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CHAPTER II

PARAGAS v. HEIRS OF DOMINADOR BALACANO


FACTS:
Gregorio Balacano, married to Lorenza, owned 2 parcels of land. He was already 81 years old, very weak, could barely talk, and
had been battling w/ liver disease for over a month. On his deathbed, barely a week before he died, he allegedly signed a Deed of
Absolute Sale over the lots in favor of the Paragas Spouses, accompanied by Atty. De Guzman who proceeded to notarize the
same, alleging that it was a mere confirmation of a previous sale and that Gregorio had already paid a P 50,000.00 deposit. The
Paragas driver was also there to take a picture of Gregorio signing the said deed, w/ a ballpen in his hand. There was nothing to
show that the contents of the deed were explained to Gregorio. Paragas then sold a portion of the disputed lot to Catalino. The
grandson of Gregorio, Domingo, sought to annul the sale and partition. There was no sufficient evidence to support any prior
agreement or partial execution thereof.

ISSUE: W/N Balacano is incapacitated to enter into a contract of sale

HELD:
A person is not rendered incompetent merely because of old age; however, when such age has impaired the mental faculties as
to prevent a person from protecting his rights, then he is undeniably incapacitated. He is clearly at a disadvantage, and the courts
must be vigilant for his protection. In this case, Gregorios consent was clearly absent hence the sale was null and void. The
dubious circumstances raise serious doubts on his capacity to render consent.

Considering that the Paragas Spouses are not owners of the said properties, it only follows that the subsequent sale thereof to
Catalino who was not in good faith is likewise void. Further, the lots pertained to the conjugal partnership having been
inherited by Gregorio during his marriage to Lorenza. It cannot thus be sold w/o the latters consent.

RUBIAS v. BATILLER
FACTS:
Petitioner Domingo Rubias, a lawyer, filed a suit to recover the ownership and possession of certain portions of lot which he bought
from his father-in-law (Francisco Militante) when he was counsel of the latter in a land registration case involving the lot in question
against its present occupant respondent (Isaias Batiller). Respondent claimed that the complaint does not state a cause of action,
the truth of the matter being that he and his predecessors-in-interest have always been in actual, open, and continuous possession
since time immemorial under claim of ownership of the portions of the lot in question.

The trial court issued a pre-trial order which stated that during the pre-trial conference, the parties have agreed that the facts are
attendant in the case and that they will no longer introduce any evidence, testimonial or documentary to prove them. (Pls. read the
full text of the case to be guided on this portion.)

ISSUE: W/N the contract of sale between the petitioner and his father-in-law was void because it was made when plaintiff was
counsel of his father-in-law in a land registration case involving the property in dispute

HELD:
YES! Manifestly, plaintiffs complaint against defendant, to be declared absolute owner of the land and to be restored to possession
thereof with damages was bereft of any factual or legal basis. The purchase by a lawyer of the property in litigation from his clients
is categorically prohibited by Article 1491, paragraph 5 of the Civil Code, and that consequently, plaintiffs purchase of the property
in litigation from his client was void and could produce no legal effect by virtue of Article 1409, paragraph 7 of the Civil Code which
provides that contracts expressly prohibited or declared void by law are inexistent and void from the beginning and that these
contracts cannot be ratified.

The Court cited Director of Lands vs. Abagat (53 Phil 147; March 27, 1929), which the Court again affirming the invalidity and
nullity of the lawyers purchase of the land in litigation from his client, ordered the issuance of writ of possession for the return of
the land by the lawyer to the adverse parties without reimbursement of the price paid by him and other expenses.

Article 1491 of the Civil Code prohibits certain persons, by reason of the relation of trust or their peculiar control over the property
from acquiring such property in their trust or control directly or indirectly and even at a public or judicial auction as follows: a.)
guardians, b.) agents, c.) administrators, d.) public officers and employees, judicial officers and employees, prosecuting attorneys,
and lawyers, and e.) others especially disqualified by law.
PHILIPPINE TRUST COMPANY v. ROLDAN
FACTS:
Mariano L Bernardo, a minor, inherited from his father, Marcelo Bernardo 17 parcels of land located in Guiguinto, Bulacan. In view
of his minority, guardianship proceedings were instituted on July 27, 1947, where Socorro Roland, surviving spouse of Marcelo
and step-mother of Mariano, was appointed as guardian of the latter. Also, Socorro filed a motion asking authority to sell as
guardian the 17 parcels for the sum of P14,700 to his brother-in-law, Dr. Fidel C. Ramos, the purpose of the sale being allegedly
to invest money in a residential house, which the minor desired to have on Tindalo St., Manila. The motion was granted. On August
5, 1947 Socorro, as guardian, then executed the proper deed of sale in favor of Fidel Ramos and on August 12, 1947, she asked
for and obtained judicial confirmation of the sale.

However, on August 13, 1947, Fidel Ramos executed in favor of Socorro personally, a deed of conveyance covering the same 17
parcels for the sum of P15,000. And on October 21, 1947 Socorro sold 4 out of the 17 parcels to Emilio Cruz for P3,000, reserving
herself the right to repurchase. On August 10, 1948, petitioner Phil. Trust Co. replaced Socorro as guardian. Petitioner filed a
complaint to annul two contracts regarding the 17 parcels of land: a) the sale thereof by Socorro, as guardian, to Fidel Ramos; and
b) sale thereof by Fidel Ramos to Socorro personally. Petitioner contends that the step-mother in effect, sold to herself, the
properties of her ward thus should be annulled as it violates Art. 1459 of the Civil Code prohibiting the guardian from purchasing
either in person or through the mediation of another the property of her ward. As to the third conveyance, that Socorro had
acquired no valid title to convey to Cruz. The trial court held that Art 1459 was not controlling as there was no proof that Ramos
was a mere intermediary or that the latter agreed with Socorro to but the parcels of land for her benefit. The Court of Appeals
affirmed the judgment, adding that the minor new the particulars of, and approved the transactions, and that only clear and positive
evidence of fraud and bad faith, and not mere insinuations and interferences will overcome the presumptions that a sale was
concluded in all good faith for value. Hence, this petition.

ISSUE: W/N the two contracts of sale made by Socorro was valid.

HELD: No. The court held that even without proof that Socorro had connived with Fidel Ramos. Remembering the general doctrine
that guardianship is a trust of the highest order, and the trustee cannot be allowed to have any inducement to neglect his ward's
interest and in line with the court's suspicion whenever the guardian acquires the ward's property we have no hesitation to declare
that in this case, in the eyes of the law, Socorro Roldan took by purchase her ward's parcels thru Dr. Ramos, and that Article 1459
of the Civil Code applies.

The temptation which naturally besets a guardian so circumstanced, necessitates the annulment of the transaction, even if no
actual collusion is proved (so hard to prove) between such guardian and the intermediate purchaser. This would uphold a sound
principle of equity and justice. From both the legal and equitable standpoints these three sales should not be sustained: the first
two for violation of article 1459 of the Civil Code; and the third because Socorro Roldan could pass no title to Emilio Cruz. The
annulment carries with it (Article 1303 Civil Code) the obligation of Socorro Roldan to return the 17 parcels together with their fruits
and the duty of the minor, through his guardian to repay P14,700 with legal interest.

FABILLO v. IAC
FACTS:
Florencio Fabillo contracted the services of Atty. Murillo to revive a lost case over his inheritance from his deceased sister Justinia.
He sought to acquire the San Salvador and Pugahanay Properties that his sister left behind, against the latters husband. They
entered into a contract where a contingent fee in favor of Atty. Murillo in case the case was won was agreed upon. The fee was
for 40% of the value of whatever benefit Florencio may derive from the suit such as if the properties were sold, rented, or
mortgaged. It was vague, however, regarding the fee in case Florencio or his heirs decide to occupy the house allowing Atty.
Murillo the option to occupy or lease 40% of the said house and lot. A compromise agreement was entered into where Florencio
acquired both the San Salvador and Pugahanay Properties. Atty. Murillo installed a tenant in the Pugahanay Property; later on
Florencio claimed exclusive rights over the properties invoking Art. 1491 of the Civil Code. Florencio and Atty. Murillo both died
and were succeeded by their respective heirs.

ISSUE: W/N contingent fees agreed upon are valid

HELD:
Contingent fees are not contemplated by the prohibition in Art. 1491 disallowing lawyers to purchase properties of their clients
under litigation. The said prohibition applies only during the pendency of the litigation. Payment of the contingent fee is made after
the litigation, and is thus not covered by the prohibition. For as long as there is no fraud or undue influence, or as long as the fees
are not exorbitant, the same is valid and enforceable. It is even recognized by the Cannons of Professional Ethics.

However, considering that the contract is vague on the matter of division of the shares if Florencio occupies the property; the
ambiguity is to be construed against Atty. Murillo being the one who drafted the contract and being a lawyer more knowledgeable
about the law. The Court thus, invoking the time-honored principle that a lawyer shall uphold the dignity of the legal profession,
ordered only a contingent fee of P 3,000.00 as reasonable attorneys fees.

CHAPTER III

PUP v. CA
FACTS:
Petitioner NDC (National Development Corp.) a GOCC owned & had in its disposal a 10-hectare property which is the NDC
Compound.

A portion of which was leased to private respondent Firestone Corporation for ceramic manufacturing business. Both parties
entered into a contract of lease for a term of 10 years, renewable for another 10 years. Firestone built several warehouses and
facilities therein.

Prior to the expiration of the said lease contract, Firestone wrote NDC requesting for an extension of their lease agreement. Since
business between NDC and FIRESTONE went smooth, the lease was twice renewed, this time conferring upon Firestone an
express grant the first option to purchase the leased premise in the event that NDC decided to dispose and sell the properties
including the lot. So Firestone now has the right of first refusal.

Eventually though, a Memorandum Order No. 214 was issued by then President Corazon Aquino ordering the transfer of the whole
NDC compound to the National Government. The order of conveyance would automatically result in the cancellation of NDC's
total obligation in favor of the National Government. The memorandum order was in consideration of NDCs P57M debt.

And so, pursuant thereto, NDC had no choice but to transfer the property to Polytechnic University of the Philippines, another
GOCC, and in need of expansion.

Firestone therefore instituted an action for specific performance to compel NDC to sell the leased property in its favor.

ISSUE: Whether or not there is a valid sale between NDC and PUP.

HELD:
YES. All three (3) essential elements of a valid sale, without which there can be no sale, were attendant in the "disposition" and
"transfer" of the property from NDC to PUP - consent of the parties, determinate subject matter, and consideration therefor.
1. consent is manifested by the Memo Order No. 214,
2. the subject matter was the property subject of the dispute.
3. the cancellation of liabilities constituted consideration

But the argument of PUP and NDC was untenable. GOCCs have personalities separate and distinct from the government. Sale
brings within its grasp the whole gamut of transfers where ownership of a thing is ceded for consideration. Further, judging from
the conduct of the parties in this case, all the elements of a valid sale attend. Consent is manifested by the Memo Order No. 214,
the cancellation of liabilities constituted consideration; the subject matter was of course the property subject of the dispute.

Since a sale was involved, the right of first refusal in favor of Firestone must be respected. It forms an integral part of the lease
and is supported by considerationFirestone having made substantial investments therein. Only when Firestone fails to exercise
such right may the sale to PUP proceed.

So here we see that GOCCs even though government owned & controlled has a personality of its own distinct and separate from
that of the government. The intervention in a transaction of the Office of the President thru the Executive Secretary DOES NOT
CHANGE THE INDEPENDENT EXISTENCE of a government entity as it deals with another government entity.