3y1s Prop f Donations

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Cases on donations

Article 725

G.R. No. 120721 February 23, 2005

MANUEL G. ABELLO, JOSE C. CONCEPCION, TEODORO D. REGALA, AVELINOV. CRUZ,petitioners,vs.COMMISSIONER OF INTERNAL REVENUE and COURT OF APPEALS,respondents.

D E C I S I O N

AZCUNA, J .:

This is a petition for review on certiorariunder Rule 45 of the Rules of Civil Procedure,

assailing the decision of the Court of Appeals in CA G.R. SP No. 27134, entitled"Comissioner of Internal Revenue v. Manuel G. Abello, Jose C. Concepcion, Teodoro D.Regala, Avelino V. Cruz and Court of Tax Appeals," which reversed and set aside thedecision of the Court of Tax Appeals (CTA), ordering the Commissioner of InternalRevenue (Commissioner) to withdraw his letters dated April 21, 1988 and August 4,1988 assessing donors taxes and to desist from collecting donors taxes frompetitioners.

During the 1987 national elections, petitioners, who are partners in the Angara, Abello,Concepcion, Regala and Cruz (ACCRA) law firm, contributed P882,661.31 each to thecampaign funds of Senator Edgardo Angara, then running for the Senate. In letters

dated April 21, 1988, the Bureau of Internal Revenue (BIR) assessed each of thepetitioners P263,032.66 for their contributions. On August 2, 1988, petitionersquestioned the assessment through a letter to the BIR. They claimed that political orelectoral contributions are not considered gifts under the National Internal RevenueCode (NIRC), and that, therefore, they are not liable for donors tax. The claim forexemption was denied by the Commissioner.

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On September 12, 1988, petitioners filed a petition for review with the CTA, which wasdecided on October 7, 1991 in favor of the petitioners. As aforestated, the CTA orderedthe Commissioner to desist from collecting donors taxes from the petitioners.2

On appeal, the Court of Appeals reversed and set aside the CTA decision on April 20,1994.3The appellate Court ordered the petitioners to pay donors tax amountingto P263,032.66 each, reasoning as follows:

The National Internal Revenue Code, as amended, provides:

Sec. 91. Imposition of Tax. (a) There shall be levied, assessed, collected, and paidupon the transfer by any person, resident, or non-resident, of the property by gift, a tax,
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computed as provided in Section 92. (b) The tax shall apply whether the transfer is intrust or otherwise, whether the gift is direct or indirect, and whether the property is realor personal, tangible or intangible.

Pursuant to the above-quoted provisions of law, the transfer of property by gift, whether

the transfer is in trust or otherwise, whether the gift is direct or indirect, and whether theproperty is real or personal, tangible or intangible, is subject to donors or gift tax.

A gift is generally defined as a voluntary transfer of property by one to another withoutany consideration or compensation therefor (28 C.J. 620; Santos vs. Robledo, 28 Phil.250).

In the instant case, the contributions are voluntary transfers of property in the form ofmoney from private respondents to Sen. Angara, without considerations therefor.Hence, they squarely fall under the definition of donation or gift.

As correctly pointed out by the Solicitor General:

The fact that the contributions were given to be used as campaign funds of Sen. Angaradoes not affect the character of the fund transfers as donation or gift. There was therebyno retention of control over the disposition of the contributions. There was simply anindication of the purpose for which they were to be used. For as long as thecontributions were used for the purpose for which they were intended, Sen. Angara hadcomplete and absolute power to dispose of the contributions. He was fully entitled to theeconomic benefits of the contributions.

Section 91 of the Tax Code is very clear. A donors or gift tax is imposed on the transfer

of property by gift.1awphi1.nt

The Bureau of Internal Revenue issued Ruling No. 344 on July 20, 1988, which reads:

Political Contributions.For internal revenue purposes, political contributions in thePhilippines are considered taxable gift rather than taxable income. This is so, because apolitical contribution is indubitably not intended by the giver or contributor as a return ofvalue or made because of any intent to repay another what is his due, but bestowedonly because of motives of philanthropy or charity. His purpose is to give and to bolsterthe morals, the winning chance of the candidate and/or his party, and not to employ orbuy. On the other hand, the recipient-donee does not regard himself as exchanging his

services or his product for the money contributed. But more importantly he receivesfinancial advantages gratuitously.

When the U.S. gift tax law was adopted in the Philippines (before May 7, 1974), thetaxability of political contributions was, admittedly, an unsettled issue; hence, it cannotbe presumed that the Philippine Congress then had intended to consider or treatpolitical contributions as non-taxable gifts when it adopted the said gift tax law.Moreover, well-settled is the rule that the Philippines need not necessarily adopt the


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present rule or construction in the United States on the matter. Generally, statutes ofdifferent states relating to the same class of persons or things or having the samepurposes are not considered to be inpari materiabecause it cannot be justifiablypresumed that the legislature had them in mind when enacting the provision beingconstrued. (5206, Sutherland, Statutory Construction, p. 546.) Accordingly, in the

absence of an express exempting provision of law, political contributions in thePhilippines are subject to the donors gift tax.(cited in National Internal Revenue CodeAnnotated by Hector S. de Leon, 1991 ed., p. 290).

In the light of the above BIR Ruling, it is clear that the political contributions of theprivate respondents to Sen. Edgardo Angara are taxable gifts. The vagueness of thelaw as to what comprise the gift subject to tax was made concrete by the above-quotedBIR ruling. Hence, there is no doubt that political contributions are taxable gifts.4

Petitioners filed a motion for reconsideration, which the Court of Appeals denied in itsresolution of June 16, 1995.5

Petitioners thereupon filed the instant petition on July 26, 1995. Raised are the followingissues:

1. DID THE HONORABLE COURT OF APPEALS ERR WHEN IT FAILED TOCONSIDER IN ITS DECISION THE PURPOSE BEHIND THE ENACTMENT OFOUR GIFT TAX LAW?

2. DID THE HONORABLE COURT OF APPEALS ERR IN NOT CONSIDERINGTHE INTENTION OF THE GIVERS IN DETERMINING WHETHER OR NOTTHE PETITIONERS POLITICAL CONTRIBUTIONS WERE GIFTS SUBJECT

TO DONORS TAX?

3. DID THE HONORABLE COURT OF APPEALS ERR WHEN IT FAILED TOCONSIDER THE DEFINITION OF AN "ELECTORAL CONTRIBUTION" UNDERTHE OMNIBUS ELECTION CODE IN DETERMINING WHETHER OR NOTPOLITICAL CONTRIBUTIONS ARE TAXABLE?

4. DID THE HONORABLE COURT OF APPEALS ERR IN NOT CONSIDERINGTHE ADMINISTRATIVE PRACTICE OF CLOSE TO HALF A CENTURY OF NOTSUBJECTING POLITICAL CONTRIBUTIONS TO DONORS TAX?

5. DID THE HONORABLE COURT OF APPEALS ERR IN NOT CONSIDERINGTHE AMERICAN JURISPRUDENCE RELIED UPON BY THE COURT OF TAXAPPEALS AND BY THE PETITIONERS TO THE EFFECT THAT POLITICALCONTRIBUTIONS ARE NOT TAXABLE GIFTS?

6. DID THE HONORABLE COURT OF APPEALS ERR IN NOT APPLYINGAMERICAN JURISPRUDENCE ON THE GROUND THAT THIS WAS NOT
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KNOWN AT THE TIME THE PHILIPPINES GIFT TAX LAW WAS ADOPTED IN1939?

7. DID THE HONORABLE COURT OF APPEALS ERR IN RESOLVING THECASE MAINLY ON THE BASIS OF A RULING ISSUED BY THE RESPONDENT

ONLY AFTER THE ASSESSMENTS HAD ALREADY BEEN MADE?

8. DID THE HONORABLE COURT OF APPEALS ERR WHEN IT DID NOTCONSTRUE THE GIFT TAX LAW LIBERALLY IN FAVOR OF THE TAXPAYER

AND STRICLTY AGAINST THE GOVERNMENT IN ACCORDANCE WITHAPPLICABLE PRINCIPLES OF STATUTORY CONSTRUCTION?

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First, Fifth and Sixth Issues

Section 91 of the National Internal Revenue Code (NIRC) reads:

(A) There shall be levied, assessed, collected and paid upon the transfer by anyperson, resident or nonresident, of the property by gift, a tax, computed asprovided in Section 92

(B) The tax shall apply whether the transfer is in trust or otherwise, whether thegift is direct or indirect, and whether the property is real or personal, tangible orintangible.

The NIRC does not define transfer of property by gift. However, Article 18 of the CivilCode, states:

In matters which are governed by the Code of Commerce and special laws, theirdeficiency shall be supplied by the provisions of this Code.

Thus, reference may be made to the definition of a donation in the Civil Code. Article725 of said Code defines donation as:

. . . an act of liberality whereby a person disposes gratuitously of a thing or right in favorof another, who accepts it.

Donation has the following elements: (a) the reduction of the patrimony of the donor; (b)the increase in the patrimony of the donee; and, (c) the intent to do an act of liberality

or animus donandi.

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The present case falls squarely within the definition of a donation. Petitioners, the lateManuel G. Abello8, Jose C. Concepcion, Teodoro D. Regala and Avelino V. Cruz, eachgave P882,661.31 to the campaign funds of Senator Edgardo Angara, without anymaterial consideration. All three elements of a donation are present. The patrimony ofthe four petitioners were reduced by P882,661.31 each. Senator Edgardo Angaraspatrimony correspondingly increased by P3,530,645.24

9. There was intent to do an act
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of liberality or animus donandiwas present since each of the petitioners gave theircontributions without any consideration.

Taken together with the Civil Code definition of donation, Section 91 of the NIRC isclear and unambiguous, thereby leaving no room for construction. InRizal Commercial

Banking Corporation v. Intermediate Appellate Court

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the Court enunciated:

It bears stressing that the first and fundamental duty of the Court is to apply the law.When the law is clear and free from any doubt or ambiguity, there is no room forconstruction or interpretation. As has been our consistent ruling, where the law speaksin clear and categorical language, there is no occasion for interpretation; there is onlyroom for application (Cebu Portland Cement Co. v. Municipality of Naga,24 SCRA 708[1968])

Where the law is clear and unambiguous, it must be taken to mean exactly what it saysand the court has no choice but to see to it that its mandate is obeyed (Chartered Bank

Employees Association v. Ople,138 SCRA 273 [1985]; Luzon Surety Co., Inc. v. DeGarcia,30 SCRA 111 [1969]; Quijano v. Development Bank of the Philippines,35 SCRA270 [1970]).

Only when the law is ambiguous or of doubtful meaning may the court interpret orconstrue its true intent.l^vvphi1.netAmbiguity is a condition of admitting two or moremeanings, of being understood in more than one way, or of referring to two or morethings at the same time. A statute is ambiguous if it is admissible of two or morepossible meanings, in which case, the Court is called upon to exercise one of its judicialfunctions, which is to interpret the law according to its true intent.

Second Issue

Since animus donandior the intention to do an act of liberality is an essential element ofa donation, petitioners argue that it is important to look into the intention of the giver todetermine if a political contribution is a gift. Petitioners argument is not tenable. First ofall, donative intent is a creature of the mind. It cannot be perceived except by thematerial and tangible acts which manifest its presence. This being the case, donativeintent is presumed present when one gives a part of ones patrimony to another withoutconsideration. Second, donative intent is not negated when the person donating hasother intentions, motives or purposes which do not contradict donative intent. This Courtis not convinced that since the purpose of the contribution was to help elect a candidate,

there was no donative intent. Petitioners contribution of money without any materialconsideration evinces animus donandi. The fact that their purpose for donating was toaid in the election of the donee does not negate the presence of donative intent.

Third Issue
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Petitioners maintain that the definition of an "electoral contribution" under the OmnibusElection Code is essential to appreciate how a political contribution differs from ataxable gift.

11Section 94(a) of the said Code defines electoral contribution as follows:

The term "contribution" includes a gift, donation, subscription, loan, advance or deposit

of money or anything of value, or a contract, promise or agreement to contribute,whether or not legally enforceable, made for the purpose of influencing the results of theelections but shall not include services rendered without compensation by individualsvolunteering a portion or all of their time in behalf of a candidate or political party. It shallalso include the use of facilities voluntarily donated by other persons, the money valueof which can be assessed based on the rates prevailing in the area.

Since the purpose of an electoral contribution is to influence the results of the election,petitioners again claim that donative intent is not present. Petitioners attempt to placethe barrier of mutual exclusivity between donative intent and the purpose of politicalcontributions. This Court reiterates that donative intent is not negated by the presence

of other intentions, motives or purposes which do not contradict donative intent.

Petitioners would distinguish a gift from a political donation by saying that theconsideration for a gift is the liberality of the donor, while the consideration for a politicalcontribution is the desire of the giver to influence the result of an election by supportingcandidates who, in the perception of the giver, would influence the shaping ofgovernment policies that would promote the general welfare and economic well-being ofthe electorate, including the giver himself.

Petitioners attempt is strained. The fact that petitioners will somehow in the futurebenefit from the election of the candidate to whom they contribute, in no way amounts to

a valuable material consideration so as to remove political contributions from thepurview of a donation. Senator Angara was under no obligation to benefit thepetitioners. The proper performance of his duties as a legislator is his obligation as anelected public servant of the Filipino people and not a consideration for the politicalcontributions he received. In fact, as a public servant, he may even be called to enactlaws that are contrary to the interests of his benefactors, for the benefit of the greatergood.

In fine, the purpose for which the sums of money were given, which was to fund thecampaign of Senator Angara in his bid for a senatorial seat, cannot be considered as amaterial consideration so as to negate a donation.

Fourth Issue

Petitioners raise the fact that since 1939 when the first Tax Code was enacted, up to1988 the BIR never attempted to subject political contributions to donors tax. Theyargue that:
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. . . It is a familiar principle of law that prolonged practice by the government agencycharged with the execution of a statute, acquiesced in and relied upon by all concernedover an appreciable period of time, is an authoritative interpretation thereof, entitled togreat weight and the highest respect. . . .12

This Court holds that the BIR is not precluded from making a new interpretation of thelaw, especially when the old interpretation was flawed. It is a well-entrenched rule that

. . . erroneous application and enforcement of the law by public officers do not blocksubsequent correct application of the statute (PLDT v. Collector of Internal Revenue, 90Phil. 676), and that the Government is never estopped by mistake or error on the part ofits agents (Pineda v. Court of First Instance of Tayabas, 52 Phil. 803, 807; BenguetConsolidated Mining Co. v. Pineda, 98 Phil. 711, 724).13

Seventh Issue

Petitioners question the fact that the Court of Appeals decision is based on a BIR ruling,namely BIR Ruling No. 88-344, which was issued after the petitioners were assessedfor donors tax. This Court does not need to delve into this issue. It is i mmaterialwhether or not the Court of Appeals based its decision on the BIR ruling because it isnot pivotal in deciding this case. As discussed above, Section 91 (now Section 98) ofthe NIRC as supplemented by the definition of a donation found in Article 725 of theCivil Code, is clear and unambiguous, and needs no further elucidation.

Eighth Issue

Petitioners next contend that tax laws are construed liberally in favor of the taxpayer

and strictly against the government. This rule of construction, however, does not benefitpetitioners because, as stated, there is here no room for construction since the law isclear and unambiguous.

Finally, this Court takes note of the fact that subsequent to the donations involved in thiscase, Congress approved Republic Act No. 7166 on November 25, 1991, providing inSection 13 thereof that political/electoral contributions, duly reported to the Commissionon Elections, are not subject to the payment of any gift tax. This all the more shows thatthe political contributions herein made are subject to the payment of gift taxes, since thesame were made prior to the exempting legislation, and Republic Act No. 7166 providesno retroactive effect on this point.

WHEREFORE, the petition is DENIED and the assailed Decision and Resolution of theCourt of Appeals are AFFIRMED.

No costs.

SO ORDERED.
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Article 726

G.R. No. 112796 March 5, 1998

TITO R. LAGAZO, petitioner,vs.COURT OF APPEALS and ALFREDO CABANLIT, respondents.

PANGANIBAN, J .:

Where the acceptance of a donation was made in a separate instrument but notformally communicated to the donor, may the donation be nonetheless considered

complete, valid and subsisting? Where, the deed of donation did not expressly imposeany burden the expressed consideration being purely one of liberality and generositya separate but the recipient actually paid charges imposed on the property like landtaxes and installment arrearages, may the donation be deemed onerous and thusgoverned by the law on ordinary contracts?

The Case

The Court answers these questions in the negative as it resolves this petition for reviewunder Rule 45 of the Rules of Court seeking to set aside the Decision 1of the Court of

Appeals2in CA-GR CV No. 38050 promulgated on November 29, 1993. The assailed

Decision reversed the Regional Trial Court, Branch 30, Manila, in Civil Case No. 87-39133 which had disposed3of the controversy in favor of herein petitioner in thefollowing manner:4

WHEREFORE, judgment is hereby rendered in favor of the plaintiff andagainst the defendant as follows:

1. Ordering the defendant, or any person claiming rights under him, tosurrender to plaintiff possession of the premises known as Lot 8w, Block6, Psd-135534 of the Monserrat Estate, and the improvement standingthereon, located at 3320 2nd St., V. Mapa, Old Sta. Mesa, Manila;

2. Ordering the defendant to pay plaintiff the sum of Five Thousand(P5,000.00) Pesos, as and for attorney's fees; and

3. Costs against the defendant.

The defendant's counterclaims are hereby dismissed.


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The Facts

Although the legal conclusions and dispositions of the trial and the appellate courts areconflicting, the factual antecedents of the case are not substantially disputed. 5Wereproduce their narration from the assailed Decision:

Civil Case No. 83-39133 involves an action filed by plaintiff-appellee[herein petitioner] on January 22, 1987 seeking to recover from defendant-appellant [a] parcel of land which the former claims to have acquired fromhis grandmother by donation. Defendant-appellant [herein privaterespondent], on the other hand, put up the defense that when the allegeddonation was executed, he had already acquired the property by a Deedof Assignment from a transferee of plaintiff-appellee's grandmother.

The evidence for plaintiff-appellee [herein petitioner] is summarized asfollows:

Catalina Jacob Vda. de Reyes, a widow and grandmother of plaintiff-appellee, was awarded in July 1975 a 60.10-square meter lot which is aportion of the Monserrat Estate, more particularly described as Lot 8W,Block 6 of Psd-135834, located at 3320 2nd St., V. Mapa, Old Sta. Mesa,Manila. The Monserrat Estate is a public land owned by the City of Manilaand distributed for sale to bona fidetenants under its land-for-the-landlessprogram. Catalina Jacob constructed a house on the lot.

On October 3, 1977, or shortly before she left for Canada where she isnow a permanent resident, Catalina Jacob executed a special power of

attorney (Exh. "A") in favor of her son-in-law Eduardo B. Espaolauthorizing him to execute all documents necessary for the finaladjudication of her claim as awardee of the lot.

Due to the failure of Eduardo B. Espaol to accomplish the purpose of thepower of attorney granted to him, Catalina Jacob revoked said authority inan instrument executed in Canada on April 16, 1984 (Exh. "D").Simultaneous with the revocation, Catalina Jacob executed another powerof attorney of the same tenor in favor plaintiff-appellee.

On January 30, 1985, Catalina Jacob executed in Canada a Deed of

Donation over a Lot 8W in favor of plaintiff-appellee (Exh. "E"). Followingthe donation, plaintiff-appellee checked with the Register of Deeds andfound out that the property was in the delinquent list, so that he paid theinstallments in arrears and the remaining balance on the lot (Exhs. "F", "F-1" and "F-2") and declared the said property in the name of Catalina Jacob(Exhs. "G", "G-1", "G-2" and "G-3").


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On January 29, 1986, plaintiff-appellee sent a demand letter to defendant-appellant asking him to vacate the premises (Exh. "H"). A similar letterwas sent by plaintiff-appellee's counsel to defendant on September 11,1986 (Exh. "I"). However, defendant-appellant refused to vacate thepremises claiming ownership thereof. Hence, plaintiff-appellee instituted

the complaint for recovery of possession and damages against defendant-appellant.

Opposing plaintiff-appellee's version, defendant-appellant claimed that thehouse and lot in controversy were his by virtue of the following documents:

1. Deed of Absolute Sale executed by Catalina Jacob dated October 7,1977 in favor of Eduardo B. Espaol covering the residential houselocated at the premises (Exh. "4").

2. Deed of Assignment over Lot 8W executed by Catalina Jacob in favor

of Eduardo Espaol dated September 30, 1980 (Exh. "5"); and

3. Deed of Assignment executed by Eduardo B. Espaol over Lot 8W anda residential house thereon in favor of defendant-appellant dated October2, 1982 (Exh. "6").

After trial, the lower court decided in favor of plaintiff-appellee and againstdefendant-appellant, rationalizing that the version of the former is morecredible than that of the latter. According to the lower court:

From the oral and documentary evidence adduced by the

parties[,] it appears that the plaintiff- has a better right overthe property, subject matter of the case. The version of theplaintiff is more credible than that of the defendant. Thetheory of the plaintiff is that the house and lot belong to himby virtue of the Deed of Donation in his favor executed by hisgrandmother Mrs. Jacob Vda. de Reyes, the real awardee ofthe lot in question. The defendant's theory is that he is theowner thereof because he bought the house and lot fromEduardo Espaol, after the latter had shown and given tohim Exhibits 1, 4 and 5. He admitted that he signed the Deedof Assignment in favor of Eduardo Espaol on September

30, 1980, but did not see awardee Catalina Jacob Vda. deReyes signed [sic] it. In fact, the acknowledgement in Exhibit"5" shows that the assignor/awardee did not appear beforethe notary public. It may be noted that on said date, theoriginal awardee of the lot was no longer in the Philippines,as both parties admitted that she had not come back to thePhilippines since 1977. (Exhs. K, K-1). Defendant, claimingto be the owner of the lot, unbelievably did not take any


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action to have the said house and lot be registered or hadthem declared in his own name. Even his Exhibit 7 was notmailed or served to the addressee. Such attitude and laxityis very unnatural for a buyer/owner of a property, in starkcontrast of [sic] the interest shown by the plaintiff who saw to

it that the lot was removed from the delinquent list for non-payment of installments and taxes due thereto [sic].6

Ruling of the Appellate Court

In reversing the trial court's decision,7Respondent Court of Appeals anchored its ruling

upon the absence of any showing that petitioner acceptedhis grandmother's donation ofthe subject land. Citing jurisprudence that the donee's failure to accept a donationwhether in the same deed of donation or in a separate instrument renders the donationnull and void, Respondent Court denied petitioner's claim of ownership over thedisputed land. The appellate court also struck down petitioner's contention that the

formalities for a donation of real property should not apply to his case since it was anonerous one he paid for the amortizations due on the land before and after theexecution of the deed of donation reasoning that the deed showed no burden, chargeor condition imposed upon the donee; thus, the payments made by petitioner were hisvoluntary acts.

Dissatisfied with the foregoing ruling, petitioner now seeks a favorable disposition fromthis Court.

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Issues

Petitioner anchors his petition on the following grounds:

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[I.] In reversing the decision of the trial court, the Court of Appeals decideda question of substance in a way not in accord with the law and applicabledecisions of this Honorable Court.

[II.] Even granting the correctness of the decision of the Court of Appeals,certain fact and circumstances transpired in the meantime which wouldrender said decision manifestly unjust, unfair and inequitable to petitioner.

We believe that the resolution of this case hinges on the issue of whether the donation

was simple or onerous.

The Court's Ruling

The petition lacks merit.

Main Issue:Simple or Onerous Donation?


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At the outset, let us differentiate between a simple donation and an onerous one. Asimple or pure donation is one whose cause is pure liberality (no strings attached), whilean onerous donation is one which is subject to burdens, charges or future servicesequal to or more in value than the thing donated. 10Under Article 733 of the Civil Code,donations with an onerous cause shall be governed by the rules on contracts; hence,

the formalities required for a valid simple donation are not applicable.

Petitioner contends that the burdens, charges or conditions imposed upon a donationneed not be stated on the deed of donation itself. Thus, although the deed did notcategorically impose any charge, burden or condition to be satisfied by him, thedonation was onerous since he in fact and in reality paid for the installments in arrearsand for the remaining balance of the lot in question. Being an onerous donation, hisacceptance thereof may be express or implied, as provided under Art. 1320 of the CivilCode, and need not comply with the formalities required by Art. 749 of the same code.His payment of the arrearages and balance and his assertion of his right of possessionagainst private respondent clearly indicate his acceptance of the donation.

We rule that the donation was simple, not onerous. Even conceding that petitioner's fullpayment of the purchase price of the lot might have been a burden to him, suchpayment was not however imposed by the donor as a condition for the donation.Rather, the deed explicitly stated:

That for and in consideration of the love and affection which the DONEEinspires in the DONOR, and as an act of liberality and generosity andconsidering further that the DONEE is a grandson of the DONOR, theDONOR hereby voluntarily and freely gives, transfer[s] and conveys, byway of donation unto said DONEE, his heirs, executors, administrators

and assigns, all the right, title and interest which the said DONOR has inthe above described real property, together with all the buildings andimprovements found therein,free from all lines [sic] and encumbrancesand charges whatsoever; 11[emphasis supplied]

It is clear that the donor did not have any intention to burden or charge petitioner as thedonee. The words in the deed are in fact typical of a pure donation. We agree withRespondent Court that the payments made by petitioner were merely his voluntary acts.This much can be gathered from his testimony in court, in which he never even claimedthat a burden or charge had been imposed by his grandmother.

ATTY FORONDA:

q After you have received this [sic] documents, the . . .revocation of power of attorney and the Special Power of

Attorney in your favor, what did you do?

WITNESS:


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a I went here in City Hall and verif[ied] the status of theaward of my grandmother.

q When you say the award, are you referring to the award inparticular [of the] lot in favor of your grandmother?

a Yes, Sir.

q What was the result of your verification?

a According to the person in the office, the papers of mygrandmother is [sic] includ[ed] in the dilinquent [sic] list.

q What did you do then when you found out that the lot wasinclud[ed] in the dilinquent [sic] list?

a I talked to the person in charged [sic] in the office and Iasked him what to do so that the lot should not [be] includedin the dilinquent [sic] list.

ATTY. FORONDA:

q And what was the anwer [sic] given to you to the inquirywhich you made?

WITNESS:

a According to the person in the office, that I would pay theat least [sic] one half of the installment in order to take [out]the document [from] the delinquent list.

q And [were] you able to pay?

a I was able to pay, sir.

q What were you able to pay, one half of the balance or theentire amounts [sic]?

a First, I paid the [sic] one half of the balance since the timethe lot was awarded to us.

q What about the remaining balance, were you able to payit?

a I was able to pay that, sir.


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q So, as of now, the amount in the City of Manila of the lothas already been duly paid, is it not?

a Yes, sir. 12

The payments even seem to have been made pursuant to the power ofattorney 13executed by Catalina Reyes in favor of petitioner, her grandson,authorizing him to execute acts necessary for the fulfillment of her obligations.Nothing in the records shows that such acts were meant to be a burden in thedonation.

As a pure or simple donation, the following provisions of the Civil Code are applicable:

Art. 734. The donation is perfected from the moment the donor knows ofthe acceptance by the donee.

Art. 746. Acceptance must be made during the lifetime of the donor andthe donee.

Art. 749. In order that the donation of an immovable may be valid, it mustbe made in a public instrument, specifying therein the property donatedand the value of the charges which the donee must satisfy.

The acceptance may be made in the same deed of donation and in aseparate public document, but it shall not take effect unless it is doneduring the lifetime of the donor.

If the acceptance is made in a separate instrument, the donor shall benotified thereof in authentic form, and this step shall be noted in bothinstruments.

In the words of the esteemed Mr. Justice Jose C. Vitug, 14"Like any other contract, anagreement of the parties is essential. The donation, following the theory ofcognition (Article 1319, Civil Code), is perfected only upon the moment the donor knowsof the acceptance by the donee." Furthermore, "[i]f the acceptance is made in aseparate instrument, the donor shall be notified thereof in an authentic form, and thisstep shall be noted in both instruments."

15

Acceptance of the donation by the donee is, therefore, indispensable; its absencemakes the donation null and void. 16The perfection and the validity of a donation arewell explained by former Sen. Arturo M. Tolentino in this wise:

. . . Title to immovable property does not pass from the donor to the doneeby virtue of a deed of donation until and unless it has been accepted in apublic instrument and the donor duly notified thereof. The acceptance maybe made in the very same instrument of donation. If the acceptance does


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not appear in the same document, it must be made in another. Solemnwords are not necessary; it is sufficient if it shows the intention to accept.But in this case it is necessary that formal notice thereof be given to thedonor, and the fact that due notice has been given must be noted in bothinstruments (that containing the offer to donate and that showing the

acceptance). Then and only then is the donation perfected. If theinstrument of donation has been recorded in the registry of property, theinstrument that shows the acceptance should also be recorded. Where thedeed of donation fails to show the acceptance, or where the formal noticeof the acceptance, made in a separate instrument, is either not given tothe donor or else not noted in the deed of donation and in the separateacceptance, the donation is null and void.

17

Exhibit E (the deed of donation) does not show any indication that petitioner-doneeaccepted the gift. During the trial, he did not present any instrument evidencing suchacceptance despite the fact that private respondent already raised this allegation in his

supplemental pleading

18

to which petitioner raised no objection. It was only after theCourt of Appeals had rendered its decision, when petitioner came before this Court, thathe submitted an affidavit

19dated August 28, 1990, manifesting that he "wholeheartedlyaccepted" the lot given to him by his grandmother, Catalina Reyes. This is too late,because arguments, evidence, causes of action and matters not raised in the trial courtmay no longer be raised on appeal. 20

True, the acceptance of a donation may be made at any time during the lifetime of thedonor. And grantingarguendothat such acceptance may still be admitted in evidence onappeal, there is still need for proof that a formal notice of such acceptance was receivedby the donor and noted in both the deed of donation and the separate instrument

embodying the acceptance. At the very least, this last legal requisite of annotation inboth instruments of donation and acceptance was not fulfilled by petitioner. For thisreason, the subject lot cannot be adjudicated to him.

Secondary Issue:Supervening Events

Petitioner also contends that certain supervening events have transpired which renderthe assailed Decision "manifestly unjust, unfair and inequitable" to him. The City ofManila has granted his request for the transfer to his name of the lot originally awardedin favor of Catalina Reyes. A deed of sale

21covering the subject lot has in fact beenexecuted between the City of Manila, as the vendor; and petitioner, as the vendee. Thecorresponding certificate of title 22has also been issued in petitioner's name.

A close perusal of the city government's resolution 23granting petitioner's requestreveals that the request for and the grant of the transfer of the award were premised onthe validity and perfection of the deed of donation executed by the original awardee,petitioner's grandmother. This is the same document upon which petitioner, as against


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private respondent, asserts his right over the lot. But, as earlier discussed and ruled,this document has no force and effect and, therefore, passes no title, right or interest.

Furthermore, the same resolution states:

WHEREAS, in a report submitted by Ms. [Menchu C.] Bello [, SpecialInvestigator,] on February 7, 1990, it is stated that . . . constructed on thelot is a make-shift structure used for residential purposes by the proposedtransferee Tito Lagazo and his family; . . . and that constructed at Lot 8,Block 6, former Monserrat Estate is a make-shift structure used as adwelling place by Lagazo and family because the front portion of theirhouse which was constructed on a road lot was demolished, and thestructure was extended backward covering a portion of the old temporaryroad lot. . . .

The above findings of the investigator are, however, directly contradictory to the

testimonies in court of petitioner himself and of private respondent. Petitionerclaimed the following: that the house constructed on the subject lot was ownedby his grandmother Catalina Jacob; that before the latter left for Canada in 1977,Eduardo Espaol had already been living in the same house and continued to doso until 1982; and that private respondent occupied the premises after Espaolleft. 24On the other hand, private respondent testified that he bought the subjecthouse and lot from Eduardo Espaol in 1982, after which he and his familyoccupied the same; but sometime in 1985, they had to leave the place due to aroad-widening project which reduced the house to "about three meters [in] lengthand one arm[']s width." 25

Between the testimonies under oath of the contending parties and the report notsubjected to cross-examination which was prepared by the investigator whorecommended the approval of petitioner's request for transfer, it is the former to whichthe Court is inclined to give more credence. The investigator's report must have beenbased on the misrepresentations of petitioner who arrogated unto himself theprerogatives of both Espaol and private respondent. Further, it is on record thatpetitioner had required private respondent to vacate the subject premises before heinstituted this complaint. This shows he was not in actual possession of the property,contrary to the report of the investigator.

Cabanlit's Claim of Ownership

Petitioner also assails Respondent Court's conclusion that it is unnecessary to passupon private respondent's claim over the property. Petitioner insists that the principalissue in the case, as agreed upon by the parties during pretrial, is "who between theparties is the owner of the house and lot in question."

In disposing of the principal issue of the right of petitioner over the subject propertyunder the deed of donation, we arrive at one definite conclusion: on the basis of the


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alleged donation, petitioner cannot be considered the lawful owner of the subjectproperty. This does not necessarily mean, however, that private respondent isautomatically the rightful owner.

In resolving private respondent's claim of ownership, the examination of the

genuineness of the documents (deeds of assignment over the lot between CatalinaReyes and Eduardo Espaol and between Espaol and private respondent) upon whichhe asserts his right is necessary, especially in light of petitioner's allegations of forgery.However, the respective assignors in both documents are not parties to the instantcase. Not having been impleaded in the trial court, they had no participation whatsoeverin the proceedings at bar. Elementary norms of fair play and due process bar us frommaking any disposition which may affect their rights. Verily, there can be no valid

judgment for or against them. 26

Anyhow, since petitioner, who was the plaintiff below, failed to prove with clear andconvincing evidence his ownership claim over the subject property, the parties thus

resume their status quo ante. The trial court should have dismissed his complaint for hisfailure to prove a right superior to that of private respondent, but without prejudice toany action that Catalina Reyes or Eduardo Espaol or both may have against saidprivate respondent. Stating this point otherwise, we are not ruling in this case on therights and obligations between, on the one hand, Catalina Reyes, her assigns and/orrepresentatives; and, on the other, Private Respondent Cabanlit.

Not having proven any right to a valid, just and demandable claim that compelled him tolitigate or to incur expenses in order to protect his interests by reason of an unjustifiedact or omission of private respondent, petitioner cannot be awarded attorney's fees. 27

WHEREFORE, the petition is hereby DENIED and the assailed Decision is AFFIRMED.

SO ORDERED.

Article 728

G.R. No. 123968 April 24, 2003

URSULINA GANUELAS, METODIO GANUELAS and ANTONIO

GANUELAS,petitioners,vs.HON. ROBERT T. CAWED, Judge of the Regional Trial Court of San Fernando, LaUnion (Branch 29), LEOCADIA G. FLORES, FELICITACION G. AGTARAP,CORAZON G. SIPALAY and ESTATE OF ROMANA GANUELAS DE LA ROSA,represented by GREGORIO DELA ROSA, Administrator,respondents.

CARPIO MORALES, J.:


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The present petition for review under Rule 45 of the Rules of Court assails, on aquestion of law, the February 22, 1996 decision 1 of the Regional Trial Court of SanFernando, La Union, Branch 29, in Civil Case No. 3947, an action for declaration ofnullity of a deed of donation.

The facts, as culled from the records of the case, are as follows:

On April 11, 1958, Celestina Ganuelas Vda. de Valin (Celestina) executed a Deed ofDonation of Real Property 2 covering seven parcels of land in favor of her nieceUrsulina Ganuelas (Ursulina), one of herein petitioners.

The pertinent provision of the deed of donation reads, quoted verbatim:

xxx xxx xxx

That, for and in consideration of the love and affection which the DONOR has for

the DONEE, and of the faithful services the latter has rendered in the past to theformer, the said DONOR does by these presents transfer and convey, by way ofDONATION, unto the DONEE the property above, described, to becomeeffective upon the death of the DONOR; but in the event that the DONEE shoulddie before the DONOR, the present donation shall be deemed rescinded and ofno further force and effect.

xxx xxx xxx.3

On June 10, 1967, Celestina executed a document denominated as Revocation ofDonation4purporting to set aside the deed of donation. More than a month later or on

August 18, 1967, Celestina died without issue and any surviving ascendants andsiblings.

After Celestina's death, Ursulina had been sharing the produce of the donatedproperties with private respondents Leocadia G. Flores, et al., nieces of Celestina.

In 1982, or twenty-four years after the execution of the Deed of Donation, Ursulinasecured the corresponding tax declarations, in her name, over the donated properties,to wit: Tax Declarations Nos. 18108, 18109, 18110, 18111, 18112, 18113 and 18114,and since then, she refused to give private respondents any share in the produce of theproperties despite repeated demands.

Private respondents were thus prompted to file on May 26, 1986 with the RTC of SanFernando, La Union a complaint

5against Ursulina, along with Metodio Ganuelas and

Antonio Ganuelas who were alleged to be unwilling plaintiffs. The complaint alleged thatthe Deed of Donation executed by Celestina in favor of Ursulina was void for lack ofacknowledgment by the attesting witnesses thereto before notary public Atty. HenryValmonte, and the donation was a disposition mortis causawhich failed to comply withthe provisions of the Civil Code regarding formalities of wills and testaments, hence, it


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was void. The plaintiffs-herein private respondents thus prayed that judgment berendered ordering Ursulina to return to them as intestate heirs the possession andownership of the properties. They likewise prayed for the cancellation of the taxdeclarations secured in the name of Ursulina, the partition of the properties among theintestate heirs of Celestina, and the rendering by Ursulina of an accounting of all the

fruits of the properties since 1982 and for her to return or pay the value of their shares.

The defendants-herein petitioners alleged in their Answer6that the donation in favor of

Ursulina was inter vivosas contemplated under Article 729 of the Civil Code,7hence,

the deed did not have to comply with the requirements for the execution of a valid will;the Revocation of Donation is null and void as the ground mentioned therein is notamong those provided by law to be the basis thereof; and at any rate, the revocationcould only be legally enforced upon filing of the appropriate complaint in court within theprescriptive period provided by law, which period had, at the time the complaint wasfiled, already lapsed.

By Decision of February 22, 1996, the trial court, holding that the provision in the Deedof Donation that in the event that the DONEE should predecease the DONOR, the"donation shall be deemed rescinded and of no further force and effect" is an explicitindication that the deed is a donation mortis causa,8found for the plaintiffs-hereinprivate respondents, thus:

WHEREFORE the Court renders judgment declaring null and void the Deed ofDonation of Real Property executed by Celestina Ganuelas, and orders thepartition of the estate of Celestina among the intestate heirs.

SO ORDERED.9

The trial court also held that the absence of a reservation clause in the deed impliedthat Celestina retained complete dominion over her properties, thus supporting theconclusion that the donation is mortis causa,

10and that while the deed contained an

attestation clause and an acknowledgment showing the intent of the donor to effect apostmortem disposition, the acknowledgment was defective as only the donor anddonee appear to have acknowledged the deed before the notary public, therebyrendering the entire document void.11

Lastly, the trial court held that the subsequent execution by Celestina of the Revocationof Donation showed that the donor intended the revocability of the donation ad nutum,thus sustaining its finding that the conveyance wasmortis causa.12

On herein petitioners' argument that the Revocation of Donation was void as the groundmentioned therein is not one of those allowed by law to be a basis for revocation, thetrial court held that the legal grounds for such revocation as provided under the CivilCode arise only in cases of donations inter vivos, but not in donationsmortiscausawhich are revocable at will during the lifetime of the donor. The trial court held, inany event, that given the nullity of the disposition mortis causain view of a failure to


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comply with the formalities required therefor, the Deed of Revocation was asuperfluity.

13

Hence, the instant petition for review, petitioners contending that the trial court erred:

I. . . . WHEN IT DECLARED NULL AND VOID THE DONATION EXECUTED BYCELESTINA GANUELAS;

II. . . . WHEN IT UPHELD THE REVOCATION OF DONATION;

III. . . . IN RENDERING ITS DECISION ADVERSE TO PETITIONER URSULINAGANUELAS.14

Petitioners argue that the donation contained in the deed is inter vivosas the mainconsideration for its execution was the donor's affection for the donee rather than thedonor's death;

15that the provision on the effectivity of the donation after the donor's

death simply meant that absolute ownership would pertain to the donee on thedonor's death;16and that since the donation is inter vivos, it may be revoked only for thereasons provided in Articles 760,1776418and 76519of the Civil Code.

In a letter of March 16, 1998,20private respondent Corazon Sipalay, reacting to thisCourt's January 28, 1998 Resolution requiring private respondents "to SHOW CAUSEwhy they should not be disciplinarily dealt with or held in contempt" for failure to submitthe name and address of their new counsel, explains that they are no longer interestedin pursuing the case and are "willing and ready to waive whatever rights" they have overthe properties subject of the donation. Petitioners, who were required to comment onthe letter, by Comment of October 28, 1998,21welcome private respondents' gesture

but pray that "for the sake of enriching jurisprudence, their [p]etition be given due courseand resolved."

The issue is thus whether the donation is inter vivosor mortis causa.

Crucial in the resolution of the issue is the determination of whether the donor intendedto transfer the ownership over the properties upon the execution of the deed.22

Donation inter vivosdiffers from donation mortis causain that in the former, the act isimmediately operative even if the actual execution may be deferred until the death ofthe donor, while in the latter, nothing is conveyed to or acquired by the donee until the

death of the donor-testator.

23

The following ruling of this Court inAlejandro v.Geraldez is illuminating:24

If the donation is made in contemplation of the donor's death, meaning that thefull or naked ownership of the donated properties will pass to the donee onlybecause of the donor's death, then it is at that time that the donation takes effect,and it is a donation mortis causawhich should be embodied in a last will andtestament.


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But if the donation takes effect during the donor's lifetime or independently of thedonor's death, meaning that the full or naked ownership (nuda proprietas) of thedonated properties passes to the donee during the donor's lifetime, not by reasonof his death but because of the deed of donation, then the donation is inter vivos.

The distinction between a transfer inter vivosand mortis causais important as thevalidity or revocation of the donation depends upon its nature. If the donation is intervivos, it must be executed and accepted with the formalities prescribed by Articles748

25and 749

26of the Civil Code, except when it is onerous in which case the rules on

contracts will apply. If it is mortis causa, the donation must be in the form of a will, withall the formalities for the validity of wills, otherwise it is void and cannot transferownership.

27

The distinguishing characteristics of a donation mortis causaare the following:

1. It conveys no title or ownership to the transferee before the death of the

transferor; or, what amounts to the same thing, that the transferor should retainthe ownership (full or naked) and control of the property while alive;

2. That before his death, the transfer should be revocable by the transferor atwill, ad nutum; but revocability may be provided for indirectly by means of areserved power in the donor to dispose of the properties conveyed;

3. That the transfer should be void if the transferor should survive thetransferee.28

In the donation subject of the present case, there is nothing therein which indicates that

any right, title or interest in the donated properties was to be transferred to Ursulinaprior to the death of Celestina.

The phrase "to become effective upon the death of the DONOR" admits of no otherinterpretation but that Celestina intended to transfer the ownership of the properties toUrsulina on her death, not during her lifetime.

29

More importantly, the provision in the deed stating that if the donee should die beforethe donor, the donation shall be deemed rescinded and of no further force and effectshows that the donation is a postmortem disposition.

As stated in a long line of cases, one of the decisive characteristics of a donation mortiscausais that the transfer should be considered void if the donor should survive thedonee.

30

More. The deed contains an attestation clause expressly confirming the donationas mortis causa:


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SIGNED by the above-named donor, Celestina Ganuelas, at the foot of this deedof donation mortis causa, consisting of two (2) pages and on the left margin ofeach and every page thereof in the joint presence of all of us who at her requestand in her presence and that of each other have in like manner subscribed ournames as witnesses.31(Emphasis supplied)

To classify the donation as inter vivos simply because it is founded on considerations oflove and affection is erroneous. That the donation was prompted by the affection of thedonor for the donee and the services rendered by the latter is of no particularsignificance in determining whether the deed constitutes a transfer inter vivosor not,because a legacy may have an identical motivation.

32In other words, love and affection

may also underline transfers mortis causa.33

In Maglasang v. Heirs of Cabatingan,34the deeds of donation contained provisionsalmost identical to those found in the deed subject of the present case:

That for and in consideration of the love and affection of the DONOR for theDONEE, x x x. the DONOR does hereby, by these presents, transfer, convey, byway of donation, unto the DONEE the above-described property, together withthe buildings and all improvements existing thereon, to become effective uponthe death of the DONOR; PROVIDED, HOWEVER, that in the event that theDONEE should die before the DONOR, the present donation shall be deemedautomatically rescinded and of no further force and effect. (Emphasis supplied)

In that case, this Court held that the donations were mortis causa, for the above-quotedprovision conclusively establishes the donor's intention to transfer the ownership andpossession of the donated property to the donee only after the former's death. Like in

the present case, the deeds therein did not contain any clear provision that purports topass proprietary rights to the donee prior to the donor's death.

As the subject deed then is in the nature of a mortis causa disposition, the formalities ofa will under Article 728 of the Civil Code should have been complied with, failing whichthe donation is void and produces no effect.

35

As noted by the trial court, the attesting witnesses failed to acknowledge the deedbefore the notary public, thus violating Article 806 of the Civil Code which provides:

Art. 806. Every will must be acknowledged before a notary public by the

testatorand the witnesses

. The notary public shall not be required to retain acopy of the will, or file another with the office of the Clerk of Court. (Emphasissupplied)

The trial court did not thus commit any reversible error in declaring the Deed ofDonation to be mortis causa.

WHEREFORE, the petition is hereby DENIED for lack of merit.


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SO ORDERED.

Article 737

G.R. No. 150179 April 30, 2003

HEIRS OF WILLIAM SEVILLA, NAMELY: WILFREDO SEVILLA, WILSON SEVILLA,WILMA SEVILLA, WILLINGTON SEVILLA, AND WILLIAM SEVILLA, JR., HEIRS OFMARIA SEVILLA, NAMELY: AMADOR SEVILLA, JENO CORTES, VICTOR CORTES,MARICEL CORTES, ALELEI*CORTES AND ANJEI**CORTES,petitioners,vs.LEOPOLDO SEVILLA, PETER SEVILLA, AND LUZVILLA SEVILLA,respondents.

YNARES-SANTIAGO, J.:

One who alleges defect or lack of valid consent to a contract by reason of fraud orundue influence must establish by full, clear and convincing evidence such specific actsthat vitiated a party's consent, otherwise, the latter's presumed consent to the contractprevails.1

The instant petition for review seeks to set aside the September 26, 2000 Decision2ofthe Court of Appeals in CA-G.R. CV No. 48956, affirming in totothe Decision3of theRegional Trial Court of Dipolog City, Branch 6, in Civil Case No. 4240 whichdeclared, inter alia, the questioned Deed of Donation Inter Vivosvalid and binding onthe parties.

The undisputed facts reveal that on December 10, 1973, Filomena Almirol de Sevilladied intestate leaving 8 children, namely: William, Peter, Leopoldo, Felipe, Rosa, Maria,Luzvilla, and Jimmy, all surnamed Sevilla. William, Jimmy and Maria are now deceasedand are survived by their respective spouses and children.

4Filomena Almirol de Sevilla

left the following properties:

PARCEL I:

A parcel of land known as Lot No. 653 situated at General Luna St., Dipolog City,with an area of about 804 square meters, more or less, duly covered by Transfer

Certificate of Title No. (T-6671)-1448 [in the name of Filomena Almirol de Sevilla,Honorata Almirol and Felisa Almirol] and assessed at P31,360.00 according toTax Dec. No. 018-947;

PARCEL II:

A parcel of land known as Lot No. 3805-B situated at Olingan, Dipolog City, withan area of about 18,934 square meters, more or less, duly covered by Transfer


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Certificate of Title No. T-6672 and assessed at P5,890 according to Tax Dec. No.009-761;

PARCEL III:

A parcel of land known as Lot No. 837-1/4 situated at Magsaysay Street, DipologCity, with an area of about 880 square meters more or less, duly covered byOriginal Certificate of Title No. 0-6064 and assessed at P12,870.00 according toTax Dec. No. 020-1078;

PARCEL IV:

A parcel of residential land known as Lot No. 1106-B-3 situated at Sta. Filomena,Dipolog City, with an area of 300 square meters, more or less, assessed atP3,150.00 according to Tax Dec. No. 006-317;

Commercial building erected on Parcel I above-described; and residentialbuilding erected just at the back of the commercial building above-described anderected on Parcel I above-described;5

Parcel I, Lot No. 653, is the paraphernal property of Filomena Almirol de Sevilla whichshe co-owned with her sisters, Honorata Almirol and Felisa Almirol,

6who were both

single and without issue. Parcels II, III and IV are conjugal properties of FilomenaAlmirol de Sevilla and her late husband Andres Sevilla.7When Honorata died in 1982,her 1/3 undivided share in Lot No. 653 was transmitted to her heirs, Felisa Almirol andthe heirs of Filomena Almirol de Sevilla, who thereby acquired the property in theproportion of one-half share each.

During the lifetime of Felisa and Honorata Almirol, they lived in the house of FilomenaAlmirol de Sevilla, together with their nephew, respondent Leopoldo Sevilla and hisfamily. Leopoldo attended to the needs of his mother, Filomena, and his two aunts,Honorata and Felisa.

8

Felisa died on July 6, 1988.9Previous thereto, on November 25, 1985, she executed alast will and testament devising her 1/2 share in Lot No. 653 to the spouses LeopoldoSevilla and Belen Leyson.10On August 8, 1986, Felisa executed another documentdenominated as "Donation Inter Vivos" ceding to Leopoldo Sevilla her 1/2 undividedshare in Lot No. 653, which was accepted by Leopoldo in the same document. 11

On September 3, 1986, Felisa Almirol and Peter Sevilla, in his own behalf and in behalfof the heirs of Filomena Almirol de Sevilla, executed a Deed of Extra-judicial Partition,identifying and adjudicating the 1/3 share of Honorata Almirol to the heirs of Filomena

Almirol de Sevilla and to Felisa Almirol.12

Thereafter, respondents Leopoldo, Peter and Luzvilla Sevilla obtained the cancellationof Transfer Certificate of Title No. (T-6671)-1448, over Lot No. 653, and the issuance of


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the corresponding titles to Felisa Almirol and the heirs of Filomena Almirol de Sevilla.However, the requested titles for Lot Nos. 653-A and 653-B, were left unsigned by theRegister of Deeds of Dipolog City, pending submission by Peter Sevilla of a SpecialPower of Attorney authorizing him to represent the other heirs of Filomena Almirol deSevilla.13

On June 21, 1990, Felipe Sevilla, Rosa Sevilla, and the heirs of William, Jimmy andMaria, all surnamed Sevilla, filed the instant case against respondents Leopoldo Sevilla,Peter Sevilla and Luzvilla Sevilla, for annulment of the Deed of Donation and the Deedof Extrajudicial Partition, Accounting, Damages, with prayer for Receivership and forPartition of the properties of the late Filomena Almirol de Sevilla.

14They alleged that the

Deed of Donation is tainted with fraud because Felisa Almirol, who was then 81 years ofage, was seriously ill and of unsound mind at the time of the execution thereof; and thatthe Deed of Extra-judicial Partition is void because it was executed without theirknowledge and consent.

15

In their answer,

16

respondents denied that there was fraud or undue pressure in theexecution of the questioned documents. They alleged that Felisa was of sound mind atthe time of the execution of the assailed deeds and that she freely and voluntarily cededher undivided share in Lot No. 653 in consideration of Leopoldo's and his family's love,affection, and services rendered in the past. Respondents further prayed that Parcels II,III, and IV be partitioned among the heirs of Filomena Almirol de Sevilla in accordancewith the law on intestate succession.

On December 16, 1994, a decision was rendered by the Regional Trial Court of DipologCity, Zamboanga del Norte, Branch 6, upholding the validity of the Deed of Donationand declaring the Deed of Extra-judicial Partition unenforceable. The dispositive portion

thereof, reads:

WHEREFORE, IN VIEW OF THE FOREGOING, summing up the evidence forboth the plaintiffs and the defendants, the Court hereby renders judgment:

1) Declaring the questioned Deed of Donation Inter Vivosvalid and binding, and,therefore, has the full force and effect of law;

2) Declaring the questioned Deed of Extra-Judicial Partition as unenforceable asyet as against the other heirs, as it lacks the legal requisites of Special Power of

Attorney or any other appropriate instrument to be executed by the other heirs

who were not made parties thereto;

3) Finding the parties herein entitled to the partition of Parcel II, III, IV asdesignated in the Complaint, in equal shares, and, as to Lot No. 653 designatedas Parcel I, it shall be divided equally into two, between defendant LeopoldoSevilla on one hand, and, collectively, the Heirs of William Sevilla, Heirs of JimmySevilla, Heirs of Maria Sevilla, Felipe Sevilla, Leopoldo Sevilla, Peter Sevilla,


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Luzvilla Sevilla-Tan, on the other hand, as well as the two buildings thereon inproportionate values;

4) Directing the parties, if they can agree, to submit herewith a project ofpartition, which shall designate the share which pertains to the heirs entitled

thereto, that is, the particular and specific portions of the properties subject of thepartition;

5) Directing defendant Peter Sevilla to pay and/or collect from the parties theamounts corresponding to each one entitled or liable thereto, as recorded in theStatement of Accounts, except for defendant Leopoldo Sevilla who is found bythe Court to have incurred only an overdraft of P5,742.98 and not P33,204.33 asearlier computed therein.

6) Dismissing the plaintiffs' claim for damages, which is not proved with sufficientevidence, and defendants' counterclaim, on the same ground.

7) With costs de officio.

IT IS SO ORDERED.17

Both parties appealed to the Court of Appeals. Petitioners contended that the Deed ofDonation should be declared void and that Lot No. 653 should be divided equallyamong them. Respondents, on the other hand, posited that the trial court erred indeclaring the Deed of Extra-judicial Partition unenforceable against the other heirs ofFilomena Almirol de Sevilla who were not parties to said Deed.

On September 26, 2000, the Court of Appeals affirmed in totothe assailed decision ofthe trial court.18

Petitioners filed a motion for reconsideration but the same was deniedon August 30, 2001.19

Hence, the instant petition based on the following assignment of errors:

THAT THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING AS VOIDAB INITIO THE DEED OF DONATION EXECUTED BY FELISA ALMIROL IN FAVOROF RESPONDENT LEOPOLDO SEVILLA CEDING TO HIM ONE HALF PORTION OFLOT 653, DIPOLOG CADASTRE, IT HAVING BEEN EXECUTED WITH FRAUD,UNDUE PRESSURE AND INFLUENCE;

THAT THE APPELLATE COURT GREATLY ERRED IN NOT ORDERING THEPARTITION OF LOT 653, DIPOLOG CADASTRE EQUALLY AMONG THE EIGHT (8)HEIRS OF FILOMENA, HONORATA AND FELISA, ALL SURNAMED ALMIROL.20

To resolve the issue raised in the instant petition for review, the validity of thedonation inter vivosexecuted by Felisa Almirol in favor of Leopoldo Sevilla must first bedetermined.


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Donation is an act of liberality whereby a person disposes gratuitously of a thing or rightin favor of another who accepts it.

21Under Article 737 of the Civil Code, the donor's

capacity shall be determined as of the time of the making of the donation. Like any othercontract, an agreement of the parties is essential,22and the attendance of a vice ofconsent renders the donation voidable.23

In the case at bar, there is no question that at the time Felisa Almirol executed the deedof donation she was already the owner of 1/2 undivided portion of Lot No. 653. Her 1/3undivided share therein was increased by 1/2 when she and Filomena inherited the 1/3share of their sister Honorata after the latter's death. Hence, the 1/2 undivided share ofFelisa in Lot No. 653 is considered a present property which she can validly dispose ofat the time of the execution of the deed of donation.

24

Petitioners, however, insist that respondent Leopoldo Sevilla employed fraud and undueinfluence on the person of the donor. This argument involves appreciation of theevidence.25The settled rule is that factual findings of the trial court, if affirmed by the

Court of Appeals, are entitled to great respect.

26

There are exceptional circumstanceswhen findings of fact of lower courts may be set aside27

but none is present in the caseat bar. Indeed, neither fraud nor undue influence can be inferred from the followingcircumstance alleged by the petitioners, to wit

A. That Felisa Almirol lived with respondent Leopoldo Sevilla in the residentialhouse owned by petitioners and respondents;

B. That the old woman Felisa Almirol was being supported out of the rentalsderived from the building constructed on the land which was a common fund. . . .

C. That when Felisa Almirol was already 82 years old, he [Leopoldo Sevilla]accompanied her in the Office of Atty. Vic T. Lacaya, Sr., for the purpose ofexecuting her last will and testament . . .

D. That in the last will and testament executed by Felisa Almirol, she had devisedin favor of respondent Leopoldo Sevilla one-half of the land in question;

E. That respondent Leopoldo Sevilla not contented with the execution by FelisaAlmirol of her last will and testament, had consulted a lawyer as to how he will beable to own the land immediately;

F. That upon the advice of Atty. Helen Angeles, Clerk of Court of the RegionalTrial Court of Zamboanga del Norte, Dipolog City, Felisa Almirol executed aDeed of Donation, hence, the questioned Deed of Donation executed in his favor;

G. That the subject matter of the Deed of Donation was the one-half portion ofLot 653, Dipolog Cadastre, which was willed by Felisa Almirol, in favor ofrespondent Leopoldo Sevilla in her last will and testament;


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H. That at the time of the execution of the Deed of Donation, Lot No. 653,Dipolog Cadastre, was not yet partitioned between petitioners and respondentsthey being heirs of the late Filomena and Honorata, all surnamed Almirol;

I. That after the execution of the Deed of Donation, respondent Peter Sevilla and

the late Felisa Almirol were the only ones who executed the Deed of Extra-judicial Partition over Lot 653, Dipolog Cadastre, the petitioners were not madeparties in the said Deed of Extrajudicial Partition;

J. That on the basis of the Deed of Extrajudicial Partition and Deed of Donation,respondent Leopoldo Sevilla caused the subdivision survey of Lot 653, DipologCadastre, dividing the same into two (2) lots, adjudicating one-half of the lot in hisfavor and the other half in favor of respondents Peter Sevilla and Luzvilla Sevilla,and to respondent Leopoldo Sevilla himself;

K. That only two persons knew the actual survey of the land, petitioner Felipe

Sevilla and respondent Leopoldo Sevilla himself, the rest of the co-owners werenot even notified;

L. That on the basis of the Extrajudicial Partition, Deed of Donation, the approvedsubdivision plan, respondent Leopoldo Sevilla filed a petition for issuance of thecorresponding titles for the two lots, but the Register of Deeds of Dipolog Cityrefused to issue the corresponding titles for the two lots to respondent LeopoldoSevilla so that up to this moment . . . the two titles were left unsigned by theRegister of Deeds.28

There is fraud when, through the insidious words or machinations of one of the

contracting parties, the other is induced to enter into a contract which, without them, hewould not have agreed to.29There is undue influence when a person takes improperadvantage of his power over the will of another, depriving the latter of a reasonablefreedom of choice. The following circumstances shall be considered: the confidential,family, spiritual and other relations between the parties, or the fact that the personalleged to have been unduly influenced was suffering from mental weakness, or wasignorant or in financial distress.

30

Ei incumbit probatio qui dicit, non qui negat. He who asserts, not he who denies, mustprove. We have consistently applied the ancient rule that if the plaintiff, upon whomrests the burden of proving his cause of action, fails to show in a satisfactory manner

facts on which he bases his claim, the defendant is under no obligation to prove hisexception or defense.31In the instant case, the self-serving testimony of the petitionersare vague on what acts of Leopoldo Sevilla constituted fraud and undue influence andon how these acts vitiated the consent of Felisa Almirol. Fraud and undue influence thatvitiated a party's consent must be established by full, clear and convincing evidence,otherwise, the latter's presumed consent to the contract prevails.

32Neither does the fact

that the donation preceded the partition constitute fraud. It is not necessary that partition


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should first be had because what was donated to Leopoldo was the 1/2 undivided shareof Felisa in Lot No. 653.

Moreover, petitioners failed to show proof why Felisa should be held incapable ofexercising sufficient judgment in ceding her share to respondent Leopoldo.

33As testified

by the notary public who notarized the Deed of Donation, Felisa confirmed to him herintention to donate her share in Lot No. 653 to Leopoldo. He stressed that though thedonor was old, she was of sound mind and could talk sensibly. Significantly, there isnothing in the record that discloses even an attempt by petitioners to rebut saiddeclaration of the notary public.

Clearly, therefore, the courts below did not err in sustaining the validity of the deed ofdonation.

Anent the Deed of Extra-judicial Partition, we find that the same is void ab initioand notmerely unenforceable. InDelos Reyes v. Court of Appeals,34which is a case involving

the sale of a lot by a person who is neither the owner nor the legal representative, wedeclared the contract void ab initio. It was held that one of the requisites of a validcontract under Article 1318 of the Civil Code is the consent and the capacity to giveconsent of the parties to the contract. The legal capacity of the parties is an essentialelement for the existence of the contract because it is an indispensable condition for theexistence of consent. There is no effective consent in law without the capacity to givesuch consent. In other words, legal consent presupposes capacity. Thus, there is saidto be no consent, and consequently, no contractwhen the agreement is entered into byone in behalf of another who has never given him authorization therefor unless he hasby law a right to represent the latter.35

In the case at bar, at the time Felisa executed the deed of extra-judicial partition dividingthe share of her deceased sister Honorata between her and the heirs of FilomenaAlmirol de Sevilla, she was no longer the owner of the 1/2 undivided portion of Lot No.653, having previously donated the same to respondent Leopoldo Sevilla who acceptedthe donation in the same deed. A donation inter vivos, as in the instant case, isimmediately operative and final.36As a mode of acquiring ownership, it results in aneffective transfer of title over the property from the donor to the donee and the donationis perfected from the moment the donor knows of the acceptance by the donee. Andonce a donation is accepted, the donee becomes the absolute owner of the propertydonated.

Evidently, Felisa did not possess the capacity to give consent to or execute the deed ofpartition inasmuch as she was neither the owner nor the authorized representative ofrespondent Leopoldo to whom she previously transmitted ownership of her undividedshare in Lot No. 653. Considering that she had no legal capacity to give consent to thedeed of partition, it follows that there is no consent given to the execution of the deed,and therefore, there is no contract to speak of. As such, the deed of partition is void abinitio, hence, not susceptible of ratification.


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Nevertheless, the nullity of the deed of extra-judicial partition will not affect the validity ofthe donation inter vivosceding to respondent Leopoldo Sevilla the 1/2 undivided shareof Felisa Almirol in Lot No. 653. Said lot should therefore be divided as follows: 1/2 shallgo to respondent Leopoldo Sevilla by virtue of the deed of donation, while the other halfshall be divided equally among the heirs of Filomena Almirol de Sevilla including

Leopoldo Sevilla, following the rules on intestate succession.

Finally, we note that the name of Rosa Sevilla, daughter of Filomena Almirol de Sevilla,and one of the plaintiffs herein, was omitted in the dispositive portion of the trial court'sdecision.37Her name should therefore be included in the dispositive portion as one ofthe heirs entitled to share in the properties of the late Filomena Almirol de Sevilla.

WHEREFORE, in view of all the foregoing, the Decision of the Court of Appeals in CA-G.R. CV No. 48956, affirming in totothe Decision of the Regional Trial Court of DipologCity, Branch 6, in Civil Case No. 4240, is AFFIRMED with MODIFICATION. The Deedof Extra-judicial Partition dated September 3, 1986 is declared void, and the name of

Rosa Sevilla is ordered included in the dispositive portion of the trial court's judgment.

SO ORDERED.

Article 748

G.R. No. 152317 November 10, 2004

VICTORIA MOREO-LENTFER,*GUNTER LENTFER and JOHN CRAIGIE YOUNGCROSS,petitioners,vs.

HANS JURGEN WOLFF,respondent.

D E C I S I O N

QUISUMBING, J.:

For review on certiorari are the Decision1dated June 14, 2001, and Resolution2datedFebruary 22, 2002, of the Court of Appeals in CA-G.R. CV No. 48272. The decisionreversed the judgment3of the Regional Trial Court of Calapan City, Oriental Mindoro,Branch 39, in Civil Case No. R-4219.

The facts are as follows:
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The petitioners are Gunter Lentfer, a German citizen; his Filipina wife, Victoria Moreo-Lentfer; and John Craigie Young Cross, an Australian citizen, all residing in Sabang,Puerto Galera, Oriental Mindoro. Respondent Hans Jurgen Wolff is a German citizen,residing in San Lorenzo Village, Makati City.

Petitioners alleged that with respondent, on March 6, 1992, they engaged the notarialservices of Atty. Rodrigo C. Dimayacyac for: (1) the sale of a beach house owned bypetitioner Cross in Sabang, Puerto Galera, Oriental Mindoro, and (2) the assignment ofCross' contract of lease on the land where the house stood. The sale of the beachhouse and the assignment of the lease right would be in the name of petitioner VictoriaMoreo-Lentfer, but the total consideration of 220,000 Deutschmarks (DM) would bepaid by respondent Hans Jurgen Wolff. A promissory note was executed by saidrespondent in favor of petitioner Cross.

According to respondent, however, the Lentfer spouses were his confidants who held intrust for him, a time deposit account in the amount of DM 200,0004at Solid Bank

Corporation. Apprised of his interest to own a house along a beach, the Lentfer coupleurged him to buy petitioner Cross' beach house and lease rights in Puerto Galera.Respondent agreed and through a bank-to-bank transaction, he paid Cross the amountof DM 221,7005as total consideration for the sale and assignment of the lease rights.However, Cross, Moreo-Lentfer and Atty. Dimayacyac surreptitiously executed a deedof sale whereby the beach house was made to appear as sold to Moreo-Lentfer foronly P100,000.6The assignment of the lease right was likewise made in favor ofMoreo-Lentfer.7Upon learning of this, respondent filed a Complaint docketed as CivilCase No. R-4219 with the lower court for annulment of sale and reconveyance ofproperty with damages and prayer for a writ of attachment.

After trial, the court a quo dismissed the complaint for failure to establish a cause ofaction, thus:

ACCORDINGLY, judgment is hereby rendered in favor of the defendants andagainst the plaintiff, dismissing the complaint for the reason that plaintiff has notestablished a cause of action against the defendants with costs against theplaintiff.

SO ORDERED.8

Aggrieved, respondent appealed to the Court of Appeals.9

But in its Decision10

dated June 14, 2001, the appellate court reversed the decision ofthe trial court, thus:

WHEREFORE, the judgment appealed from is hereby REVERSED and a new one ishereby rendered, as follows:
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1. Defendants-appellees spouses Genter11and Victoria Moreno-Lentferand John Craigie Young Cross are jointly and severally held liable to payplaintiff-appellant the amount of 220,000.00 DM German Currency or itspresent peso equivalent plus legal interest starting from March 8, 1993,the date of the last final demand letter;

2. The above defendants-appellees are jointly and severally held liable topay plaintiff-appellant the amount of P200,000.00 Philippine Currency,representing the amount of expenses incurred in the repairs andmaintenance of the property plus legal interest starting from October 28,1992, the date the amount was received by defendant-appellee VictoriaMoreno-Lentfer; and

3. The case against defendant-appellee Rodrigo Dimayacyac isdismissed.

SO ORDERED.

12

Hence, the instant petition raising the following issues:

1) DOES ARTICLE 1238 OF THE NEW CIVIL CODE APPLY IN THE CASE ATBAR?13

2) DOES THE PRINCIPLE OF SOLUTIO INDEBITI UNDER ARTICLE 2154 OFTHE NEW CIVIL CODE, THE PRINCIPLE OF JUSTICE AND EQUITY, APPLYIN THE CASE AT BAR?

14

Article 1238 of the New Civil Code provides:

ART. 1238. Payment made by a third person who does not intend to bereimbursed by the debtor is deemed to be a donation, which requires the debtor'sconsent. But the payment is in any case valid as to the creditor who hasaccepted it.

Petitioners posit that in a contract of sale, the seller is the creditor, who in this case isCross, and the buyer is the debtor, namely Moreo-Lentfer in this case. Respondent isthe third person who paid the consideration on behalf of Moreo-Lentfer, the debtor.Petitioners insist that respondent did not intend to be reimbursed for said payment and

debtor Moreo-Lentfer consented to it. Thus, by virtue of Article 1238, payment byrespondent is considered a donation.

Respondent counters that Article 1238 bears no relevance to the case since it appliesonly to contracts of loan where payment is made by a third person to a creditor in favorof a debtor of a previously incurred obligation. The instant case, in contrast, involves acontract of sale where no real creditor-debtor relationship exists between the parties.
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