Obligations and Contracts Final Exam Coverage

OBLIGATIONS AND CONTRACTS S.Y.
2012-2013
FINAL EXAM: Defective Contracts to Estoppel
RESCISSIBLE CONTRACTS ............................................................................3

ROSENCOR vs. INQUING [G.R. No. 140479. March 8, 2001] ........................... 3
KHE HONG CHENG vs. CA [G.R. No. 144169. March 28, 2001] ....................... 14
GOZUN vs. MERCADO (G.R. No. 167812, December 19, 2006) ...................... 132
CABALES vs. CA (G.R. No.162421, 3-Aug-2007) ................................................ 138
PENALBER vs. RAMOS (G.R. No. 178645, 30-Jan-2009) .................................. 144
June 21, 2006) ...................... 20
THE ESTATE OF PEDRO GONZALES vs. THE HEIRS OF MARCOS PEREZ

(G.R. No. 169681, 5-Nov-2009) ............................................................................ 154
HEIRS OF QUIRONG vs. DBP (G.R. No. 173441, December 3, 2009) ............. 29
VOID CONTRACTS .................................................................................... 161
UNION BANK vs. ONG (G.R. No. 152347
ADA VS. BAYLON, 678 SCRA 293, G.R. No. 184235, August 13, 2012 ................33
MODINA vs. CA (G.R. No. 109355., 29-Oct-1999) ............................................. 161
VOIDABLE CONTRACTS ............................................................................ 46
DOMINGO vs. CA (G.R. No. 127540. 17-Oct-2001) .......................................... 166
SAMONTE vs. CA [G.R. No. 104223. July 12, 2001] ............................................ 46
SPS. BAUTISTA vs. SILVA (G.R. No. 157434, 19-Sept-2006) ............................ 172
MENDEZONA VS. OZAMIZ (376 SCRA 482) .................................................... 52
HULST vs. PR BUILDERS, INC. (G.R. No. 156364 , 3-Sept-2007) ................... 179
FAMANILA vs. CA (G.R. No. 150429, August 29, 2006) .................................... 61
QUIMPO vs. VDA. DE VELTRAN (G.R. No. 160956, 13-Feb-2008) ................ 189
CATALAN vs. BASA (G.R. No. 159567, July 31, 2007)......................................... 66
SPS ALINAS vs. SPS ALINAS (G.R. No. 158040, 14-Apr-2008) ........................ 195
VILLANUEVA vs. CHIONG [G.R. No. 159889, June 05, 2008] .......................... 71
NUNGA vs. NUNGA (G.R. No. 178306, 18-Dec-2008) ..................................... 203
AYSON vs. PARAGAS (557 SCRA 50).................................................................. 76
CAMPOS VS. PASTRANA (G.R. No. 175994, 8-Dec-2009) .............................. 215
DESTREZA vs. ALAROS (G.R. No. 176863, October 30, 2009) ......................... 84
TECSON vs. FRANCISCO (G.R. No. 180683, 1-Jun-2011) ..................................222
KINGS PROPERTIES vs. GALIDO (G.R. No. 170023, November 27, 2009) ...... 91
DPWH vs. QUIWA 665 SCRA 479, G.R. No. 183444 ........................................ 233
VILORIA vs. CONTINENTAL AIRLINES, 663 SCRA 57, G.R. NO. 188288..... 102
ESTOPPEL .................................................................................................. 243
UNENFORCEABLE CONTRACTS ............................................................... 120
LIM vs. QUEENSLAND TOKYO COMMODITIES, INC. (G.R. No. 136031, 4Jan-2002) .............................................................................................................. 243
REGAL FILMS vs. CONCEPCION [G.R. No. 139532. August 9, 2001] .......... 120
LITONJUA vs. FERNANDEZ [G.R. No. 148116. April 14, 2004] ....................... 123
REPUBLIC vs. CA, SPS SANTOS, ST. JUDGES ENT., INC., SPS CALAGUIAN
(G.R. No. 116111, 21-Jan-1999) .............................................................................. 248
OBLIGATIONS AND CONTRACTS S.Y. 2012-2013

HEIRS OF HERMOSILLA vs. SPS REMOQUILLO (G.R. No. 167320, 30-Jan2007) ..................................................................................................................... 256
ASILO, JR. vs. PEOPLE and SPOUSES BOMBASI, G.R. No. 159017-18, March 9,
2011 ........................................................................................................................ 260

Plaintiffs and plaintiffs-intervenors averred that they are the lessees since 1971 of
a two-story residential apartment located at No. 150 Tomas Morato Ave.,
Quezon City covered by TCT No. 96161 and owned by spouses Faustino and
RESCISSIBLE CONTRACTS
Cresencia Tiangco. The lease was not covered by any contract. The lessees were
ROSENCOR vs. INQUING [G.R. No. 140479. March 8, 2001]1
renting the premises then for P150.00 a month and were allegedly verbally
granted by the lessors the pre-emptive right to purchase the property if ever
This is a petition for review on certiorari under Rule 45 of the Rules of Court
[1]
they decide to sell the same.
seeking reversal of the Decision of the Court of Appeals dated June 25, 1999 in
Upon the death of the spouses Tiangcos in 1975, the management of the
CA-G.R. CV No. 53963. The Court of Appeals decision reversed and set aside the
property was adjudicated to their heirs who were represented by Eufrocina de
[2]
Decision dated May 13, 1996 of Branch 217 of the Regional Trial Court of
Leon. The lessees were allegedly promised the same pre-emptive right by the
Quezon City in Civil Case No. Q-93-18582.
heirs of Tiangcos since the latter had knowledge that this right was extended to
The case was originally filed on December 10, 1993 by Paterno Inquing, Irene
Guillermo and Federico Bantugan, herein respondents, against Rosencor
Development Corporation (hereinafter Rosencor), Rene Joaquin, and
Eufrocina de Leon. Originally, the complaint was one for annulment of absolute
the former by the late spouses Tiangcos. The lessees continued to stay in the
premises and allegedly spent their own money amounting from P50,000.00 to
P100,000.00 for its upkeep. These expenses were never deducted from the
rentals which already increased to P1,000.00.
deed of sale but was later amended to one for rescission of absolute deed of
In June 1990, the lessees received a letter from Atty. Erlinda Aguila demanding
sale. A complaint-for intervention was thereafter filed by respondents Fernando
that they vacate the premises so that the demolition of the building be
Magbanua and Danna Lizza Tiangco. The complaint-in-intervention was
undertaken. They refused to leave the premises. In that same month, de Leon
admitted by the trial court in an Order dated May 4, 1994.
[3]
The facts of the case, as stated by the trial court and adopted by the appellate
court, are as follows:
refused to accept the lessees rental payment claiming that they have run out of
receipts and that a new collector has been assigned to receive the
payments. Thereafter, they received a letter from Eufrocina de Leon offering to
sell to them the property they were leasing for P2,000,000.00. xxx.
This action was originally for the annulment of the Deed of Absolute Sale dated
September 4, 1990 between defendants Rosencor and Eufrocina de Leon but
later amended (sic) praying for the rescission of the deed of sale.
The lessees offered to buy the property from de Leon for the amount of
P1,000,000.00. De Leon told them that she will be submitting the offer to the
other heirs. Since then, no answer was given by de Leon as to their offer to buy
1 Rescissible Contracts

the property. However, in November 1990, Rene Joaquin came to the leased
The lessees offered to reimburse de Leon the selling price of P726,000.00 plus an
premises introducing himself as its new owner.
additional P274,000.00 to complete their P1,000.000.00 earlier offer. When
In January 1991, the lessees again received another letter from Atty. Aguila
their offer was refused, they filed the present action praying for the following: a)
demanding that they vacate the premises. A month thereafter, the lessees
rescission of the Deed of Absolute Sale between de Leon and Rosencor dated
received a letter from de Leon advising them that the heirs of the late spouses
September 4, 1990; b) the defendants Rosencor/Rene Joaquin be ordered to
Tiangcos have already sold the property to Rosencor. The following month Atty.
reconvey the property to de Leon; and c) de Leon be ordered to reimburse the
Aguila wrote them another letter demanding the rental payment and
plaintiffs for the repairs of the property, or apply the said amount as part of the
introducing herself as counsel for Rosencor/Rene Joaquin, the new owners of
price for the purchase of the property in the sum of P100,000.00.
the premises.
After trial on the merits, the Regional Trial Court rendered a Decision
The lessees requested from de Leon why she had disregarded the pre-emptive
May 13, 1996 dismissing the complaint. The trial court held that the right of
right she and the late Tiangcos have promised them. They also asked for a copy
redemption on which the complaint was based was merely an oral one and as
of the deed of sale between her and the new owners thereof but she refused to
such, is unenforceable under the law. The dispositive portion of the May 13,
heed their request. In the same manner, when they asked Rene Joaquin a copy
1996 Decision is as follows:
of the deed of sale, the latter turned down their request and instead Atty. Aguila
WHEREFORE, in view of the foregoing, the Court DISMISSES the instant
wrote them several letters demanding that they vacate the premises. The
action. Plaintiffs and plaintiffs-intervenors are hereby ordered to pay their
lessees offered to tender their rental payment to de Leon but she refused to
respective monthly rental of P1,000.00 per month reckoned from May 1990 up to
accept the same.
the time they leave the premises. No costs.
In April 1992 before the demolition can be undertaken by the Buiding Official,
SO ORDERED.
the barangay interceded between the parties herein after which Rosencor raised
Not satisfied with the decision of the trial court, respondents herein filed a
the issue as to the rental payment of the premises. It was also at this instance
Notice of Appeal dated June 3, 1996. On the same date, the trial court issued an
that the lessees were furnished with a copy of the Deed of Sale and discovered
Order for the elevation of the records of the case to the Court of Appeals. On
that they were deceived by de Leon since the sale between her and Rene
August 8, 1997, respondents filed their appellate brief before the Court of
Joaquin/Rosencor took place in September 4, 1990 while de Leon made the offer
Appeals.
to them only in October 1990 or after the sale with Rosencor had been
consummated. The lessees also noted that the property was sold only for
P726,000.00.
[4]
[5]
dated
[6]

On June 25, 1999, the Court of Appeals rendered its decision
[7]
reversing the
I.
decision of the trial court. The dispositive portion of the June 25, 1999 decision
THE COURT OF APPEALS GRAVELY ERRED WHEN IT ORDERED THE
is as follows:
RESCISSION OF THE ABSOLUTE DEED OF SALE BETWEEN EUFROCINA DE
WHEREFORE, premises considered, the appealed decision (dated May 13, 1996)
LEON AND PETITIONER ROSENCOR.
of the Regional Trial Court (Branch 217) in Quezon City in Case No. Q-93-18582
II.
is hereby REVERSED and SET ASIDE. In its stead, a new one is rendered
ordering:
THE COURT OF APPEALS COMMITTED MANIFEST ERROR IN MANDATING

THAT EUFROCINA DE LEON AFFORD RESPONDENTS THE OPPORTUNITY
(1) The rescission of the Deed of Absolute Sale executed between the appellees
on September 4, 1990;
(2) The reconveyance of the subject premises to appellee Eufrocina de Leon;
TO EXERCISE THEIR RIGHT OF FIRST REFUSAL.

III.
THE COURT OF APPEALS GRIEVOUSLY ERRED IN CONCLUDING THAT
(3) The heirs of Faustino and Crescencia Tiangco, thru appellee Eufrocina de
RESPONDENTS HAVE ESTABLISHED THEIR RIGHT OF FIRST REFUSAL
Leon, to afford the appellants thirty days within which to exercise their right of
DESPITE PETITIONERS RELIANCE ON THEIR DEFENSE BASED ON THE
first refusal by paying the amount of ONE MILLION PESOS (P1,000,000.00) for
STATUTE OF FRAUDS.
the subject property; and

(4) The appellants to, in turn, pay the appellees back rentals from May 1990 up
to the time this decision is promulgated.
No pronouncement as to costs.
SO ORDERED.
[8]
Eufrocina de Leon, for herself and for the heirs of the spouses Faustino and
Crescencia Tiangco, did not appeal the decision of the Court of Appeals.
At the onset, we note that both the Court of Appeals and the Regional Trial
Court relied on Article 1403 of the New Civil Code, more specifically the
provisions on the statute of frauds, in coming out with their respective
Petitioners herein filed a Motion for Reconsideration of the decision of the
decisions. The trial court, in denying the petition for reconveyance, held that
Court of Appeals but the same was denied in a Resolution dated October 15,
right of first refusal relied upon by petitioners was not reduced to writing and as
such, is unenforceable by virtue of the said article. The Court of Appeals, on the
[9]
1999.
Hence, this petition for review on certiorari where petitioners Rosencor

Development Corporation and Rene Joaquin raise the following assignment of
errors
[10]
other hand, also held that the statute of frauds governs the right of first refusal
claimed by respondents. However, the appellate court ruled that respondents
had duly proven the same by reason of petitioners waiver of the protection of

the statute by reason of their failure to object to the presentation of oral
b) A special promise to answer for the debt, default, or miscarriage of another;
evidence of the said right.
c) An agreement made in consideration of marriage, other than a mutual
Both the appellate court and the trial court failed to discuss, however, the
promise to marry;
threshold issue of whether or not a right of first refusal is indeed covered by the
d) An agreement for the sale of goods, chattels or things in action, at a price not
provisions of the New Civil Code on the statute of frauds. The resolution of the
less than five hundred pesos, unless the buyer accept and receive part of such
issue on the applicability of the statute of frauds is important as it will
goods and chattels, or the evidences, or some of them, of such things in action,
determine the type of evidence which may be considered by the trial court as
or pay at the time some part of the purchase money; but when a sale is made by
proof of the alleged right of first refusal.
auction and entry is made by the auctioneer in his sales book, at the time of the
The term statute of frauds is descriptive of statutes which require certain
sale, of the amount and kind of property sold, terms of sale, price, names of
classes of contracts to be in writing. This statute does not deprive the parties of
purchasers and person on whose account the sale is made, it is a sufficient
the right to contract with respect to the matters therein involved, but merely
memorandum;
regulates the formalities of the contract necessary to render it enforceable. Thus,
e) An agreement for the leasing of a longer period than one year, or for the sale
they are included in the provisions of the New Civil Code regarding
of real property or of an interest therein;
unenforceable contracts, more particularly Art. 1403, paragraph 2. Said article
f) A representation to the credit of a third person.
provides, as follows:
The purpose of the statute is to prevent fraud and perjury in the enforcement of
Art. 1403. The following contracts are unenforceable, unless they are ratified:
obligations depending for their evidence on the unassisted memory of witnesses
xxx
by requiring certain enumerated contracts and transactions to be evidenced by a
(2) Those that do not comply with the Statute of Frauds as set forth in this
writing signed by the party to be charged.
number. In the following cases an agreement hereafter made shall be
refers to specific kinds of transactions and cannot apply to any other transaction
unenforceable by action, unless the same, or some note or memorandum
that is not enumerated therein.
thereof, be in writing, and subscribed by the party charged, or by his agent;
the existence of a perfected contract.
evidence, therefore, of the agreement cannot be received without the writing, or
The question now is whether a right of first refusal is among those enumerated
a secondary evidence of its contents:
in the list of contracts covered by the Statute of Frauds. More specifically, is a
a) An agreement that by its terms is not to be performed within a year from the
right of first refusal akin to an agreement for the leasing of a longer period than
making thereof;
[12]
[11]
Moreover, the statute of frauds
The application of such statute presupposes

[13]

one year, or for the sale of real property or of an interest therein as
testified that they were promised by the late spouses Faustino and Crescencia
contemplated by Article 1403, par. 2(e) of the New Civil Code.
Tiangco and, later on, by their heirs a right of first refusal over the property they
We have previously held that not all agreements affecting land must be put
were currently leasing should they decide to sell the same. Moreover,
into writing to attain enforceability
[14]
. Thus, we have held that the setting up of
respondents presented a letter
[20]
dated October 9, 1990 where Eufrocina de
, and an agreement creating a
Leon, the representative of the heirs of the spouses Tiangco, informed them that
are not covered by the provisions of the statute of frauds. The
they had received an offer to buy the disputed property for P2,000,000.00 and
reason simply is that these agreements are not among those enumerated in
offered to sell the same to the respondents at the same price if they were
Article 1403 of the New Civil Code.
interested. Verily, if Eufrocina de Leon did not recognize respondents right of
boundaries,
[15]
right of way
the oral partition of real property
[17]
[16]
A right of first refusal is not among those listed as unenforceable under the
statute of frauds. Furthermore, the application of Article 1403, par. 2(e) of the
New Civil Code presupposes the existence of a perfected, albeit unwritten,
first refusal over the property they were leasing, then she would not have
bothered to offer the property for sale to the respondents.
It must be noted that petitioners did not present evidence before the trial court
A right of first refusal, such as the one involved in the instant
contradicting the existence of the right of first refusal of respondents over the
case, is not by any means a perfected contract of sale of real property. At best, it
disputed property. They only presented petitioner Rene Joaquin, the vice-
is a contractual grant, not of the sale of the real property involved, but of the
president of petitioner Rosencor, who admitted having no personal knowledge
contract of sale.
[18]
right of first refusal over the property sought to be sold
[19]
It is thus evident that the statute of frauds does not contemplate cases involving
a right of first refusal. As such, a right of first refusal need not be written to be
enforceable and may be proven by oral evidence.
of the details of the sales transaction between Rosencor and the heirs of the
spouses Tiangco
Leon
[22]
[21]
They also dispensed with the testimony of Eufrocina de
who could have denied the existence or knowledge of the right of first
refusal. As such, there being no evidence to the contrary, the right of first
refusal claimed by respondents was substantially proven by respondents before
The next question to be ascertained is whether or not respondents have
the lower court.
satisfactorily proven their right of first refusal over the property subject of the
Deed of Absolute Sale dated September 4, 1990 between petitioner Rosencor
and Eufrocina de Leon.
Having ruled upon the question as to the existence of respondents right of first
refusal, the next issue to be answered is whether or not the Court of Appeals
erred in ordering the rescission of the Deed of Absolute Sale dated September 4,
On this point, we agree with the factual findings of the Court of Appeals that
respondents have adequately proven the existence of their right of first
refusal. Federico Bantugan, Irene Guillermo, and Paterno Inquing uniformly
1990 between Rosencor and Eufrocina de Leon and in decreeing that the heirs of
the spouses Tiangco should afford respondents the exercise of their right of first
refusal. In other words, may a contract of sale entered into in violation of a

third partys right of first refusal be rescinded in order that such third party can
third person is in lawful possession of the subject of the contract and that he did
exercise said right?
not act in bad faith. However, this rule is not applicable in the case before us
The issue is not one of first impression.
because the petitioner is not considered a third party in relation to the Contract
In Guzman, Bocaling and Co, Inc. vs. Bonnevie
[23]
, the Court upheld the decision
of a lower court ordering the rescission of a deed of sale which violated a right of
lawfully and in good faith.

Indeed, Guzman, Bocaling and Co. was the vendee in the Contract of
first refusal granted to one of the parties therein. The Court held:
xxx Contract of Sale was not voidable but rescissible. Under Article 1380 to 1381
(3) of the Civil Code, a contract otherwise valid may nonetheless be
subsequently rescinded by reason of injury to third persons, like creditors. The
status of creditors could be validly accorded the Bonnevies for they had
substantial interests that were prejudiced by the sale of the subject property to
the petitioner without recognizing their right of first priority under the Contract
Sale. Moreover, the petitioner cannot be deemed a purchaser in good faith for
the record shows that it categorically admitted that it was aware of the lease in
favor of the Bonnevies, who were actually occupying the subject property at the
time it was sold to it. Although the Contract of Lease was not annotated on the
transfer certificate of title in the name of the late Jose Reynoso and Africa
Reynoso, the petitioner cannot deny actual knowledge of such lease which was
equivalent to and indeed more binding than presumed notice by registration.
of Lease.
According to Tolentino, rescission is a remedy granted by law to the contracting
parties and even to third persons, to secure reparations for damages caused to
them by a contract, even if this should be valid, by means of the restoration of
things to their condition at the moment prior to the celebration of said
contract. It is a relief allowed for the protection of one of the contracting parties
and even third persons from all injury and damage the contract may cause, or to
protect
of Sale nor may its possession of the subject property be regarded as acquired
some
incompatible
and
preferent
right
created
by
the
contract. Rescission implies a contract which, even if initially valid, produces a

lesion or pecuniary damage to someone that justifies its invalidation for reasons
of equity.
It is true that the acquisition by a third person of the property subject of the
contract is an obstacle to the action for its rescission where it is shown that such
A purchaser in good faith and for value is one who buys the property of another
without notice that some other person has a right to or interest in such property
without and pays a full and fair price for the same at the time of such purchase
or before he has notice of the claim or interest of some other person in the
property. Good faith connotes an honest intention to abstain from taking
unconscientious advantage of another. Tested by these principles, the
petitioner cannot tenably claim to be a buyer in good faith as it had notice of the
lease of the property by the Bonnevies and such knowledge should have
cautioned it to look deeper into the agreement to determine if it involved
stipulations that would prejudice its own interests.
Subsequently
[25]
Inc.
[24]
in Equatorial Realty and Development, Inc. vs. Mayfair Theater,
, the Court, en banc, with three justices dissenting,
[26]
ordered the
rescission of a contract entered into in violation of a right of first refusal. Using

the ruling in Guzman Bocaling & Co., Inc. vs. Bonnevie as basis, the Court
As also earlier emphasized, the contract of sale between Equatorial and Carmelo
decreed that since respondent therein had a right of first refusal over the said
is characterized by bad faith, since it was knowingly entered into in violation of
property, it could only exercise the said right if the fraudulent sale is first set
the rights of and to the prejudice of Mayfair. In fact, as correctly observed by
aside or rescinded. Thus:
the Court of Appeals, Equatorial admitted that its lawyers had studied the
What Carmelo and Mayfair agreed to, by executing the two lease contracts, was
contract of lease prior to the sale. Equatorials knowledge of the stipulations
that Mayfair will have the right of first refusal in the event Carmelo sells the
therein should have cautioned it to look further into the agreement to
leased premises. It is undisputed that Carmelo did recognize this right of
determine if it involved stipulations that would prejudice its own interests.
Mayfair, for it informed the latter of its intention to sell the said property in
Since Mayfair had a right of first refusal, it can exercise the right only if the
1974. There was an exchange of letters evidencing the offer and counter-offers
fraudulent sale is first set aside or rescinded. All of these matters are now before
made by both parties. Carmelo, however, did not pursue the exercise to its
us and so there should be no piecemeal determination of this case and leave
logical end. While it initially recognized Mayfairs right of first refusal, Carmelo
festering sores to deteriorate into endless litigation. The facts of the case and
violated such right when without affording its negotiations with Mayfair the full
considerations of justice and equity require that we order rescission here and
process to ripen to at least an interface of a definite offer and a possible
now. Rescission is a relief allowed for the protection of one of the contracting
corresponding acceptance within the 30-day exclusive option time granted
parties and even third persons from all injury and damage the contract may
Mayfair, Carmelo abandoned negotiations, kept a low profile for some time, and
cause or to protect some incompatible and preferred right by the contract. The
then sold, without prior notice to Mayfair, the entire Claro M. Recto property to
sale of the subject real property should now be rescinded considering that
Equatorial.
Mayfair, which had substantial interest over the subject property, was
Since Equatorial is a buyer in bad faith, this finding renders the sale to it of the
prejudiced by the sale of the subject property to Equatorial without Carmelo
property in question, rescissible. We agree with respondent Appellate Court
conferring to Mayfair every opportunity to negotiate within the 30-day stipulate
that the records bear out the fact that Equatorial was aware of the lease
period.
contracts because its lawyers had, prior to the sale, studied the said
In Paranaque Kings Enterprises, Inc. vs. Court of Appeals,
contracts. As such, Equatorial cannot tenably claim that to be a purchaser in
the allegations in a complaint showing violation of a contractual right of first
good faith, and, therefore, rescission lies.
option or priority to buy the properties subject of the lease constitute a valid
cause of action enforceable by an action for specific performance. Summarizing
[27]
[28]
the Court held that
the rulings in the two previously cited cases, the Court affirmed the nature of

10
and concomitant rights and obligations of parties under a right of first
first refusal of the lessee Mayfair, and rescinded the sale of the property by the
refusal. Thus:
lessor Carmelo to Equatorial Realty "considering that Mayfair, which had
We hold however, that in order to have full compliance with the contractual
substantial interest over the subject property, was prejudiced by its sale to
right granting petitioner the first option to purchase, the sale of the properties
Equatorial without Carmelo conferring to Mayfair every opportunity to
for the amount of P9,000,000.00, the price for which they were finally sold to
negotiate within the 30-day stipulated period"
respondent Raymundo, should have likewise been offered to petitioner.
In that case, two contracts of lease between Carmelo and Mayfair provided "that
The Court has made an extensive and lengthy discourse on the concept of, and
if the LESSOR should desire to sell the leased premises, the LESSEE shall be
obligations under, a right of first refusal in the case of Guzman, Bocaling & Co.
given 30 days exclusive option to purchase the same." Carmelo initially offered
vs. Bonnevie. In that case, under a contract of lease, the lessees (Raul and
to sell the leased property to Mayfair for six to seven million pesos. Mayfair
Christopher Bonnevie) were given a "right of first priority" to purchase the
indicated interest in purchasing the property though it invoked the 30-day
leased property in case the lessor (Reynoso) decided to sell. The selling price
period. Nothing was heard thereafter from Carmelo. Four years later, the latter
quoted to the Bonnevies was 600,000.00 to be fully paid in cash, less a mortgage
sold its entire Recto Avenue property, including the leased premises, to
lien of P100,000.00. On the other hand, the selling price offered by Reynoso to
Equatorial for P11,300,000.00 without priorly informing Mayfair. The Court held
and accepted by Guzman was only P400,000.00 of which P137,500.00 was to be
that both Carmelo and Equatorial acted in bad faith: Carmelo for knowingly
paid in cash while the balance was to be paid only when the property was
violating the right of first option of Mayfair, and Equatorial for purchasing the
cleared of occupants. We held that even if the Bonnevies could not buy it at the
property despite being aware of the contract stipulation. In addition to
price quoted (P600,000.00), nonetheless, Reynoso could not sell it to another
rescission of the contract of sale, the Court ordered Carmelo to allow Mayfair to
for a lower price and under more favorable terms and conditions without first
buy the subject property at the same price of P11,300,000.00.
offering said favorable terms and price to the Bonnevies as well. Only if the
In the recent case of Litonjua vs. L&R Corporation,
Bonnevies failed to exercise their right of first priority could Reynoso thereafter
case of Guzman, Bocaling & Co. vs. Bonnevie, held that the sale made therein in
lawfully sell the subject property to others, and only under the same terms and
violation of a right of first refusal embodied in a mortgage contract, was
conditions previously offered to the Bonnevies.
rescissible. Thus:
While petitioners question the validity of paragraph 8 of their mortgage
[29]
the Court, also citing the
This principle was reiterated in the very recent case of Equatorial Realty vs.
contract, they appear to be silent insofar as paragraph 9 thereof is
Mayfair Theater, Inc. which was decided en banc. This Court upheld the right of
concerned. Said paragraph 9 grants upon L&R Corporation the right of first
refusal over the mortgaged property in the event the mortgagor decides to sell

11
the same. We see nothing wrong in this provision. The right of first refusal has
Register of Deeds. As such, PWHAS is presumed to have been notified thereof
long been recognized as valid in our jurisdiction. The consideration for the loan
by registration, which equates to notice to the whole world.
mortgage includes the consideration for the right of first refusal. L&R
X X
Corporation is in effect stating that it consents to lend out money to the spouses
Litonjua provided that in case they decide to sell the property mortgaged to it,
then L&R Corporation shall be given the right to match the offered purchase
price and to buy the property at that price. Thus, while the spouses Litonjua
had every right to sell their mortgaged property to PWHAS without securing the
prior written consent of L&R Corporation, they had the obligation under
paragraph 9, which is a perfectly valid provision, to notify the latter of their
intention to sell the property and give it priority over other buyers. It is only
All things considered, what then are the relative rights and obligations of the
parties? To recapitulate: the sale between the spouses Litonjua and PWHAS is
valid, notwithstanding the absence of L & R Corporation's prior written consent
thereto. Inasmuch as the sale to PWHAS was valid, its offer to redeem and its
tender of the redemption price, as successor-in-interest of the spouses Litonjua,
within the one-year period should have been accepted as valid by the L & R
Corporation. However, while the sale is, indeed, valid, the same is rescissible
because it ignored L & R Corporation's right of first refusal.
upon the failure of L&R Corporation to exercise its right of first refusal could the
spouses Litonjua validly sell the subject properties to the others, under the same
terms and conditions offered to L&R Corporation.
Thus, the prevailing doctrine, as enunciated in the cited cases, is that a contract
of sale entered into in violation of a right of first refusal of another person, while
valid, is rescissible.
What then is the status of the sale made to PWHAS in violation of L & R
Corporation's contractual right of first refusal? On this score, we agree with the
Amended Decision of the Court of Appeals that the sale made to PWHAS is
rescissible. The case of Guzman, Bocaling & Co. v. Bonnevie is instructive on this
There is, however, a circumstance which prevents the application of this

doctrine in the case at bench. In the cases cited above, the Court ordered the
rescission of sales made in violation of a right of first refusal precisely because
the vendees therein could not have acted in good faith as they were aware or
point.
should have been aware of the right of first refusal granted to another person by
X X
the vendors therein. The rationale for this is found in the provisions of the New
It was then held that the Contract of Sale there, which violated the right of first
Civil Code on rescissible contracts. Under Article 1381 of the New Civil Code,
refusal, was rescissible.
paragraph 3, a contract validly agreed upon may be rescinded if it is undertaken
In the case at bar, PWHAS cannot claim ignorance of the right of first refusal
in fraud of creditors when the latter cannot in any manner collect the claim due
granted to L & R Corporation over the subject properties since the Deed of Real
them. Moreover, under Article 1385, rescission shall not take place when the
Estate Mortgage containing such a provision was duly registered with the

things which are the object of the contract are legally in the possession of third
persons who did not act in bad faith.
[30]
12
demanded that respondent Irene Guillermo vacate the structure they were
occupying to make way for its demolition.
It must be borne in mind that, unlike the cases cited above, the right of first
We fail to see how the letter could give rise to bad faith on the part of the
refusal involved in the instant case was an oral one given to respondents by the
petitioner. No mention is made of the right of first refusal granted to
deceased spouses Tiangco and subsequently recognized by their heirs. As such,
respondents. The name of petitioner Rosencor or any of it officers did not
in order to hold that petitioners were in bad faith, there must be clear and
appear on the letter and the letter did not state that Atty. Aguila was writing in
convincing proof that petitioners were made aware of the said right of first
behalf of petitioner. In fact, Atty. Aguila stated during trial that she wrote the
refusal either by the respondents or by the heirs of the spouses Tiangco.
letter in behalf of the heirs of the spouses Tiangco. Moreover, even assuming
It is axiomatic that good faith is always presumed unless contrary evidence is
that Atty. Aguila was indeed writing in behalf of petitioner Rosencor, there is no
[31]
adduced.
A purchaser in good faith is one who buys the property of another
showing that Rosencor was aware at that time that such a right of first refusal
without notice that some other person has a right or interest in such a property
existed.
and pays a full and fair price at the time of the purchase or before he has notice
Neither was there any showing that after receipt of this June 1, 1990 letter,
of the claim or interest of some other person in the property.
[32]
In this regard,
respondents notified Rosencor or Atty. Aguila of their right of first refusal over
the rule on constructive notice would be inapplicable as it is undisputed that the
the property. Respondents did not try to communicate with Atty. Aguila and
right of first refusal was an oral one and that the same was never reduced to
inform her about their preferential right over the disputed property. There is
writing, much less registered with the Registry of Deeds. In fact, even the lease
even no showing that they contacted the heirs of the spouses Tiangco after they
contract by which respondents derive their right to possess the property
received this letter to remind them of their right over the property.
involved was an oral one.
Respondents likewise point to the letter dated October 9, 1990 of Eufrocina de
On this point, we hold that the evidence on record fails to show that petitioners
Leon, where she recognized the right of first refusal of respondents, as indicative
acted in bad faith in entering into the deed of sale over the disputed property
of the bad faith of petitioners. We do not agree. Eufrocina de Leon wrote the
with the heirs of the spouses Tiangco. Respondents failed to present any
letter on her own behalf and not on behalf of petitioners and, as such, it only
evidence that prior to the sale of the property on September 4, 1990, petitioners
shows that Eufrocina de Leon was aware of the existence of the oral right of first
were aware or had notice of the oral right of first refusal.
refusal. It does not show that petitioners were likewise aware of the existence of
as indicative of petitioners
the said right. Moreover, the letter was made a month after the execution of the
knowledge of the said right. In this letter, a certain Atty. Erlinda Aguila
Deed of Absolute Sale on September 4, 1990 between petitioner Rosencor and
Respondents point to the letter dated June 1, 1990
[33]
the heirs of the spouses Tiangco. There is no showing that prior to the date of

13
the execution of the said Deed, petitioners were put on notice of the existence of
WHEREFORE, premises considered, the decision of the Court of Appeals dated
the right of first refusal.
June 25, 1999 is REVERSED and SET ASIDE. The Decision dated May 13, 1996 of
Clearly, if there was any indication of bad faith based on respondents evidence,
the Quezon City Regional Trial Court, Branch 217 is hereby REINSTATED
it would only be on the part of Eufrocina de Leon as she was aware of the right
insofar as it dismisses the action for rescission of the Deed of Absolute Sale
of first refusal of respondents yet she still sold the disputed property to
dated September 4, 1990 and orders the payment of monthly rentals of P1,000.00
Rosencor. However, bad faith on the part of Eufrocina de Leon does not mean
per month reckoned from May 1990 up to the time respondents leave the
that petitioner Rosencor likewise acted in bad faith. There is no showing that
premises.
prior to the execution of the Deed of Absolute Sale, petitioners were made aware
SO ORDERED.
or put on notice of the existence of the oral right of first refusal. Thus, absent
clear and convincing evidence to the contrary, petitioner Rosencor will be
presumed to have acted in good faith in entering into the Deed of Absolute Sale
over the disputed property.
Considering that there is no showing of bad faith on the part of the petitioners,
the Court of Appeals thus erred in ordering the rescission of the Deed of
Absolute Sale dated September 4, 1990 between petitioner Rosencor and the
heirs of the spouses Tiangco. The acquisition by Rosencor of the property
subject of the right of first refusal is an obstacle to the action for its rescission
where, as in this case, it was shown that Rosencor is in lawful possession of the
subject of the contract and that it did not act in bad faith.
[34]
This does not mean however that respondents are left without any remedy for
the unjustified violation of their right of first refusal. Their remedy however is
not an action for the rescission of the Deed of Absolute Sale but an action for
damages against the heirs of the spouses Tiangco for the unjustified disregard of
their right of first refusal
[35]

KHE HONG CHENG vs. CA [G.R. No. 144169. March 28, 2001]2
14
total loss of the shipment. Because of the loss, the insurer, American Home,
paid the amount of P354,000.00 (the value of the copra) to the consignee.
Before the Court is a Petition for Review on Certiorari under Rule 45, seeking to
Having been subrogated into the rights of the consignee, American Home
set aside the decision of the Court of Appeals dated April 10, 2000 and its
instituted Civil Case No. 13357 in the Regional Trial Court (RTC) of Makati,
resolution dated July 11, 2000 denying the motion for reconsideration of the
Branch 147 to recover the money paid to the consignee, based on breach of
aforesaid decision. The original complaint that is the subject matter of this case
contract of carriage. While the case was still pending, or on December 20, 1989,
is an accion pauliana-- an action filed by Philam Insurance Company, Inc.
petitioner Khe Hong Cheng executed deeds of donations of parcels of land in
(respondent Philam) to rescind or annul the donations made by petitioner Khe
favor of his children, herein co-petitioners Sandra Joy and Ray Steven. The
Hong Cheng allegedly in fraud of creditors. The main issue for resolution is
parcel of land with an area of 1,000 square meters covered by Transfer
whether
already
Certificate of Title (TCT) No. T-3816 was donated to Ray Steven. Petitioner Khe
prescribed. While the first paragraph of Article 1389 of the Civil Code
Hong Cheng likewise donated in favor of Sandra Joy two (2) parcels of land
states: The action to claim rescission must be commenced within four years...
located in Butuan City, covered by TCT No. RT-12838. On the basis of said
the question is, from which point or event does this prescriptive period
deeds, TCT No. T-3816 was cancelled and in lieu thereof, TCT No. T-5072 was
commence to run?
issued in favor of Ray Steven and TCT No. RT-12838 was cancelled and in lieu
The facts are as follows:
thereof, TCT No. RT-21054 was issued in the name of Sandra Joy.
Petitioner Khe Hong Cheng, alias Felix Khe, is the owner of Butuan Shipping
The trial court rendered judgment against petitioner Khe Hong Cheng in Civil
Lines. It appears that on or about October 4, 1985, the Philippine Agricultural
Case No. 13357 on December 29, 1993, four years after the donations were made
Trading Corporation shipped on board the vessel M/V PRINCE ERIC, owned by
and the TCTs were registered in the donees names. The decretal portion of the
petitioner Khe Hong Cheng, 3,400 bags of copra at Masbate, Masbate, for
aforesaid decision reads:
delivery to Dipolog City, Zamboanga del Norte. The said shipment of copra was
Wherefore, in view of the foregoing, the Court hereby renders judgment in
covered by a marine insurance policy issued by American Home Insurance
favor of the plaintiff and against the defendant, ordering the latter to pay the
Company (respondent Philam's assured). M/V PRINCE ERIC, however, sank
former:
somewhere between Negros Island and Northeastern Mindanao, resulting in the
1) the sum of P354,000.00 representing the amount paid by the plaintiff to the
or
not
the
action
to
rescind
the
donations
has
Philippine Agricultural Trading Corporation with legal interest at 12% from the
time of the filing of the complaint in this case;

2) the sum of P50,000.00 as attorneys fees;
3) the costs.
15
Acting thereon, the trial court denied the motion to dismiss. It held that
respondent Philam's complaint had not yet prescribed. According to the trial
[1]
After the said decision became final and executory, a writ of execution was
forthwith issued on September 14, 1995. Said writ of execution, however, was
court, the prescriptive period began to run only from December 29, 1993, the
date of the decision of the trial court in Civil Case No. 13357.
[4]
not served. An alias writ of execution was, thereafter, applied for and granted in
On appeal by petitioners, the CA affirmed the trial court's decision in favor of
October 1996. Despite earnest efforts, the sheriff found no property under the
respondent Philam. The CA declared that the action to rescind the donations
name of Butuan Shipping Lines and/or petitioner Khe Hong Cheng to levy or
had not yet prescribed. Citing Articles 1381 and 1383 of the Civil Code, the CA
garnish for the satisfaction of the trial court's decision. When the sheriff,
basically ruled that the four year period to institute the action for rescission
accompanied by counsel of respondent Philam, went to Butuan City on January
began to run only in January 1997, and not when the decision in the civil case
17, 1997, to enforce the alias writ of execution, they discovered that petitioner
became final and executory on December 29, 1993. The CA reckoned the accrual
Khe Hong Cheng no longer had any property and that he had conveyed the
of respondent Philam's cause of action on January 1997, the time when it first
subject properties to his children.
learned that the judgment award could not be satisfied because the judgment
On February 25, 1997, respondent Philam filed a complaint with the Regional
Trial Court of Makati City, Branch 147, for the rescission of the deeds of
donation executed by petitioner Khe Hong Cheng in favor of his children and
for the nullification of their titles (Civil Case No. 97-415). Respondent Philam
alleged, inter alia, that petitioner Khe Hong Cheng executed the aforesaid deeds
in fraud of his creditors, including respondent Philam.
[2]
Petitioners subsequently filed their answer to the complaint a quo. They moved
for its dismissal on the ground that the action had already prescribed. They
creditor, petitioner Khe Hong Cheng, had no more properties in his name. Prior
thereto, respondent Philam had not yet exhausted all legal means for the
satisfaction of the decision in its favor, as prescribed under Article 1383 of the
Civil Code.
[5]
The Court of Appeals thus denied the petition for certiorari filed before it, and
held that the trial court did not commit any error in denying petitioners' motion
to dismiss. Their motion for reconsideration was likewise dismissed in the
appellate court's resolution dated July 11, 2000.
posited that the registration of the deeds of donation on December 27, 1989
Petitioners now assail the aforesaid decision and resolution of the CA alleging
constituted constructive notice and since the complaint a quo was filed only on
that:
February 25, 1997, or more than four (4) years after said registration, the action
was already barred by prescription.
[3]

16
PUBLIC RESPONDENT GRAVELY ERRED AND ACTED IN GRAVE ABUSE OF
from the moment the cause of action accrues, therefore, applies. Article 1150 of
DISCRETION WHEN IT DENIED THE PETITION TO DISMISS THE CASE
the Civil Code is particularly instructive:
BASED ON THE GROUND OF PRESCRIPTION.
Art. 1150. The time for prescription for all kinds of actions, when there is no
II
special provision which ordains otherwise, shall be counted from the day they
PUBLIC RESPONDENT COURT OF APPEALS GRAVELY ERRED IN HOLDING
may be brought.
THAT PRESCRIPTION BEGINS TO RUN WHEN IN JANUARY 1997 THE
Indeed, this Court enunciated the principle that it is the legal possibility of
SHERIFF WENT TO BUTUAN CITY IN SEARCH OF PROPERTIES OF
bringing the action which determines the starting point for the computation of
PETITIONER FELIX KHE CHENG TO SATISFY THE JUDGMENT IN CIVIL
the prescriptive period for the action.
CASE NO. 13357 AND FOUND OUT THAT AS EARLY AS DEC. 20, 1989,
follows:
PETITIONERS KHE CHENG EXECUTED THE DEEDS OF DONATIONS IN
Art. 1383. An action for rescission is subsidiary; it cannot be instituted except
FAVOR OF HIS CO-PETITIONERS THAT THE ACTION FOR RESCISSION
when the party suffering damage has no other legal means to obtain reparation
ACCRUED BECAUSE PRESCRIPTION BEGAN TO RUN WHEN THESE
for the same.
DONATIONS WERE REGISTERED WITH THE REGISTER OF DEEDS IN

DECEMBER 1989, AND WHEN THE COMPLAINT WAS FILED ONLY IN
FEBRUARY 1997, MORE THAN FOUR YEARS HAVE ALREADY LAPSED AND
THEREFORE, IT HAS ALREADY PRESCRIBED.
[6]
Essentially, the issue for resolution posed by petitioners is this: When did the
four (4) year prescriptive period as provided for in Article 1389 of the Civil Code for
respondent Philam to file its action for rescission of the subject deeds of donation
commence to run?
[7]
Article 1383 of the Civil Code provides as
It is thus apparent that an action to rescind or an accion pauliana must be of last

resort, availed of only after all other legal remedies have been exhausted and
have been proven futile. For an accion pauliana to accrue, the following
requisites must concur:
1) That the plaintiff asking for rescission has a credit prior to the alienation,
although demandable later; 2) That the debtor has made a subsequent contract
conveying a patrimonial benefit to a third person; 3) That the creditor has no
other legal remedy to satisfy his claim, but would benefit by rescission of the
The petition is without merit.
conveyance to the third person; 4) That the act being impugned is fraudulent; 5)
Article 1389 of the Civil Code simply provides that, The action to claim
That the third person who received the property conveyed, if by onerous title,
rescission must be commenced within four years. Since this provision of law is
has been an accomplice in the fraud.
silent as to when the prescriptive period would commence, the general rule, i.e,
We quote with approval the following disquisition of the CA on the matter:
[8]
(Emphasis ours)

17
An accion pauliana accrues only when the creditor discovers that he has no
be constructive notice to all persons from the time of such registering, filing, or
other legal remedy for the satisfaction of his claim against the debtor other than
entering.
an accion pauliana. The accion pauliana is an action of a last resort. For as
Petitioners argument that the Civil Code must yield to the Mortgage and
long as the creditor still has a remedy at law for the enforcement of his claim
Registration Laws is misplaced, for in no way does this imply that the specific
against the debtor, the creditor will not have any cause of action against the
provisions of the former may be all together ignored. To count the four year
creditor for rescission of the contracts entered into by and between the debtor
prescriptive period to rescind an allegedly fraudulent contract from the date of
and another person or persons. Indeed, an accion pauliana presupposes a
registration of the conveyance with the Register of Deeds, as alleged by the
judgment and the issuance by the trial court of a writ of execution for the
petitioners, would run counter to Article 1383 of the Civil Code as well as settled
satisfaction of the judgment and the failure of the Sheriff to enforce and satisfy
jurisprudence. It would likewise violate the third requisite to file an action for
the judgment of the court. It presupposes that the creditor has exhausted the
rescission of an allegedly fraudulent conveyance of property, i.e., the creditor
property of the debtor. The date of the decision of the trial court against the
has no other legal remedy to satisfy his claim.
debtor is immaterial. What is important is that the credit of the plaintiff

antedates that of the fraudulent alienation by the debtor of his property. After
all, the decision of the trial court against the debtor will retroact to the time
when the debtor became indebted to the creditor.
[9]
An accion pauliana thus presupposes the following: 1) A judgment; 2) the

issuance by the trial court of a writ of execution for the satisfaction of the
judgment, and 3) the failure of the sheriff to enforce and satisfy the judgment of
the court. It requires that the creditor has exhausted the property of the debtor.
Petitioners, however, maintain that the cause of action of respondent Philam
The date of the decision of the trial court is immaterial. What is important is
against them for the rescission of the deeds of donation accrued as early as
that the credit of the plaintiff antedates that of the fraudulent alienation by the
December 27, 1989, when petitioner Khe Hong Cheng registered the subject
debtor of his property. After all, the decision of the trial court against the debtor
conveyances with the Register of Deeds. Respondent Philam allegedly had
will retroact to the time when the debtor became indebted to the creditor.
constructive knowledge of the execution of said deeds under Section 52 of
Tolentino, a noted civilist, explained:
Presidential Decree No. 1529, quoted infra, as follows:

xxx[T]herefore, credits with suspensive term or condition are excluded, because
Section 52. Constructive knowledge upon registration. Every conveyance,
mortgage, lease, lien, attachment, order, judgment, instrument or entry
affecting registered land shall, if registered, filed or entered in the Office of the
Register of Deeds for the province or city where the land to which it relates lies,
the accion pauliana presupposes a judgment and unsatisfied execution, which

cannot exist when the debt is not yet demandable at the time the rescissory
action is brought. Rescission is a subsidiary action, which presupposes that the

18
creditor has exhausted the property of the debtor which is impossible in credits
appellees Bareng. Plaintiffs-appellants, in seeking the rescission of the contracts
which cannot be enforced because of a suspensive term or condition.
of sale entered into between defendants-appellees, failed to show and prove that
While it is necessary that the credit of the plaintiff in the accion pauliana must
defendants-appellees Bareng had no other property, either at the time of the
be prior to the fraudulent alienation, the date of the judgment enforcing it is
sale or at the time this action was filed, out of which they could have collected
immaterial. Even if the judgment be subsequent to the alienation, it is merely
this (sic) debts. (Emphasis ours)
declaratory with retroactive effect to the date when the credit was
Even if respondent Philam was aware, as of December 27, 1989, that petitioner
constituted.
[10]
Khe Hong Cheng had executed the deeds of donation in favor of his children,
These principles were reiterated by the Court when it explained the requisites of
the complaint against Butuan Shipping Lines and/or petitioner Khe Hong
an accion pauliana in greater detail, to wit:
Cheng was still pending before the trial court. Respondent Philam had no
The following successive measures must be taken by a creditor before he may

bring an action for rescission of an allegedly fraudulent sale: (1) exhaust the
properties of the debtor through levying by attachment and execution upon all
the property of the debtor, except such as are exempt from execution; (2)
exercise all the rights and actions of the debtor, save those personal to him
(accion subrogatoria); and (3) seek rescission of the contracts executed by the
debtor in fraud of their rights (accion pauliana). Without availing of the first
and second remedies, i.e., exhausting the properties of the debtor or
subrogating themselves in Francisco Baregs transmissible rights and actions,
petitioners simply undertook the third measure and filed an action for
[11]
annulment of sale. This cannot be done.
(Emphasis ours)
In the same case, the Court also quoted the rationale of the CA when it upheld
the dismissal of the accion pauliana on the basis of lack of cause of action:
In this case, plaintiffs appellants had not even commenced an action against
defendants-appellees Bareng for the collection of the alleged indebtedness.
Plaintiffs-appellants had not even tried to exhaust the property of defendants-
inkling, at the time, that the trial court's judgment would be in its favor and
further, that such judgment would not be satisfied due to the deeds of donation
executed by petitioner Khe Hong Cheng during the pendency of the case. Had
respondent Philam filed his complaint on December 27, 1989, such complaint
would have been dismissed for being premature. Not only were all other legal
remedies for the enforcement of respondent Philams claims not yet exhausted
at the time the deeds of donation were executed and registered. Respondent
Philam would also not have been able to prove then that petitioner Khe Hong
Chneg had no more property other than those covered by the subject deeds to
satisfy a favorable judgment by the trial court.
It bears stressing that petitioner Khe Hong Cheng even expressly declared and
represented that he had reserved to himself property sufficient to answer for his
debts contracted prior to this date:
That the DONOR further states, for the same purpose as expressed in the next
preceding paragraph, that this donation is not made with the object of
defrauding his creditors having reserved to himself property sufficient to answer
his debts contracted prior to this date.
[12]

As mentioned earlier, respondent Philam only learned about the unlawful
conveyances made by petitioner Khe Hong Cheng in January 1997 when its
counsel accompanied the sheriff to Butuan City to attach the properties of
petitioner Khe Hong Cheng. There they found that he no longer had any
properties in his name. It was only then that respondent Philam's action for
rescission of the deeds of donation accrued because then it could be said that
respondent Philam had exhausted all legal means to satisfy the trial court's
judgment in its favor. Since respondent Philam filed its complaint for accion
pauliana against petitioners on February 25, 1997, barely a month from its
discovery that petitioner Khe Hong Cheng had no other property to satisfy the
judgment award against him, its action for rescission of the subject deeds clearly
had not yet prescribed.
A final point. Petitioners now belatedly raise on appeal the defense of improper
venue claiming that respondent Philams complaint is a real action and should
have been filed with the RTC of Butuan City since the property subject matter of
the donations are located therein. Suffice it to say that petitioners are already
deemed to have waived their right to question the venue of the instant case.
Improper venue should be objected to as follows 1) in a motion to dismiss filed
within the time but before the filing of the answer;
[13]
or 2) in the answer as an
affirmative defense over which, in the discretion of the court, a preliminary

hearing may be held as if a motion to dismiss had been filed.
[14]
Having failed to
either file a motion to dismiss on the ground of improper of venue or include

the same as an affirmative defense in their answer, petitioners are deemed to
have their right to object to improper venue.
WHEREFORE, premises considered, the petition is hereby DENIED for lack of
merit. SO ORDERED.
19

UNION BANK vs. ONG (G.R. No. 152347
June 21, 2006)3
20
Commission (SEC). To protect its interest, Union Bank lost no time in filing
with the RTC of Pasig City an action for rescission of the sale between the
By this petition for review under Rule 45 of the Rules of Court, petitioner Union
1
spouses Ong and Jackson Lee for purportedly being in fraud of creditors.
Bank of the Philippines (Union Bank) seeks to set aside the decision dated
In its complaint, docketed as Civil Case No. 61601 and eventually raffled to
December 5, 2001 of the Court of Appeals (CA) in CA-G.R. No. 66030 reversing
Branch 157 of the court, Union Bank assailed the validity of the sale, alleging
an earlier decision of the Regional Trial Court (RTC) of Pasig City in Civil Case
that the spouses Ong and Lee entered into the transaction in question for the
No. 61601, a suit thereat commenced by the petitioner against the herein
lone purpose of fraudulently removing the property from the reach of Union
respondents for annulment or rescission of sale in fraud of creditors.
Bank and other creditors. The fraudulent design, according to Union Bank, is
The facts:
evidenced by the following circumstances: (1) insufficiency of consideration, the
Herein respondents, the spouses Alfredo Ong and Susana Ong, own the
majority capital stock of Baliwag Mahogany Corporation (BMC). On October 10,
1990, the spouses executed a Continuing Surety Agreement in favor of Union
Bank to secure a P40,000,000.00-credit line facility made available to BMC. The
agreement expressly stipulated a solidary liability undertaking.
purchase price of P12,500,000.00 being below the fair market value of the
subject property at that time; (2) lack of financial capacity on the part of Lee to
buy the property at that time since his gross income for the year 1990, per the
credit investigation conducted by the bank, amounted to only P346,571.73; and
(3) Lee did not assert absolute ownership over the property as he allowed the
spouses Ong to retain possession thereof under a purported Contract of Lease
On October 22, 1991, or about a year after the execution of the surety agreement,
dated October 29, 1991.
the spouses Ong, forP12,500,000.00, sold their 974-square meter lot located in
Greenhills, San Juan, Metro Manila, together with the house and other
improvements standing thereon, to their co-respondent, Jackson Lee (Lee, for
short). The following day, Lee registered the sale and was then issued Transfer
Certificate of Title (TCT) No. 4746-R. At about this time, BMC had already
availed itself of the credit facilities, and had in fact executed a total of twentytwo (22) promissory notes in favor of Union Bank.
On November 22, 1991, BMC filed a Petition for Rehabilitation and for
Declaration of Suspension of Payments with the Securities and Exchange
Answering, herein respondents, as defendants a quo, maintained, in the main,

that both contracts of sale and lease over the Greenhills property were founded
on good and valid consideration and executed in good faith. They also scored
Union Bank for forum shopping, alleging that the latter is one of the
participating creditors in BMCs petition for rehabilitation.
Issues having been joined, trial followed. On September 27, 1999, the trial court,
applying Article 1381 of the Civil Code and noting that the evidence on record
"present[s] a holistic combination of circumstances distinctly characterized by
badges of fraud," rendered judgment for Union Bank, the Deed of Sale executed

21
on October 22, 1991 by the spouses Ong in favor of Lee being declared null and
Union Bank, not even a feeble or half-hearted one, to establish that appellants
void.
spouses have no other property from which Union Bank, as creditor of BMC,
Foremost of the circumstances adverted to relates to the execution of the sale
could obtain payment. While appellants Ong may be independently liable
against the backdrop of the spouses Ong, as owners of 70% of BMC's stocks,
directly to Union Bank under the Continuing Surety Agreement, all that Union
knowing of the companys insolvency. This knowledge was the reason why,
Bank tried to prove was that BMC was insolvent at the time of the questioned
according to the court, the spouses Ong disposed of the subject property leaving
sale. No competent evidence was adduced showing that appellants Ong had no
the bank without recourse to recover BMC's indebtedness. The trial court also
leviable assets other than the subject property that would justify challenge to
made reference to the circumstances which Union Bank mentioned in its
the transaction.
complaint as indicia of conveyance in fraud of creditors.
Petitioner moved for a reconsideration of the above decision but its motion was
Therefrom, herein respondents interposed an appeal to the CA which docketed
denied by the appellate court in its resolution of February 21, 2002.
their recourse as CA-G.R. No. 66030.
Hence, petitioners present recourse on its submission that the appellate court
In its Decision dated December 5, 2001, the CA reversed and set aside the trial
erred:
court's ruling, observing that the contract of sale executed by the spouses Ong
I. xxx WHEN IT CONSIDERED THAT THE SALE TRANSACTION BETWEEN
and Lee, being complete and regular on its face, is clothed with the prima facie
[ RESPONDENTS SPOUSES ONG AND LEE] ENJOYS THE PRESUMPTION OF
presumption of regularity and legality. Plodding on, the appellate court said:
REGULARITY AND LEGALITY AS THERE EXISTS ALSO A PRESUMPTION
In order that rescission of a contract made in fraud of creditors may be decreed,
THAT THE SAID SALE WAS ENTERED IN FRAUD OF CREDITORS.
it is necessary that the complaining creditors must prove that they cannot
PETITIONER THEREFORE NEED NOT PROVE THAT RESPONDENTS
recover in any other manner what is due them. xxx.
SPOUSES ONG DID NOT LEAVE SUFFICIENT ASSETS TO PAY THEIR
There is no gainsaying that the basis of liability of the appellant spouses in their
personal capacity to Union Bank is the Continuing Surety Agreement they have
CREDITORS. BUT EVEN THEN, PETITIONER HAS PROVEN THAT THE

SPOUSES HAVE NO OTHER ASSETS.
signed on October 10, 1990. However, the real debtor of Union Bank is BMC,
II. IN CONCLUDING, ASSUMING EX-GRATIA ARGUMENTI THAT THE SALE
which has a separate juridical personality from appellants Ong. Granting that
BETWEEN DEFENDANT-APPELLANTS ENJOY THE PRESUMPTION OF
BMC was already insolvent at the time of the sale, still, there was no showing
REGULARITY AND LEGALITY, THAT THE EVIDENCE ADDUCED BY THE
that at the time BMC filed a petition for suspension of payment that appellants
PETITIONER WAS NOT SUFFICIENT TO OVERCOME THE PRESUMPTION.
Ong were themselves bankrupt. In the case at bench, no attempt was made by

22
III. xxx IN FINDING THAT IT WAS [RESPONDENT] LEE WHO HAS
Essentially, petitioner anchors its case on Article 1381 of the Civil Code which
SUFFICIENTLY PROVEN THAT THERE WAS A VALID AND SUFFICIENT
lists as among the rescissible contracts "[T]hose undertaken in fraud of creditors
CONSIDERATION FOR THE SALE.
when the latter cannot in any other manner collect the claim due them."
IV. xxx IN NOT FINDING THAT JACKSON LEE WAS IN BAD FAITH WHEN
Contracts in fraud of creditors are those executed with the intention to
HE PURCHASED THE PROPERTY.
Petitioner maintains, citing China Banking Corporation vs. Court of
prejudice the rights of creditors. They should not be confused with those
entered into without such mal-intent, even if, as a direct consequence thereof,
Appeals, that the sale in question, having been entered in fraud of creditor, is
the creditor may suffer some damage. In determining whether or not a certain
rescissible. In the same breath, however, petitioner would fault the CA for
conveying contract is fraudulent, what comes to mind first is the question of
failing to consider that the sale between the Ongs and Lee is presumed
whether the conveyance was a bona fide transaction or a trick and contrivance
fraudulent under Section 70 of Act No. 1956, as amended, or the Insolvency Law.
to defeat creditors. To creditors seeking contract rescission on the ground of
Elaborating on this point, petitioner states that the subject sale occurred thirty
fraudulent conveyance rest the onus of proving by competent evidence the
(30) days prior to the filing by BMC of a petition for suspension of payment
existence of such fraudulent intent on the part of the debtor, albeit they may fall
before the SEC, thus rendering the sale not merely rescissible but absolutely
back on the disputable presumptions, if proper, established under Article 1387 of
void.
the Code.
We resolve to deny the petition.
In the present case, respondent spouses Ong, as the CA had determined, had
In effect, the determinative issue tendered in this case resolves itself into the
question of whether or not the Ong-Lee contract of sale partakes of a
conveyance to defraud Union Bank. Obviously, this necessitates an inquiry into
the facts and this Court eschews factual examination in a petition for review
under Rule 45 of the Rules of Court, save when, as in the instant case, a clash
between the factual findings of the trial court and that of the appellate court
6
exists, among other exceptions.

As between the contrasting positions of the trial court and the CA, that of the
latter commends itself for adoption, being more in accord with the evidence on
hand and the laws applicable thereto.
sufficiently established the validity and legitimacy of the sale in question. The
conveying deed, a duly notarized document, carries with it the presumption of
validity and regularity. Too, the sale was duly recorded and annotated on the
title of the property owners, the spouses Ong. As the transferee of said property,
respondent Lee caused the transfer of title to his name.
There can be no quibbling about the transaction being supported by a valid and
sufficient consideration. Respondent Lees account, while on the witness box,
about this angle of the sale was categorical and straightforward. An excerpt of
his testimony:
Atty. De Jesus :

23
Before you prepared the consideration of this formal offer, as standard operating
The foregoing testimony readily proves that money indeed changed hands in
procedure of buy and sell, what documents were prepared?
connection with the sale of the subject property. Respondent Lee, as purchaser,
xxx xxx xxx
paid the stipulated contract price to the spouses Ong, as vendors. Receipts
Jackson Lee:
presented in evidence covered and proved such payment. Accordingly, any

suggestion negating payment and receipt of valuable consideration for the
A. There is a downpayment.
subject conveyance, or worse, that the sale was fictitious must simply be
Q. And how much was the downpayment?
rejected.
A. P2,500,000.00.
In a bid to attach a badge of fraud on the transaction, petitioner raises the issue
Q. Was that downpayment covered by a receipt signed by the seller?
of inadequate consideration, alleging in this regard that only P12,500,000.00 was
A. Yes, Sir, P500,000.00 and P2,000,000.00

xxx xxx xxx
Q. Are you referring to the receipt dated October 19, 1991, how about the other
receipt dated October 21, 1991?
A. Yes, Sir, this is the same receipt.
paid for property having, during the period material, a fair market value
of P14,500,000.00.
We do not agree.
The existence of fraud or the intent to defraud creditors cannot plausibly be
presumed from the fact that the price paid for a piece of real estate is perceived
to be slightly lower, if that really be the case, than its market value. To be sure, it
xxx xxx xxx
is logical, even expected, for contracting minds, each having an interest to
Q. Considering that the consideration of this document is for P12,000,000.00
protect, to negotiate on the price and other conditions before closing a sale of a
and you made mention only ofP2,500,000.00, covered by the receipts, do you
valuable piece of land. The negotiating areas could cover various items. The
have evidence to show that, finally, Susana Ong received the balance
purchase price, while undeniably an important consideration, is doubtless only
of P10,000,000.00?
one of them. Thus, a scenario where the price actually stipulated may, as a
A. Yes, Sir.
matter of fact, be lower than the original asking price of the vendor or the fair
Q. Showing to you a receipt denominated as Acknowledgement Receipt, dated

October 25, 1991, are you referring to this receipt to cover the balance
of P10,000,000.00?
A. Yes, sir.
market value of the property, as what perhaps happened in the instant case, is
not out of the ordinary, let alone indicative of fraudulent intention. That the
spouses Ong acquiesced to the price ofP12,500,000.00, which may be lower than
the market value of the house and lot at the time of alienation, is certainly not
an unusual business phenomenon.

24
Lest it be overlooked, the disparity between the price appearing in the
A. Well, it says here in item C of the conditions the Capital Gains Stocks (sic),
conveying deed and what the petitioner regarded as the real value of the
documentary stamps, transfer tax registration and brokers fee for the buyers
property is not as gross to support a conclusion of fraud. What is more, one
account. I do not know how much is this worth. If at all in condition (sic) to the
Oliver Morales, a licensed real estate appraiser and broker, virtually made short
12.5 million which is the selling price, may I, therefore aside (sic) how much is
shrift of petitioners claim of gross inadequacy of the purchase price. Mr.
the total cost pertaining to this. The capital gains tax on (sic), documentary
Morales declared that there exists no gross disparity between the market value
stamps, transfer tax are all computed on the basis of the consideration which is
of the subject property and the price mentioned in the deed as consideration.
P12.5 M, the capital gain stocks (sic) is 5%, 5% of 12.5 M.
He explained why:
xxx xxx xxx
ATTY. EUFEMIO:
Yes sir if the 5% capital gains tax and documentary stamps respectively shall be
Q. I am showing to you the said two (2) exhibits Mr. Morales and I would like
added to the 12.5 Million before the inclusion of the transfer tax, the amount will
you to go over the terms and conditions stated therein and as an expert in real
be already in the vicinity of P13,250.000.
estate appraiser (sic) and also as a real estate broker, can you give this
Q. With such consideration Mr. Witness and in the light of the terms and
Honorable Court your considered opinion whether the consideration stated
conditions in the said Offer to Purchase and Deed of Absolute Sale could you
therein P12,500,000.00 in the light of all terms and conditions of the said Deed
give your opinion as to whether the consideration is fair and reasonable.
of Absolute Sale and Offer to Purchase could be deemed fair and reasonable?
xxx xxx xxx
xxx xxx xxx

A. With our proposal of P14.5 M as compared now to P13,250,000.00 may I give
MR. MORALES:
my opinion that generally there will be two appraisers. In fairness to the
A. My opinion generally a Deed of Absolute Sale indicated prescribed not only
situation, they should not vary by as much as 7% down so we are playing at a
the amount of the consideration. There are also other expenses involved in the
variance actually of about 15%. In my experience in this profession for the last 27
sales. I do not see here other payment of who takes care of capital gains stocks
years as I have said in fairness if there is another appraisal done by another
(sic) in this Deed of Sale neither who shouldered the documentary stamps or
person, that kind of difference is very marginal should at least indicate the
even transfer tax. That is my comment regarding this.
fairness of the property and so therefore the only way to find out is to determine
Q. Precisely Mr. Witness we have also shown to you the Offer to Purchase which
the difference between the P14.5 M and the P13,250,000.00. My computation
has been marked as Exhibit "9" as to the terms which we are asking?
indicates that it is close to 10% something like that difference. What is the
xxx xxx xxx
question again?

25
Q. Whether it is fair and reasonable under the circumstances.
It is true that respondent spouses, as surety for BMC, bound themselves to
A. I have answered already the question and I said maximum of 15%.
answer for the latters debt. Nonetheless, for purposes of recovering what the
Q. So based on your computation this is about 10% which is fair and reasonable.
A That is right sir.
eventually insolvent BMC owed the bank, it behooved the petitioner to show
that it had exhausted all the properties of the spouses Ong. It does not appear in
10
this case that the petitioner sought other properties of the spouses other than
Withal, the consideration of the sale is fair and reasonable as would justify the
the subject Greenhills property. The CA categorically said so. Absent proof,
conclusion that the sale is undoubtedly a true and genuine conveyance to which
therefore, that the spouses Ong had no other property except their Greenhills
the parties thereto are irrevocably and undeniably bound.
home, the sale thereof to respondent Lee cannot simplistically be considered as
It may be stressed that, when the validity of sales contract is in issue, two
one in fraud of creditors.
veritable presumptions are relevant: first, that there was sufficient consideration
Neither was evidence adduced to show that the sale in question peremptorily
11
of the contract ; and, second, that it was the result of a fair and regular private
12
transaction. If shown to hold, these presumptions infer prima facie the

13
transaction's validity, except that it must yield to the evidence adduced which
the party disputing such presumptive validity has the burden of overcoming.
Unfortunately for the petitioner, it failed to discharge this burden. Its bare
allegation respecting the sale having been executed in fraud of creditors and
without adequate consideration cannot, without more, prevail over the
respondents' evidence which more than sufficiently supports a conclusion as to
the legitimacy of the transaction and the bona fides of the parties.
deprived the petitioner of means to collect its claim against the Ongs. Where a
creditor fails to show that he has no other legal recourse to obtain satisfaction
for his claim, then he is not entitled to the rescission asked.
15
For a contract to be rescinded for being in fraud of creditors, both contracting

parties must be shown to have acted maliciously so as to prejudice the creditors
16
who were prevented from collecting their claims. Again, in this case, there is
no evidence tending to prove that the spouses Ong and Lee were conniving
cheats. In fact, the petitioner did not even attempt to prove the existence of
personal closeness or business and professional interdependence between the
Parenthetically, the rescissory action to set aside contracts in fraud of creditors
spouses Ong and Lee as to cast doubt on their true intent in executing the
is accion pauliana, essentially a subsidiary remedy accorded under Article 1383 of
contract of sale. With the view we take of the evidence on record, their
the Civil Code which the party suffering damage can avail of only when he has
relationship vis--vis the subject Greenhills property was no more than one
14
no other legal means to obtain reparation for the same. In net effect, the
between vendor and vendee dealing with each other for the first time. Any
provision applies only when the creditor cannot recover in any other manner
insinuation that the two colluded to gyp petitioner bank is to read in a
what is due him.
relationship something which, from all indications, appears to be purely

business.

It cannot be overemphasized that rescission is generally unavailing should a
17
26
Petitioner has made much of respondent Lee not taking immediate possession
third person, acting in good faith, is in lawful possession of the property, that is
of the property after the sale, stating that such failure is an indication of his
to say, he is protected by law against a suit for rescission by the registration of
participation in the fraudulent scheme to prejudice petitioner bank.
the transfer to him in the registry.
We are not persuaded.
As recited earlier, Lee was - and may still be - in lawful possession of the subject
Lee, it is true, allowed the respondent spouses to continue occupying the
property as the transfer to him was by virtue of a presumptively valid onerous
premises even after the sale. This development, however, is not without basis or
contract of sale. His possession is evidenced by no less than a certificate of title
practical reason. The spouses' continuous possession of the property was by
issued him by the Registry of Deeds of San Juan, Metro Manila, after the usual
virtue of a one-year lease they executed with respondent Lee six days after the
registration of the corresponding conveying deed of sale. On the other hand, the
sale. As explained by the respondent spouses, they insisted on the lease
bona fides of his acquisition can be deduced from his conduct and outward acts
arrangement as a condition for the sale in question. And pursuant to the lease
previous to the sale. As testified to by him and duly noted by the CA,
contract aforementioned, the respondent Ongs paid and Lee collected rentals at
respondent Lee undertook what amounts to due diligence on the possible
the rate of P25,000.00 a month. Contrary thus to the petitioners asseveration,
defects in the title of the Ongs before proceeding with the sale. As it were, Lee
respondent Lee, after the sale, exercised acts of dominion over the said property
decided to buy the property only after being satisfied of the absence of such
and asserted his rights as the new owner. So, when the respondent spouses
18
20
defects.
continued to occupy the property after its sale, they did so as mere tenants.
Time and again, the Court has held that one dealing with a registered parcel of
While the failure of the vendee to take exclusive possession of the property is
land need not go beyond the certificate of title as he is charged with notice only
generally recognized as a badge of fraud, the same cannot be said here in the
of burdens which are noted on the face of the register or on the certificate of
light of the existence of what appears to be a genuine lessor-lessee relationship
19
title. The Continuing Surety Agreement, it ought to be particularly pointed out,
between the spouses Ong and Lee. To borrow from Reyes vs. Court of
was never recorded nor annotated on the title of spouses Ong. There is no
Appeals, possession may be exercised in ones own name or in the name of
evidence extant in the records to show that Lee had knowledge, prior to the
another; an owner of a piece of land has possession, either when he himself
subject sale, of the surety agreement adverted to. In fine, there is nothing to
physically occupies the same or when another person who recognizes his right
remotely suggest that the purchase of the subject property was characterized by
as owner is in such occupancy.
anything other than good faith.
Petitioners assertion regarding respondent Lees lack of financial capacity to
21
acquire the property in question since his income in 1990 was only P346,571.73 is
clearly untenable. Assuming for argument that petitioner got its figure right, it

27
is clearly incorrect to measure ones purchasing capacity with ones income at a
There lies the glaring difference with the instant case.
given period. But the more important consideration in this regard is the
Here, the existence of fraud cannot be presumed, or, at the very least, what were
uncontroverted fact that respondent Lee paid the purchase price of said
perceived to be badges of fraud have been proven to be otherwise. And, unlike
property. Where he sourced the needed cash is, for the nonce, really of no
Alfonso Roxas Chua in China Banking, a judgment has not been rendered
moment.
against respondent spouses Ong or that a writ of attachment has been issued
22
The cited case of China Banking cannot plausibly provide petitioner with a
against them at the time of the disputed sale.
winning card. In that case, the Court, applying Article 1381 (3) of the Civil Code,
In a last-ditch attempt to resuscitate a feeble cause, petitioner cites Section 70 of
rescinded an Assignment of Rights to Redeem owing to the failure of the
the Insolvency Law which, unlike the invoked Article 1381 of the Civil Code that
assignee to overthrow the presumption that the said conveyance/assignment is
deals with a valid but rescissible contract, treats of a contractual infirmity
fraudulent. In turn, the presumption was culled from Article 1387, par. 2, of the
resulting in nullity no less of the transaction in question. Insofar as pertinent,
Code pertinently providing that "[A]lienation by onerous title are also presumed
Section 70 of the Insolvency Law provides:
fraudulent when made by persons against whom some judgment has been
rendered in any instance or some writ of attachment has been issued."
Sec. 70. If any debtor, being insolvent, or in contemplation of insolvency, within

thirty days before the filing of a petition by or against him, with a view to giving
Indeed, when the deed of assignment was executed in China Banking, the
a preference to any creditor or person having a claim against him xxx makes any
assignor therein already faced at that time an adverse judgment. In the same
xxx sale or conveyance of any part of his property, xxx such xxx sale, assignment
case, moreover, the Court took stock of other signs of fraud which tainted the
or conveyance is void, and the assignee, or the receiver, may recover the
transaction therein and which are, significantly, not obtaining in the instant
property or the value thereof, as assets of such insolvent debtor. xxx. Any
case. We refer, firstly, to the element of kinship, the assignor, Alfonso Roxas
payment, pledge, mortgage, conveyance, sale, assignment, or transfer of
Chua, being the father of the assignee, Paulino. Secondly, Paulino admitted
property of whatever character made by the insolvent within one (1) month
knowing his father to be insolvent. Hence, the Court, rationalizing the rescission
before the filing of a petition in insolvency by or against him,except for a
of the assignment of rights, made the following remarks:
valuable pecuniary consideration made in good faith shall be void. xxx.
The mere fact that the conveyance was founded on valuable consideration does
(Emphasis added)
not necessarily negate the presumption of fraud under Article 1387 of the Civil
Petitioner avers that the Ong-Lee sales contract partakes of a fraudulent transfer
Code. There has to be valuable consideration and the transaction must have
and is null and void in contemplation of the aforequoted provision, the sale
been made bona fide.
23

28
having occurred on October 22, 1991 or within thirty (30) days before BMC filed
invested by law with a personality separate and distinct from those of the
a petition for suspension of payments on November 22, 1991.
persons composing it. Mere ownership by a single or small group of
Petitioner's reliance on the afore-quoted provision is misplaced for the following
stockholders of nearly all of the capital stock of the corporation is not, without
reasons:
more, sufficient to disregard the fiction of separate corporate personality.
First, Section 70, supra, of the Insolvency Law specifically makes reference to
Third, Section 70 of the Insolvency Law considers transfers made within a
conveyance of properties made by a "debtor" or by an "insolvent" who filed a
month after the date of cleavage void, except those made in good faith and for
petition, or against whom a petition for insolvency has been filed. Respondent
valuable pecuniary consideration. The twin elements of good faith and valuable
spouses Ong have doubtlessly not filed a petition for a declaration of their own
and sufficient consideration have been duly established. Given the validity and
insolvency. Neither has one been filed against them. And as the CA aptly
the basic legitimacy of the sale in question, there is simply no occasion to apply
observed, it was never proven that respondent spouses are likewise insolvent,
Section 70 of the Insolvency Law to nullify the transaction subject of the instant
petitioner having failed to show that they were down to their Greenhills
case.
property as their only asset.
All told, we are far from convinced by petitioners argumentation that the
It may be that BMC had filed a petition for rehabilitation and suspension of
circumstances surrounding the sale of the subject property may be considered
payments with the SEC. The nagging fact, however is that BMC is a different
badges of fraud. Consequently, its failure to show actual fraudulent intent on
juridical person from the respondent spouses. Their seventy percent (70%)
the part of the spouses Ong defeats its own cause.
ownership of BMCs capital stock does not change the legal situation.
WHEREFORE, the instant petition is DENIED and the assailed decision of the
Accordingly, the alleged insolvency of BMC cannot, as petitioner postulates,
Court of Appeals is AFFIRMED.
extend to the respondent spouses such that transaction of the latter comes
Costs against petitioner.
within the purview of Section 70 of the Insolvency Law.

Second, the real debtor of petitioner bank in this case is BMC. The fact that the
respondent spouses bound themselves to answer for BMCs indebtedness under
the surety agreement referred to at the outset is not reason enough to conclude
that the spouses are themselves debtors of petitioner bank. We have already
passed upon the simple reason for this proposition. We refer to the basic
precept in this jurisdiction that a corporation, upon coming into existence, is
24
SO ORDERED.
25

HEIRS OF QUIRONG vs. DBP (G.R. No. 173441, December 3, 2009)4
29
of nullity of documents with damages against the DBP and the Funcions before
the Regional Trial Court (RTC) of Dagupan City, Branch 42, in Civil Case D-7159.
This case is about the prescriptive period of an action for rescission of a contract
On December 27, 1984, notwithstanding the suit, the DBP executed a deed of
of sale where the buyer is evicted from the thing sold by a subsequent judicial
absolute sale of the subject lot in Sofia Quirongs favor. The deed of sale carried
order in favor of a third party.
substantially the same waiver of warranty against eviction and of any adverse
The Facts and the Case
lien or encumbrance.
The facts are not disputed. When the late Emilio Dalope died, he left a 589-
On May 11, 1985, Sofia Quirong having since died, her heirs (petitioner Quirong
square meter untitled lot in Sta. Barbara, Pangasinan, to his wife, Felisa Dalope
heirs) filed an answer in intervention in Civil Case D-7159 in which they asked
(Felisa) and their nine children, one of whom was Rosa Dalope-Funcion. To
the RTC to award the lot to them and, should it instead be given to the Dalopes,
enable Rosa and her husband Antonio Funcion (the Funcions) get a loan from
to allow the Quirong heirs to recover the lots value from the DBP. But, because
respondent Development Bank of the Philippines (DBP), Felisa sold the whole
the heirs failed to file a formal offer of evidence, the trial court did not rule on
lot to the Funcions. With the deed of sale in their favor and the tax declaration
the merits of their claim to the lot and, alternatively, to relief from the DBP.
transferred in their names, the Funcions mortgaged the lot with the DBP.
On December 16, 1992 the RTC rendered a decision, declaring the DBPs sale to
On February 12, 1979, after the Funcions failed to pay their loan, the DBP
Sofia Quirong valid only with respect to the shares of Felisa and Rosa Funcion in
foreclosed the mortgage on the lot and consolidated ownership in its name on
the property. It declared Felisas sale to the Funcions, the latters mortgage to
June 17, 1981.
the DBP, and the latters sale to Sofia Quirong void insofar as they prejudiced
Four years later or on September 20, 1983 the DBP conditionally sold the lot to
4
Sofia Quirong for the price of P78,000.00. In their contract of sale, Sofia
the shares of the eight other children of Emilio and Felisa who were each
entitled to a tenth share in the subject lot.
Quirong waived any warranty against eviction. The contract provided that the
The DBP received a copy of the decision on January 13, 1993 and, therefore, it
DBP did not guarantee possession of the property and that it would not be liable
had until January 28, 1993 within which to file a motion for its reconsideration
for any lien or encumbrance on the same. Quirong gave a down payment of
or a notice of appeal from it. But the DBP failed to appeal supposedly because of
P14,000.00.
excusable negligence and the withdrawal of its previous counsel of record.
Two months after that sale or on November 28, 1983 Felisa and her eight
When the RTC judgment became final and the court issued a writ of execution,
children (collectively, the Dalopes) filed an action for partition and declaration
the DBP resisted the writ by motion to quash, claiming that the decision could
not be enforced because it failed to state by metes and bounds the particular

30
portions of the lot that would be assigned to the different parties in the case.
The issues presented in this case are:
The RTC denied the DBPs motion, prompting the latter to seek recourse by
1. Whether or not the Quirong heirs action for rescission of respondent DBPs
special civil action of certiorari directly with this Court in G.R. 116575,
sale of the subject property to Sofia Quirong was already barred by prescription;
Development Bank of the Philippines v. Fontanilla. On September 7, 1994 the
and
Court issued a resolution, denying the petition for failure of the DBP to pay the
prescribed fees. This resolution became final and executory on January 17, 1995.
2. In the negative, whether or not the heirs of Quirong were entitled to the
rescission of the DBPs sale of the subject lot to the late Sofia Quirong as a
10
On June 10, 1998 the Quirong heirs filed the present action against the DBP
before the RTC of Dagupan City, Branch 44, in Civil Case CV-98-02399-D for
consequence of her heirs having been evicted from it.

The Courts Rulings
rescission of the contract of sale between Sofia Quirong, their predecessor, and
the DBP and praying for the reimbursement of the price of P78,000.00 that she
paid the bank plus damages. The heirs alleged that they were entitled to the
rescission of the sale because the decision in Civil Case D-7159 stripped them of
nearly the whole of the lot that Sofia Quirong, their predecessor, bought from
the DBP. The DBP filed a motion to dismiss the action on ground of prescription
June
14,
2004,
after
hearing
the
case,
DBP and their predecessor, Sofia Quirong, is barred by prescription reckoned

from the date of finality of the December 16, 1992 RTC decision in Civil Case D7159 and applying the prescriptive period of four years set by Article 1389 of the
Civil Code.
Unfortunately, the CA did not state in its decision the date when the RTC
and res judicata but the RTC denied their motion.

On
The CA held that the Quirong heirs action for rescission of the sale between
the
RTC
rendered
11
decision, rescinding the sale between Sofia Quirong and the DBP and ordering
the latter to return to the Quirong heirs the P78,000.00 Sofia Quirong paid the
12
bank. On appeal by the DBP, the Court of Appeals (CA) reversed the RTC
decision and dismissed the heirs action on the ground of prescription. The CA
decision in Civil Case D-7159 became final and executory, which decision
resulted in the Quirong heirs loss of 80% of the lot that the DBP sold to Sofia
Quirong. Petitioner heirs claim that the prescriptive period should be reckoned
from January 17, 1995, the date this Courts resolution in G.R. 116575 became final
and executory.
15
concluded that, reckoned from the finality of the December 16, 1992 decision in
But the incident before this Court in G.R. 116575 did not deal with the merit of
Civil Case D-7159, the complaint filed on June 10, 1998 was already barred by the
the RTC decision in Civil Case D-7159. That decision became final and executory
13
four-year prescriptive period under Article 1389 of the Civil Code. The Quirong
on January 28, 1993 when the DBP failed to appeal from it within the time set for
heirs filed a motion for reconsideration of the decision but the appellate court
such appeal. The incident before this Court in G.R. 116575 involved the issuance
14
denied it, thus, this petition.

The Issues Presented
of the writ of execution in that case. The DBP contested such issuance
supposedly because the dispositive portion of the decision failed to specify

31
details that were needed for its implementation. Since this incident did not
"Rescission" is a subsidiary action based on injury to the plaintiffs economic
affect the finality of the decision in Civil Case D-7159, the prescriptive period
interests as described in Articles 1380 and 1381. "Resolution," the action referred
remained to be reckoned from January 28, 1993, the date of such finality.
to in Article 1191, on the other hand, is based on the defendants breach of faith,
The next question that needs to be resolved is the applicable period of
a violation of the reciprocity between the parties. As an action based on the
prescription. The DBP claims that it should be four years as provided under
binding force of a written contract, therefore, rescission (resolution) under
Article 1389 of the Civil Code. Article 1389 provides that "the action to claim
Article 1191 prescribes in 10 years. Ten years is the period of prescription of
rescission must be commenced within four years." The Quirong heirs, on the
actions based on a written contract under Article 1144.
other hand, claim that it should be 10 years as provided under Article 1144 which
The distinction makes sense. Article 1191 gives the injured party an option to
states that actions "upon a written contract" must be brought "within 10 years
choose between, first, fulfillment of the contract and, second, its rescission. An
from the date the right of action accrues."
action to enforce a written contract (fulfillment) is definitely an "action upon a
Now, was the action of the Quirong heirs "for rescission" or "upon a written
written contract," which prescribes in 10 years (Article 1144). It will not be logical
contract"? There is no question that their action was for rescission, since their
to make the remedy of fulfillment prescribe in 10 years while the alternative
complaint in Civil Case CV-98-02399-D asked for the rescission of the contract
remedy of rescission (or resolution) is made to prescribe after only four years as
of sale between Sofia Quirong, their predecessor, and the DBP and the
provided in Article 1389 when the injury from which the two kinds of actions
reimbursement of the price of P78,000.00 that Sofia Quirong paid the bank plus
derive is the same.
damages. The prescriptive period for rescission is four years.
Here, the Quirong heirs alleged in their complaint that they were entitled to the
But it is not that simple. The remedy of "rescission" is not confined to the
rescission of the contract of sale of the lot between the DBP and Sofia Quirong
16
rescissible contracts enumerated under Article 1381. Article 1191 of the Civil
because the decision in Civil Case D-7159 deprived her heirs of nearly the whole
Code gives the injured party in reciprocal obligations, such as what contracts are
of that lot. But what was the status of that contract at the time of the filing of
about, the option to choose between fulfillment and "rescission." Arturo M.
the action for rescission? Apparently, that contract of sale had already been fully
Tolentino, a well-known authority in civil law, is quick to note, however, that
performed when Sofia Quirong paid the full price for the lot and when, in
the equivalent of Article 1191 in the old code actually uses the term "resolution"
exchange, the DBP executed the deed of absolute sale in her favor. There was a
17
rather than the present "rescission." The calibrated meanings of these terms
turnover of control of the property from DBP to Sofia Quirong since she
are distinct.
assumed under their contract, "the ejectment of squatters and/or occupants" on
18
the lot, at her own expense.
19

32
Actually, the cause of action of the Quirong heirs stems from their having been
28, 1997 within which to file their action for rescission. Given that they filed
ousted by final judgment from the ownership of the lot that the DBP sold to
their action on June 10, 1998, they did so beyond the four-year period.
Sofia Quirong, their predecessor, in violation of the warranty against eviction
With the conclusion that the Court has reached respecting the first issue
that comes with every sale of property or thing. Article 1548 of the Civil Code
presented in this case, it would serve no useful purpose for it to further consider
provides:
the issue of whether or not the heirs of Quirong would have been entitled to the
Article 1548. Eviction shall take place whenever by a final judgment based on a
rescission of the DBPs sale of the subject lot to Sofia Quirong as a consequence
right prior to the sale or an act imputable to the vendor, the vendee is deprived
of her heirs having been evicted from it. As the Court has ruled above, their
of the whole or of a part of thing purchased.
action was barred by prescription. The CA acted correctly in reversing the RTC
xxxx
decision and dismissing their action.
With the loss of 80% of the subject lot to the Dalopes by reason of the judgment
Parenthetically, the Quirong heirs were allowed by the RTC to intervene in the
of the RTC in Civil Case D-7159, the Quirong heirs had the right to file an action
original action for annulment of sale in Civil Case D-7159 that the Dalopes filed
for rescission against the DBP pursuant to the provision of Article 1556 of the
against the DBP and the Funcions. Not only did the heirs intervene in defense of
Civil Code which provides:
the sale, they likewise filed a cross claim against the DBP. And they were
Article 1556. Should the vendee lose, by reason of the eviction, a part of the
thing sold of such importance, in relation to the whole, that he would not have
bought it without said part, he may demand the rescission of the contract; but
with the obligation to return the thing without other encumbrances than those
which it had when he acquired it. x x x
apparently heard on their defense and cross claim but the RTC did not
adjudicate their claim for the reason that they failed to make a formal offer of
their documentary exhibits. Yet, they did not appeal from this omission or from
the judgment of the RTC, annulling the DBPs sale of the subject lot to Sofia
Quirong. This point is of course entirely academic but it shows that the Quirong
heirs have themselves to blame for the loss of whatever right they may have in
And that action for rescission, which is based on a subsequent economic loss
the case.
suffered by the buyer, was precisely the action that the Quirong heirs took
against the DBP. Consequently, it prescribed as Article 1389 provides in four
years from the time the action accrued. Since it accrued on January 28, 1993
WHEREFORE, the Court DENIES the petition and AFFIRMS the November 30,
2005 decision of the Court of Appeals in CA-G.R. CV 83897.
when the decision in Civil Case D-7159 became final and executory and ousted
SO ORDERED.
the heirs from a substantial portion of the lot, the latter had only until January
Psalm 31:24 - Be strong and take heart, all you who hope in the LORD.

ADA VS. BAYLON, 678 SCRA 293, G.R. No. 184235, August 13, 2012
33
Adanza. Ramon died intestate on July 8, 1989 and was survived by herein
respondent Florante Baylon (Florante), his child from his first marriage, as well
DECISION
as by petitioner Flora Baylon, his second wife, and their legitimate children,
namely, Ramon, Jr. and herein petitioners Remo, Jose, Eric, Florentino and Ma.
Ruby, all surnamed Baylon.
REYES, J.:
On July 3, 1996, the petitioners filed with the RTC a Complaint4 for partition,
Before this Court is a petition for review on certiorari under Rule 45 of the Rules
of Court seeking to annul and set aside the Decision1 dated October 26, 2007
rendered by the Court of Appeals (CA) in CA-G.R. CV No. 01746. The assailed
decision partially reversed and set aside the Decision2 dated October 20, 2005
issued ~y the Regional Trial Court (RTC), Tan jay City, Negros Oriental, Branch
43 in Civil Case No. 11657.
accounting and damages against Florante, Rita and Panfila. They alleged therein
that Spouses Baylon, during their lifetime, owned 43 parcels of land5 all situated
in Negros Oriental. After the death of Spouses Baylon, they claimed that Rita
took possession of the said parcels of land and appropriated for herself the
income from the same. Using the income produced by the said parcels of land,
Rita allegedly purchased two parcels of land, Lot No. 47096 and half of Lot No.
4706,7 situated in Canda-uay, Dumaguete City. The petitioners averred that Rita
The Antecedent Facts
refused to effect a partition of the said parcels of land.
This case involves the estate of spouses Florentino Baylon and Maximina Elnas
In their Answer,8 Florante, Rita and Panfila asserted that they and the
Baylon (Spouses Baylon) who died on November 7, 1961 and May 5, 1974,
petitioners co-owned 229 out of the 43 parcels of land mentioned in the latters
respectively.3 At the time of their death, Spouses Baylon were survived by their
complaint, whereas Rita actually owned 10 parcels of land10 out of the 43 parcels
legitimate children, namely, Rita Baylon (Rita), Victoria Baylon (Victoria),
which the petitioners sought to partition, while the remaining 11 parcels of land
Dolores Baylon (Dolores), Panfila Gomez (Panfila), Ramon Baylon (Ramon) and
are separately owned by Petra Cafino Adanza,11 Florante,12 Meliton Adalia,13
herein petitioner Lilia B. Ada (Lilia).
Consorcia Adanza,14 Lilia15 and Santiago Mendez.16 Further, they claimed that
Lot No. 4709 and half of Lot No. 4706 were acquired by Rita using her own
Dolores died intestate and without issue on August 4, 1976. Victoria died on
November 11, 1981 and was survived by her daughter, herein petitioner Luz B.
money. They denied that Rita appropriated solely for herself the income of the

34
estate of Spouses Baylon, and expressed no objection to the partition of the

estate of Spouses Baylon, but only with respect to the co-owned parcels of land.
(1) declaring the existence of co-ownership over parcels nos. 1, 2, 3, 5, 7, 10, 13, 14,
16, 17, 18, 26, 29, 30, 33, 34, 35, 36, 40 and 41 described in the complaint;
During the pendency of the case, Rita, through a Deed of Donation dated July 6,
1997, conveyed Lot No. 4709 and half of Lot No. 4706 to Florante. On July 16,
(2) directing that the above mentioned parcels of land be partitioned among the
2000, Rita died intestate and without any issue. Thereafter, learning of the said
heirs of Florentino Baylon and Maximina Baylon;
donation inter vivos in favor of Florante, the petitioners filed a Supplemental

Pleading17 dated February 6, 2002, praying that the said donation in favor of the
respondent be rescinded in accordance with Article 1381(4) of the Civil Code.
They further alleged that Rita was already sick and very weak when the said
Deed of Donation was supposedly executed and, thus, could not have validly
(3) declaring a co-ownership on the properties of Rita Baylon namely parcels

no[s]. 6, 11, 12, 20, 24, 27, 31, 32, 39 and 42 and directing that it shall be
partitioned among her heirs who are the plaintiffs and defendant in this case;
given her consent thereto.

(4) declaring the donation inter vivos rescinded without prejudice to the share
Florante and Panfila opposed the rescission of the said donation, asserting that
Article 1381(4) of the Civil Code applies only when there is already a prior
judicial decree on who between the contending parties actually owned the
of Florante Baylon to the estate of Rita Baylon and directing that parcels nos. 1
and 2 paragraph V of the complaint be included in the division of the property
as of Rita Baylon among her heirs, the parties in this case;
properties under litigation.18

(5) excluding from the co-ownership parcels nos. 20, 21, 22, 9, 43, 4, 8, 19 and 37.
The RTC Decision
Considering that the parties failed to settle this case amicably and could not
On October 20, 2005, the RTC rendered a Decision,19 the decretal portion of
which reads:
agree on the partition, the parties are directed to nominate a representative to

act as commissioner to make the partition. He shall immediately take [his] oath
of office upon [his] appointment. The commissioner shall make a report of all
the proceedings as to the partition within fifteen (15) days from the completion
Wherefore judgment is hereby rendered:

35
of this partition. The parties are given ten (10) days within which to object to the
Clearly, the donation inter vivos in favor of Florante Baylon was executed to
report after which the Court shall act on the commissioner report.
prejudice the plaintiffs right to succeed to the estate of Rita Baylon in case of
death considering that as testified by Florante Baylon, Rita Baylon was very
SO ORDERED.20 (Emphasis ours)
weak and he tried to give her vitamins x x x. The donation inter vivos executed
by Rita Baylon in favor of Florante Baylon is rescissible for the reason that it
refers to the parcels of land in litigation x x x without the knowledge and
The RTC held that the death of Rita during the pendency of the case, having
approval of the plaintiffs or of this Court. However, the rescission shall not
died intestate and without any issue, had rendered the issue of ownership
affect the share of Florante Baylon to the estate of Rita Baylon.21
insofar as parcels of land which she claims as her own moot since the parties
below are the heirs to her estate. Thus, the RTC regarded Rita as the owner of
the said 10 parcels of land and, accordingly, directed that the same be
partitioned among her heirs. Nevertheless, the RTC rescinded the donation
inter vivos of Lot No. 4709 and half of Lot No. 4706 in favor of Florante. In
rescinding the said donation inter vivos, the RTC explained that:
Florante sought reconsideration of the Decision dated October 20, 2005 of the
RTC insofar as it rescinded the donation of Lot No. 4709 and half of Lot No.
4706 in his favor.22 He asserted that, at the time of Ritas death on July 16, 2000,
Lot No. 4709 and half of Lot No. 4706 were no longer part of her estate as the
same had already been conveyed to him through a donation inter vivos three
years earlier. Thus, Florante maintained that Lot No. 4709 and half of Lot No.
However, with respect to lot nos. 4709 and 4706 which [Rita] had conveyed to
4706 should not be included in the properties that should be partitioned among
Florante Baylon by way of donation inter vivos, the plaintiffs in their
the heirs of Rita.
supplemental pleadings (sic) assailed the same to be rescissible on the ground

that it was entered into by the defendant Rita Baylon without the knowledge
and approval of the litigants [or] of competent judicial authority. The subject
parcels of lands are involved in the case for which plaintiffs have asked the
On July 28, 2006, the RTC issued an Order23 which denied the motion for
reconsideration filed by Florante.
Court to partition the same among the heirs of Florentino Baylon and Maximina
Elnas.
The CA Decision

36
On appeal, the CA rendered a Decision24 dated October 26, 2007, the

dispositive portion of which reads:
If the lots, however, are found to have belonged exclusively to Rita Baylon,
during her lifetime, her donation thereof in favor of Florante Baylon is valid. For
WHEREFORE, the Decision dated October 20, 2005 and Order dated July 28,
then, she merely exercised her ownership right to dispose of what legally
2006 are REVERSED and SET ASIDE insofar as they decreed the rescission of the
belonged to her. Upon her death, the lots no longer form part of her estate as
Deed of Donation dated July 6, 1997 and the inclusion of lot no. 4709 and half of
their ownership now pertains to Florante Baylon. On this score, an action for
lot no. 4706 in the estate of Rita Baylon. The case is REMANDED to the trial
rescission against such donation will not prosper. x x x.
court for the determination of ownership of lot no. 4709 and half of lot no. 4706.
Verily, before plaintiffs-appellees may file an action for rescission, they must
SO ORDERED.25
first obtain a favorable judicial ruling that lot no. 4709 and half of lot no. 4706
actually belonged to the estate of Spouses Florentino and Maximina Baylon, and
not to Rita Baylon during her lifetime. Until then, an action for rescission is
The CA held that before the petitioners may file an action for rescission, they
must first obtain a favorable judicial ruling that Lot No. 4709 and half of Lot No.
4706 actually belonged to the estate of Spouses Baylon and not to Rita. Until
premature. For this matter, the applicability of Article 1381, paragraph 4, of the
New Civil Code must likewise await the trial courts resolution of the issue of
ownership.
then, the CA asserted, an action for rescission is premature. Further, the CA

ruled that the petitioners action for rescission cannot be joined with their
action for partition, accounting and damages through a mere supplemental
Be that as it may, an action for rescission should be filed by the parties
pleading. Thus:
concerned independent of the proceedings below. The first cannot simply be

lumped up with the second through a mere supplemental pleading.26 (Citation
omitted)
If Lot No. 4709 and half of Lot No. 4706 belonged to the Spouses estate, then
Rita Baylons donation thereof in favor of Florante Baylon, in excess of her
undivided share therein as co-heir, is void. Surely, she could not have validly
The petitioners sought reconsideration27 of the Decision dated October 26,
disposed of something she did not own. In such a case, an action for rescission
2007 but it was denied by the CA in its Resolution28 dated March 6, 2008.
of the donation may, therefore, prosper.

Hence, this petition.
37
raised the refusal of their co-heirs, Florante, Rita and Panfila, to partition the
properties which they inherited from Spouses Baylon. Second, in their
Issue
supplemental pleading, the petitioners assailed the donation inter vivos of Lot
No. 4709 and half of Lot No. 4706 made by Rita in favor of Florante pendente
lite.
The lone issue to be resolved by this Court is whether the CA erred in ruling
that the donation inter vivos of Lot No. 4709 and half of Lot No. 4706 in favor of
Florante may only be rescinded if there is already a judicial determination that
the same actually belonged to the estate of Spouses Baylon.
The actions of partition and

rescission cannot be joined in a
single action.
The Courts Ruling

By a joinder of actions, or more properly, a joinder of causes of action is meant
The petition is partly meritorious.
the uniting of two or more demands or rights of action in one action, the
statement of more than one cause of action in a declaration. It is the union of
two or more civil causes of action, each of which could be made the basis of a
Procedural Matters
separate suit, in the same complaint, declaration or petition. A plaintiff may

under certain circumstances join several distinct demands, controversies or
Before resolving the lone substantive issue in the instant case, this Court deems
rights of action in one declaration, complaint or petition.29
it proper to address certain procedural matters that need to be threshed out

which, by laxity or otherwise, were not raised by the parties herein.
The objectives of the rule or provision are to avoid a multiplicity of suits where
the same parties and subject matter are to be dealt with by effecting in one
Misjoinder of Causes of Action
action a complete determination of all matters in controversy and litigation

between the parties involving one subject matter, and to expedite the
disposition of litigation at minimum cost. The provision should be construed so
The complaint filed by the petitioners with the RTC involves two separate,
distinct and independent actions partition and rescission. First, the petitioners

38
as to avoid such multiplicity, where possible, without prejudice to the rights of
adjudicated by the court together
the litigants.30
with the other causes of action.
Nevertheless, while parties to an action may assert in one pleading, in the
Nevertheless, misjoinder of causes of action is not a ground for dismissal.
alternative or otherwise, as many causes of action as they may have against an
Indeed, the courts have the power, acting upon the motion of a party to the case
opposing party, such joinder of causes of action is subject to the condition, inter
or sua sponte, to order the severance of the misjoined cause of action to be
alia, that the joinder shall not include special civil actions governed by special
proceeded with separately.33 However, if there is no objection to the improper
rules.31
joinder or the court did not motu proprio direct a severance, then there exists
no bar in the simultaneous adjudication of all the erroneously joined causes of
Here, there was a misjoinder of causes of action. The action for partition filed by
action. On this score, our disquisition in Republic of the Philippines v.
the petitioners could not be joined with the action for the rescission of the said
Herbieto34 is instructive, viz:
donation inter vivos in favor of Florante. Lest it be overlooked, an action for

partition is a special civil action governed by Rule 69 of the Rules of Court while
This Court, however, disagrees with petitioner Republic in this regard. This
an action for rescission is an ordinary civil action governed by the ordinary rules
procedural lapse committed by the respondents should not affect the
of civil procedure. The variance in the procedure in the special civil action of
jurisdiction of the MTC to proceed with and hear their application for
partition and in the ordinary civil action of rescission precludes their joinder in
registration of the Subject Lots.
one complaint or their being tried in a single proceeding to avoid confusion in

determining what rules shall govern the conduct of the proceedings as well as in
the determination of the presence of requisite elements of each particular cause
xxxx
of action.32
Considering every application for land registration filed in strict accordance
A misjoined cause of action, if not
with the Property Registration Decree as a single cause of action, then the defect
in the joint application for registration filed by the respondents with the MTC
severed upon motion of a party or

by the court sua sponte, may be
constitutes a misjoinder of causes of action and parties. Instead of a single or

joint application for registration, respondents Jeremias and David, more

39
appropriately, should have filed separate applications for registration of Lots No.
adjudicated the issues raised in the actions for partition and rescission filed by
8422 and 8423, respectively.
the petitioners.
Misjoinder of causes of action and parties do not involve a question of
Asserting a New Cause of Action in a Supplemental Pleading
jurisdiction of the court to hear and proceed with the case. They are not even
accepted grounds for dismissal thereof. Instead, under the Rules of Court, the
misjoinder of causes of action and parties involve an implied admission of the
courts jurisdiction. It acknowledges the power of the court, acting upon the
motion of a party to the case or on its own initiative, to order the severance of
the misjoined cause of action, to be proceeded with separately (in case of
In its Decision dated October 26, 2007, the CA pointed out that the said action
for rescission should have been filed by the petitioners independently of the
proceedings in the action for partition. It opined that the action for rescission
could not be lumped up with the action for partition through a mere
supplemental pleading.
misjoinder of causes of action); and/or the dropping of a party and the

severance of any claim against said misjoined party, also to be proceeded with
separately (in case of misjoinder of parties).35 (Citations omitted)
We do not agree.
It should be emphasized that the foregoing rule only applies if the court trying
A supplemental pleading may raise
the case has jurisdiction over all of the causes of action therein notwithstanding
a new cause of action as long as it
the misjoinder of the same. If the court trying the case has no jurisdiction over a
misjoined cause of action, then such misjoined cause of action has to be severed
from the other causes of action, and if not so severed, any adjudication rendered
has some relation to the original

cause of action set forth in the
by the court with respect to the same would be a nullity.
original complaint.
Here, Florante posed no objection, and neither did the RTC direct the severance
Section 6, Rule 10 of the Rules of Court reads:
of the petitioners action for rescission from their action for partition. While this
may be a patent omission on the part of the RTC, this does not constitute a
Sec. 6. Supplemental Pleadings. Upon motion of a party the court may, upon
ground to assail the validity and correctness of its decision. The RTC validly
reasonable notice and upon such terms as are just, permit him to serve a

40
supplemental pleading setting forth transactions, occurrences or events which
Thus, a supplemental pleading may properly allege transactions, occurrences or
have happened since the date of the pleading sought to be supplemented. The
events which had transpired after the filing of the pleading sought to be
adverse party may plead thereto within ten (10) days from notice of the order
supplemented, even if the said supplemental facts constitute another cause of
admitting the supplemental pleading.
action.
In Young v. Spouses Sy,36 this Court had the opportunity to elucidate on the
Admittedly, in Leobrera v. Court of Appeals,38 we held that a supplemental
purpose of a supplemental pleading. Thus:
pleading must be based on matters arising subsequent to the original pleading

related to the claim or defense presented therein, and founded on the same
As its very name denotes, a supplemental pleading only serves to bolster or add
something to the primary pleading. A supplement exists side by side with the
cause of action. We further stressed therein that a supplemental pleading may

not be used to try a new cause of action.
original. It does not replace that which it supplements. Moreover, a

supplemental pleading assumes that the original pleading is to stand and that
However, in Planters Development Bank v. LZK Holdings and Development
the issues joined with the original pleading remained an issue to be tried in the
Corp.,39 we clarified that, while a matter stated in a supplemental complaint
action. It is but a continuation of the complaint. Its usual office is to set up new
should have some relation to the cause of action set forth in the original
facts which justify, enlarge or change the kind of relief with respect to the same
pleading, the fact that the supplemental pleading technically states a new cause
subject matter as the controversy referred to in the original complaint.
of action should not be a bar to its allowance but only a matter that may be
considered by the court in the exercise of its discretion. In such cases, we
The purpose of the supplemental pleading is to bring into the records new facts
stressed that a broad definition of "cause of action" should be applied.
which will enlarge or change the kind of relief to which the plaintiff is entitled;
hence, any supplemental facts which further develop the original right of action,
Here, the issue as to the validity of the donation inter vivos of Lot No. 4709 and
or extend to vary the relief, are available by way of supplemental complaint even
half of Lot No. 4706 made by Rita in favor of Florante is a new cause of action
though they themselves constitute a right of action.37 (Citations omitted and
that occurred after the filing of the original complaint. However, the petitioners
emphasis ours)
prayer for the rescission of the said donation inter vivos in their supplemental
pleading is germane to, and is in fact, intertwined with the cause of action in the

41
partition case. Lot No. 4709 and half of Lot No. 4706 are included among the
Baylon. Until then, Florante avers that an action for rescission would be
properties that were sought to be partitioned.
premature.
The petitioners supplemental pleading merely amplified the original cause of
The petitioners contentions are well-taken.
action, on account of the gratuitous conveyance of Lot No. 4709 and half of Lot
No. 4706 after the filing of the original complaint and prayed for additional
reliefs, i.e., rescission. Indeed, the petitioners claim that the said lots form part
of the estate of Spouses Baylon, but cannot be partitioned unless the gratuitous
conveyance of the same is rescinded. Thus, the principal issue raised by the
petitioners in their original complaint remained the same.
Main Issue: Propriety of Rescission
The resolution of the instant dispute is fundamentally contingent upon a

determination of whether the donation inter vivos of Lot No. 4709 and half of
Lot No. 4706 in favor of Florante may be rescinded pursuant to Article 1381(4) of
the Civil Code on the ground that the same was made during the pendency of
the action for partition with the RTC.
Rescission is a remedy to address

the damage or injury caused to the
After having threshed out the procedural matters, we now proceed to adjudicate
contracting parties or third
the substantial issue presented by the instant petition.

persons.
The petitioners assert that the CA erred in remanding the case to the RTC for
the determination of ownership of Lot No. 4709 and half of Lot No. 4706. They
maintain that the RTC aptly rescinded the said donation inter vivos of Lot No.
4709 and half of Lot No. 4706 pursuant to Article 1381(4) of the Civil Code.
Rescission is a remedy granted by law to the contracting parties and even to

third persons, to secure the reparation of damages caused to them by a contract,
even if it should be valid, by means of the restoration of things to their
condition at the moment prior to the celebration of said contract.41 It is a
remedy to make ineffective a contract, validly entered into and therefore
In his Comment,40 Florante asserts that before the petitioners may file an
obligatory under normal conditions, by reason of external causes resulting in a
action for rescission, they must first obtain a favorable judicial ruling that Lot
pecuniary prejudice to one of the contracting parties or their creditors.42
No. 4709 and half of Lot No. 4706 actually belonged to the estate of Spouses

Contracts which are rescissible are valid contracts having all the essential
42
xxxx
requisites of a contract, but by reason of injury or damage caused to either of

the parties therein or to third persons are considered defective and, thus, may
be rescinded.
(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.
The kinds of rescissible contracts, according to the reason for their susceptibility
to rescission, are the following: first, those which are rescissible because of
lesion or prejudice;43 second, those which are rescissible on account of fraud or
bad faith;44 and third, those which, by special provisions of law,45 are
susceptible to rescission.46
The rescission of a contract under Article 1381(4) of the Civil Code only requires
the concurrence of the following: first, the defendant, during the pendency of
the case, enters into a contract which refers to the thing subject of litigation;
and second, the said contract was entered into without the knowledge and
approval of the litigants or of a competent judicial authority. As long as the
Contracts which refer to things
foregoing requisites concur, it becomes the duty of the court to order the
subject of litigation is rescissible
rescission of the said contract.
pursuant to Article 1381(4) of the

Civil Code.
The reason for this is simple. Article 1381(4) seeks to remedy the presence of bad
faith among the parties to a case and/or any fraudulent act which they may
commit with respect to the thing subject of litigation.
Contracts which are rescissible due to fraud or bad faith include those which
involve things under litigation, if they have been entered into by the defendant
without the knowledge and approval of the litigants or of competent judicial
When a thing is the subject of a judicial controversy, it should ultimately be
authority. Thus, Article 1381(4) of the Civil Code provides:
bound by whatever disposition the court shall render. The parties to the case are
therefore expected, in deference to the courts exercise of jurisdiction over the
case, to refrain from doing acts which would dissipate or debase the thing
Art. 1381. The following contracts are rescissible:
subject of the litigation or otherwise render the impending decision therein

ineffectual.

43
The absence of such knowledge or approval would not precipitate the invalidity
There is, then, a restriction on the disposition by the parties of the thing that is
of an otherwise valid contract. Nevertheless, such contract, though considered
the subject of the litigation. Article 1381(4) of the Civil Code requires that any
valid, may be rescinded at the instance of the other litigants pursuant to Article
contract entered into by a defendant in a case which refers to things under
1381(4) of the Civil Code.
litigation should be with the knowledge and approval of the litigants or of a

competent judicial authority.
Here, contrary to the CAs disposition, the RTC aptly ordered the rescission of
the donation inter vivos of Lot No. 4709 and half of Lot No. 4706 in favor of
Further, any disposition of the thing subject of litigation or any act which tends
Florante. The petitioners had sufficiently established the presence of the
to render inutile the courts impending disposition in such case, sans the
requisites for the rescission of a contract pursuant to Article 1381(4) of the Civil
knowledge and approval of the litigants or of the court, is unmistakably and
Code. It is undisputed that, at the time they were gratuitously conveyed by Rita,
irrefutably indicative of bad faith. Such acts undermine the authority of the
Lot No. 4709 and half of Lot No. 4706 are among the properties that were the
court to lay down the respective rights of the parties in a case relative to the
subject of the partition case then pending with the RTC. It is also undisputed
thing subject of litigation and bind them to such determination.
that Rita, then one of the defendants in the partition case with the RTC, did not
inform nor sought the approval from the petitioners or of the RTC with regard
to the donation inter vivos of the said parcels of land to Florante.
It should be stressed, though, that the defendant in such a case is not absolutely
proscribed from entering into a contract which refer to things under litigation.
If, for instance, a defendant enters into a contract which conveys the thing
Although the gratuitous conveyance of the said parcels of land in favor of
under litigation during the pendency of the case, the conveyance would be valid,
Florante was valid, the donation inter vivos of the same being merely an exercise
there being no definite disposition yet coming from the court with respect to
of ownership, Ritas failure to inform and seek the approval of the petitioners or
the thing subject of litigation. After all, notwithstanding that the subject thereof
the RTC regarding the conveyance gave the petitioners the right to have the said
is a thing under litigation, such conveyance is but merely an exercise of
donation rescinded pursuant to Article 1381(4) of the Civil Code.
ownership.
Rescission under Article 1381(4) of
This is true even if the defendant effected the conveyance without the
knowledge and approval of the litigants or of a competent judicial authority.
the Civil Code is not preconditioned

44
upon the judicial determination as
with regard to the thing subject litigation, this would only bring about the very
to the ownership of the thing
predicament that the said provision of law seeks to obviate. Assuming arguendo
subject of litigation.
that a rescissory action under Article 1381(4) of the Civil Code could only be
instituted after the dispute with respect to the thing subject of litigation is
judicially determined, there is the possibility that the same may had already
In this regard, we also find the assertion that rescission may only be had after
been conveyed to third persons acting in good faith, rendering any judicial
the RTC had finally determined that the parcels of land belonged to the estate of
determination with regard to the thing subject of litigation illusory. Surely, this
Spouses Baylon intrinsically amiss. The petitioners right to institute the action
paradoxical eventuality is not what the law had envisioned.
for rescission pursuant to Article 1381(4) of the Civil Code is not preconditioned
upon the RTCs determination as to the ownership of the said parcels of land.
Even if the donation inter vivos is
validly rescinded, a determination
It bears stressing that the right to ask for the rescission of a contract under
Article 1381(4) of the Civil Code is not contingent upon the final determination
of the ownership of the thing subject of litigation. The primordial purpose of
as to the ownership of the subject

parcels of land is still necessary.
Article 1381(4) of the Civil Code is to secure the possible effectivity of the
impending judgment by a court with respect to the thing subject of litigation. It
Having established that the RTC had aptly ordered the rescission of the said
seeks to protect the binding effect of a courts impending adjudication vis--vis
donation inter vivos in favor of Florante, the issue that has to be resolved by this
the thing subject of litigation regardless of which among the contending claims
Court is whether there is still a need to determine the ownership of Lot No.
therein would subsequently be upheld. Accordingly, a definitive judicial
4709 and half of Lot No. 4706.
determination with respect to the thing subject of litigation is not a condition

sine qua non before the rescissory action contemplated under Article 1381(4) of
the Civil Code may be instituted.
In opting not to make a determination as to the ownership of Lot No. 4709 and
half of Lot No. 4706, the RTC reasoned that the parties in the proceedings
before it constitute not only the surviving heirs of Spouses Baylon but the
Moreover, conceding that the right to bring the rescissory action pursuant to
surviving heirs of Rita as well. As intimated earlier, Rita died intestate during
Article 1381(4) of the Civil Code is preconditioned upon a judicial determination
the pendency of the proceedings with the RTC without any issue, leaving the

45
parties in the proceedings before the RTC as her surviving heirs. Thus, the RTC
In this regard, if Lot No. 4709 and half of Lot No. 4706, as unwaveringly claimed
insinuated, a definitive determination as to the ownership of the said parcels of
by Florante, are indeed exclusively owned by Rita, then the said parcels of land
land is unnecessary since, in any case, the said parcels of land would ultimately
may not be partitioned simultaneously with the other properties subject of the
be adjudicated to the parties in the proceedings before it.
partition case before the RTC. In such case, although the parties in the case
before the RTC are still co-owners of the said parcels of land, the RTC would not
We do not agree.
have the authority to direct the partition of the said parcels of land as the
proceedings before it is only concerned with the estate of Spouses Baylon.
Admittedly, whoever may be adjudicated as the owner of Lot No. 4709 and half
of Lot No. 4706, be it Rita or Spouses Baylon, the same would ultimately be
transmitted to the parties in the proceedings before the RTC as they are the only
surviving heirs of both Spouses Baylon and Rita. However, the RTC failed to
realize that a definitive adjudication as to the ownership of Lot No. 4709 and
half of Lot No. 4706 is essential in this case as it affects the authority of the RTC
to direct the partition of the said parcels of land. Simply put, the RTC cannot
properly direct the partition of Lot No. 4709 and half of Lot No. 4706 until and
unless it determines that the said parcels of land indeed form part of the estate
WHEREFORE, in consideration of the foregoing disquisitions, the petition is

PARTIALLY GRANTED. The Decision dated October 26, 2007 issued by the
Court of Appeals in CA-G.R. CV No. 01746 is MODIFIED in that the Decision
dated October 20, 2005 issued by the Regional Trial Court, Tanjay City, Negros
Oriental, Branch 43 in Civil Case No. 11657, insofar as it decreed the rescission of
the Deed of Donation dated July 6, 1997 is hereby REINSTATED. The case is
REMANDED to the trial court for the determination of the ownership of Lot No.
4709 and half of Lot No. 4706 in accordance with this Decision.
of Spouses Baylon.
SO ORDERED.
It should be stressed that the partition proceedings before the RTC only covers
the properties co-owned by the parties therein in their respective capacity as the
surviving heirs of Spouses Baylon. Hence, the authority of the RTC to issue an
order of partition in the proceedings before it only affects those properties
which actually belonged to the estate of Spouses Baylon.

46
involved the entire Lot 216. The complaint therein sought the annulment of
several certificates of title covering portions of Lot 216 and the reinstatement of
VOIDABLE CONTRACTS
OCT No. RO-238(555). The defendants in the second case were Nicolas Jadol,
SAMONTE vs. CA [G.R. No. 104223 . July 12, 2001]5
Beatriz Jadol, Jacobo Tagorda, Henry Jadol, Aurelio Rotor and herein petitioner.
Tiburcio Samonte (petitioner) filed this petition for review on certiorari seeking
to reverse and set aside the Decision, dated November 29, 1991, of the Court of
The present case stems only from the latter case (Civil Case No. 1816) and, as
culled from the CA decision, the facts relevant herein are as follows:
Appeals (CA) in CA-G.R. CV No. 16645. He likewise seeks the reversal of CA
Civil Case No. 1816
Resolution,
(CA-G.R. CV No. 16645)
dated
February
21,
1992,
which
denied
his
motion
for
reconsideration.
From the pleadings and the evidence adduced by the parties the following are
The parcel of land (Lot No. 216) subject of this dispute is situated in Nasipit,
not disputed or deemed admitted: that Lot 216 of the Cadastral survey of
Agusan del Norte, and originally covered by Original Certificate of Title No. RO-
Nasipit, containing an area of 12,753 square meters, more or less, situated at
238(555) issued in the names Apolonia Abao and her daughter Irenea Tolero, pro
Anislagan, Nasipit, Agusan (now del Norte) is covered by Original Certificate of
indiviso. It contained an area of 12,753 square meters. Two cases were
Title (OCT) No. RO-238 issued in 1927 in the name of Apolonia Abao and Irenea
separately filed in the Regional Trial Court, Branch II of Nasipit, Agusan del
Tolero in equal undivided shares (Exhibit E); that OCT No. RO-238 was
Norte involving the entire lot. Both cases were filed by the surviving heirs of
administratively reconstituted on August 8, 1957 and the assigned number of the
[1]
Apolonia Abao and Irenea Tolero. These heirs, children of Irenea Tolero and
reconstituted title is OCT No. RO-238 (555) (Exhibit D identical to Exhibit-
grandchildren of Apolonia Abao, are the respondents in this case.
Samonte); that on August 8, 1957, based on an affidavit of Extra-judicial
The first case, Civil Case No. 1672, was an action for quieting of title and
Settlement and Confirmation of Sale (Exhibit D-1), OCT No. RO-238 (555) was
recovery of possession of a parcel of land which originally formed part of the
cancelled and lieu thereof Transfer Certificate of Title (TCT) No. RT-476 was
entire property. Said parcel of land was denominated as Lot 216-B-2-G and
issued in the name of Irenea Tolero, share and Nicolas Jadol, share (Exhibit
covered by Transfer Certificate of Title (TCT) No. RT-899 in the name of Irenea
C identical to Exhibit 3-Samonte); that on February 13, 1959, based on
Tolero. The defendants named therein were spouses Andres and Amanda Lacho.
subdivision plan, subdividing Lot 216 into Lot 216-A and Lot 216-B, the Register
The second case, Civil Case No. 1816, is similarly an action for quieting of title
and recovery of possession. Unlike the first case, however, Civil Case No. 1816
of Deeds of Agusan (now del Norte) cancelled TCT No. RT-476 and issued in its
place TCT No. RT-553 in the name of Tiburcio Samonte for Lot 216-A (Exhibit 2Samonte) and TCT No. RT-554. Irenea Tolero and Nicolas Jadol for Lot 216-B
5 Annullable Contracts

47
(Exhibit B); that on February 13, 1959 based on a subdivision plan subdividing
(Exhibits 5 and 7-Samonte) and have paid the real estate taxes thereon (Exhibit
Lot 216-B to 216-B-1 and 216-B-2, TCT No. RT-554 was cancelled and in its place
6 to 6-K, inclusive Samonte). The portions he bought is now covered by TCT
TCT No. RT-555 was issued in the name of Jacob B. Tagorda for Lot 216-B-1 and
No. RT-553 (Exhibit 2-Samonte) and TCT No. RT-1658 (Exhibit 4-Samonte).
TCT No. 556 in the name of Irenea Tolero and Nicolas Jadol for Lot 216-B-2;
Defendant Jadols claim that they became owners of one-half (1/2) portion of Lot
Plaintiffs in their evidence claim ownership over the entire lot, Lot 216, as one-
216 by purchase from Ignacio Atupan and Apolonia Abao on September 15, 1939
half (1/2) of the area of 12.753 square meters was registered in the name of their
as shown by a document notarized by Jacobo Bello (Exhibit 1-Jadol) and signed
mother Irenea Tolero (Exhibit E) the other half was registered in the name of
by Irenea Tolero (Exhibit 1-D-Jadol) as a witness. They were in possession since
their grandmother, Apolonia Abao. After Apolonia Abao died during the
they bought the land. The land is covered by Tax Declaration No. 1630 (Exhibit
Japanese occupation and Irenea Tolero died in 1945, they inherited and became
2-Jadol) and Tax Declaration No. 1676 (Exhibit 3-Jadol) in their name (Decision,
owners of Lot 216. Plaintiffs questioned the series of cancellation of the
pp. 36-39).
certificate of title starting from OCT No. RO-238 (555) and the Deed of Extra-
Initially, the two cases were heard independently of each other. It was
judicial Settlement and Confirmation of Sale executed by Ignacio Atupan on
discovered, however, that they were intimately related. Accordingly, the court a
August 7, 1957 (Exhibit D-1) adjudicating one-half (1/2) of the area of Lot
quo jointly tried the two cases. After due trial, the trial court rendered separate
216. Plaintiffs maintain that Ignacio Atupan is not a son of Apolonia Abao but
decisions, both in favor of the plaintiffs therein. The dispositive portion
he only grew up while living with Apolonia Abao. That when Lot 216 was
particularly of the decision in Civil Case No. 1816 reads:
subdivided into two (2) lots, Lot 216-A and Lot 216-A (sic) which was made as
[2]
Civil Case No. 1816
one of the basis in the cancellation of TCT No. 476 and issuance of TCT No. 553
and TCT No. 554 on February 13, 1959, the plaintiffs or their predecessors-ininterest have not signed any document agreeing as to the manner how Lot 216
was to be divided, nor have they consented to the partition of the same.
Defendant Samonte in his evidence claim that he bought portions of the Lot 216
IN VIEW OF THE FOREGOING, judgment is hereby rendered in favor of the

plaintiffs and against the defendants:
a) declaring plaintiffs co-owners of the entire of (sic) Lot 216 being the surviving
heirs of Apolonia Abao and Irenea Tolero;
in good faith as he was made to believe that all the papers in possession of his
b) directing the reinstatement of Original Certificate of Title No. RO-238(555);
vendors were all in order. One of the documents presented by him is a Deed of
c) directing the cancellation of Transfer Certificate of Title No. RT-476 and all
Absolute Sale executed in 1939 (Exhibit 8-Samonte). He has been in open,
subsequent certificates of title derived therefrom which are all declared null and
continuous, adverse and exclusive possession of the portions of Lot 216 he
void;
bought for more than 20 years and have declared the land for taxation purposes

48
d) declaring the subdivision survey of Lot 216 null and void and ineffectual;
THE COURT OF APPEALS ERRED AS A MATTER OF LAW AND
e) directing the defendants to vacate the premises of Lot 216 and to remove all
JURISPRUDENCE IN NOT HOLDING THAT HEREIN PETITIONER WAS A
their improvements therefrom as they are builders in bad faith;
BUYER IN GOOD FAITH FOR VALUE, HENCE HE IS PROTECTED BY LAW.
f) directing defendants Jadol and Samonte to pay jointly and severally the
The petition is bereft of merit.
plaintiffs the sum of P20,000.00 for the use and occupation of the land;
It is not disputed that Ignacio Atupan caused the fraudulent cancellation of
g) directing defendants Jadol and Samonte to pay P5,000.00 as attorneys fees;
OCT No. RO-238(555). The trial court found that Atupan, on the basis of his
h) ordering the dismissal of the counterclaims of defendants; and
[6]
Affidavit of Extra-judicial Settlement and Confirmation Sale, adjudicated unto

himself one-half of Lot 216 by misrepresenting himself as the sole heir of
i) directing the defendants Jadol and Samonte to pay the costs.

SO ORDERED.
[3]
Apolonia Abao. Atupan, in said affidavit, likewise confirmed the two deeds of
sale allegedly executed by him and Abao on September 15 and 16, 1939, covering
Plaintiffs were likewise declared the lawful owners of Lot 216-B-2-G in Civil Case
the latters one-half lot in favor of Nicolas Jadol.
No. 1672. Defendants therein were ordered to, among others, vacate the
The trial court found Atupans affidavit, dated August 7, 1957, to be tainted with
premises and remove the improvements made thereon.
[4]
fraud because he falsely claimed therein that he was the sole heir of Abao when
The defendants in the two cases respectively appealed the aforesaid decisions to
in fact, he merely lived and grew up with her. Jadol and his wife, Beatriz, knew
the CA. The CA ordered the consolidation of the two appeals. Thereafter, the
about this fact. Despite this knowledge, however, the Jadol spouses still
CA rendered the decision of November 29, 1991 affirming the decisions of the
presented the affidavit of Atupan before the Register of Deeds of the Province of
trial court and dismissing the appeals. Petitioner then filed the instant petition
Agusan when they caused the cancellation of OCT No. R0-238(555) and issuance
assailing particularly the decision in CA-G.R. CV No. 16645. He alleges that:
of TCT No. RT-476 in their names covering that portion owned by Abao.
The trial court concluded that the incorporation of the statement in Atupans
THE HONORABLE COURT OF APPEALS ERRED AS A MATTER OF LAW IN

DEPARTING FROM THE PREVAILING DOCTRINE SUPPORTED BY THE
WEIGHT OF AUTHORITIES THAT THE DISCOVERY OF THE FRAUD IS
DEEMED TO HAVE TAKEN PLACE AT THE TIME OF THE REGISTRATION
(CARANTES VS. COURT OF APPEALS, 76 SCRA 514);
II
[5]
affidavit confirming the alleged execution of the aforesaid deeds of sale was
intended solely to facilitate the issuance of the certificate of title in favor of the
Jadol spouses. It was noted that the documents evidencing the alleged
transactions were not presented in the Register of Deeds. It was further pointed
out that the Jadol spouses only sought the registration of these transactions in

49
1957, eighteen (18) years after they supposedly took place or twelve (12) years
subject lot in their names way back in August 8, 1957. It is petitioners
after Abao died.
contention that since eighteen years had already lapsed from the issuance of
Based on the foregoing facts, the CA, on appeal, ruled that the cancellation of
TCT No. RT-476 until the time when respondents filed the action in the court a
OCT No. R0-238(555) and the consequent issuance of TCT No. RT-476 in its
quo in 1975, the same was time-barred.
place in the name of the Jadol spouses were effected through fraudulent means
Petitioners defense of prescription is untenable. The general rule that the
and that they (spouses Jadol) not only had actual knowledge of the fraud but
discovery of fraud is deemed to have taken place upon the registration of real
were also guilty of bad faith.
[7]
property because it is considered a constructive notice to all persons
[10]
does
Nonetheless, petitioner contends that respondents action in the court a
not apply in this case. Instead, the CA correctly applied the ruling in Adille vs.
quo had already prescribed. Generally, an action for reconveyance of real
Court of Appeals
property based on fraud may be barred by the statute of limitations which
In Adille, petitioner therein executed a deed of extra-judicial partition
requires that the action must be commenced within four (4) years from the
misrepresenting himself to be the sole heir of his mother when in fact she had
discovery of fraud, and in case of registered land, such discovery is deemed to
other children. As a consequence, petitioner therein was able to secure title to
have taken place from the date of the registration of title.
[8]
[11]
which is substantially on all fours with the present case.
the land in his name alone. His siblings then filed a case for partition on the
ground that said petitioner was only a trustee on an implied trust of the
Article 1456 of the Civil Code, however, provides:

Art. 1456. If property is acquired through mistake or fraud, the person obtaining
it is, by force of law, considered a trustee of an implied trust for the benefit of
property. Among the issues resolved by the Court in that case was
prescription. Said petitioner registered the property in 1955 and the claim of
private respondents therein was presented in 1974.
the person from whom the property comes.

As it had been indubitably established that fraud attended the registration of a
portion of the subject property, it can be said that the Jadol spouses were
The Courts resolution of whether prescription had set in therein is

quite apropos to the instant case:
trustees thereof on behalf of the surviving heirs of Abao. An action based on
It is true that registration under the Torrens system is constructive notice of
implied or constructive trust prescribes in ten (10) years from the time of its
title, but it has likewise been our holding that the Torrens title does not furnish
creation or upon the alleged fraudulent registration of the property.
[9]
Petitioner, as successor-in-interest of the Jadol spouses, now argues that the

respondents action for reconveyance, filed only in 1975, had long prescribed
considering that the Jadol spouses caused the registration of a portion of the
a shield for fraud. It is therefore no argument to say that the act of registration is
equivalent to notice of repudiation, assuming there was one, notwithstanding
the long-standing rule that registration operates as a universal notice of title.

50
For the same reason, we cannot dismiss private respondents claims commenced
With respect to this particular lot therefore, petitioner cannot pretend to be a
in 1974 over the estate registered in 1955. While actions to enforce a constructive
purchaser in good faith. It is axiomatic that one who buys from a person who is
trust prescribes in ten years, reckoned from the date of the registration of the
not a registered owner is not a purchaser in good faith.
property, we, as we said, are not prepared to count the period from such a date
Moreover, with respect to the other portion which petitioner bought from
in this case. We note the petitioners sub rosa efforts to get hold of the property
Jacobo Tagorda, the trial court held that he was, as in the first case, a buyer in
exclusively for himself beginning with his fraudulent misrepresentation in his
bad faith. The general rule is that a person dealing with registered land has a
unilateral affidavit of extrajudicial settlement that he is the only heir and child
right to rely on the Torrens certificate of title and to dispense with the need of
of his mother Feliza with the consequence that he was able to secure title in his
making further inquiries.
name [alone]. Accordingly, we hold that the right of the private respondents
party has actual knowledge of facts and circumstances that would impel a
commenced from the time they actually discovered the petitioners act of
reasonably cautious man to make such inquiry or when the purchaser has
defraudation. According to the respondent Court of Appeals, they "came to
knowledge of a defect or the lack of title in his vendor or of sufficient facts to
know [of it] apparently only during the progress of the litigation." Hence,
induce a reasonably prudent man to inquire into the status of the title of the
prescription is not a bar.
[12]
property in litigation.
[16]
[15]
[14]
This rule, however, admits of exceptions: when the
One who falls within the exception can neither be
In this case, the CA reckoned the prescriptive period from the time respondents
denominated an innocent purchaser for value nor a purchaser in good faith; and
had actually discovered the fraudulent act of Atupan which was, as borne out by
hence does not merit the protection of the law.
the records, only during the trial of Civil Case No. 1672.
[13]
Citing Adille, the CA
rightfully ruled that respondents action for reconveyance had not yet
prescribed.
[17]
The CA established that petitioner is not a purchaser in good faith with respect
to this portion of the subject property, thus:
xxx While it may be true that the second portion was purchased by Samonte
On the issue of whether petitioner is a buyer in bad faith as he claims, the Court
from Tagorda in whose name the same was then registered under TCT No. RT-
likewise holds in the negative. It was established during the trial by the court a
555, Samonte was previously charged with the fact that Jadol lacked the capacity
quo that he knew that respondents were the only surviving heirs of Irenea
to transmit title over any part of the subject property including that portion
Tolero. Despite this knowledge, petitioner still bought a portion of the subject
which the latter sold to Tagorda. Thus, Samonte was clearly in bad faith when
lot from the Jadol spouses on July 20, 1957, when the same was still registered
he sought the registration of the deed of sale of July 10, 1972 which effected the
under OCT No. R0-238(555) in the name of Abao and Tolero.
cancellation of TCT No. RT-555 and the issuance of TCT No. 1658 in his favor.
xxx
[18]

Petitioner cannot now claim that he already acquired valid title to the
property. The inscription in the registry, to be effective, must be made in good
faith. The defense of indefeasibility of a Torrens Title does not extend to a
transferee who takes the certificate of title with notice of a flaw. A holder in bad
faith of a certificate of title is not entitled to the protection of the law, for the
law cannot be used as a shield for frauds.
[19]
In fine, there is no compelling reason to deviate from the salutary rule that
findings and conclusions of the trial court, especially if affirmed by the appellate
court, are accorded utmost respect by this Court.
WHEREFORE, the instant petition is DENIED for lack of merit. The Decision,
dated November 29, 1991 of the Court of Appeals and its Resolution, dated
February 21, 1992, in CA-G.R. CV No. 16645 are AFFIRMED in toto.
SO ORDERED.
51

MENDEZONA VS. OZAMIZ (376 SCRA 482)6
52
The petitioners initiated the suit to remove a cloud on their said respective titles
caused by the inscription thereon of a notice of lis pendens, which came about as
[1]
Before us is a petition for review on certiorari of the Decision and the
a result of an incident in Special Proceeding No. 1250 of the RTC
Resolution of the Court of Appeals dated July 27, 1998 and May 19, 2000,
of Oroquieta City. Special Proceeding No. 1250 is a proceeding for guardianship
respectively, in CA-G.R. CV No. 39752 which reversed and set aside the
over the person and properties of Carmen Ozamiz initiated by the respondents
[2]
[8]
Decision dated September 23, 1992 rendered in favor of the petitioners by the
Julio H. Ozamiz, Jose Ma. Ozamiz, Carmen H. Ozamiz,
Regional Trial Court (RTC) of Cebu City, Branch 6 in Civil Case No. CEB-10766.
Teresa O.F. Zarraga, Carlos O. Fortich, Jose Luis O. Ros, Paulita O. Rodriguez
[3]
Paz O. Montalvan, Ma.
[9]
Civil Case No. CEB-10766 is a suit for quieting of title. It was instituted
on September
25,
1991 by
petitioner
spouses
Mario
and Lourdes O. Lon.
It appears that on January 15, 1991, the respondents instituted the petition for
the
guardianship with the Regional Trial Court of Oroquieta City, alleging therein
amended complaint filed on October 7, 1991, herein co-petitioner spouses Luis
that Carmen Ozamiz, then 86 years old, after an illness in July 1987, had become
J. Mendezona and Maricar L. Mendezona and Teresita Adad Vda.
disoriented and could not recognize most of her friends; that she could no
J. Mendezona and Teresita M. Mendezona as
de Mendezona joined as co-plaintiffs.
initial
[4]
plaintiffs, and
in
longer take care of herself nor manage her properties by reason of her failing
[5]
In their complaint, the petitioners, as plaintiffs therein, alleged that petitioner

spouses Mario J. Mendezona and Teresita M. Mendezona, petitioner spouses
Luis J. Mendezona and Maricar L.Mendezona, and petitioner Teresita Adad Vda.
de Mendezona own a parcel of land each in the Banilad Estate, Lahug, Cebu City
health,
weak
mind
and
absent-mindedness.
Mario Mendezona and
Luis Mendezona, herein petitioners who are nephews of Carmen Ozamiz,

and Pilar Mendezona, a sister of CarmenOzamiz, filed an opposition to the
guardianship petition.
with almost similar areas of 3,462 square meters, 3,466 square meters and 3,468
In the
square meters, covered and described in Transfer Certificate of Title (TCT) Nos.
the oppositors thereto agreed that Carmen Ozamiz needed a guardian over her
[6]
116834, 116835, and 116836 respectively, of the Registry of Deeds of Cebu City.
The petitioners ultimately traced their titles of ownership over their respective
[7]
properties from a notarized Deed of Absolute Sale dated April 28, 1989
executed in their favor by CarmenOzamiz for and in consideration of the sum of
One Million Forty Thousand Pesos (P1,040,000.00).
course
of
the
guardianship
proceeding, the
petitioners
and
person and her properties, and thus respondent Paz O. Montalvan was
designated as guardian over the person of Carmen Ozamiz while petitioner
Mario
J. Mendezona,
respondents
Roberto
J. Montalvan and
Julio
H. Ozamiz were designated as joint guardians over the properties of the said
ward.
As guardians, respondents Roberto J. Montalvan and Julio H. Ozamiz filed on
August
6,
1991
with
the
guardianship
court
their
inventories
and

[10]
Accounts,
53
listing therein Carmen Ozamizsproperties, cash, shares of stock,
circumstances surrounding the sale. Carmencita Cedeno and Martin Yungco,
vehicles and fixed assets, including a 10,396 square meter property known as
instrumental witnesses to the Deed of Absolute Sale dated April 28, 1989, and,
the Lahug property. Said Lahug property is the same property covered by the
Atty. Asuncion Bernades, the notary public who notarized the said document,
Deed of Absolute Sale dated April 28, 1989 executed by Carmen Ozamiz in favor
testified
of
Carmen Ozamiz was of sound mind and that she voluntarily and knowingly
the
petitioners.
Respondents
Roberto
J. Montalvan and
Julio
H. Ozamiz caused the inscription on the titles of petitioners a notice

[11]
of lis pendens,
regarding Special Proceeding No. 1250, thus giving rise to the
suit for quieting of title, Civil Case No. CEB-10766, filed by herein petitioners.
In their Answer
[12]
in Civil Case No. CEB-10766 the respondents opposed the
that
on
the
day
of
execution
of
the
said
contract
that
executed the said deed of sale.

For the defendants, the testimonies of respondent Paz O. Montalvan, a sister of
Carmen Ozamiz; Concepcion Agac-ac,
respondent
Julio Ozamiz;
an
assistant
of
CarolinaLagura,
Carmen Ozamiz;
a househelper of
petitioners claim of ownership of the Lahug property and alleged that the titles
Carmen Ozamiz; Joselito Gunio, an appraiser of land; Nelfa Perdido, a part-time
issued in the petitioners names are defective and illegal, and the ownership of
bookkeeper of Carmen Ozamiz, and the deposition of Dr. Faith Go, physician of
the said property was acquired in bad faith and without value inasmuch as the
Carmen Ozamiz, were offered in evidence.
consideration for the sale is grossly inadequate and unconscionable.
The
Respondents further alleged that at the time of the sale on April 28,
Mario Mendezona and Luis Mendezona, to rebut the testimony of respondent
1989 Carmen Ozamiz was already ailing and not in full possession of her mental
Julio H. Ozamiz; and, Dr. William Buot, a doctor of neurology to rebut aspects
faculties; and that her properties having been placed in administration, she was
of the deposition of Dr. Faith Go on the mental capacity of Carmen Ozamiz at
in effect incapacitated to contract with petitioners.
the time of the sale.
The issues for resolution were delimited in the pre-trial to: (a) the propriety of
During the trial, the trial court found that the following facts have been duly
recourse to quieting of title; (b) the validity or nullity of the Deed of Absolute
established:
Sale dated April 28, 1989 executed by Carmen Ozamiz in favor of herein
petitioners; (c) whether the titles over the subject parcel of land in plaintiffs
names be maintained or should they be cancelled and the subject parcels of
landreconveyed; and (d) damages and attorneys fees.
[13]
Trial on the merits ensued with the parties presenting evidence to prove their
respective
allegations.
Petitioners
Mario Mendezona, Teresita Adad Vda.
de Mendezona and Luis Mendezona, as plaintiffs therein, testified on the
(1)
petitioners
presented
as
rebuttal
witnesses
petitioners
[14]
On April 28, 1989, Carmen Ozamiz sold to her nephews, Mario, Antonio
and Luis, all surnamed Mendezona, three (3) parcels of residential land
in Cebu City, per a Deed of Absolute Sale (Exh. D) for a consideration of
P1,040,000.00, in which deed the usufructuary rights were reserved during her
lifetime.

(2)
The three parcels of land were subsequently transferred to the names of
54
Inventories and Accounts, with the Oroquieta Court as to the inclusion of the
the three vendees per TCTs Nos. 108729, 108730 and 108731 (Exhs. J, K & L,
property (Exh.R-1).
respectively). A partition agreement was entered into by the three vendees (Exh.
(6)
3) and the parcels of land are now titled in the names of the plaintiffs.
plaintiff Teresita Adad Mendezona was granted a General Power of Attorney
Mario Mendezona TCT No. 116834 (Exh. A);
(Exh. 1) by Carmen Ozamiz on March 23, 1988 and after his demise,
Luis Mendezona TCT No. 116835 (Exh. B);
Carmen Ozamizgranted Mario Mendezona a General Power of Attorney (Exh.
Prior
to
his
death,
the
deceased
husband
of
2.) on August 11, 1990. Both powers of attorney relate to the administration of
Antonio Mendezona TCT No. 116836 (Exh. C);
the property, subject of this action, in Cebu City.

(3)
The
reservation
of
the usufructuary rights
to
the
vendor
Carmen Ozamiz during her lifetime was confirmed by the plaintiffs-spouses

Mario Mendezona and Teresita Moraza and
plaintiffs
spouses
On September 23, 1992 the trial court rendered its decision in favor of the
petitioners, the dispositive portion of which reads, to wit:
Luis Mendezona andMaricar Longa in a sworn statement (Exh. I) executed
Wherefore, premises considered, the Court is of the opinion and so declares
on October 15, 1990, which was duly annotated on the titles of the property;
that:
(4)
1.
The capital gains tax was paid (Exh. H) on May 5, 1989 and a certificate
The property described in the complaint was sold, with reservation
(Exh. H-1) was issued by the Bureau of Internal Revenue authorizing the
of usufructuary rights by Carmen Ozamiz to the plaintiffs under a valid contract,
Register of Deeds to transfer the property to the vendees;
voluntarily and deliberately entered into while she was of sound mind, for
(5)
A petition for guardianship over the person and properties of
Carmen Ozamiz (Exh. E) was filed by all the defendants, (except the defendant
Roberto Montalvan) on January 15, 1991 with the Regional Trial Court
ofOroquieta City, denominated as Spec. Proc. No. 1250 and subsequently, an
sufficient and good consideration, and without fraud, force, undue influence or
intimidation having been exercised upon her, and consequently, the Court
orders the defendants herein to acknowledge and recognize the plaintiffs title
to the aforecited property and to refrain from further clouding the same;
Inventories and Accounts (Exh. F) was filed by court-appointed guardians
2.
Roberto Montalvan and Julio Ozamiz, in which the property was listed (Exh. F-
Antonio Mendezona should be titled in the name of Teresita Adad vda.
1) and a Notice of Lis Pendens was filed with the Register of Deeds of Cebu City
de Mendezona as
on August 13, 1991 by said joint guardians. Plaintiff Mario Mendezona, as
of Cebu City is hereby ordered to do so;
another joint guardian over Carmen Ozamiz, filed his opposition (Exh. R) to the
That
the
one-third
(1/3)
share
her paraphernal property
and
erroneously
the
Register
titled
of
to
Deeds

3.
The Notice of Lis Pendens affecting the property should be eliminated
55
been discovered prior to the trial in the court below by the exercise of due
from the record and the Register of Deeds of Cebu City is ordered to expunge
diligence.
the same.
The appellate court denied both motions in its Resolution dated May 19, 2000.
Hence, the instant petition anchored on the following grounds:
SO ORDERED.
I.
On appeal to the Court of Appeals, the appellate court reversed the factual
THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT THE APRIL 28,
findings of the trial court and ruled that the Deed of Absolute Sale dated April
1989 DEED OF ABSOLUTE SALE WAS A SIMULATED CONTRACT.
28, 1989 was a simulated contract since the petitioners failed to prove that the
A.
consideration was actually paid, and, furthermore, that at the time of the
execution of the contract the mental faculties of Carmen Ozamiz were already
seriously impaired. Thus, the appellate court declared that the Deed of Absolute
Sale of April 28, 1989 is null and void. It ordered the cancellation of the
[15]
THE COURT OF APPEALS GRAVELY ERRED IN IGNORING THE STATUTORY

PRESUMPTIONS OF ACTUAL AND SUFFICIENT CONSIDERATION FOR,
AND OF THE REGULARITY AND TRUTHFULNESS OF, THE NOTARIZED
DEED OF ABSOLUTE SALE.
certificates of title issued in the petitioners names and directed the issuance of
B.
new certificates of title in favor of Carmen Ozamiz or her estate.

Petitioners filed a motion for reconsideration of the decision of the appellate
court. Subsequent thereto, the petitioners filed a motion for a new trial and/or
for reception of evidence. They contended, among other things, that the
appellate
court
totally
ignored
the
testimony
of
Judge Teodorico Durias regarding the mental condition of Carmen Ozamiz a

month before the execution of the Deed of Absolute Sale in question. The said
testimony
was
taken
in
the
Special
the Regional Trial Court of Oroquieta City.
Proceeding
1250
RECOGNIZE AND RULE THAT IT WAS THE RESPONDENTS - AS THE

PARTIES ASSAILING THE DEED OF ABSOLUTE SALE - WHO HAD FAILED
TO DISCHARGE THEIR BURDEN OF PROVING THAT THERE WAS NO
CONSIDERATION FOR THE TRANSACTION.
C.
THE COURT OF APPEALS GRAVELY ERRED IN REFUSING TO RECEIVE IN
in
EVIDENCE THE THREE (3) CHECKS, WHICH PROVED BEYOND ANY DOUBT
that
THAT THE PURCHASE PRICE FOR THE LAHUG PROPERTY HAD BEEN PAID
Judge Duriass testimony is a newly-discovered evidence which could not have
TO CARMEN OZAMIZ, AFTER ASKING FOR THEM AND HAVING THEM
as
witness
in
the Regional Trial Court of Cebu City.
Civil
Case
Petitioners
Judge Durias was
in
PETITIONERS THE BURDEN OF PROVING PAYMENT, AND IN REFUSING TO
not
presented
However,
No.
THE COURT OF APPEALS GRAVELY ERRED IN IMPOSING ON THE
No.
CEB-10766
alleged

56
PRESENTED TO IT IN OPEN COURT, THUS COOPERATING WITH
THE COURT OF APPEALS GRAVELY ERRED IN GIVING WEIGHT TO THE
RESPONDENTS EFFORTS TO SUPPRESS THE CHECKS (WHICH THE COURT
HEARSAY TESTIMONY OF DR. FAITH GO ON THE MENTAL CONDITION OF
ITSELF AND RESPONDENTS CHALLENGED PETITIONERS TO PRODUCE).
CARMEN OZAMIZ ON THE DATE SHE EXECUTED THE DEED OF
II.
ABSOLUTE SALE.
THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT CARMEN
D.
OZAMIZS MENTAL FACULTIES WERE SERIOUSLY IMPAIRED WHEN SHE
THE COURT OF APPEALS GRAVELY ERRED IN IGNORING, AND IN
EXECUTED THE DEED OF ABSOLUTESALE ON APRIL 28, 1989.
REFUSING TO RECEIVE IN EVIDENCE, JUDGE TEODORICO DURIASS
A.
TESTIMONY (THAT CARMEN OZAMIZ WAS OF SOUND MIND WHEN SHE
THE COURT OF APPEALS GRAVELY ERRED IN IGNORING THE STATUTORY

PRESUMPTION THAT CARMEN OZAMIZ WAS OF SOUND MIND AND HAD
THE REQUISITE CAPACITY TO CONTRACT WHEN SHE EXECUTED THE
EXECUTED ANOTHER CONTRACT BARELY A MONTH BEFORE SHE

EXECUTED
THE
DEED
OF
ABSOLUTE SALE)
ON
THE
GROUND
THAT THAT TESTIMONY WAS FORGOTTEN EVIDENCE.
DEED OF ABSOLUTE SALE, AND IN REFUSING TO RULE THAT IT WAS THE
We shall first rule on the issue of whether to consider the testimony of
RESPONDENTS - AS THE PARTIES ALLEGING MENTAL INCAPACITY- WHO
Judge Durias as newly discovered evidence. A motion for new trial upon the
HAD FAILED TO DISCHARGE THEIR BURDEN OF REBUTTING THAT
ground of newly discovered evidence is properly granted only where there is
PRESUMPTION.
concurrence of the following requisites, namely: (a) the evidence had been
discovered after trial; (b) the evidence could not have been discovered and
B.
produced during trial even with the exercise of reasonable diligence; and (c) the
THE COURT OF APPEALS GRAVELY ERRED IN REFUSING TO ACCEPT AND
GIVE DUE AND PREPONDERANT WEIGHT TO UNREFUTED EVIDENCE,
INCLUDING THE UNREFUTED TESTIMONIES OF THE INSTRUMENTAL
WITNESSES AND OF THE NOTARY PUBLIC, THAT CARMEN OZAMIZ
EXECUTED THE DEED
OF
evidence is material and not merely corroborative, cumulative or impeaching

and is of such weight that if admitted, would probably alter the result. All three
(3) requisites must characterize the evidence sought to be introduced at the new
trial.
ABSOLUTE SALE FREELY, VOLUNTARILY,
KNOWINGLY, AND INTELLIGENTLY.
We find that the requirement of reasonable diligence has not been met by the
petitioners. As early as the pre-trial of the case at bar, the name of
C.
Judge Durias has already cropped up as a possible witness for the defendants,
herein respondents. That the respondents chose not to present him is not an

57
indicia per se of suppression of evidence, since a party in a civil case is free to
The respondents posit a different view. They contend that clear and convincing
choose who to present as his witness. Neither can Judge Durias testimony in
evidence refuted the presumptions on regularity of execution of the Deed of
another case be considered as newly discovered evidence since the facts to be
Absolute Sale and existence of consideration thereof. Relying upon the
testified to by Judge Durias which were existing before and during the trial,
testimonies of Paz O. Montalvan, Concepcion Agac-ac, Carolina Lagura and Dr.
could have been presented by the petitioners at the trial below.
[16]
The testimony
Faith Go, they aver that they were able to show that Carmen Ozamiz was
of Judge Durias has been in existence waiting only to be elicited from him by
already physically and mentally incapacitated since the latter part of 1987 and
questioning.
[17]
could not have executed the said Deed of Absolute Sale on April 28,
It has been held that a lack of diligence is exhibited where the newly discovered
1989 covering the disputed Lahug property. They also alleged that no error is
evidence was necessary or proper under the pleadings, and its existence must
ascribable to the appellate court for not considering the allegedly rehearsed
have occurred to the party in the course of the preparation of the case, but no
testimonies of the instrumental witnesses and the notary public.
effort was made to secure it; there is a failure to make inquiry of persons who
Factual findings of the appellate court are generally conclusive on this Court
were likely to know the facts in question, especially where information was not
which is not a trier of facts. It is not the function of the Supreme Court to
sought from co-parties; there is a failure to seek evidence available through
analyze or weigh evidence all over again. However, this rule is not without
public records; there is a failure to discover evidence that is within the control of
exception. If there is a showing that the appellate courts findings of facts
the complaining party; there is a failure to follow leads contained in other
complained of are totally devoid of support in the record or that they are so
evidence; and, there is a failure to utilize available discovery procedures.
[18]
Thus,
glaringly erroneous as to constitute grave abuse of discretion, this Court must

[19]
the testimony of Judge Durias cannot be considered as newly discovered
discard such erroneous findings of facts.
evidence to warrant a new trial.
the case at bench.
In this petition at bench, herein petitioners essentially take exception to two (2)
Simulation is defined as the declaration of a fictitious will, deliberately made by
main factual findings of the appellate court, namely, (a) that the notarized Deed
agreement of the parties, in order to produce, for the purposes of deception, the
of Absolute Sale dated April 28, 1989 was a simulated contract, and (b) that
appearances of a juridical act which does not exist or is different from what that
Carmen Ozamizs mental faculties were seriously impaired when she executed
which was really executed.
the said contract on April 28, 1989. The petitioners allege that both conclusions
declaration of will different from the will of the parties; (b) the false appearance
are contrary or opposed to well-recognized statutory presumptions of regularity
must have been intended by mutual agreement; and (c) the purpose is to
enjoyed by a notarized document and that a contracting party to a notarized
deceive third persons.
contract is of sound and disposing mind when she executes the contract.
bar.
[21]
[20]
We find that the exception applies in
The requisites of simulation are: (a) an outward
None of these were clearly shown to exist in the case at

58
Contrary to the erroneous conclusions of the appellate court, a simulated
While Concepcion Agac-ac testified that she was aware of all the transactions of
contract cannot be inferred from the mere non-production of the checks. It was
Carmen Ozamiz,
not the burden of the petitioners to prove so. It is significant to note that the
Carmen Ozamiz passed through her since AntonioMendezona, as appointed
Deed of Absolute Sale dated April 28, 1989 is a notarized document duly
administrator,
acknowledged before a notary public. As such, it has in its favor the
to Nelfa Perdido, she testified that most of the transactions that she recorded
presumption of regularity, and it carries the evidentiary weight conferred upon
refer only to rental income and expenses, and the amounts thereof were
it with respect to its due execution. It is admissible in evidence without further
reported to her by Concepcion Agac-ac only, not by Carmen Ozamiz. She does
proof of its authenticity and is entitled to full faith and credit upon its face.
[22]
not
record
she
directly
deposits
[25]
also
admitted
reported
or
that
not
all
[24]
to
Carmen Ozamiz.
withdrawals
in
the
bank
income
With
of
respect
accounts
of
Payment is not merely presumed from the fact that the notarized Deed of
Carmen Ozamiz.
Absolute Sale dated April 28, 1989 has gone through the regular procedure as
appellate court misplaced reliance thereon.
evidenced by the transfer certificates of title issued in petitioners names by the
Considering that Carmen Ozamiz acknowledged, on the face of the notarized
Register of Deeds. In other words, whosoever alleges the fraud or invalidity of a
deed, that she received the consideration at One Million Forty Thousand Pesos
notarized document has the burden of proving the same by evidence that is
(P1,040,000.00), the appellate court should not have placed too much emphasis
clear, convincing, and more than merely preponderant.
[23]
Their testimonies hardly deserve any credit and, hence, the
Therefore, with this
on the checks, the presentation of which is not really necessary. Besides, the
well-recognized statutory presumption, the burden fell upon the respondents to
burden to prove alleged non-payment of the consideration of the sale was on
prove their allegations attacking the validity and due execution of the said Deed
the respondents, not on the petitioners. Also, between its conclusion based on
of Absolute Sale. Respondents failed to discharge that burden; hence, the
inconsistent oral testimonies and a duly notarized document that enjoys
presumption in favor of the said deed stands. But more importantly, that
presumption of regularity, the appellate court should have given more weight to
notarized deed shows on its face that the consideration of One Million Forty
the latter. Spoken words could be notoriously unreliable as against a written
Thousand Pesos (P1,040,000.00) was acknowledged to have been received by
document that speaks a uniform language.
Carmen Ozamiz.
Furthermore, the appellate court erred in ruling that at the time of the
Simulation cannot be inferred from the alleged absence of payment based on
execution of the Deed of Absolute Sale on April 28, 1989 the mental faculties of
the
Carmen Ozamiz were already seriously impaired.
testimonies
of Concepcion Agac-ac,
assistant
of
Carmen Ozamiz,
[26]
[27]
It placed too much reliance
and Nelfa Perdido, part-time bookkeeper of Carmen Ozamiz. The testimonies of
upon the testimonies of the respondents witnesses. However, after a thorough
these two (2) witnesses are unreliable and inconsistent.
scrutiny of the transcripts of the testimonies of the witnesses, we find that the
respondents core witnesses all made sweeping statements which failed to show

59
the true state of mind of Carmen Ozamiz at the time of the execution of the
It has been held that a person is not incapacitated to contract merely because of
disputed document. The testimonies of the respondents witnesses on the
advanced years or by reason of physical infirmities. Only when such age or
mental capacity of Carmen Ozamiz are far from being clear and convincing, to
infirmities impair her mental faculties to such extent as to prevent her from
say the least.
properly, intelligently, and fairly protecting her property rights, is she
Carolina Lagura,
a househelper of
Carmen Ozamiz,
testified
that
when
considered incapacitated.
[30]
The respondents utterly failed to show adequate
Carmen Ozamiz was confronted by Paz O. Montalvan in January 1989 with the
proof that at the time of the sale on April 28, 1989 Carmen Ozamiz had allegedly
sale of the Lahug property, CarmenOzamiz denied the same. She testified that
lost control of her mental faculties.
Carmen Ozamiz understood the question then.

inconsistent
with
statement
that
since
We note that the respondents sought to impugn only one document, namely,
the Deed of Absolute Sale dated April 28, 1989, executed by Carmen Ozamiz.
CarmenOzamiz could not fully understand the things around her, that she was
However, there are nine (9) other important documents that were, signed by
physically fit but mentally could not carry a conversation or recognize persons
Carmen Ozamiz either before or after April 28, 1989 which were not assailed by
[29]
(Carolinas)
However, this declaration is

1988
who visited her.
her
[28]
Furthermore, the disputed sale occurred on April 28, 1989 or
the respondents.
[31]
Such is contrary to their assertion of complete incapacity of
three (3) months after this alleged confrontation in January 1989. This
Carmen Ozamiz to handle her affairs since 1987. We agree with the trial courts
inconsistency was not explained by the respondents.
assessment that it is unfair for the [respondents] to claim soundness of mind of
The revelation of Dr. Faith Go did not also shed light on the mental capacity of
Carmen Ozamizwhen it benefits them and otherwise when it disadvantages
Carmen Ozamiz on the relevant day - April 28, 1989 when the Deed of Absolute
them.
Sale was executed and notarized. At best, she merely revealed that
the condition is presumed to continue to exist, in the absence of proof to the
Carmen Ozamiz was suffering from certain infirmities in her body and at times,
contrary.
she
existed in the other acts done or contracts executed, are presumed to continue
was
forgetful,
but
there
was
no
categorical
statement
that
[32]
A person is presumed to be of sound mind at any particular time and
[33]
Competency and freedom from undue influence, shown to have

[34]
CarmenOzamiz succumbed to what the respondents suggest as her alleged
until the contrary is shown.
second childhood as early as 1987. The petitioners rebuttal witness, Dr.
All the foregoing considered, we find the instant petition to be meritorious and
William Buot, a doctor of neurology, testified that no conclusion of mental
the same should be granted.
incapacity at the time the said deed was executed can be inferred from Dr.
WHEREFORE, the instant petition is hereby GRANTED and the assailed
Faith Gos clinical notes nor can such fact be deduced from the mere
Decision and Resolution of the Court of Appeals are hereby REVERSED and SET
prescription of a medication for episodic memory loss.
ASIDE.
The
Decision
datedSeptember
23,
1992 of

the Regional Trial Court of Cebu City, Branch 6, in Civil Case No. CEB-10766 is
REINSTATED. No pronouncement as to costs.
SO ORDERED.
60

FAMANILA vs. CA (G.R. No. 150429, August 29, 2006)7
61
confined at the Emmanuel Hospital in Portland, Oregon, U.S.A. On July 19,

1990, he underwent a second brain operation.
Before us is a petition for review on certiorari assailing the Decision
[1]
of the
Court of Appeals in CA-G.R. SP No. 50615 dated March 30, 2001 which affirmed
the Decision
[2]
of the National Labor Relations Commission (NLRC) dated
March 31, 1998 dismissing petitioners complaint for payment of disability and
other benefits for lack of merit and the Resolution
[3]
dated October 5, 2001 of the
Owing to petitioners physical and mental condition, he was repatriated to

the Philippines. On August
21,
1990,
he
was
examined
at
the American Hospital in Intramuros,Manila where the examining physician, Dr.

Patricia Abesamis declared that he cannot go back to sea duty and has been
Court of Appeals denying petitioners motion for reconsideration.
observed for 120 days, he is being declared permanently, totally disabled.
The antecedent facts are as follows:
Thereafter, authorized representatives of the respondents convinced him to

settle his claim amicably by accepting the amount of US$13,200.
In 1989, respondent NFD International Manning Agents, Inc. hired the services
of petitioner Roberto G. Famanila as Messman
[4]
for Hansa Riga, a vessel
registered and owned by its principal and co-respondent, Barbership
[7]
[6]
Petitioner
accepted the offer as evidenced by his signature in the Receipt and Release
dated February 28, 1991.
[8]
His wife, Gloria Famanila and one Richard Famanila,
acted as witnesses in the signing of the release.
Management Limited.
On June 11, 1997, petitioner filed a complaint
[9]
with the NLRC which was
at
docketed as NLRC OCW Case No. 6-838-97-L praying for an award of disability
the port of Eureka, California, U.S.A. and while petitioner was assisting in the
benefits, share in the insurance proceeds, moral damages and attorneys
loading operations, the latter complained of a headache. Petitioner experienced
fees. On September 29, 1997, Acting Executive Labor Arbiter Voltaire A.
dizziness and he subsequently collapsed. Upon examination, it was determined
Balitaan dismissed the complaint on the ground of prescription. Petitioner
that he had a sudden attack of left cerebral hemorrhage from a ruptured
appealed the decision with the NLRC. On March 31, 1998, the NLRC
On June
21,
cerebral aneurysm.
1990,
[5]
while Hansa
Riga was
docked
Petitioner underwent a brain operation and he was
promulgated its decision
[10]
finding the appeal to be without merit and ordered
its dismissal. When the motion for reconsideration

in its resolution dated June 29, 1998,
[12]
[11]
was denied by the NLRC
petitioner filed a petition for certiorari
with this Court. On December 2, 1998, we resolved to refer the case to the Court

of Appeals pursuant to our ruling in St. Martin Funeral Home v. National Labor
[13]
62
factors allegedly vitiated his consent which makes the Receipt and Release void
Relations Commission.
and unenforceable.
On March 30, 2001, the Court of Appeals promulgated the assailed decision
The petition lacks merit.
which dismissed the petition for lack of merit. Petitioners motion for
reconsideration was denied, hence, the present petition for review raising the
following issues:
It is fundamental that the scope of the Supreme Courts judicial review under
Rule 45 of the Rules of Court is confined only to errors of law. It does not extend
to questions of fact. More so in labor cases where the doctrine applies with
I.
THE
COURT
OF
APPEALS
COMMITTED
GRAVE
ABUSE
OF
greater force.
[14]
The Labor Arbiter and the NLRC have already determined the
DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN
factual issues, and these were affirmed by the Court of Appeals. Thus, they are
UPHOLDING THE VALIDITY OF THE RECEIPT AND RELEASE SINCE
accorded not only great respect but also finality and are deemed binding upon
PETITIONERS CONSENT THERETO WAS VITIATED THEREBY MAKING THE
this Court so long as they are supported by substantial evidence.
SAME VOID AND UNENFORCEABLE.
reviewed the records of the case and we find no reason to deviate from the
[15]
We
findings of the labor arbiter, NLRC and the Court of Appeals.

II.
THE COURT OF
APPEALS COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN
A vitiated consent does not make a contract void and unenforceable. A vitiated
HOLDING THAT THE PRESCRIPTION PERIOD APPLICABLE TO THE CLAIM
consent only gives rise to a voidable agreement. Under the Civil Code, the vices
OF THE PETITIONER IS THE 3-YEAR PERIOD PROVIDED FOR UNDER THE
of consent are mistake, violence, intimidation, undue influence or fraud.
LABOR CODE OF THE PHILIPPINESAND NOT THE 10-YEAR PERIOD
consent is given through any of the aforementioned vices of consent, the
PROVIDED FOR UNDER THE CIVIL CODE.
contract is voidable.
[17]
proper action in court.
[16]
If
A voidable contract is binding unless annulled by a
[18]
Petitioner claims that he did not sign the Receipt and Release voluntarily or
freely because he was permanently disabled and in financial constraints. These
Petitioner contends that his permanent and total disability vitiated his consent
to
the
Receipt
and
Release
thereby
rendering
it
void
and

63
unenforceable. However, disability is not among the factors that may vitiate
and represents a reasonable settlement, it is binding on the parties and may not
consent. Besides, save for petitioners self-serving allegations, there is no proof
later be disowned simply because of change of mind. It is only where there is
on record that his consent was vitiated on account of his disability. In the
clear proof that the waiver was wangled from an unsuspecting or gullible person,
absence of such proof of vitiated consent, the validity of the Receipt and Release
or the terms of the settlement are unconscionable on its face, that the law will
must be upheld. We agree with the findings of the Court of Appeals that:
step in to annul the questionable transaction. But where it is shown that the
person making the waiver did so voluntarily, with full understanding of what he
In the case at bar, there is nothing in the records to show that petitioners
consent was vitiated when he signed the agreement. Granting that petitioner
has not fully recovered his health at the time he signed the subject document,
was doing, and the consideration for the quitclaim is credible and reasonable,
the transaction must be recognized as a valid and binding undertaking,
[22]
as in
this case.
the same cannot still lead to the conclusion that he did not voluntar[il]y accept
the agreement, for his wife and another relative witnessed his signing.
To be valid and effective, waivers must be couched in clear and unequivocal

terms, leaving no doubt as to the intention of those giving up a right or a benefit
Moreover, the document entitled receipt and release which was attached by
petitioner in his appeal does not show on its face any violation of law or public
policy. In fact, petitioner did not present any proof to show that the
consideration for the same is not reasonable and acceptable. Absent any
evidence to support the same, the Court cannot, on its own accord, decide
against the unreasonableness of the consideration.
that legally pertains to them.
[23]
We have reviewed the terms and conditions
contained in the Receipt and Release and we find the same to be clear and
unambiguous. The signing was even witnessed by petitioners wife, Gloria T.
Famanila and one Richard T. Famanila. The Receipt and Release provides in
part:
[19]
That for and in consideration of the sum of THIRTEEN THOUSAND TWO

It is true that quitclaims and waivers are oftentimes frowned upon and are
considered as ineffective in barring recovery for the full measure of the workers
right and that acceptance of the benefits therefrom does not amount to
[20]
estoppel.
The reason is plain. Employer and employee, obviously do not

[21]
stand on the same footing.
However, not all waivers and quitclaims are
invalid as against public policy. If the agreement was voluntarily entered into
HUNDRED DOLLARS (US$13,200.00) or its equivalent in Philippine currency

THREE HUNDRED SIXTY FIVE THOUSAND NINE HUNDRED FOUR PESOS
(365,904.00), the receipt of which is hereby acknowledged to my full and
complete satisfaction x x x I, ROBERTO G. FAMANILA, x x x hereby remise,
release and forever discharge said vessel HANSA RIGA, her Owners, operators,
managers, charterers, agents, underwriters, P and I Club, master, officers, and

64
crew and all parties at interest therein or thereon, whether named or not named,
I hereby certify that I am of legal age and that I fully understand this instrument
including but not limited to BARBER SHIP MANAGEMENT LIMITED, NFD
which was read to me in the local dialect and I agree that this is a FULL AND
INTERNATIONAL MANNING AGENTS, INC. and ASSURANCEFORENIGEN
FINAL RELEASE AND DISCHARGE of all parties and things referred to herein,
GARD from any and all claims, demands, debts, dues, liens, actions or causes of
and I further agree that this release may be pleaded as an absolute and final bar
action, at law or in equity, in common law or in admiralty, statutory or
to any suit or suits or legal proceedings that may hereafter be prosecuted by me
contractual, arising from and under the laws of the United States of America,
or by any one claiming by, through, or under me, against any of the persons
Norway, Hongkong or the Republic of the Philippines and/or any other foreign
or things
country now held, owned or possessed by me or by any person or persons,
referred to or related herein, for any matter or thing referred to or related
arising from or related to or concerning whether directly or indirectly,
herein.
[24]
proximately or remotely, without being limited to but including the said illness
st
suffered by me on board the vessel HANSA RIGA on or about 21 June 1990 at

Portland, Oregon and disability compensation in connection therewith.
It is elementary that a contract is perfected by mere consent and from that

moment the parties are bound not only to the fulfillment of what has been
expressly stipulated but also to all the consequences which, according to their
This instrument is a GENERAL RELEASE intended to release all liabilities of any
nature, may be in keeping with good faith, usage and law.
character and/or claims or damages and/or losses and/or any other liabilities
necessity is not an acceptable ground for annulling the Receipt and Release
whatsoever, whether contractual or statutory, at common law or in equity,
since it has not been shown that petitioner was forced to sign it.
[25]
Further, dire
[26]
tortious or in admiralty, now or henceforth in any way related to or occurring as

a consequence of the illness suffered by me as Messman of the vessel HANSA
RIGA, including but not limited to all damages and/or losses consisting of loss
of support, loss of earning capacity, loss of all benefits of whatsoever nature and
extent incurred, physical pain and suffering and/or all damages and/or
Regarding prescription, the applicable prescriptive period for the money claims
against the respondents is the three year period pursuant to Article 291 of the
Labor Code which provides that:
indemnities claimable in law, tort, contract, common law, equity and/or

admiralty by me or by any person or persons pursuant to the laws of the United
ART. 291. Money Claims. All money claims arising from employer-employee
States of America, Norway, Hongkong or the Republic of the Philippines and of
relations accruing during the effectivity of this Code shall be filed within three
all other countries whatsoever.
(3) years from the time the cause of action accrued; otherwise they shall be
forever barred.

xxxx
Since petitioners demand for an award of disability benefits is a money claim

arising from his employment, Article 291 of the Labor Code applies. From the
time petitioner was declared permanently and totally disabled on August 21,
1990 which gave rise to his entitlement to disability benefits up to the time that
he filed the complaint on June 11, 1997, more than three years have elapsed
thereby effectively barring his claim.
WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals

dated March 30, 2001 in CA-G.R. SP No. 50615 which affirmed the Decision of
the National Labor Relations Commission dismissing petitioners complaint for
disability and other benefits for lack of merit, and
the Resolution dated October 5, 2001 denying the motion for reconsideration,
are AFFIRMED.
SO ORDERED.
65

CATALAN vs. BASA (G.R. No. 159567, July 31, 2007)8
66
The donation was registered with the Register of Deeds. The Bureau of Internal
Revenue then cancelled Tax Declaration No. 2876, and, in lieu thereof, issued
[4]
This is a petition for review on certiorari under Rule 45 of the Revised Rules of
Tax Declaration No. 18080
Court of the Court of Appeals decision in CA-G.R. CV No. 66073, which affirmed
to her. The remaining half of the property remained in Felicianos name under
the judgment of the Regional Trial Court, Branch 69, Lingayen, Pangasinan, in
Tax Declaration No. 18081.
Civil Case No. 17666, dismissing the Complaint for Declaration of Nullity of
On December 11, 1953, Peoples Bank and Trust Company filed Special
Documents, Recovery of Possession and Ownership, and damages.
Proceedings No. 4563
The facts, which are undisputed by the parties, follow:
declare Feliciano incompetent. On December 22, 1953, the trial court issued its
On October 20, 1948, FELICIANO CATALAN (Feliciano) was discharged from

active military service. The Board of Medical Officers of the Department of
Veteran Affairs found that he was unfit to render military service due to his
schizophrenic reaction, catatonic type, which incapacitates him because of
flattening of mood and affect, preoccupation with worries, withdrawal, and sparce
[5]
before the Court of First Instance of Pangasinan to
Order for Adjudication of Incompetency for Appointing Guardian for the Estate
and Fixing Allowance
[7]
of Feliciano. The following day, the trial court
appointed Peoples Bank and Trust Company as Felicianos guardian.
[8]
Peoples
Bank and Trust Company has been subsequently renamed, and is presently
known as the Bank of the Philippine Islands (BPI).
On November 22, 1978, Feliciano and Corazon Cerezo donated Lots 1 and 3 of
[1]
(sic) and pointless speech.
On September 28, 1949, Feliciano married Corazon Cerezo.
[6]
to Mercedes for the 400.50 square meters donated
[2]
their property, registered under Original Certificate of Title (OCT) No. 18920, to
their son Eulogio Catalan.
[9]
On June 16, 1951, a document was executed, titled Absolute Deed of

Donation,
[3]
wherein Feliciano allegedly donated to his sister MERCEDES
CATALAN(Mercedes) one-half of the real property described, viz:
On March 26, 1979, Mercedes sold the property in issue in favor of her children
Delia and Jesus Basa.
[10]
The Deed of Absolute Sale was registered with the
Register of Deeds of Pangasinan on February 20, 1992, and Tax Declaration No.
A parcel of land located at Barangay Basing, Binmaley, Pangasinan. Bounded on
12911 was issued in the name of respondents.
[11]
the North by heirs of Felipe Basa; on the South by Barrio Road; On the East by
heirs of Segundo Catalan; and on the West by Roman Basa. Containing an area
of Eight Hundred One (801) square meters, more or less.
On June 24, 1983, Feliciano and Corazon Cerezo donated Lot 2 of the
aforementioned property registered under OCT No. 18920 to their children Alex
Catalan, Librada Catalan and Zenaida Catalan. On February 14, 1983, Feliciano
and Corazon Cerezo donated Lot 4 (Plan Psu-215956) of the same OCT No.
18920 to Eulogio and Florida Catalan.
[12]

On April 1, 1997, BPI, acting as Felicianos guardian, filed a case for Declaration
of Nullity of Documents, Recovery of Possession and Ownership,
[13]
as well as
2.
Declaring the defendants Jesus Basa and Delia Basa the lawful owners of
the land in question which is now declared in their names under Tax
damages against the herein respondents. BPI alleged that the Deed of Absolute
Declaration No. 12911 (Exhibit 4);
Donation to Mercedes was void ab initio, as Feliciano never donated the
3.
property to Mercedes. In addition, BPI averred that even if Feliciano had truly
and to pay the Costs.(sic)
intended to give the property to her, the donation would still be void, as he was
67
Ordering the plaintiff to pay the defendants Attorneys fees of P10,000.00,
SO ORDERED.
[15]
not of sound mind and was therefore incapable of giving valid consent. Thus, it
claimed that if the Deed of Absolute Donation was void ab initio, the
subsequent Deed of Absolute Sale to Delia and Jesus Basa should likewise be
Petitioners challenged the trial courts decision before the Court of Appeals via a
nullified, for Mercedes Catalan had no right to sell the property to anyone. BPI
Notice of Appeal pursuant to Rule 41 of the Revised Rules of Court.
raised doubts about the authenticity of the deed of sale, saying that its
appellate court affirmed the decision of the trial court and held, viz:
registration long after the death of Mercedes Catalan indicated fraud. Thus, BPI
In sum, the Regional Trial Court did not commit a reversible error in disposing
sought remuneration for incurred damages and litigation expenses.
that plaintiff-appellants failed to prove the insanity or mental incapacity of late
On August 14, 1997, Feliciano passed away. The original complaint was
(sic) Feliciano Catalan at the precise moment when the property in dispute was
amended to substitute his heirs in lieu of BPI as complainants in Civil Case No.
donated.
17666.
Thus, all the elements for validity of contracts having been present in the 1951
On December 7, 1999, the trial court found that the evidence presented by the
donation coupled with compliance with certain solemnities required by the Civil
complainants was insufficient to overcome the presumption that Feliciano was
Code in donation inter vivos of real property under Article 749, which provides:
sane and competent at the time he executed the deed of donation in favor of
xxx
Mercedes Catalan. Thus, the court declared, the presumption of sanity or

competency not having been duly impugned, the presumption of due execution of
the donation in question must be upheld.
[14]
It rendered judgment, viz:
WHEREFORE, in view of the foregoing considerations, judgment is hereby

rendered:
1.
Dismissing plaintiffs complaint;
[16]
The
Mercedes Catalan acquired valid title of ownership over the property in

dispute. By virtue of her ownership, the property is completely subjected to her
will in everything not prohibited by law of the concurrence with the rights of
others (Art. 428, NCC).
The validity of the subsequent sale dated 26 March 1979 (Exhibit 3, appellees
Folder of Exhibits) of the property by Mercedes Catalan to defendant-appellees

68
Jesus Basa and Delia Basa must be upheld. Nothing of the infirmities which
2.
WHETHER OR NOT THE CERTIFICATE OF DISABILITY FOR
allegedly flawed its authenticity is evident much less apparent in the deed itself
DISCHARGE (EXHIBIT S) AND THE REPORT OF A BOARD OF OFFICERS
or from the evidence adduced. As correctly stated by the RTC, the fact that the
CONVENED UNDER THE PROVISIONS OF ARMY REGULATIONS (EXHIBITS
Deed of Absolute Sale was registered only in 1992, after the death of Mercedes
S-1 AND S-2) ARE ADMISSIBLE IN EVIDENCE;
Catalan does not make the sale void ab initio. Moreover, as a notarized
document, the deed of absolute sale carries the evidentiary weight conferred
upon such public document with respect to its due execution (Garrido vs. CA
236 SCRA 450). In a similar vein, jurisprudence has it that documents
acknowledged before a notary public have in their favor the presumption of
regularity, and to contradict the same, there must be evidence that is clear,
convincing and more than preponderant (Salame vs. CA, 239 SCRA 256).
3.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS
HAS DECIDED CA-G.R. CV NO. 66073 IN A WAY PROBABLY NOT IN

ACCORD WITH LAW OR WITH THE APPLICABLE DECISIONS OF THE
HONORABLE COURT IN UPHOLDING THE SUBSEQUENT SALE OF THE
PROPERTY IN DISPUTE BY THE DONEE MERCEDES CATALAN TO HER
CHILDREN RESPONDENTS JESUS AND DELIA BASA; AND-
WHEREFORE, foregoing premises considered, the Decision dated December 7,

1999 of the Regional Trial Court, Branch 69, is hereby affirmed.
SO ORDERED.
[17]
Thus, petitioners filed the present appeal and raised the following issues:
1.
4.
WHETHER OR NOT CIVIL CASE NO. 17666 IS BARRED BY
PRESCRIPTION AND LACHES.
[18]
Petitioners aver that the presumption of Felicianos competence to donate
WHETHER OR NOT THE HONORABLE COURT OF APPEALS HAS
property to Mercedes had been rebutted because they presented more than the
DECIDED CA-G.R. CV NO. 66073 IN A WAY PROBABLY NOT IN ACCORD
requisite preponderance of evidence. First, they presented the Certificate of
WITH LAW OR WITH THE APPLICABLE DECISIONS OF THE HONORABLE
Disability for the Discharge of Feliciano Catalan issued on October 20, 1948 by
COURT IN HOLDING THAT THE REGIONAL TRIAL COURT DID NOT
the Board of Medical Officers of the Department of Veteran Affairs. Second,
COMMIT A REVERSIBLE ERROR IN DISPOSING THAT PLAINTIFF-
they proved that on December 22, 1953, Feliciano was judged an incompetent by
APPELLANTS (PETITIONERS) FAILED TO PROVE THE INSANITY OR
the Court of First Instance of Pangasinan, and put under the guardianship of
MENTAL INCAPACITY OF THE LATE FELICIANO CATALAN AT THE
BPI. Based on these two pieces of evidence, petitioners conclude that Feliciano
PRECISE MOMENT WHEN THE PROPERTY IN DISPUTE WAS DONATED;
had been suffering from a mental condition since 1948 which incapacitated him
from entering into any contract thereafter, until his death on August 14,

69
1997. Petitioners contend that Felicianos marriage to Corazon Cerezo
In order for donation of property to be valid, what is crucial is the donors
on September 28, 1948 does not prove that he was not insane at the time he
capacity to give consent at the time of the donation. Certainly, there lies no
made the questioned donation. They further argue that the donations Feliciano
doubt in the fact that insanity impinges on consent freely given.
executed in favor of his successors (Decision, CA-G.R. CV No. 66073) also
the burden of proving such incapacity rests upon the person who alleges it; if no
cannot prove his competency because these donations were approved and
sufficient proof to this effect is presented, capacity will be presumed.
confirmed in the guardianship proceedings.
[19]
[25]
However,
[26]
In addition, petitioners claim
A thorough perusal of the records of the case at bar indubitably shows that the
that the Deed of Absolute Sale executed on March 26, 1979 by Mercedes Catalan
evidence presented by the petitioners was insufficient to overcome the
and her children Jesus and Delia Basa is simulated and fictitious. This is
presumption that Feliciano was competent when he donated the property in
allegedly borne out by the fact that the document was registered only
question to Mercedes. Petitioners make much ado of the fact that, as early as
on February 20, 1992, more that 10 years after Mercedes Catalan had already
1948, Feliciano had been found to be suffering from schizophrenia by the Board
died. Since Delia Basa and Jesus Basa both knew that Feliciano was
of Medical Officers of the Department of Veteran Affairs. By itself, however, the
incompetent to enter into any contract, they cannot claim to be innocent
allegation cannot prove the incompetence of Feliciano.
purchasers of the property in question.
[20]
Lastly, petitioners assert that their
case is not barred by prescription or laches under Article 1391 of the New Civil
Code because they had filed their case on April 1, 1997, even before the four year
period after Felicianos death on August 14, 1997 had begun.
[21]
A study of the nature of schizophrenia will show that Feliciano could still be
presumed capable of attending to his property rights. Schizophrenia was
brought to the attention of the public when, in the late 1800s, Emil Kraepelin, a
German psychiatrist, combined hebrephrenia and catatonia with certain
The petition is bereft of merit, and we affirm the findings of the Court of
paranoid states and called the condition dementia praecox. Eugene Bleuler, a
Appeals and the trial court.
Swiss psychiatrist, modified Kraepelins conception in the early 1900s to include
A donation is an act of liberality whereby a person disposes gratuitously a thing

or right in favor of another, who accepts it.
[22]
Like any other contract, an
cases
with
better
outlook
schizophrenia. According
to
and
in
medical
1911
renamed
references,
in
the
condition
persons
with
agreement of the parties is essential. Consent in contracts presupposes the
schizophrenia, there is a gradual onset of symptoms, with symptoms becoming
following requisites: (1) it should be intelligent or with an exact notion of the
increasingly bizarre as the disease progresses. The condition improves
matter to which it refers; (2) it should be free; and (3) it should be
(remission or residual stage) and worsens (relapses) in cycles. Sometimes,
spontaneous.
[23]
The parties' intention must be clear and the attendance of a vice
of consent, like any contract, renders the donation voidable.
[24]
sufferers may appear relatively normal, while other patients in remission may
appear strange because they speak in a monotone, have odd speech habits,
appear to have no emotional feelings and are prone to have ideas of

reference. The latter refers to the idea that random social behaviors are
directed against the sufferers.
[27]
It has been proven that the administration of
70
existed in the other acts done or contracts executed, are presumed to continue
until the contrary is shown.
[32]
the correct medicine helps the patient. Antipsychotic medications help bring
Needless to state, since the donation was valid, Mercedes had the right to sell
biochemical imbalances closer to normal in a schizophrenic. Medications
the property to whomever she chose.
reduce delusions, hallucinations and incoherent thoughts and reduce or
presented to prove the claim that Mercedes sale of the property to her children
eliminate chances of relapse.
[28]
[33]
Not a shred of evidence has been
Schizophrenia can result in a dementing illness
was tainted with fraud or falsehood. It is of little bearing that the Deed of Sale
similar in many aspects to Alzheimers disease. However, the illness will wax
was registered only after the death of Mercedes. What is material is that the sale
and wane over many years, with only very slow deterioration of intellect.
[29]
of the property to Delia and Jesus Basa was legal and binding at the time of its
From these scientific studies it can be deduced that a person suffering from
execution. Thus, the property in question belongs to Delia and Jesus Basa.
schizophrenia does not necessarily lose his competence to intelligently dispose
Finally, we note that the petitioners raised the issue of prescription and laches
his property. By merely alleging the existence of schizophrenia, petitioners
for the first time on appeal before this Court. It is sufficient for this Court to
failed to show substantial proof that at the date of the donation, June 16, 1951,
note that even if the present appeal had prospered, the Deed of Donation was
Feliciano Catalan had lost total control of his mental faculties. Thus, the lower
still a voidable, not a void, contract. As such, it remained binding as it was not
courts correctly held that Feliciano was of sound mind at that time and that this
annulled in a proper action in court within four years.
condition
[30]
adduced.
continued
to
exist
until
proof
to
the
contrary
was
Sufficient proof of his infirmity to give consent to contracts was
only established when the Court of First Instance of Pangasinan declared him an
incompetent onDecember 22, 1953.
[31]
IN VIEW WHEREOF, there being no merit in the arguments of the petitioners,

the petition is DENIED. The decision of the Court of Appeals in CA-G.R. CV No.
66073 is affirmed in toto.
SO ORDERED.
It is interesting to note that the petitioners questioned Felicianos capacity at

the time he donated the property, yet did not see fit to question his mental
competence when he entered into a contract of marriage with Corazon Cerezo
or when he executed deeds of donation of his other properties in their
favor. The presumption that Feliciano remained competent to execute
contracts, despite his illness, is bolstered by the existence of these other
contracts. Competency and freedom from undue influence, shown to have
[34]

VILLANUEVA
vs.
CHIONG
[G.R.
No.
159889,
June
05,
2008] 9
with Damages, docketed as Civil Case No. 4383. On February 12, 1992,
petitioners filed with the RTC a Complaint
This petition for review on certiorari seeks the modification of the

[1]
Decision dated December 17, 2002 of the Court of Appeals in CA-G.R. CV. No.
68383, which had affirmed the Joint Decision
[2]
71
[7]
for Specific Performance with
Damages, docketed as Civil Case No. 4460. Upon proper motion, the RTC
consolidated
these
two
cases.
[8]
dated July 19, 2000 of the
Regional Trial Court (RTC) of Dipolog City, Branch 6, in Civil Case No.
4460. The RTC annulled the sale made by respondent Florentino Chiong in
On May 13, 1992, Florentino executed the questioned Deed of Absolute Sale
favor
of
[9]
in
petitioners.
favor of petitioners Walter and Aurora Villanueva conveying a portion of a

parcel
of
land
which
respondents
acquired
during
their
marriage.
On July 19, 2000, the RTC, in its Joint Decision, annulled the deed of absolute
sale dated May 13, 1992, and ordered petitioners to vacate the lot and remove all
The
pertinent
facts
are
as
follows:
improvements therein. The RTC likewise dismissed Civil Case No. 4460, but
ordered Florentino to return to petitioners the consideration of the sale with
Respondents Florentino and Elisera Chiong were married sometime in January
interest from May 13, 1992.
[10]
The fallo of the decision reads:
1960 but have been separated in fact since 1975. During their marriage, they
acquired Lot No. 997-D-1 situated at Poblacion, Dipolog City and covered by
Transfer Certificate of Title (TCT) No. (T-19393)-2325,
[3]
issued by the Registry of
WHEREFORE, by preponderance of evidence, judgment is hereby rendered as

follows:
Deeds of Zamboanga del Norte. Sometime in 1985, Florentino sold the one-half
western
portion
of
the
lot
to
petitioners
for
P8,000,
installments. Thereafter, Florentino allowed petitioners to occupy

build a store, a shop, and a house thereon.
last
installment
payment
on December
payable
[4]
Shortly
in
the lot and
after
their
[5]
13, 1986, petitioners demanded
from respondents the execution of a deed of sale in their favor. Elisera, however,
refused
to
sign
deed
On July 5, 1991, Elisera filed with the RTC a Complaint
of
[6]
sale.
for Quieting of Title
For Civil Case No. 4383, (a) annulling the Deed of Sale executed by Florentino
Chiong in favor of Walter Villanueva, dated May 13, 1992 (Exhibit "2"); ordering
defendant Walter Villanueva to vacate the entire land in question and to remove
all buildings therein, subject to [i]ndemnity of whatever damages he may incur
by virtue of the removal of such buildings, within a period of 60 days from the
finality of this decision; award of damages is hereby denied for lack of proof.
In Civil Case No. 4460, complaint is hereby dismissed, but defendant Florentino
Chiong, having received the amount of P8,000.00 as consideration of the sale of
the land subject of the controversy, the sale being annulled by this Court, is

72
ordered to return the said amount to [the] spouses Villanueva, with interest to
be computed from the date of the annulled deed of sale, until the same is fully
paid, within the period of 60 days from finality of this judgment. Until such
THAT THE LOWER COURT AS WELL AS THE HONORABLE COURT OF
amount is returned, together with the interest, [the] spouses Villanueva may
APPEALS ... LIKEWISE ERRED IN DECLARING AS NULL AND VOID THE
continue
DEED OF SALE EXECUTED BY RESPONDENT FLORENTINO CHIONG IN
to
occupy
the
premises
in
question.
FAVOR OF THE HEREIN PETITIONERS.

No
pronouncement
as
to
costs.
[13]
Simply put, the basic issues are: (1) Is the subject lot an exclusive property of
Florentino or a conjugal property of respondents? (2) Was its sale by Florentino
IT IS SO ORDERED.
[11]
without
Elisera's
consent
valid?
The Court of Appeals affirmed the RTC's decision:

WHEREFORE, premises considered, the appealed decision dated July 19, 2000
Petitioners contend that the Court of Appeals erred when it held that the lot is
of the Regional Trial Court, Branch 6, Dipolog City is herebyAFFIRMED.
conjugal property. They claim that the lot belongs exclusively to Florentino
because respondents were already separated in fact at the time of sale and that
[12]
SO ORDERED.
Petitioners sought reconsideration, but to no avail. Hence, this petition.
the share of Elisera, which pertains to the eastern part of Lot No. 997- D-1, had
previously been sold to Spouses Jesus Y. Castro and Aida Cuenca. They also aver
that while there was no formal liquidation of respondents' properties, their
Petitioners assign the following errors as issues for our resolution:
separation
in
fact
resulted
in
its
actual
liquidation.
Further,
assuming arguendo that the lot is still conjugal, the transaction should not be
I.
entirely
voided
as
Florentino
had
one-half
share
over
it.
Elisera, for her part, counters that the sale of the lot to petitioners without her
THAT THE COURT A QUO AS WELL AS THE HONORABLE COURT OF
knowledge, consent or authority, was void because the lot is conjugal
APPEALS ... GRAVELY ERRED IN NOT HOLDING THAT THE LAND IN
property. She adds that the sale was neither authorized by any competent court
QUESTION BELONGED SOLELY TO RESPONDENT FLORENTINO CHIONG
nor did it redound to her or their children's benefit. As proof of the lot's
AND ULTIMATELY TO THE HEREIN PETITIONERS.
conjugal nature, she presented a transfer certificate of title, a real property tax
II.
declaration, and a Memorandum of Agreement
[14]
dated November 19, 1979

which she and her husband had executed for the administration of their
conjugal
properties.
73
1992, where he declared his capacity to sell as a co-owner of the subject lot.
[20]
[15]
Anent the second issue, the sale by Florentino without Elisera's consent is not,
[21]
Anent the first issue, petitioners' contention that the lot belongs exclusively to
however, void ab initio. In Vda. de Ramones v. Agbayani,
Florentino because of his separation in fact from his wife, Elisera, at the time of
Villaranda,
sale dissolved their property relations, is bereft of merit. Respondents'
or encumbrance of conjugal property prior to the effectivity of the Family Code
separation in fact neither affected the conjugal nature of the lot nor prejudiced
on August 3, 1988 is not void, but merely voidable. Articles 166 and 173 of the
Elisera's interest over it. Under Article 178
[16]
of the Civil Code, the separation in
[22]
Civil Code
[23]
citing Villaranda v.
we held that without the wife's consent, the husband's alienation
provide:
fact between husband and wife without judicial approval shall not affect the
ART. 166. Unless the wife has been declared a non compos mentis or a
conjugal
spendthrift, or is under civil interdiction or is confined in a leprosarium,the
partnership.
The
lot
retains
its
conjugal
nature.
husband cannot alienate or encumber any real property of the conjugal

Likewise, under Article 160
[17]
of the Civil Code, all property acquired by the
partnership
without
the
wife's
consent...
spouses during the marriage is presumed to belong to the conjugal partnership

of gains, unless it is proved that it pertains exclusively to the husband or to the
This article shall not apply to property acquired by the conjugal partnership
wife. Petitioners' mere insistence as to the lot's supposed exclusive nature is
before
the
effective
date
of
this
Code.
insufficient to overcome such presumption when taken against all the evidence
for
respondents.
ART. 173. The wife may, during the marriage, and within ten years from
the transaction questioned, ask the courts for theannulment of any
On the basis alone of the certificate of title, it cannot be presumed that the lot
contract of the husband entered into without her consent, when such
was acquired during the marriage and that it is conjugal property since it was
consent is required, or any act or contract of the husband which tends to
registered "in the name of Florentino Chiong, Filipino, of legal age, married to
defraud her or impair her interest in the conjugal partnership property. Should
Elisera Chiong... ."
[18]
But Elisera also presented a real property tax declaration
the wife fail to exercise this right, she or her heirs, after the dissolution of the
acknowledging her and Florentino as owners of the lot. In addition, Florentino
marriage, may demand the value of property fraudulently alienated by the
and Elisera categorically declared in the Memorandum of Agreement they
husband. (Emphasis supplied.)
executed that the lot is a conjugal property.
[19]
Moreover, the conjugal nature of
the lot was admitted by Florentino in the Deed of Absolute Sale dated May 13,
Applying Article 166, the consent of both Elisera and Florentino is necessary for
the sale of a conjugal property to be valid. In this case, the requisite consent of

74
Elisera was not obtained when Florentino verbally sold the lot in 1985 and
Sioca,45 Phil. 430," in which cases annulment was held to refer only to the
executed the Deed of Absolute Sale on May 13, 1992. Accordingly, the contract
extent of the one-half interest of the wife... .
entered by Florentino is annullable at Elisera's instance, during the marriage
Now, if a voidable contract is annulled, the restoration of what has been given is
and within ten years from the transaction questioned, conformably with Article
proper.
173. Fortunately, Elisera timely questioned the sale when she filed Civil Case No.
4383 on July 5, 1991, perfectly within ten years from the date of sale and
execution
of
the
deed.
Petitioners finally contend that, assuming arguendo the property is still conjugal,
[27]
[26]
Article 1398 of the Civil Code provides:
An obligation having been annulled, the contracting parties shall restore to each
other the things which have been the subject matter of the contract, with their
fruits, and the price with its interest, except in cases provided by law.
In obligations to render service, the value thereof shall be the basis for damages.
the transaction should not be entirely voided as Florentino had one-half share
over the lot. Petitioners' stance lacks merit. In Heirs of Ignacia Aguilar-Reyes v.
Mijares
[24]
[25]
citingBucoy v. Paulino, et al.,
a case involving the annulment of
sale executed by the husband without the consent of the wife, it was held that
The effect of annulment of the contract is to wipe it out of existence, and to

restore the parties, insofar as legally and equitably possible, to their original
situation
before
the
contract
was
entered
into.
[28]
the alienation must be annulled in its entirety and not only insofar as the share
of the wife in the conjugal property is concerned. Although the transaction in
the said case was declared void and not merely voidable, the rationale for the
annulment of the whole transaction is the same. Thus:
Strictly applying Article 1398 to the instant case, petitioners should return to
respondents the land with its fruits
[29]
and respondent Florentino should return
to petitioners the sum of P8,000, which he received as the price of the land,
together
with
interest
thereon.
The plain meaning attached to the plain language of the law is that the contract,
in its entirety, executed by the husband without the wife's consent, may be
annulled by the wife. Had Congress intended to limit such annulment in so far
as the contract shall "prejudice" the wife, such limitation should have been
spelled out in the statute. It is not the legitimate concern of this Court to recast
the law. As Mr. Justice Jose B. L. Reyes of this Court and Judge Ricardo C. Puno
of the Court of First Instance correctly stated, "[t]he rule (in the first sentence of
Article 173) revokes Baello vs. Villanueva, 54 Phil. 213 and Coque vs. Navas
On the matter of fruits and interests, we take into consideration that petitioners
have been using the land and have derived benefit from it just as respondent
Florentino has used the price of the land in the sum of P8,000. Hence, if, as
ordered by the lower court, Florentino is to pay a reasonable amount or legal
interest for the use of the money then petitioners should also be required to pay
a reasonable amount for the use of the land.
[30]
Under the particular
circumstances of this case, however, it would be equitable to consider the two

amounts as offsetting each other. Hence, the award of the trial court for the
payment
of
interest
should
be
deleted.
WHEREFORE, the petition is DENIED for lack of merit. The assailed Decision
dated December 17, 2002 of the Court of Appeals in CA-G.R. CV. No. 68383
affirming the Joint Decision dated July 19, 2000 of the Regional Trial Court of
Dipolog City, Branch 6, in Civil Case No. 4460 is hereby AFFIRMED with
MODIFICATION.
SO ORDERED.
The order for the payment of interest is DELETED.
75

AYSON vs. PARAGAS (557 SCRA 50)10
2.
76
That we occupy the said land by tolerance without paying any rental
whatsoever;
For review on certiorari under Rule 45 of the Rules of Court are the
[1]
Decision dated May 31, 2000 and the Resolution

the
Court
of
Appeals
in
[2]
dated December 12, 2000 of
CA-G.R.
CV
No.
59645.
3.
That we further agree to vacate the aforesaid land within three (3)
months from the date hereof and to remove and transfer our house therefrom to
another place;
4.
That in consideration of vacating the said parcel of land the amount of
The subject of this controversy is the one-fourth (1/4) portion of, corresponding
Twenty Thousand Pesos (P20,000.00) shall be paid to us; and, that the amount
to the share of respondent Maxima Paragas in, the real property located at
of Ten Thousand Pesos (P10,000.00) shall be paid upon signing of this affidavit
Caranglaan District, Dagupan City, originally covered by Transfer Certificate of
and the balance of Ten Thousand Pesos (P10,000.00) shall be paid upon removal
Title
of our house on the third month from date hereof.
No.
7316
of
the
Register
of
Deeds
of
Dagupan
The controversy commenced with the filing of an ejectment complaint
City.
[3]
(4) despite the receipt of the P10,000.00 upon the execution of the Affidavit,
on
April 12, 1993 before Branch 1 of the Municipal Trial Court in Cities (MTCC) of
Dagupan City by herein petitioner Amado Z. Ayson, as represented by his
natural father Zosimo S. Zareno
[4]
(Zareno), against respondent-spouses Felix
and Maxima Paragas. The complaint, docketed as Civil Case No. 9161, alleged,
among others, that: (1) petitioner is the registered owner of the property being
respondent-spouses refused to vacate the land as agreed upon; and (5) despite
demands, respondent-spouses still refused to vacate, thus constraining him to
file the complaint. Aside from respondents' vacating the land, petitioner prayed
for the return of the P10,000.00 he paid them; and the payment of P10,000.00
actual damages, P10,000.00 exemplary damages, P20,000.00 attorney's fees, and
the
costs.
occupied by the respondent-spouses as shown by Transfer Certificate of Title No.

59036 of the Registry of Deeds of Dagupan City in his name; (2) respondentspouses are occupying the said land through his tolerance without rent; (3) on
[5]
April 8, 1992, respondent-spouses executed an Affidavit

1.
which declared:
In their Answer,
[6]
respondent-spouses alleged that Zareno had no personality
and authority to file the case and the filing of the complaint was made in bad
faith.
That we are occupants of a parcel of land (Lot 6595-A-2) covered by
Transfer Certificate of Title No. 57684 located at Caranglaan District, Dagupan

City owned by Amado Ll. Ayson;
During the preliminary conference, the following admissions were made By petitioner

(1)
77
That the defendants (respondent spouses) had been in possession of
WHEREFORE, the preponderance of evidence being in favor of the plaintiff
the land in question since 1930; and
(petitioner),
judgment
is
hereby
rendered:
1) Ordering the defendants (respondent spouses) to vacate the land in question

(2)
That the semi-concrete house of the defendants (respondent

spouses) stands on the land in question.
located at Caranglaan District, Dagupan City and covered by Transfer Certificate

of Title No. 59036 of the Registry of Deeds for the City of Dagupan, and to
deliver the physical and peaceful possession to the plaintiff (petitioner);
By respondent spouses
2) Ordering the defendants (respondent spouses) jointly and severally to pay the
(1)
That the defendant (respondent) Felix Paragas had executed an

affidavit on April 8, 1992 wherein he admitted that he is occupying
the land by tolerance of the plaintiff (petitioner) without paying any
rental whatsoever and had agreed to vacate the premises within
three (3) months but refused to vacate later;
plaintiff (petitioner) the sum of P300.00 as monthly rental of the land from the
date of the filing of the complaint until the defendants (respondent spouses)
vacate
plaintiff (petitioner) the amount of P10,000.00 representing the sum received by

from
the
plaintiff
(petitioner)
on
April
8,
4)
That there was a demand to vacate the premises; and
Other
(4) That there is a Certification to File Action in Court.
claims
With
SO ORDERED.
costs
are
denied
against
for
lack
the
of
merit.
defendants.
[8]
[7]
Respondent-spouses appealed the said Decision to the Regional Trial Court
On August 31, 1993, the MTCC, Branch 1, Dagupan City decided in favor of
(RTC) of Dagupan City. In the Decision
petitioner, based mainly on the above admissions, rendering judgment as
affirmed the MTCC Decision, the dispositive portion of which reads -
follows:
1992;
That the plaintiff (petitioner) is the registered owner of the land in

question;
(3)
premises;
3) Ordering defendant (respondent) Felix Paragas to return or indemnify the
him
(2)
the
[9]
dated August 16, 1996, the RTC

78
WHEREFORE, the appeal interposed by the appellants is hereby DISMISSED.
Trial Court, Branch 1 of Dagupan City, also before the RTC of Dagupan City, a
Judgment is rendered in favor of the plaintiff (petitioner) and against the
complaint
defendants (respondent spouses), to wit:
and titles with a prayer for preliminary injunction and damages. The complaint
1.
ORDERING
defendants
(respondent
spouses),
their
agents,
[13]
for declaration of nullity of deed of sale, transactions, documents
was docketed as Civil Case No. D-10772 and was raffled to Branch 42.
representatives and assigns to vacate the land subject matter of this case;
2.
ORDERING defendants (respondent spouses) to return to the plaintiff
(petitioner) the amount of P10,000.00 received by them in consideration of their
The complaint alleged, inter alia, that respondent Maxima is a co-owner of a

parcel of land originally covered by TCT No. 7316 of the Registry of Deeds of
Dagupan City, her share having an area of 435.75 square meters. Sometime
promise to vacate the land subject matter of this case;
prior to April 13, 1955, respondent Felix, then an employee of the defunct
3.
ORDERING defendants (respondent spouses) to pay to the plaintiff
(petitioner) P10,000.00 in actual damages; P10,000.00 in exemplary damages;

and P20,000.00 in attorney's fees; and
4.
Blas F. Rayos and Amado Ll. Ayson, then both occupying high positions in the
[10]
said institution, required respondent-spouses to sign, without explaining to
Respondent-spouses went to the Court of Appeals via a petition for review. In its
Decision
[11]
amount of P3,000.00. It was agreed that respondent Felix would pay the said
amount by installment to the Dagupan Colleges. Pursuant to that agreement,
ORDERING defendants to pay the costs.
SO ORDERED.
Dagupan Colleges (now University of Pangasinan) failed to account for the
dated October 13, 1997, the appellate court dismissed the petition.
The Decision was appealed to this Court. We denied the appeal in a Resolution
them, a Deed of Absolute Sale on April 13, 1955 over respondent Maxima's real
property under threat that respondent Felix would be incarcerated for
misappropriation
if
they
refused
to
do
so.
dated December 3, 1997, on the basis of the failure of respondent-spouses to

show any reversible error in the decisions of the three courts below. Our
Resolution became final and executory on January 29, 1998 and was entered in
the
Book
of
Entries
of
Judgments.
[12]
The complaint further alleged that later, respondent-spouses, true to their

promise to reimburse the defalcated amount, took pains to pay their obligation
in installments regularly deducted from the salaries received by respondent
Felix from Dagupan Colleges; that the payments totaled P5,791.69; that
Meanwhile, on October 11, 1993, during the pendency of the appeal with the RTC,
respondent-spouses filed against petitioner, as represented by his attorney-infact Zosimo S. Zareno, the heirs of Blas F. Rayos, the spouses Delfin and Gloria
Alog, and Hon. Judge George M. Mejia, as Presiding Judge of the Metropolitan
notwithstanding the full payment of the obligation, Amado Ll. Ayson and Blas F.
Rayos did nothing to cancel the purported Deed of Absolute Sale; and that they
were shocked when they received a copy of the complaint for ejectment filed by
petitioner.

79
were issued TCT 57683 on January 14, 1992. On the same day, Amado Ll. Ayson
During the pre-trial, the following was established -
for his portion of the property was also issued TCT 57684. Amado Ll. Ayson later
[T] he land in question was a portion of a larger lot covered by TCT No. 41021
passed on ownership of his share to Amado Z. Ayson and issued to the latter was
with an area of 1,743 square meters in the name of Buenaventura Marias, father
TCT 59036 after the latter executed an Affidavit of Self Adjudication dated
of the plaintiff (respondent) Maxima Marias-Paragas. Transfer Certificate of
August 3, 1992 upon the death of Amado Ll. Ayson.
Title No. 41021 was later on cancelled and replaced by TCT No. 7316 in the
After trial on the merits, the RTC, Branch 42, Dagupan City rendered its
names of Maxima Marias, Rufino Marias, Rizalina Marias and Buenaventura
Decision dated March 6, 1998 in favor of respondent-spouses declaring the
Marias, specifying that each would receive one-fourth (1/4) thereof. The
Deed of Absolute Sale as an equitable mortgage, the decretal portion of which
portion pertaining to Maxima Marias-Paragas was later on allegedly conveyed
reads -
to Blas F. Rayos and Amado Ll. Ayson by virtue of a Deed of Sale allegedly
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against
executed on April 13, 1955 by Maxima Marias-Paragas with the conformity of
the defendants, except the spouses Delfin and Gloria Alog:
her husband Felix Paragas, after which TCT 7354 was issued canceling TCT No.
7316. Under TCT No. 7354, the new owners were Blas F. Rayos and Amado Ll.
Ayson, Rufino Marias, Rizalina Marias and Angela Marias. The land was
subdivided later on into four (4) lots, distributed as follows: Lot A went to Blas F.
[14]
[15]
1.
Annulling the Deed of Sale executed by Felix Paragas and Maxima
Paragas on April 13, 1955 (Exh. 3) in favor of defendants Blas F. Rayos and Amado
Ll. Ayson except as it affects the interest of Spouses Delfin and Gloria Alog over
the property in question;
Rayos and Amado Ll. Ayson, Lot B to Rufino Marias, Lot C to Rizalina Marias,
and Lot D to Angela Marias. Each lot has an area of 435.75 square meters. For
Lot A, TCT No. 22697 was issued in the name of both Blas F. Rayos and Amado
Ll.
Ayson.
2.
Annulling likewise TCT No. 57684 issued to Amado Ll. Ayson and TCT
No. 59036 issued to Amado Z. Ayson, including the respective tax declarations
thereof;
3.
Ordering Amado Z. Ayson to reconvey ownership of the property
On November 15, 1991, Lot A was the subject of a subdivision between Amado Ll.
covered by TCT No. 59036 to the herein plaintiffs, the true owners thereof;
Ayson and Blas F. Rayos. Said subdivision was approved on December 10, 1991,
4.
dividing the property into equal halves, each half with an area of 217.88 square
pay jointly and severally to the herein plaintiffs the amount paid by Spouses
meters. Thereafter, the one-half (1/2) pertaining to Blas F. Rayos was sold by his
Delfin and Gloria Alog to the late Blas F. Rayos, there being no proof adduced by
successors-in-interest to spouses Delfin and Gloria Alog by virtue of an Extra-
the plaintiffs as to the actual current market value of the said property;
Judicial Settlement With Sale dated January 10, 1992, to which the said spouses
Ordering defendant Amado Z. Ayson and the estate of Blas F. Rayos to

5.
80
Ordering the said defendants Amado Z. Ayson and the estate of Blas F.
of the MTCC had already become final upon the Entry of Judgment of our
Rayos to pay jointly and severally to the plaintiffs other amounts of P50,000.00
Resolution affirming the MTCC, the RTC, and the Court of Appeals.
as moral damages and P10,000.00 as attorney's fees, including appearance fee;

6.
Further ordering the aforementioned defendants, except defendant-
As regards the action for declaration of nullity of the deed of absolute sale,
petitioner claims that respondent-spouses are likewise bound by their admission
spouses Delfin and Gloria Alog, to pay costs.
during the pre-trial that the series of certificates of title from the time the Deed
[16]
SO ORDERED.
of Absolute Sale was registered with the Register of Deeds of Dagupan City
Petitioner appealed the said Decision to the Court of Appeals, which affirmed
eventually
led
to
the
issuance
of
TCT
No.
59036
in
his
name.
the same in its Decision dated May 31, 2000. The motion for reconsideration
filed by petitioner was likewise denied by the Court of Appeals in its Resolution
dated December 12, 2000. Hence, this petition raising the sole issue that -
Petitioner further argues that the action instituted before the RTC, Branch 42,
Dagupan City has already prescribed. According to him, the complaint alleged
The Honorable Court of Appeals has acted in excess of or with grave abuse of
that the Deed of Absolute Sale was executed through fraud, making the said
discretion amounting to lack of jurisdiction in dismissing the appeal of the
contract merely voidable, and the action to annul voidable contracts based on
herein petitioner Amado Z. Ayson, Jr. and in affirming the decision of the
fraud prescribed in four (4) years from the discovery of fraud. He insists that the
Regional Trial Court, Branch 42, Dagupan City in Civil Case No. D-10772, in
registration of the Deed of Absolute Sale occurred on May 4, 1955, which
violation of the laws on sale, equitable mortgage, prescription, laches and
operated as constructive notice of the fraud to the whole world, including
estoppel as well as the laws on property registration.
[17]
respondent-spouses. Thus, petitioner concludes that the action had long
Petitioner contends that respondent-spouses are bound by the judicial
prescribed when they filed the same on October 11, 1993, since its cause had
admissions they made both in the ejectment case and in the case for declaration
accrued
of
nullity
of
the
Deed
of
Absolute
38
years
ago.
Sale.
Petitioner adds that respondent-spouses are bound by estoppel and guilty of
With respect to the ejectment case, he posits that respondent-spouses cannot
laches in light of the judicial admissions they have already made and the
renege on the effects of their admissions that petitioner is the registered owner
unreasonable length of time that had lapsed before they questioned the validity
of the disputed property; that they were occupying the same by mere tolerance
of the Deed of Absolute Sale and the Affidavit they executed on April 8, 1992.
of the latter without rent; and that they undertook to vacate the premises in
accordance with the Affidavit dated April 8, 1992, especially when the findings
He also asseverates that the Deed of Absolute Sale is a true sale and not an

81
equitable mortgage, arguing that the alleged payments made by respondent
thereof since her marriage to respondent Felix in 1944. However, unfortunately
Felix were made from December 29, 1965 to December 17, 1980, long after the
for them, the MTCC held them bound by the admissions made by their counsel
execution of the contract on April 13, 1955; that respondent-spouses only paid
and decided that petitioner had a better right to possess the property.
realty taxes over their house and not on the disputed land; that their possession
of the property was by his mere tolerance; that there was no evidence proffered
Nevertheless, it must be remembered that in ejectment suits the issue to be
that the amount of P3,000.00 as consideration for the sale was unusually
resolved is merely the physical possession over the property, i.e., possession de
inadequate in 1955; and that the other co-owners of the land did not question or
facto and not possession de jure, independent of any claim of ownership set
protest the subdivision thereof leading to the issuance of TCT No. 59036 in his
forth by the party-litigants.
name.
the defense of ownership in his pleadings and the question of possession cannot
[19]
Should the defendant in an ejectment case raise
be resolved without deciding the issue of ownership, the issue of ownership

[20]
Lastly, petitioner claims that he is a transferee in good faith, having had no
shall be resolved only to determine the issue of possession.
notice of the infirmity affecting the title of his predecessor Amado Ll. Ayson
rendered in such an action shall be conclusive only with respect to physical
over the property. He says that he was only exercising his right as an heir when
possession and shall in no wise bind the title to the realty or constitute a
he adjudicated unto himself the parcel of land pertaining to his adoptive
binding and conclusive adjudication of the merits on the issue of ownership.
[18]
The judgment
father,
resulting in the issuance of TCT No. 59036 in his name, and, thus,
Therefore, such judgment shall not bar an action between the same parties
should
not
respecting the title or ownership over the property,
be
penalized
for
his
exercise
of
legal
right.
resorted
The
arguments
do
not
to
by
[21]
respondent-spouses
which action was precisely

in
this
case.
persuade.
Anent the claim that respondent-spouses admitted the series of TCTs issued by
First. With respect to the admissions made by respondent-spouses, through
reason of the registration of the questioned Deed of Absolute Sale, suffice it to
their counsel during the preliminary conference of the ejectment case, it is
state that records show that they admitted only the existence thereof, not
worthy to note that, as early as the submission of position papers before the
necessarily
the
validity
of
their
issuance.
MTCC, they already questioned the sale of the subject property to Amado Ll.
Ayson and Blas F. Rayos for being fictitious and asserted their ownership over
Second. The Deed of Absolute Sale is, in reality, an equitable mortgage or a
the land, pointing to the fact that respondent Maxima had been living on the
contract of loan secured by a mortgage. The Civil Code enumerates the cases in
land since her birth in 1913 and that they had been in continuous possession

which a contract, purporting to be a sale, is considered only as a contract of loan
subject
to
the
usury
82
laws.
[22]
secured by a mortgage, viz.:

Art. 1602. The contract shall be presumed to be an equitable mortgage, in any of
Art. 1604. The provisions of article 1602 shall also apply to a contract purporting
the following cases:
to be an absolute sale.
(1) When the price of the sale with right to repurchase is unusually
inadequate;
In such cases, parol evidence then becomes competent and admissible to prove
that the instrument was in truth and in fact given merely as a security for the
repayment of a loan; and upon adequate proof of the truth of such allegations,
the courts will enforce the agreement or understanding in this regard, in accord
(2) When the vendor remains in possession as lessee or otherwise
with the true intent of the parties at the time the contract was executed, even if
the conveyance was accompanied by registration in the name of the transferee
(3) When upon or after the expiration of the right to repurchase another
and
the
issuance
of
new
certificate
of
title
in
his
name.
[23]
instrument extending the period of redemption or granting a new

period is executed;
In this case, the evidence before the RTC, Branch 42, Dagupan City had
established that the possession of the subject property remained with
(4) When the purchaser retains for himself a part of the purchase price;
respondent-spouses despite the execution of the Deed of Absolute Sale on April

13, 1955. In fact, testimonies during the trial showed that petitioner and his
predecessors never disturbed the possession of respondent-spouses until the
(5) When the vendor binds himself to pay the taxes on the thing sold;
In any other case where it may be fairly inferred that the real intention
(6) of the parties is that the transaction shall secure the payment of a debt
or the performance of any other obligation.
filing
of
the
ejectment
case
on
April
12,
1992.
[24]
Moreover, the evidence presented by respondent-spouses indubitably reveals

that they signed the contract under threat of prosecution, with the view to
secure the payment of the P3,000.00 defalcated by respondent Felix. Amado Ll.
Ayson and Blas F. Rayos obviously exerted undue influence on Felix taking
advantage of the latter's lack of education and understanding of the legal effects
In any of the foregoing cases, any money, fruits, or other benefit to be received
by the vendee as rent or otherwise shall be considered as interest which shall be
of
his
signing
the
deed.

83
Respondent-spouses have clearly proven that they have already paid the
ceased either from the payment of the obligation through salary deduction or
aforesaid amount. That the obligation was paid in installments through salary
from the death of Amado Ll. Ayson and Blas F. Rayos, it is apparent that such
deduction over a period of 10 years from the signing of the Deed of Absolute
defect of consent never ceased up to the time of the signing of the Affidavit on
Sale is of no moment. It is safe to assume that this repayment scheme was in the
April 8, 1992 when Zareno, acting on behalf of petitioner, caused respondent
nature of an easy payment plan based on the respondent-spouses' capacity to
Felix to be brought to him, and taking advantage of the latter being unlettered,
pay. Also noteworthy is that the deductions from respondent Felix's salary
unduly influenced Felix into executing the said Affidavit for a fee of
amounted to a total of P5,791.69,
[25]
or almost double the obligation of P3,000.00.
Furthermore, it cannot be denied that petitioner failed to adduce countervailing
P10,000.00.
[27]
The complaint praying for the nullity of the Deed of Absolute Sale
was filed on October 11, 1993, well within the four-year prescriptive period.
proof that the payments, as evidenced by the volume of receipts, were for some
other
obligation.
Regarding the finality of the adjudication of physical possession in favor of

petitioner, it may be reiterated that the right of possession is a necessary
That the realty taxes paid by respondent-spouses was only for their house can be
incident of ownership. This adjudication of ownership of the property to
explained by the fact that, until the filing of the ejectment case, respondent
respondent-spouses must include the delivery of possession to them since
Maxima was not aware that the land she co-owned was already partitioned, such
petitioner has not shown a superior right to retain possession of the land
that the payments of real estate taxes in her name were limited to the
independently of his claim of ownership which is herein rejected. Verily, to
improvement
grant execution of the judgment in the ejectment case would work an injustice
on
the
land.
on respondent-spouses who had been conclusively declared the owners and

An equitable mortgage is a voidable contract. As such, it may be annulled within
thus,
rightful
possessors
of
the
disputed
land.
[28]
four (4) years from the time the cause of action accrues. This case, however, not
only involves a contract resulting from fraud, but covers a transaction ridden
WHEREFORE, the petition is DENIED and the Decision of the Court of
with threat, intimidation, and continuing undue influence which started when
Appeals in CA-G.R. CV No. 59645 dated May 31, 2000 is AFFIRMED.
petitioner's adoptive father Amado Ll. Ayson and Blas F. Rayos, Felix's superiors
at Dagupan Colleges, practically bullied respondent-spouses into signing the
Deed of Absolute Sale under threat of incarceration. Thus, the four-year period
should start from the time the defect in the consent ceases.
[26]
While at first
glance, it would seem that the defect in the consent of respondent-spouses
SO ORDERED.

DESTREZA vs. ALAROS (G.R. No. 176863, October 30, 2009)11
84
On June 5, 1991 respondent Plazo wrote a letter to Bonuan, reiterating her

request for copies of the titles. Since the latter was abroad, it was the acting
[1]
This is a petition for review under Rule 45 of the decision and

[2]
resolution
of the Court of Appeals that affirmed with modification the
judgment of the Regional Trial Court (RTC)
[3]
Register of Deeds who granted her request and furnished her with certified true
copies of the titles, except that of TCT 40353 which was missing.
[9]
of Nasugbu, Batangas, in the
action for nullification of deed of absolute sale and the corresponding transfer
certificate of title that respondents filed against petitioner.
On the same day, in an effort to find TCT 40353, respondent Plazo found
another title, TCT 55396, at the Assessors Office covering the same Utod
sugarland and canceling the missing TCT 40353. The new title, entered on July
18, 1989, was in the name of petitioner Gregorio M. Destreza and his wife
The Facts and the Case

The evidence on record shows that on November 16, 1989 Pedro L. Rioza
(Rioza) died,
Plazo (Plazo)
[4]
[5]
Bernarda Butiong.
leaving several heirs, which included respondents Ma. Gracia R.
and Ma. Fe R. Alaras (Alaras).
[6]
Respondent Plazo also went to the Bureau of Internal Revenue (BIR)

of Batangas City to inquire on any record involving the sale of the Utod
In the course of settling Riozas estate, respondent Plazo wrote a

letter
[7]
dated April 30, 1991 to the Registry of Deeds of Nasugbu, Batangas
requesting for certified true copies of all titles in Riozas name, including a
sugarland. But on August 15, 1991 the Revenue District Officer certified that the
BIRs office did not have any record of sale of the sugarland covered by TCT
40353.
[10]
sugarland located at Barangay Utod, Nasugbu, Batangas covered by Transfer

Certificate of Title (TCT) 40353. When she delivered the letter, Plazo also asked
Finally, respondent Alaras testified that on August 1, 1989, her late father,
that she be shown the originals of the titles but they were not available. To
Rioza, gave her the title of a land that he wanted to mortgage to her
inquire on the matter, she talked to the Register of Deeds, Atty. Alexander
uncle. Rioza told her that the land was about five hectares and was located at
Bonuan. According to Bonuan, he had the titles in his personal files and there
Barangay Utod, Nasugbu, Batangas. She did not, however, look at the number
were no transactions involving them.
[8]
of the title. A week later, unable to secure a mortgage from her uncle, she
returned the title to her father and never saw it again.
[11]

Their discovery prodded respondents Plazo and Alaras to file a
[12]
complaint
against the Destreza spouses and the Register of Deeds before the
RTC of Nasugbu on December 26, 1991 and an amended complaint
[13]
55396 to petitioner Destreza. They asked, among others, that TCT 55396 be
nullified, that TCT 40353 be restored, and that the Destrezas be ordered to
reconvey the land to the Rioza estate.
[14]
Register of Deeds Bonuan denied that TCT 40353 was
had been recorded. With regard to TCT 55396, he explained that the new title
had not yet been released to the Destreza spouses because they were yet to
submit certain required documents. Bonuan claimed that during his lifetime,
the late Rioza, asked him for a photocopy of TCT 55396. As a courtesy to the
ex-mayor, Bonuan gave him a copy.
of absolute sale
[17]
and 55396
[16]
[19]
After the sale, petitioner Destreza immediately took possession of the land,
plowing and planting on it even until the case was filed. No communication or
demand letter from respondents Plazo and Alaras disturbed his occupation until
as well as the duplicate original of the deed
dated June 15, 1989 between Rioza and the Destreza spouses.
[20]
The RTC found after hearing that TCT 55396 was yet inexistent on July 15,
1989 when petitioner Destreza claims he already received a copy from the
Register of Deeds. It declared that the deed of sale between Rioza and
Destreza is not a public document for the failure of the notary public to submit
his report to the RTC notarial section. Thus, the RTC found no basis for the
cancellation of TCT 40353 and the issuance of TCT 55396 in the name of the
Destreza spouses.
In compliance with the RTCs order, Bonuan gave the court certified
[15]
name.
he received the summons for suit.
missing since he had the title safe in his office and no transaction affecting it
copies of TCTs 40353
Destreza returned to the Register of Deeds and got a copy of TCT 55396 in his
on
September 20, 1993. They claim serious irregularities in the issuance of TCT
In his answer,
85
[21]
The RTC nullified the Deed of Sale and TCT 55396 and ordered the
Register of Deeds of Nasugbu, Batangas to restore TCT 40353 in the name of the
late Rioza. The trial court, however, ordered the estate of Rioza to pay the
Destreza spouses P60,000.00. And it ordered the latter to vacate and deliver
On the part of the Destreza spouses, petitioner Destreza testified that on

June 16, 1989 he bought the Utod sugarland from Rioza through Toribio Ogerio,
a commonkumpadre. He paid him P100,000.00.
[18]
Destreza did not get a copy
of the deed of sale nor a receipt for the payment but Rioza accompanied him to
the Register of Deeds. After about a month, but not later than July 15, 1989,
possession of the Utod sugarland to respondents Plazo and Alaras, acting for
Riozas estate, within five days from receipt of the payment mentioned.
[22]

The Destreza spouses appealed
[23]
86
to the Court of Appeals (CA) in CA-G.R. CV
The core issue in this case is whether or not sufficient evidence warranted
73031, contending that the notary public's failure to submit a copy of the
the nullification of the deed of sale that the late Rioza executed in favor of the
instrument to the notarial section is not sufficient to nullify the deed of sale and
Destrezas.
TCT 55396. On October 31, 2006 the CA rendered a decision,

modification the October 1, 2001 Judgment
[25]
[24]
affirming with
of the RTC. Although the CA
Ruling
found that the deed of sale may be presumed regularly executed despite the
notary's failure to report the transaction to the RTC Notarial Section, Destrezas
themselves destroyed such presumption when they failed to prove its
authenticity and genuineness. Further, the Destrezas claim that they paid
RiozaP100,000.00 when the price stated in the deed of sale was
only P60,000.00 placed the veracity of the deed in doubt.
[26]
Thus, the CA
The CA held that the Destrezas could not just rely on the deed of sale in
their favor or on the TCT issued in their names. They needed to present further
evidence to prove the authenticity and genuineness of that deed. Having failed
to do so, the CA theorized that it was justified in annulling that deed of sale and
the corresponding TCT. Said the CA:
affirmed the RTC decision with the modification that Riozas estate did not
have to pay any amount to the Destrezas.
for reconsideration.
[27]
The CA denied the latters motion
[28]
Verily, the sugarland deed should have been admitted as evidence since,
being a public document, it has in its favor the presumption of
authenticity. Nevertheless, even though the same is presumed authentic still,
Destreza seeks this Courts review of the decision and resolution of the
CA. Destreza insists that (1) the presumption of due execution and authenticity
the presumption may be rebutted by convincing evidence. The Destreza

Spouses, on their own, destroyed this presumption. We explain.
of the notarized deed is not destroyed by their failure to present further

witnesses and documents; (2) respondents Plazo and Alaras had the burden to
To strengthen their case, the Destreza Spouses could have presented as
prove the invalidity of the deed of sale; and (3) respondents evidence failed to
witnesses the notary public, the eyewitnesses to the signing of the sugarland
overcome the presumption of authenticity and due execution of the notarized
deed, or an expert to prove the authenticity and genuineness of all the
[29]
deed of absolute sale executed by Rioza.
signatures appearing on the said instrument; they did not. Worse, in claiming
that what they paid for the sugarland is one million pesos, and not six hundred
Issues
thousand pesos (PhP600,000.00) as indicated in the deed, they, themselves,

placed in doubt the veracity of the deed.
[30]

87
reports. They should not be made to suffer the consequences of the negligence
Moreover, the sugarland deed was supposed to be executed in 1989. Yet,
of the Notary Public in following the procedures prescribed by the Notarial
the Destreza Spouses failed to present any tax receipts or tax declarations in
Law. Thus, the notarized deed of sale executed by Rioza is admissible as
their names. As held by the Supreme Court, tax receipts and declarations are
evidence of the sale of the Utod sugarland to the Destrezas. Furthermore, it will
prima facie proofs of ownership or possession of the property for which such taxes
be shown later that the Destrezas did not fabricate the sale of the Utod
have been paid. Not only did the Destreza Spouses fail to present any evidence
sugarland as may be suggested by the failure of the Notary Public to submit his
to bolster their claim that they really paid the purchase price for the sugarland,
notarial report because there are evidence which show that Rioza really
but they even failed to explain what documents are lacking resulting to the non-
consented to the sale.
release of TCT No. T-55396.

The CA, however, made a mistake with regard to the assignment of the
The above circumstances, coupled with the fact that the Destreza
burden of proof. No rule requires a party, who relies on a notarized deed of sale
Spouses failed to present any proof showing payment of the purchase price,
for establishing his ownership, to present further evidence of such deeds
does not sit well with this Court. As previously stated, We find it hard to believe
genuineness lest the presumption of its due execution be for naught. Under the
that one would not ask for, or keep, receipts for considerable amounts given. x
rules of evidence, Every instrument duly acknowledged or proved and certified

as provided by law, may be presented in evidence without further proof, the
[31]
x x.
certificate of acknowledgment being prima facie evidence of the execution of the

[32]
instrument or document involved.

At the outset, the ruling of the CA was correct. Indeed, the notarized deed
of sale should be admitted as evidence despite the failure of the Notary Public in
submitting his notarial report to the notarial section of the RTC Manila. It is the
Here, Atty. Crispulo Ducusin notarized the deed of sale that Rioza
swearing of a person before the Notary Public and the latters act of signing and
acknowledged as his free act and deed on June 17, 1989. By signing and affixing
affixing his seal on the deed that is material and not the submission of the
his notarial seal on the deed, Atty. Ducusin converted it from a private
notarial report.
document to a public document.
[33]
As such, the deed of sale is entitled to full
faith and credit upon its face. And since Rioza, the executor of the deed, is
already dead, the notarized deed of absolute sale is the best evidence of his
Parties who appear before a notary public to have their documents notarized
should not be expected to follow up on the submission of the notarial
consent
to
the
sale
of
the
Utod
sugarland
to
the
Destreza

88
spouses. Parenthetically, it is not disputed that the Destrezas immediately and
1.
Plazo and Alaras point out that Destrezas acquisition of a copy of TCT
openly occupied the land right after the sale and continuously cultivated it from
55396 is questionable. Destreza said that he got a copy of the TCT on July 15,
then on.
1989 but such TCT was entered into the registry of title only on July 18,
1989. Moreover, Bonuan, the Register of Deeds, testified that he had not yet
The burden of proof is the duty of a party to present such amount of

evidence on the facts in issue as the law deems necessary for the establishment
of his claim.
[34]
Here, since respondents Plazo and Alaras claim, despite the
issued that TCT to the Destrezas because of some lacking documents. He did,
however, say that he released a copy of it to ex-mayor Rioza upon the latters
request.
Destrezas evidence of title over the property and open possession of it, that
grave and serious doubts plague TCT 55396, the burden is on them to prove
These circumstances may appear perplexing but the problem is that they did not
such claim. Only when they are successful in doing so will the court be justified
touch the validity of the deed of sale. And it does not help that the trial did not
in nullifying the notarized deed of sale that their father Rioza executed in favor
really address them. Plazo and Alaras did not confront petitioner Gregorio
of the Destrezas.
Destreza regarding these circumstances when he took the witness stand. It

would be pure speculation to declare that the Destrezas defrauded Rioza based
But more than plausible evidence was required of Plazo and Alaras. An
solely on them.
allegation of fraud with regard to the execution of a notarized deed of absolute

sale is a grave allegation. It cannot be declared on mere speculations. In fact, to
At any rate, Section 57 of Presidential Decree No. 1529, the Property Registration
overcome the presumption of regularity and due execution of a notarized deed,
Decree, provides that an owner who wants to convey his registered land shall
there must be clear and convincing evidence showing otherwise. The burden of
execute and register a deed of conveyance in a form sufficient in law. The
proof to overcome the presumption lies on the one contesting the
Register of Deeds shall then make out in the registration book a new certificate
same.
[35]
Without such evidence, the presumption remains undiminished.
[36]
of title to the new owner and shall prepare and deliver to him an owner's
duplicate certificate. The Register of Deeds shall note upon the original and
The Courts present task, therefore, is to determine if respondents Plazo

and Alaras evidence that their father did not sell the subject land to the
Destrezas is clear and convincing.
duplicate certificate the date of transfer, the volume and page of the registration
book in which the new certificate is registered and a reference by number to the
last preceding certificate. The original and the owner's duplicate of the grantor's
certificate shall be stamped canceled.

89
sugarland to the Destrezas is void. Alaras admitted that she did not see the
Here, the supposed irregularity lies in the release of a copy of the title to
number of the title handed to her. Nor did she identify in court any specific title
the Destrezas even before it had been entered into the books of the Register of
as the one she got. To be of value to her cause, Alaras needed to testify that TCT
Deeds. Furthermore, the Destrezas were able to acquire a copy of it when they
40353 remained uncancelled in her fathers hands even after the supposed entry
still needed to submit some registration requirements. But the premature
of TCT 55396 in the Registry of Deeds.
[38]
But she did not so testify.
release of a copy of the registered title cannot affect the validity of the contract
of sale between Rioza and the Destrezas. Registration only serves as the
3.
Plazo and Alaras also question the testimony of Gregorio Destreza
operative act to convey or affect the land insofar as third persons are
that he paid P100,000.00 to Rioza when the figure appearing on the deed of
concerned. It does not add anything to the efficacy of the contract of sale
sale was onlyP60,000.00. Again, this is not sufficient ground to nullify such
between the buyer and the seller. In fact, if a deed is not registered, the deed
deed. The fact remains that Rioza sold his land to the Destrezas under that
will continue to operate as a contract between the parties.
[37]
document and they paid for it. The explanation for the difference in the prices
can be explained only by Rioza and Gregorio Destreza. Unfortunately, Rioza
Furthermore, the declaration of Bonuan that he furnished ex-mayor

Rioza with a copy of TCT 55396 strengthens the case of the Destrezas. It shows
had died. On the other hand, Plazo and Alaras chose not to confront Destreza
regarding that difference when the latter took the witness stand.
that Rioza knew of and gave consent to the sale of his Utod sugarland to them
considering that he even helped facilitate the registration of the deed of
In sum, the Court finds the notarized deed of sale that the late Pedro
sale. This negates any possible suggestion that the Destrezas merely fabricated
Rioza executed in favor of the Destrezas valid and binding upon them and
the sale of the Utod sugarland on the evidence that the Notary Public failed to
their successors-in-interest. It served as authority to the Register of Deeds to
submit his notarial report. Whatever irregularity in registration may have been
register the conveyance of the property and issue a new title in favor of the
incurred, it did not affect the validity of the sale.
Destrezas. That the Destrezas occupied and cultivated the land openly for seven
years before and after Riozas death negates any scheme to steal the land.
2.
Alaras claims that on August 1, 1989, months after the sale of the
Utod sugarland to the Destrezas, her father Rioza asked her to mortgage some
WHEREFORE, the appealed decision of the Court of Appeals in CA-G.R.
land. He gave Alaras the title to it, impressing on her that such title covered a
CV 73031 is REVERSED and SET ASIDE. We declare the Deed of Sale valid and
land in Barangay Utod. But this does not prove that the sale of the Utod
order the Registry of Deeds to register TCT 55396 in the name of spouses

Gregorio M. Destreza and Bernarda E. Butiong and issue the same upon their
compliance with the requirements of registration.
SO ORDERED.
90

91
KINGS PROPERTIES vs. GALIDO (G.R. No. 170023, November 27, 2009)12
The Antipolo property with a total area of 14.8882 hectares was registered
The Case
under Original Certificate of Title (OCT) No. 535.
Kings Properties Corporation (petitioner) filed this Petition for Review on

[1]
Certiorari assailing the Court of Appeals Decision
[2]
in CA-G.R. CV No. 68828 as well as the Resolution
[5]
The issuance of the
homestead patent was subject to the following conditions:
dated 20 December 2004

[3]
dated 10 October 2005
To have and to hold the said tract of land, with the appurtenances thereunto of
denying the Motion for Reconsideration. In the assailed decision, the Court of
right belonging unto the said Heirs of Domingo Eniceo and to his heir or heirs
Appeals reversed the Regional Trial Courts Decision
[4]
dated 4 July 2000. This
and assigns forever, subject to the provisions of sections 118, 121, 122 and 124 of
case involves an action for cancellation of certificates of title, registration of
Commonwealth Act No. 141, as amended, which provide that except in favor of
deed of sale and issuance of certificates of title filed by Canuto A. Galido
the Government or any of its branches, units or institutions, the land hereby
(respondent) before Branch 71 of the Regional Trial Court of Antipolo City (trial
acquired shall be inalienable and shall not be subject to incumbrance for a
court).
period of five (5) years next following the date of this patent, and shall not be
liable for the satisfaction of any debt contracted prior to the expiration of that
period; that it shall not be alienated, transferred or conveyed after five (5) years
The Facts
On 18 April 1966, the heirs of Domingo Eniceo, namely Rufina Eniceo and
Maria Eniceo, were awarded with Homestead Patent No. 112947 consisting of
four parcels of land located in San Isidro, Antipolo, Rizal (Antipolo property)
and particularly described as follows:
and before twenty-five (25) years next following the issuance of title, without the
approval of the Secretary of Agriculture and Natural Resources; that it shall not
be incumbered, alienated, or transferred to any person, corporation, association,
or partnership not qualified to acquire public lands under the said Act and its
amendments; x x x
1.
[6]
Lot No. 1 containing an area of 96,297 square meters;

On 10 September 1973, a deed of sale covering the Antipolo property was
Lot No. 3 containing an area of 25,170 square meters;
executed between Rufina Eniceo and Maria Eniceo as vendors and respondent
Lot No. 4 containing an area of 26,812 square meters; and
as vendee. Rufina Eniceo and Maria Eniceo sold the Antipolo property to
Lot No. 5 containing an area of 603 square meters.
respondent for P250,000.
[7]
A certain Carmen Aldana delivered the owners
duplicate copy of OCT No. 535 to respondent.

[8]

92
Petitioner states that as early as 1991, respondent knew of the RTC decision
Petitioner alleges that when Maria Eniceo died in June 1975, Rufina Eniceo
and the heirs of Maria Eniceo (Eniceo heirs),
[9]
who continued to occupy the
Antipolo property as owners, thought that the owners duplicate copy of OCT
No. 535 was lost.
in LRC Case No. 584-A because respondent filed a criminal case against Rufina
Eniceo and Leonila Bolinas (Bolinas) for giving false testimony upon a material
[14]
fact during the trial of LRC Case No. 584-A.
[10]
Petitioner alleges that sometime in February 1995, Bolinas came to the

On 5 April 1988, the Eniceo heirs registered with the Registry of Deeds of
office of Alberto Tronio Jr. (Tronio), petitioners general manager, and offered to
Marikina City (Registry of Deeds) a Notice of Loss dated 2 April 1988 of the
sell the Antipolo property. During an on-site inspection, Tronio saw a house and
owners copy of OCT No. 535. The Eniceo heirs also filed a petition for the
ascertained that the occupants were Bolinas relatives. Tronio also went to the
issuance of a new owners duplicate copy of OCT No. 535 with Branch 72 of the
Registry of Deeds to verify the records on file. Tronio ascertained that OCT No.
Regional Trial Court (RTC) of Antipolo, Rizal. The case was docketed as LRC
535 was clean and had no lien and encumbrances. After the necessary
verification, petitioner decided to buy the Antipolo property.
[11]
Case No. 584-A.
On 31 January 1989, the RTC rendered a decision finding that the certified
true copy of OCT No. 535 contained no annotation in favor of any person,
[15]
On 14 March 1995, respondent caused the annotation of his adverse claim

in OCT No. 535.
[16]
corporation or entity. The RTC ordered the Registry of Deeds to issue a second
owners copy of OCT No. 535 in favor of the Eniceo heirs and declared the
original owners copy of OCT NO. 535 cancelled and considered of no further
On 20 March 1995, the Eniceo heirs executed a deed of absolute sale in

favor of petitioner covering lots 3 and 4 of the Antipolo property for P500,000.
[17]
[12]
value.
On the same date, Transfer Certificate of Title (TCT) Nos. 277747 and
On 6 April 1989, the Registry of Deeds issued a second owners copy of
OCT No. 535 in favor of the Eniceo heirs.
[13]
277120 were issued. TCT No. 277747 covering lots 1 and 5 of the Antipolo
property was registered in the names of Rufina Eniceo, Ambrosio Eniceo,
Rodolfo Calove, Fernando Calove and Leonila Calove Bolinas.
[18]
TCT
No.

277120 covering lots 3 and 4 of the Antipolo property was registered in the name
of petitioner.
[19]
93
filed a motion for reconsideration, which the CA denied in its Resolution dated
10 October 2005.
On 5 April 1995, the Eniceo heirs executed another deed of sale in favor of
petitioner covering lots 1 and 5 of the Antipolo property for P1,000,000. TCT No.
Aggrieved by the CAs decision and resolution, petitioner elevated the case
before this Court.
278588 was issued in the name of petitioner and TCT No. 277120 was
[20]
cancelled.
The Ruling of the Trial Court
On 17 August 1995, the Secretary of the Department of Environment and

Natural Resources (DENR Secretary) approved the deed of sale between the
Eniceo heirs and respondent.
[21]
The trial court stated that although respondent claims that the Eniceo heirs
sold to him the Antipolo property, respondent did not testify in court as to the
existence, validity and genuineness of the purported deed of sale and his
possession of the duplicate owners copy of OCT No. 535. The trial court stated
On 16 January 1996, respondent filed a civil complaint with the trial court
that as owner of a property consisting of hectares of land, respondent should
against the Eniceo heirs and petitioner. Respondent prayed for the cancellation
have come to court to substantiate his claim and show that the allegations of the
of the certificates of title issued in favor of petitioner, and the registration of the
Eniceo heirs and petitioner are mere fabrications.
[25]
deed of sale and issuance of a new transfer certificate of title in favor of

respondent.
[22]
The trial court noticed that respondent did not register the deed of sale
with the Register of Deeds immediately after its alleged execution on 10
On 4 July 2000, the trial court rendered its decision dismissing the case for
lack of legal and factual basis.
[23]
September 1973. Further, respondent waited for 22 long years before he had the
sale approved by the DENR Secretary. The trial court declared that respondent
slept on his rights. The trial court concluded that respondents failure to
Respondent appealed to the Court of Appeals (CA). On 20 December 2004,

the CA rendered a decision reversing the trial courts decision.
[24]
Respondent
register the sale and secure the cancellation of OCT No. 535 militates against his
claim of ownership. The trial court believed that respondent has not established

the preponderance of evidence necessary to justify the relief prayed for in his
complaint.
[26]
94
The CA ruled that the deed of sale in favor of respondent, being a

notarized document, has in its favor the presumption of regularity and carries
the evidentiary weight conferred upon it with respect to its due execution. The
The trial court stated that Bolinas was able to prove that the Eniceo heirs
have remained in actual possession of the land. The filing of a petition for the
issuance of a new owners duplicate copy requires the posting of the petition in
three different places which serves as a notice to the whole world. Respondents
CA added that whoever asserts forgery has the burden of proving it by clear,
positive and convincing evidence because forgery can never be presumed. The
CA found that petitioner and the Eniceo heirs have not substantiated the
allegation of forgery.
[30]
failure to oppose this petition can be deemed as a waiver of his right, which is
fatal to his cause.
[27]
The CA pointed out that laches has not set in. One of the requisites of
laches, which is injury or prejudice to the defendant in the event relief is
The trial court noted that petitioner is a buyer in good faith and for value
because petitioner has exercised due diligence in inspecting the property and
verifying the title with the Register of Deeds.
accorded to the complainant or the suit is not held to be barred, is wanting in

the instant case. The CA added that unrecorded sales of land brought under the
Torrens system are valid between parties because registration of the instrument
[28]
is merely intended to bind third persons.
[31]
The trial court held that even if the court were to believe that the deed of
sale in favor of respondent were genuine, still it could not be considered a
legitimate disposition of property, but merely an equitable mortgage. The trial
court stated that respondent never obtained possession of the Antipolo property
at any given time and a buyer who does not take possession of a property sold to
him is presumed to be a mortgagee only and not a vendee.
[29]
The CA declared that petitioners contention regarding the validity of the

questioned deed on the ground that it was executed without the approval of the
DENR Secretary is untenable. The DENR Secretary approved the deed of sale on
17 August 1995. However, even supposing that the sale was not approved, the
requirement for the DENR Secretarys approval is merely directory and its
absence does not invalidate any alienation, transfer or conveyance of the
homestead after 5 years and before 25 years from the issuance of the title which
The Ruling of the Court of Appeals
can be complied with at any time in the future.
[32]

95
The CA ruled that petitioner is a buyer in bad faith because it purchased
WHEREFORE, the appealed decision of the Regional Trial Court of Rizal
the disputed properties from the Eniceo heirs after respondent had caused the
(Antipolo, Branch 71) is REVERSED and SET ASIDE and another rendered as
inscription on OCT No. 535 of an adverse claim. Registration of the adverse
follows:
claim serves as a constructive notice to the whole world. Petitioner cannot feign
ignorance of facts which should have put it on guard and then claim that it
acted under the honest belief that there was no defect in the title of the vendors.
Knowing that an adverse claim was annotated in the certificates of title of the
Eniceo heirs, petitioner was forewarned that someone is claiming an interest in
the disputed properties.
[33]
1.
DECLARING NULL AND VOID TRANSFER CERTIFICATES OF TITLES
NOS. 277747, 277120 AND 278588 OF THE REGISTRY OF DEEDS OF

MARIKINA CITY (THE LAST TWO IN THE NAME OF DEFENDANTAPPELLEE KINGS PROPERTIES CORPORATION), THE DERIVATIVE TITLES
THEREOF AND THE INSTRUMENTS WHICH WERE THE BASES OF THE
ISSUANCE OF SAID CERTIFICATES OF TITLE; AND
The CA found no merit in petitioners contention that the questioned deed

of sale is an equitable mortgage. The CA stated that for the presumption of an
equitable mortgage to arise, one must first satisfy the requirement that the
parties entered into a contract denominated as a contract of sale and that their
intention was to secure an existing debt by way of mortgage.
[34]
2.
DECLARING PLAINTIFF-APPELLANT CANUTO A. GALIDO THE
OWNER OF FEE SIMPLE OF LOT NOS. 1, 3, 4, 5 FORMERLY REGISTERED

UNDER ORIGINAL CERTIFICATE OF TITLE NO. 535 IN THE NAME OF THE
HEIRS OF DOMINGO ENICEO, REPRESENTED BY RUFINA ENICEO, AND
ORDERING THE REGISTER OF DEEDS OF MARIKINA CITY TO ISSUE NEW
The CA stated that the execution of the notarized deed of sale, even
TRANSFER CERTIFICATES OF TITLE FOR SAID PARCELS OF LAND IN THE
without actual delivery of the disputed properties, transferred ownership from
NAME OF PLAINTIFF-APPELLANT CANUTO A. GALIDO, UPON PAYMENT
the Eniceo heirs to respondent. The CA held that respondents possession of the
OF THE PROPER FEES AND PRESENTATION OF THE DEED OF SALE DATED
owners duplicate copy of OCT No. 535 bolsters the contention that the Eniceo
SEPTEMBER 10, 1973 EXECUTED BY RUFINA ENICEO AND MARIA ENICEO,
heirs sold the disputed properties to him by virtue of the questioned deed.
[35]
AS SOLE HEIRS OF THE LATE DOMINGO ENICEO, IN FAVOR OF THE

[36]
LATTER.
The CA reversed the trial courts decision. The dispositive portion of the
CA decision reads:
The Issues

Petitioner raises two issues in this petition:
public instrument, it was clearly tantamount to a delivery of the land resulting

in the symbolic possession thereof being transferred to the buyer.
1.
Whether the adverse claim of respondent over the Antipolo property
should be barred by laches;

2.
[37]
[41]
Petitioner alleges that the deed of sale is a forgery. The Eniceo heirs also
claimed in their answer that the deed of sale is fake and spurious.
and
Whether the deed of sale delivered to respondent should be presumed an
equitable mortgage pursuant to Article 1602(2) and 1604 of the Civil Code.
96
[38]
[42]
However,
as correctly held by the CA, forgery can never be presumed. The party alleging
forgery is mandated to prove it with clear and convincing evidence.
[43]
Whoever
alleges forgery has the burden of proving it. In this case, petitioner and the
Eniceo heirs failed to discharge this burden.
The Ruling of the Court
Validity of the deed of sale to respondent
Petitioner invokes the belated approval by the DENR Secretary, made
The contract between the Eniceo heirs and respondent executed on 10
within 25 years from the issuance of the homestead, to nullify the sale of the
September 1973 was a perfected contract of sale. A contract is perfected once
Antipolo property. The sale of the Antipolo property cannot be annulled on the
there is consent of the contracting parties on the object certain and on the cause
ground that the DENR Secretary gave his approval after 21 years from the date
of the obligation.
[39]
In the present case, the object of the sale is the Antipolo
property and the price certain is P250,000.
the deed of sale in favor of respondent was executed. Section 118 of

Commonwealth Act No. 141 or the Public Land Act (CA 141), as amended by
Commonwealth Act No. 456,
[44]
reads:
The contract of sale has also been consummated because the vendors and
vendee have performed their respective obligations under the contract. In a
contract of sale, the seller obligates himself to transfer the ownership of the
determinate thing sold, and to deliver the same to the buyer, who obligates
himself to pay a price certain to the seller.
[40]
The execution of the notarized
EST V NOV
N TEE R VE VEEVT
SEROSSA S VCT TSTER ,

SOVRC OSES
ER SVRE
E EECTEOR
deed of sale and the delivery of the owners duplicate copy of OCT No. 535 to
VOS EVSSES OVSE
respondent is tantamount to a constructive delivery of the object of the sale.
N TEE OSSS SOT
In Navera v. Court of Appeals, the Court ruled that since the sale was made in a
ONTE TEE ROTE
OVA
VCT TST
N TC EXS .111 .CES
VC ,SV TC ,S OVSEEC
N EE SOTEVT ,SOVI VR S
VC
VC
CEOSS
OS EVOT
V OVR N
VN
O TE E
N TEE CCSOVSE
V T
SE
CSSSEST
E TEE ROTE
VC
T
N TEE OSS
N N VE AEO C N
N TEE SOTEVT
OT
E OVR
R OVT X X X

97
No alienation, transfer, or conveyance of any homestead after five years

and before twenty-five years after the issuance of title shall be valid without the
approval of the Secretary of Agriculture and Natural Resources,
[45]
Equitable Mortgage
which
approval shall not be denied except on constitutional and legal grounds.
Petitioner contends that the deed of sale in favor of respondent is an

equitable mortgage because the Eniceo heirs remained in possession of the
Antipolo property despite the execution of the deed of sale.
[46]
In Spouses Alfredo v. Spouses Borras,
the Court explained the
implications of Section 118 of CA 141. Thus:
An equitable mortgage is one which although lacking in some formality,

or form or words, or other requisites demanded by a statute, nevertheless
A otrmg
A rtA eri og ro tA noA etrening oA ptriA ren mrgnmoA grA rA etnarg A
reveals the intention of the parties to charge real property as security for a debt,
nmonanorreArAermoAotrmgAtngenmApna At rtoAptriAge Agni AgergAge Aerg mgArtAotrmgAnoA
and contains nothing impossible or contrary to law.
AsenoA . A anrergnrmA rpA genoA etreningnrmA t mo toA rA ore A arno A .noor o, however,
of an equitable mortgage are:
[47]
The essential requisites
expires on the fifth year. From then on until the next 20 years, the land grant
may be alienated provided the Secretary of Agriculture and Natural Resources
approves the alienation. The Secretary is required to approve the alienation
unless there are constitutional and legal grounds to deny the approval. In this
case, there are no apparent or legal grounds for the Secretary to disapprove the
1.
The parties entered into a contract denominated as a contract of sale; and
2. Their intention was to secure existing debt by way of a mortgage.

[49]
In Lim v. Calaguas,
[48]
the Court held that in order for the presumption of
equitable mortgage to apply, there must be: (1) something in the language of the
sale of the Subject Land.
contract; or (2) in the conduct of the parties which shows clearly and beyond
Ase A prnert A grA o srt A ge A reetrareA rpA ge A c st grttA or oA mrg AAAAAAAAAAAAipso
factoAse A rio ms A rpA reetrareA itA ge A c st grttA or oA mrg A .ore A arnoA ire A ra
sale made after the expiration of the 5-year period, for in such event the
requirement of Section 118 of the Public Land Act becomes merely directory or a
formality. etrorsnmoAge A pp sgArpAtrgnptnmoAA,erg tAse AreetrareAirtAi Ao srt o
rmoA roregnmoA ge A gtrmorsgnrmA roA npA ge A ore A eroA i
.rrgertnt o )dmo tosrtnmoAoreeen o(
mA et anrroetA
doubt that they intended the contract to be a mortgage and not a pacto de
[50]
retro sale.
Proof by parol evidence should be presented in court. Parol
evidence is admissible to support the allegation that an instrument in writing,

purporting on its face to transfer the absolute title to property, was in truth and
in fact given merely as security for the payment of a loan. The presumption of
equitable mortgage under Article 1602 of the Civil Code is not conclusive. It may
be rebutted by competent and satisfactory proof of the contrary.
[51]

only in the Appellees Brief
Petitioner claims that an equitable mortgage can be presumed because the
Eniceo heirs remained in possession of the Antipolo property. Apart from the
[56]
98
filed before the CA that the Eniceo heirs claimed
as an alternative defense that the deed should be presumed as an equitable

mortgage.
fact that the Eniceo heirs remained in possession of the Antipolo property,
petitioner has failed to substantiate its claim that the contract of sale
[57]
IN PHILIPPINE PORTS AUTHORITY V. CITY OF ILOILO,
WE RULED
was intended to secure an existing debt by way of mortgage. In fact, mere
THAT A PARTY WHO ADOPTS A CERTAIN THEORY UPON WHICH THE
tolerated possession is not enough to prove that the transaction was an
CASE IS TRIED AND DECIDED BY THE LOWER COURT WILL NOT BE
equitable mortgage.
[52]
PERMITTED TO CHANGE THE THEORY ON APPEAL. A THEORY OF THE

CASE NOT BROUGHT TO THE ATTENTION OF THE LOWER COURT WILL
Furthermore, petitioner has not shown any proof that the Eniceo heirs
were indebted to respondent. On the contrary, the deed of sale executed in
NOT BE CONSIDERED BY A REVIEWING COURT, AS A NEW THEORY

CANNOT BE RAISED FOR THE FIRST TIME AT SUCH LATE STAGE.
favor of respondent was drafted clearly to convey that the Eniceo heirs sold and
transferred the Antipolo property to respondent. The deed of sale even inserted
ALTHOUGH PETITIONER RAISED THE DEFENSE OF EQUITABLE
a provision about defrayment of registration expenses to effect the transfer of
MORTGAGE IN THE LOWER COURT, HE CANNOT CLAIM THAT THE DEED
title to respondent.
WAS AN EQUITABLE MORTGAGE BECAUSE PETITIONER WAS NOT A

PRIVY TO THE DEED OF SALE DATED 10 SEPTEMBER 1973. PETITIONER
In any event, as pointed out by respondent in his Memorandum, this
MERELY STEPPED INTO THE SHOES OF THE ENICEO HEIRS. PETITIONER,
defense of equitable mortgage is available only to petitioners predecessors-in-
WHO MERELY ACQUIRED ALL THE RIGHTS OF ITS PREDECESSORS,
interest who should have demanded, but did not, for the reformation of the
CANNOT ESPOUSE A THEORY THAT IS CONTRARY TO THE THEORY OF
deed of sale.
[53]
A perusal of the records shows that the Eniceo heirs never
THE CASE CLAIMED BY THE ENICEO HEIRS.
presented the defense of equitable mortgage before the trial court. In their
Answer
[54]
and Memorandum
[55]
filed before the trial court, the Eniceo heirs
The Court notes that the Eniceo heirs have not appealed the CAs decision,
claimed that the alleged deed of sale dated 10 September 1973 between Rufina
hence, as to the Eniceo heirs, the CAs decision that the contract was a sale and
Eniceo and Maria Eniceo was fake and spurious. The Eniceo heirs contended
not an equitable mortgage is now final. Since petitioner merely assumed the
that even assuming there was a contract, no consideration was involved. It was

rights of the Eniceo heirs, petitioner is now estopped from questioning the deed
99
eArmoArmo tAge Ai en pAgergAge t At t AmrAo p sgAnmAge Agnge A e Arsg oAnmAorroAprng

m A terA ertsero oA t reA ogrg A tngeA emrte oo A rpA rA o p sgA rtA A .rpA ge A a mort
of sale dated 10 September 1973.
erseArpAgnge AnmAenoAa mortAsrmmrgAserniAgergAe AeroArscrnt oAgnge Age t grAnmAorroA

rmoA ge AA ;ge A ermoA rtA rpA rmA nmg t ogA ge t nmA prngeA roA rornmogA ge A gtr A rtm tA rp
Petitioner is not a buyer in good faith
ori A tre A irogA i A reeen oA grA rm A terA eroA emrte oo A rpA prsgoA tenseA oerreoA
Aera AergAeniArermAorseAnmcrnttArmoAnma ognorgnrmAro be necessary to acquaint
Petitioner maintains that the subsequent sale must be upheld because
him with the defects in the title of his vendor.
[61]
petitioner is a buyer in good faith, having exercised due diligence by inspecting

the property and the title sometime in February 1995.
Petitioner does not dispute that respondent registered his adverse claim
with the Registry of Deeds on 14 March 1995. The registration of the adverse
In Agricultural and Home Extension Development Group v. Court of

[58]
Appeals,
a buyer in good faith is defined as one who buys the property of
another without notice that some other person has a right to or interest in such
claim constituted, by operation of law, notice to the whole world.
[62]
From that
date onwards, subsequent buyers were deemed to have constructive notice of

respondents adverse claim.
property and pays a full and fair price for the same at the time of such purchase
or before he has notice of the claim or interest of some other person in the
property.
PETITIONER PURCHASED THE ANTIPOLO PROPERTY ONLY ON 20

MARCH 1995 AND 5 APRIL 1995 AS SHOWN BY THE DATES IN THE DEEDS
OF SALE. ON THE SAME DATES, THE REGISTRY OF DEEDS ISSUED NEW
the Court held that in the realm of
TCTS IN FAVOR OF PETITIONER WITH THE ANNOTATED ADVERSE
double sales, the registration of an adverse claim places any subsequent buyer of
CLAIM. CONSEQUENTLY, THE ADVERSE CLAIM REGISTERED PRIOR TO
the registered land in bad faith because such annotation was made in the title of
THE SECOND SALE CHARGED PETITIONER WITH CONSTRUCTIVE NOTICE
the property before the Register of Deeds and he could have discovered that the
OF THE DEFECT IN THE TITLE OF ENICEO HEIRS. THEREFORE,
[59]
In Balatbat v. Court of Appeals,
subject property was already sold.
[60]
The Court explained further, thus:
PETITIONER CANNOT BE DEEMED AS A PURCHASER IN GOOD FAITH

WHEN THEY BOUGHT AND REGISTERED THE ANTIPOLO PROPERTY.
A ertsero tA rpA rA arer oA en s A rpA etre tgtA srmmrgA drogA sero A enoA t oA grA
prsgoAtenseAoerreoAergArAt rormrie AirmArermAenoAorrtoArmoAge mAserniAgergA

[63]
IN CARBONELL V. COURT OF APPEALS,
100
THIS COURT RULED THAT
from the time of acquisition until the title is transferred to him by registration
IN DOUBLE SALES, THE FIRST BUYER ALWAYS HAS PRIORITY RIGHTS
or failing registration, by delivery of possession. The second buyer must show
OVER SUBSEQUENT BUYERS OF THE SAME PROPERTY. BEING THE FIRST
continuing good faith and innocence or lack of knowledge of the first sale until
BUYER, HE IS NECESSARILY IN GOOD FAITH COMPARED TO SUBSEQUENT
his contract ripens into full ownership through prior registration as provided by
BUYERS. THE GOOD FAITH OF THE FIRST BUYER REMAINS ALL
law.
THROUGHOUT
DESPITE
HIS
SUBSEQUENT
ACQUISITION
[65]
OF
KNOWLEDGE OF THE SUBSEQUENT SALE. ON THE OTHER HAND, THE
Laches
SUBSEQUENT BUYER, WHO MAY HAVE ENTERED INTO A CONTRACT OF

SALE IN GOOD FAITH, WOULD BECOME A BUYER IN BAD FAITH BY HIS
SUBSEQUENT
ACQUISITION
OF
KNOWLEDGE OF THE FIRST SALE.
[64]
CONSTRUCTIVE
PETITIONER CONTENDS THAT RESPONDENT IS GUILTY OF LACHES
THE SEPARATE OPINION OF THEN
BECAUSE HE SLEPT ON HIS RIGHTS BY FAILING TO REGISTER THE SALE
ACTUAL
OR
JUSTICE TEEHANKEE IS INSTRUCTIVE, THUS:
OF THE ANTIPOLO PROPERTY AT THE EARLIEST POSSIBLE TIME.

PETITIONER CLAIMS THAT DESPITE RESPONDENTS KNOWLEDGE OF THE
Ase A ora tmnmoA etnmsnee A e t A no prius tempore, potior jureA,pntogA nmA gni (
mrte oo A ornm oA itA ge A pntogA irt tA rpA ge A o srmoA ore A A .)ogtrmo tA nmA tnoeg
SUBSEQUENT SALE IN 1991, RESPONDENT STILL FAILED TO HAVE THE

DEED OF SALE REGISTERED WITH THE REGISTRY OF DEEDS.
AsrmmrgAo p rgAge ApntogAirt teoAtnoegoA rs egArmetAroAetrano oAitAge Code and

that is where the second buyer first registers in good faith the second sale ahead
The essence of laches is the failure or neglect, for an unreasonable and
of the first. Such knowledge of the first buyer does bar her from availing of her
unexplained length of time, to do that which, through due diligence, could have
rights under the law, among them, to first her purchase as against the second
been done earlier, thus giving rise to a presumption that the party entitled to
buyer. But in converso knowledge gained by the second buyer of the first sale
assert it had either abandoned or declined to assert it.
[66]
defeats his rights even if he is first to register the second sale, since such
knowledge taints his prior registration with bad faith.
Respondent discovered in 1991 that a new owners copy of OCT
No. 535
This is the price exacted by Article 1544 of the Civil Code for the second
was issued to the Eniceo heirs. Respondent filed a criminal case against the
buyer being able to displace the first buyer: that before the second buyer can
Eniceo heirs for false testimony. When respondent learned that the Eniceo heirs
obtain priority over the first, he must show that he acted in good faith
were planning to sell the Antipolo property, respondent caused the annotation
throughout (i.e., in ignorance of the first sale and of the first buyers rights)

of an adverse claim. On 16 January 1996, when respondent learned that OCT No.
535 was cancelled and new TCTs were issued, respondent filed a civil complaint
with the trial court against the Eniceo heirs and petitioner. Respondents actions
negate petitioners argument that respondent is guilty of laches.
True, unrecorded sales of land brought under Presidential Decree
No.
1529 or the Property Registration Decree (PD 1529) are effective between and
binding only upon the immediate parties. The registration required in Section 51
of PD 1529 is intended to protect innocent third persons, that is, persons who,
without knowledge of the sale and in good faith, acquire rights to the
[67]
property.
Petitioner, however, is not an innocent purchaser for value.
WHEREFORE, we DENY the petition. We AFFIRM the 20 December 2004

Decision and 10 October 2005 Resolution of the Court of Appeals in CA-G.R. CV
No. 68828.
SO ORDERED.
101

VILORIA vs. CONTINENTAL AIRLINES, 663 SCRA 57, G.R. NO. 188288
102
damages filed by petitioners Fernando Viloria (Fernando) and Lourdes Viloria

(Lourdes), collectively called Spouses Viloria, against respondent Continental
REYES, J.:
Airlines, Inc. (CAI). As culled from the records, below are the facts giving rise to
such complaint.
This is a petition for review under Rule 45 of the Rules of Court from the January
30, 2009 Decision1 of the Special Thirteenth Division of the Court of Appeals
On or about July 21, 1997 and while in the United States, Fernando purchased for
(CA) in CA-G.R. CV No. 88586 entitled "Spouses Fernando and Lourdes Viloria v.
himself and his wife, Lourdes, two (2) round trip airline tickets from San Diego,
Continental Airlines, Inc.," the dispositive portion of which states:
California to Newark, New Jersey on board Continental Airlines. Fernando

purchased the tickets at US$400.00 each from a travel agency called "Holiday
Travel" and was attended to by a certain Margaret Mager (Mager). According to
WHEREFORE, the Decision of the Regional Trial Court, Branch 74, dated 03
April 2006, awarding US$800.00 or its peso equivalent at the time of payment,
plus legal rate of interest from 21 July 1997 until fully paid, [P]100,000.00 as
moral damages, [P]50,000.00 as exemplary damages, [P]40,000.00 as attorneys
fees and costs of suit to plaintiffs-appellees is hereby REVERSED and SET ASIDE.
Defendant-appellants counterclaim is DENIED.
Spouses Viloria, Fernando agreed to buy the said tickets after Mager informed
them that there were no available seats at Amtrak, an intercity passenger train
service provider in the United States. Per the tickets, Spouses Viloria were
scheduled to leave for Newark on August 13, 1997 and return to San Diego on
August 21, 1997.
Subsequently, Fernando requested Mager to reschedule their flight to Newark to

an earlier date or August 6, 1997. Mager informed him that flights to Newark via
Costs against plaintiffs-appellees.
Continental Airlines were already fully booked and offered the alternative of a
round trip flight via Frontier Air. Since flying with Frontier Air called for a
SO ORDERED.2
higher fare of US$526.00 per passenger and would mean traveling by night,
Fernando opted to request for a refund. Mager, however, denied his request as
the subject tickets are non-refundable and the only option that Continental
On April 3, 2006, the Regional Trial Court of Antipolo City, Branch 74 (RTC)
rendered a Decision, giving due course to the complaint for sum of money and
Airlines can offer is the re-issuance of new tickets within one (1) year from the

103
date the subject tickets were issued. Fernando decided to reserve two (2) seats
In a letter dated March 24, 1998, Continental Micronesia denied Fernandos
with Frontier Air.
request for a refund and advised him that he may take the subject tickets to any
Continental ticketing location for the re-issuance of new tickets within two (2)
As he was having second thoughts on traveling via Frontier Air, Fernando went
to the Greyhound Station where he saw an Amtrak station nearby. Fernando
made inquiries and was told that there are seats available and he can travel on
years from the date they were issued. Continental Micronesia informed
Fernando that the subject tickets may be used as a form of payment for the
purchase of another Continental ticket, albeit with a re-issuance fee.5
Amtrak anytime and any day he pleased. Fernando then purchased two (2)
tickets for Washington, D.C.
On June 17, 1999, Fernando went to Continentals ticketing office at Ayala

Avenue, Makati City to have the subject tickets replaced by a single round trip
From Amtrak, Fernando went to Holiday Travel and confronted Mager with the
Amtrak tickets, telling her that she had misled them into buying the
Continental Airlines tickets by misrepresenting that Amtrak was already fully
booked. Fernando reiterated his demand for a refund but Mager was firm in her
position that the subject tickets are non-refundable.
Upon returning to the Philippines, Fernando sent a letter to CAI on February 11,
1998, demanding a refund and alleging that Mager had deluded them into
purchasing the subject tickets.3
ticket to Los Angeles, California under his name. Therein, Fernando was
informed that Lourdes ticket was non-transferable, thus, cannot be used for the
purchase of a ticket in his favor. He was also informed that a round trip ticket to
Los Angeles was US$1,867.40 so he would have to pay what will not be covered
by the value of his San Diego to Newark round trip ticket.
In a letter dated June 21, 1999, Fernando demanded for the refund of the subject
tickets as he no longer wished to have them replaced. In addition to the dubious
circumstances under which the subject tickets were issued, Fernando claimed
that CAIs act of charging him with US$1,867.40 for a round trip ticket to Los
Angeles, which other airlines priced at US$856.00, and refusal to allow him to
In a letter dated February 24, 1998, Continental Micronesia informed Fernando
use Lourdes ticket, breached its undertaking under its March 24, 1998 letter.6
that his complaint had been referred to the Customer Refund Services of
Continental Airlines at Houston, Texas.4
On September 8, 2000, Spouses Viloria filed a complaint against CAI, praying
that CAI be ordered to refund the money they used in the purchase of the
subject tickets with legal interest from July 21, 1997 and to pay P1,000,000.00 as

104
moral damages, P500,000.00 as exemplary damages and P250,000.00 as
Following a full-blown trial, the RTC rendered its April 3, 2006 Decision,
attorneys fees.7
holding that Spouses Viloria are entitled to a refund in view of Magers

misrepresentation in obtaining their consent in the purchase of the subject
CAI interposed the following defenses: (a) Spouses Viloria have no right to ask
tickets.9 The relevant portion of the April 3, 2006 Decision states:
for a refund as the subject tickets are non-refundable; (b) Fernando cannot
insist on using the ticket in Lourdes name for the purchase of a round trip
Continental Airlines agent Ms. Mager was in bad faith when she was less candid
ticket to Los Angeles since the same is non-transferable; (c) as Mager is not a
and diligent in presenting to plaintiffs spouses their booking options. Plaintiff
CAI employee, CAI is not liable for any of her acts; (d) CAI, its employees and
Fernando clearly wanted to travel via AMTRAK, but defendants agent misled
agents did not act in bad faith as to entitle Spouses Viloria to moral and
him into purchasing Continental Airlines tickets instead on the fraudulent
exemplary damages and attorneys fees. CAI also invoked the following clause
misrepresentation that Amtrak was fully booked. In fact, defendant Airline did
printed on the subject tickets:
not specifically denied (sic) this allegation.
3. To the extent not in conflict with the foregoing carriage and other services
Plainly, plaintiffs spouses, particularly plaintiff Fernando, were tricked into
performed by each carrier are subject to: (i) provisions contained in this ticket,
buying
(ii) applicable tariffs, (iii) carriers conditions of carriage and related regulations
misrepresentations. Continental Airlines agent Ms. Mager further relied on and
which are made part hereof (and are available on application at the offices of
exploited plaintiff Fernandos need and told him that they must book a flight
carrier), except in transportation between a place in the United States or Canada
immediately or risk not being able to travel at all on the couples preferred date.
and any place outside thereof to which tariffs in force in those countries apply.8
Unfortunately, plaintiffs spouses fell prey to the airlines and its agents
Continental
Airline
tickets
on
Ms.
Magers
misleading
unethical tactics for baiting trusting customers."10

According to CAI, one of the conditions attached to their contract of carriage is
the non-transferability and non-refundability of the subject tickets.
Citing Articles 1868 and 1869 of the Civil Code, the RTC ruled that Mager is
CAIs agent, hence, bound by her bad faith and misrepresentation. As far as the
The RTCs Ruling
RTC is concerned, there is no issue as to whether Mager was CAIs agent in view
of CAIs implied recognition of her status as such in its March 24, 1998 letter.

105
The act of a travel agent or agency being involved here, the following are the
agent relationship with Ms. Mager by its offer in the letter dated March 24, 1998
pertinent New Civil Code provisions on agency:
an obvious attempt to assuage plaintiffs spouses hurt feelings.11
Art. 1868. By the contract of agency a person binds himself to render some
Furthermore, the RTC ruled that CAI acted in bad faith in reneging on its
service or to do something in representation or on behalf of another, with the
undertaking to replace the subject tickets within two (2) years from their date of
consent or authority of the latter.
issue when it charged Fernando with the amount of US$1,867.40 for a round trip
ticket to Los Angeles and when it refused to allow Fernando to use Lourdes
Art. 1869. Agency may be express, or implied from the acts of the principal, from
ticket. Specifically:
his silence or lack of action, or his failure to repudiate the agency, knowing that
another person is acting on his behalf without authority.
Tickets may be reissued for up to two years from the original date of issue.
When defendant airline still charged plaintiffs spouses US$1,867.40 or more
Agency may be oral, unless the law requires a specific form.
than double the then going rate of US$856.00 for the unused tickets when the
same were presented within two (2) years from date of issue, defendant airline
exhibited callous treatment of passengers.12
As its very name implies, a travel agency binds itself to render some service or to
do something in representation or on behalf of another, with the consent or
authority of the latter. This court takes judicial notice of the common services
The Appellate Courts Ruling
rendered by travel agencies that represent themselves as such, specifically the

reservation and booking of local and foreign tours as well as the issuance of
On appeal, the CA reversed the RTCs April 3, 2006 Decision, holding that CAI
airline tickets for a commission or fee.
cannot be held liable for Magers act in the absence of any proof that a principalagent relationship existed between CAI and Holiday Travel. According to the CA,
The services rendered by Ms. Mager of Holiday Travel agency to the plaintiff
spouses on July 21, 1997 were no different from those offered in any other travel
agency. Defendant airline impliedly if not expressly acknowledged its principal-
Spouses Viloria, who have the burden of proof to establish the fact of agency,
failed to present evidence demonstrating that Holiday Travel is CAIs agent.
Furthermore, contrary to Spouses Vilorias claim, the contractual relationship
between Holiday Travel and CAI is not an agency but that of a sale.

106
sides of legal prism, the transaction in issue was simply a contract of sale,
Plaintiffs-appellees assert that Mager was a sub-agent of Holiday Travel who was
wherein Holiday Travel buys airline tickets from Continental Airlines and then,
in turn a ticketing agent of Holiday Travel who was in turn a ticketing agent of
through its employees, Mager included, sells it at a premium to clients.13
Continental Airlines. Proceeding from this premise, they contend that

Continental Airlines should be held liable for the acts of Mager. The trial court
The CA also ruled that refund is not available to Spouses Viloria as the word
held the same view.
"non-refundable" was clearly printed on the face of the subject tickets, which
constitute their contract with CAI. Therefore, the grant of their prayer for a
We do not agree. By the contract of agency, a person binds him/herself to
refund would violate the proscription against impairment of contracts.
render some service or to do something in representation or on behalf of

another, with the consent or authority of the latter. The elements of agency are:
Finally, the CA held that CAI did not act in bad faith when they charged Spouses
(1) consent, express or implied, of the parties to establish the relationship; (2)
Viloria with the higher amount of US$1,867.40 for a round trip ticket to Los
the object is the execution of a juridical act in relation to a third person; (3) the
Angeles. According to the CA, there is no compulsion for CAI to charge the
agent acts as a representative and not for him/herself; and (4) the agent acts
lower amount of US$856.00, which Spouses Viloria claim to be the fee charged
within the scope of his/her authority. As the basis of agency is representation,
by other airlines. The matter of fixing the prices for its services is CAIs
there must be, on the part of the principal, an actual intention to appoint, an
prerogative, which Spouses Viloria cannot intervene. In particular:
intention naturally inferable from the principals words or actions. In the same
manner, there must be an intention on the part of the agent to accept the
appointment and act upon it. Absent such mutual intent, there is generally no
agency. It is likewise a settled rule that persons dealing with an assumed agent
are bound at their peril, if they would hold the principal liable, to ascertain not
only the fact of agency but also the nature and extent of authority, and in case
either is controverted, the burden of proof is upon them to establish it. Agency
It is within the respective rights of persons owning and/or operating business

entities to peg the premium of the services and items which they provide at a
price which they deem fit, no matter how expensive or exhorbitant said price
may seem vis--vis those of the competing companies. The Spouses Viloria may
not intervene with the business judgment of Continental Airlines.14
is never presumed, neither is it created by the mere use of the word in a trade or
business name. We have perused the evidence and documents so far presented.
We
find
nothing
except
bare
allegations
of
plaintiffs-appellees
that
Mager/Holiday Travel was acting in behalf of Continental Airlines. From all
The Petitioners Case

107
In this Petition, this Court is being asked to review the findings and conclusions
pertains to airfares in September 2000 and not to airfares prevailing in June 1999,
of the CA, as the latters reversal of the RTCs April 3, 2006 Decision allegedly
the time when Fernando asked CAI to apply the value of the subject tickets for
lacks factual and legal bases. Spouses Viloria claim that CAI acted in bad faith
the purchase of a new one.16 CAI likewise argued that it did not undertake to
when it required them to pay a higher amount for a round trip ticket to Los
protect Spouses Viloria from any changes or fluctuations in the prices of airline
Angeles considering CAIs undertaking to re-issue new tickets to them within
tickets and its only obligation was to apply the value of the subject tickets to the
the period stated in their March 24, 1998 letter. CAI likewise acted in bad faith
purchase of the newly issued tickets.
when it disallowed Fernando to use Lourdes ticket to purchase a round trip to

Los Angeles given that there is nothing in Lourdes ticket indicating that it is
non-transferable. As a common carrier, it is CAIs duty to inform its passengers
of the terms and conditions of their contract and passengers cannot be bound
by such terms and conditions which they are not made aware of. Also, the
subject contract of carriage is a contract of adhesion; therefore, any ambiguities
should be construed against CAI. Notably, the petitioners are no longer
With respect to Spouses Vilorias claim that they are not aware of CAIs
restrictions on the subject tickets and that the terms and conditions that are
printed on them are ambiguous, CAI denies any ambiguity and alleged that its
representative informed Fernando that the subject tickets are non-transferable
when he applied for the issuance of a new ticket. On the other hand, the word
"non-refundable" clearly appears on the face of the subject tickets.
questioning the validity of the subject contracts and limited its claim for a
refund on CAIs alleged breach of its undertaking in its March 24, 1998 letter.
CAI also denies that it is bound by the acts of Holiday Travel and Mager and
that no principal-agency relationship exists between them. As an independent
The Respondents Case
In its Comment, CAI claimed that Spouses Vilorias allegation of bad faith is
contractor, Holiday Travel was without capacity to bind CAI.
Issues
negated by its willingness to issue new tickets to them and to credit the value of
the subject tickets against the value of the new ticket Fernando requested. CAI
argued that Spouses Vilorias sole basis to claim that the price at which CAI was
To determine the propriety of disturbing the CAs January 30, 2009 Decision and
willing to issue the new tickets is unconscionable is a piece of hearsay evidence
whether Spouses Viloria have the right to the reliefs they prayed for, this Court
an advertisement appearing on a newspaper stating that airfares from Manila
deems it necessary to resolve the following issues:
to Los Angeles or San Francisco cost US$818.00.15 Also, the advertisement

108
a. Does a principal-agent relationship exist between CAI and Holiday Travel?

I. A principal-agent relationship exists between CAI and Holiday Travel.
b. Assuming that an agency relationship exists between CAI and Holiday Travel,
is CAI bound by the acts of Holiday Travels agents and employees such as
With respect to the first issue, which is a question of fact that would require this
Mager?
Court to review and re-examine the evidence presented by the parties below,
this Court takes exception to the general rule that the CAs findings of fact are
c. Assuming that CAI is bound by the acts of Holiday Travels agents and
conclusive upon Us and our jurisdiction is limited to the review of questions of
employees, can the representation of Mager as to unavailability of seats at
law. It is well-settled to the point of being axiomatic that this Court is
Amtrak be considered fraudulent as to vitiate the consent of Spouse Viloria in
authorized to resolve questions of fact if confronted with contrasting factual
the purchase of the subject tickets?
findings of the trial court and appellate court and if the findings of the CA are
contradicted by the evidence on record.17
d. Is CAI justified in insisting that the subject tickets are non-transferable and
non-refundable?
According to the CA, agency is never presumed and that he who alleges that it
exists has the burden of proof. Spouses Viloria, on whose shoulders such burden
rests, presented evidence that fell short of indubitably demonstrating the
e. Is CAI justified in pegging a different price for the round trip ticket to Los
existence of such agency.
Angeles requested by Fernando?

We disagree. The CA failed to consider undisputed facts, discrediting CAIs
f. Alternatively, did CAI act in bad faith or renege its obligation to Spouses
Viloria to apply the value of the subject tickets in the purchase of new ones
when it refused to allow Fernando to use Lourdes ticket and in charging a
higher price for a round trip ticket to Los Angeles?
This Courts Ruling
denial that Holiday Travel is one of its agents. Furthermore, in erroneously

characterizing the contractual relationship between CAI and Holiday Travel as a
contract of sale, the CA failed to apply the fundamental civil law principles
governing agency and differentiating it from sale.

109
In Rallos v. Felix Go Chan & Sons Realty Corporation,18 this Court explained the
element is also present considering that CAI has not made any allegation that
nature of an agency and spelled out the essential elements thereof:
Holiday Travel exceeded the authority that was granted to it. In fact, CAI
consistently maintains the validity of the contracts of carriage that Holiday
Out of the above given principles, sprung the creation and acceptance of the
relationship of agency whereby one party, called the principal (mandante),
authorizes another, called the agent (mandatario), to act for and in his behalf in
transactions with third persons. The essential elements of agency are: (1) there is
consent, express or implied of the parties to establish the relationship; (2) the
object is the execution of a juridical act in relation to a third person; (3) the
agent acts as a representative and not for himself, and (4) the agent acts within
Travel executed with Spouses Viloria and that Mager was not guilty of any
fraudulent misrepresentation. That CAI admits the authority of Holiday Travel
to enter into contracts of carriage on its behalf is easily discernible from its
February 24, 1998 and March 24, 1998 letters, where it impliedly recognized the
validity of the contracts entered into by Holiday Travel with Spouses Viloria.
When Fernando informed CAI that it was Holiday Travel who issued to them
the subject tickets, CAI did not deny that Holiday Travel is its authorized agent.
the scope of his authority.1avvphi1

Prior to Spouses Vilorias filing of a complaint against it, CAI never refuted that
Agency is basically personal, representative, and derivative in nature. The
authority of the agent to act emanates from the powers granted to him by his
principal; his act is the act of the principal if done within the scope of the
authority. Qui facit per alium facit se. "He who acts through another acts
himself."19
it gave Holiday Travel the power and authority to conclude contracts of carriage
on its behalf. As clearly extant from the records, CAI recognized the validity of
the contracts of carriage that Holiday Travel entered into with Spouses Viloria
and considered itself bound with Spouses Viloria by the terms and conditions
thereof; and this constitutes an unequivocal testament to Holiday Travels
authority to act as its agent. This Court cannot therefore allow CAI to take an
altogether different position and deny that Holiday Travel is its agent without
Contrary to the findings of the CA, all the elements of an agency exist in this
condoning or giving imprimatur to whatever damage or prejudice that may
case. The first and second elements are present as CAI does not deny that it
result from such denial or retraction to Spouses Viloria, who relied on good faith
concluded an agreement with Holiday Travel, whereby Holiday Travel would
on CAIs acts in recognition of Holiday Travels authority. Estoppel is primarily
enter into contracts of carriage with third persons on CAIs behalf. The third
based on the doctrine of good faith and the avoidance of harm that will befall an
element is also present as it is undisputed that Holiday Travel merely acted in a
innocent party due to its injurious reliance, the failure to apply it in this case
representative capacity and it is CAI and not Holiday Travel who is bound by
would result in gross travesty of justice.20 Estoppel bars CAI from making such
the contracts of carriage entered into by Holiday Travel on its behalf. The fourth
denial.

110
were subject to the company's control, the relationship between the company
As categorically provided under Article 1869 of the Civil Code, "[a]gency may be
and the dealer is one of agency, tested under the following criterion:
express, or implied from the acts of the principal, from his silence or lack of
action, or his failure to repudiate the agency, knowing that another person is
"The difficulty in distinguishing between contracts of sale and the creation of an
acting on his behalf without authority."
agency to sell has led to the establishment of rules by the application of which
this difficulty may be solved. The decisions say the transfer of title or agreement
Considering that the fundamental hallmarks of an agency are present, this Court
to transfer it for a price paid or promised is the essence of sale. If such transfer
finds it rather peculiar that the CA had branded the contractual relationship
puts the transferee in the attitude or position of an owner and makes him liable
between CAI and Holiday Travel as one of sale. The distinctions between a sale
to the transferor as a debtor for the agreed price, and not merely as an agent
and an agency are not difficult to discern and this Court, as early as 1970, had
who must account for the proceeds of a resale, the transaction is a sale; while
already formulated the guidelines that would aid in differentiating the two (2)
the essence of an agency to sell is the delivery to an agent, not as his property,
contracts. In Commissioner of Internal Revenue v. Constantino,21 this Court
but as the property of the principal, who remains the owner and has the right to
extrapolated that the primordial differentiating consideration between the two
control sales, fix the price, and terms, demand and receive the proceeds less the
(2) contracts is the transfer of ownership or title over the property subject of the
agent's commission upon sales made. 1 Mechem on Sales, Sec. 43; 1 Mechem on
contract. In an agency, the principal retains ownership and control over the
Agency, Sec. 48; Williston on Sales, 1; Tiedeman on Sales, 1." (Salisbury v. Brooks,
property and the agent merely acts on the principals behalf and under his
94 SE 117, 118-119)22
instructions in furtherance of the objectives for which the agency was

established. On the other hand, the contract is clearly a sale if the parties
As to how the CA have arrived at the conclusion that the contract between CAI
intended that the delivery of the property will effect a relinquishment of title,
and Holiday Travel is a sale is certainly confounding, considering that CAI is the
control and ownership in such a way that the recipient may do with the
one bound by the contracts of carriage embodied by the tickets being sold by
property as he pleases.
Holiday Travel on its behalf. It is undisputed that CAI and not Holiday Travel
who is the party to the contracts of carriage executed by Holiday Travel with
Since the company retained ownership of the goods, even as it delivered
third persons who desire to travel via Continental Airlines, and this conclusively
possession unto the dealer for resale to customers, the price and terms of which
indicates the existence of a principal-agent relationship. That the principal is

bound by all the obligations contracted by the agent within the scope of the

111
authority granted to him is clearly provided under Article 1910 of the Civil Code
employees and the contractual relationship between the airline company and its
and this constitutes the very notion of agency.
agent does not operate to create a juridical tie between the airline company and
its agents employees. Article 2180 of the Civil Code does not make the principal
II. In actions based on quasi-delict, a principal can only be held liable for the
tort committed by its agents employees if it has been established by
preponderance of evidence that the principal was also at fault or negligent or
vicariously liable for the tort committed by its agents employees and the
principal-agency relationship per se does not make the principal a party to such
tort; hence, the need to prove the principals own fault or negligence.
that the principal exercise control and supervision over them.

On the other hand, if the passengers cause of action for damages against the
Considering that Holiday Travel is CAIs agent, does it necessarily follow that
CAI is liable for the fault or negligence of Holiday Travels employees? Citing
China Air Lines, Ltd. v. Court of Appeals, et al.,23 CAI argues that it cannot be
held liable for the actions of the employee of its ticketing agent in the absence of
an employer-employee relationship.
airline company is based on contractual breach or culpa contractual, it is not

necessary that there be evidence of the airline companys fault or negligence. As
this Court previously stated in China Air Lines and reiterated in Air France vs.
Gillego,24 "in an action based on a breach of contract of carriage, the aggrieved
party does not have to prove that the common carrier was at fault or was
negligent. All that he has to prove is the existence of the contract and the fact of
its non-performance by the carrier."
An examination of this Courts pronouncements in China Air Lines will reveal

that an airline company is not completely exonerated from any liability for the
tort committed by its agents employees. A prior determination of the nature of
the passengers cause of action is necessary. If the passengers cause of action
against the airline company is premised on culpa aquiliana or quasi-delict for a
tort committed by the employee of the airline companys agent, there must be
Spouses Vilorias cause of action on the basis of Magers alleged fraudulent

misrepresentation is clearly one of tort or quasi-delict, there being no preexisting contractual relationship between them. Therefore, it was incumbent
upon Spouses Viloria to prove that CAI was equally at fault.
an independent showing that the airline company was at fault or negligent or

has contributed to the negligence or tortuous conduct committed by the
However, the records are devoid of any evidence by which CAIs alleged liability
employee of its agent. The mere fact that the employee of the airline companys
can be substantiated. Apart from their claim that CAI must be held liable for
agent has committed a tort is not sufficient to hold the airline company liable.
Magers supposed fraud because Holiday Travel is CAIs agent, Spouses Viloria
There is no vinculum juris between the airline company and its agents
did not present evidence that CAI was a party or had contributed to Magers

112
complained act either by instructing or authorizing Holiday Travel and Mager to
persons whose acts or omissions are imputable, by a legal fiction, to others who
issue the said misrepresentation.
are in a position to exercise an absolute or limited control over them. The

legislature which adopted our Civil Code has elected to limit extra-contractual
It may seem unjust at first glance that CAI would consider Spouses Viloria
bound by the terms and conditions of the subject contracts, which Mager
entered into with them on CAIs behalf, in order to deny Spouses Vilorias
request for a refund or Fernandos use of Lourdes ticket for the re-issuance of a
new one, and simultaneously claim that they are not bound by Magers
supposed misrepresentation for purposes of avoiding Spouses Vilorias claim for
damages and maintaining the validity of the subject contracts. It may likewise
liability with certain well-defined exceptions to cases in which moral

culpability can be directly imputed to the persons to be charged. This moral
responsibility may consist in having failed to exercise due care in one's own acts,
or in having failed to exercise due care in the selection and control of one's
agent or servants, or in the control of persons who, by reasons of their status,
occupy a position of dependency with respect to the person made liable for their
conduct.26 (emphasis supplied)
be argued that CAI cannot deny liability as it benefited from Magers acts, which
were performed in compliance with Holiday Travels obligations as CAIs agent.
It is incumbent upon Spouses Viloria to prove that CAI exercised control or

supervision over Mager by preponderant evidence. The existence of control or
However, a persons vicarious liability is anchored on his possession of control,

whether absolute or limited, on the tortfeasor. Without such control, there is
nothing which could justify extending the liability to a person other than the
supervision cannot be presumed and CAI is under no obligation to prove its

denial or nugatory assertion. Citing Belen v. Belen,27 this Court ruled in Jayme v.
Apostol,28 that:
one who committed the tort. As this Court explained in Cangco v. Manila
Railroad Co.:25
In Belen v. Belen, this Court ruled that it was enough for defendant to deny an
alleged employment relationship. The defendant is under no obligation to prove
With respect to extra-contractual obligation arising from negligence, whether of
the negative averment. This Court said:
act or omission, it is competent for the legislature to elect and our Legislature
has so elected to limit such liability to cases in which the person upon whom
"It is an old and well-settled rule of the courts that the burden of proving the
such an obligation is imposed is morally culpable or, on the contrary, for
action is upon the plaintiff, and that if he fails satisfactorily to show the facts
reasons of public policy, to extend that liability, without regard to the lack of
upon which he bases his claim, the defendant is under no obligation to prove his
moral culpability, so as to include responsibility for the negligence of those
exceptions. This [rule] is in harmony with the provisions of Section 297 of the

113
Code of Civil Procedure holding that each party must prove his own affirmative
is tantamount to seeking for an annulment of the subject contracts on the
allegations, etc."29 (citations omitted)
ground of vitiated consent.
Therefore, without a modicum of evidence that CAI exercised control over
Whether the subject contracts are annullable, this Court is required to
Holiday Travels employees or that CAI was equally at fault, no liability can be
determine whether Magers alleged misrepresentation constitutes causal fraud.
imposed on CAI for Magers supposed misrepresentation.
Similar to the dispute on the existence of an agency, whether fraud attended the
execution of a contract is factual in nature and this Court, as discussed above,
III. Even on the assumption that CAI may be held liable for the acts of Mager,
still, Spouses Viloria are not entitled to a refund. Magers statement cannot be
may scrutinize the records if the findings of the CA are contrary to those of the
RTC.
considered a causal fraud that would justify the annulment of the subject
contracts that would oblige CAI to indemnify Spouses Viloria and return the
Under Article 1338 of the Civil Code, there is fraud when, through insidious
money they paid for the subject tickets.
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. In
Article 1390, in relation to Article 1391 of the Civil Code, provides that if the
consent of the contracting parties was obtained through fraud, the contract is
considered voidable and may be annulled within four (4) years from the time of
the discovery of the fraud. Once a contract is annulled, the parties are obliged
under Article 1398 of the same Code to restore to each other the things subject
order that fraud may vitiate consent, it must be the causal (dolo causante), not
merely the incidental (dolo incidente), inducement to the making of the
contract.30 In Samson v. Court of Appeals,31 causal fraud was defined as "a
deception employed by one party prior to or simultaneous to the contract in
order to secure the consent of the other."32
matter of the contract, including their fruits and interest.

Also, fraud must be serious and its existence must be established by clear and
On the basis of the foregoing and given the allegation of Spouses Viloria that
Fernandos consent to the subject contracts was supposedly secured by Mager
convincing evidence. As ruled by this Court in Sierra v. Hon. Court of Appeals,

et al.,33 mere preponderance of evidence is not adequate:
through fraudulent means, it is plainly apparent that their demand for a refund
Fraud must also be discounted, for according to the Civil Code:

114
Art. 1338. There is fraud when, through insidious words or machinations of one
This Court finds the only proof of Magers alleged fraud, which is Fernandos
of the contracting parties, the other is induced to enter into a contract which
testimony that an Amtrak had assured him of the perennial availability of seats
without them, he would not have agreed to.
at Amtrak, to be wanting. As CAI correctly pointed out and as Fernando

admitted, it was possible that during the intervening period of three (3) weeks
Art. 1344. In order that fraud may make a contract voidable, it should be serious
and should not have been employed by both contracting parties.
from the time Fernando purchased the subject tickets to the time he talked to
said Amtrak employee, other passengers may have cancelled their bookings and
reservations with Amtrak, making it possible for Amtrak to accommodate them.
Indeed, the existence of fraud cannot be proved by mere speculations and
To quote Tolentino again, the "misrepresentation constituting the fraud must be
conjectures. Fraud is never lightly inferred; it is good faith that is. Under the
established by full, clear, and convincing evidence, and not merely by a
Rules of Court, it is presumed that "a person is innocent of crime or wrong" and
preponderance thereof. The deceit must be serious. The fraud is serious when it
that "private transactions have been fair and regular."35 Spouses Viloria failed to
is sufficient to impress, or to lead an ordinarily prudent person into error; that
overcome this presumption.
which cannot deceive a prudent person cannot be a ground for nullity. The
circumstances of each case should be considered, taking into account the
personal conditions of the victim."34
IV. Assuming the contrary, Spouses Viloria are nevertheless deemed to have
ratified the subject contracts.
After meticulously poring over the records, this Court finds that the fraud
alleged by Spouses Viloria has not been satisfactorily established as causal in
nature to warrant the annulment of the subject contracts. In fact, Spouses
Viloria failed to prove by clear and convincing evidence that Magers statement
was fraudulent. Specifically, Spouses Viloria failed to prove that (a) there were
Even assuming that Magers representation is causal fraud, the subject contracts
have been impliedly ratified when Spouses Viloria decided to exercise their right
to use the subject tickets for the purchase of new ones. Under Article 1392 of the
Civil Code, "ratification extinguishes the action to annul a voidable contract."
indeed available seats at Amtrak for a trip to New Jersey on August 13, 1997 at
the time they spoke with Mager on July 21, 1997; (b) Mager knew about this; and
Ratification of a voidable contract is defined under Article 1393 of the Civil Code
(c) that she purposely informed them otherwise.
as follows:

115
However, annulment under Article 1390 of the Civil Code and rescission under
Art. 1393. Ratification may be effected expressly or tacitly. It is understood that
Article 1191 are two (2) inconsistent remedies. In resolution, all the elements to
there is a tacit ratification if, with knowledge of the reason which renders the
make the contract valid are present; in annulment, one of the essential elements
contract voidable and such reason having ceased, the person who has a right to
to a formation of a contract, which is consent, is absent. In resolution, the defect
invoke it should execute an act which necessarily implies an intention to waive
is in the consummation stage of the contract when the parties are in the process
his right.
of performing their respective obligations; in annulment, the defect is already

present at the time of the negotiation and perfection stages of the contract.
Accordingly, by pursuing the remedy of rescission under Article 1191, the Vilorias
Implied ratification may take diverse forms, such as by silence or acquiescence;

by acts showing approval or adoption of the contract; or by acceptance and
retention of benefits flowing therefrom.36
had impliedly admitted the validity of the subject contracts, forfeiting their right
to demand their annulment. A party cannot rely on the contract and claim
rights or obligations under it and at the same time impugn its existence or
validity. Indeed, litigants are enjoined from taking inconsistent positions.39
Simultaneous with their demand for a refund on the ground of Fernandos

vitiated consent, Spouses Viloria likewise asked for a refund based on CAIs
V. Contracts cannot be rescinded for a slight or casual breach.
supposed bad faith in reneging on its undertaking to replace the subject tickets
with a round trip ticket from Manila to Los Angeles.
CAI cannot insist on the non-transferability of the subject tickets.
In doing so, Spouses Viloria are actually asking for a rescission of the subject
contracts based on contractual breach. Resolution, the action referred to in
Considering that the subject contracts are not annullable on the ground of
Article 1191, is based on the defendants breach of faith, a violation of the
vitiated consent, the next question is: "Do Spouses Viloria have the right to
reciprocity between the parties37 and in Solar Harvest, Inc. v. Davao Corrugated
rescind the contract on the ground of CAIs supposed breach of its undertaking
Carton Corporation,38 this Court ruled that a claim for a reimbursement in view
to issue new tickets upon surrender of the subject tickets?"
of the other partys failure to comply with his obligations under the contract is
one for rescission or resolution.
Article 1191, as presently worded, states:

116
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.
Clearly, there is nothing in the above-quoted section of CAIs letter from which
the restriction on the non-transferability of the subject tickets can be inferred.
The injured party may choose between the fulfilment and the rescission of the
In fact, the words used by CAI in its letter supports the position of Spouses
obligation, with the payment of damages in either case. He may also seek
Viloria, that each of them can use the ticket under their name for the purchase
rescission, even after he has chosen fulfillment, if the latter should become
of new tickets whether for themselves or for some other person.
impossible.
Moreover, as CAI admitted, it was only when Fernando had expressed his
The court shall decree the rescission claimed, unless there be just cause
interest to use the subject tickets for the purchase of a round trip ticket between
authorizing the fixing of a period.
Manila and Los Angeles that he was informed that he cannot use the ticket in
Lourdes name as payment.
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
Contrary to CAIs claim, that the subject tickets are non-transferable cannot be
Mortgage Law.
implied from a plain reading of the provision printed on the subject tickets
stating that "[t]o the extent not in conflict with the foregoing carriage and other
services performed by each carrier are subject to: (a) provisions contained in
According to Spouses Viloria, CAI acted in bad faith and breached the subject
contracts when it refused to apply the value of Lourdes ticket for Fernandos
purchase of a round trip ticket to Los Angeles and in requiring him to pay an
amount higher than the price fixed by other airline companies.
this ticket, x x x (iii) carriers conditions of carriage and related regulations

which are made part hereof (and are available on application at the offices of
carrier) x x x." As a common carrier whose business is imbued with public
interest, the exercise of extraordinary diligence requires CAI to inform Spouses
Viloria, or all of its passengers for that matter, of all the terms and conditions
In its March 24, 1998 letter, CAI stated that "non-refundable tickets may be used
governing their contract of carriage. CAI is proscribed from taking advantage of
as a form of payment toward the purchase of another Continental ticket for
any ambiguity in the contract of carriage to impute knowledge on its passengers
$75.00, per ticket, reissue fee ($50.00, per ticket, for tickets purchased prior to
of and demand compliance with a certain condition or undertaking that is not
October 30, 1997)."
clearly stipulated. Since the prohibition on transferability is not written on the

117
face of the subject tickets and CAI failed to inform Spouses Viloria thereof, CAI
albeit under her name and for her exclusive use. In other words, CAIs
cannot refuse to apply the value of Lourdes ticket as payment for Fernandos
willingness to comply with its undertaking under its March 24, 1998 cannot be
purchase of a new ticket.
doubted, albeit tainted with its erroneous insistence that Lourdes ticket is nontransferable.
CAIs refusal to accept Lourdes ticket for the purchase of a new ticket for
Fernando is only a casual breach.
Moreover, Spouses Vilorias demand for rescission cannot prosper as CAI cannot
be solely faulted for the fact that their agreement failed to consummate and no
Nonetheless, the right to rescind a contract for non-performance of its

stipulations is not absolute. The general rule is that rescission of a contract will
not be permitted for a slight or casual breach, but only for such substantial and
fundamental violations as would defeat the very object of the parties in making
the agreement.40 Whether a breach is substantial is largely determined by the
attendant circumstances.41
new ticket was issued to Fernando. Spouses Viloria have no right to insist that a
single round trip ticket between Manila and Los Angeles should be priced at
around $856.00 and refuse to pay the difference between the price of the subject
tickets and the amount fixed by CAI. The petitioners failed to allege, much less
prove, that CAI had obliged itself to issue to them tickets for any flight
anywhere in the world upon their surrender of the subject tickets. In its March
24, 1998 letter, it was clearly stated that "[n]on-refundable tickets may be used
as a form of payment toward the purchase of another Continental ticket"42 and
While CAIs refusal to allow Fernando to use the value of Lourdes ticket as
there is nothing in it suggesting that CAI had obliged itself to protect Spouses
payment for the purchase of a new ticket is unjustified as the non-transferability
Viloria from any fluctuation in the prices of tickets or that the surrender of the
of the subject tickets was not clearly stipulated, it cannot, however be
subject tickets will be considered as full payment for any ticket that the
considered substantial. The endorsability of the subject tickets is not an
petitioners intend to buy regardless of actual price and destination. The CA was
essential part of the underlying contracts and CAIs failure to comply is not
correct in holding that it is CAIs right and exclusive prerogative to fix the prices
essential to its fulfillment of its undertaking to issue new tickets upon Spouses
for its services and it may not be compelled to observe and maintain the prices
Vilorias surrender of the subject tickets. This Court takes note of CAIs
of other airline companies.43
willingness to perform its principal obligation and this is to apply the price of
the ticket in Fernandos name to the price of the round trip ticket between
Manila and Los Angeles. CAI was likewise willing to accept the ticket in Lourdes
name as full or partial payment as the case may be for the purchase of any ticket,
The conflict as to the endorsability of the subject tickets is an altogether

different matter, which does not preclude CAI from fixing the price of a round

118
trip ticket between Manila and Los Angeles in an amount it deems proper and
of the subject contracts and they are therefore bound to their respective
which does not provide Spouses Viloria an excuse not to pay such price, albeit
obligations thereunder. As the 1st sentence of Article 1192 provides:
subject to a reduction coming from the value of the subject tickets. It cannot be
denied that Spouses Viloria had the concomitant obligation to pay whatever is
not covered by the value of the subject tickets whether or not the subject tickets
are transferable or not.1avvphi1
Art. 1192. In case both parties have committed a breach of the obligation, the
liability of the first infractor shall be equitably tempered by the courts. If it
cannot be determined which of the parties first violated the contract, the same
shall be deemed extinguished, and each shall bear his own damages. (emphasis
There is also no showing that Spouses Viloria were discriminated against in bad
supplied)
faith by being charged with a higher rate. The only evidence the petitioners
presented to prove that the price of a round trip ticket between Manila and Los
Angeles at that time was only $856.00 is a newspaper advertisement for another
airline company, which is inadmissible for being "hearsay evidence, twice
removed." Newspaper clippings are hearsay if they were offered for the purpose
of proving the truth of the matter alleged. As ruled in Feria v. Court of
Appeals,:44
Therefore, CAIs liability for damages for its refusal to accept Lourdes ticket for
the purchase of Fernandos round trip ticket is offset by Spouses Vilorias
liability for their refusal to pay the amount, which is not covered by the subject
tickets. Moreover, the contract between them remains, hence, CAI is duty
bound to issue new tickets for a destination chosen by Spouses Viloria upon
their surrender of the subject tickets and Spouses Viloria are obliged to pay
whatever amount is not covered by the value of the subject tickets.
[N]ewspaper articles amount to "hearsay evidence, twice removed" and are

therefore not only inadmissible but without any probative value at all whether
objected to or not, unless offered for a purpose other than proving the truth of
This Court made a similar ruling in Central Bank of the Philippines v. Court of
Appeals.46 Thus:
the matter asserted. In this case, the news article is admissible only as evidence
that such publication does exist with the tenor of the news therein stated.45
(citations omitted)
Since both parties were in default in the performance of their respective

reciprocal obligations, that is, Island Savings Bank failed to comply with its
obligation to furnish the entire loan and Sulpicio M. Tolentino failed to comply
The records of this case demonstrate that both parties were equally in default;
hence, none of them can seek judicial redress for the cancellation or resolution

119
with his obligation to pay his P17,000.00 debt within 3 years as stipulated, they
are both liable for damages.
_____________________________________________________________________
Proverbs 3:5-6 - Trust in the LORD with all your heart and lean not on your own
Article 1192 of the Civil Code provides that in case both parties have committed
understanding; in all your ways submit to him, and he will make your paths
a breach of their reciprocal obligations, the liability of the first infractor shall be
straight.
equitably tempered by the courts. WE rule that the liability of Island Savings
Bank for damages in not furnishing the entire loan is offset by the liability of
Sulpicio M. Tolentino for damages, in the form of penalties and surcharges, for
not paying his overdue P17,000.00 debt. x x x.47
Another consideration that militates against the propriety of holding CAI liable
for moral damages is the absence of a showing that the latter acted fraudulently
and in bad faith. Article 2220 of the Civil Code requires evidence of bad faith
and fraud and moral damages are generally not recoverable in culpa contractual
except when bad faith had been proven.48 The award of exemplary damages is
likewise not warranted. Apart from the requirement that the defendant acted in
a wanton, oppressive and malevolent manner, the claimant must prove his
entitlement to moral damages.49
WHEREFORE, premises considered, the instant Petition is DENIED.
SO ORDERED.

120
20714 and raffled to Branch 76, for rescission of contract with damages. In his
UNENFORCEABLE CONTRACTS
complaint, respondent contended that he was entitled to rescind the contract,

plus damages, and to be released from further commitment to work exclusively
REGAL FILMS vs. CONCEPCION [G.R. No. 139532. August 9, 2001]13
for petitioner owing to the latters failure to honor the agreement.

Instead of filing an answer to the complaint, petitioner moved for its dismissal
The case involves a compromise judgment issued by the Regional Trial Court of
Quezon City, later affirmed by the Court of Appeals, and now being assailed in
the instant petition for review.
on
the
allegation
that
the
parties
had
settled
their
differences
amicably. Petitioner averred that both parties had executed an agreement,

dated 17 June 1994, which was to so operate as an addendum to the 1991 and 1993
contracts between them. The agreement was signed by a representative of
Culled from the records, the facts that led to the controversy would not appear
to be in serious dispute.
In 1991, respondent Gabriel "Gabby" Concepcion, a television artist and movie
actor, through his manager Lolita Solis, entered into a contract with petitioner
Regal Films, Inc., for services to be rendered by respondent in petitioners
petitioner and by Solis purportedly acting for and in behalf of respondent

Concepcion.
The preliminary conference held by the trial court failed to produce a settlement
between the parties; thereupon, the trial court ordered Solis and respondent to
comment on petitioner's motion to dismiss.
motion pictures. Petitioner, in turn, undertook to give two parcels of land to

respondent, one located in Marikina and the other in Cavite, on top of the
talent fees it had agreed to pay.
On 30 September 1994, Solis filed a motion to dismiss the complaint reiterating

that she, acting for herself and for respondent Concepcion, had already settled
the case amicably with petitioner. On 17 October 1994, respondent Concepcion
In 1993, the parties renewed the contract, incorporating the same undertaking
on the part of petitioner to give respondent the two parcels of land mentioned
in the first agreement. Despite the appearance of respondent in several films
produced by petitioner, the latter failed to comply with its promise to convey to
himself opposed the motion to dismiss contending that the addendum,

containing provisions grossly disadvantageous to him, was executed without his
knowledge and consent. Respondent stated that Solis had since ceased to be his
manager and had no authority to sign the addendum for him.
respondent the two aforementioned lots.

During the preliminary conference held on 23 June 1995, petitioner intimated to
On 30 May 1994, respondent and his manager filed an action against petitioner
before the Regional Trial Court of Quezon City, docketed Civil Case No. Q-94-
respondent and his counsel its willingness to allow respondent to be released

from his 1991 and 1993 contracts with petitioner rather than to further pursue
the addendum which respondent had challenged.
13 Unenforceable Contracts

121
On 03 July 1995, respondent filed a manifestation with the trial court to the
Concepcion's Manifestation, that after the 1995 Metro Manila Films Festival
effect that he was now willing to honor the addendum to the 1991 and 1993
scam/fiasco in which Concepcion was involved, the relationship between the
contracts and to have it considered as a compromise agreement as to warrant a
parties had become bitter to render compliance with the terms and conditions
judgment in accordance therewith. The manifestation elicited a comment from
of the Addendum no longer possible and consequently release Concepcion from
both petitioner and Solis to the effect that the relationship between the parties
the 1991 and 1993 contracts."
had by then become strained, following the notorious Manila Film Festival scam
Dissatisfied, petitioner appealed to this Court claiming in its petition for review
involving respondent, but that it was still willing to release respondent from his
that -
contract.
On 24 October 1995, the trial court issued an order rendering judgment on
compromise based on the subject addendum which respondent had previously
challenged but later agreed to honor pursuant to his manifestation of 03 July
1995.
Petitioner moved for reconsideration; having been denied, it then elevated the
case to the Court of Appeals arguing that the trial court erred in treating
[1]
"I.
THE COURT OF APPEALS ERRED IN AFFIRMING THE TRIAL COURT'S
ACTION IN RENDERING JUDGMENT ON A COMPROMISE BASED ON THE
ADDENDUM
WHEN
PETITIONER
REGAL
FILMS
SUBMITTED
THIS
DOCUMENT TO THE TRIAL COURT MERELY TO SERVE AS BASIS FOR ITS

MOTION TO DISMISS;
II.
the addendum of 17 June 1994 as being a compromise agreement and in

depriving it of its right to procedural due process.
THE COURT OF APPEALS ERRED IN RENDERING JUDGMENT ON A

COMPROMISE WHEN THE PARTIES DID NOT AGREE TO SUCH A
On 30 July 1999, the appellate court rendered judgment affirming the order of
COMPROMISE;
the trial court of 24 October 1995; it ruled:

III.
"In the instant case, there was an Addendum to the contract signed by Lolita
and Regal Films' representative to which addendum Concepcion through his
Manifestation expressed his conformity. There was, therefore, consent of all the
parties.
The addendum/compromise agreement was perfected and is binding on the
THE COURT OF APPEALS ERRED IN HOLDING THAT THE MINDS OF THE

PARTIES HAD MET TO ELEVATE THE PREVIOUSLY REJECTED ADDENDUM
TO THE LEVEL OF A JUDGMENT ON A COMPROMISE."
[2]
The petition is meritorious.
parties and may not later be disowned simply because of a change of mind of
Petitioner argues that the subject addendum could not be the basis of the
Regal Films and/or Lolita by claiming, in their Opposition/Reply to
compromise judgment. The Court agrees.

122
A compromise is an agreement between two or more persons who, for
susceptible to ratification by the person on whose behalf it was executed? The
preventing or putting an end to a lawsuit, adjust their respective positions by
answer would obviously be in the affirmative; however, that ratification should
mutual consent in the way they feel they can live with. Reciprocal concessions
be made before its revocation by the other contracting party.
are the very heart and life of every compromise agreement,
[3]
[8]
The adamant
where each party
refusal of respondent to accept the terms of the addendum constrained
approximates and concedes in the hope of gaining balanced by the danger of
petitioner, during the preliminary conference held on 23 June 1995, to instead
[4]
losing.
It is, in essence, a contract. Law and jurisprudence recite three
express its willingness to release respondent from his contracts prayed for in his
minimum elements for any valid contract - (a) consent; (b) object certain which
complaint and to thereby forego the rejected addendum. Respondent's
is the subject matter of the contract; and (c) cause of the obligation which is
subsequent attempt to ratify the addendum came much too late for, by then,
established.
[5]
Consent is manifested by the meeting of the offer and the
the addendum had already been deemed revoked by petitioner.
acceptance upon the thing and the cause which are to constitute the
WHEREFORE, the petition is GRANTED, and the appealed judgment of the
agreement. The offer, however, must be certain and the acceptance seasonable
Court of Appeals affirming that of the trial court is SET ASIDE, and the case is
and absolute; if qualified, the acceptance would merely constitute a counter-
remanded to the trial court for further proceedings. No costs.
offer.
[6]
SO ORDERED.
In this instance, the addendum was flatly rejected by respondent on the theses
(a) that he did not give his consent thereto nor authorized anyone to enter into
the agreement, and (b) that it contained provisions grossly disadvantageous to
him. The outright rejection of the addendum made known to the other ended
the offer. When respondent later filed his Manifestation, stating that he was,
after all, willing to honor the addendum, there was nothing to still accept.
Verily, consent could be given not only by the party himself but by anyone duly
authorized and acting for and in his behalf. But by respondent's own admission,
the addendum was entered into without his knowledge and consent. A contract
entered into in the name of another by one who ostensibly might have but who,
in reality, had no real authority or legal representation, or who, having such
authority, acted beyond his powers, would be unenforceable.
[7]
The addendum,
let us then assume, resulted in an unenforceable contract, might it not then be

LITONJUA vs. FERNANDEZ [G.R. No. 148116. April 14, 2004]14
123
In the afternoon of November 27, 1995, the petitioners met with respondent
Fernandez
and
the
[6]
two
brokers
at
the
petitioners
office
This is a petition for review on certiorari of the Decision of the Court of
in Mandaluyong City.
Appeals in CA-G.R. CV No. 64940, which reversed and set aside the June 23,
the petitioners would buy the property consisting of 36,742 square meters, for
[1]
The petitioners and respondent Fernandez agreed that
of the Regional Trial Court of Pasig City, Branch 68, in Civil
the price of P150 per square meter, or the total sum of P5,098,500. They also
Case No. 65629, as well as its Resolution dated April 30, 2001 denying the
agreed that the owners would shoulder the capital gains tax, transfer tax and the
petitioners motion for reconsideration of the aforesaid decision.
expenses for the documentation of the sale. The petitioners and respondent
1999 Decision
[2]
The heirs of Domingo B. Ticzon
[3]
are the owners of a parcel of land located
in San Pablo City, covered by Transfer Certificate of Title (TCT) No. T-36766 of
[4]
the Register of Deeds of San Pablo City.
On the other hand, the heirs of Paz
Ticzon Eleosida, represented by Gregorio T. Eleosida, are the owners of a parcel

of land located in San Pablo City, covered by TCT No. 36754, also of the Register
of Deeds of San Pablo City.
[5]
Fernandez also agreed to meet on December 8, 1995 to finalize the sale. It was
also agreed upon that on the said date, respondent Fernandez would present a
special power of attorney executed by the owners of the property, authorizing
her to sell the property for and in their behalf, and to execute a deed of absolute
sale thereon. The petitioners would also remit the purchase price to the owners,
through respondent Fernandez. However, only Agapito Fisico attended the
meeting. He informed the petitioners that respondent Fernandez was
The Case for the Petitioners
encountering some problems with the tenants and was trying to work out a
[7]
Sometime in September 1995, Mrs. Lourdes Alimario and Agapito Fisico who
settlement with them.
worked as brokers, offered to sell to the petitioners, Antonio K. Litonjua and
respondent Fernandez on January 5, 1995, demanding that their transaction be
Aurelio K. Litonjua, Jr., the parcels of land covered by TCT Nos. 36754 and
finalized by January 30, 1996.
36766. The petitioners were shown a locator plan and copies of the titles
showing that the owners of the properties were represented by Mary Mediatrix
Fernandez and Gregorio T. Eleosida, respectively. The brokers told the
petitioners that they were authorized by respondent Fernandez to offer the
property for sale. The petitioners, thereafter, made two ocular inspections of
the property, in the course of which they saw some people gathering coconuts.
After a few weeks of waiting, the petitioners wrote

[8]
When the petitioners received no response from respondent Fernandez, the

petitioners sent her another Letter
[9]
dated February 1, 1996, asking that the
Deed of Absolute Sale covering the property be executed in accordance with

their verbal agreement dated November 27, 1995. The petitioners also
demanded the turnover of the subject properties to them within fifteen days
from receipt of the said letter; otherwise, they would have no option but to
protect their interest through legal means.

Upon receipt of the above letter, respondent Fernandez wrote the petitioners
on February 14, 1996
[10]
and clarified her stand on the matter in this wise:
124
In view thereof, I regret to formally inform you now that we are no longer
selling the property until all problems are fully settled. We have not demanded
1) It is not true I agreed to shoulder registration fees and other miscellaneous
and received from you any earnest money, thereby, no obligations exist. In the
expenses, etc. I do not recall we ever discussed about them. Nonetheless, I
meantime, we hope that in the future we will eventually be able to transact
made an assurance at that time that there was no liens/encumbrances and
business since we still have other properties in San Pablo City.
tenants on my property (TCT 36755).
Appended thereto was a copy of respondent Fernandez letter to the petitioners
2) It is not true that we agreed to meet on December 8, 1995 in order to sign the
dated January 16, 1996, in response to the latters January 5, 1996 letter.
Deed of Absolute Sale. The truth of the matter is that you were the one who
On April 12, 1996, the petitioners filed the instant Complaint for specific
emphatically stated that you would prepare a Contract to Sell and requested us
performance with damages
to come back first week of December as you would be leaving the country
owners of the property. In their complaint, the petitioners alleged, inter alia,
then. In fact, what you were demanding from us was to apprise you of the
the following:
status of the property, whether we would be able to ascertain that there are
4.
really no tenants. Ms. Alimario and I left your office, but we did not assure you
parcels of land covered by Transfer Certificates of Title Nos. 36766 and 36754
that we would be back on the first week of December.
measuring a total of 36,742 square meters in Barrio Concepcion, San Pablo City.
Unfortunately, some people suddenly appeared and claiming to be tenants for
After a brief negotiation, defendants committed and specifically agreed to sell
the entire properties (including those belonging to my other relatives.) Another
to plaintiffs 33,990 square meters of the two (2) aforementioned parcels of land
thing, the Barangay Captain now refuses to give a certification that our
at P150.00 per square meter.
properties are not tenanted.
5.
Thereafter, I informed my broker, Ms. Lulu Alimario, to relay to Mr. Agapito
(a)
that due to the appearance of alleged tenants who are demanding for a one-
subject property in plaintiffs names would be for defendants account.
hectare share, my cousin and I have thereby changed our mind and that the sale
will no longer push through. I specifically instructed her to inform you thru
your broker that we will not be attending the meeting to be held sometime first
week of December.
[11]
(b)
[13]
[12]
against respondent Fernandez and the registered
On 27 November 1995, defendants offered to sell to plaintiffs two (2)
The parties also unequivocally agreed to the following:

The transfer tax and all the other fees and expenses for the titling of the
The plaintiffs would pay the entire purchase price of P5,098,500.00 for
the aforementioned 33,990 square meters of land in plaintiffs office on 8

December 1995.

6.
125
Defendants repeatedly assured plaintiffs that the two (2) subject parcels of
manufacture of construction materials. Consequently, by reason of defendants
land were free from all liens and encumbrances and that no squatters or tenants
failure to honor their just obligations, plaintiffs suffered, and continue to suffer,
occupied them.
actual damages, consisting in unrealized profits and cost of money, in the
7.
amount of at least P5 Million.
Plaintiffs, true to their word, and relying in good faith on the commitment
of defendants, pursued the purchase of the subject parcels of lands. On 5
12.
January 1996, plaintiffs sent a letter of even date to defendants, setting the
defendants fraudulent actuations for which reason defendants are liable to
date of sale and payment on 30 January 1996.
plaintiffs for moral damages in the amount of at least P1.5 Million.
7.1
Defendants received the letter on 12 January 1996 but did not reply to it.
13.
8.
On 1 February 1996, plaintiffs again sent a letter of even date to defendants
demanding execution of the Deed of Sale.

8.1
Defendants received the same on 6 February 1996. Again, there was no
reply. Defendants thus reneged on their commitment a second time.
Plaintiffs also suffered sleepless nights and mental anxiety on account of
By reason of defendants above-described fraudulent actuations, plaintiffs,
despite their willingness and ability to pay the agreed purchase price, have to
date
been
unable
to
take
delivery
of
the
title
to
the
subject
property. Defendants acted in a wanton, fraudulent and malevolent manner in

violating the contract to sell. By way of example or correction for the public
good, defendants are liable to plaintiff for exemplary damages in the amount
9.
On 14 February 1996, defendant Fernandez sent a written communication
of P500,000.00.
of the same date to plaintiffs enclosing therein a copy of her 16 January

1996 letter to plaintiffs which plaintiffs never received before. Defendant
Fernandez stated in her 16 January 1996 letter that despite the meeting of minds
among the parties over the 33,990 square meters of land for P150.00 per square
14.
Defendants bad faith and refusal to honor their just obligations to
plaintiffs constrained the latter to litigate and to engage the services of

undersigned counsel for a fee in the amount of at least P250,000.00.
[14]
meter on 27 November 1995, defendants suddenly had a change of heart and no
The petitioners prayed that, after due hearing, judgment be rendered in their
longer wished to sell the same. Paragraph 6 thereof unquestionably shows
favor ordering the respondents to
defendants previous agreement as above-mentioned and their unjustified
(a)
breach of their obligations under it.
government agencies that will enable defendants to comply with their
10.
obligations under the Contract to Sell;
Defendants cannot unilaterally, whimsically and capriciously cancel a
Secure at defendants expense all clearances from the appropriate
perfected contract to sell.
(b)
Execute a Contract to Sell with terms agreed upon by the parties;
11.
(c)
Solidarily pay the plaintiffs the following amounts:
Plaintiffs intended to use the subject property for their subdivision project
to support plaintiffs quarry operations, processing of aggregate products and

126
1.
P5,000,000.00 in actual damages;
respondents breached the said contract to sell; and (3) the corollary issue of
2.
P1,500,000.00 in moral damages;
damages.
3.
P500,000.00 in exemplary damages;
Respondent Fernandez testified that she requested Lourdes Alimario to look for
4.
P250,000.00 in attorneys fees.
[19]
a buyer of the properties in San Pablo City on a best offer basis. She was later
[15]
On July 5, 1996, respondent Fernandez filed her Answer to the complaint.
[16]
informed by Alimario that the petitioners were interested to buy the

She
claimed that while the petitioners offered to buy the property during the
meeting of November 27, 1995, she did not accept the offer; thus, no verbal
contract to sell was ever perfected. She specifically alleged that the said contract
to sell was unenforceable for failure to comply with the statute of frauds. She
also maintained that even assuming arguendo that she had, indeed, made a
commitment or promise to sell the property to the petitioners, the same was not
binding upon her in the absence of any consideration distinct and separate from
the price. She, thus, prayed that judgment be rendered as follows:
properties. On November 27, 1995, along with Alimario and another person, she
met with the petitioners in the latters office and told them that she was at the
conference merely to hear their offer, that she could not bind the owners of the
properties as she had no written authority to sell the same. The petitioners
offered to buy the property at P150 per square meter. After the meeting,
respondent Fernandez requested Joy Marquez to secure a barangay clearance
stating that the property was free of any tenants. She was surprised to learn that
the clearance could not be secured. She contacted a cousin of hers, also one of
the owners of the property, and informed him that there was a prospective
1.
Dismissing the Complaint, with costs against the plaintiffs;
buyer of the property but that there were tenants thereon. Her cousin told her
2.
On the COUNTERCLAIM, ordering plaintiffs to pay defendant moral
that he was not selling his share of the property and that he was not agreeable to
damages in the amount of not less than P2,000,000.00 and exemplary damages
the price of P150 per square meter. She no longer informed the other owners of
in the amount of not less than P500,000.00 and attorneys fees and
the petitioners offer. Respondent Fernandez then asked Alimario to apprise the
reimbursement expenses of litigation in the amount of P300,000.00.
[17]
On September 24, 1997, the trial court, upon motion of the petitioners, declared
the other respondents in default for failure to file their responsive pleading
within the reglementary period.
[18]
At the pre-trial conference held on March 2,
1998, the parties agreed that the following issues were to be resolved by the trial
court: (1) whether or not there was a perfected contract to sell; (2) in the event
that there was, indeed, a perfected contract to sell, whether or not the
petitioners of the foregoing developments, through their agent, Agapito

Fisico. She was surprised to receive a letter from the petitioners dated January 5,
1996. Nonetheless, she informed the petitioners that she had changed her mind
in pursuing the negotiations in a Letter dated January 18, 1996. When she
received
petitioners February
1,
1996 Letter,
she
sent
Reply-Letter
dated February 14, 1996.

After trial on the merits, the trial court rendered judgment in favor of the
petitioners on June 23, 1999,
[20]
the dispositive portion of which reads:

WHEREFORE, in view of the foregoing, the Court hereby renders judgment in
CONFIRMATION
favor of plaintiffs ANTONIO K. LITONJUA and AURELIO K. LITONJUA and
WRITTEN EVIDENCE THEREOF.
against defendants MARY MEDIATRIX T. FERNANDEZ, HEIRS OF PAZ
IV. THE LOWER COURT ERRED IN NOT HOLDING THAT A SPECIAL
TICZON ELEOSIDA, represented by GREGORIO T. ELEOSIDA, JOHN DOES
POWER OF ATTORNEY WAS REQUIRED IN ORDER THAT DEFENDANT-
and JANE DOES; HEIRS OF DOMINGO B. TICZON, represented by MARY
APPELLANT FERNANDEZ COULD NEGOTIATE THE SALE ON BEHALF OF
MEDIATRIX T. FERNANDEZ, CRISTETA TICZON, EVANGELINE JILL R.
THE OTHER REGISTERED CO-OWNERS OF THE TWO LOTS.
TICZON, ERLINDA T. BENITEZ, DOMINIC TICZON, JOSEFINA LUISA

PIAMONTE, JOHN DOES and JANE DOES, ordering defendants to:
1.
execute a Contract of Sale and/or Absolute Deed of Sale with the terms
agreed upon by the parties and to secure all clearances from the concerned
government agencies and removal of any tenants from the subject property at
their expense to enable defendants to comply with their obligations under the
perfected agreement to sell; and
2.
THE
PERFECTEDSALE AND
CONSTITUTED
AS
V. THE LOWER COURT ERRED IN AWARDING ATTORNEYS FEES IN THE

DISPOSITIVE PORTION OF THE DECISION WITHOUT STATING THE BASIS
IN THE TEXT OF SAID DECISION.
[22]
On February 28, 2001, the appellate court promulgated its decision reversing
and setting aside the judgment of the trial court and dismissing the petitioners
complaint, as well as the respondents counterclaim.
[23]
The appellate court
ruled that the petitioners failed to prove that a sale or a contract to sell over the
pay to plaintiffs the sum of Two Hundred Thousand (P200,000.00)
Pesos as and by way of attorneys fees.
OF
127
property between the petitioners and the private respondent had been perfected.
[21]
On appeal to the Court of Appeals, the respondents ascribed the following

errors to the court a quo:
I. THE LOWER COURT ERRED IN HOLDING THAT THERE WAS A
PERFECTED CONTRACT OF SALE OF THE TWO LOTS ON NOVEMBER 27,
Hence, the instant petition for review on certiorari under Rule 45 of the Revised
Rules of Court.
The petitioners submit the following issues for the Courts resolution:
A. WHETHER
OR
NOT
THERE
WAS
PERFECTED
CONTRACT
OF SALE BETWEEN THE PARTIES.
1995.
B. WHETHER OR NOT THE CONTRACT FALLS UNDER THE COVERAGE OF
II. THE LOWER COURT ERRED IN NOT HOLDING THAT THE VERBAL
THE STATUTE OF FRAUDS.
CONTRACT OF SALE AS CLAIMED BY PLAINTIFFS-APPELLEES ANTONIO

LITONJUA AND AURELIO LITONJUA WAS UNENFORCEABLE.
C. WHETHER OR NOT THE DEFENDANTS DECLARED IN DEFAULT ARE

BENEFITED BY THE ASSAILED DECISION OF THE COURT OF APPEALS.
III. THE LOWER COURT ERRED IN HOLDING THAT THE LETTER OF

DEFENDANT-APPELLANT FERNANDEZ DATED JANUARY 16, 1996 WAS A
The petition has no merit.
[24]

128
The general rule is that the Courts jurisdiction under Rule 45 of the Rules of
The petitioners argue that the letter is a sufficient note or memorandum of the
Court is limited to the review of errors of law committed by the appellate
perfected contract, thus, removing it from the coverage of the statute of
court. As the findings of fact of the appellate court are deemed continued, this
frauds. The letter specifically makes reference to a sale which respondent
Court is not duty-bound to analyze and calibrate all over again the evidence
Fernandez agreed to initially, but which the latter withdrew because of the
[25]
adduced by the parties in the court a quo.
This rule, however, is not without
emergence of some people who claimed to be tenants on both parcels of
exceptions, such as where the factual findings of the Court of Appeals and the
land. According to the petitioners, the respondents-owners, in their answer to
trial court are conflicting or contradictory.
[26]
Indeed, in this case, the findings of
the complaint, as well as respondent Fernandez when she testified, admitted the
the trial court and its conclusion based on the said findings contradict those of
authenticity and due execution of the said letter. Besides, when the petitioner
the appellate court. However, upon careful review of the records of this case, we
Antonio Litonjua testified on the contract of sale entered into between
find no justification to grant the petition. We, thus, affirm the decision of the
themselves
appellate court.
thereto. Consequently, the respondents-owners thereby ratified the said
On the first and second assignment of errors, the petitioners assert that there
contract of sale. The petitioners thus contend that the appellate courts
was a perfected contract of sale between the petitioners as buyers and the
declaration that there was no perfected contract of sale between the petitioners
respondents-owners, through respondent Fernandez, as sellers. The petitioners
and the respondents-owners is belied by the evidence, the pleadings of the
contend that the perfection of the said contract is evidenced by the January 16,
parties, and the law.
1996 Letter of respondent Fernandez.
[27]
The pertinent portions of the said letter
and
the
respondents-owners,
the
latter
did
not
object
The petitioners contention is bereft of merit. In its decision, the appellate court
are as follows:
ruled that the Letter of respondent Fernandez dated January 16, 1996 is hardly
[M]y cousin and I have thereby changed our mind and that the sale will
the note or memorandum contemplated under Article 1403(2)(e) of the New
no longer push through. I specifically instructed her to inform you thru your
Civil Code, which reads:
broker that we will not be attending the meeting to be held sometime first week
of December.
In view thereof, I regret to formally inform you now that we are no longer
(2)
selling the property until all problems are fully settled. We have not demanded
number. In the following cases an agreement hereafter made shall be
and received from you any earnest money, thereby, no obligations exist
[28]
Those that do not comply with the Statute of Frauds as set forth in this

thereof, be in writing, and subscribed by the party charged, or by his agent;

129
evidence, therefore, of the agreement cannot be received without the writing, or
the subject letter stating that we are no longer selling the property until all
secondary evidence of its contents:
problems are fully settled. To read a definite previous agreement for the sale of
the property in favor of plaintiffs-appellees into the contents of this letter is to
(e)
An agreement for the leasing for a longer period than one year, or for
unduly restrict the freedom of the contracting parties to negotiate and prejudice
the right of every property owner to secure the best possible offer and terms in
[29]
the sale of real property or of an interest therein.
such sale transactions. We believe, therefore, that the trial court committed a
The appellate court based its ruling on the following disquisitions:
reversible error in finding that there was a perfected contract of sale or contract
In the case at bar, the letter dated January 16, 1996 of defendant-appellant can
to sell under the foregoing circumstances. Hence, the defendant-appellant may
hardly be said to constitute the note or memorandum evidencing the agreement
not be held liable in this action for specific performance with damages.
of the parties to enter into a contract of sale as it is very clear that defendantappellant as seller did not accept the condition that she will be the one to pay
the registration fees and miscellaneous expenses and therein also categorically
denied she had already committed to execute the deed of sale as claimed by the
plaintiffs-appellees. The letter, in fact, stated the reasons beyond the control of
the defendant-appellant, why the sale could no longer push through because
of the problem with tenants. The trial court zeroed in on the statement of the
defendant-appellant that she and her cousin changed their minds, thereby
concluding that defendant-appellant had unilaterally cancelled the sale or
backed out of her previous commitment. However, the tenor of the letter
actually reveals a consistent denial that there was any such commitment on the
part
of
defendant-appellant
to
sell
the
subject
lands
to
plaintiffs-
appellees. When defendant-appellant used the words changed our mind, she
was clearly referring to the decision to sell the property at all (not necessarily to
plaintiffs-appellees) and not in selling the property to herein plaintiffs-appellees
as defendant-appellant had not yet made the final decision to sell the property to
said plaintiffs-appellees. This conclusion is buttressed by the last paragraph of
[31]
In Rosencor Development Corporation vs. Court of Appeals,
[30]
the term statute
of frauds is descriptive of statutes which require certain classes of contracts to

be in writing. The statute does not deprive the parties of the right to contract
with respect to the matters therein involved, but merely regulates the
formalities of the contract necessary to render it enforceable. The purpose of
the statute is to prevent fraud and perjury in the enforcement of obligations,
depending for their existence on the unassisted memory of witnesses, by
requiring certain enumerated contracts and transactions to be evidenced by a
writing signed by the party to be charged. The statute is satisfied or, as it is
often stated, a contract or bargain is taken within the statute by making and
executing a note or memorandum of the contract which is sufficient to state the
requirements of the statute.
[32]
The application of such statute presupposes the
existence of a perfected contract. However, for a note or memorandum to satisfy

the statute, it must be complete in itself and cannot rest partly in writing and
partly in parol. The note or memorandum must contain the names of the
parties, the terms and conditions of the contract and a description of the
property sufficient to render it capable of identification.
[33]
Such note or

130
memorandum must contain the essential elements of the contract expressed
that she promised to present to the petitioners on December 8, 1996 a written
with certainty that may be ascertained from the note or memorandum itself, or
authority to sell the properties.
some other writing to which it refers or within which it is connected, without
respondent Fernandez when she testified, thus:
resorting to parol evidence.
[34]
To be binding on the persons to be charged, such
note or memorandum must be signed by the said party or by his agent duly
[35]
authorized in writing.
[43]
However, the petitioners claim was belied by
Madam Witness, what else did you tell to the plaintiffs?
I told them that I was there representing myself as one of the owners of the
properties, and I was just there to listen to his proposal because that time, we
[36]
In City of Cebu v. Heirs of Rubi,
we held that the exchange of written
were just looking for the best offer and I did not have yet any written authorities
correspondence between the parties may constitute sufficient writing to
from my brother and sisters and relatives. I cannot agree on anything yet since
evidence the agreement for purposes of complying with the statute of frauds.
it is just a preliminary meeting, and so, I have to secure authorities and relate
In this case, we agree with the findings of the appellate court that there was no
the matters to my relatives, brother and sisters, sir.
perfected contract of sale between the respondents-owners, as sellers, and the
And what else was taken up?
Mr. Antonio Litonjua told me that they will be leaving for another country
petitioners, as buyers.
There is no documentary evidence on record that the respondents-owners
and he requested me to come back on the first week of December and in the
specifically authorized respondent Fernandez to sell their properties to another,
meantime, I should make an assurance that there are no tenants in our
including the petitioners. Article 1878 of the New Civil Code provides that a
properties, sir.
special power of attorney is necessary to enter into any contract by which the
ownership of an immovable is transmitted or acquired either gratuitously or for
a valuable consideration,
[38]
property,
[37]
or to create or convey real rights over immovable
or for any other act of strict dominion.
[39]
Any sale of real property
[44]
The petitioners cannot feign ignorance of respondent Fernandez lack of

authority to sell the properties for the respondents-owners. It must be stressed
that the petitioners are noted businessmen who ought to be very familiar with
the intricacies of business transactions, such as the sale of real property.
by one purporting to be the agent of the registered owner without any authority
therefor in writing from the said owner is null and void.
[40]
The declarations of
the agent alone are generally insufficient to establish the fact or extent of her
[41]
authority.
In this case, the only evidence adduced by the petitioners to prove
that respondent Fernandez was authorized by the respondents-owners is the

testimony of petitioner Antonio Litonjua that respondent Fernandez openly
represented herself to be the representative of the respondents-owners,
[42]
and
The settled rule is that persons dealing with an assumed agent are bound at
their peril, and if they would hold the principal liable, to ascertain not only the
fact of agency but also the nature and extent of authority, and in case either is
controverted, the burden of proof is upon them to prove it.
[45]
In this case,
respondent Fernandez specifically denied that she was authorized by the

respondents-owners to sell the properties, both in her answer to the complaint

131
and when she testified. The Letter dated January 16, 1996 relied upon by the
not and should not prejudice the respondents-owners who had been declared in
petitioners was signed by respondent Fernandez alone, without any authority
default.
from the respondents-owners. There is no evidence on record that the
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The decision of
respondents-owners ratified all the actuations of respondent Fernandez in
the appellate court is AFFIRMED IN TOTO. Costs against the petitioners.
connection with her dealings with the petitioners. As such, said letter is not
binding on the respondents as owners of the subject properties.
Contrary to the petitioners contention, the letter of January 16, 1996
[46]
is not a
note or memorandum within the context of Article 1403(2) because it does not
contain the following: (a) all the essential terms and conditions of the sale of the
properties; (b) an accurate description of the property subject of the sale; and,
(c) the names of the respondents-owners of the properties. Furthermore, the
letter made reference to only one property, that covered by TCT No. T-36755.
We note that the petitioners themselves were uncertain as to the specific area of
the properties they were seeking to buy. In their complaint, they alleged to have
agreed to buy from the respondents-owners 33,990 square meters of the total
acreage of the two lots consisting of 36,742 square meters. In their Letter to
respondent Fernandez dated January 5, 1996, the petitioners stated that they
agreed to buy the two lots, with a total area of 36,742 square meters.
[47]
However,
in their Letter dated February 1, 1996, the petitioners declared that they agreed
to buy a portion of the properties consisting of 33,990 square meters.
[48]
When
he testified, petitioner Antonio Litonjua declared that the petitioners agreed to

buy from the respondents-owners 36,742 square meters at P150 per square meter
or for the total price of P5,098,500.
[49]
The failure of respondent Fernandez to object to parol evidence to prove (a) the
essential terms and conditions of the contract asserted by the petitioners and,
(b) her authority to sell the properties for the respondents-registered owners did
[50]
SO ORDERED.

GOZUN vs. MERCADO (G.R. No. 167812, December 19, 2006)15
132
Petitioner delivered the campaign materials to respondents headquarters

along Gapan-Olongapo Road in San Fernando, Pampanga.
[8]
On challenge via petition for review on certiorari is the Court of Appeals

Decision of December 8, 2004 and Resolution of April 14, 2005 in CA-G.R. CV
[1]
[2]
No. 76309 reversing the trial courts decision
Meanwhile, on March 31, 1995, respondents sister-in-law, Lilian Soriano (Lilian)
against Jose Teofilo T. Mercado
obtained from petitioner cash advance of P253,000 allegedly for the allowances
a.k.a. Don Pepito Mercado (respondent) and accordingly dismissing the
of poll watchers who were attending a seminar and for other related
complaint of Jesus M. Gozun(petitioner).
expenses. Lilian acknowledged on petitioners 1995 diary

amount.
[9]
receipt of the
[10]
In the local elections of 1995, respondent vied for the gubernatorial post
in Pampanga. Upon respondents request, petitioner, owner of JMG Publishing
Petitioner later sent respondent a Statement of Account
House, a printing shop located in San Fernando, Pampanga, submitted to
of P2,177,906 itemized as follows: P640,310 for JMG Publishing House; P837,696
respondent draft samples and price quotation of campaign materials.
for Metro Angeles Printing; P446,900 for St. Joseph Printing Press; and P253,000,
By petitioners claim, respondents wife had told him that respondent already
the cash advance obtained by Lilian.
[11]
in the total amount
approved his price quotation and that he could start printing the campaign
materials, hence, he did print campaign materials like posters bearing
respondents
candidates,
[4]
photograph,
[3]
sample ballots,
[5]
leaflets
containing
the
slate
poll watcher identification cards,
[6]
of
party
On August 11, 1995, respondents wife partially paid P1,000,000 to petitioner who
issued a receipt
[12]
therefor.
and stickers.
Despite repeated demands and respondents promise to pay, respondent failed
Given the urgency and limited time to do the job order, petitioner availed of the
to settle the balance of his account to petitioner.
services and facilities of Metro Angeles Printing and of St. Joseph Printing Press,
owned by his daughter Jennifer Gozun and mother Epifania Macalino Gozun,
respectively.
[7]
Petitioner and respondent being compadres, they having been principal

sponsors at the weddings of their respective daughters, waited for more than
three (3) years for respondent to honor his promise but to no avail, compelling

133
petitioner to endorse the matter to his counsel who sent respondent a demand
[13]
letter.
Respondent, however, failed to heed the demand.
[14]
When confronted
with the
official receipt issued to
his
wife
acknowledging her payment to JMG Publishing House of the amount

Petitioner thus filed with the Regional Trial Court of Angeles City on November
25, 1998 a complaint
[15]
against respondent to collect the remaining amount
of P1,000,000, respondent claimed that it was his first time to see the receipt,
albeit he belatedly came to know from his wife and Cabalu that the P1,000,000
represented compensation [to petitioner] who helped a lot in the campaign as a
of P1,177,906 plus inflationary adjustment and attorneys fees.
gesture of goodwill.
In his Answer with Compulsory Counterclaim,
[16]
[18]
respondent denied having
transacted with petitioner or entering into any contract for the printing of
Acknowledging that petitioner is engaged in the printing business, respondent
campaign materials. He alleged that the various campaign materials delivered to
explained that he sometimes discussed with petitioner strategies relating to his
him were represented as donations from his family, friends and political
candidacy, he (petitioner) having actively volunteered to help in his
supporters. He added that all contracts involving his personal expenses were
campaign; that his wife was not authorized to enter into a contract with
coursed through and signed by him to ensure compliance with pertinent
petitioner regarding campaign materials as she knew her limitations; that he no
election laws.
longer questioned the P1,000,000 his wife gave petitioner as he thought that it
was just proper to compensate him for a job well done; and that he came to
know about petitioners claim against him only after receiving a copy of the
On petitioners claim that Lilian, on his (respondents) behalf, had obtained

from him a cash advance of P253,000, respondent denied having given her
complaint, which surprised him because he knew fully well that the campaign
materials were donations.
[19]
authority to do so and having received the same.

At the witness stand, respondent, reiterating his allegations in his Answer,
claimed that petitioner was his over-all coordinator in charge of the conduct of
seminars for volunteers and the monitoring of other matters bearing on his
candidacy; and
that
while
his
campaign
Upon questioning by the trial court, respondent could not, however, confirm if
it was his understanding that the campaign materials delivered by petitioner
were donations from third parties.
[20]
manager, Juanito Johnny Cabalu (Cabalu), who was authorized to approve
Finally, respondent, disclaiming knowledge of the Comelec rule that if a
details with regard to printing materials, presented him some campaign
campaign material is donated, it must be so stated on its face, acknowledged
materials, those were partly donated.
[17]
that nothing of that sort was written on all the materials made by petitioner.
[21]

what capacity she received the money. Thus, applying Article 1317
As adverted to earlier, the trial court rendered judgment in favor of petitioner,
134
[24]
of the Civil
Code, it held that petitioners claim for P253,000 is unenforceable.
the dispositive portion of which reads:

On the accounts claimed to be due JMG Publishing House P640,310,
WHEREFORE, the plaintiff having proven its (sic) cause of action by
Metro Angeles Printing P837,696, and St. Joseph Printing Press P446,900,
preponderance of evidence, the Court hereby renders a decision in favor of the
the appellate court, noting that since the owners of the last two printing presses
plaintiff ordering the defendant as follows:
were not impleaded as parties to the case and it was not shown that petitioner
was authorized to prosecute the same in their behalf, held that petitioner could
not collect the amounts due them.
1. To pay the plaintiff the sum of P1,177,906.00 plus 12% interest per annum
from the filing of this complaint until fully paid;
Finally, the appellate court, noting that respondents wife had
paid P1,000,000 to petitioner, the latters claim of P640,310 (after excluding
2. To pay the sum of P50,000.00 as attorneys fees and the costs of suit.
SO ORDERED.
the P253,000) had already been settled.
[22]
Hence, the present petition, faulting the appellate court to have erred:
1.
. . . when it dismissed the complaint on the ground that there is no
Also as earlier adverted to, the Court of Appeals reversed the trial courts
evidence,
decision and dismissed the complaint for lack of cause of action.
that Lilian R. Soriano was authorized by the respondent to receive the cash
other
than
petitioners
own
testimony,
to
prove
advance from the petitioner in the amount of P253,000.00.

xxxx
In reversing the trial courts decision, the Court of Appeals held that other than
petitioners testimony, there was no evidence to support his claim
2.
that Lilian was authorized by respondent to borrow money on his behalf. It
the Metro Angeles Press and St. Joseph Printing Press on the ground that the
noted that the acknowledgment receipt
[23]
signed by Lilian did not specify in
. . . when it dismissed the complaint, with respect to the amounts due to
complaint was not brought by the real party in interest.

xxxx
[25]
135
more recently, We stated that, if the special authority is not written, then it
must be duly established by evidence:
By the contract of agency a person binds himself to render some service or to do

something in representation or on behalf of another, with the consent or
authority of the latter.
[26]
the Rules require, for attorneys to compromise the litigation of their clients, a
Contracts entered into in the name of another person
special authority. And while the same does not state that the special authority
by one who has been given no authority or legal representation or who has
be in writing the Court has every reason to expect that, if not in writing, the
acted beyond his powers are classified as unauthorized contracts and are
same be duly established by evidence other than the self-serving assertion of
declared unenforceable, unless they are ratified.
[27]
counsel himself that such authority was verbally given him.
[31]
(Emphasis and
underscoring supplied)
Generally, the agency may be oral, unless the law requires a specific
form.
[28]
However, a special power of attorney is necessary for an agent to, as in
this case, borrow money, unless it be urgent and indispensable for the
preservation of the things which are under administration.
[29]
Since nothing in
Petitioner submits that his following testimony suffices to establish that

respondent had authorized Lilian to obtain a loan from him, viz:
this case involves the preservation of things under administration, a

determination of whether Soriano had the special authority to borrow money on
behalf of respondent is in order.
Q :
Another caption appearing on Exhibit A is cash advance, it states given
on 3-31-95 received by Mrs. Lilian Soriano in behalf of Mrs. Annie Mercado,

amount P253,000.00, will you kindly tell the Court and explain what does that
Lim Pin v. Liao Tian, et al.
[30]
held that the requirement of a special power of
attorney refers to the nature of the authorization and not to its form.
caption means?
A :
It is the amount representing the money borrowed from me by the
defendant when one morning they came very early and talked to me and
. . . The requirements are met if there is a clear mandate from the principal
told me that they were not able to go to the bank to get money for the
specifically authorizing the performance of the act. As early as 1906, this Court
allowances of Poll Watchers who were having a seminar at the headquarters
in Strong v. Gutierrez-Repide (6 Phil. 680) stated that such a mandate may be
plus other election related expenses during that day, sir.
either oral or written. The one thing vital being that it shall be express. And

Q :
Considering that this is a substantial amount which according to you was
taken by Lilian Soriano, did you happen to make her acknowledge the amount
the
said
amount
was
delivered
and
in
what
136
capacity
did Lilian R. Soriano received [sic] the money. The note reads:
at that time?
A :
Yes, sir.
[32]
(Emphasis supplied)
3-31-95
261,120 ADVANCE MONEY FOR TRAINEE
Petitioners testimony failed to categorically state, however, whether the
RECEIVED BY
loan was made on behalf of respondent or of his wife. While petitioner claims
that Lilian was authorized by respondent, the statement of account marked as
Exhibit A states that the amount was received by Lilian in behalf of Mrs.
RECEIVED FROM JMG THE AMOUNT OF 253,000 TWO HUNDRED FIFTY

THREE THOUSAND PESOS
Annie Mercado.
Invoking Article 1873
[33]
of the Civil Code, petitioner submits that
respondent informed him that he had authorized Lilian to obtain the loan,
hence, following Macke v. Camps
[34]
which holds that one who clothes another
with apparent authority as his agent, and holds him out to the public as
such, respondent cannot be permitted to deny the authority.
(SIGNED)
LILIAN R. SORIANO
3-31-95
Nowhere in the note can it be inferred that defendant-appellant was connected
with the said transaction. Under Article 1317 of the New Civil Code, a person
cannot be bound by contracts he did not authorize to be entered into his
Petitioners submission does not persuade. As the appellate court

observed:
behalf.
[35]
(Underscoring supplied)
It bears noting that Lilian signed in the receipt in her name alone, without
indicating therein that she was acting for and in behalf of respondent. She thus
. . . Exhibit B [the receipt issued by petitioner] presented by plaintiffappellee to support his claim unfortunately only indicates the Two Hundred
Fifty
Three
Thousand
Pesos
(P253,0000.00)
was received
by
one Lilian R. Soriano on 31 March 1995, but without specifying for what reason
bound herself in her personal capacity and not as an agent of respondent or

anyone for that matter.

It is a general rule in the law of agency that, in order to bind the
principal by a mortgage on real property executed by an agent, it must upon its
137
even if the contract performed by the contracting parties would incidentally

[38]
inure to one's benefit.
(Underscoring supplied)
face purport to be made, signed and sealed in the name of the principal,
otherwise, it will bind the agent only. It is not enough merely that the agent
was in fact authorized to make the mortgage, if he has not acted in the name of
the principal. x x x
[36]
(Emphasis and underscoring supplied)
In light thereof, petitioner is the real party in interest in this case. The
trial courts findings on the matter were affirmed by the appellate court.
[39]
It
erred, however, in not declaring petitioner as a real party in interest insofar as

recovery of the cost of campaign materials made by petitioners mother and
On the amount due him and the other two printing presses, petitioner
explains that he was the one who personally and directly contracted with
sister are concerned, upon the wrong notion that they should have been, but
were not, impleaded as plaintiffs.
respondent and he merely sub-contracted the two printing establishments in

order to deliver on time the campaign materials ordered by respondent.
In sum, respondent has the obligation to pay the total cost of printing his
campaign materials delivered by petitioner in the total of P1,924,906, less the
Respondent counters that the claim of sub-contracting is a change in

petitioners theory of the case which is not allowed on appeal.
partial payment ofP1,000,000, or P924,906.

WHEREFORE, the petition is GRANTED. The Decision dated December 8,
2004 and the Resolution dated April 14, 2005 of the Court of Appeals are
[37]
In Oco v. Limbaring,
this Court ruled:
herebyREVERSED and SET ASIDE.

The April 10, 2002 Decision of the Regional Trial Court of Angeles City, Branch
The parties to a contract are the real parties in interest in an action upon
it, as consistently held by the Court. Only the contracting parties are bound by
the stipulations in the contract; they are the ones who would benefit from and
could violate it. Thus, one who is not a party to a contract, and for whose benefit
it was not expressly made, cannot maintain an action on it. One cannot do so,
57, is REINSTATED mutatis mutandis, in light of the foregoing discussions. The

trial courts decision is MODIFIED in that the amount payable by respondent to
petitioner is reduced to P924,906.
SO ORDERED.

138
CABALES vs. CA (G.R. No.162421, 3-Aug-2007)16
Corrompido only released the document of sale with pacto de retro after
PUNO, C.J.:
Saturnina paid for the share of her deceased son, Alberto, including his vale
This is a petition for review on certiorari seeking the reversal of the

[1]
of P300.00.
decision of the Court of Appeals dated October 27, 2003, in CA-G.R. CV No.
On even date, Saturnina and her four (4) children Bonifacio, Albino,
68319 entitledNelson Cabales and Rito Cabales v. Jesus Feliano and Anunciacion
Francisco and Leonora sold the subject parcel of land to respondents-spouses
Feliano, which affirmed with modification the decision
[2]
of the Regional Trial
Jesus and Anunciacion Feliano for P8,000.00. The Deed of Sale provided in its
Court of Maasin, Southern Leyte, Branch 25, dated August 11, 2000, in Civil Case
last paragraph, thus:
No. R-2878. The resolution of the Court of Appeals dated February 23, 2004,
It is hereby declared and understood that the amount of TWO THOUSAND
which denied petitioners motion for reconsideration, is likewise herein assailed.
TWO HUNDRED EIGHTY SIX PESOS (P2,286.00) corresponding and belonging
The facts as found by the trial court and the appellate court are well established.
to the Heirs of Alberto Cabales and to Rito Cabales who are still minors upon
Rufino Cabales died on July 4, 1966 and left a 5,714-square meter parcel of land
the execution of this instrument are held
located in Brgy. Rizal, Sogod, Southern Leyte, covered by Tax Declaration No.
in trust by the VENDEE and to be paid and delivered only to them upon
17270 to his surviving wife Saturnina and children Bonifacio, Albino, Francisco,
reaching the age of 21.
Leonora, Alberto and petitioner Rito.

On July 26, 1971, brothers and co-owners Bonifacio, Albino and Alberto
On December 17, 1985, the Register of Deeds of Southern Leyte issued

Original Certificate of Title No. 17035 over the purchased land in the names of
sold the subject property to Dr. Cayetano Corrompido for P2,000.00, with right
respondents-spouses.
to repurchase within eight (8) years. The three (3) siblings divided the proceeds
On December 30, 1985, Saturnina and her four (4) children executed an affidavit
of the sale among themselves, each getting a share of P666.66.
to the effect that petitioner Nelson would only receive the amount of P176.34
The following month or on August 18, 1971, Alberto secured a note (vale)
from Dr. Corrompido in the amount of P300.00.
In 1972, Alberto died leaving his wife and son, petitioner Nelson.
On December 18, 1975, within the eight-year redemption period, Bonifacio
and Albino tendered their payment of P666.66 each to Dr. Corrompido. But Dr.
from respondents-spouses when he reaches the age of 21 considering that

Saturnina paid Dr. Corrompido P966.66 for the obligation of petitioner Nelsons
late father Alberto, i.e.,P666.66 for his share in the redemption of the sale
with pacto de retro as well as his vale of P300.00.
On July 24, 1986, 24-year old petitioner Rito Cabales acknowledged receipt
of the sum of P1,143.00 from respondent Jesus Feliano, representing the formers
share in the proceeds of the sale of subject property.

139
In 1988, Saturnina died. Petitioner Nelson, then residing in Manila, went
and (3) petitioner Rito had no more right to redeem his share to subject
back to his fathers hometown in Southern Leyte. That same year, he learned
property as the sale by Saturnina, his legal guardian pursuant to Section 7, Rule
from his uncle, petitioner Rito, of the sale of subject property. In 1993, he
93 of the Rules of Court, was perfectly valid; and it was shown that he received
signified his intention to redeem the subject land during a barangay conciliation
his share of the proceeds of the sale on July 24, 1986, when he was 24 years old.
process that he initiated.
On appeal, the Court of Appeals modified the decision of the trial court. It held
that the sale by Saturnina of petitioner Ritos undivided share to the property
On January 12, 1995, contending that they could not have sold their respective
was unenforceable for lack of authority or legal representation but that the
shares in subject property when they were minors, petitioners filed before the
contract was effectively ratified by petitioner Ritos receipt of the proceeds
Regional Trial Court of Maasin, Southern Leyte, a complaint for redemption of
on July 24, 1986. The appellate court also ruled that petitioner Nelson is co-
the subject land plus damages.
owner to the extent of one-seventh (1/7) of subject property as Saturnina was

not subrogated to Albertos rights when she repurchased his share to the
property. It further directed petitioner Nelson to pay the estate of the late
In their answer, respondents-spouses maintained that petitioners were

estopped from claiming any right over subject property considering that (1)
petitioner Rito had already received the amount corresponding to his share of
the proceeds of the sale of subject property, and (2) that petitioner Nelson failed
to consign to the court the total amount of the redemption price necessary for
Saturnina Cabales the amount of P966.66, representing the amount which the
latter paid for the obligation of petitioner Nelsons late father Alberto. Finally,
however, it denied petitioner Nelsons claim for redemption for his failure to
tender or consign in court the redemption money within the period prescribed
by law.
legal redemption. They prayed for the dismissal of the case on the grounds of
laches and prescription.
In this petition for review on certiorari, petitioners contend that the Court of
Appeals erred in (1) recognizing petitioner Nelson Cabales as co-owner of
subject land but denied him the right of legal redemption, and
No amicable settlement was reached at pre-trial. Trial ensued and

on August 11, 2000, the trial court ruled against petitioners. It held that (1)
Alberto or, by his death, any of his heirs including petitioner Nelson lost their
(2) not
recognizing petitioner Rito Cabales as co-owner of subject land with similar

right of legal redemption.
First, we shall delineate the rights of petitioners to subject land.
right to subject land when not one of them repurchased it from Dr. Corrompido;
(2) Saturnina was effectively subrogated to the rights and interests of Alberto
when she paid for Albertos share as well as his obligation to Dr. Corrompido;
When Rufino Cabales died intestate, his wife Saturnina and his six (6) children,
Bonifacio, Albino, Francisco, Leonora, Alberto and petitioner Rito, survived and

140
succeeded him. Article 996 of the New Civil Code provides that [i]f a widow or
Saturnina redeemed for Albertos heirs who had then acquired his pro-
widower and legitimate children or descendants are left, the surviving spouse
indiviso share in subject property, it did not vest in her ownership over the pro-
has in the succession the same share as that of each of the children. Verily, the
indiviso share she redeemed. But she had the right to be reimbursed for the
seven (7) heirs inherited equally on subject property. Petitioner Rito and
redemption price and held a lien upon the property for the amount due until
Alberto, petitioner Nelsons father, inherited in their own rights and with equal
reimbursement. The result is that the heirs of Alberto, i.e., his wife and his son
shares as the others.
petitioner Nelson, retained ownership over their pro-indiviso share.
But before partition of subject land was effected, Alberto died. By operation of
Upon redemption from Dr. Corrompido, the subject property was resold to
law, his rights and obligations to one-seventh of subject land were transferred to
respondents-spouses by the co-owners. Petitioners Rito and Nelson were then
his legal heirs his wife and his son petitioner Nelson.
minors and as indicated in the Deed of Sale, their shares in the proceeds were
We shall now discuss the effects of the two (2) sales of subject land to the rights
held in trust by respondents-spouses to be paid and delivered to them upon
of the parties.
reaching the age of majority.
The first sale with pacto de retro to Dr. Corrompido by the brothers and co-
As to petitioner Rito, the contract of sale was unenforceable as correctly held by
owners Bonifacio, Albino and Alberto was valid but only as to their pro-
the Court of Appeals. Articles 320 and 326 of the New Civil Code
indiviso shares to the land. When Alberto died prior to repurchasing his share,
Art. 320. The father, or in his absence the mother, is the legal administrator of
his rights and obligations were transferred to and assumed by his heirs, namely
the property pertaining to the child under parental authority. If the property is
his wife and his son, petitioner Nelson. But the records show that it was
worth more than two thousand pesos, the father or mother shall give a bond
Saturnina, Albertos mother, and not his heirs, who repurchased for him. As
subject to the approval of the Court of First Instance.
correctly ruled by the Court of Appeals, Saturnina was not subrogated to
Art. 326. When the property of the child is worth more than two thousand
Albertos or his heirs rights to the property when she repurchased the share.
pesos, the father or mother shall be considered a guardian of the childs
[3]
[6]
state that:
In Paulmitan v. Court of Appeals, we held that a co-owner who redeemed
property, subject to the duties and obligations of guardians under the Rules of
the property in its entirety did not make her the owner of all of it. The property
Court.
remained in a condition of co-ownership as the redemption did not provide for

a mode of terminating a co-ownership.
[4]
In other words, the father, or, in his absence, the mother, is considered
But the one who redeemed had the
legal administrator of the property pertaining to the child under his or her
right to be reimbursed for the redemption price and until reimbursed, holds a
parental authority without need of giving a bond in case the amount of the
lien upon the subject property for the amount due.
[5]
Necessarily, when
property of the child does not exceed two thousand pesos.
[7]
Corollary to this,

141
Rule 93, Section 7 of the Revised Rules of Court of 1964, applicable to this case,
(1) Those entered into in the name of another person by one who has been
automatically designates the parent as legal guardian of the child without need
given no authority or legal representation, or who has acted beyond his powers;
of any judicial appointment in case the latters property does not exceed two
thousand pesos,
[8]
thus:
Accordingly, the contract of sale as to the pro-indiviso share of petitioner
Sec. 7. Parents as guardians. When the property of the child under parental
Rito was unenforceable. However, when he acknowledged receipt of the
authority is worth two thousand pesos or less, the father or the mother, without
proceeds of the sale onJuly 24, 1986, petitioner Rito effectively ratified it. This
the necessity of court appointment, shall be his legal guardian x x x x
[9]
act of ratification rendered the sale valid and binding as to him.
Saturnina was clearly petitioner Ritos legal guardian without necessity of
With respect to petitioner Nelson, on the other hand, the contract of sale
court appointment considering that the amount of his property or one-seventh
was void. He was a minor at the time of the sale. Saturnina or any and all the
of subject property was P1,143.00, which is less than two thousand
other co-owners were not his legal guardians with judicial authority to alienate
pesos. However, Rule 96, Sec. 1
[10]
provides that:
or encumber his property. It was his mother who was his legal guardian and, if
Section 1. To what guardianship shall extend. A guardian appointed shall
duly authorized by the courts, could validly sell his undivided share to the
have the care and custody of the person of his ward, and the management of his
property. She did not. Necessarily, when Saturnina and the others sold the
estate, or the management of the estate only, as the case may be. The guardian
subject property in its entirety to respondents-spouses, they only sold and
of the estate of a nonresident shall have the management of all the estate of the
transferred title to their pro-indiviso shares and not that part which pertained to
ward within the Philippines, and no court other than that in which such
petitioner Nelson and his mother. Consequently, petitioner Nelson and his
guardian was appointed shall have jurisdiction over the guardianship.
mother retained ownership over their undivided share of subject property.

But
Indeed, the legal guardian only has the plenary power of administration of
the minors property. It does not include the power of alienation which needs
judicial authority.
[11]
may
petitioners
redeem
the
subject
land
from
[12]
respondents-
spouses? Articles 1088 and 1623 of the New Civil Code are pertinent:
Art. 1088. Should any of the heirs sell his hereditary rights to a stranger before
Thus, when Saturnina, as legal guardian of petitioner Rito,
the partition, any or all of the co-heirs may be subrogated to the rights of the
sold the latters pro-indiviso share in subject land, she did not have the legal
purchaser by reimbursing him for the price of the sale, provided they do so
authority to do so.
within the period of one month from the time they were notified in writing of
Article 1403 of the New Civil Code provides, thus:
the sale by the vendor.

142
Art. 1623. The right of legal pre-emption or redemption shall not be exercised
Thus, we interpret and apply the law not independently of but in consonance
except within thirty days from the notice in writing by the prospective vendor,
with justice. Law and justice are inseparable, and we must keep them so. x x x x
or by the vendor, as the case may be. The deed of sale shall not be recorded in
x x x x While we may not read into the law a purpose that is not there, we
the Registry of Property, unless accompanied by an affidavit of the vendor that
nevertheless have the right to read out of it the reason for its enactment. In
he has given written notice thereof to all possible redemptioners.
doing so, we defer not to the letter that killeth but to the spirit that vivifieth,
The right of redemption of co-owners excludes that of adjoining owners.
to give effect to the lawmakers will.
Clearly, legal redemption may only be exercised by the co-owner or co-
In requiring written notice, Article 1088 (and Article 1623 for that
[14]
owners who did not part with his or their pro-indiviso share in the property held
matter)
in common. As demonstrated, the sale as to the undivided share of petitioner
and to indicate the date of such notice as the starting time of the 30-day period
Rito became valid and binding upon his ratification on July 24, 1986. As a result,
of redemption. Considering the shortness of the period, it is really necessary, as
he lost his right to redeem subject property.
a general rule, to pinpoint the precise date it is supposed to begin, to obviate the
However, as likewise established, the sale as to the undivided share of petitioner
problem of alleged delays, sometimes consisting of only a day or two.
Nelson and his mother was not valid such that they were not divested of their
In the instant case, the right of redemption was invoked not days but years after
ownership thereto. Necessarily, they may redeem the subject property from
the sale was made in 1978. We are not unmindful of the fact that petitioner
respondents-spouses. But they must do so within thirty days from notice in
Nelson was a minor when the sale was perfected. Nevertheless, the records
writing of the sale by their co-owners vendors. In reckoning this period, we
show that in 1988, petitioner Nelson, then of majority age, was informed of the
held in Alonzo v. Intermediate Appellate Court,
[13]
thus:
seeks to ensure that the redemptioner is properly notified of the sale
sale of subject property. Moreover, it was noted by the appellate court that
x x x we test a law by its results; and likewise, we may add, by its purposes. It is
petitioner Nelson was likewise informed thereof in 1993 and he signified his
a cardinal rule that, in seeking the meaning of the law, the first concern of the
intention
judge
the
process. But he only filed the complaint for legal redemption and damages
lawmaker. Unquestionably, the law should never be interpreted in such a way
on January 12, 1995, certainly more than thirty days from learning about the
as to cause injustice as this is never within the legislative intent. An
sale.
indispensable part of that intent, in fact, for we presume the good motives of the
In the face of the established facts, petitioner Nelson cannot feign ignorance of
legislature, is to render justice.
the sale of subject property in 1978. To require strict proof of written notice of
should
be
to
discover
in
its
provisions
the
intent
of
to
redeem
subject
property
during
a barangayconciliation
the sale would be to countenance an obvious false claim of lack of knowledge

thereof, thus commending the letter of the law over its purpose, i.e., the
notification of redemptioners.
The Court is satisfied that there was sufficient notice of the sale to petitioner
Nelson. The thirty-day redemption period commenced in 1993, after petitioner
Nelson
sought
the barangay conciliation
process
to
redeem
his
property. By January 12, 1995, when petitioner Nelson filed a complaint for legal
redemption and damages, it is clear that the thirty-day period had already
expired.
As in Alonzo, the Court, after due consideration of the facts of the instant case,
hereby interprets the law in a way that will render justice.
[15]
Petitioner Nelson, as correctly held by the Court of Appeals, can no longer

redeem subject property. But he and his mother remain co-owners thereof with
respondents-spouses. Accordingly, title to subject property must include them.
IN VIEW WHEREOF, the petition is DENIED. The assailed decision and
resolution of the Court of Appeals of October 27, 2003 and February 23, 2004 are
AFFIRMED WITH MODIFICATION. The Register of Deeds of Southern Leyte is
ORDERED to cancel Original Certificate of Title No. 17035 and to issue in lieu
thereof a new certificate of title in the name of respondents-spouses Jesus and
Anunciacion Feliano for the 6/7 portion, and petitioner Nelson Cabales and his
mother for the remaining 1/7 portion, pro indiviso.
SO ORDERED.
143

144
PENALBER vs. RAMOS (G.R. No. 178645, 30-Jan-2009)17
of land which petitioner also claimed to own (the land and the improvements
CHICO-NAZARIO, J.:
thereon shall be hereinafter referred to as the Ugac properties). Petitioner
Assailed in this Petition for Review on Certiorari under Rule 45 of the Rules of
averred that in the middle part of 1986, she discovered that TCT No. T-43373
[1]
Court is the Decision dated 15 December 2006 of the Court of Appeals in CA-
was cancelled on 13 May 1983 and TCT No. T-58043
[5]
was issued in its stead in
dated 19
the name of respondent spouses Ramos. Upon verification, petitioner learned
January 2000 of the Regional Trial Court (RTC) of Tuguegarao City, Branch 2, in
that the basis for the cancellation of her title was a Deed of Donation of
Civil Case No. 3672, which declared petitioner Lina Pealber the owner of the
a Registered Land,
Bonifacio property subject of this case and ordered respondent spouses Quirino
purportedly executed in favor of respondent spouses Ramos on 27 April
Ramos and Leticia Pealber to reconvey the same to petitioner.
1983. Petitioner insisted that her signature on the said Deed of Donation was a
G.R. CV No. 69731. Said Decision reversed and set aside the Decision
[2]
The factual and procedural antecedents of the case are set forth hereunder.
Residential
[6]
House
and Camarin,
which
petitioner
forgery as she did not donate any property to respondent spouses Ramos. When
petitioner confronted the respondent spouses Ramos about the false donation,
Petitioner is the mother of respondent Leticia and the mother-in-law of

respondent Quirino, husband of Leticia. Respondent Bartex, Inc., on the other
hand, is a domestic corporation which bought from respondent spouses Ramos
the latter pleaded that they would just pay for the Ugac properties in the
amount of P1 Million. Petitioner agreed to the proposition of the respondent
spouses Ramos.
one of the two properties involved in this case.

Subsequently, around 10 January 1987,
On 18 February 1987, petitioner filed before the RTC a Complaint for Declaration
of Nullity of Deeds and Titles, Reconveyance, Damages, [with] Application for a
Writ of Preliminary Prohibitory Injunction against the respondents.
[3]
It was
docketed as Civil Case No. 3672.
[7]
petitioner found out that the
respondent spouses Ramos were selling the Ugac properties to respondent

Bartex, Inc. Petitioner then sent her son, Johnson Paredes (Johnson),
[8]
to
caution respondent Bartex, Inc. that respondent spouses Ramos were not the
lawful owners of the said properties. Johnson was allegedly able to convey
First Cause of Action
petitioners caveat to a representative of respondent Bartex, Inc. Petitioner also
Firstly, petitioner alleged in her Complaint that she was the owner of a parcel of
warned respondent spouses Ramos not to sell the Ugac properties anymore,
land situated in Ugac Norte, Tuguegarao, Cagayan, with an area of 1,457 sq.m.
otherwise, she would file the necessary action against them. The respondent
[4]
of the
spouses Ramos then assured her that they would do no such thing. As a
Register of Deeds for the Province of Cagayan, registered in petitioners
precaution, petitioner executed an Affidavit of Adverse Claim over the Ugac
name. A residential house and a warehouse were constructed on the said parcel
Properties on 19 January 1987 and caused the same to be annotated on TCT No.
and covered by Transfer Certificate of Title (TCT) No. T-43373
T-58043 on the same day. Despite petitioners warnings, respondent spouses


Ramos still executed in favor of respondent Bartex, Inc. a Deed of Absolute
Sale
[9]
145
On 22 March 1982, petitioner allowed respondent spouses Ramos to manage the
over the Ugac properties on 12 January 1987 for a total price
hardware store. Thereafter, in 1984, Mendoza put the Bonifacio property up for
of P150,000.00. As a result, TCT No. T-58043 in the name of respondent spouses
sale. As petitioner did not have available cash to buy the property, she allegedly
Ramos was cancelled and TCT No. T-68825
[10]
in the name of respondent Bartex,
entered into a verbal agreement with respondent spouses Ramos with the
Inc. was issued on 20 January 1987.
following terms:
Petitioner contended that the Deed of Absolute Sale executed by respondent
1.
spouses Ramos in favor of respondent Bartex, Inc. did not convey any valid title,
and in behalf of [herein petitioner];
not only because respondent Bartex, Inc. was a buyer in bad faith, but also
2.
because respondent spouses Ramos did not own the Ugac properties. Thus,
[respondent spouses Ramos] from the accumulated earnings of the store;
petitioner prayed for the declaration of nullity of (1) the Deed of Donation of a
Registered Land, Residential House and Camarin purportedly executed by
petitioner in favor respondent spouses Ramos; (2) TCT No. T-58043, issued in
the name of respondent spouses Ramos; (3) the Deed of Absolute Sale executed
3.
[The lot would be bought [by herein respondent spouses Ramos] for
The consideration of P80,000.00 for said lot would be paid by
Since [respondent spouses Ramos] have the better credit standing, they
would be made to appear in the Deed of Sale as the vendees so that the title to
be issued in their names could be used by [them] to secure a loan with which to
build a bigger building and expand the business of [petitioner].
by the respondent spouses Ramos in favor of respondent Bartex, Inc.; and (4)
TCT No. T-68825, issued in the name of respondent Bartex, Inc. Should
petitioners prayer not be granted, petitioner sought in the alternative that
respondent spouses Ramos be ordered to pay the assessed value of the Ugac
properties, which was about P1.5 Million. Petitioner further prayed that TCT No.
T-43373, in her name, be declared valid and active.
Second Cause of Action
In accordance with the above agreement, respondent spouses Ramos

allegedly entered into a contract of sale
property,
[12]
[11]
with Mendoza over the Bonifacio

[13]
and on 24 October 1984, TCT No. T-62769
covering said property
was issued in the names of respondent spouses Ramos.

On 20 September 1984, respondent spouses Ramos returned the management of
the hardware store to petitioner. On the bases of receipts and disbursements,
petitioner asserted that the Bonifacio property was fully paid out of the funds of
Secondly, petitioner claimed that for many years prior to 1984, she operated a
hardware store in a building she owned along Bonifacio St., Tuguegarao,
Cagayan. However, the commercial lot (Bonifacio property) upon which the
building stood is owned by and registered in the name of Maria Mendoza
(Mendoza), from whom petitioner rented the same.
the store and if respondent spouses Ramos had given any amount for the
purchase price of the said property, they had already sufficiently reimbursed
themselves from the funds of the store. Consequently, petitioner demanded
from respondent spouses Ramos the reconveyance of the title to the Bonifacio
property to her but the latter unjustifiably refused.

146
Petitioner insisted that respondent spouses Ramos were, in reality, mere
properties to respondent Bartex, Inc. for P150,000.00. Thus, respondent spouses
trustees of the Bonifacio property, thus, they were under a moral and legal
Ramos maintained that petitioner was not entitled to any reimbursement for
obligation to reconvey title over the said property to her. Petitioner, therefore,
the Ugac properties.
prayed that she be declared the owner of the Bonifacio property; TCT No. T-
With regard to petitioners second cause of action involving the Bonifacio
62769, in the name of respondent spouses, be declared null and void; and the
property, respondent spouses Ramos contended that they were given not only
Register of Deeds for the Province of Cagayan be directed to issue another title
the management, but also the full ownership of the hardware store by the
in her name.
petitioner, on the condition that the stocks and merchandise of the store will be
On 2 March 1987, respondent spouses Ramos accordingly filed before the RTC
their Answer
[14]
inventoried, and out of the proceeds of the sales thereof, respondent spouses
to petitioners Complaint. As regards the first cause of action,
Ramos shall pay petitioners outstanding obligations and liabilities. After
respondent spouses Ramos alleged that petitioner, together with her son,
settling and paying the obligations and liabilities of petitioner, respondent
Johnson, and the latters wife, Maria Teresa Paredes, mortgaged the Ugac
spouses Ramos bought the Bonifacio property from Mendoza out of their own
properties to the Development Bank of the Philippines (DBP) on 19 August 1990
funds.
for the amount of P150,000.00. When the mortgage was about to be foreclosed
Lastly, even if petitioner and respondent spouses Ramos belonged to the same
because of the failure of petitioner to pay the mortgage debt, petitioner asked
family, the spouses Ramos faulted petitioner for failing to exert efforts to arrive
respondent spouses Ramos to redeem the mortgaged property or pay her
at an amicable settlement of their dispute. Hence, respondent spouses Ramos
mortgage debt to DBP. In return, petitioner promised to cede, convey and
sought, by way of a counterclaim against petitioner, moral and exemplary
transfer full ownership of the Ugac properties to them. Respondent spouses
damages and attorneys fees, for allegedly filing a false, flimsy and frivolous
Ramos paid the mortgage debt and, in compliance with her promise, petitioner
complaint.
voluntarily transferred the Ugac properties to the former by way of a Deed of

Donation dated 27 April 1983. After accepting the donation and having the
Deed of Donation registered, TCT No. T- 58043 was issued to respondent
spouses Ramos and they then took actual and physical possession of the Ugac
properties. Respondent spouses Ramos asserted that petitioner had always been
aware of their intention to sell the Ugac properties as they posted placards
thereon stating that the said properties were for sale. Respondent spouses
Ramos further averred that petitioner also knew that they finally sold the Ugac
On 27 April 1987, respondent Bartex, Inc. filed before the RTC its own Answer to
petitioners Complaint, alleging, inter alia, that when a representative of the
corporation inquired about the Ugac properties for sale, respondent spouses
Ramos presented their owners duplicate copy of TCT No. T-58043, together
with the tax declarations covering the parcel of land and the buildings
thereon. Respondent Bartex, Inc. even verified the title and tax declarations
covering the Ugac properties with the Register of Deeds and the Office of the
Municipal Assessor as to any cloud, encumbrance or lien on the properties, but

147
none were found. Respondent spouses Ramos were then actually occupying the
property in favor of [respondent spouses Ramos]. Such denial, by itself, is not
Ugac properties and they only vacated the same after the consummation of the
sufficient to overcome the presumption of regularity of the notarial deed
sale to respondent Bartex, Inc. Respondent Bartex, Inc. claimed that the sale of
of donation and its entitlement to full faith and credit. While it is true that,
the Ugac properties by respondent spouses Ramos to the corporation was
generally, the party who asserts the affirmative side of a proposition has the
already consummated on 12 January 1987, and the documents conveying the said
burden of proof, which in this instance is (sic) the [respondent spouses Ramos]
properties were by then being processed for registration, when petitioner caused
who are asserting the validity of the deed of donation, [respondent spouses
the annotation of an adverse claim at the back of TCT No. T-58043 on 19 January
Ramos] can merely rely on the above-stated presumption given to notarial
1987. As respondent Bartex, Inc. was never aware of any imperfection in the title
documents and need not present any evidence to support their claim of validity
of respondent spouses Ramos over the Ugac properties, it claimed that it was an
and due execution of the notarized deed of donation. On the other hand,
innocent purchaser in good faith.
[petitioner], in addition to her allegation that she did not execute any
Trial of the case thereafter ensued.
such deed of donation in favor of [respondent spouses Ramos] should
On 19 January 2000, the RTC promulgated its decision, ruling on petitioners

first cause of action in this wise:
have had her allegedly falsified signature on the deed of donation

examined by qualified handwriting experts to prove that, indeed, she did
not execute the same. Her failure to do so results in the failure of her
On the first cause of action, the Court finds the testimony of [herein
cause.
[15]
(Emphasis ours.)
petitioner] Lina Penalber (sic) denying her execution of the deed of

donation over the Ugac property in favor of [herein respondent spouses]
With respect to petitioners second cause of action, the RTC adjudged that:
Quirino Ramos and Leticia Penalber-Ramos (sic) insufficient to support
On the second cause of action, the Court finds the evidence
the said cause of action. A notarial document is, by law, entitled to full faith
preponderantly in favor of the [herein petitioner]. The evidence on record
and credit upon its face (Arrieta v. Llosa, 282 SCRA 248) and a high degree of
shows that when [petitioner] allowed [herein respondent spouses Ramos] full
proof is needed to overthrow the presumption of truth in the recitals contained
management of the hardware store located on the Bonifacio property in March,
in a public document executed with all legal formalities (People vs. Fabro, 277
1982 (sic) an inventory of the stocks in trade in the said store was made showing
SCRA 19). Hence, in order to contradict the facts contained in a notarial
stocks worth P226,951.05 and when she got back the store from [respondent
document and the presumption of regularity in its favor, these (sic) must be
spouses Ramos] on September 1984, another inventory was made [on] the stocks
evidence that is clear, convincing and more than merely preponderant (Calahat
in trade in the said store showing, stocks worthP110,005.88 or a difference
vs. Intermediate Appellate Court, 241 SCRA 356). In the case at bench,
of P116,946.17. The only reason for an inventory having been made when
[petitioner] claims that she did not execute the deed of donation over the Ugac
the hardware store was turned over to [respondent spouses Ramos] was,

148
to the mind of the Court, for the latter to account for the sales of such
2.
stocks. And to arrive at the net amount due to [petitioner], all that is needed to
against the [herein respondent spouses Ramos];
be done is to deduct the value of the stocks present at the store when
2.1
management was returned to [petitioner] in September 1984 from the value of
plan PST-2-01-019316 (sic) with an area of 195 square meters situated along
the stocks found in the hardware store when said management was given to
Bonifacio Street, Tuguegarao, Cagayan; and
[respondent spouses Ramos] in 1982. [Petitioner] claims that the purchase price
for the Bonifacio property was to be taken from the proceeds of sales from the
On the second cause of action, in favor of the [petitioner] and
Declaring the [petitioner] the owner of Lot 2-B of subdivision
2.2
Ordering the [respondent spouses Ramos] to reconvey to the
[petitioner] the said property (Bonifacio property).
hardware store which, as the evidence on record stands[,] shows a balance in

her favor of more than P116,000.00. [Respondent spouses Ramos] contend that
With costs de oficio.
[17]
(Emphasis ours.)
said amount was expended to pay off [petitioners] obligations to her
On 22 February 2000, respondent spouses Ramos filed with the RTC a Motion
suppliers. The record, however, is totally silent on how much and when
for Reconsideration
[respondent spouses Ramos] paid said alleged obligations of [petitioner] or even
the RTC on petitioners second cause of action on the ground that
who were the said suppliers thus paid. That [petitioner] and [respondent
the alleged express trust created between them and petitioner involving the
spouses Ramos] agreed that the amount due [petitioner] from the
Bonifacio
[19]
[18]
property
of the afore-mentioned decision, assailing the ruling of
could
not
be
proven
by
parol
evidence. In
an
proceeds of the sales of her stocks in the hardware store would be applied
Order
to the purchase price of the Bonifacio property is supported by the fact
for Reconsideration for lack of merit, ratiocinating that respondent spouses
that [petitioner] did not ever ask for an accounting of said proceeds,
Ramos failed to interpose timely objections when petitioner testified on their
despite the fact that as early as September, 1984 (sic) she already knew
alleged verbal agreement regarding the purchase of the Bonifacio property. As
that her stocks left by her in March, 1982 (sic) was already sold by
such, respondent spouses Ramos were deemed to have waived such objections,
[respondent
which cannot be raised anymore in their Motion for Reconsideration. The RTC
spouses
Ramos]
and
that
[16]
of P116,000.00 plus which was due to her.
there
was
difference
(Emphasis ours.)
Thus, the RTC decreed:
dated 17 July 2000, the RTC denied respondent spouses Ramos Motion
then reiterated its finding that petitioners evidence clearly established her
second cause of action. Additionally, the RTC held that the requirement that
the parties exert earnest efforts towards an amicable settlement of the dispute
WHEREFORE, in view of all the foregoing, judgment is hereby rendered:

1.
Finding the evidence on record insufficient to prove the [herein
petitioners] first cause of action, and, hence, dismissing the same;
had likewise been waived by the respondents as they filed no motion regarding
the same before the trial.

149
On 24 July 2000, respondent spouses Ramos elevated their case to the Court of
inventories, it is not known if the goods, representing the amount of
Appeals, insofar as the ruling of the RTC on petitioners second cause of action
Php116,946.17, were actually sold or not. It may have been taken without
was concerned.
[20]
The appeal was docketed as CA-G.R. CV No. 69731.
actually being sold.
On 15 December 2006, the Court of Appeals rendered the assailed Decision in
It is a basic rule of evidence that bare allegations, unsubstantiated by evidence,
favor of respondent spouses Ramos.
are not equivalent to proof. As between [petitioners] bare allegation of a verbal
Finding merit in the appeal, the appellate court observed that the second cause
trust agreement, and the deed of absolute sale between Maria Mendoza and
of action involved not only the petitioner and her daughter, but also her son-in-
[respondent spouses Ramos], the latter should prevail.
law, who was not covered by the term family relations under Article 150
[21]
of
Although oral testimony is allowed to prove that a trust exists, contrary to the
of the Family Code, requiring the
contention of [respondent spouses Ramos], and the court may rely on parol
exertion of earnest efforts toward a compromise, did not apply as the
evidence to arrive at a conclusion that an express trust exists, what is crucial is
impediment arising from the said provision was limited only to suits between
the intention to create a trust. While oftentimes the intention is manifested by
members of the same family or those encompassed in the term family relations
the trustor in express or explicit language, such intention may be manifested by
under Article 150.
inference from what the trustor has said or done, from the nature of the
The Court of Appeals also declared that petitioner failed to prove her claim with
transaction, or from the circumstances surrounding the creation of the
the required quantum of evidence. According to the Court of Appeals:
purported trust.
It appears that before management of the store was transferred to [herein
However, an inference of the intention to create a trust, made from language,
respondent spouses Ramos], a beginning inventory of the stocks of the hardware
conduct or circumstances, must be made with reasonable certainty. It cannot
store was made by [herein petitioners] other children showing stocks
rest on vague, uncertain or indefinite declarations. An inference of intention
amounting to Php226,951.05. After management of the hardware store was
to create a trust, predicated only on circumstances, can be made only
returned to [petitioner], a second inventory was made with stocks amounting to
where they admit of no other interpretation. Here, [petitioner] failed to
Php110,004.88 showing a difference of Php116,946.15. Contrary, however, to
establish with reasonable certainty her claim that the purchase of the
the finding of the trial court, We find that said inventory showing such
subject lot was pursuant to a verbal trust agreement with [respondent
difference is not conclusive proof to show that the said amount was used
spouses Ramos].
to pay the purchase price of the subject lot. In fact, as testified by Johnson
Thus, the Court of Appeals disposed of the case as follows:
the Family Code. Therefore, Article 151
[22]
[23]
Paredes, son of [petitioner] who made the computation on the alleged
(Emphasis ours.)

WHEREFORE,
is
when the findings of the trial court are grounded entirely on speculation,
hereby GRANTED and the Decision dated 19 January 2000 of the Regional Trial
surmise and conjecture. As will be discussed further, we find the afore-
Court (RTC) of Tuguegarao City, Branch 2, with respect to the second cause of
mentioned exception to be applicable in the present Petition, thus, warranting a
action
departure from the general rule.
or
in
the
view
Bonifacio
of
the
foregoing,
Property
in
the
Civil
instant
Case
No.
appeal
150
3672
is
hereby REVERSED and SET ASIDE and a new one entered DISMISSING the
second cause of action of [herein petitioners] complaint.
[24]
On 12 January 2007, petitioner sought reconsideration
In its technical legal sense, a trust is defined as the right, enforceable solely in
[25]
of the foregoing
Decision, but it was denied by the appellate court in a Resolution
[26]
dated 31
equity, to the beneficial enjoyment of property, the legal title to which is vested
in another, but the word trust is frequently employed to indicate duties,
May 2007.
relations, and responsibilities which are not strictly technical trusts.
To have the ruling of the Court of Appeals overturned, petitioner brought her
who establishes a trust is called the trustor; one in whom confidence is reposed
case before us through the instant Petition, raising the following issues: (1)
is known as the trustee; and the person for whose benefit the trust has been
whether the existence of a trust agreement between her and respondent spouses
created is referred to as the beneficiary.
Ramos was clearly established, and (2) whether such trust agreement was valid
the trustee and the beneficiary (cestui que trust) as regards certain property, real,
and enforceable.
personal, money or choses in action.
At the outset, it is apparent that petitioner is raising questions of fact in the
Trusts are either express or implied. Express trusts are created by
instant Petition. Be it noted that in a petition for review under Rule 45 of the
the intention of the trustor or of the parties. Implied trusts come into being
Rules of Court, only questions of law must be entertained. A question of law
by operation of law.
arises when there is doubt as to what the law is on a certain state of facts, while
and positive acts of the parties, by some writing or deed, or will, or by words
there is a question of fact when the doubt arises as to the truth or falsity of the
either expressly or impliedly evincing an intention to create a trust.
alleged facts.
[27]
When the doubt or difference arises as to the truth or falsehood
[33]
[31]
[30]
A person
There is a fiduciary relation between
[32]
Express trusts are those which are created by the direct

[34]
No
particular words are required for the creation of an express trust, it being
[35]
of alleged facts or when the query necessarily solicits calibration of the whole
sufficient that a trust is clearly intended.
evidence considering mostly the credibility of witnesses, existence and relevancy
1443 of the Civil Code, when an express trust concerns an immovable property
of specific surrounding circumstances, their relation to each other and to the
or any interest therein, the same may not be proved by parol or oral
whole and probabilities of the situation, questions or errors of fact are
evidence.
raised.
[28]
The rule that only questions of law may be raised in a petition for
review under Rule 45, however, admits of certain exceptions,
[29]
among which is
[36]
However, in accordance with Article

151
In the instant case, petitioner maintains that she was able to prove the existence
agreement. Such being the case, it behooved for the respondent spouses Ramos
of a trust agreement between her and respondent spouses Ramos. She calls
to hold the Bonifacio property for petitioners benefit.
attention to the fact that respondent spouses Ramos could not account for
Petitioners arguments fail to persuade.
the P116,946.15 difference in the beginning inventory and the second inventory
of the stocks of the hardware store, and they failed to present proof to support
their allegation that the amount was used to pay the other obligations of
petitioner. As respondent spouses Ramos never denied the existence of
the P116,946.15 difference, petitioner contends that they have the burden of
proving where this amount had gone, if indeed they did not use the same to buy
the Bonifacio property. Petitioner asserts that given the respondent spouses
Ramos failure to discharge such burden, the only conclusion would be that they
did use the amount to purchase the Bonifacio property.
It bears stressing that petitioner has the burden of proving her cause of action in
the instant case and she may not rely on the weakness of the defense of
respondent spouses Ramos. Burden of proof is the duty of any party to present
evidence to establish his claim or defense by the amount of evidence required by
law, which is preponderance of evidence in civil cases. Preponderance of
evidence
[37]
is the weight, credit, and value of the aggregate evidence on either
side and is usually considered to be synonymous with the term "greater weight
of the evidence" or "greater weight of the credible evidence. It is evidence which
is more convincing to the court as worthy of belief than that which is offered in
Petitioner further alleges that based on the verbal agreement between her and
opposition thereto.
respondent spouses Ramos, a trust agreement was created and that the same is
asserts the affirmative of the issue has the burden of proof to obtain a favorable
valid and enforceable. Petitioner claims that she is the trustor for it was she
judgment. For the plaintiff, the burden of proof never parts.
who entrusted the Bonifacio property to respondent spouses Ramos as the
defendant, an affirmative defense is one which is not a denial of an essential
trustees, with the condition that the same be used to secure a loan, the proceeds
ingredient in the plaintiffs cause of action, but one which, if established, will be
of which would be used to build a bigger building to expand petitioners
a good defense i.e., an avoidance of the claim.
business. Petitioner maintains that a trust agreement was clearly intended by

the parties when petitioner left the management of the hardware store to
respondent spouses Ramos, with the agreement that the proceeds from the sales
from said store be used to buy the lot upon which the store stands. The
respondent spouses Ramos assumption of the management of the hardware
store and their eventual purchase of the Bonifacio property indubitably shows
that respondent spouses Ramos honored their obligation under the verbal
[38]
Therefore, the party, whether plaintiff or defendant, who

[39]
For the
[40]
From the allegations of the petitioners Complaint in Civil Case No. 3672, the
alleged verbal trust agreement between petitioner and respondent spouses
Ramos is in the nature of an express trust as petitioner explicitly agreed therein
to allow the respondent spouses Ramos to acquire title to the Bonifacio property
in their names, but to hold the same property for petitioners benefit. Given
that the alleged trust concerns an immovable property, however, respondent
spouses Ramos counter that the same is unenforceable since the agreement was

152
made verbally and no parol evidence may be admitted to prove the existence of
September 1984, the respondent spouses Ramos returned the management of
an express trust concerning an immovable property or any interest therein.
the store to petitioner. Thereafter, petitioner allowed her son Johnson to
On this score, we subscribe to the ruling of the RTC in its Order dated 17 July
inventory the stocks of the store. Johnson found out that the purchase price
2000 that said spouses were deemed to have waived their objection to the parol
of P80,000.00 for the Bonifacio property was already fully paid. When
evidence as they failed to timely object when petitioner testified on the said
petitioner told the respondent spouses Ramos to transfer the title to the
verbal agreement. The requirement in Article 1443 that the express trust
Bonifacio property in her name, the respondent spouses Ramos refused, thus,
concerning an immovable or an interest therein be in writing is merely for
prompting petitioner to file a complaint against them.
purposes of proof, not for the validity of the trust agreement. Therefore, the
Similarly, Johnson testified
said article is in the nature of a statute of frauds. The term statute of frauds is
management of the hardware store to respondent spouses Ramos. During that
descriptive of statutes which require certain classes of contracts to be in
time, an inventory
writing. The statute does not deprive the parties of the right to contract with
the said stocks were determined to be P226,951.05. When respondent spouses
respect to the matters therein involved, but merely regulates the formalities of
Ramos returned the management of the store to petitioner on 20 September
the contract necessary to render it enforceable.
[41]
The effect of non-compliance
[45]
[44]
that on 22 March 1982, petitioner turned over the
of the stocks of the store was made and the total value of
1984, another inventory
[46]
of the stocks was made, with the total value of the
is simply that no action can be proved unless the requirement is complied
stocks falling to P110,004.88. The difference of P116,946.16 was attributed to the
with. Oral evidence of the contract will be excluded upon timely objection. But
purchase of the Bonifacio property by the respondent spouses Ramos using the
if the parties to the action, during the trial, make no objection to the
profits from the sales of the store.
admissibility of the oral evidence to support the contract covered by the statute,
A careful perusal of the records of the case reveals that respondent spouses
and thereby permit such contract to be proved orally, it will be just as binding
Ramos did indeed fail to interpose their objections regarding the admissibility of
upon the parties as if it had been reduced to writing.

Per petitioners testimony,
[43]
[42]
the afore-mentioned testimonies when the same were offered to prove the
the Bonifacio property was offered for sale by its
alleged verbal trust agreement between them and petitioner. Consequently,
owner Mendoza. Petitioner told respondent spouses Ramos that she was going
these testimonies were rendered admissible in evidence. Nevertheless, while
to buy the lot, but the title to the same will be in the latters names. The money
admissibility of evidence is an affair of logic and law, determined as it is
from the hardware store managed by respondent spouses Ramos shall be used
by its relevance and competence, the weight to be given to such evidence,
to buy the Bonifacio property, which shall then be mortgaged by the respondent
once admitted, still depends on judicial evaluation.
spouses Ramos so that they could obtain a loan for building a bigger store. The
admissibility of the said testimonies, the Court holds that the same carried little
purchase price of P80,000.00 was paid for the Bonifacio property. On 20
[47]
Thus, despite the

153
weight in proving the alleged verbal trust agreement between petitioner and
assailed Decision of the Court of Appeals in CA-G.R. CV No. 69731 dated 15
respondent spouses.
December 2006 is hereby AFFIRMED. Costs against petitioner.
Petitioners allegations as to the existence of an express trust agreement with
SO ORDERED.
respondent spouses Ramos, supported only by her own and her son Johnsons
testimonies, do not hold water. As correctly ruled by the Court of Appeals, a
resulting difference of P116,946.15 in the beginning inventory of the stocks of the
hardware store (before management was transferred to respondent spouses
Ramos) and the second inventory thereof (after management was returned to
petitioner), by itself, is not conclusive proof that the said amount was used to
pay the purchase price of the Bonifacio property, such as would make it the
property of petitioner held merely in trust by respondent spouses Ramos. Such
a conclusion adopted by the RTC is purely speculative and non sequitur. The
resulting difference in the two inventories might have been caused by other
factors and the same is capable of other interpretations (e. g., that the amount
thereof may have been written off as business losses due to a bad economic
condition, or that the stocks of the store might have been damaged or otherwise
their purchase prices have increased dramatically, etc.), the exclusion of which
rested upon the shoulders of petitioner alone who has the burden of proof in the
instant case. This petitioner miserably failed to do. The fact that respondent
spouses Ramos never denied the P116,946.15 difference, or that they failed to
present proof that they indeed used the said amount to pay the other
obligations and liabilities of petitioner is not sufficient to discharge petitioners
burden to prove the existence of the alleged express trust agreement.
WHEREFORE,
premises
considered,
the
instant
Petition
for
Review
on Certiorari under Rule 45 of the Rules of Court is hereby DENIED. The

THE ESTATE OF PEDRO GONZALES vs. THE HEIRS OF MARCOS PEREZ
(G.R. No. 169681, 5-Nov-2009)18
154
forwarded to the Provincial Governor of Rizal for his approval. The Governor,
however, did not act upon the said deed.
PERALTA, J.:
Sometime in September 1966, Pedro sold to Marcos Perez a portion of Lot C,
This resolves the instant Petition for Review on Certiorari under Rule 45 of the
[1]
Rules of Court praying for the nullification of the Decision of the Court of
Appeals (CA) dated April 25, 2005 in CA-G.R. CV No. 60998 and its
[2]
Resolution
dated September 14, 2005. The challenged Decision of the CA
reversed and set aside the judgment of the Regional Trial Court (RTC) of
denominated as Lot C-3, which contains an area of 375 square meters. The
contract of sale was embodied in a Deed of Sale
[5]
which, however, was not
notarized. To segregate the subject property from the remaining portions of Lot
C, Marcos had the same surveyed wherein a technical description of the subject
lot was prepared by a surveyor.
[6]
Marikina City, Branch 272 in Civil Case No. 94-57-MK while its assailed
Resolution denied petitioners' motion for reconsideration.
The antecedent facts are as follows:
Subsequently, Pedro and Marcos died.

On February 7, 1992, the Municipality of Marikina, through its then Mayor
Rodolfo Valentino, executed a Deed of Absolute Transfer of Real Property over
The former Municipality of Marikina in the Province of Rizal (now City of

Marikina, Metro Manila) used to own a parcel of land located in Barrio
Concepcion of the said municipality covered by Original Certificate of Title
(OCT) No. 629
[3]
Lots A and C in favor of the Estate of Pedro C. Gonzales.
[7]
On June 25, 1992,
Transfer Certificate of Title (TCT) No. 223361, covering Lot C, was issued in the
name of the said estate.
[8]
of the Register of Deeds of Rizal. The said property was
subdivided into three (3) lots, namely, lots A, B and C, per subdivision plan
[4]
(LRC) Psd-4571.
Subsequently, herein petitioners executed an extra-judicial partition wherein

Lot C was subdivided into three lots. As a result of the subdivision, new titles
were issued wherein the 370-square-meter portion of Lot C-3 is now
On January 14, 1966, the Municipal Council of Marikina passed Resolution No. 9,
series of 1966 which authorized the sale through public bidding of Municipal
Lots A and C.
denominated as Lot C-1 and is covered by TCT No. 244447
[9]
and the remaining
5 square meters of the subject lot (Lot C-3) now forms a portion of another lot
denominated as Lot C-2 and is now covered by TCT No. 244448.
[10]
On April 25, 1966, a public bidding was conducted wherein Pedro Gonzales was
the highest bidder. Two days thereafter, or on April 27, 1966, the Municipal
Council of Marikina issued Resolution No. 75 accepting the bid of Pedro.
Thereafter, a deed of sale was executed in favor of the latter which was later
On October 1, 1992, herein respondents sent a demand letter to one of

herein
petitioners
property.
[11]
asking
for
the
reconveyance
of
the
subject
However, petitioners refused to reconvey the said lot. As a
consequence, respondents filed an action for Annulment and/or Rescission of

Deed of Absolute Transfer of Real Property x x x and for Reconveyance with
[12]
WHEREFORE, premises
assailed
Decision
the
instant
dated
Appeal
February
2,
is
Damages.
hereby GRANTED and
On February 2, 1998, the RTC rendered its Decision with the following
is REVERSED and SET ASIDE. TCT No. 244447 and partially, TCT No. 244448,
dispositive portion:
with respect to five (5) square meters, are declared NULL and VOID and
WHEREFORE, foregoing premises, judgment is hereby rendered as follows:
the
considered,
155
1998
defendants-appellees are ordered to reconvey in favor of the plaintiffsappellants the subject property covered by said Transfer Certificates of Title
1.
DISMISSING the complaint subject of the case in caption for lack of
merit;
(five square meters only with respect to TCT No. 244448). The trial court's
dismissal of defendants-appellees' counterclaim is, however, AFFIRMED.
2.
DECLARING VALID both Transfer Certificates of Title Nos. 244447 and
SO ORDERED.
[14]
244448 issued by the Register of Deeds of Marikina;

The CA held that a sale of real property, though not consigned in a public
3.
DISMISSING the defendants' counterclaim.

SO ORDERED.
[13]
instrument, is nevertheless valid and binding among the parties and that the
form required in Article 1358 of the Civil Code is not essential to the validity or
enforceability of the transactions but only for convenience.
The RTC ruled that since the Deed of Sale executed between Pedro and Marcos
Petitioners filed a motion for reconsideration, but the same was denied by the
was not notarized, the same is considered void and of no effect. In addition, the
CA in its Resolution of September 14, 2005 on the ground that the said motion
trial court also held that Pedro became the owner of the subject lot only on
was filed out of time.
February 7, 1992; as such, he could not have lawfully transferred ownership
Hence, the present petition with the following assignment of errors:
thereof to Marcos in 1966.
WITH DUE RESPECT TO THE HONORABLE COURT OF APPEALS, ITS
Herein respondents appealed the RTC Decision to the CA contending that the
FINDINGS OF FACT RUN COUNTER TO THOSE OF THE TRIAL
RTC erred in relying only on Articles 1356 and 1358 of the Civil Code. Instead,
COURT,
respondents assert that the RTC should also have applied the provisions of
ACCORD WITH LAW AND JURISPRUDENCE.
Articles 1357, 1403 (2), 1405 and 1406 of the same Code.
THUS, IT HAS DECIDED THE CASE IN A WAY NOT IN
WITH DUE RESPECT, THE ALLEGED DEED OF SALE IS SUSPECT AND
On April 25, 2005, the CA rendered its presently assailed Decision disposing as
RIDDEN WITH INCONSISTENCIES. IN FACT, THE LOWER COURT HELD
follows:
THAT THE DEED OF SALE FAILED TO MEET THE SOLEMNITY

REQUIREMENTS PROVIDED UNDER THE LAW FOR ITS VALIDITY.

156
WITH DUE RESPECT, THE COURT OF APPEALS ERRED IN DISREGARDING
executed on behalf of the municipal government by the mayor, upon resolution
THE FINDINGS OF FACT AND THE APPLICATION OF LAW BY THE
of the council, with the approval of the governor.
REGIONAL TRIAL COURT THAT UNDER THE PURPORTED DEED OF SALE
In Municipality of Camiling v. Lopez,
THE VENDOR COULD NOT HAVE TRANSFERRED OWNERSHIP.
[15]
[16]
the Court found occasion to expound on
the nature and effect of the provincial governor's power to approve contracts
In their first and last assigned errors, petitioners contend that Marcos, who is
entered into by a municipal government as provided for under Section 2196 of
respondents' predecessor-in-interest, could not have legally bought the disputed
the Revised Administrative Code. The Court held, thus:
parcel of land from petitioners' predecessor-in-interest, Pedro, in September
x x x The approval by the provincial governor of contracts entered into and
1966 because, during that time, Pedro had not yet acquired ownership of the
executed by a municipal council, as required in [S]ection 2196 of the Revised
subject lot. Petitioners' assertion is based on the premise that as of February 29,
Administrative Code, is part of the system of supervision that the provincial
1968, the Deed of Sale between Pedro and the Municipality of Marikina was still
government exercises over the municipal governments. It is not a prohibition
subject to approval by the Provincial Governor of Rizal, as required under
against municipal councils entering into contracts regarding municipal
Section 2196 of the Revised Administrative Code. Considering that on the
properties subject of municipal administration or control. It does not deny the
supposed date of sale in favor of Marcos, the requisite approval of the Provincial
power, right or capacity of municipal councils to enter into such contracts; such
Governor was not yet secured, petitioners conclude that Pedro could not be
power or capacity is recognized. Only the exercise thereof is subject to
considered as the owner of the subject property and, as such, he did not yet
supervision by approval or disapproval, i.e., contracts entered in pursuance of
possess the right to transfer ownership thereof and, thus, could not have
the power would ordinarily be approved if entered into in good faith and for the
lawfully sold the same to Marcos.
best interests of the municipality; they would be denied approval if found illegal
or unfavorable to public or municipal interest. The absence of the approval,
The Court does not agree.
[17]
therefore, does not per se make the contracts null and void.
This pronouncement was later reiterated in Pechueco Sons Company v.

[18]
Section 2196 of the Revised Administrative Code provides:
Provincial Board of Antique,
where the Court ruled more emphatically that:
In other words, as regards the municipal transactions specified in Section 2196

of the Revised Administrative Code, the Provincial Governor has two courses of
SECTION 2196. Execution of deeds. When the government of a municipality is
a party to a deed or an instrument which conveys real property or any interest
therein or which creates a lien upon the same, such deed or instrument shall be
action to take either to approve or disapprove the same. And since absence
of such approval does not necessarily render the contract entered into by

157
the municipality null and void, the transaction remains voidable until
other manner signifying an agreement that the possession is transferred from
such time when by subsequent unfavorable action of the governor, for
the vendor to the vendee.
[19]
reasons of public interest, the contract is thereby invalidated.
In conjunction with the above-stated provision, Article 1497 of the Civil Code
It is clear from the above-quoted pronouncements of the Court that, pending
states that:
approval or disapproval by the Provincial Governor of a contract entered into by

a municipality which falls under the provisions of Section 2196 of the Revised
Administrative Code, such contract is considered voidable. In the instant case,
The thing sold shall be understood as delivered when it is placed in the

control and possession of the vendee.
there is no showing that the contract of sale entered into between Pedro and the
Municipality of Marikina was ever acted upon by the Provincial Governor.
Hence, consistent with the rulings enunciated above, the subject contract
In the present case, there is no dispute that Pedro took control and
should be considered voidable. Voidable or annullable contracts, before they are
possession of the said lot immediately after his bid was accepted by the
set aside, are existent, valid, and binding, and are effective and obligatory
Municipal Government of Marikina. In fact, herein petitioners, in their Answer
between the parties.
[20]
with Compulsory Counterclaim admit that both Pedro and Marcos, together
In the present case, since the contract was never annulled or set aside, it had the
effect of transferring ownership of the subject property to Pedro. Having
lawfully acquired ownership of Lots A and C, Pedro, in turn, had the full
capacity
to
transfer
ownership
of
these
parcels
of
land
or
parts
thereof, including the subject property which comprises a portion of Lot C.
with their respective heirs, were already occupying the subject property even
before the same was sold to Pedro and that, after buying the same, Pedro
allowed Marcos and his family to stay thereon.
[21]
This only shows that upon
perfection of the contract of sale between the Municipality of Marikina and

Pedro, the latter acquired ownership of the subject property by means of
delivery of the same to him.
It is wrong for petitioners to argue that it was only on June 25, 1992, when TCT
No. 223361 covering Lot C was issued in the name of the estate of Pedro, that he
became the owner thereof.
Hence, the issuance of TCT No. 223361, as well as the execution of the Deed of
Absolute Transfer of Real Property on February 7, 1992 by the Municipal Mayor
of Marikina, could not be considered as the operative acts which transferred
Article 1496 of the Civil Code provides:
ownership of Lot C to Pedro. Pedro already acquired ownership of the subject
The ownership of the thing sold is acquired by the vendee from the moment it is
property as early as 1966 when the same was delivered to him by the
delivered to him in any of the ways specified in Articles 1497 to 1501, or in any
Municipality of Marikina, and the execution of the Deed of Absolute Transfer of

158
Real Property as well as the consequent issuance of TCT No. 223316 are simply a
Guillermo Flores. Although the defendants-appellees [herein petitioners] are
confirmation of such ownership.
assailing the genuineness of the signatures of their parents on the said Deed,
It may not be amiss to point out at this juncture that the Deed of Absolute
they presented no evidence of the genuine signatures of their parents as would
Transfer of Real Property executed by the Mayor of Marikina was no longer
give this Court a chance to scrutinize and compare it with the assailed
subject to approval by the Provincial Governor of Rizal because Marikina
signatures. Bare allegations, unsubstantiated by evidence, are not equivalent to
already became part of Metro Manila on November 7, 1975.

1996, Marikina became a chartered city.
[22]
On December 8,
[23]
proof under our Rules.
[24]
In the instant petition, petitioners would have us review the factual
In their second assignment of error, petitioners question the authenticity and
determinations of the CA. However, settled is the rule that the Court is not a
due execution of the Deed of Sale executed by Pedro in favor of Marcos.
trier of facts and only questions of law are the proper subject of a petition for
Petitioners also argue that even assuming that Pedro actually executed the
review on certiorari in this Court.

[26]
[25]
While there are exceptions to this
subject Deed of Sale, the same is not valid because it was not notarized as
rule,
required under the provisions of Articles 1403 and 1358 of the Civil Code.
them. Hence, the Court sees no reason to disturb the findings of the CA, which
The Court is not persuaded.

The RTC, in its abbreviated discussion of the questions raised before it, did not
touch on the issue of whether the Deed of Sale between Pedro and Marcos is
authentic and duly executed. However, the CA, in its presently assailed Decision,
adequately discussed this issue and ruled as follows:
x x x In the present case, We are convinced that plaintiffs-appellants [herein
the Court finds that the instant case does not fall under any of
are supported by evidence on record.

On the question of whether the
subject Deed of Sale is invalid on the
ground that it does not appear in a public document, Article 1358 of the same
Code enumerates the acts and contracts that should be embodied in a public
document, to wit:
Art. 1358. The following must appear in a public document:
respondents] have substantially proven that Pedro, indeed, sold the subject
(1)
property to Marcos for P9,378.75. The fact that no receipt was presented to
transmission, modification or extinguishment of real rights over
prove actual payment of consideration, in itself, the absence of receipts, or any
immovable property; sales of real property or of an interest therein are
proof of consideration, would not be conclusive since consideration is always
governed by Articles 1403, No. 2 and 1405;
presumed. Likewise, the categorical statement in the trial court of Manuel P.
(2) The cession, repudiation or renunciation of hereditary rights or of those of
Bernardo, one of the witnesses in the Deed of Sale, that he himself saw Pedro
the conjugal partnership of gains;
sign such Deed lends credence. This was corroborated by another witness,
Acts and contracts which have for their object the creation,

159
(3) The power to administer property, or any other power which has for its
Under Article 1403(2), the sale of real property should be in writing and
object an act appearing or which should appear in a public document, or should
subscribed by the party charged for it to be enforceable.
prejudice a third person; and
Court, the Deed of Sale between Pedro and Marcos is in writing and subscribed
(4) The cession of actions or rights proceeding from an act appearing in a
by Pedro and his wife Francisca; hence, it is enforceable under the Statute of
public document.
Frauds.
[28]
In the case before the
All other contracts where the amount involved exceeds five hundred
However, not having been subscribed and sworn to before a notary public, the
pesos must appear in writing, even a private one. But sales of goods, chattels or
Deed of Sale is not a public document and, therefore, does not comply with
things in action are governed by Articles 1403, No. 2 and 1405.
Article 1358 of the Civil Code.
On the other hand, pertinent portions of Article 1403 of the Civil Code provide
Nonetheless, it is a settled rule that the failure to observe the proper form
as follows:
prescribed by Article 1358 does not render the acts or contracts enumerated
Art. 1403. The following contracts are unenforceable, unless they are
therein invalid. It has been uniformly held that the form required under the said
Article is not essential to the validity or enforceability of the transaction, but
ratified:
merely for convenience.

xxxx
[29]
The Court agrees with the CA in holding that a sale
of real property, though not consigned in a public instrument or formal writing,

(2) Those that do not comply with the Statute of Frauds as set forth in
is, nevertheless, valid and binding among the parties, for the time-honored rule
this number. In the following cases an agreement hereafter made shall be
is that even a verbal contract of sale of real estate produces legal effects between
the parties.
thereof, be in writing, and subscribed by the party charged, or by his
public document, it does not affect the validity of such conveyance. Article 1358
agent; evidence, therefore, of the agreement cannot be received without the
does not require the accomplishment of the acts or contracts in a public
writing, or a secondary evidence of its contents:
instrument in order to validate the act or contract but only to insure its
(a)
efficacy.
An agreement that by its terms is not to be performed within a year from
Stated differently, although a conveyance of land is not made in a
Thus, based on the foregoing, the Court finds that the CA did not err
in ruling that the contract of sale between Pedro and Marcos is valid and
the making thereof;
binding.
xxxx
(e) An agreement for the leasing for a longer period than one year,
sale of real property or of an interest therein; x x x
[31]
[30]
[27]
or for the

WHEREFORE, the instant petition is DENIED. The assailed Decision and
Resolution of the Court of Appeals in CA-G.R. CV No. 60998 are AFFIRMED.
SO ORDERED.
John 14:14 - Yes, ask me for anything in my name, and I will do it!
160

161
Upon learning the institution of the said case, MERLINDA presented a

VOID CONTRACTS
Complaint-in-intervention, seeking the declaration of nullity of the Deed of Sale
MODINA vs. CA (G.R. No. 109355., 29-Oct-1999)19
between her husband and MODINA on the ground that the titles of the parcels
PURISIMA, J.:
of land in dispute were never legally transferred to her husband. Fraudulent
At bar is a Petition for Review on Certiorari assailing the decision of the Court of
Appeals in CA - G.R. CV No. 26051 affirming the decision of the trial court in the
case, entitled Serafin Modina vs Ernesto Hontarciego, Paulino Figueroa and
acts were allegedly employed by him to obtain a Torrens Title in his

favor. However, she confirmed the validity of the lease contracts with the other
private respondents.
Ramon Chiang vs Merlinda Plana Chiang, intervenors, which declared as void
MERLINDA also admitted that the said parcels of land were those ordered sold
and inexistent the deed of definite sale dated December 17, 1975 as well as the
by Branch 2 of the then Court of First Instance of Iloilo in Special Proceeding No.
Certificates of Title Nos. T-86912, T-86913, T-86914 in the name of Ramon
2469 in Intestate Estate of Nelson Plana where she was appointed as the
Chiang.
administratix, being the widow of the deceased, her first husband. An Authority
to Sell was issued by the said Probate Court for the sale of the same properties.
The facts that matter are as follows:

The parcels of land in question are those under the name of Ramon Chiang
(hereinafter referred to as CHIANG ) covered by TCT Nos. T-86912, T-86913, and
[2]
After due hearing, the Trial Court decided in favor of MERLINDA, disposing
thus:
T-86914. He theorized that subject properties were sold to him by his wife,
WHEREFORE, judgment is hereby rendered (1) declaring as void and inexistent
Merlinda Plana Chiang (hereinafter referred to as MERLINDA), as evidenced by
the sale of Lots 10063, 10088, 10085 and 10089 of the Cadastral Survey of Sta.
a Deed of Absolute Sale dated December 17, 1975, and were subsequently sold
Barbara by Merlinda Plana in favor of Ramon Chiang as evidenced by the deed
by CHIANG to the petitioner Serafin Modina (MODINA), as shown by the
of definite sale dated December 17, 1975 (Exhibits H; 3-Chiang; 9
Deeds of Sale, dated August 3, 1979 and August 24, 1979, respectively.
Intervenor) as well as the Certificates of Title Nos. T-86912, T-86913, T-86914
[1]
MODINA brought a Complaint for Recovery of Possession with Damages

against the private respondents, Ernesto Hontarciego, Paul Figueroa and
Teodoro Hipalla, docketed as Civil Case No. 13935 before the Regional Trial
Court of Iloilo City.
and T-86915 in the name of Ramon Chiang; (2) declaring as void and inexistent
the sale of the same properties by Ramon Chiang in favor of Serafin Modina as
evidenced by the deeds of sale (Exhibits A, B, 6 Chiang and 7 Chiang)
dated August 3, and 24, 1979, as well as. Certificates of Title Nos. T-102631,
102630, 102632 and 102890 in the name of Serafin Modina; (3) ordering the
Register of Deeds of Iloilo to cancel said certificates of title in the names of
19 Void Contracts
Ramon Chiang and Serafin Modina and to reinstate the Certificates of Title Nos.

162
T-57960, T-57962, T-57963 and T-57864 in the name of Nelson Plana; (4)
Furthermore, under Art. 1490, husband and wife are prohibited to sell
ordering Serafin Modina to vacate and restore possession of the lots in question
properties to each other. And where, as in this case, the sale is inexistent
to Merlinda Plana Chiang; (5) ordering Ramon Chiang to restitute and pay to
for lack of consideration, the principle of in pari delicto non oritur
Serafin Modina the sum of P145,800.00 and; (6) ordering Serafin Modina to pay
actio does not apply. (Vasquez vs Porta, 98 Phil 490). (Emphasis
Ernesto Hontarciego the sum of P44,500.00 as actual and compensatory
ours) Thus, Art. 1490 provides:
damages plus the sum of P5,000.00, for and as attorneys fees, with costs in favor
Art. 1490. The husband and the wife cannot sell property to each other, except:
of said defendants against the plaintiff.
(1) when a separation of property was agreed upon in the marriage settlements;
On appeal, the Court of Appeals affirmed the aforesaid decision in toto.
or
Dissatisfied therewith, petitioner found his way to this Court via the present
(2) when there has been a judicial separation of property under Art. 191.
Petition for Review under Rule 45 seeking to set aside the assailed decision of
the Court of Appeals.
The exception to the rule laid down in Art. 1490 of the New Civil Code not
having existed with respect to the property relations of Ramon Chiang and
Raised for resolution here are: (1) whether the sale of subject lots should be
Merlinda Plana Chiang, the sale by the latter in favor of the former of the
nullified, (2) whether petitioner was not a purchaser in good faith, (3) whether
properties in question is invalid for being prohibited by law. Not being the
the decision of the trial court was tainted with excess of jurisdiction; and (4)
owner of subject properties, Ramon Chiang could not have validly sold the same
whether or not only three-fourths of subject lots should be returned to the
to plaintiff Serafin Modina. The sale by Ramon Chiang in favor of Serafin
private respondent.
Modina is, likewise, void and inexistent.
Anent the first issue, petitioner theorizes that the sale in question is null and
void for being violative of Article 1490
[3]
of the New Civil Code prohibiting sales
between spouses. Consequently, what is applicable is Article 1412
[4]
supra on the
principle of in pari delicto, which leaves both guilty parties where they are, and
keeps undisturbed the rights of third persons to whom the lots involved were
sold; petitioner stressed.
xxx xxx
[5]
xxx
The Court of Appeals, on the other
hand, adopted the following
findings a quo: that there is no sufficient evidence establishing fault on the part
of MERLINDA, and therefore, the principle of in pari delicto is inapplicable and
the sale was void for want of consideration. In effect, MERLINDA can recover
the lots sold by her husband to petitioner MODINA. However, the Court of
Petitioner anchors his submission on the following statements of the Trial Court
Appeals ruled that the sale was void for violating Article 1490 of the Civil Code,
which the Court of Appeals upheld, to wit:
which prohibits sales between spouses.

The principle of in pari delicto non oritur actio
[6]
denies all recovery to the guilty
parties inter se. It applies to cases where the nullity arises from the illegality of
[7]
163
offense or misdemeanor or whether the consideration involved is merely

rendered illegal.
[13]
the consideration or the purpose of the contract. When two persons are
The statement below that it is likewise null and void for being violative of
equally at fault, the law does not relieve them. The exception to this general
Article 1490 should just be treated as a surplusage or an obiter dictum on the
rule is when the principle is invoked with respect to inexistent contracts.
[8]
In the petition under consideration, the Trial Court found that subject Deed of
Sale was a nullity for lack of any consideration.
[9]
part of the Trial Court as the issue of whether the parcels of land in dispute are
conjugal in nature or they fall under the exceptions provided for by law, was
This finding duly supported by
neither raised nor litigated upon before the lower Court. Whether the said lots
evidence was affirmed by the Court of Appeals. Well-settled is the rule that this
were ganancial properties was never brought to the fore by the parties and it is
Court will not disturb such finding absent any evidence to the contrary.
Under Article 1409
[11]
[10]
too late to do so now.
of the New Civil Code, enumerating void contracts, a
Futhermore, if this line of argument be followed, the Trial Court could not have
contract without consideration is one such void contract. One of the
declared subject contract as null and void because only the heirs and the
characteristics of a void or inexistent contract is that it produces no effect. So
creditors can question its nullity and not the spouses themselves who executed
also, inexistent contracts can be invoked by any person whenever juridical
the contract with full knowledge of the prohibition.
effects founded thereon are asserted against him. A transferor can recover the
Records show that in the complaint-in-intervention of MERLINDA, she did not
object of such contract by accion reivindicatoria and any possessor may refuse to
aver the same as a ground to nullify subject Deed of Sale. In fact, she denied the
deliver it to the transferee, who cannot enforce the transfer.
[12]
[14]
existence of the Deed of Sale in favor of her husband. In the said Complaint, her
Thus, petitioners insistence that MERLINDA cannot attack subject contract of
allegations referred to the want of consideration of such Deed of Sale. She did
sale as she was a guilty party thereto is equally unavailing.
not put up the defense under Article 1490, to nullify her sale to her husband
But the pivot of inquiry here is whether MERLINDA is barred by the principle
CHIANG because such a defense would be inconsistent with her claim that the
of in pari delicto from questioning subject Deed of Sale.
same sale was inexistent.
It bears emphasizing that as the contracts under controversy are inexistent
The Trial Court debunked petitioners theory that MERLINDA intentionally
contracts within legal contemplation, Articles 1411 and 1412 of the New Civil
gave away the bulk of her and her late husbands estate to defendant CHIANG
Code are inapplicable. In pari delicto doctrine applies only to contracts with
as his exclusive property, for want of evidentiary anchor. They insist on the
illegal consideration or subject matter, whether the attendant facts constitute an
Deed of Sale wherein MERLINDA made the misrepresentation that she was a
widow and CHIANG was single, when at the time of execution thereof, they

164
were in fact already married. Petitioner insists that this document conclusively
property and the latter learned that the same formed part of the properties of
established bad faith on the part of MERLINDA and therefore, the principle
MERLINDAs first husband; (2) that the said sale was between the spouses; (3)
of in pari delicto should have been applied.
that when the property was inspected, MODINA met all the lessees who
These issues are factual in nature and it is not for this Court to appreciate and
informed that subject lands belong to MERLINDA and they had no knowledge
evaluate the pieces of evidence introduced below. An appellate court defers to
that the same lots were sold to the husband.
the factual findings of the Trial Court, unless petitioner can show a glaring
It is a well-settled rule that a purchaser cannot close his eyes to facts which
mistake in the appreciation of relevant evidence.
would put a reasonable man upon his guard to make the necessary inquiries,
Since one of the characteristics of a void or inexistent contract is that it does not
and then claim that he acted in good faith. His mere refusal to believe that such
produce any effect, MERLINDA can recover the property from petitioner who
defect exists, or his wilful closing of his eyes to the possibility of the existence of
never acquired title thereover.
a defect in his vendors title, will not make him an innocent purchaser for value,
As to the second issue, petitioner stresses that his title should have been
respected since he is a purchaser in good faith and for value. The Court of
Appeals, however, opined that he (petitioner) is not a purchaser in good
faith. It found that there were circumstances known to MODINA which
rendered their transaction fraudulent under the attendant circumstances.
As a general rule, in a sale under the Torrens system, a void title cannot give rise
if it afterwards develops that the title was in fact defective, and it appears that
he had such notice of the defect as would have led to its discovery had he acted
with that measure of precaution which may reasonably be required of a prudent
man in a like situation.
[15]
Thus, petitioner cannot claim that the sale between him and MODINA falls
under the exception provided for by law.
to a valid title. The exception is when the sale of a person with a void title is to a
With regard to the third issue posed by petitioner - whether the Trial Courts
third person who purchased it for value and in good faith.
decision allowing recovery on the part of Merlinda Chiang of subject properties
A purchaser in good faith is one who buys the property of another without
notice that some other person has a right to or interest in such property and
pays a full and fair price at the time of the purchase or before he has notice of
the claim or interest of some other person in the property.
was void - petitioners contention is untennable. It is theorized that as the sale

by MERLINDA was by virtue of an Order to Sell issued in the Intestate Estate
Proceedings of her late husband, Nelson Plana - to allow recovery will defeat the
said order of the Probate Court. Petitioner equated the aforesaid Order to Sell as
a judgment, which another court in a regular proceeding has no jurisdiction to
In the case under scrutiny, petitioner cannot claim that he was a purchaser in
good faith. There are circumstances which are indicia of bad faith on his part,
to wit: (1) He asked his nephew, Placido Matta, to investigate the origin of the
reverse.

165
Petitioner is under the mistaken impression that as the Order to Sell had
WHEREFORE, the Petition is DENIED and the decision of the Court of Appeals,
become a judgment in itself as to the validity of the sale of the properties
dated September 30, 1992, in CA-G.R. CV No. 26051 AFFIRMED. No
involved, any question as to its nullity should have been brought before the
pronouncement as to costs.
Court of Appeals on appeal when the said Order was issued.
SO ORDERED.
It is a well-settled rule that a Court of First Instance (now Regional Trial Court)
has jurisdiction over a case brought to rescind a sale made upon prior authority
of a Probate Court. This does not constitute an interference or review of the
order of a co-equal Court since the Probate Court has no jurisdiction over the
question of title to subject properties. Consequently, a separate action may be
brought to determine the question of ownership.
[16]
Lastly, on the issue of whether only three-fourths of the property in question

should have been returned to MERLINDA, petitioners stance is equally
unsustainable. It is a settled doctrine that an issue which was neither averred in
the Complaint nor raised during the trial before the lower court cannot be
raised for the first time on appeal, as such a recourse would be offensive to the
basic rules of fair play, justice, and due process.
[17]
The issue of whether only three-fourths of subject property will be returned was
never an issue before the lower court and therefore, the petitioner cannot do it
now. A final word. In a Petition for Review, only questions of law may be
raised. It is perceived by the Court that what petitioner is trying to, albeit subtly,
is for the Court to examine the probative value or evidentiary weight of the
evidence presented below
[18]
The Court cannot do that unless the appreciation
of the pieces of evidence on hand is glaringly erroneous. But this is where

petitioner utterly failed.

166
DOMINGO vs. CA (G.R. No. 127540. 17-Oct-2001)20
defendants (now petitioners) entered the properties illegally, and they refused
DECISION
to leave them when asked to do so.
QUISUMBING, J.:
Herein petitioners, as defendants below, contested plaintiffs claims. According
This petition seeks to annul the decision of the Court of Appeals dated August
to defendants, the alleged deed of absolute sale was void for being spurious as
29, 1996, which set aside the decision of the Regional Trial Court of Batac, Ilocos
well as lacking consideration. They said that Paulina Rigonan did not sell her
Norte, Branch 17, in Civil Case No. 582-17 forreinvindicacion consolidated with
properties to anyone. As her nearest surviving kin within the fifth degree of
[1]
Cadastral Case No. 1.
[2]
The petition likewise seeks to annul the resolution dated
December 11, 1996, denying petitioners motion for reconsideration.

The facts of this case, culled from the records, are as follows:
consanguinity, they inherited the three lots and the permanent improvements
thereon when Paulina died in 1966. They said they had been in possession of
the contested properties for more than 10 years. Defendants asked for damages
against plaintiffs.
Paulina Rigonan owned three (3) parcels of land, located at Batac and Espiritu,
Ilocos Norte, including the house and warehouse on one parcel. She allegedly
sold them to private respondents, the spouses Felipe and Concepcion Rigonan,
During trial, Juan Franco, Notary Public Evaristo P. Tagatag
[3]
and plaintiff
Felipe Rigonan testified for plaintiffs (private respondents now).
who claim to be her relatives. In 1966, herein petitioners Eugenio Domingo,
Franco testified that he was a witness to the execution of the questioned deed of
Crispin Mangabat and Samuel Capalungan, who claim to be her closest
absolute sale. However, when cross-examined and shown the deed he stated
surviving relatives, allegedly took possession of the properties by means of
that the deed was not the document he signed as a witness, but rather it was the
stealth, force and intimidation, and refused to vacate the same. Consequently,
will and testament made by Paulina Rigonan.
on February 2, 1976, herein respondent Felipe Rigonan filed a complaint
Atty. Tagatag testified that he personally prepared the deed, he saw Paulina
for reinvindicacion against petitioners in the Regional Trial Court of Batac,
Rigonan affix her thumbprint on it and he signed it both as witness and notary
Ilocos Norte. On July 3, 1977, he amended the complaint and included his wife
public. He further testified that he also notarized Paulinas last will and
as co-plaintiff. They alleged that they were the owners of the three parcels of
testament dated February 19, 1965. The will mentioned the same lots sold to
land through the deed of sale executed by Paulina Rigonan on January 28, 1965;
private respondents. When asked why the subject lots were still included in the
that since then, they had been in continuous possession of the subject
last will and testament, he could not explain. Atty. Tagatag also mentioned that
properties and had introduced permanent improvements thereon; and that
he registered the original deed of absolute sale with the Register of Deeds.
Plaintiff Felipe Rigonan claimed that he was Paulinas close relative. Their
fathers were first cousins. However, he could not recall the name of Paulinas
20 Void Contracts

167
grandfather. His claim was disputed by defendants, who lived with Paulina as
hospitalized prior to her death. She stated that Paulina was never badly in need
their close kin. He admitted the discrepancies between the Register of Deeds
of money during her lifetime.
copy of the deed and the copy in his possession. But he attributed them to the
On March 23, 1994, the trial court rendered judgment in favor of defendants
representative from the Office of the Register of Deeds who went to plaintiffs
(now the petitioners). It disposed:
house after that Office received a subpoena duces tecum. According to him, the
representative showed him blanks in the deed and then the representative filled
in the blanks by copying from his (plaintiffs) copy.
Counsel for defendants (petitioners herein) presented as witnesses Jose Flores,
the owner of the adjacent lot; Ruben Blanco, then acting Registrar of Deeds in
Ilocos Norte; and Zosima Domingo, wife of defendant Eugenio Domingo.
Jose Flores testified that he knew defendants, herein petitioners, who had lived
on the land with Paulina Rigonan since he could remember and continued to
live there even after Paulinas death. He said he did not receive any notice nor
any offer to sell the lots from Paulina, contrary to what was indicated in the
WHEREFORE, premises considered, judgment is hereby rendered in favor of

defendants and against the plaintiffs, and as prayed for, the Amended
Complaint is hereby DISMISSED.
Defendants are hereby declared, by virtue of intestate succession, the lawful
owners and possessors of the house including the bodega and the three (3)
parcels of land in suit and a Decree of Registration adjudicating the ownership
of the said properties to defendants is hereby issued.
The alleged deed of sale (Exhs. A, A-1, 1 and 1-a) is hereby declared null
and void and fake and the prayer for the issuance of a writ of preliminary
injunction is hereby denied.
deed of sale that the vendor had notified all the adjacent owners of the sale. He
averred he had no knowledge of any sale between Paulina and private
Plaintiffs are hereby ordered to pay defendants:
respondents.
a) P20,000.00 as moral damages;
Ruben Blanco, the acting Registrar of Deeds, testified that only the carbon copy,
b) P10,000.00 as exemplary damages;
also called a duplicate original, of the deed of sale was filed in his office, but he
c) P10,000.00 attorneys fees and other litigation expenses.
could not explain why this was so.

Zosima Domingo testified that her husband, Eugenio Domingo, was Paulinas
nephew. Paulina was a first cousin of Eugenios father. She also said that they
lived with Paulina and her husband, Jose Guerson, since 1956. They took care of
her, spent for her daily needs and medical expenses, especially when she was
[4]
Private respondents herein appealed to the Court of Appeals.

On August 29, 1996, the CA reversed the trial courts decision, thus:
WHEREFORE, the decision dated March 23, 1994 is hereby SET ASIDE. The
plaintiffs-appellants Felipe Rigonan and Concepcion Rigonan are declared the
owners of the properties under litigation and the defendants-appellees are

168
hereby ordered to VACATE the subject properties and SURRENDER the
possession thereof to the heirs of the plaintiffs-appellants.
THAT THE FINDINGS OF FACT OF RESPONDENT COURT OF APPEALS ARE
Costs against the defendants-appellees.
[5]
Hence, this petition assigning the following as errors:

I
THE RESPONDENT COURT OF APPEALS HAS DECIDED QUESTIONS OF
LEGAL SUBSTANCE AND SIGNIFICANCE NOT IN ACCORDANCE WITH THE
EVIDENCE, LAW AND WITH THE APPLICABLE DECISIONS OF THIS
HONORABLE COURT.
PREMISED ON SUPPOSED ABSENCE OF EVIDENCE BUT IS CONTRADICTED

BY THE EVIDENCE ON RECORD THUS CONSTITUTES GRAVE ABUSE OF
DISCRETION.
[6]
The basic issue for our consideration is, did private respondents sufficiently
establish the existence and due execution of the Deed of Absolute and
Irrevocable Sale of Real Property? Marked as Exhibits A, A-1, 1 and 1-a,
this deed purportedly involved nine (9) parcels of land, inclusive of the three (3)
parcels in dispute, sold at the price of P850 by Paulina Rigonan to private
II
respondents on January 28, 1965, at Batac, Ilocos Norte.
[7]
The trial court found
THAT THE FINDINGS OF RESPONDENT COURT OF APPEALS ARE
the deed fake, being a carbon copy with no typewritten original presented; and
CONTRARY TO THOSE OF THE TRIAL COURT AND CLEARLY VIOLATES
the court concluded that the documents execution was tainted with alterations,
THE RULE THAT THE FACTUAL FINDINGS OF TRIAL COURTS ARE
defects, tamperings, and irregularities which render it null and void ab initio.
ENTITLED TO GREAT WEIGHT AND RESPECT ON APPEAL, ESPECIALLY

WHEN SAID FINDINGS ARE ESTABLISHED BY UNREBUTTED TESTIMONIAL
AND DOCUMENTARY EVIDENCE.
[8]
Petitioners argue that the Court of Appeals erred in not applying the doctrine
that factual findings of trial courts are entitled to great weight and respect on
appeal, especially when said findings are established by unrebutted testimonial
III
and documentary evidence. They add that the Court of Appeals, in reaching a
THAT THE FINDINGS AND CONCLUSIONS OF RESPONDENT COURT OF
different conclusion, had decided the case contrary to the evidence presented
APPEALS ARE GROUNDED ENTIRELY ON SPECULATIONS, SURMISES,
and the law applicable to the case. Petitioners maintain that the due execution
CONJECTURES, OR ON INFERENCES MANIFESTLY MISTAKEN.
of the deed of sale was not sufficiently established by private respondents, who
IV
THAT THE RESPONDENT COURT OF APPEALS MANIFESTLY OVERLOOKED
CERTAIN RELEVANT FACTS NOT DISPUTED BY THE PARTIES AND WHICH,
IF PROPERLY CONSIDERED, WOULD JUSTIFY A DIFFERENT CONCLUSION.
as plaintiffs had the burden of proving it. First, the testimonies of the two
alleged instrumental witnesses of the sale, namely, Juan Franco and Efren
Sibucao, were dispensed with and discarded when Franco retracted his oral and
written testimony that he was a witness to the execution of the subject deed. As
a consequence, the appellate court merely relied on Atty. Tagatags (the notary

169
public) testimony, which was incredible because aside from taking the double
still be denied in due course for it does not present any substantial legal issue,
role of a witness and notary public, he was a paid witness. Further his testimony,
but factual or evidentiary ones which were already firmly resolved by the Court
that the subject deed was executed in the house of Paulina Rigonan, was
of Appeals based on records and the evidence presented by the parties. Private
rebutted by Zosima Domingo, Paulinas housekeeper, who said that she did not
respondents claim that the factual determination by the trial court lacks
see Atty. Tagatag, Juan Franco and Efren Sibucao in Paulinas house on the
credibility for it was made by the trial judge who presided only in one hearing of
alleged date of the deeds execution.
the case. The trial judge could not validly say that the deed of absolute sale was
Secondly, petitioners said that private respondents failed to account for the
fake because no signature was forged, according to private respondents; and
typewritten original of the deed of sale and that the carbon copy filed with the
indeed a thumbmark, said to be the sellers own, appears thereon.
Register of Deeds was only a duplicate which contained insertions and
In their reply, petitioners said that the copy of the petition filed with this Court
erasures. Further, the carbon copy was without an affidavit of explanation, in
was accompanied with a certification against forum shopping. If private
violation of the Administrative Code as amended, which requires that if the
respondents copy did not contain same certification, this was only due to
original deed of sale is not presented or available upon registration of the deed,
inadvertence. Petitioners ask for the Courts indulgence for anyway there was
the carbon copy or so-called duplicate original must be accompanied by an
substantial compliance with Revised Circular No. 28-91.
affidavit of explanation, otherwise, registration must be denied.
[9]
On the contention that here only factual issues had been raised, hence not the
Thirdly, petitioners aver that the consideration of only P850 for the parcels of
proper subject for review by this Court, petitioners reply that this general rule
land sold, together with a house and a warehouse, was another indication that
admits of exceptions, as when the factual findings of the Court of Appeals and
the sale was fictitious because no person who was financially stable would sell
the trial court are contradictory; when the findings are grounded entirely on
said property at such a grossly inadequate consideration.
speculations, surmises or conjectures; and when the Court of Appeals
Lastly, petitioners assert that there was abundant evidence that at the time of
overlooked certain relevant facts not disputed by the parties which if properly
the execution of the deed of sale, Paulina Rigonan was already senile. She could
considered would justify a different conclusion. All these, according to
not have consented to the sale by merely imprinting her thumbmark on the
petitioners, are present in this case.
deed.
Before proceeding to the main issue, we shall first settle procedural issues raised
In their comment, private respondents counter that at the outset the petition
by private respondents.
must
forum-
While the trial judge deciding the case presided over the hearings of the case
shopping. Nonetheless, even disregarding this requirement, the petition must
only once, this circumstance could not have an adverse effect on his
be
dismissed
for
it
lacks
certification
against

170
decision. The continuity of a court and the efficacy of its proceedings are not
deed of sale. The carbon copy did not bear her signature, but only her alleged
affected by the death, resignation or cessation from the service of the presiding
thumbprint. Juan Franco testified during the direct examination that he was an
judge. A judge may validly render a decision although he has only partly heard
instrumental witness to the deed. However, when cross-examined and shown a
the testimony of the witnesses.
[10]
After all, he could utilize and rely on the
records of the case, including the transcripts of testimonies heard by the former
copy of the subject deed, he retracted and said that said deed of sale was not the
document he signed as witness.
[13]
He declared categorically he knew nothing
[14]
presiding judge.
about it.
On the matter of the certification against forum-shopping, petitioners aver that
We note that another witness, Efren Sibucao, whose testimony should have
they attached one in the copy intended for this Court. This is substantial
corroborated Atty. Tagatags, was not presented and his affidavit was withdrawn
compliance. A deviation from a rigid enforcement of the rules may be allowed
from the court,
to attain their prime objective for, after all, the dispensation of justice is the core
uncorroborated, was self-serving.
reason for the courts existence.
[11]
[15]
leaving only Atty. Tagatags testimony, which aside from being
Secondly, we agree with the trial court that irregularities abound regarding the
While the issues raised in this petition might appear to be mainly factual, this
execution and registration of the alleged deed of sale. On record, Atty. Tagatag
petition is properly given due course because of the contradictory findings of
testified that he himself registered the original deed with the Register of
the trial court and the Court of Appeals. Further, the latter court apparently
Deeds.
overlooked
different
presented at the trial. Also, the carbon copy on file, which is allegedly a
Moreover, a compelling sense to make sure that justice is done,
duplicate original, shows intercalations and discrepancies when compared to
and done rightly in the light of the issues raised herein, constrains us from
purported copies in existence. The intercalations were allegedly due to blanks
relying on technicalities alone to resolve this petition.
left unfilled by Atty. Tagatag at the time of the deeds registration. The blanks
Now, on the main issue. Did private respondents establish the existence and
were allegedly filled in much later by a representative of the Register of
due execution of the deed of sale? Our finding is in the negative. First, note
Deeds. In addition, the alleged other copies of the document bore different
that private respondents as plaintiffs below presented only a carbon copy of this
dates of entry: May 16, 1966, 10:20 A.M.
conclusion.
certain
[12]
relevant
facts
which
justify
[16]
Yet, the original was nowhere to be found and none could be
[19]
[17]
and June 10, 1966, 3:16 P.M.,

[20]
and
deed. When the Register of Deeds was subpoenaed to produce the deed, no
different entry numbers: 66246, 74389
original typewritten deed but only a carbon copy was presented to the trial
registered long after its alleged date of execution and after Paulinas death on
court. Although the Court of Appeals calls it a duplicate original, the deed
March 20, 1966.
contained filled in blanks and alterations. None of the witnesses directly

testified to prove positively and convincingly Paulinas execution of the original
given a copy.
[22]
[21]
and 64369.
[18]
The deed was apparently
Admittedly, the alleged vendor Paulina Rigonan was not

171
Furthermore, it appears that the alleged vendor was never asked to vacate the
In the present case, at the time of the execution of the alleged contract, Paulina
premises she had purportedly sold. Felipe testified that he had agreed to let
Rigonan was already of advanced age and senile. She died an octogenarian on
Paulina stay in the house until her death.
[23]
In Alcos v. IAC, 162 SCRA 823 (1988),
March 20, 1966, barely over a year when the deed was allegedly executed on
the buyers immediate possession and occupation of the property was deemed
January 28, 1965, but before copies of the deed were entered in the registry
corroborative of the truthfulness and authenticity of the deed of sale. The
allegedly on May 16 and June 10, 1966. The general rule is that a person is not
alleged vendors continued possession of the property in this case throws an
incompetent to contract merely because of advanced years or by reason of
inverse implication, a serious doubt on the due execution of the deed of
physical infirmities.
sale. Noteworthy, the same parcels of land involved in the alleged sale were still
mental faculties so as to prevent the person from properly, intelligently, and
included in the will subsequently executed by Paulina and notarized by the
firmly protecting her property rights then she is undeniably incapacitated. The
same notary public, Atty. Tagatag.
[24]
[27]
However, when such age or infirmities have impaired the
These circumstances, taken together,
unrebutted testimony of Zosima Domingo shows that at the time of the alleged
militate against unguarded acceptance of the due execution and genuineness of
execution of the deed, Paulina was already incapacitated physically and
the alleged deed of sale.
mentally. She narrated that Paulina played with her waste and urinated in
Thirdly, we have to take into account the element of consideration for the
bed. Given these circumstances, there is in our view sufficient reason to
sale. The price allegedly paid by private respondents for nine (9) parcels,
seriously doubt that she consented to the sale of and the price for her parcels of
including the three parcels in dispute, a house and a warehouse, raises further
land. Moreover, there is no receipt to show that said price was paid to and
questions. Consideration is the why of a contract, the essential reason which
received by her. Thus, we are in agreement with the trial courts finding and
moves the contracting parties to enter into the contract.
[25]
On record, there is
unrebutted testimony that Paulina as landowner was financially well off. She
loaned money to several people.
[26]
conclusion on the matter:

The whole evidence on record does not show clearly that the fictitious P850.00
We see no apparent and compelling reason
consideration was ever delivered to the vendor. Undisputably, the P850.00
for her to sell the subject parcels of land with a house and warehouse at a
consideration for the nine (9) parcels of land including the house and bodega is
meager price of P850 only.
grossly and shockingly inadequate, and the sale is null and void ab initio.
In Rongavilla vs. CA, 294 SCRA 289 (1998), private respondents were in their
WHEREFORE, the petition is GRANTED. The decision and resolution of the
advanced years, and were not in dire need of money, except for a small amount
Court of Appeals dated August 29, 1996 and December 11, 1996, respectively, are
of P2,000 which they said were loaned by petitioners for the repair of their
REVERSED and SET ASIDE. The decision of the Regional Trial Court of Batac,
houses roof. We ruled against petitioners, and declared that there was no valid
Ilocos Norte, Branch 17, dated March 23, 1994, is REINSTATED. Costs against
sale because of lack of consideration.
private respondents. SO ORDERED.
[28]

172
Civil Case No. 3091-V-89 is a Complaint for Annulment of Deed of Absolute Sale
SPS. BAUTISTA vs. SILVA (G.R. No. 157434, 19-Sept-2006)21
and Transfer Certificate of Title (TCT) No. V-2765, Reconveyance and Damages
DECISION
filed with the RTC, Branch 171, Valenzuela, Metro Manila by Berlina F. Silva
AUSTRIA-MARTINEZ, J.:
(Berlina), through Hermes Dorado (Dorado) as Attorney-in-Fact, against
To establish his status as a buyer for value in good faith, a person dealing with
land registered in the name of and occupied by the seller need only show that he
1
relied on the face of the seller's certificate of title. But for a person dealing with
land registered in the name of and occupied by the seller whose capacity to sell
2
is restricted, such as by Articles 166 and 173 of the Civil Code or Article 124 of
the Family Code, he must show that he inquired into the latter's capacity to sell
5
Spouses Claro and Nida Bautista (Spouses Bautista). Spouses Bautista filed their
8
Answer and a Third-Party Complaint against Berlina's husband, Pedro M. Silva

9
(Pedro). In an Order dated August 6, 1991, the RTC declared third-party

defendant Pedro in default for failure to file an answer to the Third-Party
Complaint.
10
The undisputed facts of the case, as found by the RTC, are as follows:
in order to establish himself as a buyer for value in good faith. The extent of his
1. That Transfer Certificate of Title No. B-37189 of the Registry of Deeds for xxx
inquiry depends on the proof of capacity of the seller. If the proof of capacity
Metro Manila District III over a parcel of land (Lot 42, Block 10, of the
consists of a special power of attorney duly notarized, mere inspection of the
subdivision plan (LRC) Psd-210217, Sheet 2, being a portion of Lot 903, Malinta
face of such public document already constitutes sufficient inquiry. If no such
Estate, LRC Record No. 5941) situated in xxx Barrio of Parada, Valenzuela, Metro
special power of attorney is provided or there is one but there appear flaws in
Manila, containing an area of 216 square meters, more or less, was registered in
its notarial acknowledgmentmere inspection of the document will not do; the
the names of Spouses Berlina F. Silva and Pedro M. Silva on August 14, 1980;
buyer must show that his investigation went beyond the document and into the
2. That on March 3, 1988, Pedro M. Silva, for himself and as attorney-in-fact of
circumstances of its execution.
his wife Berlina F. Silva, thru a Special Power of Attorney purportedly executed
Appealed by Petition for Review on Certiorari under Rule 45 of the Rules of

6
Court are the November 21, 2001 Decision of the Court of Appeals (CA) in CA7
on November 18, 1987 by Berlina F. Silva in his favor, signed and executed a
Deed of Absolute Sale over the said parcel of land covered by Transfer
G.R. CV No. 48767 which affirmed in toto the January 10, 1995 Decision of the
Certificate of Title No. B-37189 in favor of defendants-spouses Claro Bautista and
Regional Trial Court (RTC) in Civil Case No. 3091-V-89, and the February 27,
Nida Bautista; and
2003 CA Resolution which denied the motion for reconsideration.
3. That as a consequence, Transfer Certificate of Title No. 37189 was cancelled

and in lieu thereof, Transfer Certificate of Title No. V-2765 of the Registry of
21 Void Contracts

Deeds for the Valenzuela Branch was issued in the names of Spouses Claro
Bautista and Nida Bautista on March 4, 1988.
11
173
M. Silva, condemning the third-party defendant Pedro Silva to indemnify/pay

third-party plaintiffs Spouses Claro Bautista and Nida Bautista the amount of
Based on the evidence presented, the RTC also found that the signature
Seventy Thousand Pesos (P70,000.00) the contract price of the sale of the
appearing on the Special Power of Attorney (SPA) as that of Berlina Silva is a
property, with interest at the legal rate from the date of the execution of the said
forgery, and that consequently the Deed of Absolute Sale executed by Pedro in
document on March 3, 1988 until the amount is fully paid and for whatever
favor of Spouses Bautista is not authorized by Berlina.
12
The RTC rendered judgment on January 10, 1995, the decretal portion of which
amount that the thirdparty plaintiffs were adjudged and paid to the plaintiff by
reason of this decision and the costs of suit.
13
reads:
SO ORDERED.
WHEREFORE, Judgment is hereby rendered:
Spouses Bautista filed an appeal with the CA which, in its November 21, 2001
14
1. Declaring the Deed of Absolute Sale dated March 3, 1988 executed by Pedro M.
Decision, affirmed in toto the RTC decision; and, in a Resolution

15
Silva, for himself and as attorney-in-fact of Berlina F. Silva, in favor of
dated February 27, 2003, denied the Motion for Reconsideration.
defendants-spouses Claro Bautista and Nida Bautista over the parcel of land,
Hence, the herein petition filed by Spouses Bautista praying that the CA
described and covered by Transfer Certificate of Title No. B-37189 Metro Manila
Decision and Resolution be annulled and set aside on the following grounds:
District III, null and void and the resulting Transfer Certificate of Title No. V-
I. Respondent as represented by Hermes Dorado in his capacity as attorney-in-
2765 of Valenzuela Registry in the name of Spouses Claro Bautista and Nida
fact has no legal authority to file action against spouses petitioners.
Bautista cancelled and that Transfer Certificate of Title No. B-37189 reinstated.
II. The petitioners are considered as purchasers in good faith and for value
2. Ordering defendants to reconvey the property covered by the said Transfer
having relied upon a Special Power of Attorney which appears legal, valid and
Certificate of Title No. V-2765 together with the improvements thereon to the
genuine on its face.
plaintiff.
III. Gratia argumenti that the special power of attorney is a forgery and the deed
3. Condemning the defendants to pay the plaintiff the sum of P5,000.00 in the
of sale executed by the husband is null and void, the nullity [thereof] does not
concept of reasonable attorney's fees and the costs of suit.
include the one half share of the husband.
Defendants' counterclaim is dismissed.
The petition fails for lack of merit.
Judgment on default is hereby entered in favor of the third-party plaintiffs

Spouses Claro Bautista and Nida Bautista against third-party defendants Pedro
16

174
As to the first ground, petitioners argue that for lack of authority of Dorado to
convincing evidence that respondent did not sign the SPA, and on the
represent respondent, the latter's Complaint failed to state a cause of action and
uncontroverted Certification of Dorado that respondent was in Germany
should have been dismissed.
17
working as a nurse when the SPA was purportedly executed in 1987.
The argument holds no water.
The SPA being a forgery, it did not vest in Pedro any authority to alienate the
True, there was no written authority for Dorado to represent respondent in the
subject property without the consent of respondent. Absent such marital
filing of her Complaint. However, no written authorization of Dorado was
consent, the deed of sale was a nullity.
needed because the Complaint was actually filed by respondent, and not merely
But then petitioners disclaim any participation in the forgery of the SPA or in
through Dorado as her attorney-in-fact. As correctly observed by the CA,
the unauthorized sale of the subject property. They are adamant that even with
18
27
respondent herself signed the verification attached to the Complaint. She
their knowledge that respondent was in Germany at the time of the sale, they
stated therein that she is the plaintiff in Civil Case No. 3091-V-89 and that she
acted in good faith when they bought the subject property from Pedro alone
19
caused the preparation of the Complaint. Respondent also personally testified

20
because the latter was equipped with a SPA which contains a notarial
28
on the facts alleged in her Complaint. In reality, respondent acted for and by
acknowledgment that the same is valid and authentic. They invoke the status
herself, and not through any representative, when she filed the Complaint.
of buyers in good faith whose registered title in the property is already
Therefore, respondent being the real party in interest, by virtue of the then
indefeasible and against which the remedy of reconveyance is no longer
21
22
29
prevailing Articles 166 and 173 of the Civil Code, the Complaint she filed
available. In the alternative, petitioners offer that should respondent be
sufficiently stated a cause of action. The sufficiency of the Complaint was not
declared entitled to reconveyance, let it affect her portion only but not that of
affected by the inclusion of Dorado as party representative for this was an
Pedro.
23
30
obvious error which, under Section 11 of Rule 3, is not a ground for dismissal, as
Whether or not petitioners are buyers for value in good faith is a question of fact
it may be corrected by the court, on its own initiative and at any stage of the
not cognizable by us in a petition for review. We resolve only questions of law;
action, by dropping such party from the complaint.
31
24
we do not try facts nor examine testimonial or documentary evidence on record.
Anent the second ground, there is no merit to petitioners' claim that they are
We leave these to the trial and appellate courts to whose findings and
purchasers in good faith.
conclusions we accord great weight and respect, especially when their findings
That the SPA is a forgery is a finding of the RTC and the CA on a question of
concur. We may have at times reversed their findings and conclusions but we
32
especially as it is based on the
resort to this only under exceptional circumstances as when it is shown that said
expert opinion of the NBI which constitutes more than clear, positive and
courts failed to take into account certain relevant facts which, if properly
25
fact. The same is conclusive upon the Court,
26
33
considered, would justify a different conclusion. No such exceptional

175
circumstance obtains in the present case for we find the conclusions of the RTC
order to determine the seller's title and capacity to transfer any interest in the
and CA supported by the established facts and applicable law. However, we do
property. Under such circumstance, it is no longer sufficient for said buyer to
not fully subscribe to some of their views on why petitioners cannot be
merely show that he relied on the face of the title; he must now also show that
considered in good faith, as we will discuss below.
he exercised reasonable precaution by inquiring beyond the title. Failure to
A holder of registered title may invoke the status of a buyer for value in good
exercise such degree of precaution makes him a buyer in bad faith.
42
43
34
faith as a defense against any action questioning his title. Such status, however,
is never presumed but must be proven by the person invoking it.
35
44
In the present case, petitioners were dealing with a seller (Pedro) who had title
to and possession of the land but, as indicated on the face of his title, whose
A buyer for value in good faith is one who buys property of another, without
capacity to sell was restricted, in that the marital consent of respondent is
notice that some other person has a right to, or interest in, such property and
required before he could convey the property. To prove good faith then,
pays full and fair price for the same, at the time of such purchase, or before he
petitioners must show that they inquired not only into the title of Pedro but also
has notice of the claim or interest of some other persons in the property. He
into his capacity to sell.
buys the property with the well-founded belief that the person from whom
According to petitioners, to determine Pedro's capacity to sell, they conducted
he receives the thing had title to the property and capacity to convey it.
36
the following forms of inquiry: first, they inspected the photocopy of the SPA
45
To prove good faith, a buyer of registered and titled land need only show that he
presented to them by Pedro; second, they brought said copy to Atty. Lorenzo
relied on the face of the title to the property. He need not prove that he made
Lucero (the notary public who prepared the deed of sale) and asked whether it
further inquiry for he is not obliged to explore beyond the four corners of the
was genuine; and third, they inspected the original copy of the SPA after they
46
47
title. Such degree of proof of good faith, however, is sufficient only when the
advanced payment of Php55,000.00 to Pedro. Essentially, petitioners relied on
following conditions concur: first, the seller is the registered owner of the
the SPA, specifically on its notarial acknowledgment which states that
37
land;
38
39
second, the latter is in possession thereof; and third, at the time of the
sale, the buyer was not aware of any claim or interest of some other person in
40
respondent appeared before the notary public and acknowledged having

executed the SPA in favor of Pedro.
the property, or of any defect or restriction in the title of the seller or in his
The RTC and CA, however, found such inquiry superficial. They expected of
41
petitioners an investigation not only into the whereabouts of respondent at the
capacity to convey title to the property.
48
Absent one or two of the foregoing conditions, then the law itself puts the buyer
time of the execution of the SPA but also into the genuineness of the signature
on notice and obliges the latter to exercise a higher degree of diligence by
appearing on it.
scrutinizing the certificate of title and examining all factual circumstances in
49

176
We find such requirements of the RTC and CA too stringent that to adopt them
therefore, is described by the question, did the grantee make a choice
would be to throw commerce into madness where buyers run around to probe
between not knowing and finding out the truth; or were the circumstances
the circumstances surrounding each piece of sales document while sellers
such that he was not faced with that choice? (Emphasis ours)
scramble to produce evidence of its good order. Remember that it is not just any
This means that no automatic correlation exists between the state of forgery of a
scrap of paper that is under scrutiny but a SPA, the execution and attestation of
document and the bad faith of the buyer who relies on it. A test has to be done
which a notary public has intervened.
whether the buyer had a choice between knowing the forgery and finding it out,
To what extent, therefore, should an inquiry into a notarized special power of
or he had no such choice at all.
attorney go in order for one to qualify as a buyer for value in good faith?
When the document under scrutiny is a special power of attorney that is duly
We agree with one author who said:
notarized, we know it to be a public document where the notarial
x x x To speak of "notice", as applied to the grantee, is to follow the language of
acknowledgment is prima facie evidence of the fact of its due execution. A
the Statue of Elizabeth. Its proviso protects the man who purchases "upon good
buyer presented with such a document would have no choice between knowing
consideration and bona fide * * * not having at the time * * * any manner of
and finding out whether a forger lurks beneath the signature on it. The notarial
notice or knowledge." The term "notice", however, is really but an approach to
acknowledgment has removed that choice from him and replaced it with a
the test of good faith, and all modern legislation tends toward that point.
presumption sanctioned by law that the affiant appeared before the notary
Thus, some present day statutes (outside of the Uniform Law) may speak of
notice, actual and constructive, and define both terms, but they should be
"liberally construed, so as to protect bona fide purchaser for value." They may
require the grantee to have "knowledge" of the debtor's intent, but save for
technical purposes of pleading, the term is read in the light of the rules we are
studying. It comes always to a question of the grantee's good faith as distinct
from mere negligence.
50
There must, indeed, be more than negligence. There must be a conscious

turning away from the subject x x x. As put by the Supreme Court, the
grantee must take the consequences if he "chooses to remain ignorant of
what the necessities of the case require him to know." The search,
51
public and acknowledged that he executed the document, understood its import
and signed it. In reality, he is deprived of such choice not because he is
incapable of knowing and finding out but because, under our notarial system,
he has been given the luxury of merely relying on the presumption of regularity
of a duly notarized SPA. And he cannot be faulted for that because it is precisely
that fiction of regularity which holds together commercial transactions across
borders and time.
In sum, all things being equal, a person dealing with a seller who has
possession and title to the property but whose capacity to sell is restricted,
qualifies as a buyer in good faith if he proves that he inquired into the title of
the seller as well as into the latter's capacity to sell; and that in his inquiry, he
relied on the notarial acknowledgment found in the seller's duly notarized

177
special power of attorney. He need not prove anything more for it is already the
attorney, but because the latter had actual notice of facts that should have put
function of the notarial acknowledgment to establish the appearance of the
them on deeper inquiry into the capacity to sell of the seller.
parties to the document, its due execution and authenticity.
52
In the present case, petitioners knew that Berlina was in Germany at the time
Note that we expressly made the foregoing rule applicable only under the
they were buying the property and the SPA relied upon by petitioners has a
operative words "duly notarized" and "all things being equal." Thus, said rule
defective notarial acknowledgment. The SPA was a mere photocopy and we are
should not apply when there is an apparent flaw afflicting the notarial
not convinced that there ever was an original copy of said SPA as it was only this
acknowledgment of the special power of attorney as would cast doubt on the
photocopy that was testified to by petitioner Nida Bautista and offered into
due execution and authenticity of the document; or when the buyer has actual
evidence by her counsel. We emphasize this fact because it was actually this
notice of circumstances outside the document that would render suspect its
photocopy that was relied upon by petitioners before they entered into the deed
genuineness.
of sale with Pedro. As admitted to by petitioner Nida Bautista, upon inspection
56
57
In Domingo v. Reed, we found that the special power of attorney relied upon by
of the photocopy of the SPA, they gave Pedro an advanced payment of
the buyers contained a defective notarial acknowledgment in that it stated there
Php55,000.00; this signifies that, without further investigation on the SPA,
that only the agent-wife signed the document before the notary public while the
petitioners had agreed to buy the subject property from Pedro.
principal-husband did not. Such flaw rendered the notarial acknowledgment of
But then said photocopy of the SPA contains no notarial seal. A notarial seal is a
no effect and reduced the special power of attorney into a private document. We
mark, image or impression on a document which would indicate that the notary
declared the buyer who relied on the private special power of attorney a buyer
public has officially signed it. There being no notarial seal, the signature of
in bad faith.
the notary public on the notarial certificate was therefore incomplete. The
53
58
In Lao v. Villones-Lao, and Estacio v. Jaranilla, we found that the buyers knew
notarial certificate being deficient, it was as if the notarial acknowledgment was
of circumstances extrinsic to the special power of attorney which put in
unsigned. The photocopy of the SPA has no notarial acknowledgment to speak
question the actual execution of said document. In Domingo Lao, the buyer
of. It was a mere private document which petitioners cannot foist as a banner of
knew that the agent-wife was estranged from the principal-husband but was
good faith.
living within the same city. In theEstacio case, we found admissions by the
All told, it was not sufficient evidence of good faith that petitioners merely
buyers that they knew that at the time of the purported execution of the special
relied on the photocopy of the SPA as this turned out to be a mere private
power of attorney, the alleged principal was not in the Philippines. In both cases
document. They should have adduced more evidence that they looked beyond it.
we held that the buyers were not in good faith, not because we found any
They did not. Instead, they took no precautions at all. They verified with Atty.
outward defect in the notarial acknowledgment of the special powers of
Lucero whether the SPA was authentic but then the latter was not the notary
54
55

public who prepared the document. Worse, they purposely failed to inquire who
was the notary public who prepared the SPA. Finally, petitioners conducted the
transaction in haste. It took them all but three days or from March 2 to 4, 1988
to enter into the deed of sale, notwithstanding the restriction on the capacity to
59
sell of Pedro. In no way then may petitioners qualify as buyers for value in
good faith.
That said, we come to the third issue on whether petitioners may retain the
portion of Pedro Silva in the subject property. Certainly not. It is well-settled
that the nullity of the sale of conjugal property contracted by the husband
without the marital consent of the wife affects the entire property, not just the
60
share of the wife. We see no reason to deviate from this rule.

WHEREFORE, the petition is hereby DENIED. The Decision dated November
21, 2001 and Resolution dated February 27, 2003 of the Court of Appeal
are AFFIRMED.
Costs against petitioners.
SO ORDERED
178

HULST vs. PR BUILDERS, INC. (G.R. No. 156364 , 3-Sept-2007)22
2) Pay complainant the sum of P297,000.00 as actual damages;
DECISION
3) Pay complainant the sum of P100,000.00 by way of moral damages;
4) Pay complainant the sum of P150,000.00 as exemplary damages;
Before the Court is a Petition for Review on Certiorari under Rule 45 of the
179
5) P50,000.00 as attorney's fees and for other litigation expenses; and
Revised Rules of Court assailing the Decision dated October 30, 2002 of the
6) Cost of suit.
Court of Appeals (CA) in CA-G.R. SP No. 60981.

SO ORDERED.
The facts:
Meanwhile, spouses Hulst divorced. Ida assigned her rights over the purchased
Jacobus Bernhard Hulst (petitioner) and his spouse Ida Johanna Hulst-Van
property to petitioner. From then on, petitioner alone pursued the case.
Ijzeren (Ida), Dutch nationals, entered into a Contract to Sell with PR Builders,
Inc. (respondent), for the purchase of a 210-sq m residential unit in respondent's
townhouse project in Barangay Niyugan, Laurel, Batangas.
On August 21, 1997, the HLURB Arbiter issued a Writ of Execution addressed to
the Ex-Officio Sheriff of the Regional Trial Court of Tanauan, Batangas directing
the latter to execute its judgment.
When respondent failed to comply with its verbal promise to complete the
project by June 1995, the spouses Hulst filed before the Housing and Land Use
Regulatory Board (HLURB) a complaint for rescission of contract with interest,
damages and attorney's fees, docketed as HLRB Case No. IV6-071196-0618.
On April 13, 1998, the Ex-Officio Sheriff proceeded to implement the Writ of
Execution. However, upon complaint of respondent with the CA on a Petition
for Certiorari and Prohibition, the levy made by the Sheriff was set aside,
6
requiring the Sheriff to levy first on respondent's personal properties. Sheriff

On April 22, 1997, HLURB Arbiter Ma. Perpetua Y. Aquino (HLURB Arbiter)
2
rendered a Decision in favor of spouses Hulst, the dispositive portion of which
Jaime B. Ozaeta (Sheriff) tried to implement the writ as directed but the writ
was returned unsatisfied.
reads:
On January 26, 1999, upon petitioner's motion, the HLURB Arbiter issued an
WHEREFORE, premises considered, judgment is hereby rendered in favor of the
Alias Writ of Execution.
complainant, rescinding the Contract to Sell and ordering respondent to:

On March 23, 1999, the Sheriff levied on respondent's 15 parcels of land covered
1) Reimburse complainant the sum of P3,187,500.00, representing the purchase
price paid by the complainants to P.R. Builders, plus interest thereon at the rate
by 13 Transfer Certificates of Title (TCT) in Barangay Niyugan, Laurel,

Batangas.
10
of twelve percent (12%) per annum from the time complaint was filed;
In a Notice of Sale dated March 27, 2000, the Sheriff set the public auction of the
22 Void Contracts
levied properties on April 28, 2000 at 10:00 a.m..
11

180
Two days before the scheduled public auction or on April 26, 2000, respondent
definitely cannot agree with the position of the Complainants and the Sheriff
filed an Urgent Motion to Quash Writ of Levy with the HLURB on the ground
that the aggregate value of the 12,864.00-square meter levied properties is only
that the Sheriff made an overlevy since the aggregate appraised value of the
around PhP6,000,000.00. The disparity between the two valuations are [sic] so
levied properties at P6,500.00 per sq m is P83,616,000.00, based on the Appraisal
egregious that the Sheriff should have looked into the matter first before
12
Report of Henry Hunter Bayne Co., Inc. dated December 11, 1996, which is over
and above the judgment award.
13
proceeding with the execution sale of the said properties, especially when the
auction sale proceedings was seasonably objected by Respondent's counsel, Atty.
At 10:15 a.m. of the scheduled auction date of April 28, 2000, respondent's
Noel Mingoa. However, instead of resolving first the objection timely posed by
counsel objected to the conduct of the public auction on the ground that
Atty. Mingoa, Sheriff Ozaete totally disregarded the objection raised and,
respondent's Urgent Motion to Quash Writ of Levy was pending resolution.
posthaste, issued the corresponding Certificate of Sale even prior to the
Absent any restraining order from the HLURB, the Sheriff proceeded to sell the
payment of the legal fees (pars. 7 & 8, Sheriff's Return).
15 parcels of land. Holly Properties Realty Corporation was the winning bidder
While we agree with the Complainants that what is material in an execution sale
for all 15 parcels of land for the total amount of P5,450,653.33. The sum
proceeding is the amount for which the properties were bidded and sold during
of P5,313,040.00 was turned over to the petitioner in satisfaction of the judgment
the public auction and that, mere inadequacy of the price is not a sufficient
award after deducting the legal fees.
14
ground to annul the sale, the court is justified to intervene where the
At 4:15 p.m. of the same day, while the Sheriff was at the HLURB office to remit
inadequacy of the price shocks the conscience (Barrozo vs. Macaraeg, 83 Phil.
the legal fees relative to the auction sale and to submit the Certificates of
378). The difference between PhP83,616,000.00 and Php6,000,000.00 is
Sale for the signature of HLURB Director Belen G. Ceniza (HLURB Director),
PhP77,616,000.00 and it definitely invites our attention to look into the
he received the Order dated April 28, 2000 issued by the HLURB Arbiter to
proceedings had especially so when there was only one bidder, the HOLLY
15
suspend the proceedings on the matter.
16
Four months later, or on August 28, 2000, the HLURB Arbiter and HLURB
Director issued an Order setting aside the sheriff's levy on respondent's real
17
properties, reasoning as follows:
PROPERTIES REALTY CORPORATION represented by Ma, Chandra Cacho (par.

7, Sheriff's Return) and the auction sale proceedings was timely objected by
Respondent's counsel (par. 6, Sheriff's Return) due to the pendency of the
Urgent Motion to Quash the Writ of Levy which was filed prior to the execution
sale.
While we are not making a ruling that the fair market value of the levied
properties is PhP6,500.00 per square meter (or an aggregate value of
PhP83,616,000.00) as indicated in the Hunter Baynes Appraisal Report, we
Besides, what is at issue is not the value of the subject properties as

determined during the auction sale, but the determination of the value of

181
21
the properties levied upon by the Sheriff taking into consideration
Macaraeg does not apply since said case stated that "when there is a right to
Section 9(b) of the 1997 Rules of Civil Procedure x x x.
redeem inadequacy of price should not be material" holds no water as what is
xxxx
obtaining in this case is not "mere inadequacy," but an inadequacy that shocks
22
It is very clear from the foregoing that, even during levy, the Sheriff has to
consider the fair market value of the properties levied upon to determine
whether they are sufficient to satisfy the judgment, and any levy in excess of the
judgment award is void (Buan v. Court of Appeals, 235 SCRA 424).
the senses; that Buan v. Court of Appeals properly applies since the questioned
levy covered 15 parcels of land posited to have an aggregate value
of P83,616,000.00 which shockingly exceeded the judgment debt of only
around P6,000,000.00.
23
Without filing a motion for reconsideration, petitioner took the present
18
x x x x (Emphasis supplied).
recourse on the sole ground that:

The dispositive portion of the Order reads:
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING
WHEREFORE, the levy on the subject properties made by the Ex-Officio Sheriff
of the RTC of Tanauan, Batangas, is hereby SET ASIDE and the said Sheriff is
THE ARBITER'S ORDER SETTING ASIDE THE LEVY MADE BY THE SHERIFF
ON THE SUBJECT PROPERTIES.
24
hereby directed to levy instead Respondent's real properties that are reasonably
sufficient to enforce its final and executory judgment, this time, taking into
consideration not only the value of the properties as indicated in their
respective tax declarations, but also all the other determinants at arriving at a
fair market value, namely: the cost of acquisition, the current value of like
properties, its actual or potential uses, and in the particular case of lands, their
the HLURB setting aside the levy made by the sheriff, it behooves this Court to
address a matter of public and national importance which completely escaped
the attention of the HLURB Arbiter and the CA: petitioner and his wife are
foreign nationals who are disqualified under the Constitution from owning real
property in their names.
size, shape or location, and the tax declarations thereon.

SO ORDERED.
Before resolving the question whether the CA erred in affirming the Order of
Section 7 of Article XII of the 1987 Constitution provides:
19
A motion for reconsideration being a prohibited pleading under Section 1(h),

Rule IV of the 1996 HLURB Rules and Procedure, petitioner filed a Petition
for Certiorari and Prohibition with the CA on September 27, 2000.
Sec. 7. Save in cases of hereditary succession, no private lands shall be

transferred
or
conveyed
except
to
individuals,
corporations,
or
associations qualified to acquire or hold lands of the public domain.

(Emphasis supplied).
20
On October 30, 2002, the CA rendered herein assailed Decision dismissing the
petition.
The
CA
held
that
petitioner's
insistence
that Barrozo v.
The capacity to acquire private land is made dependent upon the capacity to
acquire or hold lands of the public domain. Private land may be transferred or

182
32
conveyed only to individuals or entities "qualified to acquire lands of the public
This rule, however, is subject to exceptions that permit the return of that
domain." The 1987 Constitution reserved the right to participate in the
which may have been given under a void contract to: (a) the innocent party
disposition, exploitation, development and utilization of lands of the public
(Arts. 1411-1412, Civil Code); (b) the debtor who pays usurious interest (Art. 1413,
25
domain for Filipino citizens or corporations at least 60 percent of the capital of

26
33
34
Civil Code); (c) the party repudiating the void contract before the illegal
which is owned by Filipinos. Aliens, whether individuals or corporations, have
purpose is accomplished or before damage is caused to a third person
been disqualified from acquiring public lands; hence, they have also been
and if public interest is subserved by allowing recovery (Art. 1414, Civil
27
35
disqualified from acquiring private lands.
Code); (d) the incapacitated party if the interest of justice so demands (Art.
Since petitioner and his wife, being Dutch nationals, are proscribed under the
1415, Civil Code); (e) the party for whose protection the prohibition by law is
Constitution from acquiring and owning real property, it is unequivocal that the
intended if the agreement is not illegal per se but merely prohibited and if
Contract to Sell entered into by petitioner together with his wife and
public policy would be enhanced by permitting recovery (Art. 1416, Civil
respondent is void. Under Article 1409 (1) and (7) of the Civil Code, all contracts
Code); and (f) the party for whose benefit the law has been intended such as in
whose cause, object or purpose is contrary to law or public policy and those
price ceiling laws (Art. 1417, Civil Code) and labor laws (Arts. 1418-1419, Civil
expressly prohibited or declared void by law are inexistent and void from the
Code).
beginning. Article 1410 of the same Code provides that the action or defense for
It is significant to note that the agreement executed by the parties in this case is
the declaration of the inexistence of a contract does not prescribe. A void
a Contract to Sell and not a contract of sale. A distinction between the two is
36
37
28
contract is equivalent to nothing; it produces no civil effect. It does not create,

modify or extinguish a juridical relation.
29
38
39
material in the determination of when ownership is deemed to have been

transferred to the buyer or vendee and, ultimately, the resolution of the
Generally, parties to a void agreement cannot expect the aid of the law; the
question on whether the constitutional proscription has been breached.
courts leave them as they are, because they are deemed in pari delicto or "in
In a contract of sale, the title passes to the buyer upon the delivery of the thing
30
equal fault." In pari delicto is "a universal doctrine which holds that no action
sold. The vendor has lost and cannot recover the ownership of the property
arises, in equity or at law, from an illegal contract; no suit can be maintained for
until and unless the contract of sale is itself resolved and set aside. On the
its specific performance, or to recover the property agreed to be sold or
other hand, a contract to sell is akin to a conditional sale where the efficacy or
delivered, or the money agreed to be paid, or damages for its violation; and
obligatory force of the vendor's obligation to transfer title is subordinated to the
where the parties are in pari delicto, no affirmative relief of any kind will be
happening of a future and uncertain event, so that if the suspensive condition
given to one against the other."
31
40
does not take place, the parties would stand as if the conditional obligation had
41
never existed. In other words, in a contract to sell, the prospective seller agrees

183
to transfer ownership of the property to the buyer upon the happening of an
modification is meant to correct erroneous conclusions of fact or law and
event, which normally is the full payment of the purchase price. But even upon
whether it was made by the court that rendered it or by the highest court of the
the fulfillment of the suspensive condition, ownership does not automatically
land. The only recognized exceptions to the general rule are the correction of
transfer to the buyer. The prospective seller still has to convey title to the
clerical errors, the so-called nunc pro tunc entries which cause no prejudice to
prospective buyer by executing a contract of absolute sale.
42
45
any party, void judgments, and whenever circumstances transpire after the
46
Since the contract involved here is a Contract to Sell, ownership has not yet
finality of the decision rendering its execution unjust and inequitable. None of
transferred to the petitioner when he filed the suit for rescission. While the
the exceptions is present in this case. The HLURB decision cannot be considered
intent to circumvent the constitutional proscription on aliens owning real
a void judgment, as it was rendered by a tribunal with jurisdiction over the
property was evident by virtue of the execution of the Contract to Sell, such
subject matter of the complaint.
violation of the law did not materialize because petitioner caused the rescission
Ineluctably, the HLURB Decision resulted in the unjust enrichment of petitioner
of the contract before the execution of the final deed transferring ownership.
at the expense of respondent. Petitioner received more than what he is entitled
Thus, exception (c) finds application in this case. Under Article 1414, one who
to recover under the circumstances.
repudiates the agreement and demands his money before the illegal act has
Article 22 of the Civil Code which embodies the maxim, nemo ex alterius
taken place is entitled to recover. Petitioner is therefore entitled to recover what
incommode debet lecupletari (no man ought to be made rich out of another's
he has paid, although the basis of his claim for rescission, which was granted by
injury), states:
the HLURB, was not the fact that he is not allowed to acquire private land under
Art. 22. Every person who through an act of performance by another, or any
the Philippine Constitution. But petitioner is entitled to the recovery only of the
other means, acquires or comes into possession of something at the expense of
amount of P3,187,500.00, representing the purchase price paid to respondent.
the latter without just or legal ground, shall return the same to him.
No damages may be recovered on the basis of a void contract; being nonexistent,

43
the agreement produces no juridical tie between the parties involved. Further,
44
petitioner is not entitled to actual as well as interests thereon, moral and

exemplary damages and attorney's fees.
47
The above-quoted article is part of the chapter of the Civil Code on Human
Relations, the provisions of which were formulated as basic principles to be
observed for the rightful relationship between human beings and for the
stability of the social order; designed to indicate certain norms that spring from
The Court takes into consideration the fact that the HLURB Decision dated
the fountain of good conscience; guides for human conduct that should run as
April 22, 1997 has long been final and executory. Nothing is more settled in the
golden threads through society to the end that law may approach its supreme
law than that a decision that has acquired finality becomes immutable and
ideal which is the sway and dominance of justice. There is unjust enrichment
unalterable and may no longer be modified in any respect even if the
48

184
when a person unjustly retains a benefit at the loss of another, or when a person
The Court shall now proceed to resolve the single issue raised in the present
retains money or property of another against the fundamental principles of
petition: whether the CA seriously erred in affirming the HLURB Order setting
justice, equity and good conscience.
49
aside the levy made by the Sheriff on the subject properties.
A sense of justice and fairness demands that petitioner should not be allowed to
Petitioner avers that the HLURB Arbiter and Director had no factual basis for
benefit from his act of entering into a contract to sell that violates the
pegging the fair market value of the levied properties at P6,500.00 per sq m
constitutional proscription.
or P83,616,000.00; that reliance on the appraisal report was misplaced since the
This is not a case of equity overruling or supplanting a positive provision of law
appraisal was based on the value of land in neighboring developed subdivisions
or judicial rule. Rather, equity is exercised in this case "as the complement of
and on the assumption that the residential unit appraised had already been
legal jurisdiction [that] seeks to reach and to complete justice where courts of
built; that the Sheriff need not determine the fair market value of the subject
law, through the inflexibility of their rules and want of power to adapt their
properties before levying on the same since what is material is the amount for
judgments to the special circumstances of cases, are incompetent to do so."
50
The purpose of the exercise of equity jurisdiction in this case is to prevent unjust
enrichment and to ensure restitution. Equity jurisdiction aims to do complete
justice in cases where a court of law is unable to adapt its judgments to the
special circumstances of a case because of the inflexibility of its statutory or
legal jurisdiction.
which the properties were bidded and sold during the public auction; that the
pendency of any motion is not a valid ground for the Sheriff to suspend the
execution proceedings and, by itself, does not have the effect of restraining the
Sheriff from proceeding with the execution.
Respondent, on the other hand, contends that while it is true that the HLURB
Arbiter and Director did not categorically state the exact value of the levied
51
The sheriff delivered to petitioner the amount of P5,313,040.00 representing the

net proceeds (bidded amount isP5,450,653.33) of the auction sale after
52
deducting the legal fees in the amount of P137,613.33. Petitioner is only entitled
properties, said properties cannot just amount to P6,000,000.00; that the

HLURB Arbiter and Director correctly held that the value indicated in the tax
declaration is not the sole determinant of the value of the property.
to P3,187,500.00, the amount of the purchase price of the real property paid by
The petition is impressed with merit.
petitioner to respondent under the Contract to Sell. Thus, the Court in the
If the judgment is for money, the sheriff or other authorized officer must
exercise of its equity jurisdiction may validly order petitioner to return the
execute the same pursuant to the provisions of Section 9, Rule 39 of the Revised
excess amount of P2,125,540.00.
Rules of Court, viz:

Sec. 9. Execution of judgments for money, how enforced.

185
(a) Immediate payment on demand. - The officer shall enforce an execution of a
Thus, under Rule 39, in executing a money judgment against the property of the
judgment for money by demanding from the judgment obligor the immediate
judgment debtor, the sheriff shall levy on all property belonging to the
payment of the full amount stated in the writ of execution and all lawful fees. x x
judgment debtor as is amply sufficient to satisfy the judgment and costs, and
sell the same paying to the judgment creditor so much of the proceeds as will
(b) Satisfaction by levy. - If the judgment obligor cannot pay all or part of the
satisfy the amount of the judgment debt and costs. Any excess in the proceeds
obligation in cash, certified bank check or other mode of payment acceptable to
shall be delivered to the judgment debtor unless otherwise directed by the
the judgment obligee, the officer shall levy upon the properties of the
judgment or order of the court.
judgment obligor of every kind and nature whatsoever which may be
Clearly, there are two stages in the execution of money judgments. First, the
disposed of for value and not otherwise exempt from execution, giving the
levy and then the execution sale.
latter the option to immediately choose which property or part thereof may be
Levy has been defined as the act or acts by which an officer sets apart or
levied upon, sufficient to satisfy the judgment. If the judgment obligor does not
appropriates a part or the whole of a judgment debtor's property for the purpose
exercise the option, the officer shall first levy on the personal properties, if any,
of satisfying the command of the writ of execution. The object of a levy is to
and then on the real properties if the personal properties are insufficient to
take property into the custody of the law, and thereby render it liable to the lien
answer for the judgment.
of the execution, and put it out of the power of the judgment debtor to divert it
The sheriff shall sell only a sufficient portion of the personal or real
to any other use or purpose.
property of the judgment obligor which has been levied upon.
On the other hand, an execution sale is a sale by a sheriff or other ministerial
When there is more property of the judgment obligor than is sufficient to
officer under the authority of a writ of execution of the levied property of the
satisfy the judgment and lawful fees, he must sell only so much of the
debtor.
personal or real property as is sufficient to satisfy the judgment and
In the present case, the HLURB Arbiter and Director gravely abused their
lawful fees.
discretion in setting aside the levy conducted by the Sheriff for the reason that
Real property, stocks, shares, debts, credits, and other personal property, or
the auction sale conducted by the sheriff rendered moot and academic the
any interest in either real or personal property, may be levied upon in like
motion to quash the levy. The HLURB Arbiter lost jurisdiction to act on the
manner and with like effect as under a writ of attachment (Emphasis
motion to quash the levy by virtue of the consummation of the auction sale.
supplied).
53
54
55
56
57
Absent any order from the HLURB suspending the auction sale, the sheriff
rightfully proceeded with the auction sale. The winning bidder had already paid

186
the winning bid. The legal fees had already been remitted to the HLURB. The
declaration should be taken in the context of the other declarations of the Court
judgment award had already been turned over to the judgment creditor. What
in Barrozo, to wit:
was left to be done was only the issuance of the corresponding certificates of
Another point raised by appellant is that the price paid at the auction sale was
sale to the winning bidder. In fact, only the signature of the HLURB Director for
so inadequate as to shock the conscience of the court. Supposing that this issue
58
that purpose was needed a purely ministerial act.
is open even after the one-year period has expired and after the properties have
A purely ministerial act or duty is one which an officer or tribunal performs in a
passed into the hands of third persons who may have paid a price higher than
given state of facts, in a prescribed manner, in obedience to the mandate of a
the auction sale money, the first thing to consider is that the stipulation
legal authority, without regard for or the exercise of his own judgment upon the
contains no statement of the reasonable value of the properties; and although
propriety or impropriety of the act done. If the law imposes a duty upon a public
defendant' answer avers that the assessed value wasP3,960 it also avers that
officer and gives him the right to decide how or when the duty shall be
their real market value was P2,000 only. Anyway, mere inadequacy of price
performed, such duty is discretionary and not ministerial. The duty is
which was the complaint' allegation is not sufficient ground to annul
ministerial only when the discharge of the same requires neither the exercise of
the sale. It is only where such inadequacy shocks the conscience that the
59
official discretion nor judgment. In the present case, all the requirements of
courts will intervene. x x x Another consideration is that the assessed value
auction sale under the Rules have been fully complied with to warrant the
being P3,960 and the purchase price being in effect P1,864 (P464 sale price
issuance of the corresponding certificates of sale.
plus P1,400 mortgage lien which had to be discharged) the conscience is not
And even if the Court should go into the merits of the assailed Order, the
shocked upon examining the prices paid in the sales in National Bank v.
petition is meritorious on the following grounds:
Gonzales, 45 Phil., 693 and Guerrero v. Guerrero, 57 Phil., 445, sales which were
Firstly, the reliance of the HLURB Arbiter and Director, as well as the CA,
60
61
on Barrozo v. Macaraeg and Buan v. Court of Appeals is misplaced.

The HLURB and the CA misconstrued the Court's pronouncements
in Barrozo. Barrozo involved a judgment debtor who wanted to repurchase
properties sold at execution beyond the one-year redemption period. The
statement of the Court in Barrozo, that "only where such inadequacy shocks the
conscience the courts will intervene," is at best a mere obiter dictum. This
left undisturbed by this Court.

Furthermore, where there is the right to redeem as in this case
inadequacy of price should not be material because the judgment debtor
may re-acquire the property or else sell his right to redeem and thus
recover any loss he claims to have suffered by reason of the price
obtained at the execution sale.
x x x x (Emphasis supplied).
62

187
In other words, gross inadequacy of price does not nullify an execution sale. In
the 15 levied properties was successively bidded upon and sold, one after the
an ordinary sale, for reason of equity, a transaction may be invalidated on the
other until the judgment debt and the lawful fees were fully satisfied. Holly
ground of inadequacy of price, or when such inadequacy shocks one's
Properties Realty Corporation successively bidded upon and bought each of the
conscience as to justify the courts to interfere; such does not follow when the
levied properties for the total amount of P5,450,653.33 in full satisfaction of the
law gives the owner the right to redeem as when a sale is made at public
judgment award and legal fees.
63
auction, upon the theory that the lesser the price, the easier it is for the owner
64
67
Secondly, the Rules of Court do not require that the value of the property levied
to effect redemption. When there is a right to redeem, inadequacy of price
be exactly the same as the judgment debt; it can be less or more than the
should not be material because the judgment debtor may re-acquire the
amount of debt. This is the contingency addressed by Section 9, Rule 39 of the
property or else sell his right to redeem and thus recover any loss he claims to
Rules of Court. In the levy of property, the Sheriff does not determine the exact
65
have suffered by reason of the price obtained at the execution sale. Thus,
valuation of the levied property. Under Section 9, Rule 39, in conjunction with
respondent stood to gain rather than be harmed by the low sale value of the
Section 7, Rule 57 of the Rules of Court, the sheriff is required to do only two
auctioned properties because it possesses the right of redemption. More
specific things to effect a levy upon a realty: (a) file with the register of deeds a
importantly, the subject matter in Barrozo is the auction sale, not the levy made
copy of the order of execution, together with the description of the levied
by the Sheriff.
property and notice of execution; and (b) leave with the occupant of the
The Court does not sanction the piecemeal interpretation of a decision. To get
property copy of the same order, description and notice. Records do not show
the true intent and meaning of a decision, no specific portion thereof should be
that respondent alleged non-compliance by the Sheriff of said requisites.
isolated and resorted to, but the decision must be considered in its entirety.
66
68
Thirdly, in determining what amount of property is sufficient out of which to
As regards Buan, it is cast under an entirely different factual milieu. It involved
secure satisfaction of the execution, the Sheriff is left to his own judgment. He
the levy on two parcels of land owned by the judgment debtor; and the sale at
may exercise a reasonable discretion, and must exercise the care which a
public auction of one was sufficient to fully satisfy the judgment, such that the
reasonably prudent person would exercise under like conditions and
levy and attempted execution of the second parcel of land was declared void for
circumstances, endeavoring on the one hand to obtain sufficient property to
being in excess of and beyond the original judgment award granted in favor of
satisfy the purposes of the writ, and on the other hand not to make an
the judgment creditor.
unreasonable and unnecessary levy. Because it is impossible to know the
In the present case, the Sheriff complied with the mandate of Section 9, Rule 39
precise quantity of land or other property necessary to satisfy an execution, the
of the Revised Rules of Court, to "sell only a sufficient portion" of the levied
Sheriff should be allowed a reasonable margin between the value of the property
properties "as is sufficient to satisfy the judgment and the lawful fees." Each of
levied upon and the amount of the execution; the fact that the Sheriff levies
69

upon a little more than is necessary to satisfy the execution does not render his
70
188
that is, on the assumption that the residential units appraised had already been
actions improper. Section 9, Rule 39, provides adequate safeguards against
built. The Appraiser in fact made this qualification in its Appraisal Report: "[t]he
excessive levying. The Sheriff is mandated to sell so much only of such real
property subject of this appraisal has not been constructed. The basis of the
property as is sufficient to satisfy the judgment and lawful fees.
appraiser is on the existing model units." Since it is undisputed that the
In the absence of a restraining order, no error, much less abuse of discretion,
townhouse project did not push through, the projected value did not become a
can be imputed to the Sheriff in proceeding with the auction sale despite the
reality. Thus, the appraisal value cannot be equated with the fair market value.
pending motion to quash the levy filed by the respondents with the HLURB. It is
The Appraisal Report is not the best proof to accurately show the value of the
elementary that sheriffs, as officers charged with the delicate task of the
levied properties as it is clearly self-serving.
enforcement and/or implementation of judgments, must, in the absence of a
Therefore, the Order dated August 28, 2000 of HLURB Arbiter Aquino and
restraining order, act with considerable dispatch so as not to unduly delay the
Director Ceniza in HLRB Case No. IV6-071196-0618 which set aside the sheriff's
administration of justice; otherwise, the decisions, orders, or other processes of
levy on respondent's real properties, was clearly issued with grave abuse of
71
74
the courts of justice and the like would be futile. It is not within the
discretion. The CA erred in affirming said Order.
jurisdiction of the Sheriff to consider, much less resolve, respondent's objection
WHEREFORE, the instant petition is GRANTED. The Decision dated October
to the continuation of the conduct of the auction sale. The Sheriff has no
30, 2002 of the Court of Appeals in CA-G.R. SP No. 60981 is REVERSED and SET
authority, on his own, to suspend the auction sale. His duty being ministerial,
ASIDE. The Order dated August 28, 2000 of HLURB Arbiter Ma. Perpetua Y.
he has no discretion to postpone the conduct of the auction sale.
Aquino and Director Belen G. Ceniza in HLRB Case No. IV6-071196-0618 is
Finally, one who attacks a levy on the ground of excessiveness carries the burden
declared NULL andVOID. HLURB Arbiter Aquino and Director Ceniza are
72
of sustaining that contention. In the determination of whether a levy of
directed to issue the corresponding certificates of sale in favor of the winning
execution is excessive, it is proper to take into consideration encumbrances
bidder, Holly Properties Realty Corporation. Petitioner is ordered to return to
upon the property, as well as the fact that a forced sale usually results in a
respondent the amount of P2,125,540.00, without interest, in excess of the
sacrifice; that is, the price demanded for the property upon a private sale is not
proceeds of the auction sale delivered to petitioner. After the finality of herein
73
the standard for determining the excessiveness of the levy.
judgment, the amount of P2,125,540.00 shall earn 6% interest until fully paid.
Here, the HLURB Arbiter and Director had no sufficient factual basis to
SO ORDERED.
determine the value of the levied property. Respondent only submitted an

Appraisal Report, based merely on surmises. The Report was based on the
projected value of the townhouse project after it shall have been fully developed,

QUIMPO vs. VDA. DE VELTRAN (G.R. No. 160956, 13-Feb-2008) 23
189
In 1966, Joaquin and respondents undertook an oral partition of parcel III (San
Jose property) and parcel IV. Half of the properties was given to Joaquin and the
other half to the respondents. However, no document of partition was executed,
NACHURA, J.:
[1]
This Petition for Review on Certiorari assails the July 22, 2003 Decision of the
Court of Appeals in CA-G.R. CV No. 56187, and the October 16, 2003 Resolution
denying
the
motion
for
its
reconsideration.
because Joaquin refused to execute a deed. Consuelo and Ireneo occupied their
respective shares in the San Jose property, and installed several tenants over
their share in parcel IV. Joaquin, on the other hand, became the administrator of
the remaining undivided properties and of the shares of respondents Danilo,
Eustaquia Perfecto-Abad (Eustaquia) was the owner of several parcels of land in
Marites,
Anita
and
Helen,
who
were
still
minors
at
that
time.
Goa, Camarines Sur, described as follows:

In 1989, Danilo, Marites, Anita and Helen wanted to take possession of the
Parcel I - Residential land situated at Abucayan, Goa, Camarines Sur covering an
area
of
684
square-meters;
portions allotted to them, but Joaquin prevented them from occupying the same.
Joaquin also refused to heed respondents demand for partition of parcels I and
II, prompting respondents to file a complaint for judicial partition and/or
Parcel II Coconut land situated at Abucayan, Goa, Camarines Sur covering an

area
of
4.3731
hectares;
Parcel III Residential land situated at San Jose Street, Goa, Camarines Sur
covering
an
area
of
1,395
square
meters;
and
recovery of possession with accounting and damages with the Regional Trial
Court
(RTC)
of
Camarines
Sur.
[3]
Joaquin denied the material allegations in the complaint, and averred, as his
special and affirmative defenses, lack of cause of action and prescription. He
asserted absolute ownership over parcels III and IV, claiming that he purchased
Parcel IV Abaca and coconut land situated at Abucayan, Goa, Camarines Sur
covering an area 42.6127 hectares.
[2]
these lands from Eustaquia in 1946, evidenced by deeds of sale executed on

August 23, 1946 and December 2, 1946. He, likewise, claimed continuous,
Eustaquia died intestate in 1948 leaving these parcels of land to her grandchild
peaceful and adverse possession of these lots since 1946, and alleged that
and great grandchildren, namely, Joaquin Quimpo and respondents Consuelo,
Consuelos occupation of the portion of the San Jose property was by mere
Ireneo,
tolerance.
Danilo,
Marites,
Anita
and
Helen,
all
surnamed
Abad.
[4]
During the pendency of the case, Joaquin died. Accordingly, he was substituted
23 Void Contracts

190
by his wife, Estela Tena-Quimpo and his children, namely, Jose, Adelia, Joaquin,
1.
Ordering the above-named substituted defendants, and the plaintiffs to
Anita, Angelita, Amelia, Arlene, Joy and Aleli, all surnamed Quimpo (the
execute their written agreement of partition with respect to parcel Nos. III and
Quimpos).
IV more particularly described in paragraph 7 of the complaint, and for them to

execute an agreement of partition with respect to parcel Nos. I and II, both
On December 12, 1996, the RTC rendered a Decision
[5]
in favor of respondents,
parcels are more particularly described in paragraph 7 of the complaint;
declaring them as co-owners of all the properties left by Eustaquia. It rejected
2.
Joaquins claim of absolute ownership over parcels III and IV, and declared void
Helen Abad the owner of six (6) hectares a portion included in parcel No. IV
the purported deeds of sale executed by Eustaquia for lack of consideration and
also described in paragraph 7 of the complaint, and therefore, entitled to its
consent. The court found that at the time of the execution of these deeds,
possession and ordering the said substituted defendants to deliver that portion
Joaquin was not gainfully employed and had no known source of income, which
to them as their share thereto;
shows that the deeds of sale state a false and fictitious consideration. Likewise,
Eustaquia could not have possibly given her consent to the sale because she was
already 91 years old at that time. The RTC also sustained the oral partition
among the heirs in 1966. According to the trial court, the possession and
occupation of land by respondents Consuelo and Ireneo, and Joaquins
3.
Declaring the plaintiffs Danilo Abad, Marites Abad, Anita Abad and
Ordering the above-named substituted defendants to pay plaintiffs the
sum of Six Thousand Pesos (P6,000.00), Philippine Currency, as reasonable

attorneys fees and the sum of One Thousand Pesos (P1,000.00) also of
Philippine Currency, as litigation expenses and for the said defendants to pay
the costs.
acquiescence for 23 years, furnish sufficient evidence that there was actual
partition of the properties. It held that Joaquin and his heirs are
The counterclaim, not being proved, the same is hereby ordered dismissed.
now estopped from claiming ownership over the entire San Jose property as well
as
over
parcel
IV.
SO ORDERED.
[6]
On appeal, the CA affirmed the RTC ruling. Sustaining the RTC, the CA declared
The RTC disposed, thus:
WHEREFORE, decision is hereby rendered in favor of the plaintiffs Consuelo
Vda. de Beltran, Ireneo Abad, Marites Abad, Danilo Abad, Anita Abad and
Helen Abad and against defendant Joaquin Quimpo, substituted by the latters
wife Estela Tena and their children, Amparo, Jose, Amelia, Joaquin Jr., Adelia,
Arlene, Anita, Joy, Angelita and Aleli, all surnamed Quimpo, as follows:
that it was plausible that Eustaquias consent was vitiated because she was then
91 years old and sickly. It was bolstered by the fact that the deeds of sale only
surfaced 43 years after its alleged execution and 23 years from the time of the
oral partition. The CA also rejected petitioners argument that the action was
barred by prescription and laches, explaining that prescription does not run
against the heirs so long as the heirs, for whose benefit prescription is invoked,

191
have not expressly or impliedly repudiated the co-ownership. The CA found no
The Quimpos insist on the validity of the deeds of sale between Joaquin and
repudiation on Joaquins part. It, therefore, concluded that respondents action
Eustaquia. They assail the probative value and weight given by the RTC and the
could
CA in favor of the respondents pieces of evidence while refusing to give
not
be
barred
by
prescription
or
laches.
credence or value to the documents they presented. Specifically, they contend

The Quimpos, thus, filed the instant petition for review on certiorari imputing
that the notarized deeds of sale and the tax declarations should have adequately
the following errors to the CA:
established
Joaquins
ownership
of
parcels
III
and
IV.
1) THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT

PETITIONERS DID NOT ACQUIRE OWNERSHIP OVER [THE] SUBJECT
The contention has no merit. Well-entrenched is the rule that the Supreme
PARCELS OF LAND BY WAY OF DEEDS OF ABSOLUTE SALE EXECUTED IN
Courts role in a petition under Rule 45 is limited to reviewing or reversing
THEIR
errors of law allegedly committed by the appellate court. Factual findings of the
FAVOR;
trial court, especially when affirmed by the Court of Appeals, are conclusive on
2) THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT CO-
the parties. Since such findings are generally not reviewable, this Court is not
OWNERSHIP EXISTS AMONG PETITIONERS AND RESPONDENTS OVER
duty-bound to analyze and weigh all over again the evidence already considered
THE
in the proceedings below, unless the factual findings complained of are devoid
SUBJECT
PARCELS
OF
LAND;
of support from the evidence on record or the assailed judgment is based on a

misapprehension
of
facts.
[8]
RESPONDENTS HAVE PROVEN THEIR FILIATION TO THE ORIGINAL

OWNER OF THE SUBJECT PARCELS OF LAND BY MERE SCANT EVIDENCE;
Petitioners fail to convince us that the CA committed reversible error in

affirming the trial court and in giving no weight to the pieces of evidence they
4) THE HONORABLE COURT OF APPEALS ERRED IN NOT RULING THAT
presented.
LACHES HAS TIMEBARRED THE RESPONDENTS FROM ASSAILING THE

ABSOLUTE OWNERSHIP OF PETITIONERS OVER THE SUBJECT PARCELS
The stated consideration for the sale are P5,000.00 and P6,000.00, respectively,
OF
an amount which was so difficult to raise in the year 1946. Respondents
LAND;
AND
established that at the time of the purported sale Joaquin Quimpo was not
RESPONDENTS ARE ENTITLED TO ATTORNEYS FEES.
[7]
gainfully employed. He was studying in Manila and Eustaquia was the one
supporting him; that when Eustaquia died two (2) years later, Joaquin was not

192
able to continue his studies. The Quimpos failed to override this. Except for the
property may have been declared for taxation purposes in the name of Joaquin
incredible and unpersuasive testimony of Joaquins daughter, Adelia Magsino,
Quimpo does not necessarily prove ownership for it is well settled that a tax
no other testimonial or documentary evidence was offered to prove that Joaquin
declaration or tax receipts are not conclusive evidence of ownership.
was duly employed and had the financial capacity to buy the subject properties
therefore, correctly found this proof inadequate to establish Joaquins claim of
in
absolute
1946.
[9]
In Rongavilla v. Court of Appeals,
[15]
The CA,
dominion.
reiterated in Cruz v. Bancom Finance
For forty-three (43) years, Consuelo and Ireneo occupied their portions of the
we held that a deed of sale, in which the stated consideration has not
San Jose property and significantly, Joaquin never disturbed their possession.
been, in fact, paid is a false contract; that it is void ab initio. Furthermore, Ocejo
They also installed tenants in parcel IV, and Joaquin did not prevent them from
[10]
Corp,
[11]
v. Flores,
ruled that a contract of purchase and sale is null and void and
doing so, nor did he assert his ownership over the same. These unerringly point
produces no effect whatsoever where it appears that the same is without cause
to the fact that there was indeed an oral partition of parcels III and IV.
or consideration which should have been the motive thereof, or the purchase
[16]
price which appears thereon as paid but which in fact has never been paid by
In Maglucot-aw v. Maglucot,
the
[P]artition may be inferred from circumstances sufficiently strong to support the
purchaser
to
the
vendor.
we held, viz.:
presumption. Thus, after a long possession in severalty, a deed of partition may

Likewise, both the trial court and the CA found that Eustaquia was 91 years old,
be presumed. It has been held that recitals in deeds, possession and occupation
weak and senile, at the time the deeds of sale were executed. In other words, she
of land, improvements made thereon for a long series of years, and acquiescence
was already mentally incapacitated by then, and could no longer be expected to
for 60 years, furnish sufficient evidence that there was an actual partition of
give her consent to the sale. The RTC and CA cannot, therefore, be faulted for
land either by deed or by proceedings in the probate court, which had been lost
not
and were not recorded.
giving
credence
to
the
deeds
of
sale
in
favor
of
Joaquin.
[17]
Petitioners also presented Tax Declaration Nos. 3650,
[12]
[13]
3708,
[14]
and 3659
Furthermore, in Hernandez v. Andal,
we explained that:
to
substantiate Joaquins claim of absolute dominion over parcels III and IV. But
we note that these tax declarations are all in the name of Eustaquia PerfectoAbad. These documents, therefore, do not support their claim of absolute
dominion since 1946, but enervate it instead. Besides, the fact that the disputed
On general principle, independent and in spite of the statute of frauds, courts of

equity have enforced oral partition when it has been completely or partly
performed.

193
Regardless of whether a parol partition or agreement to partition is valid and
the operation of the statute of frauds. It has been held that where there was a
enforceable at law, equity will in proper cases, where the parol partition has
partition in fact between tenants in common, and a part performance, a court of
actually been consummated by the taking of possession in severalty and the
equity would have regard to and enforce such partition agreed to by the parties.
exercise of ownership by the parties of the respective portions set off to each,
The CA, therefore, committed no reversible error in sustaining the oral partition
recognize and enforce such parol partition and the rights of the parties
over parcels III and IV and in invalidating the deeds of sale between Eustaquia
thereunder. Thus, it has been held or stated in a number of cases involving an
and
Joaquin.
oral partition under which the parties went into possession, exercised acts of
ownership, or otherwise partly performed the partition agreement, that equity
Similarly, we affirm the CA ruling that respondents are co-owners of the subject
will confirm such partition and in a proper case decree title in accordance with
four (4) parcels of land, having inherited the same from a common ancestor
the
Eustaquia Perfecto-Abad. Petitioners assertion that respondents failed to prove
possession
in
severalty.
their relationship to the late Eustaquia deserves scant consideration.

In numerous cases it has been held or stated that parol partitions may be
sustained on the ground of estoppel of the parties to assert the rights of a tenant
in common as to parts of land divided by parol partition as to which possession
in severalty was taken and acts of individual ownership were exercised. And a
court of equity will recognize the agreement and decree it to be valid and
effectual for the purpose of concluding the right of the parties as between each
other
to
hold
their
respective
parts
in
severalty.
During the pre-trial, Joaquin Quimpo admitted that:

Eustaquia Perfecto Abad and Diego Abad had two (2) children by the names of
Leon Abad and Joaquin Abad; that Leon Abad has three (3) children namely:
Anastacia, Wilfredo and Consuelo, all surnamed Abad; that Joaquin Abad has
only one (1) child, a daughter by the name of Amparo; that Wilfredo has four (4)
children, namely, Danilo, Helen, Marites and Anita; Amparo has one child, son
Joaquin Quimpo, x x x
[18]
A parol partition may also be sustained on the ground that the parties thereto
have acquiesced in and ratified the partition by taking possession in severalty,
exercising acts of ownership with respect thereto, or otherwise recognizing the
existence
of
the
partition.
Consuelo was the grandchild of Eustaquia, while respondents Danilo, Helen,

Marites, Anita and also Joaquin Quimpo were Eustaquias great grandchildren.
As such, respondents can rightfully ask for the confirmation of the oral partition
over parcels III and IV, and the partition of parcels I and II. Jurisprudence is
A number of cases have specifically applied the doctrine of part performance, or

have stated that a part performance is necessary, to take a parol partition out of
replete with rulings that any co-owner may demand at any time the partition of
the common property unless a co-owner has repudiated the co-ownership. This

action for partition does not prescribe and is not subject to laches.
[19]
Finally, petitioners challenge the attorneys fees in favor of respondents.
The grant of attorneys fees depends on the circumstances of each case and lies
within the discretion of the court. It may be awarded when a party is compelled
to litigate or to incur expenses to protect its interest by reason of an unjustified
act
by
the
other,
[20]
as
in
this
case.
In fine, we find no reversible error in the assailed rulings of the Court of Appeals.
WHEREFORE, the petition is DENIED. The Decision and Resolution of the

Court
of
Appeals
SO ORDERED.
in
CA-G.R.
CV
No.
56187,
are AFFIRMED.
194

SPS ALINAS vs. SPS ALINAS (G.R. No. 158040, 14-Apr-2008)24
administration
of
said
195
properties.
Sometime in 1993, petitioners discovered that their two lots were already titled
This resolves the Petition for Review on Certiorari under Rule 45 of the Rules of
in
the
name
of
respondent
spouses.
[1]
Court, praying that the Decision of the Court of Appeals (CA) dated September
25, 2002, and the CA Resolution
motion
for
[2]
dated March 31, 2003, denying petitioners'
reconsideration,
be
reversed
and
set
aside.
Records show that after Lot 896-B-9-A was extra-judicially foreclosed, Transfer
Certificate of Title (TCT) No. T-11853
[3]
covering said property was issued in the
name of mortgagee RBO on November 13, 1987. On May 2, 1988, the duly
The
factual
antecedents
of
the
case
are
as
follows.
authorized representative of RBO executed a Deed of Installment Sale of Bank's

[4]
Acquired Assets conveying Lot 896-B-9-A to respondent spouses. RBO's TCT

Spouses Onesiforo and Rosario Alinas (petitioners) separated sometime in 1982,
with Rosario moving to Pagadian City and Onesiforo moving to Manila. They
over Lot 896-B-9-A was then cancelled and on February 22, 1989, TCT No. T12664
[5]
covering said lot was issued in the name of respondent spouses.
left behind two lots identified as Lot 896-B-9-A with a bodega standing on it
and Lot 896-B-9-B with petitioners' house. These two lots are the subject of the
present
petition.
Lot 896-B-9-B was also foreclosed by the SSS and on November 17, 1986, the ExOficio City Sheriff of Ozamis City issued a Certificate of Sale
[6]
over said
property in favor of the SSS. However, pursuant to a Special Power of

Petitioner Onesiforo Alinas (Onesiforo) and respondent Victor Alinas (Victor)
are brothers. Petitioners allege that they entrusted their properties to Victor
and Elena Alinas (respondent spouses) with the agreement that any income
from rentals of the properties should be remitted to the Social Security System
Attorney
[7]
signed by Onesiforo in favor of Victor, dated March 10, 1989, the
latter was able to redeem, on the same date, Lot 896-B-9-B from the SSS for the
sum of P111,110.09. On June 19, 1989, a Certificate of Redemption
9-A with the bodega was mortgaged as security for the loan obtained from the
RBO, while Lot 896-B-9-B with the house was mortgaged to the SSS. Onesiforo
alleges that he left blank papers with his signature on them to facilitate the
was issued by
the
SSS.
(SSS) and to the Rural Bank of Oroquieta City (RBO), as such rentals were
believed sufficient to pay off petitioners' loans with said institutions. Lot 896-B-
[8]
Onesiforo's signature also appears in an Absolute Deed of Sale
[9]
likewise dated
March 10, 1989, selling Lot 896-B-9-B to respondent spouses. The records also
show
Agreement
notarized
[10]
document
dated
March
10,
1989
and
captioned
whereby petitioner Onesiforo acknowledged that his brother
Victor used his own money to redeem Lot 896-B-9-B from the SSS and, thus,
24 Void Contracts

196
Victor became the owner of said lot. In the same Agreeement, petitioner
life had struck him with a cruel blow in the form of a failed marriage that sent
Onesiforo waived whatever rights, claims, and interests he or his heirs,
him plummeting to the depths of despair is not explained and likewise defies
successors and assigns have or may have over the subject property. On March 15,
comprehension. That his signatures appear exactly on the spot where they
1993, by virtue of said documents, TCT No. 17394

issued
in
the
name
[11]
covering Lot 896-B-9-B was
of
respondent
spouses.
ought to be in Exhs. "M", "N" & "O" belies his pretension that he affixed them on
blank paper only for the purpose of facilitating his sister Terry's acts of
administration.
On June 25, 1993, petitioners filed with the Regional Trial Court (RTC) of
Ozamis City a complaint for recovery of possession and ownership of their
This Court, therefore, does not find that defendant spouses had schemed to
conjugal
obtain title to plaintiffs' properties or enriched themselves at the expense of
properties
with
damages
against
respondent
spouses.
plaintiffs.
[12]
After trial, the RTC rendered its Decision dated November 13, 1995, finding that:
with the following dispositive portion:
1. Plaintiffs have not proven that they entrusted defendant spouses with the
WHEREFORE, this Court renders judgment:
care and administration of their properties. It was Valeria Alinas, their mother,
whom plaintiff Onesiforo requested/directed to "take care of everything and sell
everything" and Teresita Nuez, his elder sister, to whom he left a "verbal"
authority
to
administer
his
1.
B-9-A with the building (bodega) standing thereon and affirming the validity of
their acquisition thereof from the Rural Bank of Oroquieta, Inc.;
properties.
2.
2. Plaintiffs have not proven their allegation that defendant spouses agreed to
pay rent of P1,500.00 a month for the occupancy of plaintiffs' house, which rent
was to be remitted to the SSS and Rural Bank of Oroquieta to pay off plaintiffs'
loan and to keep for plaintiffs the rest of the rent after the loans would have
been
paid
in
declaring [respondents] Victor Jr. and Elena Alinas owners of Lot 896-
full.
declaring [petitioners] Onesiforo and Rosario Alinas owners of Lot 896-
B-9-B with the house standing thereon, plaintiff Onesiforo's sale thereof to
defendants spouses without the consent of his wife being null and void and
defendant spouses' redemption thereof from the SSS not having conferred its
ownership to them;
3.
ordering [petitioners] to reimburse [respondents] Victor Jr. and Elena
Alinas the redemption sum of P111,100.09, paid by them to the SSS (without
3.
Plaintiff Onesiforo's allegation that defendants concocted deeds of
conveyances (Exh. "M", "N" & "O") with the use of his signatures in blank is not
worthy of credence. Why his family would conspire to rob him at a time when
interest as it shall be compensated with the rental value of the house they
occupy) within sixty days from the finality of this judgment;

4.
ordering [respondents] to vacate the subject house within thirty days
3.
197
ordering [petitioners] Rosario Alinas to reimburse [respondents] the
from receiving the reimbursement mentioned in No. 3 above; and
redemption amount of P55,550.00 with interest of 12% per annum from the time
5.
of redemption until fully paid.
reinstating TCT No. T-7248 in the name of [petitioners] and cancelling
TCT No. T-17394 in the name of [respondents].
4.
No
costs.
ordering the [respondents] to convey and transfer one half portion of
Lot 896-B-9-B unto Rosario Alinas, which comprises her share on the property
simultaneous to the tender of the above redemption price, both to be
SO ORDERED.
accomplished within sixty (60) days from finality of this judgment.
[13]
Only respondent spouses appealed to the CA assailing the RTC's ruling that they
5.
acquired Lot 896-B-9-B from the SSS by mere redemption and not by
above, [petitioner] Rosario Alinas may proceed against them under Section 10,
purchase. They likewise question the reimbursement by petitioners of the
Rule 39 of the 1997 Rules of Civil Procedure.
redemption
6.
price
without
interest.
in the event of failure of [respondents] to execute the acts as specified
on the other hand, failure of [petitioner] Rosario Alinas to reimburse
the redemption price within sixty (60) days from the finality of this decision will
On September 25, 2002, the CA promulgated herein assailed Decision, the
render the conveyance and sale of her share by her husband to [respondents], of
dispositive portion of which reads:
full force and effect.
WHEREFORE, in view of the foregoing disquisitions, the first paragraph of the
No
costs.
dispositive portion of the assailed decision is AFFIRMED and the rest

[14]
MODIFIED as follows:
SO ORDERED.
1.
Petitioners moved for reconsideration but the CA denied said motion per herein
declaring [respondents] Victor Jr. and Elena Alinas owners of Lot 896-
B-9-A with the building (bodega) standing thereon and affirming the validity of
assailed
Resolution
dated
March
31,
2003.
their acquisition thereof from the Rural Bank of Oroquieta, Inc.;

2.
declaring Onesiforo's sale of Lot 896-B-9-B together with the house
Hence, the present petition on the following grounds:
standing thereon to [respondents] in so far as Rosario Alinas, his wife's share of
The Honorable Court of Appeals abuse [sic] its discretion in disregarding the
one half thereof is concerned, of no force and effect;
testimony of the Register of Deeds, Atty. Nerio Nuez, who swore that the
signatures
appearing
on
various
TCTs
were
not
his
own;

198
The Honorable Court of Appeals manifestly abuse [sic] its discretion in
allegations of the complaint, is one for recovery of possession of the subject
declaring the respondents to be the owners of Lot 896-B-9-A with the building
property and damages. However, such action is not a direct, but a
(bodega) standing thereon when they merely redeemed the property and are
collateral attack of TCT No. 236044.
therefore
As in De Pedro, the complaint filed by herein petitioners with the RTC is also
mere
trustees
of
the
real
owners
of
the
property;
[17]
(Emphasis supplied)
one for recovery of possession and ownership. Verily, the present case is merely
It was pure speculation and conjecture and surmise for the Honorable Court of
a collateral attack on TCT No. T-17394, which is not allowed by law and
Appeals to impose an obligation to reimburse upon petitioners without ordering
jurisprudence.
respondents to account for the rentals of the properties from the time they
occupied the same up to the present time and thereafter credit one against the
other whichever is higher.
[15]
With regard to the second issue, petitioners' claim that it was the CA which
declared respondent spouses owners of Lot 896-B-9-A (with bodega) is
The first issue raised by petitioners deserves scant consideration. By assailing
misleading. It was the RTC which ruled that respondent spouses are the owners
the authenticity of the Registrar of Deeds' signature on the certificates of title,
of Lot 896-B-9-A and, therefore, since only the respondent spouses appealed to
they
the CA, the issue of ownership over Lot 896-B-9-A is not raised before the
are,
in
effect,
questioning
the
validity
of
the
certificates.
appellate court. Necessarily, the CA merely reiterated in the dispositive portion

Section 48 of Presidential Decree No. 1529 provides, thus:
of its decision the RTC's ruling on respondent spouses' ownership of Lot 896-B-
Sec. 48. Certificate not subject to collateral attack. - A certificate of title shall
9-A.
not be subject to collateral attack. It cannot be altered, modified, or cancelled

It is a basic principle that no modification of judgment or affirmative relief can
except in a direct proceeding in accordance with law.

Pursuant to said provision, the Court ruled in De Pedro v. Romasan Development
Corporation
[16]
be granted to a party who did not appeal.
[18]
Hence, not having appealed from
the RTC Decision, petitioners can no longer seek the reversal or modification of
that:
the trial court's ruling that respondent spouses had acquired ownership of Lot
It has been held that a certificate of title, once registered, should not thereafter
896-B-9-A
by
virtue
of
the
sale
of
the
lot
to
them
by
RBO.
be impugned, altered, changed, modified, enlarged or diminished except in a

direct
proceeding
permitted
by
law.
Furthermore, the CA did not commit any reversible error in affirming the trial
court's factual findings as the records are indeed bereft of proof to support the
The action of the petitioners against the respondents, based on the material
petitioners' allegations that they left the care and administration of their

199
properties to respondent spouses; and that there is an agreement between
The CA ruling completely deviated from the clear dictate of Article 124 of the
petitioners and respondent spouses regarding remittance to the SSS and the
Family Code which provides:
RBO of rental income from their properties. Thus, respondent spouses may not
Art. 124. The administration and enjoyment of the conjugal partnership property
be held responsible for the non-payment of the loan with RBO and the eventual
shall
foreclosure
of
petitioners'
Lot
belong
to
both
spouses
jointly.
896-B-9-A.
In the event that one spouse is incapacitated or otherwise unable to participate
Petitioners do not assail the validity of the foreclosure of said lot but argues that
in the administration of the conjugal properties, the other spouse may assume
respondent spouses merely redeemed the property from RBO. This is, however,
sole powers of administration. These powers do not include the powers of
belied by evidence on record which shows that ownership over the lot had duly
disposition or encumbrance which must have the authority of the court or the
passed on to the RBO, as shown by TCT No. T-11853 registered in its name; and
written consent of the other spouse. In the absence of such authority or
subsequently, RBO sold the lot with its improvements to respondent
consent the disposition or encumbrance shall be void. x x x (Underscoring
spouses. Needless to stress, the sale was made after the redemption period had
and emphasis supplied)
lapsed. The trial court, therefore, correctly held that respondent spouses
acquired their title over the lot from RBO and definitely not from petitioners.
However, with regard to Lot 896-B-9-B (with house), the Court finds it patently
erroneous for the CA to have applied the principle of equity in sustaining the
validity of the sale of Onesiforo's one-half share in the subject property to
respondent
spouses.
[19]
In Homeowners Savings & Loan Bank v. Dailo,
the Court categorically stated
thus:
In Guiang v. Court of Appeals, it was held that the sale of a conjugal property
requires the consent of both the husband and wife. In applying Article 124 of the
Family Code, this Court declared that the absence of the consent of one
renders the entire sale null and void, including the portion of the
conjugal property pertaining to the husband who contracted the sale. x x
Although petitioners were married before the enactment of the Family Code on
August 3, 1988, the sale in question occurred in 1989. Thus, their property
relations are governed by Chapter IV on Conjugal Partnership of Gains of the
Family
Code.
x x x By express provision of Article 124 of the Family Code, in the absence of
(court) authority or written consent of the other spouse, any disposition or
encumbrance of the conjugal property shall be void.
[20]

200
Thus, pursuant to Article 124 of the Family Code and jurisprudence, the sale of
another's expense, the Court agrees with the CA that petitioners should
petitioners' conjugal property made by petitioner Onesiforo alone is void in its
reimburse respondent spouses the redemption price paid for Lot 896-B-9-B in
entirety.
the amount of P111,110.09 with legal interest from the time of filing of the
complaint.
It is true that in a number of cases, this Court abstained from applying the literal
import of a particular provision of law if doing so would lead to unjust, unfair
In Heirs of Aguilar-Reyes, the husband's sale of conjugal property without the
[21]
consent of the wife was annulled but the spouses were ordered to refund the
and
absurd
results.
purchase price to the buyers, it was ruled that an interest of 12% per annum on
In the present case, the Court does not see how applying Article 124 of the
the purchase price to be refunded is not proper. The Court elucidated as
Family Code would lead to injustice or absurdity. It should be noted that
follows:
respondent spouses were well aware that Lot 896-B-9-B is a conjugal property of
The trial court, however, erred in imposing 12% interest per annum on the
petitioners. They also knew that the disposition being made by Onesiforo is
amount due the respondents. In Eastern Shipping Lines, Inc. v. Court of Appeals,
without the consent of his wife, as they knew that petitioners had separated,
it was held that interest on obligations not constituting a loan or forbearance of
and, the sale documents do not bear the signature of petitioner Rosario. The
money is six percent (6%) annually. If the purchase price could be established
fact that Onesiforo had to execute two documents, namely: the Absolute Deed
with certainty at the time of the filing of the complaint, the six percent (6%)
of Sale dated March 10, 1989 and a notarized Agreement likewise dated March 10,
interest should be computed from the date the complaint was filed until finality
1989, reveals that they had full knowledge of the severe infirmities of the
of the decision. In Lui vs. Loy,involving a suit for reconveyance and annulment
[22]
sale. As held in Heirs of Aguilar-Reyes v. Spouses Mijares,
"a purchaser cannot
of title filed by the first buyer against the seller and the second buyer, the Court,
close his eyes to facts which should put a reasonable man on his guard and still
ruling in favor of the first buyer and annulling the second sale, ordered the seller
claim he acted in good faith."
[23]
Such being the case, no injustice is being
to refund to the second buyer (who was not a purchaser in good faith) the
foisted on respondent spouses as they risked transacting with Onesiforo alone
purchase price of the lots. It was held therein that the 6% interest should be
despite their knowledge that the subject property is a conjugal property.
computed from the date of the filing of the complaint by the first buyer. After
the judgment becomes final and executory until the obligation is satisfied, the
Verily, the sale of Lot 896-B-9-B to respondent spouses is entirely null and void.
amount due shall earn interest at 12% per year, the interim period being deemed
equivalent
However, in consonance with the salutary principle of non-enrichment at
to
forbearance
of
credit.

201
Accordingly, the amount of P110,000.00 due the respondent spouses
testified that they never agreed to rent the house and when they finally took
which could be determined with certainty at the time of the filing of the
over the same, it was practically inhabitable and so they even incurred expenses
complaint shall earn 6% interest per annum from June 4, 1986 until the
to repair the house.
finality of this decision. If the adjudged principal and the interest (or any
house, considering the condition it was in; as well as for the lot respondent
part thereof) remain unpaid thereafter, the interest rate shall be twelve
spouses
[27]
There is absolutely no proof of the rental value for the
are
occupying.
percent (12%) per annum computed from the time the judgment becomes
[24]
final and executory until it is fully satisfied.
Respondent spouses, having knowledge of the flaw in their mode of acquisition,
Thus, herein petitioners should reimburse respondent spouses the redemption
are deemed to be possessors in bad faith under Article 526
price plus interest at the rate of 6% per annum from the date of filing of the
Code. However, they have a right to be refunded for necessary expenses on the
complaint, and after the judgment becomes final and executory, the amount due
property as provided under Article 546
shall
there is no credible proof to support respondent spouses' allegation that they
earn
12%
interest per
annum until
the
obligation
is
satisfied.
[29]
[28]
of the Civil
of the same Code. Unfortunately,
spent more than P400,000.00 to repair and make the house habitable.
Petitioners pray that said redemption price and interest be offset or
compensated
against
the
rentals
for
the
house
and
bodega.
Set-off or compensation is governed by Article 1279 of the Civil Code which

provides, thus:
The records show that the testimonial evidence for rentals was only with regard
to the bodega.
[25]
However, the Court has affirmed the ruling of the RTC that
Lot 896-B-9-A with the bodega had been validly purchased by respondent
spouses from the RBO and a TCT over said property was issued in the name of
respondent spouses on February 22, 1989. Testimonial evidence shows that the
bodega was leased out by respondent spouses only beginning January of 1990
when ownership had been transferred to them.
[26]
Article 1279. In order that compensation may be proper, it is necessary:

1.
That each one of the obligors be bound principally, and that he be at
the time a principal creditor of the other;

2.
That both debts consist in a sum of money, or if the things due are
consumable, they be of the same kind, and also of the same quality if the latter
has been stated;
Hence, any rentals earned
from the lease of said bodega rightfully belongs to respondent spouses and
cannot be offset against petitioners' obligation to respondent spouses.
As to rentals for Lot 896-B-9-B and the house thereon, respondent Victor
3.
That the two debts be due;
4.
That they be liquidated and demandable;
5.
That over neither of them there be any retention or controversy,
commenced by third persons and communicated in due time to the debtor.

202
Therefore, under paragraph 4 of the foregoing provision, compensation or set-
decision becomes final, interest at the rate of 12% per annum on the
off is allowed only if the debts of both parties against each other is already
principal and interest (or any part thereof) shall be imposed until full
liquidated and demandable. To liquidate means "to make the amount of
payment;
indebtedness or an obligation clear and settled in the form of money."
[30]
In the
present case, no definite amounts for rentals nor for expenses for repairs on
4. ordering the respondent spouses to convey and transfer Lot 896-B-9-B to
subject house has been determined. Thus, in the absence of evidence upon
petitioners and vacate said premises within fifteen (15) days from finality of this
which to base the amount of rentals, no compensation or set-off can take place
Decision;
between
petitioners
and
respondent
and
spouses.
5. in the event of failure of respondent spouses to execute the acts as specified
While the courts are empowered to set an amount as reasonable compensation
above, petitioners may proceed against them under Section 10, Rule 39 of the
to the owners for the use of their property, this Court cannot set such amount
1997
based
on
mere
surmises
and
WHEREFORE, the petition is PARTLY GRANTED. The Decision of the Court

of Appeals dated September 25, 2002 is MODIFIED to read as follows:
1. declaring respondent spouses Victor Jr. and Elena Alinas owners of Lot 896B-9-A with the building (bodega) standing thereon and affirming the validity of
acquisition
thereof
from
the
Rural
Bank
of
of
Civil
Procedure.
conjecture
No
their
Rules
Oroquieta,
Inc.;
2. declaring Onesiforo's sale of Lot 896-B-9-B together with the house

standing thereon to respondent spouses null and void ab initio;
3. ordering petitioners to jointly and severally reimburse respondent spouses

the redemption amount of P111,110.09 with interest at 6% per annum from the
date of filing of the complaint, until finality of this decision. After this
SO ORDERED.
costs.

203
NUNGA vs. NUNGA (G.R. No. 178306, 18-Dec-2008)25
Rosario Elena Nacario, Cecilia Viray and Dwight Nunga, the Members. In the
CHICO-NAZARIO, J.:
same meeting, stockholder Jesus Gonzalez (Gonzalez) made known his
Before this Court is a Petition for Review on Certiorari under Rule 45 of the
intention
Rules
of
Court
[2]
Resolution
assailing
[1]
the
Decision dated
31
January
2007
to
sell
his
shareholdings.
and
dated 4 June 2007 of the Court of Appeals in CA-G.R. CV No. 78424.
Victor, thereafter, informed his father, Francisco Jr., of Gonzalez's intention to
dated 25
sell his shares. Francisco Jr. then instructed Victor to inquire from Gonzalez the
October 2002 of the Regional Trial Court (RTC) of the City of San Fernando,
terms of the sale. After a series of negotiations, Gonzalez ultimately agreed to
Pampanga, Branch 42, in Commercial Case No. 018, which ordered the
sell
The appellate court, in its assailed decision, reversed the Decision
[3]
his
shares
of
stock
to
Francisco
Jr.
registration of the transfer of ownership of the disputed shares of stock in the

Rural Bank of Apalit, Inc. (RBA) in favor of petitioners; and in its resolution,
On 19 February 1996, Gonzalez executed a Contract to Sell
denied the Motion for Reconsideration of the aforementioned decision.
Francisco Jr., which pertinently provided:
Presented
hereunder
are
the
factual
antecedents
of
the
case.
[5]
in favor of
CONTRACT TO SELL
KNOW ALL MEN BY THESE PRESENTS:
On 30 January 1996, the RBA conducted its Annual Stockholders' Meeting at its
principal office in San Vicente, Apalit, Pampanga. Attending the said meeting
This CONTRACT TO SELL, executed this 19th day of February, 1996, at Quezon
were stockholders representing 28,150 out of the 35,956 total outstanding shares
City, by:
[4]
of stock of RBA. Petitioner Francisco R. Nunga, Jr. (Francisco Jr.), his son
petitioner Victor D. Nunga (Victor), and his nephew respondent Francisco N.
Nunga III (Francisco III) were among the stockholders of RBA. However,
JESUS J. GONZALE[Z], of legal age, Filipino citizen, married to Cristina D.

Gonzale[z], residing at No. 10 2nd Ave., Crame, Quezon City, hereinafter
referred to as the VENDOR;
petitioner Francisco Jr. was not present at the meeting, as he was then in the
United
States
of
America
where
he
is
naturalized
citizen.
in favor of
FRANCISCO D. (sic) NUNGA, JR., of legal age, single, residing at Poblacion,
Quorum having been established at the meeting, the stockholders proceeded
Masantol, Pampanga[,] hereinafter referred to as the"PURCHASER";
with the election of the RBA Board of Directors to serve for the fiscal year 1996.
WITNESSETH:
Francisco III was voted the Chairman of the Board; with Ma. Elena Rueda, Ma.
25 Void Contracts

204
That the VENDOR is the absolute registered owner of several shares of stocks of
the RURAL BANK OF APALIT, INC. located at Apalit, Pampanga, more
That it is further agreed that the VENDOR will execute an authorization in favor
particularly described as follows:
of the herein purchaser or his representative, Victor D. Nunga[,] to retrieve all
Stock Cert. No. No.
of
SharesDate of Issue
Journal Folio No.
the corresponding Stocks (sic) Certificates as above indicated from the Apalit
Rural Bank, Inc.
Represented
WHEREFORE, for and in consideration of the total amount of P200,000(sic)

5
250
May, 1978
36
122
Jan., 1991
105
264
Feb., 1991
152
487
Nov., 1993
166
Feb, 1994
181
525
July, 1994
213
336
receipt in part of which is herein acknowledged in the amount of P50,000.00,

the vendor hereby agrees to sell, cede and transfer all the above stated shares of
stocks to the PURCHASER, his heirs[,] successors, and assigns, absolutely free
from
any
encumbrance
and
lien
whatsoever.
IN WITNESS WHEREOF, I have hereunto set my signature this 19th day

of FEBRUARY, (sic) 1996, at Quezon City, Philippines.
(signed)
JESUS J. GONZALES
Vendor
That the VENDOR has offered to sell the abovestated (sic) shares of stocks and
the PURCHASER has agreed to purchase the same for a total consideration of
P200,000;
That it is hereby agreed that out of the total consideration or contract price, the
purchaser will pay the amount of FIFTY THOUSAND PESOS (P50,000.00),
receipt of which is herein acknowledged by the purchaser, at the date and place
below stated and the remaining balance of P150,000will be paid in full on
February, (sic) 28, 1996;
On even date, Victor gave the initial payment of P50,000.00 to Gonzalez, who
duly acknowledged the same.
[6]
In exchange, Gonzalez handed Victor RBA Stock
Certificates No. 105, No. 152 and No. 166. As to the four other certificates that
were in the possession of the RBA, Gonzalez issued a letter
[7]
addressed to Isabel
Firme (Firme), the RBA Corporate Secretary, which instructed the latter to turn
over to Victor the remaining stock certificates in Gonzalez's name. Upon being
presented with Gonzalez's letter, Firme gave Victor Stock Certificate No. 181, but
alleged that Stock Certificates No. 5 and No. 36 could no longer be located in the
files of RBA. Firme advised Victor to merely reconstitute the missing stock

certificates.
[8]
A reading of the said Contract to Sell would reveal, however, that
the same was only notarized on 28 February 1996.
205
July 25, 1994
181
525
52,500.00
February 2, 1996
213
336
33,600.00
Before Francisco Jr. and Victor could pay the balance of the contract price for
Gonzalez's RBA shares of stock, Gonzalez entered into another contract
involving the very same shares. It would appear that on 27 February 1996,
Gonzalez executed a Deed of Assignment
[9]
IN WITNESS WHEREOF, the ASSIGNOR have (sic) cause (sic) these presents to
be signed at Quezon City, this 27 day of February, 1996.
of his RBA shares of stock in favor

(signed)
of Francisco III, the relevant terms of which recite:
JESUS J. GONZALE[Z]
DEED OF ASSIGNMENT
Vendor
At the same time the afore-quoted Deed was executed, Francisco III paid in full
For value (sic) consideration received, the undersigned ASSIGNOR JESUS
the agreed purchase price of P300,000.00 using a BPI (Bank of the Philippine
GONZALE[Z], of legal age, Filipino and resident of #10 2ND AVENUE, CUBAO,
Islands) Family Bank Check No. 0347505 issued in favor of Gonzalez. An
QUEZON CITY, METRO MANILA hereby sells, assigns and transfers unto
acknowledgment receipt signed by Gonzalez and witnessed by his wife Cristina
FRANCISCO N. NUNGA III (AS ASSIGNEE), Filipino, of legal age and with
D. Gonzalez evidenced the payment.
postal address at 1122 Alhambra St., Ermita 1000 Metro Manila, his assigns and
shares were already in Victor's possession, Gonzalez immediately wrote Victor a
successors, all their rights, titles and interests to the following shares of stocks
letter,
owned by the ASSIGNOR in Apalit Rural Bank, Inc., with par value of one
III,
[11]
[10]
Since the stock certificates covering the
demanding that Victor hand over the said stock certificates to Francisco
the
supposed
new
owner
of
the
shares.
hundred pesos only (P100.00) per share, free from all liens and encumbrances.
Date
SC. No.
No. of Shares
May 24, 1969
4 (sic)
250
January 02, 1975
36
122
Amount
The next day, on 28 February 1996, Francisco Jr. arrived from the United States
of America. He and Victor then promptly proceeded to the residence of
25,000.00
Gonzalez in order to pay the balance of P150,000.00 of the purchase price stated
12,200.00
in their Contract to Sell with Gonzalez. Gonzalez, however, informed them that
he already sold his shares of stock to Francisco III.
February 19, 1991
105
264
26,400.00
November 10, 1993
152
487
48,700.00
February 22, 1994
166
800.00
[12]
After discussing the matter,
Gonzalez was somehow convinced to accept the balance of the purchase price
and sign his name at the dorsal portion of the stock certificates to endorse the

same to Francisco Jr. Gonzalez also executed aDeed of Absolute Sale
[13]
in favor
of Francisco Jr., which states:

DEED OF ABSOLUTE SALE
This DEED OF ABSOLUTE SALE, executed this 28th day of February, 1996, at
SAN JUAN, M.M. by:
152
487
Nov., 1993
166
Feb., 1994
181
525
July, 1994
213
336
206
That Stock Certificate Nos. 5 and 36 respectively representing 250 and 122 shares
of the Rural Bank of Apalit[,] Inc. were lost and is (sic) currently in the process
of
reconstitution;
JESUS J. GONZALE[Z], of legal age, Filipino citizen, married to Cristina D.

Gonzale[z], residing at No. 10 2nd Ave., Crame, Quezon City, hereinafter
That the VENDOR has offered to sell the abovestated (sic) shares of stocks and
referred to as the VENDOR;
the
PURCHASER
has
agreed
to
purchase
the
same.
in favor of
FRANCISCO R. NUNGA, JR., of legal age, married, residing at Poblacion,
WHEREFORE, for and in consideration of the total amount of TWO HUNDRED
Masantol, Pampanga[,] hereinafter referred to as the "PURCHASER"[;]
THOUSAND PESOS (P 200,000.00), receipt of which in full is herein

acknowledged, the VENDOR hereby sells, cedes and transfers all the above
WITNESSETH:
stated shares of stocks to the PURCHASER, his heirs, successors, and assigns,
That the VENDOR is the absolute registered owner of several shares of stocks of
absolutely
free
from
any
encumbrance
and
lien
whatsoever.
the RURAL BANK OF APALIT, INC. located at Apalit, Pampanga, more

particularly described as follows:
Stock Cert. No.
No.
of
IN WITNESS WHEREOF, I have hereunto set my signature this 28 day of FEB

SharesDate of Issue
Represented
Journal
No.
Folio
(sic), 1996, at SAN JUAN, MM, Philippines.

(signed)
250
May, 1978
JESUS J. GONZALE[Z]
36
122
Jan., 1991
Vendor
105
264
Feb., 1991
Incidentally, on that same day, Francisco III delivered to Firme the Deed of
Assignment which Gonzalez executed in his favor, and a copy of Gonzalez's

207
letter to Victor dated 27 February 1996 demanding the latter to surrender the
certificates in order that the same may be transferred to Francisco III's name;
stock certificates in his possession to Francisco III. Accordingly, on 1 March 1996,
and (b) Francisco Jr. and Victor to desist from attempting to register the
Firme wrote Victor a letter

with
the
enclosed
[14]
27
requesting that the latter immediately comply

February
1996
letter
of
Gonzalez.
purported sale by Gonzales of his RBA shares of stock to Francisco Jr., who had
already become a naturalized American citizen and was, thus, disqualified from
owning shares in RBA.
Victor refused to comply with Firme's request and instead demanded that the
Francisco III and Firme filed their joint Answer
sale of shares of stock by Gonzalez in favor of Francisco Jr. on 28 February 1996
while Francisco Jr. and Victor filed their Answer
be entered into the Corporate Book of Transfer of RBA. Firme, in turn, rejected
Gonzalez, however, was considered in default in both SEC cases for failure to file
Victor's demand, alleging that Francisco III already bought Gonzalez's shares.
Consequently, on 14 March 1996, Victor filed a Petition
[16]
[15]
[18]
in SEC Case No. 03-96-5288,
[19]
in SEC Case No. 03-96-5292.
his answers despite notice.
with the Securities
and Exchange Commission (SEC) against Francisco III and Firme, which was
Eventually, Francisco Jr.
docketed as SEC Case No. 03-96-5288. Victor prayed that the SEC declare null
two cases pending before the SEC, alleging that they involved common
and void the Stockholders' Meeting held on 30 January 1996 for lack of the
questions of fact and law, which required the presentation of similar evidence.
required majority quorum; as well as the votes cast for the shares of the
Said Motion was granted in an Order
deceased stockholders, namely, Teodorico R. Nunga, Carmencita N. Nunga and
SEC Cases No. 03-96-5288 and No. 03-96-5292 were jointly heard.
Jesus Enrico N. Nunga. Victor additionally requested that the transfer of

Gonzalez's RBA shareholdings to Francisco Jr. be annotated on the RBA
Corporate Transfer Book and new stock certificates be issued in favor of
Francisco Jr. Victor finally pleaded that Francisco III and Firme be ordered to
[20]
and Victor filed a Motion for Consolidation
[22]
[21]
of the
dated 30 September 1996. Thereafter,
After the parties submitted their respective Offers of Evidence, but before the
SEC could rule on the same, the cases were eventually turned over to the RTC
pursuant to Administrative Circular AM No. 00-11-03
dated
21
[23]
of the Supreme Court
November
2000.
[24]
jointly pay him P50,000.00 as attorney's fees, damages and litigation expenses.
On the same date, Francisco III likewise filed a Complaint
[17]
against Gonzalez,
Francisco Jr., and Victor before the SEC, which was docketed as SEC Case No.
In the RTC, SEC Cases No. 03-96-5288 and No. 03-96-5292 were docketed
asCommercial
Cases
No.
001
and
No.
018,
respectively.
03-96-5292. Francisco III sought the issuance of a Temporary Restraining Order

(TRO) against Francisco Jr. and Victor, who were allegedly conspiring to oust
Francisco Jr. and Victor subsequently filed a Motion to Resolve their Formal
him and the other members of the RBA Board of Directors. Francisco III also
Offer of Exhibits, which the SEC was not able to act upon. In an Order
prayed, inter alia, for judgment ordering (a) Victor to surrender Gonzalez's stock
30 April 2002, the RTC admitted the formal offers of evidence in both cases.
[25]
dated

208
Assignment was executed in bad faith as [Francisco III] is aware of the

On 25 October 2002,
[26]
the RTC promulgated its Decision. With respect
transaction between [herein petitioner Victor] in (sic) behalf of his father and
to Commercial Case No. 001, Victor's Petition, the RTC ruled:
[Gonzalez], thus, the conclusion that the Deed of Assignment was executed with
The Court, after a careful study on the evidences on record finds that
malice. The Contract to Sell may not be a public instrument
[herein petitioner Victor] failed to substantiate the allegation in the
consensual contract it is, therefore, valid there being a meeting of the mind (sic)
petition. [Victor] failed to controvert the documentary evidences presented by
between the parties. Further, there being no contention on (sic) the contrary, on
[herein respondent Francisco III] to wit: Minutes of the Stockholders Meeting,
the validity of the Deed of Absolute Sale interposed by [Gonzalez] coupled with
showing the number of shares present in person or in proxy[;] written Proxy in
the proof of full payment and the endorsement of the Stock Certificate at the
favor of Dwight N. Nunga in (sic) behalf of deceased Teodorico R. Nunga by virtue
back by the owner[,] which is the only operative act of valid transfer of shares of
of the Extrajudicial Settlement of estate in (sic) behalf of Carmencita Noel Nunga
stock certificate provided for by law and jurisprudence, clearly convinced the
proxy executed by Ma. Del Carmen N. Leveriza in her capacity as the Judicial
Court that the latter honored the transaction between him and [Victor] in (sic)
Administratrix duly appointed by the RTC Branch 60, Makati[,] Metro Manila in
behalf of his father [Francisco Jr.] and[,] to bind third parties, the fact of transfer
should
stating thereat the fact that the certificate of stock delivered for registration in
xxxx
the Corporate Transfer Book were mere xerox copies thus, the refusal. Thus
Further, with respect to the issue on the citizenship of [Francisco Jr.], not being
further, proved [Victor's] lack of cause of action against [Francisco III] and as a
qualified to own such share (sic), the Court is inclined to give credence on (sic)
result of which damages on the part of [Francisco III] and Isabel C. Firme who
the contention of the latter[,] it being supported by R.A. 8179[,] known as "An
were constrained to hire the services of their counsel to protect their right (sic).
Act to Further Liberalize Foreign Investment,["] to wit:
(Emphasis ours.)
SEC. 9. Investment Rights of Former Natural-born Filipinos. - For purposes of
[27]
[28]
As regards Commercial Case No. 018,
Francisco III's Complaint, the RTC
registered
with
the
transfer
book
of
the
but being a
; Affidavit of respondent Isabel C. Firme
Special Proceedings No. M-1461
be
[29]
corporation.
this Act, former natural born citizens of the Philippines shall have the same
decreed:
investment rights of a Filipino citizen in Cooperatives under Republic Act No.
The Court[,] after a careful study on the aforementioned evidences (sic)
6938, Rural Banks under Republic Act No. 7353, Thrift Banks and Private
on record[,] finds and holds that [herein petitioner Francisco Jr.] has a
Development Banks under Republic Act No. 7906, and Financing Companies
better right over the subject shares considering that the Contract to Sell was
under Republic Act No. 5980."
executed prior to the Deed of Assignment presented by the [herein respondent
Furthermore, insofar as (sic) [Gonzalez], the same was (sic) considered as in
Francisco III]. The Court gleaned also from the evidences (sic) that the Deed of
default for failure to appear and participate despite notice. (Emphasis ours.)

[33]
In the end, the RTC disposed of the two cases in this wise:
Thus, Francisco III filed with the RTC a Notice of Appeal.
WHEREFORE, in view of the foregoing, judgment is hereby rendered
the Court of Appeals was docketed as CA-G.R. CV No. 78424.
209
His appeal before
inCommercial Case No. 001 ordering the dismissal of the Petition filed by
[herein petitioner Victor] against [herein respondent Francisco III] and Isabel C.
Before the Court of Appeals, Francisco III argued that the RTC erred in: (1)
Firme.
ruling that Francisco Jr. had a better right over the disputed shares of stock,
considering that the prior contract which he had entered into with Gonzalez
Insofar as Commercial Case No. 018[,] judgment is hereby rendered in favor of
was a mere contract to sell; (2) finding that the Deed of Assignment in Francisco
the [herein petitioners Victor and Francisco Jr.] and against [Francisco III]
III's favor was executed in bad faith, inasmuch as it was not supported by any of
ordering
the evidence presented by all the parties; and (3) giving retroactive effect to
the
following:
Republic Act No. 8179,
[34]
which grants former natural born citizens (such as
1) Ordering the Corporate Secretary of the Rural Bank of Apalit, Inc, (sic) to
Francisco Jr.) equal investment rights in rural banks of the Philippines as
register the fact of the transfer of ownership in favor of [Francisco Jr.] and to
Philippine citizens. In relation to his third assignment of error, Francisco III
cancel Stock certificate (sic) in the name of Jesus [Gonzalez] and to issue a new
pointed out that Republic Act No. 8179 took effect only on 16 April 1996, after
one (sic) in the name of [Francisco Jr.] upon presentation of Stock Certificate
Francisco Jr. entered into the questionable contracts with Gonzalez; hence, the
Nos. 105, 152, 166, 181, 213, 5 and 36 duly endorsed by Jesus [Gonzalez];
said statute cannot benefit Francisco Jr.
2) The [respondent Francisco III] to pay the [petitioners Victor and Francisco
On 31 January 2007, the Court of Appeals rendered its assailed Decision favoring
Jr.] the amount of P100,000.00 [for] moral damages[;]
Francisco III. It held that Francisco Jr. cannot invoke the provisions of Republic
Act No. 8179 based on the following ratiocination:
3) The amount of P100,000.00 [for] exemplary damages[;]
In the instant case, there is nothing in Republic Act No. 8179 [An Act to
Further Liberalize Foreign Investment] which provides that it should
4) The amount of P50,000.00 [for] attorneys (sic) fees and the cost of suit.
Francisco III filed a Motion for Partial Reconsideration
Decision, but it was denied by the RTC in an Order
[32]
[30]
retroact to the date of effectivity of Republic Act No. 7353 [The Rural
of the afore-quoted
Banks Act of 1992]. Neither is it necessarily implied from Republic Act No.
dated 31 January 2003.
8179 that it or any of its provisions should be given a retroactive effect. On
[31]
the contrary, there is an express provision in Republic Act No. 8179 that it "shall
take effect fifteen (15) days after publication in two (2) newspapers of general

210
circulation in the Philippines." Being crystal clear on its prospective application,
have wasted time and effort in inserting a new provision granting to former
it must be given its literal meaning and applied without further interpretation
natural-born citizens of the Philippines equal investment rights in Republic Act
(BPI Leasing Corporation vs. Court of Appeals, 416 SCRA 4, 13 [2003]). Republic
No. 8179.
Act No. 8179 was published on March 31, 1996 at the Manila Times andMalaya;
hence,
it
took
effect
on
April
15,
1996.
x.
Furthermore, there is no merit in the assertion of FRANCISCO JR. and VICTOR

that Republic Act No. 8179 should be given a retroactive effect in accordance
Republic Act No. 7353 specifically states that "the capital stock of any rural bank
shall be fully owned and held directly or indirectly by citizens of the Philippines
xxx." It bears stressing that the use of the word "shall" alone, applying the rule
on statutory construction, already underscores the mandatory nature of the law,
and hence; (sic) requires adherence thereto. xxx Therefore, it is Our considered
view that the sale and the subsequent transfer on February 28, 1996 of the shares
of stock of JESUS [Gonzalez] to FRANCISCO, JR., a naturalized American citizen,
with the following rule:

"The principle that a new law shall not have retroactive effect only governs
rights arising from acts done under the rule of the former law; but if a right be
declared for the first time by a new law it shall take effect from the time of such
declaration, even though it has arisen from acts subject to the former laws,
provided that it does not prejudice another acquired right of the same origin." x
x x.
were made in patent violation of Republic Act No. 7353. Considering that
Republic Act No. 7353 did not contain any provision authorizing the validity of
the sale and transfer of the shares of stock to a foreigner, specifically to a former
natural-born citizen of the Philippines, the same should be deemed null and
void pursuant to Article 5 of the Civil Code of the Philippines, which reads:
Republic Act No. 8179 cannot be applied retroactively insofar as the instant case
is concerned, as its application would prejudice the (sic) FRANCISCO III who
had acquired vested right over the shares of stock prior to the effectivity of the
said law. Such right was vested to him when the Deed of Assignment was
executed by Jesus in his favor on February 27, 1996. Undoubtedly, FRANCISCO
"ART. 5. Acts executed against the provisions of mandatory or prohibitory laws

shall be void, except when the law itself authorizes their validity."
III had a better right over the shares of stock of JESUS inasmuch as the validity
of the Deed of Assignment was not affected despite the prior execution of the
x x x The fact that Republic Act No. 8179 expressly granted to former natural-
Contract to Sell in favor of FRANCISCO JR. on February 19, 1996. As previously
born citizens of the Philippines investment rights similar to those of citizens of
adverted to, the said Contract, as well as the Deed of Absolute Sale and the
the Philippines bolsters the view that Republic Act No. 7353 indeed prohibited
subsequent transfer of the shares of stock to FRANCISCO JR., was null and void
foreign nationals from owning shares of stock in rural banks. Had it been
for violating a mandatory provision of Republic Act No. 7353. x x x.
necessarily implied from the provisions of Republic Act No. 7353 that foreign
nationals could own shares of stock in rural banks, the legislature would not
[35]

211
The Court of Appeals, however, decided to award Francisco III only attorney's
2) [T]he Corporate Secretary of Rural Bank of Apalit, Inc. to register the
fees and cost of suit, but not moral and exemplary damages:
assignment of shares of stock in favor of Francisco Nunga III, to cancel the stock
We hold that FRANCISCO III is not entitled to moral damages. FRANCISCO III
certificates of Jesus Gonzale[z], and to issue new ones in the name of Francisco
made no mention in his Complaint and during the hearing that he sustained
Nunga III; and,
mental anguish, serious anxiety, wounded feelings and other emotional and
3) Jesus Gonzale[z], Francisco Nunga, Jr., and Victor Nunga to pay, jointly and
mental sufferings by reason of the double sale. x x x.
severally, the sum of P20,000.00 as attorney's fees, plus the cost of suit.
[37]
Francisco Jr. and Victor, together with Gonzalez, filed a Motion for
[38]
Likewise, FRANCISCO III is not entitled to exemplary damages. x x x In the
Reconsideration
of the foregoing Decision. Their Motion, however, was
instant case, FRANCISCO III failed to sufficiently prove his entitlement to moral,
denied by the Court of Appeals in its assailed Resolution dated 4 June 2007.
temperate or compensatory damages. Hence, his claim for exemplary damages

[39]
must similarly fail.
Refusing to concede, Francisco Jr. and Victor filed the instant Petition,
However, as to his claim for attorney's fees and cost of suit, We find it to be
they anchor on the following assignment of errors:
tenable as the records of the case clearly reveal that FRANCISCO III was
I.
which
compelled to litigate or to incur expenses to protect his interest because of the

double sale. x x x. Under the circumstances obtaining in the instant case, We
deem that the award of P20,000.00 as attorney's fees is reasonable.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN DECLARING THE
[36]
SALE OF THE SHARES OF STOCK OF GONZALE[Z] TO FRANCISCO JR.,
The fallo of the Court of Appeals Decision thus reads:
NULL
AND
VOID AB
INITIO ON
THE
BASIS
OF
THE
ALLEGED
WHEREFORE, the foregoing premises considered, the Decision dated October
DISQUALIFICATION OF FRANCISCO JR. UNDER REPUBLIC ACT NO. 7353?
25, 2002 of Branch 42 of the Regional Trial Court of San Fernando, Pampanga
II.
with respect to Commercial Case No. 018 is herebyREVERSED and SET ASIDE.
A new one is hereby rendered ORDERING the following:
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN

HOLDING THAT FRANCISCO III HAS A VESTED RIGHT TO THE SHARES OF
1) Victor Nunga to surrender the stock certificates of Jesus Gonzalez to the
STOCK OF GONZALE[Z], WHICH WOULD BE IMPAIRED BY THE
Corporate
RETROACTIVE APPLICATION OF REPUBLIC ACT NO. 8179?
Secretary
of
Rural
Bank
of
Apalit,
Inc.;
III.

212
therefore, a total absence of consideration, making the said contract between

WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED [IN]
Francisco
III
and
Gonzalez
inexistent.
AWARDING DAMAGES TO FRANCISCO III AND WITHDRAWING THE

AWARD OF NOMINAL DAMAGES TO PETITIONERS BY THE TRIAL COURT?
The Court finds the Petition devoid of merit.
Essentially, the fundamental issue that this Court is called upon to resolve is
As the Court of Appeals declared, Francisco Jr. was disqualified from acquiring
who among the parties to this case has a better right to the disputed RBA shares
Gonzalez's shares of stock in RBA. The argument of Francisco Jr. and Victor that
of stock.
there was no specific provision in Republic Act No. 7353 which prohibited the
transfer of rural bank shares to individuals who were not Philippine citizens or
Francisco Jr. and Victor contend that the consummated sale of the RBA shares
declared such transfer void, is both erroneous and unfounded.
of stock by Gonzalez to Francisco Jr. gives the latter a superior right over the
Section 4 of Republic Act No. 7353 explicitly provides:
same, since the transaction complied with all the elements of a valid sale.
Section 4. x x x With exception of shareholdings of corporations organized
Contrary to the ruling of the Court of Appeals, Francisco Jr. and Victor claim
primarily to hold equities in rural banks as provided for under Section 12-C of
that there was no provision in Republic Act No. 7353, prior to its amendment,
Republic Act 337, as amended, and of Filipino-controlled domestic banks, the
which explicitly prohibited any transfer of shares to individuals who were not
capital stock of any rural bank shall be fully owned and held directly or
Philippine citizens, or which declared such a transfer void. Hence, there was an
indirectly by citizens of the Philippines or corporations, associations or
implied recognition by the legislature that to declare the nullity of such acts
cooperatives qualified under Philippine laws to own and hold such capital stock:
would be more disadvantageous and harmful to the purposes of the law.
x x x. (Emphasis ours.)
Moreover, Francisco Jr. and Victor contend that the passage of Republic Act No.
8179, An Act to Further Liberalize Foreign Investment, cured whatever legal
infirmity there may have been in the purchase by Francisco Jr. of the RBA shares
of stock from Gonzalez. As Republic Act No. 8179 expressly creates and declares
for the first time a substantive right, then it may be given retroactive effect. The
Deed of Assignment between Francisco III and Gonzalez did not confer upon
Francisco III a vested interest that could be impaired by the retroactive
application of Republic Act No. 8179. The Deed was not only executed later in
time, but the check issued for its payment was also never encashed. There was,
Otherwise stated, the afore-quoted provision categorically provides that only

citizens of the Philippines can own and hold, directly or indirectly, the capital
stock of a rural bank, subject only to the exception also clearly stated in the
same provision. This was the very interpretation of Section 4 of Republic Act No.
[40]
7353 made by this Court in Bulos, Jr. v. Yasuma,
on the basis of which the
Court disqualified therein respondent Yasuma, a foreigner, from owning capital

stock in the Rural Bank of Paraaque. In the instant case, it is undisputed that
when Gonzalez executed the Contract to Sell and the Deed of Absolute Sale

213
covering his RBA shares of stock in favor of Francisco Jr., the latter was already a
established in the previous discussion, the Contract to Sell between Gonzalez
naturalized citizen of the United States of America. Consequently, the
and Francisco Jr. was void and without force and effect for being contrary to law.
acquisition by Francisco Jr. of the disputed RBA shares by virtue of the foregoing
It intended to effect a transfer, which was prohibited by Republic Act No. 7353.
contracts is a violation of the clear and mandatory dictum of Republic Act No.
It is even irrelevant that the terms of said Contract to Sell had been fully
7353, which the Court cannot countenance.
complied with and performed by the parties thereto, and that a Deed of
Even the subsequent enactment of Republic Act No. 8179 cannot benefit
Absolute Sale was already executed by Gonzalez in favor of Francisco Jr. A void
Francisco Jr. It is true that under the Civil Code of the Philippines, laws shall
agreement will not be rendered operative by the parties' alleged performance
But there are
(partial or full) of their respective prestations. A contract that violates the law is
settled exceptions to this general rule, such as when the statute is CURATIVE or
null andvoid ab initio and vests no rights and creates no obligations. It produces
have no retroactive effect, unless the contrary is provided.
REMEDIAL in nature, or when it CREATES NEW RIGHTS.
[42]
[41]
Francisco Jr. and
no
legal
effect
at
all.
[44]
Victor assert that, as an exception to the cardinal rule of prospective application

of laws, Republic Act No. 8179 may be retroactively applied, since it creates for
With respect to the award of damages, the Court agrees in the findings of the
the first time a substantive right in favor of natural-born citizens of the
Court of Appeals that Francisco III failed to establish his entitlement to moral
Philippines. Francisco Jr. and Victor, however, overlooked the vital exception to
damages in view of the absence of proof that he endured physical suffering,
the exception. While it is true that a law creating new rights may be given
mental anguish, fright, serious anxiety, besmirched reputation, wounded
retroactive effect, the same can only be made possible if the new right does
feelings, moral shock, social humiliation, or any similar injury.
[43]
not prejudice or impair any vested right.
The Court upholds the finding of the Court of Appeals that Republic Act No.
8179 cannot be applied retroactively to the present case, as to do so would
prejudice the vested rights of Francisco III to the disputed RBA shares of stock.
Francisco III, who is undeniably a citizen of the Philippines, and who is fully
qualified to own shares of stock in a Philippine rural bank, had acquired vested
rights to the disputed RBA shares of stock by virtue of the Deed of Assignment
executed in his favor by Gonzalez.
[45]
As regards the
grant of exemplary damages, we likewise uphold the ruling of the appellate

court that the same was not warranted under the circumstances, as FRANCISCO
III was not able to prove that he was entitled to moral, temperate or
compensatory damages. Exemplary damages are imposed by way of example or
correction for the public good, in addition to moral, temperate, liquidated or
compensatory damages.
[46]
In contracts and quasi-contracts, exemplary damages
may be awarded if the defendant acted in a wanton, fraudulent, reckless,

oppressive or malevolent manner.
[47]
It cannot, however, be considered as a
matter of right; the court has to decide whether or not such damages should be
It would not matter that Gonzalez executed the Contract to Sell in favor of
Francisco Jr. prior to the Deed of Assignment in favor of Francisco III. As
adjudicated.
[48]
Before the court may consider an award for exemplary damages,

the plaintiff must first show that he is entitled to moral, temperate or
compensatory damages; but it is not necessary that he prove the monetary value
thereof.
[49]
As to the contention that the Court of Appeals erred in withdrawing the award
of nominal damages to the petitioners by the RTC, the Court finds the same to
be utterly misleading. The appellate court did not decree any such withdrawal,
as the RTC had not awarded any nominal damages in favor of the petitioners in
the
first
place.
However, as Francisco III was indeed compelled to litigate and incur expenses to
protect his interests,
P20,000.00
[50]
as
the Court sustains the award by the Court of Appeals of

attorney's
fees,
plus
costs
of
suit.
WHEREFORE, premises considered, the Petition for Review under Rule 45 of

the Rules of Court is hereby DENIED. The assailed Decision dated 31 January
2007 and Resolution dated 4 June 2007 of the Court of Appeals in CA-G.R. CV
No.
78424
SO ORDERED.
are
herebyAFFIRMED in
toto.
No
costs.
214

215
[4]
CAMPOS VS. PASTRANA (G.R. No. 175994, 8-Dec-2009)26
Trial Court of Roxas City, Branch 16, rendered a Decision finding Carlito to have
DEL CASTILLO, J.:
retained possession of the fishpond notwithstanding the expiration of the contract of
It sometimes happens that a creditor, after securing a judgment against a debtor, finds
lease and ordering him to pay rentals, the value of the produce and damages to the
that the debtor had transferred all his properties to another leaving nothing to satisfy the
herein respondents. The Decision became final and executory and a Writ of
[1]
obligation to the creditor. In this petition for review on certiorari, petitioners ask us to
[5]
Execution was issued on February 7, 1995. Subsequently, on September 19, 1995, an

[6]
set aside the November 23, 2005 Decision of the Court of Appeals (CA) in CA-G.R. CV
Alias Writ of Execution was also issued. Both were returned unsatisfied as per Sheriffs
No. 68731 declaring as null the sale of several parcels of land made by their parents in
Return of Service dated November 14, 1995.
their favor, for being absolutely simulated transactions. Also assailed is theNovember 21,
During the pendency of the Agrarian Case, as well as prior to the filing of the Possession
[2]
[3]
2006 Resolution.
Case, Carlito was the registered owner of the following properties:
Factual antecedents
1.
This is the third case between essentially the same parties and the second among those
Title Nos. 18205 and 18417, respectively and
cases to reach this Court on appeal, spanning a period of close to three decades.
2.
The first case arose from the refusal of Carlito Campos (Carlito), the father of herein
Nos. P-9199 and P-9200,
petitioners, to surrender the possession of a fishpond he leased from respondents
When the respondents were about to levy these properties to satisfy the judgment in the
mother, Salvacion Buenvenida, despite the expiration of their contract of lease in
Possession Case, they discovered that spouses Carlito and Margarita Campos transferred
1980. Alleging that he was an agricultural lessee, Carlito filed an agrarian case docketed
these lots to their children Rosemarie and Jesus Campos, herein petitioners, by virtue of
as CAR
Deeds of Absolute Sale dated October 18, 1985 and November 2, 1988.
Case
No.
1196
(Agrarian
Case) against
his
lessor. After
trial,
Residential Lots 3715-A and 3715-B-2 covered by Transfer Certificates of

[7]
[8]
Agricultural Lots 850 and 852 covered by Original Certificates of Title

[9]
[10]
respectively.
[11]
[12]
Specifically,
the Regional Trial Court of Roxas City, Branch 14, found that Carlito was not an
spouses Campos sold the residential lots (Lots 3715-A and 3715-B-2), with a total area of
agricultural tenant. He then appealed to the CA and subsequently to this Court, but was
1,393 square meters, to their daughter Rosemarie for P7,000.00 and the agricultural lots
unsuccessful.
(Lots 850 and 852) with a combined area of 7,972 square meters, to their son Jesus
While the appeal in the Agrarian Case was pending before the CA, herein respondents
for P5,600.00.
filed the second case, Civil Case No. V-5417, against Carlito for Recovery of Possession
Proceedings before the Regional Trial Court
and Damages with Preliminary Mandatory Injunction (Possession Case) involving the
Civil Case No. V-7028
same fishpond subject of the earlier agrarian case. On November 27, 1990, the Regional
On February 18, 1997, respondents instituted the third case, Civil Case No.
26 Void Contracts

[13]
216
V-7028 (Nullity of Sale Case), subject of this appeal, seeking to declare as null the
The Deed of Absolute Sale (Exh. 6 & 10) executed by the spouses Carlito Campos and
aforesaid deeds of sale and the transfer certificates of title issued pursuant thereto. They
Margarita Arduo to Rosemarie Campos and Jesus Campos were dated October 17,
alleged that the contracts of sale between spouses Campos and petitioners were
1985 andNovember 2, 1988, respectively.
simulated for the sole purpose of evading the levy of the abovementioned properties in
It can readily [be] gleaned from the records that Civil Case No. V-5417 was filed on July 7,
satisfaction of a money judgment that might be rendered in the Possession Case.
1987 and was decided on November 27, 1990. Furthermore, the alias writ of execution
[14]
In their Answer with Counterclaim,
spouses Campos and petitioners averred that
was issued only on July 5, 1995 for which the Sheriffs Return of Service was returned
Rosemarie and Jesus Campos acquired the lots in question in good faith and for value
unsatisfied on November 14, 1995.
because they were sold to them before they had any notice of the claims or interests of
WHEREFORE, the complaint of the plaintiffs against the defendants is
other persons thereover.
DISMISSED. Their claim for damages is likewise DISMISSED. The counter-claim of the
On August 21, 2000, the Regional Trial Court of Roxas City, Branch 14, dismissed the
defendants must also be DISMISSED as the case was not filed in evident bad faith and
[15]
complaint.
It held that
with malicious intent.

[16]
In the Resolution of this case the issue is whether or not the spouses Carlito Campos and
SO ORDERED.
Margarita Arduo, sensing that an unfavorable judgment might be rendered against
Proceedings before the Court of Appeals
them in Civil Case No. V-5417 filed in Branch 16 on July 17, 1987 by the same plaintiffs for
Recovery of Possession and Damages with Preliminary Mandatory Injunction, in evident
bad faith and wanton disregard of the law, maliciously and fraudulently, executed a
purely fictitious and simulated sale of their properties thereby ceding and transferring
their ownership thereto to their children Rosemarie Campos-Bautista and Jesus
Campos.
Upon review of the evidence presented, the CA found that the conveyances were made
in 1990, and not in 1985 or 1988, or just before their actual registration with the Registry
of Deeds, evidently to avoid the properties from being attached or levied upon by the
respondents. The CA likewise noted that the zonal value of the subject properties were
much higher than the value for which they were actually sold. The appellate court
further observed that despite the sales, spouses Campos retained possession of the
A close scrutiny of the defendants documentary exhibits and testimonies showed that
properties in question. Finally, the CA took note of the fact that the writ of execution
as early as 1981 defendant Jesus Campos was already leasing a fishpond in Brgy.
and alias writ issued in the Possession Case remained unsatisfied as the lower court
Majanlud, Sapi-an, Capiz from Victorino Jumpay and defendant Rosemarie Campos was
could not find any other property owned by the spouses Campos that could be levied
engaged in the sari-sari store business starting 1985 so that they were able to purchase
upon to satisfy its judgment, except the parcels of land subject of the assailed
the properties of their parents out of their profits derived therefrom.
transactions.

217
On these bases, the CA ruled that the assailed contracts of sale were indeed absolutely
COMPLAINT HAVING BEEN FILED AFTER SEVEN (7) YEARS OR ONLY ON 14
simulated transactions and declared the same to be void ab initio. The dispositive
OCTOBER 1997, FROM THE TIME THE TITLES WERE ISSUED IN 1990.
portion of the Decision of the CA reads:
III.
WHEREFORE,
the
instant
appeal
is
GRANTED. The
decision
of
THE COURT OF APPEALS ERRONEOUSLY ANCHORED ITS IMPUGNED
the Regional Trial Court of Roxas City, Branch 14, dated August 21, 2000 in Civil
JUDGMENT ON MISAPPREHENSION OF FACTS THAT THE SALE WERE
Case No. V-7028 is REVERSED and SET ASIDE. Let a copy of this Decision be
ANTEDATED, HENCE SIMULATED DESPITE GLARING ABSENCE OF
furnished to the Register of Deeds of the Province of Capiz who is hereby
EVIDENCE IN SUPPORT THEREOF.
ordered to cancel Transfer Certificates of Title Nos. T-26092 and T-26093 in the
IV.
name of Rosemarie Campos, and Transfer Certificates of Title Nos. T-23248 and
23249 in the name of Jesus Campos and restore said titles in the name of the
THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN

CASTING ASIDE OVERWHELMING EVIDENCE DULY APPRECIATED BY THE
previous owner, Carlito Campos.
TRIAL COURT THAT PETITIONERS ARE BUYERS IN GOOD FAITH AND FOR
SO ORDERED.
VALUE, WHO EXERCISED DOMINION OVER THE SUBJECT LOTS, WHICH

[17]
[18]
Only petitioners moved for reconsideration but the CA denied the same.
IF
Issues
CONCLUSION THAT THE SALE AND TRANSFER OF TITLES ARE VALID.
Hence, this petition for review on certiorari raising the following errors:
Petitioners arguments
I.
Petitioners assail the application of Article 1409
THE COURT OF APPEALS COMMITTED AN ERROR OF LAW IN APPLYING
contracts as against Article 1381(3) of the Civil Code on rescissible contracts in fraud of
ARTICLE 1409, CIVIL CODE, INSTEAD OF ARTICLE 1381 (3), CIVIL CODE,
creditors,
AND IN SPECULATING THAT A CAUSE OF ACTION OF SUPPOSED SALE IN
spousesCampos to their children were allegedly done to evade the enforcement of the
FRAUD OF CREDITORS EXISTS DESPITE NON-EXHAUSTION OF REMEDIES
writ of execution in the Possession Case.
TO ENFORCE THE JUDGMENT IN CIVIL CASE NO. V-5417.
misappreciated the facts of this case when it found that the questioned transactions
II.
were tainted with badges of fraud.
THE
PROPERLY
CONSIDERED,
SHALL
[20]
OF
APPEALS
COMMITTED
AN
ERROR
OF
LAW
OVERLOOKING THAT THE CAUSE OF ACTION HAD PRESCRIBED, THE
THE
SINGULAR
[19]
of the Civil Code on void
[21]
considering
that
the
questioned
[22]
[23]
COURT
WARRANT
Respondents arguments
conveyances
executed
by
the
In addition, petitioners allege that the CA

Respondents argue that the application of Article 1409 on void contracts was a natural
9)
and logical consequence of the CAs finding that subject deeds of sale were absolutely
reply briefs are not disputed by the respondents; and
simulated and fictitious, consistent with the nature of the respondents cause of action
10)
which was for declaration of nullity of said contracts and the transfer certificates of titles
evidence and contradicted by the evidence on record.
[24]
issued pursuant thereto.
Respondents also stressed that the CAs finding is conclusive
upon us and that only questions of law may be raised in a petition for review
[25]
218
When the facts set forth in the petition as well as in the petitioners main and
When the findings of fact of the CA are premised on the supposed absence of
None of these exceptions is present in this case. We find that the Decision of the CA is
supported by the required quantum of evidence.
on certiorari under Rule 45 of the Rules of Court.
The subject Deeds of Absolute Sale executed by the Spouses Campos to their children
Our Ruling
The petition lacks merit.
(herein petitioners) are absolutely simulated and fictitious.

The CA correctly held that the assailed Deeds of Absolute Sale were executed when the
Well-settled is the rule that this Court is not a trier of facts. When supported by
Possession Case was already pending, evidently to avoid the properties subject thereof
substantial evidence, the findings of fact of the CA are conclusive and binding, and are
from being attached or levied upon by the respondents. While the sales in question
not reviewable by this Court, unless the case falls under any of the following recognized
transpired on October 18, 1985 and November 2, 1988, as reflected on the Deeds of
exceptions:
Absolute Sale, the same were registered with the Registry of Deeds only on October 25,
1)
1990 and September 25, 1990.
When the conclusion is a finding grounded entirely on speculation, surmises
and conjectures;
We also agree with the findings of the CA that petitioners failed to explain the reasons
2)
When the inference made is manifestly mistaken, absurd or impossible;
for the delay in the registration of the sale, leading the appellate court to conclude that
3)
Where there is a grave abuse of discretion;
the conveyances were made only in 1990 or sometime just before their actual
4)
When the judgment is based on a misappreciation of facts;
5)
When the findings of fact are conflicting;
6)
When the CA in making its findings, went beyond the issues of the case and
registration and that the corresponding Deeds of Absolute Sale were antedated. This
conclusion is bolstered by the fact that the supposed notary public before whom the
the same is contrary to the admissions of both appellant and appellee;
deeds of sale were acknowledged had no valid notarial commission at the time of the
[26]
notarization of said documents.
Indeed, the Deeds of Absolute Sale were executed for the purpose of putting the lots in
7)
When the findings are contrary to those of the trial court;
question beyond the reach of creditors. First, the Deeds of Absolute Sale were registered
8)
When the findings of fact are conclusions without citation of specific evidence
exactly one month apart from each other and about another one month from the time
on which they are based;
of the promulgation of the judgment in the Possession Case. The Deeds of Absolute

219
Sale were antedated and that the same were executed when the Possession Case was
As correctly noted by the CA, the appraised value of the properties subject of this
already pending.
controversy may be lower at the time of the sale in 1990 but it could not go lower
Second, there was a wide disparity in the alleged consideration specified in the Deeds of
thanP7,000.00 and P5,600.00. We likewise find the considerations involved in the
Absolute Sale and the actual zonal valuation of the subject properties as per the BIR
assailed contracts of sale to be inadequate considering the market values presented in
Certification, as follows:
the tax declaration and in the BIR zonal valuation.

[31]
Consideration
Market Value
Computed
specified
in
as per Tax
Zonal
Deed
of
Declaration
Valuation
Absolute Sale
Third, we cannot believe that the buyer of the 1,393-square meter residential land
could not recall the exact area of the two lots she purchased. In her cross-examination,
petitioner Rosemarie Campos stated:
(BIR
Q:
Can you tell us the total area of those two (2) lots that they sold to you?
Certification)
A:
It consists of One Thousand (1,000) Square Meters.
Residential
Lots: From
[32]
xxxx
P 7,000.00
[27]
P 83,580.00
[28]
P 417,900.00
Spouses
Q:
By the way, for how much did you buy this [piece] of land consisting of
1,000 square meters?
Campos to
A:
daughter,
Seven Thousand Pesos (P7,000.00) Your Honor.
[33]
Rosemarie
Fourth, it appears on record that the money judgment in the Possession Case has not
Campos
been discharged with. Per Sheriffs Service Return dated November 14, 1995, the Alias
Writ of Execution and Sheriffs Demand for Payment dated September 19, 1995 remain
Agricultural
Lots: From
Spouses
Campos to
son,
unsatisfied.
P 5,600.00
[29]
P 25,000.19
[30]
P 39,860.00
Finally, spouses Campos continue to be in actual possession of the properties in

question. Respondents have established through the unrebutted testimony of Rolando
Azoro that spouses Campos have their house within Lot 3715-A and Lot 3715-B-2 and
[34]
Jesus
Campos
that they reside there together with their daughter Rosemarie.
In addition,
spousesCampos continued to cultivate the rice lands which they purportedly sold to
[35]
their son Jesus.
Meantime, Jesus, the supposed new owner of said rice lands, has

[36]
relocated to Bulacan
[37]
where he worked as a security guard.
220
In other words, despite
the proper Registry of Deeds for more than five years, or until a month before the
the transfer of the said properties to their children, the latter have not exercised
promulgation of the judgment in the Possession Case. Hence, we affirm the finding of
complete dominion over the same. Neither have the petitioners shown if their parents
the CA that the purported deed was antedated. Moreover, her failure to take exclusive
are paying rent for the use of the properties which they already sold to their children.
possession of the property allegedly sold, or, alternatively, to collect rentals is contrary to
[38]
In Suntay v. Court of Appeals,
the principle of ownership and a clear badge of simulation. On these grounds, we
we held that:
The failure of the late Rafael to take exclusive possession of the property allegedly sold to
cannot hold that Rosemarie Campos was an innocent buyer for value.
him is a clear badge of fraud. The fact that, notwithstanding the title transfer, Federico
Likewise, petitioner Jesus Campos supposedly bought the rice land from his parents in
remained in actual possession, cultivation and occupation of the disputed lot from the
1988 but did not have the assailed Deed of Absolute Sale registered with the proper
time the deed of sale was executed until the present, is a circumstance which is
Registry of Deeds for more than two years, or until two months before the promulgation
unmistakably added proof of the fictitiousness of the said transfer, the same being
of the judgment in the Possession Case. Thus, we likewise affirm the finding of the CA
contrary to the principle of ownership.
that the purported deed was antedated. In addition, on cross, he confirmed that he had
[39]
While in Spouses Santiago v. Court of Appeals,
we held that the failure of petitioners
to take exclusive possession of the property allegedly sold to them, or in the alternative,
knowledge of the prior pending cases when he supposedly purchased his parents rice
land stating that:
to collect rentals from the alleged vendor x x x is contrary to the principle of ownership
Q:
and a clear badge of simulation that renders the whole transaction void and without
cases in the past prior to this case now, is that right?
force and effect, pursuant to Article 1409 of the Civil Code.
A:
Yes, sir. I knew about it.
The issuance of transfer certificates of title to petitioners did not vest upon them ownership
Q:
And in spite of your knowledge, that there was a pending case between
of the properties.
your parents and the plaintiffs here, you still purchased these two (2) lots 850
The fact that petitioners were able to secure titles in their names did not operate to vest
and 852 from your parents, is that what you are telling us?
upon them ownership over the subject properties. That act has never been recognized
A:
[40]
as a mode of acquiring ownership.
The Torrens system does not create or vest title. It
only confirms and records title already existing and vested. It does not protect a usurper
[41]
from the true owner. It cannot be a shield for the commission of fraud.
In the instant case, petitioner Rosemarie Campos supposedly bought the residential
properties in 1985 but did not have the assailed Deed of Absolute Sale registered with
You never knew that your parents and the plaintiffs in this case have
All I knew was that, that case was a different case from the subject
matter then [sic] the lot now in question.
[42]
On these findings of fact, petitioner Jesus Campos cannot be considered as an innocent

buyer and for value.

221
Since both the transferees, Rosemarie and Jesus Campos, are not innocent purchasers
was contemplated under the said provision of the Civil Code. The aforementioned
for value, the subsequent registration procured by the presentation of the void deeds of
badges must have been considered merely as grounds for holding that the sale is
absolute sale is likewise null and void.
fictitious. Consequently, we find that the CA properly applied the governing law over the
The action for the declaration of the inexistence of the assailed Deeds of Absolute Sale does
matter under consideration which is Article 1409 of the Civil Code on void or inexistent
not prescribe.
contracts.
Petitioners argue that respondents cause of action had prescribed when they filed the
WHEREFORE, the petition is DENIED. Costs against petitioners.
Nullity of the Sale Case on October 14, 1997, or seven years after the registration of the
SO ORDERED.
questioned sales in 1990.

We cannot agree. As discussed above, the sale of subject properties to herein petitioners
_____________________________________________________________________
are null and void. And under Article 1410 of the Civil Code, an action or defense for the
___________Matthew 6:33-34 - But seek first his kingdom and his righteousness,
declaration of the inexistence of a contract is imprescriptible. Hence, petitioners
and all these things will be given to you as well. Therefore do not worry about
contention that respondents cause of action is already barred by prescription is without
tomorrow, for tomorrow will worry about itself. Each day has enough trouble of
legal basis.
its own.
Since the assailed Deeds of Absolute Sale are null and void, the Civil Code provisions on
rescission have no application in the instant case.
Finally, petitioners argument that the applicable law in this case is Article 1381(3) of the
Civil Code on rescissible contracts and not Article 1409 on void contracts is not a
question of first impression. This issue had already been settled several decades ago
when we held that an action to rescind is founded upon and presupposes the existence
[43]
of a contract.
A contract which is null and void is no contract at all and hence could
[44]
not be the subject of rescission.
In the instant case, we have declared the Deeds of Absolute Sale to be fictitious and
inexistent for being absolutely simulated contracts. It is true that the CA cited instances
that may constitute badges of fraud under Article 1387 of the Civil Code on rescissible
contracts. But there is nothing else in the appealed decision to indicate that rescission

TECSON vs. FRANCISCO (G.R. No. 180683, 1-Jun-2011)27
PEREZ, J.:
[1]
For Review are the Decision
[2]
dated 12 December 2006 and Resolution
[3]
dated
2 October 2007 of the Court of Appeals in CA-G.R. CV No. 70303. In the said
decision and resolution, the Court of Appeals reversed the Regional Trial Court
(RTC), Branch 19 of Pagadian City
[4]
thereby allowing the respondents to recover
four hundred fifty-seven (457) square meters of land from Transfer Certificate of
Title (TCT) No. T-4,342 in the name of petitioner Jose Tecson. The decretal
portion of the decision of the appellate court reads:
[5]
b)
P10,000 as exemplary damages; and
c)
P20,000 as attorneys fees.
222
The antecedents of this case are as follows:

Sometime in 1945, Atty. Agustin Fausto (Atty. Fausto) acquired in co-ownership
with his sister, Waldetrudes Fausto-Nadela (Waldetrudes), Lot 2189a one
thousand fifteen (1,015) square meter parcel of land situated at Jose Zulueta
Street corner National Highway in Pagadian City, Zamboanga Del Sur.
Atty. Fausto constructed his house on a portion of the said lot.
[6]
In 1953,
[7]
In 1970, following a cadastral proceeding, Atty. Fausto and Waldetrudes were

WHEREFORE, in the light of the foregoing, the appeal is hereby GRANTED.
The assailed decision is hereby REVERSED and SET ASIDE.
Defendant-appellee Atty. Jose L. Tecson is entitled only to 507 square meters
under Lot 2189-A; he is DIRECTED to reconvey, within thirty (30) days from
recognized as co-owners of Lot 2189. Consequently, Original Certificate of Title

(OCT) No. 734
[8]
covering Lot 2189 was issued in the names of:
[I]n undivided shares, Waldetrudes Fausto, married to Leon Nadela; and

Agustin Fausto, married to Isabel Pareja, x x x.
notice, the excess of 457 square meters thereof to herein plaintiff-appellants in

order to restore the latters original area of 508 square meters under Lot 2189-B
pursuant to Exhibit B (Subdivision Plan Psd-09-06-000110 dated March 25,
1974) and Exhibit C (the Agreement of Partition dated April 15, 1974). Failure
on his part to reconvey the aforesaid 457 square meters within the period
prescribed thereto, the Clerk of Court of RTC, Branch 19, Pagadian City, is
hereby directed to cause the transfer of the same in favor of herein plaintiffappellants pursuant to Section 10, Rule 39 of the Rules of Court.
Defendant-appellees Aurora L. Tecson and Atty. Jose L. Tecson are directed to
pay, jointly and severally, plaintiff-appellants the following:
a)
P200,000 as moral damages;
Not long after, Atty. Fausto and Waldetrudes decided to partition Lot 2189. For
this purpose, Waldetrudes hired one Engr. Ernesto D. Aguilar (Engr. Aguilar) to
prepare a subdivision plan for the lot. On 25 March 1974, Engr. Aguilar prepared
subdivision plan Psd-09-06-000110 (First Plan)
[9]
that divided Lot 2189 into two
(2) lots, i.e., Lot 2189-A with an area of 507 square meters, and Lot 2189-B with
an area of 508 square meters. An illustration of the First Plan shows this
division:
On 6 April 1974, the Regional Director of the Bureau of Lands approved the First
Plan.
On 15 April 1974, Atty. Fausto and Waldetrudes formalized their decision to
subdivide Lot 2189 by executing an Agreement of Partition.
27 Void Contracts
[10]
Under this

223
agreement (First Partition Agreement), Waldetrudes was to be given absolute
On 28 September 1977, a second partition over Lot 2189 (Second Partition
ownership over Lot 2189-A, while Atty. Fausto was to be conferred separate
Agreement)
[11]
dominion over Lot 2189-B.
The First Partition Agreement, however, was never
[20]
was executed between the respondents in their capacity as heirs
of Atty. Fausto on one hand, and Waldetrudes on the other. Presumably with
registered with the Register of Deeds.
the Second Plan as a new basis, the agreement named Waldetrudes as the owner
On 14 March 1975, Atty. Fausto died. He was survived by herein respondents,
of Lot 2189-B while the respondents were allocated Lot 2189-A.
who are his wife
[12]
and children.
[13]
On 8 May 1978, Waldetrudes sold Lot 2189-B, with an area of nine hundred
On 7 July 1977, however, Waldetrudes entered into a Contract to Sell
[14]
with
sixty-four (964) square meters, to Aurora.
[21]
herein petitioner Aurora L. Tecson (Aurora). In it, Waldetrudes undertook to
Meanwhile, it would seem that the Register of Deeds had refused registration of
sell, among others, her ideal share in Lot 2189 to Aurora upon full payment of
the Second Partition Agreement in view of the fact that several of the
the purchase price.
[15]
respondents,
On 28 July 1977, Engr. Aguilar prepared a second subdivision plan (Second

Plan)
[16]
for Lot 2189. The Second Plan, designated as Psd-268803, drastically
altered the division of Lot 2189 under the First Plan.
[17]
It introduced the
minors.
[22]
namely
Jose,
Elizabeth
and
Victor were
Isabel Vda. De Fausto (Isabel)the wife of Atty. Faustoto secure her

appointment as the legal guardian of her minor children in connection with the
[23]
On 28 July 1978, the guardianship court granted Isabels Petition

1.
Waldetrudes Lot 2189-A with an area of 507 square meters under the
First Plan was now Lot 2189-B with an increased area of 964 square
[18]
meters.
2.
[19]
First Plan was now Lot 2189-A with a decreased area of 51 square meters.
[24]
and, on 17
January 1980, issued an Order approving the Second Partition Agreement.
[25]
On 19 February 1980, the following events transpired:

1.
Atty. Faustos Lot 2189-B with an area of 508 square meters under the
still
Hence, a guardianship proceeding was commenced by respondent
Second Partition Agreement.
following changes:
Romualdo,
The Second Partition Agreement was finally registered with the Register
of Deeds. As a consequence, OCT No. 734 covering Lot 2189 was cancelled and,
in lieu thereof, were issued the following titles:
An illustration of the Second Plan will further highlight these changes:

The Second Plan was approved by the Land Registration Commission on 12
a.
Transfer Certificate of Title (TCT) No. T-4,335 covering Lot 2189-A in
August 1977.
the name of Atty. Fausto; and

[26]
b.
TCT No. T-4,336 for Lot 2189-B in the name of Waldetrudes.
2.
The sale of Lot 2189-B in favor of Aurora was likewise registered with
the Register of Deeds.
[27]
Accordingly, the newly issued TCT No. T-4,336 was
immediately cancelled and replaced by TCT No. T-4,338
[28]
in the name of
Agreement as the only true, correct and binding division of Lot 2189.
[35]
Hence,
Atty. Fausto is entitled not merely to the meager fifty-one (51) square meter lot
actually given to him under the Second Plan and Second Partition Agreement,
but to the five hundred eight (508) square meters of land allotted for him under
the original partition.
Aurora.
224
[36]
Verily, Waldetrudes could not have sold more than her rightful share of only
3.
Aurora executed a Deed of Absolute Sale,
[29]
conveying Lot 2189-B to her
brother, herein petitioner Atty. Jose L. Tecson (Atty. Tecson).
five hundred seven (507) square meters.
[37]
The respondents, thus, ask for the
nullification of the sale of Lot 2189-B to the petitioners, at least with respect to
the excess amounting to four hundred fifty-seven (457) square meters.
[38]
In the same vein, the respondents impugn the validity and binding effect of the
4.
On the very same day, the above deed was registered with the Register
of Deeds.
[30]
Second Plan and the ensuing Second Partition Agreement.
[39]
They denounce
the said plan and agreement as mere handiworks of respondent Atty. Tecson
himself in a fraudulent scheme to get a lions share of Lot 2189.
On 20 February 1980, TCT No. T-4,338 was cancelled. In its place, TCT No. T[31]
4,342
was issued, this time, in the name of Atty. Tecson.
[32]
Complaint
for the Declaration of Nullity of Documents, Titles, Reconveyance
and Damages against Waldetrudes and the petitioners before the Regional Trial
Court (RTC) of Pagadian City. In essence, the respondents seek the recovery of
four hundred fifty-seven (457) square meters of land from TCT No. T-4,342,
which they believe was unlawfully taken from the lawful share of their
predecessor-in-interest, Atty. Fausto, in Lot 2189.
[33]
The respondents allege that Atty. Fausto and Waldetrudes are, in actual fact,
co-owners in equal share of Lot 2189.
[34]
They insist on the First Partition
More
particularly, the respondents claim that:

1.
Atty. Tecson was the one who deceived them into signing the Second
Partition Agreement.
Seven (7) years after, or on 28 May 1987, the respondents filed a
[40]
[41]
The respondents say that they were not involved in the
preparation of the Second Partition Agreement.
[42]
It was only respondent Atty.
Tecson who presented them with the said agreement and who misleadingly told
them that it was required to facilitate the sale of Waldetrudes share.
[43]
The
respondents explain that they believed Atty. Tecson because he was their longtime neighbor, a close family friend and, not the least, a respected member of
the community being a former governor of the province.
2.
[44]
The respondents also point out that the Second Partition Agreement
did not specify the exact areas allotted for each component lot, and that they
were never furnished with copies of the Second Plan.
[45]

3.
The Second Plan, which supposedly supplants the First Plan and divides
Lot 2189 into two (2) vastly unequal portions, was prepared without the
respondents knowledge or consent.
[46]
For which reason, the Second Plan could
7.
225
That the aforestated documents were not registered in the Office of the
Register of Deeds until the death of my brother Agustin Fausto on March 14,
1975, however, the papers or documents involving Lot No. 2189 was kept by me;
not be binding upon them.
8.
4.
I thought of selling my portion which is Lot 2189-B in favor of Jose L. Tecson,
The guardianship proceeding purportedly initiated in the name of
respondent
[47]
Tecson.
Isabel
was
actually
orchestrated
and
financed
by
Atty.
Atty. Tecson was the one who hired Atty. Fausto M. Lingating, his
former legal adviser during his term as governor, to handle the guardianship
case for and on behalf of Isabel.
That due to financial problem especially I am already very old and sickly,
however, in the document the vendee appears to be the sister of Jose L. Tecson
in the person of Aurora L. Tecson;
9.
That I do not know later on how Jose L. Tecson maneuvered to have the
[48]
parcel of land again surveyed reducing the area of my brother to only 51 square
On 20 October 1988, Waldetrudes, who was originally sued by the respondents

as a defendant in the RTC, executed an affidavit
[49]
expressing her intent to join
meters, when in truth and in fact the portion of my late brother has an area of
508 square meters;
the respondents in their cause. In the mentioned affidavit, Waldetrudes
10.
confirmed the allegations of the respondents as follows:
but the area sold is only 507 square meters and there is no intention on my part
xxxx
to sell to Jose L. Tecson more than that area;
5.
That the truth of the matter is that, my brother the late Agustin Fausto
11.
That while it is true that I sold Jose L. Tecson my portion of Lot 2189-B
That several occasion in the past I was made to sign documents by Jose
and I are co-owners of a parcel of land covered by Original Certificate of Title
L. Tecson in relation to the portion sold in his favor, trusting him to be closed
No. 734 of Lot 2189, situated at Gatas District, Pagadian City, containing an area
(sic) to the family, not knowing later on that he maneuvered to change the area
of 1,015 square meters, more or less, in equal share pro indiviso;
of my portion from 507 square meters to 964 square meters encroaching the
6.
share of my late brother Atty. Agustin Fausto thereby reducing his area to 51
That sometimes (sic) in 1974 the late Agustin Fausto and myself agreed
to terminate our co-ownership and have the area surveyed and the same was
square meters;
approved and designated as PSD-09-06-000110, of which we have executed an

agreement of partition on April 15, 1974 apportioning Lot No. 2189-A with an
12.
area of 508 square meters in favor of my late brother Agustin Fausto and Lot No.
true intention in selling my share to Jose L. Tecson, I am informing the
2189-B with an area of 507 square meters in my favor;
Honorable Court that I am joining as party plaintiff in Civil Case No. 2692 in
That because of the illegal maneuvering which does not reflect to be my
order that the truth will come out and justice will prevail.

226
On 18 August 1992, the trial court ordered Waldetrudes to be dropped as a
The claim of petitioner Atty. Tecson over the entire nine hundred sixty-four
party-defendant from the case and, instead, be impleaded therein as a party-
(964) square meters of land covered by TCT No. T-4,342 is intricately linked
plaintiff.
[50]
with the validity of the Second Plan and the Second Partition Agreement. As a
During the trial, Waldetrudes

[54]
Isabel
[51]
and respondents Romualdo,
[52]
Minerva
[53]
and
T-4,338 and T-4,336, are but derivates of the division of Lot 2189 fixed by the
were able to testify.
In its decision dated 8 December 2000, the RTC dismissed the complaint of the
respondents.
[55]
The trial court found no merit in the position of the
respondents and considered the petitioners to be innocent purchasers for value

[56]
of Lot 2189-B.
The dispositive portion of the ruling of the trial court reads:
perusal of the facts reveal, TCT No. T-4,342, along with its precursors TCT Nos.
[57]
WHEREFORE, judgment is hereby rendered dismissing the case, and placing

defendants spouses Jose Tecson and Leonila F. Tecson in physical possession of
Second Plan and the Second Partition Agreement.

Understandably, the petitioners argue in favor of the validity of the Second Plan
and the Second Partition Agreement.
[59]
They deny Atty. Tecsons participation
in the preparation of the said instruments.
[60]
The petitioners insist that the
Second Plan and the Second Partition Agreement were voluntary and intelligent
deeds of Waldetrudes and the respondents themselves.
[61]
Lot No. 2189-B, with an area of 964 square meters in accordance with the
The petitioners also claim that the Second Plan and the Second Partition
approved subdivision plan on August 12, 1977 of the then Land Registration
Agreement present a more accurate reflection of the true nature of the co-
Commission; and ordering the plaintiffs to pay defendants:
ownership between Atty. Fausto and Waldetrudes.
a)
Moral damages in the amount of P30,000.00;
respondents profess, Waldetrudes and Atty. Fausto were not actually co-owners
in equal share of Lot 2189.
b)
Attorneys fee in the amount of P15,000.00;
c.
And the cost of litigation expenses in the amount of P5,000.00.
As earlier mentioned, the Court of Appeals reversed the ruling of the trial court
[58]
on appeal.
Hence, the present appeal by the petitioners.
Contrary to what the
[62]
In truth, the siblings were not even co-owners at
[63]
all.
According to the petitioners, Lot 2189 was originally the conjugal property of
Waldetrudes and her late husband, Leon Nadela.
Fausto was never a co-owner of Lot 2189.
[65]
[64]
At the inception, Atty.
Suitably, it was only Waldetrudes
The primary issue in this appeal is whether the respondents may recover the
who initially declared Lot 2189 for taxation purposes per Tax Declaration No.
four hundred fifty-seven (457) square meters of land from TCT No. T-4,342,
6521.
registered in the name of petitioner Atty. Tecson.
During the cadastral proceedings in 1970, however, Waldetrudes allowed Lot
The petitioners would like this Court to answer in the negative.
2189 to be registered in her name and the name of Atty. Fausto as co-
[66]
owners.
[67]
The petitioners claim that Waldetrudes consented to such a

registration only because Atty. Fausto had already constructed his house on a
portion of Lot 2189.
[68]
The registered co-ownership between Waldetrudes and
Atty. Fausto is, therefore, based merely on the siblings actual occupancy of Lot
[69]
227
Third. During the cadastral proceeding involving Lot 2189, Waldetrudes herself
stated that Atty. Fausto was a co-owner of the subject lot. The transcript taken
from the proceeding shows:
[72]
2189.
Commissioner: What is your relation with Waldetrudes Fausto who is the
The petitioners point out that the interest of Atty. Fausto in Lot 2189 was only
claimant of Lot No. 2189 (portion) of a parcel of land located at Pagadian City
limited to the house he constructed thereonwhich, as it happened, lies evenly
and more particularly bounded as follows: On the North by Lot No. 2190, on the
on the fifty-one (51) square meter portion eventually assigned to him under the
East by Zulueta St., on the South by National Highway and on the West by Gatas
Second Plan and Second Partition Agreement.
[70]
Hence, the Second Plan and
the Second Partition Agreement must be sustained as perfectly valid

instruments.
Creek with an area of 1015 sq. meters and a house as a permanent improvement.
A: I am the very one sir.
Q: How did you acquire the said land?
We are not convinced.
A: I purchase (sic) it from Sofia Vda. Claro in the year 1945 but a copy of the
Waldetrudes and Atty. Fausto are Co-owners in Equal Share
document was lost.
After reviewing the arguments and evidence presented in this case, We rule that
xxxx
Waldetrudes and Atty. Fausto are, indeed, co-owners of Lot 2189. Moreover, We
Q: Who is your co-owner of this land?
hold that the siblings have equal shares in the said lot.
A: My co-owner is my brother Atty. Agustin Fausto.
First. The mother title of Lot 2189, OCT No. 734, states in no unclear terms that
Waldetrudes and Atty. Fausto were co-owners of the subject lot. The
inscription in the original title for Lot 2189 carries more than sufficient weight to
prove the existence of a co-ownership between Waldetrudes and Atty. Fausto.
Fourth. There was likewise no evidence behind the petitioners allegation that
Second. Other than the bare assertion of the petitioners, there is absolutely no
the registered co-ownership between Waldetrudes and Atty. Fausto was based
proof on record that Waldetrudes was the sole beneficial owner of Lot 2189. Tax
on their actual occupancy of Lot 2189. On the contrary, OCT No. 734
Declaration No. 6521 simply cannot prevail over OCT No. 734 as conclusive
categorically states that Waldetrudes and Atty. Fausto are co-owners in
[71]
evidence of the true ownership of Lot 2189.
undivided share of Lot 2189. The conspicuous silence of OCT No. 734 as to the
definite extent of the respective shares of Atty. Fausto and Waldetrudes in Lot

2189 gives rise to a presumption that they are in equal measure. We are at once
reminded of Article 485 of the Civil Code,
[73]
to wit:
a consequence, Waldetrudes and the respondents were misinformed as to the

true nature of the Second Partition Agreement. These factual findings are
adequately supported by the positive testimonies of respondents Romualdo
Article 485. x x x
The portions belonging to the co-owners in the co-ownership shall be presumed
Fausto,
[77]
Minerva Fausto
[78]
[79]
and Isabel,
equal, unless the contrary is proved.
ROMUALDOS DIRECT EXAMINATION
Fifth. The equality in terms of share in Lot 2189, was affirmed by Waldetrudes
ATTY. PERALTA:
when she testified in open court, to wit:
228
[74]
to wit:
Q: Will you please go over if this is the machine copy of the Deed of partition
DIRECT EXAMINATION
which was brought to you by Atty. Tecson and requested you to sign the same?
ATTY. PERALTA
A: Yes sir that is the one.
Q: Now considering that you are, you owned that parcel of land jointly with
xxxx
your younger brother Atty. Agustin Fausto, what is the extent of your
Q: When was that Deed of Partition marked as Exhibit G presented to you by
ownership?
Atty. Tecson?
A: We have co-equal shares sir.
A: Early part of 1977. I was already connected with the Provincial Assessor that
Clearly, the evidence preponderates in favor of the position that Waldetrudes
was the time I have seen so many Deed of Sale and the area is specified so before
and Atty. Fausto were co-owners in equal share of Lot 2189.
I signed I asked Atty. Tecson where is the area and he told me never mind the
area it will be surveyed and I did not insist because I trusted him very much.
Second Plan and Second Partition Agreement is Invalid

Having settled the existence and extent of the co-ownership between
Waldetrudes and Atty. Fausto, We next inquire into the validity of the Second
Q: By the time this was presented to you by Atty. Tecson there was no survey of
2189?
Plan and Second Partition Agreement.
A: There was no survey.
We find the Second Plan and Second Partition Agreement to be invalid.
xxxx
We agree with the findings of the Court of Appeals that Atty. Tecson was behind
COURT: This document which you said you were present during the signing of
the execution of the Second Partition Agreement.
[75]
It was Atty. Tecson who
misled Waldetrudes and the respondents into signing the Second Partition
Agreeement without giving them notice of the existence of a Second Plan.
[76]
As
your brothers and sisters but you cannot remember whether you were present
for the others where did you sign this document?
A: At our house.

229
Q: When you signed the document with your mother, brothers and sisters Atty.
COURT: Who delivered this document to you[r] house?
Tecson brought the documents?
A: Atty. Tecson.
A: Yes, sir.
COURT: You want to impress this court that when you affixed your signatures
MINERVA FAUSTOS DIRECT EXAMINATION
in your house Atty. Tecson was present?
ATTY. PERALTA:
A: Yes sir.
Q: Why, at the time when who brought this deed of partition for signature?
COURT: After signing what was done to this document?
A: Jose L. Tecson.
A: We are not aware of that but we just waited for the survey because Atty.
Q: You are referring to one of the defendants, Jose L. Tecson?
Tecson told us that the survey follows later.
A: Yes, sir.
COURT: Who kept this document?
Q: Now, when this was brought by Jose L. Tecson, the defendant Jose L. Tecson,
A: My Auntie Waldetrudes Nadela.
where did he
COURT:
COURT: For a moment.
It is clear now that this document was signed in your house and it was kept by
Q: You said that defendant Jose L. Tecson brought that deed of partition. Were
your Auntie?
you there when defendant Jose L. Tecson brought that deed of partition?
A: Yes, sir.
A: Yes, your Honor.
xxxx
Q: Where was it brought?
ATTY. PERALTA:
A: In the house.
Q: When Atty. Tecson went your house to request you to sign how did he tell
COURT: Proceed.
you?
ATTY. PERALTA:
A: He told us just to sign the document and the survey will just follow we just
Q: Who were present in your house when this was brought by defendant Jose L.
sign the document without the area and he told us that the area will just follow
Tecson?
later.

230
A: Myself, Neneth or Agustin, Romualdo and Jose Fausto. There were four (4) of
which has the same number 3976584 issued on January 6, 1977, Pagadian City,
us when that deed of partition was brought to the house, myself, my sister
who placed this residence certificate?
Agustina, my brothers Romualdo and Jose.
A: All of us sir never exhibited our residence certificates. It was the Tecsons
Q: Do you want to convey to the Court that when this was brought to you
who supplied the residence certificate numbers.
Francisco Fausto, Victor Fausto and your sister Elizabeth, Maria Fausto were not
ISABELS DIRECT EXAMINATION
around when this was brought by Jose L. Tecson for signature in your house?
A: Yes, sir.
ATTY. PERALTA:
Q: Do you remember having signed a Deed of Partition together with some of
xxxx
your children?
Q: Why did you sign above the typewritten name of Francisco Fausto knowing
A: Yes sir[.] I can remember.
that he was not around?

A: Because defendant Jose L. Tecson told me to affix the signature of Francisco
Fausto because this deed of partition is just to facilitate the transferring (sic) of
Q: Who brought that Deed of Partition for signature together with some of your
children?
A: Governor Tecson.
the title of the land.

Q: Were you able to sign the Deed of Partition?
xxxx
A: I signed that Deed of Partition because according to him just sign this for
Q: Who signed for her, for and behalf of Maria Lilia Fausto?
A: I signed myself.
Q: Why did you sign for Maria Lilia Fausto?
A: Because Jose L. Tecson told me to sign the document in order that the deed
purposes of subdividing the property.

xxxx
Q: Do you recall if you have filed guardianship proceeding?
A: I have not remembered having filed a guardianship proceeding.
of partition could be accomplished.

Q: Have you heard that there was guardianship proceeding?
xxxx
A: All I can remember about that guardianship proceeding was that when Gov.
Q: Now, how about the residence certificates appearing after the name of
Agustina Fausto, with her own residence certificate 3976584 to have been issued
January 6, 1977, Pagadian City, and the Residence Certificate of Jose Fausto
Tecson let me sign a guardianship because some of my children were not

around.

231
Q: Do you want to convey to this court that personally you have not filed
In other words, the deceit employed by Atty. Tecson goes into the
guardianship proceeding but it was Governor Tecson who let you sign some
very nature of the Second Partition Agreement and not merely to its
documents regarding guardianship?
object or principal condition. Evidently, there is an absence of a genuine
A: It was Governor Tecson who explained to me to sign that guardianship
intent on the part of the co-owners to be bound under a new partition
proceeding because according to him it will facilitate and I thought that
proposing a new division of Lot 2189. The apparent consent of Waldetrudes and
guardianship was only for purposes of being guardian to my children as a
the respondents to the Second Partition Agreement is, in reality, totally
mother.
wanting. For that reason, the Second Partition Agreement is null and void.
Indeed, the lack of a plausible explanation why a co-owner would gratuitously
Third. The Second Partition Agreement being a complete nullity, it cannot be
cede a very substantial portion of his rightful share to another co-owner in
ratified either by the lapse of time or by its approval by the guardianship
partition renders the foregoing testimonies more credible as against the plain
court.
general denial of Atty. Tecson. On this point, We find no reversible error on the
Fourth. The First Plan and the First Partition Agreement remain as the valid
part of the Court of Appeals.
and binding division of Lot 2189. Hence, pursuant to the First Partition
The established facts have several legal consequences:
Agreement, Waldetrudes is the absolute owner of Lot 2189-A with an area of
First. The Second Plan, having been prepared without the knowledge and
consent of any of the co-owners of Lot 2189, have no binding effect on them.
[82]
only five hundred seven (507) square meters. Atty. Fausto, on the other hand,
has dominion over Lot 2189-B with an area of five hundred eight (508) square
meters.
Second. The Second Partition Agreement is null and void as an absolute

simulation,
[80]
albeit induced by a third party. The fraud perpetrated by Atty.
Tecson did more than to vitiate the consent of Waldetrudes and the
respondents. It must be emphasized that Waldetrudes and the
respondents never had any intention of entering into a new partition
Fifth. Inevitably, Waldetrudes can only sell her lawful share of five hundred
seven (507) square meters. The sales in favor of Aurora and, subsequently, Atty.
Tecson, are thereby null and void insofar as it exceeded the 507 square meter
[83]
share of Waldetrudes in Lot 2189. Nemo dat quod non habet.
distinct from the First Partition Agreement. The established facts reveal
Atty. Tecson is not an innocent purchaser for value
that Waldetrudes and the respondents assented to the Second Partition
The remaining bar to the recovery by the respondents of the excess area held by
Agreement because Atty. Tecson told them that the instrument was merely
Atty. Tecson is the principle of an innocent purchaser for value of land under
required to expedite the sale of Waldetrudes share.
[81]
the Torrens System of Registration.

232
The petitioners claim that they are bona fide purchasers of the entire nine
Being the one behind the execution of the Second Partition Agreement, there is
hundred sixty-four (964) square meters of land covered by Lot 2189-Bwith
no doubt that Atty. Tecson knew that Lot 2189 was owned in common by
Aurora merely relying on the strength of TCT No. T-4,336 in the name of
Waldetrudes and Atty. Fausto. This, taken together with the instruments
Waldetrudes, while Atty. Tecson placing confidence in TCT No. T-4,338 in the
unusual silence as to the definite area allotted for each component lot and the
name of Aurora. Both TCT Nos. T-4,336 and T-4,338 define the area of Lot 2189-
Second Plan, reveals a deliberate attempt on the part of Atty. Tecson to conceal
B as nine hundred sixty-four (964) square meters.
[84]
The petitioners allege that
from Waldetrudes and the respondents the unequal division of Lot 2189.
at the time they made their respective purchase, they did not know of the
The necessity to conceal the disproportionate division of Lot 2189 can only be
existing partition of Lot 2189 per the First Plan and the First Partition
explained by Atty. Tecsons prior knowledge that such a partition is inherently
Agreement.
[85]
defective for being contrary to the actual sharing between Waldetrudes and Atty.
We disagree. The proven facts indicate that Atty. Tecson knew or, at the very
Fausto. Atty. Tecson is clearly in bad faith.
least, should have known that Atty. Fausto and Waldetrudes were co-owners in
Verily, Atty. Tecson cannot be considered as an innocent purchaser of the excess
equal share of Lot 2189. We must be reminded of the following circumstances:
area of Lot 2189-B. Based on the facts and circumstances prevailing in this case,
1.
Atty.
Atty. Tecson may be charged with actual notice of the defect plaguing the
Faustos.
[86]
Tecson
was
long-time
friend
and
neighbor
of
the
Atty. Tecson himself testified that he considered Atty. Fausto as a
good friend and even admitted that he would sometimes visit the latter in his
[87]
house to play mahjong.
By this, Atty. Tecson knew that Atty. Fausto has an
actual interest in Lot 2189.

2.
Atty. Tecson was the one who presented the Second Partition
agreement, had no knowledge of the existence of the Second Plan;
[89]
and
The Second Partition Agreement failed to state the specific areas
allotted for each component of Lot 2189 and made no mention of the division
[90]
Costs against petitioner.

SO ORDERED.
Waldetrudes and the respondents were not involved in the preparation
proposed by the Second Plan.
of Appeals decision in CA-G.R. CV No. 70303 dated 12 December 2006 is
[88]
of the Second Partition Agreement and, at the time they signed the said
4.
WHEREFORE, the petition is hereby DENIED. Accordingly, the appealed Court
herebyAFFIRMED.
Agreement to Waldetrudes and the respondents;

3.
Second Partition Agreement. The respondents may, therefore, recover.

DPWH vs. QUIWA 665 SCRA 479, G.R. No. 183444
233
claimed that they had accomplished works on the Sacobia-Bamban-Parua River

Control Project pursuant to this emergency project.2 Ronaldo E. Quiwa claimed
SERENO, J.:
that under two construction agreements with the DPWH, his construction
company, the R.E.Q. Construction, had accomplished the channeling of the
Sacobia-Bamban-Parua River Control Project for the excavated spoils of 69,835
Assailed in this Petition for Review on Certiorari is the 26 June 2008 Decision of
the Court of Appeals in CA-G.R. CV No. 76584,1 affirming the trial courts
judgment in favor of herein respondents in their money claims against
petitioner DPWH.
cubic meters, pegged at P3,448,258.25 for one project, and 80,480 cubic meters
at the cost of P4,019,976.00 for another, or a total amount of P7,508,234.25.3
Efren Rigor, on behalf of Chiara Construction, alleged that the sum of money
due him for the channeling of the Sacobia-Bamban-Parua River was
P8,854,654.10 for three accomplished projects.4 Romeo Dimatulac of Ardy
The Factual Antecedents
Construction claimed P1,402,928.45 for double diking;5 and Felicitas C. Sumera,

P4,232,363.40 for her construction company.6
With the eruption of Mt. Pinatubo in 1991 and the consequent onslaught of
lahar and floodwater, the rehabilitation of the affected areas became urgent.
Initially, R.E.Q. Construction filed its money claim with the DPWH, which
River systems needed to be channeled, dredged, desilted and diked to prevent
referred the matter to the Commission on Audit.7 The COA returned the claims
flooding and overflowing of lahar; and to avert damage to life, limb and property
to the DPWH with the information that the latter had already been given the
of the people in the area.
funds and the authority to disburse them.8 When respondent Quiwa filed his
claims with the DPWH, it failed to act on these, resulting in the withholding of
In 1992, a number of contractors, including herein respondents, were engaged

by the DPWH through its Project Manager, Philip F. Meez, for the aforesaid
services pursuant to an emergency project under the Mount Pinatubo
Rehabilitation Project. It was alleged that prior to the engagement of the
contractors, Undersecretary Teodoro T. Encarnacion of DPWH, who had overall
supervision of the infrastructure and flood control projects, met with the
contractors and insisted on the urgency of the said projects. Respondents
the payment due him, despite the favorable report and Certification of
Completion made by the Asstistant Project Manager for Operations, Engineer
Rolando G. Santos.9 Prompted by the prolonged inaction of the DPWH on their
claims, respondents jointly filed an action for a sum of money against the
DPWH.10 The case was decided in their favor by the Regional Trial Court (RTC)
of Manila, Branch 51, in Civil Case No. 96-77180.11

234
As found by the RTC, the respondents, plaintiffs therein, were duly licensed
Undersecretary Teodoro T. Encarnacion had told them to "fast-track" the
contractors, who had completed the construction works on the Sacobia-
project.12
Bamban-Parua River as certified by the DPWH itself. In 1992, the funding for the
infrastructure and other work requirements under the Mt. Pinatubo
Rehabilitation Program in the amount of P400 million pesos was initially
allocated by the government, and was later increased to P700M. Despite the
completion of respondents works in accordance with the specifications and the
allocation of the funds to cover the said services, the DPWH unjustly denied the
claims. The court a quo gave credence to the evidence presented by respondents,
consisting of contract agreements; statement of work accomplished, certified
and signed by the engineers of the DPWH; and testimonial evidence of
witnesses. It ruled that respondents were able to prove their claims by a
preponderance of evidence. The RTC found that the contracts between DPWH
and the plaintiffs were valid contracts, as all the requisites thereof -- consent,
The RTC also ruled that the claim of the respondents against DPWH was proper
since they had already made a demand on the Commission on Audit regarding
the payment of their construction services. Thus, they first availed themselves of
the proper administrative remedy in filing their claim with COA, which
unfortunately referred the claim to the DPWH. The court a quo also reasoned
that the contracts could not be declared void on the ground of the absence of a
certification of availability of funds issued by the proper accounting official. It
found that there was already an advice of allotment from the Department of
Budget and Management to cover the projects.13 The respondents were thus
correct in suing the government for the nonpayment of the services they had
rendered. Consequently, the court a quo disposed:
subject matter and cause -- were present; and, notwithstanding the absence of
the signature of the regional director on the agreement executed with Quiwa
and Sumera, the contract was ratified when he affixed his signature to the
WHEREFORE, in view of the foregoing, judgment is hereby ordered in favor of
Inspection and Certification of Completion of the projects.
plaintiffs Ronaldo Quiwa doing business under the name R.E.Q . Construction,
Efren N. Rigor, doing business under the name Chiara Construction, Romeo R.
Dimatulac, doing business under the namme (sic) Ardy Construction and
The court a quo likewise sustained the claim of Rigor and Dimatulac even in the
absence of a written contract. It held that there was already a perfected contract,
since there was a concurrence of the essential requisites thereof. It also, in effect,
held that DPWH was already estopped from repudiating the contract, as the
against Felicitas C. Sumera, doing business under the namee (sic) FC.S. (sic)
Construction and against defendants Department of Public Works and
Highways, Gregorio R. Vigilar, Teodoro T. Encarnacion and Jose P. de Jesus,
ordering them to jointly and solidarily pay plaintiffs the following amounts:
latter had already made representations and assurances that the plaintiffs would
be paid for the work that they would do, and as even then DPWH
1) To plaintiff Ronaldo Z. Quiwa

First: The principal sum of P3,488,258.25 representing the actual work
235
Second: The sum of 10% of the total amount due as attorneys fees; and
accomplishments of Quiwas first project, the channeling with disposal of

Sacobia-Bamban-Parua River from Sta. 2 + 100 to Sta. 2 + 500 (left bank) in
Bamban, Tarlac and the principal sum of P3,843,252.90 representing the actual
work accomplishments of Quiwas second project which is Channeling with
Third: The sum equivalent to the lawful fees paid by Plaintiff Rigor in entering
or docketing the action which must be the proportion of the filing fees for his
total claim in the amount of P6,998,849.10 as costs of suit.
Disposal of Sacobia-Bamban-Parua River from Sta. 1 + 200 to Sta. 1 + 500 at

Bamban, Tarlac with legal rate of interest from July 1992 until fully paid;
3) For Plaintiff Romeo Dimatulac
accomplishments of plaintiff Dimatulac project, the Double Diking at SacobiaThird: The sum equivalent to the lawful fees paid by plaintiff Quiwa in entering
and docketing the action which must be the proportion of the filing fees for his
Bamban-Parua River Control System from Station 2 + 000 to Station 2 + 400 in

Bamban, Tarlac with legal rate of interest from July 1922 until fully paid;
total claim in the amount of P7,331,511.115 as costs of suit.

2) To plaintiff Efren Rigor
Third: The sum equivalent to the lawful fees paid by plaintiff Dimatulac in
accomplishments of plaintiff Rigors first project, the channeling and disposal of
entering and docketing the action which must be the proportion of the filing fee
for his total claim in the amount of P1,402,928.45 as costs of suit.
Sacobia-Bamban-Parua River Channeling Section 1 + 200 Sta. 1 + 500 in Bamban,

Tarlac, and the principal sum of P3,155,641.20 representing the actual
accomplisments of plaintiff Rigors second project which is the Channeling and
Disposal Sacobia-Bamban-Parua River from Station -0 + 700 to Station-1 + 000
in Bamban, Tarlac with legal rate of interest from July 1992 until fully paid;
4) To plaintiff Felicitas C. Sumera

236
DPWH to enter into contracts on behalf of DPWH. DPWH likewise contested
accomplishments of plaintiff Sumeras project, the Channeling with disposal of
the RTCs award of attorneys fees and costs of suit to respondents.
the Sacobia-Bamban-Parua River Control covering Station -1 = 500 to Station -1 +

800 in Bamban, Tarlac with legal rate of interest from July 1992 until fully paid;
The Court of Appeals (CA), similar to the court a quo, sided with respondents.
The CA resolved in the affirmative the issue of whether the respondents are
entitled to their claim representing actual expenses for the construction projects
they undertook. It found that there was already a fund allocation for the projects,
Third: The sum equivalent to the lawful fees paid by plaintiff Sumeras (sic) in
entering and docketing the action which must be the proportion of the filing
fees for her total claim in the amount of P4,232,363.40 as costs of suit.. (sic)
and that the payment for the channeling services rendered by the respondents
had been included in the said fund allocation as testified to by DPWHs witness,
Felix Desierto. It ruled that DPWH officials who approved the projects, even
though middle-rank, had the authority to bind the department. The CA held:
SO ORDERED.
...[I]t appears that all the procedures followed by the project managers and
plaintiff-appellees were in accordance with the usual DPWH procedures, such
Not amenable to the trial courts Decision, Petitioner DPWH, through the
that, there was no reason for plaintiffs-appellees not to rely on the authority of
Office of the Solicitor General, filed an appeal14 to question the said Decision.
the project managers who allowed them to proceed with their projects from
DPWH mainly argued that there was no valid contract between it and
start to finish.17
respondents.15 It claimed that there was no certification of the availability of

funds issued by the DPWH Chief Accountant or by the head of its accounting
unit as required by Executive Order No. 292, or the Administrative Code of
1987.16 It also alleged other deficiencies and irregularities, which rendered the
contract void from its inception, such as the absence of the requirements
enumerated in Presidential Decree (P.D.) Nos. 1594 and 1445; and the lack of
authority on the part of Engineer Philip Meez, Project Manager II of the
The CA further held that revalidation was not part of the contract and, thus, not
a precondition for payment to the respondents. The constitution of the
revalidation team after the commencement of the construction project
indicated that approval by DPWH was not meant to be a condition for the
payment of the project.18 With the completion of the project, the CA ruled that
the DPWH was estopped from refusing to pay plaintiffs:19

237
...[I]t is readily seen that defendant-appellants conduct in allowing the subject
IN NOT FINDING THAT THE AWARD OF ATTORNEYS FEES AND COSTS OF
projects to continue without objecting thereto and in even assigning its own
SUIT IS UNWARRANTED AND HAS NO BASIS IN LAW.
employees to oversee these projects estopped defendant-appellant from

adopting a position that such projects were not authorized. Without a doubt,
such acts induced plaintiff-appellees to believe that such projects will be
honored by defendant-appellant and that they will be compensated for all their
expenditures.20
According to the CA, the absence of a written contract with R. Dimatulac and
Rigor did not affect the validity and the enforceability of the contracts between
DPWH and the contractors.
Petitioner insists that there was no valid contract between it and the
respondents, and, thus, the latter had no cause of action against the former.
Consequently, there was no basis to grant the Complaint and to award
attorneys fees and the costs of suit in favor of the respondents.23
On the other hand, respondents, in their comment, reiterates the correctness of

the RTC and the CA Decisions. They also brought to the attention of this Court
the fact that the individual defendants in the case, DPWH former Secretaries
Gregorio T. Vigilar and Jose P. de Jesus, and Undersecretary Teodoro T.
With the affirmance of the RTC Decision, DPWH filed a Petition for Review21
Encarnacion did not file an appeal to this Court. Both the RTC and the CA
before this Court, alleging that the following were errors committed by the
Decisions adjudged these defendants jointly and solidarily liable with DPWH to
Court of Appeals:22
pay the amount awarded to the respondents. Respondents are effectively

claiming that the said judgments have become final and executory against
IN NOT FINDING THAT THE PURPORTED CONTRACTS BETWEEN THE
defendant public officials.
PARTIES ARE NULL AND VOID FROM THE BEGINNING AND HENCE, NOT
BINDING BETWEEN THEM;
The Issues
IN NOT FINDING THAT [RESPONDENTS QUIWA ET AL.] HAVE NO CAUSE
We find that the crux of the Petition is simply whether the DPWH is liable to
OF ACTION AGAINST [PETITIONER DPWH];
pay the claims filed against them by the plaintiffs. Corollary to this main issue,
the following sub-issues beg for resolution:

238
Whether, in the absence of the legal requirements under PD 1445, a valid
With the findings of the trial and the appellate courts, there is no longer any
contract between the DPWH and the plaintiffs exists;
issue on whether the contractors completed the projects in accordance with the
specifications agreed upon. The regular course of a contract is that after the
Whether the plaintiffs are entitled to payment for accomplishing 100% of the
work, attorneys fees and costs of suit;
Whether the Secretary and the Undersecretary of DWPH should be held jointly
and solidarily liable to plaintiffs.
complete rendering of services, the contractors are subsequently paid. The

DPWH, however, deviated from this course.
It should be noted that the completion of the works was recognized by the
DPWH, as shown by the certifications issued by its engineers and even by
municipal officials. Notwithstanding the said recognition, DPWH chose not to
act on the claims of respondents, and later denied liability for the payment of
The Courts Ruling
the works on the ground of the invalidity of the contracts.
It should be borne in mind that a review under Rule 45 of the Rules of Court is
Petitioner DPWH primarily argues that the contracts with herein respondents
discretionary and must be granted only when there are special and important
were void for not complying with Sections 85 and 86 of P.D. 1445, or the
reasons therefor.24 We find that these reasons are not present in this case.
Government Auditing Code of the Philippines, as amended by Executive Order

No. 292. These sections require an appropriation for the contracts and a
As a general rule, the factual findings of the trial court, when affirmed by the
appellate court, attain conclusiveness and are given utmost respect by this
Court.25 DPWH never questioned the completion of the Sacobia-Bamban-Parua
river works. Neither did it question the authority of those who certified the
completion of the works by respondents. The trial court ruled that the works
were completed, as shown by the evidence presented before it. This finding was
affirmed by the Court of Appeals. There is, therefore, no reason for us to view
these factual findings.
certification by the chief accountant of the agency or by the head of its

accounting unit as to the availability of funds. It should be noted that there was
an appropriation amounting to P400 million, which was increased to P700
million. The funding was for the rehabilitation of the areas devastated and
affected by Mt. Pinatubo, which included the Sacobia-Bamban-Parua River for
which some of the channeling, desilting and diking works were rendered by
herein respondents construction companies.

239
It was, however, undisputed that there was no certification from the chief
knowledge and consent of the Ministry of Public Works but without any written
accountant of DPWH regarding the said expenditure. In addition, the project
contract and the covering appropriation. The purpose of the project was to
manager has a limited authority to approve contracts in an amount not
prevent the flooding of the neighboring areas and to irrigate the adjacent
exceeding P1 million.26 Notwithstanding these irregularities, it should be
farmlands. On December 16, 1985, the petitioner sought compensation in the
pointed out that there is no novelty regarding the question of satisfying a claim
sum of P1,299,736.00 "for the completed portion of the P2.3 million Betis River
for construction contracts entered into by the government, where there was no
project, which was implemented or undertaken sometime in mid-May, 1984."
appropriation and where the contracts were considered void due to technical
reasons. It has been settled in several cases that payment for services done on
account of the government, but based on a void contract, cannot be avoided.
The Court first resolved such question in Royal Trust Construction v.
Commission on Audit.27 In that case, the court issued a Resolution granting the
claim of Royal Trust Construction under a void contract. The unpublished
Resolution reads as follows:
In a memorandum dated February 17, 1986, then Public Works Minister Jesus
Hipolito recommended immediate "payment of the works already completed"
from the cash disbursement ceiling of P300,000.00 for Betis River. On July 16,
1986, his successor, Minister Rogaciano M. Mercado manifested that his office
was interposing "no objection to the proposal to use the P294,000.00 release for
Betis River Control, Betis, Mexico, Pampanga, for the partial payment of work
already accomplished for the channel improvement of said river from Sta. 2+200
NOV 23 1988
to Sta. 5-100, subject, however, to existing budgetary accounting and auditing

rules and regulations."
Gentlemen
On July 20, 1987, the Chairman of the Commission on Audit ruled that "payment
Quoted hereunder, for your information, is a resolution of the Court En Banc
dated NOV 22 1988
to the contractor for the work accomplished, starting with the first partial
payment in the amount of P268,051.14 only on the basis of quantum meruit may
be allowed, in keeping with the time-honored principle that no one may be
permitted to unjustly enrich himself at the expense of another." However, in a
G.R. No. 84202 (ROYAL TRUST CONSTRUCTION v. COMMISSION ON
subsequent indorsement dated August 27, 1987, Chairman Domingo reversed
AUDIT). The petitioner undertook the widening and deepening of the Betis
himself and held:
River in Pampanga at the urgent request of the local officials and with the

240
"However, this Commission is only too aware of its existing policy on recovery
The work done by it was impliedly authorized and later expressly acknowledged
from government contracts on the basis of quantum meruit. Under COA
by the Ministry of Public Works, which has twice recommended favorable
Resolution No. 36-58, dated November 15, 1986, this Commission has adhered to
action on the petitioners request for payment. Despite the admitted absence of
a policy of barring such recovery where the project subject of the contract is
a specific covering appropriation as required under COA Resolution No. 36-58,
patently violative of the mandatory legal provisions relating to, among others,
the petitioner may nevertheless be compensated for the services rendered by it,
the existence of the corresponding appropriation covering the contract cost. The
concededly for the public benefit, from the general fund allotted by law to the
mere delay in the accomplishment of the required certificate of availability of
Betis River Project. Substantial compliance with the said resolution, in view of
funds (CAF) to support a contract presents an entirely different situation
the circumstances of this case, should suffice. The Court also feels that the
considering that since the covering funds have in fact been already appropriated
remedy suggested by the respondent, to compensation claimed, would entail
and budgetarily allotted to the implementing agency, the delayed execution of
additional expense, inconvenience and delay which in fairness should not be
the CAF would not alter such fact."
imposed on the petitioner.
Even so, he added that "considering the sacrifices already made by the appellant
Accordingly, in the interest of substantial justice and equity, the respondent
in accomplishing the project in question, which are favorable circumstances
Commission on Audit is DIRECTED to determine on a quantum meruit basis
attendant to the claim, payment on the basis of quantum meruit may be given
the total compensation due to the petitioner for the services rendered by it in
due course but only upon order of a court."
the channel improvement of the Betis River in Pampanga and to allow the
payment thereof immediately upon completion of the said determination."
The respondent is now faulted for grave abuse of discretion in disallowing the
petitioners claim without an order from a court. The Solicitor General, in
Very truly yours,
support of the Commission on Audit, agrees that the said payment cannot be
made because it is barred for lack of the required covering appropriation, let
(sgd)
alone the corresponding written contract.

Daniel T. Martinez
Clerk of Court
We hold for the petitioner.

241
The above case became the authority in granting claims of a contractor against
Although this Court agrees with respondents postulation that the "implied
the government based on a void contract. This exercise of equity to compensate
contracts", which covered the additional constructions, are void, in view of
contracts with the government was repeated in Eslao vs. COA.28 In the said case,
violation of applicable laws, auditing rules and lack of legal requirements, we
the respondent therein, Commission on Audit (COA), was ordered to pay the
nonetheless find the instant petition laden with merit and uphold, in the
company of petitioner for the services rendered by the latter in constructing a
interest of substantial justice, petitioners-contractors right to be compensated
building for a state university, notwithstanding the contracts violations of the
for the "additional constructions" on the public works housing project, applying
mandatory requirements of law, including the prior appropriation of funds
the principle of quantum meruit.1avvphi1
therefor. The Court, in resolving the case, cited the unpublished Resolution in
Royal Construction, wherein the Court allowed the payment of the companys
The Court also held in the above case:
services sans the legal requirements of prior appropriation.

Notably, the peculiar circumstances present in the instant case buttress
Royal Trust Construction was again mentioned in Melchor v. COA,29 which was
decided a few months after Eslao. In Melchor, it was found that the contract was
approved by an unauthorized person and, similar to the case at bar, the required
certification of the chief accountant was absent. The Court did not deny or
justify the invalidity of the contract. The Court, however, found that the
government unjustifiably denied what the latter owed to the contractors,
petitioners claim for compensation for the additional constructions, despite the
illegality and void nature of the "implied contracts" forged between the DPWH
and petitioners-contractors. On this matter, it bears stressing that the illegality
of the subject contracts proceeds from an express declaration or prohibition by
law, and not from any intrinsic illegality. Stated differently, the subject contracts
are not illegal per se.
leaving them uncompensated after the government had benefited from the
already completed work.
To emphasize, the contracts in the above cases, as in this case, were not illegal
per se. There was prior appropriation of funds for the project including
In EPG Construction Co., et al v Hon. Gregorio R. Vigilar,30 the Court again
refused to stamp with legality DPWHs act of evading the payment of contracts
that had been completed, and from which the government had already
benefited. The Court held:
appropriation; and payment to the contractors, upon the subsequent

completion of the works, was warranted.

242
As to Public Works and Highways officials Gregorio R. Vigilar, Teodoro T.
In conclusion, we uphold the CA in affirming the liability of the DPWH for the
Encarnacion and Jose P. de Jesus, their personal liability should not be sustained.
works accomplished by herein contractors. We, however, delete the liability of
They were sued in their official capacity, and it would be unfair to them to pay
Gregorio Vigilar, Teodoro Encarnacion and Jose P. de Jesus, as well as other
the contractors out of their own pockets. In Melchor, the Court declared that it
monetary awards in favor of respondents, as these awards were not directly for
was unjust to hold the public official liable for the payment of a construction
the subject accomplished works and were not funded by the department.
that benefited the government.

IN VIEW THEREOF, the assailed 26 June 2008 Decision of the Court of Appeals
We also depart from the CA and the RTC rulings awarding the respondents
is hereby AFFIRMED with MODIFICATION. Gregorio Vigilar, Teodoro
attorneys fees and costs of suit. The Constitution provides that "no money shall
Encarnacion and Jose P. de Jesus are absolved from their solidary liability with
be paid out of the Treasury except in pursuance of an appropriation made by
the government for the payment of the subject contracts. The payment is solely
law."31 Attorneys fees and costs of suit were not included in the appropriation
on account of DPWH. Likewise, attorneys fees and costs of suit are hereby
of expenditures for the Sacobia-Bamban-Parua project. In addition, we are not
DELETED.
disposed to say that there was bad faith on the part of the DPWH in not settling
its liability to the respondents for the works accomplished by the latter. The
DPWH relied on P.D. 1445, Section 87, which provides that contracts in
violation of Sections 85 and 86 thereof are void. The subject contracts
undoubtedly lacked the legal requirement of certification of the chief
accountant of DWPH. It was also clear that the project manager had no
authority to approve the contracts, since the amounts involved were beyond his
authority.32 A strict application of the law, as the DPWH officials did, would
therefore give a reasonable basis for the denial of the claim and eliminate the
badge of bad faith on their part. The DPWH officials were apparently
apprehensive that they might end up being liable to the government if they had
wrongfully paid the contractors. This apprehension clearly showed in their letter
to the DOJ Secretary.33
SO ORDERED.

243
ESTOPPEL
deposit was made, for any loss of whatever nature, and for all obligations, which
LIM vs. QUEENSLAND TOKYO COMMODITIES, INC. (G.R. No. 136031, 4Jan-2002)28
the investor would incur with the broker.
QUISUMBING, J.:
[5]
Because respondent Queensland dealt in pesos only, it had to convert US$5,000

in managers check to pesos, amounting to P125,000 since the exchange rate at
[1]
Before us is a petition for review assailing the June 25, 1998, decision of the
that time was P25 to US$1.00. To accommodate petitioners request to trade
Court of Appeals in CA-G.R. CV No. 46495 which reversed and set aside the
right away, it advanced the P125,000 from its own funds while waiting for the
decision of the Regional Trial Court of Cebu, Branch 24, dismissing the
managers check to clear. Thereafter, a deposit notice in the amount of P125,000
complaint by respondent for a sum of money as well as petitioners
was issued to Queensland, marked as Exhibit E. This was sent to Lim who
counterclaim.
received it as indicated by his signature marked as Exhibit E-1. Then, Lim
Private respondent Queensland Tokyo Commodities, Incorporated (Queensland,
signed the Customers Agreement, marked as Exhibit F, which provides as
for brevity) is a duly licensed broker engaged in the trading of commodities
follows:
futures with full membership and with a floor trading right at the Manila
25. Upon signing of this Agreement, I shall deposit an initial margin either by
Futures Exchange, Inc..
[2]
personal check, managers check or cash. In the case of the first, I shall not be
Sometime in 1992, Benjamin Shia, a market analyst and trader of Queensland,

was introduced to petitioner Jefferson Lim by Marissa Bontia,
[3]
employees. Marissas father was a former employee of Lims father.
[4]
one of his
permitted to trade until the check has been cleared by my bank and credited to
your account. In respect of margin calls or additional deposits required, I shall
likewise pay them either by personal check, managers check or cash. In the
Shia suggested that Lim invest in the Foreign Exchange Market, trading U.S.
event my personal check is dishonored, the company has the right without call
dollar against the Japanese yen, British pound, Deutsche Mark and Swiss Franc.
or notice to settle/close my trading account against which the deposit was
Before investing, Lim requested Shia for proof that the foreign exchange was
really lucrative. They conducted mock tradings without money involved. As the
mock trading showed profitability, Lim decided to invest with a marginal
deposit of US$5,000 in managers check. The marginal deposit represented the
advance capital for his future tradings. It was made to apply to any authorized
future transactions, and answered for any trading account against which the
made. In such event, any loss of whatever nature shall be borne by me and I
shall settle such loss upon demand together with interest and reasonable cost of
collection. However, in the event such liquidation gives rise to a profit then
such amount shall be credited to the Company. The above notwithstanding, I
am not relieved of any legal responsibility as a result of my check being
dishonored by my bank.
[6]
Petitioner Lim was then allowed to trade with respondent company which was
28 Estoppel
coursed through Shia by virtue of the blank order forms, marked as Exhibits G,

[7]
G-1 to G-13,
244
all signed by Lim. Respondent furnished Lim with the daily
On October 27, 1992, Citibank informed respondent that the travelers check
market report and statements of transactions as evidenced by the receiving
could not be cleared unless it was duly signed by Lim, the original purchaser of
[8]
forms, marked as Exhibits J, J-1 to J-4,
some of which were received by
the travelers check. A Miss Arajo, from the accounting staff of Queensland,
Lim.
returned the check to Lim for his signature, but the latter, aware of his P44,465
During the first day of trading or on October 22, 1992, Lim made a net profit
loss, demanded for a liquidation of his account and said he would get back what
of P6,845.57.
[9]
Shia went to the office of Lim and informed him about it. He
was elated. He agreed to continue trading. During the second day of trading or
on October 23, 1992, they lost P44,465.
was left of his investment.
[16]
Meanwhile, Lim signed only one portion of the
travelers check, leaving the other half blank. He then kept it.
[17]
Arajo went back
to the office without it.
[10]
Meanwhile, on October 22, 1992, respondent learned that it would take
Respondent asked Shia to talk to petitioner for a settlement of his account but
seventeen (17) days to clear the managers check given by petitioner. Hence,
petitioner refused to talk with Shia. Shia made follow-ups for more than a week
on October 23, 1992, at about 11:00 A.M., upon managements request, Shia
beginning October 27, 1992. Because petitioner disregarded this request,
returned the check to petitioner who informed Shia that petitioner would rather
respondent was compelled to engage the services of a lawyer, who sent a
replace the managers check with a travelers check.
[11]
Considering that it
demand letter
[18]
to petitioner. This letter went unheeded. Thus, respondent

[19]
was 12:00 noon already, petitioner requested Shia to come back at 2:00
filed a complaint
P.M.. Shia went with petitioner to the bank to purchase a travelers check at the
collection of a sum of money.
PCI Bank, Juan Luna Branch at 2:00 P.M.. Shia noticed that the travelers check
On April 22, 1994, the trial court rendered its decision, thus:
was not indorsed but Lim told Shia that Queensland could sign the indorsee
WHEREFORE, in view of all the foregoing, the complaint is dismissed without
portion.
[12]
Because Shia trusted the latters good credit rating, and out of
ignorance, he brought the check back to the office unsigned.
[13]
Inasmuch as that
against petitioner, docketed as Civil Case No. CEB-13737, for
pronouncement as to costs. The defendants counterclaim is likewise dismissed.

SO ORDERED.
[20]
was a busy Friday, the check was kept in the drawer of respondents
consultant. Later, the travelers check was deposited with Citibank.
[14]
On appeal by Queensland, the Court of Appeals reversed and set aside the trial
courts decision, with the following fallo:
On October 26, 1992, Shia informed petitioner that they incurred a floating loss
[15]
of P44,695
on October 23, 1992. He told petitioner that they could still recover
their losses. He could unlock the floating loss on Friday. By unlocking the
floating loss, the loss on a particular day is minimized.
WHEREFORE, the decision appealed from is hereby REVERSED AND SET

ASIDE, and another one is entered ordering appellee [Jefferson Lim] to pay
appellant the sum of P125,000.00, with interest at the legal rate until the whole
amount is fully paid, P10,000.00 as attorneys fees, and costs.
[21]

Petitioner herein filed a motion for reconsideration before the Court of Appeals,
which was denied in a resolution dated October 6, 1998.
[22]
245
of the contract he was entering into. The Customers Agreement was duly
notarized and as a public document it is evidence of the fact, which gave rise to
[25]
Dissatisfied, petitioner filed the instant recourse alleging that the appellate
its execution and of the date of the latter.
court committed errors:
deposit to respondent in the form of a managers check in the amount of
I - IN REVERSING THE DECISION OF THE RTC WHICH DISMISSED
US$5,000 as evidenced by PCI Bank Managers Check No. 69007, dated October
22, 1992.
RESPONDENTS COMPLAINT;
Next, petitioner paid his investment
[26]
All these are indicia that petitioner treated the Customers
Agreement as a valid and binding contract.

II - IN HOLDING THAT THE PETITIONER IS ESTOPPED IN QUESTIONING
THE VALIDITY OF THE CUSTOMERS AGREEMENT AND FROM DENYING
Moreover, we agree that, on petitioners part, there was misrepresentation of

facts. He replaced the managers check with an unendorsed travelers check,
THE EFFECTS OF HIS CONDUCT;
instead of cash, while assuring Shia that respondent Queensland could sign the
III - IN NOT TAKING JUDICIAL NOTICE OF THE LETTER OF RESPONDENT
THAT THE SEC HAS ISSUED A CEASE AND DESIST ORDER AGAINST
THE MANILA INTERNATIONAL FUTURES EXCHANGE COMMISSION AND
ALL COMMODITY TRADERS INCLUDING THE RESPONDENT.
indorsee portion thereof.
[27]
As it turned out, Citibank informed respondent that
only the original purchaser (i.e. the petitioner) could sign said check. When the
check was returned to petitioner for his signature, he refused to sign. Then, as
petitioner himself admitted in his Memorandum,
Despite the petitioners formulation of alleged errors, we find that the main
issue is whether or not the appellate court erred in holding that petitioner is
estopped from questioning the validity of the Customers Agreement that he
signed.
[28]
he used the travelers check
[29]
for his travel expenses.
More significantly, petitioner already availed himself of the benefits of the

Customers Agreement whose validity he now impugns. As found by the CA,
even before petitioners initial marginal deposit (in the form of the PCI
[30]
The essential elements of estoppel are: (1) conduct of a party amounting to false
managers check dated October 22, 1992)
representation or concealment of material facts or at least calculated to convey
started trading on October 22, 1992, thereby making a net profit
the impression that the facts are otherwise than, and inconsistent with, those
of P6,845.57. On October 23, he continued availing of said agreement, although
which the party subsequently attempts to assert; (2) intent, or at least
this time he incurred a floating loss of P44,645.
expectation, that this conduct shall be acted upon by, or at least influence, the
authorized respondent to trade on those dates, this claim is belied by his
other party; and (3) knowledge, actual or constructive, of the real facts.
[23]
Here, it is uncontested that petitioner had in fact signed the Customers

Agreement in the morning of October 22, 1992,
[24]
knowing fully well the nature
was converted into cash, he already
[31]
While he claimed he had not

[32]
signature affixed in the order forms, marked as Exhibits G, G-1 to G-13.
Clearly, by his own acts, petitioner is estopped from impugning the validity of
the Customers Agreement. For a party to a contract cannot deny the validity

246
thereof after enjoying its benefits without outrage to ones sense of justice and
All deposits, payments and repayments, etc. will be in Philippine Currency. When
fairness.
a deposit with the Company is not in cash or bank draft, such deposit will not
It appears that petitioners reason to back out of the agreement is that he began
take effect in the account concerned until it has been confirmed NEGOTIABLE
sustaining losses from the trade. However, this alone is insufficient to nullify
for payment by authorized management personnel.
the contract or disregard its legal effects. By its very nature it is already a
Respondent claims it informed petitioner of its policy not to accept dollar
perfected, if not a consummated, contract. Courts have no power to relieve
investment. For this reason, it converted the petitioners US$5,000 managers
parties from obligations voluntarily assumed, simply because their contracts
check to pesos (P125,000) out of respondents own funds to accommodate
[33]
turned out to be disastrous or unwise investments.
Notably, in the Customers
petitioners request to trade right away.
[36]
[35]
On record, it appears that petitioner

[37]
Agreement, petitioner has been forewarned of the high risk involved in the
agreed to the conversion of his dollar deposit to pesos.
foreign
Neither is there merit in petitioners contention that respondent violated the
currency
Statement,
[34]
investment
as
stated
in
the
Risk
Disclosure
located in the same box where petitioner signed.
Customers Agreement by allowing him to trade even if his managers check was
Further, petitioner contends that the Customers Agreement was rendered
not yet cleared, as he had no margin deposit as required by the Customers
nugatory because: (1) the marginal deposit he gave was in dollars and (2)
Agreement, viz:
respondent allowed him to trade even before the US$5,000 managers check was
5. Margin Receipt
cleared. This contention is disingenuous to say the least, but hardly meritorious.
A Margin Receipt issued by the Company shall only be for the purpose of
Petitioner himself was responsible for the issuance of the US$5,000 managers
acknowledging receipt of an amount as margin deposit for Spot/Futures
check. It was he who failed to replace the managers check with cash. He
Currency Trading. All checks received for the purpose of margin deposits have to
authorized Shia to start trading even before the US$5,000 check had cleared. He
be cleared through such bank account as may be opened by the Company before
could not, in fairness to the other party concerned, now invoke his own
any order can be accepted.
misdeeds to exculpate himself, conformably with the basic principle in law that
he who comes to court must come with clean hands.
[38]
But as stated earlier, respondent advanced petitioners marginal deposit

of P125,000 out of its own funds while waiting for the US$5,000 managers check
Contrary to petitioners contention, we also find that respondent did not violate
to clear, relying on the good credit standing of petitioner. Contrary to
paragraph 14 of the Guidelines for Spot/Futures Currency Trading, which
petitioners averment now, respondent had advanced his margin deposit with
provides:
his approval. Nowhere in the Guidelines adverted to by petitioner was such an
14. DEPOSITS & PAYMENTS
arrangement prohibited. Note that the advance was made with petitioners

[39]
consent, as indicated by his signature, Exhibit E-1,

notice, Exhibit E,
[40]
affixed in the deposit
sent to him by respondent. By his failure to seasonably
object to this arrangement and by affixing his signature to the notice of deposit,
petitioner is barred from questioning said arrangement now.
Anent the last assigned error, petitioner faults the appellate court for not taking
judicial notice of the cease and desist order against the Manila International
Futures
Exchange
Commission
and
all
commodity
traders
including
respondent. However, we find that this issue was first raised only in petitioners
motion for reconsideration of the Court of Appeals decision. It was never raised
in the Memorandum
[41]
filed by petitioner before the trial court. Hence, this
Court cannot now, for the first time on appeal, pass upon this issue. For an
issue cannot be raised for the first time on appeal. It must be raised seasonably
in the proceedings before the lower court. Questions raised on appeal must be
within the issues framed by the parties and, consequently, issues not raised in
the trial court cannot be raised for the first time on appeal.
[42]
WHEREFORE, the instant petition is DENIED for lack of merit. The decision of
the Court of Appeals dated June 25, 1998, in CA-G.R. CV No. 46495 is
AFFIRMED. Costs against petitioner.
SO ORDERED.
247

REPUBLIC vs. CA, SPS SANTOS, ST. JUDGES ENT., INC., SPS CALAGUIAN
(G.R. No. 116111, 21-Jan-1999)29
248
meters. For Lot 865-B-1 defendant St. Judes Enterprises, Inc. was issued TCT No.
22660 on July 25, 1966.
PANGANIBAN, J.:
Sometime in March 1966 defendant St Judes Enterprises, Inc. subdivided Lot
Is the immunity of the government from laches and estoppel absolute? May it
still recover the ownership of lots sold in good faith by a private developer to
innocent purchasers for value. Notwithstanding its approval of the subdivision
plan and its issuance of separate individual certificates of title thereto?
No. 865-B-1 under subdivision plan (LRC) PSD-55643 and as a result thereof the
Register of Deeds of Caloocan City cancelled TCT No. 22660 and in lieu thereof
issued Certificates of Title Nos. 23967 up to 24068 inclusive, all in the name of
defendants St. Judes Enterprises, Inc. The subdivision of lot 865-B-1 [which
The Case
was] covered [by] TCT No. 22660 was later found to have expanded and
These are the main questions raised in the Petition for Review before us, seeking
enlarged from its original area of 40,523 square meters to 42,044 square meters
to set aside the November 29, 1993 Decision[1] of the Court of Appeals[2] in CA-
or an increase of 1,421 square meters. This expansion or increase in area was
GR CV No. 34647. The assailed Decision affirmed the ruling[3] of the Regional
confirmed by the land Registration Commission [to have been made] on the
Trial Court of Caloocan City, Branch 125, in Civil Case No. C-111708, which
northern portion of Lot 865-B-1.
dismissed petitioners Complaint for the cancellation of Transfer Certificates of
Subsequently, defendant St. Judes Enterprises, Inc. sold the lots covered by
Title (TCTs) to several lots in Caloocan City, issued in the name of private
TCT Nos. 24013 and 24014 to defendant Sps. Catalino Santos and Thelma Barreto
respondents.
Santos[;] TCT No. 24019 to defendant Sps. Domingo Calaguian and Felicidad de
In a Resolution[4] dated July 7, 1994, the Court of Appeals denied the Republics
Jesus[;] TCT No. 24022 to defendant Virginia dela Fuente[;] and TCT No. 2402[3]
motion for reconsideration.
to defendant Lucy Madaya. Accordingly, these titles were cancelled and said
The Facts
The facts of the case are not disputed. The trial courts summary, which was
adopted by the Court of Appeals, is reproduced below:
defendants were issued the following: TCT No. C-43319 issued in the name of
Sps. Santos containing an area of 344 square meters[;] TCT No. 55513 issued in
the name of defendants Sps. Calaguian containing an area of 344 square
meters[;] TCT No. 13309 issued in the name of Sps. Santos[;] TCT No. 24069
Defendant St. Judes Enterprises, Inc. is the registered owner of a parcel of land
issued in the name of Virginia dela Fuente containing an area of 350 square
known as Lot 865-B-1 of the subdivision plan (LRC) PSD-52368, being a portion
meters[;] and TCT No. C-46648 issued in the name of defendant Lucy Mandaya
of Lot 865-B located in Caloocan City containing an area of 40,623 square
with an area of 350 square meters."[5]

"[On January 29, 1985, then Solicitor General Estelito Mendoza filed] an action
29 Estoppel
seeking xxx the annulment and cancellation of Transfer Certificates of Title

249
(TCT) Nos. 24015, 24017, 24018, 24020, 24021, 24024, 24025 and 24068 issued in
the plaintiff's allegation that the area of the subdivision increased by 1,421 square
the name of defendant St. Jude's Enterprises, Inc.[;] Transfer Certificates of Title
meters is without any basis in fact and in law."[6]
Nos. 13309 and C-43319 both registered in the name of Sps. Catalino Santos and
Ruling of the Trial Court
Thelma B. Santos[;] TCT No. 55513 registered in the name of Sps. Domingo
Calaguian and Felicidad de Jesus[;] TCT No. 24069 registered in the name of
Virginia dela Fuente[;] and TCT No. C-46648 registered in the name of Lucy
Mandaya, principally on the ground that said Certificates of Title were issued on
the strength of [a] null and void subdivision plan (LRC) PSD-55643 which
expanded the original area of TCT No. 22660 in the name of St. Jude's
Enterprises, Inc. from 40,623 square meters to 42,044 square meters upon its
subdivision
On April 30, 1991, the trial court dismissed the Complaint.[7] While the plaintiff
sufficiently proved the enlargement or expansion of the area of the disputed
property, it presented no proof that Respondent St. Jude Enterprises, Inc. (St.
Jude) had committed fraud when it submitted the subdivision plan to the Land
Registration Commission (LRC) for approval. Because the plan was presumed to
have been subjected to investigation, study and verification by the LRC, there
was no one to blame for the increase in the area but the plaintiff[,] for having
allowed and approved the subdivision plan. Thus, the court concluded, the
"Defendants Virginia dela Fuente and Lucy Mandaya were declared in default
government was already in estoppel to question the approved subdivision
for failure to file their respective answer within the reglementary period.
plan.
"Defendants Sps. Catalino Santos and Thelma Barreto Santos, St. Jude's
The trial court also took into account the absence of complaints from adjoining
Enterprises, Inc. and Sps. Domingo Calaguian and Felicidad Calaguian filed
owners whose supposed lots [were] encroached upon by the defendants, as well
separate answers to the complaint. Defendants Sps. Domingo Calaguian and Sps.
as the fact that an adjoining owner had categorically stated that there was no
Catalino Santos interposed defenses, among others, that they acquired the lots
such encroachment. Finding that Spouses Santos, Spouses Calaguian, Dela
in question in good faith from their former owner, defendant St. Jude's
Fuente and Madaya had brought their respective lots from St. Jude for value and
Enterprises, Inc. and for value and that the titles issued to the said defendants
in good faith, the court held that their titles could no longer be questioned,
were rendered incontrovetible, conclusive and indefeasible after one year from
because under the Torrens system, such titles had become absolute and
the date of the issuance of the titles by the Register of Deeds of Caloocan City.
irrevocable. As regards the Republics allegation that it had filed the case to
"On the other hand, defendant St. Jude's Enterprises, Inc. Interposed defenses,
protect the integrity of the said system, the court said:
among others, that the cause of action of plaintiff is barred by prior judgment;
xxx [S]ustaining the position taken by the government would certainly lead to
that the subdivision plan submitted having been approved by the LRC, the
disastrous consequences. Buyers in good faith would lose their titles. Adjoining
government is now in estoppel to question the approved subdivision plan; and
owners who were deprived of a portion of their lot would be forced to accept the

250
portion of the property allegedly encroached upon. Actions for recovery will be
1. Whether or not the government is estopped from questioning the approved
filed right and left[;] thus instead of preserving the integrity of the Torrens
subdivision plan which expanded the areas covered by the transfer certificates of
System it would certainly cause chaos rather than stability. Finally, if only to
title in question;
strengthen the Torrens System and in the interest of justice, the boundaries of
2. Whether or not the Court of Appeals erred when it did not consider the
the affected properties of the defendants should not be disturbed and the status
Torrens System as merely a means of registering title to land;
quo should be maintained.[8]
3. Whether or not the Court of Appeals erred when it failed to consider that
The solicitor general appealed the trial courts Decision to the Court of Appeals.
petitioners complaint before the lower court was filed to preserve the integrity
Ruling of the Appellate Court
of the Torrens System.
Citing several cases[9] upholding the indefeasibility of titles issued under the
We shall discuss the second and third questions together. Hence, the issues
Torrens system, the appellate court affirmed the trial court. It berated
shall be (1) the applicability of estoppel against the State and (2) the Torrens
petitioner for bringing the suit only after nineteen (19) years had passed since
system.
the issuance of St. Judes title and the approval of the subdivision plan. The
The Courts Ruling
pertinent portion of the assailed Decision reads:[10]
The petition is bereft of merit.
xxx Rather than make the Torrens system reliable and stable, [its] act of filing
First Issue: Estoppel Against the Government
the instant suit rocks the system, as it gives the impression to Torrens title
holders, like appellees, that their titles to properties can be questioned by the
same authority who had approved the same even after a long period of time. In
that case, no Torrens title holder shall be at peace with the ownership and
The general rule is that the State cannot be put in estoppel by the mistakes or
error of its officials or agents.
subject to exceptions, viz.:
[13]
However, like all general rules, this is also
[14]
possession of his land, for the Commission of land Registration can question his
Estoppels against the public are little favored. They should not be invoked
title any time it makes a finding unfavorable to said Torrens title holder.
except in rate and unusual circumstances, and may not be invoked where they
would operate to defeat the effective operation of a policy adopted to protect
Undaunted, petitioner seeks a review by this Court.[11]
the public. They must be applied with circumspection and should be applied
The Issues
only in those special cases where the interests of justice clearly require
[12]
In this petition, the Republic raises the following issues for our resolution:
it. Nevertheless, the government must not be allowed to deal dishonorably or

capriciously with its citizens, and must not play an ignoble part or do a shabby

251
thing; and subject to limitations x x x, the doctrine of equitable estoppel may be
prolonged inaction strongly militates against its cause, as it is tantamount to
invoked against public authorities as well as against private individuals.
laches, which means the failure or neglect, for an unreasonable and
the government, in its effort to recover ill-
unexplained length of time, to do that which by exercising due diligence could
gotten wealth, tried to skirt the application of estoppel against it by invoking a
or should have been done earlier; it is negligence or omission to assert a right
[15]
In Republic v. Sandiganbayan,
specific constitutional provision.
[16]
The Court countered:
[17]
We agree with the statement that the State is immune from estoppel, but this
within a reasonable time, warranting a presumption that the party entitled to

assert it either has abandoned it or declined to assert it.
[19]
concept is understood to refer to acts and mistakes of its officials especially
The Court notes private respondents argument that, prior to the subdivision,
those which are irregular (Sharp International Marketing vs. Court of
the surveyors erred in the original survey of the whole tract of land covered by
Appeals, 201 SCRA 299; 306 [1991]; Republic v. Aquino, 120 SCRA 186 [1983]),
TCT No. 22660. So that less then the actual land area was indicated on the
which peculiar circumstances are absent in the case at bar. Although the States
title. Otherwise, the adjoining owners would have complained upon the
right of action to recover ill-gotten wealth is not vulnerable to estoppel[;] it
partition of the land in accordance with the LRC-approved subdivision plan. As
is non sequitur to suggest that a contract, freely and in good faith executed
it is, Florencio Quintos, the owner of the 9,146 square-meter Quintos Village
between the parties thereto is susceptible to disturbance ad infinitum. A
adjoining the northern portion of St. Judes property (the portion allegedly
different interpretation will lead to the absurd scenario of permitting a party to
expanded), even attested on August 16, 1973 that there [was] no overlapping
unilaterally jettison a compromise agreement which is supposed to have the
of boundaries as per my approved plan (LRC) PSD 147766 dated September 8,
authority of res judicata (Article 2037, New Civil Code), and like any other
1971.
contract, has the force of law between parties thereto (Article 1159, New Civil
or the purchasers of its property. It is clear, therefore, that there was no actual
Code; Hernaez vs. Kao, 17 SCRA 296 [1966]; 6 Padilla, Civil Code Annotated,
damage to third persons caused by the resurvey and the subdivision.
th
[20]
None of the other neighboring owners ever complained against St. Jude
7 ed., 1987, p. 711; 3 Aquino, Civil Code, 1990 ed., p. 463). xxx.
Significantly, the other private respondents -- Spouses Santos, Spouses
The Court further declared that (t)he real office of the equitable norm of
Calaguian, Dela Fuente and Madaya -- bought such expanded lots in good
estoppel is limited to supply[ing] deficiency in the law, but it should not
faith, relying on the clean certificates of St. Jude, which had no notice of any
supplant positive law.
[18]
In the case at bar, for nearly twenty years (starting from the issuance of St.
Judes titles in 1966 up to the filing of the Complaint in 1985), petitioner failed
to correct and recover the alleged increase in the land area of St. Jude. Its
flaw in them either. It is only fair and reasonable to apply the equitable
principle of estoppel by laches against the government to avoid an injustice
[21]
to
the innocent purchasers for value.

Likewise time-settled is the doctrine that where innocent third persons, relying
on the correctness of the certificate of title, acquire rights over the property,

[25]
252
courts cannot disregard such rights and order the cancellation of the
In another case,
certificate. Such cancellation would impair public confidence in the certificate
The Torrens System was adopted in this country because it was believed to be
of title, for everyone dealing with property registered under the Torrens system
most effective measure to guarantee the integrity of land titles and to protect
would have to inquire in every instance whether the title has been regularly
their indefeasibility once the claim of ownership is established and
issued or not. This would be contrary to the very purpose of the law, which is to
recognized. If a person purchases a piece of land on the assurance that the
stabilize land titles. Verily, all persons dealing with registered land may safely
sellers title thereto is valid, he should not run the risk of being told later that
rely on the correctness of the certificate of title issued therefor, and the law or
his acquisition was ineffectual after all. This would not only be unfair to
the courts do not oblige them to go behind the certificate in order to investigate
him. What is worse is that if this were permitted, public confidence in the
again the true condition of the property. They are only charged with notice of
system would be eroded and land transactions would have to be attended by
the liens and encumbrances on the property that are noted on the certificate.
[22]
this Court further said:
complicated and not necessarily conclusive investigations and proof of
When private respondents-purchasers bought their lots from St. Jude, they did
ownership. The further consequence would be that land conflicts could be even
not have to go behind the titles thereto to verify their contents or search for
more abrasive, if not even violent. The Government, recognizing the worthy
hidden defects or inchoate rights that could defeat their rights to said
purposes of the Torrens System, should be the first to accept the validity of titles
lots. Although they were bound by liens and encumbrances annotated on the
issued thereunder once the conditions laid down by the law are satisfied. [Italics
titles, private respondents-purchasers could not have had notice of defects that
supplied.]
only an inquiry beyond the face of the titles could have satisfied.
rationale for this presumption has been stated thus:
[23]
The
[24]
Petitioner never presented proof that the private respondents who had bought
their lots from St. Jude were buyers in bad faith. Consequently, their claim of
The main purpose of the Torrens System is to avoid possible conflicts of title to
good faith prevails. A purchaser in good faith and for value is one who buys the
real estate and to facilitate transactions relative thereto by giving the public the
property of another without notice that some other person has a right to or an
right to rely upon the face of a Torrens Certificate of Title and to dispense with
interest in such property; and who pays a full and fair price for the same at the
the need of inquiring further, except when the party concerned had actual
time of such purchase or before he or she has notice of the claims or interest of
knowledge of facts and circumstances that should impel a reasonably cautious
some other person.
man to make such further inquiry (Pascua v. Capuyoc, 77 SCRA 78). Thus,
any unconscientious advantage of another.
where innocent third persons relying on the correctness of the certificate thus
Furthermore, it should be stressed that the total area of forty thousand six
issued, acquire rights over the property, the court cannot disregard such rights
hundred twenty-three (40,623) square meters indicated on St. Judes original
(Director of Land v. Abache, et al., 73 Phil. 606).
title (TCT No. 22660) was not an exact area. Such figure was followed by the
[26]
Good faith is the honest intention to abstain from taking

[27]

253
phrase more or less. This plainly means that the land area indicated was not
96,930 sq. meters.
precise. Atty. Antonio H. Noblejas, who became the counsel of St. Jude
f. There is no allegation whatever in the Perez report that there was error in
subsequent to his tenure as Land Registration Commissioner, offers a sensible
laying out the metes and bounds of Lot 865-B-1 in Plan (LRC) Psd-55643, as
explanation. In his letter
[28]
to the LRC dated November 8, 1982, he gave the
specified in the Technical Description of the said lot set forth in T.C.T. No. N-
following information:
22660 covering the same. There is likewise no allegation, on the contrary there
a. Records show that our client owned a large tract of land situated in an area
is confirmation from the boundary owner on the northern side, Mr. Florencio
cutting the boundary of Quezon City and Caloocan City, then known as Lot 865-
Quintos, that there is no overlapping of boundaries on the northern side of Lot
B, Psd-60608, and described in T.C.T. No. 100412, containing an area of 96,931 sq.
865-B-1, Psd-55643.
meters, more or less.
g. We respectfully submit that the area of 42, 044 sq. meters stated in Plan (LRC)
b. It will be noted that on the northern portion of this Lot 865-B, Psd-60608, is
Psd-55643 as the size of Lot 865-B-a, is the more accurate area, confirmed by the
xxx Lot 865-A, Psd-60608, which means that at a previous point of time, these 2
Perez
lots composed one whole tract of land.
rectifies previous surveryors error in computing its area as 40,622 sq. meters in
c. On December 23, 1965, Lot 865-B, Psd-60608, was subdivided into 2 lots,
Plan (LRC) Psd-52368, which is about 3.5% tolerable error (1,422 divided by 40,622
denominated as Lot 865-B-1, with an area of 40,622 sq. meters, more or less, on
= .035).
the Caloocan side, and Lot 865-B-2, with an area of 56,308 sq. meters, more or
[h.] It is well settled that in the identification of a parcel of land covered by
less, on the Quezon City side, under Plan (LRC) Psd-52368.
certificate of title, what is controlling are the metes and bounds as set forth in
d. On March 1-10, 1966, Lot 865-B-1, Psd-52368, then covered by T.C.T. No. N-
its Technical Description and not the area stated therein, which is merely an
22660, was subdivided into residential lots under Plan (LRC) Psd-55643, with a
approximation as indicated in the more or less phrase placed after the number
total area of 42,044 sq. meters, more or less.
of square meters.
e. It will be noted that Lot 865-B, Psd-60608, covered by T.C.T. No. 100412,
i. There is thus no unauthorized expansion of the survey occasioned by the
contained an area of 96,931 sq. meters, more or less, but when subdivided under
subdivision of Lot 865-B-1 under Plan (LRC) Psd-55643; consequently, LRC
Plan (LRC) Psd-52368, into 2 lots, its total area shrank by 1 sq. meter, to wit:
Circular No. 167, Series of 1967, finds no application thereto, as to bar the
Lot 865-B-1, Psd-52368 = 40,622 sq. meters
report
as
per
surveyor[]s
findings
on
the
ground,
which
processing and registration in due course of transactions involving the

subdivision lots of our client, subject hereof. This is apart from the fact that
Lot 865-B-2, Psd-52368 = 56,308
LRC Circular No. 167 has not been implemented by the Register of Deeds of

254
Caloocan City or any proper government authority since its issuance in 1967,
True, the Torrens system is not a means of acquiring titles to lands; it is merely a
and that, in the interest of justice and equity, its restrictive and oppressive effect
system of registration of titles to lands.
on transactions over certificates of titles of subdivisions that allegedly expanded
included in a Torrens certificate of title is not necessarily acquired by the holder
on re-surveys, cannot be allowed to continue indefinitely. (Italics supplied.)
of such certificate.
The discrepancy in the figures could have been caused by the inadvertence or
But in the interest of justice and equity, neither may the titleholder be made to
the negligence of the surveyors. There is no proof, though, that the land area
bear the unfavorable effect of the mistake or negligence of the States agents, in
indicated was intentionally and fraudulently increased. The property originally
the absence of proof of his complicity in a fraud or of manifest damage to third
registered was the same property that was subdivided. It is well-settled that
persons. First, the real purpose of the Torrens system is to quite title to land to
what defines a piece of titled property is not the numerical date indicated as the
put a stop forever to any question as to the legality of the title, except claims that
area of the land, but the boundaries or metes and bounds of the property
were noted in the certificate at the time of the registration or that may arise
specified in its technical description as enclosing it and showing its limits.
[29]
[30]
Consequently, land erroneously
[31]
subsequent thereto.
[32]
Second, as we discussed earlier, estoppel by laches now
Petitioner miserably failed to prove any fraud, either on the part of Private
bars petitioner from questioning private respondents titles to the subdivision
Respondent St. Jude or on the part of land registration officials who had
lots. Third, it was never proven that Private Respondent St. Jude was a party to
approved the subdivision plan and issued the questioned TCTs. Other than its
the fraud that led to the increase in the area of the property after its
peremptory statement in the Complaint that the expansion of the area was
subdivision. Finally, because petitioner even failed to give sufficient proof of
motivated by bad faith with intent to defraud, to the damage and prejudice of
any error that might have been committed by its agent who had surveyed the
the
allege
property, the presumption of regularity in the performance of their functions
specifically how fraud was perpetrated to cause an increase in the actual land
must be respected. Otherwise, the integrity of the Torrens system, which
size
the
petitioner purportedly aims to protect by filing this case, shall forever be sullied
allegation. That the land registration authorities supposedly erred or
by the ineptitude and inefficiency of land registration officials, who are
committed an irregularity was merely a conclusion drawn from the table
ordinarily presumed to have regularly performed their duties.
survey showing that the aggregate area of the subdivision lots exceeded the
We cannot, therefore, adhere to the petitioners submission that, in filing this
area indicated on the title of the property before its subdivision. Fraud cannot
suit, it seeks to preserve the integrity of the Torrens system. To the contrary, it
be presumed, and the failure of petitioner to prove it defeats it own cause.
is rather evident from our foregoing discussion that petitioners action derogates
Second Issue: The Torrens System
the very integrity of the system. Time and again, we have said that a Torrens
government
and
indicated. Nor
of
was
public
any
interests,
evidence
petitioner
proffered
to
did
not
substantiate
[33]

certificate is evidence of an indefeasible title to property in favor of the person
whose name appears thereon.
WHEREFORE, the petition is hereby DENIED and the assailed Decision
is AFFIRMED.
SO ORDERED.
255

HEIRS OF HERMOSILLA vs. SPS REMOQUILLO (G.R. No. 167320, 30-Jan2007)30
256
On July 8, 1963, Apolinario conveyed Lot 12 to his son Salvador Hermosilla

(Salvador), Jaimes uncle.
DECISION
Salvador later filed an application to purchase Lot 12 which was awarded to him
CARPIO MORALES, J.:
by the defunct Land Authority on December 16, 1971.
Petitioners Heirs of Salvador Hermosilla, namely: Adelaida H. Dolleton, Ruben

1
Hermosilla, Lolita H. de la Vega, Erlinda H. Inovio, Celia H. Vivit, Zenaida H.

3
Achoy, Precilla H. Limpiahoy, and Edgardo Hermosilla, assail the Court of

4
Appeals Decision dated September 29, 2004 which reversed the trial courts
On February 10, 1972, Jaime and his uncle Salvador forged a "Kasunduan ng
Paglipat Ng Karapatan sa Isang Lagay na Lupang Solar" (Kasunduan) whereby
Jaime transferred ownership of the 65 square meters (the questioned property)
in favor of Salvador.
decision in their favor and accordingly dismissed their complaint.

After Apolinario died, his daughter Angela Hermosilla filed a protest before the
Subject of the controversy is a 65-square meter portion of a lot located in
Poblacion, San Pedro, Laguna.
On August 31, 1931, the Republic of the Philippines acquired through purchase
the San Pedro Tunasan Homesite.
Land
Authority,
which
became
the
National
Housing
Authority
(NHA), contending that as an heir of the deceased, she is also entitled to Lots 12
and 19. By Resolution of June 10, 1981, the NHA dismissed the protest.
The NHA later awarded on March 16, 1986 Lot 19 to Jaime for which he and his
Apolinario Hermosilla (Apolinario), who was occupying a lot in San Pedro
wife were issued a title, Transfer Certificate of Title No. T-156296, on September
Tunasan Homesite until his death in 1964, caused the subdivision of the lot into
15, 1987.
two, Lot 12 with an area of 341 square meters, and Lot 19 with an area of 341
square meters of which the 65 square meters subject of this controversy form
part.
On May 25, 1992, petitioners filed an action for Annulment of Title on the
ground of fraud with damages against Jaime and his spouse, together with the
Register of Deeds, before the Regional Trial Court (RTC) of Bian, Laguna,
On April 30, 1962, Apolinario executed a Deed of Assignment transferring
alleging that by virtue of the Kasunduan executed in 1972, Jaime had conveyed
possession of Lot 19 in favor of his grandson, herein respondent Jaime
to his uncle Salvador the questioned propertypart of Lot 19 covered by TCT No.
Remoquillo (Jaime). As the Land Tenure Administration (LTA) later found that
T-156296 which was issued in 1987.
Lot 19 was still available for disposition to qualified applicants, Jaime, being its
actual occupant, applied for its acquisition before the LTA on May 10, 1963.
By Decision of May 11, 1999, the RTC of Bian, Laguna, Branch 25, found
the Kasunduan a perfected contract of sale, there being a meeting of the minds
upon an identified object and upon a specific price, and that ownership over the
30 Estoppel
questioned property had already been transferred and delivered to Salvador.

257
On the alleged failure of consideration of the Kasunduan, the trial court held
Cometa involves a different factual milieu concerning the right of redemption,
that the same did not render the contract void, but merely allowed an action for
however. And petitioners contention that prescription does not lie against a co-
specific performance. The dispositive portion of the trial courts Decision reads:
owner fails because only the title covering the questioned property, which
WHEREFORE, judgment is hereby rendered declaring plaintiffs as co-owners of
petitioners claim to solely own, is being assailed.
the 65 square meters of the 341square meters covered by TCT T-156296,
While this Court finds that the action is, contrary to the appellate courts ruling,
registered in the name of defendants. The Court hereby directs the Register of
not barred by the statute of limitations, it is still dismissible as discussed below.
Deeds of Laguna, Calamba Branch, to cancel said Transfer Certificate of Title,
Albeit captioned as one for Annulment of Title, the Complaint ultimately seeks
and in lieu thereof, to issue another [to] plaintiffs [as] co-owners of the above
the reconveyance of the property.
portion.
From the allegations of the Complaint, petitioners seek the reconveyance of the
8
property based on implied trust. The prescriptive period for the reconveyance of
SO ORDERED. (Underscoring supplied)
fraudulently registered real property is 10 years, reckoned from the date of the
The Court of Appeals, reversing the decision of the trial court, held that
issuance of the certificate of title, if the plaintiff is not in possession, but
the Kasunduan was void because at the time of its execution in 1972, the
imprescriptible if he is in possession of the property.
Republic of the Philippines was still the owner of Lot 19, hence, no right
An action for reconveyance based on an implied trust prescribes in ten
thereover was transmitted by Jaime who was awarded the Lot in 1986, and
years. The ten-year prescriptive periodapplies only if there is an actual need
consequently no right was transmitted by Salvador through succession to
to reconvey the property as when the plaintiff is not in possession of the
petitioners. And it found no evidence of fraud in Jaimes act of having Lot 19,
property. However, if the plaintiff, as the real owner of the property also
including the questioned property, registered in his and his wifes name in 1987.
remains in possession of the property, the prescriptive period to recover the title
At all events, the appellate court held that the action had prescribed, it having
and possession of the property does not run against him. In such a case, an
been filed in 1992, more than four years from the issuance to Jaime and his wife
action for reconveyance, if nonetheless filed, would be in the nature of a suit for
of the Transfer Certificate of Title.
quieting of title, an action that is imprescriptible. (Emphasis and underscoring
10
11
Hence, the present petition for review on certiorari.

Petitioners argue that the application of the law on prescription would
perpetrate fraud and spawn injustice, they citing Cometa v. Court of
9
Appeals; and that at any rate, prescription does not lie against a co-owner.
supplied)
It is undisputed that petitioners houses occupy the questioned property and
12
that respondents have not been in possession thereof. Since there was no
actual need to reconvey the property as petitioners remained in possession

258
thereof, the action took the nature of a suit for quieting of title, it having been
proscribes the conveyance of the privilege or preference to purchase a land from
filed to enforce an alleged implied trust after Jaime refused to segregate title
the San Pedro Tunasan project before it is awarded to a tenant or bona fide
over Lot 19. One who is in actual possession of a piece of land claiming to be
occupant, thus:
the owner thereof may wait until his possession is disturbed or his title is
SEC. 6. Privilege of Preference to Purchase Intransferable; Waiver or Forfeiture
13
attacked before taking steps to vindicate his right. From the body of the
Thereof. From the date of acquisition of the estate by the Government
complaint, this type of action denotes imprescriptibility.
and before issuance of the Order of Award, no tenant or bona fideoccupant in
As priorly stated, however, when the Kasunduan was executed in 1972 by Jaime
whose favor the land may be sold shall transfer or encumber the privilege or
in favor of Salvador petitioners predecessor-in-interest Lot 19, of which the
preference to purchase the land, and any transfer or encumbrance made in
questioned property forms part, was still owned by the Republic.Nemo dat quod
violation hereof shall be null and void: Provided, however, That such
14
non habet. Nobody can give what he does not possess. Jaime could not thus
privilege or preference may be waived or forfeited only in favor of the Land
have transferred anything to Salvador via the Kasunduan.
Authority . . . (Italics in the original, emphasis and underscoring supplied)
Claiming exception to the rule, petitioners posit that at the time the Kasunduan
Petitioners insistence on any right to the property under the Kasunduan thus
was executed by Jaime in 1972, his application which was filed in 1963 for the
fails.
award to him of Lot 19 was still pending, hence, the Kasunduan transferred to
[T]he transfer "became one in violation of law (the rules of the PHHC being
Salvador Jaimes vested right to purchase the same, in support of which they cite
promulgated in pursuance of law have the force of law) and therefore void ab
a law on estoppel, Art. 1434 of the Civil Code, which provides that "[w]hen a
initio." Hence, appellant acquired no right over the lot from a contract voidab
person who is not the owner of a thing sells or alienates and delivers it and later,
initio, no rights are created. Estoppel, as postulated by petitioner, will not apply
the seller or grantor acquires title thereto, such title passes by operation of law
for it cannot be predicated on an illegal act. It is generally considered that as
to the buyer or grantee."
17
15
between the parties to a contract, validity cannot be given to it by estoppel if it

18
Petitioners reliance on Article 1434 of the Civil Code does not lie. The principles
is prohibited by law or is against public policy. (Emphasis and underscoring
of estoppel apply insofar as they are not in conflict with the provisions of the
supplied)
Civil
Petitioners go on to postulate that if the Kasunduan is void, it follows that the
Code,
the
Code
of
Commerce,
the
Rules
of
Court
16
and speciallaws. 1avvphi1.net
1962 Deed of Assignment executed by Apolinario in favor of Jaime is likewise
Land Authority Administrative Order No. 4 (1967), "Rules and Regulations
void to thus deprive the latter of any legal basis for his occupation and
governing Disposition of the Laguna Settlement Project in San Pedro, Laguna,"
acquisition of Lot 19.

Petitioners position fails. Petitioners lose sight of the fact that, as reflected
above, Jaime acquired Lot 19 in his own right, independently of the Deed of
Assignment.
In another vein, since the property was previously a public land, petitioners
have no personality to impute fraud or misrepresentation against the State or
19
violation of the law. If the title was in fact fraudulently obtained, it is the State
which should file the suit to recover the property through the Office of the
Solicitor General. The title originated from a grant by the government, hence, its
cancellation is a matter between the grantor and the grantee.
20
At all events, for an action for reconveyance based on fraud to prosper, the
plaintiff must prove by clear and convincing evidence not only his title to the
property but also the fact of fraud. Fraud is never presumed. Intentional acts to
deceive and deprive another of his right, or in some manner injure him must be
specifically alleged and proved by the plaintiff by clear and convincing
21
evidence. Petitioners failed to discharge this burden, however.

WHEREFORE, the petition is, in light of the foregoing ratiocination, DENIED.
SO ORDERED.
259

260
ASILO, JR. vs. PEOPLE and SPOUSES BOMBASI, G.R. No. 159017-18, March
9, 2011
The lease contract provided that the late Vda. De Coronado could build a
firewall on her rented property which must be at least as high as the store; and
PEREZ, J.:
in case of modification of the public market, she or her heir/s would be given
preferential rights.
At bench are appeals by certiorari1 from the Decision2 of the Fourth Division of
the Sandiganbayan; (1) finding Demetrio T. Comendador3 (Mayor Comendador)
and Paulino S. Asilo, Jr.4 guilty beyond reasonable doubt of violation of Sec. 3(e)
Visitacion took over the store when her mother died sometime in 1984.9 From
then on up to January 1993, Visitacion secured the yearly Mayors permits.10
of Republic Act No. 3019; (2) dismissing the cases against accused Alberto S.
Angeles;5 (3) ordering the defendants Municipality of Nagcarlan, Laguna,
Demetrio T. Comendador and Paulino S. Asilo, Jr. to pay the plaintiffs now
Sometime in 1986, a fire razed the public market of Nagcarlan. Upon Visitacions
respondents Visitacion C. Bombasi (Visitacion) and Cesar C. Bombasi damages;
request for inspection on 15 May 1986, District Engineer Marcelino B. Gorospe
and (4) dismissing the cases against the spouses Alida and Teddy Coroza6 and
(Engineer Gorospe) of the then Ministry of Public Works and Highways,11
Benita and Isagani Coronado.7
Regional Office No. IV-A, found that the store of Visitacion remained intact and
stood strong. This finding of Engineer Gorospe was contested by the
Municipality of Nagcarlan.
The factual antecedents of the case are:

The store of Visitacion continued to operate after the fire until 15 October 1993.
On 15 March 1978, Private Respondent Visitacions late mother Marciana Vda.
De Coronado (Vda. De Coronado) and the Municipality of Nagcarlan, Laguna
(represented by the then Municipal Mayor Crisostomo P. Manalang) entered
On 1 September 1993, Visitacion received a letter12 from Mayor Comendador
into a lease contract whereby the Municipality allowed the use and enjoyment
directing her to demolish her store within five (5) days from notice. Attached to
of property comprising of a lot and a store located at the corner of Coronado
the letter were copies of Sangguniang Bayan Resolution No. 15613 dated 30
and E. Fernandez Sts. at Poblacion, Nagcarlan, Laguna, in favor of the
August 1993 and a Memorandum issued by Asst. Provincial Prosecutor
respondents mother for a period of twenty (20) years beginning on 15 March
Marianito Sasondoncillo of Laguna.
1978 until 15 March 1998, extendible for another 20 years.8

The relevant provisos of the Resolution No. 156 states that:
261
appear to be defiant, let me reiterate to you and the council that we are willing
to vacate the said building provided that a new contract is executed granting to
NOW THEREFORE, be it RESOLVED, as it hereby resolved to authorize Hon.

Demetrio T. Comendador to enforce and order the Coronados to demolish the
building constructed on the space previously rented to them in order to give
way for the construction of a new municipal market building.
us the same space or lot and the same area. I believe that our proposal is most
reasonable and fair under the circumstance. If you are not amenable to the said
proposal, I concur with the position taken by the Council for you to file the
appropriate action in court for unlawful detainer to enable our court to finally
thresh out our differences.141avvphi1
RESOLVED FURTHER, to authorize Demetrio T. Comendador, Honorable

Mayor of Nagcarlan to file an Unlawful Detainer Case with damages for the
expenses incurred due to the delay in the completion of the project if the
Coronados continuously resists the order.
On 15 September 1993, Asst. Provincial Prosecutor Florencio Buyser sent a letter

to Visitacion ordering her to vacate the portion of the public market she was
occupying within 15 days from her receipt of the letter; else, a court action will
be filed against her.
On 3 September 1993, Visitacion wrote a reply letter to Mayor Comendador

saying that: (1) the lease contract was still existing and legally binding; (2) she
was willing to vacate the store as long as same place and area would be given to
her in the new public market; and (3) in case her proposals are not acceptable to
Mayor Comendador, for the latter to just file an unlawful detainer case against
On 11 October 1993, the Sangguniang Bayan of Nagcarlan, Laguna issued

Resolution No. 183 authorizing Mayor Comendador to demolish the store being
occupied by Visitacion using legal means. The significant portion of the
Resolution reads:
her pursuant to Sangguniang Bayan Resolution No. 156. Pertinent portions of

the letter read:
Kung kaya ang Sangguniang Bayan ay buong pagkakaisang IPINASIYA: Ang

pagbibigay kapangyarihan kay Kgg. Demetrio T. Comendador na ipagiba ang
x x x With all due respect to the resolution of the Municipal Council and the
opinion rendered by the Laguna Asst. Provincial Prosecutor, it is my considered
view, however, arrived at after consultation with my legal counsel, that our
existing lease contract is still legally binding and in full force and effect. Lest I
anumang istrakturang nagiging sagabal sa mabilis at maayos na pagbabangon

ng pamilihang bayan.15

On 14 October 1993, Municipal Administrator Paulino S. Asilo, Jr. (Asilo) also
262
The spouses prayed for the following disposition:
sent a letter16 to Visitacion informing her of the impending demolition of her

store the next day. Within the same day, Visitacion wrote a reply letter17 to
Asilo, alleging that there is no legal right to demolish the store in the absence of
a court order and that the Resolutions did not sanction the demolition of her
store but only the filing of an appropriate unlawful detainer case against her.
She further replied that if the demolition will take place, appropriate
1. RESTRAINING or ENJOINING defendant Municipality and defendant

Municipal Mayor from leasing the premises subject of lease Annex "A" hereof,
part of which is now occupied by PNP Outpost and by the Municipal Collectors
Office, and the equivalent adjacent area thereof, and to cause the removal of
said stalls;
administrative, criminal and civil actions will be filed against Mayor

Comendador, Asilo and all persons who will take part in the demolition.
2. UPHOLDING the right of plaintiffs to occupy the equivalent corner area of
the leased areas being now assigned to other persons by defendants
On 15 October 1993, Mayor Comendador relying on the strength of Sangguniang
Bayan Resolution Nos. 183 and 156 authorized the demolition of the store with
Municipality and/or by defendant Municipal Mayor, and to allow plaintiffs to

construct their stalls thereon;
Asilo and Angeles supervising the work.

3. MAKING the injunction permanent, after trial;
Engineer Winston Cabrega (Engineer Cabrega), a licensed civil engineer,
estimated the cost of the demolished property as amounting to P437,900.0018
4. ORDERING defendants to pay plaintiffs, jointly and severally, the following
On 19 August 1994, Visitacion, together with her husband Cesar Bombasi
(Spouses Bombasi) filed with the Regional Trial Court of San Pablo City, Laguna
(a) P437,900.00 for loss of building/store and other items therein;
a Civil Case19 for damages with preliminary injunction against the Municipality
of Nagcarlan, Laguna, Mayor Demetrio T. Comendador, Paulino S. Asilo, Jr., and
(b) P200,000.00 for exemplary damages;
Alberto S. Angeles. The complaint was soon after amended to include the
Spouses Benita and Isagani Coronado and Spouses Alida and Teddy Coroza as
formal defendants because they were then the occupants of the contested area.
(c) P200,000.00 for moral damages;

263
(d) P30,.00 for attorneys fees and P700.00 for every attendance of counsel in
FOUR HUNDRED THIRTY SEVEN THOUSAND AND NINE HUNDRED ONLY
court.
(P437,900.00).
5. GRANTING further reliefs upon plaintiffs as justice and equity may warrant in
Upon their arraignments, all the accused entered their separate pleas of "Not
the premises.20
Guilty."
Spouses Bombasi, thereafter, filed a criminal complaint21 against Mayor
On 4 March 1997, the Sandiganbayan promulgated a Resolution ordering the
Comendador, Asilo and Angeles for violation of Sec. 3(e) of Republic Act No.
consolidation of Civil Case No. SP-4064 (94)23 with Criminal Case No. 23267
3019 otherwise known as the "Anti-Graft and Corrupt Practices Act" before the
pending before the Third Division pursuant to Section 4, Presidential Decree No.
Office of the Ombudsman. On 22 February 1996, an Information22 against
1606, which pertinently reads:
Mayor Comendador, Asilo and Angeles was filed, which reads:

Any provision of law or Rules of Court to the contrary notwithstanding, the
That on or about October 15, 1993, at Nagcarlan, Laguna, Philippines, and within
criminal action and the corresponding civil action for the recovery of civil
the jurisdiction of this Honorable Court, the above-named accused, all public
liability arising from the offense charged shall at all times be simultaneously
officers, accused Demetrio T. Comendador, being then the Municipal Mayor,
instituted with, and jointly determined in the same proceeding by the
accused Paulino S. Asilo, Jr. being then the Municipal Administrator and
Sandiganbayan or the appropriate courts, the filing of the criminal action being
accused Alberto S. Angeles being then the Municipal Planning and
deemed to necessarily carry with it the filing of the civil action, and no right to
Development Coordinator, all of the Municipality of Nagcarlan, Laguna,
reserve the filing of such civil action separately from the criminal action shall be
committing the crime herein charged in relation to, while in the performance
recognized; Provided, however, that where the civil action had heretofore been
and taking advantage of their official functions, conspiring and confederating
filed separately but judgment therein has not yet been rendered, and the
with each other, and with evident bad faith, manifest partiality or through gross
criminal case is hereafter filed with the Sandiganbayan or the appropriate court,
inexcusable negligence, did then and there willfully, unlawfully, criminally cause
said civil action shall be transferred to the Sandiganbayan or the appropriate
the demolition of a public market stall leased by the municipal government in
court as the case may be, for consolidation and joint determination with the
favor of one Visitacion Coronado-Bombasi without legal or justifiable ground
criminal action, otherwise the separate civil action shall be deemed
therefor, thus, causing undue injury to the latter in the amount of PESOS:
abandoned.24

264
accused are sentenced to suffer the indeterminate penalty of 6 years and 2

During the pendency of the case, Alberto S. Angeles died on 16 November 1997.
months imprisonment as minimum to 10 years and 1 day as maximum.
Accordingly, the counsel of Angeles filed a motion to drop accused Angeles. On

22 September 1999, the Third Division of Sandiganbayan issued an Order25
The order of the court dated September 22, 1999 dismissing the cases against the
DISMISSING the case against Angeles. The germane portion of the Order reads:
accused Alberto S. Angeles, who died on November 16, 1997 is hereby reiterated.
In view of the submission of the death certificate of accused/defendant Alberto
In Civil Case No. 4064, defendants Municipality of Nagcarlan, Laguna, Demetrio
S. Angeles, and there being no objection on the part of the Public Prosecutor,
T. Comendador and Paulino S. Asilo, Jr. are hereby ordered jointly and severally
cases against deceased accused/defendant Angeles only, are hereby DISMISSED.
to pay plaintiff P437,900.00 as actual damages for the destruction of the store;
P100,000.00 as moral damages; P30,000.00 as attorneys fees, and to pay the cost
The death of Mayor Comendador followed on 17 September 2002. As a result,
of the suit. The prayer for exemplary damages is denied as the court found no
the counsel of the late Mayor filed on 3 March 2003 a Manifestation before the
aggravating circumstances in the commission of the crime.
Sandiganbayan informing the court of the fact of Mayor Comendadors death.

In view of this courts finding that the defendant spouses Alida and Teddy
On 28 April 2003, the Sandiganbayan rendered a decision, the dispositive
Coroza are lawful occupants of the subject market stalls from which they cannot
portion of which reads as follows:
be validly ejected without just cause, the complaint against them is dismissed.
The complaint against defendant spouses Benita and Isagani Coronado is
likewise dismissed, it appearing that they are similarly situated as the spouses
WHEREFORE, premises considered, judgment is hereby rendered as follows:
Coroza. Meanwhile, plaintiff Visitacion Bombasi is given the option to accept

market space being given to her by the municipality, subject to her payment of
In Criminal Case No. 23267, the court finds accused Demetrio T. Comendador
the appropriate rental and permit fees.
and Paulino S. Asilo, Jr. guilty beyond reasonable doubt of violation of Sec. 3(e)
of Republic Act. No. 3019 as amended, and in the absence of aggravating and
mitigating circumstances, applying the Indeterminate Sentence Law, said
The prayer for injunctive relief is denied, the same having become moot and
academic.

265
The compulsory counterclaim of defendant Comendador is likewise denied for
Petitioner Asilo argues that in order to sustain conviction under Sec. 3(e) of
lack of merit.26
Republic Act No. 3019 or "The Anti-Graft and Corrupt Practices Act," the public
officer must have acted with manifest partiality, evident bad faith or gross
Within the same day, Asilo, through his counsel, filed a Motion for
Reconsideration27 of the Decision alleging that there was only an error of
negligence. He also contended that he and his co-accused acted in good faith in
the demolition of the market and, thereby, no liability was incurred.
judgment when he complied with and implemented the order of his superior,
Mayor Comendador. He likewise alleged that there is no liability when a public
On the other hand, Petitioner Victoria argues that the death of Mayor
officer commits in good faith an error of judgment. The Sandiganbayan, on its
Comendador prior to the promulgation of the decision extinguished NOT ONLY
Resolution28 dated 21 July 2003 denied the Motion for Reconsideration on the
Mayor Comendadors criminal liability but also his civil liability. She also
ground that good faith cannot be argued to support his cause in the face of the
asserted good faith on the part of the accused public officials when they
courts finding that bad faith attended the commission of the offense charged.
performed the demolition of the market stall. Lastly, she contended that
The Court further explained that the invocation of compliance with an order of
assuming arguendo that there was indeed liability on the part of the accused
a superior is of no moment for the "demolition [order] cannot be described as
public officials, the actual amount of damages being claimed by the Spouses
having the semblance of legality inasmuch as it was issued without the authority
Bombasi has no basis and was not duly substantiated.
and therefore the same was patently illegal."29

Liability of the accused public officials
The counsel for the late Mayor also filed its Motion for Reconsideration30 on 12
under Republic Act No. 3019
May 2003 alleging that the death of the late Mayor had totally extinguished both
his criminal and civil liability. The Sandiganbayan on its Resolution31 granted
the Motion insofar as the extinction of the criminal liability is concerned and
Section 3(e) of Republic Act No. 3019 provides:
denied the extinction of the civil liability holding that the civil action is an
independent civil action.
In addition to acts or omissions of public officers already penalized by existing

law, the following shall constitute corrupt practices of any public officer and are
Hence, these Petitions for Review on Certiorari.32
hereby declared to be unlawful:

266
We agree with the Sandiganbayan that it is undisputable that the first two
xxxx
requisites of the criminal offense were present at the time of the commission of
the complained acts and that, as to the remaining elements, there is sufficient
amount of evidence to establish that there was an undue injury suffered on the
(e) Causing any undue injury to any party, including the Government, or giving
any private party any unwarranted benefits, advantage or preference in the
part of the Spouses Bombasi and that the public officials concerned acted with
evident bad faith when they performed the demolition of the market stall.
discharge of his official, administrative or judicial functions through manifest

partiality, evident bad faith or gross inexcusable negligence. This provision shall
apply to officers and employees of offices or government corporations charged
Causing undue injury to any party, including the government, could only mean
with the grant of licenses or permits or other concessions.
actual injury or damage which must be established by evidence.34
The elements of the offense are as follows: (1) that the accused are public
In jurisprudence, "undue injury" is consistently interpreted as "actual." Undue
officers or private persons charged in conspiracy with them; (2) that said public
has been defined as "more than necessary, not proper, [or] illegal;" and injury as
officers commit the prohibited acts during the performance of their official
"any wrong or damage done to another, either in his person, rights, reputation
duties or in relation to their public positions; (3) that they caused undue injury
or property [that is, the] invasion of any legally protected interest of another."
to any party, whether the Government or a private party; (4) OR that such injury
Actual damage, in the context of these definitions, is akin to that in civil law.35
is caused by giving unwarranted benefits, advantage or preference to the other

party; and (5) that the public officers have acted with manifest partiality, evident
It is evident from the records, as correctly observed by the Sandiganbayan, that
bad faith or gross inexcusable negligence.33
Asilo and Mayor Comendador as accused below did not deny that there was
indeed damage caused the Spouses Bombasi on account of the demolition. We
We sustain the Sandiganbayan in its finding of criminal and civil liabilities
affirm the finding that:
against petitioner Asilo and petitioner Mayor Comendador as here represented

by his widow Victoria Bueta.
xxx. Clearly, the demolition of plaintiffs store was carried out without a court
order, and notwithstanding a restraining order which the plaintiff was able to
obtain. The demolition was done in the exercise of official duties which

267
apparently was attended by evident bad faith, manifest partiality or gross

inexcusable negligence as there is nothing in the two (2) resolutions which gave
1. It is a two-storey building, sketch of which is attached.
the herein accused the authority to demolish plaintiffs store.

2. It is located within the market site.
"Evident bad faith" connotes not only bad judgment but also palpably and
patently fraudulent and dishonest purpose to do moral obliquity or conscious
wrongdoing for some perverse motive or ill will.36 [It] contemplates a state of
3. The building has not been affected by the recent fire.
mind affirmatively operating with furtive design or with some motive or selfinterest or ill will or for ulterior purposes.37
4. The concrete wall[s] does not even show signs of being exposed to fire.41
It is quite evident in the case at bar that the accused public officials committed
Second, the Sangguniang Bayan resolutions are not enough to justify demolition.
bad faith in performing the demolition.
Unlike its predecessor law,42 the present Local Government Code43 does not
expressly provide for the abatement of nuisance.44 And even assuming that the
First, there can be no merit in the contention that respondents structure is a

public nuisance. The abatement of a nuisance without judicial proceedings is
possible if it is nuisance per se.38 Nuisance per se is that which is nuisance at all
times and under any circumstance, regardless of location and surroundings.39
In this case, the market stall cannot be considered as a nuisance per se because
as found out by the Court, the buildings had not been affected by the 1986 fire.
This finding was certified to by Supervising Civil Engineer Wilfredo A.
power to abate nuisance is provided for by the present code, the accused public
officials were under the facts of this case, still devoid of any power to demolish
the store. A closer look at the contested resolutions reveals that Mayor
Comendador was only authorized to file an unlawful detainer case in case of
resistance to obey the order or to demolish the building using legal means.
Clearly, the act of demolition without legal order in this case was not among
those provided by the resolutions, as indeed, it is a legally impossible provision.
Sambrano of the Laguna District Engineer Office.40 To quote:

Furthermore, the Municipality of Nagcarlan, Laguna, as represented by the then
An inspection has been made on the building (a commercial establishment)
cited above and found out the following:
Mayor Comendador, was placed in estoppel after it granted yearly business

permits45 in favor of the Spouses Bombasi. Art. 1431 of the New Civil Code
provides that, through estoppel, an admission or representation is rendered

268
conclusive upon the person making it, and cannot be denied or disproved as
We now hold, as did the Sandiganbayan that the civil liability of Mayor
against the person relying thereon. The representation made by the
Comendador survived his death; and that of Angeles could have likewise
municipality that the Spouses Bombasi had the right to continuously operate its
survived had it not been for the fact that the resolution of the Sandiganbayan
store binds the municipality. It is utterly unjust for the Municipality to receive
that his death extinguished the civil liability was not questioned and lapsed into
the benefits of the store operation and later on claim the illegality of the
finality.
business.
We laid down the following guidelines in People v. Bayotas:46
The bad faith of the petitioners completes the elements of the criminal offense
of violation of Sec. 3(e) of Republic Act No. 3019. The same bad faith serves as
the source of the civil liability of Asilo, Angeles, and Mayor Comendador.
Death of the accused pending appeal of his conviction extinguishes his criminal
liability as well as the civil liability based solely thereon. As opined by Justice
Regalado, in this regard, "the death of the accused prior to final judgment
It must be noted that when Angeles died on 16 November 1997, a motion to drop
terminates his criminal liability and only the civil liability directly arising from
him as an accused was filed by his counsel with no objection on the part of the
and based solely on the offense committed, i.e., civil liability ex delicto in senso
prosecution. The Sandiganbayan acted favorably on the motion and issued an
strictiore."
Order dismissing all the cases filed against Angeles. On the other hand, when
Mayor Comendador died and an adverse decision was rendered against him
which resulted in the filing of a motion for reconsideration by Mayor
Comendadors counsel, the prosecution opposed the Motion specifying the
ground that the civil liability did not arise from delict, hence, survived the death
of the accused. The Sandiganbayan upheld the opposition of the prosecution
Corollarily, the claim for civil liability survives notwithstanding the death of
(the) accused, if the same may also be predicated on a source of obligation other
than delict. Article 1157 of the Civil Code enumerates these other sources of
obligation from which the civil liability may arise as a result of the same act or
omission:
which disposition was not appealed.

a) Law
We note, first off, that the death of Angeles and of Mayor Comendador during
the pendency of the case extinguished their criminal liabilities.
b) Contracts

269
Upon death of the accused pending appeal of his conviction, the criminal action
c) Quasi-contracts
is extinguished inasmuch as there is no longer a defendant to stand as the

accused; the civil action instituted therein for recovery of civil liability ex delicto
is ipso facto extinguished, grounded as it is on the criminal.48
d) Acts or omissions punished by law; and

The New Civil Code provisions under the Chapter, Human Relations, were cited
e) Quasi-delicts. (Emphasis ours)
by the prosecution to substantiate its argument that the civil action based
therein is an independent one, thus, will stand despite the death of the accused
Where the civil liability survives, as explained [above], an action for recovery
during the pendency of the case.
therefore may be pursued but only by way of filing a separate civil action47 and
subject to Section 1, Rule 111 of the 1985 Rules on Criminal Procedure as
amended. This separate civil action may be enforced either against the
executor/administrator or the estate of the accused, depending on the source of
obligation upon which the same is based as explained above.
Finally, the private offended party need not fear a forfeiture of his right to file
this separate civil action by prescription, in cases where during the prosecution
of the criminal action and prior to its extinction, the private-offended party
instituted together therewith the civil action. In such case, the statute of
limitations on the civil liability is deemed interrupted during the pendency of
the criminal case, conformably with provisions of Article 1155 of the New Civil
Code, which should thereby avoid any apprehension on a possible privation of
On the other hand, the defense invoked Section 4 of Presidential Decree No.
1606, as amended by Republic Act No. 8249, in support of its argument that the
civil action was dependent upon the criminal action, thus, was extinguished
upon the death of the accused. The law provides that:
Any provision of law or the Rules of Court to the contrary notwithstanding, the
criminal action and the corresponding civil action for the recovery of civil
liability arising from the offense charged shall at all times be simultaneously
instituted with, and jointly determined in the same proceeding by, the
Sandiganbayan, the filing of the criminal action being deemed to necessarily
carry with it the filing of the civil action, and no right to reserve the filing of
such action shall be recognized. (Emphasis ours)
right by prescription.
We agree with the prosecution.

270
Death of Mayor Comendador during the pendency of the case could have
In any of the cases referred to in this article, whether or not the defendant's act
extinguished the civil liability if the same arose directly from the crime
or omission constitutes a criminal offense, the aggrieved party has a right to
committed. However, in this case, the civil liability is based on another source of
commence an entirely separate and distinct civil action for damages, and for
obligation, the law on human relations.49 The pertinent articles follow:
other relief. Such civil action shall proceed independently of any criminal
prosecution (if the latter be instituted), and may be proved by a preponderance
Art. 31 of the Civil Code states:
When the civil action is based on an obligation not arising from the act or
of evidence.
As held in Aberca v. Ver:
omission complained of as a felony, such civil action may proceed

independently of the criminal proceedings and regardless of the result of the
It is obvious that the purpose of the above codal provision [Art. 32 of the New
latter.
Civil Code] is to provide a sanction to the deeply cherished rights and freedoms
enshrined in the Constitution. Its message is clear; no man may seek to violate
And, Art. 32(6) states:
Any public officer or employee, or any private individual, who directly or

indirectly obstructs, defeats, violates or in any manner impedes or impairs any
of the following rights and liberties of another person shall be liable to the latter
for damages:
those sacred rights with impunity. x x x.50
Indeed, the basic facts of this case point squarely to the applicability of the law
on human relations. First, the complaint for civil liability was filed way AHEAD
of the information on the Anti-Graft Law. And, the complaint for damages
specifically invoked defendant Mayor Comendadors violation of plaintiffs right
to due process. Thus:
(6) The right against deprivation of property without due process of law;
xxxx
xxxx

271
In causing or doing the forcible demolition of the store in question, the
(d) Removal of improvements on property subject of execution. When the
individual natural defendants did not only act with grave abuse of authority but
property subject of execution contains improvements constructed or planted by
usurped a power which belongs to our courts of justice; such actuations were
the judgment obligor or his agent, the officer shall not destroy, demolish or
done with malice or in bad faith and constitute an invasion of the property
remove said improvements except upon special order of the court, issued upon
rights of plaintiff(s) without due process of law.
motion of the judgment obligee after due hearing and after the former has failed
to remove the same within a reasonable time fixed by the court.
xxxx
The above-stated rule is clear and needs no interpretation. If demolition is
The Court is in one with the prosecution that there was a violation of the right
to private property of the Spouses Bombasi. The accused public officials should
necessary, there must be a hearing on the motion filed and with due notices to
the parties for the issuance of a special order of demolition.53
have accorded the spouses the due process of law guaranteed by the
Constitution and New Civil Code. The Sangguniang Bayan Resolutions as
This special need for a court order even if an ejectment case has successfully
asserted by the defense will not, as already shown, justify demolition of the store
been litigated, underscores the independent basis for civil liability, in this case,
without court order. This Court in a number of decisions51 held that even if
where no case was even filed by the municipality.
there is already a writ of execution, there must still be a need for a special order
for the purpose of demolition issued by the court before the officer in charge
can destroy, demolish or remove improvements over the contested property.52
The pertinent provisions are the following:
The requirement of a special order of demolition is based on the rudiments of

justice and fair play. It frowns upon arbitrariness and oppressive conduct in the
execution of an otherwise legitimate act. It is an amplification of the provision
of the Civil Code that every person must, in the exercise of his rights and in the
Before the removal of an improvement must take place, there must be a special
performance of his duties, act with justice, give everyone his due, and observe
order, hearing and reasonable notice to remove. Section 10(d), Rule 39 of the
honesty and good faith.54
Rules of Court provides:

Notably, the fact that a separate civil action precisely based on due process
violations was filed even ahead of the criminal case, is complemented by the fact

272
that the deceased plaintiff Comendador was substituted by his widow, herein
P100,000.00. The only evidence adduced by respondents to prove actual
petitioner Victoria who specified in her petition that she has "substituted him as
damages claimed by private respondent were the summary computation of
petitioner in the above captioned case." Section 1, Rule III of the 1985 Rules in
damage made by Engr. Jesus R. Regal, Jr. amounting to P171,088.46 and the
Criminal Procedure mentioned in Bayotas is, therefore, not applicable. Truly,
receipt issued by the BB Construction and Steel Fabricator to private respondent
the Sandiganbayan was correct when it maintained the separate docketing of
for P35,000.00 representing cost for carpentry works, masonry, welding, and
the civil and criminal cases before it although their consolidation was
electrical works. Respondents failed to present Regal to testify on his estimation.
erroneously based on Section 4 of Presidential Decree No. 1606 which deals with
In its five-page decision, the trial court awarded P150,000.00 as actual damages
civil liability "arising from the offense charged."
to private respondent but failed to state the factual basis for such award. Indeed,
the trial court merely declared in the decretal portion of its decision that the
We must, however, correct the amount of damages awarded to the Spouses

Bombasi.
"sum of P150,000.00 as reasonable compensation sustained by plaintiff for her

damaged apartment." The appellate court, for its part, failed to explain how it
arrived at the amount of P100,000.00 in its three-page decision. Thus, the
appellate court merely declared:
To seek recovery of actual damages, it is necessary to prove the actual amount of

loss with a reasonable degree of certainty, premised upon competent proof and
on the best evidence obtainable.55 In this case, the Court finds that the only
evidence presented to prove the actual damages incurred was the itemized list
of damaged and lost items56 prepared by Engineer Cabrega, an engineer
commissioned by the Spouses Bombasi to estimate the costs.
With respect to the civil liability of the appellants, they contend that there was
no urgent necessity to completely demolish the apartment in question
considering the nature of the damages sustained as a result of the accident.
Consequently, appellants continue, the award of P150,000.00 as compensation
sustained by the plaintiff-appellee for her damaged apartment is an
unconscionable amount.
As held by this Court in Marikina Auto Line Transport Corporation v. People of

the Philippines,57
Further, in one case,58 this Court held that the amount claimed by the
respondent-claimants witness as to the actual amount of damages "should be
x x x [W]e agree with the contention of petitioners that respondents failed to
admitted with extreme caution considering that, because it was a bare assertion,
prove that the damages to the terrace caused by the incident amounted to
it should be supported by independent evidence." The Court further said that

273
whatever claim the respondent witness would allege must be appreciated in
pecuniary loss in the impairment of their store. Based on the record of the
consideration of his particular self-interest.59 There must still be a need for the
case,64 the demolished store was housed on a two-story building located at the
examination of the documentary evidence presented by the claimants to
markets commercial area and its concrete walls remained strong and not
support its claim with regard to the actual amount of damages.
affected by the fire. However, due to the failure of the Spouses Bombasi to prove
the exact amount of damage in accordance with the Rules of Evidence,65 this
The price quotation made by Engineer Cabrega presented as an exhibit60

partakes of the nature of hearsay evidence considering that the person who
court finds that P200,000.00 is the amount just and reasonable under the
circumstances.
issued them was not presented as a witness.61 Any evidence, whether oral or
documentary, is hearsay if its probative value is not based on the personal
WHEREFORE, the instant appeal is DENIED. Accordingly, the Decision of the
knowledge of the witness but on the knowledge of another person who is not on
Sandiganbayan
the witness stand. Hearsay evidence, whether objected to or not, has no
MODIFICATION. The Court affirms the decision finding the accused Paulino S.
probative value unless the proponent can show that the evidence falls within the
Asilo, Jr. and Demetrio T. Comendador guilty of violating Section 3(e) of
exceptions to the hearsay evidence rule.62 Further, exhibits do not fall under
Republic Act No. 3019. We declare the finality of the dismissal of both the
any of the exceptions provided under Sections 37 to 47 of Rule 130 of the Rules
criminal and civil cases against Alberto S. Angeles as the same was not appealed.
of Court.
In view of the death of Demetrio T. Comendador pending trial, his criminal
dated
28
April
2003
is
hereby
AFFIRMED
WITH
liability is extinguished; but his civil liability survives. The Municipality of

Though there is no sufficient evidence to award the actual damages claimed,
this Court grants temperate damages for P200,000.00 in view of the loss suffered
by the Spouses Bombasi. Temperate damages are awarded in accordance with
Art. 2224 of the New Civil Code when the court finds that some pecuniary loss
Nagcarlan, Paulino Asilo and Demetrio T. Comendador, as substituted by

Victoria Bueta Vda. De Comendador, are hereby declared solidarily liable to the
Spouses Bombasi for temperate damages in the amount of P200,000.00 and
moral damages in the amount of P100,000.00.
has been suffered but its amount cannot, from the nature of the case, be proven
with certainty. The amount of temperate or moderated damages is usually left to
Costs against the petitioners-appellants.
the discretion of the courts but the same should be reasonable, bearing in mind
that the temperate damages should be more than nominal but less than
compensatory.63 Without a doubt, the Spouses Bombasi suffered some form of
SO ORDERED.

"Let not your heart be troubled: ye believe in God, believe also in me."John 14:1 KJV
_____________________________________________________________________
274

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Obligations and Contracts Final Exam Coverage

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OBLIGATIONS AND CONTRACTS S.Y.

RESCISSIBLE CONTRACTS ............................................................................3

June 21, 2006) ...................... 20

THE ESTATE OF PEDRO GONZALES vs. THE HEIRS OF MARCOS PEREZ

VOID CONTRACTS .................................................................................... 161

UNION BANK vs. ONG (G.R. No. 152347

MODINA vs. CA (G.R. No. 109355., 29-Oct-1999) ............................................. 161

VOIDABLE CONTRACTS ............................................................................ 46

DOMINGO vs. CA (G.R. No. 127540. 17-Oct-2001) .......................................... 166

SAMONTE vs. CA [G.R. No. 104223. July 12, 2001] ............................................ 46

MENDEZONA VS. OZAMIZ (376 SCRA 482) .................................................... 52

FAMANILA vs. CA (G.R. No. 150429, August 29, 2006) .................................... 61

CATALAN vs. BASA (G.R. No. 159567, July 31, 2007)......................................... 66

NUNGA vs. NUNGA (G.R. No. 178306, 18-Dec-2008) ..................................... 203

AYSON vs. PARAGAS (557 SCRA 50).................................................................. 76

CAMPOS VS. PASTRANA (G.R. No. 175994, 8-Dec-2009) .............................. 215

TECSON vs. FRANCISCO (G.R. No. 180683, 1-Jun-2011) ..................................222

ESTOPPEL .................................................................................................. 243

UNENFORCEABLE CONTRACTS ............................................................... 120

OBLIGATIONS AND CONTRACTS S.Y. 2012-2013

OBLIGATIONS AND CONTRACTS S.Y. 2012-2013

they decide to sell the same.

property was adjudicated to their heirs who were represented by Eufrocina de

Quezon City in Civil Case No. Q-93-18582.

sale. A complaint-for intervention was thereafter filed by respondents Fernando

Magbanua and Danna Lizza Tiangco. The complaint-in-intervention was

admitted by the trial court in an Order dated May 4, 1994.

OBLIGATIONS AND CONTRACTS S.Y. 2012-2013

premises introducing himself as its new owner.

additional P274,000.00 to complete their P1,000.000.00 earlier offer. When

September 4, 1990; b) the defendants Rosencor/Rene Joaquin be ordered to

reconvey the property to de Leon; and c) de Leon be ordered to reimburse the

introducing herself as counsel for Rosencor/Rene Joaquin, the new owners of

price for the purchase of the property in the sum of P100,000.00.

1996 Decision is as follows:

WHEREFORE, in view of the foregoing, the Court DISMISSES the instant

action. Plaintiffs and plaintiffs-intervenors are hereby ordered to pay their

accept the same.

the time they leave the premises. No costs.

OBLIGATIONS AND CONTRACTS S.Y. 2012-2013

THE COURT OF APPEALS GRAVELY ERRED WHEN IT ORDERED THE

RESCISSION OF THE ABSOLUTE DEED OF SALE BETWEEN EUFROCINA DE

LEON AND PETITIONER ROSENCOR.

THE COURT OF APPEALS COMMITTED MANIFEST ERROR IN MANDATING

TO EXERCISE THEIR RIGHT OF FIRST REFUSAL.

RESPONDENTS HAVE ESTABLISHED THEIR RIGHT OF FIRST REFUSAL

DESPITE PETITIONERS RELIANCE ON THEIR DEFENSE BASED ON THE

the subject property; and

Petitioners herein filed a Motion for Reconsideration of the decision of the

Hence, this petition for review on certiorari where petitioners Rosencor

OBLIGATIONS AND CONTRACTS S.Y. 2012-2013

the statute by reason of their failure to object to the presentation of oral

b) A special promise to answer for the debt, default, or miscarriage of another;

evidence of the said right.

c) An agreement made in consideration of marriage, other than a mutual

issue on the applicability of the statute of frauds is important as it will

proof of the alleged right of first refusal.