21. Magna Financial Services vs.

Colarina ( 2005)

FACTS: Elias Colarina bought on installment from Magna Financial Services Group, Inc., 1 unit of Suzuki
Multicab. After making a down payment, Colarina executed a PN for the balance of P229,284. To secure payment
thereof, Colarina executed an integrated PN and deed of chattel mortgage over the motor vehicle.

Colarina failed to pay the monthly amortization beginning January 1999, accumulating an unpaid balance of
P131,607. Despite repeated demands, he failed to make the necessary payment. Magna Financial Services Group,
Inc. filed a Complaint for Foreclosure of Chattel Mortgage with Replevin before the MTCC. Upon filing of a bond,
a writ of replevin was issued. Colarina who voluntarily surrendered physical possession of the vehicle to the Sheriff.
After declaring Colarina in default, the trial court ruled against defendant and ordered him to pay the sum of
P131,607 plus penalty charges, attorney’s fees and cost. In case of nonpayment, the multicab shall be sold at public
auction. The RTC affirmed. The CA rendered its decision ruling that the courts erred in ordering the defendant to
pay the unpaid balance of the purchase price irrespective of the fact that the complaint was for the foreclosure of the
chattel mortgage.

ISSUE: What is the true nature of a foreclosure of chattel mortgage under Article 1484(3)

RULING: Our Supreme Court in Bachrach Motor Co., Inc. v. Millan held: “Undoubtedly the principal object of
the amendment (referring to Act 4122 amending Art. 1454, Civil Code of 1889) was to remedy the abuses
committed in connection with the foreclosure of chattel mortgages. This amendment prevents mortgagees from
seizing the mortgaged property, buying it at foreclosure sale for a low price and then bringing the suit against the
mortgagor for a deficiency judgment. The almost invariable result of this procedure was that the mortgagor found
himself minus the property and still owing practically the full amount of his original indebtedness.”

In its complaint, Magna Financial prayed for the principal sum of P131,607, attorney’s fees etc. It is further prayed
that pendent lite, an Order of Replevin issue commanding the Provincial Sheriff at Legazpi City or any of his
deputies to take such multicab into his custody and, after judgment, upon default in the payment of the amount
adjudged due to the plaintiff, to sell said chattel at public auction in accordance with the chattel mortgage law. In its
Memorandum before us, petitioner resolutely declared that it has opted for the remedy provided under Article
1484(3) CC that is, to foreclose the chattel mortgage.

It is, however, unmistakable from the Complaint that petitioner preferred to avail itself of the first and third remedies
under Article 1484, at the same time suing for replevin. For this reason, the Court of Appeals justifiably set aside
the decision of the RTC. Perusing the Complaint, the petitioner, under its prayer number 1, sought for the payment
of the unpaid amortizations which is a remedy that is provided under Article 1484(1) of the Civil Code, allowing an
unpaid vendee to exact fulfillment of the obligation. At the same time, petitioner prayed that Colarina be ordered
to surrender possession of the vehicle so that it may ultimately be sold at public auction, which remedy is contained
under Article 1484(3). Such a scheme is not only irregular but is a flagrant circumvention of the prohibition of the
law. By praying for the foreclosure of the chattel, Magna Financial Services Group, Inc. renounced whatever claim
it may have under the promissory note.

Article 1484, paragraph 3, provides that if the vendor has availed himself of the right to foreclose the chattel
mortgage, “he shall have no further action against the purchaser to recover any unpaid balance of the purchase price.
Any agreement to the contrary shall be void.” In other words, in all proceedings for the foreclosure of chattel
mortgages executed on chattels which have been sold on the installment plan, the mortgagee is limited to the
property included in the mortgage.
Contrary to petitioner’s claim, a contract of chattel mortgage, which is the transaction involved in the present case, is
in the nature of a conditional sale of personal property given as a security for the payment of a debt, or the
performance of some other obligation specified therein, the condition being that the sale shall be void upon the seller
paying to the purchaser a sum of money or doing some other act named. If the condition is performed according to
its terms, the mortgage and sale immediately become void, and the mortgagee is thereby divested of his title. On the
other hand, in case of non payment, foreclosure is one of the remedies available to a mortgagee by which he subjects
the mortgaged property to the satisfaction of the obligation to secure that for which the mortgage was given.
Foreclosure may be effected either judicially or extrajudicially, that is, by ordinary action or by foreclosure under
power of sale contained in the mortgage. It may be effected by the usual methods, including sale of goods at public
auction. Extrajudicial foreclosure, as chosen by the petitioner, is attained by causing the mortgaged property to be
seized by the sheriff, as agent of the mortgagee, and have it sold at public auction in the manner prescribed by
Section 14 of Act No. 1508, or the Chattel Mortgage Law. This rule governs extrajudicial foreclosure of chattel
mortgage.

In sum, since the petitioner has undeniably elected a remedy of foreclosure under Article 1484(3) of the Civil Code,
it is bound by its election and thus may not be allowed to change what it has opted for nor to ask for more. On this
point, the Court of Appeals correctly set aside the trial court’s decision and instead rendered a judgment of
foreclosure as prayed for by the petitioner.

TEACHING: Art 1484(3) PROHIBITS OTHER ACTION TO RECOVER ANY UNPAID BALANCE OF THE
PURCHASE PRICE AFTER FORECLOSURE. In other words, in all proceedings for the foreclosure of chattel
mortgages executed on chattels which have been sold on the installment plan, the mortgagee is limited to the
property included in the mortgage.

-NATURE OF CONTRACT OF CHATTEL MORTGAGE: conditional sale of personal property given as security
for the payment of a debt, or the performance of some other obligation specified therein, the condition being that the
sale shall be VOID UPON THE SELLER PAYING OR PERFORMING THE OBLIGATION SPECIFIED.

22. Filinvest Credit Corp. v. CA, 178 SCRA 188 (1989)

FACTS: The private respondents were engaged in the sale of gravel produced from crushed rocks, they bought a
rock crusher machine with the financial assistance of petitioner with waiver of warranties and subject to the
conditions, that the machinery be purchased in Petitioner's name, that it be leased (with option to purchase upon
termination of the period) to the private respondents and for the latter to execute a Real estate mortgage as security
for the amount advanced. Three months from the date of delivery of the machine private respondent sent a letter
complaint to the Respondent alleging that contrary to the 20-40tons per hour capacity of the machine it could only
process 5tons per hour. Subsequently the latter stopped payment of the remaining checks they issued to petitioner.
Petitioner then after repeated demands for the rentals, extrajudicially foreclose the REM.

ISSUES: WON the real transaction was lease or sale?

WON Petitioner be held liable for the deficiency of the machine?

RULING:
 1. The real intention of the parties should prevail. The nomenclature of the agreement cannot change its true
essence, i.e., a sale on installments. It is basic that a contract is what the law defines it and the parties intend it to be,
not what it is called by the parties. It is apparent here that the intent of the parties to the subject contract is for the so-
called rentals to be the installment payments. Upon the completion of the payments, then the rock crusher, subject
matter of the contract, would become the property of the private respondents. This form of agreement has been
criticized as a lease only in name.

Sellers desirous of making conditional sales of their goods, but who do not wish openly to make a bargain in that
form, for one reason or another, have frequently resorted to the device of making contracts in the form of leases
either with options to the buyer to purchase for a small consideration at the end of term, provided the so-called rent
has been duly paid, or with stipulations that if the rent throughout the term is paid, title shall thereupon vest in the
lessee. It is obvious that such transactions are leases only in name. The so-called rent must necessarily be regarded
as payment of the price in installments since the due payment of the agreed amount results, by the terms of bargain,
in the transfer of title to the lessee.

Indubitably, the device contract of lease with option to buy is at times resorted to as a means to circumvent Article
1484, particularly paragraph (3) thereof.Through the set-up, the vendor, by retaining ownership over the property in
the guise of being the lessor, retains, likewise, the right to repossess the same, without going through the process of
foreclosure, in the event the vendee-lessee defaults in the payment of the installments. There arises therefore no need
to constitute a chattel mortgage over the movable sold. More important, the vendor, after repossessing the property
and, in effect, canceling the contract of sale, gets to keep all the installments-cum-rentals already paid.

Article 1485. The preceding article shall be applied to contracts purporting to be leases of personal property with
option to buy, when the lessor has deprived the lessee of possession or enjoyment of the thing.

2. Taking into account that due to the nature of its business and its mode of providing financial assistance to
particular item is left to the client concerned, the latter, therefore, shoulders the responsibility of protecting
himself against product defects. This is where the waiver of warranties is of paramount importance.
Common sense dictates that a buyer inspects a product before purchasing it (under the principle of caveat
emptor or "buyer beware") and does not return it for defects discovered later on, particularly if the return
of the product is not covered by or stipulated in a contract or warranty. In the case at bar, to declare the
waiver as non-effective, as the lower courts did, would impair the obligation of contracts. Certainly, the
waiver in question could not be considered a mere surplusage in the contract between the parties.

23. Orbe vs. Filinvest G.R. 208185 Sept. 6, 2017

FACTS: Sometime in June 2001, Priscilla Orbe entered into a purchase agreement with respondent Filinvest Land,
Inc. over a 385-square meter lot identified as Lot 1, Block 10, Phase 1, Highlands Pointe, Taytay, Rizal. The total
contract price was PhP 2,566,795.00, payable on installment basis. 
From June 17, 2001 to July 14, 2004, Orbe paid a total of PhP 608,648.00. These were mainly through several
Metrobank checks, for which Filinvest issued official receipts. Orbe was unable to make further payments allegedly
on account of financial difficulties. 
On October 4, 2004, Filinvest sent a notice of cancellation, which was received by Orbe on October 18, 2004. 
Noting that efforts to seek for a reconsideration of said cancellation proved futile, and that the parcel had since been
sold by Filinvest to a certain Ruel Ymana in evident bad faith, Orbe filed against Filinvest a Complaint for refund
with damages dated November 13, 2007 before the HLURB Field Office. Orbe emphasized that she made payments
beginning June 2001 to October 2004. She further asserted that the October 4, 2004 Notice did not amount to an
effective cancellation by notarial act. 

ISSUE: Whether Orbe is entitled to the benefits under Section 3 of RA No. 6552.

RULING: The Court ruled in the negative. 

Contrary to petitioner’s allegations, she did not pay at least two years of installments as to fall within the protection
of Section 3. 

When Section 3 speaks of paying “at least two years of installments,” it refers to the equivalent of the totality of
payments diligently or consistently made throughout a period of two years. Accordingly, where installments are to
be paid on a monthly basis, paying “at least two years of installments” pertains to the aggregate value of 24 monthly
installments. As explained in Gatchalian Realty v. Angeles: It should be noted that Section 3 of R.A. 6552 and
paragraph six of Contract Nos. 2271 and 2272, speak of “two years of installments.” The basis for computation of
the term refers to the installments that correspond to the number of months of payments, and not to the number of
months that the contract is in effect as well as any grace period that has been given. Both the law and the contracts
thus prevent any buyer who has not been diligent in paying his monthly installments from unduly claiming the rights
provided in Section 3 of R.A. 6552. 

The phrase “at least two years of installments” refers to value and time. It does not only refer to the period when the
buyer has been making payments, with total disregard for the value that the buyer has actually conveyed. It refers to
the proportionate value of the installments made, as well as payments having been made for at least two years. 
Laws should never be so interpreted as to produce results that are absurd or unreasonable. Sustaining petitioner’s
contention that she falls within Section 3’s protection just because she has been paying for more than two years goes
beyond a justified liberal construction of the Maceda Law. It facilitates arbitrariness, as intermittent payments of
fluctuating amounts would become permissible, so long as they stretch for two years. Worse, it condones absurdity.
It sets a precedent that would endorse minimal token payments that extend for two years. A buyer could, then,
literally pay loose change for two years and still come under Section 3’s protection. 

24. IDA C. LABAGALA, petitioner, vs. NICOLASA T. SANTIAGO, AMANDA T. SANTIAGO and HON.
COURT OF APPEALS, respondents.

FACTS: Jose T. Santiago owned a parcel of land located in Rizal Avenue Extension, Sta. Cruz, Manila. Alleging
that Jose had fraudulently registered it in his name alone, his sisters Nicolasa and Amanda (now respondents herein),
sued Jose for recovery of 2/3 share of the property. On April 20, 1981, the trial court in that case decided in favor of
the sisters, recognizing their right of ownership over portions of the property. The Register of Deeds of Manila was
required to include the names of Nicolasa and Amanda in the certificate of title to said property.

Jose died intestate on February 6, 1984. On August 5, 1987, respondents filed a complaint for recovery of title,
ownership, and possession against herein petitioner, Ida C. Labagala, before the Regional Trial Court of Manila, to
recover from her the 1/3 portion of said property pertaining to Jose but which came into petitioner’s sole possession
upon Jose’s death.

Respondents alleged that Jose’s share in the property belongs to them by operation of law, because they are the only
legal heirs of their brother, who died intestate and without issue. They claimed that the purported sale of the
property made by their brother to petitioner sometime in March 1979 was executed through petitioner’s
machinations and with malicious intent, to enable her to secure the corresponding transfer certificate of title in
petitioner’s name alone.

Respondents insisted that the deed of sale was a forgery. The deed showed that Jose affixed his thumbmark thereon
but respondents averred that, having been able to graduate from college, Jose never put his thumbmark on
documents he executed but always signed his name in full. They claimed that Jose could not have sold the property
belonging to his “poor and unschooled sisters who… sacrificed for his studies and personal welfare.” Respondents
also pointed out that it is highly improbable for petitioner to have paid the supposed consideration of P150,000 for
the sale of the subject property because petitioner was unemployed and without any visible means of livelihood at
the time of the alleged sale. They also stressed that it was quite unusual and questionable that petitioner registered
the deed of sale only on January 26, 1987, or almost eight years after the execution of the sale.

On the other hand, petitioner claimed that her true name is not Ida C. Labagala as claimed by respondent but Ida C.
Santiago. She claimed not to know any person by the name of Ida C. Labagala. She claimed to be the daughter of
Jose and thus entitled to his share in the subject property. She maintained that she had always stayed on the
property, ever since she was a child. She argued that the purported sale of the property was in fact a donation to her,
and that nothing could have precluded Jose from putting his thumbmark on the deed of sale instead of his signature.
She pointed out that during his lifetime, Jose never acknowledged respondents’ claim over the property such that
respondents had to sue to claim portions thereof. She lamented that respondents had to disclaim her in their desire to
obtain ownership of the whole property.

ISSUE: Whether or not there is a valid sale or donation?

RULING: No. Clearly, there is no valid sale in this case. Jose did not have the right to transfer ownership of the
entire property to petitioner since 2/3 thereof belonged to his sisters. Petitioner could not have given her consent to
the contract, being a minor at the time. Consent of the contracting parties is among the essential requisites of a
contract, including one of sale, absent which there can be no valid contract.

Moreover, petitioner admittedly did not pay any centavo for the property, which makes the sale void. Article 1471
of the Civil Code provides:
Art. 1471. If the price is simulated, the sale is void, but the act may be shown to have been in reality a donation, or
some other act or contract.

Neither may the purported deed of sale be a valid deed of donation. Again, as explained by the Court of Appeals:
…Even assuming that the deed is genuine, it cannot be a valid donation. It lacks the acceptance of the donee
required by Art. 725 of the Civil Code. Being a minor in 1979, the acceptance of the donation should have been
made by her father, Leon Labagala or [her] mother Cornelia Cabrigas or her legal representative pursuant to Art.
741 of the same Code. No one of those mentioned in the law - in fact no one at all - accepted the “donation” for Ida.

In sum, the court find no reversible error attributable to the assailed decision of the Court of Appeals, hence it must
be upheld.

WHEREFORE, the petition is DENIED, and the decision of the Court of Appeals in CA-G.R. CV No. 32817 is
AFFIRMED.

25. SPS. Rudy Paragas and Corazon B. Paragas, Petitioners, v. Hrs. of Dominador Balacano
FACTS: Gregorio Balacano, married to Lorenza Sumigcay, was the registered owner of Lot 1175-E and Lot 1175-F
of the Subd. Gregorio and Lorenza had three children, namely: Domingo, Catalino and Alfredo, all surnamed
Balacano. Lorenza died on December 11, 1991. Gregorio, on the other hand, died on July 28, 1996.

Prior to his death, Gregorio was admitted at the Veterans General Hospital in Bayombong, Nueva Vizcaya on June
28, 1996 and stayed there until July 19, 1996. He was transferred in the afternoon of July 19, 1996 to the Veterans
Memorial Hospital in Quezon City where he was confined until his death.

Gregorio purportedly sold on July 22, 1996, or barely a week prior to his death, a portion of Lot 1175-E (specifically
consisting of 15,925 square meters from its total area of 22,341 square meters) and the whole Lot 1175-F to the
Spouses Paragas for the total consideration of P500,000.00. This sale appeared in a deed of absolute sale notarized
by Atty. Alexander V. de Guzman, Notary Public for Santiago City, on the same date - July 22, 1996 - and
witnessed by Antonio Agcaoili and Julia Garabiles. Gregorio's certificates of title over Lots 1175-E and 1175-F
were consequently cancelled and new certificates of title were issued in favor of the Spouses Paragas.

The Spouses Paragas then sold on October 17, 1996 a portion of Lot 1175-E consisting of 6,416 square meters to
Catalino for the total consideration of P60,000.00.

Domingo's children (Dominic, Rodolfo, Nanette and Cyric, all surnamed Balacano;') filed on October 22, 1996 a
complaint for annulment of sale and partition against Catalino and the Spouses Paragas. They essentially alleged - in
asking for the nullification of the deed of sale - that: (1) their grandfather Gregorio could not have appeared before
the notary public on July 22, 1996 at Santiago City because he was then confined at the Veterans Memorial Hospital
in Quezon City; (2) at the time of the alleged execution of the deed of sale, Gregorio was seriously ill, in fact dying
at that time, which vitiated his consent to the disposal of the property; and (3) Catalino manipulated the execution of
the deed and prevailed upon the dying Gregorio to sign his name on a paper the contents of which he never
understood because of his serious condition. Alternatively, they alleged that assuming Gregorio was of sound and
disposing mind, he could only transfer a half portion of Lots 1175-E and 1175-F as the other half belongs to their
grandmother Lorenza who predeceased Gregorio - they claimed that Lots 1175-E and 1175-F form part of the
conjugal partnership properties of Gregorio and Lorenza. Finally, they alleged that the sale to the Spouses Paragas
covers only a 5-hectare portion of Lots 1175-E and 1175-F leaving a portion of 6,416 square meters that Catalino is
threatening to dispose. They asked for the nullification of the deed of sale executed by Gregorio and the partition of
Lots 1175-E and 1175-F. They likewise asked for damages.

Instead of filing their Answer, the defendants Catalino and the Spouses Paragas moved to dismiss the complaint on
the following grounds: (1) the plaintiffs have no legal capacity - the Domingo's children cannot file the case because
Domingo is still alive, although he has been absent for a long time; (2) an indispensable party is not impleaded - that
Gregorio's other son, Alfredo was not made a party to the suit; and (3) the complaint states no cause of action - that
Domingo's children failed to allege a ground for the annulment of the deed of sale; they did not cite any mistake,
violence, intimidation, undue influence or fraud, but merely alleged that Gregorio was seriously ill. Domingo's
children opposed this motion.

ISSUE: Whether or not the Court of Appeals committed reversible error in upholding the findings and conclusions
of the trial court on the nullity of the Deed of Sale purportedly executed between petitioners and the late Gregorio
Balacano.

RULING:
No. Specifically, the Court of Appeals, in affirming the trial court, found that there was no prior and perfected
contract of sale that remained to be fully consummated.
Article 24 of the Civil Code tells us that in all contractual, property or other relations, when one of the parties is at a
disadvantage on account of his moral dependence, ignorance, indigence, mental weakness, tender age or other
handicap, the courts must be vigilant for his protection.

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

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

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

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

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

. . . She died an octogenarian on March 20, 1966, barely over a year when the deed was allegedly executed on
January 28, 1965, but before copies of the deed were entered in the registry allegedly on May 16 and June 10, 1966.
The general rule is that a person is not incompetent to contract merely because of advanced years or by reason of
physical infirmities. However, when such age or infirmities have impaired the mental faculties so as to prevent the
person from properly, intelligently, and firmly protecting her property rights then she is undeniably incapacitated.
The unrebutted testimony of Zosima Domingo shows that at the time of the alleged execution of the deed, Paulina
was already incapacitated physically and mentally. She narrated that Paulina played with her waste and urinated in
bed. Given these circumstances, there is in our view sufficient reason to seriously doubt that she consented to the
sale of and the price for her parcels of land.

Moreover, there is no receipt to show that said price was paid to and received by her. Thus, we are in agreement
with the trial court's finding and conclusion on the matter: . . .

In the case at bar, the Deed of Sale was allegedly signed by Gregorio on his death bed in the hospital. Gregorio was
an octogenarian at the time of the alleged execution of the contract and suffering from liver cirrhosis at that -
circumstances which raise grave doubts on his physical and mental capacity to freely consent to the contract. Adding
to the dubiety of the purported sale and further bolstering respondents' claim that their uncle Catalino, one of the
children of the decedent, had a hand in the execution of the deed is the fact that on 17 October 1996, petitioners sold
a portion of Lot 1175-E consisting of 6,416 square meters to Catalino for P60,000.00. One need not stretch his
imagination to surmise that Catalino was in cahoots with petitioners in maneuvering the alleged sale.
On the whole, we find no reversible error on the part of the appellate court in CA-G.R. CV No. 64048 that would
warrant the reversal thereof.

26. Guiang vs CA 291 SCRA 372, June 26, 1998

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

Over the objection of private respondent Gilda Corpuz and while she was in Manila seeking employment (with the
consent of her husband), her husband sold to the petitioner-spouses Antonio and Luzviminda Guiang one half of
their conjugal property, consisting of their residence and the lot on which it stood. Upon her return to Cotabato,
respondent gathered her children and went back to the subject property. Petitioners filed a complaint for trespassing.
Later, there was an amicable settlement between the parties. Feeling that she had the shorter end of the bargain,
respondent filed an Amended Complaint against her husband and petitioners. The said complaint sought the
declaration of a certain deed of sale, which involved the conjugal property of private respondent and her husband,
null and void.

ISSUE: Whether the contract of sale, if without the consent of the wife, is void.

RULING: Yes, Article 124 of the Family Code rules that in the event that one spouse is incapacitated or otherwise
unable to participate in the administration of the conjugal properties, the other spouse may assume sole powers of
administration. These powers do not include the powers of disposition or encumbrance which must have the
authority of the court or the written consent of the other spouse. In the absence of such authority or consent, the
disposition or encumbrance shall be void.

Respondent’s consent to the contract of sale of their conjugal property was totally inexistent or absent. The nullity of
the contract of sale is premised on the absence of private respondent’s consent. To constitute a valid contract, the
Civil Code requires the concurrence of the following elements: (1) cause, (2) object, and (3) consent, the last
element being indubitably absent in the case at bar.

27. Pelayo vs. Perez , 459 SCRA 475 (2005)

FACTS: On January 11, 1988, David Pelayo conveyed to Melki Perez two parcels of agricultural land situated in
Panabo, Davao City which are portions of Lot 4192, Cad. 276 covered by OCT P-16873 by a Deed of Absolute
Sale. His wife, Loreza and another one whose signature is illegible witnessed the execution of the deed.

Loreza, however, signed only on the third page in the space provided for witnesses on account of which Perez’
application for registration of the deed with the ROD was denied.

Perez thereupon asked Loreza to sign on the first and second pages of the deed but she refused , hence, he instituted
on August 8, 1991 the instant complaint for specific performance against her and her husband.

The defendants moved to dismiss the complaint on the ground that it stated no cause of action, citing Section 6 of
RA 6656 otherwise known as the Comprehensive Agrarian Reform Law which took effect on June 10, 1988 and
which provides that contracts executed prior thereto shall "be valid only when registered with the Register of Deeds
within a period of three (3) months after the effectivity of this Act."
The questioned deed having been executed on January 10, 1988, the defendants claimed that Perez had at least up to
September 10, 1988 within which to register the same, but as they failed to, it is not valid and, therefore,
unenforceable.

The trial court dismissed the complaint. On appeal, the dismissal was set aside and the case was remanded to the
lower court for further proceedings.

The defendants claimed that as the lots were occupied illegally by some persons against whom they filed an
ejectment case, they and Perez who is their friend and known at the time as an activist/leftist, hence feared by many,
just made it appear in the deed that the lots were sold to him in order to frighten said illegal occupants, with the
intentional omission of Loreza’s signature so that the deed could not be registered; and that the deed being simulated
and bereft of consideration is void/inexistent.

Perez countered that the lots were given to him by defendant Pelayo in consideration of his services as his attorney-
in-fact to make the necessary representation and negotiation with the illegal occupants-defendants in the ejectment
suit; and that after his relationship with defendant Pelayo became sour, the latter sent a letter to the ROD of Tagum
requesting him not to entertain any transaction concerning the lots title to which was entrusted to Perez who
misplaced and could not locate it.

Pelayo claimed in any event that the deed was without his wife Loreza’s consent, hence, in light of Art. 166 of the
Civil Code which provides: Unless the wife has been declared a non compos mentis or a spendthrift, or is under civil
interdiction or is confined in a leprosarium, the husband cannot alienate or encumber any real property of the
conjugal partnership without the wife’s consent it is null and void.

The trial court, finding, among others, that Perez did not possess, nor pay the taxes on the lots, that defendant Pelayo
was indebted to Perez for services rendered and, therefore, the deed could only be considered as evidence of debt,
and that in any event, there was no marital consent to nor actual consideration for the deed, held that the deed was
null and void and void and without force.

The CA ruled that by Lorenza’s signing as witness to the execution of the deed, she had knowledge of the
transaction and is deemed to have given her consent to the same; that herein petitioners failed to adduce sufficient
proof to overthrow the presumption that there was consideration for the deed, and that petitioner David Pelayo,
being a lawyer, is presumed to have acted with due care and to have signed the deed with full knowledge of its
contents and import. The CA reversed and set aside the RTC Decision, declaring as valid and enforceable the
questioned deed of sale and ordering herein petitioner Lorenza Pelayo to affix her signature on all pages of said
document.

ISSUE: WON the deed of sale was null and void on the following grounds: (a) for not complying with the provision
in R.A. No. 6657 that such document must be registered with the Register of Deeds within three months after the
effectivity of said law; (b) for lack of marital consent; (c) for being prohibited under Article 1491 (2) of the Civil
Code; and (d) for lack of consideration.

HELD: (a) The issue of whether or not the deed of sale is null and void under R.A. No. 6657, for respondent’s
failure to register said document with the Register of Deeds within three months after the effectivity of R.A. No.
6657, had been resolved with finality by the CA. Thus, under the principle of law of the case, said ruling of the CA
is now binding on petitioners. Petitioners not having questioned the Decision of the CA which then attained finality,
the ruling that the deed of sale subject of this case is not among the transactions deemed as invalid under R.A. No.
6657, is now immutable.
(b) SC agreed that by affixing Lorenza’s signature to the Deed of Sale on the space provided for witnesses, is
deemed to have given her implied consent to the contract of sale.

Sale is a consensual contract that is perfected by mere consent, which may either be express or implied. A wife’s
consent to the husband’s disposition of conjugal property does not always have to be explicit or set forth in any
particular document, so long as it is shown by acts of the wife that such consent or approval was indeed given. In the
present case, although it appears on the face of the deed of sale that Lorenza signed only as an instrumental witness,
circumstances leading to the execution of said document point to the fact that Lorenza was fully aware of the sale of
their conjugal property and consented to the sale.

Moreover, under Article 173, in relation to Article 166, both of the New Civil Code, which was still in effect on
January 11, 1988 when the deed in question was executed, the lack of marital consent to the disposition of conjugal
property does not make the contract void ab initio but merely voidable.

Art. 166. Unless the wife has been declared a non compos mentis or a spendthrift, or is under civil interdiction or is
confined in a leprosarium, the husband cannot alienate or encumber any real property of the conjugal property
without the wife’s consent. If she refuses unreasonably to give her consent, the court may compel her to grant the
same.

Art. 173. The wife may, during the marriage, and within ten years from the transaction questioned, ask the courts
for the annulment of any contract of the husband entered into without her consent, when such consent is required,
or any act or contract of the husband which tends to defraud her or impair her interest in the conjugal partnership
property. Should the wife fail to exercise this right, she or her heirs, after the dissolution of the marriage, may
demand the value of property fraudulently alienated by the husband.

Hence, it has been held that the contract is valid until the court annuls the same and only upon an action brought by
the wife whose consent was not obtained. In the present case, despite respondent’s repeated demands for Lorenza to
affix her signature on all the pages of the deed of sale, showing respondent’s insistence on enforcing said contract,
Lorenza still did not file a case for annulment of the deed of sale. It was only when respondent filed a complaint for
specific performance on August 8, 1991 when petitioners brought up Lorenza’s alleged lack of consent as an
affirmative defense. Thus, if the transaction was indeed entered into without Lorenza’s consent, it would be quite
puzzling why for more than three and a half years, Lorenza did absolutely nothing to seek the nullification of the
assailed contract.

The foregoing circumstances lead the Court to believe that Lorenza knew of the full import of the transaction
between respondent and her husband; and, by affixing her signature on the deed of sale, she, in effect, signified her
consent to the disposition of their conjugal property.

(c) With regard to petitioners’ asseveration that the deed of sale is invalid under Article 1491, paragraph 2 of the
New Civil Code, SC found such argument unmeritorious. Article 1491 (2) provides:

Art. 1491. The following persons cannot acquire by purchase, even at a public or judicial auction, either in person
or through the mediation of another:

(2) Agents, the property whose administration or sale may have been entrusted to them, unless the consent of the
principal has been given;
Petitioners, by signing the Deed of Sale in favor of respondent, are also deemed to have given their consent to the
sale of the subject property in favor of respondent, thereby making the transaction an exception to the general rule
that agents are prohibited from purchasing the property of their principals.

(d) The element of consideration for the sale is indeed present. Petitioners admitted that they authorized respondent
to represent them in negotiations with the "squatters" occupying the disputed property and, in consideration of
respondent’s services, they executed the subject deed of sale. Aside from such services rendered by respondent,
petitioners also acknowledged in the deed of sale that they received in full the amount of Ten Thousand Pesos.
Evidently, the consideration for the sale is respondent’s services plus the aforementioned cash money.

The petition is DENIED and the Decision of the Court of Appeals is AFFIRMED.

W/N the deed was null and void for lack of marital consent?

HELD: We agree with the CA ruling that petitioner Lorenza, by affixing her signature to the
Deed of Sale on the space provided for witnesses, is deemed to have given her implied consent to
the contract of sale. Sale is a consensual contract that is perfected by mere consent, which may
either be express or implied. A wife’s consent to the husband’s disposition of conjugal property
does not always have to be explicit or set forth in any particular document, so long as it is shown
by acts of the wife that such consent or approval was indeed given. In the present case, although
it appears on the face of the deed of sale that Lorenza signed only as an instrumental witness,
circumstances leading to the execution of said document point to the fact that Lorenza was fully
aware of the sale of their conjugal property and consented to the sale. In their Pre-Trial Brief,
petitioners admitted that even prior to 1988, they have been having serious problems, including
threats to the life of petitioner David Pelayo, due to conflicts with the illegal occupants of the
property in question, so that respondent, whom many feared for being a leftist/activist, offered
his help in driving out said illegal occupants. Human experience tells us that a wife would surely
be aware of serious problems such as threats to her husband’s life and the reasons for such
threats. As they themselves stated, petitioners problems over the subject property had been going
on for quite some time, so it is highly improbable for Lorenza not to be aware of what her
husband was doing to remedy such problems. Petitioners do not deny that Lorenza Pelayo was
present during the execution of the deed of sale as her signature appears thereon. Neither do they
claim that Lorenza Pelayo had no knowledge whatsoever about the contents of the subject
document. Thus, it is quite certain that she knew of the sale of their conjugal property between
her husband and respondent.

28. CALIMLIM- CANULLAS vs. FORTUN G.R. No. L-57499 June 22, 1984

FACTS: Petitioner Mercedes Calimlim-Canullas was married to Fernando Canullas. They have children and lived
in the residential land in question which Fernando inherited the land after his father died.

Years after, Fernando abandoned his family and was living with private respondent Corazon. (Both were convicted
of concubinage in a judgment rendered the Court of First Instance which has become final during the pendency of
this petition.)

Fernado sold the said inherited land with the house thereon to Corazon. Unable to take possession of the said
property, Corazon filed a complaint for quieting of title and damages against Mercedes.
However, Mercedes claimed that the sale of the land, with the house and improvements, was null and void because
they are conjugal properties and she had not given her consent.
Respondent Court (Fortun as judge) principally declared Corazon as the lawful owner of the land in question and 1/2
of the house erected on said land.
Upon reconsideration prayed for by Mercedes, respondent Court amended its decision and resolved that indeed
Corazon was the true and lawful owner of the land but declared the sale of the conjugal house and improvements
null and void.

ISSUES:
1. WON the construction of a conjugal house on the exclusive property of the husband ipso facto gave the
land the character of conjugal property.
2. WON the sale of the lot together with the house and improvements thereon was valid.

RULING:
On Issue No. 1
No. Second paragraph of Article 158 of the Civil Code reads: Buildings constructed at the expense of the
partnership during the marriage on land belonging to one of the spouses also pertain to the partnership, but the value
of the land shall be reimbursed to the spouse who owns the same.
The Court ruled that both the land and the building belong to the conjugal partnership but the conjugal partnership is
indebted to the husband for the value of the land.
The spouse owning the lot becomes a creditor of the conjugal partnership for the value of the lot, which value would
be reimbursed at the liquidation of the conjugal partnership.

On Issue No. 2
No. Article 1409 of the Civil Code states inter alia that: contracts whose cause, object, or purpose is contrary to
law, morals, good customs, public order, or public policy are void and inexistent from the very beginning.
Article 1352 also provides that: "Contracts without cause, or with unlawful cause, produce no effect whatsoever.
The cause is unlawful if it is contrary to law, morals, good customs, public order, or public policy."
In the case at bar, the sale was made by a husband in favor of a concubine after he had abandoned his family and left
the conjugal home where his wife and children lived and from whence they derived their support. It was subversive
of the stability of the family, a basic social institution which public policy cherishes and protects. Hence, the Court
ruled that the sale is null and void being contrary to morals and public policy.
Additionally, the law emphatically prohibits the spouses (also include couples living as husband and wife without
benefit of marriage) from selling and donating property to each other during marriage subject to certain exceptions.
Such prohibitions were also designed to prevent the exercise of undue influence by one spouse over the other, as
well as to protect the institution of marriage, which is the cornerstone of family law.

29. Rubias vs. Batiller, 51 SCRA 120 (1973)

FACTS: On August 31, 1964, plaintiff Domingo D. Rubias, a lawyer, filed a suit to recover the ownership and
possession of certain portions of lot located in Barrio General Luna, Barotac Viejo, Iloilo which he bought from his
father-in-law, Francisco Militante in 1956 against its present occupant defendant, Isaias Batiller, who illegally
entered said portions of the lot.
Plaintiff prayed also for damages and attorney’s fees. In his answer with counter-claim defendant claims the
complaint of the plaintiff does not state a cause of action, the truth of the matter being that he and his predecessors-
in-interest have always been in actual, open and continuous possession since time immemorial under claim of
ownership of the portions of the lot in question and for the alleged malicious institution of the complaint he claims
he has suffered moral damages in the amount of P 2,000.00, as well as the sum of P500.00 for attorney’s fees.

Defendant claims that plaintiff could not have acquired any interest in the property in dispute as the contract he
(plaintiff) had with Francisco Militante was inexistent and void. Plaintiff strongly opposed defendant’s motion to
dismiss claiming that defendant cannot invoke Articles 1409 and 1491 of the Civil Code as Article 1422 of the same
Code provides that ‘The defense of illegality of contracts is not available to third persons whose interests are not
directly affected’.

Issue: Whether the sale was void

Ruling: The stipulated facts and exhibits of record indisputably established plaintiff’s lack of cause of action and
justified the outright dismissal of the complaint. Plaintiff’s claim of ownership to the land in question was predicated
on the sale thereof for P2,000.00 made in 1956 by his father-in-law, Francisco Militante, in his favor, at a time when
Militante’s application for registration thereof had already been dismissed by the Iloilo land registration court and
was pending appeal in the Court of Appeals.

Hence, there was no right or title to the land that could be transferred or sold by Militante’s purported sale in 1956 in
favor of plaintiff. Manifestly, then plaintiff’s complaint against defendant, to be declared absolute owner of the land
and to be restored to possession thereof with damages was bereft of any factual or legal basis.

Article 1491 of our Civil Code (like Article 1459 of the Spanish Civil Code) prohibits in its six paragraphs certain
persons, by reason of the relation of trust or their peculiar control over the property, from acquiring such property in
their trust or control either directly or indirectly and even at a public or judicial auction as follows: (1) guardians; (2)
agents; (3) administrators; (4)public officers and employees; judicial officers and employees, prosecuting attorneys,
and lawyers; and (6) others especially disqualified by law

30. Philippine Trust Co. vs. Roldan, 99 Phil 392 (1956)

FACTS: These 17 parcels located in Guiguinto, Bulacan, were part of the properties inherited by Mariano L.
Bernardo from his father, Marcelo Bernardo, deceased. In view of his minority, guardianship proceedings were
instituted, wherein Socorro Roldan was appointed his guardian. She was the surviving spouse of Marcelo Bernardo,
and the stepmother of said Mariano L. Bernardo. On July 27, 1947, Socorro filed a motion asking authority to sell as
guardian the 17 parcels for the sum of P14,700 to his brother-in-law, Dr. Fidel C. Ramos, the purpose of the sale
being allegedly to invest money in a residential house, which the minor desired to have on Tindalo St., Manila. The
motion was granted.

On August 5, 1947 Socorro, as guardian, then executed the proper deed of sale in favor of Fidel Ramos and on
August 12, 1947, she asked for and obtained judicial confirmation of the sale. However, on August 13, 1947, Fidel
Ramos executed in favor of Socorro personally, a deed of conveyance covering the same 17 parcels for the sum of
P15,000. And on October 21, 1947 Socorro sold 4 out of the 17 parcels to Emilio Cruz for P3,000, reserving herself
the right to repurchase.
On August 10, 1948, petitioner Phil. Trust Co. replaced Socorro as guardian. Petitioner filed a complaint to annul
two contracts regarding the 17 parcels of land: a) the sale thereof by Socorro, as guardian, to Fidel Ramos; and b)
sale thereof by Fidel Ramos to Socorro personally. Petitioner contends that the stepmother in effect, sold to herself,
the properties of her ward thus should be annulled as it violates Art. 1459 of the Civil Code prohibiting the guardian
from purchasing “either in person or through the mediation of another” the property of her ward. As to the third
conveyance, that Socorro had acquired no valid title to convey to Cruz.

The trial court held that Art 1459 was not controlling as there was no proof that Ramos was a mere intermediary or
that the latter agreed with Socorro to but the parcels of land for her benefit. The Court of Appeals affirmed the
judgment, adding that the minor new the particulars of, and approved the transactions, and that ‘only clear and
positive evidence of fraud and bad faith, and not mere insinuations and interferences will overcome the
presumptions that a sale was concluded in all good faith for value.

ISSUE: Whether the two contracts of sale were valid

RULING: No. The court held that even without proof that Socorro had connived with Fidel Ramos. Remembering
the general doctrine that guardianship is a trust of the highest order, and the trustee cannot be allowed to have any
inducement to neglect his ward's interest and in line with the court's suspicion whenever the guardian acquires the
ward's property we have no hesitation to declare that in this case, in the eyes of the law, Socorro Roldan took by
purchase her ward's parcels thru Dr. Ramos, and that Article 1459 of the Civil Code applies.

She acted it may be true without malice; there may have been no previous agreement between her and Dr. Ramos to
the effect that the latter would buy the lands for her. But the stubborn fact remains that she acquired her protege’s
properties, through her brother-in-law. That she planned to get them for herself at the time of selling them to Dr.
Ramos, may be deduced from the very short time between the two sales (one week). The temptation which naturally
besets a guardian so circumstanced, necessitates the annulment of the transaction, even if no actual collusion is
proved (so hard to prove) between such guardian and the intermediate purchaser.

This would uphold a sound principle of equity and justice. Hence, from both the legal and equitable standpoints
these three sales should not be sustained: the first two for violation of article 1459 of the Civil Code; and the third
because Socorro Roldan could pass no title to Emilio Cruz. The annulment carries with is (Article 1303 Civil Code)
the obligation of Socorro Roldan to return the 17 parcels together with their fruits and the duty of the minor, through
his guardian to repay P14,700 with legal interest.

31. Director of Lands vs. Ababa , 88 SCRA 513 (1979)

FACTS: The adverse claimant, Atty. Alberto B. Fernandez was retained as counsel by petitioner, Maximo
Abarquez for the annulment of a contract of sale with right of repurchase and for the recovery of the land which was
the subject matter thereof. Litigating as a pauper in the lower court and engaging the services of his lawyer on a
contingent basis, petitioner, liable to compensate his lawyer whom he also retained for his appeal executed a
document on June 10, 1961 in the Cebuano-Visayan dialect whereby he obliged himself to give to his lawyer one-
half (1/2) of whatever he might recover from Lots 5600 and 5602 should the appeal prosper.

The real Property sought to be recovered in Civil Case No. R6573 was actually the share of the petitioner in Lots
5600 and 5602, which were part of the estate of his deceased parents and which were partitioned the heirs which
included petitioner Maximo Abarquez and his elder sister Agripina Abarquez, the defendant in said civil
case. Petitioner discovered later that the claim of his sister over his share was based on an instrument he was believe
all along to be a mere acknowledgment of the receipt of P700.00 which his sister gave to him as a consideration for
g care of their father during the latter's illness and never an instrument of pacto de retro. Hence, he instituted an
action to annul the alleged instrument of pacto de retro. 

The Court of Appeals in a decision promulgated on August 27, 1963 reversed the decision of the lower court and
annulled the dead of pacto de retro. The case having been resolved and title having been issued to petitioner,
adverse claimant waited for petitioner to comply with his obligation under the document executed by him on June
10, 1961 by delivering the one-half (½) portion of the said parcels of land. 

Petitioner refused to comply with his obligation and instead offered to sell the whole parcels of land to petitioner-
spouses Juan Larrazabal and Marta C. de Larrazabal. Adverse t claimant immediately took stops to protect his
interest by filing with the trial court a motion to annotate Ins attorney's lien, and by notifying the prospective buyers
of his claim over the one-half portion of the parcels of land. 

Notwithstanding the annotation of the adverse claim, petitioner-spouse Maximo Abarquez and Anastacia Cabigas
conveyed by deed of absolute sale to petitioner-spouses Juan Larrazabal and Marta C. de Larrazabal.

ISSUE: Whether or not the contract for a contingent fee, basis of the interest of Atty. Fernandez, is prohibited by the
Article 1491 of the New Civil Code and Canon 13 of the Canons of Professional Ethics. 

RULING: This contention is without merit. Article 1491 prohibits only the sale or assignment between the lawyer
and his client, of property which is the subject of litigation. As WE have already stated. "The prohibition in said
article a only to applies stated: " The prohibition in said article applies only to a sale or assignment to the lawyer by
his client of the property which is the subject of litigation. In other words, for the prohibition to operate, the sale or t
of the property must take place during the pendency of the litigation involving the property".

A contract for a contingent fee is not covered by Article 1491 because the tranfer or assignment of the property in
litigation takes effect only after the finality of a favorable judgment. In the instant case, the attorney's fees of Atty.
Fernandez, consisting of one-half (1/2) of whatever Maximo Abarquez might recover from his share in the lots in
question, is contingent upon the success of the appeal. Hence, the payment of the attorney's fees, that is, the transfer
or assignment of one-half (1/2) of the property in litigation will take place only if the appeal prospers. Therefore, the
tranfer actually takes effect after the finality of a favorable judgment rendered on appeal and not during the
pendency of the litigation involving the property in question. Consequently, the contract for a contingent fee is not
covered by Article 1491. 

While Canon 10 prohibits a lawyer from purchasing ...any interest in the subject matter of the litigation which he is
conducting", Canon 13, on the other hand, allowed a reasonable contingent fee contract, thus: "A contract for a con.
tangent fee where sanctioned by law, should be reasonable under all the circumstances of the ca including the risk
and uncertainty of the compensation, but should always be subject to the supervision of a court, as to its
reasonableness."

Contingent fees are not prohibited in the Philippines, and since impliedly sanctioned by law 'Should be under the
supervision of the court in order that clients may be protected from unjust charges'. The reason for allowing
compensation for professional services based on contingent fees is that if a person could not secure counsel by a
promise of large fees in case of success, to be derived from the subject matter of the suit, it would often place the
poor in such a condition as to amount to a practical denial of justice.
Finally, a contingent fee contract is always subject to the supervision of the courts with respect to the stipulated
amount and may be reduced or nullified. So that in the event that there is any undue influence or fraud in the
execution of the contract or that the fee is excessive, the client is not without remedy because the court will amply
protect him.

The contract for a contingent fee, being valid, vested in Atty Fernandez an interest or right over the lots in question
to the extent of one-half thereof. Said interest became vested in Atty. Fernandez after the case was won on appeal
because only then did the assignment of the one-half (½) portion of the lots in question became effective and
binding. So that when he filed his affidavit of adverse claim his interest was already an existing one. There was
therefore a valid interest in the lots to be registered in favor of Atty. Fernandez adverse to Maximo Abarquez. 

The one-half (½) interest of Atty. Fernandez in the lots in question should therefore be respected. Indeed, he has a
better right than petitioner-spouses, Juan Larrazabal and Marta C. de Larrazabal. They purchased their two-thirds
(2/3) interest in the lots in question with the knowledge of the adverse claim of Atty. Fernandez. The adverse claim
was annotated on the old transfer certificate of title and was later annotated on the new transfer certificate of title
issued to them.

Having purchased the property with the knowledge of the adverse claim, they are therefore in bad faith.
Consequently, they are estopped from questioning the validity of the adverse claim. 

32. Del Rosario vs. Millado, 26 SCRA 700 (1969)

FACTS: Eladio Tiburcio, now deceased, claimed title to a tract of land of about 430 hectares, in Diliman, Quezon
City; that parts of said land were the object of two (2) ejectment cases of the City Court of Quezon City, against La
Paz Mesina Vda. de Pascual, one of the heirs of said deceased, one filed by herein complainant, Florentino B. del
Rosario, and the other by Leonor Sta. Clara. Prior to the institution of said cases, one Conrado Baluyot, who claims
to be another heir of Eladio Tiburcio, offered to allow respondent to construct a house on part of said land of about
430 hectares, in consideration of his professional services in defense of the claim thereto of the Tiburcios. Baluyot's
understanding with respondent was that, should he succeed in securing a decision favorable to the Tiburcios, he
(respondent) could buy the land on which his house was built, namely, lots 4 and 5 of Block E-102 of Quezon City,
by paying the current value thereof. Mrs. Pascual, who occupied another lot in the same block, knew that respondent
was in possession of said lots 4 and 5 and had constructed a house thereon, by agreement with Baluyot, as one of the
heirs of the deceased. Mrs. Pascual, who claimed an interest in the whole Block E-102, asked respondent to be her
counsel in said ejectment cases. after filing the answer of Mrs. Pascual, as defendant in said two (2) cases,
respondent ceased to be her counsel therein.

Respondent alleged that Mrs. Pascual was the owner and possessor of the lots involved in said cases, there is no real
inconsistency between this allegation and his claim over said lots 4 and 5, much less a misrepresentation of facts,
because the issue in the ejectment cases hinged upon the right of possession whereas the alleged ownership of Mrs.
Pascual merely tended to bolster up her alleged prior possession, and because he could not acquire title to said lots 4
and 5 from the heirs of the late Eladio Tiburcio, unless they — and, hence, Mrs. Pascual, as one of the heirs of the
deceased — were the true owners thereof.1awphil.ñê

ISSUE: Whether Atty. Millado violated Art. 1491 of the Civil Code.
RULING: No, the records show that respondent's alleged interest in said lots was acquired before he intervened as
counsel for Mrs. Pascual in the ejectment cases against her and that said interest is not necessarily inconsistent with
that of his aforementioned client, aside from the fact that he had made no substantial misrepresentation in the
pleadings filed by him in said cases. This fact and the absence of said conflict are made more manifest by the
circumstance that the charges under consideration have been preferred, not by Mrs. Pascual, but by her opponent in
one of the ejectment cases above mentioned.1awphil.ñêt

33. Fabillo vs. IAC , 195 SCRA 28 (1991)

FACTS: In her last will and testament, Justina Fabillo bequeathed to her brother, Florencio, a house and lot in San
Salvador Street, Palo, Leyte. After Justina's death, Florencio filed a petition for the probate of said will. the probate
court approved the project of partition "with the reservation that the ownership of the land declared under Tax
Declaration No. 19335 and the house erected thereon be litigated and determined in a separate proceedings."

Florencio sought the assistance of lawyer Alfredo M. Murillo in recovering the San Salvador property. Acquiescing
to render his services, Murillo wrote Florencio the following handwritten letter:

Considering that Atty. Montilla lost this case and the present action is a revival of a lost case, I trust that you will
gladly give me 40% of the money value of the house and lot as a contigent (sic) fee in case of a success.

Thirteen days later, Florencio and Murillo entered into the following contract:

That for and in consideration for his legal services, in the two cases, I hereby promise and bind myself to pay Atty.
ALFREDO M. MURILLO, in case of success in any or both cases the sum equivalent to FORTY PER CENTUM
(40%) of whatever benefit I may derive from such cases to be implemented.

The court, declared Florencio Fabillo as the lawful owner not only of the San Salvador property but also the
Pugahanay parcel of land.

Consequently, Murillo proceeded to implement the contract of services between him and Florencio Fabillo by taking
possession and exercising rights of ownership over 40% of said properties. He installed a tenant in the Pugahanay
property.

Sometime in 1966, Florencio Fabillo claimed exclusive right over the two properties and refused to give Murillo his
share of their produce. Murillo filed on March 23, 1970 in the then Court of First Instance of Leyte a complaint
captioned "ownership of a parcel of land, damages and appointment of a receiver" against Florencio Fabillo, his wife
Josefa Taña, and their children.

ISSUE: Whether the contract of Services violates Art. 1491 of the Civil Code.

RULING: The contract of services did not violate said provision of law. Article 1491 of the Civil Code, specifically
paragraph 5 thereof, prohibits lawyers from acquiring by purchase even at a public or judicial auction, properties and
rights which are the objects of litigation in which they may take part by virtue of their profession. The said
prohibition, however, applies only if the sale or assignment of the property takes place during the pendency of the
litigation involving the client's property.

Hence, a contract between a lawyer and his client stipulating a contingent fee is not covered by said prohibition
under Article 1491 (5) of the Civil Code because the payment of said fee is not made during the pendency of the
litigation but only after judgment has been rendered in the case handled by the lawyer. In fact, under the 1988 Code
of Professional Responsibility, a lawyer may have a lien over funds and property of his client and may apply so
much thereof as may be necessary to satisfy his lawful fees and disbursements

However, we disagree with the courts below that the contingent fee stipulated between the Fabillo spouses and
Murillo is forty percent of the properties subject of the litigation for which Murillo appeared for the Fabillos. A
careful scrutiny of the contract shows that the parties intended forty percent of the value of the properties as
Murillo's contingent fee. This is borne out by the stipulation that "in case of success of any or both cases," Murillo
shall be paid "the sum equivalent to forty per centum of whatever benefit" Fabillo would derive from favorable
judgments. The same stipulation was earlier embodied by Murillo in his letter of August 9, 1964 aforequoted.

Worth noting are the provisions of the contract which clearly states that in case the properties are sold, mortgaged,
or leased, Murillo shall be entitled respectively to 40% of the "purchase price," "proceeds of the mortgage," or
"rentals." The contract is vague, however, with respect to a situation wherein the properties are neither sold,
mortgaged or leased because Murillo is allowed "to have the option of occupying or leasing to any interested party
forty per cent of the house and lot." Had the parties intended that Murillo should become the lawful owner of 40% of
the properties, it would have been clearly and unequivocally stipulated in the contract considering that the Fabillos
would part with actual portions of their properties and cede the same to Murillo.

The ambiguity of said provision, however, should be resolved against Murillo as it was he himself who drafted the
contract.

Considering the nature of the case, the value of the properties subject matter thereof, the length of time and effort
exerted on it by Murillo, we hold that Murillo is entitled to the amount of Three Thousand Pesos (P3,000.00) as
reasonable attorney's fees for services rendered in the case which ended on a compromise agreement.

Petitioners are to pay Atty. Alfredo M. Murillo or his heirs the amount of P3,000.00 as his contingent fee with legal
interest from October 29, 1964 when Civil Case No. 3532 was terminated until the amount is fully paid less any and
all amounts which Murillo might have received out of the produce or rentals of the Pugahanay and San Salvador
properties.

34 Britanico vs. Espinosa 486 SCRA 523 (2006)

FACTS: Complainant Theodore C. Britanico filed an administrative complaint against Respondent Judge Wenie D.
Espinosa when both parties entered into a contract of Sale for six parcels of land for P3,500,000. The subject lots are
free patents and under Commonwealth Act No. 141, it imposes prohibition for the alienation of the land within 5
years from the date of issuance of the title. The certificates of title were issued on October 21, 1997. The
negotiations and initial payments were made in 1999 or within two years of the issuance of the titles.

Complainant learned later on that the same properties were being sold to another buyer. This forced him to place a
notice of adverse claim on the titles to protect his interests over the properties.

Respondent Judge admits the preparation of the Deed of Absolute Sale. He claims, however, that he made it at the
instance of the complainant and that such was only a draft and was not intended to formalize the transaction.
Respondent further averred that the failure of the transaction was directly attributable to the complainant, due to his
failure to pay the remaining consideration of P3,400,000. Further he claimed that his participation in the transaction
was limited to the following: (a) assurance that the properties belonged to the Zaragoza family; (b) assurance that
Amado G. Zaragoza was the agent/AIF of the landowners; and (c) the role of Eprol Z. Espinosa, his wife, in the
transaction.

ISSUE: WON Respondent Judge can validly enter into the said Contract of Sale.

RULING: No, Respondent, being a member of the Judiciary, should have restrained himself from participating in
the sale of the properties. In fact, it was incumbent upon him to advise the parties to discontinue the transaction
because it was contrary to law. Granting, for the sake of argument, that the deed of sale he prepared was only a draft,
it is still an act which pursued the continuance of the sale. Being a judge, he should have taken steps to prevent the
sale, or at least he should have informed the parties that the sale was illegal.

35 Macariola vs. Asuncion , 114 SCRA 77 (1982)

FACTS: This case stemmed from a civil suit (No. 3010) for partition filed against Petitioner Macariola by her
siblings from her deceased father’s second marriage which was adjudicated and approved by Respondent Judge
Elias Asuncion, notwithstanding the fact that the project of partition was not signed by the parties themselves but
only by the respective counsel of plaintiffs and defendant.

In accordance with the project of partition, Lot 1184-E with an area of 2,172.5556 sqm. was sold to Dr. Arcadio
Galapon who was issued TCT No. 2338 of the ROD in Tacloban. A portion (1,306 sqm.) of the said lot was later
sold to the Respondent Judge and his wife.

On August 31, 1966, spouses Asuncion and spouses Galapon conveyed their respective shares and interest in Lot
1184-E to “The Traders Manufacturing and Fishing Industries Inc.” At the time of said sale the stockholders of the
corporation including Judge Asuncion as the President and Mrs. Asuncion as the secretary. The Articles of
Incorporation were registered with the SEC.

Thus, on August 6, 1968, Macariola filed a complaint alleging four causes of action, to wit:
[1] that respondent Judge Asuncion violated Article 1491, paragraph 5, of the New Civil Code in acquiring by
purchase a portion of Lot No. 1184-E which was one of those properties involved in Civil Case No. 3010 decided by
him;
[2] that he likewise violated Article 14, paragraphs I and 5 of the Code of Commerce, Section 3, paragraph H, of
R.A. 3019, otherwise known as the Anti-Graft and Corrupt Practices Act, Section 12, Rule XVIII of the Civil
Service Rules, and Canon 25 of the Canons of Judicial Ethics, by associating himself with the Traders
Manufacturing and Fishing Industries, Inc., as a stockholder and a ranking officer while he was a judge of the Court
of First Instance of Leyte;
[3] that respondent was guilty of coddling an impostor and acted in disregard of judicial decorum by closely
fraternizing with a certain Dominador Arigpa Tan who openly and publicly advertised himself as a practicing
attorney when in truth and in fact his name does not appear in the Rolls of Attorneys and is not a member of the
Philippine Bar; and
[4] that there was a culpable defiance of the law and utter disregard for ethics by the respondent Judge.

The CFI dismissed the case against Judge Asuncion and adjudged Macariola to pay damages.

ISSUE: WON Respondent violated Article 1491, par. 5 of the New Civil Code.
RULING: There is no merit in the contention of complainant Bernardita R. Macariola. Article 1491 provides: The
following persons cannot acquire by purchase, even at a public or judicial action, either in person or through the
mediation of another:

(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and employees
connected with the administration of justice, the property and rights in litigation or levied upon an execution before
the court within whose jurisdiction or territory they exercise their respective functions; this prohibition includes the
act of acquiring by assignment and shall apply to lawyers, with respect to the property and rights which may be the
object of any litigation in which they may take part by virtue of their profession.

The prohibition in the aforesaid Article applies only to the sale or assignment of the property which is the
subject of litigation to the persons disqualified therein. For the prohibition to operate, the sale or assignment of
the property must take place during the pendency of the litigation involving the property.

Here, when the respondent Judge purchased on March 6, 1965 a portion of Lot 1184-E, the decision in Civil Case
No. 3010 which he rendered on June 8, 1963 was already final because none of the parties therein filed an appeal
within the reglementary period; hence, the lot in question was no longer subject of the litigation. Moreover, at
the time of the sale, respondent's order and the amended order approving the project of partition, had long become
final for there was no appeal from said orders.

Furthermore, respondent Judge did not buy the lot in question directly from the plaintiffs in Civil Case No. 3010 but
from Dr. Arcadio Galapon who earlier purchased the lots from three of the plaintiffs, namely, Priscilla Reyes, Adela
Reyes, and Luz R. Bakunawa after the finality of the decision. The subsequent sale of spouses Asuncion and spouses
Galapon of their respective shares and interest in said Lot 1184-E to the Traders Manufacturing and Fishing
Industries, Inc. also took place long after the finality of the decision in the said civil case and of the subsequent two
aforesaid orders therein approving the project of partition.

While it appears that Macariola filed an action before the CFI of Leyte seeking to annul the project of partition and
the two orders approving the same, as well as the partition of the estate and the subsequent conveyances, the same,
however, is of no moment. It can no longer alter, change or affect the aforesaid facts — that the questioned sale to
respondent Judge, now Court of Appeals Justice, was effected and consummated long after the finality of the
aforesaid decision or orders.

Consequently, the sale of the subject lot took place one year after the finality of the decision in Civil Case No. 3010
as well as the two orders approving the project of partition, and not during the pendency of the litigation, there was
no violation of paragraph 5, Article 1491 of the New Civil Code.

While it is true that respondent Judge did not violate paragraph 5, Article 1491 of the New Civil Code in acquiring
by purchase a portion of Lot 1184-E which was in litigation in his court, it was, however, improper for him to have
acquired the same. He should be reminded of Canon 3 of the Canons of Judicial Ethics which requires that: "A
judge's official conduct should be free from the appearance of impropriety, and his personal behavior, not only upon
the bench and in the performance of judicial duties, but also in his everyday life, should be beyond reproach." And
as aptly observed by the Investigating Justice: "... it was unwise and indiscreet on the part of respondent to have
purchased or acquired a portion of a piece of property that was or had been in litigation in his court and caused it to
be transferred to a corporation of which he and his wife were ranking officers at the time of such transfer. One who
occupies an exalted position in the judiciary has the duty and responsibility of maintaining the faith and trust of the
citizenry in the courts of justice, so that not only must he be truly honest and just, but his actuations must be such as
not give cause for doubt and mistrust in the uprightness of his administration of justice.
WHEREFORE, THE RESPONDENT ASSOCIATE JUSTICE OF THE COURT OF APPEALS IS HEREBY
REMINDED TO BE MORE DISCREET IN HIS PRIVATE AND BUSINESS ACTIVITIES.