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sitesRosencor Dev’t and Rene Joaquin v. Paterno Inquing, Irene Guillermo, Frederico Bantugan, Fernando Magbanua, and Liza Tiangco

Facts: Paterno Inquing, Irene Guillermo, Frederico Bantugan,

Fernando Magbanua, and Liza Tiangco, herein respondents, averred that they are the lessees, since 1971, of a two-story residential apartment located at Tomas

Morato Ave., Quezon City owned by the spouses Faustino and Cresencia Tiangco.

The lease was not covered by a contract and the lessees were assured by the Spouses Tiangco that they had the pre-emptive right to purchase the property if ever there was a decision to sell it.

Upon the death of the Spouses Tiangco in 1975, the management of the property was adjucated to their heirs who were represented by Eufrocina de Leon. The lessess were allegedly promised the same pre-emptive rights to purchase by the heirs of the spouses Tiangco.

In June 1990, the lessees received a letter from a certain Atty. Erlinda Aguila demanding that they vacate the premises so that demolition to the building could be undertaken. The lessees refused to vacate.

Thereafter, they received a letter from Eufrocina De Leon offering to sell them the property for 2,000,000.00 pesos. The lessees countered the offer by offering to buy the property for 1,000,000 pesos. However, no answer was given by De Leon to accept the offer.

However, in November 1990, Rene Joaquin, came to the leased premises introducing himself as the new owner.

In January 1991, the lessees again received another letter from Atty. Aguila demanding that they vacate the premises. And thereafter, they received a letter from De Leon advising them that the heirs had already sold the property to Rosencor.

The lessees, later on, received a copy of the Deed of Sale between De Leon and Rosencor. They discovered that the sale took place on September 1990 while the offer by De Leon happened a month later in October 1990.

The lessees offered to reimburse De Leon the selling price but they were refused. They then filed an action, among others, for the rescission of the Deed of Absolute Sale between De Leon and Rosencor.

The RTC dismissed the complaint holding that the right of first refusal of the lessees was merely and oral one and was thus unenforceable by virtue of the statute of frauds.

The CA reversed the decision of the RTC and ordered, among others, the rescission of the Deed of Absolute Sale and for the heirs to afford the lessees to exercise their rights of first refusal.

Hence, the present petition wherein Rosencor and Rene Joaquin raise the following errors:I. THE CA GRAVELY ERRED WHEN IT ORDERED THE

RESCISSION OF THE DEED OF ABSOLUTE SALEII. THE CA COMMITTED MANIFEST ERROR IN

MANDATING THAT DE LEON AFFORD THE RESPONDENTS THE OPPORTUNITY TO EXERCISE THEIR RIGHT OF FIRST REFUSAL

III. THE CA GRIEVOUSLY ERRED IN CONCLUDING THAT RESPONDENTS HAVE ESTABLISHED THEIR RIGHT OF FIRST REFUSAL DESPITE PETITIONERS’ RELIANCE ON THEIR DEFENSE BASED ON THE STATUTE OF FRAUDS.

Issues: WON the oral contract for the rights of first refusal of the lessees was valid, WON the respondents have proven their right of

first refusal, and WON the rescission of the Deed of Absolute Sale was proper

First Issue Both the RTC and the CA based their decisions on the

statue of frauds. The RTC ruled that, being only oral, the right of refusal of the lessees was unenforceable. The CA, on the other hand, claims that the statute of frauds governs the said right.

However, the right of first refusal is not among those listed unenforceable under the statue of frauds. Paragraph 2(e) of Article 1403 of the Civil Code only mentions a perfected contract of sale of real property. A right of first refusal is not a perfected contract of sale of real property.

And, also, the Court has also previously held that not all agreements affecting land must be put into writing to attain enforceability.

Second Issue The Court agrees with the CA that the lessee-respondents

have proven the existence of their right of first refusal. All respondents have individually and uniformly testified

that they were promised by the late Spouses Tiangco and, later on, by their heirs a right of first refusal over the property they were leasing.

Furthermore, the act by De Leon of offering to sell the property to the lessees verifies that the heirs recognize the existence of the right of first refusal.

Also, the petitioners did not present evidence that the rights of first refusal did not exist.

Third Issue The court mentioned four cases in relation to the third

issue. In the first cases, the court held in Guzman, Bocaling and

Co, Inc. vs. Bonnevie that a Contract of Sale was not voidable but rescissible. Under Article 1380 to 1381 (paragraph 3) of the Civil Code, a contract otherwise valid may nonetheless be subsequently be rescinded by reason of injury to third persons, like creditors.

According to Tolentino, rescission is a remedy granted by law to the contracting parties and even to third persons, to secure reparations for damages caused to them by a contract.

In the second case, Equatorial Realty and Dev’t, Inc. vs Mayfair Theater, Inc, the court ordered the rescission of a contract entered into in violation of a right of first refusal. Mayfair could only exercise the right if the fraudulent sale is first set aside or rescinded.

Third, in Paranaque Kings Enterprises, Inc. vs CA, the Court held that the allegations in a complaint showing violation of a contractual right of first option to buy properties subject to lease constitute a valid cause of action by summarizing the rulings in the two previously cited cases.

Lastly, in the case of Litonjua vs L&R Corporation, the court held that the sale made therein in violation of a right of first refusal embodied in a mortgage contract was rescissible.

Thus, as enunciated in the cited cases, a contract of sale entered into in violation of a right of first refusal of another person is rescissible.

However, that doctrine cannot be applied to the case at bar. Under Article 1381 of the Civil Code, paragraph 3, a contract validly agreed upon may be rescinded if it is “undertaken in fraud of creditors when the latter cannot in any manner collect the claim due them.”

Moreover, under Article 1385, rescission shall not take place “when the things which are the object of the contract are legally in the possession of third persons who did not act in bad faith.”

Good faith is always presumed unless contrary to the evidence is adduced. In the case at bar, there clear and convincing evidence should have been shown to prove that petitioners were aware of the right of first refusal accorded to the respondents.

Respondents point to the letter by Atty. Aguila as proof. However, no mention about the rights of first refusal was made in said letter.

Neither was there any showing that respondents notified Rosencor of Atty. Aguila of their right of first refusal after they received the said letter.

Respondents also point to the letter by De Leon where she recognized the right of first refusal of the respondents. However, De Leon was writing on her behalf and not on behalf of petitioners and, as such, it only shows that De Leon was aware of the existence of the rights. It does not show that petitioners were aware of such rights.

Clearly, De Leon is the only party in bad faith in this case. Considering the there was no showing of bad faith on the

part of the petitioners, the CA erred in ordering for the rescission of the Deed of Absolute Sale between Rosencor and De Leon.

Thus, the remedy for the respondent is not rescission but an action for damages against De Leon and the heirs of the Spouses Tiangco for the unjustified disregard of their right of first refusal.

KHE HONG CHENG v. CA and PHILAM INSURANCE CO.(355 SCRA 701)

Facts:

Petitioner Khe Hong Cheng is the owner of Butuan Shipping Lines. On or about 4 October 1985, the Philippine Agricultural Trading Corporation shipped on board the vessel M/V PRINCE ERIC (owned by petitioner) 3, 400 bags of copra for delivery to Dipolog City. The said shipment was covered by a marine insurance policy issued by American Home Insurance Company (respondent Philam’s assured). M/V PRINCE ERIC, however, sank resulting in the total loss of the shipment. Because of this, the insurer, American Home, paid the amount of P354, 000. 00 (the value of the copra) to the consignee.

American Home then instituted a civil case based on breach of contract of carriage for the recovery of the money paid.

While the case was still pending, or on 20 December 1989, petitioner Khe Hong Cheng executed deeds of donations of parcels of land in favor of his children.

On 29 December 1993, four years after the donations were made and the TCTs were registered in the donees’ names, the trial court rendered judgment against petitioner. However, despite earnest efforts, the sheriff found no property under the name of Butuan Shipping Lines or petitioner Khe Hong Cheng to levy or garnish in satisfaction of the trial court’s decision. When the sheriff, accompanied by counsel of respondent Philam, went to Butuan City on 17 January 1997 to enforce the alias writ of execution, they discovered that petitioner no longer had any property and that he had conveyed the subject properties to his children. Philam thus filed a complaint for the rescission of the deeds of donation alleging that those were executed in fraud of creditors.

Petitioners moved for the dismissal of the complaint on the ground that the action had prescribed. This was denied by the trial court. The CA also declared that the action to rescind the donations had not yet prescribed. It reckoned the accrual of respondent Philam’s cause of action on January 1997, when it first learned that petitioner Khe Hong Cheng had no more properties in his name.

The issue for resolution posed by petitioners is this: When did the four (4) year prescriptive period as provided for in Article 1389 of the CC for respondent Philam to file its action for rescission commence to run?

Held:

Article 1389 of the CC simply provides that, “The action to claim rescission must be commenced within four years”. Since the provision of law is silent as to when the prescriptive period would begin, the general rule as stated in Article 1150, from the moment the cause of action accrues, therefore applies.

Now, Article 1383 of the CC provides as follows:

Article 1383.An action for rescission is subsidiary, it cannot be instituted except when the party suffering the damage has no other legal means to obtain reparation for the same.

It is thus apparent that an action to rescind or an accion pauliana must be of last resort, availed of only after all other legal remedies have been exhausted and have been proven futile. For an accion pauliana to accrue, the following requisites must concur:

(1) That the plaintiff asking for rescission has a credit prior to the alienation, although demandable later;

(2) That the debtor has made a subsequent contract conveying a patrimonial benefit to a third person;

(3) That the creditor has no other legal remedy to satisfy his claim, but would benefit by rescission of the conveyance to the third person;

(4) That the act being impugned is fraudulent;

(5) That the third person who received the property conveyed, if by onerous title, has been an accomplice in the fraud.

As enunciated by the CA, for as long as the creditor still has a remedy at law for the enforcement of his claim against the debtor, he will not have any cause of action for rescission of contracts. Indeed, an accion pauliana presupposes a judgment and the issuance by the trial court of a writ of execution and the failure of the sheriff to enforce and satisfy such. It presupposes that the creditor has exhausted the property of the debtor. The date of decision of the trial court against the debtor is immaterial. What is important is that the credit antedates that of the fraudulent alienation of property. After all, the decision of the trial court will retroact to the time when the debtor became indebted to the creditor.

Petitioners contend that the registration of the deeds of donation on 27 December 1989 constituted constructive notice to respondent Philam, hence, the cause of action to rescind should have accrued by then. This argument runs counter to Article 1383 of the CC as well as settled jurisprudence. It would likewise contravene the 3rd requisite to file an action for rescission of an allegedly fraudulent conveyance (that the creditor has no other legal remedy to satisfy his claim).

Even if respondent Philam was aware as of December 1989 that petitioner Khe Hong Cheng had executed the deeds of donation in favor of his children, the complaint against Butuan Shipping Lines was still pending. Respondent Philam had no inkling, at the time, that the trial court’s judgment would be in its favor and further, that such judgment could not be satisfied. Had respondent Philam filed its complaint on 27 December 1989, such complaint would have been dismissed for being premature.

As mentioned earlier, respondent Philam only learned about the unlawful conveyances in January 1997. It was only then that the cause of action accrued because then it could be said that it had exhausted all legal means to satisfy the trial court’s judgment. Since respondent Philam filed its complaint for accion pauliana on 25 February 1997, barely a month from its discovery that petitioner Khe Hong Cheng had no other property left, its action for rescission clearly had not yet prescribed.

Hence, the petition must be DENIED for lack of merit.

G.R. No. 152347 June 21, 2006UNION BANK OF THE PHILIPPINES, Petitioner, vs.SPS. ALFREDO ONG AND SUSANA ONG and JACKSON LEE, Respondents.

ISSUE:Is the suit commenced by the petitioner against the respondents for annulment or rescission of sale in fraud of creditors.

FACTS:

1. Respondents, the spouses Alfredo Ong and Susana Ong, own the majority capital stock of Baliwag Mahogany Corporation (BMC).

2. On October 10, 1990, the spouses executed a Continuing Surety Agreement in favor of Union Bank to secure a P40,000,000.00-credit line facility made available to BMC.

3. A year after the execution of the surety agreement, the spouses Ong, forP12,500,000.00, sold their house and lot located in Greenhills, San Juan, Metro Manila, to their co-respondent, Jackson Lee (Lee, for short).

4. On November 22, 1991, BMC filed a Petition for Rehabilitation and for Declaration of Suspension of Payments with the Securities and Exchange Commission (SEC). To protect its interest, Union Bank filed with the RTC of Pasig City an action for rescission of the sale between the spouses Ong and Jackson Lee for purportedly being in fraud of creditors.

5. The fraudulent design, according to Union Bank, is evidenced by the following circumstances: (1) insufficiency of consideration, the purchase price of P12,500,000.00 being below the fair market value of the subject property at that time; (2) lack of financial capacity on the part of Lee to buy the property at that time since his gross income for the year 1990, per the credit investigation conducted by the bank, amounted to only P346,571.73; and (3) Lee did not assert absolute ownership over the property as he allowed the spouses Ong to retain possession thereof under a purported Contract of Lease dated October 29, 1991.

6. RTC rendered decision, applying Article 1381 of the Civil Code and noting that the evidence on record "present[s circumstances distinctly characterized by badges of fraud," rendered judgment for Union Bank, the Deed of Sale executed by the spouses Ong in favor of Lee being declared null and void.

7. Respondents filed an appeal to CA . The CA reversed and set aside the trial court's ruling, observing that the contract of sale executed by the spouses Ong and Lee, being complete and regular on its face, is clothed with the prima facie presumption of regularity and legality.

HELD:In this case , the determinative issue tendered in this case resolves itself into the question of whether or not the Ong-Lee contract of sale partakes of a conveyance to defraud Union Bank.Essentially, petitioner anchors its case on Article 1381 of the Civil Code which lists as among the rescissible contracts "[T]hose undertaken in fraud of creditors when the latter cannot in any other manner collect the claim due them."

1. In a bid to attach a badge of fraud on the transaction, petitioner raises the issue of inadequate consideration, alleging payment of only P12,500,000.00 for a property having a fair market value of P14,500,000.00.

The Supreme Court held: The existence of fraud or the intent to defraud creditors cannot plausibly be presumed from the fact that the price paid for a piece of real estate

is perceived to be slightly lower, if that really be the case, than its market value. That the spouses Ong acquiesced to the price ofP12,500,000.00, which may be lower than the market value of the house and lot at the time of alienation, is certainly not an unusual business phenomenon.

2. Petitioner’s assertion regarding respondent Lee’s lack of financial capacity to acquire the property in question since his income in 1990 was only P346,571.73 is clearly untenable.

The Supreme Court held: Assuming for argument that petitioner got its figure right, it is clearly incorrect to measure one’s purchasing capacity with one’s income at a given period. But the more important consideration in this regard is the uncontroverted fact that respondent Lee paid the purchase price of said property. Where he sourced the needed cash is, for the nonce, really of no moment.

3. Petitioner has made much of respondent Lee not taking immediate possession of the property after the sale, stating that such failure is an indication of his participation in the fraudulent scheme to prejudice petitioner bank

The Court held: Lee, it is true, allowed the respondent spouses to continue occupying the premises even after the sale. This development, however, is not without basis or practical reason. The spouses' continuous possession of the property was by virtue of a one-year lease20 they executed with respondent Lee six days after the sale. possession may be exercised in one’s own name or in the name of another; an owner of a piece of land has possession, either when he himself physically occupies the same or when another person who recognizes his right as owner is in such occupancy.

4. In a last-ditch attempt to resuscitate a feeble cause, petitioner cites Section 70 of the Insolvency Law.

The Court held: Respondent spouses Ong have doubtlessly not filed a petition for a declaration of their own insolvency. Neither has one been filed against them.

WHEREFORE, the instant petition is DENIED and the assailed decision of the Court of Appeals is AFFIRMED.

Heirs of Sofia Quirong vs. DBP

Nature of the case:This case is about the prescriptive period of an action for rescission of a contract of sale where the buyer is evicted from the thing sold by a subsequent judicial order in favor of a third party.

Facts: When Emilio Dalope died he left 589 square meter lot to

his wife and their 9 childreno One of whom is Rosa Dalope-Funcion

To enable Rosa and his husband to obtain a loan from DBP

o Felisa the wife of the Emilio sold the lot to Funcions

o The deed of sale was in their favor and the tax declaration transferred in their names

The funcions mortgage the lot with the DBP Funcions failed to pay their loan

o DBP foreclosed the mortgage and consolidated ownership in its name on 1981

4 years after the DBP conditionally sold the lot to Sofia Quirong for the price of 78000.

o In their contract of sale,Sofia Quirong waived any warranty against eviction.

The contract provided that the DBP did not guarantee possession of the property and that it would not be liable for any lien or encumbrance on the same.

o Quirong gave down payment of 14000 Two months after the saleFelisa and her eight children

filed an action for partition and declaration of nullity of documents with damages against the DBP and Funcions before the the RTC.

On DEC 1984 notwithstanding the suit, the DBP executed a deed of absolute sale of the subject lot in Sofia Quirong’s favor.

On May 1985 Sofia Quirong’s heirs filed an answer in intervention which they asked the RTC to award the lot to them and should instead be given to the Dalopes, to allow the Quirong’s heirs to recover the lot’s value from the DBP.

o The heirs failed to file a formal offer of evidence, the trial court did not rule on the merits of their claim to the lot.

On Dec 1992 the RTC declared that the DBP’s sale to Sofia Quirong valid only with respect to the shares of Felisa and Rosa in the property.

o It declares Felisa’s sale to the functions, the latter’s mortgage to the DBP, and the latter’s sale to Sofia Quirong void. Insofar as they prejudiced the share of the 8 other children of Emilio and Felisa.

DBP received a copy of the decision on JAN 1993, but the DBP failed to appeal supposedly because of excusable negligence and the withdrawal of its counsel of record.

o When the RTC decision became final and the court issued a writ of execution, the DBP resisted the writ by motion to quash, claiming that the decision could not be enforced because it failed to state by metes and bounds the particular portion of the lot that would be assigned to the different parties in the case. The RTC denied the motion. The resolution became final and executory on JAN 1995

On June 1998 the Quirong heir filed the present action against the DBP for Rescission of the contract of sale between Sofia Quirong and the DBP.

The DBP filed a motion to dismiss the action on ground of prescription but the RTC denied their motion.

On Appeal the CA reversed the Decision of the RTC.o The CA concluded that, reckoned from the

finality of the DEC 1992 decision, the complaint

was filed on JUNE 1998 was already barred by the four-year prescriptive period under Article 1389 of the NCC.

Issue: WON the Quirong heirs’ action for rescission of respondent DBP’s sale to the subject property to Sofia Quirong was already barred by prescription.

Held: Petitioner heirs claim that the prescriptive period should

be reckoned from January 17, 1995, the date this Court’s resolution in G.R. 116575 became final and executory.

But the incident before this Court in G.R. 116575 did not deal with the merit of the RTC decision in Civil Case D-7159. That decision became final and executory on January 28, 1993 when the DBP failed to appeal from it within the time set for such appeal.

Since this incident did not affect the finality of the decision in Civil Case D-7159, the prescriptive period remained to be reckoned from January 28, 1993, the date of such finality.

The DBP claims that it should be four years as provided under Article 1389 of the Civil Code. Article 1389 provides that “the action to claim rescission must be commenced within four years.”

The Quirong heirs, on the other hand, claim that it should be 10 years as provided under Article 1144 which states that actions “upon a written contract” must be brought “within 10 years from the date the right of action accrues.”

The remedy of “rescission” is not confined to the rescissible contracts enumerated under Article 1381. Article 1191 of the Civil Code gives the injured parties in reciprocal obligations, such as what contracts are about, the option to choose between fulfillment and “rescission.”

“Rescission” is a subsidiary action based on injury to the plaintiff’s economic interests as described in Articles 1380 and 1381.

“Resolution,” the action referred to in Article 1191, is based on the defendant’s breach of faith, a violation of the reciprocity between the parties. As an action based on the binding force of a written contract, therefore, rescission (resolution) under Article 1191 prescribes in 10 years under Article 1144.

Actually, the cause of action of the Quirong heirs stems from their having been ousted by final judgment from the ownership of the lot that the DBP sold to Sofia Quirong, in violation of the warranty against eviction that comes with every sale of property or thing. Article 1548 of the Civil Code provides:

Article 1548. Eviction shall take place whenever by a final judgment based on a right prior to the sale or an act imputable to the vendor, the vendee is deprived of the whole or of a part of thing purchased.

o With the loss of 80% of the subject lot to the Dalopes by reason of the judgment of the RTC in Civil Case D-7159, the Quirong heirs had the right to file an action for rescission against the DBP pursuant to the provision of Article 1556 of the Civil Code which provides:

Article 1556. Should the vendee lose, by reason of the eviction, a part of the thing sold of such importance, in relation to the whole, that he would not have bought it without said part, he may demand the rescission of the contract; but with the obligation to return the thing without other encumbrances than those which it had when he acquired it.

The action for rescission, which is based on a subsequent economic loss suffered by the buyer, was precisely the action that the Quirong heirs took against the DBP. Consequently, it prescribed as Article 1389 provides in four years from the time the action accrued. Since it accrued on January 28, 1993 when the decision in Civil Case D-7159 became final and executory and ousted the heirs from a substantial portion of the lot, the latter had only until January 28, 1997 within which to file their action for rescission. Given that they filed their action on June 10, 1998, they did so beyond the four-year period.

Their action was barred by prescription.

ADA vs BAYLONFACTS: This case involves the estate of spouses Florentino Baylon and

Maximina Elnas Baylon. At the time of their death, Spouses Baylon were survived by 6

their legitimate children. 2 of the children died instestate. One of them is survived by

herein respondent Florante Baylon. The petitioners filed with the RTC a Complaint for partition,

accounting and damages against Florante, Rita and Panfila. They alleged therein that Spouses Baylon, during their lifetime,

owned 43 parcels of land5 all situated in Negros Oriental. After the death of Spouses Baylon, they claimed that Rita took

possession of the said parcels of land and appropriated for herself the income from the same.

Using the income produced by the said parcels of land, Rita allegedly purchased two parcels of land, Lot No. 47096 and half of Lot No. 4706, situated in Canda-uay, Dumaguete City.

The petitioners averred that Rita refused to effect a partition of the said parcels of land.

In their Answer, Florante, Rita and Panfila asserted that they and the petitioners co-owned 22 out of the 43 parcels of land mentioned in the latter’s complaint, whereas Rita actually owned 10 parcels of land out of the 43 parcels which the petitioners sought to partition.

During the pendency of the case, Rita, through a Deed of Donation dated July 6, 1997, conveyed Lot No. 4709 and half of Lot No. 4706 to Florante.

Rita died intestate and without any issue. Thereafter, learning of the said donation inter vivos in favor of

Florante, the petitioners filed a Supplemental Pleading, praying that the said donation in favor of the respondent be rescinded in accordance with Article 1381(4) of the Civil Code.

Florante and Panfila opposed the rescission of the said donation, asserting that Article 1381(4) of the Civil Code applies only when there is already a prior judicial decree on who between the contending parties actually owned the properties under litigation.

RTC ruled donation inter vivos executed by Rita Baylon in favor of Florante Baylon is rescissible for the reason that it refers to the parcels of land in litigation without the knowledge and approval of the plaintiffs or of this Court.

CA held that before the petitioners may file an action for rescission, they must first obtain a favorable judicial ruling that Lot No. 4709 and half of Lot No. 4706 actually belonged to the estate of Spouses Baylon and not to Rita.

ISSUE: WON the CA erred in ruling that the donation inter vivos of Lot No. 4709 and half of Lot No. 4706 in favor of Florante may only be rescinded if there is already a judicial determination that the same actually belonged to the estate of Spouses Baylon.HELD: The petition is partly meritotious. The resolution of the instant dispute is fundamentally

contingent upon a determination of whether the donation inter vivos of Lot No. 4709 and half of Lot No. 4706 in favor of Florante may be rescinded pursuant to Article 1381(4) of the Civil Code on the ground that the same was made during the pendency of the action for partition with the RTC.

Contracts which are rescissible due to fraud or bad faith include those which involve things under litigation, if they have been entered into by the defendant without the knowledge and approval of the litigants or of competent judicial authority.

The RTC aptly ordered the rescission of the donation inter vivos of Lot No. 4709 and half of Lot No. 4706 in favor of Florante.

The petitioners had sufficiently established the presence of the requisites for the rescission of a contract pursuant to Article 1381(4) of the Civil Code.

It is undisputed that, at the time they were gratuitously conveyed by Rita, Lot No. 4709 and half of Lot No. 4706 are among the properties that were the subject of the partition case then pending with the RTC.

It is also undisputed that Rita, then one of the defendants in the partition case with the RTC, did not inform nor sought the approval from the petitioners or of the RTC with regard to the donation inter vivos of the said parcels of land to Florante.

Although the gratuitous conveyance of the said parcels of land in favor of Florante was valid, the donation inter vivos of the same being merely an exercise of ownership, Rita’s failure to inform and seek the approval of the petitioners or the RTC regarding the conveyance gave the petitioners the right to have the said donation rescinded pursuant to Article 1381(4) of the Civil Code.

The petitioners’ right to institute the action for rescission pursuant to Article 1381(4) of the Civil Code is not preconditioned upon the RTC’s determination as to the ownership of the said parcels of land.

It bears stressing that the right to ask for the rescission of a contract under Article 1381(4) of the Civil Code is not contingent upon the final determination of the ownership of the thing subject of litigation.

The petition is partly granted. The decision of the CA is modified. The case remanded to the trial court for the determination of the ownership of Lot No. 4709 and half of Lot No. 4706.

TIBURCIO SAMONTE, petitioner, vs. COURT OF APPEALS. – Moe Tomawis

Facts:From the pleadings and the evidence adduced by the parties the following are not disputed or deemed admitted: that Lot 216, containing an area of 12,753 square meters,Agusan (now del Norte) is covered by OCT No. RO-238 issued in 1927 in the name of Apolonia Abao and Irenea Tolero in equal undivided shares; that OCT No. RO-238 was administratively reconstituted on August 8, 1957 and the assigned number of the reconstituted title is OCT No. RO-238; that on August 8, 1957, based on an affidavit of Extra-judicial Settlement and Confirmation of Sale OCT No. RO-238 (555) was cancelled and lieu thereof TCT No. RT-476 was issued in the name of Irenea Tolero, ½ share and Nicolas Jadol, ½ share; that on February 13, 1959, based on subdivision plan, subdividing Lot 216 into Lot 216-A and Lot 216-B, the Register of Deeds of Agusan (now del Norte) cancelled TCT No. RT-476 and issued in its place TCT No. RT-553 in the name of Tiburcio Samonte for Lot 216-A and TCT No.RT-554.Irenea Tolero and Nicolas Jadol for Lot 216-B; that on February 13, 1959 based on a subdivision plan subdividing Lot 216-B to 216-B-1 and 216-B-2, TCT No. RT-554 was cancelled and in its place TCT No. RT-555 was issued in the name of Jacob B. Tagorda for Lot 216-B-1 and TCT No. 556 in the name of Irenea Tolero and Nicolas Jadol for Lot 216-B-2;

Plaintiffs in their evidence claim ownership over the entire lot, Lot 216, as one-half (1/2) of the area of 12.753 square meters was registered in the name of their mother Irenea Tolero the other half was registered in the name of their grandmother, Apolonia Abao. After Apolonia Abao died during the Japanese occupation and Irenea Tolero died in 1945, they inherited and became owners of Lot 216. Plaintiffs questioned the series of cancellation of the certificate of title starting from OCT No. RO-238 (555) and the Deed of Extra-judicial Settlement and Confirmation of Sale executed by Ignacio Atupan on August 7, 1957 adjudicating one-half (1/2) of the area of Lot 216. Plaintiffs maintain that Ignacio Atupan is not a son of Apolonia Abao but he only grew up while living with Apolonia Abao. That the plaintiffs or their predecessors-in-interest have not signed any document agreeing as to the manner how Lot 216 was to be divided, nor have they consented to the partition of the same.

Accordingly, the court a quo jointly tried the two cases. After due trial, the trial court rendered separate decisions, both in favor of the plaintiffs therein. The CA affirmed.

ISSUE: Whether or not the action for reconveyance is already barred by presccription.

It is not disputed that Ignacio Atupan caused the fraudulent cancellation of OCT No. RO-238(555). The trial court found that Atupan, on the basis of his “Affidavit of Extra-judicial Settlement and Confirmation Sale,” adjudicated unto himself one-half of Lot 216 by misrepresenting himself as the sole heir of Apolonia Abao. Atupan, in said affidavit, likewise confirmed the two deeds of sale allegedly executed by him and Abao on September 15 and 16, 1939, covering the latter’s one-half lot in favor of Nicolas Jadol.

The trial court found Atupan’s affidavit, dated August 7, 1957, to be tainted with fraud because he falsely claimed therein that he was the sole heir of Abao when in fact, he merely lived and grew up with her. Jadol and his wife, Beatriz, knew about this fact. Despite this

knowledge, however, the Jadol spouses still presented the affidavit of Atupan before the Register of Deeds of the Province of Agusan when they caused the cancellation of OCT No. R0-238(555) and issuance of TCT No.RT-476 in their names covering that portion owned by Abao.

The trial court concluded that the incorporation of the statement in Atupan’s affidavit confirming the alleged execution of the aforesaid deeds of sale was intended solely to facilitate the issuance of the certificate of title in favor of the Jadol spouses. It was noted that the documents evidencing the alleged transactions were not presented in the Register of Deeds. It was further pointed out that the Jadol spouses only sought the registration of these transactions in 1957, eighteen (18) years after they supposedly took place or twelve (12) years after Abao died.

Nonetheless, petitioner contends that respondents’ action in the court a quo had already prescribed. Generally, an action for reconveyance of real property based on fraud may be barred by the statute of limitations which requires that the action must be commenced within four (4) years from the discovery of fraud, and in case of registered land, such discovery is deemed to have taken place from the date of the registration of title.

Petitioner, as successor-in-interest of the Jadol spouses, now argues that the respondents’ action for reconveyance, filed only in 1975, had long prescribed considering that the Jadol spouses caused the registration of a portion of the subject lot in their names way back in August 8, 1957. It is petitioner’s contention that since eighteen years had already lapsed from the issuance of TCT No. RT-476 until the time when respondents filed the action in the court a quo in 1975, the same was time-barred.

Petitioner’s defense of prescription is untenable. The general rule that the discovery of fraud is deemed to have taken place upon the registration of real property because it is “considered a constructive notice to all persons”[10] does not apply in this case.

The Court’s resolution of whether prescription had set in therein is quite apropos to the instant case:

It is true that registration under the Torrens system is constructive notice of title, but it has likewise been our holding that the Torrens title does not furnish a shield for fraud. It is therefore no argument to say that the act of registration is equivalent to notice of repudiation, assuming there was one, notwithstanding the long-standing rule that registration operates as a universal notice of title.

For the same reason, we cannot dismiss private respondents’ claims commenced in 1974 over the estate registered in 1955. While actions to enforce a constructive trust prescribes in ten years, reckoned from the date of the registration of the property, we, as we said, are not prepared to count the period from such a date in this case.

We note the petitioner’s sub rosa efforts to get hold of the property exclusively for himself beginning with his fraudulent misrepresentation in his unilateral affidavit of extrajudicial settlement that he is “the only heir and child of his mother Feliza

with the consequence that he was able to secure title in his name [alone].” Accordingly, we hold that the right of the private respondents commenced from the time they actually discovered the petitioner’s act of defraudation. According to the respondent Court of Appeals, they "came to know [of it] apparently only during the progress of the litigation." Hence, prescription is not a bar.

In this case, the CA reckoned the prescriptive period from the time respondents had actually discovered the fraudulent act of Atupan which was, as borne out by the records, only during the trial of Civil Case No. 1672.] Citing Adille, the CA rightfully ruled that respondents’ action for reconveyance had not yet prescribed.WHEREFORE, the instant petition is DENIED for lack of merit. The Decision, dated November 29, 1991 of the Court of Appeals and its Resolution, dated February 21, 1992, in CA-G.R. CV No. 16645 are AFFIRMED in toto.

Mendezona vs Ozamis(MARIO J. MENDEZONA and TERESITA M. MENDEZONA, LUIS J. MENDEZONA and MARICAR L. MENDEZONA and

TERESITA ADAD VDA. DE MENDEZONA, petitioners, vs. JULIO H. OZAMIZ, ROBERTO J. MONTALVAN, JOSE MA.

OZAMIZ, CARMEN H. OZAMIZ, PAZ O. MONTALVAN, MA. TERESA O.F. ZARRAGA, CARLOS O. FORTICH, JOSE LUIS O.

ROS, PAULITA O. RODRIGUEZ, and LOURDES O. LON, respondents. )

Facts: The original owner of the “Lahug Property”(subject

property in this case) by the name Carmen Ozamiz Executed a “Notarized Deed of Absolute Sale” dated April 28, 1989 in favor of herein petitioners in consideration of a sum of P1,040,000.

January 15, 1991 herein respondents instituted a petition for guardianship with the RTC alleging that Carmen Ozamiz, then 86 years old, after an illness sometime in 1987 has become disoriented and could no longer take care of herself nor manage her properties.

Mario Mendezona and Luis Mendezona, two of herein petitioner and who are nephews of Carmen Ozamiz and a certain Pilar Mendezona filed an opposition to the above said guardianship petition. In the course of the proceeding both parties agreed that Carmen Ozamiz needed a guardian over her person and properties.

One of herein respondent Paz O. Montalvan was designated as guardian over the person of Carmen Ozamiz while petitioner Mario J. Mendezona, respondents Roberto J. Montalvan and Julio H. Ozamiz were designated as joint guardians over the properties of the said ward. And as guardians respondents Roberto and Julio filed with the guardianship court their “inventories and Accounts”, listing Carmen Ozamiz’s assets including the property known as the “Lahug property”. Said respondents also caused the inscription on the titles of petitioners a notice of lis pendens (suit pending) prompting herein petitioners to file a suit for quieting of title (A proceeding to establish an individual's right to ownership of real property against one or more adverse claimants.)

respondents opposed the petitioners’ claim of ownership of the Lahug property and alleged among others, that at the time of the sale on April 28, 1989 Carmen Ozamiz was

already ailing and not in full possession of her mental faculties.

During the case the petitioners presented the Notarized Deed of Absolute Sale and witnesses who testified for the regularity of the said document, on the other hand the respondents presented different testimonials and the deposition of Dr. Faith Go, physician of Carmen Ozamiz.

RTC rendered a decision in favor of the petitioners upholding the validity of the contract and further stating said contract was voluntarily and deliberately entered into while Carmen Ozamis was of sound mind, for sufficient and good consideration, and without fraud, force, undue influence or intimidation having been exercised upon her, and consequently, the Court orders the defendants herein to acknowledge and recognize the plaintiffs’ title to the aforecited property.

Upon appeal the CA reversed the factual finding of the RTC. And further denied the petitioners motion for reconsideration and motion for a new trial.

Issue:WON the ward’s mental faculties were indeed seriously impaired when she executed the contract so as to warrant it’s nullity.

Ruling. No. opposed to well-recognized statutory presumptions of

regularity enjoyed by a notarized document and that a contracting party to a notarized contract is of sound and disposing mind when executing the contract.

The supreme Court held that the appellate court erred in ruling that at the time of the execution of the Deed of Absolute Sale on April 28, 1989 the mental faculties of Carmen Ozamiz were already seriously impaired. The testimonies of the respondents’ witnesses on the mental capacity of Carmen Ozamiz are far from being clear and convincing.

1. Carolina Lagura, a househelper of Carmen Ozamiz, testified that when Carmen Ozamiz was confronted by Paz O. Montalvan in January 1989 with the sale of the Lahug property, Carmen Ozamiz denied the same. She testified that Carmen Ozamiz understood the question then. However, this declaration is inconsistent with her (Carolina’s) statement that since 1988 Carmen Ozamiz could not fully understand the things around her, that she was physically fit but mentally could not carry a conversation or recognize persons who visited her. Furthermore, the disputed sale occurred on April 28, 1989 or three (3) months after this alleged confrontation in January 1989. This inconsistency was not explained by the respondents.2. The revelation of Dr. Faith Go did not also shed light on the mental capacity of Carmen Ozamiz on the relevant day - April 28, 1989 when the Deed of Absolute Sale was executed and notarized. At best, she merely revealed that Carmen Ozamiz was suffering from certain infirmities in her body and at times, she was forgetful, but there was no categorical statement that Carmen Ozamiz succumbed to what the respondents suggest as her alleged “second childhood” as early as 1987. The petitioners’ rebuttal witness, Dr. William Buot, a doctor of neurology, testified that no conclusion of mental incapacity at the time the said deed was

executed can be inferred from Dr. Faith Go’s clinical notes nor can such fact be deduced from the mere prescription of a medication for episodic memory loss.

It has been held that a person is not incapacitated to contract merely because of advanced years or by reason of physical infirmities. Only when such age or infirmities impair her mental faculties to such extent as to prevent her from properly, intelligently, and fairly protecting her property rights, is she considered incapacitated.The respondents utterly failed to show adequate proof that at the time of the sale on April 28, 1989 Carmen Ozamiz had allegedly lost control of her mental faculties.

The court note that the respondents sought to impugn only one document, namely, the Deed of Absolute Sale dated April 28, 1989, executed by Carmen Ozamiz. However, there are nine (9) other important documents that were, signed by Carmen Ozamiz either before or after April 28, 1989 which were not assailed by the respondents. Such is contrary to their assertion of complete incapacity of Carmen Ozamiz to handle her affairs since 1987. The court agrees with the trial court’s assessment that “it is unfair for the [respondents] to claim soundness of mind of Carmen Ozamiz when it benefits them and otherwise when it disadvantages them.” A person is presumed to be of sound mind at any particular time and the condition is presumed to continue to exist, in the absence of proof to the contrary. Competency and freedom from undue influence, shown to have existed in the other acts done or contracts executed, are presumed to continue until the contrary is shown.

The petition is hereby GRANTED and the assailed Decision and Resolution of the Court of Appeals are hereby REVERSED and SET ASIDE. The Decision of the Regional Trial Court REINSTATED.

ROBERTO G. FAMANILA, petitioner Vs. CA and BARBERSHIP MANAGEMENT LIMITED and NFD MANNING AGENTS, respondentsFACTS:

In 1989, respondent NFD International Manning Agents Inc. hired the service of petitioner Roberto Famanila as Messman for HANSA RIGA, a vessel registered and owned by its principal and co-respondent, Barbership Management Unlimited.

June 21, 1990, while HANSA RIGA was docked at the port of eureka, California, USA, and while petitioner was assisting in the loading operations, the latter complained of a headache. Petitioner experienced dizziness and he subsequently collapsed.

Upon examination, it was determined that he had sudden attack of left cerebral hemorrhage from a rupture cerebral aneurysm. Petitioner underwent a brain operation and e was confined at the Emmanuel hospital at Portland, Oregon, USA.

July 19, 1990, he again underwent a second brain operation.

Due to the physical and mental condition, he was repatriated to the Philippines.

Aug. 21, 1990, petitioner was examined at the American Hospital in Intramuros, Manila, where the examining physician declared that he cannot go back to sea duty and has been observed for 120 days and declared as permanently and totally disabled.

Authorized representatives of the respondents convinced the petitioner to amicably settle his claims against the respondent by accepting the offered amount of $13,200.

Petitioner accepted the offer as evidenced by his signature in the receipt and release dated Feb. 28, 1991. The petitioner’s wife, Gloria Famanila and one Richard Famanila, acted as witnesses in the signing of release.

June 11, 1997, petitioner filed a complaint with the NLRC praying for an award of disability benefits, share in the insurance proceeds, moral damages and attorney’s fees.

Acting executive labor arbiter Balitaan dismissed the complaint on the ground of prescription.

Appealed the decision with the NLRC and even filed a Motion for Reconsideration yet both were dismissed for the fact that these were without merit.

Petitioner referred the case to the Court of appeals and raised the issue that, he did not sign the receipt and release voluntarily because he was permanently disabled and in financial constraints, but still dismissed the case for lack of merit.

ISSUE: WON the petitioner’s consent in the receipt and release was vitiated due to his disability, thereby making the same VOID or Unenforceable?RULING: SC said No.

Vitiated consent does not make a contract void and unenforceable. A vitiated consent only gives rise to voidable agreement. Under the CC, vices of consent are Mistake, Violence, Intimidation, Undue Influence or Fraud. If consent is given through any of the aforementioned vices of consent, the contract is voidable. A voidable contract is binding unless annulled by a proper action in court.

Petitioner’s contention that his permanent and total disability vitiated his consent in the said agreement thereby renders it void and unenforceable .

This court corrects it by mentioning that, disability is not among the factors that may vitiate the consent. In the absence of proof of vitiated consent, then the court must upheld to the validity of the receipt and release.

In the case at bar, there are nothing in records showing that petitioner’s consent was vitiated when he signed the agreement.

The document entitled receipt and release which was attached by petitioner in its appeal does not show on its face any violation of law or public policy. In fact, the petitioner did not present any proof to show that the consideration for the same is not reasonable and acceptable.

Not all waiver and quitclaims are invalid as against public policy. If the agreement was voluntarily entered into and represents a reasonable settlement, it is binding on the parties and may not later be disowned simply because of change of mind.

It is only where there is clear and proof that the waiver was wangled from an unsuspecting or gullible person, or the terms of the settlement are unconscionable on its face, that the law will step in to annul the questionable transaction.

In the case at bench, it was shown that the petitioner made the waiver voluntarily with full understanding of what he was doing, and the consideration for the quitclaim is credible and reasonable, the transaction must be recognized as a valid and binding undertaking.

Dire necessity is not an acceptable ground for annulling waiver since it has not been shown that employee was force to sign it. The signing was even witnessed by the petitioner’s wife, and one Richard T. Famanila.

the decision of CA was affirmed and denied the petition.

Catalan vs Basa

Facts: In 1948, Feliciano Catalan was discharged from active military service. The Board of Medical Officers of the Department of Veteran Affairs found that he was unfit to render military service due to his "schizophrenic reactions”.

In 1949, Feliciano got married to Corazon Cerezo.

On June 16, 1951, a document was executed, titled “Absolute Deed of DONATION,” wherein Feliciano allegedly donated to his sister Mercedes Catalan a parcel of land located at Pangasinan. The donation was then registered with the Register of Deeds.

In 1953, People’s Bank and Trust Company (presently known as BPI) filed a Special Proceeding before the CFI of Pangasinan to declare Feliciano incompetent. The trial court issued its order for adjudication of Incompetency for Appointing Guardian for the Estate and Fixing Allowance of Feliciano. The court consequently appointed People’s Bank and Trust Company as Feliciano’s guardian.

In 1978, Feliciano and Corazon donated a real property to their son Eulogio. The spouses again, in 1983, donated to their children, Alex, Librada, and Zenaida a parcel of land. On the same year, the spouses donated a parcel of land in favor of Eulogio and Florida Catalan.

Conversely, on March 26, 1979, Mercedes sold the property in issue in favor of her children Delia and Jesus Basa (herein respondents). The “Deed of Absolute SALE” was then registered with the Register of Deeds.

In April of 1997, BPI acting as Feliciano’s guardian, filed a case before the trial court for the Declaration of Nullity of Documents, Recovery of Possession and Ownership with damages against herein respondents.

BPI contented that Feliciano was not of sound mind and was therefore incapable of giving a valid consent. Thus, it claimed that the Deed of Absolute DONATION was void and the subsequent Deed of Absolute SALE should likewise be void, for Mercedes had no right to sell the property.

When Feliciano passed away on August of 1997, the original complaint was amended to substitute his heirs in lieu of BPI as complainants.

The trial court rendered a decision in favor of respondents.

On appeal, the CA affirmed the decision of the trial court.

Hence, the present petition.

Trial Court Ruling: The evidence presented by the complainants was insufficient to overcome the presumption that Feliciano was sane and competent at the time he executed the deed of donation in favor of Mercedes Catalan. Thus the presumption of due execution of the donation in question must be upheld.

Issue: Whether or not the donation made by Feliciano was valid?

Held: Yes.

A donation is an act of liberality whereby a person disposes gratuitously a thing or right in favor of another, who accepts it. Like any other contract, an agreement of the parties is essential. Consent in contracts presupposes the following requisites: (1) it should be intelligent or with an exact notion of the matter to which it refers; (2) it should be free; and (3) it should be spontaneous. The parties' intention must be clear and the attendance of a vice of consent, like any contract, renders the donation voidable.

In order for donation of property to be valid, what is crucial is the donor’s capacity to give consent at the time of the donation. Certainly, there lies no doubt in the fact that insanity impinges on consent freely given. However, the burden of proving such incapacity rests upon the person who alleges it; if no sufficient proof to this effect is presented, capacity will be presumed.

In the case at bar, the evidence presented by the petitioners was insufficient to overcome the presumption that Feliciano was competent when he donated the property in question to Mercedes. Petitioners make much ado of the fact that, as early as 1948, Feliciano had been found to be suffering from schizophrenia by the Board of Medical Officers of the Department of Veteran Affairs. By itself, however, the allegation cannot prove the incompetence of Feliciano.

According to medical references, on one hand, in persons with schizophrenia, there is a gradual onset of symptoms, with symptoms becoming increasingly bizarre as the disease progresses. It has been proven; on the other hand, that administration of correct medicine helps the patient to manage such symptoms and reduces the chances of relapse. Schizophrenia can result in a dementing illness similar in many aspects to Alzheimer’s disease. However, the illness will wax and wane over many years, with only very slow deterioration of intellect.

From these scientific studies it can be deduced that a person suffering from schizophrenia does not necessarily lose his competence to intelligently dispose his property. By merely alleging the existence of schizophrenia, petitioners failed to show substantial

proof that at the date of the donation, Feliciano Catalan had lost total control of his mental faculties. Furthermore, the presumption was bolstered by the existence of the other contracts he entered into like his marriage with Corazon and the other donations made in favor of petitioners.

It must be noted that sufficient proof of his infirmity to give consent to contracts was only established when the CFI of Pangasinan declared him an incompetent on December 22, 1953.

Finally, the petitioners raised the issue of prescription and laches for the first time on appeal before this Court. It is sufficient to note that even if the present appeal had prospered, the Deed of Donation was still a voidable, not a void, contract. As such, it remained binding as it was not annulled in a proper action in court within four years. (Refer to Article 1390 and 1391)

Note: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.

Art. 1391. The action for annulment shall be brought within four years xxx.

Villanueva, petitionersvs Chiong, respondentsFacts:Respondents Florentino and Elisera Chiong were married sometime in 1960 but have been separated in fact since 1975. During their marriage, they acquired a lot situated at Poblacion, Dipolog City, covered by a TCT issued by the Registry of Deeds of Zamboanga del Norte.Sometime in 1985, Florentino sold the one-half western portion of the lot to petitioners for P8,000, payable in installments. Thereafter, Florentino allowed petitioners to occupythe lot and build a store, a shop, and a house thereon. Shortly after their last installment payment, petitioners demanded from respondents the execution of a deed of sale in their favor. Elisera, however, refused to sign a deed of sale.On 1991, Elisera filed a civil case for Complaint for Quieting of Title with Damages. On 1992, petitioners filed a Complaint for Specific Performance with Damages.On May 1992, Florentino executed the questioned Deed of Absolute Sale in favor of petitioners.RTC: ANNULED the deed of absolute sale dated May 1992, and ordered petitioners to vacate the lot and remove all improvements therein; DISMISSED Civil Case filed by petitioners, but ordered Florentino to return to petitioners the consideration of the sale with interest from May 1992.CA: AFFIRMED.Petitioners contend that the lot is not a conjugal property. It belongs exclusively to Florentino because respondents were already separated in fact at the time of sale and that the share of Elisera,

had previously been sold to Spouses Jesus Y. Castro and Aida Cuenca. They also aver that the separation in fact resulted in its actual liquidation. Even assuming that the lot is still conjugal, the transaction should not be entirely voided as Florentino had one-half share over it.Elisera counters that the sale of the lot to petitioners without her knowledge, consent or authority, was void because the lot is conjugal property. It was neither authorized by any competent court nor did it redound to her or their children's benefit. As proof of the lot's conjugal nature, she presented a transfer certificate of title, a real property tax declaration, and a Memorandum of Agreement which she and her husband had executed for the administration of their conjugal properties. Issue: (1) WON the subject lot is an exclusive property of Florentino or a conjugal property of respondents? (2) WON the sale by Florentino without Elisera's consent is valid?

Held:1st issue.The lot retains its conjugal nature. Respondents' separation in fact neither affected the conjugal nature of the lot nor prejudiced Elisera's interest over it. Under Article 178 of the Civil Code, the separation in fact between husband and wife without judicial approval shall not affect the conjugal partnership.Likewise, under Article 160 of the Civil Code, all property acquired by the spouses during the marriage is presumed to belong to the conjugal partnership of gains, unless it is proved that it pertains exclusively to the husband or to the wife.The real property tax declaration acknowledged Elisera and Florentino as owners of the lot. Both also declared in the Memorandum of Agreement they executed that the lot is a conjugal property.Florentino admitted the same in the Deed of Absolute Sale where he declared his capacity to sell as a co-owner of the subject lot.2nd issue.The court held that without the wife's consent, the husband's alienation or encumbrance of conjugal property prior to the effectivity of the Family Code on August 3, 1988 is not void, but merely voidable.

ART. 166 CC. Unless the wife has been declared a non compos mentis or a spendthrift, or is under civil interdiction or is confined in a leprosarium, the husband cannot alienate or encumber any real property of the conjugal partnership without the wife's consent.ART. 173 CC. 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. (Emphasis supplied.)

In this case, the requisite consent of Elisera was not obtained for the sale of a conjugal property to be valid. Accordingly, the contract

entered by Florentino is annullable at Elisera's instance, during the marriage and within ten years from the transaction questioned. Fortunately, Elisera timely questioned. Moreover, according to jurisprudence, plain meaning attached to the plain language of the law is that the contract, in its entirety, executed by the husband without the wife's consent, may be annulled by the wife.Now, if a voidable contract is annulled, the restoration of what has been given is proper. Article 1398 of the Civil Code provides:

An obligation having been annulled, the contracting parties shall restore to each other the things which have been the subject matter of the contract, with their fruits, and the price with its interest, except in cases provided by law.

Strictly applying Article 1398 to the instant case, petitioners should return to respondents the land with its fruits and respondent Florentino should return the sum of P8,000, which he received as the price of the land, together with interest thereon.SC: Petitioners have been using the land and have derived benefit from it just as respondent Florentino has used the price of the land in the sum of P8,000. Hence, it would be equitable to consider the two amounts as offsetting each other. CA decision AFFIRMED WITH MODIFICATION. The order for the payment of interest is DELETED.

AMADO Z. AYSON, JR., petitioner, vs.SPOUSES FELIX and MAXIMA PARAGAS, respondents.

The controversy commenced with the filing of an ejectment complaint3 on April 12, 1993 before Branch 1 of the Municipal Trial Court in Cities (MTCC) of Dagupan City by herein petitioner Amado Z. Ayson, as represented by his natural father Zosimo S. Zareno4

(Zareno), against respondent-spouses Felix and Maxima Paragas. Respondents executed an affidavit declaring that:

1. That we are occupants of a parcel of land owned by Amado Ll. Ayson;

2. That we occupy the said land by tolerance without paying any rental whatsoever;

3. That we further agree to vacate the aforesaid land within three (3) months from the date hereof and to remove and transfer our house therefrom to another place;

4. That in consideration of vacating the said parcel of land the amount of Twenty Thousand Pesos (P20,000.00) shall be paid to us; and, that the amount of Ten Thousand Pesos (P10,000.00) shall be paid upon signing of this affidavit and the balance of Ten Thousand Pesos (P10,000.00) shall be paid upon removal of our house on the third month from date hereof.

Despite the receipt of the P10,000.00 upon the execution of the Affidavit, respondent-spouses refused to vacate the land as agreed

upon; and (5) despite demands, respondent-spouses still refused to vacate, thus constraining him to file the complaint. In their Answer, 6

respondent-spouses alleged that Zareno had no personality and authority to file the case and the filing of the complaint was made in bad faith.

MTCC decided in favor of petitioner. Affirmed by RTC, CA, SC

Meanwhile, on October 11, 1993, during the pendency of the appeal with the RTC, respondent-spouses filed against petitioner, the heirs of Blas F. Rayos, the spouses Delfin and Gloria Alog a complaint13 for declaration of nullity of deed of sale, transactions, documents and titles with a prayer for preliminary injunction and damages.

The complaint alleged respondent Maxima is a co-owner of a parcel of land which is her ¼ share of land inherited from her father. Sometime prior to April 13, 1955, respondent Felix, then an employee of the defunct Dagupan Colleges (now University of Pangasinan) failed to account for the amount of P3,000.00. It was agreed that respondent Felix would pay the said amount by installment to the Dagupan Colleges. Pursuant to that agreement, Blas F. Rayos and Amado Ll. Ayson, then both occupying high positions in the said institution, required respondent-spouses to sign, without explaining to them, a Deed of Absolute Sale on April 13, 1955 over respondent Maxima’s real property under threat that respondent Felix would be incarcerated for misappropriation if they refused to do so.

The complaint further alleged that later, respondent-spouses, true to their promise to reimburse the defalcated amount, took pains to pay their obligation in installments regularly deducted from the salaries received by respondent Felix from Dagupan Colleges; that the payments totaled P5,791.69; that notwithstanding the full payment of the obligation, Amado Ll. Ayson and Blas F. Rayos did nothing to cancel the purported Deed of Absolute Sale; and that they were shocked when they received a copy of the complaint for ejectment filed by petitioner.

Later, the land was later conveyed to Ayson and Rayos by virtue of the Deed of Sale. The portion belonging to Rayos was sold by his heirs to spouses Alog and the potion belonging to Ayson was adjudicated to his adopted son, the Petitioner.

RTC ruled in favor of respondent declaring the deed of sale as an equitable mortgage.

WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendants, except the spouses Delfin and Gloria Alog:

1. Annulling the Deed of Sale executed by Felix Paragas and Maxima Paragas on April 13, 1955 (Exh. 3) in favor of defendants Blas F. Rayos and Amado Ll. Ayson except as it affects the interest of Spouses Delfin and Gloria Alog over the property in question;

2. Annulling likewise TCT No. 57684 issued to Amado Ll. Ayson and TCT No. 59036 issued to Amado Z. Ayson, including the respective tax declarations thereof;

3. Ordering Amado Z. Ayson to reconvey ownership of the property covered by TCT No. 59036 to the herein plaintiffs, the true owners thereof;

4. Ordering defendant Amado Z. Ayson and the estate of Blas F. Rayos to pay jointly and severally to the herein plaintiffs the amount paid by Spouses Delfin and Gloria Alog to the late Blas F. Rayos, there being no proof adduced by the plaintiffs as to the actual current market value of the said property;

CA denied the petition.

Petitioner’sc ontentions:

Petitioner contends that respondent-spouses are bound by the judicial admissions they made both in the ejectment case and in the case for declaration of nullity of the Deed of Absolute Sale.

Petitioner further argues that the action instituted before the RTC, Branch 42, Dagupan City has already prescribed. According to him, the complaint alleged that the Deed of Absolute Sale was executed through fraud, making the said contract merely voidable, and the action to annul voidable contracts based on fraud prescribed in four (4) years from the discovery of fraud. He insists that the registration of the Deed of Absolute Sale occurred on May 4, 1955, which operated as constructive notice of the fraud to the whole world, including respondent-spouses. Thus, petitioner concludes that the action had long prescribed when they filed the same on October 11, 1993, since its cause had accrued 38 years ago.---MAIN ISSUE

Petitioner adds that respondent-spouses are bound by estoppel and guilty of laches in light of the judicial admissions they have already made and the unreasonable length of time that had lapsed before they questioned the validity of the Deed of Absolute Sale and the Affidavit they executed on April 8, 1992.

He also asseverates that the Deed of Absolute Sale is a true sale and not an equitable mortgage, arguing that the alleged payments made by respondent Felix were made from December 29, 1965 to December 17, 1980, long after the execution of the contract on April 13, 1955; that respondent-spouses only paid realty taxes over their house and not on the disputed land; that their possession of the property was by his mere tolerance; that there was no evidence proffered that the amount of P3,000.00 as consideration for the sale was unusually inadequate in 1955; and that the other co-owners of the land did not question or protest the subdivision thereof leading to the issuance of TCT No. 59036 in his name.

Lastly, petitioner claims that he is a transferee in good faith, having had no notice of the infirmity affecting the title of his predecessor Amado Ll. Ayson over the property. He says that he was only exercising his right as an heir when he adjudicated unto himself the parcel of land pertaining to his adoptive father,18 resulting in the

issuance of TCT No. 59036 in his name, and, thus, should not be penalized for his exercise of a legal right.

HELD :

First. With respect to the admissions made by respondent-spouses, through their counsel during the preliminary conference of the ejectment case, it is worthy to note that, as early as the submission of position papers before the MTCC, they already questioned the sale of the subject property to Amado Ll. Ayson and Blas F. Rayos for being fictitious and asserted their ownership over the land, pointing to the fact that respondent Maxima had been living on the land since her birth in 1913 and that they had been in continuous possession thereof since her marriage to respondent Felix in 1944. However, unfortunately for them, the MTCC held them bound by the admissions made by their counsel and decided that petitioner had a better right to possess the property.

Nevertheless, it must be remembered that in ejectment suits the issue to be resolved is merely the physical possession over the property, i.e., possession de facto and not possession de jure, independent of any claim of ownership set forth by the party-litigants. The judgment rendered in such an action shall be conclusive only with respect to physical possession and shall in no wise bind the title to the realty or constitute a binding and conclusive adjudication of the merits on the issue of ownership. Therefore, such judgment shall not bar an action between the same parties respecting the title or ownership over the property,21 which action was precisely resorted to by respondent-spouses in this case.

Anent the claim that respondent-spouses admitted the series of TCTs issued by reason of the registration of the questioned Deed of Absolute Sale, suffice it to state that records show that they admitted only the existence thereof, not necessarily the validity of their issuance.

Second. The Deed of Absolute Sale is, in reality, an equitable mortgage or a contract of loan secured by a mortgage. Art. 1602 states that The contract shall be presumed to be an equitable mortgage, in any of the following cases:

(2) When the vendor remains in possession as lessee or otherwise;

In such cases, parol evidence then becomes competent and admissible to prove that the instrument was in truth and in fact given merely as a security for the repayment of a loan; and upon adequate proof of the truth of such allegations, the courts will enforce the agreement or understanding in this regard, in accord with the true intent of the parties at the time the contract was executed, even if the conveyance was accompanied by registration in the name of the transferee and the issuance of a new certificate of title in his name.23

In this case, the evidence before the RTC, Branch 42, Dagupan City had established that the possession of the subject property remained with respondent-spouses despite the execution of the Deed of Absolute Sale on April 13, 1955. In fact, testimonies during

the trial showed that petitioner and his predecessors never disturbed the possession of respondent-spouses until the filing of the ejectment case on April 12, 1992.24 .1avvphi1

That the realty taxes paid by respondent-spouses was only for their house can be explained by the fact that, until the filing of the ejectment case, respondent Maxima was not aware that the land she co-owned was already partitioned, such that the payments of real estate taxes in her name were limited to the improvement on the land.

An equitable mortgage is a voidable contract. As such, it may be annulled within four (4) years from the time the cause of action accrues. This case, however, not only involves a contract resulting from fraud, but covers a transaction ridden with threat, intimidation, and continuing undue influence which started when petitioner’s adoptive father Amado Ll. Ayson and Blas F. Rayos, Felix’s superiors at Dagupan Colleges, practically bullied respondent-spouses into signing the Deed of Absolute Sale under threat of incarceration. Thus, the four-year period should start from the time the defect in the consent ceases.26 While at first glance, it would seem that the defect in the consent of respondent-spouses ceased either from the payment of the obligation through salary deduction or from the death of Amado Ll. Ayson and Blas F. Rayos, it is apparent that such defect of consent never ceased up to the time of the signing of the Affidavit on April 8, 1992 when Zareno, acting on behalf of petitioner, caused respondent Felix to be brought to him, and taking advantage of the latter being unlettered, unduly influenced Felix into executing the said Affidavit for a fee of P10,000.00.27 The complaint praying for the nullity of the Deed of Absolute Sale was filed on October 11, 1993, well within the four-year prescriptive period.

Regarding the finality of the adjudication of physical possession in favor of petitioner, it may be reiterated that the right of possession is a necessary incident of ownership. This adjudication of ownership of the property to respondent-spouses must include the delivery of possession to them since petitioner has not shown a superior right to retain possession of the land independently of his claim of ownership which is herein rejected

Petiton denied.

GREGORIO DESTREZA, vs.ATTY. MA. GRACIA RIÑOZA-PLAZO and MA. FE ALARAS, Respondents.The Facts

on November 16, 1989 Pedro L. Riñoza (Riñoza) died leaving several heirs, including herein respondents Ma. Gracia R. Plazo (Plazo) and Ma. Fe R. Alaras (Alaras).

In the course of settling Riñoza’s estate, Plazo wrote a letter to the Registry of Deeds requesting for certified true copies of all titles in Riñoza’s name, including a sugarland located at Barangay Utod, Batangas covered by TCT 40353. When she delivered the letter, Plazo also asked that she be shown the originals of the titles but they were not available. To inquire on the matter, she talked to the Register of Deeds, Atty. Bonuan. According to Bonuan, he

had the titles in his personal files and there were no transactions involving them.

Thereafter, Plazo wrote a letter to Bonuan, reiterating her request for copies of the titles. Since the latter was abroad, it was the acting Register of Deeds furnished her with certified true copies of the titles, except that of TCT 40353 which was missing.

in an effort to find TCT 40353, Plazo found another title, TCT 55396, at the Assessor’s Office covering the same Utod sugarland and canceling the missing TCT 40353. The new title was in the name of the Destreza Spouses

Respondent Plazo also went to the Bureau of Internal Revenue (BIR) of Batangas City to inquire on any record involving the sale of the Utod sugarland. But it did not have any record of sale of the sugarland covered by TCT 40353.

Finally testified that before the death of Riñoza, he gave her the title of a land that he wanted to mortgage to her uncle. Riñoza told her that the land was located at Barangay Utod, Nasugbu, Batangas. She did not, however, look at the number of the title. Unable to secure a mortgage from her uncle, she returned the title to her father and never saw it again.

Their discovery prodded respondents Plazo and Alaras to file a complaint against the Destreza spouses and the Register of Deeds before the RTC claiming serious irregularities in the issuance of TCT 55396. They asked that TCT 55396 be nullified, that TCT 40353 be restored, and that the Destrezas be ordered to reconvey the land to the Riñoza estate.

In his answer, Atty. Bonuan denied that TCT 40353 was missing since he had the title safe in his office and no transaction affecting it had been recorded. With regard to TCT 55396, he explained that the new title had not yet been released to the Destreza spouses because they were yet to submit certain required documents. Bonuan claimed that during his lifetime, the late Riñoza, asked him for a photocopy of TCT 55396. As a courtesy to the ex-mayor, Bonuan gave him a copy.

the Destreza spouses, petitioner Destreza testified they bought the Utod sugarland from Riñoza through Toribio Ogerio, a common kumpadre. He paid him P100,000.00.18 Destreza did not get a copy of the deed of sale nor a receipt for the payment but Riñoza accompanied him to the Register of Deeds. After about a month, Destreza returned to the Register of Deeds and got a copy of TCT 55396 in his name and immediately took possession of the land until the case was filed

The RTC cancelled TCT 55396, nullified the deed of sale and restored TCT 40353 after it found that TCT 55396 was yet inexistent on July 15, 1989 when petitioner Destreza claims he already received a copy from the Register of Deeds. It declared that the deed of sale between Riñoza and Destreza is not a public document for the failure of the notary public to submit his report to the RTC notarial section.

the Court of Appeals affirmed the decision of the RTC, contending that the deed of sale may be presumed regular despite the notary’s failure to report the transcaton to the

RTC notarial section however the Destrea spouses destroyed such presumption when they failed to prove its authenticity and genuineness, furthermore the destreza spouses claimed that they have paid rinoza 100T but the price stated in the DOS was only 60T placed the veracity of DOS in doubt. Hence this petition.

Issueswhether or not sufficient evidence warranted the nullification of the deed of sale that the late Riñoza executed in favor of the Destrezas.HELD

the notarized deed of sale should be admitted as evidence despite the failure of the Notary Public in submitting his notarial report to the notarial section of the RTC Manila. It is the swearing of a person before the Notary Public and the latter’s act of signing and affixing his seal on the deed that is material and not the submission of the notarial report. They should not be made to suffer the consequences of the negligence of the Notary Public in following the procedures prescribed by the Notarial Law.

Under the rules of evidence, "Every instrument duly acknowledged or proved and certified as provided by law, may be presented in evidence without further proof, the certificate of acknowledgment being prima facie evidence of the execution of the instrument or document involved. A certain Atty. Ducusin notarized the deed of sale that Riñoza acknowledged as his free act and deed. By signing and affixing his notarial seal on the deed, Atty. Ducusin converted it from a private document to a public document. As such, the deed of sale is entitled to full faith and credit upon its face. And since Riñoza, the executor of the deed, is already dead, the notarized deed of absolute sale is the best evidence of his consent to the sale. it is also not disputed that the Destrezas immediately and openly occupied the land right after the sale.

An allegation of fraud with regard to the execution of a notarized deed of absolute sale is a grave allegation. It cannot be declared on mere speculations. In fact, to overcome the presumption of regularity and due execution of a notarized deed, there must be clear and convincing evidence showing otherwise. The burden of proof to overcome the presumption lies on the one contesting the same which in this case are the respondents plazo and alaras. Without such evidence, the presumption remains undiminished

There were 3 evidences obtained by respondents to prove that their father did not sell the subject land to the destreza’s.

First : the premature release of a copy of the title to the Destreza spouses even before it was entered into the books of the register of deeds and despite the fact that they still needed to submit registration requirements.

The SC held that such premature release of a copy of the registered title cannot affect the validity of the contract of sale between Rinoza and the Destrezas. Registration only serves as the operative act to convey or affect the land insofar as third persons are concerned. And even if a deed is not registered, the deed will continue to operate as a contract between the parties.furthermore, the declaration of Bonuan that he furnished ex-mayor Riñoza with a copy of TCT 55396 strengthens the case of the Destrezas. It

shows that Riñoza knew of and gave consent to the sale of his Utod sugarland to them considering that he even helped facilitate the registration of the deed of sale. Whatever irregularity in registration may have been incurred, it did not affect the validity of the sale.

Second : Alaras claims that months after the sale of the Utod sugarland to the Destrezas, her father Riñoza asked her to mortgage some land. He gave Alaras the title to it, telling her that such title covered a land in Barangay Utod. But this does not prove that the sale of the Utod sugarland to the Destrezas is void. Alaras admitted that she did not see the number of the title nor did she identify in court any specific title as the one she got. To be of value to her cause, Alaras needed to testify that TCT 40353 remained uncancelled in her father’s hands even after the supposed entry of TCT 55396 in the Registry of Deeds. But she did not so testify.

Third: the testimony of the Destreza’s that they paid P100T when the price on the deed of sale was only P60,000.00. Again, this is not sufficient ground to nullify such deed. The fact remains that Riñoza sold his land to the Destrezas under that document and they paid for it. The explanation for the difference in the prices can be explained only by Riñoza and Gregorio Destreza. Unfortunately, Riñoza had died and respondednt failed to confront Destreza regarding that difference when the latter took the witness stand.

Hence, the notarized deed of sale is valid and binding upon them and their successors-in-interest.

#13: KINGS PROPERTIES CORPORATION vs CANUTO GALIDO (VOIDABLE CONTRACTS)

Facts: On April 1966, Rufina Eniceo and Maria Eniceo (heirs of

Domingo Eniceo) were awarded with Homestead Patent No. 112947 consisting of four parcels of land located in San Isidro, Antipolo, Rizal. The Antipolo property with a total area of 14.8882 hectares was registered under Original Certificate of Title (OCT) No. 535. The issuance of the homestead patent was subject to the following conditions:

o To have and to hold the said tract of land, with the appurtenances thereunto of right belonging unto the said Heirs of Domingo Eniceo and to his heir or heirs and assigns forever, subject to the provisions of sections 118, 121, 122 and 124 of Commonwealth Act No. 141, as amended, which provide that except in favor of the Government or any of its branches, units or institutions, the land hereby acquired shall be inalienable and shall not be subject to incumbrance for a period of five (5) years next following the date of this patent, and shall not be liable for the satisfaction of any debt contracted prior to the expiration of that period; that it shall not be alienated, transferred or conveyed after five (5) years and before twenty-five (25) years next following the

issuance of title, without the approval of the Secretary of Agriculture and Natural Resources; that it shall not be incumbered, alienated, or transferred to any person, corporation, association, or partnership not qualified to acquire public lands under the said Act and its amendments; x x x

On September 1973, Rufina and Maria sold the Antipolo property to Canuto Galido for P250,000. A deed of sale was executed between them and Carmen Aldana delivered the owner’s duplicate copy of OCT No. 535 to respondent.

On 1988, the Eniceo heirs (actual occupant of the property) registered a Notice of Loss with the Registry of Deeds of Markina City and filed a petition for the issuance of a new owner’s duplicate copy of OCT No. 535 with Branch 72 of the RTC of Antipolo. RTC found that the certified true copy of OCT No. 535 contained no annotation in favor of any person, corporation or entity. It then ordered the Registry of Deeds to issue a second owner’s copy of OCT No. 535 in favor of the Eniceo heirs and declared the original owner’s copy of OCT NO. 535 cancelled and considered of no further value.

On April 1989, the Registry of Deeds issued a second owner’s copy of OCT No. 535 in favor of the Eniceo heirs.

Petitioner alleges that sometime in February 1995, Leonila Bolinas (a relative of the Eniceo heirs) came to the office of Alberto Tronio Jr (petitioner’s general manager) and offered to sell the Antipolo property. Tronio then did an on-site inspection and ascertained that OCT No. 535 was clean and had no lien and encumbrances. Petitioner then bought the Antipolo property.

On March 14, 1995, respondent caused the annotation of his adverse claim in OCT No. 535.

On March 20, 1995, the Eniceo heirs executed a deed of absolute sale in favor of petitioner covering lots 3 & 4 of the Antipolo property for P500,000. New TCTs were issued.

On April 5, 1995, the Eniceo heirs again executed another deed of sale in favor of petitioner covering the remaining lots of the Antipolo property for P1,000,000. The previous TCT was cancelled and a new one was issued in the name of petitioner.

On August 17, 1995, the DENR Secretary approved the deed of sale between the Eniceo heirs and respondent.

On 16 January 1996, respondent filed a civil complaint with the trial court against the Eniceo heirs and petitioner. Respondent prayed for the cancellation of the certificates of title issued in favor of petitioner, and the registration of the deed of sale and issuance of a new transfer certificate of title in favor of respondent.

On 4 July 2000, the trial court rendered its decision dismissing the case for lack of legal and factual basis. Respondent appealed to the Court of Appeals. On 20 December 2004, the CA rendered a decision reversing the trial court’s decision. Aggrieved by the CA’s decision and resolution, petitioner elevated the case before this Court.

Petitioner’s Contentions:

*The DENR Secretary gave only his approval for the deed of sale in favor of respondent after 21 years from the date the deed was executed.*The deed of sale to respondent was a forgery.*The deed of sale in favor of respondent is an equitable mortgage because the Eniceo heirs remained in possession of the Antipolo property despite the execution of the deed of sale.*The subsequent sale must be upheld because the petitioner is a buyer in good faith.*The respondent is guilty of laches because he slept on his rights by failing to register the sale of the Antipolo property at the earliest possible time.

Issue: Whether or not the deed of sale to respondent may be annulled

Held: NO.

1. The contract between the Eniceo heirs and respondent executed on 10 September 1973 was a perfected contract of sale. A contract is perfected once there is consent of the contracting parties on the object certain and on the cause of the obligation. In the present case, the object of the sale is the Antipolo property and the price certain is P250,000.

The contract of sale has also been consummated because the vendors and vendee have performed their respective obligations under the contract. In a contract of sale, the seller obligates himself to transfer the ownership of the determinate thing sold, and to deliver the same to the buyer, who obligates himself to pay a price certain to the seller. The execution of the notarized deed of sale and the delivery of the owner’s duplicate copy of OCT No. 535 to respondent is tantamount to a constructive delivery of the object of the sale.2. As to the late approval by DENR Secretary:The sale of the Antipolo property cannot be annulled on the ground that the DENR Secretary gave his approval after 21 years from the date the deed of sale in favor of respondent was executed. In Spouses Alfredo v. Spouses Borras, the Court explained the implications of Section 118 of CA 141. Thus:

o A grantee or homesteader is prohibited from alienating to a private individual a land grant within five years from the time that the patent or grant is issued. A violation of this prohibition renders a sale void. This, however, expires on the fifth year. From then on until the next 20 years, the land grant may be alienated provided the Secretary of Agriculture and Natural Resources approves the alienation. The Secretary is required to approve the alienation unless there are "constitutional and legal grounds" to deny the approval. In this case, there are no apparent or legal grounds for the Secretary to disapprove the sale of the Subject Land.

The failure to secure the approval of the Secretary does not ipso facto make a sale void. The absence of approval by the Secretary does not a sale made after the expiration of the 5-year period, for in such event the requirement of Section 118 of the Public Land Act becomes merely directory or a formality. The approval may be secured later, producing the effect of ratifying and adopting the transaction as if the sale had been previously authorized.

3. On Forgery: As correctly held by the CA, forgery can never be presumed. The party alleging forgery is mandated to prove it with clear and convincing evidence. Whoever alleges forgery has the burden of proving it. In this case, petitioner and the Eniceo heirs failed to discharge this burden. 4. On Equitable Mortgage: An equitable mortgage is "one which although lacking in some formality, or form or words, or other requisites demanded by a statute, nevertheless reveals the intention of the parties to charge real property as security for a debt, and contains nothing impossible or contrary to law." The essential requisites of an equitable mortgage are:

1. The parties entered into a contract denominated as a contract of sale; and2. Their intention was to secure existing debt by way of a mortgage. Petitioner has not shown any proof that the Eniceo heirs

were indebted to respondent. On the contrary, the deed of sale executed in favor of respondent was drafted clearly to convey that the Eniceo heirs sold and transferred the Antipolo property to respondent. Hence, the Court ruled that the contract was a sale and not an equitable mortgage. 5. Petitioner is not a buyer in good faith. In Agricultural and Home Extension Development Group v. Court of Appeals, a buyer in good faith is defined as "one who buys the property of another without notice that some other person has a right to or interest in such property and pays a full and fair price for the same at the time of such purchase or before he has notice of the claim or interest of some other person in the property." Petitioner does not dispute that respondent registered his adverse claim with the Registry of Deeds on 14 March 1995. The registration of the adverse claim constituted, by operation of law, notice to the whole world. From that date onwards, subsequent buyers were deemed to have constructive notice of respondent’s adverse claim. Petitioner purchased the Antipolo property only on 20 March 1995 and 5 April 1995 as shown by the dates in the deeds of sale. On the same dates, the Registry of Deeds issued new TCTs in favor of petitioner with the annotated adverse claim. Consequently, the adverse claim registered prior to the second sale charged petitioner with constructive notice of the defect in the title of Eniceo heirs. Therefore, petitioner cannot be deemed as a purchaser in good faith when they bought and registered the Antipolo property. 6. On Laches: The essence of laches is the failure or neglect, for an unreasonable and unexplained length of time, to do that which, through due diligence, could have been done earlier, thus giving rise to a presumption that the party entitled to assert it had either abandoned or declined to assert it.

Respondent discovered in 1991 that a new owner’s copy of OCT No. 535 was issued to the Eniceo heirs. Respondent filed a criminal case against the Eniceo heirs for false testimony. When respondent learned that the Eniceo heirs were planning to sell the Antipolo property, respondent caused the annotation of an adverse claim. On 16 January 1996, when respondent learned that OCT No. 535 was cancelled and new TCTs were issued, respondent filed a civil complaint with the trial court against the Eniceo heirs and petitioner. Respondent’s actions negate petitioner’s argument that respondent is guilty of laches.

The petition was denied.

VILORIA VS. CONTINENTAL AIRLINES 663 SCRA 57

FACTS: On or about July 21, 1997 and while in the US, Fernando

Viloria purchased for himself and his wife, Lourdes, 2 round trip airline tickets from San Diego, California to Newark, New Jersey on board Continental Airlines.

He purchased the tickets at US$400.00 each from a travel agency called “Holiday Travel” and was attended to by a certain Margaret Mager.

According to Spouses Viloria, Fernando agreed to buy the said tickets after Mager informed them that there were no available seats at Amtrak (intercity passenger train service provider in the US).

Per the tickets, Spouses Viloria were scheduled to leave for Newark on August 13, 1997 and return to San Diego on August 21, 1997.

Subsequently, Fernando requested Mager to reschedule their flight to Newark to an earlier date or August 6, 1997.

Mager informed him that flights to Newark via Continental Airlines were already fully booked and offered the alternative of a round trip flight via Frontier Air.

Since flying with Frontier Air called for a higher fare of US$526.00 per passenger and would mean traveling by night, Fernando opted to request for a refund. Mager, however, denied his request as the subject tickets are non-refundable and the only option that Continental Airlines can offer is the re-issuance of new tickets within 1 year from the date the subject tickets were issued. Fernando decided to reserve 2 seats with Frontier Air.

As he was having second thoughts on traveling via Frontier Air, Fernando went to the Greyhound Station where he saw an Amtrak station nearby. Fernando made inquiries and was told that there are seats available and he can travel on Amtrak anytime and any day he pleased. Fernando then purchased 2 tickets for Washington, D.C.

From Amtrak, Fernando went to Holiday Travel and confronted Mager with the Amtrak tickets, telling her that she had misled them into buying the Continental Airlines tickets by misrepresenting that Amtrak was already fully booked. Fernando reiterated his demand for a refund but Mager was firm in her position that the subject tickets are non-refundable.

Upon returning to the Philippines, Fernando sent a letter to CAI, demanding a refund and alleging that Mager had deluded them into purchasing the subject tickets.

On September 8, 2000, Spouses Viloria filed a complaint against CAI, praying that CAI be ordered to refund the money they used in the purchase of the subject tickets with legal interest from July 21, 1997 and to pay P1,000,000.00 as moral damages, P500,000.00 as exemplary damages and P250,000.00 as attorney’s fees.

CAI interposed the following defenses: (a) Spouses Viloria have no right to ask for a refund as the subject tickets are non-refundable; (b) Fernando cannot insist on using the ticket in Lourdes’ name for the purchase of a round trip ticket to Los Angeles since the same is non-transferable; (c) as Mager is not a CAI employee, CAI is not liable for any

of her acts; (d) CAI, its employees and agents did not act in bad faith as to entitle Spouses Viloria to moral and exemplary damages and attorney’s fees.

RTC ruled in favor of the spouses Viloria. On appeal, CA reversed the decision of RTC. Hence, the

present petition.

ISSUE: WON the representation of Mager as to unavailability of seats at Amtrak be considered fraudulent as to vitiate the consent of Spouse Viloria in the purchase of the subject tickets.

HELD: No. Article 1390, in relation to Article 1391 of the Civil Code,

provides that if the consent of the contracting parties was obtained through fraud, the contract is considered voidable and may be annulled within four (4) years from the time of the discovery of the fraud. Once a contract is annulled, the parties are obliged under Article 1398 of the same Code to restore to each other the things subject matter of the contract, including their fruits and interest.

Under Article 1338 of the Civil Code, there is fraud when, through insidious words or machinations of one of the contracting parties, the other is induced to enter into a contract which, without them, he would not have agreed to. In order that fraud may vitiate consent, it must be the causal (dolo causante), not merely the incidental (dolo incidente), inducement to the making of the contract.

Also, fraud must be serious and its existence must be established by clear and convincing evidence.

Article 1344 provides that in order that fraud may make a contract voidable, it should be serious and should not have been employed by both contracting parties.

After meticulously poring over the records, this Court finds that the fraud alleged by Spouses Viloria has not been satisfactorily established as causal in nature to warrant the annulment of the subject contracts. In fact, Spouses Viloria failed to prove by clear and convincing evidence that Mager’s statement was fraudulent. Specifically, Spouses Viloria failed to prove that (a) there were indeed available seats at Amtrak for a trip to New Jersey on August 13, 1997 at the time they spoke with Mager on July 21, 1997; (b) Mager knew about this; and (c) that she purposely informed them otherwise.

This Court finds the only proof of Mager’s alleged fraud, which is Fernando’s testimony that an Amtrak had assured him of the perennial availability of seats at Amtrak, to be wanting.

As CAI correctly pointed out and as Fernando admitted, it was possible that during the intervening period of three (3) weeks from the time Fernando purchased the subject tickets to the time he talked to said Amtrak employee, other passengers may have cancelled their bookings and reservations with Amtrak, making it possible for Amtrak to accommodate them. Indeed, the existence of fraud cannot be proved by mere speculations and conjectures. Fraud is never lightly inferred; it is good faith that is.

Under the Rules of Court, it is presumed that "a person is innocent of crime or wrong" and that "private transactions have been fair and regular."Spouses Viloria failed to overcome this presumption.

Even assuming that Mager’s representation is causal fraud, the subject contracts have been impliedly ratified when Spouses Viloria decided to exercise their right to use the subject tickets for the purchase of new ones. Under Article 1392 of the Civil Code, “ratification extinguishes the action to annul a voidable contract.”

Ratification of a voidable contract is defined under Article 1393 of the Civil Code as follows:

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

Implied ratification may take diverse forms, such as by silence or acquiescence; by acts showing approval or adoption of the contract; or by acceptance and retention of benefits flowing therefrom.

Simultaneous with their demand for a refund on the ground of Fernando’s vitiated consent, Spouses Viloria likewise asked for a refund based on CAI’s supposed bad faith in reneging on its undertaking to replace the subject tickets with a round trip ticket from Manila to Los Angeles.

In doing so, Spouses Viloria are actually asking for a rescission of the subject contracts based on contractual breach. Resolution, the action referred to in Article 1191, is based on the defendant’s breach of faith, a violation of the reciprocity between the parties37 and in Solar Harvest, Inc. v. Davao Corrugated Carton Corporation,38 this Court ruled that a claim for a reimbursement in view of the other party’s failure to comply with his obligations under the contract is one for rescission or resolution.

However, annulment under Article 1390 of the Civil Code and rescission under Article 1191 are two (2) inconsistent remedies. In resolution, all the elements to make the contract valid are present; in annulment, one of the essential elements to a formation of a contract, which is consent, is absent. In resolution, the defect is in the consummation stage of the contract when the parties are in the process of performing their respective obligations; in annulment, the defect is already present at the time of the negotiation and perfection stages of the contract.

Accordingly, by pursuing the remedy of rescission under Article 1191, the Vilorias had impliedly admitted the validity of the subject contracts, forfeiting their right to demand their annulment. A party cannot rely on the contract and claim rights or obligations under it and at the same time impugn its existence or validity. Indeed, litigants are enjoined from taking inconsistent positions.

REGAL FILMS, INC., petitioner, vs. GABRIEL CONCEPCION, respondent.

In 1991, respondent Gabriel "Gabby" Concepcion, a television artist and movie actor, through his manager

Lolita Solis, entered into a contract with petitioner Regal Films, Inc., for services to be rendered by respondent in petitioner’s motion pictures. Petitioner, in turn, undertook to give two parcels of land to respondent, one located in Marikina and the other in Cavite, on top of the “talent fees” it had agreed to pay.

In 1993, the parties renewed the contract, incorporating the same undertaking on the part of petitioner to give respondent the two parcels of land mentioned in the first agreement. Despite the appearance of respondent in several films produced by petitioner, the latter failed to comply with its promise to convey to respondent the two aforementioned lots.

On 30 May 1994, respondent and his manager filed an action against petitioner before the Regional Trial Court of Quezon City, for rescission of contract with damages. In his complaint, respondent contended that he was entitled to rescind the contract, plus damages, and to be released from further commitment to work exclusively for petitioner owing to the latter’s failure to honor the agreement.

Instead of filing an answer to the complaint, petitioner moved for its dismissal on the allegation that the parties had settled their differences amicably. Petitioner averred that both parties had executed an agreement, dated 17 June 1994, which was to so operate as an addendum to the 1991 and 1993 contracts between them. The agreement was signed by a representative of petitioner and by Solis purportedly acting for and in behalf of respondent Concepcion.

On 30 September 1994, Solis filed a motion to dismiss the complaint reiterating that she, acting for herself and for respondent Concepcion, had already settled the case amicably with petitioner. On 17 October 1994, respondent Concepcion himself opposed the motion to dismiss contending that the addendum, containing provisions grossly disadvantageous to him, was executed without his knowledge and consent. Respondent stated that Solis had since ceased to be his manager and had no authority to sign the addendum for him.

During the preliminary conference held on 23 June 1995, petitioner intimated to respondent and his counsel its willingness to allow respondent to be released from his 1991 and 1993 contracts with petitioner rather than to further pursue the addendum which respondent had challenged.

On 03 July 1995, respondent filed a manifestation with the trial court to the effect that he was now willing to honor the addendum to the 1991 and 1993 contracts and to have it considered as a compromise agreement as to warrant a judgment in accordance therewith.

On 24 October 1995, the trial court issued an order rendering judgment on compromise based on the subject addendum which respondent had previously challenged but later agreed to honor pursuant to his manifestation. Petitioner moved for reconsideration; having been denied, it then elevated the case to the Court

of Appeals which affirmed the trial court’s decision. Dissatisfied, petitioner elevated the case to the Supreme Court, hence this petition.

ISSUE: WON the addendum which lacks knowledge and consent of the respondent renders it unenforceable.HELD: YES

A compromise is an agreement between two or more persons who, for preventing or putting an end to a lawsuit, adjust their respective positions by mutual consent in the way they feel they can live with It is, in essence, a contract. Law and jurisprudence recite three minimum elements for any valid contract - (a) consent; (b) object certain which is the subject matter of the contract; and (c) cause of the obligation which is established.

In this instance, the addendum was flatly rejected by respondent on the theses (a) that he did not give his consent thereto nor authorized anyone to enter into the agreement, and (b) that it contained provisions grossly disadvantageous to him.

The outright rejection of the addendum made known to the other ended the offer. When respondent later filed his Manifestation, stating that he was, after all, willing to honor the addendum, there was nothing to still accept.

Verily, consent could be given not only by the party himself but by anyone duly authorized and acting for and in his behalf. But by respondent's own admission, the addendum was entered into without his knowledge and consent. A contract entered into in the name of another by one who ostensibly might have but who, in reality, had no real authority or legal representation, or who, having such authority, acted beyond his powers, would be unenforceable. The addendum resulted in an unenforceable contract.

It can be ratified but the ratification should be made before its revocation by the other contracting party. The adamant refusal of respondent to accept the terms of the addendum constrained petitioner, during the preliminary conference held on 23 June 1995, to instead express its willingness to release respondent from his contracts prayed for in his complaint and to thereby forego the rejected addendum. Respondent's subsequent attempt to ratify the addendum came much too late for, by then, the addendum had already been deemed revoked by petitioner.

Litonjua vs. Fernandez (ObliCon 4th EXAM case #16)Facts of the case:

Involved in the case are two parcel of lands registered in the Registry of deeds of San Pablo City with TCT No. T-36766 and T-36754 owned by the heirs of Domingo Ticzon and Heirs of Paz Ticzon Eleosida respectively.

Sometime in 1995, brokers Lourdes Alimaro and Agapito Fisico offered to sell to petitioners Antonio K. Litonjua and Aurelio K. Litonjua the lands mentioned above. Petitioners were shown a locator plan and copies of the titles showing that the owners of the properties were represented by Mary Mediatrix Fernandez and Gregorio T. Eleosida, respectively. The brokers told the petitioners that they were authorized by respondent Fernandez to offer the property for sale.

Petitioners made 2 ocular inspections of the property where they saw some people gathering coconuts.

The respondents and the brokers met with the petitioners at the petitioner’s Mandaluyong City office where they agreed that the petitioners would buy the property consisting of 36,742 sq. mts. For PhP150 per square meter or a total sum of PhP5,098,500. Petitioners contented that in the meeting, it was agreed upon that the owners would shoulder the capital gains tax, transfer tax, and the expenses for the documentation of the sale.

Petitioners contended that it was agreed upon in the same meeting that they will meet again on 8th December, 1995 to finalize the sale and that respondent Fernandez would present Special Power of Attorney executed by the owners of the property authorizing her to sell in their behalf, and to execute a deed of absolute sale thereon. The petitioners, in turn, would remit the purchase price to the owners, through respondent Fernandez.

However, only the broker Agapito Fisico attended the meeting where he informed the petitioners that respondent Fernandez was encountering some problems with the tenanrs and was trying to work out a settlement with them.

5th January 1995, respondents wrote a letter to respondent Fernandez demanding that the sale be finalized by 30 th

January, 1996. When no response was received, another letter was sent on 1st February 1996 asking that the deed of absolute sale for the property be executed in accordance with the verbal agreement on 27th November 1995. Petitioner likewise demanded the turnover of the subject properties within 15days from receipt of the letter otherwise they would have no option but to protect their interest through legal means.

Upon receipt of the letter, respondent Fernandez sent a reply on 14th February 1996 and clarified to wit;

o That it was not true that they agreed to shoulder the registration fees and other miscellaneous expenses nor ever recalling that it was discussed upon although she made an assurance that there were no liens, encumbrances and tenants on her property TCT-36755.

o That it was not true that they agreed to meet again on December 8th 1995 to sign a deed of absolute sale. That respondent left the office without giving an assurance that they would be back on the said date.

o She informed the petitioner that so called tenants suddenly appeared on her property and that of her other relatives thus barring them to be issued with a certification from the brgy captain that said properties were not tenanted. Further, that said tenants were asking for a hectare portion of the whole property.

o That she had asked her broker to inform the petitioner that they were no longer interested to sell the property until all problems were settled and that they will no longer be attending the said meeting on 8th December.

On 12th April 1996, petitioner filed a complaint for specific performance with damages against respondents and the registered owners of the property contending that the respondent cannot unilaterally, whimsically and capriciously cancel a perfected contract to sell.

In petitioner’s answer to the complaint, she claimed that although the petitioner offered to buy the property during the meeting of 27th November 1995 but she did not accept the offer, thus no verbal contract to sell took place.

Upon reviewing the merits of the case, RTC ruled in favour of the petitioners and ordering the respondents to execute a contract of sale and/or absolute deed of sale with the terms agreed upon and to secure from concerned govt. agencies all clearances needed and the removal of all tenants from said property at their expense.

On appeal, the CA reverse the judgement of the RTC for failure on the part of the petitioner to prove that a contract to sell over the properties have been perfected.

Issue: WON there was a perfected sale, and that the contract falls under the coverage of the statue of frauds.

Held: The court ruled that the petition has no merit. On the issue of a perfected contract to sell, the court ruled

that there was no perfected contract to sell for it failed to satisfy Art. 1403 of the New Civil Code which requires certain classes of contracts to be in writing.

The statute of frauds does not deprive the parties the right to contract but merely regulates the formalities of the contract necessary to render it enforceable. The purpose of which is to prevent fraud and perjury in the enforcement obligations for their existence to be dependent on the unassisted memory of the witnesses but by requiring certain enumerated contracts and transactions to be evidenced in writing signed by the party to be charged.

The statute is satisfied by an execution of a note or a memorandum which is sufficient to state the requirements of the statute. For a note or memorandum to satisfy the statute, it must be complete in itself and cannot rest partly in writing and partly in parol.

The note or memorandum must contain:o The names of the partieso The terms and conditions of the contracto A description of the property sufficient to render

it capable of identification. Further, the note or memorandum should include the

essential elements of the contract expressed with certainty without resorting to parol evidence. Such must also be signed by the said party or by his agent duly authorized in writing.

There were no documentary evidenced on record that the respondents-owners authorizing respondent Fernandez to sell their properties to another.

Art. 1878 of the NCC provides that a special power of attorney is necessary to enter into any contract for transfer of ownerships.

The court further emphasized that petitioners, as noted businessmen, ought to be very familiar with the intricacies of business transactions such as a sale of a real property

JESUS M. GOZUN, petitioner, vs.JOSE TEOFILO T. MERCADO

In the local elections of 1995, respondent vied for the gubernatorial post in Pampanga. Upon respondent’s request, petitioner, owner of JMG Publishing House, a printing shop located in San Fernando, Pampanga, submitted to respondent draft samples and price quotation of campaign materials. By petitioner’s claim, respondent’s wife had told him that respondent already approved his price quotation and that he could start printing the campaign materials, hence, he did print campaign materials like posters bearing respondent’s photograph, leaflets containing the slate of party candidates, sample ballots, poll watcher identification cards, and stickers.

Meanwhile, on March 31, 1995, respondent’s sister-in-law, Lilian Soriano (Lilian) obtained from petitioner "cash advance" of P253,000 allegedly for the allowances of poll watchers who were attending a seminar and for other related expenses. Lilian acknowledged on petitioner’s 1995 diary9 receipt of the amount.

Petitioner later sent respondent a Statement of Account11 in the total amount of P2,177,906 itemized as follows: P640,310 for JMG Publishing House; P837,696 for Metro Angeles Printing; P446,900 for St. Joseph Printing Press; and P253,000, the "cash advance" obtained by Lilian.

Despite repeated demands and respondent’s promise to pay, respondent failed to settle the balance of his account to petitioner.On petitioner’s claim that Lilian, on his (respondent’s) behalf, had obtained from him a cash advance of P253,000, respondent denied having given her authority to do so and having received the same.As adverted to earlier, the trial court rendered judgment in favor of petitioner.

Also as earlier adverted to, the Court of Appeals reversed the trial court’s decision and dismissed the complaint for lack of cause of action.

Issue: Whether or not, the petittioner’s claim of 253,000 is unenforceable.

By the contract of agency a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter.26 Contracts entered into in the name of another person by one who has been given no authority or legal representation or who has acted beyond

his powers are classified as unauthorized contracts and are declared unenforceable, unless they are ratified.

Generally, the agency may be oral, unless the law requires a specific form.28 However, a special power of attorney is necessary for an agent to, as in this case, borrow money, unless it be urgent and indispensable for the preservation of the things which are under administration.29 Since nothing in this case involves the preservation of things under administration, a determination of whether Soriano had the special authority to borrow money on behalf of respondent is in order.

Petitioner’s testimony failed to categorically state, however, whether the loan was made on behalf of respondent or of his wife. While petitioner claims that Lilian was authorized by respondent, the statement of account marked as Exhibit "A" states that the amount was received by Lilian "in behalf of Mrs. Annie Mercado."

Nowhere in the note can it be inferred that defendant-appellant was connected with the said transaction. Under Article 1317 of the New Civil Code, a person cannot be bound by contracts he did not authorize to be entered into his behalf.

It bears noting that Lilian signed in the receipt in her name alone, without indicating therein that she was acting for and in behalf of respondent. She thus bound herself in her personal capacity and not as an agent of respondent or anyone for that matter.

It is a general rule in the law of agency that, in order to bind the principal by a mortgage on real property executed by an agent, it must upon its face purport to be made, signed and sealed in the name of the principal, otherwise, it will bind the agent only. It is not enough merely that the agent was in fact authorized to make the mortgage, if he has not acted in the name of the principal.

NELSON CABALES and RITO CABALES v. CA18th Case

Facts:1. Rufino Cabales died on July ‘66 and left a 5,714-sq m

parcel of land (Brgy. Rizal, Sogod, Southern Leyte) to his surviving wife Saturnina and 6 children (Bonifacio, Albino, Francisco, Leonora, Alberto & petitioner Rito).

1st SALE WITH RIGHT TO REPURCHASE2. July ‘71: brothers & co-owners Bonifacio, Albino & Alberto

sold the subject property to Dr. Cayetano Corrompido for P2T, w/ right to repurchase w/in 8 years. + The 3 siblings divided the proceeds of the sale among themselves, each getting a share of P666.66. + Alberto secured a note (“vale”) from Dr. Corrompido in the amount of P300. + 1972: Alberto died leaving his wife and son, petitioner Nelson.

3. Dec ‘75: w/in the 8-year redemption period, Bonifacio and Albino tendered their payment of P666.66 each to Dr. Corrompido. But Dr. Corrompido only released the

document of sale with pacto de retro after Saturnina paid for the share of her deceased son, Alberto, including his “vale” of P300.

SECOND SALE4. Saturnina & her 4 children Bonifacio, Albino, Francisco &

Leonora sold the subject parcel of land to respondents-spouses Jesus & Anunciacion Feliano for P8T.

PROVISION IN THE DEED SALE5. The Deed of Sale provided: It is hereby declared and

understood that the amount of P2,286 corresponding to the Heirs of Alberto Cabales and to Rito Cabales who are still minors upon the execution of this instrument are held in trust by the VENDEE and to be paid and delivered only to them upon reaching the age of 21.

AFFIDAVIT RE: RECEIVABLE OF PETITIONER NELSON (Son of Alberto)

6. Saturnina and her 4 children executed an affidavit to the effect that petitioner Nelson (son of Alberto) would only receive the amount of P176.34 when he reaches the age of 21 considering that Saturnina paid Dr. Corrompido P966.66 for the obligation of his father Alberto ( P666.66 for his share in the redemption of the sale with pacto de retro as well as his “vale” of P300.00)

SUBSEQUENT EVENTS7. July 24, ’86: 24-year old petitioner Rito Cabales

acknowledged receipt of the sum of P1,143.00 from respondent Jesus Feliano, representing the former’s share in the proceeds of the sale of subject property.

8. ‘88: Saturnina died. Co-petitioner Nelson went back to his father’s hometown in Southern Leyte. That same year, he learned from his uncle, petitioner Rito, of the sale of subject property.

9. ’93: Nelson signified his intention to redeem the subject land during a barangay conciliation process that he initiated.

PETITIONERS CONTENDED THEY COULD NOT HAVE SOLD THEIR SHARES

10. Jan ’95: contending that they could not have sold their respective shares in subject property when they were minors, petitioners filed before RTC Maasin, a complaint for redemption of the subject land plus damages.

11. Respondents-spouses Feliano maintained that petitioners were estopped from claiming any right over subject property considering that:(1) petitioner Rito had already received the amount corresponding to his share of the proceeds of the sale of subject property, and (2) that petitioner Nelson failed to consign to the court the total amount of the redemption price necessary for legal redemption. + They prayed for the dismissal of the case on the grounds of laches and prescription.

TRIAL COURT RULED AGAINST PETITIONERS

12. (a) Alberto or, by his death, any of his heirs including petitioner Nelson lost their right to subject land when not one of them repurchased it from Dr. Corrompido; (b) Saturnina was effectively subrogated to the rights and interests of Alberto when she paid for Alberto’s share as well as his obligation to Dr. Corrompido; and (c) petitioner Rito had no more right to redeem his share to subject property as the sale by Saturnina, his legal guardian pursuant to Section 7, Rule 93 of the Rules of Court, was perfectly valid; and it was shown that he received his share of the proceeds of the sale on July 24, ‘86, when he was 24 y.o..

13. CA MODIFIED RTC’S DECISION. + Sale by Saturnina of petitioner Rito’s undivided share to the property was unenforceable for lack of authority or legal representation but that the contract was effectively ratified by petitioner Rito’s receipt of the proceeds on July 24, ‘86. + Further, petitioner Nelson is co-owner to the extent of 1/7 of subject property as Saturnina was not subrogated to Alberto’s rights when she repurchased his share to the property. It further directed petitioner Nelson to pay the estate of the late Saturnina Cabales the amount of P966.66, representing the amount which the latter paid for the obligation of petitioner Nelson’s late father Alberto. + Finally, however, it denied petitioner Nelson’s claim for redemption for his failure to tender or consign in court the redemption money within the period prescribed by law.

Issues: Whether or not the sale with respect to Petitioner Nelson was void (It is void). Whether or not the sale by Saturnina of Petitioner Rito’s share was unenforceable (It is unenforceable but eventually ratified). May petitioners redeem the subject land from respondents-spouses? (Only Nelson can do so but it was too late)

Ruling:

RIGHTS OF PETITIONERS TO SUBJECT LAND1. When Rufino died intestate, his wife Saturnina & his 6 children, survived and succeeded him pursuant to Article 996, CC: “[i]f a widow or widower and legitimate children or descendants are left, the surviving spouse has in the succession the same share as that of each of the children.” The 7 heirs inherited equally on subject property. Petitioner Rito and Alberto, petitioner Nelson’s father, inherited in their own rights and with equal shares as the others. + But before partition of subject land was effected, Alberto died . By operation of law, his rights and obligations to 1/7 of subject land were transferred to his legal heirs – his wife and his son petitioner Nelson.

EFFECTS OF THE TWO SALES2. The first sale with pacto de retro to Dr. Corrompido by the brothers and co-owners Bonifacio, Albino and Alberto was valid but only as to their pro-indiviso shares to the land. + When Alberto died prior to repurchasing his share, his rights and obligations were transferred to and assumed by his heirs, namely his

wife and his son, petitioner Nelson. But the records show that it was Saturnina, Alberto’s mother, and not his heirs, who repurchased for him. As correctly ruled by CA, Saturnina was not subrogated to Alberto’s or his heirs’ rights to the property when she repurchased the share.

3. Paulmitan v. CA Doctrine: A co-owner who redeemed the property in its entirety did not make her the owner of all of it. The property remained in a condition of co-ownership as the redemption did not provide for a mode of terminating a co-ownership. But the one who redeemed had the right to be reimbursed for the redemption price and until reimbursed, holds a lien upon the subject property for the amount due.+ When Saturnina redeemed for Alberto’s heirs who had then acquired his pro-indiviso share in subject property, it did not vest in her ownership over the pro-indiviso share she redeemed but she had the right to be reimbursed for the redemption price and held a lien upon the property for the amount due until reimbursement. The result is that the heirs of Alberto, i.e., his wife and his son petitioner Nelson, retained ownership over their pro-indiviso share.

UNENFORCEABLE CONTRACT OF SALE BUT EVENTUALLY RATIFIED (Petitioner Rito)4.Upon redemption from Dr. Corrompido, the subject property was resold to respondents-spouses by the co-owners. Petitioners Rito and Nelson were then minors and as indicated in the Deed of Sale, their shares in the proceeds were held in trust by respondents-spouses to be paid and delivered to them upon reaching the age of majority.

a. As to petitioner Rito, the contract of sale was unenforceable as correctly held by the CA. + Articles 320 and 326, CC:Art. 320. The father, or in his absence the mother, is the legal administrator of the property pertaining to the child under parental authority. If the property is worth more than 2T, the father or mother shall give a bond subject to the approval of the CFI.Art. 326. When the property of the child is worth more than 2T, the father or mother shall be considered a guardian of the child’s property, subject to the duties and obligations of guardians under the Rules of Court.+ In other words, the father, or, in his absence, the mother, is considered legal administrator of the property pertaining to the child under his or her parental authority w/o need of giving a bond in case the amount of the property of the child does not exceed 2T.

b. Corollary to this, Rule 93, Section 7 of the Revised Rules of Court of 1964, applicable to this case, automatically designates the parent as legal guardian of the child without need of any judicial appointment in case the latter’s property does not exceed 2T, thus: Sec. 7. Parents as guardians. – When the property of the child under parental authority is worth 2T or less, the father or the mother, without the necessity of court appointment, shall be his legal guardian x x x x + Saturnina was clearly petitioner Rito’s legal guardian without necessity of court appointment considering that the amount of his property or 1/7 of subject property was P1,143.00, which is less than 2T.

c. However, Rule 96, Sec. 1 provides that: Section 1. To what guardianship shall extend. – A guardian appointed shall have the care and custody of the person of his ward, and the management of his estate, or the management of the estate only, as the case may be. The guardian of the estate of a nonresident shall have the management of all the estate of the ward within the Philippines, and no court other than that in which such guardian was appointed shall have jurisdiction over the guardianship.+ Indeed, the legal guardian only has the plenary power of administration of the minor’s property. It does not include the power of alienation which needs judicial authority.+ Thus, when Saturnina, as legal guardian of petitioner Rito, sold the latter’s pro-indiviso share in subject land, she did not have the legal authority to do so. +Article 1403, CC provides: The following contracts are unenforceable, unless they are ratified: (1) Those entered into in the name of another person by one who has been given no authority or legal representation, or who has acted beyond his powers;+ Accordingly, the contract of sale as to the pro-indiviso share of petitioner Rito was unenforceable.

d. However, when he acknowledged receipt of the proceeds of the sale on July 24, 1986, petitioner Rito effectively ratified it. This act of ratification rendered the sale valid and binding as to him.

VOID CONTRACT OF SALE (Petitioner Nelson, son of deceased Alberto)5. With respect to petitioner Nelson, on the other hand, the contract of sale was void. + He was a minor at the time of the sale. Saturnina or any and all the other co-owners were NOT his legal guardians with judicial authority to alienate or encumber his property. + It was his mother who was his legal guardian and, if duly authorized by the courts, could validly sell his undivided share to the property. She did not. Necessarily, when Saturnina and the others sold the subject property in its entirety to respondents-spouses, they only sold and transferred title to their pro-indiviso shares and not that part which pertained to petitioner Nelson and his mother. + Consequently, petitioner Nelson and his mother retained ownership over their undivided share of subject property.

ON REDEMPTION6. May petitioners redeem the subject land from respondents-spouses? Articles 1088 and 1623, CC: Art. 1088. Should any of the heirs sell his hereditary rights to a stranger before the partition, any or all of the co-heirs may be subrogated to the rights of the purchaser by reimbursing him for the price of the sale, provided they do so within the period of one month from the time they were notified in writing of the sale by the vendor.Art. 1623.The right of legal pre-emption or redemption shall not be exercised except within thirty days from the notice in writing by the prospective vendor, or by the vendor, as the case may be. The deed of sale shall not be recorded in the Registry of Property, unless accompanied by an affidavit of the vendor that he has given written notice thereof to all possible redemptioners.

a. Clearly, legal redemption may only be exercised by the co-owner or co-owners who did not part with his or their pro-indiviso share in the property held in common. + As demonstrated, the sale as to the undivided share of petitioner Rito became valid and binding upon his ratification on July 24, 1986. As a result, he lost his right to redeem subject property.

b. However, as likewise established, the sale as to the undivided share of petitioner Nelson and his mother was not valid such that they were not divested of their ownership thereto.Necessarily, they may redeem the subject property from respondents-spouses. But they must do so within thirty days from notice in writing of the sale by their co-owners vendors.+ SC held to interpret and apply the law not independently of but in consonance with justice. Law and justice are inseparable, and we must keep them so. In doing so, we defer not to “the letter that killeth” but to “the spirit that vivifieth,” to give effect to the lawmaker’s will.+ In requiring written notice, Article 1088 (and Article 1623 for that matter) seeks to ensure that the redemptioner is properly notified of the sale and to indicate the date of such notice as the starting time of the 30-day period of redemption. Considering the shortness of the period, it is really necessary, as a general rule, to pinpoint the precise date it is supposed to begin, to obviate the problem of alleged delays, sometimes consisting of only a day or two.+ In the instant case, the right of redemption was invoked not days but years after the sale was made in 1978. + Records show that in 1988, petitioner Nelson, then of majority age, was informed of the sale of subject property. Moreover, it was noted by CA that petitioner Nelson was likewise informed thereof in 1993 and he signified his intention to redeem subject property during a barangay conciliation process. + But he only filed the complaint for legal redemption and damages on January 12, 1995, certainly more than thirty days from learning about the sale. + The Court is satisfied that there was sufficient notice of the sale to petitioner Nelson. The 30-day redemption period commenced in 1993, after petitioner Nelson sought the barangay conciliation process to redeem his property. By January 12, 1995, when petitioner Nelson filed a complaint for legal redemption and damages, it is clear that the thirty-day period had already expired.

7. Petitioner Nelson, as correctly held by CA, can no longer redeem subject property. But he and his mother remain co-owners thereof with respondents-spouses. Accordingly, title to subject property must include them. Register of Deeds of Southern Leyte was ORDERED to cancel Original Certificate of Title No. 17035 and to issue in lieu thereof a new certificate of title in the name of respondents-spouses Jesus and Anunciacion Feliano for the 6/7 portion, and petitioner Nelson Cabales and his mother for the remaining 1/7 portion, pro indiviso.

Penalber vs Ramos

THE FACTUAL ANTECEDENT OF THE CASE IS AS FOLLOWS: Petitioner is the mother of respondent Leticia and the

mother-in-law of respondent Quirino, husband of Leticia.

Respondent Bartex, Inc., on the other hand, is a domestic corporation which bought from respondent spouses Ramos one of the two properties involved in this case.

On 18 February 1987, petitioner filed before the RTC a Complaint for Declaration of Nullity of Deeds and Titles, Reconveyance, Damages, with Application for a Writ of Preliminary Prohibitory Injunction against the respondents.

There were 2 causes of action that was assailed by the petitioner. Focus: 2nd cause of action.

Second Cause of Action Secondly, petitioner claimed that for many years prior to

1984, she operated a hardware store in a building she owned along Bonifacio St., Tuguegarao, Cagayan. However, the commercial lot (Bonifacio property) upon which the building stood is owned by and registered in the name of Maria Mendoza, from whom petitioner rented the same.

On March1982, petitioner allowed respondent spouses Ramos to manage the hardware store. Thereafter, in 1984, Mendoza put the Bonifacio property up for sale. As petitioner did not have available cash to buy the property, she allegedly entered into a verbal agreement with respondent spouses Ramos with the following terms:

[1.] The lot would be bought by respondent spouses Ramos for and in behalf of herein petitioner;[2.] The consideration of P80,000.00 for said lot would be paid by respondent spouses Ramos from the accumulated earnings of the store;[3.] Since respondent spouses Ramos have the better credit standing, they would be made to appear in the Deed of Sale as the vendees so that the title to be issued in their names could be used by them to secure a loan with which to expand the business of petitioner.

In accordance with the above agreement, respondent spouses Ramos allegedly entered into a contract of sale with Mendoza over the Bonifacio property, and TCT covering said property was issued in the names of respondent spouses Ramos.

On September 1984, respondent spouses Ramos returned the management of the hardware store to petitioner. On the bases of receipts and disbursements, petitioner asserted that the Bonifacio property was fully paid out of the funds of the store. It appears that before management of the store was transferred a beginning inventory of the stocks of the hardware store amounted to 227K. After management of the hardware store was returned, a second inventory was made with stocks amounting to 110K showing a difference of 117K. Consequently, petitioner demanded from respondent spouses Ramos the reconveyance of the title to the Bonifacio property to her but the latter unjustifiably refused.

Petitioner insisted that respondent spouses Ramos were, in reality, mere trustees of the Bonifacio property, thus, they were under a moral and legal obligation to reconvey title over the said property to her. Petitioner, therefore, prayed that she be declared the owner of the Bonifacio property.

RESPONDENTS’ SIDE:

With regard to petitioner’s second cause of action involving the Bonifacio property, respondent spouses Ramos contended that they were given not only the management, but also the full ownership of the hardware store by the petitioner, on the condition that the stocks and merchandise of the store will be inventoried, and out of the proceeds of the sales thereof, respondent spouses Ramos shall pay petitioner’s outstanding obligations and liabilities. After settling and paying the obligations and liabilities of petitioner, respondent spouses Ramos bought the Bonifacio property from Mendoza out of their own funds.

On the second cause of action, RTC ruled in favor of the petitioner. Declaring the petitioner the owner of Bonifacio property; and Ordering the respondent spouses Ramos to reconvey to the petitioner the said Bonifacio property.

Spouses Ramos elevated their case to the Court of Appeals, insofar as the ruling of the RTC on petitioner’s second cause of action was concerned, CA rendered the assailed decision in favor of respondent spouses Ramos.

ISSUES: Whether the existence of a trust agreement between her

and respondent spouses Ramos was clearly established, and

Whether such trust agreement was valid and enforceable.RULING:

The petitioner alleged that the verbal trust agreement between her and respondent spouses Ramos is in the nature of an express trust as petitioner explicitly agreed to allow the respondent spouses Ramos to acquire title to the Bonifacio property in their names, and to hold the same property for petitioner’s benefit. Given that the alleged trust concerns an immovable property, however, respondent spouses Ramos counter that the same is unenforceable since the agreement was made verbally and no parol evidence may be admitted to prove the existence of an express trust concerning an immovable property or any interest therein.

On this score, SC subscribe to the ruling of the RTC that said spouses were deemed to have waived their objection to the parol evidence as they failed to timely object when petitioner testified on the said verbal agreement. The requirement in Article 1443 that the express trust concerning an immovable or an interest therein be in writing is merely for purposes of proof, not for the validity of the trust agreement. Therefore, the said article is in the nature of a statute of frauds. The term statute of frauds is descriptive of statutes which require certain classes of contracts to be in writing. The effect of non-compliance is simply that no action can be proved unless the requirement is complied with. Oral evidence of the contract will be excluded upon timely objection. But if the parties to the action, during the trial, make no objection to the admissibility of the oral evidence to support the contract covered by the statute, and thereby permit such contract to be proved orally, it will be just as binding upon the parties as if it had been reduced to writing.

However, petitioner’s allegations as to the existence of an express trust agreement with respondent spouses Ramos, supported only by her own and her son Johnson’s testimonies, do not hold water. As correctly ruled by the Court of Appeals, a resulting difference of P117K in the beginning inventory of the stocks of the hardware store and the second inventory, by itself, is not conclusive proof that the said amount was used to pay the purchase price of the Bonifacio property, (the difference might be due to bad economic condition or damages of the merchandise), thus it cannot be assumed that she is now the owner of the Bonifacio property.

Petitioner’s arguments fail to prove the existence of the alleged express trust agreement. Thus the petition is denied and the decision of the CA is affirmed

Gonzales v. Perez

FACTS

1. The former Municipality of used to own a parcel of land located in Barrio Concepcion subdivided into three (3) lots, namely, lots A, B and C.

2. On January 14, 1966, the Municipal Council of Marikina passed Resolution No. 9, series of 1966 which authorized the sale through public bidding of Municipal Lots A and C.

3. A public bidding was conducted wherein Pedro Gonzales was the highest bidder.

4. Sometime in September 1966, Pedro sold to Marcos Perez a portion of Lot C, denominated as Lot C-3, which contains an area of 375 square meters. The contract of sale was embodied in a Deed of Sale5 which, however, was not notarized

5. Subsequently, Pedro and Marcos died.6. In 1992, the Municipality of Marikina, through its then

Mayor Rodolfo Valentino, executed a Deed of Absolute Transfer of Real Property over Lots A and C in favor of the Estate of Pedro C. Gonzales.

7. Subsequently, herein petitioners executed an extra-judicial partition wherein Lot C was subdivided into three lots. As a result of the subdivision, new titles were issued wherein the 370-square-meter portion of Lot C-3 is now denominated as Lot C-1 and is covered by TCT No. 2444479 and the remaining 5 square meters of the subject lot (Lot C-3) now forms a portion of another lot denominated as Lot C-2 and is now covered by TCT No. 244448.

8. On October 1, 1992, herein respondents sent a demand letter to one of herein petitioners asking for the reconveyance of the subject property. However, petitioners refused to reconvey the said lot. As a consequence, respondents filed an action for "Annulment and/or Rescission of Deed of Absolute Transfer of Real Property and for Reconveyance with Damages.

ISSUE

Whether or not the Deed of Absolute Sale between Gonzales and Perez were unenforceable due to the absence of notarization as a public document

RULING1. NO, the Deed of Sale was valid and enforceable.2. On the question of whether the subject Deed of Sale is

invalid on the ground that it does not appear in a public document, Article 1358 of the same Code enumerates the acts and contracts that should be embodied in a public document, to wit:

3. 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;

4. Art. 1403. The following contracts are unenforceable, unless they are ratified:

(2) Those that do not comply with the Statute of Frauds as set forth in this number. In the following cases an agreement hereafter made shall be unenforceable by action, unless the same, or some note or memorandum thereof, be in writing, and subscribed by the party charged, or by his agent; evidence, therefore, of the agreement cannot be received without the writing, or a secondary evidence of its contents:

5. Under Article 1403(2), the sale of real property should be in:a. writing and;b. subscribed by the party charged for it to be

enforceable6. In the case before the Court, the Deed of Sale between

Pedro and Marcos is in writing and subscribed by Pedro and his wife Francisca; hence, it is enforceable under the Statute of Frauds.

7. However, not having been subscribed and sworn to before a notary public, the Deed of Sale is not a public document and, therefore, does not comply with Article 1358 of the Civil Code.

8. Nonetheless, it is a settled rule that the failure to observe the proper form prescribed by Article 1358 does not render the acts or contracts enumerated therein invalid. It has been uniformly held that the form required under the said Article is not essential to the validity or enforceability of the transaction, but merely for convenience.

9. The Court agrees with the CA in holding that a sale of real property, though not consigned in a public instrument or formal writing, is, nevertheless, valid and binding among the parties, for the time-honored rule is that even a verbal contract of sale of real estate produces legal effects between the parties.

10. Stated differently, although a conveyance of land is not made in a public document, it does not affect the validity of such conveyance. Article 1358 does not require the accomplishment of the acts or contracts in a public

instrument in order to validate the act or contract but only to insure its efficacy.

11. Thus, based on the foregoing, the Court finds that the CA did not err in ruling that the contract of sale between Pedro and Marcos is valid and binding.

SERAFIN MODINA, petitioner vs. COURT OF APPEALS AND ERNESTO HONTARCIEGO, PAUL FIGUEROA, TEODORO HIPALLA AND RAMON CHIANG, MERLINDA CHIANG, respondents.FACTS:

The parcels of land in question are those under the name of Ramon covered by TCT Nos. T-86912, T-86913, and T-86914.

He theorized that subject properties were sold to him by his wife, Merlinda Plana Chiang, as evidenced by a Deed of Absolute Sale dated December 17, 1975,

Properties were subsequently sold by CHIANG to the petitioner Serafin Modina , as shown by the Deeds of Sale, dated August 3, 1979 and August 24, 1979, respectively.

MODINA brought a Complaint for Recovery of Possession with Damages against the private respondents, Ernesto Hontarciego, Paul Figueroa and Teodoro Hipalla, before the Regional Trial Court of Iloilo City.

Upon learning the institution of the said case, MERLINDA presented a Complaint-in-intervention, seeking the declaration of nullity of the Deed of Sale between her husband and MODINA on

o The ground that the titles of the parcels of land in dispute were never legally transferred to her husband.

o Fraudulent acts were allegedly employed by him to obtain a Torrens Title in his favor.

However, she confirmed the validity of the lease contracts with the other private respondents.

MERLINDA also admitted that the said parcels of land were those ordered sold by Branch 2 of the then Court of First Instance of Iloilo in Special Proceeding No. 2469 in “Intestate Estate of Nelson Plana”

o Where she was appointed as the administratix, being the widow of the deceased, her first husband.

o An Authority to Sell was issued by the said Probate Court for the sale of the same properties.

The Trial Court decided in favor of MERLINDA, Declaring as void and inexistent the sale of the same properties by

Ramon Chiang in favor of Serafin Modina as evidenced by the deeds of sale.

On appeal, the Court of Appeals affirmed the aforesaid decision in toto.

ISSUES: 1.) WON the sale of the subject lots is null and void.2.) WON Merlinda is barred by the principle of in pari delicto

from questioning the deed of sale. RULING:

1.) The sale of the subject lots is null and void.

Under Article 1409[11] of the New Civil Code, enumerating void contracts, a contract without consideration is one such void contract. One of the characteristics of a void or inexistent contract is that it produces no effect. So also, inexistent contracts can be invoked by any person whenever juridical effects founded thereon are asserted against him. A transferor can recover the object of such contract by accion reivindicatoria and any possessor may refuse to deliver it to the transferee, who cannot enforce the transfer.

The sale in question is null and void for being violative of Article 1490 of the New Civil Code prohibiting sales between spouses.

Art. 1490. The husband and the 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 Art. 191.

The exception to the rule laid down in Art. 1490 of the New Civil Code not having existed with respect to the property relations of Ramon Chiang and Merlinda Plana Chiang, the sale by the latter in favor of the former of the properties in question is invalid for being prohibited by law. Not being the owner of subject properties, Ramon Chiang could not have validly sold the same to plaintiff Serafin Modina. The sale by Ramon Chiang in favor of Serafin Modina is, likewise, void and inexistent.

2.) As correctly founded by the Court of Appeals, there is no sufficient evidence establishing fault on the part of MERLINDA, and therefore, the principle of in pari delicto is inapplicable and the sale was void for want of consideration.

It bears emphasizing that as the contracts under controversy are inexistent contracts within legal contemplation, Articles 1411 and 1412 of the New Civil Code are inapplicable.

In pari delicto doctrine applies only to contracts with illegal consideration or subject matter, whether the attendant facts constitute an offense or misdemeanor or whether the consideration involved is merely rendered illegal.

The statement below that it is likewise null and void for being violative of Article 1490 should just be treated as a surplusage or an obiter dictum on the part of the Trial Court as the issue of whether the parcels of land in dispute are conjugal in nature or they fall under the exceptions provided for by law, was neither raised nor litigated upon before the lower Court.

Records show that in the complaint-in-intervention of MERLINDA, she did not aver the same as a ground to nullify subject Deed of Sale. In fact, she denied the existence of the Deed of Sale in favor of her husband. In the said Complaint, her allegations referred to the want of consideration of such Deed of Sale. She did not put up the defense under Article 1490, to nullify her sale to her husband CHIANG because such a defense would be inconsistent with her claim that the same sale was inexistent.

The Trial Court debunked petitioner’s theory that MERLINDA intentionally gave away the bulk of her and her late husband’s estate to defendant CHIANG as his exclusive property, for want of evidentiary anchor. They insist on the Deed of Sale wherein MERLINDA made the misrepresentation that she was a widow and CHIANG was single, when at the time of execution thereof, they were in fact already married. Petitioner insists that this document conclusively established bad faith on the part of MERLINDA and therefore, the principle of in pari delicto should have been applied.

These issues are factual in nature and it is not for this Court to appreciate and evaluate the pieces of evidence introduced below. An appellate court defers to the factual findings of the Trial Court, unless petitioner can show a glaring mistake in the appreciation of relevant evidence.

Since one of the characteristics of a void or inexistent contract is that it does not produce any effect, MERLINDA can recover the property from petitioner who never acquired title thereover.

WHEREFORE, the Petition is DENIED and the decision of the Court of Appeals, AFFIRMED.

Domingo v. CA

Facts: Paulina Rigonan owned three (3) parcels of land, including the house and warehouse on one parcel. She allegedly sold them to respondents, the spouses Felipe and Concepcion Rigonan for 840 pesos. In 1966, herein petitioners Domingo, Mangabat and Capalungan, who claim to be her closest surviving relatives, allegedly took possession of the properties by means of stealth, force and intimidation, and refused to vacate the same. Consequently, spousesRigonan filed a complaint for reinvindicacion against petitioners in the Regional Trial Court. They alleged that they were the owners of the three parcels of land through the deed of sale executed by Paulina Rigonan on January 28, 1965.On the other hand, petitioners alleged that the deed of absolute sale was void for being spurious as well as lack of consideration. As her nearest surviving kin within the fifth degree of consanguinity, they inherited the three lots and the permanent improvements thereon when Paulina died.The trial court rendered judgment in favor of petitioners that the alleged deed of sale was null and void and fake but the Court of Appeals reversed the trial court’s decision.

Issue:Whether or not respondent spouses were able to prove the existence of a valid Deed of Sale.Held: No, respondent spouses were not able to prove the existence of a valid Deed of Sale.First, respondent spouses could not present the original deed of sale at the trial. Only the carbon copy of this was presented which does not bear Pauliana’s signature, only the alleged thumbprint. The copy contained filled in blanks and alterations which shows discrepancies add intercalations. According to respondents, it was left unfilled by Atty. Tagatag at the time of registration of the deed and it was filled much later by the registrar of deeds. However, none of the witness attested to the veracity of the execution of the deed of sale. Juan Franco retracted as a witness during the cross examination when he said that it was not the document he signed as a witness thereof. EfrenSibucao, whose testimony should corroborate Atty. Tagatag’stestimony was withdrawn from the court leaving only the testimony of the Tagatag which aside from uncorroborated, was self-serving. Secondly, the alleged other copies of the document bore different dates of entry: May 16, 1966, 10:20 A.M. and June 10, 1966, 3:16 P.M., and different entry numbers: 66246, 74389 and 64369. Therefore, the deed was apparently registered long after its alleged date of execution and after Paulina’s death on March 20, 1966. Admittedly, the alleged vendor Paulina Rigonan was not given a copy.Furthermore, it appears the Paulina was never asked to vacate the premises she had purportedly sold. According to respondents, they allowed her to stay until her death. In Alcos v. IAC, the buyer’s immediate possession and occupation of the property was deemed corroborative of the truthfulness and authenticity of the deed of sale. Here, Paulina’s continued possession of the property throws a serious doubt on the due execution of the Deed of sale. Noteworthy, the same parcels of land involved in the alleged sale were still included in the Will executed by Pauliana band notarized by Atty. Tagatag. These circumstances, taken together would militate against the veracity of the execution of the Deed. Thirdly, there is unrebutted the testimony that Pauliana as a land owner was financially well off. She loaned money to several people. Therefore, there is no apparent and compelling reason for her to sell the subject property at the price of 180 only. Therefore, the consideration of P850is fictitious and inadequate.The general rule is that a person is not competent to contact by means of advanced years or by reason of physical infirmities. However, when such age or infirmities have impaired the mental faculties so as to prevent the person from protecting her property rights, then, she is undeniably incapacitated. Here, Paulina died an octogenarian on March 20, 1966. The unrebutted testimony of Zosima Domingo shows Paulina was already incapacitated physically and mentally during the alleged execution of the deed. She narrated that Paulina played with her waste and urinated in bed. Given these circumstances, there is sufficient reason to seriously doubt that she consented to the sale of and the price for her parcels of land. Moreover, there is no receipt to show that said price was paid to and received by her.

Bautista v. Silva

Facts:

Involved this case is a parcel of land, situated in Bario Parada, Valenzuela, Metro Manila containing an area of 216 sqm, more or less, covered by Transfer Certificate of Title No. B-37189 and registered in the names of the spouses Berlina and Pedro Silva on August 14, 1980.

On March 3, 1988, Pedro Silva, thru a Special Power of Attorney, purportedly executed by Berlina Silva on November 17, 1987, signed and executed a Deed of Absolute Sale over the said parcel of land, in favor of the spouses Claro and Nida Bautista.

As a consequence, TCT No. B-37189 was cancelled. In lieu thereof, TCT No. V-2765 was issued in the names of the defendant-spouses Bautista on March 4, 1988.

Based on the evidence presented, the RTC found that the signature appearing on the SPA as that of Berlina Silva is a forgery, and consequently, the Deed of Absolute Sale executed by Pedro Silva in favor of the spouses Bautista is not authorized by Berlina.

On January 10, 1995, RTC rendered its decision declaring the Deed of Absolute sale null and Void; TCT No. V-2765 in the names of the spouses Bautista cancelled; and TCT No. B-37189 reinstated.

On appeal, CA affirmed the decision of the RTC and denied the Motion for Reconsideration.

Issue: WON the petitioners were purchasers in good faith WON the petitioners may retain that of Pedro Silva’s share

in the subject property.

Held: As to the first issue, there is no merit on the petitioner’s

claim that they are purchasers in good faith. The SPA being a forgery, it did not vest in Pedro any

authority to alienate the property without the consent of the respondent. Absent such marital consent, the deed of absolute sale was a nullity.

However, the petitioners disclaim any participation in the forgery of the SPA and in the unauthorized sale of the subject property. They are adamant that even with their knowledge that Berlina was in Germany at the time of the Sale, they still acted in good faith when they bought the property from Pedro, because Pedro was equipped with a SPA which contains notarial acknowledgment that the same was valid and authentic.

To prove good faith, a buyer of a registered and titled property need only show that he relied on the face of the title to the property. He need not prove that he made further inquiry for he is not obliged to explore the four corners of the title for it is already the function of the notarial acknowledgment to establish the appearance of the parties to the document, its due execution and authenticity.

Such degree of proof of good faith, however, is sufficient only when the ff. conditions concur: first, the seller is the registered owner of the land; second, that the latter is in possession thereof; and third, the buyer was not aware of any claim or interest of some other person in the property,

or of restriction in his capacity to convey title to the property.

Absent one or two of the foregoing conditions, the law itself puts the buyer on notice and obliges the latter to exercise a higher degree of diligence. Failure to exercise such degree of precaution makes him a buyer of bad faith.

In the present case, petitioners were dealing with the seller, Pedro who had title to and possession of the land, whose capacity to sell was restricted because the marital consent of the respondent is required before he could convey the property.

To prove good faith then, the petitioners must show that they inquired not only into the title of Pedro but also into his capacity to sell.

Accdng to the petitioners, to determine Pedro’s capacity to sell, they conducted the following forms of inquiry: first, they inspected the photocopy of the SPA presented to them by Pedro; second, they brought said copy to Atty. Lucero (the notary public who prepared the deed of sale) and asked whether it was genuine; and third, they inspected the original copy of the SPA after they advance payment of 55k to Pedro.

The RTC and CA, however, found such inquiry superficial. The Court cited the case of Domingo v. Reed, wherein, the

SPA relied upon by the buyers contained a defective notarial acknowledgment in that it stated that only the agent-wife signed the document before the notary public and the principal-husband did not. Such flaw rendered the notarial acknowledgment of no effect and the SPA reduced into a private document. The court declared the buyer who relied on the private SPA, a buyer in bad faith.

In the case at bar, petitioners knew that Berlina was in Germany at the time they were buying the subject property and that the SPA they relied upon has a defective notarial acknowledgment.

The SPA was a mere photocopy, the court were not convinced that there ever was an original copy of the SPA as it was only this photocopy that was testified by petitioner Nida Bautista and offered into evidence by her counsel.

Moreover, the photocopy of the SPA contains no notarial seal. There being no notarial seal, the signature of the notary public on the notarial acknowledgment was therefore incomplete.

All told, it was not sufficient of good faith that petitioners merely relied on the photocopy of the SPA as this turned out to be a mere private document. They should have adduced more evidence that they looked beyond it. But they did not. Instead, they took no precautions at all.

They verified with Atty. Lucero whether the SPA was authentic but then the latter was not the notary public who prepared the document. Worse, they purposely failed to inquire who was the notary public who prepared the SPA.

Finally, petitioners conducted the transaction in haste. It took them all but three days from March 2 to 4, 1988 to enter into the deed of sale, notwithstanding the restriction of the capacity to sell of Pedro.

Therefore, in no way then may petitioners qualify as buyers for value in good faith.

That said, we come to the third issue on whether or not the petitioners may retain the portion of Pedro Silva in the subject property.

The court held no. It is well settled that the nullity of sale of conjugal property contracted by the husband without marital consent of the wife affects the entire property, not just the share of the wife.

Hence, petition is hereby denied. Decision of the CA is affirmed.

VOID AND INEXISTENT CONTRACTSJacobus Hulst vs. PR Builders, Inc. (2007)

FACTS: Jacobus Hulst and Ida are spouses and Dutch nationals, and

entered a Contract to Sell with PR Builders to buy a townhouse in Batangas.

PR Builders failed to comply with its verbal promise to complete the project by June 1995, so the Hulst spouses filed before the HLURB for rescission of contract with interest, damages and attorney fees.

The HLURB Arbiter decided in favor of the spouses. Afterwards, the spouses divorced. Ida assigned her rights over

the townhouse to Jacobus, who continued to pursue the case. The Sheriff implemented the Writ of Execution by levying on

respondent’s 15 parcels of land covered by 13 TCTs. A public auction was set afterwards of the levied properties. Respondent filed an Urgent Motion to Quash Writ of Levy on

the ground that an overlevy was made. The aggregated appraised value of the properties based on the Appraisal Report is over P83.6 million.

Without a restraining order from the HLURB, the Sheriff proceeded to sell the properties at the public auction. Holly Properties Realty Corporation won the bid for all 15 parcels of land at P5.4 million.

P5.3 million was turned over to Hulst to satisfy the judgment award.

Later on the same day, the Sheriff received an order dated on the day of the auction from the HLURB Arbiter to suspend execution.

The HLURB Arbiter and Director ordered to set aside the Sheriff’s levy, saying that the valuations of the Sheriff and the Appraisal Report is so egregious at P6 million and P83.6 million respectively.

The court is justified to intervene where the inadequacy of price shocks the conscience. The Sheriff should have looked into the matter first and not disregard the objections of PR Builders’ counsel.

What is at issue is not the value of the properties as determined during the auction sale, but the determination of value levied upon by the Sheriff taking in consideration the fair market value of the properties levied upon to determine whether they are sufficient to satisfy the judgment. Any levy in excess of the judgment award is void.

Hulst filed before the CA. The CA dismissed the petition saying that the inadequacy of price being supposedly immaterial in the

right to redeem is not applicable, because the adequacy in the present case is not mere inadequacy but an inadequacy that shocks the senses. The aggregate value of P83.6 million shockingly exceeds the judgment debt of only around P6 million.

ISSUE: WON the Contract to Sell was a void and inexistent contract?

HELD: Yes. SC granted petition and declared HLURB order NULL and

VOID.

1. Foreigners acquiring Philippine property First, SC immediately addressed the important fact that the

Hulst spouses are foreign nationals who are disqualified under the Constitution from owning real property in their names.

It is unequivocal that the Contract to Sell entered into by the Hulst spouses is void, since they are both Dutch nationals.

Art 1409 of the Civil Code provides that all contracts whose cause, object or purpose is contrary to law or public policy and those expressly prohibited or declared void by law are inexistent and void from the beginning. Art 1410 provides that the action or defense for the declaration of the inexistence of a contract does not prescribe. A void contract is equivalent to nothing; it produces no civil effect. It does not create, modify or extinguish a juridical relation.

2. Exceptions to Pari Delicto Generally, parties to a void agreement cannot expect the aid of

the law when they are deemed in pari delicto. There should have been no suit to recover from one to the other.

There are exceptions, particularly Article 1414 (c) which provides that “When money is paid or property delivered for an illegal purpose, the contract may be repudiated by one of the parties before the purpose has been accomplished, or before any damage has been cause to a third person. In such case, the courts may, if the public interest will be subserved, allow the party repudiating the contract to recover the money or property.”

3. Contract to Sell, not Contract of Sale. 1414, not 1412 Hulst spouses and PR Builders entered a Contract to Sell, not a

Contract of Sale. In a Contract of Sale, the title passes to the buyer upon delivery of the purchase price. A Contract to Sell is a conditional sale where the obligatory force of the seller’s obligation to transfer title is subordinated to the happening of a future and uncertain event. If the suspensive condition does not take place, the parties would stand as if the conditional obligation never existed.

Art 1414, not Art 1412 applies because the unlawful or forbidden cause that does not constitute a criminal offense referred to in Art 1412 has not taken place before the purpose was accomplished or before any damage has been cause. Ownership was not transferred to the alien petitioner in the Contract to Sell before Hulst filed for rescission.

In a Contract to Sell, ownership has not yet transferred to Hulst when he filed for rescission. The intent to circumvent the constitutional proscription on aliens owning real property or the violation of the law did not materialize because petitioner caused the rescission of the contract before the execution of the final deed transferring ownership.

Hulst can recover under the exception (c) under Article 1414. One who repudiates the agreement and demands his money before the illegal act has taken place is entitled to recover. The contract being void and inexistent, he is, however, only entitled to recover the purchase price paid and not damages and interests due to absence of a juridical tie.

4. Gross inadequacy of price Gross inadequacy of price does not nullify an execution sale,

except if it is one that shocks the conscience to allow the courts to intervene. Furthermore, where there is right to redeem, the inadequacy of price should be immaterial since the judgment debtor may reacquire the property or else sell his right to redeem and recover any loss.

The HLURB Arbiter and Director had no sufficient factual basis to determine the value of the properties. PR Builders only submitted an Appraisal Report based on surmises and assumption that the units appraised had already been built. The projected value did not become a reality because the property has not been developed. The Appraisal Report is not the best proof to show that there was inadequacy that shocks the conscience.

The HLURB Arbiter lost jurisdiction by virtue of the consummation of the auction sale. The winning bidder, Holly Properties Realty Corporation, rightfully acquired the properties. The Sheriff was right to proceed with the public auction absent any order from the HLURB Arbiter and Director on the set date. Each of the 15 properties were successfully bidded upon and sold and the debt and fees fully satisfied and remitted upon payment by Holly Properties. What was only left to be done was the issuance of the certificates of sale to the winning bidder.

Quimpo vs. Beltran (VOID CONTRACT)

Facts: Eustaquia Perfecto-Abad was the owner of several parcels of land

in Goa, Camarines Sur: an Abucayan residential land, Abucayan coconut land, San Jose residential land, and Abucayan abaca and coconut land.

Eustaquia died intestate in 1948 leaving these properties to her grandchild and great grandchildren, namely Joacquin Quimpo (petitioner) and the respondents Abad- four of whom were minors at that time.

In 1966, Joacquin and respondents undertook an oral partition of the San Jose residential land and the Abucayan abaca and coconut land. Half of the properties was given to Joacquin and the other to the respondents. However, no document of partition was executed, because Joacquin refused to execute a deed.

Respondents occupied their respective shares in the San Jose property, and installed several tenants over their share in the Abucayan abaca and coconut land. Joacquin, on the other hand,

became the administrator of the remaining undivided properties and of the shares of the four minor respondents at that time.

In 1989, the minor respondents wanted to take possession of the portions allotted to them, but Joacquin prevented them from occupying the same. He also refused to heed respondents’ demand for partition of the Abucayan residential and coconut lands, prompting the respondents to file a complaint for judicial partition and/or recovery of possession.

Joacquin denied the material allegations in the complaint and averred lack of cause of action and prescription. He asserted absolute ownership over the San Jose residential and Abucayan abaca and coconut lands, claiming that he purchased these lands from Eustaquia in 1946, evidenced by deeds of sale executed on August 23, 1946 and December 2, 1946. He, likewise, claimed continuous, peaceful and adverse possession of these lots since 1946, and alleged that respondent Consuelo’s occupation of the portion of the San Jose property was by mere tolerance.

During the pendency of the case, Joaquin died. Accordingly, he was substituted by his wife, Estela Tena-Quimpo and his children.

The RTC rendered a Decision in favor of respondents, declaring them as co-owners of all the properties left by Eustaquia. It rejected Joaquin’s claim of absolute ownership over subject properties, and declared void the purported deeds of sale executed by Eustaquia for lack of consideration and consent. It found that at the time of the execution of these deeds, Joaquin was not gainfully employed and had no known source of income, which shows that the deeds of sale state a false and fictitious consideration.

Likewise, Eustaquia could not have possibly given her consent to the sale because she was already 91 years old at that time . The RTC also sustained the oral partition among the heirs in 1966.

According to the trial court, the possession and occupation of land by respondents, and Joaquin’s acquiescence for 23 years, furnish sufficient evidence that there was actual partition of the properties. It held that Joaquin and his heirs are now estopped from claiming ownership over the entire San Jose property as well as the Abucayan abaca and coconut property.

On appeal, the CA affirmed the RTC ruling. The CA declared that it was plausible that Eustaquia’s consent was vitiated because she was then 91 years old and sickly. It was bolstered by the fact that the deeds of sale only surfaced 43 years after its alleged execution and 23 years from the time of the oral partition.

The CA also rejected petitioners’ argument that the action was barred by prescription and laches, explaining that prescription does not run against the heirs so long as the heirs, for whose benefit prescription is invoked, have not expressly or impliedly repudiated the co-ownership.

The CA found no repudiation on Joaquin’s part. It, therefore, concluded that respondents’ action could not be barred by prescription or laches.

The Quimpos, thus, filed the instant petition, insisting on the validity of the deeds of sale between Joaquin and Eustaquia.

Issue: Whether or not the deeds of sale between Joacquin and Eustaquia were valid

Held: (Deeds of Sale; Void) The contention has no merit.

The stated considerations for the sale were P5,000.00 and P6,000.00, respectively, amounts which were so difficult to raise in the year 1946.

Respondents established that at the time of the purported sale Joaquin Quimpo was not gainfully employed. He was studying in Manila and Eustaquia was the one supporting him; that when Eustaquia died two (2) years later, Joaquin was not able to continue his studies.

The Quimpos failed to override this. Except for the incredible and unpersuasive testimony of Joaquin’s daughter, no other testimonial or documentary evidence was offered to prove that Joaquin was duly employed and had the financial capacity to buy the subject properties in 1946.

In Rongavilla v. CA, reiterated in Cruz v. Bancom Finance Corp, SC held that a deed of sale, in which the stated consideration has not been, in fact, paid is a false contract; that it is void ab initio.

Furthermore, Ocejo v. Flores,ruled that a contract of purchase and sale is null and void and produces no effect whatsoever where it appears that the same is without cause or consideration which should have been the motive thereof, or the purchase price which appears thereon as paid but which in fact has never been paid by the purchaser to the vendor.

Likewise, both the trial court and the CA found that Eustaquia was 91 years old, weak and senile, at the time the deeds of sale were executed. In other words, she was already mentally incapacitated by then, and could no longer be expected to give her consent to the sale.

(Ownership issue) Petitioners also presented Tax Declarations to substantiate

Joaquin’s claim of absolute dominion over San Jose and Abucayan abaca and coconut properties. But these tax declarations are all in the name of Eustaquia Perfecto-Abad. These documents, therefore, do not support their claim of absolute dominion since 1946, but enervate it instead. Besides, the fact that the disputed property may have been declared for taxation purposes in the name of Joaquin Quimpo does not necessarily prove ownership for it is well settled that a tax declaration or tax receipts are not conclusive evidence of ownership.

For forty-three (43) years, respondents occupied their portions of the San Jose property and significantly, Joaquin never disturbed their possession. They also installed tenants in the Abucayan abaca and coconut land, and Joaquin did not prevent them from doing so, nor did he assert his ownership over the same. These unerringly point to the fact that there was indeed an oral partition of said parcels of land.

In Maglucot-aw v. Maglucot, SC held, viz.:‘Partition may be inferred from circumstances sufficiently strong to support the presumption. Thus, after a long possession in severalty, a deed of partition may be presumed. It has been held that recitals in deeds, possession and occupation of land, improvements made thereon for a long series of years, and acquiescence for 60 years, furnish sufficient evidence that there was an actual partition of land either by deed or by proceedings in the probate court, which had been lost and were not recorded.’

Furthermore, in Hernandez v. Andal, SC explained that:

‘On general principle, independent and in spite of the statute of frauds, courts of equity have enforced oral partition when it has been completely or partly performed.’

Regardless of whether a parol partition or agreement to partition is valid and enforceable at law, equity will, where the parol partition has actually been consummated by the taking of possession in severalty and the exercise of ownership by the parties of the respective portions set off to each, recognize and enforce such parol partition and the rights of the parties there under. Thus, it has been held or stated in a number of cases involving an oral partition under which the parties went into possession, exercised acts of ownership, or otherwise partly performed the partition agreement, that equity will confirm such partition and in a proper case decree title in accordance with the possession in severalty.

A parol partition may be sustained on the ground that the parties thereto have acquiesced in and ratified the partition by taking possession in severalty, exercising acts of ownership with respect thereto, or otherwise recognizing the existence of the partition.

Under the ‘doctrine of part performance’, a part performance is necessary, to take a parol partition out of the operation of the statute of frauds. It has been held that where there was a partition in fact between tenants in common, and a part performance, a court of equity would have regard to and enforce such partition agreed to by the parties.

The CA, therefore, committed no reversible error in sustaining the oral partition over subject properties and in invalidating the deeds of sale between Eustaquia and Joaquin.

Petitioners’ assertion that respondents failed to prove their relationship to the late Eustaquia deserves scant consideration.

During the pre-trial, Joaquin Quimpo admitted that:Respondent Consuelo was the grandchild of Eustaquia, while minor respondents and also Joaquin Quimpo were Eustaquia’s great grandchildren. As such, respondents can rightfully ask for the confirmation of the oral partition over subject properties. Jurisprudence is replete with rulings that any co-owner may demand at any time the partition of the common property unless a co-owner has repudiated the co-ownership. This action for partition does not prescribe and is not subject to laches.

Hence, petition is denied.

Spouses Onesefiro Alinas v. Spouses Victor Alinas (2008)

Facts: Spouses Onesiforo and Rosario Alinas (petitioners) separated

sometime in 1982 They left behind two lots, lot A with a bodega standing on it and

lot B with petitioners' house Petitioner Onesiforo and respondent Victor are brothers.

Petitioners allege that they entrusted their properties to Victor and Elena Alinas (respondent spouses) with the agreement that any income from rentals of the properties should be remitted to the Social Security System (SSS) and to the Rural Bank of

Oroquieta City (RBO), as such rentals were believed sufficient to pay off petitioners' loans with said institutions.

Lot A with the bodega was mortgaged as security for the loan obtained from the RBO, while Lot B with the house was mortgaged to the SSS.

Sometime in 1993, petitioners discovered that their two lots were already titled in the name of respondent spouses.

Issue(s): Whether or not the sale of Lot B to the respondent spouses is

valid, considering that the petitioner-husband executed the sale w/o the consent of his wife

Held: Sale of Lot B to respondent spouses is voidRationale: Although petitioners were married before the enactment of the

Family Code on August 3, 1988, the sale in question occurred in 1989. Thus, their property relations are governed by Chapter IV on Conjugal Partnership of Gains of the Family Code.

Thus, pursuant to Article 124 of the Family Code and jurisprudence, the sale of petitioners' conjugal property made by petitioner Onesiforo without the consent of his wife is void

respondent spouses were well aware that Lot B is a conjugal property of petitioners. They also knew that the disposition being made by Onesiforo is without the consent of his wife, as they knew that petitioners had separated, and, the sale documents do not bear the signature of petitioner Rosario

the bodega was leased out by respondent spouses only beginning January of 1990 when ownership had been transferred to them.26 Hence, any rentals earned from the lease of said bodega rightfully belongs to respondent spouses

Respondent spouses, having knowledge of the flaw in their mode of acquisition, are deemed to be possessors in bad faith under Article 52628 of the Civil Code. However, they have a right to be refunded for necessary expenses on the property (e.g. repairs)

Nunga v. NungaNUNGA vs. NUNGA (G.R. No. 178306, 18-Dec-2008)Facts:On 30 January 1996, the RBA conducted its Annual Stockholders' Meeting at its principal office in San Vicente, Apalit, Pampanga. Attending the said meeting were stockholders representing 28,150 out of the 35,956 total outstanding shares of stock of RBA.[4]Petitioner Francisco R. Nunga, Jr. (Francisco Jr.), his son petitioner Victor D. Nunga (Victor), and his nephew respondent Francisco N. Nunga III (Francisco III) were among the stockholders of RBA. However, petitioner Francisco Jr. was not present at the meeting, as he was then in the United States of America where he is a naturalized citizen.The stockholders proceeded with the election of the RBA Board of Directors to serve for the fiscal year 1996. Victor, thereafter, informed his father, Francisco Jr., of Gonzalez's intention to sell his shares. Francisco Jr. then instructed Victor to inquire from Gonzalez the terms of the sale. After a series of negotiations, Gonzalez ultimately agreed to sell his shares of stock to Francisco Jr.

On 19 February 1996, Gonzalez executed a Contract to Sell in favor of Francisco Jr. On even date, Victor gave the initial payment of P50,000.00 to Gonzalez, who duly acknowledged the same.[6] In exchange, Gonzalez handed Victor RBA Stock Certificates No. 105, No. 152 and No. 166. As to the four other certificates that were in the possession of the RBA, Gonzalez issued a letter[7] addressed to Isabel Firme (Firme), the RBA Corporate Secretary, which instructed the latter to turn over to Victor the remaining stock certificates in Gonzalez's name. Upon being presented with Gonzalez's letter, Firme gave Victor Stock Certificate No. 181, but alleged that Stock Certificates No. 5 and No. 36 could no longer be located in the files of RBA. Firme advised Victor to merely reconstitute the missing stock certificates. A reading of the said Contract to Sell would reveal, however, that the same was only notarized on 28 February 1996.Before Francisco Jr. and Victor could pay the balance of the contract price for Gonzalez's RBA shares of stock, Gonzalez entered into another contract involving the very same shares. It would appear that on 27 February 1996, Gonzalez executed a Deed of Assignment of his RBA shares of stock in favor of Francisco III.At the same time the afore-quoted Deed was executed, Francisco III paid in full the agreed purchase price of P300,000.00. An acknowledgment receipt signed by Gonzalez and witnessed by his wife Cristina D. Gonzalez evidenced the payment. Since the stock certificates covering the shares were already in Victor's possession, Gonzalez immediately wrote Victor a letter, demanding that Victor hand over the said stock certificates to Francisco III, the supposed new owner of the shares.The next day, on 28 February 1996, Francisco Jr. arrived from the United States of America. He and Victor then promptly proceeded to the residence of Gonzalez in order to pay the balance of P150,000.00 of the purchase price stated in their Contract to Sell with Gonzalez. Gonzalez, however, informed them that he already sold his shares of stock to Francisco III. After discussing the matter, Gonzalez was somehow convinced to accept the balance of the purchase price and sign his name at the dorsal portion of the stock certificates to endorse the same to Francisco Jr. Gonzalez also executed a Deed of Absolute Sale in favor of Francisco Jr.Incidentally, on that same day, Francisco III delivered to Firme the Deed of Assignment which Gonzalez executed in his favor, and a copy of Gonzalez's letter to Victor dated 27 February 1996 demanding the latter to surrender the stock certificates in his possession to Francisco III. Accordingly, on 1 March 1996, Firme wrote Victor a letter requesting that the latter immediately comply with the enclosed 27 February 1996 letter of Gonzalez.Victor refused to comply with Firme's request and instead demanded that the sale of shares of stock by Gonzalez in favor of Francisco Jr. on 28 February 1996 be entered into the Corporate Book of Transfer of RBA. Firme, in turn, rejected Victor's demand, alleging that Francisco III already bought Gonzalez's shares.Consequently, on 14 March 1996, Victor filed a Petition with the Securities and Exchange Commission (SEC) against Francisco III and Firme. Victor prayed that the SEC declare null and void the Stockholders' Meeting held on 30 January 1996 for lack of the required majority quorum; as well as the votes cast for the shares of the deceased stockholders, namely, Teodorico R. Nunga, Carmencita N. Nunga and Jesus Enrico N. Nunga. Victor additionally requested that the transfer of Gonzalez's RBA shareholdings to Francisco Jr. be

annotated on the RBA Corporate Transfer Book and new stock certificates be issued in favor of Francisco Jr. On the same date, Francisco III likewise filed a Complaintagainst Gonzalez, Francisco Jr., and Victor before the SEC. Francisco III sought the issuance of a Temporary Restraining Order (TRO) against Francisco Jr. and Victor, who were allegedly conspiring to oust him and the other members of the RBA Board of Directors. Francisco III also prayed, inter alia, for judgment ordering Victor to surrender Gonzalez's stock certificates in order that the same may be transferred to Francisco III's name and Francisco Jr. and Victor to desist from attempting to register the purported sale by Gonzales of his RBA shares of stock to Francisco Jr., who had already become a naturalized American citizen and was, thus, disqualified from owning shares in RBA.Before the Court of Appeals, Francisco III argued that the RTC erred in: (1) ruling that Francisco Jr. had a better right over the disputed shares of stock, considering that the prior contract which he had entered into with Gonzalez was a mere contract to sell; (2) finding that the Deed of Assignment in Francisco III's favor was executed in bad faith, inasmuch as it was not supported by any of the evidence presented by all the parties; and (3) giving retroactive effect to Republic Act No. 8179,[34] which grants former natural born citizens (such as Francisco Jr.) equal investment rights in rural banks of the Philippines as Philippine citizens. In relation to his third assignment of error, Francisco III pointed out that Republic Act No. 8179 took effect only on 16 April 1996, after Francisco Jr. entered into the questionable contracts with Gonzalez; hence, the said statute cannot benefit Francisco Jr.On 31 January 2007, the Court of Appeals rendered its assailed Decision favoring Francisco III. It held that Francisco Jr. cannot invoke the provisions of Republic Act No. 8179 based on the following ratiocination:In the instant case, there is nothing in Republic Act No. 8179 [An Act to Further Liberalize Foreign Investment] which provides that it should retroact to the date of effectivity of Republic Act No. 7353 [The Rural Banks Act of 1992]. Neither is it necessarily implied from Republic Act No. 8179 that it or any of its provisions should be given a retroactive effect. On the contrary, there is an express provision in Republic Act No. 8179 that it "shall take effect fifteen (15) days after publication in two (2) newspapers of general circulation in the Philippines." CA reversed the RTC’s decision and rendered a new one:1) Victor Nunga to surrender the stock certificates of Jesus Gonzalez to the Corporate Secretary of Rural Bank of Apalit, Inc.;2) The Corporate Secretary of Rural Bank of Apalit, Inc. to register the assignment of shares of stock in favor of Francisco Nunga III, to cancel the stock certificates of Jesus Gonzale[z], and to issue new ones in the name of Francisco Nunga III; and,ISSUE: W/N the sale of shares of stocks of Gonzales to Francisco Jr. is null and void ab initio on the basis of the alleged disqualification of Francisco Jr. under RA 7353.RULING:As the Court of Appeals declared, Francisco Jr. was disqualified from acquiring Gonzalez's shares of stock in RBA. The argument of Francisco Jr. and Victor that there was no specific provision in Republic Act No. 7353 which prohibited the transfer of rural bank shares to individuals who were not Philippine citizens or declared such transfer void, is both erroneous and unfounded.

Section 4 of Republic Act No. 7353 explicitly provides:Section 4. x x x With exception of shareholdings of corporations organized primarily to hold equities in rural banks as provided for under Section 12-C of Republic Act 337, as amended, and of Filipino-controlled domestic banks, the capital stock of any rural bank shall be fully owned and held directly or indirectly by citizens of the Philippines or corporations, associations or cooperatives qualified under Philippine laws to own and hold such capital stock: x x x..)It is undisputed that when Gonzalez executed the Contract to Sell and the Deed of Absolute Sale covering his RBA shares of stock in favor of Francisco Jr., the latter was already a naturalized citizen of the United States of America. Consequently, the acquisition by Francisco Jr. of the disputed RBA shares by virtue of the foregoing contracts is a violation of the clear and mandatory dictum of Republic Act No. 7353, which the Court cannot countenance.The Contract to Sell between Gonzalez and Francisco Jr. was void and without force and effect for being contrary to law. It intended to effect a transfer, which was prohibited by Republic Act No. 7353. It is even irrelevant that the terms of said Contract to Sell had been fully complied with and performed by the parties thereto, and that a Deed of Absolute Sale was already executed by Gonzalez in favor of Francisco Jr. A void agreement will not be rendered operative by the parties' alleged performance (partial or full) of their respective prestations. A contract that violates the law is null and void ab initio and vests no rights and creates no obligations. It produces no legal effect at all.Even the subsequent enactment of Republic Act No. 8179 cannot benefit Francisco Jr. It is true that under the Civil Code of the Philippines, laws shall have no retroactive effect, unless the contrary is provided.[41] But there are settled exceptions to this general rule, such as when the statute is CURATIVE or REMEDIAL in nature, or when it CREATES NEW RIGHTS.[42] Francisco Jr. and Victor assert that, as an exception to the cardinal rule of prospective application of laws, Republic Act No. 8179 may be retroactively applied, since it creates for the first time a substantive right in favor of natural-born citizens of the Philippines. Francisco Jr. and Victor, however, overlooked the vital exception to the exception. While it is true that a law creating new rights may be given retroactive effect, the same can only be made possible if the new right does not prejudice or impair any vested right.[43]The Court upholds the finding of the Court of Appeals that Republic Act No. 8179 cannot be applied retroactively to the present case, as to do so would prejudice the vested rights of Francisco III to the disputed RBA shares of stock. Francisco III, who is undeniably a citizen of the Philippines, and who is fully qualified to own shares of stock in a Philippine rural bank, had acquired vested rights to the disputed RBA shares of stock by virtue of the Deed of Assignment executed in his favor by Gonzalez.

Jesus and Rosemarie Campos v Nenita Buenvenida Pastrana et.alFacts:

Respondents filed a case against Carlito Campos for Recovery of Possession and Damages with Preliminary Mandatory Injunction involving a fishpond.

On November 27, 1990, the Regional Trial Court of Roxas City, rendered a Decision finding Carlito to have retained possession of the fishpond notwithstanding the expiration

of the contract of lease and ordering him to pay rentals, the value of the produce and damages to the herein respondents.

The Decision became final and executory and a Writ of Execution was issued on February 7, 1995. Subsequently, on September 19, 1995, an Alias Writ of Execution was also issued. Both were returned unsatisfied as per Sheriff’s Return of Service dated November 14, 1995.

Carlito was the registered owner of the following properties: Residential Lots 3715-A and 3715-B-2 covered by Transfer Certificates of Title Nos. 18205 and 18417, respectively and Agricultural Lots 850 and 852 covered by Original Certificates of Title Nos. P9199 and P-9200, respectively.

When the respondents were about to levy these properties to satisfy the judgment, they discovered that spouses Carlito and Margarita Campos transferred these lots to their children petitioners Rosemarie and Jesus Campos by virtue of Deeds of Absolute Sale dated October 18, 1985 and November 2, 1988.

On February 18, 1997, respondents instituted the third case, (Nullity of Sale Case), subject of this appeal, seeking to declare as null the aforesaid deeds of sale and the transfer certificates of title issued pursuant thereto. They alleged that the contracts of sale between spouses Campos and petitioners were simulated for the sole purpose of evading the levy of the properties in satisfaction of a money judgment that might be rendered in the Possession Case.

In their Answer with Counterclaim, spouses Campos and petitioners averred that Rosemarie and Jesus Campos acquired the lots in question in good faith and for value because they were sold to them before they had any notice of the claims or interests of other persons thereover.

On August 21, 2000, the Regional Trial Court of Roxas City dismissed the complaint as the case was not filed in evident bad faith and with malicious intent.

Upon review of the evidence presented, the CA found that the conveyances were made in 1990, and not in 1985 or 1988, or just before their actual registration with the Registry of Deeds, evidently to avoid the properties from being attached or levied upon by the respondents. The CA likewise noted that the zonal value of the subject properties were much higher than the value for which they were actually sold. The appellate court further observed that despite the sales, spouses Campos retained possession of the properties in question. Finally, the CA took note of the fact that the writ of execution and alias writ issued in the Possession Case remained unsatisfied as the lower court could not find any other property owned by the spouses Campos that could be levied upon to satisfy its judgment, except the parcels of land subject of the assailed transactions.

The CA ruled that the assailed contracts of sale were indeed absolutely simulated transactions and declared the same to be void ab initio.

Hence, this petition for review before the SC.Issue:

WON THE COURT OF APPEALS COMMITTED AN ERROR OF LAW IN APPLYING ARTICLE 1409 OF THE NEW CIVIL CODEHeld:

The petition lacks merit. Respondents argue that the application of Article 1409 on

void contracts was a natural and logical consequence of the CA’s finding that subject deeds of sale were absolutely simulated and fictitious, consistent with the nature of the respondents’ cause of action which was for declaration of nullity of said contracts and the transfer certificates of titles issued pursuant thereto.

The subject Deeds of Absolute Sale executed by the Spouses Campos to their children (herein petitioners) are absolutely simulated and fictitious.

The CA correctly held that the assailed Deeds of Absolute Sale were executed when the Possession Case was already pending, evidently to avoid the properties subject thereof from being attached or levied upon by the respondents. While the sales in question transpired on October 18, 1985 and November 2, 1988, as reflected on the Deeds of Absolute Sale, the same were registered with the Registry of Deeds only on October 25, 1990 and September 25, 1990.

Indeed, the Deeds of Absolute Sale were executed for the purpose of putting the lots in question beyond the reach of creditors.

First, the Deeds of Absolute Sale were registered exactly one month apart from each other and about another one month from the time of the promulgation of the judgment in the Possession Case. The Deeds of Absolute Sale were antedated and that the same were executed when the Possession Case was already pending.

Second, there was a wide disparity in the alleged consideration specified in the Deeds of Absolute Sale and the actual zonal valuation of the subject properties as per the BIR Certification.

It was found out that Carlito sold the alleged residential lots to his daughter, Rosemarie for P7,000 and the alleged agricultural lots to his son Jesus for P5,600.

As correctly noted by the CA, the appraised value of the properties subject of this controversy may be lower at the time of the sale in 1990 but it could not go lower than P7, 000.00 and P5, 600.00. We likewise find the considerations involved in the assailed contracts of sale to be inadequate considering the market values presented in the tax declaration and in the BIR zonal valuation.

Third, we cannot believe that the buyer of the 1,393-square meterresidential land could not recall the exact area of the two lots she purchased.

Fourth, it appears on record that the money judgment in the Possession Case has not been discharged with. Per Sheriff’s Service Return dated November 14, 1995, the Alias Writ of Execution and Sheriff’s Demand for Payment dated September 19, 1995 remain unsatisfied.

Lastly, despite the transfer of the said properties to their children, the latter have not exercised complete dominion over the same. Neither have the petitioners shown if their parents are paying rent for the use of the properties which they already sold to their children.

Moreover, petitioner Rosemarie Campos supposedly bought the residential properties in 1985 but did not have the assailed Deed of Absolute Sale registered with the proper Registry of Deeds for more than five years, or until a month before the promulgation of the judgment in the Possession Case. Hence, we affirm the finding of the CA that the purported deed was antedated. Moreover, her failure to take exclusive possession of the property allegedly sold, or, alternatively, to collect rentals is contrary to the principle of ownership and a clear badge of simulation. On these grounds, we cannot hold that Rosemarie Campos was an innocent buyer for value.

Likewise, petitioner Jesus Campos supposedly bought the rice land from his parents in 1988 but did not have the assailed Deed of Absolute Sale registered with the proper Registry of Deeds for more than two years, or until two months before the promulgation of the judgment in the Possession Case. Thus, we likewise affirm the finding of the CA that the purported deed was antedated. On these findings of fact, petitioner Jesus Campos cannot be considered as an innocent buyer and for value.

Since both the transferees, Rosemarie and Jesus Campos, are not innocent purchasers for value, the subsequent registration procured by the presentation of the void deeds of absolute sale is likewise null and void.

The petition is DENIED.

Tecson vs FaustoAURORA L. TECSON et. al vs. MINERVA FAUSTO et.alFacts:• Sometime in 1945, Atty. Agustin Fausto (Atty. Fausto) acquired in co-ownership with his sister, Waldetrudes • Lot 2189—a one thousand fifteen (1,015) square meter parcel of land. Atty. Fausto constructed his house on a portion of the said lot. • In 1970, following a cadastral proceeding, Atty. Fausto and Waldetrudes were recognized as co-owners of Lot 2189. Consequently, Original Certificate of Title (OCT) No. 734 covering Lot 2189 was issued in their names • Atty. Fausto and Waldetrudes decided to partition Lot 2189. For this purpose, Waldetrudes (First Plan) that divided Lot 2189 into two (2) lots, i.e., Lot 2189-A with an area of 507 square meters, and Lot 2189-B with an area of 508 square meters. • On 15 April 1974, Atty. Fausto and Waldetrudes formalized their decision to subdivide Lot 2189 by executing an Agreement of Partition. Under this agreement, Waldetrudes was to be given absolute ownership over Lot 2189-A, while Atty. Fausto given ownership over Lot 2189-B. The First Partition Agreement, however, was never registered with the Register of Deeds.• On 14 March 1975, Atty. Fausto died. He was survived by herein respondents, who are his wife and children. • On 7 July 1977, however, Waldetrudes entered into a Contract to Sell with herein petitioner Aurora L. Tecson where she undertook to sell her "ideal share" in Lot 2189 to Aurora.• A second subdivision plan (Second Plan) was prepared It introduced the following changes:

1. Waldetrudes’ Lot 2189-A with an area of 507 square meters under the First Plan was now Lot 2189-B with an increased area of 964 square meters. 2. Atty. Fausto’s Lot 2189-B with an area of 508 square meters under the First Plan was now Lot 2189-A with a decreased area of 51 square meters. • A second partition over Lot 2189 (Second Partition Agreement) was executed between respondent and Waldetrudes. The agreement named Waldetrudes as the owner of Lot 2189-B while the respondents were allocated Lot 2189-A.• Register of Deeds had refused registration of the Second Partition Agreement in view of the fact that several of the respondents were still minors. Hence, a guardianship proceeding was commenced by Isabel to secure her appointment as the legal guardian of her minor children in connection with the Second Partition Agreement. • The guardianship court granted Isabel’s Petition and issued an Order approving the Second Partition Agreement. • The sale of Lot 2189-B in favor of Aurora took place and was likewise registered with the Register of Deeds.• Aurora subsequently executed a Deed of Absolute Sale, conveying Lot 2189-B to her brother, herein petitioner Atty. Jose L. Tecson (Atty. Tecson). The deed was registered and a new TCT was issued.• Seven (7) years after, the respondents filed a Complaint for the Declaration of Nullity of Documents, Titles, Reconveyance and Damages against Waldetrudes and the petitioners. In essence, the respondents seek the recover the 457 sqm. of land, which they believe was unlawfully taken from the lawful share of their predecessor-in-interest, Atty. Fausto, in Lot 2189. They insist on the First Partition Agreement as the only true, correct and binding division of Lot 2189.• The respondents claim that:1. Atty. Tecson was the one who deceived them into signing the Second Partition Agreement who misleadingly told them that it was required to facilitate the sale of Waldetrudes’ share. The respondents believed Atty. Tecson because he was their long-time neighbor, a close family friend and, not the least, a respected member of the community being a former governor of the province. 2. The respondents also point out that the Second Partition Agreement did not specify the exact areas allotted for each component lot, and that they were never furnished with copies of the Second Plan. 3. The Second Plan, which supposedly supplants the First Plan and divides Lot 2189 into two (2) vastly unequal portions, was prepared without the respondents’ knowledge or consent. For which reason, the Second Plan could not be binding upon them.4. The guardianship proceeding purportedly initiated in the name of respondent Isabel was actually orchestrated and financed by Atty. Tecson.

• On 20 October 1988, Waldetrudes, who was originally sued by the respondents as a defendant in the RTC, executed an affidavit expressing her intent to join the respondents in their cause. In the mentioned affidavit, and she confirmed the allegations of the respondents • RTC dismissed the complaint of the respondents.for lack of merit. CA reversed the decision. Hence the present appeal by petitioners.

• Petiioner denied allegations and according to the petitioners, Lot 2189 was originally the conjugal property of Waldetrudes and her husband. At the inception, Atty. Fausto was never a co-owner of Lot 2189. Suitably, it was only Waldetrudes who initially declared Lot 2189 for taxation purposes. • The petitioners claim that Waldetrudes consented to such a registration only because Atty. Fausto had already constructed his house on a portion of Lot 2189. The registered co-ownership between Waldetrudes and Atty. Fausto is, therefore, based merely on the siblings’ actual occupancy of Lot 2189 and they are only entitled to 51 sqm where the house was constructedIssue: WON the respondents may recover the four hundred fifty-seven (457) sqm now registered in the name of petitioner Atty. Tecson? YESHeld:• Waldetrudes and Atty. Fausto are Co-owners in Equal ShareFirst. The mother title of Lot 2189, OCT No. 734, states in no unclear terms that Waldetrudes and Atty. Fausto were co-owners of the subject lot. The inscription in the original title for Lot 2189 carries more than sufficient weight to prove the existence of a co-ownership between Waldetrudes and Atty. Fausto.Second. Other than the bare assertion of the petitioners, there is absolutely no proof on record that Waldetrudes was the sole beneficial owner of Lot 2189. Tax Declaration No. 6521 simply cannot prevail over OCT No. 734 as conclusive evidence of the true ownership of Lot 2189. Third. During the cadastral proceeding involving Lot 2189, Waldetrudes herself stated that Atty.Fausto was a co-owner of the subject lot. Fourth. There was likewise no evidence behind the petitioners’ allegation that the registered co-ownership was based on their actual occupancy of Lot 2189. On the contrary, OCT No. 734 categorically states that Waldetrudes and Atty. Fausto are co-owners "in undivided share" of Lot 2189. The conspicuous silence as to the definite extent of the respective shares in Lot 2189 gives rise to a presumption that they are in equal measure. Fifth. The equality in terms of share in Lot 2189, was affirmed by Waldetrudes when she testified in open court, • Second Plan and Second Partition Agreement is Invalid. We agree with the findings of the Court of Appeals that Atty. Tecson was behind the execution of the Second Partition Agreement. It was Atty. Tecson who misled Waldetrudes and the respondents into signing the Second Partition Agreement without giving them notice of the existence of a Second Plan. As a consequence, Waldetrudes and the respondents were misinformed as to the true nature of the Second Partition Agreement. • Indeed, the lack of a plausible explanation why a co-owner would gratuitously cede a very substantial portion of his rightful share to another co-owner in partition renders the foregoing testimonies more credible as against the plain general denial of Atty. Tecson. • The established facts have several legal consequences:First. The Second Plan, having been prepared without the knowledge and consent of any of the co-owners of Lot 2189, have no binding effect on them.Second. The Second Partition Agreement is null and void as an absolute simulation, albeit induced by a third party the deceit employed by Atty. Tecson goes into the very nature of the Second

Partition Agreement and not merely to its object or principal condition. Evidently, there is an absence of a genuine intent on the part of the co-owners to be bound under a new partition proposing a new division of Lot 2189. The apparent consent of Waldetrudes and the respondents to the Second Partition Agreement is, in reality, totally wanting. For that reason, the Second Partition Agreement is null and void.1avvphi1Third. The Second Partition Agreement being a complete nullity, it cannot be ratified either by the lapse of time or by its approval by the guardianship court. Fourth. The First Plan and the First Partition Agreement remain as the valid and binding division of Lot 2189. Fifth. Inevitably, Waldetrudes can only sell her lawful share of five hundred seven (507) square meters. The sales in favor of Aurora and, subsequently, Atty. Tecson, are thereby null and void insofar as it exceeded the 507 square meter share of Waldetrudes in Lot 2189. • Atty. Tecson is not an innocent purchaser for value being the one behind the execution of the Second Partition Agreement, there is no doubt that Atty. Tecson knew that Lot 2189 was owned in common by Waldetrudes and Atty. Fausto.• The petition is hereby DENIED. CA AFFIRMED.

G.R. No. 183444 October 12, 2011DPWH VS QUIWA

RONALDO E. QUIWA, doing business under the name "R.E.Q. Construction,"

FACTS: With the eruption of Mt. Pinatubo in 1991 and the

consequent onslaught of lahar and floodwater, the rehabilitation of the affected areas became urgent.

River systems needed to be channeled, dredged, desalted and diked to prevent flooding and overflowing of lahar; and to avert damage to life, limb and property of the people in the area.

In 1992, a number of contractors, including herein respondents, were engaged by the DPWH through its Project Manager, Philip F. Meñez, for the aforesaid services pursuant to an emergency project under the Mount Pinatubo Rehabilitation Project.

It was alleged that prior to the engagement of the contractors, Undersecretary Teodoro T. Encarnacion of DPWH, who had overall supervision of the infrastructure and flood control projects, met with the contractors and insisted on the urgency of the said projects.

Ronaldo E. Quiwa claimed that under two construction agreements with the DPWH, his construction company, the R.E.Q. Construction, had accomplished the channeling of the Sacobia-Bamban-Parua River Control Project for the excavated spoils of 69,835 cubic meters, pegged at P3,448,258.25 for one project, and 80,480 cubic meters at the cost of P4,019,976.00 for another, or a total amount of P7,508,234.25.

Initially, R.E.Q. Construction filed its money claim with the DPWH, which referred the matter to the Commission on Audit.

The COA returned the claims to the DPWH with the information that the latter had already been given the funds and the authority to disburse them

Despite the favorable report and Certification of Completion made by the Assistant Project Manager for Operations, Engineer Rolando G. Santos.

DPWH, failed to act on these claims of QUIWA, resulting in the withholding of the payment due him,

Prompted by the prolonged inaction of the DPWH on their claims, respondents jointly filed an action for a sum of money against the DPWH.

The case was decided in their favor by the Regional Trial Court (RTC) of Manila, Branch 51, in Civil Case No. 96-77180.11

In 1992, the funding for the infrastructure and other work requirements under the Mt. Pinatubo Rehabilitation Program in the amount of P400 million pesos was initially allocated by the government, and was later increased to P700M.

Despite the completion of respondents’ works in accordance with the specifications and the allocation of the funds to cover the said services, the DPWH unjustly denied the claims.

The court a quo gave credence to the evidence presented by respondents, consisting of contract agreements; statement of work accomplished, certified and signed by the engineers of the DPWH; and testimonial evidence of witnesses.

It ruled that respondents were able to prove their claims by a preponderance of evidence.

The RTC found that the contracts between DPWH and the plaintiffs were valid contracts, as all the requisites thereof -- consent, subject matter and cause -- were present; and, notwithstanding the absence of the signature of the regional director on the agreement executed with Quiwa and Sumera, the contract was ratified when he affixed his signature to the Inspection and Certification of Completion of the projects.

It also, in effect, held that DPWH was already estopped from repudiating the contract, as the latter had already made representations and assurances that the plaintiffs would be paid for the work that they would do, and as even then DPWH Undersecretary Teodoro T. Encarnacion had told them to "fast-track" the project.

Not amenable to the trial court’s Decision, Petitioner DPWH, through the Office of the Solicitor General, filed an appeal to question the said Decision.

DPWH mainly argued that there was no valid contract between it and respondents.

It claimed that there was no certification of the availability of funds issued by the DPWH Chief Accountant or by the head of its accounting unit as required by Executive Order No. 292, or the Administrative Code of 1987.

It also alleged other deficiencies and irregularities, which rendered the contract void from its inception, such as the absence of the requirements enumerated in Presidential Decree (P.D.) Nos. 1594 and 1445; and

the lack of authority on the part of Engineer Philip Meñez, Project Manager II of the DPWH to enter into contracts on behalf of DPWH. DPWH likewise contested the RTC’s award of attorney’s fees and costs of suit to respondents.

The Court of Appeals (CA), similar to the court a quo, sided with respondents.

The CA resolved in the affirmative the issue of whether the respondents are entitled to their claim representing actual expenses for the construction projects they undertook.

It found that there was already a fund allocation for the projects, and that the payment for the channeling services rendered by the respondents had been included in the said fund allocation as testified to by DPWH’s witness, Felix Desierto.

It ruled that DPWH officials who approved the projects, even though middle-rank, had the authority to bind the department. The CA held:

...[I]t appears that all the procedures followed by the project managers and plaintiff-appellees were in accordance with the usual DPWH procedures, such that, there was no reason for plaintiffs-appellees not to rely on the authority of the project managers who allowed them to proceed with their projects from start to finish.

The CA further held that revalidation was not part of the contract and, thus, not a precondition for payment to the respondents. The constitution of the revalidation team after the commencement of the construction project indicated that approval by DPWH was not meant to be a condition for the payment of the project.

With the completion of the project, the CA ruled that the DPWH was estopped from refusing to pay plaintiffs:19

...[I]t is readily seen that defendant-appellant’s conduct in allowing the subject projects to continue without objecting

thereto and in even assigning its own employees to oversee these projects estopped defendant-appellant from adopting a position that such projects were not authorized.

Without a doubt, such acts induced plaintiff-appellees to believe that such projects will be honored by defendant-appellant and that they will be compensated for all their expenditures.

According to the CA, the absence of a written contract with R. Dimatulac and Rigor did not affect the validity and the enforceability of the contracts between DPWH and the contractors.

With the affirmance of the RTC Decision, DPWH filed a Petition for Review21 before this Court, alleging that the following were errors committed by the Court of Appeals:

The Issues Whether or not DPWH is liable to pay the claims filed

against them by the plaintiffs.

Whether, in the absence of the legal requirements under PD 1445, a valid contract between the DPWH and the plaintiffs exists;

Whether the plaintiffs are entitled to payment for accomplishing 100% of the work, attorney’s fees and costs of suit;

Whether the Secretary and the Undersecretary of DWPH should be held jointly and solidarily liable to plaintiffs.

The Court’s Ruling DPWH never questioned the completion of the Sacobia-

Bamban-Parua river works. Neither did it question the authority of those who certified the completion of the works by respondents.

The trial court ruled that the works were completed, as shown by the evidence presented before it. This finding was affirmed by the Court of Appeals. There is, therefore, no reason for us to view these factual findings.

With the findings of the trial and the appellate courts, there is no longer any issue on whether the contractors completed the projects in accordance with the specifications agreed upon.

The regular course of a contract is that after the complete rendering of services, the contractors are subsequently paid. The DPWH, however, deviated from this course.

It should be noted that the completion of the works was recognized by the DPWH, as shown by the certifications issued by its engineers and even by municipal officials.

Notwithstanding the said recognition, DPWH chose not to act on the claims of respondents, and later denied liability for the payment of the works on the ground of the invalidity of the contracts.

Petitioner DPWH primarily argues that the contracts with herein respondents were void for not complying with Sections 85 and 86 of P.D. 1445, or the Government Auditing Code of the Philippines, as amended by Executive Order No. 292.

These sections require o An appropriation for the contracts and o A certification by the chief accountant of the

agency or by the head of its accounting unit as to the availability of funds.

It should be noted that there was an appropriation amounting to P400 million, which was increased to P700 million.

The funding was for the rehabilitation of the areas devastated and affected by Mt. Pinatubo, which included the Sacobia-Bamban-Parua River for which some of the channeling, desalting and diking works were rendered by herein respondents’ construction companies.

It was, however, undisputed that there was no certification from the chief accountant of DPWH regarding the said expenditure.

In addition, the project manager has a limited authority to approve contracts in an amount not exceeding P1 million.

It has been settled in several cases that payment for services done on account of the government, but based on a void contract, cannot be avoided.

G.R. No. 84202 (ROYAL TRUST CONSTRUCTION v. COMMISSION ON AUDIT). – The petitioner undertook the widening and deepening of the Betis River in Pampanga at the urgent request of the local officials and with the knowledge and consent of the Ministry of Public Works but without any written contract and the covering appropriation.

The purpose of the project was to prevent the flooding of the neighboring areas and to irrigate the adjacent farmlands. On December 16, 1985, the petitioner sought compensation in the sum of P1, 299, 736.00 "for the completed portion of the P2.3 million Betis River projects, which was implemented or undertaken sometime in mid-May, 1984."

In a memorandum dated February 17, 1986, then Public Works Minister Jesus Hipolito recommended immediate "payment of the works already completed" from the cash disbursement ceiling of P300,000.00 for Betis River.

On July 16, 1986, his successor, Minister Rogaciano M. Mercado manifested that his office was interposing "no objection to the proposal to use the P294, 000.00 release for Betis River Control, Betis, Mexico, Pampanga, for the partial payment of work already accomplished for the channel improvement of said river from Sta. 2+200 to Sta. 5-100, subject, however, to existing budgetary accounting and auditing rules and regulations."

On July 20, 1987, the Chairman of the Commission on Audit ruled that "payment to the contractor for the work accomplished, starting with the first partial payment in the amount of P268, 051.14 only on the basis of quantum meruit may be allowed , in keeping with the time-honored principle that no one may be permitted to unjustly enrich himself at the expense of another."

However, in a subsequent indorsement dated August 27, 1987, Chairman Domingo reversed himself and held:

"However, this Commission is only too aware of its existing policy on recovery from government contracts on the basis of quantum meruit.

Under COA Resolution No. 36-58, dated November 15, 1986, this Commission has adhered to a policy of barring such recovery where the project subject of the contract is patently violative of the mandatory legal provisions relating to, among others, the existence of the corresponding appropriation covering the contract cost.

The mere delay in the accomplishment of the required certificate of availability of funds (CAF) to support a contract presents an entirely different situation considering that since the covering funds have in fact been already appropriated and budgetary allotted to the implementing agency, the delayed execution of the CAF would not alter such fact ."

Even so, he added that "considering the sacrifices already made by the appellant in accomplishing the project in question, which are favorable circumstances attendant to the claim, payment on the basis of quantum meruit may be given due course but only upon order of a court."

The respondent is now faulted for grave abuse of discretion in disallowing the petitioner’s claim without an order from a court. The Solicitor General, in support of the Commission on Audit, agrees that the said payment cannot be made because it is barred for lack of the required covering appropriation, let alone the corresponding written contract.

We hold for the petitioner. The work done by it was impliedly authorized and later

expressly acknowledged by the Ministry of Public Works, which has twice recommended favorable action on the petitioner’s request for payment.

Despite the admitted absence of a specific covering appropriation as required under COA Resolution No. 36-58, the petitioner may nevertheless be compensated for the services rendered by it, concededly for the public benefit, from the general fund allotted by law to the Betis River Project.

Substantial compliance with the said resolution, in view of the circumstances of this case, should suffice.

Accordingly, in the interest of substantial justice and equity, the respondent Commission on Audit is DIRECTED to determine on a quantum meruit basis the total compensation due to the petitioner for the services rendered by it in the channel improvement of the Betis River in Pampanga and to allow the payment thereof immediately upon completion of the said determination."

Very truly yours,(sgd)Daniel T. Martinez

This exercise of equity to compensate contracts with the government was repeated in Eslao vs. COA.

o In the said case, the respondent therein, Commission on Audit (COA), was ordered to pay the company of petitioner for the services rendered by the latter in constructing a building for a state university, notwithstanding the contract’s violations of the mandatory requirements of law, including the prior appropriation of funds therefor.

o The Court, in resolving the case, cited the unpublished Resolution in Royal Construction, wherein the Court allowed the payment of the company’s services sans the legal requirements of prior appropriation.

Royal Trust Construction was again mentioned in Melchor v. COA, which was decided a few months after Eslao.

In Melchor, it was found that the contract was approved by an unauthorized person and, similar to the case at bar, the required certification of the chief accountant was absent.

The Court did not deny or justify the invalidity of the contract.

The Court, however, found that the government unjustifiably denied what the latter owed to the contractors, leaving them uncompensated after the government had benefited from the already completed work.

In EPG Construction Co., et al v Hon. Gregorio R. Vigilar,

The Court again refused to stamp with legality DPWH’s act of evading the payment of contracts that had been

completed, and from which the government had already benefited.

The Court held:o Although this Court agrees with respondent’s

postulation that the "implied contracts", which covered the additional constructions, are void, in view of violation of applicable laws, auditing rules and lack of legal requirements, we nonetheless find the instant petition laden with merit and uphold, in the interest of substantial justice, petitioners-contractors’ right to be compensated for the "additional constructions" on the public works housing project, applying the principle of quantum meruit.

The Court also held in the above case: Notably, the peculiar circumstances present in the instant

case buttress petitioners’ claim for compensation for the additional constructions, despite the illegality and void nature of the "implied contracts" forged between the DPWH and petitioners-contractors.

On this matter, it bears stressing that the illegality of the subject contracts proceeds from an express declaration or prohibition by law, and not from any intrinsic illegality. Stated differently, the subject contracts are not illegal per se.

To emphasize, the contracts in the above cases, as in this case, were not illegal per se. There was prior appropriation of funds for the project including appropriation; and payment to the contractors, upon the subsequent completion of the works, was warranted.

As to Public Works and Highways officials Gregorio R. Vigilar, Teodoro T. Encarnacion and Jose P. de Jesus, their personal liability should not be sustained.

They were sued in their official capacity, and it would be unfair to them to pay the contractors out of their own pockets.

In Melchor, the Court declared that it was unjust to hold the public official liable for the payment of a construction that benefited the government.

We also depart from the CA and the RTC rulings awarding the respondent’s attorney’s fees and costs of suit.

The Constitution provides that "no money shall be paid out of the Treasury except in pursuance of an appropriation made by law."

Attorney’s fees and costs of suit were not included in the appropriation of expenditures for the Sacobia-Bamban-Parua project.

In addition, we are not disposed to say that there was bad faith on the part of the DPWH in not settling its liability to the respondents for the works accomplished by the latter.

The DPWH relied on P.D. 1445, Section 87, which provides that contracts in violation of Sections 85 and 86 thereof are void.

The subject contracts undoubtedly lacked the legal requirement of certification of the chief accountant of DWPH.

It was also clear that the project manager had no authority to approve the contracts, since the amounts involved were beyond his authority.

A strict application of the law, as the DPWH officials did, would therefore give a reasonable basis for the denial of the claim and eliminate the badge of bad faith on their part.

The DPWH officials were apparently apprehensive that they might end up being liable to the government if they had wrongfully paid the contractors. This apprehension clearly showed in their letter to the DOJ Secretary.

In conclusion, we uphold the CA in affirming the liability of the DPWH for the works accomplished by herein contractors.

We, however, delete the liability of Gregorio Vigilar, Teodoro Encarnacion and Jose P. de Jesus, as well as other monetary awards in favor of respondents, as these awards were not directly for the subject accomplished works and were not funded by the department.

IN VIEW THEREOF, the assailed 26 June 2008 Decision of the Court of Appeals is hereby AFFIRMED with MODIFICATION. Gregorio Vigilar, Teodoro Encarnacion and Jose P. de Jesus are absolved from their solidary liability with the government for the payment of the subject contracts.

The payment is solely on account of DPWH. Likewise, attorney’s fees and costs of suit are hereby DELETED.

JEFFERSON LIM vs. QUEENSLAND TOKYO COMMODITIES, INC.FACTS:

Private respondent Queensland Tokyo Commodities Incorporated is a duly licensed broker engaged in the trading of commodities futures with full membership and with a floor trading right at the Manila Futures Exchange, Inc.

Sometime in 1992, Benjamin Shia, a market analyst and trader of Queensland, was introduced to

petitioner Jefferson Lim by Marissa Bontia, one of his employees.

Shia suggested that Lim invest in the Foreign Exchange Market, trading U.S. dollar against the Japanese yen, British pound, Deutsche Mark and Swiss Franc.

Before investing, Lim requested Shia for proof that the foreign exchange was really lucrative. They conducted mock tradings without money involved. As the mock trading showed profitability, Lim decided to invest with a marginal deposit of US$5,000 in manager’s check.

Because respondent Queensland dealt in pesos only, it had to convert US$5,000 in manager’s check to pesos, amounting to P125,000 since the exchange rate at that time was P25 to US$1.00.

To accommodate petitioner’s request to trade right away, it advanced the P125,000 from its own funds while waiting for the manager’s check to clear. Thereafter, a deposit notice in the amount of P125,000 was issued to Queensland. This was sent to Lim who received it as indicated by his signature. Then, Lim signed the Customer’s Agreement.

During the first day of trading or on October 22, 1992, Lim made a net profit of P6,845.57. He was elated. He agreed to continue trading.

During the second day of trading or on October 23, 1992, they lost P44,465.

Meanwhile, on October 22, 1992, respondent learned that it would take seventeen (17) days to clear the manager’s check given by petitioner. Hence, upon management’s request, Shia returned the check to petitioner who informed Shia that petitioner would rather replace the manager’s check with a traveler’s check.

Petitioner requested Shia to come back at 2:00 P.M.. Shia went with petitioner to the bank to purchase a traveler’s check at the PCI Bank. Shia noticed that the traveler’s check was not indorsed but Lim told Shia that Queensland could sign the indorsee portion. Because Shia trusted the latter’s good credit rating, and out of ignorance, he brought the check back to the office unsigned.

Citibank informed respondent that the traveler’s check could not be cleared unless it was duly signed by Lim, the original purchaser of the traveler’s check. A Miss Arajo, from the accounting staff of Queensland, returned the check to Lim for his signature, but the latter, aware of his P44,465 loss, demanded for a liquidation of his account and said he would get back what was left of his investment.

Meanwhile, Lim signed only one portion of the traveler’s check, leaving the other half blank. He then kept it. Arajo went back to the office without it.

Respondent asked Shia to talk to petitioner for a settlement of his account but petitioner refused to talk with Shia. Shia made follow-ups for more than a week beginning October 27, 1992. Because petitioner disregarded this request, respondent was

compelled to engage the services of a lawyer, who sent a demand letter to petitioner. This letter went unheeded. Thus, respondent filed a complaint against petitioner.

the trial court dismissed the complaint. On appeal by Queensland, the Court of Appeals

reversed and set aside the trial court’s decision. Petitioner filed a motion for reconsideration before

the CA, which was denied. Dissatisfied, petitioner filed the instant recourse alleging that the appellate court committed error:

ISSUE:II -… IN HOLDING THAT THE PETITIONER IS ESTOPPED IN

QUESTIONING THE VALIDITY OF THE CUSTOMER’S AGREEMENT AND FROM DENYING THE EFFECTS OF HIS CONDUCT;

HELD: The essential elements of estoppel are:

(1) conduct of a party amounting to false representation or concealment of material facts or at least calculated to convey the impression that the facts are otherwise than, and inconsistent with, those which the party subsequently attempts to assert; (2) intent, or at least expectation, that this conduct shall be acted upon by, or at least influence, the other party; and (3) knowledge, actual or constructive, of the real facts.

Here, it is uncontested that petitioner had in fact signed the Customer’s Agreement in the morning of October 22, 1992, knowing fully well the nature of the contract he was entering into. The Customer’s Agreement was duly notarized and as a next, petitioner paid his investment deposit to respondent in the form of a manager’s check in the amount of US$5,000 as evidenced by PCI Bank Manager’s Check No. 69007, dated October 22, 1992. All these are indicia that petitioner treated the Customer’s Agreement as a valid and binding contract.

More significantly, petitioner already availed himself of the benefits of the Customer’s Agreement whose validity he now impugns.

As found by the CA, even before petitioner’s initial marginal deposit (in the form of the PCI manager’s check dated October 22, 1992) was converted into cash, he already started trading on October 22, 1992, thereby making a net profit of P6,845.57.

On October 23, he continued availing of said agreement, although this time he incurred a “floating loss” of P44,645. While he claimed he had not authorized respondent to trade on those dates, this claim is belied by his signature affixed in the order forms.

Clearly, by his own acts, petitioner is estopped from impugning the validity of the Customer’s Agreement. For a party to a contract cannot deny

the validity thereof after enjoying its benefits without outrage to one’s sense of justice and fairness.

It appears that petitioner’s reason to back out of the agreement is that he began sustaining losses from the trade. However, this alone is insufficient to nullify the contract or disregard its legal effects. By its very nature it is already a perfected, if not a consummated, contract. Courts have no power to relieve parties from obligations voluntarily assumed, simply because their contracts turned out to be disastrous or unwise investments. Notably, in the Customer’s Agreement, petitioner has been forewarned of the high risk involved in the foreign currency investment as stated in the “Risk Disclosure Statement,” located in the same box where petitioner signed.

Neither is there merit in petitioner’s contention that respondent violated the Customer’s Agreement by allowing him to trade even if his manager’s check was not yet cleared, as he had no margin deposit as required by the Customer’s Agreement, viz:

5. Margin ReceiptA Margin Receipt issued by the Company shall only be for the purpose of acknowledging receipt of an amount as margin deposit for Spot/Futures Currency Trading. All checks received for the purpose of margin deposits have to be cleared through such bank account as may be opened by the Company before any order can be accepted.

But as stated earlier, respondent advanced petitioner’s marginal deposit of P125,000 out of its own funds while waiting for the US$5,000 manager’s check to clear, relying on the good credit standing of petitioner. Contrary to petitioner’s averment now, respondent had advanced his margin deposit with his approval. Nowhere in the “Guidelines” adverted to by petitioner was such an arrangement prohibited. Note that the advance was made with petitioner’s consent, as indicated by his signature, affixed in the deposit notice, sent to him by respondent. By his failure to seasonably object to this arrangement and by affixing his signature to the notice of deposit, petitioner is barred from questioning said arrangement now.

the instant petition is DENIED for lack of merit. The decision of the Court of Appeals is AFFIRMED.

Republic v CA (301 SCRA 366)Facts:St. Jude’s Enterprises is the registered owner of a parcel of land in Caloocan. In March 1966, this land was subdivided into two lots under subdivision plan (LRC) PSD 55643. The first lot was later found to have expanded its area, this was confirmed by the Land Registration Commission (LRC). St Jude’s then sold the lots to Spouses Santos, Spouses Calaguian, and Lucy Madaya.

In January 1985, Sol Gen Estelito Mendoza filed an action to annul the sales on the lots on the ground that the subdivision plan was null and void because it expanded the area of the land.The RTC dismissed the complaint. It found that the buyers of the land purchased the lots in good faith and since the titles were registered under the Torrens system, such titles became absolute and irrevocable. Also, even if the Sol Gen proved the expansion of the area, there was no proof of fraud when St. Jude submitted the subdivision plan to the LRC.The CA affirmed the RTC. Thus, the petition for review.

Issue/s:Whether or not the gov’t is estopped from questioning the approved subdivision plan.

Held: Yes. While the general rule is that the State can’t be put in estoppel by mistakes of its officials, this is subject to limitations. Where innocent 3rd persons, relying on the correctness of the certificate of title, acquire rights over the property, courts cannot disregard such rights and cancel the certificate. In the case, for nearly 20 years (1966-1985), the State failed to correct and recover the alleged increase of land area of St. Jude. Also, there was no proof given that the land area was intentionally and fraudulently increased or how fraud was allegedly made. The State’s prolonged inaction is tantamount to laches (the negligence/omission of a right w/in a reasonable time, warranting a presumption that the party entitled to assert it has abandoned or declined to assert it). Also, the buyers bought the lots in good faith, relying on the clean certificate of St. Jude. They did not have to go behind the titles to verify the contents or search for hidden defects that could defeat their rights to the lots. The main purpose of the Torrens system is to avoid conflicts of title and to facilitate transactions by giving the public to rely on the face of a Torrens Title and to dispense the need of inquiring further. It is only fair and reasonable to apply estoppel to avoid injustice to the innocent purchasers for value. Furthermore, Sol Gen didn’t present proof that they bought the lots in bad faith.

*As regards the expansion of the land, the SC said that the “more or less” term used in the surveyor’s findings indicates that the land was not exact. What defines a piece of titled property is not the numerical data, but the boundaries or “metes and bounds” of the property specified in its technical description and showing its limits.

*SC affirmed CA.

Doctrine: Where innocent 3rd persons, relying on the correctness of the certificate of title, acquire rights over the property, courts cannot disregard such rights and cancel the certificate. All persons dealing with registered land may safely rely on the correctness of the title issued. The law/courts do not oblige them to go behind the certificate in order to investigate again the true condition of the property.

Hermosilla vs. Remoquillo (G.R. No. 167320; January 30, 2007)

Nature: Petitioners Heirs of Salvador Hermosilla assail the CA’s Decision, which reversed the trial court’s decision in their favor and accordingly dismissed their complaint.

Facts: Subject of the controversy is a 65-square meter portion of a lot

located in Poblacion, San Pedro, Laguna. Aug. 31, 1931: the Republic of the Philippines acquired through

purchase the San Pedro Tunasan Homesite. Apolinario Hermosilla, who was occupying a lot in San Pedro

Tunasan Homesite until his death in 1964, caused the subdivision of the lot into two, Lot 12 with an area of 341 square meters, and Lot 19 with an area of 341 square meters of which the 65 square meters subject of this controversy form part.

April 30, 1962: Apolinario executed a Deed of Assignment transferring possession of Lot 19 in favor of his grandson, herein respondent Jaime Remoquillo. As the Land Tenure Administration (LTA) later found that Lot 19 was still available for disposition to qualified applicants, Jaime, being its actual occupant, applied for its acquisition before the LTA on May 10, 1963.

July 8, 1963: Apolinario conveyed Lot 12 to his son Salvador Hermosilla, Jaime’s uncle.

Salvador later filed an application to purchase Lot 12 which was awarded to him by the defunct Land Authority on December 16, 1971.

February 10, 1972: Jaime and his uncle Salvador forged a Kasunduan whereby Jaime transferred ownership of the 65 square meters (the questioned property) in favor of Salvador.

After Apolinario died, his daughter Angela filed a protest before the Land contending that as an heir of the deceased, she is also entitled to Lots 12 and 19. The NHA dismissed the protest.

The NHA later awarded on March 16, 1986 Lot 19 to Jaime for which he and his wife were issued a title, TCT No. T-156296, on September 15, 1987.

Petitioners filed an action for Annulment of Title on the ground of fraud with damages against Jaime and his spouse, together with the Register of Deeds, before the RTC of Biñan, Laguna, alleging that by virtue of the Kasunduan executed in 1972, Jaime had conveyed to his uncle Salvador the questioned property–part of Lot 19 covered by TCT No. T-156296 which was issued in 1987.

RTC: found the Kasunduan a perfected contract of sale, there being a meeting of the minds upon an identified object and upon a specific price, and that ownership over the questioned property had already been transferred and delivered to Salvador.

On the alleged failure of consideration of the Kasunduan, the trial court held that the same did not render the contract void, but merely allowed an action for specific performance.

CA: reversed the decision of the trial court. It held that the Kasunduan was void because at the time of its execution in 1972, the Republic of the Philippines was still the owner of Lot 19, hence, no right thereover was transmitted by Jaime who was awarded the Lot in 1986, and consequently no right was transmitted by Salvador through succession to petitioners. And it found no evidence of fraud in Jaime’s act of having Lot 19,

including the questioned property, registered in his and his wife’s name in 1987.

At all events, the appellate court held that the action had prescribed, it having been filed in 1992, more than four years from the issuance to Jaime and his wife of the TCT.

Hence, the present petition for review on certiorari. When the Kasunduan was executed in 1972 by Jaime in favor of

Salvador – petitioners’ predecessor-in-interest – Lot 19, of which the questioned property forms part, was still owned by the Republic. Nemo dat quod non habet. Nobody can give what he does not possess. Jaime could not thus have transferred anything to Salvador via the Kasunduan.

Claiming exception to the rule, petitioners posit that at the time the Kasunduan was executed by Jaime in 1972, his application which was filed in 1963 for the award to him of Lot 19 was still pending, hence, the Kasunduan transferred to Salvador Jaime’s vested right to purchase the same, in support of which they cite a law on estoppel, Art. 1434 of the Civil Code, which provides that "[w]hen a person who is not the owner of a thing sells or alienates and delivers it and later, the seller or grantor acquires title thereto, such title passes by operation of l aw to the buyer or grantee.

Issue: WON the Principle of Estoppel applies.Held: No Petitioners’ reliance on Article 1434 of the Civil Code does not

lie. The principles of estoppel apply insofar as they are not in

conflict with the provisions of the Civil Code, the Code of Commerce, the Rules of Court and special laws.

Land Authority Administrative Order No. 4 (1967), "Rules and Regulations governing Disposition of the Laguna Settlement Project in San Pedro, Laguna," proscribes the conveyance of the privilege or preference to purchase a land from the San Pedro Tunasan project before it is awarded to a tenant or bona fide occupant, thus:

o SEC. 6. Privilege of Preference to Purchase Intransferable; Waiver or Forfeiture Thereof. – From the date of acquisition of the estate by the Government and before issuance of the Order of Award, no tenant or bona fide occupant in whose favor the land may be sold shall transfer or encumber the privilege or preference to purchase the land, and any transfer or encumbrance made in violation hereof shall be null and void: Provided, however, That such privilege or preference may be waived or forfeited only in favor of the Land Authority . . .

Petitioners’ insistence on any right to the property under the Kasunduan thus fails.

The transfer "became one in violation of law (the rules of the PHHC being promulgated in pursuance of law have the force of law) and therefore void ab initio." Hence, appellant acquired no right over the lot from a contract void ab initio, no rights are created.

Estoppel, as postulated by petitioner, will not apply for it cannot be predicated on an illegal act. It is generally considered that as between the parties to a contract, validity cannot be given to it by estoppel if it is prohibited by law or is against public policy.

Petition was DENIED.

Paulino Asilo Jr. vs. People of the Philippines and Spouses Visitacion and Cesar Bombasi

Facts: Private respondent Visitacion’s late mother Marciana De Coronado and the Municipality of Nagcarlan, Laguna, which is represented by Mayor Crisostomo Manalang, entered into a lease contract.

- In the contract, the Municipality allowed the use of property comprising a lot and a store within the municipality in favor of the respondent’s mother for a period of 20 years and is extendible for another 20 years.

- The lease contract provided that De Cronado could build a firewall on her rented property which must be at least as high as the store; and in case of modification of the public market, she or her heirs would be given preferential rights.

- Visitacion took over the store when her mother died. From 1984 to 1993, she secured the yearly Mayor’s permits.

- In 1986, a fire razed the public market of Nagcarlan. The result of the inspection request of Visitacion revealed that her store remained intact and stood strong. This finding of Engineer Gorospe was contested by the Municipality of Nagcarlan.

- The store of Visitacion continued to operate after the fire until 1993.

- In September 1993, Visitacion received a letter from Mayor Comendador directing her to demolish her store 5 days from notice.

- Visitacion wrote a reply letter saying that: a. The lease contract was still existing and legally binding b. She was willing to vacate the store as long as same place and area would be given to her in the new public marketc. in case her proposals are not acceptable to Mayor Comendador, for the latter to just file an unlawful detainer case against her.

- In October of 1993, Mayor Comendador relying on the strength of Sangguiniang Bayan Resolutions authorized the demolition of the store with Asilo and Angeles supervising the work.

- The spouses filed with the RTC of Laguna a Civil Case for damages with preliminary injunction against the Municipality of Nagcarlan, Laguna, Mayor Demetrio Comendador, Paulino Asilo Jr. and Alberto Angeles.

- Spouses Bombasi also filed a criminal complaint against Mayor Comendador, Asilo, and Angeles for violation of Sec. 3(e) of RA No. 3019 (Anti Graft and Corrupt Practices Act) before the Office of the Ombudsman.

- Angeles died during the pendency of the case. While Mayor Comendador and Asilo was charged guilty of the said offense after causing injury suffered on the part of the Spouses Bombasi and that

they acted with evident bad faith when they performed the demolition of the market stall.

- The Municipality of Nagcarlan, Laguna contended that the respondents’ structure is a nuisance and that the abatement of which can be carried out without the judicial proceedings.

Issue: Whether or not the contention of the petitioners that the respondents’ structure being a public nuisance can be demolished without judicial proceedings?

Ruling: - The Supreme Court held that the respondents’ market stall cannot be considered as nuisance per se because it has not been affected by the fire and is therefore strong and intact.

- Furthermore, the Municipality of Nagcarlan, Laguna as represented by the then Mayor Comendador, was placed in estoppel after it granted yearly business permits in favor of the Spouses Bombasi.

- Article 1431 of the Civil Code provides that, through estoppel, an admission or representation is rendered conclusive upon the person making it, and cannot be denied or disproved as against the person relying thereon.

- The representation made by the municipality that the Spouses Bombasi has the right to continuously operate its store binds the municipality. It is utterly unjust for the Municipality to receive the benefits of the store operation and later on claim on the illegality of the business.

- The Municipality of Nagcarlan, Paulino Asilo, and Demetrio Comendador, are hereby declared solidarily liable to the Spouses Bombasi to temperate and moral damages.