JUANA ALMIRA, RENATO GARCIA, ROGELIO GARCIA, RODOLFO GARCIA, ROSITA GARCIA, RHODORA (2) Na ang UNANG BAHAGI
(2) Na ang UNANG BAHAGI ang siyang mananagot tungkol sa anumang kasulatang
GARCIA, ROSALINDA GARCIA, ROLANDO GARCIA and RAFAEL GARCIA Represented in this
suit by EDGARDO ALVAREZ, petitioners, vs. COURT OF APPEALS AND FEDERICO
BRIONES, respondents.
DECISION
AZCUNA, J.:
Before us is a petition for review on certiorari assailing the decision rendered by the Court of
Appeals in C.A. G.R. CV No. 40954 [1] which reversed the decision of the Regional Trial Court, Branch 32, of
San Pedro, Laguna that rescinded the Kasunduan ng Pagbibilihan[2] entered into between petitioners and
private respondent over a portion of a parcel of land situated in Sta. Rosa, Laguna.
The facts of the case are as follows:
Petitioners are the wife and the children of the late Julio Garcia who inherited from his mother,
Maria Alibudbud, a portion of a 90,655 square-meter property denominated as Lot 1642 of the Sta. Rosa
Estate in Barangay Caingin, Sta. Rosa, Laguna and covered by TCT No. RT-1076. Lot 1642 was co-owned
and registered in the names of three persons with the following shares: Vicente de Guzman (), Enrique
Hemedes (1/4), and Francisco Alibudbud, the father of Maria Alibudbud (). Although there was no
separate title in the name of Julio Garcia, there were tax declarations in his name to the extent of his
grandfathers share covering an area of 21,460 square meters. On July 5, 1984, petitioners, as heirs of
Julio Garcia, and respondent Federico Briones entered into a Kasunduan ng Pagbibilihan (Kasunduan for
brevity) over the 21,460 square-meter portion for the sum of P150,000.00. Respondent paid P65,000.00
upon execution of the contract while the balance of P85,000.00 was made payable within six (6) months
from the date of the execution of the instrument. At the time of the execution of
the Kasunduan, petitioners allegedly informed respondent that TCT No. RT-1076 was in the possession
of their cousin, Conchalina Alibudbud who having bought Vicente de Guzmans share, owned the bigger
portion of Lot 1642. This notwithstanding, respondent willingly entered into the Kasunduan provided
that the full payment of the purchase price will be made upon delivery to him of the title.[3]
The Kasunduan provides:
Na ang UNANG BAHAGI ay siyang magkakamayari (co-owners), bilang tagapagmana ng yumaong Julio
Garcia sa isang lagay na lupang taniman ng palay, matatagpuan sa nayon ng Caingin, Santa Rosa,
Laguna, may buong lawak na 21,460 metrong parisukat, humigit kumulang, na lalong makikilala sa mga
katangiang inilalahad sa pahayag ng Buwis Bilang 3472 na ganito ang natutunguhan: Mga kahanggan:
Hilaga-1641-Nazario Lauriles; Timog-Barique Hemedez; Silangan- Vicente de Guzman; at Kanluran-
Francisco Alibudbod; hinalagahan para sa pagbabayad ng buwis pampamahalaan ng P12,720.00; at
kasalukuyang may nabibinbing kahilingan sa hukuman upang magkaroon ng sariling titulo; nalilibot ng
batong mohon na nagsisilbing hanganan sa bawat sulok.
Na ang UNANG BAHAGI ay inialok sa IKALAWANG BAHAGI upang bilihin ang lupang nabanggit sa
kabuuang halagang ISANG DAAN AT LIMAMPUNG LIBONG (P150,000.00) PISO, Salaping Pilipino, at ang
IKALAWANG BAHAGI ay sumangayon na bilhin ang naulit na lupa batay sa sumusunod na mga pasubali
at Kasunduan:
(1) Na pinatutunayan ng UNANG BAHAGI na tinanggap nila sa buong kasiyahan ng
kalooban buhat sa IKALAWANG BAHAGI ang halagang ANIMNAPU AT LIMANG LIBONG
(P65,000.00) PISO, salaping Pilipino, bilang paunang bayad, at ang nalalabing
WALUMPU AT LIMANG LIBONG (85,000.00) PISO, ay babayaran ng IKALAWANG
BAHAGI sa UNANG BAHAGI sa loob ng anim na buwan simula sa takda ng kasulatang
ito, sa pasubali na ang kaukulang titulo sa lupang nabanggit ay maipagkakaloob ng
UNANG BAHAGI;
inihanda ukol sa pagbibilihang ito, gayundin sa gastos sa notaryo publiko, capital gains
tax at pagpapatala ng kasulatan sa lalawigan ng Laguna;
(3) Na ang UNANG BAHAGI ay lalagda sa isang Kasulatan ng Bilihang Tuluyan matapos na
mabayarang lahat ng IKALAWANG BAHAGI ang kaukulang kabuuang halaga ng lupang
nabanggit.
Respondent took possession of the property subject of the Kasunduan and made various
payments to petitioners amounting to P58,500.00. However, upon failure of petitioners to deliver to him
a separate title to the property in the name of Julio Garcia, he refused to make further payments,
prompting petitioners to file a civil action before the Regional Trial Court of San Pedro, Laguna, Branch
32, on May 13, 1991 for (a) rescission of the Kasunduan; (b) return by respondent to petitioners of the
possession of the subject parcel of land; and (c) payment by respondent of damages in favor of
petitioners.
Petitioners alleged that respondent was bound to pay the balance of the purchase price within six
(6) months from the date of the execution of the Kasunduan and upon delivery to him of TCT No. RT-
1076. Petitioners claimed that they approached respondent several times to deliver TCT No. RT-1076 but
respondent told them that he did not have money to pay the balance of the purchase price.
[4]
 Respondent, on the other hand, filed a counterclaim for damages and averred that he refused to make
further payments because of petitioners failure to deliver to him a separate title in the name of Julio
Garcia.
On November 26, 1992, the trial court rendered a decision, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendant decreeing
the rescission of the Kasunduan ng Pagbibilihan dated July 5, 1984 and ordering the defendant to return
and restore possession of the property subject of the Kasunduan ng Pagbibilihan to the plaintiffs. For
paucity of evidence, no judgment can be rendered on the other reliefs prayed for in the complaint.
On the other hand, plaintiffs are hereby ordered to refund to the defendant the downpayment of
P65,000.00 and the partial payment of the balance totaling to P58,500.00 plus legal interest. Defendants
counterclaim is hereby dismissed for lack of merit. Costs against defendant.[5]
In its decision, the trial court noted that proceedings for the issuance of a separate title covering
the property subject of sale entail time and the parties could not have intended delivery by petitioners to
respondent of a separate title in the name of Julio Garcia as a condition for respondents payment of the
full purchase price within six months from the time of the execution of the Kasunduan. Said court
observed that even if petitioners were obliged to deliver a separate title in the name of Julio Garcia to
respondent, the latter appeared to have insufficient funds to settle his obligation as indicated by the fact
that his payments amounting to P58,500.00 were made in trickles, having been given on thirty-nine
occasions within a span of two years from the time of the execution of the Kasunduan. It concluded that
respondent refused to complete payment of the full purchase price not because of the failure of
petitioners to deliver a separate title in the name of Julio Garcia but because respondent simply did not
have sufficient funds at hand.
The Court of Appeals, however, noting that the Kasunduan made no reference to TCT No. RT-
1076, reversed the decision of the trial court, and dismissed the complaint. The appellate court opined
that the parties intended to refer to a separate title over the 21,460 square meter lot when
the Kasunduan mentioned a kaukulang titulo ng lupang nabanggit since it was the portion which was
covered by a separate tax declaration in the name of Julio Garcia and it was the portion that petitioners
could sell. The appellate court noted that the actuations of the parties subsequent to the execution of
the Kasunduan confirmed respondents claim that a separate title to the property subject of
the Kasunduan should be delivered to him. Nevertheless, respondents counterclaim for damages was
dismissed on the ground that the filing of the complaint for rescission was not attended by malice, there
being an honest difference of opinion between the parties as to the interpretation of the Kasunduan.
Feeling aggrieved by the aforesaid decision, petitioners filed before us the instant petition
for certiorari, raising issues which may essentially be summarized as follows: (1) whether payment of the
balance of the purchase price is conditioned upon delivery of a separate title in the name of Julio Garcia;
(2) whether petitioners are entitled to rescind the Kasunduan for failure of respondent to complete
payment of the purchase price; and (3) whether the Court of Appeals should have dismissed respondents
appeal for failure to comply with Circular 28-91.
Petitioners contend that the Kasunduan never made a reference to a title in the name of Julio
Garcia and that there was nothing in the actuations of the parties which would indicate that full
payment of the purchase price is conditioned upon the delivery to respondent of said title. Petitioners
allege that respondent refused to give further payments not because of their failure to deliver a separate
title in the name of Julio Garcia but because he simply did not have sufficient funds to complete payment
of the purchase price. Petitioners ask for rescission of the Kasunduan pursuant to Article 1191 of the Civil
Code on the ground that respondent failed to complete payment of the purchase price. They further
aver that the appellate court should have dismissed respondents appeal in the first place for failure of
respondent to comply with Circular No. 28-91 [6] requiring parties to submit a certification of non-forum
shopping in petitions filed before the Supreme Court and the Court of Appeals. Petitioners lament that
although they raised the issue regarding respondents procedural lapse early on at the appellate court,
the latter still entertained respondents appeal.
As a rule, our jurisdiction in cases brought before us from the Court of Appeals under Rule 45 of
the Rules of Court is limited to reviewing errors of law. Factual findings of the appellate court are
generally binding on us.[7] However, this principle is subject to certain exceptions such as the situation in
this case where the trial court and the appellate court arrived at diverse factual findings. [8]
The subject of conflicting interpretations between the parties pertains to the provision in
the Kasunduan which states:
(1) Na pinatutunayan ng UNANG BAHAGI na tinanggap nila sa buong kasiyahan ng kalooban buhat sa
IKALAWANG BAHAGI ang halagang ANIMNAPU AT LIMANG LIBO (P65,000.00) PISO, Salaping Pilipino,
bilang paunang bayad, at ang nalalabing WALUMPU AT LIMANG LIBONG (85,000.00) PISO ay babayaran
ng IKALAWANG BAHAGI sa UNANG BAHAGI sa loob ng anim na buwan simula sa takda ng kasulatang
ito, sa pasubali na ang kaukulang titulo ng lupang nabanggit ay maipagkakaloob ng  UNANG BAHAGI sa
IKALAWANG BAHAGI
Petitioners allege that the kaukulang titulo ng lupang nabanggit refers to TCT No. RT-1076 and
not to a separate title in the name of Julio Garcia. Petitioners stress the implausibility of delivering the
separate title to respondent within six (6) months from the time of the execution of
the Kasunduan considering that issuance of the title required prior settlement of the estates of Francisco
Alibudbud, Vicente de Guzman and Enrique Hemedes; partition of Lot 1642; and segregation of the
portion pertaining to the share acquired by Julio Garcia. Respondent, for his part, insists that
the kaukulang titulo ng lupang nabanggit refers to a separate title in the name of Julio Garcia. He argues
that he only acceded to the Kasunduan upon having been assured by petitioners that they would be able
to deliver to him a separate title in the name of Julio Garcia. Petitioners allegedly told respondent that
there was a pending petition in the court of Bian for the issuance of a separate title to the subject
property.[9]
It is basic in the interpretation and construction of contracts that the literal meaning of the
stipulations shall control if the terms of the contract are clear and leave no doubt on the intention of the
contracting parties. However, if the terms of the agreement are ambiguous, resort is made to contract
interpretation which is the determination of the meaning attached to written or spoken words that make
the contract.[10] To ascertain the true intention of the parties, their subsequent or contemporaneous
actions must be principally considered.
The tenor of the correspondence between petitioners and respondent shows that the parties
intended that a separate title to the property in the name of Julio Garcia shall be delivered to respondent
as a condition for the latters payment of the balance of the purchase price. Thus, petitioner Juana
Almiras letter dated July 24, 1986 to respondent reads:
Ang totoo po ngayon ay kailangan naming ang halagang LABING LIMANG LIBO (P15,000.00) PISO, yan
po ang dahilan kung bakit kami ay sumulat sa inyo, sapagkat sa mga unang naghawak at nag-ayos ng
papeles ng lupang ito ay hindi nila naayos at hindi nila natapos, kaya po kami ay nakakita at malaki po
ang nagastos naming sa una na walang nangyari, kaya nga itong huli ay lalong lumaki
Unawain po naman ninyo kami sa halagang kailangan naming para sa huling gumagawa ng Titulo ng
lupa para naman po maayos na ito.[11]
Respondent signified his willingness to pay the balance of the purchase price but reminded
petitioners of their obligation to deliver title to the property in the following reply:
Hindi lingid sa inyong kaalaman na sa ilalim ng naubit na Kasunduan ng Pagbibilihan ay maliwanag ang
inyong tungkulin na ipagkaboob sa amin ang kaukulang titulo ng lupa sa boob ng anim (6) na buwan
simula sa takda ng nasabing kasulatan at kami naman ay nahahandang magbayad ng lahat ng
nalababing kabayaran x x x at tuwing kayo ay kukuha ng pera ang lagi niyong idinadahilan ay ang
diumano ay paglalakad tungkol sa titulo. x x x[12]
Had the parties intended that petitioners deliver TCT No. RT-1076 instead of a separate title in the
name of Julio Garcia to respondent, then there would have been no need for petitioners to ask for partial
sums on the ground that this would be used to pay for the processing of the title to the property.
Petitioners had only to present the existing title, TCT No. RT-1076, to respondent and demand the
balance of the purchase price. This, petitioners did not do. Instead, they were content to ask small sums
from respondent on thirty-nine occasions for two years before filing an action in court for rescission of
the Kasunduan another five years later. It is readily discernible from the tenor of various
receipts[13] issued by petitioners that the sums given by respondent on these thirty-nine occasions were
made upon request of petitioners seeking respondents indulgence. A letter [14] dated October 11, 1984
and addressed to respondents father, Tata Omy, whom respondent authorized to give payments during
the time he was working abroad reads:
Tata Omy,
Ako si Rogelio A. Garcia ang sumulat nito at ang maydala ay si Rolando Garcia na kapatid kong bunso at
ito ay pinagawa ng aking ina si Juana Garcia. Ang dahilan ay mayroon silang nabiling t.v. 17 inches at
ngayon ay naririto sa amin. Kaya ako ay labis na nahihiya sa inyo ni Viring ngunit ano ang magagawa ko
para diyan kaya kayo na ang bahalang magpasensiya sa amin. Ang kailangan nila ay halagang P800.00
at para mabili nila ang T. V. + P200.00
Ang gumagalang,
(Sgd.) Rogelio Garcia
Received: P1,000.00
By( Sgd). Rosita Garcia
There is thus no basis to conclude that insufficiency of funds rather than failure of petitioners to
deliver a separate title in the name of Julio Garcia prevented respondent from completing payment of
the purchase price.
 That the parties agreed on delivery of a separate title in the name of Julio Garcia as a condition for
respondents payment of the balance of the purchase price is bolstered by the fact that there was already
an approved subdivision plan of the 21,460 square-meter lot years before petitioners filed an action in
court for rescission. [15] The parties evidently assumed petitioners would be able to deliver a separate title
in the name of Julio Garcia to respondent within six (6) months from the time of the execution of
the Kasunduan since there was already a pending petition in court for the issuance of a separate title to
21,460 square-meter lot at that time. Unfortunately, the petitioners were not able to secure a separate
title in the name of Julio Garcia within the stipulated period.
Finally, we note that, as quoted earlier, the Kasunduan itself in its opening paragraph refers to the
subject property being sold as buong lawak na 21,640 metrong parisukat, x x x at sa kasalukuyan may
nabibinbing kahilingan sa hukuman upang magkaroon ng sariling titulo; x x x. The next paragraph of
the Kasunduan, therefore, which speaks of ang kaukulang titulo sa lupang nabanggit, clearly refers to
the separate title being applied for, even without resort to extraneous evidence.
Petitioners, however, insist that it was respondents counsel who prepared the Kasunduan and any
ambiguity therein should be construed against respondent pursuant to Article 1377 of the Civil Code
which states that the interpretation of obscure words or stipulations in a contract shall not favor the
party who caused the obscurity.
We find no reason to apply Article 1377 of the Civil Code in this case where the evident intention
of the parties can be readily discerned by their subsequent and contemporaneous acts. While it is true
that the Kasunduan was prepared by the counsel of respondent, there is no indication that respondent
took unfair advantage of petitioners when he had the terms of the Kasunduan drawn by his counsel.
Petitioners freely assented to the Kasunduan which is written entirely in a language spoken and
understood by both parties. That petitioners were fully aware of the terms of the Kasunduan is
evidenced by their attempts to comply with their obligation by securing a subdivision plan and technical
description[16] of the property subject of sale.
Having ruled that the kaukulang titulo ng lupang nabanggit refers to a separate title in the name
of Julio Garcia, we proceed to the issue as to whether petitioners may rescind the  Kasunduan pursuant
to Article 1191 of the Civil Code for failure of respondent to give full payment of the balance of the
purchase price.
The rights of the parties are governed by the terms and the nature of the contract they enter into.
Hence, although the nature of the Kasunduan was never placed in dispute by both parties, it is necessary
to ascertain whether the Kasunduan is a contract to sell or a contract of sale before the issue as to
whether petitioners may ask for rescission of the contract may be resolved. In a contract to sell,
ownership is, by agreement, reserved to the vendor and is not to pass until full payment of the purchase
price; whereas, in contract of sale, title to the property passes to the vendee upon delivery of the thing
sold.[17] Non-payment by the vendee in a contract of sale entitles the vendor to demand specific
performance or rescission of the contract, with damages, under Article 1191 of the Civil Code.
respondents obligation to pay the balance of the purchase price. It was not a condition imposed on the
perfection of the contract of sale. In Laforteza v. Machuca,[19] we stated that the fact that the obligation
to pay the balance of the purchase price was made subject to the condition that the seller first deliver
the reconstituted title of the property does not make the agreement a contract to sell for such condition
is not inconsistent with a contract of sale.
Addressing now the issue as to whether rescission of the Kasunduan by petitioners may prosper,
we rule in the negative. The power to rescind is only given to the injured party. The injured party is the
party who has faithfully fulfilled his obligation or is ready and willing to perform with his obligation. In
the case at bar, petitioners were not ready, willing and able to comply with their obligation to deliver a
separate title in the name of Julio Garcia to respondent. Therefore, they are not in a position to ask for
rescission of the Kasunduan. Moreover, respondents obligation to pay the balance of the purchase price
was made subject to delivery by petitioners of a separate title in the name of Julio Garcia within six (6)
months from the time of the execution of the Kasunduan, a condition with which petitioners failed to
comply. Failure to comply with a condition imposed on the performance of an obligation gives the other
party the option either to refuse to proceed with the sale or to waive that condition under Article 1545
of the Civil Code.[20] Hence, it is the respondent who has the option either to refuse to proceed with the
sale or to waive the performance of the condition imposed on his obligation to pay the balance of the
purchase price.
It follows that, not having established that they were ready, able and willing to comply with their
obligation to deliver to respondent a separate title in the name of Julio Garcia, petitioners may not ask
for rescission of the Kasunduan nor recover damages.
As regards the issue that the appellate court should have dismissed respondents appeal for failure
of respondent to comply with Circular No. 28-91 requiring the submission of a certificate of non-forum
shopping in petitions filed before us and the Court of Appeals, suffice it to say that when technicality
deserts its function of being an aid to justice, the courts are justified in exempting from its operations a
particular case.[21] Procedural rules are intended to insure the orderly conduct of litigation, because of
the higher objective they seek, which is to protect the parties substantive rights. [22]
WHEREFORE, the petition is DENIED and the decision rendered by the Court of Appeals in CA G.R.
No. 40954 entitled, Juana Almira, et al., plaintiffs-appellees v. Federico Briones, defendant-appellant is
AFFIRMED. No costs.
SO ORDERED.

Although both parties have consistently referred to the Kasunduan as a contract to sell, a careful
reading of the provisions of the Kasunduan reveals that it is a contract of sale. A deed of sale is absolute
in nature in the absence of any stipulation reserving title to the vendor until full payment of the purchase
price. In such cases ownership of the thing sold passes to the vendee upon actual or constructive delivery
thereof.[18] There is nothing in the Kasunduan which expressly provides that petitioners retain title or
ownership of the property, until full payment of the purchase price. The absence of such stipulation in
the Kasunduan coupled with the fact that respondent took possession of the property upon the
execution of the Kasunduanindicate that the parties have contemplated a contract of absolute sale.

Stated otherwise, there was a perfected contract of sale. The parties agreed on the sale of a
determinate object, i.e., 21, 460 square meters of Lot 1642, covered by a tax declaration in the name of
Julio Garcia, and the price certain therefor, without any reservation of title on the part of petitioners.
Ownership was effectively conveyed by petitioners to respondent, who was given possession of the
property. The delivery of a separate title in the name of Julio Garcia was a condition imposed on
SPS. NONILON (MANOY) and IRENE MONTECALVO, Petitioners,  that the issue to be resolved was whether their Agreement had been rescinded and novated. Hence, the
vs. MTC dismissed the case for lack of jurisdiction since the issue is not susceptible of pecuniary estimation.
HEIRS (Substitutes) OF EUGENIA T. PRIMERO, represented by their Attorney-in-Fact, ALFREDO T. The MTC's Decision dismissing the ejectment case became final as Eugenia and her children did not
PRIMERO, JR., Respondents. appeal therefrom.4

DECISION On June 18, 1996, Irene and Nonilon retaliated by instituting Civil Case No. II-3588 with the RTC of Lanao
del Norte for specific performance, to compel Eugenia to convey the 293-square meter portion of Lot
No. 263.5
DEL CASTILLO, J.:

Proceedings before the Regional Trial Court

Jurisprudence is replete with rulings that in civil cases, the party who alleges a fact has the burden of
proving it. Burden of proof is the duty of a party to present evidence on the facts in issue necessary to
prove the truth of his claim or defense by the amount of evidence required by law. 11 In this case, the
petitioners awfully failed to discharge their burden to prove by preponderance of evidence that the
Agreement they entered into with respondents' predecessor-in-interest is a contract of sale and not a
mere contract to sell, or that said Agreement was novated after the latter subsequently entered into an
oral contract of sale with them over a determinate portion of the subject property more than a decade
ago.
Petitioners filed this appeal from the Decision of the Court of Appeals (CA) affirming the Regional Trial
Court's (RTC's) dismissal of their action for specific performance where they sought to compel the
respondents to convey the property subject of their purported oral contract of sale.
Trial on the merits ensued and the contending parties adduced their respective testimonial and
documentary evidence before the trial court.
Irene testified that after their Agreement for the purpose of negotiating the sale of Lot No. 263 failed to
materialize, she and Eugenia entered into an oral contract of sale and agreed that the amount of
₱40,000.00 she earlier paid shall be considered as down payment. Irene claimed that she made several
payments amounting to ₱293,000.00 which prompted Eugenia's daughters Corazon Calacat (Corazon)
and Sylvia Primero (Sylvia) to ask Engr. Antonio Ravacio (Engr. Ravacio) to conduct a segregation survey
on the subject property. Thereafter, Irene requested Eugenia to execute the deed of sale, but the latter
refused to do so because her son, Atty. Alfredo Primero, Jr. (Atty. Primero), would not agree.

Factual Antecedents On March 22, 1999, herein respondents filed with the court a quo a "Notice of Death of the
Defendant"6 manifesting that Eugenia passed away on February 28, 1999 and that the decedent's
surviving legal heirs agreed to appoint their co-heir Atty. Primero, to act as their representative in said
The property involved in this case is a portion of a parcel of land known as Lot No. 263 located at Sabayle
case. In an Order7 dated April 8, 1999, the trial court substituted the deceased defendant with Atty.
Street, Iligan City. Lot No. 263 has an area of 860 square meters covered by Original Certificate of Title
Primero.
(OCT) No. 0-2712registered in the name of Eugenia Primero (Eugenia), married to Alfredo Primero, Sr.
(Alfredo).
Respondents, on the other hand, presented the testimony of Atty. Primero to establish that Eugenia
could not have sold the disputed portion of Lot No. 263 to the petitioners. According to Atty. Primero, at
In the early 1980s, Eugenia leased the lot to petitioner Irene Montecalvo (Irene) for a monthly rental of
the time of the signing of the Agreement on January 13, 1985, Eugenia's husband, Alfredo, was already
₱500.00. On January 13, 1985, Eugenia entered into an un-notarized Agreement3 with Irene, where the
dead. Eugenia merely managed or administered the subject property and had no authority to dispose of
former offered to sell the property to the latter for ₱1,000.00 per square meter. They agreed that Irene
the same since it was a conjugal property. In addition, respondents asserted that the deposit of
would deposit the amount of ₱40,000.00 which shall form part of the down payment equivalent to 50%
₱40,000.00 was retained as rental for the subject property.
of the purchase price. They also stipulated that during the term of negotiation of 30 to 45 days from
receipt of said deposit, Irene would pay the balance of ₱410,000.00 on the down payment. In case Irene
defaulted in the payment of the down payment, the deposit would be returned within 10 days from the Respondents likewise presented Sylvia, who testified that the receipts issued to petitioners were for the
lapse of said negotiation period and the Agreement deemed terminated. However, if the negotiations lot rentals.8Another sister of Atty. Primero, Corazon, testified that petitioners were their tenants in
pushed through, the balance of the full value of ₱860,000.00 or the net amount of ₱410,000.00 would subject land, which she co-owns with her mother Eugenia.9 She denied having sold the purported 293-
be paid in 10 equal monthly installments from receipt of the down payment, with interest at the square meter portion of Lot No. 263 to the petitioners.10
prevailing rate.
As rebuttal witness, petitioners presented Engr. Ravacio, a surveyor who undertook the segregation of
Irene failed to pay the full down payment within the stipulated 30-45-day negotiation period. the 293-square meter portion out of the subject property. 11
Nonetheless, she continued to stay on the disputed property, and still made several payments with an
aggregate amount of ₱293,000.00. On the other hand, Eugenia did not return the ₱40,000.00 deposit to
On October 22, 2001, the RTC rendered a Decision: 12 (1) dismissing the complaint and the counterclaim
Irene, and refused to accept further payments only in 1992.
for lack of legal and factual bases; (2) ordering petitioners to pay respondents ₱2,500.00 representing
rentals due, applying therefrom the amount deposited and paid; and (3) ordering petitioner to pay 12%
Thereafter, Irene caused a survey of Lot No. 263 and the segregation of a portion equivalent to 293 legal interest from finality of decision until full payment of the amount due.13
square meters in her favor. However, Eugenia opposed her claim and asked her to vacate the property.
Then on May 13, 1996, Eugenia and the heirs of her deceased husband Alfredo filed a complaint for
Aggrieved, petitioners appealed the Decision of the trial court to the CA.
unlawful detainer against Irene and her husband, herein petitioner Nonilon Montecalvo (Nonilon) before
the Municipal Trial Court (MTC) of Iligan City. During the preliminary conference, the parties stipulated
Proceedings before the Court of Appeals must concur, namely, (1) buyer fails to pay the balance of the 50% down payment within the agreed
period and (2) seller should return the deposit of ₱40,000.00 within 10 days if the first condition was not
complied with. Petitioners conclude that since both seller and buyer failed to discharge their reciprocal
Both parties filed their respective briefs before the appellate court.14 Thereafter, on November 28, 2003,
obligations, being in pari delictu, the seller could not repudiate their agreement to sell.
the CA rendered a Decision15 affirming the RTC Decision.16

The petitioners' contention is without merit.

Petitioners timely filed a Motion for Reconsideration.17 However, in a Resolution18 dated June 27, 2004,
the CA resolved to deny the same for lack of merit.19
There is no dispute as to the due execution and existence of the Agreement. The issue thus presented is
whether the said Agreement is a contract of sale or a contract to sell. For a better understanding and
Issues
resolution of the issue at hand, it is apropos to reproduce herein the Agreement in haec verba:

Petitioners thus filed this Petition for Review on Certiorari anchored on the following grounds.
A g r e e m e n t

1. WHETHER AN ORAL CONTRACT OF SALE OF A PORTION OF [A] LOT IS BINDING [UPON] THE
This Agreement, made and executed by and between:
SELLER.

EUGENIA T. PRIMERO, a Filipino of legal age and residing in Camague, Iligan City (hereinafter called the
2. WHETHER A SELLER IN AN ORAL CONTRACT OF SALE OF A PORTION OF [A] LOT CAN BE
OWNER)
COMPELLED TO EXECUTE THE REQUIRED DEED OF SALE AFTER THE AGREED CONSIDERATION
WAS PAID AND POSSESSION THEREOF DELIVERED TO AND ENJOYED BY THE BUYER.
- and -
3. WHETHER THE BUYER HAS A RIGHT TO ENFORCE AN ORAL CONTRACT OF SALE AFTER THE
PORTION SOLD IS SEGREGATED BY AGREEMENT OF THE PARTIES. IRENE P. MONTECALVO, Filipino of legal age and presently residing at Sabayle St., Iligan City (hereinafter
[called] the INTERESTED PARTY);
4. WHETHER THE SELLER IS BOUND BY THE HANDWRITTEN RECEIPTS PREPARED AND SIGNED
BY HER EXPRESSLY INDICATING PAYMENTS OF LOTS. WITNESSETH:

5. WHETHER THE TRIAL COURT COULD RENDER A JUDGMENT ON ISSUES NOT DEFINED IN THE 1. That the OWNER is the true and absolute owner of a parcel of land located at
PRE-TRIAL ORDER. Sabayle St. immediately fronting the St. Peter's College which is presently leased to
the INTERESTED PARTY;
Our Ruling
2. That the property referred to contains an area of EIGHT HUNDRED SIXTY
SQUARE METERS at the value of One Thousand Pesos (₱1,000.00) per square
The petition lacks merit.
meters;

The Agreement dated January 13, 1985 is a contract to sell. Hence, with petitioners' non-compliance
3. That this agreement is entered into for the purpose of negotiating the sale of
with its terms and conditions, the obligation of the respondents to deliver and execute the
the above referred property between the same parties herein under the following
corresponding deed of sale never arose.
terms and conditions, to wit:

The CA found that the Agreement dated January 13, 1985 is not a contract of sale but a mere contract to
a) That the term of this negotiation is for a period of Thirty to Forty Five
sell, the efficacy of which is dependent upon the resolutory condition that Irene pay at least 50% of the
(30-45) days from receipt of a deposit;
purchase price as down payment within 30-45 days from the day Eugenia received the ₱40,000.00

b) That Forty Thousand Pesos (₱40,000.00) shall be deposited to

deposit.20 Said court further found that such condition was admittedly not met.21
demonstrate the interest of the Interested Party to acquire the
property referred to above, which deposit shall not earn any interest;
Petitioners admit that the Agreement dated January 13, 1985 is at most, "a preliminary agreement for an
eventual contract."22 However, they argue that contrary to the findings of the appellate court, it was not
c) That should the contract or agreement push through the deposit
only the buyer, Irene, who failed to meet the condition of paying the balance of the 50% down
shall form part of the down payment of Fifty percent (50%) of the total
payment.23 They assert that the Agreement explicitly required Eugenia to return the deposit of
or full value. Otherwise the deposit shall be returned within TEN (10)
₱40,000.00 within 10 days, in case Irene failed to pay the balance of the 50% down payment within the
days from the lapse of the period of negotiation;
stipulated period.24 Thus, petitioners posit that for the cancellation clause to operate, two conditions
 4. That should this push through, the balance of Four Hundred Ten Thousand on
the down payment shall be made upon execution of the Agreement to Sell and the
balance of the full value of Eight Hundred Sixty Thousand or Four Hundred Ten
Thousand Pesos shall be paid in equal monthly installment within Ten (10) months
from receipt of the down payment with [sic] according to prevailing interest.
IN WITNESS WHEREOF, the parties have signed these presents in the City of Iligan this 13th day of
January 1985.
(Signed) (Signed)
IRENE PEPITO MONTECALVO EUGENIA TORRES PRIMERO
SIGNED IN THE PRESENCE OF:
(Signed) (Signed)
In Salazar v. Court of Appeals,25 we distinguished a contract of sale from a contract to sell in that in a
contract of sale the title to the property passes to the buyer upon the delivery of the thing sold; in
a contract to sell, ownership is, by agreement, reserved in the seller and is not to pass to the buyer until
full payment of the purchase price. Otherwise stated, in a contract of sale, the seller loses ownership
over the property and cannot recover it until and unless the contract is resolved or rescinded; whereas,
in a contract to sell, title is retained by the seller until full payment of the price.26 In the latter contract,
payment of the price is a positive suspensive condition, failure of which is not a breach but an event that
prevents the obligation of the vendor to convey title from becoming effective. 27
In the Agreement, Eugenia, as owner, did not convey her title to the disputed property to Irene since the
Agreement was made for the purpose of negotiating the sale of the 860-square meter property. 28
On this basis, we are more inclined to characterize the agreement as a contract to sell rather than a
contract of sale. Although not by itself controlling, the absence of a provision in the Agreement
transferring title from the owner to the buyer is taken as a strong indication that the Agreement is a
contract to sell.29
In a contract to sell, the prospective seller explicitly reserves the transfer of title to the prospective
buyer, meaning, the prospective seller does not as yet agree or consent to transfer ownership of the
property subject of the contract to sell until the happening of an event, which for present purposes we
shall take as the full payment of the purchase price.30 What the seller agrees or obliges himself to do is to
fulfill his promise to sell the subject property when the entire amount of the purchase price is delivered
to him.31 In other words, the full payment of the purchase price partakes of a suspensive condition, the
non-fulfillment of which prevents the obligation to sell from arising and thus, ownership is retained by
the prospective seller without further remedies by the prospective buyer. 32 A contract to sell is
commonly entered into in order to protect the seller against a buyer who intends to buy the property in
installment by withholding ownership over the property until the buyer effects full payment therefor. 33
In this case, the Agreement expressly provided that it was "entered into for the purpose of negotiating
the sale of the above referred property between the same parties herein x x x." The term of the
negotiation shall be for a period of 30-45 days from receipt of the ₱40,000.00 deposit and the buyer has
to pay the balance of the 50% down payment amounting to ₱410,000.00 within the said period of
negotiation. Thereafter, an Agreement to Sell shall be executed by the parties and the remainder of the
purchase price amounting to another ₱410,000.00 shall be paid in 10 equal monthly installments from
receipt of the down payment. The assumption of both parties that the purpose of the Agreement was for
negotiating the sale of Lot No. 263, in its entirety, for a definite price, with a specific period for payment
of a specified down payment, and the execution of a subsequent contract for the sale of the same on
installment payments leads to no other conclusion than that the predecessor-in-interest of the herein
respondents and the herein petitioner Irene entered into a contract to sell.
As stated in the Agreement, the payment of the purchase price, in installments within the period
stipulated, constituted a positive suspensive condition, the failure of which is not really a breach but an
event that prevents the obligation of the seller to convey title in accordance with Article 1184 of the Civil
Code.34 Hence, for petitioners' failure to comply with the terms and conditions laid down in the
Agreement, the obligation of the predecessor-in-interest of the respondents to deliver and execute the
corresponding deed of sale never arose.
The fact that the predecessor-in-interest of the respondents failed to return the ₱40,000.00 deposit
subsequent to the expiration of the period of negotiation did not prevent the respondents from
repudiating the Agreement. The obligation of the respondent to convey the property never came to pass
as the petitioners did not comply with the positive suspensive condition of full payment of the purchase
price within the period as stipulated.
The alleged oral contract of sale for the 293-square meter portion of the property was not proved by
preponderant evidence. Hence, petitioners cannot compel the successors-in-interest of the deceased
Eugenia to execute a deed of absolute sale in their favor.
Petitioners alleged in their Complaint that in 1992, Eugenia refused to accept further payments and
suggested that she will convey to petitioners 293 square meters of her 860-square meter property, in
proportion to payments already made. Thus, Eugenia caused the segregation of the area where the
petitioners' building now stands, consisting of 293 square meters.1avvphi1
In support of their contention, petitioners presented the testimony of Irene, who testified that Eugenia
segregated for them an area of 293 square meters for the agreed price of ₱1,000.00 per square
meter.35 The total purchase price allegedly agreed upon by the parties, amounting to ₱293,000.00,
corresponded to the amount of payments already made by Irene.36 They likewise presented (1) 82
receipts covering the period October 13, 1986 to July 10, 1994;37(2) the testimony of the surveyor, Engr.
Ravacio, to show that the segregation survey of the 293-square meter portion of the property was made
with the knowledge and consent of Eugenia; and (3) the resulting subdivision plan.
On the other hand, respondents counter that the alleged contract of sale is contradicted by petitioners'
own evidence.
We cannot sustain the contention of the petitioners. The primal issue to be resolved is whether the
parties subsequently entered into a contract of sale over the segregated 293-square meter portion of Lot
No. 263. It is a fundamental principle that for a contract of sale to be valid, the following elements must
be present: (a) consent or meeting of the minds; (b) determinate subject matter; and (3) price certain in
money or its equivalent.38 Until the contract of sale is perfected, it cannot, as an independent source of
obligation, serve as a binding juridical relation between the parties. 39
Contrary to petitioners' allegations that the 82 receipts indicated that they were issued "for payment of
lot (at Sabayle)",40 a cursory examination thereof shows that the receipts from 1986 to 1992 do not
consistently indicate "Sabayle Lot" or "Sabayle Lot Deposit". More than half of the receipts presented
merely indicated receipt of differing sums of money from the petitioners. In addition, the receipts for the
years 1993 to 1994 do not establish installment payments for the purchase of the disputed portion of Lot
No. 263. Rather, the receipts indicate that the same were issued as proof of "cash advance", 41 "cash for
groceries, electric bill, water bill, telephone/long distance", 42"cash",43 "cash for mktg"44 and "x x x cash to
be paid a month after".45 These are not consistent with the allegation of the petitioners that they have prevailing valuation of the property in litigation, witness Atty. Primero, a licensed real estate broker
paid the full amount of the purchase price for the 293-square meter portion of the lot by 1992. testified that:

Moreover, the testimony of petitioners' witness, surveyor Engr. Ravacio, shows that Eugenia was neither x x x There is no fixed pricing for each year because it always depends on the environment so that if the
around when the survey was conducted nor gave her express consent to the conduct of the same. 46 On price in 1986, as you were referring to 1986, it would have risen or increased from ₱1,000.00, then it
the other hand, respondents' witness, Sylvia, testified that the receipts issued to the petitioners were for would increase to ₱3,000.00, then it would increase to ₱7,000.00 and again increase to ₱15,000.00 and
the lot rentals.47 In addition, respondents' third witness, Corazon, testified that petitioners were their right now the current price of property in that area is ₱25,000.00 per square meter.55
tenants in subject land, which she co-owns with her mother Eugenia, and disclaimed any sale of any
portion of their lot to the petitioners.48
The RTC rightly modified the rental award to ₱2,500.00 per month, considering that it is settled
jurisprudence that courts may take judicial notice of the general increase in rentals, particularly in
Thirdly, since the surveyor himself, Engr. Ravacio, admitted that Eugenia did not give her express consent business establishments.
to the conduct of the segregation plan, the resulting subdivision plan, submitted by the petitioners to the
trial court to prove that Eugenia caused the segregation of the 293-square meter area, cannot be
WHEREFORE, the petition is DENIED. The November 28, 2003 Decision of the Court of Appeals affirming
appreciated.
the October 22, 2001 Decision of the Regional Trial Court of Lanao del Norte, Branch 2, is
hereby AFFIRMED.
Section 1 of Rule 133 of the Rules of Court provides that in civil cases, the party having the burden of
proof must establish his case by a preponderance of evidence. However, the evidence presented by the
SO ORDERED.
petitioners, as considered above, fails to convince this Court that Eugenia gave her consent to the
purported oral deed of sale for the 293-square meter portion of her property. We are hence in
agreement with the finding of the CA that there was no contract of sale between the parties. As a
consequence, petitioners cannot rightfully compel the successors-in-interest of Eugenia to execute a
deed of absolute sale in their favor.

The courts below correctly modified the rental award to ₱2,500.00 per month.

Lastly, petitioners argue that the courts below erred in imposing a ₱2,500.00 monthly rental from 1985
onwards, since said amount is far greater than the last agreed monthly rental (December 1984) of
₱500.00.

In its Decision, the CA affirmed the ruling of the RTC "that the trial court had authority to fix a reasonable
value for the continued use and occupancy of the leased premises after the termination of the lease
contract, and that it was not bound by the stipulated rental in the contract of lease since it is equally
settled that upon termination or expiration of the contract of lease, the rental stipulated therein may no
longer be the reasonable value for the use and occupation of the premises as a result of the change or
rise in values. Moreover, the trial court can take judicial notice of the general increase in rentals of real
estate especially of business establishments". 49 The appellate court likewise held that the petitioners
failed to discharge their burden to show that the said price was exorbitant or unconscionable. 50 Hence,
the CA found no reason to disturb the trial court's decision ordering the petitioners to pay ₱2,500.00 as
monthly rentals.51 The appellate court further held that "to deprive Eugenia of the rentals due her as the
owner-lessor of the subject property would result to unjust enrichment on the part of Irene." 52

The courts below correctly took judicial notice of the nature of the leased property subject of the case at
bench based on its location and commercial viability. As described in the Agreement, the property is
immediately in front of St. Peter's College.53 More significantly, it is stated in the Declaration of Real
Property submitted by the petitioners as evidence in the trial court, that the property is used
predominantly for commercial purposes.54 The assessment by the trial court of the area where the
property is located is therefore fairly grounded.

Furthermore, the trial court also had factual basis in arriving at the said conclusion, the same being
based on the un-rebutted testimony of a witness who is a real estate broker. With respect to the
REYES VS. TUPARAN
Subject of this petition for review is the February 13, 2009 Decision[1] of the Court of
Appeals (CA) which affirmed with modification the February 22, 2006 Decision [2]of the Regional Trial
Court, Branch 172, Valenzuela City (RTC), in Civil Case No. 3945-V-92, an action for Rescission of Contract
with Damages.
 
On September 10, 1992, Mila A. Reyes (petitioner) filed a complaint for Rescission of Contract
with Damages against Victoria T. Tuparan (respondent) before the RTC. In her Complaint, petitioner
alleged, among others, that she was the registered owner of a 1,274 square meter residential and
commercial lot located in Karuhatan, Valenzuela City, and covered by TCT No. V-4130; that on that
property, she put up a three-storey commercial building known as RBJ Building and a residential
apartment building; that since 1990, she had been operating a drugstore and cosmetics store on the
ground floor of RBJ Building where she also had been residing while the other areas of the buildings
including the sidewalks were being leased and occupied by tenants and street vendors.
 
In December 1989, respondent leased from petitioner a space on the ground floor of
the RBJ Building for her pawnshop business for a monthly rental of ₱4,000.00. A close friendship
developed between the two which led to the respondent investing thousands of pesos in petitioners
financing/lending business from February 7, 1990 to May 27, 1990, with interest at the rate of 6% a
month.
 
On June 20, 1988, petitioner mortgaged the subject real properties to the Farmers Savings
Bank and Loan Bank, Inc. (FSL Bank) to secure a loan of ₱2,000,000.00 payable in installments.
On November 15, 1990, petitioners outstanding account on the mortgage reached ₱2,278,078.13.
Petitioner then decided to sell her real properties for at least ₱6,500,000.00 so she could liquidate her
bank loan and finance her businesses. As a gesture of friendship, respondent verbally offered to
conditionally buy petitioners real properties for ₱4,200,000.00 payable on installment basis without
interest and to assume the bank loan. To induce the petitioner to accept her offer, respondent offered
the following conditions/concessions:
 
 
 
1. That the conditional sale will be cancelled if the plaintiff (petitioner)
can find a buyer of said properties for the amount of ₱6,500,000.00 within the
next three (3) months provided all amounts received by the plaintiff from the
defendant (respondent) including payments actually made by defendant to
Farmers Savings and Loan Bank would be refunded to the defendant with
additional interest of six (6%) monthly;
 
2. That the plaintiff would continue using the space occupied by her
and drugstore and cosmetics store without any rentals for the duration of the
installment payments;
 
3. That there will be a lease for fifteen (15) years in favor of the plaintiff
over the space for drugstore and cosmetics store at a monthly rental of only
₱8,000.00 after full payment of the stipulated installment payments are made by
the defendant;
4. That the defendant will undertake the renewal and payment of the
fire insurance policies on the two (2) subject buildings following the expiration of
the then existing fire insurance policy of the plaintiff up to the time that plaintiff is
fully paid of the total purchase price of ₱4,200,000.00.[3]
 
After petitioners verbal acceptance of all the conditions/concessions, both parties worked
together to obtain FSL Banks approval for respondent to assume her (petitioners) outstanding bank
account. The assumption would be part of respondents purchase price for petitioners mortgaged real
properties. FSL Bank approved their proposal on the condition that petitioner would sign or remain as
co-maker for the mortgage obligation assumed by respondent.
 
On November 26, 1990, the parties and FSL Bank executed the corresponding Deed of
Conditional Sale of Real Properties with Assumption of Mortgage. Due to their close personal friendship
and business relationship, both parties chose not to reduce into writing the other terms of their
agreement mentioned in paragraph 11 of the complaint. Besides, FSL Bank did not want to incorporate
in the Deed of Conditional Sale of Real Properties with Assumption of Mortgage any other side
agreement between petitioner and respondent.
 
Under the Deed of Conditional Sale of Real Properties with Assumption of Mortgage,
respondent was bound to pay the petitioner a lump sum of ₱1.2 million pesos without interest as part of
the purchase price in three (3) fixed installments as follows:
 
a)     ₱200,000.00 due January 31, 1991
b)    ₱200,000.00 due June 30, 1991
c)     ₱800,000.00 due December 31, 1991
 
Respondent, however, defaulted in the payment of her obligations on their due dates. Instead
of paying the amounts due in lump sum on their respective maturity dates, respondent paid petitioner in
small amounts from time to time. To compensate for her delayed payments, respondent agreed to pay
petitioner an interest of 6% a month. As of August 31, 1992, respondent had only paid ₱395,000.00,
leaving a balance of ₱805,000.00 as principal on the unpaid installments and ₱466,893.25 as unpaid
accumulated interest.
 
Petitioner further averred that despite her success in finding a prospective buyer for the
subject real properties within the 3-month period agreed upon, respondent reneged on her promise to
allow the cancellation of their deed of conditional sale. Instead, respondent became interested in owning
the subject real properties and even wanted to convert the entire property into a modern commercial
complex. Nonetheless, she consented because respondent repeatedly professed friendship and assured
her that all their verbal side agreement would be honored as shown by the fact that since December
1990, she (respondent) had not collected any rentals from the petitioner for the space occupied by her
drugstore and cosmetics store.
 
On March 19, 1992, the residential building was gutted by fire which caused the petitioner to
lose rental income in the amount of ₱8,000.00 a month since April 1992. Respondent neglected to renew
the fire insurance policy on the subject buildings.
 
Since December 1990, respondent had taken possession of the subject real properties and
had been continuously collecting and receiving monthly rental income from the tenants of the buildings
and vendors of the sidewalk fronting the RBJ building without sharing it with petitioner.
 
On September 2, 1992, respondent offered the amount of ₱751,000.00 only payable
on September 7, 1992, as full payment of the purchase price of the subject real properties and
demanded the simultaneous execution of the corresponding deed of absolute sale.
Respondents Answer
 
Respondent countered, among others, that the tripartite agreement erroneously designated
by the petitioner as a Deed of Conditional Sale of Real Property with Assumption of Mortgage was
actually a pure and absolute contract of sale with a term period. It could not be considered a conditional
sale because the acquisition of contractual rights and the performance of the obligation therein did not
depend upon a future and uncertain event. Moreover, the capital gains and documentary stamps and
other miscellaneous expenses and real estate taxes up to 1990 were supposed to be paid by petitioner
but she failed to do so.
Respondent further averred that she successfully rescued the properties from a definite
foreclosure by paying the assumed mortgage in the amount of ₱2,278,078.13 plus interest and other
finance charges. Because of her payment, she was able to obtain a deed of cancellation of mortgage and
secure a release of mortgage on the subject real properties including petitioners ancestral residential
property in Sta. Maria, Bulacan.
Petitioners claim for the balance of the purchase price of the subject real properties was
baseless and unwarranted because the full amount of the purchase price had already been paid, as she
did pay more than ₱4,200,000.00, the agreed purchase price of the subject real properties, and she had
even introduced improvements thereon worth more than ₱4,800,000.00. As the parties could no longer
be restored to their original positions, rescission could not be resorted to.
 
Respondent added that as a result of their business relationship, petitioner was able to obtain
from her a loan in the amount of ₱400,000.00 with interest and took several pieces of jewelry worth
₱120,000.00. Petitioner also failed and refused to pay the monthly rental of ₱20,000.00 since November
16, 1990 up to the present for the use and occupancy of the ground floor of the building on the subject
real property, thus, accumulating arrearages in the amount of ₱470,000.00 as of October 1992.
 
Ruling of the RTC
 
On February 22, 2006, the RTC handed down its decision finding that respondent failed to pay in full the
₱4.2 million total purchase price of the subject real properties leaving a balance of ₱805,000.00. It stated
that the checks and receipts presented by respondent refer to her payments of the mortgage obligation
with FSL Bank and not the payment of the balance of ₱1,200,000.00. The RTC also considered the Deed
of Conditional Sale of Real Property with Assumption of Mortgage executed by and among the two
parties and FSL Bank a contract to sell, and not a contract of sale. It was of the opinion that although the
petitioner was entitled to a rescission of the contract, it could not be permitted because her non-
payment in full of the purchase price may not be considered as substantial and fundamental breach of
the contract as to defeat the object of the parties in entering into the contract. [4] The RTC believed that
the respondents offer stated in her counsels letter dated September 2, 1992 to settle what she thought
was her unpaid balance of ₱751,000.00 showed her sincerity and willingness to settle her obligation.
Hence, it would be more equitable to give respondent a chance to pay the balance plus interest within a
given period of time.
 
Finally, the RTC stated that there was no factual or legal basis to award damages and attorneys fees
because there was no proof that either party acted fraudulently or in bad faith.
 
Thus, the dispositive portion of the RTC Decision reads:
 
WHEREFORE, judgment is hereby rendered as follows:
 
1. Allowing the defendant to pay the plaintiff within thirty (30) days
from the finality hereof the amount of ₱805,000.00, representing the unpaid
purchase price of the subject property, with interest thereon at 2% a month
from January 1, 1992 until fully paid. Failure of the defendant to pay said amount
within the said period shall cause the automatic rescission of the contract (Deed of
Conditional Sale of Real Property with Assumption of Mortgage) and the plaintiff
and the defendant shall be restored to their former positions relative to the
subject property with each returning to the other whatever benefits each derived
from the transaction;
2. Directing the defendant to allow the plaintiff to continue using the
space occupied by her for drugstore and cosmetic store without any rental
pending payment of the aforesaid balance of the purchase price.
3. Ordering the defendant, upon her full payment of the purchase price
together with interest, to execute a contract of lease for fifteen (15) years in favor
of the plaintiff over the space for the drugstore and cosmetic store at a fixed
monthly rental of ₱8,000.00; and
 
 
 
4. Directing the plaintiff, upon full payment to her by the defendant of
the purchase price together with interest, to execute the necessary deed of sale,
as well as to pay the Capital Gains Tax, documentary stamps and other
miscellaneous expenses necessary for securing the BIR Clearance, and to pay the
real estate taxes due on the subject property up to 1990, all necessary to transfer
ownership of the subject property to the defendant.
 
No pronouncement as to damages, attorneys fees and costs.
 
SO ORDERED.[5]
 
Ruling of the CA
 
On February 13, 2009, the CA rendered its decision affirming with modification the RTC Decision.  The CA
agreed with the RTC that the contract entered into by the parties is a contract to sell but ruled that the
remedy of rescission could not apply because the respondents failure to pay the petitioner the balance
of the purchase price in the total amount of ₱805,000.00 was not a breach of contract, but merely an
event that prevented the seller (petitioner) from conveying title to the purchaser (respondent). It
reasoned that out of the total purchase price of the subject property in the amount of ₱4,200,000.00,
respondents remaining unpaid balance was only ₱805,000.00. Since respondent had already paid a
substantial amount of the purchase price, it was but right and just to allow her to pay the unpaid balance
of the purchase price plus interest. Thus, the decretal portion of the CA Decision reads:
 
WHEREFORE, premises considered, the Decision dated 22 February
2006 and Order dated 22 December 2006 of the Regional Trial Court of Valenzuela
City, Branch 172 in Civil Case No. 3945-V-92 are AFFIRMED with MODIFICATION in
that defendant-appellant Victoria T. Tuparan is hereby ORDERED to pay plaintiff-
appellee/appellant Mila A. Reyes, within 30 days from finality of this Decision, the
amount of ₱805,000.00 representing the unpaid balance of the purchase price of
the subject property, plus interest thereon at the rate of 6% per annum from 11
September 1992 up to finality of this Decision and, thereafter, at the rate of 12%
per annum until full payment. The ruling of the trial court on the automatic
rescission of the Deed of Conditional Sale with Assumption of Mortgage is hereby
DELETED. Subject to the foregoing, the dispositive portion of the trial courts
decision is AFFIRMED in all other respects.
 
SO ORDERED.[6]
 
After the denial of petitioners motion for reconsideration and respondents motion for partial
reconsideration, petitioner filed the subject petition for review praying for the reversal and setting aside
of the CA Decision anchored on the following
ASSIGNMENT OF ERRORS
  
A. THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED ITS
DISCRETION IN DISALLOWING THE OUTRIGHT RESCISSION OF THE SUBJECT DEED
OF CONDITIONAL SALE OF REAL PROPERTIES WITH ASSUMPTION OF MORTGAGE
ON THE GROUND THAT RESPONDENT TUPARANS FAILURE TO PAY PETITIONER
REYES THE BALANCE OF THE PURCHASE PRICE OF ₱805,000.00 IS NOT A BREACH
OF CONTRACT DESPITE ITS OWN FINDINGS THAT PETITIONER STILL RETAINS
OWNERSHIP AND TITLE OVER THE SUBJECT REAL PROPERTIES DUE TO
RESPONDENTS REFUSAL TO PAY THE BALANCE OF THE TOTAL PURCHASE PRICE
OF ₱805,000.00 WHICH IS EQUAL TO 20% OF THE TOTAL PURCHASE PRICE OF
₱4,200,000.00 OR 66% OF THE STIPULATED LAST INSTALLMENT OF ₱1,200,000.00
PLUS THE INTEREST THEREON. IN EFFECT, THE COURT OF APPEALS AFFIRMED
AND ADOPTED THE TRIAL COURTS CONCLUSION THAT THE RESPONDENTS NON-
PAYMENT OF THE ₱805,000.00 IS ONLY A SLIGHT OR CASUAL BREACH OF
CONTRACT.
 
 
B. THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED ITS
DISCRETION IN DISREGARDING AS GROUND FOR THE RESCISSION OF THE
SUBJECT CONTRACT THE OTHER FRAUDULENT AND MALICIOUS ACTS
COMMITTED BY THE RESPONDENT AGAINST THE PETITIONER WHICH BY
THEMSELVES SUFFICIENTLY JUSTIFY A DENIAL OF A GRACE PERIOD OF THIRTY
(30) DAYS TO THE RESPONDENT WITHIN WHICH TO PAY TO THE PETITIONER THE
₱805,000.00 PLUS INTEREST THEREON.
 
 
C. EVEN ASSUMING ARGUENDO THAT PETITIONER IS NOT ENTITLED
TO THE RESCISSION OF THE SUBJECT CONTRACT, THE COURT OF APPEALS STILL
SERIOUSLY ERRED AND ABUSED ITS DISCRETION IN REDUCING THE INTEREST ON
THE ₱805,000.00 TO ONLY 6% PER ANNUM STARTING FROM THE DATE OF FILING
OF THE COMPLAINT ON SEPTEMBER 11, 1992 DESPITE THE PERSONAL
COMMITMENT OF THE RESPONDENT AND AGREEMENT BETWEEN THE PARTIES
THAT RESPONDENT WILL PAY INTEREST ON THE ₱805,000.00 AT THE RATE OF 6%
MONTHLY STARTING THE DATE OF DELINQUENCY ON DECEMBER 31, 1991.
 
D. THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED ITS
DISCRETION IN THE APPRECIATION AND/OR MISAPPRECIATION OF FACTS
RESULTING INTO THE DENIAL OF THE CLAIM OF PETITIONER REYES FOR ACTUAL
DAMAGES WHICH CORRESPOND TO THE MILLIONS OF PESOS OF
RENTALS/FRUITS OF THE SUBJECT REAL PROPERTIES WHICH RESPONDENT
TUPARAN COLLECTED CONTINUOUSLY SINCE DECEMBER 1990, EVEN WITH THE
UNPAID BALANCE OF ₱805,000.00 AND DESPITE THE FACT THAT RESPONDENT
DID NOT CONTROVERT SUCH CLAIM OF THE PETITIONER AS CONTAINED IN HER
AMENDED COMPLAINT DATED APRIL 22, 2006.
 
 
E. THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED ITS
DISCRETION IN THE APPRECIATION OF FACTS RESULTING INTO THE DENIAL OF
THE CLAIM OF PETITIONER REYES FOR THE ₱29,609.00 BACK RENTALS THAT
WERE COLLECTED BY RESPONDENT TUPARAN FROM THE OLD TENANTS OF THE
PETITIONER.
 
 
F. THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED ITS
DISCRETION IN DENYING THE PETITIONERS EARLIER URGENT MOTION FOR
ISSUANCE OF A PRELIMINARY MANDATORY AND PROHIBITORY INJUNCTION
DATED JULY 7, 2008 AND THE SUPPLEMENT THERETO DATED AUGUST 4, 2008
THEREBY CONDONING THE UNJUSTIFIABLE FAILURE/REFUSAL OF JUDGE FLORO
ALEJO TO RESOLVE WITHIN ELEVEN (11) YEARS THE PETITIONERS THREE (3)
SEPARATE MOTIONS FOR PRELIMINARY INJUNCTION/ TEMPORARY
RESTRAINING ORDER, ACCOUNTING AND DEPOSIT OF RENTAL INCOME DATED
MARCH 17, 1995, AUGUST 19, 1996 AND JANUARY 7, 2006 THEREBY PERMITTING
THE RESPONDENT TO UNJUSTLY ENRICH HERSELF BY CONTINUOUSLY
COLLECTING ALL THE RENTALS/FRUITS OF THE SUBJECT REAL PROPERTIES
WITHOUT ANY ACCOUNTING AND COURT DEPOSIT OF THE COLLECTED
RENTALS/FRUITS AND THE PETITIONERS URGENT MOTION TO DIRECT
DEFENDANT VICTORIA TUPARAN TO PAY THE ACCUMULATED UNPAID REAL
ESTATE TAXES AND SEF TAXES ON THE SUBJECT REAL PROPERTIES
DATED JANUARY 13, 2007 THEREBY EXPOSING THE SUBJECT REAL PROPERTIES
TO IMMINENT AUCTION SALE BY THE CITY TREASURER OF VALENZUELA CITY.
 
 
G. THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED ITS
DISCRETION IN DENYING THE PETITIONERS CLAIM FOR MORAL AND EXEMPLARY
DAMAGES AND ATTORNEYS FEES AGAINST THE RESPONDENT.
 
In sum, the crucial issue that needs to be resolved is whether or not the CA was correct in
ruling that there was no legal basis for the rescission of the Deed of Conditional Sale with Assumption of
Mortgage.
 
Position of the Petitioner
 
The petitioner basically argues that the CA should have granted the rescission of the subject Deed of
Conditional Sale of Real Properties with Assumption of Mortgage for the following reasons:
 
1. The subject deed of conditional sale is a reciprocal obligation whose
outstanding characteristic is reciprocity arising from identity of cause by virtue of
which one obligation is correlative of the other.
2. The petitioner was rescinding not enforcing the subject Deed of
Conditional Sale pursuant to Article 1191 of the Civil Code because of the
respondents failure/refusal to pay the ₱805,000.00 balance of the total purchase
price of the petitioners properties within the stipulated period ending December
31, 1991.
 
3. There was no slight or casual breach on the part of the respondent
because she (respondent) deliberately failed to comply with her contractual
obligations with the petitioner by violating the terms or manner of payment of the
₱1,200,000.00 balance and unjustly enriched herself at the expense of the
petitioner by collecting all rental payments for her personal benefit and
enjoyment.
 
Furthermore, the petitioner claims that the respondent is liable to pay interest at the rate of
6% per month on her unpaid installment of ₱805,000.00 from the date of the delinquency, December 31,
1991, because she obligated herself to do so.
Finally, the petitioner asserts that her claim for damages or lost income as well as for the back
rentals in the amount of ₱29,609.00 has been fully substantiated and, therefore, should have been
granted by the CA. Her claim for moral and exemplary damages and attorneys fees has been likewise
substantiated.
Position of the Respondent
 
The respondent counters that the subject Deed of Conditional Sale with Assumption of Mortgage
entered into between the parties is a contract to sell and not a contract of sale because the title of the
subject properties still remains with the petitioner as she failed to pay the installment payments in
accordance with their agreement.
 
Respondent echoes the RTC position that her inability to pay the full balance on the purchase price may
not be considered as a substantial and fundamental breach of the subject contract and it would be more
equitable if she would be allowed to pay the balance including interest within a certain period of time.
She claims that as early as 1992, she has shown her sincerity by offering to pay a certain amount which
was, however, rejected by the petitioner.
 
Finally, respondent states that the subject deed of conditional sale explicitly provides that the
installment payments shall not bear any interest. Moreover, petitioner failed to prove that she was
entitled to back rentals.
The Courts Ruling
 
The petition lacks merit.
 
The Court agrees with the ruling of the courts below that the subject Deed of Conditional Sale
with Assumption of Mortgage entered into by and among the two parties and FSL Bank on November 26,
1990 is a contract to sell and not a contract of sale. The subject contract was correctly classified as a
contract to sell based on the following pertinent stipulations:
 
8. That the title and ownership of the subject real properties shall
remain with the First Party until the full payment of the Second Party of the
balance of the purchase price and liquidation of the mortgage obligation
of ₱2,000,000.00. Pending payment of the balance of the purchase price and
liquidation of the mortgage obligation that was assumed by the Second Party, the
Second Party shall not sell, transfer and convey and otherwise encumber the
subject real properties without the written consent of the First and Third Party.
 
9. That upon full payment by the Second Party of the full balance of the
purchase price and the assumed mortgage obligation herein mentioned the Third
Party shall issue the corresponding Deed of Cancellation of Mortgage and the First
Party shall execute the corresponding Deed of Absolute Sale in favor of the Second
Party.[7]
 
Based on the above provisions, the title and ownership of the subject properties remains with
the petitioner until the respondent fully pays the balance of the purchase price and the assumed
mortgage obligation. Thereafter, FSL Bank shall then issue the corresponding deed of cancellation of
mortgage and the petitioner shall execute the corresponding deed of absolute sale in favor of the
respondent.
Accordingly, the petitioners obligation to sell the subject properties becomes demandable
only upon the happening of the positive suspensive condition, which is the respondents full payment of
the purchase price. Without respondents full payment, there can be no breach of contract to speak of
because petitioner has no obligation yet to turn over the title. Respondents failure to pay in full the
purchase price is not the breach of contract contemplated under Article 1191 of the New Civil Code but
rather just an event that prevents the petitioner from being bound to convey title to the respondent. The
2009 case of Nabus v. Joaquin & Julia Pacson[8] is enlightening:
The Court holds that the contract entered into by the Spouses Nabus
and respondents was a contract to sell, not a contract of sale.
 
A contract of sale is defined in Article 1458 of the Civil Code, thus:
 
Art. 1458. By the contract of sale, one of the contracting parties
obligates himself to transfer the ownership of and to deliver a determinate thing,
and the other to pay therefor a price certain in money or its equivalent.
 
xxx
 
Sale, by its very nature, is a consensual contract because it is perfected
by mere consent. The essential elements of a contract of sale are the following:
 
a) Consent or meeting of the minds, that is, consent to
transfer ownership in exchange for the price;
b) Determinate subject matter; and
c) Price certain in money or its equivalent.
Under this definition, a Contract to Sell may not be considered as a
Contract of Sale because the first essential element is lacking. In a contract to sell,
the prospective seller explicitly reserves the transfer of title to the prospective
buyer, meaning, the prospective seller does not as yet agree or consent to transfer
ownership of the property subject of the contract to sell until the happening of an
event, which for present purposes we shall take as the full payment of the
purchase price. What the seller agrees or obliges himself to do is to fulfill his
promise to sell the subject property when the entire amount of the purchase price
is delivered to him. In other words, the full payment of the purchase price partakes
of a suspensive condition, the non-fulfillment of which prevents the obligation to
sell from arising and, thus, ownership is retained by the prospective seller without
further remedies by the prospective buyer.
 
xxx xxx xxx
Stated positively, upon the fulfillment of the suspensive condition
which is the full payment of the purchase price, the prospective sellers obligation
to sell the subject property by entering into a contract of sale with the prospective
buyer becomes demandable as provided in Article 1479 of the Civil Code which
states:
 
Art. 1479. A promise to buy and sell a determinate thing for a price
certain is reciprocally demandable.
 
An accepted unilateral promise to buy or to sell a determinate thing for
a price certain is binding upon the promissor if the promise is supported by a
consideration distinct from the price.
A contract to sell may thus be defined as a bilateral contract whereby
the prospective seller, while expressly reserving the ownership of the subject
property despite delivery thereof to the prospective buyer, binds himself to sell
the said property exclusively to the prospective buyer upon fulfillment of the
condition agreed upon, that is, full payment of the purchase price.
 A contract to sell as defined hereinabove, may not even be considered
as a conditional contract of sale where the seller may likewise reserve title to the
property subject of the sale until the fulfillment of a suspensive condition, because
in a conditional contract of sale, the first element of consent is present, although it
is conditioned upon the happening of a contingent event which may or may not
occur. If the suspensive condition is not fulfilled, the perfection of the contract of
sale is completely abated. However, if the suspensive condition is fulfilled, the
contract of sale is thereby perfected, such that if there had already been previous
delivery of the property subject of the sale to the buyer, ownership thereto
automatically transfers to the buyer by operation of law without any further act
having to be performed by the seller.
In a contract to sell, upon the fulfillment of the suspensive condition
which is the full payment of the purchase price, ownership will not automatically
transfer to the buyer although the property may have been previously delivered to
him. The prospective seller still has to convey title to the prospective buyer by
entering into a contract of absolute sale.
 
Further, Chua v. Court of Appeals, cited this distinction between a
contract of sale and a contract to sell:
 
In a contract of sale, the title to the property
passes to the vendee upon the delivery of the thing sold; in a
contract to sell, ownership is, by agreement, reserved in the
vendor and is not to pass to the vendee until full payment of
the purchase price. Otherwise stated, in a contract of sale,
the vendor loses ownership over the property and cannot
recover it until and unless the contract is resolved or
rescinded; whereas, in a contract to sell, title is retained by
the vendor until full payment of the price. In the latter
contract, payment of the price is a positive suspensive
condition, failure of which is not a breach but an event that
prevents the obligation of the vendor to convey title from
becoming effective.
 
It is not the title of the contract, but its express terms or stipulations
that determine the kind of contract entered into by the parties. In this case, the
contract entitled Deed of Conditional Sale is actually a contract to sell. The
contract stipulated that as soon as the full consideration of the sale has been paid
by the vendee, the corresponding transfer documents shall be executed by the
vendor to the vendee for the portion sold. Where the vendor promises to execute
a deed of absolute sale upon the completion by the vendee of the payment of the
price, the contract is only a contract to sell. The aforecited stipulation shows that
the vendors reserved title to the subject property until full payment of the
purchase price.
 
xxx
Unfortunately for the Spouses Pacson, since the Deed of Conditional
Sale executed in their favor was merely a contract to sell, the obligation of the
seller to sell becomes demandable only upon the happening of the suspensive
condition. The full payment of the purchase price is the positive suspensive
condition, the failure of which is not a breach of contract, but simply an event that
prevented the obligation of the vendor to convey title from acquiring binding
force. Thus, for its non-fulfilment, there is no contract to speak of, the obligor
having failed to perform the suspensive condition which enforces a juridical
relation. With this circumstance, there can be no rescission or fulfillment of an
obligation that is still non-existent, the suspensive condition not having occurred
as yet. Emphasis should be made that the breach contemplated in Article 1191 of
the New Civil Code is the obligors failure to comply with an obligation already
extant, not a failure of a condition to render binding that obligation.  [Emphases
and underscoring supplied]
 
 
Consistently, the Court handed down a similar ruling in the 2010 case of Heirs of Atienza v.
Espidol, [9] where it was written:
Regarding the right to cancel the contract for non-payment of an
installment, there is need to initially determine if what the parties had was a
contract of sale or a contract to sell. In a contract of sale, the title to the property
passes to the buyer upon the delivery of the thing sold. In a contract to sell, on the
other hand, the ownership is, by agreement, retained by the seller and is not to
pass to the vendee until full payment of the purchase price. In the contract of sale,
the buyers non-payment of the price is a negative resolutory condition; in the
contract to sell, the buyers full payment of the price is a positive suspensive
condition to the coming into effect of the agreement. In the first case, the seller
has lost and cannot recover the ownership of the property unless he takes action
to set aside the contract of sale. In the second case, the title simply remains in the
seller if the buyer does not comply with the condition precedent of making
payment at the time specified in the contract. Here, it is quite evident that the
contract involved was one of a contract to sell since the Atienzas, as sellers, were
to retain title of ownership to the land until respondent Espidol, the buyer, has
paid the agreed price. Indeed, there seems no question that the parties
understood this to be the case.
 
Admittedly, Espidol was unable to pay the second installment
of P1,750,000.00 that fell due in December 2002. That payment, said both the RTC
and the CA, was a positive suspensive condition failure of which was not regarded
a breach in the sense that there can be no rescission of an obligation (to turn over
title) that did not yet exist since the suspensive condition had not taken place . x x
x. [Emphases and underscoring supplied]
 
Thus, the Court fully agrees with the CA when it resolved: Considering, however, that the
Deed of Conditional Sale was not cancelled by Vendor Reyes (petitioner) and that out of the total
purchase price of the subject property in the amount of ₱4,200,000.00, the remaining unpaid balance of
Tuparan (respondent) is only ₱805,000.00, a substantial amount of the purchase price has already been
paid. It is only right and just to allow Tuparan to pay the said unpaid balance of the purchase price to
Reyes.[10]
 
Granting that a rescission can be permitted under Article 1191, the Court still cannot allow it
for the reason that, considering the circumstances, there was only a slight or casual breach in the
fulfillment of the obligation.
Unless the parties stipulated it, rescission is allowed only when the breach of the contract is
substantial and fundamental to the fulfillment of the obligation. Whether the breach is slight or
substantial is largely determined by the attendant circumstances. [11] In the case at bench, the subject
contract stipulated the following important provisions:
 
 
2. That the purchase price of ₱4,200,000.00 shall be paid as follows:
   
a) ₱278,078.13 received in cash by the First Party but directly paid to Finally, the Court upholds the ruling of the courts below regarding the non-imposition of
the Third Party as partial payment of the mortgage obligation of the First Party in damages and attorneys fees. Aside from petitioners self-serving statements, there is not enough
order to reduce the amount to ₱2,000,000.00 only as of November 15, 1990; evidence on record to prove that respondent acted fraudulently and maliciously against the petitioner. In
  the case of Heirs of Atienza v. Espidol,[13] it was stated:
b) ₱721,921.87 received in cash by the First Party as additional  
payment of the Second Party; Respondents are not entitled to moral damages because contracts are
  not referred to in Article 2219 of the Civil Code, which enumerates the cases when
c)                 ₱1,200,000.00 to be paid in installments as follows: moral damages may be recovered. Article 2220 of the Civil Code allows the
  recovery of moral damages in breaches of contract where the defendant acted
1.     ₱200,000.00 payable on or before January 31, 1991; fraudulently or in bad faith. However, this case involves a contract to sell,
2.     ₱200,000.00 payable on or before June 30, 1991; wherein full payment of the purchase price is a positive suspensive condition, the
3.     ₱800,000.00 payable on or before December 31, non-fulfillment of which is not a breach of contract, but merely an event that
1991; prevents the seller from conveying title to the purchaser.  Since there is no breach
  of contract in this case, respondents are not entitled to moral damages.
Note: All the installments shall not bear any interest.  
   
d)                ₱2,000,000.00 outstanding balance of the mortgage In the absence of moral, temperate, liquidated or compensatory
obligation as of November 15, 1990 which is hereby assumed by the Second Party. damages, exemplary damages cannot be granted for they are allowed only in
  addition to any of the four kinds of damages mentioned.
xxx  
3.     That the Third Party hereby acknowledges receipts from the  
Second Party P278,078.13 as partial payment of the loan obligation of First Party in WHEREFORE, the petition is DENIED.
order to reduce the account to only ₱2,000,000.00 as of November 15, 1990 to be  
assumed by the Second Party effective November 15, 1990.[12] SO ORDERED.
 
From the records, it cannot be denied that respondent paid to FSL Bank petitioners mortgage
obligation in the amount of ₱2,278,078.13, which formed part of the purchase price of the subject
property. Likewise, it is not disputed that respondent paid directly to petitioner the amount of
₱721,921.87 representing the additional payment for the purchase of the subject property. Clearly, out
of the total price of ₱4,200,000.00, respondent was able to pay the total amount of ₱3,000,000.00,
leaving a balance of ₱1,200,000.00 payable in three (3) installments.
 
Out of the ₱1,200,000.00 remaining balance, respondent paid on several dates the first and
second installments of ₱200,000.00 each. She, however, failed to pay the third and last installment of
₱800,000.00 due on December 31, 1991. Nevertheless, on August 31, 1992, respondent, through
counsel, offered to pay the amount of ₱751,000.00, which was rejected by petitioner for the reason that
the actual balance was ₱805,000.00 excluding the interest charges.
 
Considering that out of the total purchase price of ₱4,200,000.00, respondent has already
paid the substantial amount of ₱3,400,000.00, more or less, leaving an unpaid balance of only
₱805,000.00, it is right and just to allow her to settle, within a reasonable period of time, the balance of
the unpaid purchase price. The Court agrees with the courts below that the respondent showed her
sincerity and willingness to comply with her obligation when she offered to pay the petitioner the
amount of ₱751,000.00.
 
On the issue of interest, petitioner failed to substantiate her claim that respondent made a
personal commitment to pay a 6% monthly interest on the ₱805,000.00 from the date of
delinquency, December 31, 1991. As can be gleaned from the contract, there was a stipulation stating
that: All the installments shall not bear interest. The CA was, however, correct in imposing interest at the
rate of 6% per annum starting from the filing of the complaint on September 11, 1992.
 
 
 
 
SPOUSES SERRANO VS. CAGUIAT to sell on March 23, 1990, shows that plaintiffs position deserves more weight and
Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as credibility. First, the P100,000.00 that plaintiff paid whether as downpayment or
amended, assailing the Decision[1] of the Court of Appeals dated January 29, 1999 and its Resolution earnest money showed that there was already a perfected contract.Art. 1482 of
dated July 14, 1999 in CA-G.R. CV No. 48824. the Civil Code of the Philippines, reads as follows, to wit:
 
Spouses Onnie and Amparo Herrera, petitioners, are the registered owners of a lot located in Art. 1482. Whenever earnest money is given in a contract of
Las Pias, Metro Manila covered by Transfer Certificate of Title No. T-9905. sale, it shall be considered as part of the price and as proof of the
Sometime in March 1990, Godofredo Caguiat, respondent, offered to buy the lot. Petitioners perfection of the contract.
agreed to sell it at P1,500.00 per square meter. Respondent then gave petitioners P100,000.00 as partial
payment. In turn, petitioners gave respondent the corresponding receipt stating that respondent
Second, plaintiff was the first to react to show his eagerness to push through
promised to pay the balance of the purchase price on or before March 23, 1990, thus:
with the sale by sending defendants the letter dated March 25, 1990. (Exh. D) and
Las Pias, Metro Manila
reiterated the same intent to pursue the sale in a letter dated April 6, 1990. Third,
March 19, 1990
plaintiff had the balance of the purchase price ready for payment (Exh.
RECEIPT FOR PARTIAL PAYMENT OF LOT NO. 23 COVERED BY
C). Defendants mere allegation that it was plaintiff who did not appear on March
TCT NO. T-9905, LAS PIAS, METRO MANILA
23, 1990 is unavailing. Defendants letters (Exhs. 2 and 5) appear to be mere
RECEIVED FROM MR. GODOFREDO CAGUIAT THE AMOUNT OF ONE
afterthought.
HUNDRED THOUSAND PESOS (P100,000.00) AS PARTIAL PAYMENT OF
 
OUR LOTSITUATED IN LAS PIAS, M.M. COVERED BY TCT NO. T-9905 AND WITH AN
 
AREA OF 439 SQUARE METERS.
On appeal, the Court of Appeals, in its assailed Decision of January 29, 1999, affirmed the trial
MR. CAGUIAT PROMISED TO PAY THE BALANCE OF THE PURCHASE PRICE ON OR
courts judgment.
BEFORE MARCH 23, 1990, AND THAT WE WILL EXECUTE AND SIGN THE FINAL
 
DEED OF SALE ON THIS DATE.
Forthwith, petitioners filed their motion for reconsideration but it was denied by the
SIGNED THIS 19TH DAY OF MARCH, 1990 AT LAS PIAS, M.M.
appellate court in its Resolution[8] dated July 14, 1999.
(SGD) AMPARO HERRERA (SGD) ONNIE SERRANO[2]
 
 
Hence, the present recourse.
On March 28, 1990, respondent, through his counsel Atty. Ponciano Espiritu, wrote
 
petitioners informing them of his readiness to pay the balance of the contract price and requesting them
to prepare the final deed of sale.[3] The basic issue to be resolved is whether the document entitled Receipt for Partial
  Payment signed by both parties earlier mentioned is a contract to sell or a contract of sale.
 
On April 4, 1990, petitioners, through Atty. Ruben V. Lopez, sent a letter [4] to respondent Petitioners contend that the Receipt is not a perfected contract of sale as provided for in
stating that petitioner Amparo Herrera is leaving for abroad on or before April 15, 1990 and that they are Article 1458[9] in relation to Article 1475 [10] of the Civil Code. The delivery to them of P100,000.00 as
canceling the transaction. Petitioners also informed respondent that he can recover the earnest money down payment cannot be considered as proof of the perfection of a contract of sale under Article
of P100,000.00 anytime. 1482[11] of the same Code since there was no clear agreement between the parties as to the amount of
  consideration.
 
Again, on April 6, 1990,[5] petitioners wrote respondent stating that they delivered to his Generally, the findings of fact of the lower courts are entitled to great weight and should not
counsel Philippine National Bank Managers Check No. 790537 dated April 6, 1990 in the amount be disturbed except for cogent reasons. 14 Indeed, they should not be changed on appeal in the absence
of P100,000.00 payable to him. of a clear showing that the trial court overlooked, disregarded, or misinterpreted some facts of weight
  and significance, which if considered would have altered the result of the case. [12] In the present case,
we find that both the trial court and the Court of Appeals interpreted some significant facts resulting in
an erroneous resolution of the issue involved.
In view of the cancellation of the contract by petitioners, respondent filed with the Regional Trial Court,
 
Branch 63, Makati City a complaint against them for specific performance and damages, docketed as Civil
In holding that there is a perfected contract of sale, both courts mainly relied on the earnest
Case No. 90-1067.[6]
money given by respondent to petitioners. They invoked Article 1482 of the Civil Code which provides
 
that "Whenever earnest money is given in a contract of sale, it shall be considered as part of the price
and as proof of the perfection of the contract."
On June 27, 1994, after hearing, the trial court rendered its Decision [7] finding there was a perfected  
contract of sale between the parties and ordering petitioners to execute a final deed of sale in favor of
respondent. The trial court held:
We are not convinced.
 
x x x

In the evaluation of the evidence presented by the parties as to the In San Miguel Properties Philippines, Inc. v. Spouses Huang, [13] we held that the stages of a
issue as to who was ready to comply with his obligation on the verbal agreement contract of sale are: (1) negotiation, covering the period from the time the prospective contracting
parties indicate interest in the contract to the time the contract is perfected; (2) perfection, which takes In this case, the Receipt for Partial Payment shows that the true agreement between the
place upon the concurrence of the essential elements of the sale, which is the meeting of the minds of parties is a contract to sell.
the parties as to the object of the contract and upon the price; and (3) consummation, which begins  
when the parties perform their respective undertakings under the contract of sale, culminating in the
extinguishment thereof. First, ownership over the property was retained by petitioners and was not to pass to
respondent until full payment of the purchase price. Thus, petitioners need not push through with the
With the above postulates as guidelines, we now proceed to determine the real nature of the
sale should respondent fail to remit the balance of the purchase price before the deadline on March 23,
contract entered into by the parties.
1990. In effect, petitioners have the right to rescind unilaterally the contract the moment respondent
It is a canon in the interpretation of contracts that the words used therein should be given fails to pay within the fixed period.[18]
their natural and ordinary meaning unless a technical meaning was intended. [14] Thus, when petitioners  
declared in the said Receipt for Partial Payment that they
Second, the agreement between the parties was not embodied in a deed of sale. The absence
  of a formal deed of conveyance is a strong indication that the parties did not intend immediate transfer
of ownership, but only a transfer after full payment of the purchase price.[19]
 
RECEIVED FROM MR. GODOFREDO CAGUIAT THE AMOUNT OF ONE
HUNDRED THOUSAND PESOS (P100,000.00) AS PARTIAL PAYMENT OF  
OUR LOT SITUATED IN LAS PIAS, M.M. COVERED BY TCT NO. T-9905 AND WITH AN
Third, petitioners retained possession of the certificate of title of the lot. This is an additional
AREA OF 439 SQUARE METERS.
indication that the agreement did not transfer to respondent, either by actual or constructive delivery,
MR. CAGUIAT PROMISED TO PAY THE BALANCE OF THE PURCHASE PRICE ON OR
ownership of the property.[20]
BEFORE MARCH 23, 1990, AND THAT WE WILL EXECUTE AND SIGN THE FINAL
DEED OF SALE ON THIS DATE.  
 
  It is true that Article 1482 of the Civil Code provides that Whenever earnest money is given in
there can be no other interpretation than that they agreed to a conditional contract of sale, a contract of sale, it shall be considered as part of the price and proof of the perfection of the
consummation of which is subject only to the full payment of the purchase price. contract. However, this article speaks of earnest money given in a contract of sale. In this case,
  the earnest money was given in a contract to sell.The earnest money forms part of the consideration
only if the sale is consummated upon full payment of the purchase price. [21] Now, since the earnest
money was given in a contract to sell, Article 1482, which speaks of a contract of sale, does not apply.
A contract to sell is akin to a conditional sale where the efficacy or obligatory force of the
 
vendor's obligation to transfer title is subordinated to the happening of a future and uncertain event, so
As previously discussed, the suspensive condition (payment of the balance by respondent) did
that if the suspensive condition does not take place, the parties would stand as if the conditional
not take place. Clearly, respondent cannot compel petitioners to transfer ownership of the property to
obligation had never existed. The suspensive condition is commonly full payment of the purchase price.
[15] him.
 
 
The differences between a contract to sell and a contract of sale are well-settled in
jurisprudence. As early as 1951, in Sing Yee v. Santos,[16] we held that: WHEREFORE, we GRANT the instant Petition for Review. The challenged Decision of the Court
  of Appeals is REVERSED and respondents complaint is DISMISSED.
x x x [a] distinction must be made between a contract of sale in which title passes
to the buyer upon delivery of the thing sold and a contract to sell x x x where by  
agreement the ownership is reserved in the seller and is not to pass until the full
payment, of the purchase price is made. In the first case, non-payment of the price
is a negative resolutory condition; in the second case, full payment is a positive  
suspensive condition. Being contraries, their effect in law cannot be identical. In  
the first case, the vendor has lost and cannot recover the ownership of the land SO ORDERED.
sold until and unless the contract of sale is itself resolved and set aside. In the
second case, however, the title remains in the vendor if the vendee does not
comply with the condition precedent of making payment at the time specified in
the contract.
 

In other words, in a contract to sell, ownership is retained by the seller and is not to pass to
the buyer until full payment of the price.[17]
  NABUS VS. PACSON
 This is a petition for review on certiorari  [1] of the Decision[2] of the Court of Appeals in CA-G.R.
CV No. 44941 dated November 28, 2003. The Court of Appeals affirmed with modification the Decision of
the Regional Trial Court of La Trinidad, Benguet, Branch 10, ordering petitioner Betty Tolero to execute a
deed of absolute sale in favor of respondents, spouses Joaquin and Julia Pacson, over the lots covered by
Transfer Certificate of Title (TCT) Nos. T-18650 and T-18651 upon payment to her by respondents of the
sum of P57,544.[8]4 representing the balance due for the full payment of the property subject of this
case; and ordering petitioner Betty Tolero to surrender to respondents her owners duplicate copy of TCT
Nos. T-18650 and T-18651.
 
The facts, as stated by the trial court,[3] are as follows:
 
The spouses Bate and Julie Nabus were the owners of parcels of land with a total area of
1,665 square meters, situated in Pico, La Trinidad, Benguet, duly registered in their names under TCT No.
T-9697 of the Register of Deeds of the Province of Benguet. The property was mortgaged by the Spouses
Nabus to the Philippine National Bank (PNB), La Trinidad Branch, to secure a loan in the amount
of P30,000.00.
 
On February 19, 1977, the Spouses Nabus executed a Deed of Conditional Sale [4] covering
1,000 square meters of the 1,665 square meters of land in favor of respondents Spouses Pacson for a
consideration of P170,000.00, which was duly notarized on February 21, 1977. The consideration was to
be paid, thus:
 
THAT, the consideration of the amount of P170,000.00 will be paid by
the VENDEE herein in my favor in the following manner:
a.       That the sum of P13,000.00, more or less, on or
before February 21, 1977 and which amount will be paid directly
to the PNB, La Trinidad Branch, and which will form part of the
purchase price;
 
b.      That after paying the above amount to the PNB, La Trinidad,
Benguet branch, a balance of about P17,500.00 remains as
my mortgage balance and this amount will be paid by the VENDEE
herein at the rate of not less than P3,000.00 a month beginning
March 1977, until the said mortgage balance is fully liquidated,
and that all payments made by the VENDEE to the PNB, La
Trinidad, Benguet branch, shall form part of the consideration of
this sale;
c. That, as soon as the mortgage obligation with the PNB as cited above
is fully paid, then the VENDEE herein hereby obligates himself, his
heirs and assigns, to pay the amount of not less than P2,000.00 a
month in favor of the VENDOR, his heirs and assigns, until the full
amount of P170,000.00 is fully covered (including the payments
cited in Pars. a and b above);
THAT, as soon as the full consideration of this sale has been paid by the
VENDEE, the corresponding transfer documents shall be executed by the VENDOR
to the VENDEE for the portion sold;
THAT, the portion sold is as shown in the simple sketch hereto attached
as Annex "A" and made part hereof;
THAT, a segregation survey for the portion sold in favor of the VENDEE
and the portion remaining in favor of the VENDOR shall be executed as soon as
possible, all at the expense of the VENDEE herein;
THAT, it is mutually understood that in as much as there is a claim by
other persons of the entire property of which the portion subject of this
Instrument is only a part, and that this claim is now the subject of a civil case now
pending before Branch III of the Court of First Instance of Baguio and Benguet,
should the VENDOR herein be defeated in the said civil action to the end that he is
divested of title over the area subject of this Instrument, then he hereby warrants
that he shall return any and all monies paid by the VENDEE herein whether paid to
the PNB, La Trinidad, Benguet Branch, or directly received by herein VENDOR, all
such monies to be returned upon demand by the VENDEE;
THAT, [a] portion of the parcel of land subject of this instrument is
presently in the possession of Mr. Marcos Tacloy, and the VENDOR agrees to
cooperate and assist in any manner possible in the ouster of said Mr. Marcos
Tacloy from said possession and occupation to the end that the VENDEE herein
shall make use of said portion as soon as is practicable;
THAT, finally, the PARTIES hereby agree that this Instrument shall be
binding upon their respective heirs, successors or assigns. [5]
 
Pursuant to the Deed of Conditional Sale, respondents paid PNB the amount
of P12,038.86 on February 22, 1977[6] and P20,744.30 on July 17, 1978[7] for the full payment of the loan.
 
At the time of the transaction, Mr. Marcos Tacloy had a basket-making shop on the property,
while the spouses Delfin and Nelita Flores had a store. Tacloy and the SpousesFlores vacated the
property after respondents paid them P4,000.00 each.
Thereafter, respondents took possession of the subject property. They constructed an 80 by
32-feet building and a steel-matting fence around the property to house their truck body-building shop
which they called the Emiliano Trucking Body Builder and Auto Repair Shop.
 
On December 24, 1977, before the payment of the balance of the mortgage amount with
PNB, Bate Nabus died. On August 17, 1978, his surviving spouse, Julie Nabus, and their minor daughter,
Michelle Nabus, executed a Deed of Extra Judicial Settlement over the registered land covered by TCT
No. 9697. On the basis of the said document, TCT No. T- 17718[8] was issued on February 17, 1984 in the
names of Julie Nabus and Michelle Nabus.
 
Meanwhile, respondents continued paying their balance, not in installments of P2,000.00 as
agreed upon, but in various, often small amounts ranging from as low as P10.00[9] to as high
as P15,566.00,[10] spanning a period of almost seven years, from March 9, 1977[11] to January 17, 1984.[12]
There was a total of 364 receipts of payment,[13] which receipts were mostly signed by Julie
Nabus, who also signed as Julie Quan when she remarried. The others who signed were Bate Nabus;
PNB, La Trinidad Branch; Maxima Nabus; Sylvia Reyes; Michelle Nabus and the second husband of Julie
Nabus, Gereon Quan. Maxima Nabus is the mother of Bate Nabus, while Sylvia Reyes is a niece.
The receipts showed that the total sum paid by respondents to the Spouses Nabus
was P112,455.16,[14] leaving a balance of P57,544.84. The sum of P30,000.00 which was the value of the
pick-up truck allegedly sold and delivered in 1978 to the Spouses Nabus, was not considered as payment
because the registration papers remained in the name of its owner, Dominga D. Pacson, who is the
sister of Joaquin Pacson. The vehicle was also returned to respondents.
During the last week of January 1984, Julie Nabus, accompanied by her second husband,
approached Joaquin Pacson to ask for the full payment of the lot. Joaquin Pacson agreed to pay, but told
her to return after four days as his daughter, Catalina Pacson, would have to go over the numerous
receipts to determine the balance to be paid. When Julie Nabus returned after four days, Joaquin sent
her and his daughter, Catalina, to Atty. Elizabeth Rillera for the execution of the deed of absolute
sale. Since Julie was a widow with a minor daughter, Atty. Rillera required Julie Nabus to return in four
days with the necessary documents, such as the deed of extrajudicial settlement, the transfer certificate
of title in the names of Julie Nabus and minor Michelle Nabus, and the guardianship papers of
Michelle. However, Julie Nabus did not return.
 
Getting suspicious, Catalina Pacson went to the Register of Deeds of
the Province of Benguet and asked for a copy of the title of the land. She found that it was still in the
name of Julie and Michelle Nabus.
 
After a week, Catalina Pacson heard a rumor that the lot was already sold to petitioner Betty
Tolero. Catalina Pacson and Atty. Rillera went to the Register of Deeds of the Province of Benguet, and
found that Julie Nabus and her minor daughter, Michelle Nabus, represented by the formers mother as
appointed guardian by a court order dated October 29, 1982, had executed a Deed of Absolute Sale in
favor of Betty Tolero on March 5, 1984, covering the whole lot comprising 1,665 square meters. [15] The
property was described in the deed of sale as comprising four lots: (1) Lot A-2-A, with an area of 832
square meters; (2) Lot A-2-B, 168 square meters; (3) Lot A-2-C, 200 square meters; and  (4) Lot A-2-D,
465 square meters. Lots A-2-A and A-2-B, with a combined area of 1,000 square meters, correspond to
the lot previously sold to Joaquin and Julia Pacson in the Deed of Conditional Sale.
 
Catalina Pacson and Atty. Rillera also found that the Certificate of Title over the property in
the name of Julie and Michelle Nabus was cancelled on March 16, 1984, and four titles to the fours lots
were issued in the name of Betty Tolero, namely: TCT No. T-18650 [16] for Lot A-2-A; TCT No.
18651[17] for Lot A-2-B; TCT No. T-18652[18] for Lot A-2-C; and T-18653[19] for Lot A-2-D.
 
On March 22, 1984, the gate to the repair shop of the Pacsons was padlocked. A sign was
displayed on the property stating No Trespassing.[20]
 
On March 26, 1984, Catalina Pacson filed an affidavit-complaint regarding the padlocking
incident of their repair shop with the police station at La Trinidad, Benguet.
 
On March 28, 2008, respondents Joaquin and Julia Pacson filed with the Regional Trial Court
of La Trinidad, Benguet (trial court) a Complaint [21] for Annulment ofDeeds, with damages and prayer for
the issuance of a writ of preliminary injunction.[22] They sought the annulment of (1) the Extra-judicial
Settlement of Estate, insofar as their right to the 1,000-square-meter lot subject of the Deed of
Conditional Sale[23] was affected; (2) TCT No. T-17718 issued in the names of Julie and Michelle Nabus;
and (3) the Deed of Absolute Sale[24] in favor of Betty Tolero and the transfer certificates of title issued
pursuant thereto. They also prayed for the award of actual, moral and exemplary damages, as well as
attorneys fees.
 
In their Answer,[25] Julie and Michelle Nabus alleged that respondent Joaquin Pacson did not
proceed with the conditional sale of the subject property when he learned that there was a pending
case over the whole property. Joaquin proposed that he would rather lease the property with a monthly
rental of P2,000.00 and apply the sum of P13,000.00 as rentals, since the amount was already paid to
the bank and could no longer be withdrawn. Hence, he did not affix his signature to the second page of a
copy of the Deed of Conditional Sale.[26] Julie Nabus alleged that in March 1994, due to her own
economic needs and those of her minor daughter, she sold the property to Betty Tolero, with authority
from the court.
 
During the hearing on the merits, Julie Nabus testified that she sold the property to Betty
Tolero because she was in need of money. She stated that she was free to sell the property because the
Deed of Conditional Sale executed in favor of the Spouses Pacson was converted into a contract of
lease. She claimed that at the time when the Deed of Conditional Sale was being explained to them by
the notary public, Joaquin Pacson allegedly did not like the portion of the contract stating that there was
a pending case in court involving the subject property. Consequently, Joaquin Pacson did not continue
to sign the document; hence, the second page of the document was unsigned. [27] Thereafter, it was
allegedly their understanding that the Pacsons would occupy the property as lessees and whatever
amount paid by them would be considered rentals.
 
Betty Tolero put up the defense that she was a purchaser in good faith and for value. She
testified that it was Julie Nabus who went to her house and offered to sell the property consisting of two
lots with a combined area of 1,000 square meters. She consulted Atty. Aurelio de Peralta before she
agreed to buy the property. She and Julie Nabus brought to Atty. De Peralta the pertinent papers such as
TCT No. T-17718 in the names of Julie and Michelle Nabus, the guardianship papers of Michelle Nabus
and the blueprint copy of the survey plan showing the two lots. After examining the documents
and finding that the title was clean, Atty. De Peralta gave her the go-signal to buy the property.
Tolero testified that upon payment of the agreed price of P200,000.00, the Deed of Absolute
Sale was executed and registered, resulting in the cancellation of the title of Julie and Michelle Nabus
and the issuance in her name of TCT Nos. T-18650 and T-18651 [28] corresponding to the two lots.
Thereafter, she asked her common-law husband, Ben Ignacio, to padlock the gate to the property and
hang the No Trespassing sign.
 
Tolero also testified that as the new owner, she was surprised and shocked to receive the
Complaint filed by the Spouses Pacson. She admitted that she knew very well the Spouses Pacson,
because they used to buy vegetables regularly from her. She had been residing along the highway at
Kilometer 4, La Trinidad, Benguet since 1971. She knew the land in question, because it was only 50
meters away across the highway. She also knew that the Spouses Pacson had a shop on the property for
the welding and body-building of vehicles. She was not aware of the Deed of Conditional Sale executed
in favor of the Pacsons, and she saw the document for the first time when Joaquin Pacson showed it to
her after she had already bought the property and the title had been transferred in her name. At the
time she was buying the property, Julie Nabus informed her that the Pacsons were merely renting the
property. She did not bother to verify if that was true, because the Pacsons were no longer in the
property for two years before she bought it.
In a Decision dated September 30, 1993, the trial court ruled in favor of respondents. The
dispositive portion of the Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered in
favor of the plaintiffs, ordering defendant Betty Tolero to execute a deed of
absolute sale in favor of the Spouses Joaquin and Julia Pacson over the lots
covered by Transfer Certificates of Title Nos. T-18650 and T-18651 upon payment
to her by the plaintiffs of the sum of P57,544.[8]4 representing the balance due for
 the full payment of the property subject of this case. In addition to the execution
of a deed of absolute sale, defendant Betty Tolero shall surrender to the plaintiffs
her owners duplicate copy of Transfer Certificates of Title Nos. T-18650 and T-
18651.
decision, but deleted the award of attorneys fees. The dispositive portion of the Decision reads:
Defendants Julie Nabus, Michelle Nabus, and Betty Tolero shall also pay
the plaintiffs damages as follows: P50,000.00 for moral damages; P20,000.00 for
exemplary damages; and P10,000.00 for attorneys fees and expenses for litigation.
[29]
 
Two issues determined by the trial court were: (1) Was the Deed of Conditional Sale between
the Spouses Pacson and the Nabuses converted into a contract of lease? and (2) Was Betty Tolero a
buyer in good faith?
The trial court held that the Deed of Conditional Sale was not converted into a contract of
lease because the original copy of the contract [30] showed that all the pages were signed by all the
parties to the contract. By the presumption of regularity, all other carbon copies must have been duly
signed. The failure of Joaquin Pacson to sign the second page of one of the carbon copies of the contract
was by sheer inadvertence. The omission was of no consequence since the signatures of the parties in  
all the other copies of the contract were complete. Moreover, all the receipts of payment expressly
stated that they were made in payment of the lot. Not a single receipt showed payment for rental.
 
Further, the trial court held that Betty Tolero was not a purchaser in good faith as she had
actual knowledge of the Conditional Sale of the property to the Pacsons.
 
The trial court stated that the Deed of Conditional Sale contained reciprocal obligations
between the parties, thus:
THAT, as soon as the full consideration of this sale has been paid by the
VENDEE, the corresponding transfer documents shall be executed by the VENDOR
to the VENDEE for the portion sold;
xxxx
THAT, finally, the PARTIES hereby agree that this Instrument shall be
binding upon their respective heirs, successors or assigns. [31]
 
In other words, the trial court stated, when the vendees (the Spouses Pacson) were already
ready to pay their balance, it was the corresponding obligation of the vendors (Nabuses) to execute the
transfer documents.  
 
The trial court held that [u]nder Article 1191 of the Civil Code, an injured party in a reciprocal
obligation, such as the Deed of Conditional Sale in the case at bar, may choose between the fulfillment
[or] the rescission of the obligation, with the payment of damages in either case. It stated that in filing
the case, the Spouses Pacson opted for fulfillment of the obligation, that is, the execution of the Deed of
Absolute Sale in their favor upon payment of the purchase price.
 
Respondents appealed the decision of the trial court to the Court of Appeals.
 
In the Decision dated November 28, 2003, the Court of Appeals affirmed the trial courts
 
WHEREFORE, finding no reversible error in the September 30, 1993
Decision of the Regional Trial Court of La Trinidad, Benguet, Branch 10, in Civil
Case No. 84-CV-0079, the instant appeal is hereby DISMISSED for lack of merit, and
the assailed Decision is hereby AFFIRMED and UPHELD with the modification that
the award of attorneys fees is deleted.[32]
 
Petitioners filed this petition raising the following issues:
I
THE [COURT OF APPEALS] ERRED IN CONSIDERING THE CONTRACT
ENTERED INTO BETWEEN THE SPOUSES BATE NABUS AND JULIE NABUS AND
SPOUSES JOAQUIN PACSON AND JULIA PACSON TO BE A CONTRACT OF SALE.
II
THE COURT A QUO ERRED IN FINDING THAT THERE ARE ONLY TWO
ISSUES IN THE CASE ON APPEAL AND THEY ARE: WHETHER THE DEED OF
CONDITIONAL SALE WAS CONVERTED INTO A CONTRACT OF LEASE; AND THAT
[WHETHER] PETITIONER BETTY TOLERO WAS A BUYER IN GOOD FAITH.
 
III
THAT THE TRIAL COURT ERRED IN HOLDING THAT [RESPONDENTS]
BALANCE TO THE SPOUSES NABUS UNDER THE CONDITIONAL SALE IS
ONLY P57,544.[8]4.
IV
THAT ASSUMING WITHOUT ADMITTING THAT PETITIONER BETTY
TOLERO WAS AWARE OF THE EXISTENCE OF THE DEED OF CONDITIONAL SALE, THE
TRIAL COURT, AS WELL AS THE [COURT OF APPEALS], ERRED IN ORDERING
PETITIONER BETTY TOLERO TO EXECUTE A DEED OF ABSOLUTE SALE IN FAVOR OF
THE [RESPONDENTS] AND TO SURRENDER THE OWNER'S DUPLICATE COPY OF TCT
NOS. T-18650 AND T-18651, WHICH WAS NOT PRAYED FOR IN THE PRAYER IN THE
COMPLAINT.
V
THAT THE [COURT OF APPEALS] ERRED IN FINDING BETTY TOLERO [AS]
A BUYER [WHO] FAILED TO TAKE STEPS IN INQUIRING FROM THE [RESPONDENTS]
THE STATUS OF THE PROPERTY IN QUESTION BEFORE HER PURCHASE, CONTRARY
TO FACTS ESTABLISHED BY EVIDENCE.
VI
THE [COURT OF APPEALS] ERRED IN CONSIDERING PETITIONER BETTY
TOLERO A BUYER IN BAD FAITH, IGNORING THE APPLICATION OF THE DOCTRINE IN
THE RULING OF THE SUPREME COURT IN THE CASE OF RODOLFO ALFONSO, ET
AL. VS. COURT OF APPEALS, G.R. NO. 63745.[33]
 
 
  
The main issues to be resolved are:
1)    Whether or not the Deed of Conditional Sale was converted into a contract of
lease;
2)    Whether the Deed of Conditional Sale was a contract to sell or a contract of
sale.
As regards the first issue, the Deed of Conditional Sale entered into by the Spouses Pacson
and the Spouses Nabus was not converted into a contract of lease. The 364 receipts issued to the
Spouses Pacson contained either the phrase as partial payment of lot located in Km. 4 or cash vale or
cash vale (partial payment of lot located in Km. 4), evidencing sale under the contract and not the lease
of the property. Further, as found by the trial court, Joaquin Pacsons non-signing of the second page of a
carbon copy of the Deed of Conditional Sale was through sheer inadvertence, since the original
contract[34] and the other copies of the contract were all signed by Joaquin Pacson and the other parties
to the contract.
On the second issue, petitioners contend that the contract executed by the respondents and
the Spouses Nabus was a contract to sell, not a contract of sale. They allege that the contract was subject
to the suspensive condition of full payment of the consideration agreed upon before ownership of the
subject property could be transferred to the vendees. Since respondents failed to pay the full amount of
the consideration, having an unpaid balance of P57,544.84, the obligation of the vendors to execute the
Deed of Absolute Sale in favor of respondents did not arise. Thus, the subsequent Deed of Absolute Sale
executed in favor of Betty Tolero, covering the same parcel of land was valid, even if Tolero was aware of
the previous deed of conditional sale.
 
Moreover, petitioners contend that respondents violated the stipulated condition in the
contract that the monthly installment to be paid was P2,000.00, as respondents gave meager amounts as
low as P10.00.
 
 
Petitioners also assert that respondents allegation that Julie Nabus failure to bring the
pertinent documents necessary for the execution of the final deed of absolute sale, which was the
reason for their not having paid the balance of the purchase price, was untenable, and a lame and
shallow excuse for violation of the Deed of Conditional Sale.Respondents could have made a valid tender
of payment of their remaining balance, as it had been due for a long time, and upon refusal to accept
payment, they could have consigned their payment to the court as provided by law. This, respondents
failed to do.
 
The Court holds that the contract entered into by the Spouses Nabus and respondents was a
contract to sell, not a contract of sale.
 
A contract of sale is defined in Article 1458 of the Civil Code, thus:
 
Art. 1458. By the contract of sale, one of the contracting parties
obligates himself to transfer the ownership of and to deliver a determinate thing,
and the other to pay therefor a price certain in money or its equivalent.
A contract of sale may be absolute or conditional.
Ramos v. Heruela[35] differentiates a contract of absolute sale and a contract of conditional
sale as follows:
 
Article 1458 of the Civil Code provides that a contract of sale may be
absolute or conditional.  A contract of sale is absolute when title to the property
passes to the vendee upon delivery of the thing sold. A deed of sale is absolute
when there is no stipulation in the contract that title to the property remains with
the seller until full payment of the purchase price. The sale is also absolute if there
is no stipulation giving the vendor the right to cancel unilaterally the contract the
moment the vendee fails to pay within a fixed period. In a conditional sale, as in a
contract to sell, ownership remains with the vendor and does not pass to the
vendee until full payment of the purchase price. The full payment of the purchase
price partakes of a suspensive condition, and non-fulfillment of the condition
prevents the obligation to sell from arising.[36]
Coronel v. Court of Appeals[37] distinguished a contract to sell from a contract of sale, thus:
Sale, by its very nature, is a consensual contract because it is perfected
by mere consent. The essential elements of a contract of sale are the following:
a) Consent or meeting of the minds, that is, consent to
transfer ownership in exchange for the price;
b) Determinate subject matter; and
c) Price certain in money or its equivalent.
 
Under this definition, a Contract to Sell may not be considered as
a Contract of Sale because the first essential element is lacking. In a contract to
sell, the prospective seller explicitly reserves the transfer of title to the
prospective buyer, meaning, the prospective seller does not as yet agree or
consent to transfer ownership of the property subject of the contract to sell until
the happening of an event, which for present purposes we shall take as the full
payment of the purchase price. What the seller agrees or obliges himself to do is
to fulfill his promise to sell the subject property when the entire amount of the
purchase price is delivered to him. In other words, the full payment of the
purchase price partakes of a suspensive condition, the non-fulfilment of which
prevents the obligation to sell from arising and, thus, ownership is retained by
the prospective seller without further remedies by the prospective buyer.
 
xxxx
Stated positively, upon the fulfillment of the suspensive condition
which is the full payment of the purchase price, the prospective sellers obligation
to sell the subject property by entering into a contract of sale with the prospective
buyer becomes demandable as provided in Article 1479 of the Civil Code which
states:
Art. 1479. A promise to buy and sell a
determinate thing for a price certain is reciprocally
demandable.
 An accepted unilateral promise to buy or to sell a
determinate thing for a price certain is binding upon the
promissor if the promise is supported by a consideration
distinct from the price.
A contract to sell may thus be defined as a bilateral contract whereby
the prospective seller, while expressly reserving the ownership of the subject
property despite delivery thereof to the prospective buyer, binds himself to sell
the said property exclusively to the prospective buyer upon fulfillment of the
condition agreed upon, that is, full payment of the purchase price.
A contract to sell as defined hereinabove, may not even be considered
as a conditional contract of sale where the seller may likewise reserve title to the
property subject of the sale until the fulfillment of a suspensive condition, because
in a conditional contract of sale, the first element of consent is present, although it
is conditioned upon the happening of a contingent event which may or may not
occur. If the suspensive condition is not fulfilled, the perfection of the contract of
sale is completely abated. However, if the suspensive condition is fulfilled,
the contract of sale is thereby perfected, such that if there had already been
previous delivery of the property subject of the sale to the buyer, ownership
thereto automatically transfers to the buyer by operation of law without any
further act having to be performed by the seller.
In a contract to sell, upon the fulfillment of the suspensive condition
which is the full payment of the purchase price, ownership will not automatically
transfer to the buyer although the property may have been previously delivered
to him. The prospective seller still has to convey title to the prospective buyer by
entering into a contract of absolute sale.[38]
 
 
Further, Chua v. Court of Appeals [39] cited this distinction between a contract of sale and a
contract to sell:
 
In a contract of sale, the title to the property passes to the vendee upon
the delivery of the thing sold; in a contract to sell, ownership is, by agreement,
reserved in the vendor and is not to pass to the vendee until full payment of the
purchase price. Otherwise stated, in a contract of sale, the vendor loses ownership
over the property and cannot recover it until and unless the contract is resolved or
rescinded; whereas, in a contract to sell, title is retained by the vendor until full
payment of the price. In the latter contract, payment of the price is a positive
suspensive condition, failure of which is not a breach but an event that prevents
the obligation of the vendor to convey title from becoming effective. [40]
It is not the title of the contract, but its express terms or stipulations that determine the kind
of contract entered into by the parties. In this case, the contract entitled Deed of Conditional Sale is
actually a contract to sell. The contract stipulated that as soon as the full consideration of the sale has
been paid by the vendee, the corresponding transfer documents shall be executed by the vendor to
the vendee for the portion sold.[41] Where the vendor promises to execute a deed of absolute sale upon
the completion by the vendee of the payment of the price, the contract is only a contract to sell. [42] The
aforecited stipulation shows that the vendors reserved title to the subject property until full payment of
the purchase price.
If respondents paid the Spouses Nabus in accordance with the stipulations in the Deed of
Conditional Sale, the consideration would have been fully paid in June 1983. Thus, during the last week
of January 1984, Julie Nabus approached Joaquin Pacson to ask for the full payment of the lot. Joaquin
Pacson agreed to pay, but told her to return after four days as his daughter, Catalina Pacson, would have
to go over the numerous receipts to determine the balance to be paid.
 
When Julie Nabus returned after four days, Joaquin Pacson sent Julie Nabus and his
daughter, Catalina, to Atty. Elizabeth Rillera for the execution of the deed of sale.Since Bate Nabus had
already died, and was survived by Julie and their minor daughter, Atty. Rillera required Julie Nabus to
return in four days with the necessary documents such as the deed of extrajudicial settlement, the
transfer certificate of title in the names of Julie Nabus and minor Michelle Nabus, and the guardianship
papers of Michelle.However, Julie Nabus did not return.
As vendees given possession of the subject property, the ownership of which was still with
the vendors, the Pacsons should have protected their interest and inquired from Julie Nabus why she
did not return and then followed through with full payment of the purchase price and the execution of
the deed of absolute sale. The Spouses Pacson had the legal remedy of consigning their payment to the
court; however, they did not do so. A rumor that the property had been sold to Betty Tolero prompted
them to check the veracity of the sale with the Register of Deeds of the  Province of Benguet. They found
out that on March 5, 1984, Julie Nabus sold the same property to Betty Tolero through a Deed of
Absolute Sale, and new transfer certificates of title to the property were issued to Tolero.
 
 
Thus, the Spouses Pacson filed this case for the annulment of the contract
of absolute sale executed in favor of Betty Tolero and the transfer certificates of title issued in her name.
 
Unfortunately for the Spouses Pacson, since the Deed of Conditional Sale executed in their
favor was merely a contract to sell, the obligation of the seller to sell becomes demandable only upon
the happening of the suspensive condition.[43] The full payment of the purchase price is the positive
suspensive condition, the failure of which is not a breach of contract, but simply an event that
prevented the obligation of the vendor to convey title from acquiring binding force .[44] Thus, for its
non-fulfilment, there is no contract to speak of, the obligor having failed to perform the suspensive
condition which enforces a juridical relation. [45] With this circumstance, there can be no rescission or
fulfilment of an obligation that is still non-existent, the suspensive condition not having occurred as yet.
[46]
 Emphasis should be made that the breach contemplated in Article 1191 of the New Civil Code is the
obligors failure to comply with an obligation already extant, not a failure of a condition to render
binding that obligation.[47]
 
The trial court, therefore, erred in applying Article 1191 of the Civil Code [48] in this case by
ordering fulfillment of the obligation, that is, the execution of the deed of absolute sale in favor of the
Spouses Pacson upon full payment of the purchase price, which decision was affirmed by the Court of
Appeals. Ayala Life Insurance, Inc. v. Ray Burton Development Corporation[49] held:
 
Evidently, before the remedy of specific performance may be availed
of, there must be a breach of the contract. 
Under a contract to sell, the title of the thing to be sold is retained by
the seller until the purchaser makes full payment of the agreed purchase price.   
Such payment is a positive suspensive condition, the non-fulfillment of which
is not a breach of contract but merely an event that prevents the seller from
conveying title to the purchaser.   The non-payment of the purchase price renders
the contract to sell ineffective and without force and effect.   Thus, a cause of
action for specific performance does not arise.[50]  
 
 Since the contract to sell was without force and effect, Julie Nabus validly conveyed the
subject property to another buyer, petitioner Betty Tolero, through a contract of absolute sale, and on
the strength thereof, new transfer certificates of title over the subject property were duly issued to
Tolero.[51]

The Spouses Pacson, however, have the right to the reimbursement of their payments to the
Nabuses, and are entitled to the award of nominal damages. The Civil Code provides:
 
Art. 2221. Nominal damages are adjudicated in order that a right of the
plaintiff, which has been violated or invaded by the defendant, may be vindicated
or recognized, and not for the purpose of indemnifying the plaintiff for any loss
suffered by him.
 
Art. 2222. The court may award nominal damages in every obligation
arising from any source enumerated in article 1157, or in every case where any
property right has been invaded.
 
 

As stated by the trial court, under the Deed of Conditional Sale, respondents had the right to
demand from petitioners Julie and Michelle Nabus that the latter execute in their favor a deed of
absolute sale when they were ready to pay the remaining balance of the purchase price. The Nabuses
had the corresponding duty to respect the respondents right, but they violated such right, for they could
no longer execute the document since they had sold the property to Betty Tolero.[52] Hence, nominal
damages in the amount of P10,000.00 are awarded to respondents.
 
Respondents are not entitled to moral damages because contracts are not referred to in
Article 2219[53] of the Civil Code, which enumerates the cases when moral damages may be
recovered. Article 2220[54] of the Civil Code allows the recovery of moral damages in breaches of
contract where the defendant acted fraudulently or in bad faith. However, this case involves a contract
to sell, wherein full payment of the purchase price is a positive suspensive condition, the non-fulfillment
of which is not a breach of contract, but merely an event that prevents the seller from conveying title to
the purchaser.  Since there is no breach of contract in this case, respondents are not entitled to moral
damages.
 
In the absence of moral, temperate, liquidated or compensatory damages, exemplary
damages cannot be granted for they are allowed only in addition to any of the four kinds of damages
mentioned.[55]
 
 
WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals in CA-G.R. CV No. 44941,
dated November 28, 2003, is REVERSED and SET ASIDE. Judgment is hereby rendered upholding the
validity of the sale of the subject property made by petitioners Julie Nabus and Michelle Nabus in favor
of petitioner Betty Tolero, as well as the validity of Transfer Certificates of Title Nos. T-18650 and T-
18651 issued in the name of Betty Tolero. Petitioners Julie Nabus and Michelle Nabus
are ORDERED to REIMBURSE respondents spouses Joaquin and Julia Pacson the sum of One Hundred
Twelve Thousand Four Hundred Fifty-Five Pesos and Sixteen Centavos (P112,455.16), and to pay Joaquin
and Julia Pacson nominal damages in the amount of Ten Thousand Pesos (P10,000.00), with annual
interest of twelve percent (12%) until full payment of the amounts due to Joaquin and Julia Pacson.
 
No costs.
 
SO ORDERED.
G.R. No. 196251               July 9, 2014 November 8, 2000 500,000.00

OLIVAREZ REALTY CORPORATION and DR. PABLO R. OLIVAREZ, Petitioner, 

vs. As to the balance of ₱14,080,490.00, Olivarez Realty Corporation agreed to pay in 30 equal monthly
BENJAMIN CASTILLO, Respondent. installments every eighth day of the month beginning in the month that the parties would receive a
decision voiding the Philippine Tourism Authority’s title to the property.8 Under the deed of conditional
sale, Olivarez RealtyCorporation shall file the action against the Philippine Tourism Authority "with the
DECISION
full assistance of [Castillo]."9 Paragraph C of the deed of conditional sale provides:

LEONEN, J.:
Trial may be dispensed with and a summary judgment rendered if the case can be resolved judiciously by
plain resort to the pleadings, affidavits, depositions, and other papers filed by the parties.
This is a petition for review on certiorari1 of the Court of Appeals' decision2 dated July 20, 2010 and
resolution3dated March 18, 2011 in CAG.R. CV No. 91244.
The facts as established from the pleadings of the parties are as follows:
C. [Olivarez Realty Corporation] assumes the responsibility of taking necessary legal action thru Court to
have the claim/title TCT T-18493 of Philippine Tourism Authority over the above-described property be
nullified and voided; with the full assistance of [Castillo][.]10
Should the action against the Philippine Tourism Authority be denied, Castillo agreed to reimburse all the
amounts paid by Olivarez Realty Corporation. Paragraph D of the deed of conditional sale provides:
D. In the event that the Court denie[s] the petition against the Philippine Tourism Authority, all sums
received by [Castillo] shall be reimbursed to [Olivarez Realty Corporation] without interest[.] 11

Benjamin Castillo was the registered owner of a 346,918-squaremeter parcel of land located in Laurel,
Batangas, covered by Transfer Certificate of Title No. T-19972. 4 The Philippine Tourism Authority
allegedly claimed ownership of the sameparcel of land based on Transfer Certificate of Title No. T-
18493.5 On April 5, 2000, Castillo and Olivarez Realty Corporation, represented by Dr. Pablo R. Olivarez,
entered into a contract of conditional sale6 over the property. Under the deed of conditional sale, Castillo
agreed to sell his property to Olivarez Realty Corporation for ₱19,080,490.00. Olivarez Realty
Corporation agreed toa down payment of ₱5,000,000.00, to be paid according to the following schedule:
DATE AMOUNT
As to the "legitimate tenants" occupying the property, Olivarez Realty Corporation undertook to pay
them "disturbance compensation," while Castillo undertook to clear the land of the tenants within six
months from the signing of the deed of conditional sale. Should Castillo fail to clear the land within six
months, Olivarez Realty Corporation may suspend its monthly down payment until the tenants vacate
the property. Paragraphs E and F of the deed of conditional sale provide: E. That [Olivarez Realty
Corporation] shall pay the disturbance compensation to legitimate agricultural tenants and fishermen
occupants which in no case shall exceed ONE MILLION FIVE HUNDRED THOUSAND (₱1,500,000.00)
PESOS. Said amountshall not form part of the purchase price. In excess of this amount, all claims shall be
for the account of [Castillo];

F. That [Castillo] shall clear the land of [the] legitimate tenants within a period of six (6) months upon
April 8, 2000 500,000.00 signing of this Contract, and in case [Castillo] fails, [Olivarez Realty Corporation] shall have the right to
suspend the monthly down payment until such time that the tenants [move] out of the land[.] 12

May 8, 2000 500,000.00 The parties agreed thatOlivarez Realty Corporation may immediately occupy the property upon signing
of the deed of conditional sale. Should the contract be cancelled, Olivarez RealtyCorporation agreed to
return the property’s possession to Castillo and forfeit all the improvements it may have introduced on
May 16, 2000 500,000.00 the property. Paragraph I of the deed of conditional sale states:

I. Immediately upon signing thisContract, [Olivarez Realty Corporation] shall be entitled to occupy,
June 8, 2000 1,000,000.00 possess and develop the subject property. In case this Contract is canceled [sic], any improvement
introduced by [the corporation] on the property shall be forfeited in favor of [Castillo][.] 13
July 8, 2000 500,000.00
On September 2, 2004, Castillo filed a complaint 14 against Olivarez Realty Corporation and Dr. Olivarez
with the Regional Trial Court of Tanauan City, Batangas.
August 8, 2000 500,000.00
Castillo alleged that Dr. Olivarez convinced him into selling his property to Olivarez Realty Corporation on
the representation that the corporation shall be responsible in clearing the property of the tenants and
September 8, 2000 500,000.00 in paying them disturbance compensation. He further alleged that Dr. Olivarez solely prepared the deed
of conditional sale and that he was made to sign the contract with its terms "not adequately explained
[to him] in Tagalog."15
October 8, 2000 500,000.00
After the parties had signed the deed of conditional sale, Olivarez Realty Corporation immediately took
possession of the property. However, the corporation only paid 2,500,000.00 ofthe purchase price.
Contrary to the agreement, the corporation did not file any action against the Philippine Tourism
Authority to void the latter’s title to the property. The corporation neither cleared the land of the
tenants nor paid them disturbance compensation. Despite demand, Olivarez Realty Corporation refused
to fully pay the purchase price.16
Arguing that Olivarez Realty Corporation committed substantial breach of the contract of conditional sale
and that the deed of conditional sale was a contract of adhesion, Castillo prayed for rescission of
contract under Article 1191 of the Civil Code of the Philippines. He further prayed that Olivarez Realty
Corporation and Dr. Olivarez be made solidarily liable for moral damages, exemplary damages, attorney’s
fees, and costs of suit.17
In their answer,18 Olivarez Realty Corporation and Dr. Olivarez admitted that the corporation only paid
₱2,500,000.00 ofthe purchase price. In their defense, defendants alleged that Castillo failed to "fully
assist"19 the corporation in filing an action against the Philippine Tourism Authority. Neither did Castillo
clear the property of the tenants within six months from the signing of the deed of conditional sale.
Thus, according to defendants, the corporation had "all the legal right to withhold the subsequent
payments to [fully pay] the purchase price."20
Olivarez Realty Corporation and Dr. Olivarez prayedthat Castillo’s complaint be dismissed. By way of
compulsory counterclaim, they prayed for ₱100,000.00 litigation expenses and ₱50,000.00 attorney’s
fees.21
Castillo replied to the counterclaim,22 arguing that Olivarez Realty Corporation and Dr. Olivarez had no
right to litigation expenses and attorney’s fees. According to Castillo, the deed of conditional sale clearly
states that the corporation "assume[d] the responsibility of taking necessary legal action" 23 against the
Philippine Tourism Authority, yet the corporation did not file any case. Also, the corporation did not pay
the tenants disturbance compensation. For the corporation’s failure to fully pay the purchase price,
Castillo claimed that hehad "all the right to pray for the rescission of the [contract],"24 and he "should not
be held liable . . . for any alleged damages by way of litigation expenses and attorney’s fees." 25
On January 10, 2005, Castillo filed a request for admission, 26 requesting Dr. Olivarez to admit under oath
the genuineness of the deed of conditional sale and Transfer Certificate of Title No. T-19972. He likewise
requested Dr. Olivarez to admit the truth of the following factual allegations:
1. That Dr. Olivarez is the president of Olivarez Realty Corporation;
2. That Dr. Olivarez offered to purchase the parcel of land from Castillo and that he undertook
to clear the property of the tenants and file the court action to void the Philippine Tourism
Authority’s title to the property;
3. That Dr. Olivarez caused the preparation of the deed of conditional sale;
4. That Dr. Olivarez signed the deed of conditional sale for and on behalf of Olivarez Realty
Corporation;
5. That Dr. Olivarez and the corporation did not file any action against the Philippine Tourism
Authority;
6. That Dr. Olivarez and the corporation did not pay the tenants disturbance compensation
and failed to clear the property of the tenants; and
7. That Dr. Olivarez and the corporation only paid ₱2,500,000.00 of the agreed purchase
price.27
On January 25, 2005, Dr. Olivarez and Olivarez Realty Corporation filed their objections to the request for
admission,28 stating that they "reiterate[d] the allegations [and denials] in their [answer]."29
The trial court conducted pre-trial conference on December 17, 2005.
On March 8, 2006, Castillo filed a motion for summary judgment and/or judgment on the pleadings. 30 He
argued that Olivarez Realty Corporation and Dr. Olivarez "substantially admitted the material allegations
of [his] complaint,"31specifically:
1. That the corporation failed to fully pay the purchase price for his property;32
2. That the corporation failed to file an action to void the Philippine Tourism Authority’s title
to his property;33and
3. That the corporation failed to clear the property of the tenants and pay them disturbance
compensation.34
Should judgment on the pleadings beimproper, Castillo argued that summary judgment may still be
rendered asthere is no genuine issue as to any material fact.35 He cited Philippine National Bank v.
Noah’s Ark Sugar Refinery36 as authority.
Castillo attached to his motion for summary judgment and/or judgment on the pleadings his
affidavit37 and the affidavit of a Marissa Magsino38 attesting to the truth of the material allegations of his
complaint.
Olivarez Realty Corporation and Dr. Olivarez opposed39 the motion for summary judgment and/or
judgment on the pleadings, arguing that the motion was "devoid of merit." 40 They reiterated their claim
that the corporation withheld further payments of the purchase price because "there ha[d] been no
favorable decision voiding the title of the Philippine Tourism Authority."41 They added that Castillo sold
the property to another person and that the sale was allegedly litigated in Quezon City. 42
Considering that a title adverse to that of Castillo’s existed, Olivarez Realty Corporation and Dr. Olivarez
argued that the case should proceed to trial and Castillo be required to prove that his title to the
property is "not spurious or fake and that he had not sold his property to another person."43
In reply to the opposition to the motion for summary judgment and/or judgment on the
pleadings,44 Castillo maintained that Olivarez Realty Corporation was responsible for the filing of an
action against the Philippine Tourism Authority. Thus, the corporation could not fault Castillo for not
suing the PhilippineTourism Authority.45 The corporation illegally withheld payments of the purchase
price.
As to the claim that the case should proceed to trial because a title adverse to his title existed, Castillo
argued that the Philippine Tourism Authority’s title covered another lot, not his property.46
During the hearing on August 3, 2006, Olivarez Realty Corporation and Dr. Olivarez prayed that they be
given 30 days to file a supplemental memorandum on Castillo’s motion for summary judgment and/or
judgment on the pleadings.47
The trial court granted the motion. Itgave Castillo 20 days to reply to the memorandum and the
corporation and Dr. Olivarez 15 days to respond to Castillo’s reply.48
In their supplemental memorandum,49 Olivarez Realty Corporation and Dr. Olivarez argued that there
was "an obvious ambiguity"50 as to which should occur first — the payment of disturbance compensation
to the tenants or the clearing of the property of the tenants. 51 This ambiguity, according to defendants, is
a genuine issue and "oughtto be threshed out in a full blown trial."52
Olivarez Realty Corporation and Dr. Olivarez added that Castillo prayed for irreconcilable reliefs of
reformation of instrument and rescission of contract. 53 Thus, Castillo’s complaint should be dismissed.
Castillo replied54 to the memorandum, arguing that there was no genuine issue requiring trial of the case.
According to Castillo, "common sense dictates . . . that the legitimate tenants of the [property] shall not
vacate the premises without being paid any disturbance compensation . . ."55 Thus, the payment of
disturbance compensation should occur first before clearing the property of the tenants.
With respect to the other issuesraised in the supplemental memorandum, specifically, that Castillo sold
the property to another person, he argued that these issues should not be entertained for not having
been presented during pre-trial.56
In their comment on the reply memorandum, 57 Olivarez Realty Corporation and Dr. Olivarez reiterated
their arguments that certain provisions of the deed of conditional sale were ambiguous and that the
complaint prayed for irreconcilable reliefs.58
As to the additional issues raised in the supplemental memorandum, defendants argued that issues not
raised and evidence not identified and premarked during pre-trial may still be raised and presented
during trial for good cause shown. Olivarez Realty Corporation and Dr. Olivarez prayed that Castillo’s
complaint be dismissed for lack of merit.59
Ruling of the trial court
The trial court found that Olivarez Realty Corporation and Dr. Olivarez’s answer "substantially [admitted
the material allegations of Castillo’s] complaint and [did] not . . . raise any genuine issue [as to any
material fact]."60
Defendants admitted that Castillo owned the parcel of land covered by Transfer Certificate of Title No. T-
19972. They likewise admitted the genuineness of the deed of conditional sale and that the corporation
only paid ₱2,500,000.00 of the agreed purchase price.61
According to the trial court, the corporation was responsible for suing the Philippine Tourism Authority
and for paying the tenants disturbance compensation. Since defendant corporation neither filed any case
nor paid the tenants disturbance compensation, the trial court ruled that defendant corporation had no
right to withhold payments from Castillo.62
As to the alleged ambiguity of paragraphs E and F of the deed of conditional sale, the trial court ruled
that Castillo and his witness, Marissa Magsino, "clearly established" 63 in their affidavits that the deed of
conditional sale was a contract of adhesion. The true agreement between the parties was that the
corporation would both clear the land of the tenants and pay them disturbance compensation.
With these findings, the trial court ruled that Olivarez Realty Corporation breached the contract
ofconditional sale.1âwphi1 In its decision64 dated April 23, 2007, the trial court ordered the deed of
conditional sale rescinded and the ₱2,500,000.00 forfeited in favor of Castillo "as damages under Article
1191 of the Civil Code."65
The trial court declared Olivarez Realty Corporation and Dr. Olivarez solidarily liable to Castillo for
500,000.00 as moral damages, ₱50,000.00 as exemplary damages, and ₱50,000.00 as costs of suit. 66
Ruling of the Court of Appeals
Olivarez Realty Corporation and Dr. Olivarez appealed to the Court of Appeals. 67
In its decision68 dated July 20, 2010, the Court of Appeals affirmed in totothe trial court’s decision.
According to the appellate court, the trial court "did not err in its finding that there is no genuine
controversy as to the facts involved [in this case]."69 The trial court, therefore, correctly rendered
summary judgment.70
As to the trial court’s award of damages, the appellatecourt ruled that a court may award damages
through summary judgment "if the parties’ contract categorically [stipulates] the respective obligations
of the parties in case of default."71 As found by the trial court,paragraph I of the deed of conditional sale
categorically states that "in case [the deed of conditional sale] is cancelled, any improvementintroduced
by [Olivarez Realty Corporation] on the property shall be forfeited infavor of [Castillo]."72 Considering
that Olivarez Realty Corporation illegally retained possession of the property, Castillo forewent rentto
the property and "lost business opportunities."73 The ₱2,500,000.00 down payment, according to the
appellate court, shouldbe forfeited in favor of Castillo. Moral and exemplary damages and costs ofsuit
were properly awarded.
On August 11, 2010, Olivarez RealtyCorporation and Dr. Olivarez filed their motion for
reconsideration,74 arguing that the trial court exceeded its authority in forfeiting the ₱2,500,000.00 down
payment and awarding ₱500,000.00 in moral damages to Castillo. They argued that Castillo only prayed
for a total of ₱500,000.00 as actual and moral damages in his complaint.75 Appellants prayed that the
Court of Appeals "take a second hard look"76 at the case and reconsider its decision.
In the resolution77 dated March 18, 2011, the Court of Appeals denied the motion for reconsideration.
Proceedings before this court
Olivarez Realty Corporation and Dr. Olivarez filed their petition for review on certiorari78 with this court.
Petitionersargue that the trial court and the Court of Appeals erred in awarding damages to Castillo.
Under Section 3, Rule 35 of the 1997 Rules ofCivil Procedure, summary judgment may be rendered
except as to the amountof damages. Thus, the Court of Appeals "violated the procedural steps in
rendering summary judgment."79
Petitioners reiterate that there are genuine issues ofmaterial fact to be resolved in this case. Thus, a full-
blown trial is required, and the trial court prematurely decided the case through summary judgment.
They cite Torres v. Olivarez Realty Corporation and Dr. Pablo Olivarez,80 a case decided by the Ninth
Division of the Court of Appeals.
In Torres, Rosario Torres was the registeredowner of a parcel of land covered by Transfer Certificate of
Title No. T-19971. Under a deed of conditional sale, she sold her property to OlivarezRealty Corporation
for ₱17,345,900.00. When the corporation failed to fully pay the purchase price, she sued for rescission
of contractwith damages. In their answer, the corporation and Dr. Olivarez argued thatthey discontinued
payment because Rosario Torres failed to clear the land of the tenants.
Similar to Castillo, Torres filed a motion for summary judgment, which the trial court granted. On appeal,
the Court of Appeals set aside the trial court’s summary judgment and remanded the case to the trial
court for further proceedings.81 The Court of Appeals ruled that the material allegations of the complaint
"were directly disputed by [the corporation and Dr. Olivarez] in their answer" 82 when they argued that
they refused to pay because Torres failed to clear the land of the tenants.
With the Court of Appeals’ decision in Torres,Olivarez Realty Corporation and Dr. Olivarez argue that this
case should likewise be remanded to the trial court for further proceedings under the equipoise rule.
Petitioners maintain that Castillo availed himself of the irreconcilable reliefs of reformation of instrument
and rescission of contract.83 Thus, the trial court should have dismissed the case outright.
Petitioners likewise argue that the trial court had no jurisdiction to decide the case as Castillo failed
topay the correct docket fees.84 Petitioners argue that Castillo should have paid docket fees based on the
property’s fair market value since Castillo’s complaint is a real action.85
In his comment,86 Castillo maintains that there are no genuine issues as to any material fact inthis case.
The trial court, therefore, correctly rendered summary judgment.
As to petitioners’ claim that the trial court had no jurisdiction to decide the case, Castillo argues that he
prayed for rescission of contract in his complaint. This action is incapable of pecuniary estimation, and
the Clerk of Court properly computed the docket fees based on this prayer. 87 Olivarez Realty Corporation
and Dr. Olivarez replied,88reiterating their arguments in the petition for review on certiorari.
The issues for our resolution are the following:
I. Whether the trial court erred in rendering summary judgment;
II. Whether proper docket fees were paid in this case.
The petition lacks merit.
I issues of material fact. These are issues that can be resolved judiciously by plain resort to the pleadings,
The trial court correctly rendered
summary judgment, as there were no
genuine issues of material fact in this case
Trial "is the judicial examination and determination of the issues between the parties to the
action."89 During trial, parties "present their respective evidence of their claims and defenses." 90 Parties
to an action have the right "to a plenary trial of the case"91 to ensure that they were given a right to fully
present evidence on their respective claims.
There are instances, however, whentrial may be dispensed with. Under Rule 35 of the 1997 Rules of Civil
Procedure, a trial court may dispense with trial and proceed to decide a case if from the pleadings,
affidavits, depositions, and other papers on file, there is no genuine issue as to any material fact. In such
a case, the judgment issued is called a summary judgment.
A motion for summary judgment is filed either by the claimant or the defending party.92 The trial court
then hears the motion for summary judgment. If indeed there are no genuine issues of material fact, the
trial court shall issue summary judgment. Section 3, Rule 35 of the 1997 Rules of Civil Procedure
provides:
SEC. 3. Motion and proceedings thereon. – The motion shall be served at least ten (10) days beforethe
time specified for the hearing. The adverse party may serve opposing affidavits, depositions, or
admission at least three (3) days before the hearing. After the hearing, the judgment sought shall be
rendered forthwith ifthe pleadings, supporting affidavits, depositions, and admissions on file, showthat,
except as to the amount of damages, there is no genuine issue as to any material fact and that the
moving party is entitled to a judgment as a matter of law.
An issue of material fact exists if the answer or responsive pleading filed specifically denies the material
allegations of fact set forth in the complaint or pleading. If the issue offact "requires the presentation of
evidence, it is a genuine issue of fact."93 However, if the issue "could be resolved judiciously by plain
resort"94 to the pleadings, affidavits, depositions, and other paperson file, the issue of fact raised is sham,
and the trial court may resolve the action through summary judgment.
A summary judgment is usually distinguished from a judgment on the pleadings. Under Rule 34 of the
1997 Rules of Civil Procedure, trial may likewise be dispensed with and a case decided through judgment
on the pleadings if the answer filed fails to tender an issue or otherwise admits the material allegations
of the claimant’s pleading.95
Judgment on the pleadings is proper when the answer filed fails to tender any issue, or otherwise
admitsthe material allegations in the complaint.96 On the other hand, in a summary judgment, the
answer filed tenders issues as specific denials and affirmative defenses are pleaded, but the issues raised
are sham, fictitious, or otherwise not genuine.97
In this case, Olivarez Realty Corporation admitted that it did not fully pay the purchase price as agreed
upon inthe deed of conditional sale. As to why it withheld payments from Castillo, it set up the following
affirmative defenses: First, Castillo did not filea case to void the Philippine Tourism Authority’s title to the
property; second,Castillo did not clear the land of the tenants; third, Castillo allegedly sold the property
to a third person, and the subsequent sale is currently being litigated beforea Quezon City court.
Considering that Olivarez RealtyCorporation and Dr. Olivarez’s answer tendered an issue, Castillo
properly availed himself of a motion for summary judgment.
However, the issues tendered by Olivarez Realty Corporation and Dr. Olivarez’s answer are not genuine
affidavits, depositions, and other papers on file; otherwise, these issues are sham, fictitious, or patently
unsubstantial.
Petitioner corporation refused to fully pay the purchase price because no court case was filed to void the
Philippine Tourism Authority’s title on the property. However, paragraph C of the deed of conditional
sale is clear that petitioner Olivarez Realty Corporation is responsible for initiating court action against
the Philippine Tourism Authority:
C. [Olivarez Realty Corporation] assumes the responsibility of taking necessary legal action thru Court to
have the claim/title TCT T-18493 of Philippine Tourism Authority over the above-described property be
nullified and voided; with the full assistance of [Castillo].98
Castillo’s alleged failureto "fully assist" 99 the corporation in filing the case is not a defense. As the trial
court said, "how can [Castillo] assist [the corporation] when [the latter] did not file the action [in the first
place?]"100
Neither can Olivarez Realty Corporation argue that it refused to fully pay the purchase price due to the
Philippine Tourism Authority’s adverse claim on the property. The corporation knew of this adverse claim
when it entered into a contract of conditional sale. It even obligated itself under paragraph C of the deed
of conditional sale to sue the Philippine Tourism Authority. This defense, therefore, is sham.
Contrary to petitioners’ claim, there is no "obvious ambiguity" 101 as to which should occur first — the
payment of the disturbance compensation or the clearing of the land within six months from the signing
of the deed of conditional sale. The obligations must be performed simultaneously. In this case, the
parties should have coordinated to ensure that tenants on the property were paid disturbance
compensation and were made to vacate the property six months after the signingof the deed of
conditional sale.
On one hand, pure obligations, or obligations whose performance do not depend upon a future or
uncertainevent, or upon a past event unknown to the parties, are demandable at once.102 On the other
hand, obligations with a resolutory period also take effect at once but terminate upon arrival of the day
certain.103
Olivarez Realty Corporation’s obligation to pay disturbance compensation is a pure obligation. The
performance of the obligation to pay disturbance compensation did not depend on any condition.
Moreover, the deed of conditional sale did not give the corporation a period to perform the obligation.
As such, the obligation to pay disturbance compensation was demandable at once. Olivarez
RealtyCorporation should have paid the tenants disturbance compensation upon execution of the deed
of conditional sale.
With respect to Castillo’s obligation to clear the land of the tenants within six months from the signing of
the contract, his obligation was an obligation with a resolutory period. The obligation to clear the land of
the tenants took effect at once, specifically, upon the parties’ signing of the deed of conditional sale.
Castillo had until October 2, 2000, six months from April 5, 2000 when the parties signed the deed of
conditional sale, to clear the land of the tenants.
Olivarez Realty Corporation, therefore, had no right to withhold payments of the purchase price. As the
trial court ruled, Olivarez Realty Corporation "can only claim non-compliance [of the obligation to clear
the land of the tenants in] October 2000."104 It said:
. . . it is clear that defendant [Olivarez Realty Corporation] should have paid the installments on the ₱5
million downpayment up to October 8, 2000, or a total of ₱4,500,000.00. That is the agreement because
the only time that defendant [corporation] can claim non-compliance of the condition is after October,
2000 and so it has the clear obligation topay up to the October 2000 the agreed installments. Since it
paid only 2,500,000.00, then a violation of the contract has already been committed. . . .105
The claim that Castillo sold the property to another is fictitious and was made in bad faith to prevent the
trial court from rendering summary judgment. Petitioners did not elaborate on this defense and insisted
on revealing the identity of the buyer only during trial.106 Even in their petition for review on certiorari,
petitioners never disclosed the name of this alleged buyer. Thus, as the trial court ruled, this defense did
not tender a genuine issue of fact, with the defense "bereft of details." 107
Castillo’s alleged prayer for the irreconcilable reliefs of rescission of contract and reformation of
instrument is not a ground to dismiss his complaint. A plaintiff may allege two or more claims in the
complaint alternatively or hypothetically, either in one cause of action or in separate causes of action per
Section 2, Rule 8 of the 1997 Rules of Civil Procedure.108 It is the filing of two separatecases for each of
the causes of action that is prohibited since the subsequently filed case may be dismissed under Section
4, Rule 2 of the 1997 Rules of Civil Procedure109 on splitting causes of action.
As demonstrated, there are no genuineissues of material fact in this case. These are issues that can be
resolved judiciously by plain resort to the pleadings, affidavits, depositions, and other papers on file. As
the trial court found, Olivarez Realty Corporation illegally withheld payments of the purchase price. The
trial court did not err in rendering summary judgment.
II
Castillo is entitled to cancel the contract
of conditional sale
Since Olivarez Realty Corporation illegally withheld payments of the purchase price, Castillo is entitled to
cancel his contract with petitioner corporation. However, we properly characterize the parties’ contract
as a contract to sell, not a contract of conditional sale.
In both contracts to sell and contracts of conditional sale, title to the property remains with the seller
until the buyer fully pays the purchase price.110 Both contracts are subject to the positive suspensive
condition of the buyer’s full payment of the purchase price.111
In a contract of conditional sale, the buyer automatically acquires title to the property upon full payment
of the purchase price.112 This transfer of title is "by operation of law without any further act having to be
performed by the seller."113 In a contract to sell, transfer of title to the prospective buyer is not
automatic.114 "The prospective seller [must] convey title to the property [through] a deed of conditional
sale."115
The distinction is important to determine the applicable laws and remedies in case a party does not fulfill
his or her obligations under the contract. In contracts of conditional sale, our laws on sales under the
Civil Code of the Philippines apply. On the other hand, contracts to sell are not governed by our law on
sales116 but by the Civil Code provisions on conditional obligations.
Specifically, Article 1191 of the Civil Code on the right to rescind reciprocal obligations does not apply to
contracts to sell.117 As this court explained in Ong v. Court of Appeals,118 failure to fully pay the purchase
price in contracts to sell is not the breach of contract under Article 1191.119 Failure to fully pay the
purchase price is "merely an event which prevents the [seller’s] obligation to convey title from acquiring
binding force."120 This is because "there can be no rescission of an obligation that is still nonexistent, the
suspensive condition not having [happened]."121
In this case, Castillo reserved his title to the property and undertook to execute a deed of absolute sale
upon Olivarez Realty Corporation’s full payment of the purchase price. 122 Since Castillo still has to
execute a deed of absolute sale to Olivarez RealtyCorporation upon full payment of the purchase price,
the transfer of title is notautomatic. The contract in this case is a contract to sell.
As this case involves a contract tosell, Article 1191 of the Civil Code of the Philippines does not apply. The
contract to sell is instead cancelled, and the parties shall stand as if the obligation to sell never existed. 123
Olivarez Realty Corporation shall return the possession of the property to Castillo. Any improvement that
Olivarez Realty Corporation may have introduced on the property shall be forfeited in favor of Castillo
per paragraph I of the deed of conditional sale:
I. Immediately upon signing thisContract, [Olivarez Realty Corporation] shall be entitled to occupy,
possess and develop the subject property. In case this Contract is cancelled, any improvement
introduced by [Olivarez Realty Corporation] on the property shall be forfeited in favor of [Castillo.] 124
As for prospective sellers, thiscourt generally orders the reimbursement of the installments paidfor the
property when setting aside contracts to sell.125 This is true especially ifthe property’s possession has not
been delivered to the prospective buyer prior to the transfer of title.
In this case, however, Castillo delivered the possession of the property to Olivarez Realty Corporation
prior to the transfer of title. We cannot order the reimbursement of the installments paid.
In Gomez v. Court of Appeals,126 the City of Manila and Luisa Gomez entered into a contract to sell over a
parcel of land. The city delivered the property’s possession to Gomez. She fully paid the purchase price
for the property but violated the terms of the contract to sell by renting out the property to other
persons. This court set aside the contract to sell for her violation of the terms of the contract to sell. It
ordered the installments paid forfeited in favor of the City of Manila "as reasonable compensation for
[Gomez’s] use of the [property]"127 for eight years.
In this case, Olivarez Realty Corporation failed to fully pay the purchase price for the property. It only
paid ₱2,500,000.00 out of the ₱19,080,490.00 agreed purchase price. Worse, petitioner corporation has
been in possession of Castillo’s property for 14 years since May 5, 2000 and has not paid for its use of the
property.
Similar to the ruling in Gomez, we order the ₱2,500,000.00 forfeited in favor of Castillo as reasonable
compensation for Olivarez Realty Corporation’s use of the property.
III
Olivarez Realty Corporation is liable for
moral and exemplary damages and
attorney’s fees
We note that the trial court erred in rendering summary judgment on the amount of damages. Under
Section 3, Rule 35 of the 1997 Rules of Civil Procedure, summary judgment may be rendered, except as
to the amount of damages.
In this case, the trial court erred in forfeiting the ₱2,500,000.00 in favor of Castillo as damages under
Article 1191 of the Civil Code of the Philippines. As discussed, there is nobreach of contract under Article
1191 in this case.
The trial court likewise erred inrendering summary judgment on the amount of moral and exemplary
damages and attorney’s fees.
Nonetheless, we hold that Castillois entitled to moral damages, exemplary damages, and attorney’s fees.
Moral damages may be awarded in case the claimant experienced physical suffering, mental anguish,
fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and
similar injury.128
As for exemplary damages, they are awarded in addition to moral damages by way of example or
correction for the public good.129 Specifically in contracts, exemplary damages may be awarded if the
defendant acted in a wanton, fraudulent,reckless, oppressive, or malevolent manner.130
Under the deed of conditional sale, Olivarez Realty Corporation may only suspend the monthly down
payment in case Castillo fails to clear the land of the tenants six months from the signing of the
instrument. Yet, even before the sixth month arrived, Olivarez Realty Corporation withheld payments for
Castillo’s property. It evenused as a defense the fact that no case was filed against the PhilippineTourism
Authority when, under the deed of conditional sale, Olivarez Realty Corporation was clearly responsible
for initiating action against the Philippine Tourism Authority. These are oppressive and malevolent acts,
and we find Castillo entitled to ₱500,000.00 moral damages and ₱50,000.00 exemplary damages:
Plaintiff Castillo is entitled to moral damages because of the evident bad faith exhibited by defendants in
dealing with him regarding the sale of his lot to defendant [Olivarez Realty Corporation]. He suffered
much prejudice due to the failure of defendants to pay him the balance of purchase price which he
expected touse for his needs which caused him wounded feelings, sorrow, mental anxiety and sleepless
nights for which defendants should pay ₱500,000.00 as moral damages more than six (6) years had
elapsed and defendants illegally and unfairly failed and refused to pay their legal obligations to plaintiff,
unjustly taking advantage of a poor uneducated man like plaintiff causing much sorrow and financial
difficulties. Moral damages in favor of plaintiff is clearly justified . . . [Castillo] is also entitled to
₱50,000.00 as exemplary damages to serve as a deterrent to other parties to a contract to religiously
comply with their prestations under the contract.131
We likewise agree that Castillo is entitled to attorney’s fees in addition to the exemplary
damages.132 Considering that Olivarez Realty Corporation refused to satisfy Castillo’splainly valid, just,
and demandable claim,133 the award of ₱50,000.00 as attorney’s fees is in order. However, we find that
Dr. Pablo R.Olivarez is not solidarily liable with Olivarez Realty Corporation for the amount of damages.
Under Article 1207 of the Civil Code of the Philippines, there is solidary liability only when the obligation
states it or when the law or the nature of the obligation requires solidarity. 134 In case of corporations,
they are solely liable for their obligations.135 The directors or trustees and officers are not liable with the
corporation even if it is through their acts that the corporation incurred the obligation. This is because a
corporation is separate and distinct from the persons comprising it.136
As an exception to the rule, directors or trustees and corporate officers may be solidarily liable with the
corporation for corporate obligations if they acted "in bad faith or with gross negligence in directing the
corporate affairs."137
In this case, we find that Castillo failed to prove with preponderant evidence that it was through Dr.
Olivarez’s bad faith or gross negligence that Olivarez Realty Corporation failed to fully pay the purchase
price for the property. Dr. Olivarez’s alleged act of making Castillo sign the deed of conditional sale
without explaining to the latter the deed’s terms in Tagalog is not reason to hold Dr. Olivarez solidarily
liable with the corporation. Castillo had a choice not to sign the deed of conditional sale. He could have
asked that the deed of conditional sale be written in Tagalog. Thus, Olivarez Realty Corporation issolely
liable for the moral and exemplary damages and attorney’s fees to Castillo.
IV
The trial court acquired jurisdiction over
Castillo’s action as he paid the correct
docket fees
Olivarez Realty Corporation and Dr. Olivarez claimed that the trial court had no jurisdiction to take
cognizance of the case. In the reply/motion to dismiss the complaint 138 they filed with the Court of
Appeals, petitioners argued that Castillo failed to pay the correct amount of docket fees. Stating that this
action is a real action, petitioners argued that the docket fee Castillo paid should have been based on the
fair market value of the property. In this case, Castillo only paid 4,297.00, which is insufficient "if the real
nature of the action was admitted and the fair market value of the property was disclosed and made the
basis of the amount of docket fees to be paid to the court."139Thus, according to petitioners, the case
should be dismissed for lack of jurisdiction.
Castillo countered that his action for rescission is an action incapable of pecuniary estimation. Thus, the
Clerk of Court of the Regional Trial Court of Tanauan City did not err in assessing the docket fees based
on his prayer.
We rule for Castillo. In De Leon v. Court of Appeals,140 this court held that an action for rescission of
contract of sale of real property is an action incapable of pecuniary estimation. In De Leon, the action
involved a real property. Nevertheless, this court held that "it is the nature of the action as one for
rescission of contract which is controlling."141 Consequently, the docket fees to be paid shall be for
actions incapableof pecuniary estimation, regardless if the claimant may eventually recover the real
property. This court said:
. . . the Court in Bautista v.Lim, held that an action for rescission of contract is one which cannot be
estimated and therefore the docket fee for its filing should be the flat amount of ₱200.00 as then fixed in
the former Rule 141, §141, §5(10). Said this Court:
Transfer Certificate of Title No. T-19972 together with all the improvements that petitioner corporation
introduced on the property. The amount of ₱2,500,000.00 is FORFEITED in favor of respondent Benjamin
Castillo as reasonable compensation for the use of petitioner Olivarez Realty Corporation of the
property.
Petitioner Olivarez Realty Corporation shall PAY respondent Benjamin Castillo ₱500,000.00 as moral
damages, ₱50,000.00 as exemplary damages, and ₱50,000.00 as attorney's fees with interest at 6% per
annum from the time this decision becomes final and executory until petitioner
corporation fully pays the amount of damages.144

We hold that Judge Dalisay did not err in considering Civil Case No. V-144 as basically one for rescission SO ORDERED.
or annulment of contract which is not susceptible of pecuniary estimation (1 Moran's Comments on the
Rules of Court, 1970 Ed, p. 55; Lapitan vs. Scandia, Inc., L-24668, July 31, 1968, 24 SCRA 479, 781-483).

Consequently, the fee for docketing it is ₱200, an amount already paid by plaintiff, now respondent
Matilda Lim.1âwphi1(She should pay also the two pesos legal research fund fee, if she has not paid it, as
required in Section 4 of Republic Act No. 3870, the charter of the U.P. Law Center).

Thus, although eventually the result may be the recovery of land, it is the nature of the action as one for
rescission of contract which is controlling. The Court of Appeals correctly applied these cases to the
present one. As it said:

We would like to add the observations that since the action of petitioners [private respondents] against
private respondents [petitioners] is solely for annulment or rescission which is not susceptible of
pecuniary estimation, the action should not be confused and equated with the "value of the property"
subject of the transaction; that by the very nature of the case, the allegations, and specific prayer in the
complaint, sans any prayer for recovery of money and/or value of the transaction, or for actual or
compensatory damages, the assessment and collection of the legal fees should not be intertwined with
the merits of the case and/or what may be its end result; and that to sustain private respondents'
[petitioners'] position on what the respondent court may decide after all, then the assessment should be
deferred and finally assessed only after the court had finally decided the case, which cannot be done
because the rules require that filing fees should be based on what is alleged and prayed for in the face of
the complaint and paid upon the filing of the complaint.142

Although we discussed that there isno rescission of contract to speak of in contracts of conditional sale,
we hold that an action to cancel a contract to sell, similar to an action for rescission of contract of sale, is
an action incapable of pecuniary estimation. Like any action incapable of pecuniary estimation, an action
to cancel a contract to sell "demands an inquiry into other factors" 143 aside from the amount of money to
be awarded to the claimant. Specifically in this case, the trial court principally determined whether
Olivarez Realty Corporation failed to pay installments of the property’s purchase price as the parties
agreed upon in the deed of conditional sale. The principal natureof Castillo’s action, therefore, is
incapable of pecuniary estimation.

All told, there is no issue that the parties in this case entered into a contract to sell a parcel of land and
that Olivarez Realty Corporation failed to fully pay the installments agreed upon.Consequently, Castillo is G.R. No. 200602               December 11, 2013
entitled to cancel the contract to sell.
ACE FOODS, INC., Petitioner, 
WHEREFORE, the petition for review on certiorari is DENIED. The Court of Appeals’ decision dated July vs.
20, 2010 and in CA-G.R. CV No. 91244 is AFFIRMEDwith MODIFICATION. MICRO PACIFIC TECHNOLOGIES CO., LTD.1, Respondent.

The deed of conditional sale dated April 5, 2000 is declared CANCELLED. Petitioner Olivarez Realty DECISION
Corporation shall RETURN to respondent Benjamin Castillo the possession of the property covered by
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari2are the Decision3 dated October 21, 2011 and
Resolution4 dated February 8, 2012 of the Court of Appeals (CA) in CA-G.R. CV No. 89426 which reversed
and set aside the Decision5 dated February 28, 2007 of the Regional Trial Court of Makati, Branch 148
(RTC) in Civil Case No. 02-1248, holding petitioner ACE Foods, Inc. (ACE Foods) liable to respondent Micro
Pacific Technologies Co., Ltd. (MTCL) for the payment of Cisco Routers and Frame Relay Products (subject
products) amounting to ₱646,464.00 pursuant to a perfected contract of sale.
The Facts
ACE Foods is a domestic corporation engaged in the trading and distribution of consumer goods in
wholesale and retail bases,6 while MTCL is one engaged in the supply of computer hardware and
equipment.7
On September 26, 2001, MTCL sent a letter-proposal 8 for the delivery and sale of the subject products to
be installed at various offices of ACE Foods. Aside from the itemization of the products offered for sale,
the said proposal further provides for the following terms, viz.:9
TERMS : Thirty (30) days upon delivery
VALIDITY : Prices are based on current dollar rate and subject to changes without prior notice.
DELIVERY : Immediate delivery for items on stock, otherwise thirty (30) to forty-five days upon receipt of
[Purchase Order]
WARRANTY : One (1) year on parts and services. Accessories not included in warranty.
On October 29, 2001, ACE Foods accepted MTCL’s proposal and accordingly issued Purchase Order No.
10002310(Purchase Order) for the subject products amounting to ₱646,464.00 (purchase price).
Thereafter, or on March 4, 2002, MTCL delivered the said products to ACE Foods as reflected in Invoice
No. 7733 11 (Invoice Receipt). The fine print of the invoice states, inter alia, that "[t]itle to sold property is
reserved in MICROPACIFIC TECHNOLOGIES CO., LTD. until full compliance of the terms and conditions of
above and payment of the price"12 (title reservation stipulation). After delivery, the subject products
were then installed and configured in ACE Foods’s premises. MTCL’s demands against ACE Foods to pay
the purchase price, however, remained unheeded.13 Instead of paying the purchase price, ACE Foods
sent MTCL a Letter14 dated September 19, 2002, stating that it "ha[s] been returning the [subject
products] to [MTCL] thru [its] sales representative Mr. Mark Anteola who has agreed to pull out the said
[products] but had failed to do so up to now."
Eventually, or on October 16, 2002, ACE Foods lodged a Complaint 15 against MTCL before the RTC,
praying that the latter pull out from its premises the subject products since MTCL breached its "after
delivery services" obligations to it, particularly, to: (a) install and configure the subject products; (b)
submit a cost benefit study to justify the purchase of the subject products; and (c) train ACE Foods’s
technicians on how to use and maintain the subject products. 16 ACE Foods likewise claimed that the
subject products MTCL delivered are defective and not working. 17
For its part, MTCL, in its Answer with Counterclaim, 18 maintained that it had duly complied with its
obligations to ACE Foods and that the subject products were in good working condition when they were
delivered, installed and configured in ACE Foods’s premises. Thereafter, MTCL even conducted a training
course for ACE Foods’s representatives/employees; MTCL, however, alleged that there was actually no
agreement as to the purported "after delivery services." Further, MTCL posited that ACE Foods refused
and failed to pay the purchase price for the subject products despite the latter’s use of the same for a
period of nine (9) months. As such, MTCL prayed that ACE Foods be compelled to pay the purchase price,
as well as damages related to the transaction.19
The RTC Ruling
On February 28, 2007, the RTC rendered a Decision, 20 directing MTCL to remove the subject products
from ACE Foods’s premises and pay actual damages and attorney fees in the amounts of ₱200,000.00
and ₱100,000.00, respectively.21
At the outset, it observed that the agreement between ACE Foods and MTCL is in the nature of a
contract to sell. Its conclusion was based on the fine print of the Invoice Receipt which expressly
indicated that "title to sold property is reserved in MICROPACIFIC TECHNOLOGIES CO., LTD. until full
compliance of the terms and conditions of above and payment of the price," noting further that in a
contract to sell, the prospective seller explicitly reserves the transfer of title to the prospective buyer,
and said transfer is conditioned upon the full payment of the purchase price.22 Thus, notwithstanding the
execution of the Purchase Order and the delivery and installation of the subject products at the offices of
ACE Foods, by express stipulation stated in the Invoice Receipt issued by MTCL and signed by ACE
Foods, i.e., the title reservation stipulation, it is still the former who holds title to the products until full
payment of the purchase price therefor. In this relation, it noted that the full payment of the price is a
positive suspensive condition, the non-payment of which prevents the obligation to sell on the part of
the seller/vendor from materializing at all.23 Since title remained with MTCL, the RTC therefore directed
it to withdraw the subject products from ACE Foods’s premises. Also, in view of the foregoing, the RTC
found it unnecessary to delve into the allegations of breach since the non-happening of the aforesaid
suspensive condition ipso jure prevented the obligation to sell from arising.24
Dissatisfied, MTCL elevated the matter on appeal.25
The CA Ruling
In a Decision26 dated October 21, 2011, the CA reversed and set aside the RTC’s ruling, ordering ACE
Foods to pay MTCL the amount of ₱646,464.00, plus legal interest at the rate of 6% per annum to be
computed from April 4, 2002, and attorney’s fees amounting to ₱50,000.00.27
It found that the agreement between the parties is in the nature of a contract of sale, observing that the
said contract had been perfected from the time ACE Foods sent the Purchase Order to MTCL which, in
turn, delivered the subject products covered by the Invoice Receipt and subsequently installed and
configured them in ACE Foods’s premises.28 Thus, considering that MTCL had already complied with its
obligation, ACE Foods’s corresponding obligation arose and was then duty bound to pay the agreed
purchase price within thirty (30) days from March 5, 2002.29 In this light, the CA concluded that it was
erroneous for ACE Foods not to pay the purchase price therefor, despite its receipt of the subject
products, because its refusal to pay disregards the very essence of reciprocity in a contract of sale. 30 The
CA also dismissed ACE Foods’s claim regarding MTCL’s failure to perform its "after delivery services"
obligations since the letter-proposal, Purchase Order and Invoice Receipt do not reflect any agreement
to that effect.31
Aggrieved, ACE Foods moved for reconsideration which was, however, denied in a Resolution 32 dated
February 8, 2012, hence, this petition.
 The Issue Before the Court At this juncture, the Court must dispel the notion that the stipulation anent MTCL’s reservation of
ownership of the subject products as reflected in the Invoice Receipt, i.e., the title reservation
stipulation, changed the complexion of the transaction from a contract of sale into a contract to sell.
The essential issue in this case is whether ACE Foods should pay MTCL the purchase price for the subject
Records are bereft of any showing that the said stipulation novated the contract of sale between the
products.
parties which, to repeat, already existed at the precise moment ACE Foods accepted MTCL’s proposal. To
be sure, novation, in its broad concept, may either be extinctive or modificatory. It is extinctive when an
The Court’s Ruling old obligation is terminated by the creation of a new obligation that takes the place of the former; it is
The petition lacks merit. merely modificatory when the old obligation subsists to the extent it remains compatible with the
amendatory agreement. In either case, however, novation is never presumed, and the animus novandi,
A contract is what the law defines it to be, taking into consideration its essential elements, and not what whether totally or partially, must appear by express agreement of the parties, or by their acts that are
the contracting parties call it.33 The real nature of a contract may be determined from the express terms too clear and unequivocal to be mistaken.38
of the written agreement and from the contemporaneous and subsequent acts of the contracting
parties. However, in the construction or interpretation of an instrument, the intention of the parties is
In the present case, it has not been shown that the title reservation stipulation appearing in the Invoice
primordial and is to be pursued. The denomination or title given by the parties in their contract is not
Receipt had been included or had subsequently modified or superseded the original agreement of the
conclusive of the nature of its contents.34
parties. The fact that the Invoice Receipt was signed by a representative of ACE Foods does not, by and
of itself, prove animus novandi since: (a) it was not shown that the signatory was authorized by ACE
The very essence of a contract of sale is the transfer of ownership in exchange for a price paid or
Foods (the actual party to the transaction) to novate the original agreement; (b) the signature only
promised. 35This may be gleaned from Article 1458 of the Civil Code which defines a contract of sale as
proves that the Invoice Receipt was received by a representative of ACE Foods to show the fact of
follows:
delivery; and (c) as matter of judicial notice, invoices are generally issued at the consummation stage of
Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the
the contract and not its perfection, and have been even treated as documents which are not
ownership and to deliver a determinate thing, and the other to pay therefor a price certain in money or
actionable per se, although they may prove sufficient delivery. 39 Thus, absent any clear indication that
its equivalent.
the title reservation stipulation was actually agreed upon, the Court must deem the same to be a mere
unilateral imposition on the part of MTCL which has no effect on the nature of the parties’ original
A contract of sale may be absolute or conditional. (Emphasis supplied)
agreement as a contract of sale. Perforce, the obligations arising thereto, among others, ACE Foods’s
Corollary thereto, a contract of sale is classified as a consensual contract, which means that the sale is
obligation to pay the purchase price as well as to accept the delivery of the goods,40 remain enforceable
perfected by mere consent. No particular form is required for its validity. Upon perfection of the
and subsisting.1âwphi1
contract, the parties may reciprocally demand performance, i.e., the vendee may compel transfer of
ownership of the object of the sale, and the vendor may require the vendee to pay the thing sold. 36
As a final point, it may not be amiss to state that the return of the subject products pursuant to a
rescissory action41is neither warranted by ACE Foods’s claims of breach – either with respect to MTCL’s
In contrast, a contract to sell is defined as a bilateral contract whereby the prospective seller, while
breach of its purported "after delivery services" obligations or the defective condition of the products -
expressly reserving the ownership of the property despite delivery thereof to the prospective buyer,
since such claims were not adequately proven in this case. The rule is clear: each party must prove his
binds himself to sell the property exclusively to the prospective buyer upon fulfillment of the condition
own affirmative allegation; one who asserts the affirmative of the issue has the burden of presenting at
agreed upon, i.e., the full payment of the purchase price. A contract to sell may not even be considered
the trial such amount of evidence required by law to obtain a favorable judgment, which in civil cases, is
as a conditional contract of sale where the seller may likewise reserve title to the property subject of the
by preponderance of evidence. 42 This, however, ACE Foods failed to observe as regards its allegations of
sale until the fulfillment of a suspensive condition, because in a conditional contract of sale, the first
breach. Hence, the same cannot be sustained.
element of consent is present, although it is conditioned upon the happening of a contingent event
which may or may not occur.37
WHEREFORE, the petition is DENIED. Accordingly, the Decision dated October 21, 2011 and Resolution
dated February 8, 2012 of the Court of Appeals in CA-G.R. CV No. 89426 are hereby AFFIRMED.
In this case, the Court concurs with the CA that the parties have agreed to a contract of sale and not to a
contract to sell as adjudged by the RTC. Bearing in mind its consensual nature, a contract of sale had
been perfected at the precise moment ACE Foods, as evinced by its act of sending MTCL the Purchase SO ORDERED.
Order, accepted the latter’s proposal to sell the subject products in consideration of the purchase price
of ₱646,464.00. From that point in time, the reciprocal obligations of the parties – i.e., on the one hand,
G.R. No. 192669               April 21, 2014
of MTCL to deliver the said products to ACE Foods, and, on the other hand, of ACE Foods to pay the
purchase price therefor within thirty (30) days from delivery – already arose and consequently may be
demanded. Article 1475 of the Civil Code makes this clear: RAUL SABERON, JOAN F. SABERON and JACQUELINE SABERON, Petitioners, 
vs.
OSCAR VENTANILLA, JR., and CARMEN GLORIA D. VENTANILLA, Respondents.
Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds upon the thing
which is the object of the contract and upon the price.
RESOLUTION
From that moment, the parties may reciprocally demand performance, subject to the provisions of the
law governing the form of contracts. MENDOZA, J.:
For resolution of the Court is a motion for reconsideration of the Court's January 19, 2011
Resolution1 which denied the petition of Raul F. Saberon, Jr., Joan F. Saberon and Jacqueline F. Saberon
(Saberons). In effect, it affirmed the March 12, 2010 Decision 2 and the June 18, 2010 Resolution3 of the
Court of Appeals (CA) in CA-G.R. CV No. 85520, holding that the June 21, 2005 Decision of the Regional
Trial Court, Branch 80, Quezon City (RTC) in Civil Case No. 96-26486, was correct in, among others,
ordering the cancellation of Transfer Certificate of Title (TCT) Nos. 55396 and 55397 in the name of the
Saberons and Samuel Marquez (Marquez).
This case is an offshoot of two (2) cases involving the same property, docketed as G.R. No. 82978 and
G.R. No. 107282, which had been decided by the Court with finality on November 22, 1990 and March
16, 1994, respectively.
Antecedent Facts
In the earlier cases, Manila Remnant Co., Inc. (MRCI) was the petitioner, being the owner of several
parcels of land situated in Quezon City, constituting the subdivision known as Capitol Homes Subdivision
Nos. I and II. On July 25, 1972, MRCI entered into a contract with A.U. Valencia & Co. Inc. (AUVC) entitled
"Confirmation of Land Development and Sales Contract," whereby for a consideration, including sales
commission and management fee, the latter was to develop the aforesaid subdivision with authority to
manage the sales thereof; execute contracts to sell to lot buyers; and issue official receipts. At that time,
the president of AUVC, was Artemio U. Valencia (Valencia).
It was not until March 1978 when the Ventanillas discovered Valencia’s deception. Believing that they
had already remitted the total amount of ₱73,122.35 for the two lots, the Ventanillas offered to pay the
balance to MRCI. To their shock, their names as lot buyers did not appear in MRCI’s records. Instead,
MRCI showed them a copy of the contract to sell signed by Valencia, in favor of Crisostomo. MRCI
refused the Ventanillas’ offer to pay for the remainder of the contract price.
Aggrieved, the Ventanillas commenced an action for specific performance, annulment of deeds and
damages against MRCI, AUVC, and Crisostomo with the Court of First Instance, Branch 17-B, Quezon City
(CFI Quezon City) docketed as Civil Case No. 26411, where Crisostomo was declared in default for his
failure to file an answer.
On November 17, 1980, the CFI Quezon City rendered a decision declaring the contracts to sell in favor
of the Ventanillas as valid and subsisting, and annulling the contract to sell in favor of Crisostomo. It
ordered the MRCI to execute an absolute deed of sale in favor of the Ventanillas, free from all liens and
encumbrances. Damages and attorney's fees in the total amount of ₱210,000.00 were also awarded to
the Ventanillas for which the MRCI, AUVC, and Crisostomo were held solidarily liable. The CFI Quezon
City ruled further that if for any reason the transfer of the lots could not be effected, MRCI, AUVC and
Crisostomo would be solidarily liable to the Ventanillas for the reimbursement of the sum of ₱73,122.35,
representing the amount they paid for the two (2) lots, and the legal interest thereon from March 1970,
plus the decreed damages and attorney's fees. Valencia was also held liable to MRCI for moral and
exemplary damages and attorney's fees.

On separate appeals filed by AUVC and MRCI, the CA sustained the CFI Quezon City’s decision in toto.
On March 3, 1970, MRCI and AUVC executed two (2) contracts to sell covering Lots 1 and 2 of Block 17,
in favor of Oscar C. Ventanilla, Jr. and Carmen Gloria D. Ventanilla (Ventanillas), for the combined
contract price of ₱66,571.00 payable monthly for ten (10) years. The Ventanillas paid the down payment The 1990 Case
as stipulated in the two (2) contracts.
MRCI then filed before this Court a petition for certiorari docketed as G.R. No. 82978, to review the
On March 13, 1970, Valencia, holding out himself as president of MRCI, and without the knowledge of decision of the CA upholding the solidary liability of MRCI, AUVC and Crisostomo for the payment of
the Ventanillas, resold the same property to Carlos Crisostomo (Crisostomo), without any consideration. moral and exemplary damages and attorney's fees to the Ventanillas.
Valencia transmitted the fictitious contract with Crisostomo to MRCI while he kept the contracts to sell
with the Ventanillas in his private office files. All the amounts paid by the latter were deposited in
On November 22, 1990, this Court affirmed the decision of the CA and declared the judgment of the CFI
Valencia’s bank account and remitted to MRCI as payments of Crisostomo. The Ventanillas continued to
Quezon City immediately executory.
pay the monthly installment.       

Encouraged by the seeming triumph of their cause, the Ventanillas moved for the issuance of a writ of
Thereafter, MRCI terminated its business relationship with AUVC on account of irregularities discovered
execution in Civil Case No. 26411. The writ was issued on May 3, 1991, and served upon MRCI on May 9,
in its collection and remittances. Consequently, Valencia was removed as president by the Board of
1991. A notice of levy was annotated in the titles of MRCI on May 31, 1991.
Directors of MRCI. He then stopped transmitting the Ventanillas’ monthly installments which at that
time, already amounted to ₱17,925.40 for Lot 1 and ₱18,141.95 for Lot 2 (appearing in MRCI’s records as
credited under the name of Crisostomo). In a manifestation and motion, however, MRCI alleged that the subject properties could not longer be
delivered to the Ventanillas because they had already been sold to Samuel Marquez (Marquez) on
February 7, 1990, while its petition was pending before this Court. Nevertheless, MRCI offered to
On June 8, 1973, AUVC sued MRCI to impugn the abrogation of their agency agreement before the Court
reimburse the amount paid by the Ventanillas, including legal interest plus damages. MRCI also prayed
of First Instance, Branch 19, Manila (CFI Manila), which eventually ordered all lot buyers to deposit their
that its tender of payment be accepted and that all garnishments on their accounts lifted.
monthly amortizations with the court. On July 17, 1973, AUVC informed the Ventanillas that it was still
authorized by the trial court to collect the monthly amortizations and requested them to continue
remitting their payment, with the assurance that said payments would be deposited later in court. The Ventanillas accepted the amount of ₱210,000.00 as damages and attorney’s fees but rejected the
reimbursement offered by MRCI in lieu of the execution of the absolute deed of sale. They contended
that the alleged sale to Marquez was void, fraudulent, and in contempt of court and that no claim of
For AUVC’s failure to forward its collections to the trial court as ordered, MRCI caused the publication of
ownership over the properties in question had ever been made by Marquez.
a notice cancelling the contracts to sell of some lot buyers including those of Crisostomo in whose name
the payments of the Ventanillas had been credited.
On July 19, 1991, the CFI Quezon City ordered that the garnishment made by the Sheriff upon the bank
account of MRCI could be lifted only upon the deposit to the Court of the amount of ₱500,000.00 in
cash.
MRCI then moved for reconsideration praying that it be ordered to reimburse the Ventanillas in the
amount of ₱263,074.10 and that the garnishment of its bank deposit be lifted. This plea was denied
twice by the trial court prompting MRCI to file another petition for certiorari with the CA, which ruled
that the contract to sell in favor of Marquez did not constitute a legal impediment to the immediate
execution of the judgment. Furthermore, it held that the cash bond fixed by the trial court for the lifting
of the garnishment was fair and reasonable because the value of the lot in question had considerably
increased.
The 1994 Case
From the CA, the case was elevated to this Court as G.R. No. 107282 where MRCI argued that the sale of
the properties to Marquez was valid because at the time of the sale, the issue of the validity of the sale
to the Ventanillas had not yet been resolved. Further, there was no specific injunction against it re-selling
the property. As a buyer in good faith, Marquez had a right to rely on the recitals in the certificate of
title. The subject matter of the controversy having been passed to an innocent purchaser for value, the
execution of the absolute deed of sale in favor of the Ventanillas could not be ordered by the trial court.
The Ventanillas countered that the validity of the sale to them had already been established even while
the previous petition was still awaiting resolution. The petition only questioned the solidary liability of
MRCI to the Ventanillas. Hence, the portion of the decision ordering MRCI to execute an absolute deed
of sale in their favor had already become final and executory when MRCI failed to appeal it to the Court.
Thus, an order enjoining MRCI from reselling the property in litigation was unnecessary. Besides, the
unusual lack of interest, on the part of Marquez, to protect and assert his right over the disputed
property was, to the Ventanillas, a clear indication that the alleged sale to him was merely a ploy of MRCI
to evade the execution of the absolute deed of sale in their favor.
At any rate, even if it be assumed that the contract to sell in favor of Marquez is valid, it cannot prevail
over the final and executory judgment ordering MRCI to execute an absolute deed of sale in favor of the
Ventanillas. No less importantly, the records do not show that Marquez has already paid the supposed
balance amounting to ₱616,000.00 of the original price of over ₱800,000.00. (Emphasis supplied)
As it turned out, the execution of the judgment in favor of the Ventanillas was yet far from fruition.
Samuel Cleofe, Register of Deeds for Quezon City (ROD Cleofe) revealed to them, that on March 11,
1992, MRCI registered a deed of absolute sale to Marquez who eventually sold the same property to the
Saberons, which conveyance was registered in July 1992. ROD Cleofe opined that a judicial order for the
cancellation of the titles in the name of the Saberons was essential before he complied with the writ of
execution in Civil Case No. 26411. Apparently, the notice of levy, through inadvertence, was not carried
over to the title issued to Marquez, the same being a junior encumbrance which was entered after the
contract to sell to Marquez had already been annotated.
Civil Case No. Q-96-26486
Once again, the Ventanillas were constrained to go to court to seek the annulment of the deed of sale
executed between MRCI and Marquez as well as the deed of sale between Marquez and the Saberons, as
the fruits of void conveyances. The case was docketed as Civil Case No. Q-96-26486 with the Regional
Trial Court, Branch 80, Quezon City (RTC).
During the trial, all the defendants, including Edgar Krohn Jr. (Krohn) as President of MRCI, and Bede
Tabalingcos (Tabalingcos) as its legal counsel, filed their respective answers, except Marquez who was
declared in default.

On June 21, 2005, the RTC rendered its decision, the dispositive portion of which reads:
On March 16, 1994, the Court settled the controversy in this wise:

Wherefore, premises considered, judgment is hereby rendered in favour of plaintiffs, the spouses Oscar
The validity of the contract to sell in favor of the Ventanilla spouses is not disputed by the parties. Even
and Carmen Ventanilla, and against defendants MRCI, Krohn, Tabalingcos, Marquez and Saberon, as
in the previous petition, the recognition of that contract was not assigned as error of either the trial
follows:
court or appellate court. The fact that the MRCI did not question the legality of the award for damages to
the Ventanillas also shows that it even then already acknowledged the validity of the contract to sell in
favor of the private respondents. (1) Declaring the Transfer Certificated of Title Nos. 55396 and 55397 in the name of Samuel
Marquez, and Transfer Certificates of Title Nos. 63140 and 63141 in the names of Raul, Jr.,
Joan and Jacqueline Saberon as null and void;
On top of all this, there are other circumstances that cast suspicion on the validity, not to say the very
existence, of the contract with Marquez.
(2) Ordering defendant MRCI to receive payment of the balance of the purchase price to be
paid by the plaintiffs and to execute a Deed of Absolute Sale in favour of the plaintiffs, and in
First, the contract to sell in favor of Marquez was entered into after the lapse of almost ten years from
case of failure thereof, ordering plaintiffs to consign the amount with this Court;
the rendition of the judgment of the trial court upholding the sale to the Ventanillas.

(3) Ordering the Register of Deeds to cancel the titles in the name of Marquez and the
Second, the petitioner did not invoke the contract with Marquez during the hearing on the motion for
Saberons, and to issue new certificates of title in the name of the spouses Ventanillas upon
the issuance of the writ of execution filed by the private respondents. It disclosed the contract only after
registration of the Deed of Absolute Sale in favour of the plaintiffs or proof of their
the writ of execution had been served upon it.
consignment;

Third, in its manifestation and motion dated December 21, 1990, the petitioner said it was ready to
(4) Ordering defendant MRCI, Krohn, Tabalingcos and Marquez to pay plaintiffs, jointly and
deliver the titles to the Ventanillas provided that their counterclaims against private respondents were
severally, the sums of:
paid or offset first. There was no mention of the contract to sell with Marquez on February 7, 1990.

a. ₱100,000.00, as moral damages; and

Fourth, Marquez has not intervened in any of these proceedings to assert and protect his rights to the
subject property as an alleged purchaser in good faith.
b. ₱50,000.00, as attorney’s fees.
 (5) Ordering defendant MRCI, Krohn, Tabalingcos and Marquez to pay defendants Saberon, Thousand Pesos (₱2,100,000.00) as purchase price for the lots. Upon payment of the real property taxes,
jointly and severally, the sum of ₱7,118,155.88 representing the value of the properties in a certification was issued by the Office of the City Treasurer for the purpose of transferring the title over
dispute and the value of the improvements introduced by defendants Saberon; and the property.

(6) Ordering the defendants to pay the costs of the suit.
Defendants’ counterclaims are hereby dismissed for lack of merit.
Separate appeals were instituted by MRCI and Tabalingcos, on one hand, and the Saberons, on the other.
The former contended that no fraudulent act could be attributed to them for the sale of the property to
the title of Marquez, considering that ROD Cleofe was the one who inadvertently omitted the carrying
over of the notice of levy to Marquez who consequently secured a clean title to the lot. MRCI
Tabalingcos further claimed that the sale to Marquez was effected while the previous case was still
pending, at a time when they had every liberty to believe in the legality of their position.
Meanwhile, the Saberons relied on one central argument—that they were purchasers in good faith,
having relied on the correctness of the certificates of title covering the lots in question; and therefore,
holders of a valid and indefeasible title.
In the assailed decision, the CA made its conclusion hinged on the following findings:
Thereafter, Marquez executed the Deed of Absolute Sale in favor of the Saberons. The ROD-QC then
issued TCT Nos. 63140 and 63141 in their names.
Unknown to the Saberons, the former owner of the properties had entered into contracts to sell with the
Ventanillas, way back in 1970. It was only upon receipt of the summons in the case filed by the
Ventanillas with the RTC that they learned of the present controversy.
With the RTC and the CA rulings against their title over the properties, the Saberons now come to the
Court with their vehement insistence that they were purchasers in good faith and for value. Before
purchasing the lots, they exercised due diligence and found no encumbrance or annotations on the titles.
At the same time, the Ventanillas also failed to rebut the presumption of their good faith as there was no
showing that they confederated with MRCI and its officers to deprive the Ventanillas of their right over
the subject properties.
According to the Saberons, the CA likewise erred in ruling that there was no constructive notice of the
levy made upon the subject lands. They claimed that the appellate court could not solely rely on AFP
Mutual Benefit Association Inc. v. Santiago.5 Instead, they urged the Court to interpret

When MRCI executed a Contract to Sell in favor of Marquez in February 1990, it was in the throes of an
Sections 52 and 42 of Presidential Decree (P.D.) No. 1529 which cover the effects of registration and the
appeal from the Decision in Civil Case No. 26411 where its very first Contracts to Sell to the Ventanillas
manner thereof; and to examine Section 54 which shows that, in addition to the filing of the instrument
were upheld over those of Crisostomo. The Marquez Contract to Sell was in fact the third in a row, and
creating, transferring or claiming interest in registered land less than ownership, a brief memorandum of
registered a year later, on May 21, 1991, appears as the first recorded entry in MRCI’s titles. The notice
such shall be made by the Register of Deeds on the certificate of title and signed by him. Hence, the
of levy in Civil Case No. 26411 came ten days later, on May 31, 1991. Then, in February 1992, MRCI
ruling in AFP, that an entry of a notice of levy and attachment in the primary entry or day book of the
executed a deed of absolute sale to Marquez and when the new titles were issued in Marquez’ name,
Registry of Deeds was sufficient notice to all persons that the land was already subject to such
the notice of levy was not carried over. A few months later, these titles were cancelled by virtue of a
attachment, would be rendered as a superfluity in light of the mandatory character of the said provision.
deed of sale to the Saberons and, on the same day, TCT 63140 and 63141 were issued clean to them.

The Saberons further pointed that the claim of the Ventanillas over the subject properties never ripened
According to the CA, the arguments espoused by MRCI and Tabalingcos were untenable. The said parties
into ownership as they failed to consign the balance on the purchase price stipulated on the contracts to
were found guilty of bad faith for selling the lots to Marquez at a time when litigation as to the validity of
sell, thus preventing the obligatory force of the contract from taking effect.
the first sale to the Ventanillas was still pending. In other words, MRCI was sufficiently aware of the
Court decision confirming its failure to supervise and control the affairs of its authorized agent, AUVC,
which led to the explicit pronouncement that the first sale to the Ventanillas was valid. This should have On October 4, 2010, the Court required the Ventanillas to file their comment to the petition. 6 On January
served as a warning to MRCI that it could no longer deal with the property in deference to the Court’s 19, 2011, the Court resolved to deny the Saberons’ petition for failure to sufficiently show any reversible
ruling and affirmation of the trial court’s order to execute the deed of sale in favor of the Ventanillas. error in the assailed judgment by the CA.7 In its June 15, 2011 Resolution,8 the Court required the
Obviously, MRCI took no heed of this caveat. The titles had been transferred yet again to the Saberons, Ventanillas to comment on the motion for reconsideration filed by the Saberons.
who claimed to be purchasers in good faith. Unfortunately, there was an exception to the general rule.
The CA cited AFP Mutual Benefit Association Inc. v. Santiago,4 where the Court ruled that with respect to
Resolution of the Court
involuntary liens, an entry of a notice of levy and attachment in the primary entry or day book of the
Registry of Deeds was considered as sufficient notice to all persons that the land was already subject to
attachment. Resultantly, attachment was duly perfected and bound the land. At first glance, it would seem that the case involves convoluted issues brought about by the number of
times the Ventanillas were impelled by circumstances to seek judicial action. Nonetheless, the
antecedents would readily reveal that the essential facts are not disputed: 1) that the subject properties
The Present Petition
have indeed been the objects of various transfers effected by MRCI leading to the current controversy
between the Saberons and the Ventanillas; and 2) that prior to the sale to the Saberons, a notice of levy
Aggrieved by this CA ruling, the Saberons filed the present petition. They claimed that in 1992, a certain as an encumbrance was already in existence.
Tiks Bautista offered the lots to Raul Saberon, who, after being given photocopies of the titles to the
land, inquired with the Registry of Deeds for Quezon City (ROD-QC) to verify the authenticity of the
Sections 51 and 52 of P.D. No. 1529 explain the purpose and effects of registering both voluntary and
same. He found no encumbrances or annotations on the said titles, other than restrictions for
involuntary instruments, to wit:
construction and negotiation. As agreed upon, he paid Marquez the amount of Two Million One Hundred
Section 51. Conveyance and other dealings by registered owner. An owner of registered land may
convey, mortgage, lease, charge or otherwise deal with the same in accordance with existing laws. He
may use such forms of deeds, mortgages, leases or other voluntary instruments as are sufficient in law.
But no deed, mortgage, lease, or other voluntary instrument, except a will purporting to convey or affect
registered land shall take effect as a conveyance or bind the land, but shall operate only as a contract
between the parties and as evidence of authority to the Register of Deeds to make registration.
The act of registration shall be the operative act to convey or affect the land insofar as third persons are
concerned, and in all cases under this Decree, the registration shall be made in the office of the Register
of Deeds for the province or city where the land lies.
Section 52. Constructive notice upon registration. Every conveyance, mortgage, lease, lien, attachment,
order, judgment, instrument or entry affecting registered land shall, if registered, filed or entered in the
office of the Register of Deeds for the province or city where the land to which it relates lies, be
constructive notice to all persons from the time of such registering, filing or entering.
These provisions encapsulate the rule that documents, like the certificates of title do not effect a
conveyance of or encumbrances on a parcel of land. Registration is the operative act that conveys
ownership or affects the land insofar as third persons are concerned. By virtue of registration, a
constructive notice to the whole world of such voluntary or involuntary instrument or court writ or
processes, is thereby created.
The question of utmost relevance to this case, then, is this: whether or not the registration of the notice
of levy had produced constructive notice that would bind third persons despite the failure of the ROD-QC
to annotate the same in the certificates of title?
In answering these questions, the Court is beckoned to rule on two conflicting rights over the subject
properties: the right of the Ventanillas to acquire the title to the registered land from the moment of
inscription of the notice of levy on the day book (or entry book), on one hand; and the right of the
Saberons to rely on what appears on the certificate of title for purposes of voluntary dealings with the
same parcel of land, on the other.
The Saberons maintain that they had no notice of any defect, irregularity or encumbrance in the titles of
the property they purchased. In its decision, however, the RTC pointed out that their suspicion should
have been aroused by the circumstance that Marquez, who was not engaged in the buy-and-sell
business and had the property for only a few months, would offer the same for sale. Although the RTC
found that the Saberons may not be considered as innocent purchasers for value because of this
circumstance, it, nonetheless, ruled that they, who might well be unwilling victims of the fraudulent
scheme employed by MRCI and Marquez, were entitled to actual and compensatory damages.
To this latter finding, the Court agrees. The Saberons could not be said to have authored the
entanglement they found themselves in. No fault can be attributed to them for relying on the face of the
title presented by Marquez. This is bolstered by the fact that the RTC decision shows no categorical
finding that the Saberons’ purchase of the lots from Marquez was tainted with bad faith. That the
Saberons should have harbored doubts against Marquez is too high a standard to impose on a buyer of
titled land. This is in consonance to the rule that the one who deals with property registered under the
Torrens system is charged with notice only of such burdens and claims as are annotated on the title. 9 "All
persons dealing with property covered by Torrens certificate of title are not required to explore further
than what the Torrens title upon its face indicates in quest for any hidden defect or inchoate right that
may subsequently defeat his right thereto."10 These rules remain as essential features of the Torrens
system. The present case does not entail a modification or overturning of these principles.
Be that as it may, no fault can likewise be imputed to the Ventanillas.
In ultimately ruling for the Ventanillas, the courts a quo focused on the superiority of their notice of levy
and the constructive notice against the whole world which it had produced and which effectively bound
third persons including the Saberons.
It has already been established in the two previous cases decided by the Court that the contracts to sell
executed in favor of the Ventanillas are valid and subsisting. Clearly, it has been acknowledged, even by
MRCI, as can be seen in the latter’s own choice to only question their solidary liability in the 1990 case
and its failure to assign the same as an error in the 1994 case. In the same vein, the issue on Marquez’s
title had already been passed upon and settled in the 1994 case. That he purchased the lots prior to the
annotation of the notice of levy in MRCI’s title was of no moment. In fact, the Court explicitly declared
that MRCI’s transaction with Marquez "cannot prevail over the final and executory judgment ordering
MRCI to execute an absolute deed of sale in favor of the Ventanillas."
These favorable findings prompted the Ventanillas to register the notice of levy on the properties. The
records show that on the strength of a final and executory decision by the Court, they successfully
obtained a writ of execution from the RTC and a notice of levy was then entered, albeit on the primary
entry book only. The contract to sell to Marquez was registered on May 21, 1991, while the notice of levy
was issued ten (10) days later, or on May 31, 1991. In February 1992, MRCI executed the Deed of Sale
with Marquez, under whose name the clean titles, sans the notice of levy, were issued. A year later, or
on March 11, 1992, MRCI registered the deed of sale to Marquez who later sold the same property to
the Saberons.
This complex situation could have been avoided if it were not for the failure of ROD Cleofe to carry over
the notice of levy to Marquez’s title, serving as a senior encumbrance that might have dissuaded the
Saberons from purchasing the properties.
The Court agrees with the position of the RTC in rejecting ROD Cleofe’s theory.
Distinctions between a contract to sell and a contract of sale are well-established in
urisprudence.1âwphi1 In a contract of sale, the title to the property passes to the vendee upon the
delivery of the thing sold; in a contract to sell, ownership is, by agreement, reserved in the vendor and is
not to pass to the vendee until full payment of the purchase price. Otherwise stated, in a contract of
sale, the vendor loses ownership over the property and cannot recover it until and unless the contract is
resolved or rescinded; whereas, in a contract to sell, title is retained by the vendor until full payment of
the price. In the latter contract, payment of the price is a positive suspensive condition, failure of which
is not a breach but an event that prevents the obligation of the vendor to convey title from becoming
effective.11
It is undeniable, therefore, that no title was transferred to Marquez upon the annotation of the contract
to sell on MRCI’s title. As correctly found by the trial court, the contract to sell cannot be substituted by
the Deed of Absolute Sale as a "mere conclusion" of the previous contract since the owners of the
properties under the two instruments are different.12
Considering that the deed of sale in favor of Marquez was of later registration, the notice of levy should
have been carried over to the title as a senior encumbrance.
Corollary to this is the rule that a levy of a judgment debtor creates a lien, which nothing can
subsequently destroy except the very dissolution of the attachment of the levy itself. 13 Prior registration
of the lien creates a preference, since the act of registration is the operative act to convey and affect the
land.14 Jurisprudence dictates that the said lien continues until the debt is paid, or the sale is had under
an execution issued on the judgment or until the judgment is satisfied, or the attachment is discharged
or vacated in the same manner provided by law. Under no law, not even P.D. No. 1529, is it stated that
an attachment shall be discharged upon sale of the property other than under execution. 15
Additionally, Section 59 of P.D. No. 1529 provides that, "[i]f, at the time of the transfer, subsisting
encumbrances or annotations appear in the registration book, they shall be carried over and stated in
the new certificate or certificates, except so far as they may be simultaneously released or discharged."
This provision undoubtedly speaks of the ministerial duty on the part of the Register of Deeds to carry
over existing encumbrances to the certificates of title.
From the foregoing, ROD Cleofe’s theory that a deed of sale, as a mere conclusion of a contract to sell,
turns into a senior encumbrance which may surpass a notice of levy, has no leg to stand on. It was, in
fact, properly rejected by the courts a quo. Verily, the controversy at hand arose not from the
Ventanillas’ fault, but from ROD Cleofe’s misplaced understanding of his duty under the law.
although the notice of attachment had not been noted on the certificate of title, its notation in the book
of entry of the Register of Deeds produced all the effects which the law gave to its registration or
inscription, to wit:
…Under the rule of notice, it is presumed that the purchaser has examined every instrument of record
affecting the title. Such presumption is irrebuttable. He is charged with notice of every fact shown by the
record and is presumed to know every fact shown by the record and to know every fact which an
examination of the record would have disclosed. This presumption cannot be overcome by proof of
innocence or good faith. Otherwise, the very purpose and object of the law requiring a record would be
destroyed. Such presumption cannot be defeated by proof of want of knowledge of what the record
contains any more than one may be permitted to show that he was ignorant of the provisions of the law.
The rule that all persons must take notice of the facts which the public record contains is a rule of law.
The rule must be absolute; any variation would lead to endless confusion and useless litigation. For these
reasons, a declaration from the court that respondent was in bad faith is not necessary in order that the
notice of levy on attachment may be annotated on TCT No. PT-94912.

The fact that the notice of levy on attachment was not annotated on the original title on file in the
Surely, the Ventanillas had every right to presume that the Register of Deeds would carry over the notice
Registry of Deeds, which resulted in its non-annotation on the title TCT No. PT-94912, should not
of levy to subsequent titles covering the subject properties. The notice was registered precisely to bind
prejudice petitioner. As long as the requisites required by law in order to effect attachment are complied
the properties and to serve as caution to third persons who might potentially deal with the property
with and the appropriate fees duly paid, attachment is duly perfected. The attachment already binds the
under the custody of the law. In DBP v. Acting Register of Deeds of Nueva Ecija, 16 the Court ruled that
land. This is because what remains to be done lies not within the petitioner’s power to perform but is a
entry alone produced the effect of registration, whether the transaction entered was a voluntary or
duty incumbent solely on the Register of Deeds. (Emphasis supplied)
involuntary one, so long as the registrant had complied with all that was required of him for purposes of
entry and annotation, and nothing more remained to be done but a duty incumbent solely on the
Register of Deeds. In the case at bench, the notice of levy covering the subject property was annotated in the entry book of
the ROD QC prior to the issuance of a TCT in the name of the Saberons. Clearly, the Ventanillas’ levy was
placed on record prior to the sale. This shows the superiority and preference in rights of the Ventanillas
While the Court is not unmindful that a buyer is charged with notice only of such burdens and claims as
over the property as against the Saberons. In AFP, the Court upheld the registration of the levy on
are annotated on the title, the RTC and the CA are both correct in applying the rule as to the effects of
attachment in the primary entry book as a senior encumbrance despite the mistake of the ROD, the
involuntary registration. In cases of voluntary registration of documents, an innocent purchaser for value
Court must, a fortiori, sustain the notice of levy registered by the Ventanillas notwithstanding the
of registered land becomes the registered owner, and, in contemplation of law the holder of a certificate
nonfeasance of ROD Cleofe. Again, the prevailing rule is that there is effective registration once the
of title, the moment he presents and files a duly notarized and valid deed of sale and the same is entered
registrant has fulfilled all that is needed of him for purposes of entry and annotation, so that what is left
in the day book and at the same time he surrenders or presents the owner's duplicate certificate of title
to be accomplished lies solely on the Register of Deeds.20
covering the land sold and pays the registration fees, because what remains to be done lies not within
his power to perform. The Register of Deeds is duty bound to perform it.17 In cases of involuntary
registration, an entry thereof in the day book is a sufficient notice to all persons even if the owner's Suffice it to say, no bad faith can be ascribed to the parties alike. Nevertheless, the equal footing of the
duplicate certificate of title is not presented to the register of deeds. Therefore, in the registration of an parties necessarily tilts in favor of the superiority of the Ventanillas’ notice of levy, as discussed.
attachment, levy upon execution, notice of lis pendens, and the like, the entry thereof in the day book is
a sufficient notice to all persons of such adverse claim.18
The Court also sees no reason to dwell in the contention that the rights or interests of the Ventanillas in
the subject properties never ripened into ownership. It bears stressing that the previous decisions
This rule was reiterated in the more recent case of Armed Forces and Police Mutual Benefit Association, discussed herein already sealed the validity of the contract to sell issued to the Ventanillas decades ago.
Inc., v. Santiago,19 as relied upon by the CA. In AFP, the Notice of Levy was presented for registration in As found by the RTC, it was MRCI’s obstinate refusal to accept their tender of payment, not to mention
the Registry of Deeds of Pasig City. The Notice was entered in the Primary Entry Book, but was not the devious transfer of the property, which caused the decade-long delay of the execution of the deed of
annotated on the TCT because the original copy of the said title on file in the Registry of Deeds was not sale in their favor. This is a finding that the Court, which is not a trier of facts, will have to respect.
available at that time. Six (6) days after the presentation of the Notice of Levy, the Deed of Absolute Sale
involving the same parcel of land was presented for registration and likewise entered. The deed of sale
In the same vein, the attribution of laches against the Ventanillas is flawed. Their failure to learn about
was examined by the same employee who examined the notice of levy, but she failed to notice that the
the structures being built on the subject lands and the payment of real property taxes by the Saberons is
title subject of the sale was the same title which was the subject of the notice of levy earlier presented.
not sufficient justification to withhold the declaration of their ownership over it. Against a different
Unaware of the previous presentation of the notice of levy, the Register of Deeds issued a certificate of
factual milieu, laches may be said to have set it but not so in this case. While the Ventanillas may have
title in the name of the vendee on the basis of the deed of sale. The Register of Deeds in AFP
been unaware that improvements were being erected over the lots, this obliviousness can, by no means,
immediately requested the vendee to surrender the documents in light of the mistake discovered so that
be treated as a lack of vigilance on their part. It bears stressing that the Ventanillas are now of advanced
he could take appropriate rectification or correction. Settling the issue on whether the notice of levy
age and retired as university professors. Considering the length of litigation which they had to endure in
could be annotated in the certificate of title, the Court ruled in the affirmative on the ground that the
order to assert their right over the property which they have painstakingly paid for decades ago, to hold
preference created by the levy on attachment was not diminished by the subsequent registration of the
now that they have been remiss in the protection of their rights would be the height of impropriety, if
prior sale. Superiority and preference in rights were given to the registration of the levy on attachment;
not injustice. To exact from them an obligation to visit the land in litigation every so often, lest they be
held to have slept on their rights, is iniquitous and unreasonable. All told, the Ventanillas remain as
innocent victims of deception.
The Court deems it significant to note that the amount of ₱7,118,115.88 awarded to the Saberons by the
RTC is to be satisfied by MRCI, Krohn, Tabalingcos, and Marquez, who have not been impleaded as
parties to the present petition, thus, rendering the said award final and executory. The said amount,
however, is separate and distinct from those provided under Article 44821 in relation to Article 54622 of
the Civil Code. In the petition, the Saberons invoked the said provisions, claiming that they are entitled to
reimbursement of all the expenses incurred in the introduction of improvements on the subject lands
amounting to ₱23,058,822.79.
The Court finds the Saberons to be builders in good faith.
Should the Ventanillas elect to appropriate the improvements, the trial court is ordered to determine the
value of the improvements and the necessary and useful expenses after hearing and reception of
evidence. Should the Ventanillas, however, pursue the option to oblige the Saberons to pay the "price of
the land," the trial court is ordered to determine said price to be paid to the V entanillas.
WHEREFORE, the Motion for Reconsideration is PARTIALLY GRANTED. The appealed March 12, 2010
Decision and the June 18, 2010 Resolution of the Court of Appeals in CA-G.R. CV No. 85520 are
AFFIRMED with modification in that the Ventanillas are given a period of sixty ( 60) days from finality of
this Resolution to decide whether to pay the Saberons the value of the improvements and the necessary
and useful expenses defrayed on the 2 lots or to oblige the Saberons to pay them the "price" of said lots.
Depending on the option exercised by the Ventanillas, the case is hereby remanded to the court of origin
for further proceedings as to the determination of reimbursement due to the petitioners or of the
"price" of the subject lots due to the Ventanillas.

SO ORDERED.
No less than the court a quo observed that "no actual evidence that the Saberons connived with the
MRCI and Marquez to have the titles registered in their names to the prejudice of the (Ventanillas)" and
that what was obvious was that "the Saberons dealt with clean certificates of titles." Also quite telling on
this point is the finding that MRCI, Krohn, Tabalingcos, and Marquez are liable to the Saberons. The RTC
reasoned out in the following wise:

This Court is not convinced, however that defendants Saberon took part in the fraudulent scheme
employed by the other defendants against the plaintiffs. Although they may not be considered as
innocent purchasers for value shown in the discussion above, this Court is not ready to conclude that the
Saberons joined the other defendants in their efforts to frustrate plaintiffs’ rights over the disputed
properties. On the contrary, they may be considered victims of the same fraudulent employed by
defendants MRCI and Marquez, and thus can rightfully claim damages from the same. 23

Consequently, Article 448 in relation to Article 546 of the Civil Code will apply.1âwphi1 The provisions
respectively read:

Article 448. The owner of the land on which anything has been built, sow or planted in good faith, shall
have the right to appropriate, as his own the works, sowing, or planting, after payment of the indemnity
provided for in Article 546 and 548, or to oblige the one who built or planted to pay the price of the land,
and the one who sowed, the proper rent. However, the builder or planter cannot be obliged to buy the
land and if its value is considerably more than that of the building or trees. In such case, he shall pay
reasonable rent, if the owner of the land does not choose to appropriate the building or trees after
proper indemnity. The parties shall agree upon the terms of the lease and in case disagreement, the
court shall fix the terms thereof.
Article 546. Necessary expenses shall be refunded to every possessor; but only the possessor in good
faith may retain the thing until he has been reimbursed therefore.
IDA C. LABAGALA, petitioner, vs. NICOLASA T. SANTIAGO, AMANDA T. SANTIAGO and HON. COURT OF
APPEALS, respondents.
DECISION
QUISUMBING, J.:
This petition for review on certiorari seeks to annul the decision dated March 4, 1997,[1] of the
Court of Appeals in CA-G.R. CV No. 32817, which reversed and set aside the judgment dated October 17,
1990,[2] of the Regional Trial Court of Manila, Branch 54, in Civil Case No. 87-41515, finding herein
petitioner to be the owner of 1/3 pro indiviso share in a parcel of land.

Useful expenses shall be refunded only to the possessor in good faith with the same right of retention,
the person who has defeated him in the possession having the option of refunding the amount of the
expenses or of paying the increase in value which the thing may have acquired by reason thereof.
Thus, the two options available to the Ventanillas: 1) they may exercise the right to appropriate after
payment of indemnity representing the value of the improvements introduced and the necessary and
useful expenses defrayed on the subject lots; or 2) they may forego payment of the said indemnity and
instead, oblige the Saberons to pay the price of the land.
The pertinent facts of the case, as borne by the records, are as follows:
Jose T. Santiago owned a parcel of land covered by TCT No. 64729, located in Rizal Avenue
Extension, Sta. Cruz, Manila. Alleging that Jose had fraudulently registered it in his name alone, his sisters
Nicolasa and Amanda (now respondents herein), sued Jose for recovery of 2/3 share of the property.
[3]
 On April 20, 1981, the trial court in that case decided in favor of the sisters, recognizing their right of
ownership over portions of the property covered by TCT No. 64729. The Register of Deeds of Manila was
required to include the names of Nicolasa and Amanda in the certificate of title to said property.[4]
 Jose died intestate on February 6, 1984. On August 5, 1987, respondents filed a complaint for
recovery of title, ownership, and possession against herein petitioner, Ida C. Labagala, before the
Regional Trial Court of Manila, to recover from her the 1/3 portion of said property pertaining to Jose but
which came into petitioners sole possession upon Joses death.
Respondents alleged that Joses share in the property belongs to them by operation of law,
because they are the only legal heirs of their brother, who died intestate and without issue. They
claimed that the purported sale of the property made by their brother to petitioner sometime in March
1979[5] was executed through petitioners machinations and with malicious intent, to enable her to secure
the corresponding transfer certificate of title (TCT No. 172334[6]) in petitioners name alone.[7]
Respondents insisted that the deed of sale was a forgery. The deed showed that Jose affixed his
thumbmark thereon but respondents averred that, having been able to graduate from college, Jose
never put his thumbmark on documents he executed but always signed his name in full.  They claimed
that Jose could not have sold the property belonging to his poor and unschooled sisters who sacrificed
for his studies and personal welfare. [8] Respondents also pointed out that it is highly improbable for
petitioner to have paid the supposed consideration of P150,000 for the sale of the subject property
because petitioner was unemployed and without any visible means of livelihood at the time of the
alleged sale. They also stressed that it was quite unusual and questionable that petitioner registered the
deed of sale only on January 26, 1987, or almost eight years after the execution of the sale. [9]
On the other hand, petitioner claimed that her true name is not Ida C. Labagala as claimed by
respondent but Ida C. Santiago. She claimed not to know any person by the name of Ida C. Labagala. She
claimed to be the daughter of Jose and thus entitled to his share in the subject property.  She maintained
that she had always stayed on the property, ever since she was a child.  She argued that the purported
sale of the property was in fact a donation to her, and that nothing could have precluded Jose from
putting his thumbmark on the deed of sale instead of his signature. She pointed out that during his
lifetime, Jose never acknowledged respondents claim over the property such that respondents had to
sue to claim portions thereof. She lamented that respondents had to disclaim her in their desire to
obtain ownership of the whole property.
Petitioner revealed that respondents had in 1985 filed two ejectment cases against her and other
occupants of the property. The first was decided in her and the other defendants favor, while the second
was dismissed. Yet respondents persisted and resorted to the present action.
Petitioner recognized respondents ownership of 2/3 of the property as decreed by the RTC. But
she averred that she caused the issuance of a title in her name alone, allegedly after respondents
refused to take steps that would prevent the property from being sold by public auction for their failure
to pay realty taxes thereon. She added that with a title issued in her name she could avail of a realty tax
amnesty.
On October 17, 1990, the trial court ruled in favor of petitioner, decreeing thus:
WHEREFORE, judgment is hereby rendered recognizing the plaintiffs [herein respondents] as being
entitled to the ownership and possession each of one-third (1/3) pro indiviso share of the property
originally covered by Transfer Certificate of Title No. 64729, in the name of Jose T. Santiago and
presently covered by Transfer Certificate of Title No. 172334, in the name of herein defendant [herein
petitioner] and which is located at No. 3075-A Rizal Avenue Extension, Sta. Cruz, Manila, as per
complaint, and the adjudication to plaintiffs per decision in Civil Case No. 56226 of this Court, Branch VI,
and the remaining one-third (1/3) pro indiviso share adjudicated in said decision to defendant Jose T.
Santiago in said case, is hereby adjudged and adjudicated to herein defendant as owner and entitled to
possession of said share. The Court does not see fit to adjudge damages, attorneys fees and costs. Upon
finality of this judgment, Transfer Certificate of Title No. 172334 is ordered cancelled and a new title
issued in the names of the two (2) plaintiffs and the defendant as owners in equal shares, and the
Register of Deeds of Manila is so directed to effect the same upon payment of the proper fees by the
parties herein.
SO ORDERED.[10]
According to the trial court, while there was indeed no consideration for the deed of sale
executed by Jose in favor of petitioner, said deed constitutes a valid donation. Even if it were not,
petitioner would still be entitled to Joses 1/3 portion of the property as Joses daughter. The trial court
ruled that the following evidence shows petitioner to be the daughter of Jose: (1) the decisions in the
two ejectment cases filed by respondents which stated that petitioner is Joses daughter, and (2) Joses
income tax return which listed petitioner as his daughter. It further said that respondents knew of
petitioners existence and her being the daughter of Jose, per records of the earlier ejectment cases they
filed against petitioner. According to the court, respondents were not candid with the court in refusing to
recognize petitioner as Ida C. Santiago and insisting that she was Ida C. Labagala, thus affecting their
credibility.
Respondents appealed to the Court of Appeals, which reversed the decision of the trial court.
WHEREFORE, the appealed decision is REVERSED and one is entered declaring the appellants Nicolasa
and Amanda Santiago the co-owners in equal shares of the one-third (1/3) pro indiviso share of the late
Jose Santiago in the land and building covered by TCT No. 172334. Accordingly, the Register of Deeds of
Manila is directed to cancel said title and issue in its place a new one reflecting this decision.
SO ORDERED.
Apart from respondents testimonies, the appellate court noted that the birth certificate of Ida
Labagala presented by respondents showed that Ida was born of different parents, not Jose and his
wife. It also took into account the statement made by Jose in Civil Case No. 56226 that he did not have
any child.
Hence, the present petition wherein the following issues are raised for consideration:
1. Whether or not petitioner has adduced preponderant evidence to prove that she is the
daughter of the late Jose T. Santiago, and
2. Whether or not respondents could still impugn the filiation of the petitioner as the daughter of
the late Jose T. Santiago.
Petitioner contends that the trial court was correct in ruling that she had adduced sufficient
evidence to prove her filiation by Jose Santiago, making her his sole heir and thus entitled to inherit his
1/3 portion. She points out that respondents had, before the filing of the instant case, previously
considered[11] her as the daughter of Jose who, during his lifetime, openly regarded her as his legitimate
daughter.She asserts that her identification as Joses daughter in his ITR outweighs the strange answers
he gave when he testified in Civil Case No. 56226.
Petitioner asserts further that respondents cannot impugn her filiation collaterally, citing the case
of Sayson v. Court of Appeals [12] in which we held that (t)he legitimacy of (a) child can be impugned only
in a direct action brought for that purpose, by the proper parties and within the period limited by law.
[13]
 Petitioner also cites Article 263 of the Civil Code in support of this contention.[14]
For their part, respondents contend that petitioner is not the daughter of Jose, per her birth
certificate that indicate her parents as Leo Labagala and Cornelia Cabrigas, instead of Jose Santiago and
Esperanza Cabrigas.[15] They argue that the provisions of Article 263 of the Civil Code do not apply to the
present case since this is not an action impugning a childs legitimacy but one for recovery of title,
ownership, and possession of property.
The issues for resolution in this case, to our mind, are (1) whether or not respondents may impugn
petitioners filiation in this action for recovery of title and possession; and (2) whether or not petitioner is
entitled to Joses 1/3 portion of the property he co-owned with respondents, through succession, sale, or
donation.
On the first issue, we find petitioners reliance on Article 263 of the Civil Code to be misplaced. Said
article provides:
Art. 263. The action to impugn the legitimacy of the child shall be brought within one year from the
recording of the birth in the Civil Register, if the husband should be in the same place, or in a proper
case, any of his heirs.
If he or his heirs are absent, the period shall be eighteen months if they should reside in the Philippines;
and two years if abroad. If the birth of the child has been concealed, the term shall be counted from the
discovery of the fraud.
This article should be read in conjunction with the other articles in the same chapter on paternity
and filiation in the Civil Code. A careful reading of said chapter would reveal that it contemplates
situations where a doubt exists that a child is indeed a mans child by his wife, and the husband (or, in
proper cases, his heirs) denies the childs filiation. It does not refer to situations where a child is alleged
not to be the child at all of a particular couple.[16]
Article 263 refers to an action to impugn the legitimacy of a child, to assert and prove that a
person is not a mans child by his wife. However, the present case is not one impugning petitioners
legitimacy. Respondents are asserting not merely that petitioner is not a legitimate child of Jose, but that
she is not a child of Jose at all. [17] Moreover, the present action is one for recovery of title and possession,
and thus outside the scope of Article 263 on prescriptive periods.
Petitioners reliance on Sayson is likewise improper. The factual milieu present in Sayson does not
obtain in the instant case. What was being challenged by petitioners in Sayson was (1) the validity of the
adoption of Delia and Edmundo by the deceased Teodoro and Isabel Sayson, and (2) the legitimate
status of Doribel Sayson. While asserting that Delia and Edmundo could not have been validly adopted
since Doribel had already been born to the Sayson couple at the time, petitioners at the same time made
the conflicting claim that Doribel was not the child of the couple. The Court ruled in that case that it was
too late to question the decree of adoption that became final years before. Besides, such a challenge to
the validity of the adoption cannot be made collaterally but in a direct proceeding.[18]
In this case, respondents are not assailing petitioners legitimate status but are, instead, asserting
that she is not at all their brothers child. The birth certificate presented by respondents support this
allegation.
We agree with the Court of Appeals that::
[19]
The Certificate of Record of Birth (Exhibit H)  plainly states that Ida was the child of the spouses Leon
Labagala and [Cornelia] Cabrigas. This document states that it was Leon Labagala who made the report
to the Local Civil Registrar and therefore the supplier of the entries in said Certificate. Therefore, this
certificate is proof of the filiation of Ida. Appellee however denies that Exhibit H is her Birth
Certificate. She insists that she is not Ida Labagala but Ida Santiago. If Exhibit H is not her birth certificate,
then where is hers? She did not present any though it would have been the easiest thing to do
considering that according to her baptismal certificate she was born in Manila in 1969. This court rejects
such denials and holds that Exhibit H is the certificate of the record of birth of appellee Ida
Against such evidence, the appellee Ida could only present her testimony and a baptismal certificate
(Exhibit 12) stating that appellees parents were Jose Santiago and Esperanza Cabrigas. But then, a
decisional rule in evidence states that a baptismal certificate is not a proof of the parentage of the
baptized person. This document can only prove the identity of the baptized, the date and place of her
baptism, the identities of the baptismal sponsors and the priest who administered the sacrament --
nothing more.[20] (Citations omitted.)
At the pre-trial conducted on August 11, 1988, petitioners counsel admitted that petitioner did
not have a birth certificate indicating that she is Ida Santiago, though she had been using this name all
her life.[21]
Petitioner opted not to present her birth certificate to prove her relationship with Jose and
instead offered in evidence her baptismal certificate.[22] However, as we held in Heirs of Pedro Cabais v.
Court of Appeals:
a baptismal certificate is evidence only to prove the administration of the sacrament on the dates
therein specified, but not the veracity of the declarations therein stated with respect to [a
persons] kinsfolk.The same is conclusive only of the baptism administered, according to the rites
of the Catholic Church, by the priest who baptized subject child, but it does not prove the veracity
of the declarations and statements contained in the certificate concerning the relationship of the
person baptized.[23]
A baptismal certificate, a private document, is not conclusive proof of filiation. [24] More so are the
entries made in an income tax return, which only shows that income tax has been paid and the amount
thereof.[25]
We note that the trial court had asked petitioner to secure a copy of her birth certificate but
petitioner, without advancing any reason therefor, failed to do so. Neither did petitioner obtain a
certification that no record of her birth could be found in the civil registry, if such were the case.  We find
petitioners silence concerning the absence of her birth certificate telling. It raises doubt as to the
existence of a birth certificate that would show petitioner to be the daughter of Jose Santiago and
Esperanza Cabrigas. Her failure to show her birth certificate would raise the presumption that if such
evidence were presented, it would be adverse to her claim. Petitioners counsel argued that petitioner
had been using Santiago all her life. However, use of a family name certainly does not establish pedigree.
Further, we note that petitioner, who claims to be Ida Santiago, has the same birthdate as Ida
Labagala.[26] The similarity is too uncanny to be a mere coincidence.
During her testimony before the trial court, petitioner denied knowing Cornelia Cabrigas, who was
listed as the mother in the birth certificate of Ida Labagala. In her petition before this Court, however,
she stated that Cornelia is the sister of her mother, Esperanza. It appears that petitioner made conflicting
statements that affect her credibility and could cast a long shadow of doubt on her claims of filiation.
Thus, we are constrained to agree with the factual finding of the Court of Appeals that petitioner
is in reality the child of Leon Labagala and Cornelia Cabrigas, and contrary to her averment, not of Jose
Santiago and Esperanza Cabrigas. Not being a child of Jose, it follows that petitioner can not inherit from
him through intestate succession. It now remains to be seen whether the property in dispute was validly
transferred to petitioner through sale or donation.
On the validity of the purported deed of sale, however, we agree with the Court of Appeals that:
This deed is shot through and through with so many intrinsic defects that a reasonable mind is
inevitably led to the conclusion that it is fake. The intrinsic defects are extractable from the
following questions: a) If Jose Santiago intended to donate the properties in question to Ida, what
was the big idea of hiding the nature of the contract in the faade of the sale? b) If the deed is a
genuine document, how could it have happened that Jose Santiago who was of course fully aware
that he owned only 1/3 pro indiviso of the properties covered by his title sold or donated the
whole properties to Ida? c) Why in heavens name did Jose Santiago, a college graduate, who
always signed his name in documents requiring his signature (citation omitted) [affix] his
thumbmark on this deed of sale? d) If Ida was [the] child of Jose Santiago, what was the sense of
 the latter donating his properties to her when she would inherit them anyway upon his death? e)
Why did Jose Santiago affix his thumbmark to a deed which falsely stated that: he was single (for
he was earlier married to Esperanza Cabrigas); Ida was of legal age (for [s]he was then just 15
years old); and the subject properties were free from liens and encumbrances (for Entry No.
27261, Notice of Adverse Claim and Entry No. 6388, Notice of Lis Pendens were already annotated
in the title of said properties). If the deed was executed in 1979, how come it surfaced only in
1984 after the death of Jose Santiago and of all people, the one in possession was the baptismal
sponsor of Ida?[27]

Clearly, there is no valid sale in this case. Jose did not have the right to transfer ownership of the
entire property to petitioner since 2/3 thereof belonged to his sisters. [28] Petitioner could not have given
her consent to the contract, being a minor at the time. [29] Consent of the contracting parties is among the
essential requisites of a contract, [30] including one of sale, absent which there can be no valid
contract.Moreover, petitioner admittedly did not pay any centavo for the property, [31] which makes the
sale void. Article 1471 of the Civil Code provides:

Art. 1471. If the price is simulated, the sale is void, but the act may be shown to have been in reality a
donation, or some other act or contract.

Neither may the purported deed of sale be a valid deed of donation. Again, as explained by the
Court of Appeals:

Even assuming that the deed is genuine, it cannot be a valid donation. It lacks the acceptance of the
donee required by Art. 725 of the Civil Code. Being a minor in 1979, the acceptance of the donation
should have been made by her father, Leon Labagala or [her] mother Cornelia Cabrigas or her legal
representative pursuant to Art. 741 of the same Code. No one of those mentioned in the law - in fact no
one at all - accepted the donation for Ida.[32]

In sum, we find no reversible error attributable to the assailed decision of the Court of Appeals,
hence it must be upheld.
JULIAN FRANCISCO (Substituted by his Heirs, namely: CARLOS ALTEA FRANCISCO; the heirs of late
WHEREFORE, the petition is DENIED, and the decision of the Court of Appeals in CA-G.R. CV No. ARCADIO FRANCISCO, namely: CONCHITA SALANGSANG-FRANCISCO (surviving spouse), and his
32817 is AFFIRMED. children namely: TEODULO S. FRANCISCO, EMILIANO S. FRANCISCO, MARIA THERESA S. FRANCISCO,
PAULINA S. FRANCISCO, THOMAS S. FRANCISCO; PEDRO ALTEA FRANCISCO; CARINA FRANCISCO-ALCANTARA;
Costs against petitioner. EFREN ALTEA FRANCISCO; DOMINGA LEA FRANCISCO-REGONDON; BENEDICTO ALTEA FRANCISCO and
ANTONIO ALTEA FRANCISCO), petitioner, vs. PASTOR HERRERA, respondent.
SO ORDERED.
DECISION

QUISUMBING, J.:

This is a petition for review on certiorari of the decision [1] of the Court of Appeals, dated August
30, 1999, in CA-G.R. CV No. 47869, which affirmed in toto the judgment[2] of the Regional Trial Court
(RTC) of Antipolo City, Branch 73, in Civil Case No. 92-2267. The appellate court sustained the trial courts
ruling which: (a) declared null and void the deeds of sale of the properties covered by Tax Declaration
Nos. 01-00495 and 01-00497; and (b) directed petitioner to return the subject properties to respondent
who, in turn, must refund to petitioner the purchase price of P1,750,000.

The facts, as found by the trial court and affirmed by the Court of Appeals, are as follows:

Eligio Herrera, Sr., the father of respondent, was the owner of two parcels of land, one consisting
of 500 sq. m. and another consisting of 451 sq. m., covered by Tax Declaration (TD) Nos. 01-00495 and
01-00497, respectively. Both were located at Barangay San Andres, Cainta, Rizal. [3]
 On January 3, 1991, petitioner bought from said landowner the first parcel, covered by TD No. 01-
00495, for the price of P1,000,000, paid in installments from November 30, 1990 to August 10, 1991.
On March 12, 1991, petitioner bought the second parcel covered by TD No. 01-00497,
for P750,000.
Contending that the contract price for the two parcels of land was grossly inadequate, the
children of Eligio, Sr., namely, Josefina Cavestany, Eligio Herrera, Jr., and respondent Pastor Herrera,
tried to negotiate with petitioner to increase the purchase price. When petitioner refused, herein
respondent then filed a complaint for annulment of sale, with the RTC of Antipolo City, docketed as Civil
Case No. 92-2267. In his complaint, respondent claimed ownership over the second parcel, which is the
lot covered by TD No. 01-00497, allegedly by virtue of a sale in his favor since 1973. He likewise claimed
that the first parcel, the lot covered by TD No. 01-00495, was subject to the co-ownership of the
surviving heirs of Francisca A. Herrera, the wife of Eligio, Sr., considering that she died intestate on April
2, 1990, before the alleged sale to petitioner. Finally, respondent also alleged that the sale of the two
lots was null and void on the ground that at the time of sale, Eligio, Sr. was already incapacitated to give
consent to a contract because he was already afflicted with senile dementia, characterized by
deteriorating mental and physical condition including loss of memory.
In his answer, petitioner as defendant below alleged that respondent was estopped from assailing
the sale of the lots. Petitioner contended that respondent had effectively ratified both contracts of sales,
by receiving the consideration offered in each transaction.
On November 14, 1994, the Regional Trial Court handed down its decision, the dispositive portion
of which reads:
WHEREFORE, in view of all the foregoing, this court hereby orders that:
1. The deeds of sale of the properties covered by Tax Dec. Nos. 01-00495 and 01-00497 are
declared null and void;
2. The defendant is to return the lots in question including all improvements thereon to the
plaintiff and the plaintiff is ordered to simultaneously return to the defendant the
purchase price of the lots sold totalling to P750,000.00 for lot covered by TD 01-00497
and P1,000,000.00 covered by TD 01-00495;
3. The court also orders the defendant to pay the cost of the suit.
4. The counter-claim of the defendant is denied for lack of merit.
SO ORDERED.[4]
Petitioner then elevated the matter to the Court of Appeals in CA-G.R. CV No. 47869. On August
30, 1999, however, the appellate court affirmed the decision of the Regional Trial Court, thus:
WHEREFORE, premises considered, the decision appealed from is hereby AFFIRMED in toto.  Costs
against defendant-appellant.
SO ORDERED.[5]
Hence, this petition for review anchored on the following grounds:
I. THE COURT OF APPEALS COMPLETELY IGNORED THE BASIC DIFFERENCE BETWEEN A VOID
AND A MERELY VOIDABLE CONTRACT THUS MISSING THE ESSENTIAL SIGNIFICANCE OF
THE ESTABLISHED FACT OF RATIFICATION BY THE RESPONDENT WHICH EXTINGUISHED
WHATEVER BASIS RESPONDENT MAY HAVE HAD IN HAVING THE CONTRACT AT BENCH
ANNULLED.
II. THE DECISION OF THE COURT OF APPEALS ON SENILE DEMENTIA:
A. DISREGARDED THE FACTUAL BACKGROUND OF THE CASE;
B. WAS CONTRARY TO ESTABLISHED JURISPRUDENCE; AND
C. WAS PURELY CONJECTURAL, THE CONJECTURE BEING ERRONEOUS.
III. THE COURT OF APPEALS WAS IN GROSS ERROR AND IN FACT VIOLATED PETITIONERS
RIGHT TO DUE PROCESS WHEN IT RULED THAT THE CONSIDERATION FOR THE
QUESTIONED CONTRACTS WAS GROSSLY INADEQUATE. [6]
The resolution of this case hinges on one pivotal issue: Are the assailed contracts of sale void or
merely voidable and hence capable of being ratified?
Petitioner contends that the Court of Appeals erred when it ignored the basic distinction between
void and voidable contracts. He argues that the contracts of sale in the instant case, following Article
1390[7] of the Civil Code are merely voidable and not void ab initio. Hence, said contracts can be ratified.
Petitioner argues that while it is true that a demented person cannot give consent to a contract pursuant
to Article 1327,[8] nonetheless the dementia affecting one of the parties will not make the contract
void per se but merely voidable. Hence, when respondent accepted the purchase price on behalf of his
father who was allegedly suffering from senile dementia, respondent effectively ratified the contracts.
The ratified contracts then become valid and enforceable as between the parties.
Respondent counters that his act of receiving the purchase price does not imply ratification on his
part. He only received the installment payments on his senile fathers behalf, since the latter could no
longer account for the previous payments. His act was thus meant merely as a safety measure to prevent
the money from going into the wrong hands. Respondent also maintains that the sales of the two
properties were null and void. First, with respect to the lot covered by TD No. 01-00497, Eligio, Sr. could
no longer sell the same because it had been previously sold to respondent in 1973. As to lot covered by
TD No. 01-00495, respondent contends that it is co-owned by Eligio, Sr. and his children, as heirs of
Eligios wife. As such, Eligio, Sr. could not sell said lot without the consent of his co-owners.
We note that both the trial court and the Court of Appeals found that Eligio, Sr. was already
suffering from senile dementia at the time he sold the lots in question. In other words, he was already
mentally incapacitated when he entered into the contracts of sale. Settled is the rule that findings of fact
of the trial court, when affirmed by the appellate court, are binding and conclusive upon the Supreme
Court.[9]
Coming now to the pivotal issue in this controversy. A void or inexistent contract is one which has
no force and effect from the very beginning. Hence, it is as if it has never been entered into and cannot
be validated either by the passage of time or by ratification. There are two types of void contracts: (1)
those where one of the essential requisites of a valid contract as provided for by Article 1318 [10] of the
Civil Code is totally wanting; and (2) those declared to be so under Article 1409 [11] of the Civil Code. By
contrast, a voidable or annullable contract is one in which the essential requisites for validity under
Article 1318 are present, but vitiated by want of capacity, error, violence, intimidation, undue influence,
or deceit.
Article 1318 of the Civil Code states that no contract exists unless there is a concurrence of
consent of the parties, object certain as subject matter, and cause of the obligation established. Article
1327 provides that insane or demented persons cannot give consent to a contract. But, if an insane or
demented person does enter into a contract, the legal effect is that the contract is voidable or annullable
as specifically provided in Article 1390.[12]
 In the present case, it was established that the vendor Eligio, Sr. entered into an agreement with
petitioner, but that the formers capacity to consent was vitiated by senile dementia.Hence, we must rule
that the assailed contracts are not void or inexistent per se; rather, these are contracts that are valid and
binding unless annulled through a proper action filed in court seasonably.

An annullable contract may be rendered perfectly valid by ratification, which can be express or
implied. Implied ratification may take the form of accepting and retaining the benefits of a contract.
[13]
 This is what happened in this case. Respondents contention that he merely received payments on
behalf of his father merely to avoid their misuse and that he did not intend to concur with the contracts
is unconvincing. If he was not agreeable with the contracts, he could have prevented petitioner from
delivering the payments, or if this was impossible, he could have immediately instituted the action for
reconveyance and have the payments consigned with the court. None of these happened. As found by
the trial court and the Court of Appeals, upon learning of the sale, respondent negotiated for the
increase of the purchase price while receiving the installment payments. It was only when respondent
failed to convince petitioner to increase the price that the former instituted the complaint for
reconveyance of the properties. Clearly, respondent was agreeable to the contracts, only he wanted to
get more. Further, there is no showing that respondent returned the payments or made an offer to do
so. This bolsters the view that indeed there was ratification. One cannot negotiate for an increase in the
price in one breath and in the same breath contend that the contract of sale is void.

Nor can we find for respondents argument that the contracts were void as Eligio, Sr., could not sell
the lots in question as one of the properties had already been sold to him, while the other was the
subject of a co-ownership among the heirs of the deceased wife of Eligio, Sr. Note that it was found by
both the trial court and the Court of Appeals that Eligio, Sr., was the declared owner of said lots. This
finding is conclusive on us. As declared owner of said parcels of land, it follows that Eligio, Sr., had the
right to transfer the ownership thereof under the principle of jus disponendi.

In sum, the appellate court erred in sustaining the judgment of the trial court that the deeds of
sale of the two lots in question were null and void.

WHEREFORE, the instant petition is GRANTED. The decision dated August 30, 1999 of the Court of
Appeals in CA-G.R. CV No. 47869, affirming the decision of the Regional Trial Court in Civil Case No. 92-
2267 is REVERSED. The two contracts of sale covering lots under TD No. 01-00495 and No. 01-00497 are
hereby declared VALID. Costs against respondent.

SO ORDERED.
SPS. RUDY PARAGAS and CORAZON B. PARAGAS, petitioners, vs. HRS. OF DOMINADOR BALACANO,
namely: DOMINIC, RODOLFO, NANETTE and CYRIC, all surnamed BALACANO, represented
by NANETTE BALACANO and ALFREDO BALACANO, respondents.

RESOLUTION

CHICO-NAZARIO, J.:

This petition for review seeks to annul the Decision [1] dated 15 February 2005 of the Court of
Appeals in CA-G.R. CV No. 64048, affirming with modification the 8 March 1999 Decision [2] of the
Regional Trial Court (RTC), Branch 21, of Santiago City, Isabela, in Civil Case No. 21-2313. The petition
likewise seeks to annul the Resolution [3] dated 17 May 2005 denying petitioners motion for
reconsideration.

The factual antecedents were synthesized by the Court of Appeals in its decision.

Gregorio Balacano, married to Lorenza Sumigcay, was the registered owner of Lot 1175-E and Lot 1175-F
of the Subd. Plan Psd-38042 [located at Baluarte, Santiago City, Isabela] covered by TCT No. T-103297
and TCT No. T-103298 of the Registry of Deeds of the Province of Isabela.
Gregorio and Lorenza had three children, namely: Domingo, Catalino and Alfredo, all surnamed
Balacano. Lorenza died on December 11, 1991. Gregorio, on the other hand, died on July 28, 1996.
Prior to his death, Gregorio was admitted at the Veterans General Hospital in Bayombong, Nueva Vizcaya
on June 28, 1996 and stayed there until July 19, 1996. He was transferred in the afternoon of July 19,
1996 to the Veterans Memorial Hospital in Quezon City where he was confined until his death.
Gregorio purportedly sold on July 22, 1996, or barely a week prior to his death, a portion of Lot 1175-E
(specifically consisting of 15,925 square meters from its total area of 22,341 square meters) and the
whole Lot 1175-F to the Spouses Rudy (Rudy) and Corazon Paragas (collectively, the Spouses Paragas) for
the total consideration of P500,000.00. This sale appeared in a deed of absolute sale notarized by Atty.
Alexander V. de Guzman, Notary Public for Santiago City, on the same date July 22, 1996 and witnessed
by Antonio Agcaoili (Antonio) and Julia Garabiles (Julia). Gregorios certificates of title over Lots 1175-E
and 1175-F were consequently cancelled and new certificates of title were issued in favor of the Spouses
Paragas.
The Spouses Paragas then sold on October 17, 1996 a portion of Lot 1175-E consisting of 6,416 square
meters to Catalino for the total consideration of P60,000.00.
Domingos children (Dominic, Rodolfo, Nanette and Cyric, all surnamed Balacano;) filed on October 22,
1996 a complaint for annulment of sale and partition against Catalino and the Spouses Paragas. They
essentially alleged in asking for the nullification of the deed of sale that: (1) their grandfather Gregorio
could not have appeared before the notary public on July 22, 1996 at Santiago City because he was then
confined at the Veterans Memorial Hospital in Quezon City; (2) at the time of the alleged execution of
the deed of sale, Gregorio was seriously ill, in fact dying at that time, which vitiated his consent to the
disposal of the property; and (3) Catalino manipulated the execution of the deed and prevailed upon the
dying Gregorio to sign his name on a paper the contents of which he never understood because of his
serious condition. Alternatively, they alleged that assuming Gregorio was of sound and disposing mind,
he could only transfer a half portion of Lots 1175-E and 1175-F as the other half belongs to their
grandmother Lorenza who predeceased Gregorio they claimed that Lots 1175-E and 1175-F form part of
the conjugal partnership properties of Gregorio and Lorenza. Finally, they alleged that the sale to the
Spouses Paragas covers only a 5-hectare portion of Lots 1175-E and 1175-F leaving a portion of 6,416
square meters that Catalino is threatening to dispose. They asked for the nullification of the deed of sale
executed by Gregorio and the partition of Lots 1175-E and 1175-F. They likewise asked for damages.
Instead of filing their Answer, the defendants Catalino and the Spouses Paragas moved to dismiss the
complaint on the following grounds: (1) the plaintiffs have no legal capacity - the Domingos children
cannot file the case because Domingo is still alive, although he has been absent for a long time; (2) an
indispensable party is not impleaded that Gregorios other son, Alfredo was not made a party to the suit;
and (3) the complaint states no cause of action that Domingos children failed to allege a ground for the
annulment of the deed of sale; they did not cite any mistake, violence, intimidation, undue influence or
fraud, but merely alleged that Gregorio was seriously ill. Domingos children opposed this motion.
The lower court denied the motion to dismiss, but directed the plaintiffs-appellees to amend the
complaint to include Alfredo as a party. Alfredo was subsequently declared as in default for his failure to
file his Answer to the Complaint.
The defendants-appellees filed their Answer with Counterclaim on May 7, 1997, denying the material
allegations of the complaint. Additionally, they claimed that: (1) the deed of sale was actually executed
by Gregorio on July 19 (or 18), 1996 and not July 22, 1996; (2) the Notary Public personally went to the
Hospital in Bayombong, Nueva Vizcaya on July 18, 1996 to notarize the deed of sale already subject of a
previously concluded covenant between Gregorio and the Spouses Paragas; (3) at the time Gregorio
signed the deed, he was strong and of sound and disposing mind; (4) Lots 1175-E and 1175-F were
Gregorios separate capital and the inscription of Lorenzas name in the titles was just a description of
Gregorios marital status; (5) the entire area of Lots 1175-E and 1175-F were sold to the Spouses Paragas.
They interposed a counterclaim for damages.
At the trial, the parties proceeded to prove their respective contentions.
Plaintiff-appellant Nanette Balacano testified to prove the material allegations of their complaint. On
Gregorios medical condition, she declared that: (1) Gregorio, who was then 81 years old, weak and sick,
was brought to the hospital in Bayombong, Nueva Vizcaya on June 28, 1996 and stayed there until the
afternoon on July 19, 1996; (2) thereafter, Gregorio, who by then was weak and could no longer talk and
whose condition had worsened, was transferred in the afternoon of July 19, 1996 to the Veterans
Memorial Hospital in Quezon City where Gregorio died. She claimed that Gregorio could not have signed
a deed of sale on July 19, 1996 because she stayed at the hospital the whole of that day and saw no
visitors. She likewise testified on their agreement for attorneys fees with their counsel and the litigation
expenses they incurred.
Additionally, the plaintiffs-appellees presented in evidence Gregorios medical records and his death
certificate.
Defendants-appellees, on the other hand, presented as witnesses Notary Public de Guzman and
instrumental witness Antonio to prove Gregorios execution of the sale and the circumstances under the
deed was executed. They uniformly declared that: (1) on July 18, 1996, they went to the hospital in
Bayombong, Nueva Vizcaya where Gregorio was confined with Rudy; (2) Atty. De Guzman read and
explained the contents of the deed to Gregorio; (3) Gregorio signed the deed after receiving the money
from Rudy; (4) Julia and Antonio signed the deed as witnesses. Additionally, Atty. De Guzman explained
that the execution of the deed was merely a confirmation of a previous agreement between the Spouses
Paragas and Gregorio that was concluded at least a month prior to Gregorios death; that, in fact,
Gregorio had previously asked him to prepare a deed that Gregorio eventually signed on July 18, 1996.
He also explained that the deed, which appeared to have been executed on July 22, 1996, was actually
executed on July 18, 1996; he notarized the deed and entered it in his register only on July 22, 1996. He
claimed that he did not find it necessary to state the precise date and place of execution (Bayombong,
Nueva Vizcaya, instead of Santiago City) of the deed of sale because the deed is merely a confirmation of
a previously agreed contract between Gregorio and the Spouses Paragas. He likewise stated that of the
stated P500,000.00 consideration in the deed, Rudy paid Gregorio P450,000.00 in the hospital because
Rudy had previously paid Gregorio P50,000.00. For his part, Antonio added that he was asked by Rudy to
take pictures of Gregorio signing the deed. He also claimed that there was no entry on the date when he
signed; nor did he remember reading Santiago City as the place of execution of the deed. He described
Gregorio as still strong but sickly, who got up from the bed with Julias help.
Witness for defendants-appellants Luisa Agsalda testified to prove that Lot 1175-E was Gregorios
separate property. She claimed that Gregorios father (Leon) purchased a two-hectare lot from them in
1972 while the other lot was purchased from her neighbor. She also declared that Gregorio inherited
these lands from his father Leon; she does not know, however, Gregorios brothers share in the
inheritance. Defendant-appellant Catalino also testified to corroborate the testimony of witness Luisa
Agsalda; he said that Gregorio told him that he (Gregorio) inherited Lots 1175-E and 1175-F from his
father Leon. He also stated that a portion of Lot 1175-E consisting of 6,416 square meters was sold to
him by the Spouses Paragas and that he will pay the Spouses Paragas P50,000.00, not as consideration
for the return of the land but for the transfer of the title to his name.
Additionally, the defendants-appellants presented in evidence the pictures taken by Antonio when
Gregorio allegedly signed the deed.[4]
 The lower court, after trial, rendered the decision declaring null and void the deed of sale
purportedly executed by Gregorio Balacano in favor of the spouses Rudy Paragas and Corazon Paragas.
In nullifying the deed of sale executed by Gregorio, the lower court initially noted that at the time
Gregorio executed the deed, Gregorio was ill. The lower courts reasoning in declaring the deed of sale
null and void and this reasonings premises may be summarized as follows: (1) the deed of sale was
improperly notarized; thus it cannot be considered a public document that is usually accorded the
presumption of regularity; (2) as a private document, the deed of sales due execution must be proved in
accordance with Section 20, Rule 132 of the Revised Rules on Evidence either: (a) by anyone who saw
the document executed or written; or (b) by evidence of the genuineness of the signature or handwriting
of the maker; and (3) it was incumbent upon the Spouses Paragas to prove the deed of sales due
execution but failed to do so the lower court said that witness Antonio Agcaoili is not credible while Atty.
Alexander De Guzman is not reliable.[5]
The lower court found the explanations of Atty. De Guzman regarding the erroneous entries on
the actual place and date of execution of the deed of sale as justifications for a lie. The lower court said
The Court cannot imagine an attorney to undertake to travel to another province to notarize a document
when he must certainly know, being a lawyer and by all means, not stupid, that he has no authority to
notarize a document in that province. The only logical thing that happened was that Rudy Paragas
brought the deed of sale to him on July 22, 1996 already signed and requested him to notarize the same
which he did, not knowing that at that time the vendor was already in a hospital and [sic] Quezon City. Of
course had he known, Atty. De Guzman would not have notarized the document. But he trusted Rudy
Paragas and moreover, Gregorio Balacano already informed him previously in June that he will sell his
lands to Paragas. In addition [sic, (,) was omitted] Rudy Paragas also told him that Balacano received an
advance of P50,000.00.
The intention to sell is not actual selling. From the first week of June when, according to Atty. De
Guzman, Gregorio Balacano informed him that he will sell his land to Rudy Paragas, enough time elapsed
to the time he was brought to the hospital on June 28, 1996. Had there been a meeting of the minds
between Gregorio Balacano and Rudy Paragas regarding the sale, surely Gregorio Balacano would have
immediately returned to the office of Atty. De Guzman to execute the deed of sale. He did not until he
was brought to the hospital and diagnosed to have liver cirrhosis. Because of the seriousness of his
illness, it is not expected that Gregorio Balacano would be negotiating a contract of sale. Thus, Rudy
Paragas negotiated with Catalino Balacano, the son of Gregorio Balacano with whom the latter was
staying.[6]
The lower court also did not consider Antonio Agcaoili, petitioner Rudy Paragass driver, a
convincing witness, concluding that he was telling a rehearsed story. The lower court said
The only portion of his testimony that is true is that he signed the document. How could the Court
believe that he brought a camera with him just to take pictures of the signing? If the purpose was to
record the proceeding for posterity, why did he not take the picture of Atty. De Guzman when the latter
was reading and explaining the document to Gregorio Balacano? Why did he not take the picture of both
Gregorio Balacano and Atty. de Guzman while the old man was signing the document instead of taking a
picture of Gregorio Balacano alone holding a ball pen without even showing the document being signed?
Verily there is a picture of a document but only a hand with a ball pen is shown with it. Why? Clearly the
driver Antonio Agcaoili must have only been asked by Rudy Paragas to tell a concocted story which he
himself would not dare tell in Court under oath.[7]
The lower court likewise noted that petitioner Rudy Paragas did not testify about the signing of
the deed of sale. To the lower court, Rudys refusal or failure to testify raises a lot of questions, such as:
(1) was he (Rudy) afraid to divulge the circumstances of how he obtained the signature of Gregorio
Balacano, and (2) was he (Rudy) afraid to admit that he did not actually pay the P500,000.00 indicated in
the deed of sale as the price of the land?[8]
The lower court also ruled that Lots 1175-E and 1175-F were Gregorios and Lorenzas conjugal
partnership properties. The lower court found that these lots were acquired during the marriage
because the certificates of title of these lots clearly stated that the lots are registered in the name
Gregorio, married to Lorenza Sumigcay. Thus, the lower court concluded that the presumption of law
(under Article 160 of the Civil Code of the Philippines) that property acquired during the marriage is
presumed to belong to the conjugal partnership fully applies to Lots 1175-E and 1175-F.[9]
Thus, on 8 March 1999, the RTC, Branch 21, of Santiago City, Isabela, rendered a Decision [10] in
Civil Case No. 21-2313, the dispositive portion of which reads as follows:
WHEREFORE in the light of the foregoing considerations judgment is hereby rendered:
1. DECLARING as NULL and VOID the deed of sale purportedly executed by Gregorio
Balacano in favor of the spouses Rudy Paragas and Corazon Paragas over lots
1175-E and 1175-F covered by TCT Nos. T-103297 and T-103298, respectively;
2. ORDERING the cancellation of TCT Nos. T-258042 and T-258041 issued in the name
of the spouses Rudy and Corazon Paragas by virtue of the deed of sale; and
DECLARING the parcel of lands, lots 1175-E and 1175-F as part of the estate of the deceased spouses
Gregorio Balacano and Lorenza Balacano.[11]
In the assailed Decision dated 15 February 2005, the Court of Appeals affirmed the Decision of the
trial court, with the modification that Lots 1175-E and 1175-F were adjudged as belonging to the estate
of Gregorio Balacano. The appellate court disposed as follows:
WHEREFORE, premises considered, the appeal is hereby DISMISSED. We AFFIRM the appealed Decision
for the reasons discussed above, with the MODIFICATION that Lots 1175-E and 1175-F belong to the
estate of Gregorio Balacano.
Let a copy of this Decision be furnished the Office of the Bar Confidant for whatever action her Office
may take against Atty. De Guzman.[12] (Emphasis in the original.)
Herein petitioners motion for reconsideration was met with similar lack of success when it was
denied for lack of merit by the Court of Appeals in its Resolution [13] dated 17 May 2005.
Hence, this appeal via a petition for review where petitioners assign the following errors to the
Court of Appeals, viz:
A. THE HONORABLE COURT OF APPEALS, WITH GRAVE ABUSE OF DISCRETION, SERIOUSLY
ERRED IN FINDING THAT THERE WAS NO PERFECTED AND PARTIALLY EXECUTED
CONTRACT OF SALE OVER LOTS 1175-E AND 1175-F PRIOR TO THE SIGNING OF THE
DEED OF SALE.
B. THE HONORABLE COURT OF APPEALS, WITH GRAVE ABUSE OF DISCRETION, SERIOUSLY
FAILED TO APPRECIATE THE SIGNIFICANCE OF THE JUDICIAL ADMISSION ON THE
AUTHENTICITY AND DUE EXECUTION OF THE DEED OF SALE MADE BY THE
RESPONDENTS DURING THE PRE-TRIAL CONFERENCE.
C. THE HONORABLE COURT OF APPEALS, WITH GRAVE ABUSE OF DISCRETION, BASED ITS
CONCLUSION THAT GREGORIOS CONSENT TO THE SALE OF THE LOTS WAS ABSENT
MERELY ON SPECULATIONS AND SURMISES.
 D. THE HONORABLE COURT OF APPEALS, WITH GRAVE ABUSE OF DISCRETION, SERIOUSLY
ERRED IN NOT RULING ON THE ISSUE OF RESPONDENTS LACK OF LEGAL CAPACITY TO
SUE FOR NOT BEING THE PROPER PARTIES IN INTEREST.
E. THE HONORABLE COURT OF APPEALS, WITH GRAVE ABUSE OF DISCRETION, SERIOUSLY
ERRED IN DISMISSING ATTY. ALEXANDER DE GUZMAN AND ANTONIO AGCAOILI AS
NOT CREDIBLE WITNESSES.[14]
At bottom is the issue of whether or not the Court of Appeals committed reversible error in
upholding the findings and conclusions of the trial court on the nullity of the Deed of Sale purportedly
executed between petitioners and the late Gregorio Balacano.
To start, we held in Blanco v. Quasha[15] that this Court is not a trier of facts. As such, it is not its
function to examine and determine the weight of the evidence supporting the assailed decision. Factual
findings of the Court of Appeals, which are supported by substantial evidence, are binding, final and
conclusive upon the Supreme Court,[16] and carry even more weight when the said court affirms the
factual findings of the trial court. Moreover, well- entrenched is the prevailing jurisprudence that only
errors of law and not of facts are reviewable by this Court in a petition for review on  certiorari under
Rule 45 of the Revised Rules of Court.
The foregoing tenets in the case at bar apply with greater force to the petition under
consideration because the factual findings by the Court of Appeals are in full agreement with that of the
trial court.
Specifically, the Court of Appeals, in affirming the trial court, found that there was no prior and
perfected contract of sale that remained to be fully consummated. The appellate court explained -
In support of their position, the defendants-appellants argue that at least a month prior to Gregorios
signing of the deed, Gregorio and the Spouses Paragas already agreed on the sale of Lots 1175-E and
1175-F; and that, in fact, this agreement was partially executed by Rudys payment to Gregorio
of P50,000.00 before Gregorio signed the deed at the hospital. In line with this position, defendants-
appellants posit that Gregorios consent to the sale should be determined, not at the time Gregorio
signed the deed of sale on July 18, 1996, but at the time when he agreed to sell the property in June
1996 or a month prior to the deeds signing; and in June 1996, Gregorio was of sound and disposing mind
and his consent to the sale was in no wise vitiated at that time. The defendants-appellants further argue
that the execution or signing of the deed of sale, however, irregular it might have been, does not affect
the validity of the previously agreed sale of the lots, as the execution or signing of the deed is merely a
formalization of a previously agreed oral contract.
...
In the absence of any note, memorandum or any other written instrument evidencing the alleged
perfected contract of sale, we have to rely on oral testimonies, which in this case is that of Atty. de
Guzman whose testimony on the alleged oral agreement may be summarized as follows: (1) that
sometime in the first week of June 1996, Gregorio requested him (Atty. de Guzman) to prepare a deed of
sale of two lots; (2) Gregorio came to his firms office in the morning with a certain Doming Balacano,
then returned in the afternoon with Rudy; (3) he (Atty. de Guzman) asked Gregorio whether he really
intends to sell the lots; Gregorio confirmed his intention; (4) Gregorio and Rudy left the law office at 5:00
p.m., leaving the certificates of title; (5) he prepared the deed a day after Rudy and Gregorio came. With
regard to the alleged partial execution of this agreement, Atty. de Guzman said that he was told by Rudy
that there was already a partial payment of P50,000.00.
We do not consider Atty. de Guzmans testimony sufficient evidence to establish the fact that there was a
prior agreement between Gregorio and the Spouses Paragas on the sale of Lots 1175-E and 1175-F. This
testimony does not conclusively establish the meeting of the minds between Gregorio and the Spouses
Paragas on the price or consideration for the sale of Lots 1175-E and 1175-F Atty. de Guzman merely
declared that he was asked by Gregorio to prepare a deed; he did not clearly narrate the details of this
agreement. We cannot assume that Gregorio and the Spouses Paragas agreed to a P500,000.00
consideration based on Atty. de Guzmans bare assertion that Gregorio asked him to prepare a deed, as
Atty. de Guzman was not personally aware of the agreed consideration in the sale of the lots, not being
privy to the parties agreement. To us, Rudy could have been a competent witness to testify on the
perfection of this prior contract; unfortunately, the defendants-appellants did not present Rudy as their
witness.
We seriously doubt too the credibility of Atty. de Guzman as a witness. We cannot rely on his testimony
because of his tendency to commit falsity. He admitted in open court that while Gregorio signed the
deed on July 18, 1996 at Bayombong, Nueva Vizcaya, he nevertheless did not reflect these matters when
he notarized the deed; instead he entered Santiago City and July 22, 1996, as place and date of
execution, respectively. To us, Atty. de Guzmans propensity to distort facts in the performance of his
public functions as a notary public, in utter disregard of the significance of the act of notarization,
seriously affects his credibility as a witness in the present case. In fact, Atty. de Guzmans act in falsifying
the entries in his acknowledgment of the deed of sale could be the subject of administrative and
disciplinary action, a matter that we however do not here decide.
Similarly, there is no conclusive proof of the partial execution of the contract because the only evidence
the plaintiffs-appellants presented to prove this claim was Atty. de Guzmans testimony, which is hearsay
and thus, has no probative value. Atty. de Guzman merely stated that Rudy told him that Rudy already
gave P50,000.00 to Gregorio as partial payment of the purchase price; Atty. de Guzman did not
personally see the payment being made.[17]
But, did Gregorio give an intelligent consent to the sale of Lots 1175-E and 1175-F when he signed
the deed of sale? The trial court as well as the appellate court found in the negative. In the Court of
Appeals rationale-
It is not disputed that when Gregorio signed the deed of sale, Gregorio was seriously ill, as he in fact died
a week after the deeds signing. Gregorio died of complications caused by cirrhosis of the liver. Gregorios
death was neither sudden nor immediate; he fought at least a month-long battle against the disease
until he succumbed to death on July 22, 1996. Given that Gregorio purportedly executed a deed during
the last stages of his battle against his disease, we seriously doubt whether Gregorio could have read, or
fully understood, the contents of the documents he signed or of the consequences of his act. We note in
this regard that Gregorio was brought to the Veterans Hospital at Quezon City because his condition had
worsened on or about the time the deed was allegedly signed. This transfer and fact of death not long
after speak volumes about Gregorios condition at that time. We likewise see no conclusive evidence that
the contents of the deed were sufficiently explained to Gregorio before he affixed his signature. The
evidence the defendants-appellants offered to prove Gregorios consent to the sale consists of the
testimonies of Atty. de Guzman and Antonio. As discussed above, we do not find Atty. de Guzman a
credible witness. Thus, we fully concur with the heretofore-quoted lower courts evaluation of the
testimonies given by Atty. de Guzman and Antonio because this is an evaluation that the lower court was
in a better position to make.
Additionally, the irregular and invalid notarization of the deed is a falsity that raises doubts on the
regularity of the transaction itself. While the deed was indeed signed on July 18, 1996 at Bayombong,
Nueva Vizcaya, the deed states otherwise, as it shows that the deed was executed on July 22, 1996 at
Santiago City. Why such falsity was committed, and the circumstances under which this falsity was
committed, speaks volume about the regularity and the validity of the sale. We cannot but consider the
commission of this falsity, with the indispensable aid of Atty. de Guzman, an orchestrated attempt to
legitimize a transaction that Gregorio did not intend to be binding upon him nor on his bounty.
Article 24 of the Civil Code tells us that in all contractual, property or other relations, when one of the WHEREFORE, the present petition is hereby DENIED. Accordingly, the Decision [23] and the
parties is at a disadvantage on account of his moral dependence, ignorance, indigence, mental weakness, Resolution,[24] dated 15 February 2005 and 17 May 2005, respectively, of the Court of Appeals in CA-G.R.
tender age or other handicap, the courts must be vigilant for his protection.[18] CV No. 64048 are hereby AFFIRMED. No costs.

SO ORDERED.
Based on the foregoing, the Court of Appeals concluded that Gregorios consent to the sale of the
lots was absent, making the contract null and void. Consequently, the spouses Paragas could not have
made a subsequent transfer of the property to Catalino Balacano. Indeed, nemo dat quod non
habet. Nobody can dispose of that which does not belong to him.[19]

We likewise find to be in accord with the evidence on record the ruling of the Court of Appeals
declaring the properties in controversy as paraphernal properties of Gregorio in the absence of
competent evidence on the exact date of Gregorios acquisition of ownership of these lots.

On the credibility of witnesses, it is in rhyme with reason to believe the testimonies of the
witnesses for the complainants vis--vis those of the defendants. In the assessment of the credibility of
witnesses, we are guided by the following well-entrenched rules: (1) that evidence to be believed must
not only spring from the mouth of a credible witness but must itself be credible, and (2) findings of facts
and assessment of credibility of witness are matters best left to the trial court who had the front-line
opportunity to personally evaluate the witnesses demeanor, conduct, and behavior while testifying. [20]

In the case at bar, we agree in the trial courts conclusion that petitioners star witness, Atty. De
Guzman is far from being a credible witness. Unlike this Court, the trial court had the unique opportunity
of observing the demeanor of said witness. Thus, we affirm the trial court and the Court of Appeals
uniform decision based on the whole evidence in record holding the Deed of Sale in question to be null
and void.

In Domingo v. Court of Appeals,[21] the Court declared as null and void the deed of sale therein
inasmuch as the seller, at the time of the execution of the alleged contract, was already of advanced age
and senile. We held

. . . She died an octogenarian on March 20, 1966, barely over a year when the deed was allegedly
executed on January 28, 1965, but before copies of the deed were entered in the registry allegedly on
May 16 and June 10, 1966. The general rule is that a person is not incompetent to contract merely
because of advanced years or by reason of physical infirmities. However, when such age or infirmities
have impaired the mental faculties so as to prevent the person from properly, intelligently, and firmly
protecting her property rights then she is undeniably incapacitated. The unrebutted testimony of Zosima HEIRS OF IGNACIA AGUILAR-REYES, petitioners, vs. SPOUSES CIPRIANO MIJARES AND FLORENTINA
Domingo shows that at the time of the alleged execution of the deed, Paulina was already incapacitated MIJARES, respondents.
physically and mentally. She narrated that Paulina played with her waste and urinated in bed. Given
DECISION
these circumstances, there is in our view sufficient reason to seriously doubt that she consented to the
sale of and the price for her parcels of land. Moreover, there is no receipt to show that said price was YNARES-SANTIAGO, J.:
paid to and received by her. Thus, we are in agreement with the trial courts finding and conclusion on
the matter: . . .
Under the regime of the Civil Code, the alienation or encumbrance of a conjugal real property
requires the consent of the wife. The absence of such consent renders the entire transaction [1] merely
In the case at bar, the Deed of Sale was allegedly signed by Gregorio on his death bed in the voidable and not void.[2] The wife may, during the marriage and within ten years from the transaction
hospital. Gregorio was an octogenarian at the time of the alleged execution of the contract and suffering questioned, bring an action for the annulment of the contract entered into by her husband without her
from liver cirrhosis at that circumstances which raise grave doubts on his physical and mental capacity to consent.[3]
freely consent to the contract. Adding to the dubiety of the purported sale and further bolstering
respondents claim that their uncle Catalino, one of the children of the decedent, had a hand in the Assailed in this petition for review on certiorari are the January 26, 2000 Decision[4] and June 19,
execution of the deed is the fact that on 17 October 1996, petitioners sold a portion of Lot 1175-E 2000, Resolution[5] of the Court of Appeals in CA-G.R. No. 28464 which declared respondents as
consisting of 6,416 square meters to Catalino for P60,000.00.[22] One need not stretch his imagination to purchasers in good faith and set aside the May 31, 1990 and June 29, 1990 Orders of the Regional Trial
surmise that Catalino was in cahoots with petitioners in maneuvering the alleged sale. Court of Quezon City, Branch 101, in Civil Case No. Q-48018.

On the whole, we find no reversible error on the part of the appellate court in CA-G.R. CV No. The controversy stemmed from a dispute over Lot No. 4349-B-2,[6] approximately 396 square
64048 that would warrant the reversal thereof. meters, previously covered by Transfer Certificate of Title (TCT) No. 205445, located in Balintawak,
Quezon City and registered in the name of Spouses Vicente Reyes and Ignacia Aguilar-Reyes. [7] Said lot
and the apartments built thereon were part of the spouses conjugal properties having been purchased
using conjugal funds from their garments business.[8]
Vicente and Ignacia were married in 1960, but had been separated de facto since 1974.
[9]
 Sometime in 1984, Ignacia learned that on March 1, 1983, Vicente sold Lot No. 4349-B-2 to respondent
spouses Cipriano and Florentina Mijares for P40,000.00. [10] As a consequence thereof, TCT No. 205445
was cancelled and TCT No. 306087 was issued on April 19, 1983 in the name of respondent spouses.
[11]
 She likewise found out that Vicente filed a petition for administration and appointment of guardian
with the Metropolitan Trial Court of Quezon City, Branch XXI. Vicente misrepresented therein that his
wife, Ignacia, died on March 22, 1982, and that he and their 5 minor children were her only heirs. [12] On
September 29, 1983, the court appointed Vicente as the guardian of their minor children.
[13]
 Subsequently, in its Order dated October 14, 1983, the court authorized Vicente to sell the estate of
Ignacia.[14]
On August 9, 1984, Ignacia, through her counsel, sent a letter to respondent spouses demanding
the return of her share in the lot. Failing to settle the matter amicably, Ignacia filed on June 4, 1996 a
complaint[15] for annulment of sale against respondent spouses. The complaint was thereafter amended
to include Vicente Reyes as one of the defendants.[16]
In their answer, respondent spouses claimed that they are purchasers in good faith and that the
sale was valid because it was duly approved by the court. [17] Vicente Reyes, on the other hand,
contended that what he sold to the spouses was only his share in Lot No. 4349-B-2, excluding the share
of his wife, and that he never represented that the latter was already dead. [18] He likewise testified that
respondent spouses, through the counsel they provided him, took advantage of his illiteracy by filing a
petition for the issuance of letters of administration and appointment of guardian without his
knowledge.[19]
On February 15, 1990, the court a quo rendered a decision declaring the sale of Lot No. 4349-B-2
void with respect to the share of Ignacia. It held that the purchase price of the lot was P110,000.00 and
ordered Vicente to return thereof or P55,000.00 to respondent spouses. The dispositive portion of the
said decision, reads-
WHEREFORE, premises above considered, judgment is hereby rendered declaring the subject Deed of
Absolute Sale, dated March [1,] 1983 signed by and between defendants Vicente Reyes and defendant
Cipriano Mijares NULL AND VOID WITH RESPECT TO ONE-HALF (1/2) OF THE SAID PROPERTY;
The Register of Deeds of Quezon City is hereby ordered to cancel TCT No. 306083 (sic) in the names of
defendant spouses Cipriano Mijares and Florentina Mijares and to issue a new TCT in the name of the
plaintiff Ignacia Aguilar-Reyes as owner in fee simple of one-half (1/2) of said property and the other half
in the names of defendant spouses Cipriano Mijares and Florentin[a] Mijares, upon payment of the
required fees therefore;
Said defendant spouses Mijares are also ordered to allow plaintiff the use and exercise of rights, as well
as obligations, pertinent to her one-half (1/2) ownership of the subject property;
Defendant Vicente Reyes is hereby ordered to reimburse P55,000.00 with legal rate of interest from the
execution of the subject Deed of Absolute Sale on March 1, 1983, to the defendant spouses Cipriano
Mijares and Florentina Mijares which corresponds to the one-half (1/2) of the actual purchase price by
the said Mijares but is annulled in this decision (sic);
Defendant Vicente Reyes is hereby further ordered to pay plaintiff the amount of P50,000.00 by way of
moral and exemplary damages, plus costs of this suit.
SO ORDERED.[20]
Ignacia filed a motion for modification of the decision praying that the sale be declared void in its
entirety and that the respondents be ordered to reimburse to her the rentals they collected on the
apartments built on Lot No. 4349-B-2 computed from March 1, 1983.
On May 31, 1990, the trial court modified its decision by declaring the sale void in its entirety and
ordering Vicente Reyes to reimburse respondent spouses the purchase price of P110,000, thus
WHEREFORE, premises considered, judgment is hereby rendered declaring the subject Deed of Absolute
Sale, dated March 1, 1983 signed by and between defendants Vicente Reyes and defendant Cipriano
Mijares as null and void ab initio, in view of the absence of the wifes conformity to said transaction.
Consequent thereto, the Register of Deeds for Quezon City is hereby ordered to cancel TCT No. 306083
(sic) in the name of Cipriano Mijares and Florentin[a] Mijares and issue a new TCT in the name of the
plaintiff and defendant Ignacia Aguilar-Reyes and Vicente Reyes as owners in fee simple, upon payment
of required fees therefore.
Defendant Vicente Reyes is hereby ordered to pay the amount of one hundred ten thousand pesos
(P110,000.00) with legal rate of interest at 12% per annum from the execution of the subject Deed of
Absolute Sale on March 1, 1983.
Further, defendant Vicente Reyes is ordered to pay the amount of P50,000.00 by way of moral and
exemplary damages, plus costs of this suit.
SO ORDERED.[21]
On motion[22] of Ignacia, the court issued an Order dated June 29, 1990 amending the dispositive
portion of the May 31, 1990 decision by correcting the Transfer Certificate of Title of Lot No. 4349-B-2, in
the name of Cipriano Mijares and Florentina Mijares, from TCT No. 306083 to TCT No. 306087; and
directing the Register of Deeds of Quezon City to issue a new title in the name of Ignacia Aguilar-Reyes
and Vicente Reyes. The Order likewise specified that Vicente Reyes should pay Ignacia Aguilar-Reyes the
amount of P50,000.00 as moral and exemplary damages.[23]
Both Ignacia Aguilar-Reyes and respondent spouses appealed the decision to the Court of Appeals.
[24]
 Pending the appeal, Ignacia died and she was substituted by her compulsory heirs. [25]
Petitioners contended that they are entitled to reimbursement of the rentals collected on the
apartment built on Lot No. 4349-B-2, while respondent spouses claimed that they are buyers in good
faith. On January 26, 2000, the Court of Appeals reversed and set aside the decision of the trial court.  It
ruled that notwithstanding the absence of Ignacias consent to the sale, the same must be held valid in
favor of respondents because they were innocent purchasers for value. [26] The decretal potion of the
appellate courts decision states
WHEREFORE, premises considered, the Decision appealed from and the Orders dated May 31, 1990 and
June 29, 1990, are SET ASIDE and in lieu thereof a new one is rendered
1. Declaring the Deed of Absolute Sale dated March 1, 1983 executed by Vicente Reyes in favor of
spouses Cipriano and [Florentina] Mijares valid and lawful;
2. Ordering Vicente Reyes to pay spouses Mijares the amount of P30,000.00 as attorneys fees and legal
expenses; and
3. Ordering Vicente Reyes to pay spouses Mijares P50,000.00 as moral damages.
No pronouncement as to costs.
SO ORDERED.[27]
Undaunted by the denial of their motion for reconsideration, [28] petitioners filed the instant
petition contending that the assailed sale of Lot No. 4392-B-2 should be annulled because respondent
spouses were not purchasers in good faith.
The issues for resolution are as follows: (1) What is the status of the sale of Lot No. 4349-B-2 to
respondent spouses? (2) Assuming that the sale is annullable, should it be annulled in its entirety or only
with respect to the share of Ignacia? (3) Are respondent spouses purchasers in good faith?
[29]
Articles 166 and 173 of the Civil Code,  the governing laws at the time the assailed sale was
contracted, provide:
Art.166. Unless the wife has been declared a non compos mentis or a spendthrift, or is under civil
interdiction or is confined in a leprosarium, the husband cannot alienate or encumber any real property
of the conjugal partnership without the wifes consent. If she refuses unreasonably to give her consent,
the court may compel her to grant the same
Art. 173. The wife may, during the marriage and within ten years from the transaction questioned, ask
the courts for the annulment of any contract of the husband entered into without her consent, when
such consent is required, or any act or contract of the husband which tends to defraud her or impair her
interest in the conjugal partnership property. Should the wife fail to exercise this right, she or her heirs
after the dissolution of the marriage, may demand the value of property fraudulently alienated by the
husband.
Pursuant to the foregoing provisions, the husband could not alienate or encumber any conjugal
real property without the consent, express or implied, of the wife otherwise, the contract is
voidable. Indeed, in several cases[30] the Court had ruled that such alienation or encumbrance by the
husband is void. The better view, however, is to consider the transaction as merely voidable and not
void.[31] This is consistent with Article 173 of the Civil Code pursuant to which the wife could, during the
marriage and within 10 years from the questioned transaction, seek its annulment.[32]
In the case of Heirs of Christina Ayuste v. Court of Appeals,[33] it was categorically held that
There is no ambiguity in the wording of the law. A sale of real property of the conjugal partnership made
by the husband without the consent of his wife is voidable. The action for annulment must be brought
during the marriage and within ten years from the questioned transaction by the wife. Where the law
speaks in clear and categorical language, there is no room for interpretation there is room only for
application.[34]
Likewise, in Spouses Guiang v. Court of Appeals,[35] the Court quoted with approval the ruling of
the trial court that under the Civil Code, the encumbrance or alienation of a conjugal real property by the
husband absent the wifes consent, is voidable and not void. Thus
Under Article 166 of the Civil Code, the husband cannot generally alienate or encumber any real
property of the conjugal partnership without the wifes consent. The alienation or encumbrance if so
made however is not null and void. It is merely voidable. The offended wife may bring an action to annul
the said alienation or encumbrance. Thus, the provision of Article 173 of the Civil Code of the Philippines,
to wit:
Art. 173. The wife may, during the marriage and within ten years from the transaction questioned, ask
the courts for the annulment of any contract of the husband entered into without her consent, when
such consent is required, or any act or contract of the husband which tends to defraud her or impair her
interest in the conjugal partnership property. Should the wife fail to exercise this right, she or her heirs
after the dissolution of the marriage, may demand the value of property fraudulently alienated by the
husband.
This particular provision giving the wife ten (10) years x x x during [the] marriage to annul the alienation
or encumbrance was not carried over to the Family Code. It is thus clear that any alienation or
encumbrance made after August 3, 1988 when the Family Code took effect by the husband of the
conjugal partnership property without the consent of the wife is null and void
In the case at bar, there is no dispute that Lot No. 4349-B-2, is a conjugal property having been
purchased using the conjugal funds of the spouses during the subsistence of their marriage.  It is beyond
cavil therefore that the sale of said lot to respondent spouses without the knowledge and consent of
Ignacia is voidable. Her action to annul the March 1, 1983 sale which was filed on June 4, 1986, before
her demise is perfectly within the 10 year prescriptive period under Article 173 of the Civil Code.  Even if
we reckon the period from November 25, 1978 which was the date when Vicente and the respondent
spouses entered into a contract concerning Lot No. 4349-B-2, Ignacias action would still be within the
prescribed period.
Anent the second issue, the trial court correctly annulled the voidable sale of Lot No. 4349-B-2 in
its entirety. In Bucoy v. Paulino,[36] a case involving the annulment of sale with assumption of mortgages
executed by the husband without the consent of the wife, it was held that the alienation or
encumbrance must be annulled in its entirety and not only insofar as the share of the wife in the
conjugal property is concerned. Although the transaction in the said case was declared void and not
merely voidable, the rationale for the annulment of the whole transaction is the same thus
The plain meaning attached to the plain language of the law is that the contract, in its entirety, executed
by the husband without the wife's consent, may be annulled by the wife. Had Congress intended to limit
such annulment in so far as the contract shall prejudice the wife, such limitation should have been
spelled out in the statute. It is not the legitimate concern of this Court to recast the law. As Mr. Justice
Jose B. L. Reyes of this Court and Judge Ricardo C. Puno of the Court of First Instance correctly stated,
[t]he rule (in the first sentence of Article 173) revokes Baello vs. Villanueva, 54 Phil. 213 and Coque vs.
Navas Sioca, 45 Phil. 430, in which cases annulment was held to refer only to the extent of the one-half
interest of the wife
The necessity to strike down the contract of July 5, 1963 as a whole, not merely as to the share of the
wife, is not without its basis in the common-sense rule. To be underscored here is that upon the
provisions of Articles 161, 162 and 163 of the Civil Code, the conjugal partnership is liable for many
obligations while the conjugal partnership exists. Not only that. The conjugal property is even subject to
the payment of debts contracted by either spouse before the marriage, as those for the payment of fines
and indemnities imposed upon them after the responsibilities in Article 161 have been covered (Article
163, par. 3), if it turns out that the spouse who is bound thereby, should have no exclusive property or if
it should be insufficient. These are considerations that go beyond the mere equitable share of the wife in
the property. These are reasons enough for the husband to be stopped from disposing of the conjugal
property without the consent of the wife. Even more fundamental is the fact that the nullity is decreed
by the Code not on the basis of prejudice but lack of consent of an indispensable party to the contract
under Article 166.[37]
With respect to the third issue, the Court finds that respondent spouses are not purchasers in
good faith. A purchaser in good faith is one who buys property of another, without notice that some
other person has a right to, or interest in, such property and pays full and fair price for the same, at the
time of such purchase, or before he has notice of the claim or interest of some other persons in the
property. He buys the property with the belief that the person from whom he receives the thing was the
owner and could convey title to the property. A purchaser cannot close his eyes to facts which should
put a reasonable man on his guard and still claim he acted in good faith.[38]
In the instant case, there existed circumstances that should have placed respondent spouses on
guard. The death certificate of Ignacia, shows that she died on March 22, 1982. The same death
certificate, however, reveals that (1) it was issued by the Office of the Civil Registrar of Lubao Pampanga
on March 10, 1982; (2) the alleged death of Ignacia was reported to the Office of the Civil Registrar
on March 4, 1982; and (3) her burial or cremation would be on March 8, 1982.[39] These obvious flaws in
the death certificate should have prompted respondents to investigate further, especially so that
respondent Florentina Mijares admitted on cross examination that she asked for the death certificate of
Ignacia because she was suspicious that Ignacia was still alive. [40] Moreover, respondent spouses had all
the opportunity to verify the claim of Vicente that he is a widower because it was their lawyer, Atty.
Rodriguito S. Saet, who represented Vicente in the special proceedings before the Metropolitan Trial
Court.
Neither can respondent spouses rely on the alleged court approval of the sale. Note that the
Order issued by the Metropolitan Trial Court of Quezon City, Branch XXXI, appointing Vicente as guardian
of his 5 minor children, as well as the Order authorizing him to sell the estate of Ignacia were issued only
on September 29, 1983 and October 14, 1983, respectively. On the other hand, the sale of the entire Lot
No. 4349-B-2 to respondent spouses appears to have been made not on March 1, 1983, but even as early
as November 25, 1978. In the Agreement dated November 25, 1978, Vicente in consideration of the
amount of P110,000.00, sold to Cipriano Mijares Lot No. 4349-B-2 on installment basis, with the first
installment due on or before July 31, 1979. [41] This was followed by a Memorandum of Understanding
executed on July 30, 1979, by Vicente and Cipriano (1) acknowledging Ciprianos receipt of Vicentes down
payment in the amount of P50,000.00; and (2) authorizing Florentina Mijares to collect rentals. [42] On July
14, 1981, Vicente and Cipriano executed another Memorandum of Agreement, stating, among other,
that out of the purchase price of P110,000.00 Vicente had remaining balance of P19,000.00. [43] Clearly
therefore, the special proceedings before the Metropolitan Trial Court of Quezon City, Branch XXXI,
could not have been the basis of respondent spouses claim of good faith because the sale of Lot No.
4349-B-2 occurred prior thereto.
Respondent spouses cannot deny knowledge that at the time of the sale in 1978, Vicente was
married to Ignacia and that the latter did not give her conformity to the sale. This is so because the 1978
Agreement described Vicente as married but the conformity of his wife to the sale did not appear in the
deed. Obviously, the execution of another deed of sale in 1983 over the same Lot No. 4349-B-2, after the
alleged death of Ignacia on March 22, 1982, as well as the institution of the special proceedings were,
intended to correct the absence of Ignacias consent to the sale. Even assuming that respondent spouses
believed in good faith that Ignacia really died on March 22, 1982, after they purchased the lot, the fact
remains that the sale of Lot No. 4349-B-2 prior to Ignacias alleged demise was without her consent and
therefore subject to annulment. The October 14, 1983 order authorizing the sale of the estate of Ignacia,
could not have validated the sale of Lot No. 4349-B-2 because said order was issued on the assumption
that Ignacia was already dead and that the sale dated March 1, 1983 was never categorically approved in
the said order.
The fact that the 5 minor children [44] of Vicente represented by the latter, signed the March 1,
1983 deed of sale of Lot No. 4349-B-2 will not estop them from assailing the validity thereof. Not only
were they too young at that time to understand the repercussions of the sale, they likewise had no right
to sell the property of their mother who, when they signed the deed, was very much alive.
If a voidable contract is annulled, the restoration of what has been given is proper.  The
relationship between parties in any contract even if subsequently annulled must always be characterized
and punctuated by good faith and fair dealing. Hence, for the sake of justice and equity, and in
consonance with the salutary principle of non-enrichment at anothers expense, the Court sustains the
trial courts order directing Vicente to refund to respondent spouses the amount of P110,000.00 which
they have paid as purchase price of Lot No. 4349-B-2.[45] The court a quo correctly found that the subject
of the sale was the entire Lot No. 4349-B-2 and that the consideration thereof is not P40,000.00 as
stated in the March 1, 1983 deed of sale, but P110,000.00 as evidenced by the (1) Agreement dated
November 25, 1978 as well as the July 30, 1979 Memorandum of Understanding and the July 14, 1981
Memorandum of Agreement which served as receipts of the installment payments made by respondent
Cipriano Mijares; and (2) the receipt duly signed by Vicente Reyes acknowledging receipt of the amount
of P110,000.00 from respondent spouses as payment of the sale of the controverted lot.[46]
The trial court, however, erred in imposing 12% interest per annum on the amount due the
respondents. In Eastern Shipping Lines, Inc. v. Court of Appeals,[47] it was held that interest on obligations
not constituting a loan or forbearance of money is six percent (6%) annually. If the purchase price could
be established with certainty at the time of the filing of the complaint, the six percent (6%) interest
should be computed from the date the complaint was filed until finality of the decision. In Lui v. Loy,
[48]
 involving a suit for reconveyance and annulment of title filed by the first buyer against the seller and
the second buyer, the Court, ruling in favor of the first buyer and annulling the second sale, ordered the
seller to refund to the second buyer (who was not a purchaser in good faith) the purchase price of the
lots. It was held therein that the 6% interest should be computed from the date of the filing of the
complaint by the first buyer. After the judgment becomes final and executory until the obligation is
satisfied, the amount due shall earn interest at 12% per year, the interim period being deemed
equivalent to a forbearance of credit.[49]
Accordingly, the amount of P110,000.00 due the respondent spouses which could be determined
with certainty at the time of the filing of the complaint shall earn 6% interest per annum from June 4,
1986 until the finality of this decision. If the adjudged principal and the interest (or any part thereof)
remain unpaid thereafter, the interest rate shall be twelve percent (12%) per annum computed from the
time the judgment becomes final and executory until it is fully satisfied.
Petitioners prayer for payment of rentals should be denied. Other than the allegation of Ignacia in
her Sinumpaang Salaysay that the apartments could be rented at P1,000.00 a month, no other evidence
was presented to substantiate her claim. In awarding rentals which are in the nature of actual damages,
the Court cannot rely on mere assertions, speculations, conjectures or guesswork but must depend on
competent proof and on the best evidence obtainable regarding the actual amount of loss. [50] None,
having been presented in the case at bar, petitioners claim for rentals must be denied.
While as a general rule, a party who has not appealed is not entitled to affirmative relief other
than the ones granted in the decision of the court below, law and jurisprudence authorize a tribunal to
consider errors, although unassigned, if they involve (1) errors affecting the lower courts jurisdiction over
the subject matter, (2) plain errors not specified, and (3) clerical errors. [51]In this case, though defendant
Vicente Reyes did not appeal, the plain error committed by the court a quo as to the award of moral and
exemplary damages must be corrected. These awards cannot be lumped together as was done by the
trial court.[52] Moral and exemplary damages are different in nature, and require separate
determination. Moral damages are awarded where the claimant experienced physical suffering, mental
anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social
humiliation, and similar injury as a result of the act complained of. [53] The award of exemplary damages,
on the other hand, is warranted when moral, temperate, liquidated, or compensatory damages were
likewise awarded by the court.[54]
Hence, the trial courts award of P50,000.00 by way of moral and exemplary damages should be
modified. Vicente Reyes should be ordered to pay the amounts of P25,000.00 as moral damages and
P25,000.00 as exemplary damages. Since Vicente Reyes was among the heirs substituted to the late
Ignacia Aguilar-Reyes, payment of moral and exemplary damages must be made by Vicente to his
children, petitioners in this case.
WHEREFORE, in view of all the foregoing, the petition is PARTIALLY GRANTED. The January 26,
2000 Decision and June 19, 2002, Resolution of the Court of Appeals in CA-G.R. No. 28464 are REVERSED
and SET ASIDE. The May 31, 1990 Order of the Regional Trial Court of Quezon City, Branch 101, in Civil
Case No. Q-48018, which annulled the March 1, 1983 Deed of Absolute Sale over Lot No. 4349-B-2, and
ordered the Register of Deeds of Quezon City to cancel TCT No. 306087 in the name of respondent
spouses Cipriano Mijares and Florentina Mijares covering the same property; as well as the June 29,
1990 Order correcting the typographical errors in the order dated March 1, 1983, are REINSTATED, with
the following MODIFICATIONS

(1) The Register of Deeds of Quezon City is ordered to issue a new certificate of title over Lot No.
4349-B-2, in the name of petitioners as co-owners thereof;

(2) Vicente Reyes is ordered to reimburse the respondent spouses the amount of P110,000.00 as
purchase price of Lot No. 4349-B-2, with interest at 6% per annum from June 4, 1986, until finality of this
decision. After this decision becomes final, interest at the rate of 12% per annum on the principal and
interest (or any part thereof) shall be imposed until full payment.

(3) Defendant Vicente Reyes is ordered to pay the heirs of the late Ignacia Aguilar-Reyes, the
amounts of P25,000.00 as moral damages and P25,000.00 as exemplary damages.

SO ORDERED.

Spouses ANTONIO and LUZVIMINDA GUIANG, petitioners, vs. COURT OF APPEALS and GILDA

CORPUZ, respondents.

DECISION

PANGANIBAN, J.:

The sale of a conjugal property requires the consent of both the husband and the wife. The
absence of the consent of one renders the sale null and void, while the vitiation thereof makes it merely
voidable. Only in the latter case can ratification cure the defect.
The Case

These were the principles that guided the Court in deciding this petition for review of the
Decision[1] dated January 30, 1996 and the Resolution[2] dated May 28, 1996, promulgated by the Court of
Appeals in CA-GR CV No. 41758, affirming the Decision of the lower court and denying reconsideration,
respectively.

On May 28, 1990, Private Respondent Gilda Corpuz filed an Amended Complaint [3] against her
husband Judie Corpuz and Petitioners-Spouses Antonio and Luzviminda Guiang. The said Complaint
sought the declaration of a certain deed of sale, which involved the conjugal property of private
respondent and her husband, null and void. The case was raffled to the Regional Trial Court of
Koronadal, South Cotabato, Branch 25. In due course, the trial court rendered a Decision [4] dated
September 9, 1992, disposing as follows:[5]
ACCORDINGLY, judgment is rendered for the plaintiff and against the defendants,
1. Declaring both the Deed of Transfer of Rights dated March 1, 1990 (Exh. A) and the amicable
settlement dated March 16, 1990 (Exh. B) as null and void and of no effect;
2. Recognizing as lawful and valid the ownership and possession of plaintiff Gilda Corpuz over the
remaining one-half portion of Lot 9, Block 8, (LRC) Psd-165409 which has been the subject of the Deed of
Transfer of Rights (Exh. A);
3. Ordering plaintiff Gilda Corpuz to reimburse defendants Luzviminda and Antonio Guiang the amount
of NINE THOUSAND (P9,000.00) PESOS corresponding to the payment made by defendants Guiangs to
Manuel Callejo for the unpaid balance of the account of plaintiff in favor of Manuel Callejo, and another
sum of P379.62 representing one-half of the amount of realty taxes paid by defendants Guiangs on Lot 9,
Block 8, (LRC) Psd-165409, both with legal interests thereon computed from the finality of the decision.
No pronouncement as to costs in view of the factual circumstances of the case.
Dissatisfied, petitioners-spouses filed an appeal with the Court of Appeals. Respondent Court, in
its challenged Decision, ruled as follows:[6]
WHEREFORE, the appealed decision of the lower court in Civil Case No. 204 is hereby
AFFIRMED by this Court. No costs considering plaintiff-appellees failure to file her brief,
despite notice.
Reconsideration was similarly denied by the same court in its assailed Resolution: [7]
Finding that the issues raised in defendants-appellants motion for reconsideration of Our
decision in this case of January 30, 1996, to be a mere rehash of the same issues which We
have already passed upon in the said decision, and there [being] no cogent reason to disturb
the same, this Court RESOLVES to DENY the instant motion for reconsideration for lack of
merit.
The Facts
The facts of this case are simple. Over the objection of private respondent and while she was in
Manila seeking employment, her husband sold to the petitioners-spouses one half of their conjugal
property, consisting of their residence and the lot on which it stood. The circumstances of this sale are
set forth in the Decision of Respondent Court, which quoted from the Decision of the trial court, as
follows:[8]
1. Plaintiff Gilda Corpuz and defendant Judie Corpuz are legally married spouses. They were
married on December 24, 1968 in Bacolod City, before a judge. This is admitted by
defendants-spouses Antonio and Luzviminda Guiang in their answer, and also admitted by
defendant Judie Corpuz when he testified in court (tsn. p..3, June 9, 1992), although the
latter says that they were married in 1967. The couple have three children, namely: Junie 18
years old, Harriet 17 years of age, and Jodie or Joji, the youngest, who was 15 years of age in
August, 1990 when her mother testified in court.
Sometime on February 14, 1983, the couple Gilda and Judie Corpuz, with plaintiff-wife Gilda
Corpuz as vendee, bought a 421 sq. meter lot located in Barangay Gen. Paulino Santos (Bo.
1), Koronadal, South Cotabato, and particularly known as Lot 9, Block 8, (LRC) Psd-165409
from Manuel Callejo who signed as vendor through a conditional deed of sale for a total
consideration of P14,735.00. The consideration was payable in installment, with right of
cancellation in favor of vendor should vendee fail to pay three successive installments (Exh.
2, tsn. p. 6, February 14, 1990).
2. Sometime on April 22, 1988, the couple Gilda and Judie Corpuz sold one-half portion of
their Lot No. 9, Block 8, (LRC) Psd-165409 to the defendants-spouses Antonio and
Luzviminda Guiang. The latter have since then occupied the one-half portion [and] built their
house thereon (tsn. p. 4, May 22, 1992). They are thus adjoining neighbors of the Corpuzes.
3. Plaintiff Gilda Corpuz left for Manila sometime in June 1989. She was trying to look for
work abroad, in [the] Middle East. Unfortunately, she became a victim of an unscrupulous
illegal recruiter. She was not able to go abroad. She stayed for sometime in Manila however,
coming back to Koronadal, South Cotabato, x x x on March 11, 1990. Plaintiffs departure for
Manila to look for work in the Middle East was with the consent of her husband Judie Corpuz
(tsn. p. 16, Aug.12, 1990; p. 10, Sept. 6, 1991).
After his wifes departure for Manila, defendant Judie Corpuz seldom went home to the
conjugal dwelling. He stayed most of the time at his place of work at Samahang Nayon
Building, a hotel, restaurant, and a cooperative. Daughter Harriet Corpuz went to school at
Kings College, Bo. 1, Koronadal, South Cotabato, but she was at the same time working as
household help of, and staying at, the house of Mr. Panes. Her brother Junie was not
working. Her younger sister Jodie (Joji) was going to school. Her mother sometimes sent
them money (tsn. p. 14, Sept. 6, 1991).
Sometime in January 1990, Harriet Corpuz learned that her father intended to sell the
remaining one-half portion including their house, of their homelot to defendants
Guiangs. She wrote a letter to her mother informing her. She [Gilda Corpuz] replied that she
was objecting to the sale. Harriet, however, did not inform her father about this; but instead
gave the letter to Mrs. Luzviminda Guiang so that she [Guiang] would advise her father (tsn.
pp. 16-17, Sept. 6, 1991).
4. However, in the absence of his wife Gilda Corpuz, defendant Judie Corpuz pushed through
the sale of the remaining one-half portion of Lot 9, Block 8, (LRC) Psd-165409. On March 1,
1990, he sold to defendant Luzviminda Guiang thru a document known as Deed of Transfer
of Rights (Exh. A) the remaining one-half portion of their lot and the house standing thereon
for a total consideration of P30,000.00 of which P5,000.00 was to be paid in June ,
1990. Transferor Judie Corpuzs children Junie and Harriet signed the document as witnesses.
Four (4) days after March 1, 1990 or on March 5, 1990, obviously to cure whatever defect in
defendant Judie Corpuzs title over the lot transferred, defendant Luzviminda Guiang as
vendee executed another agreement over Lot 9, Block 8, (LRC) Psd-165408 (Exh. 3), this time
with Manuela Jimenez Callejo, a widow of the original registered owner from whom the
couple Judie and Gilda Corpuz originally bought the lot (Exh. 2), who signed as vendor for a
consideration of P9,000.00. Defendant Judie Corpuz signed as a witness to the sale (Exh. 3-
A). The new sale (Exh. 3) describes the lot sold as Lot 8, Block 9, (LRC) Psd-165408 but it is
obvious from the mass of evidence that the correct lot is Lot 8, Block 9, (LRC) Psd-165409,
the very lot earlier sold to the couple Gilda and Judie Corpuz.
 5. Sometime on March 11, 1990, plaintiff returned home. She found her children staying settlement ratified said sale, citing Article 1409 of the Code which expressly bars ratification of the
with other households. Only Junie was staying in their house. Harriet and Joji were with Mr. contracts specified therein, particularly those prohibited or declared void by law.
Panes. Gilda gathered her children together and stayed at their house. Her husband was
nowhere to be found. She was informed by her children that their father had a wife already. Hence, this petition.[9]

6. For staying in their house sold by her husband, plaintiff was complained against by The Issues

defendant Luzviminda Guiang and her husband Antonio Guiang before the Barangay
authorities of Barangay General Paulino Santos (Bo. 1), Koronadal, South Cotabato, for
trespassing (tsn. p. 34, Aug. 17, 1990). The case was docketed by the barangay authorities as
In their Memorandum, petitioners assign to public respondent the following errors: [10]
Barangay Case No. 38 for trespassing. On March 16, 1990, the parties thereat signed a
document known as amicable settlement. In full, the settlement provides for, to wit:
I
That respondent, Mrs. Gilda Corpuz and her three children, namely: Junie,
Hariet and Judie to leave voluntarily the house of Mr. and Mrs. Antonio Whether or not the assailed Deed of Transfer of Rights was validly executed.
Guiang, where they are presently boarding without any charge, on or before
April 7, 1990. II

FAIL NOT UNDER THE PENALTY OF THE LAW.
Believing that she had received the shorter end of the bargain, plaintiff went to the Barangay
Captain of Barangay Paulino Santos to question her signature on the amicable
settlement. She was referred however to the Officer-In-Charge at the time, a certain Mr. de
la Cruz. The latter in turn told her that he could not do anything on the matter (tsn. p. 31,
Aug. 17, 1990).
This particular point was not rebutted. The Barangay Captain who testified did not deny that
Mrs. Gilda Corpuz approached him for the annulment of the settlement. He merely said he
forgot whether Mrs. Corpuz had approached him (tsn. p. 13, Sept. 26, 1990). We thus
conclude that Mrs. Corpuz really approached the Barangay Captain for the annulment of the
settlement. Annulment not having been made, plaintiff stayed put in her house and lot.
Whether or not the Court of Appeals erred in not declaring as voidable contract under Art.
1390 of the Civil Code the impugned Deed of Transfer of Rights which was validly ratified
thru the execution of the amicable settlement by the contending parties.
III
Whether or not the Court of Appeals erred in not setting aside the findings of the Court a
quo which recognized as lawful and valid the ownership and possession of private
respondent over the remaining one half (1/2) portion of the subject property.
In a nutshell, petitioners-spouses contend that (1) the contract of sale (Deed of Transfer of Rights)
was merely voidable, and (2) such contract was ratified by private respondent when she entered into an
amicable settlement with them.

This Courts Ruling

7. Defendant-spouses Guiang followed thru the amicable settlement with a motion for the
execution of the amicable settlement, filing the same with the Municipal Trial Court of
Koronadal, South Cotabato. The proceedings [are] still pending before the said court, with
the filing of the instant suit. The petition is bereft of merit.

8. As a consequence of the sale, the spouses Guiang spent P600.00 for the preparation of First Issue: Void or Voidable Contract?

the Deed of Transfer of Rights, Exh. A; P9,000.00 as the amount they paid to Mrs. Manuela
Callejo, having assumed the remaining obligation of the Corpuzes to Mrs. Callejo (Exh.
3); P100.00 for the preparation of Exhibit 3; a total of P759.62 basic tax and special Petitioners insist that the questioned Deed of Transfer of Rights was validly
educational fund on the lot; P127.50 as the total documentary stamp tax on the various executed by the parties-litigants in good faith and for valuable consideration. The absence of private
documents; P535.72 for the capital gains tax; P22.50 as transfer tax; a standard fee respondents consent merely rendered the Deed voidable under Article 1390 of the Civil Code, which
of P17.00; certification fee of P5.00. These expenses particularly the taxes and other provides:
expenses towards the transfer of the title to the spouses Guiangs were incurred for the
whole Lot 9, Block 8, (LRC) Psd-165409.
ART. 1390. The following contracts are voidable or annullable, even though there may have
Ruling of Respondent Court
been no damage to the contracting parties:

x x x x x x x x x
Respondent Court found no reversible error in the trial courts ruling that any alienation or
encumbrance by the husband of the conjugal property without the consent of his wife is null and void as (2) Those where the consent is vitiated by mistake, violence, intimidation, undue influence
provided under Article 124 of the Family Code. It also rejected petitioners contention that the amicable or fraud.
 These contracts are binding, unless they are annulled by a proper action in court. They are
susceptible of ratification.(n)
The error in petitioners contention is evident. Article 1390, par. 2, refers to contracts visited by
vices of consent, i.e., contracts which were entered into by a person whose consent was obtained and
vitiated through mistake, violence, intimidation, undue influence or fraud. In this instance, private
respondents consent to the contract of sale of their conjugal property was totally inexistent or
absent. Gilda Corpuz, on direct examination, testified thus:[11]
Q Now, on March 1, 1990, could you still recall where you were?
A I was still in Manila during that time.
x x x x x x x x x
ATTY. FUENTES:
Q When did you come back to Koronadal, South Cotabato?
A That was on March 11, 1990, Maam.
Q Now, when you arrived at Koronadal, was there any problem which arose concerning the
ownership of your residential house at Callejo Subdivision?
A When I arrived here in Koronadal, there was a problem which arose regarding my residential
house and lot because it was sold by my husband without my knowledge.
This being the case, said contract properly falls within the ambit of Article 124 of the Family Code,
which was correctly applied by the two lower courts:
ART. 124. The administration and enjoyment of the conjugal partnership property shall
belong to both spouses jointly. In case of disagreement, the husbands decision shall prevail,
subject to recourse to the court by the wife for proper remedy, which must be availed of
within five years from the date of the contract implementing such decision.
In the event that one spouse is incapacitated or otherwise unable to participate in the
administration of the conjugal properties, the other spouse may assume sole powers of
administration. These powers do not include the powers of disposition or encumbrance
which must have the authority of the court or the written consent of the other spouse. In
the absence of such authority or consent, the disposition or encumbrance shall be
void. However, the transaction shall be construed as a continuing offer on the part of the
consenting spouse and the third person, and may be perfected as a binding contract upon
the acceptance by the other spouse or authorization by the court before the offer is
withdrawn by either or both offerors.(165a) (Italics supplied)
Comparing said law with its equivalent provision in the Civil Code, the trial court adroitly explained
the amendatory effect of the above provision in this wise:[12]
The legal provision is clear. The disposition or encumbrance is void. It becomes still clearer if
we compare the same with the equivalent provision of the Civil Code of the
Philippines.Under Article 166 of the Civil Code, the husband cannot generally alienate or
encumber any real property of the conjugal partnership without the wifes consent. The
alienation or encumbrance if so made however is not null and void. It is merely voidable. The
offended wife may bring an action to annul the said alienation or encumbrance. Thus, the
provision of Article 173 of the Civil Code of the Philippines, to wit:
Art. 173. The wife may, during the marriage and within ten years from the
transaction questioned, ask the courts for the annulment of any contract of
the husband entered into without her consent, when such consent is required,
or any act or contract of the husband which tends to defraud her or impair her
interest in the conjugal partnership property. Should the wife fail to exercise
this right, she or her heirs after the dissolution of the marriage, may demand
the value of property fraudulently alienated by the husband.(n)
This particular provision giving the wife ten (10) years x x x during [the] marriage to annul
the alienation or encumbrance was not carried over to the Family Code. It is thus clear that
any alienation or encumbrance made after August 3, 1988 when the Family Code took effect
by the husband of the conjugal partnership property without the consent of the wife is null
and void.
Furthermore, it must be noted that the fraud and the intimidation referred to by petitioners were
perpetrated in the execution of the document embodying the amicable settlement. Gilda Corpuz alleged
during trial that barangay authorities made her sign said document through misrepresentation and
coercion.[13] In any event, its execution does not alter the void character of the deed of sale between the
husband and the petitioners-spouses, as will be discussed later. The fact remains that such contract was
entered into without the wifes consent.
In sum, the nullity of the contract of sale is premised on the absence of private respondents
consent. To constitute a valid contract, the Civil Code requires the concurrence of the following
elements: (1) cause, (2) object, and (3) consent,[14] the last element being indubitably absent in the case
at bar.
Second Issue: Amicable Settlement
Insisting that the contract of sale was merely voidable, petitioners aver that it was duly ratified by
the contending parties through the amicable settlement they executed on March 16, 1990 in Barangay
Case No. 38.
The position is not well taken. The trial and the appellate courts have resolved this issue in favor
of the private respondent. The trial court correctly held:[15]
By the specific provision of the law [Art. 1390, Civil Code] therefore, the Deed of Transfer of
Rights (Exh. A) cannot be ratified, even by an amicable settlement. The participation by some
barangay authorities in the amicable settlement cannot otherwise validate an invalid
act. Moreover, it cannot be denied that the amicable settlement (Exh. B) entered into by
plaintiff Gilda Corpuz and defendant spouses Guiang is a contract. It is a direct offshoot of
the Deed of Transfer of Rights (Exh. A). By express provision of law, such a contract is also
void. Thus, the legal provision, to wit:
Art. 1422. A contract which is the direct result of a previous illegal contract, is
also void and inexistent. (Civil Code of the Philippines).
In summation therefore, both the Deed of Transfer of Rights (Exh. A) and the amicable
settlement (Exh. 3) are null and void.
 Doctrinally and clearly, a void contract cannot be ratified.[16]

Neither can the amicable settlement be considered a continuing offer that was accepted and
perfected by the parties, following the last sentence of Article 124. The order of the pertinent events is
clear: after the sale, petitioners filed a complaint for trespassing against private respondent, after which
the barangay authorities secured an amicable settlement and petitioners filed before the MTC a motion
for its execution. The settlement, however, does not mention a continuing offer to sell the property or an
acceptance of such a continuing offer. Its tenor was to the effect that private respondent would vacate
the property. By no stretch of the imagination, can the Court interpret this document as the acceptance
mentioned in Article 124.

WHEREFORE, the Court hereby DENIES the petition and AFFIRMS the challenged Decision and

Resolution. Costs against petitioners.

SO ORDERED.

CONCEPCION R. AINZA, substituted by her legal heirs, DR. NATIVIDAD A. TULIAO, CORAZON A. JALECO
and LILIA A. OLAYON, petitioners, vs. SPOUSES ANTONIO PADUA and EUGENIA
PADUA, respondents.

DECISION

YNARES-SANTIAGO, J.:

This petition for review on certiorari assails the February 24, 2004 decision of the Court of Appeals
in CA-G.R. CV No. 70239,[1] and its September 28, 2004 resolution, denying reconsideration thereof. [2]

In her complaint for partition of real property, annulment of titles with damages, [3] Concepcion
Ainza (Concepcion) alleged that respondent-spouses Eugenia (Eugenia) and Antonio Padua (Antonio)
owned a 216.40 sq. m. lot with an unfinished residential house located at No. 85-A Durian corner Pajo
Sts., Barangay Quirino 2-C, Project 2, Quezon City, covered by Transfer Certificate of Title No. 271935.
Sometime in April 1987, she bought one-half of an undivided portion of the property from her daughter,
Eugenia and the latters husband, Antonio, for One Hundred Thousand Pesos (P100,000.00).

No Deed of Absolute Sale was executed to evidence the transaction, but cash payment was
received by the respondents, and ownership was transferred to Concepcion through physical delivery to
her attorney-in-fact and daughter, Natividad Tuliao (Natividad). Concepcion authorized Natividad and the
latters husband, Ceferino Tuliao (Ceferino) to occupy the premises, and make improvements on the
unfinished building.
 Thereafter, Concepcion alleged that without her consent, respondents caused the subdivision of
the property into three portions and registered it in their names under TCT Nos. N-155122, N-155123
and N-155124 in violation of the restrictions annotated at the back of the title.
On the other hand, Antonio averred that he bought the property in 1980 and introduced
improvements thereon. Between 1989 and 1990, he and his wife, Eugenia, allowed Natividad and
Ceferino to occupy the premises temporarily. In 1994, they caused the subdivision of the property and
three (3) separate titles were issued.
Thereafter, Antonio requested Natividad to vacate the premises but the latter refused and
claimed that Concepcion owned the property. Antonio thus filed an ejectment suit on April 1, 1999.
Concepcion, represented by Natividad, also filed on May 4, 1999 a civil case for partition of real property
and annulment of titles with damages.
Antonio claimed that his wife, Eugenia, admitted that Concepcion offered to buy one third (1/3) of
the property who gave her small amounts over several years which totaled P100,000.00 by 1987 and for
which she signed a receipt.
On January 9, 2001, the Regional Trial Court of Quezon City, Branch 85, rendered judgment [4] in
favor of Concepcion, the dispositive portion of which states:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and against the
defendants and ordering:
1. the subdivision of the subject property between the said plaintiff and defendants in
equal shares with one-half of the property, including the portion occupied by the
spouses Severino and Natividad Tuliao to be awarded to the plaintiff;
2. the cancellation of Transfer Certificates of Title Nos. N-155122, N-155123, N-155124 of
the Registry of Deeds of Quezon City;
3. the defendants to pay to the plaintiff P50,000.00 as attorneys fees.
SO ORDERED.[5]
The trial court upheld the sale between Eugenia and Concepcion. It ruled that the sale was
consummated when both contracting parties complied with their respective obligations. Eugenia
transferred possession by delivering the property to Concepcion who in turn paid the purchase price. It
also declared that the transfer of the property did not violate the Statute of Frauds because a fully
executed contract does not fall within its coverage.
On appeal by the respondents, the Court of Appeals reversed the decision of the trial court, and
declared the sale null and void. Applying Article 124 of the Family Code, the Court of Appeals ruled that
since the subject property is conjugal, the written consent of Antonio must be obtained for the sale to be
valid. It also ordered the spouses Padua to return the amount of P100,000.00 to petitioners plus interest.
[6]
The sole issue for resolution in this petition for review is whether there was a valid contract of sale
between Eugenia and Concepcion.
A contract of sale is perfected by mere consent, upon a meeting of the minds on the offer and the
acceptance thereof based on subject matter, price and terms of payment.[7]
In this case, there was a perfected contract of sale between Eugenia and Concepcion. The records
show that Eugenia offered to sell a portion of the property to Concepcion, who accepted the offer and
agreed to pay P100,000.00 as consideration. The contract of sale was consummated when both parties
fully complied with their respective obligations. Eugenia delivered the property to Concepcion, who in
turn, paid Eugenia the price of One Hundred Thousand Pesos (P100,000.00), as evidenced by the receipt
which reads:
R E C E I P T
Received the amount of ONE HUNDRED THOUSAND PESOS (P100,000.00) as payment for the lot on 85-A
Durian St., Project 2, Quezon City, from Mrs. Concepcion R. Ainza, on April, 1987.
_______(Sgd.)______
Mrs.. Eugenia A. Padua[8]
The verbal contract of sale between Eugenia and Concepcion did not violate the provisions of the
Statute of Frauds that a contract for the sale of real property shall be unenforceable unless the contract
or some note or memorandum of the sale is in writing and subscribed by the party charged or his agent.
[9]
 When a verbal contract has been completed, executed or partially consummated, as in this case, its
enforceability will not be barred by the Statute of Frauds, which applies only to an executory agreement.
[10]
 Thus, where one party has performed his obligation, oral evidence will be admitted to prove the
agreement.[11]
In the instant case, the oral contract of sale between Eugenia and Concepcion was evidenced by a
receipt signed by Eugenia. Antonio also stated that his wife admitted to him that she sold the property to
Concepcion.
It is undisputed that the subject property was conjugal and sold by Eugenia in April 1987 or prior
to the effectivity of the Family Code on August 3, 1988, Article 254 of which repealed Title V, Book I of
the Civil Code provisions on the property relations between husband and wife. However, Article 256
thereof limited its retroactive effect only to cases where it would not prejudice or impair vested or
acquired rights in accordance with the Civil Code or other laws. In the case at bar, vested rights of
Concepcion will be impaired or prejudiced by the application of the Family Code; hence, the provisions of
the Civil Code should be applied.
In Felipe v. Heirs of Aldon, et al.,[12] the legal effect of a sale of conjugal properties by the wife
without the consent of the husband was clarified, to wit:
The legal ground which deserves attention is the legal effect of a sale of lands belonging to the conjugal
partnership made by the wife without the consent of the husband.
It is useful at this point to re-state some elementary rules: The husband is the administrator of the
conjugal partnership. (Art. 165, Civil Code) Subject to certain exceptions, the husband cannot alienate or
encumber any real property of the conjugal partnership without the wifes consent. (Art. 166, Idem.) And
the wife cannot bind the conjugal partnership without the husbands consent, except in cases provided
by law. (Art. 172, Idem.).
In the instant case, Gimena, the wife, sold lands belonging to the conjugal partnership without the
consent of the husband and the sale is not covered by the phrase except in cases provided by law. The
Court of Appeals described the sale as invalid a term which is imprecise when used in relation to
contracts because the Civil Code uses specific names in designating defective contracts,
namely: rescissible (Arts. 1380 et seq.), voidable (Arts. 1390 et seq.), unenforceable (Arts. 1403, et seq.),
and void or inexistent (Arts. 1409 et seq.).
The sale made by Gimena is certainly a defective contract but of what category? The answer: it is a
voidable contract.
According to Art. 1390 of the Civil Code, among the voidable contracts are [T]hose where one of the
parties is incapable of giving consent to the contract. (Par. 1.) In the instant case Gimena had no capacity
to give consent to the contract of sale. The capacity to give consent belonged not even to the husband
alone but to both spouses.

The view that the contract made by Gimena is a voidable contract is supported by the legal provision
that contracts entered by the husband without the consent of the wife when such consent is required,
are annullable at her instance during the marriage and within ten years from the transaction
questioned. (Art. 173, Civil Code).

Gimenas contract is not rescissible for in such a contract all the essential elements are untainted but
Gimenas consent was tainted. Neither can the contract be classified as unenforceable because it does
not fit any of those described in Art. 1403 of the Civil Code. And finally, the contract cannot be void or
inexistent because it is not one of those mentioned in Art. 1409 of the Civil Code. By process of
elimination, it must perforce be a voidable contract.

The voidable contract of Gimena was subject to annulment by her husband only during the marriage
because he was the victim who had an interest in the contract. Gimena, who was the party responsible
for the defect, could not ask for its annulment. Their children could not likewise seek the annulment of
the contract while the marriage subsisted because they merely had an inchoate right to the lands sold.
(Emphasis supplied)

The consent of both Eugenia and Antonio is necessary for the sale of the conjugal property to be
valid. Antonios consent cannot be presumed.[13] Except for the self-serving testimony of petitioner
Natividad, there is no evidence that Antonio participated or consented to the sale of the conjugal
property. Eugenia alone is incapable of giving consent to the contract. Therefore, in the absence of
Antonios consent, the disposition made by Eugenia is voidable.[14]
The contract of sale between Eugenia and Concepcion being an oral contract, the action to annul
the same must be commenced within six years from the time the right of action accrued. [15] Eugenia sold
the property in April 1987 hence Antonio should have asked the courts to annul the sale on or before
April 1993. No action was commenced by Antonio to annul the sale, hence his right to seek its annulment
was extinguished by prescription.
Even assuming that the ten (10)-year prescriptive period under Art. 173 should apply, Antonio is
still barred from instituting an action to annul the sale because since April 1987, more than ten (10) years
had already lapsed without any such action being filed.
In sum, the sale of the conjugal property by Eugenia without the consent of her husband is
voidable. It is binding unless annulled. Antonio failed to exercise his right to ask for the annulment within
the prescribed period, hence, he is now barred from questioning the validity of the sale between his wife
and Concepcion.
WHEREFORE, the petition is GRANTED. The decision dated February 24, 2004 of the Court of
Appeals in CA-G.R. CV No. 70239 and its resolution dated September 28, 2004 are REVERSED and SET
ASIDE. The decision dated January 9, 2001 of the Regional Trial Court of Quezon City, Branch 85, in Civil
Case No. Q-99-37529, is REINSTATED.
SO ORDERED.
SPOUSES FUENTES VS. ROCA
This case is about a husbands sale of conjugal real property, employing a challenged affidavit
of consent from an estranged wife. The buyers claim valid consent, loss of right to declare nullity of sale,
and prescription.
 
The Facts and the Case
 
Sabina Tarroza owned a titled 358-square meter lot in Canelar, Zamboanga City. On October 11,
1982 she sold it to her son, Tarciano T. Roca (Tarciano) under a deed of absolute sale. [1] But Tarciano did
not for the meantime have the registered title transferred to his name.
Six years later in 1988, Tarciano offered to sell the lot to petitioners Manuel and Leticia Fuentes (the
Fuentes spouses). They arranged to meet at the office of Atty. Romulo D. Plagata whom they asked to
prepare the documents of sale. They later signed an agreement to sell that Atty. Plagata
prepared[2] dated April 29, 1988, which agreement expressly stated that it was to take effect in six
months.
 
The agreement required the Fuentes spouses to pay Tarciano a down payment of P60,000.00
for the transfer of the lots title to him. And, within six months, Tarciano was to clear the lot of structures
and occupants and secure the consent of his estranged wife, Rosario Gabriel Roca (Rosario), to the
sale. Upon Tarcianos compliance with these conditions, the Fuentes spouses were to take possession of
the lot and pay him an additional P140,000.00 or P160,000.00, depending on whether or not he
succeeded in demolishing the house standing on it. If Tarciano was unable to comply with these
conditions, the Fuentes spouses would become owners of the lot without any further formality and
payment.
The parties left their signed agreement with Atty. Plagata who then worked on the other requirements of
the sale. According to the lawyer, he went to see Rosario in one of his trips to Manila and had her sign an
affidavit of consent.[3] As soon as Tarciano met the other conditions, Atty. Plagata notarized Rosarios
affidavit in Zamboanga City. On January 11, 1989 Tarciano executed a deed of absolute sale [4] in favor of
the Fuentes spouses. They then paid him the additional P140,000.00 mentioned in their agreement. A
new title was issued in the name of the spouses[5] who immediately constructed a building on the
lot. On January 28, 1990 Tarciano passed away, followed by his wife Rosario who died nine months
afterwards.
 
Eight years later in 1997, the children of Tarciano and Rosario, namely, respondents Conrado G. Roca,
Annabelle R. Joson, and Rose Marie R. Cristobal, together with Tarcianos sister, Pilar R. Malcampo,
represented by her son, John Paul M. Trinidad (collectively, the Rocas), filed an action for annulment of
sale and reconveyance of the land against the Fuentes spouses before the Regional Trial Court (RTC) of
Zamboanga City in Civil Case 4707. The Rocas claimed that the sale to the spouses was void since
Tarcianos wife, Rosario, did not give her consent to it. Her signature on the affidavit of consent had been
forged. They thus prayed that the property be reconveyed to them upon reimbursement of the price
that the Fuentes spouses paid Tarciano.[6]
The spouses denied the Rocas allegations. They presented Atty. Plagata who testified that he personally
saw Rosario sign the affidavit at her residence in Paco, Manila, on September 15, 1988. He admitted,
however, that he notarized the document in Zamboanga City four months later on January 11, 1989.[7] All
the same, the Fuentes spouses pointed out that the claim of forgery was personal to Rosario and she
alone could invoke it. Besides, the four-year prescriptive period for nullifying the sale on ground of fraud
had already lapsed.
 
Both the Rocas and the Fuentes spouses presented handwriting experts at the trial. Comparing Rosarios
standard signature on the affidavit with those on various documents she signed, the Rocas expert
testified that the signatures were not written by the same person. Making the same comparison, the
spouses expert concluded that they were.[8]
On February 1, 2005 the RTC rendered judgment, dismissing the case. It ruled that the action had already
prescribed since the ground cited by the Rocas for annulling the sale, forgery or fraud, already prescribed
under Article 1391 of the Civil Code four years after its discovery. In this case, the Rocas may be deemed
to have notice of the fraud from the date the deed of sale was registered with the Registry of Deeds and
the new title was issued. Here, the Rocas filed their action in 1997, almost nine years after the title was
issued to the Fuentes spouses on January 18, 1989.[9]
Moreover, the Rocas failed to present clear and convincing evidence of the fraud. Mere variance in the
signatures of Rosario was not conclusive proof of forgery.[10] The RTC ruled that, although the Rocas
presented a handwriting expert, the trial court could not be bound by his opinion since the opposing
expert witness contradicted the same. Atty. Plagatas testimony remained technically unrebutted.[11]
 
Finally, the RTC noted that Atty. Plagatas defective notarization of the affidavit of consent did not
invalidate the sale. The law does not require spousal consent to be on the deed of sale to be
valid. Neither does the irregularity vitiate Rosarios consent. She personally signed the affidavit in the
presence of Atty. Plagata.[12]
 
On appeal, the Court of Appeals (CA) reversed the RTC decision.  The CA found sufficient evidence of
forgery and did not give credence to Atty. Plagatas testimony that he saw Rosario sign the document
in Quezon City. Its jurat said differently. Also, upon comparing the questioned signature with the
specimen signatures, the CA noted significant variance between them. That Tarciano and Rosario had
been living separately for 30 years since 1958 also reinforced the conclusion that her signature had been
forged.
 
Since Tarciano and Rosario were married in 1950, the CA concluded that their property relations were
governed by the Civil Code under which an action for annulment of sale on the ground of lack of spousal
consent may be brought by the wife during the marriage within 10 years from the
transaction. Consequently, the action that the Rocas, her heirs, brought in 1997 fell within 10 years of
the January 11, 1989 sale.
 
Considering, however, that the sale between the Fuentes spouses and Tarciano was merely voidable, the
CA held that its annulment entitled the spouses to reimbursement of what they paid him plus legal
interest computed from the filing of the complaint until actual payment. Since the Fuentes spouses were
also builders in good faith, they were entitled under Article 448 of the Civil Code to payment of the value
of the improvements they introduced on the lot. The CA did not award damages in favor of the Rocas
and deleted the award of attorneys fees to the Fuentes spouses. [13]
 
Unsatisfied with the CA decision, the Fuentes spouses came to this court by petition for review.[14]
The Issues Presented
 
The case presents the following issues:
 
1. Whether or not Rosarios signature on the document of consent to her husband Tarcianos
sale of their conjugal land to the Fuentes spouses was forged;
2. Whether or not the Rocas action for the declaration of nullity of that sale to the spouses
already prescribed; and
 
3. Whether or not only Rosario, the wife whose consent was not had, could bring the action
to annul that sale.
 
The Courts Rulings
 
First. The key issue in this case is whether or not Rosarios signature on the document of
consent had been forged. For, if the signature were genuine, the fact that she gave her consent to her
husbands sale of the conjugal land would render the other issues merely academic.
 
The CA found that Rosarios signature had been forged. The CA observed a marked difference
between her signature on the affidavit of consent [15] and her specimen signatures.[16] The CA gave no
weight to Atty. Plagatas testimony that he saw Rosario sign the document in Manila on September 15,
1988 since this clashed with his declaration in the jurat that Rosario signed the affidavit in Zamboanga
City on January 11, 1989.
 
The Court agrees with the CAs observation that Rosarios signature strokes on the affidavit
appears heavy, deliberate, and forced. Her specimen signatures, on the other hand, are consistently of a
lighter stroke and more fluid. The way the letters R and s were written is also remarkably different. The
variance is obvious even to the untrained eye.
 
Significantly, Rosarios specimen signatures were made at about the time that she signed the
supposed affidavit of consent. They were, therefore, reliable standards for comparison. The Fuentes
spouses presented no evidence that Rosario suffered from any illness or disease that accounted for the
variance in her signature when she signed the affidavit of consent. Notably, Rosario had been living
separately from Tarciano for 30 years since 1958. And she resided so far away in Manila. It would have
been quite tempting for Tarciano to just forge her signature and avoid the risk that she would not give
her consent to the sale or demand a stiff price for it.
 
What is more, Atty. Plagata admittedly falsified the jurat of the affidavit of consent. That jurat
declared that Rosario swore to the document and signed it in ZamboangaCity on January 11, 1989 when,
as Atty. Plagata testified, she supposedly signed it about four months earlier at her residence in
Paco, Manila on September 15, 1988. While a defective notarization will merely strip the document of its
public character and reduce it to a private instrument, that falsified jurat, taken together with the marks
of forgery in the signature, dooms such document as proof of Rosarios consent to the sale of the
land. That the Fuentes spouses honestly relied on the notarized affidavit as proof of  Rosarios consent
does not matter. The sale is still void without an authentic consent.
 
Second. Contrary to the ruling of the Court of Appeals, the law that applies to this case is the
Family Code, not the Civil Code. Although Tarciano and Rosario got married in 1950, Tarciano sold the
conjugal property to the Fuentes spouses on January 11, 1989, a few months after the Family Code took
effect on August 3, 1988.
When Tarciano married Rosario, the Civil Code put in place the system of conjugal partnership of gains
on their property relations. While its Article 165 made Tarciano the sole administrator of the conjugal
partnership, Article 166[17] prohibited him from selling commonly owned real property without his wifes
consent. Still, if he sold the same without his wifes consent, the sale is not void but merely
voidable. Article 173 gave Rosario the right to have the sale annulled during the marriage within ten
years from the date of the sale. Failing in that, she or her heirs may demand, after dissolution of the
marriage, only the value of the property that Tarciano fraudulently sold. Thus:
 
Art. 173. The wife may, during the marriage, and within ten years
from the transaction questioned, ask the courts for the annulment of any
contract of the husband entered into without her consent, when such consent is
required, or any act or contract of the husband which tends to defraud her or
impair her interest in the conjugal partnership property. Should the wife fail to
exercise this right, she or her heirs, after the dissolution of the marriage, may
demand the value of property fraudulently alienated by the husband.
But, as already stated, the Family Code took effect on August 3, 1988. Its Chapter 4
on Conjugal Partnership of Gains expressly superseded Title VI, Book I of the Civil Code on Property
Relations Between Husband and Wife.[18] Further, the Family Code provisions were also made to apply to
already existing conjugal partnerships without prejudice to vested rights. [19] Thus:
 
Art. 105. x x x The provisions of this Chapter shall also apply to conjugal
partnerships of gains already established between spouses before the effectivity
of this Code, without prejudice to vested rights already acquired in accordance
with the Civil Code or other laws, as provided in Article 256. (n)
 
Consequently, when Tarciano sold the conjugal lot to the Fuentes spouses on January 11, 1989, the law
that governed the disposal of that lot was already the Family Code.
 
In contrast to Article 173 of the Civil Code, Article 124 of the Family Code does not provide a
period within which the wife who gave no consent may assail her husbands sale of the real property. It
simply provides that without the other spouses written consent or a court order allowing the sale, the
same would be void. Article 124 thus provides:
Art. 124. x x x In the event that one spouse is incapacitated or
otherwise unable to participate in the administration of the conjugal properties,
the other spouse may assume sole powers of administration. These powers do
not include the powers of disposition or encumbrance which must have the
authority of the court or the written consent of the other spouse. In the absence
of such authority or consent, the disposition or encumbrance shall be void. x x x
Under the provisions of the Civil Code governing contracts, a void or inexistent contract has
no force and effect from the very beginning. And this rule applies to contracts that are declared void by
positive provision of law,[20] as in the case of a sale of conjugal property without the other spouses
written consent. A void contract is equivalent to nothing and is absolutely wanting in civil effects. It
cannot be validated either by ratification or prescription.[21]
 
But, although a void contract has no legal effects even if no action is taken to set it aside,
when any of its terms have been performed, an action to declare its inexistence is necessary to allow
restitution of what has been given under it. [22] This action, according to Article 1410 of the Civil Code
does not prescribe. Thus:
 
Art. 1410. The action or defense for the declaration of the inexistence of a
contract does not prescribe.
Here, the Rocas filed an action against the Fuentes spouses in 1997 for annulment of sale and
reconveyance of the real property that Tarciano sold without their mothers (his wifes) written
consent. The passage of time did not erode the right to bring such an action.
 
Besides, even assuming that it is the Civil Code that applies to the transaction as the CA held,
Article 173 provides that the wife may bring an action for annulment of sale on the ground of lack of
spousal consent during the marriage within 10 years from the transaction. Consequently, the action that
the Rocas, her heirs, brought in 1997 fell within 10 years of the January 11, 1989 sale. It did not yet
prescribe.
 
The Fuentes spouses of course argue that the RTC nullified the sale to them based on fraud
and that, therefore, the applicable prescriptive period should be that which applies to fraudulent
transactions, namely, four years from its discovery. Since notice of the sale may be deemed given to the
Rocas when it was registered with the Registry of Deeds in 1989, their right of action already prescribed
in 1993.
But, if there had been a victim of fraud in this case, it would be the Fuentes spouses in that
they appeared to have agreed to buy the property upon an honest belief that Rosarios written consent
to the sale was genuine. They had four years then from the time they learned that her signature had
been forged within which to file an action to annul the sale and get back their money plus damages. They
never exercised the right.
 
If, on the other hand, Rosario had agreed to sign the document of consent upon a false
representation that the property would go to their children, not to strangers, and it turned out that this
was not the case, then she would have four years from the time she discovered the fraud within which to
file an action to declare the sale void. But that is not the case here. Rosario was not a victim of fraud or
misrepresentation. Her consent was simply not obtained at all. She lost nothing since the sale without
her written consent was void. Ultimately, the Rocas ground for annulment is not forgery but the lack of
written consent of their mother to the sale. The forgery is merely evidence of lack of consent.
 
Third. The Fuentes spouses point out that it was to Rosario, whose consent was not obtained,
that the law gave the right to bring an action to declare void her husbands sale of conjugal land.  But
here, Rosario died in 1990, the year after the sale. Does this mean that the right to have the sale
declared void is forever lost?
 
The answer is no. As stated above, that sale was void from the beginning. Consequently, the
land remained the property of Tarciano and Rosario despite that sale. When the two died, they passed
on the ownership of the property to their heirs, namely, the Rocas. [23] As lawful owners, the Rocas had
the right, under Article 429 of the Civil Code, to exclude any person from its enjoyment and disposal.
In fairness to the Fuentes spouses, however, they should be entitled, among other things, to
recover from Tarcianos heirs, the Rocas, the P200,000.00 that they paid him, with legal interest until fully
paid, chargeable against his estate.
 
Further, the Fuentes spouses appear to have acted in good faith in entering the land and
building improvements on it. Atty. Plagata, whom the parties mutually entrusted with closing and
documenting the transaction, represented that he got Rosarios signature on the affidavit of consent. The
Fuentes spouses had no reason to believe that the lawyer had violated his commission and his  
oath. They had no way of knowing that Rosario did not come to Zamboanga to give her consent. There is 5. The RTC of Zamboanga City from which this case originated is DIRECTED to receive
no evidence that they had a premonition that the requirement of consent presented some evidence and determine the amount of indemnity to which petitioner spouses Manuel and Leticia
difficulty. Indeed, they willingly made a 30 percent down payment on the selling price months earlier on Fuentes are entitled.
the assurance that it was forthcoming.  
  SO ORDERED.
Further, the notarized document appears to have comforted the Fuentes spouses that
everything was already in order when Tarciano executed a deed of absolute sale in their favor on January
11, 1989. In fact, they paid the balance due him. And, acting on the documents submitted to it, the
Register of Deeds of Zamboanga City issued a new title in the names of the Fuentes spouses.  It was only
after all these had passed that the spouses entered the property and built on it. He is deemed a
possessor in good faith, said Article 526 of the Civil Code, who is not aware that there exists in his title or
mode of acquisition any flaw which invalidates it.
 
As possessor in good faith, the Fuentes spouses were under no obligation to pay for their stay
on the property prior to its legal interruption by a final judgment against them. [24] What is more, they are
entitled under Article 448 to indemnity for the improvements they introduced into the property with a
right of retention until the reimbursement is made. Thus:
 
Art. 448. The owner of the land on which anything has been built, sown or
planted in good faith, shall have the right to appropriate as his own the works,
sowing or planting, after payment of the indemnity provided for in Articles 546
and 548, or to oblige the one who built or planted to pay the price of the land,
and the one who sowed, the proper rent. However, the builder or planter cannot
be obliged to buy the land if its value is considerably more than that of the
building or trees. In such case, he shall pay reasonable rent, if the owner of the
land does not choose to appropriate the building or trees after proper
indemnity. The parties shall agree upon the terms of the lease and in case of
disagreement, the court shall fix the terms thereof. (361a) SPOUSES AGGABAO VS. SPOUSES PARULAN
 
The Rocas shall of course have the option, pursuant to Article 546 of the Civil Code, [25] of On July 26, 2000, the Regional Trial Court (RTC), Branch 136, in Makati City annulled the deed
indemnifying the Fuentes spouses for the costs of the improvements or paying the increase in value of absolute sale executed in favor of the petitioners covering two parcels of registered land the
which the property may have acquired by reason of such improvements. respondents owned for want of the written consent of respondent husband Dionisio Parulan, Jr. On  July
  2, 2004, in C.A.-G.R. CV No. 69044,[1] the Court of Appeals (CA) affirmed the RTC decision.
WHEREFORE, the Court DENIES the petition and AFFIRMS WITH MODIFICATION the decision of the  
Court of Appeals in CA-G.R. CV 00531 dated February 27, 2007as follows: Hence, the petitioners appeal by petition for review on certiorari, seeking to reverse the
  decision of the CA. They present as the main issue whether the sale of conjugal property made by
1. The deed of sale dated January 11, 1989 that Tarciano T. Roca executed in favor of Manuel respondent wife by presenting a special power of attorney to sell (SPA) purportedly executed by
O. Fuentes, married to Leticia L. Fuentes, as well as the Transfer Certificate of Title T-90,981 that the respondent husband in her favor was validly made to the vendees, who allegedly acted in good faith and
Register of Deeds of Zamboanga City issued in the names of the latter spouses pursuant to that deed of paid the full purchase price, despite the showing by the husband that his signature on the SPA had been
sale are DECLARED void; forged and that the SPA had been executed during his absence from the country.
   
2. The Register of Deeds of Zamboanga City is DIRECTED to reinstate Transfer Certificate of We resolve the main issue against the vendees and sustain the CAs finding that the vendees
Title 3533 in the name of Tarciano T. Roca, married to Rosario Gabriel; were not buyers in good faith, because they did not exercise the necessary prudence to inquire into the
  wifes authority to sell. We hold that the sale of conjugal property without the consent of the husband
3. Respondents Gonzalo G. Roca, Annabelle R. Joson, Rose Marie R. Cristobal, and Pilar was not merely voidable but void; hence, it could not be ratified.
Malcampo are ORDERED to pay petitioner spouses Manuel and Leticia Fuentes the P200,000.00 that the  
latter paid Tarciano T. Roca, with legal interest from January 11, 1989 until fully paid, chargeable against Antecedents
his estate;  
  Involved in this action are two parcels of land and their improvements (property) located at No. 49
4. Respondents Gonzalo G. Roca, Annabelle R. Joson, Rose Marie R. Cristobal, and Pilar Miguel Cuaderno Street, Executive Village, BF Homes, Paraaque City and registered under Transfer
Malcampo are further ORDERED, at their option, to indemnify petitioner spouses Manuel and Leticia Certificate of Title (TCT) No. 63376 [2] and TCT No. 63377[3] in the name of respondents Spouses Maria
Fuentes with their expenses for introducing useful improvements on the subject land or pay the increase Elena A. Parulan (Ma. Elena) and Dionisio Z. Parulan, Jr. (Dionisio), who have been estranged from one
in value which it may have acquired by reason of those improvements, with the spouses entitled to the another.
right of retention of the land until the indemnity is made; and  
In January 1991, real estate broker Marta K. Atanacio (Atanacio) offered the property to the petitioners,
who initially did not show interest due to the rundown condition of the improvements. But Atanacios
persistence prevailed upon them, so that on February 2, 1991, they and Atanacio met with Ma. Elena at
the site of the property. During their meeting, Ma. Elena showed to them the following documents,
namely: (a) the owners original copy of TCT No. 63376; (b) a certified true copy of TCT No. 63377; (c)
three tax declarations; and (d) a copy of the special power of attorney (SPA) dated January 7,
1991 executed by Dionisio authorizing Ma. Elena to sell the property. [4] Before the meeting ended, they
paid P20,000.00 as earnest money, for which Ma. Elena executed a handwritten Receipt of Earnest
Money, whereby the parties stipulated that: (a) they would pay an additional payment of P130,000.00 on
February 4, 1991; (b) they would pay the balance of the bank loan of the respondents amounting
to P650,000.00 on or before February 15, 1991; and (c) they would make the final payment
of P700,000.00 once Ma. Elena turned over the property on March 31, 1991.[5]
 
On February 4, 1991, the petitioners went to the Office of the Register of Deeds and the Assessors Office
of Paraaque City to verify the TCTs shown by Ma. Elena in the company of Atanacio and her husband
(also a licensed broker).[6] There, they discovered that the lot under TCT No. 63376 had been
encumbered to Banco Filipino in 1983 or 1984, but that the encumbrance had already been cancelled
due to the full payment of the obligation. [7] They noticed that the Banco Filipino loan had been effected
through an SPA executed by Dionisio in favor of Ma. Elena. [8] They found on TCT No. 63377 the
annotation of an existing mortgage in favor of the Los Baos Rural Bank, also effected through an SPA
executed by Dionisio in favor of Ma. Elena, coupled with a copy of a court order authorizing Ma. Elena to
mortgage the lot to secure a loan of P500,000.00.[9]
The petitioners and Atanacio next inquired about the mortgage and the court order annotated on TCT
No. 63377 at the Los Baos Rural Bank. There, they met with Atty. Noel Zarate, the banks legal counsel,
who related that the bank had asked for the court order because the lot involved was conjugal property.
[10]
 
Following their verification, the petitioners delivered P130,000.00 as additional down payment
on February 4, 1991; and P650,000.00 to the Los Baos Rural Bank on February 12, 1991, which then
released the owners duplicate copy of TCT No. 63377 to them.[11]
On March 18, 1991, the petitioners delivered the final amount of P700,000.00 to Ma. Elena, who
executed a deed of absolute sale in their favor. However, Ma. Elena did not turn over the owners
duplicate copy of TCT No. 63376, claiming that said copy was in the possession of a relative who was
then in Hongkong.[12] She assured them that the owners duplicate copy of TCT No. 63376 would be
turned over after a week.
 
On March 19, 1991, TCT No. 63377 was cancelled and a new one was issued in the name of
the petitioners.
Ma. Elena did not turn over the duplicate owners copy of TCT No. 63376 as promised. In due
time, the petitioners learned that the duplicate owners copy of TCT No. 63376 had been all along in the
custody of Atty. Jeremy Z. Parulan, who appeared to hold an SPA executed by his brother Dionisio
authorizing him to sell both lots.[13]
 
At Atanacios instance, the petitioners met on March 25, 1991 with Atty. Parulan at the Manila Peninsula.
[14]
 For that meeting, they were accompanied by one Atty. Olandesca. [15] They recalled that Atty. Parulan
smugly demanded P800,000.00 in exchange for the duplicate owners copy of TCT No. 63376, because
Atty. Parulan represented the current value of the property to be P1.5 million. As a counter-offer,
however, they tendered P250,000.00, which Atty. Parulan declined,[16] giving them only until April 5,
1991 to decide.
 
Hearing nothing more from the petitioners, Atty. Parulan decided to call them on April 5,
1991, but they informed him that they had already fully paid to Ma. Elena.[17]
 
Thus, on April 15, 1991, Dionisio, through Atty. Parulan, commenced an action (Civil Case No.
91-1005 entitled Dionisio Z. Parulan, Jr., represented by Jeremy Z. Parulan, as attorney in fact, v. Ma.
Elena Parulan, Sps. Rex and Coney Aggabao), praying for the declaration of the nullity of the deed of
absolute sale executed by Ma. Elena, and the cancellation of the title issued to the petitioners by virtue
thereof.
 
In turn, the petitioners filed on July 12, 1991 their own action for specific performance with
damages against the respondents.
 
Both cases were consolidated for trial and judgment in the RTC.[18]
 
Ruling of the RTC
 
After trial, the RTC rendered judgment, as follows:
 
WHEREFORE, and in consideration of the foregoing, judgment is hereby
rendered in favor of plaintiff Dionisio A. Parulan, Jr. and against defendants Ma.
Elena Parulan and the Sps. Rex and Concepcion Aggabao, without prejudice to any
action that may be filed by the Sps. Aggabao against co-defendant Ma. Elena
Parulan for the amounts they paid her for the purchase of the subject lots, as
follows:
1.      The Deed of Absolute Sale dated March 18, 1991 covering the sale of
the lot located at No. 49 M. Cuaderno St., Executive Village, BF Homes, Paraaque,
Metro Manila, and covered by TCT Nos. 63376 and 63377 is declared null and void.
2.      Defendant Mrs. Elena Parulan is directed to pay litigation expenses
amounting to P50,000.00 and the costs of the suit.
 
SO ORDERED.[19]
The RTC declared that the SPA in the hands of Ma. Elena was a forgery, based on its finding
that Dionisio had been out of the country at the time of the execution of the SPA; [20] that NBI Sr.
Document Examiner Rhoda B. Flores had certified that the signature appearing on the SPA purporting to
be that of Dionisio and the set of standard sample signatures of Dionisio had not been written by one
and the same person;[21] and that Record Officer III Eliseo O. Terenco and Clerk of Court Jesus P.
Maningas of the Manila RTC had issued a certification to the effect that Atty. Alfred Datingaling, the
Notary Public who had notarized the SPA, had not been included in the list of Notaries Public in Manila
for the year 1990-1991.[22]
The RTC rejected the petitioners defense of being buyers in good faith because of their failure to exercise
ordinary prudence, including demanding from Ma. Elena a court order authorizing her to sell the
properties similar to the order that the Los Baos Rural Bank had required before accepting the mortgage
of the property.[23] It observed that they had appeared to be in a hurry to consummate the transaction
despite Atanacios advice that they first consult a lawyer before buying the property; that with ordinary
prudence, they should first have obtained the owners duplicate copies of the TCTs before paying the full
amount of the consideration; and that the sale was void pursuant to Article 124 of theFamily Code.[24]
 
Ruling of the CA
 
As stated, the CA affirmed the RTC, opining that Article 124 of the Family Code applied
because Dionisio had not consented to the sale of the conjugal property by Ma. Elena; and that the RTC
correctly found the SPA to be a forgery.
The CA denied the petitioners motion for reconsideration.[25]
  
Issues
 
The petitioners now make two arguments: (1) they were buyers in good faith; and (2) the CA
erred in affirming the RTCs finding that the sale between Mrs. Elena and the petitioners had been a
nullity under Article 124 of the Family Code.
 
The petitioners impute error to the CA for not applying the ordinary prudent mans standard
in determining their status as buyers in good faith. They contend that the more appropriate law to apply
was Article 173 of the Civil Code, not Article 124 of the Family Code; and that even if the SPA held by Ma.
Elena was a forgery, the ruling in Veloso v. Court of Appeals[26] warranted a judgment in their favor.
 
Restated, the issues for consideration and resolution are as follows:
 
1) Which between Article 173 of the Civil Code and Article 124 of the Family
Code should apply to the sale of the conjugal property executed without the
consent of Dionisio?
2) Might the petitioners be considered in good faith at the time of their purchase
of the property?
 
3) Might the ruling in Veloso v. Court of Appeals be applied in favor of the
petitioners despite the finding of forgery of the SPA?
Ruling
 
The petition has no merit. We sustain the CA.
 
1.
Article 124, Family Code, applies to sale of conjugal
properties made after the effectivity of the Family Code
 
The petitioners submit that Article 173 of the Civil Code, not Article 124 of the Family
Code, governed the property relations of the respondents because they had been married prior to the
effectivity of the Family Code; and that the second paragraph of Article 124 of the Family Code should
not apply because the other spouse held the administration over the conjugal property. They argue that
notwithstanding his absence from the country Dionisio still held the administration of the conjugal
property by virtue of his execution of the SPA in favor of his brother; and that even assuming that Article
124 of the Family Code properly applied, Dionisio ratified the sale through Atty. Parulans counter-offer
during the March 25, 1991 meeting.
We do not subscribe to the petitioners submissions.
 
To start with, Article 254[27] the Family Code has expressly repealed several titles under
the Civil Code, among them the entire Title VI in which the provisions on the property relations between
husband and wife, Article 173 included, are found.
 
Secondly, the sale was made on March 18, 1991, or after August 3, 1988, the effectivity of
the Family Code. The proper law to apply is, therefore, Article 124 of the Family Code, for it is settled
that any alienation or encumbrance of conjugal property made during the effectivity of the Family
Code is governed by Article 124 of the Family Code.[28]
 
Article 124 of the Family Code provides:
Article 124. The administration and enjoyment of the conjugal partnership
property shall belong to both spouses jointly. In case of disagreement, the
husbands decision shall prevail, subject to recourse to the court by the wife for
proper remedy, which must be availed of within five years from the date of the
contract implementing such decision.
 
In the event that one spouse is incapacitated or otherwise unable to
participate in the administration of the conjugal properties, the other spouse
may assume sole powers of administration. These powers do not include
disposition or encumbrance without authority of the court or the written
consent of the other spouse. In the absence of such authority or consent, the
disposition or encumbrance shall be void. However, the transaction shall be
construed as a continuing offer on the part of the consenting spouse and the third
person, and may be perfected as a binding contract upon the acceptance by the
other spouse or authorization by the court before the offer is withdrawn by either
or both offerors.
 
Thirdly, according to Article 256 [29] of the Family Code, the provisions of the Family Code may
apply retroactively provided no vested rights are impaired. In Tumlos v. Fernandez,[30] the Court rejected
the petitioners argument that the Family Code did not apply because the acquisition of the contested
property had occurred prior to the effectivity of the Family Code, and pointed out that Article 256
provided that the Family Code could apply retroactively if the application would not prejudice vested or
acquired rights existing before the effectivity of the Family Code. Herein, however, the petitioners did
not show any vested right in the property acquired prior to August 3, 1988 that exempted their situation
from the retroactive application of the Family Code.
Fourthly, the petitioners failed to substantiate their contention that Dionisio, while holding
the administration over the property, had delegated to his brother, Atty. Parulan, the administration of
the property, considering that they did not present in court the SPA granting to Atty. Parulan the
authority for the administration.
Nonetheless, we stress that the power of administration does not include acts of disposition
or encumbrance, which are acts of strict ownership. As such, an authority to dispose cannot proceed
from an authority to administer, and vice versa, for the two powers may only be exercised by an agent by
following the provisions on agency of the Civil Code (from Article 1876 to Article 1878). Specifically, the
apparent authority of Atty. Parulan, being a special agency, was limited to the sale of the property in
question, and did not include or extend to the power to administer the property. [31]
 
Lastly, the petitioners insistence that Atty. Parulans making of a counter-offer during
the March 25, 1991 meeting ratified the sale merits no consideration. Under Article 124 of the Family
Code, the transaction executed sans the written consent of Dionisio or the proper court order was void;
hence, ratification did not occur, for a void contract could not be ratified. [32]
On the other hand, we agree with Dionisio that the void sale was a continuing offer from the
petitioners and Ma. Elena that Dionisio had the option of accepting or rejecting before the offer was
withdrawn by either or both Ma. Elena and the petitioners. The last sentence of the second paragraph of
Article 124 of the Family Code makes this clear, stating that in the absence of the other spouses consent,
the transaction should be construed as a continuing offer on the part of the consenting spouse and the
third person, and may be perfected as a binding contract upon the acceptance by the other spouse or
upon authorization by the court before the offer is withdrawn by either or both offerors.
 
 
 
2.
Due diligence required in verifying not only vendors title,
 but also agents authority to sell the property
 
A purchaser in good faith is one who buys the property of another, without notice that some
other person has a right to, or interest in, such property, and pays the full and fair price for it at the time
of such purchase or before he has notice of the claim or interest of some other persons in the
property. He buys the property with the belief that the person from whom he receives the thing was the
owner and could convey title to the property. He cannot close his eyes to facts that should put a
reasonable man on his guard and still claim he acted in good faith. [33] The status of a buyer in good faith
is never presumed but must be proven by the person invoking it.[34]
 
Here, the petitioners disagree with the CA for not applying the ordinary prudent mans
standard in determining their status as buyers in good faith. They insist that they exercised due diligence
by verifying the status of the TCTs, as well as by inquiring about the details surrounding the mortgage
extended by the Los Baos Rural Bank. They lament the holding of the CA that they should have been put
on their guard when they learned that the Los Baos Rural Bank had first required a court order before
granting the loan to the respondents secured by their mortgage of the property.
 
The petitioners miss the whole point.
 
Article 124 of the Family Code categorically requires the consent of both spouses before the
conjugal property may be disposed of by sale, mortgage, or other modes of disposition. In Bautista v.
Silva,[35] the Court erected a standard to determine the good faith of the buyers dealing with
a seller who had title to and possession of the land but whose capacity to sell was restricted, in that the
consent of the other spouse was required before the conveyance, declaring that in order to prove good
faith in such a situation, the buyers must show that they inquired not only into the title of the seller  but
also into the sellers capacity to sell.[36] Thus, the buyers of conjugal property must observe two kinds of
requisite diligence, namely: (a) the diligence in verifying the validity of the title covering the property;
and (b) the diligence in inquiring into the authority of the transacting spouse to sell conjugal property in
behalf of the other spouse.
 
It is true that a buyer of registered land needs only to show that he has relied on the face of
the certificate of title to the property, for he is not required to explore beyond what the certificate
indicates on its face.[37] In this respect, the petitioners sufficiently proved that they had checked on the
authenticity of TCT No. 63376 and TCT No. 63377 with the Office of the Register of Deeds in Pasay City as
the custodian of the land records; and that they had also gone to the Los Baos Rural Bank to inquire
about the mortgage annotated on TCT No. 63377. Thereby, the petitioners observed the requisite
diligence in examining the validity of the TCTs concerned.
 
Yet, it ought to be plain enough to the petitioners that the issue was whether or not they had
diligently inquired into the authority of Ma. Elena to convey the property, not whether or not the TCT
had been valid and authentic, as to which there was no doubt. Thus, we cannot side with them.
Firstly, the petitioners knew fully well that the law demanded the written consent of Dionisio
to the sale, but yet they did not present evidence to show that they had made inquiries into the
circumstances behind the execution of the SPA purportedly executed by Dionisio in favor of Ma. Elena.
Had they made the appropriate inquiries, and not simply accepted the SPA for what it represented on its
face, they would have uncovered soon enough that the respondents had been estranged from each
other and were under de factoseparation, and that they probably held conflicting interests that would
negate the existence of an agency between them. To lift this doubt, they must, of necessity, further
inquire into the SPA of Ma. Elena. The omission to inquire indicated their not being buyers in good faith,
for, as fittingly observed in Domingo v. Reed:[38]
 
What was required of them by the appellate court, which we affirm, was
merely to investigate as any prudent vendee should the authority of Lolita to sell
the property and to bind the partnership. They had knowledge of facts that should
have led them to inquire and to investigate, in order to acquaint themselves with
possible defects in her title. The law requires them to act with the diligence of a
prudent person; in this case, their only prudent course of action was to investigate
whether respondent had indeed given his consent to the sale and authorized his
wife to sell the property.[39]
 
Indeed, an unquestioning reliance by the petitioners on Ma. Elenas SPA without first taking
precautions to verify its authenticity was not a prudent buyers move.[40] They should have done
everything within their means and power to ascertain whether the SPA had been genuine and authentic.
If they did not investigate on the relations of the respondents vis--vis each other, they could have done
other things towards the same end, like attempting to locate the notary public who had notarized the
SPA, or checked with the RTC in Manila to confirm the authority of Notary Public Atty. Datingaling. It
turned out that Atty. Datingaling was not authorized to act as a Notary Public for Manila during the
period 1990-1991, which was a fact that they could easily discover with a modicum of zeal.
 
Secondly, the final payment of P700,000.00 even without the owners duplicate copy of the
TCT No. 63376 being handed to them by Ma. Elena indicated a revealing lack of precaution on the part of
the petitioners. It is true that she promised to produce and deliver the owners copy within a week
because her relative having custody of it had gone to Hongkong, but their passivity in such an essential
matter was puzzling light of their earlier alacrity in immediately and diligently validating the TCTs to the
extent of inquiring at the Los Baos Rural Bank about the annotated mortgage. Yet, they could have
rightly withheld the final payment of the balance. That they did not do so reflected their lack of due care
in dealing with Ma. Elena.
 
Lastly, another reason rendered the petitioners good faith incredible. They did not take
immediate action against Ma. Elena upon discovering that the owners original copy of TCT No. 63376
was in the possession of Atty. Parulan, contrary to Elenas representation. Human experience would have
impelled them to exert every effort to proceed against Ma. Elena, including demanding the return of the
substantial amounts paid to her. But they seemed not to mind her inability to produce the TCT, and,
instead, they contented themselves with meeting with Atty. Parulan to negotiate for the possible
turnover of the TCT to them.
 
3.
Veloso v. Court of Appeals cannot help petitioners
 
The petitioners contend that the forgery of the SPA notwithstanding, the CA could still have
decided in their favor conformably with Veloso v. Court of Appeals, [41] a casewhere the petitioner
husband claimed that his signature and that of the notary public who had notarized the SPA the
petitioner supposedly executed to authorize his wife to sell the property had been forged. In denying
relief, the Court upheld the right of the vendee as an innocent purchaser for value.
Veloso is inapplicable, however, because the contested property therein was exclusively
owned by the petitioner and did not belong to the conjugal regime. Veloso being upon conjugal
property, Article 124 of the Family Code did not apply.
 
In contrast, the property involved herein pertained to the conjugal regime, and,
consequently, the lack of the written consent of the husband rendered the sale void pursuant to Article
124 of the Family Code. Moreover, even assuming that the property involved in Veloso was conjugal, its
sale was made on November 2, 1987, or prior to the effectivity of the Family Code; hence, the sale was
still properly covered by Article 173 of the Civil Code, which provides that a sale effected without the
consent of one of the spouses is only voidable, not void. However, the sale herein was made already
during the effectivity of the Family Code, rendering the application of Article 124 of the Family Code clear
and indubitable.
 The fault of the petitioner in Veloso was that he did not adduce sufficient evidence to prove
that his signature and that of the notary public on the SPA had been forged. The Court pointed out that
his mere allegation that the signatures had been forged could not be sustained without clear and
convincing proof to substantiate the allegation. Herein, however, both the RTC and the CA found from
the testimonies and evidence presented by Dionisio that his signature had been definitely forged, as
borne out by the entries in his passport showing that he was out of the country at the time of the
execution of the questioned SPA; and that the alleged notary public, Atty. Datingaling, had no authority
to act as a Notary Public for Manila during the period of 1990-1991.
 
WHEREFORE, we deny the petition for review on certiorari, and affirm the decision dated July
2, 2004 rendered by the Court of Appeals in C.A.-G.R. CV No. 69044 entitled Dionisio Z. Parulan, Jr. vs.
Ma. Elena Parulan and Sps. Rex and Concepcion Aggabao and Sps. Rex and Concepcion Aggabao vs.
Dionisio Z. Parulan, Jr. and Ma. Elena Parulan.
 
Costs of suit to be paid by the petitioners.
 
SO ORDERED.

PELAYO VS. PEREZ

This resolves the petition for review on certiorari seeking the reversal of the Decision [1] of the
Court of Appeals (CA) promulgated on April 20, 1999 which reversed the Decision of the Regional Trial
Court (RTC) of Panabo, Davao, Branch 34, in Civil Case No. 91-46; and the CA Resolution dated December
17, 1999 denying petitioners motion for reconsideration.
 
The antecedent facts as aptly narrated by the CA are as follows:
 
David Pelayo (Pelayo),by a Deed of Absolute Sale executed on January
11, 1988, conveyed to Melki Perez (Perez) two parcels of agricultural land (the
lots) situated in Panabo, Davao which are portions of Lot 4192, Cad. 276 covered
by OCT P-16873.
 
Loreza Pelayo (Loreza), wife of Pelayo, and another one whose
signature is illegible witnessed the execution of the deed.
 
Loreza, however, signed only on the third page in the space provided
for witnesses on account of which Perez application for registration of the deed
with the Office of the Register of Deeds in Tagum, Davao was denied.
 
Perez thereupon asked Loreza to sign on the first and second pages of
the deed but she refused, hence, he instituted on August 8, 1991 the instant
complaint for specific performance against her and her husband Pelayo
(defendants).
 
The defendants moved to dismiss the complaint on the ground that it
stated no cause of action, citing Section 6 of RA 6656 otherwise known as the
Comprehensive Agrarian Reform Law which took effect on June 10, 1988 and
which provides that contracts executed prior thereto shall be valid only when
registered with the Register of Deeds within a period of three (3) months after the
effectivity of this Act.
The questioned deed having been executed on January 10, 1988, the
defendants claimed that Perez had at least up to September 10, 1988 within which
to register the same, but as they failed to, it is not valid and, therefore,
unenforceable.
 
The trial court thus dismissed the complaint. On appeal to this Court,
the dismissal was set aside and the case was remanded to the lower court for
further proceedings.
 
In their Answer, the defendants claimed that as the lots were occupied
illegally by some persons against whom they filed an ejectment case, they and
Perez who is their friend and known at the time as an activist/leftist, hence feared
by many, just made it appear in the deed that the lots were sold to him in order to
frighten said illegal occupants, with the intentional omission of Lorezas signature
so that the deed could not be registered; and that the deed being simulated and
bereft of consideration is void/inexistent.
Perez countered that the lots were given to him by defendant Pelayo in
consideration of his services as his attorney-in-fact to make the necessary
representation and negotiation with the illegal occupants-defendants in the
ejectment suit; and that after his relationship with defendant Pelayo became sour,
the latter sent a letter to the Register of Deeds of Tagum requesting him not to
entertain any transaction concerning the lots title to which was entrusted to Perez
who misplaced and could [not] locate it.
 
Defendant Pelayo claimed in any event, in his Pre-trial brief filed on
March 19, 1996, that the deed was without his wife Lorezas consent, hence, in
light of Art. 166 of the Civil Code which provides:
Article 166. Unless the wife has been declared a
non compos mentis or a spendthrift, or is under civil
interdiction or is confined in a leprosarium, the husband
cannot alienate or encumber any real property of the
conjugal partnership without the wifes consent . . .
it is null and void.
 
The trial court, finding, among others, that Perez did not possess, nor
pay the taxes on the lots, that defendant Pelayo was indebted to Perez for services
rendered and, therefore, the deed could only be considered as evidence of debt,
and that in any event, there was no marital consent to nor actual consideration for
the deed, held that the deed was null and void and accordingly rendered judgment
the dispositive portion of which reads:
 
WHEREFORE, judgment is hereby rendered
ordering and directing the defendants to pay plaintiff Melki
Perez the sum of TEN THOUSAND (P10,000.00) Pesos as
principal with 12% interest per annum starting from the date
of filing of the complaint on August 1, 1991 until plaintiff is
fully paid.
 
The defendants shall likewise pay to plaintiff the
sum of THREE THOUSAND (P3,000.00) as attorneys fees.
The court further orders that the Deed of
Absolute Sale, (Annex A) of the complaint and (Annex C) of
the plaintiffs Motion for Summary Judgment is declared null
and void and without force and it is likewise removed as a
cloud over defendants title and property in suit. . . .[2]
 
 
The RTC Decision was appealed by herein respondent Perez to the CA. Petitioners failed to file
their appellees brief. The CA then promulgated its Decision on April 20, 1999 whereby it ruled that by
Lorenzas signing as witness to the execution of the deed, she had knowledge of the transaction and is
deemed to have given her consent to the same; that herein petitioners failed to adduce sufficient proof
to overthrow the presumption that there was consideration for the deed, and that petitioner David
Pelayo, being a lawyer, is presumed to have acted with due care and to have signed the deed with full
knowledge of its contents and import. The CA reversed and set aside the RTC Decision, declaring as valid
and enforceable the questioned deed of sale and ordering herein petitioner Lorenza Pelayo to affix her
signature on all pages of said document.
Petitioners moved for reconsideration of the decision but the same was denied per
Resolution dated December 17, 1999. The CA found said motion to have been filed out of time and ruled
that even putting aside technicality, petitioners failed to present any ground bearing on the merits of the
case to justify a reversal or setting aside of the decision.
 
Hence, this petition for review on certiorari on the following grounds:
 
1. The CA erred in ignoring the specific provision of Section 6, in relation to Section 4 of R.A.
No. 6657 otherwise known as the Comprehensive Agrarian Reform Law of 1988 which took effect on
June 15, 1988 and which provides that contracts executed prior thereto shall be valid only when
registered with the Register of Deeds within a period of three (3) months after the effectivity of this Act.
2. The CA erred in holding that the deed of sale was valid and considering the P10,000.00
adjudged by the trial court as Perezs remuneration as the consideration for the deed of sale, instead of
declaring the same as null and void for being fictitious or simulated and on the basis of Art. 491, Par. 2 of
the New Civil Code which prohibits agents from acquiring by purchase properties from his principal
under his charge.
3. The CA made a novel ruling that there was implied marital consent of the wife of petitioner
David Pelayo.
 
4. Petitioners should have been allowed to file their appellees brief to ventilate their side,
considering the existence of peculiar circumstances which prevented petitioners from filing said brief.
 
On the other hand, respondent points out that the CA, in resolving the first appeal docketed
as CA-G.R. SP No. 38700[3] brought by respondent assailing the RTC Order granting herein petitioners
motion to dismiss, already ruled that under R.A. No. 6657, the sale or transfer of private agricultural land
is allowed only when the area of the land being conveyed constitutes or is a part of, the landowner-seller
retained area and when the total landholding of the purchaser-transferee, including the property sold,
does not exceed five (5) hectares; that in this case, the land in dispute is only 1.3 hectares and there is no
proof that the transferees (herein respondent) total landholding inclusive of the subject land will exceed
5 hectares, the landholding ceiling prescribed by R.A. No. 6657; that the failure of respondent to register
the instrument was not due to his fault or negligence but can be attributed to Lorenzas unjustified
refusal to sign two pages of the deed despite several requests of respondent; and that therefore, the CA
ruled that the deed of sale subject of this case is valid under R.A. No. 6657.
  
Respondent further maintains that the CA correctly held in its assailed Decision that there
was consideration for the contract and that Lorenza is deemed to have given her consent to the deed of
sale.
 
Respondent likewise opines that the CA was right in denying petitioners motion for
reconsideration where they prayed that they be allowed to file their appellees brief as their counsel
failed to file the same on account of said counsels failing health due to cancer of the liver. Respondent
emphasized that in petitioners motion for reconsideration, they did not even cite any errors made by the
CA in its Decision.
 
The issues boil down to the question of whether or not the deed of sale was null and void on
the following grounds: (a) for not complying with the provision in R.A. No. 6657 that such document
must be registered with the Register of Deeds within three months after the effectivity of said law; (b)
for lack of marital consent; (c) for being prohibited under Article 1491 (2) of the Civil Code; and (d) for
lack of consideration.
We rule against petitioners.
 
The issue of whether or not the deed of sale is null and void under R.A. No. 6657, for
respondents failure to register said document with the Register of Deeds within three months after the
effectivity of R.A. No. 6657, had been resolved with finality by the CA in its Decision dated November 24,
1994 in CA-G.R. SP No. 38700.[4] Herein petitioners no longer elevated said CA Decision to this Court and
the same became final and executory on January 7, 1995.[5]
 
In said decision, the CA interpreted Section 4, in relation to Section 70 of R.A. No. 6657, to
mean thus:
 
. . . the proper interpretation of both sections is that under R.A. No.
6657, the sale or transfer of a private agricultural land is allowed only when said
land area constitutes or is a part of the landowner-seller retained area and only
when the total landholdings of the purchaser-transferee, including the property
sold does not exceed five (5) hectares.
 
 
Aside from declaring that the failure of respondent to register the deed was not of his own fault or
negligence, the CA ruled that respondents failure to register the deed of sale within three months after
effectivity of The Comprehensive Agrarian Reform Law did not invalidate the deed of sale as the
transaction over said property is not proscribed by R.A. No. 6657.
 
Thus, under the principle of law of the case, said ruling of the CA is now binding on
petitioners. Such principle was elucidated in Cucueco vs. Court of Appeals,[6] to wit:
 
Law of the case has been defined as the opinion delivered on a former
appeal.  It is a term applied to an established rule that when an appellate court
passes on a question and remands the case to the lower court for further
proceedings, the question there settled becomes the law of the case upon
subsequent appeal. It means that whatever is once irrevocably established as the
controlling legal rule or decision between the same parties in the same case
continues to be the law of the case, whether correct on general principles or not,
so long as the facts on which such decision was predicated continue to be the facts
of the case before the court. 
 
Petitioners not having questioned the Decision of the CA dated November 24, 1994 which then attained
finality, the ruling that the deed of sale subject of this case is not among the transactions deemed as
invalid under R.A. No. 6657, is now immutable.
 
We agree with the CA ruling that petitioner Lorenza, by affixing her signature to the Deed of
Sale on the space provided for witnesses, is deemed to have given her implied consent to the contract of
sale.
 
Sale is a consensual contract that is perfected by mere consent, which may either be express
or implied.[7] A wifes consent to the husbands disposition of conjugal property does not always have to
be explicit or set forth in any particular document, so long as it is shown by acts of the wife that such
consent or approval was indeed given.[8] In the present case, although it appears on the face of the deed
of sale that Lorenza signed only as an instrumental witness, circumstances leading to the execution of
said document point to the fact that Lorenza was fully aware of the sale of their conjugal property and
consented to the sale.
 
In their Pre-Trial Brief,[9] petitioners admitted that even prior to 1988, they have been having
serious problems, including threats to the life of petitioner David Pelayo, due to conflicts with the illegal
occupants of the property in question, so that respondent, whom many feared for being a leftist/activist,
offered his help in driving out said illegal occupants.
 
Human experience tells us that a wife would surely be aware of serious problems such as
threats to her husbands life and the reasons for such threats. As they themselves stated, petitioners
problems over the subject property had been going on for quite some time, so it is highly improbable for
Lorenza not to be aware of what her husband was doing to remedy such problems. Petitioners do not
deny that Lorenza Pelayo was present during the execution of the deed of sale as her signature appears
thereon. Neither do they claim that Lorenza Pelayo had no knowledge whatsoever about the contents of
the subject document. Thus, it is quite
 
certain that she knew of the sale of their conjugal property between her husband and respondent.
 
Under the rules of evidence, it is presumed that a person takes ordinary care of his concerns.
[10]
 Petitioners did not even attempt to overcome the aforementioned presumption as no evidence was
ever presented to show that Lorenza was in any way lacking in her mental faculties and, hence, could not
have fully understood the ramifications of signing the deed of sale. Neither did petitioners present any
evidence that Lorenza had been defrauded, forced, intimidated or threatened either by her own
husband or by respondent into affixing her signature on the subject document. If Lorenza had any
objections over the conveyance of the disputed property, she could have totally refrained from having
any part in the execution of the deed of sale. Instead, Lorenza even affixed her signature thereto.
 
Moreover, under Article 173, in relation to Article 166, both of the New Civil Code, which was
still in effect on January 11, 1988 when the deed in question was executed, the lack of marital consent to
the disposition of conjugal property does not make the contract void ab initio but merely voidable. Said
provisions of law provide:
 
Art. 166. Unless the wife has been declared a non compos mentis or a
spendthrift, or is under civil interdiction or is confined in a leprosarium, the
husband cannot alienate or encumber any real property of the conjugal property
without the wifes consent. If she refuses unreasonably to give her consent, the
court may compel her to grant the same.
 
...
Art. 173. The wife may, during the marriage, and within ten years from
the transaction questioned, ask the courts for the annulment of any contract of
 the husband entered into without her consent, when such consent is required, or
any act or contract of the husband which tends to defraud her or impair her
interest in the conjugal partnership property. Should the wife fail to exercise this
right, she or her heirs, after the dissolution of the marriage, may demand the value
of property fraudulently alienated by the husband.
 
 
Hence, it has been held that the contract is valid until the court annuls the same and only
upon an action brought by the wife whose consent was not obtained. [11] In the present case, despite
respondents repeated demands for Lorenza to affix her signature on all the pages of the deed of sale,
showing respondents insistence on enforcing said contract, Lorenza still did not file a case for annulment
of the deed of sale. It was only when respondent filed a complaint for specific performance on August 8,
1991 when petitioners brought up Lorenzas alleged lack of consent as an affirmative defense. Thus, if the
transaction was indeed entered into without Lorenzas consent, we find it quite puzzling why for more
than three and a half years, Lorenza did absolutely nothing to seek the nullification of the assailed
contract.
The foregoing circumstances lead the Court to believe that Lorenza knew of the full import of
the transaction between respondent and her
 
husband; and, by affixing her signature on the deed of sale, she, in effect, signified her consent to the
disposition of their conjugal property.
 
With regard to petitioners asseveration that the deed of sale is invalid under Article 1491,
paragraph 2 of the New Civil Code, we find such argument unmeritorious. Article 1491 (2) provides:
 
Art. 1491. The following persons cannot acquire by purchase, even at a public or
judicial auction, either in person or through the mediation of another:
 
...
 
(2) Agents, the property whose administration or sale may have been entrusted to
them, unless the consent of the principal has been given;
...
 
 
In Distajo vs. Court of Appeals,[12] a landowner, Iluminada Abiertas, designated one of her sons
as the administrator of several parcels of her land. The landowner subsequently executed a Deed of
Certification of Sale of Unregistered Land, conveying some of said land to her son/administrator. Therein,
we held that:
 
Under paragraph (2) of the above article, the prohibition against agents
purchasing property in their hands for sale or management is not absolute. It does
not apply if the principal consents to the sale of the property in the hands of the
agent or administrator. In this case, the deeds of sale signed by Iluminada Abiertas
shows that she gave consent to the sale of the properties in favor of her son, Rufo,
who was the administrator of the properties. Thus, the consent of the principal
Iluminada Abiertas removes the transaction out of the prohibition contained in
Article 1491(2).[13]
The above-quoted ruling is exactly in point with this case before us. Petitioners, by signing the
Deed of Sale in favor of respondent, are also deemed to have given their consent to the sale of the
subject property in favor of respondent, thereby making the transaction an exception to the general rule
that agents are prohibited from purchasing the property of their principals.
 
Petitioners also argue that the CA erred in ruling that there was consideration for the sale. We
find no error in said appellate courts ruling. The element of consideration for the sale is indeed present.
Petitioners, in adopting the trial courts narration of antecedent facts in their petition, [14] thereby
admitted that they authorized respondent to represent them in negotiations with the squatters
occupying the disputed property and, in consideration of respondents services, they executed the
subject deed of sale. Aside from such services rendered by respondent, petitioners also acknowledged in
the deed of sale that they received in full the amount of Ten Thousand Pesos. Evidently, the
consideration for the sale is respondents services plus the aforementioned cash money.
 
Petitioners contend that the consideration stated in the deed of sale is excessively
inadequate, indicating that the deed of sale was merely simulated. We are not persuaded. Our ruling
in Buenaventura vs. Court of Appeals[15] is pertinent, to wit:
 
. . . Indeed, there is no requirement that the price be equal to the exact
value of the subject matter of sale. . . . As we stated in Vales vs. Villa:
Courts cannot follow one every step of his life
and extricate him from bad bargains, protect him from
unwise investments, relieve him from one-sided contracts,
or annul the effects of foolish acts. Courts cannot constitute
themselves guardians of persons who are not legally
incompetent. Courts operate not because one person has
been defeated or overcome by another, but because he has
been defeated or overcome illegally. Men may do foolish
things, make ridiculous contracts, use miserable judgment,
and lose money by them indeed, all they have in the world;
but not for that alone can the law intervene and restore.
There must be, in addition, a violation of the law, the
commission of what the law knows as an actionable wrong,
before the courts are authorized to lay hold of the situation
and remedy it.[16]
 
Verily, in the present case, petitioners have not presented proof that there has been fraud, mistake or
undue influence exercised upon them by respondent. It is highly unlikely and contrary to human
experience that a layman like respondent would be able to defraud, exert undue influence, or in any way
vitiate the consent of a lawyer like petitioner David Pelayo who is expected to be more knowledgeable in
the ways of drafting contracts and other legal transactions.
 
Furthermore, in their Reply to Respondents Memorandum, [17] petitioners adopted the CAs
narration of fact that petitioners stated in a letter they sent to the Register of Deeds of Tagum that they
have entrusted the titles over subject lots to herein respondent. Such act is a clear indication that they
intended to convey the subject property to herein respondent and the deed of sale was not merely
simulated or fictitious.
 
Lastly, petitioners claim that they were not able to fully ventilate their defense before the CA
as their lawyer, who was then suffering from cancer of the liver, failed to file their appellees brief. Thus,
in their motion for reconsideration of the CA Decision, they prayed that they be allowed to submit such
appellees brief. The CA, in its Resolution dated December 17, 1999, stated thus:
By movant-defendant-appellees own information, his counsel received
a copy of the decision on May 5, 1999. He, therefore, had fifteen (15) days from
said date or up to May 20, 1999 to file the motion. The motion, however, was sent
through a private courier and, therefore, considered to have been filed on the date
 of actual receipt on June 17, 1999 by the addressee Court of Appeals, was filed
beyond the reglementary period.
 
Technicality aside, movant has not proffered any ground bearing on the
merits of the case why the decision should be set aside.
 
 
Petitioners never denied the CA finding that their motion for reconsideration was filed
beyond the fifteen-day reglementary period. On that point alone, the CA is correct in denying due course
to said motion. The motion having been belatedly filed, the CA Decision had then attained finality. Thus,
in Abalos vs. Philex Mining Corporation,[18] we held that:
 
. . . Nothing is more settled in law than that once a judgment attains
finality it thereby becomes immutable and unalterable. It may no longer be
modified in any respect, even if the modification is meant to correct what is
perceived to be an erroneous conclusion of fact or law, and regardless of whether
the modification is attempted to be made by the court rendering it or by the
highest court of the land.
 
 
Moreover, it is pointed out by the CA that said motion did not present any defense or
argument on the merits of the case that could have convinced the CA to reverse or modify its Decision.
 
We have consistently held that a petitioners right to due process is not violated where he was
able to move for reconsideration of the order or decision in question. [19] In this case, petitioners had the ARTURO R. ABALOS, petitioner, vs. DR. GALICANO S. MACATANGAY, JR., respondent.
opportunity to fully expound on their defenses through a motion for reconsideration. Petitioners did file
such motion but they wasted such opportunity by failing to present therein whatever errors they DECISION
believed the CA had committed in its Decision. Definitely, therefore, the denial of petitioners motion for
reconsideration, praying that they be allowed to file appellees brief, did not infringe petitioners right to TINGA, J.:
due process as any issue that petitioners wanted to raise could and should have been contained in said
motion for reconsideration. The instant petition seeks a reversal of the Decision of the Court of Appeals in CA-G.R. CV No.
  48355 entitled Dr. Galicano S. Macatangay, Jr. v. Arturo R. Abalos and Esther Palisoc-Abalos,
IN VIEW OF THE FOREGOING, the petition is DENIED and the Decision of the Court of Appeals promulgated on March 14, 2002. The appellate court reversed the trial courts decision which dismissed
dated April 20, 1999 and its Resolution dated December 17, 1999 are hereby AFFIRMED. the action for specific performance filed by respondent, and ordered petitioner and his wife to execute
in favor of herein respondent a deed of sale over the subject property.

Spouses Arturo and Esther Abalos are the registered owners of a parcel of land with
improvements located at Azucena St., Makati City consisting of about three hundred twenty-seven (327)
square meters, covered by Transfer Certificate of Title (TCT) No. 145316 of the Registry of Deeds of
Makati.

Armed with a Special Power of Attorney dated June 2, 1988, purportedly issued by his wife, Arturo
executed a Receipt and Memorandum of Agreement (RMOA) dated October 17, 1989, in favor of
respondent, binding himself to sell to respondent the subject property and not to offer the same to any
other party within thirty (30) days from date. Arturo acknowledged receipt of a check from respondent
in the amount of Five Thousand Pesos (P5,000.00), representing earnest money for the subject property,
the amount of which would be deducted from the purchase price of One Million Three Hundred Three
Hundred Thousand Pesos (P1,300,000.00). Further, the RMOA stated that full payment would be
effected as soon as possession of the property shall have been turned over to respondent.

Subsequently, Arturos wife, Esther, executed a Special Power of Attorney dated October 25, 1989,
appointing her sister, Bernadette Ramos, to act for and in her behalf relative to the transfer of the
property to respondent. Ostensibly, a marital squabble was brewing between Arturo and Esther at the
time and to protect his interest, respondent caused the annotation of his adverse claim on the title of
the spouses to the property on November 14, 1989.
 On November 16, 1989, respondent sent a letter to Arturo and Esther informing them of his
readiness and willingness to pay the full amount of the purchase price. The letter contained a demand
upon the spouses to comply with their obligation to turn over possession of the property to him. On the
same date, Esther, through her attorney-in-fact, executed in favor of respondent, a Contract to Sell the
property to the extent of her conjugal interest therein for the sum of six hundred fifty thousand pesos
(P650,000.00) less the sum already received by her and Arturo. Esther agreed to surrender possession of
the property to respondent within twenty (20) days from November 16, 1989, while the latter promised
to pay the balance of the purchase price in the amount of one million two hundred ninety thousand
pesos (P1,290,000.00) after being placed in possession of the property. Esther also obligated herself to
execute and deliver to respondent a deed of absolute sale upon full payment.
In a letter dated December 7, 1989, respondent informed the spouses that he had set aside the
amount of One Million Two Hundred Ninety Thousand Pesos (P1,290,000.00) as evidenced by Citibank
Check No. 278107 as full payment of the purchase price. He reiterated his demand upon them to comply
with their obligation to turn over possession of the property.Arturo and Esther failed to deliver the
property which prompted respondent to cause the annotation of another adverse claim on TCT No.
145316. On January 12, 1990, respondent filed a complaint for specific performance with damages
against petitioners. Arturo filed his answer to the complaint while his wife was declared in default.
The Regional Trial Court (RTC) dismissed the complaint for specific performance. It ruled that
the Special Power of Attorney (SPA) ostensibly issued by Esther in favor of Arturo was void as it was
falsified. Hence, the court concluded that the SPA could not have authorized Arturo to sell the property
to respondent. The trial court also noted that the check issued by respondent to cover the earnest
money was dishonored due to insufficiency of funds and while it was replaced with another check by
respondent, there is no showing that the second check was issued as payment for the earnest money on
the property.
On appeal taken by respondent, the Court of Appeals reversed the decision of the trial court. It
ruled that the SPA in favor of Arturo, assuming that it was void, cannot affect the transaction between
Esther and respondent. The appellate court ratiocinated that it was by virtue of the SPA executed by
Esther, in favor of her sister, that the sale of the property to respondent was effected. On the other
hand, the appellate court considered the RMOA executed by Arturo in favor of respondent valid to effect
the sale of Arturos conjugal share in the property.
Dissatisfied with the appellate courts disposition of the case, petitioner seeks a reversal of its
decision alleging that:
I.
The Court of Appeals committed serious and manifest error when it decided on the appeal without
affording petitioner his right to due process.
II.
The Court of Appeals committed serious and manifest error in reversing and setting aside the findings of
fact by the trial court.
III.
The Court of Appeals erred in ruling that a contract to sell is a contract of sale, and in ordering petitioner
to execute a registrable form of deed of sale over the property in favor of respondent. [1]
Petitioner contends that he was not personally served with copies of summons, pleadings, and
processes in the appeal proceedings nor was he given an opportunity to submit an appellees brief.  He
alleges that his counsel was in the United States from 1994 to June 2000, and he never received any
news or communication from him after the proceedings in the trial court were terminated. Petitioner
submits that he was denied due process because he was not informed of the appeal proceedings, nor
given the chance to have legal representation before the appellate court.
We are not convinced. The essence of due process is an opportunity to be heard. Petitioners
failure to participate in the appeal proceedings is not due to a cause imputable to the appellate court but
because of petitioners own neglect in ascertaining the status of his case. Petitioners counsel is equally
negligent in failing to inform his client about the recent developments in the appeal proceedings. Settled
is the rule that a party is bound by the conduct, negligence and mistakes of his counsel. [2] Thus,
petitioners plea of denial of due process is downright baseless.
Petitioner also blames the appellate court for setting aside the factual findings of the trial court
and argues that factual findings of the trial court are given much weight and respect when supported by
substantial evidence. He asserts that the sale between him and respondent is void for lack of consent
because the SPA purportedly executed by his wife Esther is a forgery and therefore, he could not have
validly sold the subject property to respondent.
Next, petitioner theorizes that the RMOA he executed in favor of respondent was not perfected
because the check representing the earnest money was dishonored. He adds that there is no evidence
on record that the second check issued by respondent was intended to replace the first check
representing payment of earnest money.
Respondent admits that the subject property is co-owned by petitioner and his wife, but he
objects to the allegations in the petition bearing a relation to the supposed date of the marriage of the
vendors. He contends that the alleged date of marriage between petitioner and his wife is a new factual
issue which was not raised nor established in the court a quo.Respondent claims that there is no basis to
annul the sale freely and voluntarily entered into by the husband and the wife.
The focal issue in the instant petition is whether petitioner may be compelled to convey the
property to respondent under the terms of the RMOA and the Contract to Sell. At bottom, the resolution
of the issue entails the ascertainment of the contractual nature of the two documents and the status of
the contracts contained therein.
Contracts, in general, require the presence of three essential elements: (1) consent of the
contracting parties; (2) object certain which is the subject matter of the contract; and (3) cause of the
obligation which is established.[3]
Until the contract is perfected, it cannot, as an independent source of obligation, serve as a
binding juridical relation.[4] In a contract of sale, the seller must consent to transfer ownership in
exchange for the price, the subject matter must be determinate, and the price must be certain in money
or its equivalent.[5] Being essentially consensual, a contract of sale is perfected at the moment there is a
meeting of the minds upon the thing which is the object of the contract and upon the price. [6] However,
ownership of the thing sold shall not be transferred to the vendee until actual or constructive delivery of
the property.[7]
On the other hand, an accepted unilateral promise which specifies the thing to be sold and the
price to be paid, when coupled with a valuable consideration distinct
and separate fromthe price, is what may properly be termed a perfected contract of option.[8] An option
merely grants a privilege to buy or sell within an agreed time and at a determined price.  It is separate
and distinct from that which the parties may enter into upon the consummation of the option. [9] A
perfected contract of option does not result in the perfection or consummation of the sale; only when
the option is exercised may a sale be perfected. [10] The option must, however, be supported by a
consideration distinct from the price.[11]
Perusing the RMOA, it signifies a unilateral offer of Arturo to sell the property to respondent for a
price certain within a period of thirty days. The RMOA does not impose upon respondent an obligation to
buy petitioners property, as in fact it does not even bear his signature thereon. It is quite clear that after
the lapse of the thirty-day period, without respondent having exercised his option, Arturo is free to sell
the property to another. This shows that the intent of Arturo is merely to grant respondent the privilege
to buy the property within the period therein stated. There is nothing in the RMOA which indicates that
Arturo agreed therein to transfer ownership of the land which is an essential element in a contract of
sale. Unfortunately, the option is not binding upon the promissory since it is not supported by a
consideration distinct from the price.[12]
As a rule, the holder of the option, after accepting the promise and before he exercises his option,
is not bound to buy. He is free either to buy or not to buy later. In Sanchez v. Rigos[13]we ruled that in an
accepted unilateral promise to sell, the promissor is not bound by his promise and may, accordingly,
withdraw it, since there may be no valid contract without a cause or consideration. Pending notice of its
withdrawal, his accepted promise partakes of the nature of an offer to sell which, if acceded or
consented to, results in a perfected contract of sale.
Even conceding for the nonce that respondent had accepted the offer within the period stated
and, as a consequence, a bilateral contract of purchase and sale was perfected, the outcome would be
the same. To benefit from such situation, respondent would have to pay or at least make a valid tender
of payment of the price for only then could he exact compliance with the undertaking of the other party.
[14]
 This respondent failed to do. By his own admission, he merely informed respondent spouses of his
readiness and willingness to pay. The fact that he had set aside a check in the amount of One Million Two
Hundred Ninety Thousand Pesos (P1,290,000.00) representing the balance of the purchase price could
not help his cause.Settled is the rule that tender of payment must be made in legal tender. A check is not
legal tender, and therefore cannot constitute a valid tender of payment. [15] Not having made a valid
tender of payment, respondents action for specific performance must fail.
With regard to the payment of Five Thousand Pesos (P5,000.00), the Court is of the view that the
amount is not earnest money as the term is understood in Article 1482 which signifies proof of the
perfection of the contract of sale, but merely a guarantee that respondent is really interested to buy the
property. It is not the giving of earnest money, but the proof of the concurrence of all the essential
elements of the contract of sale which establishes the existence of a perfected sale. [16] No reservation of
ownership on the part of Arturo is necessary since, as previously stated, he has never agreed to transfer
ownership of the property to respondent.
Granting for the sake of argument that the RMOA is a contract of sale, the same would still be
void not only for want of consideration and absence of respondents signature thereon, but also for lack
of Esthers conformity thereto. Quite glaring is the absence of the signature of Esther in the RMOA, which
proves that she did not give her consent to the transaction initiated by Arturo. The husband cannot
alienate any real property of the conjugal partnership without the wifes consent.[17]
However, it was the Contract to Sell executed by Esther through her attorney-in-fact which the
Court of Appeals made full use of. Holding that the contract is valid, the appellate court explained that
while Esther did not authorize Arturo to sell the property, her execution of the SPA authorizing her sister
to sell the land to respondent clearly shows her intention to convey her interest in favor of respondent.
In effect, the court declared that the lack of Esthers consent to the sale made by Arturo was cured by her
subsequent conveyance of her interest in the property through her attorney-in-fact.
We do not share the ruling.
The nullity of the RMOA as a contract of sale emanates not only from lack of Esthers consent
thereto but also from want of consideration and absence of respondents signature thereon. Such nullity
cannot be obliterated by Esthers subsequent confirmation of the putative transaction as expressed in the
Contract to Sell. Under the law, a void contract cannot be ratified[18] and the action or defense for the
declaration of the inexistence of a contract does not prescribe. [19] A void contract produces no effect
either against or in favor of anyoneit cannot create, modify or extinguish the juridical relation to which it
refers.[20]
True, in the Contract to Sell, Esther made reference to the earlier RMOA executed by Arturo in
favor of respondent. However, the RMOA which Arturo signed is different from the deed which Esther
executed through her attorney-in-fact. For one, the first is sought to be enforced as a contract of sale
while the second is purportedly a contract to sell only. For another, the terms and conditions as to the
issuance of title and delivery of possession are divergent.
The congruence of the wills of the spouses is essential for the valid disposition of conjugal
property. Where the conveyance is contained in the same document which bears the conformity of both
husband and wife, there could be no question on the validity of the transaction. But when there are two
documents on which the signatures of the spouses separately appear, textual concordance of the
documents is indispensable. Hence, in this case where the wifes putative consent to the sale of conjugal
property appears in a separate document which does not, however, contain the same terms and
conditions as in the first document signed by the husband, a valid transaction could not have arisen.
Quite a bit of elucidation on the conjugal partnership of gains is in order.
Arturo and Esther appear to have been married before the effectivity of the Family Code. There
being no indication that they have adopted a different property regime, their property relations would
automatically be governed by the regime of conjugal partnership of gains. [21]
The subject land which had been admittedly acquired during the marriage of the spouses forms
part of their conjugal partnership.[22]
Under the Civil Code, the husband is the administrator of the conjugal partnership. This right is
clearly granted to him by law. [23] More, the husband is the sole administrator. The wife is not entitled as
of right to joint administration. [24]
The husband, even if he is statutorily designated as administrator of the conjugal partnership,
cannot validly alienate or encumber any real property of the conjugal partnership without the wifes
consent.[25] Similarly, the wife cannot dispose of any property belonging to the conjugal partnership
without the conformity of the husband. The law is explicit that the wife cannot bind the conjugal
partnership without the husbands consent, except in cases provided by law. [26]
More significantly, it has been held that prior to the liquidation of the conjugal partnership, the
interest of each spouse in the conjugal assets is inchoate, a mere expectancy, which constitutes neither a
legal nor an equitable estate, and does not ripen into title until it appears that there are assets in the
community as a result of the liquidation and settlement. The interest of each spouse is limited to the net
remainder or remanente liquido (haber ganancial) resulting from the liquidation of the affairs of the
partnership after its dissolution.[27] Thus, the right of the husband or wife to one-half of the conjugal
assets does not vest until the dissolution and liquidation of the conjugal partnership, or after dissolution
of the marriage, when it is finally determined that, after settlement of conjugal obligations, there are net
assets left which can be divided between the spouses or their respective heirs. [28]
In not a few cases, we ruled that the sale by the husband of property belonging to the conjugal
partnership without the consent of the wife when there is no showing that the latter is incapacitated is
void ab initio because it is in contravention of the mandatory requirements of Article 166 of the Civil
Code.[29] Since Article 166 of the Civil Code requires the consent of the wife before the husband may
alienate or encumber any real property of the conjugal partnership, it follows that acts or transactions
executed against this mandatory provision are void except when the law itself authorizes their validity. [30]
Quite recently, in San Juan Structural and Steel Fabricators, Inc. v. Court of Appeals,[31] we ruled
that neither spouse could alienate in favor of another, his or her interest in the partnership or in any
property belonging to it, or ask for partition of the properties before the partnership itself had been
legally dissolved. Nonetheless, alienation of the share of each spouse in the conjugal partnership could
be had after separation of property of the spouses during the marriage had been judicially decreed, upon
their petition for any of the causes specified in Article 191 [32] of the Civil Code in relation to Article
214[33] thereof.
As an exception, the husband may dispose of conjugal property without the wifes consent if such
sale is necessary to answer for conjugal liabilities mentioned in Articles 161 and 162 of the Civil Code.
[34]
 In Tinitigan v. Tinitigan, Sr.,[35] the Court ruled that the husband may sell property belonging to the
conjugal partnership even without the consent of the wife if the sale is necessary to answer for a big
conjugal liability which might endanger the familys economic standing. This is one instance where the
wifes consent is not required and, impliedly, no judicial intervention is necessary.

Significantly, the Family Code has introduced some changes particularly on the aspect of the
administration of the conjugal partnership. The new law provides that the administration of the conjugal
partnership is now a joint undertaking of the husband and the wife. In the event that one spouse is
incapacitated or otherwise unable to participate in the administration of the conjugal partnership, the
other spouse may assume sole powers of administration. However, the power of administration does not
include the power to dispose or encumber property belonging to the conjugal partnership. [36] In all
instances, the present law specifically requires the written consent of the other spouse, or authority of
the court for the disposition or encumbrance of conjugal partnership property without which, the
disposition or encumbrance shall be void.[37]

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

WHEREFORE, the appealed Decision is hereby REVERSED and SET ASIDE. The complaint in Civil
Case No. 90-106 of the Regional Trial Court of Makati is ordered DISMISSED.  No pronouncement as to
costs.
G.R. No. L-57499 June 22, 1984
SO ORDERED.

MERCEDES CALIMLIM- CANULLAS, petitioner, 

vs.
HON. WILLELMO FORTUN, Judge, Court of First instance of Pangasinan, Branch I, and CORAZON
DAGUINES, respondents.

Fernandez Law Offices for petitioner.

Francisco Pulido for respondents.

MELENCIO-HERRERA, J.:

Petition for Review on certiorari assailing the Decision, dated October 6, 1980, and the Resolution on the
Motion for Reconsideration, dated November 27, 1980, of the then Court of First Instance of Pangasinan,
Branch I, in Civil Case No. 15620 entitled "Corazon DAGUINES vs. MERCEDES Calimlim-Canullas,"
upholding the sale of a parcel of land in favor of DAGUINES but not of the conjugal house thereon'

The background facts may be summarized as follows: Petitioner MERCEDES Calimlim-Canullas and
FERNANDO Canullas were married on December 19, 1962. They begot five children. They lived in a small
house on the residential land in question with an area of approximately 891 square meters, located at
Bacabac, Bugallon, Pangasinan. After FERNANDO's father died in 1965, FERNANDO inherited the land.

In 1978, FERNANDO abandoned his family and was living with private respondent Corazon DAGUINES.
During the pendency of this appeal, they were convicted of concubinage in a judgment rendered on
October 27, 1981 by the then Court of First Instance of Pangasinan, Branch II, which judgment has
become final.
On April 15, 1980, FERNANDO sold the subject property with the house thereon to DAGUINES for the
sum of P2,000.00. In the document of sale, FERNANDO described the house as "also inherited by me
from my deceased parents."
Unable to take possession of the lot and house, DAGUINES initiated a complaint on June 19, 1980 for
quieting of title and damages against MERCEDES. The latter resisted and claimed that the house in
dispute where she and her children were residing, including the coconut trees on the land, were built
and planted with conjugal funds and through her industry; that the sale of the land together with the
house and improvements to DAGUINES was null and void because they are conjugal properties and she
had not given her consent to the sale,
In its original judgment, respondent Court principally declared DAGUINES "as the lawful owner of the
land in question as well as the one-half () of the house erected on said land." Upon reconsideration
prayed for by MERCEDES, however, respondent Court resolved:
WHEREFORE, the dispositive portion of the Decision of this Court, promulgated on
October 6, 1980, is hereby amended to read as follows:
(1) Declaring plaintiff as the true and lawful owner of the land in question and the
10 coconut trees;
(2) Declaring as null and void the sale of the conjugal house to plaintiff on April 15,
1980 (Exhibit A) including the 3 coconut trees and other crops planted during the
conjugal relation between Fernando Canullas (vendor) and his legitimate wife,
herein defendant Mercedes Calimlim- Canullas;
xxx xxx xxx
The issues posed for resolution are (1) whether or not the construction of a conjugal house on the
exclusive property of the husband ipso facto gave the land the character of conjugal property; and (2)
whether or not the sale of the lot together with the house and improvements thereon was valid under
the circumstances surrounding the transaction.
The determination of the first issue revolves around the interpretation to be given to the second
paragraph of Article 158 of the Civil Code, which reads:
xxx xxx xxx
Buildings constructed at the expense of the partnership during the marriage on
land belonging to one of the spouses also pertain to the partnership, but the value
of the land shall be reimbursed to the spouse who owns the same.
We hold that pursuant to the foregoing provision both the land and the building belong to the conjugal
partnership but the conjugal partnership is indebted to the husband for the value of the land. The
spouse owning the lot becomes a creditor of the conjugal partnership for the value of the lot, 1 which
value would be reimbursed at the liquidation of the conjugal partnership. 2
In his commentary on the corresponding provision in the Spanish Civil Code (Art. 1404), Manresa stated:
El articulo cambia la doctrine; los edificios construidos durante el matrimonio en
suelo propio de uno de los conjuges son gananciales, abonandose el valor del
suelo al conj uge a quien pertenezca.
It is true that in the case of Maramba vs. Lozano,  3 relied upon by respondent Judge, it was held that the
land belonging to one of the spouses, upon which the spouses have built a house, becomes conjugal
property only when the conjugal partnership is liquidated and indemnity paid to the owner of the land.
We believe that the better rule is that enunciated by Mr. Justice J.B.L. Reyes in Padilla vs. Paterno, 3
SCRA 678, 691 (1961), where the following was explained:
As to the above properties, their conversion from paraphernal to conjugal assets
should be deemed to retroact to the time the conjugal buildings were first
constructed thereon or at the very latest, to the time immediately before the
death of Narciso A. Padilla that ended the conjugal partnership. They can not be
considered to have become conjugal property only as of the time their values were
paid to the estate of the widow Concepcion Paterno because by that time the
conjugal partnership no longer existed and it could not acquire the ownership of
said properties. The acquisition by the partnership of these properties was, under
the 1943 decision, subject to the suspensive condition that their values would be
reimbursed to the widow at the liquidation of the conjugal partnership; once paid,
the effects of the fulfillment of the condition should be deemed to retroact to the
date the obligation was constituted (Art. 1187, New Civil Code) ...
The foregoing premises considered, it follows that FERNANDO could not have alienated the house and
lot to DAGUINES since MERCEDES had not given her consent to said sale. 4
Anent the second issue, we find that the contract of sale was null and void for being contrary to morals
and public policy. The sale was made by a husband in favor of a concubine after he had abandoned his
family and left the conjugal home where his wife and children lived and from whence they derived their
support. That sale was subversive of the stability of the family, a basic social institution which public
policy cherishes and protects. 5
Article 1409 of the Civil Code states inter alia that: contracts whose cause, object, or purpose is contrary
to law, morals, good customs, public order, or public policy are void and inexistent from the very
beginning.
Article 1352 also provides that: "Contracts without cause, or with unlawful cause, produce no effect
whatsoever. The cause is unlawful if it is contrary to law, morals, good customs, public order, or public
policy."
Additionally, the law emphatically prohibits the spouses from selling property to each other subject to
certain exceptions.6 Similarly, donations between spouses during marriage are prohibited. 7 And this is so
because if transfers or con conveyances between spouses were allowed during marriage, that would
destroy the system of conjugal partnership, a basic policy in civil law. It was also designed to prevent the
exercise of undue influence by one spouse over the other,8 as well as to protect the institution of
marriage, which is the cornerstone of family law. The prohibitions apply to a couple living as husband
and wife without benefit of marriage, otherwise, "the condition of those who incurred guilt would turn
out to be better than those in legal union." Those provisions are dictated by public interest and their
criterion must be imposed upon the wig of the parties. That was the ruling in Buenaventura vs.
Bautista, also penned by Justice JBL Reyes (CA) 50 O.G. 3679, and cited in Matabuena vs. Cervantes. 9 We
quote hereunder the pertinent dissertation on this point:
 We reach a different conclusion. While Art. 133 of the Civil Code considers as void
a donation between the spouses during the marriage, policy considerations of the
most exigent character as wen as the dictates of morality require that the same
prohibition should apply to a common-law relationship.

As announced in the outset of this opinion, a 1954 Court of Appeals decision,

Buenaventura vs. Bautista, 50 OG 3679, interpreting a similar provision of the old
Civil Code speaks unequivocally. If the policy of the law is, in the language of the
opinion of the then Justice J.B.L. Reyes of that Court, 'to prohibit donations in favor
of the other consort and his descendants because of fear of undue influence
and improper pressure upon the donor, a prejudice deeply rooted in our ancient
law, ..., then there is every reason to apply the same prohibitive policy to persons
living together as husband and wife without benefit of nuptials. For it is not to be
doubted that assent to such irregular connection for thirty years bespeaks greater
influence of one party over the other, so that the danger that the law seeks to
avoid is correspondingly increased'. Moreover, as pointed out by Ulpian (in his lib
32 ad Sabinum, fr. 1), "It would not be just that such donations — should subsist,
lest the conditions of those who incurred guilt should turn out to be better." So
long as marriage remains the cornerstone of our family law, reason and morality
alike demand that the disabilities attached to marriage should likewise attach
to concubinage (Emphasis supplied),

[G.R. No. L-8477.  May 31, 1956.]

WHEREFORE, the Decision of respondent Judge, dated October 6, 1980, and his Resolution of November
27, 1980 on petitioner's Motion for Reconsideration, are hereby set aside and the sale of the lot, house THE PHILIPPINE TRUST COMPANY, as Guardian of the Property of the minor, MARIANO L.
and improvements in question, is hereby declared null and void. No costs. BERNARDO, Petitioner, vs. SOCORRO ROLDAN, FRANCISCO HERMOSO, FIDEL C. RAMOS and EMILIO
CRUZ, Respondents.
SO ORDERED.  
DECISION
BENGZON, J.:
As guardian of the property of the minor Mariano L. Bernardo, the Philippine Trust Company filed in the
Manila court of first instance a complaint to annul two contracts regarding 17 parcels of
land:chanroblesvirtuallawlibrary (a) sale thereof by Socorro Roldan, as guardian of said minor, to Fidel C.
Ramos; chan roblesvirtualawlibraryand (b) sale thereof by Fidel C. Ramos to Socorro Roldan personally.
The complaint likewise sought to annul a conveyance of four out of the said seventeen parcels by
Socorro Roldan to Emilio Cruz.
The action rests on the proposition that the first two sales were in reality a sale by the guardian to
herself — therefore, null and void under Article 1459 of the Civil Code. As to the third conveyance, it is
also ineffective, because Socorro Roldan had acquired no valid title to convey to Cruz.
The material facts of the case are not complicated. These 17 parcels located in Guiguinto, Bulacan, were
part of the properties inherited by Mariano L. Bernardo from his father, Marcelo Bernardo, deceased. In
view of his minority, guardianship proceedings were instituted, wherein Socorro Roldan was appointed
his guardian. She was the surviving spouse of Marcelo Bernardo, and the stepmother of said Mariano L.
Bernardo.
On July 27, 1947, Socorro Roldan filed in said guardianship proceedings (Special Proceeding 2485,
Manila), a motion asking for authority to sell as guardian the 17 parcels for the sum of P14,700 to Dr.
Fidel C. Ramos, the purpose of the sale being allegedly to invest the money in a residential house, which
the minor desired to have on Tindalo Street, Manila. The motion was granted.
On August 5, 1947 Socorro Roldan, as guardian, executed the proper deed of sale in favor of her brother-
in-law Dr. Fidel C. Ramos (Exhibit A-1), and on August 12, 1947 she asked for, and obtained, judicial
confirmation of the sale. On August 13, 1947, Dr. Fidel C. Ramos executed in favor of Socorro Roldan,
personally, a deed of conveyance covering the same seventeen parcels, for the sum of P15,000 (Exhibit
A-2). And on October 21, 1947 Socorro Roldan sold four parcels out of the seventeen to Emilio Cruz for
P3,000, reserving to herself the right to repurchase (Exhibit A-3).
The Philippine Trust Company replaced Socorro Roldan as guardian, on August 10, 1948. And this
litigation, started two months later, seeks to undo what the previous guardian had done. The step-
mother in effect, sold to herself, the properties of her ward, contends the Plaintiff, and the sale should
be annulled because it violates Article 1459 of the Civil Code prohibiting the guardian from purchasing
“either in person or through the mediation of another” the property of her ward.
The court of first instance, following our decision in Rodriguez vs. Mactal, 60 Phil. 13 held the article was
not controlling, because there was no proof that Fidel C. Ramos was a mere intermediary or that the
latter had previously agreed with Socorro Roldan to buy the parcels for her benefit.
However, taking the former guardian at her word - she swore she had repurchased the lands from Dr.
Fidel C. Ramos to preserve it and to give her protege opportunity to redeem — the court rendered
judgment upholding the contracts but allowing the minor to repurchase all the parcels by paying
P15,000, within one year.
The Court of Appeals affirmed the judgment, adding that the minor knew the particulars of, and
approved the transaction, and that “only clear and positive evidence of fraud or bad faith, and not mere
insinuations and inferences will overcome the presumptions that a sale was concluded in all good faith
for value”.
At first glance the resolutions of both courts accomplished substantial
justice:chanroblesvirtuallawlibrary the minor recovers his properties. But if the conveyances are annulled
as prayed for, the minor will obtain a better deal:chanroblesvirtuallawlibrary he receives all the fruits of
the lands from the year 1947 (Article 1303 Civil Code) and will return P14,700, not P15,000.
To our minds the first two transactions herein described couldn’t be in a better juridical situation than if
this guardian had purchased the seventeen parcels on the day following the sale to Dr. Ramos. Now, if
she was willing to pay P15,000 why did she sell the parcels for less? In one day (or actually one week) the
price could not have risen so suddenly. Obviously when, seeking approval of the sale she represented the
price to be the best obtainable in the market, she was not entirely truthful. This is one phase to consider.
Again, supposing she knew the parcels were actually worth P17,000; chan roblesvirtualawlibrarythen she
agreed to sell them to Dr. Ramos at P14,700; chan roblesvirtualawlibraryand knowing the realty’s value
she offered him the next day P15,000 or P15,500, and got it. Will there be any doubt that she was
recreant to her guardianship, and that her acquisition should be nullified? Even without proof that she
had connived with Dr. Ramos. Remembering the general doctrine that guardianship is a trust of the
highest order, and the trustee cannot be allowed to have any inducement to neglect his ward’s interest
and in line with the court’s suspicion whenever the guardian acquires the ward’s property 1 we have no
hesitation to declare that in this case, in the eyes of the law, Socorro Roldan took by purchase her ward’s
parcels thru Dr. Ramos, and that Article 1459 of the Civil Code applies.
She acted it may be true without malice; chan roblesvirtualawlibrarythere may have been no previous
agreement between her and Dr. Ramos to the effect that the latter would buy the lands for her. But the
stubborn fact remains that she acquired her protege’s properties, through her brother-in-law. That she
planned to get them for herself at the time of selling them to Dr. Ramos, may be deduced from the very
short time between the two sales (one week). The temptation which naturally besets a guardian so
circumstanced, necessitates the annulment of the transaction, even if no actual collusion is proved (so
hard to prove) between such guardian and the intermediate purchaser. This would uphold a sound
principle of equity and justice. 2
We are aware of course that in Rodriguez vs. Mactal, 60 Phil. p. 13 wherein the guardian Mactal sold in
January 1926 the property of her ward to Silverio Chioco, and in March 1928 she bought it from Chioco,
this Court said:chanroblesvirtuallawlibrary
“In order to bring the sale in this case within the part of Article 1459, quoted above, it is essential that
the proof submitted establish some agreement between Silverio Chioco and Trinidad Mactal to the effect
that Chioco should buy the property for the benefit of Mactal. If there was no such agreement, either
express or implied, then the sale cannot be set aside cralaw . (Page 16; chan roblesvirtualawlibraryItalics
supplied.)”
However, the underlined portion was not intended to establish a general principle of law applicable to all
subsequent litigations. It merely meant that the subsequent purchase by Mactal could not be annulled in
that particular case because there was no proof of a previous agreement between Chioco and her. The
court then considered such proof necessary to establish that the two sales were actually part of one
scheme — guardian getting the ward’s property through another person — because two years had
elapsed between the sales. Such period of time was sufficient to dispel the natural suspicion of the
guardian’s motives or actions. In the case at bar, however, only one week had elapsed. And if we were
technical, we could say, only one day had elapsed from the judicial approval of the sale (August 12), to
the purchase by the guardian (Aug. 13).
Attempting to prove that the transaction was beneficial to the minor, Appellee’s attorney alleges that the
money (P14,700) invested in the house on Tindalo Street produced for him rentals of P2,400 yearly; chan
roblesvirtualawlibrarywhereas the parcels of land yielded to his step-mother only an average of P1,522
per year. 3 The argument would carry some weight if that house had been built out of the purchase price
of P14,700 only.  4 One thing is certain:chanroblesvirtuallawlibrary the calculation does not include the
price of the lot on which the house was erected. Estimating such lot at P14,700 only, (ordinarily the city
lot is more valuable than the building) the result is that the price paid for the seventeen parcels gave the
minor an income of only P1,200 a year, whereas the harvest from the seventeen parcels netted his step-
mother a yearly profit of P1,522.00. The minor was thus on the losing end.
Hence, from both the legal and equitable standpoints these three sales should not be
sustained:chanroblesvirtuallawlibrarythe first two for violation of article 1459 of the Civil Code; chan
roblesvirtualawlibraryand the third because Socorro Roldan could pass no title to Emilio Cruz. The
annulment carries with is (Article 1303 Civil Code) the obligation of Socorro Roldan to return the 17
parcels together with their fruits and the duty of the minor, through his guardian to repay P14,700 with
legal interest.
Judgment is therefore rendered:chanroblesvirtuallawlibrary
a.  Annulling the three contracts of sale in question; chan roblesvirtualawlibraryb. declaring the minor as
the owner of the seventeen parcels of land, with the obligation to return to Socorro Roldan the price of
P14,700 with legal interest from August 12, 1947; chan roblesvirtualawlibraryc. Ordering Socorro Roldan
and Emilio Cruz to deliver said parcels of land to the minor; chan roblesvirtualawlibraryd. Requiring
Socorro Roldan to pay him beginning with 1947 the fruits, which her attorney admits, amounted to
P1,522 a year; chan roblesvirtualawlibrarye. Authorizing the minor to deliver directly to Emilio Cruz, out
of the price of P14,700 above mentioned, the sum of P3,000; chan roblesvirtualawlibraryand f.
charging Appellees with the costs. SO ORDERED.
RICARDO DISTAJO, ERNESTO DISTAJO, RAUL DISTAJO, FEDERICO DISTAJO, ZACARIAS A. DISTAJO,
EDUARDO DISTAJO, and PILAR DISTAJO TAPAR, petitioners, vs. COURT OF APPEALS and
LAGRIMAS SORIANO DISTAJO, respondents.

DECISION

PARDO, J.:

The case under consideration is a petition for review on certiorari of a decision of the Court of
Appeals[1], which modified the ruling of the Regional Trial Court, Roxas City regarding seven parcels of
land located in Barangay Hipona, Pontevedra, Capiz.[2]

During the lifetime of Iluminada Abiertas, she designated one of her sons, Rufo Distajo, to be the
administrator of her parcels of land denoted as Lot Nos. 1018, 1046, 1047, and 1057 situated in Barangay
Hipona, Pontevedra, Capiz.

On May 21, 1954, Iluminada Abiertas sold a portion of Lot No. 1018 (1018-A) to her other
children, namely, Raul Distajo, Ricardo Distajo, Ernesto Distajo, Federico Distajo, and Eduardo Distajo. [3]

On May 29, 1963, Iluminada Abiertas certified to the sale of Lot Nos. 1046 and 1047 in favor of
Rufo Distajo.[4]

On June 4, 1969, Iluminada Abiertas sold Lot No. 1057 to Rhodora Distajo, the daughter of Rufo
Distajo.[5]

On July 12, 1969, Iluminada Abiertas sold Lot No. 1018 to Rufo Distajo.[6]

Meanwhile, Justo Abiertas, Jr., the brother of Iluminada Abiertas, died leaving behind his children,
Teresita, Alicia, Josefa and Luis Abiertas. Teresita paid for the real estate taxes of the following
properties, which she inherited from her father: Lot Nos. 1001, 1048, 1049, and a portion of Lot No.
1047, all located in Capiz. On May 26, 1954, Teresita Abiertas sold Lot No. 1001 in favor of Rufo Distajo.
[7]
 On June 2, 1965, Teresita Abiertas, for herself and representing her sisters and brother, sold Lot Nos.
1048, 1049, and a portion of Lot No. 1047 to Rufo Distajo.[8]

After purchasing the above-mentioned parcels of land, Rufo Distajo took possession of the
property and paid the corresponding real estate taxes thereon. Rhodora Distajo likewise paid for the real
estate taxes of Lot No. 1057.
 When Iluminada Abiertas died in 1971, Zacarias Distajo, Pilar Distajo-Tapar, and Rizaldo Distajo,
[9]
 demanded possession of the seven parcels of land from Lagrimas S. Distajo, and her husband, Rufo
Distajo. The latter refused.
Consequently, on June 5, 1986, Ricardo Distajo, with the other heirs of Iluminada Abiertas,
namely, Ernesto Distajo, Raul Distajo, Federico Distajo, Zacarias Distajo, Eduardo Distajo, and Pilar
Distajo, filed with the Regional Trial Court, Roxas City a complaint for recovery of possession and
ownership of Lot No. 1018, partition of Lot Nos. 1001, 1018-B, 1046, 1047, 1048, 1049, 1057, and
damages.
On September 4, 1986, private respondent Lagrimas Distajo [10] filed an answer with counterclaim.
On April 9, 1990, the trial court dismissed the complaint for lack of cause of action, laches and
prescription. The counterclaim was likewise dismissed. The parties appealed to the Court of Appeals.[11]
On August 21, 1992, the Court of Appeals rendered its decision, [12] the dispositive portion of which
states as follows:
PREMISES CONSIDERED, the decision appealed from is hereby SET ASIDE and a new judgment rendered,
as follows:
WHEREFORE, the Court decides the case in favor of the defendant and dismisses the plaintiffs complaint
for lack of cause of action except with regard to the plaintiffs claim over a 238 sq. m. portion of Lot No.
1018 (the portion adjoining the market site and measuring seventeen meters and that adjoining the
property of E. Rodriguez measuring 14 meters). The Court hereby Orders the partition of Lot No. 1018 to
conform to the following: 238 sq. m. as above specified to belong to the plaintiffs as prayed for by them
while the rest is declared property of the defendant.
Upon partition of Lot No. 1018 in accordance with this Courts Order, the City Assessor of Roxas City is
hereby Ordered to cancel Tax Declaration 2813 in the name of Rufo Distajo (or any subsequent tax
declaration/s issued relative to the above-cited Tax Declaration No. 2813) and forthwith to issue the
corresponding tax declarations in the names of the respective parties herein.
SO ORDERED.
On September 10, 1992, Ricardo Distajo filed a motion for reconsideration. [13] On December 9,
1993, the Court of Appeals denied the motion.[14]
Hence, this petition.[15]
Petitioner alleges that Iluminada Abiertas exclusively owns the seven parcels of land delineated as
Lot Nos. 1001, 1018, 1046, 1047, 1048, 1049, and 1057, all of which should be partitioned among all her
heirs. Furthermore, Rufo Distajo cannot acquire the subject parcels of land owned by Iluminada Abiertas
because the Civil Code prohibits the administrator from acquiring properties under his administration.
[16]
 Rufo Distajo merely employed fraudulent machinations in order to obtain the consent of his mother
to the sale, and may have even forged her signature on the deeds of sale of the parcels of land.
In her comment dated May 13, 1994, private respondent Lagrimas S. Distajo contends that Rufo
Distajo rightfully owns the subject parcels of land because of various deeds of sale executed by Iluminada
Abiertas selling Lot Nos. 1018-B, 1047 and 1046 in favor of Rufo Distajo and Lot No. 1057 in favor of
Rhodora Distajo. Private respondent also avers that petitioner cannot claim any right over Lot Nos. 1001,
1048 and 1049, considering that such lands belong to the brother of Iluminada Abiertas, namely, Justo
Abiertas, Jr., whose heirs sold said parcels of land to Rufo Distajo.
The petition lacks merit.
Factual findings of the trial court will not be disturbed on appeal unless the court has overlooked
or ignored some fact or circumstance of sufficient weight or significance, which, if considered, would
alter the result of the case. [17] When there is no conflict between the findings of the trial and appellate
courts, a review of the facts found by the appellate court is unnecessary. [18]
Since the trial court and the Court of Appeals agree that Iluminada Abiertas owned Lot Nos. 1046,
1057 and a portion of Lot No. 1047, and that Justo Abiertas Jr. owned Lot Nos. 1001, 1048, and 1049,
such findings are binding on this Court, which is not a trier of facts. [19] However, the record shows that
Lot No. 1018 should be divided into Lot No. 1018-A and 1018-B, the delineation of which the Court of
Appeals clarified in its decision.
The issues in this case, therefore, are limited to those properties which were owned by Iluminada
Abiertas, ascendant of petitioner, consisting of Lot Nos. 1018-A, 1046, 1057, and a portion of 1047.
In his petition, Ricardo Distajo assails the genuineness of the signatures of Iluminada Abiertas in
the deeds of sale of the parcels of land, and claims that Rufo Distajo forged the signature of Iluminada
Abiertas. However, no handwriting expert was presented to corroborate the claim of forgery.  Petitioner
even failed to present a witness who was familiar with the signature of Iluminada Abiertas. Forgery
should be proved by clear and convincing evidence, and whoever alleges it has the burden of proving the
same.[20]
Petitioner likewise contends that the sale transactions are void for having been entered into by
the administrator of the properties. We disagree. The pertinent Civil Code provision provides:
Art. 1491. The following persons cannot acquire by purchase, even at a public or judicial auction, either
in person or through the mediation of another:
(1) The guardian, the property of the person or persons who may be under guardianship;
(2) Agents, the property whose administration or sale may have been entrusted to them,
unless the consent of the principal has been given;
(3) Executors and administrators, the property of the estate under administration; x x x
Under paragraph (2) of the above article, the prohibition against agents purchasing property in
their hands for sale or management is not absolute. It does not apply if the principal consents to the sale
of the property in the hands of the agent or administrator. In this case, the deeds of sale signed by
Iluminada Abiertas shows that she gave consent to the sale of the properties in favor of her son, Rufo,
who was the administrator of the properties. Thus, the consent of the principal Iluminada Abiertas
removes the transaction out of the prohibition contained in Article 1491(2).
Petitioner also alleges that Rufo Distajo employed fraudulent machinations to obtain the consent
of Iluminada Abiertas to the sale of the parcels of land. However, petitioner failed to adduce convincing
evidence to substantiate his allegations.
In the absence of any showing of lack of basis for the conclusions made by the Court of Appeals,
this Court finds no cogent reason to reverse the ruling of the appellate court.
WHEREFORE, the Court DENIES the petition and AFFIRMS the decision of the Court of Appeals in
CA-G.R. CV No. 30063.
SO ORDERED.
G.R. No. L-7041             February 21, 1957

JESUS MA. CUI, ET AL., plaintiffs-appellants, 

vs.
ANTONIO MA. CUI, ET AL., defendants-appellees.

Claro M. Recto, Jose P. Laurel and Vicente Jayme for appellants.

Pimintel & Pimintel and Amador E. Gomez for appellees.

BAUTISTA ANGELO, J.:

On May 25, 1948, Jesus Ma. Cui and Jorge Ma. Cui brought an action in the Court of First Instance of
Cebu against Antonio Ma. Cui and Mercedes Cui de Ramos seeking the annulment of the sale of three
parcels of land against Antonio Ma. Cui and Mercedes Cui de Ramas of the latter and the partition of the
same among the heirs who should inherit them including the plaintiffs. The Rehabilitation Finance
Corporation was included as party defendant because the lands above-mentioned were mortgaged to it
to secure a loan of P130,000, the object being to have the mortgage declared null and void.

On March 19, 1949, Rosario Cui, daughter of Don Mariano Cui, filed in the same court a petition for the
appointment of a guardian of the person and properties of her father on the ground of incompetency
and, accordingly, he was declared incompetent on March 31, 1949 and one Victorino Reynes was
appointed as his guardian.

On July 13, 1949, the complaint was amended by including as party plaintiffs the guardian as party
plaintiffs the guardian Victorino Reynes and the other children and relatives of Don Mariano, namely,
Jose Ma. Cui, Serafin Ma. Cui, Rosario Cui, her husband Irineo Encarnacion, Lourdes C. Velez, Priscilla
Velez and Federico Tamayo.

Defendants in their answer set up the defense that the sale mentioned in the complaint is valid because
it was executed when Don Mariano Cui was still in possession of his mental faculties and that, while the
sale was at first executed in favor of the defendants and their sister Rosario Cui, the latter however
resold her share to Don Mariano for reason stated in the deed of resale executed to the effect. They
prayed that the complaint be dismissed.
On May 22, 1951, after due hearing and the presentation of voluminous evidence on the part of both
parties, the court rendered its decision dismissing the complaint and which plaintiffs appealed in due
time, and because the value of the property involved exceeds the amount of P50,000, the case was
certified to us for decision by the Court of Appeals under section 1 of Republic Act No. 296.
Plaintiffs and defendants, with the exception of the Rehabilitation Finance Corporation, are the
legitimate children of Don Mariano Cui and Doña Antonia Perales who died intestate in the City of Cebu
on March 20, 1939. Plaintiffs in their complaint allege that during the marriage of Don Mariano Cui and
Doña Antonia Perales, the spouses acquired certain properties in the City of Cebu, namely, Lots Nos.
2312, 2313 and 2319, with an approximate area of 2,658 square meters, having an assessed value of
P159,480, and a market value of 120 per square meter; that upon the death of Doña Antonia Perales, the
conjugal partnership did not leave any indebtedness and the conjugal properties were placed under the
administration of Don Mariano Cui; that while the latter was 84 years of age and under the influence of
defendants, the latter, by means of deceit, secured the transfer to themselves of the aforementioned
lots without any pecuniary consideration; that in the deed of sale executed on March 8, 1946, Rosario
Cui appeared as one of the vendees, but on learning of this fact she subsequently renounced her rights
under the sale and returned her portion to Don Mariano Cui by executing a deed of resale in his favor on
October 11, 1946; that defendants, fraudulently and with the desire of enriching themselves unjustly at
the expense of their father, Don Mariano Cui, and of their brothers and co-heirs, secured a loan of
P130,000 from the Rehabilitation properties, and with the loan thus obtained, defendants contructed
thereon an apartment building of strong materials consisting of 14 doors, valued at approximately
P130,000 and another building on the same parcels of land, which buildings were leased to some Cinese
commercial firms a monthly rental of P7,600, which defendants have collected and will continue to
collect to the prejudice of the plaintiffs; and because of this fraudulent and illegal transaction, plaintiffs
prayed that the sale and mortgage executed on the properties in question, in so far as the shares of the
plaintiffs are concerned, be declared null and void and the defendants be ordered to pay the plaintiffs
their shares in the rentals of the properties at the rate of P7,600 a month from November 1, 1947 up to
the time of their full payment, together with whatever interest may be thereon and the expenses of
litigation.
also aver that they are the exclusive owner of the 12-door apartment constructed on the 2/3portion of
the lots in question, having been constructed at their expense and by virtue of the authorization given to
them in the deed of sale Exhibit A; that the loan of P130,000 obtained from the Rehabilitation Finance
Corporation was solicited personally by defendants Antonio Ma. Cui and Mercedes Cui de Ramas for
their exclusive benefit and for the purpose of investing it in the construction of said building; that since
the property is undivided, Don Mariano Cui, as one of the co-owners, consented to the execution of a
mortgage thereon in favor of said corporation to guarantee the payment of the loan jointly with his co-
owners, the aforesaid defendants, for the sole purpose of accommodating the latter and to enable them
to obtain the loan; that the plaintiffs are in estoppel to claim that the lots in question belong to the
conjugal partnership of their parents Don Mariano Cui and Doña Antonia Perales, and that plaintiffs
instituted the present action because they do not like the manner in which their father had disposed of
said lots, especially Jesus Ma. Cui who was unsuccessful in his request that the ¹/3 said lots be sold to
him. They prayed that the action be dismissed.
In this appeal, appellants now contended that the lower court erred: (1) "In not declaring the deed of
sale, Exhibit A, avoid or inexistent for lack of valid consent and consideration"; (2) "In not declaring illegal
the sale, evidenced by Exhibit A, on the ground that it was a transaction between principal and agent,
which is prohibited by paragraph (2), Article 1959 of the old Civil Code"; (3) "In not finding that the three
lots conveyed by means of the deed of sale, Exhibit A, belong to the unliquidated conjugal partnership of
Don Mariano Cui and his deceased wife Doña Antonia Perales, and that entire property"; and (4) "In not
finding that the plaintiffs are entitled to seven-eights (7/8) of property in question and of the rentals
thereof beginning November 1, 1947." We will discuss these issues separately.
In support of their contention that Don Mariano Cui did not and could not have validly consented to the
deed of sale in question, appellants submitted the following proposition: (a) Don Mariano was
incapacitated to give his consent by reason of his age and ailment; (b) Don Mariano acted under a
mistake, and his signature was secured by means of deceit; and (c) the sale Exhibit A is vatiated by undue
influence.

In support of the first proposition, it is argued that Don Mariano, at the time he signed the deed of sale
Defendants, on the other hand, aver that while the properties in question were acquired during the
Exhibit A on March 8, 1946, was already 83 years old, was sickly and infirm, and frequently complained
marriage of Don Mariano Cui and Doña Antonia Perales, however, they were entirely the exclusive
of ill health. It is also contended that six days before the sale, or on March 2, 1946, he had executed a
property of Don Mariano Cui up to the time of their transfer to defendants under the deed of Sale
general power of attorney in favor of defendant Antonio Cui, which act could signify that Don Mariano
Exhibit A, having been acquired by him as a donation from his uncle Don Pedro Cui and his aunt Doña
himself realized that he was longer capacitated to administer his properties and found it necessary to
Benigna Cui; that this fact was known to the plaintiffs and to the guardian of Don Mariano, Victorino
relieve himself of the task of dealing with other persons in connection therewith. It is also pointed out
Reynes, because in the extra-judicial partition executed between plaintiffs and defendants on December
that his children, Jorge, Jesus and Rosario Cui testified that he was ill, he was forgetful, he could not read
6, 1946 of the properties of the deceased Antonia Perales, the three lots in question did not form part of
nor remember well what he read, and his letters show that he was no longer familiar with the rules of
the conjugal properties of the spouses Don Mariano Cui and Doña Antonia Perales; that Don Mariano
orthography. In his letter he also complained about his illness and he realized that his affections were
Cui, for a consideration, voluntarily and without deceit, pressure or influence on the part of defendants,
due to his old age. It is also emphasized that as early as August, 1944, Jesus Cui noted that his father was
executed and signed the deed of sale Exhibit A; and that Don Cariano Cui was at that time in full
"muy debil . . . en cuestiones negocios" and that "en cuanto a su capacidad para administar sus bienes en
enjoyment of his mental faculties and only suffered loss of memory several years later when he was
que tenia que producir o estudiar, el (Don Mariano) no se acordaba." Although he was not in same when
declared by the court incompetent to manage his properties.
he signed the deed of sale Exhibit A, yet he was admittedly "incompetente para manejar su dinero." (pp.
85-86, Brief for plaintiffs and Appellants.)
Defendants denied that the building constructed on the three lots in question consisted of 14 doors and
alleged that it consisted of only 12 doors. They also denied that they received the sum of P7,600 as
As regards the second proportion, it is insinuated that if Don Mariano, by reason of his advanced age, his
monthly rental of said building because what they have been receiving was only a monthly rental of
weak mind and body and feeble will and reason, was not capacitated to give his consent, it would follow
P4,800. As a special defense, they aver that they are the owners of the naked ownership of 2/3 of the
as a corollary that he could not fully understand the contents of the deed of sale. He must have
three lots in question subject to the usufruct over the rents of products thereof in favor of Don Mariano
therefore labored under a mistake as to true nature of the transaction especially when it was written in a
Cui during his lifetime, with the exception of the rents from the building constructed on the 2/3 portion
language which he did not understand. Other insinuation leading to the same result are: Don Mariano
belonging to them; that the 2/3 of the lots in question did not produce any rent at the time of their
must have erroneously thought that the only way to pay his debt of P3,000 to Ramon Aboitiz was by
acquisition by the defendants, for they produced rentals only after the defendants had constructed the
executing the sale, just as he gave consent to the sale of his conjugal property of San Jose St., Cebu City,
12-door apartment now standing thereon; that subsequently and by verbal agreement between Don
because he thought it was the only available way to pay his indebtedness to the Insular Life Assurance
Mariano Cui and the defendants, the usufruct of the former over said 2/3 portion was fixed at P400
Co. Or he must have thought that the document he was made to sign by Antonio Cui was not a sale but a
monthly, and this sum Don Mariano has been receiving since then up to the present time. Defendants
mere authority to administer the property for purpose of revenue, or he must have been induced to
signing it after he was promised a life annuity in the form of usufruct over the rents of the properties in
question. In other words the insinuation is made that Antonio Cui employed deceit in securing the
signature Don Mariano to the sale in question in order merely to satisfy his selfish ends. There being,
therefore, error and deceit, there is no valid consent which can give validity to the sale on the sale on the
part of Don Mariano.
And with regard to the third proposition, the following circumstances are pointed out: At the time of the
sale, Don Mariano was already 83 years old, was infirm and was living with the vendees, herein
appellees. Antonio Cui was his lawyer and attorney in fact and there was between them confidential
family and spiritual relations. Don Mariano was then in financial as shown by the fact that he was
worried about his debt to Ramon Aboitiz, and way back in 1946 he had to borrow money from his
daughter Rosario Cui which remained unpaid even after the sale in question. The presence of undue
influence is further shown, appellants contend, in the execution by Don Mariano of the Mortgage in
favor of the Rehabilitation Finance Corporation, the extrajudicial partition Exhibit 1-a, the partition of the
property in question, the alleged oral waiver of usufrutuary rights, and the alleged explanatory
statement Exhibit 34. These acts, which were allegedly mastermined by Antonio Cui, show, appellants
contend, that Antonio Cui could get from father whatever he wanted.
We do not believe the arguments advanced by appellants in an effort to nullify the deed of sale Exhibit A
sufficient in law to invalidate the same on the ground of lack of valid consent on the part of Don Mariano
for the simple reason that they are merely based on surmises or conjectures or circumstances which,
though they may show inferentially that he was sickly or forgetful because of his advanced age, do not
however point unremittingly to the conclusion that at the time he signed said deed of sale he was not full
enjoyment of his mental faculties as to disqualify him to do so or that he was not aware of the nature of
the transaction he was then undertaking. Although at the time of the sale he was already 83 years old,
he was sickly and forgetful, as contended, yet, according to the authorities, weakness of mind alone, not
caused by insanity, is not a ground for avoiding a contract, for it is still necessary to show that the person
at the time of doing the act "is not capable of understanding with reasonable clearness the nature and
effect of the transaction in which he is engaging" (Page on Contracts, Vol. III, p. 2810). Or, as well stated
in the very case cited by counsel for appellants only when there is "great weakness of mind in a person
executing a conveyance of land, arising from age, sickness, or any other cause", can a person ask a court
of equity to interfere in order to set aside the conveyance (Allore vs. Jewell, 24 Law Ed., 263-264). And
here the evidence shows that such is not the case, for the several letters and documents signed all
executed by Don Mariano many months after the execution of the deed of sale Exhibit A clearly indicate
that, while he was of an advanced age, he was however still physically fit and his mind was keen and
clear. This we will see in the following discussion of the evidence.
One of such evidence is the testimony of Rosario Cui, one of the appellants herein. It should be
remembered that it was she who initiated the proceedings for the declaration of incompetency of Don
Mariano Cui in order that he may be placed under guardianship and at the hearing held for that purpose,
she was the main witness. When called upon to testify as to the state of health and mental condition of
Don Mariano, she stated that during the period she had been living with her father in Calapan, Mindoro,
which dates as for back as the Japanese occupation, she had observed that the state of his mind was very
good, he was not yet so forgetful as he is now, and that she discovered his mental weakness which
makes him incompetent to manage his own affairs only sometime in the month of January, 1949 (pp. 5
and 6, Exhibit 9; p. 136, t.s.n). And on the strenght of her testimony, Don Mariano was declared
incompetent on March 31, 1949. This is an indication that, when the deed of sale was executed on
March 8, 1946, three years before his declaration of incompetency, Don Mariano was still in the full
enjoyment of his mental-faculties. It should be stated that his testimony of Rosario Cui stands
undisputed.
A circumstance which strongly corroborates this testimony of Rosario Cui is the letter Exhibit 26 which
Don Mariano wrote to Don Ramon Aboitiz on May 31, 1946, two months after the execution of the deed
of sale Exhibit A, in relation to the indebtedness he owed him by reason of his having acted as the surety
of his son Jesus Cui which the latter had not been able to settle. This letter, which shows how lucid, keen,
clear and analytical his mind was, is herein reproduced for ready reference:
Cebu, Mayo 31, 1946
Sr. DON RAMON ABOITIZ
CEBU
ESTIMADO AMIGO —
La portadora de la presente es mi hija Mercedes, esposa del Dr. Ramas, a quien he dado el encargo de
presentarse a Vd. con esta carta y pagarle en mi nombre como fiador de mi hijo Jesus Cui el saldo
resultante de laliquidacion hecha por Vd. el 5 de Diciembre de 1941 de la deuda que este contrajo, de
Vd. por cierto prestamo en metalico que le dio bajo mi garantia consistente en hipoteca.
Como Vd. trata de cobrar intereses sobre el mencionado saldo hasta la fecha en que se pague el mismo a
partir desde el 1.o de Enero de 1944, permitame que le suplique encarecidamente apelando a su buen
corazon y reconocida generosidad, deje Vd. de cobrarme esos intereses. En apoyo de esta suplica
someto a su buen criterio lo siguiente: 1.o, mi buenavoluntad, diligencia y prontitud en finiquitar al
citado saldo; 2.o el motivo, como Vd. lo sabe, se tuvo que contraer la citada deuda sin ningun provecho
para mi, antes bien me ha causada molestias y apuros para pagarla completamente, y 3.o durante la
ocupacion japonesa en Cebu y estando yo ya refugiado en Manila le escribia de vez en cuando a mi dicho
hijo Jesusy siempre le recordaba que procurara hacerlo por todos los medios, sabiendo yo que el
disponia de bastante dinero; lo cual demuestra a Vd. que la prealudida deuda me ha tenido en constante
preocupacion, realizandose porultimo mis temores de que al fin habria yo que pagar casi a la deuda
entera.
Como Vd. muy pronto se va a marchar de este nuestro pais, concedame Vd. lo que le pido en la
precedente suplica como un recuerdo, imperecerederopara mi, de nuestra buena amistad. Le deseo un
feliz viaje, asi como una feliz estancia en el pais donde establecerse, con buen exito ademas en
susnegocios.
Disponga como gusto de affmo. amigo y servidor.
(Fdo.)
Scarcely four months before the execution of the deed of sale, Don Mariano was residing in Calapan,
Mindoro, in the house of Rosario Cui, and while there he received several letters from his daughter-in-
law, Carmen Gomez, wherein in a very expressive and persuasive manner she asked her father-in-law,
Don Mariano, to extend a helping hand to his son Jesus Cui, who was then confined in the stockade of
the military authorities in Leyte for collaboration, so that he may get his provisional release by putting up
a bail bond for him. Because Jesus Cui, his son, had embarked him into some commercial venture even
before the war which resulted in a disastrous failure and made him suffer a loss of nearly P25,000, aside
from the undertaking he assumed as a surety for the payment of a loan of P3,000 which Jesus had
contracted from Don Ramon Aboitiz on January 27, 1941 which Jesus failed to pay, all of which made him
bitter and resentful against his own son, Don Mariano turned a deaf ear to the plea of Carmen stating in
a language as forceful as it is clear the reasons for his attitude. These reasons were expressed by Don
Mariano in letters dated November 11, 1945 and November 22, 1945 which are also herein reproduced
for ready reference, omitting the letters of Carmen, which are referred to therein, for being unnecessary
for our purpose. Note that the person named Chong appearing in the letters is the nickname given to
Jesus, son of Don Mariano:
Calapan, Mindoro  de TRES MIL PESOS, que creo que estan sin pagar aun y que yo como burro de carga tendre que pagarlos.
        Nbre. 11, 1945
MI ESTIMADA MAMING —
Recibi el 9 del actual tu carta, fechada el 21 de Obre. ppdo y me entere desu contenido.
Empiezo dandote las expressivas gracias por su interes y buen deseo por mi salud, que ya no es tan
buena como antes; tengo ya mis achaques a causa de mi vejez que va avanzando cada dia mas; no puedo
esperar ya buena salud.
Me haces una apologia en favor de tu marido Chong, mi hijo, alabandole comoun buen hijo; comprendo
que lo hagas, porque la pasion te ciega; pero no me lo digas a mi que conozco muy a-fondo a Chong.
Nunca le he conocido a Chong como buen hijo mio, pues me ha dado el los mayores disgustos que he
tenido en mi vida. Mes mijores amigos que esteban al tanto de la vida de Chong y de sus fracasos en los
negocios y con quienes a veces me desahogaba, me echaban a mi la culpa porque era yo demasiado
apasionado por el. Ahora que llegado a ser pobre, lo comprendo y lo lamento, y me recuerda de lo que
me dijo a mi tia Benigna, ya difunta (q.e.p.d) un dia, muy formalmente y en serio, que presentia que yo a
la vez me quedaria pobre y me aconsejo que tuviera mucho cuidado en administrar mis bienes con
prudencia..
Siento mucho tener que decirte que no me encuentro en condiciones para prestar la fianza que me pides
en favor de Chong; primero, porque no dispongo de beienes inmuebles para constituir la fianza y
segundo, porque si bien es verdad que me quedan solares en la calle Manalili de esa Ciudad, pero el
gravamen de hipoteca sobre estos solares esta sin cancelarse aun en el registro de propiedad, lo cual
tendra aun bastante tiempo, y por otra parte, me reservo los mismos, siempre libres, para poder
disponer de ellos cuando fuere necesario, para atendar mis gastos. Dispensame, pues, que no pueda
complacerte en lo que me pides. Ahora le escribo a nene para que te envie esta carta como me lo pides.
En retorno Yre y Nenita te envian sus recuerdos.
Termino deseando a ti y Nene siempre beuna salud y enviando a este un cariñoso beso y a ti.
En sincero afecto de tu suergo
MARIANO CUI
Calapan, Mindoro
        Nbre. 22, 1945
ME APRECIABLE MAMING —
Recibi el 20 del actual por correo tu carta escrita ya alli en Manila y me apresuro a contestartela.
Ya habras recibido y te habras enterado ya de mi carta, fecha 11 del actual. Contestando la tuya anterior
portador de aquella mi nieto Liling, que semarcho de aqui para alli el sabado pasado.
Siento mucho tener que desirte que insisto en mi negativa de ser fiador de Chong en la forma indirecta
que se me propone por los que negocian en prestar fianzas; yo que he sido juez conozco el alcance de
esa fianza queyo otorgue a favor de Don Ramon Aboitiz para garantir el prestamo, que este hizo a Chong,
Debes, pues dejarme ya en pazporque tengo mala pata en ser fiador de Chong. Estoy pidiendo a Dios que
me de medios para poder ayudarle. Temo, ademas, que Dios me castigue haciendomal uso de los pocos
bienes que me ga dejado para mantenerme durante los pocos anos de vida que me va considiendo aun y
para ni vivir pidiendo limosna, ya que de mis hijos poco puedo esperar.
Agradezco mucho to oferta de que cuando os establicias alli en Manila pararesidir permanentemente me
distenares una habitacion para mi, y me reservotal oferta para cuando sea conveniente aceptarla.
Sin otra cosa mas, afectuoso recuerdos a Chong y a ti mi aprecio sincero.
Tu suegro,
Rosario Cui not only testified that Don Mariano was still good and of sound mind when he lived with her
for eighteen months from September, 1944 up to February, 1946, and for another four months from
July, 1946 to October, 1946 in Calapan, Mindoro, but she also sustained correspondence with Don
Mariano even as late as the year 1947. Hereunder we transcribe Don Mariano's letter to Rosario on July
14, 1947:
Cebu, Julio 14, 1947
Sra. ROSARIO C. DE ENCARNACION
CALAPAN, MINDOROMI 
QUERIDISIMA HIJA —
Siento mucho que el no haber tu recibido carta mia desde que he llegado aquios haya preocupado tanto
artibuyendolo a mi falta de buena salud. Gracias a Dios no fue asi.
A la semana despues de haber llegado he recibido una carta tuya, disculpandote de no haber tu podido
despedirnos abordo del barco en que ibamos con motivo de las fuertes lluvias que entonces cayeron. Te
conteste que habias hecho muy bien, teniendo tu una salud muy delicada para cogerte unas mojaduras
de funestas consecuencias para ti.
A mediados de mayo ultimo calcule que estarias aun en Manila a consequenciaaun de la operacion de tu
matriz; pero no sabiendo que direccion pner en micarta a ti desisti de escribirte.
Cuanta bondad y generosidad en el arreglo de mi cuarto o habitacion. Aunqueno lo veo aun, os lo
agradezco ya de todo corazon. Debe de estar ya muy confortable, y sin las goteras que tanto me
molestaban. Espero poder volveraun alli en cuanto se termine estos asuntos.
Te deseo que se te desaperezca pronto la debilidad de tu corazon para que notengas mas inveycciones
de alcampor.
Envio mis mas afectuosos recuerdos a Yre y chiquillos.
Te da un fuerte abrazo tu padre que entranablamente te quiere.
Another interesting circumstance is the discussion which Jesus Ma. Cui had with his father Don Mariano
on April 20, 1946 relative to the sale of the lots in question. It should be noted that when Jesus came to
know of that sale he could not refrain his anger feeling that he had been ignored or the subject of
discrimination on the part of his father and give vent to his feeling he wrote to him on March 20, 1947 a
letter, copy of which was marked Exhibit M-2, wherein he appealed to him (his father) to give him and
his other children an opportunity to buy the properties in question, to which letter Don Mariano
answered with another date April 22, 1947 wherein he apparently gave in to the demand of Jesus
subject to certain condition. As the evidence shows, Don Mariano came to answer the letter of Jesus in
this manner: Don Mariano discussed the matter with his son Antonio showing to him the letter of Jesus
on which occasion Antonio said: "Bueno papa, si tu crees que en eso el esta empeñado y si queres darle
a el y el ha dicho a ti que el va a hacer todos los medios para conseguir dicho terreno, puedes hacer todo
lo que quiera con tal de que me devuelves mi dinero que yo habia pagado porque era dinero de mi
esposa." To this Don Mariano answered: "Vamos a ver primero, que es lo que van a contestar a la carta
que voy a mandar."
The letter thus referred to is the one sent by Don Mariano to Jesus, Exhibit I, wherein the former made
known to Jesus that he was willing to give to all his children equal opportunity to buy the lots in question
subject to the condition that his son or daughter who is not able to pay his debt or obligations or has no
money with which to pay them would be automatically excluded from the sale. The evidence also shows
that neither Jesus nor the other children who wanted to participate in the sale took the trouble of
answering the letter nor made known their desire as to the proposition of their father, and such silence
is undoubtedly due to the fact that they were not in a financial condition to comply with the condition
imposed in the letter. In fact, according to Antonio Cui, such is the predicament in which his brothers
were situated as shown by the fact that Jorge at that time was indebted to his father in the amount of
P6,000, Jesus in the amount of P18,000, Jose in the amount of P14,000, while his other brothers did not
have the necessary means to take part in the sale. The fact unfolded in connection with this incident
constitute a clear indication of the state of mind then enjoyed by Don Mariano for he took the
precaution before answering the letter of Jesus of discussing the matter first with his son Antonio who
was the one mostly affected by the decision he was about to make considering the menacing attitude
and the incessant demand of Jesus regarding the transaction. Only a person of sound mind could have
adopted such precaution and circumspections.
The deed of sale Exhibit A was executed by Don Mariano Cui, Antonio Cui and Mercedes Cui de Ramas on
March 8, 1946 in the city of Cebu, and by Rosario Cui and her husband Dr. Ireneo Encarnacion in the City
of Manila on March 20, 1946. The consideration of the sale was P64,000 plus the reservation of the right
in favor of Don Mariano "to enjoy the fruits and rents of the same" as long as he lives. It appears
however that, while in said deed of sale it is stated that Don Mariano has acknowledged receipt of said
consideration of P64,000, the same is not true with regard to the share of Rosario Cui. So Don Mariano
went to Calapan, Mindoro in July, 1946 to collect from Rosario her share of the purchase price
amounting to P20,000. Rosario then excused herself from going ahead with the sale alleging as reason
that she needed what money she had to rehabilitate her electric plant in Calapan and also because Cebu
was very far from Mindoro where they had already their permanent residence. Not being able to pay her
share in the consideration of the sale, Don Mariano demanded from her the resale of her interest. This
was done when she went to Manila on October 11, 1946 to execute the deed of resale in favor of Don
Mariano. This attitude of Don Mariano is very significant in so far as his state of mind is concerned. It
shows that he was fully conscious of what was transpiring and of the transaction he was executing so
much so that he went to the extent of demanding from Rosario the resale of her interest when she failed
to pay her share in the consideration of the sale.
There are other letters and documents which Don Mariano had prepared and executed in the
neighborhood of the time the deed of sale in question was executed which also depict the mental
condition that he possessed at the time, and to show this we can do no better than to quote what the
lower court said on this point:
Ademas de lo que ya dejamos expuesto, Don Mariano Cui ejecuto varios actos que tambien
impugnan la contension de que el ya estuvo mentalmente incapacitado al otogar el Exh. A.
Poco antes y tambien despues de otogar dicha escritura, el escribo varias cartas a sus hijos y
otogo varios documentos. Entre las cartas figuran el Exh. 4, que esta dirigida a Jorge, lleva la
fecha 24 de marzo de 1945; Exh. 23, dirigida a su hija Mercedes, fechada 9 de septiembre de
1946; Exh. 26, dirigida a Don Ramon Aboitiz, fechada el 21 de mayo de 1946; Exhs. 36 y 40
dirigidas a su hijo Antonio, y fechadas 3 de julio p. 13 de agosto de 1945, respectivamente;
Exhs. 41 y 42, contestaciones de las cartas de Carmen, esposa de Jesus, fechadas el 11 y 22 de
noviembre de 1945, respectivamente; y exh. 57, dirigida a su hija Rosario, fechada Julio 14,
1947. Entre los documentos figuran; Exh. 1-a, escitura de reparticion extrajudicial, otorgada el
6 de deciembre de 1946; Exh. 3-b, un affidavit de fecha 20 de febrero de 1945; Exh. 24, recibo
a favor de Gil Ramas, otorgado el 5 de marzo de 1946; Exh. 24, constanciaque fue suscrita y
jurada ante el Escribano de este Juzgado el 23 de febrerode 1948; Exh. 34, borrador de exhibit
anterior con las correcciones hechas de puno y letra de Don Mariano Cui; Exh. 44,
autorizacion a Mercedes y Antonio para hipotecar su participacion en los lotes en cuestion,
fechadael 7 de enero de 1947; Exh. 45, convenio entre Don Mariano, por una parte, y
Mercedes y Antonio, por otra parte, referente a los terrenos en cuestion, que lleva fecha 30
de septiembre de 1947; Exh. C escritura de hipoteca a favor de la RFC de fecha 15 de abril de
1947; y Exh. S, un memorandum que contiene algunas notas de sus ingresos y gastos que
comprende has ta el mes de enero de 1949, poco antes de haber perdido su memoria.
Una lectura de las cartas arribas mencionadas dos lleva a la necesaria conviccion de que
durante el periodo en que se escibieron las mismas, o sea hasta el mes de Julio de 1947, Don
Mariano Cui aun tenia el pleno goce de sus facultades mentales, pues de otro modo, el no
podia expresarsecon tanta claridad y precision en los asuntos que trataba en dichas cartas.
Con respecto a los documentos arriba referidos, los mismos, son de tal naturaleza e
importancia, que no se podian haber otorgardo por Don Mariano si el no estaba en su cabal
juicio. El Exh. S fue presentado por los mismos demandantes, y esta circunstancia,
naturalmente, presupone que ellos admiten que Don Mariano Cui estuvo mentalmente sano
al anotar los asientos en dicho memorandum, muchos de los cuales tuvieron lugar ya despues
de otorgarse el documento en cuestion Exh. A.
It is obvious from the foregoing discussion that Don Mariano signed and executed the deed of sale
Exhibit A not only at a time when he was still in the full enjoyment of his mental faculties, but also under
conditions which indicate that he knew what he was doing and, as a consequence, it cannot be said that
he has entered into the transaction without his consent or under a misapprehension that the document
he was signing was not the sale of the properties in question but one merely pertaining to their
administration.
In connection with the contention that the deed of sale Exhibit A was executed by Don Mariano under
circumstances which point out that he has done so because of undue influence on the part of the
defendants, counsel for appellants mentions the following circumstances: (1) Don Mariano was already
83 years old, he was the father of the vendees, and at the time of the sale or long before it was
consummated, he was living with the vendees; (2) one of the vendees, Antonio Cui, was his attorney in
fact and lawyer; (3) the vendor and the vendees had obviously confidential family and spiritual relations;
(4) the vendor was suffering from mental weakness; and (5) the vendor was in financial distress. The
presence of undue influence, according to appellants, is further shown by the execution of the mortgage
in favor of the Rehabilitation Finance Corporation, the extra-judicial petition Exh. 1-a, the partition of the
properties in question, the alleged oral waiver of usufructuary rights, and the explanatory statement
Exhibit 34, which acts, it is claimed, in which Don Mariano was supposed to have taken part and which
were all masterminded by Antonio Cui, show that Antonio Cui could get from his father whatever he
wanted.
There is however no concrete proof that may substantiate this claim of undue influence. The only direct P. Como llego a su poder este documento?
evidence on the matter is the testimony of Jesus Cui which in the main is based on mere conjecture and
not on actual facts. The circumstance that Don Mariano Cui was then living in the house of Mercedes Cui
R. Esto me dio mi papa; sabe usted cuando estaba tratando con mi hermano,este me insulto y
when the deed of sale was signed does not necessarily imply that he was made to sign it under the
estaba y llorando, y despues se fueron al cine; y entoncesdijo el; Deja Vd. y mande preparar
insidious machinations practiced on him by his daughter. On the contrary, the evidence shows that Don
una orden mia de que yo quiero se termineese asunto y que se arregle entre estedes y no me
Mariano lived most of the time before the execution of the sale with his other children and not
gusta que haya pleito y yo voy a firmar y se preparo eso.
necessarily with herein defendants. Thus, according to the testimony of Jesus Cui himself, during the
Japanese occupation, or from 1942 to 1943, his father lived in the City of Cebu. During the month of
September, 1943, he went to Manila and lived in the house of his daughter Lourdes Cui de Velez, where P. Usted mando preparar el exhibit G en la localidad?
he stayed up to September, 1944. Then he went to Calapan, Mindoro to live in the house of his daughter
Rosario where he stayed up to February, 1946 when he returned to Cebu. It was only then that he began R. Si, señor, con el S. Jayme.
living in the house of Mercedes Cui. In Mercedes Cui when the deed of sale was executed on March 8,
1946. There is therefore no basis for concluding that said deed of sale was executed simply under the
undue influence of Antonio Cui and Mercedes Cui. The fact that about six days before the sale Antonio P. Donde lo firmo este exhibit G?
Cui was made by Don Mariano Cui his attorney in fact could not mean anything unusual for he was then
getting old and he needed one who could help him administer the properties of his deceased spouse, R. En la casa de mi hermana Mercedes. Cuando lo firmo estabamos los dos, mi marido y yo.
and the choice fell on Antonio because he was the only lawyer in the family. And if to all this we add that
Don Mariano was then in full enjoyment of his mental faculties, as we have already pointed out
elsewhere, it would be presumptuous, if not unfair, on our part to affirm, as appellants want us to do, P. Su hermano de usted estaba presente?
that he allowed himself to do an act which is not fully accord with his free and voluntary will.
R. Estaba en casa mi hermana Mercedes, pero no estaba delante. Mi hermano estaba
We will not take up the claim that the deed of sale Exhibit A was executed without mediating any ausente. Cuando se hizo este, debla haberse firmado el 24, pero era por suplica de mi papa, y
consideration on the part of the vendees. if this were true then said deed would be void and inexistent habia mucha gente, y ademas en aquel dia noquiera dar disgustos, y cuando nos marchamos,
for it would then be afictitious or simulated contract. This claim is merely predicated on the documents le dije: "Papa, esta aqui el papel que me ha entregado, que voy a hacer", y dijo: "voy a
Exhibits G and H and the declarations of Rosario Cui and Jesus Ma. Cui. We will briefly discuss this firmarlo."
evidence.
P. Eso fue cuando?
Exhibit G is an alleged written statement made by Don Mariano Cui on January 24, 1949 which reads as
follows: R. El enero 25.

A quien corresponde: P. Sabiendo usted que su padre vivia en la casa de Mercedes por que no llamo usted a
Mercedes para ser mas legal?
Habiendome enterado que hoy existe un lio entre mis hijos en el Juzgado sobre mis
propiedades t los de mi difunta esposa, y sobre todo porque el transpaso de las misma a mi No me acuerdo de eso.
hijo Antonio Ma. Cui ya hija Mercedes Cui de Ramas no se halla aun pagado por los mismos,
es mi deseo que el pleito entre mis hijos sea inmediatamente zanjadoy todas participen por
P. Ni siquiera el esposo de su hermana, el Doctor, llamo usted para que preseciara la firma de
igual dichos bienes.
este Exhibit G?

Y para que asi consta firmo esta declaracion en la Ciudad de Cebu, hoy a 24 de enero de 1949.
R. No me acorde de eso. (pags. 162-B, 163 y164, transcripcion,)

(Fdo.) MARIANO CUI

If we would give credit to what document Exhibit G literally says, we would indeed come to the
conclusion that Antonio Ma. Cui and his sister Mercedes, vendees of the property, have not as yet paid
Rosario Cui, testifying on the circumstances surrounding the preparation of said Exhibit G, said as
the consideration of the sale to their father Don Mariano, but the testimony of Rosario Cui itself belies
follows:
that such was the real intention of Don Mariano when the statement was allegedly made. According to
Rosario Cui, when Don Mariano was informed that a case was brought to court to seek the annulment of
Sr. PIMENTEL: the sale of the Manalili property and she informed him of the attitude of the other children, Don
Mariano said: "Deje Vd. y mande preparar una orden mia de que yo quieroque se termine el asunto y se
arregle entre ustedes y no me gusta que haya pleito, y yo voy a firmar y se preparo eso." Then she
P. Ayer declaro usted sobre este Exhibit G que, segun usted, esta firmadopor su Padres?
caused that statementto be prepared by Atty. Jayme which was signed by Don Mariano in the house of
Mercedes, If we were to believe the testimony of Rosario Cui, we would find that the only wish of Don
R. Si, señor. Mariano was to have the litigation terminated and amicably settled and that nothing was said about the
alleged non-payment of the consideration. And it is strange that the statement was signed in the house
of Mercedes Cui and the latter never came to know about it before it was presented in court. It is
apparent that the whole thing was a concoction of some of those interested in winning the case which
was already pending in court by inserting something that might serve as basis for the nullification of the
sale; and our suspicion is strengthened when we consider that statement was allegedly signed at a time
when, according to Rosario Cui herself, her father was already mentally infirm, so much so that about
one month thereafter he was declared incompetent and mentally incapacitated.
The document Exhibit H is an alleged letter of Don Mariano to his son-in-law, Dr. Ireneo Encarnacion,
husband of Rosario, dated January 30, 1949, wherein Don Mariano apparently added at the foot the
following statement: "PD. Quizas te podre pagar cuando me paguen ellos Nene los solares de Manalili." If
we will give credit to the above statement, we would also conclude that the vendees have not paid the
consideration of the sale of the Manalili property. Again we can say that such cannot represent the clear
will of Don Mariano if we want to be consistent with our finding that at that time he was no longer in
possession of his mental faculties. Apparently, this is another scheme employed by Rosario Cui and her
husband to bolster up their case seeking the annulment of the sale.
But the most serious attempt to show that the defendants did not pay any consideration for the sale of
the lots in question is the story that is now being brought to bear on the sale of the San Jose property by
Don Mariano to his daughter-in-law, Elisa Quintos, wife of Antonio Cui, on August 31, 1944 which, it is
alleged, does not show on its face the true consideration paid by Elisa to don Mariano regarding said
property. In relating the so try relative to this transaction, the picture which counsel for appellants wants
to portray is that the true consideration paid by Elisa to Don Mariano is the sum of P125,000, and not
simply P50,000 as it was made to appear therein, and, therefore, when the deed of sale was executed on
March 8, 1946 no actual consideration passed from Antonio Cui to Don Mariano because the latter was
not then owing any amount either to said Antonio or to his wife Elisa Quintos.
Before discussing the details concerning the sale of the San Jose property as narrated by counsel for
appellants, let us take note of the version of Antonio Cui as to how he came to pay the consideration of
P21,333 assigned to him in the transaction. Antonio Cui testified that of the said sum of P21,333
representing his share in the consideration of the sale, P1,333 was advanced in his favor by his sister
Mercedes as shown by the receipt Exhibit 24 issued by Don Mariano in favor of the latter. The balance of
P20,000 represents settlement of the debt his father then owed to his wife Elisa. This indebtedness,
according to Antonio, arose in the following manner: On June 10, 1935, the conjugal partnership of the
spouses Don Mariano Cui and Doña Antonia Perales contracted an obligation of P80,000 with the
Filipinas Life Assurance Co., Ltd. secured by a mortgaged on real estate belonging both to the conjugal
partnership and to the estate of Don Mariano. On March 23, 1942, the company made a demand on Don
Mariano for the payment of the obligation which was then increasing in view of the accumulation of the
interests. In order that he may settle this obligation, Don Mariano asked his son Jesus Cui to look for a
buyer of the San Jose property in Cebu City.
Apparently, Jesus made efforts to look for a buyer as shown by several letters and telegrams he sent to
his father regarding the matter so much so that Don Mariano, acknowledging said efforts, sent to him on
October 5, 1943 a letter thanking him for the interest he was displaying and stating that he could keep
for himself whatever amount he might secure in excess of the sum of P90,000 which at that time was the
totality of the obligation (Exh. 49). But since two years had passed and nothing concrete came from the
efforts exerted by Jesus, Don Mariano had to turn for help to his son Antonio. Antonio agree to help and
said that he would talk to his wife about it. The best way he and his wife found to raise the money was to
sell the property his wife had in Malate, City of Manila, for the sum P300,000. Of this amount, they gave
to his father the sum of P125,000 to cover his needs and obligations. With this money, Don Mariano pay
his debt to the insurance company of P94,736.93, including interests, deducted the sum of P5,000
representing the amount spent by him for the wedding of Antonio and Elisa, and applied P50,000 as
consideration for the sale to Elisa Quintos of the house and lot at San Jose street in Cebu City. And in
recognition of the help extended to him by Antonio and Elisa, Don Mariano acknowledged in their favor
the sum of P70,000 as a loan. The deed of sale of the San Jose property to Elisa Quintos was executed by
Don Mariano Cui on August 31, 1944 with two of his children, Lourdes Cui de Velez and Jorge Cui as
witnesses. And when the sale of the lots in question came, it was agreed that the loan of P70,000 be
reduced to P20,000, Philippine currency, in deference to the request of Don Mariano which amount, in
addition to the sum of P1,333 advanced by Mercedes, became the consideration paid by Antonio Cui for
his share in the transaction. This is the explanation given by Antonio of how he came to pay the
consideration of the sale, and apparently this is supported by the same deed of sale wherein Don
Mariano acknowledged having received the total consideration (Exhibit A).
Appellants, however, do not seem to agree to this narration for they do not give faith and credit to the
explanation given by Antonio Cui as to how he came to pay his share in the consideration of sale, and to
show that Antonio cannot be truthful and that the sale of the San Jose property, as well as that of the
lots in question, are but the product of his insidious scheme and manipulations to serve his own selfish
interests, they brought forth in this case certain documents and telegrams tending to show that Don
Mariano could have intended to sell the San Jose property for less than the amount of his obligation to
the insurance company more so when he had received offers for the purchase of said property in the
amount of not less than P150,000. Thus, an attempt was made to show that on August 25, 1944, or five
days before the sale to Elisa Quintos was consummated, Paulino Gullas offered to buy the property for
P150,000. There was also an attempt to show that at about the time the sale was being made to Elisa
Quintos of that property, Sergio Osmeña, Jr. also made an offer in the same amount of P150,000.
While these facts are true because they are supported by unrefuted evidence, it is however also true
that those offers came when the negotiation between Don Mariano Cui and Elisa Quintos had already
been completed. It should be borne in mind that the authority given by Don Mariano Cui to Jesus Cui to
sell the property was given even as early as 1942 and despite the lapse of two years nothing concrete
came out in spite of the efforts made by Jesus to look for a buyer, and so Elisa Quintos had to sell her
property in Manila just to please and accommodate her father-in-law, Don Mariano. The offer, therefore,
of Paulino Gullas or of Sergio Osmeña, Jr., even for the sum of P150,000, came late, and under the
circumstances, Don Mariano had no other alternative, as any other decent man would have done, than
to reject the offers and maintain the sale he made to Elisa even at the sacrifice of some material
advantage in his favor. He wrote to Jesus on August 7, 1944 (Exhibit 52) and told him that he had already
sold the San Jose property to Elisa assuring him at the same time that although the price paid for it was
not high, still he considered the sale to his advantage as Elisa and Antonio spontaneously reserved in his
favor the right to occupy for life any room he may choose in the same house included in the transaction
when he should return to Cebu to live there, a privilege which Don Mariano knew no other buyer would
be in position to offer. This explains somewhat this apparent incongruity in the transaction. This
consideration may really appear low especially when done in Japanese currency, but at the same time
we cannot overlook the fact that some moral factor has played an important part in the transaction. At
any rate, that is the consideration that appears in the document (Exhibit R), and its genuineness and due
execution is not now disputed. We are, therefore, constrained to consider it on its face value.
The consideration paid by Mercedes Cui for her share in the sale in question is also disputed by
appellants who claim that she has not paid any amount and that the explanation she has given as to how
she came to pay said consideration is not worthy of credence. Mercedes Cui, on this matter, testified
that before her father Mariano left for Manila in the month of July, 1943, he had been taking from her on
several occasions sum of money which reached a total of P140,000; that in February, 1946, her father
returned to Cebu and she again gave him the sum of P2,000, making a total of P16,000, the money taken
by her father; that after receiving the sum of P2,000, her father offered to sell her ¹/3 of the interest in
the three lots in question, which she accepted; that days before she signed the deed of sale Exhibit A,
she gave her father the sum of P6,666, of which P1,333 were given for the account of her brother
Antonio Cui, and the sum of P5,333 was applied to cover the balance of her share in the consideration to
complete the amount of P16,000 previously taken by her father; that in acknowledgement of the receipt
from her of said amounts, her father executed the receipts Exhibit 24 in his own handwriting, and days
after, she was made to sign said deed of sale; and that her father did not include in the sale her other
brothers and sisters because he knew their precarious financial situation.
The weakness which appellants find in this explanation given by Mercedes Cui lies in that she has been
able to produce any receipt showing the deliveries of money she claimed to have made to her father.
This may be true, but this was explained by her saying that it has never been her habit to ask for receipt
from her father for any money she may have given him, unlike her sister Rosario who has the habit of
asking for receipts. On the other hand, she claims that her payment of the consideration cannot be
disputed for Don Mariano has expressly acknowledged having received it in a document written in his
own handwriting, as evidence by Exhibit 24, the genuineness of which is not disputed. And there is one
circumstance that bolster up this claim, which also holds true with regard to Antonio Cui, and that is the
attitude shown by Don Mariano when Rosario Cui has not paid her consideration in the sale. It should be
recalled that when Don Mariano came to know this fact, he went to Calapan, Mindoro, where Rosario
was residing, to demand payment from her, and when she failed, he asked her to execute a deed of
resale in his favor. If Antonio or Mercedes, as appellants now claim, has not paid his or her share in the
consideration, Don Mariano would have also demanded from any one of them the resale of the
property, in the same way that Rosario was required. The fact that Don Mariano did not do so shows
that both paid their shares to his full satisfaction.
But appellants are not yet satisfied with this reasoning. They insist that Mercedes has not paid any
consideration because, they contend, if it were true that she has given her father the different sums of
money she claims she has given, which amount to P16,000, the receipt of said amounts would have been
noted by Don Mariano in the diary Exhibit KK which was kept by him during the years 1942 to 1945
wherein several entries appear of different sums of money received and disbursed by him for sundry
expenses. When these alleged sums were not noted down in said diary, they contend, it is because they
are not true.
If we were to believe the testimony of Jesus Ma. Cui that his father had the habit of writing down in said
diary all the receipts and expenses he makes daily up to the last centavo, the contention may be correct,
considering that the sums of money delivered by Mercedes do not appear in said diary. But that
statement of Jesus Cui is an exaggeration for, as affirmed by Antonio Cui, not all the entries appearing
therein are in the handwriting of Don Mariano, nor is it true that all the receipts and expenses he makes
everyday are noted down therein, for the truth is that there are many money transactions and expenses
made by Don Mariano during the period of 1942 to 1945 that have not been recorded therein. Thus, the
expenses and receipts had by Don Mariano while he was in Manila, do not appear therein, nor those
incurred by him in his travels from Manila to Calapan, and vice-versa. Nor do they appear therein the
expenses incurred by Don Mariano for his son Jorge and his family when they went to Calapan; neither
does it appear the loan of P3,000 made to Miguel Ortigas. It does not also appear the sum of P18,000
borrowed from him by Jorge while they were in Manila as testified by the latter.
In connection with this diary, we may also point out the suspicious circumstances surrounding its
presentation in court as evidence. It appears that this document was presented by Rosario Cui who
testified that she received it from her father after Mercedes had already testified in this case, which was
on September 30, 1949. According to her, Don Mariano on that occasion gave her instruction as to
where to get said document and what to do with it. She said that when she talked with her father about
the claim of Antonio that the consideration he paid was P70,000 which were reduced to P20,000 upon
his request, her father said: "despues me dijo mi papa quebuscara en sus libros, porque el tenia un libro
diario donde apuntaba susgastos y tenia varios cuadernos todavia alli pero yo no quise sacar todo;
entonses al me dijo que yo lo llevara y lo utilizara para comprobar dos gastos y las entradas durante esos
años." (p. 112, Memorandum for Appellees)What Rosario has attributed to her father as regards the use
of the diary Exhibit KK is hard to believe considering that by that time, September 30,1949, Don Mariano
could no longer hold such a coherent conversation and much less give instructions as to the best way
could make use of the diary, considering that Don Mariano at that time has already been declared
mentally incapacitated. The presentation of said diary can have no other meaning than that it is an
eleventh hour attempt to bolster up the claim of appellants that the deed of sale Exhibit A lacks
consideration.
As an additional arguemen to nullify the deed of sale Exhibit A, even partially, in the supposition that all
their previous arguments would prove of no avail, appellants raise the question that said sale should be
invalidated at least in so far as the portion of the property sold to Antonio Cui is concerned, for the
reason that when that sale was effected he was then acting as the agent or administrator of the
properties of Don Mariano Cui. In advancing this argument, appellants lay stress on the power of
attorney Exhibit L which was executed by Don Mariano in favor of Antonio Cui on March 2, 1946,
wherein the former has constituted the latter as his "true and lawful attorney" to perform in his name
and that of the intestate heirs of Doña Antonia Perales the following acts:
. . . to administer, sell, mortgage, lease, demand, claim, represent me and the intestate heirs,
in all meetings of corporations, associations, of which my or their presence is required, sue
for, collect, cash, indorse checks drawn in my favor or of the intestate heirs against any
person or entity or bank, and sign all documents, that I and or the intestate heirs to which I
am the administrator are entitled to; giving and granting untomy said attorney full power to
perform and to make everything necessary to be done or which he believes to be necessary
or beneficial for me and the said heirs as fully and to all intents and purposes as I might or
could do if personally present, with full power of substitution, and revocation, hereby
granting ratifying all that he or his substitutes shall lawfully do or cause to be done by virtue
of these presents.
While under article 1459 of the old Civil Code an agent or administrator is disqualified from purchasing
property in his hands for sale or management, and, in this case, the property in question was sold to
Antonio Cui while he was already the agent or administrator of the properties of Don Mariano Cui, we
however believe that this question can not now be raised or invoked for the following reasons.
(1) This contention is being raised in this appeal for the first time. It was never raised in the trial court. An
examination of the complaints, both original as well as amended, will show that nowhere therein do they
raise the invalidity of the sale on that ground nor ask as an alternative relief for the partial revocation of
the sale in so far as Antonio's share is concerned because of the alleged relation of principal and agent
between vendor and vendee. It is undoubtedly for this reason that the trial has not passed upon this
question in its decision. And considering that under Section 19, Rule 48, of our Rules of Court, an
appellant may only include "In his assignment of error any question of law or fact that has been raised in
the court below and which is within the issues made by the parties in their pleadings", it follows that
appellants are now prevented from raising this question for the first time in this instance.
(2) The power of attorney in question is couched in so general a language that one cannot tell whether it
refers to the properties of Don Mariano or only to the conjugal properties of the spouses. However,
considering that the appointment was extended to Antonio Cui by Don Mariano so that he may act as
agent "for me and for the intestate heirs of the deceased Antonia Perales", one is led to believe that the
power refers to the conjugal properties wherein he had one-half interest in the heirs of Doña Antonia,
the remaining half. Moreover, the power of attorney was executed on March 2, 1946 while the deed of
sale was executed on March 8, 1946. They were therefore executed practically at the same time, which
makes it doubtful as to whether such sale can be deemed to be within the prohibition of the law.
(3) The prohibition of the law is contained in article 1459 of the old Civil Code, but this prohibition has
already been removed. Under the provisions of article 1491, section 2, of the new Civil Code, an agent
may now buy property placed in his hands for sale or administration, provided that the principal gives his
consent thereto. While the new Code came into effect only on August 30, 1950, however, since this is a
right that is declared for the first time, the same may be given retroactive effect if no vested or acquired
right is impaired (Article 2253, new Civil Code). During the lifetime Don Mariano, and particularly on
March 8, 1946, the herein appellants could not claim any vested or acquired right in these properties,
for, as heirs, the most they had was a mere expentancy. We may, therefore, invoke now this practical
and liberal provision of our new Civil Code even if the sale had taken place before its effectivity.
The remaining question to be determined refers to the nature of the properties in question which
appellants claim belong to the conjugal partnership of Don Mariano Cui and Doña Antonia Perales while,
on the other hand, appellees contend belong exclusively to Don Mariano.
In support of their contention, appellants rely on the legal presumption that said properties are conjugal
because they were acquired by Don Mariano and his wife during their marriage, and on the testimony of
Jesus, Jorge and Rosario Cui, three of the children of Don Mariano, who testified that said properties are
conjugal because they have always been of the belief or impression that they belong to the conjugal
partnership of their parents. They have not presented any documentary evidence in support of their
contention.
It is true that the properties in question were acquired during the marriage of Don Mariano Cui Doña
Antonia Perales", and as much they are presumed to be conjugal properties (Article 1407, old Civil Code),
but this presumption appears here rebutted by conclusive and strong evidence to the contrary. It should
be stated that these properties originally belonged to Don Pedro Cui and Doña Benigna Cui, uncle and
aunt, respectively, of Don Mariano, which were donated by them to Don Mariano on April 12, 1912 on
condition that the latter renounce any further inheritance he might have been in the intestate estate of
the donors. And while appellees have been able to introduce any copy of the deed of donation because
the same has already disappeared, the fact however remains that it has been clearly established that
such donation has been actually made exclusively to Don Mariano by clear and satisfactory evidence. The
following is a discussion of such evidence which consists in the testimony of Marta Cui and Generoso
Vda. de Jakosalem, both nieces of the donors, and in numerous documents the genuineness of which is
not disputed.
Marta Cui, a woman 81 years old, testified that since she was 10 years of age she lived in the company of
her uncle Pedro Cui and aunt Benigna Cui; that during their lifetime these two made donations of their
lands to their nephews and nieces subject to the condition that they should renounce whatever share
they might have in their inheritance and among the donees was Don Mariano Cui; that the donations
were made exclusively to their nephews and nieces, or without including their respective spouses; that
the donation made in her favor is contained in the document Exhibit 21; and that the lots in question
were donated to Don Mariano Cui to the exclusion of his spouse Antonia Perales. Examining said
donation Exhibit 21 one would find that it was really made exclusive in favor of Marta Cui subject to the
condition that she would renounce whatever inheritance she might have from the donors.
Generoso Vda. de Jakosalem, another woman of advanced age who because of unexpected illness was
not able to continue testifying, also affirmed that the lots in question were donated to Don Mariano by
her uncle Pedro Cui and aunt Benigna Cui exclusively, and this she knows personally because on the
same date such donation was made, she also received a donation from the same donors.
Antonia Ma. Cui, testifying on this matter, said: that while he was acting as private secretary of his father
Don Mariano before the was, he had an opportunity to see a copy of the deed of donation of the lots in
question in his favor (his father), which copy was furnished by the clerk of court, and at the foot thereof
there appears a note to the effect that the original of said deed was on file in the record of the cadastral
case covering the property; that said document appears signed by the donors Pedro Cui and Benigna Cui,
by the donee Mariano Cui and the instrumental witnesses Victor Cui and Dionisio Jakosalem; that said
copy having been lost, he went to see the clerk of court to inquire about the original that was on file in
the record of the cadastral case but the clerk of court told him that the record was destroyed during the
last was; that he them went to the office of the Bureau of Achives to see if he could get a copy of the
document but in said office he only found the notarial register of the notary public Raymundo Enrique
wherein the deed of donation appears recorded; that at his request the chief of said office issued
photastic copies of the pages of the notarial register which contained the annotation relative not only to
the deed of donation in question but also to that which pertains to the other deeds of donation executed
by the donors Pedro Cui and Benigna Cui (Exhibit 31-a and 31-b); that the entry No. 310 that appears in
the copy marked Exhibit 31-b refers to the deed of donation of the lots in question in favor of his father
because said entry refers to a property situated in Plaza Washington, Cebu, where his father did not have
any other property except that donated to him by his relatives, which was later divided into three lots,
and that it is of common knowledge among members of the Cui family that all the nephews of Pedro Cui
and Benigna Cui received from them by way of donation several pieces of lands subject to the condition
that they renounce their right to inherit from the donors.
Entry No. 310 which appears in photastic copy Exhibit 31-b contains under the heading "Nature of
Instrument" the following annotation: "Donacion condicional que hacen Pedro Cui y Benigna Cui a favor
de su sobrino Mariano Cui de un solar con todas sus mejoras y edifficio en la plaza de Washington, Cebu;
y la aceptacion del donatario quien agradece a los donantes." In the same entry there also appears that
the document was executed on April 12, 1912 by Pedro Cui, Benigna Cui, and attested by Victor Cui and
Dionisio Jakosalem.
In the photastic copy Exhibit 31-a, there appear entries Nos. 301, 303, 304 and 305 which refer to the
deeds of donnation executed by Pedro Cui and Benigna Cui in favor of their nephews and nieces
Mauricio Cui, Marta Cui, Victor Cui, Angel Cui and Felicidad Cui. Note that these donations were made
exclusively in favor of the nephews and nieces without including their respective spouses and were all
executed on April 11, 1912, or one day before the execution of the donation in favor of Don Mariano Cui.
The two photostatic copies Exhibits 31-a and 31-b corroborate the testimony of Marta Cui and Generoso
Vda. de Jakosalem to the effect that all the donations made by Don Pedro Cui and Benigna Cui in favor of
their nephews and nieces were made to them exclusively or without including their respective spouses,
and subject to the condition that they should renounce their right to inherit from the donors.
In addition to the foregoing evidence, there are other documents which strenghten the contention that
the lots in question were donated exclusively to Don Mariano Cui. One of them is the inventory prepared
by Don Mariano of the properties which belonged to him exclusively and those which belonged to the
conjugal partnership, as a result of the death of his wife Antonia Perales in 1939, copies of which were
furnished to all the children of Don Mariano. In this inventory marked Exhibit 8, under the heading
"Bienes del esposo superviviente Don Mariano Cui," the following appears: "1.-Un solar compuesto de
los lotes 2312, 2313 y 2319, del Catastro de Cebu, con sus mejoras consistentes en una casa de pierda y
madera con techo de teja y con una azotea tambien de pierda y madera." In the same inventory under
the heading "Bienes ganancials habidos durante el matrimonio de Don Mariano Cui y Doña Antonia
Perales," there also appears the following statement: "1. Un edificio mixto de concreto y madera con
techo de hierro galvanizado . . . construido un una porcion de terreno, de mildosientos cincuenta (1,250)
metros cuadrados de superficie, mas o menos, la cual forma parte de un solar de mayor extention,
situado entre las Calles Manalili y Calderon de la ciudad de Cebu, Cebu . . . y pertenece en propiedad
exclusiva al esposa superviviente Don Mariano Cui." This property is the one known as lots Nos. 2312,
2313, and 2319. This inventory was never objected to by the heirs and shows clearly that while the land
belongs exclusively to Don Mariano Cui the building constructed thereon was considered as conjugal
property.
Another important document is the extra-judicial partition of the properties pertaining to the conjugal
partnership of Don Mariano Cui and the deceased wife Antonia Perales, marked Exhibit 1-a, which was
signed by Don Mariano and all his children, with the exception of Jorge Cui, who was then in Manila
when the document was signed on December 6, 1946. In said document mention is made of the
inventory which was prepared by Don Mariano of the conjugal properties belonging to him and his wife,
as well as the powers of attorney executed in favor of Don Mariano by his children authorizing him to
administer the properties belonging to the conjugal partnership. It is interesting to note that in this deed
of partition a relation is made of the conjugal properties as well as of the debts and obligation which
were then existing against the partnership and the disposition made of the properties to pay said debts
and obligations. It is also interesting to note that the three lots in question are not included in this deed
of partition. The fact that all the heirs, with the exception of Jorge, signed this deeds of partition without
any protest, is a clear proof that they knew right along that said lots were exclusive property of their
father and did not belong to the conjugal partnership. It is true that appellants Jesus Ma. Cui and Rosario
Cui, while admitting the authenticity and due execution of the above deed of partition, now contend that
they signed the same without being aware of its contents, but this contention can hardly be given credit,
for we can not suppose that, referring as it does to an important document which concern precisely a
partition of inheritance, they should sign the same without first ascertaining or satisfying themselves of
the nature of the transaction.
A.M. Nos. 1302, 1391 and 1543             April 26, 1991
PAULINO VALENCIA, complainant, 
Other important documents that may have a bearing on this matter are inheritance tax return Exhibit 32 vs.
and the relation Exhibit 33 of the real properties of Don Mariano Cui for the purpose required by law ATTY. ARSENIO FER CABANTING, respondent.
relative to the issuance of the Residence Certificate B. The inheritance tax return was filed by Don CONSTANCIA L. VALENCIA, complainant, 
Mariano Cui in 1939 in connection with the hereditary left by his wife Antonia Perales and in said the lots vs.
in question were not included, while the relation Exhibit 33 includes said lots because they were deemed ATTY. DIONISIO C. ANTINIW, ATTY. EDUARDO U. JOVELLANOS and ATTY. ARSENIO FER.
by Don Mariano as his exclusive property and as such should be included in the assessment to be made CABANTING,respondents.
in connection with the issuance of the Residence Certificate B. These two documents, which were LYDIA BERNAL, complainant, 
prepared by Don Mariano Cui, clearly indicate that the lots in question were always considered by him as vs.
his exclusive property. ATTY. DIONISIO C. ANTINIW, respondent.

There can therefore be no doubt, in the light of the overhelming evidence, testimonial as well as
documentary, we have discussed in the preceeding paragraphs, that these three lots in question have PER CURIAM:
always been considered not only by Don Mariano Cui, but by his children and other relatives, him by his
uncle Pedro Cui and aunt Benigna Cui to the exclusion of his wife Antonia Perales. Consequently, the
These consolidated administrative cases seek to disbar respondents Dionisio Antiniw, Arsenio Fer.
contention that, in disposing of said property, Don Mariano Cui has appropriated what belongs to his co-
Cabanting and Eduardo Jovellanos (the last named, now an MCTC Judge) for grave malpractice and
heirs, has completely no function in the evidence.
misconduct in the exercise of their legal profession committed in the following manner:

Having reached the conclusion that the lots in question were the exclusive property of Don Mariano Cui
and that the deed of sale Exhibit A was executed by him freely, intelligently, and with sufficient
pecuniary consideration, we deem it unnecessary to dwell on the other points discussed by both parties
in their briefs and in their respective memoranda. While these points, vehemently advocated by
appellants' counsel may throw could on the due execution of the sale, or may cast doubt on the
sufficiency of its consideration, we are however constrained to uphold its validity if we are to be
consistent with our conclusion that Don Mariano has executed it while still in the full enjoyment of his
mental faculties, considering that he never lifted a finger to dispute it, in the same manner he did with
regard to Rosario Cui. No other conclusion is plausible and proper, considering all the circumstances of
the case.
Wherefore, we hereby affirm the decision appealed from, without pronouncement as to costs.
1. Administrative Cases No. 1302 and 1391.
In 1933, complainant Paulino Valencia (Paulino in short) and his wife Romana allegedly bought a parcel
of land, where they built their residential house, from a certain Serapia Raymundo, an heir of Pedro
Raymundo the original owner. However, they failed to register the sale or secure a transfer certificate of
title in their names.
Sometime in December, 1968, a conference was held in the house of Atty. Eduardo Jovellanos to settle
the land dispute between Serapia Raymundo (Serapia in short) another heir of Pedro Raymundo, and the
Valencia spouses since both were relatives and distant kin of Atty. Jovellanos. Serapia was willing to
relinquish ownership if the Valencias could show documents evidencing ownership. Paulino exhibited a
deed of sale written in the Ilocano dialect. However, Serapia claimed that the deed covered a different
property. Paulino and Serapia were not able to settle their differences. (Report of Investigating Judge
Catalino Castaneda, Jr., pp. 21-22).

On December 15, 1969 Serapia, assisted by Atty. Arsenio Fer. Cabanting, filed a complaint against
Paulino for the recovery of possession with damages. The case was docketed as Civil Case No. V-2170,
entitled "Serapia Raymundo, Plaintiff, versus Paulino Valencia, Defendant." (Report, p. 11).
Summoned to plead in Civil Case No. V-2170, the Valencias engaged the services of Atty. Dionisio 2. Administrative Case No. 1543.
Antiniw. Atty. Antiniw advised them to present a notarized deed of sale in lieu of the private document
written in Ilocano. For this purpose, Paulino gave Atty. Antiniw an amount of P200.00 to pay the person
A deed of donation propter nuptias involving the transfer of a piece of land by the grandparents of Lydia
who would falsify the signature of the alleged vendor (Complaint, p. 2; Rollo, p. 7). A "Compraventa
Bernal (complainant,) in favor of her parents, was lost during the last world war. For this reason, her
Definitiva" (Exh. B) was executed purporting to be a sale of the questioned lot.
grandmother (the living donor) executed a deed of confirmation of the donation propter nuptias with
renunciation of her rights over the property. (Complaint, p. 1). Notwithstanding the deed, her
On January 22, 1973, the Court of First Instance of Pangasinan, Branch V, rendered a decision in favor of grandmother still offered to sell the same property in favor of the complainant, ostensibly to strengthen
plaintiff, Serapia Raymundo. The lower court expressed the belief that the said document is not the deed of donation (to prevent others from claim-ing the property).
authentic. (Report, p. 14)
On consultation, Atty., Antiniw advised them to execute a deed of sale. Atty. Antiniw allegedly prepared
Paulino, thereafter, filed a Petition for Certiorari, under Rule 65, with Preliminary Injunction before the and notarized the deed of sale in the name of her grandfather (deceased at the time of signing) with her
Court of Appeals alleging that the trial court failed to provide a workable solution concerning his house. grandmother's approval.
While the petition was pending, the trial court, on March 9, 1973, issued an order of execution stating
that "the decision in this case has already become final and executory" (Exhibits 3 and 3-A). On March
Felicidad Bernal-Duzon, her aunt who had a claim over the property filed a complaint against her (Lydia
14, 1973, a writ of execution was issued.
Bernal) and her counsel, Atty. Antiniw for falsification of a public document. (Complaint, pp. 1-2) The
fiscal exonerated the counsel for lack of evidence, while a case was filed in court against Lydia Bernal.
On March 20, 1973, Serapia sold 40 square meters of the litigated lot to Atty. Jovellanos and the
remaining portion she sold to her counsel, Atty. Arsenio Fer. Cabanting, on April 25, 1973. (Annex "A" of
On October 3, 1975, Lydia Bernal filed a disbarment proceeding (docketed as Administrative Case
Administrative Case No. 1302).
No.1543) against Atty. Antiniw for illegal acts and bad advice.

On March 4, 1974, Paulino filed a disbarment proceeding (docketed as Administrative Case No. 1302)
Pursuant to the resolution of the First Division of this Court dated December 9, 1974, the resolution of
against Atty. Cabanting on the ground that said counsel allegedly violated Article 1491 of the New Civil
the Second Division dated March 3, 1975 and the two resolutions of the Second Division both dated
Code as well as Article II of the Canons of Professional Ethics, prohibiting the purchase of property under
December 3, 1975, Administrative Cases Nos. 1302, 1391 and 1543 were referred to the Office of the
litigation by a counsel.
Solicitor General for investigation, report and recommendation.

On March 21, 1974 the appellate court dismissed the petition of Paulino.
Upon formal request of Constancia L. Valencia and Lydia Bernal dated March 3, 1976, all of these cases
were ordered consolidated by Solicitor General Estelito P. Mendoza per his handwritten directive of
On October 14, 1974, Constancia Valencia, daughter of Paulino, filed a disbarment proceeding (docketed March 9, 1976.
as Administrative Case No. 1391) against Atty. Dionisio Antiniw for his participation in the forgery of
"Compraventa Definitiva" and its subsequent introduction as evidence for his client; and also, against
On April 12, 1988, We referred the investigation of these cases to the Integrated Bar of the
Attys. Eduardo Jovellanos and Arsenio Cabanting for purchasing a litigated property allegedly in violation
Philippines.1âwphi1 When Atty. Jovellanos was appointed as Municipal Circuit Trial Court Judge of
of Article 1491 of the New Civil Code; and against the three lawyers, for allegedly rigging Civil Case No. V-
Alcala-Bautista, Pangasinan, We referred the investigation of these cases to Acting Presiding Judge Cesar
2170 against her parents. On August 17, 1975, Constancia Valencia filed additional charges against Atty.
Mindaro, Regional Trial Court, Branch 50, Villasis, Pangasinan, for further investigation.
Antiniw and Atty. Jovellanos as follows:

In view of the seriousness of the charge against the respondents and the alleged threats against the
1. AGAINST ATTY. DIONISIO ANTINIW:
person of complainant Constancia L. Valencia, We directed the transfer of investigation to the Regional
Trial Court of Manila.
In the year 1973 Atty. Dionisio Antiniw fraudulently and in confabulation with one Lydia
Bernal had a deed of sale, fabricated, executed and ratified before him as Notary Public by
The three administrative cases were raffled to Branch XVII of the Regional Trial Court of Manila, under
one Santiago Bernal in favor of Lydia Bernal when as a matter of fact said Santiago Bernal had
the sala of Judge Catalino Castaneda, Jr.
died already about eight years before in the year 1965.

2. AGAINST ATTY. EDUARDO JOVELLANOS:
In the year 1954 Atty. Eduardo Jovellanos, fraudulently and in bad faith, in confabulation with
Rosa de los Santos as vendee had, as Notary Public, executed and ratified before him, two (2)
deeds of sale in favor of said Rosa de los Santos when as a matter of fact the said deeds were
not in fact executed by the supposed vendor Rufino Rincoraya and so Rufino Rincoraya had
filed a Civil Case in Court to annul and declare void the said sales (p. 7, Report)
After investigation, Judge Catalino Castañeda, Jr., recommended the dismissal of cases against Atty.
Jovellanos and Atty. Arsenio Fer. Cabanting; dismissal of Administrative Case No. 1543 and the additional
charges in Administrative Case No. 1391 against Antiniw and Judge Jovellanos; however, he
recommended the suspension of Atty. Antiniw from the practice of law for six months finding him guilty
of malpractice in falsifying the "Compraventa Definitiva."
The simplified issues of these consolidated cases are:
 I. Whether or not Atty. Cabanting purchased the subject property in violation of Art. 1491 of
the New Civil Code.
II. Whether or not Attys. Antiniw and Jovellanos are guilty of malpractice in falsifying notarial
documents.
III. Whether or not the three lawyers connived in rigging Civil Case No. V-2170.
I evidence.
Under Article 1491 of the New Civil Code:
The following persons cannot acquire by purchase, even at a public of judicial auction, either
in person or through the mediation of another:
x x x           x x x          x x x
(5) . . . this prohibition includes the act of acquiring by assignment and shall apply to lawyers,
with respect to the property and rights which may be the object of any litigation in which they
make take part by virtue of their profession.
Public policy prohibits the transactions in view of the fiduciary relationship involved. It is intended to
curtail any undue influence of the lawyer upon his client. Greed may get the better of the sentiments of
loyalty and disinterestedness. Any violation of this prohibition would constitute malpractice (In re:
Attorney Melchor Ruste, 40 O.G. p. 78) and is a ground for suspension. (Beltran vs. Fernandez, 70 Phil.
248).
Art. 1491, prohibiting the sale to the counsel concerned, applies only while the litigation is pending.
(Director of Lands vs. Adaba, 88 SCRA 513; Hernandez vs. Villanueva, 40 Phil. 775).
In the case at bar, while it is true that Atty. Arsenio Fer. Cabanting purchased the lot after finality of
judgment, there was still a pending certiorari proceeding. A thing is said to be in litigation not only if
there is some contest or litigation over it in court, but also from the moment that it becomes subject to
the judicial action of the judge. (Gan Tingco vs. Pabinguit, 35 Phil. 81). Logic indicates,
in certiorari proceedings, that the appellate court may either grant or dismiss the petition. Hence, it is
not safe to conclude, for purposes under Art. 1491 that the litigation has terminated when the judgment
of the trial court become final while a certiorari connected therewith is still in progress. Thus, purchase
of the property by Atty. Cabanting in this case constitutes malpractice in violation of Art. 1491 and the
Canons of Professional Ethics. Clearly, this malpractice is a ground for suspension.
The sale in favor of Atty. Jovellanos does not constitute malpractice. There was no attorney-client
relationship between Serapia and Atty. Jovellanos, considering that the latter did not take part as counsel
in Civil Case No. V-2170. The transaction is not covered by Art. 1491 nor by the Canons adverted to.
II
It is asserted by Paulino that Atty. Antiniw asked for and received the sum of P200.00 in consideration of
his executing the document "Compraventa Definitiva" which would show that Paulino bought the
property. This charge, Atty. Antiniw simply denied. It is settled jurisprudence that affirmative testimony is
given greater weight than negative testimony (Bayasen vs. CA, L-25785, Feb. 26, 1981; Vda. de Ramos vs.
CA, et al., L40804, Jan. 31, 1978). When an individual's integrity is challenged by evidence, it is not
enough that he deny the charges against him; he must meet the issue and overcome the evidence for
the relator and show proofs that he still maintains the highest degree of morality and integrity which at
all time is expected of him. (De los Reyes vs. Aznar, Adm. Case No. 1334, Nov. 28, 1989).
Although Paulino was a common farmer who finished only Grade IV, his testimony, even if not
corroborated by another witness, deserves credence and can be relied upon. His declaration dwelt on a
subject which was so delicate and confidential that it would be difficult to believe the he fabricated his
There is a clear preponderant evidence that Atty. Antiniw committed falsification of a deed of sale, and
its subsequent introduction in court prejudices his prime duty in the administration of justice as an
officer of the court.
A lawyer owes entire devotion to the interest of his client (Santos vs. Dichoso, 84 SCRA 622), but not at
the expense of truth. (Cosmos Foundry Shopworkers Union vs. La Bu, 63 SCRA 313). The first duty of a
lawyer is not to his client but to the administration of justice. (Lubiano vs. Gordalla, 115 SCRA 459) To
that end, his client's success is wholly subordinate. His conduct ought to and must always be
scrupulously observant of law and ethics. While a lawyer must advocate his client's cause in utmost
earnestness and with the maximum skill he can marshal, he is not at liberty to resort to illegal means for
his client's interest. It is the duty of an attorney to employ, for the purpose of maintaining the causes
confided to him, such means as are consistent with truth and honor. (Pangan vs. Ramos, 93 SCRA 87).
Membership in the Bar is a privilege burdened with conditions. By far, the most important of them is
mindfulness that a lawyer is an officer of the court. (In re: Ivan T. Publico, 102 SCRA 722). This Court may
suspend or disbar a lawyer whose acts show his unfitness to continue as a member of the Bar. (Halili vs.
CIR, 136 SCRA 112). Disbarment, therefore, is not meant as a punishment depriving him of a source of
livelihood but is rather intended to protect the administration of justice by requiring that those who
exercise this function should be competent, honorable and reliable in order that courts and the public
may rightly repose confidence in them. (Noriega vs. Sison, 125 SCRA 293). Atty. Antiniw failed to live up
to the high standards of the law profession.
The other charges of malpractice against Atty. Antiniw and Atty. Jovellanos should be dismissed for lack
of evidence.
During the proceedings in Administrative Case No. 1543, Lydia Bernal testified in full on direct
examination, but she never submitted herself for cross-examination. Several subpoenas for cross-
examination were unheeded. She eventually requested the withdrawal of her complaint.
Procedural due process demands that respondent lawyer should be given an opportunity to cross-
examine the witnesses against him.1âwphi1 He enjoys the legal presumption that he is innocent of the
charges against him until the contrary is proved. (Santos vs. Dichoso, 84 SCRA 622). The case must be
established by clear, convincing and satisfactory proof. (Camus vs. Diaz, Adm. Case No. 1616, February 9,
1989), Since Atty. Antiniw was not accorded this procedural due process, it is but proper that the direct
testimony of Lydia Bernal be stricken out.
In view also of the affidavit of desistance executed by the complainant, Administrative Case No. 1543
should be dismissed. Although the filing of an affidavit of desistance by complainant for lack of interest
does not ipso factoresult in the termination of a case for suspension or disbarment of an erring lawyer
(Munar vs. Flores, 122 SCRA 448), We are constrained in the case at bar, to dismiss the same because
there was no evidence to substantiate the charges.

The additional charge against Atty. Antiniw in Administrative Case No. 1391 is predicated on the
information furnished by Lydia Bernal. It was not based on the personal knowledge of Constancia L.
Valencia: hence, hearsay. "Any evidence, whether oral or documentary, is hearsay if its probative value is
not based on the personal knowledge of the witness but on the knowledge of some other person not on
the witness stand." (Regalado, Remedial Law Compendium, 6th ed., vol. 2, 1989, p. 486). Being hearsay,
the evidence presented is inadmissible.

The additional charge filed by Constancia L. Valencia against Atty. Jovellanos in Administrative Case No.
1391 was not proved at all. Complainant failed to prove her additional charges.

III
G.R. No. L-26096 February 27, 1979
There is no evidence on record that the three lawyers involved in these administrative cases conspired in
executing the falsified "Compraventa Definitiva" and rigged the Civil Case No. V-2170.
THE DIRECTOR OF LANDS, petitioner, 
vs.
Atty. Jovellanos is a distant kin of the Raymundos and Valencias. In fact, he and the Valencias are SILVERETRA ABABA, ET AL., claimants, JUAN LARRAZABAL, MARTA C. DE LARRAZABAL, MAXIMO
neighbors and only two meters separate their houses. It would not be believable that Atty. Jovellanos, a ABAROQUEZ and ANASTACIA CABIGAS, petitioners-appellants, ALBERTO FERNANDEZ, adverse
practicing lawyer, would hold a meeting with the heirs of Pedro Raymundo in his house with the claimant-appellee.
intention of inducing them to sue the Valencias. Atty. Jovellanos even tried to settle the differences
between the parties in a meeting held in his house. He appeared in Civil Case No. V-2170 as an
Juanito Ll. Abao for petitioners-appellants.
involuntary witness to attest to the holding of the conference.

Alberto R Fernandez in his own behalf.

Besides, the camaraderie among lawyers is not proof of conspiracy, but a sign of brotherhood among
them. One of the fourfold duties of a lawyer is his duty to the Bar. A lawyer should treat the opposing
counsel, and his brethren in the law profession, with courtesy, dignity and civility. They may "do as
adversaries do in law: strive mightily but (they) eat and drink as friends." This friendship does not MAKASIAR, J.:
connote conspiracy.
This is an appeal from the order of the Court of First Instance of Cebu dated March 19, 1966 denying the
WHEREFORE, judgment is hereby rendered declaring: 1. Dionisio Antiniw DISBARRED from the practice of petition for the cancellation of an adverse claim registered by the adverse claimant on the transfer
law, and his name is ordered stricken off from the roll of attorneys; 2. Arsenio Fer. Cabanting certificate of title of the petitioners.
SUSPENDED from the practice of law for six months from finality of this judgment; and 3. Administrative
Case No. 1391 against Attorney Eduardo Jovellanos and additional charges therein, and Administrative
The adverse claimant, Atty. Alberto B. Fernandez was retained as counsel by petitioner, Maximo
Case No. 1543 DISMISSED.
Abarquez, in Civil Case No. R-6573 of the Court of First Instance of Cebu, entitled "Maximo Abarquez vs.
Agripina Abarquez", for the annulment of a contract of sale with right of repurchase and for the recovery
SO ORDERED. of the land which was the subject matter thereof. The Court of First Instance of Cebu rendered a decision
on May 29, 1961 adverse to the petitioner and so he appealed to the Court of Appeals.

Litigating as a pauper in the lower court and engaging the services of his lawyer on a contingent basis,
petitioner, liable to compensate his lawyer whom he also retained for his appeal executed a document
on June 10, 1961 in the Cebuano-Visayan dialect whereby he obliged himself to give to his lawyer one-
half (1/2) of whatever he might recover from Lots 5600 and 5602 should the appeal prosper. The
contents of the document as translated are as follows:

AGREEMENT

KNOW ALL MEN BY THESE PRESENTS:

 That I, MAXIMO ABARQUEZ, Plaintiff in Case No. R-6573 of the Court of First
Instance of Cebu, make known through this agreement that for the services
rendered by Atty. Alberto B. Fernandez who is my lawyer in this case, if the appeal
is won up to the Supreme Court, I Promise and will guarantee that I win give to
said lawyer one-half (1/2) of what I may recover from the estate of my father in
Lots No. 5600 and 5602 which are located at Bulacao Pardo, City of Cebu. That
with respect to any money which may be adjudged to me from Agripina Abarquez,
except 'Attorney's Fees', the same shall pertain to me and not to said lawyer.
IN WITNESS WHEREOF, I have caused my right thumb. mark to be affixed hereto
this 10th of June, 1961, at the City of Cebu.
THUMBMARK
MAXIMO ABARQUEZ
(p. 5, Petitioner-Appellant's Brief, p. 26, rec.)
The real Property sought to be recovered in Civil Case No. R6573 was actually the share of the petitioner
in Lots 5600 and 5602, which were part of the estate of his deceased parents and which were partitioned
the heirs which included petitioner Maximo Abarquez and his elder sister Agripina Abarquez, the
defendant in said civil case.
This partition was made pursuant to a project of partition approved by the Court which provided am
other that Lots Nos. 5600 and 5602 were to be divided into three equal Parts, one third of which shall be
given to Maximo Abarquez. However, Agripina Abarquez the share of her brother stating that the latter
executed an instrument of pacto de retroprior to the partition conveying to her any or all rights in the
estate of their parents. Petitioner discovered later that the claim of his sister over his share was based on
an instrument he was believe all along to be a mere acknowledgment of the receipt of P700.00 which his
sister gave to him as a consideration for g care of their father during the latter's illness and never an
instrument of pacto de retro. Hence, he instituted an action to annul the alleged instrument of pacto de
retro.
The Court of Appeals in a decision promulgated on August 27, 1963 reversed the decision of the lower
court and annulled the dead of pacto de retro. Appellee Agripina Abarquez filed a motion for
reconsideration but the same was denied in a resolution dated January 7, 1964 (p. 66, Record on Appeal;
p. 13, Rec.) and the judgment became final and executory on January 22,1964.
Subsequently, Transfer Certificate of Title No. 31841 was issued on May 19,1965 in the name of Maximo
Abarquez, married to Anastacia Cabigas, over his adjudged share in Lots Nos. 5600 and 5602 containing
an area of 4,085 square meters (p. 110, ROA; p. 13, rec.). These parcels of land later by the subject
matter of the adverse claim filed by the claimant.
The case having been resolved and title having been issued to petitioner, adverse claimant waited for
petitioner to comply with ha obligation under the document executed by him on June 10, 1961 by
delivering the one-half (½) portion of the said parcels of land.
Petitioner refused to comply with his obligation and instead offered to sell the whole parcels of land
covered by TCT No. 31841 to petitioner-spouses Juan Larrazabal and Marta C. de Larrazabal. Upon being
informed of the intention of the petitioner, adverse t claimant immediately took stops to protect his
interest by filing with the trial court a motion to annotate Ins attorney's lien on TCT No. 31841 on June
10, 1965 and by notifying the prospective buyers of his claim over the one-half portion of the parcels of
land.
Realizing later that the motion to annotate attorney's lien was a wrong remedy, as it was not within the
purview of Section 37, rule 138 of the Revised Rule of Court, but before the same was by the trial court,
adverse t by an affidavit of adverse claim on July 19, 1965 with the Register of Deeds of Cebu (p. 14,
ROA; p. 13, rec.). By virtue of the petition of mid affidavit the adverse claim for one-half (½) of the lots
covered by the June 10, 1961 document was annotated on TCT No. 31841.
Notwithstanding the annotation of the adverse claim, petitioner-spouse Maximo Abarquez and
Anastacia Cabigas conveyed by deed of absolute sale on July 29, 1965 two-thirds (2/3) of the lands
covered by TCT No. 31841 to petitioner-spouses Juan Larrazabal and Marta C. de Larrazabal. When the
new transfer certificate of title No. 32996 was issued, the annotation of adverse claim on TCT No. 31841
necessarily had to appear on the new transfer certificate of title. This adverse claim on TCT No. 32996
became the subject of cancellation proceedings filed by herein petitioner-spouses on March 7, 1966 with
the Court of First Instance of Cebu (p. 2 ROA; p. 13, rec.). The adverse claimant, Atty. Alberto B.
Fernandez, filed his opposition to the petition for cancellation on March 18, 1966 (p. 20, ROA; p. 13 rec.).
The trial court resolved the issue on March 19, 1966, when it declared that:
...the petition to cancel the adverse claim should be denied. The admission by the
petitioners that the lawyers (Attys. Fernandez and Batiguin) are entitled to only
one-third of the lot described in Transfer Certificate of Title No. 32966 is the best
proof of the authority to maintain said adverse claim (p. 57, ROA; p. 13, rec.).
Petitioner-spouses decided to appeal the order of dismissal to this Court and correspondingly filed the
notice of appeal on April 1, 1966 with the trial court. On April 2, 1966, petitioner-spouses filed the appeal
bond and subsequently filed the record on appeal on April 6, 1966. The records of the case were
forwarded to this Court through the Land Registration Commission of Manila and were received by this
Court on May 5, 1966.
Counsel for the petitioner-spouses filed the printed record on appeal on July 12, 1966. Required to file
the appellants' brief, counsel filed one on August 29, 1966 while that of the appellee was filed on
October 1, 1966 after having been granted an extension to file his brief.
The case was submitted for decision on December 1, 1966. Counsel for the petitioners filed a motion to
expunge appellees' brief on December 8, 1966 for having been filed beyond the reglementary period,
but the same was denied by this Court in a resolution dated February 13, 1967.
The pivotal issue to be resolved in the instant case is the validity or nullity of the registration of the
adverse claim of Atty. Fernandez, resolution of which in turn hinges on the question of whether or not
the contract for a contingent fee, basis of the interest of Atty. Fernandez, is prohibited by the Article
1491 of the New Civil Code and Canon 13 of the Canons of Professional Ethics.
Petitioners contend that a contract for a contingent fee violates Article 1491 because it involves an
assignment of a property subject of litigation. That article provides:
Article 1491. The following persons cannot acquire by purchase even at a public or
judicial auction, either in person or through the petition of another.
xxx xxx xxx
(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior and other
o and employees connected with the administration of justice, the property and
rights in litigation or levied upon an execution before the court within whose
 jurisdiction or territory they exercise their respective functions;this prohibition C. Prohibiciones impuestas a las personas encargadas, mas o menos directamente,
includes the act of acquiring by assignment and shall apply to lawyers, with de la administracion de justicia.—El mismo art. 1,459 del Codigo civil prohibe a los
respect to the property and rights which may be the object of any litigation in Magistrados, Jueces, individuos del Minesterio fiscal, Secretarios de Tribunales y
which they may take part by virtue of their profession (Emphasis supplied). Juzgados y Oficiales de Justicia adquirir por compra (aunque sea en subasta publica
o judicial, por si ni por persona alguna intermedia). 'Los bienes y derechos que
estuviesen en litigio ante el Tribunal en cuya jurisdicion on teritorio ejercieran sus
This contention is without merit. Article 1491 prohibits only the sale or assignment between the lawyer
respectivas funciones, extendiendo se esta prohibicion al acto de adquirir por
and his client, of property which is the subject of litigation. As WE have already stated. "The prohibition
cesion', y siendo tambien extensiva ' Alos Abogados y Procuradores respecto a los
in said article a only to applies stated: " The prohibition in said article applies only to a sale or assignment
bienes y derecho que fueran objeto del un litigioen que intervengan pos su
to the lawyer by his client of the property which is the subject of litigation. In other words, for the
profession y oficio.'
prohibition to operate, the sale or t of the property must take place during the pendency of the litigation
involving the property" (Rosario Vda. de Laig vs. Court of Appeals, et al., L-26882, November 21, 1978).
El fundamento de esta prohibicion es clarismo. No solo se trata—dice Manresa—
de quitar la ocasion al fraude; persiguese, ademas, el proposito de rodear a las
Likewise, under American Law, the prohibition does not apply to "cases where after completion of
personas que intervienen en la administracion de justicia de todos los prestigios
litigation the lawyer accepts on account of his fee, an interest the assets realized by the litigation"
que necesitan para ejercer su ministerio, librando los de toda sospecha, que,
(Drinker, Henry S., Legal Ethics, p. 100 [1953], citing App. A, 280; N.Y. Ciu 714). "There is a clear
aunque fuere infundada, redundaria en descredito de la institucion.
distraction between such cases and one in which the lawyer speculates on the outcome of the matter in
which he is employed" (Drinker, supra, p. 100 citing A.B.A. Op. 279).
Por no dor lugar a recelos de ninguna clase, admite el Codigo (en el apartado
penutimo del art. 1.459) algunos casos en que, por excepcion, no se aplica el
A contract for a contingent fee is not covered by Article 1491 because the tranfer or assignment of the
pricipio prohibitivo de que venimos hablando. Tales son los de que se trate de
property in litigation takes effect only after the finality of a favorable judgment. In the instant case, the
acciones hereditarias entre coheredero, de cesion en pago de creditos, o de
attorney's fees of Atty. Fernandez, consisting of one-half (1/2) of whatever Maximo Abarquez might
garantia de los bienes que posean los funcionarios de justicia.
recover from his share in the lots in question, is contingent upon the success of the appeal. Hence, the
payment of the attorney's fees, that is, the transfer or assignment of one-half (1/2) of the property in
litigation will take place only if the appeal prospers. Therefore, the tranfer actually takes effect after the Algunos autores (Goyena, Manresa, Valverde) creen que en
finality of a favorable judgment rendered on appeal and not during the pendency of the litigation la prohibicion del art. 1.459 esta comprendido el pacto
involving the property in question. Consequently, the contract for a contingent fee is not covered by de quota litis (o sea el convenio por el cual se concede al
Article 1491. Abogado o Procurador, para el caso de obtener sentencia
favorable una parte alicuota de la cosa o cantidad que se
litiga), porque dicho pacto supone la venta o cesion de una
While Spanish civilists differ in their views on the above issue — whether or not a contingent fee contract
parte de la cosa o drecho que es objecto del litigio.
(quota litis agreement) is covered by Article 1491 — with Manresa advancing that it is covered, thus:
Pero Mucius Scaevola oberva, conrazon, que en el repetido
pacto no hay propiamente caso de compraventa ni de cesion
Se ha discutido si en la incapacidad de Ion Procumdam y Abogados asta o el pecto de derechos, y bastan para estimario nulo otros preceptos
de quota litis. Consiste este, como es sabido, en la estipulacion de que el Abogado del Codigo como los relativos a la ilicitud de la causa (Castan,
o el Procurador ban de hacer suyos una parte alicuota de In cona que se li m la son Derecho Civil Espñol, Tomo 4, pp. 68-69, [9a ed., 1956],
es favorable. Con es te concepto a la vista, es para nosortros que el articulo que emphasis supplied).
comentamos no menciona ese pacto; pero como la incapacidad de los Abogados y
Procuradores se extinede al acto de adquirir por cesion; y la efectividad del pacto
The Supreme Court of Spain, in its sentencia of 12 November 1917, has ruled that Article 1459 of the
de quota litis implica necesariamente una cesion, estimamos que con solo el num.
Spanish Civil Code (Article 1491 of our Civil Code) does not apply to a contract for a contingent fee
5 del articulo 1459 podria con exito la nulidad de ese pacto tradicionalmente
because it is not contrary to morals or to law, holding that:
considerado como ilicito.

... que no es susceptible de aplicarse el precepto contenido en el num. 5 del art.

xxx xxx xxx
1.459 a un contrato en el que se restrigen los honorarios de un Abogado a un
tanto por ciento de lo que se obtuviera en el litigio, cosa no repudiada por la moral
Debe tenerse tambien en cuenta, respecto del ultimo parrafo del articulo 1459, la ni por la ley (Tolentino, Civil Code of the Philippines, p. 35, Vol. V [1959];
sentencia del Tribunal Supreme de 25 Enero de 1902, que delcara que si bien el Castan, supra; Manresa, supra).
procurador no puede adquirir para si los bienes, en cuanto a los cuales tiene
incapacidad, puede adquirirlos para otra persona en quien no concurra
In the Philippines, among the Filipino commentators, only Justice Capistrano ventured to state his view
incapacidad alguna (Manresa, Comentarios al Codigo Civil Español, Tomo X, p. 110
on the said issue, thus:
[4a ed., 1931] emphasis supplied).

The incapacity to purchase or acquire by assignment, which the law also extends
Castan, maintaining that it is not covered, opines thus;
to lawyers with t to the property and rights which may be the object of any
 litigation in which they may take part by virtue of their profession, also covers
contracts for professional services quota litis. Such contracts, however, have been
declared valid by the Supreme Court" (Capistrano, Civil Code of the Philippines, p.
44, Vol. IV [1951]).
Dr. Tolentino merely restated the views of Castan and Manresa as well as the state of jurisprudence in
Spain, as follows:
Attorneys-at-law—Some writers, like Goyena, Manresa and Valverde believe that
this article covers quota litis agreements, under which a lawyer is to be given an
aliquot part of the property or amount in litigation if he should win the case for his
client. Scaevola and Castan, however, believe that such a contract does not involve
a sale or assignment of right but it may be void under other articles of the Code,
such as those referring to illicit cause- On the other hand the Spanish Supreme
Court has held that this article is not applicable to a contract which limits the fees
of a lawyer to a certain percentage of what may be recovered in litigation, as this
is not contrary to moral or to law. (Tolentino, Civil Code of the Philippines, p. 35,
Vol. V [1959]; Castan, supra, Emphasis supplied).
Petitioners her contend that a contract for a contingent fee violates the Canons of Professional Ethics.
this is likewise without merit This posture of petitioners overlooked Canon 13 of the Canons which
expressly contingent fees by way of exception to Canon 10 upon which petitioners relied. For while
Canon 10 prohibits a lawyer from purchasing ...any interest in the subject matter of the litigation which
he is conducting", Canon 13, on the other hand, allowed a reasonable contingent fee contract, thus: "A
contract for a con. tangent fee where sanctioned by law, should be reasonable under all the
circumstances of the ca including the risk and uncertainty of the compensation, but should always be
subject to the supervision of a court, as to its reasonableness." As pointed out by an authority on Legal
Ethics:
Every lawyer is intensely interested in the successful outcome of his case, not only
as affecting his reputation, but also his compensation. Canon 13 specifically
permits the lawyer to contract for a con tangent fee which of itself, negatives the
thought that the Canons preclude the lawyer's having a stake in his litigation. As
pointed out by Professor Cheatham on page 170 n. of his Case Book, there is an
inescapable conflict of interest between lawyer and client in the matter of
fees. Nor despite some statements to the con in Committee opinions, is it believed
that, particularly in view of Canon 13, Canon 10 precludes in every case an
arrangement to make the lawyer's fee payable only out of the results of the
litigation. The distinction is between buying an interest in the litigation as a
speculation which Canon 10 condemns and agreeing, in a case which the lawyer
undertakes primarily in his professional capacity, to accept his compensation
contingent on the outcome (Drinker, Henry S Legal Ethics, p. 99, [1953], Emphasis
supplied).
These Canons of Professional Ethics have already received "judicial recognition by being cited and
applied by the Supreme Court of the Philippines in its opinion" Malcolm, Legal and Judicial Ethics, p. 9
[1949]). And they have likewise been considered sources of Legal Ethics. More importantly, the American
Bar Association, through Chairman Howe of the Ethics Committee, opined that "The Canons of
Professional Ethics are legislative expressions of professional opinion ABA Op. 37 [1912])" [See footnote
25, Drinker, Legal Ethics, p. 27]. Therefore, the Canons have some binding effect
Likewise, it must be noted that this Court has already recognized this type of a contract as early as the
case of Ulanday vs. Manila Railroad Co. (45 PhiL 540 [1923]), where WE held that "contingent fees are
not prohibited in the Philippines, and since impliedly sanctioned by law 'Should be under the supervision
of the court in order that clients may be protected from unjust charges' (Canons of Profession 1 Ethics)".
The same doctrine was subsequently reiterated in Grey vs. Insular Lumber Co. (97 PhiL 833 [1955])
and Recto vs. Harden (100 PhiL 427 [1956]).
In the 1967 case of Albano vs. Ramos (20 SCRA 171 [19671), the attorney was allowed to recover in a
separate action her attomey's fee of one-third (1/3) of the lands and damages recovered as stipulated in
the contingent fee contract. And this Court in the recent case of Rosario Vda de Laig vs. Court of Appeals,
et al. (supra), which involved a contingent fee of one-half (½) of the property in question, held than
,contingent fees are recognized in this i jurisdiction (Canon 13 of the Canons of Professional Ethics
adopted by the Philippine Bar association in 1917 [Appendix B, Revised Rules of Court)), which
contingent fees may be a portion of the property in litigation."
Contracts of this nature are permitted because they redound to the benefit of the poor client and the
lawyer "especially in cases where the client has meritorious cause of action, but no means with which to
pay for legal services unless he can, with the sanction of law, make a contract for a contingent fee to be
paid out of the proceeds of the litigation" (Francisco, Legal Ethics, p. 294 [1949], citing Lipscomb vs.
Adams 91 S.W. 1046, 1048 [1949]). Oftentimes, contingent fees are the only means by which the poor
and helpless can redress for injuries sustained and have their rights vindicated. Thus:
The reason for allowing compensation for professional services based on
contingent fees is that if a person could not secure counsel by a promise of large
fees in case of success, to be derived from the subject matter of the suit, it would
often place the poor in such a condition as to amount to a practical denial of
justice. It not infrequently happens that person are injured through the negligence
or willful misconduct of others, but by reason of poverty are unable to employ
counsel to assert their rights. In such event their only means of redress lies in
gratuitous service, which is rarely given, or in their ability to find some one who
will conduct the case for a contingent fee. That relations of this king are often
abused by speculative attorneys or that suits of this character are turned into a
sort of commercial traffic by the lawyer, does not destroy the beneficial result to
one who is so poor to employ counsel (id, at p. 293, citing Warvelle, Legal Ethics, p.
92, Emphasis supplied).
Justice George Malcolm, writing on contingent fees, also stated that:
... the system of contingent compensation has the merit of affording to certain
classes of persons the opportunity to procure the prosecution of their claims
which otherwise would be beyond their means. In many cases in the United States
and the Philippines, the contingent fee is socially necessary (Malcolm, Legal and
Judicial Ethics, p. 55 [1949], emphasis supplied).
Stressing further the importance of contingent fees, Professor Max Radin of the University of California,
said that:
The contingent fee certainly increases the possibility that vexatious and unfounded
suits will be brought. On the other hand, it makes possible the enforcement of
legitimate claims which otherwise would be abandoned because of the poverty of
the claimants. Of these two possibilities, the social advantage seems clearly on the
side of the contingent fee. It may in fact be added by way of reply to the first
 objection that vexations and unfounded suits have been brought by men who
could and did pay substantial attorney's fees for that purpose (Radin, Contingent
Fees in California, 28 Cal. L. Rev. 587, 589 [1940], emphasis supplied).
Finally, a contingent fee contract is always subject to the supervision of the courts with respect to the
stipulated amount and may be reduced or nullified. So that in the event that there is any undue
influence or fraud in the execution of the contract or that the fee is excessive, the client is not without
remedy because the court will amply protect him. As held in the case of Grey vs. Insular Lumber
Co., supra, citing the case of Ulanday vs. Manila Railroad Co., supra:
judgments, for the payment of money, and executions issued in pursuance of such
judgments, which he has secured in a litigation of his client ... (emphasis supplied).
Therefore, as an interest in registered land, the only adequate remedy open to Atty. Fernandez is to
register such interest as an adverse claim. Consequently, there being a substantial compliance with
Section 110 of Act 496, the registration of the adverse claim is held to be valid. Being valid, its
registration should not be cancelled because as WE have already stated, "it is only when such claim is
found unmeritorious that the registration thereof may be cancelled" (Paz Ty Sin Tei vs. Jose Lee Dy Piao
103 Phil. 867 [1958]).

Where it is shown that the contract for a contingent fee was obtained by any
undue influence of the attorney over the client, or by any fraud or imposition, or
that the compensation is so clearly excessive as to amount to extortion, the court
win in a proper case protect the aggrieved party.
In the present case, there is no iota of proof to show that Atty. Fernandez had exerted any undue
influence or had Perpetrated fraud on, or had in any manner taken advantage of his client, Maximo
Abarquez. And, the compensation of one-half of the lots in question is not excessive nor unconscionable
considering the contingent nature of the attorney's fees.
With these considerations, WE find that the contract for a contingent fee in question is not violative of
the Canons of Professional Ethics. Consequently, both under the provisions of Article 1491 and Canons
10 and 13 of the Canons of Profession Ethics, a contract for a contingent fee is valid
The one-half (½) interest of Atty. Fernandez in the lots in question should therefore be respected.
Indeed, he has a better right than petitioner-spouses, Juan Larrazabal and Marta C. de Larrazabal. They
purchased their two-thirds (2/3) interest in the lots in question with the knowledge of the adverse claim
of Atty. Fernandez. The adverse claim was annotated on the old transfer certificate of title and was later
annotated on the new transfer certificate of title issued to them. As held by this Court:
The annotation of an adverse claim is a measure designed to protect the interest
of a person over a piece of real property where the registration of such interest or
right is not otherwise provided for by the Land Registration Act, and serves as a
notice and warning to third parties dealing with said property that someone is
claiming an interest on the same or a better right than the registered owner
thereof (Sanchez, Jr. vs. Court of Appeals, 69 SCRA 332 [1976]; Paz Ty Sin Tei vs.
Jose Le Dy Piao supra).

Having purchased the property with the knowledge of the adverse claim, they are therefore in bad faith.
In resolving now the issue of the validity or nullity for the registration of the adverse claim, Section 110
Consequently, they are estopped from questioning the validity of the adverse claim.
of the Land Registration Act (Act 496) should be considered. Under d section, an adverse claim may be
registered only by..
WHEREFORE, THE DECISION OF THE LOWER COURT DENYING THE PETITION FOR THE CANCELLATION OF
THE ADVERSE CLAIM SHOULD BE, AS IT IS HEREBY AFFIRMED, WITH COSTS AGAINST PETITIONER-
Whoever claims any part or interest in registered land adverse to the registered
APPELLANTS JUAN LARRAZABAL AND MARTA C. DE LARRAZABAL.
owner, arising subsequent to the date of the o registration ... if no other provision
is made in this Act for registering the same ...
SO ORDERED.
The contract for a contingent fee, being valid, vested in Atty Fernandez an interest or right over the lots
in question to the extent of one-half thereof. Said interest became vested in Atty. Fernandez after the
case was won on appeal because only then did the assignment of the one-half (½) portion of the lots in
question became effective and binding. So that when he filed his affidavit of adverse claim his interest
was already an existing one. There was therefore a valid interest in the lots to be registered in favor of
Atty. Fernandez adverse to Mo Abarquez.

Moreover, the interest or claim of Atty. Fernandez in the lots in question arose long after the original
petition which took place many years ago. And, there is no other provision of the Land Registration Act
under which the interest or claim may be registered except as an adverse claim under Section 110
thereof. The interest or claim cannot be registered as an attorney's charging lien. The lower court was
correct in denying the motion to annotate the attomey's lien. A charging lien under Section 37, Rule 138
of the Revised Rules of Court is limited only to money judgments and not to judgments for the
annulment of a contract or for delivery of real property as in the instant case. Said Section provides that:

Section 37. An attorney shall have a lien upon the funds, documents and papers of
his client which have lawfully come into his oppossession and may retain the same
until his lawful fees and disbursements have been paid, and may apply such funds
to the satisfaction thereof. He shall also have a lien to the same extent upon all
G.R. No. 173188               January 15, 2014

THE CONJUGAL PARTNERSHIP OF THE SPOUSES VICENTE CADAVEDO AND BENITA ARCOY-CADAVEDO
(both deceased), substituted by their heirs, namely: HERMINA, PASTORA, Heirs of FRUCTUOSA, Heirs
of RAQUEL, EVANGELINE, VICENTE, JR., and ARMANDO, all surnamed CADAVEDO, Petitioners, 
vs.
VICTORINO (VIC) T. LACAYA, married to Rosa Legados, Respondents.
DECISION
BRION, J.:
We solve in this Rule 45 petition for review on certiorari1 the challenge to the October 11, 2005
decision2 and the May 9, 2006 resolution3 of the Court of Appeals (CA) inPetitioners, CA-G.R. CV No.
56948. The CA reversed and set aside the September 17, 1996 decision 4 of the Regional Trial Court (RTC),
Branch 10, of Dipolog City in Civil Case No. 4038, granting in part the complaint for recovery of
possession of property filed by the petitioners, the Conjugal Partnership of the Spouses Vicente
Cadavedo and Benita Arcoy-Cadavedo against Atty. Victorino (Vic) T. Lacaya, married to Rosa Legados
(collectively, the respondents).

The Factual Antecedents

The Spouses Vicente Cadavedo and Benita Arcoy-Cadavedo (collectively, the spouses Cadavedo)
acquired a homestead grant over a 230,765-square meter parcel of land known as Lot 5415 (subject lot)
located in Gumay, Piñan, Zamboanga del Norte. They were issued Homestead Patent No. V-15414 on
March 13, 1953andOriginal Certificate of Title No. P-376 on July 2, 1953.On April30, 1955, the spouses
Cadavedo sold the subject lot to the spouses Vicente Ames and Martha Fernandez (the spouses Ames)
Transfer Certificate of Title (TCT) No. T-4792 was subsequently issued in the name of the spouses Ames.

The present controversy arose when the spouses Cadavedo filed an action5 before the RTC(then Court of
First Instance) of Zamboanga City against the spouses Ames for sum of money and/or voiding of contract
of sale of homestead after the latter failed to pay the balance of the purchase price. The spouses
Cadavedo initially engaged the services of Atty. Rosendo Bandal who, for health reasons, later withdrew
from the case; he was substituted by Atty. Lacaya.

On February 24, 1969, Atty. Lacaya amended the complaint to assert the nullity of the sale and the
issuance of TCT No. T-4792 in the names of the spouses Ames as gross violation of the public land law.
The amended complaint stated that the spouses Cadavedo hired Atty. Lacaya on a contingency fee basis.
The contingency fee stipulation specifically reads:
10. That due to the above circumstances, the plaintiffs were forced to hire a lawyer on contingent basis
and if they become the prevailing parties in the case at bar, they will pay the sum of ₱2,000.00 for
attorney’s fees.6
In a decision dated February 1, 1972, the RTC upheld the sale of the subject lot to the spouses Ames. The
spouses Cadavedo, thru Atty. Lacaya, appealed the case to the CA.
On September 18, 1975, and while the appeal before the CAin Civil Case No. 1721was pending, the
spouses Ames sold the subject lot to their children. The spouses Ames’ TCT No. T-4792 was subsequently
cancelled and TCT No. T-25984was issued in their children’s names. On October 11, 1976, the spouses
Ames mortgaged the subject lot with the Development Bank of the Philippines (DBP) in the names of
their children.
On August 13, 1980, the CA issued itsdecision in Civil Case No. 1721,reversing the decision of the RTC and
declaring the deed of sale, transfer of rights, claims and interest to the spouses Ames null and void ab
initio. It directed the spouses Cadavedo to return the initial payment and ordered the Register of Deeds
to cancel the spouses Ames’ TCT No. T-4792 and to reissue another title in the name of the spouses
Cadavedo. The case eventually reached this Court via the spouses Ames’ petition for review on certiorari
which this Court dismissed for lack of merit.
Meanwhile, the spouses Ames defaulted in their obligation with the DBP. Thus, the DBP caused the
publication of a notice of foreclosure sale of the subject lot as covered by TCT No. T-25984(under the
name of the spouses Ames’ children). Atty. Lacaya immediately informed the spouses Cadavedo of the
foreclosure sale and filed an Affidavit of Third Party Claim with the Office of the Provincial Sheriff on
September 14, 1981.
With the finality of the judgment in Civil Case No. 1721,Atty. Lacaya filed on September 21, 1981 a
motion for the issuance of a writ of execution.
On September 23, 1981,and pending the RTC’s resolution of the motion for the issuance of a writ of
execution, the spouses Ames filed a complaint 7 before the RTC against the spouses Cadavedo for
Quieting of Title or Enforcement of Civil Rights due Planters in Good Faith with prayer for Preliminary
Injunction. The spouses Cadavedo, thru Atty. Lacaya, filed a motion to dismiss on the ground of res
judicata and to cancel TCT No. T-25984 (under the name of the spouses Ames’ children).
On October 16, 1981, the RTC granted the motion for the issuance of a writ of execution in Civil Case No.
1721,andthe spouses Cadavedo were placed in possession of the subject lot on October 24, 1981. Atty.
Lacaya asked for one-half of the subject lot as attorney’s fees. He caused the subdivision of the subject
lot into two equal portions, based on area, and selected the more valuable and productive half for
himself; and assigned the other half to the spouses Cadavedo.
Unsatisfied with the division, Vicente and his sons-in-law entered the portion assigned to the
respondents and ejected them. The latter responded by filing a counter-suit for forcible entry before the
Municipal Trial Court (MTC); the ejectment case was docketed as Civil Case No. 215. This incident
occurred while Civil Case No. 3352was pending.
On May 13, 1982, Vicente andAtty. Lacaya entered into an amicable settlement (compromise
agreement)8 in Civil Case No. 215 (the ejectment case), re-adjusting the area and portion obtained by
each. Atty. Lacaya acquired 10.5383 hectares pursuant to the agreement. The MTC approved the
compromise agreementin a decision dated June 10, 1982.
Meanwhile, on May 21, 1982, the spouses Cadavedo filed before the RTC an action against the DBP for
Injunction; it was docketed as Civil Case No. 3443 (Cadavedo v. DBP).The RTC subsequently denied the
petition, prompting the spouses Cadavedo to elevate the case to the CAvia a petition for certiorari. The
CA dismissed the petition in its decision of January 31, 1984.
The records do not clearly disclose the proceedings subsequent to the CA decision in Civil Case No. 3443.
However, on August 18, 1988, TCT No. 41051was issued in the name of the spouses Cadavedo
concerning the subject lot.
On August 9, 1988, the spouses Cadavedo filed before the RTC an action9 against the respondents,
assailing the MTC-approved compromise agreement. The case was docketed as Civil Case No. 4038 and is
the root of the present case. The spouses Cadavedo prayed, among others, that the respondents be
ejected from their one-half portion of the subject lot; that they be ordered to render an accounting of
the produce of this one-half portion from 1981;and that the RTC fix the attorney’s fees on a quantum
meruit basis, with due consideration of the expenses that Atty. Lacaya incurred while handling the civil
cases.
During the pendency of Civil Case No. 4038, the spouses Cadavedo executed a Deed of Partition of Estate
in favor of their eight children. Consequently, TCT No. 41051 was cancelled and TCT No. 41690 was
issued in the names of the latter. The records are not clear on the proceedings and status of Civil Case
No. 3352.
The Ruling of the RTC
In the September 17, 1996 decision10 in Civil Case No. 4038, the RTC declared the contingent fee of
10.5383 hectares as excessive and unconscionable. The RTC reduced the land area to 5.2691 hectares
and ordered the respondents to vacate and restore the remaining 5.2692hectares to the spouses
Cadavedo.
The RTC noted that, as stated in the amended complaint filed by Atty. Lacaya, the agreed attorney’s fee
on contingent basis was ₱2,000.00. Nevertheless, the RTC also pointed out that the parties novated this
agreement when they executed the compromise agreement in Civil Case No. 215 (ejectment case),
thereby giving Atty. Lacaya one-half of the subject lot. The RTC added that Vicente’s decision to give Atty.
Lacaya one-half of the subject lot, sans approval of Benita, was a valid act of administration and binds
the conjugal partnership. The RTC reasoned out that the disposition redounded to the benefit of the
conjugal partnership as it was done precisely to remunerate Atty. Lacaya for his services to recover the
property itself.
These considerations notwithstanding, the RTC considered the one-half portion of the subject lot, as
Atty. Lacaya’s contingent fee,excessive, unreasonable and unconscionable. The RTC was convinced that
the issues involved in Civil Case No. 1721were not sufficiently difficult and complicated to command such
an excessive award; neither did it require Atty. Lacaya to devote much of his time or skill, or to perform
extensive research.
Finally, the RTC deemed the respondents’ possession, prior to the judgment, of the excess portion of
their share in the subject lot to be in good faith. The respondents were thus entitled to receive its fruits.
On the spouses Cadavedo’s motion for reconsideration, the RTC modified the decision in its
resolution11 dated December 27, 1996. The RTC ordered the respondents to account for and deliver the
produce and income, valued at ₱7,500.00 per annum, of the 5.2692hectares that the RTC ordered the
spouses Amesto restore to the spouses Cadavedo, from October 10, 1988 until final restoration of the should be entitled for his services in Civil Case No. 1721,as those cases had not yet been instituted at
premises. that time. Thus, these cases should not be considered in fixing the attorney’s fees. The petitioners also
claim that the spouses Cadavedo concluded separate agreements on the expenses and costs for each of
these subsequent cases, and that Atty. Lacaya did not even record any attorney’s lien in the spouses
The respondents appealed the case before the CA.
Cadavedo’s TCT covering the subject lot.

The Ruling of the CA

The petitioners further direct the Court’s attention to the fact that Atty. Lacaya,in taking over the case
from Atty. Bandal, agreed to defray all of the litigation expenses in exchange for one-half of the subject
In its decision12 dated October 11, 2005, the CA reversed and set aside the RTC’s September 17, 1996 lot should they win the case. They insist that this agreement is a champertous contract that is contrary to
decision and maintained the partition and distribution of the subject lot under the compromise public policy, prohibited by law for violation of the fiduciary relationship between a lawyer and a client.
agreement. In so ruling, the CA noted the following facts: (1) Atty. Lacaya served as the spouses
Cadavedo’s counsel from 1969 until 1988,when the latter filed the present case against Atty. Lacaya; (2)
Finally, the petitioners maintain that the compromise agreement in Civil Case No. 215 (ejectment case)
during the nineteen (19) years of their attorney-client relationship, Atty. Lacaya represented the spouses
did not novate their original stipulated agreement on the attorney’s fees. They reason that Civil Case No.
Cadavedo in three civil cases –Civil Case No. 1721, Civil Case No. 3352, and Civil Case No. 3443; (3) the
215 did not decide the issue of attorney’s fees between the spouses Cadavedo and Atty. Lacaya for the
first civil case lasted for twelve years and even reached this Court, the second civil case lasted for seven
latter’s services in Civil Case No. 1721.
years, while the third civil case lasted for six years and went all the way to the CA;(4) the spouses
Cadavedo and Atty. Lacaya entered into a compromise agreement concerning the division of the subject
lot where Atty. Lacaya ultimately agreed to acquire a smaller portion; (5) the MTC approved the The Case for the Respondents
compromise agreement; (6) Atty. Lacaya defrayed all of the litigation expenses in Civil Case No. 1721;
and (7) the spouses Cadavedo expressly recognized that Atty. Lacaya served them in several cases.
In their defense,14 the respondents counter that the attorney’s fee stipulated in the amended complaint
was not the agreed fee of Atty. Lacaya for his legal services. They argue that the questioned stipulation
Considering these established facts and consistent with Canon 20.01 of the Code of Professional for attorney’s fees was in the nature of a penalty that, if granted, would inure to the spouses Cadavedo
Responsibility (enumerating the factors that should guide the determination of the lawyer’s fees), the CA and not to Atty. Lacaya.
ruled that the time spent and the extent of the services Atty. Lacaya rendered for the spouses Cadavedo
in the three cases, the probability of him losing other employment resulting from his engagement, the
The respondents point out that: (1) both Vicente and Atty. Lacaya caused the survey and subdivision of
benefits resulting to the spouses Cadavedo, and the contingency of his fees justified the compromise
the subject lot immediately after the spouses Cadavedo reacquired its possession with the RTC’s
agreement and rendered the agreed fee under the compromise agreement reasonable.
approval of their motion for execution of judgment in Civil Case No. 1721; (2) Vicente expressly ratified
and confirmed the agreement on the contingent attorney’s fee consisting of one-half of the subject lot;
The Petition (3) the MTC in Civil Case No. 215 (ejectment case) approved the compromise agreement; (4) Vicente is
the legally designated administrator of the conjugal partnership, hence the compromise agreement
ratifying the transfer bound the partnership and could not have been invalidated by the absence of
In the present petition, the petitioners essentially argue that the CA erred in: (1) granting the attorney’s
Benita’s acquiescence; and (5) the compromise agreement merely inscribed and ratified the earlier oral
fee consisting of one-half or 10.5383 hectares of the subject lot to Atty. Lacaya, instead of confirming the
agreement between the spouses Cadavedo and Atty. Lacaya which is not contrary to law, morals, good
agreed contingent attorney’s fees of ₱2,000.00; (2) not holding the respondents accountable for the
customs, public order and public policy.
produce, harvests and income of the 10.5383-hectare portion (that they obtained from the spouses
Cadavedo) from 1988 up to the present; and (3) upholding the validity of the purported oral contract
between the spouses Cadavedo and Atty. Lacaya when it was champertous and dealt with property then While the case is pending before this Court, Atty. Lacaya died. 15 He was substituted by his wife -Rosa -and
still subject of Civil Case No. 1721.13 their children –Victoriano D.L. Lacaya, Jr., Rosevic Lacaya-Ocampo, Reymar L. Lacaya, Marcelito L. Lacaya,
Raymundito L. Lacaya, Laila Lacaya-Matabalan, Marivic Lacaya-Barba, Rosalie L. Lacaya and Ma. Vic-Vic
Lacaya-Camaongay.16
The petitioners argue that stipulations on a lawyer’s compensation for professional services, especially
those contained in the pleadings filed in courts, control the amount of the attorney’s fees to which the
lawyer shall be entitled and should prevail over oral agreements. In this case, the spouses Cadavedo and The Court’s Ruling
Atty. Lacaya agreed that the latter’s contingent attorney’s fee was ₱2,000.00 in cash, not one-half of the
subject lot. This agreement was clearly stipulated in the amended complaint filed in Civil Case No. 1721.
We resolve to GRANT the petition.
Thus, Atty. Lacaya is bound by the expressly stipulated fee and cannot insist on unilaterally changing its
terms without violating their contract.
The subject lot was the core of four successive and overlapping cases prior to the present controversy. In
three of these cases, Atty. Lacaya stood as the spouses Cadavedo’s counsel. For ease of discussion, we
The petitioners add that the one-half portion of the subject lot as Atty. Lacaya’s contingent attorney’s fee
summarize these cases (including the dates and proceedings pertinent to each) as follows:
is excessive and unreasonable. They highlight the RTC’s observations and argue that the issues involved
in Civil Case No. 1721, pursuant to which the alleged contingent fee of one-half of the subject lot was
agreed by the parties, were not novel and did not involve difficult questions of law; neither did the case Civil Case No. 1721 – Cadavedo v. Ames (Sum of money and/or voiding of contract of sale of homestead),
require much of Atty. Lacaya’s time, skill and effort in research. They point out that the two subsequent filed on January 10, 1967. The writ of execution was granted on October 16, 1981.
civil cases should not be considered in determining the reasonable contingent fee to which Atty. Lacaya
Civil Case No. 3352 – Ames v. Cadavedo (Quieting of Title and/or Enforcement of Civil Rights due Planters
in Good Faith with Application for Preliminary injunction), filed on September 23, 1981.
Civil Case No. 3443 – Cadavedo v. DBP (Action for Injunction with Preliminary Injunction), filed on May
21, 1982.
Civil Case No. 215 –Atty. Lacaya v. Vicente Cadavedo, et. al. (Ejectment Case), filed between the latter
part of 1981 and early part of 1982. The parties executed the compromise agreement on May 13, 1982.
Civil Case No. 4038 –petitioners v. respondents (the present case).
The agreement on attorney’s fee
consisting of one-half of the subject
lot is void; the petitioners are entitled
to recover possession
The core issue for our resolution is whether the attorney’s fee consisting of one-half of the subject lot is
valid and reasonable, and binds the petitioners. We rule in the NEGATIVE for the reasons discussed
below.
A. The written agreement providing for
a contingent fee of ₱2,000.00 should prevail
over the oral agreement providing for one-
half of the subject lot
The spouses Cadavedo and Atty. Lacaya agreed on a contingent fee of ₱2,000.00 and not, as asserted by
the latter, one-half of the subject lot. The stipulation contained in the amended complaint filed by Atty.
Lacaya clearly stated that the spouses Cadavedo hired the former on a contingency basis; the Spouses
Cadavedo undertook to pay their lawyer ₱2,000.00 as attorney’s fees should the case be decided in their
favor.
Contrary to the respondents’ contention, this stipulation is not in the nature of a penalty that the court
would award the winning party, to be paid by the losing party. The stipulation is a representation to the
court concerning the agreement between the spouses Cadavedo and Atty. Lacaya, on the latter’s
compensation for his services in the case; it is not the attorney’s fees in the nature of damages which the
former prays from the court as an incident to the main action.
At this point, we highlight that as observed by both the RTC and the CA and agreed as well by both
parties, the alleged contingent fee agreement consisting of one-half of the subject lot was not reduced
to writing prior to or, at most, at the start of Atty. Lacaya’s engagement as the spouses Cadavedo’s
counsel in Civil Case No. 1721.An agreement between the lawyer and his client, providing for the
former’s compensation, is subject to the ordinary rules governing contracts in general. As the rules
stand, controversies involving written and oral agreements on attorney’s fees shall be resolved in favor
of the former.17 Hence, the contingency fee of ₱2,000.00 stipulated in the amended complaint prevails
over the alleged oral contingency fee agreement of one-half of the subject lot.
B. The contingent fee agreement between
the spouses Cadavedo and Atty. Lacaya,
awarding the latter one-half of the subject
lot, is champertous
Granting arguendo that the spouses Cadavedo and Atty. Lacaya indeed entered into an oral contingent
fee agreement securing to the latter one-half of the subject lot, the agreement is nevertheless void.
In their account, the respondents insist that Atty. Lacaya agreed to represent the spouses Cadavedo in
Civil Case No. 1721 and assumed the litigation expenses, without providing for reimbursement, in
exchange for a contingency fee consisting of one-half of the subject lot. This agreement is champertous
and is contrary to public policy.18
Champerty, along with maintenance (of which champerty is an aggravated form), is a common law
doctrine that traces its origin to the medieval period. 19 The doctrine of maintenance was directed
"against wanton and in officious intermeddling in the disputes of others in which the intermeddler has
no interest whatever, and where the assistance rendered is without justification or
excuse."20 Champerty, on the other hand, is characterized by "the receipt of a share of the proceeds of
the litigation by the intermeddler."21 Some common law court decisions, however, add a second factor in
determining champertous contracts, namely, that the lawyer must also, "at his own expense maintain,
and take all the risks of, the litigation."22
The doctrines of champerty and maintenance were created in response "to medieval practice of
assigning doubtful or fraudulent claims to persons of wealth and influence in the expectation that such
individuals would enjoy greater success in prosecuting those claims in court, in exchange for which they
would receive an entitlement to the spoils of the litigation."23 "In order to safeguard the administration
of justice, instances of champerty and maintenance were made subject to criminal and tortuous liability
and a common law rule was developed, striking down champertous agreements and contracts of
maintenance as being unenforceable on the grounds of public policy."24
In this jurisdiction, we maintain the rules on champerty, as adopted from American decisions, for public
policy considerations.25 As matters currently stand, any agreement by a lawyer to "conduct the litigation
in his own account, to pay the expenses thereof or to save his client therefrom and to receive as his fee a
portion of the proceeds of the judgment is obnoxious to the law." 26 The rule of the profession that
forbids a lawyer from contracting with his client for part of the thing in litigation in exchange for
conducting the case at the lawyer’s expense is designed to prevent the lawyer from acquiring an interest
between him and his client. To permit these arrangements is to enable the lawyer to "acquire additional
stake in the outcome of the action which might lead him to consider his own recovery rather than that of
his client or to accept a settlement which might take care of his interest in the verdict to the sacrifice of
that of his client in violation of his duty of undivided fidelity to his client’s cause."27
In Bautista v. Atty. Gonzales,28 the Court struck down the contingent fee agreement between therein
respondent Atty. Ramon A. Gonzales and his client for being contrary to public policy. There, the Court
held that an reimbursement of litigation expenses paid by the former is against public policy, especially if
the lawyer has agreed to carry on the action at his expense in consideration of some bargain to have a
part of the thing in dispute. It violates the fiduciary relationship between the lawyer and his client.29
In addition to its champertous character, the contingent fee arrangement in this case expressly
transgresses the Canons of Professional Ethics and, impliedly, the Code of Professional
Responsibility.30 Under Rule 42 of the Canons of Professional Ethics, a lawyer may not properly agree
with a client that the lawyer shall pay or beat the expense of litigation.31 The same reasons discussed
above underlie this rule.
C. The attorney’s fee consisting of
one-half of the subject lot is excessive
and unconscionable
We likewise strike down the questioned attorney’s fee and declare it void for being excessive and Case No. 1721.38 In reversing the RTC ruling, the CA gave weight to the compromise agreement and in so
unconscionable.1âwphi1The contingent fee of one-half of the subject lot was allegedly agreed to secure doing, found justification in the unproved oral contingent fee agreement.
the services of Atty. Lacaya in Civil Case No. 1721.Plainly, it was intended for only one action as the two
other civil cases had not yet been instituted at that time. While Civil Case No. 1721 took twelve years to
While contingent fee agreements are indeed recognized in this jurisdiction as a valid exception to the
be finally resolved, that period of time, as matters then stood, was not a sufficient reason to justify a
prohibitions under Article 1491(5) of the Civil Code,39 contrary to the CA’s position, however, this
large fee in the absence of any showing that special skills and additional work had been involved. The
recognition does not apply to the present case. A contingent fee contract is an agreement in writing
issue involved in that case, as observed by the RTC(and with which we agree), was simple and did not
where the fee, often a fixed percentage of what may be recovered in the action, is made to depend upon
require of Atty. Lacaya extensive skill, effort and research. The issue simply dealt with the prohibition
the success of the litigation.40 The payment of the contingent fee is not made during the pendency of the
against the sale of a homestead lot within five years from its acquisition.
litigation involving the client’s property but only after the judgment has been rendered in the case
handled by the lawyer.41
That Atty. Lacaya also served as the spouses Cadavedo’s counsel in the two subsequent cases did not and
could not otherwise justify an attorney’s fee of one-half of the subject lot. As assertedby the petitioners,
In the present case, we reiterate that the transfer or assignment of the disputed one-half portion to Atty.
the spouses Cadavedo and Atty. Lacaya made separate arrangements for the costs and expenses foreach
Lacaya took place while the subject lot was still under litigation and the lawyer-client relationship still
of these two cases. Thus, the expenses for the two subsequent cases had been considered and taken
existed between him and the spouses Cadavedo. Thus, the general prohibition provided under Article
cared of Based on these considerations, we therefore find one-half of the subject lot as attorney’s fee
1491 of the Civil Code, rather than the exception provided in jurisprudence, applies. The CA seriously
excessive and unreasonable.
erred in upholding the compromise agreement on the basis of the unproved oral contingent fee
agreement.
D. Atty. Lacaya’s acquisition of
the one-half portion contravenes
Notably, Atty. Lacaya, in undertaking the spouses Cadavedo’s cause pursuant to the terms of the alleged
Article 1491 (5) of the Civil Code
oral contingent fee agreement, in effect, became a co-proprietor having an equal, if not more, stake as
the spouses Cadavedo. Again, this is void by reason of public policy; it undermines the fiduciary
Article 1491 (5) of the Civil Code forbids lawyers from acquiring, by purchase or assignment, the property relationship between him and his clients.42
that has been the subject of litigation in which they have taken part by virtue of their profession. 32 The
same proscription is provided under Rule 10 of the Canons of Professional Ethics.33
E.The compromise agreement could not
validate the void oral contingent fee
A thing is in litigation if there is a contest or litigation over it in court or when it is subject of the judicial agreement; neither did it supersede the
action.34Following this definition, we find that the subject lot was still in litigation when Atty. Lacaya written contingent fee agreement
acquired the disputed one-half portion. We note in this regard the following established facts:(1)on
September 21, 1981, Atty. Lacaya filed a motion for the issuance of a writ of execution in Civil Case No.
The compromise agreement entered into between Vicente and Atty. Lacaya in Civil Case No. 215
1721; (2) on September 23, 1981, the spouses Ames filed Civil Case No. 3352 against the spouses
(ejectment case) was intended to ratify and confirm Atty. Lacaya’s acquisition and possession of the
Cadavedo; (3)on October 16, 1981, the RTC granted the motion filed for the issuance of a writ of
disputed one-half portion which were made in violation of Article 1491 (5) of the Civil Code. As earlier
execution in Civil Case No. 1721 and the spouses Cadavedo took possession of the subject lot on October
discussed, such acquisition is void; the compromise agreement, which had for its object a void
24, 1981; (4) soon after, the subject lot was surveyed and subdivided into two equal portions, and Atty.
transaction, should be void.
Lacaya took possession of one of the subdivided portions; and (5) on May 13, 1982, Vicente and Atty.
Lacaya executed the compromise agreement.
A contract whose cause, object or purpose is contrary to law, morals, good customs, public order or
public policy is in existent and void from the beginning.43 It can never be ratified44 nor the action or
From these timelines, whether by virtue of the alleged oral contingent fee agreement or an agreement
defense for the declaration of the in existence of the contract prescribe;45 and any contract directly
subsequently entered into, Atty. Lacaya acquired the disputed one-half portion (which was after October
resulting from such illegal contract is likewise void and in existent.46
24, 1981) while Civil Case No. 3352 and the motion for the issuance of a writ of execution in Civil Case
No. 1721were already pending before the lower courts. Similarly, the compromise agreement, including
the subsequent judicial approval, was effected during the pendency of Civil Case No. 3352. In all of these, Consequently, the compromise agreement did not supersede the written contingent fee agreement
the relationship of a lawyer and a client still existed between Atty. Lacaya and the spouses Cadavedo. providing for attorney’s fee of ₱2,000.00; neither did it preclude the petitioners from questioning its
validity even though Vicente might have knowingly and voluntarily acquiesced thereto and although the
MTC approved it in its June 10, 1982 decision in the ejectment case. The MTC could not have acquired
Thus, whether we consider these transactions –the transfer of the disputed one-half portion and the
jurisdiction over the subject matter of the void compromise agreement; its judgment in the ejectment
compromise agreement –independently of each other or resulting from one another, we find them to be
case could not have attained finality and can thus be attacked at any time. Moreover, an ejectment case
prohibited and void35 by reason of public policy.36 Under Article 1409 of the Civil Code, contracts which
concerns itself only with the issue of possession de facto; it will not preclude the filing of a separate
are contrary to public policy and those expressly prohibited or declared void by law are considered in
action for recovery of possession founded on ownership. Hence, contrary to the CA’s position, the
existent and void from the beginning.37
petitioners–in filing the present action and praying for, among others, the recovery of possession of the
disputed one-half portion and for judicial determination of the reasonable fees due Atty. Lacaya for his
What did not escape this Court’s attention is the CA’s failure to note that the transfer violated the services –were not barred by the compromise agreement.
provisions of Article 1491(5) of the Civil Code, although it recognized the concurrence of the transfer and
the execution of the compromise agreement with the pendency of the two civil cases subsequent to Civil
Atty. Lacaya is entitled to receive attorney’s fees on a quantum meruit basis
In view of their respective assertions and defenses, the parties, in effect, impliedly set aside any express
stipulation on the attorney’s fees, and the petitioners, by express contention, submit the reasonableness
of such fees to the court’s discretion. We thus have to fix the attorney’s fees on a quantum meruit basis.
"Quantum meruit—meaning ‘as much as he deserves’—is used as basis for determining a lawyer’s
professional fees in the absence of a contract x x x taking into account certain factors in fixing the
amount of legal fees."47 "Its essential requisite is the acceptance of the benefits by one sought to be
charged for the services rendered under circumstances as reasonably to notify him that the lawyer
performing the task was expecting to be paid compensation"48 for it. The doctrine of quantum meruit is a
device to prevent undue enrichment based on the equitable postulate that it is unjust for a person to
retain benefit without paying for it.49
Under Section 24, Rule 138 of the Rules of Court50 and Canon 20 of the Code of Professional
Responsibility,51factors such as the importance of the subject matter of the controversy, the time spent
and the extent of the services rendered, the customary charges for similar services, the amount involved
in the controversy and the benefits resulting to the client from the service, to name a few, are
considered in determining the reasonableness of the fees to which a lawyer is entitled.
In the present case, the following considerations guide this Court in considering and setting Atty.
Lacaya’s fees based on quantum meruit: (1) the questions involved in these civil cases were not novel
and did not require of Atty. Lacaya considerable effort in terms of time, skill or the performance of
extensive research; (2) Atty. Lacaya rendered legal services for the Spouses Cadavedo in three civil cases
beginning in 1969 until 1988 when the petitioners filed the instant case; (3) the first of these civil cases
(Cadavedo v. Ames) lasted for twelve years and reaching up to this Court; the second (Ames v.
Cadavedo) lasted for seven years; and the third (Cadavedo and Lacaya v. DBP) lasted for six years,
reaching up to the CA; and (4) the property subject of these civil cases is of a considerable size of
230,765 square meters or 23.0765 hectares.
All things considered, we hold as fair and equitable the RTC’s considerations in appreciating the
character of the services that Atty. Lacaya rendered in the three cases, subject to modification on
valuation. We believe and so hold that the respondents are entitled to two (2) hectares (or
approximately one-tenth [1/10] of the subject lot), with the fruits previously received from the disputed
one-half portion, as attorney’s fees. They shall return to the petitioners the remainder of the disputed
one-half portion.
The allotted portion of the subject lot properly recognizes that litigation should be for the benefit of the
client, not the lawyer, particularly in a legal situation when the law itself holds clear and express
protection to the rights of the client to the disputed property (a homestead lot). Premium consideration,
in other words, is on the rights of the owner, not on the lawyer who only helped the owner protect his
rights. Matters cannot be the other way around; otherwise, the lawyer does indeed effectively acquire a
property right over the disputed property. If at all, due recognition of parity between a lawyer and a
client should be on the fruits of the disputed property, which in this case, the Court properly accords.
WHEREFORE, in view of these considerations, we hereby GRANT the petition. We AFFIRM the decision
dated September 17, 1996 and the resolution dated December 27, 1996of the Regional Trial Court of
Dipolog City, Branch 10,in Civil Case No. 4038, with the MODIFICATION that the respondents, the
spouses Victorino (Vic) T. Lacaya and Rosa Legados, are entitled to two (2) hectares (or approximately
one-tenth [1/10] of the subject lot) as attorney’s fees. The fruits that the respondents previously
received from the disputed one-half portion shall also form part of the attorney’s fees. We hereby
ORDER the respondents to return to the petitioners the remainder of the 10.5383-hectare portion of the
subject lot that Atty. Vicente Lacaya acquired pursuant to the compromise agreement.
SO ORDERED.
G.R. No. 202223, March 02, 2016
JOEY R. PE�A, Petitioner, v. JESUS DELOS SANTOS AND THE HEIRS OF ROSITA DELOS SANTOS
FLORES., Respondents.
RESOLUTION
REYES, J.:
This resolves the Motion for Reconsideration1 of petitioner Joey R. Perm (Pe�a) of the Court's
Resolution2 dated September 9, 2013 which denied his Petition for Review 3 on the ground of lack of
reversible error in the assailed Decision 4 dated February 20, 2012 of the Court of Appeals (CA) in CA-G.R.
CEB SP No. 03886.
The Facts
Jesus Delos Santos (Jesus) and Rosita Delos Santos Flores (Rosita) were the judgment awardees of the
two-thirds portion or 9,915 square meters of four adjoining lots designated as Lots 393-A, 393-B, 394-D
and 394-E, measuring 14,771 sq m, located in Boracay Island, Malay, Aldan. 5 The award was embodied in
the Decision dated April 29, 1996 of the Regional Trial Court (RTC) of Kalibo, Aklan in the herein Civil Case
No. 3683, the fallo of which reads:
chanRoblesvirtualLawlibrary
WHEREFORE, in view of the foregoing considerations, judgment is hereby rendered as follows:
(1.) Dismissing the complaint filed by the plaintiffs [Vicente Delos Santos, et al.] as well [as] the complaint
in intervention filed by the second set of intervenors Casimeros, et al. for lack of merit;
(2.) Declaring the two deeds of sale (Exhibits 29 and 30) as null and void insofar as they affect the two-
thirds (2/3) share of intervenors Jesus and [Rosita];
(3.) Declaring intervenors Jesus and [Rosita] as the lawful owners of the two-thirds portion of the land
in question or 9,915 square meters on the northwest portion, representing as their shares in the
intestate estate of Leonardo delos Santos;
(4.) Declaring defendant Fred Elizalde as the rightful owner of one-third of the land in question or 4,957
square meters on the southeast portion, segregated by a boundary line running from the seashore to the
inland or from the southwest to northeast;
(5.) Ordering the cancellation or revision of Tax Declaration No. 4422 in the name of Fred Elizalde (Exhibit
26) and all tax declarations issued subsequent thereto to conform to paragraphs 3 and 4 hereof as well
as the issuance of a new tax declaration to intervenors Jesus and [Rosita] covering their two-thirds (2/3)
share;
(6.) Ordering the plaintiffs or any persons claiming interest therein to deliver complete possession of the
land to [Fred and Joan Elizalde] and Jesus and [Rosita].
No pronouncement as to costs.
SO ORDERED.6 (Citation omitted and emphasis ours)
The losing parties in the case, Vicente Delos Santos, et al. (plaintiffs) and Spouses Fred and Joan Elizalde
(appellants), appealed the foregoing judgment to the CA thru petitions separately docketed as CA-G.R.
CV No. 54136 and CA-G.R. SP No. 48475, respectively. Both appeals were dismissed and considered
withdrawn in the CA Resolution dated May 11, 1999 upon the appellants' motion to withdraw appeal. In
the subsequent CA Resolution dated January 31, 2000, the motion for reconsideration and motion to
reinstate appeal filed by the plaintiffs were denied for being time-barred as it was filed nine days late. 7
The plaintiffs sought recourse with the Court via a petition for review on certiorari docketed as G.R. Nos.
141810 and 141812.8 In a Decision dated February 2, 2007, the Court denied the petition on the ground
that the plaintiffs already lost their right of appeal to the CA when they failed to file an appellant's brief
during the more than 180-day extension.9 The Court reiterated its ruling in a Resolution dated April 23,
2007, which denied reconsideration. An Entry of Judgment in the case was forthwith issued. 10
The case was then remanded to the RTC of Kalibo, Aklan for the execution proceedings during which a
Motion for Substitution with a Motion for a Writ of Execution and Demolition11 dated March 14, 2008
was filed by Pe�a.
Pe�a averred that he is the transferee of Jesus and Rosita's adjudged allotments over the subject lots.
He claimed that he bought the same from Atty. Romeo Robiso (Atty. Robiso) who in turn, acquired the
properties from Jesus and Rosita through assignment and sale as evidenced by the following
documents, viz:
chanRoblesvirtualLawlibrary
a. Deed of Transfer or Conveyance dated May 4, 2005 transferring 2,000 sq m of Lots No. 394-PT and
393-A to Atty. Robiso;12
b. Deed of Absolute Sale dated May 4, 2005 over the 2,000 sq m of Lots No. 394-PT and 393-A in favor of
Atty. Robiso;13
c. Confirmation of Sale and Transfer dated December 5, 2006 affirming the two foregoing instruments
executed by Jesus and Rosita in favor of Atty. Robiso.14ChanRoblesVirtualawlibrary
Atty. Robiso later on sold Lots No. 393-A and 394-D to Pe�a on December 15, 2006 thru a Deed of
Absolute Sale.15 The tax declarations over the said portions were subsequently registered in Pe�a's
name.16
The plaintiffs opposed Pe�a's motion claiming that the conveyance made by Jesus and Rosita in favor of
Atty. Robiso was null and void for being a prohibited transaction because the latter was their counsel in
the case.
Apparently, Atty. Robiso was engaged by Jesus and Rosita to be their counsel in Civil Case No. 3683 by
virtue of an Attorney's Agreement and Undertaking dated July 11, 1998.17 Under the agreement, Atty.
Robiso bound himself to render his legal services in connection with Jesus and Rosita's involvement as
party-litigants in Civil Case No. 3683 and to any proceedings that may arise in connection therewith
before the CA and this Court. Atty. Robiso undertook to advance his own funds for all expenses and costs
he may incur in relation to the case. In consideration thereof, Jesus and Rosita obliged themselves to give
or pay to him as contingent professional fees, 2,000 sq m of any and all lands that the courts will award
to them in the case.
Ruling of the RTC
In an Order18 dated June 11, 2008, the RTC partially granted Pe�a's motion and ruled that Jesus and
Rosita lost their standing in the case upon the conveyance of their adjudged 2,000 sq m portion in favor
of Atty. Robiso whose ownership rights were afterwards acquired by Pe�a.
The RTC upheld that the conveyance made by Jesus and Rosita in favor of Atty. Robiso is valid since it
was not made during the pendency of litigation but after judgment has been rendered. The RTC disposed
as follows:
chanRoblesvirtualLawlibrary
WHEREFORE, premises considered, the instant Motion for Substitution and the Motion for a Writ of
Execution and Demolition is partially granted. Accordingly, it is hereby directed that:
1. Movant Joey Pe�a is joined with the original party in the First Set of Intervenors (Jesus and Rosita) in
accordance with Section 19, Rule 3 of the Rules of Court; and
2. A Writ of Execution be issued to implement the Decision dated April 29, 1996.
SO ORDERED.19 (Emphasis in the original)
The writ of execution was issued on July 10, 2008.20 The RTC denied reconsideration in an Order dated
September 8, 2008.21
Ruling of the CA
Jesus, together with the heirs of Rosita, elevated the matter to the CA thru a special civil action
for certiorari docketed as CA-G.R. CEB SP No. 03886.
In its Decision22 dated February 20, 2012, the CA reversed the RTC and ruled that the conveyance made
by Jesus and Rosita in favor of Atty. Robiso was null and void because it is a prohibited transaction under
Article 1491(5) of the Civil Code. When the two Deeds of Sale in favor of Atty. Robiso were executed on
May 4, 2005 and December 5, 2005 and the Confirmation of Sale on December 15, 2006, the case was
still pending with the Supreme Court, before which Jesus and Rosita were still represented by Atty.
Robiso. Accordingly, the CA decision disposed as follows:
chanRoblesvirtualLawlibrary
WHEREFORE, the Order dated June 11, 2008, Order dated September 8, 2008, and the Alias Writ of
Execution dated July 10, 2008 in Civil Case No. 3683 are hereby ANNULLED and SET ASIDE. The trial court
is directed to cause the execution of the final judgment in favor of [Jesus and the heirs of Rosita] in this
case with dispatch.
SO ORDERED.23ChanRoblesVirtualawlibrary
The CA reiterated the foregoing ruling when it denied Pe�a's motion for reconsideration in a
Resolution24dated May 24, 2012. Aggrieved, Pe�a filed a petition for review on certiorari before the
Court. In a Minute Resolution25 dated September 9, 2013, the Court denied the petition for lack of
reversible error in the assailed CA judgment.
On December 23, 2013, Pe�a filed a Motion for Reconsideration26 insisting that the deeds of
conveyance between Atty. Robiso and Jesus and Rosita were executed long after the decision in Civil
Case No. 3683 became final and executory. Even assuming arguendo that the deeds were void, a
separate action for declaration of their inexistence is necessary because their terms have already been
fulfilled.
Ruling of the Court
The Court denies reconsideration.
The basis of Pe�a's motion for substitution is infirm because the lots were transferred to his
predecessor-in-interest, Atty. Robiso, through a prohibited sale transaction. Article 1491(5) of the Civil
Code expressly prohibits lawyers from acquiring property or rights that may be the object of any
litigation in which they may take part by virtue of their profession, thus:
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Art. 1491. The following persons cannot acquire by purchase, even at a public or judicial auction, either
in person or through the mediation of another:
xxxx
(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and
employees connected with the administration of justice, the property and rights in litigation or levied
upon an execution before the court within whose jurisdiction or territory they exercise their respective
functions; this prohibition includes the act of acquiring by assignment and shall apply to lawyers, with
respect to the property and rights which may be the object of any litigation in which they may take part
by virtue of their profession.
xxxx
A complementary prohibition is also provided in Rule 10 of the Canons of Professional Ethics which
states:
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10. Acquiring interest in litigation.
The lawyer should not purchase any interest in the subject matter of the litigation which he is
conducting.
A property is in litigation if there is a contest or litigation over it in court or when it is subject of a judicial
action.27 Records show that the judicial action over the subject lots was still in the appellate proceedings
stage when they were conveyed to Jesus and Rosita's counsel, Atty. Robiso. The Deed of Transfer or
Conveyance and the Deed of Absolute Sale both dated May 4, 2005 as well as the Confirmation of Sale
and Transfer dated December 5, 2006 were all executed long before the termination of the appellate
proceedings before this Court in G.R. Nos. 141810 and 141812 on February 2, 2007.
success of the litigation. The payment of the contingent fee is not made during the pendency of the
litigation involving the client's property but only after the judgment has been rendered in the case
handled by the lawyer."33
Pe�a cannot rely on Article 143734 by claiming that Jesus and Rosita are already estopped from
questioning the validity of their deeds of conveyance with Atty. Robiso. Estoppel is a principle in equity
and pursuant to Article 1432 it is adopted insofar as it is not in conflict with the provisions of the Civil
Code and other laws. Otherwise speaking, estoppel cannot supplant and contravene the provision of law
clearly applicable to a case.35 Conversely, it cannot give validity to an act that is prohibited by law or one
that is against public policy.36
The rationale advanced for the prohibition in Article 1491(5) is that public policy disallows the
transactions in view of the fiduciary relationship involved, i.e., the relation of trust and confidence and
the peculiar control exercised by these persons. It is founded on public policy because, by virtue of his
office, an attorney may easily take advantage of the credulity and ignorance of his client and unduly
enrich himself at the expense of his client.37 The principle of estoppel runs counter to this policy and to
apply it in this case will be tantamount to sanctioning a prohibited and void transaction.
The other issues raised by Pe�a are merely procedural in nature and are too inconsequential to override
the fundamental considerations of public policy underlying the prohibition set forth in Article 1491(5) of
the Civil Code.chanrobleslaw
WHEREFORE, foregoing considered, the Motion for Reconsideration is hereby DENIED for lack of merit.
SO ORDERED.cralawlawlibrary

Clearly then, since the property conveyed to Atty. Robiso by Jesus and Rosita was still the object of
litigation, the deeds of conveyance executed by the latter are deemed inexistent. Under Article 1409 of
the Code, contracts which are expressly prohibited or declared void by law are considered inexistent and
void from the beginning.28 This being so, Atty. Robiso could not have transferred a valid title in favor of
Pe�a over the lots awarded to Jesus and Rosita in Civil Case No. 3683. Consequently, Pe�a has no legal
standing to be substituted in the stead of or joined with Jesus and Rosita as the first set of intervenors
and to move for issuance of a writ of execution in Civil Case No. 3683.

There is no need to bring a separate action for the declaration of the subject deeds of conveyance as
void. A void or inexistent contract is one which has no force and effect from the very beginning. Hence, it
is as if it has never been entered into and cannot be validated either by the passage of time or by
ratification.29

The need to bring a separate action for declaration of nullity applies only if the void contract is no longer
fully executory. Contrary to Pe�a's stance, the deeds of conveyance made in favor of Atty. Robiso in
2005 cannot be considered as executory because at that time the judgment award ceding the subject
lots to Jesus and Rosita was not yet implemented. A writ of execution30 was issued only on July 10, 2008.
"If the void contract is still fully executory, no party need bring an action to declare its nullity; but if any
party should bring an action to enforce it, the other party can simply set up the nullity as a defense." 31

This is notwithstanding the fact that the sale to Atty. Robiso was made pursuant to a contingency fee
contract. It is true that contingent fee agreements are recognized in this jurisdiction as a valid exception
to the prohibitions under Article 1491(5) of the Civil Code.32 The Court cannot extend a similar
recognition to the present case, however, since the payment to Atty. Robiso of his contingency fees was
made during the pendency of litigation. "A contingent fee contract is an agreement in writing where the
fee, often a fixed percentage of what may be recovered in the action, is made to depend upon the