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Rescissible Contracts

ROSENCOR V. INQUING (March 08, 2001)

Respondents are tenants of a two-storey residential apartment in
Tomas Morato QC. The lease was not covered by any contract.
Lessees were verbally given by the lessors the pre-emptive right to
purchase the property in case of sale.
The original lessors died and their heir also promised the lessees the
same pre-emptive right to purchase. The new lessors represented by
Eufrocina de Leon demanded the lessees to vacate the property
because the building will allegedly be demolished but after the lessees
declined, she sent them a letter offering to sell the property for 2M.
Lessees made a counter offer of 1M but no reply was made by the
De leon subsequently informed the lessees that the property was
already sold to Rosencor. Lessees claimed that they were deceived
because the property was already sold to Rosencor before it was
offered to them. They offered to reimburse the payment to the lessors
but the offer was declined as hence, this petition.
WON the lessors should recognize the pre-emptive right of the lessees
even if it was only given verbally.
The right of first refusal is not covered by the Statute of Frauds. The
application of such statute presupposes the existence of a perfected
contact which is no applicable in this case. As such, a right of first
refusal need not be written to be enforceable and can be proved by oral
Lessees have proven that the lessors admit the right of first refusal
given to them when the property was offered to them for 2M.

The prevailing doctrine is that a contract of sale entered in violation of

right of first refusal is rescissible. However, this doctrine cannot be
applied here because the vendees (Rosencor) is in good faith. Under
Art.1358, recission cannot take place when things which are the object
of sale is legally in possession of third person who did not act in bad
Rosencor could not have acted in bad faith because they are not aware
of the right of first refusal given verbally. Respondents should instead
file for damages.
Khe Hong Cheng
Union Bank vs. Ong
Spouses Alfredo Ong and Susana Ong own the majority capital
stock of Baliwag Mahogany Corporation (BMC).On October
10, 1990, the spouses executed a Continuing Surety Agreement
in favor of Union Bank to secure aP40,000,000.00-credit line
facility made available to BMC.
The agreement expressly stipulated a solidary liability
undertaking.On October 22, 1991, the spouses Ong, for
P12,500,000.00, sold their 974-square meter lot located in
Greenhills, San Juan, Metro Manila, together with the house
and other improvements standing thereon, to their corespondent, Jackson Lee.
The following day, Lee registered the sale and was then issued
Transfer Certificate of Title (TCT) No. 4746-R. At about this
time, BMC had already availed itself of the credit facilities, and
had in fact executed a total of twenty-two (22) promissory
notes in favor of Union Bank.
On November 22, 1991, BMC filed a Petition for
Rehabilitation and for Declaration of Suspension of
Paymentswith the Securities and Exchange Commission
To protect its interest, Union Bank lost no time in filing with
the RTC of Pasig City an action for rescission of the sale
between the spouses Ong and Jackson Lee for purportedly
being in fraud of creditors.

(1) insufficiency of consideration, the purchase price

of P12,500,000.00 being below the fair market value of the
subject property at that time;
(2) lack of financial capacity on the part of Lee to
buy the property at that time since his gross income for the
year 1990, per the credit investigation conducted by the
bank, amounted to only P346,571.73;
(3) Lee did not assert absolute ownership over the
property as he allowed the spouses Ong to retain possession
thereof under a purported Contract of Lease dated October
29, 1991.
Whether or not the Ong-Lee contract of sale partakes of a conveyance
to defraud Union Bank
The Ong-Lee contract of sale partakes a conveyance of bona
fide transaction and not a trick to defeat creditors
Contracts in fraud of creditors are those executed with the
intention to prejudice the rights of creditors. They should
not be confused with those entered into without such malintent, even if, as a direct consequence thereof, the creditor
may suffer some damage.
In the present case, respondent spouses Ong, had sufficiently
established the legitimacy of the sale. It was supported by
sufficient consideration. The disparity between the price and
the real value of the property was not as gross to support a
conclusion of fraud.
Furthermore, there was no evidence to prove that the spouses
Ong and Lee were conniving cheats. Even if the spouses Ong
did not leave the premises immediately after the sale, such
action was supported by a valid contract of lease.
It could not also be contended that Lee was not financially
capable of purchasing the property, since mere income for a
specific year is not sufficient to establish his incapacity.
It is true that respondent spouses, as surety for BMC, bound
themselves to answer for the latters debt.

Nonetheless, for purposes of recovering what the eventually

insolvent BMC owed the bank, it behooved the petitioner to
show that it had exhausted all the properties of the spouses
UB failed to show that it has no other legal recourse to obtain
satisfaction for its claim; hence, it is not entitled to the
rescission asked.
On a final note, the Insolvency Law cannot be applied in this
case. First, the spouses Ong had not filed a petition for a
declaration of their own insolvency; neither has one been filed
against them. Second, the real debtor of petitioner bank in this
case is BMC.
Third, the twin elements of good faith and valuable and sufficient
consideration have been duly established, giving no occasion to apply
Section 70 of the Insolvency Law, which considers transfers made
within a month after the date of cleavage void, except those made in
good faith and for valuable pecuniary consideration.
G.R. No. 173441

December 3, 2009


QUIRONG, Petitioners,

Emilio Dalope died

he left a lot to his wife, Felisa and their nine children, one of
whom was Rosa Dalope-Funcion.

To enable Rosa and her husband Antonio Funcion (the

sale carried substantially the same waiver of warranty against

Funcions) get a loan from respondent Development Bank of

eviction and of any adverse lien or encumbrance.

the Philippines (DBP), Felisa sold the whole lot to the


11 Sofia Quirong having since died, her heirs (petitioner Quirong

heirs) filed an answer and asked the RTC to award the lot to

the Funcions mortgaged the lot with the DBP.

after the Funcions failed to pay their loan, the DBP foreclosed

them and, should it instead be given to the Dalopes, to allow

the Quirong heirs to recover the lots value from the DBP. But,

the mortgage on the lot


DBP conditionally sold the lot to Sofia Quirong4 for the price
of P78,000.00.

In their contract of sale, Sofia Quirong waived any warranty

against eviction.

because the heirs failed to file a formal offer of evidence, the

trial court did not rule on the merits of their claim to the lot
and, alternatively, to relief from the DBP.
12 On December 16, 1992 the RTC rendered a decision, declaring
the DBPs sale to Sofia Quirong valid only with respect to the
shares of Felisa and Rosa Funcion in the property. It declared
Felisas sale to the Funcions, the latters mortgage to the DBP,

The contract provided that the DBP did not guarantee

and the latters sale to Sofia Quirong void insofar as they

possession of the property and that it would not be liable for

prejudiced the shares of the eight other children of Emilio and

any lien or encumbrance on the same.

Felisa who were each entitled to a tenth share in the subject lot.

Two months after that sale or on November 28, 1983 Felisa and

13 The DBP received a copy of the decision on January 13, 1993

her eight children (collectively, the Dalopes)5 filed an action for

and, therefore, it had until January 28, 1993 within which to

partition and declaration of nullity of documents with damages

file a motion for its reconsideration or a notice of appeal from

against the DBP and the Funcions before the Regional Trial

it. But the DBP failed to appeal supposedly because of

Court (RTC)

excusable negligence and the withdrawal of its previous

counsel of record.8

10 notwithstanding the suit, the DBP executed a deed of absolute

sale of the subject lot in Sofia Quirongs favor. The deed of

14 RTC judgment became final on January 28, 1993 and the court

19 The DBP filed a motion to dismiss the action on ground of

issued a writ of execution,

15 DBP resisted the writ by motion to quash, claiming that the

prescription and res judicata but the RTC denied their motion.
20 RTC rendered a decision,11 rescinding the sale between Sofia

decision could not be enforced because it failed to state by

Quirong and the DBP and ordering the latter to return to the

metes and bounds the particular portions of the lot that would

Quirong heirs the P78,000.00 Sofia Quirong paid the bank.12

be assigned to the different parties in the case.

21 CA reversed the RTC decision and dismissed the heirs action
16 RTC denied the DBPs motion, prompting the latter to seek

on the ground of prescription. The CA concluded that,

recourse by special civil action of certiorari directly with this

reckoned from the finality of the December 16, 1992 decision

Court in G.R. 116575, Development Bank of the Philippines v.

in Civil Case D-7159, the complaint filed on June 10, 1998 was


already barred by the four-year prescriptive period under

Article 1389 of the Civil Code.

17 On September 7, 1994 the Court issued a resolution, denying

the petition for failure of the DBP to pay the prescribed fees.
This resolution became final and executory on January 17,

Issue: Whether or not the Quirong heirs action for rescission of

respondent DBPs sale of the subject property to Sofia Quirong was

18 On June 10, 1998 the Quirong heirs filed the present

already barred by prescription

action10 against the DBP before the RTC fro rescission of the
contract of sale between Sofia Quirong, their predecessor, and
the DBP and praying for the reimbursement of the price of
P78,000.00 that she paid the bank plus damages. The heirs
alleged that they were entitled to the rescission of the sale
because the decision in Civil Case D-7159 stripped them of
nearly the whole of the lot that Sofia Quirong, their
predecessor, bought from the DBP.


the CA did not state in its decision the date when the RTC
decision in Civil Case D-7159 became final and executory,
which decision resulted in the Quirong heirs loss of 80% of
the lot that the DBP sold to Sofia Quirong.

Petitioner heirs claim that the prescriptive period should be

Supreme Court had to answer the issue of whether the action

reckoned from January 17, 1995, the date this Courts

of the Quirong heirs was "for rescission" or "upon a written

resolution in G.R. 116575 became final and executory.15


But the incident before this Court in G.R. 116575 did not deal

Their action was for rescission, since their complaint in Civil

with the merit of the RTC decision in Civil Case D-7159. That

Case CV-98-02399-D asked for the rescission of the contract of

decision became final and executory on January 28, 1993

sale between Sofia Quirong, their predecessor, and the DBP

when the DBP failed to appeal from it within the time set for

and the reimbursement of the price of P78,000.00 that Sofia

such appeal. The incident in G.R. 116575 involving the

Quirong paid the bank plus damages. The prescriptive period

issuance of the writ of execution did not affect the finality of

for rescission is four years.

the decision in Civil Case D-7159, the prescriptive period

remained to be reckoned from January 28, 1993, the date of
such finality.

But the Supreme Court said that:

As to the applicable period of prescription, the DBP claims that

it should be four years as provided under Article 1389 of the
Civil Code.16

the remedy of "rescission" is not confined to the

rescissible contracts enumerated under Article 1381.17

Article 1389 provides that "the action to claim rescission

must be commenced within four years."

Article 1191 of the Civil Code gives the injured party in

reciprocal obligations, such as what contracts are about,

The Quirong heirs, on the other hand, claim that it should be 10

the option to choose between fulfillment and

years as provided under Article 1144 which states that actions

"rescission." Arturo M. Tolentino, a well-known

"upon a written contract" must be brought "within 10

authority in civil law, is quick to note, however, that the

years from the date the right of action accrues."

equivalent of Article 1191 in the old code actually uses

the term "resolution" rather than the present

"rescission."18 The calibrated meanings of these terms

12 In the case at bar, the SC said that the cause of action of the

are distinct.

Quirong heirs stems from their having been ousted by final

judgment from the ownership of the lot that the DBP sold to

10 "Rescission" is a subsidiary action based on injury to the

Sofia Quirong, their predecessor, in violation of the warranty

plaintiffs economic interests as described in Articles 1380

against eviction that comes with every sale of property or

and 1381.

"Resolution," the action referred to in Article 1191,

on the other hand, is based on the defendants
breach of faith, a violation of the reciprocity

thing. Article 1548 of the Civil Code provides:

Article 1548. Eviction shall take place whenever by a final judgment
based on a right prior to the sale or an act imputable to the vendor, the
vendee is deprived of the whole or of a part of thing purchased.

between the parties. As an action based on the

binding force of a written contract, therefore,


rescission (resolution) under Article 1191 prescribes

in 10 years. Ten years is the period of prescription of
actions based on a written contract under Article

With the loss of 80% of the subject lot to the Dalopes by reason of the
judgment of the RTC in Civil Case D-7159, the Quirong heirs had the
right to file an action for rescission against the DBP pursuant to the
provision of Article 1556 of the Civil Code which provides:

11 Article 1191 gives the injured party an option to choose

between, first, fulfillment of the contract and, second, its
rescission. An action to enforce a written contract (fulfillment)
is definitely an "action upon a written contract," which
prescribes in 10 years (Article 1144). It will not be logical to
make the remedy of fulfillment prescribe in 10 years while the
alternative remedy of rescission (or resolution) is made to
prescribe after only four years as provided in Article 1389
when the injury from which the two kinds of actions derive is
the same.

Article 1556. Should the vendee lose, by reason of the eviction, a part
of the thing sold of such importance, in relation to the whole, that he
would not have bought it without said part, he may demand the
rescission of the contract; but with the obligation to return the thing
without other encumbrances than those which it had when he acquired
it. x x x
And that action for rescission, which is based on a subsequent
economic loss suffered by the buyer, was precisely the action that the
Quirong heirs took against the DBP. Consequently, it prescribed as

Article 1389 provides in four years from the time the action accrued.
Since it accrued on January 28, 1993 when the decision in Civil Case
D-7159 became final and executory and ousted the heirs from a
substantial portion of the lot, the latter had only until January 28, 1997
within which to file their action for rescission. Given that they filed
their action on June 10, 1998, they did so beyond the four-year period.
Thus, the action of the heirs was barred by prescription.

This case involves the estate of Spouses Florentino and
Maximina Baylon who died on November 7, 1961 and May 5, 1964
respectively. They were survived by their legitimate children namely
Rita, Victoria, Dolores, Panfila, Ramon and Lilia B. Ada (petitioner).
Dolores died intestate on August 4, 1976. Victoria died on November
11, 1981 survived by daughter Luz Adanza (petitioner). Ramon died
intestate on July 6, 1989 survived by his son Florante Baylon
(respondent) and second wife Flora with children Remo, Eric and
On July 3, 1986 petitioners Ada, et al. filed with the RTC a
complaint for partition, accounting and damages against Florante, Rita
and Panfila. They alleged that Spouses Baylon owned 43 parcels of
land all situated in Negros Oriental. After the death of the Spouses
Baylon, the y claimed that Rita took possession of the said parcels of
land and appropriated for herself the income from the same. Using the
income of the said land, Rita allegedly purchased two parcels of land
Lot No. 4709 and half of Lot no. 4706 in Dumaguete. Petitioners
averred that Rita refused to affect partition of the said parcels of land.
In their answer, respondents said that Lot no. 4709 and half of Lot no.

4706 were acquired by Rita using her own money and denied
petitioners allegations. Furthermore, she expressed no objection to the
partition of the estate of the Spouses Baylon but only with respect to
the co-owned parcels of land.
During the pendency of the case, Rita through a Deed of
Donation dated July 6, 1997 conveyed Lot no. 4709 and half of Lot no.
4706 in favor of nephew Florante Baylon. On July 16, 2000 Rita died
intestate. After the petitioners learned of the said donation inter vivos,
they filed a Supplemental Pleading on February 6, 2002 praying for
the said donation in favor of respondent Florante be rescinded in
accordance with Article 1381 (4) of the Civil Code. Florante and
Panfila opposed the rescission of the donation asserting that Article
1381 (4) applies only when there is already a prior juridical decree on
the ownership of the properties under litigation.
RTC declared the donation inter vivos rescinded without
prejudice to the share of Florante to the estate of Rita and directing
such parcels of land be included in the division of the property as of
Rita Baylon among her heirs. CA reversed the RTCs decision saying
that the rescission of the donation was premature. Petitioners must
first secure a favourable ruling that Lot no. 4709 and half of Lot no.
4706 belongs to the estate of Spouses Baylon and not to Rita.
INTER VIVOS OF LOT NO. 4709 and half of Lot no. 4706 IN
VIVOS OF LOT NO. 4709 and half of Lot no. 4706 IN FAVOR OF

Art 1381 The following contracts are rescissible:

4. Those which refer to things under litigation if they have been
entered into by the defendant without the knowledge and approval of
the litigants or of competent judicial authority.
The rescission of a contract under Article 1381 (4) of the Civil Code
only requires the concurrence of the following: first, the defendant,
during the pendency of the case, enters into a contract which refers to
the thing subject of the litigation; and second, the said contract was
entered into without the knowledge and approval of the litigants or of a
competent judicial authority. As long as the foregoing requisites
concur it becomes the duty of the court to order the rescission of the
said contract.
The rescission under Article 1381(4) of the Civil Code is not
preconditioned upon the judicial determination as to the ownership of
the thing subject of litigation. The primordial purpose of the said
article is to secure the possible effectivity of the impending judgement
by a court with respect to the thing subject of litigation. It seeks to
protect the binding effect of a litigation regardless which among the
contending claims therein would subsequently be upheld.

Voidable Contracts
Samonte vs. CA (Voidable Contracts)
There was a parcel of land (lot No. 216) which was a subject of
dispute situated in Agusan del Norte covered by original certificate of
title RO 238 (555) issued in the name of Apolonia Abao and the
daughter Irenea Tolero pro indiviso.
Two cases were separately filed in RTC. The first case was an
action for quieting of title and recovery of possession of a parcel of
land formed the entire property. On the other hand, the second case
had similar action except that a portion of land was involve in the
entire lot 216. Both cases were filed by the heirs of Abao and Tolero.
Complaint sought the annulment of several CTC covering
portion of lot 216 and the reinstatement of OCT No. RO 238 (555).
The defendants in the second case were Jadol spouses, Jacobo
Tagorda, and Aurelio Rotor as herein petitioners.
The litigation that stems out the second cases started when the
OCT No. RO 238 (555) issued in 1927 in the name of Apolonia Abao
and Irenea Tolero in equal undivided shares was administratively
reconstituted on August 8, 1957 based on an Affidavit of Extrajudicial
Settlement and Confirmation of Sale.
That OCT No. RO 238 was cancelled in lieu thereof TCT No.
RT 476 issued in the name of Irenea Tolero and Nicholas Jadol and
that each of them has half of the shares of the property. On Feb. 13,
1959 based on subdivision plan subdividing the lots, the Register of
Deeds cancelled the TCT No. RT 476 and issued RT 553 in the name
of Tiburcio Samonte as to lot 216-A and TCT No. RT- 554. For lot
216-B, it was then cancelled to issue TCT No. RT 555 issued in the
name of Jacobo Tagorda and TCT No. 556 in the name of Irenea
Plaintiff claim ownership of the entire lot as of the area 12,
753 sq.m was registered in the name of their Mother Irenea Tolero and
half to their grandmother Apolonia Abao. They also questioned the
series of cancellation of certification of titles starting from the original
title and the Deed of Extra Judicial Settlement and Confirmation of
Sale executed by Ignacio Atupan who claim to be the sole son of
Apolonia Abao and that the predecessors in interest have not signed

any document agreeing as to the manner how lot 216 was to be

divided, nor have they consented to the partition of the same.
Defendant Samonte claim that he bought portions of the lot 216
in good faith. As he was made to believe that all papers in possession
of his vendors were all papers in possession of his vendors were all in
Defendant Jadol spouses claim that they became owners of
portion of lot 216 by purchase from Ignacio Atupan and Apolonia
Abao signed by Irenea Tolero.
Petitioner contends that respondents action in the court a quo
had already presented. Generally, action for reconveyance of real
property based on fraud may be barred by Statute of limitations which
requires that action must be commenced within 4 years from the
discovery of Fraud and in case of registered land; such discovery is
deemed to have taken place from the date of reg. of title. Also,
respondents action for reconveyance had long prescribed. Since 18
years, had already lapsed from the issuance of TCT RT 476 until the
time when respondents filed action in Court.
The trial Court ruled in favour of the respondents. Ignacio
Atupan caused the fraudulent cancellation of OCT and adjudicated
unto himself of lot 216 by misrepresenting himself as the sole heir
of Apolonia Abao.
Atupans Affidavit is tainted with fraud because he falsely
claimed that he was the sole heir of Abao. Despite this knowledge
Jadol Spouses still presented the affidavit of Atupan when the cause
the cancellation of OCT. Thus, this further pointed out that Jadol
spouses only sought the registration of these transactions 18 years after
they took place or 12 years after Abao died.
Petitioners contention is untenable in the defense of
prescription. The discovery of Fraud is deemed to have taken place
upon the registration of real property because it is considered a
constructive notice to all persons does not apply in this case.
CA affirmed the trial courts decision that the consequent
issuance of TCT of the Jadol Spouses were through fraudulent means.
Citing the case of Adille vs CA where petitioner executed a deed of
extrajudicial partition misrepresenting himself to be the sole heir of his
As a consequence, petitioner was able to secure the land title in
his name alone. His siblings then filed a case for partition on the

ground that said petitioner was only a trustee on an implied trust of the
property. The court resolved on the issue of prescription. Said
petitioner, registered the property in 1955 and the claim of private
respondents was presented in 1974.
Right of private respondents commenced from the time they
actually discovered petitioners act of defraudation. Based on Article
1456, the civil code indicates implied and constructive trust.
This law provides that If the property is acquired through
mistake or fraud, the person obtaining it is, by force of law, considered
a trustee of an implied trust for the benefit of the person from whom
the property comes.
It can be said that the Jadol Spouses were trustees on behalf of
the heirs of Abao. An action based on implied or constructive trust
prescribes in 10 years from the time of its creation or upon the alleged
fraudulent registration of the property. Hence, prescription is not a bar.
Issue: Whether or not the petitioner is a buyer in good faith.
The SC ruled in the negative. Petitioner cannot pretend to be a
purchaser in good faith. It is axiomatic that one who buys from a
person who is not a registered owner is not a purchaser in good faith.
Respondents were the only surviving heirs of Irenea Tolero.
Despite this knowledge, petitioner still bought a portion of the subject
lot from the Jadol Spouses on July 20. 1957when the same was still
registered under OCT No. RO 238 (555) in the name of Abao and
The general rule is that a person dealing with registered land
has a right to rely on the Torrens Certificate of Title and to dispense
with the need of making further inquiries. This rule, however admits of
exceptions when the party has actual knowledge of facts and
circumstances that would impel a reasonably cautious man to make
such inquiry or when the purchaser has knowledge of a defect or the
lack of title of the property in litigation. One who falls within the
exception can neither be denominated an innocent purchaser for value
nor a purchaser in good faith.
Petitioner cannot claim that he already acquired a valid title to
the property. The inscription in the registry to be effective must be
made in good faith.

A holder in bad faith of a certificate of title is not entitled to the

protection of the laws. For the law cannot be used as a shield for
(G.R. No. 143370. February 6, 2002)
Civil Case No. CEB-10766 is a suit for quieting of title. It was
instituted on September 25, 1991 by petitioner spouses Mario J.
Mendezona and Teresita M. Mendezona as initial plaintiffs, and in the
amended complaint filed on October 7, 1991, herein co-petitioner
spouses Luis J. Mendezona and Maricar L. Mendezona and Teresita
Adad Vda. de Mendezona joined as co-plaintiffs.
Carmen Ozamiz, the original owner of the subject property called the
Lahug property instituted a Notarized Deed of Absolute Sale dated
April 28. 1989 in favor of herein petitioners for and in consideration of
the sum of P1,040,000.00.
On January 15, 1991, the respondents instituted the petition for
guardianship with RTC alleging that Carmen Ozamiz, then 86 years
old, after an illness, had become disoriented and could not recognize
most of her friends; that she could no longer take care of herself nor
manage her properties due to her failing health, weak mind, and
absent-mindedness. Mario Mendezona and Luis Mendezona, herein
petitioners who are nephews of Carmen Ozamiz opposed the said
guardianship petition. In the course of the guardianship proceeding,
both parties agreed that Carmen Ozamiz needed a guardian over her
person and her properties.
Respondent Paz O. Montalvan was designated as guardian over the
person of Carmen Ozamiz while petitioner Mario J. Mendezona,
respondents Roberto J. Montalvan and Julio H. Ozamiz were
designated as joint guardians over the properties of the said ward.
Respondents Roberto and Julio filed with the guardianship court their
inventories and Accounts, listing therein Carmen Ozamizs
properties, cash, shares of stock, vehicles and fixed assets, including a
10,396 square meter property known as the Lahug property.
The respondents opposed the petitioners claim of ownership of the
Lahug property and alleged that at the time of the sale on April 28,

1989, Carmen Ozamiz was already ailing and not in full possession of
her mental faculties.
During the case, the petitioners presented the Notarized Deed of
Absolute Sale and witnesses who testified for the regularity of the said
document, on the other hand the respondents presented different
testimonials and the dispositions of Dr. Faith Go, physician of Carmen
The trial court rendered its decision in favor of the petitioners
upholding the validity of the contract and further stating said contract
was voluntarily and deliberately entered into while Carmen Ozamiz
was of sound mind. Upon appeal, the CA reversed the factual findings
of the RTC.
ISSUE: WON the wards mental faculties were seriously impaired
when she executed the contract to warrant its nullity.
The Supreme Court rules that the appellate court erred in ruling that at
the time of the execution of the Deed of Absolute Sale on April 28,
1989 the mental faculties of Carmen Ozamiz were already seriously
impaired. The testimonies of the respondents witnesses on the mental
capacity of Carmen Ozamiz are far from being clear and convincing.
Carolina Lagura, househelper of Carmen Ozamiz, testified that when
Paz Montalvan confronted Carmen about the sale of Lahug property,
Carmen denied the same. She testified that Carmen understood the
question then. Laguras declaration is inconsistent with her statement
that since 1988 Carmen could not fully understand the things around
The revelation of Dr. Faith Go did not also shed light on the mental
capacity of Carmen Ozamiz when she executed and notarized the Deed
of absolute Sale on April 28, 1989. Dr. Go merely revealed that
Carmen was suffering from certain infirmities in her body and at time
forgetful, but there was no categorical statement that Carmen
succumbed to what the respondents suggest as her alleged second
childhood. Dr. William Buot testified that there was no conclusion o
mental incapacity ever written in Dr. Gos clinical note.
It has been held that a person is not incapacitated to contract merely
because of advanced age or because of physical infirmities. Only when
such age or infirmities impair her mental faculties to such extent as to

prevent her from properly, intelligently and fairly protecting her

property rights, is she considered incapacitated. The respondents failed
to show adequate proof that at the time of the sale on April 28, 1989,
Carmen had allegedly lost control of her mental faculties.
The court note that the respondents sought to impugn only one
document, namely the Deed of Absolute Sale. However, there are nine
other important documents that were signed by Carmen Ozamiz before
or after April 28, 1989, which were not assailed by the respondents.
Such is contrary to their assertion of complete incapacity of Carmen
Ozamiz to handle her affairs since 1987. The court agrees with the trial
courts assessment that it is unfair for the respondents to claim
soundness of mind of Carmen Ozamiz when it benefits them and
otherwise when it disadvantages them. A person is presumed to be of
sound mind at any particular time and the condition is presumed to
continue to exist, in the absence of proof to the contrary. Competency
and freedom from undue influence, shown to have existed in the other
acts done or contracts executed, are presumed to continue until the
contrary is shown.

G.R. No. 150429 August 29, 2006

THE COURT OF APPEALS (Spc. Fmr. Seventh Division) and
In our syllabus this case falls under voidable contracts. Article 1390 of
the Civil Code provides that voidable contracts are those where one of
the parties is incapable of giving consent to a contract, and those
where the consent is vitiated by mistake, violence, intimidation, undue
influence, or fraud.

The petitioner in this case is a seaman who alleges that his consent was

examined at the American Hospital in Intramuros, Manila where

vitiated when he signed a form releasing his employer from any and all

the examining physician, Dr. Patricia Abesamis declared that he

liabilities related to the illness he suffered on board the vessel in which

"cannot go back to sea duty and has been observed for 120 days,

he worked as a messman.

he is being declared permanently, totally disabled."

The FACTS of the case are as follows:


In 1989, respondent NFD International Manning Agents, Inc. hired

Thereafter, authorized representatives of the respondents

the services of petitioner Roberto G. Famanila as Messman for

convinced him to settle his claim amicably by accepting the

Hansa Riga, a vessel registered and owned by its principal and co-

amount of US$13,200. Petitioner accepted the offer as evidenced

respondent, Barbership Management Limited.

by his signature in the Receipt and Release dated February 28,

1991. His wife, Gloria Famanila and one Richard Famanila, acted
as witnesses in the signing of the release.

On June 21, 1990, while Hansa Riga was docked at the port of
Eureka, California, U.S.A. and while petitioner was assisting in the
loading operations, the latter complained of a headache. Petitioner

On June 11, 1997, petitioner filed a complaint with the NLRC

experienced dizziness and he subsequently collapsed. Upon

praying for an award of disability benefits, share in the insurance

examination, it was determined that he had a sudden attack of left

proceeds, moral damages and attorneys fees.

cerebral hemorrhage from a ruptured cerebral aneurysm. Petitioner

underwent a brain operation and he was confined at the Emmanuel
Hospital in Portland, Oregon, U.S.A. On July 19, 1990, he
underwent a second brain operation.

His complaint was dismissed by the Acting Executive Labor Arbiter on

the ground of prescription, and his subsequent appeal was dismissed
by the NLRC, which found the appeal to be without merit and ordered
its dismissal and also denied the motion for reconsideration. The Court
of Appeals also dismissed the petition for lack of merit and denied the
motion for reconsideration. Petitioner then filed the present motion for

Owing to petitioners physical and mental condition, he was

repatriated to the Philippines. On August 21, 1990, he was

review before the Supreme Court.


he signed the subject document, the same cannot still lead to the
conclusion that he did not voluntar[il]y accept the agreement, for his

Petitioner claims that he did not sign the Receipt and Release

wife and another relative witnessed his signing.

voluntarily or freely because he was permanently disabled and in

financial constraints. These factors allegedly vitiated his consent which

Moreover, the document entitled receipt and release which was

makes the Receipt and Release void and unenforceable.

attached by petitioner in his appeal does not show on its face any
violation of law or public policy. In fact, petitioner did not present any

HELD: The petition lacks merit.

A vitiated consent does not make a contract void and unenforceable. A
vitiated consent only gives rise to a voidable agreement. Under the
Civil Code, the vices of consent are mistake, violence, intimidation,
undue influence or fraud. If consent is given through any of the
aforementioned vices of consent, the contract is voidable. A voidable
contract is binding unless annulled by a proper action in court.
Petitioner contends that his permanent and total disability vitiated his
consent to the Receipt and Release thereby rendering it void and
unenforceable. However, disability is not among the factors that
may vitiate consent. Besides, save for petitioners self-serving
allegations, there is no proof on record that his consent was vitiated on
account of his disability. In the absence of such proof of vitiated
consent, the validity of the Receipt and Release must be upheld. We
agree with the findings of the Court of Appeals that:

proof to show that the consideration for the same is not reasonable and
acceptable. Absent any evidence to support the same, the Court cannot,
on its own accord, decide against the unreasonableness of the
It is true that quitclaims and waivers are oftentimes frowned upon and
are considered as ineffective in barring recovery for the full measure of
the workers right and that acceptance of the benefits therefrom does
not amount to estoppel. The reason is plain. Employer and employee,
obviously do not stand on the same footing. However, not all waivers
and quitclaims are invalid as against public policy. If the agreement
was voluntarily entered into and represents a reasonable settlement, it
is binding on the parties and may not later be disowned simply because
of change of mind. It is only where there is clear proof that the waiver
was wangled from an unsuspecting or gullible person, or the terms of
the settlement are unconscionable on its face, that the law will step in
to annul the questionable transaction. But where it is shown that the

In the case at bar, there is nothing in the records to show that

person making the waiver did so voluntarily, with full understanding

petitioners consent was vitiated when he signed the agreement.

of what he was doing, and the consideration for the quitclaim is

Granting that petitioner has not fully recovered his health at the time

credible and reasonable, the transaction must be recognized as a valid

any other foreign country now held, owned or possessed by me or by

and binding undertaking, as in this case.

any person or persons, arising from or related to or concerning whether

directly or indirectly, proximately or remotely, without being limited to

To be valid and effective, waivers must be couched in clear and

unequivocal terms, leaving no doubt as to the intention of those giving
up a right or a benefit that legally pertains to them. We have reviewed

but including the said illness suffered by me on board the vessel

"HANSA RIGA" on or about 21st June 1990 at Portland, Oregon and
disability compensation in connection therewith.

the terms and conditions contained in the Receipt and Release and we
find the same to be clear and unambiguous. The signing was even

This instrument is a GENERAL RELEASE intended to release all

witnessed by petitioners wife, Gloria T. Famanila and one Richard T.

liabilities of any character and/or claims or damages and/or losses

Famanila. The Receipt and Release provides in part:

and/or any other liabilities whatsoever, whether contractual or

statutory, at common law or in equity, tortious or in admiralty, now or

That for and in consideration of the sum of THIRTEEN THOUSAND

TWO HUNDRED DOLLARS (US$13,200.00) or its equivalent in
NINE HUNDRED FOUR PESOS (365,904.00), the receipt of which is
hereby acknowledged to my full and complete satisfaction x x x I,
ROBERTO G. FAMANILA, x x x hereby remise, release and forever
discharge said vessel "HANSA RIGA", her Owners, operators,
managers, charterers, agents, underwriters, P and I Club, master,
officers, and crew and all parties at interest therein or thereon, whether
named or not named, including but not limited to BARBER SHIP

henceforth in any way related to or occurring as a consequence of the

illness suffered by me as Messman of the vessel "HANSA RIGA",
including but not limited to all damages and/or losses consisting of
loss of support, loss of earning capacity, loss of all benefits of
whatsoever nature and extent incurred, physical pain and suffering
and/or all damages and/or indemnities claimable in law, tort, contract,
common law, equity and/or admiralty by me or by any person or
persons pursuant to the laws of the United States of America, Norway,
Hongkong or the Republic of the Philippines and of all other countries



I hereby certify that I am of legal age and that I fully understand this

and all claims, demands, debts, dues, liens, actions or causes of action,

instrument which was read to me in the local dialect and I agree that

at law or in equity, in common law or in admiralty, statutory or


contractual, arising from and under the laws of the United States of

parties and things referred to herein, and I further agree that this

America, Norway, Hongkong or the Republic of the Philippines and/or

release may be pleaded as an absolute and final bar to any suit or suits

or legal proceedings that may hereafter be prosecuted by me or by any

to disability benefits up to the time that he filed the complaint on June

one claiming by, through, or under me, against any of the persons or

11, 1997, more than three years have elapsed thereby effectively

things referred to or related herein, for any matter or thing referred to

barring his claim.

or related herein.
WHEREFORE, the petition is DENIED. The Decision of the Court of
It is elementary that a contract is perfected by mere consent and from

Appeals dated March 30, 2001 in CA-G.R. SP No. 50615 which

that moment the parties are bound not only to the fulfillment of what

affirmed the Decision of the National Labor Relations Commission

has been expressly stipulated but also to all the consequences which,

dismissing petitioners complaint for disability and other benefits for

according to their nature, may be in keeping with good faith, usage and

lack of merit, and

law. Further, dire necessity is not an acceptable ground for

annulling the Receipt and Release since it has not been shown that
petitioner was forced to sign it.
Regarding prescription, the applicable prescriptive period for the
money claims against the respondents is the three year period pursuant
to Article 291 of the Labor Code which provides that:
ART. 291. Money Claims. All money claims arising from employeremployee relations accruing during the effectivity of this Code shall be
filed within three (3) years from the time the cause of action accrued;
otherwise they shall be forever barred.
Since petitioners demand for an award of disability benefits is a
money claim arising from his employment, Article 291 of the Labor
Code applies. From the time petitioner was declared permanently and
totally disabled on August 21, 1990 which gave rise to his entitlement

the Resolution dated October 5, 2001 denying the motion for

reconsideration, are AFFIRMED.
Catalan vs. Basa
Pia Gwapa
Villanueva v. Chiong GR No. 159889 June 5, 2008

Respondents Florentino and EliseraChiong were married in

1960 but have been separated in fact since 1975. During their marriage
they acquired a lot in Dipolog City.

Florentino, sold one-half of the western portion of the lot for

P8,000 to petitioner spouses Villanueva. Florentino then allowed the
petitioners to occupy the lot and build a store, a shop, and a house.

When petitioners demanded for the execution of the deed of

sale, Elisera, refused to sign the deed of sale. Elisera then filed with
the RTC a complaint for Quieting of Title with Damages and in
response, the petitioners filed a complaint for Specific Performance
with Damages

On 1992, Florentino executed the questioned Deed of Absolute

Sale in favour of the petitioners.

However, the RTC annulled the deed of absolute sale and
ordered petitioners to vacate the lot and remove all improvements
therein, and ordered Florentino to return the consideration of the sale
with interest. The CA affirmed the RTCs decision.
Issue: WON the sale by Florentino without Eliseras consent valid
Ruling: The sale is voidable.Under Article 178 of the Civil Code, the
separation in fact between husband and wife without judicial approval
shall not affect the conjugal partnership. The lot retains its conjugal
nature.Applying Article 166 of the Civil Code, the consent of both
Elisera and Florentino is necessary for the sale of a conjugal property
to be valid. In this case, the consent of Elisera was not obtained when
Florentino verbally sold the lot in 1985 and executed the Deed of
Absolute Sale on 1992. Accordingly, the contract entered by
Florentino is annullable. Moreover, Elisera timely questioned the sale
within ten years (Art 173) from the date of sale and execution of the
deed.As evidence, she presented a real property tax declaration
acknowledging her and Florentino as owners of the lot and that they
also categorically declared in the MOA they executed that the lot is a
conjugal property.
Now, if a voidable contract is annulled, the restoration of what
has been given is proper. The effect of annulment of the contract is to
wipe it out of existence, and to restore the parties, insofar as legally
and equitably possible to their original situation before the contract
was entered into. Applying Article 1398 to the instant case, the SC
ruled that petitioners Villanueva should return to
respondentsChiongthe land with its fruits and respondent Florentino
should return the sum of money he received as the price of the land,
not included the payment of interest.
Art. 178 The separation in fact between husband and wide without
judicial approval, shall not affect the conjugal partnership
Art. 160 All property of the marriage is presumed to belong to the
conjugal partnership; unless it be proved that it pertains exclusively to
the husband or to the wife.
Art. 166 Unless the wife has been declared a spendthrift, or is under
civil interdiction or is confined in a leprosarium, the husband cannot
alienate or encumber any real property of the conjugal partnership
without the wifes consent..
Art. 1398 An obligation having been annulled, the contracting parties
shall restore to each other the things which have been the subject

matter of the contract, with their fruits, and the price with its interest,
except in cases provided by law.
In obligations to render service, the value thereof shall be the basis for
G.R. No. 146730|July 4, 2008|NACHURA, J.:
The subject of this controversy is the one-fourth (1/4) portion of,
corresponding to the share of respondent Maxima Paragas in, the real
property located at Caranglaan District, Dagupan City, originally
covered by Transfer Certificate of Title No. 7316 of the Register of
Deeds of Dagupan City.
The controversy commenced with the filing of an ejectment
complainton April 12, 1993 before Branch 1 of the Municipal Trial
Court in Cities (MTCC) of Dagupan City by herein petitioner Amado
Z. Ayson, as represented by his natural father Zosimo S. Zareno
(Zareno), against respondent-spouses Felix and Maxima Paragas. The
complaint, docketed as Civil Case No. 9161, alleged, among others,
that: (1) petitioner is the registered owner of the property being
occupied by the respondent-spouses as shown by Transfer Certificate
of Title No. 59036 of the Registry of Deeds of Dagupan City in his
name; (2) respondent-spouses are occupying the said land through his
tolerance without rent; (3) on April 8, 1992, respondent-spouses
executed an Affidavit which declared:
1. That we are occupants of a parcel of land (Lot 6595-A-2) covered
by Transfer Certificate of Title No. 57684 located at Caranglaan
District, Dagupan City owned by Amado Ll. Ayson;
2. That we occupy the said land by tolerance without paying any
rental whatsoever;
3. That we further agree to vacate the aforesaid land within three (3)
months from the date hereof and to remove and transfer our house
therefrom to another place;
4. That in consideration of vacating the said parcel of land the
amount of Twenty Thousand Pesos (P20,000.00) shall be paid to us;
and, that the amount of Ten Thousand Pesos (P10,000.00) shall be paid
upon signing of this affidavit and the balance of Ten Thousand Pesos
(P10,000.00) shall be paid upon removal of our house on the third
month from date hereof.

(4) despite the receipt of the P10,000.00 upon the execution of the
Affidavit, respondent-spouses refused to vacate the land as agreed
upon; and (5) despite demands, respondent-spouses still refused to
vacate, thus constraining him to file the complaint. Aside from
respondents vacating the land, petitioner prayed for the return of
the P10,000.00 he paid them; and the payment of P10,000.00 actual
damages, P10,000.00 exemplary damages, P20,000.00 attorneys fees,
and the costs.
In their Answer, respondent-spouses alleged that Zareno had no
personality and authority to file the case and the filing of the complaint
was made in bad faith.
During the preliminary conference, the following admissions were
By petitioner:
(1) That the defendants (respondent spouses) had been in possession
of the land in question since 1930; and
(2) That the semi-concrete house of the defendants (respondent
spouses) stands on the land in question.
By respondent spouses:
(1) That the defendant (respondent) Felix Paragas had executed an
affidavit on April 8, 1992 wherein he admitted that he is occupying the
land by tolerance of the plaintiff (petitioner) without paying any rental
whatsoever and had agreed to vacate the premises within three (3)
months but refused to vacate later;
(2) That the plaintiff (petitioner) is the registered owner of the land
in question;
(3) That there was a demand to vacate the premises; and
(4) That there is a Certification to File Action in Court.
On August 31, 1993, the MTCC, Branch 1, Dagupan City decided in
favor of petitioner, based mainly on the above admissions.
Meanwhile, on October 11, 1993, during the pendency of the appeal
with the RTC, respondent-spouses filed against petitioner, as
represented by his attorney-in-fact Zosimo S. Zareno, the heirs of Blas
F. Rayos, the spouses Delfin and Gloria Alog, and Hon. Judge George
M. Mejia, as Presiding Judge of the Metropolitan Trial Court, Branch 1
of Dagupan City, also before the RTC of Dagupan City, a
complaint for declaration of nullity of deed of sale, transactions,

documents and titles with a prayer for preliminary injunction and

damages. The complaint was docketed as Civil Case No. D-10772 and
was raffled to Branch 42.
The complaint alleged, inter alia, that respondent Maxima is a coowner of a parcel of land originally covered by TCT No. 7316 of the
Registry of Deeds of Dagupan City, her share having an area of
435.75 square meters. Sometime prior to April 13, 1955, respondent
Felix, then an employee of the defunct Dagupan Colleges
(now University of Pangasinan) failed to account for the amount
of P3,000.00. It was agreed that respondent Felix would pay the said
amount by installment to the Dagupan Colleges. Pursuant to that
agreement, Blas F. Rayos and Amado Ll. Ayson, then both occupying
high positions in the said institution, required respondent-spouses to
sign, without explaining to them, a Deed of Absolute Sale on April 13,
1955 over respondent Maximas real property under threat that
respondent Felix would be incarcerated for misappropriation if they
refused to do so.
The complaint further alleged that later, respondent-spouses, true to
their promise to reimburse the defalcated amount, took pains to pay
their obligation in installments regularly deducted from the salaries
received by respondent Felix from Dagupan Colleges; that the
payments totaled P5,791.69; that notwithstanding the full payment of
the obligation, Amado Ll. Ayson and Blas F. Rayos did nothing to
cancel the purported Deed of Absolute Sale; and that they were
shocked when they received a copy of the complaint for ejectment
filed by petitioner.
Petitioner contends that respondent-spouses are bound by the judicial
admissions they made both in the ejectment case and in the case for
declaration of nullity of the Deed of Absolute Sale.
Petitioner further argues that the action instituted before the RTC,
Branch 42, Dagupan City has already prescribed. According to him,
the complaint alleged that the Deed of Absolute Sale was executed
through fraud, making the said contract merely voidable, and the
action to annul voidable contracts based on fraud prescribed in four (4)
years from the discovery of fraud. He insists that the registration of
the Deed of Absolute Sale occurred on May 4, 1955, which operated as

constructive notice of the fraud to the whole world, including

respondent-spouses. Thus, petitioner concludes that the action had
long prescribed when they filed the same on October 11, 1993, since
its cause had accrued 38 years ago.

ISSUE: W/N the action for declaration of nullity of deed of sale,

transactions, documents and titles with a prayer for preliminary
injunction and damages has prescribed?
The Deed of Absolute Sale is, in reality, an equitable mortgage or a
contract of loan secured by a mortgage.
In this case, the evidence before the RTC, Branch 42, Dagupan City
had established that the possession of the subject property remained
with respondent-spouses despite the execution of the Deed of Absolute
Sale on April 13, 1955. In fact, testimonies during the trial showed
that petitioner and his predecessors never disturbed the possession of
respondent-spouses until the filing of the ejectment case on April 12,
Moreover, the evidence presented by respondent-spouses indubitably
reveals that they signed the contract under threat of prosecution, with
the view to secure the payment of the P3,000.00 defalcated by
respondent Felix. Amado Ll. Ayson and Blas F. Rayos obviously
exerted undue influence on Felix taking advantage of the latters lack
of education and understanding of the legal effects of his signing the
Respondent-spouses have clearly proven that they have already paid
the aforesaid amount. That the obligation was paid in installments
through salary deduction over a period of 10 years from the signing of
the Deed of Absolute Sale is of no moment. It is safe to assume that
this repayment scheme was in the nature of an easy payment plan
based on the respondent-spouses capacity to pay. Also noteworthy is
that the deductions from respondent Felixs salary amounted to a total
of P5,791.69,[25] or almost double the obligation of P3,000.00.
Furthermore, it cannot be denied that petitioner failed to adduce

countervailing proof that the payments, as evidenced by the volume of

receipts, were for some other obligation.
An equitable mortgage is a voidable contract. As such, it may be
annulled within four (4) years from the time the cause of action
accrues. This case, however, not only involves a contract resulting
from fraud, but covers a transaction ridden with threat, intimidation,
and continuing undue influence which started when petitioners
adoptive father Amado Ll. Ayson and Blas F. Rayos, Felixs superiors
at Dagupan Colleges, practically bullied respondent-spouses into
signing the Deed of Absolute Sale under threat of incarceration. Thus,
the four-year period should start from the time the defect in the
consent ceases.[26] While at first glance, it would seem that the defect
in the consent of respondent-spouses ceased either from the payment
of the obligation through salary deduction or from the death of Amado
Ll. Ayson and Blas F. Rayos, it is apparent that such defect of consent
never ceased up to the time of the signing of the Affidavit on April 8,
1992 when Zareno, acting on behalf of petitioner, caused respondent
Felix to be brought to him, and taking advantage of the latter being
unlettered, unduly influenced Felix into executing the said Affidavit
for a fee of P10,000.00. The complaint praying for the nullity of the
Deed of Absolute Sale was filed on October 11, 1993, well within the
four-year prescriptive period.
Regarding the finality of the adjudication of physical possession in
favor of petitioner, it may be reiterated that the right of possession is a
necessary incident of ownership. This adjudication of ownership of
the property to respondent-spouses must include the delivery of
possession to them since petitioner has not shown a superior right to
retain possession of the land independently of his claim of ownership
which is herein rejected. Verily, to grant execution of the judgment in
the ejectment case would work an injustice on respondent-spouses
who had been conclusively declared the owners and thus, rightful
possessors of the disputed land.
On November 16, 1989 Pedro L. Rioza (Rioza) died, leaving several
heirs, which included respondents. Respondent Plazo asked from the
Register of Deeds the certified true copies of all titles under Rinozas

name, however one title (TCT 40453, one covering a sugarland in

Nasugbo was missing).
an effort to find TCT 40353, respondent Plazo found another title, TCT
55396, covering the same sugarland and canceling the missing TCT
40353. The new title, entered on July 18, 1989, was in the name of
petitioner Gregorio M. Destreza. Finally, respondent Alaras testified
that on August 1, 1989, her late father, Rioza, gave her the title of a
land that he wanted to mortgage to her uncle. Rioza told her that the
land was about five hectares and was located at Barangay Utod,
Nasugbu, Batangas. She did not, however, look at the number of the
title. A week later, unable to secure a mortgage from her uncle, she
returned the title to her father and never saw it again.
Their discovery prodded respondents Plazo and Alaras to file a
complaint against the Destreza spouses and the Register of Deeds
before the RTC of Nasugbu.

of such deeds genuineness lest the presumption of its due execution

be for naught.

Issue: Whether or not sufficient evidence warranted the nullification

of the deed of sale that the late Rioza executed in favor of the

But more than plausible evidence was required of Plazo and Alaras. An
allegation of fraud with regard to the execution of a notarized deed of
absolute sale is a grave allegation. It cannot be declared on mere
speculations. In fact, to overcome the presumption of regularity and
due execution of a notarized deed, there must be clear and convincing
evidence showing otherwise. The burden of proof to overcome the
presumption lies on the one contesting the same. Without such
evidence, the presumption remains undiminished.

The CA held that the Destrezas could not just rely on the deed of sale
in their favor or on the TCT issued in their names. They needed to
present further evidence to prove the authenticity and genuineness of
that deed. Having failed to do so, the CA theorized that it was justified
in annulling that deed of sale and the corresponding TCT.
The ruling of the CA was correct. Indeed, the notarized deed of sale
should be admitted as evidence despite the failure of the Notary Public
in submitting his notarial report to the notarial section of the RTC
Manila. It is the swearing of a person before the Notary Public and the
latters act of signing and affixing his seal on the deed that is material
and not the submission of the notarial report.
Thus, the notarized deed of sale executed by Rioza is admissible as
evidence of the sale of the Utod sugarland to the Destrezas.
The CA, however, made a mistake with regard to the assignment of the
burden of proof. No rule requires a party, who relies on a notarized
deed of sale for establishing his ownership, to present further evidence

By signing and affixing his notarial seal on the deed, Atty. Ducusin
converted it from a private document to a public document. As such,
the deed of sale is entitled to full faith and credit upon its face. And
since Rioza, the executor of the deed, is already dead, the notarized
deed of absolute sale is the best evidence of his consent to the sale of
the Utod sugarland to the Destreza spouses.
Since respondents Plazo and Alaras claim that grave and serious
doubts plague TCT 55396, the burden is on them to prove such claim.
Only when they are successful in doing so will the court be justified in
nullifying the notarized deed of sale that their father Rioza executed
in favor of the Destrezas.

The Courts present task, therefore, is to determine if respondents

Plazo and Alaras evidence that their father did not sell the subject land
to the Destrezas is clear and convincing.
1. Plazo and Alaras point out that Destrezas acquisition of a copy of
TCT 55396 is questionable. Destreza said that he got a copy of the
TCT on July 15, 1989 but such TCT was entered into the registry of
title only on July 18, 1989. Moreover, Bonuan, the Register of Deeds,
testified that he had not yet issued that TCT to the Destrezas because
of some lacking documents. He did, however, say that he released a
copy of it to ex-mayor Rioza upon the latters request.
These circumstances may appear perplexing but the problem is that
they did not touch the validity of the deed of sale. And it does not help
that the trial did not really address them. Plazo and Alaras did not
confront petitioner Gregorio Destreza regarding these circumstances

when he took the witness stand. It would be pure speculation to

declare that the Destrezas defrauded Rioza based solely on them.
Here, the supposed irregularity lies in the release of a copy of the title
to the Destrezas even before it had been entered into the books of the
Register of Deeds. Furthermore, the Destrezas were able to acquire a
copy of it when they still needed to submit some registration
requirements. But the premature release of a copy of the registered title
cannot affect the validity of the contract of sale between Rioza and
the Destrezas. Registration only serves as the operative act to convey
or affect the land insofar as third persons are concerned. It does not
add anything to the efficacy of the contract of sale between the buyer
and the seller. In fact, if a deed is not registered, the deed will continue
to operate as a contract between the parties.
Furthermore, the declaration of Bonuan that he furnished ex-mayor
Rioza with a copy of TCT 55396 strengthens the case of the
Destrezas. It shows that Rioza knew of and gave consent to the sale
of his Utod sugarland to them considering that he even helped
facilitate the registration of the deed of sale. This negates any possible
suggestion that the Destrezas merely fabricated the sale of the Utod
sugarland on the evidence that the Notary Public failed to submit his
notarial report. Whatever irregularity in registration may have been
incurred, it did not affect the validity of the sale.
2. Alaras claims that on August 1, 1989, months after the sale of the
Utod sugarland to the Destrezas, her father Rioza asked her to
mortgage some land. He gave Alaras the title to it, impressing on her
that such title covered a land in Barangay Utod. But this does not
prove that the sale of the Utod sugarland to the Destrezas is void.
Alaras admitted that she did not see the number of the title handed to
her. Nor did she identify in court any specific title as the one she got.
To be of value to her cause, Alaras needed to testify that TCT 40353
remained uncancelled in her fathers hands even after the supposed
entry of TCT 55396 in the Registry of Deeds. But she did not so
3. Plazo and Alaras also question the testimony of Gregorio Destreza
that he paid P100,000.00 to Rioza when the figure appearing on the
deed of sale was only P60,000.00. Again, this is not sufficient ground
to nullify such deed. The fact remains that Rioza sold his land to the
Destrezas under that document and they paid for it. The explanation

for the difference in the prices can be explained only by Rioza and
Gregorio Destreza. Unfortunately, Rioza had died. On the other hand,
Plazo and Alaras chose not to confront Destreza regarding that
difference when the latter took the witness stand.
In sum, the Court finds the notarized deed of sale that the late Pedro
Rioza executed in favor of the Destrezas valid and binding upon them
and their successors-in-interest. It served as authority to the Register of
Deeds to register the conveyance of the property and issue a new title
in favor of the Destrezas. That the Destrezas occupied and cultivated
the land openly for seven years before and after Riozas death negates
any scheme to steal the land.
G.R. No. 170023, November 27, 2009
This case involves an action for cancellation of certificates of title,
registration of deed of sale and issuance of certificates of title filed by
Canuto A. Galido (respondent) before RTC of Antipolo City.
On 18 April 1966, the heirs of Domingo Eniceo, namely Rufina
Eniceo and Maria Eniceo, were awarded withHomestead Patent
consisting of four parcels of land located in San Isidro, Antipolo,
The Antipolo property with a total area of 14.8882 hectares was
registered under Original Certificate of Title(OCT) No. 535.
The issuance of the homestead patent was subject to the following
To have and to hold the said tract of land, with the appurtenances
thereunto of right belonging unto the said Heirs of Domingo Eniceo
and to his heir or heirs and assigns forever, subject to the provisions of
sections 118, 121, 122 and 124 of Commonwealth Act No. 141, as
amended, which provide that except in favor of the Government or any
of its branches, units or institutions, the land hereby acquired shall
be inalienable and shall not be subject to incumbrance for a period
of five (5) years next following the date of this patent, and shall not
be liable for the satisfaction of any debt contracted prior to the
expiration of that period; that it shall not be alienated, transferred
or conveyed after five (5) years and before twenty-five (25) years
next following the issuance of title, without the approval of the
Secretary of Agriculture and Natural Resources; that it shall not be
incumbered, alienated, or transferred to any person, corporation,

association, or partnership not qualified to acquire public lands under

the said Act and its amendments;
On September 1973, a deed of sale covering the Antipolo property
was executed between Rufina Eniceo andMaria Eniceo as vendors and
respondent as vendee.
Rufina Eniceo and Maria Eniceo sold the Antipolo property to
respondent for P250,000. A certain Carmen Aldana delivered the
owners duplicate copy of OCT No. 535 to respondent.
On 1988, the Eniceo heirs registered with the (Registry of Deeds) a
Notice of Loss of the owners copy of OCT No. 535.
The RTC rendered a decision finding that the certified true copy of
OCT No. 535 contained no annotationin favor of any person,
corporation or entity. The RTC ordered the Registry of Deeds to issue
a second owners copyof OCT No. 535 in favor of the Eniceo heirs
and declared the original owners copy of OCT NO. 535 cancelled and
considered of no further value.
Petitioner states that as early as 1991, respondent knew of the RTC
decision because respondent filed acriminal case against Rufina
Eniceo and Leonila Bolinas (Bolinas) for giving false testimony upon
a material factduring the trial. They alleged that sometime in 1995,
Bolinas came to the office of Alberto Tronio Jr. (Tronio),petitioners
general manager, and offered to sell the Antipolo property. During an
on-site inspection, Tronio saw a house and ascertained that the
occupants were Bolinas relatives. Tronio also went to the Registry of
Deeds to verify the records on file and ascertained that OCT No. 535
was clean and had no lien and encumbrances. After thenecessary
verification, petitioner decided to buy the Antipolo property.
On 20 March 1995, the Eniceo heirs executed a deed of absolute sale
in favor of petitioner covering lots 3and 4 of the Antipolo property for
On 17 August 1995, the Secretary of the Department of Environment
and Natural Resources (DENR Secretary) approved the deed of sale
between the Eniceo heirs and respondent.
On January 1996, respondent filed a civil complaint with the trial
court against the Eniceo heirs and petitioner praying for the
cancellation of the certificates of title issued in favor of petitioner, and
the registration of the deed of sale and issuance of a new transfer

certificate of title in favor of respondent.

The trial court rendered its decision dismissing the case for lack of
legal and factual basis.
However, the CA reversed the trial courts decision. Hence this
1.WON the deed of sale should be annulled on the ground that the
DENR Secretary gave his approval after 21 yearsfrom the date the
deed of sale in favor of respondent was executed.- NO! it cannot be
First. The contract between the Eniceo heirs and respondent executed
on 10 September 1973 was a perfected contract of sale. A contract is
perfected once there is consent of the contracting parties on the object
certain and on the cause of the obligation. In the present case, the
object of the sale is the Antipolo property and the price certainis
The contract of sale has also been consummated because the vendors
and vendee have performed theirrespective obligations under the
contract. In a contract of sale, the seller obligates himself to transfer
the ownership of the determinate thing sold, and to deliver the same to
the buyer, who obligates himself to pay a price certain to the seller.
The execution of the notarized deed of sale and the delivery of the
owners duplicate copy of OCT No. 535 to respondent is tantamount to
a constructive delivery of the object of the sale.
SECRETARY, made within 25 years from the issuance of the
homestead, to nullify the sale of the Antipolo property.
SC = The sale of the Antipolo property cannot be annulled on the
ground that the DENR Secretary gave his approval after 21 years from
the date the deed of sale in favor of respondent was executed. Section
118 of Commonwealth Act No. 141 or the Public Land Act (CA 141),
as amended by Commonwealth Act No. 456, reads:


No alienation, transfer, or conveyance of any homestead after five
years and before twenty-five years after the issuance of title shall be
valid without the approval of the Secretary of Agriculture and Natural
Resources, which approval shall not be denied except on constitutional
and legal grounds.
FORGERY = Petitioner alleges that the deed of sale is a forgery.
However, as correctly held by the CA,forgery can never be presumed.
The party alleging forgery is mandated to prove it with clear and
convincing evidence. Whoever alleges forgery has the burden of
proving it. In this case, petitioner and the Eniceo heirs failed to
discharge this burden.
Other issues : Equitable Mortgage
Petitioner contends that the deed of sale in favor of respondent is an
equitable mortgage because the Eniceo heirs remained in possession of
the Antipolo property despite the execution of the deed of sale.
An equitable mortgage is one which although lacking in some
formality, or form or words, or other requisites demanded by a statute,
nevertheless reveals the intention of the parties to charge real property
as security for a debt, and contains nothing impossible or contrary to
The essential requisites of an equitable mortgageare:
1. The parties entered into a contract denominated as a contract of sale;
2. Their intention was to secure existing debt by way of a mortgage
The presumption of equitable mortgage under Article 1602 of the
Civil Code is not conclusive. It may be rebutted by competent and
satisfactory proof of the contrary.
Apart from the fact that the Eniceo heirs remained in possession of
the Antipolo property, petitioner has failed to substantiate its claim that
the contract of sale was intended to secure an existing debt by way of
mortgage. In fact, mere tolerated possession is not enough to prove
that the transaction was an equitable mortgage.
Furthermore, petitioner has not shown any proof that the Eniceo
heirs were indebted to respondent. On the contrary, the deed of sale
executed in favor of respondent was drafted clearly to convey that the

Eniceo heirs sold and transferred the Antipolo property to respondent.

The deed of sale even inserted a provision about defraymentof
registration expenses to effect the transfer of title to respondent.
The Court notes that the Eniceo heirs have not appealed the CAs
decision, hence, as to the Eniceo heirs, the CAs decision that the
contract was a sale and not an equitable mortgage is now final. Since
petitioner merely assumed the rights of the Eniceo heirs, petitioner is
now estopped from questioning the deed of sale dated 10September
Petitioner is not a buyer in good faith
Petitioner maintains that the subsequent sale must be upheld because
petitioner is a buyer in good faith,having exercised due diligence by
inspecting the property and the title sometime in February 1995.
In Agricultural and Home Extension Development Group v. Court of
Appeals: a buyer in good faith is defined as one who buys the
property of another without notice that some other person has a right to
or interest in such property and pays a full and fair price for the same
at the time of such purchase or before he has notice of the claim or
interest of some other person in the property.
Petitioner purchased the Antipolo property only on March 1995 and
5 April 1995 as shown by the dates in the deeds of sale. On the same
dates, the registry of deeds issued new tcts in favor of petitioner with
the annotated adverse claim. Consequently, the adverse claim
registered prior to the second sale charged petitioner with constructive
notice of the defect in the title of Eniceo heirs. Therefore, petitioner
cannot be deemed as a purchaser in good faith when they bought and
registered the Antipolo property.
The essence of laches is the failure or neglect, for an unreasonable
and unexplained length of time, to do that which, through due
diligence, could have been done earlier, thus giving rise to a

presumption that the party entitled to assert it had either abandoned or

declined to assert it.
Respondent discovered in 1991 that a new owners copy of OCT No.
535 was issued to the Eniceo heirs. Respondent filed a criminal case
against the Eniceo heirs for false testimony. When respondent learned
that the Eniceo heirs were planning to sell the Antipolo property,
respondent caused the annotation of an adverse claim. On 16 January
1996, when respondent learned that OCT No. 535 was cancelled and
new TCTs were issued, respondent filed a civil complaint with the trial
court against the Eniceo heirs and petitioner. Respondents actions
negate petitioner's argument that respondent is guilty of laches.
True, unrecorded sales of land brought under Presidential Decree No.
1529 or the Property RegistrationDecree (PD 1529) are effective
between and binding only upon the immediate parties. The registration
required in Section 51 of PD 1529 is intended to protect innocent third
persons, that is, persons who, without knowledge of the sale and in
good faith, acquire rights to the property. Petitioner, however, is not an
innocent purchaser for value.

Unenforceable Contracts
Regal Films vs. Concepcion

Gabby Concepcion, a TV artist and a movie actor,

together with his manager Lolita Solis entered into a
contract with Regal Films wherein the latter promised
to convey two parcels of land on top of talent fees in
exchange for Concepcions appearances and several
motion pictures by Regal.
Despite such appearances by Concepcion, Regal still
failed to convey the parcels of land.
This prompted Concepcion to file for the rescission of
the contract.
Regal moved for the dismissal of such case because it
alleged that there was already an amicable settlement
between the parties which would serve as an
addendum to their original contract.
Concepcion opposed such dismissal claiming that the
amicable settlement was signed by Lolita Solis who
was no longer his manager that time and, thus, had no
authority to enter into the settlement on his behalf.
Due to this, Regal chose to release Concepcion from
his contract instead of pursuing the terms of the
However, Concepcion later filed a manifestation in the
Trial Court that he was already willing to accept the
terms of the amicable settlement.
The Trial Court rendered a decision granting the terms
of the settlement. The CA likewise decided the same
upon appeal by Regal.
Regal contends that Concepcion could no longer
accept the settlement because they had already
revoked their offer.

Issue: WON the amicable settlement is valid.


An amicable settlement is an agreement between the
parties to put an end or to prevent a lawsuit. It is in
essence a contract because it has all the essential
elements of a contract.
In this case, Concepcion first attacked the validity of
the amicable settlement because, according to him, it
was without his consent as it was entered into by Solis,
who was no longer his manager.
Contracts entered into in the name of another by one
without the authority to do so are unenforceable but
can still be subjected to the ratification of the person
whose name was used to enter into such contract.
However, such ratification must be done before the
revocation of the contract.
In this case, it was already too late for Concepcion to
ratify the amicable settlement because Regal had
already revoked their offer in the settlement. And thus,
no ratification can be done by him.

Lingtonjua vs Fernandez
The FACTS of the case are as follows:
The petitioners in this case were offered to buy two parcels of land by
two brokers, one Lourdes Alimario and one Agapio Fisico, who were
allegedly authorized to offer the properties to sell by the respondent
Mary Grace Fernandez . Such properties were originally owned the
heirs of Domingo Ticzon represented by Maria Mediatrix Fernandez
and the heirs of Paz Ticzon Eleosida represented by Gregorio T.
Eleosida. The petitioners were shown a locator plan and copies of the
titles of the subject properties. They the conducted two ocular
inspections in the properties where they found people gathering
Then on the afternoon of November 27, 1995, the petitioners met with
the respondent and the two brokers where they agreed that:
1.) the petitioners will be buying the properties for P5,08,500.00;
2.) the owners will be shouldering the taxes as well as the
documentation expenses; and
3.) they also agreed to meet again on December 8, 1995 to finalize the

However, it was only Fisico who attended the meeting where he

informed the petitioners that Fernandez was encountering problems
with those who were claiming to be tenants of the said property but
was working on a settlement.
After a few weeks of waiting, the petitioners sent a letter to the
respondent on January 6, 1996 demanding the execution of their
transaction. Then, receiving no reply, they sent another letter on
February 1, 1996.
Then, the respondent, upon receipt of the letter wrote to petitioners
enclosing therein her January 16, 1996 letter where in she clarified
1.) She did not agree to pay for the taxes and other miscellaneous
2/) She did not agree to meet again on December 8, 1995 to sign the
deed of sale.
She also said the in letter that some people suddenly appeared
claiming to be tenants of the property. Therefore by this reason she
said that she and her cousins have changed their minds and will no
longer be selling the said properties until all the problems are fully
Then the petitioners filed an action to specific performance and
damages against the respondent ant the registered owners of the said
properties alleging that there was already a perfected contract when the
parties met during the November 27, 1995 meeting of the parties and
that by virtue of the respondents January 16, 1996 letter they have
unilaterally cancelled such perfected contract. Such cancellation,
according to the petitioners is not allowable.
The respondent on April 5, 1996 filed an answer alleging that during
the November 27, 1996 meeting she did not accept the offer and thus
no oral contract to sell was ever perfected. She also specifically
alleged that the contract allegedly perfected on November 27, 1995
was unenforceable for not complying with the statute of frauds.
The RTC rendered a decision in favor of the respondents and upon
appeal in the Court of Appeals the appellate court reversed the
decision. Hence, the petition in the Supreme Court.
ISSUE: Whether of not there was a perfected sale during the
November 27, 1996 meeting in compliance with the statute of frauds.
RULING: No, the contract in the November 27, 1996 meeting was not
yet perfected for not being in compliance with the statute of frauds

In the case of City of Cebu vs Heirs of Rubi, the supreme court held
that written correspondence or letters exchanged by the parties may
constitute sufficient evidence of the agreement between the parties in
compliance with the statute of frauds.
Even if the letter can now provide as evidence, still the court cited the
case of Rosencor Development vs Court of Appeals that in order for
the note or memorandum to satisfy the statute of frauds it must contain
the following:
1.) the names of the parties;
2.) the terms and conditions of the contract; and
3.) a description of the property sufficient to render it capable of
Here, the January 16, 1996 letter did not contain the second and third
requisites sufficient to render it in compliance with the statute of
frauds. Further, the letter made reference only to one of the properties
herein involved which is the one owned by the heirs of Domingo
The Supreme Court also held in the case of Rosencor that in order to
be binding on the party to be charged, the note or memorandum must
be signed by such party or by his agent duly authorized in writing. In
this case, however the only evidence presented to prove that the
respondent was indeed authorized to sell or offer the properties for sale
was the mere declaration of the petitioner Litongjua that the
respondent openly represented herself as a representative of the owner.
There being no written evidence to prove such authority, the
respondent is therefore not an agent of the owners of the properties.
Judging from the forgoing facts, therefore, there was no perfection of
the sale between the respondent as the seller and the petitioners as the
buyer by reason of the non-compliance with the statute of frauds.
Lina Penalber vs Quirino and Leticia Ramos and Bartex INC.
Petitioner Lina Penalber is the mother of respondent Leticia
Ramos and the mother-in-law of respondent Quirino Ramos.

While Respondent Baxter, Inc. is a domestic corporation which

brought the two properties involved in this case from
respondent spouses.
On February 18,1987, Petitioner filed before RTC a
PROHIBITORY INJUNCTION against the respondents.
Docket as Case 3472.
As to the First Cause:
Petitioner claims to owned a parcel of land situated in Ugac
Norte, Tuguegarao Cagayan, with a land area of 1,457 and
covered by Transfer Certificate Title No. T- 43373 of the
Register of Deeds , registered under PETITIONERS name. A
residential house and a warehouse were constructed which the
petitioner also claimed to owned.
Petitioner also claims that in the middle of 1986, she
discovered that the TCT 43373 of the UGAC property was
cancelled on MAY 13,1983 an TCT # T-58043 was issued to
respondent spouses Ramos. She learned upon verification that
the cancellation of the said title was base on a purported Deed
of Donation which she allegedly executed in favor of
respondent spouses on April 27 1983.
She insisted that her signature to said deed of donation was a
forgery and that she did not donate the property.
When petitioner confronted the respondents about the false
donation , the spouses pleaded to pay for the UGAC property
in the amount of 1M, to which she agreed.
Subsequently , around January 10,1987 , petitioner discovered
that spouses Ramos were selling the UGAC property to
respondent BARTEX, Inc.

Petitioner then sent his son Johnson Paredes to caution

respondent corporation that respondent spouses were not the
lawful owners of the said properties. Johnson allegedly was
about to convey petitioners caveat to a representative of
respondent Bartex, Inc.
Petitioner also warned respondent spouses Ramos not to sell
the UGAC Properties anymore, otherwise she will file the
necessary action against them.
On JANUARY 19, 1987 As a precaution , petitioner executed
properties and had it annotated on TCT T-58043 on the same
Despite petitioners warnings , respondent spouses still
executed in favor of Bartex a deed of Absolute Sale on January
12,1987 for a total price of 150,000.00. As a result a new TCT
was issued in favor of Bartex Inc on January 20, 1987.
Petitioner contented that the DEED OF ABSOLUTE SALE
executed by Respondent Spouses in favor of respondent Bartex
Inc. did not convey any valid title not only because Bartex was
a buyer in bad faith but also respondent spouses did not own
Thus petitioner prayed for the declaration of nullity of the
following :
o 1. The Deed of Donation she purportedly executed on
April 23,1987 in favor of spouses Ramos.
o 2. The TCT T-58043 in the name of spouses Ramos;
o 3. The Deed of Absolute sale executed by spouses
Ramos to respondent Bartex Inc,;
o 4.The TCT T- 68825 issued to Bartex Inc.
If the above mentioned prayer not be granted , she prayed in
the alternative that Respondent Spouses be ordered to pay her

the assessed value of UGAC Properties at 1.5 M and to declare

her TCT T- 43373 to be valid and active.
As to the Second cause of action.
Petitioner claimed that for many years prior to 1984 she
operated a hardware store in a building she owned along
BONIFACIO St. Tuguegarao, Cagayan. However the
commercial lot upon which the building stood was owned and
registered in the name of MARIA MENDOZA , from whom
petitioner rented the same.
On March 22,1982 , petitioner allowed Respondent Spouses
Ramos to manage the hardware.
In 1984 , MENDOZA put the BONIFACIO property up for
As Petitioner did not have available cash to buy the property ,
she allegedly entered into a VERBAL AGREEMENT with
respondent spouses Ramos with the following conditions:
o 1. The lot would be bought by the Spouses Ramos in
behalf of petitioner;
o 2. The consideration of P80,000.00 for said lot would
be paid by the respondent spouses from the
accumulated earnings of the store;
o 3. Since Spouses have better credit standing, they
would be made to appear in the DEED OF SALE as
the vendees so that the title to be issued in their names
could be used by the Spouses to Secure a LOAN with
which to build a bigger building to EXPAND THE
In Accordance with the said agreement, respondent spouses
allegedly entered into contract with MENDOZA over the
TCT T-62769 was issued to respondent spouses Ramos.

On September 20,1984, respondent spouses RETURNED the

management of the hardware to petitioner.
On Basis of RECEIPTS and DISBURSTMENTS , petitioner
asserted that the BONIFACIO property was fully paid out of
the funds of the store and if respondent spouses had given any
amount as to the purchase price , they already have sufficiently
been reimbursed from the funds of the store.
Subsequently, petitioner demanded from respondent spouses
Ramos the reconveyance of the title to the BONIFACIO
property to her but they
Petitioner insisted that the spouses Ramos were , in reality
MERE TRUTEES of the BONIFACIO property, therefore they
are under moral and legal obligation to reconvey the title over
the property to her.
She therefore prayed that she be declared the owner of the
BONIFACIO property; and the TCT T- 62769 , in the name of
the respondent spouses be DECLARED NULL AND VOID
and to direct the Register of Deeds to issue another title in her
On MARCH 2, 1987, respondent spouses Ramos filed their
answer before the RTC.
As regards to petitioners First Cause of action:
They alleged that petitioner , together with her son Johnson and
PHILIPPINES for the amount of P150,000 on AUGUST
When the property was about to be FORCLOSED ,due to
failure to pay the mortgage debt petitioner asked spouses
RAMOS to REDEEM the mortgage property or PAY HER

In return petitioner PROMISED to CEDE, CONVEY and

to them.
in COMPLIANCE with her promise , PETITIONER
transferred the UGAC properties by way of DEED OF
DONATION dated APRIL 27,1987.
After accepting the donation and having the DEED of
Donation REGISTERED a TCT was issued to respondent
Respondent spouses also alleged that PETITIONER also knew
that they were selling the UGAC Property because they
POSTED PLACARDS thereon stating that the said properties
were for sale.
Respondent spouses also further alleged that petitioner also
knew that that they finally sold the property to Bartex Inc for
P150,000.00 , thus she is not entitled to any reimburstment.
As to the Second Cause of Action:
They contended that they were not only given the management
but also full ownership of the said hardware on the condition
that the STOCKS and MERCHANDISE of the store will be
inventoried, and out of the proceeds of the sales respondent
spouses shall PAY Petitioners OBLIGATIONS and
After paying the outstanding and liabilities respondent spouses
On APRIL 27,1987 , respondent Bartex Inc. filed their answer

They contended that among other things when a representative

inquired about the UGAC PROPERTIES for SALE, respondent
spouses presented THEIR OWN DUPLICATE COPY of
TCT T-58043, together with the TAX DECLARATIONS of
the land and buildings.
Respondent verified said title and tax declarations with the
Register of Deeds and with the OFFICE OF MUNICIPAL
ASSESSOR as to any cloud , encumbrance or lien on the said
property and THEY FOUND NONE.
Further they alleged that Respondent spouses Ramos were then
actually occupying the property until they vacated after the
consummation of the sale on January 12,1987.
At the time that petitioner filed for the annotation of the
affidavit of counter claim, the papers for the sale was already
on processed for registration.
As Respondent Bartex was never aware of any imperfection in
the title , they claim that they were purchaser in good faith.
On January 19, 2000 RTC RULED as to the First Cause of Action in
favor of the respondents spouses dismissing the same:
The court finds that the TESTIMONY OF PETITIONER
of the UGAC Properties in favor of respondent spouses was
INSUFFICIENT TO SUPPORT her cause of action.
Such DENIAL , by itself , is not SUFFICIENT TO
Further the court also reasoned that in addition to Petitioners
allegation that she did not execute any such Deed of Donation ,
SHE SHOULD HAVE HAD HER alleged falsified signature

on the deed of donation EXAMINED by qualified

handwriting experts to prove that indeed, she did not execute

As to the 2 Cause of Action the RTC ruled in favor of the petitioner

Declaring her the owner of BONIFACIO PROPERTY and ordering
respondents to reconvey the property to petitioner.
The Court finds that the petitioner and respondent spouses
agreed that the amount due from the proceeds of the sales of
her stocks in the hardware store would be applied to the
purchase price of the BONIFACIO PROPERTY is
SUPPORTED BY THE FACT that petitioner did not EVER
ASK for an ACCOUNTING of said proceeds , despite the fact
that as early as SEPTEMBER 1984 she already knew that her
stocks left by her in March 1982 was already sold by
respondent spouses and that there was a difference of
P116,000 plus.
On February 22,200, respondent spouses filed a MOTION FOR
RECONSIDERATION of the aforementioned decision on petitioners
2nd cause of action but it was DENIED FOR LACK OF MERIT.
INTERPOSE TIMELY OBJECTIONS when petitioner testified on
their alleged VERBAL AGREEMENT regarding the purchase of the
BONIFACIO PROPERTY as such they were deemed to have
WAIVED SUCH OBJECTIONS , which cannot be raised anymore in
their motion for Reconsideration.
On July 24, 2000 , respondent elevated the case to the COURT
OF APPEALS , in so far as the ruling on the 2nd cause of action
which reversed the RTC decision.
Finding that bare allegations , UNSUBSTANTIATED BY

As between Bare Allegation of VERBAL AGREEMENT and

Petitioner sought RECONSIDERATION but was DENIED by CA.
ISSUE: Whether or Not the VERBAL AGREEMENT entered into
The SC subscribe to the ruling of the RTC in its Order dated
July 17, 2000 that said spouses were deemed to have waived
their objection to the parol evidence as they failed to timely
object when petitioner testified on the said verbal agreement.
The requirement in Article 1443 that the express trust
concerning an immovable or an interest therein be in writing
is merely for purposes of proof, not for the validity of the
trust agreement. Therefore, the said article is in the nature of a
statute of frauds
The term statute of frauds is descriptive of statutes which
require certain classes of contracts to be in writing. The
statute does not deprive the parties of the right to contract
with respect to the matters therein involved, but merely
regulates the formalities of the contract necessary to render it
enforceable.41 The effect of non-compliance is simply that
no action can be proved unless the requirement is complied
with. Oral evidence of the contract will be excluded upon
timely objection. But if the parties to the action, during the
trial, make no objection to the admissibility of the oral
evidence to support the contract covered by the statute, and
thereby permit such contract to be proved orally, it will be just
as binding upon the parties as if it had been reduced to

A careful reading of the records of the case reveals that

respondent spouses Ramos did indeed fail to interpose their
objections regarding the admissibility of the afore-mentioned
testimonies when the same were offered to prove the alleged
verbal trust agreement between them and petitioner.
Consequently, these testimonies were rendered admissible in
evidence. Nevertheless, while admissibility of evidence is an
affair of logic and law, determined as it is by its relevance and
competence, the weight to be given to such evidence, once
admitted, still depends on judicial evaluation. Thus, despite the
admissibility of the said testimonies, the Court holds that the
same carried little weight in proving the alleged verbal trust
agreement between petitioner and respondent spouses.
Petitioners allegations as to the existence of an express trust
agreement with respondent spouses Ramos, supported only
by her own and her son Johnsons testimonies, do not hold
water. As correctly ruled by the Court of Appeals, a resulting
difference of P116,946.15 in the beginning inventory of the
stocks of the hardware store and the second inventory thereof,
by itself, is not conclusive proof that the said amount was used
to pay the purchase price of the Bonifacio property, such as
would make it the property of petitioner held merely in trust by
respondent spouses Ramos. Such a conclusion adopted by the
RTC is purely speculative and non sequitur.
The resulting difference in the two inventories might have been
caused by other factors and the same is capable of other
interpretations, the exclusion of which rested upon the
shoulders of petitioner alone who has the burden of proof in the
instant case. This petitioner miserably failed to do.

The fact that respondent spouses Ramos never denied the P116,946.15
difference, or that they failed to present proof that they indeed used the
said amount to pay the other obligations and liabilities of petitioner is
not sufficient to discharge petitioners burden to prove the existence
of the alleged express trust agreement.


The former Municipality of Marikina in the Province of Rizal
used to own a parcel of land subdivided into lots A, B and C in
Barrio Concepcion of said municipality. In 1966, the Municipal
Council of Marikina passed Resolution No. 9, authorizing the
sale through public bidding of lots A and C. In said bidding,
Pedro Gonzales was the highest bidder. Thus, Resolution No.
75 was passed accepting the bid of Pedro. Thereafter, a Deed of
Sale was executed in his favour, subject to the approval of the
Provincial Governor in accordance with Section 2196 of the
Revised Administrative Code. Unfortunately, the Governor did
not act upon the said deed.
Notwithstanding, Pedro, after a few months, sold to Marcos
Perez a 375 sqm portion of Lot C, denominated as Lot C-3.
They executed a Deed of Sale, which, however, was not
notarized. Subsequently, both Pedro and Marcos died.
In 1992, 26 years after, the Municipality of Marikina executed
a Deed of Absolute Transfer of Real Property over Lots A and
C in favor of the Estate of Pedro C. Gonzales. Subsequently,
herein petitioners executed an extra-judicial partition wherein
Lot C was subdivided into three lots and the 375 sq portion
previously sold to Perez became part of Lots C-1 and C-2.

Thereafter, herein respondents sent a demand letter to


petitioners asking for the reconveyance of the subject property.

However, their demand remaining unheeded, they filed an
action for Annulment and/or Rescission of Deed of Absolute
Transfer of Real Property and for Reconveyance with

The Supreme Court answered in the negative.

Article 1358 (1) of the Civil Cod states that Acts and contracts
which have for their object the creation, transmission,
modification or extinguishment of real rights over immovable

In view of the foregoing, the Regional Trial Court (RTC)

property; sales of real property or of an interest therein are

decided favor of petitioners. The RTC ruled that since the Deed

governed by Articles 1403, No. 2 and 1405 must appear in a

of Sale executed between Pedro and Marcos was not notarized,

public document.

the same is considered void and of no effect. In addition, the

trial court also held that Pedro became the owner of the subject
lot only on February 7, 1992; as such, he could not have
lawfully transferred ownership thereof to Marcos in 1966.
The Court of Appeals reversed the Decision of the RTC,
holding that a sale of real property, though not consigned in a

On the other hand, pertinent portions of Article 1403 of the

Civil Code provide as follows:
Art. 1403. The following contracts are unenforceable, unless
they are ratified:

public instrument, is nevertheless valid and binding among the

parties and that the form required in Article 1358 of the Civil

(2) Those that do not comply with the Statute of Frauds as set

Code is not essential to the validity or enforceability of the

forth in this number. In the following cases an agreement

transactions but only for convenience.

hereafter made shall be unenforceable by action, unless the

Whether the subject Deed of Sale is invalid on the ground that
it does not appear in a public document or not.

same, or some note or memorandum thereof, be in writing,

and subscribed by the party charged, or by his agent;
evidence, therefore, of the agreement cannot be received
without the writing, or a secondary evidence of its contents:

(a) An agreement that by its terms is not to be performed within

a year from the making thereof;

in order to validate the act or contract but only to insure its

efficacy. Thus, based on the foregoing, the Court finds that the
CA did not err in ruling that the contract of sale between Pedro


and Marcos is valid and binding.

(e) An agreement for the leasing for a longer period than one
year, or for the sale of real property or of an interest
therein; x x x27
Under Article 1403(2), the sale of real property should be in
writing and subscribed by the party charged for it to be
enforceable. In the instant case, the Deed of Sale between
Pedro and Marcos is in writing and subscribed by Pedro and
his wife Francisca; hence, it is enforceable under the Statute of
However, not having been subscribed and sworn to before a
notary public, the Deed of Sale is not a public document and,
therefore, does not comply with Article 1358 of the Civil Code.
Nonetheless, it is a settled rule that the failure to observe the
proper form prescribed by Article 1358 does not render the acts
or contracts enumerated therein invalid. It has been uniformly
held that the form required under the said Article is not
essential to the validity or enforceability of the transaction, but
merely for convenience. Article 1358 does not require the
accomplishment of the acts or contracts in a public instrument


Void Contracts
G.R. No. 109355 October 29, 1999
SERAFIN MODINA v. Court of Appeals, Et. Al
FACTS: The parcels of land in question are those under the name of
private respondent CHIANG. He theorized that subject properties were
sold to him by his wife MERLINDA, as evidenced by a Deed of
Absolute Sale, and were subsequently sold by CHIANG to the
petitioner MODINA, as shown by the Deeds of Sale.
MODINA brought a Complaint for Recovery of Possession with
Damages against the private respondents, Ernesto Hontaciergo, Paul
Figueroa and Teodoro Hipalla before the RTC of Iloilo City.
Upon learning the institution of the said case, MERLINDA presented a
Complaint-in-intervention, seeking the declaration of nullity of the
Deed of Sale between her husband and MODINA on the ground that
the titles of the parcels of land in dispute were never legally transferred
to her husband. Fraudulent acts were allegedly employed by him to
obtain a Torrens Title in his favor. However, she confirmed the validity
of the lease contracts with the other private respondents.
MERLINDA also admitted that the said parcels of land were those
ordered sold by Branch 2 of the then Court of First Instance of Iloilo in
Special Proceeding No. 2469 in Intestate Estate of Nelson Plana
where she was appointed as the administrator, being the widow of the
deceased, her first husband. An Authority to Sell was issued by the
said Probate Court for the sale of the same properties.
After due hearing, the Trial Court decided in favor of MERLINDA
declaring as void and inexistent the sale of Lots. CA affirmed the
aforesaid decision in toto. Petitioner found his way to this Court via
the present Petition for Review under Rule 45 seeking to set aside the
assailed decision of the Court of Appeals.
1 Whether the sale of subject lots should be nullified;
2 Whether petitioner was not a purchaser in good faith;
RULING: Anent the first issue, petitioner theorizes that the sale in
question is null and void for being violative of Article 1490 of the New
Civil Code prohibiting sales between spouses. Consequently, what is
applicable is Article 1412 supra on the principle of in pari delicto,
which leaves both guilty parties where they are, and keeps undisturbed

the rights of third persons to whom the lots involved were sold;
petitioner stressed.
Petitioner anchors his submission on the following statements of the
Trial Court which the Court of Appeals upheld, to wit:
Furthermore, under Art. 1490, husband and wife are
prohibited to sell properties to each other. And where, as in this case,
the sale is inexistent for lack of consideration, the principle of in pari
delicto non oritur action does not apply. (Vazques v. Porta, 98 Phil
Thus, Art. 1490 provides:
Art. 1490. The husband and wife cannot sell property to each
other, except:
1 When a separation of property was agreed upon in the
marriage settlements; or
2 When there has been a judicial separation of property
under Art. 191.
The exception to the rule laid down in Art. 1490 of the New Civil
Code not having existed with respect to the property relations of
Ramon Chiang and Merlinda Plana Chiang, the sale by the latter in
favor of the former of the properties in question is invalid for being
prohibited by law. Not being the owner of subject properties, Ramon
Chiang could not have validly sold the same to plaintiff Serafin
Modina. The sale by Ramon Chiang in favor of Serafin Modina is,
likewise, void and inexistent.
The principle of in pari delcto non oritur action denies all recovery of
the guilty parties inter se. It applies to cases where the nullity arises
from the illegality of the consideration or the purpose of the contract.
When two persons are equally at fault, the law does not relieve them.
The exception to this general rule is when the principle is invoked with
respect to inexistent contracts.
In the petition under consideration, the Trial Court found that subject
Deed of Sale was a nullity for lack of any consideration. This finding
duly supported by evidence was affirmed by the Court of Appeals.
Well-settled is the rule that this Court will not disturb such finding
absent any evidence to the contrary.
Petitioners insistence that MERLINDA cannot attack subject contract
of sale as she was a guilty party thereto is equally unavailing. But the
pivot of inquiry here is whether MERLINDA is barred by the principle
of in pari delicto from questioning subject Deed of Sale.

The Trial Court debunked petitioners theory that MERLINDA

intentionally gave away the bulk of her and her late husbands estate to
defendant CHIANG as his exclusive property, for want of evidentiary
anchor. The insist on the Deed of Sale wherein MERLINDA made the
misrepresentation that she was a widow and CHIANG was single,
when at the time of execution thereof, they were in fact already
married. Petitioner insists that this document conclusively established
bad faith on the part of MERLINDA and therefore, the principle of in
pari delicto should have been applied.
These issues are factual in nature and it is not for this Court to
appreciate and evaluate the pieces of evidence introduced below. An
appellate court defers to the factual findings of the Trial Court, unless
petitioner can show a glaring mistake in the appreciation of relevant
Since one of the characteristics of a void or inexistent contract is that it
does not produce any effect, MERLINDA can recover the property
from petitioner who never acquired title thereover.
As to the second issue, petitioner stresses that his title shoud have been
respected since he is a purchaser in good faith and for value. The Court
of Appeals, however, opined that he (petitioner) is not a purchaser in
good faith. IT found that there were circumstances known to
MODINA which rendered their transaction fraudulent under the
attendant circumstances.
A purchaser in good faith is one who buys the property of another
without notice that some other person has a right to or interest in such
property and pays a full and fair price at the time of the purchase or
before he has notice of the claim or interest of some other person in the
In the case under scrutiny, petitioner cannot claim that he was a
purchaser in good faith. There are circumstances which are indicator of
bad faith on his part, to wit: (1) He asked his nephew, Placido Matta,
to investigate the origin of the property and the latter learned that the
same formed part of the properties of MERLINDAs first husband; (2)
that the said sale was between the spousesl (3) that when the property
was inspected, MODINA met all the lessees who informed that subject
lands belong to MERLINDA and they had no knowledge that the same
lots were sold to the husband.
It is a well-settled rule that a purchaser cannot close his eyes to facts
which would put a reasonable man upon his guard to make the

necessary inquiries, and then claim that he acted in good faith. His
mere refusal to believe that such defect exists, or his willful closing of
his eyes to the possibility of the existence of a defect in his vendors
title, will not make him an innocent purchaser for value, if it
afterwards develops that the title was in fact defective, and it appears
that he had such notice of the defect as would have led to its discovery
had he acted with that easure of precaution which may reasonably be
required of a prudent man in a like situation.
Thus, petitioner cannot claim that the sale between him and MODINA
falls under the exception provided for by law.
Domingo vs. Court of Appeals
G.R. No. 127540, Oct. 17, 2001
Paulina Rigonan owned three parcels of land, located at Batac
and Espiritu, Ilocos Norte- house and warehouse on one parcel.
She allegedly sold them to private respondents, Sps. Felipe and
Concepcion Rigonan, who claim to be her relatives.
1966- herein petitioners Eugenio Domingo, Crispin Mangabat
and Samuel Capalungan, who claim to be her closest surviving
relatives, allegedly took possession of the properties by means
of stealth, force and intimidation, and refused to vacate the
February 2, 1976- Felipe Rigonan filed a complaint for
reinvindicacion against petitioners in the RTC of Batac, Ilocos
Norte. He likewise amended his complaint including his wife
as co-plaintiff.
They alleged that they were the owners of the three parcels of
land through the deed of sale executed by Paulina Rigonan on
January 28, 1965.
o They had been in continuous possession of the subject
properties and had introduced permanent improvements
o And that petitioners entered the properties illegally, and
they refused to leave them when asked to do so.
However, these allegations were contested by the petitioners
arguing that the alleged deed of sale was void for being
spurious as well as lacking consideration.

o They argue that Paulina Rignonan never sold her

properties to anyone.
o They also said that they inherited the three lots and the
permanent improvements thereon when Paulina died in
1966- being her nearest surviving relatives within the
fifth degree of consanguinity
During the trial, Juan Franco. Atty. Evaristo Tagatag and Felipe
Rigonan testified. Franco testified that he witnessed the
execution of the questioned deed of sale. However, when he
was shown the deed, he stated that it was not the document that
he signed, but rather it was the will and testament made by
o Atty. Tagatag testified that he personally prepared the
deed, he saw Paulina affix her thumbprint on it and he
signed it both as witness and notary public. He further
testified that he also notarized the last will and
testament of Paulina on Feb. 19, 1965- which also
mentioned the same lots sold to PRs which was actually
clarified as to why it was still in the will but however
Atty. Tagatag couldnt explain so.
Felipe claimed that he was Paulinas close relative. Their
fathers were first cousins. However, he could not recall the
name of Paulinas grandfather.
This claim was disputed by the petitioners who lived with
Paulina as their close kin.
Felipe also admitted the discrepancies between the Register of
Deeds Copy of the deed and the copy in his possession. He
however attributed these discrepancies to the representative
from the Register of Deeds.
o According to him, the representative showed him
blanks in the deed and the representative filled in the
blanks by copying from his copy.
Petitioners then presented Jose Flores (owner of the adjacent
lot); Ruben Blanco (acting Registrar of Deeds); and Zosima
Domingo (wife of Eugenio) as their witnesses.
o Jose- testified that he knew the petitioners who had
lived with Paulina ever since; also said that he did not

receive any notice nor any offer to sell the lots from
o Ruben- testified that only the carbon copy (also called
duplicate original) of the deed was in their records, but
he could not explain why this was so.
o Zosima- testified that she was the wife of Eugenio and
they lived with Paulina and husband Jose Guerson since
1956 and that they took care of her, spent for her daily
needs and medical expenses, especially when she was
hospitalized prior to her death; likewise stated that
Paulina was never badly in need of money during her
RTC- rendered judgment in favour of petitioners declaring the
alleged deed of sale as null and void and fake and the prayer
for the issuance of preliminary injunction denied.
Upon appeal by the respondents to the CA, the CA reversed the
RTC ruling declaring Felipe and Concepcion Rigonan as the
owners of the properties in litigation.
Hence this present appeal.
ISSUE: Whether or not the respondent Sps. Rigonan sufficiently
established the existence and due execution of the deed of sale.
Held: NO! The Supreme Court ruled in the negative.
1 PR- presented only a carbon copy of the alleged deed of sale.
a When the Register of Deeds was subpoenaed to
produce the deed, no original typewritten deed but only
a carbon copy was presented to the trial court.
i The deed contained filled in blanks and
b None of the witnesses directly testified to prove
positively and convincingly Paulinas execution of the
Deed of Sale.
c Carbon copy- did not bear her signature, but only her
alleged thumbprint.
d Juan Franco- who was presented by the respondents as
witness to the execution of the deed retracted his
statement and said that he categorically knew nothing
about the deed.

Efren Sibucaos testimony was also retracted which

leaves the testimony of Atty. Tagatag which was
uncorroborated and clearly self-serving.
2 Irregularities were clearly present regarding the execution and
registration of the alleged deed of sale. The original of the deed
was nowhere to be found which was contradictory to Atty.
Tagatags testminoy that he himself registered the original deed
with the Register of Deeds.
a Carbon copy on file- showed intercalations and
discrepancies when compared to purported copies in
existence; these intercalations were allegedly due to the
blanks left unfilled by Atty. Tagatag which were
allegedly filled in by a representative of the Register of
b Alleged other copies of the document bore different
dates of entry: May 16, 1966, 10:20AM and June 10,
1966, 3:16PM and had different entry numbers 66246,
74389, and 64369.
i Deed was apparently registered long after its
alleged date of execution and after Paulinas
death on March 20, 1966.
ii It also appears that the alleged vendor was never
asked to vacate the premises she had
purportedly sold; throws and inverse
implication, a serious doubt on the due
execution of the deed of sale.
iii Also, the same parcels of land were included in
Paulinas last will and was notarized also by the
same Atty. Tagatag.
3 Element of consideration for the sale.
a Price allegedly paid by respondent spouses for 9 parcels
including the subject lots in dispute.
b Consideration- why of the contract, essential reason
which moves the contracting parties to enter into a
c There is unrebutted testimony that Paulina as
landowner was financially well-off. No apparent reason
for her to sell the subject parcels of land at a meager
price of 850 pesos.

Paulina was already of advanced age and senile at the time of

the execution of the alleged deed of sale.
a She died an octogenarian on March 20, 1966, barely
over a year when the deed was executed on Jan. 28,
1965 but before the copies of the deed were entered in
the registry.
b GR: a person is not incompetent to contract merely
because of advanced years or by reason of physical
i However, when such age or infirmities have
impaired the mental faculties so as to prevent
the person from properly, intelligently, and
firmly protecting her property rights then she is
undeniably incapacitated.
c Zosimas testimony: at the time of the execution of the
alleged deed, Paulina was already incapacitated
physically and mentally; Paulina played with her waste
and urinated in bed

This definitely casts serious doubts as to the execution

of the deed of sale. Moreover, there is no receipt to
show that said price was paid to Paulina.
Thus, the Court reversed and set aside the decision of
the CA and reinstated the RTC decision declaring the
sale void ab initio.

GR No. 157434
The facts of the case, as found by the RTC, are as follows:
Spouses Berlina Silva and Pedro Silva were the owners of a parcel of
land with a Transfer Certificate of Title No B-37189, which was
registered on August 14, 1980 in their names.
On March 3, 1988, Pedro , for himself and as attorney-in-fact of his
wife Berlina, thru a Special Power of Attorney purportedly executed
by Berlina in his favor, executed a Deed of Absolute Sale over the said
parcel of land in favor of defendants-spouses Claro Bautista and Nida

As a consequence, TCT No B-37189 was cancelled and in lieu

thereof, TCT No. V-2765 was issued in the names of Spouses Claro
Bautista and Nida Bautista on March 4, 1988.
Based on the evidence presented, the signature appearing on the SPA
as that of Berlina is a forgery and consequently the Deed of Absolute
Sale Executed by Pedro in favor os Spouses Bautista is not authorized
by Berlina.
1 Declaring the Deed of Absolute Sale executed by Pedro in
favor of Spouses Bautista null and void and the resulting TCT
No V-2765 cancelled and TCT No B-37189 reinstated.
2 Ordering defendants to reconvey the property together with
improvements thereon to the plaintiff.
3 Condemning defendants to pay plaintiff of attorneys fees and
costs of the suit.
Affirmed in toto the RTC decision and denied the Motion for
1 Whether or Not petitioners are considered as purchasers in
good faith and for value having relied upon a SPA which
appears legal, valid, and genuine on its face?
2 Whether petitioners may retain the portion of Pedro Silva in the
subject property.

respondent was in Germany working as a nurse when the SPA was

There is no merit to petitioners' claim that they are purchasers in good

not that of Pedro.

purportedly executed in 1987.

The SPA being a forgery, it did not vest in Pedro any authority to
alienate the subject property without the consent of respondent. Absent
such marital consent, the deed of sale was a nullity.27
But then petitioners disclaim any participation in the forgery of the
SPA or in the unauthorized sale of the subject property. They are
adamant that even with their knowledge that respondent was in
Germany at the time of the sale, they acted in good faith when they
bought the subject property from Pedro alone because the latter was
equipped with a SPA which contains a notarial acknowledgment that
the same is valid and authentic.28 They invoke the status of buyers in
good faith whose registered title in the property is already indefeasible
and against which the remedy of reconveyance is no longer
available.29 In the alternative, petitioners offer that should respondent
be declared entitled to reconveyance, let it affect her portion only but

A holder of registered title may invoke the status of a buyer for value
That the SPA is a forgery is a finding of the RTC and the CA on a

in good faith as a defense against any action questioning his

question of fact.25 The same is conclusive upon the Court, 26 especially

title.34 Such status, however, is never presumed but must be proven by

as it is based on the expert opinion of the NBI which constitutes more

the person invoking it.35

than clear, positive and convincing evidence that respondent did not
sign the SPA, and on the uncontroverted Certification of Dorado that

A buyer for value in good faith is one who buys property of another,
without notice that some other person has a right to, or interest in, such

property and pays full and fair price for the same, at the time of such

In the present case, petitioners were dealing with a seller (Pedro) who

purchase, or before he has notice of the claim or interest of some other

had title to and possession of the land but, as indicated on the face of

persons in the property. He buys the property with the well-founded

his title, whose capacity to sell was restricted, in that the marital

belief that the person from whom he receives the thing had title to

consent of respondent is required before he could convey the property.

the property and capacity to convey it.36

To prove good faith then, petitioners must show that they inquired not
only into the title of Pedro but also into his capacity to sell.

To prove good faith, a buyer of registered and titled land need only
show that he relied on the face of the title to the property. He need not

According to petitioners, to determine Pedro's capacity to sell, they

prove that he made further inquiry for he is not obliged to explore

conducted the following forms of inquiry: first, they inspected the

beyond the four corners of the title.37 Such degree of proof of good

photocopy of the SPA presented to them by Pedro;45 second, they

faith, however, is sufficient only when the following conditions

brought said copy to Atty. Lorenzo Lucero (the notary public who

concur: first, the seller is the registered owner of the land; 38 second,

prepared the deed of sale) and asked whether it was genuine;46 and

the latter is in possession thereof;39 and third, at the time of the sale,

third, they inspected the original copy of the SPA after they advanced

the buyer was not aware of any claim or interest of some other person

payment of Php55,000.00 to Pedro.47 Essentially, petitioners relied on

in the property,40 or of any defect or restriction in the title of the seller

the SPA, specifically on its notarial acknowledgment which states that

or in his capacity to convey title to the property.41

respondent appeared before the notary public and acknowledged

having executed the SPA in favor of Pedro.

Absent one or two of the foregoing conditions, then the law itself puts
the buyer on notice and obliges the latter to exercise a higher degree of

The RTC and CA, however, found such inquiry superficial. They

diligence by scrutinizing the certificate of title and examining all

expected of petitioners an investigation not only into the whereabouts

factual circumstances in order to determine the seller's title and

of respondent at the time of the execution of the SPA48 but also into the

capacity to transfer any interest in the property.42 Under such

genuineness of the signature appearing on it.49

circumstance, it is no longer sufficient for said buyer to merely show

that he relied on the face of the title; he must now also show that he
exercised reasonable precaution by inquiring beyond the title.43 Failure
to exercise such degree of precaution makes him a buyer in bad faith.44

We find such requirements of the RTC and CA too stringent that to

adopt them would be to throw commerce into madness where buyers
run around to probe the circumstances surrounding each piece of sales
document while sellers scramble to produce evidence of its good order.

Remember that it is not just any scrap of paper that is under scrutiny

There must, indeed, be more than negligence. There must be a

but a SPA, the execution and attestation of which a notary public has

conscious turning away from the subject x x x. As put by the


Supreme Court, the grantee must take the consequences if he

"chooses to remain ignorant of what the necessities of the

To what extent, therefore, should an inquiry into a notarized special

power of attorney go in order for one to qualify as a buyer for value in
good faith?
We agree with one author who said:

case require him to know." The search, therefore, is

described by the question, did the grantee make a choice
between not knowing and finding out the truth; or were the
circumstances such that he was not faced with that
choice? (Emphasis ours)

x x x To speak of "notice", as applied to the grantee, is to

follow the language of the Statue of Elizabeth. Its proviso
protects the man who purchases "upon good consideration
and bona fide * * * not having at the time * * * any manner
of notice or knowledge." The term "notice", however, is really
but an approach to the test of good faith, and all modern
legislation tends toward that point.
Thus, some present day statutes (outside of the Uniform Law)
may speak of notice, actual and constructive, and define both
terms, but they should be "liberally construed, so as to protect
bona fide purchaser for value." They may require the grantee to
have "knowledge" of the debtor's intent, but save for technical
purposes of pleading, the term is read in the light of the rules
we are studying. It comes always to a question of the grantee's
good faith as distinct from mere negligence. 50

This means that no automatic correlation exists between the state of

forgery of a document and the bad faith of the buyer who relies on it.
A test has to be done whether the buyer had a choice between knowing
the forgery and finding it out, or he had no such choice at all.
When the document under scrutiny is a special power of attorney that
is duly notarized, we know it to be a public document where the
notarial acknowledgment is prima facie evidence of the fact of its due
execution.51 A buyer presented with such a document would have no
choice between knowing and finding out whether a forger lurks
beneath the signature on it. The notarial acknowledgment has removed
that choice from him and replaced it with a presumption sanctioned by
law that the affiant appeared before the notary public and
acknowledged that he executed the document, understood its import
and signed it. In reality, he is deprived of such choice not because he is
incapable of knowing and finding out but because, under our notarial
system, he has been given the luxury of merely relying on the

presumption of regularity of a duly notarized SPA. And he cannot be

testified to by petitioner Nida Bautista and offered into evidence by her

faulted for that because it is precisely that fiction of regularity which

counsel.57 We emphasize this fact because it was actually this

holds together commercial transactions across borders and time.

photocopy that was relied upon by petitioners before they entered into
the deed of sale with Pedro. As admitted to by petitioner Nida Bautista,

In sum, all things being equal, a person dealing with a seller who has
possession and title to the property but whose capacity to sell is
restricted, qualifies as a buyer in good faith if he proves that he
inquired into the title of the seller as well as into the latter's capacity to

upon inspection of the photocopy of the SPA, they gave Pedro an

advanced payment of Php55,000.00; this signifies that, without further
investigation on the SPA, petitioners had agreed to buy the subject
property from Pedro.

sell; and that in his inquiry, he relied on the notarial acknowledgment

found in the seller's duly notarized special power of attorney. He need

But then said photocopy of the SPA contains no notarial seal. A

not prove anything more for it is already the function of the notarial

notarial seal is a mark, image or impression on a document which

acknowledgment to establish the appearance of the parties to the

would indicate that the notary public has officially signed it.58 There

document, its due execution and authenticity.52

being no notarial seal, the signature of the notary public on the notarial
certificate was therefore incomplete. The notarial certificate being

Note that we expressly made the foregoing rule applicable only under
the operative words "duly notarized" and "all things being equal."
Thus, said rule should not apply when there is an apparent flaw
afflicting the notarial acknowledgment of the special power of attorney

deficient, it was as if the notarial acknowledgment was unsigned. The

photocopy of the SPA has no notarial acknowledgment to speak of. It
was a mere private document which petitioners cannot foist as a
banner of good faith.

as would cast doubt on the due execution and authenticity of the

document; or when the buyer has actual notice of circumstances

All told, it was not sufficient evidence of good faith that petitioners

outside the document that would render suspect its genuineness.

merely relied on the photocopy of the SPA as this turned out to be a

mere private document. They should have adduced more evidence that

In the present case, petitioners knew that Berlina was in Germany at

the time they were buying the property and the SPA relied upon by
petitioners has a defective notarial acknowledgment. The SPA was a

mere photocopy and we are not convinced that there ever was an
original copy of said SPA as it was only this photocopy that was

they looked beyond it. They did not. Instead, they took no precautions
at all. They verified with Atty. Lucero whether the SPA was authentic
but then the latter was not the notary public who prepared the
document. Worse, they purposely failed to inquire who was the notary
public who prepared the SPA. Finally, petitioners conducted the

transaction in haste. It took them all but three days or from March 2 to

and since there was no restraining order from the HLURB, the
Sheriff proceeded the public auction. The sum of P5, 313, 040
was turned over to spouses Hulst in satisfaction of the judgment
Four months later, HLURB issued an order setting aside the
Sheriffs levy on the properties.
Hulst filed a Petition for Certiorari with the CA, which the CA
Hence, this petition.

4, 1988 to enter into the deed of sale, notwithstanding the restriction

on the capacity to sell of Pedro.59 In no way then may petitioners
qualify as buyers for value in good faith.
That said, we come to the third issue on whether petitioners may retain
the portion of Pedro Silva in the subject property. Certainly not. It is
well-settled that the nullity of the sale of conjugal property contracted
by the husband without the marital consent of the wife affects the
entire property, not just the share of the wife.60 We see no reason to
deviate from this rule.


Petitioner Jacobus Hulst and his spouse Ida, Dutch nationals,
entered into a Contract to Sell with respondent PR Builders for a
residential unit in the latters townhouse project.
Thereafter, PR Builders failed to comply with its verbal promise
to complete the project by June 1995. So, Hulst filed before the
Housing and Land Use Regulatory Board (HLURB) a complaint
for rescission of contract with interest, damage and attorneys
HLURB Arbiter rendered a decision in favour Hulst ordering PR
Builders to reimburse the sum of P3, 187,500 (purchase price)
and 547,000 for actual, moral and exemplary damages.
HLURB issued a Writ of Execution, the Sheriff then levied on
PR Builders 15 parcels of land and set the date for the public
Two days before the auction, PR Builders filed an Urgent Motion
to Quash Writ of Levy on the ground that the Sheriff made an
overlevy of the properties. While the resolution was still pending,

WON the Contract to Sell between Hulst and PR Builders is
WON Hulst can claim recovery of what he has given under the
The contract is void.
Sec 7 of Article 12 the 1987 Consti provides, no private lands shall
be transferred or conveyed except to individuals, corporations, or
associations qualified to acquire or hold lands of the public
domain. The Constitution reserved the right to acquire and hold lands
of public domain for Filipino citizens. Therefore, the spouses Hulst,
being Dutch nationals, are disqualified under the Constitution from
owning real property.
Art. 1409 provides that, all contracts whose cause, object or purpose
is contrary to law or public policy and those expressly prohibited or
declared void by law are inexistent and void from the beginning.
Therefore, the Contract to Sell is void for being contrary to law.

Hulst can recover what he has paid under the void contract.

Generally, parties to a void agreement cannot expect the aid of law; the
courts leave them as they are, because they are deemed in pari delicto.
However this rule is subject to exceptions that permit the return of that
which may have been given under the void contract. One of the

exceptions is, Art. 1414 which provides that, When money is paid or
property delivered for an illegal purpose, the contract may be
repudiated by one of the parties before the purpose has been
accomplished, or before any damage has been caused to a third
person. In such case, the courts may, if the public interest will thus be
subserved, allow the party repudiating the contract to recover the
money or property.
The contract entered upon by Hulst and PR Builders, is a Contract to
Sell. In a Contract to Sell, the prospective seller agrees to transfer
ownership of the property upon the full payment of the purchase price.
Then the seller has to convey the title to the buyer by executing a
Contract of Absolute Sale. In this case, ownership has not yet
transferred to Hulst when he filed the suit for rescission. While the
intent to circumvent the constitutional proscription was evident by
virtue of the execution of the Contract to Sell, such violation of the law
or illegal purpose did not materialize because Hulst caused the
rescission of the contract before the execution of the final deed
transferring ownership.
Therefore, applying Article 1414, Hulst is entitled to the recovery of
the amount of P3, 187, 500, representing the purchase price. However,
he is not entitled to damages as no damages may be recovered on the
basis of a void contract. Court ordered Hulst to return the P2, 125, 540,
in excess of the proceeds of the auction sale of the 15 parcels of land
delivered to petitioner.
Quimpo V Beltran
Eustaquia Perfecto-Abad was the owner of several parcel of lands. In
1948, she died intestate leaving all her properties to her grandchild,
petitioner Joaquin Quimpo, and to her great grandchildren,
respondents Consuelo, Ireneo, Danilo, Marites, Anita and Helen.
In 1966, petitioner and respondents entered into an oral partition over
the parcel of lands. They agreed that half of the properties are to be
given to Joaquin and the other half would be divided among
respondents. However, no document of partition was executed.
Joaquin also became the administrator of the remaining undivided
properties since some of the respondents were still minor at that time.

In 1989, those respondents wanted to take possession to the portions

allotted to them but Joaquin refused to give it to them. Petitioner
Joaquin asserted absolute ownership over the parcels of land. He
claimed that he purchased the properties from Eustaquia and he even
presented the Deed of Absolute Sale. This prompted respondents to
file a complaint for judicial partition and recovery of possession
against petitioner.
RTC rendered a decision in favor of respondents, declaring them as coowners of the properties. RTC rejected Joaquins claim of ownership
over the properties since the Deed of Absolute Sale was void for lack
of consideration and consent.
On appeal, CA affirmed RTC ruling. Petitioner insisted on the validity
of the Deed of Sale, they contend that the deed of absolute sale should
have adequately established Joaquins ownership over the property.
Whether the Deed of Absolute Sale is valid or not.
No. In Rongavilla v. Court of Appeals, reiterated in Cruz v. Bancom
Finance Corp, we held that a deed of sale, in which the stated
consideration has not been, in fact, paid is a false contract; that it is
void ab initio. Furthermore, Ocejo v. Flores, ruled that a contract of
purchase and sale is null and void and produces no effect whatsoever
where it appears that the same is without cause or consideration which
should have been the motive thereof, or the purchase price which
appears thereon as paid but which in fact has never been paid by the
purchaser to the vendor.
In the case at bar, the stated consideration for the sale are P5,000.00
and P6,000.00, respectively, an amount which was so difficult to raise
in the year 1946. Respondents established that at the time of the
purported sale Joaquin Quimpo was not gainfully employed. He was
studying in Manila and Eustaquia was the one supporting him; that
when Eustaquia died two (2) years later, Joaquin was not able to
continue his studies. The Quimpos failed to override this. Except for
the incredible and unpersuasive testimony of Joaquins daughter,
Adelia Magsino, no other testimonial or documentary evidence was
offered to prove that Joaquin was duly employed and had the financial
capacity to buy the subject properties in 1946.
As for the consent, both the trial court and the CA found that Eustaquia
was 91 years old, weak and senile, at the time the deeds of sale were

executed. In other words, she was already mentally incapacitated by

then, and could no longer be expected to give her consent to the
sale. The RTC and CA cannot, therefore, be faulted for not giving
credence to the deeds of sale in favor of Joaquin
SC affirms the RTC & CA ruling that respondents are co-owners of the
subject property and in declaring the deed of absolute sale as null and
Spouses Onesiforo and Rosario Alinas (petitioners) separated
sometime in 1982, with Rosario moving to Pagadian City and
Onesiforo moving to Manila. They left behind two lots identified as
Lot 896-B-9-A with a bodega standing on it and Lot 896-B-9-B with
petitioners' house.
Petitioner Onesiforo Alinas (Onesiforo) and respondent Victor Alinas
(Victor) are brothers. Petitioners allege that they entrusted their
properties to Victor and Elena Alinas (respondent spouses) with the
agreement that any income from rentals of the properties should be
remitted to the Social Security System (SSS) and to the Rural Bank of
Oroquieta City (RBO), as such rentals were believed sufficient to pay
off petitioners' loans with said institutions. Lot 896-B-9-A with the
bodega was mortgaged as security for the loan obtained from the RBO,
while Lot 896-B-9-B with the house was mortgaged to the SSS.
Onesiforo alleges that he left blank papers with his signature on them
to facilitate the administration of said properties.
Sometime in 1993, petitioners discovered that their two lots were
already titled in the name of respondent spouses.
Records show that after Lot 896-B-9-A was extra-judicially
foreclosed, Transfer Certificate of Title (TCT) No. T-118533 covering
said property was issued in the name of mortgagee RBO on November
13, 1987. On May 2, 1988, the duly authorized representative of RBO
executed a Deed of Installment Sale of Bank's Acquired Assets4
conveying Lot 896-B-9-A to respondent spouses. RBO's TCT over Lot
896-B-9-A was then cancelled and on February 22, 1989, TCT No. T126645 covering said lot was issued in the name of respondent
Lot 896-B-9-B was also foreclosed by the SSS and on November 17,
1986, the Ex-Oficio City Sheriff of Ozamis City issued a Certificate of
Sale6 over said property in favor of the SSS. However, pursuant to a

Special Power of Attorney7 signed by Onesiforo in favor of Victor,

dated March 10, 1989, the latter was able to redeem, on the same date,
Lot 896-B-9-B from the SSS for the sum of P111,110.09. On June 19,
1989, a Certificate of Redemption8 was issued by the SSS.
Onesiforo's signature also appears in an Absolute Deed of Sale9
likewise dated March 10, 1989, selling Lot 896-B-9-B to respondent
spouses. The records also show a notarized document dated March 10,
1989 and captioned Agreement10 whereby petitioner Onesiforo
acknowledged that his brother Victor used his own money to redeem
Lot 896-B-9-B from the SSS and, thus, Victor became the owner of
said lot. In the same Agreeement, petitioner Onesiforo waived
whatever rights, claims, and interests he or his heirs, successors and
assigns have or may have over the subject property. On March 15,
1993, by virtue of said documents, TCT No. 1739411 covering Lot 896B-9-B was issued in the name of respondent spouses.
ISUUE: W/N the sale of Lot B is valid.
With regard to Lot 896-B-9-B (with house), the Court finds it patently
erroneous for the CA to have applied the principle of equity in
sustaining the validity of the sale of Onesiforo's one-half share in the
subject property to respondent spouses.
Although petitioners were married before the enactment of the Family
Code on August 3, 1988, the sale in question occurred in 1989. Thus,
their property relations are governed by Chapter IV on Conjugal
Partnership of Gains of the Family Code.
Article 124 of the Family Code provides:
Art. 124. The administration and enjoyment of the conjugal
partnership property shall belong to both spouses jointly. x x x
In the event that one spouse is incapacitated or otherwise unable to
participate in the administration of the conjugal properties, the other
spouse may assume sole powers of administration. These powers do
not include the powers of disposition or encumbrance which must have
the authority of the court or the written consent of the other spouse. In
the absence of such authority or consent the disposition or
encumbrance shall be void. x x x (Underscoring and emphasis
In Homeowners Savings & Loan Bank v. Dailo,19 the Court
categorically stated thus:

In Guiang v. Court of Appeals, it was held that the sale of a conjugal

property requires the consent of both the husband and wife. In
applying Article 124 of the Family Code, this Court declared that the
absence of the consent of one renders the entire sale null and void,
including the portion of the conjugal property pertaining to the
husband who contracted the sale.
x x x By express provision of Article 124 of the Family Code, in the
absence of (court) authority or written consent of the other spouse, any
disposition or encumbrance of the conjugal property shall be void.20
Thus, pursuant to Article 124 of the Family Code and jurisprudence,
the sale of petitioners' conjugal property made by petitioner Onesiforo
alone is void in its entirety.
Nunga Jr. vs Nunga III
FACTS: On January 30 1996, the Rural Bank of Apalit conducted its
annual stockholders meeting. Attending the said meeting were the
stockholders representing 28,150 out of the 35,956 total outstanding
shares of stock of RBA. Petitioner Francisco Nunga Jr, hi son Victor
Nunga and Rspondent Francisco III were among the stockholders of
RBA. However, petitioner Francisco Jr. was not present at the meeting,
as he was then in the United States of America where he is a
naturalized citizen.
Victor, thereafter, informed his father, Francisco Jr., of Gonzalezs
intention to sell his shares. Francisco Jr. then instructed Victor to
inquire from Gonzalez the terms of the sale. After a series of
negotiations, Gonzalez ultimately agreed to sell his shares of stock to
Francisco Jr. On even date, Victor gave the initial payment of P50,
000.00 to Gonzalez, who duly acknowledged the same. In exchange,
Gonzalez handed Victor RBA Stock Certificates No. 105, No. 152 and
No. 166. As to the four other certificates that were in the possession of
the RBA, Gonzalez issued a letter addressed to Isabel Firme (Firme),
the RBA Corporate Secretary, which instructed the latter to turn over
to Victor the remaining stock certificates in Gonzalezs name. Upon
being presented with Gonzalezs letter, Firme gave Victor Stock
Certificate No. 181, but alleged that Stock Certificates No. 5 and No.
36 could no longer be located in the files of RBA. Firme advised
Victor to merely reconstitute the missing stock certificates. A reading
of the said Contract to Sell would reveal, however, that the same was
only notarized on 28 February 1996.

Before Francisco Jr. and Victor could pay the balance of the contract
price for Gonzalezs RBA shares of stock, Gonzalez entered into
another contract involving the very same shares. Since the stock
certificates covering the shares were already in Victors possession,
Gonzalez immediately wrote Victor a letter,[11] demanding that Victor
hand over the said stock certificates to Francisco III, the supposed new
owner of the shares.
The next day, on 28 February 1996, Francisco Jr. arrived from the
United States of America. He and Victor then promptly proceeded to
the residence of Gonzalez in order to pay the balance of P150, 000.00
of the purchase price stated in their Contract to Sell with
Gonzalez. Gonzalez, however, informed them that he already sold his
shares of stock to Francisco III. After discussing the matter, Gonzalez
was somehow convinced to accept the balance of the purchase price
and sign his name at the dorsal portion of the stock certificates to
endorse the same to Francisco Jr. Gonzalez also executed a Deed of
Absolute Sale in favor of Francisco Jr.
Consequently, on 14 March 1996, Victor filed a Petition requesting
that the transfer of Gonzalezs RBA shareholdings to Francisco Jr. be
annotated on the RBA Corporate Transfer Book and new stock
certificates be issued in favor of Francisco Jr. Francisco III, on the
other hand, prayed for judgment ordering (a) Victor to surrender
Gonzalezs stock certificates in order that the same may be transferred
to Francisco IIIs name; and (b) Francisco Jr. and Victor to desist from
attempting to register the purported sale by Gonzales of his RBA
shares of stock to Francisco Jr., who had already become a naturalized
American citizen and was, thus, disqualified from owning shares in
RBA under RA 7357which states that the capital stocks of any rural
bank shall be fully owned and held directly or indirectly by citizens of
the Philippines.
ISSUE: WON the sale of shares of stock of Gonzales to Francisco Jr.
is null and void ab ignition on the basis of the alleged disqualification f
Francisco Jr under RA 7353. YES
RUING: As the Court of Appeals declared, Francisco Jr. was
disqualified from acquiring Gonzalezs shares of stock in RBA. The
argument of Francisco Jr. and Victor that there was no specific
provision in Republic Act No. 7353 which prohibited the transfer of
rural bank shares to individuals who were not Philippine citizens or
declared such transfer void, is both erroneous and unfounded.

Section 4 of Republic Act No. 7353 explicitly provides:

Section 4. x x x With exception of shareholdings of
corporations organized primarily to hold equities in rural banks
as provided for under Section 12-C of Republic Act 337, as
amended, and of Filipino-controlled domestic banks, the
capital stock of any rural bank shall be fully owned and held
directly or indirectly by citizens of the Philippines or
corporations, associations or cooperatives qualified under
Philippine laws to own and hold such capital stock: x x x.
In the instant case, it is undisputed that when Gonzalez executed the
Contract to Sell and the Deed of Absolute Sale covering his RBA
shares of stock in favor of Francisco Jr., the latter was already a
naturalized citizen of the United States of America. Consequently, the
acquisition by Francisco Jr. of the disputed RBA shares by virtue of
the foregoing contracts is a violation of the clear and mandatory
dictum of Republic Act No. 7353, which the Court cannot
The Contract to Sell between Gonzalez and Francisco Jr. was void and
without force and effect for being contrary to law. It intended to effect
a transfer, which was prohibited by Republic Act No. 7353. It is even
irrelevant that the terms of said Contract to Sell had been fully
complied with and performed by the parties thereto, and that a Deed of
Absolute Sale was already executed by Gonzalez in favor of Francisco
Jr. A void agreement will not be rendered operative by the parties'
alleged performance (partial or full) of their respective prestations. A
contract that violates the law is null and void ab initio and vests no
rights and creates no obligations. It produces no legal effect at all.
The Court upholds the finding of the Court of Appeals that Francisco
III, who is undeniably a citizen of the Philippines, and who is fully
qualified to own shares of stock in a Philippine rural bank, had
acquired vested rights to the disputed RBA shares of stock by virtue of
the Deed of Assignment executed in his favor by Gonzalez.

DPWH vs. Quiwa

In 1991, Mt. Pinatubo erupted, causing destruction to affected

communities. To avert damage to life and property, the DPWH in 1992
elected to contract the services of some construction companies to
dredge the river system in the affected communities under the Mt.
Pinatubo Rehabilitation Project. The said plan had an initial
appropriation of 400 million, with a supplemental budget of 300
million, or a total of 700 million pesos. The agency enlisted the
services of the respondents in dredging and desilting part of the
Sacobia-Bamban-Parua River system through the project manager, a
certain Philip Menes. Before they started with the project, they had a
meeting with then Usec. Encarnacion, who impressed upon them the
necessity and urgency of the project. The respondents then proceeded
with the work under the supervision of the personnel of the DPWH.
When they have completed the desilting, the respondents tried to
collect with the agency in the total amount of 7.5 million pesos, which
was not acted upon, prompting them to file a case for collection of sum
of money. The contractors contended that they entered into a valid
contract with the department, and they have completed the work
according to the work specifications as evidenced by the


accomplishment reports by the engineers of DPWH. The department

on the other hand contended that there was no valid contract between it
and the contractors, said contract bejng violative of Sections 85 and 86
of PD 1445 or the Gov't. Auditing Code, as amended by EO 292 or the

Administrative Code, and as such void as expressly stated in Section

Construction vs COA, which was cited in the subsequent cases of

87 of PD 1445. The mentioned sections require 2 elements: an

Melchor vs COA, Eslao vs COA, and EPG Construction vs Viligar.

appropriation for contracts and a certification by the chief accountant

The Court ruled that these contracts were void not because of intrinsic

of the agency or by the gead of its accounting office as to the

illegality but due to some express declaration or prohibition by law. In

availability of funds. Lacking of any of these elements, the contract is

the case at hand, the same is true. The contract was not illegal per se

void pursuant to section 87. Furthermore, the department contended

and payment upon completion was warranted.

that the project manager was not authorized to represent the former as
signatory in the contract. The RTC ruled in favor of the contractors,
whcih was sustained by the CA.
The issue in this case is whether there is a valid contract between the
DPWH and the contractors which would merit the approval of the
money claim by the contractors.
The Court ruled that indeed, the contract between the DPWH and the
contractors lacked the necessary element for it to be valid. There was
indeed a prior appropriation under the Mt. Pinatubo Rehabilitation
Project, but the second element was not present, for there was no
certification of the availability of funds from the accountant of the
agency. Furthermore, the project manager had no authority to sign in
behalf of the agency for contracts amounting to more than a million
pesos. Therefore, the contract was indeed void from its inception.
However, such would not free the DPWH from paying the contractors.
It has been established that the contractors had rendered dredging
services which would entitle them to remuneration on the basis of
equity. This was the ruling of the Court in the case of Royal Trust


Sometime in 1978 the municipality of Nagcarlan,Laguna through then
Mayor Comendador and Bombasis mother entered into a lease
contract whereby it allowed respondents mother to occupy a particular
space in the Laguna Public market for a period of 20 years. But on
1984 Marciana died before the expiration of the contract so Visitacion
Bombasi took over the said store and then From then on up to January
1993, Visitacion secured the yearly Mayors permits. Sometime in
1986 a fire razed the public market but the store of Bombas was not
affected. Upon Visitacions request for inspection on 15 May 1986,
District Engineer Marcelino B. Gorospe (Engineer Gorospe) of the
then Ministry of Public Works and Highways, Regional Office No. IVA, found that the store of Visitacion remained intact and stood strong.
This finding of Engineer Gorospe was contested by the Municipality
of Nagcarlan. On 1993 Bombasi received a letter from Mayor
Comendador directing her to demolish her store. Said action was based
on a resolution passed by the Nagcarlans Sangguniang Bayan. The
resolution empowered Mayor comendador to file a case for unlawful
detainer against Bombasi in case the latter should refuse to vacate or
demolish the store to give way to the construction of the new public
market. Bombasi on the reply stood her ground alleging that she
cannot be evicted from the said space since the contract between them
and the municipality is still existing and that the building where she
engages business has not been affected by the fire as to consider it a
public nuisance or hazard and lastly, that the said resolution does not
authorize the Mayor to demolish the said building without first filing a
case for unlawful detainer. Notwithstanding the allegations of
Bombasi, Comendador with the assistance of Asilo,Jr , demolished the
said building.
Bombasi then filed a criminal action for violation of Republic Act
3019 otherwise known as anti-graft and corrupt practices act.
Petitioner Asilo and Comendador were found guilty of the said
violation. It then appealed the conviction raising as a defense the fact

that Asilo merely acted upon an order of a superior officer,

Comendador whose action is based upon a resolution issued by the
Local legislative body.
ISSUE Whether Asilo is guilty of the violating RA 3019 ? YES.
RULING - First, there can be no merit in the contention that
respondents structure is a public nuisance. The abatement of a
nuisance without judicial proceedings is possible if it is nuisance per
se. Nuisance per se is that which is nuisance at all times and under any
circumstance, regardless of location and surroundings. In this case, the
market stall cannot be considered as a nuisance per se because as
found out by the Court, the buildings had not been affected by the
1986 fire. This finding was certified to by Supervising Civil Engineer
Wilfredo A. Sambrano of the Laguna District Engineer Office.
Second, the Sangguniang Bayan resolutions are not enough to justify
demolition. A closer look at the contested resolutions reveals that
Mayor Comendador was only authorized to file an unlawful detainer
case in case of resistance to obey the order or to demolish the building
using legal means. Clearly, the act of demolition without legal order in
this case was not among those provided by the resolutions, as indeed,
it is a legally impossible provision.
Furthermore, the Municipality of Nagcarlan, Laguna, as represented
by the then Mayor Comendador, was placed in estoppel after it granted
yearly business permits in favor of the Spouses Bombasi. Art. 1431 of
the New Civil Code provides that, through estoppel, an admission or

representation is rendered conclusive upon the person making it, and

cannot be denied or disproved as against the person relying thereon.
The representation made by the municipality that the Spouses Bombasi
had the right to continuously operate its store binds the municipality. It
is utterly unjust for the Municipality to receive the benefits of the store
operation and later on claim the illegality of the business. BASE ON
Finally, the Invocation of compliance with an order of a superior is of
no moment for the "demolition [order] cannot be described as having
the semblance of legality inasmuch as it was issued without the
authority and therefore the same was patently illegal. This Court in a
number of decisions held that even if there is already a writ of
execution, there must still be a need for a special order for the purpose
of demolition issued by the court before the officer in charge can
destroy, demolish or remove improvements over the contested