Peralta v. de guerrero v.

Madrigal PASSENGERS TICKET A WRITTEN

shipping CONTRACT
LEOQUINCO vs. POSTAL SAVINGS BANK ARTICLE 1326 – Advertisement of
Bidding
MANILA PRINCE HOTEL V. GSIS ARTICLE 1326 – Advertisement of
Bidding –FILIPINO FIRST POLICY
JALANDONI V. NATIONAL ARTICLE 1326 – Advertisement of
RESETTLEMENT & REHABILITATION Bidding
MENDOZONA V. OZAMIS SIMULATED CONTRACT & ART. 1332
CULABA V. CA ART 1240
KATIPUNAN V. KATIPUNAN ART. 1332
TAN V.MANDAP ART. 1332
CATALAN V. BASA ART. 1332
DELA CRUZ V. DELA CRUZ G.R. No. SIMULATED CONTRACT & 1332
146222
PNOC AND PNOC DOCKYARD AND ENG’G OPTION CONTRACT
CORP V. KEPPEL INC
EQUITORIAL V. MAYFAIR PERFECTED CONTRACT & OPTION
CONTRACT
ADELFA PROPERTIES V. CA OPTION CONTRACT
ABALOS V. MACATANGAY CONTRACT OF SALE,
ENJOYMENT&DISPOSITION OF
PROPERTY REGIME
JLT AGRO INC. V. BALANSAG FUTURE INHERITANCE
TANEDO V. CA FUTURE INHERITANCE
FERRER V. DIAZ FUTURE INHERITANCE
OPULENCIA V. CA FUTURE INHERITANCE
JAVIER V. VDA CRUZ LESION, ART 1355
ZAMORA V. MIRANDA 1357
MAQUILAN V. MAQUILAN 1357
DAUDEN HERNAEZ V. LOS ANGELES 1357
SARMING V. DY REFORMATION
ONG V. ONG 1357
 Peralta v. de guerrero v. Madrigal shipping

LIMITATION OF ACTION; CARRIERS; PASSENGERS TICKET A WRITTEN

CONTRACT; DAMAGES. — Where the complaint shows that appellants’ cause of
action is predicated on the failure of appellee to comply with its contract of carrying
safely the deceased from one place to another, in that the vessel on which he was
riding belonging to appellee capsized because of the reckless and imprudent
manner it was managed and steered by its crew, it can be implied that the
transportation was under taken by virtue of a written contract of carriage. It is a
matter of common knowledge that whenever a passenger boards a ship for
transportation from one place to another he is issued a ticket by the shipper which
has all the lements of a written contract namely: (1) the consent of the contracting
parties manifested by the fact that the passenger boards the ship and the shipper
consents or accepts him in the ship for transportation; (2) cause or consideration
which is the fare paid by the passenger as stated in the ticket; and (3) object,
which is the transportation of the passenger from the place of departure to the
place of destination which are stated in the ticket.

FACTS:

This is an action instituted before the Court of First Instance of Ilocos Norte to
recover damages resulting from the death of Pacifico Acacio when the ship where
the latter was riding as passenger capsized in San Jose, Antique.

On April 30, 1957, the wife and daughter of Pacifico Acacio, plaintiffs herein, filed a
complaint against defendant corporation alleging that on November 1, 1949 Pacifico
Acacio entered into a contract of carriage with defendant whereby for certain
consideration the latter undertook to carry the former on its vessel "M.S.
Regulus" from Malangas, Zamboanga, to the City of Manila; that while the vessel
was passing San Jose, Antique, its crew without taking the necessary precaution
managed and steered the same in a reckless and imprudent manner thereby
causing the vessel to capsize and resulting in the death of Pacifico Acacio.

Defendant filed a motion to dismiss on the ground that plaintiff’s cause of action
has already prescribed. It contended that they should have filed the action within
six years from the time of the alleged breach of contract, or on November 1, 1955,
and considering that the complaint was filed on April 30, 1957, or more than seven
years thereafter, the complaint was filed out of time.
The lower court sustained the motion holding that since the nature of the action is
one for recovery of damages which is not based on a written contract, the action is
already barred by the statute of limitations. Hence the present appeal.

It appears that the complaint was dismissed by the trial court on the strength of a
motion filed by defendant on the ground that the cause of action has already
prescribed. No evidence was presented by any party in support of or against the
motion, the ruling of the court having been based merely on the factual allegations
of the complaint.

ISSUE: Do the allegations of the complaint shows that the cause of action of
plaintiffs is merely for recovery of damages, as found by the trial court, or is one
based on a written contract of carriage as claimed by appellants?

RULING: Based on a written contract of carriage as claimed by appellants

Reading of the complaint would show that their cause of action is predicated upon
the failure of appellee to comply with its contract of carrying the deceased from
Malangas, Zamboanga to the City of Manila safely, in that the vessel on which he
was riding belonging to defendant capsized because of the reckless and imprudent
manner it was managed and steered by its crew. It is true that the complaint does
not in so many words state that the transportation was undertaken by virtue of a
written contract of carriage, but this can be implied from the complaint because it is
a matter of common knowledge that whenever a passenger boards a ship for
transportation from one place to another he is issued a ticket by the shipper
wherein the terms of the contract are specified. According to appellants, "This
ticket is in itself a complete written contract by and between the shipper
and the passenger. It has all the elements of a complete contract, namely:
(1) the consent of the contracting parties manifested by the fact that the
passenger boards the ship and the shipper consents or accepts him in the
ship for transportation; (2) cause or consideration which is the fare paid by
the passenger as stated in the ticket; and (3) object, which is the
transportation of the passenger from the place of departure to the place of
destination which are stated in the ticket”.

Considering that the ticket is not now before us because that case has been decided
merely on a motion to dismiss, and this ticket is necessary to determine the
right of action of appellants, it would have been more proper had action on
the motion been deferred until after trial on the merits. This is authorized by
the rule if the ground alleged in the motion does not appear to be indubitable
(Section 3, Rule 8, of the Rules of Court). We are therefore of the opinion that, in
fairness to appellants, the trial court should not have dismissed the case outright
but should have deferred action on the motion until after trial for the evidence to be
presented may still show that the contract of the parties is really written and not
merely oral as intimated by the court a quo.

LEOQUINCO vs. POSTAL SAVINGS BANK

FACTS

Sometime in March 1924, a bidding for the sale of parcel of land situated in
Navotas for the amount of P27,000.00 was conducted by Postal Savings Bank in
which the herein plaintiff emerged as the highest bidder. That in Resolution No.31,
it was expressly stated that the right to reject any and all bid is reserved to the
Board of Directors of the said bank.

On May 9,1924, the plaintiff made a letter advising the defendants regarding his
intent to tender his payment as soon as the deed of sale is executed and delivered
by the defendants in his favor. Unfortunately, the defendants refused to comply
with the same which caused the plaintiff to contend that said omission by the
defendants caused him damage amounting to P25,000.00.

Hence, this appealed cause of action.

ISSUE

Whether or not the appellant’s contention has merit to warrant favorable cause of
action against the defendants

HELD

No. There is absolutely no merit in this appeal. Appellant set forth and admitted in
his pleadings that in the resolution adopted by the board of directors authorizing
the sale at public auction of the land, as well as in the notice announcing the
auction, the appellees had expressly reserved to themselves the right to reject any
and all bids. By taking part in the auction and offering his bid, the appellant
voluntarily submitted to the terms and conditions of the auction sale, announced in
the notice, and clearly acknowledged the right so reserved to the appellees. The
appellees, making use of that right, rejected his offer. Clearly, the appellant has no
ground of action to compel them to execute a deed of sale of the land in his favor,
nor to compel them to accept his bid or offer.

QUESTION: What is the effect of express stipulation of advertiser’s right to reject

any or all bids?
During rejection, he cannot be compelled to execute or deliver the deed of sale of
the property in favor of the appealing bidder.

MANILA PRINCE HOTEL V. GSIS

GR: ART 1326 – Advertiser is not bound to accept the highest or lowest bidder.

FACTS:

The FiIipino First Policy enshrined in the 1987 Constitution, i.e., in the grant of
rights, privileges, and concessions covering the national economy and patrimony,
the State shall give preference to qualified Filipinos,1 is in oked by petitioner in its
bid to acquire 51% of the shares of the Manila Hotel Corporation (MHC) which owns
the historic Manila Hotel. Opposing, respondents maintain that the provision is not
self-executing but requires an implementing legislation for its enforcement.
Corollarily, they ask whether the 51% shares form part of the national economy
and patrimony covered by the protective mantle of the Constitution.

The controversy arose when respondent Government Service Insurance System

(GSIS), pursuant to the privatization program of the Philippine Government under
Proclamation No. 50 dated 8 December 1986, decided to sell through public bidding
30% to 51% of the issued and outstanding shares of respondent MHC. The winning
bidder, or the eventual "strategic partner," is to provide management expertise
and/or an international marketing/reservation system, and financial support to
strengthen the profitability and performance of the Manila Hotel.2 In a close bidding
held on 18 September 1995 only two (2) bidders participated: petitioner Manila
Prince Hotel Corporation, a Filipino corporation, which offered to buy 51% of the
MHC or 15,300,000 shares at P41.58 per share, and Renong Berhad, a Malaysian
firm, with ITT-Sheraton as its hotel operator, which bid for the same number of
shares at P44.00 per share, or P2.42 more than the bid of petitioner.

RULING:

Adhering to the doctrine of constitutional supremacy, the subject constitutional

provision is, as it should be, impliedly written in the bidding rules issued by
respondent GSIS, lest the bidding rules be nullified for being violative of the
Constitution. It is a basic principle in constitutional law that all laws and contracts
must conform with the fundamental law of the land. Those which violate the
Constitution lose their reason for being.

Paragraph V. J. 1 of the bidding rules provides that [if] for any reason the Highest
Bidder cannot be awarded the Block of Shares, GSIS may offer this to other
Qualified Bidders that have validly submitted bids provided that these Qualified
Bidders are willing to match the highest bid in terms of price per

share. 47 Certainly, the constitutional mandate itself is reason enough not to award
the block of shares immediately to the foreign bidder notwithstanding its
submission of a higher, or even the highest, bid. In fact, we cannot conceive of a
stronger reason than the constitutional injunction itself.

In the instant case, where a foreign firm submits the highest bid in a public bidding
concerning the grant of rights, privileges and concessions covering the national
economy and patrimony, thereby exceeding the bid of a Filipino, there is no
question that the Filipino will have to be allowed to match the bid of the foreign
entity. And if the Filipino matches the bid of a foreign firm the award should go to
the Filipino. It must be so if we are to give life and meaning to the Filipino First
Policy provision of the 1987 Constitution. For, while this may neither be expressly
stated nor contemplated in the bidding rules, the constitutional fiat is, omnipresent
to be simply disregarded. To ignore it would be to sanction a perilous skirting of the
basic law.

This Court does not discount the apprehension that this policy may discourage
foreign investors. But the Constitution and laws of the Philippines are understood to
be always open to public scrutiny. These are given factors which investors must
consider when venturing into business in a foreign jurisdiction. Any person
therefore desiring to do business in the Philippines or with any of its agencies or
instrumentalities is presumed to know his rights and obligations under the
Constitution and the laws of the forum.

The argument of respondents that petitioner is now estopped from questioning the
sale to Renong Berhad since petitioner was well aware from the beginning that a
foreigner could participate in the bidding is meritless. Undoubtedly, Filipinos and
foreigners alike were invited to the bidding. But foreigners may be awarded the sale
only if no Filipino qualifies, or if the qualified Filipino fails to match the highest bid
tendered by the foreign entity. In the case before us, while petitioner was already
preferred at the inception of the bidding because of the constitutional mandate,
petitioner had not yet matched the bid offered by Renong Berhad. Thus it did not
have the right or personality then to compel respondent GSIS to accept its earlier
bid. Rightly, only after it had matched the bid of the foreign firm and the apparent
disregard by respondent GSIS of petitioner's matching bid did the latter have a
cause of action.

Besides, there is no time frame for invoking the constitutional safeguard unless
perhaps the award has been finally made. To insist on selling the Manila Hotel to
foreigners when there is a Filipino group willing to match the bid of the foreign
group is to insist that government be treated as any other ordinary market player,
and bound by its mistakes or gross errors of judgment, regardless of the
consequences to the Filipino people. The miscomprehension of the Constitution is
regrettable. Thus we would rather remedy the indiscretion while there is still an
opportunity to do so than let the government develop the habit of forgetting that
the Constitution lays down the basic conditions and parameters for its actions.

Since petitioner has already matched the bid price tendered by Renong Berhad
pursuant to the bidding rules, respondent GSIS is left with no alternative but to
award to petitioner the block of shares of MHC and to execute the necessary
agreements and documents to effect the sale in accordance not only with the
bidding guidelines and procedures but with the Constitution as well. The refusal of
respondent GSIS to execute the corresponding documents with petitioner as
provided in the bidding rules after the latter has matched the bid of the Malaysian
firm clearly constitutes grave abuse of discretion.

The Filipino First Policy is a product of Philippine nationalism. It is embodied in the

1987 Constitution not merely to be used as a guideline for future legislation but
primarily to be enforced; so must it be enforced.

The Manila Hotel or, for that matter, 51% of the MHC, is not just any commodity to
be sold to the highest bidder solely for the sake of privatization. We are not talking
about an ordinary piece of property in a commercial district. We are talking about a
historic relic that has hosted many of the most important events in the short history
of the Philippines as a nation. We are talking about a hotel where heads of states
would prefer to be housed as a strong manifestation of their desire to cloak the
dignity of the highest state function to their official visits to the Philippines. Thus
the Manila Hotel has played and continues to play a significant role as an authentic
repository of twentieth century Philippine history and culture. In this sense, it has
become truly a reflection of the Filipino soul — a place with a history of grandeur; a
most historical setting that has played a part in the shaping of a country

WHEREFORE, respondents GOVERNMENT SERVICE INSURANCE SYSTEM,

MANILA HOTEL CORPORATION, COMMITTEE ON PRIVATIZATION and
OFFICE OF THE GOVERNMENT CORPORATE COUNSEL are directed to CEASE
and DESIST from selling 51% of the shares of the Manila Hotel Corporation
to RENONG BERHAD, and to ACCEPT the matching bid of petitioner MANILA
PRINCE HOTEL CORPORATION to purchase the subject 51% of the shares of the
Manila Hotel Corporation at P44.00 per share and thereafter to execute the
necessary clearances and to do such other acts and deeds as may be necessary for
purpose.
 JALANDONI V. NATIONAL RESETTLEMENT & REHABILITATION

FACTS:

In answer to the invitation to a public bidding, which was held on October 10, 1955,
issued by the National Resettlement and Rehabilitation Administration (NARRA), for
the plowing and harrowing of its projects in Wao, Lanao; Maramag, Bukidnon;
Tabugon and Cabanban, Negros Occidental; and Buluan, Cotabato, NARRA received
the following proposals:

Name of Bidder Offer for Total Cost of 1st and 2nd Plowing and 1st and 2nd
Harrowing

Wao, Lanao Maramag Tabugon Buluan, 3,000 has. Bukidnon &

1,000 has. 8,000 has. Cabanbanan, Cotabato 4,000 has.

1. George W. Bachelder None None None P95.00

2. Guevarra & Sons None None None P88.00

3. G. A. Machineries, &Engr. Co. Inc. P129.00 P118.00 None P117.00

4. Jaro Machineries, &Engr. Co. None P105.00 P105.00 None

5. Radiowealth Inc. None None None P103.30

With the favorable recommendation of the Committee on Bids, the Abstract of Bids
showing Jaro Machineries & Engineering Co. to be the sole bidder for the Tabugon
and Cabanbanan project and the lowest bidder for the Maramag project, was
forwarded to the NARRA Board of Directors for approval. In its special meeting of
October 27, 1955, however, the Board resolved to reject all the bids, for the reason
that the prices offered therein were too high. Later, apparently abandoning the plan
to give the work to private contractors, the Board decided to have the land-
preparation project undertaken by NARRA itself.

Claiming that the NARRA Board of Directors abused its discretion in rejecting its
bids, the Jaro Machineries & Engineering Co. protested to the President of the
Philippines. Considering the explanation given by the General Manager of the
NARRA, in connection with the aforementioned protest, the President denied the
same, as well as the alternative prayer of the Company that, as the NARRA
undertook the work in the projects subject of the bidding, it be awarded instead the
work on 9,000 hectares out of the 167,000 hectares to be opened by August or
October, 1956, under the same conditions of the bid previously rejected by the
NARRA. Its request for a reconsideration of the ruling of the President having been
denied, appellant Eduardo Jalandoni, proprietor and manager of the Jaro
Machineries & Engineering Co., filed with the Court of First Instance of Manila, an
action for damages with mandatory and prohibitory injunction against the NARRA
and the individual members of its Board of Directors, praying that he be awarded
the total sum of P200,000.00 representing unrealized profits, exemplary, nominal,
and moral damages, and attorney’s fees; that pending final disposition of the case,
defendants be compelled "to sign the contract of plowing and harrowing the land-
preparation projects of Maramag, Bukidnon, and Tabugon and Cabanbanan, Negros
Occidental" in his favor, and that defendants be restrained "from negotiating the
work of plowing and harrowing its land-preparation projects in the aforecited
projects to any other bidder to administer them."

Defendants filed a motion to dismiss the complaint, for lack of cause of action, on
the ground that in submitting the proposal, plaintiff voluntarily subjected himself to
the conditions of such public bidding, among which, is the right of NARRA to reject
any and all bids. And as the latter did reject all bids, including those of plaintiff, he
cannot now claim to have a cause of action against the NARRA. Furthermore,
defendants pointed out that plaintiff failed to comply with the prerequisite
conditions in said bidding, i.e., in connection with requirement No. 1 — that the
bidders submit a list of farm machinery and equipment they proposed to use,
plaintiff annotated in his proposal: "Two (2) D-4- present equipment will add as
soon as offer is accepted; with respect to the requirement of proof or financial
ability, plaintiff wrote: "Reference: P.N.B. certificate if offer is accepted."
Defendants contended that this deficiency made his proposal pro-forma. Over
plaintiff’s opposition, the court dismissed the case. Plaintiff appealed to the Court of
Appeals, but upon motion of defendants, the case was elevated to this Court
pursuant to Section 17 of Republic Act No. 296, as amended.

ISSUE: whether the lower court acted correctly in dismissing the complaint, without
setting the motion for hearing and allowing the parties to submit further evidence

RULING: NO. There is no doubt that by participating in the public bidding called by
the NARRA, plaintiff-appellant submitted himself (through the company owned by
him) to the conditions laid down by the former, 1 among which, is the reservation
of its right to reject any and all bids to be made therein. The wisdom of this saving
clause cannot be questioned. Under a statute requiring contracts to be awarded to
the lowest bidder, the authorities charged with the duty to make such award, acting
in good faith, may refuse to make the award, if they deem it best for the entity to
do so. 2 The discretion given to the authorities on this matter is of such wide
latitude that the courts will not interfere therewith, unless it is apparent that it is
issued as a shield to a fraudulent award. 3 There is, however, nothing of the sort in
the instant case. The rejection of the bids, including those of plaintiff-appellant, was
brought about by the alleged unreasonableness of the prices offered, as a direct
consequence of which, the Board decided to let the NARRA undertake the work
itself. We find nothing fraudulent of improper — and none has been shown — in the
Board’s desire to effect economy.

Neither can it be contended that the fact that appellant gave the lowest quotation,
which was favorably indorsed by the Committee on Bids, created a vested right in
favor of the said bidder. Admittedly, the offers were rejected by the Board of
Directors. It is clear, therefore, that there having been no meeting of the minds of
the parties, there was no perfected contract between them which could be the basis
of action against the defendants-appellees.

The presentation by a reliable and responsible bidder of the lowest bid to officials
whose duty it is to let the contract to the lowest reliable and responsible bidder, but
who have the right and have given notice that they reserve the right to reject any
and all bids, does not constitute an agreement that they will make a contract with
such a bidder, nor vest in him such an absolute right to the contract as against a
higher bidder (Colorado Paving Co. v. Murphy, [CCA 8th] 78 F. 28, 37 LRA (630.)

The mere determination of a public official or board to accept the proposal of a

bidder does not constitute a contract (Smithmeyer v. United States, 147 U.S. 342,
37 L. ed. 196, 13 S. Ct. 321); the decision must be communicated to the bidder
(Cedar Rapids Lumber Co. v. Fisher, 129 Iowa 332, 105 N.W. 595, 4 LRA [NS]
177.)

No contractual relation can arise merely from a bid, unless by the terms of the
statute and the advertisement, a bid in pursuance thereof is, as a matter of law, an
acceptance of an offer, wholly apart from any action on the part of the municipality
or any of its officers (Molloy v. Rochelle, supra.)

Considering that the aforementioned facts are averred in, and evident from the
complaint and the annexes thereto, and it appearing that the evidence plaintiff-
appellant would present, had a hearing been called for, would not have materially
affected or changed the foregoing facts, we find that the lower court committed no
error in dismissing the case. 4

In a memorandum filed by the amicus curiae, we are asked to make a ruling

clarifying the powers of a government corporation under Executive Order No. 298,
series of 1940, which requires public bidding for government contracts, to reject all
bids and then immediately negotiate to enter into contracts, claiming that such a
procedure could be a source of dishonesty and discrimination. Conscious of the
limitations on the exercise of the powers of this Court exclusively to matters
submitted to it for judicial adjudication, we must decline to express our views, and
reserve judgment until we are called upon to do so, on an appropriate case properly
coming before us. The facts of the instant case, as they appear in the pleading and
order of the lower court, do not present such a situation.

MARIO J. MENDEZONA ,et al,petitioners, versus JULIO H. OZAMIZ,et al,

respondents

February 6, 2002

Facts:

A suit was instituted on September 25, 1991 by the petitioner spouses Mario J.
Mendezona and Teresita M. Mendezona as initial plaintiff and in the amended
complaint filed on October 7, 1991, herein co-petitioner spouses Luis J. Mendezona
joined as co-plaintiff. In their compliant, the petitioners as plaintiff therein alleged
that petitioner spouses Mario J. Mendezona and Teresita M. Mendezona petitioner
spouses Luis J. Mendezona and Maricar Mendezona own a parcel of land each in
Lahug, Cebu city with similar areas 3462, 3466 and 3468 square meters covered
and described in TCT Nos 116834, 116835 and 116836. The petitioners ultimately
traced their titles of ownership over their respective properties from a deed of
Absolute Sale executed in their favor by Carmen Ozamiz and in consideration of P
1,040,000. It appears than on January 15, 1991, the respondents instituted the
petition for guardianship with RTC Oroquieta, City alleging that Carmen Ozamiz had
become disoriented and could not recognize most of her friends and could no longer
take care of her properties by reason pf weak mind and absentmindedness. As
guardians Roberto J. Montalvan and Julio H. Ozamiz filed on August 6, 1991 with
the guardianship court their Inventories and Accounts including the 10,369 square
meters Lahug property. Said Lahug property covered by deed of Absolute Sale
dated April 28, 1989 executed by Carmen Ozamiz in favor of petitioners. In their
Answer, respondents opposed the claim of ownership of the Lahug property and
alleged that the titles issued to the petitioners are defective and illegal and the
ownership of said properties was acquired in bad faith and without value inasmuch
as the consideration for the sale is grossly inadequate and unconscionable.
Respondents further alleged that on April 28, 1989 Carmen Ozamiz was already
ailing and not in full possession of her mental faculties; and that her properties
having been placed in administration, she was in effect incapacitated to contract
with petitioners. On September 23, 1992, the Trial court rendered decision in favor
of petitioners. On appeal the Court of Appeal reversed its decision and ruled that
the Absolute Sale dated April 28, 1989 was a simulated contract since the
petitioners failed to prove that the consideration was actually paid.
Issue:

Whether the court erred in ruling that the Deed of Absolute Sale dated April 28,
1989 was a simulated contract.

Held:

The Supreme Court ruled that the contact was not simulated. Contrary to the
erroneous conclusions of the appellate court, a simulated contract cannot be
inferred from the mere non production of checks. It was not the burden of the
petitioner to prove so. It is significant that the deed of Absolute Sale dated April 28,
1989 is a notarized document duly acknowledged before a notary public. As such, it
is in favor of presumption of regularity and it carries the evidentiary weight
conferred upon it with respect to its due execution. Moreover, A person is not
incapacitated to contact merely because of advanced years or by reason of physical
infirmities. Only when such age or infirmity impair her mental faculties to such
extent as to prevent her from properly, intelligently, and fairly protecting her
property rights is considered incapacitated.
 CULABA V. CA

FACTS:

The spouses Francisco and Demetria Culaba were the owners and proprietors of the
Culaba Store and were engaged in the sale and distribution of San Miguel
Corporation’s (SMC) beer products. SMC sold beer products on credit to the Culaba
spouses in the amount of P28,650.00, as evidenced by Temporary Credit Invoice
No. 42943.4 Thereafter, the Culaba spouses made a partial payment of P3,740.00,
leaving an unpaid balance of P24,910.00. As they failed to pay despite repeated
demands, SMC filed an action for collection of a sum of money against them before
the RTC of Makati, Branch 138.

The defendant-spouses denied any liability, claiming that they had already paid the
plaintiff in full on four separate occasions. To substantiate this claim, the
defendants presented four (4) Temporary Charge Sales (TCS) Liquidation Receipts.

Defendant Francisco Culaba testified that he made the foregoing payments to an

SMC supervisor who came in an SMC van. He was then showed a list of customers’
accountabilities which included his account. The defendant, in good faith, then paid
to the said supervisor, and he was, in turn, issued genuine SMC liquidation receipts.

For its part, SMC submitted a publisher’s affidavit9 to prove that the entire booklet
of TCSL Receipts bearing Nos. 27301-27350 were reported lost by it, and that it
caused the publication of the notice of loss in the July 9, 1983 issue of the Daily
Express.

After trial on the merits, the trial court rendered judgment in favor of SMC, and
held the Culaba spouses liable on the balance of its obligation.

According to the trial court, it was unusual that defendant Francisco Culaba forgot
the name of the collector to whom he made the payments and that he did not
require the said collector to print his name on the receipts. The court also noted
that although they were part of a single booklet, the TCS Liquidation Receipts
submitted by the defendants did not appear to have been issued in their natural
sequence. Furthermore, they were part of the lost booklet receipts, which the public
was duly warned of through the Notice of Loss the plaintiff caused to be published
in a daily newspaper. This confirmed the plaintiff’s claim that the receipts presented
by the defendants were spurious ones.

The Court of Appeals affirmed the decision of the trial court

ISSUE: WHETHER OR NOT RESPONDENT HAD PROVEN BY PREPONDERANT

EVIDENCE THAT PETITIONER WAS REMISS IN THE PAYMENT OF HIS ACCOUNTS TO
ITS AGENT
RULING: Payment is a mode of extinguishing an obligation. Article 1240 of the Civil
Code provides that payment shall be made to the person in whose favor the
obligation has been constituted, or his successor-in-interest, or any person
authorized to receive it. In this case, the payments were purportedly made to a
"supervisor" of the private respondent, who was clad in an SMC uniform and drove
an SMC van. He appeared to be authorized to accept payments as he showed a list
of customers’ accountabilities and even issued SMC liquidation receipts which
looked genuine. Unfortunately for petitioner Francisco Culaba, he did not ascertain
the identity and authority of the said supervisor, nor did he ask to be shown any
identification to prove that the latter was, indeed, an SMC supervisor. The
petitioners relied solely on the man’s representation that he was collecting
payments for SMC. Thus, the payments the petitioners claimed they made were not
the payments that discharged their obligation to the private respondent.

The basis of agency is representation.22 A person dealing with an agent is put upon
inquiry and must discover upon his peril the authority of the agent.23 In the instant
case, the petitioners’ loss could have been avoided if they had simply exercised due
diligence in ascertaining the identity of the person to whom they allegedly made the
payments. The fact that they were parting with valuable consideration should have
made them more circumspect in handling their business transactions. Persons
dealing with an assumed agent are bound at their peril to ascertain not only the
fact of agency but also the nature and extent of authority, and in case either is
controverted, the burden of proof is upon them to establish it.24 The petitioners in
this case failed to discharge this burden, considering that the private respondent
vehemently denied that the payments were accepted by it and were made to its
authorized representative.

Negligence is the omission to do something which a reasonable man, guided by

those considerations which ordinarily regulate the conduct of human affairs, would
do, or the doing of something, which a prudent and reasonable man would not do.
In the case at bar, the most prudent thing the petitioners should have done was to
ascertain the identity and authority of the person who collected their payments.
Failing this, the petitioners cannot claim that they acted in good faith when they
made such payments. Their claim therefor is negated by their negligence, and they
are bound by its consequences. Being negligent in this regard, the petitioners
cannot seek relief on the basis of a supposed agency
 KATIPUNAN V. KATIPUNAN

FACTS:

Facts:

Respondent Braulio Katipunan Jr. is the registered owner of a lot and a five-door
apartment constructed thereon, which were occupied by lessees. Respondent
assisted by his brother petitioner Miguel entered into a Deed of Absolute Sale with
brothers Edardo Balguma and Leopoldo Balguma, Jr. ( co-petitioners), represented
by their lawyer-father involving the subject property for a consideration of
P187,000.00. So, the title was registered in the names of the Balguma brothers and
they started collecting rentals thereon.

Later, Braulio filed a complaint for annulment of the Deed of Absolute Sale,
contending that his brother Miguel, Atty. Balguma and Inocencio Valdez ( one of the
petitioners) convinced him to work abroad. Through insidious words and
machinations, they made him sign a document purportedly a contract of
employment, which document turned out to be a Deed of Absolute Sale. He further
alleged that he did not receive the consideration stated in the contract. He claimed
that there was evident bad faith and conspiracy in taking advantage of his
ignorance, he being only a third grader.

The RTC dismissed the complaint because Braulio failed to prove his cause
of action since he admitted that he obtained loans from the Balgumas, he signed
the Deed of Absolute Sale, and he acknowledged selling the property and stopped
collecting the rentals. But when the case was elevated, the decision of RTC was
reversed and it was held that Braulio was incompetent, has very low I.Q., illiterate
and has a slow comprehension. The CA based its decision on Arts.1332 and 1390 of
NCC and Sec. 2, Rule 92 of the Rules of Court, concerning the incompetence of a
party in contract.

Issue:

Whether there was a valid contract of sale between the parties.

Held:

The Supreme Court found the petition devoid of merit. There was a vitiated consent
on the part of the respondent as he signed the Deed of Absolute Sale without the
remotest idea of what it was and received no consideration thereof. The contract
entered into by the parties being voidable contract, was correctly annulled on
appeal.

A contract of sale is born from the moment there is a meeting of minds

upon the thing which is the object of the contract and upon the price. This meeting
of minds speaks of the intent of the parties in entering the contract respecting the
subject matter and the consideration thereof. Thus, the elements of a contract of a
sale are consent, object, and price in money or its equivalent. Under Art. 1330 of
NCC, consent may be vitiated by any of the following: mistake, violence,
intimidation, undue influence, and fraud. The presence of any of these vices
renders the contract voidable.

A contract where one of the parties is incapable of giving consent or where consent
is vitiated by mistake, fraud, or intimidation is not void ab initio but only voidable
and is binding upon the parties unless annulled proper court action. The effect of
annulment is to restore the parties to the status quo ante insofar as legally and
equitably possible---this much is dictated by Art. 1398 provides that when the
defect of the contract consists in the incapacity of one of the parties, the
incapacitated person is not obliged to make any restitution, except when he has
been benefited by the things or price received by him. Thus, since the Deed of
Absolute Sale between respondent and Balguma brothers is voidable and hereby
annulled, then the restitution of the property and its fruits to respondent is just and
proper.
 TAN V. MANDAP

FACTS:

The respondents are the legitimate children of the marriage of Dionisio Mandap,
Sr., and Maria Contreras Mandap. When the Mandap spouses parted ways, their
children opted to stay with Maria. To help support the children, Maria filed Civil
Case No. E-02380 in the former Juvenile and Domestic Relations Court of Manila for
the dissolution and separation of the conjugal partnership.

Two separate lots, each with an area of 88 square meters covered by TCT Nos.
44730 and 55847, respectively, located in Felix Huertas Street, Sta. Cruz, Manila,
with improvements thereon, were adjudicated by the Juvenile and Domestic
Relations Court in favor of Dionisio Mandap, Sr.

Meanwhile, Dionisio Mandap, Sr., until his death on October 2, 1991 at age 64,
lived with Diorita Dojoles, with whom he had two children. He suffered from
diabetes since 1931, became totally blind in 1940, and was crippled for about 10
years until his death. However, before his death on May 25, 1989, he conveyed the
subject properties to his common-law wife’s sister, Elenita Dojoles Vasquez; and
her husband, Crispulo Vasquez. As a result of this sale, TCT Nos. 44730 and 55847
were cancelled and TCT Nos. 186748 and 186749 covering the subject properties
were issued in the name of Elenita Vasquez married to Crispulo Vasquez.

On September 11, 1989, the Vasquez spouses conveyed the parcel of land covered
by TCT No. 186748 in favor of petitioners. TCT No. 188862 covering the subject lot
was then issued in favor of the latter.

On September 5, 1989, prior to the sale to petitioners, the respondents filed an

action for cancellation of title with damages, before the RTC of Manila against
Diorita Dojoles and the Vasquez spouses, alleging that the sale of subject properties
by their father was fictitious, and without any consideration. Further, the consent of
their father was vitiated due to his physical infirmities. The action was docketed as
Civil Case No. 89-50263.

On February 15, 1991, respondents filed a supplemental complaint, this time

against the spouses Tan, for the nullification of the sale to the latter of subject lot.

On March 25, 1998, the trial court decided Civil Case No. 89-50263 in favor of the
herein respondents.

ISSUE: WHETHER OR NOT THE SALE BETWEEN MANDAP SR. AND THE VASQUEZES
IS VALID.
RULING: NO. At the time Dionisio Mandap, Sr., purportedly sold the lots in
question to the Vasquez spouses, he was already totally blind and paralyzed. He
could not possibly have read the contents of the deeds of sale. He could not have
consented to a contract whose terms he never knew nor understood. It cannot be
presumed Mandap, Sr., knew the contents of the deeds of sale disposing of his
properties. Article 1332 of the Civil Code is applicable in these circumstances, to
wit:

ART. 1332. When one of the parties is unable to read, or if the contract is in a
language not understood by him, and mistake or fraud is alleged, the person
enforcing the contract must show that the terms thereof have been fully explained
to the former.

As the party seeking to enforce the contract, the petitioners should have presented
evidence showing that the terms of the deeds of sale to the Vasquez spouses were
fully explained to Mandap, Sr. But petitioners failed to comply with the strict
requirements of Article 1332, thereby casting doubt on the alleged consent of the
vendor. Since the vendor in this case was totally blind and crippled at the time of
the sale, entirely dependent on outside support, every care to protect his interest
conformably with Article 24 of the Civil Code must be taken. Article 24 is clear on
this.

ART. 24. 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.

Petitioners presented no evidence disproving that (1) Mandap, Sr. was totally blind
and suffering from acute diabetes such that he could no longer discern the legal
consequences of his acts, and (2) that undue influence was exerted upon him,
which vitiated his consent.

It is true that he who alleges a fact bears the burden of proving it. However, since
fraud and undue influence are alleged by respondents, the burden shifts8 to
petitioners to prove that the contents of the contract were fully explained to
Mandap, Sr. Nothing, however, appears on record to show that this requirement
was complied with. Thus, the presumption of fraud and undue influence was not
rebutted.

More important, evidence on record, in our view, prove the existence of fraud. On
August 1, 1990, commissioners appointed by the lower court conducted an ocular
inspection concerning the physical condition of Mandap, Sr. He stated on that
occasion that he received ₱550,000 as first payment, another ₱550,000 as second
payment, and ₱1,550,000 the remaining balance of the total selling price of what
was loaned to the vendees. However, in the deeds of sale covering the subject
properties, the prices indicated were ₱250,000 and ₱320,000, respectively or a
total of only ₱570,000. This inconsistency in the amount of the consideration is
unexplained. They point to fraud in the sale of the subject properties, to the
prejudice of Mandap, Sr.

Petitioners do not dispute the fact that the notary public who notarized the deeds of
sale was not duly commissioned. But they contend the deeds’ validity were not
affected. However, it bears stressing that even an apparently valid notarization of a
document does not guarantee its validity.9 The crucial point here is that while
Mandap, Sr., testified that he executed the deeds of sale in Las Piñas, the said
documents were actually notarized in Manila. Mandap, Sr., did not personally
appear before a notary public. Yet the documents stated the contrary. Such falsity
raises doubt regarding the genuineness of the vendor’s alleged consent to the
deeds of sale.

Petitioners also claim the purchase price was not grossly inadequate so as to
invalidate the sale of subject properties. True, mere inadequacy of the price does
not necessarily void a contract of sale. However, said inadequacy may indicate that
there was a defect in the vendor’s consent.10 More important, it must be pointed
out that the trial court and the Court of Appeals voided the sale of the subject
properties not because the price was grossly inadequate, but because the
presumptions of fraud and undue influence exerted upon the vendor had not been
overcome by petitioners, the parties interested in enforcing the contract.
 CATALAN V. BASA

FACTS: On October 20, 1948, FELICIANO CATALAN (Feliciano) was discharged from
active military service. The Board of Medical Officers of the Department of Veteran
Affairs found that he was unfit to render military service due to his “schizophrenic
reaction, catatonic type, which incapacitates him because of flattening of mood and
affect, preoccupation with worries, withdrawal, and sparce (sic) and pointless
speech.”

On September 28, 1949, Feliciano married Corazon Cerezo.

On June 16, 1951, a document was executed, titled “Absolute Deed of Donation,
Feliciano allegedly donated to his sister MERCEDES CATALAN (Mercedes) one-half
of the real property (A parcel of land located at Barangay Basing, Binmaley,
Pangasinan) The donation was registered with the Register of Deeds.

On December 11, 1953, People’s Bank and Trust Company (presently BPI) filed
Special Proceedings No. 4563 to CFI of Pangasinan to declare Feliciano
incompetent.

On December 22, 1953, the trial court issued its Order for Adjudication of
Incompetency for Appointing Guardian for the Estate and Fixing Allowance of
Feliciano. The following day, the trial court appointed People’s Bank and Trust
Company as Feliciano’s guardian

OTHER DONATIONS MADE by Feliciano and Corazon

-November 22, 1978, donated Lots 1 and 3 to their son Eulogio Catalan, registered
under Original Certificate of Title (OCT) No. 18920,

-March 26, 1979, Mercedes sold the property in issue in favor of her children Delia
and Jesus Basa. Deed of Absolute Sale was registered with the Register of Deeds of
Pangasinan on February 20, 1992, and Tax Declaration No. 12911 was issued in the
name of respondents.[11]

-June 24, 1983, donated Lot 2 of the aforementioned property registered under
OCT No. 18920 to their children Alex Catalan, Librada Catalan and Zenaida Catalan.

-February 14, 1983, donated Lot 4 (Plan Psu-215956) of the same OCT No. 18920
to Eulogio and Florida Catalan.

-April 1, 1997, BPI, acting as Feliciano’s guardian, filed a case for Declaration of
Nullity of Documents, Recovery of Possession and Ownership, as well as damages
against respondents. BPI alleged that the Deed of Absolute Donation to Mercedes
was void ab initio, as Feliciano never donated the property to Mercedes.
-BPI averred even if Feliciano really intended to give the property, the donation
would still be void, as he was not of sound mind and incapable of giving valid
consent.

-If the Deed of Absolute Donation was void ab initio, the subsequent Deed of
Absolute Sale to Delia and Jesus Basa should likewise be nullified, Mercedes Catalan
had no right to sell the property to anyone.

-August 14, 1997, Feliciano passed away. The original complaint was amended to
substitute his heirs in lieu of BPI as complainants in Civil Case No. 17666.

-RTC DIDMISSED PLAINTIFF’s COMPLAINT- evidence was insufficient to overcome

the presumption that Feliciano was sane and competent at the time he executed
the deed of donation in favor of Mercedes Catalan. RTC held: the presumption of
sanity or competency not having been duly impugned, the presumption of due
execution of the donation in question must be upheld

- Declaring the defendants Jesus Basa and Delia Basa the lawful owners of the land
in question which is now declared in their names under Tax Declaration No. 12911

-CA AFFIRMED the decision of RTC (Mercedes Catalan acquired valid title of
ownership over the property in dispute. By virtue of her ownership, the property is
completely subjected to her will in everything not prohibited by law of the
concurrence with the rights of others (Art. 428, NCC))

ISSUE: WON CA has decided the case in a way probably not in accord with law, in
holding that “the RTC did not NOT COMMIT A REVERSIBLE ERROR IN DISPOSING
THAT PLAINTIFF-APPELLANTS (PETITIONERS) FAILED TO PROVE THE INSANITY OR
MENTAL INCAPACITY OF THE LATE FELICIANO CATALAN AT THE PRECISE MOMENT
WHEN THE PROPERTY IN DISPUTE WAS DONATED”

Contention of PETIONERS: Presumption of Feliciano’s competence to donate

property to Mercedes had been rebutted because they presented more than the
requisite preponderance of evidence.

1. Certificate of Disability for the Discharge of Feliciano Catalan issued on

October 20, 1948 by the Board of Medical Officers of the Department of Veteran
Affairs.

2. December 22, 1953, Feliciano was judged an incompetent by the Court of

First Instance of Pangasinan, and put under the guardianship of BPI.

-Petitioners conclude that Feliciano had been suffering from a mental condition
since 1948 which incapacitated him from entering into any contract thereafter, until
his death on August 14, 1997.
-Feliciano’s marriage to Corazon Cerezo on September 28, 1948 does not prove
that he was not insane at the time he made the questioned donation.

-donations Feliciano executed in favor of his successors also cannot prove his
competency because these donations were approved and confirmed in the
guardianship proceedings.

-Ded of Absolute Sale executed on March 26, 1979 by Mercedes Catalan and her
children Jesus and Delia Basa is simulated and fictitious because the document was
registered only on February 20, 1992, more that 10 years after Mercedes Catalan
had already died. Delia Basa and Jesus Basa both knew that Feliciano was
incompetent to enter into any contract, they cannot claim to be innocent
purchasers of the property in question

-Petitioners assert that their case is not barred by prescription or laches under
Article 1391 of the New Civil Code because they had filed their case on April 1,
1997, even before the four year period after Feliciano’s death on August 14, 1997
had begun.

Contention of BASA:

Held: SC: Petition has NO MERIT and AFFIRMS decision of CA and RTC; evidence
presented by the petitioners was insufficient to overcome the presumption that
Feliciano was competent when he donated the property in question to Mercedes.

Ddonation is an act of liberality whereby a person disposes gratuitously a thing or

right in favor of another, who accepts it; an agreement of the parties is essential.
Consent in contracts presupposes the following requisites: (1) it should be
intelligent or with an exact notion of the matter to which it refers; (2) it should be
free; and (3) it should be spontaneous. Parties' intention must be clear and the
attendance of a vice of consent, like any contract, renders the donation voidable.

In order for donation of property to be valid, what is crucial is the donor’s capacity
to give consent at the time of the donation. Certainly, there lies no doubt in the fact
that insanity impinges on consent freely given. However, the burden of proving
such incapacity rests upon the person who alleges it; if no sufficient proof to this
effect is presented, capacity will be presumed.

A study of the nature of schizophrenia will show that Feliciano could still be
presumed capable of attending to his property rights.

-In persons with schizophrenia, there is a gradual onset of symptoms, with

symptoms becoming increasingly bizarre as the disease progresses. The condition
improves (remission or residual stage) and worsens (relapses) in cycles.
Administration of the correct medicine helps the patient. Schizophrenia can result in
a dementing illness similar in many aspects to Alzheimer’s disease. the illness will
wax and wane over many years, with only very slow deterioration of intellect.

-A person suffering from schizophrenia does not necessarily lose his competence to
intelligently dispose his property. Alleging the existence of schizophrenia,
petitioners failed to show substantial proof that at the date of the donation, June
16, 1951, Feliciano Catalan had lost total control of his mental faculties.

-RTC correctly held that Feliciano was of sound mind at that time and that this
condition continued to exist until proof to the contrary was adduced. Sufficient
proof of his infirmity to give consent to contracts was only established when the CFI
of Pangasinan declared him an incompetent on December 22, 1953.

-Petitioners questioned Feliciano’s capacity at the time he donated the property but
not when he married Corazon Cerezo or when he donated in their favor.
Presumption that Feliciano remained competent to execute contracts, despite his
illness, is bolstered by the existence of these other contracts.
 DELA CRUZ V. DELA CRUZ G.R. No. 146222 January 15, 2004

FACTS:

Paciencia dela Cruz, the original plaintiff in Civil Case No. 37-M-89, was the owner
of a parcel of land with an area of two (2) ares4 and ninety (90) centares,5 located
at Lolomboy, Bocaue, Bulacan. Said parcel was registered in her name under
Transfer Certificate of Title (TCT) No. T-14.585 (M). A flea market (talipapa) with
fifty or so vendors was located on the property and Paciencia collected from them
their daily stall rentals. Paciencia had six (6) children, namely Priscilla, Erlinda,
Fortunato, Flora, Angelita and Zenaida, all surnamed dela Cruz.

On September 25, 1980, Paciencia allegedly executed a Deed of Sale whereby for
and in consideration of ₱21,000, she conveyed said parcel in favor of her son,
Fortunato dela Cruz.6 On November 26, 1980, the Register of Deeds of Bulacan
issued TCT No. T-34.723 (M) in Fortunato’s name.7 Fortunato declared the property
for taxation purposes and paid realty taxes due thereon.8 Sometime between
August 1985 to September 1988, Fortunato mortgaged the property three (3) times
to one Erlinda de Guzman for the sums of ₱25,000, ₱50,000 and ₱100,000.9
Fortunato was unable to pay these loans.

On January 11, 1989, Fortunato executed a "Kasulatan ng Bilihang Patuluyan"10 in

favor of Clark and Divina Gutierrez, the children of Claudio and Adoracion Gutierrez,
to whom he earlier offered to sell the property. The Kasulatan alleged the purchase
price to be ₱58,000 only but the amount actually paid by the Gutierrezes to
Fortunato was ₱600,000 as evidenced by a receipt showing the true consideration
for the sale.11 That same day, the sale was registered, leading to the cancellation
of TCT No. T-34.723 (M) in the name of Fortunato. Seven days later, a new
certificate of title, TCT No. T-101011 (M) was issued in the name of Clark and
Divina Gutierrez. Thereafter, the Gutierrezes took possession of the property, had
the talipapa repaired, and collected the daily stall rentals from the vendors.

On January 20, 1989, Paciencia instituted an action for reconveyance of property

with preliminary injunction against Fortunato and the spouses Claudio and
Adoracion Gutierrez, before the RTC of Malolos, Bulacan, which docketed the
complaint as Civil Case No. 37-M-89.

On February 8, 1989, the Complaint was amended to implead Clark and Divina
Gutierrez, the children of spouses Claudio and Adoracion Gutierrez, as defendants
who had the subject property titled in their names.

In her Complaint, Paciencia alleged that sometime in 1980, her son Fortunato, took
advantage of his close ties with her to induce her to sign an instrument which
appeared to be a Deed of Sale. Paciencia alleged that Fortunato assured her that
she would remain the owner thereof while Fortunato would hold the property in
trust for her and upon her death, all her children would share in the property.
Fortunato allegedly did not pay her any consideration for such sale. She also
claimed that she continued to collect the daily stall rentals from the talipapa tenants
until sometime in 1986 when she fell ill and had to be hospitalized. As a result,
Fortunato took over the collection of the rentals. After Paciencia had recovered, she
sought to resume collecting the daily rentals but upon the plea of Fortunato who
had no means of income at that time, Paciencia allowed him to continue collecting
the stall rentals. Fortunato, however, was remiss in remitting the daily collections to
Paciencia.

Sometime in December 1988, Paciencia was shocked to learn that Fortunato was
offering the property for sale. She then demanded that the property be reconveyed
to her but Fortunato refused to do so. Meanwhile upon learning that Fortunato was
negotiating the sale of the land with the Gutierrez spouses, Paciencia sent her
daughter, Erlinda dela Cruz, to warn them that Paciencia owned the property, and
not Fortunato. However, the Gutierrez couple insisted on buying the property and
registered the same in favor of their children, Divina and Clark Gutierrez.
Consequently, the Gutierrezes took over the collection of stall rentals from the
tenants of the subject property.

In sum, Paciencia alleged that the sale of the property to the Gutierrezes was null
and void and fraudulently made as Fortunato had neither right nor authority from
her to sell or convey the subject property, as he only held it in trust for her.

In his Answer, Fortunato averred that he lawfully acquired the subject property
from Paciencia, who absolutely conveyed the same to him, delivered to him the
owner’s duplicate of the title, and upon her instructions, caused the registration of
the property in his name.

For their part, Clark and Divina Gutierrez alleged that: (1) the subject property was
titled in the name of Fortunato dela Cruz; (2) Fortunato was also the one collecting
the daily rentals from the market vendors; (3) Fortunato feared he would lose the
property due to his inability to pay his mortgage indebtedness to Erlinda de
Guzman; and (4) he pleaded with them to help him, as a result of which they
turned to their parents who withdrew their lifetime savings just to be able to buy
the property. Clark and Divina likewise alleged that Fortunato disclosed to them
that Paciencia herself did not like this instant suit as she had already given to all
her children her properties through similar transfers.

ISSUE:
1. whether the Deed of Absolute Sale executed by the mother, Paciencia dela Cruz,
in favor of her son – respondent Fortunato dela Cruz – is simulated and must be
declared void.

2.whether the Gutierrezes were buyers in good faith

RULING:

1. NO. We find for respondents. Petitioners’ arguments are less than persuasive, to
say the least. As a rule, when the terms of a contract are clear and unambiguous as
to the intention of the contracting parties, the literal meaning of its stipulations
shall control. It is only when the words appear to contravene the evident intention
of the parties that the latter shall prevail over the former. The real nature of a
contract may be determined from the express terms of the agreement and from the
contemporaneous and subsequent acts of the parties thereto.16 When they have no
intention to be bound at all, the purported contract is absolutely simulated and
void. Hence, the parties may recover what they gave under the simulated contract.
If, on the other hand, the parties state a false cause in the contract to conceal their
real agreement, the contract is relatively simulated and the parties’ real agreement
may be held binding between them.17

In the present case, it is not disputed that Paciencia dela Cruz executed a Deed of
Sale in favor of her son, respondent Fortunato dela Cruz. However, petitioners
insist that the said document does not reflect the true intention and agreement of
the parties. According to petitioners, Fortunato was to merely hold the property in
trust for their mother and that ownership thereof would remain with the mother.
Petitioners, however, failed to produce even one credible witness who could
categorically testify that such was the intent of Paciencia and Fortunato. There is
nothing on record to support sufficiently petitioners’ contention. Instead, the
evidence is unclear on whether Paciencia in her lifetime, or later the petitioners
themselves, actually asserted or attempted to assert rights of ownership over the
subject property after the alleged sale thereof to Fortunato. The lot in dispute was
thrice mortgaged by Fortunato with nary a protest or complaint from petitioners.
When they learned that Fortunato mortgaged the property to Erlinda de Guzman on
three occasions: August 26, 1985, April 6, 1987 and September 7, 1988, they
refused to redeem the property. They reasoned that if they would redeem the
property and pay the debts of Fortunato, the property would merely return to
him.18 Indeed, how could Fortunato have thrice obtained a mortgage over the
property, without having dominion over it? Fortunato declared the property in his
name for taxation purposes and paid the realty taxes, without any protest from
Paciencia or petitioners. His actions are contrary to petitioners’ allegation that the
parties never intended to be bound by the assailed contract. Tax receipts and
declaration of ownership for taxation purposes are strong evidence of ownership. It
has been ruled that although tax declarations or realty tax payments are not
conclusive evidence of ownership, nevertheless, they are good indicia of possession
in the concept of owner for no one in his right mind will be paying taxes for a
property that is not in his actual or constructive possession.19

As the Court of Appeals well observed, for nine (9) years, Paciencia allowed
Fortunato to benefit from the property.1âwphi1 It was only when she learned of its
impending sale to the Gutierrez spouses, that she took action to forestall the
transfer of the property to a third person. She then caused the annotation of her
adverse claim on the certificate of title on the same day the deed in favor of the
Gutierrez children was registered. This was rather belated, for the deed was already
done.

Petitioners harp on the fact that the assailed Deed was in English and that it was
not explained to Paciencia. But we find that the petitioners failed to prove their
allegation that Pacencia could not speak, read, or understand English. Moreover,
Paciencia’s bare testimony20 on this point is uncorroborated. For Article 1332 to
apply, it must first be convincingly established that the illiterate or disadvantaged
party could not read or understand the language in which the contract was
written,21 or that the contract was left unexplained to said party. Petitioners failed
to discharge this burden.

The Deed of Absolute Sale dated September 25, 1980 was duly acknowledged
before a notary public. As a notarized document, it has in its favor the presumption
of regularity and it carries the evidentiary weight conferred upon it with respect to
its due execution. It is admissible in evidence without further proof of its
authenticity and is entitled to full faith and credit upon its face.

2. YES. when Fortunato executed the "Kasulatan ng Bilihang Patuluyan" on January

11, 1989 in favor of respondents Clark and Divina Gutierrez, the name of the
registered owner appearing in the certificate of title was that of Fortunato dela
Cruz. This Kasulatan was duly executed and acknowledged before a notary public.
At the time of its execution, there was no annotation on Fortunato’s certificate of
title to indicate any adverse claim of any third person. Only two cautionary entries
regarding Section 4,23 Rule 74 of the Rules of Court appear thereon. Nothing more
substantial appears in the certificate of title to indicate a scintilla of flaw or defect in
Fortunato’s title. Hence, we cannot fairly rule that in relying upon said title, the
respondent Gutierrezes were in bad faith. A person dealing with registered land
may safely rely upon the correctness of the certificate of title issued therefor and
the law will in no way oblige him to go behind the certificate to determine the
condition of the property. The law considers said person as an innocent purchaser
for value. An innocent purchaser for value is one who buys the property of another,
without notice that some other person has a right or interest in such property and
pays the full price for the same, at the time of such purchase or before he has
notice of the claims or interest of some other person in the property.

We note, furthermore, that the Gutierrezes did not simply rely upon the face of
Fortunato’s Certificate of Title to the property. They also employed the services of
counsel Atty. Crisanta Abarrientos, who verified the title with the Registry of Deeds.
Thus, they took all the necessary precautions to ascertain the true ownership of the
property, even engaging the services of legal counsel for that specific purpose, and
it was only after said counsel assured them that everything was in order did they
finalize the arrangements to purchase the property. Hence, we entertain no doubt
that the respondent Gutierrezes were purchasers for value and in good faith.
 PNOC AND PNOC DOCKYARD AND ENG’G CORP V. KEPPEL INC

FACTS:

Almost 40 years ago or on 6 August 1976, the respondent Keppel Philippines

Holdings, Inc.4 (Keppel) entered into a lease agreement5 (the agreement) with
Luzon Stevedoring Corporation (Lusteveco) covering 11 hectares of land located in
Bauan, Batangas. The lease was for a period of 25 years for a consideration of P2.1
million.6 At the option of Lusteveco, the rental fee could be totally or partially
converted into equity shares in Keppel.7chanrobleslaw

At the end of the 25-year Jease period, Keppel was given the "firm and absolute
option to purchase8the land for P4.09 million, provided that it had acquired
the necessary qualification to own land under Philippine laws at the time
the option is exercised.9 Apparently, when the lease agreement was executed,
less than 60% of Keppel's shareholding was Filipino-owned, hence, it was not
constitutionally qualified to acquire private lands in the country.10chanrobleslaw

If, at the end of the 25-year lease period (or in 2001), Keppel remained unqualified
to own private lands, the agreement provided that the lease would be automatically
renewed for another 25 years.11 Keppel was further allowed to exercise the option
to purchase the land up to the 30th year of the lease (or in 2006), also on the
condition that, by then, it would have acquired the requisite qualification to own
land in the Philippines.12chanrobleslaw

Together with Keppel's lease rights and option to purchase, Lusteveco warranted
not to sell the land or assign its rights to the land for the duration of the lease
unless with the prior written consent of Keppel.13 Accordingly, when the petitioner
Philippine National Oil Corporation14 (PNOC) acquired the land from Lusteveco and
took over the rights and obligations under the agreement, Keppel did not object to
the assignment so long as the agreement was annotated on PNOC's title.15 With
PNOC's consent and cooperation, the agreement was recorded as Entry No. 65340
on PNOC's Transfer of Certificate of Title No. T-50724

ISSUE:

1. whether the option to purchase the land given to Keppel is supported by a

separate valuable consideration.
2. whether Keppel's equity ownership meets the 60% Filipino-owned capital
requirement of trie Constitution, in accordance with the Court's ruling
in Gamboa v. Teves

RULING:
 1. The validity of the option contract

II.A An option contract must be supported by a separate consideration

that is either clearly specified as such in the contract or duly proven
by the offeree/promisee.
An option contract is defined in the second paragraph of Article 1479 of the Civil
Code:ChanRoblesVirtualawlibrary

Article 14791 x x x An accepted promise to buy or to sell a determinate thing for a

price certain is binding upon the promissor if the promise is supported by a
consideration distinct from the price.
An option contract is a contract where one person (the offeror/promissor) grants
to another person (the offeree/promisee) the right or privilege to buy (or to sell) a
determinate thing at a fixed price, if he or she chooses to do so within an agreed
period.59chanrobleslaw

As a contract, it must necessarily have the essential elements of subject matter,

consent, and consideration.60 Although an option contract is deemed a preparatory
contract to the principal contract of sale,61 it is separate and distinct
therefrom,62 thus, its essential elements should be distinguished from those of a
sale.63chanrobleslaw

In an option contract, the subject matter is the right or privilege to buy (or to
sell) a determinate thing for a price certain,64 while in a sales contract, the subject
matter is the determinate thing itself.65 The consent in an option contract is the
acceptance by the offeree of the offerer's promise to sell (or to buy)the determinate
thing, i.e., the offeree agrees to hold the right or privilege to buy (or to sell) within
a specified period. This acceptance is different from the acceptance of the offer
itself whereby the offeree asserts his or her right or privilege to buy (or to sell),
which constitutes as his or her consent to the sales contract. The consideration in
an option contract may be anything of value, unlike in a sale where the purchase
price must be in money or its equivalent.66 There is sufficient consideration for a
promise if there is any benefit to the offeree or any detriment to the
offeror.67chanrobleslaw

In the present case, PNOC claims the option contract is void for want of
consideration distinct from the purchase price for the land.68 The option is
incorporated as paragraph 5 of the Agreement and reads as

5. If within the period of the first [25] years [Keppel] becomes qualified to own land
under the laws of the Philippines, it has the firm and absolute option to purchase
the above property for a total price of [P-4,090,000.00] at the end of the 25th
year, discounted at 16% annual for every year before the end of the 25th year,
which amount may be converted into equity of [Keppel] at book value prevailing at
the time of sale, or paid in cash at Lusteveco's option.

However, if after the first [25] years, [Keppel] is still not qualified to own land
under the laws of the Republic of the Philippines, [Keppel's] lease of the above
stated property shall be automatically renewed for another [25] years, under the
same terms and conditions save for the rental price which shall be for the sum of
P4,090,000.00... and which sum may be totally converted into equity of [Keppel] at
book value prevailing at the time of conversion, or paid in cash at Lusteveco's
option.

If anytime within the second [25] years up to the [30th] year from the date of this
agreement, [Keppel] becomes qualified to own land under the laws of the Republic
of the Philippines, [Keppel] has the firm and absolute option to buy and Lusteveco
hereby undertakes to sell the above stated property for the nominal consideration
of [P100.00.00]...69
Keppel counters that a separate consideration is not necessary to support its option
to buy because the option is one of the stipulations of the lease contract. It claims
that a separate consideration is required only when an option to buy is embodied in
an independent contract.70 It relies on Vda. de Quirino v. Palarca,71 where the Court
declared that the option to buy the leased property is supported by the same
consideration as that of the lease itself: "in reciprocal contracts [such as lease], the
obligation or promise of each party is the consideration for that of the
other.72chanrobleslaw

In considering Keppel's submission, we note that the Court's ruling in 1969 in Vda.
de Quirino v. Palarcahas been taken out of context and erroneously applied in
subsequent cases. In 2004, through Bible Baptist Church v. CA73 we revisited Vda.
de Quirino v. Palarca and observed that the option to buy given to the lessee
Palarca by the lessor Quirino was in fact supported by a separate consideration:
Palarca paid a higher amount of rent and, in the event that he does not exercise the
option to buy the leased property, gave Quirino the option to buy the improvements
he introduced thereon. These additional concessions were separate from the
purchase price and deemed by the Court as sufficient consideration to support the
option contract.

Vda. de Quirino v. Palarca, therefore, should not be regarded as authority that the
mere inclusion of an option contract in a reciprocal lease contract provides it with
the requisite separate consideration for its validity. The reciprocal contract
should be closely scrutinized and assessed whether it contains additional
concessions that the parties intended to constitute as a consideration for
the option contract, separate from that of the purchase price.

In the present case, paragraph 5 of the agreement provided that should Keppel
exercise its option to buy, Lusteveco could opt to convert the purchase price into
equity in Keppel. May Lusteveco's option to convert the price for shares be deemed
as a sufficient separate consideration for Keppel's option to buy?

As earlier mentioned, the consideration for an option contract does not need to be
monetary and may be anything of value.74 However, when the consideration is
not monetary, the consideration must be clearly specified as such in the
option contract or clause.75chanrobleslaw
In Villamor v. CA,76 the parties executed a deed expressly acknowledging that the
purchase price of P70.00 per square meter "was greatly higher than the actual
reasonable prevailing value of lands in that place at that time."77 The difference
between the purchase price and the prevailing value constituted as the
consideration for the option contract. Although the actual amount of the
consideration was not stated, it was ascertainable from the contract whose terms
evinced the parties' intent to constitute this amount as consideration for the option
contract.78 Thus, the Court upheld the validity of the option contract.79 In the light
of the offeree's acceptance of the option, the Court further declared that a bilateral
contract to sell and buy was created and that the parties' respective obligations
became reciprocally demandable.80chanrobleslaw

When the written agreement itself does not state the consideration for the
option contract, the offeree or promisee bears the burden of proving the
existence of a separate consideration for the option.81 The offeree cannot rely
on Article 1354 of the Civil Code,82 which presumes the existence of consideration,
since Article 1479 of the Civil Code is a specific provision on option contracts that
explicitly requires the existence of a consideration distinct from the purchase
price.83chanrobleslaw

In the present case, none of the above rules were observed. We find nothing in
paragraph 5 of the Agreement indicating that the grant to Lusteveco of the option
to convert the purchase price for Keppel shares was intended by the parties as the
consideration for Keppel's option to buy the land; Keppel itself as the offeree
presented no evidence to support this finding. On the contrary, the option to
convert the purchase price for shares should be deemed part of the consideration
for the contract of sale itself, since the shares are merely an alternative to the
actual cash price.

There are, however cases where, despite the absence of an express intent in the
parties' agreements, the Court considered the additional concessions stipulated in
an agreement to constitute a sufficient separate consideration for the option
contract.

In Teodoro v. CA,84 the sub-lessee (Teodoro) who was given the option to buy the
land assumed .the obligation to pay not only her rent as sub-lessee, but also the
rent of the sub-lessor (Ariola) to the primary lessor (Manila Railroad Company).85 In
other words, Teodoro paid an amount over and above the amount due for her own
occupation of the property, and this amount was found by the Court as sufficient
consideration for the option contract.86chanrobleslaw

In Dijamco v. CA,87 the spouses Dijamco failed to pay their loan with the bank,
allowing the latter to foreclose the mortgage.88 Since the spouses Dijamco did not
exercise their right to redeem, the bank consolidated its ownership over the
mortgaged property.89 The spouses Dijamco later proposed to purchase the same
property by paying a purchase price of P622,095.00 (equivalent to their principal
loan) and a monthly amount of P13,478.00 payable for 12 months (equivalent to
the interest on their principal loan). They further stated that should they fail to
make a monthly payment, the proposal should be automatically revoked and all
payments be treated as rentals for their continued use of the property.90 The Court
treated the spouses Dijamco's proposal to purchase the property as an option
contract, and the consideration for which was the monthly interest
payments.91 Interestingly, this ruling was made despite the categorical stipulation
that the monthly interest payments should be treated as rent for the spouses
Dijamco's continued possession and use of the foreclosed property.

At the other end of the jurisprudential spectrum are cases where the Court refused
to consider the additional concessions stipulated in agreements as separate
consideration for the option contract.

In Bible Baptist Church v. CA,92 the lessee (Bible Baptist Church) paid in advance
P84,000.00 to the lessor in order to free the property from an encumbrance. The
lessee claimed that the advance payment constituted as the separate consideration
for its option to buy the property.93 The Court, however, disagreed noting that the
P84,000.00 paid in advance was eventually offset against the rent due for the first
year of the lease, "such that for the entire year from 1985 to 1986 the [Bible
Baptist Church] did not pay monthly rent."94 Hence, the Court refused to recognize
the existence of a valid option contract.95chanrobleslaw

What Teodoro, Dijamco, and Bible Baptist Church show is that the determination of
whether the additional concessions in agreements are sufficient to support an
option contract, is fraught with danger; in ascertaining the parties' intent on this
matter, a court may read too much or too little from the facts before it.

For uniformity and consistency in contract interpretation, the better rule to follow is
that the consideration for the option contract should be clearly specified as
such in the option contract or clause. Otherwise, the offeree must bear the
burden of proving that a separate consideration for the option contract
exists.

Given our finding that the Agreement did not categorically refer to any
consideration to support Keppel's option to buy and for Keppel's failure to present
evidence in this regard, we cannot uphold the existence of an option contract in this
case.

II. An option, though unsupported by a separate consideration, remains

B. an offer that, if duly accepted, generates into a contract to sell where
the parties' respective obligations become reciprocally demandable
The absence of a consideration supporting the option contract, however, does not
invalidate an offer to buy (or to sell). An option unsupported by a separate
consideration stands as an unaccepted offer to buy (or to sell) which,
when properly accepted, ripens into a contract to sell. This is the rule
established by the Court en banc as early as 1958 in Atkins v. Cua Hian Tek,96 and
upheld in 1972 in Sanchez v. Rigos.97chanrobleslaw
Sanchez v. Rigos reconciled the apparent conflict between Articles 1324 and 1479
of the Civil Code, which are quoted below:ChanRoblesVirtualawlibrary

Article 1324. When the offerer has allowed the offeree a certain period to accept,
the offer may be withdrawn at any time before acceptance by communicating such
withdrawal, except when the option is founded upon a consideration, as
something paid or promised.

Article 1479. A promise to buy and sell a determinate thing for a price certain is
reciprocally demandable.
An accepted unilateral promise to buy or to sell a determinate thing for a
price certain is binding upon the promissor if the promise is supported by a
consideration distinct from the price, [emphases supplied]
The Court en banc declared that there is no distinction between these two
provisions because the scenario contemplated in the second paragraph of

Article 1479 is the same as that in the last clause of Article 1324.98 Instead of
finding a conflict, Sanchez v. Rigos harmonised the two provisions, consistent with
the established rules of statutory construction.99chanrobleslaw

Thus, when an offer is supported by a separate consideration, a valid

option contract exists, i.e., there is a contracted offer100 which the offerer cannot
withdraw from without incurring liability in damages.

On the other hand, when the offer is not supported by a separate consideration, the
offer stands but, in the absence of a binding contract, the offeror may withdraw it
any time.101 In either case, once the acceptance of the offer is duly
communicated before the withdrawal of the offer, a bilateral contract to buy and
sell is generated which, in accordance with the first paragraph of Article 1479 of the
Civil Code, becomes reciprocally demandable.102chanrobleslaw

Sanchez v. Rigos expressly overturned the 1955 case of Southwestern Sugar v.

AGPC,103 which declared that

a unilateral promise to buy or to sell, even if accepted, is only binding if supported

by a consideration... In other words, an accepted unilateral promise can only
have a binding effect if supported by a consideration, which means that the
option can still be withdrawn, even if accepted, if the same is not
supported by any consideration.104 [Emphasis supplied]
The Southwestern Sugar doctrine was based on the reasoning that Article
1479 of the Civil Code is distinct from Article 1324 of the Civil Code and is a
provision that specifically governs options to buy (or to sell).105 As
mentioned, Sanchez v. Rigos found no conflict between these two provisions
and accordingly abandoned the Southwestern Sugar doctrine.

Unfortunately, without expressly overturning or abandoning

the Sanchez ruling, subsequent cases reverted back to the Southwestern
Sugar doctrine.106 In 2009, Eulogio v Apeles107 referred to Southwestern
Sugar v. AGPC as the controlling doctrine108 and, due to the lack of a
separate consideration, refused to recognize the option to buy as an offer
that would have resulted in a sale given its timely acceptance by the offeree.
In 2010, Tuazon v. Del Rosario-Suarez109 referred to Sanchez v. Rigos but
erroneously cited as part of its ratio decidendi that portion of the
Southwestern Sugar doctrine that Sanchez had expressly
abandoned. chanrobleslaw
110

Given that! the issue raised in the present case involves the application of
Article 1324 and 1479 of the Civil Code, it becomes imperative for the Court
[en banc] to clarify and declare here which
between Sanchez and Southwestern Sugar is the controlling doctrine.

The Constitution itself declares that "no doctrine or principle of law laid down
by the court in a decision rendered en banc or in division may be modified or
reversed except by the court sitting en banc.111Sanchez v. Rigos was an en
banc decision which was affirmed in 1994 in Asuncion v. CA,112 also an en
banc decision, while the decisions citing the Southwestern Sugar doctrine are
all division cases.113Based on the constitutional rule (as well as the inherent
logic in reconciling Civil Code provisions), there should be no doubt
that Sanchez v. Rigos remains as the controlling doctrine.

Accordingly, when an option to buy or to sell is not supported by a

consideration separate from the purchase price, the option constitutes as an
offer to buy or to sell, which may be withdrawn by the offeror at any time
prior to the communication of the offeree's acceptance. When the offer is
duly accepted, a mutual promise to buy and to sell under the first paragraph
of Article 1479 of the Civil Code ensues and the parties' respective
obligations become reciprocally demandable.

Applied to the present case, we find that the offer to buy the land was
timely accepted by Keppel.

As early as 1994, Keppel expressed its desire to exercise its option to buy
the land. Instead of rejecting outright Keppel's acceptance, PNOC referred
the matter to the Office of the Government Corporate Counsel (OGCC). In its
Opinion No. 160, series of 1994, the OGCC opined that Keppel "did not yet
have the right to purchase the Bauan lands."114 On account of the OGCC
opinion, the PNOC did not agree with Keppel's attempt to buy the
land;115 nonetheless, the PNOC made no categorical withdrawal of the offer
 to sell provided under the Agreement.

By 2000, Keppel had met the required Filipino equity proportion and duly
communicated its acceptance of the offer to buy to PNOC.116 Keppel met with
the board of directors and officials of PNOC who interposed no objection to
the sale.117 It was only when the amount of purchase price was raised that
the conflict between the parties arose,118 with PNOC backtracking in its
position and questioning the validity of the option.119chanrobleslaw

Thus, when Keppel communicated its acceptance, the offer to purchase the
Bauan land stood, not having been withdrawn by PNOC. The offer having
been duly accepted, a contract to sell the land ensued which Keppel
can rightfully demand PNOC to comply with.

2. Keppel's constitutional right to acquire full title to the land

Filipinization is the spirit that pervades the constitutional provisions on national
patrimony and economy. The Constitution has reserved the ownership of public and
private lands,120 the ownership and operation of public utilities,121 and certain areas
of investment122 to Filipino citizens, associations, and corporations. To qualify, sixty
per cent (60%) of the association or corporation's capital must be owned by Filipino
citizens. Although the 60% Filipino equity proportion has been adopted in our
Constitution since 1935, it was only in 2011 that the Court interpreted what the
term capital constituted.

In Gamboa v. Teves,123 the Court declared that the "legal and beneficial
ownership of 60 percent of the outstanding capital stock must rest in the hands of
Filipino nationals." 124 Clarifying the ruling, the Court decreed that the 60% Filipino
ownership requirement applies separately to each class of shares, whether
with or without voting rights,125 thus:ChanRoblesVirtualawlibrary

Applying uniformly the 60-40 ownership requirement in favour of Filipino citizens to

each class of shares, regardless of differences in voting rights, privileges and
restrictions, guarantees effective Filipino control of public utilities, as mandated by
the Constitution.126
Although the ruling was made in the context of ownership and operation of
public utilities, the same should be applied to the ownership of public and
private lands, since the same proportion of Filipino ownership is required and
the same nationalist policy pervades.

The uncontested fact is that, as of November 2000, Keppel's capital is 60%

Filipino-owned.127 However, there is nothing in the records showing the
nature and composition of Keppel's shareholdings, i.e.,whether its
shareholdings are divided into different classes, and 60% of each share class
is legally and beneficially owned by Filipinos - understandably because when
Keppel exercised its option to buy the land in 2000, the Gamboa ruling had
not yet been promulgated. The Court cannot deny Keppel its option to buy
the land by retroactively applying the Gamboa ruling without violating
Keppel's vested right. Thus, Keppel's failure to prove the nature and
composition of its shareholdings in 2000 could not prevent it from validly
exercising its option to buy the land.

Nonetheless, the Court cannot completely disregard the effect of

the Gamboa ruling; the 60% Filipino equity proportion is a continuing
requirement to hold land in the Philippines. Even in Gamboa, the Court
prospectively applied its ruling, thus enabling the public utilities to meet the
nationality requirement before the Securities and Exchange Commission
commences administrative investigation and cases, and imposes sanctions
for noncompliance on erring corporations.128 In this case, Keppel must be
allowed to prove whether it meets the required Filipino equity ownership and
proportion in accordance with the Gamboa ruling before it can acquire full
title to the land
 EQUITORIAL V. MAYFAIR

FACTS:

Petitioner Carmelo and Bauermann Inc. leased its parcel of land with 2-storey
building to respondent Mayfair Theater Inc.

They entered a contract which provides that if the LESSOR should desire to sell the
leased premises, the LESSEE shall be given 30-days exclusive option to purchase
the same.

Carmelo informed Mayfair that it will sell the property to Equatorial. Mayfair made
known its interest to buy the property but only to the extent of the leased
premises.

Notwithstanding Mayfair’s intention, Carmelo sold the property to Equatorial.

ISSUE:

WON the sale of the property to Equatorial is valid.

HELD:

The sale of the property should be rescinded because Mayfair has the right of first
refusal. Both Equatorial and Carmelo are in bad faith because they knew of the
stipulation in the contract regarding the right of first refusal.

The stipulation is a not an option contract but a right of first refusal and as such the
requirement of a separate consideration for the option, has no applicability in the
instant case. The consideration is built in the reciprocal obligation of the parties.

In reciprocal contract, the obligation or promise of each party is the consideration

for that of the other. (Promise to lease in return of the right to first refusal)

With regard to the impossibility of performance, only Carmelo can be blamed for
not including the entire property in the right of first refusal. Court held that Mayfair
may not have the option to buy the property. Not only the leased area but the
entire property.
 ADELFA PROPERTIES INC V. CA

FACTS: Private respondents and their brothers Jose and Dominador were the
registered CO-OWNERS of a parcel of land in Las Pinas, covered by a TCT.

Jose and Dominador sold their share (eastern portion of the land) to Adelfa.
Thereafter, Adelfa expressed interest in buying the western portion of the property
from private respondents herein. Accordingly, an “exclusive Option to Purchase”
was executed between Adelfa and Private respondents and an option money of
50,000 was given to the latter.

A new owner’s copy of the certificate of title was issued (as the copy with
respondent Salud was lost) was issued but was kept by Adelfa’s counsel, Atty.
Bernardo.

Before Adelfa could make payments, it received summons as a case was filed (RTC
Makati) against Jose and Dominador and Adelfa, because of a complaint in a civil
case by the nephews and nieces of private respondents herein. As a consequence,
Adelfa, through a letter, informed the private respondents that it would hold
payment of the full purchase price and suggested that they settle the case with
their said nephews and nieces. Salud did not heed the suggestion; respondent’s
informed Atty. Bernardo that they are canceling the transaction. Atty Bernardo
made offers but they were all rejected.

RTC Makati dismissed the civil case. A few days after, private respondents executed
a Deed of Conditional Sale in favor of Chua, over the same parcel of land.

Atty Bernardo wrote private respondents informing them that in view of the
dismissal of the case, Adelfa is willing to pay the purchase price, and requested that
the corresponding deed of Absolute Sale be executed. This was ignored by private
respondents.

Private respondents sent a letter to Adelfa enclosing therein a check representing

the refund of half the option money paid under the exclusive option to purchase,
and requested Adelfa to return the owner’s duplicate copy of Salud. Adelfa failed to
surrender the certificate of title, hence the private respondents filed a civil case
before the RTC Pasay, for annulment of contract with damages. The trial court
directed the cancellation of the exclusive option to purchase. On appeal, respondent
CA affirmed in toto the decision of the RTC hence this petition.

ISSUE:
 1. WON the agreement between Adelfa and Private respondents was strictly an
option contract
2. WON Article 1590 applies in this case, thereby justifiying the refusal by
Adelfa to pay the balance of the purchase price
3. WON Private respondents could unilaterraly and prematurely terminate the
option period, if indeed it is a option contract, as the option period has not
lapsed yet.

HELD: The judgement of the CA is AFFIRMED

1. NO. The agreement between the parties is a contract to sell, and not an option
contract or a contract of sale.

Contract to SELL

– by agreement the ownership is reserved in the vendor and is not to pass until
the full payment of the price

– title is retained by the vendor until the full payment of the price, such payment
being a positive.

Contract of SALE

– the title passes to the vendee upon the delivery of the thing sold

– the vendor has lost and cannot recover ownership until and unless the contract
is resolved or rescinded

There are two features which convince us that the parties never intended to
transfer ownership to petitioner except upon the full payment of the purchase price.

(1) the exclusive option to purchase, although it provided for automatic

rescission of the contract and partial forfeiture of the amount already paid in case
of default, does not mention that petitioner is obliged to return possession or
ownership of the property as a consequence of non-payment. There is no
stipulation anent reversion or reconveyance of the property to herein private
respondents in the event that petitioner does not comply with its obligation. With
the absence of such a stipulation, although there is a provision on the remedies
available to the parties in case of breach, it may legally be inferred that the parties
never intended to transfer ownership to the petitioner to completion of payment of
the purchase price.

(2) Secondly, it has not been shown there was delivery of the property, actual
or constructive, made to herein petitioner. The exclusive option to purchase is not
contained in a public instrument the execution of which would have been
considered equivalent to delivery. Neither did petitioner take actual, physical
possession of the property at any given time. It is true that after the reconstitution
of private respondents’ certificate of title, it remained in the possession of
petitioner’s counsel, Atty. Bayani L. Bernardo, who thereafter delivered the same to
herein petitioner. Normally, under the law, such possession by the vendee is to be
understood as a delivery. 18 However, private respondents explained that there
was really no intention on their part to deliver the title to herein petitioner with the
purpose of transferring ownership to it. They claim that Atty. Bernardo had
possession of the title only because he was their counsel in the petition for
reconstitution.

In effect, there was an implied agreement that ownership shall not pass to the
purchaser until he had fully paid the price in this case. Article 1478 of the civil code
does not require that such a stipulation be expressly made. Consequently, an
implied stipulation to that effect is considered valid and, therefore, binding and
enforceable between the parties. It should be noted that under the law and
jurisprudence, a contract which contains this kind of stipulation is considered a
contract to sell.

The important task in contract interpretation is always the ascertainment of the

intention (parties never intended to transfer ownership to petitioner except upon
the full payment of the purchase price) of the contracting parties and that task is,
of course, to be discharged by looking to the words they used to project that
intention in their contract. The title of a contract does not necessarily determine its
true nature. Hence, the fact that the document under discussion is entitled
“Exclusive Option to Purchase” is not controlling where the text thereof shows that
it is a contract to sell.

The obligation of petitioner consisted of an obligation to give something, that is, the
payment of the purchase price. The contract did not simply give petitioner the
discretion to pay for the property. It will be noted that there is nothing in the said
contract to show that petitioner was merely given a certain period within which to
exercise its privilege to buy. The agreed period was intended to give time to herein
petitioner within which to fulfill and comply with its obligation, that is, to pay the
balance of the purchase price. No evidence was presented by private respondents
to prove otherwise.

The test in determining whether a contract is a “contract of sale or purchase” or a

mere “option” is whether or not the agreement could be specifically enforced. There
is no doubt that the obligation of petitioner to pay the purchase price is specific,
definite and certain, and consequently binding and enforceable. Had private
respondents chosen to enforce the contract, they could have specifically compelled
petitioner to pay the balance. This is distinctly made manifest in the contract itself
as an integral stipulation, compliance with which could legally and definitely be
demanded from petitioner as a consequence.

While there is jurisprudence to the effect that a contract which provides that the
initial payment shall be totally forfeited in case of default in payment is to be
considered as an option contract, still we are not inclined to conform with the
findings of respondent court and the court a quo that the contract executed
between the parties is an option contract, for the reason that the parties were
already contemplating the payment of the balance of the purchase price, and were
not merely quoting an agreed value for the property. The term “balance,” connotes
a remainder or something remaining from the original total sum already agreed
upon.

In other words, the alleged option money was actually earnest money which was
intended to form part of the purchase price. The amount was not distinct from the
cause or consideration for the sale of the property, but was itself a part thereof. It
is a statutory rule that whenever earnest money is given in a contract of sale, it
shall be considered as part of the price and as proof of the perfection of the
contract. It constitutes an advance payment and must, therefore, be deducted from
the total price. Also, earnest money is given by the buyer to the seller to bind the
bargain.

There are clear distinctions between earnest money and option money, viz.:

(a) earnest money is part of the purchase price, while option money ids the money
given as a distinct consideration for an option contract;

(b) earnest money is given only where there is already a sale, while option money
applies to a sale not yet perfected; and

(c) when earnest money is given, the buyer is bound to pay the balance, while
when the would-be buyer gives option money, he is not required to buy.

The aforequoted characteristics of earnest money are apparent in the so-called

option contract under review, even though it was called “option money” by the
parties. In addition, private respondents failed to show that the payment of the
balance of the purchase price was only a condition precedent to the acceptance of
the offer or to the exercise of the right to buy. On the contrary, it has been
sufficiently established that such payment was but an element of the performance
of petitioner’s obligation under the contract to sell.
2. Its failure to pay the purchase price within the agreed period, petitioner invokes
Article 1590 of the civil Code which provides:

Art. 1590. Should the vendee be disturbed in the possession or ownership of the
thing acquired, or should he have reasonable grounds to fear such disturbance, by
a vindicatory action or a foreclosure of mortgage, he may suspend the payment of
the price until the vendor has caused the disturbance or danger to cease, unless the
latter gives security for the return of the price in a proper case, or it has been
stipulated that, notwithstanding any such contingency, the vendee shall be bound
to make the payment. A mere act of trespass shall not authorize the suspension of
the payment of the price.

Respondent court refused to apply the aforequoted provision of law on the

erroneous assumption that the true agreement between the parties was a contract
of option. As we have hereinbefore discussed, it was not an option contract but a
perfected contract to sell. Verily, therefore, Article 1590 would properly apply.

Both lower courts, are in accord that since the Civil Case in Makati involved only the
eastern half of the land subject of the deed of sale between Adelfa and the Jimenez
brothers, it did not, therefore, have any adverse effect on private respondents’ title
and ownership over the western half of the land which is covered by the contract
subject of the present case. But at a glance, it is easily discernible that, although
the complaint prayed for the annulment only of the contract of sale executed
between petitioner and the Jimenez brothers, the plaintiffs therein were claiming to
be co-owners of the entire parcel of land, and not only of a portion thereof nor, as
incorrectly interpreted by the lower courts, not pertaining exclusively to the eastern
half adjudicated to the Jimenez brothers.

Such being the case, petitioner was justified in suspending payment of the balance
of the purchase price by reason of the aforesaid vindicatory action filed against it.
The assurance made by private respondents that petitioner did not have to worry
about the case because it was pure and simple harassment is not the kind of
guaranty contemplated under the exceptive clause in Article 1590 wherein the
vendor is bound to make payment even with the existence of a vindicatory action if
the vendee should give a security for the return of the price.
3. YES. The private respondents may no longer be compelled to sell and deliver the
subject property to petitioner for two reasons, that is, petitioner’s failure to duly
effect the consignation of the purchase price after the disturbance had ceased; and,
secondarily, the fact that the contract to sell had been validly rescinded by private
respondents.

The mere sending of a letter by the vendee expressing the intention to pay, without
the accompanying payment, is not considered a valid tender of payment. Besides,
a mere tender of payment is not sufficient to compel private respondents to deliver
the property and execute the deed of absolute sale. It is consignation which is
essential in order to extinguish petitioner’s obligation to pay the balance of the
purchase price.

The rule is different in case of an option contract or in legal redemption or in a sale

with right to repurchase, wherein consignation is not necessary because these
cases involve an exercise of a right or privilege (to buy, redeem or repurchase)
rather than the discharge of an obligation, hence tender of payment would be
sufficient to preserve the right or privilege. This is because the provisions on
consignation are not applicable when there is no obligation to pay. A contract to
sell, as in the case before us, involves the performance of an obligation, not merely
the exercise of a privilege of a right. Consequently, performance or payment may
be effected not by tender of payment alone but by both tender and consignation.

Furthermore, petitioner no longer had the right to suspend payment after the
disturbance ceased with the dismissal of the civil case filed against it. Necessarily,
therefore, its obligation to pay the balance again arose and resumed after it
received notice of such dismissal. Unfortunately, petitioner failed to seasonably
make payment. By reason of petitioner’s failure to comply with its obligation,
private respondents elected to resort to and did announce the rescission of the
contract through its letter to petitioner. That written notice of rescission is deemed
sufficient under the circumstances. Article 1592 of the Civil Code which requires
rescission either by judicial action or notarial act is not applicable to a contract to
sell. Furthermore, judicial action for rescission of a contract is not necessary where
the contract provides for automatic rescission in case of breach, as in the contract
involved in the present controversy.

In the case at bar, it has been shown that although petitioner was duly furnished
and did receive a written notice of rescission which specified the grounds therefore,
it failed to reply thereto or protest against it. By such cavalier disregard, it has been
effectively estopped from seeking the affirmative relief it now desires but which it
had theretofore disdained.
 ABALOS V. MACATANGAY

FACTS:

Spouses Arturo and Esther Abalos are the registered owners of a parcel of land with
improvements. Arturo made a Receipt and Memorandum of Agreement in favor of
Macatangay, binding himself to sell to latter the subject property and not to offer
the same to any other party within 30 days from date. Full payment would also be
effected as soon as possession of the property shall have been turned over to
Macatangay. Macatangay gave an earnest money amounting to P5,000.00 to be
deducted from the purchase price of P1,300,000.00 in favor of the spouses.

Subsequently, Arturo and Esther had a marital squabble brewing at that time and
Macatangay, to protect his interest, made an annotation in the title of the
property. He then sent a letter informing them of his readiness to pay the full
amount of the purchase price. Esther, through her SPA, executed in favor of
Macatangay, a Contract to sell the property to the extent of her conjugal interest
for the sum of P650,000 less the sum already received by her and Arturo. She
agreed to surrender the property to Macatangay within 20 days along with the deed
of absolute sale upon full payment, while he promised to pay the balance of the
purchase price for P1, 290,000.00 after being placed in possession of the property.
Macatangay informed them that he was ready to pay the amount in full. The couple
failed to deliver the property so he sued the spouses.

RTC dismissed the complaint, because the SPA could not have authorized Arturo to
sell the property to Macatangay as it was falsified. CA reversed the decision, ruling
the SPA in favor of Arturo, assuming it was void, cannot affect the transaction
between Esther and Macatangay. On the other hand, the CA considered the RMOA
executed by Arturo valid to effect the sale of his conjugal share in the property.

ISSUE:

Whether or not the sale of property is valid.

RULING:

No. Arturo and Esther appear to have been married before the effectivity of the
Family Code. There being no indication that they have adopted a different property
regime, their property relations would automatically be governed by the regime of
conjugal partnership of gains. The subject land which had been admittedly acquired
during the marriage of the spouses forms part of their conjugal partnership.

Under the Civil Code, the husband is the administrator of the conjugal partnership.
This right is clearly granted to him by law. More, the husband is the sole
administrator. The wife is not entitled as of right to joint administration.
The husband, even if he is statutorily designated as administrator of the conjugal
partnership, cannot validly alienate or encumber any real property of the conjugal
partnership without the wife’s consent. Similarly, the wife cannot dispose of any
property belonging to the conjugal partnership without the conformity of the
husband. The law is explicit that the wife cannot bind the conjugal partnership
without the husband’s consent, except in cases provided by law.

More significantly, it has been held that prior to the liquidation of the conjugal
partnership, the interest of each spouse in the conjugal assets is inchoate, a mere
expectancy, which constitutes neither a legal nor an equitable estate, and does not
ripen into title until it appears that there are assets in the community as a result of
the liquidation and settlement. The interest of each spouse is limited to the net
remainder or “remanente liquido” (haber ganancial) resulting from the liquidation of
the affairs of the partnership after its dissolution. Thus, the right of the husband or
wife to one-half of the conjugal assets does not vest until the dissolution and
liquidation of the conjugal partnership, or after dissolution of the marriage, when it
is finally determined that, after settlement of conjugal obligations, there are net
assets left which can be divided between the spouses or their respective heirs.

The Family Code has introduced some changes particularly on the aspect of the
administration of the conjugal partnership. The new law provides that the
administration of the conjugal partnership is now a joint undertaking of the
husband and the wife. In the event that one spouse is incapacitated or otherwise
unable to participate in the administration of the conjugal partnership, the other
spouse may assume sole powers of administration. However, the power of
administration does not include the power to dispose or encumber property
belonging to the conjugal partnership. In all instances, the present law specifically
requires the written consent of the other spouse, or authority of the court for the
disposition or encumbrance of conjugal partnership property without which, the
disposition or encumbrance shall be void.

Inescapably, herein Arturo’s action for specific performance must fail. Even on the
supposition that the parties only disposed of their respective shares in the property,
the sale, assuming that it exists, is still void for as previously stated, the right of
the husband or the wife to one-half of the conjugal assets does not vest until the
liquidation of the conjugal partnership. Nemo dat qui non habet. No one can give
what he has not.
 JLT AGRO INC. V. BALANSAG

FACTS:

Don Julian Teves contracted two marriages, first with Antonia Baena and had two
kids namely Josefa and Emilio. After her death, he married Milagros Teves and they
had four children namely: Maria Teves, Jose Teves, Milagros Teves and Pedro
Teves. The present controversy involves a parcel of land, known as Lot No. 63,
which was originally registered in the name of the conjugal partnership of Don
Julian and Antonia. When Antonia died, the land was among the properties involved
in an action for partition. Thereafter, the parties to the case entered into a
Compromise Agreement. Section 13 of the compromise states that

“13. That in the event of death of Julian L. Teves, the properties herein adjudicated
to JosefaTevesEscaño and Emilio B. Teves, (excluding the properties comprised as
Hacienda MedallaMilagrosa together with all its accessories and accessions) shall be
understood as including not only their one-half share which they inherited from
their mother but also the legitimes and other successional rights which would
correspond to them of the other half belonging to their father, Julian L.Teves. In
other words, the properties now selected and adjudicated to Julian L. Teves (not
including his share in the Hacienda MedallaMilagrosa) shall exclusively be
adjudicated to the wife in second marriage of Julian L. Teves and his four minor
children.”

On November 16, 1972, Don Julian, Emilio and Josefa executed a Deed of
Assignment of Assets in favor of J.L.T. Agro, Inc. (petitioner) which transferred
ownership over Lot No. 63, in favor of petitioner. On April, 14 1974, Don Julian died
intestate. A TCT was issued in the name of petitioner.

Meanwhile, Milagros Donio and her children executed a Deed of Extrajudicial

Partition of Real Estate. In the deed of partition, Lot No. 63 was allotted to Milagros
Donio and her two (2) children, Maria Evelyn and Jose Catalino. Unaware that the
subject lot was already registered in the name of petitioner, respondents bought
Lot No. 63 from Milagros Donio. When respondents discovered that the lot was
already titled in the name of petitioner respondents, as vendees of Lot No. 63, filed
a complaint before the RTC. The trial court ruled that the direct adjudication of the
properties listed in the Compromise Agreement was only in favor of Don Julian and
his two children by the first marriage, Josefa and Emilio hence the sale made by
Don Julian in favor of petitioner is valid.
The Court of Appeals, however, ruled that the two children of Don Julian in the first
marriage acquired full ownership and possession of the properties respectively
adjudicated to them in the CFI decision and Don Julian himself could no longer
dispose of the same, including Lot No. 63. The Court of Appeals ruled that the
adjudication in favor of the heirs of Don Julian from the second marriage became
automatically operative upon the approval of the Compromise Agreement, thereby
vesting on them the right to validly dispose of Lot No. 63 in favor of respondents.
Petitioner argues that the appellate court erred in holding that future legitime can
be determined, adjudicated and reserved prior to the death of Don Julian.

ISSUE:

Whether or not the future legitime can be determined, adjudicated and reserved
prior to the death of Don Julian

RULING:

No. Well-entrenched is the rule that all things, even future ones, which are not
outside the commerce of man may be the object of a contract. The exception is that
no contract may be entered into with respect to future inheritance, and the
exception to the exception is the partition intervivos referred to in Article 1080. The
partition inter vivos of the properties of Don Julian is undoubtedly valid pursuant to
Article 1347. However, considering that it would become legally operative only upon
the death of Don Julian, the right of his heirs from the second marriage to the
properties adjudicated to him under the compromise agreement was but a mere
expectancy. It was a bare hope of succession to the property of their father. Being
the prospect of a future acquisition, the interest by its nature was inchoate. It had
no attribute of property, and the interest to which it related was at the time
nonexistent and might never exist.

Evidently, at the time of the execution of the deed of assignment covering Lot No.
63 in favor of petitioner, Don Julian remained the owner of the property since
ownership over the subject lot would only pass to his heirs from the second
marriage at the time of his death. Thus, as the owner of the subject lot, Don Julian
retained the absolute right to dispose of it during his lifetime. His right cannot be
challenged by Milagros Donio and her children on the ground that it had already
been adjudicated to them by virtue of the compromise agreement.
 TAÑEDO V. CA January 22, 1996

FACTS:

Lazaro Tañedo executed a deed of absolute sale in favor of Ricardo Tañedo and
Teresita Barrera in which he conveyed a parcel of land which he will inherit. Upon
the death of his father he executed an affidavit of conformity to reaffirm the said
sale. He also executed another deed of sale in favor of the spouses covering the
parcel of land he already inherited. Ricardo registered the last deed of sale in the
registry of deeds in their favor.

Ricardo later learned that Lazaro sold the same property to his children through a
deed of sale.

ISSUE:

WON the Tañedo spouses have a better right over the property against the children
of Lazaro Tañedo.

HELD:

Since a future inheritance generally cannot be a subject of a contract, the deed of

sale and the affidavit of conformity made by Lazaro has no effect. The subject of
dispute therefore is the deed of sale made by him in favor of spouses Tañedo and
another to his children after he already legally acquired the property.

Thus, although the deed of sale in favor of private respondents was later than the
one in favor of petitioners, ownership would vest in the former because of the
undisputed fact of registration. On the other hand, petitioners have not registered
the sale to them at all.

Petitioners contend that they were in possession of the property and that private
respondents never took possession thereof. As between two purchasers, the one
who registered the sale in his favor has a preferred right over the other who has
not registered his title, even if the latter is in actual possession of the immovable
property.
 Atty. Pedro M. Ferrer v. Spouses Alfredo Diaz and Imelda Diaz G.R. No.
165300, April 23, 2010

FACTS:

Allegedly, the Diazes, as represented by their daughter Comandante obtained from

him a loan of P1,118,228.00. The loan was secured by a Real Estate Mortgage
Contract by way of second mortgage over Transfer Certificate of Title (TCT) and a
Promissory Note payable within six months or up to November 7, 1999.
Comandante also issued to petitioner post-dated checks to secure payment of said
loan.

Petitioner further claimed that prior to this or on May 29, 1998, Comandante, for a
valuable consideration of P600,000.00, which amount formed part of the above
mentioned secured loan, executed in his favor an instrument entitled Waiver of
Hereditary Rights and Interests Over a Real Property (Still Undivided), and which
property is titled and registered in the name of my parents Alfredo T. Diaz and
Imelda G. Diaz, as evidenced by a Transfer Certificate of Title. On the basis of said
waiver, petitioner executed an Affidavit of Adverse Claim which he caused to be
annotated at the back of the TCT.

The Diazes, however, reneged on their obligation as the checks issued by

Comandante were dishonored upon presentment. Despite repeated demands, said
respondents still failed and refused to settle the loan. Thus, petitioner filed on
September 29, 1999 a Complaint for Collection of Sum of Money Secured by Real
Estate Mortgage Contract against the Diazes and Comandante. At the Pangans’ end,
they alleged that they acquired the subject property by purchase in good faith and
for a consideration of P3,000,000.00 on November 11, 1999 from the Diazes
through the latter’s daughter Comandante. However, on December 21, 1999, they
were surprised upon being informed by petitioner that the subject land had been
mortgaged to him by the Diazes. As affirmative defense, the Pangans asserted that
the annotation of petitioner’s adverse claim on TCT No. RT-6604 cannot impair their
rights as new owners of the subject property. They claimed that the Waiver of
Hereditary Rights and Interests Over a Real Property (Still Undivided) upon which
petitioner’s adverse claim is anchored cannot be the source of any right or interest
over the property considering that it is null and void under paragraph 2 of Article
1347 of the Civil Code.

ISSUE: Is a waiver of hereditary rights in favor of another executed by a future heir

while the parents are still living valid?

RULING:
Pursuant to the second paragraph of Article 1347 of the Civil Code, no contract may
be entered into upon a future inheritance except in cases expressly authorized by
law. For the inheritance to be considered “future”, the succession must not have
been opened at the time of the contract. A contract may be classified as a contract
upon future inheritance, prohibited under the second paragraph of Article 1347,
where the following requisites concur:

(1) That the succession has not yet been opened.

(2) That the object of the contract forms part of the inheritance; and,

(3) That the promissor has, with respect to the object, an expectancy of a right

which is purely hereditary in nature.[38]

In this case, there is no question that at the time of execution of Comandante’s

Waiver of Hereditary Rights and Interest over a Real Property (Still Undivided),
succession to either of her parent’s properties has not yet been opened since both
of them are still living. With respect to the other two requisites, both are likewise
present considering that the property subject matter of Comandante’s waiver
concededly forms part of the properties that she expect to inherit from her parents
upon their death and, such expectancy of a right, as shown by the facts, is
undoubtedly purely hereditary in nature.

From the foregoing, it is clear that Comandante and petitioner entered into a
contract involving the former’s future inheritance as embodied in the Waiver of
Hereditary Rights and Interest Over a Real Property (Still Undivided) executed by
her in petitioner’s favor. The Waiver of Hereditary Rights and Interest Over a Real
Property (Still Undivided) executed by Comandante in favor of petitioner as not
valid and that same cannot be the source of any right or create any obligation
between them for being violative of the second paragraph of Article 1347 of the
Civil Code.
 Opulencia v. Court of Appeals
G.R. No. 125853, July 30, 1998

Facts:
A complaint for specific performance filed with the court a quo, herein
private respondents, Aladin Simundac and Miguel Oliven alleged that petitioner
Natalia Carpena Opulencia executed in their favor a contract to sell Lot 2125 that
plaintiffs paid a downpayment of P300, 000.00 but defendant, despite demands,
failed to comply with her obligations under the contract.

Petitioner admitted the execution of the contract in favor of plaintiffs and

receipt of P300,000.00 as down payment. However, she put forward the following
affirmative defenses: that the property subject of the contract formed part of the
Estate of Demetrio Carpena (petitioner's father), in respect of which a petition for
probate was filed with the Regional Trial Court. At the time the contract was
executed, the parties were aware of the pendency of the probate proceeding; that
the contract to sell was not approved by the probate court; that realizing the nullity
of the contract petitioner had offered to return the down payment received from
private respondents, but the latter refused to accept it. She further argued that the
contract was subject to a suspensive condition, which was the probate of the will of
defendant's father Demetrio Carpena.

Issue:
Is a contract to sell a real property involved in testate proceedings valid and
binding without the approval of the probate court?

Ruling:
In a nutshell, petitioner contends that "where the estate of the deceased
person is already the subject of a testate or intestate proceeding, the administrator
cannot enter into any transaction involving it without prior approval of the Probate
Court." She maintains that the Contract to sell is void because it was not approved
by the probate court, as required by Section 7, Rule 89 of the Rules of Court:

SEC. 7. Regulations for granting authority to sell, mortgage, or otherwise encumber

estate. The court having jurisdiction of the estate of the deceased may authorize
the executor or administrator to sell, mortgage, or otherwise encumber real estate,
in cases provided by these rules and when it appears necessary or beneficial, under
the following regulations.

As correctly ruled by the Court of Appeals, Section 7 of Rule 89 of the Rules

of Court is not applicable, because petitioner entered into the Contract to Sell in her
capacity as an heiress, not as an executrix or administratrix of the estate.

In the contract, she represented herself as the "lawful owner" and seller of
the subject parcel of land. She also explained the reason for the sale to be
"difficulties in her living" conditions and consequent "need of cash." These
representations clearly evince that she was not acting on behalf of the estate under
probate when she entered into the Contract to Sell.

Hereditary rights are vested in the heir or heirs from the moment of the
decedent's death. Petitioner, therefore, became the owner of her hereditary share
the moment her father died. Thus, the lack of judicial approval does not invalidate
the Contract to sell, because the petitioner has the substantive right to sell the
whole or a part of her share in the estate of her late father.

The possession of hereditary property is deemed to be transmitted to the

heir without interruption from the instant of the death of the decedent, in case the
inheritance is accepted.' And Manresa with reason states that upon the death of a
person, each of his heirs 'becomes the undivided owner of the whole estate left with
respect to the part or portion which might be adjudicated to him, a community of
ownership being thus formed among the co-owners of the estate while it remains
undivided. Every part owner may assign or mortgage his part in the common
property, and the effect of such assignment or mortgage shall be limited to the
portion which may be allotted him in the partition upon the dissolution of the
community.

Hence, where some of the heirs, without the concurrence of the others, sold
a property left by their deceased father, the sale is valid, but that the effect thereof
was limited to the share which may be allotted to the vendors upon the partition of
the estate.

The Contract to Sell stipulates that petitioner's offer to sell is contingent on

the "complete clearance of the court on the Last Will Testament of her father."
Consequently, although the Contract to Sell was perfected between the petitioner
and private respondents during the pendency of the probate proceedings, the
consummation of the sale or the transfer of ownership over the parcel of land to the
private respondents is subject to the full payment of the purchase price and to the
termination and outcome of the testate proceedings. Therefore, there is no basis for
petitioner's apprehension that the Contract to Sell may result in a premature
partition and distribution of the properties of the estate. Indeed, it is settled that
"the sale made by an heir of his share in an inheritance, subject to the pending
administration, in no wise stands in the way of such administration."

Finally, petitioner is estopped from backing out of her representations in her

valid Contract to sell with private respondents, from whom she had already
received P300, 000 as initial payment of the purchase price. Petitioner may not
renege on her own acts and representations, to the prejudice of the private
respondents who have relied on them.
 JAVIER V. VDA CRUZ

FACTS:

Eusebio Cruz, who died on February 2, 1941 at the age of 100 years without
leaving any will nor compulsory heirs, was the absolute and exclusive owner of a
parcel of mountainous and unimproved land situated in sitio Matogalo, Taytay, Rizal
which he inherited from his forebears, described therein; that during his lifetime,
Eusebio Cruz had been living with one Teodora Santos 'without the sanction of
marriage"; that Teodora Santos had with her as distant relatives and protegees the
brothers Gregorio Cruz and Justo Cruz; that Gregorio Cruz was the father of Delfin
Cruz, deceased husband of defendant Dominga Vda. de Cruz and father of
defendants Leonila, Roman, Eliseo, Leberata and Melecio, all surnamed Cruz; that
on January 16, 1941 Delfin Cruz, by means of deceit and in collusion with persons
among them his father Gregorio Cruz made Eusebio Cruz, who could read and
write, stamp his thumbmark on a deed of sale of a portion of the land described in
the complaint consisting of 26,577 square meters for the sum of P700.00 in favor of
said Delfin Cruz; that at that time Delfin Cruz did not have theithin thirty days from
submittal of the case for decision.

ISSUE: WON THE SALE OF PROPERTY IS VALID.

RULING: NO. Benedicto M. Javier, as administrator of the Estate of Eusebio Cruz,

instituted against Dominga Vda. de Cruz and her children Civil Case No. 5996 to
declare null and void a deed of sale of a part of a parcel of land located in Barrio
San Isidro, Taytay, Rizal containing an area of 182,959 square meters and
assessed at P4,310.00 under Tax No. 9136 under Tax No. 9136 in the name of
Estate of E. Cruz. The sale of property for only P700 is shocking to conscience of
man.
 ZAMORA V. MIRANDA

FACTS

Petitioner is the widow of the late Fernando Zamora, the son of Alberto Zamora.
Respondent Beatriz Miranda is the cousin of Alberto Zamora, while respondent Rose
Marie Miranda-Guanio is the daughter of respondent Beatriz Miranda.

Respondent Beatriz Miranda was the registered owner of the property in question,
which is a parcel of land, with an area of more or less 5,090 square meters,
covered by Transfer Certificate of Title (TCT) No. 1594 of the Register of Deeds for
the City of Davao. The said parcel of land is located at Carmelite, Bajada, Davao
City.

According to petitioner, her father-in-law, Alberto Zamora, through an encargado,

Eduardo Cecilio, was in possession of the property in question. In 1952, she
(petitioner) was designated by Alberto Zamora as his assistant on land matters.
The property in question was turned over to her and she was introduced to Eduardo
Cecilio. After the year 1952, Alberto Zamora told her that the property in question
was owned by respondent Beatriz Miranda whose family was permanently residing
in Manila.

Petitioner allegedly contacted respondent Beatriz Miranda, and petitioner was given
a calling card and was told to see her (Beatriz). In October 1972, petitioner claimed
that she went to the residence of respondent Beatriz Miranda in Quezon City. While
there, they talked about the property in question and respondent Beatriz Miranda
drew a sketch depicting the location of the property. Thereafter, petitioner alleged
that respondent Beatriz Miranda sold to her the said property for the sum of
P50,000.00. An acknowledgment of the receipt of the amount of P50,000.00 was
prepared, and respondent Beatriz Miranda allegedly signed4Ï‚ the same. The receipt
was dated October 23, 1972.5Ï‚ In the sketch, and acknowledgment of the receipt
of P50,000.00, marked as Exhibit "B," there is a notation "Documents for Agdao
Property follows." This notation referred to the property in Agdao, which was the
subject of negotiation.

Petitioner prepared the document relative to the Agdao property.

Petitioner further claimed that after 1972, she rented out portions of the property in
question. Eduardo Cecilio allegedly continued to be her encargado as there were
squatters on the property. In January 1996, the tenants reported to her that there
were two men who went to the property in question. On the first week of February
1996, she (petitioner) met Atty. Cabebe and Mr. Joe Ang. She informed them that
she was the owner of the property in question as she bought it in 1972. After
sometime, she (petitioner) learned that the occupants of the property in question
were being harassed and were told to vacate. She (petitioner) went to Manila and
confronted respondent Beatriz Miranda, and told her that she would file a case in
court.

Respondent Rose Marie Miranda-Guanio declared that before the year 1941, her
mother, respondent Beatriz Miranda, was a resident of Davao City. Her mother left
Davao City in 1942 and resided in Manila, and she went to Davao City for vacation
only. Her mother owned the property in question. When her mother (Beatriz) left
Davao City, she did not appoint anyone to administer or take care of her property.
She (Rose Marie) disputed the claim of petitioner that the latter visited her mother
in 1972. She alleged that on June 26, 1972, she gave birth to her first child and
that she and her mother, Beatriz, took care of her child. She declared that the
signature on the receipt dated October 23, 19729ςrνll was not the signature of
her mother, Beatriz Miranda. She identified the genuine signatures of her mother
(Beatriz) which were reflected on the Voter's Affidavit (Exhibits "1" - "24"); the
1973 Residence Certificate (Exhibits "3"-"20"); the 1980 Residence Certificate
(Exhibits "4"-"21"); the 1981 Residence Certificate (Exhibits "5"-"22"); the 1974
expired passport (Exhibits "6"-"17").10ςrνll She also alleged that because of this
case she suffered damages and incurred expenses of litigation.

ISSUE:Can the receipt dated October 23, 1972 evidencing sale of real property,
being a private document, be a basis of petitioner's claim over the subject
property?

RULING: NO.

Article 1358 of the Civil Code provides that acts and contracts which have for their
object the transmission of real rights over immovable property or the sale of real
property must appear in a public document. If the law requires a document or other
special form, the contracting parties may compel each other to observe that form,
once the contract has been perfected.

In Fule v. Court of Appeals, the Court held that Article 1358 of the Civil Code, which
requires the embodiment of certain contracts in a public instrument, is only for
convenience, and registration of the instrument only adversely affects third parties.
Formal requirements are, therefore, for the benefit of third parties. Non-compliance
therewith does not adversely affect the validity of the contract nor the contractual
rights and obligations of the parties thereunder.

However, in this case, the trial court dismissed petitioner's complaint on the ground
that the receipt dated October 23, 1972 (Exhibit "B") is a worthless piece of paper,
which cannot be made the basis of petitioners claim of ownership over the property
as Mr. Arcadio Ramos, an NBI handwriting expert, established that the signature
appearing on the said receipt is not the signature of respondent Beatriz Miranda.
 VIRGILIO MAQUILAN vs. DITA MAQUILAN G.R. No. 155409 June 8, 2007

FACTS: Herein petitioner and herein private respondent are spouses who once had a blissful
married life and out of which were blessed to have a son. However, their once sugar coated
romance turned bitter when petitioner discovered that private respondent was having illicit sexual
affair with her paramour, which thus, prompted the petitioner to file a case of adultery against private
respondent and the latter's paramour. Consequently, both accused were convicted of the crime
charged.

Thereafter, private respondent, through counsel, filed a Petition for Declaration of Nullity of Marriage,
Dissolution and Liquidation of Conjugal Partnership of Gains and Damages imputing psychological
incapacity on the part of the petitioner. During the pre-trial of the said case, petitioner and private
respondent entered into a COMPROMISE AGREEMENT.

Subsequently, petitioner filed a motion for the repudiation of the AGREEMENT. This motion was
denied. Petitioner then filed a Petition for Certiorari and Prohibition with the Court of Appeals on the
ground that the conviction of the respondent of the crime of adultery disqualify her from sharing in
the conjugal property. The Petition was dismissed.

ISSUE: Is the conviction of the respondent of the crime of adultery a disqualification for her to share
in the conjugal property?

HELD: No. The conviction of adultery does not carry the accessory of civil interdiction. Article 34 of
the Revised Penal Code provides for the consequences of civil interdiction:

Art. 34. Civil Interdiction. — Civil interdiction shall deprive the offender during the time of his
sentence of the rights of parental authority, or guardianship, either as to the person or property of
any ward, of marital authority, of the right to manage his property and of the right to dispose of such
property by any act or any conveyance inter vivos.

Under Article 333 of the same Code, the penalty for adultery is prision correccional in its medium
and maximum periods. Article 333 should be read with Article 43 of the same Code. The latter
provides:

Art. 43. Prision correccional — Its accessory penalties. — The penalty of prision correccional shall
carry with it that of suspension from public office, from the right to follow a profession or calling, and
that of perpetual special disqualification from the right of suffrage, if the duration of said
imprisonment shall exceed eighteen months. The offender shall suffer the disqualification provided in
this article although pardoned as to the principal penalty, unless the same shall have been expressly
remitted in the pardon.

It is clear, therefore, and as correctly held by the CA, that the crime of adultery does not carry the
accessory penalty of civil interdiction which deprives the person of the rights to manage her property
and to dispose of such property inter vivos.
 DAUDEN HERNAEZ V. LOS ANGELES

FACTS

Marlene Dauden-Hernaez, a movie actress, filed a case against Hollywood Far East
Productions its President and General Manager,Ramon Valenzuela, to recover
P14,700 allegedly the balance due for herservices as leading actress in two motion
pictures. The complaint wasdismissed by Judge De Los Angeles mainly because her
claim was not supported by an written document, public or private in violation of
Articles 1356 and 1358 of the Civil Code. Upon a motion forreconsideration, the
respondent judged dismissed the same becausethe allegations were the same as
the first motion.According to Judge De Los Angeles, the contract sued upon wasnot
alleged to be in writing when Article 1358 requires it to be so because the amount
involved exceeds P500.

ISSUE:

Whether or not a contract for personal services involving morethan P500.00 was
either invalid or unenforceable under the last paragraph of Article 1358?

HELDNo.

The order dismissing the complaint is set aside and thecase is remanded to the CFI.

RATIO

Consistent with the Spanish Civil Code in upholding spirit andintent of the parties
over formalities, in general, contracts are valid andbinding from their perfection
regardless of whether they are oral or written.However, as provided in the 2Nd
sentence of Art. 1356:

ART. 1356. Contracts shall be obligatory in whatever formthey may have been
entered into, provided all the essential requisites for their validity are present.

However, when the law requires that a contract be in some form in order that it
may be valid or enforceable, or that a contract be proved ina certain way, that
requirement is absolute and indispensable....

Thus, the two exceptions to the general rule that the form isirrelevant to the
binding effect of a contract are:(a)

Solemn Contracts - contracts which the law requires to be in someparticular form

(writing) in order to make them valid andenforceable. Examples:1.
Donation of immovable property (Art. 749) which must be in apublic instrument to
be valid. in order "that the donation maybe valid", i.e., existing or binding.2.

Donation of movables worth more than P5,000 (Art. 748)which must be in writing
otherwise they are void.(b)

Contracts that the law requires to be proved by some writing(memorandum) of its

terms, i.e. those covered by the old Statute of Frauds, now Article 1403(2) of the
Civil Code.For the latter example, their existence are not provable bymere oral
testimony (unless wholly or partly executed) and arerequired to be in writing to be
enforceable by action in court. However, the contract sued upon (compensation for
services)does not come under either exception. While the last clause of Article1358
provides that "all other contracts where the amount involvedexceeds five hundred
pesos must appear in writing, even a private one."Said Article does not provide that
the absence of a written form in thiscase will make the agreement invalid or
unenforceable.On the contrary, Article 1357 clearly indicates that contractscovered
by Article 1358 are binding and enforceable by action or suit despite the absence of
writing.
 SARMING V. DY

FACTS:

Petitioners are the successors-in-interest of original defendant Silveria Flores, while

respondents Cresencio Dy and Ludivina Dy-Chan are the successors-in-interest of
the original plaintiff Alejandra Delfino, the buyer of one of the lots subject of this
case. They were joined in this petition by the successors-in-interest of Isabel, Juan,
Hilario, Ruperto, Tomasa, and Luisa and Trinidad themselves, all surnamed Flores,
who were also the original plaintiffs in the lower court. They are the descendants of
Venancio4 and Jose5, the brothers of the original defendant Silveria Flores.

In their complaint for reformation of instrument against Silveria Flores, the original
plaintiffs alleged that they, with the exception of Alejandra Delfino, are the heirs of
Valentina Unto Flores, who owned, among others, Lot 5734, covered by OCT 4918-
A; and Lot 4163, covered by OCT 3129-A, both located at Dumaguete City.

After the death of Valentina Unto Flores, her three children, namely: Jose,
Venancio, and Silveria, took possession of Lot 5734 with each occupying a one-third
portion. Upon their death, their children and grandchildren took possession of their
respective shares. The other parcel, Lot 4163 which is solely registered under the
name of Silveria, was sub-divided between Silveria and Jose. Two rows of coconut
trees planted in the middle of this lot serves as boundary line.

In January 1956, Luisa, Trinidad, Ruperto and Tomasa, grandchildren of Jose and
now owners of one-half of Lot 4163, entered into a contract with plaintiff Alejandra
Delfino, for the sale of one-half share of Lot 4163 after offering the same to their
co-owner, Silveria, who declined for lack of money. Silveria did not object to the
sale of said portion to Alejandra Delfino.

Before preparing the document of sale, the late Atty. Deogracias Pinili, Alejandra's
lawyer, called Silveria and the heirs of Venancio to a conference where Silveria
declared that she owned half of the lot while the other half belonged to the
vendors; and that she was selling her three coconut trees found in the half portion
offered to Alejandra Delfino for P15. When Pinili asked for the title of the land,
Silveria Flores, through her daughter, Cristita Corsame, delivered Original
Certificate of Title No. 4918-A, covering Lot No. 5734, and not the correct title
covering Lot 4163. At that time, the parties knew the location of Lot 4163 but not
the OCT Number corresponding to said lot.

Believing that OCT No. 4918-A was the correct title corresponding to Lot 4163, Pinili
prepared a notarized Settlement of Estate and Sale (hereinafter "deed") duly signed
by the parties on January 19, 1956. As a result, OCT No. 4918-A was cancelled and
in lieu thereof, TCT No. 5078 was issued in the names of Silveria Flores and
Alejandra Delfino, with one-half share each. Silveria Flores was present during the
preparation and signing of the deed and she stated that the title presented covered
Lot No. 4163.

Alejandra Delfino immediately took possession and introduced improvements on the

purchased lot, which was actually one-half of Lot 4163 instead of Lot 5734 as
designated in the deed.

Two years later, when Alejandra Delfino purchased the adjoining portion of the lot
she had been occupying, she discovered that what was designated in the deed, Lot
5734, was the wrong lot. She sought the assistance of Pinili who approached
Silveria and together they inquired from the Registry of Deeds about the status of
Lot 4163. They found out that OCT No. 3129-A covering Lot 4163 was still on file.
Alejandra Delfino paid the necessary fees so that the title to Lot 4163 could be
released to Silveria Flores, who promised to turn it over to Pinili for the reformation
of the deed of sale. However, despite repeated demands, Silveria did not do so,
prompting Alejandra and the vendors to file a complaint against Silveria for
reformation of the deed of sale with damages before the Regional Trial Court of
Negros Oriental, Branch 41, docketed as Civil Case No. 3457.

In her answer, Silveria Flores claimed that she was the sole owner of Lot 4163 as
shown by OCT No. 3129-A and consequently, respondents had no right to sell the
lot. According to her, the contract of sale clearly stated that the property being sold
was Lot 5734, not Lot 4163. She also claimed that respondents illegally took
possession of one-half of Lot 4163. She thus prayed that she be declared the sole
owner of Lot 4163 and be immediately placed in possession thereof. She also asked
for compensatory, moral, and exemplary damages and attorney's fees.

The case lasted for several years in the trial court due to several substitutions of
parties. The complaint was amended several times. Moreover, the records had to
be reconstituted when the building where they were kept was razed by fire. But,
earnest efforts for the parties to amicably settle the matters among themselves
were made by the trial court to no avail.
On September 29, 1992, the trial court found in favor of herein respondents.

ISSUE: whether or not reformation of the subject deed is proper by reason of

mistake in designating the correct lot number.

RULING: YES. Reformation is that remedy in equity by means of which a written

instrument is made or construed so as to express or conform to the real intention of
the parties.17 As provided in Article 1359 of the Civil Code:

Art. 1359. When, there having been a meeting of the minds of the parties to a
contract, their true intention is not expressed in the instrument purporting to
embody the agreement by reason of mistake, fraud, inequitable conduct or
accident, one of the parties may ask for the reformation of the instrument to the
end that such true intention may be expressed.

If mistake, fraud, inequitable conduct, or accident has prevented a meeting of the

minds of the parties, the proper remedy is not reformation of the instrument but
annulment of the contract.

An action for reformation of instrument under this provision of law may prosper
only upon the concurrence of the following requisites: (1) there must have been a
meeting of the minds of the parties to the contact; (2) the instrument does not
express the true intention of the parties; and (3) the failure of the instrument to
express the true intention of the parties is due to mistake, fraud, inequitable
conduct or accident.18

All of these requisites, in our view, are present in this case. There was a meeting of
the minds between the parties to the contract but the deed did not express the true
intention of the parties due to mistake in the designation of the lot subject of the
deed. There is no dispute as to the intention of the parties to sell the land to
Alejandra Delfino but there was a mistake as to the designation of the lot intended
to be sold as stated in the Settlement of Estate and Sale.

While intentions involve a state of mind which may sometimes be difficult to

decipher, subsequent and contemporaneous acts of the parties as well as the
evidentiary facts as proved and admitted can be reflective of one's intention. The
totality of the evidence clearly indicates that what was intended to be sold to
Alejandra Delfino was Lot 4163 and not Lot 5734. As found by both courts below,
there are enough bases to support such conclusion. We particularly note that one of
the stipulated facts during the pre-trial is that one-half of Lot 4163 is in the
possession of plaintiff Alejandra Delfino "since 1956 up to the present."19 Now,
why would Alejandra occupy and possess one-half of said lot if it was not the parcel
of land which was the object of the sale to her? Besides, as found by the Court of
Appeals, if it were true that Silveria Flores was the sole owner of Lot 4163, then she
should have objected when Alejandra Delfino took possession of one-half thereof
immediately after the sale. Additionally, we find no cogent reason to depart from
the conclusion of both the Court of Appeals and the trial court, based on the
evidence on record, that Silveria Flores owns only one-half of Lot 4163. The other
half belongs to her brother Jose, represented now by his grandchildren successors-
in-interest. As such, the latter could rightfully sell the land to Alejandra Delfino.

Furthermore, on record, it has been shown that a spot investigation conducted by a

duly licensed surveyor revealed that Lot 4163 is subdivided into two portions, one
belonging to Silveria Flores and the other to the heirs of Jose Flores.20 As found by
the trial court, if indeed it was Lot 5734 that was sold, then Silveria Flores was
occupying more than her share of the inherited lot. As a matter of fact, the trial
court also found that in spite of her title over Lot 4163, Silveria recognized the right
of Jose's grandchildren over one-half portion of the property.

Petitioners now claim that the foregoing testimony of Trinidad Flores was biased.
But we note that the appellate court sustained the trial court's reliance on her
testimony, which both found to be credible. As consistently held, factual findings of
the trial court, especially when affirmed by the appellate court, are binding upon
this Court and entitled to utmost respect.27 Considering these findings, we see no
reason to disturb the trial court's finding, affirmed by the Court of Appeals, that the
object of the contract of sale, as intended and understood by the parties, was Lot
4163 covered by OCT 3129-A which Alejandra, and now her heirs, have been
occupying. The designation of the lot in the deed of sale as Lot 5734, covered by
OCT 4918-A, was a mistake in the preparation of the document. Thus, we concur in
the conclusion reached by the courts a quo that reformation of the instrument is
proper.
 ONG V. ONG

Facts:

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.

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.

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.

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.

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.

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.

Issue:

Whether a Quitclaim Deed is equivalent to a Deed of Sale

Held: YES.

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.

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 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
tobe protected and the donee neither undertakes to do anything nor assumes any
obligation. The Quitclaim now in question does not impose any condition.

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."