G.R. No.
L-15113             January 28, 1961             TOTAL sales tax due
ANTONIO MEDINA, petitioner,
vs.
COLLECTOR OF INTERNAL REVENUE and THE COURT OF TAX APPEALS respondents.
Eusebio D. Morales for petitioner.
Office of the Solicitor General for respondents.
REYES, J.B.L. J.:
Petition to review a decision of the Court of Tax Appeals upholding a tax assessment of the Collector of Internal
Revenue except with respect to the imposition of so-called compromise penalties, which were set aside.
The records show that on or about May 20, 1944, petitioning taxpayer Antonio Medina married Antonia
Rodriguez. Before 1946, the spouses had neither property nor business of their own. Later, however, petitioner
acquired forest, concessions in the municipalities of San Mariano and Palanan in the Province of Isabela. From
1946 to 1948, the logs cut and removed by the petitioner from his concessions were sold to different persons in
Manila through his agent, Mariano Osorio.
Some time in 1949, Antonia R. Medina, petitioner's wife, started to engage in business as a lumber dealer, and up
to around 1952, petitioner sold to her almost all the logs produced in his San Mariano, concession. Mrs. Medina,
In turn, sold in Manila the logs bought from her husband through the same agent, Mariano Osorio. The proceeds
were, upon instructions from petitioner, either received by Osorio for petitioner or deposited by said agent in
petitioner's current account with the Philippine National Bank.
On the thesis that the sales made by petitioner to his wife were null and void pursuant to the provisions of Article
1490 of the Civil Code of the Philippines (formerly, Art. 1458, Civil Code of 1889), the Collector considered the
sales made by Mrs. Medina as the petitioner's original sales taxable under Section 186 of the National Internal
Revenue Code and, therefore, imposed a tax assessment on petitioner, calling for the payment of P4,553.54 as
deficiency sales taxes and surcharges from 1949 to 1952. This same assessment of September 26, 1953 sought also
the collection of another sum of P643.94 as deficiency sales tax and surcharge based on petitioner's quarterly
returns from 1946 to 1952.
On November 30, 1953, petitioner protested the assessment; however, respondent Collector insisted on his
demand. On July 9, 1954, petitioner filed a petition for reconsideration revealing for the first time the existence of
an alleged premarital agreement of complete separation of properties between him and his wife, and contending
that the assessment for the years 1946 to 1952 had already prescribed. After one hearing, the Conference Staff of
the Bureau of Internal Revenue eliminated the 50% fraud penalty and held that the taxes assessed against him
before 1948 had already prescribed. Based on these findings, the Collector issued a modified assessment,
demanding the payment of only P3,325.68, computed as follows:
  5% tax due on P7,209.83 -1949 P 360.49
  5% tax due on 16,945.55 - 1950 847.28
  5% tax due on 16,874.52 - 1951 843.75
  5% tax due on 11,009.94 - 1952     550.50
P2,602.0
25% Surcharge thereon 650.51
Short taxes per quarterly returns, 3rd quarter, 58.52
1950
25% Surcharge thereon       14.63
            TOTAL AMOUNT due & collectible P3,325.6
8
Petitioner again requested for reconsideration, but respondent Collector, in his letter of April 4, 1955, denied the
same.
Petitioner appealed to the Court of Tax Appeals, which rendered judgment as aforesaid. The Court's decision was
based on two main findings, namely, (a) that there was no premarital agreement of absolute separation of property
between the Medina spouse; and (b) assuming that there was such an agreement, the sales in question made by
petitioner to his wife were fictitious, simulated, and not bona fide.
In his petition for review to this Court, petitioner raises several assignments of error revolving around the central
issue of whether or not the sales made by the petitioner to his wife could be considered as his original taxable sales
under the provisions of Section 186 of the National Internal Revenue Code.
Relying mainly on testimonial evidence that before their marriage, he and his wife executed and recorded a
prenuptial agreement for a regime of complete separation of property, and that all trace of the document was lost
on account of the war, petitioner imputes lack of basis for the tax court's factual finding that no agreement of
complete separation of property was ever executed by and between the spouses before their marriage. We do not
think so. Aside from the material inconsistencies in the testimony of petitioner's witnesses pointed out by the trial
court, the circumstantial evidence is against petitioner's claim. Thus, it appears that at the time of the marriage
between petitioner and his wife, they neither had any property nor business of their own, as to have really urged
them to enter into the supposed property agreement. Secondly, the testimony that the separation of property
agreement was recorded in the Registry of Property three months before the marriage, is patently absurd, since
such a prenuptial agreement could not be effective before marriage is celebrated, and would automatically be
cancelled if the union was called off. How then could it be accepted for recording prior to the marriage? In the
third place, despite their insistence on the existence of the ante nuptial contract, the couple, strangely enough, did
not act in accordance with its alleged covenants. Quite the contrary, it was proved that even during their taxable
years, the ownership, usufruct, and administration of their properties and business were in the husband. And even
when the wife was engaged in lumber dealing, and she and her husband contracted sales with each other as
aforestated, the proceeds she derived from her alleged subsequent disposition of the logs — incidentally, by and
through the same agent of her husband, Mariano Osorio — were either received by Osorio for the petitioner or
deposited by said agent in petitioner's current account with the Philippine National Bank. Fourth, although
petitioner, a lawyer by profession, already knew, after he was informed by the Collector on or about September of
1953, that the primary reason why the sales of logs to his wife could not be considered as the original taxable sales
was because of the express prohibition found in Article 1490 of the Civil Code of sales between spouses married
under a community system; yet it was not until July of 1954 that he alleged, for the first time, the existence of the
supposed property separation agreement. Finally, the Day Book of the Register of Deeds on which the agreement
would have been entered, had it really been registered as petitioner insists, and which book was among those saved
from the ravages of the war, did not show that the document in question was among those recorded therein.
We have already ruled that when the credibility of witnesses is the one at issue, the trial court's judgment as to
their degree of credence deserves serious consideration by this Court (Collector vs. Bautista, et al., G.R. Nos. L-
12250 & L-12259, May 27, 1959). This is all the more true in this case because not every copy of the supposed
agreement, particularly the one that was said to have been filed with the Clerk of Court of Isabela, was accounted
for as lost; so that, applying the "best evidence rule", the court did right in giving little or no credence to the
secondary evidence to prove the due execution and contents of the alleged document (see Comments on the Rules
of Court, Moran, 1957 Ed., Vol. 3, pp. 10.12).
The foregoing findings notwithstanding, the petitioner argues that the prohibition to sell expressed under Article
1490 of the Civil Code has no application to the sales made by said petitioner to his wife, because said transactions
are contemplated and allowed by the provisions of Articles 7 and 10 of the Code of Commerce. But said
provisions merely state, under certain conditions, a presumption that the wife is authorized to engage in business
and for the incidents that flow therefrom when she so engages therein. But the transactions permitted are those
entered into with strangers, and do not constitute exceptions to the prohibitory provisions of Article 1490 against
sales between spouses.
Petitioner's contention that the respondent Collector can not assail the questioned sales, he being a stranger to said
transactions, is likewise untenable. The government, as correctly pointed out by the Tax Court, is always an
interested party to all matters involving taxable transactions and, needless to say, qualified to question their
validity or legitimacy whenever necessary to block tax evasion.
Contracts violative of the provisions of Article 1490 of the Civil Code are null and void (Uy Sui Pin vs. Cantollas,
70 Phil. 55; Uy Coque vs. Sioca 45 Phil. 43). Being void transactions, the sales made by the petitioner to his wife
were correctly disregarded by the Collector in his tax assessments that considered as the taxable sales those made
by the wife through the spouses' common agent, Mariano Osorio. In upholding that stand, the Court below
committed no error.
It is also the petitioner's contention that the lower court erred in using illegally seized documentary evidence
against him. But even assuming arguendo the truth of petitioner's charge regarding the seizure, it is now settled in
this jurisdiction that illegally obtained documents and papers are admissible in evidence, if they are found to be
competent and relevant to the case (see Wong & Lee vs. Collector of Internal Revenue, G.R. No. L-10155, August
30, 1958). In fairness to the Collector, however, it should be stated that petitioner's imputation is vehemently
denied by him, and relying on Sections 3, 9, 337 and 338 of the Tax Code and the pertinent portions of Revenue
Regulations No. V-1 and citing this Court's ruling in U.S. vs. Aviado, 38 Phil. 10, the Collector maintains that he
and other internal revenue officers and agents could require the production of books of accounts and other records
from a taxpayer. Having arrived at the foregoing conclusion, it becomes unnecessary to discuss the other issues
raised, which are but premised on the assumption that a premarital agreement of total separation of property
existed between the petitioner and his wife.
WHEREFORE, the decision appealed from is affirmed, with costs against the petitioner.
Padilla, Bautista Angelo, Labrador, Barrera, Gutierrez David and Dizon, JJ., concur.
Separate Opinions
CONCEPCION, J., concurring:
I concur in the result. I do not share the view that documents and papers illegally obtained are admissible in
evidence, if competent and relevant to the case. In this connection, I believe in the soundness of the following
observations of the Supreme Court of the United States in Weeks v. United States (232 US 383, 58 L. ed. 652, 34
S. Ct. 341)
The effect of the Fourth Amendment is to put the courts of the United States and Federal officials, in the
exercise of their power and authority, under limitations and restraints as to the exercise of such power and
authority, an to forever secure the people, their persons, houses, papers, and effects against all unreasonable
searches and seizures under the guise of law. This protection reaches all alike, whether accused of crime or
not, and the duty of giving to it force and effect is obligatory upon all entrusted under our Federal system with
the enforcement of the laws. The tendency of those who execute the criminal laws of the country to obtain
conviction by means of unlawful seizures and enforced confessions, the latter often obtained after subjecting
accused persons to unwarranted practices destructive of rights secured by the Federal Constitution, should find
no sanction in the judgments of the courts which are charged at all times with the support of the Constitution
and to which people of all conditions have a right to appeal for the maintenance of such fundamental rights.
xxx     xxx     xxx
If letters and private documents can thus be seized and held and used in evidence, against a citizen accused of
an offense, the protection of the Fourth. Amendment declaring his right to be secured against such searches
and seizures is of no value, and, so far as those thus placed are concerned well be stricken from the
Constitution. The efforts of the courts and their officials to bring the guilty to punishment, praiseworthy as
they are, are not to be aided by the sacrifice of those great principles established by years of endeavor and
suffering which have resulted in their embodiment in the fundamental law of the land." as applied and
amplified in Elkins v. United States (June 27, 1960), 4 L. ed. 1669.
G.R. No. L-57499 June 22, 1984
MERCEDES CALIMLIM- CANULLAS, petitioner,
vs.
HON. WILLELMO FORTUN, Judge, Court of First instance of Pangasinan, Branch I, and
CORAZON DAGUINES, respondents.
Fernandez Law Offices for petitioner.
Francisco Pulido for respondents.
MELENCIO-HERRERA, J.:
Petition for Review on certiorari assailing the Decision, dated October 6, 1980, and the Resolution on the Motion
for Reconsideration, dated November 27, 1980, of the then Court of First Instance of Pangasinan, Branch I, in
Civil Case No. 15620 entitled "Corazon DAGUINES vs. MERCEDES Calimlim-Canullas," upholding the sale of
a parcel of land in favor of DAGUINES but not of the conjugal house thereon'
The background facts may be summarized as follows: Petitioner MERCEDES Calimlim-Canullas and
FERNANDO Canullas were married on December 19, 1962. They begot five children. They lived in a small house
on the residential land in question with an area of approximately 891 square meters, located at Bacabac, Bugallon,
Pangasinan. After FERNANDO's father died in 1965, FERNANDO inherited the land.
In 1978, FERNANDO abandoned his family and was living with private respondent Corazon DAGUINES. During
the pendency of this appeal, they were convicted of concubinage in a judgment rendered on October 27, 1981 by
the then Court of First Instance of Pangasinan, Branch II, which judgment has become final.
On April 15, 1980, FERNANDO sold the subject property with the house thereon to DAGUINES for the sum of
P2,000.00. In the document of sale, FERNANDO described the house as "also inherited by me from my deceased
parents."
Unable to take possession of the lot and house, DAGUINES initiated a complaint on June 19, 1980 for quieting of
title and damages against MERCEDES. The latter resisted and claimed that the house in dispute where she and her
children were residing, including the coconut trees on the land, were built and planted with conjugal funds and
through her industry; that the sale of the land together with the house and improvements to DAGUINES was null
and void because they are conjugal properties and she had not given her consent to the sale,
In its original judgment, respondent Court principally declared DAGUINES "as the lawful owner of the land in
question as well as the one-half () of the house erected on said land." Upon reconsideration prayed for by
MERCEDES, however, respondent Court resolved:
WHEREFORE, the dispositive portion of the Decision of this Court, promulgated on October 6, 1980, is
hereby amended to read as follows:
(1) Declaring plaintiff as the true and lawful owner of the land in question and the 10 coconut trees;
(2) Declaring as null and void the sale of the conjugal house to plaintiff on April 15, 1980 (Exhibit A)
including the 3 coconut trees and other crops planted during the conjugal relation between Fernando Canullas
(vendor) and his legitimate wife, herein defendant Mercedes Calimlim- Canullas;
xxx xxx xxx
The issues posed for resolution are (1) whether or not the construction of a conjugal house on the exclusive
property of the husband ipso facto gave the land the character of conjugal property; and (2) whether or not the sale
of the lot together with the house and improvements thereon was valid under the circumstances surrounding the
transaction.
The determination of the first issue revolves around the interpretation to be given to the second paragraph of
Article 158 of the Civil Code, which reads:
xxx xxx xxx
Buildings constructed at the expense of the partnership during the marriage on land belonging to one of the
spouses also pertain to the partnership, but the value of the land shall be reimbursed to the spouse who owns
the same.
We hold that pursuant to the foregoing provision both the land and the building belong to the conjugal partnership
but the conjugal partnership is indebted to the husband for the value of the land. The spouse owning the lot
becomes a creditor of the conjugal partnership for the value of the lot, which value would be reimbursed at the liquidation of the conjugal
partnership.  spouses during the marriage, policy considerations of the most exigent character as wen as the dictates
In his commentary on the corresponding provision in the Spanish Civil Code (Art. 1404), Manresa stated:
El articulo cambia la doctrine; los edificios construidos durante el matrimonio en suelo propio de uno de los
conjuges son gananciales, abonandose el valor del suelo al conj uge a quien pertenezca.
It is true that in the case of Maramba vs. Lozano, relied upon by respondent Judge, it was held that the land
belonging to one of the spouses, upon which the spouses have built a house, becomes conjugal property only when
the conjugal partnership is liquidated and indemnity paid to the owner of the land. We believe that the better rule
is that enunciated by Mr. Justice J.B.L. Reyes in Padilla vs. Paterno, 3 SCRA 678, 691 (1961), where the
following was explained:
As to the above properties, their conversion from paraphernal to conjugal assets should be deemed to retroact
to the time the conjugal buildings were first constructed thereon or at the very latest, to the time immediately
before the death of Narciso A. Padilla that ended the conjugal partnership. They can not be considered to have
become conjugal property only as of the time their values were paid to the estate of the widow Concepcion
Paterno because by that time the conjugal partnership no longer existed and it could not acquire the ownership
of said properties. The acquisition by the partnership of these properties was, under the 1943 decision, subject
to the suspensive condition that their values would be reimbursed to the widow at the liquidation of the
conjugal partnership; once paid, the effects of the fulfillment of the condition should be deemed to retroact to
the date the obligation was constituted (Art. 1187, New Civil Code) ...
The foregoing premises considered, it follows that FERNANDO could not have alienated the house and lot to
DAGUINES since MERCEDES had not given her consent to said sale. 
Anent the second issue, we find that the contract of sale was null and void for being contrary to morals and public
policy. The sale was made by a husband in favor of a concubine after he had abandoned his family and left the
conjugal home where his wife and children lived and from whence they derived their support. That sale was
subversive of the stability of the family, a basic social institution which public policy cherishes and protects. 
Article 1409 of the Civil Code states inter alia that: contracts whose cause, object, or purpose is contrary to law,
morals, good customs, public order, or public policy are void and inexistent from the very beginning.
Article 1352 also provides that: "Contracts without cause, or with unlawful cause, produce no effect
whatsoever. The cause is unlawful if it is contrary to law, morals, good customs, public order, or public policy."
Additionally, the law emphatically prohibits the spouses from selling property to each other subject to certain
exceptions. Similarly, donations between spouses during marriage are prohibited. And this is so because if
transfers or con conveyances between spouses were allowed during marriage, that would destroy the system of
conjugal partnership, a basic policy in civil law. It was also designed to prevent the exercise of undue influence by
one spouse over the other, as well as to protect the institution of marriage, which is the cornerstone of family law.
The prohibitions apply to a couple living as husband and wife without benefit of marriage, otherwise, "the
condition of those who incurred guilt would turn out to be better than those in legal union." Those provisions are
dictated by public interest and their criterion must be imposed upon the wig of the parties. That was the ruling
in Buenaventura vs. Bautista, also penned by Justice JBL Reyes (CA) 50 O.G. 3679, and cited in Matabuena vs.
Cervantes. We quote hereunder the pertinent dissertation on this point:
We reach a different conclusion. While Art. 133 of the Civil Code considers as void a donation between the
of morality require that the same prohibition should apply to a common-law relationship.
 As announced in the outset of this opinion, a 1954 Court of Appeals decision, Buenaventura vs. Bautista, 50
OG 3679, interpreting a similar provision of the old Civil Code speaks unequivocally. If the policy of the law
is, in the language of the opinion of the then Justice J.B.L. Reyes of that Court, 'to prohibit donations in favor
of the other consort and his descendants because of fear of undue influence and improper pressure upon the
donor, a prejudice deeply rooted in our ancient law, ..., then there is every reason to apply the same
prohibitive policy to persons living together as husband and wife without benefit of nuptials. For it is not to be
doubted that assent to such irregular connection for thirty years bespeaks greater influence of one party over
the other, so that the danger that the law seeks to avoid is correspondingly increased'. Moreover, as pointed out
by Ulpian (in his lib 32 ad Sabinum, fr. 1), "It would not be just that such donations — should subsist, lest the
conditions of those who incurred guilt should turn out to be better." So long as marriage remains the
cornerstone of our family law, reason and morality alike demand that the disabilities attached to marriage
should likewise attach to concubinage (Emphasis supplied),
WHEREFORE, the Decision of respondent Judge, dated October 6, 1980, and his Resolution of November 27,
1980 on petitioner's Motion for Reconsideration, are hereby set aside and the sale of the lot, house and
improvements in question, is hereby declared null and void. No costs.
SO ORDERED.
Teehankee (Chairman), Plana, Relova, Gutierrez, Jr., and De la Fuente, JJ., concur.
[G.R. No. L-8477.  May 31, 1956.]
THE PHILIPPINE TRUST COMPANY, as Guardian of the Property of the minor, MARIANO
L. BERNARDO, Petitioner, vs. SOCORRO ROLDAN, FRANCISCO HERMOSO, FIDEL C.
RAMOS and EMILIO CRUZ, Respondents.
 
DECISION
BENGZON, J.:
As guardian of the property of the minor Mariano L. Bernardo, the Philippine Trust Company filed in the Manila
court of first instance a complaint to annul two contracts regarding 17 parcels of land: (a) sale thereof by Socorro
Roldan, as guardian of said minor, to Fidel C. Ramos; and (b) sale thereof by Fidel C. Ramos to Socorro Roldan
personally. The complaint likewise sought to annul a conveyance of four out of the said seventeen parcels by
Socorro Roldan to Emilio Cruz.
The action rests on the proposition that the first two sales were in reality a sale by the guardian to herself —
therefore, null and void under Article 1459 of the Civil Code. As to the third conveyance, it is also ineffective,
because Socorro Roldan had acquired no valid title to convey to Cruz.
The material facts of the case are not complicated. These 17 parcels located in Guiguinto, Bulacan, were part of
the properties inherited by Mariano L. Bernardo from his father, Marcelo Bernardo, deceased. In view of his
minority, guardianship proceedings were instituted, wherein Socorro Roldan was appointed his guardian. She was
the surviving spouse of Marcelo Bernardo, and the stepmother of said Mariano L. Bernardo.
On July 27, 1947, Socorro Roldan filed in said guardianship proceedings (Special Proceeding 2485, Manila), a
motion asking for authority to sell as guardian the 17 parcels for the sum of P14,700 to Dr. Fidel C. Ramos, the
purpose of the sale being allegedly to invest the money in a residential house, which the minor desired to have on
Tindalo Street, Manila. The motion was granted.
On August 5, 1947 Socorro Roldan, as guardian, executed the proper deed of sale in favor of her brother-in-law
Dr. Fidel C. Ramos (Exhibit A-1), and on August 12, 1947 she asked for, and obtained, judicial confirmation of
the sale. On August 13, 1947, Dr. Fidel C. Ramos executed in favor of Socorro Roldan, personally, a deed of
conveyance covering the same seventeen parcels, for the sum of P15,000 (Exhibit A-2). And on October 21, 1947
Socorro Roldan sold four parcels out of the seventeen to Emilio Cruz for P3,000, reserving to herself the right to
repurchase (Exhibit A-3).
The Philippine Trust Company replaced Socorro Roldan as guardian, on August 10, 1948. And this litigation,
started two months later, seeks to undo what the previous guardian had done. The step-mother in effect, sold to
herself, the properties of her ward, contends the Plaintiff, and the sale should be annulled because it violates
Article 1459 of the Civil Code prohibiting the guardian from purchasing “either in person or through the mediation
of another” the property of her ward.
The court of first instance, following our decision in Rodriguez vs. Mactal, 60 Phil. 13 held the article was not
controlling, because there was no proof that Fidel C. Ramos was a mere intermediary or that the latter had
previously agreed with Socorro Roldan to buy the parcels for her benefit.
However, taking the former guardian at her word - she swore she had repurchased the lands from Dr. Fidel C.
Ramos to preserve it and to give her protege opportunity to redeem — the court rendered judgment upholding the
contracts but allowing the minor to repurchase all the parcels by paying P15,000, within one year.
The Court of Appeals affirmed the judgment, adding that the minor knew the particulars of, and approved the
transaction, and that “only clear and positive evidence of fraud or bad faith, and not mere insinuations and
inferences will overcome the presumptions that a sale was concluded in all good faith for value”.
At first glance the resolutions of both courts accomplished substantial justice: the minor recovers his properties.
But if the conveyances are annulled as prayed for, the minor will obtain a better deal: he receives all the fruits of
the lands from the year 1947 (Article 1303 Civil Code) and will return P14,700, not P15,000.
To our minds the first two transactions herein described couldn’t be in a better juridical situation than if this
guardian had purchased the seventeen parcels on the day following the sale to Dr. Ramos. Now, if she was willing
to pay P15,000 why did she sell the parcels for less? In one day (or actually one week) the price could not have
risen so suddenly. Obviously when, seeking approval of the sale she represented the price to be the best obtainable
in the market, she was not entirely truthful. This is one phase to consider.
Again, supposing she knew the parcels were actually worth P17,000; then she agreed to sell them to Dr. Ramos at
P14,700; and knowing the realty’s value she offered him the next day P15,000 or P15,500, and got it. Will there be
any doubt that she was recreant to her guardianship, and that her acquisition should be nullified? Even without
proof that she had connived with Dr. Ramos. Remembering the general doctrine that guardianship is a trust of the
highest order, and the trustee cannot be allowed to have any inducement to neglect his ward’s interest and in line
with the court’s suspicion whenever the guardian acquires the ward’s property we have no hesitation to declare
that in this case, in the eyes of the law, Socorro Roldan took by purchase her ward’s parcels thru Dr. Ramos, and
that Article 1459 of the Civil Code applies.
She acted it may be true without malice; there may have been no previous agreement between her and Dr. Ramos
to the effect that the latter would buy the lands for her. But the stubborn fact remains that she acquired her
protege’s properties, through her brother-in-law. That she planned to get them for herself at the time of selling
them to Dr. Ramos, may be deduced from the very short time between the two sales (one week). The temptation
which naturally besets a guardian so circumstanced, necessitates the annulment of the transaction, even if no actual
collusion is proved (so hard to prove) between such guardian and the intermediate purchaser. This would uphold a
sound principle of equity and justice.
We are aware of course that in Rodriguez vs. Mactal, 60 Phil. p. 13 wherein the guardian Mactal sold in January
1926 the property of her ward to Silverio Chioco, and in March 1928 she bought it from Chioco, this Court said:
“In order to bring the sale in this case within the part of Article 1459, quoted above, it is essential that the proof
submitted establish some agreement between Silverio Chioco and Trinidad Mactal to the effect that Chioco should
buy the property for the benefit of Mactal. If there was no such agreement, either express or implied, then the sale
cannot be set aside. (Page 16; Italics supplied.)”
However, the underlined portion was not intended to establish a general principle of law applicable to all
subsequent litigations. It merely meant that the subsequent purchase by Mactal could not be annulled in that
particular case because there was no proof of a previous agreement between Chioco and her. The court then
considered such proof necessary to establish that the two sales were actually part of one scheme — guardian
getting the ward’s property through another person — because two years had elapsed between the sales. Such
period of time was sufficient to dispel the natural suspicion of the guardian’s motives or actions. In the case at bar,
however, only one week had elapsed. And if we were technical, we could say, only one day had elapsed from the
judicial approval of the sale (August 12), to the purchase by the guardian (Aug. 13).
Attempting to prove that the transaction was beneficial to the minor, Appellee’s attorney alleges that the money
(P14,700) invested in the house on Tindalo Street produced for him rentals of P2,400 yearly; whereas the parcels
of land yielded to his step-mother only an average of P1,522 per year. 3 The argument would carry some weight if
that house had been built out of the purchase price of P14,700 only.  4 One thing is certain: the calculation does
not include the price of the lot on which the house was erected. Estimating such lot at P14,700 only, (ordinarily the
city lot is more valuable than the building) the result is that the price paid for the seventeen parcels gave the minor
an income of only P1,200 a year, whereas the harvest from the seventeen parcels netted his step-mother a yearly
profit of P1,522.00. The minor was thus on the losing end.
Hence, from both the legal and equitable standpoints these three sales should not be sustained: the first two for
violation of article 1459 of the Civil Code; and the third because Socorro Roldan could pass no title to Emilio
Cruz. The annulment carries with is (Article 1303 Civil Code) the obligation of Socorro Roldan to return the 17
parcels together with their fruits and the duty of the minor, through his guardian to repay P14,700 with legal
interest.
Judgment is therefore rendered:
a.  Annulling the three contracts of sale in question; b. declaring the minor as the owner of the seventeen parcels of
land, with the obligation to return to Socorro Roldan the price of P14,700 with legal interest from August 12,
1947; c. Ordering Socorro Roldan and Emilio Cruz to deliver said parcels of land to the minor; d. Requiring
Socorro Roldan to pay him beginning with 1947 the fruits, which her attorney admits, amounted to P1,522 a
year; e. Authorizing the minor to deliver directly to Emilio Cruz, out of the price of P14,700 above mentioned, the
sum of P3,000; and f. charging Appellees with the costs.  On August 31, 1964, plaintiff Domingo D. Rubias, a lawyer, filed a suit to recover the ownership and
SO ORDERED.
Paras, C.J., Padilla, Montemayor, Reyes, A., Bautista Angelo, Concepcion, Reyes, J.B.L., and Endencia, JJ.,
concur.
G.R. No. L-35702 May 29, 1973
DOMINGO D. RUBIAS, plaintiff-appellant,
vs.
ISAIAS BATILLER, defendant-appellee.
Gregorio M. Rubias for plaintiff-appellant.
Vicente R. Acsay for defendant-appellee.
TEEHANKEE, J.:
In this appeal certified by the Court of Appeals to this Court as involving purely legal questions, we affirm the
dismissal order rendered by the Iloilo court of first instance after pre-trial and submittal of the pertinent
documentary exhibits.
Such dismissal was proper, plaintiff having no cause of action, since it was duly established in the record that the
application for registration of the land in question filed by Francisco Militante, plaintiff's vendor and predecessor
interest, had been dismissed by decision of 1952 of the land registration court as affirmed by final judgment in
1958 of the Court of Appeals and hence, there was no title or right to the land that could be transmitted by the
purported sale to plaintiff.
As late as 1964, the Iloilo court of first instance had in another case of ejectment likewise upheld by final
judgment defendant's "better right to possess the land in question . having been in the actual possession thereof
under a claim of title many years before Francisco Militante sold the land to the plaintiff."
Furthermore, even assuming that Militante had anything to sell, the deed of sale executed in 1956 by him in favor
of plaintiff at a time when plaintiff was concededly his counsel of record in the land registration case involving the
very land in dispute (ultimately decided adversely against Militante by the Court of Appeals' 1958 judgment
affirming the lower court's dismissal of Militante's application for registration) was properly declared inexistent
and void by the lower court, as decreed by Article 1409 in relation to Article 1491 of the Civil Code.
The appellate court, in its resolution of certification of 25 July 1972, gave the following backgrounder of the
appeal at bar:
possession of certain portions of lot under Psu-99791 located in Barrio General Luna, Barotac Viejo, Iloilo
which he bought from his father-in-law, Francisco Militante in 1956 against its present occupant defendant,
Isaias Batiller, who illegally entered said portions of the lot on two occasions — in 1945 and in 1959. Plaintiff
prayed also for damages and attorneys fees. (pp. 1-7, Record on Appeal). In his answer with counter-claim
defendant claims the complaint of the plaintiff does not state a cause of action, the truth of the matter being
that he and his predecessors-in-interest have always been in actual, open and continuous possession since time
immemorial under claim of ownership of the portions of the lot in question and for the alleged malicious
institution of the complaint he claims he has suffered moral damages in the amount of P 2,000.00, as well as
the sum of P500.00 for attorney's fees. ...
On December 9, 1964, the trial court issued a pre-trial order, after a pre-trial conference between the parties
and their counsel which order reads as follows..
 'When this case was called for a pre-trial conference today, the plaintiff appeared assisted by himself and
Atty. Gregorio M. Rubias. The defendant also appeared, assisted by his counsel Atty. Vicente R. Acsay.
A. During the pre-trial conference, the parties have agreed that the following facts are attendant in this
case and that they will no longer introduced any evidence, testimonial or documentary to prove them:
1. That Francisco Militante claimed ownership of a parcel of land located in the Barrio of General Luna,
municipality of Barotac Viejo province of Iloilo, which he caused to be surveyed on July 18-31, 1934,
whereby he was issued a plan Psu-99791 (Exhibit "B"). (The land claimed contained an area of 171:3561
hectares.)
2. Before the war with Japan, Francisco Militante filed with the Court of First Instance of Iloilo an application
for the registration of the title of the land technically described in psu-99791 (Exh. "B") opposed by the
Director of Lands, the Director of Forestry and other oppositors. However, during the war with Japan, the
record of the case was lost before it was heard, so after the war Francisco Militante petitioned this court to
reconstitute the record of the case. The record was reconstituted on the Court of the First Instance of Iloilo
and docketed as Land Case No. R-695, GLRO Rec. No. 54852. The Court of First Instance heard the land
registration case on November 14, 1952, and after the trial this court dismissed the application for
registration. The appellant, Francisco Militante, appealed from the decision of this Court to the Court of
Appeals where the case was docketed as CA-GR No. 13497-R..
3. Pending the disposal of the appeal in CA-GR No. 13497-R and more particularly on June 18, 1956,
Francisco Militante sold to the plaintiff, Domingo Rubias the land technically described in psu-99791 (Exh.
"A"). The sale was duly recorded in the Office of the Register of Deeds for the province of Iloilo as Entry No.
13609 on July 11, 1960 (Exh. "A-1").
(NOTE: As per deed of sale, Exh. A, what Militante purportedly sold to plaintiff-appellant, his son-in-law, for
the sum of P2,000.00 was "a parcel of untitled land having an area Of 144.9072 hectares ... surveyed under
Psu 99791 ... (and) subject to the exclusions made by me, under (case) CA-i3497, Land Registration Case No.
R-695, G.L.R.O. No. 54852, Court of First Instance of the province of Iloilo. These exclusions referred to
portions of the original area of over 171 hectares originally claimed by Militante as applicant, but which he
expressly recognized during the trial to pertain to some oppositors, such as the Bureau of Public Works and
Bureau of Forestry and several other individual occupants and accordingly withdrew his application over the
same. This is expressly made of record in Exh. A, which is the Court of Appeals' decision of 22 September
1958 confirming the land registration court's dismissal of Militante's application for registration.)
B. During the trial of this case on the merit, the plaintiff will prove by competent evidence the following:
4. On September 22,1958 the Court of appeals in CA-G.R. No. 13497-R promulgated its judgment confirming
the decision of this Court in Land Case No. R-695, GLRO Rec. No. 54852 which dismissed the application for
Registration filed by Francisco Militante (Exh. "I").
5. Domingo Rubias declared the land described in Exh. 'B' for taxation purposes under Tax Dec. No. 8585
(Exh. "C") for 1957; Tax Dec. Nos. 9533 (Exh. "C-1") and 10019 (Exh. "C-3")for the year 1961; Tax Dec. No.
9868 (Exh. "C-2") for the year 1964, paying the land taxes under Tax Dec. No. 8585 and 9533 (Exh. "D", "D-
1", "G-6").
6. Francisco Militante immediate predecessor-in-interest of the plaintiff, has also declared the land for taxation
purposes under Tax Dec. No. 5172 in 1940 (Exh. "E") for 1945; under Tax Dec. No. T-86 (Exh. "E-1") for
1948; under Tax Dec. No. 7122 (Exh. "2"), and paid the land taxes for 1940 (Exhs. "G" and "G-7"), for 1945
46 (Exh. "G-1") for 1947 (Exh. "G-2"), for 1947 & 1948 (Exh. "G-3"), for 1948 (Exh. "G-4"), and for 1948
and 1949 (Exh. "G-5").
7. Tax Declaration No. 2434 in the name of Liberato Demontaño for the land described therein (Exh. "F") was
cancelled by Tax. Dec. No. 5172 of Francisco Militante (Exh. "E"). Liberato Demontaño paid the land tax
under Tax Dec. No. 2434 on Dec. 20, 1939 for the years 1938 (50%) and 1959 (Exh. "H").
8. The defendant had declared for taxation purposes Lot No. 2 of the Psu-155241 under Tax Dec. Not. 8583
for 1957 and a portion of Lot No. 2, Psu-155241, for 1945 under Tax Dec. No. 8584 (Exh. "2-A" Tax No.
8583 (Exh. "2") was revised by Tax Dec. No. 9498 in the name of the defendant (Exh. "2-B") and Tax Dec.
No. 8584 (Exh. "2-A") was cancelled by Tax Dec. No. 9584 also in the name of the defendant (Exh. "2-C").
The defendant paid the land taxes for Lot 2, Psu-155241, on Nov. 9, 1960 for the years 1945 and 1946, for the
year 1950, and for the year 1960 as shown by the certificate of the treasurer (Exh. "3"). The defendant may
present to the Court other land taxes receipts for the payment of taxes for this lot.
9. The land claimed by the defendant as his own was surveyed on June 6 and 7,1956, and a plan approved by
Director of Land on November 15, 1956 was issued, identified as Psu 155241 (Exh. "5").
10. On April 22, 1960, the plaintiff filed forcible Entry and Detainer case against Isaias Batiller in the Justice
of the Peace Court of Barotac Viejo Province of Iloilo (Exh. "4") to which the defendant Isaias Batiller riled
his answer on August 29, 1960 (Exh. "4-A"). The Municipal Court of Barotac Viejo after trial, decided the
case on May 10, 1961 in favor of the defendant and against the plaintiff (Exh. "4-B"). The
plaintiff appealed from the decision of the Municipal Court of Barotac Viejo which was docketed in this Court
as Civil Case No. 5750 on June 3, 1961, to which the defendant, Isaias Batiller, on June 13, 1961 filed his
answer (Exh. "4-C"). And this Court after the trial. decided the case on November 26, 1964, in favor of the
defendant, Isaias Batiller and against the plaintiff (Exh. "4-D").
(NOTE: As per Exh. 4-B, which is the Iloilo court of first instance decision of 26 November
1964 dismissing plaintiff's therein complaint for ejectment against defendant, the iloilo court expressly found
"that plaintiff's complaint is unjustified, intended to harass the defendant" and "that the defendant, Isaias
Batiller, has a better right to possess the land in question described in Psu 155241 (Exh. "3"), Isaias Batiller
having been in the actual physical possession thereof under a claim of title many years before Francisco
Militante sold the land to the plaintiff-hereby dismissing plaintiff's complaint and ordering the plaintiff to pay
the defendant attorney's fees ....")
1. That the land he purchased from Francisco Militante under Exh. "A" was formerly owned and possessed by
Liberato Demontaño but that on September 6, 1919 the land was sold at public auction by virtue of a judgment
in a Civil Case entitled "Edw J. Pflieder plaintiff vs. Liberato Demontaño Francisco Balladeros and Gregorio
Yulo, defendants", of which Yap Pongco was the purchaser (Exh. "1-3"). The sale was registered in the Office
of the Register of Deeds of Iloilo on August 4, 1920, under Primary Entry No. 69 (Exh. "1"), and a definite
Deed of Sale was executed by Constantino A. Canto, provincial Sheriff of Iloilo, on Jan. 19, 1934 in favor of
Yap Pongco (Exh. "I"), the sale having been registered in the Office of the Register of Deeds of Iloilo on
February 10, 1934 (Exh. "1-1").
2. On September 22, 1934, Yap Pongco sold this land to Francisco Militante as evidenced by a notarial deed
(Exh. "J") which was registered in the Registry of Deeds on May 13, 1940 (Exh. "J-1").
 3. That plaintiff suffered damages alleged in his complaint.
C. Defendants, on the other hand will prove by competent evidence during the trial of this case the following facts:
1. That lot No. 2 of the Psu-1552 it (Exh. '5') was originally owned and possessed by Felipe Batiller,
grandfather of the defendant Basilio Batiller, on the death of the former in 1920, as his sole heir. Isaias Batiller
succeeded his father , Basilio Batiller, in the ownership and possession of the land in the year 1930, and since
then up to the present, the land remains in the possession of the defendant, his possession being actual, open,
public, peaceful and continuous in the concept of an owner, exclusive of any other rights and adverse to all
other claimants.
2. That the alleged predecessors in interest of the plaintiff have never been in the actual possession of the land
and that they never had any title thereto.
3. That Lot No. 2, Psu 155241, the subject of Free Patent application of the defendant has been approved.
4. The damages suffered by the defendant, as alleged in his counterclaim."'
The appellate court further related the developments of the case, as follows:
On August 17, 1965, defendant's counsel manifested in open court that before any trial on the merit of the case
could proceed he would file a motion to dismiss plaintiff's complaint which he did, alleging that plaintiff does
not have cause of action against him because the property in dispute which he (plaintiff) allegedly bought
from his father-in-law, Francisco Militante was the subject matter of LRC No. 695 filed in the CFI of Iloilo,
which case was brought on appeal to this Court and docketed as CA-G.R. No. 13497-R in which aforesaid
case plaintiff was the counsel on record of his father-in-law, Francisco Militante. Invoking Arts. 1409 and
1491 of the Civil Code which reads:
'Art. 1409. The following contracts are inexistent and void from the beginning:
xxx xxx xxx
(7) Those expressly prohibited by law.
'ART. 1491. The following persons cannot acquire any purchase, even at a public auction, either in person
of through the mediation of another: .
xxx xxx xxx
(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and
employees connected with the administration of justice, the property and rights of in litigation or levied
upon an execution before the court within whose jurisdiction or territory they exercise their respective
functions; this prohibition includes the act of acquiring an assignment and shall apply to lawyers, with
respect to the property and rights which may be the object of any litigation in which they may take part by
virtue of their profession.'
defendant claims that plaintiff could not have acquired any interest in the property in dispute as the
contract he (plaintiff) had with Francisco Militante was inexistent and void. (See pp. 22-31, Record on
Appeal). Plaintiff strongly opposed defendant's motion to dismiss claiming that defendant can not invoke
Articles 1409 and 1491 of the Civil Code as Article 1422 of the same Code provides that 'The defense of
illegality of contracts is not available to third persons whose interests are not directly affected' (See pp. 32-
35 Record on Appeal).
On October 18, 1965, the lower court issued an order disclaiming plaintiffs complaint (pp. 42-49, Record
on Appeal.) In the aforesaid order of dismissal the lower court practically agreed with defendant's
contention that the contract (Exh. A) between plaintiff and Francism Militante was null and void. In due
season plaintiff filed a motion for reconsideration (pp. 50-56 Record on Appeal) which was denied by the
lower court on January 14, 1966 (p. 57, Record on Appeal).
Hence, this appeal by plaintiff from the orders of October 18, 1965 and January 14, 1966.
Plaintiff-appellant imputes to the lower court the following errors:
'1. The lower court erred in holding that the contract of sale between the plaintiff-appellant and his father-
in-law, Francisco Militante, Sr., now deceased, of the property covered by Plan Psu-99791, (Exh. "A") was
void, not voidable because it was made when plaintiff-appellant was the counsel of the latter in the Land
Registration case.
'2. The lower court erred in holding that the defendant-appellee is an interested person to question the
validity of the contract of sale between plaintiff-appellant and the deceased, Francisco Militante, Sr.
'3. The lower court erred in entertaining the motion to dismiss of the defendant-appellee after he had
already filed his answer, and after the termination of the pre-trial, when the said motion to dismiss raised a
collateral question.
'4. The lower court erred in dismissing the complaint of the plaintiff-appellant.'
The appellate court concluded that plaintiffs "assignment of errors gives rise to two (2) legal posers — (1) whether
or not the contract of sale between appellant and his father-in-law, the late Francisco Militante over the property
subject of Plan Psu-99791 was void because it was made when plaintiff was counsel of his father-in-law in a land
registration case involving the property in dispute; and (2) whether or not the lower court was correct in
entertaining defendant-appellee's motion to dismiss after the latter had already filed his answer and after he
(defendant) and plaintiff-appellant had agreed on some matters in a pre-trial conference. Hence, its elevation of the
appeal to this Court as involving pure questions of law.
It is at once evident from the foregoing narration that the pre-trial conference held by the trial court at which the
parties with their counsel agreed and stipulated on the material and relevant facts and submitted their respective
documentary exhibits as referred to in the pre-trial order, supra, practically amounted to a fulldress trial which
placed on record all the facts and exhibits necessary for adjudication of the case.
The three points on which plaintiff reserved the presentation of evidence at the-trial dealing with the source of the
alleged right and title of Francisco Militante's predecessors, supra, actually are already made of record in
the stipulated facts and admitted exhibits. The chain of Militante's alleged title and right to the land as supposedly
traced back to Liberato Demontaño was actually asserted by Militante (and his vendee, lawyer and son-in-law,
herein plaintiff) in the land registration case and rejected by the Iloilo land registration court
which dismissed Militante's application for registration of the land. Such dismissal, as already stated, was affirmed
by the final judgment in 1958 of the Court of Appeals.
The four points on which defendant on his part reserved the presentation of evidence at the trial dealing with his
and his ancestors' continuous, open, public and peaceful possession in the concept of owner of the land and the
Director of Lands' approval of his survey plan thereof, supra, are likewise already duly established facts of record,
in the land registration case as well as in the ejectment case wherein the Iloilo court of first instance recognized the
superiority of defendant's right to the land as against plaintiff.
No error was therefore committed by the lower court in dismissing plaintiff's complaint upon defendant's motion
after the pre-trial.
1. The stipulated facts and exhibits of record indisputably established plaintiff's lack of cause of action and
justified the outright dismissal of the complaint. Plaintiff's claim of ownership to the land in question was
predicated on the sale thereof for P2,000.00 made in 1956 by his father-in- law, Francisco Militante, in his favor,
at a time when Militante's application for registration thereof had already been dismissed by the Iloilo land
registration court and was pending appeal in the Court of Appeals.
With the Court of Appeals' 1958 final judgment affirming the dismissal of Militante's application for registration,
the lack of any rightful claim or title of Militante to the land was conclusively and decisively judicially
determined. Hence, there was no right or title to the land that could be transferred or sold by Militante's purported
sale in 1956 in favor of plaintiff.
Manifestly, then plaintiff's complaint against defendant, to be declared absolute owner of the land and to be
restored to possession thereof with damages was bereft of any factual or legal basis.
2. No error could be attributed either to the lower court's holding that the purchase by a lawyer of the property in
litigation from his client is categorically prohibited by Article 1491, paragraph (5) of the Philippine Civil Code,
reproduced supra; and that consequently, plaintiff's purchase of the property in litigation from his client (assuming
that his client could sell the same since as already shown above, his client's claim to the property was defeated and
rejected) was void and could produce no legal effect, by virtue of Article 1409, paragraph (7) of our Civil Code
which provides that contracts "expressly prohibited or declared void by law' are "inexistent and that "(T)hese
contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived."
The 1911 case of Wolfson vs. Estate of Martinez relied upon by plaintiff as holding that a sale of property in
litigation to the party litigant's lawyer "is not void but voidable at the election of the vendor" was correctly held by
the lower court to have been superseded by the later 1929 case of Director of Lands vs. Abagat. In this later case
of Abagat, the Court expressly cited two antecedent cases involving the same transaction of purchase of property
in litigation by the lawyer which was expressly declared invalid under Article 1459 of the Civil Code of Spain (of
which Article 1491 of our Civil Code of the Philippines is the counterpart) upon challenge thereof not by the
vendor-client but by the adverse parties against whom the lawyer was to enforce his rights as vendee thus
acquired.
These two antecedent cases thus cited in Abagat clearly superseded (without so expressly stating the previous
ruling in Wolfson:
The spouses, Juan Soriano and Vicente Macaraeg, were the owners of twelve parcels of land. Vicenta
Macaraeg died in November, 1909, leaving a large number of collateral heirs but no descendants. Litigation
between the surviving husband, Juan Soriano, and the heirs of Vicenta immediately arose, and the herein
appellant Sisenando Palarca acted as Soriano's lawyer. On May 2, 1918, Soriano executed a deed for the
aforesaid twelve parcels of land in favor of Sisenando Palarca and on the following day, May 3, 1918, Palarca
filed an application for the registration of the land in the deed. After hearing, the Court of First Instance
declared that the deed was invalid by virtue of the provisions of article 1459 of the Civil Code, which
prohibits lawyers and solicitors from purchasing property rights involved in any litigation in which they take
part by virtue of their profession. The application for registration was consequently denied, and upon appeal
by Palarca to the Supreme Court, the judgement of the lower court was affirmed by a decision promulgated
November 16,1925. (G.R. No. 24329, Palarca vs. Director of Lands, not reported.)
In the meantime cadastral case No. 30 of the Province of Tarlac was instituted, and on August 21, 1923,
Eleuteria Macaraeg, as administratrix of the estate of Vicente Macaraeg, filed claims for the parcels in
question. Buenaventura Lavitoria administrator of the estate of Juan Soriano, did likewise and so did
Sisenando Palarca. In a decision dated June 21, 1927, the Court of First Instance, Judge Carballo presiding,
rendered judgment in favor of Palarea and ordered the registration of the land in his name. Upon appeal to this
court by the administration of the estates of Juan Soriano and Vicente Macaraeg, the judgment of the court
below was reversed and the land adjudicated to the two estates as conjugal property of the deceased spouses.
(G.R. No. 28226, Director of Lands vs. Abagat, promulgated May 21, 1928, not reported.)
In the very case of Abagat itself, the Court, again affirming the invalidity and nullity of the lawyer's purchase of
the land in litigation from his client, ordered the issuance of a writ of possession for the return of the land by the
lawyer to the adverse parties without reimbursement of the price paid by him and other expenses, and ruled that
"the appellant Palarca is a lawyer and is presumed to know the law. He must, therefore, from the beginning, have
been well aware of the defect in his title and is, consequently, a possessor in bad faith."
As already stated, Wolfson and Abagat were decided with relation to Article 1459 of the Civil Code of Spain then
adopted here, until it was superseded on August 30, 1950 by the Civil Code of the Philippines whose counterpart
provision is Article 1491.
Article 1491 of our Civil Code (like Article 1459 of the Spanish Civil Code) prohibits in its six paragraphs certain
persons, by reason of the relation of trust or their peculiar control over the property, from acquiring such property
in their trust or control either directly or indirectly and "even at a public or judicial auction," as follows: (1)
guardians; (2) agents; (3) administrators; (4) public officers and employees; judicial officers and employees,
prosecuting attorneys, and lawyers; and (6) others especially disqualified by law.
In Wolfson which involved the sale and assignment of a money judgment by the client to the lawyer, Wolfson,
whose right to so purchase the judgment was being challenged by the judgment debtor, the Court, through Justice
Moreland, then expressly reserved decision on "whether or not the judgment in question actually falls within the
prohibition of the article" and held only that the sale's "voidability can not be asserted by one not a party to the
transaction or his representative," citing from Manresa that "(C)onsidering the question from the point of view of
the civil law, the view taken by the code, we must limit ourselves to classifying as void all acts done contrary to
the express prohibition of the statute. Now then: As the code does not recognize such nullity by the mere operation
of law, the nullity of the acts hereinbefore referred to must be asserted by the person having the necessary legal
capacity to do so and decreed by a competent court."
The reason thus given by Manresa in considering such prohibited acquisitions under Article 1459 of the Spanish
Civil Code as merely voidable at the instance and option of the vendor and not void — "that the Code does not
recognize such nullity de pleno derecho" — is no longer true and applicable to our own Philippine Civil Code
which does recognize the absolute nullity of contracts "whose cause, object, or purpose is contrary to law, morals,
good customs, public order or public policy" or which are "expressly prohibited or declared void by law" and
declares such contracts "inexistent and void from the beginning."
The Supreme Court of Spain and modern authors have likewise veered from Manresa's view of the Spanish codal
provision itself. In its sentencia of 11 June 1966, the Supreme Court of Spain ruled that the prohibition of Article
1459 of the Spanish Civil Code is based on public policy, that violation of the prohibition contract cannot be
validated by confirmation or ratification, holding that:
... la prohibicion que el articulo 1459 del C.C. establece respecto a los administradores y apoderados, la cual
tiene conforme a la doctrina de esta Sala, contendia entre otras, en S. de 27-5-1959, un fundamento de orden
moral lugar la violacion de esta a la nulidad de pleno derecho del acto o negocio celebrado, ... y prohibicion
legal, afectante orden publico, no cabe con efecto alguno la aludida retification ...
The criterion of nullity of such prohibited contracts under Article 1459 of the Spanish Civil Code (Article 1491 of
our Civil Code) as a matter of public order and policy as applied by the Supreme Court of Spain to administrators
and agents in its above cited decision should certainly apply with greater reason to judges, judicial officers, fiscals
and lawyers under paragraph 5 of the codal article.
Citing the same decisions of the Supreme Court of Spain, Gullon Ballesteros, his "Curso de Derecho Civil,
(Contratos Especiales)" (Madrid, 1968) p. 18, affirms that, with respect to Article 1459, Spanish Civil Code:.
Que caracter tendra la compra que se realice por estas personas? Porsupuesto no cabe duda de que el caso
(art.) 1459, 40 y 50, la nulidad esabsoluta porque el motivo de la prohibicion es de orden publico.
Perez Gonzales in such view, stating that "Dado el caracter prohibitivo delprecepto, la consequencia de la
infraccion es la nulidad radical y ex lege."
Castan, quoting Manresa's own observation that.
"El fundamento do esta prohibicion es clarisimo. No sa trata con este precepto tan solo de guitar la ocasion al
fraude; persiguese, ademasel proposito de rodear a las personas que intervienen en la administrcionde justicia de
todos los retigios que necesitan pora ejercer su ministerio librandolos de toda suspecha, que aunque fuere in
fundada, redundura endescredito de la institucion." arrives at the contrary and now accepted view that "Puede
considerace en nuestro derecho inexistente 'o radicalmente nulo el contrato en los siguentes cases: a) ...; b) cuando
el contrato se ha celebrado en violacion de una prescripcion 'o prohibicion legal, fundada sobre motivos de orden
publico (hipotesis del art. 4 del codigo) ..."
It is noteworthy that Caltan's rationale for his conclusion that fundamental consideration of public policy render
void and inexistent such expressly prohibited purchase (e.g. by public officers and employees of government
property intrusted to them and by justices, judges, fiscals and lawyers of property and rights in litigation and
submitted to or handled by them, under Article 1491, paragraphs (4) and (5) of our Civil Code) has been adopted
in a new article of our Civil Code, viz, Article 1409 declaring such prohibited contracts as "inexistent and void
from the beginning."
Indeed, the nullity of such prohibited contracts is definite and permanent and cannot be cured by ratification. The
public interest and public policy remain paramount and do not permit of compromise or ratification. In his aspect,
the permanent disqualification of public and judicial officers and lawyers grounded on public policy differs from
the first three cases of guardians, agents and administrators (Article 1491, Civil Code), as to whose transactions it
had been opined that they may be "ratified" by means of and in "the form of a new contact, in which cases its
validity shall be determined only by the circumstances at the time the execution of such new contract. The causes
of nullity which have ceased to exist cannot impair the validity of the new contract. Thus, the object which was
illegal at the time of the first contract, may have already become lawful at the time of the ratification or second
contract; or the service which was impossible may have become possible; or the intention which could not be
ascertained may have been clarified by the parties. The ratification or second contract would then be valid from its
execution; however, it does not retroact to the date of the first contract."
As applied to the case at bar, the lower court therefore properly acted upon defendant-appellant's motion to
dismiss on the ground of nullity of plaintiff's alleged purchase of the land, since its juridical effects and plaintiff's
alleged cause of action founded thereon were being asserted against defendant-appellant. The principles governing
the nullity of such prohibited contracts and judicial declaration of their nullity have been well restated by
Tolentino in his treatise on our Civil Code, as follows:
Parties Affected. — Any person may invoke the in existence of the contract whenever juridical effects founded
thereon are asserted against him. Thus, if there has been a void transfer of property, the transferor can recover
it by the accion reinvindicatoria; and any prossessor may refuse to deliver it to the transferee, who cannot
enforce the contract. Creditors may attach property of the debtor which has been alienated by the latter under a
void contract; a mortgagee can allege the inexistence of a prior encumbrance; a debtor can assert the nullity of
an assignment of credit as a defense to an action by the assignee.
Action On Contract. — Even when the contract is void or inexistent, an action is necessary to declare its
inexistence, when it has already been fulfilled. Nobody can take the law into his own hands; hence, the
intervention of the competent court is necessary to declare the absolute nullity of the contract and to decree the
restitution of what has been given under it. The judgment, however, will retroact to the very day when the
contract was entered into.
If the void contract is still fully executory, no party need bring an action to declare its nullity; but if any party
should bring an action to enforce it, the other party can simply set up the nullity as a defense.
ACCORDINGLY, the order of dismissal appealed from is hereby affirmed, with costs in all instances against
plaintiff-appellant. So ordered.
Makalintal, Zaldivar, Castro,. Fernando, Barredo, Makasiar, Antonio and Esguerra, JJ., concur.
A.M. No. 133-J May 31, 1982
BERNARDITA R. MACARIOLA, complainant,
vs.
HONORABLE ELIAS B. ASUNCION, Judge of the Court of First Instance of Leyte, respondent.
MAKASIAR, J:
In a verified complaint dated August 6, 1968 Bernardita R. Macariola charged respondent Judge Elias B. Asuncion
of the Court of First Instance of Leyte, now Associate Justice of the Court of Appeals, with "acts unbecoming a
judge."
The factual setting of the case is stated in the report dated May 27, 1971 of then Associate Justice Cecilia Muñoz
Palma of the Court of Appeals now retired Associate Justice of the Supreme Court, to whom this case was referred
on October 28, 1968 for investigation, thus:
Civil Case No. 3010 of the Court of First Instance of Leyte was a complaint for partition filed by Sinforosa R.
Bales, Luz R. Bakunawa, Anacorita Reyes, Ruperto Reyes, Adela Reyes, and Priscilla Reyes, plaintiffs,
against Bernardita R. Macariola, defendant, concerning the properties left by the deceased Francisco Reyes,
the common father of the plaintiff and defendant.
In her defenses to the complaint for partition, Mrs. Macariola alleged among other things that; a) plaintiff
Sinforosa R. Bales was not a daughter of the deceased Francisco Reyes; b) the only legal heirs of the deceased
were defendant Macariola, she being the only offspring of the first marriage of Francisco Reyes with Felisa
Espiras, and the remaining plaintiffs who were the children of the deceased by his second marriage with Irene
Ondez; c) the properties left by the deceased were all the conjugal properties of the latter and his first wife,
Felisa Espiras, and no properties were acquired by the deceased during his second marriage; d) if there was
any partition to be made, those conjugal properties should first be partitioned into two parts, and one part is to
be adjudicated solely to defendant it being the share of the latter's deceased mother, Felisa Espiras, and the
other half which is the share of the deceased Francisco Reyes was to be divided equally among his children by
his two marriages.
On June 8, 1963, a decision was rendered by respondent Judge Asuncion in Civil Case 3010, the dispositive
portion of which reads:
IN VIEW OF THE FOREGOING CONSIDERATIONS, the Court, upon a preponderance of evidence,
finds and so holds, and hereby renders judgment (1) Declaring the plaintiffs Luz R. Bakunawa, Anacorita
Reyes, Ruperto Reyes, Adela Reyes and Priscilla Reyes as the only children legitimated by the subsequent
marriage of Francisco Reyes Diaz to Irene Ondez; (2) Declaring the plaintiff Sinforosa R. Bales to have
been an illegitimate child of Francisco Reyes Diaz; (3) Declaring Lots Nos. 4474, 4475, 4892, 5265, 4803,
4581, 4506 and 1/4 of Lot 1145 as belonging to the conjugal partnership of the spouses Francisco Reyes
Diaz and Felisa Espiras; (4) Declaring Lot No. 2304 and 1/4 of Lot No. 3416 as belonging to the spouses
Francisco Reyes Diaz and Irene Ondez in common partnership; (5) Declaring that 1/2 of Lot No. 1184 as
belonging exclusively to the deceased Francisco Reyes Diaz; (6) Declaring the defendant Bernardita R.
Macariola, being the only legal and forced heir of her mother Felisa Espiras, as the exclusive owner of
one-half of each of Lots Nos. 4474, 4475, 4892, 5265, 4803, 4581, 4506; and the remaining one-half (1/2)
of each of said Lots Nos. 4474, 4475, 4892, 5265, 4803, 4581, 4506 and one-half (1/2) of one-fourth (1/4)
of Lot No. 1154 as belonging to the estate of Francisco Reyes Diaz; (7) Declaring Irene Ondez to be the
exclusive owner of one-half (1/2) of Lot No. 2304 and one-half (1/2) of one-fourth (1/4) of Lot No. 3416;
the remaining one-half (1/2) of Lot 2304 and the remaining one-half (1/2) of one-fourth (1/4) of Lot No.
3416 as belonging to the estate of Francisco Reyes Diaz; (8) Directing the division or partition of the estate
of Francisco Reyes Diaz in such a manner as to give or grant to Irene Ondez, as surviving widow of
Francisco Reyes Diaz, a hereditary share of. one-twelfth (1/12) of the whole estate of Francisco Reyes
Diaz (Art. 996 in relation to Art. 892, par 2, New Civil Code), and the remaining portion of the estate to be
divided among the plaintiffs Sinforosa R. Bales, Luz R. Bakunawa, Anacorita Reyes, Ruperto Reyes,
Adela Reyes, Priscilla Reyes and defendant Bernardita R. Macariola, in such a way that the extent of the
total share of plaintiff Sinforosa R. Bales in the hereditary estate shall not exceed the equivalent of two-
fifth (2/5) of the total share of any or each of the other plaintiffs and the defendant (Art. 983, New Civil
Code), each of the latter to receive equal shares from the hereditary estate, (Ramirez vs. Bautista, 14 Phil.
528; Diancin vs. Bishop of Jaro, O.G. [3rd Ed.] p. 33); (9) Directing the parties, within thirty days after
this judgment shall have become final to submit to this court, for approval a project of partition of the
hereditary estate in the proportion above indicated, and in such manner as the parties may, by agreement,
deemed convenient and equitable to them taking into consideration the location, kind, quality, nature and
value of the properties involved; (10) Directing the plaintiff Sinforosa R. Bales and defendant Bernardita
R. Macariola to pay the costs of this suit, in the proportion of one-third (1/3) by the first named and two-
thirds (2/3) by the second named; and (I 1) Dismissing all other claims of the parties [pp 27-29 of Exh. C].
The decision in civil case 3010 became final for lack of an appeal, and on October 16, 1963, a project of
partition was submitted to Judge Asuncion which is marked Exh. A. Notwithstanding the fact that the
project of partition was not signed by the parties themselves but only by the respective counsel of plaintiffs
and defendant, Judge Asuncion approved it in his Order dated October 23, 1963, which for convenience is
quoted hereunder in full:
The parties, through their respective counsels, presented to this Court for approval the following project of
partition:
COMES NOW, the plaintiffs and the defendant in the above-entitled case, to this Honorable Court respectfully
submit the following Project of Partition:
l. The whole of Lots Nos. 1154, 2304 and 4506 shall belong exclusively to Bernardita Reyes Macariola;
2. A portion of Lot No. 3416 consisting of 2,373.49 square meters along the eastern part of the lot shall be
awarded likewise to Bernardita R. Macariola;
3. Lots Nos. 4803, 4892 and 5265 shall be awarded to Sinforosa Reyes Bales;
4. A portion of Lot No. 3416 consisting of 1,834.55 square meters along the western part of the lot shall
likewise be awarded to Sinforosa Reyes-Bales;
5. Lots Nos. 4474 and 4475 shall be divided equally among Luz Reyes Bakunawa, Anacorita Reyes, Ruperto
Reyes, Adela Reyes and Priscilla Reyes in equal shares;
6. Lot No. 1184 and the remaining portion of Lot No. 3416 after taking the portions awarded under item (2)
and (4) above shall be awarded to Luz Reyes Bakunawa, Anacorita Reyes, Ruperto Reyes, Adela Reyes and
Priscilla Reyes in equal shares, provided, however that the remaining portion of Lot No. 3416 shall belong
exclusively to Priscilla Reyes.
WHEREFORE, it is respectfully prayed that the Project of Partition indicated above which is made in
accordance with the decision of the Honorable Court be approved.
Tacloban City, October 16, 1963.
(SGD) BONIFACIO RAMO Atty. for the Defendant Tacloban City
(SGD) ZOTICO A. TOLETE Atty. for the Plaintiff Tacloban City
While the Court thought it more desirable for all the parties to have signed this Project of Partition,
nevertheless, upon assurance of both counsels of the respective parties to this Court that the Project of
Partition, as above- quoted, had been made after a conference and agreement of the plaintiffs and the
defendant approving the above Project of Partition, and that both lawyers had represented to the Court that
they are given full authority to sign by themselves the Project of Partition, the Court, therefore, finding the
above-quoted Project of Partition to be in accordance with law, hereby approves the same. The parties,
therefore, are directed to execute such papers, documents or instrument sufficient in form and substance for
the vesting of the rights, interests and participations which were adjudicated to the respective parties, as
outlined in the Project of Partition and the delivery of the respective properties adjudicated to each one in view
of said Project of Partition, and to perform such other acts as are legal and necessary to effectuate the said
Project of Partition.
SO ORDERED.
Given in Tacloban City, this 23rd day of October, 1963.
(SGD) ELIAS B. ASUNCION Judge
EXH. B.
The above Order of October 23, 1963, was amended on November 11, 1963, only for the purpose of
giving authority to the Register of Deeds of the Province of Leyte to issue the corresponding transfer
certificates of title to the respective adjudicatees in conformity with the project of partition (see Exh. U).
One of the properties mentioned in the project of partition was Lot 1184 or rather one-half thereof with an
area of 15,162.5 sq. meters. This lot, which according to the decision was the exclusive property of the
deceased Francisco Reyes, was adjudicated in said project of partition to the plaintiffs Luz, Anacorita
Ruperto, Adela, and Priscilla all surnamed Reyes in equal shares, and when the project of partition was
approved by the trial court the adjudicatees caused Lot 1184 to be subdivided into five lots denominated as
Lot 1184-A to 1184-E inclusive (Exh. V).
Lot 1184-D was conveyed to Enriqueta D. Anota, a stenographer in Judge Asuncion's court (Exhs. F, F-1
and V-1), while Lot 1184-E which had an area of 2,172.5556 sq. meters was sold on July 31, 1964 to Dr.
Arcadio Galapon (Exh. 2) who was issued transfer certificate of title No. 2338 of the Register of Deeds of
the city of Tacloban (Exh. 12).
On March 6, 1965, Dr. Arcadio Galapon and his wife Sold a portion of Lot 1184-E with an area of around
1,306 sq. meters to Judge Asuncion and his wife, Victoria S. Asuncion (Exh. 11), which particular portion
was declared by the latter for taxation purposes (Exh. F).
On August 31, 1966, spouses Asuncion and spouses Galapon conveyed their respective shares and interest
in Lot 1184-E to "The Traders Manufacturing and Fishing Industries Inc." (Exit 15 & 16). At the time of
said sale the stockholders of the corporation were Dominador Arigpa Tan, Humilia Jalandoni Tan, Jaime
Arigpa Tan, Judge Asuncion, and the latter's wife, Victoria S. Asuncion, with Judge Asuncion as the
President and Mrs. Asuncion as the secretary (Exhs. E-4 to E-7). The Articles of Incorporation of "The
Traders Manufacturing and Fishing Industries, Inc." which we shall henceforth refer to as "TRADERS"
were registered with the Securities and Exchange Commission only on January 9, 1967 (Exh. E) [pp. 378-
385, rec.].
Complainant Bernardita R. Macariola filed on August 9, 1968 the instant complaint dated August 6, 1968 alleging
four causes of action, to wit: [1] that respondent Judge Asuncion violated Article 1491, paragraph 5, of the New
Civil Code in acquiring by purchase a portion of Lot No. 1184-E which was one of those properties involved in
Civil Case No. 3010 decided by him; [2] that he likewise violated Article 14, paragraphs I and 5 of the Code of
Commerce, Section 3, paragraph H, of R.A. 3019, otherwise known as the Anti-Graft and Corrupt Practices Act,
Section 12, Rule XVIII of the Civil Service Rules, and Canon 25 of the Canons of Judicial Ethics, by associating
himself with the Traders Manufacturing and Fishing Industries, Inc., as a stockholder and a ranking officer while
he was a judge of the Court of First Instance of Leyte; [3] that respondent was guilty of coddling an impostor and
acted in disregard of judicial decorum by closely fraternizing with a certain Dominador Arigpa Tan who openly
and publicly advertised himself as a practising attorney when in truth and in fact his name does not appear in the
Rolls of Attorneys and is not a member of the Philippine Bar; and [4] that there was a culpable defiance of the law
and utter disregard for ethics by respondent Judge (pp. 1-7, rec.).
Respondent Judge Asuncion filed on September 24, 1968 his answer to which a reply was filed on October 16,
1968 by herein complainant. In Our resolution of October 28, 1968, We referred this case to then Justice Cecilia
Muñoz Palma of the Court of Appeals, for investigation, report and recommendation. After hearing, the said
Investigating Justice submitted her report dated May 27, 1971 recommending that respondent Judge should be
reprimanded or warned in connection with the first cause of action alleged in the complaint, and for the second
cause of action, respondent should be warned in case of a finding that he is prohibited under the law to engage in
business. On the third and fourth causes of action, Justice Palma recommended that respondent Judge be
exonerated.
The records also reveal that on or about November 9 or 11, 1968 (pp. 481, 477, rec.), complainant herein instituted
an action before the Court of First Instance of Leyte, entitled "Bernardita R. Macariola, plaintiff, versus Sinforosa
R. Bales, et al., defendants," which was docketed as Civil Case No. 4235, seeking the annulment of the project of
partition made pursuant to the decision in Civil Case No. 3010 and the two orders issued by respondent Judge
approving the same, as well as the partition of the estate and the subsequent conveyances with damages. It
appears, however, that some defendants were dropped from the civil case. For one, the case against Dr. Arcadio
Galapon was dismissed because he was no longer a real party in interest when Civil Case No. 4234 was filed,
having already conveyed on March 6, 1965 a portion of lot 1184-E to respondent Judge and on August 31, 1966
the remainder was sold to the Traders Manufacturing and Fishing Industries, Inc. Similarly, the case against
defendant Victoria Asuncion was dismissed on the ground that she was no longer a real party in interest at the time
the aforesaid Civil Case No. 4234 was filed as the portion of Lot 1184 acquired by her and respondent Judge from
Dr. Arcadio Galapon was already sold on August 31, 1966 to the Traders Manufacturing and Fishing industries,
Inc. Likewise, the cases against defendants Serafin P. Ramento, Catalina Cabus, Ben Barraza Go, Jesus Perez,
Traders Manufacturing and Fishing Industries, Inc., Alfredo R. Celestial and Pilar P. Celestial, Leopoldo Petilla
and Remedios Petilla, Salvador Anota and Enriqueta Anota and Atty. Zotico A. Tolete were dismissed with the
conformity of complainant herein, plaintiff therein, and her counsel.
On November 2, 1970, Judge Jose D. Nepomuceno of the Court of First Instance of Leyte, who was directed and
authorized on June 2, 1969 by the then Secretary (now Minister) of Justice and now Minister of National Defense
Juan Ponce Enrile to hear and decide Civil Case No. 4234, rendered a decision, the dispositive portion of which
reads as follows:
A. IN THE CASE AGAINST JUDGE ELIAS B. ASUNCION
(1) declaring that only Branch IV of the Court of First Instance of Leyte has jurisdiction to take cognizance of
the issue of the legality and validity of the Project of Partition [Exhibit "B"] and the two Orders [Exhibits "C"
and "C- 3"] approving the partition;
 (2) dismissing the complaint against Judge Elias B. Asuncion;
(3) adjudging the plaintiff, Mrs. Bernardita R. Macariola to pay defendant Judge Elias B. Asuncion,
(a) the sum of FOUR HUNDRED THOUSAND PESOS [P400,000.00] for moral damages;
(b) the sum of TWO HUNDRED THOUSAND PESOS [P200,000.001 for exemplary damages;
(c) the sum of FIFTY THOUSAND PESOS [P50,000.00] for nominal damages; and
(d) he sum of TEN THOUSAND PESOS [PI0,000.00] for Attorney's Fees.
B. IN THE CASE AGAINST THE DEFENDANT MARIQUITA VILLASIN, FOR HERSELF AND FOR
THE HEIRS OF THE DECEASED GERARDO VILLASIN —
(1) Dismissing the complaint against the defendants Mariquita Villasin and the heirs of the deceased Gerardo
Villasin;
(2) Directing the plaintiff to pay the defendants Mariquita Villasin and the heirs of Gerardo Villasin the cost of
the suit.
C. IN THE CASE AGAINST THE DEFENDANT SINFOROSA R. BALES, ET AL., WHO WERE
PLAINTIFFS IN CIVIL CASE NO. 3010 —
(1) Dismissing the complaint against defendants Sinforosa R. Bales, Adela R. Herrer, Priscilla R. Solis, Luz R.
Bakunawa, Anacorita R. Eng and Ruperto O. Reyes.
D. IN THE CASE AGAINST DEFENDANT BONIFACIO RAMO —
(1) Dismissing the complaint against Bonifacio Ramo;
(2) Directing the plaintiff to pay the defendant Bonifacio Ramo the cost of the suit.
SO ORDERED [pp. 531-533, rec.]
It is further disclosed by the record that the aforesaid decision was elevated to the Court of Appeals upon
perfection of the appeal on February 22, 1971.
I
WE find that there is no merit in the contention of complainant Bernardita R. Macariola, under her first cause of
action, that respondent Judge Elias B. Asuncion violated Article 1491, paragraph 5, of the New Civil Code in
acquiring by purchase a portion of Lot No. 1184-E which was one of those properties involved in Civil Case No.
3010. 'That Article provides:
Article 1491. The following persons cannot acquire by purchase, even at a public or judicial action, either in
person or through the mediation of another:
xxx xxx xxx
(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and
employees connected with the administration of justice, the property and rights in litigation or levied upon an
execution before the court within whose jurisdiction or territory they exercise their respective functions; this
prohibition includes the act of acquiring by assignment and shall apply to lawyers, with respect to the property
and rights which may be the object of any litigation in which they may take part by virtue of their profession
[emphasis supplied].
The prohibition in the aforesaid Article applies only to the sale or assignment of the property which is the subject
of litigation to the persons disqualified therein. WE have already ruled that "... for the prohibition to operate, the
sale or assignment of the property must take place during the pendency of the litigation involving the property"
(The Director of Lands vs. Ababa et al., 88 SCRA 513, 519 [1979], Rosario vda. de Laig vs. Court of Appeals, 86
SCRA 641, 646 [1978]).
In the case at bar, when the respondent Judge purchased on March 6, 1965 a portion of Lot 1184-E, the decision in
Civil Case No. 3010 which he rendered on June 8, 1963 was already final because none of the parties therein filed
an appeal within the reglementary period; hence, the lot in question was no longer subject of the litigation.
Moreover, at the time of the sale on March 6, 1965, respondent's order dated October 23, 1963 and the amended
order dated November 11, 1963 approving the October 16, 1963 project of partition made pursuant to the June 8,
1963 decision, had long become final for there was no appeal from said orders.
Furthermore, respondent Judge did not buy the lot in question on March 6, 1965 directly from the plaintiffs in
Civil Case No. 3010 but from Dr. Arcadio Galapon who earlier purchased on July 31, 1964 Lot 1184-E from three
of the plaintiffs, namely, Priscilla Reyes, Adela Reyes, and Luz R. Bakunawa after the finality of the decision in
Civil Case No. 3010. It may be recalled that Lot 1184 or more specifically one-half thereof was adjudicated in
equal shares to Priscilla Reyes, Adela Reyes, Luz Bakunawa, Ruperto Reyes and Anacorita Reyes in the project of
partition, and the same was subdivided into five lots denominated as Lot 1184-A to 1184-E. As aforestated, Lot
1184-E was sold on July 31, 1964 to Dr. Galapon for which he was issued TCT No. 2338 by the Register of Deeds
of Tacloban City, and on March 6, 1965 he sold a portion of said lot to respondent Judge and his wife who
declared the same for taxation purposes only. The subsequent sale on August 31, 1966 by spouses Asuncion and
spouses Galapon of their respective shares and interest in said Lot 1184-E to the Traders Manufacturing and
Fishing Industries, Inc., in which respondent was the president and his wife was the secretary, took place long
after the finality of the decision in Civil Case No. 3010 and of the subsequent two aforesaid orders therein
approving the project of partition.
While it appears that complainant herein filed on or about November 9 or 11, 1968 an action before the Court of
First Instance of Leyte docketed as Civil Case No. 4234, seeking to annul the project of partition and the two
orders approving the same, as well as the partition of the estate and the subsequent conveyances, the same,
however, is of no moment.
The fact remains that respondent Judge purchased on March 6, 1965 a portion of Lot 1184-E from Dr. Arcadio
Galapon; hence, after the finality of the decision which he rendered on June 8, 1963 in Civil Case No. 3010 and
his two questioned orders dated October 23, 1963 and November 11, 1963. Therefore, the property was no longer
subject of litigation.
The subsequent filing on November 9, or 11, 1968 of Civil Case No. 4234 can no longer alter, change or affect the
aforesaid facts — that the questioned sale to respondent Judge, now Court of Appeals Justice, was effected and
consummated long after the finality of the aforesaid decision or orders.
Consequently, the sale of a portion of Lot 1184-E to respondent Judge having taken place over one year after the
finality of the decision in Civil Case No. 3010 as well as the two orders approving the project of partition, and not
during the pendency of the litigation, there was no violation of paragraph 5, Article 1491 of the New Civil Code.
It is also argued by complainant herein that the sale on July 31, 1964 of Lot 1184-E to Dr. Arcadio Galapon by
Priscilla Reyes, Adela Reyes and Luz R. Bakunawa was only a mere scheme to conceal the illegal and unethical
transfer of said lot to respondent Judge as a consideration for the approval of the project of partition. In this
connection, We agree with the findings of the Investigating Justice thus:
And so we are now confronted with this all-important question whether or not the acquisition by respondent of
a portion of Lot 1184-E and the subsequent transfer of the whole lot to "TRADERS" of which respondent was
the President and his wife the Secretary, was intimately related to the Order of respondent approving the
project of partition, Exh. A.
Respondent vehemently denies any interest or participation in the transactions between the Reyeses and the
Galapons concerning Lot 1184-E, and he insists that there is no evidence whatsoever to show that Dr. Galapon
had acted, in the purchase of Lot 1184-E, in mediation for him and his wife. (See p. 14 of Respondent's
Memorandum).
xxx xxx xxx
On this point, I agree with respondent that there is no evidence in the record showing that Dr. Arcadio Galapon
acted as a mere "dummy" of respondent in acquiring Lot 1184-E from the Reyeses. Dr. Galapon appeared to
this investigator as a respectable citizen, credible and sincere, and I believe him when he testified that he
bought Lot 1184-E in good faith and for valuable consideration from the Reyeses without any intervention of,
or previous understanding with Judge Asuncion (pp. 391- 394, rec.).
On the contention of complainant herein that respondent Judge acted illegally in approving the project of partition
although it was not signed by the parties, We quote with approval the findings of the Investigating Justice, as
follows:
1. I agree with complainant that respondent should have required the signature of the parties more particularly
that of Mrs. Macariola on the project of partition submitted to him for approval; however, whatever error was
committed by respondent in that respect was done in good faith as according to Judge Asuncion he was
assured by Atty. Bonifacio Ramo, the counsel of record of Mrs. Macariola, That he was authorized by his
client to submit said project of partition, (See Exh. B and tsn p. 24, January 20, 1969). While it is true that
such written authority if there was any, was not presented by respondent in evidence, nor did Atty. Ramo
appear to corroborate the statement of respondent, his affidavit being the only one that was presented as
respondent's Exh. 10, certain actuations of Mrs. Macariola lead this investigator to believe that she knew the
contents of the project of partition, Exh. A, and that she gave her conformity thereto. I refer to the following
documents:
1) Exh. 9 — Certified true copy of OCT No. 19520 covering Lot 1154 of the Tacloban Cadastral Survey in
which the deceased Francisco Reyes holds a "1/4 share" (Exh. 9-a). On tills certificate of title the Order
dated November 11, 1963, (Exh. U) approving the project of partition was duly entered and registered on
November 26, 1963 (Exh. 9-D);
2) Exh. 7 — Certified copy of a deed of absolute sale executed by Bernardita Reyes Macariola on October
22, 1963, conveying to Dr. Hector Decena the one-fourth share of the late Francisco Reyes-Diaz in Lot
1154. In this deed of sale the vendee stated that she was the absolute owner of said one-fourth share, the
same having been adjudicated to her as her share in the estate of her father Francisco Reyes Diaz as per
decision of the Court of First Instance of Leyte under case No. 3010 (Exh. 7-A). The deed of sale was duly
registered and annotated at the back of OCT 19520 on December 3, 1963 (see Exh. 9-e).
In connection with the abovementioned documents it is to be noted that in the project of partition dated
October 16, 1963, which was approved by respondent on October 23, 1963, followed by an amending
Order on November 11, 1963, Lot 1154 or rather 1/4 thereof was adjudicated to Mrs. Macariola. It is this
1/4 share in Lot 1154 which complainant sold to Dr. Decena on October 22, 1963, several days after the
preparation of the project of partition.
Counsel for complainant stresses the view, however, that the latter sold her one-fourth share in Lot 1154
by virtue of the decision in Civil Case 3010 and not because of the project of partition, Exh. A. Such
contention is absurd because from the decision, Exh. C, it is clear that one-half of one- fourth of Lot 1154
belonged to the estate of Francisco Reyes Diaz while the other half of said one-fourth was the share of
complainant's mother, Felisa Espiras; in other words, the decision did not adjudicate the whole of the one-
fourth of Lot 1154 to the herein complainant (see Exhs. C-3 & C-4). Complainant became the owner of the
entire one-fourth of Lot 1154 only by means of the project of partition, Exh. A. Therefore, if Mrs.
Macariola sold Lot 1154 on October 22, 1963, it was for no other reason than that she was wen aware of
the distribution of the properties of her deceased father as per Exhs. A and B. It is also significant at this
point to state that Mrs. Macariola admitted during the cross-examination that she went to Tacloban City in
connection with the sale of Lot 1154 to Dr. Decena (tsn p. 92, November 28, 1968) from which we can
deduce that she could not have been kept ignorant of the proceedings in civil case 3010 relative to the
project of partition.
Complainant also assails the project of partition because according to her the properties adjudicated to her
were insignificant lots and the least valuable. Complainant, however, did not present any direct and
positive evidence to prove the alleged gross inequalities in the choice and distribution of the real properties
when she could have easily done so by presenting evidence on the area, location, kind, the assessed and
market value of said properties. Without such evidence there is nothing in the record to show that there
were inequalities in the distribution of the properties of complainant's father (pp. 386389, rec.).
Finally, while it is. true that respondent Judge did not violate paragraph 5, Article 1491 of the New Civil Code in
acquiring by purchase a portion of Lot 1184-E which was in litigation in his court, it was, however, improper for
him to have acquired the same. He should be reminded of Canon 3 of the Canons of Judicial Ethics which requires
that: "A judge's official conduct should be free from the appearance of impropriety, and his personal behavior, not
only upon the bench and in the performance of judicial duties, but also in his everyday life, should be beyond
reproach." And as aptly observed by the Investigating Justice: "... it was unwise and indiscreet on the part of
respondent to have purchased or acquired a portion of a piece of property that was or had been in litigation in his
court and caused it to be transferred to a corporation of which he and his wife were ranking officers at the time of
such transfer. One who occupies an exalted position in the judiciary has the duty and responsibility of maintaining
the faith and trust of the citizenry in the courts of justice, so that not only must he be truly honest and just, but his
actuations must be such as not give cause for doubt and mistrust in the uprightness of his administration of justice.
In this particular case of respondent, he cannot deny that the transactions over Lot 1184-E are damaging and
render his actuations open to suspicion and distrust. Even if respondent honestly believed that Lot 1184-E was no
longer in litigation in his court and that he was purchasing it from a third person and not from the parties to the
litigation, he should nonetheless have refrained from buying it for himself and transferring it to a corporation in
which he and his wife were financially involved, to avoid possible suspicion that his acquisition was related in one
way or another to his official actuations in civil case 3010. The conduct of respondent gave cause for the litigants
in civil case 3010, the lawyers practising in his court, and the public in general to doubt the honesty and fairness of
his actuations and the integrity of our courts of justice" (pp. 395396, rec.).
II
With respect to the second cause of action, the complainant alleged that respondent Judge violated paragraphs 1
and 5, Article 14 of the Code of Commerce when he associated himself with the Traders Manufacturing and
Fishing Industries, Inc. as a stockholder and a ranking officer, said corporation having been organized to engage in
business. Said Article provides that:
Article 14 — The following cannot engage in commerce, either in person or by proxy, nor can they hold any
office or have any direct, administrative, or financial intervention in commercial or industrial companies
within the limits of the districts, provinces, or towns in which they discharge their duties:
1. Justices of the Supreme Court, judges and officials of the department of public prosecution in active service.
This provision shall not be applicable to mayors, municipal judges, and municipal prosecuting attorneys nor to
those who by chance are temporarily discharging the functions of judge or prosecuting attorney.
xxx xxx xxx
5. Those who by virtue of laws or special provisions may not engage in commerce in a determinate territory.
It is Our considered view that although the aforestated provision is incorporated in the Code of Commerce which
is part of the commercial laws of the Philippines, it, however, partakes of the nature of a political law as it
regulates the relationship between the government and certain public officers and employees, like justices and
judges.
Political Law has been defined as that branch of public law which deals with the organization and operation of the
governmental organs of the State and define the relations of the state with the inhabitants of its territory (People
vs. Perfecto, 43 Phil. 887, 897 [1922]). It may be recalled that political law embraces constitutional law, law of
public corporations, administrative law including the law on public officers and elections. Specifically, Article 14
of the Code of Commerce partakes more of the nature of an administrative law because it regulates the conduct of
certain public officers and employees with respect to engaging in business: hence, political in essence.
It is significant to note that the present Code of Commerce is the Spanish Code of Commerce of 1885, with some
modifications made by the "Commission de Codificacion de las Provincias de Ultramar," which was extended to
the Philippines by the Royal Decree of August 6, 1888, and took effect as law in this jurisdiction on December 1,
1888.
Upon the transfer of sovereignty from Spain to the United States and later on from the United States to the
Republic of the Philippines, Article 14 of this Code of Commerce must be deemed to have been abrogated because
where there is change of sovereignty, the political laws of the former sovereign, whether compatible or not with
those of the new sovereign, are automatically abrogated, unless they are expressly re-enacted by affirmative act of
the new sovereign.
Thus, We held in Roa vs. Collector of Customs (23 Phil. 315, 330, 311 [1912]) that:
By well-settled public law, upon the cession of territory by one nation to another, either following a conquest
or otherwise, ... those laws which are political in their nature and pertain to the prerogatives of the former
government immediately cease upon the transfer of sovereignty. (Opinion, Atty. Gen., July 10, 1899).
While municipal laws of the newly acquired territory not in conflict with the, laws of the new sovereign
continue in force without the express assent or affirmative act of the conqueror, the political laws do not.
(Halleck's Int. Law, chap. 34, par. 14). However, such political laws of the prior sovereignty as are not in
conflict with the constitution or institutions of the new sovereign, may be continued in force if the conqueror
shall so declare by affirmative act of the commander-in-chief during the war, or by Congress in time of peace.
(Ely's Administrator vs. United States, 171 U.S. 220, 43 L. Ed. 142). In the case of American and Ocean Ins.
Cos. vs. 356 Bales of Cotton (1 Pet. [26 U.S.] 511, 542, 7 L. Ed. 242), Chief Justice Marshall said:
On such transfer (by cession) of territory, it has never been held that the relations of the inhabitants with
each other undergo any change. Their relations with their former sovereign are dissolved, and new
relations are created between them and the government which has acquired their territory. The same act
which transfers their country, transfers the allegiance of those who remain in it; and the law which may be
denominated political, is necessarily changed, although that which regulates the intercourse and general
conduct of individuals, remains in force, until altered by the newly- created power of the State.
Likewise, in People vs. Perfecto (43 Phil. 887, 897 [1922]), this Court stated that: "It is a general principle of the
public law that on acquisition of territory the previous political relations of the ceded region are totally abrogated.
"
There appears no enabling or affirmative act that continued the effectivity of the aforestated provision of the Code
of Commerce after the change of sovereignty from Spain to the United States and then to the Republic of the
Philippines. Consequently, Article 14 of the Code of Commerce has no legal and binding effect and cannot apply
to the respondent, then Judge of the Court of First Instance, now Associate Justice of the Court of Appeals.
It is also argued by complainant herein that respondent Judge violated paragraph H, Section 3 of Republic Act No.
3019, otherwise known as the Anti-Graft and Corrupt Practices Act, which provides that:
Sec. 3. Corrupt practices of public officers. — 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 hereby
declared to be unlawful:
x x x           x x x          x x x
(h) Directly or indirectly having financial or pecuniary interest in any business, contract or transaction in
connection with which he intervenes or takes part in his official capacity, or in which he is prohibited by
the Constitution or by any Iaw from having any interest.
Respondent Judge cannot be held liable under the aforestated paragraph because there is no showing that
respondent participated or intervened in his official capacity in the business or transactions of the Traders
Manufacturing and Fishing Industries, Inc. In the case at bar, the business of the corporation in which respondent
participated has obviously no relation or connection with his judicial office. The business of said corporation is not
that kind where respondent intervenes or takes part in his capacity as Judge of the Court of First Instance. As was
held in one case involving the application of Article 216 of the Revised Penal Code which has a similar
prohibition on public officers against directly or indirectly becoming interested in any contract or business in
which it is his official duty to intervene, "(I)t is not enough to be a public official to be subject to this crime; it is
necessary that by reason of his office, he has to intervene in said contracts or transactions; and, hence, the official
who intervenes in contracts or transactions which have no relation to his office cannot commit this crime.' (People
vs. Meneses, C.A. 40 O.G. 11th Supp. 134, cited by Justice Ramon C. Aquino; Revised Penal Code, p. 1174, Vol.
11 [1976]).
It does not appear also from the records that the aforesaid corporation gained any undue advantage in its business
operations by reason of respondent's financial involvement in it, or that the corporation benefited in one way or
another in any case filed by or against it in court. It is undisputed that there was no case filed in the different
branches of the Court of First Instance of Leyte in which the corporation was either party plaintiff or defendant
except Civil Case No. 4234 entitled "Bernardita R. Macariola, plaintiff, versus Sinforosa O. Bales, et
al.," wherein the complainant herein sought to recover Lot 1184-E from the aforesaid corporation. It must be
noted, however, that Civil Case No. 4234 was filed only on November 9 or 11, 1968 and decided on November 2,
1970 by CFI Judge Jose D. Nepomuceno when respondent Judge was no longer connected with the corporation,
having disposed of his interest therein on January 31, 1967.
Furthermore, respondent is not liable under the same paragraph because there is no provision in both the 1935 and
1973 Constitutions of the Philippines, nor is there an existing law expressly prohibiting members of the Judiciary
from engaging or having interest in any lawful business.
It may be pointed out that Republic Act No. 296, as amended, also known as the Judiciary Act of 1948, does not
contain any prohibition to that effect. As a matter of fact, under Section 77 of said law, municipal judges may
engage in teaching or other vocation not involving the practice of law after office hours but with the permission of
the district judge concerned.
Likewise, Article 14 of the Code of Commerce which prohibits judges from engaging in commerce is, as
heretofore stated, deemed abrogated automatically upon the transfer of sovereignty from Spain to America,
because it is political in nature.
Moreover, the prohibition in paragraph 5, Article 1491 of the New Civil Code against the purchase by judges of a
property in litigation before the court within whose jurisdiction they perform their duties, cannot apply to
respondent Judge because the sale of the lot in question to him took place after the finality of his decision in Civil
Case No. 3010 as well as his two orders approving the project of partition; hence, the property was no longer
subject of litigation.
In addition, although Section 12, Rule XVIII of the Civil Service Rules made pursuant to the Civil Service Act of
1959 prohibits an officer or employee in the civil service from engaging in any private business, vocation, or
profession or be connected with any commercial, credit, agricultural or industrial undertaking without a written
permission from the head of department, the same, however, may not fall within the purview of paragraph h,
Section 3 of the Anti-Graft and Corrupt Practices Act because the last portion of said paragraph speaks of a
prohibition by the Constitution or law on any public officer from having any interest in any business and not by a
mere administrative rule or regulation. Thus, a violation of the aforesaid rule by any officer or employee in the
civil service, that is, engaging in private business without a written permission from the Department Head may not
constitute graft and corrupt practice as defined by law.
On the contention of complainant that respondent Judge violated Section 12, Rule XVIII of the Civil Service
Rules, We hold that the Civil Service Act of 1959 (R.A. No. 2260) and the Civil Service Rules promulgated
thereunder, particularly Section 12 of Rule XVIII, do not apply to the members of the Judiciary. Under said
Section 12: "No officer or employee shall engage directly in any private business, vocation, or profession or be
connected with any commercial, credit, agricultural or industrial undertaking without a written permission from
the Head of Department ..."
It must be emphasized at the outset that respondent, being a member of the Judiciary, is covered by Republic Act
No. 296, as amended, otherwise known as the Judiciary Act of 1948 and by Section 7, Article X, 1973
Constitution.
Under Section 67 of said law, the power to remove or dismiss judges was then vested in the President of the
Philippines, not in the Commissioner of Civil Service, and only on two grounds, namely, serious misconduct and
inefficiency, and upon the recommendation of the Supreme Court, which alone is authorized, upon its own
motion, or upon information of the Secretary (now Minister) of Justice to conduct the corresponding investigation.
Clearly, the aforesaid section defines the grounds and prescribes the special procedure for the discipline of judges.
And under Sections 5, 6 and 7, Article X of the 1973 Constitution, only the Supreme Court can discipline judges
of inferior courts as well as other personnel of the Judiciary.
It is true that under Section 33 of the Civil Service Act of 1959: "The Commissioner may, for ... violation of the
existing Civil Service Law and rules or of reasonable office regulations, or in the interest of the service, remove
any subordinate officer or employee from the service, demote him in rank, suspend him for not more than one year
without pay or fine him in an amount not exceeding six months' salary." Thus, a violation of Section 12 of Rule
XVIII is a ground for disciplinary action against civil service officers and employees.
However, judges cannot be considered as subordinate civil service officers or employees subject to the disciplinary
authority of the Commissioner of Civil Service; for, certainly, the Commissioner is not the head of the Judicial
Department to which they belong. The Revised Administrative Code (Section 89) and the Civil Service Law itself
state that the Chief Justice is the department head of the Supreme Court (Sec. 20, R.A. No. 2260) [1959]); and
under the 1973 Constitution, the Judiciary is the only other or second branch of the government (Sec. 1, Art. X,
1973 Constitution). Besides, a violation of Section 12, Rule XVIII cannot be considered as a ground for
disciplinary action against judges because to recognize the same as applicable to them, would be adding another
ground for the discipline of judges and, as aforestated, Section 67 of the Judiciary Act recognizes only two
grounds for their removal, namely, serious misconduct and inefficiency.
Moreover, under Section 16(i) of the Civil Service Act of 1959, it is the Commissioner of Civil Service who has
original and exclusive jurisdiction "(T)o decide, within one hundred twenty days, after submission to it, all
administrative cases against permanent officers and employees in the competitive service, and, except as provided
by law, to have final authority to pass upon their removal, separation, and suspension and upon all matters relating
to the conduct, discipline, and efficiency of such officers and employees; and prescribe standards, guidelines and
regulations governing the administration of discipline" (emphasis supplied). There is no question that a judge
belong to the non-competitive or unclassified service of the government as a Presidential appointee and is
therefore not covered by the aforesaid provision. WE have already ruled that "... in interpreting Section 16(i) of
Republic Act No. 2260, we emphasized that only permanent officers and employees who belong to the classified
service come under the exclusive jurisdiction of the Commissioner of Civil Service" (Villaluz vs. Zaldivar, 15
SCRA 710,713 [1965], Ang-Angco vs. Castillo, 9 SCRA 619 [1963]).
Although the actuation of respondent Judge in engaging in private business by joining the Traders Manufacturing
and Fishing Industries, Inc. as a stockholder and a ranking officer, is not violative of the provissions of Article 14
of the Code of Commerce and Section 3(h) of the Anti-Graft and Corrupt Practices Act as well as Section 12, Rule
XVIII of the Civil Service Rules promulgated pursuant to the Civil Service Act of 1959, the impropriety of the
same is clearly unquestionable because Canon 25 of the Canons of Judicial Ethics expressly declares that:
A judge should abstain from making personal investments in enterprises which are apt to be involved in
litigation in his court; and, after his accession to the bench, he should not retain such investments previously
made, longer than a period sufficient to enable him to dispose of them without serious loss. It is desirable that
he should, so far as reasonably possible, refrain from all relations which would normally tend to arouse the
suspicion that such relations warp or bias his judgment, or prevent his impartial attitude of mind in the
administration of his judicial duties. ...
WE are not, however, unmindful of the fact that respondent Judge and his wife had withdrawn on January 31,
1967 from the aforesaid corporation and sold their respective shares to third parties, and it appears also that the
aforesaid corporation did not in anyway benefit in any case filed by or against it in court as there was no case filed
in the different branches of the Court of First Instance of Leyte from the time of the drafting of the Articles of
Incorporation of the corporation on March 12, 1966, up to its incorporation on January 9, 1967, and the eventual
withdrawal of respondent on January 31, 1967 from said corporation. Such disposal or sale by respondent and his
wife of their shares in the corporation only 22 days after the incorporation of the corporation, indicates that
respondent realized that early that their interest in the corporation contravenes the aforesaid Canon 25. Respondent
Judge and his wife therefore deserve the commendation for their immediate withdrawal from the firm after its
incorporation and before it became involved in any court litigation
III
With respect to the third and fourth causes of action, complainant alleged that respondent was guilty of coddling
an impostor and acted in disregard of judicial decorum, and that there was culpable defiance of the law and utter
disregard for ethics. WE agree, however, with the recommendation of the Investigating Justice that respondent
Judge be exonerated because the aforesaid causes of action are groundless, and WE quote the pertinent portion of
her report which reads as follows:
The basis for complainant's third cause of action is the claim that respondent associated and closely fraternized
with Dominador Arigpa Tan who openly and publicly advertised himself as a practising attorney (see Exhs. I,
I-1 and J) when in truth and in fact said Dominador Arigpa Tan does not appear in the Roll of Attorneys and is
not a member of the Philippine Bar as certified to in Exh. K.
The "respondent denies knowing that Dominador Arigpa Tan was an "impostor" and claims that all the time he
believed that the latter was a bona fide member of the bar. I see no reason for disbelieving this assertion of
respondent. It has been shown by complainant that Dominador Arigpa Tan represented himself publicly as an
attorney-at-law to the extent of putting up a signboard with his name and the words "Attorney-at Law" (Exh. I
and 1- 1) to indicate his office, and it was but natural for respondent and any person for that matter to have
accepted that statement on its face value. "Now with respect to the allegation of complainant that respondent is
guilty of fraternizing with Dominador Arigpa Tan to the extent of permitting his wife to be a godmother of Mr.
Tan's child at baptism (Exh. M & M-1), that fact even if true did not render respondent guilty of violating any
canon of judicial ethics as long as his friendly relations with Dominador A. Tan and family did not influence
his official actuations as a judge where said persons were concerned. There is no tangible convincing proof
that herein respondent gave any undue privileges in his court to Dominador Arigpa Tan or that the latter
benefitted in his practice of law from his personal relations with respondent, or that he used his influence, if he
had any, on the Judges of the other branches of the Court to favor said Dominador Tan.
Of course it is highly desirable for a member of the judiciary to refrain as much as possible from maintaining
close friendly relations with practising attorneys and litigants in his court so as to avoid suspicion 'that his
social or business relations or friendship constitute an element in determining his judicial course" (par. 30,
Canons of Judicial Ethics), but if a Judge does have social relations, that in itself would not constitute a ground
for disciplinary action unless it be clearly shown that his social relations be clouded his official actuations with
bias and partiality in favor of his friends (pp. 403-405, rec.).
In conclusion, while respondent Judge Asuncion, now Associate Justice of the Court of Appeals, did not violate
any law in acquiring by purchase a parcel of land which was in litigation in his court and in engaging in business
by joining a private corporation during his incumbency as judge of the Court of First Instance of Leyte, he should
be reminded to be more discreet in his private and business activities, because his conduct as a member of the
Judiciary must not only be characterized with propriety but must always be above suspicion.
WHEREFORE, THE RESPONDENT ASSOCIATE JUSTICE OF THE COURT OF APPEALS IS HEREBY
REMINDED TO BE MORE DISCREET IN HIS PRIVATE AND BUSINESS ACTIVITIES.
SO ORDERED.
Teehankee, Guerrero, De Castro, Melencio-Herrera, Plana, Vasquez, Relova and Gutierrez, JJ., concur.
Concepcion Jr., J., is on leave.
Fernando, C.J., Abad Santos and Esolin JJ., took no part.
G.R. No. L-26096 February 27, 1979
THE DIRECTOR OF LANDS, petitioner,
vs.
SILVERETRA ABABA, ET AL., claimants, JUAN LARRAZABAL, MARTA C. DE
LARRAZABAL, MAXIMO ABAROQUEZ and ANASTACIA CABIGAS, petitioners-
appellants, ALBERTO FERNANDEZ, adverse claimant-appellee.
Juanito Ll. Abao for petitioners-appellants.
Alberto R Fernandez in his own behalf.
MAKASIAR, J.:
This is an appeal from the order of the Court of First Instance of Cebu dated March 19, 1966 denying the petition
for the cancellation of an adverse claim registered by the adverse claimant on the transfer certificate of title of the
petitioners.
The adverse claimant, Atty. Alberto B. Fernandez was retained as counsel by petitioner, Maximo Abarquez, in
Civil Case No. R-6573 of the Court of First Instance of Cebu, entitled "Maximo Abarquez vs. Agripina
Abarquez", for the annulment of a contract of sale with right of repurchase and for the recovery of the land which
was the subject matter thereof. The Court of First Instance of Cebu rendered a decision on May 29, 1961 adverse
to the petitioner and so he appealed to the Court of Appeals.
Litigating as a pauper in the lower court and engaging the services of his lawyer on a contingent basis, petitioner,
liable to compensate his lawyer whom he also retained for his appeal executed a document on June 10, 1961 in the
Cebuano-Visayan dialect whereby he obliged himself to give to his lawyer one-half (1/2) of whatever he might
recover from Lots 5600 and 5602 should the appeal prosper. The contents of the document as translated are as
follows:
AGREEMENT
KNOW ALL MEN BY THESE PRESENTS:
That I, MAXIMO ABARQUEZ, Plaintiff in Case No. R-6573 of the Court of First Instance of Cebu, make
known through this agreement that for the services rendered by Atty. Alberto B. Fernandez who is my lawyer
in this case, if the appeal is won up to the Supreme Court, I Promise and will guarantee that I win give to said
lawyer one-half (1/2) of what I may recover from the estate of my father in Lots No. 5600 and 5602 which are
located at Bulacao Pardo, City of Cebu. That with respect to any money which may be adjudged to me from
Agripina Abarquez, except 'Attorney's Fees', the same shall pertain to me and not to said lawyer.
IN WITNESS WHEREOF, I have caused my right thumb. mark to be affixed hereto this 10th of June, 1961, at
the City of Cebu.
(p. 5, Petitioner-Appellant's Brief, p. 26, rec.)
The real Property sought to be recovered in Civil Case No. R6573 was actually the share of the petitioner in Lots
5600 and 5602, which were part of the estate of his deceased parents and which were partitioned the heirs which
included petitioner Maximo Abarquez and his elder sister Agripina Abarquez, the defendant in said civil case.
This partition was made pursuant to a project of partition approved by the Court which provided am other that
Lots Nos. 5600 and 5602 were to be divided into three equal Parts, one third of which shall be given to Maximo
Abarquez. However, Agripina Abarquez the share of her brother stating that the latter executed an instrument
of pacto de retro prior to the partition conveying to her any or all rights in the estate of their parents. Petitioner
discovered later that the claim of his sister over his share was based on an instrument he was believe all along to
be a mere acknowledgment of the receipt of P700.00 which his sister gave to him as a consideration for g care of
their father during the latter's illness and never an instrument of pacto de retro. Hence, he instituted an action to
annul the alleged instrument of pacto de retro.
The Court of Appeals in a decision promulgated on August 27, 1963 reversed the decision of the lower court and
annulled the dead of pacto de retro. Appellee Agripina Abarquez filed a motion for reconsideration but the same
was denied in a resolution dated January 7, 1964 (p. 66, Record on Appeal; p. 13, Rec.) and the judgment became
final and executory on January 22,1964.
Subsequently, Transfer Certificate of Title No. 31841 was issued on May 19,1965 in the name of Maximo
Abarquez, married to Anastacia Cabigas, over his adjudged share in Lots Nos. 5600 and 5602 containing an area
of 4,085 square meters (p. 110, ROA; p. 13, rec.). These parcels of land later by the subject matter of the adverse
claim filed by the claimant.
The case having been resolved and title having been issued to petitioner, adverse claimant waited for petitioner to
comply with ha obligation under the document executed by him on June 10, 1961 by delivering the one-half (½)
portion of the said parcels of land.
Petitioner refused to comply with his obligation and instead offered to sell the whole parcels of land covered by
TCT No. 31841 to petitioner-spouses Juan Larrazabal and Marta C. de Larrazabal. Upon being informed of the
intention of the petitioner, adverse t claimant immediately took stops to protect his interest by filing with the trial
court a motion to annotate Ins attorney's lien on TCT No. 31841 on June 10, 1965 and by notifying the prospective
buyers of his claim over the one-half portion of the parcels of land.
Realizing later that the motion to annotate attorney's lien was a wrong remedy, as it was not within the purview of
Section 37, rule 138 of the Revised Rule of Court, but before the same was by the trial court, adverse t by an
affidavit of adverse claim on July 19, 1965 with the Register of Deeds of Cebu (p. 14, ROA; p. 13, rec.). By virtue
of the petition of mid affidavit the adverse claim for one-half (½) of the lots covered by the June 10, 1961
document was annotated on TCT No. 31841.
Notwithstanding the annotation of the adverse claim, petitioner-spouse Maximo Abarquez and Anastacia Cabigas
conveyed by deed of absolute sale on July 29, 1965 two-thirds (2/3) of the lands covered by TCT No. 31841 to
petitioner-spouses Juan Larrazabal and Marta C. de Larrazabal. When the new transfer certificate of title No.
32996 was issued, the annotation of adverse claim on TCT No. 31841 necessarily had to appear on the new
transfer certificate of title. This adverse claim on TCT No. 32996 became the subject of cancellation proceedings
filed by herein petitioner-spouses on March 7, 1966 with the Court of First Instance of Cebu (p. 2 ROA; p. 13,
rec.). The adverse claimant, Atty. Alberto B. Fernandez, filed his opposition to the petition for cancellation on
March 18, 1966 (p. 20, ROA; p. 13 rec.). The trial court resolved the issue on March 19, 1966, when it declared
that:
...the petition to cancel the adverse claim should be denied. The admission by the petitioners that the lawyers
(Attys. Fernandez and Batiguin) are entitled to only one-third of the lot described in Transfer Certificate of
Title No. 32966 is the best proof of the authority to maintain said adverse claim (p. 57, ROA; p. 13, rec.).
Petitioner-spouses decided to appeal the order of dismissal to this Court and correspondingly filed the notice of
appeal on April 1, 1966 with the trial court. On April 2, 1966, petitioner-spouses filed the appeal bond and
subsequently filed the record on appeal on April 6, 1966. The records of the case were forwarded to this Court
through the Land Registration Commission of Manila and were received by this Court on May 5, 1966.
Counsel for the petitioner-spouses filed the printed record on appeal on July 12, 1966. Required to file the
appellants' brief, counsel filed one on August 29, 1966 while that of the appellee was filed on October 1, 1966
after having been granted an extension to file his brief.
The case was submitted for decision on December 1, 1966. Counsel for the petitioners filed a motion to expunge
appellees' brief on December 8, 1966 for having been filed beyond the reglementary period, but the same was
denied by this Court in a resolution dated February 13, 1967.
The pivotal issue to be resolved in the instant case is the validity or nullity of the registration of the adverse claim
of Atty. Fernandez, resolution of which in turn hinges on the question of whether or not the contract for a
contingent fee, basis of the interest of Atty. Fernandez, is prohibited by the Article 1491 of the New Civil Code
and Canon 13 of the Canons of Professional Ethics.
Petitioners contend that a contract for a contingent fee violates Article 1491 because it involves an assignment of a
property subject of litigation. That article provides:
Article 1491. The following persons cannot acquire by purchase even at a public or judicial auction, either in
person or through the petition of another.
xxx xxx xxx
(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior and other o and employees connected
with the administration of justice, the property and rights in litigation or levied upon an execution before the
court within whose jurisdiction or territory they exercise their respective functions; this prohibition includes
the act of acquiring by assignment and shall apply to lawyers, with respect to the property and rights which
may be the object of any litigation in which they may take part by virtue of their profession (Emphasis
supplied).
This contention is without merit. Article 1491 prohibits only the sale or assignment between the lawyer and his
client, of property which is the subject of litigation. As WE have already stated. "The prohibition in said article a
only to applies stated: " The prohibition in said article applies only to a sale or assignment to the lawyer by his
client of the property which is the subject of litigation. In other words, for the prohibition to operate, the sale or t
of the property must take place during the pendency of the litigation involving the property" (Rosario Vda. de
Laig vs. Court of Appeals, et al., L-26882, November 21, 1978).
Likewise, under American Law, the prohibition does not apply to "cases where after completion of litigation the
lawyer accepts on account of his fee, an interest the assets realized by the litigation" (Drinker, Henry S., Legal
Ethics, p. 100 [1953], citing App. A, 280; N.Y. Ciu 714). "There is a clear distraction between such cases and one
in which the lawyer speculates on the outcome of the matter in which he is employed" (Drinker, supra, p. 100
citing A.B.A. Op. 279).
A contract for a contingent fee is not covered by Article 1491 because the tranfer or assignment of the property in
litigation takes effect only after the finality of a favorable judgment. In the instant case, the attorney's fees of Atty.
Fernandez, consisting of one-half (1/2) of whatever Maximo Abarquez might recover from his share in the lots in
question, is contingent upon the success of the appeal. Hence, the payment of the attorney's fees, that is, the
transfer or assignment of one-half (1/2) of the property in litigation will take place only if the appeal prospers.
Therefore, the tranfer actually takes effect after the finality of a favorable judgment rendered on appeal and not
during the pendency of the litigation involving the property in question. Consequently, the contract for a
contingent fee is not covered by Article 1491.
While Spanish civilists differ in their views on the above issue — whether or not a contingent fee contract (quota
litis agreement) is covered by Article 1491 — with Manresa advancing that it is covered, thus:
Se ha discutido si en la incapacidad de Ion Procumdam y Abogados asta o el pecto de quota litis. Consiste
este, como es sabido, en la estipulacion de que el Abogado o el Procurador ban de hacer suyos una parte
alicuota de In cona que se li m la son es favorable. Con es te concepto a la vista, es para nosortros que el
articulo que comentamos no menciona ese pacto; pero como la incapacidad de los Abogados y Procuradores
se extinede al acto de adquirir por cesion; y la efectividad del pacto de quota litis implica necesariamente una
cesion, estimamos que con solo el num. 5 del articulo 1459 podria con exito la nulidad de ese pacto
tradicionalmente considerado como ilicito.
xxx xxx xxx
Debe tenerse tambien en cuenta, respecto del ultimo parrafo del articulo 1459, la sentencia del Tribunal
Supreme de 25 Enero de 1902, que delcara que si bien el procurador no puede adquirir para si los bienes, en
cuanto a los cuales tiene incapacidad, puede adquirirlos para otra persona en quien no concurra incapacidad
alguna (Manresa, Comentarios al Codigo Civil Español, Tomo X, p. 110 [4a ed., 1931] emphasis supplied).
Castan, maintaining that it is not covered, opines thus;
C. Prohibiciones impuestas a las personas encargadas, mas o menos directamente, de la administracion de
justicia.—El mismo art. 1,459 del Codigo civil prohibe a los Magistrados, Jueces, individuos del Minesterio
fiscal, Secretarios de Tribunales y Juzgados y Oficiales de Justicia adquirir por compra (aunque sea en subasta
publica o judicial, por si ni por persona alguna intermedia). 'Los bienes y derechos que estuviesen en litigio ante
el Tribunal en cuya jurisdicion on teritorio ejercieran sus respectivas funciones, extendiendo se esta prohibicion
al acto de adquirir por cesion', y siendo tambien extensiva ' Alos Abogados y Procuradores respecto a los bienes
y derecho que fueran objeto del un litigio en que intervengan pos su profession y oficio.'
El fundamento de esta prohibicion es clarismo. No solo se trata—dice Manresa—de quitar la ocasion al
fraude; persiguese, ademas, el proposito de rodear a las personas que intervienen en la administracion de
justicia de todos los prestigios que necesitan para ejercer su ministerio, librando los de toda sospecha, que,
aunque fuere infundada, redundaria en descredito de la institucion.
Por no dor lugar a recelos de ninguna clase, admite el Codigo (en el apartado penutimo del art. 1.459) algunos
casos en que, por excepcion, no se aplica el pricipio prohibitivo de que venimos hablando. Tales son los de
que se trate de acciones hereditarias entre coheredero, de cesion en pago de creditos, o de garantia de los
bienes que posean los funcionarios de justicia.
Algunos autores (Goyena, Manresa, Valverde) creen que en la prohibicion del art. 1.459 esta comprendido
el pacto de quota litis (o sea el convenio por el cual se concede al Abogado o Procurador, para el caso de
obtener sentencia favorable una parte alicuota de la cosa o cantidad que se litiga), porque dicho pacto
supone la venta o cesion de una parte de la cosa o drecho que es objecto del litigio. Pero Mucius
Scaevola oberva, conrazon, que en el repetido pacto no hay propiamente caso de compraventa ni de cesion
de derechos, y bastan para estimario nulo otros preceptos del Codigo como los relativos a la ilicitud de la
causa (Castan, Derecho Civil Espñol, Tomo 4, pp. 68-69, [9a ed., 1956], emphasis supplied).
The Supreme Court of Spain, in its sentencia of 12 November 1917, has ruled that Article 1459 of the Spanish
Civil Code (Article 1491 of our Civil Code) does not apply to a contract for a contingent fee because it is not
contrary to morals or to law, holding that:
... que no es susceptible de aplicarse el precepto contenido en el num. 5 del art. 1.459 a un contrato en el
que se restrigen los honorarios de un Abogado a un tanto por ciento de lo que se obtuviera en el litigio,
cosa no repudiada por la moral ni por la ley (Tolentino, Civil Code of the Philippines, p. 35, Vol. V
[1959]; Castan, supra; Manresa, supra).
In the Philippines, among the Filipino commentators, only Justice Capistrano ventured to state his view on the said
issue, thus:
The incapacity to purchase or acquire by assignment, which the law also extends to lawyers with t to the
property and rights which may be the object of any litigation in which they may take part by virtue of their
profession, also covers contracts for professional services quota litis. Such contracts, however, have been
declared valid by the Supreme Court" (Capistrano, Civil Code of the Philippines, p. 44, Vol. IV [1951]).
Dr. Tolentino merely restated the views of Castan and Manresa as well as the state of jurisprudence in Spain, as
follows:
Attorneys-at-law—Some writers, like Goyena, Manresa and Valverde believe that this article covers quota litis
agreements, under which a lawyer is to be given an aliquot part of the property or amount in litigation if he
should win the case for his client. Scaevola and Castan, however, believe that such a contract does not
involve a sale or assignment of right but it may be void under other articles of the Code, such as those
referring to illicit cause- On the other hand the Spanish Supreme Court has held that this article is not
applicable to a contract which limits the fees of a lawyer to a certain percentage of what may be recovered in
litigation, as this is not contrary to moral or to law. (Tolentino, Civil Code of the Philippines, p. 35, Vol. V
[1959]; Castan, supra, Emphasis supplied).
Petitioners her contend that a contract for a contingent fee violates the Canons of Professional Ethics. this is
likewise without merit This posture of petitioners overlooked Canon 13 of the Canons which expressly contingent
fees by way of exception to Canon 10 upon which petitioners relied. For while Canon 10 prohibits a lawyer from
purchasing ...any interest in the subject matter of the litigation which he is conducting", Canon 13, on the other
hand, allowed a reasonable contingent fee contract, thus: "A contract for a con. tangent fee where sanctioned by
law, should be reasonable under all the circumstances of the ca including the risk and uncertainty of the
compensation, but should always be subject to the supervision of a court, as to its reasonableness." As pointed out
by an authority on Legal Ethics:
Every lawyer is intensely interested in the successful outcome of his case, not only as affecting his reputation,
but also his compensation. Canon 13 specifically permits the lawyer to contract for a con tangent fee which of
itself, negatives the thought that the Canons preclude the lawyer's having a stake in his litigation. As pointed
out by Professor Cheatham on page 170 n. of his Case Book, there is an inescapable conflict of interest
between lawyer and client in the matter of fees. Nor despite some statements to the con in Committee
opinions, is it believed that, particularly in view of Canon 13, Canon 10 precludes in every case an
arrangement to make the lawyer's fee payable only out of the results of the litigation. The distinction is
between buying an interest in the litigation as a speculation which Canon 10 condemns and agreeing, in a
case which the lawyer undertakes primarily in his professional capacity, to accept his compensation
contingent on the outcome (Drinker, Henry S Legal Ethics, p. 99, [1953], Emphasis supplied).
These Canons of Professional Ethics have already received "judicial recognition by being cited and applied by the
Supreme Court of the Philippines in its opinion" Malcolm, Legal and Judicial Ethics, p. 9 [1949]). And they have
likewise been considered sources of Legal Ethics. More importantly, the American Bar Association, through
Chairman Howe of the Ethics Committee, opined that "The Canons of Professional Ethics are legislative
expressions of professional opinion ABA Op. 37 [1912])" [See footnote 25, Drinker, Legal Ethics, p. 27].
Therefore, the Canons have some binding effect
Likewise, it must be noted that this Court has already recognized this type of a contract as early as the case
of Ulanday vs. Manila Railroad Co. (45 PhiL 540 [1923]), where WE held that "contingent fees are not prohibited
in the Philippines, and since impliedly sanctioned by law 'Should be under the supervision of the court in order
that clients may be protected from unjust charges' (Canons of Profession 1 Ethics)". The same doctrine was
subsequently reiterated in Grey vs. Insular Lumber Co. (97 PhiL 833 [1955]) and Recto vs. Harden (100 PhiL 427
[1956]).
In the 1967 case of Albano vs. Ramos (20 SCRA 171 [19671), the attorney was allowed to recover in a separate
action her attomey's fee of one-third (1/3) of the lands and damages recovered as stipulated in the contingent fee
contract. And this Court in the recent case of Rosario Vda de Laig vs. Court of Appeals, et al. (supra), which
involved a contingent fee of one-half (½) of the property in question, held than ,contingent fees are recognized in
this i jurisdiction (Canon 13 of the Canons of Professional Ethics adopted by the Philippine Bar association in
1917 [Appendix B, Revised Rules of Court)), which contingent fees may be a portion of the property in litigation."
Contracts of this nature are permitted because they redound to the benefit of the poor client and the lawyer
"especially in cases where the client has meritorious cause of action, but no means with which to pay for legal
services unless he can, with the sanction of law, make a contract for a contingent fee to be paid out of the proceeds
of the litigation" (Francisco, Legal Ethics, p. 294 [1949], citing Lipscomb vs. Adams 91 S.W. 1046, 1048 [1949]).
Oftentimes, contingent fees are the only means by which the poor and helpless can redress for injuries sustained
and have their rights vindicated. Thus:
The reason for allowing compensation for professional services based on contingent fees is that if a person
could not secure counsel by a promise of large fees in case of success, to be derived from the subject matter of
the suit, it would often place the poor in such a condition as to amount to a practical denial of justice. It not
infrequently happens that person are injured through the negligence or willful misconduct of others, but by
reason of poverty are unable to employ counsel to assert their rights. In such event their only means of redress
lies in gratuitous service, which is rarely given, or in their ability to find some one who will conduct the case
for a contingent fee. That relations of this king are often abused by speculative attorneys or that suits of this
character are turned into a sort of commercial traffic by the lawyer, does not destroy the beneficial result to
one who is so poor to employ counsel (id, at p. 293, citing Warvelle, Legal Ethics, p. 92, Emphasis supplied).
Justice George Malcolm, writing on contingent fees, also stated that:
... the system of contingent compensation has the merit of affording to certain classes of persons the
opportunity to procure the prosecution of their claims which otherwise would be beyond their means. In many
cases in the United States and the Philippines, the contingent fee is socially necessary (Malcolm, Legal and
Judicial Ethics, p. 55 [1949], emphasis supplied).
Stressing further the importance of contingent fees, Professor Max Radin of the University of California, said that:
The contingent fee certainly increases the possibility that vexatious and unfounded suits will be brought. On
the other hand, it makes possible the enforcement of legitimate claims which otherwise would be abandoned
because of the poverty of the claimants. Of these two possibilities, the social advantage seems clearly on the
side of the contingent fee. It may in fact be added by way of reply to the first objection that vexations and
unfounded suits have been brought by men who could and did pay substantial attorney's fees for that purpose
(Radin, Contingent Fees in California, 28 Cal. L. Rev. 587, 589 [1940], emphasis supplied).
Finally, a contingent fee contract is always subject to the supervision of the courts with respect to the stipulated
amount and may be reduced or nullified. So that in the event that there is any undue influence or fraud in the
execution of the contract or that the fee is excessive, the client is not without remedy because the court will amply
protect him. As held in the case of Grey vs. Insular Lumber Co., supra, citing the case of Ulanday vs. Manila
Railroad Co., supra:
Where it is shown that the contract for a contingent fee was obtained by any undue influence of the attorney
over the client, or by any fraud or imposition, or that the compensation is so clearly excessive as to amount to
extortion, the court win in a proper case protect the aggrieved party.
In the present case, there is no iota of proof to show that Atty. Fernandez had exerted any undue influence or had
Perpetrated fraud on, or had in any manner taken advantage of his client, Maximo Abarquez. And, the
compensation of one-half of the lots in question is not excessive nor unconscionable considering the contingent
nature of the attorney's fees.
With these considerations, WE find that the contract for a contingent fee in question is not violative of the Canons
of Professional Ethics. Consequently, both under the provisions of Article 1491 and Canons 10 and 13 of the
Canons of Profession Ethics, a contract for a contingent fee is valid
In resolving now the issue of the validity or nullity for the registration of the adverse claim, Section 110 of the
Land Registration Act (Act 496) should be considered. Under d section, an adverse claim may be registered only
by..
Whoever claims any part or interest in registered land adverse to the registered owner, arising subsequent to
the date of the o registration ... if no other provision is made in this Act for registering the same ...
The contract for a contingent fee, being valid, vested in Atty Fernandez an interest or right over the lots in
question to the extent of one-half thereof. Said interest became vested in Atty. Fernandez after the case was won
on appeal because only then did the assignment of the one-half (½) portion of the lots in question became effective
and binding. So that when he filed his affidavit of adverse claim his interest was already an existing one. There
was therefore a valid interest in the lots to be registered in favor of Atty. Fernandez adverse to Mo Abarquez.
Moreover, the interest or claim of Atty. Fernandez in the lots in question arose long after the original petition
which took place many years ago. And, there is no other provision of the Land Registration Act under which the
interest or claim may be registered except as an adverse claim under Section 110 thereof. The interest or claim
cannot be registered as an attorney's charging lien. The lower court was correct in denying the motion to annotate
the attomey's lien. A charging lien under Section 37, Rule 138 of the Revised Rules of Court is limited only to
money judgments and not to judgments for the annulment of a contract or for delivery of real property as in the
instant case. Said Section provides that:
Section 37. An attorney shall have a lien upon the funds, documents and papers of his client which have
lawfully come into his oppossession and may retain the same until his lawful fees and disbursements have
been paid, and may apply such funds to the satisfaction thereof. He shall also have a lien to the same extent
upon all judgments, for the payment of money, and executions issued in pursuance of such judgments, which
he has secured in a litigation of his client ... (emphasis supplied).
Therefore, as an interest in registered land, the only adequate remedy open to Atty. Fernandez is to register such
interest as an adverse claim. Consequently, there being a substantial compliance with Section 110 of Act 496, the
registration of the adverse claim is held to be valid. Being valid, its registration should not be cancelled because as
WE have already stated, "it is only when such claim is found unmeritorious that the registration thereof may be
cancelled" (Paz Ty Sin Tei vs. Jose Lee Dy Piao 103 Phil. 867 [1958]).
The one-half (½) interest of Atty. Fernandez in the lots in question should therefore be respected. Indeed, he has a
better right than petitioner-spouses, Juan Larrazabal and Marta C. de Larrazabal. They purchased their two-thirds
(2/3) interest in the lots in question with the knowledge of the adverse claim of Atty. Fernandez. The adverse
claim was annotated on the old transfer certificate of title and was later annotated on the new transfer certificate of
title issued to them. As held by this Court:
The annotation of an adverse claim is a measure designed to protect the interest of a person over a piece of real
property where the registration of such interest or right is not otherwise provided for by the Land Registration
Act, and serves as a notice and warning to third parties dealing with said property that someone is claiming an
interest on the same or a better right than the registered owner thereof (Sanchez, Jr. vs. Court of Appeals, 69
SCRA 332 [1976]; Paz Ty Sin Tei vs. Jose Le Dy Piao supra).
Having purchased the property with the knowledge of the adverse claim, they are therefore in bad faith.
Consequently, they are estopped from questioning the validity of the adverse claim.
WHEREFORE, THE DECISION OF THE LOWER COURT DENYING THE PETITION FOR THE
CANCELLATION OF THE ADVERSE CLAIM SHOULD BE, AS IT IS HEREBY AFFIRMED, WITH COSTS
AGAINST PETITIONER-APPELLANTS JUAN LARRAZABAL AND MARTA C. DE LARRAZABAL.
SO ORDERED.
Teehankee (Chairman), Fernandez, Guerrero, De Castro and Melencio-Herrera, JJ., concur.
G.R. No. L-65594 July 9, 1986
MAHARLIKA PUBLISHING CORPORATION, ANGELA CALICA, ADOLFO CALICA and
the HEIRS OF THE LATE PIO CALICA, petitioners,
vs.
SPOUSES LUZ R. TAGLE and EDILBERTO TAGLE and the GOVERNMENT SERVICE
INSURANCE SYSTEM and the HONORABLE INTERMEDIATE APPELLATE
COURT, respondents.
GUTIERREZ, JR., J.:
The Government Service Insurance System (GSIS) was the registered owner of a parcel of land consisting of
1,373 square meters situated in the district of Paco and covered by Transfer Certificate of Title No. 5986 of the
Registry of Deeds of Manila.
On June 4, 1963, the GSIS entered into a conditional contract to sell the parcel of land to petitioner Maharlika
Publishing Corporation (Maharlika for short) together with the building thereon as well as the printing machinery
and equipment therein. Among the conditions of the sale are that the petitioner shall pay to the GSIS monthly
installments of P969.94 until the total purchase price shall have been fully paid and that upon the failure of
petitioner to pay any monthly installment within ninety (90) days from due date, the contract shall be deemed
automatically cancelled.
After Maharlika failed to pay the installments for several months, the GSIS, on June 7, 1966, notified Maharlika in
writing of its arrearages and warned Maharlika that the conditions of the contract would be enforced should
Maharlika fail to settle its account within fifteen (15) days from notice. Because of Maharlika's failure to settle the
unpaid accounts, the GSIS notified Maharlika in writing on June 26, 1967 that the conditional contract of sale was
annulled and cancelled and required Maharlika to sign a lease contract. Maharlika refused to vacate the premises
and to sign the lease contract.
Sometime later, the GSIS published an invitation to bid several acquired properties, among which was the
property in question, to be held at the Office of the General Manager, second floor, GSIS Building, Arroceros
Street, Manila, from 9:00 a.m. to 3:00 p.m. on February 12, 1971.
Meanwhile, on February 11, 1971, or one day before the scheduled public bidding, Maharlika represented by its
president Adolfo Calica addressed to GSIS a letter-proposal to repurchase their foreclosed properties proposing
that they be allowed to pay P11,000.00 representing ten percent (10%) of their total account; that they be allowed
to pay P18,300.00 as balance to complete the twenty-five percent (25%) of their total arrearages( P117,175.00) not
later than February 28, 1971 and the remaining seventy-five percent (75%) to be paid in twenty four (24) months.
This letter-proposal was discussed by Adolfo Calica with GSIS Board Vice-Chairman Leonilo Ocampo, who
wrote a note to the General Manager Roman Cruz, Jr., the last paragraph of which reads as follows:
It sounds fair and reasonable subject to your wise judgment, as usual. (Exhibit 4, Maharlika)
Said letter-proposal and Ocampo's note were taken by Calica to General Manager Cruz, Jr., who, in turn, wrote on
the face of Exhibit 4-Maharlika a note to one Mr. Ibañez which reads: "Hold Bidding. Discuss with me." The
letter-proposal together with two (2) checks amounting to P11,000.00 were submitted to the office of General
Manager Cruz, Jr. and were received by his Secretary.
On February 12, 1971, however, the public bidding of this particular property was held as scheduled prompting
Adolfo Calica to submit his bid to the Bidding Committee with a deposit of P11,000.00 represented by the same
two checks submitted to General Manager Cruz, Jr., together with his letter-proposal. His bid proposal reads: "I
bid to match the highest bidder."
The bidding committee rejected Maharlika's bid as an imperfect bid and recommended acceptance of private
respondent Luz Tagle's bid of P130,000.00 with a ten percent (10%) deposit of P13,000.00.
On February 19, 1971, the GSIS addressed a letter to Adolfo Calica informing him of the non-acceptance of his
bid and returning his two checks.
After approval and confirmation of the sale of the subject property to Luz Tagle on April 20, 1971, the GSIS
executed a Deed of Conditional Sale in favor of the Tagles on June 8, 1971.
Due to the refusal of petitioners to surrender the possession of the property in question, respondent spouses Luz R.
Tagle and Edilberto Tagle filed a case for Recovery of Possession with Damages with the Court of First Instance
of Manila which rendered the following decision on May 15, 1974:"
IN VIEW OF THE FOREGOING CONSIDERATIONS, the Court hereby renders judgment:
(a) declaring the letter-proposal (Exh.. 3-Maharlika) ineffective and without any binding effect, being
imperfect to create any contractual relation between GSIS and defendants Maharlika and Adolfo Calica;
(b) declaring plaintiffs and (sic) entitled to the possession of the properties in question and directing, therefore,
defendants Maharlika and Adolfo Calica, or any person or persons holding or possessing the properties in their
behalf, to forthwith vacate the properties in question and to surrender the same to the plaintiffs;"
(c) dismissing the complaint as against defendants 'Heirs of the deceased Pio Calica' (except Angela Calica) it
appearing that they were not properly summoned and represented in the instant suit:"
(d) directing the defendants Maharlika, Adolfo Calica and Angela Calica, to pay jointly and severally the
plaintiffs a monthly rental of the properties in question in the sum of P976.00 a month commencing 12
February 1971, until the said properties are vacated by said defendants, with legal interest of all sums due from
12 Feb. 1971 up to the rendition of this judgment in this instant suit, such interest to commence from the filing
of the complaint until the same is fully paid; and that such monthly rentals commencing from the date of this
judgment, shall also earn interest at the legal rate unless paid within the first ten days of the current month for
the rental of the preceding month;"
(e) dismissing the counterclaim of defendants Maharlika and the Calicas against plaintiffs;
(f) dismissing the cross-claim of defendants Maharlika and the Calicos against defendant GSIS;"
(g) dismissing all other claims which the parties may have against each other; and
(h) directing defendants Maharlika, Adolfo Calica and Angela Calica to pay the costs of this suit.
After a motion to set aside judgment and grant a new trial was denied by the trial court for lack of merit, the case
was brought on appeal to the former Court of Appeals on April 8, 1976. On March 2, 1983, the Intermediate
Appellate Court affirmed the decision of the trial court, stating as follows:
xxx xxx xxx
The mere offer to repurchase of the subject property and the deposit of the amount of P11,000.00 by the
defendants on February 11, 1971, does not have the effect of reviving the conditional deed of sale (Exhibit 4-
GSIS, Ibid, p. 29) executed by the GSIS and the defendants. To revive the said contract, and for the defendants
to be deemed to have repurchased the subject property, there should have been payment in favor of the GSIS
of all the installments due and interests thereon in the total amount of P117,175.00 as of February 11, 1971
But the defendants insist that the notations of Leonilo M. Ocampo, Vice-Chairman of the GSIS Board of
Trustees, to GSIS General Manager Roman Cruz, Jr. (Exhibits 4-A and 4-B Maharlika, Ibid, p. 76) as well as
the notation of GSIS General Manager Roman Cruz, Jr.' to hold bidding. Discuss with me' (Exhibit 4-C
Maharlika, Ibid, p. 76) means that the GSIS had accepted defendants' offer and had revived the conditional
contract of sale dated June 4, 1963.
This interpretation is far-fetched. The notations referred to by the defendants do not show acceptance of
defendants' offer to repurchase the subject property. In fact, the defendants themselves were aware that their
offer was not accepted at all because they submitted to and participated in the bidding of the subject property
on February 12,1971 (Exhibits K, K-1, 6, 6-A, Ibid, pp. 16-34), using its letter- proposal as deposit for its bid.
But defendants' bid was rejected because it was imperfect and not accompanied with a deposit of 10% of the
highest bid (Exhibits B-1, 7 GSIS, 7-A Maharlika, Ibid, pp. 5, 35), and that defendants' bid did not contain a
specific bid price proposal (Exhibit 7 GSIS, Ibid, p. 35).
The consequent auction sale of the property on February 12, 1971 and execution of the conditional deed of
sale in favor of the plaintiffs (Exhibit A, Ibid, p. 1) is valid. The plaintiffs are entitled to the possession of the
subject property.
 xxx xxx xxx
A motion for reconsideration and/or new trial was filed by petitioners. The motion was denied by the respondent
Appellate Court.
Hence, this petition for review on certiorari filed on December 16,1983.
On January 9, 1984, we resolved to deny in a minute resolution, the petition for lack of merit. A timely motion for
reconsideration was filed by the petitioners which contained the following reasons to warrant review of the case:
It is apparent that petitioners will suffer serious injustice, consisting in the loss of the subject property, by
reason of the failure of respondent Court to decide questions of substance involved herein in a way not in
accord with law and the applicable decisions of this Honorable Court, such questions being the following:
(1) Whether or not respondent Edilberto Tagle's being a GSIS officer at the time of the sale by the GSIS of the
subject property to his wife should be allowed to be introduced as newly discovered evidence or at any rate
received in the interest of justice;"
(2) Whether or not respondent Court acted with grave abuse of discretion in ignoring the irregular appearance
of respondent Luz Tagle's bid and the inference of fraud flowing therefrom in the context of surrounding
circumstances;
(3) Whether or not the auction sale in question is void for having been conducted despite the directive of the
GSIS General Manager to suspend the same in virtue of petitioners' offer to repurchase the subject property
and their payment of P11,000.00 in checks as earnest money which he accepted.
Significantly, on September 21, 1984, the GSIS filed a Supplemental Memorandum submitting for resolution of
this Court the matter of whether the respondent spouses Luz and Edilberto Tagle can still enforce their claim as
winning bidders considering the fact that they have so far made only two payments to the GSIS amounting to
P32,500.00 in violation of the terms and conditions of the conditional sale executed in their favor and which
provides for its automatic cancellation in such case, or whether the petitioners can still repurchase the property in
question as original owners thereof.
We find the petitioners' motion for reconsideration impressed with merit.
The certification secured by the petitioners from GSIS on April 28, 1983 shows that Edilberto Tagle was Chief,
Retirement Division, GSIS, from 1970 to 1978. He worked for the GSIS since 1952. Strictly speaking, the
evidence of Mr. Tagle's being a GSIS official when his wife bid for the disputed property is not newly discovered
evidence. However, we cannot simply ignore the fact that on February 12, 1971 when Adolfo Calica was
desperately trying to retrieve the property foreclosed against him, after receiving assurances from the highest GSIS
officials that his letter- proposal would be accepted and after the sale at public auction of the property was, in fact,
ordered to be stopped, the wife of a GSIS official would be allowed to bid for that property and would actually
win in the bidding.
As stated by the petitioners, this important factor implicit in good government, should have been considered in the
interest of justice. It was incumbent under the law for GSIS to have rejected the bid of the wife of a GSIS official
and to have refused to enter into the deed of conditional sale with the respondents Tagle.
The petitioners bank on the allegation that the indirect participation of Edilberto Tagle in the public bidding
creates a "conflict of interests situation" which invalidates the aforesaid transaction under the precept laid down in
Article 1409 paragraph (1) of the Civil Code making his participation void for being contrary to morals, good
customs, and public policy.
The Supreme Court has ample authority to go beyond the pleadings when in the interest of justice and the
promotion of public policy there is a need to make its own finding to support its conclusions. In this particular
case, there is absolutely no doubt that Mr. Edilberto Tagle was a GSIS Division Chief when his wife bid for the
property being sold by GSIS. The only issue is whether or not to consider this fact because it surfaced only after
trial proper.
We declare it to be a policy of the law that public officers who hold positions of trust may not bid directly or
indirectly to acquire prop properties foreclosed by their offices and sold at public auction.
Article XIII, Section 1 of our Constitution states that:
Public office is a public trust. Public officers and employees shall serve with the highest degree of
responsibility, integrity, loyalty and efficiency, and shall remain accountable to the people.
We stated in Ancheta vs. Hilario (96 SCRA 62);
xxx xxx xxx
...A public servant must exhibit at all times the highest sense of honesty and integrity. ...
Under Article 1491 of the Civil Code the following persons cannot acquire by purchase, even at a public or
judicial auction, either in person or through the mediation of another:
(1) The guardian, the property of the person or persons who may be under his guardianship;
(2) Agents, the property whose administration or sale may have been intrusted to them, unless the consent of
the principal has been given;
(3) Executors and administrators, the property of the estate under administration;
(4) Public officers and employees, the property of the State or of any subdivisions thereof, or of any
government owned or controlled corporation, or institution, the administration of which has been intrusted to
them; this provision shall apply to judges and government experts who, in any manner whatsoever, take part in
the sale;
(5) Justices, judges, prosecuting attorneys, clerk of superior and inferior courts, and other officers and
employees connected with the administration of justice, the property and rights in litigation or levied upon an
execution before the court within whose jurisdiction or territory they exercise their respective functions; this
prohibition includes the act of acquiring by assignment and shall apply to lawyers, with respect to the property
and rights which may be the object of any litigation in which they may take part by virtue of their profession;
(6) Any others specially disqualified by law.
In so providing, the Code tends to prevent fraud, or more precisely, tends not to give occasion for fraud, which is
what can and must be done (Francisco, Sales, p. 111). We, therefore, reject the contention of respondents that the
fact that Edilberto Tagle was, at the time of the public bidding, a GSIS official, will not alter or change the
outcome of the case.
A Division Chief of the GSIS is not an ordinary employee without influence or authority. The mere fact that he
exercises ample authority with respect to a particular activity, i.e., retirement, shows that his influence cannot be
lightly regarded.
The point is that he is a public officer and his wife acts for and in his name in any transaction with the GSIS. If he
is allowed to participate in the public bidding of properties foreclosed or confiscated by the GSIS, there will
always be the suspicion among other bidders and the general public that the insider official had access to
information and connections with his fellow GSIS officials as to allow him to eventually acquire the property. It is
precisely the need to forestall such suspicions and to restore confidence in the public service that the Civil Code
now declares such transactions to be void from the beginning and not merely voidable (Rubias vs. Batiller, 51
SCRA 120). The reasons are grounded on public order and public policy. We do not comment on the motives of
the private respondents or the officers supervising the bidding when they entered into the contract of sale. Suffice
it to say that it fags under the prohibited transactions under Article 1491 of the Civil Code and, therefore, void
under Article 1409.
In the case of Garciano vs. Oyao (102 SCRA 195), this Court held:
xxx xxx xxx
...We need not exaggerate the importance of being absolutely free from any suspicion which may
unnecessarily erode the faith and confidence of the People in their government. As the Constitution
categorically declared: 'Public office is a public trust. Public officers and employees shall serve with the
highest degree of responsibility, integrity, loyalty and efficiency, and shall remain accountable to the people'
(Art. XIII, Sec. 1, Constitution).
xxx xxx xxx
Respondent Wilfredo Oyao, should avoid so far as reasonably possible a situation which would normally tend
to arouse any reasonable suspicion that he is utilizing his official position for personal gain or advantage to the
prejudice of party litigants or the public in general. In the language of then Justice, now Chief Justice Enrique
M. Fernando in the case of Pineda vs. Claudio (28 SCRA 34, 54): 'There may be occasion then where the
needs of the collectivity that is the government may collide with his private interest as an individual.
In Mclain vs. Miller County (23 SW 2d. 2-4; 255) the Court ruled that:
As the efficiency of the public service is a matter of vital concern to the public, it is not surprising that
agreements tending to injure such service should be regarded as being contrary to public policy. It is not
necessary that actual fraud should be shown, for a contract which tends to the injury of the public service is
void, although the parties entered into it honestly, and proceeded under it in good faith. The courts do not
inquire into the motives of the parties in the particular case to ascertain whether they were corrupt or not, but
stop when it is ascertained that the contract is one which is opposed to public policy. Nor is it necessary to
show that any evil was in fact, done by or through the contract. The purpose of the rule is to prevent persons
from assuming a position where selfish motives may impel them to sacrifice the public good to private benefit.
There is no need, therefore, to pass upon the issue of irregularity in the appearance of the private respondents' bid
and the alleged inference of fraud flowing therefrom.
We reiterate that assuming the transaction to be fair and not tainted with irregularity, it is still looked upon with
disfavor because it places the officer in a position which might become antagonistic to his public duty.
There are other grounds which contain us to grant this petition.
We now come to the issue whether or not there was a repurchase of the property in question from the GSIS
effected by the petitioners the day before the public bidding.
In Article 1475 of the Civil Code, we find that "the contract of sale is perfected at the moment there is a meeting
of minds upon the thing which is the object of the contract and upon the price. From that moment, the parties may
reciprocally demand performance, subject to the law governing the form of contracts. "
This Court in the case of Central Bank of the Philippines vs. Court of Appeals (63 SCRA 431) ruled on the
perfection of government contracts in the following manner:
We are not persuaded that petitioner's posture conforms with law and equity. According to Paragraph IB 114.1
of the Instructions to Bidders, Ablaza was 'required to appear in the office of the Owner (the Bank) in person,
or, if a firm or corporation, a duly authorized representative (thereof) and to execute the contract within five
(5) days after notice that the contract has been awarded to him. Failure or neglect to do so shall constitute a
breach of agreement effected by the acceptance of the Proposal. There can be no other meaning of this
provision than that the Bank's acceptance of the bid of respondent Ablaza effected an actionable agreement
between them. We cannot read it in the unilateral sense suggested by petitioner that it bound only the
contractor, without any corresponding responsibility or obligation at all on the part of the Bank. An agreement
presupposed a meeting of minds and when that point is reached in the negotiations between two parties
intending to enter into a contract, the purported contract is deemed perfected and none of them may thereafter
disengage himself therefrom without being liable to the other in an action for specific performance. "
In American Jurisprudence, 2d., Section 73 (pp. 186-187), we read:
The principle is fundamental that a party cannot be held to have contracted if there was no assent, and this is
so both as to express contracts and contracts implied in fact. There must be mutual assent or a meeting of
minds in all essential elements or terms in order to form a binding contract. However, ordinarily no more is
meant by this than an expression or manifestation of mutual assent, as an objective thing, is necessary, and that
is generally deemed sufficient in the formation of a contract ... In other words, appropriate conduct by the
parties may be sufficient to establish an agreement, and there may be instances where interchanged
correspondence does not disclose the exact point at which the deal was closed, but the actions of the parties
may indicate that a binding obligation has been undertaken.
It is undisputed that when the letter-proposal of petitioners was presented to GSIS General Manager Roman Cruz,
Jr., he wrote on the face of such letter the words "Hold Bidding. Discuss with me." These instructions were
addressed to one Mr. Ibañez who was in-charge of public bidding. Thereafter, a deposit of P11,000.00 in checks
was accepted by the Secretary of Mr. Roman Cruz, Jr. In the light of these circumstances an inference may be
made that General Manager Cruz, Jr. had already accepted the petitioners' offer of repurchase or at the very least
had led them to understand that he had arrived at a decision to accept it.
It should also be noted that there is no serious denial as to General Manager Cruz, Jr.'s capacity to enter into
binding contractual obligations for GSIS without the prior approval of the Board of Trustees.
On the other hand, the letter of endorsement made by the GSIS Board Vice-Chairman Leonilo Ocampo which
states ...subject to your wise judgment, as usual leads one to conclude that it has been the practice of GSIS to
permit the General Manager to do acts within the scope of his apparent authority.
In the case of Francisco vs. Government Service Insurance System (7 SCRA 577), we held that:
xxx xxx xxx
... Corporate transactions would speedily come to a standstill were every person dealing with a corporation
held duty-bound to disbelieve every act of its responsible officers, no matter how regular they should appear
on their face. This Court has observed in Ramirez vs. Orientalist Co., 38 Phil. 634, 654-655, that—
In passing upon the liability of a corporation in cases of this kind it is always well to keep in mind the situation
as it presents itself to the third party with whom the contract is made. Naturally he can have little or no
information as to what occurs in corporate meetings; and he must necessarily rely upon the external
manifestation of corporate consent. The integrity of commercial transactions can only be maintained by
holding the corporation strictly to the liability fixed upon it by its agents in accordance with law; and we
would be sorry to announce a doctrine which would permit the property of a man in the city of Paris to be
whisked out of his hands and carried into a remote quarter of the earth without recourse against the corporation
whose name and authority had been used in the manner disclosed in this case. As already observed, it is
familiar doctrine that if a corporation knowingly permits one of its officers, or any other agent, to do acts
within the scope of an apparent authority, and thus holds him out to the public as possessing power to do those
acts, the corporation will, as against any one who has in good faith dealt with the corporation through such
agent, be estopped from denying his authority; and where it is said if the corporation permits' this means the
same as 'if the thing is permitted by the directing power of the corporation.
We note that the petitioners are not complete strangers entering into a contract with respondent GSIS for the first
time. There was an earlier contract to sell the same properties to the petitioners. That contract was perfected and
there had been partial compliance with its terms. The transaction now under question in this case merely referred
to the curing of certain defects which led to the cancellation of the earlier contract by GSIS. Under the peculiar
circumstances of this case, therefore, the acceptance of the petitioners' letter-proposal by Mr. Roman Cruz, Jr., the
person with authority to do so, and his order to his subordinates to stop the bidding so that they could first discuss
the matter with him, created an agreement of binding nature with the petitioners.
WHEREFORE, the decision and resolution of the Intermediate Appellate Court subject of the instant petition for
review on certiorari are hereby SET ASIDE. The conditional sale entered into between public respondent GSIS
and private respondents Luz and Edilberto Tagle is declared NULL and VOID for being contrary to public policy.
The prayer of petitioners for the repurchase of the subject property in an amount equal to the amount offered by
private respondents and to retain ownership and possession of the disputed property is GRANTED.
SO ORDERED.
Feria (Chairman), Fernan and Alampay, JJ., concur.
Cruz, J., concurs in the result.
G.R. No. L-24787 February 22, 1974
TUMIPUS MANGAYAO AND GUIMANDA BUBUNGAN, petitioners,
vs.
HONORABLE DOROTEO DE GUZMAN, SANTAY LASUD, AND GUINTANA CIA
LASUD, respondents.
Ernesto Q. Organo for petitioners.
Ceniza, Imbing and Bersales for respondents.
FERNANDO, J.:
A simple and bare recital of the undisputed facts reveals unmistakably the jurisdictional infirmity of the challenged
actuation of respondent Judge of the Court of First Instance of Zamboanga del Sur. Petitioners after obtaining a
judgment in their favor in a previous case in a lower court and having such decision affirmed on appeal by this
Court were sued in the sala of respondent Judge on the very same matter thus conclusively disposed of. What is
worse, respondent Judge would restrain the execution of a judgment of this Court no less already final and
executory. Petitioners had no recourse but to institute this certiorari proceeding. They were right in doing so.
Their plea must be granted.
Petitioners are non-Christian Filipinos of the Subano tribe. They filed on March 21, 1960 an action for the
recovery of property and declaration of nullity of contract against respondents Santay Lasud and Guintana Cia
Lasud in the Court of First Instance of Zamboanga del Sur, docketed as Civil Case No. 575. They obtained a
decision in their favor, affirmed on appeal by this Court on May 29, 1964. The decision became final and
executory on October 5, 1964. Then on April 1, 1965, petitioners were by virtue thereof placed in possession of
the property in question private respondents being reimbursed likewise in accordance therewith, in the sum of five
thousand pesos. There was in the meanwhile an action by private respondents for the annulment of such judgment,
notwithstanding its having been affirmed by this Court and becoming final and executory. Respondent Judge
surprisingly issued an order restraining petitioners Tumipus Mangayao, and Guimanda Bubungan to desist from
executing or causing the execution of the decision in Civil Case No. 575.
It is already apparent why on such a showing this Court immediately issued a resolution requiring respondents to
answer and granting the writ of preliminary injunction prayed for. The answers were duly forthcoming, both from
respondent Judge and private respondents. As was to be expected, no valid issue could be raised as to the legal
question involved on the above facts. The situation presented is that of a judgment final and executory, from this
Court no less, being sought to be thwarted by private respondents. What was indeed surprising was the receptivity
of respondent Judge to such an unwarranted move. To give a semblance of deceptive plausibility, private
respondents could only surmise in their answer that the case before respondent Judge "was very much open for
presentation of proof with respect to the other issues, among which were the question of indefeasibility of title,
unenforceability of contract under the Statute of Frauds; the issue of whether the transaction was a sale or
mortgage; prescription of action; intervention of the rights of an innocent purchaser for value, ... ."
It is much too clear then, that there is a fatal flaw in this attempt, without the least color of support in law, to
reopen a matter conclusively and finally determined by this Tribunal itself. To repeat, we find for petitioners.
1. The well-settled doctrine of the law of the case ought to have cautioned respondent Judge against the step he
took. The latest case in point as of the time the order complained of was issued is Kabigting v. Acting Director of
Prisons, a 1962 decision. As emphasized by the ponente, the then Justice, now Chief Justice, Makalintal: "It need Zamboanga del Sur" for annulment of judgment with preliminary injunction filed by private respondents Santay
not be stated that the Supreme Court, being the court of last resort, is the final arbiter of all legal questions Lasud and Guintana Cia Lasud. The writ of preliminary injunction issued by this Court by virtue of its resolution
properly brought before it and that its decision in any given case constitutes the law of that particular case. Once of September 10, 1965 is made permanent. With costs against respondents.
its judgment becomes final it is binding on all inferior courts, and hence beyond their power and authority to alter
or modify. If petitioner had any ground to believe that the decision of this Court in Special Proceeding No. 12276 Zaldivar (Chairman), Barredo, Antonio, Fernandez and Aquino, JJ., concur.
should further be reviewed his remedy was to ask for a reconsideration thereof. In fact he did file two motions for
that purpose, both of which were denied. A new petition before an inferior court on the same grounds was
unjustified. As much, indeed, was clearly indicated by this Court in its resolution of April 3, 1959, hereinabove
reproduced in its entirety. The import of the resolution is too plain to be misunderstood." So it has been from
1919, when in Compagnie Franco-Indochinoise v. Deutsche-Australische Dampschiffs Gesellschaft, this Court, [G.R. No. 88788. September 4, 1992.]
through Justice Street, categorically declared that a decision that has become the law of the case "is not subject to
review or reversal in any court." What is more, in 1967, there is a reaffirmation of the doctrine by this Tribunal RESTITUTO DE LEON, Petitioner, v. COURT OF APPEALS, JUANITA RAMOS and
in People v. Olarte, where it was stress by Justice J.B.L. Reyes that a ruling constituting the law of the case, "even MAXIMO PEREZ, Respondents.
if erroneous, ... may no longer be disturbed or modified since it has become final ... ." Then, in Sanchez v. Court of
Industrial Relations, promulgated in 1969, there is the pronouncement that the law of the case "does not apply Magtanggol C. Gunigundo for Petitioner.
solely to what is embodied in [this Court's] decision but likewise to its implementation carried out in fealty to what
has been ... decreed." What was done by respondent Judge appears to be both clearly inexplicable and Nuel P. Roxas, Jr. for Respondents.
unjustifiable.

2. There is another aspect that militates as strongly against the actuation of respondent Judge. Had he take the
trouble of carefully going over our 1964 decision in Mangayao v. Lasud, which is the law of this case, it could not
SYLLABUS
have escaped his attention that Justice J.B.L. Reyes as ponente, after noting the plain and explicit provision in the
1. CIVIL LAW; PUBLIC LAND ACT; PROHIBITIVE FIVE (5) YEAR ON ALIENATION AND
Administrative Code and the Public Land Act requiring the approval of the authorities concerned to deeds of sale
ENCUMBRANCE; SALE OF LAND WITHIN PERIOD, NULL AND VOID; SALE NOT SUBJECT TO
by illiterate non-Christians, as petitioners in this case, continued in this wise: "The plain text of both law clearly
RATIFICATION NOR PRESCRIPTION. — Deeds of sale of patented lands, perfected within the prohibited five
imports that non-approved conveyances and encumbrances of realty by illiterate non-Christians (which appellees
(5) year period are null and void (Sec. 124, Public Land Act). No title passed from the Egaos to Marfori which
are admitted to be) are not valid, i.e., not binding or obligatory; they are ab initio void, as correctly held by the
could be validly transferred to herein respondents Bontilao and Dignos. Nemo dat quod non habet (nobody can
appealed decision. The approval of the executive authority is not in the nature of a ratification of a defective
dispose of that which does not belong to him). (Egao v. Court of Appeals, 174 SCRA 484) . . . [W]e have
conveyance; such approval is an essential requisite for its validity, and without it the proposed contract is
consistently ruled that a sale of the homestead within the 5-year prohibitive period is void ab initio and the same
absolutely void or inexistent. To hold the contract as merely voidable, i.e., as operative and binding if not
cannot be ratified nor can it acquire validity through the passage of time. (Agustino v. Court of Appeals, 170
disapproved, would not only do violence to the text of the statutes that requires executive approval, and not
SCRA 620)
disapproval, but would nullify the obvious intent of the statute to guard the patrimony of illiterate non-Christians
from those who are inclined to prey upon their ignorance or ductility (Porkan vs. Yatco, 70 Phil. 161; Porkan vs.
2. ID.; ID.; ID.; PURPOSE. — The restrictions and qualifications attached to every alienation of these lands are
Navarro, 73 Phil. 698; Madale vs. Sa Raya, 49 Off. Gaz. 536), since it is not to be expected that the illiterate non-
mandatory, with the primordial aim to preserve land grants to the family of the applicant for free patent.
Christian who signs away his real property for lack of instructions and discrimination, would thereafter be sharp
(Vallangca v. Court of Appeals, 173 SCRA 42) The provision of the law which prohibits the sale or encumbrance
enough to ask the executive authority to refuse approval of his contract; nor would the literate buyer be at all likely
of the homestead within five years after the grant of the patent is mandatory, the purpose of the law being to
to do so. The net result of appellants' 'voidable conveyance' theory, therefore, would be that the illiterate non-
promote a definite public policy, which is to preserve and keep in the family of the patentee that portion of the
Christian could be stripped of his immovable just as if the protective statutes heretofore quoted had not been
public land which the State has gratuitously given to them. (Republic v. Court of Appeals, 171 SCRA 721)
enacted at all." Respondent Judge thus did manifest a failure to abide not only by a final decision of this Court, but
by the clear policy of the law given expression in such vigorous and forthright language by Justice J.B.L. Reyes.
3. LABOR AND SOCIAL LEGISLATION; LANDED ESTATES; PROHIBITIVE FIVE (5) YEAR PERIOD ON
When it is further considered that the unrest in that region of the Philippines is partly attributed to the exploitation
ALIENATION AND ENCUMBRANCE ON PUBLIC LANDS, APPLICABLE THERETO; CASE AT BAR. —
of the poor and the oppressed perpetrated by those with means, irrespective of the faith that they profess, it
While these cases referred to homestead and free patents, we do not see why the above doctrine should not also
becomes even more manifest why respondent Judge must be taken to task. The trend in our fundamental law set
apply to the case at bar. The reason for the distribution and sale of the Buenavista Estate was also to promote the
forth in general language in the 1935 Constitution by the adoption of the social justice principle, made more
distribution of land for the landless conformably to the constitutional intent.
explicit in the present Constitution is, to repeat aphorism of the late President Magsaysay, that "he who has less in
life should have more in law." Independently then of the applicability of the law of the case doctrine, the petition
4. CIVIL LAW; PUBLIC LAND ACT; REVERSION OF PUBLIC LAND GRANT, A MATTER BETWEEN
is meritorious.
THE STATE AND THE GRANTEE. — A private individual may not bring an action for reversion or any action
which would have the effect of cancelling a free patent and the corresponding certificate of title issued on the basis
WHEREFORE, the writ of certiorari is granted and the order of the lower court of April 29, 1965 for the issuance thereof, with the result that the land covered thereby will again form part of the public domain, as the Solicitor
of a preliminary injunction is nullified and set aside. Respondent Judge, or whoever is acting in his place, is General or the officer acting in his stead may do so. (Egao v. Court of Appeals, supra) [T]he forfeiture of a
directed to dismiss Civil Case No. 798 of the Court of First Instance of Zamboanga del Sur entitled, "Santay Lasud homestead is a matter between the State and the grantee or his heirs, and that until the State had taken steps to
and Guintana Cia Lasud v. Mangayao, Bubungan, The Development Bank of the Philippines and the Province of annul the grant and asserts title to the homestead the purchaser is, as against the vendor or his heirs, no more
entitled to keep the land than any intruder. (Acierto, Et. Al. v. De los Santos, Et Al., 95 Phil. 887) [W]hen a grant
of land is made by the government, the question of its validity is a matter between the grantor and the grantee, and
unless the point is raised by the Government and the grant is set aside, a third person cannot question the legality
of the concession. (Gacayan v. Leaño, 121 SCRA 260)
5. ID.; ID.; ID.; HEIR, BASED ON PUBLIC POLICY, SHOULD BE ALLOWED. — On the other hand, no less
than Manresa has expressed the contrary view, based on the public policy that an heir, like the herein petitioner,
cannot be prevented from inheriting property rightfully belonging to his predecessor.
6. REMEDIAL LAW; EVIDENCE; FINDINGS OF FACT OF THE TRIAL COURT, GENERALLY UPHELD
ON APPEAL; CASE AT BAR. — It is only fair, that the private respondents allowed to at least recover the
purchase price of the land, with legal interest from the time of the execution of the Tuluyang Bilihan until the
refund is actually made. This ruling is based on the findings of the lower court that the said instrument, although
deficient for lack of the required consent, was validly executed. We shall support this factual finding because the
petitioner was rather ambivalent in assailing the authenticity of the "Tuluyang Bilihan." At first he doubted its
genuineness because it was only thumbprinted and not signed by Maria de los Santos. On appeal, he alleged that
the contents of the instrument should have been explained to her because she was illiterate.
DECISION
CRUZ, J.:
The petitioner is challenging the purported sale to the private respondents of two parcels of land which he claims
is his own by right of inheritance.
The said properties were part of the Buenavista Estate, which had been purchased by the Republic of the
Philippines for distribution among landless tenants and farmers. On April 1, 1955, Lot No. S-117 thereof, covering
over 14,200 square meters, was sold to Manuel de Leon by the Department of Agriculture on behalf of the
Republic. On August 5, 1969, Lot 43 thereof, consisting of 11,847 square meters, was also sold by the Republic,
through the Land Authority, to the heirs of annulled Leon, represented by the herein petitioner, his grandson.
The first Deed of Sale carried the following limitation on the disposition of the land: chanrob1es virtual 1aw library
1. That it shall not be sold, assigned, encumbered, mortgaged or transferred, within the period of five (5) years
from the date hereof without first obtaining the written consent of the Secretary of Agriculture and Natural
Resources.
2. That except by hereditary succession, it shall not be conveyed, transferred or assigned in favor of any person
who is not landless and disqualified to acquire or own land in the Philippines.
The second sale was subject to a similar condition, thus: chanrob1es virtual 1aw library
1. . . .
2. That except by hereditary succession it shall not be subdivided, sold or in any manner transferred or
encumbered, within the period of FIFTEEN (15) years from the date of execution hereof, without first obtaining
the written consent of Governor of the Land Authority and only to persons who are qualified to purchased said
land under Commonwealth Act No. 539, Republic Act No. 1162, as amended, Republic Act No. 1400 as amended
and/or Republic Act No. 3844 or to government banking institutions or agencies or to any private banking
institutions.
On July 24, 1969, the herein private respondents filed a complaint against the petitioner for partition of the lands
and accounting in the Court of First Instance of Bulacan. They alleged that they had bought 1/2 of the lands from
Maria de los Santos, the widow of Manuel de Leon, by virtue of a "Tuluyang Bilihan" dated March 18, 1959. 1
She had filed to deliver possession to them until her death on February 5, 1960. The petitioner, who had succeeded
her in the lands, had resisted their demands for accounting of the income from the said properties.
In his answer, the petitioner averred that the subject properties belonged to him as the sole heir of Manuel de Leon.
The alleged "Tuluyang Bilihan" was a nullity because Maria de los Santos had no authority to convey the
properties during the prohibited period without the written consent of the appropriate authorities.
After trial, Judge Benigno M. Puno sustained the private respondents in a decision dated April 15, 1977. 2 This
was affirmed on appeal by the respondent court on February 16, 1989, and reconsideration was denied on June 15,
1989.
The Court of Appeals agreed that the "Tuluyang Bilihan" was genuine and valid and that the alleged lack of the
stipulated written consent could be invoked only by the Republic of the Philippines and not by the petitioner. He
was not a party to the "Tuluyang Bilihan." Besides, the said stipulations were not applicable to cases of hereditary
succession, and De los Santos, who sold the lands, was the heir of her husband, Manuel de Leon.
The petitioner has come to this Court for relief. Specifically, he claims that the Court of Appeals should not have
recognized the "Tuluyang Bilihan" as valid because the contents thereof were not explained to Maria de los
Santos. He repeats his argument that the sale, assuming it was not simulated, violated the conditions above-quoted
and was therefore void. He also insists that the complaint was barred by laches or prescriptions and that he should
not have been prevented from invoking the dead man’s statute.
We hold first of all that the stipulations in the first deed of sale in favor of Manuel de Leon were binding on his
heirs, who were also bound directly this time, by the similar stipulations in the second deed of sale.
The purpose of these stipulations was to keep within the family the property which the government had sold to the
tenant or farmer for a minimum cost to enable him to acquire his own land. Hence, it was necessary for Maria de
los Santos, before selling the subject properties to the private respondents, to first secure the written consent to
such sale of the Secretary of Agriculture and Natural Resources (in the case of the first lot) and of the Governor of
the Land Authority (in the case of the second lot).
The only exception to the said conditions is when the land is acquired by or transferred to another person by
hereditary succession. Thus, when the lands were inherited by Maria de los Santos as the surviving spouse of
Manuel de Leon, there was no need for such written consent. But such consent was still necessary when, as
transferee of the properties, she later sold them to the private respondents. The lands were transferred to the private
respondents by virtue of the "Tuluyang Bilihan" and not by hereditary succession. To be valid, therefore, the sale
needed the written consent of the above-named officials. chanrobles law library
There is no pretense that such consent was ever obtained.
We disagree with the respondent court that because Maria de los Santos acquired the subject lands by hereditary
successions she was thereby released from the conditions of the sales made on April 1, 1955, and August 5, 1969.
There is no reason why, as heir, she should be treated less strictly than her predecessor-in-interest in the
disposition of the lands during the prohibited period.
The Court has held as follows: chanrob1es virtual 1aw library

It is undisputed that Free Patent No. 298112 was issued to petitioner Apolonio Egao over Lot No. 662 on 12
August, 1965. Sec. 118 of Commonwealth Act No. 141, as amended, prohibits the alienation or encumbrance,
within a period of five (5) years from the date of issuance of the patent, of lands acquired under free patent or
homestead. Assuming, arguendo, the authenticity of the Deeds of Sale executed by the Egaos in favor of Marfori
over portions of Lot No. 662 (the land in question), dated 7 May 1964, 14 January and 6 October 1965, it clearly
appears that all deeds were executed within the prohibited period of five (5) years. As correctly found by the
appellate court —
Section 124 of the Public Land Act provided (sic) that any acquisition, conveyance, alienation, transfer or other
contract made or executed in violation of any of the provisions of Sections 118, 121, 120, 122 and 123 of this Act
shall be unlawful, null and void from its execution and shall produce the effect of annulling and canceling the
grant, title, patent or permit originally issued, recognized or confirmed, actually or - prescriptively, and cause the
reversion of the property and its improvements to the state.
x           x          x
Deeds of sale of patented lands, perfected within the prohibited five (5) year period are null and void (Sec. 124,
Public Land Act). No title passed from the Egaos to Marfori which could be validly transferred to herein
respondents Bontilao and Dignos. Nemo dat quod non habet (nobody can dispose of that which does not belong to
him).
. . . The restrictions and qualifications attached to every alienation of these lands are mandatory, with the
primordial aim to preserve land grants to the family of the applicant for free patent.
. . . The provision of the law which prohibits the sale or encumbrance of the homestead within five years after the
grant of the patent is mandatory, the purpose of the law being to promote a definite public policy, which is to
preserve and keep in the family of the patentee that portion of the public land which the State had gratuitously
given to them.
. . . [W]e have consistently ruled that a sale of the homestead within the 5-year prohibitive period is void ab initio
and the same cannot be ratified nor can it acquire validity through the passage of time.
While these cases referred to homestead and free patents, we do not see why the above doctrine should not also
apply to the case at bar. The reason for the a distribution and sale of the Buenavista Estate was also to promote the
distribution of land for the landless conformably to the constitutional intent. While it is true that the lots were not
granted outright or for free, the purchase price thereof was intentionally minimal, precisely to enable the buyers to
acquire the lots under the easiest terms. Thus, in the dispute before us, the first lot was sold for only P177.50 and
the second lot for only P236.94. The two lots covered a total area of more than two and a half hectares.
In holding that only the Republic of the Philippines could question the validity of the "Tuluyang Bilihan" on the
ground of non-compliance with the consent stipulations, the Court of Appeals is supported by ample
jurisprudence. Thus:
Furthermore, a private individual may not bring an action for reversion or any action which would have the effect
of canceling a free patent and the corresponding certificate of title issued on the basis thereof, with the result that
the land covered thereby will again form part of the public domain, as the Solicitor General or the officer acting in
his stead may do so.
. . . [T]he forfeiture of a homestead is a matter between the State and the grantee or his heirs, and that until the
State had taken steps to annul the grant and asserts title to the homestead the purchaser is, also against the vendor
or his heirs, no more entitled to keep the land than any intruder.
. . . [W]hen a grant of land is made by the government, the question of its validity is a matter between the grantor
and the grantee, and unless the point is raised by the - Government and the grant is set aside, a third person cannot
question the legality of the concession.
On the other hand, no less than Manresa has expressed the contrary view, based on the public policy that an heir,
like the herein petitioner, cannot be prevented from inheriting property rightfully belonging to his predecessor.
In any event, as the "Tuluyang Bilihan" was null and void ab initio, ownership of the disputed lands was not
transferred to the private respondents but remained with Maria de los Santos. The Republic of the Philippines, if
not the petitioner, may still ask for the reversion of the properties to the State for violation of the conditions in the
deeds of sale. Meanwhile the petitioner would have preferential rights of possession thereover vis-a-vis the private
respondents, who rely only on the void "Tuluyang Bilihan."  chanrobles law library : red
Thus, as we held in the Egao cases: chanrob1es virtual 1aw library
While the government has not taken steps to assert its title, by reversion, to a homestead sold on violation of the
Public Land Act, the vendor or his heirs is better entitled to the possession of the land, the vendees being in no
better situation than any intruder.
It is only fair, however, that the private respondents be allowed to at least recover the purchase price of the land,
with legal interest from the time of the execution of the Tuluyang Bilihan until the refund is actually made. This
ruling is based on the findings of the lower court that the said instrument, although deficient for lack of the
required consent, was validly executed.
We shall support this factual finding because the petitioner was rather ambivalent in assailing the authenticity of
the "Tuluyang Bilihan." At first he doubted its genuineness because it was only thumbprinted and not signed by
Maria de los Santos. On appeal, he alleged that the contents of the instruments should have been explained to her
because she was illiterate.
In view of the above resolutions, it is no longer necessary to examine the other objections raised in the petition.
WHEREFORE, the challenged decision of the Court of Appeals is REVERSED and a new judgment is rendered:
a) declaring the "Tuluyang Bilihan" dated March 18, 1959, null and void ab initio for violation of the conditions
stipulated in the Deed of Sale dated April 1, 1955, and the Deed of Sale dated August 5, 1969; b) recognizing the
petitioner’s preferential right to the possession of the subject properties, without prejudice to the right of the State
to ask for its reversion to it for violation of the conditions of the said Deeds of Sale; and c) requiring the petitioner
to refund to the private respondents the amount of P2,300.00, the consideration of the annulled "Tuluyang
Bilihan," with legal interest thereon from March 18, 1959, until it is fully paid. No pronouncement as to costs.
SO ORDERED.
Griño-Aquino, Medialdea and Bellosillo, JJ., concur.
G.R. No. L-31606 March 28, 1983
DONATO REYES YAP and MELITONA MARAVILLAS, petitioners,
vs.
 HON. EZEKIEL S. GRAGEDA, as Judge of the Court of First Instance of Albay and JOSE A.
RICO, respondents.
Jose P. Oira for petitioners.
Rodolfo A. Madrid for respondents.
GUTIERREZ, JR., J.:
We are asked in this petition to review the amended decision of the respondent court which declared as absolutely
null and void the sale of a residential lot in Guinobatan, Albay to a Chinese national and ordered its reconveyance
to the vendors thirty years after the sale inspite of the fact that the vendee had been a naturalized Filipino citizen
for fifteen years at the time.
We grant the petition. The questioned decision and the order amending it are reversed and set aside.
The facts are not disputed.
On April 12, 1939, Maximino Rico, for and in his own behalf and that of the minors Maria Rico, Filomeno Rico,
Prisco Rico, and Lourdes' Rico, executed a Deed of Absolute Sale (Annex 'A' to the complaint) over Lot 339 and a
portion of Lot 327 in favor of the petitioner Donato Reyes Yap who was then a Chinese national. Respondent Jose
A. Rico is the eldest son of Maximino Rico, one of the vendors in Annex 'A'.
Subsequently, the petitioner as vendee caused the registration of the instrument of sale and the cancellation of
Original Certificates of Title Nos. 29332 and 29410 and the consequent issuance in his favor of Transfer
Certificate of Title No. T-2433 covering the two lots subject matter of the Contract of Sale.
After the lapse of nearly fifteen years from and after the execution of the deed of absolute sale, Donato Reyes Yap
was admitted as a Filipino citizen and allowed to take his oath of allegiance to the Republic of the Philippines. He
was, thereafter, issued Certificate of Naturalization No. 7, File No. 19 of the Court of First Instance of Albay.
On December 1, 1967, the petitioner ceded the major portion of Lot No. 327 consisting of 1,078 square meters
which he acquired by purchase under the deed of sale in favor of his engineer son, Felix Yap, who was also a
Filipino citizen because of the Filipino citizenship of his mother and the naturalization of his father Donato Reyes
Yap.
Subsequently, Lourdes Rico, aunt and co-heir of respondent Jose A. Rico. sold the remaining portion of Lot 327 to
the petitioner who had his rights thereon duly registered under Act 496. Petitioner, Donato Reyes Yap, has been in
possession of the lots in question since 1939, openly, publicly, continuously, and adversely in the concept of
owner until the present time. The petitioner has one surviving son by his first marriage to a Filipino wife. He has
five children by his second marriage also to a Filipina and has a total of 23 grandchildren all of whom are Filipino
citizens.
The respondent court considered Section 5, Article XIII of the 1935 Constitution that "no private agricultural land
shall be transferred or assigned except to individuals, corporations, or associations qualified to acquire or hold
lands of the public domain in the Philippines" to be an absolute and unqualified prohibition and, therefore, ruled
that a conveyance contrary to it would not be validated nor its void nature altered by the subsequent naturalization
of the vendee.
The dispositive portion of the amended decision reads:
WHEREFORE, in view of all the foregoing, the Contract of Sale embodied in the 'Escritura de Compra Venta'
which is attached to the Complaint as Annex 'A', is hereby declared null and void ab initio and without any
legal force and effect.
The action to recover Lot 339 of the Cadastral Survey of Guinobatan, Albay, covered by Transfer Certificate
of Title No. T2433. and Lot 327 covered by the same Transfer Certificate of Title, is hereby granted to
plaintiff, upon payment of the consideration price of P150.00 and declaring plaintiff as the lawful owner and
entitled to the possession thereof.
Defendant Donato Reyes Yap is hereby ordered to produce his Transfer Certificate of Title No. T-2433 to the
Register of Deeds of Albay, so as to enable said office to make the due and proper annotations on said title as
well as in the original of the declaration of nullity as herein adjudged. Let Transfer Certificate of Title issued
to plaintiff, concerning said Lots 339 and 327 of the Cadastral Survey of Guinobatan, Albay.
COSTS AGAINST DEFENDANTS.
The rulings in Vasquez v.Leng Seng Giap et al. (96 Phil. 447) and Sarosa Vda. de Bersabia v. Cuenco (113 SCRA
547) sustain the petitioner's contentions. We stated in Sarosa Vda de Bersabia:
There should be no question that the sale of the land in question in 1936 by Epifania to Ong King Po was
inexistent and void from the beginning (Art. 1409 [7], Civil Code) because it was a contract executed against
the mandatory provision of the 1935 Constitution, which is an expression of public policy to conserve lands
for the Filipinos. Said provision reads:
Save in cases of hereditary succession, no private agricultural land shall be transferred or assigned except
to in. individuals, corporations, or associations, qualified to acquire or hold lands of the public domain.
Had this been a suit between Epifania and Ong King Po she could have been declared entitled to the litigated
land on the basis, as claimed, of the ruling in Philippine Banking Corporation vs. Lui She, reading:
... For another thing, and this is not only cogent but also important. Article 1416 of the Civil Code provides
as an exception to the rule on pari delicto that when the agreement is not illegal per se but is merely
prohibited, and the prohibition by the law is designed for the protection of the plaintiff, he may, if public
policy is thereby enhanced, recover what he has sold or delivered. ...
But the factual set-up has changed. The litigated property is now in the hands of a naturalized Filipino. It is no
longer owned by a disqualified vendee. Respondent, as a naturalized citizen, was constitutionally qualified to
own the subject property. There would be no more public policy to be served in allowing petitioner Epifania to
recover the land as it is already in the hands of a qualified person. Applying by analogy the ruling of this Court
in Vasquez vs. Giap and Leng Seng Giap & Sons:
 ... if the ban on aliens from acquiring not only agricultural but also urban lands, as construed by this Court
in the Krivenko case, is to preserve the nation's lands for future generations of Filipinos, that aim or
purpose would not be thwarted but achieved by making lawful the acquisition of real estate by aliens who
became Filipino citizens by naturalization.

Only recently, we had occasion to reiterate the above rulings in Vicente Godines v. Fong Pak Luen, et al. (G.R.
No. L-36731, January 27, 1983).

WHEREFORE, the amended judgment of the respondent court is hereby REVERSED and SET ASIDE. The
complaint is DISMISSED.

SO ORDERED.

Teehankee (Chairman), Melencio-Herrera, Plana, Vasquez and Relova, JJ., concur.