G.R. No.

167519 January 14, 2015

THE WELLEX GROUP, INC., Petitioner,
vs.
U-LAND AIRLINES, CO., LTD., Respondent.
Ponenete: Leonen, J.

Facts:
Wellex and U-Land agreed to develop a long-term business relationship through the creation of joint interest in
airline operations and property development projects in the Philippines. The agreement includes: I. Acquisition of APIC
and PEC shares; II. Operation and management of APIC/PEC/APC; III. Entering into and funding a joint development
agreement; and IV. The option to acquire from WELLEX shares of stock of EXPRESS SAVINGS BANK ("ESB") up to 40% of
the outstanding capital stock of ESB of U-Land. The provisions of the memorandum were agreed to be executed within
40 days from its execution date.

The 40-day period lapsed but Wellex and U-Land were not able to enter into any share purchase agreement
although drafts were exchanged between the two. However, Despite the absence of a share purchase agreement, U-
Land remitted to Wellex a total of US$7,499,945.00. Wellex acknowledged the receipt of these remittances in a
confirmation letter addressed to U-Land and allegedly delivered stock certificates and TCTs of subject properties.
Despite these transactions, Wellex and U-Land still failed to enter into the share purchase agreement and the joint
development agreement. Thus, U-Land filed a Complaint72 praying for rescission of the First Memorandum of
Agreement and damages against Wellex and for the issuance of a Writ of Preliminary Attachment. Note: After
verification with the Securities and Exchange Commission, U-Land discovered that "APIC did not own a single share of
stock in APC.

RTC: Ruled In favor of Uland and ordered rescission of contract under Art. 1911 of the civil code. Basis of rescission:
Wellex’s misrepresentation that APIC was a majority shareholder of APC that compelled it to enter into the agreement..
“Notwithstanding the said remittances, APIC does not own a single share of APC. On the other hand, defendant could
not even satisfactorily substantiate its claim that at least it had the intention to cause the transfer of APC shares to APIC.
Defendant obviously did not enter into the stipulated SPA because it did not have the shares of APC transferred to APIC
despite its representations. Under the circumstances, it is clear that defendant fraudulently violated the provisions of
the MOA.”

On appeal, the Court of Appeals affirmed the ruling of the Regional Trial Court. Hence this petition.

Petitioners invokes Suria v. Intermediate Appellate Court, which held that an "action for rescission is not a
principal action that is retaliatory in character under Article 1191 of the Civil Code, but a subsidiary one which is
available only in the absence of any other legal remedy under Article 1384 of the Civil Code Respondent U-land avers
that this case was inapplicable because the pertinent provision in Suria was not Article 1191 but rescission under Article
1383 of the Civil Code. The "rescission" referred to in Article 1191 referred to "resolution" of a contract due to a breach
of a mutual obligation, while Article 1384 spoke of "rescission" because of lesion and damage. Thus, the rescission that is
relevant to the present case is that of Article 1191, which involves breach in a reciprocal obligation. It is, in fact,
resolution, and not rescission as a result of fraud or lesion, as found in Articles 1381, 1383, and 1384 of the Civil Code.

Issue: Whether or not respondent U-Land correctly sought the principal relief of rescission or resolution under Article
1191.

Held: Yes.
 Respondent U-Land is praying for rescission or resolution under Article 1191, and not rescission under Article
1381. The failure of one of the parties to comply with its reciprocal prestation allows the wronged party to seek the
remedy of Article 1191. The wronged party is entitled to rescission or resolution under Article 1191, and even the
payment of damages. It is a principal action precisely because it is a violation of the original reciprocal prestation. Article
1381 and Article 1383, on the other hand, pertain to rescission where creditors or even third persons not privy to the
contract can file an action due to lesion or damage as a result of the contract. Rescission or resolution under Article
1191, therefore, is a principal action that is immediately available to the party at the time that the reciprocal prestation
was breached. Article 1383 mandating that rescission be deemed a subsidiary action cannot be applicable to rescission
or resolution under Article 1191. Thus, respondent U-Land correctly sought the principal relief of rescission or resolution
under Article 1191.

The order is valid. Enforcement of Section 9 of the First Memorandum of Agreement has the same effect as
rescission or resolution under Article 1191 of the Civil Code. The parties are obligated to return to each other all that
they may have received as a result of the breach by petitioner Wellex of the reciprocal obligation. Therefore, the Court
of Appeals did not err in affirming the rescission granted by the trial court.

Contrary to petitioner Wellex’s argument, this is not rescission under Article 1381 of the Civil Code. This case
does not involve prejudicial transactions affecting guardians, absentees, or fraud of creditors. Article 1381(3) pertains in
particular to a series of fraudulent actions on the part of the debtor who is in the process of transferring or alienating
property that can be used to satisfy the obligation of the debtor to the creditor. There is no allegation of fraud for
purposes of evading obligations to other creditors. The actions of the parties involving the terms of the First
Memorandum of Agreement do not fall under any of the enumerated contracts that may be subject of rescission.

Further, respondent U-Land is pursuing rescission or resolution under Article 1191, which is a principal action.
Justice J.B.L. Reyes’ concurring opinion in the landmark case of Universal Food Corporation v. Court of Appeals184 gave
a definitive explanation on the principal character of resolution under Article 1191 and the subsidiary nature of actions
under Article 1381:
The rescission on account of breach of stipulations is not predicated on injury to economic interests of the party plaintiff
but on the breach of faith by the defendant, that violates the reciprocity between the parties. It is not a subsidiary
action, and Article 1191 may be scanned without disclosing anywhere that the action for rescission thereunder is
subordinated to anything other than the culpable breach of his obligations by the defendant. This rescission is a principal
action retaliatory in character, it being unjust that a party be held bound to fulfill his promises when the other violates
his. As expressed in the old Latin aphorism: "Non servanti fidem, non est fides servanda." Hence, the reparation of
damages for the breach is purely secondary.

On the contrary, in the rescission by reason of lesion or economic prejudice, the cause of action is subordinated
to the existence of that prejudice, because it is the raison detre as well as the measure of the right to rescind. Hence,
where the defendant makes good the damages caused, the action cannot be maintained or continued, as expressly
provided in Articles 1383 and 1384. But the operation of these two articles is limited to the cases of rescission for lesión
enumerated in Article 1381 of the Civil Code of the Philippines, and does not apply to cases under Article 1191.

Rescission or resolution under Article 1191, therefore, is a principal action that is immediately available to the
party at the time that the reciprocal prestation was breached. Article 1383 mandating that rescission be deemed a
subsidiary action cannot be applicable to rescission or resolution under Article 1191. Thus, respondent U-Land correctly
sought the principal relief of rescission or resolution under Article 1191.
 The obligations of the parties gave rise to reciprocal prestations, which arose from the same cause: the desire of
both parties to enter into a share purchase agreement that would allow both parties to expand their respective airline
operations in the Philippines and other neighboring countries.

Other Matters:
1. The MOA is ambiguous. The parties were never able to arrive at a specific period within which they would bind
themselves to enter into an agreement.
2. There was no express or implied novation of the First Memorandum of Agreement. There was no incompatibility
between the original terms of the First Memorandum of Agreement and the remittances made by respondent U-Land
for the shares of stock. These remittances were actually made with the view that both parties would subsequently enter
into a share purchase agreement. It is clear that there was no subsequent agreement inconsistent with the provisions of
the First Memorandum of Agreement. There being no novation of the First Memorandum of Agreement, respondent U-
Land is entitled to the return of the amount it remitted to petitioner Wellex. Petitioner Wellex is likewise entitled to the
return of the certificates of shares of stock and titles of land it delivered to respondent U-Land.
3. Applying Article 1185 of the Civil Code, the parties are obligated to return to each other all they have received.
petitioner Wellex is obligated to return the remittances made by respondent U-Land, in the same way that respondent
U-Land is obligated to return the certificates of shares of stock and the land titles to petitioner Wellex.
4. The jurisprudence relied upon by petitioner Wellex is not applicable.
5. Petitioner Wellex was not guilty of fraud but of violating Article 1159 of the Civil Code. The absence of fraud in a
transaction does not mean that rescission under Article 1191 is not proper. This case is not an action to declare the First
Memorandum of Agreement null and void due to fraud at the inception of the contract or dolo causante. This case is not
an action for fraud based on Article 1381 of the Civil Code. Rescission or resolution under Article 1191 is predicated on
the failure of one of the parties in a reciprocal obligation to fulfill the prestation as required by that obligation. It is not
based on vitiation of consent through fraudulent misrepresentations.
6. Respondent U-Land was not bound to pay the US$3 million under the joint development agreement.
7. Respondent U-Land was not obligated to exhaust the "securities" given by petitioner Wellex
Provisions:
ART. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply
with what is incumbent upon him.
The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages
in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible.
The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period.
This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance
with articles 1385 and 1388 and the Mortgage Law.
Articles 1380 and 1381, on the other hand, provide an enumeration of rescissible contracts: ART. 1380. Contracts validly
agreed upon may be rescinded in the cases established by law. ART. 1381. The following contracts are rescissible:
(1) Those which are entered into by guardians whenever the wards whom they represent suffer lesion by more than
one-fourth of the value of the things which are the object thereof;
(2) Those agreed upon in representation of absentees, if the latter suffer the lesion stated in the preceding number;
(3) Those undertaken in fraud of creditors when the latter cannot in any other manner collect the claims due them;
(4) Those which refer to things under litigation if they have been entered into by the defendant without the knowledge
and approval of the litigants or of competent judicial authority;
(5) All other contracts specially declared by law to be subject to rescission.

Article 1383 expressly provides for the subsidiary nature of rescission:

ART. 1383. The action for rescission is subsidiary; it cannot be instituted except when the party suffering damage has no
other legal means to obtain reparation for the same.

Rescission itself, however, is defined by Article 1385:

ART. 1385. Rescission creates the obligation to return the things which were the object of the contract, together with
their fruits, and the price with its interest; consequently, it can be carried out only when he who demands rescission can
return whatever he may be obliged to restore. Neither shall rescission take place when the things which are the object
of the contract are legally in the possession of third persons who did not act in bad faith.

For Article 1191 to be applicable, however, there must be reciprocal prestations as distinguished from mutual
obligations between or among the parties. A prestation is the object of an obligation, and it is the conduct required by
the parties to do or not to do, or to give.177 Parties may be mutually obligated to each other, but the prestations of
these obligations are not necessarily reciprocal. The reciprocal prestations must necessarily emanate from the same
cause that gave rise to the existence of the contract. This distinction is best illustrated by an established authority in civil
law, the late Arturo Tolentino:
This article applies only to reciprocal obligations. It has no application to every case where two persons are mutually
debtor and creditor of each other. There must be reciprocity between them. Both relations must arise from the same
cause, such that one obligation is correlative to the other. Thus, a person may be the debtor of another by reason of an
agency, and his creditor by reason of a loan. They are mutually obligated, but the obligations are not reciprocal.
Reciprocity arises from identity of cause, and necessarily the two obligations are created at the same time.

Note: Wellex is a corporation established under Philippine law and it maintains airline operations in the Philippines. It
owns shares of stock in several corporations including Air Philippines International Corporation (APIC), Philippine Estates
Corporation (PEC), and Express Savings Bank (ESB). Wellex alleges that it owns all shares of stock of Air Philippines
Corporation (APC).

U-Land Airlines Co. Ltd. (U-Land) "is a corporation duly organized and existing under the laws of Taiwan, registered to do
business . . . in the Philippines." It is engaged in the business of air transportation in Taiwan and in other Asian countries.

Note: This case distinguished rescission under Art. 1191-“resolution” and rescission under Art. 1381, 1383 and 1384.

When a party seeks the relief of rescission as provided in Article 1381, there is no need for reciprocal prestations to exist
between or among the parties. All that is required is that the contract should be among those enumerated in Article
1381 for the contract to be considered rescissible. Unlike Article 1191, rescission under Article 1381 must be a subsidiary
action because of Article 1383.

Rescission or resolution under Article 1191 is a principal action that is immediately available to the party at the time that
the reciprocal prestation was breached. Mutual restitution is required in cases involving rescission under Article 1191.
This means bringing the parties back to their original status prior to the inception of the contract. Determining the
existence of fraud is not necessary in an action for rescission or resolution under Article 1191. The existence of fraud
must be established if the rescission prayed for is the rescission under Article 1381.

G.R. No. 212375

KABISIG REAL WEALTH DEV., INC. AND FERNANDO C. TIO VS. YOUNG BUILDERS CORPORATION
Facts: Kabisig Real Wealth Dev., Inc. (Kabisig), through Ferdinand Tio (Tio), contracted the services of Young Builders
Corporation (Young Builders) to supply labor, tools, equipment, and materials for the renovation of its building. Young
Builders then finished the work and billed Kabisig for P4,123,320.95. However, despite numerous demands, Kabisig
failed to pay. It contended that no written contract was ever entered into between the parties and it was never
informed of the estimated cost of the renovation. Thus, Young Builders filed an action for Collection of Sum of Money
against Kabisig.

The Regional Trial Court (RTC) of Cebu City rendered a Decision finding for Young Builders, ordering the defendants to
pay plaintiff P4,123,320.95 representing the value of services rendered and materials used in the renovation.

The appellate court affirmed the RTC Decision, with modification, ordering the defedants therein to pay the plaintiff
Young Builders Corporation Two Million Four Hundred Thousand (₱2,400,000.00) Pesos as TEMPERATE DAMAGES for
the value of services, rendered and materials used in the renovation of defendants-appellants building.

Issue: Whether or not Kabisig is liable to Young Builders for the damages.

Ruling: Yes. Under the Civil Code, a contract is a meeting of minds, with respect to the other, to give something or to
render some service. Under Article 1318, for a contract to be valid, it must have the following essential elements: (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. Consent must exist, otherwise, the contract is nonexistent. Consent is manifested by the
meeting of the offer and the acceptance of the thing and the cause, which are to constitute the contract. By law, a
contract of sale, is perfected at the moment there is a meeting of the minds upon the thing that is the object of the
contract and upon the price. Indeed, it is a consensual contract which is perfected by mere consent.

Kabisig’s claim as to the absence of a written contract between it and Young Builders simply does not hold water. It is
settled that once perfected, a contract is generally binding in whatever form, whether written or oral, it may have been
entered into, provided the aforementioned essential requisites for its validity are present. Article 1356 of the Civil Code
provides:

Art. 1356. Contracts shall be obligatory in whatever form they may have been entered into, provided all the essential
requisites for their validity are present.

There is nothing in the law that requires a written contract for the agreement in question to be valid and enforceable.
Also, the Court notes that neither Kabisig nor Tio had objected to the renovation work, until it was already time to settle
the bill.

Likewise, the appellate court aptly reduced the amount of damages awarded by the RTC. Under Article 2199 of the Civil
Code, actual or compensatory damages are those awarded in satisfaction of, or in recompense for, loss or injury
sustained. They proceed from a sense of natural justice and are designed to repair the wrong that has been done, to
compensate for the injury inflicted. They either refer to the loss of what a person already possesses (dano emergente),
or the failure to receive as a benefit that which would have pertained to him (lucro cesante), as in this case.

For an injured party to recover actual damages, however, he is required to prove the actual amount of loss with
reasonable degree of certainty premised upon competent proof and on the best evidence available. Here, the evidence
reveals that Young Builders failed to submit any competent proof of the specific amount of actual damages being
claimed. The documents submitted by Young Builders either do not bear the name of Kabisig or Tio, their conformity, or
signature, or do not indicate in any way that the amount reflected on its face actually refers to the renovation project.

Notwithstanding the absence of sufficient proof, Young Builders still deserves to be recompensed for actually
completing the work. In the absence of competent proof on the amount of actual damages, the courts allow the party to
receive temperate damages. Temperate or moderate damages, which are more than nominal but less than
compensatory damages, may be recovered when the court finds that some pecuniary loss has been suffered but its
amount cannot, from the nature of the case, be proved with certainty.

To determine the compensation due and to avoid unjust enrichment from resulting out of a fulfilled contract, the
principle of quantum meruit may be used. Under this principle, a contractor is allowed to recover the reasonable value
of the services rendered despite the lack of a written contract. The measure of recovery under the principle should
relate to the reasonable value of the services performed. The principle prevents undue enrichment based on the
equitable postulate that it is unjust for a person to retain any benefit without paying for it. Being predicated on equity,
said principle should only be applied if no express contract was entered into, and no specific statutory provision was
applicable. The principle of quantum meruit justifies the payment of the reasonable value of the services rendered and
should apply in the absence of an express agreement on the fees.

Under the established circumstances, the total amount of ₱2,400,000.00 which the CA awarded is deemed to be a
reasonable compensation under the principle of quantum meruit since the renovation of Kabisig’s building had already
been completed in 2001.

G.R. No. 171428 November 11, 2013

ALEJANDRO V. TANKEH, Petitioner, vs.

DEVELOPMENT BANK OF THE PHILIPPINES, STERLING SHIPPING LINES, INC., RUPERTO V. TANKEH, VICENTE ARENAS,
and ASSET PRIVATIZATION TRUST, Respondents.

Facts:

Sometime in 1980, Alejandro was approached by his brother, Ruperto (president of SSL) informing him that the
latter was operating a new shipping line business and offered him 1000 shares worth P1M to be a director of the
business. Alejandro accepted the offer based on the promised that he be part of the admin staff so that he can oversee
the operation of the business plus his son, who is a practicing lawyer would be given a position in the company.

A loan was applied from DBP for financing of an ocean-going vessel with the conditions that the first mortgage is
obtained over the vessel, the future earnings of the mortgage including proceeds should be assigned to DBP and DBP is
assigned to no less than 67% of the voting shares of the company. Alejandro signed the Assignment of Shares of Stock
with Voting Rights and the promissory note making him liable jointly and severally for the amount of the loan. After the
vessel is acquired, a deed of assignment was executed in favor of DBP. On 1983, upon realizing that he was only being
made a tool to realize the purposes of Ruperto, Alejandro officially informed the company by means of letter that he has
severed his connection with the company and asking the board to pass a resolution to released him from his liabilities
with DBP and notify the latter about this.
 On 1986, the account of SSL in the DBP were transferred to Asset Privatization Trust by virtue of Presidential
Proclamation No. 50. The asset including loan in favor of DBP were ordered to be transferred to the national
government. Despite the assignment and cash equity contribution of SSL to cover part of the acquisition cost of the
vessel and the like, the promissory note still subsisted. Hence, Alejandro is still bound as a debtor because of the
promissory note.

Alejandro’s contention: The promisorry note must be declared as null and void and he be absolved from any liability.
Ruperto exercised deceit and fraud in causing him to bind himself jointly and severally to pay DBP the amount of the
mortgage loan. All the money supposedly invested by him were put by Ruperto, hence he had never invested any
money. He was invited to attend the board meeting only once and he was never compensated by SSL for being called
director and stockholder. None of the promises of Ruperto was complied with.

Issue: WON the fraud perpetrated by Ruperto is serious enough to warrant annulment of the contract?

Ruling: No. Only incidental fraud exists in this case. Therefore it is not sufficient to warrant the annulment of the
contracts petitioner entered into but respondent Ruperto is liable to pay him damages. The distinction between fraud as
a ground for rendering a contract voidable or as basis for an award of damages is provided in Article 1344: In order that
fraud may make a contract voidable, it should be serious and should not have been employed by both contracting
parties. Incidental fraud only obliges the person employing it to pay damages.

There are two types of fraud contemplated in the performance of contracts: dolo incidente or incidental fraud and dolo
causante or fraud serious enough to render a contract voidable. If there is fraud in the performance of the contract, then
this fraud will give rise to damages. If the fraud did not compel the imputing party to give his or her consent, it may not
serve as the basis to annul the contract, which exhibits dolo causante. However, the party alleging the existence of fraud
may prove the existence of dolo incidente. This may make the party against whom fraud is alleged liable for damages.

Article 1340 of the Civil Code recognizes the reality of some exaggerations in trade which negates fraud. It reads: The
usual exaggerations in trade, when the other party had an opportunity to know the facts, are not in themselves
fraudulent.

Given the standing and stature of the petitioner, he was in a position to ascertain more information about the contract.
The following facts show that petitioner was fully aware of the magnitude of his undertaking: First, petitioner was fully
aware of the financial reverses that SSL had been undergoing, and he took great pains to release himself from the
obligation. Second, his background as a doctor, as a bank organizer, and as a businessman with experience in the textile
business and real estate should have apprised him of the irregularity in the contract that he would be undertaking. This
meant that at the time petitioner gave his consent to become a part of the corporation, he had been fully aware of the
circumstances and the risks of his participation. Intent is determined by the acts. Finally, the records showed that
petitioner had been fully aware of the effect of his signing the promissory note. The bare assertion that he was not privy
to the records cannot counteract the fact that petitioner himself had admitted that after he had severed ties with his
brother, he had written a letter seeking to reach an amicable settlement with respondent Rupert. Petitioner’s actions
defied his claim of a complete lack of awareness regarding the circumstances and the contract he had been entering.

The required standard of proof – clear and convincing evidence – was not met. There was no dolo causante or fraud
used to obtain the petitioner’s consent to enter into the contract. Petitioner had the opportunity to become aware of
the facts that attended the signing of the promissory note. He even admitted that he has a lawyer-son who the
petitioner had hoped would assist him in the administration of Sterling Shipping Lines, Inc. The totality of the facts on
record belies petitioner’s claim that fraud was used to obtain his consent to the contract given his personal
circumstances and the applicable law.
However, in refusing to allow petitioner to participate in the management of the business, respondent Ruperto V.
Tankeh was liable for the commission of incidental fraud. In Geraldez, this Court defined incidental fraud as "those
which are not serious in character and without which the other party would still have entered into the contract.
Although there was no fraud that had been undertaken to obtain petitioner’s consent, there was fraud in the
performance of the contract.

SPOUSES CHUNG v. ULANDAY CONSTRUCTION, INC.

G.R. NO. 156038 OCTOBER 11, 2010

Facts:
In February 1985, the petitioners contracted with respondent Ulanday Construction, Inc. (respondent) to
construct, within a 150-day period, the concrete structural shell of the former’s two-storey residential house in
Urdaneta Village, Makati City at the contract price of P3,291,142.00.
The Contract provided that: (a) the respondent shall supply all the necessary materials, labor, and equipment
indispensable for the completion of the project, except for work to be done by other contractors; (b) the petitioners
shall pay a P987,342.60 downpayment, with the balance to be paid in progress payments based on actual work
completed; (c) the Construction Manager or Architect shall check the respondent’s request for progress payment and
endorse it to the petitioners for payment within 3 days from receipt;11 (d) the petitioners shall pay the respondents
within 7 days from receipt of the Construction Manager’s or Architect’s certificate; (e) the respondent cannot change or
alter the plans, specifications, and works without the petitioners’ prior written approval; (f) a penalty equal to 0.01% of
the contract amount shall be imposed for each day of delay in completion, but the respondent shall be granted
proportionate time extension for delays caused by the petitioners; (g) the respondent shall correct, at its expense,
defects appearing during the 12-month warranty period after the petitioners’ issuance of final acceptance of work.
On March 17, 1995, the petitioners paid the downpayment, with the balance to be paid based on the progress
billings. As the actual construction went on, the respondent submitted 12 progress billings. While the petitioners settled
the first 7 progress billing, payment was made beyond the seven (7)-day period provided in the contract. During the
construction, the respondent also effected 19 change orders without the petitioners’ prior written approva. The
petitioners, however, paid for Change Order No. 1 and partially paid P130,000.00 for Change Order Nos. 16 and 17.
Petitioner Debbie Chung acknowledged in writing that the balance for Change Order Nos. 16 and 17 would be paid upon
completion of the contract.
After prior several demands, the respondent demanded full payment for progress billings and change
orders. The petitioners denied liability, asserting that the respondent violated the contract provisions by, among others,
failing to finish the contract within the 150-day stipulated period, failing to comply with the provisions on change orders,
and overstating its billings.

Issue:
Whether or not the petitioners’ payment of Change Order Nos. 1, 16, and 17 and their non-objection to the
other change orders affected by the respondent give rise to estoppels in pais.

Ruling:
Estoppel in pais, or equitable estoppel, arises when one, by his acts, representations or admissions or by his
silence when he ought to speak out, intentionally or through culpable negligence, induces another to believe certain
facts to exist and the other rightfully relies and acts on such beliefs so that he will be prejudiced if the former is
permitted to deny the existence of such facts.48 The real office of the equitable norm of estoppel is limited to supplying
deficiency in the law, but it should not supplant positive law.
In this case, the requirement for the petitioners’ written consent to any change or alteration in the specifications, plans
and works is explicit in Article 1724 of the Civil Code and is deemed written in the contract between the parties. The
contract also expressly provides that a mere act of tolerance does not constitute approval. Thus, the petitioners did not,
by accepting and paying for Change Order Nos. 1, 16, and 17, do away with the contractual term on change orders or
with the application of Article 1724. The payments for Change Order Nos. 1, 16, and 17 are, at best, acts of tolerance on
the petitioners’ part that could not modify the contract.

Heirs of Seraspi v. CA
GR # 135602, Apr. 28, 2000
331SCRA 293

Facts: Marcelino Recasa was the owner of two parcels of land. During his lifetime, Marcelino contracted three (3)
marriages. At the time of his death in 1943, he had fifteen (15) children from his three marriages. In 1948, his intestate
estate was partitioned into three parts by his heirs, each part corresponding to the share of the heirs in each marriage.

In the same year, Patronicio Recasa, representing the heirs of the first marriage, sold the share of the heirs in the estate
to Dominador Recasa, an heir of the second marriage. On June 15, 1950, Dominador, representing the heirs of the
second marriage, in turn sold the share of the heirs to Quirico and Purificacion Seraspi whose heirs are the present
petitioners. Included in this sale was the property sold by Patronicio to Dominador.

In 1958, the Seraspis obtained a loan from the Kalibo Rural Bank, Inc. (KRBI) on the security of the lands in question to
finance improvements on the lands. However, they failed to pay the loan for which reason the mortgage was foreclosed
and the lands were sold to KRBI as the highest bidder. Subsequently, the lands were sold by KRBI to Manuel Rata,
brother-in-law of Quirico Seraspi. It appears that Rata, as owner of the property, allowed Quirico Seraspi to administer
the property.

In 1974, private respondent Simeon Recasa, Marcelino’s child by his third wife, taking advantage of the illness of Quirico
Seraspi, who had been paralyzed due to a stroke, forcibly entered the lands in question and took possession thereof.

In 1983, the Seraspis purchased the lands from Manuel Rata and afterwards filed a complaint against Simeon Recasa for
recovery of possession of the lands.

The trial court ruled in favor of the Seraspis, stating that they had acquired the property through a sale and acquisitive
prescription. However, on appeal, the Court of Appeals reversed on the ground that the action of the Seraspis was
barred by the statute of limitations. Hence, this petition filed by Quirico Seraspi who, in the meantime, had passed away
and was thus substituted by his heirs.

Issues: (1) Whether or not petitioners’ action is barred by extinctive prescription; and (2) Whether or not private
respondent Simeon Recasa acquired ownership of the properties in question through acquisitive prescription

Held: SC ruled for petitioners. (1)Citing Arradaza v. Court of Appeals, it held that an action for recovery of title or
possession of real property or an interest therein can only be brought within ten (10) years after the cause of action has
accrued. Since the action for recovery of possession and ownership was filed by petitioners only on April 12, 1987, i.e.,
thirteen (13) years after their predecessor-in-interest had been allegedly deprived of the possession of the property by
private respondent, it was held that the action had prescribed. This case involves acquisitive, not extinctive, prescription.
What is more, the facts in that case arose before the effectivity of the Civil Code. Accordingly, what was applied was §41
of the Code of Civil Procedure which provides that title by prescription is acquired after ten (10) years, in whatever
manner possession may have been commenced or continued, and regardless of good faith or with just title.

On the other hand, what is involved here is extinctive prescription, and the applicable law is Art. 1141 of the Civil Code
which provides: Real actions over immovables prescribe after thirty years. This provision is without prejudice to what is
established for the acquisition of ownership and other real rights by prescription.

Art. 1117. Acquisitive prescription of dominion and other real rights may be ordinary or extraordinary. Ordinary
acquisitive prescription requires possession of things in good faith and with just title for the time fixed by law.
Art. 1134. Ownership and other real rights over immovable property are acquired by ordinary prescription through
possession of ten years.
Art. 1137. Ownership and other real rights over immovables also prescribe through uninterrupted adverse possession
thereof for thirty years, without need of title or of good faith.

Thus, acquisitive prescription of dominion and other real rights may be ordinary or extraordinary, depending on whether
the property is possessed in good faith and with just title for the time fixed by law. Private respondent contends that he
acquired the ownership of the questioned property by ordinary prescription through adverse possession for ten (10)
years.
(2) Respondent Simeon Recasa has neither just title nor good faith. As Art. 1129 provides: For the purposes of
prescription, there is just title when the adverse claimant came into possession of the property through one of the
modes recognized by law for the acquisition of ownership or other real rights, but the grantor was not the owner or
could not transmit any right.
In the case at bar, private respondent did not acquire possession of the property through any of the modes recognized
by the Civil Code, to wit: (1) occupation, (2) intellectual creation, (3) law, (4) donation, (5) succession, (6) tradition in
consequence of certain contracts, and (7) prescription.

Private respondent could not have acquired ownership over the property through occupation since, under Art. 714 of
the Civil Code, the ownership of a piece of land cannot be acquired by occupation. Nor can he base his ownership on
succession for the property was not part of those distributed to the heirs of the third marriage, to which private
respondent belongs.

Neither can private respondent claim good faith in his favor. Good faith consists in the reasonable belief that the person
from whom the possessor received the thing was its owner but could not transmit the ownership thereof. Private
respondent entered the property without the consent of the previous owner. For all intents and purposes, he is a mere
usurper.

Like private respondent, petitioners have not acquired the property through any of the modes recognized by law for the
acquisition of ownership. The basis of petitioners’ claim of ownership is the contract of sale they had with Rata, but this
by itself is insufficient to make them owners of the property. For while a contract of sale is perfected by the meeting of
minds upon the thing which is the object of the contract and upon the price, the ownership of the thing sold is not
transferred to the vendee until actual or constructive delivery of the property. Hence, the maxim non nudis pactis, sed
traditione dominia dominica rerum transferuntur (not mere agreements but tradition transfers the ownership of things).

Consequently, petitioners are not the owners of the property since it has not been delivered to them. At the time they
bought the property from Rata in 1983, the property was in the possession of private respondent.

However, this does not give private respondent a right to remain in possession of the property. Petitioners’ title to the
property prevails over private respondents’ possession in fact but without basis in law. As held in Waite v. Peterson,
when the property belonging to a person is unlawfully taken by another, the former has the right of action against the
latter for the recovery of the property. Such right may be transferred by the sale or assignment of the property, and the
transferee can maintain such action against the wrongdoer.