CASE # 1

MASONGSONG v. JUMAQUIO ESTIMO

G.R. No. 136773 June 25, 2003

FACTS:

Petitioners and respondents are heirs of the owners of herein subject property. The
case rooted when petitioners filed for a partition of the property and to award them one-
fifth (1/5) of it. Most of the respondents entered into a compromise agreement with
petitioners for such partition, except for the Jumaquio sisters, one of the respondents.

The Jumaquio sister avers that one Justina Navarro sold the property to the original
owner’s daughter Enriqueta Jumaquio, their mother. This is evidence by a Kasulatan sa
Bilihan ng Lupa (Kasulatan).

However, after trial on merits ensued, the RTC ruled in favor of Masongsongs, declared
the Kasunduan as void and moved for the partition as prayed for by petitioners.

The Jumaquio sisters appealed to the Court of Appeals. The appelate reversed the trial
court’s decision. Petitioners filed a motion for reconsideration but the CA denied the
same. Hence, this present case.

ISSUE:

Whether or not the Kasunduan is a valid sale?

RULING:

The Court held Yes.

Under Article 1458 of the Civil Code, the elements of a valid contract of sale are: 1.
consent or meeting of the minds; 2. determinate subject matter; and, 3. price certain in
money or its eqivalent.

The presence of these elements is apparent on the face of the Kasulatan itself. The
property was sold in 1957 for P250.00.

Moreover, the court stated that the Kasulatan does not deprive the compulsory heirs of
Guevarra of their legitimes. As opposed to a disposition inter vivoos by lucrative
gratuitous title, a valid sale for valuable consideration does not diminish the estate of the
seller. When the disposition is for valuable considreation, there is no dimunition of the
estate but merely a substitution of values, that is, the property sold is replaced by the
equivalent monetary consideration.
 CASE # 2

GREGORIO FULE VS CA, CRUZ AND BELARMINO

G.R. No. 112212 (286 SCRA 698)

March 2, 1998

FACTS:

·      Gregorio Fule, a banker and jeweler, acquired a 10 hectare of  property in Rizal which
used to be under the name of Fr. Jacobe on which (Jacobe) mortgaged the land to the
Bank of Alaminos to secure a loan of P10,000. The mortgage was forclosed and the
property later offered for public auction.

·      1984, Gregorio asked Remilia and Oliva to look for a buyer (property), the found Dr.
Cruz, just so happens that Gregorio wants the 2.5 carat EMERALD CUT EARRINGS of
Dr. Ninevetch Cruz (MD), Gregorio  offered to buy the jewelry for P100,000, was
refused, he then offered $6000 in the exchange rate of $1 is to P25, was still refused.
They agreed, however, on the land of Fule for the jewelry.

·      Dr. Cruz asked her counsel, Atty. Belarmino to check the land for any impediments.
There was. Gregorio then executed to a DEED OF REDEMPTION to cut through the
legal impediment.

·      Dr. Cruz went to the bank with Gregorio to show the jewelry and said (non-verbatim
“Oy bobo check this shit out, tapat mo sa ilaw to see if it’s fake or not. ICE ba?”.
Gregorio checked it and was happy. Gregorio and the counsel executed a DEED OF
ABSOLUTE SALE. The Property was for P200,000 and the Jewelry for P160,000, both
agreed that Dr. Cruz will pay the remaining P40,000 by cash.

·      Gregorio happy with his jewelry, went straight to a appraiser named *wait for
it* DIMAYUGA hahahahaha but anyway, Dimayuga  said that the jewel is fake.
·      Gregorio then filed a complaint before the RTC, praying for the CONTRACT OF
SALE  be deemed null and void.

·      RTC ruled in favor of Cruz stating that Gerggy boy was in bad faith. CA affirmed.

ISSUE:
Whether or not CA erred in upholding the validity of the Contract of Sale

HELD:

No. The NCC provides that the Contract of Sale  is consensual, and is perfected when
the minds met. Contract may be rendered void if (1) Party has no capacity to give
consent, and (2) if consent was gained because of VIMFU (Violence, Intimidation,
Mistake, Fraud, and Undue Influence). Dr. Cruz was not Fraudulent. SC said that
Greggy Boy was also a jeweler, he was given time to inspect the jewel before perfecting
the contract.
CASE # 4
CELESTINO CO VS CIR
(G.R. No. L-8506)

Doctrine: Contract for Piece-of-work

FACTS: Celestino Co & Company is a duly registered general co-partnership doing

business under the trade name of “Oriental Sash Factory”. From 1946 to 1951 it paid
percentage taxes of 7% on the gross receipts of its sash, door and window factory, in
accordance with sec. 186 of the National Internal Revenue Code which is a tax on the
original sales of articles by manufacturer, producer or importer. However, in 1952 it
began to claim only 3% tax under Sec. 191, which is a tax on sales of services.
Petitioner claims that it does not manufacture ready-made doors, sash and windows for
the public, but only upon special orders from the customers, hence, it is not engaged in
manufacturing under sec 186, but only in sales of services covered by sec 191. Having
failed to convince BIR, petitioner went to the Court of Tax Appeal where it also failed.
CTA, in its decision, holds that the “petitioner has chosen for its tradename and has
offered itself to the public as a “Factory”, which means it is out to do business, in its
chosen lines on a big scale. As a general rule, sash factories receive orders for doors
and windows of special design only in particular cases but the bulk of their sales is
derived from a ready-made doors and windows of standard sizes for the average
home.. Even if we were to believe petitioner’s claim that it does not manufacture ready-
made sash, doors and windows for the public and that it makes these articles only
special order of its customers, that does not make it a contractor within the purview of
section 191 of the national Internal Revenue Code… there are no less than fifty
occupations enumerated in the aforesaid section…and after reading carefully each and
every one of them, we cannot find under which the business of manufacturing sash,
doors and windows upon special order of customers fall under the category” mentioned
under Sec 191.

ISSUE:
Whether the petitioner company provides special services or is engaged in
manufacturing.

HELD: 
The important thing to remember is that Celestino Co & Company habitually makes
sash, windows and doors, as it has represented in its stationery and advertisements to
the public. That it “manufactures” the same is practically admitted by appellant itself.
The fact that windows and doors are made by it only when customers place their orders,
does not alter the nature of the establishment, for it is obvious that it only accepted such
orders as called for the employment of such material-moulding, frames, panels-as it
ordinarily manufactured or was in a position habitually to manufacture. The Oriental
Sash Factory does nothing more than sell the goods that it mass-produces or habitually
makes; sash, panels, mouldings, frames, cutting them to such sizes and combining
them in such forms as its customers may desire.
Appellant invokes Article 1467 of the New Civil Code to bolster its contention that in
filing orders for windows and doors according to specifications, it did not sell, but merely
contracted for particular pieces of work or “merely sold its services”. In our opinion when
this Factory accepts a job that requires the use of extraordinary or additional equipment,
or involves services not generally performed by it-it thereby contracts for a piece of work
— filing special orders within the meaning of Article 1467. The orders herein exhibited
were not shown to be special. They were merely orders for work — nothing is shown to
call them special requiring extraordinary service of the factory. The thought occurs to us
that if, as alleged-all the work of appellant is only to fill orders previously made, such
orders should not be called special work, but regular work. The Supreme Court affirms
the assailed decision by the CTA.
CASE # 5

CIR VS ARNOLDUS CARPENTRY SHOP

GR No. 71122

Doctrine: Contract of Sale vs Contract for a Piece of Work

FACTS: 
Arnoldus Carpentry Shop, Inc. is a domestic corporation which has been in existence
since 1960 which has for its purpose the “preparing, processing, buying, selling,
exporting, importing, manufacturing, trading and dealing in cabinet shop products, wood
and metal home and office furniture, cabinets, doors, windows, etc., including their
component parts and materials, of any and all nature and description”. The company
kept samples or models of its woodwork on display from where its customers may refer
to when placing their orders.

On March 1979, the examiners from BIR who conducted an investigation on the
company’s tax liabilities reported that subject corporation should be considered a
contractor and not a manufacturer since the corporation renders service in the course of
an independent occupation representing the will of his employer only as to the result of
his work, and not as to the means by which it is accomplished. Hence, in the
computation of the percentage tax, the 3% contractor’s tax should be imposed instead
of the 7% manufacturer’s tax. However, responded company holds that the carpentry
shop is a manufacturer and therefore entitled to tax exemption on its gross export sales
under Section 202 (e) of the National Internal Revenue Code. CIR rendered its decision
classifying the respondent as contractor which was in turn reversed by the CTA. Hence,
this appeal.
ISSUE:

Whether or not the Court of Tax Appeals erred in holding that private respondent is a
manufacturer and not a contractor.

HELD:
The Supreme Court holds that the private respondent is a “manufacturer” as defined in
the Tax Code and not a “contractor” under Section 205(e) of the Tax Code.
Petitioner CIR wants to impress upon this Court that under Article 1467, the true test of
whether or not the contract is a piece of work (and thus classifying private respondent
as a contractor) or a contract of sale (which would classify private respondent as a
manufacturer) is the mere existence of the product at the time of the perfection of the
contract such that if the thing already exists, the contract is of sale, if not, it is work. This
is not the test followed in this jurisdiction. Based on Art. 1467, what determines whether
the contract is one of work or of sale is whether the thing has been manufactured
specially for the customer and “upon his special order.” Thus, if the thing is specially
done at the order of another, this is a contract for a piece of work. If, on the other hand,
the thing is manufactured or procured for the general market in the ordinary course of
one’s business, it is a contract of sale. The distinction between a contract of sale and
one for work, labor and materials is tested by the inquiry whether the thing transferred is
one not in existence and which never would have existed but for the order of the party
desiring to acquire it, or a thing which would have existed and has been the subject of
sale to some other persons even if the order had not been given. The one who has
ready for the sale to the general public finished furniture is a manufacturer, and the
mere fact that he did not have on hand a particular piece or pieces of furniture ordered
does not make him a contractor only.

A contract for the delivery at a certain price of an article which the vendor in the ordinary
course of his business manufactures or procures for the – general market, whether the
same is on hand at the time or not, is a contract of sale, but if the goods are to be
manufactured specially for the customer and upon his special order, and not for the
general market, it is a contract for a piece of work. The facts show that the company
had a ready stock of its shop products for sale to its foreign and local buyers. As a
matter of fact, the purchase orders from its foreign buyers showed that they ordered by
referring to the models designated by petitioner. Even purchases by local buyers for
television cabinets were by orders for existing models except only for some adjustments
in sizes and accessories utilized.

The Court finds itself in agreement with CTA and as the CTA did not err in holding that
private respondent is a “manufacturer,” then private respondent is entitled to the tax
exemption under See. 202 (d) and (e) now Sec. 167 (d) and (e)] of the Tax Code.
CASE # 21

FABILLO VS. IAC

G.R. No. L-68838            
March 11, 1991

FLORENCIO FABILLO and JOSEFA TANA (substituted by their heirs Gregorio

Fabillo, Roman Fabillo, Cristeta F. Maglinte and Antonio Fabillo), petitioners,
vs.
THE HONORABLE INTERMEDIATE APPELLATE COURT (Third Civil Case
Division) and ALFREDO MURILLO (substituted by his heirs Fiamita M. Murillo,
Flor M. Agcaoili and Charito M. Babol), respondents.

FACTS:

In the instant petition for review on certiorari, petitioners seek the reversal of the
appellate court's decision interpreting in favor of lawyer Alfredo M. Murillo the contract of
services entered into between him and his clients, spouses Florencio Fabillo and Josefa
Taña.

In her last will and testament dated August 16, 1957, Justina Fabillo bequeathed to her
brother, Florencio, a house and lot in San Salvador Street, Palo, Leyte which was
covered by tax declaration No. 19335, and to her husband, Gregorio D. Brioso, a piece
of land in Pugahanay, Palo, Leyte.  After Justina's death, Florencio filed a petition for
the probate of said will. On June 2, 1962, the probate court approved the project of
partition "with the reservation that the ownership of the land declared under Tax
Declaration No. 19335 and the house erected thereon be litigated and determined in a
separate proceeding." 

Two years later, Florencio sought the assistance of lawyer Alfredo M. Murillo in
recovering the San Salvador property.
Florencio and Murillo entered into a contract.

Pursuant to said contract, Murillo filed for Florencio Fabillo Civil Case No. 3532 against
Gregorio D. Brioso to recover the San Salvador property. The case was terminated on
October 29, 1964 when the court, upon the parties' joint motion in the nature of a
compromise agreement, declared Florencio Fabillo as the lawful owner not only of the
San Salvador property but also the Pugahanay parcel of land.
Consequently, Murillo proceeded to implement the contract of services between him
and Florencio Fabillo by taking possession and exercising rights of ownership over 40%
of said properties. He installed a tenant in the Pugahanay property.

Sometime in 1966, Florencio Fabillo claimed exclusive right over the two properties and
refused to give Murillo his share of their produce.  Inasmuch as his demands for his
share of the produce of the Pugahanay property were unheeded, Murillo filed on March
23, 1970 in the then Court of First Instance of Leyte a complaint captioned "ownership
of a parcel of land, damages and appointment of a receiver" against Florencio Fabillo,
his wife Josefa Taña, and their children Ramon Fabillo and Cristeta F. Maglinte.

ISSUE:
Whether or not the contract of services agreed upon is in violation of Article 1491 of the
Civil Code.

HELD: 
The contract of services did not violate said provision of law. Article 1491 of the Civil
Code, prohibits lawyers from acquiring by purchase even at a public or judicial auction,
properties and rights which are the objects of litigation in which they may take part by
virtue of their profession. The said prohibition, however, applies only if the sale or
assignment of the property takes place during the pendency of the litigation involving
the client's property. 
Hence, a contract between a lawyer and his client stipulating a contingent fee is not
covered by said prohibition under Article 1491 (5) of the Civil Code because the
payment of said fee is not made during the pendency of the litigation but only after
judgment has been rendered in the case handled by the lawyer. In fact, under the 1988
Code of Professional Responsibility, a lawyer may have a lien over funds and property
of his client and may apply so much thereof as may be necessary to satisfy his lawful
fees and disbursements. 

As long as the lawyer does not exert undue influence on his client, that no fraud is
committed or imposition applied, or that the compensation is clearly not excessive as to
amount to extortion, a contract for contingent fee is valid and enforceable.  Moreover,
contingent fees were impliedly sanctioned by No. 13 of the Canons of Professional
Ethics which governed lawyer-client relationships when the contract of services was
entered into between the Fabillo spouses and Murillo. 

However, SC disagree with the courts below that the contingent fee stipulated between
the Fabillo spouses and Murillo is 40% of the properties subject of the litigation for
which Murillo appeared for the Fabillos. A careful scrutiny of the contract shows that the
parties intended forty percent of the value of the properties as Murillo's contingent fee.
This is borne out by the stipulation that "in case of success of any or both cases,"
Murillo shall be paid "the sum equivalent to forty per centum of whatever benefit" Fabillo
would derive from favorable judgments. The same stipulation was earlier embodied by
Murillo in his letter of August 9, 1964 aforequoted.

Worth noting are the provisions of the contract which clearly states that in case the
properties are sold, mortgaged, or leased, Murillo shall be entitled respectively to 40%
of the "purchase price," "proceeds of the mortgage," or "rentals." The contract is vague,
however, with respect to a situation wherein the properties are neither sold, mortgaged
or leased because Murillo is allowed "to have the option of occupying or leasing to any
interested party forty per cent of the house and lot." Had the parties intended that
Murillo should become the lawful owner of 40% of the properties, it would have been
clearly and unequivocally stipulated in the contract considering that the Fabillos would
part with actual portions of their properties and cede the same to Murillo.

The ambiguity of said provision, however, should be resolved against Murillo as it was
he himself who drafted the contract.  This is in consonance with the rule of interpretation
that, in construing a contract of professional services between a lawyer and his client,
such construction as would be more favorable to the client should be adopted even if it
would work prejudice to the lawyer.  Rightly so because of the inequality in situation
between an attorney who knows the technicalities of the law on the one hand and a
client who usually is ignorant of the vagaries of the law on the other hand. 

Considering the nature of the case, the value of the properties subject matter thereof,
the length of time and effort exerted on it by Murillo, we hold that Murillo is entitled to the
amount of P3,000.00 as reasonable attorney's fees for services rendered in the case
which ended on a compromise agreement. In so ruling, we uphold "the time-honored
legal maxim that a lawyer shall at all times uphold the integrity and dignity of the legal
profession so that his basic ideal becomes one of rendering service and securing
justice, not money-making. For the worst scenario that can ever happen to a client is to
lose the litigated property to his lawyer in whom all trust and confidence were bestowed
at the very inception of the legal controversy." 
CASE # 22
RUBIAS V. BATILLER

FACTS:

Before the war with Japan, Francisco Militante filed an application for registration of the
parcel of land in question. After the war, the petition was heard and denied. Pending
appeal, Militante sold the land to petitioner, his son-in-law. Plaintiff filed an action for
forcible entry against respondent. 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.

ISSUE:

Whether or not the contract of sale between appellant and his father-in-law 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

HELD:

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 made by his
father-in- law 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.

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.
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."
CASE # 23

HALILI V. COURT OF APPEALS

G.R. No. 113539

March 12, 1998

FACTS:

Simeon de Guzman, an American citizen, died sometime in 1968, leaving real

properties in the Philippines. His forced heirs were his widow private respondent Helen
Meyers Guzman, and his son, private respondent David Rey Guzman, both of whom
are also American citizens. On August 9, 1989, Helen executed a deed of quitclaim,
assigning, transferring and conveying to David Rey all her rights, titles and interests in
and over six parcels of land which the two of them inherited from Simeon.
Among the said parcels of land is that now in litigation Guzman then sold the
parcel of land to Catanaig, who is one of respondents in this case. Petitioners, who are
owners of the adjoining lot, filed a complaint before the Regional Trial Court of Malolos,
Bulacan, questioning the constitutionality and validity of the two conveyances —
between Helen Guzman and David Rey Guzman, and between the latter and Emiliano
Cataniag — and claiming ownership thereto based on their right of legal redemption
under Art. 1621 of the Civil Code. The trial court dismissed the complaint. The CA
denied the appeal of the Halilis.

ISSUE:

Whether or not the sale of the land is null and void.

RULING:

No, because the prohibition in the constitution has already been served. Article
XII, Section 7 provides that Non- Filipinos cannot acquire or hold title to private lands or
to lands of the public domain, In fine, non-Filipinos cannot acquire or hold title to private
lands or to lands of the public domain, except only by way of legal succession. While it
is true that the transfer of Helen of his right to her son who is an American citizen
contradicts the prohibition set forth in the Constitution, the Supreme Court upheld the
subsequent sale of the land to Catanig, a Filipino citizen. Jurisprudence is consistent
that “if land is invalidly transferred to an alien who subsequently becomes a citizen or
transfers it to a citizen, the flaw in the original transaction is considered cured and the
title of the transferee is rendered valid.”

The rationale of this principle was explained in Vasquez vs. Li Seng Giap thus
“[I]f 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.

Petition was denied.