THE ROMAN CATHOLIC CHURCH v PANTE

G.R. No. 174118, 11 April 2012

The Church, represented by the Archbishop of Caceres, owned a 32-square meter lot located in
Camarines Sur. The Church contracted with respondent Regino Pante for the sale of the lot on
the belief that the latter was an actual occupant of the lot. The contract between them fixed the
purchase price at P11,200.00, with the initial P1,120.00 payable as down payment, and the
remaining balance payable in three years. However, on a later date, the Church sold in favor of
the spouses Rubi a 215-square meter lot that included the lot previously sold to Pante. The
spouses Rubi asserted their ownership by erecting a concrete fence over the lot sold to Pante,
blocking the passage of Pante’s home. Pante instituted with the RTC an action to annul the sale
between the Church and the spouses Rubi. The Church 􏰀led its answer, seeking the annulment
of its contract with Pante. The Church alleged that its consent to the contract was obtained by
fraud when Pante, in bad faith, misrepresented that he had been an actual occupant of the lot
sold to him. (making it voidable) RTC ruled in favor of the Church, fi􏰀nding that the Church's
consent to the sale was secured through Pante's misrepresentation. Pante appealed to the CA -
reversed the decision of RTC (valid daw kung sale between pants and the church) Hence this
petition.

ISSUE: (1) WON the contract between the Church and Pante is voidable?

HELD/RATIO:
– No, it is valid. No misrepresentation happened.

 Contract is valid, there was no vitiation of consent to make the contract voidable. The SC
stated that there could not have been a deliberate, willful, or fraudulent act committed by Pante
that misled the Church into giving its consent to the sale of the subject lot in his favor. That
Pante was not an actual occupant of the lot he purchased was a fact that the Church either
ignored or waived as a requirement. In any case, the Church was by no means led to believe or
do so by Pante's act; there had been no vitiation of the Church's consent to the sale of the lot to
Pante.

 Contrary to the Church's contention, the actual occupancy or residency of a buyer over the
land does not appear to be a necessary quali􏰀cation that the Church requires before it could
sell its land. Had this been indeed its policy, then neither Pante nor the spouses Rubi would
qualify as buyers of the 32-square meter lot, as none of them actually occupied or resided on
the lot.

 We 􏰀find it unlikely that Pante could successfully misrepresent himself as the actual occupant
of the lot; this was a fact that the Church (which has a parish chapel in the same
barangaywhere the lot was located) could easily verify had it conducted an ocular inspection of
its own property. The surrounding circumstances actually indicate that the Church was aware
that Pante was using the lot merely as a passageway.
 No. No misrepresentation existed vitiating the seller’s consent and invalidating the contract. Consent is
an essential requisite of contracts as it pertains to the meeting of the offer and the acceptance upon the
thing and the cause which constitute the contract. To create a valid contract, the meeting of the minds
must be free, voluntary, willful and with a reasonable understanding of the various obligations the
parties assumed for themselves. Where consent, however, is given through mistake, violence,
intimidation, undue influence, or fraud, the contract is deemed voidable. However, not every mistake
renders a contract voidable. In the present case, the Church contends that its consent to sell the lot was
given on the mistaken impression arising from Pante’s fraudulent misrepresentation that he had been
the actual occupant of the lot. Contrary to the Church’s contention, the actual occupancy or residency of
a buyer over the land does not appear to be a necessary qualification that the Church requires before it
could sell its land. Had this been indeed its policy, then neither Pante nor the spouses Rubi would qualify
as buyers of the 32-sq. m. lot, as none of them actually occupied or resided on the lot.Thus, the Court
resolves to deny the petition

 ANNULMENT
The action for the annulment of contracts may be instituted by all who are thereby obliged
principally or subsidiarily. However, persons who are capable cannot allege the incapacity of those
with whom they contracted; nor can those who exerted intimidation, violence, or undue infl uence,
or employed fraud, or caused mistake base their action upon these flaws of the contract.

 Who May Institute Action. — From Art. 1397 of the Code it can be inferred that two
different requisites are required to confer the necessary capacity for the exercise of the
action for annulment.
1. that the plaintiff must have an interest in the contract.
2. The second is that the victim and not the party responsible for the vice or defect must be the
person who must assert the same.
Art. 1401. The action for annulment of contracts shall be extinguished when the thing which is the
object thereof is lost through the fraud or fault of the person who has a right to institute the
proceedings. If the right of action is based upon the incapacity of any one of the contracting parties,
the loss of the thing shall not be an obstacle to the success of the action, unless said loss took place
through the fraud or fault of the plaintiff.

 PRESCRIPTIVE PERIOD
Art. 1391. The action for annulment shall be brought within four years. This period shall
begin: In cases of intimidation, violence or undue influence, from the time the defect of the
consent ceases. In case of mistake or fraud, from the time of the discovery of the same. And
when the action refers to contracts entered into by minors or other incapacitated persons,
from the time the guardianship ceases.
Prescriptive Period. — According to Art. 1391, the action for annulment must be
commenced within a period of four years. If the action refers to contracts entered into by
incapacitated persons, the period shall be counted from the time the guardianship ceases; if
it refers to those where consent is vitiated by violence, intimidation or undue infl uence, the
period shall be counted from the time such violence, intimidation or undue infl uence ceases
or disappears; and if it refers to those where consent is vitiated by mistake or fraud, the
period shall be counted from the time of the discovery of such mistake or fraud. If the
action is not commenced within such period, the right of the party entitled to institute the
action shall prescribe.

WILLIAM ALAIN MIAILHE, petitioner, vs. COURT OF APPEALS and REPUBLIC OF THE
PHILIPPINES, respondents. G.R. No. 108991 March 20, 2001

FACTS: Petitioner, William Alain Miailhe, on his own behalf and on behalf of Victoria
DesbaratsMiailhe, Monique Miailhe-Sichere and Elaine Miailhe-Lencquesaing filed a Complaint
for Annulment of Sale, Reconveyance and Damages against [Respondent] Republic of the
Philippines and defendant Development Bank of the Philippines. The petitioner alleged that DBP
forged, threatened and intimidated petitioner to sell the property to DBP for the grossly low
price. The RTC and CA rendered their decision in favor of DBP and that the action is already
prescribed.

ISSUE: Whether or not extrajudicial demands did not interrupt prescription.

RULING: In the present case, there is as yet no obligation in existence. Respondent has no
obligation to reconvey the subject lots because of the existing Contract of Sale. Although
allegedly voidable, it is binding unless annulled by a proper action in court.12 Not being a
determinate conduct that can be extrajudically demanded, it cannot be considered as an
obligation either. Since Article 1390 of the Civil Code states that voidable "contracts are binding,
unless they are annulled by a proper action in court," it is clear that the defendants were not
obligated to accede to any extrajudicial demand to annul the Contract of Sale.

FIRST PHILIPPINE HOLDINGS CORPORATION V TRANS MIDDLE EAST EQUITIES INC. G.R. NO.
179505, 04 DECEMBER 2009

FACTS: FHPC formerly known as Meralco Securities Corporation incorporated on 30 June 1961
by Filipino Entreprenuers led by Eugenio Lopez Sr. sold its 6,299,179.00 php shares of common
stock in Philippine Commercial International Bank (PCIB), now Equitable PCIB to TMEE. Such
shares according to the FHPC were obtained by the TMEE through fraud, acts contrary to Law,
Morals, Good Customs and Public Policy and such acquisition is either voidable, void or un
forceable. FHPC filed then its motion for leave to intervene and admit complaint in intervention
and was granted by the court. On the otehr hand, TMEE filed its motion to dismiss the
complaint-in-intervention by the FHPC on the ground that the action of FHPC has already
prescribed under Article 1391 of the Civil Code. Since the action was filed only on 28 December
1988 and the sale was 24 May 1984 the action was laready 7 months late from the date of
prescription.

ISSUE : Whether or not the sale of property is void and the prescriptive period had elapsed.
 HELD: No, the SC found that the sale is not void for a suit for the annulment of voidable contract
on account of fraud shall be filed within four years from the discovery of the same, here, from
the time the questioned sale transaction on May 24, 1984 took place, FHPC didn't deny that it
had actual knowledge of the same. Simply, petitioner was fully aware of the sale of the PCIB
shares to TMEE and espite full knowledge petitioners did not question the said sale from its
inception and sometime thereafter. it was only four years and seven months had elapsed
following the knowledge or discovery of the alleged fraudulent sale that the petitioner assailed
the same, by then it was too late for the petitioners to beset same transaction, since the
prescriptive period had already come into play. The SC therefore denied the instant petition and
affirmed the resolution of the SB with cost against the petitioner.

Art. 1398. An obligation having been annulled, the contracting parties shall restore to each
other the things which have been the subject matter of the contract, with their fruits, and the
price with its interest, except in cases provided by law. In obligations to render service, the
value thereof shall be the basis for damages.

Art. 1402. As long as one of the contracting parties does not restore what in virtue of the
decree of annulment he is bound to return, the other cannot be compelled to comply with
what is incumbent upon him.

 EFFECTS
Effect of Failure to Make Restitution. — Sometimes, for some reason or other, the action for
annulment is commenced after the lapse of several years from the time of the consummation of
the contract. Suppose then that prior to the commencement of the action, the thing which
constitutes the object of the contract is lost, what is the effect upon the right of the party who,
ordinarily, is entitled to institute the action for annulment? This question is resolved in part by
the provisions of Arts. 1400 to 1402 of the Code.

Idem; Where loss is due to fault of defendant. — According to Art. 1400, when the person
obliged by the decree of annulment to return the thing cannot do so because it has been lost
through his fault, he shall return the fruits received and the value of the thing at the time of the
loss, with interest from the same date. It is evident that this rule is applicable only when the loss
of the thing is due to the fault of the party against whom the action for annulment may be
instituted.59 This is so because if the loss is due to the fault of the party who has a right to
institute the action, the provision of Art. 1401 shall apply. The loss of the thing which constitutes
the object of the contract through the fault of the party against whom the action for annulment
may be instituted shall not, therefore, extinguish the action for annulment. The only difference
from an ordinary action for annulment is that, instead of being compelled to restore the thing,
the defendant can only be compelled to pay the value thereof at the time of the loss.

Idem; Where loss is due to fault of plaintiff. — However, if the loss of the thing is due to the
fraud or fault of the party who is entitled to institute the proceedings, according to the fi rst
paragraph of Art. 1401, the action for annulment shall be extinguished. There are, therefore,
three modes whereby such action may be extinguished. They are: (1) prescription; (2) ratifi
cation; and (3) the loss of the thing which is the object of the contract through the fraud or fault
of the person who is entitled to institute the action. The second paragraph of Art. 1401, on the
other hand, which at fi rst blush seems to be an exception to the rule stated in the fi rst
paragraph, has created a legal absurdity. Under the old Code, the provision was as follows: “If
the cause of action is the incapacity of any of the contracting parties, the loss of the thing shall
not be an obstacle to the success of the action, unless it has occurred through the fraud or fault
of the plaintiff after having acquired capacity.”60 Hence, under the old law, if the loss of the
thing was due to the fraud or fault of the plaintiff after he had acquired capacity, the general
rule was applicable; in other words, the action was extinguished. But if the loss was due to the
fraud or fault of the plaintiff during his incapacity, the exception was applicable; in other words,
the loss would not be an obstacle to the success of the action. However, with the deletion of the
phrase “after having acquired capacity” from the provision of the second paragraph of Art. 1401
of the present Code, the result is an absolute redundancy. Whether the loss occurred during the
plaintiff’s incapacity or after he had acquired capacity, the action for annulment would still be
extinguished in accordance with the rule stated in the fi rst paragraph.

Idem; Where loss is due to fortuitous event. — Unfortunately, the Code in Arts. 1400 and 1401
does not provide for the effect of the loss of the object of the contract through a fortuitous
event upon the right to ask for the annulment of the contract. In spite of this omission, it is,
however, possible to apply the general principles regarding the effects of fortuitous events to
any problem that may arise. If the person obliged by the decree of annulment to return the
thing cannot do so because it has been lost through a fortuitous event, the contract can still be
annulled, but with this difference —the defendant can be held liable only for the value of the
thing at the time of the loss, but without interest thereon. The defendant, and not the plaintiff,
must suffer the loss because he was still the owner of the thing at the time of the loss; he
should, therefore, pay the value of the thing, but not the interest thereon because the loss was
not due to his fault. If it is the plaintiff who cannot return the thing because it has been lost
through a fortuitous event, the contract may still be annulled, but with this difference — he
must pay to the defendant the value of the thing at the time of the loss, but without interest
thereon. According to Dr. Tolentino, if the plaintiff offers to pay the value of the thing at the
time of its loss as a substitute for the thing itself, the annulment of the contract would still be
possible, because, otherwise, we would arrive at the absurd conclusion that an action for
annulment would in effect be extinguished by the loss of the thing through a fortuitous event.

MIGUEL KATIPUNAN, INOCENCIO VALDEZ, EDGARDO BALGUMA and LEOPOLDO BALGUMA,

JR., petitioners, vs.BRAULIO KATIPUNAN, JR., respondent. G.R. No. 132415 January 30, 2002

FACTS: Respondent Braulio Katipunan, Jr. is the owner of a 203 square meter lot and a five-door
apartment constructed thereon located at 385-F Matienza St., San Miguel, Manila. Petitioner
Miguel Katipunan, entered into a Deed of Absolute Sale4 with brothers Edgardo Balguma and
Leopoldo Balguma, Jr. (co-petitioners), represented by their father Atty. Leopoldo Balguma, Sr.,
involving the subject property for a consideration of P187,000.00. Respondent filed a complaint
for annulment of the Deed of Absolute Sale. He contended that the said contract was obtained
through insidious words and machinations. The TRC dismissed the complaint. The CA reversed
the decision of RTC.

ISSUE: Whether or not CA ered when it overturned the factual findings of the trial court which
are amply supported by the evidence on record.

RULING: The circumstances surrounding the execution of the contract manifest a vitiated
consent on the part of respondent. Undue influence was exerted upon him by his brother
Miguel and Inocencio Valdez (petitioners) and Atty. Balguma. It was his brother Miguel who
negotiated with Atty. Balguma. However, they did not explain to him the nature and contents of
the document. Worse, they deprived him of a reasonable freedom of choice. It bears stressing
that he reached only grade three. Thus, it was impossible for him to understand the contents of
the contract written in English and embellished in legal jargon.

A contract where one of the parties is incapable of giving consent or where consent is vitiated
by mistake, fraud, or intimidation is not void ab initio but only voidable and is binding upon the
parties unless annulled by proper Court action. Since the Deed of Absolute Sale between
respondent and the Balguma brothers is voidable and hereby annulled, then the restitution of
the property and its fruits to respondent is just and proper. Petitioners should turn over to
respondent all the amounts they received starting January, 1986 up to the time the property
shall have been returned to the latter.

NILO R. JUMALON, petitioner, vs.COURT OF APPEALS, HON. RUBEN D. TORRES, in his capacity
as Executive Secretary, HOUSING AND LAND USE REGULATORY BOARD, and MA. ASUNCION
DE LEON, respondents. G.R. No. 127767 January 30, 2002

FACTS: Complainant De Leon and herein petitioner, Nilo R. Jumalon, executed a conditional
sales agreement whereby the former purchased from the latter a house and lot. Jumalon
executed in favor of De Leon a Deed of Absolute Sale. De Leon learned regarding the danger
posed by the wires over the property. Also, De Leon was informed by HLURB Enforcement
Center, that construction of houses and buildings of whatever nature is strictly prohibited within
the right-of –way of the transmission line. De Leon filed a case for declaration of nullity or
annulment of sale of real property which was subsequently dismissed. De Leon then, filed a
complaint before the HLURB seeking the rescission of the conditional sales agreement and the
Absolute Deed of Sale. HLURB arbiter rendered judgement in favor of De Leon. The Board of
Commissioners of HLURB affirmed the decision of arbiter. The CA affirmed the appealed
decision.

ISSUE: Whether the Court of Appeals erred in affirming the decision of Executive Secretary
Ruben D. Torres and the HLURB declaring the rescission of the contract of sale of a house and lot
between the petitioner and private respondent
 RULING: The SC agree with the Court of Appeals that respondent de Leon was entitled to annul
the sale. There was fraud in the sale of the subject house. It is not safely habitable. It is built in a
subdivision area where there is an existing 30-meter right of way of the Manila Electric Company
(Meralco) with high-tension wires over the property, posing a danger to life and property. The
construction of houses underneath the high tension wires is prohibited as hazardous to life and
property because the line carries 115,000 volts of electricity, generates tremendous static
electricity and produces electric sparks whenever it rained

Art. 1392. Ratification extinguishes the action to annul a voidable contract.

1. The plaintiff must have an interest in the contract
2. The action must be brought by the victim and not the party responsible for the defect

Art. 1393. Ratification may be effected expressly or tacitly. It is understood that there is a tacit ratifi
cation if, with knowledge of the reason which renders the contract voidable and such reason having
ceased, the person who has a right to invoke it should execute an act which necessarily implies an
intention to waive his right.

Art. 1394. Ratification may be effected by the guardian of the incapacitated person.

-The ward can ratify provided he becomes capacitated

Art. 1395. Ratification does not require the conformity of the contracting party who has no right to
bring the action for annulment.

-The consent of the party who is in bad faith is not required

 EFFECTS Art. 1396. Ratification cleanses the contract from all its defects from the moment it was
constituted.23 Concept of Ratifi cation. — Besides prescription, the action for annulment of a
voidable contract may also be extinguished by ratifi cation.
1. The action to annul a voidable contract is extinguished; hence the contract
becomes valid
2. The contract is cleansed of its defect from the beginning

Ratification or confi rmation as it is known in the Spanish Civil Code is defi ned as the act or means by
virtue of which effi cacy is given to a contract which suffers from a vice of curable nullity.

 REQUISITES

Requisites of Ratification. — Ratification or confirmation requires the concurrence of the following

requisites:26

First: The contract should be tainted with a vice which is susceptible of being cured.

Second: The confirmation should be effected by the person who is entitled to do so under the law.

Third: It should be effected with knowledge of the vice or defect of the contract.

Fourth: The cause of the nullity or defect should have already disappeared.
The fi rst requisite of confi rmation is that the contract should be tainted with a vice which is susceptible
of being cured. It is evident that confi rmation presupposes the existence of a vice in the contract
because otherwise it would not have any object. Furthermore, such vice should be susceptible of being
cured because otherwise the contract would be void or inexistent and, therefore, not susceptible of
confi rmation.

The second requisite is that the confi rmation should be effected only by the person who is entitled to
do so under the law. This is implied from the provisions of Arts. 1394 and 1395. Hence, if the contract
was entered into by an incapacitated person, the confi rmation can be effected only by such person
upon attaining or regaining capacity or by his guardian if he has not yet attained or regained capacity,
and if the contract was executed through mistake, violence, intimidation, undue infl uence, or fraud, it
can be effected only by the innocent party

The third requisite is that the confi rmation should be effected with knowledge of the vice or defect of
the contract. This is clear from the provision of Art. 1393. Since confi rmation is above all a form of
expressing the will, as such it requires, independently of the act to which it refers, the same conditions
of freedom, knowledge and clarity which consent also requires, although it does not require the
conformity of the other party who has no right to invoke the nullity of the contract. Consequently, confi
rmation may also be invalidated by mistake, violence, intimidation, undue infl uence, or fraud.29 It must
be noted, however, that the contract may be tainted with several vices, such as when it has been
executed through mistake and fraud. In such case, if the person entitled to effect the confi rmation ratifi
es or confi rms the contract with knowledge of the mistake, but not of the fraud, his right to ask for
annulment is not extinguished thereby since the ratifi cation or confi rmation has only purged the
contract of mistake, but not of fraud.30

The fourth requisite is that the cause of nullity should have already ceased or disappeared because
otherwise the act of confi rmation would also suffer from the very vice or defect which it seeks to
cure.31 It must be observed, however, that in the case of contracts entered into by incapacitated
persons, this is not indispensable in a sense, because even while the incapacity continues to exist, the
confi rmation may be effected by the guardian of the incapacitated person.

Forms of Ratification. — There is no special form required for confi rmation, but, as the law provides, it
may be effected expressly or tacitly. The fi rst is not defi ned in the Code, but, undoubtedly, there is an
express confi rmation if, with knowledge of the reason which renders the contract voidable and such
reason having ceased, the person who has a right to invoke it should expressly declare his desire to
convalidate it, or what amounts to the same thing, to renounce his right to annul the contract.33 On the
other hand, there is a tacit confi rmation, if, with knowledge of the reason which renders the contract
voidable and such reason having ceased, the person who has a right to invoke it should execute an act
which necessarily implies an intention to waive his right.34 Thus, where it is established that a minor
who had entered into a contract of sale, not only failed to repudiate it upon reaching the age of
majority, but also disposed of the greater part of the proceeds after he became of age and after he had
knowledge of the facts which he now seeks to disaffi rm, it was held that there was a tacit ratifi cation or
confi rmation of the contract.35 Similarly, if the person who can effect the confi rmation, instead of
demanding the annulment of a contract of sale, should proceed to collect the greater part of the
purchase price, as set out in a promissory note, it is clear that there is already a tacit confi rmation of the
contract.

UNENFORCEABLE CONTRACTS

Unenforceable Contracts in General. — Unenforceable contracts are those which cannot be enforced by
a proper action in court, unless they are ratifi ed, because, either they are entered into without or in
excess of authority or they do not comply with the statute of frauds or both of the contracting parties do
not possess the required legal capacity.1 As regards the degree of defectiveness, they occupy an
intermediate ground between voidable and void contracts.

Characteristics. — Although they are essentially different from each other, yet all unenforceable
contracts possess the following characteristics:

(1) They cannot be enforced by a proper action in court;

(2) They are susceptible of ratifi cation;

(3) They cannot be assailed by third persons.

UNENFORCEABLE
cannot be enforced by a proper action in court,
The causes for the unenforceable character of
the former are different from the causes for the
rescissible character
The former is susceptible of ratifi cation,
The former cannot be assailed by third persons,
RESCISSIBLE
can be enforced, unless it is rescinded.
The causes for the unenforceable character of
the former are different from the causes for the
rescissible character
Not susceptible to rescission
may be assailed by third persons who are
prejudiced

UNENFORCEABLE
An unenforceable contract cannot be enforced by
a proper action in court,
The causes for the unenforceable character of
the former are different from the causes for the
voidable character
VOIDABLE
a voidable contract can be enforced, unless it is
annulled.
The causes for the unenforceable character of
the former are different from the causes for the
voidable character

REGAL FILMS, INC. v. CONCEPCION GR No.139532, August 9, 2001 PONENTE: VITUG, J.

FACTS: In 1991, respondent Concepcion, a television artist and movie actor, through his
manager Lolita Solis, entered into a contract with petitioner for services to be rendered by
respondent in petitioner's motion pictures. Petitioner, in turn, undertook to give two parcels of
land to respondent, one located in Marikina and the other in Cavite, on top of the talent fees it
had agreed to pay. In 1993, the parties renewed the contract, incorporating the same
undertaking. Despite the appearance of respondent in several films produced by petitioner, the
latter failed to comply with its promise. Thus, on May 1994, respondent and his manager filed an
action against petitioner for rescission of contract with damages. In his complaint, respondent
contended that he was entitled to rescind the contract, plus damages, and to be released from
further commitment to work exclusively for petitioner owing to the latter's failure to honor the
agreement. Petitioner, on the other hand, averred that both parties had executed an agreement
which was to so operate as an addendum to the 1991 and 1993 contracts between them. The
agreement was signed by a representative of petitioner and by Solis purportedly acting for and
in behalf of respondent Concepcion.

ISSUE: Whether or not the subject addendum could be the basis of the compromise judgment.

RULING: No. The Courts agrees with the contention of the petitioner. Consent could be given
not only by the party himself, but by anyone duly authorized and acting for and in his behalf. But
by respondent's own admission, the addendum was entered into without his knowledge and
consent. A contract entered into in the name of another by one who ostensibly might have but
who, in reality, had no real authority or legal representation, or who, having such authority,
acted beyond his powers, would be unenforceable. The adamant refusal of respondent to
accept the terms of the addendum constrained petitioner, during the preliminary conference to
instead express its willingness to release respondent from his contracts prayed for in his
complaint and to thereby forego the rejected addendum. Respondent's subsequent attempt to
ratify the addendum came much too late for, by then, the addendum had already been deemed
revoked by petitioner.
IGLESIA FILIPINA INDEPENDIENTE VS HEIRS OF TAEZA G.R. No. 179597; 3 February
2014 NATURE:

Petition for review on certiorari praying for a reversal of a Decision and Resolution of the Court
of Appeals denying the petitioner’s motion for reconsideration PONENTE: Peralta, J.
FACTS:
The plaintiff-appellee Iglesia Filipina Independente, a duly registered religious corporation, was
the owner of a parcel of land. The plaintiff-appellee, through its then Supreme Bishop, sold a
portion of the land to one Bienvenido de Guzman. Other portions of the lot were sold to the
defendant Bernardino Taeza by Rev. Macario Ga in his capacity as the Supreme Bishop of the
plaintiff-appellee. It was sold on installment with mortgage to secure the payment of the
balance. The defendant allegedly completed the payments. The plaintiff then filed a complaint
for annulment of the sale of the a complaint for annulment of the sale of the subject parcels of
land against Rev. Ga and the defendant on the grounds that the possession of the defendant of
the parcels of land under question was unlawful and ordering the defendant and his heirs to
vacate the premises and surrender the same to the plaintiff. The Court of Appeals reversed the
decision on the grounds that petitioner, being a corporation sole, validly transferred ownership
over the land in question through its Supreme Bishop, who was at the time the administrator of
all properties and the official representative of the church. It further held that "[t]he authority of
the then Supreme Bishop Rev. Ga to enter into a contract and represent the plaintiff-appellee
cannot be assailed, as there are no provisions in its constitution and canons giving the said
authority to any other person or entity."

ISSUE: Whether or not the Court of Appeals erred in finding that the Deed of Sale with
mortgage is unenforceable

HELD: Yes, the case clearly falls under the category of unenforceable contracts mentioned in
Article 1403 of the Civil Code. RATIO DECIDENDI: This case clearly falls under the category of
unenforceable contracts mentioned in Article 1403, paragraph (1) of the Civil Code, which
provides, thus: Art. 1403. The following contracts are unenforceable, unless they are ratified:

(1) Those entered into in the name of another person by one who has been given no authority
or legal representation, or who has acted beyond his powers; In Mercado v. Allied Banking
Corporation, the Court explained that: x x x Unenforceable contracts are those which cannot be
enforced by a proper action in court, unless they are ratified, because either they are entered
into without or in excess of authority or they do not comply with the statute of frauds or both of
the contracting parties do not possess the required legal capacity. x x x. Closely analogous
cases of unenforceable contracts are those where a person signs a deed of extrajudicial
partition in behalf of co-heirs without the latter's authority; where a mother as judicial guardian of
her minor children, executes a deed of extrajudicial partition wherein she favors one child by
giving him more than his share of the estate to the prejudice of her other children; and where a
person, holding a special power of attorney, sells a property of his principal that is not included
in said special power of attorney. In the present case, however, respondents' predecessor-in-
interest, Bernardino Taeza, had already obtained a transfer certificate of title in his name over
the property in question. Since the person supposedly transferring ownership was not
authorized to do so, the property had evidently been acquired by mistake. In Vda. de Esconde
v. Court of Appeals, the Court affirmed the trial court's ruling that the applicable provision of law
in such cases is Article 1456 of the Civil Code which states that "[i]f property is acquired through
mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied
trust for the benefit of the person from whom the property comes." Thus, in Aznar Brothers
Realty Company v. Aying, citing Vda. de Esconde, the Court clarified the concept of trust
involved in said provision, to wit: Construing this provision of the Civil Code, in Philippine
National Bank v. Court of Appeals, the Court stated: A deeper analysis of Article 1456 reveals
that it is not a trust in the technical sense for in a typical trust, confidence is reposed in one
person who is named a trustee for the benefit of another who is called the cestui que trust,
respecting property which is held by the trustee for the benefit of the cestui que trust. A
constructive trust, unlike an express trust, does not emanate from, or generate a fiduciary
relation. While in an express trust, a beneficiary and a trustee are linked by confidential or
fiduciary relations, in a constructive trust, there is neither a promise nor any fiduciary relation to
speak of and the so-called trustee neither accepts any trust nor intends holding the property for
the beneficiary. The concept of constructive trusts was further elucidated in the same case, as
follows: . . . implied trusts are those which, without being expressed, are deducible from the
nature of the transaction as matters of intent or which are superinduced on the transaction by
operation of law as matters of equity, independently of the particular intention of the parties. In
turn, implied trusts are either resulting or constructive trusts. These two are differentiated from
each other as follows:

Resulting trusts are based on the equitable doctrine that valuable consideration and not legal
title determines the equitable title or interest and are presumed always to have been
contemplated by the parties. They arise from the nature of circumstances of the consideration
involved in a transaction whereby one person thereby becomes invested with legal title but is
obligated in equity to hold his legal title for the benefit of another. On the other hand,
constructive trusts are created by the construction of equity in order to satisfy the demands of
justice and prevent unjust enrichment. They arise contrary to intention against one who, by
fraud, duress or abuse of confidence, obtains or holds the legal right to property which he ought
not, in equity and good conscience, to hold. (Italics supplied) A constructive trust having been
constituted by law between respondents as trustees and petitioner as beneficiary of the subject
property, may respondents acquire ownership over the said property? The Court held in the
same case of Aznar, that unlike in express trusts and resulting implied trusts where a trustee
cannot acquire by prescription any property entrusted to him unless he repudiates the trust, in
constructive implied trusts, the trustee may acquire the property through prescription even if he
does not repudiate the relationship. It is then incumbent upon the beneficiary to bring an action
for reconveyance before prescription bars the same. In Aznar, the Court explained the basis for
the prescriptive period, to wit: x x x under the present Civil Code, we find that just as an implied
or constructive trust is an offspring of the law (Art. 1456, Civil Code), so is the corresponding
obligation to reconvey the property and the title thereto in favor of the true owner. In this context,
and vis-á-vis prescription, Article 1144 of the Civil Code is applicable. Article 1144. The
following actions must be brought within ten years from the time the right of action accrues: (1)
Upon a written contract; (2) Upon an obligation created by law; (3) Upon a judgment. xxx

xxx

xxx

An action for reconveyance based on an implied or constructive trust must perforce prescribe in
ten years and not otherwise. A long line of decisions of this Court, and of very recent vintage at
that, illustrates this rule. Undoubtedly, it is now well-settled that an action for reconveyance
based on an implied or constructive trust prescribes in ten years from the issuance of the
Torrens title over the property. DECISION: The petition is GRANTED. The decision of the Court
of Appeals is REVERSED and SET ASIDE. /
  UNAUTHORIZED CONTRACTS

1403. [1]Those entered into in the name of another person by one who has been given no authority or
legal representation, or who has acted beyond his powers;

CABALES, ET. AL vs COURT OF APPEALS August 31, 2007

FACTS: Saturnina and her children Bonifacio, Albino, Francisco, Leonara, Alberto and petitioner Rito
inherited a parcel of land. They sold such property to Dr. Cayetano Corrompido with a right to
repurchase within 8 years. Alberto secured a note from Dr. Corrompido in the amount of Php 300.00.
Alberto died leaving a wife and son, petitioner Nelson. Within the 8-year redemption period, Bonifacio
and Albino tendered their payment to Dr. Corrompido. But Dr. Corrompido only released the document
of sale with pacto de retro after Saturnina paid the share of her deceased son, Alberto, plus the note.
Saturnina and her children executed an affidavit to the effect that petitioner Nelson would only receive
the amount of Php 176.34 from respondents-spouses when he reaches the age if 21 considering that
Saturnina paid Dr. Corrompido Php 966.66 for the obligation of petitioner Nelson’s late father Alberto.

ISSUE: Whether or not the slae entered into is valid and binding.

RULING: The legal guardian only has the plenary power of administration of the minor’s property. It
does not include the power to alienation which needs judicial authority. Thus when Saturnina, as legal
guardian of petitioner Rito, sold the latter’s pro indiviso share in subject land, she did not have the legal
authority to do so. The contarct of sale as to the pro indiviso share of Petitioner Rito was unenforceable.
However when he acknowledged receipt of the proceeds of the sale on July24, 1986, petitioner Rito
effectively ratified it. This act of ratification rendered the sale valid and binding as to him

 BOTH PARTIES INCAPACITATED

Those where both parties are incapable of giving consent to a contract

Art. 1407. In a contract where both parties are incapable of giving consent, express or implied
ratifi cation by the par ent, or guardian, as the case may be, of one of the contracting parties
shall give the same effect as if only one of them were incapacitated.
 If ratifi cation is made by the parents or guardians, as the case may be, of both
contracting parties, the contract shall be validated from the inception
 CONTRACTS INFRINGING THE STATUTE OF FRAUDS
Those that do not comply with the Statute of Frauds as set forth in this number. In the following
cases an agreement hereafter made shall be unenforceable by action, unless the same, or some
note or memorandum thereof, be in writing, and subscribed by the party charged, or by his
agent; evidence, therefore, of the agreement cannot be received without the writing, or a
secondary evidence of its contents:
(a) An agreement that by its terms is not to be performed within a year from the making
thereof;
(b) A special promise to answer for the debt, default, or miscarriage of another,
(c) An agreement made in consideration of marriage, other than a mutual promise to marry; (d)
An agreement for the sale of goods, chattels or things in action, at a price not less than Five
hundred pesos, unless the buyer accept and receive part of such goods and chattels, or the
evidences, or some of them, of such things in action, or pay at the time some part of the
purchase money, but when a sale is made by auction and entry is made by the auctioneer in his
sales book, at the time of the sale, of the amount and kind of property sold, terms of sale, price,
names of the purchasers and person on whose account the sale is made, it is a suffi cient
memorandum;
(e) An agreement for the leasing for a longer period than one year, or for the sale of real
property or of an interest therein;

 NECESSITY OF WRITING

ANUNCIACION VDA. DE OUANO V. REPUBLIC OF THE PHILIPPINES G.R. NO. 168770, 9 FEBRUARY 2011

FACTS: In 1949, the National Airport Corporation (NAC), MCIAA’s predecessor agency pursued a
program to expand the Lahug Airport in Cebu City. As an assurance from the government, there is a
promise of reconveyance or repurchase of said property so long as Lahug ceases its operation or
transfer its operation to Mactan – Cebu Airport. Some owners refused to sell, and that the Civil
Aeronautics Administration filed a complaint for the expropriation of said properties for the expansion
of the Lahug Airport. The trial court then declared said properties to be used upon the expansion of said
projects and order for just compensation to the land owners, at the same time directed the latter to
transfer certificate or ownership or title in the name of the plaintiff. At the end of 1991, Lahug Airport
completely ceased its operation while the MactanCebu airport opened to accommodate incoming and
outgoing commercial flights. This then prompted the land owners to demand for the reconveynace of
said properties being expropriated by the trial court under the power of eminent domain. Hence these
two consolidated cases arise. In G.R. No. 168812 MCIAA is hereby ordered by court to reconvey said
properties to the land owners plus attorney’s fee and cost of suit, while in G.R. No. 168770, the RTC
ruled in favor of the petitioners Oaunos and against the MCIAA for the reconveynace of their properties
but was appealed by the latter and the earlier decision was reversed, the case went up to the CA but the
CA affirmed the reversed decision of the RTC.
ISSUE: Whether or not the testimonials of the petitioners proving the promises, assurances and
representations by the airport officials and lawyers are inadmissible under the Statue of Frauds.

HELD: The SC ruled that since the respondent didn’t object during trial to the admissibility of petitioner’s
testimonial evidenc under the Statute of Frauds, it means then that they have waived their objection
and are now barred from raising the same. In any event, the Statute of Frauds is not applicable herein.
Consequently, petitioners’ pieces of evidence are admissible and should be duly given weight and
credence, since the records tend to support that the MCIAA did not as the Ouanos and Inocians posit,
object the introduction of parole evidence to prove its commitment to allow the fromer landowners to
repurchase their properties upon the occurrence of certain events

SHOEMAKER vs. LA TONDENA 68 Phil 24

FACTS: Defendant company, La tondena, Inc. entered into a written contract of lease of services with
plaintiff Harry Ives Shoemaker for a period of 5 years, with a compensation consisting of 8% of the net
earnings of defendant. That during each year that the contract was in force, plaintiff would receive
monthly during the period of the contract of the sum of Php 1,500.00 or Php 18,000.00 per annum as
minimum compensation if 8% of the net earnings of the aforementioned alleged business would not
reach the amount. The defendant company alleged that there were changes in the contract in which
both the parties agreed upon. Plaintiff filed a complaint against defendant company. The defendant
interposed a demurrer based on the ground that the facts therein alleged do not constitute a cause of
action, since it is not averred that the alleged mutual agreement modifying the contract of lease of
services, has been put in writing, whereas it states that its terms and conditions may only be modified
upon the written consent of both parties.

ISSUE: Whether or not the ocurt a quo ered in sustaining the demurrer interposed by the defendant
company to the second amended complaint filed by plaintiff, on the ground that the facts alleged
therein do not constitute a couse of action.

RULING: When in an oral contract which by its terms, is not to be performed within 1 year from the
execution thereof, one of the contracting parties has complied within the year with the obligations
imposed on him said contract, the other party cannot avoid the fulfillment of what is incumbent on him
under the same contract by invoking the statute of frauds because the latter aims to prevent and not to
protect fraud

 PAROLE EVIDENCE RULE- The parole evidence rule bars extrinsic evidence, including prior
or contemporaneous oral agreements and prior or contemporaneous written
 agreements, that contradict or create a variation of a term in writing that the parties
intended to be completely integrated.

Art. 1405. Contracts infringing the Statute of Frauds, referred to in No. 2 of Article 1403, are ratifi
ed by the failure to object to the presentation of oral evidence to prove the same, or by the
acceptance of benefi ts under them.

Art. 1406. When a contract is enforceable under the Statute of Frauds, and a public document is
necessary for its registration in the Registry of Deeds, the parties may avail themselves of the right
under Article 1357.

*EXECUTORY CONTRACTS-  It’s a contract between a debtor and another party under which
both sides still have important performance remaining.  Put another way, if either side stopped
performing the contract it would be an actual breach of contract. 

*EXECUTED CONTRACTS-  a signed contract that establishes a contractual

relationship between two or more parties. Once the contract is fully signed, each party
agrees to uphold the legal obligations they agreed on within the written agreement.

While an executed contract can refer to an agreement between two or more parties with
signatures, it can also refer to a contract that has not only been agreed upon but has
also been fulfilled. Both definitions are legally valid and can be used in either context.

*PARTIALLY EXECUTORY CONTRACTS-

ORDUA VS. FUENTEBELLA et. Al G.R. No. 176841 : June 29, 2010

FACTS: This case involves a residential lot with an area of 74 square meters located at Fairview
Subdivision, Baguio City, originally registered in the name of Armando Gabriel, Sr. under
Transfer Certificate of Title (TCT) No. 67181 of the Registry of Deeds of Baguio City.
Sometime in 1996 or thereabouts, Gabriel Sr. sold the subject lot to petitioner Antonita Ordua,
but no formal deed was executed to document the sale. The contract price was apparently
payable in installments as Antonita remitted from time to time and Gabriel Sr. accepted partial
payments. One of the Orduas would later testify that Gabriel Sr. agreed to execute a final deed of
sale upon full payment of the purchase price. In 1979, Antonita and her sons, Dennis and
Anthony Ordua, were already occupying the subject lot on the basis of some arrangement
undisclosed in the records and even constructed their house thereon. They also paid real property
taxes for the house and declared it for tax purposes, as evidenced by Tax Declaration in which
they place the assessed value of the structure at PhP 20,090. After the death of Gabriel Sr., his
son and namesake, respondent Gabriel Jr., secured TCT No. T-71499 over the subject lot and
continued accepting payments from the petitioners. On December 12, 1996, Gabriel Jr. wrote
Antonita authorizing her to fence off the said lot and to construct a road in the adjacent lot. On
December 13, 1996, Gabriel Jr. acknowledged receipt of a PhP 40,000 payment from petitioners.
Through a letter dated May 1, 1997, Gabriel Jr. acknowledged that petitioner had so far made an
aggregate payment of PhP 65,000, leaving an outstanding balance of PhP 60,000. A receipt
Gabriel Jr. issued dated November 24, 1997 reflected a PhP 10,000 payment. Despite all those
payments made for the subject lot, Gabriel Jr. would later sell it to Bernard Banta (Bernard)
obviously without the knowledge of petitioners. On July 3, 2001, petitioners, joined by Teresita,
filed a Complaint for Annulment of Title, Reconveyance with Damages against the respondents
before the RTC. The RTC ruled for the respondents. The CA dismissed the appeal, hence this
petition.

ISSUE: Whether or not the sale of the subject lot by Gabriel Sr. to Antonita is unenforceable
under the Statute of Frauds;
RULING: the court notices that Gabriel Sr., during his lifetime, sold the subject property to
Antonita, the purchase price payable on installment basis. Gabriel Sr. appeared to have been a
recipient of some partial payments. After his death, his son duly recognized the sale by accepting
payments and issuing what may be considered as receipts therefor. Gabriel Jr., in a gesture
virtually acknowledging the petitioners' dominion of the property, authorized them to construct a
fence around it. And no less than his wife, Teresita, testified as to the fact of sale and of
payments received. Eduardo's assertion in his Answer that "persons appeared in the property"
only after "he initiated ejectment proceedings" is clearly baseless.

Heirs of Alido v. Campano G.R. No. 226065, July 29, 2019 2nd Division REYES, J.
JR., J.

Facts: Soledad Alido is the registered owner of a parcel of land in Alimondian, Iloilo
was able to register it under her name. Campano took possession of the land and the
owner’s duplicate OCT, and paid its realty taxes, pursuant to an alleged sale. When
Alino died, her heirs namely, Reynaldo, Maggie, and Rodrigo, executed a Deed of
Adjudication of the property and sought to register the property in their names. As such,
they needed to retrieve OCT No. F-16558, but Campano refused to do so. Thus, they
were constrained to filed a verified petition for Campano to surrender the owner’s
duplicate of the title. Heirs of Alido, believe that Campano cannot defeat their claim of
ownership because it is supported by a certificate of title issued in the name of their
predecessor. On the other hand, Campano claims ownership over the property by virtue
of an oral sale between her and Alido

Issue: Whether contracts of sale of real property without its term being reduced in
writing are void or invalid.
Ruling: No. It is a settled rule that the failure to observe the proper form prescribed by
Article 1358 does not render the acts or contracts enumerated therein invalid. It has
been uniformly held that the form required under the said Article is not essential to the
validity or enforceability of the transaction, but merely for convenience. The Court
agrees with the CA in holding that a sale of real property, though not consigned in a
public instrument or formal writing, is, nevertheless, valid and binding among the
parties, for the time-honored rule is that even a verbal contract of sale of real estate
produces legal effects between the parties. Stated differently, although a conveyance of
land is not made in a public document, it does not affect the validity of such
conveyance. Article 1358 does not require the accomplishment of the acts or contracts
in a public instrument in order to validate the act or contract but only to insure its
efficacy. However, since the sale of a parcel of land is in violation of the five-year
prohibition on the alienation of land acquired via a free patent application, it is void and
produces no legal effect. As successors-ininterest of Alido, their right to challenge the
sale between Alido and Campano cannot be barred by laches as it was in violation of
the restriction on the sale of land acquired through free patent. Consequently, the heirs
of Alido may recover the parcel of land Alido had sold to Campano. However, as a
result of the annulment of the sale between Alido and Campano, the latter may claim
the purchase price and interest.
 ROSENCOR DEVELOPMENT CORPORATION and RENE JOAQUIN, petitioners,
vs.PATERNO INQUING, IRENE GUILLERMO, FEDERICO BANTUGAN, FERNANDO
MAGBANUA and LIZZA TIANGCO, respondents. G.R. No. 140479 March 8, 2000

FACTS: Plaintiffs and plaintiffs-intervenors averred that they are the lessess since 1971 of a
twostory residential apartment and owned by spouses Faustino and Cresencia Tiangco. The lease
was nocovered by any contract. The lesses were renting the premises then for Php 150.00 a
month and were allegedly verbally granted by the lessors the pre-emptive right to purchase the
property if ever they decide to sell the same. Upon the death of the spouses Tiangco, the
management of the property was adjudicated to their heirs who were represented by Eufrocina
deLeon. The lessees received a letter from de Leon advising them that the heirs of the late
spouses have already sold the property to Resencor. The lessees filed an action f\before th RTC
praying for the following: a) rescission of the Deed of Absolute Sale between de Leon and
Rocencor, b) the defendants Rosencor/Rene Joaquin be ordered to reconvey the property to de
Leon, c) de Leon be ordered to reimburse the plaintiffs for the repair of the property or apply the
said amount as part of the purchase of the property. The RTC dismissed the complaint while the
Ca reversed the decision of the RTC.

ISSUE: Whether or not a right of first refusal is indeed covered by the provisions of the NCC on
the Statute of Frauds.

RULING: A right of first refusal is not among those listed as unenforceable under the statute of
frauds. Furthermore, the application of Article 1403, par. 2(e) of the NCC, presupposes the
existence of a perfected, albeit unwritten, contract of sale. A right of first refusal, such as the one
involved in the instant case, is not by any means a perfected contract of sale of real property. At
best, it is a contractual grant, not of the sale of the real property involed byt of the right of first
refusal over the property sought to be sold. It is thus evident that the statute of frauds does not
contemplate cases involving a right of right of first refusal. As such, a right of first refusal need
not be written to be enforceable and may be proven by oral evidence.

SPOUSES CONSTANTE FIRME AND AZUCENA E. FIRME, petitioners, vs.UKAL

ENTERPRISES AND DEVELOPMENT CORPORATION, respondent. G.R. No. 146608
October 23, 2003

FACTS: Petitioner Spouses Firme are the registered owner of a parcel of land located on Dahlia
Avenue, Fairview Park, Quezon City. Bukal Enterprises filed a complaint for specific
performance and damges with the trial court, aleeging that the Spouses Firme reneged on their
agreement to sell the property. The complaint asked the trial court to order the Spouses Firme to
execute the deed of sale and to delover the title of the property to Bukal Enterpises upon
payment of the agreed purchase price. The RTC rendered its decision against Bukal. The CA
reversed and set aside the decision of the RTC.

ISSUE: Whether or not Statute of Frauds is applicable.

RULING: The CA held that partial performance of the contract of sale takes the oral contract out
of the scope of Statute of Frauds. This conclusion arose from the appellate court’s erronoues
finding that there was a perfected contract of sale. The recors shoe that there was no perfected
contract of sale. There is therefore no basis for the application of the Stature of Frauds. The
application of the Statute of Frauds presupposes the existence of a perfected contract