also thereby promp ng Hernaez to appeal to the Supreme Court. Hence, this pe on to
the Supreme Court
ISSUE:  Whether or not Hernaez can retrieve P14,700 despite having no wri en evidence to
support such allega on
HELD: YES. 
Judgment of the lower court is reversed and the case is remanded to the court of origin for
further proceedings provided that is in line with the ra o of the Supreme Court. The Supreme
Court ra ocinated by basing their argument on what the Spanish Civil Code provides. The
Spanish Civil Code provides that as a general rule, contracts are presumed to be valid regardless
whether they are oral or wri en. However, there are some excep ons to this general rule. Solemn 
contracts (which requires a par cular form of wri ng in order to make it valid and enforceable),
Donation  of  immovable  properties (must be in authen cated by a public instrument to be valid)
& Donation  of  movables  worth  more  than  P5,000.00 (must be in wri ng or else it is void).
However, the respondents were wrong in applying Art. 1358 since nowhere in the ar cle
provides that the absence of a wri en form will make the contract invalid or unenforceable.
Moreso, Art. 1357 even provides that the contract in ques on in this case can s ll be binding
through the ac on or suit even though the absence of a wri en form of the contract. Hence, the
pe oner won this case.
 
Obligations and Contracts | Week 11 Cases | Page 1 
 DENIED and the decision of the Court of Appeals upholding the ruling of the trial court is hereby
Sps. SEGUNDO & EPIFANIA SABESAJE-DALION v. COURT OF APPEALS  AFFIRMED. No costs. Sabesaje won! (Defendants)
and Ruperto Sabesaje Jr.  
Topic: Form of contracts; reforma on of contracts; interpreta on of contracts
February 28, 1990 | Medialdea, J. PAULINO GARCIA v. MARIA BISAYA et. al.
Topic: Form of contracts; reforma on of contracts; interpreta on of contracts
DOCTRINE:  The  provision  of  Art.  1358 on the necessity of a public document is only for convenience, not  September 28, 1955 | Reyes A, J.
for  validity  or  enforceability.  It  is  not  a  requirement for the validity of a contract of sale of a parcel of land 
that this be embodied in a public instrument. A contract of sale is a consensual contract, which means that  RECIT-READY: Par es entered into a contract of sale over an alleged unregistered por on of
the  sale  is  perfected  by  mere  consent.  No  particular  form  is  required  for  its  validity. The provision of Art.  land. It was found out by the buyer 14 years later, it was actually already registered. He wished
1358 on the necessity of a public document is only for convenience, not for validity or enforceability  the courts order the reforma on of contract. Courts dismissed complaint because appellant failed
  to allege that the instrument did not express the real agreement or true intent of the par es.
FACTS:  A land in Southern Leyte was declared in the name of Segundo Dalion. Sabesaje sued to
recover ownership this land based on a private document of absolute sale, allegedly executed by DOCTRINE:  Reformation  shall  only  be a remedy if the instrument does not express the real agreement or 
Segundo Dalion. Dalion denied the sale, saying that: intent of the parties 
 
a. The document was fic ous FACTS:  On May 20, 1952, plain ff filed a complaint against defendants alleging that on
b. His signature was a forgery November 12, 1938, defendants executed in favor of plain ff a deed of sale covering a parcel of
c. That the land is conjugal property, which he and his wife acquired in 1960 from land; That the said land was designated by the par es an unregistered land.
Saturnina Sabesaje as evidenced by the "Escritura de Venta Absoluta."
In truth, said land was a por on of a big mass of land registered. Despite persistent demand from
The spouses denied the claims of Sabesaje that a er execu ng a deed of sale over the parcel of plain ff to have error corrected, defendants refused to do so. Plaint prayed for judgement
land, they had pleaded with Sabesaje to be allowed to administer the land because Dalion did not ordering defendants to make correc ons. Defendants denied execu ng deed of sale and pleaded
have livelihood. Spouses Dalion admi ed, however, administering 5 parcels of land in Southern prescrip on as a defense. Lower court dismissed complaint on grounds of prescrip on
Leyte, which belonged to Leonardo Sabesaje, grandfather of Sabesaje, who died in 1956.
ISSUE: Whether contract is subject to reforma on
The Dalions never received their agreed 10% and 15% commission on the sales of copra and   
abaca. Sabesaje's suit, they say, was intended merely to harass and forestall Dalion's threat to sue HELD: NO 
for these unpaid commissions. On issue of prescrip on, it shall prescribe in 10 years counted from the day it could have
ins tuted his ac on to correct an error. There being nothing in the pleadings to show it was
Trial Court decided in favor of Sabesaje and ordered the Dalions to deliver the parcel of land in a discovered 10 years before the ac on, nor evidence proving he found out “only recently”, court
public document. CA affirmed. The CA upheld the validity of the sale based, among others, on the thinks the ac on prescribed before the factual basis for prescrip on had been established and
tes monies of the people who witnessed the execu on of the subject deed. clarified by evidence.
 
ISSUES:  On reforma on, appellant’s complaint states no cause of ac on. It fails to allege that the
1. Was the contract of sale valid? instrument to the reformed does not express the real agreement or inten on of the par es. Such
2. Is a public document needed for transfer of ownership? allega on is essen al.
  
HELD:  Courts do not reform instruments merely for the sake of reforming them, but only to enable some
1. YES.  party to assert his right under them as reformed. Perhaps appellant’s real grievance is that he had
People  who  witnessed  the  execution  of  the  deed  positively  testified  on  its  authenticity. They  been led to enter into a contract, making him believe the property was unregistered. Even if that
stated  that  it  had  been  executed  and signed by the signatories. A contract of sale is a consensual were the case, reforma on would not be remedy but annulment of deed.
contract, which means that the sale is perfected by mere consent. No par cular form is required  
for its validity. Upon perfec on of the contract, the par es may reciprocally demand performance  
(NCC 1475, NCC), i.e., the vendee may compel transfer of ownership of the object of the sale,  
and the vendor may require the vendee to pay the thing sold (NCC 1458).  
   
2. NO.   
The  provision  of  NCC  1358  of  NCC  on the necessity of a public document is only for convenience,   
not  for  validity  or  enforceability.  The trial court thus rightly and legally ordered Dalion to deliver to  
Sabesaje the parcel of land and to execute corresponding formal deed of conveyance in a public  
document. Under  NCC  1498,  when  the  sale  is  made  through  a  public  instrument,  the  execution  is   
equivalent  to the delivery of the thing. Delivery may either be actual (real) or constructive. Thus delivery of   
a  parcel  of  land  may  be  done  by  placing  the  vendee  in  control  and  possession  of  the  land  (real)  or  by 
embodying  the  sale  in  a  public  instrument  (constructive). DECISION ACCORDINGLY, the pe on is
Obligations and Contracts | Week 11 Cases | Page 2 
 Sps. ANTONIO JAYME & Ana Solidarios v. Hon. NESTOR ALAMPAY and Benito Ong
Topic: Form of contracts; reforma on of contracts; interpreta on of contracts
January 28, 1975 | Teehankee, J.
RECIT-READY/SUMMARY:  Spouses loaned from Ong and mortgaged their land as security.
Spouses agreed to the condi on of Ong to execute a DOS (instead of Contract of Mortgage) since
they were good friends and they needed money. When they offered to pay the loan, Ong refused
to accept payment. Spouses now wanted Ong to execute a Contract of Mortgage, but Ong
refused, so they filed a complaint before the respondent court for reforma on. The respondent
court dismissed the complaint on the grounds of prescrip on and legal impediment since the
same land was now mortgaged to another person. The spouses appealed to the SC which set
aside the dismissal and remanded the case to the lower court. It also ruled that the contract must
be reformed since the true inten on of the par es is to execute a Contract of Mortgage and not a
DOS.
DOCTRINE:    If  two  parties  agree  upon  the  mortgage  or  pledge  of  real  or  personal  property  but  the 
instrument  states  that  the  property  is  sold  absolutely  or  with  a  right  to  repurchase,  reformation  of  the  Bacaron filed a complaint for reforma on of instrument with damages and prayer of preliminary
instrument is proper.  injunc on with the RTC against Go. Bacaron stated that in 1993, he suffered business reversals,
  
FACTS:  Pe oners spouses Jayme and respondent Ong entered into an agreement whereby they
agreed that the spouses will borrow from Ong the sum of P16,500 secured by their lot in
Bacolod. Spouses agreed to the condi on required by Ong to execute in the la er's favor a Deed
of Sale (DOS) because they reposed great confidence to Ong, being a good family friend, and
since they were in dire need of money.
Since the purported sale, the spouses con nue to occupy part of the premises without paying
rentals to Ong, and they also collect all the rentals due from the other occupants of the premises.
They offered to pay the loan already but Ong unjustly refused to accept the spouses' payment.
Ong also refused to execute the proper document of mortgage upon their demand (TBH I don't
get it, they agreed naman na DOS in the first place plus they s ll occupied pala the land but oh
well). Spouses filed a complaint against Ong before the CFI presided by the respondent judge for
reforma on of instrument and praying that the DOS, which did not embody their true agreement,
be reformed and declared a Contract of Mortgage. Ong raised the defense of prescrip on.
CFI dismissed the complaint and ruled that the proper remedy is annulment on the ground of
vi ated consent, said ac on already prescribed four years a er execu on of the DOS. The
existence of a mortgage for P100,000.00 over the lot executed by Ong in favor of one Jose del
Cas llo, who is a mortgagee in good faith, presents a legal impediment to pe oners' ac on for
reforma on of instrument. Spouses' MR also denied. Hence, this pe on.
ISSUE: Whether contract executed by the par es may be reformed?
  
HELD: YES.  failed to reflect the true inten on of the par es.
The complaint for reforma on of instrument clearly alleged that the DOS did not express the true
agreement of the par es and should be reformed into the mortgage that it actually was. Such
right to reforma on is expressly recognized in Ar cle 1365 of the Civil Code which provides that
"If two par es agree upon the mortgage or pledge of real or personal property but the instrument
states that the property is sold absolutely or with a right to repurchase, reforma on of the
instrument is proper."
Jose Del Cas llo's rights over the property are recognized but that would in no way defeat
pe oners' ac on for reforma on and recovery of tle to the property. SC set aside the dismissal
order and remanded the case for trial and adjudica on on merits.
BENNY GO v. ELIODORO BACARON
Topic: Form of contracts; reforma on of contracts; interpreta on of contracts
October 11, 2005 | Panganiban, J.
RECIT-READY/SUMMARY:  Bacaron conveyed a land to Go for 20k. Bacaron demanded it since it
was only a mortgage. Go refused and said their contract is an absolute sale. Hence, the case.
Bacaron won and he can reform the contract because (1) the considera on is grossly inadequate;
and (2) the true inten on of the par es are not reflected in the contract.
DOCTRINE:  The  vendor  may  ask  for  the  reformation  of  the  instrument,  should  the  case be among those 
mentioned in Art. 1602 and 1604. 
FACTS:  Bacaron conveyed a 15-hectare parcel of land in favor of Go for P20k. A year a er,
Bacaron, seeking to recover his property, demanded from Go the P20k “loan.” Go refused to pay,
saying that the transac on between him and Bacaron is a contract of sale and not mortgage.
which forced him to borrow P20k from Go. Addi onally, prior to extending the loan, Bacaron
required Go to execute a “transfer of rights” but was told that it would only be a formality as he
could redeem the unregistered land the moment he pays the loan.
Bacaron explained that he was in a ght financial situa on and only entered the contract because
Go assured him that he could redeem his property. Lastly, Bacaron stated that the considera on is
merely P20k, which is grossly inadequate as the selling price of a 15-hectare land.
Go, however, denied Bacaron’s claim. Go explained that Bacaron’s account, as evidenced by
checks, vouchers, PNs, etc. remained unpaid during his me of financial struggle and the amount
totaled to P900k. Thus, to avoid the filing of cases, Bacaron offered to pay his indebtedness
through dacion en pago, giving the land in ques on to Go for full payment.
Go filed a counterclaim for moral damages brought about by mental anguish, wounded feelings,
and besmirched reputa on. He also prayed for exemplary damages, a orney’s fees, and li ga on
expenses since he was forced to hire counsel.
RTC: Dismissed Bacaron’s complaint; Go’s counterclaim is meritorious. CA reversed TC’s ruling.
Respondent’s appeal should be recognized and the contract entered into by the par es is an
equitable mortgage because the considera on was grossly inadequate.
Addi onally, the Court found that respondent s ll paid for the taxes during the years the land
was in Go’s possession. Bacaron also had his workers con nue to harvest in said land so he s ll
remained in control of the property. Reforma on of the contract is granted since the instrument
  
ISSUE: Whether the grand of the relief of contract reforma on was proper?
  
HELD: NO. 
The court rules for the respondent. The inten on of the par es determines whether a contract is
one of sale or mortgage. In this case, Bacaron raised an issue regarding the fact that their true
inten on is not reflected in the instrument. Under this circumstance, parol evidence (integrity of
wri en documents) becomes admissible and competent to prove the true nature of the
instrument.
Obligations and Contracts | Week 11 Cases | Page 3 
Hence, Go’s asser on that the interpreta on of the terms of the contract is unnecessary and that
the par es clearly agreed to execute an absolute deed of sale is wrong. This does not hold,
especially in light of Art. 1604 of the CC, under which even contracts purpor ng to be absolute
sales are subject to the provisions of Art. 1602.
Under Art. 1605, the vendor may ask for the reforma on of the instrument, should the case be
among those men oned in Art. 1602 and 1604. Bacaron has more than sufficiently established
that his contract with Go is an equitable mortgage and not an absolute sale, therefore, he is
allowed to avail himself of the remedy of reforma on of contracts.
 
ASUNCION ATILANO et. al. v. LADISLAO & GREGORIO ATILANO  the deed of sale was a simple mistake in the dra ing of the document. The mistake did not vi ate
Topic: Form of contracts; reforma on of contracts; interpreta on of contracts
May 21, 1969 | Makalintal, J.
RECIT-READY/SUMMARY:  The case started when Eulogio A lano I acquired lot 535, then
subdivided into 5 parts. He then, sold the 4 lots, one of the lots (535-A) was sold to his brother
Eulogio A lano II. The last lot (535-E) was retained to Eulogio A lano I. However, upon resurvey
of the lands, it was discovered that the land occupying by the pe oners was lot 535-A and not
535-E. Then the pe oners filed an ac on to return the possession of the lot 535-E. The TC
ruled in favor of the pe oners. However, the SC reversed the judgment, ruling in favor of the
respondents. The Court said that the real issue is not the possession but the real inten on of the
par es. The remedy here under the Civil code is only reforma on of the instrument. Thus, the
Court ordered the plain ffs and defendants to execute deed of conveyance.
DOCTRINE:  The  remedy of reformation of the instrument, provided for by the New Civil Code, is available  Topic: Form of contracts; reforma on of contracts; interpreta on of contracts
when,  there  having  been  a  meeting  of  the  minds  of  the  parties  to  a  contract,  their  true  intention  is  not  September 21, 1983 | Melencio-Herrera, J.
expressed  in  the  instrument  purporting  to embody the agreement by reason of mistake, fraud, inequitable 
conduct or accident.  SUMMARY: Si pet at resp nag enter sa contract. Gagawa si pet ng drawing. May tatlong payments
  
FACTS:  In 1916, Eulogio A lano acquired lot No. 535 from Gerardo Villanueva. In 1920, he
subdivided the land into give parts – 535-A, 535-B, 535-C, 535-D and 535-E. On May 18, 1920,
executed DoS for the sum of P150 covering lot No. 535- E in favor of his brother Eulogio A lano
II. Three other por ons (lot nos. 535-B, 535-C, 535-D) were sold to other persons. The only
retained lot is lot no. 535-A. Upon his death the tle passed to Ladislao A lano (Defendant).
On Dec. 6, 1952, Eulogio A lano II having become a widower upon the death of his wife Luisa
Bau sta, he and his children obtained the lot No. 535-E. On July 16, 1959, desiring to put an end
to the co-ownership, they had the land resurveyed so that it could properly be subdivided. It was
then discovered that the land they were actually occupying on the strength of DoS executed in
1920 was lot No. 535-A and not lot 535-E.
On January 25, 1960, the heirs of Eulogio A lano II, filed an ac on in the CFI, alleging, inter alia,
that they had offered to surrender to the defendants the possession of lot No. 535-A and
demanded in return the possession of lot No. 535-E. However, the defendant refused to accept
the exchange. The plain ffs’ insisted that since lot No. 535-E has an area of 2,612 sqm as
compared to the 1,808 sqm of lot No. 535-A. Defendant’s answer to the complaint, alleged that
the reference to lot No. 535-E in the DoS of May 18, 1920 was an involuntary error.
TC  Ruling:  rendered judgment for the plain ffs on the sole ground that since property was
registered under the Land Registra on Act, the defendants could not acquire it through
prescrip on. Also, there can be no dispute as to the correctness of the legal proposi on.
  
ISSUE: Whether It was real inten on for Eulogio A lano I, to sell the lot No. 535-A?
HELD: NO. 
The SC ruled in favor of the defendants. Hence, reversing the decision of the Trial Court. The SC
ordered the plain ffs to execute a deed of conveyance of lot No. 535-E in favor of the
defendants, and the la er, in turn, are ordered to executed same document, covering lot No.
535-A in favor of the plain ffs.
The real issue here is not adverse possession, but the real inten on of the par es to that sale.
From all the facts and circumstances, we are convinced that the object thereof, as intended and
understood by the par es, was that specific por on where the vendee was then already residing,
where he reconstructed his house at the end of the war, and where his heirs, the plain ffs herein,
con nued to reside therea er: namely, lot No. 535-A; and that its designa on as lot No. 535-E in
the consent of the par es, or affect the validity and binding effect of the contract between them.
The new Civil Code provides a remedy for such a situa on by means of reforma on of the
instrument. This remedy is available when, there having been a mee ng of the minds of the
par es to a contract, their true inten on is not expressed in the instrument purpor ng to embody
the agreement by reason of mistake, fraud, inequitable conduct or accident (Art. 1359, et seq.).
In this case, the deed of sale executed in 1920 need no longer be reformed. The par es have
retained possession of their respec ve proper es conformably to the real inten on of the par es
to that sale, and all they should do is to execute mutual deed of conveyance.
 
EUGENIO JUAN GONZALES v. COURT OF APPEALS and Endel Enterprises Corpora on
marrcv si pet: 1st 10k commission; 2nd 20k upon approval ng plan; and 3rd 20k ulit sa pag deliver
ng drawing. Check yung 1st and 2nd. Pero yung 3rd ques on mark kasi late yung pag bigay ni pet.
Si resp since late, gusto niya na irescind yung contract and bawiin yung 1st and 2nd payment. Sabi
ng SC di pwede kasi based sa literal interpreta on ng contract nila, en tled naman si pet sa 1st
and 2nd payment so bawal bawiin kasi nagawa niya naman ng maayos yung 1st and 2nd. Yung
3rd lang yung bawal, pero since di naman talaga ni resp binayaran si pet ng 3rd payment, walang
ibabalik si pet. FIN.
DOCTRINE:  Contracts  are  to  be  interpreted  according  to  their  literal  meaning  when  the  terms  and 
conditions are clear and leave no doubt as to the intention of the contracting parties. 
  
FACTS:  Pe oner (architect and contractor) and Respondent (Corp) entered into an agreement
for the construc on of a condominium building on the respondent’s lot. (Legaspi, Maka ). Pet,
Gonzales, agreed to undertake the prepara on plans for said building as well as the supervision of
its construc on. Such was shown in their le er agreement which stated the following:
 
“…...b. The manner of payment are as follows: 
i. As  a  commissioned  architect,  he  shall  be paid 10% or P10,000; Upon the approval 
of  the  plan  by  the  engineering  dept  of  Ayala,  P20,000;  And  upon  delivery  to  the 
petitioner of the working and drawing specifications, P20, 000….”   
 
Gonzales received the following payments: P20, 000 upon approval of said plan by engineering
dept, and P10, 000 as the commissioned engineer. The company expressed its desire verbally not
to proceed with the construc on since the working drawings had not been delivered within the
period as promised. Hence, when Gonzales submi ed its working drawings and specifica ons
Obligations and Contracts | Week 11 Cases | Page 4 
a er 7 months, respondent refused to pay Gonzales the P20,000 (payment for delivery of
working and drawing specifica ons).
Endel sued for rescission or cancella on of its contract and the return of the amount paid to
Gonzales, P30, 0000 . Averred the ff:
a. Neglect and delay in comple ng the drawings and specifica ons within three (3)
months as the usual prac ce of architects
b. Such resulted in great damage and prejudice
c. At the me the working drawings and specifica ons were delivered to it, big disastrous
floods had already wrought considerable damage in Manila and that the declara on of
Mar al Law in September of 1972 resulted in certain restric ons on non-governmental
projects.
Gonzales alleged that such agreement as men oned above did not contain any me frame which
the plans, working drawings and specifica ons shall be submi ed to Endel and assuming that
there was delay, the same was due to ENDEL’s refusal to discuss with him the prepara on of said
drawings and specifica ons.
Trial Court - neither plain ff (Endel) nor defendant (Gonzales) should be faulted for the situa on
(while there was delay in the delivery of the plans and specifica ons by GONZALES thus
warran ng rescission and res tu on, equity demanded that he should be compensated for the
me, effort and expense)
JACINTO TANGUILIG v. COURT OF APPEALS and Vicente Herce Jr.
Topic: Form of contracts; reforma on of contracts; interpreta on of contracts
January 2, 1997 | Bellosillo, J.
SUMMARY:  Tanguilig offered his service to Herce to build windmill for him. So nag agree. Hindi
nakabayad ng balance si Herce kasi sabi niya nagbayad na siya sa SPGMI na gumawa ng deepwell
para sa windmill so wala na daw siya balance. Sabi ni Tanguilig hindi kasali sa contract nila yung
deepwell but only for windmill. SC held na hindi nga kasama ang pag gawa ng deep well sa
contract nila. The contract is clear that it is only for windmill and naspecify lang yung deep well sa
contract so to know kung ano ang match specifica on for the windmill.
  
DOCTRINE:  If  the  terms  of  the  instrument  are  clear  and  leave  no  doubt as to their meaning, they should 
not be disturbed. 
  
FACTS:  Jacinto Tanguilig (doing business under JMT Engineering and Gen. Merchandising
proposed to Herce to construct windmill system for Herce. They agreed on considera on of
P60,000 with one-year guaranty from date of comple on. The downpayment – P30k, installment
– P15k, Balance – P15k.
Herce refused and failed to pay the balance, claiming that he already paid the balance of P15k to
San Pedro Gen. Merchandising (SPGMI) that constructed the deep well to which the windmill
system will be connected and claimed that it will offset his balance to Tanguilig.

CA - affirming recission of the contract but reversing the dismissal of the complaint and holding Tanguilig filed complaint and denied that the deep well was included in the agreement to build
GONZALES obligated to return to ENDEL the amount of P20,000.00 the windmill system. Contract price of P60k was solely for the windmill and exclusive of other
incidental materials needed for the project.
ISSUE: Whether Pe oner is liable to return P20,000 and pay a orney’s fees.
RTC – construc on of deep not part of windmill project, Herce was ordered to pay
HELD: NO  CA – reversed, “deep well” was twice men oned in the contract. Hence, this pe on
It is fundamental that contracts are to be interpreted according to their literal meaning when the   
terms  and  conditions  are  clear  and  leave  no  doubt  to  the  intention  of  the  contracting  parties.  ISSUE:  Whether the agreement to construct the windmill system intended to include the
Upon his being commissioned, Gonzales  received  P10,000.00  under  the  contract  and he was  installa on of a deep well
paid  P20,000.00  upon  approval  of  the  plans  by  the  Engineering Department of Ayala Securities 
Corporation. Gonzales  is  entitled  to  those  payments  by  the  very  terms  of  the  contract.  He had  HELD: NO. 
performed the services required and had earned his fees.  CA’s decision reversed, RTC’s decision AFFIRMED. Through preponderance of evidence –
installa on of a deep well was not included in the proposals of pe oner to construct a windmill
The fact that the condominium project was later abandoned and rescinded should not result in system for Herce. Nowhere in their contract is the installa on of a deep well men oned, neither
the forfeiture by Gonzales of those payments.  He  has  showed  that  he  has  fully  performed  is their itemiza on of the materials to be used in construc ng deep well
services  relating  to  the  completion  of  specification  and general working drawings, he is entitled 
to  recover  payments  specified  for  such  services.  While  it  may  be  true that Gonzales incurred in  The contract merely describe the type of deep well pump for which the proposed windmill would
delay, that delay was only with respect to the submission of working drawings and specifications.  be suitable. “Windmill suitable FOR 2 inches diameter deepwell” – meant only to convey the idea
By  reason  of  that  delay  Gonzales  is  not  entitled  to  the  compensation  provided  therefor,  or  that the proposed windmill would be appropriate for a deep well pump with said specifica on
P20,000.00,  even  though  he  may  have  already  submitted  those  drawings  and  specifications  to 
Endel.  If the real inten on of pe oner was to include a deep well in the agreement to construct a
windmill, he would have used “AND” or “WITH”. The terms of the instruments are clear and leave
If me were, indeed, of the essence of the contract, as Endel alleges, it could have cancelled it no doubt as to their meaning so they should not be disturbed. HERCE ORDERED TO PAY THE
immediately upon realizing that such services were delayed and it should not have allowed BALANCE.
Gonzales to con nue working further on the drawings and specifica ons.
 
   
   
   
 

Obligations and Contracts | Week 11 Cases | Page 5 


VICENTE SANTI v. COURT OF APPEALS and Heirs of Augusto Reyes Jr.
Topic: Form of contracts; reforma on of contracts; interpreta on of contracts
November 8, 1993 | Nocon, J.
SUMMARY: Ito yung Esperanza Jose, he owns a land in Cavite. Pinalease niya to sa Sps Francisco
for 20 years with “AUTOMATIC EXTENSION” for another 20 years 220 (Ito yung 1st contract of
lease). Later on, sila Sps Francisco, nagpatayo sila ng cinema house sa land and sold their rights sa
to Augusto Reyes. Nagkaroon ng new contract of lease between Esperanza Jose (owner ng land)
and Augusto Reyes (new lessee) for a period of 20 years “EXTENDABLE” for another 20 years for
220. Jose (owner) later on sold his rights on the land kay pe oner San . Later on namatay na si
Augusto Reyes (new lessee) and namatay na din siya so ang nag takeover ay si priv resp Alexander
Reyes. Ngayon, kinukuha na ni pet san yung land kasi nga expired na yung lease contract, pero
ayaw ibigay ni priv resp Reyes kasi may automa c extension dawn a 20 years. Nag rule yung CA
in favor kay priv resp Reyes. Hence, the issue of WON THE CONTRACT OF LEASE COULD
AUTOMATICALLY BE EXTENDED. Sabi ng SC NO kasi Art. 1370 says that if the terms of a contract 
are  clear  and  leave  no  doubt  upon  the  intention  of  the  contracting  parties,  the  literal  meaning  of  its  FACTS:  Pe oner and Respondent entered into a ten-year Contract of Lease over a piece of land
stipulations  shall  control.  In the case, wala naman daw nakalagay sa 2nd contract of lease with
Augusto Reyes (now deceased) na “Automa c Extension” unlike sa 1st contract of lease with Sps
Francisco. So talo si Resp Reyes. Mali yung CA sap ag rule in favor sa kanya.
DOCTRINE:  Art.  1370.  If  the  terms  of  a  contract  are  clear  and  leave no doubt upon the intention of the 
contracting parties, the literal meaning of its stipulations shall control.  Before the agreed term ended, respondent wrote pe oner about the former's inten on not to
FACTS:  Esperanza Jose was the owner of a lot in Cavite City. Jose leased a por on of the lot to
the Sps. Vitan-Francisco for 20 years, which was automa cally extended for another 20 years,
but for a fee of P220, as ra fied before a Notary Public. The lessees [Sps. Vitan-Francisco]
constructed a cinema house on the lot and therea er sold their rights and interest unto Augusto
A. Reyes, Jr.
A new contract of lease was entered into by Augusto Reyes Jr. with Jose for a period of 20 years
and with a monthly rent of P180. The contract of lease was extendable for another 20 years, with
a monthly rent of P220. Jose sold all of her rights and par cipa on to Vicente San , and the land
was duly registered under his name.
Augusto Reyes’ lease had expired and he had died; the plain ff wrote his representa ve
Alexander Reyes about the termina on of the lease and for the turn over of the possession of the
land. Alexander refused and consulted his lawyer, who told him that the lease was automa cally
extended for another 20 years at a rate of P220. Despite San ’s refusal, Reyes con nued to pay
for the rent by deposi ng the amount with the Clerk of Court. Reyes refused to vacate the land
and a Barangay ac on was ini ated, however no se lement was agreed upon.
Trial court ruled in favor of Pe oner San , sta ng that the Reyeses should turn over the land.
CA reversed TC; sta ng that the renewal or extension has been agreed upon in the contract of
lease.
ISSUE: Whether the contract of lease could automa cally be extended
HELD: NO.  words of that agreement. The assent of both lessor and lessee is essen al for another contract to
In a wealth of cases and as provided for in Ar cles 1370 and 1372 of the Civil Code, we have
ruled that when the terms and s pula ons embodied in a contract are clear and leave no room
for doubt, such should be read in its literal sense and that there is absolutely no reason to
construe the same in another meaning.
In the case, the phrase “automa cally extended” did not appear and was not used in the lease
contract subsequently entered into by Esperanza Jose and Augusto Reyes, Jr. for the simple
reason that the lessor does not want to be bound by the s pula on of automa c extension as
provided in the previous lease contract.
If the inten on of the par es were to provide for an automa c extension of the lease contract,
then they could have easily provided for a straight forty years contract instead of twenty.
 
CELSO FERNANDEZ v. COURT OF APPEALS and Miguel Tanjangco
Topic: Form of contracts; reforma on of contracts; interpreta on of contracts
October 18, 1988 | Feliciano, J.
DOCTRINE:   When  a  contract  does  not  include  technical  terms  or  terms of legal art, they should be read 
as to their plain and ordinary meaning.  
  
situated along Kahilum Street, Pandacan, Manila, where pe oner would put up the then
proposed New Zamora Market. Respondent Miguel Tanjangco as lessor, and pe oner Celso A.
Fernandez as lessee. The par es agreed that the lease, would be "renewable  for  another  ten (10) 
years at the option of both parties under such terms, conditions and rental reasonable at that time"  
extend further or renew the lease. Pe oner replied, that he had opted to renew the contract for
another ten (10) years so that he could recover all the expenses he had incurred in the
construc on of the market.
In another le er to pe oner, respondent, through his lawyer, advised that respondent could not
accept pe oner's unilateral ac on to renew the lease because, under the contract, any renewal
or extension thereof was possible only "at the op on of both par es.” Pe oner commenced an
ac on against respondent before the Regional Trial Court alleging that pe oner was en tled to
renew the lease contract, for another ten (10) years, which paragraph in the contract should be
construed in a liberal manner and with jus ce. He sought to compel respondent to renew the
lease agreement for another term, or asked the court to consider the original contract as renewed
for another ten (10) years or to fix another period for the renewal contract.
Respondent, in his answer, contended that a judicial interpreta on of the contract involved was
not necessary, the contract being simply worded and phrased in a categorical and unequivocal
manner that had expressed clearly the inten on of the par es to it, in respect of their mutual
presta ons.
RTC - rendered judgment in favor of pe oner. CA - reversed the trial court's decision. Hence this
pe on.
ISSUE: Whether the pe oner's unilateral ac on to renew the lease is tenable?
HELD: NO. 
Both  must  agree.  The inten on of the par es to the lease agreement is clearly discernible in the
spring into juridical existence upon expira on of the original one. The contract is s pulated to be
"renewable" for another ten years "at  the  option of both parties", second the contract is specified to
be "renewable under such terms, condi ons and rental reasonable at that me.'
Obligations and Contracts | Week 11 Cases | Page 6 
The clause stresses that the op on or faculty to renew was given, not to the lessee alone nor to
the lessor by himself, but to the two (2) simultaneously who hence must both exercise the op on
to renew if a new contract is to come about.
The above contract language as comprising, not technical terms or terms of legal art, but rather
just plain and ordinary words. As such, we understood the above language as requiringthat the
par es should mutually agree on a new contract which may not be the same as the original, under
such terms, condi ons and rental reasonable at that me. It follows therefore that the plain ff
[pe oner] cannot renew the lease by his unilateral act of exercising his op on. Simply stated, the
op on must be mutually and consen[s]ually exercised, and not unilaterally as was erroneously
done by the plain ff.
Applied to the lease contract under considera on, it appears that the lease has expressed in clear,
unmistakable and unambiguous terms the inten on of the par es that if the lease contract was to
be renewed, the op on to renew should be made by both par es. As a ma er of dic onary
meaning, "extendible" means "capable of extension", and "renewable" means "capable of renewal";
both are oriented towards the future. It may be seen that both "extendible" and "renewable",
when considered in and of themselves, are non-commi al.
 
Sps. JESUS & AMPARO SAMBENITO-RUIZ v. SHERIFF OF MANILA
and Bank of the Philippine Islands
Topic: Form of contracts; reforma on of contracts; interpreta on of contracts
July 31, 1970 | Makalintal, J.
SUMMARY: Ito sila pet Ruiz, nag execute sila ng real estate mortgage contract (land) with BPI for
a loan of 15K. Tapos sabi sa contract of mortgage na “failure to pay for 2 successive monthly
amor za ons will cause to be automa cally due and demandable in its en rety… this loan shall
not run for more than 5 years”. Later on, hindi nakabayad for 12 successive months sila pet ruiz,
so nag file for execu on of mortgaged land si BPI. Upon receipt of the no ce of execu on, pina
postpone ni pet ruiz yung execu on saying na babayran na nila yung loan, nag agree si BPI. Pero
nung wala pa din bayad pina execute na ni BPI yung mortgaged land and inauc on na ng Sheriff
to which si BPI yung hisghest bidder. Nag file for injuc on seeking the annulment nung
foreclosure si pet ruiz invoking the terms of the mortgage contract saying na premature yung pag
foforeclose since 5 years naman daw yung mortgage contract. Pero nag rule yung LC against sa
kanya. Hence, the issue of WON THE FORECLOSURE WAS PREMATURE AND THEREFORE
ILLEGAL? Sabi ng SC NO kasi “To ascertain the meaning of the provision of the mortgage contract relied  anyway be paid within 5 years; and that failure to pay two successive amor za ons would render
upon  by  the  appellants,  its  entirety  must  be  taken  into  account  and not merely its last two sentences”. In
the case, mali daw si pet Ruiz to just read that the mortgage contract was good for 5 years. Since
in default na siya for 12 successive monthly amor za ons, the foreclosure was not premature. So
talo si pet Ruiz.
DOCTRINE:  To  ascertain  the  meaning  of  the  provision  of  the  mortgage  contract  relied  upon  by  the 
appellants, its entirety must be taken into account and not merely its last two sentences. 
FACTS:  On Jan 1961 Pe oners executed in favor of BPI a real estate mortgage covering a parcel
of land situated in Sta Ana Manila as security for a loan of 15k. It provided other things as well.
Spouses defaulted.
BPI then asked the sheriff to foreclose the mortgage extrajudicially and set the auc on sale of the
property. Upon receipt of a copy of the no ce of auc on, pe oners requested BPI to postpone
the auc on for them to pay their obliga on. BPI agreed. Spouses failed to pay.
Sheriff sold the property with BPI being the highest bidder and since their bid of 15k represented
the total indebtedness, the sheriff did not collect cash but merely applied the same amount to the
bid.
Pe oners filed an injunc on seeking the annulment of the foreclosure sale claiming that despite
the accelera on clause they had five years from January 18, 1961 within which to pay their
mortgage debt because of their phrase “notwithstanding the foregoing” in the last sentence. Since
the five-year period had not yet expired when the mortgage was foreclosed, said foreclosure,
they point out, was premature. Which was denied.
  
ISSUE: Whether the foreclosure was premature and therefore illegal.
HELD: NO. 
To ascertain the meaning of the provision of the mortgage contract relied upon by the appellants,
its en rety must be taken into account and not merely its last two sentences. In the case, the
appellants lay stress on the following last two sentences of the provision of the mortgage
con-tract quoted above, to wit:
“x x x. Failure to pay two successive monthly amor za ons will cause this loan to be
automa cally due and payable in its en rety. Notwithstanding the foregoing, this loan
shall not run for more than 5 years.”
A reading of the en re provision will readily show that while the appellants were allowed to
amor ze their loan at the rate of not less than P300.00 a month, they were under obliga on to
liquidate the same within a period of not more than five (5) years from the date of the execu on
of the contract; but if they should fail to pay two successive monthly amor za ons, then the
en re loan would be due and payable.
It is obvious that the phrase “notwithstanding the foregoing” does not refer to the accelera on
clause but to the s pula on that the loan had to be “amor zed at the rate of not less than
P300.00, including interest on unpaid balance, at the rate of 8% per annum, said interest and
capital amor za on to be effected at the end of each month.”
There is nothing inconsistent between the accelera on clause and the last sentence. All that the
par es meant is that while monthly amor za ons could be as li le as P300.00 the loan should
the en re loan due and payable. Consequently, default having been commi ed for twelve
months, the foreclosure of the mortgage was not premature.
Obligations and Contracts | Week 11 Cases | Page 7