G.R. No.

L-15127 May 30, 1961

EMETERIO CUI, plainti-app!llant,
"#.
$RELL$NO UNI%ER&IT', (!!n(ant-app!ll!!.
G.$.&. &ipin, )*., o* plainti-app!llant.
E. %oltai*! Ga*+ia o* (!!n(ant-app!ll!!.
CONCE,CION, ).-
Appeal by plaintif Emeterio Cui from a decision of the Court
of First Instance of Manila, absolving defendant Arellano
University from plaintif's complaint, ith costs against the
plaintif, and dismissing defendant's counter claim, for
insu!ciency of proof thereon"
In the language of the decision appealed from#
$he essential facts of this case are short and undisputed" As
established by the agreement of facts E%hibits & and by the
respective oral and documentary evidence introduced by
the parties, it appears conclusive that plaintif, before the
school year '()*+'()( too, up preparatory la course in
the defendant University" After -nishing his preparatory la
course plaintif enrolled in the College of .a of the
defendant from the school year '()*+'()(" /laintif -nished
his la studies in the defendant university up to and
including the -rst semester of the fourth year" 0uring all the
school years in hich plaintif as studying la in defendant
la college, Francisco 1" Capistrano, brother of the mother
of plaintif, as the dean of the College of .a and legal
counsel of the defendant university" /laintif enrolled for the
last semester of his la studies in the defendant university
but failed to pay his tuition fees because his uncle 0ean
Francisco 1" Capistrano having severed his connection ith
defendant and having accepted the deanship and
chancellorship of the College of .a of Abad 2antos
University, plaintif left the defendant's la college and
enrolled for the last semester of his fourth year la in the
college of la of the Abad 2antos University graduating from
the college of la of the latter university" /laintif, during all
the time he as studying la in defendant university as
aarded scholarship grants, for scholastic merit, so that his
semestral tuition fees ere returned to him after the ends of
semester and hen his scholarship grants ere aarded to
him" $he hole amount of tuition fees paid by plaintif to
defendant and refunded to him by the latter from the -rst
semester up to and including the -rst semester of his last
year in the college of la or the fourth year, is in total
/',344"*5" After graduating in la from Abad 2antos
University he applied to ta,e the bar e%amination" $o secure
permission to ta,e the bar he needed the transcripts of his
records in defendant Arellano University" /laintif petitioned
the latter to issue to him the needed transcripts" $he
defendant refused until after he had paid bac, the /',344
*5 hich defendant refunded to him as above stated" As he
could not ta,e the bar e%amination ithout those
transcripts, plaintif paid to defendant the said sum under
protest" $his is the sum hich plaintif see,s to recover from
defendant in this case"
6efore defendant aarded to plaintif the scholarship grants
as above stated, he as made to sign the folloing contract
covenant and agreement#
7In consideration of the scholarship granted to me by the
University, I hereby aive my right to transfer to another
school ithout having refunded to the University
8defendant9 the e:uivalent of my scholarship cash"
82gd"9 Emeterio Cui7"
It is admitted that, on August ';, '()(, the 0irector of
/rivate 2chools issued Memorandum <o" 4*, series of '()(,
on the sub=ect of 72cholarship,7 addressed to 7All heads of
private schools, colleges and universities,7 reading#
'" 2chool catalogs and prospectuses submitted to this,
6ureau sho that some schools ofer full or partial
scholarships to deserving students > for e%cellence in
scholarship or for leadership in e%tra+curricular activities"
2uch inducements to poor but gifted students should be
encouraged" 6ut to stipulate the condition that such
scholarships are good only if the students concerned
continue in the same school nulli-es the principle of merit in
the aard of these scholarships"
?" @hen students are given full or partial scholarships, it is
understood that such scholarships are merited and earned"
$he amount in tuition and other fees corresponding to these
scholarships should not be subse:uently charged to the
recipient students hen they decide to :uit school or to
transfer to another institution" 2cholarships should not be
ofered merely to attract and ,eep students in a school"
4" 2everal complaints have actually been received from
students ho have en=oyed scholarships, full or partial, to
the efect that they could not transfer to other schools since
their credentials ould not be released unless they ould
pay the fees corresponding to the period of the scholarships"
@here the 6ureau believes that the right of the student to
transfer is being denied on this ground, it reserves the right
to authoriAe such transfer"
that defendant herein received a copy of this memorandumB
that plaintif as,ed the 6ureau of /rivate 2chools to pass
upon the issue on his right to secure the transcript of his
record in defendant University, ithout being re:uired to
refund the sum of /',344"*5B that the 6ureau of /rivate
2chools upheld the position ta,en by the plaintif and so
advised the defendantB and that, this notithstanding, the
latter refused to issue said transcript of records, unless said
refund ere made, and even recommended to said 6ureau
that it issue a ritten order directing the defendant to
release said transcript of record, 7so that the case may be
presented to the court for =udicial action"7 As above stated,
plaintif as, accordingly, constrained to pay, and did pay
under protest, said sum of /',344"*5, in order that he could
ta,e the bar e%amination in '(C4" 2ubse:uently, he brought
this action for the recovery of said amount, aside from
/?,333 as moral damages, /C33 as e%emplary damages,
/?,333 as attorney's fees, and /C33 as e%penses of
litigation"
In its anser, defendant reiterated the stand it too,, vis+a+
vis the 6ureau of /rivate 2chools, namely, that the
provisions of its contract ith plaintif are valid and binding
and that the memorandum above+referred to is null and
void" It, li,eise, set up a counterclaim for /'3,333"33 as
damages, and /4,333 as attorney's fees"
$he issue in this case is hether the above :uoted provision
of the contract beteen plaintif and the defendant,
hereby the former aived his right to transfer to another
school ithout refunding to the latter the e:uivalent of his
scholarships in cash, is valid or not" $he loer court resolved
this :uestion in the a!rmative, upon the ground that the
aforementioned memorandum of the 0irector of /rivate
2chools is not a laB that the provisions thereof are
advisory, not mandatory in natureB and that, although the
contractual provision 7may be unethical, yet it as more
unethical for plaintif to :uit studying ith the defendant
ithout good reasons and simply because he anted to
follo the e%ample of his uncle"7 Moreover, defendant
maintains in its brief that the aforementioned memorandum
of the 0irector of /rivate 2chools is null and void because
said o!cer had no authority to issue it, and because it had
been neither approved by the corresponding department
head nor published in the o!cial gaAette"
@e do not deem it necessary or advisable to consider as the
loer court did, the :uestion hether plaintif had su!cient
reasons or not to transfer from defendant University to the
Abad 2antos University" $he nature of the issue before us,
and its far reaching efects, transcend personal e:uations
and demand a determination of the case from a high
impersonal plane" <either do e deem it essential to pass
upon the validity of said Memorandum <o" 4*, for,
regardless of the same, e are of the opinion that the
stipulation in :uestion is contrary to public policy and,
hence, null and void" $he aforesaid memorandum merely
incorporates a sound principle of public policy" As the
0irector of /rivate 2chools correctly pointed, out in his
letter, E%hibit 6, to the defendant,
$here is one more point that merits refutation and that is
hether or not the contract entered into beteen Cui and
Arellano University on 2eptember '3, '(C' as void as
against public policy" In the case of Deigel vs" Illinois $rust
and 2avings 6an,, ?)C Ill" '*3, '( Ann" Case '?5, the court
said# 'In determining a public policy of the state, courts are
limited to a consideration of the Constitution, the =udicial
decisions, the statutes, and the practice of government
o!cers"' It might ta,e more than a government bureau or
o!ce to lay don or establish a public policy, as alleged in
your communication, but courts consider the practices of
government o!cials as one of the four factors in
determining a public policy of the state" It has been
consistently held in America that under the principles
relating to the doctrine of public policy, as applied to the la
of contracts, courts of =ustice ill not recogniAe or uphold a
transaction hich its ob=ect, operation, or tendency is
calculated to be pre=udicial to the public elfare, to sound
morality or to civic honesty 81itter vs" Mutual .ife Ins" Co",
';( U"2" '4(B Eeding vs" Fallaghere ;) ."1"A" *''B GeaAy vs"
Allen, '54 <"H" 4C(9" If Arellano University understood clearly
the real essence of scholarships and the motives hich
prompted this o!ce to issue Memorandum <o" 4*, s" '()(,
it should have not entered into a contract of aiver ith Cui
on 2eptember '3, '(C', hich is a direct violation of our
Memorandum and an open challenge to the authority of the
0irector of /rivate 2chools because the contract as
repugnant to sound morality and civic honesty" And -nally,
in Fabriel vs" Monte de /iedad, If" FaAette 2upp" 0ec" ;,
'()', p" ;5 e read# 'In order to declare a contract void as
against public policy, a court must -nd that the contract as
to consideration or the thing to be done, contravenes some
established interest of society, or is inconsistent ith sound
policy and good morals or tends clearly to undermine the
security of individual rights" $he policy enunciated in
Memorandum <o" 4*, s" '()( is sound policy" 2cholarship
are aarded in recognition of merit not to ,eep outstanding
students in school to bolster its prestige" In the
understanding of that university scholarships aard is a
business scheme designed to increase the business
potential of an education institution" $hus conceived it is not
only inconsistent ith sound policy but also good morals"
6ut hat is moralsJ Manresa has this de-nition" It is good
customsB those generally accepted principles of morality
hich have received some ,ind of social and practical
con-rmation" $he practice of aarding scholarships to
attract students and ,eep them in school is not good
customs nor has it received some ,ind of social and
practical con-rmation e%cept in some private institutions as
in Arellano University" $he University of the /hilippines hich
implements 2ection C of Article &IG of the Constitution ith
reference to the giving of free scholarships to gifted
children, does not re:uire scholars to reimburse the
corresponding value of the scholarships if they transfer to
other schools" 2o also ith the leading colleges and
universities of the United 2tates after hich our educational
practices or policies are patterned" In these institutions
scholarships are granted not to attract and to ,eep brilliant
students in school for their propaganda mine but to reard
merit or help gifted students in hom society has an
established interest or a -rst lien" 8Emphasis supplied"9
@EE1EFI1E, the decision appealed from is hereby reversed
and another one shall be entered sentencing the defendant
to pay to the plaintif the sum of /',344"*5, ith interest
thereon at the legal rate from 2eptember ', '(C), date of
the institution of this case, as ell as the costs, and
dismissing defendant's counterclaim" It is so ordered"
6engAon, C"K", /adilla, .abrador, 1eyes, K"6".", 6arrera,
/arades, 0iAon, 0e .eon and <atividad, KK", concur"
6autista Angelo, K", reserves his vote"
G.R. No. L-20175 O+to.!* 30, 1967
M$RI$ $. G$RCI$, ET $L., p!tition!*#,
"#.
RIT$ LEG$R/$, INC., *!#pon(!nt.
,i+a0o an( $1+aoili o* p!tition!*#.
G*!1o*io 2a3a*(o o* *!#pon(!nt.
/I4ON, ).-
Appeal ta,en by the spouses Maria A" Farcia and Marcelino
A" $imbang > hereinafter referred to as petitioners > from
the decision of the Court of Appeals in CA+F"1" <o" ?5'()+1
reversing the one rendered on Kanuary (, '(;3 by the Court
of First Instance of Manila in Civil Case <o" '(;? entitled
7Maria A" Farcia, et al" vs" 1ita .egarda, Inc"7 $he latter is a
corporation organiAed under /hilippine las, and is engaged
in the sale and resale of residential lots in Manila and
suburbs" @e shall refer to it hereinafter as the respondent"
In May ?3, '(C4 the petitioners instituted the civil case
mentioned above against the respondent to have certain
contracts numbered 4??, 4?), and (;C declared as e%isting
and subsistingB to compel the respondent to accept
payments tendered by themB and to recover moral and
e%emplary damages and attorney's fees in the amounts of
/;,333"33 and /',C33"33, respectively"
$he three causes of action alleged in their complaint
involved the three parcels of land sub=ect matter of the
contracts aforesaid" Each had an area of about 'C3 s:uare
meters, and formed part of the 1ita .egarda Estate situated
in Manila, and subdivided into lots sold on installment basis"
8'9 Contract to 2ell <o" 4?? 8E%hs" A and A+'9 covering .ot
)3, 6loc, *+CC, as e%ecuted by the respondent in favor of
Emiliano Irellana on March ', '()5" In Kune ?;, '()5, the
latter transferred all his rights, and interest thereunder to
Encarnacion Gito ho, in turn, on <ovember 4 of the same
year, made a similar transfer of rights in favor of 0el-n
6acho" Finally, on May ?(, '()*, 6acho also transferred all
his rights and interest to the petitioners"
8?9 In March ', '()5, Contract to 2ell <o" 4?) 8E%h" ?9
covering .ot <o" ?3, 6loc, C+CC as e%ecuted by respondent
in favor of Kesusa Feli%" $o months later, Feli%, ith the
ritten consent of the respondent, sold her rights and
interest to petitioners"
849 Contract to 2ell <o" (;C 8E%h" 49 covering .ot <o" ?5,
6loc, C+CC as e%ecuted by the respondent in favor of
Angela AlvareA 2olomon on Kanuary *, '()*" @ith the
ritten consent of the former, 2olomon also sold her rights
and interest to the petitioners on May '', '()*"
In its anser to the complaint, the respondent averred that
in relation to the Contracts to 2ell <os" *??, (;C and 4?),
petitioners paid on <ovember 5, '(C' the C4rd, )4rd and
C4rd installments, respectively, corresponding to the
installments for the month of Kuly, '(C'B that the petitioners,
as of Kune '', '(C?, had failed to pay the stipulated monthly
installments for Contracts <os" 4?? and 4?) corresponding
to the period from August, '(C' through Kune, '(C?, and in
the case of Contract <o" (;C, from August, '(C' through
May, '(C?B that despite several demands for payment of
arrears made beteen 0ecember, '(C' and Kune, '(C? by
the respondent, the petitioners had failed to pay the
amounts dueB and that upon the e%piration of the (3+day
grace period on Kune '', '(C? stipulated in the si%th
paragraph of the contracts, the respondent had cancelled
them" $he anser also prayed for an aard of damages and
attorney's fees in the sum of /?,333"33"
In April ?3, '(C) the petitioners -led a reply denying that
they ere in arrears as to their obligations under the three
contracts and, further averred as a!rmative defense that
the cancellation thereof as unlaful and arbitrary"
After trial the Court rendered =udgment declaring Contracts
<os" 4??, 4?) and (;C as e%isting and subsistingB ordering
the respondent to accept the payments tendered by the
petitioners and to pay attorney's fees in the sum of
/',C33"33" but denied the aard of moral and e%emplary
damages" From this decision the respondent appealed to the
Court of Appeals from hose decision > reversing that of
the loer court > the instant appeal as ta,en"
/etitioners no urge Us, in turn, to reverse the decision of
the Court of Appeals, claiming that the latter had committed
the folloing errors#
I" $he Eonorable Court of Appeals erred in declaring that
the respondent 1ita .egarda, Inc" had not aived its rights
to cancel its contracts ith the petitioners on the ground
that it had previously accepted late payments of the
installments due on such contracts"
II" $he Eonorable Court of Appeals erred in declaring that
par" ( of the contracts in :uestion is not in violation of Art"
'43* of the <e Civil Code"
III" $he Eonorable Court of Appeals erred in not declaring
that the respondent 1ita .egarda, Inc", after having
tolerated and accepted previously late payments on the
installments due on the contracts, suddenly and ithout
suitable arning and giving of further opportunity to pay the
same could not and should not have precipitously decided to
forfeit, as it actually forfeited, all the payments hich have
already been made to it by petitioners"
IG" $he Eonorable Court of Appeals erred in reversing and
in not a!rming the decision of the Court of First Instance of
Manila in its entirety"
$he second assignment of error is based on petitioners'
contention that the :uestioned stipulations of the contracts
are in violation of the provisions of Article '43* of the <e
Civil Code, hile the -rst and third are based on the claim
that the respondent having previously accepted late
payments of installments due on the contracts aforesaid,
must be deemed to have aived its right to cancel said
contracts on the ground of late payment of installments, and
that, at any rate, after having tolerated and accepted said
late payments, it as arbitrary on its part to cancel the
contracts suddenly and ithout suitable arning" $he -fth
and last assignment of error is merely a conse:uence of the
others"
Article '43* of the <e Civil Code reads as follos#
$he contract must bind both contracting partiesB its validity
or compliance cannot be left to the ill of one of them"
$he above legal provision is a virtual reproduction of Article
'?C; of the old Civil Code but it as so phrased as to
emphasiAe the principle that the contract must bind both
parties" $his, of course, is based -rstly, on the principle that
obligations arising from contracts have the force of la
beteen the contracting parties and secondly, that there
must be mutuality beteen the parties based on their
essential e:uality to hich is repugnant to have one party
bound by the contract leaving the other free therefrom 8*
Manresa CC;9" Its ultimate purpose is to render void a
contract containing a condition hich ma,es its ful-llment
dependent e%clusively upon the uncontrolled ill of one of
the contracting parties"
/aragraph ; of the contracts in :uestion > hich is the one
claimed to be violative of the legal provision above :uoted
> reads as follos#
2I&$E > In case the party of the 2ECI<0 /A1$ fails to
satisfy any monthly installments, or any other payments
herein agreed upon, he is granted a month of grace ithin
hich to ma,e the retarded payment, together ith the one
corresponding to the said month of graceB it is understood,
hoever, that should the month of grace herein granted to
the party of the 2ECI<0 /A1$ e%pire, ithout the payments
corresponding to both months having been satis-ed, an
interest of '3L per annum ill be charged on the amounts
he should have paidB it is understood further, that should a
period of (3 days elapse, to begin from the e%piration of the
month of grace herein mentioned, and the party of the
2ECI<0 /A1$ has not paid all the amounts he should have
paid ith the corresponding interest up to that date, the
party of the FI12$ /A1$ has the right to declare this contract
cancelled and of no efect, and as conse:uence thereof, the
party of the FI12$ /A1$ may dispose of the parcel or parcels
of land covered by this contract in favor of other persons, as
if this contract had never been entered into" In case of such
cancellation of this contract, all the amounts paid in
accordance ith this agreement together ith all the
improvements made on the premises, shall be considered as
rents paid for the use and occupation of the above
mentioned premises, and as payment for the damages
sufered by failure of the party of the 2ECI<0 /A1$ to ful-ll
his part of this agreementB and the party of the 2ECI<0
/A1$ hereby renounces all his right to demand or reclaim
the return of the same and obliges himself to peacefully
vacate the premises and deliver the same to the party of the
FI12$ /A1$"
$he above stipulation, to our mind, merely gives the vendor
7the right to declare this contract cancelled and of no efect7
upon ful-llment of the conditions therein set forth" It does
not leave the validity or compliance of the contract entirely
7to the ill of one of the contracting parties7B the stipulation
or agreement simply says that in case of default in the
payment of installments by the vendee, he shall have 8'9 7a
month of grace7, and that 8?9 should said month of grace
e%pire ithout the vendee paying his arrears, he shall have
another 7period of (3 days7 to pay 7all the amounts he
should have paid7, etc", then the vendor 7has the right to
declare this contract cancelled and of no efect"7 @e have
heretofore upheld the validity of similar stipulations" In
$aylor vs" My $ieng /iao, etc", )4 /hil" *54, *5;+*5* the
ruling as that a contract e%pressly giving to one party the
right to cancel, the same if a resolutory condition therein
agreed upon > similar to the one under consideration > is
not ful-lled, is valid, the reason being that hen the
contract is thus cancelled, the agreement of the parties is in
reality being ful-lled" Indeed, the poer thus granted can
not be said to be immoral, much less unlaful, for it could
be e%ercised > not arbitrarily > but only upon the other
contracting party committing the breach of contract of non+
payment of the installments agreed upon" Ibviously, all that
said party had to do to prevent the other from e%ercising the
poer to cancel the contract as for him to comply ith his
part of the contract" And in this case, after the maturity of
any particular installment and its non+payment, the contract
gave him not only a month grace but an additional period of
(3 days"
Eaving arrived at the above conclusions, @e no come to
the :uestion of hether or not by having previously
accepted payments of overdue installments the respondent
had aived its right to declare the contracts cancelled and
of no efect"
In this connection the record shos that on Kune '', '(C?
hen the Contracts to 2ell <os" ?4) and (;C ere cancelled,
the vendees ere ten months in arrears and that in the case
of contract to 2ell <o" 4?? the vendees had never resumed
payment of a single installment from the date hen, upon
their petition, said contract as reinstated on 2eptember
?*, '(C?" $he contracts under consideration are not of
absolute sale but mere contracts to sell > on installment"
$hey give the respondent's 8vendor9 the right to declare the
contracts cancelled and of no efect > as in fact it did >
upon ful-llment of certain conditions" All said conditions >
so the record shos > have been ful-lled" Conse:uently,
respondent's 8vendor9 right to cancel the contracts can not
be doubted"
$hat prior to the cancellation it had in fact accepted
payment of installments in arrears as but another act of
forbearance on its part to give the petitioners an additional
opportunity to ,eep the contracts alive" 1ather than give
rise to the presumption that by such act of humanity it
aived its right to cancel the contracts, it strengthens its
right to do so, considering that even after such act of
accommodation bene-cial to the petitioners, the latter
subse:uently defaulted again and again in the ful-llment of
their obligation"
It is, of course, painful for the petitioners to lose not only the
right they had ac:uired under the contracts but also
hatever amounts they had already paid thereunder, but
such conse:uences had been foreseen by the contracting
parties" $o avoid them, all that petitioners had to do > as
already said heretofore > as to comply ith their part of
the bargain" Eaving failed to do so, they really have no valid
reason to complain" $hat one contracting party appears to
have made a poor bargain is no reason for setting aside the
agreement 8FernandeA vs" Manila 1ailroad, ') /hil" ?5),
?*59"
@EE1EFI1E, the appealed =udgment being in accordance
ith la and the facts of the case, the same is hereby
a!rmed"
Concepcion, C"K", 1eyes, K"6".", Ma,alintal, 6engAon, K"/",
Daldivar, 2ancheA, Castro, Angeles and Fernando, KK", concur"
G.R. No. L-27696 &!pt!5.!* 30, 1977
MIGUEL 2LORENTINO, RO&$RIO ENC$RN$CION
(! 2LORENTINO, M$NUEL $RCE, )O&E
2LORENTINO, %ICTORINO 2LORENTINO,
$NTONIO 2LORENTINO, REME/ION
ENC$RN$CION an( &E%ERIN$ ENC$RN$CION,
p!tition!*#-app!llant#,
"#.
&$L%$/OR ENC$RN$CION, &R., &$L%$/OR
ENC$RN$CION, )R., an( $NGEL ENC$RN$CION,
oppo#ito*# to !n+65.*an+!-p!tition!*#-app!ll!#.
)o#! 2. &in1#on an( Mi16!l 2lo*!ntino o* app!llant#.
,!(*o &in1#on o* app!ll!!#.

FUE11E1I, K"#
Appeal from the decision of the Court of First Instance of
Ilocos 2ur, acting as a land registration court, in .and
1egistration case <o" <+4'3"
In May ??, '(;), the petitioners+appellants Miguel
Florentino, 1emedios Encarnacion de Florentino, Manuel
Arce, Kose Florentino, Gictorino Florentino, Antonio
Florentino, 1emedior, Encarnacion and 2everina
Encamacion, and the /etitiners+appellees 2alvador
Encamacion, 2r", 2alvador Encamacion, Kr" and Angel
Encarnacion -led ith the Court of First Instance of ilocos
2ur an application for the registration under Act )(; of a
parcel of agricultural land located at 6arrio .ubong 0ac:uel
Cabugao Ilocos 2ur"
$he application alleged among other things that the
applicants are the common and pro+indiviso oners in fee
simple of the said land ith the improvements e%isting
thereonB that to the best of their ,noledge and belief, there
is no mortgage, lien or encumbrance of any ,ind hatever
afecting said land, nor any other person having any estate
or interest thereon, legal or e:uitable, remainder,
reservation or in e%pectancyB that said applicants had
ac:uired the aforesaid land thru and by inheritance from
their predecessors in interest, lately from their aunt, 0oNa
Encarnacion Florentino ho died in Gigan, Ilocos 2ur in '()',
and for hich the said land as ad=udicated to them by
virtue of the deed of e%tra=udicial partition dated August ?),
'()5B that applicants 2alvador Encarnacion, Kr" and Angel
Encarnacion ac:uired their respective shares of the land
thru purchase from the original heirs, Kesus, Caridad,
.ourdes and 0olores surnamed 2ingson one hand and from
Asuncion Florentino on the other"
After due notice and publication, the Court set the
application for hearing" <o Ipposition hatsoever as -led
e%cept that of the 0irector of .ands hich as later
ithdran, thereby leaving the option unopposed"
$hereupon, an order of general default as ithdran
against the hole orld" Upon application of the asets the
Cler, If court as commission ill and to have the evidence
of the agents and or to submit the for the Court's for
resolution"
$he crucial point in controversy in this registration case is
centered in the stipulation mar,ed E%hibit I+' embodied in
the deed of e%tra=udicial partition 8E%hibit I9 dated August
?), '()5 hich states#
.os productos de esta parcela de terreno situada en el
6arrio .ubong 0ac:uel Cabugao Ilocos 2ur, se destination
para costear los tos de procesio de la $ercera Caida
celebration y sermon de 2iete /albras 2eis Estaciones de
Cuaresma, procesion del <ino Kesus, tilaracion y
conservacion de los mismos, construction le union camarin
en conde se depositan los carros mesas y otras cosas :ue
seven para lot leiracion de 2iete /alabras y otras cosas mas
.o :ue sobra de lihos productos despues de descontados
todos los gastos se repartira nosotros los herederos"
In his testimony during the trial, applicant Miguel Florentino
as,ed the court to include the said stipulation 8E%hibit I+'9
as an encumbrance on the land sought to be registered, and
cause the entry of the same on the face of the title that ill
-nally be issued" Ipposing its entry on the title as an
encumbrance, petitionersappellee 2alvador Encamacion, 2r",
2alvador Encarnaciori, Kr" and Angel Encarriacion -led on
Ictober 4, '(;; a manifestation see,ing to ithdra their
application on their respective shares of the land sought to
be registered" $he ithdraal as opposed by the
petitioners+appellants"
$he Court after hearing the motion for ithdraal and the
opposition thereto issued on <ovember '5, '(;; an order
and for the purpose of ascertaining and implifying the issues
therein stated that all the applicants admit the truth of the
folloingB
8'9 $hat =ust after the death of Encarnacion FIorentino in
'()' up to last year and as had alays been the case since
time immomorial the products of the land made subiect
matter of this land has been used in ansering for the
payment for the religious functions speci-ed in the 0eed
E%tra=udicial /artition belated August ?), '()5#
8?9 $hat this arrangement about the products ansering for
the comment of e%perisence for religions functions as
mentioned above as not registered in the o!ce of the
1egister of 0eeds under Act <o 44)), Act )(; or and, other
system of registrationB
849 $hat all the herein applicants ,no of the e%istence of
his arrangement as speci-ed in the 0eed of E%tra =udicial
/artition of A ad=ust ?), '()5B
8)9 $hat the 0eed of E%tra=udicial /artition of August ?),
'()+, not signed by Angel Encarnacion or 2alvador
Encarnacion, Kr,"
$he court denied the petitioners+appellee motion to
ithdra for lac, of merit, and rendered a decision under
date of <ovember ?(, '(;; con-rming the title of the
property in favor of the f appoints ith their respective
shares as follos#
2pouses Miguel Florentino and 1osario Encarnacion de
Florentino, both of legal age, Filipinos, and residents of
Gigan, Ilocos 2ur, consisting of an undivided 4'O?(5 and
*"?CO?(5 portions, respectivelyB
Manuel Arce, of legal age, Filipino, married to 1emedios
/ichay and resident of Gigan, Ilocos 2ur, consisting of an
undivided ;;O?(5 portionB
2alvador Encarnacion, Kr", of legal age, Filipino, married to
Angelita <agar and resident of Gigan, Ilocos 2ur, consisting
of an undivided ;;O?(5B Kose Florentino, of legal age, Filipino,
married to 2alvacion Florendo and resident of '; 2outh
<inth 0iliman, PueAon City, consisting of an undivided
44O?(5 portionB
Angel Encarnacion, of legal age, Filipino, single and resident
of 'C') Milagros 2t", 2ta" CruA, Manila, consisting of an
undivided 44O?(5 portionB
Gictorino Florentino, of legal age, Filipino, married to
Mercedes ." Encarnacion and resident of Gigan, Ilocos 2ur,
consisting of an undivided '5"CO?(5 portionB
Antonio Florentino, of legal age, Filipino, single and resident
of Gigan, Ilocos 2ur, consisting of an undivided '5"CO?(5B
2alvador Encarnacion, 2r", of legal age, Filipino, married to
0olores 2ingson, consisting of an undivided *"?CO?(5B
1emedios Encarnacion, of legal age, Filipino, single and
resident of Gigan, Ilocos 2ur, consisting of an undivided
*"?CO?(5 portionB and
2everina Encarnacion, of legal age, Filipino, single and
resident of Gigan, Ilocos 2ur, consisting of *"?CO?(5
undivided portion"
$he court, after ruling 7that the contention of the
proponents of encumbrance is ithout merit bemuse, ta,ing
the self+imposed arrangement in favor of the Church as a
pure and simple donation, the same is void for the that the
donee here has riot accepted the donation 8Art" 5)C, Civil
Code9 and for the further that, in the case of 2alvador
Encarnacion, Kr" and Angel Encarnacion, they had made no
oral or ritten grant at all 8Art" 5)*9 as in fact they are even
opposed to it,7 ' held in the /ositive portion, as follos#
In vie of all these, therefore, and insofar as the :uestion of
encumbrance is concerned, let the religious e%penses as
herein speci-ed be made and entered on the undivided
shares, interests and participations of all the applicants in
this case, e%cept that of 2alvador Encarnacion, 2r", 2alvador
Encarnacion, Kr" and Angel Encarnacion"
In Kanuary 4, '(;5, petitioners+appellants -led their 1eply
to the Ipposition reiterating their previous arguments, and
also attac,ing the =unction of the registration court to pass
upon the validity or invalidity of the agreement E%hibit I+',
alleging that such is speci-ed only in an ordinary action and
not proper in a land registration proceeding"
$he Motion for 1econsideration and of <e $rial as denied
on Kanuary '), '(;5 for lac, of merit, but the court modi-ed
its earlier decision of <ovember ?(, '(;;, to it#
$his Court believes, and so holds, that the contention of the
movants 8proponents of the encumbrance9 is ithout merit
because the arrangement, stipulation or grant as embodied
in E%hibit I 8Escritura de /articion E%tra=udicial9, by
hatever name it may be 8called, hether donation,
usufruct or ellemosynary gift, can be revo,ed as in fact the
oppositors 2alvador Encarnacion, 2r", ho is the only one of
the three oppositors ho is a party to said E%hibit I 8the to
others, 2alvador Encarnacion, Kr" and Angel Encarnacion no
parties to it9 did revo,e it as shon by acts accompanying
his refusal to have the same appear as an encumbrance on
the title to be issued" In fact, legally, the same can also be
ignored or discararded by ill the three oppositors" $he
reasons are# First, if the said stipulation is pour bodies in
E%hibit I+' is to be vieed as a stipulation pour autrui the
same cannot no be enforced because the Church in hose
favor it as made has not communicated its acceptance to
the oppositors before the latter revo,ed it" 2ays the ?nd par"
of Art" '4'' of the <e Civil Code#
7If a contract should contain some stipulation in favor of a
third person he may demand its ful-llment provided he
communicated his acceptance to the obligor before its
revocation" A mere incidental bene-t or interest of a person
is not su!cient" $he contracting parties must have clearly
and deliberately conferred a favor upon a third person"7 <o
evide nee has ever been submitted by the Church to sho
its clear acceptance of the grant before its revocation by the
oppositor 2alvador Encarnacion, 2r" 8or of the to other
oppositors, 2alvador Encarnacion, Kr" and Angel Encarnacion,
ho didn't even ma,e any giant, in the -rst place9, and so
not even the movants ho have o!ciously ta,en into
themselves the right to enforce the grant cannot no
maintain any action to compel compliance ith it" 86an, of
the /"I" v" Concepcion y Ei=os, Inc", C4 /hil" *3;9" 2econd, the
Church in hose favor the stipulation or grant had
apparently been made ought to be the proper party to
compel the herein three oppositors to abide ith the
stipulation" 6ut it has not made any appearance nor
registered its opposition to the application even before Ict"
'*, '(;C hen an order of general default as issued" $hird,
the movants are not, in the contemplation of 2ection ?, 1ule
4 of the 1ules of Court, the real party in interest to raise the
present issueB and Fourth, the movants having once alleged
in their application for registration that the land is ithout
encumbrance 8par" 4 thereof9, cannot no be alloted by the
rules of pleading to contradict said allegation of theirs"
8Mc0aniel v" Apacible, )) /hil" ?)*9
2I I10E1E0" ?
After Motions for 1econsideration ere denied by the court,
the petitioners+ appellants appealed directly to this Court
pursuant to 1ule ) ', 1ules of Court, raising the folloing
assign of error#
I" $he loer court erred in concluding that the stipulation
embodied in E%hibit I on religious e%penses is =ust an
arrangement stipulation, or grant revocable at the unilateral
option of the cooners"
II" $he loer court erred in -nding and concluding that the
encumbrance or religious e%penses embodied in E%hibit I,
the e%tra=udicial partition beteen the co+heirs, is binding
only on the appoints Miguel Florentino, 1osario Encarnacion
de Florentino, Manuel Arce, Kose Florentino, Antonio
Florentino, Gictorino Florentino, 1emedios Encarnacion and
2everina Encarnacion"
III" $he loer court as a registration court erred in passing
upon the merits of the encumbrance 8E%hibit I+'9 as the
sanie as never put to issue and as the :uestion involved is
an ad=udication of rights of the parties"
@e -nd the -rst and second assignments of error impressed
ith merit and, therefore, tenable" $he stipulation embodied
in E%hibit I+' on religious e%penses is not revocable at the
unilateral option of the co+oners and neither is it binding
only on the petitioners+appellants Miguel Florentino, 1osario
Encarnacion de Florentino Manuel Arce, Kose Florentino,
Gictorino Florentino Antonio Florentino, 1emedios
Encarnacion and 2everina E It is also binding on the
oppositors+appellees Angel Encarnacion,
$he stipulation 8E%hibit )''9 in pan of an e%tra=udicial
partition 8E%h" I9 duly agreed and signed by the parties,
hence the sanie must bind the contracting parties thereto
and its validity or compliance cannot be left to the ith of
one of them 8Art" '43*, <"C"C"9" Under Art '4'' of the <e
Civil Code, this stipulation ta,es efect beteen the parties,
their assign and heirs" $he article provides#
Art" '4''" > Contracts ta,e efect only beteen the parties,
their assigns and heirs, e%cept in cases here the rights and
obligations arising from the contract are not transmissible
by their nature, or by stipulation or by provision of la" $he
heir is not liable beyond the value of the property he
received from the decedent"
If a contract should contain a stipulation in favor of a third
person, he may demand its ful-llment provided he
communicated his acceptance to the obligor before its
revocation" A mere incidental bene-t or interest of a person
is not su!cient" $he contracting parties must have clearly
and deliberately conferred a favor upon a third person"
$he second paragraph of Article '4'' above+:uoted states
the la on stipulations pour autrui" Consent the nature and
purpose of the motion 8E%h" I+'9, @e hold that said
stipulation is a station pour autrui" A stipulation pour autrui
is a stipulation in favor of a third person conferring a clear
and deliberate favor upon him, and hich stipulation is
merely a part of a contract entered into by the parties,
neither of hom acted as agent of the third person, and
such third person and demand its ful-llment provo,ed that
he communicates his to the obligor before it is revo,ed" 4
$he re:uisites are# 8'9 that the stipulation in favor of a third
person should be a part, not the hole, of the contractB 8?9
that the favorable stipulation should not be conditioned or
compensated by any ,ind of obligation hateverB and 849
neither of the contracting bears the legal represented or
authoriAation of third person"
$o constitute a valid stipulation pour autrui it must be the
purpose and intent of the stipulating parties to bene-t the
third and it is not su!cient that the third person may be
incidentally bene-ted by the stipulation" $he fairest test to
determine hether the interest of third person in a contract
is a stipulation pour autrui or merely an incidental interest,
is to rely upon the intention of the parties as disclosed by
their contract" In applying this test, it meters not hether
the stipulation is in the nature of a gift or hether there is
an obligation oing from the promisee to the third person"
$hat no such obsorption e%ists may in some degree assist in
determining hether the parties intended to bene-t a third
person")
In the case at bar, the determining point is hether the co+
oners intended to bene-t the Church hen in their
e%tra=udicial partition of several parcels of land inherited by
them from 0oNa Encarnacion Florendo they agreed that ith
respect to the land situated in 6arrio .ubong 0ac:uel
Cabugao Ilocos 2ur, the fruits thereof shall serve to defray
the religious e%penses speci-ed in E%hibit I+'" $he evidence
on record shos that the true intent of the parties is to
confer a direct and material bene-t upon the Church" $he
fruits of the aforesaid land ere used thenceforth to defray
the e%penses of the Church in the preparation and
celebration of the Eoly @ee,, an annual Church function"
2u!ce it to say that ere it not for E%hibit I+', the Church
ould have necessarily e%pended for this religious occasion,
the annual relisgious procession during the Eoly @oc, and
also for the repair and preservation of all the statutes, for
the celebration of the 2even .ast @ord"
@e -nd that the trial court erred in holding that the
stipulation, arrangement or grant 8E%hibit I+'9 is revocable
at the option of the co+oners" @hile a stipulation in favor of
a third person has no binding efect in itself before its
acceptance by the party favored, the la does not provide
hen the third person must ma,e his acceptance" As a rule,
there is no time at such third person has after the time until
the stipulation is revo,ed" Eere, @e -nd that the Church
accepted the stipulation in its favor before it is sought to be
revo,ed by some of the co+oners, namely the petitioners+
appellants herein" It is not disputed that from the time of the
ith of 0oNa Encarnacion Florentino in '()', as had alays
been the case since time immemorial up to a year before
the -ring of their application in May '(;), the Church had
been en=oying the bene-ts of the stipulation" $he en=oyment
of bene-ts Qoing therefrom for almost seventeen years
ithout :uestion from any :uarters can only be construed
as an implied acceptance by the Church of the stipulation
pour autrui before its revocation"
$he acceptance does not have to be in any particular form,
even hen the stipulation is for the third person an act of
liberality or generosity on the part of the promisor or
promise" C
It need not be made e%pressly and formally" <oti-cation of
acceptance, other than such as is involved in the ma,ing of
demand, is unnecessary" ;
A trust constituted beteen to contracting parties for the
bene-t of a third person is not sub=ect to the rules governing
donation of real property" $he bene-ciary of a trust may
demand performance of the obligation ithout having
formally accepted the bene-t of the this in a public
document, upon mere ac:uiescence in the formation of the
trust and acceptance under the second paragraph of Art"
'?C5 of the Civil Code" 5
Eence, the stipulation 8E%hibit I+'9 cannot no be revo,ed
by any of the stipulators at their on option" $his must be so
because of Article '?C5, Civil Code and the cardinal rule of
contracts that it has the force of la beteen the parties" *
$hus, this Court ruled in Farcia v" 1ita .egarda, Inc", (
7Article '43( is a virtual reproduction of Article '?C; of the
Civil Code, so phrased to emphasiAe that the contract must
bind both parties, based on the principles 8'9 that obligation
arising from contracts have the force of la beteen the
contracting partiesB and 8?9 that there must be mutuality
beteen the parties based on their principle e:uality, to
hich is repugnant to have one party bound by the contract
leaving the other free therefrom"7
Conse:uently, 2alvador Encarnacion, 2r" must bear ith
E%hibit I+', being a signatory to the 0eed of E%tra=udicial
/artition embodying such bene-cial stipualtion" .i,eise,
ith regards to 2alvador, Kr" and Angel Encarnacion, they too
are bound to the agreement" 6eing subse:uent purchasers,
they are privies or successors in interestB it is a%iomatic that
contracts are enforceable against the parties and their
privies" '3 Furthermore, they are shon to have given their
conformity to such agreement hen they ,ept their peace in
'(;? and '(;4, having already bought their respective
shares of the sub=ect land but did not :uestion the
enforcement of the agreement as against them" $hey are
also shon to have ,noledge of E%hibit I+' as they had
admitted in a 0eed of 1eal Mortgage e%ecuted by them on
March *, '(;? involving their shares of the sub=ect land
that, 7$his parcel of land is encumbered as evidenced by the
document <o" )?3, page (), 6oo, ', series '()5, e%ecuted
by the heirs of the late Encarnacion Florentino, on August
?;, '()5, before M" Francisco Ante, <oty /ublic of Gigan,
Ilocos 2ur, in its page '3 of the said document of partition,
and also by other documents"7
$he annotation of E%hibit I+' on the face of the title to be
issued in this case is merely a guarantee of the continued
enforcement and ful-llment of the bene-cial stipulation" It is
error for the loer court to rule that the petitioners+
appellants are not the real parties in interest, but the
Church" $hat one of the parties to a contract pour autrui is
entitled to bring an action for its enforcement or to prevent
its breach is too clear to need any e%tensive discussion"
Upon the other hand, that the contract involved contained a
stipulation pour autrui ampli-es this settled rule only in the
sense that the third person for hose bene-t the contract
as entered into may also demand its ful-llment provo,ed
he had communicated his acceptance thereof to the obligor
before the stipulation in his favor is revo,ed" ''
/etitioners+appellants' third assignment of error is not ell+
ta,en" Firstly, the otherise rigid rule that the =urisdiction of
the .and 1egistration Court, being special and limited in
character and proceedings thereon summary in nature, does
not e%tend to cases involving issues properly litigable in
other independent suits or ordinary civil actions, has time
and again been rela%ed in special and e%ceptional
circumstances" 82ee Fovernment of the /hil" Islands v"
2era-ca, ;' /hil" (4 8'(4)9B Caoibes v" 2ison, '3? /hil" '(
8'(C59B .una v" 2antos, '3? /hil" C** 8'(C59B CruA v" $an, (4
/hil" 4)* 8'(C49B Furba% 2ingh /abla R Co" v" 1eyes, (? /hil"
'55 8'(C?9" From these cases, it may be gleaned and
gathered that the peculiarity of the e%ceptions is based not
only on the fact that .and 1egistration Courts are li,eise
the same Courts of First Instance, but also the folloing
premises 8'9 Mutual consent of the parties or their ac:uired
in submitting the at aforesaid determination by the court in
the registrationB 8?9 Full opportunity given to the parties in
the presentation of their respective s,ies of the issues and
of the evidence in support theretoB 849 Consideration by the
court that the evidence already of record is su!cient and
ade:uate for rendering a decision upon these issues" '? In
the case at bar, the records clearly sho that the second
and third premism enumerated abo are fully mt" @ith
regards to -rst premise, the petioners+appellants cannot
claim that the issues anent E%hibit I+' ere not put in issue
because this is contrary to their stand before the loer court
here they too, the initial step in praying for the court's
determination of the merits of E%hibit I+' as an
encumbrance to be annotated on the title to be issued by
such court" In the other hand, the petitioners+appellees ho
had the right to invo,e the limited =urisdiction of the
registration court failed to do so but met the issues head+on"
2econdly, for this very special reason, @e in uphold the
actuation of the loer court in determining the conQicting
interests of the parties in the registration proceedings before
it" $his case has been languishing in our courts for thirteen
tong years" $o re:uire that it be remanded to the loer court
for another proceeding under its general =urisdiction is not in
consonance ith our avoed policy of speedy =ustice" It
ould not be amiss to note that if this case be remanded to
the loer court, and should appeal again be made, the
name issues ill once more be raised before us hence, Iur
decision to resolve at once the issues in the instant petition"
I< GIE@ IF $EE FI1EFII<F, the decision of the Court of
First Instance of Ilocos 2ur in .and 1egistration Case <o" <+
4'3 is a!rmed but modi-ed to allo the annotation of
E%hibit I+' as an encumbrance on the face of the title to be
-nally issued in favor of all the applications 8herein
appellants and herein appellees9 in the registration
proceedings belo"
<o pronouncement as to cost"
2I I10E1E0"
$eehan,ee 8Chairman9, MuNoA /alma, FernandeA, KK", concur"
G.R. No. L-25797 )6n! 17, 1972
NICOL$& &$NC8E4, plainti-app!ll!!,
"#.
&E%ERIN$ RIGO&, (!!n(ant-app!llant.
&antia1o 2. 9a6ti#ta o* plainti-app!ll!!.
)!#6# G. %illa5a* o* (!!n(ant-app!llant.

CONCE,CION, C.).-p
Appeal from a decision of the Court of First Instance of
<ueva Eci=a to the Court of Appeals, hich certi-ed the case
to Us, upon the ground that it involves a :uestion purely of
la"
$he record shos that, on April 4, '(;', plaintif <icolas
2ancheA and defendant 2everina 1igos e%ecuted an
instrument entitled 7Iption to /urchase,7 hereby Mrs"
1igos 7agreed, promised and committed """ to sell7 to
2ancheA the sum of /',C'3"33, a parcel of land situated in
the barrios of Abar and 2ibot, municipality of 2an Kose,
province of <ueva Eci=a, and more particularly described in
$ransfer Certi-cate of $itle <o" <$+'?C?* of said province,
ithin to 8?9 years from said date ith the understanding
that said option shall be deemed 7terminated and elapsed,7
if 72ancheA shall fail to e%ercise his right to buy the
property7 ithin the stipulated period" Inasmuch as several
tenders of payment of the sum of /l,C'3"33, made by
2ancheA ithin said period, ere re=ected by Mrs" 1igos, on
March '?, '(;4, the former deposited said amount ith the
Court of First Instance of <ueva Eci=a and commenced
against the latter the present action, for speci-c
performance and damages"
After the -ling of defendant's anser > admitting some
allegations of the complaint, denying other allegations
thereof, and alleging, as special defense, that the contract
beteen the parties 7is a unilateral promise to sell, and the
same being unsupported by any valuable consideration, by
force of the <e Civil Code, is null and void7 > on February
'', '(;), both parties, assisted by their respective counsel,
=ointly moved for a =udgment on the pleadings" Accordingly,
on February ?*, '(;), the loer court rendered =udgment
for 2ancheA, ordering Mrs" 1igos to accept the sum =udicially
consigned by him and to e%ecute, in his favor, the re:uisite
deed of conveyance" Mrs" 1igos as, li,eise, sentenced to
pay /?33"33, as attorney's fees, and other costs" Eence, this
appeal by Mrs" 1igos"
$his case admittedly hinges on the proper application of
Article ')5( of our Civil Code, hich provides#
A1$" ')5(" A promise to buy and sell a determinate thing
for a price certain is reciprocally demandable"
An accepted unilateral promise to buy or to sell a
determinate thing for a price certain is binding upon the
promissor if the promise is supported by a consideration
distinct from the price"
In his complaint, plaintif alleges that, by virtue of the option
under consideration, 7defendant agreed and committed to
sell7 and 7the plaintif agreed and committed to buy7 the
land described in the option, copy of hich as anne%ed to
said pleading as Anne% A thereof and is :uoted on the
margin" ' Eence, plaintif maintains that the promise
contained in the contract is 7reciprocally demandable,7
pursuant to the -rst paragraph of said Article ')5("
Although defendant had really 7agreed, promised and
committed7 herself to sell the land to the plaintif, it is not
true that the latter had, in turn, 7agreed and committed
himself 7 to buy said property" 2aid Anne% A does not bear
out plaintif's allegation to this efect" @hat is more, since
Anne% A has been made 7an integral part7 of his complaint,
the provisions of said instrument form part 7and parcel7 ? of
said pleading"
$he option did not impose upon plaintif the obligation to
purchase defendant's property" Anne% A is not a 7contract to
buy and sell"7 It merely granted plaintif an 7option7 to buy"
And both parties so understood it, as indicated by the
caption, 7Iption to /urchase,7 given by them to said
instrument" Under the provisions thereof, the defendant
7agreed, promised and committed7 herself to sell the land
therein described to the plaintif for /',C'3"33, but there is
nothing in the contract to indicate that her aforementioned
agreement, promise and underta,ing is supported by a
consideration 7distinct from the price7 stipulated for the sale
of the land"
1elying upon Article '4C) of our Civil Code, the loer court
presumed the e%istence of said consideration, and this
ould seem to be the main factor that inQuenced its
decision in plaintif's favor" It should be noted, hoever,
that#
8'9 Article '4C) applies to contracts in general, hereas
the second paragraph of Article ')5( refers to 7sales7 in
particular, and, more speci-cally, to 7an accepted unilateral
promise to buy or to sell"7 In other ords, Article ')5( is
controlling in the case at bar"
8?9 In order that said unilateral promise may be 7binding
upon the promisor, Article ')5( re:uires the concurrence of
a condition, namely, that the promise be 7supported by a
consideration distinct from the price"7 Accordingly, the
promisee can not compel the promisor to comply ith the
promise, unless the former establishes the e%istence of said
distinct consideration" In other ords, the promisee has the
burden of proving such consideration" /laintif herein has
not even alleged the e%istence thereof in his complaint"
849 Upon the other hand, defendant e%plicitly averred in
her anser, and pleaded as a special defense, the absence
of said consideration for her promise to sell and, by =oining
in the petition for a =udgment on the pleadings, plaintif has
impliedly admitted the truth of said averment in defendant's
anser" Indeed as early as March '), '(3*, it had been held,
in 6auermann v" Casas, 4 that#
Ine ho prays for =udgment on the pleadings ithout
ofering proof as to the truth of his on allegations, and
ithout giving the opposing party an opportunity to
introduce evidence, must be understood to admit the truth
of all the material and relevant allegations of the opposing
party, and to rest his motion for =udgment on those
allegations ta,en together ith such of his on as are
admitted in the pleadings" 8.a Hebana Company vs" 2evilla,
( /hil" ?'39" 8Emphasis supplied"9
$his vie as reiterated in Evangelista v" 0e la 1osa ) and
Mercy's Incorporated v" Eerminia Gerde" C
2:uarely in point is 2outhestern 2ugar R Molasses Co" v"
Atlantic Fulf R /aci-c Co", ; from hich @e :uote#
$he main contention of appellant is that the option granted
to appellee to sell to it barge <o" '3 for the sum of /43,333
under the terms stated above has no legal efect because it
is not supported by any consideration and in support thereof
it invo,es article ')5( of the ne Civil Code" $he article
provides#
7A1$" ')5(" A promise to buy and sell a determinate thing
for a price certain is reciprocally demandable"
An accepted unilateral promise to buy or sell a determinate
thing for a price certain is binding upon the promisor if the
promise is supported by a consideration distinct from the
price"7
In the other hand, Appellee contends that, even granting
that the 7ofer of option7 is not supported by any
consideration, that option became binding on appellant
hen the appellee gave notice to it of its acceptance, and
that having accepted it ithin the period of option, the ofer
can no longer be ithdran and in any event such
ithdraal is inefective" In support this contention,
appellee invo,es article '4?) of the Civil Code hich
provides#
7A1$" '4?)" @hen the oferer has alloed the oferee a
certain period to accept, the ofer may be ithdran any
time before acceptance by communicating such ithdraal,
e%cept hen the option is founded upon consideration as
something paid or promised"7
$here is no :uestion that under article ')5( of the ne Civil
Code 7an option to sell,7 or 7a promise to buy or to sell,7 as
used in said article, to be valid must be 7supported by a
consideration distinct from the price"7 $his is clearly inferred
from the conte%t of said article that a unilateral promise to
buy or to sell, even if accepted, is only binding if supported
by consideration" In other ords, 7an accepted unilateral
promise can only have a binding efect if supported by a
consideration hich means that the option can still be
ithdran, even if accepted, if the same is not supported by
any consideration" It is not disputed that the option is
ithout consideration" It can therefore be ithdran
notithstanding the acceptance of it by appellee"
It is true that under article '4?) of the ne Civil Code, the
general rule regarding ofer and acceptance is that, hen
the oferer gives to the oferee a certain period to accept,
7the ofer may be ithdran at any time before acceptance7
e%cept hen the option is founded upon consideration, but
this general rule must be interpreted as modi-ed by the
provision of article ')5( above referred to, hich applies to
7a promise to buy and sell7 speci-cally" As already stated,
this rule re:uires that a promise to sell to be valid must be
supported by a consideration distinct from the price"
@e are not oblivious of the e%istence of American authorities
hich hold that an ofer, once accepted, cannot be
ithdran, regardless of hether it is supported or not by a
consideration 8'? Am" Kur" C?*9" $hese authorities, e note,
uphold the general rule applicable to ofer and acceptance
as contained in our ne Civil Code" 6ut e are prevented
from applying them in vie of the speci-c provision
embodied in article ')5(" @hile under the 7ofer of option7
in :uestion appellant has assumed a clear obligation to sell
its barge to appellee and the option has been e%ercised in
accordance ith its terms, and there appears to be no valid
or =usti-able reason for appellant to ithdra its ofer, this
Court cannot adopt a diferent attitude because the la on
the matter is clear" Iur imperative duty is to apply it unless
modi-ed by Congress"
Eoever, this Court itself, in the case of At,ins, Mroll and
Co", Inc" v" Cua Eian $e,, * decided later that 2outhestern
2ugar R Molasses Co" v" Atlantic Fulf R /aci-c Co", ( sa no
distinction beteen Articles '4?) and ')5( of the Civil Code
and applied the former here a unilateral promise to sell
similar to the one sued upon here as involved, treating
such promise as an option hich, although not binding as a
contract in itself for lac, of a separate consideration,
nevertheless generated a bilateral contract of purchase and
sale upon acceptance" 2pea,ing through Associate Kustice,
later Chief Kustice, Cesar 6engAon, this Court said#
Furthermore, an option is unilateral# a promise to sell at the
price -%ed henever the oferee should decide to e%ercise
his option ithin the speci-ed time" After accepting the
promise and before he e%ercises his option, the holder of the
option is not bound to buy" Ee is free either to buy or not to
buy later" In this case, hoever, upon accepting herein
petitioner's ofer a bilateral promise to sell and to buy
ensued, and the respondent ipso facto assumed the
obligation of a purchaser" Ee did not =ust get the right
subse:uently to buy or not to buy" It as not a mere option
thenB it as a bilateral contract of sale"
.astly, even supposing that E%h" A granted an option hich
is not binding for lac, of consideration, the authorities hold
that#
7If the option is given ithout a consideration, it is a mere
ofer of a contract of sale, hich is not binding until
accepted" If, hoever, acceptance is made before a
ithdraal, it constitutes a binding contract of sale, even
though the option as not supported by a su!cient
consideration" """ " 855 Corpus Kuris 2ecundum, p" ;C?" 2ee
also ?5 1uling Case .a 44( and cases cited"9
7It can be ta,en for granted, as contended by the defendant,
that the option contract as not valid for lac, of
consideration" 6ut it as, at least, an ofer to sell, hich as
accepted by letter, and of the acceptance the oferer had
,noledge before said ofer as ithdran" $he
concurrence of both acts > the ofer and the acceptance >
could at all events have generated a contract, if none there
as before 8arts" '?C) and '?;? of the Civil Code9"7 8Dayco
vs" 2erra, )) /hil" 44'"9
In other ords, since there may be no valid contract ithout
a cause or consideration, the promisor is not bound by his
promise and may, accordingly, ithdra it" /ending notice
of its ithdraal, his accepted promise parta,es, hoever,
of the nature of an ofer to sell hich, if accepted, results in
a perfected contract of sale"
$his vie has the advantage of avoiding a conQict beteen
Articles '4?) > on the general principles on contracts >
and ')5( > on sales > of the Civil Code, in line ith the
cardinal rule of statutory construction that, in construing
diferent provisions of one and the same la or code, such
interpretation should be favored as ill reconcile or
harmoniAe said provisions and avoid a conQict beteen the
same" Indeed, the presumption is that, in the process of
drafting the Code, its author has maintained a consistent
philosophy or position" Moreover, the decision in
2outhestern 2ugar R Molasses Co" v" Atlantic Fulf R /aci-c
Co", '3 holding that Art" '4?) is modi-ed by Art" ')5( of the
Civil Code, in efect, considers the latter as an e%ception to
the former, and e%ceptions are not favored, unless the
intention to the contrary is clear, and it is not so, insofar as
said to 8?9 articles are concerned" @hat is more, the
reference, in both the second paragraph of Art" ')5( and
Art" '4?), to an option or promise supported by or founded
upon a consideration, strongly suggests that the to 8?9
provisions intended to enforce or implement the same
principle"
Upon mature deliberation, the Court is of the considered
opinion that it should, as it hereby reiterates the doctrine
laid don in the At,ins, Mroll R Co" case, and that, insofar as
inconsistent thereith, the vie adhered to in the
2outhestern 2ugar R Molasses Co" case should be deemed
abandoned or modi-ed"
@EE1EFI1E, the decision appealed from is hereby a!rmed,
ith costs against defendant+appellant 2everina 1igos" It is
so ordered"
1eyes, K"6".", Ma,alintal, Daldivar, $eehan,ee, 6arredo and
Ma,asiar, KK", concur"
Castro, K", too, no part"


2eparate Ipinions

A<$I<II, K", concurring#
I concur in the opinion of the Chief Kustice"
I fully agree ith the abandonment of the vie previously
adhered to in 2outhestern 2ugar R Molasses Co" vs"
Atlantic Fulf and /aci-c Co", ' hich holds that an option to
sell can still be ithdran, even if accepted, if the same is
not supported by any consideration, and the rea!rmance of
the doctrine in At,ins, Mroll R Co", Inc" vs" Cua Eian $e,, ?
holding that 7an option implies """ the legal obligation to
,eep the ofer 8to sell9 open for the time speci-edB7 that it
could be ithdran before acceptance, if there as no
consideration for the option, but once the 7ofer to sell7 is
accepted, a bilateral promise to sell and to buy ensues, and
the oferee ipso facto assumes the obligations of a
purchaser" In other ords, if the option is given ithout a
consideration, it is a mere ofer to sell, hich is not binding
until accepted" If, hoever, acceptance is made before a
ithdraal, it constitutes a binding contract of sale" $he
concurrence of both acts > the ofer and the acceptance >
could in such event generate a contract"
@hile the la permits the oferor to ithdra the ofer at
any time before acceptance even before the period has
e%pired, some riters hold the vie, that the oferor can not
e%ercise this right in an arbitrary or capricious manner" $his
is upon the principle that an ofer implies an obligation on
the part of the oferor to maintain in such length of time as
to permit the oferee to decide hether to accept or not, and
therefore cannot arbitrarily revo,e the ofer ithout being
liable for damages hich the oferee may sufer" A contrary
vie ould remove the stability and security of business
transactions" 4
In the present case the trial court found that the 7/laintif
8<icolas 2ancheA9 had ofered the sum of /l,C'3"33 before
any ithdraal from the contract has been made by the
0efendant 82everina 1igos9"7 2ince 1igos' ofer sell as
accepted by 2ancheA, before she could ithdra her ofer, a
bilateral reciprocal contract > to sell and to buy > as
generated"


2eparate Ipinions
A<$I<II, K", concurring#
I concur in the opinion of the Chief Kustice"
I fully agree ith the abandonment of the vie previously
adhered to in 2outhestern 2ugar R Molasses Co" vs"
Atlantic Fulf and /aci-c Co", ' hich holds that an option to
sell can still be ithdran, even if accepted, if the same is
not supported by any consideration, and the rea!rmance of
the doctrine in At,ins, Mroll R Co", Inc" vs" Cua Eian $e,, ?
holding that 7an option implies """ the legal obligation to
,eep the ofer 8to sell9 open for the time speci-edB7 that it
could be ithdran before acceptance, if there as no
consideration for the option, but once the 7ofer to sell7 is
accepted, a bilateral promise to sell and to buy ensues, and
the oferee ipso facto assumes the obligations of a
purchaser" In other ords, if the option is given ithout a
consideration, it is a mere ofer to sell, hich is not binding
until accepted" If, hoever, acceptance is made before a
ithdraal, it constitutes a binding contract of sale" $he
concurrence of both acts > the ofer and the acceptance >
could in such event generate a contract"
@hile the la permits the oferor to ithdra the ofer at
any time before acceptance even before the period has
e%pired, some riters hold the vie, that the oferor can not
e%ercise this right in an arbitrary or capricious manner" $his
is upon the principle that an ofer implies an obligation on
the part of the oferor to maintain in such length of time as
to permit the oferee to decide hether to accept or not,
and therefore cannot arbitrarily revo,e the ofer ithout
being liable for damages hich the oferee may sufer" A
contrary vie ould remove the stability and security of
business transactions" 4
In the present case the trial court found that the 7/laintif
8<icolas 2ancheA9 had ofered the sum of /l,C'3"33 before
any ithdraal from the contract has been made by the
0efendant 82everina 1igos9"7 2ince 1igos' ofer sell as
accepted by 2ancheA, before she could ithdra her ofer, a
bilateral reciprocal contract > to sell and to buy > as
generated"
G.R. No. L-16957 $p*il 25, 1962
$RMINIO RI%ER$, in :i# +apa+ity $# $(5ini#t*ato* o
t:! Int!#tat! E#tat! o t:! (!+!a#!( R$2$EL LIT$M,
plainti-app!ll!!,
"#.
LIT$M an( COM,$N', INC., GREGORIO /' T$M,
;ILLI$M T$M, LUI& LIT$M, LI 8ONG 8$, an(
8ENR' LIT$M, (!!n(ant#-app!llant#.
/! lo# &anto# an( /! lo# &anto# o* plainti-app!ll!!.
9!n3a5in 8. $<6ino, $*t6*o C. Mo3i+a an( $l.!*t C.
M!n(o0a o* (!!n(ant#-app!llant#.
L$9R$/OR, ).-
Arminio 1ivera brought this action in his capacity a
administrator of the estate of the deceased 1afael .itam to
recover from the defendants some C)O?3) shares of stoc,
belonging to the deceased in the .i $am R Co", Inc", or their
value, alleging that the said shares have been fraudulently
transferred by the defendants, and to render an accounting
of the income or dividends that have accrue to said shares
of stoc,, ith attorneys' fees and costs"
$he material allegations of the complaint are > $hat 8'9
1afael .itam died intestate in Manila on Kanuary ', '(C' and
plaintif as appointed administrator of his estateB 8?9 the
ife of 1afael .itam, Marcosa 1ivera, -led a claim against
his estate for the sum of /?C?,;C*"44 hich the Court of
First Instance approvedB 849 believing that the properties of
the deceased ere in the possession of .i $im R Co", Inc",
the administrator -led a motion in the probate court
demanding that the /resident and Manager, Mr .ee Chu, be
re:uired to render an account of the income of the C)O?3)
shares of the deceased in said company, but said /resident
and Manager and Fregorio 0y $am opposed the motion,
claiming that the entire assets or properties of the deceased
ere transferred on Kanuary ?C, '(C3 to @illiam .itam, .uis
.itam, Eenry .itam and .i Eong Eap, and to sho such
transfer said defendants furnished photostat copies of the
said shares of stoc, and the transfer thereofB 8)9 said
transfers are -ctitious, unsupported by any ade:uate or
valuable consideration, and fraudulent, and defendants
unlafully and fraudulently conspired to bring about the
said transfersB said transfers had been made to enrich
themselves to the pre=udice of othersB said transfers ere
made in fraud of creditorsB 8C9 the value of such shares is at
least /433,333B and the probate court, upon motion of
administrator, has authoriAed him to -le the suit against the
defendants"
All the defendants -led a common anser hich their
attorneys, 2ycip, 2alaAar, et al", presented" In said anser
the defendant corporation alleged that it has no ,noledge
or information su!cient to form a belief as to the truth of all
the allegations and denied the same"
$he other defendants also denied the material allegations of
the complaint and alleged that the allegations of the
complaint are conclusions of laB that the transfers of the
shares of stoc, to defendants are null and void" $hey also
denied the authority of the plaintif to -le the actionB and as
a!rmative defenses they alleged that the shares of stoc, in
:uestion ere disposed of by the intestate for good,
su!cient and ade:uate consideration ithout intent of
committing fraudB that the corporation in hich 1afael .itam
had shares of stoc, is no longer e%isting and the present
corporation, .i $am R Company, Inc", is formed by diferent
incorporationsB that the defendant corporation does not
have in its possession any of the properties belonging to the
intestate estate of 1afael .itamB and that the complaint
states no cause of action against the individual defendants,
said defendants not having received any sum from the
deceased on Kanuary ?C, '(C3"
$he case as set for hearing on April ?, '(C; but the trial
had to be postponed because to cases involving the same
parties, F"1" <o" .+5;)) and .+5;)C, ere still pending
before the 2upreme Court" In March 4', '(C5 attorney for
the plaintif informed the court that the said cases had
already been decided so he prayed that the case be set for
hearing ane in Kune '(C5B this as done but the case as
again postponed to August C, '(C5" Garious other
postponements too, place until 2eptember ?), '(C5 hen
the attorneys for the defendants informed the court that
they ere ithdraing from the case but that they had not
as yet secured the conformity of their clients to their
ithdraal" $he court again postponed the case to
<ovember ??, '(C5 notifying the parties of the
postponement" @hen the case as called for hearing on
<ovember ??, '(C5, all the defendants failed to sho upB so
the court authoriAed the cler, of court to hear the evidence
for plaintif ithout the presence of the defendants" $he
case, hoever, as actually heard, ithout the presence of
defendants, only on February ; and '(, '(C("
In Kuly ';, '(C( after the plaintif had submitted his
memorandum, the court rendered =udgment, the dispositive
part of hich reads as follos#
/1EMI2E2 CI<2I0E1E0, this Court -nds the complaint to be
substantiated by the evidence on record and =udgment is
hereby rendered thus#
8'9 $he transfer on Kune ?C, '(C3 of the certi-cates of stoc,
of 1afael .itam to it# <os" G+?, G+4, G+(, G+'3, G+'', G+'?, G+
'4, G+'), all of .i $am R Co", Inc", in favor of the respective
transferees is hereby declared null and void and of no legal
efect and the estate of 1afael .itam remains the oner or
the above mentioned certi-cates of stoc,B
8?9 6ecause of the dissolution of .i $am R Co", Inc" in '(C?,
the successor defendant corporation is hereby directed
either to cause the issuance in favor of the estate of 1afael
.itam of the e:uivalent number of its shares of capital stoc,
or should that be not possible for one reason or another, to
pay to said estate, =ointly and severally ith the other
defendants, the value of said C)O?3) shares of stoc, hich
is hereby -%ed at /433,333"B and
849 All the defendants are ordered to pay =ointly and
severally the herein plaintif the sum of /;,333"33 as
attorney' fees and e%penses of litigation" 8pp" (C+(;, 1"I"A"9
Against the above =udgment the defendants have
prosecuted this appeal"
2ome antecedent facts constituting the bac,ground is
necessary to an understanding of the evidence on the main
issue, namely, the validity of the transfer of the C)O?3
shares of the deceased 1afael .itam to the defendants
@illiam, Eenry, and .uis .itam and .i Eong Eap"
1afael .itam as married to Marcosa 1ivera on Kune '3,
'(??" Ee died on Kanuary '3, '(C3 hile a resident of
Eulong 0uhat, Malabon, 1iAal" Upon his death intestate
proceedings ere instituted for the settlement of his estate
by Fregorio 0y $am, ho alleged that he and the others
namely, @illiam, Eenry, and .uis .itam and .i Eong Eap are
his 8of 1afael .itam9 children by a Chinese ife, ith hom
he had contracted marriage in China in '(''" In the petition
Fregorio 0y $am as proposed as administrator" $he ife of
the deceased, Marcosa 1ivera, proposed Arminio 1ivera, a
nephe" $his proposal as opposed by the petitioner
Fregorio 0y $am on the ground that Marcosa 1ivera had a
claim against the intestate" $he loer court approved the
appointment of Arminio 1ivera, and the case having come to
this Court in F"1" <o" .+;?(5, @e held that the appointment
as proper as the administrator ould have the duty of
protecting the estate against the pretending heirs" 82ee
E%hibit 7E79"
0uring the pendency of the intestate proceedings Marcosa
1ivera, incompetent, -led a claim for a total sum of
/?C?,;C*"44 against the intestate" 8E%hibit 7F79 $he claim
as approved upon the strength of a deed dated February
?), '(); here the deceased 1afael .itam ac,noledged a
ne indebtedness of /'(5,333"33 plus interest of /;?,333
for the previous year 8E%hibit 7F+?79" $he order as appealed
to this Court in F"1" <o" .+5*);, but @e dismissed the
appeal for the reason that in to cases 8F"1" <os" .+5;))+
)C9 @e had held that hen 1afael .itam as married to
Marcosa 1ivera, 1afael as not married to the mother of
Fregorio 0y $am and his four brothers and three sisters"
8E%h" 7E79 "
In <ovember 'C, '()) Arminio 1ivera, administrator of the
intestate, moved the court to re:uire the president and
manager of .i $am R Company, Inc", to give an account of
the Income derived from the C)O?3) shares of stoc, of the
intestate 8E%hibit 7I79" In anser .ee Chu alleged that at the
time of his death, 1afael .itam as no longer a stoc,holder,
having transferred his shares to various persons 8E%hibit 7K79"
Upon the -ling of this anser the probate court authoriAed
the -ling of this action against Eenry .itam, .i Eong Eap,
.uis .itam and @illiam .itam and others 8E%hibit 7M79"
$he photostat copies of the original shares of stoc, 8E%hibits
., .+' to .+59 of 1afael .itam sho the folloing transfers of
the stoc,# "
; shares to .uis .itam
; shares to .uis .itam
; shares to .uis .itam
) shares to .uis .itam ? to @illiam .itam
' shares to .i Eong Eap
; shares to @illiam .itam
; shares to @illiam .itam
* shares to @illiam .itam
( shares to Eenry .itam 8E%hs" 7., .+', to .+579"
In Civil Case <o" ?35' of the Court of First Instance of 1iAal,
Fregorio 0y $am, sought to recover certain properties in
<avotas, 1iAal, Malabon, 1iAal and in Ibando, 6ulacan,
alleging that 1afael .itam as survived by .i Eong Eap, .i
Mo, Fregorio 0y $am, Eenry .itam, 6eatriA .ee $am, Elsa .ee
$am, @illiam .itam and .uis .itam by a marriage in China in
'('' ith 2ia Mhin" $he Court of First Instance dismissed the
action and declared the properties to be e%clusive, separate
paraphernal properties of Marcosa 1ivera 8E%hibit 7M79"
Upon appeal to Us, in F"1" <o" .+5;)), @e a!rmed the
decision ith a slight modi-cation" 8E%hibit 7<79"
$he evidence for plaintif consists of the testimony of
himself and various documents" $he gist of the testimony is
as follos# 1afael .itam died on Kanuary '3, '(C', and his
ife, on 2eptember '?, '(C5" 0uring his lifetime, 1afael
.itam as /resident and Feneral Manager of the .i $am and
Company, Inc", and had C)O?3) shares thereinB that upon
plaintif's :uali-cation as administrator he inspected the
properties of the deceased in the 6icol 1egion and during
the inspection he met defendant Eenry .itam at Casiguran,
2orsogon and Eenry told him that the properties ere still
intact in diferent places" Ee further testi-ed that he met the
defendants several times in '()* in their o!ce at (?* 2an
Fernando, 2an <icolas, Manila and he as told that 1afael
.itam oned shares in the company valued at /433,333B
that hen he ent to collect the debt of 1afael .itam to his
aunt, he as told not to orry as they did not claim the
shares as their on" $hese facts ere not contradicted is
defendants did not appear in person or by attorney on the
dates of the trial"
$he main basis of the action are to documents, identi-ed
at the trial as E%hibits 7I7 and 7/7" $hey are as follos# "
MA2U.A$A< 2A /AFMAMAU$A<F "
A.AMI< <F .AEA$ <A MAMA6A6A2A <I$I#
<a a,ong si 1AFAE. .I$AM, ciudadano chino, may sapat na
gulang, may asaa at naninirahan sa Malabon, 1iAal,
/ilipinas, ay malaya at ,usang loob na "
<AF2A2AH2AH <F 2UMU2U<I0#
'" > <a bago magsi,lab ang ,atatapos na digmaan sa
/aci-co, a,o may pag,a,autang sa a,ing asaang si
MA1CI2A 1IGE1A ng halagang I2A<F 0AA< A$
$A$.I<F/U$ .IMA<F .I6I<F /I2I 8/'4C,333"339,
,ualtang pilipino, na tinanggap ,o ng boong ,asiyahang
loob sa nasabi ,ong asaa, at siya ,ong ginamit sa a,ing
negocio" Ang nasabing halaga ay salaping sarili ng a,ing
asaa, at hanggang sa sandaling ito ay hindi ,o pa
nababayaran sa ,anya ,ahi't bahagi nito"
?" > <a noong i,a ) ng Enero ng taong ito, sa hangad ,ong
maitayong muli ang a,ing negocio na nasira ng digmaan, ay
napangahasan ,ong galain at ,unin sa ,inatataguan ang
halaga pang A<IM<A/U'$ 0A.A@A<F .I6I<F /I2I
8/;?,333"339, ,ualtang pilipino, na salapi ding sarili ng
a,ing asaang si Marcosa 1ivera, ,aya't sa ngayon a,o ay
may pag,a,autang sa ,anya ng halagang I2A<F 0AA< A$
2IHAM<A/U'$ /I$I<F .I6I<F /I2I 8/'(5,333"339 ,ualtang
pilipino, at sa pamamagitan nito ay ipinanganga,o ,ong
babayaran sa ,anya, u orden, ang nasabing halaga pati ng
pa,inabang na '3L isang taon ng huling halagang
/;?,333"33, sa ganitong paraan# "
2a dati ,ong utang na /'4C,333"33 a,o ay maghuhulog ng
halagang I2A<F .I6I<F /I2I 8/',333"339 isang buan
simula sa buan ng MarAo, '();, hanggang sa buan ng
0isyembre, '()5B at .IMA<F .I6I<F /I2I 8/C,333"339 isang
buan simula sa buan ng Enero, '()*, hanggang sa
matapusan ang nasabing halagaB "
2a huling halagang /;?,333"33 a,o ay maghuhulog ng
/4',333"33 sa buan ng 0isyembre, '();, o bago dumating
ang nasabing petsa, at /4',333"33 sa buan ng 0isyembre,
'()5 o bago dumating ang nasabing petsa, at ang
pa,inabang na '3L isang taon ay nasabing halagang
/;?,333"33 ay huhulugan ,o buan+buan por
mensualidades vencidos at ang unang hulog ay
gagampanan ,o sa buan ng MarAo, '();"'SphT'"NUt
4" > Mung sa,aling hindi ,o matupad ang alin man sa mga
condiciones na nasaad sa ,asulatang ito, ang ,abuoan ng
a,ing pag,a,autang ay magiging vencido at maaaring
singilin lahat ng may haa, ng ,asulatang ito"
)" > 6ilang garantia ng a,ing pag,a,autang na ito ay
ipinanganga,o ,ong sa loob ng lalong madaling panahon ay
gagaa a,o ng isang escritura de hipoteca ng lahat ng a,ing
mga propiedades sa 2orsogon favor sa a,ing asaang
Marcosa 1ivera"
2A MA$U<AHA< <F .AEA$ <F I$I, a,o ay lumagda sa ibaba
nito, dito sa Malabon, 1iAal, /ilipinas, ngayong i,a ?) ng
Febrero, '();"
82gd"9 1afael .itam
1AFAE. .I$AM
<I.AF0AA< 2A EA1A/ <I# "
MACA1II 6" A2I2$II I..EFI6.E"
$AFI2 U<I0I2 0E AME1ICA
CIMMI<@EA.$E 0E FI.I/I<A29 2" 2"
/1IGI<CIA 0E 1IDA.
En el Municipio de Malabon, /rovincia de 1iAal, Filipinas, hoy
a ?C de Febrero de '();, A" 0" comparecio personalmente
anmi el 2r" 1afael .itam, con su certi-cado de residencia <o"
A+?;*'*4, e%pedido en Malabon, 1iAal, et ?C de Febrero de
'();, de :uien hoy fe :ue conoAco por ser la misma
persona :ue otorgo el preinserto documento y :ue rati-co
haberlo otorgado libre y espontancamente, el cual se
compone de dos paginas, inclusive la :ue contiine esta
rati-cacion, la segunda de las cual+es ha sido -rmada en el
margen iA:uierdo por el otorgante y sus testigos, y sellada
con mi timbre notarial"
Anti mi,
82gd"9 I..EFI6.E"
<I$A1II /U6.ICI
Mi commission e%pira
el 4' de 0ic", '(); "
Asiento <o" ;B /ag" <o" ?B .ibro
IIB 2erie de '();"7 8E%hibit 7I79 "
E%hibit 7/7 "
Ang ,abu+uan nang ,ualtang natangap ,o na galing sa a,ing
asaang si Marcosa 1ivera simula nang a,o ay pumaso, sa
Ispital ay .A6I<F 0A.A@A<F .I6I<F /I2I 8/'?,;33"339"
82gd"9 1afael .itam
1AFAE. .I$AM
<oviembre ?*, '(C3"
Manila"
$he court belo found that the transfer of the shares of
stoc, to defendants as simulated, -ctitious and ithout
considerationB that it as in fraud of creditors and the
conduct of the defendants at the time the transfer of the
properties of the deceased as being made, renders the
alleged sale doubtful" $he peculiar circumstances, such as
the fact that defendants claimed to be children of the
deceased, and claimed various real properties as belonging
to 1afael .itam hen as a matter of fact they ere the
e%clusive paraphernal properties of his ife > both of hich
facts ere found in the decisions of the 2upreme Court >
reveal hy the transfer of the shares as disclosed only in
the year '(C), hen as a matter of fact the transfers too,
place purportedly at the same time on Kuly ?C, '(C3"
$he above -ndings as to the e%istence of fraud, the lac, of
consideration, etc", are disputed by the appellants in their
-rst assignment of error, it being contended by them that
the premises are insu!cient to prove lac, of a
consideration, as defendants had no duty to ma,e public the
transfer and disclose the consideration therefor, etc"
Ansering the above contention, e state that defendants
did not prove that they ever paid any price or consideration
for the transfer, or that they had the means to pay for the
price, or that the deceased had ever received any payment
for the transfer, as it as shon that he as so short of
funds soon after the date of the supposed transfer that he
had to borro the sum of /'?,333"33 from his ife on
<ovember ?*, '(C3 8E%hibit 7/79" @hen in '()( and '(C3
plaintif 1ivera sa the defendants @illiam .itam, .uis .itam
and Eenry .itam, these defendants admitted that 1afael
.itam oned shares in the corporation valued at /433,333
8t"s"n", p" ?49" And even after the death of 1afael .itam, in
the year '(C?, hen plaintif ent to the 6icol region to
chec, up the properties left by the intestate for the purpose
of preparing the inventory thereof, he met Eenry .itam in
Casiguran, 2orsogon" Eenry .itam then did not say that the
properties did not belong to the deceased 8t"s"n", p" 4?9,
hen the supposed endorsement of the shares bears date of
Kuly ?C, '(C3" In the year '(C?, before plaintif -led the
inventory, he too, up ith .ee Chu the matter of the
interest of 1afael .itam in the corporation, .i $am and
Company, Inc" .ee Chu, ho as then president, admitted
that the deceased 1afael .itam oned C) shares of the
entire stoc, 8t"s"n", p" 449" Iur conclusion from all the above
facts and from these admissions in '(C? of .ee Chu, then
president of .i $am and Company, Inc", and of Eenry .itam,
one of the defendants, is that in '(C? the shares ere still
oned by 1afael .itam and had not yet been endorsed or
transferred on the boo,s of the corporation to the
defendants"
Iur e%amination of the certi-cates of stoc, shos that the
deceased 1afael .itam's signatures to the indorsement ere
authentic, but the dates of indorsement and the names are
notB so e believe, 1afael must have signed the
indorsement not on Kanuary ?C, '(C3 but before, and the
shares actually transferred in the boo,s already after '(C?"
From these circumstances e conclude that the certi-cates
of stoc, must have been delivered, already signed by the
deceased, before his death, in secret, to his alleged children,
the defendants herein, ho, after 1afael .itam's death in
Kanuary '(C', rote their names on the shares as
endorsees, in secret also" $heir purpose is evident > so that
upon 1afael's death his Filipino ife ould not be able to
claim the shares of stoc, as part of 1afael's assets and
same 8shares9 ould not be sub=ect to the payment of his
debts" $hese debts at the time of his death in '(C3 reached
more than /?C3,333" $he fact that the real properties,
presumably of the deceased, in the 6icol region ere also in
the name of the corporation, not in 1afael's on, must have
been part of the scheme to insure that his 8the deceased9
assets ould pass to his children, the defendants, free from
the claims of his ife"
It appears, therefore, that the deceased 1afael .itam had
been getting money from his Filipina ife 8to distinguish her
from the Chinese ife by hom he had his children, the
defendants bearing his name9, borroing from her big sums
hich he put in the company, .i $am and Company, Inc", in
shares of stoc, of this corporation, later endorsing the
certi-cates evidencing transfer thereof, ithout date, and
delivering the shares to his children, also investing the funds
of the company, in the purchase of real estate also in the
name of the corporation, thus depriving his ife, from hom
the money came, of the legal means to get bac, the money
loaned" And to complete the fraudulent scheme and in order
to ma,e the properties more invulnerable to the claims of
1afael .itam's creditors, the defendants for no apparent
reason, dissolved the old corporation and formed the ne .i
$am and Company, Inc", on Ictober 4, '(C?, the defendants,
children of the deceased being the ne stoc,holders 8see
E%hibit 7&79" $he fact that in the ne corporation the
respective shares of the incorporators do not e%actly
coincide ith the shares each had received from 1afael
.itam, according to the endorsements of the original shares,
prove that 1afael .itam's children actually divided his assets
among themselves, not according to the endorsements of
the shares"
$he fraudulent character of the transfer of all his shares of
stoc, by 1afael .itam is clearly inferable from the folloing
circumstances# namely, the transferees are his on childrenB
no consideration or price as given or received for the
transferB the shares of stoc, ere the only properties of
1afael .itamB there as no apparent need for him to dispose
of all of them as the corporation as the only source of
business that he hadB and he had an outstanding
indebtedness of more than /?C3,333 ith his ife ith
hom he had no issue" It has been said that 7the fertility of
man's invention in devising ne schemes of fraud is so
great that courts have declined to de-ne it, reserving to
themselves the liberty to deal ith it under hatever form it
may present itself"7 In the case at bar the fraudulent scheme
is evidenced by a series of related acts committed one after
another, silently, :uietly and surreptitiously" Iur
=urisprudence abounds ith cases here fraud had been
held to e%ist but e have found none in hich all the
circumstances above indicated are present, the
circumstances being varied as the men ho schemed the
fraud in each case" $he nearest to the case at bar is Ayles
vs" 1eyes and 1eyes, '* /hil" ?)4, here the 2upreme Court
held that fraud as proved here it as shon that the
debtor ent into insolvency and, conniving ith his parents,
sold part of his property to them and the sales ere
simulated, and only for the purpose of frustrating liabilities
contracted"
Ine last point needs consideration, and this is the claim
made by the defendant corporation that its obligation to
transfer the shares of stoc, to the estate could not be
inferred from the Articles of Incorporation 8E%hibit 7&79,
because the to corporations are distinct and separate, and
under the authorities cited by it, even if the ne succeeded
the old corporation" $his claim ould have been correct had
not the defendant corporation e%pressly ac:uired the assets
and properties of the old .i $am and Company, Inc", and
assumed its obligations and liabilities in the articles of
incorporation" 8E%h" 7&7, /ar" 7d79" $he trial court, therefore,
correctly held defendant corporation liable to the estate for
the e:uivalent number of shares of stoc,, otherise, said
corporation ould be enriching itself at the e%pense of the
estate"
In vie of the fraud and all the foregoing, the transfer of the
shares must be declared null and void and of no efect
8Article ')3(, Civil Code9, and the transferees, as ell as the
corporation hich consented to the transfer, must all be
held liable for the return of the properties, that the shares
represented, or their values 8Article '4C?, Civil Code9"
Another ob=ection to the =udgment raised by the appellants
is that they should not be re:uired to pay the amount of
/433,333 as ell as the attorney's fees" $he =udgment for
/433,333 is an alternative relief aforded the plaintif in case
the shares of stoc, can not be recovered" Attorney's fees
should be aarded because the plaintif has been forced to
various litigations in order to enforce the payment of
plaintifs claim"
Art" '4**" > @hoever ac:uires in bad faith the things
alienated in fraud of creditors, shall indemnify the latter for
damages sufered by them on account of the alienation,
henever, due to any cause, it should be impossible for him
to return them"7 8Civil Code of the /hilippines9"
Art" ''53" > $hose ho in the performance of their
obligations are guilty of fraud, negligence or delay, and
those ho in any manner contravene the tenor thereof, are
liable for damages"
.iability for <on+/erformance" > In general, every debtor
ho fails in the performance of his obligations is bound to
indemnify for the losses and damages caused thereby" 80e
la CruA vs" 2eminary of Manila, '* /hil" 443B Municipality of
Moncada v" Ca=uigan, ?' /hil" '*)B 0e la Cavada vs" 0iaA, 45
/hil" (*?B Maluenda v" Enri:ueA, ); /hil" (';B /ampanga
2ugar Mills v" Chong, )( /hil" '334B /ando v" FimeneAB C)
/hil" )C(B Acme Films v" $heaters 2upply, ;4 /hil" ;C59"
$olentino's $he <e Civil Code Annotated, p" 4')9"
$herefore the damages sustained by the plaintif by reason
of the fraudulent transfer of the shares of stoc, are the
value thereof and the e%penses of litigation, hich plaintif
has testi-ed to be /;,333, for these defendants+appellants
are liable by reason of the above+:uoted provisions" @e,
therefore, -nd ithout merit the second and last assignment
of errors of appellants and e, thereby, dismiss the same"
As their third assignment of error, it is claimed on behalf of
the appellants that defendants @illiam .itam, .uis .itam and
.i $am and Company, Inc", did not receive notice of the
hearing on February ;, and '(, '(C(B that the reason for
their failure to receive said notice is because they had
already transferred their places of residenceB that they failed
to notify the court of the changes of address because they
did not ,no that is re:uired of themB that if alloed to
present evidence, they ould substantially prove the
allegations in their anser"
$he arguments presented by appellants are the same as
those contained in their motion for ne trial andOor
reconsideration, hich the loer court denied" $he rule in
this =urisdiction is that a petition for ne trial is addressed to
the discretion of the court and this Court ill not disturb the
same on appeal, unless there is grave abuse thereof 8.a I v"
0ee, et al", .+4*(3, Kanuary ?4, '(C?9" @e are only to
e%amine the record of the case, to determine if the denial
constitutes an abuse of discretion"
$here is no :uestion that defendants Eenry .itam, Fregorio
0y $am and .i Eong Eap actually received their copies of
the order of the loer court setting the case for hearing on
February ; and '(, '(C(" Insofar as they are concerned,
therefore, they cannot claim denial of their day in court" Are
the other defendants, namely, .uis and @illiam .itam and .i
$am and Company, Inc", guilty of e%cusable negligence for
their failure to appear during the trialJ
$he record discloses that as early as August C, '(C5,
defendants' counsel, the la o!ce 2ycip, et al", as already
ithdraing from the case and this ithdraal as
reiterated in another motion for continuance of the hearing
scheduled for 2eptember ?), '(C5" As early as August C,
'(C5, therefore, defendants must have ,non that they
ould be ithout counsel" $hey should have, therefore,
ta,en steps to secure the services of another" Again on
<ovember ?', '(C5, defendant .uis .itam agreed to the
ithdraal of their counsel, and .uis .itam signed the
conformity to said ithdraal in his on behalf and in those
of the other defendants" $here is nothing in the record,
especially in the a!davit of .uis .itam supporting
defendants' motion for ne trial, that the other defendants
did not authoriAed him to sign for them" Eaving no layer to
assist them in the proceedings, and ,noing that the case
as then ready for hearing, defendants should have ta,en
the necessary precaution of hiring a ne layer for any
subse:uent hearing or hearings" $hose ho had changed
their addresses should also have informed the court thereof"
$hey failed to do so, and it as only hen they received a
copy of the decision that they hired their present counsel"
$heir neglect in doing so is certainly ine%cusable"
$he defendants admit their places of residence alleged in
the complaint in their anser" As no notices of the changes
of address as sent by them to the court, naturally notices
of hearing and orders of the court had to be sent to their
former addresses" @ith respect to defendant corporation, it
is alleged in the a!davit of .uis .itam that it had transferred
its o!ce to 2orsogon as early as '(C4, but in their anser
dated Ictober '3, '(CC, they admit that the o!ce of the
defendant corporation is at (?* 2an Fernando, 2an <icolas,
Manila, the same place here the notice of hearing as
sent" $his admission strengthens the impression that
defendants had deliberately refused to accept the notices of
hearing"
$he record also discloses that the order setting the case for
hearing as sent to defendants .uis and @illiam .itam and
.i $am and Company, Inc", ho failed to get said order
inspite of the to notices sent to them" Inasmuch as
defendants failed to get their registered letters service upon
them of said order as deemed completed, -ve days from
the date of the -rst notice, in accordance ith the provisions
of 2ec" *, 1ule ?5 of the 1ules" Conse:uently, defendants
can not no claim that they have not been given their day
in court"
Furthermore, the petition for ne trial could not be granted
because there is no shoing that defendants have valid
defenses to the complaint" $he a!davit of .uis .itam
supporting defendants' motion for reconsideration and ne
trial do not sho any such valid defense" Conse:uently, the
trial court correctly denied defendants' motion for ne trial
andOor reconsideration"
FI1 A.. $EE FI1EFII<F CI<2I0E1A$II<2 the =udgment
appealed from should be, as it hereby is, a!rmed" @ith
costs" 2o ordered"
6engAon, C"K", 6autista Angelo, Concepcion, 1eyes, K"6".",
/aredes and 0iAon, KK", concur"
G.R. No. L-217=9 an( L-2162= May 19, 1966
MIGUEL M$,$LO, ET $L., p!tition!*#,
"#.
M$>IMO M$,$LO, ET $L., *!#pon(!nt#.
,!(*o ,. T6a#on o* p!tition!*#.
,*i5i+ia# an( /!l Ca#tillo o* *!#pon(!nt#.
9ENG4ON, ).,., ).-
$he spouses Miguel Mapalo and Candida Puiba, simple
illiterate farmers, ere registered oners, ith $orrens title
certi-cate I"C"$" <o" );C34, of a ',;4C+s:uare+meter
residential land in Manaoag, /angasinan" 2aid spouses+
oners, out of love and afection for Ma%imo Mapalo > a
brother of Miguel ho as about to get married > decided
to donate the eastern half of the land to him" I"C"$" <o"
);C34 as delivered" As a result, hoever, they ere
deceived into signing, on Ictober 'C, '(4;, a deed of
absolute sale over the entire land in his favor" $heir
signatures thereto ere procured by fraud, that is, they
ere made to believe by Ma%imo Mapalo and by the
attorney ho acted as notary public ho 7translated7 the
document, that the same as a deed of donation in
Ma%imo's favor covering one+half 8the eastern half9 of their
land" Although the document of sale stated a consideration
of Five Eundred 8/C33"339 /esos, the aforesaid spouses did
not receive anything of value for the land" $he attorney's
misbehaviour as the sub=ect of an investigation but its
result does not appear on record" Eoever e too, note of
the fact that during the hearing of these cases said notary
public as present but did not ta,e the itness stand to
rebut the plaintifs' testimony supporting the allegation of
fraud in the preparation of the document"
Folloing the e%ecution of the afore+stated document, the
spouses Miguel Mapalo and Candida Puiba immediately built
a fence of permanent structure in the middle of their land
segregating the eastern portion from its estern portion"
2aid fence still e%ists" $he spouses have alays been in
continued possession over the estern half of the land up to
the present"
<ot ,non to them, meanhile, Ma%imo Mapalo, on March
'C, '(4*, registered the deed of sale in his favor and
obtained in his name $ransfer Certi-cate of $itle <o" '?*?(
over the entire land" $hirteen years later on Ictober ?3,
'(C', he sold for /?,C33"33 said entire land in favor of
Evaristo, /etronila /aci-co and Miguel all surnamed <arciso"
$he sale to the <arcisos as in turn registered on <ovember
C, '(C' and $ransfer Certi-cate of $itle <o" ''4C3 as
issued for the hole land in their names"
$he <arcisos too, possession only of the eastern portion of
the land in '(C', after the sale in their favor as made" In
February 5, '(C? they -led suit in the Court of First Instance
of /angasinan 8Civil Case <o" ''('9 to be declared oners of
the entire land, for possession of its estern portionB for
damagesB and for rentals" It as brought against the Mapalo
spouses as ell as against Floro Fuieb and 1osalia Mapalo
Fuieb ho had a house on the estern part of the land ith
the consent of the spouses Mapalo and Puiba"
$he Mapalo spouses -led their anser ith a counterclaim
on March '5, '(;C, see,ing cancellation of the $ransfer
Certi-cate of $itle of the <arcisos as to the estern half of
the land, on the grounds that their 8Mapalo spouses9
signatures to the deed of sale of '(4; as procured by
fraud and that the <arcisos ere buyers in bad faith" $hey
as,ed for reconveyance to them of the estern portion of
the land and issuance of a $ransfer Certi-cate of $itle in
their names as to said portion"
In addition, the Mapalo spouses -led on 0ecember ';, '(C5
their on complaint in the Court of First Instance of
/angasinan 8Civil Case <o" U+'449 against the aforestated
<arcisos and Ma%imo Mapalo" $hey as,ed that the deeds of
sale of '(4; and of '(C' over the land in :uestion be
declared null and void as to the estern half of said land"
Kudge Amado 2antiago of the Court of First Instance of
/angasinan located in the municipality of Urdaneta tried the
to cases =ointly" 2aid court rendered =udgment on Kanuary
'*, '(;', as follos#
@EE1EFI1E, =udgment is hereby rendered as follos, to it#
8a9 dismissing the complaint in Civil Case <o" ''(('B
8b9 declaring E%hibit A, plaintifs in Case <o" ''((' and
E%hibit ', defendants in Case <o" U+'44 as a donation only
over the eastern half portion of the above+described land,
and as null and void ith respect to the estern half portion
thereofB
8c9 declaring as null and void and ithout legal force and
efect $ransfer Certi-cate of $itle <o" '?*?( issued in favor
of Ma%imo Mapalo as regards the estern half portion of the
land covered thereinB
8d9 declaring as null and void $ransfer Certi-cate of $itle <o"
''4C3 in the names of the <arcisos insofar as the estern
half portion of the land covered therein is concernedB
8e9 ordering the spouses Mapalo and Puiba and the <arcisos
to have the above+described land be subdivided by a
competent land surveyor and that the e%penses incident
thereto be borne out by said parties pro rataB
8f9 ordering the 1egister of 0eeds of /angasinan to issue in
lieu of $ransfer Certi-cate of $itle <o" ''4C3 to ne titles
upon completion of the subdivision plan, one in favor of the
spouses Miguel Mapalo and Candida Puiba covering the
estern half portion and another for the <arcisos covering
the eastern half portion of the said land, upon payment of
the legal feesB meanhile the right of the spouses Mapalo
and Puiba is hereby ordered to be annotated on the bac, of
$ransfer Certi-cate of $itle <o" ''4C3B and
8g9 sentencing Ma%imo Mapalo and the <arcisos to pay the
costs"
I$ I2 2I I10E1E0"
$he <arcisos appealed to the Court of Appeals" In its
decision on May ?*, '(;4, the Court of Appeals reversed the
=udgment of the Court of First Instance, solely on the ground
that the consent of the Mapalo spouses to the deed of sale
of '(4; having been obtained by fraud, the same as
voidable, not void ab initio, and, therefore, the action to
annul the same, ithin four years from notice of the fraud,
had long prescribed" It rec,oned said notice of the fraud
from the date of registration of the sale on March 'C, '(4*"
$he Court of First Instance and the Court of Appeals are
therefore unanimous that the spouses Mapalo and Puiba
ere de-nitely the victims of fraud" It as only on
prescription that they lost in the Court of Appeals"
From said decision of the Court of Appeals, the Mapalo
spouses appealed to this Court"
And here appellants press the contention that the document
dated Ictober 'C, '(4;, purporting to sell the entire land in
favor of Ma%imo Mapalo, is void, not merely voidable, as to
the estern portion of the land for being absolutely
simulated or -ctitious"
2tarting ith fundamentals, under the Civil Code, either the
old or the ne, for a contract to e%ist at all, three essential
re:uisites must concur# 8'9 consent, 8?9 ob=ect, and 849
cause or consideration"' $he Court of Appeals is right in that
the element of consent is present as to the deed of sale of
Ictober 'C, '(4;" For consent as admittedly given, albeit
obtained by fraud" Accordingly, said consent, although
defective, did e%ist" In such case, the defect in the consent
ould provide a ground for annulment of a voidable
contract, not a reason for nullity ab initio"
$he parties are agreed that the second element of ob=ect is
li,eise present in the deed of Ictober 'C, '(4;, namely,
the parcel of land sub=ect matter of the same"
<ot so, hoever, as to the third element of cause or
consideration" And on this point the decision of the Court of
Appeals is silent"
As regards the eastern portion of the land, the Mapalo
spouses are not claiming the same, it being their stand that
they have donated and freely given said half of their land to
Ma%imo Mapalo" And since they did not appeal from the
decision of the trial court -nding that there as a valid and
efective donation of the eastern portion of their land in
favor of Ma%imo Mapalo, the same pronouncement has
become -nal as to them, rendering it no longer proper
herein to e%amine the e%istence, validity e!cacy of said
donation as to said eastern portion"'SphT'"NUt
<o, as to the estern portion, hoever, the fact not
disputed herein is that no donation by the Mapalo spouses
obtained as to said portion" Accordingly, e start ith the
fact that liberality as a cause or consideration does not e%ist
as regards the estern portion of the land in relation to the
deed of '(4;B that there as no donation ith respect to the
same"
It is reduced, then, to the :uestion hether there as an
onerous conveyance of onership, that is, a sale, by virtue
of said deed of Ictober 'C, '(4;, ith respect to said
estern portion" 2peci-cally, as there a cause or
consideration to support the e%istence of a contrary of saleJ
$he rule under the Civil Code, again be it the old or the ne,
is that contracts ithout a cause or consideration produce
no efect hatsoever"? <onetheless, under the Ild Civil
Code, the statement of a false consideration renders the
contract voidable, unless it is proven that it is supported by
another real and licit consideration"4 And it is further
provided by the Ild Civil Code that the action for annulment
of a contract on the ground of falsity of consideration shall
last four years, the term to run from the date of the
consummation of the contract")
Accordingly, since the deed of sale of '(4; is governed by
the Ild Civil Code, it should be as,ed hether its case is one
herein there is no consideration, or one ith a statement
of a false consideration" If the former, it is void and
ine%istentB if the latter, only voidable, under the Ild Civil
Code" As observed earlier, the deed of sale of '(4; stated
that it had for its consideration Five Eundred 8/C33"339
/esos" In fact, hoever, said consideration as totally
absent" $he problem, therefore, is hether a deed hich
states a consideration that in fact did not e%ist, is a contract
ithout consideration, and therefore void ab initio, or a
contract ith a false consideration, and therefore, at least
under the Ild Civil Code, voidable"
According to Manresa, hat is meant by a contract that
states a false consideration is one that has in fact a real
consideration but the same is not the one stated in the
document" $hus he says#
En primer lugar, nor interesa recordar la diferencia entre
simulacion y el contrato con proposito fraudulento" Este
aun:ue ilicito es realB mas el primero es falso en realidad,
aun:ue se le presente como verdadero" 8Manresa, Codigo
Civil, $omo GIII, Gol" II, p" 4C)"9
And citing a decision of the 2upreme Court of 2pain on the
matter, Manresa further clari-es the diference of false
cause and no cause, thus#
Insiste en el distingo con mas detenida descripcion la
sentencia de ?C de mayo de '()), en la :ue se argumenta#
2i bien es elemento fundamental de todo negocio, la
declaracion de voluntad substracto de una voluntad
efectiva, y la e%istencia de una causa :ue lecon-era
signi-cado =uridico seNalando la -nalidad :ue con este se
persigue, no ha de deducirse de esta doctrina,
fundamentalmente recogida en el articulo '"?;' y
concordantes del Codigo civil, :ue cual:uier falta de
adecuacion entre cual:uier incongruencia entre la causa
e%presada y la verdadera, y, en general, entre la
estructuracion y la -nalidad economicaB hayan de producir
la ine-cacia del negocio, pues por el contrario, puede este
ser valido y producir sus efectos tanto en el caso de la mera
disonancia entre el medio =uridico adoptado y el -n practico
perseguido, por utiliAacion de una via oblicua o combinacion
de formas =uridicas entrelaAadas :ue permita la obtencion
de un resultado no previsto en los cuadros de la ley >
negocios indirectos y negocios -duciarlos, validos cuando no
envuelven fraude de ley, como en el caso de la verdadera
disconformidad entre la apariencia del acto y su real
contenido, preparada deliberadamente por las partes >
negocio simulado > , ya :ue, cuando esta divergencia
implica no una ausencia total de voluntad y de acto real,
sino mera ocultacion de un negocio verdadero ba=o la falsa
apariencia de un negocio -ngido 7sirulacion relativa7, la
ine-cacia de la forma e%terna simulada, no es obstaculo
para la posible valideA del negocio disimulado :ue contiene,
en tanto este ultimo sea licito y reuna no solo los re:uisitos
generales, sino tambien los :ue corresponden a su
naturaleAa especial, doctrina, en obligada aplicacion de los
preceptos de nuestra .ey civil, especialmente en su art"
'"?5;, :ue, al establecer el principio de nulidad de los
contratos en los :ue se hace e%presion de una causa falsa,
de=a a salvo el caso de :ue esten fundados en otra
verdadera y licita" 8Manresa, Codigo Civil, $omo GIII, Gol" II
pp" 4C5+4C*9
2ancheA 1oman says#
Ha hemos dicho :ue la intervencion de causa en los
contratos es necesaria, y :ue sin ellos son nulosB solo se
concibe :ue un hombre perturbado en su raAon pueda
contratar sin causa" """
/or la misma raAon de la necesidad de la intervencion de
causa en el contrato, es preciso :ue esta sea verdadera y no
supuesta, aparente o -gurada" Pue la falsedad de la causa
vicia el consentimiento y anula el contrato, es, no solo
doctrina indudable de 0erecho Cienti-co sino tambien de
antiguo 0erecho de Castilla, :ue en multitud de leyes asi lo
declararon" 82ancheA 1oman, 0erecho Civil, $omo IG, p"
?3;"9"
In a clearer e%position of the above distinction, Castan
states#
?"V" .a causa ha de ser verdadera" .a causa falsa puede ser
erronea o simulada" Es erronea como dice Fiorgi, la causa
:ue tiene por base la credulidad en un hecho no e%istenteB y
simulada la :ue tiene lugar cuando se hace aparecer
arti-ciosamente una distinta de la verdadera" .a erronea
produce siempre la ine%istencia del contratoB la simulada no
siempre produce este efecto, por:ue puede suceder :ue la
causa oculta, pero verdadera, baste para sostener el
contrato" 0e acuerdo con esta doctrina, dice el art" '"?5; de
nuestro Codigo :ue 7la e%presion de una causa falsa en los
contratos dara lugar a la nulidad, si no se probase :ue
estaban fundados en otra verdadera y licita7" 8Castan
0erecho Civil EspaNol, $omo II, pp" ;'*+;'(9
From the foregoing it can be seen that here, as in this
case, there as in fact no consideration, the statement of
one in the deed ill not su!ce to bring it under the rule of
Article '?5; of the Ild Civil Code as stating a false
consideration" 1eturning to Manresa#
Figurando en nuestro 0erecho positivo la causa, como un
elemento esential del contrato, es consecuencia ineludible,
se reputar simulada la entrega del precio en la compraventa
de autos, el :ue haya :ue declararla nula por ine%istente
haciendose aplicacion indebida de art" '"?5; por el $ribunal
sentenciador al cohonestar la falta de precio admitiendo se
pueda tratar de una donacion, ya :ue la recta aplicacion del
citado precepto e%ige :ue los negocios simulados, o sea con
causa falsa, se =usti-:ue la verdadera y licita en :ue se
funda el acto :ue las partes han :uerido ocultar y el
cumplimiento de las formalidades impuestas por la .ey y,
cual dice la sentencia de 4 de marAo de '(4?, esta rigurosa
doctrina ha de ser especialmente impuesta en la donaciones
puras y simplesB de los :ue deduce :ue la sentencia
recurrida al no decretar la nulidad instada por falta de
causa, incide en la infraccion de los articulos '"?;', '"?5),
'"?5C y '"?5; del Codigo Civil" 82entencia de ?? de febrero
de '()39" 8Manresa, Codigo Civil, $omo GIII, Gol" II, p" 4C;9
In our vie, therefore, the ruling of this Court in Ice=o, /ereA
R Co" vs" Flores, )3 /hil" (?', is s:uarely applicable herein"
In that case e ruled that a contract of purchase and sale is
null and void and produces no efect hatsoever here the
same is ithout cause or consideration in that the purchase
price hich appears thereon as paid has in fact never been
paid by the purchaser to the vendor"
<eedless to add, the ine%istence of a contract is permanent
and incurable and cannot be the sub=ect of prescription" In
the ords of Castan# 7.a ine%istencia es perpetua e
insubsanable no pudiendo ser ob=ecto de con-rmacion ni
prescripcion 8Ip" cit", p" ;))"9 In Eugenio v" /erdido, (5 /hil"
)', )?+)4, involving a sale dated '(4?, this Court, spea,ing
through Kustice Cesar 6engAon, no Chief Kustice, stated#
Under the e%isting classi-cation, such contract ould be
7ine%isting7 and 7the action or defense for declaration7 of
such ine%istence 7does not prescribe7" 8Art" ')'3, <e Civil
Code9" @hile it is true that this is a ne provision of the <e
Civil Code, it is nevertheless a principle recogniAed since
$ipton vs" Gelasco, ; /hil" ;5 that 7mere lapse of time cannot
give e!cacy to contracts that are null and void7"
Anent the matter of hether the <arcisos ere purchasers
in good faith, the trial court in its decision resolved this
issue, thus#
@ith regard to the second issue, the <arcisos contend that
they are the oners of the above+described property by
virtue of the deed of sale 8E%h" 6, plaintifs in ''((' and
E%h" ?, defendants in U+'449 e%ecuted in their favor by
Ma%imo Mapalo, and further claim that they are purchasers
for value and in good faith" $his court, hoever, cannot also
give eight and credit on this theory of the <arcisos on the
folloing reasons# Firstly, it has been positively shon by
the undisputed testimony of Candida Puiba that /aci-co
<arciso and Evaristo <arciso stayed for some days on the
estern side 8the portion in :uestion9 of the above+
described land until their house as removed in '()3 by the
spouses Mapalo and PuibaB secondly, /aci-ca <arciso
admitted in his testimony in chief that hen they bought the
property, Miguel Mapalo as still in the premises in :uestion
8estern part9 hich he is occupying and his house is still
standing thereonB and thirdly, said /aci-co <arciso hen
presented as a rebuttal and sub+rebuttal itness
categorically declared that before buying the land in
:uestion he ent to the house of Miguel Mapalo and
Candida Puiba and as,ed them if they ill permit their elder
brother Ma%imo to sell the property"
Aside from the fact that all the parties in these cases are
neighbors, e%cept Ma%imo Mapalo the foregoing facts are
e%plicit enough and su!ciently reveal that the <arcisos
ere aare of the nature and e%tent of the interest of
Ma%imo Mapalo their vendor, over the above+described land
before and at the time the deed of sale in their favor as
e%ecuted"
Upon the aforestated declaration of /aci-co <arciso the
folloing :uestion arises# @hat as the necessity, purpose
and reason of /aci-co <arciso in still going to the spouses
Mapalo and as,ed them to permit their brother Ma%imo to
dispose of the above+described landJ $o this :uestion it is
safe to state that this act of /aci-co <arciso is a conclusive
manifestation that they 8the <arcisos9 did not only have
prior ,noledge of the onership of said spouses over the
estern half portion in :uestion but that they also have
recogniAed said onership" It also conclusively shos their
prior ,noledge of the ant of dominion on the part of their
vendor Ma%imo Mapalo over the hole land and also of the
Qa of his title thereto" Under this situation, the <arcisos
may be considered purchasers in value but certainly not as
purchasers in good faith" """ 8pp" (5+(*, 1ecord on Appeal"9
And said -nding > hich is one of fact > is found by us not
a bit disturbed by the Court of Appeals" 2aid the Court of
Appeals#
In vie of the conclusion thus reached, it becomes
unnecessary to pass on the other errors assigned" 2u!ce it
to say that, on the merits the appealed decision could have
been upheld under Article '44? of the ne Civil Code and
the folloing authorities# Ayola vs" Galderrama .umber
Manufacturers Co", Inc", )( I"F" (*3, (*?B $rasporte vs"
6eltran, C' I"F" ')4), ')4CB CorteA vs" CorteA, CA+F"1" <o"
'*)C'+1, August *, '(;'B Castillo vs" .aberinto, CA+F"1" <o"
'*''*+1, 0ecember ?3, '(;'B and '4 C"K" 45?+454, as ell
as the several facts and circumstances appreciated by the
trial court as supporting appellees' case"
thereby in efect sustaining > barring only its ruling on
prescription > the =udgment and -ndings of the trial court,
including that of bad faith on the part of the <arcisos in
purchasing the land in :uestion" @e therefore see no need
to further remand this case to the Court of Appeals for a
ruling on this point, as appellees re:uest in their brief in the
event e hold the contract of '(4; to be ine%istent as
regards the estern portion of the land"
In vie of defendants' bad faith under the circumstances e
deem it =ust and e:uitable to aard, in plaintifs' favor,
attorneys' fees on appeal, in the amount of /',333"33 as
prayed for in the counterclaim"
@herefore, the decision of the Court of Appeals is hereby
reversed and set aside, and another one is hereby rendered
a!rming in toto the =udgment of the Court of First Instance a
:uo, ith attorney's fees on appeal in favor of appellants in
the amount of /',333"33, plus the costs, both against the
private appellees" 2o ordered"
6engAon, C"K", 6autista Angelo, Concepcion, 1eyes, K"6".",
6arrera, 0iAon, 1egala, Ma,alintal, Daldivar and 2ancheA, KK",
concur"
[G.R. No. L-23213. October 28, 1977.]
WESTERN MINDANAO LM!ER "O., IN".,
Plaintiff-Appellant, #. NATI$IDAD M. MEDALLE
%&' ANTONIO MEDALLE, Defendants-Appellees.
(%)%&'o&* + (%,*r -or Appellant.
.er&%&'e/ L%0 O--*ce -or Appellee.
D E " I S I O N
"ON"E1"ION, (R., J.2
$pp!al *o5 t:! o*(!* o t:! Co6*t o 2i*#t In#tan+! o
4a5.oan1a City (i#5i##in1 t:! +o5plaint 6pon t:!
1*o6n( t:at t:! +lai5 on ?:i+: it i# o6n(!( i#
6n!no*+!a.l! 6n(!* t:! &tat6t! o 2*a6( an( #p!+ial la?.
T:! +o5plaint, il!( on /!+!5.!* 16, 1960, all!1!#
t:at-31+-+:an*o.l!#.+o5.p:
@2. A T:! ,lainti i# !n1a1!( in lo11in1 op!*ation# in
C6*6an, 4a5.oan1a City an( in +onn!+tion ?it: t:! #ai(
lo11in1 op!*ation it o.tain!( on &!pt!5.!* =, 1955 a
*i1:t-o-?ay t:*o61: t:! #ai( Lot 2136 o t:! Ca(a#t*al
&6*"!y o 4a5.oan1a *o5 M*. L6+iano 8!*nan(!0,
t:!n t:! *!1i#t!*!( o?n!*, a +opy o t:! a1*!!5!nt .!in1
!n+lo#!( a# $nn!B C$DE
@3. A T:! o*5!* o?n!*# o t:! lo11in1 +on+!##ion
op!*at!( .y t:! ,lainti +on#t*6+t!( an( 5aintain!( t:!
#ai( *oa( t:*o61: Lot 2136, .6t t:! ,lainti i5p*o"!(
t:! #ai( *oa(, payin1 to t:! *!1i#t!*!( o?n!* o* all t:!
i5p*o"!5!nt# (a5a1!( .y t:! i5p*o"!5!nt o t:! *oa(E
@7. A Lon1 .!o*! t:! !B!+6tion o t:! *i1:t-o-?ay
a1*!!5!nt on &!pt!5.!* =, 1955, #in+! t:!n an( 6p to
t:! p*!#!nt ti5! t:! #ai( *oa( :a# .!!n 5aintain!( an(
6#!( not only .y t:! p*!(!+!##o* o t:! ,lainti an( t:!
,lainti, .6t al#o .y t:! p6.li+E
@5. A T:! #ai( Lot 2136 ?a# p6*+:a#!( .y t:!
(!!n(ant# in 195= an( t:! #ai( *oa( t:!n !Bi#t!( an(
?a# in p6.li+ 6#! an( t:! (!!n(ant# (i( not oppo#! .6t
in#t!a( allo?!( t:! +ontin6!( 6#! an( 5aint!nan+! o
t:! *oa( .y t:! ,lainti an( t:! p6.li+E
@6. A T:! #ai( *oa( i# in(i#p!n#a.l! to t:! .6#in!##
op!*ation# o t:! ,lainti, .!+a6#! it i# t:! only a++!##
*o5 t:!i* +on+!##ion to t:! :i1:?ayE
@7. A T:at (!!n(ant# :a"! no? #!nt to t:! ,lainti a
noti+! F$nn!B C9DG o t:!i* int!ntion to +lo#! t:! *oa(E
an(
@=. A T:! ,lainti :a# t:! *i1:t to t:! +ontin6!( 6#! o
#ai( *oa(, t:! +lo#in1 o ?:i+: ?ill +a6#! in36#ti+! an(
i**!pa*a.l! (a5a1!# to t:! ,lainti an( t:! ,lainti i#
?illin1 to po#t a .on( o* t:! i##6an+! o a ?*it o
p*!li5ina*y in36n+tion to #top t:! (!!n(ant# *o5
+lo#in1 t:! *oa(.@+*ala? "i*t6a1a? li.*a*y
x x x
;:!*!o*!, t:! plainti p*ay!( t:at a ?*it o p*!li5ina*y
in36n+tion .! i##6!( *!#t*ainin1 t:! (!!n(ant# *o5
+lo#in1 t:! #ai( *oa(, an( at!* :!a*in1, 5aH! t:!
in36n+tion p!*5an!nt. It al#o p*ay!( t:at t:! (!!n(ant#
.! (i*!+t!( to *!+o1ni0! an( *!#p!+t t:! #ai( *oa( *i1:t-
o-?ay a1*!!5!nt. 1 Copi!# o t:! *oa( *i1:t-o-?ay
a1*!!5!nt an( t:! l!tt!* o t:! (!!n(ant# a("i#in1 t:!
plainti o t:! +lo#6*! o t:! *oa( ?!*! atta+:!( t:!*!to.
2 Upon t:! ilin1 o a .on( in t:! a5o6nt o ,1,000.00,
a ?*it o p*!li5ina*y in36n+tion ?a# i##6!(, *!#t*ainin1
t:! (!!n(ant# *o5 +lo#in1 t:! *oa(. 3
In#t!a( o a *!#pon#i"! pl!a(in1, t:! (!!n(ant# il!( a
5otion to (i#5i## t:! +o5plaint on )an6a*y 7, 1961,
6pon t:! 1*o6n( t:at t:! +lai5 on ?:i+: t:! a+tion o*
#6it i# o6n(!( i# 6n!no*+!a.l! 6n(!* t:! p*o"i#ion# o
t:! &tat6t! o 2*a6(# an( #p!+ial la?, in t:at t:! i*#t
pa1! o t:! #ai( *oa( *i1:t-o-?ay a1*!!5!nt ?a# not
#i1n!( .y .ot: pa*ti!# an( t:!*! in#t*65!ntal ?itn!##!#E
pa1! t?o t:!*!o i# not (at!(, an( t:! #i1nat6*! o t:!
plaintiD# +o*po*at! a1!nt (o!# not app!a*, an( t:at #ai(
a1*!!5!nt i# not a+Hno?l!(1!( .!o*! a p!*#on
a6t:o*i0!( to a(5ini#t!* oat:#. 7
T:! plainti oppo#!( t:! 5otion, #tatin1 t:at t:!
a1*!!5!nt .!t?!!n plainti an( L6+iano 8!*nan(!0 i#
not on! o t:o#! a1*!!5!nt# #p!+ii!( in t:! &tat6t! o
*a6(#. 5 N!"!*t:!l!##, t:! t*ial +o6*t 1*ant!( t:! 5otion
to (i#5i## on )an6a*y 17, 1961 an( (i#5i##!( t:! +a#!#.
6
T:! plainti il!( a 5otion o* *!+on#i(!*ation o t:!
#ai( o*(!*, in#i#tin1 t:at t:! *oa( *i1:t-o-?ay a1*!!5!nt
i# not +o"!*!( .y t:! &tat6t! o *a6(#. 7 T:!n, on Ma*+:
7, 1961, t:! plainti il!( an $5!n(!( Co5plaint,
a++o5pani!( .y a 5otion o* it# a(5i##ion. T:! plainti
t:!*!in p*ay!(, a5on1 ot:!*#, t:at t:! (!!n(ant# .!
o*(!*!( to H!!p t:! *oa( op!n an( to *!#p!+t t:! *i1:t-o-
?ay a1*!!5!nt, an( @#:o6l( it .! a#+!*tain!( t:at 6n(!*
t:! la? t:! plainti i# .o6n( to pay +o5p!n#ation o* t:!
*i1:t-o-?ay to t:! /!!n(ant#, it i# p*ay!( t:at t:!
*!a#ona.l! a5o6nt o #6+: +o5p!n#ation .! iB!(.@ =
$t!* :!a(in1 t:! pa*ti!#, t:! t*ial +o6*t i##6!( an o*(!*
on &!pt!5.!* 6, 1961, (!nyin1 t:! 5otion o*
*!+on#i(!*ation. 9
;:!*!6pon, t:! plainti p!*!+t!( an app!al to t:! Co6*t
o $pp!al#. 10 T:! app!llat! +o6*t, in(in1 t:at only
<6!#tion# o la? a*! *ai#!(, !l!"at!( t:! app!al to t:i#
Co6*t. 11
T:! plainti-app!llant 5a(! t:! ollo?in1 a##i1n5!nt o
!**o*# in it# 9*i!-31+-+:an*o.l!#.+o5.p:
@1. T:! t*ial +o6*t !**!( in (i#5i##in1 t:! +o5plaint on
t:! 1*o6n( t:at t:! +lai5 on ?:i+: t:! a+tion o* #6it i#
o6n(!( i# 6n!no*+!a.l! 6n(!* t:! p*o"i#ion# o t:!
&tat6t! o 2*a6(# an( #p!+ial la?E an(
@2. T:! t*ial +o6*t !**!( in (!nyin1 plaintiD# 5otion o*
*!+on#i(!*ation.@+*ala? "i*t6a1a? li.*a*y
T:! app!al i# 5!*ito*io6#. T:! &tat6t! o *a6(# *!!*# to
#p!+ii+ Hin(# o t*an#a+tion# an( +annot apply to any
t:at i# not !n65!*at!( t:!*!in. 12 T:! t*an#a+tion# o*
a1*!!5!nt# +o"!*!( .y #ai( #tat6t! a*! t:!
ollo?in1-31+-+:an*o.l!#.+o5.p:
@FaG $n a1*!!5!nt t:at .y it# t!*5# i# not to .!
p!*o*5!( ?it:in a y!a* *o5 t:! 5aHin1 t:!*!oE
@F.G $ #p!+ial p*o5i#! to an#?!* o* t:! (!.t, (!a6lt, o*
5i#+a**ia1! o anot:!*E
@F+G $n a1*!!5!nt 5a(! in +on#i(!*ation o 5a**ia1!,
ot:!* t:an a 56t6al p*o5i#! to 5a**yE
@F(G $n a1*!!5!nt o* t:! #al! o 1oo(#, +:att!l# o*
t:in1# in a+tion, at a p*i+! not l!## t:an i"! :6n(*!(
p!#o#, 6nl!## t:! .6y!* a++!pt an( *!+!i"! pa*t o #6+:
1oo(# an( +:att!l#, o* t:! !"i(!n+!#, o* #o5! o t:!5, o
#6+: t:in1# in a+tion, o* pay at t:! ti5! #o5! pa*t o t:!
p6*+:a#! 5on!yE .6t ?:!n a #al! i# 5a(! .y a6+tion an(
!nt*y i# 5a(! .y t:! a6+tion!!* in :i# #al!# .ooH, at t:!
ti5! o t:! #al!, o t:! a5o6nt an( Hin( o p*op!*ty #ol(,
t!*5# o #al!, p*i+!, na5!# o p6*+:a#!*# an( p!*#on on
?:o#! a++o6nt t:! #al! i# 5a(!, it i# #6i+i!nt
5!5o*an(65E
@F!G $n a1*!!5!nt o* t:! l!a#in1 o* a lon1!* p!*io(
t:an on! y!a*, o* o* t:! #al! o *!al p*op!*ty o* o an
int!*!#t t:!*!inE
@FG $ *!p*!#!ntation a# to t:! +*!(it o a t:i*( p!*#on.@
13
O."io6#ly, an a1*!!5!nt +*!atin1 an !a#!5!nt o *i1:t-
o-?ay i# not on! o t:o#! +ont*a+t# +o"!*!( .y t:!
#tat6t! o *a6(# #in+! it i# not a #al! o *!al p*op!*ty o*
o an int!*!#t t:!*!in. T:! t*ial +o6*t, t:!*!o*!, !**!( in
(i#5i##in1 t:! +a#! 6pon t:! (!!n(ant#D +lai5 t:at t:!
*oa( *i1:t-o-?ay a1*!!5!nt in <6!#tion i#
6n!no*+!a.l! 6n(!* t:! #tat6t! o *a6(#. 9!#i(!#, t:!
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