[G.R. No. 125172. June 26, 1998.

]
Spouses ANTONIO and LUZVIMINDA GUIANG, petitioners,
vs.
COURT OF APPEALS and GILDA CORPUZ, respondents.

FACTS:
1. Gilda Corpuz and Judie Corpuz are legally married spouses. They have 3 children named Junie, Harriet, and
Joji.
2. On Feb 14, 1983, Spouses Corpuz bought a 421 sq meter lot from Manuel Callejo who signed as vendor
through a conditional deed of sale.
3. On Apr 22, 1988, the spouses Corpuz sold one-half portion of their lot to spouses Antonio and Luzviminda
Guiang.
4. Gilda left for Manila in June 1989 to look for work abroad. Unfortunately, she became a victim of an illegal
recruiter.
5. Sometime in Jan 1990, Harriet learned that her father intended to sell the remaining half portion of the lot,
including their house, to the Guiangs. She wrote a letter to her mother.
6. Gilda replied that she was objecting to the sale. Harriet did not inform Judie about this but instead gave the
letter to Mrs. Guiang so that she would advise her father.
7. Judie pushed through the sale of the remaining one-half portion. They executed a document Deed of Transfer
of Rights.
8. On March 11, 1990, Gilda returned from Manila. Her children informed her that their father had a wife
already.
9. For staying in their house sold by her husband, Gilda was complained against by Spouses Guiang before the
Barangay authorities.
10. On March 16, 1990, the parties signed an Amicable Settlement to wit: That respondent, Mrs. Gilda
Corpuz and her three children, namely: Junie, Hariet and Judie to leave voluntarily the house of Mr. and Mrs.
Antonio Guiang, where they are presently boarding without any charge, on or before April 7, 1990.
11. Believing that she had received the shorter end of the bargain, plaintiff went to the Barangay Captain of
Barangay Paulino Santos to question her signature on the amicable settlement.
12. Gilda filed for the nullification of the Deed of Sale executed by Judie in favor of the Spouses Guiang.
13. RTC Decision: RTC rendered judgment in her favor.
14. CA Decision: CA affirmed the RTC ruling pursuant to Art 124 of the Family Code.
ISSUES:
1. Whether or not the Contract of Sale was merely voidable.
2. Whether or not the Contract of Sale was ratified by Gilda when she entered into an amicable settlement with
the spouses Guiang.

DECISION:
1. Petitioners contend that the absence of Gildas consent merely rendered the Deed voidable under Art 1390 of
the Civil Code
"ART. 1390. The following contracts are voidable or annullable, even though there may have been no damage
to the contracting parties: xxx xxx xxx (2) Those where the consent is vitiated by mistake, violence, intimidation,
undue influence or fraud.
Gildas consent was not obtained thru mistake, violence, intimidation, undue influence or fraud but her
consent was TOTALLY INEXISTENT.
This being the case, said contract properly falls within the ambit of Article 124 of the Family Code,
which was correctly applied by the two lower courts
In sum, the nullity of the contract of sale is premised on the absence of private respondent's consent. To
constitute a valid contract, the Civil Code requires the concurrence of the following elements: (1) cause,
(2) object, and (3) consent, the last element being indubitably absent in the case at bar.
2. Petitioners aver that it was duly ratified by the contending parties through the "amicable settlement" they
executed on March 16, 1990 in Barangay Case No. 38.
The trial and the appellate courts have resolved this issue in favor of the private respondent. The trial
court correctly held: 'Art. 1422. A contract which is the direct result of a previous illegal contract, is
also void and inexistent.' (Civil Code of the Philippines).
In summation therefore, both the Deed of Transfer of Rights and the 'amicable settlement' are null and
void.
WHEREFORE, the Court hereby DENIES the petition and AFFIRMS the challenged Decision and Resolution.

Heirs of Ureta Sr VS Heirs of Ureta

Facts:
In his lifetime, Alfonso Ureta (Alfonso) begot 14 children, namely, Policronio, Liberato, Narciso,
Prudencia, Vicente, Francisco, Inocensio, Roque, Adela, Wenefreda, Merlinda, Benedicto, Jorge, and Andres.
The children of Policronio (Heirs of Policronio), are opposed to the rest of Alfonsos children and their
descendants (Heirs of Alfonso).
Alfonso was financially well-off during his lifetime. He owned several fishpens, a fishpond, a sari-sari
store, a passenger jeep, and was engaged in the buying and selling of copra. Policronio, the eldest, was the only
child of Alfonso who failed to finish schooling and instead worked on his fathers lands.

Sometime in October 1969, Alfonso and four of his children, namely, Policronio, Liberato, Prudencia,
and Francisco, met at the house of Liberato. Francisco, who was then a municipal judge, suggested that in order
to reduce the inheritance taxes, their father should make it appear that he had sold some of his lands to his
children. Accordingly, Alfonso executed four (4) Deeds of Sale covering several parcels of land in favor of
Policronio,1[4] Liberato,2[5] Prudencia,3[6] and his common-law wife, Valeriana Dela Cruz.4[7] The Deed of
Sale executed on October 25, 1969, in favor of Policronio, covered six parcels of land, which are the properties
in dispute in this case.

Since the sales were only made for taxation purposes and no monetary consideration was given, Alfonso
continued to own, possess and enjoy the lands and their produce.

When Alfonso died on October 11, 1972, Liberato acted as the administrator of his fathers estate. He was
later succeeded by his sister Prudencia, and then by her daughter, Carmencita Perlas. Except for a portion of
parcel 5, the rest of the parcels transferred to Policronio were tenanted by the Fernandez Family. These tenants
never turned over the produce of the lands to Policronio or any of his heirs, but to Alfonso and, later, to the
administrators of his estate.

1
2
3
4
 Policronio died on November 22, 1974. Except for the said portion of parcel 5, neither Policronio nor his
heirs ever took possession of the subject lands.

On April 19, 1989, Alfonsos heirs executed a Deed of Extra-Judicial Partition, 5[8] which included all the
lands that were covered by the four (4) deeds of sale that were previously executed by Alfonso for taxation
purposes. Conrado, Policronios eldest son, representing the Heirs of Policronio, signed the Deed of Extra-
Judicial Partition in behalf of his co-heirs.

After their fathers death, the Heirs of Policronio found tax declarations in his name covering the six parcels of
land. On June 15, 1995, they obtained a copy of the Deed of Sale executed on October 25, 1969 by Alfonso in
favor of Policronio.

Not long after, on July 30, 1995, the Heirs of Policronio allegedly learned about the Deed of Extra-
Judicial Partition involving Alfonsos estate when it was published in the July 19, 1995 issue of the Aklan
Reporter.
CONFLICT:

Believing that the six parcels of land belonged to their late father, and as such, excluded from the Deed
of Extra-Judicial Partition, the Heirs of Policronio sought to amicably settle the matter with the Heirs of
Alfonso. Earnest efforts proving futile, the Heirs of Policronio filed a Complaint for Declaration of Ownership,
Recovery of Possession, Annulment of Documents, Partition, and Damages6[9] against the Heirs of Alfonso.

ISSUE:
(1) whether or not the Deed of Sale was valid;
(2) whether or not the Deed of Extra-Judicial Partition was valid

HELD:
The Court finds no cogent reason to deviate from the finding of the CA that the Deed of Sale is null and void for
being absolutely simulated. The Civil Code provides:

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

5
6
Art. 1346. An absolutely simulated or fictitious contract is void. A relative simulation, when it does not
prejudice a third person and is not intended for any purpose contrary to law, morals, good customs, public order
or public policy binds the parties to their real agreement.

In absolute simulation, there is a colorable contract but it has no substance as the parties have no intention to be
bound by it. The main characteristic of an absolute simulation is that the apparent contract is not really desired
or intended to produce legal effect or in any way alter the juridical situation of the parties. As a result, an
absolutely simulated or fictitious contract is void, and the parties may recover from each other what they may
have given under the contract. However, if the parties state a false cause in the contract to conceal their real
agreement, the contract is relatively simulated and the parties are still bound by their real agreement. Hence,
where the essential requisites of a contract are present and the simulation refers only to the content or terms of
the contract, the agreement is absolutely binding and enforceable between the parties and their successors in
interest.

Lacking, therefore, in an absolutely simulated contract is consent which is essential to a valid and enforceable
contract.7[14] Thus, where a person, in order to place his property beyond the reach of his creditors, simulates a
transfer of it to another, he does not really intend to divest himself of his title and control of the property; hence,
the deed of transfer is but a sham. 8[15] Similarly, in this case, Alfonso simulated a transfer to Policronio purely
for taxation purposes, without intending to transfer ownership over the subject lands.

The primary consideration in determining the true nature of a contract is the intention of the parties. If
the words of a contract appear to contravene the evident intention of the parties, the latter shall prevail. Such
intention is determined not only from the express terms of their agreement, but also from the contemporaneous
and subsequent acts of the parties.9[16] The true intention of the parties in this case was sufficiently proven by
the Heirs of Alfonso.

The Heirs of Alfonso established by a preponderance of evidence 10[17] that the Deed of Sale was one of the
four (4) absolutely simulated Deeds of Sale which involved no actual monetary consideration, executed by
Alfonso in favor of his children, Policronio, Liberato, and Prudencia, and his second wife, Valeriana, for
taxation purposes.

Malabanan VS Gaw Ching

7
8
9
10
Facts:

Gaw Ching has been leasing the house and lot located [in] 697-699 Asuncion Street, Binondo, Manila from Mr. Jabit since 1951. Plaintiff conducted his
business (Victoria Blacksmith Shop) on the ground floor and lived on the second floor. When Mr. Jabit died, his daughter, defendant Malabanan
continued to lease the premises to plaintiff but at an increased rental of P1,000.00 per month. Before the increase, Gaw Ching paid P700.00 per month,
as evidenced by receipts of rentals. There was no written contract of lease between plaintiff and Mr. Jabit as to its duration but the rentals were
evidently, paid monthly. On April 27, 1980, Angelina Malabanan told him that she was selling the house and lot for P5,000.00 per square meter. Plaintiff
told her however, that the price is prohibitive. On May 13, 1980, defendant Malabanan wrote plaintiff, reiterating that she was selling the house and lot at
P5,000.00 per square meter and that if he is not agreeable, she will sell it to another person. After receiving the letter, plaintiff turned over the letter to
his counsel, Atty. Sugay. Gaw Ching claims that he is not in a position to buy the property at P5,000.00 per square meter because it was expensive.
Subsequently, Gaw Ching tried to pay the rent for June, 1980, but Malabanan refused to accept it.
On October 2, 1980, plaintiff received another letter from defendant Malabanan which he gave to his counsel who told him that said defendant is
offering the house and lot at P5,000.00 per square meter and that if he is not agreeable, she will sell the premises to another person at P4,000.00 per
square meter. Plaintiff testified that he was willing to buy the subject property at P4,000.00 but hastened to add that it was still expensive and did not
ask his counsel to write Malabanan about it. So, also, it was the opinion of his counsel that it was not necessary to reply because the context of the
letter was invariably a threat. On November 3, 1980, plaintiff received another letter from Defendant Malabanan, informing him that the premises in
question had already been sold to defendant Leonida Senolos.
CONFLICT:
As to plaintiffs claim for damages, he testified, that this was motivated by the incident on November 16, 1981, while he was on the ground floor, when
there was a sudden brownout, and around 50 people came thereat, climbed the roof with the use of a ladder, cut the electric wires and started banging
the roof. Plaintiff, his wife, and mother-in-law were in the house and about 7 laborers were in the shop when the incident happened. Plaintiff then
immediately called up Atty. Sugay and told him that Leonida Senolos called some people to demolish the house. Plaintiff further testified that ... he was
not notified of the demolition.

ISSUE: Can Gaw Ching assail the validity of the sale?

HELD: NO

The firmly settled rule is that strangers to a contract cannot sue either or both of the contracting parties to annul
and set aside that contract. Article 1397 of the Civil Code embodies that rule in the following formulation:

Art. 1397. The action for the annulment of contracts may be instituted by all who are thereby
obliged principally or subsidiarily. However, persons who are capable cannot allege the incapacity
of those with whom they contracted; nor can those who exerted intimidation, violence, or undue
influence, or employed fraud, or caused mistake base their action upon these flaws of the
contract.

We know of no law, outside the Urban Land Reform Zone or P.D. No. 1517, that grants such a right to a lessee no
matter how long the period of the lease has been. If such right existed at all, it could only have been created by
contract; 9 respondent Gaw Ching does not, however, pretend that there had been such a contractual stipulation
between him and petitioners.

In the second place, assuming once again, for present purposes only, that respondent Gaw Ching did have a
preemptive right to purchase the land from petitioner Malabanan (which he did not), it must be stressed that
petitioner Malabanan did thrice offer the land to Gaw Ching but the latter had consistently refused to buy. Since
Gaw Ching did not in fact accept the offer to sell and did not buy the land, he suffered no prejudice, and could
not have suffered any prejudice, by the sale of the same piece of land to petitioner Senolos. No fraud was thus
worked upon him notwithstanding his insinuation that the sale of the land to petitioner Senolos had preceded the
offer of the same piece of land to himself.

In the third place, and contrary to the holding of the majority appellate court opinion, the fact that Gaw Ching had
been lessee of the house and lot was simply not enough basis for a right to bring an action to set aside the
contract of sale between the petitioners inter se. A lessee, it is elementary, cannot attack the title of his lessor
over the subject matter of the lease. 10 Moreover, the lease contract between petitioner Malabanan and
respondent Gaw Ching must in any case be held to have lapsed when the leased house was condemned and the
order of demolition issued.

Banez VS CA
FACTS

In 1956 respondent Pio Arcilla occupied a parcel of land, later known as Lot 5, Block E-130 East Avenue Subdivision, Diliman, Quezon City, owned by the People's
Homesite and Housing Corporation (hereinafter referred to as PHHC). He fenced the lot with wire, and erected a house and made some plantings thereon. His
moves to apply for the acquisition of the lot from the PHHC when the same became available for disposition came to naught because the employees of the PHHC
whose help he sought merely regaled him with promises that the matter would be attended to. Nevertheless, his occupancy was made a matter of record with the
PHHC in connection with a census of occupants and squatters taken some time later.

Notwithstanding respondent Arcilla's occupancy, the lot was awarded, on May 20, 1960, to Cristeta L. Laquihon pursuant to a conditional contract to sell executed
by the PHHC, subject to the standard resolutory conditions imposed upon grants of similar nature, including the grantee's undertaking to eject trespassers,
intruders or squatters on the land, and to construct a residential house on the lot within a period of one year from the signing of the contract, non-compliance with,
which conditions would result in the contract being "deemed annulled and cancelled". Respondent Arcilia had no notice of this award, and neither did the grantee
nor the PHHC take any step to oust him from the premises occupied by him. It was only on April 29, 1963 that he was first required to leave the area aforesaid.

Meanwhile, on May 9, 1962, grantee Cristeta L. Laquihon died, survived by her father, Basilio Laquihon, who, on July 27, 1962, executed a deed of adjudication in
his favor of the rights and interests thus far acquired by his deceased daughter over the lot in question. In said deed Basilio Laquihon also acknowledged an
indebtedness of the deceased to herein petitioner Aurea V. Baez. On November 15, 1962, PHHC's Board of Directors adopted Resolution No. 200 approving the
transfer of rights from Basilio Laquihon to Aurea V. Baez as a meritorious case. The transfer thus approved, petitioner Aurea V. Baez continued paying the
installments on the purchase price of the land.

CONFLICT:

Arcilla went to court with his complaint to nullify the award of the lot in question in favor of petitioner Aurea V. Baez and to compel the PHHC to award the same to
him, with prayer for attorney's fees and costs.

ISSUE: Can Arcilla nullify the award of the lot?

HELD: NO.
1. Article 1397 of the Civil Code provides that the action for annulment of contracts may be instituted by all who are thereby obliged principally or subsidiarily.
Hence strangers to the contract who are not bound thereby have neither the right nor the personality to bring an action to annul such contract. It cannot be
gainsaid that respondent Pio Arcilla was a stranger to, and not bound principally or subsidiarily by, the conditional contract to sell executed on May 20, 1960 by the
PHHC in favor of Cristeta L. Laquihon, and the transfer of rights over the same lot from Basilio Laquihon to Aurea V. Baez. Hence respondent Pio Arcilla could not
bring an action to annul the same.

There is, however, an exception to the rule laid down in Article 1397. This Court, in Teves vs. People's Homesite and Housing Corporation, L-21498, June 27, 1968
1
citing Ibaez vs. Hongkong and Shanghai Bank 2 , held that "a person who is not a partly obliged principally or
subsidiarily in a contract may exercise an action for nullity of the contract if he is prejudiced in his rights with respect to
one of the contracting parties, and can show the detriment which would positively result to him from the contract in which
he had no intervention." Pursuant to said doctrine, in order that respondent Pio Arcilla might bring an action for the nullity
of the contracts aforesaid, he should have been not only prejudiced in his rights with respect to one of the contracting
parties, but must have also shown the detriment which he would positively suffer from the contracts. It becomes,
therefore, necessary to inquire, whether respondent Pio Arcilla's rights were prejudiced by the aforesaid contracts, and as
to what detriment, if any, he suffered because of those contracts.

What rights of respondent Pio Arcilla were prejudiced? The Court of Appeals found that Pio Arcilla "makes no pretense
that he entered into and built his land upon appellee PHHC's land with the consent of the latter."

Pio Arcilia was, therefore, a trespasser, or a squatter, he being a person who settled or located on land, in closed or
uninclosed with "no bona fide claim or color of title and without consent of the owner." 3 He began his material possession
of the lot in bad faith, knowing that he did not have a right thereto, and it is presumed that his possession continued to be
enjoyed in the same character in which it was acquired, i.e. in bad faith until the contrary is proved. 4 And what right can a
squatter have to the land into which he has intruded against the owner of the land? The answer is not hard to find, A
squatter can have no possessory rights whatsoever, and his occupancy of the land is only at the owner's sufferance, his
acts are merely tolerated and cannot affect the owner's possession. 5 The squatter is necessarily bound to an implied
promise, that he will vacate upon demand.

Respondent Pio Arcilla, having no possessory rights whatsoever, what detriment could be have suffered from the
aforesaid contracts?

Swedish Match VS CA

Swedish Match, AB (hereinafter SMAB) is a corporation organized under the laws of Sweden not doing
business in the Philippines. SMAB, however, had three subsidiary corporations in the Philippines, all organized
under Philippine laws, to wit: Phimco Industries, Inc. (Phimco), Provident Tree Farms, Inc., and OTT/Louie
(Phils.), Inc.

Sometime in 1988, STORA, the then parent company of SMAB, decided to sell SMAB of Sweden and the
latters worldwide match, lighter and shaving products operation to Eemland Management Services, now known
as Swedish Match NV of Netherlands, (SMNV).

Several interested parties tendered offers to acquire the Phimco shares, among whom were the AFP Retirement
and Separation Benefits System, herein respondent ALS Management & Development Corporation and
respondent Antonio Litonjua (Litonjua), the president and general manager of ALS.

In his letter dated 3 November 1989, Litonjua submitted to SMAB a firm offer to buy all of the latters shares in
Phimco and all of Phimcos shares in Provident Tree Farm, Inc. and OTT/Louie (Phils.), Inc. for the sum of
P750,000,000.00.[5]

Thereafter, an exchange of correspondence ensued between petitioners and respondents regarding the projected
sale of the Phimco shares. In his letter dated 21 May 1990, Litonjua offered to buy the disputed shares,
excluding the lighter division for US$30.6 million, which per another letter of the same date was increased to
US$36 million.[7] Litonjua stressed that the bid amount could be adjusted subject to availability of additional
information and audit verification of the company finances.

Litonjua in a letter dated 18 June 1990, expressed disappointment at the apparent change in SMABs approach to
the bidding process. He pointed out that in their 4 June 1990 meeting, he was advised that one final bidder
would be selected from among the four contending groups as of that date and that the decision would be made
by 6 June 1990. He criticized SMABs decision to accept a new bidder who was not among those who
participated in the 25 May 1990 bidding. He informed Rossi that it may not be possible for them to submit their
final bid on 30 June 1990, citing the advice to him of the auditing firm that the financial statements would not
be completed until the end of July. Litonjua added that he would indicate in their final offer more specific
details of the payment mechanics and consider the possibility of signing a conditional sale at that time.[9]

Two days prior to the deadline for submission of the final bid, Litonjua again advised Rossi that they would be
unable to submit the final offer by 30 June 1990, considering that the acquisition audit of Phimco and the
review of the draft agreements had not yet been completed. He said, however, that they would be able to finalize
their bid on 17 July 1990 and that in case their bid would turn out better than any other proponent, they would
remit payment within ten (10) days from the execution of the contracts.[10]

Enriquez sent notice to Litonjua that they would be constrained to entertain bids from other parties in view of
Litonjuas failure to make a firm commitment for the shares of Swedish Match in Phimco by 30 June 1990.[11]

CONFLICT

In a letter dated 3 July 1990, Rossi informed Litonjua that on 2 July 1990, they signed a conditional contract
with a local group for the disposal of Phimco. He told Litonjua that his bid would no longer be considered
unless the local group would fail to consummate the transaction on or before 15 September1990.[12]

Apparently irked by SMABs decision to junk his bid, Litonjua promptly responded by letter dated 4 July 1990.
Contrary to his prior manifestations, he asserted that, for all intents and purposes, the US$36 million bid which
he submitted on 21 May 1990 was their final bid based on the financial statements for the year 1989. He pointed
out that they submitted the best bid and they were already finalizing the terms of the sale. He stressed that they
were firmly committed to their bid of US$36 million and if ever there would be adjustments in the bid amount,
the adjustments were brought about by SMABs subsequent disclosures and validated accounts, such as the
aspect that only ninety-six percent (96%) of Phimco shares was actually being sold and not one-hundred percent
(100%).[13]

More than two months from receipt of Litonjuas last letter, Enriquez sent a fax communication to the former,
advising him that the proposed sale of SMABs shares in Phimco with local buyers did not materialize. Enriquez
then invited Litonjua to resume negotiations with SMAB for the sale of Phimco shares. He indicated that
SMAB would be prepared to negotiate with ALS on an exclusive basis for a period of fifteen (15) days from 26
September 1990 subject to the terms contained in the letter. Additionally, Enriquez clarified that if the sale
would not be completed at the end of the fifteen (15)-day period, SMAB would enter into negotiations with
other buyers.[14]

Shortly thereafter, Litonjua sent a letter expressing his objections to the totally new set of terms and conditions
for the sale of the Phimco shares. He emphasized that the new offer constituted an attempt to reopen the already
perfected contract of sale of the shares in his favor. He intimated that he could not accept the new terms and
conditions contained therein[15]:

On 14 December 1990, respondents, as plaintiffs, filed before the Regional Trial Court (RTC) of Pasig a
complaint for specific performance with damages, with a prayer for the issuance of a writ of preliminary
injunction, against defendants, now petitioners. The individual defendants were sued in their respective
capacities as officers of the corporations or entities involved in the aborted transaction.
Arguments:

Petitioners argue that the Court of Appeals erred in failing to consider that the Statute of Frauds requires not just
the existence of any note or memorandum but that such note or memorandum should evidence an agreement to
sell; and, that in this case, there was no word, phrase, or statement in the letters exchanged between the two
parties to show or even imply that an agreement had been reached for the sale of the shares to respondent.

Petitioners stress that respondent Litonjua made it clear in his letters that the quoted prices were merely
tentative and still subject to further negotiations between him and the seller. They point out that there was no
meeting of the minds on the essential terms and conditions of the sale because SMAB did not accept
respondents offer that consideration would be paid in Philippine pesos. Moreover, Litonjua signified their
inability to submit their final bid on 30 June 1990, at the same time stating that the broad terms and conditions
described in their meeting were inadequate for them to make a response at that time so much so that he would
have to await the corresponding specifics. Petitioners argue that the foregoing circumstances prove that they
failed to reach an agreement on the sale of the Phimco shares.

In their Comment, respondents maintain that the Court of Appeals correctly ruled that the Statute of Frauds does
not apply to the instant case. Respondents assert that the sale of the subject shares to them was perfected as
shown by the following circumstances, namely: petitioners assured them that should they increase their bid, the
sale would be awarded to them and that they did in fact increase their previous bid of US$30.6 million to
US$36 million; petitioners orally accepted their revised offer and the acceptance was relayed to them by Rene
Dizon; petitioners directed them to proceed with the acquisition audit and to submit a comfort letter from the
United Coconut Planters Bank (UCPB); petitioner corporation confirmed its previous verbal acceptance of their
offer in a letter dated 11 June 1990; with the prior approval of petitioners, respondents engaged the services of
Laya, Manabat, Salgado & Co., an independent auditing firm, to immediately proceed with the acquisition
audit; and, petitioner corporation reiterated its commitment to be bound by the result of the acquisition audit and
promised to reimburse respondents cost to the extent of US$20,000.00. All these incidents, according to
respondents, overwhelmingly prove that the contract of sale of the Phimco shares was perfected.

Further, respondents argued that there was partial performance of the perfected contract on their part. They
alleged that with the prior approval of petitioners, they engaged the services of Laya, Manabat, Salgado & Co.
to conduct the acquisition audit. They averred that petitioners agreed to be bound by the results of the audit and
offered to reimburse the costs thereof to the extent of US$20,000.00. Respondents added that in compliance
with their obligations under the contract, they have submitted a comfort letter from UCPB to show petitioners
that the bank was willing to finance the acquisition of the Phimco shares.[21]
ISSUE: Was there a valid sale under the Statute of Frauds?
HELD: NO

The Statute of Frauds embodied in Article 1403, paragraph (2), of the Civil Code[22] requires certain contracts
enumerated therein to be evidenced by some note or memorandum in order to be enforceable. The term Statute
of Frauds is descriptive of statutes which require certain classes of contracts to be in writing. The Statute does
not deprive the parties of the right to contract with respect to the matters therein involved, but merely regulates
the formalities of the contract necessary to render it enforceable.[23] Evidence of the agreement cannot be
received without the writing or a secondary evidence of its contents.
The Statute, however, simply provides the method by which the contracts enumerated therein may be proved
but does not declare them invalid because they are not reduced to writing. By law, contracts are obligatory in
whatever form they may have been entered into, provided all the essential requisites for their validity are
present. However, when the law requires that a contract be in some form in order that it may be valid or
enforceable, or that a contract be proved in a certain way, that requirement is absolute and indispensable.[24]
Consequently, the effect of non-compliance with the requirement of the Statute is simply that no action can be
enforced unless the requirement is complied with.[25] Clearly, the form required is for evidentiary purposes
only. Hence, if the parties permit a contract to be proved, without any objection, it is then just as binding as if
the Statute has been complied with.[26]

The purpose of the Statute is to prevent fraud and perjury in the enforcement of obligations depending for their
evidence on the unassisted memory of witnesses, by requiring certain enumerated contracts and transactions to
be evidenced by a writing signed by the party to be charged.[27]

However, for a note or memorandum to satisfy the Statute, it must be complete in itself and cannot rest partly in
writing and partly in parol. The note or memorandum must contain the names of the parties, the terms and
conditions of the contract, and a description of the property sufficient to render it capable of identification.[28]
Such note or memorandum must contain the essential elements of the contract expressed with certainty that may
be ascertained from the note or memorandum itself, or some other writing to which it refers or within which it is
connected, without resorting to parol evidence.[29]

Contrary to the Court of Appeals conclusion, the exchange of correspondence between the parties hardly
constitutes the note or memorandum within the context of Article 1403 of the Civil Code. Rossis letter dated 11
June 1990, heavily relied upon by respondents, is not complete in itself. First, it does not indicate at what price
the shares were being sold. In paragraph (5) of the letter, respondents were supposed to submit their final offer
in U.S. dollar terms, at that after the completion of the due diligence process. The paragraph undoubtedly proves
that there was as yet no definite agreement as to the price. Second, the letter does not state the mode of payment
of the price. In fact, Litonjua was supposed to indicate in his final offer how and where payment for the shares
was planned to be made.[30]

Evidently, the trial courts dismissal of the complaint on the ground of unenforceability under the Statute of
Frauds is warranted.

Spouses Torcuator VS Spouses Bernabe

The subject of this action is Lot 17, Block 5 of the Ayala Alabang Village, Muntinlupa, Metro-Manila, with an
area of 569 square meters and covered by TCT No. S-79773. The lower court found that the above parcel of
land was purchased by the spouses Diosdado and Lourdes Salvador (Salvadors, for short) from the developers
of Ayala Alabang subject, among others, to the following conditions:--

It is part of the condition of buying a lot in Ayala Alabang Village (a) that the lot buyer shall deposit with Ayala
Corporation a cash bond (about P17,000.00 for the Salvadors) which shall be refunded to him if he builds a
residence thereon within two (2) years of purchase, otherwise the deposit shall be forfeited, (b) architectural
plans for any improvement shall be approved by Ayala Corporation, and (c) no lot may be resold by the buyer
unless a residential house has been constructed thereon (Ayala Corporation keeps the Torrens Title in their [sic]
possession).

Evidences on record further reveal that on December 18, 1980, the Salvadors sold the parcel of land to the
spouses Remigio and Gloria Bernabe (Bernabes, for expediency). Given the above restrictions, the Salvadors
concomitantly executed a special power of attorney authorizing the Bernabes to construct a residential house on
the lot and to transfer the title of the property in their names.

The Bernabes, on the other hand, without making any improvement, contracted to sell the parcel of land to the
spouses Mario and Elizabeth Torcuator (Torcuators, for brevity) sometime in September of 1986. Then again,
confronted by the Ayala Alabang restrictions, the parties agreed to cause the sale between the Salvadors and the
Bernabes cancelled (Exhibit D), in favor of (a) a new deed of sale from the Salvadors directly to the Torcuators;
(b) a new Irrevocable Special Power of Attorney (Exhibit F) executed by the Salvadors to the Torcuators in
order for the latter to build a house on the land in question; and (c) an Irrevocable Special Power of Attorney
(Exhibit E) from the Salvadors to the Bernabes authorizing the latter to sell, transfer and convey, with power of
substitution, the subject lot.

The Torcuators thereafter had the plans of their house prepared and offered to pay the Bernabes for the land
upon delivery of the sale contract.

CONFLICT:

For one reason or another, the deed of sale was never consummated nor was payment on the said sale ever
effected. Subsequently, the Bernabes sold the subject land to Leonardo Angeles, a brother-in-law (Exh. 7). The
document however is not notarized. As a result, the Torcuators commenced the instant action against the
Bernabes and Salvadors for Specific Performance or Rescission with Damages.

ISSUE: Was there a valid Contract to Sell between the parties?

HELD: NONE
Art. 1403. The following contracts are unenforceable unless they are ratified:
(2) Those that do not comply with the Statute of Frauds as set forth in this number. In the following cases an
agreement hereafter made shall be unenforceable by action, unless the same, or some note or memorandum
thereof, be in writing, and subscribed by the party charged, or by his agent; evidence, therefore, of the agreement
cannot be received without the writing, or a secondary evidence of its contents:

(e) An agreement for the leasing for a longer period than one year, or for the sale of real property or an interest
therein;

The term Statute of Frauds is descriptive of statutes which require certain classes of contracts, such as
agreements for the sale of real property, to be in writing. It does not deprive the parties the right to contract with
respect to the matters therein involved, but merely regulates the formalities of the contract necessary to render it
enforceable. The purpose of the statute is to prevent fraud and perjury in the enforcement of obligations
depending for their evidence on the unassisted memory of witnesses by requiring certain enumerated contracts
and transactions to be evidenced by a writing signed by the party to be charged.[22] The written note or
memorandum, as contemplated by Article 1403 of the Civil Code, should embody the essentials of the contract.
[23]

In the instant case, petitioners present as written evidence of the agreement the special power of attorney
executed in their favor by the Salvadors and the summary of agreement[24] allegedly initialed by respondent
Remigio Bernabe. These documents do not suffice as notes or memoranda as contemplated by Article 1403 of
the Civil Code.

The special power of attorney does not contain the essential elements of the purported contract and, more
tellingly, does not even refer to any agreement for the sale of the property. In any case, it was rendered virtually
inoperable as a consequence of the Salvadors adamant refusal to part with their title to the property.

The summary of agreement, on the other hand, is fatally deficient in the fundamentals and ambiguous in the rest
of its terms. For one, it does not mention when the alleged consideration should be paid and transfer of
ownership effected. The document does not even refer to a particular property as the object thereof. For another,
it is unclear whether the supposed purchase price is P600.00, P590.00 or P570.00/square meter. The other
conditions, such as payment of documentary stamp taxes, capital gains tax and other registration expenses, are
likewise uncertain.

Conformably with Article 1405[25] of the Civil Code, however, respondents acceptance of the agreement foisted
by petitioners on them is deemed to have arisen from their failure to object to the testimony of petitioner Mario
Torcuator on the matter[26] and their cross-examination of said petitioner thereon.[27]

Be that as it may, considering our ruling that the agreement was a contract to sell, respondents were not obliged
to convey title to the property before the happening of two (2) suspensive conditions, namely: full payment of
the purchase price and construction of a residence on the property. They were acting perfectly within their right
when they considered the agreement cancelled after unsuccessfully demanding payment from petitioners.

GREGORIO F. AVERIA, et al. v. DOMINGO AVERIA, et al.

436 SCRA 459 (2004)

 The Statute of Frauds applies only to executory contracts and not to contracts which are either partially or
totally performed

Macaria Francisco (Macaria) was married to Marcos Averia in which they had six children namely: petitioners
Gregorio and Teresa and respondents Domingo, Angel, Felipe and Felimon. Upon the death of Marcos, Macaria
contracted a second marriage with Roberto Romero in which they had no children. Upon the death of Roberto,
he left three adjoining residential lots. In a Deed of Extrajudicial Partition and Summary Settlement of the
Estate of Romero, a house and lot (Extremadura property) was apportioned to Macaria.

Macaria then filed an action for annulment of title and damages alleging that fraud was employed by her co-
heirs in which she was represented by Atty. Mario C.R. Domingo. The case lasted for 10 years until the Court of
Appeals (CA) decided in favor of Macaria entitling her to an additional 30 square meters of the estate of
Romero. Her son Gregorio and his family and Teresas family lived with her in the Extremadura property until
her death. After six years, respondents Domingo, Angel, Felipe and Filemon filed an action for judicial partition
against petitioners Gregorio and Teresa.

In their defense Gregorio contends that Macaria verbally sold of her Extramadura property to him and his
wife Agripina because they were the ones who spent for the litigation expenses in the former civil case and that
Agripina took care of her. Gregorio and co-petitioner Sylvana claimed that Domingo sold to Gregorio and
Agripina his 1/6 share in the remaining portion of the property. Upon hearing, Gregorio presented oral
evidence to establish their claim of the sale of the property to them by Macaria and also the sale of Domingo of
his share. The Regional Trial Court of (RTC) decided in favor of Gregorio. The CA however, reversed the
decision of the RTC on the ground that since the sale executed by Macaria in favor of Gregorio was in violation
of the statute of frauds and it cannot be proven by oral evidence.

Averia VS Averia

Macaria Francisco (Macaria) and Marcos Averia contracted marriage which bore six issues, namely: Gregorio,
Teresa, Domingo, Angel, Felipe and Felimon.
Macaria was widowed and she contracted a second marriage with Roberto Romero (Romero) which bore no
issue.

Romero died on February 28, 1968,[1] leaving three adjoining residential lots located at Sampaloc, Manila.

In a Deed of Extrajudicial Partition and Summary Settlement of the Estate of Romero, the house and lot
containing 150 square meters at 725 Extremadura Street, Sampaloc was apportioned to Macaria.

Transfer Certificate of Title (TCT) No. 93310 covering the Extremadura property was accordingly issued in the
name of Macaria.[2]

Alleging that fraud was employed by her co-heirs in the partition of the estate of Romero, Macaria filed on June
1, 1970 an action for annulment of title and damages before the Court of First Instance of Manila against her co-
heirs Domingo Viray, et al., docketed as Civil Case No. 79955. Macaria was represented in the case by Atty.
Mario C. R. Domingo. The case was pending litigation for about ten years until the decision of the Court of
Appeals which adjudged Macaria as entitled to an additional 30 square meters of the estate of Romero became
final and executory.

Macarias son Gregorio and his family and daughter Teresas family lived with her at Extremadura until her death
on March 28, 1983.[3]

Close to six years after Macarias demise or on January 19, 1989, her children Domingo, Angel and Felipe, along
with Susan Pelayo vda. de Averia (widow of Macarias deceased son Felimon), filed before the Regional Trial
Court (RTC) of Manila a complaint against their brother Gregorio and niece Sylvanna Vergara representing her
absentee mother Teresa Averia, for judicial partition of the Extremadura property inclusive of the 30 square
meters judicially awarded.[4] The case which was docketed as Civil Case No. 89-47554 is now the subject of the
present decision.

The defendants Gregorio and Sylvanna Vergara, in their February 8, 1989 Answer to the Complaint, countered
that Gregorio and his late wife Agripina spent for the litigation expenses in Civil Case No. 79955, upon the
request of Macaria, and the couple spent not less P20,000.00 for the purpose which amount due to the inflation
of the Philippine peso is now equivalent to more or less P200,000.00; that from 1974 to 1983, Macaria was
bedridden and it was Gregorios wife Agripina who nursed and took care of her; that before Macaria died, she in
consideration of the court and other expenses which were defrayed by Gregorio and his wife in prosecuting
Civil Case No. 79955 and of the kindness of the said couple in caring for her, verbally sold to the spouses
Gregorio and Agripina one-half () of her Extremadura property.

Gregorio and Sylvanna further countered that the plaintiff Domingo sold and assigned to the spouses Gregorio
and Agripina his one sixth (1/6) share in the remaining portion of the Extremadura property.

Gregorio and Sylvanna concluded in their Answer that the plaintiffs are not co-owners of the Extremadura
property as thereof is solely owned by Gregorio and 1/6 of the other half representing Domingos share thereof
had already been sold and assigned by him (Domingo) to Gregorio and his wife who died on May 20, 1987.[5]

ISSUE: Whether there was a valid sale

RULING: YES
Contrary then to the finding of the CA, the admission of parol evidence upon which the trial court anchored its
decision in favor of respondents is not irregular and is not foreclosed by Article 1405.

In any event, the Statute of Frauds applies only to executory contracts and not to contracts which are either
partially or totally performed.18 In the case at bar, petitioners claimed that there was total performance of the
contracts, full payment of the objects thereof having already been made and the vendee Gregorio having, even
after Macarias death in 1983, continued to occupy the property until and after the filing on January 19, 1989 of
the complaint subject of the case at bar as in fact he is still occupying it.

In proving the fact of partial or total performance, oral evidence may be received as what the trial court in the
case at bar did. Noted civilist Arturo M. Tolentino elucidates on the matter:

The statute of frauds is not applicable to contracts which are either totally or partially performed, on the theory
that there is a wide field for the commission of frauds in executory contracts which can only be prevented by
requiring them to be in writing, a fact which is reduced to a minimum in executed contracts because the
intention of the parties becomes apparent by their execution, and execution concludes, in most cases, the rights
of the parties. However it is not enough for a party to allege partial performance in order to render the
Statute of Frauds inapplicable; such partial performance must be duly proved. But neither is such party
required to establish such partial performance by documentary proof before he could have the
opportunity to introduce oral testimony on the transaction. The partial performance may be proved by
either documentary or oral evidence.

As to the sale of Domingos 1/6 share to Gregorio, petitioners were able to establish said transaction by parol
evidence, consisting of the testimonies of Gregorio Averia, Jr.,22 Veronica Averia23 and Felimon Dagondon24 the
presentation of which was, it bears repeating, not objected to.

Albeit Domingo never denied having received the total amount of P10,000.00 from Gregorio and his wife, he
denied having sold to Gregorio his interest over the property. Such disclaimer cannot, however, prevail over the
categorical, positive statements of petitioners above-named witnesses.

Not only on account of Sylvanas manner of testifying that her testimony should be given weight. Her testimony
was against the interest of her mother Teresa whom she represented, her mother being also an heir of Macaria. If
the transfer by Macaria to Gregorio of of the property is upheld as valid and enforceable, then the share of the
other heirs including Sylvannas mother would considerably be reduced.

In sum, not only did petitioners witnesses prove, by their testimonies, the forging of the contracts of sale or
assignment. They proved the full performance or execution of the contracts as well.

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

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

On May 1, 1993, Sulpicia executed a deed of sale over the property in favor of
respondents father Goyanko.

CONFLICT: In turn, Goyanko executed on October 12, 1993 a deed of sale 11[3] over the
property in favor of his common-law-wife-herein petitioner Maria B. Ching. Transfer
Certificate of Title (TCT) No. 138405 was thus issued in petitioners name.

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

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

ISSUE: Is the Sale Void?

HELD: YES

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

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

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

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

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

ARTICLE 1490. The husband and wife cannot sell property to each other, except:
(1) When a separation of property was agreed upon in the marriage settlements; or
(2) When there has been a judicial separation of property under Article 191.

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

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

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

Additionally, the law emphatically prohibits the spouses from selling property to
each other subject to certain exceptions. Similarly,
donations between spouses during marriage are prohibited. And this is so because if
transfers or conveyances between spouses were allowed during marriage, that would destroy the
system of conjugal partnership, a basic policy in civil law. It was also designed to prevent the
exercise of undue influence by one spouse over the other, as well as to protect the institution of
marriage, which is the cornerstone of family law. The prohibitions apply to a couple living as
husband and wife without benefit of marriage, otherwise, the condition of those who
incurred guilt would turn out to be better than those in legal union. Those provisions are
dictated by public interest and their criterion must be imposed upon the will of the parties.