ROSENCOR vs InquingFacts: Respondents were lessees of a property own by the spouses Tiangco. They entered to an oralagreement. .  The lessees were renting the premises then for P150.00 a month and were allegedlyverbally granted by the lessors the pre-emptive right to purchase the property if ever they decide to sell the same. Upon the death of the spouses in 1975, the management of the properties were adjudicated to the heirs who were represented by Eufrocina de Leon.  The lessees were allegedly promised the same pre-emptive right by the heirs of Tiangcos since the latter had knowledge that this right was extended to the former by the late spouses Tiangcos.  The lessees continued to stay in the premises and allegedly spent their own money amountingfrom P50,000.00 to P100,000.00 for its upkeep.  These expenses were never deducted from the rentals which already increased to P1,000.00. The respondents received a demand letter from Atty Aguila for them to vacate the premises but they refused to. On June 1990, they received a letter from De Leon offering tosell the property for 2M but made a counter-offer of 1M. In November 1990, a certain Rene Juaquin came to the leased premises introducing himself as its new owner. In January 1991, the lessees again received another letter from Atty. Aguila demanding that they vacate the premises.  A month thereafter, the lesseesreceived a letter from de Leon advising them that the heirs of the late spouses Tiangcos have already sold the property to Rosencor.  The following month Atty.. Aguila wrote them another letter demanding the rental payment and introducing herself as counsel for Rosencor/Rene Joaquin, the new owners of the premises.The lessees offered to reimburse de Leon the selling price ofP726,000.00 plus an additional P274,000.00 to complete their P1,000.000.00earlier offer.  When their offer was refused, they filed the present action praying for the following: a)rescission of the Deed of Absolute Sale between de Leon and Rosencor datedSeptember 4, 1990 Held: Thus, the prevailing doctrine, as enunciated in thecited cases, is that a contract of sale entered into in violation of a right offirst refusal of another person, while valid, is rescissible. There is, however, a circumstance which prevents the application of this doctrine in the case at bench.  In the cases cited above, the Courtordered the rescission of sales made in violation of a right of first refusal precisely because the vendees therein could not have acted in good faith as they were aware or should have been aware of the right of first refusal granted to another person by the vendors therein.  The rationale for this is found in theprovisions of the New Civil Code on rescissible contracts.  Under Article 1381 of the New 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 collectthe 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. It must be borne in mind that, unlike the cases cited above, the right of first refusal involved in the instant case was an oral one given to respondents by the deceased spouses Tiangco and subsequently recognized by their heirs.  As such, in order to hold that petitioners were in bad faith, there must be clear and convincing proof that petitioners were made aware of the said right of first refusal either by the respondents or by the heirs of the spouses Tiangco. It is axiomatic that good faith is always

presumed unless contrary evidence is adduced Apurchaser in good faith is one who buys the property of another without notice that some other person has a right or interest in such a property and pays a full and fair price at the time of the purchase or before he has notice of the claim or interest of some other person in the property In this regard, the rule on constructive notice would be inapplicable as it is undisputed that the right of first refusal was an oral one and that the same was never reduced to writing, much less registered with the Registry of Deeds.  In fact, even the lease contract by which respondents derive their right to possess the property involved was an oral one.On this point, we hold that the evidence on record fails toshow that petitioners acted in bad faith in entering into the deed of sale overthe disputed property with the heirs of the spouses Tiangco.  Respondents failed to present anyevidence that prior to the sale of the property on September 4, 1990,petitioners were aware or had notice of the oral right of first refusal.Respondents point to the letter dated June 1, 1990 as indicative of petitioners’knowledge of the said right.  Inthis letter, a certain Atty. Erlinda Aguila demanded that respondent IreneGuillermo vacate the structure they were occupying to make way for itsdemolition.We fail to see how the letter could give rise to bad faithon the part of the petitioner.  Nomention is made of the right of first refusal granted to respondents.  The name of petitioner Rosencor or anyof it officers did not appear on the letter and the letter did not state thatAtty. Aguila was writing in behalf of petitioner.  In fact, Atty. Aguila stated duringtrial that she wrote the letter in behalf of the heirs of the spousesTiangco.  Moreover, evenassuming that Atty. Aguila was indeed writing in behalf of petitioner Rosencor,there is no showing that Rosencor was aware at that time that such a right offirst refusal existed.Neither was there any showing that after receipt of thisJune 1, 1990 letter, respondents notified Rosencor or Atty. Aguila of theirright of first refusal over the property.  Respondents did not try to communicatewith Atty. Aguila and inform her about their preferential right over thedisputed property.  There iseven no showing that they contacted the heirs of the spouses Tiangco after theyreceived this letter to remind them of their right over the property.Respondents likewise point to the letter dated October 9,1990 of Eufrocina de Leon, where she recognized the right of first refusal ofrespondents, as indicative of the bad faith of petitioners.  We do not agree.  Eufrocina de Leon wrote the letter onher own behalf and not on behalf of petitioners and, as such, it only showsthat Eufrocina de Leon was aware of the existence of the oral right of firstrefusal.  It does not showthat petitioners were likewise aware of the existence of the said right..  Moreover, the letter was made a monthafter the execution of the Deed of Absolute Sale on September 4, 1990 betweenpetitioner Rosencor and the heirs of the spouses Tiangco.  There is no showing that prior to thedate of the execution of the said Deed, petitioners were put on notice of the

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existence of the right of first refusal.Clearly, if there was any indication of bad faith based onrespondents’ evidence, it would only be on the part of Eufrocina de Leon as shewas aware of the right of first refusal of respondents yet she still sold thedisputed property to Rosencor.  However,bad faith on the part of Eufrocina de Leon does not mean that petitionerRosencor likewise acted in bad faith.  Thereis no showing that prior to the execution of the Deed of Absolute Sale,petitioners were made aware or put on notice of the existence of the oral rightof first refusal.  Thus,absent clear and convincing evidence to the contrary, petitioner Rosencor willbe presumed to have acted in good faith in entering into the Deed of AbsoluteSale over the disputed property.Considering that there is no showing of bad faith on thepart of the petitioners, the Court of Appeals thus erred in ordering therescission of the Deed of Absolute Sale dated September 4, 1990 betweenpetitioner Rosencor and the heirs of the spouses Tiangco.  The acquisition by Rosencor of theproperty subject of the right of first refusal is an obstacle to the action forits rescission where, as in this case, it was shown that Rosencor is in lawfulpossession of the subject of the contract and that it did not act in bad faith..[34]This does not mean however that respondents are leftwithout any remedy for the unjustified violation of their right of firstrefusal.  Their remedyhowever is not an action for the rescission of the Deed of Absolute Sale but anaction for damages against the heirs of the spouses Tiangco for the unjustifieddisregard of their right of first refusal.WHEREFORE, premises considered, the decision of the Court of Appeals datedJune 25, 1999 is REVERSED and SET ASIDE.  The Decision dated May 13, 1996 of theQuezon City Regional Trial Court, Branch 217 is hereby REINSTATED insofar as itdismisses the action for rescission of the Deed of Absolute Sale datedSeptember 4, 1990 and orders the payment of monthly rentals of P1,000.00 permonth reckoned from May 1990 up to the time respondents leave the premises. 

Khe hong cheng vs CA 355 scra 701By Samboy Fajardo in Exclusively for 1-Manresa · Edit Doc · Delete

Facts:

                Petitioner is the owner of Butuan Shipping Lines. In 1985, the Phi agricultural Trading

corporation shipped on board the vessel M/V Prince Eric, owned by petitioner, 3,400 bags of copra at

Masbate for delivery to Dipolog City. Said shipment was covered by a marine insurance policy issued

by American Home Insurance Co. (respondent Philam’s assured). However, the vessel sank resulting

in the total loss of the shipment. American Home Insurance Company paid the amount of Php354K

(the value of the copra) to the consignee.

 

                Having been subrogated to the rights of the consignee, AHIC instituted a civil case to

recover the money paid to the consignee. While the case was still pending, on December 20, 1989,

petitioner executed deeds of donations of parcels of land in favor of his children, co-petitioners

Sandra Joy and Ray Steven.  December 29, 1993 (4 years after the donation and registration in the

names of co-petitioners) the Trial Court rendered judgment in favor of petitioner.

 

After the said decision became final and executor, a writ of execution, however was not served. An

alias writ of execution was, thereafter, applied and granted on October 1996. Despite earnest efforts,

the sheriff found no property under the name of Butuan Shipping Lines/ or petitioner to levy or

garnish the satisfaction of the TC’s decision. When the sheriff went to Butuan City 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 hi children.

 

                Thereafter, respondent Philam filed a complaint for the rescission of the deeds of donation

executed by petitioner in favor of his children and for the nullification of their titles alleging that

petitioner executed the aforesaid deeds in fraud of his creditors. Petitioner subsequently filed their

answer to the complaint a quo. They moved for its dismissal on the ground that the action has

already prescribed. They posited that the registration of the deeds of donation in December 1989

constituted a constructive notice and since the complaint a quo was FILED IN February 1997, or more

than 4 years after said registration, the action was already barred by prescription.

 

Issue:

 

WON the prescriptive period to file an action for rescission of the subject deed of donation has

already commenced.

 

Ruling:

                Article 1389 of the CC simply provides that, “ The action to claim rescission must

commenced within four years.” Since this provision is silent as to when the prescriptive period would

commence, the general rule, i.e., from the moment the cause of action accrues, therefore, applies.

Article 1150 pf the CC is particularly instructive which provides that: The time for prescription for all

kinds of actions, when there is no special provision which ordains otherwise, shall be counted from

the day they may be brought.

 

                The SC enunciated the principle that it is the legal possibility of bringing the action which

determines the starting point for the computation of the prescriptive period for the action. Article

1383 of the CC provides that: an action for rescission is subsidiary; it cannot be instituted except

when the party suffering damages 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.

 

                In the case at bar, it bears stressing that petitioner even expressly declared and

represented that he had reserved to himself property sufficient to answer for his debts contracted

prior to this date. Respondent Philam only learned about the unlawful conveyance made by petitioner

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in January 1997 when its counsel accompanied the sheriff to butuan City to attach the properties of

petitioner. There they found that he no longer had any properties in his name. It was only then that

respondent Philam’s action for rescission of the deeds of donation accrued because then it could be

said that respondent Philam had exhausted all legal means to satisfy the trial court’s judgment in its

favor. Since respondent Philam filed its complaint for accion pauliana against petitioners barely a

month from its discovery that petitioner had no other property to satisfy the judgment award against

him, its action for rescission of the subject deeds clearly had not yet prescribed.UNION BANK VS ONG 491 S 581

By Rechilda Oquias in Exclusively for 1-Manresa · Edit Doc · Delete

This case is about an action for rescission of a contract of sale.

FACTS:

 

Spouses Alfredo and Susana Ong, respondents in this case, are majority stockholders of Baliwag

mahogany Corporation (BMC).

 

On 10 October 2012, spouses Ong executed a Continuing Surety Agreement in favor of Union Bank

(UB), the purpose of which is to secure a credit line facility made available by the bank to BMC in the

amount of Php 40,000,000.00.

 

The surety agreement expressly stipulated a solidary liability undertaking.

 

About a year after, spouses Go sold a 974 sqm property consisting of a house and lot and all the

improvements standing thereon, located at Greenhills, San Juan, Metro Manila to Jackson Kee, a co-

respondent in this case, for the amount of Php 12,500,000.00.

 

The day after, Lee registered the sale and was issued a Transfer Certificate Title (TCT) in his name.

 

It should be noted that during this time, BMC has already availed of the credit line facility and in fact

had already issued a total of 22 promissory notes in favor of Union Bank.

 

A month after the sale of the Greenhills property, BMC filed a Petition for Rehabilitation and for

Declaration of Suspension of Payments with the Securities and Exchange Commission (SEC).

 

To protect its interest, UB lost no time and filed for an action for rescission of the sale between

spouses Ong and Lee for purportedly being in fraud of creditors, before the Pasig regional Trial Court.

 

UB assailed the validity of the sale. It alleged that spouses Ong and Lee only entered into the

transaction with the sole purpose of fraudulently removing the property from the reach of Union Bank

and other creditors. And this allegation is supported by the prersence of the following circumstances:

 

1. Insufficiency of Consideration - as per UB, the 12.5M purchase price is below the fair market value

at that time.

 

2. Lack of Financial Capacity of Lee to bu the property - at that time his gross annual income is only

300K as per the credit investigation conducted by the bank.

 

3. Lee did not assert absolute ownership- he allowed the spouses Ong to retain possession of the

property under a purported Contract of Lease.

 

 

The respondents, as defendants amintained in their answer that:

 

- both the contract of sale as well as the contract of lease are founded with good and valid

consideration

 

- both contracts were executed in good faith

 

The RTC ruled in favor of Union Bank which was later reversed and set aside by the Court of Appeals,

hence we have again the petition of Union Bank before the Supreme Court.

 

ISSUE:

 

Whether or not, the Ong-Lee Contract of Sale partakes of a conveyance to defraud the creditor UB.

 

RULING:

 

To settle the issue, the Court first addressed how the petitioner anchored its case on Art 1381 of the

Civil Code which lists as among the rescissible contracts " those undertaken in fraud of creditors

when the latter cannot in any other manner collect the claim due them."

 

1. Contracts in fraud of creditors are those executed with the intention to prejudice the rights of the

creditors.It should not be confused with contracts entered into wthout such mal-intent even though as

a direct consequence, the creditor may suffer some damages.

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In determining whether a contract is fraudulent, the first question that should come to mind is

whether the conveyance was a bona fide transaction, a trick or a contrivance to defeat creditor. The

burden of proof lies on the creditor seking rescission. Creditor has to prove with competent evidence

that such fraudulent intent exists on the part of the debtor.

 

In the case at bar, spouses Ong had sufficiently established the validity and legitimacy of the sale.

They were able to present a deed of sale that is duly notarized, which carries with it the presumption

of validity and regularity. The sale was also duly recorded and annotated on the title. Lee also caused

the transfer of title to his name.

 

2. The Court also said that there can be no quibbling about the transaction being supported by a valid

and sufficient consideration. Lee's account on the witness stand regarding the sale was categorical

and straightforward. His testimony readily proves that money indeed changed hands in connection

with the sale in question. Lee as buyer was able to pay the contract price to the seller, spouses Ong.

There were receipts presenteds as evidence of payment so any suggestion negating payment or

consideration, or to say that the transaction is fictitious, must be rejected.

 

Regarding the issue on badges of fraud, petitioner raises the issue of inadequate consideration,

alleging that only 12.5M was paid for the property while the fair market value is supposed to be

14.5M at that time.

 

The Court does not agree. The existence of fraud or the intent to defarud a creditor cannot plausibly

be presumed from the fact that the price paid for a piece of real estate is perceived to be slightly

lower than its market value. The Court said that it is only logical and it should be expected that

parties to a contract of sale will negotiate its terms and considerations, and price of course is one of

the items to be negotiated. So, a scenario where the agreed contract price is lower than the original

asking price of the seller, or the contract price is slightly lower than the market value is not out of the

ordinary. This is not an unusual business phenomenon let alone indicative of fraudulent intention.

 

3. The Court also does not want to overlook that the disparity between the price appearing in the

deed versus the price perceived by the petitioner to be the real value of the property is NOT as

GROSS so as to support a conclusion of fraud.

 

Mr. Oliver Morales, a licensed real estate appraiser and broker for 27 years, after going over the Deed

of Absolute Sale and Offer to Purchase, declared that there exists no gross disparity between the

market value and the price mentioned in the deed.

 

Hence, with the consideration deemed to be fair and reasonable, it would justify the conclusion that

the sale is without doubt, true and genuine.

 

4. The Court also stressed that, when the validity of a sales contract is in issue, there are 2 veritable

presumptions that are relevant:

 

- that there was sufficient consideration in the contract;

 

- that it was the result of a fair and regular private transaction

 

If show to hold, these presumptions infer prima facie that the transaction is valid, except that it must

yield to the evidences presented by the party disputing the validity, to him rests the onus of proof.

 

In this case, UB failed to discharge this burden. It just made a bare allegation that the sale was

executed to defraud the creditor and that the sale was without sufficient consideration.

 

This bare allegation cannot prevail over the evidences presented by respondents Ong and Lee, which

more than sufficiently supported the conclusion as to the legitimacy of the sale and good faith of the

parties.

 

5. Also, the Court said that the rescissory action to set aside contracts in fraud of creditors is accion

pauliana.

 

This is essentially only a subsidiary remedy as per Art. 1383 of the Civil Code. The party suffering can

only avail of this when he has no other legal means to obtain reparation.

 

In this case, it is true that spouses Ong, as surewty for BMC, binded themselves to settle BMC's debt.

But for the bank to collect what is due them, it is necessary for UB to show that it had exhausted all

the properties of the spouses Ong, to recover what BMC owed them.

 

But it does not appear that UB sought after the other properties of Ong except for the one in

Greenhills.

 

Absent proof that the Ong's had no toher property except their Greenhills home, the sale to Lee

cannot be simplistically considered as one in fraud of creditors.

 

4 | O B L I C O N F I N A L E X A M C A S E S D I G E S T

No evidence was shown by UB that the sale peremptorily deprived them of means to collect from the

Ongs.

 

Hence, when a creditor fails to show that he has no other legal recourse to obtain satisfaction for his

claim, then he is not entitled to the rescission asked.

 

6. Another aspect is, for a contract to be rescinded for being in fraud of creditors, both contracting

parties must be shown to have acted maliciously so as to prejudice creditors who were prevented

from collecting their claims.

 

Again, in this case, there were no evidence to prove that the spouses Ong and Lee were conniving

cheats. In fact, UB did not even attempt to prove the existence of a personal, business or professional

ties between the respondednts so as to cast doubts on their real intentions in executing the sale.

 

7. It cannot be overemphasized that rescission is unavailing when as per Art 1385 , the thing which is

also the object of the contract are legally in possession of the third party who did not act in bad faith.

 

The third party is protected by law against a suit for rescission by the registration of the transfer to

him in the registry.

 

The evidence of his possession is no less than the TCT issued to him by the Registry of Deeds of San

Juan, Metro Manila.

 

His good faith can also be dedeuced from his conduct and outward acts before the sale. In his

testimony and as noted by the CA, Lee undertook due diligence by checking the Ong's title for

possible defects before proceeding with the sale.

 

And so, with UB failing to to prove that the sale was in fraud of creditors and that it was without

sufficient consideration, petition for rescissionn was denied by the Court.

G.R. No. 173441              

December 3, 2009

CASE:

 

HEIRS OF SOFIA QUIRONG, Represented by ROMEO P. QUIRONG, Petitioners,

vs.

DEVELOPMENT BANK OF THE PHILIPPINES, Respondent.

 

General Description:

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:

1. When the late Emilio Dalope died, he left a 589-square meter untitled lot1 in Sta. Barbara,

Pangasinan, to his wife, Felisa Dalope (Felisa) and their nine children, one of whom was Rosa Dalope-

Funcion.2 To enable Rosa and her husband Antonio Funcion (the Funcions) get a loan from

respondent Development Bank of the Philippines (DBP), Felisa sold the whole lot to the Funcions.

2. On February 12, 1979, after the Funcions failed to pay their loan, the DBP foreclosed the mortgage on

the lot and consolidated ownership in its name on June 17, 1981.

3. Four years later or on September 20, 1983 the DBP conditionally sold the lot to Sofia Quirong4 for the

price of P78,000.00. 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.

4. Two months after that sale or on November 28, 1983 Felisa and her eight children (collectively, the

Dalopes)5 filed an action for partition and declaration of nullity of documents with damages against

the DBP and the Funcions.

5. On December 27, 1984, notwithstanding the suit, the DBP executed a deed of absolute sale of the

subject lot in Sofia Quirong’s favor.

6. On May 11, 1985, Sofia Quirong having since died, her heirs (petitioner Quirong heirs) filed an answer

in intervention in which they asked the RTC to award the lot to them and, should it instead be given

to the Dalopes, to allow the Quirong heirs to recover the lot’s value from the DBP. But, because 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 and, alternatively, to relief from the DBP.7

7. G.    On December 16, 1992 the RTC rendered a decision, declaring the DBP’s sale to Sofia

Quirong valid only with respect to the shares of Felisa and Rosa Funcion in the property.

It declared Felisa’s sale to the Funcions, the latter’s mortgage to the DBP, and the latter’s

sale to Sofia Quirong void insofar as they prejudiced the shares of the eight other children

of Emilio and Felisa who were each entitled to a tenth share in the subject lot.

8. The DBP received a copy of the decision on January 13, 1993 and, therefore, it had until January 28,

1993 within which to file a motion for its reconsideration or a notice of appeal from it. But the DBP

failed to appeal supposedly because of excusable negligence and the withdrawal of its previous

counsel of record.

5 | O B L I C O N F I N A L E X A M C A S E S D I G E S T

9. On June 10, 1998 the Quirong heirs filed the present action10 against the DBP before the RTC for

rescission of the contract of sale between Sofia Quirong, their predecessor, and the DBP and praying

for the reimbursement of the price of P78,000.00 that she paid the bank plus damages. The heirs

alleged that they were entitled to the rescission of the sale because the decision stripped them of

nearly the whole of the lot that Sofia Quirong, their predecessor, bought from the DBP. The DBP filed

a motion to dismiss the action on ground of prescription and res judicata but the RTC denied their

motion.

10. On June 14, 2004, after hearing the case, the RTC rendered a decision,11 rescinding the sale between

Sofia Quirong and the DBP and ordering the latter to return to the Quirong heirs the P78,000.00 Sofia

Quirong paid the bank.12

11.  On appeal by the DBP, the Court of Appeals (CA) reversed the RTC decision and dismissed the heirs’

action on the ground of prescription.

ISSUES

The issues presented in this case are:

1. Whether or not the Quirong heirs’ action for rescission of respondent DBP’s sale of the subject

property to Sofia Quirong was already barred by prescription; and

2. In the negative, whether or not the heirs of Quirong were entitled to the rescission of the DBP’s

sale of the subject lot to the late Sofia Quirong as a consequence of her heirs having been evicted

from it.

COURT’S RULING: (CA)

1. A.     The CA held that the Quirong heirs’ action for rescission of the sale between DBP and

their predecessor, Sofia Quirong, is barred by prescription reckoned from the date of

finality of the December 16, 1992 RTC decision in Civil Case D-7159 and applying the

prescriptive period of four years set by Article 1389 of the Civil Code.

2. The next question that needs to be resolved is the applicable period of prescription:

3.  Their complaint asked for the rescission of the contract of sale between Sofia Quirong, their

predecessor, and the DBP and the reimbursement of the price of P78,000.00 that Sofia Quirong paid

the bank plus damages. The prescriptive period for rescission is four years.

4. The status of that contract at the time of the filing of the action for rescission? Apparently, that

contract of sale had already been fully performed when Sofia Quirong paid the full price for the lot

and when, in exchange, the DBP executed the deed of absolute sale in her favor. There was a

turnover of control of the property from DBP to Sofia Quirong since she assumed under their contract,

"the ejectment of squatters and/or occupants" on the lot, at her own expense.19

5. 3.      And that 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 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.

6. With the conclusion that the Court has reached respecting the first issue presented in this case, it

would serve no useful purpose for it to further consider the issue of whether or not the heirs of

Quirong would have been entitled to the rescission of the DBP’s sale of the subject lot to Sofia

Quirong as a consequence of her heirs having been evicted from it. As the Court has ruled above,

their action was barred by prescription.

WHEREFORE, the Court DENIES the petition.

ANNULABLE CONTRACTS

1.

MENDEZONA VS. OZAMIZ

FACTS:

It appears that on January 1991, the respondents instituted the petition for guardianship with the RTC

of Oroquieta City, alleging therein that Carmen Ozamiz, then 86 years old, after an illness in July

1987, had become disoriented and could not recognize most of her friends; that she could no longer

take care of herself nor manage her properties by reason of her failing health, weak mind and absent-

mindedness. Mario Mendezona and Luis Mendezona, herein petitioners who are nephews of Carmen

Ozamiz, and Pilar Mendezona, a sister of Carmen Ozamiz, filed an opposition to the guardianship

petition. 

In the course of the guardianship proceeding, the petitioners and the oppositors thereto agreed that

Carmen Ozamiz needed a guardian over her person and her properties, and thus 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. 

6 | O B L I C O N F I N A L E X A M C A S E S D I G E S T

As guardians, respondents Roberto J. Montalvan and Julio H. Ozamiz filed on August 6, 1991 with the

guardianship court their “inventories and Accounts”,[10] listing therein Carmen Ozamiz’s properties,

cash, shares of stock, vehicles and fixed assets, including a 10,396 square meter property known as

the Lahug property. Said Lahug property is the same property covered by the Deed of Absolute Sale

dated April 28, 1989 executed by Carmen Ozamiz in favor of the petitioners. Respondents Roberto J.

Montalvan and Julio H. Ozamiz caused the inscription on the titles of petitioners a notice of lis

pendens,[11] regarding Special Proceeding No. 1250, thus giving rise to the suit for quieting of title,

Civil Case No. CEB-10766, filed by herein petitioners. 

In their Answer[12] in Civil Case No. CEB-10766 the respondents opposed the petitioners’ claim of

ownership of the Lahug property and alleged that the titles issued in the petitioners names are

defective and illegal, and the ownership of the said property was acquired in bad faith and without

value inasmuch as the consideration for the sale is grossly inadequate and unconscionable.

Respondents further alleged 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; and that her properties having been

placed in administration, she was in effect incapacitated to contract with petitioners. 

The issues for resolution were delimited in the pre-trial to: (a) the  propriety of recourse to quieting of

title; (b) the validity or nullity of the Deed of Absolute Sale dated April 28, 1989 executed by Carmen

Ozamiz in favor of herein petitioners; (c) whether the titles over the subject parcel of land in plaintiffs’

names be maintained or should they be cancelled and the subject parcels of land reconveyed; and (d)

damages and attorney’s fees.[13]

 

Trial on the merits ensued with the parties presenting evidence to prove their respective allegations.

Petitioners Mario Mendezona, Teresita Adad Vda. de Mendezona and Luis Mendezona, as plaintiffs

therein, testified on the circumstances surrounding the sale. Carmencita Cedeno and Martin Yungco,

instrumental witnesses to the Deed of Absolute Sale dated April 28, 1989, and, Atty. Asuncion

Bernades, the notary public who notarized the said document, testified that on the day of execution

of the said contract that Carmen Ozamiz was of sound mind and that she voluntarily and knowingly

executed the said deed of sale. 

For the defendants, the testimonies of respondent Paz O. Montalvan, a sister of Carmen Ozamiz;

Concepcion Agac-ac, an assistant of Carmen Ozamiz; respondent Julio Ozamiz; Carolina Lagura, a

househelper of Carmen Ozamiz; Joselito Gunio, an appraiser of land; Nelfa Perdido, a part-time

bookkeeper of Carmen Ozamiz, and the deposition of Dr. Faith Go, physician of Carmen Ozamiz, were

offered in evidence. 

The petitioners presented as rebuttal witnesses petitioners Mario Mendezona and Luis Mendezona, to

rebut the testimony of respondent Julio H. Ozamiz; and, Dr. William Buot, a doctor of neurology to

rebut aspects of the deposition of Dr. Faith Go on the mental capacity of Carmen Ozamiz at the time

of the sale.

 RTC ruled in favor of the petitioners. The CA reversed the factual findings of the RTC and ruled that

the deed of Absolute sale was a simulated contract thus null and void. 

ISSUE: Whether or not the CA erred in ruling that Carmen Ozamiz’s mental faculties were

seriously impaired when she executed the deed of absolute sale?

RULING:  YES

o Furthermore, 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. It placed too much reliance upon the testimonies of the respondents’ witnesses. However,

after a thorough scrutiny of the transcripts of the testimonies of the witnesses, we find that the

respondents’ core witnesses all made sweeping statements which failed to show the true state of

mind of Carmen Ozamiz at the time of the execution of the disputed document. The testimonies of

the respondents’ witnesses on the mental capacity of Carmen Ozamiz are far from being clear and

convincing, to say the least.

o 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.

o 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 CarmenOzamiz succumbed

7 | O B L I C O N F I N A L E X A M C A S E S D I G E S T

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.

o 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.

o We 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. We agree 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.

o SC granted the petition and reversed the decision of the CA.

3.

AINZA V CA G.R. NO 165420 JUNE 30, 2005

 

FACTS:

Concepcion alleged that spouses Padua owned a lot with unfinished

building in QC; sometime in 1987, she bought ½ of the lot from the spouses for P100,000 · No deed of

sale was executed but cash payment was received by spouses Padua and ownership was transferred

to Ainza. Ainza authorized her daughter (Natividad) and husband (Ceferino) to occupy the premises

and make improvements on the unfinished building · Thereafter, Padua had the lot partitioned into 3

and registered it under their names· Respondent Antonio Padua claimed that he bought the lot in

1980 and

introduced the improvements thereon. Between 1989 and 1990, spouses

Padua allowed Natividad and Ceferino to occupy the premises temporarily. In 1994, they caused the

subdivision of the property and 3 separate titles were issued· Antonio requested Natividad to vacate

the premises but the latter refused and claimed that Concepcion owned the property. Antonio filed an

ejectment suit on April 1, 1999. Concepcion, through Natividad, filed a civil case for partition of real

property and annulment of titles and damages on May 4, 1999 · Antonio claimed that his wife,

Eugenia, admitted that Concepcion offered to buy one third (1/3) of the property who gave her small

amounts over several years which totaled P100,000.00 by 1987 and for which she signed a receipt.

· January 1, 2001 – RTC rendered judgment in favor of Concepcion cancelling

TCTs and ordered the subdivision of the property into 2 lots and awarded ½

to Concepcion citing that the sale was consummated when both contracting

parties complied with their respective obligations · CA reversed RTC decision applying Art 124 FC that

since the property is conjugal, the written consent of the husband must be obtained for the sale to

be valid

 

ISSUE: Whether or not the sale between Concepcion and Eugenia is valid without

the written consent of Antonio

 

HELD: The verbal contract of sale did not violate the provisions of the Statute of Frauds that a

contract for the sale of real property shall be unenforceable unless the contract or some note or

memorandum of the sale is in writing abs subscribed by the party charged or his agent. When the

verbal contract has been completed, Executed or partially consummated, its enforceability will not be

barred by the Statute of Frauds. Where one party has performed his obligation, oral evidence will be

admitted to prove the agreement. The oral contract of sale between Eugenia and Concepcion was

evidenced by a receipt signed by Eugenia and Antonio’s testimony that she sold the property to

Concepcion.

It is clear that the subject property is conjugal and sold by the wife (Eugenia) in April 1987 prior to the

effectivity of FC, in which Art. 254 repealed Title V Book I NCC on property relations between husband

and wife. However, Art. 256 l imited its retroactive effect only to cases where it would not prejudice or

impair vested or acquired rights in accordance with NCC or other laws. In the present case, the vested

rights of Concepcion will be impaired or prejudiced by the application of the FC; hence, the provisions

o f the NCC will be applied.

The consent of both husband and wife is necessary for the sale of the conjugal property to be valid.

The husband’s consent cannot be presumed. Except in the testimony of Natividad, there is no clear

evidence that the husband participated or consented to the sale of the conjugal property. The wife

alone is incapable of giving consent to the contract. Therefore, in the absence of the husband’s

consent, the disposition made by the wife is VOIDABLE.

The contract of sale between Eugenia and Concepcion being an oral contract, the action to

annul the same must be commenced within 6 years from the time the right of action accrued. Since

the wife sold the property in April 1987, the husband should have asked the courts to annul the sale

8 | O B L I C O N F I N A L E X A M C A S E S D I G E S T

on or before April 1993. No action was made by the husband to annul the same, hence his right to

seek its annulment was extinguished by prescription.

Even if we were to apply the 10-year prescriptive period under Art. 173, the husband is still

barred from instituting an action to annul the same because since April 1987, more than 10 years had

already lapsed without any such action being filed.

The sale of the conjugal property by the wife without the consent of the husband is

VOIDABLE. It is binding unless annulled. The husband failed

to exercise his right to ask for the annulment within the prescribed period,

hence, he is now barred from questioning the validity of the sale between

his wife and Concepcion.

ROBERTO G. FAMANILA, Petitioner,

 vs.

THE COURT OF APPEALS (Spc. Fmr. Seventh Division) and BARBERSHIP

MANAGEMENT LIMITED and NFD INTERNATIONAL MANNING AGENTS, INC. Respondents.

  

FACTS:

 

In 1989, respondent NFD International Manning Agents, Inc. hired the services of petitioner Roberto

G. Famanila as Messman for Hansa Riga, a vessel registered and owned by its principal and co-

respondent, Barbership Management Limited.

On June 21, 1990, while  Hansa Riga was docked at the port of Eureka, California, U.S.A. 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 a sudden attack of left cerebral hemorrhage from a

ruptured cerebral aneurysm. Petitioner underwent a brain operation and he was confined at the

Emmanuel Hospital in Portland, Oregon, USA

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

 Owing to petitioner’s physical and mental condition, he was repatriated to the Philippines.  

On August 21, 1990, he was examined at the American Hospital in Intramuros, Manila where the

examining physician, Dr. Patricia Abesamis declared that he "cannot go back to sea duty and has

been observed for 120 days, he is being declared permanently, totally disabled.

  Thereafter, authorized representatives of the respondents convinced him to settle his claim

amicably by accepting the amount of US$13,200.

Petitioner accepted the offer as evidenced by his signature in the Receipt and Release dated February

28, 1991. His wife, Gloria Famanila and one Richard Famanila, acted as witnesses in the signing of

therelease.

 

On 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.  

On September 29, 1997, ActingExecutive Labor Arbiter Voltaire A. Balitaan dismissed the complaint

on the ground of prescription. Petitioner appealed the decision with the NLRC.

On March 31, 1998, the NLRC promulgated its decision finding the appeal to be without merit and

ordered its dismissal. When the motion for reconsideration was denied by the NLRC in its resolution

dated June 29, 1998, petitioner filed a petition for certiorari with this Court.

On March 30, 2001, the Court of Appeals promulgated the assailed decision which dismissed the

petition for lack of merit. Petitioner’s motion for reconsideration was denied, hence, the present

petition for review raising contending that: He did not sign the Receipt and Release voluntarily or

freely because he was permanently disabled and in financial constraints. These factors allegedly

vitiated his consent which makes the Receipt and Release void and unenforceable.

 

The petition lacks merit.

 

 

A vitiated consent does not make a contract void and unenforceable. A vitiated consent only gives

rise to a voidable agreement. Under the Civil Code, the vices of consent are mistake, violence,

9 | O B L I C O N F I N A L E X A M C A S E S D I G E S T

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 contends that his permanent and total disability vitiated his consent to the Receipt and

Release thereby rendering it void and unenforceable.

  However, disability is not among the factors that may vitiate consent. In the absence of such proof

of vitiated consent, the validity of the Receipt and Release must be upheld. We agree with the

findings of the Court 

 In the case at bar, there is nothing in the records to show that petitioner’s consent was vitiated

when he signed the agreement.

 

 

Moreover, the document entitled receipt and release which was attached by petitioner in his

appeal does not show on its face any violation of law or public policy. In fact, petitioner did not

present any proof to show that the consideration for the same is not reasonable and acceptable.

 

Not all waivers 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 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.

 

But where it is shown that the person making the waiver did so 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.

 

To be valid and effective, waivers must be couched in clear and unequivocal terms, leaving no doubt

as to the intention of those giving up a right or a benefit that legally pertains to them.

Dire necessity is not an acceptable ground for annulling waiver since it has not been

shown that the employee was force to sign it. The signing was even witnessed by petitioner’s

wife, Gloria T. Famanila and one Richard T. Famanila.

 

 

Regarding prescription, the applicable prescriptive period for the money claims against pursuant to

Article 291 of the Labor Code which provides that:

 

ART. 291.

Money Claims. – All money claims arising from employer-employee relations accruing during the

effectivity of this Code shall be filed within three (3) years from the time the cause of action accrued;

otherwise they shall be forever barred.

 

Since petitioner’s demand for an award of disability benefits is a money claim arising from his

employment, Article 291 of the Labor Code applies. From the time petitioner was declared

permanently and totally disabled on August 21, 1990 which gave rise to his entitlement to disability

benefits up to the time that he filed the complaint on June 11, 1997, more than three years have

elapsed thereby effectively barring his claim.

 

 

The petition is DENIED. The Decision of the Court of Appeals dated March 30, 2001 which affirmed

the Decision of the National Labor Relations Commission dismissing petitioner’s complaint for

disability and other benefits for lack of merit, and the Resolution dated October 5, 2001 denying the

motion for reconsideration, are AFFIRMED.

CATALAN VS. BASA - Fai

FACTS:

Oct. 20, 1948 – Feliciano Catalan was discharged from the military service due to his schizophrenic

condition. After almost a year (Sept. 28, 1949), he married Corazon Cerezo.

June 16, 1951 – Feliciano donated a parcel of land in Barangay Basing, Pangasinan to his sister

Mercedes Catalan. (One half of his real property)

Dec. 22, 1953 – Bank of the Philippine Islands (BPI) filed in the court of First Instance of Pangasinan

declaring Feliciano incompetent. After 11 days (Dec. 22, 1953), it was approved by the said court.

The following day, the court ordered BPI as Feliciano’s guardian.

10 | O B L I C O N F I N A L E X A M C A S E S D I G E S T

1979 – Mercedes Catalan sold the property in issue in favour of her children Delia and Jesus Basa.

(Deed of Absolute Sale)

April 1, 1997 – BPI, as Feliciano’s guardian, filed for Declaration of Nullity of Documents, Recovery of

Possession and Ownership. BPI alleged that the Deed of Absolute Donation by Feliciano to Mercedes

was void ab initio because he was of not sound mind and was incapable of giving consent. BPI

presented to the court two evidences:

(1) The Certificate of Disability for the Discharge of Feliciano Catalan issued on Oct. 20, 1948 by the

Board of Medical Officers of Department of Veteran Affairs

 (2) On December 22, 1953, Feliciano was judged an incompetent by the court of First Instance of

Pangasinan.

        - Based on those two pieces of evidence, petitioners conclude that Feliciano had been suffering

from a mental condition since 1948 which incapacitated him from entering into any contract

thereafter, until his death on Aug. 14, 1997.

Aug. 14, 1997 – Feliciano died. The original complaint was amended to substitute his heirs in lieu of

BPI as complaints.

The donation to Mercedes is void so the Deed of Absolute Sale to Delia and Jesus Basa should likewise

be nullified because Mercedes had no right to sell the property to anyone.

ISSUES:

1. Whether or not Feliciano’s Deed of Donation to Mercedes is valid.

2. Whether or not Feliciano’s schizophrenic condition constitutes incapacity to give consent to contract.

HELD:

1. Yes. 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.

They 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, this

allegation cannot prove the incompetence of Feliciano.

 

1. No. A series of studies of schizophrenia will show that Feliciano could still be presumed capable of

attending to his property rights. Schizophrenia can result to dimenting illness however; the illness will

wax and wane over many years, with only very slow deterioration of intellect. Thus, these scientific

studies 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, June 16, 1951, Feliciano Catalan had lost total control of his mental faculties.

                              VILLANUEVA VS. CHIONG- William

 

FACTS: 

Respondents Florentino and Elisera Chiong were married sometime in January 1960 but have been

separated in fact since 1975. During their marriage, they acquired Lot No. 997-D-1 situated at

Poblacion, Dipolog City and covered by Transfer Certificate of Title (TCT) No. (T-19393)-2325, 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 (Villanueva

spouses) for P8,000, payable in installments. Thereafter, Florentino allowed petitioners to occupy the

lot and build a store, a shop, and a house thereon. Shortly after their last installment payment on

December 13, 1986, petitioners demanded from respondents the execution of a deed of sale in their

favor. Elisera, however, refused to sign a deed of sale.

 

On July 5, 1991, Elisera filed with the RTC a Complaint for Quieting of Title with Damages, docketed

as Civil Case No. 4383. On February 12, 1992, petitioners filed with the RTC a Complaint for Specific

Performance with Damages, docketed as Civil Case No. 4460. Upon proper motion, the RTC

consolidated these two cases.

On May 13, 1992, Florentino executed the questioned Deed of Absolute Sale in favor of petitioners.

On July 19, 2000, the RTC, in its Joint Decision, annulled the deed of absolute sale dated May 13,

1992, and ordered petitioners to vacate the lot and remove all improvements therein.

The Court of Appeals affirmed the RTC's decision.

ISSUES:

11 | O B L I C O N F I N A L E X A M C A S E S D I G E S T

(1) Is the subject lot an exclusive property of Florentino or a conjugal property of

respondents? (2) Was the sale void or merely voidable?

(2)

RULING:

 

Anent the first issue, petitioners' contention that the lot belongs exclusively to Florentino because of

his separation in fact from his wife, Elisera, at the time of sale dissolved their property relations, is

bereft of merit. 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. The lot

retains its conjugal nature.

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 exclusivelyto the husband or to the wife. Petitioners' mere insistence as to the lot'ssupposed

exclusive nature is insufficient to overcome such presumption when taken against all the evidence for

respondents.

 

On the basis alone of the certificate of title, it cannot be presumed that the lot was acquired during

the marriage and that it is conjugal property since it was registered "in the name of Florentino

Chiong, Filipino, of legal age, married to Elisera Chiong… ." But Elisera also presented a real property

tax declaration acknowledging her and Florentino as owners of the lot. In addition, Florentino and

Elisera categorically declared in the Memorandum of Agreement they executed that the lot is a

conjugal property. Moreover, the conjugal nature of the lot was admitted by Florentino in the Deed of

Absolute Sale dated May 13, 1992, where he declared his capacity to sell as a co-owner of the subject

lot.

 

Anent the second issue, the sale by Florentino without Elisera's consent is not, however, void ab

initio. In Vda. de Ramones v. Agbayani, citing Villaranda v. Villaranda, we held that without the wife's

consent, the husband's alienation or encumbrance of conjugalproperty prior to the effectivity of the

Family Code on August 3, 1988 is not void, but merely voidable. Articles 166 and 173 of the Civil

Code  provide:

ART. 166. Unless the wife has been declared a non compos mentis or a spendthrift, or is under civil

interdiction or is confined in a leprosarium, the husband cannot alienate or encumber any real

property of the conjugal partnership without the wife's consent…

 

This article shall not apply to property acquired by the conjugal partnership before the effective date

of this Code.

ART. 173. The wife may, during the marriage, and within ten years from the transaction questioned,

ask the courts for the annulment of any contract of the husband entered into without her consent,

when such consent is required, or any act or contract of the husband which tends todefraud 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.)

 

Applying Article 166, the consent of both Elisera and Florentino is necessary for the sale of a conjugal

property to be valid. In this case, the requisite consent of Elisera was not obtained when Florentino

verbally sold the lot in 1985 and executed the Deed of Absolute Sale on May 13,1992. Accordingly,

the contract entered by Florentino is annullable atElisera's instance, during the marriage and within

ten years from thetransaction questioned, conformably with Article 173. Fortunately, Eliseratimely

questioned the sale when she filed Civil Case No. 4383 on July 5, 1991, perfectly within ten years

from the date of sale and execution of the deed.

Petitioners finally contend that, assuming arguendo the property is still conjugal, thetransaction

should not be entirely voided as Florentino had one-half share over the lot. Petitioners' stance lacks

merit. In Heirs of Ignacia Aguilar-Reyes v. Mijares  citing Bucoy v. Paulino, et al., a case involving the

annulment of sale executed by the husband without the consent of the wife, it was held that the

alienation must be annulled in its entirety and not only insofar as the share of the wife in the conjugal

property is concerned.

8.) VELARDE

Annullable Contracts

DESTREZA VS ALARAS

608 SCRA 775

Facts: 

On November 16, 1989 Pedro L. Riñoza (Riñoza) died, leaving several heirs, which included

respondents Ma. Gracia R. Plazo (Plazo) and Ma. Fe R. Alaras (Alaras).

In the course of settling Riñoza’s estate, respondent Plazo wrote a letter dated April 30, 1991 to the

Registry of Deeds of Nasugbu, Batangas requesting for certified true copies of all titles in Riñoza’s

name, including a sugarland located at Barangay Utod, Nasugbu, Batangas covered by (TCT) 40353.

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. Alexander Bonuan. According to Bonuan, he

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

12 | O B L I C O N F I N A L E X A M C A S E S D I G E S T

On June 5, 1991 respondent 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 who granted her request and

furnished her with certified true copies of the titles, except that of TCT 40353 which was missing.

In an effort to find TCT 40353, respondent 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, entered

on July 18, 1989, was in the name of petitioner Gregorio M. Destreza and his wife Bernarda Butiong.

Respondent Plazo also went to the BIR of Batangas City to inquire on any record involving the sale of

the Utod sugarland. But on August 15, 1991 the Revenue District Officer certified that the BIR’s office

did not have any record of sale of the sugarland covered by TCT 40353.

Finally, respondent Alaras testified that on August 1, 1989, her late father, Riñoza, gave her the title

of a land that he wanted to mortgage to her uncle. Riñoza told her that the land was about five

hectares and was located at Barangay Utod, Nasugbu, Batangas. She did not, however, look at the

number of the title. A week later, 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 of Nasugbu. They claim serious irregularities in the

issuance of TCT 55396 to petitioner Destreza. They asked, among others, 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, Register of Deeds 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.

In compliance with the RTC’s order, Bonuan gave the court certified copies of TCTs 40353 and

55396 as well as the duplicate original of the deed of absolute sale dated June 15, 1989 between

Riñoza and the Destreza spouses.

On the part of the Destreza spouses, petitioner Destreza testified that on June 16, 1989 he bought the

Utod sugarland from Riñoza through Toribio Ogerio, a common kumpadre. He paid him P1M. 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, but not later than July 15, 1989, Destreza returned to the

Register of Deeds and got a copy of TCT 55396 in his name.

After the sale, petitioner Destreza immediately took possession of the land, plowing and planting on it

even until the case was filed. No communication or demand letter from respondents Plazo and Alaras

disturbed his occupation until he received the summons for suit.

The RTC found after hearing 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. Thus, the RTC found no basis for the cancellation of TCT

40353 and the issuance of TCT 55396 in the name of the Destreza spouses. The RTC nullified the

Deed of Sale and TCT 55396 and ordered the Register of Deeds of Nasugbu, Batangas to restore TCT

40353 in the name of the late Riñoza.

The Destreza spouses appealed to the CA, contending that the notary public's failure to submit a copy

of the instrument to the notarial section is not sufficient to nullify the deed of sale and TCT 55396. On

October 31, 2006 the CA rendered a decision, affirming with modification the October 1, 2001

Judgment of the RTC. Although the CA found that the deed of sale may be presumed regularly

executed despite the notary's failure to report the transaction to the RTC Notarial Section, Destrezas

themselves destroyed such presumption when they failed to prove its authenticity and genuineness.

Further, the Destrezas’ claim that they paid Riñoza P100,000.00 when the price stated in the deed of

sale was only P60,000.00 placed the veracity of the deed in doubt. Thus, the CA affirmed the RTC

decision with the modification that Riñoza’s estate did not have to pay any amount to the

Destrezas. The CA denied the latter’s motion for reconsideration.

 

Issue:   Whether or not sufficient evidence warranted the nullification of the deed of sale

that the late Riñoza executed in favor of the Destrezas.

 

Ruling

The CA held that the Destrezas could not just rely on the deed of sale in their favor or on the TCT

issued in their names. They needed to present further evidence to prove the authenticity and

genuineness of that deed. Having failed to do so, the CA theorized that it was justified in annulling

that deed of sale and the corresponding TCT.

The ruling of the CA was correct. Indeed, 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.

Parties who appear before a notary public to have their documents notarized should not be expected

to follow up on the submission of the notarial reports. 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. Thus, the notarized deed of sale executed by Riñoza is admissible as evidence of the

sale of the Utod sugarland to the Destrezas.

The CA, however, made a mistake with regard to the assignment of the burden of proof. No rule

requires a party, who relies on a notarized deed of sale for establishing his ownership, to present

further evidence of such deed’s genuineness lest the presumption of its due execution be for naught.

Under the rules of evidence, "Every instrument duly acknowledged or proved and certified as

13 | O B L I C O N F I N A L E X A M C A S E S D I G E S T

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."

Here, Atty. Crispulo Ducusin notarized the deed of sale that Riñoza acknowledged as his free act and

deed on June 17, 1989. 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 of the Utod sugarland to the Destreza

spouses. Parenthetically, it is not disputed that the Destrezas immediately and openly occupied the

land right after the sale and continuously cultivated it from then on.

The burden of proof is the duty of a party to present such amount of evidence on the facts in issue as

the law deems necessary for the establishment of his claim. Here, since respondents Plazo and Alaras

claim, despite the Destrezas’ evidence of title over the property and open possession of it, that grave

and serious doubts plague TCT 55396, the burden is on them to prove such claim. Only when they are

successful in doing so will the court be justified in nullifying the notarized deed of sale that their

father Riñoza executed in favor of the Destrezas.

But more than plausible evidence was required of Plazo and Alaras. 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. Without such evidence, the

presumption remains undiminished.

The Court’s present task, therefore, is to determine if respondents Plazo and Alaras’ evidence that

their father did not sell the subject land to the Destrezas is clear and convincing.

1. Plazo and Alaras point out that Destreza’s acquisition of a copy of TCT 55396 is questionable.

Destreza said that he got a copy of the TCT on July 15, 1989 but such TCT was entered into the

registry of title only on July 18, 1989. Moreover, Bonuan, the Register of Deeds, testified that he had

not yet issued that TCT to the Destrezas because of some lacking documents. He did, however, say

that he released a copy of it to ex-mayor Riñoza upon the latter’s request.

These circumstances may appear perplexing but the problem is that they did not touch the validity of

the deed of sale. And it does not help that the trial did not really address them. Plazo and Alaras did

not confront petitioner Gregorio Destreza regarding these circumstances when he took the witness

stand. It would be pure speculation to declare that the Destrezas defrauded Riñoza based solely on

them.

Here, the supposed irregularity lies in the release of a copy of the title to the Destrezas even before it

had been entered into the books of the Register of Deeds. Furthermore, the Destrezas were able to

acquire a copy of it when they still needed to submit some registration requirements. But the

premature release of a copy of the registered title cannot affect the validity of the contract of sale

between Riñoza and the Destrezas. Registration only serves as the operative act to convey or affect

the land insofar as third persons are concerned. It does not add anything to the efficacy of the

contract of sale between the buyer and the seller. In fact, 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. This negates any possible suggestion that the Destrezas merely fabricated the sale of the Utod

sugarland on the evidence that the Notary Public failed to submit his notarial report. Whatever

irregularity in registration may have been incurred, it did not affect the validity of the sale.

2. Alaras claims that on August 1, 1989, 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, impressing on 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

handed to her. 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.

3. Plazo and Alaras also question the testimony of Gregorio Destreza that he paid P100,000.00 to

Riñoza when the figure appearing 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. On the other hand,

Plazo and Alaras chose not to confront Destreza regarding that difference when the latter took the

witness stand.

In sum, the Court finds the notarized deed of sale that the late Pedro Riñoza executed in favor of the

Destrezas valid and binding upon them and their successors-in-interest. It served as authority to the

Register of Deeds to register the conveyance of the property and issue a new title in favor of the

Destrezas. That the Destrezas occupied and cultivated the land openly for seven years before and

after Riñoza’s death negates any scheme to steal the land.

KINGS PROPERTIES CORP., VS. CANUTO A. GALIDO

G.R. No. 170023, November 27, 2009

FACTS :

 

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ü  This case involves an action for cancellation of certificates of title, registration of deed

of  sale  and  issuance of certificates of title filed by Canuto A. Galido (respondent) before RTC of

Antipolo City.

 

ü  On 18 April 1966, the heirs of Domingo Eniceo, namely Rufina Eniceo and Maria Eniceo, were

awarded with Homestead Patent consisting of four parcels of land located in San Isidro, Antipolo,

Rizal.

 

ü  The Antipolo property with a total area of 14.8882 hectares was registered under Original

Certificate of Title (OCT) No. 535.

 

ü  The issuance of the homestead patent was subject to the following conditions:

 

“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”

 

ü    On September 1973, a deed of sale covering the Antipolo property was executed between Rufina

Eniceo and Maria Eniceo as vendors and respondent as vendee.

 

ü  Rufina Eniceo and Maria Eniceo sold the Antipolo property to respondent for P250,000. A certain

Carmen Aldana delivered the owner’s duplicate copy of OCT No. 535 to respondent.

 

ü           On 1988, the Eniceo heirs registered with the (Registry of Deeds) a Notice of Loss of the

owner’s copy of OCT No. 535. 

 

 

ü           The RTC rendered a decision finding that the certified true copy of OCT No. 535 contained no

annotation in favor of any person, corporation or entity. The RTC 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.

 

ü           Petitioner states that as early as 1991, respondent knew of the RTC decision because

respondent filed a criminal case against Rufina Eniceo and Leonila Bolinas (Bolinas) for giving false

testimony upon a material fact during the trial. They  alleged  that sometime in  1995, Bolinas came

to the office of Alberto Tronio Jr. (Tronio), petitioner’s general manager, and offered to sell the

Antipolo property. During an on-site inspection, Tronio saw a house and ascertained that the

occupants were Bolinas’ relatives. Tronio also went to the Registry of Deeds to verify the records on

file and  ascertained that OCT No. 535 was clean and had no lien and encumbrances. After the

necessary verification, petitioner decided to buy the Antipolo property.

ü   

ü           On 20 March 1995, the Eniceo heirs executed a deed of absolute sale in favor of petitioner

covering lots 3 and 4 of the Antipolo property for P500,000.

 

ü            On 17 August 1995, the Secretary of the Department of Environment and Natural Resources

(DENR Secretary) approved the deed of sale between the Eniceo heirs and respondent.

ü   

ü           On  January 1996, respondent filed a civil complaint with the trial court against the Eniceo

heirs and petitioner praying  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.

ü   

ü  The trial court rendered its decision dismissing the case for lack of legal and factual basis. 

ü  However, the  CA reversed the trial court’s decision. Hence this petition.

 

Issue:

1. WON the deed of sale should 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. – NO! it cannot be

annulled.

 

Held:

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ü  First. 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.

 

ü  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.[40] 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.

 

ü   Petitioner invokes THE BELATED APPROVAL BY THE DENR SECRETARY, made within 25 years

from the issuance of the homestead, to nullify the sale of the Antipolo property.

 

ü  SC =  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.

Section 118 of Commonwealth Act No. 141 or the Public Land Act (CA 141), as amended by

Commonwealth Act No. 456, reads:

“SEC. 118. EXCEPT IN FAVOR OF THE GOVERNMENT OR ANY OF ITS BRANCHES, UNITS, OR

INSTITUTIONS, OR LEGALLY CONSTITUTED BANKING CORPORATIONS, LANDS ACQUIRED

UNDER FREE PATENT OR HOMESTEAD PROVISIONS SHALL NOT BE SUBJECT TO

ENCUMBRANCE OR ALIENATION FROM THE DATE OF THE APPROVAL OF THE APPLICATION

AND FOR A TERM OF FIVE YEARS FROM AND AFTER THE DATE OF THE ISSUANCE OF THE

PATENT OR GRANT X X X?

 

       No alienation, transfer, or conveyance of any homestead after five years and before twenty-five

years after the issuance of title shall be valid without the approval of the Secretary of Agriculture and

Natural Resources, which approval shall not be denied except on constitutional and legal

grounds.         

 

 

ü  FORGERY =         Petitioner alleges that the deed of sale is a forgery.  However, 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. 

 

 

Other issues : Equitable Mortgage

 

ü  Petitioner contends that 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.

 

ü  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.”[47] The essential

requisites of an equitable mortgage are:

 

1.        The parties entered into a contract denominated as a contract of sale; and

2.       Their intention was to secure existing debt by way of a mortgage. 

 

ü  The presumption of equitable mortgage under Article 1602 of the Civil Code is not conclusive. It

may be rebutted by competent and satisfactory proof of the contrary. 

ü  Apart from the fact that the Eniceo heirs remained in possession of the Antipolo property,

petitioner has failed to substantiate its claim that the contract of sale was intended to secure an

existing debt by way of mortgage. In fact, mere tolerated possession is not enough to prove that

the transaction was an equitable mortgage.

ü   Furthermore, 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. The deed of

sale even inserted a provision about defrayment of registration expenses to effect the transfer of title

to respondent.

 

ü    The Court notes that the Eniceo heirs have not appealed the CA’s decision, hence, as to the

Eniceo heirs, the CA’s decision that the contract was a sale and not an equitable mortgage is now

final. Since petitioner merely assumed the rights of the Eniceo heirs, petitioner is now estopped from

questioning the deed of sale dated 10 September 1973.

 

Petitioner is not a buyer in good faith

 

ü           Petitioner maintains that the subsequent sale must be upheld because petitioner is a buyer in

good faith, having exercised due diligence by inspecting the property and the title sometime in

February 1995.

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ü          

    In Agricultural and Home Extension Development Group v. Court of Appeals,[58]  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.”

ü   

ü           Petitioner purchased the Antipolo property only on 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.

 

Laches

 

ü           PETITIONER CONTENDS THAT 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. PETITIONER CLAIMS THAT DESPITE RESPONDENT’S KNOWLEDGE OF THE SUBSEQUENT SALE IN

1991, RESPONDENT STILL FAILED TO HAVE THE DEED OF SALE REGISTERED WITH THE REGISTRY OF

DEEDS.

 

ü           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. 

 

ü           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.

 

ü           True, unrecorded sales of land brought under Presidential Decree    No. 1529 or the Property

Registration Decree (PD 1529) are effective between and binding only upon the immediate parties.

The registration required in Section 51 of PD 1529 is intended to protect innocent third persons, that

is, persons who, without knowledge of the sale and in good faith, acquire rights to the

property.  Petitioner, however, is not an innocent purchaser for value.

 

UNENFORCEABLE CONTRACTS

1. ARAFOL

VALENCIA VS LOCQUIAO 412 S 600

By Bert Uy and Samboy Fajardo in Exclusively for 1-Manresa · Edit Doc · Delete

Facts:

In May 22, 1944, Locquiao spouses executed a deed of donation propter nuptias which was written in

Ilocano dialect involving a parcel of land in favor of their son, Benito and future wife, Tomasa. The

deed of donation propter nuptias was denominated as Inventario Ti Sagut.

By the terms of the deed, the donees were gifted with 4 parcels of land including the land in question,

a male cow and 1/3 portion of the conjugal house of donor spouses. The donees took their marriage

vows on June 4, 1944.

When the spouses died, they left as heirs their 6 children. With the permission of respondents Benito

and Tomasa, Romana, Benito's sister, took possession and cultivated the subject land and eventually

possession was taken over by Romana's daughter Constancia, when Romana's husband got sick

sometime in 1977.

Benito and Tomasa registered the donation and the original title was cancelled and in lieu thereof a

certificate of title was issued. The heirs executed a Deed of Partition with Recognition of Rights. Later,

disagreements arise among heirs concerning the part of land surface but it was settled through a

compromise agreement. But Constancia filed an action for annulment of title against the respondent

regarding the donation propter nuptias.

She alleged that the Transfer of Certificate was fraudulent and that the Inventario Ti Sagut is

spurious; that the donation did not observe the form required by law as there was no written

acceptance on the document itself or in a separate public instrument.

 

Issues:

1. WON the donation propter nuptias is effective. YES

 

17 | O B L I C O N F I N A L E X A M C A S E S D I G E S T

Held:

1. Under the old Civil Code, donation propter nuptias must be made in a public instrument in which the

property donated must be specifically described. However, Art. 1330 of the same Code provides that

"acceptance is not necessary to the validity of such gifts." In other words, the celebration of the

marriage between the beneficiary couple, in tandem with compliance with the prescribed form, was

enough to effectuate the donation propter nuptias under the old Civil Code.

Under the new Civil Cde, the rules are different. Art. 127 thereof provides that the form of donations

propter nuptias are regulated by the Statute of Frauds. Art. 1403, par. 2, which contains the Statute

of Frauds requires that the contracts mentioned thereunder need be in writing only to be enforceable.

However, as provided in Art. 129, express acceptance "is not necessary for the validity of these

donations." Thus, implied acceptance is sufficient.

It is the old Civil Code which applies in this case since the donation propter nuptias was executed in

May 22, 1944 and the new Civil Code took effect only on August 30, 1950. As a consequence,

applying Art. 1330 of the old Civil Code in the determination of the validity of thequestioned donation,

it does not matter whether or not the donees had accepted the donation. The validity of the donation

is unaffected in either case. Moreso, even implied acceptance of a donation propter nuptias suffices

under the New Civil Code.

LITONJUA VS FERNANDEZ- by fifi

FACTS:

Sometime in September 1995, Mrs. Lourdes Alimario and Agapito Fisico who worked as brokers, offered to sell to the petitioners, Antonio K. Litonjua and Aurelio K. Litonjua, Jr. The 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. The petitioners, thereafter, made two ocular inspections of the property, in the course of which they saw some people gathering coconuts.

In the afternoon of November 27, 1995, the petitioners met with respondent Fernandez and the two brokers at the petitioners’ office in Mandaluyong City.6 The petitioners and respondent Fernandez agreed that the petitioners would buy the property consisting of 36,742 square meters, for the price of P150 per square meter, or the total sum of P5,098,500. They also agreed that the owners would shoulder the capital gains tax, transfer tax and the expenses for the documentation of the sale. The petitioners and respondent Fernandez also agreed to meet on December 8, 1995 to finalize the sale. It was also agreed upon that on the said date, respondent Fernandez would present a special power of attorney executed by the owners of the property, authorizing her to sell the property for and in their

behalf, and to execute a deed of absolute sale thereon. The petitioners would also remit the purchase price to the owners, through respondent Fernandez. However, only Agapito Fisico attended the meeting. He informed the petitioners that respondent Fernandez was encountering some problems with the tenants and was trying to work out a settlement with them.7 After a few weeks of waiting, the petitioners wrote respondent Fernandez on January 5, 1995, demanding that their transaction be finalized by January 30, 1996.8

When the petitioners received no response from respondent Fernandez, the petitioners sent her another Letter9 dated February 1, 1996, asking that the Deed of Absolute Sale covering the property be executed in accordance with their verbal agreement dated November 27, 1995. The petitioners also demanded the turnover of the subject properties to them within fifteen days from receipt of the said letter; otherwise, they would have no option but to protect their interest through legal means.

Upon receipt of the above letter, respondent Fernandez wrote the petitioners in February 1996 and clarified her stand on the matter. Appended thereto was a copy of respondent Fernandez’ letter to the petitioners dated January 16, 1996, in response to the latter’s January 5, 1996 letter.

ISSUE: WON the contract falls under the coverage of statute of frauds.

RULING:

The Letter of respondent Fernandez dated January 16, 1996 is hardly the note or memorandum contemplated under Article 1403(2)(e) of the New Civil Code, which reads: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 secondary evidence of its contents:(e) An agreement for the leasing for a longer period than one year, or for the sale of real property or of an interest therein.29

In the case at bar, the letter dated January 16, 1996 of defendant-appellant can hardly be said to constitute the note or memorandum evidencing the agreement of the parties to enter into a contract of sale as it is very clear that defendant-appellant as seller did not

accept the condition that she will be the one to pay the registration fees and miscellaneous

expenses and therein also categorically denied she had already committed to execute the deed of sale as claimed by the plaintiffs-appellees. The letter, in fact, stated the reasons beyond the control of the defendant-appellant, why the sale could no longer push through – because of the problem with tenants. The trial court zeroed in on the statement of the defendant-appellant that she and her cousin changed their minds, thereby concluding that

18 | O B L I C O N F I N A L E X A M C A S E S D I G E S T

defendant-appellant had unilaterally cancelled the sale or backed out of her previous commitment. However, the tenor of the letter actually reveals a consistent denial that there was any such commitment on the part of defendant-appellant to sell the subject lands to plaintiffs-appellees. When defendant-appellant used the words "changed our mind," she was clearly referring to the decision to sell the property at all (not necessarily to plaintiffs-appellees) and not in selling the property to herein plaintiffs-appellees as defendant-appellant had not yet made the final decision to sell the property to said plaintiffs-appellees. This conclusion is buttressed by the last paragraph of the subject letter stating that "we are no longer selling the property until all problems are fully settled." To read a definite previous agreement for the sale of the property in favor of plaintiffs-appellees into the contents of this letter is to unduly restrict the freedom of the contracting parties to negotiate and prejudice the right of every property owner to secure the best possible offer and terms in such sale transactions.

The SC believed, therefore, that the trial court committed a reversible error in the finding that there was a perfected contract of sale or contract to sell under foregoing circumstances. Hence, the respondent may not be held liable. As been held in the case of Rosencor Development Corporation vs. Court of Appeals,31 the term "statute of frauds" is descriptive of statutes which require certain classes of contracts to be in writing. The statute does not deprive the parties of the right to contract with respect to the matters therein involved, but merely regulates the formalities of the contract necessary to render it enforceable. The purpose of the statute is to prevent fraud and perjury in the enforcement of obligations, depending for their existence on the unassisted memory of witnesses, by requiring certain enumerated contracts and transactions to be evidenced by a writing signed by the party to be charged. The statute is satisfied or, as it is often stated, a contract or bargain is taken within the statute by making and executing a note or memorandum of the contract which is sufficient to state the requirements of the statute.32 The application of such statute presupposes the existence of a perfected contract. However, 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 the names of the parties, the terms and conditions of the contract and a description of the property sufficient to render it capable of identification.33 Such note or memorandum must contain the essential elements of the contract expressed with certainty that may be ascertained from the note or memorandum itself, or some other writing to which it refers or within which it is connected, without resorting to parol evidence.34 To be binding on the persons to be charged, such note or memorandum must be signed by the said party or by his agent duly authorized in writing.35

Gozun vs. Mercado

Unenforceable Contract

By: Sheng Batitao

 

FACTS: Mercado (respondent) was a candidate for a gubernatorial post in Pampanga in

1995. Upon his request to Gozun (petitioner), who is his compadre and owned JMG

publishing house, Gozun submitted draft samples and price quotations for printing of

campaign materials.

 

Respondent’s wife informed petitioner that respondent already approved the samples and

quotations, and that petitioner can start printing the materials. Due to urgency and limited

time to do the job orders, petitioner availed the services and facilities of 2 other publishing

houses owned by his daughter and mother. Thereafter, petitioner delivered the materials to

respondent.

 

Respondent’s sister-in-law, Lilian Soriano, obtained a cash advance from petitioner of

P253,000 for allowance of poll watchers and other election related expenses alleging that

they were not able to go to the bank. Lilian said that she was borrowing money on behalf of

respondent’s wife as was indicated in the succeeding Statement of Account. Gozun submits

that Mercado informed him that he had authorized Lilian to obtain the loan. However, Lilian

signed the receipt in her name alone.

 

Gozun then sent a Statement of Account to Mercado amounting P2,177,906. Mrs. Annie

Mercado then paid P1M to Gozun. Despite repeated demands, respondent’s failed to settle

their balance. It took 3 years before Gozun asked his counsel to send a demand letter, but to

no avail. Gozun then filed a case to recover the balance plus damages and costs.

 

Respondent claimed that the campaign materials were donations to his campaign and that

he did not authorize his wife to enter into a contract for the campaign materials. He denied

having entered to a contract with petitioner, and stressed that he did not authorize Lilian to

borrow money from petitoner. He further claimed that the P1M paid by Annie to Gozun was

for a job well done as he would voluntarily help his campaign and would give his opinions on

his campaign strategy.

 

RTC rendered judgment in favor of Gozun.

 

CA reversed RTC’s ruling and dismissed the case for lack of cause of action.

 

19 | O B L I C O N F I N A L E X A M C A S E S D I G E S T

ISSUES: (1) WON Mercado authorized Lilian to obtain the cash advance from Gozun; and (2)

WON Gozun is the real party in interest with respect to the amount due to the other 2

publishing houses.

 

HELD:

1) NO! Gozun’s testimony failed to state whether the loan was obtained by Lilian on behalf

of Mercado or his wife. Thou the statement of account states that the loan was obtained on

behalf of Mrs. Annie Mercado, there was no specification on the signature that indeed the

loan was obtained on her behalf.

 

General rule, in order to bind the principal by a mortgage on real prop 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 that agent was authorized to

make the mortgage, if he has not acted in the name of the principal.

 

Petitioner’s submission that Mercado informed him that he authorized Lilian to obtain the

loan does not persuade the court. Nowhere can it be inferredthat Mercado was connected to

the transaction. Under Art. 1317 CC, a person cannot be bound by contracts he did not

authorize to be entered into his behalf. Thus, contract is unenforceable.

 

Lilian signed in the receipt alone w/o indicating that she was acting on behalf of Mercado or

his wife. Therefore, she bound herself in her personal capacity and not as an agent of

anyone.

2)YES! On the amount due to petitioner and 2printing presses, petitioner explains that he

was the one who personally and directly contracted w/ respondent and he merely sub-

contracted the 2printing establishments in order to deliver on time the materials ordered by

respondent.

*Petitioner is the real party in interest in this case. RTC’s findings were affirmed by CA. It

erred in not declaring petitioner as a real party in interest as recovery of the cost of

campaign materials made by petitioner’s mother and sister are concerned, upon wrong

notion that they should have been impleaded as plaintiffs. Thus, respondent is obligated to

pay the remaining amount.

1. JAMBANGAN

LIna PEÑALBER vs. RAMOS, Leticia PEÑALBER, and BARTEX INCBy Kyrie Dea Maia in Exclusively for 1-Manresa · Edit Doc · Delete

LIna PEÑALBER vs. RAMOS,  Leticia PEÑALBER, and BARTEX INC

(UNENFORCEABLE CONTRACTS)

Petitioner is the mother and mother-in-law of the private respondent spouses. Respondent Bartex,

Inc., on the other hand, is a domestic corporation which bought from respondent spouses Ramos one

of the two properties involved in the first cause of action.

First Cause of Action (side issue)

Firstly, petitioner alleged in her Complaint that she was the owner of a parcel of land and alleged that

her signature on the said Deed of Donation of this property was a forgery as she did not donate any

property to respondent spouses Ramos. Petitioner allegedly found out that the respondent spouses

Ramos were selling the properties to respondent Bartex, Inc. Petitioner prayed for the declaration of

nullity of the Deed of Donation.

RTC found that the testimony of the petitioner is insufficient to support the said cause of action. A

notarial document is, by law, entitled to full faith and credit upon its face and a high degree of proof is

needed to overthrow the presumption of truth in the recitals contained in a public document executed

with all legal formalities. Hence, in order to contradict the facts contained in a notarial document and

the presumption of regularity in its favor, there must be evidence that is clear, convincing and more

than merely preponderant. She should have had her allegedly falsified signature on the deed of

donation examined by qualified handwriting experts to prove that, indeed, she did not execute the

same. Her failure to do so results in the failure of her cause. Petitioner did not appeal this decision

thus it is deemed final and executory.

Second Cause of Action

Secondly, petitioner owned a hardware which stood on a rented commercial lot.

In 1982, petitioner allowed respondent spouses Ramos to manage the hardware store. Before this,

the petitioner made a beginning inventory of the stocks which amounts to P216,000.00. 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 the respondents for and in her behalf;

[2.] The consideration of P80,000.00 for said lot would be paid from the accumulated earnings of the

store;

[3.] Since the respondents 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 build a bigger building and expand the business;

The respondent spouses bought the property. They returned the management of the hardware to the

petitioner. Then the petitioner made a second inventory of stocks which amounted to P110,000. The

petitioner contends that the difference of P116,000 was used by the petitioner to buy the property

and demanded reconveyance of the title of the property to her. The respondents refused. Thus this

case.

RTC granted the petitioner’s pleas stating that there was an express verbal trust agreement. It is

supported by the fact that petitioner did not ever ask for an accounting of said proceeds, despite the

fact that she already knew that her stocks left by her in was already sold by the spouses and that

there was a difference of P116,000.00 plus which was due to her.

20 | O B L I C O N F I N A L E X A M C A S E S D I G E S T

Respondent filed a motion for reconsideration on the ground that the alleged express trust created

between them and petitioner involving the Bonifacio property could not be proven by parol evidence

as provided in Art 1443 of the Civil Code.  RTC denied the motion stating that respondent spouses

Ramos were deemed to have waived such objections, which cannot be raised anymore in their Motion

for Reconsideration. CA reversed the decision of the RTC.

ISSUE        (1) whether the existence of a trust agreement between her and respondent spouses

Ramos enforceable and existing. 

With regard to the ENFORCEABILITY of the parol evidence presented in the RTC:

In accordance with Article 1443 of the Civil Code, when an express trust concerns an immovable

property or any interest therein, the same may not be proved by parol or oral evidence.

Trusts are either express or implied. Express trusts are those which are created by the direct and

positive acts of the parties, by some writing or deed, or will, or by words either expressly or impliedly

evincing an intention to create a trust.  No particular words are required for the creation of an express

trust, it being sufficient that a trust is clearly intended.

However, the 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 statute does not deprive the parties of the right to

contract with respect to the matters therein involved, but merely regulates the formalities of the

contract necessary to render it enforceable. 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.

A careful perusal of the records of the case reveals that respondent spouses Ramos did indeed fail to

interpose their objections regarding the admissibility of the afore-mentioned testimonies when the

same were offered to prove the alleged verbal trust agreement between them and petitioner.

Consequently, these testimonies were rendered admissible in evidence.

As regards the EXISTENCE of the express verbal trust agreement:

The SC said,

While the admissibility of evidence is an affair of logic and law, determined as it is by its

relevance and competence, the weight to be given to such evidence, once admitted, still

depends on judicial evaluation. Thus, despite the admissibility of the said testimonies, the Court

holds that the same carried little weight in proving the alleged verbal trust agreement between

petitioner and respondent spouses.

The resulting difference of P116,000 in the beginning inventory of the stocks of the hardware store

(before management was transferred to respondent spouses Ramos) and the second inventory

thereof (after management was returned to petitioner), by itself, is not conclusive proof that the said

amount was used to pay the purchase price of the property, such as would make it the property of

petitioner held merely in trust by respondent spouses Ramos. Such a conclusion adopted by the RTC

is purely speculative and non sequitur. The resulting difference in the two inventories might have

been caused by other factors and the same is capable of other interpretations (e. g., that the amount

thereof may have been written off as business losses due to a bad economic condition, or that the

stocks of the store might have been damaged or otherwise their purchase prices have increased

dramatically, etc.), the exclusion of which rested upon the shoulders of petitioner alone who has the

burden of proof in the instant case. This petitioner miserably failed to do. The fact that respondent

spouses Ramos never denied the P116,000 difference, or that they failed to present proof that they

indeed used the said amount to pay the other obligations and liabilities of petitioner is not sufficient

to discharge petitioner’s burden to prove the existence of the alleged express trust agreement.2.

3. LASALA

VOID CONTRACTS

Modina vs CA - Void ContractsBy April Noellie Armilla in Exclusively for 1-Manresa · Edit Doc · Delete

Modina vs CA

Facts:

The parcels of land in question are those under the name of Ramon Chiang (hereinafter referred to as

CHIANG ). He theorized that subject properties were sold to him by his wife, Merlinda Plana Chiang

(hereinafter referred to as MERLINDA), as evidenced by a Deed of Absolute Sale dated December 17,

1975, and were subsequently sold by CHIANG to the petitioner Serafin Modina (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, docketed as Civil Case No.

13935 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 the

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

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” where she was appointed as the administratix, being the widow of the deceased, her first

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

properties.

After due hearing, the Trial Court decided in favor of MERLINDA.

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

Dissatisfied therewith, petitioner found his way to this Court via the present Petition for Review under

Rule 45 seeking to set aside the assailed decision of the Court of Appeals.

21 | O B L I C O N F I N A L E X A M C A S E S D I G E S T

Issues of the Case:  (1) whether the sale of subject lots should be nullified; (2) whether petitioner

was not a purchaser in good faith

Ruling of the Court:

Anent the first issue, petitioner theorizes that the sale in question is null and void for being violative

of Article 1490 of the New Civil Code prohibiting sales between spouses.  Consequently, what is

applicable is Article 1412 supra on the principle of in pari delicto, which leaves both guilty parties

where they are, and keeps undisturbed the rights of third persons to whom the lots involved were

sold; petitioner stressed.

Petitioner anchors his submission on the following statements of the Trial Court which the Court of

Appeals upheld, to wit:

“Furthermore, under Art. 1490, husband and wife are prohibited to sell properties to each

other.  And where, as in this case, the sale is inexistent for lack of consideration, the

principle of in pari delicto non oritur actio does not apply.  (Vasquez vs Porta, 98 Phil

490).  (Emphasis ours) Thus, Art. 1490 provides:

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.

xxx      xxx      xxx”

The Court of Appeals, on the other hand, adopted the following findings a quo:  that 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.  In effect, MERLINDA can

recover the lots sold by her husband to petitioner MODINA.  However, the Court of Appeals ruled that

the sale was void for violating Article 1490 of the Civil Code, which prohibits sales between spouses.

The principle of in pari delicto non oritur actio denies all recovery to the guilty parties inter se.  It

applies to cases where the nullity arises from the illegality of the consideration or the purpose of the

contract. When two persons are equally at fault, the law does not relieve them.  The exception to this

general rule is when the principle is invoked with respect to inexistent contracts.

In the petition under consideration, the Trial Court found that subject Deed of Sale was a nullity for

lack of any consideration. This finding duly supported by evidence was affirmed by the Court of

Appeals.  Well-settled is the rule that this Court will not disturb such finding absent any evidence to

the contrary.

Under Article 1409 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.

Thus, petitioner’s insistence that MERLINDA cannot attack subject contract of sale as she was a guilty

party thereto is equally unavailing.

But the pivot of inquiry here is whether MERLINDA is barred by the principle of in pari delicto from

questioning subject Deed of Sale.

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.  Whether the said lots were ganancial

properties was never brought to the fore by the parties and it is too late to do so now.

Futhermore, if this line of argument be followed, the Trial Court could not have declared subject

contract as null and void because only the heirs and the creditors can question its nullity and not the

spouses themselves who executed the contract with full knowledge of the prohibition.

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.

As to the second issue, petitioner stresses that his title should have been respected since he is a

purchaser in good faith and for value.  The Court of Appeals, however, opined that he (petitioner) is

not a purchaser in good faith.  It found that there were circumstances known to MODINA which

rendered their transaction fraudulent under the attendant circumstances.

As a general rule, in a sale under the Torrens system, a void title cannot give rise to a valid title.   The

exception is when the sale of a person with a void title is to a third person who purchased it for value

and in good faith.

22 | O B L I C O N F I N A L E X A M C A S E S D I G E S T

A purchaser in good faith is 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 at the time of the

purchase or before he has notice of the claim or interest of some other person in the property.

In the case under scrutiny, petitioner cannot claim that he was a purchaser in good faith.  There are

circumstances which are indicia of bad faith on his part, to wit:  (1)  He asked his nephew, Placido

Matta, to investigate the origin of the property and the latter learned that the same formed part of

the properties of MERLINDA’s first husband; (2)  that the said sale was between the spouses; (3) that

when the property was inspected, MODINA met all the lessees who informed that subject lands

belong to MERLINDA and they had no knowledge that the same lots were sold to the husband.

It is a well-settled rule that a purchaser cannot close his eyes to facts which would put a reasonable

man upon his guard to make the necessary inquiries, and then claim that he acted in good faith.   His

mere refusal to believe that such defect exists, or his wilful closing of his eyes to the possibility of the

existence of a defect in his vendor’s title, will not make him an innocent purchaser for value, if it

afterwards develops that the title was in fact defective, and it appears that he had such notice of the

defect as would have led to its discovery had he acted with that measure of precaution which may

reasonably be required of a prudent man in a like situation.

Thus, petitioner cannot claim that the sale between him and MODINA falls under the exception

provided for by law.

WHEREFORE, the Petition is DENIED and the decision of the Court of Appeals, dated September 30,

1992, in CA-G.R. CV No. 26051 AFFIRMED.  No pronouncement as to costs.

SO ORDERED.Void Contracts: Domingo vs CA

By Em Moie in Exclusively for 1-Manresa · Edit Doc · Delete

EUGENIO DOMINGO, CRISPIN MANGABAT and SAMUEL CAPALUNGAN, petitioners, vs. HON.

COURT OF APPEALS, THE DIRECTOR OF LANDS, and FELIPE C. RIGONAN and CONCEPCION

R. RIGONAN, respondents.

FACTS:

Paulina Rigonan owned three (3) parcels of land, located at Batac and Espiritu, Ilocos Norte, including

the house and warehouse on one parcel.  She allegedly sold them to private respondents, the

spouses Felipe and Concepcion Rigonan, who claim to be her relatives.  In 1966, herein petitioners

Eugenio Domingo, Crispin Mangabat and Samuel 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.  

So respondents filed a complaint for reinvindicacion against petitioners in the Regional Trial Court of

Batac, Ilocos Norte,  alleging that they were the owners of the three parcels of land through the deed

of sale executed by Paulina Rigonan on January 28, 1965; that since then, they had been in

continuous possession of the subject properties and had introduced permanent improvements

thereon; and that petitioners entered the properties illegally, and they refused to leave them when

asked to do so.

Petitioners contested plaintiffs’ claims.  According to defendants, the alleged deed of absolute sale

was void for being spurious as well as lacking consideration. They said that Paulina Rigonan did not

sell her properties to anyone.  As her nearest surviving kin within the fifth degree of consanguinity,

they inherited the three lots and the permanent improvements thereon when Paulina died in

1966.  They said they had been in possession of the contested properties for more than 10

years.  Defendants asked for damages against plaintiffs.

On the respondents side there were 3 witnesses. Juan Franco, Notary Public Evaristo P. Tagatag and

Felipe Rigonan himself.

**Franco testified that he was a witness to the execution of the questioned deed of absolute

sale.  However, when cross-examined and shown the deed he stated that the deed was not the

document he signed as a witness, but rather it was the will and testament made by Paulina Rigonan.

**Atty. Tagatag testified that he personally prepared the deed, he saw Paulina Rigonan affix her

thumbprint on it and he signed it both as witness and notary public.  He further testified that he also

notarized Paulina’s last will and testament dated February 19, 1965.  The will mentioned the same

lots sold to private respondents.  When asked why the subject lots were still included in the last will

and testament, he could not explain.  Atty. Tagatag also mentioned that he registered the original

deed of absolute sale with the Register of Deeds.

**Plaintiff Felipe Rigonan claimed that he was Paulina’s close relative.  Their fathers were first

cousins.  However, he could not recall the name of Paulina’s grandfather.  His claim was disputed by

defendants, who lived with Paulina as their close kin.  He admitted the discrepancies between the

Register of Deeds’ copy of the deed and the copy in his possession.  But he attributed them to the

representative from the Office of the Register of Deeds who went to plaintiffs’ house after that Office

received a subpoena duces tecum.  According to him, the representative showed him blanks in the

deed and then the representative filled in the blanks by copying from his copy.

On the petitioner’s side were witnesses Jose Flores, the owner of the adjacent lot; Ruben Blanco, then

acting Registrar of Deeds in Ilocos Norte; and Zosima Domingo, wife of defendant Eugenio Domingo.

**Jose Flores testified that he knew defendants, herein petitioners, who had lived on the land with

Paulina Rigonan since he could remember and continued to live there even after Paulina’s death. He

said he did not receive any notice nor any offer to sell the lots from Paulina, contrary to what was

indicated in the deed of sale that the vendor had notified all the adjacent owners of the sale.   He

averred he had no knowledge of any sale between Paulina and private respondents.

23 | O B L I C O N F I N A L E X A M C A S E S D I G E S T

**Ruben Blanco, the acting Registrar of Deeds, testified that only the carbon copy, also called a

duplicate original, of the deed of sale was filed in his office, but he could not explain why this was so.

**Zosima Domingo testified that her husband, Eugenio Domingo, was Paulina’s nephew.  Paulina was

a first cousin of Eugenio’s father.  She also said that they lived with Paulina and her husband, Jose

Guerson, since 1956.  They took care of her, spent for her daily needs and medical expenses,

especially when she was hospitalized prior to her death.  She stated that Paulina was never badly in

need of money during her lifetime.

On March 23, 1994, the trial court rendered judgment in favor of defendants

Upon appeal, On August 29, 1996, the CA reversed the trial court’s decision

 

ISSUE: WON the private respondents sufficiently established the existence and due execution of the

Deed of Absolute and Irrevocable Sale of Real Property.

HELD: The SC’s finding is in the negative.  

First, note that private respondents as plaintiffs below presented only a carbon copy of the

deed.  When the Register of Deeds was subpoenaed to produce the deed, no original typewritten

deed but only a carbon copy was presented to the trial court.  Although the Court of Appeals calls it a

“duplicate original,” the deed contained filled in blanks and alterations.  None of the witnesses

directly testified to prove positively and convincingly Paulina’s execution of the original deed of

sale.  The carbon copy did not bear her signature, but only her alleged thumbprint.  Juan Franco

testified during the direct examination that he was an instrumental witness to the deed.  However,

when cross-examined and shown a copy of the subject deed, he retracted and said that said deed of

sale was not the document he signed as witness.He declared categorically he knew nothing about it.

Another witness, Efren Sibucao, whose testimony should have corroborated Atty. Tagatag’s, was not

presented and his affidavit was withdrawn from the court, leaving only Atty. Tagatag’s testimony,

which aside from being uncorroborated, was self-serving.

Secondly, there are irregularities abound regarding the execution and registration of the alleged deed

of sale.  On record, Atty. Tagatag testified that he himself registered the original deed with the

Register of Deeds. Yet, the original was nowhere to be found and none could be presented at the

trial.  Also, the carbon copy on file, which is allegedly a duplicate original, shows intercalations and

discrepancies when compared to purported copies in existence.  The intercalations were allegedly

due to blanks left unfilled by Atty. Tagatag at the time of the deed’s registration.   The blanks were

allegedly filled in much later by a representative of the Register of Deeds.  In addition, 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 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 that the alleged vendor was never asked to vacate the premises she had

purportedly sold.  Felipe testified that he had agreed to let Paulina stay in the house until her

death. In Alcos v. IAC, 162 SCRA 823 (1988), the buyer’s immediate possession and occupation of the

property was deemed corroborative of the truthfulness and authenticity of the deed of sale.  The

alleged vendor’s continued possession of the property in this case throws an inverse implication, 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 subsequently executed by Paulina and

notarized by the same notary public, Atty. Tagatag. These circumstances, taken together, militate

against unguarded acceptance of the due execution and genuineness of the alleged deed of sale.

Thirdly, the element of consideration for the sale.  The price allegedly paid by private respondents for

nine (9) parcels, including the three parcels in dispute, a house and a warehouse, raises further

questions.  Consideration is the why of a contract, the essential reason which moves the contracting

parties to enter into the contract. On record, there is unrebutted testimony that Paulina as landowner

was financially well off.  She loaned money to several people. We see no apparent and compelling

reason for her to sell the subject parcels of land with a house and warehouse at a meager price of

P850 only.

In Rongavilla vs. CA, 294 SCRA 289 (1998), private respondents were in their advanced years, and

were not in dire need of money, except for a small amount of P2,000 which they said were loaned by

petitioners for the repair of their house’s roof.  We ruled against petitioners, and declared that there

was no valid sale because of lack of consideration.

In the present case, at the time of the execution of the alleged contract, Paulina Rigonan was already

of advanced age and senile.  She died an octogenarian on March 20, 1966, barely over a year when

the deed was allegedly executed on January 28, 1965, but before copies of the deed were entered in

the registry allegedly on May 16 and June 10, 1966.  The general rule is that a person is not

incompetent to contract merely because of advanced years or by reason of physical

infirmities. However, when such age or infirmities have impaired the mental faculties so as to prevent

the person from properly, intelligently, and firmly protecting her property rights then she is

undeniably incapacitated.  The unrebutted testimony of Zosima Domingo shows that at the time of

the alleged execution of the deed, Paulina was already incapacitated physically and mentally.  She

narrated that Paulina played with her waste and urinated in bed.  Given these circumstances, there is

in our view sufficient reason to seriously doubt that she consented to the sale of and the price for her

parcels of land.  Moreover, there is no receipt to show that said price was paid to and received by her.

The whole evidence on record does not show clearly that the fictitious P850.00 consideration was

ever delivered to the vendor.  Undisputably, the P850.00 consideration for the nine (9) parcels of land

24 | O B L I C O N F I N A L E X A M C A S E S D I G E S T

including the house and bodega is grossly and shockingly inadequate, and the sale is null and void ab

initio.

1. CASAN

Void Contracts: SPOUSES CLARO AND NIDA BAUTISTA vs. BERLINA SILVA

By Joy Orena in Exclusively for 1-Manresa · Edit Doc · Delete

SPOUSES CLARO AND NIDA BAUTISTA vs. BERLINA SILVA

 

FACTS:

Transfer Certificate of Title No. B-37189 over a parcel of land, containing an area of 216 square

meters, more or less, situated in Barrio of Parada, Valenzuela, Metro Manila, was registered in the

names of Spouses Berlina F. Silva and Pedro M. Silva on August 14, 1980.

On March 3, 1988, Pedro M. Silva, for himself and as attorney-in-fact of his wife Berlina F. Silva, thru a

Special Power of Attorney purportedly executed by Berlina F. Silva in his favor, signed and executed a

Deed of Absolute Sale over the said parcel of land in favor of defendants-spouses Claro Bautista and

Nida Bautista.

As a consequence, Transfer Certificate of Title No. 37189 was cancelled and in lieu thereof, Transfer

Certificate of Title No. V-2765 was issued in the names of Spouses Claro Bautista and Nida Bautista.

Based on the evidence presented, the RTC also found that the signature appearing on the Special

Power of Attorney as that of Berlina Silva is a forgery, and that consequently the Deed of Absolute

Sale executed by Pedro in favor of Spouses Bautista is not authorized by Berlina.

The RTC rendered judgment: declaring the Deed of Absolute Sale executed by Pedro M. Silva, for

himself and as attorney-in-fact of Berlina F. Silva, in favor of defendants-spouses Claro Bautista and

Nida Bautista over the parcel of land, null and void; ordering defendants to reconvey the property

covered by the said Transfer Certificate of Title No. V-2765 together with the improvements thereon

to the plaintiff; and condemning the defendants to pay the plaintiff the sum of P5,000.00 in the

concept of reasonable attorney's fees and the costs of suit.

Spouses Bautista filed an appeal with the CA which affirmed in toto the RTC decision; and, in a

Resolution, denied the Motion for Reconsideration.

Hence, the herein petition filed by Spouses Bautista praying that the CA Decision and Resolution be

annulled and set aside.

ISSUES:

Whether Hermes Dorado, in his capacity as attorney-in-fact, has no legal authority to file action

against spouses petitioners.

Whether or Not petitioners are considered as purchasers in good faith.

Whether or Not petitioners may retain the portion of Pedro Silva in the subject property.

RULING:

First Issue:

True, there was no written authority for Dorado to represent respondent in the filing of her

Complaint. However, no written authorization of Dorado was needed because the

Complaint was actually filed by respondent, and not merely through Dorado as her

attorney-in-fact.

In reality, respondent acted for and by herself, and not through any representative, when

she filed the Complaint. Therefore, respondent being the real party in interest, by virtue of the

then prevailing Articles 166 and 173 of the Civil Code, the Complaint she filed sufficiently stated a

cause of action.

The sufficiency of the Complaint was not affected by the inclusion of Dorado as party representative

for this was an obvious error which, under Section 11 of Rule 3, is not a ground for dismissal, as it

may be corrected by the court, on its own initiative and at any stage of the action, by dropping such

party from the complaint.

Second Issue:

There is no merit to petitioners' claim that they are purchasers in good faith. 

That the SPA is a forgery is a finding of the RTC and the CA on a question of fact. The same

is conclusive upon the Court, especially as it is based on the expert opinion of the NBI which

constitutes more than clear, positive and convincing evidence that respondent did not sign the SPA,

and on the uncontroverted Certification of Dorado that respondent was in Germany working as a

nurse when the SPA was purportedly executed in 1987.

The SPA being a forgery, it did not vest in Pedro any authority to alienate the subject

property without the consent of respondent. Absent such marital consent, the deed of

sale was a nullity.

But then petitioners disclaim any participation in the forgery of the SPA or in the unauthorized sale of

the subject property. They are adamant that even with their knowledge that respondent was in

Germany at the time of the sale, they acted in good faith when they bought the subject property from

25 | O B L I C O N F I N A L E X A M C A S E S D I G E S T

Pedro alone because the latter was equipped with a SPA which contains a notarial acknowledgment

that the same is valid and authentic.  They invoke the status of buyers in good faith whose registered

title in the property is already indefeasible and against which the remedy of reconveyance is no

longer available. In the alternative, petitioners offer that should respondent be declared entitled to

reconveyance, let it affect her portion only but not that of Pedro.

A holder of registered title may invoke the status of a buyer for value in good faith as a

defense against any action questioning his title. Such status, however, is never presumed but

must be proven by the person invoking it.

A buyer for value in good faith is one who buys property of another, without notice that

some other person has a right to, or interest in, such property and pays 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 persons in the property. He buys the property with the well-founded belief that

the person from whom he receives the thing had title to the property and capacity to convey it.

To prove good faith, a buyer of registered and titled land 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 beyond the four corners of the title. Such degree of proof of good faith,

however, is sufficient only when the following conditions concur: first, the seller is the

registered owner of the land; second, the latter is in possession thereof;  and third, at the

time of the sale, the buyer was not aware of any claim or interest of some other person in

the property, or of any defect or restriction in the title of the seller or in his capacity to

convey title to the property.

Absent one or two of the foregoing conditions, then the law itself puts the buyer on notice and obliges

the latter to exercise a higher degree of diligence by scrutinizing the certificate of title and examining

all factual circumstances in order to determine the seller's title and capacity to transfer any interest

in the property. Under such circumstance, it is no longer sufficient for said buyer to merely

show that he relied on the face of the title; he must now also show that he exercised

reasonable precaution by inquiring beyond the title. Failure to exercise such degree of

precaution makes him a buyer in bad faith.

In the present case, petitioners were dealing with a seller (Pedro) who had title to and

possession of the land but, as indicated on the face of his title, whose capacity to sell was

restricted, in that the marital consent of respondent is required before he could convey

the property. To prove good faith then, petitioners must show that they inquired not only

into the title of Pedro but also into his capacity to sell.

According to 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. Lorenzo 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 advanced payment of Php55,000.00 to Pedro.

Essentially, petitioners relied on the SPA, specifically on its notarial acknowledgment

which states that respondent appeared before the notary public and acknowledged

having executed the SPA in favor of Pedro.

The RTC and CA, however, found such inquiry superficial. They expected of petitioners an

investigation not only into the whereabouts of respondent at the time of the execution of the SPA but

also into the genuineness of the signature appearing on it.

To what extent, therefore, should an inquiry into a notarized special power of attorney go

in order for one to qualify as a buyer for value in good faith?

No automatic correlation exists between the state of forgery of a document and the bad faith of the

buyer who relies on it. A test has to be done whether the buyer had a choice between

knowing the forgery and finding it out, or he had no such choice at all.

When the document under scrutiny is a special power of attorney that is duly notarized,

we know it to be a public document where the notarial acknowledgment is prima facie

evidence of the fact of its due execution. A buyer presented with such a document would

have no choice between knowing and finding out whether a forger lurks beneath the

signature on it. The notarial acknowledgment has removed that choice from him and replaced it

with a presumption sanctioned by law that the affiant appeared before the notary public and

acknowledged that he executed the document, understood its import and signed it. In reality, he is

deprived of such choice not because he is incapable of knowing and finding out but because, under

our notarial system, he has been given the luxury of merely relying on the presumption of regularity

of a duly notarized SPA. And he cannot be faulted for that because it is precisely that fiction of

regularity which holds together commercial transactions across borders and time.

In sum, all things being equal, a person dealing with a seller who has possession and title to

the property but whose capacity to sell is restricted, qualifies as a buyer in good faith if

he proves that he inquired into the title of the seller as well as into the latter's capacity to

sell; and that in his inquiry, he relied on the notarial acknowledgment found in the seller's

duly notarized special power of attorney. He need not prove anything more 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.

In Domingo v. Reed,we found that the special power of attorney relied upon by the buyers contained

a defective notarial acknowledgment in that it stated there that only the agent-wife signed the

document before the notary public while the principal-husband did not. Such flaw rendered the

notarial acknowledgment of no effect and reduced the special power of attorney into a private

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document. We declared the buyer who relied on the private special power of attorney a buyer in bad

faith.

In Lao v. Villones-Lao, and Estacio v. Jaranilla, we found that the buyers knew of circumstances

extrinsic to the special power of attorney which put in question the actual execution of said

document. In Domingo Lao, the buyer knew that the agent-wife was estranged from the principal-

husband but was living within the same city. In the Estacio case, we found admissions by the buyers

that they knew that at the time of the purported execution of the special power of attorney, the

alleged principal was not in the Philippines. In both cases we held that the buyers were not in good

faith, not because we found any outward defect in the notarial acknowledgment of the special powers

of attorney, but because the latter had actual notice of facts that should have put them on deeper

inquiry into the capacity to sell of the seller.

In the present case, petitioners knew that Berlina was in Germany at the time they were

buying the property and the SPA relied upon by petitioners has a defective notarial

acknowledgment. The SPA was a mere photocopy and we are not convinced that there

ever was an original copy of said SPA as it was only this photocopy that was testified to

by petitioner Nida Bautista and offered into evidence by her counsel. We emphasize this

fact because it was actually this photocopy that was relied upon by petitioners before

they entered into the deed of sale with Pedro. As admitted to by petitioner Nida Bautista,

upon inspection of the photocopy of the SPA, they gave Pedro an advanced payment of

Php55,000.00; this signifies that, without further investigation on the SPA, petitioners

had agreed to buy the subject property from Pedro.

But then said photocopy of the SPA contains no notarial seal. A notarial seal is a mark,

image or impression on a document which would indicate that the notary public has

officially signed it. There being no notarial seal, the signature of the notary public on the

notarial certificate was therefore incomplete. The notarial certificate being deficient, it

was as if the notarial acknowledgment was unsigned. The photocopy of the SPA has no

notarial acknowledgment to speak of. It was a mere private document which petitioners

cannot foist as a banner of good faith.

All told, it was not sufficient evidence 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. 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 or from March 2 to 4, 1988 to enter into the deed of sale,

notwithstanding the restriction on the capacity to sell of Pedro. In no way then may

petitioners qualify as buyers for value in good faith.

Third Issue:

That said, we come to the third issue on whether petitioners may retain the portion of Pedro Silva in

the subject property. Certainly not. It is well-settled that the nullity of the sale of conjugal

property contracted by the husband without the marital consent of the wife affects the

entire property, not just the share of the wife.

2. REYES

Joaquin Quimpo, Sr., (substituted by his Heirs) Sr.,

vs. Consuelo Abad Vda. de Beltran, et al.

G.R. No. 160956, February 13, 2008

 

FACTS:

This is a Petition for Review on Certiorari (Rule 45: Appeal by certiorari to the SC).

Eustaquia Perfecto-Abad (Eustaquia) was the owner of several parcels of land in Goa, Camarines Sur,

described as follows:

Parcel I - Residential land situated at Abucayan, Goa, Camarines Sur;

 

Parcel II – Coconut land situated at Abucayan, Goa, Camarines Sur;

 

Parcel III – Residential land situated at San Jose Street, Goa, Camarines Sur;

 

Parcel IV – Abaca and coconut land situated at Abucayan, Goa, Camarines Sur.

Eustaquia died intestate in 1948 leaving these parcels of land to her grandchild and great

grandchildren, namely, Joaquin Quimpo and respondents Consuelo, Ireneo, Danilo, Marites, Anita and

Helen, all surnamed Abad.

In 1966, Joaquin and respondents undertook an oral partition of parcel III  and parcel IV.

Half of the properties was given to Joaquin and the other half to the respondents. However, no

document of partition was executed, because Joaquin refused to execute a deed. Consuelo and Ireneo

27 | O B L I C O N F I N A L E X A M C A S E S D I G E S T

occupied their respective shares in the San Jose property, and installed several tenants over their

share in parcel IV. Joaquin, on the other hand, became the administrator of the remaining undivided

properties and of the shares of respondents Danilo, Marites, Anita and Helen, who were still minors at

that time.

In 1989, Danilo, Marites, Anita and Helen wanted to take possession of the portions allotted to them,

but Joaquin prevented them from occupying the same. Joaquin also refused to heed respondents’

demand for partition of parcels I and II, prompting respondents to file a complaint for judicial partition

and/or recovery of possession with accounting and damages with the RTC of Camarines Sur.

Joaquin denied the material allegations. He asserted absolute ownership over parcels III

and IV, 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 Consuelo’s

occupation of the portion of the San Jose property was by mere tolerance.

During the pendency of the case, Joaquin died and was substituted by his wife and children.

RTC RULING:

On December 12, 1996, the RTC rendered a Decision declared the respondents as co-owners of all

the properties left by Eustaquia.

It rejected Joaquin’s claim of absolute ownership over parcels III and IV, and declared void

the purported deeds of sale executed by Eustaquia for lack of consideration and consent.

The court 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.

RTC also sustained the oral partition among the heirs in 1966. According to the trial court, the

possession and occupation of land by respondents Consuelo and Ireneo, and Joaquin’s consent 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

over parcel IV.

RTC ordered, among others, the execution of their (petitioner and respondents) written agreement of

partition with respect to parcel Nos. III and IV , and for them to execute an agreement of partition

with respect to parcel Nos. I and II.

CA RULING:

CA affirmed the RTC ruling. It 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.

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 have not expressly or

impliedly repudiated (renounced) 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.

 

ISSUES:

1. WON CA erred in ruling that the petitioner did not acquire ownership over the subject parcel of land

through the deed of absolute sale. (NO)

2. WON there was an oral partition, and if so is whether it is valid. (YES)

3. WON Co-ownership exists among petitioners and respondents over the subject parcel of lands. (YES)

 

SC RULING:

The Quimpos insist on the validity of the deeds of sale between Joaquin and Eustaquia. They assail

the probative value and weight given by the RTC and the CA in favor of the respondents’ pieces of

evidence while refusing to give credence or value to the documents they presented. Specifically, they

contend that the notarized deeds of sale and the tax declarations should have adequately established

Joaquin’s ownership of parcels III and IV.

The contention has no merit. Well-entrenched is the rule that the Supreme Court’s role in a petition

under Rule 45 is limited to reviewing or reversing errors of law allegedly committed by the appellate

court. Factual findings of the trial court, especially when affirmed by the Court of Appeals, are

conclusive on the parties. Since such findings are generally not reviewable, this Court is not duty-

bound to analyze and weigh all over again the evidence already considered in the proceedings below,

unless the factual findings complained of are devoid of support from the evidence on record or the

assailed judgment is based on a misapprehension of facts.

Petitioners fail to convince us that the CA committed reversible error in affirming the trial court and in

giving no weight to the pieces of evidence they presented.

The stated consideration for the sale are P5,000 and P6,000, respectively, an amount

which was 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

28 | O B L I C O N F I N A L E X A M C A S E S D I G E S T

was the one supporting him; that when Eustaquia died 2 years later, Joaquin was not able to continue

his studies. Except for the incredible and unpersuasive testimony of Joaquin’s daughter, Adelia

Magsino, 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. Court of Appeals, reiterated in Cruz v. Bancom Finance Corp, we 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. The RTC and CA cannot,

therefore, be faulted for not giving credence to the deeds of sale in favor of Joaquin.

Petitioners also presented Tax Declarations to substantiate Joaquin’s claim of absolute

dominion over parcels III and IV. But we note that 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 weaken 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. The CA, therefore, correctly found this proof inadequate to establish Joaquin’s claim of

absolute dominion.

 

ORAL PARTITION ISSUE

For 43 years, Consuelo and Ireneo occupied their portions of the San Jose property and Joaquin never

disturbed their possession. They also installed tenants in parcel IV, and Joaquin did not prevent them

from doing so, nor did he assert his ownership over the same. These proves the fact that there was

indeed an oral partition of parcels III and IV.

In Maglucot-aw v. Maglucot, we held, viz.:

[P]artition 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, we 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 in proper cases, 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 thereunder. 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 also 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, or otherwise

recognizing the existence of the partition.

A number of cases have specifically applied the doctrine of part performance, or have stated that 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 error in sustaining the oral partition over parcels III and IV and in

invalidating the deeds of sale between Eustaquia and Joaquin.

CO-OWNERSHIP ISSUE:

Consuelo was the grandchild of Eustaquia, while respondents Danilo, Helen, Marites, Anita and also

Joaquin Quimpo were Eustaquia’s great grandchildren. As such, respondents can rightfully ask for the

confirmation of the oral partition over parcels III and IV, and the partition of parcels I and II.

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.

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Alinas vs. Alinas (Void Contracts)- Marxzxz Yap

By Marxzxz Yap in Exclusively for 1-Manresa · Edit Doc · Delete

Alinas vs. Alinas (Void Contracts)

 

Spouses Onesiforo and Rosario Alinas (petitioners) separated sometime in 1982, with Rosario moving

to Pagadian City and Onesiforo moving to Manila.  They left behind two lots identified as Lot 896-B-9-

A with a bodega standing on it and Lot 896-B-9-B with petitioners' house.  These two lots are the

subject of the present petition.

Petitioner Onesiforo Alinas (Onesiforo) and respondent Victor Alinas (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 896-B-9-A with the bodega was mortgaged as

security for the loan obtained from the RBO, while Lot 896-B-9-B with the house was mortgaged to

the SSS. Onesiforo alleges that he left blank papers with his signature on them to facilitate the

administration of said properties.

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

respondent spouses.

Records show that after Lot 896-B-9-A was extra-judicially foreclosed, Transfer Certificate of Title

(TCT) No. T-11853 covering said property was issued in the name of mortgagee RBO on November

13, 1987.  On May 2, 1988, the duly authorized representative of RBO executed a Deed of Installment

Sale of Bank's Acquired Assets conveying Lot 896-B-9-A to respondent spouses.  RBO's TCT over Lot

896-B-9-A was then cancelled and on February 22, 1989, TCT No. T-12664 covering said lot was

issued in the name of respondent spouses.

Lot 896-B-9-B was also foreclosed by the SSS and on November 17, 1986, the Ex-Oficio City Sheriff of

Ozamis City issued a Certificate of Sale over said property in favor of the SSS. However, pursuant to a

Special Power of Attorney signed by Onesiforo in favor of Victor, dated March 10, 1989, the latter was

able to redeem, on the same date, Lot 896-B-9-B from the SSS for the sum of P111,110.09.  On June

19, 1989, a Certificate of Redemption was issued by the SSS.

Onesiforo's signature also appears in an Absolute Deed of Sale likewise dated March 10, 1989, selling

Lot 896-B-9-B to respondent spouses.  The records also show a notarized document dated March 10,

1989 and captioned Agreement whereby petitioner Onesiforo acknowledged that his brother Victor

used his own money to redeem Lot 896-B-9-B from the SSS and, thus, Victor became the owner of

said lot.  In the same Agreeement, petitioner Onesiforo waived whatever rights, claims, and interests

he or his heirs, successors and assigns have or may have over the subject property.   On March 15,

1993, by virtue of said documents, TCT No. 17394 covering Lot 896-B-9-B was issued in the name of

respondent spouses.

On June 25, 1993, petitioners filed with the Regional Trial Court (RTC) of Ozamis City a complaint for

recovery of possession and ownership of their conjugal properties with damages against respondent

spouses.

 

The RTC ruled that there was a valid acquisition of Lot 896-B-9-A but the sale of Lot 896-B-9-B by

Onesiforo is null and void for the sale was without the consent of the wife. On appeal, The CA affirmed

the validity of acquisition with regard to Lot 896-B-9-A but modified RTC’s ruling with the Lot 896-B-9-

B. The CA ruled that the sale of Onesiforo's one-half share in the subject property to respondent

spouses is valid.

 

Issue: WON the sale of Lot 896-B-9-B made by Onesiforo alone to respondent spouses is valid. NO!

The sale is null and void for it was made by Onesiforo without the consent of his wife.

Held:

The Court finds it patently erroneous for the CA to have applied the principle of equity in sustaining

the validity of the sale of Onesiforo's one-half share in the subject property to respondent spouses.

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.

The CA ruling completely deviated from the clear dictate of Article 124 of the Family Code which

provides:

Art. 124. The administration and enjoyment of the conjugal partnership property shall

belong to both spouses jointly. 

In the event that one spouse is incapacitated or otherwise unable to participate in the administration

of the conjugal properties, the other spouse may assume sole powers of administration. These powers

do not include the powers of disposition or encumbrance which must have the authority of the court

30 | O B L I C O N F I N A L E X A M C A S E S D I G E S T

or the written consent of the other spouse.  In the absence of such authority or consent the

disposition or encumbrance shall be void.  x x x  (Underscoring and emphasis supplied)

In Homeowners Savings & Loan Bank v. Dailo, the Court categorically stated thus:

In Guiang v. Court of Appeals, it was held that the sale of a conjugal property requires the consent of

both the husband and wife. In applying Article 124 of the Family Code, this Court declared that the

absence of the consent of one renders the entire sale null and void, including the portion

of the conjugal property pertaining to the husband who contracted the sale.   x x x

x x x By express provision of Article 124 of the Family Code, in the absence of (court) authority or

written consent of the other spouse, any disposition or encumbrance of the conjugal property shall be

void.

Thus, pursuant to Article 124 of the Family Code and jurisprudence, the sale of petitioners' conjugal

property made by petitioner Onesiforo alone is void in its entirety.

It is true that in a number of cases, this Court abstained from applying the literal import of a

particular provision of law if doing so would lead to unjust, unfair and absurd results.

In the present case, the Court does not see how applying Article 124 of the Family Code would lead to

injustice or absurdity.  It should be noted that respondent spouses were well aware that Lot 896-B-9-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 fact that Onesiforo had to execute two

documents, namely: the Absolute Deed of Sale dated March 10, 1989 and a notarized Agreement

likewise dated March 10, 1989, reveals that they had full knowledge of the severe infirmities of the

sale.  As held in Heirs of Aguilar-Reyes v. Spouses Mijares, "a purchaser cannot close his eyes to facts

which should put a reasonable man on his guard and still claim he acted in good faith."  Such being

the case, no injustice is being foisted on respondent spouses as they risked transacting with

Onesiforo alone despite their knowledge that the subject property is a conjugal property.

Verily, the sale of Lot 896-B-9-B to respondent spouses is entirely null and void.

 

 

Nunga vs Nunga

By Aizza Jopson in Exclusively for 1-Manresa · Edit Doc · Delete

FRANCISCO R. NUNGA, JR. and VICTOR D. NUNGA, petitioners, vs. FRANCISCO N. NUNGA

III, respondent.

 

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. 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.

 

Quorum having been established at the meeting, the stockholders proceeded with the election of the

RBA Board of Directors to serve for the fiscal year 1996. Francisco III was voted the Chairman of the

Board; with Ma. Elena Rueda, Ma. Rosario Elena Nacario, Cecilia Viray and Dwight Nunga, the

Members. In the same meeting, stockholder Jesus Gonzalez (Gonzalez) made known his intention to

sell his shareholdings.

 

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 Sell5 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 letter7

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.8 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

31 | O B L I C O N F I N A L E X A M C A S E S D I G E S T

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 using a BPI (Bank of the Philippine Islands) Family Bank Check No. 0347505

issued in favor of Gonzalez. 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.

 

At the same time the afore-quoted Deed was executed, Francisco III paid in full the agreed purchase

price of P300,000.00 using a BPI (Bank of the Philippine Islands) Family Bank Check No. 0347505

issued in favor of Gonzalez. An acknowledgment receipt signed by Gonzalez and witnessed by his

wife Cristina D. Gonzalez evidenced the payment.10 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.

 

Issue:

 

WHETHER OR NOT THE SALE OF THE SHARES OF STOCK OF GONZALEZ TO FRANCISCO JR., NULL AND

VOID AB INITIO ON THE BASIS OF THE ALLEGED DISQUALIFICATION OF FRANCISCO JR. UNDER

REPUBLIC ACT NO. 7353.

 

Ruling:

 

Francisco Jr. and Victor contend that the consummated sale of the RBA shares of stock by Gonzalez to

Francisco Jr. gives the latter a superior right over the same, since the transaction complied with all

the elements of a valid sale. Contrary to the ruling of the Court of Appeals, Francisco Jr. and Victor

claim that there was no provision in Republic Act No. 7353, prior to its amendment, which explicitly

prohibited any transfer of shares to individuals who were not Philippine citizens, or which declared

such a transfer void. Hence, there was an implied recognition by the legislature that to declare the

nullity of such acts would be more disadvantageous and harmful to the purposes of the law.

Moreover, Francisco Jr. and Victor contend that the passage of Republic Act No. 8179, An Act to

Further Liberalize Foreign Investment, cured whatever legal infirmity there may have been in the

purchase by Francisco Jr. of the RBA shares of stock from Gonzalez. As Republic Act No. 8179

expressly creates and declares for the first time a substantive right, then it may be given retroactive

effect. The Deed of Assignment between Francisco III and Gonzalez did not confer upon Francisco III a

vested interest that could be impaired by the retroactive application of Republic Act No. 8179. The

Deed was not only executed later in time, but the check issued for its payment was also never

encashed. There was, therefore, a total absence of consideration, making the said contract between

Francisco III and Gonzalez inexistent.

 

The Court finds the Petition devoid of merit.

 

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. (Emphasis ours.)

32 | O B L I C O N F I N A L E X A M C A S E S D I G E S T

 

Otherwise stated, the afore-quoted provision categorically provides that only citizens of the

Philippines can own and hold, directly or indirectly, the capital stock of a rural bank, subject only to

the exception also clearly stated in the same provision. This was the very interpretation of Section 4

of Republic Act No. 7353 made by this Court in Bulos, Jr. v. Yasuma, on the basis of which the Court

disqualified therein respondent Yasuma, a foreigner, from owning capital stock in the Rural Bank of

Parañaque. In the instant case, 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.

 

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. 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. 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.

 

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.

 

It would not matter that Gonzalez executed the Contract to Sell in favor of Francisco Jr. prior to the

Deed of Assignment in favor of Francisco III. As established in the previous discussion, 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.

Joaquin & Emma Villegas vs. Rural Bank of Tanjay Inc. G.R. 161407 June 5, 2009

 

One who seeks justice and equity must come to court with clean hands. This is the principle applied in

this case.

 

RTC’s decision:

The complaint is ordered dismissed, considering that petitioners failed to prove by preponderance of

evidence, and ordered to pay respondent the sum of 3,000 as attorney’s fees and to pay costs

without pronouncement as to counterclaim.

 

CA’s decision:

Affirmed with modification. Thus, ordering respondent to reimburse petitioners their downpayment of

250,000 and deleting the award of attorney’s fees to respondent.

 

FACTS:

 

Sometime in June 1982, the case stemmed from a P350,000 agricultural loan obtained by the spouses

from a Rural Bank (the bank) secured by a real estate mortgage on their residential house and 5,229

square meters lot.  

In order that the bank could grant and approve the loan and mortgage contracts pursuant to R.A. 720

or the Rural Bank Act, the loan was made to appear as several sugar crop loans not exceeding

P50,000 each covered by Promissory Notes even if the spouses never really planted sugar cane on

any agricultural land because their mortgaged land was a residential lot.

When the spouses failed to pay the loan upon maturity, the bank foreclosed the property with the

bank emerging as the highest bidder in the foreclosure sale.

Consequently the sheriff executed a certificate of sale in the bank’s favor which was registered with

the Register of Deeds.

The spouses however likewise failed to redeem the property within the one year redemption period.

Nevertheless, in May 1987, the bank entered into an agreement with Joaquin, through his Atty.-in-fact

entitled “Promise to Sell” wherein the bank as Vendor promised to sell, transfer and convey unto

Joaquin as Vendee all its rights and interest in the said parcel of land for and in consideration of

33 | O B L I C O N F I N A L E X A M C A S E S D I G E S T

P713,312.72 payable by a down-payment of P250,000 and the balance on yearly installment for five

years with interest at the prevailing rate. In case of 90 days delay in payment of the yearly

installments, the sale will become null and void and of no further force and effect but all payments

made shall be returned less interest.

After paying the P250,000 down payment however, the spouses failed to pay the first yearly

installment prompting the bank to consolidate title over the property.

So the TCT of the spouses was canceled and a new TCT was issued in favor of the bank which likewise

took possession of the property, on November 8, 1989.

On January 15, 1990, this impelled the spouses to file an action in court for declaration of nullity of

the loan and mortgage contracts, recovery of possession, accounting and damages.

They alleged that the said contracts were merely simulated and made to appear as sugar crop loans

and therefore null and void.

In resisting the complaint, respondent bank averred that petitioners have absolutely no cause of

action against it, and that the complaint was filed only to force it to allow petitioners to reacquire the

foreclosed properties under conditions unilaterally favorable to them.

 

ISSUE: WON petitioners are entitled to the reliefs prayed for, may recover possession of the

mortgaged properties. - NO

 

HELD:

 

Under Article 1345 and 1346 of the Civil Code, simulation of contract may be absolute, when the

parties do not intend to be bound at all; or relative, when the parties conceal their true agreement.

An absolutely simulated contract is null and void while a relatively simulated contract binds the

parties as long as it does not prejudice third persons and is not intended for any purpose contrary to

law, moral, customs, public order or public policy.

In this case, it is obvious that the sugar crop loans were relatively simulated contract and that both

parties intended to be bound thereby.

There are two juridical acts in relative simulation—the ostensible and hidden acts.

 The ostensible act is the contract that the parties pretend to have executed while the hidden act is

the true agreement between the parties.

This true agreement may be binding upon the parties if the concealed act is lawful and the essential

requisites of a valid contract are present.

The loan and mortgage here made to appear as sugar crop loans have all the essential requisites of a

contract, but the purpose thereof is illicit as they are intended to circumvent the Rural Bank Act

requirement in procuring loans.

Consequently, while the parties intend to be bound thereby, the agreement is void and inexistent

because its purpose is contrary to law, Article 1409 (1) of the Civil Code.

The fault for the nullity of the contracts does not lie on the bank alone as the spouses themselves are

aware that they are simulated, voluntarily entered into them, and eagerly accepted the proceeds of

the sugar crop loans but never planted sugarcane on any property.

Accordingly, both are at fault or in pari delicto.

So neither party may recover what he has given by virtue of the contract or demand the performance

of the other party’s undertaking, Article 1412 (1) of the Civil Code.

While the Promise to Sell ultimately allows the spouses to recover the property under the void loans,

said contract is a separate and independent contract from that of the void loan and mortgage.

It did not purport to ratify the said void contract because void contracts cannot be ratified.

It did not grant the relief of recovering the property prayed for by the spouses.

They are only entitled to reimbursement of the P250,000 down payment as stipulated in said Promise

to Sell.

CAMPOS VS BEUNVENIDA (G.R. No. 175994 : September 29, 2010)

JESUS CAMPOS AND ROSEMARIE CAMPOS-BAUTISTA

Vs.

NENITA BUENVENIDA PASTRANA, ROGER BUENVENIDA, SONIA BUENVENIDA, TEDDY

BUENVENIDA, VICTOR BUENVENIDA, HARRY BUENVENIDA, MILDRED BUENVENIDA.

MANOLITO BUENVENIDA AND DAISY BUENVENIDA, REPRESENTED BY THEIR ATTORNEY'-IN-

FACT, CARLITO BUENVENIDA

Facts:

• This case happen when a creditor of the securing a judgment against a debtor, fids that

the debtor had transferred all his properties to satisfy the obligations to the creditor.

• This is the 3rd case between the same parties.

1st Case: (Agrarian Case)

• The first case arose from the refusal of CARLITO CAMPOS(father of the petitioners) to

surrender the possession of a fish pond he leased from SALVASION BUENVENIDA

(respondent’s Mother) despite the expiration of the contract of lease in 1980.

34 | O B L I C O N F I N A L E X A M C A S E S D I G E S T

• Carlito alleged that he was an agricultural lessee.

• RTC of Roxas City found that Carlito was not an agricultural tenant. He then appealed to

the CA but was unsuccessful.

2Nd Case (Possession case)

• While the appeal in the agrarian case was pendig before the CA, the herein respondents

filed he second case against Carlito for RECOVERY OF POSSESSION AND DAMAGES WITH

PRELIMINARY MANDATORY INJUNCTION involving the same fish pond.

• RTC rendered a decision in favor of the Buenvenidas. The decision became final and

executory and a writ of execution was issued on Feb 7, 1995. Subsequently on September

09, 1995 an allias writ of execution was also issued. BOTH were returned unsatisfied.

(during the pendency of the Agrarian Case, as well as prior to the filing of the possession

Case CArlito was the registered owner of the 2 Properties: (1) The residential Lots; (2) An

Agricultural Lot.

o But when the respondent were about to levy these properties to satisfy the judgment in

the possession case, they were discovered that the spouses Carlito and Margarita

transferred these lots to their children Rosemarie and Jesus. Herein by virtue of Deed of

Absolute Sale dated October 18, 1985 and November 2, 1988

3rd Case: (Nullity of Sale case)

• On February 18, 1997, respondents instituted the 3rd case.

• The respondents alleged that the contracts of sale between the spouse Campos and

petitioners were SIMULATED for the sole purpose of evading the levy in satisfaction of a

money judgment that might be rendered in ht possession Case.

• In their answer with counterclaim, spouses Campos and petitioners averred that Rosemarie

and Jesus acquired the lots in question in good faith and for the value because they were

sold to them befre they had any notice of the claims or interest of other persons there over.

• Upon review of the evidence presented, the CA found that:

o 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. 

o Likewise noted that the zonal value of the subject properties were much higher than the

value for which they were actually sold. 

o Despite the sales, spouses Campos retained possession of the properties in question.

o 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. 

• On these bases, the CA ruled that the assailed contracts of sale were indeed absolutely

simulated transactions and declared the same to be void ab initio.

• The CA ordered to cancel Transfer Certificates of Title Nos. T-26092 and T-26093 in the

name of Rosemarie Campos, and Transfer Certificates of Title Nos. T-23248 and 23249 in the

name of Jesus Campos and restore said titles in the name of the previous owner, Carlito

Campos.

ISSUE:

1.) The CA committed an error of law in applying article 409, civil Code, Instead of article

1381 (3), Civil Code, and in speculating that a cause of action supposed sale in Fraud of

Creditors exists despite non – exhaustion of remedies to enforce the judgment in civil case

no. V-5417.

2.) The CA committed an error of law overlooking the cause of action had prescribed , the

complaint having been filed after & years or only on 14 OCTOBER 1997, from the time the

titles were issued in 1990.

3.) The CA erroneously anchored its impugned judgment on misapprehension of the facts

that the sales were antedated, hence SIMULATED despite glaring absence of evidence in

support thereof.

4.) The CA committed a grave abuse of discretion in casting aside ovelwhelming evidence

duly appreciated by the trial court tht petitioners are buyers in good faith and for the value,

who exercised Dominion over the subject lots, which if properly considered, shall warrant the

singular conckusion that the sale and transfer of titiles are valid.

RULINGS:

• The petition lacks merit. Well-settled is the rule that this Court is not a trier of facts. When

supported by substantial evidence, the findings of fact of the CA are conclusive and binding,

and are not reviewable by this Court, unless the case falls under any of the following

recognized exceptions: (1)When the conclusion is a finding grounded entirely on speculation,

surmises and conjectures;(2)When the inference made is manifestly mistaken, absurd or

impossible;(3)Where there is a grave abuse of discretion;(4)When the judgment is based on

a misappreciation of facts;(5)When the findings of fact are conflicting;(6)When the CA in

making its findings, went beyond the issues of the case and the same is contrary to the

admissions of both appellant and appellee;(7)When the findings are contrary to those of the

trial court;(8)When the findings of fact are conclusions without citation of specific evidence

on which they are based;(9)When the facts set forth in the petition as well as in the

petitioners’ main and reply briefs are not disputed by the respondents; and (10) When the

findings of fact of the CA are premised on the supposed absence of evidence and

contradicted by the evidence on record. None of these exceptions is present in this case. We

35 | O B L I C O N F I N A L E X A M C A S E S D I G E S T

find that the Decision of the CA is supported by the required quantum of evidence.

• The subject Deeds of Absolute Sale executed by the Spouses Campos to their children

(herein petitioners) are absolutely simulated and fictitious.

• 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, as follows:

Consideration specified in Deed of Absolute Sale

Market Value as per Tax Declaration

Computed Zonal Valuation (BIR Certification)

Residential Lots: From Spouses Campos to daughter, Rosemarie Campos

P 7,000.00

P 83,580.00[27]

P 417,900.00[28]

Agricultural Lots: From Spouses Campos to son,

Jesus Campos

P 5,600.00

P 25,000.19[29]

P 39,860.00[30]

• 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 meter[31] residential land

could not recall the exact area of the two lots she purchased. (During her cross-examination)

• 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.

• Finally, spouses Campos continue to be in actual possession of the properties in question.

Respondents have established through the unrebutted testimony of Rolando Azoro that

spouses Campos have their house within Lot 3715-A and Lot 3715-B-2 and that they reside

there together with their daughter Rosemarie. In addition, spouses Campos continued to

cultivate the rice lands which they purportedly sold to their son Jesus. Meantime, Jesus, the

supposed new owner of said rice lands, has relocated to Bulacanwhere he worked as a

security guard. In other words, 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.

• The fact that petitioners were able to secure titles in their names did not operate to vest

upon them ownership over the subject properties. That act has never been recognized as a

mode of acquiring ownership. The Torrens system does not create or vest title. It only

confirms and records title already existing and vested. It does not protect a usurper from the

true owner. It cannot be a shield for the commission of fraud.

• The action for the declaration of the inexistence of the assailed Deeds of Absolute Sale

does not prescribe. Petitioners argue that respondents’ cause of action had prescribed when

they filed the Nullity of the Sale Case on October 14, 1997, or seven years after the

registration of the questioned sales in 1990. We cannot agree. As discussed above, the sale

of subject properties to herein petitioners are null and void. And under Article 1410 of the

Civil Code, an action or defense for the declaration of the inexistence of a contract is

imprescriptible. Hence, petitioners’ contention that respondents’ cause of action is already

barred by prescription is without legal basis.

• Since the assailed Deeds of Absolute Sale are null and void, the Civil Code provisions on

rescission have no application in the instant case. Petitioners’ argument that the applicable

law in this case is Article 1381(3) of the Civil Code on rescissible contracts and not Article

1409 on void contracts is not a question of first impression. This issue had already been

settled several decades ago when we held that “an action to rescind is founded upon and

presupposes the existence of a contract”( Onglengco vs Ozaeta). A contract which is null and

void is no contract at all and hence could not be the subject of rescission ( Perez vs Ca)

• In the instant case, we have declared the Deeds of Absolute Sale to be fictitious and

inexistent for being absolutely simulated contracts. It is true that the CA cited instances that

may constitute badges of fraud under Article 1387 of the Civil Code on rescissible contracts.

36 | O B L I C O N F I N A L E X A M C A S E S D I G E S T

But there is nothing else in the appealed decision to indicate that rescission was

contemplated under the said provision of the Civil Code. The aforementioned badges must

have been considered merely as grounds for holding that the sale is fictitious. Consequently,

we find that the CA properly applied the governing law over the matter under consideration

which is Article 1409 of the Civil Code on void or inexistent contracts.

11. GACAYAN

ESTOPPEL

ESTOPPEL

JEFFERSON LIM v. QUEENSLAND TOKYO COMMODITIES, INC.

G.R. No. 136031   January 4, 2002

 

FACTS: Private respondent Queensland Tokyo Commodities, Incorporated (Queensland, for brevity)

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. Marissa’s father was a former

employee of Lim’s father.

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. The marginal deposit

represented the advance capital for his future tradings. It was made to apply to any authorized future

transactions, and answered for any trading account against which the deposit was made, for any loss

of whatever nature, and for all obligations, which the investor would incur with the broker.

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, marked as Exhibit "F," which provides as

follows:

25. Upon signing of this Agreement, I shall deposit an initial margin either by personal check,

manager’s check or cash. In the case of the first, I shall not be permitted to trade until the check has

been cleared by my bank and credited to your account. In respect of margin calls or additional

deposits required, I shall likewise pay them either by personal check, manager’s check or cash. In the

event my personal check is dishonored, the company has the right without call or notice to

settle/close my trading account against which the deposit was made. In such event, any loss of

whatever nature shall be borne by me and I shall settle such loss upon demand together with interest

and reasonable cost of collection. However, in the event such liquidation gives rise to a profit then

such amount shall be credited to the Company. The above notwithstanding, I am not relieved of any

legal responsibility as a result of my check being dishonored by my bank.

Petitioner Lim was then allowed to trade with respondent company which was coursed through Shia

by virtue of the blank order forms all signed by Lim. Respondent furnished Lim with the daily market

report and statements of transactions as evidenced by the receiving forms some of which were

received by Lim.

During the first day of trading or on October 22, 1992, Lim made a net profit of P6,845.57. Shia went

to the office of Lim and informed him about it. 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, on October 23, 1992, at about 11:00 A.M., 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.

On October 26, 1992, Shia informed petitioner that they incurred a floating loss of P44,695 on

October 23, 1992. He told petitioner that they could still recover their losses. He could unlock the

floating loss on Friday. By unlocking the floating loss, the loss on a particular day is minimized.

On October 27, 1992, 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.16 Meanwhile, Lim signed only one portion of the traveler’s check, leaving the other

half blank. He then kept it.17 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 for collection of a sum of money.

37 | O B L I C O N F I N A L E X A M C A S E S D I G E S T

The trial court dismissed the petition without pronouncement as to cost whereas the Court of Appeals

reversed the trial court’s decision.

ISSUE: (3 ISSUES ARE ILLUSTRATED IN THE CASE, BUT I WILL FOCUS ON THE TOPIC ON ESTOPPEL)

Whether or not the appellate court erred in holding that petitioner is estopped from questioning the

validity of the Customer’s Agreement that he signed.

HELD: Yes, petitioner is stopped from questioning the validity of the Customer’s Agreement which he

signed.

REASONING: 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.23

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 public document it is evidence of the fact, which gave rise to

its execution and of the date of the latter. 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.

Moreover, we agree that, on petitioner’s part, there was misrepresentation of facts. He replaced

the manager’s check with an unendorsed traveler’s check, instead of cash, while assuring Shia that

respondent Queensland could sign the indorsee portion thereof. As it turned out, Citibank informed

respondent that only the original purchaser (i.e. the petitioner) could sign said check. When the check

was returned to petitioner for his signature, he refused to sign. Then, as petitioner himself admitted in

his Memorandum, he used the traveler’s check for his travel expenses.

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, marked as Exhibits "G", "G-1" to "G-13".

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.

WHEREFORE, the instant petition is DENIED for lack of merit. The decision of the Court of Appeals

dated June 25, 1998, in CA-G.R. CV No. 46495 is AFFIRMED. Costs against petitioner.

ESTOPPEL by: Kathrina M. Herana

 

Republic (Represented by the Acting Commissioner of Land Registration) vs.

CA (Sps. Santos and St. Jude's Enterprises, Sps. Calaguian, Virginia dela Fuente and Lucy Madaya)

(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 from its original area of 40,523 sq. meters to 42,044

sq. meters or an increase of 1,421 sq. meters; this was confirmed by the Land Registration

Commission (LRC).

• St Jude’s then sold the lots to Spouses Santos, Spouses Calaguian, Virginia dela Fuente and Lucy

Madaya.

 

• In January 29, 1985, Solicitor General 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.

• The trial court also took into account the "absence of complaints from adjoining owners whose

supposed lots were encroached upon by the defendants," as well as the fact that an adjoining owner

had categorically stated that there was no such encroachment.

• And since the titles were registered under the Torrens system, such titles became absolute and

irrevocable.

• Also, even if the Solicitor General proved the expansion of the area, there was no proof of fraud

when St. Jude submitted the subdivision plan to the LRC.

 

38 | O B L I C O N F I N A L E X A M C A S E S D I G E S T

• The CA affirmed the RTC, berated petitioner for bringing the suit only after 19 years had passed

since the issuance of St. Jude's title and the approval of the subdivision plan.

 

• Thus, the petition for review.

 

(. . . Rather than make the Torrens system reliable and stable, [its] act of filing the instant suit rocks

the system, as it gives the impression to Torrens title holders, like appellees, that their titles to

properties can be questioned by the same authority who had approved the same even after a long

period of time. In that case, no Torrens title holder shall be at peace with the ownership and

possession of his land, for the Commission of Land Registration can question his title anytime it

makes a finding unfavorable to said Torrens title holder.)

 

 

Issue: Whether or not the government is estopped from questioning the approved subdivision

plan,which expanded the areas covered by the transfer certificates of title in question.

 

Held:

The SC held in the affirmative.

• 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.

 

• The Court further declared that "the real office of the equitable norm of estoppel is limited to

supplying deficiency in the law, but it should not supplant positive law."

 

• In the case at bar, for nearly 20 years (July 25, 1966 - January 29, 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 the equitable estoppel to avoid injustice to the innocent

purchasers for value.

 

• Likewise time-settled doctrine that 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.

 

• Furthermore, Solicitor General did not present proof that they, private respondents, 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 the decision of CA.

 

The Torrens System:

 

o Torrens system is not a means of acquiring titles to lands; it is merely a system of registration of

titles to lands.

o The real purpose of the Torrens system is to quiet title to land to put a stop forever to any question

as to the legality of the title.

o Torrens certificate is evidence of an indefeasible title to property in favor of the person whose name

appears thereon.

MELANIE, DANILO AND SIMEON MESINA vs. GLORIA GARCIA

 

39 | O B L I C O N F I N A L E X A M C A S E S D I G E S T

This is a petition for review on certiorari seeking to reverse and set aside the CA decision which

affirmed the decision of the RTC of Cabanatuan City, ordering petitioners to issue the necessary Deed

of Absolute Sale over the parcel of land subject of this case in favor of repondent.

 

The pertinent facts, as summarized by the RTC and CA, are as follows:

In April 1977, Atty. Honorio Garcia and Felicisima Mesina entered into a Contract to Sell over a lot of

235 sq.m. in Cabanatuan City, covered by Trasfer Certificate of Title in the name of Felicisima which

was eventually cancelled and transferred in the name of herein petitioners who are the children of

Felicisima. Atty. Garcia is the deceased husband of herein respondent, Gloria Garcia.

Among the stipulations in the contract is one where the monthly payment for the pusrchase price of

the subject lot should begin in May 1977, payable within 7 years.

Instituting this case at bar, respondent asserts that despite full payment made in February 1984 for

the consideration of the subject lot, petitioners refused to issue the necessary Deed of Absolute Sale

to effect the transfer of property to her.

The RTC ruled in favor of respondent Felicisima, ordering petitioners to issue the Deed of Absolute

Sale in favor of her, and ordering her to vacate and return the excess of the 235 sq.m. area subject of

the contract to sell.

Petitioners appealed the aforesaid decision but which was dismissed by the CA for lack of merit.

Hence this petition.

Petitioners aver that respondent’s cause of action has already prescribed. The series of extrajudicial

demands made by respondent could not have interrupted the prescriptive period pursuant to the

instances when prescriptive period shall be interrupted stated in Article 1155 of the Civil Code, as it

refers only to demands made by a creditor; thus, respondent, being a debtor, does not qualify.

Petitioners likewise argue that the principle of estoppel does not apply to them because they never

induced respondent to believe that she already owned the subject lot by making full payment, in view

of the fact that they repeatedly denied her requests for the execution of the Deed of Absolute Sale in

her favor. Further, they made it clear to her that they have not accepted her late payments.

Petitioners also claim that there is no reliable and credible evidence adduced by respondent to

support her claims that she has completely paid the purchase price of the subject property.

 

ISSUES:

1.  Whether respondent’s cause of action has already prescribed

2.  Whether petitioners are in estoppel

3.  Whether no competent evidence has been adduced by respondent to prove her cause of action.

 

COURT’S RULING:

The petition has no merit.

 

FIRST ISSUE:

Regarding the first issue on prescription of respondent’s cause of action, the Civil Code provides that

an action based on a written contract must be brought within 10 years  from the time the right of

action accrues.

The CA found that respondent’s right of action accrued upon the full and final payment of the contract

price which was in February 1984, thus, respondent had until February 1994 to bring an action to

enforce such contract. Petitioners contend that respondent’s Complaint for Specific Performance with

Damages made in January 1997 was already barred by prescription.

The Court finds this untenable.

Article 1155 of the Civil Code provides that the prescriptive period is interrupted:

Ø When an action has been filed in court;

Ø When there is a written extrajudicial demand made by the creditor; and

Ø When there is any written acknowledgment of the debt by the debtor.

A further examination of the facts show that respondent made a series of written extrajudicial

demands to respondents to execute the Deed of Absolute Sale in her favor, starting April 1986 until

January 1997.

Respondent even filed a complaint before the Housing and Land Use Regulatory Board (HLURB) to

compel petitioners to execute the same.

After such incident, respondent executed and Affidavit of Adverse Claim over subject lot, stating

therein that after the decision of the HLURB, one of the petitioners assured her that as soon as their

mother Felicisima recoverd from her ailment, the Deed of Absolute Sale shall be executed in favor of

respondent, which unfortunately did not happen.

Thus, respondent sent a final demand letter to petitoners, which still went unheeded, hence, her filing

of a formal Complaint for Specific Performance with Damages.

The Court finds that the series of written extrajudicial demands made by respondent did in fact

interrupt the running of the prescriptive period of 10 years, thereby preventing prescription to bar the

cause of action of respondent against petitioners.

Anent petitioners’ argument that respondent being a debtor, does not qualify under said provision,

the Court finds this indefensible.

It is understood that the purchase price of the subject lot has already been paid in full.

40 | O B L I C O N F I N A L E X A M C A S E S D I G E S T

Hence, the respondent was no longer a debtor of the petitioners’ deceased mother Felicisima

because she already performed her obligation to the latter.

Upon her full payment of the purchase price, her right to demand the execution of the Deed of

Absolute Sale begins and Felicisima’s obligation to execute said deed commenced.

The Court upholds the right of respondent to have the Deed of Absolute Sale issued in her favor.

 

SECOND ISSUE:

Regarding the issue on estoppel, the Court finds that indeed, petitioners are estopped from declaring

that they never had knowledge as to the acceptance of the delayed payments made by respondents,

and that they never induced her to believe that she had validly made full payment.

Under the doctrine of estoppel, an admission or representation is rendered conclusive upon the

person making it, and cannot be denied or disproved against the person relying thereon. A party,

having performed affirmative acts upon which another person based his subsequent actions, cannot

thereafter refute his acts or renege on the effects of the same to the prejudice of the latter.

The evidence on record revealed that petitioners can no longer deny having accepted late payments

made by respondent.

In a letter sent to petitioner Simeon Mesina by Engr. Danilo Angeles (husband of petitioners’

authorized collection agant Angelina Angeles), he told Simeon that the title and the Deed of Sale were

both ready for their signature, and respondent was willing and ready to pay the excess area.

If petitioners did not accept respondent’s late payments and if they did not consider such as full

payment of the purchase price, the title as well as the Deed of Sale could not have been prepared for

their signature.

Respondent could not have sent a demand letter to ask for the execution of such documents had she

not been induced to believe that she made a valid full payment.

Likewise, in an Affifavit executed by Simeon, he affirmed that:

Ø -----he would recommend the acceptance of the late payment but with the condition that

respondent would shoulder all expenses for the transfer of the title and separation of the lot from the

mother title.

Ø -----in a draft of the Deed of Absolute Sale presented to Simeon for his signature, he noticed that

the area of the lot was increased, thereby requesting Mrs. Angeles to relay to respondent that this

was not the area agreed upon, requesting further that the area actually agreed upon be stated in the

Deed.

Based on the foregoing statements made under oath, the late payments were indeed accepted by

petitioners.

Petitioners made an admission or representation that respondent already paid in full the purchase

value of the subject property.

They are already estopped from claiming otherwise.

 

THIRD ISSUE:

The Court cannot concede to petitioners’ contention that respondent failed to prove the fact of full

payment as there was no relieble and credible evidence adduced by the latter to support her claims.

The evidence presented by respondent before the RTC as sustained by the CA. i.e:

Ø Receipts of payment issued by petitioners’ mother during her lifetime

Ø Receipts issued by authorized collection agent

Ø Affidavit of Adverse Claim, properly recorded before the Register of Deeds, which remained

unquestioned

Ø Series of demand letters

Such documents are all proofs that respondent had truly completed the performance of her

obligation, which is the full payment of the purchase price of the subject property.

 

Wherefore, the instant Petition for Review is hereby DENIED.

Hermosilla vs. Remoquillo - ESTOPPEL

By Rain Agdeppa Catague in Exclusively for 1-Manresa · Edit Doc · Delete

 

FACTS:

Subject of the controversy is the 65 sq.m portion of a lot located at Poblacion, San Pedro, Laguna.

On August 31, 1931 the Republic of the Philippines acquired through purchase the San Pedro Tunasan

Homesite.

Apolinario Hermosilla was occupying a lot at the said Homesite until his death in 1964.

He subdivided his lot into two, lot 12 with an area of 341 sq.m and lot 19 with an area of 341 sq.m

also, which the 65 sq.m subject of this controversy form part.

On April 30, 1962, Apolinario executed a Deed of assignment transferring possession of Lot 19 in

favor of his grandson, respondent Jaime Remoquillo.

41 | O B L I C O N F I N A L E X A M C A S E S D I G E S T

The Land Tenure Administration later found out that lot 19 was still available for disposition, for

qualified applicants.

On May 10, 1963, Jaime, being the actual occupant of Lot 19 applied for its acquisition before the LTA.

On July 8, 1963 Apolinario conveyed Lot 12 to his son Salvador Hermosilla, Jaime’s uncle.

Salvador filed with the LTA an application to purchase Lot 12, which was awarded to him on Dec. 16,

1971

On February 10, 1972, Jaime and Salvador forged a Kasunduan ng Paglipat Ng Karapatan sa Isang

Lagay na Lupang Solar, whereby Jaime transferred ownership of the 65 sq.m in favor of Salvador.

On March 16, 1986 the NHA (LTA) awarded Lot 19 to Jaime.

And on September 15, 1987 He and his wife were issued a title, TCT No. T-156296.

On May 25, 1992, petitioners filed an action for annulment of title on the ground of fraud with

damages against Jaime and his wife, together with the Register of Deeds, before RTC 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.

The RTC ruled in favor of the petitioners. Stating that the contract is void for there being a meeting of

minds upon an identified object and upon a specific price.

And on Appeal to the CA, it reversed the decision of the RTC. It held that the Kasunduan was void,

because during its execution in1972, the Republic was still the owner of the lot.

On appeal to the Supreme Court the petitioners cite the law on Estoppel, specifically Article 1434

which states “when a person who is not the owner of the thing sells or alienates and delivers it and

later, the seller or grantor acquires title thereto, such title passes by operation of law to the buyer or

grantee.”

ISSUE:

1. won the prescriptive period to recover the property obtained by fraud is applicable at the case at

bar.

2. won article 1434 Of the Civil Code would apply in this case.

3. won the property was acquired by the spouses Remoquillo through fraud which by force of law,

considered them trustees of an implied trust.

HELD:

1. No.

The prescriptive period for the reconveyance of fraudulently registered real property is 10 years,

reckoned from the date of the issuance of the certificate of title, if the plaintiff is not in possession,

but imprescriptible if he is in possession of the property.

It is undisputed that petitioner’s houses occupy the questioned property and that respondents have

not been in possession thereof.

Since there was no actual need to reconvey the property as petitioners action took the nature of a

suit for quieting of title, it having been filed to enforce an alleged implied trust after Jaime refused to

segregate title over Lot 19.

One who is in actual possession of a piece of land claiming to be the owner thereof may wait until his

possession is disturbed or his title is attacked before taking steps to vindicate his right. From the

body of the complaint, this type of action denotes imprescribtibility.

2. NO.

Petitioner’s 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

bonafide occupant.

Sec. 6. Privilege of Preference to Purchase Intransferable; Waiver of 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 purcahse the land, and any transfer or encumbrance made in violation hereof shall be

null and void.

Petitioner’s insistence on any right to the property under the Kasunduan thus fails.

The transfer became one in violation of law and therefore void ab initio.

Estoppel as postulated by the petitioner will not apply for it cannot be predicted 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.

3. No.

The property was previously a public land, petitioner’s have no personality to impute fraud or

misrepresentation against the State or violation of the law.

If the title was in fact fraudulently obtained, it is the state which should file the suit to recover the

property to the Solicitor General.

42 | O B L I C O N F I N A L E X A M C A S E S D I G E S T

At all events, for an action for reconveyance based on fraud to prosper, the petitioner must prove by

clear and convincing evidence not only his title to the property but also the fact of the fraud.

Fraud is never presumed. Intentional acts to decieve and deprive another of his right, or in some

manner injure him must be specifically alleged and proved by the petitoners by a clear and

convincing evidence. Petitioners failed to discharge this burden.

WHEREFORE, the petition is, in light of the foregoing ratiocination, DENIED.

ESTOPPEL

ROGELIO DIZON vs. PHILIPPINE VETERANS BANK

                                                    (G.R. No. 165938, 25-Mar-2009)

 

FACTS:  Herein petitioner Rogelio Dizon and his wife Corazon were the owners of three parcels of

land located in Angeles City, Pampanga covered by Transfer Certificate of Title (TCT) Nos. T-12567, T-

35788 and T-29117-R (3793).

On September 26, 1979, the Spouses Dizon mortgaged these lots to herein respondent Philippine

Veterans Bank (PVB) as security for a credit accommodation which they obtained from PVB.  The

Spouses Dizon failed to pay their obligation.

As a consequence, PVB extrajudicially foreclosed the mortgage and was able to acquire the subject

properties at public auction conducted on December 8, 1983. Subsequently, a Certificate of Sale was

issued in favor of PVB which was registered with the Register of Deeds of Angeles City on November

22, 1984. However, the owner’s duplicate copies of titles in possession of PVB were lost.

In June 1986, PVB filed with the (RTC) of Angeles City a Petition for the Issuance of Owner's Duplicate

Certificate Title covering the subject lots. The petition was dismissed due to failure of PVB to

prosecute the case for an unreasonable length of time.

On July 26, 1999, PVB filed anew with the RTC of Angeles City a Petition for Issuance of Owner's

Duplicate Copy of Transfer Certificate of Title over the same parcels of land. Herein petitioner Dizon

opposed the petition. On August 6, 2001, the RTC granted the petition of PVB and directed the

Register of Deeds to issue in favor of PVB owner’s duplicate copies of the TCTs of the said subject lots

after PVB complied with the requirements of PD 11529 otherwise known as Property Registration

Decree.

Rogelio Dizon then filed a motion for reconsideration with the CA but was denied. Hence, the present

case before the SC with the following grounds/ issues:

1. The petition filed by the respondent bank has prescribed, Citing Article 1142 of the Civil Code

which states that “a mortgage action prescribes in ten years” since it took more than 16years after

the foreclosure sale for the respondent bank to take an action in lieu of the lost owner’s copies of

titles

2.  That the titles presented by PVB in its first petition filed with the RTC in June 1986

were altered and spurious titles. 

3. xxx

4. xxx

 

ISSUE: W/N the petitioner is estopped from assailing the authenticity of the titles.  YES

 

HELD: The Court cannot follow the logic in petitioner's arguments considering that, in the first place,

he and his wife were the ones who submitted the titles to PVB. Now that PVB seeks to obtain a

duplicate copy of the titles covering the subject properties which it legally acquired, petitioner has

made a complete turnaround and now assails the authenticity of these titles which he and his wife

used to obtain their loan. Nonetheless, petitioner is estopped from doing so.

 

Settled is the rule that a person, who by his deed or conduct has induced another to act in a

particular manner, is barred from adopting an inconsistent position, attitude or course of conduct that

thereby causes loss or injury to the latter. The doctrine of estoppel is based upon the grounds of

public policy, fair dealing, good faith and justice, and its purpose is to forbid one to speak against his

own act, representations, or commitments to the injury of one to whom they were directed and who

reasonably relied thereon.

 

 Article 1431 of the Civil Code states that “[t]hrough 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 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.

 

In the present case, petitioner may not renege on his own acts and representations to the

prejudice of respondent bank, which has relied on them. Since petitioner entered into a

binding contract on his own volition using the titles which he now assails, he is therefore

43 | O B L I C O N F I N A L E X A M C A S E S D I G E S T

estopped from questioning the authenticity of these documents which paved the way for

the consummation of the contract from which he derived benefit.

 

Other than to harass the respondent, the Court is at a loss as to what petitioner really desires to

achieve in opposing the respondent bank's petition. The Court agrees with respondent's observation

that petitioner's actuations are demonstrative of his desperate attempt to cling on to the subject

properties despite the fact that he has lost them by reason of foreclosure due to his failure to pay his

obligations and his subsequent inability to redeem them during the period allowed by law.

 

ON THE ISSUE OF PRESCRIPTION:

It is true that, under Article 1142 of the Civil Code, an action to enforce a right arising from a

mortgage should be enforced within ten (10) years from the time the right of action accrues;

otherwise, it will be barred by prescription and the mortgage creditor will lose his rights under the

mortgage. It is clear that the actions referred to under Article 1142 of the Civil Code are those that

necessarily arise from a mortgage.

In the present case, however, PVB's petition for the issuance of an owner's duplicate certificate of title

already arises from its right as the owner of the subject properties and no longer as a mortgagee.

The mortgage contract respondent entered into with petitioner had already been

foreclosed, the properties sold and the sale in favor of PVB registered with the Register of

Deeds of the Province of Cagayan. Hence, since the petition filed by PVB is not a

mortgage action, the provisions of Article 1142 of the Civil Code do not apply.

In any case, Presidential Decree (PD) No. 1529, otherwise known as the Property Registration Decree,

the law that specifically governs petitions for the replacement of lost duplicate certificates of title,

does not provide for any limitation or period for filing the said petition. The silence of the law on this

matter can only be interpreted to mean that there is no intention to provide a prescriptive period for

filing this petition.  

 

Prisma construction vs. MenchavezBy Enelg Allan in Exclusively for 1-Manresa · Edit Doc · Delete

Prisma Construction vs. Menchavez

Facts:

On December 8, 1993, Pantaleon, the President and Chairman of the Board of PRISMA, obtained a

P1,000,000.00 loan from the respondent, with a monthly interest of P40,000.00 payable

for six months, or a total obligation of P1,240,000.00 to be paid within six (6) months.

To secure the payment of the loan, Pantaleon issued a promissory note which states;

I, Rogelio S. Pantaleon, hereby acknowledge the receipt of ONE MILLION TWO HUNDRED FORTY

THOUSAND PESOS (P1,240,000), Philippine Currency, from Mr. Arthur F. Menchavez, representing a

six-month loan payable as schedule.

Pantaleon signed the promissory note in his personal capacity, and as duly authorized by the Board of

Directors of PRISMA. However, the petitioners failed to completely pay the loan within the stipulated

six (6)-month period.

As of January 4, 1997, the petitioners had already paid a total of P1,108,772.00.   However, the

respondent found that the petitioners still had an outstanding balance of P1,364,151.00 as of January

4, 1997, to which it applied a 4% monthly interest. Thus, on August 28, 1997, the respondent filed

a complaint for sum of money with the RTC to enforce the unpaid balance, plus 4% monthly

interest.

In their Answer dated October 6, 1998, the petitioners admitted the loan of P1,240,000.00, but denied

the stipulation on the 4% monthly interest, arguing that the interest was not provided in the

promissory note. Pantaleon also denied that he made himself personally liable and that he made

representations that the loan would be repaid within six (6) months.

The respondent submits that the petitioners are estopped from disputing the 4% monthly interest

beyond the six-month stipulated period, since they agreed to pay this interest on the principal

amount under the promissory note and the board resolution.

RTC ruled that petitioners were still indebted to the respondent for P3,526,117.00 as of February 11,

1999 after considering the 4% monthly interest. The RTC also observed that PRISMA was a one-man

corporation of Pantaleon and used this circumstance to justify the piercing of the veil of corporate

fiction. ruled in favor of respondents. CA affirmed the RTC decision but noted that the interest of 4%

per month, or 48% per annum, was unreasonable and should be reduced to 12% per annum.  

Issue: WON petitioners are estopped to from disputing the 4% monthly interest beyond the six-month

stipulated period, since they agreed to pay this interest on the principal amount under the promissory

note and the board resolution.

Ruling:

Doctrine of Estoppel not applicable

We cannot apply the doctrine of estoppel in the present case since the facts and circumstances, as

established by the record, negate its application. Under the promissory note, what the petitioners

agreed to was the payment of a specific sum of P40,000.00 per month for six months – not a

4% rate of interest per month for six (6) months – on a loan whose principal is

P1,000,000.00, for the total amount of P1,240,000.00. 

Thus, no reason exists to place the petitioners in estoppel, barring them from raising their present

defenses against a 4% per month interest after the six-month period of the agreement. 

The board resolution, on the other hand, simply authorizes Pantaleon to contract for a loan with a

monthly interest of not more than 4%.  This resolution merely embodies the extent of Pantaleon’s

authority to contract and does not create any right or obligation except as between Pantaleon and the

board. Again, no cause exists to place the petitioners in estoppel.

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