KINDS OF OBLIGATION

Maria Tomimbang v. Atty. Jose Tomimbang

Facts:

Petitioner and respondent are siblings. Their parents donated to petitioner an eight-door
apartment located at 149 Santolan Road, Murphy, Quezon City. Petitioner failed to obtain a loan
from PAG-IBIG Fund, hence, respondent offered to extend a credit line to petitioner on the
following conditions: (1) petitioner shall keep a record of all the advances; (2) petitioner shall
start paying the loan upon the completion of the renovation; (3) upon completion of the
renovation, a loan and mortgage agreement based on the amount of the advances made shall be
executed by petitioner and respondent; and (4) the loan agreement shall contain comfortable
terms and conditions which petitioner could have obtained from PAG-IBIG.

A conflict between the siblings ensued leading to a new agreement whereby petitioner was
to start making monthly payments on her loan. Upon respondent's demand, petitioner turned
over to respondent all the records of the cash advances for the renovations. Subsequently, or
from June to October of 1997, petitioner made monthly payments of P18, 700.00, or a total
ofP93, 500.00. Petitioner never denied the fact that she started making such monthly payments.
Thereafter, the petitioner can no longer be found and also stopped making the monthly payments.
Thus, a complaint was filed against the petitioner demanding payment of the loan plus interest.
Petitioner contended that the loan is not yet due and demandable as the renovation of the
apartment is not yet completed.

Issue:

Whether or not the loan is already due and demandable.

Ruling:

The loan is already due and demandable due to the subsequent agreement entered in to by
the parties.
Article 1291 of the Civil Code provides, thus:

Art. 1291. Obligations may be modified by:

The petitioner admitted that she started to comply with the demand of the respondent to
pay on a monthly basis. Her partial performance of her obligation is unmistakable proof that
indeed the original agreement between her and respondent had been novated by the deletion of
the condition that payments shall be made only after completion of renovations. Hence, by her
very own admission and partial performance of her obligation, there can be no other conclusion
but that under the novated agreement, petitioner's obligation

SUMMARY:

The case involved conflict between two siblings when the debtor or the petitioner suddenly
stopped paying her monthly payments on the ground that the debt is not yet due and demandable
based from their original agreement to pay only after the completion of the renovation. The
petitioner’s claim is incorrect since it can be clearly inferred from the above facts that both of
them entered into a subsequent agreement, that is for the latter to start making her payments
immediately, deleting their original/ principal conditions. Due to the fact that this agreement has
been brought to mind between two parties, and the petitioner’s performance renders the
obligation due and demandable. Therefore, making the petitioner’s claim to be nullified and the
original agreement to be a novated one.

REFLECTIVE ESSAY

It is essential to a person to know his rights and obligations, especially when dealing with debts
or contracts. Unfortunately, not all people are given the chance to study law. In that case, the
defendant basically wasn’t aware of such fact that their subsequent agreement novated their
original agreement and turning it into a pure one which is due and demandable at once. But even
though one has no knowledge of such law, it is not right to evade your obligations and run away
from your creditors.

Novation is one of the means of extinguishing an obligation. It is the total or partial extinction of
an obligation through the creation of a new one which substitutes it. It is the substitution or
change of an obligation by another, which extinguishes or modifies the first, either by changing
its object or principal conditions, by or substituting another in place of the debtor, or by
subrogating a third person in the rights of the creditor. In the case stated above, the principal
conditions of the original contract were deleted.

Novation is a contract containing two stipulations: one to extinguish or modify an existing

There are two types of novation according to extent or effect: (a) Total or extinctive. — when the
old obligation is completely extinguished; or (b) Partial or modificatory. — when the old
obligation is merely modified, i.e., the change is merely incidental to the main obligation. In the
case presented, it is a partial or modificatory novation since it does not extinguish the old
obligation that is to pay his loan on a monthly basis, what only changed is the extinguishments of
the conditions.
 MONTECILLO VS. REYNES 385 SCRA 244

FACTS:

Respondents Ignacia Reynes and spouses Abucay filed on June 20, 1984 a complaint for
Declaration of Nullity and Quieting of Title against petitioner Rico Montecillo. Reynes asserted
that she is the owner of a lot situated in Mabolo, Cebu City. In 1981 Reynes sold 185 square
meters of the Mabolo Lot to the Abucay Spouses who built a residential house on the lot they
bought.

Reynes alleged further that she signed a Deed of Sale of the Mabolo Lot in favor of Montecillo.
Reynes, being illiterate signed by affixing her thumb-mark on the document. Montecillo
promised to pay the agreed P47,000.00 purchase price within one month from the signing of the
Deed of Sale. And that Montecillo failed to pay the purchase price after the lapse of the one-
month period, prompting Reynes to demand from Montecillo the return of the Deed of Sale.
Since Montecillo refused to return the Deed of Sale, Reynes executed a document unilaterally
revoking the sale and gave a copy of the document to Montecillo.

Subsequently, on May 23, 1984 Reynes signed a Deed of Sale transferring to the Abucay
Spouses the entire Mabolo Lot, at the same time confirming the previous sale in 1981 of a 185
square meter portion of the lot.

Reynes and the Abucay Spouses alleged that they received information that the Register of
Deeds of Cebu City issued a Certificate of Title in the name of Montecillo for the Mabolo Lot.
They argued that “for lack for consideration there (was no meeting of the minds) between
Reynes and Montecillo. Thus, the trial court should declare null and void ab initio Monticello’s
Deed of sale, and order the cancellation of certificates of title No. 90805 in the name of
Montecillo.

In his Answer, Montecillo a bank executive claimed he was a buyer in good faith and had
actually paid the P47,000.00 consideration stated on his Deed of Sale. Montecillo however
admitted he still owned Reynes a balance of P10,000.00. He also alleged that he paid P50,000.00
for the release of the chattel mortgage which he argued constituted a lien on the Mabolo Lot. He
further alleged that he paid for the real property tax as well as the capital gains tax on the sale of
the Mabolo Lot.

In their reply, Reynes and the Abucay Spouses contended that Montecillo did not have authority
to discharge the chattel mortgage especially after Reynes revoked Montecillo’s Deed of Sale and
gave the mortgagee a copy of the document of revocation. Reynes and the Abucay Spouses
claimed that Montecillo secured the release of the chattel mortgage through machination. They
further asserted that Montecillo took advantage of the real property taxes paid by the Abucay
Spouses and surreptitiously caused the transfer of the title to the Mabolo Lot in his name. During
pre-trial Montecillo claimed that the consideration for the sale of the Mabolo Lot was the amount
he paid to Cebu Iced and Cold Storage Corporation for the mortgage debt of Bienvenido Jayag.
Montecillo argued that the release of the mortgage was necessary since the mortgage constituted
a lien on the Mabolo Lot.

Reynes, however stated that she had nothing to do with Jayag’s mortgage debt except that the
house mortgaged by Jayag stood on a portion of the Mabolo Lot. Reynes further stated that the
payment by Montecillo to release the mortgage on Jayag’s house is a matter between Montecillo
and Jayag. The mortgage on the house being a chattel mortgage could not be interpreted in any
way as an encumbrance on the Mabolo Lot. Reynes further claimed that the mortgage debt had
long prescribed since the P47,000.00 mortgage debt was due for payment on January 30,1967.

ISSUE:

Whether or not there was a valid consent in the case at bar to have a valid contract.

RULING:

One of the three essential requisites of a valid contract is consent of the parties on the
object and cause of the contract. In a contract of sale, the parities must agree not only on the
price, but also on the manner of payment of the price. An agreement on the price but a
disagreement on the manner of its payment will not result in consent, thus preventing the
existence of a valid contract for a lack of consent. This lack of consent is separate and distinct for
lack of consideration where the contract states that the price has been paid when in fact it has
never been paid.

Reynes expected Montecillo to pay him directly the P47, 000.00 purchase price within
one month after the signing of the Deed of Sale. On the other hand, Montecillo thought that his
agreement with Reynes required him to pay the P47,000.00-purchase price to Cebu Ice Storage
to settle Jayag’s mortgage debt. Montecillo also acknowledged a balance of P10, 000.00 in favor
of Reynes although this amount is not stated in Montecillo’s Deed of Sale. Thus, there was no
consent or meeting of the minds, between Reynes and Montecillo on the manner of payment.
This prevented the existence of a valid contract because of lack of consent.

In summary, Montecillo’s Deed of Sale is null and void ab initio not only for lack of
consideration, but also for lack of consent. The cancellation of TCT No. 90805 in the name of
Montecillo is in order as there was no valid contract transferring ownership of the Mabolo Lot
from Reynes to Montecillo.
 JASMIN SOLER VS. COURT OF APPEALS G.R. No. 123892 May 2, 2001

FACTS:

Petitioner is a professional interior designer. In November 1986, her friend Rosario Pardo asked
her to talk to Nida Lopez, who was manager of the COMBANK Ermita Branch for they were
planning to renovate the branch offices. Even prior to November 1986, petitioner and Nida
Lopez knew each other because of Rosario Pardo, the latter’s sister. During their meeting,
petitioner was hesitant to accept the job because of her many out of town commitments, and also
considering that Ms. Lopez was asking that the designs be submitted by December 1986, which
was such a short notice. Ms. Lopez insisted, however, because she really wanted petitioner to do
the design for renovation. Petitioner acceded to the request. Ms. Lopez assured her that she
would be compensated for her services. Petitioner even told Ms. Lopez that her professional fee
was P10,000.00, to which Ms. Lopez acceded.

During the November 1986 meeting between petitioner and Ms. Lopez, there were discussions as
to what was to be renovated. Ms. Lopez again assured petitioner that the bank would pay her
fees. After a few days, petitioner requested for the blueprint of the building so that the proper
design, plans and specifications could be given to Ms. Lopez in time for the board meeting in
December 1986. Petitioner then asked her draftsman Jackie Barcelon to go to the jobsite to make
the proper measurements using the blue print. Petitioner also did her research on the designs and
individual drawings of what the bank wanted. Petitioner hired Engineer Ortanez to make the
electrical layout, architects Frison Cruz and De Mesa to do the drafting. For the services
rendered by these individuals, petitioner paid their professional fees. Petitioner also contacted the
suppliers of the wallpaper and the sash makers for their quotation. So come December 1986, the
lay out and the design were submitted to Ms. Lopez. She even told petitioner that she liked the
designs.

Subsequently, petitioner repeatedly demanded payment for her services but Ms. Lopez just
ignored the demands. In February 1987, by chance petitioner and Ms. Lopez saw each other in a
concert at the Cultural Center of the Philippines. Petitioner inquired about the payment for her
services, Ms. Lopez curtly replied that she was not entitled to it because her designs did not
conform to the bank’s policy of having a standard design, and that there was no agreement
between her and the bank.
Petitioner, through her lawyers, who wrote Ms. Lopez, demanding payment for her professional
fees in the amount of P10,000.00 which Ms. Lopez ignored. The lawyers wrote Ms. Lopez once
again demanding the return of the blueprint copies petitioner submitted which Ms. Lopez refused
to return. The petitioner then filed at the trial court a complaint against COMBANK and Ms.
Lopez for collection of professional fees and damages.

In its answer, COMBANK stated that there was no contract between COMBANK and petitioner;
that Ms. Lopez merely invited petitioner to participate in a bid for the renovation of the
COMBANK Ermita Branch; that any proposal was still subject to the approval of the
COMBANK’s head office.

The trial court rendered judgment in favor of plaintiff. On appeal, the Court of Appeals reversed
the decision. Hence, this petition.

ISSUE: Whether or not the Court of Appeals erred in ruling that there was no contract between
petitioner and respondents, in the absence of the element of consent.

RULING:
A contract is a meeting of the minds between two persons whereby one binds himself to give
something or to render some service to bind himself to give something to render some service to
another for consideration. There is no contract unless the following requisites concur: 1. Consent
of the contracting parties; 2. Object certain which is the subject matter of the contract; and 3.
Cause of the obligation which is established.

In the case at bar, there was a perfected oral contract. When Ms. Lopez and petitioner met in
November 1986, and discussed the details of the work, the first stage of the contract commenced.
When they agreed to the payment of the P10,000.00 as professional fees of petitioner and that
she should give the designs before the December 1986 board meeting of the bank, the second
stage of the contract proceeded, and when finally petitioner gave the designs to Ms. Lopez, the
contract was consummated. Petitioner believed that once she submitted the designs she would be
paid her professional fees. Ms. Lopez assured petitioner that she would be paid.

It is familiar doctrine that if a corporation knowingly permits one of its officers, or any other
agent, to act within the scope of an apparent authority, it holds him out to the public as
possessing the power to do those acts; and thus, the corporation will, as against anyone who has
in good faith dealt with it through such agent, be estopped from denying the agent’s authority.
Also, petitioner may be paid on the basis of quantum meruit. "It is essential for the proper
operation of the principle that there is an acceptance of the benefits by one sought to be charged
for the services rendered under circumstances as reasonably to notify him that the lawyer
performing the task was expecting to be paid compensation therefor. The doctrine of quantum
meruit is a device to prevent undue enrichment based on the equitable postulate that it is unjust
for a person to retain benefit without paying for it." The designs petitioner submitted to Ms.
Lopez were not returned. Ms. Lopez, an officer of the bank as branch manager used such designs
for presentation to the board of the bank. Thus, the designs were in fact useful to Ms. Lopez for
she did not appear to the board without any designs at the time of the deadline set by the board.
Decision reversed and set aside. Decision of the trial court affirmed.

SUMMARY:
The petitioner was requested by Ms. Lopez, a branch manager of COMBANK to make a
design/blueprint for the renovation of their office and that it would be expected to finish after one
month. Despite the short notice and the petitioner’s out-of-town commitments, she agreed to
provided that she’ll be compensated for her services in the amount of 10,000 in which Lopez
agreed. During the lapse of time, petitioner did her job and was able to produce a blueprint “on
time” of the design of what the bank wanted. During the process, petitioner incurred expenses for
payment to her subordinates. Eventually, Ms. Lopez accepted the blueprint. However, Ms. Lopez
failed to pay her the compensation agreed upon. On their unexpected meeting, petitioner inquired
about the payment but Ms. Lopez alleged that she and the bank did not enter into an agreement
and that the design was rejected since it does not conform to the standard design policy of the
bank. Due to this, petitioner seek help from her lawyer to demand payment from Ms. Lopez, in
which she ignored and to return the blueprint copies but she again ignored. This time, petitioner
then filed at the trial court a complaint against COMBANK and Ms. Lopez for collection of
professional fees and damages. The trial court favored the claim of the petitioner however, this
decision was reversed by the court of appeal erring ruling that there has been no contract
perfected.

REFLECTIVE ESSAY:
ART. 1305 of the Civil Code defines contract as a meeting of minds between two persons
whereby one binds himself, with respect to the other, to give something or to render some
service. Contract is one of the sources of obligations.3 (Art. 1157.) one of the characteristics of a
contract is that a contract is consensual. It is, as a general rule, by mere consent and from that
moment the parties are bound not only by the fulfillment of what has been expressly stipulated
but also to all the consequences which, according to their nature, may be in keeping with good
faith, usage and law.
LOURDES ONG LIMSON VS. COURT of APPEALS, et al 357 SCRA 209 G. R. No. 135929
April 20, 2001

FACTS:

In July 1978, respondent spouses Lorenzo de Vera and Asuncion Santos-de Vera, through their
agent Marcosa Sanchez, offered to sell to petitioner Lourdes Ong Limson a parcel of land. The
respondent spouses were the owners of the subject property.

On July 31, 1978, she agreed to but the property at the price of P34. 00 per square meter and
gave P20, 000.00 as “earnest money”. The respondent spouses signed a receipt thereafter and
gave her a 10-day option period to purchase the property. Respondent spouses informed
petitioner that the subject property was mortgaged to Emilio Ramos and Isidro Ramos. Petitioner
was asked to pay the balance of the purchase price to enable the respondent spouses to settle
their obligation with the Ramoses. Petitioner agreed to meet respondent spouses and the
Ramoses on August 5, 1978, to consummate the transaction; however, the respondent spouses
and the Ramoses did not appear, same with their second meeting.

On August 23, 1978, petitioner allegedly gave respondent spouses three checks for the settlement
the back taxes of property. On September 5, 1978, the agent of the respondent spouses informed
petitioner that the property was the subject of a negotiation for the sale to respondent Sunvar
Realty Development Corporation.

Petitioner alleged that it was only on September 15, 1978, that TCT No. S-72946 covering the
property was issued to respondent spouses. On the same day, petitioner filed and Affidavit of
Adverse Claim with the Office of the Registry of Deeds of Makati, Metro Manila. The Deed of
Sale between respondent spouses and respondent Sunvar was executed on September 15, 1978
and TCT No. S-72377 was issued in favor of Sunvar on September 26, 1978 with the Adverse
Claim of petitioner annotated thereon.

Respondent spouses and Sunvar filed their Answers and Answers to Cross-Claim, respectively.
On appeal, the Court of Appeals completely reversed the decision of the trial court and ordered
the Register of Deeds of Makati City to lift the Adverse Claim and ordered petitioner to pay
respondent Sunvar and respondent spouses exemplary and nominal damages and attorney’s fees.
Hence, this petition.

ISSUE:
 Whether or not the agreement between petitioner and respondent spouses was a mere option or a
contract to sell.

RULING:

The Supreme Court held that the agreement between the parties was a contract of option and not
a contract to sell. An option is continuing offer or contract by which the owner stipulates with
another that the latter shall have the right to buy the property at a fixed price within a time
certain, or under, or in compliance with, certain terms and conditions, or which gives the owner
of the property the right to sell or demand a sale. It is also sometimes called an “unaccepted
offer”. An option is not of itself a purchase, but merely secures the privilege to buy. It is not a
sale of property but a sale of the right to purchase. Its distinguishing characteristic is that it
imposes no binding obligation on the person holding the option, aside from the consideration for
the offer.
DOMINGO V. COURT OF APPEALS G.R. No. 127540. October 17, 2001

FACTS:

Paulina Rigonan owned three parcels of land including the house and warehouse on one parcel.
She allegedly sold them to private respondents, the spouses Felipe and Concepcion Rigonan,
who claim to be her relatives. In 1966, petitioners who claim to be her closest surviving
relatives, allegedly took possession of the properties by means of stealth, force and intimidation,
and refused to vacate the same. According to defendants, the alleged deed of absolute sale was
void for being spurious as well as lacking consideration. They said that Paulina Rigonan did not
sell her properties to anyone. As her nearest surviving kin within the fifth degree of
consanguinity, they inherited the three lots and the permanent improvements thereon when
Paulina died. They said they had been in possession of the contested properties for more than 10
years.

ISSUE:

1.) Whether or not the consideration in Deed of Sale can be used to impugn the validity of the
Contract of Sale. 2.) Whether or not the alleged Deed of Sale executed by Paulina Rigonan in
favor of the private respondents is valid.

RULING:

1.) Consideration is the why of a contract, the essential reason which moves the contracting
parties to enter into the contract. The Court had seen no apparent and compelling reason for her
to sell the subject 9 parcels of land with a house and warehouse at a meager price of P850 only.
On record, there is unrebutted testimony that Paulina as landowner was financially well off. She
loaned money to several people. Undisputably, the P850.00 consideration for the nine (9) parcels
of land including the house and bodega is grossly and shockingly inadequate, and the sale is null
and void ab initio.

2.) The Curt ruled in the negative. Private respondents presented only a carbon copy of this deed.
When the Register of Deeds was subpoenaed to produce the deed, no original typewritten deed
but only a carbon copy was presented to the trial court. None of the witnesses directly testified
to prove positively and convincingly Paulina’s execution of the original deed of sale. The carbon
copy did not bear her signature, but only her alleged thumbprint. Juan Franco testified during the
direct examination that he was an instrumental witness to the deed. However, when
crossexamined and shown a copy of the subject deed, he retracted and said that said deed of sale
was not the document he signed as witness
LIM VS. COURT OF APPEALS G.R. No. 55201, February 3, 1994

FACTS:

The deceased spouses Tan Quico and Josefa Oraa, who both died intestate left 96 hectares of
land. The late spouses were survived by four children; Cresencia, Lorenzo, Hermogenes and
Elias. Elias died on May 2, 1935. Cresencia died on December 20, 1967. She was survived by
her husband, Lim Chay Sing, and children, Mariano, Jaime, Jose Jovita, Anacoreta, Antonietta,
Ruben, Benjamin and Rogelio who are now the petitioners in the case at bench. The Cresencia
only reached the second grade of elementary school. She could not read or write in English. On
the other hand, Lorenzo is a lawyer and a CPA. Heirs of Cresencia alleged that since the demise
of the spouses Tan Quico and Josefa Oraa, the subject properties had been administered by
respondent Lorenzo. They claimed that before her death, Cresencia had demanded their partition
from Lorenzo. After Cresencia’s death, they likewise clamored for their partition. Their effort
proved fruitless. Respondents Lorenzo and Hermogenes’ unyielding stance against partition is
based on various contentions. They cited as evidence the “Deed of Confirmation of Extra
Judicial Settlement of the Estate of Tan Quico and Josefa Oraa” and a receipt of payment.
Principally, they urge that the properties had already been partitioned, albeit, orally; and during
her lifetime, the late Cresencia had sold and conveyed all her interests in said properties to
respondent Lorenzo.

ISSUE: Whether or not there is error or mistake in the signing of the Deed.

RULING: There is an error in the signing of the Deed. Article 1332 of the Civil Code provides:
“When one of the parties is unable to read, or if the contract is in a language not understood by
him, and mistake or fraud is alleged, the person enforcing the contract must show that the terms
thereof have been fully explained to the former.” In the case at bar, the questioned Deed is
written in English, a language not understood by Cresencia an illiterate in the said language. It
was prepared by the respondent Lorenzo, a lawyer and CPA. Lorenzo did not cause the
notarization of the Deed. Considering these circumstances, the burden was on private
respondents to prove that the content of the Deed was explained to the illiterate Cresencia before
she signed it. In this regard, the evidence adduced by the respondents failed to discharge their
burden. This substantive law came into being due to the finding of the Code Commission that
there is still a fairly large number of illiterates in this country, and documents are usually drawn
up in English or Spanish. It is also in accord with our state policy of promoting social justice. It
also supplements Article 24 of the Civil Code which calls on court to be vigilant in the protection
of the rights of those who are disadvantaged in life.