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 1 dated January 30, 1996 and the Resolution 2 dated May 28, 1996, promulgated by the 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 3 against her 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 4 dated 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 property, 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

I

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

II

Whether or not the Court 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 andcoercion. 13 In any event, its execution does not alter the void character of the deed of sale between 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, 14 the last element being indubitably absent in the case at bar.

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. 165879             November 10, 2006

MARIA B. CHING, Petitioner, vs.JOSEPH C. GOYANKO, JR., EVELYN GOYANKO, JERRY GOYANKO, IMELDA GOYANKO, JULIUS GOYANKO, MARY ELLEN GOYANKO AND JESS GOYANKO, Respondents.

D E C I S I O N

CARPIO MORALES, J.:

On December 30, 1947, Joseph Goyanko (Goyanko) and Epifania dela Cruz (Epifania) were married.1 Out of the union were born respondents Joseph, Jr., Evelyn, Jerry, Imelda, Julius, Mary Ellen and Jess, all surnamed Goyanko.

Respondents claim that in 1961, their parents acquired a 661 square meter property located at 29 F. Cabahug St., Cebu City but that as

they (the parents) were Chinese citizens at the time, the property was registered in the name of their aunt, Sulpicia Ventura (Sulpicia).

On May 1, 1993, Sulpicia executed a deed of sale2 over the property in favor of respondents’ father Goyanko. In turn, Goyanko executed on October 12, 1993 a deed of sale3 over the property in favor of his common-law-wife-herein petitioner Maria B. Ching. Transfer Certificate of Title (TCT) No. 138405 was thus issued in petitioner’s name.

After Goyanko’s death on March 11, 1996, respondents discovered that ownership of the property had already been transferred in the name of petitioner. Respondents thereupon had the purported signature of their father in the deed of sale verified by the Philippine National Police Crime Laboratory which found the same to be a forgery.4

Respondents thus filed with the Regional Trial Court of Cebu City a complaint for recovery of property and damages against petitioner, praying for the nullification of the deed of sale and of TCT No. 138405 and the issuance of a new one in favor of their father Goyanko.

In defense, petitioner claimed that she is the actual owner of the property as it was she who provided its purchase price. To disprove that Goyanko’s signature in the questioned deed of sale is a forgery, she presented as witness the notary public who testified that Goyanko appeared and signed the document in his presence.

By Decision of October 16, 1998,5 the trial court dismissed the complaint against petitioner, the pertinent portions of which decision read:

There is no valid and sufficient ground to declare the sale as null and void, fictitious and simulated. The signature on the questioned Deed of Sale is genuine. The testimony of Atty. Salvador Barrameda who declared in court that Joseph Goyanko, Sr. and Maria Ching together with their witnesses appeared before him for notarization of Deed of Sale in question is more reliable than the conflicting testimonies of the two document examiners. Defendant Maria Ching asserted that the Deed of Sale executed by Joseph Goyanko, Sr. in her favor is valid and genuine. The signature of Joseph Goyanko, Sr. in the

questioned Deed of Absolute Sale is genuine as it was duly executed and signed by Joseph Goyanko, Sr. himself.

The parcel of lands known as Lot No. 6 which is sought to be recovered in this case could never be considered as the conjugal property of the original Spouses Joseph C. Goyanko and Epifania dela Cruz or the exclusive capital property of the husband. The acquisition of the said property by defendant Maria Ching is well-elicited from the aforementioned testimonial and documentary evidence presented by the defendant. Although for a time being the property passed through Joseph Goyanko, Sr. as a buyer yet his ownership was only temporary and transitory for the reason that it was subsequently sold to herein defendant Maria Ching. Maria Ching claimed that it was even her money which was used by Joseph Goyanko, Sr. in the purchase of the land and so it was eventually sold to her. In her testimony, defendant Ching justified her financial capability to buy the land for herself. The transaction undertaken was from the original owner Sulpicia Ventura to Joseph Goyanko, Sr. and then from Joesph Goyanko, Sr. to herein defendant Maria Ching.

The land subject of the litigation is already registered in the name of defendant Maria Ching under TCT No. 138405. By virtue of the Deed of Sale executed in favor of Maria Ching, Transfer Certificate of Title No. 138405 was issued in her favor. In recognition of the proverbial virtuality of a Torrens title, it has been repeatedly held that, unless bad faith can be established on the part of the person appearing as owner on the certificate of title, there is no other owner than that in whose favor it has been issued. A Torrens title is not subject to collateral attack. It is a well-known doctrine that a Torrens title, as a rule, is irrevocable and indefeasible, and the duty of the court is to see to it that this title is maintained and respected unless challenged in a direct proceedings [sic].6 (Citations omitted; underscoring supplied)

Before the Court of Appeals where respondents appealed, they argued that the trial court erred:

1. . . . when it dismissed the complaint a quo . . . , in effect, sustaining the sale of the subject property between Joseph, Sr. and the defendant-appellee, despite the proliferation in the records and

admissions by both parties that defendant-appellee was the "mistress" or "common-law wife" of Joseph, Sr..

2. . . . when it dismissed the complaint a quo . . . , in effect, sustaining the sale of the subject property between Joseph, Sr. and the defendant-appellee, despite the fact that the marriage of Joseph, Sr. and Epifania was then still subsisting thereby rendering the subject property as conjugal property of Joseph, Sr. and Epifania.

3. . . . in dismissing the complaint a quo . . . , in effect, sustaining the validity of the sale of the subject property between Joseph, Sr. and the defendant-appellee, despite the clear findings of forgery and the non-credible testimony of notary public.7

By Decision dated October 21, 2003,8 the appellate court reversed that of the trial court and declared null and void the questioned deed of sale and TCT No. 138405. Held the appellate court:

. . . The subject property having been acquired during the existence of a valid marriage between Joseph Sr. and Epifania dela Cruz-Goyanko, is presumed to belong to the conjugal partnership. Moreover, while this presumption in favor of conjugality is rebuttable with clear and convincing proof to the contrary, we find no evidence on record to conclude otherwise. The record shows that while Joseph Sr. and his wife Epifania have been estranged for years and that he and defendant-appellant Maria Ching, have in fact been living together as common-law husband and wife, there has never been a judicial decree declaring the dissolution of his marriage to Epifania nor their conjugal partnership. It is therefore undeniable that the 661-square meter property located at No. 29 F. Cabahug Street, Cebu City belongs to the conjugal partnership.

Even if we were to assume that the subject property was not conjugal, still we cannot sustain the validity of the sale of the property by Joseph, Sr. to defendant-appellant Maria Ching, there being overwhelming evidence on records that they have been living together as common-law husband and wife. On this score, Art. 1352 of the Civil Code provides:

"Art. 1352. Contracts without cause, or with unlawful cause, produce no effect whatsoever. The cause is unlawful if it is contrary to law,

morals, good customs, public order or public policy."

We therefore find that the contract of sale in favor of the defendant-appellant Maria Ching was null and void for being contrary to morals and public policy. The purported sale, having been made by Joseph Sr. in favor of his concubine, undermines the stability of the family, a basic social institution which public policy vigilantly protects. Furthermore, the law emphatically prohibits spouses from selling property to each other, subject to certain exceptions. And this is so because transfers or conveyances between spouses, if allowed during the marriage would destroy the system of conjugal partnership, a basic policy in civil law. The prohibition was designed to prevent the exercise of undue influence by one spouse over the other and is likewise applicable even to common-law relationships otherwise, "the condition of those who incurred guilt would turn out to be better than those in legal union.9 (Underscoring supplied)

Hence, the present petition, petitioners arguing that the appellate court gravely erred in:

I.

. . . APPLYING THE STATE POLICY ON PROHIBITION AGAINST CONVEYANCES AND TRANSFERS OF PROPERTIES BETWEEN LEGITIMATE AND COMMON LAW SPOUSES ON THE SUBJECT PROPERTY, THE SAME BEING FOUND BY THE COURT A QUO, AS THE EXCLUSIVE PROPERTY OF PETITIONER, AND THAT THE SAME WAS NEVER PART OF THE CONJUGAL PROPERTY OF THE MARRIAGE BETWEEN RESPONDENTS’ MOTHER EPIFANIA GOYANKO AND PETITIONER’S COMMON LAW HUSBAND, JOSEPH GOYANKO, SR., NOR THE EXCLUSIVE OR CAPITAL PROPERTY OF THE LATTER AT ANYTIME BEFORE THE SAME WAS VALIDLY ACQUIRED BY PETITIONER.

II.

. . . NOT FINDING THAT A JURIDICAL RELATION OF TRUST AS PROVIDED FOR UNDER ARTICLES 1448 AND 1450 OF THE NEW CIVIL CODE CAN VALIDLY EXIST BETWEEN COMMON LAW SPOUSES.

III.

. . . NOT FINDING THAT A CONVEYANCE OVER A PROPERTY MADE BY A TRUSTEE, WHO BECAME AS SUCH IN CONTEMPLATION OF LAW, AND WHO HAPPENS TO BE A COMMON LAW HUSBAND OF THE BENEFICIARY, IS NOT A VIOLATION OF A STATE POLICY ON PROHIBITION AGAINST CONVEYANCES AND TRANSFERS OF PROPERTIES BETWEEN LEGITIMATE AND COMMON LAW SPOUSES.

IV.

. . . ALLOWING RESPONDENTS TO ABANDON THEIR ORIGINAL THEORY OF THEIR CASE DURING APPEAL.10

The pertinent provisions of the Civil Code which apply to the present case read:

ART. 1352. Contracts without cause, or with unlawful cause, produce no effect whatever. The cause is unlawful if it is contrary to law, morals, good customs, public order or public policy.

ART. 1409. The following contracts are inexistent and void from the beginning:

(1) Those whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy;

(2) Those which are absolutely simulated or fictitious;

(3) Those whose cause or object did not exist at the time of the transaction;

(4) Those whose object is outside the commerce of men;

(5) Those which contemplate an impossible service;

(6) Those where the intention of the parties relative to the principal object of the contract cannot be ascertained;

(7) Those expressly prohibited or declared void by law.

These contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived.

ARTICLE 1490. The husband and wife cannot sell property to each other, except:

(1) When a separation of property was agreed upon in the marriage settlements; or

(2) When there has been a judicial separation of property under Article 191. (Underscoring supplied)

The proscription against sale of property between spouses applies even to common law relationships. So this Court ruled in Calimlim-Canullas v. Hon. Fortun, etc., et al.:11

Anent the second issue, we find that the contract of sale was null and void for being contrary to morals and public policy. The sale was made by a husband in favor of a concubine after he had abandoned his family and left the conjugal home where his wife and children lived and from whence they derived their support. The sale was subversive of the stability of the family, a basic social institution which public policy cherishes and protects.

Article 1409 of the Civil Code states inter alia that: contracts whose cause, object, or purposes is contrary to law, morals, good customs, public order, or public policy are void and inexistent from the very beginning.

Article 1352 also provides that: "Contracts without cause, or with unlawful cause, produce no effect whatsoever. The cause is unlawful if it is contrary to law, morals, good customs, public order, or public policy."

Additionally, the law emphatically prohibits the spouses from selling property to each other subject to certain exceptions. 1âwphi1

Similarly, donations between spouses during marriage are prohibited. And this is so because if transfers or conveyances between spouses were allowed during marriage, that would destroy the system of conjugal partnership, a basic policy in civil law. It was also designed to prevent the exercise of undue influence by one

spouse over the other, as well as to protect the institution of marriage, which is the cornerstone of family law. The prohibitions apply to a couple living as husband and wife without benefit of marriage, otherwise, "the condition of those who incurred guilt would turn out to be better than those in legal union." Those provisions are dictated by public interest and their criterion must be imposed upon the will of the parties. . . .12 (Italics in the original; emphasis and underscoring supplied)

As the conveyance in question was made by Goyangko in favor of his common- law-wife-herein petitioner, it was null and void.

Petitioner’s argument that a trust relationship was created between Goyanko as trustee and her as beneficiary as provided in Articles 1448 and 1450 of the Civil Code which read:

ARTICLE 1448. There is an implied trust when property is sold, and the legal estate is granted to one party but the price is paid by another for the purpose of having the beneficial interest of the property. The former is the trustee, while the latter is the beneficiary. However, if the person to whom the title is conveyed is a child, legitimate or illegitimate, of the one paying the price of the sale, no trust is implied by law, it being disputably presumed that there is a gift in favor of the child.

ARTICLE 1450. If the price of a sale of property is loaned or paid by one person for the benefit of another and the conveyance is made to the lender or payor to secure the payment of the debt, a trust arises by operation of law in favor of the person to whom the money is loaned or for whom it is paid. The latter may redeem the property and compel a conveyance thereof to him.

does not persuade.

For petitioner’s testimony that it was she who provided the purchase price is uncorroborated. That she may have been considered the breadwinner of the family and that there was proof that she earned a living do not conclusively clinch her claim.

As to the change of theory by respondents from forgery of their father’s signature in the deed of sale to sale contrary to public policy,

it too does not persuade. Generally, a party in a litigation is not permitted to freely and substantially change the theory of his case so as not to put the other party to undue disadvantage by not accurately and timely apprising him of what he is up against,13 and to ensure that the latter is given the opportunity during trial to refute all allegations against him by presenting evidence to the contrary. In the present case, petitioner cannot be said to have been put to undue disadvantage and to have been denied the chance to refute all the allegations against her. For the nullification of the sale is anchored on its illegality per se, it being violative of the above-cited Articles 1352, 1409 and 1490 of the Civil Code.

WHEREFORE, the petition is DENIED for lack of merit.

Costs against petitioner.

SO ORDERED.

G.R. No. 158907             February 12, 2007

EDUARDO B. OLAGUER, Petitioner, vs.EMILIO PURUGGANAN, JR. AND RAUL LOCSIN, Respondents.

D E C I S I O N

CHICO-NAZARIO, J.:

This is a Petition for Review on Certiorari, under Rule 45 of the Rules of Court, assailing the Decision,1 dated 30 June 2003, promulgated by the Court of Appeals, affirming the Decision of the Regional Trial Court, dated 26 July 1995, dismissing the petitioner’s suit.

The parties presented conflicting accounts of the facts.

EDUARDO B. OLAGUER’S VERSION

Petitioner Eduardo B. Olaguer alleges that he was the owner of 60,000 shares of stock of Businessday Corporation (Businessday) with a total par value of P600,000.00, with Certificates of Stock No. 005, No. 028, No. 034, No. 070, and No. 100.2 At the time he was employed with the corporation as Executive Vice-President of

Businessday, and President of Businessday Information Systems and Services and of Businessday Marketing Corporation, petitioner, together with respondent Raul Locsin (Locsin) and Enrique Joaquin (Joaquin), was active in the political opposition against the Marcos dictatorship.3 Anticipating the possibility that petitioner would be arrested and detained by the Marcos military, Locsin, Joaquin, and Hector Holifeña had an unwritten agreement that, in the event that petitioner was arrested, they would support the petitioner’s family by the continued payment of his salary.4 Petitioner also executed a Special Power of Attorney (SPA), on 26 May 1979, appointing as his attorneys-in-fact Locsin, Joaquin and Hofileña for the purpose of selling or transferring petitioner’s shares of stock with Businessday. During the trial, petitioner testified that he agreed to execute the SPA in order to cancel his shares of stock, even before they are sold, for the purpose of concealing that he was a stockholder of Businessday, in the event of a military crackdown against the opposition.5 The parties acknowledged the SPA before respondent Emilio Purugganan, Jr., who was then the Corporate Secretary of Businessday, and at the same time, a notary public for Quezon City.6

On 24 December 1979, petitioner was arrested by the Marcos military by virtue of an Arrest, Search and Seizure Order and detained for allegedly committing arson. During the petitioner’s detention, respondent Locsin ordered fellow respondent Purugganan to cancel the petitioner’s shares in the books of the corporation and to transfer them to respondent Locsin’s name.7

As part of his scheme to defraud the petitioner, respondent Locsin sent Rebecca Fernando, an employee of Businessday, to Camp Crame where the petitioner was detained, to pretend to borrow Certificate of Stock No. 100 for the purpose of using it as additional collateral for Businessday’s then outstanding loan with the National Investment and Development Corporation. When Fernando returned the borrowed stock certificate, the word "cancelled" was already written therein. When the petitioner became upset, Fernando explained that this was merely a mistake committed by respondent Locsin’s secretary.8

During the trial, petitioner also agreed to stipulate that from 1980 to 1982, Businessday made regular deposits, each amounting to

P10,000.00, to the Metropolitan Bank and Trust Company accounts of Manuel and Genaro Pantig, petitioner’s in-laws. The deposits were made on every 15th and 30th of the month.9 Petitioner alleged that these funds consisted of his monthly salary, which Businessday agreed to continue paying after his arrest for the financial support of his family.10 After receiving a total of P600,000.00, the payments stopped. Thereafter, respondent Locsin and Fernando went to ask petitioner to endorse and deliver the rest of his stock certificates to respondent Locsin, but petitioner refused. 11

On 16 January 1986, petitioner was finally released from detention. He then discovered that he was no longer registered as stockholder of Businessday in its corporate books. He also learned that Purugganan, as the Corporate Secretary of Businessday, had already recorded the transfer of shares in favor of respondent Locsin, while petitioner was detained. When petitioner demanded that respondents restore to him full ownership of his shares of stock, they refused to do so. On 29 July 1986, petitioner filed a Complaint before the trial court against respondents Purugganan and Locsin to declare as illegal the sale of the shares of stock, to restore to the petitioner full ownership of the shares, and payment of damages.12

RESPONDENT RAUL LOCSIN’S VERSION

In his version of the facts, respondent Locsin contended that petitioner approached him and requested him to sell, and, if necessary, buy petitioner’s shares of stock in Businessday, to assure support for petitioner’s family in the event that something should happen to him, particularly if he was jailed, exiled or forced to go underground.13 At the time petitioner was employed with Businessday, respondent Locsin was unaware that petitioner was part of a group, Light-a-Fire Movement, which actively sought the overthrow of the Marcos government through an armed struggle.14 He denied that he made any arrangements to continue paying the petitioner’s salary in the event of the latter’s imprisonment.15

When petitioner was detained, respondent Locsin tried to sell petitioner’s shares, but nobody wanted to buy them. Petitioner’s reputation as an oppositionist resulted in the poor financial condition of Businessday and discouraged any buyers for the shares of stock.16

In view of petitioner’s previous instructions, respondent Locsin decided to buy the shares himself. 1awphi1.net Although the capital deficiency suffered by Businessday caused the book value of the shares to plummet below par value, respondent Locsin, nevertheless, bought the shares at par value.17 However, he had to borrow from Businessday the funds he used in purchasing the shares from petitioner, and had to pay the petitioner in installments of P10,000.00 every 15th and 30th of each month.18

The trial court in its Decision, dated 26 July 1995, dismissed the Complaint filed by the petitioner. It ruled that the sale of shares between petitioner and respondent Locsin was valid. The trial court concluded that petitioner had intended to sell the shares of stock to anyone, including respondent Locsin, in order to provide for the needs of his family should he be jailed or forced to go underground; and that the SPA drafted by the petitioner empowered respondent Locsin, and two other agents, to sell the shares for such price and under such terms and conditions that the agents may deem proper. It further found that petitioner consented to have respondent Locsin buy the shares himself. It also ruled that petitioner, through his wife, received from respondent Locsin the amount of P600,000.00 as payment for the shares of stock.19 The dispositive part of the trial court’s Decision reads:

WHEREFORE, for failure of the [herein petitioner] to prove by preponderance of evidence, his causes of action and of the facts alleged in his complaint, the instant suit is hereby ordered DISMISSED, without pronouncement as to costs.

[Herein respondents’] counterclaims, however, are hereby DISMISSED, likewise, for dearth of substantial evidentiary support.20

On appeal, the Court of Appeals affirmed the Decision of the trial court that there was a perfected contract of sale.21 It further ruled that granting that there was no perfected contract of sale, petitioner, nevertheless, ratified the sale to respondent Locsin by his receipt of the purchase price, and his failure to raise any protest over the said sale.22 The Court of Appeals refused to credit the petitioner’s allegation that the money his wife received constituted his salary from Businessday since the amount he received as his salary, P24,000.00

per month, did not correspond to the amount he received during his detention, P20,000.00 per month (deposits of P10,000.00 on every 15th and 30th of each month in the accounts of the petitioner’s in-laws). On the other hand, the total amount received, P600,000.00, corresponds to the aggregate par value of petitioner’s shares in Businessday. Moreover, the financial condition of Businessday prevented it from granting any form of financial assistance in favor of the petitioner, who was placed in an indefinite leave of absence, and, therefore, not entitled to any salary. 23

The Court of Appeals also ruled that although the manner of the cancellation of the petitioner’s certificates of stock and the subsequent issuance of the new certificate of stock in favor of respondent Locsin was irregular, this irregularity will not relieve petitioner of the consequences of a consummated sale.24

Finally, the Court of Appeals affirmed the Decision of the trial court disallowing respondent Locsin’s claims for moral and exemplary damages due to lack of supporting evidence.25

Hence, the present petition, where the following issues were raised:

I.

THE APPELLATE COURT ERRED IN RULING THAT THERE WAS A PERFECTED CONTRACT OF SALE BETWEEN PETITIONER AND MR. LOCSIN OVER THE SHARES;

II.

THE APPELLATE COURT ERRED IN RULING THAT PETITIONER CONSENTED TO THE ALLEGED SALE OF THE SHARES TO MR. LOCSIN;

III.

THE APPELLATE COURT ERRED IN RULING THAT THE AMOUNTS RECEIVED BY PETITIONER’S IN LAWS WERE NOT PETITIONER’S SALARY FROM THE CORPORATION BUT INSTALLMENT PAYMENTS FOR THE SHARES;

IV.

THE APPELLATE COURT ERRED IN RULING THAT MR. LOCSIN WAS THE PARTY TO THE ALLEGED SALE OF THE SHARES AND NOT THE CORPORATION; AND

V.

THE APPELLATE COURT ERRED IN RULING THAT THE ALLEGED SALE OF THE SHARES WAS VALID ALTHOUGH THE CANCELLATION OF THE SHARES WAS IRREGULAR.26

The petition is without merit.

The first issue that the petitioner raised is that there was no valid sale since respondent Locsin exceeded his authority under the SPA27

issued in his, Joaquin and Holifena’s favor. He alleged that the authority of the afore-named agents to sell the shares of stock was limited to the following conditions: (1) in the event of the petitioner’s absence and incapacity; and (2) for the limited purpose of applying the proceeds of the sale to the satisfaction of petitioner’s subsisting obligations with the companies adverted to in the SPA.28

Petitioner sought to impose a strict construction of the SPA by limiting the definition of the word "absence" to a condition wherein "a person disappears from his domicile, his whereabouts being unknown, without leaving an agent to administer his property,"29 citing Article 381 of the Civil Code, the entire provision hereunder quoted:

ART 381. When a person disappears from his domicile, his whereabouts being unknown, and without leaving an agent to administer his property, the judge, at the instance of an interested party, a relative, or a friend, may appoint a person to represent him in all that may be necessary.

This same rule shall be observed when under similar circumstances the power conferred by the absentee has expired.

Petitioner also puts forward that the word "incapacity" would be limited to mean "minority, insanity, imbecility, the state of being deaf-mute, prodigality and civil interdiction."30 He cites Article 38 of the Civil

Code, in support of this definition, which is hereunder quoted:

ART. 38 Minority, insanity or imbecility, the state of being a deaf-mute, prodigality and civil interdiction are mere restrictions on capacity to act, and do not exempt the incapacitated person, from certain obligations, as when the latter arise from his acts or from property relations, such as easements.

Petitioner, thus, claims that his arrest and subsequent detention are not among the instances covered by the terms "absence or incapacity," as provided under the SPA he executed in favor of respondent Locsin.

Petitioner’s arguments are unpersuasive. It is a general rule that a power of attorney must be strictly construed; the instrument will be held to grant only those powers that are specified, and the agent may neither go beyond nor deviate from the power of attorney. However, the rule is not absolute and should not be applied to the extent of destroying the very purpose of the power. If the language will permit, the construction that should be adopted is that which will carry out instead of defeat the purpose of the appointment. Clauses in a power of attorney that are repugnant to each other should be reconciled so as to give effect to the instrument in accordance with its general intent or predominant purpose. Furthermore, the instrument should always be deemed to give such powers as essential or usual in effectuating the express powers.31

In the present case, limiting the definitions of "absence" to that provided under Article 381 of the Civil Code and of "incapacity" under Article 38 of the same Code negates the effect of the power of attorney by creating absurd, if not impossible, legal situations. Article 381 provides the necessarily stringent standards that would justify the appointment of a representative by a judge. Among the standards the said article enumerates is that no agent has been appointed to administer the property. In the present case, petitioner himself had already authorized agents to do specific acts of administration and thus, no longer necessitated the appointment of one by the court. Likewise, limiting the construction of "incapacity" to "minority, insanity, imbecility, the state of being a deaf-mute, prodigality and civil interdiction," as provided under Article 38, would render the SPA

ineffective. Article 1919(3) of the Civil Code provides that the death, civil interdiction, insanity or insolvency of the principal or of the agent extinguishes the agency. It would be equally incongruous, if not outright impossible, for the petitioner to require himself to qualify as a minor, an imbecile, a deaf-mute, or a prodigal before the SPA becomes operative. In such cases, not only would he be prevented from appointing an agent, he himself would be unable to administer his property.

On the other hand, defining the terms "absence" and "incapacity" by their everyday usage makes for a reasonable construction, that is, "the state of not being present" and the "inability to act," given the context that the SPA authorizes the agents to attend stockholders’ meetings and vote in behalf of petitioner, to sell the shares of stock, and other related acts. This construction covers the situation wherein petitioner was arrested and detained. This much is admitted by petitioner in his testimony.32

Petitioner’s contention that the shares may only be sold for the sole purpose of applying the proceeds of the sale to the satisfaction of petitioner’s subsisting obligations to the company is far-fetched. The construction, which will carry out the purpose, is that which should be applied. Petitioner had not submitted evidence that he was in debt with Businessday at the time he had executed the SPA. Nor could he have considered incurring any debts since he admitted that, at the time of its execution, he was concerned about his possible arrest, death and disappearance. The language of the SPA clearly enumerates, as among those acts that the agents were authorized to do, the act of applying the proceeds of the sale of the shares to any obligations petitioner might have against the Businessday group of companies. This interpretation is supported by the use of the word "and" in enumerating the authorized acts, instead of phrases such as "only for," "for the purpose of," "in order to" or any similar terms to indicate that the petitioner intended that the SPA be used only for a limited purpose, that of paying any liabilities with the Businessday group of companies.

Secondly, petitioner argued that the records failed to show that he gave his consent to the sale of the shares to respondent Locsin for the price of P600,000.00. This argument is unsustainable. Petitioner

received from respondent Locsin, through his wife and in-laws, the installment payments for a total of P600,000.00 from 1980 to 1982, without any protest or complaint. It was only four years after 1982 when petitioner demanded the return of the shares. The petitioner’s claim that he did not instruct respondent Locsin to deposit the money to the bank accounts of his in-laws fails to prove that petitioner did not give his consent to the sale since respondent Locsin was authorized, under the SPA, to negotiate the terms and conditions of the sale including the manner of payment. Moreover, had respondent Locsin given the proceeds directly to the petitioner, as the latter suggested in this petition, the proceeds were likely to have been included among petitioner’s properties which were confiscated by the military. Instead, respondent Locsin deposited the money in the bank accounts of petitioner’s in-laws, and consequently, assured that the petitioner’s wife received these amounts. Article 1882 of the Civil Code provides that the limits of an agent’s authority shall not be considered exceeded should it have been performed in a manner more advantageous to the principal than that specified by him.

In addition, petitioner made two inconsistent statements when he alleged that (1) respondent Locsin had not asked the petitioner to endorse and deliver the shares of stock, and (2) when Rebecca Fernando asked the petitioner to endorse and deliver the certificates of stock, but petitioner refused and even became upset.33 In either case, both statements only prove that petitioner refused to honor his part as seller of the shares, even after receiving payments from the buyer. Had the petitioner not known of or given his consent to the sale, he would have given back the payments as soon as Fernando asked him to endorse and deliver the certificates of stock, an incident which unequivocally confirmed that the funds he received, through his wife and his in-laws, were intended as payment for his shares of stocks. Instead, petitioner held on to the proceeds of the sale after it had been made clear to him that respondent Locsin had considered the P600,000.00 as payment for the shares, and asked petitioner, through Fernando, to endorse and deliver the stock certificates for cancellation.

As regards the third issue, petitioner’s allegation that the installment payments he was adjudged to have received for the shares were actually salaries which Businessday promised to pay him during his

detention is unsupported and implausible. Petitioner received P20,000.00 per month through his in-laws; this amount does not correspond to his monthly salary at P24,000.00.34 Nor does the amount received correspond to the amount which Businessday was supposed to be obliged to pay petitioner, which was only P45,000.00 to P60,000.00 per annum.35 Secondly, the petitioner’s wife did not receive funds from respondent Locsin or Businessday for the entire duration of petitioner’s detention. Instead, when the total amount received by the petitioner reached the aggregate amount of his shares at par value -- P600,000.00 -- the payments stopped. Petitioner even testified that when respondent Locsin denied knowing the petitioner soon after his arrest, he believed respondent Locsin’s commitment to pay his salaries during his detention to be nothing more than lip-service.36

Granting that petitioner was able to prove his allegations, such an act of gratuity, on the part of Businessday in favor of petitioner, would be void. An arrangement whereby petitioner will receive "salaries" for work he will not perform, which is not a demandable debt since petitioner was on an extended leave of absence, constitutes a donation under Article 72637 of the Civil Code. Under Article 748 of the Civil Code, if the value of the personal property donated exceeds P5,000.00, the donation and the acceptance shall have to be made in writing. Otherwise, the donation will be void. In the present case, petitioner admitted in his testimony38 that such arrangement was not made in writing and, hence, is void.

The fact that some of the deposit slips and communications made to petitioner’s wife contain the phrase "household expenses" does not disprove the sale of the shares. The money was being deposited to the bank accounts of the petitioner’s in-laws, and not to the account of the petitioner or his wife, precisely because some of his property had already been confiscated by the military. Had they used the phrase "sale of shares," it would have defeated the purpose of not using their own bank accounts, which was to conceal from the military any transaction involving the petitioner’s property.

Petitioner raised as his fourth issue that granting that there was a sale, Businessday, and not respondent Locsin, was the party to the transaction. The curious facts that the payments were received on the

15th and 30th of each month and that the payor named in the checks was Businessday, were adequately explained by respondent Locsin. Respondent Locsin had obtained cash advances from the company, paid to him on the 15th and 30th of the month, so that he can pay petitioner for the shares. To support his claim, he presented Businessday’s financial records and the testimony of Leo Atienza, the Company’s Accounting Manager. When asked why the term "shares of stock" was used for the entries, instead of "cash advances," Atienza explained that the term "shares of stock" was more specific rather than the broader phrase "cash advances."39 More to the point, had the entries been for "shares of stock," the issuance of shares should have been reflected in the stock and transfer books of Businessday, which the petitioner presented as evidence. Instead the stock and transfer books reveal that the increase in respondent Locsin’s shares was a result of the cancellation and transfer of petitioner’s shares in favor of respondent Locsin.

Petitioner alleges that the purported sale between himself and respondent Locsin of the disputed shares of stock is void since it contravenes Article 1491 of the Civil Code, which provides that:

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

x x x x

(2) Agents, the property whose administration or sale may have been entrusted to them, unless the consent of the principal has been given; x x x.

It is, indeed, a familiar and universally recognized doctrine that a person who undertakes to act as agent for another cannot be permitted to deal in the agency matter on his own account and for his own benefit without the consent of his principal, freely given, with full knowledge of every detail known to the agent which might affect the transaction.40 The prohibition against agents purchasing property in their hands for sale or management is, however, clearly, not absolute. It does not apply where the principal consents to the sale of the property in the hands of the agent or administrator.>41

In the present case, the parties have conflicting allegations. While respondent Locsin averred that petitioner had permitted him to purchase petitioner’s shares, petitioner vehemently denies having known of the transaction. However, records show that petitioner’s position is less credible than that taken by respondent Locsin given petitioner’s contemporaneous and subsequent acts.42 In 1980, when Fernando returned a stock certificate she borrowed from the petitioner, it was marked "cancelled." Although the petitioner alleged that he was furious when he saw the word cancelled, he had not demanded the issuance of a new certificate in his name. Instead of having been put on his guard, petitioner remained silent over this obvious red flag and continued receiving, through his wife, payments which totalled to the aggregate amount of the shares of stock valued at par. When the payments stopped, no demand was made by either petitioner or his wife for further payments.

From the foregoing, it is clear that petitioner knew of the transaction, agreed to the purchase price of P600,000.00 for the shares of stock, and had in fact facilitated the implementation of the terms of the payment by providing respondent Locsin, through petitioner’s wife, with the information on the bank accounts of his in-laws. Petitioner’s wife and his son even provided receipts for the payments that were made to them by respondent Locsin,43 a practice that bespeaks of an onerous transaction and not an act of gratuity.

Lastly, petitioner claims that the cancellation of the shares and the subsequent transfer thereof were fraudulent, and, therefore, illegal. In the present case, the shares were transferred in the name of the buyer, respondent Locsin, without the petitioner delivering to the buyer his certificates of stock. Section 63 of the Corporation Code provides that:

Sec.63. Certificate of stock and transfer of shares.— xxx Shares of stock so issued are personal property and may be transferred by delivery of the certificate or certificates indorsed by the owner or his attorney-in-fact or other person legally authorized to make the transfer. No transfer, however, shall be valid, except as between the parties, until the transfer is recorded in the books of the corporation showing the names of the parties to the transaction, the date of the transfer, the number of the certificate or certificates and the number

of shares transferred. (Emphasis provided.)

The aforequoted provision furnishes the procedure for the transfer of shares – the delivery of the endorsed certificates, in order to prevent the fraudulent transfer of shares of stock. However, this rule cannot be applied in the present case without causing the injustice sought to be avoided. As had been amply demonstrated, there was a valid sale of stocks. Petitioner’s failure to deliver the shares to their rightful buyer is a breach of his duty as a seller, which he cannot use to unjustly profit himself by denying the validity of such sale. Thus, while the manner of the cancellation of petitioner’s certificates of stock and the issuance of the new certificates in favor of respondent Locsin was highly irregular, we must, nonetheless, declare the validity of the sale between the parties. Neither does this irregularity prove that the transfer was fraudulent. In his testimony, petitioner admitted that they had intended to conceal his being a stockholder of Businessday.44

The cancellation of his name from the stock and transfer book, even before the shares were actually sold, had been done with his consent. As earlier explained, even the subsequent sale of the shares in favor of Locsin had been done with his consent.

IN VIEW OF THE FOREGOING, the instant Petition is DENIED. This Court AFFIRMS the assailed Decision of the Court of Appeals, promulgated on 30 June 2003, affirming the validity of the sale of the shares of stock in favor of respondent Locsin. No costs.

SO ORDERED.

[A.C. No.  3046.  October 26, 1998]

REGALADO DAROY, complainant, vs. ATTY. ESTEBAN ABECIA, respondent.

D E C I S I O NMENDOZA, J.:

This refers to the complaint for malpractice filed by Regalado Daroy (now deceased) against Esteban Abecia, a member of the Bar.  Complainant Daroy accused respondent Abecia of having forged his signature in a deed of absolute sale by means of which the latter was able to transfer a  parcel of land in Opol, Misamis Oriental, first to Jose Gangay and eventually to his (respondent’s) wife Nena Abecia.

The facts of the instant case are as follows:

Respondent Abecia was counsel of complainant Daroy in a case for forcible entry before the Municipal Trial Court of Opol, Misamis Oriental.[1] Judgment was rendered in favor of complainant as plaintiff in the ejectment case, ordering the defendants to pay damages, attorney’s fees, and the costs of the suit. To satisfy the judgment, the sheriff sold at public auction on March 25, 1971 a parcel of land belonging to one of the defendants to complainant Daroy as highest bidder for P1,250.00. Upon failure of the defendants to redeem the land, its ownership was consolidated in complainant Daroy.

Complainant Daroy claimed that respondent Abecia forged his signature in a deed of absolute sale, dated March 31, 1971, transferring the subject parcel of land to Jose Gangay purportedly for the sum of P1,250.00 and that in a fictitious deed of absolute sale, dated April 17, 1971, it was made to appear that Gangay in turn conveyed the land to Nena Abecia, wife of respondent Abecia, for the sum of P1,350.00.[2] Complainant alleged that he entrusted the title to the land (TCT No. T-315) to Abecia as his counsel and  allowed him to take possession of the land upon the latter’s request. By means of the forged deed of sale, Abecia was able to obtain new transfer certificates of title, first in the name of Gangay and then in that of Mrs. Abecia, from the Registry of Deeds of Misamis Oriental.[3] Daroy claimed he discovered the fraud only in 1984.

Daroy submitted in evidence a report of the National Bureau

of Investigation, which had examined the deed of sale in favor of Jose Gangay, showing that Daroy’s signature in the deed of sale had been written by a different hand. In addition, Daroy presented the affidavit, executed on August 10, 1988, of Anita Gangay, wife of Jose Gangay, in which she retracted an earlier affidavit executed on June 5, 1985.  In the first affidavit, she stated that she had bought the land in question from Regalado Daroy and then sold it to her sister Nena Abecia, wife of respondent Esteban.  Now, in her present affidavit, it is stated that she did not buy the land from Daroy nor later sell it to Nena Abecia and that she really did not know anything about the controversy between Regalado Daroy and Esteban Abecia, both of whom are her brothers-in-law.  (It appears that Mrs. Conchita Daroy, Mrs. Anita Gangay, and Mrs. Nena Abecia are sisters, although Conchita Daroy and Regalado Daroy are not married but lived together in a common-law relationship.)

A  complaint for falsification of public document was also filed against respondent Abecia in the Office of the City Prosecutor of Cagayan de Oro which, however, dismissed the same.[4] On appeal, then Undersecretary of Justice Silvestre H. Bello III reversed on May 6, 1988 the findings of the City Prosecutor of Cagayan de Oro and consequently ordered the filing of  the corresponding information in court.[5] Accordingly, City Prosecutor Rodolfo R. Waga filed an information for falsification of public document, dated June 30, 1988, with the Regional Trial Court of Misamis Oriental.[6]

Respondent Abecia was unable to attend the hearings. He asked for their transfer to Cagayan de Oro on the  ground that he did not have the means to travel, but his request was apparently denied sub silencio as the Commission continued the hearings in Pasig, Metro Manila. As a result only his counsel was present at the hearings.[7]

As respondent reiterated his request for the transfer of venue, it was agreed at the hearing of January 30, 1989 that respondent’s

answer, dated August 3, 1987, and the affidavits of his witnesses as well as his own would be considered as their direct testimonies.[8]

In his answer, respondent Esteban Abecia maintained that on March 31, 1971, Regalado Daroy sold the land in question to Jose Gangay, and the latter in turn sold the land to Nena Abecia on April 17, 1971.  He cited the sheriff’s return, dated August 6, 1973, in which it was stated that on August 4, 1993 “Regalado Daroy and his assignee Nena Abecia were . . . placed in actual possession of the parcel of land subject matter of the Deed of Conveyance and Possession.”[9] He also referred to the resolution of the Assistant Provincial Fiscal of Misamis Oriental, who dismissed the complaint for grave coercion and malicious mischief filed by Gertrudes De Bajuyo, one of the defendants in the ejectment case, against Regalado Daroy and Nena Abecia for the demolition of her house, precisely on the basis of  “the right of Mrs. Nena Abecia . . . as assignee to do whatever she wants to do of the things she owns.”[10]

On July 15, 1993, Commissioner Plaridel C. Jose rendered a report finding respondent Abecia guilty of malpractice and recommending his disbarment. In his report, Commissioner Jose stated:[11]

. . . In the course of his law practice, the respondent handled several cases in behalf of the complainant Regalado Daroy, among which is Civil Case No. 3288, wherein a parcel of land located at Opol, Misamis Oriental covered by TCT No. T-15924 (TCT No. T-315) was the subject of litigation. In the course of handling the same, the complainant entrusted to the respondent the pertinent documents necessary in the said case which included his said TCT No. T-15924.

In the year 1971, without the knowledge of the complainant, a document entitled Deed of Sale dated March 31, 1971 was executed and notarized by Notary Public Erasmo G. Damasing as

Doc. No. 68, Page No. 16, Book No. VIII, Series of 1971, which appears to have been signed by complainant Regalado Daroy, thereby conveying the said property in favor of a certain Jose Gangay, married to Anita Basmayor, by virtue of which TCT No. T-15925 was issued in the name of Jose Gangay.

Two weeks thereafter, under date of April 17, 1971, the said Jose Gangay executed a Deed of Sale of the same property in favor of Mrs. Nena Abecia, the wife of the respondent, by virtue of which TCT No. T-15926 was issued in the name of Nena Abecia, married to Atty. Esteban Abecia, the respondent.

Sometime in the year 1984, the complainant discovered that his said property was already in the name of Mrs. Nena Abecia and Atty. Esteban Abecia.

. . . .

The foregoing evidence sufficiently proved respondent’s acts complained of in the present case . . . . The significant fact is that the herein respondent was instrumental and responsible for falsifying the signature of his client, complainant Daroy, in the deed of conveyance in favor of Jose Gangay, for which he is at present criminally charged in Criminal Case No. 88-443 before the Regional Trial Court of Misamis Oriental.

In an unclear manner, respondent tried to justify his act by alleging that the transfer of his client’s property to his wife was proper because he allegedly was not paid for his professional services. Such allegation, even if true, would not exculpate him from liability.  A lawyer who executed with his client a deed transferring ownership over a parcel of land involved in a pending litigation as his attorney’s fees violates the rule prohibiting the purchase of property in litigation by a lawyer from his client.

. . . What is saddening is the fact that he is presently an incumbent

labor arbiter of the National Labor Relations Commission with the delicate responsibility of administering justice to the parties before him. . . .  The Commission has no alternative but to recommend his disbarment. It is likewise recommended that the National Labor Relations Commission be furnished with these findings for its guidance and appropriate action.

The Board of Governors of the Integrated Bar of the Philippines in Resolution No. XI-94-072, dated March 26 1994,[12]

approved the report but reduced the penalty to indefinite suspension.

Respondent Abecia filed a Motion for Reconsideration and/or Appeal. Among other things, he contends that:[13]

. . . .

1. The Commission on Bar Discipline erred when it held that complainant had no knowledge of the execution of the Deed of Absolute Sale on March 31, 1971 before Notary Public Erasmo G. Damasing. 

Complainant very well knew of the execution of the deed of sale as shown in the Sheriff’s Return of Service (Respondent’s Annex “9”) dated August 6, 1973, where he declared that he was accompanied by the complainant and his assignee, Nena Abecia, in implementing the Deed of Conveyance and Possession on August 4, 1973.  The Deputy Sheriff even went as far as declaring that the land was already in the name of complainant’s assignee. Paragraph 2 of the said Sheriff’s Return of Service is herein quoted verbatim:

“2. The undersigned then proceeded to the parcel of land which is the subject matter of the Deed of Conveyance and Possession together with purchaser Regalado Daroy, his assignee Nena Abecia, Atty. Esteban Abecia, Ex-LTC Registrar Clemente Quiblat, P.M. Salazar, and the Police Sgt. of Opol, Misamis

Oriental, Felix Abejuela.  Regalado Daroy and his assignee, Nena Abecia, were then formally placed in actual and physical possession of the parcel of land subject matter of the Deed of Conveyance and Possession.  Regalado Daroy and his assignee, Nena Abecia, then asserted their ownership of the parcel of land by making use of the improvements found on the land such as the young coconuts and bananas.  As a matter of fact the parcel of land is already in the name of Nena Abecia per Transfer Certificate of Title No. T-15926 entered in the Register of Deeds of Cagayan de Oro City on June 18, 1973 at 1:00 P.M.”   (Underscoring Ours).

Likewise, in Office File No. 419-74 of the Office of the Provincial Fiscal (Respondent’s Annex “10”) dated April 18, 1974, wherein complainant Regalado Daroy was the accused, then 4th Asst. Fiscal Alejo G. Rola referred to Nena Abecia as the owner of the subject property by virtue of her being the assignee and/or transferee of the rights of Regalado Daroy.

Furthermore, in Criminal Case No. 88-443 before Branch 25 of the RTC of Misamis Oriental, complainant testified in open court that he came to know of the Deed of Absolute Sale (Exhibit “A”) when the sheriff awarded the land to him (TSN, p. 3. Oct. 4, 1989).  The Sheriff’s Deed of Conveyance and Possession, however, was executed by the Provincial Sheriffs way back in April 11, 1972.

How indeed can complainant now have the temerity to claim that he discovered that the subject property was transferred only in 1984? And how could the Commission on Bar Discipline have overlooked the above evidence and believed the complainant “hook, line and sinker”?

2. The Commission on Bar Discipline erred in not giving credence and weight to the testimony/sworn statement of the Notary Public (Respondent’s Annex “4”) and the instrumental witnesses to the execution of the questioned Deed of Absolute Sale (Respondent’s

Annexes “5” and “6”).  Between the Notary Public and the complainant, the Notary Public, who is known for his unquestioned integrity, honesty and probity, is more believable. In fact, Notary Public Erasmo G. Damasing, then the incumbent vice-mayor, went on to become the congressman of Cagayan de Oro City.  And between the positive identification of the complainant as the person who executed the instrument by the Notary Public (and the instrumental witnesses) and the assertion of the alleged handwriting expert, the positive identification must prevail especially since the questioned signature of complainant has as many strokes as the sample signatures in the documents submitted for comparison.

Respondent’s motion is well taken.  As already stated, the land in question was purchased by complainant at the sheriff’s sale held on March 25, 1971.  The land was owned by Gertrudes de Bajuyo, wife of one of the defendants in the action for forcible entry.  Upon the lapse of one year and the failure of the owner to redeem the land, its ownership was consolidated in the name of complainant Regalado Daroy.  In his sheriff’s Return of Service issued on August 6, 1973  -  long before the complaint in this case was filed on May 25, 1987 ¾ Deputy Sheriff Eufrosino P. Castillo stated that when he finally transferred the land to the buyer, he placed in possession of the land not only the buyer, Regalado Daroy, but also the latter’s assignee, Nena Abecia, in whose name the title to the land had in fact been transferred.  The Deputy Sheriff said in his report:[14]

2. The undersigned then proceeded to the parcel of land which is the subject matter of the Deed of Conveyance and Possession together with purchaser Regalado Daroy, his assignee Nena Abecia, Atty. Esteban Abecia, Ex-LTC Registrar Clemente  Quiblat, P.M. Salazar, and the Police Sgt. of Opol, Misamis Oriental, Felix Abejuela.  Regalado Daroy and his assignee,

Nena Abecia, were then formally place in actual and physical possession of the parcel of land subject of the Deed of Conveyance and Possession.  Regalado Daroy and his assignee, Nena Abecia, then asserted their ownership of the parcel of land by making use of the improvements found in the land such as the young coconuts and bananas.  As a matter of fact the parcel of land is already in the name of Nena Abecia per Transfer Certificate of Title No. T-15926 entered in the Register of Deeds at Cagayan de Oro City on June 18, 1973 at 1:00 P.M.

3. At about 2:00 P.M. of the same day, August 4, 1973, the undersigned accompanied with police Sgt. Felex Abejuela of Opol Police Department and P.M. Salazar went to the house of Restituto Bajuyo at Mulugan, Opol, Mis. Or. The undersigned explained to Restituto Bajuyo that Regalado Daroy and his assignee Nena Abecia were already placed in actual and physical possession of the parcel of land subject matter of the Deed of Conveyance and Possession and admonished him not to molest Regalado Daroy and his assignee or anybody appointed by them to take care of the aforecited parcel of land.  He was warned  that any violation will be contrary to law and will subject him to court punishment.

It would appear, therefore, that as early as August 4, 1973 Daroy already knew that title to the land had already been transferred in the name of respondent’s wife.  Complainant’s claim that he came to know of such transfer only in 1984 is thus belied.  Nor does it appear that the transfer was made without his knowledge and consent. To the contrary, the sheriff’s return suggests that Daroy had agreed to such transfer.  Hence, the references to Mrs. Abecia as Daroy’s assignee.

It appears further that as a consequence of the demolition of the former owner’s house, complainant and Mrs. Abecia were charged, together with Deputy Sheriff Eufrosino P. Castillo, with grave coercion/malicious mischief in the Office of the Provincial Fiscal of Misamis Oriental.  In his resolution, dated April 18, 1974, dismissing the charges, Assistant Provincial Fiscal Alejo G. Rola stated, among other things:[15]

The undersigned despite the declaration of complainant Gertrudes de Bajuyo corroborated by the testimony of Josefina Jaraula that she was intimidated by a PC soldier, is of the opinion that such evidence is insufficient to warrant a belief that such an act was in fact done by Sgt.  Abalos, because the other witnesses for the complainant namely, Lito Ejina and Jose Jaime  never mentioned that there was such intimidation employed by Sgt. Abalos at the time despite the fact that these two (2) aforenamed witnesses, were present at the time and on the date Josefina Jaraula was around.  The undersigned is however of the considered opinion that the house occupied by complainant Gertrudes de Bajuyo was demolished by respondents, but such an act is a right of Mrs. Nena Abecia in her capacity as an assignee to do whatever she wants to do of the thing she owns.  Furthermore, the allegation of complainant regarding the intimidation made against her by the PC Sgt. corroborated by the other witness Josefina Jaraula is insufficient to offset the presumption of regularity of performance of an official duty by a public officer, apart from the fact that the testimony of Gertrudes Bajuyo and Josefina Jaraula are of dubious credibility.

Like the sheriff’s return made in 1973, this resolution of the Assistant Provincial Fiscal rendered the following year (1974) belies complainant’s allegation that the land in question was transferred to Mrs. Abecia without his knowledge and consent and that he came to know about it only in 1984. 

The aforementioned documents were attached to the answer of

respondent Esteban Abecia. However, despite the parties’ agreement made at the hearing held on January 30, 1989, that the said documents would be considered the evidence of respondent Abecia, they were not even mentioned in the report of the Commissioner who investigated the case.

Indeed, what appears to have happened in this  case is that the parties thought that because the land had been acquired by complainant at a public sale held in order to satisfy a judgment in his favor in a case in which respondent was complainant’s counsel, the latter could not acquire the land.  The parties apparently had in mind Art. 1491 of the Civil Code which provides, in pertinent parts, as follows:

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

. . . .

(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and employees connected with the administration of justice, the property and rights in litigation or levied upon an execution before the court within whose jurisdiction or territory they exercise their respective functions;  this prohibition includes the act of acquiring by assignment and shall apply to lawyers, with respect to the property and rights which may be the object of any litigation in which they may take part by virtue of their profession.[16]

Of course, the parties were mistaken in thinking that respondent could not validly acquire the land. In Guevara v. Calalang,[17] on facts similar to those in this case, we held that the prohibition in Art. 1491 does not apply to the sale of a parcel of land, acquired by a client to satisfy a judgment in his favor, to his attorney as long as the property was not the subject of the

litigation.  For indeed, while judges, prosecuting attorneys, and others connected with the administration of justice are prohibited from acquiring “property or rights in litigation or levied upon in execution,”  the prohibition with respect to attorneys in the case extends only to “property and rights which may be the object of any litigation in which they may take part by virtue of their profession.”

The point is,  the parties in this case thought the transfer of the land to respondent Abecia was prohibited and so they contrived a way whereby the land would be sold to Jose Gangay, whose wife Anita is the sister of Mrs. Nena Abecia, and then Gangay would sell the land to Mrs. Abecia.  As Jose Gangay stated in his affidavit of March 6, 1985:[18]

4.     T           -      Ano ba ang iyong masasabi tungkol sa nangyari?

           S          -      Sinabihan ako ni Atty. Esteban Abecia, sapagkat siya raw ang abogado sa lupang pinagkaguluhan, hindi maari na siya ang nakalagay na nagbili ng upa sa kanyang cliente na si Regalado Daroy, dahil laban raw sa kanilang batas sa mga abogado, kaya sinabihan ako ni Atty. Esteban Abecia na maari bang gamitin niya ang pangalan ko na ako raw ang nakabili sa lupa ni Regalado Daroy at paglipas raw ng isang taon, ay kanya ng ilipat sa pangalan sa documento at tituto hanggang sa pangalan ng kanyang asawa na si Nena Abecia.

5.T    -           Sumagot ka ba sa hiling ni Atty. Esteban Abecia?

S        -           Opo, pumayag ako dahil silang dalawa, si Regalado Daroy at si Atty. Esteban Abecia ay aking mga bilas, sapagkat ang isa’t-isa naming mga asawa ay magkakapatid.

6.     T           -      Ano man ang nangyari pagkatapos noon?

S      -             Isang araw, ay pumunta si Atty. Esteban Abecia sa amin at sinama niya ako doon kay Atty. Wilfredo Linaac upang ipa tunayan ang aking pangalan doon sa documento sa pagbili, at dahil doon, iyong documento sa pabili ay na notariohan ni Atty. Wilfredo Linaac.

7.     T           -      Binayaran ba kayo ni Nena Abecia at ni Atty. Esteban Abecia sa pera na naghaga ng isang libo tatlong daan at limang[pung] pesos (P1,350.00) na iyong ang halaga sa lupa.

S      -             Wala.

8.     T           -      Ipakita ko sa iyo itong documento ng pagbili at may takda ng petsa na Abril 17, 1971 notariadad ni Atty. Wilfredo Linaac Signes sa Doc. No. 333, Pahina 48, Aklat No. VI; taon series sa 1971; ano mang ang kaugnayan nito sa documento ng pagbili?

S      -             Ang lahat na mga papiles sa sinasabi ninyo ay wala akong nalalaman, ang nalaman ko lang noon akoy dinala ni Atty. Esteban Abecia sa oficina ni Atty. Wilfredo Linaac tinanong ako kong aking pirma iyong sa sa documento.

The sale of the land to Gangay may be fictitious and, therefore, void, but that complainant Regalado Daroy intended to convey the land ultimately to respondent Esteban Abecia appears to be the case.

It is true that the NBI found the signature of Regalado Daroy on the deed of sale made in favor of Jose Gangay to have been forged.  But Erasmo Damasing, the notary public who notarized the deed, affirmed that Daroy and his wife appeared before him on March 31, 1971 and, in his presence, signed the document in question.[19] Daisy Felicilda likewise stated in an affidavit executed on February 17, 1986 that she was a witness to the execution of the deed of sale and that she saw Daroy signing the deed of sale.[20]

Daroy never denied these claims of the notary public and a witness to the execution of the deed of sale. Nor was the NBI writing expert ever called to testify on his finding that the signature of Daroy in the deed of sale appeared to have been signed by a different hand. The finding that the deed of sale was forged was simply implied from the report of the NBI writing expert. As complainant, Daroy had the burden of proving that contrary to the

recital in the jurat he and his wife never appeared before the notary public and acknowledged the deed to be their voluntary act.

 WHEREFORE, the resolution dated March 26, 1994, of the IBP Board of Governors is RECONSIDERED and the complaint against respondent Esteban Abecia is DISMISSED.

SO ORDERED.

Melo, (Acting Chairman), Puno, and Martinez, JJ., concur.

 

G.R. No. 132474 November 19, 1999

RENATO CENIDO (deceased), represented by VICTORIA CENIDOSA, petitioner, vs.SPOUSES AMADEO APACIONADO and HERMINIA STA. ANA, respondents.

 

PUNO, J.:

In this petition for review, petitioner Renato Cenido seeks to reverse and set aside the decision of the Court of Appeals 1 in CA-G.R. CV No. 41011 which declared the private respondents as the owners of a house and lot in Binangonan, Rizal. 2

The antecedent facts are as follows:

On May 22, 1989, respondent spouses Amadeo Apacionado and Herminia Sta. Ana filed with the Regional Trial Court, Branch 70, Rizal a complaint against petitioner Renato Cenido for, "Declaration of Ownership, Nullity, with Damages." 3 The spouses alleged that: (1) they are the owners of a parcel of unregistered land, 123 square meters in area and located at Rizal Street, Barrio Layunan, Binangonan, Rizal, more particularly described as follows:

. . . that certain parcel of land located at Rizal, St., Layunan, Binangonan, Rizal, with an area of 123 square meters, more or less, bounded on the North by Gavino Aparato; on the East by Rizal St., on the South by Tranquilino Manuzon; and on the West by Simplicio Aparato, and the

residential house standing thereon. 4

(2) this house and lot were purchased by the spouses from its previous owner, Bonifacio Aparato, now deceased, who lived under the spouses' care and protection for some twenty years prior to his death; (3) while he was alive, Bonifacio Aparato mortgaged the said property twice, one to the Rural Bank of Binangonan and the other to Linda C. Ynares, as security for loans obtained by him; (4) the loans were paid off by the spouses thereby securing the release and cancellation of said mortgages; (5) the spouses also paid and continue to pay the real estate taxes on the property; (6) from the time of sale, they have been in open, public, continuous and uninterrupted possession of the property in the concept of owners; (7) that on January 7, 1987, petitioner Renato Cenido, claiming to be the owner of the subject house and lot, filed a complaint for ejectment against them with the Municipal Trial Court, Branch 2, Binangonan, Rizal; (8) through fraudulent and unauthorized means, Cenido was able to cause the issuance in his name of Tax Declaration No. 02-0368 over the subject property, which fact the spouses learned only upon the filing of the ejectment case; (9) although the ejectment case was dismissed by the Municipal Trial Court (MTC), Branch 2, the tax declaration in Cenido's name was not cancelled and still subsisted; (10) the spouses have referred the matter to the barangay for conciliation but Cenido unjustifiably refused to appear thereat. The spouses thus prayed that:

WHEREFORE, it is respectfully prayed of the Honorable Court that judgment issue in the case:

1. Declaring them (plaintiffs) the true and absolute owners of the house and lot now covered by Tax Declaration No. 02-0368;

2. Declaring Tax Declaration No. 02-0368 in the name of defendant Renato Cenido as null and void and directing the Provincial Assessor of Rizal and the Municipal Assessor of Binangonan, Rizal to register and to declare the house and lot covered by the same in their names (plaintiffs) for purposes of taxation;

3. Ordering defendant to pay them in the least amount of P50,000.00 as and for moral damages suffered;

4. Ordering defendant to pay them the amount of P10,000.00 as and for attorney's fees;

5. Ordering payment by defendant of exemplary damages in such amount which the Honorable Court may deem just and equitable in the premises;

6. Ordering defendant to pay the costs of suit; and

Plaintiffs pray for such other and further relief which the Honorable Court may deem just and equitable considering the foregoing premises. 5

Petitioner Cenido answered claiming that: (1) he is the illegitimate son of Bonifacio Aparato, the deceased owner of the subject property; (2) as Aparato's sole surviving heir, he became the owner of the property as evidenced by the cancellation of Tax Declaration No. 02-0274 in Bonifacio's name and the issuance of Tax Declaration No. 02-0368 in his name; (3) his ownership over the house and lot was also confirmed in 1985 by the Municipal Trial Court, Branch 1, Binangonan in Case No. 2264 which "adjudicated various claims involving the same subject property wherein plaintiffs were privy to the said case;" (4) that in said case, the Apacionado spouses participated in the execution of the compromise agreement partitioning the deceased's estate among his heirs, which agreement was adopted by the Municipal Trial Court as its judgment; (5) that the Apacionado spouses were allowed to stay in his father's house temporarily; (6) the mortgages on the property were obtained by his father upon request of the Apacionados who used the proceeds of the loans exclusively for themselves; (7) the real estate taxes or the property were paid for by his father, the principal, and the spouses were merely his agents; (8) the instrument attesting to the alleged sale of the house and lot by Bonifacio Aparato to the spouses is not a public document; (8) petitioner Cenido was never summoned to appear before the barangay for conciliation proceedings. 6

Respondent spouses replied that: (1) Cenido is not the illegitimate son of Bonifacio, Cenido's claim of paternity being spurious; (2) the ownership of the property was not the proper subject in Civil Case No. 2264 before the MTC, Branch I, nor were the spouses parties in said case. 7

The parties went to trial. Respondent spouses presented four (4) witnesses, namely, respondent Herminia Sta. Ana Apacionado; Rolando Nieves, the barangay captain; Norberto Aparato the son of Gavino Aparato, Bonifacio's brother; and Carlos Inabayan, one of the two witnesses to the deed of sale between Bonifacio Aparato and the spouses over the property. Petitioner Cenido presented only himself as witness.

On March 30, 1993, the trial court rendered judgment. The court upheld petitioner Cenido's ownership over the property by virtue of the recognition made by Bonifacio's then surviving brother, Gavino, in the compromise judgment of the MTC. Concomitantly, the court also did not sustain the deed of sale between Bonifacio and the spouses because it was neither notarized nor signed by Bonifacio and was intrinsically defective. The court ordered thus:

WHEREFORE, in the light of the foregoing considerations, the Court believes that preponderance of evidence is on the side of defendant and so the complaint could not be given due course. Accordingly, the case is, as it should be, dismissed. No attorney's fees or damages is being awarded as no evidence to this effect had been given by defendant. With costs against plaintiffs.

SO ORDERED. 8

Respondent spouses appealed to the Court of Appeals. In a decision dated September 30, 1997, the appellate court found the appeal meritorious and reversed the decision of the trial court. It held that the recognition of Cenido's filiation by Gavino, Bonifacio's brother, did not comply with the requirements of the Civil Code and the Family Code; that the deed between Bonifacio and respondent spouses was a valid contract of sale over the property; and Cenido's failure to object to the presentation of the deed before the trial court was a waiver of the defense of the Statute of Frauds. The Court of Appeals disposed of as follows:

WHEREFORE, the appealed Decision is hereby REVERSED and SET ASIDE. Plaintiffs-Appellants Spouses Amadeo Apacionado and Herminia Sta. Ana are declared owners of the subject house and lot now covered by Tax Declaration No. 02-6368. 9

Hence, this recourse. Petitioner Cenido alleges that:

1. The unsigned, unnotarized and highly doubtful private document designated as "Pagpapatunay" which is solely relied upon by the respondents in support of their case is not sufficient to vest ownership of and transfer the title, rights and interest over the subject property to the respondents.

xxx xxx xxx

2. The Court of Appeals departed from the accepted and usual course of judicial proceedings in that it ruled against the petitioner in view of the alleged weakness of his defense rather than evaluate the case based on the strength of the respondents' evidence, thereby necessitating this Honorable Court's exercise of its power of supervision. 10

Victoria Cenidosa, in representation of petitioner Cenido, has manifested, through counsel, that petitioner died in September 1993; that on December 18, 1985, eight years before his death, Cenido sold the subject house and lot to Maria D. Ojeda for the sum of P70,000.00; that Maria D. Ojeda is now old and sickly, and is thus being represented in the instant case by her daughter, Victoria O. Cenidosa. 11

In the same vein, respondent Herminia Sta. Ana Apacionado also manifested that her husband, Amadeo Apacionado, died on August 11, 1989. Amadeo is now being represented by his compulsory heirs. 12

Before ruling on petitioner's arguments, it is necessary to establish certain facts essential for a proper adjudication of the case.

The records reveal that the late Bonifacio Aparato had two siblings — a sister named Ursula and a brother named Gavino. 13 Ursula died on March 1, 1979, 14 Bonifacio on January 3, 1982 15 and Gavino, sometime after Bonifacio's death. Both Ursula and Bonifacio never married and died leaving no legitimate offspring. Gavino's son, Norberto, however, testified that there was a fourth sibling, a sister, who married but also died; as to when she died or whether she left any heirs, Norberto did not know. 16 What is clear and undisputed is that Bonifacio was survived by Gavino who also left legitimate heirs.

Both Bonifacio and Ursula lived in the subject property under the care and protection of the Apacionados. Herminia Sta. Ana Apacionado started living with them in 1976. She took care of Bonifacio and Ursula, who died three years later. Herminia married Amado Apacionado, whose paternal grandmother was a sister of Bonifacio. 17

Amadeo moved into Bonifacio's house and assisted Herminia in taking care of the old man until his demise.

Shortly after Bonifacio's death, Civil Case No. 2264 was instituted by petitioner Cenido against Gavino Aparato before the Municipal Trial Court, Branch 1, Binangonan. The records do not reveal the nature of this action. 18 Nevertheless, three years after filing of the case, the parties entered into a compromise agreement. The parties listed the properties of Bonifacio comprising two parcels of land: one parcel was the residential house and lot in question and the other was registered agricultural land with an area of 38,641 square meters; Gavino Aparato expressly recognized Renato Cenido as the sole illegitimate son of his brother, likewise, Cenido recognized Gavino as the brother of Bonifacio; as Bonifacio's heirs, they partitioned his estate among themselves, with the subject property and three portions of the agricultural land as Cenido's share, and the remaining 15,309 square meters of the agricultural land as Gavino's; both parties agreed to share in the documentation, registration and other expenses for the transfer of their shares. This compromise agreement was adopted as the decision of the MTC on January 31, 1985. 19

In the same year, petitioner Cenido obtained in his name Tax Declaration No. 02-6368 over the subject property. Two years later, in January 1987, he filed an ejectment case against respondent spouses who continued occupying the property in question. This case was dismissed.

Respondent spouses' claim of ownership over the subject property is anchored on a one-page typewritten document entitled "Pagpapatunay," executed by Bonifacio Aparato. The "Pagpapatunay" reads as follows:

PAGPAPATUNAY

DAPAT MALAMAN NG LAHAT:

Akong si BONIFACIO APARATO, binata, Pilipino, husto sa gulang, at kasalukuyang naninirahan sa Layunan, Binangonan, Rizal, ay nagpapatunay nitong mga sumusunod:

Una: — Na, ako ang siyang nagmamay-ari ng isang lagay na lupang SOLAR at Bahay Tirahan na nakatirik sa nabanggit na solar na makikita sa lugar ng Rizal St., Layunan, Binangonan, Rizal;

Ikalawa: — Na, sapagkat ang nagalaga sa akin hanggang sa ako'y tuluyang kunin ng Dakilang Maykapal ay walang iba kungdi ang mag-asawang AMADEO APACIONADO at HERMINIA STA. ANA APACIONADO;

Ikatlo: — Na, pinatutunayan ko sa mga maykapangyarihan at kanginumang tao na ang nabanggit na SOLAR at bahay tirahan ay ipinagbili ko sa nabanggit na mag-asawa sa halagang SAMPUNG LIBONG (P10,000.00) PISO, bilang pakunsuwelo sa kanilang pagmamalasakit sa aking pagkatao at kalalagayan;

Na, patunay na ito ay aking nilagdaan ng maliwanag ang aking isip at nalalaman ko ang lahat ng nilalaman nito.

SA KATUNAYAN NG LAHAT, lumagda ako ng aking pangalan at apelyido ngayong ika-10 ng Disyembre 1981, dito sa Layunan, Binangonan, Rizal.

(Thumbmarked)

BONIFACIO APARATO

Nagpatunay

NILAGDAAN SA HARAP NINA:

(SGD.) (SGD.)

Virgilio O. Cenido Carlos Inabayan

— Saksi — — Saksi — 20

On its face, the document "Pagpapatunay" attests to the fact that Bonifacio Aparato was the owner of the house and lot in Layunan, Rizal; that because the Apacionado spouses took care of him until the time of his death, Bonifacio sold said property to them for the sum of P10,000.00; that he was signing the same document with a clear mind and with full knowledge of its contents; and as proof thereof, he was affixing his signature on said document on the tenth day of December 1981 in Layunan, Binangonan, Rizal. Bonifacio affixed his thumbmark on the space above his name; and this was witnessed by Virgilio O. Cenido and Carlos Inabayan.

Petitioner Cenido disputes the authenticity and validity of the "Pagpapatunay." He claims that it is not a valid contract of sale and its genuineness is highly doubtful because: (1) it was not notarized and is merely a private instrument; (2) it was not signed by the vendor, Bonifacio; (3) it was improbable for Bonifacio to have executed the document and dictated the words "lumagda ako ng aking pangalan at apelyido" because he was paralyzed and could no longer sign his name at that time; and (4) the phrase "ang nag-alaga sa akin hanggang sa ako'y tuluyang kunin ng Dakilang Maykapal" speaks of an already departed Bonifacio and could have been made only by persons other than the dead man himself. 21

To determine whether the "Pagpapatunay" is a valid contract of sale, it must contain the essential requisites of contracts, viz: (1) consent of the contracting parties; (2) object certain which is the subject matter of the contract; and (3) cause of the obligation which is established. 22

The object of the "Pagpapatunay" is the house and lot. The consideration is P10,000.00 for the services rendered to Aparato by respondent spouses. According to respondent Herminia Apacionado, this P10,000.00 was not actually paid to Bonifacio because the amount merely quantified the services they rendered to the old man. It was the care the spouses voluntarily gave that was the cause of the sale. 23 The cause therefore was the service remunerated. 24

Petition alleges that Bonifacio did not give his consent to the deed because he did not affix his signature, but merely his thumbmark, on the document. Bonifacio was a literate person who could legibly sign his full name, and his signature is evident in several documents such

as his identification card as member of the Anderson Fil-American Guerillas; 25 the "Kasulatan ng Palasanglaan" dated July 25, 1974 where he and his two other siblings mortgaged the subject property for P2,000.00 to one Linda Y. Cenido; 26 "Padagdag sa Sanglaan" dated June 16, 1976; 27 and another "Pagdagdag sa Sanglaan" dated March 2, 1979. 28

Respondent Herminia Sta. Ana Apacionado testified that Bonifacio Aparato affixed his thumbmark because he could no longer write at the time of execution of the document. The old man was already 61 years of age and could not properly see with his eyes. He was stricken by illness a month before and was paralyzed from the waist down. He could still speak albeit in a garbled manner, and be understood. The contents of the "Pagpapatunay" were actually dictated by him to one Leticia Bandola who typed the same on a typewriter she brought to his house. 29

That Bonifacio was alive at the time of execution of the contract and voluntarily gave his consent to the instrument is supported by the testimony of Carlos Inabayan, the lessee of Bonifacio's billiard hall at the ground floor of the subject property. Inabayan testified that on December 10, 1981, he was summoned to go up to Bonifacio's house. There, he saw Bonifacio, respondent Apacionados, and a woman and her husband. He was given a sheet of paper to read. He read the paper and understood that it was a deed of sale of the house and lot executed by Bonifacio in favor of the Apacionados. Thereafter, Bonifacio requested him to sign the document as witness. Reexamining the "Pagpapatunay," Inabayan saw that Bonifacio affixed his thumbmark on the space above his name. Inabayan thus signed the document and returned to the billiard hall. 30

Inabayan's testimony has not been rebutted by petitioner. Petitioner, through counsel, waived his right to do so, finding no need to cross-examine the witness. 31 This waiver was granted by the court in the order of September 23, 1992. 32

One who alleges any defect or the lack of a valid consent to a contract must establish the same by full, clear and convincing evidence, not merely by preponderance thereof. 33 Petitioner has not alleged that the old man, by his physical or mental state, was

incapacitated to give his consent at the time of execution of the "Pagpapatunay." Petitioner has not shown that Bonifacio was insane or demented or a deaf-mute who did not know how to write. 34 Neither has petitioner claimed, at the very least, that the consent of Bonifacio to the contract was vitiated by mistake, violence, intimidation, undue influence or fraud. 35 If by assailing the intrinsic defects in the wordage of the "Pagpapatunay" petitioner Cenido seeks to specifically allege the exercise of extrinsic fraud and undue influence on the old man, these defects are not substantial as to render the entire contract void. There must be clear and convincing evidence of what specific acts of undue influence 36 or fraud 37 were employed by respondent spouses that gave rise to said defects. Absent such proof, Bonifacio's presumed consent to the "Pagpapatunay" remains.

The "Pagpapatunay," therefore, contains all the essential requisites of a contract. Its authenticity and due execution have not been disproved either. The finding of the trial court that the document was prepared by another person and the thumbmark of the dead Bonifacio was merely affixed to it is pure conjecture. On the contrary, the testimonies of respondent Herminia Sta. Ana and Carlos Inabayan prove that the document is authentic and was duly executed by Bonifacio himself.

The "Pagpapatunay" is undisputably a private document. And this fact does not detract from its validity. The Civil Code, in Article 1356 provides:

Art. 1356. Contracts shall be obligatory, in whatever form they may have been entered into, provided all the essential requisites for their validity are present. However, when the law requires that a contract be in some form in order that it may be valid or enforceable, or that a contract be proved in a certain way, that requirement is absolute and indispensable. In such cases, the right of the parties stated in the following article cannot be exercised.

Generally, contracts are obligatory, in whatever form such contracts may have been entered into, provided all the essential requisites for their validity are present. When, however, the law requires that a contract be in some form for it to be valid or enforceable, that requirement must be complied with.

A certain form may be prescribed by law for any of the following purposes: for validity, enforceability, or greater efficacy of the contract. 38 When the form required is for validity, its non-observance renders the contract void and of no effect. 39 When the required form is for enforceability, non-compliance therewith will not permit, upon the objection of a party, the contract, although otherwise valid, to be proved or enforced by action. 40 Formalities intended for greater efficacy or convenience or to bind third persons, if not done, would not adversely affect the validity or enforceability of the contract between the contracting parties themselves. 41

Art. 1358 of the Civil Code requires that:

Art. 1358. The following must appear in a public document:

(1) Acts and contracts which have for their object the creation, transmission, modification or extinguishment of real rights over immovable property; sales of real property or of an interest therein are governed by Articles 1403, No. 2 and 1405;

(2) The cession, repudiation or renunciation of hereditary rights or of those of the conjugal partnership of gains;

(3) The power to administer property, or any other power which has for its object an act appearing or which should appear in a public document, or should prejudice a third person;

(4) The cession of actions or rights proceeding from an act appearing in a public document.

All other contracts where the amount involved exceeds five hundred pesos must appear in writing, even a private one. But sales of goods, chattels or things in action are governed by Articles 1403, No. 2 and 1405.

Acts and contracts which create, transmit, modify or extinguish real rights over immovable property should be embodied in a public document. Sales of real property are governed by the Statute of Frauds which reads:

Art. 1403. The following contracts are unenforceable, unless they are

ratified:

(1) . . .

(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 and by the party charged, or by his agent; evidence, therefore, of the agreement cannot be received without the writing, or a secondary evidence of its contents:

(a) An agreement that by its terms is not to be performed within a year from the making thereof;

xxx xxx 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;

(3) . . . .

The sale of real property should be in writing and subscribed by the party charged for it to be enforceable. The "Pagpapatunay" is in writing and subscribed by Bonifacio Aparato, the vendor; hence, it is enforceable under the Statute of Frauds. Not having been subscribed and sworn to before a notary public, however, the "Pagpapatunay" is not a public document, and therefore does not comply with Article 1358, paragraph 1 of the Civil Code.

The requirement of a public document in Article 1358 is not for the validity of the instrument but for its efficacy. 42 Although a conveyance of land is not made in a public document, it does not affect the validity of such conveyance. 43 Article 1358 does not require the accomplishment of the acts or contracts in a public instrument in order to validate the act or contract but only to insure its efficacy, 44 so that after the existence of said contract has been admitted, the party bound may be compelled to execute the proper document. 45 This is clear from Article 1357, viz:

Art. 1357. If the law requires a document or other special form, as in

the acts and contracts enumerated in the following article [Article 1358], the contracting parties may compel each other to observe that form, once the contract has been perfected. This right may be exercised simultaneously with the action upon the contract.

The private conveyance of the house and lot is therefore valid between Bonifacio Aparato and respondent spouses. The question of whether the "Pagpapatunay" is sufficient to transfer and convey title to the land for purposes of original registration 46 or the issuance of a real estate tax declaration in respondent spouses' names, as prayed for by respondent spouses, 47 is another matter altogether. 48 For greater efficacy of the contract, convenience of the parties and to bind third persons, respondent spouses have the right to compel the vendor or his heirs to execute the necessary document to properly convey the property. 49

Anent petitioner's second assigned error, the fact that the Court of Appeals sustained the validity of the "Pagpapatunay" was not a conclusion that necessarily resulted from the weakness of petitioner's claim of filiation to Bonifacio Aparato. Of and by itself, the "Pagpapatunay" is a valid contract of sale between the parties and the Court of Appeals did not err in upholding its validity.

The issue of petitioner's paternity, however, is essential to determine whether Tax Declaration No. 02-6368 in the name of petitioner Cenido should be nullified, as prayed for by respondent spouses in their complaint.

Tax Declaration No. 02-6368 50 in petitioner Cenido's name was issued pursuant to the compromise judgment of the MTC where Gavino Aparato, Bonifacio's brother, expressly recognized petitioner Cenido as Bonifacio's sole illegitimate son. The compromise judgment was rendered in 1985, three years after Bonifacio's demise.

Under the Civil Code, 51 natural children and illegitimate children other than natural are entitled to support and successional rights only when recognized or acknowledged by the putative parent. 52 Unless recognized, they have no rights whatsoever against their alleged parent or his estate. 53

The filiation of illegitimate children may be proved by any of the forms

of recognition of natural children. 54 This recognition may be made in three ways: 55 (1) voluntarily, which must be express such as that in a record of birth, a will, a statement before a court of record, or in any authentic writing; 56 (2) legally, i.e., when a natural child is recognized, such recognition extends to his or her brothers and sisters of the full blood; 57 and (3) judicially or compulsorily, which may be demanded by the illegitimate child of his parents. 58 The action for compulsory recognition of the illegitimate child must be brought during the lifetime of the presumed parents. This is explicitly provided in Article 285 of the Civil Code, viz:

Art. 285. The action for the recognition of natural children may be brought only during the lifetime of the presumed parents, except in the following cases:

(1) If the father or mother died during the minority of the child, in which case the latter may file the action before the expiration of four years from the attainment of his majority;

(2) If after the death of the father or of the mother a document should appear of which nothing had been heard and in which either or both parents recognize the child.

In this case, the action must be commenced within four years from the finding of the document.

The illegitimate child can file an action for compulsory recognition only during the lifetime of the presumed parent. After the parent's death, the child cannot bring such action, except, however, in only two instances: one is when the supposed parent died during the minority of the child, and the other is when after the death of the parent, a document should be discovered in which the parent recognized the child as his. The action must be brought within four years from the attainment of majority in the first case, and from the discovery of the document in the second case. The requirement that the action be filed during the parent's lifetime is to prevent illegitimate children, on account of strong temptations to large estates left by dead persons, to claim part of this estate without giving the alleged parent personal opportunity to be heard. 59 It is vital that the parent be heard for only the parent is in a position to reveal the true facts

surrounding the claimant's conception. 60

In the case at bar, petitioner Cenido did not present any record of birth, will or any authentic writing to show he was voluntarily recognized by Bonifacio as his illegitimate son. In fact, petitioner admitted on the witness stand that he had no document to prove Bonifacio's recognition, much less his filiation. 61 The voluntary recognition of petitioner's filiation by Bonifacio's brother before the MTC does not qualify as a "statement in a court of record." Under the law, this statement must be made personally by the parent himself or herself, not by any brother, sister or relative; after all, the concept of recognition speaks of a voluntary declaration by the parent, or if the parent refuses, by judicial authority, to establish the paternity or maternity of children born outside wedlock. 62

The compromise judgment of the MTC does not qualify as a compulsory recognition of petitioner. In the first place, when he filed this case against Gavino Aparato, petitioner was no longer a minor. He was already pushing fifty years old. 63 Secondly, there is no allegation that after Bonifacio's death, a document was discovered where Bonifacio recognized petitioner Cenido as his son. Thirdly, there is nothing in the compromise judgment that indicates that the action before the MTC was a settlement of Bonifacio's estate with a gross value not exceeding P20,000.00. 64 Definitely, the action could not have been for compulsory recognition because the MTC had no jurisdiction over the subject matter. 65

The Real Property Tax Code provides that real property tax be assessed in the name of the person "owning or administering" the property on which the tax is levied. 66 Since petitioner Cenido has not proven any successional or administrative rights to Bonifacio's estate, Tax Declaration No. 02-6368 in Cenido's name must be declared null and void.

IN VIEW WHEREOF, the petition is denied and the Decision and Resolution of the Court of Appeals in CA-G.R. CV No. 41011 are affirmed. Tax Declaration No. 02-6368 in the name of petitioner Renato Cenido is declared null and void.

No costs.

SO ORDERED.

Davide, Jr., C.J., Kapunan, Pardo and Ynares-Santiago, JJ., concur.

G.R. No. 139982             November 21, 2002

JULIAN FRANCISCO (Substituted by his Heirs, namely: CARLOS ALTEA FRANCISCO; the heirs of late ARCADIO FRANCISCO, namely: CONCHITA SALANGSANG-FRANCISCO (surviving spouse), and his children namely: TEODULO S. FRANCISCO, EMILIANO S. FRANCISCO, MARIA THERESA S. FRANCISCO, PAULINA S. FRANCISCO, THOMAS S. FRANCISCO; PEDRO ALTEA FRANCISCO; CARINA FRANCISCO-ALCANTARA; EFREN ALTEA FRANCISCO; DOMINGA LEA FRANCISCO-REGONDON; BENEDICTO ALTEA FRANCISCO and ANTONIO ALTEA FRANCISCO), petitioner, vs.PASTOR HERRERA, respondent.

D E C I S I O N

QUISUMBING, J.:

This is a petition for review on certiorari of the decision1 of the Court of Appeals, dated August 30, 1999, in CA-G.R. CV No. 47869, which affirmed in toto the judgment2 of the Regional Trial Court (RTC) of Antipolo City, Branch 73, in Civil Case No. 92-2267. The appellate court sustained the trial court’s ruling which: (a) declared null and void the deeds of sale of the properties covered by Tax Declaration Nos. 01-00495 and 01-00497; and (b) directed petitioner to return the subject properties to respondent who, in turn, must refund to petitioner the purchase price of P1,750,000.

The facts, as found by the trial court and affirmed by the Court of Appeals, are as follows:

Eligio Herrera, Sr., the father of respondent, was the owner of two parcels of land, one consisting of 500 sq. m. and another consisting of 451 sq. m., covered by Tax Declaration (TD) Nos. 01-00495 and 01-00497, respectively. Both were located at Barangay San Andres, Cainta, Rizal.3

On January 3, 1991, petitioner bought from said landowner the first parcel, covered by TD No. 01-00495, for the price of P1,000,000, paid in installments from November 30, 1990 to August 10, 1991.

On March 12, 1991, petitioner bought the second parcel covered by TD No. 01-00497, for P750,000.

Contending that the contract price for the two parcels of land was grossly inadequate, the children of Eligio, Sr., namely, Josefina Cavestany, Eligio Herrera, Jr., and respondent Pastor Herrera, tried to negotiate with petitioner to increase the purchase price. When petitioner refused, herein respondent then filed a complaint for annulment of sale, with the RTC of Antipolo City, docketed as Civil Case No. 92-2267. In his complaint, respondent claimed ownership over the second parcel, which is the lot covered by TD No. 01-00497, allegedly by virtue of a sale in his favor since 1973. He likewise claimed that the first parcel, the lot covered by TD No. 01-00495, was subject to the co-ownership of the surviving heirs of Francisca A. Herrera, the wife of Eligio, Sr., considering that she died intestate on April 2, 1990, before the alleged sale to petitioner. Finally, respondent also alleged that the sale of the two lots was null and void on the ground that at the time of sale, Eligio, Sr. was already incapacitated to give consent to a contract because he was already afflicted with senile dementia, characterized by deteriorating mental and physical condition including loss of memory.

In his answer, petitioner as defendant below alleged that respondent was estopped from assailing the sale of the lots. Petitioner contended that respondent had effectively ratified both contracts of sales, by receiving the consideration offered in each transaction.

On November 14, 1994, the Regional Trial Court handed down its decision, the dispositive portion of which reads:

WHEREFORE, in view of all the foregoing, this court hereby orders that:

1. The deeds of sale of the properties covered by Tax Dec. Nos. 01-00495 and 01-00497 are declared null and void;

2. The defendant is to return the lots in question including all

improvements thereon to the plaintiff and the plaintiff is ordered to simultaneously return to the defendant the purchase price of the lots sold totalling to P750,000.00 for lot covered by TD 01-00497 and P1,000,000.00 covered by TD 01-00495;

3. The court also orders the defendant to pay the cost of the suit.

<>4. The counter-claim of the defendant is denied for lack of merit.

SO ORDERED.4

Petitioner then elevated the matter to the Court of Appeals in CA-G.R. CV No. 47869. On August 30, 1999, however, the appellate court affirmed the decision of the Regional Trial Court, thus:

WHEREFORE, premises considered, the decision appealed from is hereby AFFIRMED in toto. Costs against defendant-appellant.

SO ORDERED.5

Hence, this petition for review anchored on the following grounds:

I. THE COURT OF APPEALS COMPLETELY IGNORED THE BASIC DIFFERENCE BETWEEN A VOID AND A MERELY VOIDABLE CONTRACT THUS MISSING THE ESSENTIAL SIGNIFICANCE OF THE ESTABLISHED FACT OF RATIFICATION BY THE RESPONDENT WHICH EXTINGUISHED WHATEVER BASIS RESPONDENT MAY HAVE HAD IN HAVING THE CONTRACT AT BENCH ANNULLED.

II. THE DECISION OF THE COURT OF APPEALS ON "SENILE DEMENTIA":

A. DISREGARDED THE FACTUAL BACKGROUND OF THE CASE;

B. WAS CONTRARY TO ESTABLISHED JURISPRUDENCE; AND

C. WAS PURELY CONJECTURAL, THE CONJECTURE BEING ERRONEOUS.

III. THE COURT OF APPEALS WAS IN GROSS ERROR AND IN FACT VIOLATED PETITIONERS’ RIGHT TO DUE PROCESS

WHEN IT RULED THAT THE CONSIDERATION FOR THE QUESTIONED CONTRACTS WAS GROSSLY INADEQUATE.6

The resolution of this case hinges on one pivotal issue: Are the assailed contracts of sale void or merely voidable and hence capable of being ratified?

Petitioner contends that the Court of Appeals erred when it ignored the basic distinction between void and voidable contracts. He argues that the contracts of sale in the instant case, following Article 13907 of the Civil Code are merely voidable and not void ab initio. Hence, said contracts can be ratified. Petitioner argues that while it is true that a demented person cannot give consent to a contract pursuant to Article 1327,8 nonetheless the dementia affecting one of the parties will not make the contract void per se but merely voidable. Hence, when respondent accepted the purchase price on behalf of his father who was allegedly suffering from senile dementia, respondent effectively ratified the contracts. The ratified contracts then become valid and enforceable as between the parties.

Respondent counters that his act of receiving the purchase price does not imply ratification on his part. He only received the installment payments on his senile father’s behalf, since the latter could no longer account for the previous payments. His act was thus meant merely as a safety measure to prevent the money from going into the wrong hands. Respondent also maintains that the sales of the two properties were null and void. First, with respect to the lot covered by TD No. 01-00497, Eligio, Sr. could no longer sell the same because it had been previously sold to respondent in 1973. As to lot covered by TD No. 01-00495, respondent contends that it is co-owned by Eligio, Sr. and his children, as heirs of Eligio’s wife. As such, Eligio, Sr. could not sell said lot without the consent of his co-owners.

We note that both the trial court and the Court of Appeals found that Eligio, Sr. was already suffering from senile dementia at the time he sold the lots in question. In other words, he was already mentally incapacitated when he entered into the contracts of sale. Settled is the rule that findings of fact of the trial court, when affirmed by the appellate court, are binding and conclusive upon the Supreme Court.9

Coming now to the pivotal issue in this controversy. A void or inexistent contract is one which has no force and effect from the very beginning. Hence, it is as if it has never been entered into and cannot be validated either by the passage of time or by ratification. There are two types of void contracts: (1) those where one of the essential requisites of a valid contract as provided for by Article 131810 of the Civil Code is totally wanting; and (2) those declared to be so under Article 140911 of the Civil Code. By contrast, a voidable or annullable contract is one in which the essential requisites for validity under Article 1318 are present, but vitiated by want of capacity, error, violence, intimidation, undue influence, or deceit.

Article 1318 of the Civil Code states that no contract exists unless there is a concurrence of consent of the parties, object certain as subject matter, and cause of the obligation established. Article 1327 provides that insane or demented persons cannot give consent to a contract. But, if an insane or demented person does enter into a contract, the legal effect is that the contract is voidable or annullable as specifically provided in Article 1390.12

In the present case, it was established that the vendor Eligio, Sr. entered into an agreement with petitioner, but that the former’s capacity to consent was vitiated by senile dementia. Hence, we must rule that the assailed contracts are not void or inexistent per se; rather, these are contracts that are valid and binding unless annulled through a proper action filed in court seasonably.

An annullable contract may be rendered perfectly valid by ratification, which can be express or implied. Implied ratification may take the form of accepting and retaining the benefits of a contract.13 This is what happened in this case. Respondent’s contention that he merely received payments on behalf of his father merely to avoid their misuse and that he did not intend to concur with the contracts is unconvincing. If he was not agreeable with the contracts, he could have prevented petitioner from delivering the payments, or if this was impossible, he could have immediately instituted the action for reconveyance and have the payments consigned with the court. None of these happened. As found by the trial court and the Court of Appeals, upon learning of the sale, respondent negotiated for the increase of the purchase price while receiving the installment

payments. It was only when respondent failed to convince petitioner to increase the price that the former instituted the complaint for reconveyance of the properties. Clearly, respondent was agreeable to the contracts, only he wanted to get more. Further, there is no showing that respondent returned the payments or made an offer to do so. This bolsters the view that indeed there was ratification. One cannot negotiate for an increase in the price in one breath and in the same breath contend that the contract of sale is void.

Nor can we find for respondent’s argument that the contracts were void as Eligio, Sr., could not sell the lots in question as one of the properties had already been sold to him, while the other was the subject of a co-ownership among the heirs of the deceased wife of Eligio, Sr. Note that it was found by both the trial court and the Court of Appeals that Eligio, Sr., was the "declared owner" of said lots. This finding is conclusive on us. As declared owner of said parcels of land, it follows that Eligio, Sr., had the right to transfer the ownership thereof under the principle of jus disponendi.

In sum, the appellate court erred in sustaining the judgment of the trial court that the deeds of sale of the two lots in question were null and void.

WHEREFORE, the instant petition is GRANTED. The decision dated August 30, 1999 of the Court of Appeals in CA-G.R. CV No. 47869, affirming the decision of the Regional Trial Court in Civil Case No. 92-2267 is REVERSED. The two contracts of sale covering lots under TD No. 01-00495 and No. 01-00497 are hereby declared VALID. Costs against respondent.

SO ORDERED.

Bellosillo, (Chairman), Mendoza, and Callejo, Sr., JJ., concur.Austria-Martinez, J., on leave.

Footnotes

1 Rollo, pp. 33-40.

2 Records, pp. 224-232.

3 Id. at 224-225.

4 Id. at 231-232.

5 Rollo, p. 39.

6 Id. at 16-17.

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

(1) Those where one of the parties is incapable of giving consent to a contract;

(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.

8 ART. 1327. - The following cannot give consent to a contract:

x x x

(2) Insane or demented persons, and deaf-mutes who do not know how to write.

9 Bordalba v. Court of Appeals, G.R. No. 112443, January 25, 2002, p. 7.

10 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.

11 ART. 1409. The following contracts are inexistent and void from the beginning:

(1) Those whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy;

(2) Those which are absolutely simulated or fictitious;

(3) Those whose cause or object did not exist at the time of the transaction;

(4) Those whose object is outside the commerce of man;

(5) Those which contemplate an impossible service;

(6) Those where the intention of the parties relative to the principal object of the contract cannot be ascertained;

(7) Those expressly prohibited or declared by law.

These contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived.

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

(1) Those where one of the parties is incapable of giving consent to a contract;

. . .

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