Sps. Rufino Angel and Emerita Angel v.

Simplicio Aledo and Felixberto Modales

Facts
Spouses Angel engaged the services of Modales to construct a two-storey residential building at GSIS
Quezon City. In their "Construction Agreement," since Modales was at the time an engineer under the employ
of the DPWH, the parties made it appear that the contractor was Modales’ father-in-law, Aledo. The said
agreement was for the construction of the building up to its "rough finish" stage. After the completion of the
building in its "rough finish" stage, another "Construction Agreement" was forged by the spouses Angel and
Aledo for effecting the "finishing touches" of the building.
Aledo filed before the RTC a Complaint for collection of sum of money against the spouses Angel,
alleging that despite the completion of the construction of their building and their acceptance thereof, they
failed to pay the balance of "the consideration of the contract" and the cost of materials supplied by him.
Spouses Angel claimed that Aledo has no cause of action as he is only a dummy of his son-in-law Modales who
was "the actual contractor" with whom they contracted for the construction of their residential building; and
that, in any event, there were defects in the construction and some of the materials "deposited" by Modales in
the construction site were not used.
Spouses Angel filed a Third Party Complaint against Modales, alleging that he failed to comply with his
obligation under the "Construction Agreements" as the building had a lot of defects, hence, Modales should be
held liable for moral damages. Modales alleged that the Angels have no cause of action against him as he had
nothing to do with the contracts; and that "he never acted as a ‘dummy’" and, in any event, the Angels never
complained of any defect in the construction, hence, they are in estoppel and are guilty of laches.
The trial court rendered judgment in favor of spouses Angel. CA dismissed Aledo’s appeal for failure to
file such appeal in a reglementary period. But CA entered a new decision dismissing the Angels’ Counterclaim
and Third-Party Complaint. CA held that the "Construction Agreements," which were entered into by the parties
"with the knowledge that Modales was prohibited from contracting without the requisite permission from the
proper government authorities," were contrary to law and public policy.

Issue
Whether or not the contract was contrary to law and public policy

Ruling
Yes, the Construction Agreement entered into by the parties was contrary to law and public policy,
hence, void. Art. 1412 states that:
“If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense, the
following rules shall be observed:
(1) When the fault is on the part of both contracting parties, neither may recover what he has given by virtue of
the contract, or demand the performance of the other’s undertaking;
(2) When only one of the contracting parties is at fault, he cannot recover what he has given by reason of the
contract, or ask for the fulfillment of what has been promised him. The other, who is not at fault, may demand
the return of what he has given without any obligation to comply with his promise, they were in pari delicto
and, therefore, they have "no action against each other."
Since admittedly it was with Modales that Spouses Angel contracted to construct their residential
building but that his father-in-law Aledo, his "mere" dummy, was named in the "Construction Agreements," the
CA did not err in holding that said agreements were contrary to law and public policy, hence, petitioners and
respondents Aledo and Modales were in pari delicto, and in accordingly pronouncing the dismissal of
petitioners’ Counterclaim and dismissing their Third-Party Complaint. Ex dolo malo non oritur actio. In pari
delicto potior est conditio defendentis. (No right of action arises from fraud. In equal fault, the condition of the
defendant is better.)
Petition denied.