FIRST DIVISION

[G.R. No. 13300. September 29, 1919.]

BASILIA BOUGH and GUSTAVUS BOUGH , plaintiffs-appellants, vs .

MATILDE CANTIVEROS and PRESBITERA HANOPOL , defendants-
appellees.

P. E. del Rosario and William F. Mueller for appellants.

Sison & Veloso for appellees.

SYLLABUS

1. PLEADING AND PRACTICE; CIVIL PROCEDURE; ANSWERS; GENUINENESS

AND DUE EXECUTION OF WRITTEN INSTRUMENTS; SECTION 103 OF THE CODE OF
CIVIL PROCEDURE CONSTRUED. — In accordance with section 103 of the Code of Civil
Procedure, the genuineness and due execution of a written instrument, properly
pleaded, is deemed admitted unless the plaintiff or defendant, as the case may be, shall
specifically deny the same under oath.
2. ID.; ID.; ID.; ID.; ID. — The phrase "genuineness and due execution of the
instrument" means nothing more than that the instrument is not spurious, counterfeit,
or of different import on its face from the one executed.
3. ID.; ID.; ID.; ID.; ID. — The failure of the party to le an a davit denying the
genuineness and due execution of the document does not estop him from
controverting it by evidence of fraud, mistake, compromise, payment, statute of
limitations, estoppel, and want of consideration.
4. ID.; ID.; ID.; ID.; ID.; DEFENSE OF ILLEGALITY OF FRAUD. — As section 285
of the Code of Civil Procedure permits a writing to be impeached because of its
illegality or fraud, such a defense would not be barred by the provisions of section 103.
5. ID.; ID.; ID.; ID.; ID.; ID. — Held: That although the defendants did not deny
the genuineness and due execution of the contract of sale of December 9, 1913, under
oath, yet the defendants could properly set up the defenses of fraud and want of
consideration.
6. PUBLIC INSTRUMENTS; VARYING TERMS; PAROLE EVIDENCE TO
ESTABLISH ILLEGALITY OR FRAUD; SECTION 2185 OF THE CODE OF CIVIL
PROCEDURE CONSTRUED. — Article 1218 of the Civil Code which provides that public
instruments are evidence of the fact which gave rise to their execution, should be read
in conjunction with section 286 of the Code of Civil Procedure.
7. ID.; ID.; ID.; ID. — Evidence to establish illegality or fraud, is expressly
permitted under section 285 of the Code of Civil Procedure, and may be proved by
circumstantial evidence, aided by legitimate inferences from the direct facts.
8. CONTRACTS; ILLEGAL AS AGAINST PUBLIC POLICY. — Contracting
parties may not establish pacts, clauses, and conditions, which con ict with the laws,
morals, or public order.
9. ID.; ID.; "PUBLIC ORDER" CONSTRUED. — "Public order" in the civil law
signifies the public weal — public policy.
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 10. ID.; ID.; ACTIONS TO ENFORCE. — A party to an illegal contract cannot
come into a court of law and ask to have his illegal objects carried out. The law will not
aid either party to an illegal agreement; it leaves the parties where it finds them.
11. ID.; ID.; ID. — Where the parties to an illegal contract are not equally guilty,
and where public policy is considered as advanced by allowing the more excusable of
the two to sue for. relief against the transaction, relief is given to him. Cases of this
character are, where the conveyance was wrongfully induced by the grantee through
imposition or overreaching, or by false representations, especially by one in a
confidential relation.
12. ID.; ID.; ID. — Held: That since the grantor, reposing faith in the integrity of
the grantee and relying on a suggested occurrence which did not in fact take place, was
made the dupe of the grantee, the grantor should be placed in the position in which she
was before the transactions were entered into.

DECISION

MALCOLM , J : p

This action was begun in the Court of First Instance of Leyte, pursuant to a
complaint by means of which the plaintiffs Basilia Bough and Gustavus Bough sought
to have themselves put in possession of the property covered by the deed of sale
quoted in the complaint, and to require the defendant Matilde Cantiveros to pay the
plaintiffs the sum of ve hundred pesos by way of damages, and to pay the costs.
Matilde Cantiveros answered with a general denial and a special defense, not sworn to,
in which she asked that judgment be rendered declaring the contract of sale
theretofore made between herself and Basilia Bough null. The plaintiffs, thereupon,
denied under oath the genuineness and due execution of the so-called donation
intervivos set forth in the answer. Presbitera Hanopol was permitted to intervene as a
defendant. After trial, judgment was rendered by the Honorable W. E. McMahon, judge
of rst instance, in favor of the defendants, declaring the deed of sale, Exhibit A,
ctitious, null, and without effect, and absolving the defendants from the complaint,
with costs against the plaintiffs. It is from this judgment through the ordinary means of
perfection of a bill of exceptions that the case is brought to this court for decision.
The facts are these: Matilde Cantiveros is reputed to be the richest resident of
the municipality of Carigara, Leyte. In the latter part of the year 1913, she was the owner
of various parcels of realty of the value of thirty thousand pesos, or more. On December
24, 1912, Matilde Cantiveros and her husband Jose Vasquez, signed a marital contract
of separation. At this time there lived with Matilde Cantiveros, Basilia Hanopol, a cousin
and protege since childhood, who was married to Gustavus Bough. For this reason,
Gustavus Bough was regarded by Matilde Cantiveros with great confidence, even as her
child. Through the in uence of Gustavus Bough, who brought a story to Matilde
Cantiveros that her husband Jose Vasquez was in town and might contest the contract
for the separation of the conjugal property, Matilde Cantiveros was induced to sign a
ctitious contract of sale of all her property to Basilia Bough. This document,
introduced in evidence as Exhibit A, was prepared in due form and acknowledged
before a notary public, the amount of the consideration, ten thousand pesos, being last
inserted with a pen. By this deed, Matilde Cantiveros purported to convey sixty-three
parcels of land, the real value of which was over thirty thousand pesos, for ten thousand
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 pesos, although no evidence that any such sum ever passed between the parties was
introduced, to her cousin, Basilia Bough. In order to reassure Matilde Cantiveros that
they would not take advantage of the ctitious sale, Gustavus Bough and Basilia Bough
prepared and signed another document, introduced in evidence as Exhibit 1, which is a
donation by them to Matilde Cantiveros of all the property mentioned in Exhibit A, to be
effective in case of the death of themselves and their children before the death of
Matilde Cantiveros. The defendant, Matilde Cantiveros, has remained in possession of
the property.
These facts, which, it may be said, are mainly derived from the ndings of the trial
court, merely repeat the threadbare story of a conveyance of property entered into with
a fraudulent intention and for a fraudulent purpose, in order to defeat recovery in a suit
at law by a third party.
Plaintiffs and appellants assign six errors of the trial court. In so far as these
assignments concern the facts, they need no discussion. Plaintiff's declarations have
not been corroborated, while defendant's story has been corroborated by reliable
witnesses. All the reason — all the equity — of the case, is in favor of the defendants. As
far as necessary for the disposition of the appeal, we resolve plaintiff's points in order.
1. The rst assignment of error reads: "The lower Court erred in permitting
the defendants to present evidence, over the objections of the plaintiff, tending to
impugn the genuineness and due execution of the document, Exhibit A, and in admitting
them to show the circumstances under which it was executed."
It is undeniable that this was an action brought upon a written instrument, and
that the complaint contained a copy of the instrument, but that its genuineness and due
execution were not speci cally denied under oath in the answer. Is this fatal to the
defense?
Section 103 of the Philippine Code of Civil Procedure provides:
"When an action is brought upon a written instrument and the complaint
contains or has annexed a copy of such instrument, the genuineness and due
execution of the instrument shall be deemed admitted, unless speci cally denied
under oath in the answer; and when the defense to an action, or a counterclaim
stated in an answer, is founded upon a written instrument and the copy thereof is
contained in or annexed to the answer, the genuineness and due execution of
such instrument shall be deemed admitted, unless speci cally denied under oath
by the plaintiff in his pleadings."
This section is derived from sections 448 and 449 of the Code of Civil Procedure
of California, and is to be found in varying form in the statutes of practically all the
states of the American Union. The meaning of this portion of the Code, and the intention
of the Legislature in enacting it, are easily found. The law says that the genuineness and
due execution of a written instrument properly pleaded shall be deemed admitted
unless the plaintiff or defendant, as the case may be, shall speci cally deny the same
under oath. When the law makes use of the phrase "genuineness and due execution of
the instrument" it means nothing more than that the instrument is not spurious,
counterfeit, or of different import on its face from the one executed. As an example,
where the name of a corporation is signed to the document which is the basis of an
action, the failure of the defendant corporation to put in issue, by denial under oath, the
due execution of the instrument, is required in section 103 of the Code of Civil
Procedure, operates as an admission of the authority of the o cer to execute the
contract, since the authority of the o cer to bind the company is essential to the due
execution of its contract. (Ramirez vs. Orientalist Co. and Fernandez [1918], 38 Phil.,
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 634.) But the failure of the party to le an a davit denying the genuineness and due
execution of the document does not estop him from controverting it by evidence of
fraud mistake, compromise, payment, statute of limitations, estoppel, and want of
consideration. As section 285 of our Code of Civil Procedure permits a writing to be
impeached because of its illegality or fraud, such a defense would not be barred by the
provisions of section 103. (Moore vs. Copp [1897], 119 Cal., 429; Brooks vs. Johnson
[1898], 122 Cal., 669; Hibberd vs. Rohde and McMillian [1915], 32 Phil., 476.)
We hold that although the defendants did not deny the genuineness and due
execution of the contract of sale of December 9, 1913, under oath, yet the defendants
could properly set up the defenses of fraud and want of consideration.
2. The second assignment of error reads: "The lower Court erred in nding
that the plaintiff Gustavus Bough, having prepared a contract of separation between the
defendant Matilde Cantiveros and her husband, Jose Vasquez, sought to cause her to
believe that she exposed herself to a suit by her husband regarding her property,
notwithstanding the contract of separation, and for that reason and for the purpose of
shielding herself from the consequences of the apprehended suit, that she and her
mother executed the document Exhibit A."
Counsel relies on the provisions of article 1218 of the Civil Code, which provides
that "Public instruments are evidence, even against a third person, of the fact which
gave rise to their execution and of the date of the latter." The effect of this article has
been announced in numerous decisions of the Supreme Court of Spain and of this
Court. (See Hijos de I. de la Rama vs. Robles and Robles [1907], 8 Phil., 712.) But in
conjunction with article 1218 of the Civil Code, there should always be read section 285
of the Code of Civil Procedure which provides that:
"When the terms of an agreement have been reduced to writing by the
parties, it is to be considered as containing all those terms, and therefore there
can be, between the parties and their representatives or successors in interest, no
evidence of the terms of agreement other than the con- tents of the writing, except
in the following cases:
"1. Where a mistake or imperfection of the writing, or its failure to
express the true intent and agreement of the parties, is put in issue by the
pleadings;
"2. Where the validity of the agreement is the fact in dispute. But this
section does not exclude other evidence of the circumstances under which the
agreement was made, or to which it relates, or to explain an intrinsic ambiguity, or
to establish its illegality or fraud. The term 'agreement' includes deeds and
instruments conveying real estate, and wills as well as contracts between parties."
While thus as the law well says "public instruments are evidence of the fact which
gave rise to their execution" and are to be considered as containing all the terms of the
agreement, yet, if the validity of the agreement is the issue, parole evidence may be
introduced to establish illegality or fraud. Evidence to establish illegality or fraud, is
expressly permitted under section 285 of the Code of Civil Procedure, and may be
proved by circumstantial evidence, aided by legitimate inferences from the direct facts.
(Camacho vs. Municipality of Baliuag [1914], 28 Phil., 466; Maulini vs. Serrano [1914],
28 Phil., 640; Union Mut. Life Insurance Co. vs. Wilkinson [1872], 13 Wall., 222; Maxon
vs. Llewelyn [1898], 122 Cal., 195, construing section 1856 of the Code of Civil
Procedure of California, identical with section 285 of the Code of Civil Procedure of the
Philippines.)
We hold that parole evidence was properly admitted to show the illegality of the
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 contract of sale introduced as Exhibit A.
3. The third point raised by appellant is, that the defendant, having accepted
the donation expressed in the instrument Exhibit 1, is now estopped from denying the
consideration set forth therein. A su cient answer is, that it having been established
that Exhibit A is invalid, such an instrument cannot be made the basis of an estoppel.
We hold that the so-called donation in favor of Matilde Cantiveros did not
operate to create an estoppel.
4. The last question which is propounded by appellant relates to the effect of
the illegality of the instant contract. It is rudimentary that contracting parties may not
establish pacts, clauses, and conditions, which con ict with the laws, morals, or public
order; "public order" signi es "the public weal" — public policy (Article 1255, Civil Code;
Manresa, Comentarios al Codigo Civil, Vol. 8, p. 574.) It is further well settled, that a
party to an illegal contract cannot come into a court of law and ask to have his illegal
objects carried out. The rule is expressed in the maxims: "Ex dolo malo non oritur actio,"
and "In pari delicto potior est conditio defendentis." The law will not aid either party to
an illegal agreement; it leaves the parties where it nds them. (Article 1306, Civil Code;
Perez vs. Herranz [1907], 7 Phil., 693.) Where, however, the parties to an illegal contract
are not equally guilty, and where public policy is considered as advanced by allowing
the more excusable of the two to sue for relief against the transaction, relief is given to
him. Cases of this character are, where the conveyance was wrongfully induced by the
grantee through imposition or overreaching, or by false representations, especially by
one in a con dential relation. (13 C. J., 497-499; Pride vs. Andrew [1894], 51 Ohio State,
405.)
As corroborative examples of these principles, we may cite the following:
"Where a husband falsely represented to his wife that she was liable for
certain debts, and that the creditors would take her property and in uenced by
this, and intending to defraud such creditors, she transferred her property to him, it
was held that the deed would be set aside." (Boyd vs. De la Montagnie [1878], 73
N. Y., 498.)
"Where a party has given a conveyance of his property with intent to
defraud a creditor, the law will allow him no relief against such conveyance, but
will leave him in the situation in which he has placed himself. But where there is
no creditor in fact, but only an imaginary one, through fear of whom the grantor,
encouraged by the grantee, makes the conveyance, a fraudulent intent will not be
imputed to the grantor, and where the conveyance of the property has been
without consideration, he may recover the same or its value." (Kervick vs. Mitchell
[1885], 68 Iowa, 273.)
"Where a son falsely represented to his mother that a suit was about to be
brought against her for slander which would result in her losing all her property,
and thereby induced her to convey all her property to him, it was held that the
conveyance would be set aside at her suit." (Harper vs. Harper & Co. [1887], 85 Ky.,
160.)
"Where a woman seventy years of age and illiterate was induced by her
son-in-law and the sureties on his bond to execute a mortgage to the sureties to
indemnify them on a defalcation by the son-in-law, by holding out to her the
anticipated punishment of the latter, without allowing her a chance to consult any
disinterested friend, it was held that the mortgage would be set aside." (Bell vs.
Campbell [1894], 123 Mo., 1.)
"One who executes a bill of sale at the instance of the grantee, for the
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 purpose of putting his property beyond the reach of a third person whom the
grantee represented was about to institute suit against the grantor, is entitled to
recover the value of the property, where such third person had no valid claim
against the grantor, but had been settled with in full, and his receipt taken."
(Kervick vs. Mitchell [1885], 68 Iowa, 273.)
"A brother who conveyed property to his sister on a secret trust for his
bene t, to defeat any claim for alimony which his wife, who had instituted a suit
for divorce, might make against him, is entitled to enforce the trust upon which
the conveyance was made, where it does not appear that any claim for alimony
was ever set up by his wife, or allowed, or that facts existed entitling her to such
an allowance. The court said: 'It does not appear that there was any creditor
whose rights or interests could be prejudiced by the conveyance, and the question
is whether or not the mere motive which impelled the party to make the deed will
preclude him from enforcing the trust upon which it was executed. We think that
where there is no creditor, there is no fraud, and therefore no policy of the law to
prevent the enforcement of the trust.' " (Rivera vs. White [1901], 94 Tex., 538.)
"A conveyance made by a mother to a daughter in consequence of false
representations that her property might otherwise be taken from her to satisfy a
claim for alimony arising from a suit for divorce about to be brought against her
son by his wife will be cancelled. The Court said: 'If the conveyance was made for
the purpose of protecting the property from such claim, such representations
being untrue, and such apprehensions in fact groundless, then she is entitled to
have the deeds set aside.' " (Kleeman vs. Peltzer [1885], 17 Neb., 381.)
In this instance, the grantor, reposing faith in the integrity of the grantee, and
relying on a suggested occurrence, which did not in fact take place, was made the dupe
of the grantee, and led into an agreement against public policy. The party asking to be
relieved from the agreement which she was induced to enter into by means of fraud,
was thus in delicto, but not in pari delicto with the other party. The deed was procured
by misrepresentation and fraud su cient to vitiate the transaction. The rights of
creditors are not affected. We feel that justice will be done if we place the grantor in the
position in which she was before these transactions were entered into.
The facts of this case are not greatly dissimilar from those to be found in
Hibberd vs. Rohde and McMillian ( [1915], 32 Phil., 476), relating to the defenses
permissible where an instrument was submitted by the plaintiff, and not denied under
oath by the defendant, and to the subject of contracts against public policy. The
doctrine there announced need not be incorporated in this decision.
We resolve each assignment of error against the appellants, and having done so,
a rm the judgment of the trial court, with costs of this instance against the appellants.
So ordered.
Arellano, C. J., Torres, Johnson, Araullo, Street, Avanceña and Moir, JJ., concur.

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