SEVENTH CASE

G.R. No. 105135. June 22, 1995.

SUNLIFE ASSURANCE COMPANY OF CANADA, Petitioner, v. The Hon. COURT OF APPEALS and
Spouses ROLANDO and BERNARDA BACANI, Respondents.
SYLLABUS
1. REMEDIAL LAW; EVIDENCE; FINDINGS OF FACT OF LOWER COURTS; RULE AND
EXCEPTION. — The rule that factual findings of the lower court and the appellate court
are binding on this Court is not absolute and admits of exceptions, such as when the
judgment is based on a misappreciation of the facts.
2. COMMERCIAL LAW; INSURANCE; CONCEALMENT; DEFINED. — Section 26 of The
Insurance Code is explicit in requiring a party to a contract of insurance to communicate
to the other, in good faith, all facts within his knowledge which are material to the
contract and as to which he makes no warranty, and which the other has no means of
ascertaining. Said Section provides: "A neglect to communicate that which a party
knows and ought to communicate. is called concealment."cralaw virtua1aw library
3. ID.; ID.; ID.; TEST OF MATERIALITY; RULE; APPLICATION IN CASE AT BAR. — Materiality is
to be determined not by the event, but solely by the probable and reasonable influence
of the facts upon the party to whom communication is due, in forming his estimate of
the disadvantages of the proposed contract or in making his inquiries (The Insurance
Code, Sec. 31). The terms of the contract are clear. The insured is specifically required to
disclose to the insurer matters relating to his health. The information which the insured
failed to disclose were material and relevant to the approval and issuance of the
insurance policy. The matters concealed would have definitely affected petitioner’s
action on his application, either by approving it with the corresponding adjustment for a
higher premium or rejecting the same. Moreover, a disclosure may have warranted a
medical examination of the insured by petitioner in order for it to reasonably assess the
risk involved in accepting the application. In Vda. de Canilang v. Court of Appeals, 223
SCRA 443 (1993), we held that materiality of the information withheld does not depend
on the state of mind of the insured. Neither does it depend on the actual or physical
events which ensue. Thus, "good faith" is no defense in concealment. The insured’s
failure to disclose the fact that he was hospitalized for two weeks prior to filing his
application for insurance, raises grave doubts about his bonafides. It appears that such
concealment was deliberate on his part.
4. ID.; ID.; ID.; RULE IN CASE THERE IS A WAIVER OF MEDICAL EXAMINATION. — The
argument, that petitioner’s waiver of the medical examination of the insured debunks
the materiality of the facts concealed, is untenable. We reiterate our ruling in Saturnino
v. Philippine American Life Insurance Company, 7 SCRA 316 (1963), that "x x x the
waiver of a medical examination [in a non-medical insurance contract renders even
more material the information required of the applicant concerning previous condition
 of health and diseases suffered, for such information necessarily constitutes an
important factor which the insurer takes into consideration in deciding whether to issue
the policy or not x x x." Moreover, such argument of private respondents would make
Section 27 of the Insurance Code, which allows the injured party to rescind a contract of
insurance where there is concealment, ineffective.
5. ID.; ID.; ID.; RULE IN CASE THE FACTS CONCEALED HAD NO BEARING TO THE CAUSE OF
DEATH OF THE INSURED. — Anent the finding that the facts concealed had no bearing to
the cause of death of the insured, it is well settled that the insured need not die of the
disease he had failed to disclose to the insurer. It is sufficient that his non-disclosure
misled the insurer in forming his estimates of the risks of the proposed insurance policy
or in making inquiries.
DECISION
QUIASON, J.:
This is a petition for review on certiorari under Rule 45 of the Revised Rules of Court to reverse
and set aside the Decision dated February 21, 1992 of the Court of Appeals in CA-G.R. CV No.
29068, and its Resolution dated April 22, 1992, denying reconsideration thereof.
We grant the petition.
I
On April 15, 1986, Robert John B. Bacani procured a life insurance contract for himself from
petitioner. He was issued Policy No. 3-903-766-X valued P100,000.00, with double indemnity in
case of accidental death. The designated beneficiary was his mother, respondent Bernarda
Bacani.
On June 26, 1987, the insured died in a plane crash. Respondent Bernarda Bacani filed a claim
with petitioner, seeking the benefits of the insurance policy taken by her son. Petitioner
conducted an investigation and its findings prompted it to reject the claim.
In its letter, petitioner informed respondent Bernarda Bacani, that the insured did not disclosed
material facts relevant to the issuance of the policy, thus rendering the contract of insurance
voidable. A check representing the total premiums paid in the amount of P10,172.00 was
attached to said letter.
Petitioner claimed that the insured gave false statements in his application when he answered
the following questions:jgc:chanrobles.com.ph
"5. Within the past 5 years have you:
a) consulted any doctor or other health practitioner?
b) submitted to:chanrob1es virtual 1aw library
ECG? X-rays? blood tests? other tests?
c) attended or been admitted to any hospital or other medical facility?
"6. Have you ever had or sought advice for:
x x x
b) urine, kidney or bladder disorder?"
The deceased answered questions No. 5(a) in the affirmative but limited his answer to a
consultation with a certain Dr. Reinaldo D. Raymundo of the Chinese General Hospital on
February 1986, for cough and flu complications. The other questions were answered in the
negative (Rollo, p. 53).
Petitioner discovered that two weeks prior to his application for insurance, the insured was
examined and confined at the Lung Center of the Philippines, where he was diagnosed for renal
failure. During his confinement, the deceased was subjected to urinalysis, ultra-sonography and
hematology tests.
On November 17, 1988, respondent Bernarda Bacani and her husband, respondent Rolando
Bacani, filed an action for specific performance against petitioner with the Regional Trial Court,
Branch 191, Valenzuela, Metro Manila. Petitioner filed its answer with counterclaim and a list
off exhibits consisting of medical records furnished by the Lung Center of the Philippines.
On January, 14, 1990, private respondents filed a "Proposed Stipulation with Prayer for
Summary Judgment" where they manifested that they "have no evidence to refute the
documentary evidence of concealment/misrepresentation by the decedent of his health
condition" (Rollo, p. 62).
Petitioner filed its Request for Admissions relative to the authenticity and due execution of
several documents as well as allegations regarding the health of the insured. Private
respondents failed to oppose said request or reply thereto, thereby rendering an admission of
the matters alleged.
Petitioner then moved for a summary judgment and the trial court decided in favor of private
respondents. The dispositive portion of the decision is reproduced as
follows:jgc:chanrobles.com.ph
"WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the
defendants, condemning the latter to pay the former the amount of One Hundred Thousand
Pesos (P100,000.00) the face value of insured’s Insurance Policy No. 3903766, and the
Accidental Death Benefit in the amount of One Hundred Thousand Pesos (P100,000.00) and
further sum of P5,000.00 in the concept of reasonable attorney’s fees and the costs of the suit.
"Defendant’s counterclaim is hereby Dismissed" (Rollo, pp. 43-44).
In the ruling of private respondents, the trial court concluded that the facts concealed by the
insured were made in good faith and under the belief that they need not be disclosed.
Moreover, it held that the health history of the insured was immaterial since the insurance
policy was "non-medical."
Petitioner appealed to the Court of Appeals, which affirmed the decision of the trial court. The
appellate court ruled that petitioner cannot avoid its obligation by claiming concealment
because the cause of death was unrelated to the facts concealed by the insured. It also
sustained the finding of the trial court that the matters relating to the health history of the
insured were irrelevant since the petitioner waived the medical examination prior to the
approval and issuance of the insurance policy. Moreover, the appellate court agreed with the
trial court that the policy was "non-medical" (Rollo, pp. 4-5).
Petitioner’s motion for reconsideration was denied, hence, this petition.
II
We reverse the decision of the Court of Appeals.
The rule that factual findings of the lower court and the appellate court are binding on this
Court is not absolute and admits of exceptions, such as when the judgment is based on a
misappreciation of the facts (Geronimo v. Court of Appeals, 224 SCRA 494 [1993]).
In weighing the evidence presented, the trial court concluded that indeed there was
concealment and misrepresentation, however, the same was made in "good faith" and the facts
concealed or misrepresented were irrelevant since the policy was "non-medical." We disagree.
Section 26 of the Insurance Code is explicit in requiring a party to a contract of insurance to
communicate to the other, in good faith, all facts within his knowledge which are material to
the contract and as to which he makes no warranty, and which the other has no means of
ascertaining. Said Section provides:
"A neglect to communicate that which a party knows and ought to communicate, is called
concealment."
Materiality is to be determined not by the event, but solely by the probable and reasonable
influence of the facts upon the party to whom communication is due, in forming his estimate of
the disadvantages of the proposed contract or in making his inquiries (The Insurance Code, Sec
31).
The terms of the contract are clear. The insured is specifically required to disclose to the insurer
matters relating to his health.
The information which the insured failed to disclose were material and relevant to the approval
and the issuance of the insurance policy. The matters concealed would have definitely affected
petitioner’s action on his application, either by approving it with the corresponding adjustment
for a higher premium or rejecting the same. Moreover, a disclosure may have warranted a
medical examination of the insured by petitioner in order for it to reasonably assess the risk
involved in accepting the application.
In Vda. de Canilang v. Court of Appeals, 223 SCRA 443 (1993), we held that materiality of the
information withheld does not depend on the state of mind of the insured. Neither does it
depend on the actual or physical events which ensue.
Thus, "good faith" is no defense in concealment. The insured’s failure to disclose the fact that
he was hospitalized for two weeks prior to filing his application for insurance, raises grave
doubts about his bonafides. It appears that such concealment was deliberate on his part.
The argument, that petitioner’s waiver of the medical examination of the insured debunks the
materiality of the facts concealed, is untenable. We reiterate our ruling in Saturnino v.
Philippine American Life Insurance Company, 7 SCRA 316 (1963), that." . . the waiver of a
medical examination [in a non-medical insurance contract] renders even more material the
information required of the applicant concerning previous condition of health and diseases
suffered, for such information necessarily constitutes an important factor which the insurer
takes into consideration in deciding whether to issue the policy or not . . . ."cralaw virtua1aw
library
Moreover, such argument of private respondents would make Section 27 of the Insurance
Code, which allows the injured party to rescind a contract of insurance where there is
concealment, ineffective (See Vda de Canilang v. Court of Appeals, supra).
Anent the finding that the facts concealed had no bearing to the cause of death of the insured,
it is well settled that the insured need not die of the disease he had failed to disclose to the
insurer. It is sufficient that his non-disclosure misled the insurer in forming his estimates of the
risks of the proposed insurance policy or in making inquiries (Henson v. The Philippine American
Life Insurance Co., 56 O.G. No. 48 [1960]).
We, therefore, rule that petitioner properly exercised its right to rescind the contract of
insurance by reason of the concealment employed by the insured. It must be emphasized that
rescission was exercised within the two-year contestability period as recognized in Section 48 of
The Insurance Code.
WHEREFORE, the petition is GRANTED and the Decision of the Court of Appeals is REVERSED
and SET ASIDE.
SO ORDERED.

EIGHT CASE
G.R. No. 173211 : October 11, 2012
HEIRS OF DR. MARIO S. INTAC and ANGELINA MENDOZA-INTAC, Petitioners, v. COURT OF
APPEALS and SPOUSES MARCELO ROY, JR. and JOSEFINA MENDOZA-ROY and SPOUSES
DOMINADOR LOZADA and MARTINA MENDOZA-LOZADA, Respondents.
DECISION
MENDOZA, J.:
This is a Petition for Review on Certiorari under Rule 45 assailing the February 16, 2006 Decision
of the Court of Appeals (CA), in CA G.R. CV No. 75982, which modified the April 30, 2002
Decision of the Regional Trial Court, Branch 220, Quezon City ( RTC), in Civil Case No. Q-94-
19452, an action for cancellation of transfer certificate of title and reconveyance of property.
The Facts
From the records, it appears that Ireneo Mendoza (Ireneo), married to Salvacion Fermin
(Salvacion), was the owner of the subject property, presently covered by TCT No. 242655 of the
Registry of Deeds of Quezon City and situated at No. 36, Road 8, Bagong Pag-asa, Quezon City,
which he purchased in 1954. Ireneo had two children: respondents Josefina and Martina
(respondents), Salvacion being their stepmother. When he was still alive, Ireneo, also took care
of his niece, Angelina, since she was three years old until she got married. The property was
then covered by TCT No. 106530 of the Registry of Deeds of Quezon City. On October 25, 1977,
Ireneo, with the consent of Salvacion, executed a deed of absolute sale of the property in favor
of Angelina and her husband, Mario (Spouses Intac). Despite the sale, Ireneo and his family,
including the respondents, continued staying in the premises and paying the realty taxes. After
Ireneo died intestate in 1982, his widow and the respondents remained in the premises. After
Salvacion died, respondents still maintained their residence there. Up to the present, they are
in the premises, paying the real estate taxes thereon, leasing out portions of the property, and
collecting the rentals.
The Dispute
The controversy arose when respondents sought the cancellation of TCT No. 242655, claiming
that the sale was only simulated and, therefore, void. Spouses Intac resisted, claiming that it
was a valid sale for a consideration.
On February 22, 1994, respondents filed the Complaint for Cancellation of Transfer Certificate
of Title (TCT) No. 242655 against Spouses Intac before the RTC. The complaint prayed not only
for the cancellation of the title, but also for its reconveyance to them. Pending litigation, Mario
died on May 20, 1995 and was substituted by his heirs, his surviving spouse, Angelina, and their
children, namely, Rafael, Kristina, Ma. Tricia Margarita, Mario, and Pocholo, all surnamed Intac
(petitioners).
Averments of the Parties
In their Complaint, respondents alleged, among others, that when Ireneo was still alive,
Spouses Intac borrowed the title of the property (TCT No. 106530) from him to be used as
collateral for a loan from a financing institution; that when Ireneo informed respondents about
the request of Spouses Intac, they objected because the title would be placed in the names of
said spouses and it would then appear that the couple owned the property; that Ireneo,
however, tried to appease them, telling them not to worry because Angelina would not take
advantage of the situation considering that he took care of her for a very long time; that during
his lifetime, he informed them that the subject property would be equally divided among them
after his death; and that respondents were the ones paying the real estate taxes over said
property.
It was further alleged that after the death of Ireneo in 1982, a conference among relatives was
held wherein both parties were present including the widow of Ireneo, Salvacion; his nephew,
Marietto Mendoza (Marietto); and his brother, Aurelio Mendoza (Aurelio). In the said
conference, it was said that Aurelio informed all of them that it was Ireneos wish to have the
property divided among his heirs; that Spouses Intac never raised any objection; and that
neither did they inform all those present on that occasion that the property was already sold to
them in 1977.
Respondents further alleged that sometime in 1993, after the death of Salvacion, rumors
spread in the neighborhood that the subject property had been registered in the names of
Spouses Intac; that upon verification with the Office of the Register of Deeds of Quezon City,
respondents were surprised to find out that TCT No. 106530 had indeed been cancelled by
virtue of the deed of absolute sale executed by Ireneo in favor of Spouses Intac, and as a result,
TCT No. 242655 was issued in their names; that the cancellation of TCT No. 106530 and the
subsequent issuance of TCT No. 242655 were null and void and had no legal effect whatsoever
because the deed of absolute sale was a fictitious or simulated document; that the Spouses
Intac were guilty of fraud and bad faith when said document was executed; that Spouses Intac
never informed respondents that they were already the registered owners of the subject
property although they had never taken possession thereof; and that the respondents had
been in possession of the subject property in the concept of an owner during Ireneos lifetime
up to the present.
In their Answer, Spouses Intac countered, among others, that the subject property had been
transferred to them based on a valid deed of absolute sale and for a valuable consideration;
that the action to annul the deed of absolute sale had already prescribed; that the stay of
respondents in the subject premises was only by tolerance during Ireneos lifetime because they
were not yet in need of it at that time; and that despite respondents knowledge about the sale
that took place on October 25, 1977, respondents still filed an action against them.
Ruling of the RTC
On April 30, 2002, the RTC rendered judgment in favor of respondents and against Spouses
Intac. The dispositive portion of its Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered:
(1) Declaring the Deed of Absolute Sale executed by Ireneo Mendoza in favor of Mario and
Angelina Intac dated October 25, 1977 as an equitable mortgage;
(2) Ordering the Register of Deeds of Quezon City to cancel Transfer Certificate Title No. 242655
and, in lieu thereof, issue a new Transfer Certificate of Title in the name of Ireneo Mendoza;
and
(3) Ordering defendants to pay plaintiffs the amount of Thirty Thousand Pesos (Php30,000.00)
as and for attorneys fees.
The other claims for damages are hereby denied for lack of merit.
SO ORDERED.
The RTC ruled, among others, that the sale between Ireneo and Salvacion, on one hand, and
Spouses Intac was null and void for being a simulated one considering that the said parties had
no intention of binding themselves at all. It explained that the questioned deed did not reflect
the true intention of the parties and construed the said document to be an equitable mortgage
on the following grounds: the signed document did not express the real intention of the
contracting parties because Ireneo signed the said document only because he was in urgent
need of funds; the amount of ₱60,000.00 in 1977 was too inadequate for a purchase price of
a 240-square meter lot located in Quezon City; Josefina and Martina continued to be in
possession of the subject property from 1954 and even after the alleged sale took place in 1977
until this case was filed in 1994; and the Spouses Intac started paying real estate taxes only in
1999. The RTC added that the Spouses Intac were guilty of fraud because they effected the
registration of the subject property even though the execution of the deed was not really
intended to transfer the ownership of the subject property.
Ruling of the CA
On appeal, the CA modified the decision of the RTC. The CA ruled that the RTC erred in first
declaring the deed of absolute sale as null and void and then interpreting it to be an equitable
mortgage. The CA believed that Ireneo agreed to have the title transferred in the name of the
Spouses Intac to enable them to facilitate the processing of the mortgage and to obtain a loan.
This was the exact reason why the deed of absolute sale was executed. Marietto testified that
Ireneo never intended to sell the subject property to the Spouses Intac and that the deed of
sale was executed to enable them to borrow from a bank. This fact was confirmed by Angelina
herself when she testified that she and her husband mortgaged the subject property sometime
in July 1978 to finance the construction of a small hospital in Sta. Cruz, Laguna.
The CA further observed that the conduct of Spouses Intac belied their claim of ownership.
When the deed of absolute sale was executed, Spouses Intac never asserted their ownership
over the subject property, either by collecting rents, by informing respondents of their
ownership or by demanding possession of the land from its occupants. It was not disputed that
it was respondents who were in possession of the subject property, leasing the same and
collecting rentals. Spouses Intac waited until Ireneo and Salvacion passed away before they
disclosed the transfer of the title to respondents. Hence, the CA was of the view that the
veracity of their claim of ownership was suspicious.
Moreover, wrote the CA, although Spouses Intac claimed that the purchase of the subject
property was for a valuable consideration (P60,000.00), they admitted that they did not have
any proof of payment. Marietto, whose testimony was assessed by the RTC to be credible,
testified that there was no such payment because Ireneo never sold the subject property as he
had no intention of conveying its ownership and that his only purpose in lending the title was to
help Spouses Intac secure a loan. Thus, the CA concluded that the deed of absolute sale was a
simulated document and had no legal effect.
Finally, the CA stated that even assuming that there was consent, the sale was still null and void
because of lack of consideration. The decretal portion of the CA Decision reads:
WHEREFORE, in view of the foregoing premises, the decision of the Regional Trial Court of
Quezon City, Branch 220, is AFFIRMED with modifications, as follows:
1. The Deed of Absolute Sale dated October 25, 1977 executed by Ireneo Mendoza and
Salvacion Fermen in favor of Spouses Mario and Angelina Intac is hereby declared NULL
AND VOID;
2. the Register of Deed[s] of Quezon City is ordered to cancel TCT No. 242655 and, in lieu
thereof, issue a new one and reinstate Ireneo Mendoza as the registered owner;
3. The defendant appellants are hereby ordered to pay the plaintiff appellees the amount
of thirty thousand pesos (Php30,000.00) as and for attorneys fees; and
4. The other claims for damages are denied for lack of merit.
SO ORDERED.
Not in conformity, petitioners filed this petition for review anchored on the following
ASSIGNMENT OF ERRORS
I
THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT AFFIRMED THE DECISION OF
THE REGIONAL TRIAL COURT DATED FEBRUARY 16, 2006 WHICH WAS CONTRARY TO THE
APPLICABLE LAWS AND EXISTING JURISPRUDENCE.
 II
THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT CLEARLY OVERLOOKED,
MISUNDERSTOOD AND/OR MISAPPLIED THE EVIDENCE PRESENTED IN THE COURT A QUO.
Petitioners position
Petitioners primarily argue that the subject deed of sale was a valid and binding contract
between the parties. They claim that all the elements of a valid contract of sale were present,
to wit: [a] consent or meeting of the minds, that is, consent to transfer ownership in exchange
of price; [b] determinate subject matter; and [c] price certain in money or its equivalent.
Petitioners claim that respondents have validly gave their consent to the questioned sale of the
subject property. In fact, it was Ireneo and Salvacion who approached them regarding their
intention to sell the subject property. Ireneo and Salvacion affixed their signatures on the
questioned deed and never brought any action to invalidate it during their lifetime. They had all
the right to sell the subject property without having to inform their children of their intention
to sell the same. Ordinary human experience dictates that a party would not affix his or her
signature on any written instrument which would result in deprivation of ones property right if
there was really no intention to be bound by it. A party would not keep silent for several years
regarding the validity and due execution of a document if there was an issue on the real
intention of the vendors. The signatures of Ireneo and Salvacion meant that they had knowingly
and willfully entered into such agreement and that they were prepared for the consequences of
their act.
Respondents Position
Respondents are of the position that the RTC and the CA were correct in ruling that the
questioned deed of absolute sale was a simulated one considering that Ireneo and Salvacion
had no intention of selling the subject property. The true intention rather was that Spouses
Intac would just borrow the title of the subject property and offer it as a collateral to secure a
loan. No money actually changed hands.
According to respondents, there were several circumstances which put in doubt the validity of
the deed of absolute sale. First, the parties were not on equal footing because Angelina was a
doctor by profession while Ireneo and Salvacion were less educated people who were just
motivated by their trust, love and affection for her whom they considered as their own child.
Second, if there was really a valid sale, it was just and proper for Spouses Intac to divulge the
conveyance to respondents, being compulsory heirs, but they did not. Third, Ireneo and
Salvacion did nothing to protect their interest because they banked on the representation of
Spouses Intac that the title would only be used to facilitate a loan with a bank. Fourth, Ireneo
and Salvacion remained in possession of the subject property without being disturbed by
Spouses Intac. Fifth, the price of the sale was inadequate and inequitable for a prime property
located in Pag-asa, Quezon City. Sixth, Ireneo and Salvacion had no intention of selling the
subject property because they had heirs who would inherit the same. Seventh, the Spouses
Intac abused the trust and affection of Ireneo and Salvacion by arrogating unto themselves the
ownership of the subject property to the prejudice of his own children, Josefina and Martina.
Finally, petitioners could not present a witness to rebut Mariettos testimony which was
straightforward and truthful.
The Courts Ruling

Basically, the Court is being asked to resolve the issue of whether the Deed of Absolute Sale,
dated October 25, 1977, executed by and between Ireneo Mendoza and Salvacion Fermin, as
vendors, and Mario Intac and Angelina Intac, as vendees, involving the subject real property in
Pagasa, Quezon City, was a simulated contract or a valid agreement.
The Court finds no merit in the petition.
A contract, as defined in the Civil Code, is a meeting of minds, with respect to the other, to give
something or to render some service. Article 1318 provides:
Art. 1318. There is no contract unless the following requisites concur:
(1) Consent of the contracting parties;
(2) Object certain which is the subject matter of the contract;
(3) Cause of the obligation which is established.
Accordingly, for a contract to be valid, it must have 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.12ςrνll
All these elements must be present to constitute a valid contract. Consent is essential to the
existence of a contract; and where it is wanting, the contract is non-existent. In a contract of
sale, its perfection is consummated at the moment there is a meeting of the minds upon the
thing that is the object of the contract and upon the price. Consent is manifested by the
meeting of the offer and the acceptance of the thing and the cause, which are to constitute the
contract.
In this case, the CA ruled that the deed of sale executed by Ireneo and Salvacion was absolutely
simulated for lack of consideration and cause and, therefore, void. Articles 1345 and 1346 of
the Civil Code provide:chanroblesvirtuallawlibrary
Art. 1345. Simulation of a contract may be absolute or relative. The former takes place when
the parties do not intend to be bound at all; the latter, when the parties conceal their true
agreement.
Art. 1346. An absolutely simulated or fictitious contract is void. A relative simulation, when it
does not prejudice a third person and is not intended for any purpose contrary to law, morals,
good customs, public order or public policy binds the parties to their real agreement.
If the parties state a false cause in the contract to conceal their real agreement, the contract is
only relatively simulated and the parties are still bound by their real agreement. Hence, where
the essential requisites of a contract are present and the simulation refers only to the content
or terms of the contract, the agreement is absolutely binding and enforceable between the
parties and their successors in interest.
In absolute simulation, there is a colorable contract but it has no substance as the parties have
no intention to be bound by it. "The main characteristic of an absolute simulation is that the
apparent contract is not really desired or intended to produce legal effect or in any way alter
the juridical situation of the parties." "As a result, an absolutely simulated or fictitious contract
is void, and the parties may recover from each other what they may have given under the
contract."
In the case at bench, the Court is one with the courts below that no valid sale of the subject
property actually took place between the alleged vendors, Ireneo and Salvacion; and the
alleged vendees, Spouses Intac. There was simply no consideration and no intent to sell it.
Critical is the testimony of Marietto, a witness to the execution of the subject absolute deed of
sale. He testified that Ireneo personally told him that he was going to execute a document of
sale because Spouses Intac needed to borrow the title to the property and use it as collateral
for their loan application. Ireneo and Salvacion never intended to sell or permanently transfer
the full ownership of the subject property to Spouses Intac. Marietto was characterized by the
RTC as a credible witness.
Aside from their plain denial, petitioners failed to present any concrete evidence to disprove
Mariettos testimony. They claimed that they actually paid P150,000.00 for the subject property.
They, however, failed to adduce proof, even by circumstantial evidence, that they did, in fact,
pay it. Even for the consideration of P60,000.00 as stated in the contract, petitioners could not
show any tangible evidence of any payment therefor. Their failure to prove their payment only
strengthened Mariettos story that there was no payment made because Ireneo had no
intention to sell the subject property.
Angelinas story, except on the consideration, was consistent with that of Marietto. Angelina
testified that she and her husband mortgaged the subject property sometime in July 1978 to
finance the construction of a small hospital in Sta. Cruz, Laguna. Angelina claimed that Ireneo
offered the property as he was in deep financial need.
Granting that Ireneo was in financial straits, it does not prove that he intended to sell the
property to Angelina. Petitioners could not adduce any proof that they lent money to Ireneo or
that he shared in the proceeds of the loan they had obtained. And, if their intention was to
build a hospital, could they still afford to lend money to Ireneo? And if Ireneo needed money,
why would he lend the title to Spouses Intac when he himself could use it to borrow money for
his needs? If Spouses Intac took care of him when he was terminally ill, it was not surprising for
Angelina to reciprocate as he took care of her since she was three (3) years old until she got
married. Their caring acts for him, while they are deemed services of value, cannot be
considered as consideration for the subject property for lack of quantification and the Filipino
culture of taking care of their elders.
Thus, the Court agrees with the courts below that the questioned contract of sale was only for
the purpose of lending the title of the property to Spouses Intac to enable them to secure a
loan. Their arrangement was only temporary and could not give rise to a valid sale. Where there
is no consideration, the sale is null and void ab initio. In the case of Lequin v. Vizconde, the
Court wrote:
here can be no doubt that the contract of sale or Kasulatan lacked the essential element of
consideration. It is a well-entrenched rule that where the deed of sale states that the purchase
price has been paid but in fact has never been paid, the deed of sale is null and void ab initio for
lack of consideration. Moreover, Art. 1471 of the Civil Code, which provides that "if the price is
simulated, the sale is void," also applies to the instant case, since the price purportedly paid as
indicated in the contract of sale was simulated for no payment was actually made.
Consideration and consent are essential elements in a contract of sale. Where a partys consent
to a contract of sale is vitiated or where there is lack of consideration due to a simulated price,
the contract is null and void ab initio. [Emphases supplied]
More importantly, Ireneo and his family continued to be in physical possession of the subject
property after the sale in 1977 and up to the present. They even went as far as leasing the same
and collecting rentals. If Spouses Intac really purchased the subject property and claimed to be
its true owners, why did they not assert their ownership immediately after the alleged sale took
place? Why did they have to assert their ownership of it only after the death of Ireneo and
Salvacion? One of the most striking badges of absolute simulation is the complete absence of
any attempt on the part of a vendee to assert his right of dominion over the property.
On another aspect, Spouses Intac failed to show that they had been paying the real estate taxes
of the subject property. They admitted that they started paying the real estate taxes on the
property for the years 1996 and 1997 only in 1999. They could only show two (2) tax receipts
(Real Property Tax Receipt No. 361105, dated April 21, 1999, and Real Property Tax Receipt No.
361101, dated April 21, 1999).18ςrνll Noticeably, petitioners tax payment was just an
afterthought. The non-payment of taxes was also taken against the alleged vendees in the case
of Lucia Carlos Ali v. Heirs of Angelica A. Lorenzo. Thus,
Furthermore, Lucia religiously paid the realty taxes on the subject lot from 1980 to 1987.While
tax receipts and declarations of ownership for taxation purposes are not, in themselves,
incontrovertible evidence of ownership, they constitute at least proof that the holder has a
claim of title over the property, particularly when accompanied by proof of actual possession.
They are good indicia of the possession in the concept of owner, for no one in his right mind
would be paying taxes for a property that is not in his actual or at least constructive possession.
The voluntary declaration of a piece of property for taxation purposes manifests not only one's
sincere and honest desire to obtain title to the property and announces his adverse claim
against the State and all other interested parties, but also the intention to contribute needed
revenues to the Government. Such an act strengthens one's bona fide claim of acquisition of
ownership.
On the other hand, respondent heirs failed to present evidence that Angelica, during her
lifetime, paid the realty taxes on the subject lot. They presented only two tax receipts showing
that Servillano, Sr. belatedly paid taxes due on the subject lot for the years 1980-1981 and part
of year 1982 on September 8, 1989, or about a month after the institution of the complaint on
August 3, 1989, a clear indication that payment was made as an afterthought to give the
semblance of truth to their claim.
Thus, the subsequent acts of the parties belie the intent to be bound by the deed of sale.
[Emphases supplied]
The primary consideration in determining the true nature of a contract is the intention of the
parties. If the words of a contract appear to contravene the evident intention of the parties, the
latter shall prevail. Such intention is determined not only from the express terms of their
agreement, but also from the contemporaneous and subsequent acts of the parties. As
heretofore shown, the contemporaneous and subsequent acts of both parties in this case, point
to the fact that the intention of Ireneo was just to lend the title to the Spouses Intac to enable
them to borrow money and put up a hospital in Sta. Cruz, Laguna. Clearly, the subject contract
was absolutely simulated and, therefore, void.
In view of the foregoing, the Court finds it hard to believe the claim of the Spouses Intac that
the stay of Ireneo and his family in the subject premises was by their mere tolerance as they
were not yet in need of it. As earlier pointed out, no convincing evidence, written or
testimonial, was ever presented by petitioners regarding this matter. It is also of no moment
that TCT No. 106530 covering the subject property was cancelled and a new TCT (TCT No.
242655) was issued in their names. The Spouses Intac never became the owners of the
property despite its registration in their names. After all, registration does not vest title.
As a logical consequence, petitioners did not become the owners of the subject property even
after a TCT had been issued in their names. After all, registration does not vest title. Certificates
of title merely confirm or record title already existing and vested. They cannot be used to
protect a usurper from the true owner, nor can they be used as a shield for the commission of
fraud, or to permit one to enrich oneself at the expense of others. Hence, reconveyance of the
subject property is warranted.
The Court does not find acceptable either the argument of the Spouses Intac that respondents
action for cancellation of TCT No. 242655 and the reconveyance of the subject property is
already barred by the Statute of Limitations. The reason is that the respondents are still in
actual possession of the subject property. It is a well-settled doctrine that "if the person
claiming to be the owner of the property is in actual possession thereof, the right to seek
reconveyance, which in effect seeks to quiet title to the property, does not prescribe." In Lucia
Carlos Ali, it was also written:
The lower courts fault Lucia for allegedly not taking concrete steps to recover the subject lot,
demanding its return only after 10 years from the registration of the title. They, however, failed
to consider that Lucia was in actual possession of the property.
It is well-settled that an action for reconveyance prescribes in 10 years, the reckoning point of
which is the date of registration of the deed or the date of issuance of the certificate of title
over the property. In an action for reconveyance, the decree of registration is highly regarded
as incontrovertible. What is sought instead is the transfer of the property or its title, which has
been erroneously or wrongfully registered in another person's name, to its rightful or legal
owner or to one who has a better right.
However, in a number of cases in the past, the Court has consistently ruled that if the person
claiming to he the owner of the property is in actual possession thereof, the right to seek
reconveyance, which in effect seeks to quiet title to the property, does not prescribe. The
reason for this is that one who is in actual possession of a piece of land claiming to be the
owner thereof may wait until his possession is disturbed or his title is attacked before taking
steps to vindicate his right. The reason being, that his undisturbed possession gives him the
continuing right to seek the aid of a court of equity to ascertain the nature of the adverse claim
of a third party and its effect on his title, which right can be claimed only by one who is in
possession. Thus, considering that Lucia continuously possessed the subject lot, her right to
institute a suit to clear the cloud over her title cannot he barred by the statute of limitations.:
[Emphases supplied]
WHEREFORE, the petition is DENIED.
SO ORDERED.

NINETH CASE
G.R. No. 208984, September 16, 2015
WT CONSTRUCTION, INC., Petitioner, v. THE PROVINCE OF CEBU, Respondent.
DECISION
PERLAS-BERNABE, J.:
Before this Court are consolidated petitions for review on certiorari assailing the Decision dated
December 19, 2012 and the Resolution3 dated August 8, 2013 of the Court of Appeals (CA) in
CA-G.R. CEB-CV No. 03791, which affirmed the Order4 dated September 22, 2009 of the
Regional Trial Court of Cebu City, Branch 6 (RTC) in Civil Case No. CEB-34012 finding the
Province of Cebu liable to pay WT Construction, Inc. (WTCI) the amount of P257,413,911.73,
but reduced the legal interest rate imposable thereon from 12% to 6% per annum.
The Facts
Sometime in 2005, the Province of Cebu was chosen by former President Gloria Macapagal-
Arroyo to host the 12th Association of Southeast Asian Nations (ASEAN) Summit scheduled on
December 10, 2006. To cater to the event, it decided to construct the Cebu International
Convention Center (CICC or the project) at the New Mandaue Reclamation Area, Mandaue City,
Cebu, which would serve as venue for the ASEAN Summit.
Accordingly, the Province of Cebu conducted a public bidding for the project and, on February
22, 2006, WTCI emerged as the winning bidder for the construction of Phase I thereof which
consists of the substructure of CICC. On July 26, 2006, after completing Phase I and receiving
payment therefor, WTCI again won the bidding for Phase II of the project involving the adjacent
works on CICC.
As Phase II neared completion, the Province of Cebu caused WTCI to perform additional works
on the project which included site development, and additional structural, architectural,
electric, and plumbing works (additional works). Cognizant of the need to complete the project
in time for the ASEAN Summit, and with the repeated assurances that it would be promptly
paid, WTCI agreed to perform the additional works notwithstanding the lack of public bidding.
In November 2006, weeks before the scheduled ASEAN Summit, WTCI completed the project,
including the additional works and, accordingly, demanded payment therefor.In a letter dated
February 8, 2007, WTCI billed the Province of Cebu the amount of P175,951,478.69
corresponding to the added cost for the site development and extended structural and
architectural works. In a separate letter dated February 12, 2007, WTCI billed the Province of
Cebu the amount of P85,266,407.97 representing the cost for the additional electrical and
plumbing works. The Province of Cebu, however, refused to pay,thereby prompting WTCI to
send a Final Billing12 dated February 21, 2007 where it demanded payment of the aggregate
sum of P261,217,886.66.
In the letters dated March 20, 2007 and September 11, 2007, WTCI again reiterated its demand
for payment but the Province of Cebu still refused to pay. Thus, on January 22, 2008, WTCI filed
a complaint15 for collection of sum of money before the RTC which was docketed as Civil Case
No. CEB-34012.
or its defense, the Province of Cebu admitted the existence of the additional works but
maintained that there was no contract between it and WTCI therefor. It also claimed that the
additional works did not undergo public bidding as required by Republic Act No. (RA) 9184,
otherwise known as the "Government Procurement Reform Act." Upon joint verification by the
parties, the value of the additional works was pegged at P263,263,261.41.
The RTC Ruling
In a Judgment dated May 20, 2009, the RTC ruled in favor of WTCI and ordered the Province of
Cebu to pay the following amounts: (a) P263,263,261.41 representing the cost of the additional
works, with legal interest at the rate of 12% per annum computed from the filing of the
complaint on January 22, 2008 until fully paid; (b) P50,000.00 as attorney's fees; and (c) costs of
suit. The RTC found that there was a perfected oral contract between the parties for the
additional works on CICC, and that WTCI must be duly compensated therefor under the
doctrine of quantum meruit; otherwise, the Province of Cebu would be unjustly enriched.
The Province of Cebu sought a reconsideration of the foregoing and argued that its valuation of
the additional works was only P257,413,911.73. Further, it maintained that it was not liable to
pay interests as WTCI performed the additional works at its own risk, given that there was no
public bidding.
WTCI, on the other hand, neither filed an appeal nor a motion for reconsideration of the May
20, 2009 Judgment of the RTC.
In an Order dated September 22, 2009, the RTC granted in part the motion for reconsideration
and reduced the amount of actual damages from P263,263,261.41 to P257,413,911.73, in
accordance with the cost standards for the year 2006 provided by the Commission on Audit
(COA), the National Statistics Office (NSO), the Department of Trade and Industry (DTI), and the
Province of Cebu itself. On all other points, including the award of 12% legal interest from the
filing of the complaint, as well as the award of attorney's fees and costs of suit, the RTC
sustained its earlier ruling.
Dissatisfied, the Province of Cebu appealed to the CA.
The CA Ruling
In a Decision dated December 19, 2012, the CA affirmed the RTC's Order dated September 22,
2009 but reduced the interest rate to 6% per annum. It remarked that the issue of whether or
not a contract existed between the parties for the additional works has been rendered
immaterial in view of the admission by the Province of Cebu that it was liable for the amount of
P257,413,911.73, and that it had paid the same to WTCI; hence, only the award of interest,
attorney's fees, and costs of suit are at issue. In this regard, the CA pointed out that the
reduction of the interest rate from 12% to 6% per annum is warranted given that the liability of
the Province of Cebu did not arise from a loan or forbearance of money but from the
non¬payment of services rendered by WTCI. Anent the award of attorney's fees and costs of
suit, the CA affirmed the same after finding that the Province of Cebu acted maliciously and in
bad faith when it refused to pay the value of the additional works.
On January 24, 2013, the Province of Cebu moved for reconsideration which was, however,
denied by the CA in a Resolution dated August 8, 2013.

WTCI, on the other hand, did not seek for a reconsideration of the CA's December 19, 2012
Decision but filed, on November 13, 2013, a petition for review on certiorari before this Court,
docketed as G.R. No. 208984. In said petition, WTCI maintained that the obligation is one for
forbearance of money since its performance of the additional works was a mere financial
accommodation to the Province of Cebu, thereby warranting the imposition of legal interest at
the rate of 12% per annum, as originally decreed by the RTC. It further claimed that the interest
should be computed from the date of extrajudicial demand, i.e., from the date of receipt of the
Province of Cebu of its February 8 and 12, 2007 billing letters.
On November 13, 2013, the Province of Cebu filed its own petition for review on
certioraribefore this Court, docketed as G.R. No. 209245. It contended that there was no
perfected contract between the parties and that even if there was, the same is void for lack of
public bidding as required under RA 9184. While it admitted paying P257,413,911.73 to WTCI,
the Province of Cebu averred that it did so only under the principle of quantum meruit, adding
too that it could not be held liable for interest, attorney's fees, and costs of suit because there
was no valid contract and that, at any rate, even if it wanted to pay WTCI sooner, it could not
do so owing to the lack of documentation.
In a Resolution dated December 4, 2013, the Court consolidated the present petitions.
The Issues Before the Court
The issues for the resolution of the Court are: (a) whether or not the liability of the Province of
Cebu is in the nature of a loan or forbearance of money; and (b) whether or not the interest
due should be computed from the date of the filing of the complaint or from the time
extrajudicial demand was made.
The Court's Ruling
At the outset, it must be pointed out that a determination of whether or not there wras a
perfected oral contract between the Province of Cebu and WTCI is a question of fact which is
beyond the scope of the Court's power in a petition for review on certiorari, subject to certain
exceptions which do not obtain in this case. It is a settled rule that questions of law may be
brought before this Court on petition for review on certiorari under Rule of the Rules of Court.
This Court is not a trier of facts and factual findings of the RTC, when affirmed by the CA, as in
this case, are entitled to great weight and respect by this Court and are deemed final and
conclusive when supported by the evidence on record. Accordingly, the Court affirms the
liability of the Province of Cebu to WTCI in the amount of P257,413,911.73 which corresponds
to the value of the additional works.
The Court now proceeds to determine the nature of the liability of the Province of Cebu to
WTCI.

There is no question that the present case does not involve an obligation arising from a loan;
what is at issue is whether the liability of the Province of Cebu involves a forbearance of money,
based on WTCI's claim that it merely advanced the cost of the additional works. In Sunga-Chan
v. CA, the Court characterized a transaction involving forbearance of money as follows:
The term "forbearance," within the context of usury law, has been described as a contractual
obligation of a lender or creditor to refrain, during a given period of time, from requiring the
borrower or debtor to repay the loan or debt then due and payable.
In Estores v. Supangan, the Court explained that forbearance of money, goods, or credit refers
to arrangements other than loan agreements where a person acquiesces to the temporary use
of his money, goods or credits pending the happening of certain events or fulfilment of certain
conditions such that if these conditions are breached, the said person is entitled not only to the
return of the principal amount given, but also to compensation for the use of his money
equivalent to the legal interest since the use or deprivation of funds is akin to a loan.
Applying the foregoing standards to the case at hand, the Court finds that the liability of the
Province of Cebu to WTCI is not in the nature of a forbearance of money as it does not involve
an acquiescence to the temporary use of WTCI's money, goods or credits. Rather, this case
involves WTCI's performance of a particular service, i.e., the performance of additional works
on CICC, consisting of site development, additional structural, architectural, plumbing, and
electrical works thereon.
Verily, the Court has repeatedly recognized that liabilities arising from construction contracts
do not partake of loans or forbearance of money but are in the nature of contracts of service. In
Federal Builders, Inc. v. Foundation Specialists, Inc., the Court ruled that the liability arising
from the non-payment for the construction works, specifically the construction of a diaphragm
wall, capping beam, and guide walls of the Trafalgar Plaza in Makati City, do not partake of a
loan or forbearance of money but is more in the nature of a contract of service. The Court,
therefore, sustains the CA's ruling that the rate of legal interest imposable on the liability of the
Province of Cebu to WTCI is 6% per annum, in accordance with the guidelines laid down in
Eastern Shipping Lines, Inc. v. Court of Appeals50 (Eastern Shipping Lines, Inc.), viz.:
II. With regard particularly to an award of interest in the concept of actual and compensatory
damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e.,
a loan or forbearance of money, the interest due should be that which may have been
stipulated in writing. Furthermore, the interest due shall itself earn legal interest from
the time it is judicially demanded. In the absence of stipulation, the rate of interest shall
 be 12% per annum to be computed from default, i.e., from judicial or extrajudicial
demand under and subject to the provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an
interest on the amount of damages awarded may be imposed at the discretion of the
court at the rate of 6% per annum. No interest, however, shall be adjudged on
unliquidated claims or damages except when or until the demand can be established
with reasonable certainty. Accordingly, where the demand is established with
reasonable certainty, the interest shall begin to run from the time the claim is made
judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so
reasonably established at the time the demand is made, the interest shall begin to run
only from the date the judgment of the court is made (at which time the quantification
of damages may be deemed to have been reasonably ascertained). The actual base for
the computation of legal interest shall, in any case, be on the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and
executory, the rate of legal interest, whether the case falls under paragraph 1 or
paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this
interim period being deemed to be by then an equivalent to a forbearance of credit.
The foregoing guidelines have been updated in Nacar v. Gallery Frames (Nacar), pursuant to
Bangko Sentral ng Pilipinas (BSP) Circular No. 799, series of 2013, which reduced the rate of
legal interest for loans or transactions involving forbearance of money, goods, or credit from
12% to 6% per annum. Nevertheless, the rate of legal interest for obligations not constituting
loans or forbearance such as the one subject of this case remains unchanged at 6% per annum.
Coming now to the issue of whether the RTC and the CA erred in computing the interest due
WTCI from the time of the filing of the complaint, the Court finds merit in WTCI's argument that
the same should be reckoned from the time WTCI made the extrajudicial demand for the
payment of the principal, i.e., upon receipt of the Province of Cebu of WTCI's February 8, 2007
and February 12, 2007 letters demanding payment for the additional structural and
architectural works, and additional electrical and plumbing works, respectively. The Court
observes, however, that WTCI neither appealed from nor sought a reconsideration of the May
20, 2009 Judgment of the RTC which awarded interest to it computed from the time of the filing
of the complaint on January 22, 2008. Accordingly, the RTC's determination of the interest's
reckoning point had already become final as against WTCI since it was not one of the assigned
errors considered on appeal. It is settled that a decision becomes final as against a party who
does not appeal the same.54 Consequently, the present petition of WTCI questioning the RTC's
determination on the reckoning point of the legal interest awarded can no longer be given due
course. The Court is, therefore, constrained to uphold the rulings of the RTC and the CA that the
legal interest shall be computed from the time of the filing of the complaint.
Lastly, the Court agrees with the CA that the legal interest rate of 6% shall be imposed from the
finality of the herein judgment until satisfaction thereof. This is in view of the principle that in
the interim, the obligation assumes the nature of a forbearance of credit which, pursuant to
Eastern Shipping Lines, Inc. as modified by Nacar, is subject to legal interest at the rate of 6%
per annum.
WHEREFORE, the petitions are DENIED. The Decision dated December 19, 2012 and the
Resolution dated August 8, 2013 of the Court of Appeals in CA-G.R. CEB-CV No. 03791 are
hereby AFFIRMED.
SO ORDERED.

TENTH CASE
G.R. No. 126376 November 20, 2003

SPOUSES BERNARDO BUENAVENTURA and CONSOLACION JOAQUIN, SPOUSES JUANITO EDRA

and NORA JOAQUIN, SPOUSES RUFINO VALDOZ and EMMA JOAQUIN, and NATIVIDAD
JOAQUIN, petitioners, vs. COURT OF APPEALS, SPOUSES LEONARDO JOAQUIN and FELICIANA
LANDRITO, SPOUSES FIDEL JOAQUIN and CONCHITA BERNARDO, SPOUSES TOMAS JOAQUIN
and SOLEDAD ALCORAN, SPOUSES ARTEMIO JOAQUIN and SOCORRO ANGELES, SPOUSES
ALEXANDER MENDOZA and CLARITA JOAQUIN, SPOUSES TELESFORO CARREON and FELICITAS
JOAQUIN, SPOUSES DANILO VALDOZ and FE JOAQUIN, and SPOUSES GAVINO JOAQUIN and
LEA ASIS, respondents.
DECISION
CARPIO, J.:
The Case
This is a petition for review on certiorari to annul the Decision2dated 26 June 1996 of the Court
of Appeals in CA-G.R. CV No. 41996. The Court of Appeals affirmed the Decision dated 18
February 1993 rendered by Branch 65 of the Regional Trial Court of Makati ("trial court") in Civil
Case No. 89-5174. The trial court dismissed the case after it found that the parties executed the
Deeds of Sale for valid consideration and that the plaintiffs did not have a cause of action
against the defendants.
The Facts
The Court of Appeals summarized the facts of the case as follows:
Defendant spouses Leonardo Joaquin and Feliciana Landrito are the parents of plaintiffs
Consolacion, Nora, Emma and Natividad as well as of defendants Fidel, Tomas, Artemio, Clarita,
Felicitas, Fe, and Gavino, all surnamed JOAQUIN. The married Joaquin children are joined in this
action by their respective spouses.
Sought to be declared null and void ab initio are certain deeds of sale of real property executed
by defendant parents Leonardo Joaquin and Feliciana Landrito in favor of their co-defendant
children and the corresponding certificates of title issued in their names, to wit:
1. Deed of Absolute Sale covering Lot 168-C-7 of subdivision plan (LRC) Psd-256395
executed on 11 July 1978, in favor of defendant Felicitas Joaquin, for a consideration of
₱6,000.00 (Exh. "C"), pursuant to which TCT No. [36113/T-172] was issued in her name
(Exh. "C-1");
2. Deed of Absolute Sale covering Lot 168-I-3 of subdivision plan (LRC) Psd-256394
executed on 7 June 1979, in favor of defendant Clarita Joaquin, for a consideration of
₱1[2],000.00 (Exh. "D"), pursuant to which TCT No. S-109772 was issued in her name
(Exh. "D-1");
3. Deed of Absolute Sale covering Lot 168-I-1 of subdivision plan (LRC) Psd-256394
executed on 12 May 1988, in favor of defendant spouses Fidel Joaquin and Conchita
Bernardo, for a consideration of ₱54,[3]00.00 (Exh. "E"), pursuant to which TCT No.
155329 was issued to them (Exh. "E-1");
4. Deed of Absolute Sale covering Lot 168-I-2 of subdivision plan (LRC) Psd-256394
executed on 12 May 1988, in favor of defendant spouses Artemio Joaquin and Socorro
Angeles, for a consideration of ₱[54,3]00.00 (Exh. "F"), pursuant to which TCT No.
155330 was issued to them (Exh. "F-1"); and
5. Absolute Sale of Real Property covering Lot 168-C-4 of subdivision plan (LRC) Psd-
256395 executed on 9 September 1988, in favor of Tomas Joaquin, for a consideration
of ₱20,000.00 (Exh. "G"), pursuant to which TCT No. 157203 was issued in her name
(Exh. "G-1").
6. Deed of Absolute Sale covering Lot 168-C-1 of subdivision plan (LRC) Psd-256395
executed on 7 October 1988, in favor of Gavino Joaquin, for a consideration of
₱25,000.00 (Exh. "K"), pursuant to which TCT No. 157779 was issued in his name (Exh.
"K-1").]
In seeking the declaration of nullity of the aforesaid deeds of sale and certificates of title,
plaintiffs, in their complaint, aver:
- XX-
The deeds of sale, Annexes "C," "D," "E," "F," and "G," [and "K"] are simulated as they are, are
NULL AND VOID AB INITIO because –
a) Firstly, there was no actual valid consideration for the deeds of sale xxx over the
properties in litis;
 b) Secondly, assuming that there was consideration in the sums reflected in the questioned
deeds, the properties are more than three-fold times more valuable than the measly
sums appearing therein;
c) Thirdly, the deeds of sale do not reflect and express the true intent of the parties
(vendors and vendees); and
d) Fourthly, the purported sale of the properties in litis was the result of a deliberate
conspiracy designed to unjustly deprive the rest of the compulsory heirs (plaintiffs
herein) of their legitime.
-XXI -
Necessarily, and as an inevitable consequence, Transfer Certificates of Title Nos. 36113/T-172,
S-109772, 155329, 155330, 157203 [and 157779] issued by the Registrar of Deeds over the
properties in litis xxx are NULL AND VOID AB INITIO.
Defendants, on the other hand aver (1) that plaintiffs do not have a cause of action against
them as well as the requisite standing and interest to assail their titles over the properties in
litis; (2) that the sales were with sufficient considerations and made by defendants parents
voluntarily, in good faith, and with full knowledge of the consequences of their deeds of sale;
and (3) that the certificates of title were issued with sufficient factual and legal basis.4
(Emphasis in the original)
The Ruling of the Trial Court
Before the trial, the trial court ordered the dismissal of the case against defendant spouses
Gavino Joaquin and Lea Asis. Instead of filing an Answer with their co-defendants, Gavino
Joaquin and Lea Asis filed a Motion to Dismiss. In granting the dismissal to Gavino Joaquin and
Lea Asis, the trial court noted that "compulsory heirs have the right to a legitime but such right
is contingent since said right commences only from the moment of death of the decedent
pursuant to Article 777 of the Civil Code of the Philippines."
After trial, the trial court ruled in favor of the defendants and dismissed the complaint. The trial
court stated:
In the first place, the testimony of the defendants, particularly that of the xxx father will show
that the Deeds of Sale were all executed for valuable consideration. This assertion must prevail
over the negative allegation of plaintiffs.
And then there is the argument that plaintiffs do not have a valid cause of action against
defendants since there can be no legitime to speak of prior to the death of their parents. The
court finds this contention tenable. In determining the legitime, the value of the property left at
the death of the testator shall be considered (Art. 908 of the New Civil Code). Hence, the
legitime of a compulsory heir is computed as of the time of the death of the decedent. Plaintiffs
therefore cannot claim an impairment of their legitime while their parents live.
All the foregoing considered, this case is DISMISSED.
In order to preserve whatever is left of the ties that should bind families together, the
counterclaim is likewise DISMISSED.
No costs. SO ORDERED.
The Ruling of the Court of Appeals
The Court of Appeals affirmed the decision of the trial court. The appellate court ruled:
To the mind of the Court, appellants are skirting the real and decisive issue in this case, which
is, whether xxx they have a cause of action against appellees.
Upon this point, there is no question that plaintiffs-appellants, like their defendant brothers
and sisters, are compulsory heirs of defendant spouses, Leonardo Joaquin and Feliciana
Landrito, who are their parents. However, their right to the properties of their defendant
parents, as compulsory heirs, is merely inchoate and vests only upon the latter’s death. While
still alive, defendant parents are free to dispose of their properties, provided that such
dispositions are not made in fraud of creditors.
Plaintiffs-appellants are definitely not parties to the deeds of sale in question. Neither do they
claim to be creditors of their defendant parents. Consequently, they cannot be considered as
real parties in interest to assail the validity of said deeds either for gross inadequacy or lack of
consideration or for failure to express the true intent of the parties. In point is the ruling of the
Supreme Court in Velarde, et al. vs. Paez, et al., 101 SCRA 376, thus:
The plaintiffs are not parties to the alleged deed of sale and are not principally or subsidiarily
bound thereby; hence, they have no legal capacity to challenge their validity.
Plaintiffs-appellants anchor their action on the supposed impairment of their legitime by the
dispositions made by their defendant parents in favor of their defendant brothers and sisters.
But, as correctly held by the court a quo, "the legitime of a compulsory heir is computed as of
the time of the death of the decedent. Plaintiffs therefore cannot claim an impairment of their
legitime while their parents live."
With this posture taken by the Court, consideration of the errors assigned by plaintiffs-
appellants is inconsequential.
WHEREFORE, the decision appealed from is hereby AFFIRMED, with costs against plaintiffs-
appellants.
SO ORDERED.
Hence, the instant petition.
Issues
Petitioners assign the following as errors of the Court of Appeals:

1. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE CONVEYANCE IN QUESTION
HAD NO VALID CONSIDERATION.
2. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT EVEN ASSUMING THAT THERE
WAS A CONSIDERATION, THE SAME IS GROSSLY INADEQUATE.
3. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE DEEDS OF SALE DO NOT
EXPRESS THE TRUE INTENT OF THE PARTIES.
4. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE CONVEYANCE WAS PART
AND PARCEL OF A CONSPIRACY AIMED AT UNJUSTLY DEPRIVING THE REST OF THE
CHILDREN OF THE SPOUSES LEONARDO JOAQUIN AND FELICIANA LANDRITO OF THEIR
INTEREST OVER THE SUBJECT PROPERTIES.
5. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT PETITIONERS HAVE A GOOD,
SUFFICIENT AND VALID CAUSE OF ACTION AGAINST THE PRIVATE RESPONDENTS.
The Ruling of the Court
We find the petition without merit.
We will discuss petitioners’ legal interest over the properties subject of the Deeds of Sale
before discussing the issues on the purported lack of consideration and gross inadequacy of the
prices of the Deeds of Sale.
Whether Petitioners have a legal interest over the properties subject of the Deeds of Sale
Petitioners’ Complaint betrays their motive for filing this case. In their Complaint, petitioners
asserted that the "purported sale of the properties in litis was the result of a deliberate
conspiracy designed to unjustly deprive the rest of the compulsory heirs (plaintiffs herein) of
their legitime." Petitioners’ strategy was to have the Deeds of Sale declared void so that
ownership of the lots would eventually revert to their respondent parents. If their parents die
still owning the lots, petitioners and their respondent siblings will then co-own their parents’
estate by hereditary succession.
It is evident from the records that petitioners are interested in the properties subject of the
Deeds of Sale, but they have failed to show any legal right to the properties. The trial and
appellate courts should have dismissed the action for this reason alone. An action must be
prosecuted in the name of the real party-in-interest.
[T]he question as to "real party-in-interest" is whether he is "the party who would be benefitted
or injured by the judgment, or the ‘party entitled to the avails of the suit.’"
xxx
In actions for the annulment of contracts, such as this action, the real parties are those who are
parties to the agreement or are bound either principally or subsidiarily or are prejudiced in their
rights with respect to one of the contracting parties and can show the detriment which would
positively result to them from the contract even though they did not intervene in it.
These are parties with "a present substantial interest, as distinguished from a mere expectancy
or future, contingent, subordinate, or consequential interest…. The phrase ‘present substantial
interest’ more concretely is meant such interest of a party in the subject matter of the action as
will entitle him, under the substantive law, to recover if the evidence is sufficient, or that he has
the legal title to demand and the defendant will be protected in a payment to or recovery by
him."
Petitioners do not have any legal interest over the properties subject of the Deeds of Sale. As
the appellate court stated, petitioners’ right to their parents’ properties is merely inchoate and
vests only upon their parents’ death. While still living, the parents of petitioners are free to
dispose of their properties. In their overzealousness to safeguard their future legitime,
petitioners forget that theoretically, the sale of the lots to their siblings does not affect the
value of their parents’ estate. While the sale of the lots reduced the estate, cash of equivalent
value replaced the lots taken from the estate.
Whether the Deeds of Sale are void for lack of consideration
Petitioners assert that their respondent siblings did not actually pay the prices stated in the
Deeds of Sale to their respondent father. Thus, petitioners ask the court to declare the Deeds of
Sale void.
A contract of sale is not a real contract, but a consensual contract. As a consensual contract, a
contract of sale becomes a binding and valid contract upon the meeting of the minds as to
price. If there is a meeting of the minds of the parties as to the price, the contract of sale is
valid, despite the manner of payment, or even the breach of that manner of payment. If the
real price is not stated in the contract, then the contract of sale is valid but subject to
reformation. If there is no meeting of the minds of the parties as to the price, because the price
stipulated in the contract is simulated, then the contract is void. Article 1471 of the Civil Code
states that if the price in a contract of sale is simulated, the sale is void.
It is not the act of payment of price that determines the validity of a contract of sale. Payment
of the price has nothing to do with the perfection of the contract. Payment of the price goes
into the performance of the contract. Failure to pay the consideration is different from lack of
consideration. The former results in a right to demand the fulfillment or cancellation of the
obligation under an existing valid contract while the latter prevents the existence of a valid
contract.
Petitioners failed to show that the prices in the Deeds of Sale were absolutely simulated. To
prove simulation, petitioners presented Emma Joaquin Valdoz’s testimony stating that their
father, respondent Leonardo Joaquin, told her that he would transfer a lot to her through a
deed of sale without need for her payment of the purchase price. The trial court did not find
the allegation of absolute simulation of price credible. Petitioners’ failure to prove absolute
simulation of price is magnified by their lack of knowledge of their respondent siblings’ financial
capacity to buy the questioned lots. On the other hand, the Deeds of Sale which petitioners
presented as evidence plainly showed the cost of each lot sold. Not only did respondents’
minds meet as to the purchase price, but the real price was also stated in the Deeds of Sale. As
of the filing of the complaint, respondent siblings have also fully paid the price to their
respondent father.
Whether the Deeds of Sale are void for gross inadequacy of price
Petitioners ask that assuming that there is consideration, the same is grossly inadequate as to
invalidate the Deeds of Sale.
Articles 1355 of the Civil Code states:
Art. 1355. Except in cases specified by law, lesion or inadequacy of cause shall not invalidate a
contract, unless there has been fraud, mistake or undue influence. (Emphasis supplied)
Article 1470 of the Civil Code further provides:
Art. 1470. Gross inadequacy of price does not affect a contract of sale, except as may indicate a
defect in the consent, or that the parties really intended a donation or some other act or
contract.
Petitioners failed to prove any of the instances mentioned in Articles 1355 and 1470 of the Civil
Code which would invalidate, or even affect, the Deeds of Sale. Indeed, there is no requirement
that the price be equal to the exact value of the subject matter of sale. All the respondents
believed that they received the commutative value of what they gave. As we stated in Vales v.
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.
Moreover, the factual findings of the appellate court are conclusive on the parties and carry
greater weight when they coincide with the factual findings of the trial court. This Court will not
weigh the evidence all over again unless there has been a showing that the findings of the
lower court are totally devoid of support or are clearly erroneous so as to constitute serious
abuse of discretion. In the instant case, the trial court found that the lots were sold for a valid
consideration, and that the defendant children actually paid the purchase price stipulated in
their respective Deeds of Sale. Actual payment of the purchase price by the buyer to the seller
is a factual finding that is now conclusive upon us.
WHEREFORE, we AFFIRM the decision of the Court of Appeals in toto.
SO ORDERED.
ELEVENTH CASE
G.R. No. L-11240 December 18, 1957
CONCHITA LIGUEZ, petitioner,vs. THE HONORABLE COURT OF APPEALS, MARIA NGO VDA. DE
LOPEZ, ET AL., respondents.
Ruiz, Ruiz and Ruiz for appellant.
Laurel Law Offices for appellees.
REYES, J.B.L., J.:
From a decision of the Court of Appeals, affirming that of the Court of First Instance of Davao
dismissing her complaint for recovery of land, Conchita Liguez has resorted to this Court,
praying that the aforesaid decision be reversed on points of law. We granted certiorari on
October 9, 1956.
The case began upon complaint filed by petitioner-appellant against the widow and heirs of the
late Salvador P. Lopez to recover a parcel of 51.84 hectares of land, situated in barrio Bogac-
Linot, of the municipality of Mati, Province of Davao. Plaintiff averred to be its legal owner,
pursuant to a deed of donation of said land, executed in her favor by the late owner, Salvador
P. Lopez, on 18 May 1943. The defense interposed was that the donation was null and void for
having an illicit causa or consideration, which was the plaintiff's entering into marital relations
with Salvador P. Lopez, a married man; and that the property had been adjudicated to the
appellees as heirs of Lopez by the court of First Instance, since 1949.
The Court of Appeals found that the deed of donation was prepared by the Justice of the Peace
of Mati, Davao, before whom it was signed and ratified on the date aforesaid. At the time, the
appellant Liguez was a minor, only 16 years of age. While the deed recites—
That the DONOR, Salvador P. Lopez, for and in the consideration of his love and affection for
the said DONEE, Conchita Liguez, and also for the good and valuable services rendered to the
DONOR by the DONEE, does by these presents, voluntarily give grant and donate to the said
donee, etc. (Paragraph 2, Exhibit "A")
he Court of Appeals found that when the donation was made, Lopez had been living with the
parents of appellant for barely a month; that the donation was made in view of the desire of
Salvador P. Lopez, a man of mature years, to have sexual relations with appellant Conchita
Liguez; that Lopez had confessed to his love for appellant to the instrumental witnesses, with
the remark that her parents would not allow Lopez to live with her unless he first donated the
land in question; that after the donation, Conchita Liguez and Salvador P. Lopez lived together
in the house that was built upon the latter's orders, until Lopez was killed on July 1st, 1943, by
some guerrillas who believed him to be pro-Japanese.

It was also ascertained by the Court of Appeals that the donated land originally belonged to the
conjugal partnership of Salvador P. Lopez and his wife, Maria Ngo; that the latter had met and
berated Conchita for living maritally with her husband, sometime during June of 1943; that the
widow and children of Lopez were in possession of the land and made improvements thereon;
that the land was assessed in the tax rolls first in the name of Lopez and later in that of his
widow.; and that the deed of donation was never recorded.
Upon these facts, the Court of Appeals held that the deed of donation was inoperative, and null
and void (1) because the husband, Lopez, had no right to donate conjugal property to the
plaintiff appellant; and (2) because the donation was tainted with illegal cause or consideration,
of which donor and donee were participants.
Appellant vigorously contends that the Court of First Instance as well as the Court of Appeals
erred in holding the donation void for having an illicit cause or consideration. It is argued that
under Article 1274 of the Civil Code of 1889 (which was the governing law in 1948, when the
donation was executed), "in contracts of pure beneficence the consideration is the liberality of
the donor", and that liberality per se can never be illegal, since it is neither against law or
morals or public policy.
The flaw in this argument lies in ignoring that under Article 1274, liberality of the do or is
deemed causa in those contracts that are of "pure" beneficence; that is to say, contracts
designed solely and exclusively to procure the welfare of the beneficiary, without any intent of
producing any satisfaction for the donor; contracts, in other words, in which the idea of self-
interest is totally absent on the part of the transferor. For this very reason, the same Article
1274 provides that in remuneratory contracts, the consideration is the service or benefit for
which the remuneration is given; causa is not liberality in these cases because the contract or
conveyance is not made out of pure beneficence, but "solvendi animo." In consonance with this
view, this Supreme Court in Philippine Long Distance Co. vs. Jeturian * G.R. L-7756, July 30,
1955, like the Supreme Court of Spain in its decision of 16 Feb. 1899, has ruled that bonuses
granted to employees to excite their zeal and efficiency, with consequent benefit for the
employer, do not constitute donation having liberality for a consideration.
Here the facts as found by the Court of Appeals (and which we can not vary) demonstrate that
in making the donation in question, the late Salvador P. Lopez was not moved exclusively by the
desire to benefit appellant Conchita Liguez, but also to secure her cohabiting with him, so that
he could gratify his sexual impulses. This is clear from the confession of Lopez to the witnesses
Rodriguez and Ragay, that he was in love with appellant, but her parents would not agree
unless he donated the land in question to her. Actually, therefore, the donation was but one
part of an onerous transaction (at least with appellant's parents) that must be viewed in its
totality. Thus considered, the conveyance was clearly predicated upon an illicit causa.
Appellant seeks to differentiate between the alleged liberality of Lopez, as causa for the
donation in her favor, and his desire for cohabiting with appellant, as motives that impelled him
to make the donation, and quotes from Manresa and the jurisprudence of this Court on the
distinction that must be maintained between causa and motives (De Jesus vs. Urrutia and Co.,
33 Phil. 171). It is well to note, however that Manresa himself (Vol. 8, pp. 641-642), while
maintaining the distinction and upholding the inoperativeness of the motives of the parties to
determine the validity of the contract, expressly excepts from the rule those contracts that are
conditioned upon the attainment of the motives of either party.
. . . distincion importantisima, que impide anular el contrato por la sola influencia de los
motivos a no ser que se hubiera subordinando al cumplimiento de estos como condiciones la
eficacia de aquel.
The same view is held by the Supreme Court of Spain, in its decisions of February 4, 1941, and
December 4, 1946, holding that the motive may be regarded as causa when it predetermines
the purpose of the contract.
In the present case, it is scarcely disputable that Lopez would not have conveyed the property
in question had he known that appellant would refuse to cohabit with him; so that the
cohabitation was an implied condition to the donation, and being unlawful, necessarily tainted
the donation itself.
The Court of Appeals rejected the appellant's claim on the basis of the well- known rule "in pari
delicto non oritur actio" as embodied in Article 1306 of 1889 (reproduced in Article 1412 of the
new Civil Code):
The same view is held by the Supreme Court of Spain, in its decisions of February 4, 1941, and
December 4, 1946, holding that the motive may be regarded as causa when it predetermines
the purpose of the contract.
In the present case, it is scarcely disputable that Lopez would not have conveyed the property
in question had he known that appellant would refuse to cohabit with him; so that the
cohabitation was an implied condition to the donation, and being unlawful, necessarily tainted
the donation itself.
The Court of Appeals rejected the appellant's claim on the basis of the well- known rule "in pari
delicto non oritur actio" as embodied in Article 1306 of 1889 (reproduced in Article 1412 of the
new Civil Code):
ART. 1412. If the act in which the unlawful or forbidden cause consists does not constitute a
criminal offense, the following rules shall be observed:
(1) When the fault is on the part of both contracting parties, neither may recover what he has
given by virtue of the contract, or demand the performance of the other's undertaking;
(2) When only one of the contracting parties is at fault, he cannot recover, what he has given by
reason of the contract, or ask for fulfillment of what has been promised him. The other, who is
not at fault, may demand the return of what he has given without any obligation to comply
with his promise.
In our opinion, the Court of Appeals erred in applying to the present case the pari delicto rule.
First, because it can not be said that both parties here had equal guilt when we consider that as
against the deceased Salvador P. Lopez, who was a man advanced in years and mature
experience, the appellant was a mere minor, 16 years of age, when the donation was made;
that there is no finding made by the Court of Appeals that she was fully aware of the terms of
the bargain entered into by and Lopez and her parents; that, her acceptance in the deed of
donation (which was authorized by Article 626 of the Old Civil Code) did not necessarily imply
knowledge of conditions and terms not set forth therein; and that the substance of the
testimony of the instrumental witnesses is that it was the appellant's parents who insisted on
the donation before allowing her to live with Lopez. These facts are more suggestive of
seduction than of immoral bargaining on the part of appellant. It must not be forgotten that
illegality is not presumed, but must be duly and adequately proved.
n the second place, the rule that parties to an illegal contract, if equally guilty, will not be aided
by the law but will both be left where it finds them, has been interpreted by this Court as
barring the party from pleading the illegality of the bargain either as a cause of action or as a
defense. Memo auditor propriam turpitudinem allegans. Said this Court in Perez vs. Herranz, 7
Phil. 695-696:
It is unnecessary to determine whether a vessel for which a certificate and license have been
fraudulently obtained incurs forfeiture under these or any other provisions of this act. It is
enough for this case that the statute prohibits such an arrangement as that between the
plaintiff and defendant so as to render illegal both the arrangement itself and all contracts
between the parties growing out of it.
It does not, however, follow that the plaintiff can succeed in this action. There are two answers
to his claim as urged in his brief. It is a familiar principle that the courts will not aid either party
to enforce an illegal contract, but will leave them both where it finds them; but where the
plaintiff can establish a cause of action without exposing its illegality, the vice does not affect
his right to recover. The American authorities cited by the plaintiff fully sustain this doctrine.
The principle applies equally to a defense. The law in those islands applicable to the case is
found in article 1305 of the Civil Code, shutting out from relief either of the two guilty parties to
an illegal or vicious contract.
In the case at bar the plaintiff could establish prima facie his sole ownership by the bill of sale
from Smith, Bell and Co. and the official registration. The defendant, on his part, might
overthrow this title by proof through a certain subsequent agreement between him and the
plaintiff, dated March 16, 1902, that they had become owners in common of the vessel, 'the
agreement not disclosing the illegal motive for placing the formal title in the plaintiff. Such an
ownership is not in itself prohibited, for the United States courts recognize the equitable
ownership of a vessel as against the holder of a legal title, where the arrangement is not one in
fraud of the law. (Weston vs. Penniman, Federal Case 17455; Scudder vs. Calais Steamboat
Company, Federal Case 12566.).
On this proof, the defendant being a part owner of the vessel, would have defeated the action
for its exclusive possession by the plaintiff. The burden would then be cast upon the plaintiff to
show the illegality of the arrangement, which the cases cited he would not be allowed to do.
The rule was reaffirmed in Lima vs. Lini Chu Kao, 51 Phil. 477.
The situation confronting us is exactly analogous. The appellant seeks recovery of the disputed
land on the strength of a donation regular on its face. To defeat its effect, the appellees must
plead and prove that the same is illegal. But such plea on the part of the Lopez heirs is not
receivable, since Lopez, himself, if living, would be barred from setting up that plea; and his
heirs, as his privies and successors in interest, can have no better rights than Lopez himself.
Appellees, as successors of the late donor, being thus precluded from pleading the defense of
immorality or illegal causa of the donation, the total or partial ineffectiveness of the same must
be decided by different legal principles. In this regard, the Court of Appeals correctly held that
Lopez could not donate the entirety of the property in litigation, to the prejudice of his wife
Maria Ngo, because said property was conjugal in character and the right of the husband to
donate community property is strictly limited by law (Civil Code of 1889, Arts. 1409, 1415, 1413;
Baello vs. Villanueva, 54 Phil. 213).
RT. 1409. The conjugal partnership shall also be chargeable with anything which may have been
given or promised by the husband alone to the children born of the marriage in order to obtain
employment for them or give then, a profession or by both spouses by common consent,
should they not have stipulated that such expenditures should be borne in whole or in part by
the separate property of one of them.".
ART. 1415. The husband may dispose of the property of the conjugal partnership for the
purposes mentioned in Article 1409.)
ART. 1413. In addition to his powers as manager the husband may for a valuable consideration
alienate and encumber the property of the conjugal partnership without the consent of the
wife.
The text of the articles makes it plain that the donation made by the husband in contravention
of law is not void in its entirety, but only in so far as it prejudices the interest of the wife. In this
regard, as Manresa points out (Commentaries, 5th Ed., pp. 650-651, 652-653), the law asks no
distinction between gratuitous transfers and conveyances for a consideration.
Puede la mujer como proprietaria hacer anular las donaciones aun durante el matrimonio? Esta
es, en suma, la cuestion, reducida a determinar si la distinta naturaleza entre los actos a titulo
oneroso y los actos a titulo lucrativo, y sus especiales y diversas circunstancias, pueden motivar
una solucion diferente en cuanto a la epoca en que la mujer he de reclamar y obtener la
nulidad del acto; cuestion que no deja de ser interesantisima.lawphi1.net
El Codigo, a pesar de la variacion que ha introducido en el proyecto de 1851, poniendo como
segundo parrafo del articulo 1.413, o como limitacion de las enajenaciones u obligaciones a
titulo oneroso, lo que era una limitacion general de todos los actos del marido, muestra, sin
embargo, que no ha variado de criterio y que para el las donaciones deben en todo equipararse
a cualquier otro acto ilegal o frraudulento de caracter oneroso, al decir en el art. 1.419:
"Tambien se traera a colacion en el inventario de la sociedad— el importe de las donaciones y
enajenaciones que deban considerarse ilegales o fraudulentas, con sujecion al art. 1.413.'
(Debio tambien citarse el articulo 1.415, que es el que habla de donaciones.)lawphi1.net
"En resumen: el marido solo puede donar los bienes gananciales dentro de los limites marcados
en el art. 1.415. Sin embargo, solo la mujer o sus herederos pueden reclamar contra la valides
de la donacion, pues solo en su interes establece la prohibicion. La mujer o sus herederos, para
poder dejar sin efecto el acto, han de sufrir verdadero perjuicio, entendiendose que no le hay
hasta, tanto que, terminada por cualquier causa la sociedad de gananciales, y hecha su
liquidacion, no pueda imputarse lo donado al haber por cualquier concepto del marido, ni
obtener en su consecuencia la mujer la dibida indemnizacion. La donacioni reviste por tanto
legalmente, una eficacia condicional, y en armonia con este caracter, deben fijarse los efectos
de la misma con relacion a los adquirentes y a los terceros poseedores, teniendo, en su caso, en
cuenta lo dispuesto en la ley Hipotecaria. Para prevenir todo perjuicio, puede la mujer, durante
el matrimonio inmediatamente al acto, hacer constar ante los Tribunales su existencia y
solicitor medidas de precaucion, como ya se ha dicho. Para evitarlo en lo sucesivo, y cuando las
circunstancias lo requieran, puede instar la declaracion de prodigalidad.
To determine the prejudice to the widow, it must be shown that the value of her share in the
property donated can not be paid out of the husband's share of the community profits. The
requisite data, however, are not available to us and necessitate a remand of the records to the
court of origin that settled the estate of the late Salvador P. Lopez.
The situation of the children and forced heirs of Lopez approximates that of the widow. As
privies of their parent, they are barred from invoking the illegality of the donation. But their
right to a legitime out of his estate is not thereby affected, since the legitime is granted them by
the law itself, over and above the wishes of the deceased. Hence, the forced heirs are entitled
to have the donation set aside in so far as in officious: i.e., in excess of the portion of free
disposal (Civil Code of 1889, Articles 636, 654) computed as provided in Articles 818 and 819,
and bearing in mind that "collationable gifts" under Article 818 should include gifts made not
only in favor of the forced heirs, but even those made in favor of strangers, as decided by the
Supreme Court of Spain in its decisions of 4 May 1899 and 16 June 1902. So that in computing
the legitimes, the value of the property to herein appellant, Conchita Liguez, should be
considered part of the donor's estate. Once again, only the court of origin has the requisite date
to determine whether the donation is inofficious or not.
The prima facie donation inter vivos and its acceptance by the donees having been proved by
means of a public instrument, and the donor having been duly notified of said acceptance, the
contract is perfect and obligatory and it is perfectly in order to demand its fulfillment, unless an
exception is proved which is based on some legal reason opportunely alleged by the donor or
her heirs.
So long as the donation in question has not been judicially proved and declared to be null,
inefficacious, or irregular, the land donated is of the absolute ownership of the donees and
consequently, does not form a part of the property of the estate of the deceased Martina
Lopez; wherefore the action instituted demanding compliance with the contract, the delivery
by the deforciant of the land donated, or that it be, prohibited to disturb the right of the
donees, should not be considered as incidental to the probate proceedings aforementioned.
The case of Galion vs. Gayares, supra, is not in point. First, because that case involved a
stimulated transfer that case have no effect, while a donation with illegal causa may produce
effects under certain circumstances where the parties are not of equal guilt; and again, because
the transferee in the Galion case took the property subject to lis pendens notice, that in this
case does not exist.
In view of the foregoing, the decisions appealed from are reversed and set aside, and the
appellant Conchita Liguez declared entitled to so much of the donated property as may be
found, upon proper liquidation, not to prejudice the share of the widow Maria Ngo in the
conjugal partnership with Salvador P. Lopez or the legitimes of the forced heirs of the latter.
The records are ordered remanded to the court of origin for further proceedings in accordance
with this opinion. Costs against appellees. So ordered.