OTHERS RELATIVELY DISQUALIFIED

Article 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 his 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;
(4) Public officers and employees, the property of the State or of any subdivision thereof, or of any government
owned or controlled corporation, or institution, the administration of which has been entrusted to them; this
provision shall apply to judges and government experts who, in any manner whatsoever, take part in the sale;
(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;
(6) Any others specially disqualified by law.

 Legal Status of Contracts Entered into in

Violation of 1491
Only purchases by agents of property covered by
the agency are valid and binding when made with
the express consent of their principals, and no such
exception is granted in all other instances covered by
said article.
This would also mean that, apart from the case of
the agents, in all cases covered under Article 1491,
consent or knowledge by the persons who is sought
to be protected by the law, cannot validate any of
the transactions covered.

 Guardians, Agents, and Administrator

AGENTS
“Brokers” do not come within the coverage of the prohibition as their authority
consist merely in looking for a buyer or a seller, and to bring the former and the latter
together to consummate the transaction; therefore, they are not prohibited to buy for
themselves. As held in Schmid & Oberly v. RJL Martinez Fishing Corp., “[a] broker is
generally defined as one who is engaged, for others, on a commission, negotiating
contracts relative to property with the custody of which he has no concern; the
negotiation between other parties, never acting in his own name but in the name of
those who employed him; he is strictly a middleman and for some purpose the agent of
both parties. ... A broker is one whose occupation it is to bring parties together to
bargain, or to bargain for them, in matters of trade, commerce or navigation.
GUARDIANS, ADMINISTRATORS AND EXECUTORS
Guardians, administrators and executors are necessarily officers of the courts since
they are appointed or confirmed to such position pursuant to judicial proceedings.

 PHILIPPINE TRUST CO. v. ROLDAN

99 Phil. 392 | May 31, 1956
The court-appointed guardian had filed a motion with the trial court for authority to sell as guardian the parcels of
land of the ward for the purpose of being able to invest the proceeds for a residential house for the ward. When the court
authority was granted, the guardian sold the parcels of land in favor of her brother-in-law in the sum approved by the court.
The guardian subsequently asked for and was granted judicial confirmation of the sale. Immediately thereafter, the
brother-in-law sold the same parcels of land to the guardian.
The Philippine Trust Co., which became the substitute guardian, brought an action to annul the contract, on the ground
that the prohibition under the Civil Code prevented the guardian from purchasing “either in person or through the mediation
of another.”
The Court held that even without such proof, the sale can be rescinded: “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,” the Court held that the
re-sale of the parcels of land to the guardian herself, should be declared void.
Philippine Trust Co. shows that even a court-approved sale would not stand against the inhibition provided by Article
1491. There were discussions in the decision of the proof sought to be shown by the guardian that the transaction benefited
the ward; however, the Court disproved such benefit and showed that the “minor was on the losing end.” It therefore
decreed that “from both the legal and equitable standpoints these three sales should not be sustained.”
These statements of the Court in Philippine Trust Co. bring up the issue of whether proof of advantage or benefit to the
ward, estate or the principal, would be sufficient basis to take the transaction out of the prohibition of Article 1491.

 PHILIPPINE TRUST CO. v. ROLDAN

GR L-8477 | May 31, 1956
Facts: As guardian of the property of minor Mariano Bernardo, the Philippine Trust Company filed in the
Manila Court of First Instance a complaint to annul two contracts regarding 17 parcels of land: (a) sale
thereof by Socorro Roldan, as guardian of said minor, to Fidel C. Ramos; (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.
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.
Socorro Roldan filed in said guardianship proceedings 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. As guardian, Roldan executed the proper deed of sale in favor of her brother-
in-law Dr. Fidel C. Ramos, 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. And on October 21, 1947 Socorro
Roldan sold four parcels out of the seventeen to another party, reserving to herself the right to repurchase.
The Philippine Trust Company replaced Socorro Roldan as guardian and 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.
ISSUE: Whether or not the sale should be annulled. - YES
HELD: At first glance the resolutions of both courts accomplished substantial justice - the minor recovers
his properties. But if the conveyances are annulled as prayed for, the minor will obtain a better deal 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 then she agreed to sell them to Dr.
Ramos at P14,700 and 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.

 Article 1459 Applies

Remembering the general doctrine that guardianship is a trust of the highest order, and
the trustee cannot be allowed to have any inducement to neglect his ward’s interest and in
line with the court’s suspicion whenever the guardian acquires the ward’s property we have
no hesitation to declare that in this case, in the eyes of the law, Socorro Roldan took by
purchase her ward’s parcels thru Dr. Ramos, and that Article 1459 of the Civil Code applies.
She acted it may be true without malice there 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.
Hence, from both the legal and equitable standpoints these three sales should not be
sustained the first two for violation of article 1459 of the Civil Code and the third because
Socorro Roldan could pass no title to the third buyer.

 COMMENTARY
There was a sale of the property of the ward by the guardian. The reason of
the prohibition under 1491 is that these persons occupy fiduciary relationship
with the seller.
The prohibition under this article prevents them from being tempted and
take advantage of their position.
In this case, the general doctrine that guardianship is a trust of the highest
order, and the trustee cannot be allowed to have any inducement to neglect
his ward’s interest and in line with the court’s suspicion whenever the guardian
acquires the ward’s property we have no hesitation to declare that in this
case, in the eyes of the law, Socorro Roldan took by purchase her ward’s
parcels thru Dr. Ramos.
Take note the short period of time between the sales. Even if the ward
benefitted from the sale, it would still be void so that it cannot be abused or
taken advantage.

 DISTAJO v. COURT OF APPEALS

GR 112954 | August 25, 2000
Facts: During the lifetime of Iluminada Abiertas, she designated one of her sons, Rufo Distajo, to be the administrator
of her parcels of land in Capiz denominated as Lot Nos. 1018, 1046, 1047, and 1057. Iluminada Abiertas certified to the
sale of Lot Nos. 1018, 1046 and 1047 in favor of Rufo Distajo and other parcels of land to her other kins.
After purchasing the above-mentioned parcels of land, Rufo Distajo, together with his wife, Lagrimas, took possession
of the property and paid the corresponding real estate taxes thereon. When Iluminada died there was a demand of the
possession of the seven parcels of land from Rufo – he refused.
Consequently, on June 5, 1986, Ricardo Distajo, with the other heirs of Iluminada Abiertas, filed a complaint for
recovery of possession and ownership of those lands sold alleging that 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. 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.
ISSUE: Whether or not the sale transactions are void for having been entered into by the administrator of the
properties.
RULING: The sale is valid.
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: xxx (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 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).

 On the Allegation of Forgery

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. 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.

COMMENTARY
So here, the ability of the agent to sell property is not absolute. It requires that the
principal must give his consent. Thus, the prohibition does not apply when consent was
given by the principal to a sale made in the hands of the administrator. The document
signed by Illuminada showed she gave consent and there was no sign of forgery. If you
allege fraud or machination, you must al

 CUI v. CUI
GR L-7041 | February 21, 1957
Facts: Jesus and Antonio are children of Don Mariano Cui and Doña Antonia Perales who died intestate in Cebu in
1939. Jesus alleged that during the marriage of their parents, they have acquired certain properties (Lots Nos.
2312, 2313 and 2319). Upon the death of their mother, the properties were placed under the administration of
their father (84 years old).
However, Antonio, by means of deceit, secured the transfer of the said lots to them without any pecuniary
consideration; that in the deed of sale, Rosario Cui appeared as one of the vendees. Upon 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.
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 constructed 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 Chinese commercial firms a monthly rental of P7,600, which defendants have
collected and will continue to collect to the prejudice of the plaintiffs;
Jesus alleged that the sale should be invalidated so far as the portion of the property sold to Antonio Cui is
concerned, for the reason that when that sale was effected, Antonio was then acting as the agent or administrator
of the properties of Don Mariano Cui. Jesus lays 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.
ISSUE: WON the sale of the property to Antonio was valid.

 CUI v. CUI
GR L-7041 | February 21, 1957

Argument: As an additional argument 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

RULING: YES.
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 cannot now be raised or invoked.
1. Raised for the first time;
2. Power of attorney are so general 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.
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 expectancy. 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

On Infirmity of Consent
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
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.

COMMENTARY
The old civil code was still applicable when the sale took place (March
8, 1946). The exception under Art 1491 referring to “unless the
principal consents” only apply to the NEW CIVIL CODE applies
retroactively as long as no vested rights are impaired. Sale to
guardians, agents, executors and administrators involve private
interest. Thus, a sale entered into is really void. However, it can be
ratified by a new contract. For instance, if the ward has reached the
age of majority or the present legal guardian will sale the property to
a previous guardian. In allegedly that he did not enjoy his full mental
faculties, the SC noted that, although at the time of the sale, he was
already 83 years old but weakness of mind alone is not a ground to
declare the contract void or voidable.

ATTORNEYS

Prohibition: 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.
 VALENCIA v. CABANTING
196 SCRA 302 | April 26, 1991
Facts: 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 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.
On December 15, 1969 Serapia, assisted by Atty. Arsenio Fer. Cabanting, filed a complaint against Paulino for
the recovery of possession with damages.
The Valencias engaged the services of Atty. Dionisio 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 who would falsify the signature of the alleged vendor.
A "Compraventa Definitiva" was executed purporting to be a sale of the questioned lot. On January 22, 1973,
the Court of First Instance of Pangasinan, Branch V, rendered a decision in favor of plaintiff, Serapia
Raymundo. The lower court expressed the belief that the said document is not authentic.

 Paulino, thereafter, filed a Petition for Certiorari before the Court of Appeals alleging that
the trial court failed to provide a workable solution concerning his house. 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". On March 14, 1973,
a writ of execution was issued.
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. On March 4, 1974, Paulino filed a disbarment proceeding against Atty. Cabanting on
the ground that said counsel allegedly violated Article 1491 of the New Civil Code as well as
Article II of the Canons of Professional Ethics, prohibiting the purchase of property under
litigation by a counsel.
On March 21, 1974 the appellate court dismissed the petition of Paulino. On October 14,
1974, Constancia Valencia, daughter of Paulino, filed a disbarment proceeding (docketed 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 Attys. Eduardo Jovellanos and Arsenio Cabanting for purchasing a
litigated property allegedly in violation of Article 1491 of the New Civil Code; and against
the three lawyers, for allegedly rigging Civil Case No. V-2170 against her parents.

ISSUE: WON Atty. Cabanting purchased the subject property in violation Article 1491 of the
NCC. –

RULING - 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 and is a ground for suspension.
Art. 1491, prohibiting the sale to the counsel concerned, applies only while the litigation is pending.
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.
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. V2170. The transaction is not covered by Art. 1491 nor
by the Canons adverted to.

 DIRECTOR OF LANDS v. ABABA

88 SCRA 513 | February 27, 1979

Facts: The adverse claimant, Atty. Alberto B. Fernandez was retained as counsel by petitioner, Maximo 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 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 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 decease parents and which were partitioned the heirs which included
petitioner Maximo Abarquez and his elder sister Agripina Abarquez, the defendant in said civil case.
The case having been resolved and title having been issued to petitioner, adverse claimant waited for petitioner to
comply with his 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 claimant immediately took steps to protect his
interest by filing with the trial court a motion to annotate his 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. The motion was
granted.
The annotation of adverse claim appeared on the new TCT. This adverse claim became the subject of a cancellation
proceedings filed by petitioner spouses.

The trial court resolved the case in favor of the adverse claimant. On appeal, petitioners contended that a contract for a
contingent fee violates Article 1491 because it involves an assignment of a property subject of litigation.
ISSUE: Whether or not the contract for a contingent fee as basis for the interest of Atty. Fernandez is prohibited by
Article 1491 of the Civil Code. – No.
RULING: This contention is without merit. Article 1491 prohibits only the sale or assignment between the lawyer and his
client, of property which is the subject of litigation. As WE have already stated. "The prohibition in said article applies
only to a sale or assignment to the lawyer by his client of the property which is the subject of litigation. In other words,
for the prohibition to operate, the sale of the property must take place during the pendency of the litigation involving
the property."
Likewise, under American Law, the prohibition does not apply to "cases where after completion of litigation the lawyer
accepts on account of his fee, an interest the assets realized by the litigation". "There is a clear distraction between such
cases and one in which the lawyer speculates on the outcome of the matter in which he is employed."
A contract for a contingent fee is not covered by Article 1491 because the transfer or assignment of the property in
litigation takes effect only after the finality of a favorable judgment. In the instant case, the attorney's fees of Atty.
Fernandez, consisting of one-half (1/2) of whatever Maximo Abarquez might 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 transfer actually takes effect after the finality of a favorable judgment rendered on appeal and not
during the pendency of the litigation involving the property in question. Consequently, the contract for a contingent fee
is not covered by Article 1491.

 CONJUGAL PARTNERSHIP OF CADAVEDO v. LACAYA

January 15, 2014 | GR 173188
Facts: The Spouses Vicente Cadavedo and Benita Arcoy Cadavedo acquired a homestead grant over a 230,765-square meter
parcel of land known as Lot 5415 located in Gumay, Piñan, Zamboanga del Norte. On April 30, 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 action 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. That due to the
above circumstances, the plaintiffs were forced to hire a lawyer NOTES ON SALES | REGINALD MATT SANTIAGO 102 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
fee
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 CA in Civil Case No. 1721 was pending, the spouses Ames sold the
subject lot to their children. The spouses Ames’ TCT No. T-4792 was subsequently cancelled and TCT No. T25984 was 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 its decision 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.
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, the spouses Ames filed Civil Case No. 3352 against the spouses
Cadavedo.
On October 16, 1981, the RTC granted the motion filed for the issuance of a writ of execution in Civil Case No. 1721 and
the spouses Cadavedo took possession of the subject lot on October 24, 1981. Soon after, the subject lot was surveyed
and subdivided into two equal portions, and 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.
Atty. Lacaya took possession of one of the subdivided portions; and unsatisfied Vicente sought to eject Lacaya (5) on May
13, 1982, Vicente and Atty. Lacaya executed the compromise agreement. This incident occurred while Civil Case No.
3352 was pending.
RTC: 10.5 hectares was reduced to 5.2691
CA: Reversed RTC.
ISSUE: Whether the attorney’s fee consisting of one-half of the subject lot is valid and reasonable, and binds the
petitioners.
RULING: NO.

The agreement on attorney’s fee consisting of one-half of the subject lot is void; the petitioners are entitled to recover
possession.
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.
In violation of Article 1491(5)
Article 1491 (5) of the Civil Code forbids lawyers from acquiring, by purchase or assignment, the property that has been
the subject of litigation in which they have taken part by virtue of their profession. The same proscription is provided under
Rule 10 of the Canons of Professional Ethics.
A thing is in litigation if there is a contest or litigation over it in court or when it is subject of the judicial action. Following
this definition, we find that the subject lot was still in litigation when Atty. Lacaya acquired the disputed one-half portion.
Whether by virtue of the alleged oral contingent fee agreement or an agreement subsequently entered into, Atty. Lacaya
acquired the disputed one-half portion (which was after October 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, the relationship of a lawyer and a client still existed between Atty. Lacaya and the spouses
Cadavedo. Thus, whether we consider these transactions –the transfer of the disputed one-half portion and the compromise
agreement –independently of each other or resulting from one another, we find them to be prohibited and void by reason of
public policy.

Under Article 1409 of the Civil Code, contracts which are contrary to public policy and those expressly
prohibited or declared void by law are considered in existent and void from the beginning.
What did not escape this Court’s attention is the CA’s failure to note that the transfer violated the 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 Case No. 1721.

Improper Contingent
In reversing the RTC ruling, the CA gave weight to the compromise agreement and in so doing, found
justification in the unproved oral contingent fee agreement.
While contingent fee agreements are indeed recognized in this jurisdiction as a valid exception to the
prohibitions under Article 1491(5) of the Civil Code, contrary to the CA’s position, however, this recognition
does not apply to the present case.
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 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.

In the present case, we reiterate that the transfer or assignment of the disputed one-half portion to Atty. Lacaya
took place while the subject lot was still under litigation and the lawyer-client relationship still existed between
him and the spouses Cadavedo.
Thus, the general prohibition provided under Article 1491 of the Civil Code, rather than the exception provided
in jurisprudence, applies. The CA seriously erred in upholding the compromise agreement on the basis of the
unproved oral contingent fee agreement.
Notably, Atty. Lacaya, in undertaking the spouses Cadavedo’s cause pursuant to the terms of the alleged 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 relationship between him
and his clients.
The compromise agreement could not validate the void oral contingent fee agreement; neither did it supersede
the written contingent fee agreement.
The compromise agreement entered into between Vicente and Atty. Lacaya in Civil Case No. 215 (ejectment
case) was intended to ratify and confirm Atty. Lacaya acquisition and possession of the disputed one-half portion
which were made in violation of Article 1491 (5) of the Civil Code.
As earlier discussed, such acquisition is void; the compromise agreement, which had for its object a void
transaction, should be void.
Thus, the agreement herein is void and he is now made to be entitled under quantum meruit.

 PENA v. DELOS SANTOS

GR 202223 | March 2, 2016
Facts: Jesus Delos Santos and Rosita Delos Santos Flores were judgment awardees of
the 2/3 portion of four adjoining lots in Boracay. Peña averred that he is the
transferee of the alleged allotments over the subject lots. He claimed that he
bought the same from Atty. Robiso who acquired the properties from Jesus and
Rosita through assignment and sale.
It was shown that Atty. Robiso sold the lots to Peña thru a Deed of Absolute Sale.
The plaintiffs opposed his motion claiming that the conveyance was null and void for
being a prohibited transaction because the latter was their counsel in the case. It
was shown that Atty. Robiso was indeed engaged by Jesus and Rosita to be the
counsel in their case. Under the Agreement and Undertaking where Atty. Robiso
bound himself to render his legal services in connection with Jesus and Rosita’s
involvement as party-litigants and that 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 the 2000 sq.m. of any and all
lands that the courts will award to them.
RTC ruled that Jesus and Rosita that conveyance was valid since it was
not made during the pendency of litigation but after judgment has been
rendered.
CA reversed ruling because it was prohibited transaction under Article
1491(5) of the Civil Code, when the two Deeds of Sale in favor Atty.
Robiso were executed on executed the case was still pending with the
SC and were still represented by Atty. Robiso.

Issue: Whether or not the deeds of conveyance between Atty. Robiso

and Jesusa and Rosita were executed long after the decision became
final and executory.

The Lots Were Transferred through a Prohibited Sale Transaction

Article 1491(5) of the Civil Code expressly prohibits lawyers from acquiring property or rights that may the object of any litigation
in which they may take part by their profession, thus.

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 over the subject
lots was still in the appellate proceedings stage when they were conveyed to Atty. Robiso. The two deeds of sale were all executed
long before termination of the proceedings.

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.
Article 1409 applies, this being so, Atty. Robiso could not have
transferred a valid title in favor of Peña over the lots awarded
to Jesus and Rosita. Thus, the petitioner has no legal standing.
Issue:
Whether or not the action for the declaration of nullity of the
contract should be in a separate contract.
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 and
cannot be validated by prescription or ratification.
The need to bring a separate action for declaration of
nullity applies only if the void contract is no longer full
executory. If the contract is still fully executory, no party

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. Article 1409
applies, this being so, Atty. Robiso could not have
transferred a valid title in favor of Peña over the
lots awarded to Jesus and Rosita. Thus, the
petitioner has no legal standing.
Issue: Whether or not the action for the declaration of nullity of the contract should
be in a separate contract.

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 and
cannot be validated by prescription or ratification.

The need to bring a separate action for declaration of nullity applies only if the void
contract is no longer full executory. If the 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.

Contrary to Peña’s stance, the deeds of conveyance cannot be

considered as executory because at that time the judgment award
ceding the lots was not yet implement.

IN THE CASE: Contingent fee agreements are recognized in this

jurisdiction as a valid exception to the prohibitions under Article
1491(5) of the Civil Code. The Court cannot extend a similar recognition
to the present case for the contingent fees was during the pendency.
PETITION DENIED.