Republic of the Philippines (Civil Case No.
(Civil Case No. 1191) to be declared owners of the entire land, for possession of its western
SUPREME COURT
Manila
EN BANC
G.R. No. L-21489 and L-21628 May 19, 1966
MIGUEL MAPALO, ET AL., petitioners,
vs.
MAXIMO MAPALO, ET AL., respondents.
Pedro P. Tuason for petitioners.
Primicias and Del Castillo for respondents.
BENGZON, J.P., J.:
The spouses Miguel Mapalo and Candida Quiba, simple illiterate farmers, were registered owners,
with Torrens title certificate O.C.T. No. 46503, of a 1,635-square-meter residential land in
Manaoag, Pangasinan. Said spouses-owners, out of love and affection for Maximo Mapalo — a
brother of Miguel who was about to get married — decided to donate the eastern half of the land
to him. O.C.T. No. 46503 was delivered. As a result, however, they were deceived into signing, on
October 15, 1936, a deed of absolute sale over the entire land in his favor. Their signatures
thereto were procured by fraud, that is, they were made to believe by Maximo Mapalo and by the
attorney who acted as notary public who "translated" the document, that the same was a deed of
donation in Maximo's favor covering one-half (the eastern half) of their land. Although the
document of sale stated a consideration of Five Hundred (P500.00) Pesos, the aforesaid spouses
did not receive anything of value for the land. The attorney's misbehaviour was the subject of an
investigation but its result does not appear on record. However we took note of the fact that during
the hearing of these cases said notary public was present but did not take the witness stand to
rebut the plaintiffs' testimony supporting the allegation of fraud in the preparation of the document.
Following the execution of the afore-stated document, the spouses Miguel Mapalo and Candida
Quiba immediately built a fence of permanent structure in the middle of their land segregating the
eastern portion from its western portion. Said fence still exists. The spouses have always been in
continued possession over the western half of the land up to the present.
Not known to them, meanwhile, Maximo Mapalo, on March 15, 1938, registered the deed of sale
in his favor and obtained in his name Transfer Certificate of Title No. 12829 over the entire land.
Thirteen years later on October 20, 1951, he sold for P2,500.00 said entire land in favor of
Evaristo, Petronila Pacifico and Miguel all surnamed Narciso. The sale to the Narcisos was in turn
registered on November 5, 1951 and Transfer Certificate of Title No. 11350 was issued for the
whole land in their names.
The Narcisos took possession only of the eastern portion of the land in 1951, after the sale in their
favor was made. On February 7, 1952 they filed suit in the Court of First Instance of Pangasinan
portion; for damages; and for rentals. It was brought against the Mapalo spouses as well as
against Floro Guieb and Rosalia Mapalo Guieb who had a house on the western part of the land
with the consent of the spouses Mapalo and Quiba.
The Mapalo spouses filed their answer with a counterclaim on March 17, 1965, seeking
cancellation of the Transfer Certificate of Title of the Narcisos as to the western half of the land, on
the grounds that their (Mapalo spouses) signatures to the deed of sale of 1936 was procured by
fraud and that the Narcisos were buyers in bad faith. They asked for reconveyance to them of the
western portion of the land and issuance of a Transfer Certificate of Title in their names as to said
portion.
In addition, the Mapalo spouses filed on December 16, 1957 their own complaint in the Court of
First Instance of Pangasinan (Civil Case No. U-133) against the aforestated Narcisos and Maximo
Mapalo. They asked that the deeds of sale of 1936 and of 1951 over the land in question be
declared null and void as to the western half of said land.
Judge Amado Santiago of the Court of First Instance of Pangasinan located in the municipality of
Urdaneta tried the two cases jointly. Said court rendered judgment on January 18, 1961, as
follows:
WHEREFORE, judgment is hereby rendered as follows, to wit:
(a) dismissing the complaint in Civil Case No. 11991;
(b) declaring Exhibit A, plaintiffs in Case No. 11991 and Exhibit 1, defendants in Case No.
U-133 as a donation only over the eastern half portion of the above-described land, and
as null and void with respect to the western half portion thereof;
(c) declaring as null and void and without legal force and effect Transfer Certificate of Title
No. 12829 issued in favor of Maximo Mapalo as regards the western half portion of the
land covered therein;
(d) declaring as null and void Transfer Certificate of Title No. 11350 in the names of the
Narcisos insofar as the western half portion of the land covered therein is concerned;
(e) ordering the spouses Mapalo and Quiba and the Narcisos to have the above-
described land be subdivided by a competent land surveyor and that the expenses
incident thereto be borne out by said partiespro rata;
(f) ordering the Register of Deeds of Pangasinan to issue in lieu of Transfer Certificate of
Title No. 11350 two new titles upon completion of the subdivision plan, one in favor of the
spouses Miguel Mapalo and Candida Quiba covering the western half portion and another
for the Narcisos covering the eastern half portion of the said land, upon payment of the
legal fees; meanwhile the right of the spouses Mapalo and Quiba is hereby ordered to be
annotated on the back of Transfer Certificate of Title No. 11350; and
 (g) sentencing Maximo Mapalo and the Narcisos to pay the costs.
IT IS SO ORDERED.
The Narcisos appealed to the Court of Appeals. In its decision on May 28, 1963, the Court of
Appeals reversed the judgment of the Court of First Instance, solely on the ground that the
consent of the Mapalo spouses to the deed of sale of 1936 having been obtained by fraud, the
same was voidable, not void ab initio, and, therefore, the action to annul the same, within four
years from notice of the fraud, had long prescribed. It reckoned said notice of the fraud from the
date of registration of the sale on March 15, 1938. The Court of First Instance and the Court of
Appeals are therefore unanimous that the spouses Mapalo and Quiba were definitely the victims
of fraud. It was only on prescription that they lost in the Court of Appeals.
From said decision of the Court of Appeals, the Mapalo spouses appealed to this Court.
And here appellants press the contention that the document dated October 15, 1936, purporting to
sell the entire land in favor of Maximo Mapalo, is void, not merely voidable, as to the western
portion of the land for being absolutely simulated or fictitious.
Starting with fundamentals, under the Civil Code, either the old or the new, for a contract to exist
at all, three essential requisites must concur: (1) consent, (2) object, and (3) cause or
consideration.1 The Court of Appeals is right in that the element of consent is present as to the
deed of sale of October 15, 1936. For consent was admittedly given, albeit obtained by fraud.
Accordingly, said consent, although defective, did exist. In such case, the defect in the consent
would provide a ground for annulment of a voidable contract, not a reason for nullity ab initio.
The parties are agreed that the second element of object is likewise present in the deed of
October 15, 1936, namely, the parcel of land subject matter of the same.
Not so, however, as to the third element of cause or consideration. And on this point the decision
of the Court of Appeals is silent.
As regards the eastern portion of the land, the Mapalo spouses are not claiming the same, it being
their stand that they have donated and freely given said half of their land to Maximo Mapalo. And
since they did not appeal from the decision of the trial court finding that there was a valid and
effective donation of the eastern portion of their land in favor of Maximo Mapalo, the same
pronouncement has become final as to them, rendering it no longer proper herein to examine the
existence, validity efficacy of said donation as to said eastern portion.1äwphï1.ñët
Now, as to the western portion, however, the fact not disputed herein is that no donation by the
Mapalo spouses obtained as to said portion. Accordingly, we start with the fact that liberality as a
cause or consideration does not exist as regards the western portion of the land in relation to the
deed of 1936; that there was no donation with respect to the same.
It is reduced, then, to the question whether there was an onerous conveyance of ownership, that
is, a sale, by virtue of said deed of October 15, 1936, with respect to said western portion.
Specifically, was there a cause or consideration to support the existence of a contrary of sale?
The rule under the Civil Code, again be it the old or the new, is that contracts without a cause or
consideration produce no effect whatsoever.2 Nonetheless, under the Old Civil Code, the
statement of a false consideration renders the contract voidable, unless it is proven that it is
supported by another real and licit consideration.3 And it is further provided by the Old Civil Code
that the action for annulment of a contract on the ground of falsity of consideration shall last four
years, the term to run from the date of the consummation of the contract.4
Accordingly, since the deed of sale of 1936 is governed by the Old Civil Code, it should be asked
whether its case is one wherein there is no consideration, or one with a statement of a false
consideration. If the former, it is void and inexistent; if the latter, only voidable, under the Old Civil
Code. As observed earlier, the deed of sale of 1936 stated that it had for its consideration Five
Hundred (P500.00) Pesos. In fact, however, said consideration was totally absent. The problem,
therefore, is whether a deed which states a consideration that in fact did not exist, is a contract
without consideration, and therefore void ab initio, or a contract with a false consideration, and
therefore, at least under the Old Civil Code, voidable.
According to Manresa, what is meant by a contract that states a false consideration is one that
has in fact a real consideration but the same is not the one stated in the document. Thus he says:
En primer lugar, nor interesa recordar la diferencia entre simulacion y el contrato con
proposito fraudulento. Este aunque ilicito es real; mas el primero es falso en realidad,
aunque se le presente como verdadero. (Manresa, Codigo Civil, Tomo VIII, Vol. II, p.
354.)
And citing a decision of the Supreme Court of Spain on the matter, Manresa further clarifies the
difference of false cause and no cause, thus:
Insiste en el distingo con mas detenida descripcion la sentencia de 25 de mayo de 1944,
en la que se argumenta:
Si bien es elemento fundamental de todo negocio, la declaracion de voluntad substracto
de una voluntad efectiva, y la existencia de una causa que leconfiera significado juridico
señalando la finalidad que con este se persigue, no ha de deducirse de esta doctrina,
fundamentalmente recogida en el articulo 1.261 y concordantes del Codigo civil, que
cualquier falta de adecuacion entre cualquier incongruencia entre la causa expresada y la
verdadera, y, en general, entre la estructuracion y la finalidad economica; hayan de
producir la ineficacia del negocio, pues por el contrario, puede este ser valido y producir
sus efectos tanto en el caso de la mera disonancia entre el medio juridico adoptado y el
fin practico perseguido, por utilizacion de una via oblicua o combinacion de formas
juridicas entrelazadas que permita la obtencion de un resultado no previsto en los
cuadros de la ley — negocios indirectos y negocios fiduciarlos, validos cuando no
envuelven fraude de ley, como en el caso de la verdadera disconformidad entre la
apariencia del acto y su real contenido, preparada deliberadamente por las partes —
 negocio simulado — , ya que, cuando esta divergencia implica no una ausencia total de
voluntad y de acto real, sino mera ocultacion de un negocio verdadero bajo la falsa
apariencia de un negocio fingido "sirulacion relativa", la ineficacia de la forma externa
simulada, no es obstaculo para la posible validez del negocio disimulado que contiene,
en tanto este ultimo sea licito y reuna no solo los requisitos generales, sino tambien los
que corresponden a su naturaleza especial, doctrina, en obligada aplicacion de los
preceptos de nuestra Ley civil, especialmente en su art. 1.276, que, al establecer el
principio de nulidad de los contratos en los que se hace expresion de una causa falsa,
deja a salvo el caso de que esten fundados en otra verdadera y licita. (Manresa, Codigo
Civil, Tomo VIII, Vol. II pp. 357-358)
Sanchez Roman says:
Ya hemos dicho que la intervencion de causa en los contratos es necesaria, y que sin
ellos son nulos; solo se concibe que un hombre perturbado en su razon pueda contratar
sin causa. ...
Por la misma razon de la necesidad de la intervencion de causa en el contrato, es
preciso que esta sea verdadera y no supuesta, aparente o figurada. Que la falsedad de
la causa vicia el consentimiento y anula el contrato, es, no solo doctrina indudable de
Derecho Cientifico sino tambien de antiguo Derecho de Castilla, que en multitud de leyes
asi lo declararon. (Sanchez Roman, Derecho Civil, Tomo IV, p. 206.).
In a clearer exposition of the above distinction, Castan states:
2.º. La causa ha de ser verdadera. La causa falsa puede ser erronea o simulada. Es
erronea como dice Giorgi, la causa que tiene por base la credulidad en un hecho no
existente; y simulada la que tiene lugar cuando se hace aparecer artificiosamente una
distinta de la verdadera. La erronea produce siempre la inexistencia del contrato; la
simulada no siempre produce este efecto, porque puede suceder que la causa oculta,
pero verdadera, baste para sostener el contrato. De acuerdo con esta doctrina, dice el
art. 1.276 de nuestro Codigo que "la expresion de una causa falsa en los contratos dara
lugar a la nulidad, si no se probase que estaban fundados en otra verdadera y licita".
(Castan Derecho Civil Español, Tomo II, pp. 618-619)
From the foregoing it can be seen that where, as in this case, there was in fact no consideration,
the statement of one in the deed will not suffice to bring it under the rule of Article 1276 of the Old
Civil Code as stating a false consideration. Returning to Manresa:
Figurando en nuestro Derecho positivo la causa, como un elemento esential del contrato,
es consecuencia ineludible, se reputar simulada la entrega del precio en la compraventa
de autos, el que haya que declararla nula por inexistente haciendose aplicacion indebida
de art. 1.276 por el Tribunal sentenciador al cohonestar la falta de precio admitiendo se
pueda tratar de una donacion, ya que la recta aplicacion del citado precepto exige que
los negocios simulados, o sea con causa falsa, se justifique la verdadera y licita en que
se funda el acto que las partes han querido ocultar y el cumplimiento de las formalidades
impuestas por la Ley y, cual dice la sentencia de 3 de marzo de 1932, esta rigurosa
doctrina ha de ser especialmente impuesta en la donaciones puras y simples; de los que
deduce que la sentencia recurrida al no decretar la nulidad instada por falta de causa,
incide en la infraccion de los articulos 1.261, 1.274, 1.275 y 1.276 del Codigo Civil.
(Sentencia de 22 de febrero de 1940). (Manresa, Codigo Civil, Tomo VIII, Vol. II, p. 356)
In our view, therefore, the ruling of this Court in Ocejo, Perez & Co. vs. Flores, 40 Phil. 921, is
squarely applicable herein. In that case we ruled that a contract of purchase and sale is null and
void and produces no effect whatsoever where the same is without cause or consideration in that
the purchase price which appears thereon as paid has in fact never been paid by the purchaser to
the vendor.
Needless to add, the inexistence of a contract is permanent and incurable and cannot be the
subject of prescription. In the words of Castan: "La inexistencia es perpetua e insubsanable no
pudiendo ser objecto de confirmacion ni prescripcion (Op. cit., p. 644.) In Eugenio v. Perdido, 97
Phil. 41, 42-43, involving a sale dated 1932, this Court, speaking through Justice Cesar Bengzon,
now Chief Justice, stated:
Under the existing classification, such contract would be "inexisting" and "the action or
defense for declaration" of such inexistence "does not prescribe". (Art. 1410, New Civil
Code). While it is true that this is a new provision of the New Civil Code, it is nevertheless
a principle recognized since Tipton vs. Velasco, 6 Phil. 67 that "mere lapse of time cannot
give efficacy to contracts that are null and void".
Anent the matter of whether the Narcisos were purchasers in good faith, the trial court in its
decision resolved this issue, thus:
With regard to the second issue, the Narcisos contend that they are the owners of the
above-described property by virtue of the deed of sale (Exh. B, plaintiffs in 11991 and
Exh. 2, defendants in U-133) executed in their favor by Maximo Mapalo, and further claim
that they are purchasers for value and in good faith. This court, however, cannot also give
weight and credit on this theory of the Narcisos on the following reasons: Firstly, it has
been positively shown by the undisputed testimony of Candida Quiba that Pacifico
Narciso and Evaristo Narciso stayed for some days on the western side (the portion in
question) of the above-described land until their house was removed in 1940 by the
spouses Mapalo and Quiba; secondly, Pacifica Narciso admitted in his testimony in chief
that when they bought the property, Miguel Mapalo was still in the premises in question
(western part) which he is occupying and his house is still standing thereon; and thirdly,
said Pacifico Narciso when presented as a rebuttal and sub-rebuttal witness categorically
declared that before buying the land in question he went to the house of Miguel Mapalo
and Candida Quiba and asked them if they will permit their elder brother Maximo to sell
the property.
Aside from the fact that all the parties in these cases are neighbors, except Maximo
Mapalo the foregoing facts are explicit enough and sufficiently reveal that the Narcisos
were aware of the nature and extent of the interest of Maximo Mapalo their vendor, over
the above-described land before and at the time the deed of sale in their favor was
executed.
 Upon the aforestated declaration of Pacifico Narciso the following question arises: What
was the necessity, purpose and reason of Pacifico Narciso in still going to the spouses
Mapalo and asked them to permit their brother Maximo to dispose of the above-described
land? To this question it is safe to state that this act of Pacifico Narciso is a conclusive
manifestation that they (the Narcisos) did not only have prior knowledge of the ownership
of said spouses over the western half portion in question but that they also have
recognized said ownership. It also conclusively shows their prior knowledge of the want of
dominion on the part of their vendor Maximo Mapalo over the whole land and also of the
flaw of his title thereto. Under this situation, the Narcisos may be considered purchasers
in value but certainly not as purchasers in good faith. ... (pp. 97-98, Record on Appeal.)

And said finding — which is one of fact — is found by us not a bit disturbed by the Court of
Appeals. Said the Court of Appeals:

In view of the conclusion thus reached, it becomes unnecessary to pass on the other
errors assigned. Suffice it to say that, on the merits the appealed decision could have
been upheld under Article 1332 of the new Civil Code and the following authorities: Ayola
vs. Valderrama Lumber Manufacturers Co., Inc., 49 O.G. 980, 982; Trasporte vs. Beltran,
51 O.G. 1434, 1435; Cortez vs. Cortez, CA-G.R. No. 18451-R, August 8, 1961; Castillo
vs. Laberinto, CA-G.R. No. 18118-R, December 20, 1961; and 13 C.J. 372-373, as well
as the several facts and circumstances appreciated by the trial court as supporting
appellees' case.

thereby in effect sustaining — barring only its ruling on prescription — the judgment and findings
of the trial court, including that of bad faith on the part of the Narcisos in purchasing the land in
question. We therefore see no need to further remand this case to the Court of Appeals for a
ruling on this point, as appellees request in their brief in the event we hold the contract of 1936 to
be inexistent as regards the western portion of the land.

In view of defendants' bad faith under the circumstances we deem it just and equitable to award,
in plaintiffs' favor, attorneys' fees on appeal, in the amount of P1,000.00 as prayed for in the
counterclaim.

Wherefore, the decision of the Court of Appeals is hereby reversed and set aside, and another
one is hereby rendered affirming in toto the judgment of the Court of First Instance a quo, with
attorney's fees on appeal in favor of appellants in the amount of P1,000.00, plus the costs, both
against the private appellees. So ordered.

Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L., Barrera, Dizon, Regala, Makalintal,
Zaldivar and Sanchez, JJ., concur.
 Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 83974 August 17, 1998
SPOUSES NARCISO RONGAVILLA and DOLORES RONGAVILLA, petitioners,
vs.
COURT OF APPEALS and MERCEDES DELA CRUZ and FLORENCIA DELA
CRUZ, respondents.
QUISUMBING, J.:
For review on appeal by certiorari are the Decision 1 of the Court of Appeals in CA-G.R. CV No.
06543, promulgated on March 11, 1988, and the Resolution 2 dated June 28, 1988, denying
petitioners' motion for reconsideration.
The appealed decision affirmed in toto the judgment of the Regional Trial Court of Pasay City in
Civil Case No. LP-8790-P, which disposed of the controversy as follows:
WHEREFORE, judgment is hereby rendered declaring void and inexistent the
Deed of Absolute Sale (Exh. "1") dated June 3, 1976 allegedly executed by
plaintiffs in favor of defendant spouses, which document is now particularly
identified as Doc. No. 164; Page No. 34; Book No. I; Series of 1976 in the
Notarial Register of Arcadio Espiritu, a Notary Public for and in the Province of
Cavite. Further, defendant spouses are hereby ordered —
a. To reconvey to the plaintiffs, free from all liens and encumbrances, the
property covered by Transfer Certificate of Title No. S-28903 of the Registry of
Deeds for the Province of Rizal;
b. To pay to plaintiffs the sum of P5,000.00 as attorney's fees; and
c. To pay the costs of the suit.3
As gleaned from the record, the private parties are closely related. Plaintiffs below, now the private
respondents, are the aunts of herein petitioner Dolores Rongavilla. Both spinsters, they earn their
livelihood as embroiderers ("magbuburda") and dressmakers; although unschooled in English,
they are however able to read and write in Tagalog. Since they are of advanced age (Mercedes de
la Cruz, 60 and Florencia de la Cruz, 71), their day to day activities were confined mostly close to
home.
The property subject of this controversy between kith and kin is a parcel of land, located in
Manuyo, Las Piñas, Rizal (now Metro Manila) owned by private respondents, in the proportion of
one-half (1/2) pro-indiviso, with another niece named Juanita Jimenez as co-owner of the other
one-half. The whole parcel consisted of 131 square meters and was covered by Original
Certificate of Title (OCT) No. 5415 of the Register of Deeds of the Province of Rizal. This OCT, as
well as the Transfer Certificate of Title (TCT) No. S-28903 after the parcel was subdivided, was
kept in the possession of Juanita Jimenez, who is the elder sister of Dolores Rongavilla.
Although the basic fact situation here might appear all too familiar, the legal controversy itself is
notable for having passed through the entire channel of the justice system. 4 The present petition
before us was given due course per Resolution 5 dated June 26, 1989; but it was denied on
September 20, 1989, for non-compliance with certain requirements; 6 although, upon motion for
reconsideration by the petitioners showing compliance, it was reinstated7on September 2, 1991.
Considering the circumstances in this case, including the relationship of the parties, it behooves
this Court now to examine closely and carefully the questioned judgment and the record below.
For the Court could not but be mindful of the codal admonition that:
In all contractual, property or other relations, when one of the parties is at a
disadvantage on account of his moral dependence, ignorance, indigence, mental
weakness, tender age, or other handicap, the courts must be vigilant for his
protection. (Art. 24, Civil Code)
From the facts found below, it appears that in the month of May, 1976, the private respondents
borrowed the amount of two thousand (P2,000) from the petitioners for the purpose of having their
(respondents') dilapidated rooftop repaired.
A month later, petitioner Dolores Rongavilla and her sister Juanita Jimenez visited their aunts'
home, bringing with them a document for the signature of their aunts. The document is admittedly
typewritten in English. When asked in Tagalog by one of the aunts, respondent Mercedes de la
Cruz, what the paper was all about, Dolores Rongavilla answered also in Tagalog, that it was just
a document to show that the private respondents had a debt amounting to P2,000. On account of
that representation, private respondents signed the document.
In September 1980, or after a lapse of over four years, petitioner Dolores Rongavilla went to
private respondents' place and asked them to vacate the parcel in question, claiming that she and
her husband were already the new owners of the land.
Surprised by petitioners' moves, private respondents with the help of friends went to the Office of
the Register of Deeds of the Province of Rizal to verify the matter. They discovered that their
Certificate of Title had been cancelled and a new one, Transfer Certificate of Title No. S-28903,
had been issued in favor of petitioners. They further discovered that said parcel of land had been
mortgaged with the Cavite Development Bank by the petitioners. It was only then that the private
respondents realized that the document they had previously been asked by their nieces to sign
was a deed of sale.
On February 3, 1981, private respondents filed with the Court of First Instance, now Regional Trial
Court, of Pasay City the sworn complaint 8 to have the purported deed of sale declared void and
inexistent, for being fictitious and simulated, and secured by means of fraud and
misrepresentation. They alleged that they did not sell their property in question to the defendants;
that they did not receive any consideration on the supposed sale; that their Original Certificate of
Title was cancelled and TCT No. S-28903 was issued in favor of defendants (herein petitioners),
who thereafter mortgaged said title for a total of P40,000.00 to the damage and prejudice of the
plaintiffs. They also claimed moral and exemplary damages, as the court might determine.
Petitioners duly filed their answer 9 after the denial of their motion to dismiss, alleging that plaintiffs
(now the private respondents) sold their parcel of land voluntarily, that there was consent to the
deed of sale, that there was sufficient consideration therefor, and that the document on the sale
was complete in itself and in due form, enabling the Register of Deeds to cancel their old TCT and
issue a new one. Petitioners further stated that private respondents were fully apprised by the
Notary Public, Atty. Arcadio G. Espiritu, on what the document was all about, and having
understood the explanation made by said Notary Public, they voluntarily affixed their signatures on
said document. Petitioners also asserted as affirmative and/or special defenses that prescription
had set in and that private respondents no longer had a cause of action, and that the deed of sale
contained all the pre-requisites of a contract, namely consent of the parties, consideration or a
price certain, and determinate thing or object; and could no longer be annulled. They also claimed
moral and exemplary damages.
The trial court's judgment, quoted at the outset, being adverse to the petitioners, they seasonably
appealed. And after their rebuff at the appellate level, they come now to this Court
on certiorari under Rule 45 of the Rules of Court, citing the following grounds for their petition:
(1) It is clear and patent error of the Court of Appeals to declare as void and
inexistent the Deed of Absolute Sale (Exhibit 1) dated June 3, 1976.
(2) The Court of Appeals committed grave error of law in holding that the action
to declare nullity of the Deed of Absolute Sale (Exhibit 1) does not prescribe.
(3) The Court of Appeals committed grave abuse of discretion in relying on a
purported Certificate of the Bureau of Internal Revenue which was not offered in
evidence.
(4) The Court of Appeals committed grave error of law and abuse of discretion
and grave abuse of discretion amounting to lack or excess of jurisdiction in
ordering the petitioners to reconvey the subject parcel of land to the private
respondents. 10
With a slight variation but consistent with the grounds they have relied on, petitioners raise in their
Memorandum 11the following:
ISSUES
1. Did the Court of Appeals commit a clear and patent error in
declaring as "void and inexistent" the Deed of Absolute Sale
(Exhibit 1) dated June 3, 1976?
2. Did the Court of Appeals commit grave error in holding that
the action to annul the Deed of Sale (Exhibit 1) does not
prescribe?
3. Did the Court of Appeals commit grave abuse of discretion in
relying on a purported Certificate of the Bureau of Internal
Revenue which was not offered in evidence?
4. Did the Court of Appeals commit grave error of law and grave
abuse of discretion amounting to lack of jurisdiction or in excess
of jurisdiction in ordering petitioners to reconvey the subject
parcel of land to the private respondents?
These issues may be synthesized into one: Did the respondent Court of Appeals commit
reversible error when it upheld the trial court's judgment that the disputed Deed of Sale (Exhibit
"1") is void and inexistent?
To resolve this pivotal issue, it must be noted that private respondents, as plaintiffs below, based
their complaint to declare the disputed deed void and inexistent on two fundamental grounds: (1)
lack of consent and (2) want of consideration. Under oath, they strongly denied selling or even just
agreeing to sell, their parcel of land to their niece and nephew-in-law. During the hearing, they
also denied going to and appearing before the Notary Public who prepared the deed of sale. They
also vehemently denied receiving any consideration for the alleged sale. They added that their
signatures on the purported deed of sale were obtained by fraud and misrepresentation as
petitioners had misled them to believe the document was just a paper to evidence a debt of
P2,000 they obtained to buy G.I. sheets for the repair of their leaking roof. 12 Private respondents
were shocked and got sick when they were told by petitioners that they (respondents) were no
longer the owners of the land. 13
On these two points of consent and consideration, the trial court found that:
. . . . A careful analysis and meticulous evaluation of the evidence on record has
convinced the Court that the sale of their property to the defendants was farthest
from the plaintiffs' minds. The Court believes that when plaintiffs voluntarily
signed the document which turned out to be a deed of sale, they were misled by
defendant Dolores Rongavilla and her sister Juanita Jimenez into believing that
what they signed was a document acknowledging the loan of P2,000.00
extended them by said defendant.
The Deed of Absolute Sale (Exh. "1") mentions a consideration of P2,000.00.
Three years after the alleged sale, the same property was mortgaged by
defendant spouses with the Cavite Development Bank for P40,000.00. Clearly
enough, the gross inadequacy and unconsciounableness [sic] of the
 consideration deters the Court from subscribing to defendants' theory that
plaintiffs sold the property to them. It is more reasonable to assume that the
amount of P2,000.00 mentioned in the deed refers to the loan defendants
extended to plaintiffs for the same amount.
Plaintiffs are now of advanced age. Their only property is the lot in question and
the house erected thereon. . . . .
As there is no indication that plaintiffs were in dire need of money, except for a
few [sic] amount necessary for the repair of the roof of their house for which they
obtained a loan of P2,000.00 from defendants, there was no reason for plaintiffs
to dispose of their property. To do so would be inconsistent with the regular norm
of human conduct and the natural course of events. It is not in accord with the
natural promptings and instincts of human nature. 14
To these findings by the trial court, the Court of Appeals in its own decision assented. In addition,
it laid stress an the point of lack of consideration by quoting agreeably the trial judge's holding
thereon:
By more than mere preponderance of evidence plaintiffs [herein private
respondents] have established the merit of their cause of action. The Court is of
the opinion and so holds that there was fraud exercised by defendant Dolores
Rongavilla and her sister Juanita Jimenez in securing the signature of the Deed
of Absolute Sale (Exh. "1") and there was no consideration whatsoever for the
alleged sale. Undoubtedly, the said deed of sale is simulated, fictitious and
void. 15
And before concluding, the appellate court reiterated the proper characterization of the deed of
sale in question, not as an annullable contract, but as a void and inexistent contract as found by
the trial court:
. . . In the case at bar, however, We are dealing not merely with a voidable
contract which is tainted with fraud, mistake, undue influence, violence or
intimidation which may justify the annulment of a contract, but with a contract that
is null and void ab initio.
In the present case, plaintiffs-appellees declared under oath in their complaint
that they signed the alleged document without knowing that said document was
deed of absolute sale. This means that plaintiffs-appellees consent was not only
vitiated, but that plaintiffs-appellees have not given their consent at all. And since
there was no consent, the deed of absolute sale is, therefore, null and void ab
initio. . . . 16
Dissatisfied, petitioners now seek from this Court the reversal of the judgment below. They insist in
their petition before us that the deed is valid; and that because of the statute of limitations, after
the lapse of four years from its execution and registration, it could no longer be annulled.
They assert that "the presumption that contracts are presumed to be valid and to be supported by
lawful and good consideration has not been overthrown;" and that "a stipulation in consideration of
one dollar is just as effectual and valuable as a larger sum stipulated or paid". 17
They further assert that since private respondents signed the Deed of Sale, as a public instrument,
the truth of the recitals therein embodied could only be impugned and disproved, not by mere
preponderance of evidence, but by evidence of "the clearest and most satisfactory character,
convincing and overwhelming." 18 Petitioners further state that since they have been the ones
paying real estate taxes on the property, rather than their aunts, the latter by their acts had
confirmed the deed executed by them. 19
Despite the petitioners' insistence that the deed of sale is presumed valid and, being registered,
could not be disturbed anymore, we however find their arguments and ratiocination less than
persuasive. While petitioners would not want the deed of sale to be impugned, they themselves
contradict the recitals therein. On the vital point of consideration, they and their witnesses, namely
Juanita Jimenez and Atty. Arcadio Espiritu repeatedly declared that the true consideration paid for
the sale of the land was not P2,000 as stated in their own Exhibit "1", the Deed of Sale, but in fact
P7,800.00. 20
Petitioner Dolores Rongavilla herself on cross-examination testified as follows:
ATTY. RODRIGUEZ:
Q. You stated that you were present when this was explained
by the notary public, how did the notary public explain this deed
of sale in English or Tagalog?
A. It was explained by the notary public that the property is
being sold by them to us and that the consideration was only
P2,000.00 as appearing in the document in order that we may
be able to save for the payment of taxes and documentary
stamps.
Q. Did the plaintiffs not say anything when the notary public
according to you explained that instead of P7,800.00, P2,000.00
will be stated in the document?
A. They did not say anything because we gave to them the
amount of the consideration agreed between us the sum of
P7,800.00. (t.s.n., Sept. 2, 1982, pp. 9-10) 21
By their own testimony, the petitioners are pictured as not exactly averse to bending the truth,
particularly the purported consideration. Sadly, the irony of it is that while they claimed they were
regularly paying taxes on the land in question they had no second thoughts stating at the trial and
later on appeal that they had resorted to doctoring the price stated in the disputed Deed of Sale,
allegedly "to save on taxes". That admission surely opens the door to questions on the integrity,
genuineness and veracity of said public instrument.
Thus, the trial court could not be said to err in asserting that "while it is true that public documents
are presumed genuine and regular under the provisions of the Rules of Court, this presumption is
a rebuttable presumption which may be overcome by clear, strong and convincing evidence." 22
Moreover, Exhibit "1", the deed itself, shows that contrary to the testimony of the notary public,
who appeared as a witness for petitioners, what was originally typed therein was the amount of
"Three Thousand Pesos (P3,000)", which later on was substituted by the handwritten amount now
of "Two Thousand Pesos (P2,000)." 23 There is no need to speculate on the motivation for this
alteration. The notary public might have just wanted to further save on taxes, rather than short-
change the coffers of the government. But, again, the whole fabric of petitioners' claim to the
sanctity of the deed as public instrument had thereby been shredded.
If as petitioners claimed on trial, the price paid was P7,800 while their deed showed only P2,000,
after the amount of P3,000 in the deed was altered, one may well inquire: which figure could this
Court believe? Could one say that the trial and the appellate courts both erred in holding that no
consideration passed from the buyer to the seller?
But petitioners herein would further take to task the appellate court for grave abuse of discretion,
as well as for a reversible error, in having relied on the "purported Certification of the Bureau of
Internal Revenue which was not offered in evidence". Since this is a petition under Rule 45,
however, we will not dwell on the alleged grave abuse of discretion but limit our observation to the
alleged error of law. The BIR certificate was the subject of the testimony of witnesses at the
hearing where both parties took full advantage of the opportunity for direct and cross-examination
as well as rebuttal and
sur-rebuttal. 24 On the witness stand, private respondents as plaintiffs below denied that they had
any tax account number nor even residence certificates. They were supported by their witnesses,
testifying also under oath. They contradicted the claim of the petitioners' lawyer-notary public, that
the disputed deed of sale was complete and in due form and was signed in his presence by the
private respondents. They further denied even having gone to the office of the lawyer-notary
public in Bacoor, Cavite, on June 3, 1976, the date of execution shown in the deed, or on any
other date. While indeed the BIR certificate was not formally offered in evidence, hence no longer
available on review, the record would show that said BIR certificate was presented during the
testimony on rebuttal of respondent Mercedes de la Cruz: 25
ATTY. RODRIGUEZ:
According to the defendants, there was the alleged deed of sale
executed by you and your sister in favor of the defendants
before Notary Public Arcadio G. Espiritu. It appears you have
presented Tax Account No. (TAN) 2345-463-6 and your sister
Florencia de la Cruz also presented Tax Account No. (TAN)
2345-468-4. Now, do you have any tax account number?
WITNESS:
None, sir. 26
xxx xxx xxx
ATTY. RODRIGUEZ:
I am showing to you this certification from the "Kawanihan ng
Rentas, Quezon City, dated June 16, 1982, addressed to Miss
Florencia de la Cruz and Miss Mercedes de la Cruz, Las Piñas,
Metro-Manila, issued by the accounting chief, stating that in
reply to you[r] request dated June 14, 1982,
requesting certification of your TAN, the records of their office
do not show that you were issued any tax account number,
what relation has this document which for purposes of
identification, we respectfully request that the same be marked
Exhibit "C" to the certification issued by the BIR?
WITNESS:
Yes, this is the one. 27
Now even if the matter of the official certification by the BIR is set aside, the whole question of the
TAN being fake or belonging to somebody else, would boil down to one of credibility between the
two camps. Unfortunately for the petitioners herein, the trial court found them and their witnesses
far from credible. As remarked by the trial Judge, "the declarations of defendants [herein
petitioners] do not inspire rational belief." 28 It would thus appear that the trial court and the
appellate court committed no grave error of law, that would impel us on this point to override their
judgment.
Neither can we give assent to the assertion of petitioners that the appealed Court of Appeals (CA)
decision here as well as the judgment below is "contrary to settled jurisprudence". This Court
in Rivero v. Court of Appeals, 80 SCRA 411 (1977) had occasion already to affirm a trial court's
judgment declaring null and void the questioned deed of sale where it found:
The undisputed facts of record support the finding of the trial court that
the consent of Ana Concepcion to the deed of sale was obtained through
fraudulent misrepresentation of [her nephew] Jaime Rivero that the contract she
was signing was one of mortgage.
The land in question is located in the municipality of Polo, Bulacan, very near
Manila. It has an area of 2 hectares, 32 ares and 45 centares.
The consideration for the sale of said land is only P5,000.00 which is not only
grossly inadequate but shocking to the conscience . . . 29
In Ocejo, Perez & Co. vs. Flores, 40 Phil. 921 (1920), regarding the sale of land in Tayabas,
Quezon, the Court confronted a similar question:
 The first question presented is whether the contract of sale executed by Isabel
Flores in favor of Joaquin Bas is valid or not.
By relying upon the documents executed in his favor by Isabel Flores evidencing
the contract of sale, Joaquin Bas insists that there has been a perfect and valid
contract of sale of real estate between them and that he paid to her the
consideration of P20,000 mentioned in said documents. . . . .
Isabel Flores, on the other hand, maintained that there was neither a real sale
nor did she receive a centavo from the defendant, as the price of said sale, . . . 30
Concluded the Court, after reviewing the series of transactions on record:
It is then evident that the contract of sale mentioned in the notarial document of
May 7, 1915, lacks cause or consideration and is therefore null and void and
without any effect whatsoever according to Article 1275 of the Civil Code, for it
has been satisfactorily and conclusively proven that the purchaser Joaquin Bas
has not paid Isabel Flores for the price of the lands that the latter has sold to him,
and after being contented with having for a long time given several promises
showing that he had no intention to comply with his contract, he concluded by
executing four promissory notes payable to the vendor, which recite the
aforementioned purchase price and which were not also paid, there appearing in
the record facts from which it can be inferred that fraud has been committed. 31
This Court in Mapalo v. Mapalo, 17 SCRA 114 (1966) stated:
The rule under the Civil Code, again be it the old or the new, is that contracts
without a cause or consideration produce no effect whatsoever. 32
The "problem" before the Court "is whether a deed which states a consideration that in fact did not
exist, is a contract, without consideration, and therefore void ab initio, or a contract with a false
consideration, and therefore, at least under the Old Civil Code, voidable." This problem arose, as
observed by the Court, because the questioned "deed of sale" between the brothers Magpalo, in
1936, stated that it had for its consideration Five Hundred (P500.00) Pesos. In fact, however, said
"consideration was totally absent." 33
Thus, the Court concluded:
In our view, therefore, the ruling of this Court in Ocejo, Perez & Co. vs. Flores, 40
Phil. 921 is squarely applicable herein. In that case we ruled that a contract of
purchase and sale is null and void and produces no effect whatsoever where the
same is without cause or consideration in that the purchase price which appears
thereon as paid has in fact never been paid by the purchaser to the vendor. 34
Turning now to the issue of prescription, it follows that once the disputed deed is found to be
inexistent and void, the statute of limitations cannot apply. As the courts below ruled, the cause of
action for its declaration as such is imprescriptible. 35 Petitioners-spouses contend, however, that
this is contrary to settled jurisprudence because the applicable precedent should be Pangadil v.
CFI of Cotabato, 116 SCRA 347 (1982). But the fact situation of that case differs radically from the
present controversy. There the Court upheld the dismissal of the action to declare a document
known as "Ratificacion de Una Venta" as inexistent and void after finding that it was "not a
contract wherein the parties do not intend to be bound at all," that no circumstance was alleged to
sustain the contention "that the execution of the aforesaid document is contrary to public
policy;" 36 and that for 27 years the petitioners did not even care to verify the status of the land in
question. "Their inaction for such a considerable period of time reflects on the credibility of their
pretense that they merely intended to confirm an oral mortgage, instead of a sale of the land in
question." 37
Here in the present case, there is no doubt about the credibility of plaintiffs below (herein private
respondents) in pursuing their cause promptly and forcefully. They never intended to sell, nor
acceded to be bound by the sale of their land. Public policy is also well served in defending the
rights of the aged to legal protection, including their right to property that is their home, as against
fraud, misrepresentation, chicanery and abuse of trust and confidence by those who owed them
candor and respect.
More to the point, in our view, is Baranda v. Baranda, 150 SCRA 59 (1987), where this Court
found that:
The Civil Code provides in Article 1391 that an action to annul a contract on the
ground of vitiated consent must be filed within four years from the discovery of
the vice of consent. In the instant case, however, we are dealing not with a
voidable contract tainted with fraud, mistake, undue influence, violence or
intimidation that can justify its nullification, but with a contract that is null and
void ab initio.
Paulina Baranda declared under oath in her complaint that she signed the deeds
of sale without knowing what they were, which means that her consent was not
merely marred by the above-stated vices, so as to make the contracts voidable,
but that she had not given her consent at all. We are also satisfied that there
was no void consideration either for the alleged transfers, for reasons already
discussed. Lack of consent and consideration made the deeds of sale void
altogether 38 and rendered them subject to attack at any time, conformably to the
rule in Article 1410 that an action to declare the inexistence of void contracts
"does not prescribe". 39
And if the passage of time could not cure the fatal flaw in the inexistent and void contract, neither
could an alleged ratification or confirmation thereof. Further, as in the case before us,
reconveyance is proper. "The defect of inexistence of a contract is permanent and incurable,
hence it cannot be cured either by ratification or by prescription. . . . There is no need of an action
to set aside a void or inexistent contract; in fact such action cannot logically exist. However, an
action to declare the non-existence of the contract can be maintained; and in the same action, the
plaintiff may recover what he has given by virtue of the contract." 40
Given the circumstances of the case and there being no reversible error in the challenged
decision, we are in accord with the judgment below and find the petitioners' appeal without merit.
For as well said in the Court of Appeals' Decision and Resolution under review, "We cannot
contemplate of the rather absurd situation, which defendants-appellants would ineluctably lead
[u]s to, where plaintiffs-appellees would sell their only house, in which they have lived for so many
years, in order to secure the measly sum of P2,000.00 to repair the roof of their only house, which
would all be lost to them anyway upon the consummation of the sale. They would then become
homeless, and the repaired roof would be of no use to them." 41 Experience which is the life of the
law — as well as logic and common sense — militates against the petitioners' cause.

WHEREFORE, the instant petition is hereby DENIED. The Decision and the Resolution of the
Court of Appeals in CA-G.R. CV No. 06543 are hereby AFFIRMED.

Costs against petitioners.

SO ORDERED.

Davide, Jr., Bellosillo, Vitug and Panganiban, JJ., concur.

 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 120724-25 May 21, 1998
FERNANDO T. MATE, petitioner,
vs.
THE HONORABLE COURT OF APPEALS and INOCENCIO TAN, respondents.
MARTINEZ, J.:
In this petition for review, petitioner assails the Decision 1 of the Court of Appeals dated August 29,
1994 in CA-G.R. CV No. 28225-26, which affirmed with modification the decision of the trial court,
the dispositive portion of which reads, to wit:
WHEREFORE, this Court finds the Deed of Sale with Right of Repurchase
executed October 6, 1986 valid and binding between plaintiff and defendant (as
vendor and vendee-a-retro respectively); that as the period to redeem has
expired, ownership thereof was consolidated by operation of law, and the
Register of Deeds is hereby ordered to REGISTER this decision consolidating
the defendant's ownership over the properties covered by Transfer Certificate of
Title No. T-90-71, covering Lot 8; Original Certificate of Title No. N-311 covering
Lot 5370, all of the Tacloban Cadastre, and issuing to defendant Inocencio Tan
his titles after cancellation of the titles presently registered in plaintiff Fernando T.
Mate's name and that of his wife.
The plaintiff Fernando Mate is further ordered to pay defendant the sum of ONE
HUNDRED FORTY THOUSAND (P140,000.00) PESOS, for and as attorney's
fees.
With costs against the plaintiff Fernando Mate.
SO ORDERED.2
The facts of this case, as summarized in the petition, are reproduced hereunder:
On October 6, 1986 Josefina R. Rey (hereafter referred to as "Josie" for short)
and private respondent went to the residence of petitioner at Tacloban City. Josie
who is a cousin of petitioner's wife solicited his help to stave off her and her
family's prosecution by private respondent for violation of B.P. 22 on account of
the rubber checks that she, her mother, sister and brother issued to private
respondent amounting to P4,435067.00. She requested petitioner to cede to
private respondent his three (3) lots in Tacloban City in order to placate him. On
hearing Josie's proposal he immediately rejected it as he owed private
respondent nothing and he was under no obligation to convey to him his
properties. Furthermore, his lots were not for sale. Josie explained to him that he
was in no danger of losing his properties as he will merely execute a simulated
document transferring them to private respondent but they will be redeemed by
her with her own funds. After a long discussion, he agreed to execute a fictitious
deed of sale with right to repurchase covering his three (3) lots mentioned above
subject to the following conditions:
1. The amount to be stated in the document is P1,400,000.00 with interest
thereon at 5% a month;
2. The properties will be repurchased within six (6) months or on or before April
4, 1987;
3. Although it would appear in the document that petitioner is the vendor, it is
Josie who will provide the money for the redemption of the properties with her
own funds;
4. Titles to the properties will be delivered to private respondent but the sale will
not be registered in the Register of Deeds and annotated on the titles.
To assure petitioner that Josie will redeem the aforesaid properties, she issued to
him two (2) BPI checks both postdated December 15, 1986. One check was for
P1,400,000.00 supposedly for the selling price and the other was for
P420,000.00 corresponding to the interests for 6 months. Immediately thereafter
petitioner prepared the Deed of Sale with Right to Repurchase (Exh. A) and after
it has been signed and notarized, it was given to private respondent together with
the titles of the properties and the latter did not register the transaction in the
Register of Deeds as agreed upon.
On January 14, 1987, petitioner deposited the check for P1,400,000.00 (Exh. B)
in his account at the United Coconut Planters Bank and the other check for
P420,000.00 (Exh. D) in his account at METROBANK preparatory to the
redemption of his properties. However, both of them were dishonored by the
drawee bank for having been drawn against a closed account. Realizing that he
was swindled, he sent Josie a telegram about her checks and when she failed to
respond, he went to Manila to look for her but she could not be found. So he
returned to Tacloban City and filed Criminal Cases Nos. 8310 and 8312 against
her for violation of B.P. 22 but the cases were later archived as the accused
(Josie) could not be found as she went into hiding. To protect his interest, he filed
Civil Case No. 7396 of the Regional Trial Court of Leyte, Branch VII, entitled
"Fernando T. Mate vs. Josefina R. Rey and Inocencio Tan" for Annulment of
Contract with Damages. Defendant Josefina R. Rey (Josie) was declared in
default and the case proceeded against private respondent. But during the trial
the RTC court asked private respondent to file an action for consolidation of
ownership of the properties subject of the sale and pursuant thereto he filed Civil
 Case No. 7587 that was consolidated with the case he filed earlier which were
later decided jointly by the trial court in favor of private respondent and was
subsequently appealed to respondent Court that affirmed it with modification.
Thereupon, petitioner filed a motion to reconsider the decision but it was denied.
Hence, the instant petition for review.3
In this petition for review, the petitioner presents as the sole issue the validity of the Deed of Sale
with Right to Repurchase. He contends that it is null and void for lack of consideration because
allegedly no money changed hands when he signed it and the checks that were issued for
redemption of the properties involved in the sale have been dishonored by the drawee bank for
having been drawn against a closed account. 4
The contention is without merit.
There was a consideration. The respondent court aptly observed that —
In preparing and executing the deed of sale with right of repurchase and in
delivering to Tan the land titles, appellant actually accommodated Josefina so
she would not be charged criminally by Tan. To ensure that he could repurchase
his lots, appellant got a check of P1,400,000.00 from her. Also, by allowing his
titles to be in possession of Tan for a period of six months, appellant secured
from her another check for P420,000.00. With this arrangement, appellant was
convinced he had a good bargain. Unfortunately his expectation crumbled. For
this tragic incident, not only Josefina, but also Tan, according to appellant must
be answerable.
xxx xxx xxx
It is plain that consideration existed at the time of the execution of the deed of
sale with right of repurchase. It is not only appellant's kindness to Josefina, being
his cousin, but also his receipt of P420,000.00 from her which impelled him to
execute such contract. 5
Furthermore, while petitioner did not receive the P1.4 Million purchase prices from respondent
Tan, he had in his possession a postdated check of Josie Rey in an equivalent amount precisely
to repurchase the two lots on or before the sixth month.
As admitted by petitioner, by virtue of the sale with pacto de retro, Josie Rey gave him, as vendor-
a-retro, a postdated check in the amount of P1.4 Million, which represented the repurchase price
of the two (2) lots. Aside from the P1.4 Million check, Josie gave another postdated check to
petitioner in the amount of P420,000.00, ostensibly as interest for six (6) months but which
apparently was his fee for having executed the pacto de retrodocument. Josie thus assumed the
responsibility of paying the repurchase price on behalf of petitioner to private respondent.
Unfortunately, the two checks issued by Josie Rey were worthless. Both were dishonored upon
presentment by petitioner with the drawee banks. However, there is absolutely no basis for
petitioner to file a complaint against private respondent Tan and Josie Rey to annul the pacto de
retro sale on the ground of lack of consideration, invoking his failure to encash the two checks.
Petitioner's cause of action was to file criminal actions against Josie Rey under B.P. 22, which he
did. The filing of the criminal cases was a tacit admission by petitioner that there was a
consideration of the pacto de retro sale.
Petitioner further claims that the pacto de retro sale was subject to the condition that in the event
the checks given by Josie Reyes to him for the repurchase of the property were dishonored, then
the document shall be declared null and void for lack of consideration.
We are not persuaded.
Private respondent Tan was already poised to file criminal cases against Josie Rey and her family.
It would not be logical for respondent Tan to agree to the conditions allegedly imposed by
petitioner. Petitioner knew that he was bound by the deed of sale with right to repurchase, as
evidenced by his filing criminal cases against Josie Rey when the two checks bounced.
The respondent court further made the candid but true observation that:
If there is anybody to blame for his predicament, it is appellant himself. He is a
lawyer. He was the one who prepared the contract. He knew what he was
entering into. Surely, he must have been aware of the risk involved. When
Josefina's checks bounced, he should have repurchased his lots with his own
money. Instead, he sued not only Josefina but also Tan for annulment of contract
on the ground of lack of consideration and false pretenses on their part.
Petitioner then postulates that "it is not only illegal but immoral to require him to repurchase his
own properties with his own money when he did not derive any benefit from the transaction."
Thus, he invokes the case of Singson vs. Isabela Sawmill, 88 SCRA 633, 643, where the Court
said that "where one or two innocent persons must suffer, that person who gave occasion for the
damages to be caused must bear consequences." Petitioner's reliance on this doctrine is
misplaced. He is not an innocent person. As a matter of fact, he gave occasion for the damage
caused by virtue of the deed of sale with right to repurchase which he prepared and signed. Thus,
there is the equitable maxim that between two innocent parties, the one who made it possible for
the wrong to be done should be the one to bear the resulting loss.6
Petitioner further insinuates that private respondent deceived him into signing the deed of sale
with right to repurchase. This is not borne out by the evidence nor by petitioner's own statement of
facts which we heretofore produced. As aptly observed by the respondent court "We are at a loss
why herein appellant ascribes false pretenses to Tan who merely signed the contract." 7 Contrary
to petitioner's pretension, respondent Tan did not employ any devious scheme to make the former
sign the deed of sale. It is to be noted that Tan waived his right to collect from Josefina Rey by
virtue of the pacto de retro sale. In turn, Josefina gave petitioner a postdated check in the amount
of P1.4 Million to ensure that the latter would not lose his two lots. Petitioner, a lawyer, should
have known that the transaction was fraught with risks since Josefina Rey and family had a
checkered history of issuing worthless checks. But had petitioner not agreed to the arrangement,
respondent Tan would not have agreed to waive prosecution of Josefina Rey.
Apparently, it was petitioner's agreed for a huge profit that impelled him to accede to the scheme
of Josefina Rey even if he knew it was a dangerous undertaking. When the drafted the pacto de
retro document, he threw caution to the winds forgetting that prudence might have been the better
course of action. We can only sympathize with petitioner's predicament. However, a contract is a
contract. One agreed upon, and provided all the essential elements are present, it is valid and
binding between the parties.

Petitioner has no one to blame but himself for his misfortune.

WHEREFORE, the Decision of the Court of Appeals dated August 29, 1994 is hereby AFFIRMED.
The petition for review is hereby DENIED DUE COURSE for lack of merit.

SO ORDERED.

Regalado, Melo, Puno and Mendoza, JJ., concur.

 THIRD DIVISION
G.R. No. 144735 October 18, 2001
YU BUN GUAN, petitioner,
vs.
ELVIRA ONG, respondent.
PANGANIBAN, J.:
A simulated deed of sale has no legal effect, and the transfer certificate of title issued in
consequence thereof should be cancelled. Pari delicto does not apply to simulated sales.
Statement of the Case
Before us is a Petition for Review under rule 45 of the Rules of Court, assailing the April 25, 2000
Decision1 and the August 31, 2000 Resolution2 of the Court of Appeals3 (CA) in CA-GR CV No.
61364. The decretal portion of the Decision reads as follows:
"We cannot see any justification for the setting aside of the contested Decision.
"THE FOREGOING CONSIDERED, the appealed Decision is hereby AFFIRMED."4
The assailed Resolution denied petitioner's "Supplemental Motion for Reconsideration with Leave
to Submit [Newly] Discovered Evidence."
The CA sustained the Decision of the Regional Trial Court (RTC) of Makati City (Branch 60),
which had disposed as follows:5
"23. WHEREFORE, the Court hereby renders judgment as follows:
23.1 The Deed of Sale dated July 24, 1992 (Exh. EE on Exh. 3) is declared
VOID.
23.2 The plaintiff ELVIRA ONG is declared the OWNER of the property covered
by Transfer Certificate of Title No. 217614, Registry of Deeds, Makati (Exh. DD).
23.3 The Register of Deeds, City of Makati is ordered to:
23.2.1. Cancel Transfer Certificate of Title No. 181033 (Exh. HH); and
23.2.2. Issue in lieu thereof, a transfer certificate of title in the name of
ELVIRA A. ONG, of legal age, single, Filipino';
23.[4]. The defendant YU BUN GUAN is ordered to pay to the said plaintiff, the
following:
23.[4].1. P48,631.00 – As reimbursement of the capital gains tax (Exh.
FF);
23.[4].2. Six (6) percent of P48,631.00 – per annum from November 23,
1993, until the said P48,631.00 is paid – as damages;
23.[4].3. P100,000.00 – as moral damages;
23.[4].4. P50,000.00 as exemplary damages;
23.[4].5. P100,000.00 – as attorney's fees.
23.[5]. The COUNTERCLAIM is DISMISSED.
23.[6]. Cost is taxed against the defendant.
"24. In Chambers, City of Makati, June 23, 1998.
The Facts
The antecedents of the case are succinctly summarized by the Court of Appeals in this wise:
'[Herein respondent] said that she and [petitioner] are husband and wife, having been
married according to Chinese rites on April 30, 1961. They lived together until she and
her children were abandoned by [petitioner] on August 26, 1992, because of the latter's
'incurable promiscuity, volcanic temper and other vicious vices'; out of the reunion were
born three (3) children, now living with her [respondent].
"She purchased on March 20, 1968, out of her personal funds, a parcel of land, then
referred to as the Rizal property, from Aurora Seneris, and supported by Title No. 26795,
then subsequently registered on April 17, 1968, in her name.1âwphi1.nêt
"Also during their marriage, they purchased, out of their conjugal funds, a house and lot,
in 1983, thereafter, registered in their names, under Title No. 118884.
'Before their separation in 1992, she 'reluctantly agreed' to the [petitioner's] 'importunings'
that she execute a Deed of Sale of the J.P. Rizal property in his favor, but on the promise
that he would construct a commercial building for the benefit of the children. He
suggested that the J.P. Rizal property should be in his name alone so that she would not
be involved in any obligation. The consideration for the 'simulated sale' was that, after its
execution in which he would represent himself as single, a Deed of Absolute Sale would
be executed in favor of the three (3) children and that he would pay the Allied Bank, Inc.
the loan he obtained.
"Because of the 'glib assurances' of [petitioner], [respondent] executed a Deed of
Absolute Sale in 1992, but then he did not pay the consideration of P200,000.00,
supposedly the 'ostensible' valuable consideration. On the contrary, she paid for the
capital gains tax and all the other assessments even amounting to not less than
P60,000.00, out of her personal funds.
"Because of the sale, a new title (TCT No. 181033) was issued in his name, but to 'insure'
that he would comply with his commitment, she did not deliver the owner's copy of the title
to him.
"Because of the refusal of [petitioner] to perform his promise, and also because he
insisted on delivering to him the owner's copy of the title [to] the JP Rizal property, in
addition to threats and physical violence, she decided executing an Affidavit of Adverse
Claim.
Also to avoid burdening the JP Rizal property with an additional loan amount, she wrote
the Allied Bank, Inc. on August 25, 1992, withdrawing her authority for [petitioner] to apply
for additional loans.
"To save their marriage, she even sought the help of relatives in an earnest effort [at]
reconciliation, not to mention a letter to [petitioner] on November 3, 1992.
"[Petitioner], on the other hand, filed with the RTC, Makati, in 1993 (Case No. M-2905), a
'Petition for Replacement' of an owner's duplicate title.
"Attached to the Petition was the Affidavit of Loss dated March 26, 1993, in which he
falsely made it appear that the owner's copy of the title was lost or misplaced, and that
was granted by the court in an Order dated September 17, 1993, following which a new
owner's copy of the title was issued to [petitioner].
"Upon discovery of the 'fraudulent steps' taken by the [petitioner], [respondent]
immediately executed an Affidavit of Adverse Claim on November 29, 1993.
"She precisely asked the court that the sale of the JP Rizal property be declared as null
and void; for the title to be cancelled; payment of actual, moral and exemplary damages;
and attorney's fees.
"It was, on the other hand, the version of [petitioner] that sometime in 1968 or before he
became a Filipino, 'through naturalization' the JP Rizal property was being offered to him
for sale. Because he was not a Filipino, he utilized [respondent] as his 'dummy' and
agreed to have the sale executed in the name of [respondent], although the consideration
was his own and from his personal funds.
"When he finally acquired a Filipino citizenship in 1972, he purchased another property
being referred to as the 'Juno lot' out of his own funds. If only to reflect the true ownership
of the JP Rizal property, a Deed of Sale was then executed in 1972. Believing in good
faith that his owner's copy of the title was lost and not knowing that the same was
surreptitiously 'concealed' by [respondent], he filed in 1993 a petition for replacement of
the owner's copy of the title, in court.
"[Petitioner] added that [respondent] could not have purchased the property because she
had no financial capacity to do so; on the other hand, he was financially capable although
he was financially capable although he was disqualified to acquire the property by reason
of his nationality. [Respondent] was in pari delicto being privy to the simulated sale.
"Before the court a quo, the issues were: who purchased the JP Rizal property? [W]as the
Deed of Sale void? and damages.6
Ruling of the Trial Court
After examining the evidence adduced by both parties, the RTC found that the JP Rizal property
was the paraphernal property of the respondent, because (1) the title had been issued in her
name; (2) petitioner had categorically admitted that the property was in her name; (3) petitioner
was estopped from claiming otherwise, since he had signed the Deed of Absolute Sale that stated
that she was the "absolute and registered owner"; (4) she had paid the real property taxes
thereon.7
The trial court further held that the in pari delicto rule found in Articles 1411 and 1412 of the Civil
Code was not applicable to the present case, because it would apply only to existing contracts
with an illegal cause or object, not to simulated or fictitious contracts or to those that were
inexistent due to lack of an essential requisite such as cause or consideration.8 It likewise voided
the Deed of Absolute Sale of the JP Rizal property for having been simulated and executed during
the marriage of the parties.9
Ruling of the Court of Appeals
The Court of Appeals upheld the trial court's findings that the JP Rizal property had been acquired
by respondent alone, out of her own personal funds. It ruled thus:
"x x x [T]he JP Rizal property was purchased by the [respondent] alone; therefore it is a
paraphernal property. As a matter of fact, the title was issued in her name, Exh. 'DD' This
was even admitted by [petitioner] in the Answer that the sale was executed in her name
alone. He also signed the sale mentioning [respondent] to be an absolute owner;
therefore he should be estopped from claiming otherwise. She alone likewise did the
payment of the taxes.10
The CA debunked the contention of petitioner that he had purchased the property out of his own
funds and merely used respondent as his dummy.11 It also held that the latter was not in pari
delicto with him, because the contract was simulated or fictitious due to the lack of consideration.
The contract was deemed void for having been executed during the couple's marriage. 12 The CA
likewise affirmed the award of actual, moral and exemplary damages to respondent.13
Hence, this Petition.14
Issues
In his Memorandum, petitioner raises the following issues for the Court's consideration:
I
"Whether or not the Court of Appeals gravely erred in not applying [the] rules on co-
ownership under Article 144 of the New Civil Code in determining the proprietary rights of
the parties herein even as respondent herself expressly declared that the money with
which she allegedly bought the property in question in 1968 came from her funds, salaries
and savings at the time she and petitioner already lived as husband and wife.
II
"Whether or not the Court of Appeals likewise palpably erred in declaring the sale of the
subject property to herein petitioner in 1992 to be fictitious, simulated and inexistent.
III
"Whether or not the Court of Appeals further erred in not applying the '[in] pari delicto' rule
to the sale of the subject property in favor of the petitioner in 1992 contrary to the express
declaration to that effect in the very same case it cited (Rodriguez v. Rodriguez; 20 SCRA
908) in the decision herein sought to be reviewed.
IV
"Whether or not the Court of Appeals gravely erred in annul[l]ing the title (TCT No.
181033) to the subject property in the name of herein petitioner in the absence of actual
fraud."15 (Underscoring in the original.)
This Court's Ruling
The Petition is devoid of merit.
First Issue:
Nature of the Property
Petitioner contends that the JP Rizal property should be deemed as co-owned, considering that
respondent testified during trial that the money she used in purchasing it had come from her
income, salaries and savings, which are conjugal in nature.
On the other hand, respondent maintains that the finding of the two lower courts that the property
was acquired using funds solely owned by her is binding and supported by evidence. She further
argues that the two defenses of petitioner are contradictory to each other because, if the property
is co-owned, he cannot claim to own it in its entirety.
We find no reason to disturb the findings of the RTC and the CA that the source of the money
used to acquire the property was paraphernal. This issue is factual in nature. It is axiomatic that
"factual findings of the trial court, especially when affirmed by the Court of Appeals, as in this
case, are binding and conclusive on the Supreme Court. It is not the function of this Court to
reexamine the lower courts' findings of fact. While there are exceptions to this rule, petitioner has
not shown its entitlement to any of them."16
The testimony of petitioner as to the source of the money he had supposedly used to purchase the
property was at best vague and unclear. At first he maintained that the money came from his own
personal funds. Then he said that it came from his mother; and next, from his father. Time and
time again, "we [have] held that the unnatural and contradictory testimony of a witness, x x x
makes him unreliable x x x."17 His statement that the JP Rizal property was bought with his own
money can hardly be believed, when he himself was unsure as to the source of those funds.
On the other hand, the capacity of respondent to purchase the subject property cannot be
questioned. It was sufficiently established during trial that she had the means to do so. In fact, her
testimony that she had purchased several other lots using her personal funds was not disputed.
Equally without merit is the contention of petitioner that, because he was a Chinese national at the
time, respondent was merely used as a dummy in acquiring the property; thus, she could not have
legally acquired title thereto. He testified that sometime during the last month of 1968, he had
consulted a certain Atty. Flores, who advised him that the property be registered in the name of
respondent. However, TCT No. 217614 had been issued earlier on April 17, 1968. Thus, it
appears that the subject property had already been bought and registered in the name of
respondent, long before Atty. Flores allegedly advised him to have the property registered in her
name.
We therefore agree with the CA's affirmation of the RTC's findings that the property had been
acquired using respondent's paraphernal property. The CA rule thus:
"The fact however, is that Yu never refuted Elvira's testimony that: (a) the money with
which she acquired the JP Rizal property came from": (1) her income as a cashier in the
Hong Kiat Hardware: a (2) income from her paraphernal property – a lot in Guadalupe; (3)
her savings from the money which her parents gave her while she was still a student; and
(4) the money which her sister gave her for helping her run the beauty parlor; (b) her
parents were well off – they had stores, apartments and beauty parlors from which they
derived income; (c) before her marriage she bought lots in different places (p. 8, TSN,
Jan. 26, 1998; pp. 22-23, TSN March 10, 1998)."18
Second Issue: Fourth Issue:

Fictitious, Simulated and Inexistent Sale Cancellation of TCT

Next, petitioner argues that there was a valid sale between the parties, and that the consideration
consisted of his promise to construct a commercial building for the benefit of their three children
and to pay the loan he had obtained from Allied Bank.
We disagree. In Rongavilla v. Court of Appeals,19 the Court declared that a deed of sale, in which
the stated consideration had not in fact been paid, is null and void:
"The 'problem' before the Court is whether a deed which states a consideration that in fact
did not exist, is a contract, without consideration, and therefore void ab initio, or a contract
with a false consideration, and therefore, at least under the Old Civil Code, voidable. x x
x."
Finally, based on the foregoing disquisition, it is quite obvious that the Court of Appeals did not err
in ordering the cancellation of TCT No. 181033, because the Deed of Absolute Sale transferring
ownership to petitioner was completely simulated, void and without effect. In fact, there was no
legal basis for the issuance of the certificate itself.1âwphi1.nêt
WHEREFORE, the Petition is hereby DENIED and the assailed. Decision AFFIRMED. Costs
against petitioner.
SO ORDERED.
Melo, and Sandoval-Gutierrez, JJ., concur.

"In our view, therefore, the ruling of this Court in Ocejo, Perez & Co. vs. Flores, 40 Phil. Vitug, J. On Official Leave.
921[,] is squarely applicable herein. In that case we ruled that a contract of purchase and
sale is null and null and void and produces no effect whatsoever where the same is
without cause or consideration in that the purchase price which appears thereon as paid
has in fact never been paid by the purchaser to vendor."20

In the present case, it is clear from the factual findings of both lower courts that the Deed of Sale
was completely simulated and, hence, void and without effect. No portion of the P200,000
consideration stated in the Deed was ever paid. And, from the facts of the case, it is clear that
neither party had any intention whatsoever to pay that amount.

Instead, the Deed of Sale was executed merely to facilitate the transfer of the property to
petitioner pursuant to an agreement between the parties to enable him to construct a commercial
building and to sell the Juno property to their children. Being merely a subterfuge, that agreement
cannot be taken as the consideration for the sale.

Third Issue:

Inapplicability of the in Pari Delicto Principle

The principle of in pari delicto provides that when two parties are equally at fault, the law leaves
them as they are and denies recovery by either one of them. However, this principle does not
apply with respect to inexistent and void contracts. Said this Court in Modina v. Court of Appeals:21

"The principle of in pari delicto non oritur actio denies all recovery to 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."22
 Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-67888 October 8, 1985
IMELDA ONG, ET AL., petitioners,
vs.
ALFREDO ONG, ET AL., respondents.
Faustino Y Bautista and Fernando M. Mangubat for private respondent.
RELOVA, J.:
This is a petition for review on certiorari of the decision, dated June 20, 1984, of the Intermediate
Appellate Court, in AC-G.R. No. CV-01748, affirming the judgment of the Regional Trial Court of
Makati, Metro Manila. Petitioner Imelda Ong assails the interpretation given by respondent
Appellate Court to the questioned Quitclaim Deed.
Records show that on February 25, 1976 Imelda Ong, for and in consideration of One (P1.00)
Peso and other valuable considerations, executed in favor of private respondent Sandra Maruzzo,
then a minor, a Quitclaim Deed whereby she transferred, released, assigned and forever quit-
claimed to Sandra Maruzzo, her heirs and assigns, all her rights, title, interest and participation in
the ONE-HALF (½) undivided portion of the parcel of land, particularly described as follows:
A parcel of land (Lot 10-B of the subdivision plan (LRC) Psd 157841, being a
portion of Lot 10, Block 18, Psd-13288, LRC (GLRC) Record No. 2029, situated
in the Municipality of Makati, Province of Rizal, Island of Luzon ... containing an
area of ONE HUNDRED AND TWENTY FIVE (125) SQUARE METERS, more or
less.
On November 19, 1980, Imelda Ong revoked the aforesaid Deed of Quitclaim and, thereafter, on
January 20, 1982 donated the whole property described above to her son, Rex Ong-Jimenez.
On June 20, 1983, Sandra Maruzzo, through her guardian (ad litem) Alfredo Ong, filed with the
Regional Trial Court of Makati, Metro Manila an action against petitioners, for the recovery of
ownership/possession and nullification of the Deed of Donation over the portion belonging to her
and for Accounting.
In their responsive pleading, petitioners claimed that the Quitclaim Deed is null and void inasmuch
as it is equivalent to a Deed of Donation, acceptance of which by the donee is necessary to give it
validity. Further, it is averred that the donee, Sandra Maruzzo, being a minor, had no legal
personality and therefore incapable of accepting the donation.
Upon admission of the documents involved, the parties filed their responsive memoranda and
submitted the case for decision.
On December 12, 1983, the trial court rendered judgment in favor of respondent Maruzzo and
held that the Quitclaim Deed is equivalent to a Deed of Sale and, hence, there was a valid
conveyance in favor of the latter.
Petitioners appealed to the respondent Intermediate Appellate Court. They reiterated their
argument below and, in addition, contended that the One (P1.00) Peso consideration is not a
consideration at all to sustain the ruling that the Deed of Quitclaim is equivalent to a sale.
On June 20, 1984, respondent Intermediate Appellate Court promulgated its Decision affirming the
appealed judgment and held that the Quitclaim Deed is a conveyance of property with a valid
cause or consideration; that the consideration is the One (P1.00) Peso which is clearly stated in
the deed itself; that the apparent inadequacy is of no moment since it is the usual practice in
deeds of conveyance to place a nominal amount although there is a more valuable consideration
given.
Not satisfied with the decision of the respondent Intermediate Appellate Court, petitioners came to
Us questioning the interpretation given by the former to this particular document.
On March 15, 1985, respondent Sandra Maruzzo, through her guardian ad litem Alfredo Ong, filed
an Omnibus Motion informing this Court that she has reached the age of majority as evidenced by
her Birth Certificate and she prays that she be substituted as private respondent in place of her
guardian ad litem Alfredo Ong. On April 15, 1985, the Court issued a resolution granting the same.
A careful perusal of the subject deed reveals that the conveyance of the one- half (½) undivided
portion of the above-described property was for and in consideration of the One (P 1.00) Peso and
the other valuable considerations (emphasis supplied) paid by private respondent Sandra
Maruzzo through her representative, Alfredo Ong, to petitioner Imelda Ong. Stated differently, the
cause or consideration is not the One (P1.00) Peso alone but also the other valuable
considerations. As aptly stated by the Appellate Court-
... although the cause is not stated in the contract it is presumed that it is existing
unless the debtor proves the contrary (Article 1354 of the Civil Code). One of the
disputable presumptions is that there is a sufficient cause of the contract (Section
5, (r), Rule 131, Rules of Court). It is a legal presumption of sufficient cause or
consideration supporting a contract even if such cause is not stated therein
(Article 1354, New Civil Code of the Philippines.) This presumption cannot be
overcome by a simple assertion of lack of consideration especially when the
contract itself states that consideration was given, and the same has been
reduced into a public instrument with all due formalities and solemnities. To
overcome the presumption of consideration the alleged lack of consideration
 must be shown by preponderance of evidence in a proper action. (Samanilla vs,
Cajucom, et al., 107 Phil. 432).

The execution of a deed purporting to convey ownership of a realty is in itself prima facie evidence
of the existence of a valuable consideration, the party alleging lack of consideration has the
burden of proving such allegation. (Caballero, et al. vs. Caballero, et al., (CA), 45 O.G. 2536).

Moreover, even granting that the Quitclaim deed in question is a donation, Article 741 of the Civil
Code provides that the requirement of the acceptance of the donation in favor of minor by parents
of legal representatives applies only to onerous and conditional donations where the donation may
have to assume certain charges or burdens (Article 726, Civil Code). The acceptance by a legal
guardian of a simple or pure donation does not seem to be necessary (Perez vs. Calingo, CA-40
O.G. 53). Thus, Supreme Court ruled in Kapunan vs. Casilan and Court of Appeals, (109 Phil.
889) that the donation to an incapacitated donee does not need the acceptance by the lawful
representative if said donation does not contain any condition. In simple and pure donation, the
formal acceptance is not important for the donor requires no right to be protected and the donee
neither undertakes to do anything nor assumes any obligation. The Quitclaim now in question
does not impose any condition.

The above pronouncement of respondent Appellate Court finds support in the ruling of this Court
in Morales Development Co., Inc. vs. CA, 27 SCRA 484, which states that "the major premise
thereof is based upon the fact that the consideration stated in the deeds of sale in favor of Reyes
and the Abellas is P1.00. It is not unusual, however, in deeds of conveyance adhering to the
Anglo-Saxon practice of stating that the consideration given is the sum of P1.00, although the
actual consideration may have been much more. Moreover, assuming that said consideration of
P1.00 is suspicious, this circumstance, alone, does not necessarily justify the inference that Reyes
and the Abellas were not purchasers in good faith and for value. Neither does this inference
warrant the conclusion that the sales were null and void ab initio. Indeed, bad faith and
inadequacy of the monetary consideration do not render a conveyance inexistent, for the
assignor's liberality may be sufficient cause for a valid contract (Article 1350, Civil Code), whereas
fraud or bad faith may render either rescissible or voidable, although valid until annulled, a
contract concerning an object certain entered into with a cause and with the consent of the
contracting parties, as in the case at bar."

WHEREFORE. the appealed decision of the Intermediate Appellate Court should be, as it is
hereby AFFIRMED, with costs against herein petitioners.

SO ORDERED.

Teehankee (Chairman), Melencio-Herrera, Plana, De la Fuente and Patajo, JJ., concur.

Gutierrez, Jr., J., in the result.

 Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-38498 August 10, 1989
ISAAC BAGNAS, ENCARNACION BAGNAS, SILVESTRE BAGNAS MAXIMINA BAGNAS,
SIXTO BAGNAS and AGATONA ENCARNACION, petitioners,
vs.
HON. COURT OF APPEALS, ROSA L. RETONIL TEOFILO ENCARNACION, and JOSE B.
NAMBAYAN respondents.
Beltran, Beltran & Beltran for petitioners.
Jose M. Legaspi for private respondents.
NARVASA, J.:
The facts underlying this appeal by certiorari are not in dispute. Hilario Mateum of Kawit, Cavite,
died on March 11, 1964, single, without ascendants or descendants, and survived only by
collateral relatives, of whom petitioners herein, his first cousins, were the nearest. Mateum left no
will, no debts, and an estate consisting of twenty-nine parcels of land in Kawit and Imus, Cavite,
ten of which are involved in this appeal. 1
On April 3, 1964, the private respondents, themselves collateral relatives of Mateum though more
remote in degree than the petitioners, 2 registered with the Registry of Deeds for the Province of
Cavite two deeds of sale purportedly executed by Mateum in their (respondents') favor covering
ten parcels of land. Both deeds were in Tagalog, save for the English descriptions of the lands
conveyed under one of them; and each recited the reconsideration of the sale to be" ... halagang
ISANG PISO (Pl.00), salaping Pilipino, at mga naipaglingkod, ipinaglilingkod sa aking kapakanan
..." ("the sum of ONE PESO Pl.00), Philippine Currency, and services rendered, being rendered
and to be rendered for my benefit"). One deed was dated February 6,1963 and covered five
parcels of land, and the other was dated March 4, 1963, covering five other parcels, both,
therefore, antedating Mateum's death by more than a year. 3 It is asserted by the petitioners, but
denied by the respondents, that said sales notwithstanding, Mateum continued in the possession
of the lands purportedly conveyed until his death, that he remained the declared owner thereof
and that the tax payments thereon continued to be paid in his name. 4 Whatever the truth,
however, is not crucial. What is not disputed is that on the strength of the deeds of sale, the
respondents were able to secure title in their favor over three of the ten parcels of land conveyed
thereby. 5
On May 22,1964 the petitioners commenced suit against the respondents in the Court of First
Instance of Cavite, seeking annulment of the deeds of sale as fictitious, fraudulent or falsified, or,
alternatively, as donations void for want of acceptance embodied in a public instrument. Claiming
ownership pro indiviso of the lands subject of the deeds by virtue of being intestate heirs of Hilario
Mateum, the petitioners prayed for recovery of ownership and possession of said lands,
accounting of the fruits thereof and damages. Although the complaint originally sought recovery of
all the twenty-nine parcels of land left by Mateum, at the pre-trial the parties agreed that the
controversy be limited to the ten parcels subject of the questioned sales, and the Trial Court
ordered the exclusion of the nineteen other parcels from the action. 6 Of the ten parcels which
remained in litigation, nine were assessed for purposes of taxation at values aggregating P10,500
00. The record does not disclose the assessed value of the tenth parcel, which has an area of
1,443 square meters. 7
In answer to the complaint, the defendants (respondents here) denied the alleged fictitious or
fraudulent character of the sales in their favor, asserting that said sales were made for good and
valuable consideration; that while "... they may have the effect of donations, yet the formalities and
solemnities of donation are not required for their validity and effectivity, ... that defendants were
collateral relatives of Hilario Mateum and had done many good things for him, nursing him in his
last illness, which services constituted the bulk of the consideration of the sales; and (by way of
affirmative defense) that the plaintiffs could not question or seek annulment of the sales because
they were mere collateral relatives of the deceased vendor and were not bound, principally or
subsidiarily, thereby. 8
After the plaintiffs had presented their evidence, the defendants filed a motion for dismissal in
effect, a demurrer to the evidence reasserting the defense set up in their answer that the plaintiffs,
as mere collateral relatives of Hilario Mateum, had no light to impugn the latter's disposition of his
properties by means of the questioned conveyances and submitting, additionally, that no evidence
of fraud maintaining said transfers had been presented. 9
The Trial Court granted the motion to dismiss, holding (a) on the authority of Armentia vs.
Patriarca, 10 that the plaintiffs, as mere collateral relatives, not forced heirs, of Hilario Mateum,
could not legally question the disposition made by said deceased during his lifetime, regardless of
whether, as a matter of objective reality, said dispositions were valid or not; and (b) that the
plaintiffs evidence of alleged fraud was insufficient, the fact that the deeds of sale each stated a
consideration of only Pl.00 not being in itself evidence of fraud or simulation. 11
On appeal by the plaintiffs to the Court of Appeals, that court affirmed, adverting with approval to
the Trial Court's reliance on the Armentia ruling which, it would appear, both courts saw as
denying, without exception, to collaterals, of a decedent, not forced heirs, the right to impugn the
latter's dispositions inter vivos of his property. The Appellate Court also analyzed the testimony of
the plaintiffs' witnesses, declared that it failed to establish fraud of any kind or that Mateum had
continued paying taxes on the lands in question even after executing the deeds conveying them to
the defendants, and closed with the statement that "... since in duly notarized and registered
deeds of sale consideration is presumed, we do not and it necessary to rule on the alternative
allegations of the appellants that the said deed of sale were (sic) in reality donations. 12
One issue clearly predominates here. It is whether, in view of the fact that, for properties assuredly
worth in actual value many times over their total assessed valuation of more than P10,000.00, the
questioned deeds of sale each state a price of only one peso (P1.00) plus unspecified past,
present and future services to which no value is assigned, said deeds were void or inexistent from
the beginning ("nulo") or merely voidable, that is, valid until annulled. If they were only voidable,
then it is a correct proposition that since the vendor Mateum had no forced heirs whose legitimes
may have been impaired, and the petitioners, his collateral relatives, not being bound either
principally or subsidiarily to the terms of said deeds, the latter had and have no actionable right to
question those transfers.
On the other hand, if said deeds were void ab initio because to all intents and purposes without
consideration, then a different legal situation arises, and quite another result obtains, as pointed
out by the eminent civil law authority, Mr. Justice J.B.L. Reyes who, in his concurring opinion
in Armentia, said:
I ... cannot bring myself to agree to the proposition that the heirs intestate would
have no legal standing to contest the conveyance made by the deceased if the
same were made without any consideration, or for a false and fictitious
consideration. For under the Civil Code of the Philippines, Art. 1409, par. 3,
contracts with a cause that did not exist at the time of the transaction are
inexistent and void from the beginning. The same is true of contracts stating a
false cause (consideration) unless the persons interested in upholding the
contract should prove that there is another true and lawful consideration therefor.
(lbid., Art. 1353).
If therefore the contract has no causa or consideration, or the causa is false and
fictitious (and no true hidden causa is proved) the property allegedly conveyed
never really leaves the patrimony of the transferor, and upon the latter's death
without a testament, such property would pass to the transferor's heirs intestate
and be recoverable by them or by the Administrator of the transferor's estate. In
this particular regard, I think Concepcion vs. Sta. Ana, 87 Phil. 787 and Sobs vs.
Chua Pua Hermanos, 50 Phil. 536, do not correctly state the present law, and
must be clarified.
To be sure the quoted passage does not reject and is not to be construed as rejecting
the Concepcion and Solisrulings 13 as outrightly erroneous, far from it. On the contrary, those
rulings undoubtedly read and applied correctly the law extant in their time: Art. 1276 of the Civil
Code of 1889 under which the statement of a false cause in a contract rendered it voidable only,
not void ab initio. In observing that they "... do not correctly state the present law and must be
clarified," Justice Reyes clearly had in mind the fact that the law as it is now (and already was in
the time Armentia) no longer deems contracts with a false cause, or which are absolutely
simulated or fictitious, merely voidable, but declares them void, i.e., inexistent ("nulo") unless it is
shown that they are supported by another true and lawful cause or consideration. 14 A logical
consequence of that change is the juridical status of contracts without, or with a false, cause is
that conveyances of property affected with such a vice cannot operate to divest and transfer
ownership, even if unimpugned. If afterwards the transferor dies the property descends to his
heirs, and without regard to the manner in which they are called to the succession, said heirs may
bring an action to recover the property from the purported transferee. As pointed out, such an
action is not founded on fraud, but on the premise that the property never leaves the estate of the
transferor and is transmitted upon his death to heirs, who would labor under no incapacity to
maintain the action from the mere fact that they may be only collateral relatives and bound neither
principally or subsidiarily under the deed or contract of conveyance.
In Armentia the Court determined that the conveyance questioned was merely annullable not
void ab initio, and that the plaintiff s action was based on fraud vitiating said conveyance. The
Court said:
Hypothetically admitting the truth of these allegations (of plaintiffs complaint), the
conclusion is irresistible that the sale is merely voidable. Because Marta
Armentia executed the document, and this is not controverted by plaintiff.
Besides, the fact that the vendees were minors, makes the contract, at worst,
annullable by them, Then again, inadequacy of consideration does not imply total
want of consideration. Without more, the parted acts of Marta Armentia after the
sale did not indicate that the said sale was void from the being.
The sum total of all these is that, in essence, plaintiffs case is bottomed on fraud,
which renders the contract voidable.
It therefore seems clear that insofar as it may be considered as setting or reaffirming
precedent, Armentia only ruled that transfers made by a decedent in his lifetime, which are
voidable for having been fraudulently made or obtained, cannot be posthumously impugned by
collateral relatives succeeding to his estate who are not principally or subsidiarily bound by such
transfers. For the reasons already stated, that ruling is not extendible to transfers which, though
made under closely similar circumstances, are void ab initio for lack or falsity of consideration.
The petitioners here argue on a broad front that the very recitals of the questioned deeds of sale
reveal such want or spuriousness of consideration and therefore the void character of said sales.
They:
1. advert to a decision of the Court of Appeals in Montinola vs. Herbosa (59 O.G. No. 47, pp,
8101, 8118) holding that a price of P l.00 for the sale of things worth at least P20,000.00 is so
insignificant as to amount to no price at all, and does not satisfy the law which, while not requiring
for the validity of a sale that the price be adequate, prescribes that it must be real, not fictitious,
stressing the obvious parallel between that case and the present one in stated price and actual
value of the property sold;
2. cite Manresa to the same effect: that true price, which is essential to the validity of a sale,
means existent, real and effective price, that which does not consist in an insignificant amount as,
say, P.20 for a house; that it is not the same as the concept of a just price which entails weighing
and measuring, for economic equivalence, the amount of price against all the factors that
determine the value of the thing sold; but that there is no need of such a close examination when
the immense disproportion between such economic values is patent a case of insignificant or
ridiculous price, the unbelievable amount of which at once points out its inexistence; 15
3. assert that Art. 1458 of the Civil Code, in prescribing that a sale be for a ... price certain in
money or its equivalent ... requires that "equivalent" be something representative of money, e.g., a
check or draft, again citing Manresa 16 to the effect that services are not the equivalent of money
insofar as said requirement is concerned and that a contract is not a true sale where the price
consists of services or prestations;
4. once more citing Manresa 17 also point out that the "services" mentioned in the questioned
deeds of sale are not only vague and uncertain, but are unknown and not susceptible of
determination without the necessity of a new agreement between the parties to said deeds.
Without necessarily according all these assertions its full concurrence, but upon the consideration
alone that the apparent gross, not to say enormous, disproportion between the stipulated price (in
each deed) of P l.00 plus unspecified and unquantified services and the undisputably valuable real
estate allegedly sold worth at least P10,500.00 going only by assessments for tax purposes which,
it is well-known, are notoriously low indicators of actual value plainly and unquestionably
demonstrates that they state a false and fictitious consideration, and no other true and lawful
cause having been shown, the Court finds both said deeds, insofar as they purport to be sales, not
merely voidable, but void ab initio.
As the record clearly demonstrates, the respondents not only failed to offer any proof whatsoever,
opting to rely on a demurrer to the petitioner's evidence and upon the thesis, which they have
maintained all the way to this Court, that petitioners, being mere collateral relatives of the
deceased transferor, were without right to the conveyances in question. In effect, they gambled
their right to adduce evidence on a dismissal in the Trial Court and lost, it being the rule that when
a dismissal thus obtained is reversed on appeal, the movant loses the right to present evidence in
his behalf. 23
WHEREFORE, the appealed Decision of the Court of Appeals is reversed. The questioned
transfers are declared void and of no force or effect. Such certificates of title as the private
respondents may have obtained over the properties subject of said transfers are hereby annulled,
and said respondents are ordered to return to the petitioners possession of an the properties
involved in tills action, to account to the petitioners for the fruits thereof during the period of their
possession, and to pay the costs. No damages, attorney's fees or litigation expenses are awarded,
there being no evidence thereof before the Court.

Neither can the validity of said conveyances be defended on the theory that their true causa is the SO ORDERED.
liberality of the transferor and they may be considered in reality donations 18 because the
law 19 also prescribes that donations of immovable property, to be valid, must be made and Cruz, Gancayco, Griñ;o-Aquino and Medialdea, JJ., concur.
accepted in a public instrument, and it is not denied by the respondents that there has been no
such acceptance which they claim is not required. 20

The transfers in question being void, it follows as a necessary consequence and conformably to
the concurring opinion in Armentia, with which the Court fully agrees, that the properties
purportedly conveyed remained part of the estate of Hilario Mateum, said transfers
notwithstanding, recoverable by his intestate heirs, the petitioners herein, whose status as such is
not challenged.

The private respondents have only themselves to blame for the lack of proof that might have
saved the questioned transfers from the taint of invalidity as being fictitious and without ilicit cause;
proof, to be brief, of the character and value of the services, past, present, and future, constituting
according to the very terms of said transfers the principal consideration therefor. The petitioners'
complaint (par. 6) 21 averred that the transfers were "... fraudulent, fictitious and/or falsified and
(were) ... in reality donations of immovables ...," an averment that the private respondents not only
specifically denied, alleging that the transfers had been made "... for good and valuable
consideration ...," but to which they also interposed the affirmative defenses that said transfers
were "... valid, binding and effective ...," and, in an obvious reference to the services mentioned in
the deeds, that they "... had done many good things to (the transferor) during his lifetime, nursed
him during his ripe years and took care of him during his previous and last illness ...," (pars. 4, 6,
16 and 17, their answer).lâwphî1.ñèt 22 The onus, therefore, of showing the existence of valid and
illicit consideration for the questioned conveyances rested on the private respondents. But even
on a contrary assumption, and positing that the petitioners initially had the burden of showing that
the transfers lacked such consideration as they alleged in their complaint, that burden was shifted
to the private respondents when the petitioners presented the deeds which they claimed showed
that defect on their face and it became the duty of said respondents to offer evidence of existent
lawful consideration.
 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-10141 January 31, 1958
REPUBLIC OF THE PHILIPPINES, petitioner,
vs.
PHILIPPINE RESOURCES DEVELOPMENT CORPORATION and the COURT OF
APPEALS, respondents.
Office of the Solicitor General Ambrosio Padilla, and Solicitor Frine C. Zaballero for petitioner.
Vicente L. Santiago for respondent Corporation.
PADILLA, J.:
This is a petition under Rule 46 to review a judgment rendered by the Court of Appeals,in CA-GR
No. 15767-R, Philippine Resources Development Corporation vs. The Hon. Judge Magno
Gatmaitan et al.
The findings of the Court of Appeals are, as follows.
It appears that on May 6, 1955, the Republic of the Philippines in representation of the
Bureau of Prisons instituted against Macario Apostol and the Empire Insurance Co. a
complaint docketed as Civil Case No. 26166 of the Court of First instance of Manila. The
complaint alleges as the first cause of action, that defendant Apostol submitted the
highest bid the amount P450.00 per ton for the purchase of 100 tons of Palawan
Almaciga from the Bureau of Prisons; that a contract therefor was drawn and by virtue of
which, Apostol obtained goods from the Bureau of Prisons valued P15,878.59; that of
said account, Apostol paid only P691.10 leaving a balane obligation of P15,187.49. The
complaint further averes, as second cause of action, that Apostol submitted the best bid
with the Bureau of Prisons for the purchase of three million board feet of logs at P88.00
per 1,000 board feet; that a contract was executed between the Director of Prisons and
Apostol pursuant to which contract Apostol obtained deliveries of logs valued at
P65.830.00, and that Apostol failed to pay a balance account Of P18,827.57. All told, for
the total demand set forth in complaint against Apostol is for P34,015.06 with legal
interests thereon from January 8, 1952. The Empire lnsurance Company was included in
the complaint having executed a performance bond of P10,000.00 in favor of Apostol.
In his answer, Apostol interposed payment as a defense and sought the dismissal of the
complaint.
On July 19, 1955, the Philippine Resources Development Corporation moved to
intervene, appending to its motion, the complaint in the intervention of even date. The
complaint recites that for sometime prior to Apostol's transactions the corporate had some
goods deposited in a warehouse at 1201 Herran, Manila; that Apostol, then the president
of the corporation but without the knowledge or consent of the stockholders thereof,
disposed of said goods by delivering the same to the Bureau of Prisons of in an attempt
to settle his personal debts with the latter entity; that upon discovery of Apodol's act, the
corporation took steps to recover said goods by demanding from the Bureau of Prisons
the return thereof; and that upon the refusal of the Bureau to return said goods, the
corporation sought leave to intervene in Civil Case No. 26166.
As aforestated, His Honor denied the motion for intervention and thereby issued an order
to this effect on July 23, 1955. A motion for the reconsideration of said order was filed by
the movant corporation and the same was likewise denied by His Honor on August 18,
1955 . . . (Annex L.).
On 3 September 1955, in a petition for a writ of certiorari filed in the Court of Appeals, the herein
respondent corporation prayed for the setting aside of the order of the Court of First Instance that
had denied the admission of its complaint-in-intervention and for an order directing the latter Court
to allow the herein respondent corporation to intervene in the action (Annex G). On 12 December
1955 the Court of Appeals set aside the order denying the motion to intervene and ordered the
respondent court to admit the herein respondent corporation's complaint-in-intervention with costs
against Macario Apostol.
On 9 January 1956 the Republic of the Philippines filed this petition in this Court for the purpose
stated at the beginning of this opinion.
The Goverment contends that the intervenor has no legal interest in the matter in litigation,
because the action brought in the Court of First Instance of Manila against Macario Apostol and
the Empire Insurance Company (Civil Case No. 26166, Annex A) is just for the collection from the
defendant Apostol of a sum of money, the unpaid balance of the purchase price of logs and
almaciga bought by him from the Bureau of Prisons, whereas the intervenor seeks to recover
ownership and possession of G. I. sheets, black sheets, M. S. plates, round bars and G. I. pipes
that it claims its owns-an intervention which would change a personal action into one ad rem and
would unduly delay the disposition of the case.
The Court of Appeals held that:
Petitioner ardently claims that the reason behind its motion to intervene is the desire to
protect its rights and interests over some materials purportedly belonging to it; that said
material were unauthorizedly and illegally assigned and delivered to the Bureau of
Prisons by petitioning corporation's president Macario Apostol in payment of the latter's
personal accounts with the said entity; and that the Bureau of Prisons refused to return
said materials despite petitioner's demands to do so.
Petitioner refers to the particulars recited in Apostol's answer dated July 12, 1955 to the
effect that Apostol had paid unto the Bureau of Prisons his accounts covered, among
others, by BPPO 1077 for the sum of P4,638.40 and BPPO 1549 for the amount of
P4,398.54. Petitioner moreover, points to the State of Paid and Unpaid accounts of
Apostol dated January 16, 1954 prepared by the accounting of officer of the Bureau of
Prisons (Annex B. Complaint in Intervention), wherein it appears that the aforementioned
accounts covered respectively by BPPO Nos. 1077 for 892 pieces of GI sheets and 1549
for 399 pieces of GI pipes in the total sum of P9,036.94 have not been credited to
Apostol's account in view of lack of supporting papers; and that according to the reply
letter of the Undersecretary of Justice, said GI sheets and pipes were delivered by
Macario Apostol to the Bureau of Prisons allegedly in Apostol's capacity as owner and
that the black iron sheets were delivered by Apostol as President of the petitioner
corporation.
Respondents, on the other hand, assert that the subject matter of the original litigation is
a sum of money allegedly due to the Bureau of Prisons from Macario Apostol and not the
goods or the materials reportedly turned over by Apostol as payment of his private debts
to the Bureau of Prisons and the recovery of which is sought by the petitioner; and that for
this reason, petitioner has no legal interest in the very subject matter in litigation as to
entitle it to intervene.
We find no merit in respondents' contention. It is true that the very subject matter of the
original case is a sum of money. But it is likewise true as borne out by the records, that
the materials purportedly belonging to the petitioner corporation have been assessed and
evaluated and their price equivalent in terms of money have been determined; and that
said materials for whatever price they have been assigned by defendant now respondent
Apostol as tokens of payment of his private debts with the Bureau of Prisons. In view of
these considerations, it becomes enormously plain in the event the respondent judge
decides to credit Macario Apostol with the value of the goods delivered by the latter to the
Bureau of Prisons, the petitioner corporation stands to be adversely affected by such
judgment. The conclusion, therefore, is inescapable that the petitioner possesses a legal
interest in the matter in litigation and that such interest is of an actual, material, direct and
immediate nature as to entitle petitioner to intervene.
xxx xxx xxx
Section 3 of Rule 13 of the Rules of Court endows the lower Court with discretion to allow
or disapprove the motion for intrvention (Santarromana et al. vs. Barrios, 63 Phil. 456);
and that in the exercise of such discretion, the court shall consider whether or not the
intervention will unduly delay or prejudice the adjudicatio of the rights of the original
parties and whether or not the intervenors the rights may be fully protected in a separate
proceeding. The petitioner in the instant case positively authorized to a separate action
against any of all the respondents. But considering that the resolution of the issues raised
in and enjoined by the pleadings in the main case, would virtally affect the rights not only
the original parties but also of the berein petitioner: that far from unduly delaying or
prejudicing the adjudication of the rights of the original parties or bringing about confusion
in the original case, the adnission of the complaint in intervention would help clarify the
vital issue of the true and real ownership of the materials involved, besides preventing an
abhorrent munltiplicity of suit, we believe that the motion to intervene should be given due
to cause.
We find no reason for disturbing the foregoing pronouncements. The Government argues that
"Price . . . is always paid in terms of money and the supposed payment beeing in kind, it is no
payment at all, "citing Article 1458 of the new Civil Code. However, the same Article provides that
the purschaser may pay "a price certain in money or its equivalent," which means that they meant
of the price need not be in money. Whether the G.I. sheets, black sheets, M. S. Plates, round bars
and G. I. pipes claimed by the respondent corporation to belong to it and delivered to the Bureau
of Prison by Macario Apostol in payment of his account is sufficient payment therefore, is for the
court to pass upon and decide after hearing all the parties in the case. Should the trial court hold
that it is as to credit Apostol with the value or price of the materials delivered by him, certainly the
herein respondent corporation would be affected adversely if its claim of ownership of such
sheets, plates, bars and pipes is true.
The Government reiterates in its original stand that counsel appearing for the respondent
corporation has no authority to represent it or/and sue in its behalf, the Court of Appeals held that:
Respondents aver also that petitioner lacks legal capacity to sue and that its counsel is
acting merely in an individual capacity without the benefit of the corporate act authorizing
him to bring sue. In this connection, respondents invoked among others section 20 of
Rule 127 which provision, in our opinion, squarely disproves their claim as by virtue
thereof, the authority of petitioner's counsel is pressumed. Withal, the claim of the counsel
for the petitioner that a resolution to proceed against Apostol, had been unanonimously
adopted by the stockholders of the corporation, has not been refuted.
Evidently, petitioner is a duly organized corporation with offices at the Samanillo Building
and that as such, it is endowed with a personality distinct and separate from that of its
president or stockholders. It has the right to bring suit to safeguard its interests and
ordinarily, such right is exercised at the instance of the president. However, under the
circumstance now obtaining, such right properly devolves upon the other officers of the
corporations as said right is sought to be exercised against the president himself who is
the very object of the intended suit.
The power of a corporation to sue and be sued in any court1 is lodged in the board of directors
which exercises it corporater powers,2 and not in the president, as contended by the Government.
The "motion for admission of complaint in intervention" (Annex C) and the "complaint in
intervention" attached thereto, signed by counsel and filed in the Court of First Instance begin with
the following statement: "COMES NOW the above-name Intervenor, by its undersigned counsel, .
. . , "and underneath his typewritten name is affixed the description" Counsel for the Intervenor."
As counsels authority to appeal for the respondent corporation was newer questioned in the Court
of First Instance, it is to be pressumed that he was properly authorized to file the complaint in
intervention and appeal for his client.1 It was only in the Court of Appeals where his authority to
appear was questioned. As the Court of Appeals was satisfied that counsel was duly authorized
by his client to file the complaint does in intervention and to appear in its behalf, hte resolution of
the Court of Appeals on this point should not be disturbed.
Granting that counsel has not been actually authorized by the board of directors to appear for and
in behalf of the respondent corporation, the fact that counsel is the secretary treasurer of the
respondent corporation and member of the board of directors; and that the other members of the
board, namely, Macario Apostol, the president, and his wife Pacita R. Apostol, who shuold
normally initiate the action to protect the corporate properties and in interest are the ones to be
adversely affected thereby, a single stockholder under such circumstances may sue in behalf of
the corporation.2 Counsel as a stockholder and director of the respondent corporation may sue in
its behalf and file the complaint in intervention in the proper court.

The judgment under review is affirmed, without pronouncements as to costs.

Bengzon, Paras, C.J., Montemayor, Reyes, A., Bautista Angelo, Labrador, Concepcion, Reyes,
J.B.L., Endencia, and Felix, JJ., concur.
 Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISI0N
G.R. No. 172674 July 12, 2007
SPS. JORGE NAVARRA and CARMELITA BERNARDO NAVARRA and RRRC
DEVELOPMENT CORPORATION, Petitioners,
vs.
PLANTERS DEVELOPMENT BANK and ROBERTO GATCHALIAN REALTY,
INC., Respondents.
DECISION
GARCIA, J.:
Assailed and sought to be set aside in this petition for review under Rule 45 of the Rules of Court
is the decision1dated September 27, 2004 of the Court of Appeals (CA) in CA-G.R. CV No. 50002,
as reiterated in its resolution2dated May 8, 2006, denying reconsideration thereof. The challenged
decision reversed that of the Regional Trial Court (RTC) of Makati City, Branch 66, in its Civil Case
No. 16917, an action for Specific Performance and Injunction thereat commenced by the herein
petitioners against the respondents. The Makati RTC ruled that a perfected contract of sale
existed in favor of Jorge Navarra and Carmelita Bernardo Navarra (Navarras) over the properties
involved in the suit and accordingly ordered Planters Development Bank (Planters Bank) to
execute the necessary deed of sale therefor. The CA reversed that ruling. Hence, this recourse by
the petitioners.
The facts:
The Navarras are the owners of five (5) parcels of land located at B.F. Homes, Parañaque and
covered by Transfer Certificates of Title (TCT) Nos. S-58017, S-58011, S-51732, S-51733 and A-
14574. All these five (5) parcels of land are the subject of this controversy.
On July 5, 1982, the Navarras obtained a loan of ₱1,200,000.00 from Planters Bank and, by way
of security therefor, executed a deed of mortgage over their aforementioned five (5) parcels of
land. Unfortunately, the couple failed to pay their loan obligation. Hence, Planters Bank foreclosed
on the mortgage and the mortgaged assets were sold to it for ₱1,341,850.00, it being the highest
bidder in the auction sale conducted on May 16, 1984. The one-year redemption period expired
without the Navarras having redeemed the foreclosed properties.
On the other hand, co-petitioner RRRC Development Corporation (RRRC) is a real estate
company owned by the parents of Carmelita Bernardo Navarra. RRRC itself obtained a loan from
Planters Bank secured by a mortgage over another set of properties owned by RRRC. The loan
having been likewise unpaid, Planters Bank similarly foreclosed the mortgaged assets of RRRC.
Unlike the Navarras, however, RRRC was able to negotiate with the Bank for the redemption of its
foreclosed properties by way of a concession whereby the Bank allowed RRRC to refer to it
would-be buyers of the foreclosed RRRC properties who would remit their payments directly to the
Bank, which payments would then be considered as redemption price for RRRC. Eventually, the
foreclosed properties of RRRC were sold to third persons whose payments therefor, directly made
to the Bank, were in excess by ₱300,000.00 for the redemption price.
In the meantime, Jorge Navarra sent a letter to Planters Bank, proposing to repurchase the five (5)
lots earlier auctioned to the Bank, with a request that he be given until August 31, 1985 to pay the
down payment of ₱300,000.00. Dated July 18, 1985 and addressed to then Planters Bank
President Jesus Tambunting, the letter reads in full:
This will formalize my request for your kind consideration in allowing my brother and me to buy
back my house and lot and my restaurant building and lot together with the adjacent road lot.
Since my brother, who is working in Saudi Arabia, has accepted this arrangement only recently as
a result of my urgent offer to him, perhaps it will be safe for us to set August 31, 1985 as the last
day for the payment of a ₱300,000.00 downpayment. I hope you will grant us the opportunity to
raise the funds within this period, which includes an allowance for delays.
The purchase price, I understand, will be based on the redemption value plus accrued interest at
the prevailing rate up to the date of our sales contract. Maybe you can give us a long term
payment scheme on the basis of my brother’s annual savings of roughly US$30,000.00 everytime
he comes home for his home leave.
I realize that this is not a regular transaction but I am seeking your favor to give me a chance to
reserve whatever values I can still recover from the properties and to avoid any legal
complications that may arise as a consequence of the total loss of the Balangay lot. I hope that
you will extend to me your favorable action on this grave matter.
In response, Planters Bank, thru its Vice-President Ma. Flordeliza Aguenza, wrote back Navarra
via a letter dated August 16, 1985, thus:
Regarding your letter dated July 18, 1985, requesting that we give up to August 31, 1985 to buy
back your house and lot and restaurant and building subject to a ₱300,000.00 downpayment on
the purchase price, please be advised that the Collection Committee has agreed to your request.
Please see Mr. Rene Castillo, Head, Acquired Assets Unit, as soon as possible for the details of
the transaction so that they may work on the necessary documentation.
Accordingly, Jorge Navarra went to the Office of Mr. Rene Castillo on August 20, 1985, bringing
with him a letter requesting that the excess payment of ₱300,000.00 in connection with the
redemption made by the RRRC be applied as down payment for the Navarras’ repurchase of their
foreclosed properties.
Because the amount of ₱300,000.00 was sourced from a different transaction between RRRC and
Planters Bank and involved different debtors, the Bank required Navarra to submit a board
resolution from RRRC authorizing him to negotiate for and its behalf and empowering him to apply
the excess amount of ₱300,000.00 in RRRC’s redemption payment as down payment for the
repurchase of the Navarras’ foreclosed properties.
Meanwhile, titles to said properties were consolidated in the name of Planters Bank, and on
August 27, 1985, new certificates of title were issued in its name, to wit: TCT Nos. 97073, 97074,
97075, 97076 and 97077.
Then, on January 21, 1987, Planters Bank sent a letter to Jorge Navarra informing him that it
could not proceed with the documentation of the proposed repurchase of the foreclosed properties
on account of his non- compliance with the Bank’s request for the submission of the needed board
resolution of RRRC.
In his reply-letter of January 28, 1987, Navarra claimed having already delivered copies of the
required board resolution to the Bank. The Bank, however, did not receive said copies. Thus, on
February 19, 1987, the Bank sent a notice to the Navarrras demanding that they surrender and
vacate the properties in question for their failure to exercise their right of redemption.
Such was the state of things when, on June 31, 1987, in the RTC of Makati City, the Navarras filed
their complaint for Specific Performance with Injunction against Planters Bank. In their complaint
docketed in said court as Civil Case No. 16917 and raffled to Branch 66 thereof, the Navarras, as
plaintiffs, alleged that a perfected contract of sale was made between them and Planters Bank
whereby they would repurchase the subject properties for ₱1,800,000.00 with a down payment of
₱300,000.00.
In its Answer, Planters Bank asserted that there was no perfected contract of sale because the
terms and conditions for the repurchase have not yet been agreed upon.
On September 9, 1988, a portion of the lot covered by TCT No. 97077 (formerly TCT No. A-
14574) was sold by Planters Bank to herein co-respondent Roberto Gatchalian Realty, Inc.
(Gatchalian Realty). Consequently, TCT No. 97077 was cancelled and TCT No. 12692 was issued
in the name of Gatchalian Realty. This prompted the Navarras to amend their complaint by
impleading Gatchalian Realty as additional defendant.
In a decision dated July 10, 1995, the trial court ruled that there was a perfected contract of sale
between the Navarras and Planters Bank, and accordingly rendered judgment as follows:
WHEREFORE, in view of the foregoing, judgment is hereby rendered ordering:
a) the cancellation of the Deed of Absolute Sale (Exh. "2") over lot 4137-C between
defendant Planters Development Bank and defendant Roberto Gatchalian Realty
Corporation (RGRI) with the vendor bank refunding all the payments made by the vendee
RGRI "without interest less the five percent (5%) broker’s commission":
b) the defendant Planters Development Bank to execute the Deed of Absolute Sale over
the lots covered by TCT Nos. 97073, 97074, 97075, 97076, and 97077 in favor of all the
plaintiffs for a consideration of ONE MILLION EIGHT HUNDRED THOUSAND
(P1,800,000.00) less the downpayment of P300,000.00 plus interest at the rate of twenty
five percent (25%) per year for five (5) years to be paid in full upon the execution of the
contract;
c) the defendant Planters Development Bank the amount of TEN THOUSAND PESOS
(P10,000.00) by way of attorney’s fees.
d) No costs.
SO ORDERED.
Therefrom, Planters Bank and Gatchalian Realty separately went on appeal to the CA whereat
their appellate recourse were consolidated and docketed as CA-G.R. CV No. 50002.
As stated at the threshold hereof, the appellate court, in its decision of September 27, 2004,
reversed that of the trial court and ruled that there was no perfected contract of sale between the
parties. Partly says the CA in its decision:
The Court cannot go along with the deduction of the trial court that the response of Planters Bank
was favorable to Jorge Navarra’s proposal and that the P300,000.00 in its possession is a down
payment and as such sufficient bases to conclude that there was a valid and perfected contract of
sale. Based on the turn of events and the tenor of the communications between the offerors and
the creditor bank, it appears that there was not even a perfected contract to sell, much less a
perfected contract of sale.
Article 1319 cited by the trial court provides that the acceptance to an offer must be absolute.
Simply put, there must be unqualified acceptance and no condition must tag along. But Jorge
Navarra in trying to convince the bank to agree, had himself laid out terms in offering (1) a
downpayment of P300,000.00 and setting (2) as deadline August 31, 1985 for the payment
thereof. Under these terms and conditions the bank indeed accepted his offer, and these are
essentially the contents of Exhibits "J" and "K."
But was there compliance? According to the evidence on file the P300,000.00, if at all, was given
beyond the agreed period. The court a quo missed the fact that the said amount came from the
excess of the proceeds of the sale to the Peña spouses which Jorge Navarra made to appear was
made before the deadline he set of August 31, 1985. But this is athwart Exhibits "M-1" and "N", the
Contract to Sell and the Deed of Sale between RRRC and the Peñas, for these were executed
only on September 13, 1985 and October 7, 1985 respectively.
xxx xxx xxx
There were two separate and independent loans secured by distinct mortgages on different lots
and their only commonality is the relationship of the Navarras and Bernardo families. It is thus
difficult to conceive and to conclude that such Byzantine arrangement was acquiesced to and
provided for in that single and simple letter of the bank.
With their motion for reconsideration having been denied by the CA in its resolution of May 8,
2006, petitioners are now with this Court via this recourse on their submission that the CA erred -
I raise the funds within this period, which includes an allowance for delays.
XXX IN CONCLUDING THAT THERE WAS NO PERFECTED CONTRACT TO
REPURCHASE THE FORECLOSED PROPERTIES BETWEEN THE PETITIONERS
AND THE PRIVATE RESPONDENT PLANTERS DEVELOPMENT BANK, AS
CORRECTLY FOUND BY THE TRIAL COURT.
II
XXX IN HOLDING THAT THE PARTIES NEVER GOT PAST THE NEGOTIATION
STAGE.
While the question raised is essentially one of fact, of which the Court normally eschews from, yet,
given the conflicting factual findings of the trial and appellate courts, the Court shall go by the
exception3 to the general rule and proceed to make its own assessment of the evidence.
We DENY.
Petitioners contend that a perfected contract of sale came into being when respondent Bank, thru
a letter dated August 16, 1985, formally accepted the offer of the Navarras to repurchase the
subject properties.
In general, contracts undergo three distinct stages, to wit: negotiation, perfection or birth, and
consummation. Negotiation begins from the time the prospective contracting parties manifest their
interest in the contract and ends at the moment of their agreement. Perfection or birth of the
contract takes place when the parties agree upon the essential elements of the contract, i.e.,
consent, object and price. Consummation occurs when the parties fulfill or perform the terms
agreed upon in the contract, culminating in the extinguishment thereof.4
A negotiation is formally initiated by an offer which should be certain with respect to both the
object and the cause or consideration of the envisioned contract. In order to produce a contract,
there must be acceptance, which may be express or implied, but it must not qualify the terms of
the offer. The acceptance of an offer must be unqualified and absolute to perfect the contract. In
other words, it must be identical in all respects with that of the offer so as to produce consent or
meeting of the minds.5
Here, the Navarras assert that the following exchange of correspondence between them and
Planters Bank constitutes the offer and acceptance, thus:
Letter dated July 18, 1985 of Jorge Navarra:
This will formalize my request for your kind consideration in allowing my brother and me to buy
back my house and lot and my restaurant building and lot together with the adjacent road lot.
Since my brother, who is working in Saudi Arabia, has accepted this arrangement only recently as
a result of my urgent offer to him, perhaps it will be safe for us to set August 31, 1985 as the last
day for the payment of a ₱300,000.00 downpayment. I hope you will grant us the opportunity to
The purchase price, I understand, will be based on the redemption value plus accrued interest at
the prevailing rate up to the date of our sales contract. Maybe you can give us a long term
payment scheme on the basis of my brother’s annual savings of roughly US$30,000.00 everytime
he comes home for his home leave.
I realize that this is not a regular transaction but I am seeking your favor to give me a chance to
reserve whatever values I can still recover from the properties and to avoid any legal
complications that may arise as a consequence of the total loss of the Balangay lot. I hope that
you will extend to me your favorable action on this grave matter.
Letter dated August 16, 1985 of Planters Bank
Regarding your letter dated July 18, 1985, requesting that we give up to August 31, 1985 to buy
back your house and lot and restaurant and building subject to a ₱300,000.00 downpayment on
the purchase price, please be advised that the Collection Committee has agreed to your request.
Please see Mr. Rene Castillo, Head, Acquired Assets Unit, as soon as possible for the details of
the transaction so that they may work on the necessary documentation. (Emphasis ours)
Given the above, the basic question that comes to mind is: Was the offer certain and the
acceptance absolute enough so as to engender a meeting of the minds between the parties?
Definitely not.
While the foregoing letters indicate the amount of ₱300,000.00 as down payment, they are,
however, completely silent as to how the succeeding installment payments shall be made. At
most, the letters merely acknowledge that the down payment of ₱300,000.00 was agreed upon by
the parties. However, this fact cannot lead to the conclusion that a contract of sale had been
perfected. Quite recently, this Court held that before a valid and binding contract of sale can exist,
the manner of payment of the purchase price must first be established since the agreement on the
manner of payment goes into the price such that a disagreement on the manner of payment is
tantamount to a failure to agree on the price.6
Too, the Navarras’ letter/offer failed to specify a definite amount of the purchase price for the
sale/repurchase of the subject properties. It merely stated that the "purchase price will be based
on the redemption value plus accrued interest at the prevailing rate up to the date of the sales
contract." The ambiguity of this statement only bolsters the uncertainty of the Navarras’ so-called
"offer" for it leaves much rooms for such questions, as: what is the redemption value? what
prevailing rate of interest shall be followed: is it the rate stipulated in the loan agreement or the
legal rate? when will the date of the contract of sale be based, shall it be upon the time of the
execution of the deed of sale or upon the time when the last installment payment shall have been
made? To our mind, these questions need first to be addressed, discussed and negotiated upon
by the parties before a definite purchase price can be arrived at.
Significantly, the Navarras wrote in the same letter the following:
Maybe you can give us a long-term payment scheme on the basis of my brother’s annual savings
of roughly US$30,000.00 every time he comes home for his home leave.
Again, the offer was not clear insofar as concerned the exact number of years that will comprise
the long-term payment scheme. As we see it, the absence of a stipulated period within which the
repurchase price shall be paid all the more adds to the indefiniteness of the Navarras’ offer.
Evidently, what transpired between the parties was only a prolonged negotiation to buy and to sell,
and, at the most, an offer and a counter-offer with no definite agreement having been reached by
them. With the hard reality that no perfected contract of sale/repurchase exists in this case, any
independent transaction between the Planters Bank and a third-party, like the one involving the
Gatchalian Realty, cannot be affected.
WHEREFORE, the petition is DENIED and the assailed decision and resolution of the Court of
Appeals are AFFIRMED.
No pronouncement as to costs.
SO ORDERED.

Clearly, then, the lack of a definite offer on the part of the spouses could not possibly serve as the
basis of their claim that the sale/repurchase of their foreclosed properties was perfected. The
reason is obvious: one essential element of a contract of sale is wanting: the price certain. There
can be no contract of sale unless the following elements concur: (a) consent or meeting of the
minds; (b) determinate subject matter; and (c) price certain in money or its equivalent. Such
contract is born or perfected from the moment there is a meeting of minds upon the thing which is
the object of the contract and upon the price.7 Here, what is dramatically clear is that there was no
meeting of minds vis-a-vis the price, expressly or impliedly, directly or indirectly.

Further, the tenor of Planters Bank’s letter-reply negates the contention of the Navarras that the
Bank fully accepted their offer. The letter specifically stated that there is a need to negotiate on the
other details of the transaction8before the sale may be formalized. Such statement in the Bank’s
letter clearly manifests lack of agreement between the parties as to the terms of the purported
contract of sale/repurchase, particularly the mode of payment of the purchase price and the period
for its payment. The law requires acceptance to be absolute and unqualified. As it is, the Bank’s
letter is not the kind which would constitute acceptance as contemplated by law for it does not
evince any categorical and unequivocal undertaking on the part of the Bank to sell the subject
properties to the Navarras.

The Navarras’ attempt to prove the existence of a perfected contract of sale all the more becomes
futile in the light of the evidence that there was in the first place no acceptance of their offer. It
should be noted that aside from their first letter dated July 18, 1985, the Navarras wrote another
letter dated August 20, 1985, this time requesting the Bank that the down payment of ₱300,000.00
be instead taken from the excess payment made by the RRRC in redeeming its own foreclosed
properties. The very circumstance that the Navarras had to make this new request is a clear
indication that no definite agreement has yet been reached at that point. As we see it, this request
constitutes a new offer on the part of the Navarras, which offer was again conditionally accepted
by the Bank as in fact it even required the Navarras to submit a board resolution of RRRC before it
could proceed with the proposed sale/repurchase. The eventual failure of the spouses to submit
the required board resolution precludes the perfection of a contract of sale/repurchase between
the parties. As earlier mentioned, contracts are perfected when there is concurrence of the parties’
wills, manifested by the acceptance by one of the offer made by the other. 9Here, there was no
concurrence of the offer and acceptance as would result in a perfected contract of sale.1avvphi1