Azaragga v Rodriguez

FACTS:
 Jose Rodriguez executed in favor of Regino Ramirez a document whereby he bound himself to
pay Ramirez the amount of P400.25 on May 15, 1899. This was in payment of Fray Lesmes
Perez’ debt to Ramirez.
 Rodriguez owed Perez P1,983.75 that is why he assumed Perez’ obligation to Ramirez.
 Subsequently, the document was indorsed by Ramirez in favor of Azarraga as payment of debt.
Azarraga wrote a letter to Rodriguez requesting payment of P400.25 as a consequence of the
indorsement in Azarraga’s favor.
 Rodriguez wrote a letter acknowledging his indebtedness and obligation and engaging to pay the
same.
 Despite several requests for payment, Rodriguez did not pay Azarraga, and instead asked for
several extensions.
 Thus, Azurraga decided to file a complaint against Rodriguez. CFI ruled that Rodriguez is liable
for the amount.

ISSUES: WON the assignment or transfer of credit is valid even if the cause or consideration is not stated
in the contract?

Held: Yes. The assignment or transfer of the credit in question, made by Ramirez, the creditor, is perfectly
valid, and notwithstanding the fact that the cause or consideration for the transfer is not stated in the
indorsement, it must be presumed that one exists and that it is a lawful one, unless the debtor should prove
the contrary, which he has not done in this case.

Gutierrez Hermanos vs. Orense

Gr. No. L-9188
1914

FACTS:

Engracio Orense had been the owner of a parcel of land in Guinobatan, Albay. On February 14, 1907, Jose
Duran, a nephew of Orense, sold the property for P1,500 to Gutierrez Hermanos, with Orense’s knowledge
and consent, executed before a notary a public instrument. The said public instrument contained a provision
giving Duran the right to repurchase it for the same price within a period of four years from the date of the
said instrument.

Orense continued occupying the land by virtue of a contract of lease. After the lapse of four years, Gutierrez
asked Orense to deliver the property to the company and to pay rentals for the use of the property.

Orense refused to do so. He claimed that the sale was void because it was done without his authority and
that he did not authorize his nephew to enter into such contract.

Gutierrez Hermanos then charged Duran with Estafa, for having represented himself in the said
deed of sale to be the absolute owner of the land. During trial, Orense was presented as witness of the
defense. Because of this, the court acquitted Duran for charge of Estafa. On Mar 5, 1913 Gutierrez
Hermanos then filed a complaint in the CFI Albay against Engracio Orense.

Issue: Whether or not Orense is bound by Duran’s act of selling plaintiff’s property.

Held: Yes. It having been proven at the trial that he gave his consent to the said sale, it follows that the
defendant conferred verbal, or at least implied, power of agency upon his nephew Duran, who accepted it
in the same way by selling the said property. The principal must therefore fulfill all the obligations contracted
by the agent, who acted within the scope of his authority. (Civil Code, arts. 1709, 1710 and 1727) Article
1259 of the Civil Code prescribes: "No one can contract in the name of another without being authorized
by him or without his legal representation according to law. A contract executed in the name of another by
one who has neither his authorization nor legal representation shall be void, unless it should be ratified by
the person in whose name it was executed before being revoked by the other contracting party.”- The sworn
statement made by the defendant, Orense, while testifying as a witness at the trial of Duran for Estafa,
virtually confirms and ratifies the sale of his property effected by his nephew, Duran, and, pursuant to article
1313 of the Civil Code, remedies all defects which the contract may have contained from the moment of its
execution.

AYALA V. RAY BURTON DEV’T

Petitioner Ayala Corporation (AYALA) is the owner of the Ayala estate located in Makati City. The said
estate was originally a raw land which was subdivided for sale into different lots devoted for residential,
commercial and industrial purposes. The development of the estate consisted of road and building
construction and installation of a central sewerage treatment plant and drainage system which services the
whole Ayala Commercial Area.
On March 20, 1984, Karamfil Import-Export Company Ltd. (KARAMFIL) bought from AYALA a piece
of land identified as Lot 26, Block 2 consisting of 1,188 square meters, located at what is now known as
H.V. de la Costa Street, Salcedo Village, Makati City. The said land, which is now the subject of this case.
The transaction was documented in a Deed of Sale[1] of even date, which provides, among others, that
the vendee would comply with certain special conditions and restrictions on the use or occupancy of the
land, among which are -
Deed Restrictions:[2]

a) The total height of the building to be constructed on the lot shall not be more than forty-two (42) meters,
nor shall it have a total gross floor area of more than five (5) times the lot area; and

b) The sewage disposal must be by means of connection into the sewerage system servicing the area.

Special Conditions:[3]

a) The vendee must obtain final approval from AYALA of the building plans and specifications of the
proposed structures that shall be constructed on the land;

b) The lot shall not be sold without the building having been completed; and

c) Any breach of the stipulations and restrictions entitles AYALA to rescission of the contract.

As a result of the sale, a Transfer Certificate of Title No. 132086 [4] was issued in the name of
KARAMFIL. The said special conditions and restrictions were attached as an annex to the deed of sale and
incorporated in the “Memorandum of Encumbrances” at the reverse side of the title of the lot as Entry No.
2432/T-131086.
On February 18, 1988, KARAMFIL sold the lot to Palmcrest Development and Realty Corporation
(PALMCREST) under a Deed of Absolute Sale[5] of even date. This deed was submitted to AYALA for
approval in order to obtain the latter’s waiver of the special condition prohibiting the resale of the lot until
after KARAMFIL shall have constructed a building thereon. AYALA gave its written conformity to the sale
but reflecting in its approval the same special conditions/restrictions as in the previous sale. AYALA’s
conformity was annotated on the deed of sale.[6] PALMCREST did not object to the stipulated conditions
and restrictions.[7]
PALMCREST in turn sold the lot to Ray Burton Development Corporation (RBDC), now respondent,
on April 11, 1988, with the agreement that AYALA retains possession of the Owner’s Duplicate copy of the
title until a building is erected on said parcel of land in accordance with the requirements and/or restrictions
of AYALA.[8] The Deed of Absolute Sale[9]executed on the said date was also presented to AYALA for
approval since no building had yet been constructed on the lot at the time of the sale. As in the KARAMFIL-
PALMCREST transaction, AYALA gave its conformity to the sale, subject to RBDC’s compliance with the
special conditions/restrictions which were annotated in the deed of sale.
The conditions and restrictions of the sale were likewise entered as encumbrances at the reverse side of
the Transfer Certificate of Title No. 155384 which was later issued in the name of RBDC.[11] Like
PALMCREST, RBDC was not also averse to the aforesaid conditions and restrictions. [12]
Sometime in June of 1989, RBDC submitted to AYALA for approval a set of architectural plans for the
construction of a 5-storey office building on the subject lot, with a height of 25.85 meters and a total gross
floor area of 4,989.402 square meters.[13] The building was to be known as “Trafalgar Tower” but later
renamed “Trafalgar Plaza.” Since the building was well within the 42-meter height restriction, AYALA
approved the architectural plans.
Upon written request[14] made by RBDC, AYALA likewise agreed to release the owner’s copy of the
title covering the subject lot to the China Banking Corporation as guarantee of the loan granted to RBDC
for the construction of the 5-storey building.
Meanwhile, on November 28, 1989, RBDC, together with the Makati Developers Association, Inc.
(MADAI), of which RBDC is a member, and other lot owners, filed a complaint against AYALA before the
Housing and Land Use Regulatory Board (HLRB). The complaint sought the nullification of the very same
Deed Restrictions incorporated in the deeds of sale of the lots purchased by the complainants from AYALA
and annotated on their certificates of title, on the grounds, inter alia, that said restrictions purportedly: (a)
place unreasonable control over the lots sold by AYALA, thereby depriving the vendees of the full enjoyment
of the lots they bought, in violation of Article 428 of the Civil Code; (b) have been superseded by Presidential
Decree No. 1096 (the National Building Code) and Metro Manila Commission Zoning Ordinance No. 81-
01; (c) violate the constitutional provision on equal protection of the laws, since the restrictions are imposed
without regard to reasonable standards or classifications; and (d) are contracts of adhesion [15] since AYALA
would not sell the lots unless the buyers agree to the deed restrictions.
In the meantime, on August 22, 1990, the HLRB En Banc rendered a decision[18] (a) upholding the
Deed Restrictions; (b) absolving AYALA from the charge of unsound business practice; and (c) dismissing
HLRB Case No. REM-A-0818. MADAI and RBDC separately appealed the decision to the Office of the
President, which appeal was docketed as O.P. Case No. 4476.
While the appeal was pending before the Office of the President, the September 21, 1990 issue of
the Business World magazine[19] featured the “Trafalgar Plaza” as a modern 27-storey structure which will
soon rise in Salcedo Village, Makati City. Stunned by this information, AYALA, through counsel, then sent
a letter[20] to RBDC demanding the latter to cease the construction of the building which dimensions do not
conform to the previous plans it earlier approved. RBDC, through counsel, replied with a series of
letters[21] requesting for time to assess the merits of AYALA’s demand.
For failing to heed AYALA’s bidding, RBDC was sued on January 25, 1991 before the Regional Trial
Court of Makati City (Branch 148). AYALA’s complaint for Specific Performance or Rescission.
ISSUE: Whether the Deed of Restriction was a contract of adhesion.
HELD: NO. A contract of adhesion in itself is not an invalid agreement. This type of contract is as binding
as a mutually executed transaction. We have emphatically ruled in the case of Ong Yiu vs. Court of Appeals,
et. al.[50] that “contracts of adhesion wherein one party imposes a ready-made form of contract on the other
x x x are contracts not entirely prohibited. The one who adheres to the contract is in reality free to reject it
entirely; if he adheres he gives his consent.” This ruling was reiterated in Philippine American General
Insurance Co., Inc. vs. Sweet Lines, Inc., et. al.,[51] wherein we further declared through Justice Florenz
Regalado that “not even an allegation of ignorance of a party excuses non-compliance with the contractual
stipulations since the responsibility for ensuring full comprehension of the provisions of a contract of
carriage (a contract of adhesion) devolves not on the carrier but on the owner, shipper, or consignee as the
case may be.”
The stringent treatment towards contracts of adhesion which the courts are enjoined to observe is in
pursuance of the mandate in Article 24 of the New Civil Code that "(i)n all contractual, property or other
relations, when one of the parties is at a disadvantage on account of his moral dependence, ignorance,
indigence, mental weakness, tender age or other handicap, the courts must be vigilant for his protection."
Thus, the validity and/or enforceability of a contract of adhesion will have to be determined by the
peculiar circumstances obtaining in each case and the situation of the parties concerned.
In the instant case, the stipulations in the Deed Restrictions and Special Conditions are plain and
unambiguous which leave no room for interpretation. Moreover, there was even no attempt on the part of
RBDC to prove that, in the execution of the Deed of Sale on the subject lot, it was a weaker or a
disadvantaged party on account of its moral dependence, ignorance, mental weakness or other
handicap. On the contrary, as testified to by Edwin Ngo, President of RBDC, the latter is a realty firm and
has been engaged in realty business,[54] and that he, a businessman for 30 years,[55] represented RBDC in
the negotiations and in the eventual purchase of the subject lot from PALMCREST.[56] Edwin Ngo's
testimony proves that RBDC was not an unwary party in the subject transaction. Instead, Edwin Ngo has
portrayed RBDC as a knowledgeable realty firm experienced in real estate business.

Dizon vs. Gaborro, 83 SCRA 688-691 – ARTICLE 1359

Facts:
Petitioner, Jose P. Dizon, was the owner of the three parcels of land, situated in Mabalacat, Pampanga. He
constituted a first mortgage to DBP to secure a loan of P38,000.00 and a second mortgage
to PNB amounting P93,831.91.

Petitioner defaulted in the payment of his debt, therefore, the Development Bank of the Philippines
foreclosed the mortgage extrajudicially. Gaborro became interested in the lands of Dizon. But since the
property was already foreclosed by the DPB. They then entered into a contract captioned as “Deed of sale
with assumption of mortgage” and the second contract executed the same day, is called “Option to
Purchase Real Estate” The sum of P131,813.91 which purports to be the consideration of the sale was not
actually paid by Alfredo G. Gaborro to the petitioner. The said amount represents the aggregate debts of
the petitioner with the Development Bank of the Philippines trial the Philippine National Bank.

After the execution of said contracts, Alfredo G. Gaborro took possession of the three parcels of land.
Gaborro made several payments to the DBP and PNB. He improved, cultivated the kinds raised sugarcane
and other crops produce.

Jose P. Dizon through his lawyer, wrote a letter to Gaborro informing him that he is formally offering
reimburse Gaborro of what he paid to the banks. Gaborro did not agree to the demands of the petitioner,
hence, Jose P. Dizon instituted a complaint in the Court of First Instance of Pampanga, alleging that the
documents Deed of Sale With Assumption of Mortgage and the Option to Purchase Real Estate did not
express the true intention and agreement between the parties. Petitioner, contended that the two deeds
constitute in fact a single transaction that their real agreement was not an absolute sale of the land but
merely an equitable mortgage or conveyance by way of security for the reimbursement or refund by Dizon
to Gaborro of any and all sums which the latter may have paid on account of the mortgage debts in favor
of the DBP and the PNB.
Issue: Whether or not the contract showed the true agreement between the parties.

Held:

No. In the light of the foreclosure proceedings and sale of the properties, a legal point of primary importance
here, as well as other relevant facts and circumstances, We agree with the findings of the trial and appellate
courts that the true intention of the parties is that respondent Gaborro would assume and pay the
indebtedness of petitioner Dizon to DBP and PNB, and in consideration therefor, respondent Gaborro was
given the possession, the enjoyment and use of the lands until petitioner can reimburse fully the respondent
the amounts paid by the latter to DBP and PNB, to accomplish the following ends: (a) payment of the bank
obligations; (b) make the lands productive for the benefit of the possessor, respondent Gaborro, (c) assure
the return of the land to the original owner, petitioner Dizon, thus rendering equity and fairness to all parties
concerned.

In view of all these considerations, the law and Jurisprudence, and the facts established. We find that the
agreement between petitioner Dizon and respondent Gaborro is one of those innonimate contracts under
Art. 1307 of the New Civil Code whereby petitioner and respondent agreed "to give and to do" certain rights
and obligations respecting the lands and the mortgage debts of petitioner which would be acceptable to the
bank. but partaking of the nature of the antichresis insofar as the principal parties, petitioner Dizon and
respondent Gaborro, are concerned.

The court held that the true agreement between the plaintiff and defendant is that the defendant would
assume and pay the indebtedness of the plaintiff to DBP and PNB, and in consideration therefore, the
defendant was given the possession and enjoyment of the properties in question until the plaintiff shall have
reimbursed to defendant fully the amount of P131,831.91 plus 8% interest per annum from October 6, 1959
until full payment, said right to be exercised within one year from the date the judgment becomes final, if
he fails to do so within the said period, then he is deemed to have lost his right over the lands forever.