Sales Part IV Page |1
G.R. No. L-21489 and L-21628             May 19, 1966
MIGUEL MAPALO, ET AL., petitioners,  fees to the latter on his counterclaim.
vs.
MAXIMO MAPALO, ET AL., respondents.
Contracts; Consent secured through fraud.—When the consent to a contract
was fraudulently obtained, the contract is voidable.
Purchase and sale; Contracts without cause or consideration; Statement of
false consideration.—The rule under the Civil Code, be it the old or the new,
is that contracts without a cause or consideration produce no effect
whatsoever. (Art. 1275, Old Civil Code; Art. 1352, New Civil Code.)
Nonetheless, under the Old Civil Code, the statement of a false consideration
renders the contract voidable, unless it is proven that it is supported by
another real and licit consideration. (Art. 1276, Old Civil Code.)
Same; Annulment of contract on the ground of falsity of consideration;
Prescription.—The action for annulment of a contract on the ground of falsity
of consideration shall last four years, the term to run from the date of the
consummation of the contract. (Art. 1301, Old Civil Code.)
Same; Contract that states false consideration construed.—A contract that
states a false consideration is one that has in fact a real consideration but
the same is not the one stated in the document. (Manresa, Codigo Civil,
Tomo VIII, Vol. II, p. 354.)
Same; Contract without consideration; Effect of statement of consideration in
the document.—Where there was in fact no consideration, the statement of
one in the deed will not suffice to bring it under the rule of Article 1276 of
the Old Civil Code as stating a false consideration.
Same; Statement that purchase price was paid but in fact never been paid to
the vendor.—A contract of purchase and sale is void and produces no effect
whatsoever where the same is without cause or consideration in that the
purchase price, which appears thereon as paid, has in fact never been paid
by the purchaser to the vendor.
Same; Inexistent contract cannot be the subject of prescription.—The
inexistence of a contract is permanent and incurable and cannot be the
subject of prescription.
Attorney’s fees.—Purchasers in bad faith of a parcel of land who brought an
action for its recovery from the true owner were held liable to pay attorney’s
Pedro P. Tuason for petitioners.
Primicias and Del Castillo for respondents.
BENGZON, J.P., J.:
The spouses Miguel Mapalo and Candida Quiba, simple illiterate farmers,
were registered owners, with Torrens title certificate O.C.T. No. 46503, of a
1,635-square-meter residential land in Manaoag, Pangasinan. Said spouses-
owners, out of love and affection for Maximo Mapalo — a brother of Miguel
who was about to get married — decided to donate the eastern half of the
land to him. O.C.T. No. 46503 was delivered. As a result, however, they
were deceived into signing, on October 15, 1936, a deed of absolute sale
over the entire land in his favor. Their signatures thereto were procured by
fraud, that is, they were made to believe by Maximo Mapalo and by the
attorney who acted as notary public who "translated" the document, that the
same was a deed of donation in Maximo's favor covering one-half (the
eastern half) of their land. Although the document of sale stated a
consideration of Five Hundred (P500.00) Pesos, the aforesaid spouses did
not receive anything of value for the land. The attorney's misbehaviour was
the subject of an investigation but its result does not appear on record.
However we took note of the fact that during the hearing of these cases said
notary public was present but did not take the witness stand to rebut the
plaintiffs' testimony supporting the allegation of fraud in the preparation of
the document.
Following the execution of the afore-stated document, the spouses Miguel
Mapalo and Candida Quiba immediately built a fence of permanent structure
in the middle of their land segregating the eastern portion from its western
portion. Said fence still exists. The spouses have always been in continued
possession over the western half of the land up to the present.
Not known to them, meanwhile, Maximo Mapalo, on March 15, 1938,
registered the deed of sale in his favor and obtained in his name Transfer
Certificate of Title No. 12829 over the entire land. Thirteen years later on
October 20, 1951, he sold for P2,500.00 said entire land in favor of Evaristo,
Petronila Pacifico and Miguel all surnamed Narciso. The sale to the Narcisos

was in turn registered on November 5, 1951 and Transfer Certificate of Title
No. 11350 was issued for the whole land in their names.
The Narcisos took possession only of the eastern portion of the land in 1951,
after the sale in their favor was made. On February 7, 1952 they filed suit in
the Court of First Instance of Pangasinan (Civil Case No. 1191) to be
declared owners of the entire land, for possession of its western portion; for
damages; and for rentals. It was brought against the Mapalo spouses as well
as against Floro Guieb and Rosalia Mapalo Guieb who had a house on the
western part of the land with the consent of the spouses Mapalo and Quiba.
The Mapalo spouses filed their answer with a counterclaim on March 17,
1965, seeking cancellation of the Transfer Certificate of Title of the Narcisos
as to the western half of the land, on the grounds that their (Mapalo
spouses) signatures to the deed of sale of 1936 was procured by fraud and
that the Narcisos were buyers in bad faith. They asked for reconveyance to
them of the western portion of the land and issuance of a Transfer
Certificate of Title in their names as to said portion.
In addition, the Mapalo spouses filed on December 16, 1957 their own
complaint in the Court of First Instance of Pangasinan (Civil Case No. U-133)
against the aforestated Narcisos and Maximo Mapalo. They asked that the
deeds of sale of 1936 and of 1951 over the land in question be declared null
and void as to the western half of said land.
Judge Amado Santiago of the Court of First Instance of Pangasinan located
in the municipality of Urdaneta tried the two cases jointly. Said court
rendered judgment on January 18, 1961, as follows:
WHEREFORE, judgment is hereby rendered as follows, to wit:
(a) dismissing the complaint in Civil Case No. 11991;
(b) declaring Exhibit A, plaintiffs in Case No. 11991 and Exhibit 1,
defendants in Case No. U-133 as a donation only over the eastern
half portion of the above-described land, and as null and void with
respect to the western half portion thereof;
(c) declaring as null and void and without legal force and effect
Transfer Certificate of Title No. 12829 issued in favor of Maximo
Sales Part IV Page |2
Mapalo as regards the western half portion of the land covered
therein;
(d) declaring as null and void Transfer Certificate of Title No. 11350
in the names of the Narcisos insofar as the western half portion of
the land covered therein is concerned;
(e) ordering the spouses Mapalo and Quiba and the Narcisos to have
the above-described land be subdivided by a competent land
surveyor and that the expenses incident thereto be borne out by said
partiespro rata;
(f) ordering the Register of Deeds of Pangasinan to issue in lieu of
Transfer Certificate of Title No. 11350 two new titles upon
completion of the subdivision plan, one in favor of the spouses
Miguel Mapalo and Candida Quiba covering the western half portion
and another for the Narcisos covering the eastern half portion of the
said land, upon payment of the legal fees; meanwhile the right of
the spouses Mapalo and Quiba is hereby ordered to be annotated on
the back of Transfer Certificate of Title No. 11350; and
(g) sentencing Maximo Mapalo and the Narcisos to pay the costs.
IT IS SO ORDERED.
The Narcisos appealed to the Court of Appeals. In its decision on May 28,
1963, the Court of Appeals reversed the judgment of the Court of First
Instance, solely on the ground that the consent of the Mapalo spouses to the
deed of sale of 1936 having been obtained by fraud, the same was voidable,
not void ab initio, and, therefore, the action to annul the same, within four
years from notice of the fraud, had long prescribed. It reckoned said notice
of the fraud from the date of registration of the sale on March 15, 1938. The
Court of First Instance and the Court of Appeals are therefore unanimous
that the spouses Mapalo and Quiba were definitely the victims of fraud. It
was only on prescription that they lost in the Court of Appeals.
From said decision of the Court of Appeals, the Mapalo spouses appealed to
this Court.
And here appellants press the contention that the document dated October
15, 1936, purporting to sell the entire land in favor of Maximo Mapalo, is

void, not merely voidable, as to the western portion of the land for being
absolutely simulated or fictitious.
Starting with fundamentals, under the Civil Code, either the old or the new,
for a contract to exist at all, three essential requisites must concur: (1)
consent, (2) object, and (3) cause or consideration. 1 The Court of Appeals is
right in that the element of consent is present as to the deed of sale of
October 15, 1936. For consent was admittedly given, albeit obtained by
fraud. Accordingly, said consent, although defective, did exist. In such case,
the defect in the consent would provide a ground for annulment of a
voidable contract, not a reason for nullity ab initio.
The parties are agreed that the second element of object is likewise present
in the deed of October 15, 1936, namely, the parcel of land subject matter of
the same.
Not so, however, as to the third element of cause or consideration. And on
this point the decision of the Court of Appeals is silent.
As regards the eastern portion of the land, the Mapalo spouses are not
claiming the same, it being their stand that they have donated and freely
given said half of their land to Maximo Mapalo. And since they did not appeal
from the decision of the trial court finding that there was a valid and
effective donation of the eastern portion of their land in favor of Maximo
Mapalo, the same pronouncement has become final as to them, rendering it
no longer proper herein to examine the existence, validity efficacy of said
donation as to said eastern portion.1äwphï1.ñët
Now, as to the western portion, however, the fact not disputed herein is that
no donation by the Mapalo spouses obtained as to said portion. Accordingly,
we start with the fact that liberality as a cause or consideration does not
exist as regards the western portion of the land in relation to the deed of
1936; that there was no donation with respect to the same.
It is reduced, then, to the question whether there was an onerous
conveyance of ownership, that is, a sale, by virtue of said deed of October
15, 1936, with respect to said western portion. Specifically, was there a
cause or consideration to support the existence of a contrary of sale?
The rule under the Civil Code, again be it the old or the new, is that
contracts without a cause or consideration produce no effect
Sales Part IV Page |3
whatsoever.2 Nonetheless, under the Old Civil Code, the statement of a false
consideration renders the contract voidable, unless it is proven that it is
supported by another real and licit consideration.3 And it is further provided
by the Old Civil Code that the action for annulment of a contract on the
ground of falsity of consideration shall last four years, the term to run from
the date of the consummation of the contract.4
Accordingly, since the deed of sale of 1936 is governed by the Old Civil
Code, it should be asked whether its case is one wherein there is no
consideration, or one with a statement of a false consideration. If the
former, it is void and inexistent; if the latter, only voidable, under the Old
Civil Code. As observed earlier, the deed of sale of 1936 stated that it had
for its consideration Five Hundred (P500.00) Pesos. In fact, however, said
consideration was totally absent. The problem, therefore, is whether a deed
which states a consideration that in fact did not exist, is a contract without
consideration, and therefore void ab initio, or a contract with a false
consideration, and therefore, at least under the Old Civil Code, voidable.
According to Manresa, what is meant by a contract that states a false
consideration is one that has in fact a real consideration but the same is not
the one stated in the document. Thus he says:
En primer lugar, nor interesa recordar la diferencia entre simulacion
y el contrato con proposito fraudulento. Este aunque ilicito es real;
mas el primero es falso en realidad, aunque se le presente como
verdadero. (Manresa, Codigo Civil, Tomo VIII, Vol. II, p. 354.)
And citing a decision of the Supreme Court of Spain on the matter, Manresa
further clarifies the difference of false cause and no cause, thus:
Insiste en el distingo con mas detenida descripcion la sentencia de
25 de mayo de 1944, en la que se argumenta:
Si bien es elemento fundamental de todo negocio, la declaracion de
voluntad substracto de una voluntad efectiva, y la existencia de una
causa que leconfiera significado juridico señalando la finalidad que
con este se persigue, no ha de deducirse de esta doctrina,
fundamentalmente recogida en el articulo 1.261 y concordantes del
Codigo civil, que cualquier falta de adecuacion entre cualquier
incongruencia entre la causa expresada y la verdadera, y, en
general, entre la estructuracion y la finalidad economica; hayan de

producir la ineficacia del negocio, pues por el contrario, puede este
ser valido y producir sus efectos tanto en el caso de la mera
disonancia entre el medio juridico adoptado y el fin practico
perseguido, por utilizacion de una via oblicua o combinacion de
formas juridicas entrelazadas que permita la obtencion de un
resultado no previsto en los cuadros de la ley — negocios indirectos
y negocios fiduciarlos, validos cuando no envuelven fraude de ley,
como en el caso de la verdadera disconformidad entre la apariencia
del acto y su real contenido, preparada deliberadamente por las
partes — negocio simulado — , ya que, cuando esta divergencia
implica no una ausencia total de voluntad y de acto real, sino mera
ocultacion de un negocio verdadero bajo la falsa apariencia de un
negocio fingido "sirulacion relativa", la ineficacia de la forma externa
simulada, no es obstaculo para la posible validez del negocio
disimulado que contiene, en tanto este ultimo sea licito y reuna no
solo los requisitos generales, sino tambien los que corresponden a su
naturaleza especial, doctrina, en obligada aplicacion de los preceptos
de nuestra Ley civil, especialmente en su art. 1.276, que, al
establecer el principio de nulidad de los contratos en los que se hace
expresion de una causa falsa, deja a salvo el caso de que esten
fundados en otra verdadera y licita. (Manresa, Codigo Civil, Tomo
VIII, Vol. II pp. 357-358)
Sanchez Roman says:
Ya hemos dicho que la intervencion de causa en los contratos es
necesaria, y que sin ellos son nulos; solo se concibe que un hombre
perturbado en su razon pueda contratar sin causa. ...
Por la misma razon de la necesidad de la intervencion de causa en el
contrato, es preciso que esta sea verdadera y no supuesta, aparente
o figurada. Que la falsedad de la causa vicia el consentimiento y
anula el contrato, es, no solo doctrina indudable de Derecho
Cientifico sino tambien de antiguo Derecho de Castilla, que en
multitud de leyes asi lo declararon. (Sanchez Roman, Derecho Civil,
Tomo IV, p. 206.).
In a clearer exposition of the above distinction, Castan states:
2.º. La causa ha de ser verdadera. La causa falsa puede ser erronea
o simulada. Es erronea como dice Giorgi, la causa que tiene por base
Sales Part IV Page |4
la credulidad en un hecho no existente; y simulada la que tiene lugar
cuando se hace aparecer artificiosamente una distinta de la
verdadera. La erronea produce siempre la inexistencia del contrato;
la simulada no siempre produce este efecto, porque puede suceder
que la causa oculta, pero verdadera, baste para sostener el contrato.
De acuerdo con esta doctrina, dice el art. 1.276 de nuestro Codigo
que "la expresion de una causa falsa en los contratos dara lugar a la
nulidad, si no se probase que estaban fundados en otra verdadera y
licita". (Castan Derecho Civil Español, Tomo II, pp. 618-619)
From the foregoing it can be seen that where, as in this case, there was in
fact no consideration, the statement of one in the deed will not suffice to
bring it under the rule of Article 1276 of the Old Civil Code as stating a false
consideration. Returning to Manresa:
Figurando en nuestro Derecho positivo la causa, como un elemento
esential del contrato, es consecuencia ineludible, se reputar simulada
la entrega del precio en la compraventa de autos, el que haya que
declararla nula por inexistente haciendose aplicacion indebida de art.
1.276 por el Tribunal sentenciador al cohonestar la falta de precio
admitiendo se pueda tratar de una donacion, ya que la recta
aplicacion del citado precepto exige que los negocios simulados, o
sea con causa falsa, se justifique la verdadera y licita en que se
funda el acto que las partes han querido ocultar y el cumplimiento
de las formalidades impuestas por la Ley y, cual dice la sentencia de
3 de marzo de 1932, esta rigurosa doctrina ha de ser especialmente
impuesta en la donaciones puras y simples; de los que deduce que
la sentencia recurrida al no decretar la nulidad instada por falta de
causa, incide en la infraccion de los articulos 1.261, 1.274, 1.275 y
1.276 del Codigo Civil. (Sentencia de 22 de febrero de 1940).
(Manresa, Codigo Civil, Tomo VIII, Vol. II, p. 356)
In our view, therefore, the ruling of this Court in Ocejo, Perez & Co. vs.
Flores, 40 Phil. 921, is squarely applicable herein. In that case we ruled that
a contract of purchase and sale is null and void and produces no effect
whatsoever where the same is without cause or consideration in that the
purchase price which appears thereon as paid has in fact never been paid by
the purchaser to the vendor.
Needless to add, the inexistence of a contract is permanent and incurable
and cannot be the subject of prescription. In the words of Castan: "La

inexistencia es perpetua e insubsanable no pudiendo ser objecto de
confirmacion ni prescripcion (Op. cit., p. 644.) In Eugenio v. Perdido, 97 Phil.
41, 42-43, involving a sale dated 1932, this Court, speaking through Justice
Cesar Bengzon, now Chief Justice, stated:
Under the existing classification, such contract would be "inexisting"
and "the action or defense for declaration" of such inexistence "does
not prescribe". (Art. 1410, New Civil Code). While it is true that this
is a new provision of the New Civil Code, it is nevertheless a principle
recognized since Tipton vs. Velasco, 6 Phil. 67 that "mere lapse of
time cannot give efficacy to contracts that are null and void".
Anent the matter of whether the Narcisos were purchasers in good faith, the
trial court in its decision resolved this issue, thus:
With regard to the second issue, the Narcisos contend that they are
the owners of the above-described property by virtue of the deed of
sale (Exh. B, plaintiffs in 11991 and Exh. 2, defendants in U-133)
executed in their favor by Maximo Mapalo, and further claim that
they are purchasers for value and in good faith. This court, however,
cannot also give weight and credit on this theory of the Narcisos on
the following reasons: Firstly, it has been positively shown by the
undisputed testimony of Candida Quiba that Pacifico Narciso and
Evaristo Narciso stayed for some days on the western side (the
portion in question) of the above-described land until their house
was removed in 1940 by the spouses Mapalo and Quiba; secondly,
Pacifica Narciso admitted in his testimony in chief that when they
bought the property, Miguel Mapalo was still in the premises in
question (western part) which he is occupying and his house is still
standing thereon; and thirdly, said Pacifico Narciso when presented
as a rebuttal and sub-rebuttal witness categorically declared that
before buying the land in question he went to the house of Miguel
Mapalo and Candida Quiba and asked them if they will permit their
elder brother Maximo to sell the property.
Aside from the fact that all the parties in these cases are neighbors,
except Maximo Mapalo the foregoing facts are explicit enough and
sufficiently reveal that the Narcisos were aware of the nature and
extent of the interest of Maximo Mapalo their vendor, over the
above-described land before and at the time the deed of sale in their
favor was executed.
Sales Part IV Page |5
Upon the aforestated declaration of Pacifico Narciso the following
question arises: What was the necessity, purpose and reason of
Pacifico Narciso in still going to the spouses Mapalo and asked them
to permit their brother Maximo to dispose of the above-described
land? To this question it is safe to state that this act of Pacifico
Narciso is a conclusive manifestation that they (the Narcisos) did not
only have prior knowledge of the ownership of said spouses over the
western half portion in question but that they also have recognized
said ownership. It also conclusively shows their prior knowledge of
the want of dominion on the part of their vendor Maximo Mapalo
over the whole land and also of the flaw of his title thereto. Under
this situation, the Narcisos may be considered purchasers in value
but certainly not as purchasers in good faith. ... (pp. 97-98, Record
on Appeal.)
And said finding — which is one of fact — is found by us not a bit disturbed
by the Court of Appeals. Said the Court of Appeals:
In view of the conclusion thus reached, it becomes unnecessary to
pass on the other errors assigned. Suffice it to say that, on the
merits the appealed decision could have been upheld under Article
1332 of the new Civil Code and the following authorities: Ayola vs.
Valderrama Lumber Manufacturers Co., Inc., 49 O.G. 980,
982; Trasporte vs. Beltran, 51 O.G. 1434, 1435; Cortez vs. Cortez,
CA-G.R. No. 18451-R, August 8, 1961; Castillo vs. Laberinto, CA-G.R.
No. 18118-R, December 20, 1961; and 13 C.J. 372-373, as well as
the several facts and circumstances appreciated by the trial court as
supporting appellees' case.
thereby in effect sustaining — barring only its ruling on prescription — the
judgment and findings of the trial court, including that of bad faith on the
part of the Narcisos in purchasing the land in question. We therefore see no
need to further remand this case to the Court of Appeals for a ruling on this
point, as appellees request in their brief in the event we hold the contract of
1936 to be inexistent as regards the western portion of the land.
In view of defendants' bad faith under the circumstances we deem it just
and equitable to award, in plaintiffs' favor, attorneys' fees on appeal, in the
amount of P1,000.00 as prayed for in the counterclaim.

Wherefore, the decision of the Court of Appeals is hereby reversed and set
aside, and another one is hereby rendered affirming in toto the judgment of
the Court of First Instance a quo, with attorney's fees on appeal in favor of
appellants in the amount of P1,000.00, plus the costs, both against the
private appellees. So ordered.
G.R. No. 83974. August 17, 1998
SPOUSES NARCISO RONGAVILLA and DOLORES
RONGAVILLA, petitioners, vs. COURT OF APPEALS AND MERCEDES
DELA CRUZ AND FLORENCIA DELA CRUZ, respondents.
Contracts; Sales; Land Titles; The admission by a party that he had resorted
to doctoring the price stated in a Deed of Sale, allegedly “to save on taxes,”
surely opens the door to questions on the integrity, genuineness and veracity
of said public instrument.—Despite the petitioners’ insistence that the deed of
sale is presumed valid and, being registered, could not be disturbed anymore,
we however find their arguments and ratiocination less than persuasive. While
petitioners would not want the deed of sale to be impugned, they themselves
contradict the recitals therein. On the vital point of consideration, they and
their witnesses, namely Juanita Jimenez and Atty. Arcadio Espiritu repeatedly
declared that the true consideration paid for the sale of the land was not
P2,000 as stated in their own Exhibit “1,” the Deed of Sale, but in fact
P7,800.00. x x x By their own testimony, the petitioners are pictured as not
exactly averse to bending the truth, particularly the purported consideration.
Sadly, the irony of it is that while they claimed they were regularly paying
taxes on the land in question they had no second thoughts stating at the trial
and later on appeal that they had resorted to doctoring the price stated in the
disputed Deed of Sale, allegedly “to save on taxes.” That admission surely
opens the door to questions on the integrity, genuineness and veracity of said
public instrument.
Same; Same; Pleadings and Practice; Appeals; In petitions under Rule 45, the
Court does not dwell on the alleged grave abuse of discretion but limits its
observation to alleged errors of law.—But petitioners herein would further
take to task the appellate court for grave abuse of discretion, as well as for a
reversible error, in having relied on the “purported Certification of the Bureau
of Internal Revenue which was not offered in evidence.” Since this is a
petition under Rule 45, however, we will not dwell on the alleged grave abuse
of discretion but limit our observation to the alleged error of law. The BIR
Sales Part IV Page |6
certificate was the subject of the testimony of witnesses at the hearing where
both parties took full advantage of the opportunity for direct and cross-
examination as well as rebuttal and sur-rebuttal.
Same; Same; Once a disputed deed is found to be inexistent and void, the
statute of limitations cannot apply—the cause of action for its declaration as
such is imprescriptible.—Turning now to the issue of prescription, it follows
that once the disputed deed is found to be inexistent and void, the statute of
limitations cannot apply. As the courts below ruled, the cause of action for its
declaration as such is imprescriptible.
Same; Same; Senior Citizens; Public policy is also well served in defending the
rights of the aged to legal protection, including their right to property that is
their home, as against fraud, misrepresentation, chicanery and abuse of trust
and confidence by those who owed them candor and respect.—Here in the
present case, there is no doubt about the credibility of plaintiffs below (herein
private respondents) in pursuing their cause promptly and forcefully. They
never intended to sell, nor acceded to be bound by the sale of their land.
Public policy is also well served in defending the rights of the aged to legal
protection, including their right to property that is their home, as against
fraud, misrepresentation, chicanery and abuse of trust and confidence by
those who owed them candor and respect.
Same; Same; There is no need of an action to set aside a void or inexistent
contract, as in fact such action cannot logically exist, though an action to
declare the non-existence of the contract can be maintained, and in that same
action, the plaintiff may recover what he has given by virtue of that contract.
—And if the passage of time could not cure the fatal flaw in the inexistent and
void contract, neither could an alleged ratification or confirmation thereof.
Further, as in the case before us, reconveyance is proper. “The defect of
inexistence of a contract is permanent and incurable, hence it cannot be
cured either by ratification or by prescription. x x x There is no need of an
action to set aside a void or inexistent contract; in fact such action cannot
logically exist. However, an action to declare the nonexistence of the contract
can be maintained; and in the same action, the plaintiff may recover what he
has given by virtue of the contract.”
Same; Same; Experience is the life of the law.—Given the circumstances of
the case and there being no reversible error in the challenged decision, we
are in accord with the judgment below and find the petitioners’ appeal
without merit. For as well said in the Court of Appeals’ Decision and
Resolution under review, “We cannot contemplate of the rather absurd
situation, which defendantsappellants would ineluctably lead [u]s to, where
plaintiffs-appellees would sell their only house, in which they have lived for so

many years, in order to secure the measly sum of P2,000.00 to repair the roof
of their only house, which would all be lost to them anyway upon the
consummation of the sale. They would then become homeless, and the
repaired roof would be of no use to them.” Experience which is the life of the
law—as well as logic and common sense—militates against the petitioners’
cause.
DECISION
QUISUMBING, J.:
For review on appeal by certiorari are the Decision[1] of the Court of Appeals
in CA-G.R. CV No. 06543, promulgated on March 11, 1988, and the
Resolution[2] dated June 28, 1988, denying petitioner's motion for
reconsideration.
The appealed decision affirmed in toto the judgment of the Regional Trial
Court of Pasay City in Civil Case No. LP-8790-P, which disposed of the
controversy as follows:
"WHEREFORE, judgment is hereby rendered declaring void and inexistent
the Deed of Absolute Sale (Exh. "I") dated June 3, 1976 allegedly executed
by plaintiffs in favor of defendant spouses, which document is now
particulary identified as Doc, No. 164; Page no. 34; Book No. I; Series of
1976 in the Notarial Register of Arcadio Espiritu, a Notary Public for and in
Province of Cavite. Further, defendant spouses are hereby ordered -
a. To reconvey to the plaintiffs, free from all liens and encumbrances, the
property covered by Transfer Certificate of Title No. S-28903 of the Registry
of Deeds for the Province of Rizal;
b. . To pay to plaintiffs the sum of P5,000.00 as attorney's fees; and
c. To pay the cost of the suit."[3]
As gleaned from the record, the private parties are closely related. Plaintiffs
below, now the private respondents, are the aunts of herein petitioner
Dolores Rongavilla. Both spinsters, they earn their livelihood as embroiderers
("magbuburda") and dressmakers; although unschooled in English, they are
however able to read and write in Tagalog. Since they are of advanced age
(Mercedes de la Cruz, 60 and Florencia de la Cruz, 71), their day to day
activities were confined mostly close to home.
Sales Part IV Page |7
The property subject of this controversy between kith and kin is a parcel of
land, located in Manuyo, Las Pias, Rizal (now Metro Manila) owned by private
respondents, in the proportion of one-half (1/2) pro-indiviso, with another
niece named Juanita Jimenez as co-owner of the other one-half. The whole
parcel consisted of 131 square meters and was covered by Original
Certificate of Title (OCT) No. 5415 of the Register of Deeds of the Province
of Rizal. This OCT, as well as the Transfer Certificate of Title (TCT) No. S-
28903 after the parcel was subdivided, was kept in the possession of Juanita
Jimenez, who is the elder sister of Dolores Rongavilla.
Although the basic fact situation here might appear all too familiar, the legal
controversy itself is notable for having passed through the entire channel of
the justice system.[4] The present petition before us was given due course
per Resolution[5] dated June 26, 1989; but it was denied on September 20,
1989, for non-compliance with certain requirements; [6] although, upon
motion for reconsideration by the petitioners showing compliance, it was
reinstated[7] on September 2, 1991.
Considering the circumstances in this case, including the relationship of the
parties, it behooves this Court now to examine closely and carefully the
questioned judgment and the record below. For the Court could not but be
mindful of the codal admonition that:
"In all contractual, property or other relations, when one of the parties is at
a disadvantage on account of his moral dependence, ignorance, indigence,
mental weakness, tender age, or other handicap, the courts must vigilant for
his protection." (Art. 24, Civil Code)
From the facts found below, it appears that in the month of May, 1976, the
private respondents borrowed the amount of two thousand (P2,000) from
the petitioners for the purpose of having their (respondents') dilapidated
rooftop repaired.
A month later, petitioner Dolores Rongavilla and her sister Juanita Jimenez
visited their aunt's home, bringing with them a document for the signature of
their aunts. The document is admittedly typewritten in English. When asked
in Tagalog by one of the aunts, respondent Mercedes de la Cruz, what the
paper was all about, Dolores Rongavilla answered also in Tagalog, that it
was just a document to show that the private respondents had a debt
amounting to P2,000. On account of that representation, private respondent
signed the document.
In September 1980, or after a lapse of over four years, petitioner Dolores
Rongavilla went to private respondents' place and asked them to vacate the

parcel in question, claiming that she and her husband were already the new
owners of the land.
Surprised by petitioners' moves, private respondents with the help of friends
went to the Office of the Register of Deeds of the Province of Rizal to verify
the matter. They discovered that their Certificate of Title had been cancelled
and a new one, Transfer Certificate of Title No. S-28903, had been issued in
favor of petitioners. They further discovered that said parcel of land had
been mortgaged with the Cavite Development Bank by the petitioners. It was
only then that the private respondents realized that the document they had
previously been asked by their nieces to sign was a deed of sale.
On February 3, 1981, private respondents filed with the Court of First
Instance, now Regional Trial Court, of Pasay City the sworn complaint [8] to
have the purported deed of sale declared void and inexistent, for being
fictitious and simulated, and secured by means of fraud and
misrepresentation. They alleged that they did not sell their property in
question to the defendants; that they did not receive any consideration on
the supposed sale; that their Original Certificate of Title was cancelled and
TCT No. S-28903 was issued in favor of defendants (herein petitioners), who
thereafter mortgaged said title for a total of P40,000.00 to the damage and
prejudice of the plaintiffs. They also claimed moral and exemplary damages,
as the court might determine.
Petitioners duly filed their answer[9] after the denial of their motion to
dismiss, alleging that plaintiffs (now the private respondents) sold their
parcel of land voluntarily, that there was consent to the deed of sale, that
there was sufficient consideration therefor and that the document on the
sale was complete in itself and in due form, enabling the Register of deeds
to cancel their old TCT and issue a new one. Petitioners further stated that
private respondent were fully appraised by the Notary Public, Atty. Arcadio
G. Espiritu, on what the document was all about, and having understood the
explanation made by said Notary Public, they voluntarily affixed their
signatures on said document. Petitioners also asserted as affirmative and/or
special defenses that prescription had set in and that private respondents no
longer had a cause of action, and that the deed of sale contained all the pre-
requisites of a contract, namely consent of the parties, consideration or a
price certain, and determinate thing or object; and could no longer be
annulled. They also claimed moral and exemplary damages.
The trial court's judgment, quoted at the outset, being adverse to the
petitioners, they seasonably appealed. And after their rebuff at the appellate
level, they come now to this Court on certiorari under Rule 45 of the Rules of
Court, citing the following grounds for their petition:
Sales Part IV Page |8
"(1) It is clear and patent error of the Court of Appeals to declare as 'void
and inexistent the Deed of Absolute Sale (Exhibit 1) dated June 3, 1976.
(2) The Court of Appeals committed grave error of law in holding that the
action to declare nullity of the Deed of Absolute Sale (Exhibit 1) does not
prescribe.
(3) The Court of Appeals committed grave abuse of discretion in relying on a
purported Certificate of Bureau of Internal Revenue which was not offered in
evidence.
(4) The Court of Appeals committed grave error of law and abuse of
discretion and grave abuse of discretion amounting to lack or excess of
jurisdiction in ordering the petitioners to reconvey the subject parcel of land
to the private respondents."[10]
With a slight variation but consistent with the grounds they have relied on
petitioners raise in their Memorandum[11] the following:
"ISSUES
1. Did the Court of Appeals commit a clear and patent error in declaring as
'void and inexistent' the Deed of Absolute Sale (Exhibit 1) dated June
3, 1976?
2. Did the Court of Appeals commit grave error in holding that the action to
annul the Deed of Sale (Exhibit 1) does not prescribe?
3. Did the Court of Appeals commit grave abuse of discretion in relying on a
purported Certificate of the Bureau of Internal Revenue which was
not offered in evidence?
4. Did the Court of Appeals commit grave error of law and grave abuse of
discretion amounting to lack of jurisdiction or in excess of jurisdiction
in ordering petitioners to reconvey the subject parcel of land to the
private respondents?"
These issues may be synthesized into one: Did the respondent Court of
Appeals commit reversible error when it upheld the trial court's judgment
that the disputed Deed of Sale (Exhibit "1") is void and inexistent?

To resolve this pivotal issue, it must be noted that private respondents, as
plaintiffs below, based their complaint to declare the disputed deed void and
inexistent on two fundamental grounds: (1) lack of consent and (2) want of
consideration. Under oath, they strongly denied selling or even just agreeing
to sell, their parcel of land to their niece and nephew-in-law. During the
hearing, they also denied going to and appearing before the Notary Public
who prepared the deed of sale. They also vehemently denied receiving any
consideration for the alleged sale. They added that their signatures on the
purported deed of sale were obtained by fraud and misrepresentation as
petitioners had misled them to believe the document was just a paper to
evidence a debt of P2,000 they obtained to buy G.I sheets for the repair of
their leaking roof.[12] Private respondents were shocked and got sick when
they were told by petitioners that they (respondents) were no longer the
owners of the land.[13]
On these two points of consent and consideration, the trial court found that:
"x x x. A careful analysis and meticulous evaluation of the evidence on
record has convinced the Court that the sale of their property to the
defendants was farthest from the plaintiffs' minds. The Court believes that
when plaintiffs voluntarily signed the document which turned out to be a
deed of sale, they were misled by defendant Dolores Rongavilla and her
sister Juanita Jimenez into believing that what they signed was a document
acknowledging the loan of P2,000.00 extended them by said defendant.
"The Deed of Absolute Sale (Exh. "l") mentions a consideration of P2,000.00.
Three years after the alleged sale, the same property was mortgaged by
defendant spouses with the Cavite Development Bank for P40,000.00.
Clearly enough, the gross inadequacy and unconsciounableness [sic] of the
consideration deters the Court from subscribing to defendants' theory that
plaintiffs sold the property to them. It is more reasonable to assume that the
amount of P2,000.00 mentioned in the deed refers to the loan defendants
extended to plaintiffs for the same amount.
"Plaintiffs are now of advanced age. Their only property is the lot in question
and the house erected thereon. x x x.
"As there is no indication that plaintiffs were in dire need of money, except
for few [sic] amount, except for few [sic] amount necessary for the repair of
the roof of their house for which they obtained a loan of P2,000.00 from
defendants, there was no reason for plaintiffs to dispose of their property. To
do so would be inconsistent with the regular norm of human conduct and the
Sales Part IV Page |9
natural course of events. It is not in accord with the natural promptings and
instincts of human nature."[14]
To these findings by thetrial court, the Court of Appelas in its own decision
asserted. In addition, it laid stress on the point of lack of consideration by
quoting agreeably the trial judge's holding thereon:
"By more than mere preponderance of evidence of evidence plaintiffs [herein
private respondents] have established the merit of their cause of action. The
Court is of the opinion and so holds that there was fraud exercised by
defendant Dolores Rongavilla and her sister Juanita Jimenez in securing the
signature of the Deed of Absolute Sale (Exh. 'l') and there was no
consideration whatsoever dor the alleged sale. Undoubtedly, the said deed of
sale is simulated, fictitious and void."[15]
And before concluding, the appellate court reiterated the proper
characterization of the deed of sale in question, not as an annullable
contract, but as a void and inexistent contract asfound by the trial court:
"x x x. In the case at bar, however, We are dealing not merely with a
voidable contract which is tainted with fraud, mistake, undue influence,
violence or intimidation which may justify the annulment of a contract, but
with a contract that is null and void  ab initio.
"In the present case, plaintiffs-appellees declared under oath in their
complaint that they signed the alleged document without knowing that said
document was a deed of absolute sale. This means that plaintiffs-appelles
consent was not only vitiated, but that plaintiffs-appealles have not give their
consent at all. And since there was no consent, the deed of absolute sale is,
therefore, null and void ab initio. xxx'"[16]
Dissatisfied, petitioners now seek from this Court the reversal of the
judgment below. They insist in their petition before us that the deed is valid;
and that because of the statute of limitations, after the lapse of four years
from its execution and registration, it could no longer be annulled.
They assert that "the presumption that contracts are presumed to be valid
and to be supported by lawful and good consideration of one dollar is just as
effectual and valuable as a larger sum stipulated or paid''.[17]
They further assert that since private respondents signed the Deed of Sale,
as a public instrument, the truth of the recitals therein embodied could only

be impugned and disproved, not by mere preponderance of evidence, but by
evidence of the "the clearest and most satisfactory character, convincing and
overwhelming.'"[18] Petitioners further state that since they have been the
ones paying real estate taxes on the property, rather than their aunts, the
latter by their acts had confirmed the deed executed by them.[19]
Despite the petitioners' insistence that the deed of sale is presumed valid
and, being registered, could not be disturbed anymore, we however find
their arguments and ratiocination less than persuasive. While petitioners
would not want the deed of sale to be impugned, they themselves contradict
the recitals therein. On the vital point of consideration, they and their
witnesses, namely Juanita Jimenez and Atty. Arcadio Espiritu repeatedly
declared that the true consideration paid for the sale of the land was
not P2,000 as stated in their own Exhibit "l", the Deed of Sale, but in
fact P7,800.00.[20]
Petitioner Dolores Rongavilla herself on cross-examination testified as
follows:
"Atty. Rodriguez:
Q.  You stated that you were present when this was explained by the notary
public, how did the notary public explain this deed of sale in English
or Tagalog?
A. It was explained by the notary public  that the property is being sold by
them to us and that the consideration was only  P2,000.00 as
appearing in the document in order that we may be able to save for
the payment of taxes  and documentary stamps.
Q.  Did the plaintiffs not say anything when the notary public according to
you explained that instead of P7,800.00, P2,000.00 will be stated in
the document?
A. They did not say anything because we gave to them the amount of the
consideration agreed between us the sum of P7,800.00. (t.s.n.,
Sept. 2, 1982, pp. 9-10)"[21]
By their own testimony, the petitioners are pictured as not exactly averse to
bending the truth, particularly the purported consideration. Sadly, the irony
of it is that while they claimed they were regulary paying taxes on the land in
question they had no second thoughts stating at the trial and later on appeal
that they had resorted to doctoring the price stated in the disputed Deed of
Sale, allegedly "to save on taxes". That admission surely opens the door to
S a l e s P a r t I V P a g e | 10
questions on the integrity, genuineness and veracity of said public
instrument.
Thus, the trial court could not be said to err in asserting that "while it is true
that public documents are presumed genuine and regular under the
provisions of the Rules of Court, this presumption is a rebuttable
presumption which may be overcome by clear, strong and convincing
evidence."[22]
Moreover, Exhibit "l", the deed itself, shows that contrary to the testimony of
the notary public, who appeared as a witness for petitioners, what was
originally typed therein was the amount of "Three Thousand Pesos
(P3,000)", which later on was substituted by the handwritten amount now of
Two Thousand Pesos (P2,000)."[23] There is no need to speculate on the
motivation for this alteration. The notary public might have just wanted to
further save on taxes, rather than short-change the coffers of the
government. But, again, the whole fabric of petitioners' claim to the sanctity
of the deed as public instrument had thereby been shredded.
If as petitioners claimed on trial, the price paid was P7,800 while their deed
showed only P2,000, after the amount of P3,000 in the deed was altered,
one may well inquire: which figure could this Court believe? Could one say
that the trial and the appellate courts both erred in holding that no
consideration passed from the buyer to the seller?
But petitioners herein would further take to task the appellate court for grave
abuse of discretion, as well as for a reversible error, in having relied on the
"purported Certification of the Bureau of Internal Revenue which was not
offered in evidence". Since this is a petition under Rule 45, however, we will
not dwell on the alleged grave abuse of discretion but limit our observation
to the alleged error of law. The BIR certificate was the subject of
the testimony of witnesses at the hearing where both parties took full
advantage of the opportunity for direct and cross-examination as well as
rebuttal and sur-rebuttal.[24] On the witness stand, private respondents as
plaintiffs below denied that they had any tax account number nor even
residence certificates. They were supported by their witnesses, testifying also
under oath. They contradicted the claim of the petitioners' lawyer-notary
public, that the disputed deed of sale was complete and in due form and was
signed in his presence by the private respondents. They further denied even
having gone to the office of the lawyer-notary public in Bacoor, Cavite, on
June 3, 1976, the date of execution shown in the deed, or on any other date.
While indeed the BIR certificate was not formally offered in evidence, hence
no longer available on review, the record would show that said BIR

certificate was presented during the testimony on rebuttal of respondent
Mercedes de la Cruz:[25]
"ATTY. RODRIGUEZ:
According to the defendants, there was the alleged deed of sale executed
by you and your sister in favor of the defendants before  Notary
Public Arcadio G. Espiritu. It appears you have presented Tax
Account No. (TAN) 2345-463-6 and your sister Florencia de la Cruz
also presented Tax Account No. (TAN) 2345-468-4. Now, do you
have any tax account number?
WITNESS:
None, sir.[26]
xxx
ATTY. RODRIGUEZ:
I am showing to you this certification  from the "Kawanihan ng Rentas,
Quezon City , dated June 16, 1982, addressed to Miss Florencia de
la Cruz and Miss Mercedes de la Cruz, Las Pias, Metro-Manila, issued
by the accounting chief, stating that in reply to you[r] request dated
June 14, 1982, requesting certification  of your TAN, the records of
their office do not show that you were issued any tax account
number, what relation has this document which for purposes of
identification, we respectfully request that the same be marked
Exhibit "C" to the certification issued by the BIR?
WITNESS:
"Yes, this is the one."[27]
Now even if the matter of the official certification by the BIR is set aside, the
whole question of the TAN being fake or belonging to somebody else, would
boil down to one of credibility between the two camps. Unfortunately for the
petitioners herein, the trial court found them and their witnesses far from
credible. As remarked by the trial Judge, "the declarations of defendants
[herein petitioners] do not inspire rational belief."[28] It would thus appear
that the trial court and the appellate court committed no grave error of law,
that would impel us on this point to override their judgment.
Neither can we give assent to the assertion of petitioners that the appealed
Court of Appeals (CA) decision here as well as the judgment below is
"contrary to settled jurisprudence". This Court in Rivero v. Court of Appeals,
S a l e s P a r t I V P a g e | 11
80 SCRA 411 (1977) had occasion already to affirm a trial court's judgment
declaring null and void the questioned deed of sale where it found:
"The undisputed facts of record support the finding of the trial court that
the consent of Ana Concepcion to the deed of sale was obtained through
fraudulent misrepresentation of [her nephew] Jaime Rivero that the contract
she was signing was one of mortgage."
"The land in question is located in the municipality of Polo, Bulacan, very
near Manila. It has an area of 2 hectares, 32 ares and 45 centares.
The consideration for the sale of said land is only P5,000.00 which is not only
grossly inadequate but shocking to the conscience x x x"[29]
In Ocejo, Perez & Co. vs. Flores, 40 Phil. 921 (1920), regarding the sale of
land in Tayabas, Quezon, the Court confronted a similar question:
"The first question presented is whether the contract of sale executed by
Isabel Flores in favor of Joaquin Bas is valid or not.
"By relying upon the documents executed in his favor by Isabel Flores
evidencing the contract of sale, Joaquin Bas insists that there has been a
perfect and valid contract of sale of real estate between them and that he
paid to her the consideration of P20,000 mentioned in said documents. x x x.
"Isabel Flores, on the other hand, maintained that there was neither a real
sale nor did she receive a centavo from the defendant, as the price of said
sale, x x x."[30]
Concluded the Court, after reviewing the series of transactions on
record:
"It is then evident that the contract of sale mentioned in the notarial
document of May 7, 1915, lacks cause or consideration and is therefore null
and void and without any effect whatsoever according to Article 1275 of the
Civil Code, for it has been satisfactorily and conclusively proven that the
purchaser Joaquin Bas has not paid Isabel Flores for the price of the lands
that the latter has sold to him, and after being contented with having for a
long time given several promises showing that he had no intention to comply
with his contract, he concluded by executing four promissory notes payable
to the vendor, which recite the aforementioned purchase price and which

were not also paid, there appearing in the record facts from which it can be
inferred that fraud has been committed."[31]
This Court in Mapalo v. Mapalo, 17 SCRA 114 (1966) stated:
"The rule under the Civil Code, again be it the old or the new, is that
contracts without a cause or consideration produce no effect whatsoever."[32]
The "problem" before the Court "is whether a deed which states a
consideration that in fact did not exist, is a contract, without consideration,
and therefore void ab initio, or a contract with a false consideration, and
therefore, at least under the Old Civil Code, voidable." This problem arose,
as observed by the Court, because the questioned "deed of sale" between
the brothers Magpalo, in 1936, stated that it had for its consideration Five
Hundred (P500.00) Pesos. In fact, however, said "consideration was totally
absent."[33]
Thus, the Court concluded:
"In our view, therefore, the ruling of this Court in Ocejo, Perez & Co. vs.
Flores, 40 Phil. 921 is squarely applicable herein. In that case we ruled that a
contract of purchase and sale is null and null and void and produces no
effect whatsoever where the same is without cause or consideration in that
the purchase price which appears thereon as paid has in fact never been
paid by the puchaser to vendor."[34]
Turning now to the issue of prescription, it follows that once the disputed
deed is found to be inexistent and void, the statute of limitations cannot
apply. As the courts below ruled, the cause of action for its declaration as
such is imprescriptible.[35] Petitioners-spouses contend, however, that this is
contrary to settled jurisprudence because the applicable precedent should
be Pangadil v. CFI of Cotabato, 116 SCRA 347 (1982). But the fact situation
of that case differs radically from the present controversy. There the Court
upheld the dismissal of the action to declare a document known as
"Ratificacion de Una Venta" as inexistent and void after finding that it was
"not a contract wherein the parties do not intend to be bound at all;" that no
circumstance was alleged to sustain the contention "that the execution of the
aforesaid document is contrary to public policy;"[36] and that for 27 years the
petitioners did not even care to verify the status of the land in question.
"Their inaction for such a considerable period of time reflects on the
credibility of their pretense that they merely intended to confirm an oral
mortgage, instead of sale of the land in question."[37]
S a l e s P a r t I V P a g e | 12
Here in the present case, there is no doubt about the credibility of plaintiffs
below (herein private respondents) in pursuing their cause promptly and
forcefully. They never intended to sell, nor acceded to be bound by the sale
of their land. Public policy is also well served in defending the rights of the
aged to legal protection, including their right to property that is their home,
as against fraud, misrepresentation, chicanery and abuse of trust and
confidence by those who owed them candor and respect.
More to the point, in our view, is  Baranda v. Baranda, 150 SCRA 59 (1987),
where this Court found that:
"This Civil Code provides in Article 1391 that an action to annul a contract on
the ground of vitiated consent must be filed within four years from the
discovery of the vice of consent. In the instant case, however, we are
dealing not with a voidable contract tainted with fraud, mistake, undue
influence, violence or intimidation that can justify its nullification, but with a
contract that is null and void ab initio
"Paulina Baranda declared under oath in her complaint that she signed the
deeds of sale without knowing what they were, which means that her
consent was not merely marred by the above-stated vices, so as to make the
contracts voidable, but that she had not given her consent at all. We are
also satisfied that there was no valid consideration either for the alleged
transfers, for reasons already discussed. Lack of consent and consideration
made the deeds of sale void altogether [38]and rendered them subject to
attack at any time, conformably to the rule in Article 1410 that an action to
declare the inexistence of void contracts 'does not prescribe'."[39]
And if the passage of time could not cure the fatal flaw in the inexistent and
void contract, neither could an alleged ratification or confirmation thereof.
Further, as in the case before us, reconveyance is proper. "The defect of
inexistence of a contract is permanent and incurable, hence it cannot be
cured either by ratification or by prescription. x x x There is no need of an
action to set aside a void or inexistent contract; in fact such action cannot
logically exist. However, an action to declare the non-existence of the
contract can be maintained; and in the same action, the plaintiff may recover
what he has given by virtue of the contract."[40]
Given the circumstances of the case and there being no reversible error in
the challenged decision, we are in accord with the judgment below and find
the petitioners' appeal without merit. For as well said in the Court of Appeals'
Decision and Resolution under review, "We cannot contemplate of the rather

absurd situation, which defendants-appellants would ineluctably lead [u]s to,
where plaintiffs-appellees would sell their only house, in which they have
lived for so many years, in order to secure the measly sum of P2,000.00 to
repair the roof of their only house, which would all be lost to them anyway
upon the consummation of the sale. They would then become homeless, and
the repaired roof would be of no use to them."[41] Experience which is the life
of the law -- as well as logic and common sense -- militates against the
petitioners' cause.
WHEREFORE, the instant petition is hereby DENIED. The Decision and the
Resolution of the Court of Appeals in CA-G.R. CV No. 06543 are hereby
AFFIRMED.
Cost against petitioners.
SO ORDERED.
[G.R. No. 120724-25. May 21, 1998]
FERNANDO T. MATE, petitioner, vs. THE HONORABLE COURT OF
APPEALS and INOCENCIO TAN,  respondents.
Civil Law; Sales; The filing of the criminal cases was a tacit admission by
petitioner that there was a consideration of the pacto de retro sale.—As
admitted by petitioner, by virtue of the sale with pacto de retro, Josie Rey
gave him, as vendor-a-retro, a postdated check in the amount of P1.4
Million, which represented the repurchase price of the two (2) lots. Aside
from the P1.4 Million check, Josie gave another postdated check to petitioner
in the amount of P420,000.00, ostensibly as interest for six (6) months but
which apparently was his fee for having executed the pacto de retro
document. Josie thus assumed the responsibility of paying the repurchase
price on behalf of petitioner to private respondent. Unfortunately, the two
checks issued by Josie Rey were worthless. Both were dishonored upon
presentment by petitioner with the drawee banks. However, there is
absolutely no basis for petitioner to file a complaint against private
respondent Tan and Josie Rey to annul the pacto de retro sale on the ground
of lack of consideration, invoking his failure to encash the two checks.
Petitioner’s cause of action was to file criminal actions against Josie Rey
under B.P. 22, which he did. The filing of the criminal cases was a tacit
S a l e s P a r t I V P a g e | 13
admission by petitioner that there was a consideration of the pacto de retro
sale.
Same; Same; Between two innocent parties, the one who made it possible
for the wrong to be done should be the one to bear the resulting loss.—
Petitioner then postulates that “it is not only illegal but immoral to require
him to repurchase his own properties with his own money when he did not
derive any benefit from the transaction.” Thus, he invokes the case of
Singson vs. Isabela Sawmill, 88 SCRA 633, 643, where the Court said that
“where one or two innocent persons must suffer, that person who gave
occasion for the damages to be caused must bear consequences.”
Petitioner’s reliance on this doctrine is misplaced. He is not an innocent
person. As a matter of fact, he gave occasion for the damage caused by
virtue of the deed of sale with right to repurchase which he prepared and
signed. Thus, there is the equitable maxim that between two innocent
parties, the one who made it possible for the wrong to be done should be
the one to bear the resulting loss.
DECISION
MARTINEZ, J.:
In this petition for review, petitioner assails the Decision[1] of the Court of
Appeals dated August 29, 1994 in CA-G.R. CV No. 28225-26, which affirmed
with modification the decision of the trial court, the dispositive portion of
which reads, to wit:
WHEREFORE, this Court finds the Deed of Sale with Right of Repurchase
executed October 6, 1986 valid and binding between plaintiff and defendant
(as vendor and vendee-a-retro respectively); that as the period to redeem
has expired, ownership thereof was consolidated by operation of law, and
the Register of Deeds is hereby ordered to REGISTER this decision
consolidating the defendants ownership over the properties covered by
Transfer Certificate of Title No. T-90-71, covering Lot 8; Original Certificate
of Title No. N-311 covering Lot 5370, all of the Tacloban Cadastre, and
issuing to defendant Inocencio Tan his titles after cancellation of the titles
presently registered in plaintiff Fernando T. Mates name and that of his wife.
The plaintiff Fernando Mate is further ordered to pay defendant the sum of
ONE HUNDRED FORTY THOUSAND (P140,000.00) PESOS, for and as
attorneys fees.

With costs against the plaintiff Fernando Mate.
SO ORDERED.[2]
The facts of this case, as summarized in the petition, are reproduced
hereunder:
On October 6, 1986 Josefina R. Rey (hereafter referred to as Josie for short)
and private respondent went to the residence of petitioner at Tacloban
City. Josie who is a cousin of petitioners wife solicited his help to stave off
her and her family’s prosecution by private respondent for violation of B.P.
22 on account of the rubber checks that she, her mother, sister and brother
issued to private respondent amounting to P4,432,067.00. She requested
petitioner to cede to private respondent his three (3) lots in Tacloban City in
order to placate him. On hearing Josies proposal, he immediately rejected it
as he owed private respondent nothing and he was under no obligation to
convey to him his properties. Furthermore, his lots were not for sale. Josie
explained to him that he was in no danger of losing his properties as he will
merely execute a simulated document transferring them to private
respondent but they will be redeemed by her with her own funds. After a
long discussion, he agreed to execute a fictitious deed of sale with right to
repurchase covering his three (3) lots mentioned above subject to the
following conditions:
1. The amount to be stated in the document is P1,400,000.00 with interest
thereon at 5% a month;
2. The properties will be repurchased within six (6) months or on or before
April 4, 1987;
3. Although it would appear in the document that petitioner is the vendor, it
is Josie who will provide the money for the redemption of the properties with
her own funds;
4. Titles to the properties will be delivered to private respondent but the sale
will not be registered in the Register of Deeds and annotated on the titles.
To assure petitioner that Josie will redeem the aforesaid properties, she
issued to him two (2) BPI checks both postdated December 15, 1986. One
check was for P1,400,000.00 supposedly for the selling price and the other
S a l e s P a r t I V P a g e | 14
was for P420,000.00 corresponding to the interests for 6
months. Immediately thereafter petitioner prepared the Deed of Sale with
Right to Repurchase (Exh. A) and after it has been signed and notarized, it
was given to private respondent together with the titles of the properties and
the latter did not register the transaction in the Register of Deeds as agreed
upon.
On January 14, 1987, petitioner deposited the check for P1,400,000.00 (Exh.
B) in his account at the United Coconut Planters Bank and the other check
for P420,000.00 (Exh. D) in his account at METROBANK preparatory to the
redemption of his properties. However, both of them were dishonored by the
drawee bank for having been drawn against a closed account.Realizing that
he was swindled, he sent Josie a telegram about her checks and when she
failed to respond, he went to Manila to look for her but she could not be
found. So he returned to Tacloban City and filed Criminal Cases Nos. 8310
and 8312 against her for violation of B.P. 22 but the cases were later
archived as the accused (Josie) could not be found as she went into
hiding. To protect his interest, he filed Civil Case No. 7396 of the Regional
Trial Court of Leyte, Branch VII, entitled `Fernando T. Mate vs. Josefina R.
Rey and Inocencio Tan for Annulment of Contract with Damages. Defendant
Josefina R. Rey (Josie) was declared in default and the case proceeded
against private respondent. But during the trial the RTC court asked private
respondent to file an action for consolidation of ownership of the properties
subject of the sale and pursuant thereto he filed Civil Case No. 7587 that
was consolidated with the case he filed earlier which were later decided
jointly by the trial court in favor of private respondent and was subsequently
appealed to respondent Court that affirmed it with modification. Thereupon,
petitioner filed a motion to reconsider the decision but it was denied. Hence,
the instant petition for review.[3]
In this petition for review, the petitioner presents as the sole issue the
validity of the Deed of Sale with Right to Repurchase. He contends that it is
null and void for lack of consideration because allegedly no money changed
hands when he signed it and the checks that were issued for redemption of
the properties involved in the sale have been dishonored by the drawee bank
for having been drawn against a closed account.[4]
The contention is without merit.
There was a consideration. The respondent court aptly observed that –
In preparing and executing the deed of sale with right of repurchase and in
delivering to Tan the land titles, appellant actually accommodated Josefina

so she would not be charged criminally by Tan. To ensure that he could
repurchase his lots, appellant got a check of P1,400,000.00 from her. Also,
by allowing his titles to be in possession of Tan for a period of six months,
appellant secured from her another check for P420,000.00. With this
arrangement, appellant was convinced he had a good bargain. Unfortunately
his expectation crumbled. For this tragic incident, not only Josefina, but also
Tan, according to appellant must be answerable.
x x x x x x x x x
It is plain that consideration existed at the time of the execution of the deed
of sale with right of repurchase. It is not only appellants kindness to
Josefina, being his cousin, but also his receipt of P420,000.00 from her
which impelled him to execute such contract.[5]
Furthermore, while petitioner did not receive the P1.4 Million purchase price
from respondent Tan, he had in his possession a postdated check of Josie
Rey in an equivalent amount precisely to repurchase the two lots on or
before the sixth month.
As admitted by petitioner, by virtue of the sale with pacto de retro, Josie Rey
gave him, as vendor-a-retro, a postdated check in the amount of P1.4
Million, which represented the repurchase price of the two (2) lots. Aside
from the P1.4 Million check, Josie gave another postdated check to petitioner
in the amount of P420,000.00, ostensibly as interest for six (6) months but
which apparently was his fee for having executed the pacto de
retro document. Josie thus assumed the responsibility of paying the
repurchase price on behalf of petitioner to private respondent.
Unfortunately, the two checks issued by Josie Rey were worthless. Both were
dishonored upon presentment by petitioner with the drawee banks.
However, there is absolutely no basis for petitioner to file a complaint
against private respondent Tan and Josie Rey to annul the pacto de
retro sale on the ground of lack of consideration, invoking his failure to
encash the two checks. Petitioners cause of action was to file criminal
actions against Josie Rey under B.P. 22, which he did. The filing of the
criminal cases was a tacit admission by petitioner that there was a
consideration of the pacto de retro sale.
Petitioner further claims that the pacto de retro sale was subject to the
condition that in the event the checks given by Josie Reyes to him for the
repurchase of the property were dishonored, then the document shall be
declared null and void for lack of consideration.
S a l e s P a r t I V P a g e | 15
We are not persuaded.
Private respondent Tan was already poised to file criminal cases against
Josie Rey and her family. It would not be logical for respondent Tan to agree
to the conditions allegedly imposed by petitioner. Petitioner knew that he
was bound by the deed of sale with right to repurchase, as evidenced by his
filing criminal cases against Josie Rey when the two checks bounced.
The respondent court further made the candid but true observation that:
If there is anybody to blame for his predicament, it is appellant himself. He is
a lawyer. He was the one who prepared the contract. He knew what he was
entering into. Surely, he must have been aware of the risk involved. When
Josefinas checks bounced, he should have repurchased his lots with his own
money. Instead, he sued not only Josefina but also Tan for annulment of
contract on the ground of lack of consideration and false pretenses on their
part.
Petitioner then postulates that it is not only illegal but immoral to require
him to repurchase his own properties with his own money when he did not
derive any benefit from the transaction . Thus, he invokes the case
of Singson vs. Isabela Sawmill, 88 SCRA 633, 643, where the Court said
that where one or two innocent persons must suffer, that person who gave
occasion for the damages to be caused must bear consequences. Petitioners
reliance on this doctrine is misplaced. He is not an innocent person. As a
matter of fact, he gave occasion for the damage caused by virtue of the
deed of sale with right to repurchase which he prepared and signed. Thus,
there is the equitable maxim that between two innocent parties, the one
who made it possible for the wrong to be done should be the one to bear
the resulting loss.[6]
Petitioner further insinuates that private respondent deceived him into
signing the deed of sale with right to repurchase. This is not borne out by
the evidence nor by petitioner’s own statement of facts  which we heretofore
reproduced. As aptly observed by the respondent court We are at a loss why
herein appellant ascribes false pretenses to Tan who merely signed the
contract.[7] Contrary to petitioners pretension, respondent Tan did not
employ any devious scheme to make the former sign the deed of sale. It is
to be noted that Tan waived his right to collect from Josefina Rey by virtue
of the pacto de retro sale. In turn, Josefina gave petitioner a postdated
check in the amount of P1.4 Million to ensure that the latter would not lose
his two lots. Petitioner, a lawyer, should have known that the transaction
was fraught with risks since Josefina Rey and family had a checkered history
of issuing worthless checks. But had petitioner not agreed to the

arrangement, respondent Tan would not have agreed to waive prosecution
of Josefina Rey.
Apparently, it was petitioner’s greed for a huge profit that impelled him to
accede to the scheme of Josefina Rey even if he knew it was a dangerous
undertaking. When he drafted the pacto de retro document, he threw
caution to the winds forgetting that prudence might have been the better
course of action. We can only sympathize with petitioners
predicament.However, a contract is a contract. Once agreed upon, and
provided all the essential elements are present, it is valid and binding
between the parties.
Petitioner has no one to blame but himself for his misfortune.
WHEREFORE, the Decision of the Court of Appeals dated August 29, 1994
is hereby AFFIRMED. The petition for review is hereby DENIED DUE COURSE
for lack of merit.
SO ORDERED.
[G.R. No. 144735. October 18, 2001]
YU BUN GUAN, petitioner, vs.  ELVIRA ONG, respondent.
Appeals; Evidence; It is axiomatic that factual findings of the trial court,
especially when affirmed by the Court of Appeals, are binding and conclusive
on the Supreme Court.—We find no reason to disturb the findings of the RTC
and the CA that the source of the money used to acquire the property was
paraphernal. This issue is factual in nature. It is axiomatic that “factual
findings of the trial court, especially when affirmed by the Court of Appeals,
as in this case, are binding and conclusive on the Supreme Court. It is not
the function of this Court to re-examine the lower courts’ findings of fact.
While there are exceptions to this rule, petitioner has not shown its
entitlement to any of them.”
S a l e s P a r t I V P a g e | 16
Witnesses; The unnatural and contradictory testimony of a witness makes
him unreliable.—The testimony of petitioner as to the source of the money
he had supposedly used to purchase the property was at best vague and
unclear. At first he maintained that the money came from his own personal
funds. Then he said that it came from his mother; and next, from his father.
Time and time again, “we [have] held that the unnatural and contradictory
testimony of a witness, x x x makes him unreliable x x x.” His statement that
the JP Rizal property was bought with his own money can hardly be
believed, when he himself was unsure as to the source of those funds.
Contracts; Sales; Simulated Contracts; A Deed of Sale that is completely
simulated is void and without effect.—In the present case, it is clear from the
factual findings of both lower courts that the Deed of Sale was completely
simulated and, hence, void and without effect. No portion of the P200,000
consideration stated in the Deed was ever paid. And, from the facts of the
case, it is clear that neither party had any intention whatsoever to pay that
amount. Instead, the Deed of Sale was executed merely to facilitate the
transfer of the property to petitioner pursuant to an agreement between the
parties to enable him to construct a commercial building and to sell the Juno
property to their children. Being merely a subterfuge, that agreement cannot
be taken as the consideration for the sale.
Principle of In Pari Delicto; Words and Phrases; The principle of in pan
delicto provides that when two parties are equally at fault, the law leaves
them as they are and denies recovery by either one of them; The principle of
in pari delicto does not apply with respect to inexistent and void contracts.—
The principle of in pari delicto provides that when two parties are equally at
fault, the law leaves them as they are and denies recovery by either one of
them. However, this principle does not apply with respect to inexistent and
void contracts. Said this Court in Modina v. Court of Appeals: “The principle
of in pari delicto non oritur actio denies all recovery to the guilty parties inter
se. It applies to cases where the nullity arises from the illegality of the
consideration or the purpose of the contract. When two persons are equally
at fault, the law does not relieve them. The exception to this general rule is
when the principle is invoked with respect to inexistent contracts.” Yu Bun
Guan vs. Ong, 367 SCRA 559, G.R. No. 144735 October 18, 2001
DECISION
PANGANIBAN,  J.:

A simulated deed of sale has no legal effect, and the transfer certificate of
title issued in consequence thereof should be cancelled. Pari delicto  does not
apply to simulated sales.
Statement of the Case
Before us is a Petition for Review under Rule 45 of the Rules of Court,
assailing the April 25, 2000 Decision[1] and the August 31, 2000
Resolution[2] of the Court of Appeals[3] (CA) in CA-GR CV No. 61364. The
decretal portion of the Decision reads as follows:
We cannot see any justification for the setting aside of the contested
Decision.
THE FOREGOING CONSIDERED, the appealed Decision is hereby AFFIRMED.
[4]
The assailed Resolution denied petitioners Supplemental Motion for
Reconsideration with Leave to Submit [Newly] Discovered Evidence.
The CA sustained the Decision of the Regional Trial Court (RTC) of Makati
City (Branch 60), which had disposed as follows:[5]
23. WHEREFORE, the Court hereby renders judgment as follows:
23.1. The Deed of Sale dated July 24, 1992 (Exh. EE or Exh. 3) is declared
VOID.
23.2. The plaintiff ELVIRA ONG is declared the OWNER of the property
covered by Transfer Certificate of Title No. 217614, Registry of Deeds,
Makati (Exh. DD).
23.3. The Register of Deeds, City of Makati is ordered to:
23.2.1. Cancel Transfer Certificate of Title No. 181033 (Exh. HH); and
23.2.2. Issue in lieu thereof, a transfer certificate of title in the name of
ELVIRA A. ONG, of legal age, single, Filipino;
23.[4]. The defendant YU BUN GUAN is ordered to pay to the said plaintiff,
the following:
S a l e s P a r t I V P a g e | 17
23.[4].1. P48,631.00 As reimbursement of the capital gains tax (Exh. FF);
23.[4].2. Six (6) percent of P48,631.00 per annum from November 23, 1993,
until the said P48,631.00 is paid as damages
23.[4].3. P100,000.00 - as moral damages;
23.[4].4. P 50,000.00 as exemplary damages;
23.[4].5. P 100,000.00 as attorneys fees.
23.[5]. The COUNTERCLAIM is DISMISSED.
23.[6]. Cost is taxed against the defendant.
24. In Chambers, City of Makati, June 23, 1998.
The Facts
The antecedents of the case are succinctly summarized by the Court of
Appeals in this wise:
[Herein respondent] said that she and [petitioner] are husband and wife,
having been married according to Chinese rites on April 30, 1961. They lived
together until she and her children were abandoned by [petitioner] on
August 26, 1992, because of the latters incurable promiscuity, volcanic
temper and other vicious vices; out of the reunion were born three (3)
children, now living with her [respondent].
She purchased on March 20, 1968, out of her personal funds, a parcel of
land, then referred to as the Rizal property, from Aurora Seneris, and
supported by Title No. 26795, then subsequently registered on April 17,
1968, in her name.
Also during their marriage, they purchased, out of their conjugal funds, a
house and lot, in 1983, thereafter, registered in their names, under Title No.
118884.

Before their separation in 1992, she reluctantly agreed to the [petitioners]
importunings that she execute a Deed of Sale of the J.P. Rizal property in his
favor, but on the promise that he would construct a commercial building for
the benefit of the children. He suggested that the J.P. Rizal property should
be in his name alone so that she would not be involved in any
obligation. The consideration for the simulated sale was that, after its
execution in which he would represent himself as single, a Deed of Absolute
Sale would be executed in favor of the three (3) children and that he would
pay the Allied Bank, Inc. the loan he obtained.
Because of the glib assurances of [petitioner], [respondent] executed a Deed
of Absolute Sale in 1992, but then he did not pay the consideration
of P200,000.00, supposedly the ostensible valuable consideration. On the
contrary, she paid for the capital gains tax and all the other assessments
even amounting to not less than P60,000.00, out of her personal funds.
Because of the sale, a new title (TCT No. 181033) was issued in his name,
but to insure that he would comply with his commitment, she did not deliver
the owners copy of the title to him.
Because of the refusal of [petitioner] to perform his promise, and also
because he insisted on delivering to him the owners copy of the title [to] the
JP Rizal property, in addition to threats and physical violence, she decided
executing an Affidavit of Adverse Claim.
Also to avoid burdening the JP Rizal property with an additional loan amount,
she wrote the Allied Bank, Inc. on August 25, 1992, withdrawing her
authority for [petitioner] to apply for additional loans.
To save their marriage, she even sought the help of relatives in an earnest
effort [at] reconciliation, not to mention a letter to [petitioner] on November
3, 1992.
[Petitioner], on the other hand, filed with the RTC, Makati, in 1993 (Case No.
M-2905), a Petition for Replacement of an owners duplicate title.
Attached to the Petition was the Affidavit of Loss dated March 26, 1993, in
which he falsely made it appear that the owners copy of the title was lost or
misplaced, and that was granted by the court in an Order dated September
17, 1993, following which a new owners copy of the title was issued to
[petitioner].
S a l e s P a r t I V P a g e | 18
Upon discovery of the fraudulent steps taken by the [petitioner],
[respondent] immediately executed an Affidavit of Adverse Claim on
November 29, 1993.
She precisely asked the court that the sale of the JP Rizal property be
declared as null and void; for the title to be cancelled; payment of actual,
moral and exemplary damages; and attorneys fees.
It was, on the other hand, the version of [petitioner] that sometime in 1968
or before he became a Filipino, through naturalization, the JP Rizal property
was being offered to him for sale. Because he was not a Filipino, he utilized
[respondent] as his dummy and agreed to have the sale executed in the
name of [respondent], although the consideration was his own and from his
personal funds.
When he finally acquired a Filipino citizenship in 1972, he purchased another
property being referred to as the Juno lot out of his own funds. If only to
reflect the true ownership of the JP Rizal property, a Deed of Sale was then
executed in 1972. Believing in good faith that his owners copy of the title
was lost and not knowing that the same was surreptitiously concealed by
[respondent], he filed in 1993 a petition for replacement of the owners copy
of the title, in court.
[Petitioner] added that [respondent] could not have purchased the property
because she had no financial capacity to do so; on the other hand, he was
financially capable although he was disqualified to acquire the property by
reason of his nationality. [Respondent] was in pari delicto being privy to the
simulated sale.
Before the court a quo, the issues were: who purchased the JP Rizal
property? [W]as the Deed of Sale void? and damages.[6]
Ruling of the Trial Court
After examining the evidence adduced by both parties, the RTC found that
the JP Rizal property was the paraphernal property of respondent, because
(1) the title had been issued in her name; (2) petitioner had categorically
admitted that the property was in her name; (3) petitioner was estopped
from claiming otherwise, since he had signed the Deed of Absolute Sale that
stated that she was the absolute and registered owner; and (4) she had paid
the real property taxes thereon.[7]

The trial court further held that the in pari delicto rule found in Articles 1411
and 1412 of the Civil Code was not applicable to the present case, because it
would apply only to existing contracts with an illegal cause or object, not to
simulated or fictitious contracts or to those that were inexistent due to lack
of an essential requisite such as cause or consideration.[8] It likewise voided
the Deed of Absolute Sale of the JP Rizal property for having been simulated
and executed during the marriage of the parties.[9]
Ruling of the Court of Appeals
The Court of Appeals upheld the trial courts findings that the JP Rizal
property had been acquired by respondent alone, out of her own personal
funds. It ruled thus:
x x x [T]he JP Rizal property was purchased by the [respondent] alone;
therefore it is a paraphernal property. As a matter of fact, the title was
issued in her name, Exh. DD. This was even admitted by [petitioner] in the
Answer that the sale was executed in her name alone. He also signed the
sale mentioning [respondent] to be an absolute owner; therefore, he should
be estopped from claiming otherwise. She alone likewise did the payment of
the taxes.[10]
The CA debunked the contention of petitioner that he had purchased the
property out of his own funds and merely used respondent as his dummy.
[11]
 It also held that the latter was not in pari delicto  with him, because the
contract was simulated or fictitious due to the lack of consideration. The
contract was deemed void for having been executed during the couples
marriage.[12] The CA likewise affirmed the award of actual, moral and
exemplary damages to respondent.[13]
Hence, this Petition.[14]
Issues
In his Memorandum, petitioner raises the following issues for the Courts
consideration:
I On the other hand, respondent maintains that the finding of the two lower
Whether or not the Court of Appeals gravely erred in not applying [the] rules
on co-ownership under Article 144 of the New Civil Code in determining the
proprietary rights of the parties herein even as respondent herself expressly
declared that the money with which she allegedly bought the property in
S a l e s P a r t I V P a g e | 19
question in 1968 came from her funds, salaries and savings at the time she
and petitioner already lived as husband and wife.
II
Whether or not the Court of Appeals likewise palpably erred in declaring the
sale of the subject property to herein petitioner in 1992 to be fictitious,
simulated and inexistent.
III
Whether or not the Court of Appeals further erred in not applying the [in]
pari delicto rule to the sale of the subject property in favor of the petitioner
in 1992 contrary to the express declaration to that effect in the very same
case it cited (Rodriguez v. Rodriguez; 20 SCRA 908) in the decision herein
sought to be reviewed.
IV
Whether or not the Court of Appeals gravely erred in annul[l]ing the title
(TCT No. 181033) to the subject property in the name of herein petitioner in
the absence of actual fraud.[15](Underscoring in the original.)
This Court’s Ruling
The Petition is devoid of merit.
First Issue: Nature of the Property
Petitioner contends that the JP Rizal property should be deemed as co-
owned, considering that respondent testified during trial that the money she
used in purchasing it had come from her income, salaries and savings, which
are conjugal in nature.
courts that the property was acquired using funds solely owned by her is
binding and supported by evidence. She further argues that the two
defenses of petitioner are contradictory to each other because, if the
property is co-owned, he cannot claim to own it in its entirety.

We find no reason to disturb the findings of the RTC and the CA that the
source of the money used to acquire the property was paraphernal. This
issue is factual in nature. It is axiomatic that factual findings of the trial
court, especially when affirmed by the Court of Appeals, as in this case, are
binding and conclusive on the Supreme Court. It is not the function of this
Court to reexamine the lower courts findings of fact. While there are
exceptions to this rule, petitioner has not shown its entitlement to any of
them.[16]
The testimony of petitioner as to the source of the money he had supposedly
used to purchase the property was at best vague and unclear. At first he
maintained that the money came from his own personal funds. Then he said
that it came from his mother; and next, from his father. Time and time
again, we [have] held that the unnatural and contradictory testimony of a
witness, x x x makes him unreliable x x x.[17] His statement that the JP Rizal
property was bought with his own money can hardly be believed, when he
himself was unsure as to the source of those funds.
On the other hand, the capacity of respondent to purchase the subject
property cannot be questioned. It was sufficiently established during trial
that she had the means to do so. In fact, her testimony that she had
purchased several other lots using her personal funds was not disputed.
Equally without merit is the contention of petitioner that, because he was a
Chinese national at the time, respondent was merely used as a dummy in
acquiring the property; thus, she could not have legally acquired title
thereto. He testified that sometime during the last month of 1968, he had
consulted a certain Atty. Flores, who advised him that the property be
registered in the name of respondent. However, TCT No. 217614 had been
issued earlier on April 17, 1968. Thus, it appears that the subject property
had already been bought and registered in the name of respondent, long
before Atty. Flores allegedly advised him to have the property registered in
her name.
We therefore agree with the CAs affirmation of the RTCs findings that the
property had been acquired using respondents paraphernal property. The CA
ruled thus:
The fact however, is that Yu never refuted Elviras testimony that: (a) the
money with which she acquired the JP Rizal property came from: (1) her
income as a cashier in the Hong Kiat Hardware; (2) income from her
paraphernal property a lot in Guadalupe; (3) her savings from the money
which her parents gave her while she was still a student; and (4) the money
which her sister gave her for helping her run the beauty parlor; (b) her
S a l e s P a r t I V P a g e | 20
parents were well off they had stores, apartments and beauty parlors from
which they derived income; (c) before her marriage she bought lots in
different places (p. 8, TSN, Jan. 26, 1998; pp. 22-23, TSN March 10, 1998).
[18]
Second Issue: Fictitious, Simulated and Inexistent Sale
Next, petitioner argues that there was a valid sale between the parties, and
that the consideration consisted of his promise to construct a commercial
building for the benefit of their three children and to pay the loan he had
obtained from Allied Bank.
We disagree. In Rongavilla v. Court of Appeals,[19] the Court declared that a
deed of sale, in which the stated consideration had not in fact been paid, is
null and void:
The problem before the Court is whether a deed which states a consideration
that in fact did not exist, is a contract, without consideration, and therefore
void ab initio, or a contract with a false consideration, and therefore, at least
under the Old Civil Code, voidable. x x x."
"In our view, therefore, the ruling of this Court in Ocejo, Perez & Co. vs.
Flores, 40 Phil. 921[,] is squarely applicable herein. In that case we ruled
that a contract of purchase and sale is null and null and void and produces
no effect whatsoever where the same is without cause or consideration in
that the purchase price which appears thereon as paid has in fact never
been paid by the purchaser to vendor."[20]
In the present case, it is clear from the factual findings of both lower courts
that the Deed of Sale was completely simulated and, hence, void and
without effect. No portion of the P200,000 consideration stated in the Deed
was ever paid. And, from the facts of the case, it is clear that neither party
had any intention whatsoever to pay that amount.
Instead, the Deed of Sale was executed merely to facilitate the transfer of
the property to petitioner pursuant to an agreement between the parties to
enable him to construct a commercial building and to sell the Juno property
to their children. Being merely a subterfuge, that agreement cannot be taken
as the consideration for the sale.
Third Issue: Inapplicability of the  in Pari Delicto Principle

The principle of in pari delicto  provides that when two parties are equally at
fault, the law leaves them as they are and denies recovery by either one of
them. However, this principle does not apply with respect to inexistent and
void contracts. Said this Court in Modina v. Court of Appeals:[21]
The principle of in pari delicto non oritur actio denies all recovery to the
guilty parties inter se. It applies to cases where the nullity arises from the
illegality of the consideration or the purpose of the contract. When two
persons are equally at fault, the law does not relieve them. The exception to
this general rule is when the principle is invoked with respect to inexistent
contracts.[22]
Fourth Issue: Cancellation of TCT
Finally, based on the foregoing disquisition, it is quite obvious that the Court
of Appeals did not err in ordering the cancellation of TCT No. 181033,
because the Deed of Absolute Sale transferring ownership to petitioner was
completely simulated, void and without effect. In fact, there was no legal
basis for the issuance of the certificate itself.
WHEREFORE, the Petition is hereby DENIED and  the assailed
Decision AFFIRMED. Costs against petitioner.
SO ORDERED.
G.R. No. L-67888 October 8, 1985
IMELDA ONG, ET AL., petitioners, 
vs.
ALFREDO ONG, ET AL., respondents.
S a l e s P a r t I V P a g e | 21
Civil Law; Sales; Consideration; Conveyance of property for P1.00
consideration and other valuable considerations, valid.—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 (P1.00) Peso and the other valuable considerations (italics 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.
Same; Same; Same; Bad faith and inadequacy of monetary consideration do
not render a conveyance inexistent, as the assignor's liability may be
sufficient cause for a valid contract.—lt is not unusual, however, in deeds of
conveyance adhering to the AngloSaxon 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." Ong vs. Ong, 139 SCRA 133, No. L-67888
October 8, 1985
Faustino Y Bautista and Fernando M. Mangubat for private respondent.
RELOVA, J.:
This is a petition for review on certiorari of the decision, dated June 20,
1984, of the Intermediate Appellate Court, in AC-G.R. No. CV-01748,
affirming the judgment of the Regional Trial Court of Makati, Metro Manila.
Petitioner Imelda Ong assails the interpretation given by respondent
Appellate Court to the questioned Quitclaim Deed.
Records show that on February 25, 1976 Imelda Ong, for and in
consideration of One (P1.00) Peso and other valuable considerations,
executed in favor of private respondent Sandra Maruzzo, then a minor, a

Quitclaim Deed whereby she transferred, released, assigned and forever
quit-claimed to Sandra Maruzzo, her heirs and assigns, all her rights, title,
interest and participation in the ONE-HALF (½) undivided portion of the
parcel of land, particularly described as follows:
A parcel of land (Lot 10-B of the subdivision plan (LRC) Psd
157841, being a portion of Lot 10, Block 18, Psd-13288, LRC
(GLRC) Record No. 2029, situated in the Municipality of
Makati, Province of Rizal, Island of Luzon ... containing an
area of ONE HUNDRED AND TWENTY FIVE (125) SQUARE
METERS, more or less.
On November 19, 1980, Imelda Ong revoked the aforesaid Deed of Quitclaim
and, thereafter, on January 20, 1982 donated the whole property described
above to her son, Rex Ong-Jimenez.
On June 20, 1983, Sandra Maruzzo, through her guardian ( ad litem) Alfredo
Ong, filed with the Regional Trial Court of Makati, Metro Manila an action
against petitioners, for the recovery of ownership/possession and nullification
of the Deed of Donation over the portion belonging to her and for
Accounting.
In their responsive pleading, petitioners claimed that the Quitclaim Deed is
null and void inasmuch as it is equivalent to a Deed of Donation, acceptance
of which by the donee is necessary to give it validity. Further, it is averred
that the donee, Sandra Maruzzo, being a minor, had no legal personality and
therefore incapable of accepting the donation.
Upon admission of the documents involved, the parties filed their responsive
memoranda and submitted the case for decision.
On December 12, 1983, the trial court rendered judgment in favor of
respondent Maruzzo and held that the Quitclaim Deed is equivalent to a
Deed of Sale and, hence, there was a valid conveyance in favor of the latter.
Petitioners appealed to the respondent Intermediate Appellate Court. They
reiterated their argument below and, in addition, contended that the One
(P1.00) Peso consideration is not a consideration at all to sustain the ruling
that the Deed of Quitclaim is equivalent to a sale.
S a l e s P a r t I V P a g e | 22
On June 20, 1984, respondent Intermediate Appellate Court promulgated its
Decision affirming the appealed judgment and held that the Quitclaim Deed
is a conveyance of property with a valid cause or consideration; that the
consideration is the One (P1.00) Peso which is clearly stated in the deed
itself; that the apparent inadequacy is of no moment since it is the usual
practice in deeds of conveyance to place a nominal amount although there is
a more valuable consideration given.
Not satisfied with the decision of the respondent Intermediate Appellate
Court, petitioners came to Us questioning the interpretation given by the
former to this particular document.
On March 15, 1985, respondent Sandra Maruzzo, through her guardian ad
litem  Alfredo Ong, filed an Omnibus Motion informing this Court that she has
reached the age of majority as evidenced by her Birth Certificate and she
prays that she be substituted as private respondent in place of her
guardian ad litem Alfredo Ong. On April 15, 1985, the Court issued a
resolution granting the same.
A careful perusal of the subject deed reveals that the conveyance of the one-
half (½) undivided portion of the above-described property was for and in
consideration of the One (P 1.00) Peso and the other valuable
considerations (emphasis supplied) paid by private respondent Sandra
Maruzzo through her representative, Alfredo Ong, to petitioner Imelda Ong.
Stated differently, the cause or consideration is not the One (P1.00) Peso
alone but also the other valuable considerations. As aptly stated by the
Appellate Court-
... although the cause is not stated in the contract it is
presumed that it is existing unless the debtor proves the
contrary (Article 1354 of the Civil Code). One of the
disputable presumptions is that there is a sufficient cause of
the contract (Section 5, (r), Rule 131, Rules of Court). It is a
legal presumption of sufficient cause or consideration
supporting a contract even if such cause is not stated
therein (Article 1354, New Civil Code of the Philippines.) This
presumption cannot be overcome by a simple assertion of
lack of consideration especially when the contract itself
states that consideration was given, and the same has been
reduced into a public instrument with all due formalities and
solemnities. To overcome the presumption of consideration
 S a l e s P a r t I V P a g e | 23

the alleged lack of consideration must be shown by WHEREFORE. the appealed decision of the Intermediate Appellate Court
preponderance of evidence in a proper action. (Samanilla vs, should be, as it is hereby AFFIRMED, with costs against herein petitioners.
Cajucom, et al., 107 Phil. 432).
SO ORDERED.
The execution of a deed purporting to convey ownership of a realty is in
itself prima facie evidence of the existence of a valuable consideration, the
party alleging lack of consideration has the burden of proving such
allegation. (Caballero, et al. vs. Caballero, et al., (CA), 45 O.G. 2536).

Moreover, even granting that the Quitclaim deed in question is a donation,

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

The above pronouncement of respondent Appellate Court finds support in

the ruling of this Court in Morales Development Co., Inc. vs. CA, 27 SCRA
484, which states that "the major premise thereof is based upon the fact
that the consideration stated in the deeds of sale in favor of Reyes and the
Abellas is P1.00. It is not unusual, however, in deeds of conveyance
adhering to the Anglo-Saxon practice of stating that the consideration given
is the sum of P1.00, although the actual consideration may have been much
more. Moreover, assuming that said consideration of P1.00 is suspicious, this
circumstance, alone, does not necessarily justify the inference that Reyes
and the Abellas were not purchasers in good faith and for value. Neither
does this inference warrant the conclusion that the sales were null and
void ab initio. Indeed, bad faith and inadequacy of the monetary
consideration do not render a conveyance inexistent, for the assignor's
liberality may be sufficient cause for a valid contract (Article 1350, Civil
Code), whereas fraud or bad faith may render either rescissible or voidable,
although valid until annulled, a contract concerning an object certain entered
into with a cause and with the consent of the contracting parties, as in the
case at bar."
 S a l e s P a r t I V P a g e | 24

ISAAC BAGNAS, ENCARNACION BAGNAS, SILVESTRE BAGNAS

MAXIMINA BAGNAS, SIXTO BAGNAS and AGATONA
ENCARNACION, petitioners, 
vs.
HON. COURT OF APPEALS, ROSA L. RETONIL TEOFILO
ENCARNACION, and JOSE B. NAMBAYAN respondents.

Civil Law; Sales; Consideration; The apparent gross disproportion between

the stipulated price and the undisputably valuable real estate allegedly sold,
demonstrates that the deeds of sale in question state a false consideration,
thereby making them not merely voidable, but void ab initio.—Without
necessarily according all these assertions its full concurrence, but upon the
consideration alone that the apparent gross, not to say enormous,
disproportion between the stipulated price (in each deed) of P1.00 plus
unspecified and unquantified services and the undisputably valuable real
estate allegedly sold—worth at least P10,500.00 going only by assessments
for tax purposes which, it is well-known, are notoriously low indicators of
actual value—plainly and unquestionably demonstrates that they state a
false and fictitious consideration, and no other true and lawful cause having
been shown, the Court finds both said deeds, insofar as they purport to be
sales, not merely voidable, but void ab initio.

Same; Same; Same; Same; Succession; Intestate Heirs; The transfers in

question being void, the properties covered thereby remain part of the estate
of the deceased, and are therefore recoverable by the intestate heirs of the
latter.—The transfers in question being void, it follows as a necessary
consequence and conformably to the concurring opinion in Armentia, with
which the Court fully agrees, that the properties purportedly conveyed
remained part of the estate of Hilario Mateum, said transfers
notwithstanding, recoverable by his intestate heirs, the petitioners herein,
whose status as such is not challenged. Bagnas vs. Court of Appeals, 176
SCRA 159, G.R. No. 38498 August 10, 1989

Beltran, Beltran & Beltran for petitioners.

Jose M. Legaspi for private respondents.

NARVASA, J.:
G.R. No. L-38498 August 10, 1989
The facts underlying this appeal by certiorari are not in dispute. Hilario
Mateum of Kawit, Cavite, died on March 11, 1964, single, without ascendants

or descendants, and survived only by collateral relatives, of whom petitioners
herein, his first cousins, were the nearest. Mateum left no will, no debts, and
an estate consisting of twenty-nine parcels of land in Kawit and Imus, Cavite,
ten of which are involved in this appeal. 1
On April 3, 1964, the private respondents, themselves collateral relatives of
Mateum though more remote in degree than the petitioners, 2 registered
with the Registry of Deeds for the Province of Cavite two deeds of sale
purportedly executed by Mateum in their (respondents') favor covering ten
parcels of land. Both deeds were in Tagalog, save for the English
descriptions of the lands conveyed under one of them; and each recited the
reconsideration of the sale to be" ... halagang ISANG PISO (Pl.00), salaping
Pilipino, at mga naipaglingkod, ipinaglilingkod sa aking kapakanan ..." ("the
sum of ONE PESO Pl.00), Philippine Currency, and services rendered, being
rendered and to be rendered for my benefit"). One deed was dated February
6,1963 and covered five parcels of land, and the other was dated March 4,
1963, covering five other parcels, both, therefore, antedating Mateum's
death by more than a year. 3 It is asserted by the petitioners, but denied by
the respondents, that said sales notwithstanding, Mateum continued in the
possession of the lands purportedly conveyed until his death, that he
remained the declared owner thereof and that the tax payments thereon
continued to be paid in his name. 4 Whatever the truth, however, is not
crucial. What is not disputed is that on the strength of the deeds of sale, the
respondents were able to secure title in their favor over three of the ten
parcels of land conveyed thereby. 5
On May 22,1964 the petitioners commenced suit against the respondents in
the Court of First Instance of Cavite, seeking annulment of the deeds of sale
as fictitious, fraudulent or falsified, or, alternatively, as donations void for
want of acceptance embodied in a public instrument. Claiming
ownership pro indiviso of the lands subject of the deeds by virtue of being
intestate heirs of Hilario Mateum, the petitioners prayed for recovery of
ownership and possession of said lands, accounting of the fruits thereof and
damages. Although the complaint originally sought recovery of all the
twenty-nine parcels of land left by Mateum, at the pre-trial the parties
agreed that the controversy be limited to the ten parcels subject of the
questioned sales, and the Trial Court ordered the exclusion of the nineteen
other parcels from the action. 6 Of the ten parcels which remained in
litigation, nine were assessed for purposes of taxation at values aggregating
P10,500 00. The record does not disclose the assessed value of the tenth
parcel, which has an area of 1,443 square meters. 7
S a l e s P a r t I V P a g e | 25
In answer to the complaint, the defendants (respondents here) denied the
alleged fictitious or fraudulent character of the sales in their favor, asserting
that said sales were made for good and valuable consideration; that while
"... they may have the effect of donations, yet the formalities and
solemnities of donation are not required for their validity and effectivity, ...
that defendants were collateral relatives of Hilario Mateum and had done
many good things for him, nursing him in his last illness, which services
constituted the bulk of the consideration of the sales; and (by way of
affirmative defense) that the plaintiffs could not question or seek annulment
of the sales because they were mere collateral relatives of the deceased
vendor and were not bound, principally or subsidiarily, thereby. 8
After the plaintiffs had presented their evidence, the defendants filed a
motion for dismissal in effect, a demurrer to the evidence reasserting the
defense set up in their answer that the plaintiffs, as mere collateral relatives
of Hilario Mateum, had no light to impugn the latter's disposition of his
properties by means of the questioned conveyances and submitting,
additionally, that no evidence of fraud maintaining said transfers had been
presented. 9
The Trial Court granted the motion to dismiss, holding (a) on the authority of
Armentia vs. Patriarca, 10 that the plaintiffs, as mere collateral relatives, not
forced heirs, of Hilario Mateum, could not legally question the disposition
made by said deceased during his lifetime, regardless of whether, as a
matter of objective reality, said dispositions were valid or not; and (b) that
the plaintiffs evidence of alleged fraud was insufficient, the fact that the
deeds of sale each stated a consideration of only Pl.00 not being in itself
evidence of fraud or simulation. 11
On appeal by the plaintiffs to the Court of Appeals, that court affirmed,
adverting with approval to the Trial Court's reliance on the Armentia ruling
which, it would appear, both courts saw as denying, without exception, to
collaterals, of a decedent, not forced heirs, the right to impugn the latter's
dispositions inter vivos of his property. The Appellate Court also analyzed the
testimony of the plaintiffs' witnesses, declared that it failed to establish fraud
of any kind or that Mateum had continued paying taxes on the lands in
question even after executing the deeds conveying them to the defendants,
and closed with the statement that "... since in duly notarized and registered
deeds of sale consideration is presumed, we do not and it necessary to rule
on the alternative allegations of the appellants that the said deed of sale
were (sic) in reality donations. 12

One issue clearly predominates here. It is whether, in view of the fact that,
for properties assuredly worth in actual value many times over their total
assessed valuation of more than P10,000.00, the questioned deeds of sale
each state a price of only one peso (P1.00) plus unspecified past, present
and future services to which no value is assigned, said deeds were void or
inexistent from the beginning ("nulo") or merely voidable, that is, valid until
annulled. If they were only voidable, then it is a correct proposition that
since the vendor Mateum had no forced heirs whose legitimes may have
been impaired, and the petitioners, his collateral relatives, not being bound
either principally or subsidiarily to the terms of said deeds, the latter had and
have no actionable right to question those transfers.
On the other hand, if said deeds were void ab initio because to all intents
and purposes without consideration, then a different legal situation arises,
and quite another result obtains, as pointed out by the eminent civil law
authority, Mr. Justice J.B.L. Reyes who, in his concurring opinion
in Armentia, said:
I ... cannot bring myself to agree to the proposition that the
heirs intestate would have no legal standing to contest the
conveyance made by the deceased if the same were made
without any consideration, or for a false and fictitious
consideration. For under the Civil Code of the Philippines,
Art. 1409, par. 3, contracts with a cause that did not exist at
the time of the transaction are inexistent and void from the
beginning. The same is true of contracts stating a false
cause (consideration) unless the persons interested in
upholding the contract should prove that there is another
true and lawful consideration therefor. (lbid., Art. 1353).
If therefore the contract has no causa or consideration, or
the causa is false and fictitious (and no true hidden causa is
proved) the property allegedly conveyed never really leaves
the patrimony of the transferor, and upon the latter's death
without a testament, such property would pass to the
transferor's heirs intestate and be recoverable by them or by
the Administrator of the transferor's estate. In this particular
regard, I think Concepcion vs. Sta. Ana, 87 Phil. 787 and
Sobs vs. Chua Pua Hermanos, 50 Phil. 536, do not correctly
state the present law, and must be clarified.
S a l e s P a r t I V P a g e | 26
To be sure the quoted passage does not reject and is not to be construed as
rejecting the Concepcion and Solisrulings 13 as outrightly erroneous, far from
it. On the contrary, those rulings undoubtedly read and applied correctly the
law extant in their time: Art. 1276 of the Civil Code of 1889 under which the
statement of a false cause in a contract rendered it voidable only, not
void ab initio. In observing that they "... do not correctly state the present
law and must be clarified," Justice Reyes clearly had in mind the fact that the
law as it is now (and already was in the time Armentia) no longer deems
contracts with a false cause, or which are absolutely simulated or fictitious,
merely voidable, but declares them void, i.e., inexistent ("nulo") unless it is
shown that they are supported by another true and lawful cause or
consideration. 14 A logical consequence of that change is the juridical status
of contracts without, or with a false, cause is that conveyances of property
affected with such a vice cannot operate to divest and transfer ownership,
even if unimpugned. If afterwards the transferor dies the property descends
to his heirs, and without regard to the manner in which they are called to the
succession, said heirs may bring an action to recover the property from the
purported transferee. As pointed out, such an action is not founded on fraud,
but on the premise that the property never leaves the estate of the
transferor and is transmitted upon his death to heirs, who would labor under
no incapacity to maintain the action from the mere fact that they may be
only collateral relatives and bound neither principally or subsidiarily under
the deed or contract of conveyance.
In Armentia the Court determined that the conveyance questioned was
merely annullable not void ab initio, and that the plaintiff s action was based
on fraud vitiating said conveyance. The Court said:
Hypothetically admitting the truth of these allegations (of
plaintiffs complaint), the conclusion is irresistible that the
sale is merely voidable. Because Marta Armentia executed
the document, and this is not controverted by plaintiff.
Besides, the fact that the vendees were minors, makes the
contract, at worst, annullable by them, Then again,
inadequacy of consideration does not imply total want of
consideration. Without more, the parted acts of Marta
Armentia after the sale did not indicate that the said sale
was void from the being.
The sum total of all these is that, in essence, plaintiffs case
is bottomed on fraud, which renders the contract voidable.

It therefore seems clear that insofar as it may be considered as setting or
reaffirming precedent, Armentia only ruled that transfers made by a
decedent in his lifetime, which are voidable for having been fraudulently
made or obtained, cannot be posthumously impugned by collateral relatives
succeeding to his estate who are not principally or subsidiarily bound by such
transfers. For the reasons already stated, that ruling is not extendible to
transfers which, though made under closely similar circumstances, are
void ab initio for lack or falsity of consideration.
The petitioners here argue on a broad front that the very recitals of the
questioned deeds of sale reveal such want or spuriousness of consideration
and therefore the void character of said sales. They:
1. advert to a decision of the Court of Appeals in Montinola vs. Herbosa (59
O.G. No. 47, pp, 8101, 8118) holding that a price of P l.00 for the sale of
things worth at least P20,000.00 is so insignificant as to amount to no price
at all, and does not satisfy the law which, while not requiring for the validity
of a sale that the price be adequate, prescribes that it must be real, not
fictitious, stressing the obvious parallel between that case and the present
one in stated price and actual value of the property sold;
2. cite Manresa to the same effect: that true price, which is essential to the
validity of a sale, means existent, real and effective price, that which does
not consist in an insignificant amount as, say, P.20 for a house; that it is not
the same as the concept of a just price which entails weighing and
measuring, for economic equivalence, the amount of price against all the
factors that determine the value of the thing sold; but that there is no need
of such a close examination when the immense disproportion between such
economic values is patent a case of insignificant or ridiculous price, the
unbelievable amount of which at once points out its inexistence; 15
3. assert that Art. 1458 of the Civil Code, in prescribing that a sale be for
a ... price certain in money or its equivalent ... requires that "equivalent" be
something representative of money, e.g., a check or draft, again citing
Manresa 16 to the effect that services are not the equivalent of money insofar
as said requirement is concerned and that a contract is not a true sale where
the price consists of services or prestations;
4. once more citing Manresa 17 also point out that the "services" mentioned
in the questioned deeds of sale are not only vague and uncertain, but are
S a l e s P a r t I V P a g e | 27
unknown and not susceptible of determination without the necessity of a
new agreement between the parties to said deeds.
Without necessarily according all these assertions its full concurrence, but
upon the consideration alone that the apparent gross, not to say enormous,
disproportion between the stipulated price (in each deed) of P l.00 plus
unspecified and unquantified services and the undisputably valuable real
estate allegedly sold worth at least P10,500.00 going only by assessments
for tax purposes which, it is well-known, are notoriously low indicators of
actual value plainly and unquestionably demonstrates that they state a false
and fictitious consideration, and no other true and lawful cause having been
shown, the Court finds both said deeds, insofar as they purport to be sales,
not merely voidable, but void ab initio.
Neither can the validity of said conveyances be defended on the theory that
their true causa is the liberality of the transferor and they may be considered
in reality donations 18 because the law 19 also prescribes that donations of
immovable property, to be valid, must be made and accepted in a public
instrument, and it is not denied by the respondents that there has been no
such acceptance which they claim is not required. 20
The transfers in question being void, it follows as a necessary consequence
and conformably to the concurring opinion in Armentia, with which the Court
fully agrees, that the properties purportedly conveyed remained part of the
estate of Hilario Mateum, said transfers notwithstanding, recoverable by his
intestate heirs, the petitioners herein, whose status as such is not
challenged.
The private respondents have only themselves to blame for the lack of proof
that might have saved the questioned transfers from the taint of invalidity as
being fictitious and without ilicit cause; proof, to be brief, of the character
and value of the services, past, present, and future, constituting according to
the very terms of said transfers the principal consideration therefor. The
petitioners' complaint (par. 6) 21 averred that the transfers were "...
fraudulent, fictitious and/or falsified and (were) ... in reality donations of
immovables ...," an averment that the private respondents not only
specifically denied, alleging that the transfers had been made "... for good
and valuable consideration ...," but to which they also interposed
the affirmative defenses that said transfers were "... valid, binding and
effective ...," and, in an obvious reference to the services mentioned in the
deeds, that they "... had done many good things to (the transferor) during

his lifetime, nursed him during his ripe years and took care of him during his
previous and last illness ...," (pars. 4, 6, 16 and 17, their
answer).lâwphî1.ñèt  22 The onus, therefore, of showing the existence of valid
and illicit consideration for the questioned conveyances rested on the private
respondents. But even on a contrary assumption, and positing that the
petitioners initially had the burden of showing that the transfers lacked such
consideration as they alleged in their complaint, that burden was shifted to
the private respondents when the petitioners presented the deeds which
they claimed showed that defect on their face and it became the duty of said
respondents to offer evidence of existent lawful consideration.
As the record clearly demonstrates, the respondents not only failed to offer
any proof whatsoever, opting to rely on a demurrer to the petitioner's
evidence and upon the thesis, which they have maintained all the way to this
Court, that petitioners, being mere collateral relatives of the deceased
transferor, were without right to the conveyances in question. In effect, they
gambled their right to adduce evidence on a dismissal in the Trial Court and
lost, it being the rule that when a dismissal thus obtained is reversed on
appeal, the movant loses the right to present evidence in his behalf. 23
WHEREFORE, the appealed Decision of the Court of Appeals is reversed. The
questioned transfers are declared void and of no force or effect. Such
certificates of title as the private respondents may have obtained over the
properties subject of said transfers are hereby annulled, and said
respondents are ordered to return to the petitioners possession of an the
properties involved in tills action, to account to the petitioners for the fruits
thereof during the period of their possession, and to pay the costs. No
damages, attorney's fees or litigation expenses are awarded, there being no
evidence thereof before the Court.
S a l e s P a r t I V P a g e | 28
G.R. No. L-10141             January 31, 1958
REPUBLIC OF THE PHILIPPINES, petitioner, 
vs.
PHILIPPINE RESOURCES DEVELOPMENT CORPORATION and the
COURT OF APPEALS, respondents.
PLEADING AND PRACTICE; INTERVENTION, WHERE INTERVENOR PosSESS
LEGAL INTEREST IN THE MATTER IN LITIGATION; RIGHT TO INTERVENE.—
In the exercise of discretion under section 3 of Rule 13 of the Rules of Court,
the court shall consider whether the intervention will unduly delay the
adjudication of the rights of the original parties and whether the intervenor's
rights may be fully protected in a separate proceeding. Although the
respondent corporation is entitled to bring a separate action against any or
all the parties thereto, yet as the determination of the issues joined by the
parties in the case would vitally affect the rights not only of the original
parties but also of the herein respondent corporation; and as the allowance
of the complaint in intervention, far from unduly delaying the adjudication of
the rights of the original parties or bringing confusion in the original case,
would help clarify the vital issue of the ownership of the materials involved
and would prevent multiplicity of suits, intervention should be allowed.
2.OBLIGATION AND CONTRACT; PAYMENT; KINDS OF PAYMENT; IN TERMS
OF MONEY OR ITS EQUIVALENT.—Although Article 1458 of the new Civil
Code provides that price * * * is always paid in terms of money and the
supposed payment being in kind it is no payment at all," yet the same article
provides that the purchaser may pay "a price certain in money or its
equivalent" which means that payment of the price need not be money.
3.CORPORATION; POWER TO SUE AND BE SUED; BOARD OF DIRECTORS
NOT THE PRESIDENT.—The power of a corporation to sue and be sued in
any court is lodged in the board of directors that exercised its corporate
powers, and not in the president.
4.ATTORNEY AND CLIENT; AUTHORITY TO APPEAR AS COUNSEL.— Where
the motion for admission of complaint in intervention and the complaint in
intervention attached thereto, signed by counsel and filed in the Court of

First Instance begin with the following statement; "COMES NOW the above-
named Intervenor, by its undersigned counsel. * * *", and underneath his
typewritten name is affixed the description "Counsel for the Intervenor," the
latter's authority to appear for the respondent corporation not having
questioned in the Court of First Instance, it is presumed that he was properly
authorized to file the complaint-in-intervention and appear for his client.
5.CORPORATION; DERIVATIVE SUIT; A SINGLE STOCKHOLDER MAY SUE IN
BEHALF OF THE CORPORATION.—Where the counsel is the secretary
treasurer of the respondent corporation and a member of the board of
directors, and the other members of the board, who should normally initiate
the action to protect the corporate properties and interests are the ones to
be adversely affected thereby, Held: That a single stockholder under such
circumstances may sue in behalf of the corporation. Counsel as a stockholder
and director of the respondent corporation may sue in its behalf and file the
complaint-in-intervention in the proper court. Republic vs. Phil. Resources
Dev. Corp., et al., 102 Phil. 960, No. L-10141 January 31, 1958
Office of the Solicitor General Ambrosio Padilla, and Solicitor Frine C.
Zaballero for petitioner.
Vicente L. Santiago for respondent Corporation.
PADILLA, J.:
This is a petition under Rule 46 to review a judgment rendered by the Court
of Appeals,in CA-GR No. 15767-R, Philippine Resources Development
Corporation vs. The Hon. Judge Magno Gatmaitan et al.
The findings of the Court of Appeals are, as follows.
It appears that on May 6, 1955, the Republic of the Philippines in
representation of the Bureau of Prisons instituted against Macario
Apostol and the Empire Insurance Co. a complaint docketed as Civil
Case No. 26166 of the Court of First instance of Manila. The
complaint alleges as the first cause of action, that defendant Apostol
submitted the highest bid the amount P450.00 per ton for the
purchase of 100 tons of Palawan Almaciga from the Bureau of
Prisons; that a contract therefor was drawn and by virtue of which,
Apostol obtained goods from the Bureau of Prisons valued
P15,878.59; that of said account, Apostol paid only P691.10 leaving
a balane obligation of P15,187.49. The complaint further averes, as
S a l e s P a r t I V P a g e | 29
second cause of action, that Apostol submitted the best bid with the
Bureau of Prisons for the purchase of three million board feet of logs
at P88.00 per 1,000 board feet; that a contract was executed
between the Director of Prisons and Apostol pursuant to which
contract Apostol obtained deliveries of logs valued at P65.830.00,
and that Apostol failed to pay a balance account Of P18,827.57. All
told, for the total demand set forth in complaint against Apostol is
for P34,015.06 with legal interests thereon from January 8, 1952.
The Empire lnsurance Company was included in the complaint
having executed a performance bond of P10,000.00 in favor of
Apostol.
In his answer, Apostol interposed payment as a defense and sought
the dismissal of the complaint.
On July 19, 1955, the Philippine Resources Development Corporation
moved to intervene, appending to its motion, the complaint in the
intervention of even date. The complaint recites that for sometime
prior to Apostol's transactions the corporate had some goods
deposited in a warehouse at 1201 Herran, Manila; that Apostol, then
the president of the corporation but without the knowledge or
consent of the stockholders thereof, disposed of said goods by
delivering the same to the Bureau of Prisons of in an attempt to
settle his personal debts with the latter entity; that upon discovery of
Apodol's act, the corporation took steps to recover said goods by
demanding from the Bureau of Prisons the return thereof; and that
upon the refusal of the Bureau to return said goods, the corporation
sought leave to intervene in Civil Case No. 26166.
As aforestated, His Honor denied the motion for intervention and
thereby issued an order to this effect on July 23, 1955. A motion for
the reconsideration of said order was filed by the movant corporation
and the same was likewise denied by His Honor on August 18,
1955 . . . (Annex L.).
On 3 September 1955, in a petition for a writ of certiorari filed in the Court
of Appeals, the herein respondent corporation prayed for the setting aside of
the order of the Court of First Instance that had denied the admission of its
complaint-in-intervention and for an order directing the latter Court to allow
the herein respondent corporation to intervene in the action (Annex G). On
12 December 1955 the Court of Appeals set aside the order denying the

motion to intervene and ordered the respondent court to admit the herein
respondent corporation's complaint-in-intervention with costs against
Macario Apostol.
On 9 January 1956 the Republic of the Philippines filed this petition in this
Court for the purpose stated at the beginning of this opinion.
The Goverment contends that the intervenor has no legal interest in the
matter in litigation, because the action brought in the Court of First Instance
of Manila against Macario Apostol and the Empire Insurance Company (Civil
Case No. 26166, Annex A) is just for the collection from the defendant
Apostol of a sum of money, the unpaid balance of the purchase price of logs
and almaciga bought by him from the Bureau of Prisons, whereas the
intervenor seeks to recover ownership and possession of G. I. sheets, black
sheets, M. S. plates, round bars and G. I. pipes that it claims its owns-an
intervention which would change a personal action into one ad rem and
would unduly delay the disposition of the case.
The Court of Appeals held that:
Petitioner ardently claims that the reason behind its motion to
intervene is the desire to protect its rights and interests over some
materials purportedly belonging to it; that said material were
unauthorizedly and illegally assigned and delivered to the Bureau of
Prisons by petitioning corporation's president Macario Apostol in
payment of the latter's personal accounts with the said entity; and
that the Bureau of Prisons refused to return said materials despite
petitioner's demands to do so.
Petitioner refers to the particulars recited in Apostol's answer dated
July 12, 1955 to the effect that Apostol had paid unto the Bureau of
Prisons his accounts covered, among others, by BPPO 1077 for the
sum of P4,638.40 and BPPO 1549 for the amount of P4,398.54.
Petitioner moreover, points to the State of Paid and Unpaid accounts
of Apostol dated January 16, 1954 prepared by the accounting of
officer of the Bureau of Prisons (Annex B. Complaint in Intervention),
wherein it appears that the aforementioned accounts covered
respectively by BPPO Nos. 1077 for 892 pieces of GI sheets and
1549 for 399 pieces of GI pipes in the total sum of P9,036.94 have
not been credited to Apostol's account in view of lack of supporting
papers; and that according to the reply letter of the Undersecretary
S a l e s P a r t I V P a g e | 30
of Justice, said GI sheets and pipes were delivered by Macario
Apostol to the Bureau of Prisons allegedly in Apostol's capacity as
owner and that the black iron sheets were delivered by Apostol as
President of the petitioner corporation.
Respondents, on the other hand, assert that the subject matter of
the original litigation is a sum of money allegedly due to the Bureau
of Prisons from Macario Apostol and not the goods or the materials
reportedly turned over by Apostol as payment of his private debts to
the Bureau of Prisons and the recovery of which is sought by the
petitioner; and that for this reason, petitioner has no legal interest in
the very subject matter in litigation as to entitle it to intervene.
We find no merit in respondents' contention. It is true that the very
subject matter of the original case is a sum of money. But it is
likewise true as borne out by the records, that the materials
purportedly belonging to the petitioner corporation have been
assessed and evaluated and their price equivalent in terms of money
have been determined; and that said materials for whatever price
they have been assigned by defendant now respondent Apostol as
tokens of payment of his private debts with the Bureau of Prisons. In
view of these considerations, it becomes enormously plain in the
event the respondent judge decides to credit Macario Apostol with
the value of the goods delivered by the latter to the Bureau of
Prisons, the petitioner corporation stands to be adversely affected by
such judgment. The conclusion, therefore, is inescapable that the
petitioner possesses a legal interest in the matter in litigation and
that such interest is of an actual, material, direct and immediate
nature as to entitle petitioner to intervene.
xxx     xxx     xxx
Section 3 of Rule 13 of the Rules of Court endows the lower Court
with discretion to allow or disapprove the motion for intrvention
(Santarromana et al. vs. Barrios, 63 Phil. 456); and that in the
exercise of such discretion, the court shall consider whether or not
the intervention will unduly delay or prejudice the adjudicatio of the
rights of the original parties and whether or not the intervenors the
rights may be fully protected in a separate proceeding. The
petitioner in the instant case positively authorized to a separate
action against any of all the respondents. But considering that the

resolution of the issues raised in and enjoined by the pleadings in
the main case, would virtally affect the rights not only the original
parties but also of the berein petitioner: that far from unduly
delaying or prejudicing the adjudication of the rights of the original
parties or bringing about confusion in the original case, the adnission
of the complaint in intervention would help clarify the vital issue of
the true and real ownership of the materials involved, besides
preventing an abhorrent munltiplicity of suit, we believe that the
motion to intervene should be given due to cause.
We find no reason for disturbing the foregoing pronouncements. The
Government argues that "Price . . . is always paid in terms of money and the
supposed payment beeing in kind, it is no payment at all, "citing Article 1458
of the new Civil Code. However, the same Article provides that the
purschaser may pay "a price certain in money or its equivalent," which
means that they meant of the price need not be in money. Whether the G.I.
sheets, black sheets, M. S. Plates, round bars and G. I. pipes claimed by the
respondent corporation to belong to it and delivered to the Bureau of Prison
by Macario Apostol in payment of his account is sufficient payment therefore,
is for the court to pass upon and decide after hearing all the parties in the
case. Should the trial court hold that it is as to credit Apostol with the value
or price of the materials delivered by him, certainly the herein respondent
corporation would be affected adversely if its claim of ownership of such
sheets, plates, bars and pipes is true.
The Government reiterates in its original stand that counsel appearing for
the respondent corporation has no authority to represent it or/and sue in its
behalf, the Court of Appeals held that:
Respondents aver also that petitioner lacks legal capacity to sue and
that its counsel is acting merely in an individual capacity without the
benefit of the corporate act authorizing him to bring sue. In this
connection, respondents invoked among others section 20 of Rule
127 which provision, in our opinion, squarely disproves their claim as
by virtue thereof, the authority of petitioner's counsel is pressumed.
Withal, the claim of the counsel for the petitioner that a resolution to
proceed against Apostol, had been unanonimously adopted by the
stockholders of the corporation, has not been refuted.
Evidently, petitioner is a duly organized corporation with offices at
the Samanillo Building and that as such, it is endowed with a
S a l e s P a r t I V P a g e | 31
personality distinct and separate from that of its president or
stockholders. It has the right to bring suit to safeguard its interests
and ordinarily, such right is exercised at the instance of the
president. However, under the circumstance now obtaining, such
right properly devolves upon the other officers of the corporations as
said right is sought to be exercised against the president himself
who is the very object of the intended suit.
The power of a corporation to sue and be sued in any court 1 is lodged in the
board of directors which exercises it corporater powers,2 and not in the
president, as contended by the Government. The "motion for admission of
complaint in intervention" (Annex C) and the "complaint in intervention"
attached thereto, signed by counsel and filed in the Court of First Instance
begin with the following statement: "COMES NOW the above-name
Intervenor, by its undersigned counsel, . . . , "and underneath his
typewritten name is affixed the description" Counsel for the Intervenor." As
counsels authority to appeal for the respondent corporation was newer
questioned in the Court of First Instance, it is to be pressumed that he was
properly authorized to file the complaint in intervention and appeal for his
client.1 It was only in the Court of Appeals where his authority to appear was
questioned. As the Court of Appeals was satisfied that counsel was duly
authorized by his client to file the complaint does in intervention and to
appear in its behalf, hte resolution of the Court of Appeals on this point
should not be disturbed.
Granting that counsel has not been actually authorized by the board of
directors to appear for and in behalf of the respondent corporation, the fact
that counsel is the secretary treasurer of the respondent corporation and
member of the board of directors; and that the other members of the board,
namely, Macario Apostol, the president, and his wife Pacita R. Apostol, who
shuold normally initiate the action to protect the corporate properties and in
interest are the ones to be adversely affected thereby, a single stockholder
under such circumstances may sue in behalf of the corporation.2 Counsel as
a stockholder and director of the respondent corporation may sue in its
behalf and file the complaint in intervention in the proper court.
The judgment under review is affirmed, without pronouncements as to costs.
 S a l e s P a r t I V P a g e | 32

CARMELITA BERNARDO  
NAVARRA and RRRC Present:
DEVELOPMENT CORPORATION,  
Petitioners, PUNO, C.J., Chairperson,
  *
SANDOVAL-GUTIERREZ,
  CORONA,
- versus - AZCUNA and
  GARCIA, JJ.
   
  Promulgated:
PLANTERS DEVELOPMENT BANK  
and ROBERTO GATCHALIAN July 12, 2007
REALTY, INC.,
Respondents.

DECISION
Contracts; Stages; In general, contracts undergo three distinct stages, to
wit: negotiation, perfection or birth, and consummation.—In general,
contracts undergo three distinct stages, to wit: negotiation, perfection or
birth, and consummation. Negotiation begins from the time the prospective
contracting parties manifest their interest in the contract and ends at the
moment of their agreement. Perfection or birth of the contract takes place
when the parties agree upon the essential elements of the contract, i.e.,
consent, object and price. Consummation occurs when the parties fulfill or
perform the terms agreed upon in the contract, culminating in the
extinguishment thereof.

Same; Sales; A negotiation is formally initiated by an offer which should be

certain with respect to both the object and the cause or consideration of the
envisioned contract—there must be acceptance, which may be express or
implied, but it must not qualify the terms of the offer.—A negotiation is
formally initiated by an offer which should be certain with respect to both the
object and the cause or consideration of the envisioned contract. In order to
produce a contract, there must be acceptance, which may be express or
implied, but it must not qualify the terms of the offer. The acceptance of an
offer must be unqualified and absolute to perfect the contract. In other
words, it must be identical in all respects with that of the offer so as to
produce consent or meeting of the minds.

Same; Same; Before a valid and binding contract of sale can exist, the
SPS. JORGE NAVARRA and G.R. No. 172674 manner of payment of the purchase price must first be established since the

agreement on the manner of payment goes into the price such that a
disagreement on the manner of payment is tantamount to a failure to agree
on the price.—While the foregoing letters indicate the amount of
P300,000.00 as down payment, they are, however, completely silent as to
how the succeeding installment payments shall be made. At most, the letters
merely acknowledge that the down payment of P300,000.00 was agreed
upon by the parties. However, this fact cannot lead to the conclusion that a
contract of sale had been perfected. Quite recently, this Court held that
before a valid and binding contract of sale can exist, the manner of payment
of the purchase price must first be established since the agreement on the
manner of payment goes into the price such that a disagreement on the
manner of payment is tantamount to a failure to agree on the price.
Same; Same; A letter/offer that merely stated that the “purchase price will
be based on the redemption value plus accrued interest at the prevailing rate
up to the date of the sales contract” fails to specify a definite amount of the
purchase price—the ambiguity of such statement only bolsters the
uncertainty of the “offer.”—The Navarras’ letter/offer failed to specify a
definite amount of the purchase price for the sale/repurchase of the subject
properties. It merely stated that the “purchase price will be based on the
redemption value plus accrued interest at the prevailing rate up to the date
of the sales contract.” The ambiguity of this statement only bolsters the
uncertainty of the Navarras’ so-called “offer” for it leaves much rooms for
such questions, as: what is the redemption value? what prevailing rate of
interest shall be followed: is it the rate stipulated in the loan agreement or
the legal rate? when will the date of the contract of sale be based, shall it be
upon the time of the execution of the deed of sale or upon the time when
the last installment payment shall have been made? To our mind, these
questions need first to be addressed, discussed and negotiated upon by the
parties before a definite purchase price can be arrived at.
Same; Same; The absence of a stipulated period within which the
repurchase price shall be paid all the more adds to the indefiniteness of the
offer to purchase.—The offer was not clear insofar as concerned the exact
number of years that will comprise the longterm payment scheme. As we see
it, the absence of a stipulated period within which the repurchase price shall
be paid all the more adds to the indefiniteness of the Navarras’ offer.
Same; Same; Elements.—The lack of a definite offer on the part of the
spouses could not possibly serve as the basis of their claim that the
sale/repurchase of their foreclosed properties was perfected. The reason is
obvious: one essential element of a contract of sale is wanting: the price
S a l e s P a r t I V P a g e | 33
certain. There can be no contract of sale unless the following elements
concur: (a) consent or meeting of the minds; (b) determinate subject
matter; and (c) price certain in money or its equivalent. Such contract is
born or perfected from the moment there is a meeting of minds upon the
thing which is the object of the contract and upon the price. Here, what is
dramatically clear is that there was no meeting of minds vis-à-vis the price,
expressly or impliedly, directly or indirectly.
Same; Same; Where the letter-reply specifically stated that there is a need
to negotiate on the other details of the transaction before the sale may be
formalized, the same clearly manifested lack of agreement between the
parties as to the terms of the purported contract of sale/repurchase,
particularly the mode of payment of the purchase price and the period for its
payment.—The tenor of Planters Bank’s letter-reply negates the contention
of the Navarras that the Bank fully accepted their offer. The letter specifically
stated that there is a need to negotiate on the other details of the
transaction before the sale may be formalized. Such statement in the Bank’s
letter clearly manifests lack of agreement between the parties as to the
terms of the purported contract of sale/repurchase, particularly the mode of
payment of the purchase price and the period for its payment. The law
requires acceptance to be absolute and unqualified. As it is, the Bank’s letter
is not the kind which would constitute acceptance as contemplated by law
for it does not evince any categorical and unequivocal undertaking on the
part of the Bank to sell the subject properties to the Navarras.
GARCIA, J.:
 
Assailed and sought to be set aside in this petition for review under Rule 45
of the Rules of Court is the decision [1] dated September 27, 2004 of the
Court of Appeals (CA) in CA-G.R. CV No. 50002, as reiterated in its
resolution[2] dated May 8, 2006, denying reconsideration thereof. The
challenged decision reversed that of the Regional Trial Court (RTC)
of Makati City, Branch 66, in its Civil Case No. 16917, an action for Specific
Performance and Injunction  thereat commenced by the herein petitioners
against the respondents. The Makati RTC ruled that a perfected contract of
sale existed in favor of Jorge Navarra and Carmelita Bernardo
Navarra (Navarras) over the properties involved in the suit and accordingly
ordered Planters Development Bank (Planters Bank) to execute the
necessary deed of sale therefor. The CA reversed that ruling. Hence, this
recourse by the petitioners.
 
The facts:

 
The Navarras are the owners of five (5) parcels of land located at B.F.
Homes, Paraaque and covered by Transfer Certificates of Title (TCT) Nos. S-
58017, S-58011, S-51732, S-51733 and A-14574. All these five (5) parcels of
land are the subject of this controversy.
 
On July 5, 1982, the Navarras obtained a loan of P1,200,000.00 from
Planters Bank and, by way of security therefor, executed a deed of mortgage
over their aforementioned five (5) parcels of land. Unfortunately, the couple
failed to pay their loan obligation. Hence, Planters Bank foreclosed on the
mortgage and the mortgaged assets were sold to it for P1,341,850.00, it
being the highest bidder in the auction sale conducted on May 16, 1984. The
one-year redemption period expired without the Navarras having redeemed
the foreclosed properties.
 
On the other hand, co-petitioner RRRC Development Corporation (RRRC) is a
real estate company owned by the parents of Carmelita Bernardo Navarra.
RRRC itself obtained a loan from Planters Bank secured by a mortgage over
another set of properties owned by RRRC. The loan having been likewise
unpaid, Planters Bank similarly foreclosed the mortgaged assets of RRRC.
Unlike the Navarras, however, RRRC was able to negotiate with the Bank for
the redemption of its foreclosed properties by way of a concession whereby
the Bank allowed RRRC to refer to it would-be buyers of the foreclosed RRRC
properties who would remit their payments directly to the Bank, which
payments would then be considered as redemption price for RRRC.
Eventually, the foreclosed properties of RRRC were sold to third persons
whose payments therefor, directly made to the Bank, were in excess
by P300,000.00 for the redemption price.
 
In the meantime, Jorge Navarra sent a letter to Planters Bank, proposing to
repurchase the five (5) lots earlier auctioned to the Bank, with a request that
he be given until August 31, 1985 to pay the down payment of P300,000.00.
Dated July 18, 1985 and addressed to then Planters Bank President Jesus
Tambunting, the letter reads in full:
This will formalize my request for your kind
consideration in allowing my brother and me to buy back my
house and lot and my restaurant building and lot together
with the adjacent road lot.
 
Since my brother, who is working in Saudi Arabia,
has accepted this arrangement only recently as a result of
my urgent offer to him, perhaps it will be safe for us to set
S a l e s P a r t I V P a g e | 34
August 31, 1985 as the last day for the payment of
a P300,000.00 downpayment. I hope you will grant us the
opportunity to raise the funds within this period, which
includes an allowance for delays.
 
The purchase price, I understand, will be based on
the redemption value plus accrued interest at the prevailing
rate up to the date of our sales contract. Maybe you can
give us a long term payment scheme on the basis of my
brothers annual savings of roughly US$30,000.00 everytime
he comes home for his home leave.
 
I realize that this is not a regular transaction but I
am seeking your favor to give me a chance to reserve
whatever values I can still recover from the properties and
to avoid any legal complications that may arise as a
consequence of the total loss of the Balangay lot. I hope
that you will extend to me your favorable action on this
grave matter.
 
 
In response, Planters Bank, thru its Vice-President Ma. Flordeliza Aguenza,
wrote back Navarra via a letter dated August 16, 1985, thus:
 
Regarding your letter dated July 18, 1985, requesting that
we give up to August 31, 1985 to buy back your house and
lot and restaurant and building subject to a P300,000.00
downpayment on the purchase price, please be advised that
the Collection Committee has agreed to your request.
 
Please see Mr. Rene Castillo, Head, Acquired Assets
Unit, as soon as possible for the details of the transaction so
that they may work on the necessary documentation.
 
Accordingly, Jorge Navarra went to the Office of Mr. Rene Castillo on
August 20, 1985, bringing with him a letter requesting that the
excess payment of P300,000.00 in connection with the redemption
made by the RRRC be applied as down payment for the Navarras
repurchase of their foreclosed properties.
 
Because the amount of P300,000.00 was sourced from a different
transaction between RRRC and Planters Bank and involved different debtors,
 S a l e s P a r t I V P a g e | 35

the Bank required Navarra to submit a board resolution from RRRC In a decision dated July 10, 1995, the trial court ruled that there was a
authorizing him to negotiate for and its behalf and empowering him to apply perfected contract of sale between the Navarras and Planters Bank, and
the excess amount of P300,000.00 in RRRCs redemption payment as down accordingly rendered judgment as follows:
payment for the repurchase of the Navarras foreclosed properties.  
  WHEREFORE, in view of the foregoing, judgment is hereby rendered
Meanwhile, titles to said properties were consolidated in the name of ordering:
Planters Bank, and on August 27, 1985, new certificates of title were issued  
in its name, to wit: TCT Nos. 97073, 97074, 97075, 97076 and 97077. a)                  the cancellation of the Deed of
  Absolute Sale (Exh. 2) over lot 4137-C
Then, on January 21, 1987, Planters Bank sent a letter to Jorge Navarra between defendant Planters Development
informing him that it could not proceed with the documentation of the Bank and defendant Roberto Gatchalian
proposed repurchase of the foreclosed properties on account of his non- Realty Corporation (RGRI) with the vendor
compliance with the Banks request for the submission of the needed board bank refunding all the payments made by
resolution of RRRC. the vendee RGRI without interest less the
  five percent (5%) brokers commission:
In his reply-letter of January 28, 1987, Navarra claimed having already  
delivered copies of the required board resolution to the Bank. The Bank, b)                  the defendant Planters Development
however, did not receive said copies. Thus, on February 19, 1987, the Bank Bank to execute the Deed of Absolute Sale
sent a notice to the Navarrras demanding that they surrender and vacate  the over the lots covered by TCT Nos. 97073,
properties in question for their failure to exercise their right of redemption. 97074, 97075, 97076, and 97077 in favor of
  all the plaintiffs for a consideration of ONE
Such was the state of things when, on June 31, 1987, in the RTC of Makati MILLION EIGHT HUNDRED THOUSAND
City, the Navarras filed their complaint for Specific Performance with (P1,800,000.00) less the downpayment of
Injunction against Planters Bank. In their complaint docketed in said court P300,000.00 plus interest at the rate of
as Civil Case No. 16917 and raffled to Branch 66 thereof, the Navarras, as twenty five percent (25%) per year for five
plaintiffs, alleged that a perfected contract of sale was made between them (5) years to be paid in full upon the
and Planters Bank whereby they would repurchase the subject properties execution of the contract;
for P1,800,000.00 with a down payment of P300,000.00.  
  c)                  the defendant Planters Development
In its Answer, Planters Bank asserted that there was no perfected contract of Bank the amount of TEN THOUSAND PESOS
sale because the terms and conditions for the repurchase have not yet been (P10,000.00) by way of attorneys fees.
agreed upon.  
  d)                  No costs.
On September 9, 1988, a portion of the lot covered by TCT No. 97077  
(formerly TCT No. A-14574) was sold by Planters Bank to herein co- SO ORDERED.
respondent Roberto Gatchalian Realty, Inc. (Gatchalian  
Realty). Consequently, TCT No. 97077 was cancelled and TCT No. 12692 Therefrom, Planters Bank and Gatchalian Realty separately went on appeal
was issued in the name of Gatchalian Realty. This prompted the Navarras to to the CA whereat their appellate recourse were consolidated and docketed
amend their complaint by impleading Gatchalian Realty as additional as CA-G.R. CV No. 50002.
defendant.  
  As stated at the threshold hereof, the appellate court, in its decision
of September 27, 2004, reversed that of the trial court and ruled that there

was no perfected contract of sale between the parties. Partly says the CA in
its decision:
The Court cannot go along with the deduction of the trial
court that the response of Planters Bank was favorable to
Jorge Navarras proposal and that the P300,000.00 in its
possession is a down payment and as such sufficient bases
to conclude that there was a valid and perfected contract of
sale. Based on the turn of events and the tenor of the
communications between the offerors and the creditor bank,
it appears that there was not even a perfected contract to
sell, much less a perfected contract of sale.
 
Article 1319 cited by the trial court provides that the
acceptance to an offer must be absolute. Simply put, there
must be unqualified acceptance and no condition must tag
along. But Jorge Navarra in trying to convince the bank to
agree, had himself laid out terms in offering (1) a
downpayment of P300,000.00 and setting (2) as deadline
August 31, 1985 for the payment thereof. Under these terms
and conditions the bank indeed accepted his offer, and these
are essentially the contents of Exhibits J and K.
 
But was there compliance? According to the evidence on file
the P300,000.00, if at all, was given beyond the agreed
period. The court a quo missed the fact that the said amount
came from the excess of the proceeds of the sale to the Pea
spouses which Jorge Navarra made to appear was made
before the deadline he set of August 31, 1985. But this is
athwart Exhibits M-1 and N, the Contract to Sell and the
Deed of Sale between RRRC and the Peas, for these were
executed only on September 13, 1985 and October 7,
1985 respectively.
 
xxx xxx xxx
 
There were two separate and independent loans secured by
distinct mortgages on different lots and their only
commonality is the relationship of the Navarras and
Bernardo families. It is thus difficult to conceive and to
conclude that such Byzantine arrangement was acquiesced
S a l e s P a r t I V P a g e | 36
to and provided for in that single and simple letter of the
bank.
With their motion for reconsideration having been denied by the CA in its
resolution of May 8, 2006, petitioners are now with this Court via this
recourse on their submission that the CA erred -
I
 
XXX IN CONCLUDING THAT THERE WAS NO PERFECTED
CONTRACT TO REPURCHASE THE FORECLOSED
PROPERTIES BETWEEN THE PETITIONERS AND THE
PRIVATE RESPONDENT PLANTERS DEVELOPMENT BANK, AS
CORRECTLY FOUND BY THE TRIAL COURT.
 
II
 
XXX IN HOLDING THAT THE PARTIES NEVER GOT PAST
THE NEGOTIATION STAGE.
 
While the question raised is essentially one of fact, of which the Court
normally eschews from, yet, given the conflicting factual findings of the trial
and appellate courts, the Court shall go by the exception[3] to the general
rule and proceed to make its own assessment of the evidence.
 
We DENY.
Petitioners contend that a perfected contract of sale came into being when
respondent Bank, thru a letter dated August 16, 1985, formally accepted the
offer of the Navarras to repurchase the subject properties.
 
In general, contracts undergo three distinct stages, to wit: negotiation,
perfection or birth, and consummation. Negotiation begins from the time
the prospective contracting parties manifest their interest in the contract and
ends at the moment of their agreement. Perfection or birth of the contract
takes place when the parties agree upon the essential elements of the
contract, i.e., consent, object and price. Consummation occurs when the
parties fulfill or perform the terms agreed upon in the contract, culminating
in the extinguishment thereof.[4]
 
A negotiation is formally initiated by an offer which should be certain with
respect to both the object and the cause or consideration of the envisioned

contract. In order to produce a contract, there must be acceptance, which
may be express or implied, but it must not qualify the terms of the offer. The
acceptance of an offer must be unqualified and absolute to perfect the
contract. In other words, it must be identical in all respects with that of the
offer so as to produce consent or meeting of the minds.[5]
 
Here, the Navarras assert that the following exchange of correspondence
between them and Planters Bank constitutes the offer and acceptance, thus:
Letter dated July 18, 1985 of Jorge Navarra:
 
This will formalize my request for your kind
consideration in allowing my brother and me to buy back my
house and lot and my restaurant building and lot together
with the adjacent road lot.
 
Since my brother, who is working in Saudi Arabia,
has accepted this arrangement only recently as a result of
my urgent offer to him, perhaps it will be safe for us to set
August 31, 1985 as the last day for the payment of
a P300,000.00 downpayment. I hope you will grant us the
opportunity to raise the funds within this period, which
includes an allowance for delays.
The purchase price, I understand, will be based on
the redemption value plus accrued interest at the prevailing
rate up to the date of our sales contract. Maybe you can
give us a long term payment scheme on the basis of my
brothers annual savings of roughly US$30,000.00 everytime
he comes home for his home leave.
 
I realize that this is not a regular transaction but I
am seeking your favor to give me a chance to reserve
whatever values I can still recover from the properties and
to avoid any legal complications that may arise as a
consequence of the total loss of the Balangay lot. I hope
that you will extend to me your favorable action on this
grave matter.
 
Letter dated August 16, 1985 of Planters Bank
Regarding your letter dated July 18, 1985, requesting that
we give up to August 31, 1985 to buy back your house and
S a l e s P a r t I V P a g e | 37
lot and restaurant and building subject to a P300,000.00
downpayment on the purchase price, please be advised that
the Collection Committee has agreed to your request.
 
Please see Mr. Rene Castillo, Head, Acquired
Assets Unit, as soon as possible for the details of the
transaction so that they may work on the necessary
documentation. (Emphasis ours)
Given the above, the basic question that comes to mind is: Was the offer
certain and the acceptance absolute enough so as to engender a meeting of
the minds between the parties? Definitely not.
While the foregoing letters indicate the amount of P300,000.00 as down
payment, they are, however, completely silent as to how the succeeding
installment payments shall be made. At most, the letters merely
acknowledge that the down payment of P300,000.00 was agreed upon by
the parties. However, this fact cannot lead to the conclusion that a contract
of sale had been perfected. Quite recently, this Court held that before a valid
and binding contract of sale can exist, the manner of payment of the
purchase price must first be established since the agreement on the manner
of payment goes into the price such that a disagreement on the manner of
payment is tantamount to a failure to agree on the price.[6]
Too, the Navarras letter/offer failed to specify a definite amount of the
purchase price for the sale/repurchase of the subject properties. It merely
stated that the purchase price will be based on the redemption value plus
accrued interest at the prevailing rate up to the date of the sales contract.
The ambiguity of this statement only bolsters the uncertainty of the Navarras
so-called offer for it leaves much rooms for such questions, as: what is the
redemption value? what prevailing rate of interest shall be followed: is it the
rate stipulated in the loan agreement or the legal rate? when will the date of
the contract of sale be based, shall it be upon the time of the execution of
the deed of sale or upon the time when the last installment payment shall
have been made? To our mind, these questions need first to be addressed,
discussed and negotiated upon by the parties before a definite purchase
price can be arrived at.
 
Significantly, the Navarras wrote in the same letter the following:
 
Maybe you can give us a long-term payment scheme
on the basis of my brothers annual savings of roughly
 S a l e s P a r t I V P a g e | 38

US$30,000.00 every time he comes home for his home again conditionally accepted by the Bank as in fact it even required the
leave. Navarras to submit a board resolution of RRRC before it could proceed with
  the proposed sale/repurchase. The eventual failure of the spouses to submit
Again, the offer was not clear insofar as concerned the exact number of the required board resolution precludes the perfection of a contract of
years that will comprise the long-term payment scheme. As we see it, the sale/repurchase between the parties. As earlier mentioned, contracts are
absence of a stipulated period within which the repurchase price shall be perfected when there is concurrence of the parties wills, manifested by the
paid all the more adds to the indefiniteness of the Navarras offer. acceptance by one of the offer made by the other.[9] Here, there was no
  concurrence of the offer and acceptance as would result in a perfected
Clearly, then, the lack of a definite offer on the part of the spouses could not contract of sale.
possibly serve as the basis of their claim that the sale/repurchase of their  
foreclosed properties was perfected. The reason is obvious: one essential Evidently, what transpired between the parties was only a prolonged
element of a contract of sale is wanting: the price certain. There can be no negotiation to buy and to sell, and, at the most, an offer and a counter-offer
contract of sale unless the following elements concur: (a) consent or meeting with no definite agreement having been reached by them. With the hard
of the minds; (b) determinate subject matter; and (c) price certain in money reality that no perfected contract of sale/repurchase exists in this case, any
or its equivalent. Such contract is born or perfected from the moment there independent transaction between the Planters Bank and a third-party, like
is a meeting of minds upon the thing which is the object of the contract and the one involving the Gatchalian Realty, cannot be affected.
upon the price.[7] Here, what is dramatically clear is that there was no  
meeting of minds vis-a-vis the price, expressly or impliedly, directly or WHEREFORE, the petition is DENIED and the assailed decision and
indirectly. resolution of the Court of Appeals are AFFIRMED.
 
Further, the tenor of Planters Banks letter-reply negates the contention of
the Navarras that the Bank fully accepted their offer. The letter specifically
stated that there is a need to negotiate on the other details of the
transaction[8] before the sale may be formalized. Such statement in the
Banks letter clearly manifests lack of agreement between the parties as to
the terms of the purported contract of sale/repurchase, particularly the mode
of payment of the purchase price and the period for its payment. The law
requires acceptance to be absolute and unqualified. As it is, the Banks letter
is not the kind which would constitute acceptance as contemplated by law
for it does not evince any categorical and unequivocal undertaking on the
part of the Bank to sell the subject properties to the Navarras.
 
The Navarras attempt to prove the existence of a perfected contract of sale
all the more becomes futile in the light of the evidence that there was in the
first place no acceptance of their offer. It should be noted that aside from
their first letter dated July 18, 1985, the Navarras wrote another letter
dated August 20, 1985, this time requesting the Bank that the down
payment of P300,000.00 be instead taken from the excess payment made by
the RRRC in redeeming its own foreclosed properties. The very circumstance
that the Navarras had to make this new request is a clear indication that no
definite agreement has yet been reached at that point. As we see it, this
request constitutes a new offer on the part of the Navarras, which offer was