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Private respondent Saturnino Bareng was the registered owner of two parcels of land, one of
which is Lot No. 661-E. Petitioners were lessees of a 200 sq. m. portion of one of Lot No.661-E.On April
29, 1985, Saturnino Bareng and his son, Francisco Bareng, obtained a loan from petitioners amounting
to twenty six thousand pesos (P26,000), in exchange for possession and enjoyment of the fruits of Lot
No. 661-E.On August 3, 1986, Saturnino sold to his son Francisco 18,500 sq. m. of Lot No. 661-D-5-A. In
turn, Francisco sold on August 27, 1986 to Jose Ramos. The portion of land being rented to petitioners
was included in the portion sold to Jose Ramos. The deeds of sale were not registered in the office of the
register of deeds. As the Barengs failed to pay their loan, petitioners complained to Police Captain
Rodolfo Saet. A Compromise Agreement was executed between Francisco Bareng and the Adorables
whereby the former acknowledged his indebtedness of P56,385.00 which he promised to pay on or
before July 15, 1987. When the maturity date arrived, however, Francisco Bareng failed to pay. A
demand letter was sent to Francisco Bareng, but he refused to pay. Petitioners, learning of the sale
made by Francisco Bareng to Jose Ramos, then filed a complaint with the Regional Trial Court for the
annulment or rescission of the sale on the ground that the sale was fraudulently prepared and executed.
On February 15, 1991, the trial court rendered judgment dismissing the complaint for lack of cause of
action, declaring the contract of sale between Francisco Bareng and Jose Ramos valid and ordering
Francisco Bareng to pay the amount he owed petitioners. On appeal, the Court of Appeals affirmed the
decision of the Regional Trial Court, with modification as to the amount of Francisco
Bareng's debt to petitioners.


Whether the petitioners have the right to rescind the contract between their debtors and a third party

NO. According to the SC, as creditors, petitioners do not have such material interest as they only
have a personal right to receive payment for the loan; it is not a real right over the lot subject of the
deed of sale. A personal right is the power of one person to demand of another, as a definite passive
subject, the fulfillment of a prestation to give, to do, or not to do. On the other hand, a real right is the
power belonging to a person over a specific thing, without a passive subject individually determined,
against whom such right may be personally exercised. In this case, while petitioners have an interest in
securing payment of the loan they extended, their right to seek payment does not in any manner attach
to a particular portion of the patrimony of their debtor ,Francisco Bareng. According to the SC, before a
person can impugn the fraudulent actions of a debtor, the creditor must first exercise all other rights
and actions for the same purpose as stated in Art.1177 of the Civil Code: The creditors, after having pursued
the property in possession of the debtor to satisfy their claims may exercise all the rights and bring all the actions of
the latter for the same purpose, save those which are inherent in his person; they may also impugn the
actions which the debtor may have done to defraud them.(Emphasis added)Indeed, an action for
rescission is a subsidiary remedy; it cannot be instituted except when the party suffering damage has no
other legal means to obtain reparation for the same.

On the Carlatan Bridge in La Union. Picart was riding on his pony over said bridge. Before he had gotten
half way across, Smith approached from the opposite direction in an automobile. As the defendant
neared the bridge he saw a horseman on it and blew his horn to give warning of his approach. He
continued his course and after he had taken the bridge he gave two more successive blasts, as it
appeared to him that the man on horseback before him was not observing the rule of the road.
Picart saw the automobile coming and heard the warning signals. However, being perturbed by the
novelty of the apparition or the rapidity of the approach, he pulled the pony closely up against the
railing on the right side of the bridge instead of going to the left. He says that the reason he did this was
that he thought he did not have sufficient time to get over to the other side. As the automobile
approached, Smith guided it toward his left, that being the proper side of the road for the machine. In so
doing the defendant assumed that the horseman would move to the other side. Seeing that the pony
was apparently quiet, the defendant, instead of veering to the right while yet some distance away or
slowing down, continued to approach directly toward the horse without diminution of speed. When he
had gotten quite near, there being then no possibility of the horse getting across to the other side, the
defendant quickly turned his car sufficiently to the right to escape hitting the horse; but in so doing the
automobile passed in such close proximity to the animal that it became frightened and turned its body
across the bridge, got hit by the car and the limb was broken. The horse fell and its rider was thrown off
with some violenceAs a result of its injuries the horse died. The plaintiff received contusions which
caused temporary unconsciousness and required medical attention for several days.

From a judgment of the CFI of La Union absolving Smith from liability Picart has appealed.

ISSUE: WON Smith was guilty of negligence such as gives rise to a civil obligation to repair the damage
HELD: the judgment of the lower court must be reversed, and judgment is here rendered that the Picart
recover of Smith damages

The test by which to determine the existence of negligence in a particular case may be stated as follows:
Did the defendant in doing the alleged negligent act use that person would have used in the same
situation? If not, then he is guilty of negligence. The existence of negligence in a given case is not
determined by reference to the personal judgment of the actor in the situation before him. The law
considers what would be reckless, blameworthy, or negligent in the man of ordinary intelligence and
prudence and determines liability by that. The question as to what would constitute the conduct of a
prudent man in a given situation must of course be always determined in the light of human experience
and in view of the facts involved in the particular case.

Could a prudent man, in the case under consideration, foresee harm as a result of the course actually
pursued? If so, it was the duty of the actor to take precautions to guard against that harm. Reasonable
foresight of harm, followed by ignoring of the suggestion born of this prevision, is always necessary
before negligence can be held to exist. Stated in these terms, the proper criterion for determining the
existence of negligence in a given case is this: Conduct is said to be negligent when a prudent man in the
position of the tort feasor would have foreseen that an effect harmful to another was sufficiently
probable to warrant his foregoing conduct or guarding against its consequences.

Applying this test to the conduct of the defendant in the present case we think that negligence is clearly
established. A prudent man, placed in the position of the defendant, would in our opinion, have
recognized that the course which he was pursuing was fraught with risk, and would therefore have
foreseen harm to the horse and the rider as reasonable consequence of that course. Under these
circumstances the law imposed on the Smith the duty to guard against the threatened harm.

It goes without saying that the plaintiff himself was not free from fault, for he was guilty of antecedent
negligence in planting himself on the wrong side of the road. But as we have already stated, Smith was
also negligent; and in such case the problem always is to discover which agent is immediately and
directly responsible. It will be noted that the negligent acts of the two parties were not
contemporaneous, since the negligence of the defendant succeeded the negligence of the plaintiff by an
appreciable interval. Under these circumstances the law is that the person who has the last fair chance
to avoid the impending harm and fails to do so is chargeable with the consequences, without reference
to the prior negligence of the other party.

Facts: The Philippine Bar Association wanted to erect a building in its lot in Intramuros. They were able
to obtain a contract with the United Construction Company Inc for the construction of the building and
the design was obtained from Juan M. Nakpil & Sons and Juan F. Nakpil. The Building was completed in
June 1966. On August 2, 1968 a massive earthquake hit Manila with an intensity of about 7.3. This
earthquake caused damage to the building and caused it to lean forward dangerously which led to the
vacation of the building. United Construction Company in turn shored up the building and incurred
13,661.28 php as costs. The PBA then instituted a case against UCC for damages due to its negligence
regarding the construction of the said building thru its failure to follow the designs coming from the
architects. UCC then filed a complaint against the architects (Nakpil & Sons) alleging that it was the
designs that are flawed and that caused the building’s inability to withstand an earthquake. UCC also
included the president of PBA for including them in their petition. Nakpil & Sons answer that the
petitioners need not to change the defendants in their petition as UCC deviated from the plans which
caused the damages to the building. In the course of the trial a commissioner was appointed by both
parties to give a report regarding the technical aspects of the case. His report concluded that indeed
there were faults arising from the negligence of both defendants. The report stated that the design was
flawed and that UCC deviated from the designs which aggravated the problem. The defendants then put
up the Act of God defense.

Issue: Whether or not the defendants could escape liability from the building due to a fortuitous event
which is unforeseeable and inevitable even if their negligence is established

Held: The defendants cannot validly invoke the Act of God defense. This is because of the report
submitted by the appointed Commissioner which established their negligence. Acceptance of the
building, after completion, does not imply waiver of any of the causes of action by reason of any defect.
To exempt the obligor from its liability these requisites should first concur: (a) the cause of the breach of
the obligation must be independent of the will of the debtor; (b) the event must be either unforeseeable
or unavoidable; (c) the event must be such as to render it impossible for the debtor to fulfill his
obligation in a normal manner; and (d) the debtor must be free from any participation in, or aggravation
of the injury to the creditor. The report of the Commissioner established that the defects that occurred
to the building could be attributed to the act of man specifically that of the architects and the engineers
as well as the builders. This was because of the fact that UCC deviated from the plans submitted by the
architects and their failure to observe the required marksmanship in constructing the building as well as
the required degree of supervision. Nakpil & Sons are also liable for the inadequacies and defect in their
submitted plan and specifications. These circumstances are the proximate causes of the damages that
the PBA building incurred. The costs are to be paid by the defendants amounting to 5M which includes
all appreciable damages as well as indemnity plus 100,000php for the attorney’s fee.

One who negligently creates a dangerous condition cannot escape liability for the natural and probable
consequences thereof, although the act of a third person, or an act of God for which he is not
responsible, intervenes to precipitate the loss.

On 13 January 1950, Teodoro Vaño, as attorney-in-fact of Jose Vaño, sold seven lots of the Banilad
Estate located in Cebu City to Benito Liu and Cirilo Pangalo. Teodoro Vaño dealt with Frank Liu, the
brother of Benito Liu, in the sale of the lots. The lots sold to Benito Liu were Lot Nos. 5, 6, 13, 14, and 15
of Block 12 for a total price of P4,900. Benito Liu gave a down payment of P1,000, undertaking to pay
the balance of P3,900 in monthly installments of P100 beginning at the end of January 1950. The lots
sold to Cirilo Pangalo were Lot Nos. 14 and 15 of Block 11 for a total price of P1,967.50. Cirilo Pangalo
gave P400 as down payment, undertaking to pay the balance of P1,567.50 in monthly installments of
P400 beginning at the end of January 1950. Meanwhile, Jose Vaño passed away. Benito Liu subsequently
paid installments totaling P2,900, leaving a balance of P1,000. Apparently, Benito Liu stopped further
payments because Teodoro Vaño admitted his inability to transfer the lot titles to Benito Liu. Later, in a
letter dated 16 October 1954, Teodoro Vaño informed Frank Liu that the Supreme Court had already
declared valid the will of his father Jose Vaño. Thus, Teodoro Vaño could transfer the titles to the
buyers’ names upon payment of the balance of the purchase price.When Benito Liu failed to reply,
Teodoro Vaño sent him another letter,reminding him of his outstanding balance. It appears that it was
only after nine years that Frank Liu responded through a letter. In the letter, Frank Liu informed Teodoro
Vaño that he was ready to pay the balance of the purchase price of the seven lots. He requested for the
execution of a deed of sale of the lots in his name and the delivery of the titles to him. On 22 April 1966,
Benito Liu sold to Frank Liu the five lots (Lot Nos. 5, 6, 13, 14 and 15 of Block 12) which Benito Liu
purchased from Teodoro Vaño. Frank Liu assumed the balance of P1,000 for the five lots. Cirilo Pangalo
likewise sold to Frank Liu the two lots (Lot Nos. 14 and 15 of Block 11) that Pangalo purchased from
Teodoro Vaño. Frank Liu likewise assumed the balance of P417 for the two lots.Frank Liu reiterated in a
letter his request for Teodoro Vaño to execute the deed of sale covering the seven lots so he could
secure the corresponding certificates of title in his name. He also requested for the construction of the
subdivision roads pursuant to the original contract. In the letter, Frank Liu referred to another letter,
which he allegedly sent to Teodoro Vaño. According to Frank Liu, he enclosed PBC Check No. D-782290
for P1,417, which isthe total balance of the accounts of Benito Liu and Cirilo Pangalo on the seven lots.
On 19 August 1968, Teodoro Vaño sold Lot No. 6 to respondent Teresita Loy for P3,930. The Register of
Deeds of Cebu City entered this sale in the Daybook on 24 February 1969.On 16 December 1969,
Teodoro Vaño sold Lot No. 5 to respondent Alfredo Loy for P3,910. The Register of Deeds of Cebu City
entered this sale in the Daybook on 16 January 1970.Teodoro Vaño died. His widow, Milagros Vaño,
succeeded as administratrix of the Estate of Jose Vaño

The probate court approved the claim of Frank Liu. Thus, Milagros Vaño executed a deed of conveyance
covering the seven lots in favor of Frank Liu, in compliance with the probate court’s order. The deed of
conveyance included Lot Nos. 5 and 6, the same lots Teodoro Vaño sold to Alfredo Loy, Jr. and to
Teresita Loy. The probate court, upon an ex-parte motion filed by Teresita Loy, issued an Order
approving the sale by Teodoro Vaño of Lot No. 6 in her favor likewise, approving the sale of Lot No. 5 by
Teodoro Vaño in his favor.The Register of Deeds of Cebu City issued a new title in the name of Alfredo
Loy, Jr. and Perfeccion V. Loy likewise, in the name of Teresita A. Loy on Lot Nos. 5 and 6 respectively.
On 3 June 1976, Milagros Vaño filed a motion for reconsideration of the Orders of the probate court.
She contended that she already complied with the probate court’s Order to execute a deed of sale
covering the seven lots, including Lot Nos. 5 and 6, in favor of Frank Liu. She also stated that no one
notified her of the motion of the Loys, and if the Loys or the court notified her, she would have objected
to the sale of the same lots to the Loys. Frank Liu then filed a complaint for reconveyance or annulment
of title of Lot Nos. 5 and 6. The probate court denied the motion for reconsideration of Milagros Vaño
on the ground that the conflicting claims regarding the ownership of Lot Nos. 5 and 6 were already
under litigation.The Regional Trial Court rendered judgment against Frank Liu. Frank Liu appealed to the
Court of Appeals, which affirmed in toto the decision of the trial court. Frank Liu filed a motion for
reconsideration but the Court of Appeals denied the same. Hence, the instant petition

1. Whether or not there is unilateral extrajudicial rescission of the contract to sell between
Teodoro Vaño and Frank Liu?
2. Whether or not the subsequent sales to Alfredo Loy, Jr. and Teresita Loy of Lot Nos. 5 and 6,
respectively, were valid?
On the first issue, there was no valid cancellation of the contract to sell because there was no written
notice of the cancellation to Benito Liu or Frank Liu. There was even no implied cancellation of the
contract to sell. The letter does not mention anything about rescinding or cancelling the contract to sell.
Although the law allows the extra-judicial cancellation of a contract to sell upon failure of one party to
comply with his obligation, notice of such cancellation must still be given to the party who is at fault. The
notice of cancellation to the other party is one of the requirements for a valid cancellation of a contract
to sell, aside from the existence of a lawful cause. The fact that Teodoro Vaño advised Frank Liu to file
his claim with the probate court is certainly not the conduct of one who supposedly unilaterally
rescinded the contract with Frank Liu. In this case, there was prior delay or default by the seller. As
admitted by Teodoro Vaño, he could not deliver the titles because of a case questioning the authenticity
of the will of his father. On the second issue, a prior contract to sell made by the decedent prevails over
the subsequent contract of sale made by the administrator without probate court approval. The
administrator cannot unilaterally cancel a contract to sell made by the decedent in his lifetime. Any
cancellation must observe all legal requisites, like written notice of cancellation based on lawful cause.
It is immaterial if the prior contract is a mere contract to sell and does not immediately convey
ownership. Frank Liu’s contract to sell became valid and effective upon its execution. The seller, Jose
Vaño, was then alive and thus there was no need for court approval for the immediate effectivity of the
contract to sell. In contrast, the execution of the contracts of sale of the Loys took place after the death
of the registered owner of the lots. The law requires court approval for the effectivity of the Loys’
contracts of sale against third parties. The probate court did not validly give this approval since it failed
to notify all interested parties of the Loy’s motion for court approval of the sale. Besides, the probate
court had lost jurisdiction over the lots after it approved the earlier sale to Frank Liu. Clearly, Frank Liu’s
contract to sell prevails over the Loys’ contracts of sale.Since the Loys have no contract of sale validly
approved by the probate court, while Frank Liu has a contract of sale approved by the probate court, Lot
Nos. 5 and 6 belong to Frank Liu. The Estate of Jose Vaño should reimburse the Loys their payments on
Lot Nos. 5 and 6.