SERAFIN MODINA, vs. COURT OF APPEALS

At bar is a Petition for Review on Certiorari assailing the decision of the Court of Appeals in CA G.R. CV No. 26051 affirming the decision of the trial court in the case, entitled "Serafin Modina vs. Ernesto Hontarciego, Paulino Figueroa and Ramon Chiang vs. Merlinda Plana Chiang, intervenors", which declared as void and inexistent the deed of definite sale dated December 17, 1975 as well as the Certificates of Title Nos. T-86912, T-86913, T-86914 in the name of Ramon Chiang.1âwphi1.nêt

The facts that matter are as follows:

The parcels of land in question are those under the name of Ramon Chiang (hereinafter referred to as CHIANG) covered by TCT Nos. T-86912, T-86913, and T-86914. He theorized that subject properties were sold to him by his wife, Merlinda Plana Chiang (hereinafter referred to as MERLINDA), as evidenced by a Deed of Absolute Sale dated December 17, 1975, 1 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. 2

After due hearing, the Trial Court decided in favor of MERLINDA, disposing thus:

WHEREFORE, judgment is hereby rendered (1) declaring as void and inexistent the sale of Lots 10063, 10088, 10085 and 10089 of the Cadastral Survey of Sta. Barbara by Merlinda Plana in favor of Ramon Chiang as evidenced by the deed of definite sale dated December 17, 1975 (Exhibits "H"; "3"-Chiang; "9" Intervenor) as well as the Certificates of Title Nos. T-86912,

T-86913, T-86914 and T-86915 in the name of Ramon Chiang; (2) declaring as void and inexistent the sale of the same properties by Ramon Chiang in favor of Serafin Modina as evidenced by the deeds of sale (Exhibits "A", "B", "6" — Chiang and "7" — Chiang) dated August 3, and 24, 1979, as well as Certificates of Title Nos. T-102631, 102630, 102632 and 102890 in the name of Serafin Modina; (3) ordering the Register of Deeds of Iloilo to cancel said certificates of title in the names of Ramon Chiang and Serafin Modina and to reinstate the Certificates of Title Nos. T-57960, T-57962, T-57963 and T-57864 in the name of Nelson Plana; (4) ordering Serafin Modina to vacate and restore possession of the lots in question to Merlinda Plana Chiang; (5) ordering Ramon Chiang to restitute and pay to Serafin Modina the sum of P145,800.00 and; (6) ordering Serafin Modina to pay Ernesto Hontarciego the sum of P44,500.00 as actual and compensatory damages plus the sum of P5,000.00, for and as attorney's fees, with costs in favor of said defendants against the plaintiff.

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

Raised for resolution here are: (1) whether the sale of subject lots should be nullified, (2) whether petitioner was not a purchaser in good faith, (3) whether the decision of the trial court was tainted with excess of jurisdiction; and (4) whether or not only three-fourths of subject lots should be returned to the private respondent.

Anent the first issue, petitioner theorizes that the sale in question is null and void for being violative of Article 1490 3 of the New Civil Code prohibiting sales between spouses. Consequently, what is applicable is Article 1412 4 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.1âwphi1.nêt

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 propety 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 6 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. 7 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. 8

In the petition under consideration, the Trial Court found that subject Deed of Sale was a nullity for lack of any consideration. 9 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. 10

Under Article 1409 11 of the New Civil Code, enumerating void contracts, a contract without consideration is one such void contract. One of the characteristics of a void or inexistent contract is that it produces no effect. So also, inexistent contracts can be invoked by any person whenever juridical effects founded thereon are asserted against him. A transferor can recover the object of such contract by accion reivindicatoria and

any possessor may refuse to deliver it to the transferee, who cannot enforce the transfer. 12

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. 13

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.

Furthermore, 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. 14

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.1âwphi1.nêt

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 MERLINIDA 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.

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. 15

Thus, petitioner cannot claim that the sale between him and MODINA falls under the exception provided for by law.

With regard to the third issue posed by petitioner — whether the Trial Court's decision allowing recovery on the part of Merlinda Chiang of subject properties was void — petitioner's contention is untennable. It is theorized that as the sale by MERLINDA was by virtue of an Order to Sell issued in the Intestate Estate Proceedings of her late husband, Nelson Plana — to allow recovery will defeat the said order of the Probate Court. Petitioner equated the aforesaid Order to Sell as a judgment, which another court in a regular proceeding has no jurisdiction to reverse.

Petitioner is under the mistaken impression that as the Order to Sell had become a judgment in itself as to the validity of the sale of the properties involved, any question as to its nullity should have been brought before the Court of Appeals on appeal when the said Order was issued.

It is a well-settled rule that a Court of First Instance (now Regional Trial Court) has jurisdiction over a case brought to rescind a sale made upon prior authority of a Probate Court. This does not constitute an interference or review of the order of a co-equal Court since the Probate Court has no jurisdiction over the question of title to subject properties. Consequently, a separate action may be brought to determine the question of ownership. 16

Lastly, on the issue of whether only three-fourths of the property in question should have been returned to MERLINDA, petitioner's stance is equally unsustainable. It is a settled doctrine that an issue which was neither averred in the Complaint nor raised during the trial before the lower court cannot be raised for the first time on appeal, as such a recourse would be offensive to the basic rules of fair play, justice, and due process. 17

The issue of whether only three-fourths of subject property will be returned was never an issue before the lower court and therefore, the petitioner cannot do it now. A final word. In a Petition for Review, only questions of law may be raised. It is perceived by the Court that what petitioner is trying to, albeit subtly, is for the Court to examine the probative value or evidentiary weight of the evidence presented below 18. The Court cannot do that unless the appreciation of the pieces of evidence on hand is glaringly erroneous. But this is where petitioner utterly failed.

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.

GURREA Petitioners, vs. ENRIQUE SUPLICO, Respondent.

Before us is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the Decision1 of the Court of Appeals (CA) dated February 24, 2000 in CA-G.R. CV No. 56210, which affirmed in toto the Decision2 dated July 5, 1996 of the Regional Trial Court (RTC) of Pasig City, Branch 268, in Civil Case No. 47543; and the CA Resolution3 dated August 7, 2000 which denied petitioners’ motion for reconsideration.

The present petition arose from a complaint for annulment of title with prayer for preliminary injunction filed with the Court of First Instance (CFI) of Rizal, docketed as Civil Case No. 47543, by Rosalina Gurrea (plaintiff) in her capacity as attorney-in-fact of the heirs of Ricardo Gurrea (Ricardo), namely: Natividad, Carlos, Juliet and Ricardo, Jr., all surnamed Gurrea, and Teresa Gurrea Colemenares.4 The complaint was filed against Atty. Enrique Suplico (defendant), Gen. Gaudencio Tobias, in his capacity as General Manager of the National Housing Authority, and Joseph Estrada, in his capacity as Municipal Mayor of San Juan, Rizal.5

The CA adopted the facts of the case as summarized by the RTC, to wit:

The lot in question situated at 245 Marne Street, San Juan, Metro Manila was originally owned by one of herein plaintiffs’ Attorney-in-Fact, Rosalina Gurrea, as evidence (sic) by TCT No. 49767 (Exhibit "A"). That sometime in 1958, Rosalina Gurrea transferred the ownership of said lot to Adelina Gurrea, whose ownership was evidenced by TCT No. 58253 (Exhibit "B"). That Adelina Gurrea continued to be the owner of the lot until her death. Thereafter, Special Proceedings No. 7185 was instituted to have the will she executed during her lifetime probated and to settle her estate. Under the said will, the San Juan lot was bequeathed to Pilar and Luis Gurrea, while 700,000 pesetas, ¼ of the lot in Baguio City and a one-hectare piece of land in Pontevedra, Negros Occidental were given to Ricardo Gurrea.

Ricardo Gurrea, represented by and through his counsel Atty. Enrique Suplico (the defendant), filed an Opposition in Special Proc. No. 7185. In consideration of said representation, Ricardo Gurrea agreed to pay Atty. Suplico "a contingent fee of twenty (20%) of whatever is due me, either real or personal property" (Exhibit "5"). During the pendency of the proceedings and upon the oral instructions of Ricardo Gurrea, Atty. Suplico negotiated with the other heirs of Adelina Gurrea regarding the transfer of the piso (apartment building) in Spain to Ricardo Gurrea’s daughter, Juliet Gurrea de Melendres. Ricardo Gurrea further instructed Atty. Suplico not to enter into any settlement with the heirs unless the piso is transferred to his daughter. Finally, the transfer of the piso worth P64,000.00 was executed and the heirs arrived at an amicable settlement regarding the estate of Adelina Gurrea. Hence, Ricardo Gurrea withdrew his Opposition and the heirs then drew up a project of partition which was eventually approved by the probate court. Pursuant to the project of partition, the following

properties were adjudicated to Ricardo Gurrea: (1) the whole of the Baguio lot (with assessed value of P26,350.00); (2) the whole of the San Juan lot (with assessed value of P9,630.00); and (3) a parcel of land in Pontevedra, Negros Occidental (with assessed value of P300.00). (Exhibit "R" for plaintiff and exhibit "19" for defendant).

As payment of his attorney’s fees, Ricardo Gurrea offered the San Juan lot to Atty. Suplico who was initially hesitant to accept the same as the property is occupied by squatters. However, in order not to antagonize his client, Atty. Suplico agreed to Ricardo Gurrea’s proposal with the further understanding that he will receive an additional commission of 5% if he sells the Baguio property. Thereafter, the deed of Transfer of Rights and Interest was drafted. The said deed was presented to Ricardo Gurrea for his signature. That before signing the same, the contents of the deed were first explained to Ricardo Gurrea by Atty. Suplico and Atty. Manuel Pama, the notary public. On August 20, 1975, the deed was finally signed by Ricardo Gurrea at the office of Atty. Pama, in the presence of the latter, Atty. Suplico, Victor Tupas and another person, the last two acting as witnesses. Later, on October 7, 1980, Atty. Suplico registered the deed and obtained a title/TCT to the San Juan property under his name. Ricardo Gurrea died on October 22, 1980. After his death, his heirs instituted Special Pro. No. 2722 for the settlement of Ricardo Gurrea’s estate. In the said proceedings, Atty. Suplico filed several claims for unpaid attorney’s fees (no claim was filed relative to Special Proc. No. 7185); however, all were dismissed with finality (Exhibits "I" and "J"). Also in the same case, the estate’s administrator, Carlos Gurrea, filed an Inventory of Properties left by the decedent, which did not initially include the property subject of this case. The said lot was included only subsequently in the Amended Inventory (Exhibit "G").6

On July 11, 1985, the RTC issued an Order dismissing the complaint on the ground that it does not state a cause of action because the plaintiff is not the real party-in-interest.7 The complaint-in-intervention was likewise dismissed. Plaintiff filed an appeal with the CA questioning the July 11, 1985 Order of the RTC.8 The case was docketed as CA-G.R. CV No. 14790.

Thereafter, defendant filed a Motion for Issuance of Writ of Execution Pending Appeal.9 In its Order dated May 20, 1986, the RTC granted defendant’s motion.10 Plaintiff then filed a petition for certiorari, prohibition and mandamus with the CA seeking to annul the trial court’s Order of May 20, 1986. The case was docketed as CA-G.R. SP No. 09394.

Subsequently, CA-G.R. CV No. 14790 and CA-G.R. SP No. 09394 were consolidated.

On November 21, 1989, the CA promulgated its Decision in the consolidated cases, the dispositive portion of which reads as follows:

WHEREFORE, judgment is hereby rendered, as follows:

(1) REVERSING the order appealed from in CA-G.R. CV No. 14790 and GRANTING the appellant Rosalina Gurrea a period of sixty (60) days from finality of this decision within which to implead in Civil Case No. 47543 the real parties-in-interest; after compliance herewith by the appellant, the trial court shall proceed to hear and decide the case accordingly; and

(2) GRANTING the petition for certiorari and prohibition in CA-G.R. SP No. 09394, hereby ANNULLING and SETTING ASIDE the respondent Court’s order dated May 20, 1986, granting the respondent Enrique Suplico’s motion for execution pending appeal (Annex C, petition), and the writ issued pursuant thereto (Annex D, petition).

Costs against the appellee and respondent Enrique Suplico in both cases.

SO ORDERED.11

Accordingly, an Amended Complaint was filed in the RTC impleading the heirs of Ricardo as additional plaintiffs, to wit: Natividad Ariaga Vda. de Gurrea, Carlos Gurrea, Julieta Gurrea, Teresa Gurrea-Rodriguez, Ricardo Gurrea, Jr., Ma. Victoria Gurrea Candel and Ramona Gurrea-Montinola.12 Thereafter, trial ensued.

In the course of the trial, Gen. Gaudencio Tobias of the NHA and then Mayor Joseph Estrada of San Juan, were dropped as defendants upon motion of plaintiffs and without the objection of defendant.

After trial, the RTC rendered judgment the dispositive portion of which reads:

WHEREFORE, taking all the foregoing into consideration, the Court finds that the preponderance of evidence is in favor of the defendant and against the plaintiffs, hence, orders the DISMISSAL of the above entitled case. No pronouncement as to damages, costs and attorney’s fees.

SO ORDERED.13

Plaintiffs and defendant appealed the case to the CA.

Plaintiffs-appellants contended that the RTC erred: in upholding the validity of the supposed contract of attorney’s fees between Ricardo and defendant-appellant which provided for the payment of attorney’s fees in the form of real property because such an agreement is prohibited by Article 1491 of the Civil Code; in limiting its evaluation of the transfer of rights and interests in defendant-appelant’s favor only on the basis of whether the deed evidencing said transfer of rights and interests was forged, without regard to the facts and circumstances surrounding its execution; in not finding that

defendant-appellant has been fully paid for all the services he had rendered for Ricardo; in not declaring the payment of the subject lot as attorney’s fees to be unconscionable based on the guidelines for determining attorney’s fees.

On the other hand, defendant-appellant asserted that the RTC erred in refusing to dismiss the complaint for lack of cause of action; and in refusing to award counterclaim in his favor.

On February 24, 2000, the CA rendered its Decision affirming, in toto, the judgment of the RTC. The CA maintained the lower court’s ruling that the plaintiffs-appellants failed to present clear and convincing evidence that defendant-appellant defrauded and exerted undue influence on Ricardo in the latter’s execution of the deed of Transfer of Rights and Interest and in consequently transferring his ownership of the San Juan lot in his (defendant-appellant’s) favor; and that based on the evidence, the San Juan lot may be considered as reasonable attorney’s fees for defendant-appellant.

However, the CA did not discuss the issue of whether the contract of attorney’s fees between the late Ricardo and defendant-appellant and the consequent transfer of rights and interest in favor of the latter is invalid for being violative of Article 1491 of the Civil Code.

Plaintiffs-appellants (hereinafter petitioners), with the exception of plaintiff-appellant Rosalina Gurrea, who died on June 2, 1999, filed a Motion for Reconsideration, but the CA denied the same in a Resolution issued on August 7, 2000.

Hence, the present petition raising the following issues:

1. WHETHER OR NOT, ASSUMING WITHOUT ADMITTING, THAT THE ‘TRANSFER OF RIGHTS AND INTERESTS’ (EXHIBIT E; 1) WAS DULY EXECUTED BY RICARDO GURREA, THE SAME VIOLATES ARTICLE 1491 OF THE NEW CIVIL CODE AND, THEREFORE, NULL AND VOID.

2. WHETHER OR NOT THE SUPPOSED CONTRACT FOR ATTORNEY’S FEES IN THE FORM OF THE ‘MANIFESTATION’ DATED JUNE 24, 1972 (EXHIBIT 5) PROVIDING FOR THE PAYMENT OF ATTORNEY’S FEES OUT OF THE PROPERTIES IN LITIGATION, IS VALID;

3. WHETHER OR NOT, ASSUMING THAT THE ‘MANIFESTATION’ AND ‘TRANSFER OF RIGHTS AND INTERESTS’ ARE VALID, AND FURTHER ASSUMING THAT RESPONDENT-ATTORNEY HAS NOT YET BEEN PAID HIS ATTORNEY’S FEES IN SPECIAL PROCEEDINGS NO. 7185, THE PAYMENT OF SAID FEES BY WAY OF THE WHOLE PROPERTY SUBJECT MATTER OF THE INSTANT CASE IS UNCONSCIONABLE OR UNREASONABLE CONSIDERING THE GUIDELINES FOR FIXING ATTORNEY’S FEES;

4. WHETHER OR NOT PETITIONERS ARE ENTITLED TO THE CANCELLATION OF RESPONDENT ATTORNEY’S TITLE OVER THE SUBJECT PROPERTY AND THE RECONVEYANCE THEREOF TO THE HEREIN PETITIONERS OR TO THE ESTATE OF THE LATE RICARDO GURREA.

5. WHETHER OR NOT PETITIONERS ARE ENTITLED TO THE DAMAGES CLAIMED IN THE ACTION SUBSTANTIATED BY THEIR EVIDENCE.14

As to the first issue, petitioners argue on the premise that, under the law, estate proceedings shall be deemed closed and terminated when the court declares it to be so and only after delivery of the remaining estate to the heirs entitled to receive the same. Petitioners contend that no evidence was presented to show that the probate court issued an order declaring Special Proceedings No. 7185 closed and terminated. In addition, when the Transfer of Rights and Interest in favor of respondent was notarized on August 20, 1975, the title over the subject lot was still in the name of Adelina Gurrea and that said title was transferred only in the name of Ricardo on October 7, 1980. On these bases, petitioners conclude that at the time the Transfer of Rights and Interest was notarized, there is no dispute that the subject property still formed part of the estate of Adelina Gurrea and was, therefore, still the subject of litigation. Hence, the transfer of rights and interest over the subject property in favor of Atty. Suplico (respondent) is null and void.

Anent the second issue, petitioners contend that the Manifestation dated June 24, 1972 executed by Ricardo providing for the payment in favor of respondent of a contingent fee of twenty percent (20%) of whatever is due to Ricardo, either real or personal property is invalid because based on jurisprudence, attorney’s fees, based on a contingent fee contract, may be paid only out of a certain percentage of the value of the real property in litigation; and that the real property itself may not be given as payment of attorney’s fees.

As to the third issue, petitioners assert that even assuming that the above-mentioned Manifestation and Transfer of Rights and Interest are valid and that respondent had not yet been paid his attorney’s fees, the subject property is an unreasonable and unconscionable payment for the actual services that respondent had rendered for Ricardo, taking into consideration the guidelines for fixing attorney’s fees.

Petitioners did not elaborate on the fourth issue while, in the fifth issue, they submitted to the discretion of the Court their entitlement to damages and attorney’s fees, as claimed before the trial court.

On his part, respondent contends that the issue as to whether Special Proceedings No. 7185 was already closed and terminated at the time of execution of the deed of Transfer of Rights and Interest, involves the determination of factual matters and appreciation of pieces of evidence which cannot be raised in a petition for review on certiorari before

this Court. Even assuming that petitioners may properly raise a factual issue in the present petition, respondent submits that there is sufficient evidentiary basis for the trial court’s conclusion that the Transfer of Rights and Interest was executed and entered into after the termination of Special Proceedings No. 7185. Respondent also contends that based on jurisprudence, the Court has upheld the validity of contingency fee contracts providing for the payment of attorney’s fees out of a portion or part of the property subject of litigation; that the subject property is just, reasonable and equitable payment for the services he rendered for the late Ricardo, consisting of the signing of the Project of Partition, filing of an Opposition during the estate proceedings, and negotiating with the other heirs which resulted in Ricardo’s recovery of three parcels of land.

The Court finds the petition meritorious.

It is a fundamental rule that the Supreme Court’s jurisdiction in a petition for review on certiorari as a mode of appeal under Rule 45 of the Rules of Court, as amended, such as the one at bar, is limited to reviewing only errors of law, not of fact.15 The rationale of this rule is founded on the fact that the Court is not a trier of facts and does not normally undertake the re-examination of the evidence presented by the contending parties during the trial of the case considering that the findings of facts of the CA are conclusive and binding on the Court.16

However, there are recognized exceptions to this rule, to wit:

(1) when the findings are grounded entirely on speculation, surmises or conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the findings of facts are conflicting; (6) when in making its findings the CA went beyond the issues of the case, or its findings are contrary to the admissions of both the appellant and the appellee; (7) when the findings are contrary to the trial court; (8) when the findings 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 petitioner’s main and reply briefs are not disputed by the respondent; (10) when the findings of fact are premised on the supposed absence of evidence and contradicted by the evidence on record; and (11) when the CA manifestly overlooked certain relevant facts not disputed by the parties, which, if properly considered, could justify a different conclusion.17

The Court finds the present case falling under the second exception for reasons discussed hereunder.

At the outset, it should be stressed that the question as to whether the deed of Transfer of Rights and Interest was forged was resolved by the CA when it affirmed the ruling of the RTC that herein petitioners failed to present clear, convincing and satisfactory evidence that respondent defrauded Ricardo. The CA also ruled that there is no

evidence on record to show that the signature of the late Ricardo on the questioned deed is simulated or false. This matter is not assailed in the present petition.

However, despite having been specifically assigned as an error by petitioners in their appellant’s brief filed with the CA, the appellate court failed to rule on the question of whether the subject Transfer of Rights and Interest was executed even before the estate proceedings were closed and terminated.

Anent the first issue, it is necessary to resolve whether the subject property was still the object of litigation at the time the deed of Transfer of Rights and Interest in favor of respondent was executed; and if so, whether the same should be considered null and void for being violative of the provisions of Article 1491 of the Civil Code.

Article 1491(5) of the Civil Code provides:

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

…

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

… (emphasis supplied)

In its Decision, the RTC made the following disquisition:

[A]ccording to the evidence for the defendant, a Motion for Termination of Proceeding and Discharge of the Executor and Bond dated June 20, 1975 was filed in the case, alleging in paragraphs 3 and 5 thereof, that the executor Angel E. Ordoñez has already turned over to the respective heirs and devisees all their respective shares in accordance with the Project of Partition duly approved by the Court. Thereafter, more than one month from the filing thereof, the Transfer of Rights and Interest was executed on August 20, 1975. Hence, at the time of the execution of the questioned document, it may be concluded that Special Proceedings No. 7185 had been terminated. The property in San Juan is no longer the subject of a litigation and may be alienated by the client to his lawyer as payment of attorney’s fees rendered. (emphasis supplied)

It is clear from the above-quoted ruling of the trial court that its sole basis in concluding that Special Proceedings No. 7185 had been terminated and that the subject property is no longer the object of litigation at the time the deed of Transfer of Rights and Interest was executed on August 20, 1975 is the allegation of the executor, Angel E. Ordoñez, in his Motion18 for Termination of Proceeding and Discharge of the Executor and Bond dated June 20, 1975, that he had already turned over to the respective heirs and devisees all their respective shares in accordance with the project of partition duly approved by the probate court.

The Court finds the trial court’s inference to be without sufficient basis. How can the trial court conclude that Special Proceedings No. 7185 had been terminated and the subject property no longer the object of litigation when no evidence was presented to show that when the Transfer of Rights and Interest was executed, the probate court had already issued an order declaring the estate proceedings closed and terminated? A thing is said to be in litigation not only if there is some contest or litigation over it in court, but also from the moment that it becomes subject to the judicial action of the judge.19 In the present case, there is no proof to show that at the time the deed of Transfer of Rights and Interest was executed, the probate court had issued an order granting the Motion for Termination of Proceeding and Discharge of the Executor and Bond. Since the judge has yet to act on the above-mentioned motion, it follows that the subject property which is the subject matter of the deed of Transfer of Rights and Interest, is still the object of litigation, that is Special Proceedings No. 7185.

Furthermore, we agree with the petitioners’ undisputed contention that when the deed of Transfer of Rights and Interest was executed, the title over the subject lot was still in the name of Adelina Gurrea and that it was only on October 7, 1980 that the title was transferred in the name of Ricardo. The rule is that as long as the order for the distribution of the estate has not been complied with, the probate proceedings cannot be deemed closed and terminated.20 The probate court loses jurisdiction of an estate under administration only after the payment of all the debts and the remaining estate delivered to the heirs entitled to receive the same.21 In the present case, while the subject lot was assigned as Ricardo’s share in the project of partition executed by the heirs of Adelina Gurrea, the title over the subject lot was still in the name of the latter and was not yet conveyed to Ricardo when the Transfer of Rights and Interest was executed. As correctly cited by petitioners, the Court held in Lucero v. Bañaga22 that:

[t]he term "delivery" or tradition has two aspects: (1) the de jure delivery or the execution of deeds of conveyance and (2) the delivery of the material possession (Florendo vs. Foz, 20 Phil. 388, 393). The usual practice is that, if the land to be delivered is in the name of the decedent, the administrator executes a deed, conveying the land to the distributee. That deed, together with the project of partition, the order approving it, the letters of administration and the certification as to the payment of the estate, inheritance and realty taxes, is registered in the corresponding Registry of Deeds. Title would then be issued to the distributee. Thereafter, the administrator or executor

places him in material possession of the land if the same is in the custody of the former.23

It follows that, since at the time of execution of the deed of Transfer of Rights and Interest, the subject property still formed part of the estate of Adelina, and there being no evidence to show that material possession of the property was given to Ricardo, the probate proceedings concerning Adelina’s estate cannot be deemed to have been closed and terminated and the subject property still the object of litigation.

Having been established that the subject property was still the object of litigation at the time the subject deed of Transfer of Rights and Interest was executed, the assignment of rights and interest over the subject property in favor of respondent is null and void for being violative of the provisions of Article 1491 of the Civil Code which expressly prohibits lawyers from acquiring property or rights which may be the object of any litigation in which they may take part by virtue of their profession.

Article 1409 of the same Code provides, among others, that contracts which are expressly prohibited or declared void by law are considered inexistent and void from the beginning.

Anent the second issue, the Court has already held that the said property is still the object of litigation at the time the subject Manifestation and Transfer of Rights and Interest were executed and, thus, may not be acquired by respondent pursuant to the provisions of Article 1491 of the Civil Code.

Considering that the subject Transfer of Rights and Interest is null and void, the Court no longer finds it necessary to resolve the third issue.

As to the fourth issue, it follows that respondent’s title over the subject property should be cancelled and the property reconveyed to the estate of Ricardo, the same to be distributed to the latter’s heirs. This is without prejudice, however, to respondent’s right to claim his attorney’s fees from the estate of Ricardo, it being undisputed that he rendered legal services for the latter.

Anent the last issue, the Court is not persuaded by petitioners’ prayer for the grant of attorney’s fees in an amount as the Court may determine. The general rule is that attorney’s fees cannot be recovered as part of damages because no premium should be placed on the right to litigate.24 Article 2208 of the Civil Code provides that in the absence of stipulation, attorney’s fees and expenses of litigation, other than judicial costs, cannot be recovered, except:

(1) When exemplary damages are awarded;

(2) When the defendant’s act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest;(3) In criminal cases of malicious prosecution against the plaintiff;(4) In case of a clearly unfounded civil action or proceeding against the plaintiff;(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff’s plainly valid, just and demandable claim;(6) In actions for legal support;(7) In actions for the recovery of wages of household helpers, laborers and skilled workers;(8) In actions for indemnity under workmen’s compensation and employer’s liability laws;(9) In a separate civil action to recover civil liability arising from a crime;(10) When at least double judicial costs are awarded;1avvphil.net(11) In any other case where the court deems it just and equitable that attorney’s fees and expenses of litigation should be recovered.

The Court finds that the present case does not fall under any of the enumerated exceptions. It is settled that even if a claimant is compelled to litigate with third persons or to incur expenses to protect its rights, still attorney’s fees may not be awarded where no sufficient showing of bad faith could be reflected in a party’s persistence in a case other than an erroneous conviction of the righteousness of his cause.25 In the present case, even granting that petitioners were compelled to litigate and incur expenses to protect their interests, attorney’s fees may not be awarded in their favor because there is no sufficient showing that respondent acted in gross and evident bad faith in refusing to satisfy their claim, in view of his erroneous belief and judgment that he has lawfully acquired the subject property.

As to petitioners’ entitlement to other forms of damages, while the complaint filed by herein petitioners with the trial court contains a general prayer for the grant of other reliefs, the rule is that evidence should be taken of the damages claimed and the court should determine who are the persons entitled to such indemnity.26 The power of the courts to grant damages and attorney’s fees demands factual, legal and equitable justification; its basis cannot be left to speculation or conjecture.27 In the present case, no allegation, much less, evidence was presented by petitioners to prove that they are entitled to damages.

WHEREFORE, the assailed Decision and Resolution of the Court of Appeals in CA-G.R. No. CV No. 56210 together with the Decision dated July 5, 1996 of the Regional Trial Court of Pasig City, Branch 268 in Civil Case No. 47543 are REVERSED and SET ASIDE. A new judgment is rendered canceling Transfer Certificate of Title No. 24474 in the name of respondent Enrique P. Suplico and reinstating Transfer Certificate of Title No. 24473 in the name of Ricardo Gurrea.

No pronouncement as to costs. SO ORDERED.

MARIA B. CHING, Petitioner, vs. JOSEPH C. GOYANKO,

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

Respondents claim that in 1961, their parents acquired a 661 square meter property located at 29 F. Cabahug St., Cebu City but that as they (the parents) were Chinese citizens at the time, the property was registered in the name of their aunt, Sulpicia Ventura (Sulpicia).

On May 1, 1993, Sulpicia executed a deed of sale [2] over the property in favor of respondents’ father Goyanko. In turn, Goyanko executed on October 12, 1993 a deed of sale [3] over the property in favor of his common-law-wife-herein petitioner Maria B. Ching. Transfer Certificate of Title (TCT) No. 138405 was thus issued in petitioner’s name.

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

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

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

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

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

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

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

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

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

1. . . . when it dismissed the complaint a quo . . . , in effect, sustaining the sale of the subject property between Joseph, Sr. and the defendant-appellee, despite the proliferation in the records and admissions by both parties that defendant-appellee was the "mistress" or "common-law wife" of Joseph, Sr..

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

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

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

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

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

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

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

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

I. . . . APPLYING THE STATE POLICY ON PROHIBITION AGAINST CONVEYANCES AND TRANSFERS OF PROPERTIES BETWEEN LEGITIMATE AND COMMON LAW SPOUSES ON THE SUBJECT PROPERTY, THE SAME BEING FOUND BY THE COURT A QUO, AS THE EXCLUSIVE PROPERTY OF PETITIONER, AND THAT THE SAME

WAS NEVER PART OF THE CONJUGAL PROPERTY OF THE MARRIAGE BETWEEN RESPONDENTS’ MOTHER EPIFANIA GOYANKO AND PETITIONER’S COMMON LAW HUSBAND, JOSEPH GOYANKO, SR., NOR THE EXCLUSIVE OR CAPITAL PROPERTY OF THE LATTER AT ANYTIME BEFORE THE SAME WAS VALIDLY ACQUIRED BY PETITIONER.

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

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

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

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

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

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

(1) Those whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy;(2) Those which are absolutely simulated or fictitious;(3) Those whose cause or object did not exist at the time of the transaction;(4) Those whose object is outside the commerce of men;(5) Those which contemplate an impossible service;(6) Those where the intention of the parties relative to the principal object of the contract cannot be ascertained;(7) Those expressly prohibited or declared void by law.

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

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

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

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

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

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

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

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

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

donations between spouses during marriage are prohibited. And this is so because if transfers or conveyances between spouses were allowed during marriage, that would destroy the system of conjugal partnership, a basic policy in civil law. It was also designed to prevent the exercise of undue influence by one spouse over the other, as well as to protect the institution of marriage, which is the cornerstone of family law. The prohibitions apply to a couple living as husband and wife without benefit of marriage, otherwise, "the condition of those who incurred guilt would turn out to be better than those in legal union." Those provisions are dictated by public interest and their criterion must be imposed upon the will of the parties. . . . [12] (Italics in the original; emphasis and underscoring supplied)

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

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

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

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

does not persuade.

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

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

WHEREFORE, the petition is DENIED for lack of merit.

Costs against petitioner.

SO ORDERED

BERCERO, Petitioner, vs. CAPITOL DEVELOPMENT CORPORATION,1

Before the Court is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court assailing the Decision2 dated February 11, 2002 of the Court of Appeals (CA) in CA-G.R. CV No. 56484 which set aside the Decision3 dated May 27, 1996 of the Regional Trial Court, Branch 88, Quezon City (RTC-Branch 88) in Civil Case No. Q-92-11732, and the CA Resolution4 dated August 29, 2002 which denied petitioner’s Motion for Reconsideration.

The factual background of the case is as follows:

On January 31, 1983, Capitol Development Corporation (respondent) leased its commercial building and lot located at 1194 EDSA, Quezon City to R.C. Nicolas Merchandising, Inc., (R.C. Nicolas) for a 10-year period or until January 31, 1993 with the option for the latter to make additional improvements in the property to suit its business and to sublease portions thereof to third parties.5

R.C. Nicolas converted the space into a bowling and billiards center and subleased separate portions thereof to Midland Commercial Corporation, Jerry Yu, Romeo Tolentino, Julio Acuin, Nicanor Bas, and Pedro T. Bercero (petitioner). Petitioner’s sublease contract with R.C. Nicolas was for a three-year period or until August 16, 1988.6

Meanwhile, for failure to pay rent, respondent filed an ejectment case against R.C. Nicolas before the Metropolitan Trial Court, Branch 41, Quezon City (MeTC-Branch 41), docketed as Civil Case No. 52933. Respondent also impleaded the sub-lessees of R.C. Nicolas as parties-defendants.

During the pendency of Civil Case No. 52933, several sub-lessees including petitioner, entered into a compromise settlement with respondent.7 In the compromise settlement, the sub-lessees recognized respondent as the lawful and absolute owner of the property and that the contract between respondent and R.C. Nicolas had been lawfully terminated because of the latter’s non-payment of rent; and that the sub-lessees voluntarily surrendered possession of the premises to respondent; that the sub-lessees directly executed lease contracts with respondent considering the termination of leasehold rights of R.C. Nicolas.

Petitioner entered into a lease contract with respondent for a three-year period, from August 16, 1988 to August 31, 1991.8

On October 21, 1988, respondent and petitioner, as well as several other sub-lessees of R.C. Nicolas, filed a Joint Manifestation and Motion in Civil Case No. 52933, manifesting to the MeTC-Branch 41 that they entered into a compromise settlement and

moved that the names of the sub-lessees as parties-defendants be dropped and excluded.9

On November 14, 1988, R.C. Nicolas filed a complaint for ejectment and collection of unpaid rentals against petitioner before the Metropolitan Trial Court, Branch 39, Quezon City (MeTC-Branch 39), docketed as Civil Case No. 0668.10 On April 18, 1989, MeTC-Branch 39 rendered a Decision in favor of R.C. Nicolas and ordered the eviction of petitioner from the leased premises.11

Dissatisfied, petitioner filed an appeal before the Regional Trial Court, Branch 78, Quezon City (RTC-Branch 78). R.C. Nicolas filed a Motion for Execution Pending Appeal which was opposed by petitioner.

In an Order dated October 4, 1990, RTC-Branch 78 directed the issuance of a writ of execution pending appeal since petitioner failed to file a

supersedeas bond and periodically deposit the rentals due during the pendency of the appeal.12 Accordingly, on October 22, 1990 a writ of execution was issued.13 Sometime in November 1990, petitioner was evicted from the leased premises.14

Petitioner assailed the Order dated October 4, 1990 in a petition for certiorari with the CA, docketed as CA-G.R. SP No. 23275, but the petition was denied due course and dismissed by the CA in a Decision dated December 28, 1990.15

On September 3, 1991, respondent filed a Manifestation in Civil Case No. 52933 urging MeTC-Branch 41 to order R.C. Nicolas to desist from harassing respondent and petitioner, and to confirm respondent’s right of possession to the premises in the light of the ejectment case filed by R.C. Nicolas against petitioner.16

Two months later, or on November 13, 1991, MeTC-Branch 41 rendered a Decision in Civil Case No. 52933 in favor of respondent and ordered R.C. Nicolas to pay its unpaid rentals from September 1986 until October 1988.17

Meanwhile, since his eviction in November 1990, petitioner made repeated demands on respondent for the restoration of his possession of the commercial space leased to him to no avail. 18

Thus, on March 24, 1992, petitioner filed a complaint for sum of money with attachment and mandatory injunction with damages against the respondent before the RTC-Branch 88, docketed as Civil Case No. Q-92-11732.19

On May 27, 1996, RTC-Branch 88 rendered its Decision20 in favor of petitioner, the dispositive portion of which reads:

WHEREFORE, premises rendered, this Court finds for the plaintiff and orders the defendant:

1) to restore plaintiff’s possession of the rented building located at 1194 EDSA, Quezon City for the next three years effective from receipt of the copy of this decision;2) to pay the plaintiff the following:a. P480,000.00 – actual damagesb. P 50,000.00 – moral damagesc. P 50,000.00 – exemplary damagesd. P 50,000.00 – attorney’s fees3) to pay the costs.

Accordingly, the counterclaim filed by the defendant Capitol Development Corporation is hereby DISMISSED.

SO ORDERED.21

The RTC held that respondent miserably failed to comply with its obligation under Article 1654 of the New Civil Code due to its apathy and failure to extend any assistance to the petitioner and was, therefore, liable for the restoration of petitioner’s possession and the payment of actual damages corresponding to lost profit, cash, generator, and other items petitioner lost due to the eviction, as well as moral and exemplary damages and attorney’s fees.

Dissatisfied, respondent filed an appeal with the CA, docketed as CA-G.R. CV No. 56484.

On February 11, 2002, the CA rendered its Decision22 setting aside the Decision of RTC-Branch 88, to wit:

WHEREFORE, premises considered, the Decision dated May 27, 1996 of the Regional Trial Court of Quezon City, Branch 88, in Civil Case No. Q-92-11732, is hereby REVERSED and SET ASIDE. No pronouncement as to costs.

Applying the equitable principle of estoppel, the CA held that although respondent as lessor failed to ensure the peaceful possession of petitioner as its lessee in the subject premises, the latter is not entitled to damages since he was aware of the facts which led to his ouster from the subject premises; and that petitioner was well aware that respondent had a 10-year lease contract with R.C. Nicolas which was subject of an ejectment suit that was still pending litigation when petitioner executed a lease contract with respondent.

On March 5, 2002, petitioner filed his Motion for Reconsideration.23 On August 29, 2002, the CA issued its Resolution denying petitioner’s Motion for Reconsideration.24

Hence, the present Petition anchored on the following grounds:

I - THE HONORABLE COURT OF APPEALS CLEARLY COMMITTED GRAVE ERROR AND ABUSE OF DISCRETION IN APPLYING THE PRINCIPLE OF ESTOPPEL TO PETITIONER

II - THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ERROR BY DISREGARDING THE LAW, JURISPRUDENCE AND EVIDENCE IN DELETING THE AWARD MADE BY THE LOWER COURT OF DAMAGES AND REVERSING THE THREE (3) YEAR POSSESSION OF THE SUBJECT PROPERTY GIVEN TO THE PETITIONER25

Petitioner argues that the principle of estoppel is inapplicable because he dealt with respondent in good faith and relied upon the latter’s representations that the lease of R.C. Nicolas was already terminated at the time he contracted with the latter; that respondent assured him that it had a valid and legal right to enter into a new lease contract with him; that he is entitled to damages since respondent did not even lift a finger to protect him when R.C. Nicolas filed an ejectment case against him; and that respondent acted in utter bad faith when it still refused to restore his possession after he was evicted in November 1990, notwithstanding that his lease contract with respondent was valid until August 31, 1991.

Respondent, on the other hand, counters that the CA correctly applied the principle of estoppel since petitioner voluntarily entered into a lease agreement with respondent despite full knowledge that the latter’s lease with R.C. Nicolas over the subject premise had yet to be judicially terminated; and that petitioner knew that at the time he contracted with respondent, he still had existing obligations to R.C. Nicolas relating to their sub-lease agreement.

Under Article 1654 (3) of the New Civil Code, to wit:

Art. 1654. The lessor is obliged:

x x x x

(3) To maintain the lessee in the peaceful and adequate enjoyment of the lease for the entire duration of the contract.

it is the duty of the lessor to place the lessee in the legal possession of the premises and to maintain the peaceful possession thereof during the entire term of the lease.26 To

fully appreciate the importance of this provision, the comment of Manresa on said article is worth mentioning:

The lessor must see that the enjoyment is not interrupted or disturbed, either by others’ acts x x x or by his own. By his own acts, because, being the person principally obligated by the contract, he would openly violate it if, in going back on his agreement, he should attempt to render ineffective in practice the right in the thing he had granted to the lessee; and by others’ acts, because he must guarantee the right he created, for he is obligated to give warranty in the manner we have set forth in our commentary on article 1553, and, in this sense, it is incumbent upon him to protect the lessee in the latter’s peaceful enjoyment.27

The obligation of the lessor arises only when acts, termed as legal trespass (perturbacion de derecho), disturb, dispute, object to, or place difficulties in the way of the lessee’s peaceful enjoyment of the premises that in some manner or other cast doubt upon the right of the lessor by virtue of which the lessor himself executed the lease, in which case the lessor is obligated to answer for said act of trespass.28 The lessee has the right to be respected in his possession and should he be disturbed therein, he shall be restored to said possession by the means established by the law or by the Rules of Court.29 Possession is not protection against a right but against the exercise of a right by one’s own authority.30

Petitioner claims that respondent as lessor was obliged to restore his possession following his eviction from the premises. The Court disagrees.

Void are all contracts in which the cause or object does not exist at the time of the transaction.31 In the present case, the lease contract between petitioner and respondent is void for having an inexistent cause - respondent did not have the right to lease the property to petitioner considering that its lease contract with R.C. Nicolas was still valid and subsisting, albeit pending litigation. Having granted to R.C. Nicolas the right to use and enjoy its property from 1983 to 1993, respondent could not grant that same right to petitioner in 1988. When petitioner entered into a lease contract with respondent, the latter was still obliged to maintain R.C. Nicolas’s peaceful and adequate possession and enjoyment of its lease for the 10-year duration of the contract.

Respondent’s unilateral rescission of its lease contract with R.C. Nicolas, without waiting for the final outcome of the ejectment case it filed against the latter, is unlawful. A lease is a reciprocal contract and its continuance, effectivity or fulfillment cannot be made to depend exclusively upon the free and uncontrolled choice of just one party to a lease contract.32 Thus, the lease contract entered into between petitioner and respondent, during the pendency of the lease contract with R.C. Nicolas, is void.

There is no merit to petitioner’s claim of good faith in dealing with respondent. Good faith is ordinarily used to describe that state of mind denoting "honesty of intention, and

freedom from knowledge of circumstances which ought to put the holder upon inquiry;33 an honest intention to abstain from taking any unconscientious advantage of another, even through technicalities of law, together with absence of all information, notice, or benefit or belief of facts which render the transaction unconscientious."34 Being privy to the pendency of the ejectment case involving the leasehold rights of R.C. Nicolas since he was impleaded as a party-defendant in said ejectment case, petitioner cannot feign innocence of the existence thereof. Petitioner was fully aware that R.C. Nicolas had a lease contract with respondent which was subject of a pending litigation.

It is well-settled that parties to a void agreement cannot expect the aid of the law; the courts leave them as they are, because they are deemed in pari delicto or "in equal fault".35 No suit can be maintained for its specific performance, or to recover the property agreed to be sold or delivered, or the money agreed to be paid, or damages for its violation, and no affirmative relief of any kind will be given to one against the other.36 Each must bear the consequences of his own acts.37 They will be left where they have placed themselves since they did not come into court with clean hands.

In sum, the underlying case for sum of money filed by petitioner against respondent cannot prosper, his right of action being anchored on a contract which, for all intents and purposes, has no legal existence and effect from the start. A void or inexistent contract is equivalent to nothing; it is absolutely wanting in civil effects; it cannot be the basis of actions to enforce compliance.38

WHEREFORE, the present petition is DENIED for lack of merit. The assailed Decision and Resolution of the Court of Appeals in CA-G.R. CV No. 56484 are AFFIRMED. Petitioner’s Complaint and respondent’s Counterclaim in Civil Case No. Q-92-11732 are DISMISSED. Costs against petitioner.

SO ORDERED.

JACOBUS BERNHARD HULST, petitioner, vs. PR BUILDERS, INC.,.

Before the Court is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court assailing the Decision1 dated October 30, 2002 of the Court of Appeals (CA) in CA-G.R. SP No. 60981.

The facts:

Jacobus Bernhard Hulst (petitioner) and his spouse Ida Johanna Hulst-Van Ijzeren (Ida), Dutch nationals, entered into a Contract to Sell with PR Builders, Inc. (respondent), for the purchase of a 210-sq m residential unit in respondent's townhouse project in Barangay Niyugan, Laurel, Batangas.

When respondent failed to comply with its verbal promise to complete the project by June 1995, the spouses Hulst filed before the Housing and Land Use Regulatory Board (HLURB) a complaint for rescission of contract with interest, damages and attorney's fees, docketed as HLRB Case No. IV6-071196-0618.

On April 22, 1997, HLURB Arbiter Ma. Perpetua Y. Aquino (HLURB Arbiter) rendered a Decision2 in favor of spouses Hulst, the dispositive portion of which reads:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the complainant, rescinding the Contract to Sell and ordering respondent to:1) Reimburse complainant the sum of P3,187,500.00, representing the purchase price paid by the complainants to P.R. Builders, plus interest thereon at the rate of twelve percent (12%) per annum from the time complaint was filed;2) Pay complainant the sum of P297,000.00 as actual damages;3) Pay complainant the sum of P100,000.00 by way of moral damages;4) Pay complainant the sum of P150,000.00 as exemplary damages;5) P50,000.00 as attorney's fees and for other litigation expenses; and6) Cost of suit.SO ORDERED.3

Meanwhile, spouses Hulst divorced. Ida assigned her rights over the purchased property to petitioner.4 From then on, petitioner alone pursued the case.

On August 21, 1997, the HLURB Arbiter issued a Writ of Execution addressed to the Ex-Officio Sheriff of the Regional Trial Court of Tanauan, Batangas directing the latter to execute its judgment.5

On April 13, 1998, the Ex-Officio Sheriff proceeded to implement the Writ of Execution. However, upon complaint of respondent with the CA on a Petition for Certiorari and Prohibition, the levy made by the Sheriff was set aside, requiring the

Sheriff to levy first on respondent's personal properties.6 Sheriff Jaime B. Ozaeta (Sheriff) tried to implement the writ as directed but the writ was returned unsatisfied.7

On January 26, 1999, upon petitioner's motion, the HLURB Arbiter issued an Alias Writ of Execution.8

On March 23, 1999, the Sheriff levied on respondent's 15 parcels of land covered by 13 Transfer Certificates of Title (TCT)9 in Barangay Niyugan, Laurel, Batangas.10

In a Notice of Sale dated March 27, 2000, the Sheriff set the public auction of the levied properties on April 28, 2000 at 10:00 a.m..11

Two days before the scheduled public auction or on April 26, 2000, respondent filed an Urgent Motion to Quash Writ of Levy with the HLURB on the ground that the Sheriff made an overlevy since the aggregate appraised value of the levied properties at P6,500.00 per sq m is P83,616,000.00, based on the Appraisal Report12 of Henry Hunter Bayne Co., Inc. dated December 11, 1996, which is over and above the judgment award.13

At 10:15 a.m. of the scheduled auction date of April 28, 2000, respondent's counsel objected to the conduct of the public auction on the ground that respondent's Urgent Motion to Quash Writ of Levy was pending resolution. Absent any restraining order from the HLURB, the Sheriff proceeded to sell the 15 parcels of land. Holly Properties Realty Corporation was the winning bidder for all 15 parcels of land for the total amount of P5,450,653.33. The sum of P5,313,040.00 was turned over to the petitioner in satisfaction of the judgment award after deducting the legal fees.14

At 4:15 p.m. of the same day, while the Sheriff was at the HLURB office to remit the legal fees relative to the auction sale and to submit the Certificates of Sale15 for the signature of HLURB Director Belen G. Ceniza (HLURB Director), he received the Order dated April 28, 2000 issued by the HLURB Arbiter to suspend the proceedings on the matter.16

Four months later, or on August 28, 2000, the HLURB Arbiter and HLURB Director issued an Order setting aside the sheriff's levy on respondent's real properties,17 reasoning as follows:

While we are not making a ruling that the fair market value of the levied properties is PhP6,500.00 per square meter (or an aggregate value of PhP83,616,000.00) as indicated in the Hunter Baynes Appraisal Report, we definitely cannot agree with the position of the Complainants and the Sheriff that the aggregate value of the 12,864.00-square meter levied properties is only around PhP6,000,000.00. The disparity between the two valuations are [sic] so

egregious that the Sheriff should have looked into the matter first before proceeding with the execution sale of the said properties, especially when the auction sale proceedings was seasonably objected by Respondent's counsel, Atty. Noel Mingoa. However, instead of resolving first the objection timely posed by Atty. Mingoa, Sheriff Ozaete totally disregarded the objection raised and, posthaste, issued the corresponding Certificate of Sale even prior to the payment of the legal fees (pars. 7 & 8, Sheriff's Return).

While we agree with the Complainants that what is material in an execution sale proceeding is the amount for which the properties were bidded and sold during the public auction and that, mere inadequacy of the price is not a sufficient ground to annul the sale, the court is justified to intervene where the inadequacy of the price shocks the conscience (Barrozo vs. Macaraeg, 83 Phil. 378). The difference between PhP83,616,000.00 and Php6,000,000.00 is PhP77,616,000.00 and it definitely invites our attention to look into the proceedings had especially so when there was only one bidder, the HOLLY PROPERTIES REALTY CORPORATION represented by Ma, Chandra Cacho (par. 7, Sheriff's Return) and the auction sale proceedings was timely objected by Respondent's counsel (par. 6, Sheriff's Return) due to the pendency of the Urgent Motion to Quash the Writ of Levy which was filed prior to the execution sale.

Besides, what is at issue is not the value of the subject properties as determined during the auction sale, but the determination of the value of the properties levied upon by the Sheriff taking into consideration Section 9(b) of the 1997 Rules of Civil Procedure x x x.

x x x x

It is very clear from the foregoing that, even during levy, the Sheriff has to consider the fair market value of the properties levied upon to determine whether they are sufficient to satisfy the judgment, and any levy in excess of the judgment award is void (Buan v. Court of Appeals, 235 SCRA 424).

x x x x18 (Emphasis supplied).

The dispositive portion of the Order reads:

WHEREFORE, the levy on the subject properties made by the Ex-Officio Sheriff of the RTC of Tanauan, Batangas, is hereby SET ASIDE and the said Sheriff is hereby directed to levy instead Respondent's real properties that are reasonably sufficient to enforce its final and executory judgment, this time, taking into consideration not only the value of the properties as indicated in their respective tax declarations, but also all the other determinants at arriving at a fair market value, namely: the cost of acquisition, the current value of like

properties, its actual or potential uses, and in the particular case of lands, their size, shape or location, and the tax declarations thereon.

SO ORDERED.19

A motion for reconsideration being a prohibited pleading under Section 1(h), Rule IV of the 1996 HLURB Rules and Procedure, petitioner filed a Petition for Certiorari and Prohibition with the CA on September 27, 2000.

On October 30, 2002, the CA rendered herein assailed Decision20 dismissing the petition. The CA held that petitioner's insistence that Barrozo v. Macaraeg21 does not apply since said case stated that "when there is a right to redeem inadequacy of price should not be material" holds no water as what is obtaining in this case is not "mere inadequacy," but an inadequacy that shocks the senses; that Buan v. Court of Appeals22 properly applies since the questioned levy covered 15 parcels of land posited to have an aggregate value of P83,616,000.00 which shockingly exceeded the judgment debt of only around P6,000,000.00.

Without filing a motion for reconsideration,23 petitioner took the present recourse on the sole ground that:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE ARBITER'S ORDER SETTING ASIDE THE LEVY MADE BY THE SHERIFF ON THE SUBJECT PROPERTIES.24

Before resolving the question whether the CA erred in affirming the Order of the HLURB setting aside the levy made by the sheriff, it behooves this Court to address a matter of public and national importance which completely escaped the attention of the HLURB Arbiter and the CA: petitioner and his wife are foreign nationals who are disqualified under the Constitution from owning real property in their names.

Section 7 of Article XII of the 1987 Constitution provides:

Sec. 7. Save in cases of hereditary succession, no private lands shall be transferred or conveyed except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain. (Emphasis supplied).

The capacity to acquire private land is made dependent upon the capacity to acquire or hold lands of the public domain. Private land may be transferred or conveyed only to individuals or entities "qualified to acquire lands of the public domain." The 1987 Constitution reserved the right to participate in the disposition, exploitation, development and utilization of lands of the public domain for Filipino citizens25 or corporations at least 60 percent of the capital of which is owned by Filipinos.26 Aliens,

whether individuals or corporations, have been disqualified from acquiring public lands; hence, they have also been disqualified from acquiring private lands.27

Since petitioner and his wife, being Dutch nationals, are proscribed under the Constitution from acquiring and owning real property, it is unequivocal that the Contract to Sell entered into by petitioner together with his wife and respondent is void. Under Article 1409 (1) and (7) of the Civil Code, all contracts whose cause, object or purpose is contrary to law or public policy and those expressly prohibited or declared void by law are inexistent and void from the beginning. Article 1410 of the same Code provides that the action or defense for the declaration of the inexistence of a contract does not prescribe. A void contract is equivalent to nothing; it produces no civil effect.28

It does not create, modify or extinguish a juridical relation.29

Generally, parties to a void agreement cannot expect the aid of the law; the courts leave them as they are, because they are deemed in pari delicto or "in equal fault."30 In pari delicto is "a universal doctrine which holds that no action arises, in equity or at law, from an illegal contract; no suit can be maintained for its specific performance, or to recover the property agreed to be sold or delivered, or the money agreed to be paid, or damages for its violation; and where the parties are in pari delicto, no affirmative relief of any kind will be given to one against the other."31

This rule, however, is subject to exceptions32 that permit the return of that which may have been given under a void contract to: (a) the innocent party (Arts. 1411-1412, Civil Code);33 (b) the debtor who pays usurious interest (Art. 1413, Civil Code);34 (c) the party repudiating the void contract before the illegal purpose is accomplished or before damage is caused to a third person and if public interest is subserved by allowing recovery (Art. 1414, Civil Code);35 (d) the incapacitated party if the interest of justice so demands (Art. 1415, Civil Code);36 (e) the party for whose protection the prohibition by law is intended if the agreement is not illegal per se but merely prohibited and if public policy would be enhanced by permitting recovery (Art. 1416, Civil Code);37 and (f) the party for whose benefit the law has been intended such as in price ceiling laws (Art. 1417, Civil Code)38 and labor laws (Arts. 1418-1419, Civil Code).39

It is significant to note that the agreement executed by the parties in this case is a Contract to Sell and not a contract of sale. A distinction between the two is material in the determination of when ownership is deemed to have been transferred to the buyer or vendee and, ultimately, the resolution of the question on whether the constitutional proscription has been breached.

In a contract of sale, the title passes to the buyer upon the delivery of the thing sold. The vendor has lost and cannot recover the ownership of the property until and unless the contract of sale is itself resolved and set aside.40 On the other hand, a contract to sell is akin to a conditional sale where the efficacy or obligatory force of the vendor's

obligation to transfer title is subordinated to the happening of a future and uncertain event, so that if the suspensive condition does not take place, the parties would stand as if the conditional obligation had never existed.41 In other words, in a contract to sell, the prospective seller agrees to transfer ownership of the property to the buyer upon the happening of an event, which normally is the full payment of the purchase price. But even upon the fulfillment of the suspensive condition, ownership does not automatically transfer to the buyer. The prospective seller still has to convey title to the prospective buyer by executing a contract of absolute sale.42

Since the contract involved here is a Contract to Sell, ownership has not yet transferred to the petitioner when he filed the suit for rescission. While the intent to circumvent the constitutional proscription on aliens owning real property was evident by virtue of the execution of the Contract to Sell, such violation of the law did not materialize because petitioner caused the rescission of the contract before the execution of the final deed transferring ownership.

Thus, exception (c) finds application in this case. Under Article 1414, one who repudiates the agreement and demands his money before the illegal act has taken place is entitled to recover. Petitioner is therefore entitled to recover what he has paid, although the basis of his claim for rescission, which was granted by the HLURB, was not the fact that he is not allowed to acquire private land under the Philippine Constitution. But petitioner is entitled to the recovery only of the amount of P3,187,500.00, representing the purchase price paid to respondent. No damages may be recovered on the basis of a void contract; being nonexistent, the agreement produces no juridical tie between the parties involved.43 Further, petitioner is not entitled to actual as well as interests thereon,44 moral and exemplary damages and attorney's fees.

The Court takes into consideration the fact that the HLURB Decision dated April 22, 1997 has long been final and executory. Nothing is more settled in the law than that a decision that has acquired finality becomes immutable and unalterable and may no longer be modified in any respect even if the modification is meant to correct erroneous conclusions of fact or law and whether it was made by the court that rendered it or by the highest court of the land.45 The only recognized exceptions to the general rule are the correction of clerical errors, the so-called nunc pro tunc entries which cause no prejudice to any party, void judgments, and whenever circumstances transpire after the finality of the decision rendering its execution unjust and inequitable.46 None of the exceptions is present in this case. The HLURB decision cannot be considered a void judgment, as it was rendered by a tribunal with jurisdiction over the subject matter of the complaint.47

Ineluctably, the HLURB Decision resulted in the unjust enrichment of petitioner at the expense of respondent. Petitioner received more than what he is entitled to recover under the circumstances.

Article 22 of the Civil Code which embodies the maxim, nemo ex alterius incommode debet lecupletari (no man ought to be made rich out of another's injury), states:

Art. 22. Every person who through an act of performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him.

The above-quoted article is part of the chapter of the Civil Code on Human Relations, the provisions of which were formulated as basic principles to be observed for the rightful relationship between human beings and for the stability of the social order; designed to indicate certain norms that spring from the fountain of good conscience; guides for human conduct that should run as golden threads through society to the end that law may approach its supreme ideal which is the sway and dominance of justice.48 There is unjust enrichment when a person unjustly retains a benefit at the loss of another, or when a person retains money or property of another against the fundamental principles of justice, equity and good conscience.49

A sense of justice and fairness demands that petitioner should not be allowed to benefit from his act of entering into a contract to sell that violates the constitutional proscription.

This is not a case of equity overruling or supplanting a positive provision of law or judicial rule. Rather, equity is exercised in this case "as the complement of legal jurisdiction [that] seeks to reach and to complete justice where courts of law, through the inflexibility of their rules and want of power to adapt their judgments to the special circumstances of cases, are incompetent to do so."50

The purpose of the exercise of equity jurisdiction in this case is to prevent unjust enrichment and to ensure restitution. Equity jurisdiction aims to do complete justice in cases where a court of law is unable to adapt its judgments to the special circumstances of a case because of the inflexibility of its statutory or legal jurisdiction.51

The sheriff delivered to petitioner the amount of P5,313,040.00 representing the net proceeds (bidded amount is P5,450,653.33) of the auction sale after deducting the legal fees in the amount of P137,613.33.52 Petitioner is only entitled to P3,187,500.00, the amount of the purchase price of the real property paid by petitioner to respondent under the Contract to Sell. Thus, the Court in the exercise of its equity jurisdiction may validly order petitioner to return the excess amount of P2,125,540.00.

The Court shall now proceed to resolve the single issue raised in the present petition: whether the CA seriously erred in affirming the HLURB Order setting aside the levy made by the Sheriff on the subject properties.

Petitioner avers that the HLURB Arbiter and Director had no factual basis for pegging the fair market value of the levied properties at P6,500.00 per sq m or P83,616,000.00; that reliance on the appraisal report was misplaced since the appraisal was based on the value of land in neighboring developed subdivisions and on the assumption that the residential unit appraised had already been built; that the Sheriff need not determine the fair market value of the subject properties before levying on the same since what is material is the amount for which the properties were bidded and sold during the public auction; that the pendency of any motion is not a valid ground for the Sheriff to suspend the execution proceedings and, by itself, does not have the effect of restraining the Sheriff from proceeding with the execution.

Respondent, on the other hand, contends that while it is true that the HLURB Arbiter and Director did not categorically state the exact value of the levied properties, said properties cannot just amount to P6,000,000.00; that the HLURB Arbiter and Director correctly held that the value indicated in the tax declaration is not the sole determinant of the value of the property.

The petition is impressed with merit.

If the judgment is for money, the sheriff or other authorized officer must execute the same pursuant to the provisions of Section 9, Rule 39 of the Revised Rules of Court, viz:

Sec. 9. Execution of judgments for money, how enforced. –

(a) Immediate payment on demand. - The officer shall enforce an execution of a judgment for money by demanding from the judgment obligor the immediate payment of the full amount stated in the writ of execution and all lawful fees. x x x

(b) Satisfaction by levy. - If the judgment obligor cannot pay all or part of the obligation in cash, certified bank check or other mode of payment acceptable to the judgment obligee, the officer shall levy upon the properties of the judgment obligor of every kind and nature whatsoever which may be disposed of for value and not otherwise exempt from execution, giving the latter the option to immediately choose which property or part thereof may be levied upon, sufficient to satisfy the judgment. If the judgment obligor does not exercise the option, the officer shall first levy on the personal properties, if any, and then on the real properties if the personal properties are insufficient to answer for the judgment.

The sheriff shall sell only a sufficient portion of the personal or real property of the judgment obligor which has been levied upon.

When there is more property of the judgment obligor than is sufficient to satisfy the judgment and lawful fees, he must sell only so much of the personal or real property as is sufficient to satisfy the judgment and lawful fees.

Real property, stocks, shares, debts, credits, and other personal property, or any interest in either real or personal property, may be levied upon in like manner and with like effect as under a writ of attachment (Emphasis supplied).53

Thus, under Rule 39, in executing a money judgment against the property of the judgment debtor, the sheriff shall levy on all property belonging to the judgment debtor as is amply sufficient to satisfy the judgment and costs, and sell the same paying to the judgment creditor so much of the proceeds as will satisfy the amount of the judgment debt and costs. Any excess in the proceeds shall be delivered to the judgment debtor unless otherwise directed by the judgment or order of the court.54

Clearly, there are two stages in the execution of money judgments. First, the levy and then the execution sale.

Levy has been defined as the act or acts by which an officer sets apart or appropriates a part or the whole of a judgment debtor's property for the purpose of satisfying the command of the writ of execution.55 The object of a levy is to take property into the custody of the law, and thereby render it liable to the lien of the execution, and put it out of the power of the judgment debtor to divert it to any other use or purpose.56

On the other hand, an execution sale is a sale by a sheriff or other ministerial officer under the authority of a writ of execution of the levied property of the debtor.57

In the present case, the HLURB Arbiter and Director gravely abused their discretion in setting aside the levy conducted by the Sheriff for the reason that the auction sale conducted by the sheriff rendered moot and academic the motion to quash the levy. The HLURB Arbiter lost jurisdiction to act on the motion to quash the levy by virtue of the consummation of the auction sale. Absent any order from the HLURB suspending the auction sale, the sheriff rightfully proceeded with the auction sale. The winning bidder had already paid the winning bid. The legal fees had already been remitted to the HLURB. The judgment award had already been turned over to the judgment creditor. What was left to be done was only the issuance of the corresponding certificates of sale to the winning bidder. In fact, only the signature of the HLURB Director for that purpose was needed58 – a purely ministerial act.

A purely ministerial act or duty is one which an officer or tribunal performs in a given state of facts, in a prescribed manner, in obedience to the mandate of a legal authority, without regard for or the exercise of his own judgment upon the propriety or

impropriety of the act done. If the law imposes a duty upon a public officer and gives him the right to decide how or when the duty shall be performed, such duty is discretionary and not ministerial. The duty is ministerial only when the discharge of the same requires neither the exercise of official discretion nor judgment.59 In the present case, all the requirements of auction sale under the Rules have been fully complied with to warrant the issuance of the corresponding certificates of sale.

And even if the Court should go into the merits of the assailed Order, the petition is meritorious on the following grounds:

Firstly, the reliance of the HLURB Arbiter and Director, as well as the CA, on Barrozo v. Macaraeg60 and Buan v. Court of Appeals61 is misplaced.

The HLURB and the CA misconstrued the Court's pronouncements in Barrozo. Barrozo involved a judgment debtor who wanted to repurchase properties sold at execution beyond the one-year redemption period. The statement of the Court in Barrozo, that "only where such inadequacy shocks the conscience the courts will intervene," is at best a mere obiter dictum. This declaration should be taken in the context of the other declarations of the Court in Barrozo, to wit:

Another point raised by appellant is that the price paid at the auction sale was so inadequate as to shock the conscience of the court. Supposing that this issue is open even after the one-year period has expired and after the properties have passed into the hands of third persons who may have paid a price higher than the auction sale money, the first thing to consider is that the stipulation contains no statement of the reasonable value of the properties; and although defendant' answer avers that the assessed value was P3,960 it also avers that their real market value was P2,000 only. Anyway, mere inadequacy of price – which was the complaint' allegation – is not sufficient ground to annul the sale. It is only where such inadequacy shocks the conscience that the courts will intervene. x x x Another consideration is that the assessed value being P3,960 and the purchase price being in effect P1,864 (P464 sale price plus P1,400 mortgage lien which had to be discharged) the conscience is not shocked upon examining the prices paid in the sales in National Bank v. Gonzales, 45 Phil., 693 and Guerrero v. Guerrero, 57 Phil., 445, sales which were left undisturbed by this Court.

Furthermore, where there is the right to redeem – as in this case – inadequacy of price should not be material because the judgment debtor may re-acquire the property or else sell his right to redeem and thus recover any loss he claims to have suffered by reason of the price obtained at the execution sale.

x x x x (Emphasis supplied).62

In other words, gross inadequacy of price does not nullify an execution sale. In an ordinary sale, for reason of equity, a transaction may be invalidated on the ground of inadequacy of price, or when such inadequacy shocks one's conscience as to justify the courts to interfere; such does not follow when the law gives the owner the right to redeem as when a sale is made at public auction,63 upon the theory that the lesser the price, the easier it is for the owner to effect redemption.64 When there is a right to redeem, inadequacy of price should not be material because the judgment debtor may re-acquire the property or else sell his right to redeem and thus recover any loss he claims to have suffered by reason of the price obtained at the execution sale.65 Thus, respondent stood to gain rather than be harmed by the low sale value of the auctioned properties because it possesses the right of redemption. More importantly, the subject matter in Barrozo is the auction sale, not the levy made by the Sheriff.

The Court does not sanction the piecemeal interpretation of a decision. To get the true intent and meaning of a decision, no specific portion thereof should be isolated and resorted to, but the decision must be considered in its entirety.66

As regards Buan, it is cast under an entirely different factual milieu. It involved the levy on two parcels of land owned by the judgment debtor; and the sale at public auction of one was sufficient to fully satisfy the judgment, such that the levy and attempted execution of the second parcel of land was declared void for being in excess of and beyond the original judgment award granted in favor of the judgment creditor.

In the present case, the Sheriff complied with the mandate of Section 9, Rule 39 of the Revised Rules of Court, to "sell only a sufficient portion" of the levied properties "as is sufficient to satisfy the judgment and the lawful fees." Each of the 15 levied properties was successively bidded upon and sold, one after the other until the judgment debt and the lawful fees were fully satisfied. Holly Properties Realty Corporation successively bidded upon and bought each of the levied properties for the total amount of P5,450,653.33 in full satisfaction of the judgment award and legal fees.67

Secondly, the Rules of Court do not require that the value of the property levied be exactly the same as the judgment debt; it can be less or more than the amount of debt. This is the contingency addressed by Section 9, Rule 39 of the Rules of Court. In the levy of property, the Sheriff does not determine the exact valuation of the levied property. Under Section 9, Rule 39, in conjunction with Section 7, Rule 57 of the Rules of Court, the sheriff is required to do only two specific things to effect a levy upon a realty: (a) file with the register of deeds a copy of the order of execution, together with the description of the levied property and notice of execution; and (b) leave with the occupant of the property copy of the same order, description and notice.68 Records do not show that respondent alleged non-compliance by the Sheriff of said requisites.

Thirdly, in determining what amount of property is sufficient out of which to secure satisfaction of the execution, the Sheriff is left to his own judgment. He may exercise a

reasonable discretion, and must exercise the care which a reasonably prudent person would exercise under like conditions and circumstances, endeavoring on the one hand to obtain sufficient property to satisfy the purposes of the writ, and on the other hand not to make an unreasonable and unnecessary levy.69 Because it is impossible to know the precise quantity of land or other property necessary to satisfy an execution, the Sheriff should be allowed a reasonable margin between the value of the property levied upon and the amount of the execution; the fact that the Sheriff levies upon a little more than is necessary to satisfy the execution does not render his actions improper.70 Section 9, Rule 39, provides adequate safeguards against excessive levying. The Sheriff is mandated to sell so much only of such real property as is sufficient to satisfy the judgment and lawful fees.

In the absence of a restraining order, no error, much less abuse of discretion, can be imputed to the Sheriff in proceeding with the auction sale despite the pending motion to quash the levy filed by the respondents with the HLURB. It is elementary that sheriffs, as officers charged with the delicate task of the enforcement and/or implementation of judgments, must, in the absence of a restraining order, act with considerable dispatch so as not to unduly delay the administration of justice; otherwise, the decisions, orders, or other processes of the courts of justice and the like would be futile.71 It is not within the jurisdiction of the Sheriff to consider, much less resolve, respondent's objection to the continuation of the conduct of the auction sale. The Sheriff has no authority, on his own, to suspend the auction sale. His duty being ministerial, he has no discretion to postpone the conduct of the auction sale.

Finally, one who attacks a levy on the ground of excessiveness carries the burden of sustaining that contention.72 In the determination of whether a levy of execution is excessive, it is proper to take into consideration encumbrances upon the property, as well as the fact that a forced sale usually results in a sacrifice; that is, the price demanded for the property upon a private sale is not the standard for determining the excessiveness of the levy.73

Here, the HLURB Arbiter and Director had no sufficient factual basis to determine the value of the levied property. Respondent only submitted an Appraisal Report, based merely on surmises. The Report was based on the projected value of the townhouse project after it shall have been fully developed, that is, on the assumption that the residential units appraised had already been built. The Appraiser in fact made this qualification in its Appraisal Report: "[t]he property subject of this appraisal has not been constructed. The basis of the appraiser is on the existing model units."74 Since it is undisputed that the townhouse project did not push through, the projected value did not become a reality. Thus, the appraisal value cannot be equated with the fair market value. The Appraisal Report is not the best proof to accurately show the value of the levied properties as it is clearly self-serving.

Therefore, the Order dated August 28, 2000 of HLURB Arbiter Aquino and Director Ceniza in HLRB Case No. IV6-071196-0618 which set aside the sheriff's levy on respondent's real properties, was clearly issued with grave abuse of discretion. The CA erred in affirming said Order.

WHEREFORE, the instant petition is GRANTED. The Decision dated October 30, 2002 of the Court of Appeals in CA-G.R. SP No. 60981 is REVERSED and SET ASIDE. The Order dated August 28, 2000 of HLURB Arbiter Ma. Perpetua Y. Aquino and Director Belen G. Ceniza in HLRB Case No. IV6-071196-0618 is declared NULL and VOID. HLURB Arbiter Aquino and Director Ceniza are directed to issue the corresponding certificates of sale in favor of the winning bidder, Holly Properties Realty Corporation. Petitioner is ordered to return to respondent the amount of P2,125,540.00, without interest, in excess of the proceeds of the auction sale delivered to petitioner. After the finality of herein judgment, the amount of P2,125,540.00 shall earn 6% interest until fully paid.

SO ORDERED.

JOAQUIN QUIMPO, SR., vs. CONSUELO ABAD VDA. DE BELTRAN,

This Petition for Review on Certiorari assails the July 22, 2003 Decision1 of the Court of Appeals in CA-G.R. CV No. 56187, and the October 16, 2003 Resolution denying the motion for its reconsideration.

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 covering an area of 684 square-meters;Parcel II – Coconut land situated at Abucayan, Goa, Camarines Sur covering an area of 4.3731 hectares;Parcel III – Residential land situated at San Jose Street, Goa, Camarines Sur covering an area of 1,395 square meters; and Parcel IV – Abaca and coconut land situated at Abucayan, Goa, Camarines Sur covering an area 42.6127 hectares.2

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 (San Jose property) 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 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 Regional Trial Court (RTC) of Camarines Sur.3

Joaquin denied the material allegations in the complaint, and averred, as his special and affirmative defenses, lack of cause of action and prescription. 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.4

During the pendency of the case, Joaquin died. Accordingly, he was substituted by his wife, Estela Tena-Quimpo and his children, namely, Jose, Adelia, Joaquin, Anita, Angelita, Amelia, Arlene, Joy and Aleli, all surnamed Quimpo (the Quimpos).

On December 12, 1996, the RTC rendered a Decision5 in favor of respondents, declaring them as co-owners of all the properties left by Eustaquia. It rejected Joaquin’s claim of absolute ownership over 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. The RTC also sustained the oral partition among the heirs in 1966. According to the trial court, the possession and occupation of land by respondents Consuelo and Ireneo, and Joaquin’s acquiescence for 23 years, furnish sufficient evidence that there was actual partition of the properties. It held that Joaquin and his heirs are now estopped from claiming ownership over the entire San Jose property as well as over parcel IV.

The RTC disposed, thus:

WHEREFORE, decision is hereby rendered in favor of the plaintiffs Consuelo Vda. de Beltran, Ireneo Abad, Marites Abad, Danilo Abad, Anita Abad and Helen Abad and against defendant Joaquin Quimpo, substituted by the latter’s wife Estela Tena and their children, Amparo, Jose, Amelia, Joaquin Jr., Adelia, Arlene, Anita, Joy, Angelita and Aleli, all surnamed Quimpo, as follows:

1. Ordering the above-named substituted defendants, and the plaintiffs to execute their written agreement of partition with respect to parcel Nos. III and IV more particularly described in paragraph 7 of the complaint, and for them to execute an agreement of partition with respect to parcel Nos. I and II, both parcels are more particularly described in paragraph 7 of the complaint;

2. Declaring the plaintiffs Danilo Abad, Marites Abad, Anita Abad and Helen Abad the owner of six (6) hectares a portion included in parcel No. IV also described in paragraph 7 of the complaint, and therefore, entitled to its possession and ordering the said substituted defendants to deliver that portion to them as their share thereto;

3. Ordering the above-named substituted defendants to pay plaintiffs the sum of Six Thousand Pesos (P6,000.00), Philippine Currency, as reasonable attorney’s fees and the sum of One Thousand Pesos (P1,000.00) also of Philippine Currency, as litigation expenses and for the said defendants to pay the costs.

The counterclaim, not being proved, the same is hereby ordered dismissed.

SO ORDERED.6

On appeal, the CA affirmed the RTC ruling. Sustaining the RTC, the CA declared that it was plausible that Eustaquia’s consent was vitiated because she was then 91 years old and sickly. It was bolstered by the fact that the deeds of sale only surfaced 43 years after its alleged execution and 23 years from the time of the oral partition. The CA also rejected petitioners’ argument that the action was barred by prescription and laches, explaining that prescription does not run against the heirs so long as the heirs, for whose benefit prescription is invoked, have not

expressly or impliedly repudiated the co-ownership. The CA found no repudiation on Joaquin’s part. It, therefore, concluded that respondents’ action could not be barred by prescription or laches.

The Quimpos, thus, filed the instant petition for review on certiorari imputing the following errors to the CA:

1) THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT PETITIONERS DID NOT ACQUIRE OWNERSHIP OVER [THE] SUBJECT PARCELS OF LAND BY WAY OF DEEDS OF ABSOLUTE SALE EXECUTED IN THEIR FAVOR;

2) THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT CO-OWNERSHIP EXISTS AMONG PETITIONERS AND RESPONDENTS OVER THE SUBJECT PARCELS OF LAND;

3) THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT RESPONDENTS HAVE PROVEN THEIR FILIATION TO THE ORIGINAL OWNER OF THE SUBJECT PARCELS OF LAND BY MERE SCANT EVIDENCE;

4) THE HONORABLE COURT OF APPEALS ERRED IN NOT RULING THAT LACHES HAS TIME–BARRED THE RESPONDENTS FROM ASSAILING THE ABSOLUTE OWNERSHIP OF PETITIONERS OVER THE SUBJECT PARCELS OF LAND; AND

5) THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT RESPONDENTS ARE ENTITLED TO ATTORNEY’S FEES.7

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.8

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 P5,000.00 and P6,000.00, 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 was the one supporting him; that when Eustaquia died two (2) years later, Joaquin was not able to continue his studies. The Quimpos failed to override this. Except for the incredible and unpersuasive testimony of Joaquin’s daughter, 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,9 reiterated in Cruz v. Bancom Finance Corp,10 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,11 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 Declaration Nos. 3650,12 3708,13 and 365914 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 enervate it instead. Besides, the fact that the disputed property may have been declared for taxation purposes in the name of Joaquin Quimpo does not necessarily prove ownership for it is well settled that a tax declaration or tax receipts are not conclusive evidence of ownership.15 The CA, therefore, correctly found this proof inadequate to establish Joaquin’s claim of absolute dominion.

For forty-three (43) years, Consuelo and Ireneo occupied their portions of the San Jose property and significantly, 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 unerringly point to the fact that there was indeed an oral partition of parcels III and IV.

In Maglucot-aw v. Maglucot,16 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,17 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.

In numerous cases it has been held or stated that parol partitions may be sustained on the ground of estoppel of the parties to assert the rights of a tenant in common as to parts of land divided by parol partition as to which possession in severalty was taken and acts of individual ownership were exercised. And a court of equity will recognize the agreement and decree it to be valid and effectual for the purpose of concluding the right of the parties as between each other to hold their respective parts 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 with respect thereto, 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 reversible error in sustaining the oral partition over parcels III and IV and in invalidating the deeds of sale between Eustaquia and Joaquin.

Similarly, we affirm the CA ruling that respondents are co-owners of the subject four (4) parcels of land, having inherited the same from a common ancestor – Eustaquia Perfecto-Abad. Petitioners’ assertion that respondents failed to prove their relationship to the late Eustaquia deserves scant consideration.

During the pre-trial, Joaquin Quimpo admitted that:

Eustaquia Perfecto Abad and Diego Abad had two (2) children by the names of Leon Abad and Joaquin Abad; that Leon Abad has three (3) children namely: Anastacia, Wilfredo and Consuelo, all surnamed Abad; that Joaquin Abad has only one (1) child, a daughter by the name of Amparo; that Wilfredo has four (4) children, namely, Danilo, Helen, Marites and Anita; Amparo has one child, son Joaquin Quimpo, x x x 18

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.19

Finally, petitioners challenge the attorney’s fees in favor of respondents.

The grant of attorney’s fees depends on the circumstances of each case and lies within the discretion of the court. It may be awarded when a party is compelled to litigate or to incur expenses to protect its interest by reason of an unjustified act by the other,20 as in this case.

In fine, we find no reversible error in the assailed rulings of the Court of Appeals.

WHEREFORE, the petition is DENIED. The Decision and Resolution of the Court of Appeals in CA-G.R. CV No. 56187, are AFFIRMED.

SO ORDERED.

ROSARIO ALINAS, petitioner, vs. ELENA ALINAS, respondents.

This resolves the Petition for Review on Certiorari under Rule 45 of the Rules of Court, praying that the Decision1 of the Court of Appeals (CA) dated September 25, 2002, and the CA Resolution2 dated March 31, 2003, denying petitioners' motion for reconsideration, be reversed and set aside.

The factual antecedents of the case are as follows.

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-118533 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 Assets4 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-126645 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 Sale6 over said property in favor of the SSS. However, pursuant to a Special Power of Attorney7 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 Redemption8 was issued by the SSS.

Onesiforo's signature also appears in an Absolute Deed of Sale9 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 Agreement10 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. 1739411 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.

After trial, the RTC rendered its Decision dated November 13, 1995, finding that:

1. Plaintiffs have not proven that they entrusted defendant spouses with the care and administration of their properties. It was Valeria Alinas, their mother, whom plaintiff Onesiforo requested/directed to "take care of everything and sell everything" and Teresita Nuñez, his elder sister, to whom he left a "verbal" authority to administer his properties.

2. Plaintiffs have not proven their allegation that defendant spouses agreed to pay rent of P1,500.00 a month for the occupancy of plaintiffs' house, which rent was to be remitted to the SSS and Rural Bank of Oroquieta to pay off plaintiffs' loan and to keep for plaintiffs the rest of the rent after the loans would have been paid in full.

3. Plaintiff Onesiforo's allegation that defendants concocted deeds of conveyances (Exh. "M", "N" & "O") with the use of his signatures in blank is not worthy of credence. Why his family would conspire to rob him at a time when life had struck him with a cruel blow in the form of a failed marriage that sent him plummeting to the depths of despair is not explained and likewise defies comprehension. That his signatures appear exactly on the spot where they ought to be in Exhs. "M", "N" & "O" belies his pretension that he affixed them on blank paper only for the purpose of facilitating his sister Terry's acts of administration.

This Court, therefore, does not find that defendant spouses had schemed to obtain title to plaintiffs' properties or enriched themselves at the expense of plaintiffs.12

with the following dispositive portion:

WHEREFORE, this Court renders judgment:

1. declaring [respondents] Victor Jr. and Elena Alinas owners of Lot 896-B-9-A with the building (bodega) standing thereon and affirming the validity of their acquisition thereof from the Rural Bank of Oroquieta, Inc.;

2. declaring [petitioners] Onesiforo and Rosario Alinas owners of Lot 896-B-9-B with the house standing thereon, plaintiff Onesiforo's sale thereof to defendants spouses without the consent of his wife being null and void and defendant spouses' redemption thereof from the SSS not having conferred its ownership to them;

3. ordering [petitioners] to reimburse [respondents] Victor Jr. and Elena Alinas the redemption sum of P111,100.09, paid by them to the SSS (without interest as it shall be compensated with the rental value of the house they occupy) within sixty days from the finality of this judgment;

4. ordering [respondents] to vacate the subject house within thirty days from receiving the reimbursement mentioned in No. 3 above; and

5. reinstating TCT No. T-7248 in the name of [petitioners] and cancelling TCT No. T-17394 in the name of [respondents].

No costs.

SO ORDERED.13

Only respondent spouses appealed to the CA assailing the RTC's ruling that they acquired Lot 896-B-9-B from the SSS by mere redemption and not by purchase. They likewise question the reimbursement by petitioners of the redemption price without interest.

On September 25, 2002, the CA promulgated herein assailed Decision, the dispositive portion of which reads:

WHEREFORE, in view of the foregoing disquisitions, the first paragraph of the dispositive portion of the assailed decision is AFFIRMED and the rest MODIFIED as follows:

1. declaring [respondents] Victor Jr. and Elena Alinas owners of Lot 896-B-9-A with the building (bodega) standing thereon and affirming the validity of their acquisition thereof from the Rural Bank of Oroquieta, Inc.;

2. declaring Onesiforo's sale of Lot 896-B-9-B together with the house standing thereon to [respondents] in so far as Rosario Alinas, his wife's share of one half thereof is concerned, of no force and effect;

3. ordering [petitioners] Rosario Alinas to reimburse [respondents] the redemption amount of P55,550.00 with interest of 12% per annum from the time of redemption until fully paid.

4. ordering the [respondents] to convey and transfer one half portion of Lot 896-B-9-B unto Rosario Alinas, which comprises her share on the property simultaneous to the tender of the above redemption price, both to be accomplished within sixty (60) days from finality of this judgment.

5. in the event of failure of [respondents] to execute the acts as specified above, [petitioner] Rosario Alinas may proceed against them under Section 10, Rule 39 of the 1997 Rules of Civil Procedure.

6. on the other hand, failure of [petitioner] Rosario Alinas to reimburse the redemption price within sixty (60) days from the finality of this decision will render the conveyance and sale of her share by her husband to [respondents], of full force and effect.

No costs.

SO ORDERED.14

Petitioners moved for reconsideration but the CA denied said motion per herein assailed Resolution dated March 31, 2003.

Hence, the present petition on the following grounds:

The Honorable Court of Appeals abuse [sic] its discretion in disregarding the testimony of the Register of Deeds, Atty. Nerio Nuñez, who swore that the signatures appearing on various TCTs were not his own;

The Honorable Court of Appeals manifestly abuse [sic] its discretion in declaring the respondents to be the owners of Lot 896-B-9-A with the building (bodega) standing thereon when they merely redeemed the property and are therefore mere trustees of the real owners of the property;

It was pure speculation and conjecture and surmise for the Honorable Court of Appeals to impose an obligation to reimburse upon petitioners without ordering

respondents to account for the rentals of the properties from the time they occupied the same up to the present time and thereafter credit one against the other whichever is higher.15

The first issue raised by petitioners deserves scant consideration. By assailing the authenticity of the Registrar of Deeds' signature on the certificates of title, they are, in effect, questioning the validity of the certificates.

Section 48 of Presidential Decree No. 1529 provides, thus:

Sec. 48. Certificate not subject to collateral attack. - A certificate of title shall not be subject to collateral attack. It cannot be altered, modified, or cancelled except in a direct proceeding in accordance with law.

Pursuant to said provision, the Court ruled in De Pedro v. Romasan Development Corporation16 that:

It has been held that a certificate of title, once registered, should not thereafter be impugned, altered, changed, modified, enlarged or diminished except in a direct proceeding permitted by law. x x x

The action of the petitioners against the respondents, based on the material allegations of the complaint, is one for recovery of possession of the subject property and damages. However, such action is not a direct, but a collateral attack of TCT No. 236044.17 (Emphasis supplied)

As in De Pedro, the complaint filed by herein petitioners with the RTC is also one for recovery of possession and ownership. Verily, the present case is merely a collateral attack on TCT No. T-17394, which is not allowed by law and jurisprudence.

With regard to the second issue, petitioners’ claim that it was the CA which declared respondent spouses owners of Lot 896-B-9-A (with bodega) is misleading. It was the RTC which ruled that respondent spouses are the owners of Lot 896-B-9-A and, therefore, since only the respondent spouses appealed to the CA, the issue of ownership over Lot 896-B-9-A is not raised before the appellate court. Necessarily, the CA merely reiterated in the dispositive portion of its decision the RTC's ruling on respondent spouses' ownership of Lot 896-B-9-A.

It is a basic principle that no modification of judgment or affirmative relief can be granted to a party who did not appeal.18 Hence, not having appealed from the RTC Decision, petitioners can no longer seek the reversal or modification of the trial court's ruling that respondent spouses had acquired ownership of Lot 896-B-9-A by virtue of the sale of the lot to them by RBO.

Furthermore, the CA did not commit any reversible error in affirming the trial court's factual findings as the records are indeed bereft of proof to support the petitioners’ allegations that they left the care and administration of their properties to respondent spouses; and that there is an agreement between petitioners and respondent spouses regarding remittance to the SSS and the RBO of rental income from their properties. Thus, respondent spouses may not be held responsible for the non-payment of the loan with RBO and the eventual foreclosure of petitioners' Lot 896-B-9-A.

Petitioners do not assail the validity of the foreclosure of said lot but argues that respondent spouses merely redeemed the property from RBO. This is, however, belied by evidence on record which shows that ownership over the lot had duly passed on to the RBO, as shown by TCT No. T-11853 registered in its name; and subsequently, RBO sold the lot with its improvements to respondent spouses. Needless to stress, the sale was made after the redemption period had lapsed. The trial court, therefore, correctly held that respondent spouses acquired their title over the lot from RBO and definitely not from petitioners.

However, with regard to Lot 896-B-9-B (with house), 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. x x x

In the event that one spouse is incapacitated or otherwise unable to participate in the administration of the conjugal properties, the other spouse may assume sole powers of administration. These powers do not include the powers of disposition or encumbrance which must have the authority of the court or the written consent of the other spouse. In the absence of such authority or consent the disposition or encumbrance shall be void . x x x (Underscoring and emphasis supplied)

In Homeowners Savings & Loan Bank v. Dailo,19 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 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. 20

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.21

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,22 "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."23 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.

However, in consonance with the salutary principle of non-enrichment at another’s expense, the Court agrees with the CA that petitioners should reimburse respondent spouses the redemption price paid for Lot 896-B-9-B in the amount of P111,110.09 with legal interest from the time of filing of the complaint.

In Heirs of Aguilar-Reyes, the husband's sale of conjugal property without the consent of the wife was annulled but the spouses were ordered to refund the purchase price to the buyers, it was ruled that an interest of 12% per annum on the purchase price to be refunded is not proper. The Court elucidated as follows:

The trial court, however, erred in imposing 12% interest per annum on the amount due the respondents. In Eastern Shipping Lines, Inc. v. Court of Appeals, it was held that interest on obligations not constituting a loan or forbearance of money is six percent (6%) annually. If the purchase price could be established with certainty at the time of the filing of the complaint, the six percent (6%) interest should be computed from the date the complaint was filed until finality of the decision. In Lui vs. Loy, involving a suit for reconveyance and annulment of title filed by the first buyer against the seller and the second buyer, the Court, ruling in favor of the first buyer and annulling the second sale, ordered the seller to refund to the second buyer (who was not a purchaser in good faith) the purchase price of the lots. It was held therein that the 6% interest should be computed from the date of the filing of the complaint by the first buyer. After the judgment becomes final and executory until the obligation is satisfied, the amount due shall earn interest at 12% per year, the interim period being deemed equivalent to a forbearance of credit.

Accordingly, the amount of P110,000.00 due the respondent spouses which could be determined with certainty at the time of the filing of the complaint shall earn 6% interest per annum from June 4, 1986 until the finality of this decision. If the adjudged principal and the interest (or any part thereof) remain unpaid thereafter, the interest rate shall be twelve percent (12%) per annum computed from the time the judgment becomes final and executory until it is fully satisfied.24

Thus, herein petitioners should reimburse respondent spouses the redemption price plus interest at the rate of 6% per annum from the date of filing of the complaint, and after the judgment becomes final and executory, the amount due shall earn 12% interest per annum until the obligation is satisfied.

Petitioners pray that said redemption price and interest be offset or compensated against the rentals for the house and bodega.

The records show that the testimonial evidence for rentals was only with regard to the bodega.25 However, the Court has affirmed the ruling of the RTC that Lot 896-B-9-A with the bodega had been validly purchased by respondent spouses from the RBO and a TCT over said property was issued in the name of respondent spouses on February 22, 1989. Testimonial evidence shows that the bodega was leased out by respondent spouses only beginning January of 1990 when ownership had been transferred to them.26 Hence, any rentals earned from the lease of said bodega rightfully belongs to respondent spouses and cannot be offset against petitioners' obligation to respondent spouses.

As to rentals for Lot 896-B-9-B and the house thereon, respondent Victor testified that they never agreed to rent the house and when they finally took over the same, it was

practically inhabitable and so they even incurred expenses to repair the house.27 There is absolutely no proof of the rental value for the house, considering the condition it was in; as well as for the lot respondent spouses are occupying.

Respondent spouses, having knowledge of the flaw in their mode of acquisition, are deemed to be possessors in bad faith under Article 52628 of the Civil Code. However, they have a right to be refunded for necessary expenses on the property as provided under Article 54629 of the same Code. Unfortunately, there is no credible proof to support respondent spouses' allegation that they spent more than P400,000.00 to repair and make the house habitable.

Set-off or compensation is governed by Article 1279 of the Civil Code which provides, thus:

Article 1279. In order that compensation may be proper, it is necessary:

1. That each one of the obligors be bound principally, and that he be at the time a principal creditor of the other;

2. That both debts consist in a sum of money, or if the things due are consumable, they be of the same kind, and also of the same quality if the latter has been stated;

3. That the two debts be due;

4. That they be liquidated and demandable;

5. That over neither of them there be any retention or controversy, commenced by third persons and communicated in due time to the debtor.

Therefore, under paragraph 4 of the foregoing provision, compensation or set-off is allowed only if the debts of both parties against each other is already liquidated and demandable. To liquidate means "to make the amount of indebtedness or an obligation clear and settled in the form of money."30 In the present case, no definite amounts for rentals nor for expenses for repairs on subject house has been determined. Thus, in the absence of evidence upon which to base the amount of rentals, no compensation or set-off can take place between petitioners and respondent spouses.

While the courts are empowered to set an amount as reasonable compensation to the owners for the use of their property, this Court cannot set such amount based on mere surmises and conjecture

WHEREFORE, the petition is PARTLY GRANTED. The Decision of the Court of Appeals dated September 25, 2002 is MODIFIED to read as follows:

1. declaring respondent spouses Victor Jr. and Elena Alinas owners of Lot 896-B-9-A with the building (bodega) standing thereon and affirming the validity of their acquisition thereof from the Rural Bank of Oroquieta, Inc.;

2. declaring Onesiforo's sale of Lot 896-B-9-B together with the house standing thereon to respondent spouses null and void ab initio;

3. ordering petitioners to jointly and severally reimburse respondent spouses the redemption amount of P111,110.09 with interest at 6% per annum from the date of filing of the complaint, until finality of this decision. After this decision becomes final, interest at the rate of 12% per annum on the principal and interest (or any part thereof) shall be imposed until full payment;

4. ordering the respondent spouses to convey and transfer Lot 896-B-9-B to petitioners and vacate said premises within fifteen (15) days from finality of this Decision; and

5. in the event of failure of respondent spouses to execute the acts as specified above, petitioners may proceed against them under Section 10, Rule 39 of the 1997 Rules of Civil Procedure.

No costs.

SO ORDERED.

NUNGA, JR. and NUNGA, vs. FRANCISCO N. NUNGA III,.

Before this Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing the Decision1 dated 31 January 2007 and Resolution2 dated 4 June 2007 of the Court of Appeals in CA-G.R. CV No. 78424. The appellate court, in its assailed decision, reversed the Decision3 dated 25 October 2002 of the Regional Trial Court (RTC) of the City of San Fernando, Pampanga, Branch 42, in Commercial Case No. 018, which ordered the registration of the transfer of ownership of the disputed shares of stock in the Rural Bank of Apalit, Inc. (RBA) in favor of petitioners; and in its resolution, denied the Motion for Reconsideration of the aforementioned decision.

Presented hereunder are the factual antecedents of the case.

On 30 January 1996, the RBA conducted its Annual Stockholders’ Meeting at its principal office in San Vicente, Apalit, Pampanga. Attending the said meeting were stockholders representing 28,150 out of the 35,956 total outstanding shares of stock of RBA.4 Petitioner Francisco R. Nunga, Jr. (Francisco Jr.), his son petitioner Victor D. Nunga (Victor), and his nephew respondent Francisco N. Nunga III (Francisco III) were among the stockholders of RBA. However, petitioner Francisco Jr. was not present at the meeting, as he was then in the United States of America where he is a naturalized citizen.

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., which pertinently provided:

CONTRACT TO SELL

KNOW ALL MEN BY THESE PRESENTS:

This CONTRACT TO SELL, executed this 19th day of February, 1996, at Quezon City, by:

JESUS J. GONZALE[Z], of legal age, Filipino citizen, married to Cristina D. Gonzale[z], residing at No. 10 2nd Ave., Crame, Quezon City, hereinafter referred to as the VENDOR;

in favor of

FRANCISCO D. (sic) NUNGA, JR., of legal age, single, residing at Poblacion, Masantol, Pampanga[,] hereinafter referred to as the "PURCHASER";

WITNESSETH:

That the VENDOR is the absolute registered owner of several shares of stocks of the RURAL BANK OF APALIT, INC. located at Apalit, Pampanga, more particularly described as follows:

Stock Cert. No.No. of Shares Represented

Date of Issue Journal Folio No.

5 250 May, 197836 122 Jan., 1991

105 264 Feb., 1991152 487 Nov., 1993166 8 Feb., 1994181 525 July, 1994213 336    

That the VENDOR has offered to sell the abovestated (sic) shares of stocks and the PURCHASER has agreed to purchase the same for a total consideration of P 200,000 ;

That it is hereby agreed that out of the total consideration or contract price, the purchaser will pay the amount of FIFTY THOUSAND PESOS (P50,000.00), receipt of which is herein acknowledged by the purchaser, at the date and place below stated and the remaining balance of P 150,000 will be paid in full on February, (sic) 28, 1996;

That it is further agreed that the VENDOR will execute an authorization in favor of the herein purchaser or his representative, Victor D. Nunga[,] to retrieve all the corresponding Stocks (sic) Certificates as above indicated from the Apalit Rural Bank, Inc.

WHEREFORE, for and in consideration of the total amount of P 200,000 (sic) receipt in part of which is herein acknowledged in the amount of P50,000.00, the vendor hereby agrees to sell, cede and transfer all the above stated shares of stocks to the PURCHASER, his heirs[,] successors, and assigns, absolutely free from any encumbrance and lien whatsoever.

IN WITNESS WHEREOF, I have hereunto set my signature this 19th day of FEBRUARY, (sic) 1996, at Quezon City, Philippines.

(signed)

JESUS J. GONZALESVendor

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 on 27 February 1996, Gonzalez executed a Deed of Assignment9 of his RBA shares of stock in favor of Francisco III, the relevant terms of which recite:

DEED OF ASSIGNMENT

KNOW ALL MEN BY THESE PRESENTS:

For value (sic) consideration received, the undersigned ASSIGNOR JESUS GONZALE[Z], of legal age, Filipino and resident of #10 2ND AVENUE, CUBAO, QUEZON CITY, METRO MANILA hereby sells, assigns and transfers unto FRANCISCO N. NUNGA III (AS ASSIGNEE), Filipino, of legal age and with postal address at 1122 Alhambra St., Ermita 1000 Metro Manila, his assigns and successors, all their rights, titles and interests to the following shares of stocks owned by the ASSIGNOR in Apalit Rural Bank, Inc., with par value of one hundred pesos only (P100.00) per share, free from all liens and encumbrances.

Date SC. No. No. of Shares AmountMay 24, 1969 4 (sic) 250 P 25,000.00January 02, 1975 36 122 12,200.00February 19, 1991 105 264 26,400.00November 10, 1993 152 487 48,700.00February 22, 1994 166 8 800.00July 25, 1994 181 525 52,500.00February 2, 1996 213 336 33,600.00

IN WITNESS WHEREOF, the ASSIGNOR have (sic) cause (sic) these presents to be signed at Quezon City, this 27 day of February, 1996.

(signed)

JESUS J. GONZALE[Z]Assignor

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,11 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.12 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 Sale13 in favor of Francisco Jr., which states:

DEED OF ABSOLUTE SALE

KNOW ALL MEN BY THESE PRESENTS:

This DEED OF ABSOLUTE SALE, executed this 28th day of February, 1996, at SAN JUAN, M.M. by:

JESUS J. GONZALE[Z], of legal age, Filipino citizen, married to Cristina D. Gonzale[z], residing at No. 10 2nd Ave., Crame, Quezon City, hereinafter referred to as the VENDOR;

in favor of

FRANCISCO R. NUNGA, JR., of legal age, married, residing at Poblacion, Masantol, Pampanga[,] hereinafter referred to as the "PURCHASER"[;]

WITNESSETH:

That the VENDOR is the absolute registered owner of several shares of stocks of the RURAL BANK OF APALIT, INC. located at Apalit, Pampanga, more particularly described as follows:

Stock Cert. No.No. of SharesRepresented

Date of Issue Journal Folio No.

5 250 May, 1978 136 122 Jan., 1991 1105 264 Feb., 1991 5152 487 Nov., 1993 7166 8 Feb., 1994 7181 525 July, 1994 8213 336    

That Stock Certificate Nos. 5 and 36 respectively representing 250 and 122 shares of the Rural Bank of Apalit[,] Inc. were lost and is (sic) currently in the process of reconstitution;

That the VENDOR has offered to sell the abovestated (sic) shares of stocks and the PURCHASER has agreed to purchase the same.

WHEREFORE, for and in consideration of the total amount of TWO HUNDRED THOUSAND PESOS (P 200,000.00), receipt of which in full is herein acknowledged, the VENDOR hereby sells, cedes and transfers all the above stated shares of stocks to the PURCHASER, his heirs, successors, and assigns, absolutely free from any encumbrance and lien whatsoever.

IN WITNESS WHEREOF, I have hereunto set my signature this 28 day of FEB (sic), 1996, at SAN JUAN, MM, Philippines.

(signed)

JESUS J. GONZALE[Z]Vendor

Incidentally, on that same day, Francisco III delivered to Firme the Deed of Assignment which Gonzalez executed in his favor, and a copy of Gonzalez’s letter to Victor dated 27 February 1996 demanding the latter to surrender the stock certificates in his possession to Francisco III. Accordingly, on 1 March 1996, Firme wrote Victor a letter14 requesting that the latter immediately comply with the enclosed 27 February 1996 letter of Gonzalez.

Victor refused to comply with Firme’s request and instead demanded that the sale of shares of stock by Gonzalez in favor of Francisco Jr. on 28 February 1996 be entered into the Corporate Book of Transfer of RBA. Firme, in turn, rejected Victor’s demand, alleging that Francisco III already bought Gonzalez’s shares.15

Consequently, on 14 March 1996, Victor filed a Petition16 with the Securities and Exchange Commission (SEC) against Francisco III and Firme, which was docketed as SEC Case No. 03-96-5288. Victor prayed that the SEC declare null and void the Stockholders’ Meeting held on 30 January 1996 for lack of the required majority quorum; as well as the votes cast for the shares of the deceased stockholders, namely, Teodorico R. Nunga, Carmencita N. Nunga and Jesus Enrico N. Nunga. Victor additionally requested that the transfer of Gonzalez’s RBA shareholdings to Francisco Jr. be annotated on the RBA Corporate Transfer Book and new stock certificates be issued in favor of Francisco Jr. Victor finally pleaded that Francisco III and Firme be ordered to jointly pay him P50,000.00 as attorney’s fees, damages and litigation expenses.

On the same date, Francisco III likewise filed a Complaint17 against Gonzalez, Francisco Jr., and Victor before the SEC, which was docketed as SEC Case No. 03-96-5292. Francisco III sought the issuance of a Temporary Restraining Order (TRO) against Francisco Jr. and Victor, who were allegedly conspiring to oust him and the other members of the RBA Board of Directors. Francisco III also prayed, inter alia, for judgment ordering (a) Victor to surrender Gonzalez’s stock certificates in order that the same may be transferred to Francisco III’s name; and (b) Francisco Jr. and Victor to desist from attempting to register the purported sale by Gonzales of his RBA shares of stock to Francisco Jr., who had already become a naturalized American citizen and was, thus, disqualified from owning shares in RBA.

Francisco III and Firme filed their joint Answer18 in SEC Case No. 03-96-5288, while Francisco Jr. and Victor filed their Answer19 in SEC Case No. 03-96-5292. Gonzalez, however, was considered in default in both SEC cases for failure to file his answers despite notice.

Eventually, Francisco Jr.20 and Victor filed a Motion for Consolidation21 of the two cases pending before the SEC, alleging that they involved common questions of fact and law, which required the presentation of similar evidence. Said Motion was granted in an Order22 dated 30 September 1996. Thereafter, SEC Cases No. 03-96-5288 and No. 03-96-5292 were jointly heard.

After the parties submitted their respective Offers of Evidence, but before the SEC could rule on the same, the cases were eventually turned over to the RTC pursuant to Administrative Circular AM No. 00-11-0323 of the Supreme Court dated 21 November 2000.24

In the RTC, SEC Cases No. 03-96-5288 and No. 03-96-5292 were docketed as Commercial Cases No. 001 and No. 018, respectively.

Francisco Jr. and Victor subsequently filed a Motion to Resolve their Formal Offer of Exhibits, which the SEC was not able to act upon. In an Order25 dated 30 April 2002, the RTC admitted the formal offers of evidence in both cases.

On 25 October 2002,26 the RTC promulgated its Decision. With respect to Commercial Case No. 001, Victor’s Petition, the RTC ruled:

The Court, after a careful study on the evidences on record finds that [herein petitioner Victor] failed to substantiate the allegation in the petition. [Victor] failed to controvert the documentary evidences presented by [herein respondent Francisco III] to wit: Minutes of the Stockholders Meeting, showing the number of shares present in person or in proxy[;] written Proxy in favor of Dwight N. Nunga in (sic) behalf of deceased Teodorico R. Nunga by virtue of the Extrajudicial Settlement of estate in (sic) behalf of Carmencita Noel Nunga proxy executed by Ma. Del Carmen N. Leveriza in her capacity as the Judicial Administratrix duly appointed by the RTC Branch 60, Makati[,] Metro Manila in Special Proceedings No. M-146127; Affidavit of respondent Isabel C. Firme stating thereat the fact that the certificate of stock delivered for registration in the Corporate Transfer Book were mere xerox copies thus, the refusal. Thus further, proved [Victor’s] lack of cause of action against [Francisco III] and as a result of which damages on the part of [Francisco III] and Isabel C. Firme who were constrained to hire the services of their counsel to protect their right (sic). (Emphasis ours.)

As regards Commercial Case No. 018,28 Francisco III’s Complaint, the RTC decreed:

The Court[,] after a careful study on the aforementioned evidences (sic) on record[,] finds and holds that [herein petitioner Francisco Jr.] has a better right over the subject shares considering that the Contract to Sell was executed prior to the Deed of Assignment presented by the [herein respondent

Francisco III]. The Court gleaned also from the evidences (sic) that the Deed of Assignment was executed in bad faith as [Francisco III] is aware of the transaction between [herein petitioner Victor] in (sic) behalf of his father and [Gonzalez], thus, the conclusion that the Deed of Assignment was executed with malice. The Contract to Sell may not be a public instrument29 but being a consensual contract it is, therefore, valid there being a meeting of the mind (sic) between the parties. Further, there being no contention on (sic) the contrary, on the validity of the Deed of Absolute Sale interposed by [Gonzalez] coupled with the proof of full payment and the endorsement of the Stock Certificate at the back by the owner[,] which is the only operative act of valid transfer of shares of stock certificate provided for by law and jurisprudence, clearly convinced the Court that the latter honored the transaction between him and [Victor] in (sic) behalf of his father [Francisco Jr.] and[,] to bind third parties, the fact of transfer should be registered with the transfer book of the corporation.

x x x x

Further, with respect to the issue on the citizenship of [Francisco Jr.], not being qualified to own such share (sic), the Court is inclined to give credence on (sic) the contention of the latter[,] it being supported by R.A. 8179[,] known as "An Act to Further Liberalize Foreign Investment,["] to wit:

"SEC. 9. Investment Rights of Former Natural-born Filipinos. – For purposes of this Act, former natural born citizens of the Philippines shall have the same investment rights of a Filipino citizen in Cooperatives under Republic Act No. 6938, Rural Banks under Republic Act No. 7353, Thrift Banks and Private Development Banks under Republic Act No. 7906, and Financing Companies under Republic Act No. 5980."

Furthermore, insofar as (sic) [Gonzalez], the same was (sic) considered as in default for failure to appear and participate despite notice. (Emphasis ours.)

In the end, the RTC disposed of the two cases in this wise:

WHEREFORE, in view of the foregoing, judgment is hereby rendered in Commercial Case No. 001 ordering the dismissal of the Petition filed by [herein petitioner Victor] against [herein respondent Francisco III] and Isabel C. Firme.

Insofar as Commercial Case No. 018[,] judgment is hereby rendered in favor of the [herein petitioners Victor and Francisco Jr.] and against [Francisco III] ordering the following:

1) Ordering the Corporate Secretary of the Rural Bank of Apalit, Inc, (sic) to register the fact of the transfer of ownership in favor of [Francisco Jr.] and to cancel Stock certificate (sic) in the name of Jesus [Gonzalez] and to issue a new one (sic) in the name of [Francisco Jr.] upon presentation of Stock Certificate Nos. 105, 152, 166, 181, 213, 5 and 36 duly endorsed by Jesus [Gonzalez];2) The [respondent Francisco III] to pay the [petitioners Victor and Francisco Jr.] the amount of P100,000.00 [for] moral damages[;]3) The amount of P100,000.00 [for] exemplary damages[;]4) The amount of P50,000.00 [for] attorneys (sic) fees and the cost of suit.30

Francisco III filed a Motion for Partial Reconsideration31 of the afore-quoted Decision, but it was denied by the RTC in an Order32 dated 31 January 2003. Thus, Francisco III filed with the RTC a Notice of Appeal.33 His appeal before the Court of Appeals was docketed as CA-G.R. CV No. 78424.

Before the Court of Appeals, Francisco III argued that the RTC erred in: (1) ruling that Francisco Jr. had a better right over the disputed shares of stock, considering that the prior contract which he had entered into with Gonzalez was a mere contract to sell; (2) finding that the Deed of Assignment in Francisco III’s favor was executed in bad faith, inasmuch as it was not supported by any of the evidence presented by all the parties; and (3) giving retroactive effect to Republic Act No. 8179,34 which grants former natural born citizens (such as Francisco Jr.) equal investment rights in rural banks of the Philippines as Philippine citizens. In relation to his third assignment of error, Francisco III pointed out that Republic Act No. 8179 took effect only on 16 April 1996, after Francisco Jr. entered into the questionable contracts with Gonzalez; hence, the said statute cannot benefit Francisco Jr.

On 31 January 2007, the Court of Appeals rendered its assailed Decision favoring Francisco III. It held that Francisco Jr. cannot invoke the provisions of Republic Act No. 8179 based on the following ratiocination:

In the instant case, there is nothing in Republic Act No. 8179 [An Act to Further Liberalize Foreign Investment] which provides that it should retroact to the date of effectivity of Republic Act No. 7353 [The Rural Banks Act of 1992]. Neither is it necessarily implied from Republic Act No. 8179 that it or any of its provisions should be given a retroactive effect. On the contrary, there is an express provision in Republic Act No. 8179 that it "shall take effect fifteen (15) days after publication in two (2) newspapers of general circulation in the Philippines." Being crystal clear on its prospective application, it must be given its literal meaning and applied without further interpretation (BPI Leasing Corporation vs. Court of Appeals, 416 SCRA 4, 13 [2003]). Republic Act No. 8179 was published on March 31, 1996 at the Manila Times and Malaya; hence, it took effect on April 15, 1996. x x x.

Republic Act No. 7353 specifically states that "the capital stock of any rural bank shall be fully owned and held directly or indirectly by citizens of the Philippines xxx." It bears stressing that the use of the word "shall" alone, applying the rule on statutory construction, already underscores the mandatory nature of the law, and hence; (sic) requires adherence thereto. xxx Therefore, it is Our considered view that the sale and the subsequent transfer on February 28, 1996 of the shares of stock of JESUS [Gonzalez] to FRANCISCO, JR., a naturalized American citizen, were made in patent violation of Republic Act No. 7353. Considering that Republic Act No. 7353 did not contain any provision authorizing the validity of the sale and transfer of the shares of stock to a foreigner, specifically to a former natural-born citizen of the Philippines, the same should be deemed null and void pursuant to Article 5 of the Civil Code of the Philippines, which reads:

"ART. 5. Acts executed against the provisions of mandatory or prohibitory laws shall be void, except when the law itself authorizes their validity."

x x x The fact that Republic Act No. 8179 expressly granted to former natural-born citizens of the Philippines investment rights similar to those of citizens of the Philippines bolsters the view that Republic Act No. 7353 indeed prohibited foreign nationals from owning shares of stock in rural banks. Had it been necessarily implied from the provisions of Republic Act No. 7353 that foreign nationals could own shares of stock in rural banks, the legislature would not have wasted time and effort in inserting a new provision granting to former natural-born citizens of the Philippines equal investment rights in Republic Act No. 8179.

Furthermore, there is no merit in the assertion of FRANCISCO JR. and VICTOR that Republic Act No. 8179 should be given a retroactive effect in accordance with the following rule:

"The principle that a new law shall not have retroactive effect only governs rights arising from acts done under the rule of the former law; but if a right be declared for the first time by a new law it shall take effect from the time of such declaration, even though it has arisen from acts subject to the former laws, provided that it does not prejudice another acquired right of the same origin." x x x.

Republic Act No. 8179 cannot be applied retroactively insofar as the instant case is concerned, as its application would prejudice the (sic) FRANCISCO III who had acquired vested right over the shares of stock prior to the effectivity of the said law. Such right was vested to him when the Deed of Assignment was executed by Jesus in his favor on February 27, 1996. Undoubtedly,

FRANCISCO III had a better right over the shares of stock of JESUS inasmuch as the validity of the Deed of Assignment was not affected despite the prior execution of the Contract to Sell in favor of FRANCISCO JR. on February 19, 1996. As previously adverted to, the said Contract, as well as the Deed of Absolute Sale and the subsequent transfer of the shares of stock to FRANCISCO JR., was null and void for violating a mandatory provision of Republic Act No. 7353. x x x.35

The Court of Appeals, however, decided to award Francisco III only attorney’s fees and cost of suit, but not moral and exemplary damages:

We hold that FRANCISCO III is not entitled to moral damages. FRANCISCO III made no mention in his Complaint and during the hearing that he sustained mental anguish, serious anxiety, wounded feelings and other emotional and mental sufferings by reason of the double sale. x x x.

Likewise, FRANCISCO III is not entitled to exemplary damages. x x x In the instant case, FRANCISCO III failed to sufficiently prove his entitlement to moral, temperate or compensatory damages. Hence, his claim for exemplary damages must similarly fail.

However, as to his claim for attorney’s fees and cost of suit, We find it to be tenable as the records of the case clearly reveal that FRANCISCO III was compelled to litigate or to incur expenses to protect his interest because of the double sale. x x x. Under the circumstances obtaining in the instant case, We deem that the award of P20,000.00 as attorney’s fees is reasonable.36

The fallo of the Court of Appeals Decision thus reads:

WHEREFORE, the foregoing premises considered, the Decision dated October 25, 2002 of Branch 42 of the Regional Trial Court of San Fernando, Pampanga with respect to Commercial Case No. 018 is hereby REVERSED and SET ASIDE. A new one is hereby rendered ORDERING the following:

1) Victor Nunga to surrender the stock certificates of Jesus Gonzalez to the Corporate Secretary of Rural Bank of Apalit, Inc.;

2) [T]he Corporate Secretary of Rural Bank of Apalit, Inc. to register the assignment of shares of stock in favor of Francisco Nunga III, to cancel the stock certificates of Jesus Gonzale[z], and to issue new ones in the name of Francisco Nunga III; and,

3) Jesus Gonzale[z], Francisco Nunga, Jr., and Victor Nunga to pay, jointly and severally, the sum of P20,000.00 as attorney’s fees, plus the cost of suit.37

Francisco Jr. and Victor, together with Gonzalez, filed a Motion for Reconsideration38 of the foregoing Decision. Their Motion, however, was denied by the Court of Appeals in its assailed Resolution dated 4 June 2007.

Refusing to concede, Francisco Jr. and Victor filed the instant Petition,39 which they anchor on the following assignment of errors:

I - WHETHER OR NOT THE COURT OF APPEALS ERRED IN DECLARING THE SALE OF THE SHARES OF STOCK OF GONZALE[Z] TO FRANCISCO JR., NULL AND VOID AB INITIO ON THE BASIS OF THE ALLEGED DISQUALIFICATION OF FRANCISCO JR. UNDER REPUBLIC ACT NO. 7353?

II - WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT FRANCISCO III HAS A VESTED RIGHT TO THE SHARES OF STOCK OF GONZALE[Z], WHICH WOULD BE IMPAIRED BY THE RETROACTIVE APPLICATION OF REPUBLIC ACT NO. 8179?

III - WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED [IN] AWARDING DAMAGES TO FRANCISCO III AND WITHDRAWING THE AWARD OF NOMINAL DAMAGES TO PETITIONERS BY THE TRIAL COURT?

Essentially, the fundamental issue that this Court is called upon to resolve is who among the parties to this case has a better right to the disputed RBA shares of stock.

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.)

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,40 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.41 But there are settled exceptions to this general rule, such as when the statute is CURATIVE or REMEDIAL in nature, or when it CREATES NEW RIGHTS.42 Francisco Jr. and Victor assert that, as an exception to the cardinal rule of prospective application of laws, Republic Act No. 8179 may be retroactively applied, since it creates for the first time a substantive right in favor of natural-born citizens of the Philippines. Francisco Jr. and Victor, however, overlooked the vital exception to the exception. While it is true that a law creating new rights may

be given retroactive effect, the same can only be made possible if the new right does not prejudice or impair any vested right.43

The Court upholds the finding of the Court of Appeals that Republic Act No. 8179 cannot be applied retroactively to the present case, as to do so would prejudice the vested rights of Francisco III to the disputed RBA shares of stock. Francisco III, who is undeniably a citizen of the Philippines, and who is fully qualified to own shares of stock in a Philippine rural bank, had acquired vested rights to the disputed RBA shares of stock by virtue of the Deed of Assignment executed in his favor by Gonzalez.

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.44

With respect to the award of damages, the Court agrees in the findings of the Court of Appeals that Francisco III failed to establish his entitlement to moral damages in view of the absence of proof that he endured physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, or any similar injury.45 As regards the grant of exemplary damages, we likewise uphold the ruling of the appellate court that the same was not warranted under the circumstances, as FRANCISCO III was not able to prove that he was entitled to moral, temperate or compensatory damages. Exemplary damages are imposed by way of example or correction for the public good, in addition to moral, temperate, liquidated or compensatory damages.46 In contracts and quasi-contracts, exemplary damages may be awarded if the defendant acted in a wanton, fraudulent, reckless, oppressive or malevolent manner.47 It cannot, however, be considered as a matter of right; the court has to decide whether or not such damages should be adjudicated.48 Before the court may consider an award for exemplary damages, the plaintiff must first show that he is entitled to moral, temperate or compensatory damages; but it is not necessary that he prove the monetary value thereof.49

As to the contention that the Court of Appeals erred in withdrawing the award of nominal damages to the petitioners by the RTC, the Court finds the same to be utterly misleading. The appellate court did not decree any such withdrawal, as the RTC had not awarded any nominal damages in favor of the petitioners in the first place.

However, as Francisco III was indeed compelled to litigate and incur expenses to protect his interests,50 the Court sustains the award by the Court of Appeals of P20,000.00 as attorney’s fees, plus costs of suit.

WHEREFORE, premises considered, the Petition for Review under Rule 45 of the Rules of Court is hereby DENIED. The assailed Decision dated 31 January 2007 and Resolution dated 4 June 2007 of the Court of Appeals in CA-G.R. CV No. 78424 are hereby AFFIRMED in toto. No costs.

SO ORDERED.

VILLEGAS, Petitioners, vs. RURAL BANK OF TANJAY, INC., Respondent.

This petition for review on certiorari under Rule 45 of the Rules of Court assails the Court of Appeals (CA) Decision1 in CA-G.R. CV No. 40613 which affirmed with modification the Regional Trial Court (RTC) Decision in Civil Case No. 9570.2

The facts, as summarized by the CA, follow.

Sometime in June, 1982, [petitioners], spouses Joaquin and Emma Villegas, obtained an agricultural loan of P350,000.00 from [respondent] Rural Bank of Tanjay, Inc. The loan was secured by a real estate mortgage on [petitioners’] residential house and 5,229 – sq.m. lot situated in Barrio Bantayan, Dumaguete City and covered by TCT No. 12389.

For failure of [petitioners] to pay the loan upon maturity, the mortgage was extrajudicially foreclosed. At the foreclosure sale, [respondent], being the highest bidder, purchased the foreclosed properties for P367,596.16. Thereafter, the Sheriff executed in favor of [respondent] a certificate of sale, which was subsequently registered with the Registry of Deeds of Dumaguete City.

[Petitioners] failed to redeem the properties within the one-year redemption period.

In May, 1987, [respondent] and [petitioner] Joaquin Villegas, through his attorney-in-fact[,] Marilen Victoriano, entered into an agreement denominated as "Promise to Sell," whereby [respondent] promised to sell to [petitioners] the foreclosed properties for a total price of P713,312.72, payable within a period of five (5) years. The agreement reads in part:

PROMISE TO SELL

x x x x

WITNESSETH:

x x x x

2) That for and in consideration of SEVEN HUNDRED THIRTEEN THOUSAND AND THREE HUNDRED TWELVE & 72/100 PESOS (P713,312.72), the VENDOR do hereby promise to sell, transfer, and convey unto the VENDEE, their heirs, successors and assigns, all its rights, interests and participations over the above parcel of land with all the improvements thereon and a residential house.

3) That upon signing of this Promise To Sell, the VENDEE shall agree to make payment of P250,000.00 (Philippine Currency) and the balance of P463,312.72 payable in equal yearly installments plus interest based on the prevailing rate counting from the date of signing this Promise to Sell for a period of five (5) years.

x x x x

5) Provided further, that in case of a delay in any yearly installment for a period of ninety (90) days, this sale will become null and void and no further effect or

validity; and provided further, that payments made shall be reimbursed (returned) to the VENDEE less interest on the account plus additional 15%

liquidated damages and charges.

Upon the signing of the agreement, [petitioners] gave [respondent] the sum of P250,000.00 as down payment. [Petitioners], however, failed to pay the first yearly installment, prompting [respondent] to consolidate its ownership over the properties. Accordingly, TCT No. 12389 was cancelled and a new one, TCT No. 19042, (Exh. 14) was issued in [respondent’s] name on November 8, 1989. Thereafter, [respondent] took possession of the properties. Hence, the action by [petitioners for declaration of nullity of loan and mortgage contracts, recovery of possession of real property, accounting and damages and, in the alternative, repurchase of real estate] commenced on January 15, 1990.

In resisting the complaint, [respondent] 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.

x x x x

After trial on the merits, the [RTC] rendered a Decision dismissing the complaint, disposing as follows:

"In the light of the foregoing, it is considered opinion of this Court, that [petitioners] failed to prove by preponderance of evidence their case and therefore the herein complaint is ordered dismissed. [Petitioners] are ordered to pay [respondent] the sum of P3,000.00 as attorney’s fees and to pay costs without pronouncement as to counterclaim.

SO ORDERED."3

On appeal by both parties, the CA affirmed with modification the RTC’s ruling, thus:

WHEREFORE, the appealed Decision is hereby MODIFIED by (a) ORDERING [respondent] to reimburse [petitioners] their down payment of P250,000.00 and (b) DELETING the award of attorney’s fees to [respondent].

SO ORDERED.4

Hence, this appeal by certiorari raising the following issues:

(1) The Court of Appeals erred in not holding that the loan and mortgage contracts are null and void ab initio for being against public policy;

(2) The Court of Appeals erred in not holding that, by reason of the fact that the loan and mortgage contracts are null and void ab initio for being against public policy, the doctrine of estoppel does not apply in this case;

(3) The Court of Appeals erred in not finding that the addendum on the promissory notes containing an escalation clause is null and void ab initio for not being signed by petitioner Emma M. Villegas, wife of petitioner Joaquin Villegas, there being a showing that the companion real estate mortgage involves conjugal property. x x x.

(4) The Court of Appeals erred in not finding that the addendum on the promissory notes containing an escalation clause is null and void ab initio for being so worded that the implementation thereof would deprive petitioners due process guaranteed by [the] constitution, the petitioners not having been notified beforehand of said implementation.5

Notwithstanding petitioners’ formulation of the issues, the core issue for our resolution is whether petitioners may recover possession of the mortgaged properties.

The petition deserves scant consideration and ought to have been dismissed outright. Petitioners are precluded from seeking a declaration of nullity of the loan and mortgage contracts; they are likewise barred from recovering possession of the subject property.lavvphil

Petitioners insist on the nullity of the loan and mortgage contracts. Unabashedly, petitioners admit that the loan (and mortgage) contracts were made to appear as several sugar crop loans not exceeding P50,000.00 each – even if they were not – just so the respondent rural bank could grant and approve the same pursuant to Republic Act (R.A.) No. 720, the Rural Banks Act. Petitioners boldly enumerate the following circumstances that show that these loans were obtained in clear contravention of R.A. No. 720:

(a) The petitioners never planted sugar cane on any parcel of agricultural land;

(b) The mortgaged real estate is residential, with a house, located in the heart of Dumaguete City, with an area of only one-half (1/2) hectare;

(c) Petitioners never planted any sugar cane on this one-half (1/2) hectare parcel of land;

(d) Petitioners were never required to execute any chattel mortgage on standing crops;

(e) To make it appear that the petitioners were entitled to avail themselves of loan benefits under Republic Act No. 720, Rural Banks Act, respondent made them sign promissory notes for P350,000.00 in split amounts not exceeding P50,000.00 each.6

In short, petitioners aver that the sugar crop loans were merely simulated contracts and, therefore, without any force and effect.

Articles 1345 and 1346 of the Civil Code are the applicable laws, and they unmistakably provide:

Art. 1345. Simulation of a contract may be absolute or relative. The former takes place when the parties do not intend to be bound at all; the latter, when the parties conceal their true agreement.

Art. 1346. An absolutely simulated or fictitious contract is void. A relative simulation, when it does not prejudice a third person and is not intended for any purpose contrary to law, morals, good customs, public order or public policy binds the parties to their real agreement.

Given the factual antecedents of this case, it is obvious that the sugar crop loans were relatively simulated contracts and that both parties intended to be bound thereby. There are two juridical acts involved in relative simulation— the ostensible act and the hidden act.7 The ostensible act is the contract that the parties pretend to have executed while the hidden act is the true agreement between the parties.8 To determine the enforceability of the actual agreement between the parties, we must discern whether the concealed or hidden act is lawful and the essential requisites of a valid contract are present.

In this case, the juridical act which binds the parties are the loan and mortgage contracts, i.e., petitioners’ procurement of a loan from respondent. Although these loan and mortgage contracts were concealed and made to appear as sugar crop loans to make them fall within the purview of the Rural Banks Act, all the essential requisites of a contract9 were present. However, the purpose thereof is illicit, intended to circumvent the Rural Banks Act requirement in the procurement of loans.10 Consequently, while the parties intended to be bound thereby, the agreement is void and inexistent under Article 140911 of the Civil Code.

In arguing that the loan and mortgage contracts are null and void, petitioners would impute all fault therefor to respondent. Yet, petitioners’ averments evince an obvious

knowledge and voluntariness on their part to enter into the simulated contracts. We find that fault for the nullity of the contract does not lie at respondent’s feet alone, but at petitioners’ as well. Accordingly, neither party can maintain an action against the other, as provided in Article 1412 of the Civil Code:

Art. 1412. If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense, the following rules shall be observed:

(1) When the fault is on the part of both contracting parties, neither may recover what he has given by virtue of the contract, or demand the performance of the other’s undertaking;

(2) When only one of the contracting parties is at fault, he cannot recover what he has given by reason of the contract, or ask for the fulfillment of what has been promised him. The other, who is not at fault, may demand the return of what he has given without any obligation to comply with his promise.

Petitioners did not come to court with clean hands. They admit that they never planted sugarcane on any property, much less on the mortgaged property. Yet, they eagerly accepted the proceeds of the simulated sugar crop loans. Petitioners readily participated in the ploy to circumvent the Rural Banks Act and offered no objection when their original loan of P350,000.00 was divided into small separate loans not exceeding P50,000.00 each. Clearly, both petitioners and respondent are in pari delicto, and neither should be accorded affirmative relief as against the other.

In Tala Realty Services Corp. v. Banco Filipino Savings and Mortgage Bank,12 we held that when the parties are in pari delicto, neither will obtain relief from the court, thus:

The Bank should not be allowed to dispute the sale of its lands to Tala nor should Tala be allowed to further collect rent from the Bank. The clean hands doctrine will not allow the creation or the use of a juridical relation such as a trust to subvert, directly or indirectly, the law. Neither the bank nor Tala came to court with clean hands; neither will obtain relief from the court as one who seeks equity and justice must come to court with clean hands. By not allowing Tala to collect from the Bank rent for the period during which the latter was arbitrarily closed, both Tala and the Bank will be left where they are, each paying the price for its deception.13

Petitioners stubbornly insist that respondent cannot invoke the pari delicto doctrine, ostensibly because of our obiter in Enrique T. Yuchengco, Inc., et al. v. Velayo.14

In Yuchengco, appellant sold 70% of the subscribed and outstanding capital stock of a Philippine corporation, duly licensed as a tourist operator, to appellees without the required prior notice and approval of the Department of Tourism (DOT). Consequently,

the DOT cancelled the corporation’s Local Tour Operator’s License. In turn, appellees asked for a rescission of the sale and demanded the return of the purchase price.

We specifically ruled therein that the pari delicto doctrine is not applicable, because:

The obligation to secure prior Department of Tourism approval devolved upon the defendant (herein appellant) for it was he as the owner vendor who had the duty to give clear title to the properties he was conveying. It was he alone who was charged with knowing about rules attendant to a sale of the assets or shares of his tourist-oriented organization. He should have known that under said rules and regulations, on pain of nullity, shares of stock in his company could not be transferred without prior approval from the Department of Tourism. The failure to secure this approval is attributable to him alone.15

Thus, we declared that even assuming both parties were guilty of the violation, it does not always follow that both parties, being in pari delicto, should be left where they are. We recognized as an exception a situation when courts must interfere and grant relief to one of the parties because public policy requires their intervention, even if it will result in a benefit derived by a plaintiff who is in equal guilt with defendant.16

In stark contrast to Yuchengco, the factual milieu of the present case does not compel us to grant relief to a party who is in pari delicto. The public policy requiring rural banks to give preference to bona fide small farmers in the grant of loans will not be served if a party, such as petitioners, who had equal participation and equal guilt in the circumvention of the Rural Banks Act, will be allowed to recover the subject property.

The following circumstances reveal the utter poverty of petitioners’ arguments and militate against their bid to recover the subject property:

1. As previously adverted to, petitioners readily and voluntarily accepted the proceeds of the loan, divided into small loans, without question.

2. After failing to redeem the mortgaged subject property, thereby allowing respondent to consolidate title thereto,17 petitioners then entered into a Promise to Sell and made a down payment of P250,000.00.

3. Failing anew to comply with the terms of the Promise to Sell and pay the first yearly installment, only then did petitioners invoke the nullity of the loan and mortgage contracts.

In all, petitioners explicitly recognized respondent’s ownership over the subject property and merely resorted to the void contract argument after they had failed to reacquire the property and a new title thereto in respondent’s name was issued.

We are not unmindful of the fact that the Promise to Sell ultimately allows petitioners to recover the subject property which they were estopped from recovering under the void loan and mortgage contracts. However, the Promise to Sell, although it involves the same parties and subject matter, is a separate and independent contract from that of the void loan and mortgage contracts.

To reiterate, under the void loan and mortgage contracts, the parties, being in pari delicto, cannot recover what they each has given by virtue of the contract.18 Neither can the parties demand performance of the contract. No remedy or affirmative relief can be afforded the parties because of their presumptive knowledge that the transaction was tainted with illegality.19 The courts will not aid either party to an illegal agreement and will instead leave the parties where they find them.20

Consequently, the parties having no cause of action against the other based on a void contract, and possession and ownership of the subject property being ultimately vested in respondent, the latter can enter into a separate and distinct contract for its alienation. Petitioners recognized respondent’s ownership of the subject property by entering into a Promise to Sell, which expressly designates respondent as the vendor and petitioners as the vendees. At this point, petitioners, originally co-owners and mortgagors of the subject property, unequivocally acquiesced to their new status as buyers thereof. In fact, the Promise to Sell makes no reference whatsoever to petitioners’ previous ownership of the subject property and to the void loan and mortgage contracts.21 On the whole, the Promise to Sell, an independent contract, did not purport to ratify the void loan and mortgage contracts.lawphi1

By its very terms, the Promise to Sell simply intended to alienate to petitioners the subject property according to the terms and conditions contained therein. Article 1370 of the Civil Code reads:

Art. 1370. If the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control.

If the words appear to be contrary to the evident intention of the parties, the latter shall prevail over the former.

Thus, the terms and conditions of the Promise to Sell are controlling.

Paragraph 5 of the Promise to Sell provides:

5) Provided further, that in case of a delay in any yearly installment for a period of ninety (90) days, this sale will become null and void [without] further effect or validity; and provided further, that payments made shall be reimbursed (returned to the

VENDEE less interest on the account plus additional 15% liquidated damages and charges.22

As stipulated in the Promise to Sell, petitioners are entitled to reimbursement of the P250,000.00 down payment. We agree with the CA’s holding on this score:

We note, however, that there is no basis for the imposition of interest and additional 15% liquidated damages and charges on the amount to be thus reimbursed. The "Promise to Sell" is separate and distinct from the loan and mortgage contracts earlier executed by the parties. Obviously, after the foreclosure, there is no more loan or account to speak of to justify the said imposition.23

Finally, contrary to petitioners’ contention, the CA, in denying petitioners’ appeal, did not commit an error; it did not ratify a void contract because void contracts cannot be ratified. The CA simply refused to grant the specific relief of recovering the subject property prayed for by petitioners. Nonetheless, it ordered respondent to reimburse petitioners for their down payment of P250,000.00 and disallowed respondent’s claim for actual, moral and exemplary damages and attorney’s fees.

WHEREFORE, premises considered, the petition is hereby DENIED. The Decision of the Court of Appeals in CA-G.R. CV No. 40613 is hereby AFFIRMED. Costs against petitioners.

SO ORDERED.

CAMPOS vs. PASTRANA

It sometimes happens that a creditor, after securing a judgment against a debtor, finds that the debtor had transferred all his properties to another leaving nothing to satisfy the obligation to the creditor. In this petition for review on certiorari,1 petitioners ask us to set aside the November 23, 2005 Decision2 of the Court of Appeals (CA) in CA-G.R.

CV No. 68731 declaring as null the sale of several parcels of land made by their parents in their favor, for being absolutely simulated transactions. Also assailed is the November 21, 2006 Resolution.3

Factual antecedents

This is the third case between essentially the same parties and the second among those cases to reach this Court on appeal, spanning a period of close to three decades.

The first case arose from the refusal of Carlito Campos (Carlito), the father of herein petitioners, to surrender the possession of a fishpond he leased from respondents’ mother, Salvacion Buenvenida, despite the expiration of their contract of lease in 1980. Alleging that he was an agricultural lessee, Carlito filed an agrarian case docketed as CAR Case No. 1196 (Agrarian Case) against his lessor. After trial, the Regional Trial Court of Roxas City, Branch 14, found that Carlito was not an agricultural tenant. He then appealed to the CA and subsequently to this Court, but was unsuccessful.

While the appeal in the Agrarian Case was pending before the CA, herein respondents filed the second case, Civil Case No. V-5417, against Carlito for Recovery of Possession and Damages with Preliminary Mandatory Injunction (Possession Case) involving the same fishpond subject of the earlier agrarian case. On November 27, 1990, the Regional Trial Court of Roxas City, Branch 16, rendered a Decision4 finding Carlito to have retained possession of the fishpond notwithstanding the expiration of the contract of lease and ordering him to pay rentals, the value of the produce and damages to the herein respondents. The Decision became final and executory and a Writ of Execution5 was issued on February 7, 1995. Subsequently, on September 19, 1995, an Alias Writ of Execution6 was also issued. Both were returned unsatisfied as per Sheriff’s Return of Service dated November 14, 1995.

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 following properties:

1. Residential Lots 3715-A and 3715-B-2 covered by Transfer Certificates of Title Nos. 182057 and 18417,8 respectively and

2. Agricultural Lots 850 and 852 covered by Original Certificates of Title

Nos. P-91999 and P-9200,10 respectively.

When the respondents were about to levy these properties to satisfy the judgment in the Possession Case, they discovered that spouses Carlito and Margarita Campos transferred these lots to their children Rosemarie and Jesus Campos, herein petitioners, by virtue of Deeds of Absolute Sale dated October 18, 198511 and November 2, 1988.12

Specifically, spouses Campos sold the residential lots (Lots 3715-A and 3715-B-2), with a total area of 1,393 square meters, to their daughter Rosemarie for P7,000.00 and the agricultural lots (Lots 850 and 852) with a combined area of 7,972 square meters, to their son Jesus for P5,600.00.

Proceedings before the Regional Trial Court –Civil Case No. V-7028

On February 18, 1997, respondents instituted the third case, Civil Case No.

V-7028 (Nullity of Sale Case),13 subject of this appeal, seeking to declare as null the aforesaid deeds of sale and the transfer certificates of title issued pursuant thereto. They alleged that the contracts of sale between spouses Campos and petitioners were simulated for the sole purpose of evading the levy of the abovementioned properties in satisfaction of a money judgment that might be rendered in the Possession Case.

In their Answer with Counterclaim,14 spouses Campos and petitioners averred that Rosemarie and Jesus Campos acquired the lots in question in good faith and for value because they were sold to them before they had any notice of the claims or interests of other persons thereover.

On August 21, 2000, the Regional Trial Court of Roxas City, Branch 14, dismissed the complaint.15 It held that –

In the Resolution of this case the issue is whether or not the spouses Carlito Campos and Margarita Arduo, sensing that an unfavorable judgment might be rendered against them in Civil Case No. V-5417 filed in Branch 16 on July 17, 1987 by the same plaintiffs for Recovery of Possession and Damages with Preliminary Mandatory Injunction, in evident bad faith and wanton disregard of the law, maliciously and fraudulently, executed a purely fictitious and simulated sale of their properties thereby ceding and transferring their ownership thereto to their children Rosemarie Campos-Bautista and Jesus Campos.

A close scrutiny of the defendants’ documentary exhibits and testimonies showed that as early as 1981 defendant Jesus Campos was already leasing a fishpond in Brgy. Majanlud, Sapi-an, Capiz from Victorino Jumpay and defendant Rosemarie Campos was engaged in the sari-sari store business starting 1985 so that they were able to purchase the properties of their parents out of their profits derived therefrom.

The Deed of Absolute Sale (Exh. "6" & "10") executed by the spouses Carlito Campos and Margarita Arduo to Rosemarie Campos and Jesus Campos were dated October 17, 1985 and November 2, 1988, respectively.

It can readily [be] gleaned from the records that Civil Case No. V-5417 was filed on July 7, 1987 and was decided on November 27, 1990. Furthermore, the alias writ of execution was issued only on July 5, 1995 for which the Sheriff’s Return of Service was returned unsatisfied on November 14, 1995.

WHEREFORE, the complaint of the plaintiffs against the defendants is DISMISSED. Their claim for damages is likewise DISMISSED. The counter-claim of the defendants must also be DISMISSED as the case was not filed in evident bad faith and with malicious intent.

SO ORDERED.16

Proceedings before the Court of Appeals

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

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 dispositive portion of the Decision of the CA reads:

WHEREFORE, the instant appeal is GRANTED. The decision of the Regional Trial Court of Roxas City, Branch 14, dated August 21, 2000 in Civil Case No. V-7028 is REVERSED and SET ASIDE. Let a copy of this Decision be furnished to the Register of Deeds of the Province of Capiz who is hereby 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.

SO ORDERED.

Only petitioners moved for reconsideration17 but the CA denied the same.18

Issues

Hence, this petition for review on certiorari raising the following errors:

I - THE COURT OF APPEALS COMMITTED AN ERROR OF LAW IN APPLYING ARTICLE 1409, CIVIL CODE, INSTEAD OF ARTIcLE 1381 (3), CIVIL CODE, AND IN SPECULATING THAT A CAUSE OF ACTION OF SUPPOSED SALE IN FRAUD OF CREDITORS EXISTS DESPITE NON-EXHAUSTION OF REMEDIES TO ENFORCE THE JUDGMENT IN CIVIL CASE NO. V-5417.

II - THE COURT OF APPEALS COMMITTED AN ERROR OF LAW OVERLOOKING THAT THE CAUSE OF ACTION HAD PRESCRIBED, THE COMPLAINT HAVING BEEN FILED AFTER SEVEN (7) YEARS OR ONLY ON 14 OCTOBER 1997, FROM THE TIME THE TITLES WERE ISSUED IN 1990.

III - THE COURT OF APPEALS ERRONEOUSLY ANCHORED ITS IMPUGNED JUDGMENT ON MISAPPREHENSION OF FACTS THAT THE SALE WERE ANTEDATED, HENCE SIMULATED DESPITE GLARING ABSENCE OF EVIDENCE IN SUPPORT THEREOF.

IV - THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN CASTING ASIDE OVERWHELMING EVIDENCE DULY APPRECIATED BY THE TRIAL COURT THAT PETITIONERS ARE BUYERS IN GOOD FAITH AND FOR VALUE, WHO EXERCISED DOMINION OVER THE SUBJECT LOTS, WHICH IF PROPERLY CONSIDERED, SHALL WARRANT THE SINGULAR CONCLUSION THAT THE SALE AND TRANSFER OF TITLES ARE VALID.19

Petitioners’ arguments

Petitioners assail the application of Article 140920 of the Civil Code on void

contracts as against Article 1381(3)21 of the Civil Code on rescissible contracts in fraud of creditors, considering that the questioned conveyances executed by the spouses Campos to their children were allegedly done to evade the enforcement of the writ of execution in the Possession Case.22 In addition, petitioners allege that the CA misappreciated the facts of this case when it found that the questioned transactions were tainted with badges of fraud.23

Respondents’ arguments

Respondents argue that the application of Article 1409 on void contracts was a natural and logical consequence of the CA’s finding that subject deeds of sale were absolutely simulated and fictitious, consistent with the nature of the respondents’ cause of action which was for declaration of nullity of said contracts and the transfer certificates of titles issued pursuant thereto.24 Respondents also stressed that the CA’s finding is

conclusive upon us and that only questions of law may be raised in a petition for review on certiorari under Rule 45 of the Rules of Court.25

Our Ruling

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 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.

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

We also agree with the findings of the CA that petitioners failed to explain the reasons for the delay in the registration of the sale, leading the appellate court to conclude that

the conveyances were made only in 1990 or sometime just before their actual registration and that the corresponding Deeds of Absolute Sale were antedated. This conclusion is bolstered by the fact that the supposed notary public before whom the deeds of sale were acknowledged had no valid notarial commission at the time of the notarization of said documents.26

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 83,580.0027 P 417,900.0028

Agricultural Lots: From Spouses Campos to son, Jesus Campos

P 5,600.00 P 25,000.1929 P 39,860.0030

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 meter31 residential land could not recall the exact area of the two lots she purchased. In her cross-examination, petitioner Rosemarie Campos stated:

Q: Can you tell us the total area of those two (2) lots that they sold to you?

A: It consists of One Thousand (1,000) Square Meters.32

x x x x

Q: By the way, for how much did you buy this [piece] of land consisting of 1,000 square meters?

A: Seven Thousand Pesos (P7,000.00) Your Honor.33

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.34 In addition, spouses Campos continued to cultivate the rice lands which they purportedly sold to their son Jesus.35 Meantime, Jesus, the supposed new owner of said rice lands, has relocated to Bulacan36 where he worked as a security guard.37 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.

In Suntay v. Court of Appeals,38 we held that:

The failure of the late Rafael to take exclusive possession of the property allegedly sold to him is a clear badge of fraud. The fact that, notwithstanding the title transfer, Federico remained in actual possession, cultivation and occupation of the disputed lot from the time the deed of sale was executed until the present, is a circumstance which is unmistakably added proof of the fictitiousness of the said transfer, the same being contrary to the principle of ownership.

While in Spouses Santiago v. Court of Appeals,39 we held that "the failure of petitioners to take exclusive possession of the property allegedly sold to them, or in the alternative, to collect rentals from the alleged vendor x x x is contrary to the principle of ownership and a clear badge of simulation that renders the whole transaction void and without force and effect, pursuant to Article 1409 of the Civil Code".

The issuance of transfer certificates of title to petitioners did not vest upon them ownership of the properties.

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.40 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.41

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

Likewise, petitioner Jesus Campos supposedly bought the rice land from his parents in 1988 but did not have the assailed Deed of Absolute Sale registered with the proper Registry of Deeds for more than two years, or until two months before the promulgation of the judgment in the Possession Case. Thus, we likewise affirm the finding of the CA that the purported deed was antedated. In addition, on cross, he confirmed that he had knowledge of the prior pending cases when he supposedly purchased his parents’ rice land stating that:

Q: You never knew that your parents and the plaintiffs in this case have cases in the past prior to this case now, is that right?

A: Yes, sir. I knew about it.

Q: And in spite of your knowledge, that there was a pending case between your parents and the plaintiffs here, you still purchased these two (2) lots 850 and 852 from your parents, is that what you are telling us?

A: All I knew was that, that case was a different case from the subject matter then [sic] the lot now in question.42

On these findings of fact, petitioner Jesus Campos cannot be considered as an innocent buyer and for value.

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

The 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 1990.1avvphi1

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.

Finally, 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".43 A contract which is null and void is no contract at all and hence could not be the subject of rescission.44

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. 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.

WHEREFORE, the petition is DENIED. Costs against petitioners.

SO ORDERED.