Clearly then, with the absence of undue influence, petitioners have no cause of action. Even assuming undue influence vitiated their consent to the loan contract, their action would already be barred by prescription when they filed it. Moreover, petitioners had clearly slept on their rights as they failed to timely assail the validity of the mortgage agreement. The denial of the petition in G.R. No.
150773 is warranted.
Art. 1338. There is fraud when, through insidious words or machinations of one of the contracting parties, the other is induced to enter into a contract which, without them, he would not have agreed to. (1269)
KINDS OF FRAUD
A. Fraud in the Celebration of Contract
1. Dolo Causante – were it not for the fraud, the other party would not have consented--the contract is voidable 2. Dolo Incidente – even w/o the fraud, the parties would
have still agreed, fraud is incidental--Contract is valid but damages may be recovered.
B. Fraud in Performance of Obligations stipulated in the Contract
Requisites of Dolo Causante
1. Fraud must be material and serious; induced the other to consent;
2. Fraud must have been employed by only one of the contracting parties, because if both committed fraud, the contract would remain valid.
3. There must be a deliberate intent to deceive or to induce therefore misrepresentation in good faith is not fraud.
4. The other party must have relied on the untrue statement and must himself not be guilty of negligence in ascertaining the truth.
1338: There is fraud when, through insidouse words or machinations, the other party was induced. And it must not be employed on a co-party. It must be employed against the other contracting parties. And if both parties employed fraud, the courts will leave them where they are. It is as if they were in good faith because of the fact that they are in pari delicto. Now, the fraud here is fraud at the time of the inception of the contract, not the fraud at the time of the fulfillment of the contract. Because if it were the latter, that belongs to 1171, and it cannot result to the nullity or annulment of the contract but will only be a ground for damages.
But if it were fraud under 1338, it can be a ground for nullity or annulment of the contract plus damages. But the fraud here must be one that is causal. (dolo causante). Because if it were merely dolo incidente, no annulment, merely damages. And the fraud alleged by the other party seeking annulment must be clearly and convincingly established by sufficient and clear evidence, not by mere preponderance.
So, requisites of fraud:
1. It must have been employed by one contracting party upon the other contracting party, not against a co-party.
2. It must have induced the other party to enter into the contract;
example: when you apply for insurance policy and the amount is one that will not require you to undergo medical examination but only to fill up a certain form. You are a chain smoker, and there is a question there do you smoke and how many packs, you answer no, i don't smoke. And you were approved. This is an example of material misrepresentation.
3. It must have been serious and must have resulted in damage or injury to the other party now seeking annulment of the contract.
CASES
CARAM vs. LAURETA
Anent the fourth error assigned, the petitioner contends that the second deed of sale, Exhibit "F", is a voidable contract. Being a voidable contract, the action for annulment of the same on the ground of fraud must be brought within four (4) years from the discovery of the fraud. In the case at bar, Laureta is deemed to have discovered that the land in question has been sold to Caram to his prejudice on December 9, 1947, when the Deed of Sale, Exhibit
"F" was recorded and entered in the Original Certificate of Title by the Register of Deeds and a new Certificate of Title No. 140 was issued in the name of Caram. Therefore, when the present case was filed on June 29, 1959, plaintiff's cause of action had long prescribed.
The petitioner's conclusion that the second deed of sale, "Exhibit F", is a voidable contract is not correct. I n order that fraud can be a ground for the annulment of a contract, it must be employed prior to or simultaneous to the, consent or creation of the contract. The fraud or dolo causante must be that which determines or is the essential cause of the contract. Dolo causante as a ground for the annulment of contract is specifically described in Article 1338 of the New Civil Code of the Philippines as "insidious words or machinations of one of the contracting parties" which induced the other to enter into a contract, and "without them, he would not have agreed to".
The second deed of sale in favor of Caram is not a voidable contract. No evidence whatsoever was shown that through insidious words or machinations, the representatives of Caram, Irespe and Aportadera had induced Mata to enter into the contract.
Since the second deed of sale is not a voidable contract, Article 1391, Civil Code of the Philippines which provides that the action for annulment shall be brought within four (4) years from the time of the discovery of fraud does not apply. Moreover, Laureta has been in continuous possession of the land since he bought it in June 1945.
A more important reason why Laureta's action could not have prescribed is that the second contract of sale, having been registered in bad faith, is null and void. Article 1410 of the Civil Code of the Philippines provides that any action or defense for the declaration of the inexistence of a contract does not prescribe.
In a Memorandum of Authorities 22 submitted to this Court on March 13, 1978, the petitioner insists that the action of Laureta against Caram has prescribed because the second contract of sale is not void under Article 1409 23 of the Civil Code of the Philippines which enumerates the kinds of contracts which are considered void.
Moreover, Article 1544 of the New Civil Code of the Philippines does not declare void a second sale of immovable registered in bad faith.
The fact that the second contract is not considered void under
Article 1409 and that Article 1544 does not declare void a deed of sale registered in bad faith does not mean that said contract is not void. Article 1544 specifically provides who shall be the owner in case of a double sale of an immovable property. To give full effect to this provision, the status of the two contracts must be declared valid so that one vendee may contract must be declared void to cut off all rights which may arise from said contract. Otherwise, Article 1544 win be meaningless.
The first sale in favor of Laureta prevails over the sale in favor of Caram.
ALCASID vs. CA
There is fraud when, through insidious words or machinations of one of the contracting parties the other is induced to enter into a contract which, without them, he would not have agreed to (Art.
1338, Civil Code).
In order that fraud may vitiate consent and be a cause for annulment of contract, the following must concur:
1.) It must have been employed by one contracting party upon the other (Art. 1342 and 1344);
2.) It must have induced the other party to enter into the contract (Art. 1338);
3.) It must have been serious (Art. 1344);
4.) It must have resulted in damage and injury to the party seeking annulment (Tolentino, IV Commentaries on the Civil Code of the Philippines, 507 [1991 ed]).
As to the alleged mistake, Article 1331 of the Civil Code of the Philippines provides:
In order that mistake may invalidate consent, it should refer to the substance of the thing which is the object of the contract, or to those conditions which have principally moved one or both parties to enter into the contract.
To invalidate consent, the error must be real and not one that could have been avoided by the party alleging it. The error must arise from facts unknown to him. He cannot allege an error which refers to a fact known to him or which he should have known by ordinary diligent examination of the facts. An error so patent and obvious that nobody could have made it, or one which could have been avoided by ordinary prudence, cannot be invoked by the one who made it in order to annul his contract (Tolentino, supra at pp. 486-487).
Petitioner could have avoided the alleged mistake had she exerted efforts to verify from her co-owners if they really consented to sell their respective shares.
As to undue influence, Article 1337 of the Civil Code of the Philippines provides:
There is undue influence when a person takes improper advantage of his power over the will of another, depriving the latter of a reasonable freedom of choice. The following circumstances shall be considered: the confidential, family, spiritual and other relations between the parties, or the fact that the person alleged to have been unduly influenced was suffering from mental weakness or was ignorant or in financial distress.
Undue influence, therefore, is any means employed upon a party which, under the circumstances, he could not well resist and which controlled his volition and induced him to give his consent to the
contract, which otherwise he would not have entered into. It must in some measure destroy the free agency of a party and interfere with the exercise of that independent discretion which is necessary for determining the advantages or disadvantages of a proposed contract (Tolentino, supra at p. 501). If a competent person has once assented to a contract freely and fairly, he is bound thereby.
The finding of the Court of Appeals that petitioner executed the contract of her own free will and choice and not from duress is fully supported by the evidence. Such finding should not be disturbed (Martinez v. Hongkong & Shanghai Bank, 15 Phil. 252 [1910]).
Private respondent did not commit any wrongful act or omission which violated the primary right of petitioner. Hence, petitioner did not have a cause of action (State Investment House, Inc. v. Court of Appeals, 206 SCRA 348 [1992]).
SAN MIGUEL vs. ETCUBAN
In the present case, while respondents insist that their action is for the declaration of nullity of their “contract of termination,” what is inescapable is the fact that it is, in reality, an action for damages emanating form employer–employee relations. First, their claim for damages is grounded on their having been deceived into serving their employment due to SMC’s concocted financial distress and fraudulent retrenchment program – a clear case of illegal dismissal. Second, a comparison of respondents’ complaint for the declaration of nullity of the retrenchment program before the labor arbiter and the complaint for the declaration of nullity of their
“contract of termination” before the RTC reveals that the allegations and prayer of the former are almost identical with those of the latter except that the prayer for reinstatement was no longer included and the claim for backwages and other benefits was replaced with a claim for actual damages. These are telltale signs that respondents’
claim for damages is intertwined with their having been separated from their employment without just cause and, consequently, has a reasonable causal connection with their employer-employee relations with SMC. Accordingly, it cannot be denied that respondents’ claim falls under the jurisdiction of the labor arbiter as provided in paragraph 4 of Article 217.
Respondent’s assertion that their action is for the declaration of nullity of their “contract of termination” is merely an ingenious way of presenting their actual action, which is a claim for damages grounded on their having been illegal terminated. However, it would seem that respondents committed a Freudian slip when they captioned their claim against SMC as an action for damages. Even the term used for designating the contract, i.e. “contract of termination,” was formulated in a shrewd manner so as to avoid a semblance of employer-employee relations. This observation is bolstered by the fact that if respondents’ designation for the contract were to be made complete and reflective of its nature, its proper designation would be a “contract of termination of employment.”
Art. 1339. Failure to disclose facts, when there is a duty to reveal them, as when the parties are bound by confidential relations, constitutes fraud.
1339: Confidential relations: between the principal and the agent.
Like if the principal authorizes the agent to sell the property at 100,000. The agent now was able to sell it at 200,000. Is the agent bound to disclose to the principal this fact? Yes, because of the confidential relation between them. Failure to do so constitutes fraud.
Art. 1340. The usual exaggerations in trade, when the other party
had an opportunity to know the facts, are not in themselves fraudulent.
1340: Dolos Bonus. Tolerated fraud. common victims are the women. For as long as the other party has the opportunity to know the facts. The rule is: let the buyer beware. According to authors, the reason for the loss is the stupidity of the person. Why will you immediately believe that this particular product is a miracle.
Basta what is required here is that you must have the opportunity to know the facts. And if it turns out that the facts are not true, you cannot sue. Because that what we call as tolerated fraud. And the rule is let the buyer beware, caveat emptor.
CASES
AZARRAGA vs. GAY
If, notwithstanding the fact that it appeared in Exhibit 4 that the area of the second parcel was, approximately, 70 hectares, the defendant, however, stated in said document Exhibit A that said second parcel contained 98 hectares as was admitted by him in his interviews with the plaintiff in the months of April and June, 1924, then she has no right to claim from the plaintiff the shortage in area of the second parcel. Furthermore, there is no evidence of record that the plaintiff made representatin to the defendant as to the area of said second parcel, and even if he did make such false representations as are now imputed to him by the defendant, the latter accepted such representations at her own risk and she is the only one responsible for the consqunces of her inexcusable credulousness. In the case of Songco vs. Sellner (37 Phil., 254), the court said:
The law allows considerable latitude to seller's statements, or dealer's talk; and experience teaches that it as exceedingly risky to accept it at its face value.
Assertions concerning the property which is the subject of a contract of sale, or in regard to its qualities and characteristics, are the usual and ordinary means used by sellers to obtain a high price and are always understood as affording to buyers no grund from omitting to make inquires. A man who relies upon such an affirmation made by a person whose interest might so readily prompt him to exaggerate the value of his property does so at his peril, and must take the consequences of his own imprudence.
The defendant had ample opportunity to appraise herself of the condition of the land which she purchased, and the plaintiff did nothing to prevent her from making such investigation as she deemed fit, and as was said in Songco vs. Sellner, supra, when the purchaser proceeds to make investigations by himself, and the vendor does nothing to prevent such investigation from being as complete as the former might wish, the purchaser cannot later allege that the vendor made false representations to him. (National Cash Register Co. vs. Townsend, 137 N. C., 652; 70 L. R. A., 349;
Williamson vs. Holt, 147 N. C., 515.) The same doctrine has been sustained by the courts of the United States in the following cases, among others: Misrepresentation by a vendor of real property with reference to its area are not actionable, where a correct description of the property was given in the deed and recorded chain of title, which the purchaser's agent undertook to investigate and report upon, and the vendor made on effort to prevent a full investigation." (Shappirio vs. Goldberg, 48 Law. ed., 419.) "One who contracts for the purchase of real estate in reliance on the representations and statements of the vendor as to its character and value, but after he has visited and examined it for himself, and has had the means and opportunity of verifying such statements,
cannot avoid the contract on the ground that they were false or exaggerated." (Brown vs. Smith, 109 Fed., 26.)
That the defendant knew that the area of the second parcel was only about 70 hectares is shown by the fact that she received the document Exhibit 4 before the execution of the contract Exhibit A, as also Exhibit E-3 on September 30, 1920; which is the notification of the day for the trial of the application for registratin of said parcel, wherein it appears that it had an area of 60 hectares more or less, and by the fact that she received from the plaintiff in the month of June 1924 the copy of the plans of the two parcels, wherein appear their respective areas; and yet, in spite of all this, she did not complain of the difference in the area of said second parcel until the year 1926. Moreover, the record contains several of the defendant's letters to the plaintiff in the years 1921 to 1925, in which said defendant acknowledges her debt, and confining herself to petitioning for extentions of time within which to make payment for the reasons given therein. But in none of these letters is there any allusion to such lack of area, nor did she complain to the plaintiff of the supposed deceit of which she believes she is a victim.
All of which, in our opinion, shows that no such deceit was practised, as the trial court rightly found.
Art. 1341. A mere expression of an opinion does not signify fraud, unless made by an expert and the other party has relied on the former's special knowledge.
CASES
SONGCO vs. SELLNER
Notwithstanding the fact that Songco's statement as to the probable output of his crop was disingenuous and uncandid, we nevertheless think that Sellner was bound and that he must pay the price stipulated. The representation in question can only be considered matter of opinion as the cane was still standing in the field, and the quantity of the sugar it would produce could not be known with certainty until it should be harvested and milled. Undoubtedly Songco had better experience and better information on which to form an opinion on this question than Sellner. Nevertheless the latter could judge with his own eyes as to the character of the cane, and it is shown that he measured the fields and ascertained that they contained 96 1/2 hectares.
It is of course elementary that a misinterpretation upon a mere
It is of course elementary that a misinterpretation upon a mere