RESCISSIBLE CONTRACTS

Case: Onglenco vs. Ozaeta (70 Phil. 43)

This is a petition for certiorari for the contention of the petitioner that the CA erred in ruling
that the subject land’s sale should be annulled and that the respondents are not absolute
owners of the land but with the right to its immediate and peaceful possession.

The case was initially filed in the CFI of Tayabas by the petitioner against the respondents
praying that he be declared the sole owner and possessor of the subject land and that the sale
of it executed by the Provincial Sheriff of Tayabas by virtue of a writ of execution in Civil Case
3506 in the same court, conveying the aforesaid land to the respondents, be annulled.

The land in question was owned to Gregorio Hernandez and Paciencia Ona. After Hernandex’
death, Ona and her children sold the same to spouses Villanueva and Macalalag. The latter
defaulted in paying their balance that lead the former to file a case (Civil Case 3506) against the
spouses. The judgment was affirmed on appeal on February 2nd 1935.

Further, the petitioner alleged that the respondents sold the subject land to them in January
11th 1935 and its deed of conveyance was provided in June 22nd of the same year. When the
subject land was the subject of execution in Civil Case 3506, the petitioners presented a Third-
Party Claim. On the other hand, the respondents claimed that they acquired interest through
pacto de retro for the failure of the original owners to exercise their right of redemption and
that they acquired the subject property through the execution of July 29, 1935 in Civil Case
3506, with the Shereff’s sale being definitive on September 7, 1936 in default of redemption by
the redemption debtors. It was registered in the Office of the Register of Deeds on September
14, 1936.

The Court of Appeals found and so held that, as the alleged sale from Villanueva and Macalalag
to the petitioner took place on January 11 1935, or subsequent to the judgment against his
FACTS vendors in civil case No 3506, it was presumptively fraudulent.

ISSUE/S Whether the sale can be rescinded .

Article 1380.

LAWS Contracts validly agreed upon may be rescinded in the cases established by law. (1290)

RULING No. The sale cannot be rescinded. Contracts capable of rescission are those validly entered into
S (Art. 1290. Civil Code), as an action to rescind is founded upon and presupposes the existence
 of a contract (Tan Chay Heng vs. West Coast Life Insurance Co., 51 Phil., 80)

The Court of Appeals held that the sale is to be presumed fraudulent for having been executed
posterior to the entry of the judgment against the petitioner’s supposed vendors in civil case
No. 3506, evidently in pursuance of the provisions of article 1297 of the Civil Code. But as there
is nothing else in the appealed decision to indicate that rescission was contemplated under
article 1291 of said Code, the aforesaid presumption must have been considered merely as one
of the grounds for holding that the sale is fictitious.

Case: Goldenrod vs. CA (299 SCRA 141)

FACTS

Baretto and Sons owned forty three parcels of registered land which were mortgaged with UCPB. In
1988, Baretto and Sons have not paid its obligation with UCPB, making foreclosure of the mortgage
forthcoming.

Goldenrod, Inc. offered to buy the property from Baretto and Sons and issued Php1,000,000.00 as
earnest money for their purchase. The parties agreed that the former will settle Baretto and Sons’
obligation with UCPB for 24.5 Million Pesos, with the deadline set by the bank, and 20 Million Pesos as
the balance for the purchase price of the property.

Goldenrod failed to pay UCPB the 24.5Million Php loan obligation of Baretto Realty on the deadline set
for the payment. They asked for 3 extensions with the second and third requests for extension denied
by the bank.

Upon reconsolidation of the properties (43 titles into 2 lots), Baretto and Sons claimed that they
incurred expenses of 250,000php in the reconsolidation process.

Goldenrod through their agent, sent a letter to Anthony Que, informing him of their inability to purchase
the property due to UCPB’s denial of their request for payment extension. In the same letter, the agent
also demanded the refund of the earnest money. The next day, Baretto Realty sold Lot 2 of the
consolidated lots to AsiaWorld for 23Million PHP. The lot was transferred to the ownership of AsiaWorld
by way of “dacion”.
After several demands by the petitioner that their earnest money be returned which were unheeded,
Golderod filed a complaint with the RTC of Manila against private respondents for the return of
1,000,000PHP and the payment of damages including lost interests. Respondents contended that it was
the parties’ agreement that the earnest money would be forfeited to answer for losses and damages
that might be suffered by the latter in case of failure by petitioner to comply with the terms of their
purchase agreement. The RTC ruled in favor of Goldenrod. Baretto and Sons filed for the appeal which
was held in their favor, thus this SC case.

ISSUE/S

Whether the 1,000,000PHP given by GoldenRod as earnest money to Baretto and Sons be forfeited in
the rescission of their contract.

LAWS

Article 1385.

Rescission creates the obligation to return the things which were the object of the contract, together
with their fruits, and the price with its interest; consequently, it can be carried out only when he who
demands rescission can return whatever he may be obliged to restore. Neither shall rescission take
place when the things which are the object of the contract are legally in the possession of third persons
who did not act in bad faith. In this case, indemnity for damages may be demanded from the person
causing the loss. (1295)

RULINGS

No. The 1,000,000Php earnest money given by Goldenrod to Baretto and Sons cannot be forefeited. It is
discussed in Article 1385 that rescission creates the obligation to return the things which were the
object of the contract, together with their fruits, and the price with its interest.

Whenever earnest money is given in a contract of sale, it shall be considered as part of the purchase
price and as proof of the perfection of the contract. Petitioner clearly stated without any objection from
private respondents that the earnest money was intended to form part of the purchase price. It was an
advance payment which must be deducted from the total price. The parties could not have intended
that the earnest money would be forfeited should the buyer fail to pay the balance of the price,
especially in the absence of a clear and express agreement.

Respondents did not give any objection to the rescission of the agreement. They even sold Lot 2 of the
consolidated properties to AsiaWorld, the day after Anthony Que (of Baretto Realty) received the letter
regarding the rescission and the refund request of the earnest money by the petitioner. Moreover, the
right to rescind contracts is not absolute and is subject to scrutiny and review by the proper court. We
held further, in the more recent case of Adelfa Properties, Inc. v. Court of Appeals, rescission of
reciprocal contracts may be extrajudicially rescinded unless successfully impugned in court. If the party
does not oppose the declaration of rescission of the other party, specifying the grounds therefor, and it
fails to reply or protest against it, its silence thereon suggests an admission of the veracity and validity of
the rescinding party’s claim.

By virtue of the extrajudicial rescission of the contract to sell by petitioner without opposition from
private respondents who, in turn, sold the property to other persons, private respondent BARRETTO
REALTY, as the vendor, had the obligation to return the earnest money of P1,000,000.00 plus legal
interest from the date it received notice of rescission from petitioner, i.e., 30 August 1988, up to the
date of the return or payment. It would be most inequitable if respondent BARRETTO REALTY would be
allowed to retain petitioner’s payment of P1,000,000.00 and at the same time appropriate the proceeds
of the second sale made to another.

VOIDABLE

Case: Katipunan vs. Katipunan, Jr. (375 SCRA 199)

FACTS

PETITIONER: Miguel Katipunan, Inocencio Valdez, Edgardo Balguma and Leopoldo Balguma, Jr.

RESPONDENT: Braulio Katipunan, Jr.

PONENTE: Sandoval-Gutierrez, J.

This is a petition for review on certiorari assailing the decision of the CA in Braulio Katipunan, Jr. vs.
Miguel Katipunan, Inocencio Valdez, Atty. Leopoldo Balguma, Sr., Edgardo Balguma and Leopoldo
Balguma, Jr. which reversed the decision of the RTC of Manila for the annulment of a Deed of Absolute
Sale.

Braulio Katipunan, Jr. owns a 203 square meter lot and a five-door apartment in San Miguel, Manila and
is registered under his name in the Registry of Deeds in Manila.

Braulio, herein respondent, was assisted by his brother, petitioner – Miguel Katipunan, into entering a
Deed of Absolute Sale with brothers Edgardo Balguma, Leopoldo Balguma, Jr., represented by Atty.
Leopoldo Balguma, Sr. – for the subject property for a consideration of 187,000PHP.

Respondent filed a complaint for the annulment of the Deed of Absolute Sale and averred that the
petitioners convinced him to work abroad and that through insidious words and machinations, they
made him sign a document that he thought was a contract of employment. This document turned out to
be the Deed of Absolute Sale. He also claimed that he did not receive the consideration stated in the
contract. He argued that the petitioners, with evident bad faith, conspired with one another in taking
advantage of his ignorance. The RTC dismissed this complaint on grounds that the respondent failed to
prove his causes of action since he admitted that he obtained loans from the Balgumas, he signed the
Deed of Absolute sale and he acknowledged selling the property and that he stopped collecting rentals.

On the other hand, the CA gave credit to the testimony of Dr. Ana Marie Revilla, a psychiatrist at the UP-
PGH, as an expert witness – explaining that the respondent is slow in comprehension and has a very low
IQ. They ruled that the contract entered into by respondent and petitioners was voidable pursuant to
the provisions of Article 1390 of the NCC. The petitioners filed a MFR but was denied. Hence, this
petition.

ISSUE/S

Whether the contract entered into by Braulio Katipunan, Jr. and Atty Leopoldo Balguma, Jr. is voidable.

LAWS

Article 1390.

The following contracts are voidable or annullable, even though there may have been no damage to the
contracting parties:
(1) Those where one of the parties is incapable of giving consent to a contract;

(2) Those where the consent is vitiated by mistake, violence, intimidation, undue influence or fraud.

These contracts are binding, unless they are annulled by a proper action in court. They are susceptible of
ratification. (n)

RULINGS

Yes. The contract entered into by respondent and petitioners was voidable pursuant to the provisions of
Article 1390 of the NCC.

A contract of sale is born from the moment there is a meeting of minds upon the thing which is the
object of the contract and upon the price. This meeting of the minds speaks of the intent of the parties
in entering into the contract respecting the subject matter and the consideration thereof. Thus, the
elements of a contract of sale are consent, object, and price in money or its equivalent. Under Article
1330 of the Civil Code, consent may be vitiated by any of the following: (a) mistake, (2) violence, (3)
intimidation, (4) undue influence, and (5) fraud. The presence of any of these vices renders the contract
voidable.

The circumstances surrounding the execution of the contract manifest a vitiated consent on the part of
respondent. Undue influence was exerted upon him by his brother Miguel and Inocencio Valdez
(petitioners) and Atty. Balguma. It was his brother Miguel who negotiated with Atty. Balguma. However,
they did not explain to him the nature and contents of the document. Worse, they deprived him of a
reasonable freedom of choice. It bears stressing that he reached only grade three. Thus, it was
impossible for him to understand the contents of the contract written in English and embellished in legal
jargon.

Case: Petrona Tacalinar , Plaintiff- appellant, (For Art 1393 JN Robillon)

vs.

Lorenzo Corro Y Manalili, Defendant- appellees

G.R. No. 11040 Sept. 7, 1916 (Torres)

FACTS

On July 9, 1913, counsel for the widow and children of Leoncio Alfon y Visitacion filed a written
complaint in the Court of First Instance of Occidental Negros alleging as a cause of action that Leoncio
Alfon, during his lifetime, was the owner in fee simple of an estate known as the “Santo Niño
Hacienda ,” situated in Guadalupe, Calatrava, now pueblo of San Carlos, Occidental Negros, (together
with a steam engine, grist mill and certain dwelling houses for laborers) the metes and bounds of which
estate are set forth in paragraph 3 of the complaint; that in the year 1897 Leoncio Alfon, through his
daughter Asuncion Alfon, leased the said Santo Niño Hacienda to Lorenzo Corro y Manalili for the sum of
P1,500, the lessee Corro taking possession of the said leased property in that year and holding the same
until 1909 when he unlawfully sold it to his codefendant Juan Perez who was in possession thereof at
the time of the filing of the complaint; that the lessee Lorenzo Corro had paid only the sum of P1,500 as
the rent for the first year, and had not paid the rent for the subsequent years, notwithstanding the
demands made upon him by the plaintiffs; that the latter had suffered damages in the amount of
P10,000, as rents unpaid by the said lessee during the last seven years of the lease; and that the present
possessor of the said hacienda , Juan Perez, refused to deliver to the plaintiffs the possession thereof
and to pay them the amount of damages, P6,000, which by his conduct he had caused to the plaintiffs.
The latter’s counsel therefore prayed the court to render a judgment restoring the ownership and
possession of the Santo Niño Hacienda to the plaintiffs and ordering Juan Perez y Gonzalez to deliver
and to return the possession of the said hacienda , in addition to the payment of the damages
demanded; and ordering Lorenzo Corro to pay to the plaintiffs the sum of P10,000 as damages.

defendant, Juan Perez y Gonzalez, denied each and all of the allegations of the foregoing complaint and
in special defense set forth that the Santo Niño Hacienda , measuring 40 hectares, as part of other
conjugal partnership property, belonged to Lorenzo Alfon and his wife, Petrona Tacalinar, the first of
whom about the year 1898 had broken in jail and was a fugitive from justice; that in the said year 1898
his wife, Petrona Tacalinar, through her daughter Asuncion whom she duly authorized for the purpose,
sold the said hacienda to Lorenzo Corro for the sum of P3,500; that the said Corro paid P2,000 in cash
and gave the vendor his promissory note for the balance of P1,500; that subsequently, on April 27, 1899,
the fugitive husband Leoncio Alfon approved and ratified the sale, collected from the wife of the
purchaser the sum of P800 on account of the promissory note for P1,500 and later on obtained the
balance of P700 in a draft drawn on the Compania General de Tabacos de Filipinas, which sums were
received by the said Leoncio Alfon, as attested by the receipts issued by him,

ISSUE/S

Whether or not it was a contract of absolute sale of the said hacienda to Corro. or sale with right to
repurchase should be declared as an equitable mortgage.

LAWS

Article 1393 Ratification may be effected expressly or tacitly. It is understood that there is a tacit
ratification if, with knowledge of the reason which render the contract voidable and such reason having
ceased , the person who has a right to invoke it should execute an act which necessarily implies an
intention to waive his rights.

Ruling

Article 1393 Ratification may be effected expressly or tacitly. It is understood that there is a tacit
ratification if, with knowledge of the reason which render the contract voidable and such reason having
ceased , the person who has a right to invoke it should execute an act which necessarily implies an
intention to waive his rights.

1. Although there may have been some defect in the contract of sale, by virtue of which the defendants
Corro and Samorro acquired the Santo Niño Hacienda , the subsequent approval made by its owner
Leoncio Alfon purged the contract of such defect.
2. The owner of the hacienda in question, may not have authorized any one, not even his wife and
children, to sell his property, yet after he was informed of the said conveyance, if instead of demanding
its annulment he proceeded to collect in installments the amount of the promissory note for P1,500,

3. The ratification or confirmation of a contract by the person in whose name the contract was made by
a third party who had no authority therefor, validates the act from the moment of its celebration, not
merely from the time of its confirmation, for the confirmation operates upon or applies to the act
already performed.
UNENFORCEABLE

Case: Abrenica vs Gonda et al (34 Phil 739) August 15, 1916

FACTS

This case was brought by the plaintiff to compel the defendants to return the two parcels of land
described in the complaint which he claimed were sold to the defendants under the right of repurchase
for seven years and for the sum of 75Php. Further, the plaintiff alleged that the defendant refused to
deliver the same when, upon the expiration of the period, mentioned, he is entitled to redeem the
subject parcels of land upon the payment of the amount agreed upon.

However, the plaintiff stated that the agreement for the sale with right of repurchase was done verbally
between him and Gonda (one of the defendants). When he was placed on the stand as a witness, he
testified at length and answered all the questions asked by his lawyer regarding the said
agreement/contract, including its details, the persons who witnessed it, the place it was made, and the
various other circumstances connected with its execution. The defendant’s counsel failed to raise an
objection to the examination. The defendant’s lawyer also challenged one of the questions as leading
and claimed another question was irrelevant. Moreover, he only moved to strike out all of the testimony
and statements given by the plaintiff when the examination was already terminated on the ground that
the period for the fulfillment of the contract exceeded one year and that it could not be proven except
by means of a written instrument. The lawyer also did a cross examination and asked several questions
relative to the plaintiff’s ownership of the parcels of land.

ISSUE/S

Whether the two parcels of land were sold under the right of repurchase by the plaintiff to the
defendant.

LAWS

Article 1405.

Contracts infringing the Statute of Frauds, referred to in No. 2 of article 1403, are ratified by the failure
to object to the presentation of oral evidence to prove the same, or by the acceptance of benefit under
them.

HOLDINGS

Yes. The two parcels of land were sold under the right of repurchase by the plaintiff to the defendant
with the seven year term for 75 php. This agreement, though verbally made is ratified by the failure of
the defendant’s party to object to the presentation of oral evidence to prove the same as expressed on
Article 1405 of the New Civil Code.
Moreover, the fact that the defendants’ counsel asked various cross-questions, both of the plaintiff and
of the other witness, in connection with the answers given by them in their direct examination, with
respect to particulars concerning the contract, implies a waiver on his part to have the evidence stricken
out.

No timely objection or protest was made to the admission of the testimony of the plaintiff with respect
to the contract; and as the motion to strike out said evidence came to late; and, furthermore, as the
defendants themselves, by the cross- questions put by their counsel for the witnesses in respect to said
contract, tacitly waived their right to have it stricken out, that evidence, therefore, cannot be considered
either inadmissible or illegal.

The plaintiff made use of his right to recover the property within the period stipulated by the contract
and which did not exceed ten years, and as he deposited with the clerk of the court the sum of P75, the
price of the purchase, in due time, the defendant is not entitled to oppose the recovery, and the said
parcels of land must be delivered to the plaintiff, even though they be in the possession of the other
defendant, Marcelino de Garcia, to whom they were sold by his codefendant Gonda, for the latter could
not sell them to De Gracia except under the condition that they could be repurchased by the plaintiff
within the said period of seven years.

CASE:BARTOLA M. VDA

vs.

CIRILO ENCARNACION

(Nachura) G.R. No. 168902 September 28, 2007

FACTS

On October 3, 1959, Teodoro Tirona, with the conformity of his wife, petitioner Bartola, ceded to
herein respondent, Cirilo Encarnacion, his one-half (1/2) undivided interest in the said land. The Deed of
Absolute Sale3stipulated: That I, TEODORO T. TIRONA, Filipino, of legal age, married to BARTOLA
MARTINEZ, and a resident of Kawit, Cavite, but temporarily staying at Quezon City, am the true and
absolute owner of one-half (1/2) undivided interest in that parcel of land located at Kawit, Cavite,
covered by Transfer Certificate of Title No. (T-13391) RT-1883 of the Office of the Register of Deeds for
the province of Cavite, “A parcel of land (Lot No. 965 of the Cadastral Survey of Kawit,(32,814) more or
less . On March 2, 1963, Benjamin Tirona conveyed his share of the parcel of land to respondent’s
father, Pastor Encarnacion. In the Deed of Absolute Sale,7 the parties had agreed:That I, BENJAMIN T.
TIRONA, of legal age, married to Cornelia Medina, and resident of Kawit, Cavite for and in consideration
of the sum of EIGHTEEN THOUSAND PESOS (P18,000.00), Philippine Currency, to me paid by Pastor
Encarnacion, also of legal age, Filipino, married to Jacinta Vales, and resident of Sta. Isabel, Kawit,
Cavite, do hereby SELL, TRANSFER, and CONVEY and by these presents have SOLD, TRANSFERRED and
CONVEYED unto said Pastor Encarnacion all my rights and interests consisting of one-half (1/2)
undivided share in a certain parcel of land, the other one-half (1/2) thereof being owned by Cirilo
Encarnacion, which is more particularly described as follows: A parcel of land of 32, 814 (Lot No. 965 of
the Cadastral Survey of Kawit),

In the early 1960s, petitioner Cristina Dacanay, daughter of Teodoro, allegedly came to know of his
father’s ownership of two adjacent lots, Lot Nos. 965 and 966, upon seeing a Kasunduan sa Hati-Hatian
executed in 1956.10 She then confronted respondent regarding his occupation of Lot No. 966 and told
him that what was conveyed to him was only Lot 965. She added that they (petitioners) will conduct a
survey of the tract of land.11Unfazed, respondent asserted that the said lot was included in the “more
or less” phrase stated in the deeds of sale executed in their favor and that he would just see them in
court (“Magkita na lang tayo sa korte”).12Petitioners, however, did not cause the survey of the
property.

After trial, the MTC declared the plaintiffs in the ejectment case as the lawful owners of Lot No. 966. It
found no merit in respondent’s contention that the parties in the two separate sales actually intended
to convey Lot No. 966.17 On appeal, however, the Court of First Instance (CFI) of Cavite dismissed the
Complaint. It ruled that the MTC had no jurisdiction to try the case since respondent raised a genuine
issue of ownership that was “not merely frivolous but on the contrary appears to be meritorious.”18 The
plaintiffs, through counsel, then elevated the case to the Court of Appeals, which, on November 13,
1975, denied the Petition for Review for failure to file the same within the reglementary period.19
Petitioners failed to file a motion for reconsideration of the CA resolution, and thus, the CFI decision
became final and executory on December 9, 1975.

on October 2, 1995, petitioners filed the instant case, docketed as Civil Case No. 1193-1195, for accion
publiciana against respondent. In the Complaint,24 petitioners, except for brothers Teodoro and
Gallardo D. Tirona, who only succeeded to the rights of their father, alleged this time that they are the
registered owners of Lot No. 966, which is now covered by TCT No. T-81513. Claiming that respondent
has been in possession of Lot No. 966 since 1959 without any title thereto or right to occupy the same,
petitioners prayed, thus: respectfully prayed of this Honorable Court that judgment issue to pay rentals
from period respondents occupied said land until judgment is made.

After trial, the RTC dismissed the Complaint on April 6, 2000: this Court is not inclined to award any
damages nor attorney’s fees and no pronouncement as to costs. The Court of Appeals sustained the
RTC, disposing, thus:WHEREFORE, premises considered, the appeal is DENIED.Decision of the Regional
Trial Court of Imus, Cavite is hereby AFFIRMED.
ISSUE/S

Whether or not whether the Tirona brothers and the Encarnacions actually intended that the sale in
1959 and 1963 should include Lot. No. 966; and second, whether the equitable doctrine of laches
defeats petitioners’ legal title over said Lot?

LAWS

Article 1408 Unenforceable contracts cannot be assailed by third person.

HOLDINGS

1 WHEREFORE, the instant petition is DENIED for lack of merit. The November 28, 2003 Decision of the
Court of Appeals is hereby AFFIRMED.

2. Where a court of equity finds that the position of the parties has to change that equitable relief
cannot be afforded without doing injustice, or that the intervening rights of third persons may be
destroyed or seriously impaired, it will not exert its equitable powers in order to save one from the
consequences of his own neglect.

3. There is no doubt that respondent will suffer if petitioners are allowed to recover Lot No. 966.
Respondent had already developed and invested a lot in it for more than thirty (30) years now. We
cannot sanction the petitioners’ stale demand and act of resurrecting all over again an issue that had
been already settled by the passage of time and equity of the case.

4. We give credence to respondent’s representations that after the decision of the Court of Appeals in
the ejectment case became final and until the accion publiciana was filed in 1995, none of the
petitioners communicated with him and claimed possession and ownership of the “Kataasan”;and that
none of the petitioners uninterrupted possession over Lot No. 966. Leona O. Ayson, a salt bed worker at
respondent’s fishpond and wife of Isaias Ayson and daughter-in-law of Raymundo Ayson (who were
former workers of respondent in the “Kataasan”), testified that the”Kataasan” was sold to respondent
by Teodoro because when they were giving the harvest of the property to the latter he (Teodoro)
personally told them to give it to respondent as the new owners also approached him to show TCT No.
81513 upon its issuance in their names in 1976.

5. The principle is one of estoppel because it prevents people who have slept on their rights from
prejudicing the rights of third parties who have placed reliance on the inaction of the original patentee
and his successors-in-interest.
VOID

Case: Heirs of Romana Ingjug-Tiro vs. Casals (363 SCRA 435

FACTS

This petition for review arose from the dismissal of the case in the CA which affirmed the decision of the
trial court that dismissed the same on the ground of prescription and laches on the 5,354 square meter
parcel of land in Opon, Cebu. The petitioners alleged that they have been deprived of their successional
rights through fraud and misrepresentation. The vendees, herein respondents, claimed to have acquired
the property for value and in good faith.

The subject parcel of land was originally titled in the name of Mamerto Injung who left the same to his
five children – Romana, Francisco, Francisca, Luisa and Maria during the second world war. Two decades
later, Luisa, Maria, Eufemio (husband of Ramona) and Guillerma (granddaughter) sold the parcel of land
to the respondents. The vendors, allegedly represented themselves as the only surviving heirs of
Mamerto Ingjug. The sale was evidenced by a Deed of Sale of Unregistered Land and an Extrajudicial
Settlement and Confirmation of Sale.

On August 10, 1992, the heirs of one of Mamerto’s children- Romana Ingjug challenged the respondents’
ownership of the property by filing a complaint for Partition, Recovery of Ownership and Possession,
Declaration of Nullity of the Deed of Sale of Unregistered Land and the Extrajudicial Settlement and
Confirmation of Sale to the extent of the petitioners’ shares in the property.

ISSUE/S

Whether the petitioners’ right to institute a complaint for partition and reconveyance is effectively
barred by prescription.

LAWS

Article 1410.

The action or defense for the declaration of the inexistence of a contract does not prescribe.

HOLDINGS

No. The petitioners’ right to institute a complaint for partition and reconveyance is not barred by
prescription.

“The action or defense for the declaration of the inexistence of a contract does not prescribe.”. Neither
could laches be invoked in the case at bar. Laches is a doctrine in equity and our courts are basically
courts of law and not courts of equity. Equity, which has been aptly described as “justice outside
legality,” should be applied only in the absence of, and never against, statutory law. Aequetas nunguam
contravenit legis.
The positive mandate of Art. 1410 of the New Civil Code conferring imprescriptibility to actions for
declaration of the inexistence of a contract should pre-empt and prevail over all abstract arguments
based only on equity. Certainly, laches cannot be set up to resist the enforcement of an imprescriptible
legal right, and petitioners can validly vindicate their inheritance despite the lapse of time.

CASE : WILFREDO VERDEJO, petitioner, appellant, (Art 1413 JN Robillon)

vs.

THE HON. COURT OF APPEALS, HON. SOFRONIO G. SAYO, and HERMINIA PATINIO, respondents.

( G.R. No. 77735 January 29, 1988 (PADILLA, J.)

FACTS

On 20 December 1984, the herein petitioner filed a complaint against the private respondent
Herminia Patinio and one John Doe before the Regional Trial Court of Pasay City, for collection of a sum
of money amounting to P60,500.00, which said Herminia Patinio had allegedly borrowed from him but
failed to pay when it became due, notwithstanding demands.

In her answer, Herminia Patinio admitted having obtained loans from the petitioner but claimed that the
amount borrowed by her was very much less than the amount demanded in the complaint, which
amount she had already paid or settled, and that the petitioner had exacted or charged interest on the
loan ranging from 10% to 12% per month, which is exorbitant and in gross violation of the Usury Law.
Wherefore she prayed that she be reimbursed the usurious interests charged and paid. She also asked
for damages, attorneys fee and costs of suit.

After trial court on 3 September 1986, the trial court rendered Judgment, as follows:WHEREFORE,
judgment is hereby rendered dismissing plaintiff’s complaint for lack of merit.

The petitioner filed a petition for certiorari before the Court of Appeals, to annul RTC Order of 8 October
1986.The appellate court, however, as aforestated, dismissed the petition in a Decision dated 28
November 1986. The petitioner filed a motion for reconsideration of the decision, but his motion was
denied in a Resolution dated 5 March 1987.

ISSUE/SWhether or not defendant defense claim for being charged usuriously is correct?
LAWS Article 1413. Interest in excess of the interest allowed by the usury laws may be recovered by
the debtor, with interest thereon from the date of the payments.

HOLDINGS

1 This Court has ruled in one case, that with the promulgation of Central Bank Circular No. 905, series
of 1982, usury has become “legally inexistent” as the lender and the borrower can agree on any interest
that may be charged on the loan. This Circular was also given retroactive effect. But, whether or not this
Circular should also be given retroactive effect and applied in this case is yet to be determined by the
appellate court at the proper time.

2. The trial court merely added the amounts paid by the private respondent to the petitioner and,
thereafter, deducted therefrom the amounts given as loan to the private respondent and considered the
excess amount usurious, without apparently considering the lawful interest that may be collected on
said loans.

3. Only usurious interests may be reimbursed.