G.R. No.

L-55201 February 3, 1994

MARIANO T. LIM, JAIME T. LIM, JOSE T. LIM, JOVITA T. LIM, ANACORITA T. LIM,
ANTONIETTA T. LIM, RUBEN T. LIM, BENJAMIN T. LIM, ET AL., petitioners,
vs.
COURT OF APPEALS, LORENZO O. TAN and HERMOGENES O. TAN, respondents.

Eulogio E. Gatdula for petitioners.

Miles L. Ludovice for private respondents.

Topic: Vices of will

PUNO, J.:

This is a petition for review of the Decision of the Court of Appeals in CA-G.R. No. 51340-R entitled
"Mariano T. Lim, et al., vs. Lorenzo O. Tan, et al., dated July 28, 1908. 1

The case involves the partition (division) of the properties of the deceased spouse Tan Quico and
Josefa Oraa. The former died on May 11, 1932 and the latter on August 6, 1932. Both died intestate.
They left some ninety six (96) hectares of land located in the municipality of Guinobatan and
Camalig Albay. 2

The late spouses were survived by four (4) children: Cresencia, Lorenzo, Hermogenes and Elias.
Elias died on May 2, 1935 without issue. Cresencia died on December 20, 1967. She was3

survived by her husband, Lim Chay Sing, and children, Mariano, Jaime, Jose Jovita,
4

Anacoreta, Antonietta, Ruben, Benjamin and Rogelio. They are the petitioners in the
case at bench.

The sad spectacle of the heirs squalling over the properties of their deceased parents was again
replayed in the case at bench. The protagonists were the widower and children of Cresencia on one
side, and Lorenzo and Hermogenes on the other side.

The late Cresencia and Lorenzo had contrasting educational background. Cresencia only reached
the second grade of elementary school. She could not read or write in English. On the other hand,
Lorenzo is a lawyer and a CPA.

Petitioners, heirs of Cresencia, alleged that since the demise of the spouses Tan Quico and Josefa
Oraa, the subject properties had been administered by respondent Lorenzo. They claimed that
before her death, Cresencia had demanded their partition from Lorenzo. After Cresencia's death,
5

they likewise clamored for their partition. Their efforts proved fruitless. They failed Civil
6

Case No. 3676.

Respondent Lorenzo and Hermogenes adamant stance against partition is based on various
contentions. Principally, they urge: (1) that the properties had already been partitioned, albeit, orally;
and (2) during her lifetime, the late Cresencia had sold and conveyed all her interests in said
properties to respondent Lorenzo. They cited as evidence the "Deed of Confirmation of Extra
Judicial Settlement of the Estate of Tan Quico and Josefa Oraa" and a receipt of payment.
7 8
The trial court decided in favor of the petitioners. It rejected the alleged oral petition in light of the
contrary testimony of respondent Hermogenes. It voided the "Deed of Confirmation of Extra Judicial
Settlement of the Estate of Tan Quico and Josefa Oraa and Sale" on the ground that it was not
9

understood by the late Cresencia when she signed it.

On appeal, the respondent Court of Appeals, voting 4-1, reversed. It held there was evidence to
establish that the subject properties had been previously partitioned. It ruled that respondent
Lorenzo was not shown to have exercised any undue influence over the late Crescencia when she
signed the said Deed of Confirmation, etc.

Dissatisfied, petitioners filed this petition for review by certiorari. They submit:

I. THE FINDING OR CONCLUSION DRAWN BY THE HONORABLE COURT OF

APPEALS THAT —

THE EVIDENCE ON RECORD ALSO SHOWS THAT THE TERMS

OF EXH. "E" (ALSO EXH. "1" IN ENGLISH) WERE READ TO
CRESENCIANA O. TAN IN THE BICOL DIALECT, EXPLAINED TO
AND UNDERSTOOD BY HER, BEFORE SHE SIGNED THE SAME.

BASED ON THE FACTS STATED IN THE JUDGMENT QUOTING "THE

PERTINENT TESTIMONIES ON THIS POINT" OR BOTH DEFENDANTS IS
MANIFESTLY INCORRECT, AS THE SAME FALL FAR SHORT OF THE
MANDATORY REQUIREMENT OF ART. 1332, CIVIL CODE, THAT THE TERMS
THEREOF SHOULD BE FULLY EXPLAINED TO THE ILLITERATE CRESENCIA O.
TAN WHO DID NOT KNOW HOW TO READ AND WRITE IN ENGLISH.

II. THE CONCLUSION DRAWN BY THE HONORABLE COURT OF APPEALS

THAT THERE WAS NO UNDUE INFLUENCE EXERTED ON CRESENCIA O. TAN
BY HER (LAWYER-CPA) BROTHER LORENZO O. TAN BASED ON FACTS
STATED IN THE QUESTIONED JUDGMENT IS CLEARLY INCORRECT, AS IT IS
CONTRARY TO THE PROVISION OF ART. 1337, CIVIL CODE.

III. THE FINDING AND DECLARATION OF THE HONORABLE COURT OF

APPEALS THAT LORENZO O. TAN IS THE LAWFUL OWNER OF THE
PROPERTIES PERTAINING TO THE SHARE OF SAID ILLITERATE OR PARTY AT
A DISADVANTAGE, CRESENCIA O. TAN BY VIRTUE OF SAID DOCUMENT (EXH.
"E"; ALSO EXH. "1") IS CONTRARY TO LAW, AS THE LATTER'S CONSENT WAS
GIVEN BY MISTAKE, UNDUE INFLUENCE AND/OR FRAUD.

IV. THE FINDING OF THE HONORABLE COURT OF APPEALS THAT THERE

WAS AN ORAL PARTITION BY AND AMONG CRESENCIA O. TAN AND HER
TWO BROTHERS LORENZO O. TAN AND HERMOGENES O. TAN IS CONTRARY
TO THE ORAL ADMISSION OF HERMOGENES O. TAN HIMSELF WHO
TESTIFIED THAT —

WE DID NOT HAVE EXACTLY A PARTITION IN 1930.

AS WELL AS SERIOUSLY CONTRADICTED BY CLEAR, COMPETENT AND

CREDIBLE DOCUMENTARY EVIDENCE AND THEREFORE SHOULD BE
DISREGARDED.
We grant the petition.

The general rule is that factual findings of lower courts are accorded great respect by this court on
review of their decisions. In the petition at bench, we are constrained to re-examine these findings
considering the contrarieties in the findings made by the appellate court and the trial court. Indeed,
even the Decision of the appellate court is not a unanimous but a mere majority decision.

The first issue is whether or not the subject properties had already been partitioned among the heirs
of tan Quico and Josefa Oraa. The private respondents alleged that the properties had been orally
partitioned in 1930. Their evidence on this score, however, leaves much to be desired. It
10

is only respondent Lorenzo who stubbornly insisted that the said properties had already
been divided. However, brother Hermogenes, the other respondent, gave a different
testimony. We quote his testimony:

xxx xxx xxx

Court:

Q Never mind your sister, we are talking about your parents. During
their lifetime in 1930 you said that the properties would be divided,
so, in 1930, there was no actual division because it would only be
divided?

A We did not have exactly a partition in 1930.

Q You did not have a partition in 1930?

A No, your Honor. 11

The documentary evidence likewise support the conclusion that there was no such partition. Exhibit
"2", the receipt dated April 20, 1966 thumbmarked by the late Crescencia and presented by the
petitioners themselves reads:

RECEIPT FOR P8,970.00

Received from LORENZO O. TAN, on various dates, the total sum of EIGHT THOUSAND NINE HUNDRED SEVENTY
(P8,970.00) PESOS as partial payment for the sale of my pro-indiviso (each has a proportionate interest in the whole
property rather than a specified part of it) share on the properties inherited by me from my deceased parents.

As guarantee for the payment, I put up as security my pro-indiviso one-third share on

the properties inherited by me from my deceased parents.

Signed this 20th day of April, 1966 at Quezon City, Philippines.

(SGD.) CRESENCIA O. TAN

Witness: (SGD.) ANTONIETTA T. LIM

Note: Amount of P8,970 includes P6,700 paid to acquire Lot No. 202-54-41-T from
Pedro L. Morada who transferred his right to Jovita Lim.
The receipt speaks of the late Cresencia's pro-indiviso share of the subject properties or her share
before division. We also note that the subject lots are still covered by tax declarations in the
12

name of their parents. If these lots had already been partitioned to the different heirs
and then occupied by them, it appears strange that their tax declarations have not
been adjusted to reflect their ownership considering the long time that has
elapsed since 1930. Respondent Lorenzo testified that he took possession of the lot
supposed to belong to the late Crescencia in 1966, yet, he himself did not cause any
13

change in its tax declaration. Similarly corrosive of the claim of private respondents is
their own Exhibit "E" or "1", entitled "Deed of Confirmation of Extra Judicial Settlement
of the Estate of Tan Quico and Josefa Oraa." Nowhere in the text of this document
prepared by no less than respondent Lorenzo, is there any intimation that the subject
why Exhibit was entitled Deed of Confirmation, respondent Lorenzo explained; ". . . . we
want to put it in black and white, the separation of the properties which was in existence
since 1930 to 1932. . ." (TSN, March 2, 1970, p. 40). To say the least, the omission
buttresses the conclusion that the properties have not been partitioned.

An Extrajudicial Settlement of Estate is a legal process involving surviving heirs of a

deceased person to distribute the deceased person's property. The surviving heirs of the
deceased will sign a document called “Deed of Extrajudicial Settlement of Estate”

We now determine the next crucial issue of fact, i. e., whether or not the above mentioned Deed of
Confirmation of Extra Judicial Settlement of the estate of Tan Quico and Josefa Oraa (Exhibit
"E" or "1") is valid. The respondent court, reversing the trial court, held that the evidence failed to
establish that it was signed by the late Crescencia as a result of fraud, mistake or undue influence.
We hold this ruling erroneous. In calibrating the credibility of the witnesses on this issue, we take our
mandate from Article 1332 of the Civil Code which provides: "When one of the parties is
unable to read, or if the contract is in language not understood by him, and mistake or fraud
is alleged, the person enforcing the contract must show that the terms thereof have been
fully explained to the former." this substantive law came into being due to the finding of the Code
Commission that there is still a fairly large number of illiterates in this country, and documents are
usually drawn up in English or Spanish. It is also in accord with our state policy of
14

promoting social
justice. It also supplements Article 24 of the Civil Code which calls on court to be
15

vigilant in the protection of the rights of those who are disadvantaged in life. in the
petition at bench, the questioned Deed is written in English, a language not understood
by the late Crescencia, an illiterate. It was prepared by the respondent Lorenzo, a
lawyer and CPA. For reasons difficult to divine, respondent Lorenzo did not cause the
notarization of the deed. Petitioners alleged that the Deed was signed by the late
Crescencia due to mistake, fraud or undue influence. They postulated that respondent
Lorenzo took advantage of the late Crescencia's trust and confidence. Testifying on the
trust of the late Crescencia on respondent Lorenzo, petitioner Jose Lim declared: 16

xxx xxx xxx

Q Now, will you tell the Court how the relation between your mother
and your uncle Lorenzo Tan before September 1967?
 A My mother was so close to his brother, Lorenzo Tan. My mother
always asked him advice because he is considered by my mother as
God to her. . . .

Considering these circumstances, the burden was on private respondents to prove that the content
of the Deed was explained to the illiterate Crescencia before she signed it. In this regard, the
17

evidence adduced by the respondents failed to discharge their burden. On one hand,
respondent Lorenzo testified that he and his brother, respondent Hermogenes,
explained in Bicolano, the meaning of the deed to the late Crescencia, viz: 18

ATTY. LUDOVICE:

Q Who read the document to her?

A I and my brother.

Q Who is that brother?

A Hermogenes Tan.

COURT:

Q Who read that document?

A I prepared it.

Q You prepared it yourself?

A Yes, sir.

Q Why do you have to prepare the document?

A Because I have all the details.

COURT:

All right.

ATTY. LUDOVICE:

Q In what language did you read this document to Crescencia O.

Tan?

A First it was in English then it was in Bicol so as to clarify things,

they were my sister and my brother and to other persons who is
going to witness the document

Q Did your sister understand the Bicol dialect when the contents of
this was read?
 A Yes and before that, my sister knows everything what is going on.

ATTY. GATDULA:

I moved to strike out the last portion of the answer.

COURT:

Strike it out.

Respondent Hermogenes, however, gave a different testimony. He declared it was respondent

Lorenzo alone who read the text of the Deed in Bicolano to the late Crescencia. We quote his
testimony, viz:19

Q You presented this document, EXHIBIT 1 for the defendants, to

Crescencia Tan?

A It was presented by my brother Lorenzo Tan.

Q On what occasion was that on August 15, 1967 was this

presented?

A August 16 coincide with the fiesta in our town, Guinobatan.

Q Was this read to your sister by your brother Lorenzo?

A Yes, sir, that was read.

Q In what language was it read to her?

A It was read in Bicol.

Q Did your sister understand the contents of the document?

A Yes, sir.

Q Who read the document to her?

A Lorenzo Tan read the document.

This variance in testimony on a material matter works against the credibility of private respondents.
Nor are we prepared to give full faith and credit to the testimony that respondent Lorenzo alone
explained the text of the deed to the late Crescencia. Respondent Lorenzo has too much of a
material stake on the dispute. His testimony on the issue is, therefore, not free from bias and
prejudice. Indeed, the preparation and alleged signing of the said Deed leave a lot of questions
unanswered. For one, the Deed as important as it is, was not caused to be notarized by respondent
Lorenzo. The need for notarization could not have escaped respondent Lorenzo, a lawyer by
profession. Article 1358 of the Civil Code requires that the Deed should appear in a public
document. For another, respondent Lorenzo prepared the Deed in English language when he knew
all along that the late Cresencia would not be able to comprehend its meaning. For still another,
none of the alleged witnesses to the Deed was presented to testify on whether it was signed by the
late Crescencia voluntarily and with clear comprehension of its content. Last but not the least, it is
strange that the Crescencia signed the said Deed with full freedom and complete understanding of
its legal significance.

Finally, we come to the issue of whether or not the late Crescencia sold her inheritance share in
favor of the respondent Lorenzo. In taking the stance that there was indeed a sale, private
respondents point to the receipt, Exh. "2" dated April 20, 1966 as evidence. The significance of this
receipt, Exh. "2" was well analyzed by the trial court and we approve its ruling, viz:

Said defendant likewise presented in evidence a receipt (Exhibit 2) purports to show

that on April 20, 1966, Cresencia O. Tan had already received the aggregate amount
of P8,970.00 from defendant Lorenzo O. Tan as "partial payment for the sale of my
(Cresenciana O. Tan's) pro-indiviso share on the properties inherited by me from my
deceased parents.

It is contended, by these exhibits, that Cresenciana O. Tan wanted to buy Lot 202-5-
41-T at No. 53 Bignay, Project 2, Quezon City, with the proceeds of the sale to
defendant Lorenzo O. Tan of a portion of Lot 7671 located in Singtan, Guinobatan,
Albay, which is alleged to be the share of said Cresenciana O. Tan.

However, the same receipt Exhibit 2 recites at the bottom thereof that the amount of
P8,970.00 includes the amount of P6,700.00 paid to purchase the lot of certain
Pedro L. Morada who transferred his right to Jovita Lim. This statement in
Exhibit 2 belies defendant's contention that Cresenciana O. Tan is the buyer of the
lot in Quezon City.

IN VIEW WHEREOF, the petition for review on certiorari is granted and the Decision of the
respondent appellate court in Ca-G.R. No. 51340-R dated July 28, 1980 is reversed and set aside.
In its lieu, the Decision of the then CFI of Albay, 10th Judicial District, Br. II in Civil Case No. 3676 is
reinstated. Costs against private respondents.

SO ORDERED.

Narvasa, C.J., Padilla and Regalado, JJ., concur.

Nocon, J., is on leave.

G.R. No. 125172 June 26, 1998

Spouses ANTONIO and LUZVIMINDA GUIANG, petitioners,

vs.
COURT OF APPEALS and GILDA COPUZ, respondents.

PANGANIBAN, J.:

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

The Case

These were the principles that guided the Court in deciding this petition for review of the
Decision dated January 30, 1996 and the Resolution dated May 28, 1996, promulgated by the
1 2

Court of Appeals in CA-GR CV No. 41758, affirming the Decision of the lower court and denying
reconsideration, respectively.

On May 28, 1990, Private Respondent Gilda Corpuz filed an Amended Complainant against her
3

husband Judie Corpuz and Petitioner-Spouses Antonio and Luzviminda Guiang. The said Complaint
sought the declaration of a certain deed of sale, which involved the conjugal property of private
respondent and her husband, null and void. The case was raffled to the Regional Trial Court of
Koronadal, South Cotabato, Branch 25. In due course, the trial court rendered a Decision dated
4

September 9, 1992, disposing as follow: 5

ACCORDINGLY, judgment is rendered for the plaintiff and against the defendants,

1. Declaring both the Deed of Transfer of Rights dated March 1, 1990 (Exh. "A") and
the "amicable settlement" dated March 16, 1990 (Exh. "B") as null void and of no
effect;

2. Recognizing as lawful and valid the ownership and possession of plaintiff Gilda
Corpuz over the remaining one-half portion of Lot 9, Block 8, (LRC) Psd-165409
which has been the subject of the Deed of Transfer of Rights (Exh. "A");

3. Ordering plaintiff Gilda Corpuz to reimburse defendants Luzviminda Guiang the

amount of NINE THOUSAND (P9,000.00) PESOS corresponding to the payment
made by defendants Guiangs to Manuel Callejo for the unpaid balance of the
account of plaintiff in favor of Manuel Callejo, and another sum of P379.62
representing one-half of the amount of realty taxes paid by defendants Guiangs on
Lot 9, Block 8, (LRC) Psd-165409, both with legal interests thereon computed from
the finality of the decision.

No pronouncement as to costs in view of the factual circumstances of the case.

Dissatisfied, petitioners-spouses filed an appeal with the Court of Appeals. Respondent Court, in its
challenged Decision, ruled as follow:6
 WHEREFORE, the appealed of the lower court in Civil Case No. 204 is hereby
AFFIRMED by this Court. No costs considering plaintiff-appellee's failure to file her
brief despite notice.

Reconsideration was similarly denied by the same court in its assailed Resolution: 7

Finding that the issues raised in defendants-appellants motion for reconsideration of

Our decision in this case of January 30, 1996, to be a mere rehash of the same
issues which we have already passed upon in the said decision, and there [being] no
cogent reason to disturb the same, this Court RESOLVED to DENY the instant
motion for reconsideration for lack of merit.

The Facts

The facts of this case are simple. Over the objection of private respondent and while she was in
Manila seeking employment, her husband sold to the petitioners-spouses one half of their conjugal
peoperty, consisting of their residence and the lot on which it stood. The circumstances of this sale
are set forth in the Decision of Respondent Court, which quoted from the Decision of the trial court
as follows:8

1. Plaintiff Gilda Corpuz and defendant Judie Corpuz are legally married spouses.
They were married on December 24, 1968 in Bacolod City, before a judge. This is
admitted by defendants-spouses Antonio and Luzviminda Guiang in their answer,
and also admitted by defendant Judie Corpuz when he testified in court (tsn. p. 3,
June 9, 1992), although the latter says that they were married in 1967. The couple
have three children, namely: Junie — 18 years old, Harriet — 17 years of age, and
Jodie or Joji, the youngest, who was 15 years of age in August, 1990 when her
mother testified in court.

Sometime on February 14, 1983, the couple Gilda and Judie Corpuz, with plaintiff-
wife Gilda Corpuz as vendee, bought a 421 sq. meter lot located in Barangay Gen.
Paulino Santos (Bo. 1), Koronadal, South Cotabato, and particularly known as Lot 9,
Block 8, (LRC) Psd-165409 from Manuel Callejo who signed as vendor through a
conditional deed of sale for a total consideration of P14,735.00. The consideration
was payable in installment, with right of cancellation in favor of vendor should vendee
fail to pay three successive installments (Exh. "2", tsn p. 6, February 14, 1990).

2. Sometime on April 22, 1988, the couple Gilda and Judie Corpuz sold one-half
portion of their Lot No. 9, Block 8, (LRC) Psd-165409 to the defendants-spouses
Antonio and Luzviminda Guiang. The latter have since then occupied the one-half
portion [and] built their house thereon (tsn. p. 4, May 22, 1992). They are thus
adjoining neighbors of the Corpuzes.

3. Plaintiff Gilda Corpuz left for Manila sometime in June 1989. She was trying to
look for work abroad, in [the] Middle East. Unfortunately, she became a victim of an
unscrupulous illegal recruiter. She was not able to go abroad. She stayed for
sometime in Manila however, coming back to Koronadal, South Cotabato, . . . on
March 11, 1990. Plaintiff's departure for Manila to look for work in the Middle East
was with the consent of her husband Judie Corpuz (tsn. p. 16, Aug. 12, 1990; p. 10
Sept. 6, 1991).
After his wife's departure for Manila, defendant Judie Corpuz seldom went home to
the conjugal dwelling. He stayed most of the time at his place of work at Samahang
Nayon Building, a hotel, restaurant, and a cooperative. Daughter Herriet Corpuz went
to school at King's College, Bo. 1, Koronadal, South Cotabato, but she was at the
same time working as household help of, and staying at, the house of Mr. Panes. Her
brother Junie was not working. Her younger sister Jodie (Jojie) was going to school.
Her mother sometimes sent them money (tsn. p. 14, Sept. 6, 1991.)

Sometime in January 1990, Harriet Corpuz learned that her father intended to sell
the remaining one-half portion including their house, of their homelot to defendants
Guiangs. She wrote a letter to her mother informing her. She [Gilda Corpuz] replied
that she was objecting to the sale. Harriet, however, did not inform her father about
this; but instead gave the letter to Mrs. Luzviminda Guiang so that she [Guiang]
would advise her father (tsn. pp. 16-17, Sept. 6, 1991).

4. However, in the absence of his wife Gilda Corpuz, defendant Judie Corpuz pushed
through the sale of the remaining one-half portion of Lot 9, Block 8, (LRC) Psd-
165409. On March 1, 1990, he sold to defendant Luzviminda Guiang thru a
document known as "Deed of Transfer of Rights" (Exh. "A") the remaining one-half
portion of their lot and the house standing thereon for a total consideration of
P30,000.00 of which P5,000.00 was to be paid in June, 1990. Transferor Judie
Corpuz's children Junie and Harriet signed the document as witness.

Four (4) days after March 1, 1990 or on March 5, 1990, obviously to cure whatever
defect in defendant Judie Corpuz's title over the lot transferred, defendant
Luzviminda Guiang as vendee executed another agreement over Lot 9, Block 8,
(LRC) Psd-165408 (Exh. "3"), this time with Manuela Jimenez Callejo, a widow of the
original registered owner from whom the couple Judie and Gilda Corpuz originally
bought the lot (Exh. "2"), who signed as vendor for a consideration of P9,000.00.
Defendant Judie Corpuz signed as a witness to the sale (Exh. "3-A"). The new sale
(Exh. "3") describes the lot sold as Lot 8, Block 9, (LRC) Psd-165408 but it is obvious
from the mass of evidence that the correct lot is Lot 8, Block 9, (LRC) Psd-165409,
the very lot earlier sold to the couple Gilda and Judie Corpuz.

5. Sometimes on March 11, 1990, plaintiff returned home. She found her children
staying with other households. Only Junie was staying in their house. Harriet and Joji
were with Mr. Panes. Gilda gathered her children together and stayed at their house.
Her husband was nowhere to be found. She was informed by her children that their
father had a wife already.

6. For staying in their house sold by her husband, plaintiff was complained against by
defendant Luzviminda Guiang and her husband Antonio Guiang before the Barangay
authorities of Barangay General Paulino Santos (Bo. 1), Koronadal, South Cotabato,
for trespassing (tsn. p. 34, Aug. 17, 1990). The case was docketed by the barangay
authorities as Barangay Case No. 38 for "trespassing". On March 16, 1990, the
parties thereat signed a document known as "amicable settlement". In full, the
settlement provides for, to wit:

That respondent, Mrs. Gilda Corpuz and her three children, namely:
Junie, Hariet and Judie to leave voluntarily the house of Mr. and Mrs.
Antonio Guiang, where they are presently boarding without any
charge, on or before April 7, 1990.
 FAIL NOT UNDER THE PENALTY OF THE LAW.

Believing that she had received the shorter end of the bargain, plaintiff to the
Barangay Captain of Barangay Paulino Santos to question her signature on the
amicable settlement. She was referred however to the Office-In-Charge at the time, a
certain Mr. de la Cruz. The latter in turn told her that he could not do anything on the
matter (tsn. p. 31, Aug. 17, 1990).

This particular point not rebutted. The Barangay Captain who testified did not deny
that Mrs. Gilda Corpuz approached him for the annulment of the settlement. He
merely said he forgot whether Mrs. Corpuz had approached him (tsn. p. 13, Sept. 26,
1990). We thus conclude that Mrs. Corpuz really approached the Barangay Captain
for the annulment of the settlement. Annulment not having been made, plaintiff
stayed put in her house and lot.

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

8. As a consequence of the sale, the spouses Guiang spent P600.00 for the
preparation of the Deed of Transfer of Rights, Exh. "A", P9,000.00 as the amount
they paid to Mrs. Manuela Callejo, having assumed the remaining obligation of the
Corpuzes to Mrs. Callejo (Exh. "3"); P100.00 for the preparation of Exhibit "3"; a total
of P759.62 basic tax and special education fund on the lot; P127.50 as the total
documentary stamp tax on the various documents; P535.72 for the capital gains tax;
P22.50 as transfer tax; a standard fee of P17.00; certification fee of P5.00. These
expenses particularly the taxes and other expenses towards the transfer of the title to
the spouses Guiangs were incurred for the whole Lot 9, Block 8, (LRC) Psd-165409.

Ruling of Respondent Court

Respondent Court found no reversible error in the trial court's ruling that any alienation or
encumbrance by the husband of the conjugal propety without the consent of his wife is null and void
as provided under Article 124 of the Family Code. It also rejected petitioners' contention that the
"amicable sttlement" ratified said sale, citing Article 1409 of the Code which expressly bars
ratification of the contracts specified therein, particularly those "prohibited or declared void by law."

Hence, this petition. 9

The Issues

In their Memorandum, petitioners assign to public respondent the following errors: 10

Whether or not the assailed Deed of Transfer of Rights was validly executed.

II
 Whether or not the Cour of Appeals erred in not declairing as voidable contract under
Art. 1390 of the Civil Code the impugned Deed of Transfer of Rights which was
validly ratified thru the execution of the "amicable settlement" by the contending
parties.

III

Whether or not the Court of Appeals erred in not setting aside the findings of the
Court a quo which recognized as lawful and valid the ownership and possession of
private respondent over the remaining one half (1/2) portion of the properly.

In a nutshell, petitioners-spouses contend that (1) the contract of sale (Deed of Transfer of Rights)
was merely voidable, and (2) such contract was ratified by private respondent when she entered into
an amicable sttlement with them.

This Court's Ruling

The petition is bereft of merit.

First Issue: Void or Voidable Contract?

Petitioners insist that the questioned Deed of Transfer of Rights was validly executed by the parties-
litigants in good faith and for valuable consideration. The absence of private respondent's consent
merely rendered the Deed voidable under Article 1390 of the Civil Code, which provides:

Art. 1390. The following contracts are voidable or annullable, even though there may
have been no damage to the contracting parties:

xxx xxx xxx

(2) Those where the consent is vitiated by mistake, violence, intimidation, undue
influence or fraud.

These contracts are binding, unless they are annulled by a proper action in court.
They are susceptible of ratification.(n)

The error in petitioners' contention is evident. Article 1390, par. 2, refers to contracts visited by vices
of consent, i.e., contracts which were entered into by a person whose consent was obtained and
vitiated through mistake, violence, intimidation, undue influence or fraud. In this instance, private
respondent's consent to the contract of sale of their conjugal property was totally inexistent or
absent. Gilda Corpuz, on direct examination, testified thus: 11

Q Now, on March 1, 1990, could you still recall where you were?

A I was still in Manila during that time.

xxx xxx xxx

ATTY. FUENTES:
 Q When did you come back to Koronadal, South Cotabato?

A That was on March 11, 1990, Ma'am.

Q Now, when you arrived at Koronadal, was there any problem which
arose concerning the ownership of your residential house at Callejo
Subdivision?

A When I arrived here in Koronadal, there was a problem which arose

regarding my residential house and lot because it was sold by my
husband without my knowledge.

This being the case, said contract properly falls within the ambit of Article 124 of the Family Code,
which was correctly applied by the teo lower court:

Art. 124. The administration and enjoyment of the conjugal partnerhip properly shall
belong to both spouses jointly. In case of disgreement, the husband's decision shall
prevail, subject recourse to the court by the wife for proper remedy, which must be
availed of within five years from the date of the contract implementing such decision.

In the event that one spouse is incapacitated or otherwise unable to participate in the
administration of the conjugal properties, the other spouse may assume sole powers
of administration. These powers do not include the powers of disposition or
encumbrance which must have the authority of the court or the written consent of the
other spouse. In the absence of such authority or consent, the disposition or
encumbrance shall be void. However, the transaction shall be construed as a
continuing offer on the part of the consenting spouse and the third person, and may
be perfected as a binding contract upon the acceptance by the other spouse or
authorization by the court before the offer is withdrawn by either or both offerors.
(165a) (Emphasis supplied)

Comparing said law with its equivalent provision in the Civil Code, the trial court adroitly explained
the amendatory effect of the above provision in this wise: 12

The legal provision is clear. The disposition or encumbrance is void. It becomes still
clearer if we compare the same with the equivalent provision of the Civil Code of the
Philippines. Under Article 166 of the Civil Code, the husband cannot generally
alienate or encumber any real property of the conjugal partnershit without the wife's
consent. The alienation or encumbrance if so made however is not null and void. It is
merely voidable. The offended wife may bring an action to annul the said alienation
or encumbrance. Thus the provision of Article 173 of the Civil Code of the
Philippines, to wit:

Art. 173. The wife may, during the marriage and within ten years from
the transaction questioned, ask the courts for the annulment of any
contract of the husband entered into without her consent, when such
consent is required, or any act or contract of the husband which
tends to defraud her or impair her interest in the conjugal partnership
property. Should the wife fail to exercise this right, she or her heirs
after the dissolution of the marriage, may demand the value of
property fraudulently alienated by the husband.(n)
 This particular provision giving the wife ten (10) years . . . during [the] marriage to
annul the alienation or encumbrance was not carried over to the Family Code. It is
thus clear that any alienation or encumbrance made after August 3, 1988 when the
Family Code took effect by the husband of the conjugal partnership property without
the consent of the wife is null and void.

Furthermore, it must be noted that the fraud and the intimidation referred to by petitioners were
perpetrated in the execution of the document embodying the amicable settlement. Gilda Corpuz
alleged during trial that barangay authorities made her sign said document through
misrepresentation and
coercion. In any event, its execution does not alter the void character of the deed of sale between
13

the husband and the petitioners-spouses, as will be discussed later. The fact remains that such
contract was entered into without the wife's consent.

In sum, 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.
14

Second Issue: Amicable Settlement

Insisting that the contract of sale was merely voidable, petitioners aver that it was duly ratified by the
contending parties through the "amicable settlement" they executed on March 16, 1990 in Barangay
Case No. 38.

The position is not well taken. The trial and the appellate courts have resolved this issue in favor of
the private respondent. The trial court correctly held: 15

By the specific provision of the law [Art. 1390, Civil Code] therefore, the Deed to
Transfer of Rights (Exh. "A") cannot be ratified, even by an "amicable settlement".
The participation by some barangay authorities in the "amicable settlement" cannot
otherwise validate an invalid act. Moreover, it cannot be denied that the "amicable
settlement (Exh. "B") entered into by plaintiff Gilda Corpuz and defendent spouses
Guiang is a contract. It is a direct offshoot of the Deed of Transfer of Rights (Exh.
"A"). By express provision of law, such a contract is also void. Thus, the legal
provision, to wit:

Art. 1422. Acontract which is the direct result of a previous illegal

contract, is also void and inexistent. (Civil Code of the Philippines).

In summation therefore, both the Deed of transfer of Rights (Exh. "A") and the
"amicable settlement" (Exh. "3") are null and void.

Doctrinally and clearly, a void contract cannot be ratified. 16

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

WHEREFORE, the Court hereby DENIES the petition and AFFIRMS the challenged Decision and
Resolution. Costs against petitioners.

SO ORDERED.

Davide, Jr., Bellosillo, Vitug and Quisumbing, JJ., concur.

G.R. No. 146608 October 23, 2003

SPOUSES CONSTANTE FIRME AND AZUCENA E. FIRME, petitioners,

vs.
UKAL ENTERPRISES AND DEVELOPMENT CORPORATION, respondent.

DECISION

CARPIO, J.:

The Case

This is a petition for review on certiorari of the Decision dated 3 January 2001 of the Court of
1

Appeals in CA-G.R. CV No. 60747. The Court of Appeals reversed the Decision of the Regional Trial
2

Court, Branch 223, Quezon City ("trial court"), which held that there was no perfected contract of
sale since there was no consent on the part of the seller.

The Facts

Petitioner Spouses Constante and Azucena Firme ("Spouses Firme") are the registered owners of a
parcel of land ("Property") located on Dahlia Avenue, Fairview Park, Quezon City. Renato de Castro
3

("De Castro"), the vice president of Bukal Enterprises and Development Corporation ("Bukal
Enterprises") authorized his friend, Teodoro Aviles ("Aviles"), a broker, to negotiate with the Spouses
Firme for the purchase of the Property.

On 28 March 1995, Bukal Enterprises filed a complaint for specific performance and damages with
the trial court, alleging 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 deliver
the title to the Property to Bukal Enterprises upon payment of the agreed purchase price.

During trial, Bukal Enterprises presented five witnesses, namely, Aviles, De Castro, Antonio Moreno,
Jocelyn Napa and Antonio Ancheta.

Aviles testified that De Castro authorized him to negotiate on behalf of Bukal Enterprises for the
purchase of the Property. According to Aviles, he met with the Spouses Firme on 23 January 1995
and he presented them with a draft deed of sale ("First Draft") dated February 1995. The First Draft
4

of the deed of sale provides:

 DEED OF ABSOLUTE SALE

KNOW ALL MEN BY THESE PRESENTS:

This DEED OF ABSOLUTE SALE made and executed by and between the Spouses CONSTANTE
FIRME and AZUCENA E. FIRME, both of legal age, Filipino citizens and with postal address at No.
1450 Union, Paco, City of Manila, hereinafter called the VENDOR, and

BUKAL ENTERPRISES and DEVELOPMENT CORPORATION, a corporation duly organized and

registered in accordance with Philippine Laws, with business address at Dahlia Avenue, Fairview
Park, Quezon City, herein represented by its PRESIDENT, MRS. ZENAIDA A. DE CASTRO,
hereinafter called the VENDEE.

WITNESSETH:

That the VENDOR is the absolute and registered owner of a certain parcel of land located at
Fairview Park, Quezon City, and more particularly described as follows:

A parcel of land (Lot 4, Block 33 of the consolidation-subdivision plan (LRC) Pcs-8124, Sheet No. I,
being a portion of the consolidation of Lots 41-B-2-A and 41-B-2-C, Psd-1136 and Lot (LRC) Pcs-
2665, (LRC) GLRO) Record. No. 1037), situated in Quezon City, Island of Luzon. Bounded on the
NE., points 2 to 5 by Road Lot 24, of the consolidation-subdivision plan. Beginning at a point marked
"1" on plan, being S. 67 deg. 23’W., 9288.80 m. from BLLM I, Mp of Montalban, Rizal; thence N. 85
deg. 35’E., 17.39 m. to point 2; thence S. 54 deg. 22’E., 4.00 m. to point 3; thence S. 14 deg. 21’E.,
17.87 m. to point 4; thence 3 deg. 56’E., 17.92 m. to point 5; thence N. 85 deg. 12’ W., 23.38 m. to
point 6; thence N. 4 deg. 55’ W., 34.35 m. to the point of beginning; containing an area of EIGHT
HUNDRED AND SIX (806) SQUARE METERS, more or less.

VENDOR’S title thereto being evidenced by Transfer Certificate of Title No. 264243 issued by the
Register of Deeds of Quezon City;

That the VENDOR, for and in consideration of the sum of THREE MILLION TWO HUNDRED
TWENTY FOUR THOUSAND PESOS (₱3,224,000.00) Philippine Currency, to them in hand paid
and receipt whereof is hereby acknowledged, do hereby SELL, TRANSFER and CONVEY unto the
said VENDEE, its assigns, transferees and successors in interest the above described property, free
from all liens and encumbrances whatsoever;

It is hereby mutually agreed that the VENDEE shall bear all the expenses for the capital gains tax,
documentary stamps, documentation, notarization, removal and relocation of the squatters,
registration, transfer tax and other fees as may be required by law;

That the VENDOR shall pay the real estate tax for the current year and back real estate taxes,
charges and penalties if there are any.

IN WITNESS WHEREOF, we have hereunto affixed our signatures this ____ day of February, 1995,
at Quezon City, Philippines.

CONSTANTE FIRME BUKAL ENTERPRISES AND

DEVELOPMENT CORP.

BY:
 AZUCENA E. FIRME ZENAIDA A. DE CASTRO
VENDOR President

xxx

The Spouses Firme rejected this First Draft because of several objectionable conditions, including
the payment of capital gains and other government taxes by the seller and the relocation of the
squatters at the seller’s expense. During their second meeting, Aviles presented to the Spouses
Firme another draft deed of sale ("Second Draft") dated March 1995. The Spouses Firme allegedly
5

accepted the Second Draft in view of the deletion of the objectionable conditions contained in the
First Draft. According to Aviles, the Spouses Firme were willing to sell the Property at ₱4,000 per
square meter. They then agreed that payment would be made at the Far East Bank and Trust
Company ("FEBTC"), Padre Faura Branch, Manila. However, the scheduled payment had to be
postponed due to problems in the transfer of funds. The Spouses Firme later informed Aviles that
they were no longer interested in selling the Property.
6

De Castro testified that he authorized Aviles to negotiate for Bukal Enterprises the purchase of the
Property owned by the Spouses Firme. The Property was located beside the Dahlia Commercial
Complex owned by Bukal Enterprises. Aviles informed him that the Spouses Firme agreed to sell the
Property at ₱4,000 per square meter, payable in cash for a lump sum of ₱3,224,000. Furthermore,
Bukal Enterprises agreed to pay the taxes due and to undertake the relocation of the squatters on
the Property. For this purpose, Bukal Enterprises applied for a loan of ₱4,500,000 which FEBTC
granted. Bukal Enterprises then relocated the four families squatting on the Property at a cost of
₱60,000 per family. After the squatters vacated the Property, Bukal Enterprises fenced the area,
covered it with filling materials, and constructed posts and riprap. Bukal Enterprises spent
approximately ₱300,000 for these improvements. In a letter dated 7 March 1995, Bukal Enterprises
7

offered to pay the purchase price of ₱3,224,000 to the Spouses Firme upon execution of the transfer
documents and delivery of the owner’s duplicate copy of TCT No. 264243. The Spouses Firme did
not accept this offer but instead sent Bukal Enterprises a letter demanding that its workers vacate
the Property. Bukal Enterprises then filed a complaint for specific performance and damages. 8

Antonio Moreno, one of the alleged squatters on the Property, testified that he constructed his house
on the Property sometime in 1982. On 26 February 1995, he was summoned together with the other
squatters to a meeting with Aviles regarding their relocation. They agreed to relocate provided they
would be given financial assistance of ₱60,000 per family. Thus, on 6 March 1995, the squatter
families were each paid ₱60,000 in the presence of De Castro and Aviles. Thereafter, they
voluntarily demolished their houses and vacated the Property. 9

Jocelyn Mapa, the manager of FEBTC, Padre Faura Branch, testified that Bukal Enterprises has
been their client since 1994. According to her, Bukal Enterprises applied for a loan of ₱4,500,000 on
the third week of February 1995 allegedly to buy a lot in Fairview. FEBTC approved the loan on the
last week of February and released the proceeds on the first week of March. 10

Antonio Ancheta ("Ancheta"), barangay captain of Barangay Fairview, testified that he was present
when one of the officers of Bukal Enterprises, a certain Renato, paid each of the four squatter
families around ₱60,000 to ₱100,000. Ancheta informed Dr. Constante Firme that he told the
squatters to leave considering that they already received payment for their relocation. According to
Ancheta, Dr. Constante Firme must have misunderstood him and thought that the squatters left
through Ancheta’s own efforts. 11
On the other hand, Dr. Constante Firme ("Dr. Firme") was the sole witness for the defendant
spouses.

Dr. Firme testified that on 30 January 1995, he and his wife met with Aviles at the Aristocrat
Restaurant in Quezon City. Aviles arranged the meeting with the Spouses Firme involving their
Property in Fairview. Aviles offered to buy the Property at ₱2,500 per square meter. The Spouses
Firme did not accept the offer because they were reserving the Property for their children. On 6
February 1995, the Spouses Firme met again with Aviles upon the latter’s insistence. Aviles showed
the Spouses Firme a copy of a draft deed of sale ("Third Draft") which Aviles prepared. The Third
12

Draft of the deed of sale provides:

CONRACT OF SALE

KNOW ALL MEN BY THESE PRESENTS:

This AGREEMENT, executed this ___ day of February, 1995, by and between the Spouses
CONSTANTE FIRME and AZUCENA E. FIRME, both of legal age, Filipino citizen and with postal
address at __________, Quezon City, hereinafter referred to as the VENDORS, and BUKAL
ENTERPRISES and DEVELOPMENT CORPORATION, a corporation duly organized and registered
in accordance with Philippine Laws, with postal address at Fairview Park, Quezon City, herein
represented by its President and Chief Executive Officer, hereinafter referred to as the VENDEE.

WITNESSETH:

That for and in consideration of the sum of THREE MILLION TWO HUNDRED TWENTY FOUR
THOUSAND PESOS (₱3,224,000.00), Philippine Currency, payable in the form hereinafter
expressed, agreed to sell to the VENDEE and the VENDEE has agreed to buy from the VENDORS,
a parcel of land situated at Dahlia Avenue corner Rolex Street, Fairview Park, Quezon City,
containing an area of 806 Square Meters more or less, of which the VENDORS are the absolute
registered owners in accordance with the Land Registration Act, as evidenced by Transfer
Certificate of Title No. 264243 issued by the Register of Deeds of Quezon City, more particularly
described and bounded as follows:

(DESCRIPTION AND BOUNDARIES OF PROPERTY)

THE FURTHER TERMS AND CONDITIONS OF THE CONTRACT ARE AS FOLLOWS:

1. The VENDEE agrees to pay the VENDORS upon execution of this Contract the
sum of ONE MILLION PESOS (₱1,000,000.00), Philippine Currency, as
downpayment and agrees to pay the balance of TWO MILLION TWO HUNDRED
TWENTY FOUR THOUSAND PESOS (₱2,224,000.00) at the post office address of
the VENDORS in Quezon City, or such other place or Office as the VENDORS may
designate within a period of sixty (60) days counted from the date of this Contract;

2. The VENDORS have hereunto authorized the VENDEE to mortgage the property
and submit this Contract, together with a certified true copy of the TCT, Tax
Declaration, Tax Clearance and Vicinity/Lot Plan, with their Lending Bank. The
proceeds of the VENDEE’S Loan shall directly be paid and remitted by the Bank to
the VENDORS;
 3. The said parcel of land shall remain in the name of the VENDORS until the
Lending Bank of the VENDEE shall have issued a Letter Guaranty Payment in favor
of the VENDORS, at which time the VENDORS agree to execute a Deed of Absolute
Sale in favor of the VENDEE and cause the issuance of the Certificate of Title in the
name of the latter. The Capital Gains Tax and Documentary Stamps shall be
charged from the VENDORS in accordance with law; 1awphi1.nét

4. The payment of the balance of ₱2,224,000.00 by the VENDEE to the VENDORS

shall be within a period of sixty (60) days effective from the date of this Contract.
After the lapse of 60 days and the loan has not yet been released due to fortuitous
events the VENDEE shall pay an interest of the balance a monthly interest based on
existing bank rate until said fortuitous event is no longer present;

5. The VENDEE shall remove and relocate the Squatters, however, such actual,
reasonable and necessary expenses shall be charged to the VENDORS upon
presentation of receipts and documents to support the act;

6. The VENDEE shall be allowed for all legal purposes to take possession of the
parcel of land after the execution of this Contract and payment of the downpayment;

7. The VENDEE shall shoulder all expenses like the documentation, registration,
transfer tax and relocation of the property.

IN WITNESS WHEREOF, we have hereunto affixed our signatures this ____ day of February, 1995,
at Quezon City, Philippines.

CONSTANTE E. FIRME BUKAL ENTERPRISES DEV. CORP.

VENDOR VENDEE
BY:
AZUCENA E. FIRME ________________________
VENDOR President & Chief Executive Officer

xxx

The Spouses Firme did not accept the Third Draft because they found its provisions one-sided. The
Spouses Firme particularly opposed the provision on the delivery of the Property’s title to Bukal
Enterprises for the latter to obtain a loan from the bank and use the proceeds to pay for the Property.
The Spouses Firme repeatedly told Aviles that the Property was not for sale when Aviles called on 2
and 4 March 1995 regarding the Property. On 6 March 1995, the Spouses Firme visited their
Property and discovered that there was a hollow block fence on one side, concrete posts on another
side and bunkers occupied by workers of a certain Florante de Castro. On 11 March 1995, Spouses
Firme visited the Property again with a surveyor. Dr. Firme talked with Ancheta who told him that the
squatters had voluntarily demolished their shanties. The Spouses Firme sent a letter dated 20
13

March 1995 to Bukal Enterprises demanding removal of the bunkers and vacation by the occupants
of the Property. On 22 March 1995, the Spouses Firme received a letter dated 7 March 1995 from
14

Bukal Enterprises demanding that they sell the Property. 15

On 7 August 1998, the trial court rendered judgment against Bukal Enterprises as follows:
WHEREFORE, in the light of the foregoing premises, the above-entitled case [is] hereby
DISMISSED and plaintiff BUKAL ENTERPRISES DEVELOPMENT CORPORATION is hereby
ordered to pay the defendants Spouses Constante and Azucena Firme:

1. the sum of Three Hundred Thirty Five Thousand Nine Hundred Sixty Four and 90/100
(₱335,964.90) as and by way of actual and compensatory damages;

2. the sum of Five Hundred Thousand Pesos (₱500,000.00) as and by way of moral
damages;

3. the sum of One Hundred Thousand Pesos (₱100,000.00) as and by way of attorney’s
fees; and

4. the costs of the suit.

SO ORDERED. 16

Bukal Enterprises appealed to the Court of Appeals, which reversed and set aside the decision of
the trial court. The dispositive portion of the decision reads:

WHEREFORE, premises considered, the Decision, dated August 7, 1998, is hereby REVERSED
and SET ASIDE. The complaint is granted and the appellees are directed to henceforth execute the
Deed of Absolute Sale transferring the ownership of the subject property to the appellant
immediately upon receipt of the purchase price of ₱3,224,000.00 and to perform all such acts
necessary and proper to effect the transfer of the property covered by TCT No. 264243 to appellant.
Appellant is directed to deliver the payment of the purchase price of the property within sixty days
from the finality of this judgment. Costs against appellees.

SO ORDERED. 17

Hence, the instant petition. 1a\^/phi1.net

The Ruling of the Trial Court

The trial court held there was no perfected contract of sale. Bukal Enterprises failed to establish that
the Spouses Firme gave their consent to the sale of the Property. The parties did not go beyond the
negotiation stage and there was no evidence of meeting of the minds between the parties.
Furthermore, Aviles had no valid authority to bind Bukal Enterprises in the sale transaction. Under
Sections 23 and 36 (No. 7) of the Corporation Code, the corporate power to purchase a specific
property is exercised by the Board of Directors of the corporation. Without an authorization from the
Board of Directors, Aviles could not validly finalize the purchase of the Property on behalf of Bukal
Enterprises. There is no basis to apply the Statute of Frauds since there was no perfected contract
of sale.

The Ruling of the Court of Appeals

The Court of Appeals held that the lack of a board resolution authorizing Aviles to act on behalf of
Bukal Enterprises in the purchase of the Property was cured by ratification. Bukal Enterprises ratified
the purchase when it filed the complaint for the enforcement of the sale.
The Court of Appeals also held there was a perfected contract of sale. The appellate court ruled that
the Spouses Firme revealed their intent to sell the Property when they met with Aviles twice. The
Spouses Firme rejected the First Draft because they considered the terms unacceptable. When
Aviles presented the Second Draft without the objectionable provisions, the Spouses Firme no
longer had any cause for refusing to sell the Property. On the other hand, the acts of Bukal
Enterprises in fencing the Property, constructing posts, relocating the squatters and obtaining a loan
to purchase the Property are circumstances supporting their claim that there was a perfected
contract of sale.

The Spouses Firme allowed Bukal Enterprises to exercise acts of ownership over the Property when
the latter introduced improvements on the Property and evicted the squatters. These acts constitute
partial performance of the contract of sale that takes the oral contract out of the scope of the Statute
of Frauds.

The Issues

The Spouses Firme raise the following issues:

1. WHETHER THE COURT OF APPEALS ERRED IN FINDING THAT THERE WAS A

PERFECTED CONTRACT OF SALE BETWEEN PETITIONERS AND RESPONDENT
DESPITE THE ADDUCED EVIDENCE PATENTLY TO THE CONTRARY;

2. WHETHER THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE ALLEGED
CONTRACT OF SALE IS ENFORCEABLE DESPITE THE FACT THAT THE SAME IS
COVERED BY THE STATUTE OF FRAUDS;

3. WHETHER THE COURT OF APPEALS ERRED IN DISREGARDING THE FACT THAT IT

WAS NOT LEGALLY AND FACTUALLY POSSIBLE FOR RESPONDENT TO PERFECT A
CONTRACT OF SALE; AND

4. THE COURT OF APPEALS ERRED IN RULING THAT THE AWARD BY THE TRIAL
COURT OF MORAL AND COMPENSATORY DAMAGES TO PETITIONERS IS
IMPROPER. 18

The Ruling of the Court

The petition is meritorious.

The fundamental question for resolution is whether there was a perfected contract of sale between
the Spouses Firme and Bukal Enterprises. This requires a review of the factual and legal issues of
this case. As a rule, only questions of law are appealable to this Court under Rule 45 of the Rules of
19

Civil Procedure. The findings of fact by the Court of Appeals are generally conclusive and binding on
the parties and are not reviewable by this Court. However, when the factual findings of the Court of
20

Appeals are contrary to those of the trial court or when the inference made is manifestly mistaken,
this Court has the authority to review the findings of fact. Likewise, this Court may review findings of
21

fact when the judgment of the Court of Appeals is premised on a misapprehension of facts. This is
22

the situation in this case.

Whether there was a perfected contract of sale

We agree with the finding of the trial court that there was no perfected contract of sale. Clearly, the
Court of Appeals misapprehended the facts of the case in ruling otherwise.

First, the records indubitably show that there was no consent on the part of the Spouses Firme.
Aviles did not present any draft deed of sale during his first meeting with the Spouses Firme on 30
January 1995. Dr. Firme was consistent in his testimony that he and his wife rejected the provisions
23

of the Third Draft presented by Aviles during their second meeting on 6 February 1995. The
Spouses Firme found the terms and conditions unacceptable and told Aviles that they would not sell
the property. Aviles showed them only one draft deed of sale (Third Draft) during their second and
24

last meeting on 6 February 1995. When shown a copy of the First Draft, Dr. Firme testified that it
25

was not the deed of sale shown to them by Aviles during their second meeting and that the Third
26

Draft was completely different from the First Draft.27

On the other hand, Aviles gave conflicting testimony as to what transpired during the two meetings
with the Spouses Firme. In his direct examination, Aviles testified that during his first meeting with
the Spouses Firme on 23 January 1995, he showed them the First Draft which the Spouses Firme
rejected. On their second meeting, Aviles showed the Spouses Firme the Second Draft, which the
28

Spouses Firme allegedly approved because the objectionable conditions contained in the First Draft
were already deleted. However, a perusal of the First Draft and the Second Draft would show that
both deeds of sale contain exactly the same provisions. The only difference is that the date of the
First Draft is February 1995 while that of the Second Draft is March 1995.

When Aviles testified again as rebuttal witness, his testimony became more confusing. Aviles
testified that during his first meeting with the Spouses Firme on 30 January 1995, he showed them
the Third Draft, which was not acceptable to the latter. However, upon further questioning by his
29

counsel, Aviles concurred with Dr. Firme’s testimony that he presented the Third Draft (Exh. "5";
Exh. "L") to the Spouses Firme only during their second meeting. He also stated that he prepared
and presented to the Spouses Firme the First Draft (Exh. "C") and the Second Draft (Exh. "C-1")
during their first or second meeting. He testified:

ATTY. MARQUEDA:

Q: On page 11 of the tsn dated August 5, 1997 a question was posed "How did you find this
draft the Contract of Sale which was presented to you by Mr. Aviles on the second meeting?"
The answer is "On the first meeting(sic), we find it totally unacceptable, sir." What can you
30

say on this? Before that, Mr. Witness, what is this Contract of Sale that you presented to Mr.
Aviles on the second meeting? Is this different from the Contract of Sale that was marked as
Exhibit "5-L"?

Q: May I see the document Exhibit 5 – L? 31

INTERPRETER:

Witness going over the record.

ATTY. MARQUEDA:

Q: Is that the same document that was presented by you to Mr. Firme on the second
meeting or there is a different contract?
 A: This is the same document – draft of the document that I submitted to them during our
second meeting. That was February. This was the draft.

Q: What about Exhibit C and C-1 [which] were identified by you. When was this presented to
Dr. Firme?

A: This is the same.

Q: Exhibit C and C-1?

A: Yes because I prepared two documents during our meeting. One already with notarial, the
one without notarial page and the other one with notarial page already, so I prepared two
documents but with the same contents both were dated February of 1995. 32

Q: So, you are referring now to Exhibit C and C-1 for the plaintiff?

A: C-1 is already in the final form because we agreed already as to the date of the payment,
so I prepared already another document which is dated March 1995. (Emphasis supplied)
33

In his cross-examination, Aviles again changed his testimony. According to him, he presented the
Third Draft to the Spouses Firme during their first meeting. However, when he went over the
34

records, he again changed his answer and stated that he presented the Third Draft during their
second meeting. 35

In his re-direct examination, Aviles gave another version of what he presented to the Spouses Firme
during the two meetings. According to him, he presented the Third Draft during the first meeting. On
their second meeting, he presented the First and the Second Drafts to the Spouses Firme. 36

Furthermore, Aviles admitted that the first proposal of Bukal Enterprises was at ₱2,500 per square
meter for the Property. But the First, Second and Third Drafts of the deed of sale prepared by Aviles
37

all indicated a purchase price of ₱4,000 per square meter or a lump sum of ₱3,224,000 (₱4,000 per
sq.m. x 806 sq.m. = ₱3,224,000) for the Property. Hence, Aviles could not have presented any of
these draft deeds of sale to the Spouses Firme during their first meeting.

Considering the glaring inconsistencies in Aviles’ testimony, it was proper for the trial court to give
more credence to the testimony of Dr. Firme.

Even after the two meetings with Aviles, the Spouses Firme were firm in their decision not to sell the
Property. Aviles called the Spouses Firme twice after their last meeting. The Spouses Firme
informed Aviles that they were not selling the Property. Aviles himself admitted this during his
38

testimony, thus:

Q. Now, the next question which states: "But did you not have any occasion to talk to him
after that second meeting?" and the answer of Dr. Firme is "He called up a month after,
that’s March 2, 1995." What can you say on this?

A. I called him to inform him that the loan was already transferred from Makati to Padre
Faura Branch of the Far East Bank, so I scheduled already the payment of their property.

Q. When?
 A. On March 4, 1995.

Q. And then the next question which also states: "What did you talked (sic) about over the
telephone?" The answer of Dr. Firme was "When I found out that he was calling, I told him
that the property is not for sale." What can you say on this?

A. He mentioned that they are no longer interested to sell their property, perhaps they would
like a higher price of the property. They did not mention to me. I do not know what was their
reason.

Q. The next question "So, what happened next?" The answer is "He called up two days later,
March 4 and my wife answered the telephone and told him that the property is not for sale,
sir." What can you say on this?

A. That is true. That is what Mrs. Firme told me during our conversation on the telephone
that they are no longer interested to sell the property for obvious reason.

Q. When was that?

A. March 4, 1995, your honor. (Emphasis supplied)

39

Significantly, De Castro also admitted that he was aware of the Spouses Firme’s refusal to sell the
Property. 40

The confusing testimony of Aviles taken together with De Castro’s admission that he was aware of
the Spouses Firme’s refusal to sell the Property reinforces Dr. Firme’s testimony that he and his wife
never consented to sell the Property.

Consent is one of the essential elements of a valid contract. The Civil Code provides:

Art. 1318. There is no contract unless the following requisites concur:

1. Consent of the contracting parties;

2. Object certain which is the subject matter of the contract;

3. Cause of the obligation which is established.

The absence of any of these essential elements will negate the existence of a perfected contract of
sale. Thus, where there is want of consent, the contract is non-existent. As held in Salonga, et al. v.
41 42

Farrales, et al.:
43

It is elementary that consent is an essential element for the existence of a contract, and where it is
wanting, the contract is non-existent. The essence of consent is the conformity of the parties on
the terms of the contract, the acceptance by one of the offer made by the other. The contract
to sell is a bilateral contract. Where there is merely an offer by one party, without the acceptance of
the other, there is no consent. (Emphasis supplied)

In this case, the Spouses Firme flatly rejected the offer of Aviles to buy the Property on behalf of
Bukal Enterprises. There was therefore no concurrence of the offer and the acceptance on the
subject matter, consideration and terms of payment as would result in a perfected contract of
sale. Under Article 1475 of the Civil Code, the contract of sale is perfected at the moment there is a
44

meeting of minds on the thing which is the object of the contract and on the price.

Another piece of evidence which supports the contention of the Spouses Firme that they did not
consent to the contract of sale is the fact they never signed any deed of sale. If the Spouses Firme
were already agreeable to the offer of Bukal Enterprises as embodied in the Second Draft, then the
Spouses Firme could have simply affixed their signatures on the deed of sale, but they did not.

Even the existence of a signed document purporting to be a contract of sale does not preclude a
finding that the contract is invalid when the evidence shows that there was no meeting of the minds
between the seller and buyer. In this case, what were offered in evidence were mere unsigned
45

deeds of sale which have no probative value. Bukal Enterprises failed to show the existence of a
46

perfected contract of sale by competent proof. 1ªvvphi1.nét

Second, there was no approval from the Board of Directors of Bukal Enterprises as would finalize
any transaction with the Spouses Firme. Aviles did not have the proper authority to negotiate for
Bukal Enterprises. Aviles testified that his friend, De Castro, had asked him to negotiate with the
Spouses Firme to buy the Property. De Castro, as Bukal Enterprises’ vice president, testified that he
47

authorized Aviles to buy the Property. However, there is no Board Resolution authorizing Aviles to
48

negotiate and purchase the Property on behalf of Bukal Enterprises. 49

It is the board of directors or trustees which exercises almost all the corporate powers in a
corporation. Thus, the Corporation Code provides:

SEC. 23. The board of directors or trustees. — Unless otherwise provided in this Code, the
corporate powers of all corporations formed under this Code shall be exercised, all business
conducted and all property of such corporations controlled and held by the board of directors or
trustees to be elected from among the holders of stock, or where there is no stock, from among the
members of the corporation, who shall hold office for one (1) year and until their successors are
elected and qualified. x x x

SEC. 36. Corporate powers and capacity. — Every corporation incorporated under this Code has the
power and capacity:

xxx

7. To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage and otherwise
deal with such real and personal property, including securities and bonds of other corporations, as
the transaction of a lawful business of the corporation may reasonably and necessarily require,
subject to the limitations prescribed by the law and the Constitution.

xxx

Under these provisions, the power to purchase real property is vested in the board of directors or
trustees. While a corporation may appoint agents to negotiate for the purchase of real property
needed by the corporation, the final say will have to be with the board, whose approval will finalize
the transaction. A corporation can only exercise its powers and transact its business through its
50

board of directors and through its officers and agents when authorized by a board resolution or its
by-laws. As held in AF Realty & Development, Inc. v. Dieselman Freight Services, Co.:
51 52
Section 23 of the Corporation Code expressly provides that the corporate powers of all corporations
shall be exercised by the board of directors. Just as a natural person may authorize another to do
certain acts in his behalf, so may the board of directors of a corporation validly delegate some of its
functions to individual officers or agents appointed by it. Thus, contracts or acts of a corporation
must be made either by the board of directors or by a corporate agent duly authorized by the board.
Absent such valid delegation/authorization, the rule is that the declarations of an individual director
relating to the affairs of the corporation, but not in the course of, or connected with, the performance
of authorized duties of such director, are held not binding on the corporation. (Emphasis supplied)

In this case, Aviles, who negotiated the purchase of the Property, is neither an officer of Bukal
Enterprises nor a member of the Board of Directors of Bukal Enterprises. There is no Board
Resolution authorizing Aviles to negotiate and purchase the Property for Bukal Enterprises. There is
also no evidence to prove that Bukal Enterprises approved whatever transaction Aviles made with
the Spouses Firme. In fact, the president of Bukal Enterprises did not sign any of the deeds of sale
presented to the Spouses Firme. Even De Castro admitted that he had never met the Spouses
Firme. Considering all these circumstances, it is highly improbable for Aviles to finalize any contract
53

of sale with the Spouses Firme.

Furthermore, the Court notes that in the Complaint filed by Bukal Enterprises with the trial court,
Aviles signed the verification and certification of non-forum shopping. The verification and
54 55

certification of non-forum shopping was not accompanied by proof that Bukal Enterprises authorized
Aviles to file the complaint on behalf of Bukal Enterprises.

The power of a corporation to sue and be sued is exercised by the board of directors. "The physical
acts of the corporation, like the signing of documents, can be performed only by natural persons duly
authorized for the purpose by corporate by-laws or by a specific act of the board of directors." 56

The purpose of verification is to secure an assurance that the allegations in the pleading are true
and correct and that it is filed in good faith. True, this requirement is procedural and not
57

jurisdictional. However, the trial court should have ordered the correction of the complaint since
Aviles was neither an officer of Bukal Enterprises nor authorized by its Board of Directors to act on
behalf of Bukal Enterprises.

Whether the Statute of Frauds is applicable

The Court of Appeals held that partial performance of the contract of sale takes the oral contract out
of the scope of the Statute of Frauds. This conclusion arose from the appellate court’s erroneous
finding that there was a perfected contract of sale. The records show that there was no perfected
contract of sale. There is therefore no basis for the application of the Statute of Frauds. The
application of the Statute of Frauds presupposes the existence of a perfected contract. Article 1403
58

of the Civil Code provides:

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;

(2) 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:
 xxx

(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;

xxx

Whether Bukal Enterprises is a builder in good faith

Bukal Enterprises is not a builder in good faith. The Spouses Firme did not accept Aviles’ offer to
purchase the Property. Aviles testified that when he called the Spouses Firme on 2 March 1995, Dr.
Firme informed him that they were no longer interested in selling the Property. On 4 March 1995,
Aviles called again and this time Mrs. Firme told him that they were not selling the Property. Aviles
informed De Castro of the refusal of the Spouses Firme to sell the Property. However, Bukal
Enterprises still proceeded in relocating the squatters and constructing improvements on the
Property. De Castro testified:

ATTY. EJERCITO:

Q: The truth of the matter, Mr. Witness, is that the post was constructed sometime late 1994.
Is that not correct?

A: No, sir. It is not true.

Q: When was it constructed?

A: That March.

Q: When in March?

A: 1995.

Q: When in March 1995?

A: From the period of March 2, 1995 or two (2) weeks after the removal of the squatters.

Q: When were the squatters removed?

WITNESS:

A: March 6 and 7 because there were four (4) squatters.

ATTY. EJERCITO:

Q: When did you find out that the Spouses Firme did not want to sell the same?

A: First week of March 1995.

Q: In your Complaint you said you find out on March 3, 1995. Is that not correct?
A: I cannot exactly remember, sir.

ATTY. MARQUEDA:

In the Complaint it does not state March 3. Maybe counsel was thinking of this Paragraph 6
which states, "When the property was rid of the squatters on March 2, 1995 for the
documentation and payment of the sale, xxx".

ATTY. EJERCITO:

Q: So, you found out on March 2, 1995 that the defendants were no longer interested in
selling to you the property. Is that correct?

A: Yes, sir, because Mr. Aviles relayed it to me.

Q: Mr. Aviles relayed to you that the Spouses Firme were no longer interested in selling to
you the property in March 2, 1995. Is that correct?

A: Yes, sir. Mr. Aviles told me.

Q: In so many words, Mr. Witness, you learned that the Spouses Firme were no longer
interested in selling the property before you spent allegedly all the sum of money for the
relocation of squatters for all this construction that you are telling this Court now?

WITNESS:

A: The refusal to sell is not yet formal and the lawyer sent a letter tendering full payment of
the purchase price.

ATTY. EJERCITO:

Q: You mean to say that you did not believe Mr. Aviles when he told you that the Spouses
Firme were no longer selling the property?

A: No, sir.

Q: Was there anything formal when you say the Spouses Firme agreed to sell the property?

A: None, sir.

Q: And yet that time you believe Mr. Aviles when he verbally told you that the Sps. Firme
agreed to sell the property? At what point of the transaction with the Spouses Firme were
you advised by your lawyer?

WITNESS:

A: At the time when they refused to sell the lot.

ATTY. EJERCITO:
 Q: Was that before the squatters were relocated allegedly by Bukal Enterprises?

A: Yes, sir.

Q: In fact, it was the lawyer who advised you to relocate the squatters. Is it not true?

A: No, sir. (Emphasis supplied)

59

Bukal Enterprises is obviously a builder in bad faith. No deed of sale has been executed in this case.
Despite the refusal of the Spouses Firme to sell the Property, Bukal Enterprises still proceeded to
introduce improvements on the Property. Bukal Enterprises introduced improvements on the
Property without the knowledge and consent of the Spouses Firme. When the Spouses Firme
learned about the unauthorized constructions made by Bukal Enterprises on the Property, they
advised the latter to desist from further acts of trespass on their Property.
60

The Civil Code provides:

Art. 449. He who builds, plants or sows in bad faith on the land of another, loses what is built,
planted or sown without right of indemnity.

Art. 450. The owner of the land on which anything has been built, planted or sown in bad faith may
demand the demolition of the work, or that the planting or sowing be removed, in order to replace
things in their former condition at the expense of the person who built, planted or sowed; or he may
compel the builder or planter to pay the price of the land, and the owner the proper rent.

Under these provisions the Spouses Firme have the following options: (1) to appropriate what Bukal
Enterprises has built without any obligation to pay indemnity; (2) to ask Bukal Enterprises to remove
what it has built; or (3) to compel Bukal Enterprises to pay the value of the land. Since the Spouses
61

Firme are undoubtedly not selling the Property to Bukal Enterprises, they may exercise any of the
first two options. They may appropriate what has been built without paying indemnity or they may
ask Bukal Enterprises to remove what it has built at Bukal Enterprises’ own expense.

Bukal Enterprises is not entitled to reimbursement for the expenses incurred in relocating the
squatters. Bukal Enterprises spent for the relocation of the squatters even after learning that the
Spouses Firme were no longer interested in selling the Property. De Castro testified that even
though the Spouses Firme did not require them to remove the squatters, they chose to spend for the
relocation of the squatters since they were interested in purchasing the Property. 62

Whether the Spouses Firme are entitled to compensatory and moral damages

The Court agrees with the Court of Appeals to delete the award for compensatory and moral
damages. In awarding actual damages, the trial court took into account the traveling expenses
incurred by the Spouses Firme who are already residing in the United States. However, the trial
court failed to consider the testimony of Dr. Firme that they normally travel to the Philippines more
than once a year to visit their children. Thus, the expenses for the roundtrip tickets dated 1996-1997
63

could not be attributed solely for the attendance of hearings in the case.

Nevertheless, an award of nominal damages of ₱30,000 is warranted since Bukal Enterprises

violated the property rights of the Spouses Firme. The Civil Code provides:
64
Art. 2221. Nominal damages are adjudicated in order that a right of the plaintiff, which has been
violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of
indemnifying the plaintiff for any loss suffered by him.

Art. 2222. The court may award nominal damages in every obligation arising from any source
enumerated in article 1157, or in every case where any property right has been invaded.

The award of damages is also in accordance with Article 451 of the Civil Code which states that the
landowner is entitled to damages from the builder in bad faith. 65

WHEREFORE, we SET ASIDE the Decision of the Court of Appeals and RENDER a new one:

1. Declaring that there was no perfected contract of sale;

2. Ordering Bukal Enterprises to pay the Spouses Firme ₱30,000 as nominal damages.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Vitug, and Azcuna, JJ., concur.

Ynares-Santiago, J., on official leave.