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Atilano vs.

G. R. No. L-22487
May 21, 1969
Eulogio Atilano I bought Lot No. 535 from Gerardo Villanueva. Eulogio obtained a transfer
certificate of title in his name. In 1920, he subdivided the land into 5 parts. He executed a deed
of sale in favor of his brother Eulogio Atilano II, covering lot 535-E. Lots 535-B, C and D were sold
to other persons. Lot 535-A was retained by Eulogio Atilano I. Upon his death, it was transferred
to Ladislao Atilano.
When the land was resurveyed, it was found out that the lot Eugelio Atilano II was
occupying was actually Lot 535-A and not 535-E, as what was referred to in the deed of sale.
The lot that Ladislao was occupying was 535-E, and not 535-A.
subsequently, the heirs of Eugelio Atilano II filed an action against Ladislao, claiming that
they offered to surrender the possession of Lot 535-A and demanded the possession of Lot 535E, which offer was denied. Lot 535-E has an area of 2612 square meters, while 535-A only has
In their answer, Ladislao and the other possessors of Lot 535-E alleged that the reference
to Lot 535-E in the deed of sale was a mere error because Eulogio Atilano I even bought Lot 536
to increase the area of the land in his possession.
Whether or not Ladislao may be compelled to surrender Lot 535-E because of the
reference to this lot in the contract.
No. It can be inferred that the specific portion where the vendee was then already residing,
where he reconstructed his house at the end of the war, and where his heirs, the plaintiffs herein,
continued to reside thereafter: namely, lot No. 535-A; and that its designation as lot No. 535-E in
the deed of sale was simple mistake in the drafting of the document. The mistake did not vitiate
the consent of the parties, or affect the validity and binding effect of the contract between them.
The new Civil Code provides a remedy for such a situation by means of reformation of the
instrument. This remedy is available when, there having been a meeting of the funds of the
parties to a contract, their true intention is not expressed in the instrument purporting to embody
the agreement by reason of mistake, fraud, inequitable conduct on accident.

Dihiansan vs. CA
G. R. No. L-49539
September 14, 1987
Jose Serrano is the registered owner of a parcel of land in Ateneo Avenue in Naga City.
Sometime in 1966, the Archbishop of Caceres, a corporation sole, signified the intention of
donating to the City of Naga, portions of land which it owned on both sides of Ateneo Avenue to
widen the road. However, such donation did not materialize so the Archbishop offered the land
for sale to adjoining owners, one of which was Serrano.
Upon knowing Serranos preferential right over the property, Benjamin Dihiansan
requested Serrano to allow him to purchase the land. Serrano agreed. By virtue of this
agreement, Dihiansan executed a contract in favor of Serrano, obligating himself to re-sell the
property. In the same contract, Dihiansan bound himself not to sub-lease the property until
Serrano has repurchased the same. In another document, he also bound himself to pay a
monthly honorarium to Serrano until the latter has purchased the property. However, Dihiansan
failed to resell the property despite repeated demands.
Serrano took the matter to court and found out that Dihiansan already sold the property to
Ramon King. Dihiansan alleged that the agreement regarding the honorarium was void because
it was without consideration and that he offered to sell the land to Serrano but the latter refused.
Whether or not the agreement regarding the honorarium was void ab initio due to lack of
No. The consideration is Serranos preferential right to buy the property in question from
the owner. The contract clearly stipulates that pDihiansan shall re-sell the disputed property to
Serrano. The contract is the law between the parties. When the words of a contract are plain and
readily understandable, there is no room for construction. As the parties' agreement is reduced in
writing, the rule applies that their agreement is to be "considered as containing all such terms and
there can be between the parties and their successors-in-interest no evidence of the terms of the
agreement other than the contents of the writing.

BPI vs. Fidelity & Surety Co.

Laguna Coconut Oil Company executed a promissory note in favor of Philippine
Vegetable Oil Company. After a month, Fidelity & Surety Co. made a notation on the note,
obligating itself to hold Laguna Coconut Oil harmless against loss for having discounted the
foregoing note at the value stated therein.
Philippine Vegetable Oil Company indorsed the note to BPI. Upon maturity, the bank
demanded payment from both Laguna Oil and Fidelity Surety. Both failed to pay, so BPI
commenced actions against them.
BPI claimed that the Fidelity & Surety Company by having undertaken to hold the Laguna
Oil harmless for having discounted the note, contracted the obligation to pay said note on behalf
of the Laguna Oil and to be a surety for Laguna Oil. The trial court held against Fidelity and
Surety and demanded it to pay the note and also ruled that BPI should have been placed in the
indorsement, instead of Laguna Oil.
Whether or not there was a mistake in placing Laguna Oil instead of BPI in the
indorsement, justifying reformation of the instrument.
No. To justify the reformation of a written instrument upon the ground of mistake, the
concurrence of three things are necessary: First, that the mistake should be of a fact; second,
that the mistake should be proved by clear and convincing evidence; and, third, that the mistake
should be common to both parties to the instrument. The rule is, as has been above stated, that
the mistake must be mutual. There may have been a mistake here. It would, however, seem to be
straining the natural course of events to hold the Fidelity and Surety Company of the Philippine
Islands a party to that mistake.

Santi vs. CA
G. R. No. 93625
November 8, 1993
Esperanza Jose was in her lifetime, the registered owner and in absolute possession of a
parcel of land in Cavite. In 1957, she leased a portion of the property to Spouses Eugenio Vitan
and Beatriz Francisco for a period of 20 years at P180 per month, automatically extended for
another 20 years but with a rental of P220 per month. The spouses built a cinema house on said
Sometime in 1962, the lessees sold all their rights over the lessors property to Augusto
Reyes Jr. A new contract of lease was entered between the latter and Jose for a period of 20
years, extendable for another period of 20 years upon expiration. Later on, Jose sold her rights
and participation over the land to Vicente Santi.
In 1982, when the lease expired, Santi wrote Alexander Reyes, representative of Augusto
Reyes, informing him of the termination of the lease and demanding a peaceful turnover of the
land. Reyes refused, alleging that the lease was automatically extended for another 20 years.
Santi claimed that a subsequent agreement must be entered into in order that the lease be
Whether or not the terms of the contract of lease must be interpreted to grant an
automatic extension.
No. The phrase "automatically extended" did not appear and was not used in the lease
contract subsequently entered into by Esperanza Jose and Augusto Reyes, Jr. for the simple
reason that the lessor does not want to be bound by the stipulation of automatic extension as
provided in the previous lease contract.
The stipulation "said period of lease being extendable for another period of twenty (20) years . . ."
is clear that the lessor's intention is not to automatically extend the lease contract but to give her
time to ponder and think whether to extend the lease. If she decides to do so, then a new contract
shall be entered into between the lessor and lessee for a term of another twenty years and at a
monthly rental of P220.00. This must be so, for twenty (20) years is rather a long period of time
and the lessor may have other plans for the property. If the intention of the parties were to
provide for an automatic extension of the lease contract, then they could have easily provided for
a straight forty years contract instead of twenty.

Tanguilig vs. CA

Herce contracted Tanguilig to construct a windmill system for him for which he shall pay a
consideration of 60,000. Pursuant to the contract, Herce paid a downpayment of 30,000.00, an
installment of 15,000. leaving a 15,000. balance.
Herce refused to pay the balance because he had already paid this amount to San Pedro
General Merchandising Inc., which constructed a deep well to which the windmill system was to
be connected. According to Herce, since the deep well formed part of the system, the payment
he tendered to SPGMI should be credit to his account.
On the other hand, according to Tanguilig, the 60,000 was solely for the construction of
the windmill and the construction of the deep well was not part of it.
The trial court held that the construction of the deep well was not part of the windmill
project as evidenced clearly by the letter proposals. It noted, "if the intention of the parties is to
include the construction of the deep well in the project, the same should be stated in the
proposals. In the absence of such an agreement, it could be safely concluded that the
construction of the deep well is not a part of the project undertaken by the plaintiff. However, the
CA ruled to the contrary.
Whether or not the deep well project should be considered as part of the agreement of
the parties.
No. Nowhere in either proposal is the installation of a deep well mentioned, even
remotely. Neither is there an itemization or description of the materials to be used in constructing
the deep well. There is absolutely no mention in the two (2) documents that a deep well pump is a
component of the proposed windmill system. The contract prices fixed in both proposals cover
only the features specifically described therein and no other. While the words "deep well" and
"deep well pump" are mentioned in both, these do not indicate that a deep well is part of the
windmill system. They merely describe the type of deep well pump for which the proposed
windmill would be suitable. Since the terms of the instruments are clear and leave no doubt as to
their meaning they should not be disturbed.

Baluran vs. Navarro

Baluran and Paraiso entered into a contract of barter. However, the parties stipulated
that they would only transfer the material possession of their respective properties to one another.
By virtue of the contract, Baluran was allowed to construct a residential house on the
Paraisos land, while Paraiso is permitted to enjoy the fruits of Balurans riceland. The contract
prohibited them from alienating the properties of the other. It also contained a stipulation that
should Paraisos heirs desire to re-possess the residential lot, Baluran is obliged to return the
After a few years, Obedencio, Paraisos grandchild, acquired the ownership of the
residential lot from his mother and demanded that Baluran vacate the property and turn over the
possession to him.
Whether or not the contract is one of barter.
No. IT is a contract of usufruct. The contract is what the law defines it to be and not what
the parties call it. It is very clear that what the parties exchanged was not ownership, but merely
material possession or the right to enjoy the thing.
Thus, Baluran must return the property to Obedencio.

Contreras and Gingco vs. China Bank

Patricio Contreras and Jerusalem Gingco brought a suit against China Bank and spouses
Juan Molina and Teodora Arenas to annul a mortgage executed by the spouses in favor of the
bank. The CFI of Manila ruled that the deed of mortgage dated November 8, 1930 is null and void
as to the one-half of the mortgaged property belonging to Jerusalem Gingco and rescinded as to
the remaining one-half belonging to the spouses Molina.
The sheriff at first undertook to collect from the China Banking Corporation one-half of the
judgment, upon the indication, it is claimed, of the plaintiffs' attorney, but objection by the bank
having been filed with the court, the Honorable Alfonso Felix, judge, ordered that the portion of
the judgment due from this defendant was only one-third. The latter amount was later paid by the
bank and turned over to, and receipted for by, the plaintiffs' counsel. It was contended that the
banks liability must be solidary.
Whether or not the banks liability must be solidary.
No. There is no dispute, and it can be said with confidence, that the China Banking
Corporation's liability under the terms of the judgment of this court is merely joint, joint in the
sense in which the word is understood in the civil law. "It is already a well-established doctrine in
this jurisdiction that, when it is not provided in a judgment that the defendants are liable to pay
jointly and severally a certain sum of money, none of them may be compelled to satisfy in full said

Aquino vs. Tanedo

Aquino purchased several parcels of land from Tanedo for P45,000.
acknowledged the receipt of P10,000 as part of the price in their contract. They also stipulated
when the balance should be paid. Aquino took possession of the lands by virtue of this contract.
Subsequently, they agreed to consider the previous contract as rescinded and of no
effect and entered into a new contract. Because of this, Aquino returned the lands with all the
documents pertaining thereto. However, Tanedo did not return the amounts to Aquino, but
instead subscribed another document acknowledging his indebtedness and the manner of its
Upon failure to pay the balance, Aquino brought the matter to court.
demanded the return of the fruits of the land.

Whether or not Tanedo is entitled to the fruits of the land.


Tanedo also

No. Although the plaintiff and the defendant employed the word rescind, it has not, in the
contract executed by them, either the scope or the meaning of the words rescission to which
article 1295 refers and which takes place only in the cases mentioned in the preceding articles,
1291 and 1292. Article 1295 (of the Old Civil Code) refers to contracts that are rescissible in
accordance with law in the cases expressly fixed thereby, but it does not refer to contracts that
are rescinded by mutual consent and for the mutual convenience of the contracting parties. The
rescission in question was not originated by any of the causes specified in articles 1291 and 1292
nor is it any relief for the purposes sought by these articles. It is simply another contract for the
dissolution of a previous one, and its effects, in relation to the contract so dissolved, should be
determined by the agreement made by the parties, or by application of the other legal provisions,
but not by article 1295, which is not applicable.

Miailhe vs CA
William Miailhe and his family owned properties in Manila, which had been owned by
them and were in their possession for over 100 years until August 1, 1976. On said date, the
armed forces forcibly and unlawfully took possession of the properties. Such possession
continued until August 19, 1977 without any payment of rentals.
The Office of the President directed DBP to acquire the property for the government.
Thus, they Miailhes were forced to sell the properties due to threats and intimidation employed.
DBP sold the properties to the Republic. When Marcos left the country in February 24 1986, the
Miailhes demanded the return of the properties but to no avail.
In March 23, 1990, William Miailhe instituted an action for the annulment of the sale. It
was ruled that the action had already prescribed.
Whether or not the action has already prescribed.
Yes. Actions for the annulment of contracts prescribe in four years. If the ground for
annulment is vitiation of consent by intimidation, the four-year period starts from the time such
defect ceases. The running of this prescriptive period cannot be interrupted by an extrajudicial
demand made by the party whose consent was vitiated. If the facts demonstrating the lapse of
the prescriptive period are apparent from the records, the complaint should be dismissed.

Dalay vs Aquiaitin
Ciriaco Villarin, being the owner of 6 parcels of land executed a document in favor of
Eugenio Gomez, acknowledging a debt. The document states that when he fails to pay his debt
when the date agreed upon comes, the lands secured shall be used as payment. Villarin failed to
pay his debt and Eugenio, believing him to be entitled to the lands, executed a document in favor
of Juan Dalay, transferring to the latter the lands by virtue of a sale. Therefore, Juan Dalay, took
possession of such lands. In an affidavit made by Villarin, he acknowledged the title and transfer
of the lands to Eugenio.
However, 15 days after, Villarin contracted a debt in favor of Bernardino Aquiatin and
used the same properties as security for payment. A civil case was then filed. The CFI decided in
favor of Aquiatin and the lands were levied.
Dalay then instituted an action against Aquiatin and Maximo, the deputy sheriff, to have
himself declared as the owner of said lands. The answer of Aquiatin alleges that the sale upon
which Dalay relies is simulated and fraudulent, and that said plaintiff had not had exclusive
possession of, nor title to, said lands.
ISSUE: Whether or not the sale was void.
No. The transfer is not void per se inasmuch as Villarin consented to the said property
passing to Gomez in payment of the debt after the expiration of the period for payment, if the debt

was not paid. There is no question as to the occurrence of the other elements of this contract
made in favor of Dalay, the defect consisting in Villarin not having previously executed the deed of
assignment he had promised. This defect, which would have been a ground for annulling this
transfer made by Gomez in favor of Dalay, had Villarin brought the proper action, was cured by
the act of said Villarin in executing the document wherein he acknowledged that the title to, and
possession of, said lands were transferred to Gomez as in a real and absolute sale.

Bastida and Ysmael vs. Dy Buncio

Francisco Bastida and Juan Ysmael & Co. entered into a partnership agreement for the
operation of a lard and oil factory. While they were engaged in this business, Dy Buncio & Co.
authorized Bastida as a broker to offer for sale its own oil and lard factory in Makati, Rizal for
P300,000, P100,000 of which was to be paid upon signing the deed and P200,000 payable in
monthly installments.
Bastida offered the factory to Ysmael who was interested but found the price to be high
but signified the intention to inspect the property. Dy Buncio leased the factory for two years to
Bastida and gave him an option to buy it within the same period at the reduced price of P260,000.
The rental of the factory was fixed at P3,000 a month.
Pursuant to the lease with option to buy, Bastida and Ysmael took possession of the lard
and oil factory on September 28, 1948 and operated the business under the name of
"Washington Lard and Oil Factory". This arrangement was well known to Dy Buncio.
On December 2, 1948, an agreement was entered into between Ysmael and Bastida
whereby the latter assigned to the former his option to buy the factory. Dy Buncio wrote to
Bastida on the following day, August 30, expressing his objection to the transfer of the option to a
third person.
The lower court ruled that the option given by Dy Buncio to Bastida to buy the oil and lard
factory in question is valid and binding, that it was validly assigned to Ysmael, who gave notice of
his intention to exercise the option within the two-year period agreed upon, and that,
consequently, defendant is bound to respect it and to option.
Whether or not the assignment made by Bastida is valid.

Yes. It appears that, at the time the authority was given, the manifest purpose of Dy
Buncio was to have Bastida offer the property for sale to Ysmael. The intention was not to sell it
exclusively to Bastida, as now claimed by Dy Buncio, so much so that he previously gave Bastida
an authority to sell the property for P300,000 to any interested person. There is therefore no
impediment on the part of Bastida to transfer his right under the option, and this he may do either
under the contract or under the law. Thus, "All rights acquired by virtue of an obligation are
transmissible in accordance with law if the contrary is not stipulated"

Manuel Ruiz vs. CA

The Quinoneses recovered the ownership of a parcel of land from Corcuera. However,
instead of partitioning the land among the surviving heirs, the Quinoneses with the participation of
their counsel, Manuel Ruiz, was able to pressure the former into executing a simulated deed of
sale in favor of Macario Quicio. However, the real purchaser was in fact, Manuel Ruiz. The
purchase price was inadequate and unconscionable.
Manuel Ruiz was subsequently able to transfer the certificate of title in his name. The
respondents filed a motion for the recovery of the parcel of land alleging that the sale was void
because it is a violation of the prohibition against lawyers from purchasing property in litigation in
which they have participated.
Whether or not the sale to Ruiz was void.
Yes. Not only was the sale of the land in question to Ruiz, as counsel for the plaintiffs
perfected while the land in dispute was still in litigation, but also that there was collusion among
all the original petitioners herein to bring about the assailed sales transactions induced primarily
by the ascendancy exercised by Ruiz over his clients in order to make it appear that the said land
was purchased by a buyer in good faith thereby precluding its legitimate owners from recovering
the same.
Evidently, a contract entered into under such circumstances, to the extent that it
prejudices third persons with legitimate claims, is null and void ab initio because its perfection and
consummation constitute a violation of public policy due to the illegal purposes by which it was

motivated and because such an agreement carries with it the patent badges of absolute

Menil vs. CA
Agueda Garan obtained a homestead patent over the land in question. A title was issued
in her name. She sold the land to Patenciano Menil within the 5-year prohibitive period as
evidenced by a deed of sale. However, the parties did not register the sale so the land remained
in Garans name.
Subsequently, another deed of sale was executed in favor of the same vendee and this
time it was registered. Menil mortgaged the land to the Development Bank of the Philippines to
secure an agricultural loan.
Menil and his wife were in possession of the land when Garan forcibly took possession
thereof. The latter filed an action for quieting of title against the former, but such complaint was
However, Garan still refused to vacate the premises. The lower court ruled that Menil is
entitled to the land but the CA declared the sale as null and void and ordered the cancellation of
the certificate of title.
Whether or not the sale was null and void.
Yes. The law prohibiting any transfer or alienation of homestead land within five years
from the issuance of the patent does not distinguish between executory and consummated sales;
and it would hardly be in keeping with the primordial aim of this prohibition to preserve and keep
in the family of the homesteader the piece of land that the state had gratuitously given to them, to

hold valid a homestead sale actually perfected during the period of prohibition but with the
execution of the formal deed of conveyance and that the delivery of possession of the land sold to
the buyer deferred until after the expiration of the prohibitory period, purposely to circumvent the
very law that prohibits and declares invalid such transaction to protect the homesteader and his

Carantes vs. CA
A proceeding for expropriation was commenced by the government for the construction of
the Loakan Airport and a portion of Lot 44, which was originally owned by Mateo Carantes, was
needed for the landing field. The lot was subdivided into Lots Nos. 44-a (the portion which the
government sought to expropriate), 44-b, 44-c, 44-d and 44-e. Negotiations were also under way
for the purchase by the government of lots 44-b and 44-c.
When Mateo Carantes died, his son Maximino Carantes was appointed administrator of
the estate and filed a project of partition of the remaining portion of Lot 44 wherein he listed as
the heirs of Mateo Carantes who were entitled to inherit the estate, himself and his brothers and
sisters. An Assignment of Right to Inheritance was executed by the children of Mateo and the
heirs of Apung Carantes in favor of Maximino Carantes for a consideration of P1. Maximino sold
to the government lots nos. 44-b and 44-c and divided the proceeds of the sale among himself
and the other heirs of Mateo.
A complaint was instituted by the three children of Mateo and the heirs of Apung
Carantes against Maximino praying that the deed of assignment be declared null and void.
Whether or not the Assignment of Right to Inheritance is null and void.
No. Article 1409 (2) of the new Civil Code relied upon by the respondent court provides
that contracts "which are absolutely simulated or fictitious" are inexistent and void from the
beginning. The basic characteristic of simulation is the fact that the apparent contract is not really

desired or intended to produce legal effects or in any way alter the juridical situation of the
The respondents' action may not be considered as one to declare the inexistence of a
contract for lack of consideration. It is total absence of cause or consideration that renders a
contract absolutely void and inexistent. 5 In the case at bar consideration was not absent. The
sum of P1.00 appears in the document as one of the considerations for the assignment of
inheritance. In addition, the document recites that the decedent Mateo Carantes had, during his
lifetime, expressed to the signatories to the contract that the property subject-matter thereof
rightly and exclusively belonged to the petitioner Maximino Carantes. This acknowledgment by
the signatories definitely constitutes valuable consideration for the contract.

Sarmiento vs. Salud

Spouses Sarmiento purchased from the Philippine Housing and Homesite Corporation a
residential lot. A certificate of title was issued in their favor. This title contained an annotation that
the land cannot be sold within 25 years from the date of the contract and that it in case it needs to
be resold it may only be sold to PHHC.
The spouses obtained a loan from Jorge Salud and executed a mortgage on the land in
favor of the latter. The spouses failed to redeem the property. Jorge Salud was able to buy the
same at a public auction.
Subsequently, the spouses sought to annul the foreclosure proceedings, claiming that the
land may not be sold within 25 years from the contract date.
Whether or not the spouses have a cause of action.
None. Even if the transaction was wrongful, still, as between themselves, the mortgagors
and the mortgagee-purchaser were both in pari delicto, being participes criminis as it were; for
both were aware of the existence of the stipulated condition in favor of the PHHC, yet both
entered into an agreement tending to violate said condition and nullify its effects. Both parties
being equally guilty, neither was entitled to complain against the other. As argued for appellant,
the appellees Sarmiento entered into the transaction with open eyes, and having benefited from it
to the extent of the loan made by appellant, they should be held in estoppel to assail and annul
their own deliberate acts.

Rodriguez vs. Rodriguez

Concepcion Felix, widow of the late Don Felipe Calderon and with whom she had one
living child, Concepcion Calderon, contracted a second marriage on June 20, 1929, with Domingo
Rodriguez, widower with four children by a previous marriage, named Geronimo, Esmeragdo,
Jose and Mauricio, all surnamed Rodriguez.
Prior to her marriage to Rodriguez, Concepcion Felix was the registered owner of 2
fishponds. Under date of January 24, 1934, Concepcion Felix appeared to have executed a deed
of sale conveying ownership of the aforesaid properties to her daughter, Concepcion Calderon,
for the sum of P2,500.00, which the latter in turn appeared to have transferred to her mother and
stepfather by means of a document dated January 27, 1934.
On March 6, 1953, Domingo Rodriguez died intestate. On March 16, 1953, the abovenamed widow, children and grandchildren of the deceased entered into an extra-judicial
settlement of his (Domingo's) estate, consisting of one-half of the properties allegedly belonging
to the conjugal partnership. Among the properties listed as conjugal were the two fishponds.
Later, the relationship between the widow and her stepchildren had turned for the worse.
Thus, when she failed to deliver to them the balance of the earnings of the fishponds, her
stepchildren endorsed the matter to their lawyer who sent a letter of demand to the widow for
payment thereof.
Concepcion sought to declare the transfer of the properties to the conjugal partnership on
the ground that her husband employed force and pressure on her to do the same.
Whether or not the Felix may recover the fishponds.

No. Unfortunately for herein appellant, in contracts invalidated by illegal subject matter or
illegal causa, Articles 1305 and 1306 of the Civil Code then in force apply rigorously the rule in
pari delicto non oritur action, denying all recovery to the guilty parties inter se. And appellant is
clearly as guilty as her husband in the attempt to evade the legal prohibition against donation
between spouses.

Bough vs. Cantiveros

Matilde Cantiveros is the owner of various parcels of realty in Leyte. She and her husband
Jose Vasquez, signed a marital contract of separation. Basilia Hanopol, a cousin, who was
married to Gustavus Bough, lived with Cantiveros.
Bough told Cantiveros that her husband Vasquez was in town and might contest the contract
for the separation of the conjugal property. Cantiveros was then induced to sign a fictitious
contract of sale of all her property which consist of 63 parcels of land to Basilia Bough.
In order to reassure Cantiveros that they would not take advantage of the fictitious sale,
spouses Bough prepared and signed a deed of donation by them to Cantiveros of all the property
to be effective in case of their death and their children before the death of Cantiveros. She
remained in possession of the property.
The spouses Bough filed a complaint for recovery of possession of the property covered by
the deed of sale. Cantiveros asked that judgment be rendered declaring the contract of sale
theretofore made between herself and Basilia Bough null and void.

Whether or not the sale must be declared null and void.
Yes. 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 finds them. 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 they conveyance was wrongfully induced by the grantee through imposition or
overreaching, or by false representations, especially by one in a confidential relation.
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 sufficient to
vitiate the transaction.

Perez vs. Herranz

Herranz and Smith Bell & Co., as agents of the Manila Shipping and Transportation
Company, executed a bill of sale of a steamer to Perez for P58,000. It was paid by check of the
defendant. Of the sum of 58,000, Herranz retained an interest amounting to P48,000, the other
P10,000 being furnished by Perez. However, the title was placed in the name of Perez alone,
because he was a native and Herranz was a Spaniard, thus being prohibited from holding the
Whether or not Herranz may recover ownership of the steamer.
Yes. It is a familiar principle that the courts will not aid either party to enforce an illegal
contract, but will leave them both where it finds them; but where the plaintiff can establish a cause
of action without exposing its illegality, the vice does not affect his right to recover.
In the case at bar the plaintiff could establish prima facie his whole ownership by the bill
of sale from Smith, Bell & Co. and the official registration. The defendant, on his part, might
overthrow this title by proof through a certain subsequent agreement between him and the
plaintiff dated March 16, 1902, that they had become owners in common of the vessel, the
agreement not disclosing the illegal motive for placing is not in itself prohibited, for the United
States courts recognize the equitable ownership of a vessel as against the holder of a legal title,
where the arrangement is not one in fraud of the law.