BIENVENIDO BABAO etc. v. FLORENCIO PEREZ etc. et. al.
HARRY IVES SHOEMAKER v. LA TONDEÑA Inc.
Topic: Unenforceable contracts; void contracts
May 3, 1939 | Villa-Real, J.
DOCTRINE:    In  an  oral  contract  which,  by  its  terms,  is  not  to  be  performed  within  one  year  from  its  taken out of the Statute of Frauds through performance by one party thereto. In order, however
execution,  the  other party cannot avoid fulfillment of his obligation by invoking the statute of frauds when  through performance of the contract may take the case out of the opera on of the statute, it
one of the parties has complied with his obligation within the year (Art. 1403)  must appear clear that the full performance has been made by one party within one year, as
  
FACTS:  La Tondeña Inc. entered into a wri en contract with Harry Shoemaker as a technical
manager of its factories for a period of 5 years. Such contract s pulated that Shoemaker will be
receiving a monthly salary of P1,500.00 or P18,000.00 per year. It was also inscribed that for the
last year of the contract, Tondeña would be able to grant Shoemaker a vaca on leave for 6
months with full compensa on during such leave.
Later on, Tondeña requested Shoemaker to modify the contract to which Shoemaker agreed to.
Such modified contract entails that a deduc on of P200.00 would be made for each month but
such deduc on would not be applied if the condi ons of the business improves. Lastly,
Shoemaker would not be anymore en tled for the 6 months leave anymore.
Unfortunately for Tondena’s case, it was alleged that the business suffered and that Shoemaker
had to con nue his services and even fill up the du es of A.B. Powell (Assistant general manager
of La Toñdena). Tondeña deducted the P200 from Shoemaker’s salary and refused to pay the
vaca on leave and compensa on.
Shoemaker later on filed a case against La Tondeña before the lower court but a demurrer of
evidence was decided against Shoemaker since the lower court held that the modified contract
was an oral contract and that it doesn’t cons tute a cause of ac on
ISSUE: Whether the oral contract made between Shoemaker and La Tondeña is unenforceable
HELD: NO.  Trial court in favor of the plain ff. CA reversed in toto. But eventually set aside the decision and
Judgment of the lower court is reversed and that the court is remanded to the lower court of
origin for further recep on of evidence. The Supreme Court held that as a general rule: the
agreement that by its terms is not to be performed within a year from the perfec on is
unenforceable by ac on and evidence can’t be received without any hard and concrete evidence
to support its contents.
However, an excep on lies for contracts wherein its terms are not to be performed within one
year may be taken out of the statute through complete performance by one party. Hence, when
Tondeña invoked the statute of frauds, it wrongly applied such statute since it applied only to
agreements not performed by either side within a year from the perfec on of the contract.
Fortunately, both par es admi ed to the fact that Shoemaker really performed his side of
obliga on and that Tondeña can’t just invoke such statute in order to exculpate him from such
situa on since it would be contrary for the purpose, which the statute of frauds was created for
in the first place. Hence, the Supreme Court finally ra ocinated that Tondeña can’t escape such
obliga on since it would be contrary to equity and jus ce.
Topic: Unenforceable contracts; void contracts
December 28, 1957 | Bau sta Angelo, J.
DOCTRINE:  — Contracts, which by their terms are not to be performed within one year, may be
otherwise the statute would apply.
FACTS:  Plain ff is the judicial administrator of the estate of the late San ago Babao while
defendant is the judicial administrator of the estate of the late Celes na Perez. San ago and
Celes na allegedly had a verbal agreement where San ago was bound to improve the land of
Celes na and at the same me as administrator of the land that all expenses for labor and
materials will be at his cost.
In considera on, Celes na in turn bound herself to convey to San ago or his wife ½ of the land
with all the improvements a er the death of Cels na. But, before Celes na’s death she sold the
land in ques on. In consequence, San ago Babao was deprived of the possession and
administra on thereof from 1945.
Plain ff now prays for the conveyance of the one-half por on of the land in ques on and for
annulment of the sales of the por on for having been made fic ously. Defendants denied
plain ff’s claim that a verbal agreement was entered into by Celes na Perez and San ago Babao
rela ve to the clearing, improving and administering the land belonging to the former.
They alleged that in 1924. the land in ques on had already been cleared and cul vated for
agricultural purposes and that the sales made by Celes na Perez through her a orney-in-fact of
the several por ons of the land were not fic ous as alleged but were made with full knowledge
and authority of Celes na without objec on of San ago Babao.
forwarded case to SC.
  
ISSUE:  Whether the verbal agreement is unenforceable due to the prohibi on of the statute of
frauds
  
HELD: NO. 
Par al performance does not of itself exclude the applica on of the Statue of Frauds. Contract
which by their terms are not to be performed within one year may be taken out of the statute
through performance by one party thereto.
All that is required in such case is complete performance within the year by one party however
many years have to elapse before the agreement is performed by another party. But nothing less
than full performance by one party will suffice and it has been held that if anything remains to be
done a er the expira on of the year besides the mere payment of money the statute will apply.
It is not therefore correct to state that San ago Babao has fully complied with his part within the
year from the alleged contract in ques on. Pe on DENIED. RESPONDENTS WON.
Obligations and Contracts | Week 13 Cases | Page 1 
 ISAIAS and MARCELINA FABRIGAS v. SAN FRANCISCO DEL MONTE Inc.
Topic: Unenforceable contracts; void contracts
November 25, 2005 | Tiñga, J.
DOCTRINE: Unenforceable contracts which have been ratified can no longer be annulled  RECIT-READY/SUMMARY:  Defendant entered into a contract with Kabalsa, the contractor, for
 
FACTS:  Sps entered into a first contract with Del Monte to buy a residen al land for
P109,000.00. Agreement was P30k as downpayment, and monthly installments of P1,285.69 for
10 years. An automa c cancella on clause in case of default was also in the contract. A er
payment of P30k, sps took possession but failed to make further installments.
Del Monte sent 4 demand le ers giving them 2 15-day grace periods but s ll failed to pay. A er
the second 15-day extension, it was men oned failure to pay would cause the rescission.
Pe oners received a final le er. Del Monte considered the contract cancelled a er that
extension without no ce.
Pet. Marcelina remi ed the amount of P13k and P12k. A 2nd contract was entered in to over the
same property but priced at P131,642 and downpayment of P26k and monthly installment of
P2.9k. Sps irregularly paid between March 1985 to Jan 1986. They paid less than P2.9k in those
months. Del Monte demanded payment of the 9 months amount to P26k.
Sps. Paid P10k in Oct 198 but Del Monte refused to accept. Del Monte sent again a demand
le er amoun ng to P117k and gave a 30-day grace period unless contract would be cancelled/
Del Monte ins tuted ac on for Recovery and Possession with damages against spouses and
payment of P206k +24& interest per annum.
Sps. Claimed that contract 1 was unilaterally cancelled and Del Monte forced Marcelina to
execute the 2nd contract. Trial court held Contract 2 was valid and spouses are liable to pay. In the
CA, Contract 1 was rescinded pursuant to automa c rescission, but Contract 2’s validity was
upheld because the contract was ra fied.
ISSUE: Whether contract was unenforceable
  
HELD: NO  primarily liable for the payment of the debt, the promise is not within the Sec. 335 of the Code of
It is enforceable because it was ra fied. Any transac on entered into by the wife without the
court or the husband’s authority is unenforceable under Art 1317 of CC. This is what happened in
Contract 2 since she executed it without the husband’s conformity.
Being unenforceable, it is suscep ble to ra fica on. As found by the lower courts, a er being
informed of a new contract, the husband con nued remi ng payments for the sa sfac on of the
2nd obliga on. These acts cons tute ra fica on of the contract. That ra fica on cleanses the
contract from all its defects from the moment it was cons tuted.
 
 
 
 
 
 
 
PAUL REISS et. al. v. JOSE MEMIJE
Topic: Unenforceable contracts; void contracts
March 1, 1910 | Carson, J.
the repair of a house. Kabalsa wasn't able to purchase lumber from the plain ffs because he has
no money so defendant went to the plain ff. An agreement was made between defendant and
plain ffs, the la er then delivered the lumber to Kabalsa. Plain ffs filed a case before the court
for the recovery of the balance from defendant. The TC favored the plain ffs. Hence, this
pe on. Defendant was contending that the alleged promise to pay is not admissible since it
wasn't in wri ng. The SC ruled against the defendant. Under Sec. 335 of the Code of Civ. Pro, it
only needs to be wri en when the promise is collateral to the agreement. In this case, the
promise is an original or an independent one.
DOCTRINE: If the promise is an original or an independent one, it need not to be written. 
FACTS:  Defendant Memije entered into a contract with one Kabalsa, the contractor, for the repair
of a house. Kabalsa undertook to furnish the necessary materials, including lumber, with the
plain ffs. Having no money and no credit, he was unable to purchase the necessary lumber.
Memije then accompanied Kabalsa to the plain ffs' lumber yard. Memiji entered into an
agreement with the la er whereby they were to deliver the necessary lumber to Kabalsa for use
in the repair of his house. The lumber was delivered to Kabalsa.
Plain ffs filed a case before the court for the recovery of the unpaid balance against defendant
Memiji. The court favored the plain ffs. Hence, this pe on. Memije contended that the alleged
promise to pay was not in wri ng, proof thereof was not admissible in evidence, and defendant
was not bound thereby, under the provisions, of sec on 335 of the Code of Civil Procedure.
  
ISSUE: Whether the alleged promise should be in wri ng to be enforceable
HELD: NO. 
If the promise is an original or an independent one; that is, if the promisor becomes thereby
Civ. Pro., and thus, need not to be wri en.
Sec. 335, par. 2: "In the following cases an agreement herea er made shall be
enforceable by ac on unless the same, or some note or memorandum thereof, be in
wri ng, and subscribed by the party charged, or by his agent; evidence, therefore, of
the agreement can not be received without the wri ng, or secondary evidence of its
contents: 2. A special promise to answer for the debt, default, or miscarriage of
another." (Now NCC 1403)
But, on the other hand, if the promise is collateral to the agreement of another and the promisor
becomes thereby merely a surety, the promise must be in wri ng. In this case, the credit for the
lumber sold and delivered to the defendant's contractor, was extended solely and exclusively to
the defendant himself, under the verbal agreement, and that, therefore, the case does not fall
within the provisions of the statute requiring certain agreements to be made in wri ng.
If goods are sold upon the sole credit and responsibility of the party who makes the promise,
then, even though they be delivered to a third person, there is no liability of the third person.
NOTE:  It will be UNENFORCEABLE when the promise is between contractor Kabalsa and the
plain ffs. 
Obligations and Contracts | Week 13 Cases | Page 2 

MARCIANA CONLU et. al. v. PABLO ARANETA and Espiridion Guanko
Topic: Unenforceable contracts; void contracts
March 4, 1910 | Johnson, J.
RECIT-READY/SUMMARY:  Conlu filed an ac on against Araneta to recover some land. Conlu
won except for one parcel of land, which is owned by Vito. Vito received the land through an oral
contract. SC held the validity of the oral contract. Araneta won.
DOCTRINE:  An  oral  contract  for the sale of real estate is binding between the parties although in may not 
be clothed with the necessary form.  RECIT-READY:  In this case, BPI became one of the trustees of a corpora on who owned a lot.
FACTS:  Conlu commenced an ac on against Araneta to recover, as owners, certain parcels of land
together with damages. Araneta alleges that they are the owners of the parcels of land in
ques on. A er hearing the evidence, the lower court found that Conlu was the owner of the land
and was en tled to the possession of all of the parcels in ques on, except for one parcel that had
a house on it, which belonged to the estate of Vito Tiongco.
Evidence showed the ff:
● The house in ques on was originally the property of Catalina Tiongco. Catalina le the
house to her sister Anselma by virtue of will before the former’s death;
● Anselma gave Vito the property of the house in ques on as his own property. Vito
lived in the house un l his death. He also made repairs and altera ons on his own
account;
● Anselma, however, agreed that Vito could have the house as his own if he would pay
her P3k. Vito paid; and
● There was no formal conveyance of the property to Vito but the property was
recognized as his own. Therefore, at the me of Anselma’s death, the property was
under Vito’s ownership.
As of this moment, the only property in ques on is the land owned by Vito. Hence, this case.
ISSUE:  Whether the contract of sale of real property from Anselma to Vito may be proven by oral
tes mony?
HELD: YES.  ●
An oral contract for the sale of real estate, made prior to the enactment of the Code of Civil
Procedure, is binding between the par es, although it may s ll be necessary for the par es
seeking to enforce such contract to take some ac on to secure the execu on of proper
documents, but this requirement will not render the agreement invalid.
Sec. 335 of the Code of Procedure in Civil Ac ons is now in force and it has established a rule
rela ng to the method of proving contracts of sale of real property, and an oral contract for the
sale of real property can now be proven under the said sec on. However, this sec on makes no
a empt to render oral contracts invalid. It simply provides that contract shall not be enforced by
an ac on, unless the same is evidenced by some note or memorandum.
This rule does not make contracts, which have not been executed in wri ng, invalid. The rule only
requires a form. The contract exists and is valid, though it may not be clothed with the necessary
form and effect of a noncompliance with the provisions.
Addi onally, if the par es in the trial make not objec on to the admissibility of oral evidence to
support a contract of sale of real property, it will be just as binding upon the par es as if it had
been reduced to wri ng.
In this case, 13 witnesses tes fied to sale of Anselma to Vito. Conlu also did not object to these
tes monies so in effect, she permi ed the defendants to prove the oral contract of sale.
Therefore, being fully proven, the oral contract is binding as if it had been reduced to wri ng.
Ruling of the lower court affirmed.
 
LIMKETKAI SONS MILLING Inc. v. COURT OF APPEALS, BPI, and Na onal Bookstore
Topic: Unenforceable contracts; void contracts
December 1, 1995 | Melo, J.
BPI was tasked to manage, administer and sell its proper es. One of the lots, is located at Pasig
City. Therea er, BPI authorized a broker to sell the lot for P1k/sqm. Thus, the broker found the
pe oner as the buyer of the said lot. The pe oner went to BPI and nego ated the said price
(P1k/sqm). It was agreed that such payment will be cash, however, the pe oner said if it’s
possible that such payment will be in installment. Pe oner, wrote a le er to the VP of BPI with
regard to the payment. But, 2 or 3 days a er, pe oner discovered that the payment on terms
was on hold. Thus, pe oner tendered the payment, but it was refused by BPI. While filing for an
ac on against BPI, it was found out that the lot was sold to Na onal Bookstore. TC ruled in favor
of the pe oner, sta ng that the contract was perfected. CA reversed such decision. SC ruled in
favor of the pe oner sta ng that the contract was perfected and ordering the respondent to
cancel the sale of the lot of Na onal Bookstore.
DOCTRINE:  Contracts infringing the Statute of Frauds are ratified when the defense fails to object, or asks 
questions on cross-examination. 
 
CHARACTERS/PARTY(IES) OF THE CASE 
● Bank  of  the  Philippine  Islands  –  Trustee of Philippine Remnants Co, Inc. to manage,
administer, and sell its property.
● Philippine Remnants Co., Inc. – Owner of the disputed land.
● Pedro  Revilla,  Jr.  – Licensed real estate broker, who was given formal authority by
BPI to sell the disputed lot.
● Alfonso  Lim  and  Albino  Limketkai – Officials of the pe oner (Limketkai Sons
Milling, Inc.)
Merlin Albano – Vice-President of BPI.
● Rolando V. Aromin – Asst. VP of BPI, he approved the term payment.
● National Bookstore – the company who bought the disputed lot.
  
FACTS:  BPI became one of the trustee of Philippine Remnants Corpora on, to administer,
manage and sell its property. Thus, one of the lots handled by BPI, is the disputed lot, located at
Pasig city with the size of 33,056 sqm. BPI, then authorized a broker, Pedro Revilla, Jr., to sell the
disputed lot for P1k/sqm. Take note that it was approved also by the said corpora on.
Therea er, the broker, went to the pe oner, to sell the said lot, which eventually agreed to buy.
Revilla now informed to BPI that he had a buyer. Which the pe oner went to BPI to confirm
such sale which they were entertained by VP Merlin Albano and Asst. VP Aromin. They
nego ated the price, and they agreed to sell the lot at P1k/sqm to be paid in cash. 
However, pe oner, Alfonso Lim, asked if such payment is possible to paid on terms. BPI said
that there was no problem with regard to installment, however, if the term payment is
disapproved, then it shall be paid in cash. Pe oner, Albano, wrote to priv. respondent, Merlin
Albano, regarding the terms.
Obligations and Contracts | Week 13 Cases | Page 3 
The payment ini ally of 10% and the remaining 90% within a period of 90 days. However, 2 or 3
days later, the pe oner learned that its offer to pay on terms had been frozen. Pe oner,
Alfonso Lim went to BPI, and tendered the full payment (P33,056,00) to Albano. But the payment
was refused, arguing that the lot was withdrawn from his unit. Thus, the pe oner filed for an
ac on for specific performance with damages with the trial court.
However, in the course of trial, it was discovered that the lot was sold to Na onal Bookstore.
Thus, the pe oner included Na onal Bookstore in the said complaint. Respondent, in reply, that
the contract was not perfected.
RTC:  Ruled in favor the pe oner sta ng that the contract was perfected, and thus ordering, BPI,
to cancel the sale of Na onal Bookstore.
CA:  It was held that no contract of sale was perfected because there was no concurrence of the
three essen al requisites.
ISSUE: Whether the statute of frauds should be applicable in cases involving real property?
  
HELD: YES.  statutes of frauds and cannot form the basis of the case by the respondent since no agreement
SC reiterated the case of ABRENICA  v  GONDA, it was held that contracts infringing the Statute of
Frauds are ra fied when the defense fails to object or asks ques ons on cross-examina on. In the
instant case, counsel for respondent cross-examined pe oner’s witnesses at length on the
contract itself, the purchase price, the tender of cash payment, the authority of Aromin and
Revilla, and other details of the li gated contract.
Under the Abrenica Rule, even assuming that parol evidence was ini ally inadmissible, the same
became competent and admissible because of the cross examina on, which elicited evidence
proving the evidence of a perfected contract. The cross-examina on on the contract is deemed a
waiver of the defense of the Statute of Frauds.
Under, Art. 1403 of the CC, an excep on to the unenforceability of contracts pursuant to the
Statute of Frauds, is the existence of a wri en note or memorandum evidencing the contract. The
memorandum may be found in several wri ngs, not necessarily in one document. The
memorandum is wri en evidence that such a contract was entered into.
Thus, the Statute of Frauds, embodied in Art. 1403, does not require that the contact itself be
wri en. The plain test is clear that a wri en note or memorandum embodying the essen als of
the contract and signed by the party charges or his agent suffices to make the verbal agreement
enforceable, taking it out of the opera on of the statute.
In the instant case, while there is no wri en contract of sale of the Pasig property executed by
BPI in favor of plain ff, there are abundant notes and memoranda in the records of this case
evidencing the elements of a perfected contract. Therefore, regarding the admissibility and
competence of the evidence adduced by pe oner, respondent CA ruled that because the sale
involved real property, the statute of frauds is applicable. SC RULED IN FAVOR OF THE
PETITIONER. Such contract that was made cons tuted fraud and is covered by the statute of
frauds. BPI should be held liable and can be sued for damages.
 
 
 
 
 
ERNEST BERG v. MAGDALENA ESTATE Inc.
Topic: Unenforceable contracts; void contracts
October 17, 1952 | Bau sta Angelo, J.
DOCTRINE: Any agreement under the Statute of Frauds that is not written, shall be unenforceable. 
FACTS:  Pe oner and Respondent are co-owners of Crystal Arcade. Pe oner owns ⅓ and
Respondent owns ⅔. When respondent sold to pe oner the ⅓ ownership, there was a
s pula on that “should  either  vendor  or vendee decide to sell his or its undivided share, the party selling 
would grant to the other part first an irrevocable option to purchase the same at the seller’s price.” 
 
Pe oner now wants to resell his ⅓ share back to respondent for an amount of P200,000.
Respondent accepted. However respondent asked for extensions on the payment. When
respondent was now about to pay, pe oner refused. Now, respondent sues pe oner for
specific performances and damages.
Pe oner argues that the transac on between them was not supported by any note or
memorandum. Therefore, pe oner claims that the alleged transac on falls under Art. 1403 CC
was reached to in the first place. Lower Court rendered judgment favoring pe oner.
 
IMPORTANTE ‘TO:
Respondent now presented “Exhibit 3” and “Exhibit 4”. Because of the “Trading with the Enemy
Act”, both pe oner and respondent were required by the Treasury Department to first secure
permits before they can sell or dispose their proper es. In Exhibit 3, Ernest Berg desires a license
in order to sell his interest in the Crystal Arcade, Escolta, Manila, for P200,000 in cash to
Magdalena Estate, Inc. In Exhibit 4, defendant in turn stated, through its president K. H. Hemady,
that it desires a license in order "to use a por on of the P400,000 requested as a loan from the 
National  City  Bank  of  New  York,  Manila,  or  from  any  other bank in Manila, together with funds 
to  be  collected  from  old  and  new  sales  of  his  real  estate  properties, for the purchase of the
one-third (1/3) of the Crystal Arcade property in the Escolta, Manila, belonging to Mr. Ernest
Berg." With these pieces of evidence, the respondent now approaches the SC.
ISSUE: Whether an agreement has actually been reached b/w pe oner and respondent.
HELD: YES. 
The underlying rule in the Statute of Frauds rela ve to memorandums or notes as to when they
may serve as proof to determine the existence of an agreement are:
1. "No par cular form of language or instrument is necessary to cons tute a
memorandum or note in wri ng under the statute of frauds; any document or writing, 
formal  or  informal,  written  either  for  the  purpose  of  furnishing  evidence  of  the 
contract  or  for  another  purpose,  which  satisfies  all the requirements of the statute as 
to  contents  and  signature,  is  a  sufficient  memorandum  or  note. A memorandum may
be wri en as well with lead pencil as with pen and ink. It may also be filled in on a
printed form."
2. "The note or memorandum required by the statute of fraud need not be etc...
Bearing in mind the foregoing rules, we are of the opinion that the applica ons marked exhibits
"3" and "4", whether considered separately or jointly, sa sfy all the requirements of the statute as
to contents and signature and, as such, they cons tute sufficient proof to evidence the agreement
in ques on. Namely, the par es(Berg and Magdalena Inc), the price or considera on(P200,000),
and the subject ma er(Interest in the Crystal Arcade). Therefore there is an agreement reached
by pe oner and respondent.
Obligations and Contracts | Week 13 Cases | Page 4 
HOWEVER IS THE AGREEMENT ENFORCEABLE? NO!  of Berg  vs  Magdalena  Estate  Inc held that sufficient memorandum may be contained in 2 or more
Under Exhibit 3, we can tell that the sale shall only pursue when the license is given. And Under documents. Case remanded to court of origin.
Exhibit 4, we could also tell that the sale shall only pursue when the loan of P400,000 is granted  
by the bank and a er collec ng funds from his proper es.
ANTONIO and AURELIO LITONJUA Jr. v. MARY ANN GRACE FERNANDEZ et. al.
Basing from Exhibits 3 and 4, we can analyze that the sale of the interest of Crystal Arcade is Topic: Unenforceable contracts; void contracts
based upon a condi on. The very reason being is that the arrival of the condi ons in Exhibit 3 and April 14, 2004 | Callejo Sr., J.
4 are uncertain. (Di naman sure kung bibigyan sila ng license and kung iaapprove yung loan.) SUMMARY: Ito yung sila Almario and Fisco, they were brokers and offered to pet Li njua the
lands owned by the resp Fernandez and other tenants of the land. Pet Litonjua made 2 ocular and
Now, the condi on in Exhibit 3 was fulfilled since the license was secured. However the later on met with the 2 brokers and resp Fernandez (1st mee ng). It was agreed that Fernandez
important condi on is on Exhibit 4. Respondent relies on the approval of the loan and collec on would present an SPA showing that the owners of the land (respondent owners) empowers her
of his funds in his proper es. Since the loan was disapproved, all that is le is the collec on of (resp Fernandez) to sell the land and that they will meet again in a month (2nd mee ng) to finalize
funds by respondent which depends on his will. the sale. Later on, resp Fernandez was having difficulty with the tenants (respondent owners) of
the land. Un l pet Litonjua wrote resp Fernandez demanding na ifinalize na nila yung sale. Walang
In any event, it is apparent that the fulfillment of the condition contained in Exhibit 4 is made to  response from resp Fernandez. Another demand was made by pet Litonjua saying na iturnover na
depend  upon  defendant's  exclusive  will.  Because  of  this,  plaintiff's  obligation  to  sell  did  not  yung property within 15 days or else he (pet litonjua) will file a case to protect his interest.
arise, for, under article 1115 of the old Civil Code, "when the fulfillment of the condition depends  Fernandez then replied thru a le er clarifying that he is no longer selling the land; “that they were
upon  the  exclusive  will  of  the  debtor  the  conditional  obligation  shall  be  void.  The agreement is changing their minds of selling”. Hence, pet litonjua filed a case contending: (1) that resp
therefore unenforceable. Fernandez’ use of “we changed our mind” shows na nanggap ini ally ni resp Fernandez yung
  offer, and deciding that he will no longer buy anymore the land cons tutes a unilateral
CIRILO PAREDES v. JOSE ESPINO cancella on of the contract which is invalid; and (2) that there was a perfected contract to be
Topic: Unenforceable contracts; void contracts enforced during the 1st mee ng and that resp Fernandez is in bad faith for not honoring his
March 13, 1968 | Reyes JBL, Acting CJ. obliga ons. In response, resp Fernandez said that there was no acceptance of offer thus wala daw
perfected contract to sell. The LC rule in favor or resp Fernandez. Hence, the issue of WON
DOCTRINE:  Statue  of  frauds  in Art. 1403 does not require that the contract be in writing. It is clear that a  THERE IS A PERFECTED AND ENFORCEABLE CONTRACT IN THE FIRST PLACE? Sabi ng SC
written  note or memorandum embodying the essentials of the contract and signed by the party charged or  NONE kasi the  sale  of  real  property  or  of  an  interest  is  unenforceable  unless  ratified.  In the case, resp
his agent suffices to make the verbal agreement enforceable  Fernandez is just ac ng as an agent for the respondent-owners of the land. There is no evidence
   on record that the respondents-owners (tenants of the land) ra fied all the actua ons of
FACTS:  Paredes filed ac on to compel Espino to execute deed of sale and pay damages alleging respondent Fernandez in connec on with her dealings with the pe oner Litonjua during the 1st
that: mee ng. As such, said le er is not binding on the respondents as owners of the subject
● Espino entered into sale to Paredes a lot in Puerto Princesa Cadastre (P4/sqm); proper es. Pet Litonjua lost.
● Deal was closed by le er and telegram;
● Actual execu on of deed of sale and payment would be done upon arrival of Espino; DOCTRINE: The sale of real property or of an interest is unenforceable unless ratified 
● Upon arrival, Espino refused to execute the deed even though Paredes is willing and
able to pay; and FACTS: In 1995: Mrs. Alimario and Fisco worked as brokers. They offered to sell to Pe oners the
● Paredes lost expected profits from a resale of the property parcels of land and showed a locator plan and tles showing that the owners of the proper es
were represented by respondents.
Espino filed mo on to dismiss – that there is no cause of ac on and the ac on was unenforceable
under statute of frauds. Paredes opposed and a ached to his opposi on a copy of a le er The brokers told the pe oners that they were authorized by respondent to offer the property
purportedly signed by defendant and the telegram from Espino. RTC dismissed, there being no for sale. Pe oner made 2 ocular inspec ons of the property and saw some people gathering
wri en contract coconuts. In the same year, Pet and Resp met with the 2 brokers in Mandaluyong. They agreed to
   buy the property for P150/sqm or P5m total and respondent will pay the taxes and expenses.
ISSUE:  Whether or not enforcement of the contract pleaded in the complaint is barred by statue Respondent agreed to execute an SPA for the sale.
of frauds
   Respondent was encountering problems with the tenants. Pe oner wrote a le er demanding
HELD:  the finaliza on of the sale. No response from respondent and pe oner sent another le er.
Statue of frauds in Art. 1403 does not require that the contract be in wri ng. It is clear that a Pe oner demanded the turnover of the proper es within 15 days or they would protect their
wri en note or memorandum embodying the essen als of the contract and signed by the party interest through legal means. Respondent rejected the claims of pe oner
charged or his agent suffices to make the verbal agreement enforceable.   
ISSUE: Whether there was a perfected contract of sale?
The le er a ached cons tute and adequate memorandum of the transac on. They are signed by
Espino referring to the specific property and states it would be payable in cash. All the essen al HELD: NO. 
terms of the contract are present and sa sfy the requirements of the Statute of Frauds. The case There is no documentary evidence on record that the respondents-owners specifically authorised
Fernandez to sell their proper es to another, including the Pe oners, art 1878 of the NCC
Obligations and Contracts | Week 13 Cases | Page 5 
provides that a SPA is necessary to enter into any contract by which the ownership of an
immovable is transmi ed or acquired either gratuitously or for a valuable considera on.
Art. 1403. The following contracts are unenforceable, unless they are ra fied:
Those that do not comply with the Statute of Frauds as set forth in this number. In the
following cases an agreement herea er made shall be unenforceable by ac on, unless
the same, or some note or memorandum thereof, be in wri ng, and subscribed by the
party charged, or by his agent; evidence, therefore, of the agreement cannot be
received without the wri ng, or secondary evidence of its contents:
(e) An agreement for the leasing for a longer period than one year, or for the
sale of real property or of an interest therein.
The declara ons of the agent alone are generally insufficient to establish the fact or extent of her
authority. In the case at bar, the only evidence adduced by the pe oners to prove that
respondent Fernandez was authorized by the respondents-owners is the tes mony of pe oner
Antonio Litonjua that respondent Fernandez openly represented herself to be the representa ve
of the respondents-owner. PETITION DENIED. FERNANDEZ WON!
NOTE: The respondent-owners or the other tenants of the land aside from respondent Fernandez
are his family, rela ves, brother and sisters.
 
Sps. MARIO and ELIZABETH TORCUATOR v. Sps. REMEGIO and GLORIA BERNABE   formali es of the contract necessary to render it enforceable.
and Sps. Diosdado and Lourdes Salvador
Topic: Unenforceable contracts; void contracts
June 8, 2005 | Tiñga, J.
DOCTRINE:  The Statues of Fraud requires certain contracts and transactions to be evidenced by a writing  enumerated contracts and transac ons to be evidenced by a wri ng signed by the party to be
signed by the party to be charged.  charged. The wri en note or memorandum, as contemplated by Ar cle 1403 of the Civil Code,
  
FACTS:  Spouses Salvador bought a parcel of land from the developers of Ayala Alabang Village.
The contract states: "It is part of the condi on of buying a lot in Ayala Alabang Village (a) that the
lot buyer shall deposit with Ayala Corpora on a cash bond (about P17,000.00 for the Salvadors)
which shall be refunded to him if he builds a residence thereon within two (2) years of purchase,
otherwise the deposit shall be forfeited, (b) architectural plans for any improvement shall be
approved by Ayala Corpora on, and (c) no lot may be resold by the buyer unless a residen al
house has been constructed thereon.
The Salvadors sold the parcel of land to the spouses Bernabe. Given the above restric ons, the
Salvadors executed a special power of a orney authorizing the Bernabes to construct a
residen al house on the lot and to transfer the tle of the property in their names.
The Bernabes, without making any improvement, contracted to sell the parcel of land to the
spouses Torcuator. Confronted by the Ayala Alabang restric ons, the par es agreed to cause the
sale between the Salvadors and the Bernabes cancelled (Exhibit "D"), in favor of (a) a new deed of
sale from the Salvadors directly to the Torcuators; (b) a new Irrevocable Special Power of A orney
(Exhibit F) executed by the Salvadors to the Torcuators in order for the la er to build a house on
the land in ques on; and (c) an Irrevocable Special Power of A orney (Exhibit E) from the
Salvadors to the Bernabes authorizing the la er to sell, transfer and convey, with power of
subs tu on, the subject lot.
The Torcuators therea er had the plans of their house prepared and offered to pay the Bernabes
for the land upon delivery of the sale contract. However, the deed of sale was never
consummated nor was payment on the said sale ever effected.
Subsequently, the Bernabes sold the subject land to Leonardo Angeles, a brother-in-law. The
Torcuators commenced the instant ac on against the Bernabes and Salvadors for Specific
Performance or Rescission with Damages.
TC dismissed the case. CA dismissed the case ruling that the sale between the Bernabes and the
Torcuators was tainted with serious irregulari es and bad faith. Pe oners then filed the instant
pe on sta ng that the agreement is valid and enforceable
  
ISSUE: Whether the presented wri en evidence (special power of a orney and the summary of
agreement) is sufficient to make the agreement enforceable under the Statutes of Fraud?
  
HELD: NO. 
In the instant case, pe oners present as wri en evidence of the agreement the special power of
a orney executed in their favor by the Salvadors and the summary of agreement 24 allegedly
ini aled by respondent Remigio Bernabe. These documents do not suffice as notes or memoranda
as contemplated by Ar cle 1403 of the Civil Code.
The term "Statute of Frauds" is descrip ve of statutes which require certain classes of contracts,
such as agreements for the sale of real property, to be in wri ng. It does not deprive the par es
the right to contract with respect to the ma ers therein involved, but merely regulates the
The purpose of the statute is to prevent fraud and perjury in the enforcement of obliga ons
depending for their evidence on the unassisted memory of witnesses by requiring certain
should embody the essen als of the contract.
The special power of a orney does not contain the essen al elements of the purported contract
and, more tellingly, does not even refer to any agreement for the sale of the property. In any case,
it was rendered virtually inoperable as a consequence of the Salvadors' adamant refusal to part
with their tle to the property.
The summary of agreement, on the other hand, is fatally deficient in the fundamentals and
ambiguous in the rest of its terms. For one, it does not men on when the alleged considera on
should be paid and transfer of ownership effected. The document does not even refer to a
par cular property as the object thereof. For another, it is unclear whether the supposed
purchase price is P600.00, P590.00 or P570.00/square meter. The other condi ons, such as
payment of documentary stamp taxes, capital gains tax and other registra on expenses, are
likewise uncertain. WHEREFORE, the instant pe on is DENIED. Costs against pe oners.
 
 
 
 
 
 
Obligations and Contracts | Week 13 Cases | Page 6 

TOMAS FACTURAN et. al. v. RAYMUNDA SABANAL, Herederos De Francisco Sevilla,
Benedicto Libcon, Bernabela Facturan, and Eugenio Sevilla
Topic: Unenforceable contracts; void contracts
September 27, 1948 | Feria, J.
DOCTRINE:   The  statute  of  frauds is not applicable in actions which are neither for a violation of contract 
nor for the performance thereof  HELD: YES.
  
FACTS:  The case at hand involves a conjugal property and that both par es were determining to
whom the ownership should go to. The trial court favored the pe oner on the basis that the oral
evidence provided by the appellant should be stricken out from the records under the statute of
frauds.
At the trial defendant offered tes monial evidence to support his claim that original contract was
modified thru oral agreement. He also submi ed documents filed with City Engineer’s office
regarding the semi-concrete bldg. Trial court ruled in favor of plain ffs
  
ISSUE: Whether the orally extended contract is enforceable
  
 
It is established doctrine in this jurisdic on that par al performance takes an oral contract out of
scope of the Statue of Frauds. The rule is en rely applicable supports the doctrine that “ Taking of 
possession  by  the  lessee  and  the  making  of  valuable  improvement  and  the  like  on  the  faith  of  the  oral 
agreement  may  operate  to  the  case  out  of  the  prohibition  of  the  statute  for  it  would  be  gross  fraud  to 
permit the lessor in such a case to avoid the lease” 

The CA reversed the decision on the basis that the pe oners can’t invoke the statute of frauds The wri en contract of lease called for the erec on by the tenant of a building of strong wooden
in this case on the basis that it was already executed. Hence this pe on to the Supreme Court materials, but what he actually did construct on a lease lot was semi-concrete at a much higher
cost.
ISSUE: Whether the statute of frauds can be applied to a viola on of a contract  
Since the modifica on is plainly referable to the oral agreement as claimed and the same cannot
HELD: NO.  be explained on the record except as executed in reliance on the verbal modifica on of the
Judgement of the CA is affirmed. The Supreme Court held that statute of frauds may only be original lease and in the performance thereof as contented by the appellant.
invoked in executory contracts only. The object of the contract has already been perfected
through delivery and thus there is no more need to invoke the statute of frauds since the contract We  are  of  opinion  that  the  court  below  have  accepted  and  taken  into  account  the  offered 
has already been executed. testimony  on  the  extension  and  modification  of  the  original  terms  of  the  lease,  instead  of 
  declaring  the  same  unenforceable  under Statue of Frauds. The lessors are entitled to controvert 
the  evidence  of  the  lessee  with  proof  of  their  own;  but  we  are  concerned with the questions of 
MARIA PATERNO et. al. v. JAO YAN  weight of evidence but of admissibility. Judgment reversed, JAO YAN won.
Topic: Unenforceable contracts; void contracts  
February 28, 1961 | Reyes, JBL, J.
GENARO CORDIAL v. DAVID MIRANDA 
RECIT-READY/SUMMARY:  Contract of lease originally stated that defendant would construct a Topic: Unenforceable contracts; void contracts
building made of wooden material. Plain ff filed an ac on to recover the unpaid rentals. Def. December 14, 2000 | Panganiban, J.
alleged that he retained the rental because plain ff refused to acknowledge oral agreement ( to
build semi-concrete bldg) modifying the original agreement. Court held that par al performance RECIT-READY: Cordial and Miranda entered into an agreement where Cordial agreed to supply
take the contract out of the scope of SOF. – ENFORCEABLE ra an poles to Miranda. When Cordial demanded for payment, Miranda said he does now know
Cordial or any business he entered into with him. RTC ordered Miranda to pay. CA reversed. SC
DOCTRINE: (Applicable to contracts of lease)  held Statue of Frauds does not apply, oral evidence shall be permi ed because contract was
Partial  performance  takes  an  oral  contract out of the Statute of Frauds most especially when it deals with  par ally executed because Cordial performed his obliga on.
real  property.  When  oral  contract  of  sale  has  been  partially  executed  by  payment  of  the  price  oral 
testimony is admissible to evidence the existence of the contract.  DOCTRINE:  Where  one  party  has  performed  one's  obligation, oral evidence will be admitted to prove the 
  agreement 
FACTS:  Paterno under a notarized contract leased to Jao Yan a parcel of land in City of Manila for  
a period of 7 years, commencing on July 15,1948. The lessee bound himself to construct a FACTS:  Buelva used to be a supplier of Miranda for ra an poles. Buelva’s Widow in April of 1922
building “  made  of  wooden  materials”  on the lease premises which would become a property had a conversa on with Pe oner Cordial who wished to be introduced to Miranda to supply
when the lease is ended. To pay (Monthly rental, all taxes and assessments of bldg.) ra an poles.

In May 20,1955, lessors filed an ac on to recover the lease rentals in the sum of P23,250, real
estate taxes P 7,680, and a orneys fees P 2,500. In his answer defendant said that the original
contract had been orally extended 7 to 10 years and construc ng a semi-concrete bldg ( much
expensive that wooden materials by P 13k), the rentals had been retained by him because
plain ff’s refusal to recognize the modified contract, and that plain ffs maliciously garnished the
rentals due from his sub-lessee.
Mrs. Buelva brought Cordial to Miranda’s residence and Cordial wanted to supply Miranda some
ra an to which Miranda allegedly agreed. Miranda asked Cordial to see Savilla, one of his
long- me suppliers. From Miranda’s residence, Cordial with Mrs. Buelva went to Savilla in
Novaliches, Quezon City.
Cordial and Savilla knew each other, both being na ves of Camarines Sur. Savilla agreed to permit
Cordial to use Savilla’s license in Palawan subject to payment of royalty fees. Cordial with Savilla
boarded a vessel to Palawan arriving on May 29, 1992. He bought ra ans from June 30, 1992
un l October 1992 using his own money, amoun ng to a total of 50,540 pieces of ra an poles at
P164,000.00.
Obligations and Contracts | Week 13 Cases | Page 7 
On October 29, 1992, he shipped all the pieces to Manila and the vessel arrived on November 2,
1992 in Manila. Cordial personally no fied Miranda at his house of the arrival and Miranda
promised a truck would unload them from the vessel.
On the last trip of the truck, Cordial went with the truck and the ra an poles were allegedly
personally received by Miranda himself. The ra an poles were measured and a scale report was
issued, however in the name of Savilla. Cordial protested to Miranda regarding the total volume
and why the scale report was in the name of Savilla, but Miranda told him it would be fixed/
Cordial waited at Miranda’s house to be paid but Miranda never came back. Cordial wrote a le er
on January 5, 1993, demanding payment for P375,000.00 for the cost of ra an poles. In reply on
January 12, Miranda claims privity of contract does not exist between the two.
He claims he does not know him personally nor did he contract any business with Cordial, but
only with Savilla (GAGO!). Pe oner filed a complaint alleging he was the supplier who delivered
the ra an poles valued at P375k which respondent undervalued at P141k.
Respondent failed to pay a er repeated demands. Respondent claims the document which
annexed the complaint was a mere scrap of paper because it did not bear any signature or any
men on of pe oner’s name. He admi ed he used to buy ra an from Savilla, but denied
knowledge of any arrangement or agreement between Cardiol and him
RTC ruled in favor of Cardiol declaring the verbal agreement valid and enforceable. CA reversed
and held there was no wri en memorandum
ISSUE: Whether the contract is unenforceable under statute of frauds
HELD: NO.  CFI dismissed the pe on. Hence, this appeal. Pascual contended the following:
It is enforceable. The Statute of Frauds applies only to executory and not to completed, executed,
or par ally executed contracts.   Thus, where one party has performed one's obliga on, oral
evidence will be admi ed to prove the agreement. In the present case, it has clearly been
established that pe oner had delivered the ra an poles to respondent on November 3, 1992.
Because the contract was par ally executed, the Statute of Frauds does not apply.
Ar cle 1403. The following contracts are unenforceable, unless they are ra fied:
(2) Those that do not comply with the Statute of Frauds as set forth in this number. In
the following cases an agreement herea er made shall be unenforceable by ac on,
unless the same, or some note or memorandum, thereof, be in wri ng, and subscribed
by the party charged, or by his agent; evidence, therefore, of the agreement cannot be
received without the wri ng, or a secondary evidence of its contents:
(d) An agreement for the sale of goods, cha els or things in ac on,
at a price not less than five hundred pesos, unless the buyer accept
and receive part of such goods and cha els, or the evidence, or
some of them, of such things in ac on or pay at the me some
part of the purchase money; but when a sale is made by auc on
and entry is made by the auc oneer in his sales book, at the me
of the sale, of the amount and kind of property sold, terms of sale,
price, names of the purchasers and person on whose account the
sale is made, it is a sufficient memorandum.
 
 
RAMON PASCUAL v. REALTY INVESTMENT Inc. 
Topic: Unenforceable contracts; void contracts
May 12, 1952 | Bau sta Angelo, J.
RECIT-READY/SUMMARY: Plain ff Pascual is a tenant of Tuason. The land he was occupying was
transferred to the defendant to cause its sale. Pascual then offered to buy the land. Defendant
offered it for P15/sqm. Pascual agreed. Defendant increased it further to P25/sqm, to which
Pascual s ll agreed. The nego a ons were all done verbally. Defendant, however, failed to carry
out the sale. So Pascual filed a case before the CFI to compel the defendant to sell the land. CFI
dismissed because the verbal agreement was unenforceable. SC sustained the decision of the CFI
and ruled that an agreement to sell a real property should be made in wri ng to be enforceable.
DOCTRINE:   An agreement to sell a real property should be made in writing, or at lease it should appear in 
a note or memorandum, to be enforceable. 
  
FACTS:  Plain ff Pascual has occupied a parcel of land since 1912 as tenant while the same was
s ll under the administra on of Tuason. In 1941, said property was transferred to the defendant
to be subdivided and sold to the public. Pascual then offered to buy the land, and the defendant,
through its manager, verbally agreed to sell the same to Pascual provided that he would agree to
pay the price at the rate of P15/sqm. Pascual agreed, but failed to perfect the sale, and instead
asked for more me to prepare necessary papers.
Defendant increased the price to P25/sqm. to which Pascual agreed to. However, defendant
failed to carry out the sale. Pascual then filed an ac on in the CFI to compel the defendant to sell
him the property.  Defendant, through a MTD, argued that the ac on is unenforceable under the
SOF, which provided that an agreement to sell real property should be made in wri ng, or at lease
it should appear in a note or memorandum.
1. he took possession of the property as a consequence of the verbal agreement;
2. he made substan al improvements thereon upon the realiza on that he had already
acquired the right to purchase the same, and
3. since there is par al performance of the contract to sell, and due his possession and
improvements made, the rule prohibi ng the presenta on of oral evidence does not
apply because the statute does not render the contract void or without effect but
merely unavailable for the purpose of enforcing the contract itself.
  
ISSUE: Whether the verbal agreement to sell the land is unenforceable
  
HELD: YES. 
It is unenforceable. SC affirmed the decision of the CFI. The claims of Pascual were unsupported.
It was not proven that he had taken possession of the property based on the supposed verbal
contract, and that he had introduced improvements thereon.
An agreement to sell a real property should be made in wri ng, or at lease it should appear in a
note or memorandum, to be enforceable. Pe on dismissed. Defendant won.
NOTE: When the Statute of Fraud is not applicable 
Where a verbal contract of sale is adduced not for the purpose of enforcing it, but as a basis of
the possession of the person claiming to be the owner of the land, the statute of frauds is not
applicable. SOF does not apply to contracts which are either totally or par ally performed upon
the theory that there is a wide field for the commission of frauds in executory contracts which
can only be prevented by requiring them to be in wri ng, a fact which is reduced to a minimum in
executed contracts because the inten on of the par es become apparent by their execu on. 
Obligations and Contracts | Week 13 Cases | Page 8 
 MARGARITA IÑIGO v. ESTATE OF ADRIANA MALOTO and Gregorio Lira
Topic: Unenforceable contracts; void contracts
September 28, 1967 | Sanchez, J.
RECIT-READY/SUMMARY:  Inigo bought a house and lot from Maloto through a verbal
agreement. The property was paid for and Inigo acted as its owner but no receipt of DOS was
given due to the unavailability of Maloto’s lawyer. Maloto died and her administrator assailed
Inigo’s ac on to execute a DOS in her favor. SC ruled that the contract between Inigo and Maloto
is already consummated so the SOF does not forbid the oral evidence of the sale of the land.
Inigo won.
DOCTRINE:  Statute  of  Frauds  is applicable only to executory contracts – not to consummated or partially  imprescrip ble. Furthermore, the plain ff has personality, because he s ll has the rights over the
performed contracts.  property, and it cannot be presumed that the government already repossessed said property.
FACTS:  In pursuance of a verbal understanding, Inigo paid Maloto P10k as purchase price for the
disputed house and lot. The DOS was to be executed later on. Inigo did not ask Maloto for a
receipt of the money she paid considering the “almost filial rela onship” between the two – Inigo
is the niece of Maloto’s dead husband. Addi onally, Maloto told Inigo that the prepara on of the
receipt and the DOS was to be referred to the former’s lawyer, A y. Palma.
Meanwhile, Inigo already exercised ownership and dominion over the property by improving and
construc ng a retail store. Inigo was also instructed by Maloto to see A y. Palma for the
prepara on of the DOS. However, Inigo failed to reach A y. Palma for the reason that he is a
candidate for councilor that me.
Maloto eventually died and the tle to the property was transferred to the name of the
defendants, which are the nephews and niece of Maloto. The defendants rejected Inigo’s demand
for the formal execu on of the DOS. Hence, this ac on to compel defendants to execute that
deed. CFI ruled in favor of defendant’s mo on to dismiss. CA sustained CFI ruling.
ISSUE: Whether the contract in this case is unenforceable under the Statute of Frauds?
HELD: NO.  prescribed.
The complaint revealed that no wri en document was executed to record the DOS or the
payment of the purchase price of the property. These are the considera ons that impelled the
lower court to declare Inigo’s suit under the Statute of Frauds as unenforceable.
Art. 1403 (2) (e) of the CC, a verbal contract for the sale of real property is unenforceable, unless
ra fied. Long accepted is the well-se led rule that the Statute of Frauds is applicable only to
executory contracts – not to contracts either totally or par ally performed.
The complaint states that the deceased Maloto sold the disputed house and land to Inigo; that
considera on was paid; and that due to such sale, Inigo performed acts of ownership.
Such facts cons tute a consummated contract. It ma ers not that neither receipt for the
considera on nor the sale itself was in wri ng because “oral evidence of the alleged sale of the
land” is not forbidden by the Statue of Frauds and may not be excluded in court. CFI’s dismissal
order is set aside and the case is remanded to the court of origin for further proceedings.
 
 
ALEJANDRO RAS v. ESTELA and RAMON SUA
Topic: Unenforceable contracts; void contracts
September 25, 1968 | Reyes JBL, J.
RECIT-READY:  Plain ff filed a complaint against the defendant to recover the possession of a
parcel of land. The land was leased by the defendant. It was contended that the defendant
violated condi ons under the lease, such as payment of taxes. However, the defendant denied
such conten ons. Defendant said that the plain ff is barred from filing such ac on on the ground
that the ac on is already prescribed and the plain ff has no personality to file such ac on. The
lower court ruled in favor of the plain ff, annulling the contract. The SC ruled that the plain ff is
not barred from filing such ac on to the court because such contract is annulled and hence, it’s
DOCTRINES: 
● The  right  to  seek the declaration of the inexistence of a contract, for being in violation of law, is 
imprescriptible. 
● The  interest  of  the  individual  out  weights  the  interest  of  the  public,  thus,  in  this  case,  the 
plaintiff can recover what he has paid or delivered. 
FACTS:  Plain ff Ras filed a complaint against the defendant, to recover the possession of a parcel
of land which was leased by the defendant. Plain ff is in need of money and unaware of the RA
477, so he allowed to leased to the defendants the land, he acquired from the Na onal Abaca and
Others Fibers Corp. The lease was extended to a total of 10 years. Defendants failed to pay the
taxes of the land and installments due to the NAFCO. As agreed, Defendants refused to pay such
dues to the government. Plain ff asked to the defendant to return the land.
DEFENDANT’S ANSWER TO THE COMPLAINT:
● Denied that they violated any condi on of the lease.
● They contested the jurisdic on of the court to order the return of the land to plain ff,
as well as, the require possession.
● They moved for the dismissal of the case, on the ground that the cause of ac on has
● It was their conten on that plain ff’s ac on, which is for rescission of contract under
Art. 1191, prescribes in 4 yrs.
● Plain ff had failed to establish any viola on by the defendants of the terms of the
lease.
● They also content that if the case were for annulment, then plain ff has no personality
to bring the ac on, the property being the RP.
● Plain ff may no longer recover the land from defendants under the pari delicto doctrine. 
LOWER  COURT:  Judgment was rendered for the plain ff, the lower court ruling not only that
there had been viola on of the contract, by defendants' failure to pay the taxes on the land, but
also that the lease of the property was prohibited under Sec on 8 of Republic Act 477.
Consequently, the contracts executed on 29 July 1960 (Exhibit F) and 26 January 1962 (Exhibit
G) were declared annulled, and defendants were ordered to pay to plain ff the sum of P110.00 a
month from 2 April 1964 un l possession of the land is restored to the la er. On the other hand,
said plain ff was ordered to return to the defendants the sum of P1,200.00, the considera on of
the two invalidated contracts, with legal interest thereon un l the amount shall have been paid.
ISSUES: 
1. Whether the cause of ac on of plain ff is barred by prescrip on.
2. Whether the plain ff has personality to bring the ac on, since the property is under
the government.
Obligations and Contracts | Week 13 Cases | Page 9 
 However, during his last semester at his 4th year, he transferred to Abad Santos University
HELD:  wherein he graduated. To secure permission to take the Bar, he needed his transcript from
1. NO.  Arellano. But the la er refused to release it un l Pe oner paid back P1,033.87 from his
SC ruled that the conten ons of the defendants are untenable. The contracts, Exhibits D, E, F and scholarship grant which was the total amount that was covered by the scholarship.
G did not just modify the original lease by extending the period originally agreed upon. By
themselves, they cons tute individual contracts, dis nct from the agreement of 25 February Pe oner paid in protest. Pe oner then filed a case for recovery and damages. Pe oner
1958, each to be effec ve within the period specifically men oned therein. argued Memorandum No. 38 from the Director of Private Schools, sta ng in part that,  “when 
students  are  given  full  or  partial  scholarships,  it  is  understood  that  such  scholarships  are  merited and 
Thus, the life me of Exhibit D was only from 2 April 1961 to 2 April 1963; Exhibit E, from 2 April earned.  The  amount  in  tuition  and  other  fees  corresponding  to  these  scholarships  should  not  be 
1963 to 2 April 1964; Exhibit F, from 2 April 1964 to 2 April 1966; and Exhibit G, from 2 April subsequently charged to the recipient students when they decide to quit school or to transfer to another 
1966 to 2 April 1968. It follows, therefore, that even where the ac on filed on 6 May 1963 be institution. TC favored defendant sta ng that the scholarship contract was valid.
treated as one for rescission, insofar as Exhibits F and G are concerned, the cause of ac on s ll
subsists. ISSUE: Whether the scholarship contracts is valid?

It is for this reason that the lower court annulled only these two contracts yet unenforced. Of HELD: NO. 
course, there is stronger ground for affirming the ruling of the court below if the ac on were The contract of waiver with Cui on September 10, 1951, which is a direct viola on of the
considered as one for annulment of the agreement as one prohibited by law. The right to seek the memorandum because the contract was repugnant to sound morality and civic honesty. 'In order 
declara on of the inexistence of a contract, for being in viola on of law, is imprescrip ble. to  declare  a  contract  void  as  against  public  policy,  a  court  must  find  that  the  contract  as  to 
  consideration or the thing to be done, contravenes some established interest of society, or is inconsistent 
2. YES.  with sound policy and good morals or tends clearly to undermine the security of individual rights. 
SC ruled in favor the plain ff, sta ng the conten ons of the defendant is without merit. The court
said that the presump on of the defendant that upon the plain ff’s viola on of RA 477, he The policy enunciated in Memorandum No. 38, s. 1949 is sound policy. Scholarship are awarded 
automa cally loses his rights over the land and said rights immediately revert to the State. This is in  recognition  of  merit  and  not  to  keep  outstanding  students  in  school to bolster its prestige, in 
not correct per se. the  understanding  of  that  university  scholarships  award  is  a  business  scheme  designed  to 
increase  the  business  potential  of  an  education  institution. Thus conceived it  is  not  only 
RA 477 is silent as to the consequence of the aliena on or encumbering of the land a er the inconsistent with sound policy but also good morals. 
execu on of the contract of sale, but within 10 yrs from the issuance of the cer ficate of tle. In
this case, the interest of the individual outweighs the interest of the public, strict construc on of But what is morals? Manresa has this defini on. It is good customs; those  generally  accepted 
a penal provision is jus fied. principles  of  morality  which  have  received  some  kind  of  social  and  practical  confirmation. 
Scholarships  are  granted  not  to  attract  and  to keep brilliant students in school for their propaganda mine 
ART. 1416 provides: “When the agreement is not illegal per se but merely prohibited and the but to reward merit or help gifted students in whom society has an established interest. 
prohibi on by the law is designed for the protec on of the plain ff, he may, if public policy is  
thereby enhanced, recover what he has paid or delivered.
EDILBERTO and SIMPLICIO CRUZ v. BANCOM FINANCE CORPORATION (Union Bank)
In the case of Catalina  de  los  Santos  v  Roman Catholic Church of Midsayap, it was ruled that the pari Topic: Unenforceable contracts; void contracts
delicto doctrine may not be invoked in a case of this kind since it would turn counter to an March 19, 2002 | Panganiban, J.
avowed fundamental policy of the State that the forfeiture of the homestead is a ma er between DOCTRINE:  Absolutely  simulated  contract  of  sale  is  void  ab  initio  and  transfers  no  ownership  right. 
the State and the grantee or his heirs, and that un l the State has taken steps to annul the grant Purported buyer, not being the owner, cannot validly mortgage subject property. 
and asserts tle of the homestead, the purchaser is, as against the vendor or his heirs, no more   
en tled to keep the land than any intruder. FACTS:  Edilberto (priest) and Simplicio are brothers, registered owners of a 33-hectare
  agricultural land with improvements. Norma Sulit was introduced to Fr. Cruz by one Candelaria
EMETERIO CUI v. ARELLANO UNIVERSITY Sanchez and offered to purchase the land. Asking price – P700k but Norma only had P25k. Fr.
Topic: Unenforceable contracts; void contracts Cruz accepted with agreement that tles will be transferred to her upon payment of the balance.
May 30, 1961 | Concepcion, J.
Norma failed to pay. But due to the closeness of the plain ffs to Candelaria, plain ffs executed
DOCTRINE: A contract that is against public policy is void.  document of sale in the name of Candelaria who would obtain a loan using plain ff’s land as
   collateral. Same day, Candelaria executed deed of absolute sale in favor of Norma. In both
FACTS:MPe oner Emeterio Cui is a law student of Arellano University wherein he was granted document, price of land was only P150k.
a scholarship by the said school. Before awarding the scholarship grant, Pe oner was made to
sign a scholarship contract which s pulated: “In  consideration  of  the  scholarship  granted  to  me  by  Aside from the P150k, Candelaria s ll has a balance of P655k to the plain ffs for the actual price
the  university,  I  hereby  waive  my  right  to  transfer  to  another  school  without  having  refunded  to  the  of land. In a Special Agreement, Norma assumed Candelaria’s obliga on (P655k) to be paid within
university the equivalent of my scholarship cash.”  6 months and fine/penalty in case of non-fulfillment.
 

Obligations and Contracts | Week 13 Cases | Page 10 

Unknown to plain ffs, Norma obtained a loan from Bancom (P569k) secured by mortgage over
the land tled in her name. Norma again failed to pay the plain ffs. Plain ffs filed for
reconveyance. Norma was declared in default.
Bancom then filed mo on to intervene – granted by RTC. Bancom claimed to be a priority for
being a mortgagee in good faith; since Norma defaulted as well and mortgage therefore was
foreclosed (which is the land in dispute) and Bancom being the highest bidder.
RTC ruled sale between Candelaria and plain ffs (1st sale) was absolutely simulated (VOID) and
sale between Candelaria and Norma (2nd sale) has no legal effect (VOID also) and Bancom not
mortgagee in good faith so no claim. CA ruled deeds of sale were valid – that plain ffs here
intended to be bound by the contract since they did not seek to annul but executed special
agreement to enforce payment of P665k and Bancom mortgagee in good faith therefore has the
right to the land.
Hence, this pe on. Plain ffs claim that both deeds of sale were absolutely simulated, therefore,
null and void.
  
ISSUE: Whether or not the deeds of sale were absolutely simulated therefore void
  
HELD: YES.  divest himself of his title and control of the property; hence, the deed of transfer is void. In the case, there
Simula on takes place when the par es do not really want the contract they have executed to
produce legal effects by its wordings, may either be absolute or rela ve. Art. 1345 states that in
an absolute simula on, par es intend not to be bound at all, Art. 1346 states that absolutely
simulated contract is void.
In Rongavilla vs. CA – deed of sale in which the stated considera on had not in fact been paid is a
“false contract” which is void ab ini o. Deed of Sale between Candelaria and the plain ffs
s pulated a considera on (P150k) but there was actually no exchange of money. Also, Candelaria
did not receive any considera on from Norma from their contract of sale since the only purpose
is to place the property in Norma’s name.
Another sign of simula on – complete absence of any a empt on part of Norma and Candelaria
to assert their ownership rights over the land. Also, the 2 deeds of sale were executed on the
same day. Since the 2 failed to pay the purchase price of the land, they could not force the
plain ffs to vacate the land.
Deeds of Sale were executed merely to facilitate use of property as collateral to obtain loan from
Bancom. What supports the allega on that the deeds were absolutely simulated – NO
CONSIDERATION (payment) RECEIVED, both deeds being executed on same day, no a empt to
assert ownership rights but only to use it as collateral to obtain a loan.
Simulated contract is not a recognized mode of acquiring ownership. Pursuant to Art. 1409 –
failure of Norma to take possession of the property purportedly sold to her was clear badge of
simula on that rendered the whole transac on void, without force and effect.
On the issue of Bancom being a mortgagee in good faith, Court held that they are not. General
rule: mortgagee/buyer in good faith can convey rights over the tle and those in bad faith cannot.
Since Bancom is a mortgagee-bank, it is expected to exercise a greater care and prudence in its
dealings. Also, as a bank, it is expected to exercise due diligence before entering into a mortgage
contract.
Bank failed to conduct an ocular inspec on and that Bancom was already aware that there was
an adverse claim over the land when it was registered as mortgage to them. SINCE THERE WAS
ABSOLUTE SIMULATION AND THE MORTGAGEE BEING BAD FAITH, NO RIGHTS CAN BE
GRANTED TO BANCOM. Plain ffs won.
 
MANILA BANKING CORPORATION v. EDMUNDO SILVERIO and Court of Appeals
Topic: Unenforceable contracts; void contracts
August 11, 2005 | Chico-Nazario, J.
SUMMARY: Ito yung si Purificacion talaga yung unang owner ng 2 parcels of lands. Binenta niya
to kay Silverio Sr. In 1990, si Pet The Manila Banking Corp (TMBC) filed for collec on of money
and writ of a achment against kay Silverio Sr (di sinabi reason pano nagkautang si Silverio Sr kay
pet TMCBC). Nag rule yung TC in favor kay Pet TMBC so nilevy. Later on, in 1993 nag request si
resp Edmundo, nephew n Silverio Sr, kay pet TMBC na tanggalin sa a achment yung property ni
Silverio Sr kasi he (resp Edmundo) was alleging na binenta sa kanya ni Silverio Sr yung property as
early as 1989. Hence, since sa kanya yung property bawal ilevy yun for the sa sfac on ng utang
ni Silverio Sr. Nag contend ngayon si Pet TMBC na fic ous/simulated yung sale so void. Nag rule
in favor yung TC kay pet TMBC, pero nireverse ng CA saying na it was not void and assuming
man na void, only the par es to that sale can assail its validity, so wala daw dapat standing si pet
TMBC. Hence, the issue of WON PET TMBC WAS CORRECT THAT THE SALE BET SILVERIO SR
& RESP EDMUNDO IS SIMULATED? Sabi ng SC YES kasi 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 
were pieces of evidence which shows that Silverio Sr and resp Edmundo was simulated: (1) sabi ni
resp Edmundo sine 1989 pa sa kanya yung land, pero yung notarized deedof sale nag materialize
lang un l 1993; (2) Edmundo was not sure when he was asked how much niya binili yung
property from Silverio Sr, sabi ng SC imposible daw sa isang tao makalimutan na gumastos siya ng
worth 3.1M; and (3) “an  indication  of  simulation  of  contract  is  the  complete  absence  of  an  attempt in 
any  manner  on  the  part  of  the  ostensible  buyer  to  assert rights of ownership over the subject properties”.
In the case, hindi niya pinaregister agad yung alleged deed of sale from 1989 un l 1993. Pina
register niya lang kung kalian kinukuha na ni pet TMBC. Hence, there was indeed a simulated
sale. 2nd ISSUE: WON PET TMBC HAS THE RIGHT TO ASSAIL THE VALIDITY OF THE SALE
BEING A 3rd PARTY? Sabi ng SC YES kasi 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. In the case, since
void yung sale, and since judgment creditor si pet TMBC, may right siya to assail it. Panalo si Pet
TMBC.
DOCTRINES:   
● 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 void. 
● An indication of simulation of contract is the complete absence of an attempt in any manner on 
the part of the ostensible buyer to assert rights of ownership over the subject properties. 
● 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. 
FACTS: Purificacion Ver was the registered owner of two parcels of land located at La Huerta,
Paranaque City. On 16 April 1979, Purificacion Ver sold the proper es to Ricardo C. Silverio, Sr.
(Ricardo, Sr.) for P1,036,475.00. The absolute deed of sale evidencing the transac on was not
registered; hence, tle remained with the seller, Purificacion Ver.
On 22 February 1990, (TMBC), filed a complaint with the RTC of Maka City for the collec on of
a sum of money with applica on for the issuance of a writ of preliminary a achment against
Ricardo, Sr. and the Delta Motors Corpora on and writ of a achment.
Obligations and Contracts | Week 13 Cases | Page 11 
On 29 March 1993, the trial court rendered its Decision in favor of TMBC. On 22 July 1993,
respondent, the nephew of judgment debtor Ricardo, Sr., requested TMBC to have the
annota ons on the subject proper es cancelled as the proper es were no longer owned by
Ricardo, Sr.
This le er was referred to the BSP, TMBCs statutory receiver. No steps were taken to have the
annota ons cancelled. Thus, on 17 December 1993, Edmundo filed in the RTC of Maka City a
case for Cancella on of No ce of Levy on A achment and Writ of A achment. In his pe on,
Edmundo alleged that as early as 11 September 1989, the proper es, subject ma er of the case,
were already sold to him by Ricardo, Sr. As such, these proper es could not be levied upon on 02
July 1990 to answer for the debt of Ricardo, Sr. who was no longer the owner thereof.
In its Answer with Compulsory Counterclaim, TMBC alleged, among other things, that the sale in
favor of Edmundo was void, therefore, the proper es levied upon were s ll owned by Ricardo, Sr.
On 02 May 1995, a er trial on the merits, the lower court rendered its Decision dismissing
Edmundos pe on. TMBCs counterclaim was likewise dismissed for lack of sufficient merit.
The Court of Appeals, upon reviewing the case at the instance of Edmundo, reversed and set
aside the trial courts ruling. The mo on for reconsidera on filed by TMBC was denied for lack of
merit in a Resolu on dated 25 February 1998
  
ISSUES:   objec ons to the contract. PHOTOKINA, as the winning bidder, wrote several le ers to the
1. Whether or not the contract between Ricardo Sr. and Edmundo is simulated, thus void?
2. Whether TMBC has the right to assail the validity of the sale being a 3rd party?
HELD: YES BOTH ISSUES.  junked, or set aside. He further announced his inten on to replace the VRIS Project with his own
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 tle and control of the
property; hence, the deed of transfer is void.
In herein case, badges of fraud and simula on permeate the whole transac on, thus, we cannot
but refuse to give the sale validity and legi macy. Consider the following circumstances:
a. There is no proof that the said sale took place prior to the date of the a achment. The
notarized deed of sale, which would have served as the best evidence of the
transac on, did not materialize un l 22 July 1993, or three (3) years a er TMBC
caused the annota on of its lien on the tles subject ma er of the alleged sale
b. Edmundo, to say the least, was very evasive when ques oned regarding details of the
alleged sale. It goes against ordinary human experience for a person to simply forget
the details of the day when he became poorer by P3,109,425.00 cash. The only logical
conclusion is that there was actually no considera on for the said sale.
c. As correctly pointed out by TMBC, “an indica on of simula on of contract is the
complete absence of an a empt in any manner on the part of the ostensible buyer to
assert rights of ownership over the subject proper es”. In herein case, Edmundo did not
a empt to have the 1989 deed of sale registered un l 1993.
 
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 a achment as security for the sa sfac on of any
judgment in its favor. PETITIONER TMBC WON ; dismissing the pe on for Cancella on of
No ce of Levy on A achment and Writ of A achment on Transfer Cer ficates of Title of the
Registry of Deeds of Paranaque.
 
COMMISSION ON ELECTIONS, COMELEC Chairman Alfredo Benipayo, and COMELEC
Commissioners Resurreccion Borra and Floren no Tuason Jr. v. Hon. MA. LUISA 
QUIJANO-PADILLA, QC RTC Branch 215, and Photokina Marke ng Corpora on
Topic: Unenforceable contracts; void contracts
September 18, 2002 | Sandoval-Gu errez, J.
DOCTRINE:  The Statues of Fraud requires certain contracts and transactions to be evidenced by a writing 
signed by the party to be charged. 
 
FACTS:  The Philippine Congress passed the Voter's Registra on Act of 1996 (RA 8189) providing
for the moderniza on and computeriza on of the voters' registra on list and the appropria on of
funds. COMELEC promulgated a resolu on approving the VRIS Project (Voters' Registra on and
Iden fica on System Project). The VRIS Project envisions a computerized database system for
the May 2004 Elec ons.
COMELEC issued invita ons to pre-qualify and bid for the VRIS Project. Private Respondent
PHOTOKINA was allowed to bid and won for the amount of P6.588 billion pesos. The par es
then proceeded to formalize the contract. However, under the RA 8760 the budget appropriated
by Congress for the COMELEC's moderniza on project was only One (1) Billion Pesos.
COMELEC Chairman Demetriou issued a memorandum to the COMELEC en banc expressing her
COMELEC reques ng the formal execu on of the contract, but to no avail.
The new Chairman, Benipayo, announced that the VRIS Project has been scrapped, dropped,
version, the Triple E Vision.
Unsa sfied with the adverse turn of events, PHOTOKINA filed with the Regional Trial Court, a
pe on for mandamus, prohibi on and damages against the COMELEC. He alleged that the
deliberate refusal of the COMELEC and its Commissioners to formalize the contract rendered
nugatory the perfected contract between them.
RTC granted PHOTOKINA's applica on for a writ of preliminary mandatory injunc on. Hence, the
instant pe on for cer orari which they contend that there is no valid perfected contract
between them.
  
ISSUE: Whether there was a valid perfected contract?
  
HELD: NO. 
Contract is void. The contract subject of this controversy is one that can be slain in sight for being
patently void and unenforceable. Enshrined in the 1987 Philippine Cons tu on is the mandate
that "no money shall be paid out of the Treasury except in pursuance of an appropria on made by
law." It is quite evident from the tenor of the language of the law that the existence of
appropria ons and the availability of funds are indispensable pre-requisites to or condi ons sine
qua non for the execu on of government contracts. The obvious intent is to impose such
condi ons as a priori requisites to the validity of the proposed contract.
The contract is void because the funds appropriated for the project is only P1B pesos but the
offered bid is around P6.5B. Since it is against the law (Admin Code) is it void ab ini o. Clearly, the
amount appropriated is insufficient to cover the cost of the en re VRIS Project. There is no way
that the COMELEC could enter into a contract with PHOTOKINA whose accepted bid was way
beyond the amount appropriated by law for the project. They should have rejected the bid for
being excessive or should have withdrawn the No ce of Award on the ground that in the eyes of
Obligations and Contracts | Week 13 Cases | Page 12 
the law, the same is null and void. WHEREFORE, the pe on is GRANTED. The Resolu ons The respondents repeatedly requested Filinvest to return their owner's TCT copies and to give
dated December 19, 2001 and February 7, 2002 issued by respondent Judge Padilla are SET them a copy of the JVA. They received no response. Instead, Filinvest began to fence the area and
ASIDE. Special Civil Ac on No. Q-01-45405 is hereby ordered DISMISSED. prohibited entry.
 
To protect their rights, the respondents filed no ces of adverse claim. In 2010, the respondents
FILINVEST LAND Inc. v. EDUARDO ADIA et. al. filed a complaint for recovery of possession with damages against Filinvest. Lina Ferrer-De
Topic: Unenforceable contracts; void contracts Guzman (De Guzman) tes fied that she was the Head of the Land Acquisi on Department at the
November 25, 2015 | Brion, J. me of the transac ons. She stated that the sale with Filinvest did not push through because the
SUMMARY: Ito yung sila various respondents, farmers sila. They awarded parcels of land in cavite proper es were covered by the CARL which says that the proper es cannot be sold, transferred,
by the Comprehensive Agrarian Reform Law (CARL). Later on, pet Filinvest acquired possession of or conveyed within a period of ten (10) years. Thus, instead of a sale, she nego ated a transfer of
these parcels of lands by way of “Sinumpaang Salaysay” and “Pagbitaw ng Karapatan” affidavits possession to Filinvest through the affidavits un l such me that a sale could be made.
from respondents. Nag file now sila respondent ng complaint for recovery of possession with
damages against kanila pet Filinvest saying na ang kasunduan nila was there was a Joint Venture In its answer, Filinvest argued that (a) the respondents had relinquished their rights over the
Agreement (JVA) between them wherein idedevelop daw ni Pet Filinvest yung land into property, (b) no JVA was signed, and (c) all of the respondents signed the affidavits under which
residen al area. Nag present sila respondents ng witness who was was the Head of the Land possession was validly transferred to Filinvest.
Acquisi on Dept who said na hindi natuloy yung pag convey nung lands kay pet Filinvest kasi it
will be viola ve of the the CARL since dapat a er 10 years pa pwede ibenta yung land. Sabi In its decision, the RTC found the respondents to be the lawful possessors. The CA affirmed the
naman nila Pet Filinvest na walang JVA and that the respondents signed the affidavits para RTC's decision. It ruled that the respondents undoubtedly own the proper es and are en tled to
itransfer sakanila yung lands. They also said na in pari delicto silang both par es for viola ng the possession.
CARL, so dapat they should be le by law to where they’ve been found. Hence, the issue of
WON THE PRINCIPLE OF IN PARI DELICTO APPLIES IN THIS CASE? Sabi ng SC NO kasi (1) The Filinvest contends now to the SC that both par es are in pari delicto for entering into the void
Pari Delicto doctrine does not apply in an agrarian reform case and (2) Article  1416  of  the  Civil  transac on. Thus, the Court should leave them as they are. Furthermore, the pari delicto
Code  provides  an  exception  to  the  pari  delicto  doctrine. Under this article, the plaintiff may recover what  excep on in Ar cle 1416 of the Civil Code does not apply to void contracts
he  paid  or  delivered  pursuant  to  a  void  contract  if  the  following requisites are met: (a) the contract is not   
illegal  per  se  but  merely  prohibited; (b) the prohibition is for the plaintiff's protection; and (c) public policy  ISSUE: Whether the principle of in pari delicto applies in this case
will  be  enhanced  by  his  recovery.  These requisites are present in this case kasi (1st requisite) the
affidavits were prohibited per se (2nd requisite) The CARL was designed to protect the farmers HELD: NO. 
and (3rd requisite) public policy will be promoted if the respondent farmers were allowed to Ar cle 1416 of the Civil Code provides an excep on to the pari delicto doctrine. Under this
recover their land. Thus, the respondents may recover the subject proper es. Talo sila pe oner ar cle, the plain ff may recover what he paid or delivered pursuant to a void contract if the
Filinvest. following requisites are met:

DOCTRINES:   a. the contract is not illegal per se but merely prohibited;

● Article  1416  of  the  Civil  Code  provides  an  exception  to  the  pari  delicto  doctrine.  Under  this  b. the prohibi on is for the plain ff's protec on; and
article,  the  plaintiff  may  recover  what  he  paid  or  delivered  pursuant  to  a  void  contract  if  the  c. public policy will be enhanced by his recovery.
following requisites are met:    
a. the contract is not illegal per se but merely prohibited;  In the case, the pari delicto doctrine does not apply in an agrarian reform case. To hold otherwise
b. the prohibition is for the plaintiff's protection; and  would defeat the spirit and intent of the agrarian reform to free the llers from the bondage of
c. public policy will be enhanced by his recovery. the soil. The policy of the law must be upheld. The requisites of Art 1416 are present in this case:
● Meeting  the  exceptions  provided  by  Art  1416  would  allow  recovery  by  the  plaintiff  in  a  pari 
delicto situation  a. On the first requisite, the affidavits here are merely prohibited. A contract is illegal per
se if, by universally recognized standards, it is inherently bad, improper, immoral, or
FACTS: The respondents were the registered owners of various parcels of land located in Cavite. contrary to good conscience. Ordinarily, affidavits or contracts of sale are lawful. Only
These proper es were awarded to them pursuant to the Comprehensive Agrarian Reform Law Sec on 27 of the CARL made them unlawful.
(CARL) In 1995, Filinvest Land, Inc. (Filinvest) acquired possession of these proper es. Each of the b. On the second requisite, the prohibi on under Sec on 27 of the CARL is meant to
respondents executed a Sinumpaang Salaysay en tled Pagbibitaw ng Karapatan (affidavits). Based protect the farmer-beneficiaries. Sec on 2 of the CARL explains that the agrarian
on these affidavits, the respondents relinquished all their rights over the proper es for valuable reform program is founded on the landless farmers' right to own land. Thus, their
considera on. protec on must be given utmost importance.
c. On the third requisite, public policy will be promoted by allowing the respondents to
The respondents alleged that they surrendered possession of their proper es with the recover their land. The CARL distributes agricultural land to landless farmers to improve
understanding that Filinvest would develop these into a residen al subdivision, pursuant to a joint their quality of life. Returning the land to them will enhance this public policy of
venture agreement (JVA). They also entrusted their respec ve owner's duplicate original copies of agrarian reform.
the TCTs to Filinvest because they were told that these would be used in preparing the
development plans. Thus, the respondents may recover the subject proper es. WHEREFORE, we hereby DENY the
pe on for lack of merit. RESPONDENTS WON!
Obligations and Contracts | Week 13 Cases | Page 13