5655970606
DAUDEN-HERNAEZ vs DE LOS ANGELES
G.R. No. L-27010 April 30, 1960
MARLENE DAUDEN-HERNAEZ, petitioner,
vs.
HON. WALFRIDO DE LOS ANGELES, Judge of the Court of First Instance of
Quezon City, HOLLYWOOD FAR EAST PRODUCTIONS, INC., and RAMON
VALENZUELA, respondents.
FACTS
Marlene Dauden-Hernaez, a movie actress, filed a case against
Hollywood Far East Productions its President and General Manager, Ramon
Valenzuela, to recover P14,700 allegedly the balance due for her services as
leading actress in two motion pictures. The complaint was dismissed by Judge
De Los Angeles mainly because her claim was not supported by an written
document, public or private in violation of Articles 1356 and 1358 of the Civil
Code. Upon a motion for reconsideration, the respondent judged dismissed
the same because the allegations were the same as the first motion.
According to Judge De Los Angeles, the contract sued upon was not
alleged to be in writing when Article 1358 requires it to be so because the
amount involved exceeds P500.
ISSUE:
Whether or not a contract for personal services involving more than
P500.00 was either invalid or unenforceable under the last paragraph of Article
1358?
HELD
No. The order dismissing the complaint is set aside and the case is
remanded to the CFI.
RATIO
Consistent with the Spanish Civil Code in upholding spirit and intent of
the parties over formalities, in general, contracts are valid and binding from
their perfection regardless of whether they are oral or written.
However, as provided in the 2nd sentence of Art. 1356:
ART. 1356. Contracts shall be 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....
Thus, the two exceptions to the general rule that the form is irrelevant
to the binding effect of a contract are:
(a) Solemn Contracts - contracts which the law requires to be in some
particular form (writing) in order to make them valid and enforceable.
Examples:
1. Donation of immovable property (Art. 749) which must be in a public
instrument to be valid. in order "that the donation may be valid", i.e.,
existing or binding.
2. Donation of movables worth more than P5,000 (Art. 748) which must
be in writing otherwise they are void.
(b) Contracts that the law requires to be proved by some writing
(memorandum) of its terms, i.e. those covered by the old Statute of
Frauds, now Article 1403(2) of the Civil Code.
For the latter example, their existence are not provable by mere oral
testimony (unless wholly or partly executed) and are required to be in writing to
be enforceable by action in court.
However, the contract sued upon (compensation for services) does
not come under either exception. While the last clause of Article 1358 provides
that "all other contracts where the amount involved exceeds five hundred
pesos must appear in writing, even a private one." Said Article does not
provide that the absence of a written form in this case will make the agreement
invalid or unenforceable.
On the contrary, Article 1357 clearly indicates that contracts covered
by Article 1358 are binding and enforceable by action or suit despite the
absence of writing.
Meneses vs Venturozo, 659 SCRA 577
Facts:
On June 8, 1988, plaintiff Rosario G. Venturozo, respondent herein, filed a
Complaint2 for “ownership, possession x x x and damages” in the Regional
Trial Court (RTC) of Dagupan City against defendant Adelaida Meneses,
petitioner herein, alleging that she (plaintiff) is the absolute owner of an untitled
coconut land, containing an area of 2,109 square meters, situated at
Embarcadero, Mangaldan, Pangasinan, and declared under Tax Declaration
No. 239. Plaintiff alleged that she purchased the property from the spouses
Basilio de Guzman and Crescencia Abad on January 31, 1973 as evidenced
by a Deed of Absolute Sale.
That the vendors, in turn, purchased the property from defendant as
evidenced by a Deed of Absolute Sale4 dated June 20, 1966. Plaintiff alleged
that she has been in possession of the land until May 1983 when defendant
with some armed men grabbed possession of the land and refused to vacate
despite repeated demands prompting her to engage the services of counsel.
defendant Adelaida Meneses stated that plaintiff is the daughter of Basilio de
Guzman, the vendee in the Deed of Absolute Sale dated June 20, 1966 that
was purportedly executed by her (defendant) covering the subject property.
Defendant alleged that she never signed any Deed of Absolute Sale dated
June 20, 1966, and that the said deed is a forgery. Defendant also alleged that
she never appeared before any notary public.
Hence, this complaint arose.
Issue: WoN the Deed of Absolute Sale is valid
Held: No, it was a forged instrument as declared by the High Court,
The necessity of a public document for contracts which transmit or extinguish
real rights over immovable property, as mandated by Article 1358 of the Civil
Code, is only for convenience; it is not essential for validity or enforceability. As
notarized documents, Deeds of Absolute Sale carry evidentiary weight
conferred upon them with respect to their due execution and enjoy the
presumption of regularity which may only be rebutted by evidence so clear,
strong and convincing as to exclude all controversy as to falsity. The
presumptions that attach to notarized documents can be affirmed only so long
as it is beyond dispute that the notarization was regular. A defective
notarization will strip the document of its public character and reduce it to a
private instrument. Consequently, when there is a defect in the notarization of
a document, the clear and convincing evidentiary standard normally attached
to a duly-notarized document is dispensed with, and the measure to test the
validity of such document is preponderance of evidence.
In the Deed of Absolute Sale dated June 20, 1966, the Notary Public signed
his name as one of the two witnesses to the execution of the said deed; hence,
there was actually only one witness thereto. Moreover, the residence
certificate of petitioner was issued to petitioner and then it was given to the
Notary Public the day after the execution of the deed of sale and notarization;
hence, the number of petitioner’s residence certificate and the date of
issuance (June 21, 1966) thereof was written on the Deed of Absolute Sale by
the Notary Public on June 21, 1966, after the execution and notarization of the
said deed on June 20, 1966. Considering the defect in the notarization, the
Deed of Absolute Sale dated June 20, 1966 cannot be considered a public
document, but only a private document, and the evidentiary standard of its
validity shall be based on preponderance of evidence.
Section 20, Rule 132 of the Rules of Court provides that before any private
document offered as authentic is received in evidence, its due execution and
authenticity must be proved either: (a) by anyone who saw the document
executed or written; or (b) by evidence of the genuineness of the signature or
handwriting of the maker.
In regard to the genuineness of petitioner’s signature appearing on the Deed
of Absolute Sale dated June 20, 1966, the Court agrees with the trial court that
her signature therein is very much different from her specimen signatures and
those appearing in the pleadings of other cases filed against her, even
considering the difference of 17 years when the specimen signatures were
made. Hence, the Court rules that petitioner’s signature on the Deed of
Absolute Sale dated June 20, 1966 is a forgery.
The Court agrees with petitioner that her admission was taken out of context,
considering that in her Answer to the Complaint, she stated that the alleged
Deed of Sale purportedly executed by her in favor of Basilio de Guzman is a
forgery; that she never signed the said Deed of Sale; that she did not appear
personally before the Notary Public; and that she did not secure the residence
certificate mentioned in the said Deed of Sale. She also testified that she never
sold her land to Basilio de Guzman; that she never met the Notary Public,
Attorney Abelardo Biala, and that she did not meet Basilio de Guzman on June
20, 1966.42 The trial court found petitioner and her testimony to be credible,
and declared the Deed of Sale dated June 20, 1966 null and void ab initio.
These circumstances negate the said admission.
SPOUSES CLEMENCIO C. SABITSANA, JR. and MA. ROSARIO M.
SABITSANA, petitioners, vs. JUANITO F. MUERTEGUI, represented by
his Attorney-in-Fact DOMINGO A. MUERTEGUI, JR., respondent.
GR No. 181359 August 5, 2013 [WENCESLAO]
DOCTRINE: On the question of jurisdiction, it is clear under the rules that an
action for quieting of title may be instituted in the RTC, regardless of the
assessed value of the real property in dispute.
FACTS:
 Sept 2, 1981 – Alberto Garcia executed an unnotairzed Deed of Sale
in favor of respondent Juanito Muertegi over a 7,500 sqm parcel of
unregistered land located in Dalutan Island, Talahid, Almeira, Biliran,
Leyte del Norte covered by Tax Declaration no. 1996 issued in 1985 in
Garcia;s name.
 Juanito’s father Domingo and brother Domingo Jr. took possession of
the lots and planted thereon coconut and ipil-ipil trees. They also paid
the real property taces on the lots for the years 1980 up to 1998.
 1991 – Garcia sold the lot to the Muertegi Family lawyer, Atty.
Clemencio Sabitsana through a notarized deed of sale. The deed was
registered and eventually issued in Atty. Sabitsana’s name.
 As result, both Atty. Sabitsana and Juanito’s family (brother and
father) have been paying real estate taxes on the property.
 When Domingo (father Muertegi) passed away, his heirs applied for
registration and coverage of the lot under CA 141 or the Public Land
Act.
 On the other hand, Sabitsana opposed such application and claimed
that he was the true owner of the lost and asked that the application be
held in abeyance until the issue of conflicting ownership be resolved.
 April 11, 2000 – Juanito, through his attorney-in- fact, Domingo, Jr.
filed for quieting of title against petitioner Sabitsana and his wife.
Muertegis claim the ff:
(a) the spouses bought the lot in bad faith and are exercising acts of
possession and ownership and thus, constitute a cloud over his
title.
(b) The complaint also prayed for that the deed of sale be declared
null and void
(c) That Sps should respect Juanito’s title over the lot
(d) Claim for moral and exemplary damages
  Answer with Counterclaim of petititoners asserted mainly that the sale
between Garcia and Juanito was null and void ofr absence of marital
consent (Garcia’s wife). More importantly, they insisted that the RTC
of Naval, Biliran did not have jurisdiction over the case which involved
title to or interest in a parcel of land which has an assessed value of
merely P1230.00.
 Evidence and testimonies during trial:
Muertegis: Atty. Sabitsana was the family lawyer of Muertegi at the
itme Garcia sold the lot to Juanito and that as such, he was consulted
by the family before the sale was executed. After such alleged sale,
Domingo Sr. took actual possession of the lot.
Sabitsana: After conducting investigations regarding the lot, he
concluded that such sale was not recorded due to the fact that the
document of the sale was missing. He discovered that the lot was still
in the name of Garcia. Therefore, he concluded that the Muertegis
were merely bluffing and that they probably did not want him to buy
the property because they were interested in buying it for themselves
considering that it was adjacent to a lot which they owned.
 Lower courts’ decisions
RTC – Sale was valid, Muertegi won. Sabitsana ordered to pay the
family because he was not a buyer in good faith.
 after conducting an investigation, Atty. Sabitsana went on to
purchase the same lot and raced to registerd the sale ahead of the
Muertegis expecting thath is purchase and prior registration would
prevail over that of his clients. Applying the principle under Art. 1544
[double sales], Sabitsana’s registration was not in good faith,
preference should be given to the sale in favor of Juanito, as he was
the first to take possession of the lot in good faith. MR was filed but
was denied.
CA – Juanito is the rightful owner of the lot and possessed the
requisite cause of action to institute the suit for quieting of totle and
obtain judgment in his favor. RTC was affirmed.
ISSUE/S:
Main issue – who has the better right over the property?
Relevant to the topic – W/N CA erred in not holding that RTC did not ave
jurisdiction over the case at bar?
HELD:
1. Muertegi has a better right over the subject lot. [this is irrelevant but
read nalang in case she asks more details]
First, double sales [Art 1544] does not apply to sales invokving
unregisterdc land. Suffice it to state that the issue of the buyerÊs good
or bad faith is relevant only where the subject of the sale is registered
land, and the purchaser is buying the same from the registered owner
whose title to the land is clean. In such case, the purchaser who relies
on the clean title of the registered owner is protected if he is a
purchaser in good faith for value.
Second, Muertegi has a better right to the lot!
The sale to respondent Juanito was executed on September 2, 1981
via an unnotarized deed of sale, while the sale to petitioners was
made via a notarized document only on October 17, 1991, or ten
years thereafter. Thus, Juanito who was the first buyer has a better
right to the lot, while the subsequent sale to petitioners is null and void,
because when it was made, the seller Garcia was no longer the owner
of the lot. Nemo dat quod non habet.
2. RTC has jurisdiction over the suit for quieting of title.
 On the question of jurisdiction, it is clear under the rules that an
action for quieting of title may be instituted in the RTC, regardless of
the assessed value of the real property in dispute. Under Rule 63, an
action to quiet title to real property or remove clouds therefrom may be
brought in the appropriate RTC.
 I nthis case, the suit for quieting of title was prompted by petitioners’
August 24, 1998 letter-opposition to respondent’s application for
registration. Thus, in order to prevent a cloud from being cast upon his
application for a title, respondent filed this action for QT to obtain a
declaration of his rights. In this sense, the action is one for declaratory
relief, which falls within the jurisdiction of the RTC pursuant to R63.
G.R. No. 128991 April 12, 2000
YOLANDA ROSELLO-BENTIR, SAMUEL PORMIDA and CHARITO
PORMIDA, petitioners
vs.
HONORABLE MATEO M. LEANDA, in his capacity as Presiding Judge of
RTC, Tacloban City, Branch 8, and LEYTE GULF TRADERS, INC.,
respondents
DOCTRINE: Reformation of an instrument is that remedy in equity by means
of which a written instrument is made or construed so as to express or conform
to the real intention of the parties when some error or mistake has been
committed. However, an action for reformation must be brought within the
period prescribed by law, otherwise, it will be barred by the mere lapse of time.
FACTS: Leyte Gulf entered into a contract of lease of a parcel of land with
petitioner Bentir for a period of 20 years starting May 5, 1968. The lease was
extended for another 4 years (until May 31, 1992). On May 5, 1989, petitioner
Bentir sold the leased premises to petitioner spouses Samuel Pormada and
Charito Pormada. Leyte Gulf questioned the sale alleging that it had a right of
first refusal. Leyte Gulf filed a case seeking the reformation of the expired
contract of lease on the ground that its lawyer inadvertently omitted to
incorporate in the contract of lease, the verbal agreement that in the event
petitioner Bentir leases or sells the lot after the expiration of the lease, Leyte
Gulf has the right to equal the highest offer.
DEFENSE: Bentir denies that she bound herself to give Leyte Gulf the right of
first refusal in case she sells the property. But assuming for the sake of
argument that such right of first refusal was made, it is now contended that
Leyte Gulf’s cause of action to reform the contract has already prescribed after
10 years, counted from May 5, 1988 when the contract of lease incepted.
TC: ruled in favor of Bentir because action has already prescribed
CA: Action has not prescribed - the 10-year prescriptive period should be
reckoned not from the execution of the contract of lease in 1968, but from the
date of the alleged 4-year extension of the lease contract after it expired in
1988.
ISSUE: whether or not the complaint for reformation has prescribed and
whether or not it is entitled to the remedy of reformation sought
HELD: Ground of action has already prescribed, hence, Leyte Gulf is no
longer entitled to reformation of contract.
1. A suit for reformation of an instrument may be barred by lapse of time.
The prescriptive period for actions based upon a written contract and
for reformation of an instrument is ten (10) years under Article 1144 of
the Civil Code. In the case at bar, respondent corporation had 10
years from 1968, the time when the contract of lease was executed, to
file an action for reformation. Sadly, it did so only on May 15, 1992 or
twenty-four (24) years after the cause of action accrued, hence, its
cause of action has become stale, hence, time-barred.
2. Even if the supposed 4-year extended lease be considered as an
implied new lease under Art. 1670, "the other terms of the original
contract" contemplated in said provision are only those terms which
are germane to the lessee’s right of continued enjoyment of the
property leased. The prescriptive period of ten (10) years provided for
in Art. 1144 applies by operation of law, not by the will of the parties.
Therefore, the right of action for reformation accrued from the date of
execution of the contract of lease in 1968 (not when the lease was
extended in 1988).
Decision of CA is reversed and set aside.
Atilano v. Atilano
PETITIONER: Asuncion Atilano, Cristina Atilano, Rosario Atilano
RESPONDENT: Ladislao Atilano and Gregorio Atilano
SUMMARY: Eulogio Atilano I bought a parcel land, subdivided it into 5 and
built his house on one of the portions. He sold one portion to his brother
Eulogio Atilano II upon which the latter also built his house. The titles to the
lots were obtained at once. However, it was discovered many years later
that the title of Atilano I’s lot pertained to the lot sold to Atilano II, and the
latter’s title conversely pertained to the lot of Atilano I which had a much
bigger area. Atilano II’s family sought to obtain the land on the force of the
title. The Court denied their plea. It held that the families are in possession
of the lots which the contracting parties have intended. There was only a
mistake with the content of the instruments thus reformation may be
sought; however, this is no longer needed since the intent of the parties
have already been carried out. The parties must only convey to each other
a document reflecting the correct description of their lots.

DOCTRINE: When one sells or buys real property, one sells or buys the
property as he sees it, in its actual setting and by its physical metes and
boungs, and not by the mere lot number assigned to it in the certificate of
title. Reformation can only be sought pending the enforcement of the
contract but not when the intended consideration or obligations have
already been carried out.
FACTS:
1. In 1916, Eulogio Atilano I (Atilano 1) acquired by purchase from one
Gerardo Villanueva lot No. 535.
2. In 1920, Atilano I subdivided land he owned into five parcels, identifying
them as Lots 535-A to 535-E.
3. He sold one parcel, designated as No. 535-E, to his brother Eulogio Atilano
II (Atilano 2) for P150. Lots 535-B, C and D were sold to other people, while
he kept the remaining portion of land, presumably covered by title 535-A for
himself, which passed to defendant Ladislao Atilano after Eulogio I passed
away.
4. In 1952, after his wife died, Atilano 2 wanted to partition Lot 535-A among
himself and his children. They had the land resurveyed, only to find out their
lot was actually 535-E, and not 535-A, while the land that Ladislao had
 inherited from Atilano 1 was 535-A, and not 535-E. (The titles on their
respective deeds of sale were mixed up.)
5. Atilano 2 died, so his heirs instituted an action against Ladislao offering up
535-A to Ladislao in exchange for 535-E, which they alleged was what was
written in their deed of sale (Since 535-E had a bigger area than 535-A,
2,612 sqm compared to 1,808 sqm).
6. Ladislao’s defense was that the 1920 deed of sale to Atilano 2 was an
involuntary error, and that the intention of the parties to that sale (Atilano 1
and Atilano 2) meant to convey the lot correctly identified as 535-A, even if
the deed stated 535-E, on the basis that Atilano 1 had built a house on this
lot and had even increased its area while it was in his possession by
purchasing a lot next to it, before it passed to Ladislao.
7. Ladislao then interposed a counterclaim that Atilano 2 execute in his favor
the corresponding deed of transfer with respect to 535-E. 

ISSUE/S:
1. WON the heirs of Atilano 2 are entitled to the real 535-E, as stated in his
deed of sale - NO
RULING: Judgment is affirmed. The plaintiffs are ordered to execute a deed of
conveyance of lot No. 535E in favor of the defendants, and the latter, in turn,
are ordered to execute a similar document, covering lot No. 535A, in favor of
the plaintiffs.
RATIO:
1. When one sells or buys real property — a piece of land, for example — one
sells or buys the property as he sees it, in its actual setting and by its
physical metes and bounds, and not by the mere lot number assigned to it
in the certificate of title.
2. In this case, the portion correctly referred to as lot No. 535-A was already in
the possession of the Atilano 2, who had built a house on it even before
Atilano 1 had sold it to him. Atilano 1 had built a house for himself on the
real 535-E, and both brothers had lived on their respective lands for years
until the mistake was discovered in 1959.
3. The real issue here is not adverse possession, but the real intention of the
parties to that sale. From all the facts and circumstances, the object of the
sale between the Atilano brothers was 535-A, even if the deed referred to it
as 535-E, which was a simple mistake in the drafting of the document. The
mistake did not vitiate the consent of the parties or affect the validity and
binding effect of the contract between them.
4. The proper remedy to such mistake is reformation of the instrument. This
remedy is available when, there having been a meeting of the funds of the
parties to a contract, their true intention is not expressed in the instrument
purporting to embody the agreement by reason of mistake, fraud,
inequitable conduct on accident (Art. 1359, et seq.) In this case, there is no
need to reform the 1920 deed of sale since the parties retained possession
their respective properties conformably to the real intention of the parties to
that sale, and all they should do is to execute mutual deeds of conveyance.
Maximino Carrantes vs. Court of Appeals, Bilad Carrantes, Lauro
Carrantes, Eduardo Carrantes, and Michael Tumpao
76 SCRA 514
Facts: Mateo Carantes, original owner of Lot No. 44 situated at Loakan,
Baguio City, died in 1913 leaving his widow Ogasia, and six children, namely,
Bilad, Lauro, Crispino, Maximino, Apung and Sianang,. In 1930, the
government, in order to expand the landing field of the Loakan Airport, filed
for the expropriation of a portion of Lot. No. 44. Said lot was subdivided into
Lots. No. 44A to 44E for the purpose.
In 1913, Maximino Carrantes (MAX) was appointed the judicial administrator
of the estate of Mateo. Four heirs, namely, Bilad, Lauro, Sianang, and
Crisipino, executed a deed denominated “Assignment of Right to Inheritance”
assigning to Max their rights over said lot in 1939. The stated monetary
consideration is P1.00. On same date, Max sold Lot Nos. 44B and 44C to the
government. One year later the Court of First Instance, upon joint petition of
the Carrantes heirs, issued an order cancelling O.C.T. No. 3 and TCT No.
2533 was issued in its place.
On 16 March 1940, Max registered the deed of “Assignment of Right
to Inheritance”. Thus, TCT No. 2533 was cancelled and TCT 2540 was issued
in the name of Max. A formal deed of Sale was also executed by Max on the
same date in favor of the government. Hence, TCT 2540 was cancelled and
new TCTs were issued in favor of the government and Max, respectively. On
4 Sept. 1958, Bilad, Lauro, and Crispino, along with the surviving heirs of
Apung and Sianang filed complaint in the CFI.
They claimed that the execution of the deed of assignment was attended by
fraud. The trial court decided that the action of the heirs had already
prescribed since an action on fraud prescribes on four years from discovery of
such, in this case, on 16 March 1940 when Max registered the deed of
assignment. The Court of Appeals reversed and found that a constructive
trust was created. Hence, the present petition.
Issue: 1. whether a constructive trust involves a fiduciary relationship? 2.
Whether action had already prescribed?
Held: 1. The court, assuming that there was fraud, and in turn, a constructive
trust in favor of the other heirs, said that constructive trust does not involve a
promise nor fiduciary relations. Hence, the respondent court’s conclusion that
the rule on constructive notice does not apply because there was a fiduciary
relationship between the parties lacks the necessary premise.
2. Action had already prescribed because there was constructive notice to the
heirs when Maximino registered the deed of assignment with the register of
deeds on 16 March 1940. Such date is the reckoning point of counting
prescription based on fraud.
Anent respondent court’s contention that constructive trust is imprescriptible,
the court said that it is untenable. It is already settled that constructive trusts
prescribes in 10 years. In this case, the ten year period started on 16 March
1940. And since the respondents commenced the action only on 4 Sept. 1958,
the same is barred by prescription.
G.R. No. L-22962 September 28, 1972
PILAR N. BORROMEO, MARIA B. PUTONG, FEDERICO V. BORROMEO,
JOSE BORROMEO, CONSUELO B. MORALES and CANUTO V.
BORROMEO, JR., petitioners,
vs.
COURT OF APPEALS and JOSE A. VILLAMOR, (Deceased) Substituted
by FELISA VILLAMOR, ROSARIO V. LIAO LAMCO, MANUEL VILLAMOR,
AMPARO V. COTTON, MIGUEL VILLAMOR and CARMENCITA
VILLAMOR, respondents.
Facts: Jose A. Villamor was a distributor of lumber belonging to Mr. Miller
who was the agent of the Insular Lumber Company in Cebu City. Canuto
Borromeo is a friend and a former classmate of Villamor. Villamor used to
borrow some money to Borromeo from time to time. When Villamor on one
occasion with some pressing obligation to settle with Mr. Miller, he borrowed
from Borromeo a large sum of money for which he mortgaged his land and
house in Cebu City.
Mr. Miller filed civil action against the defendant and attached his
properties including those mortgaged to plaintiff, inasmuch as the deed of
mortgage in favor of plaintiff could not be registered because not properly
drawn up.
Borromeo then asked for settlement of his obligation, but defendant
instead offered to execute a document promising to pay his indebtedness
even after the lapse of ten years. Liquidation was made and defendant was
found to be indebted to plaintiff in the sum of P7,220.00, for which defendant
signed a promissory note therefor on November 29, 1933 with interest at the
rate of 12% per annum, agreeing to pay 'as soon as I have money'.
There is also a stipulation on the note that defendant 'hereby
relinquish, renounce, or otherwise waive my rights to the prescriptions
established by our Code of Civil Procedure for the collection or recovery of
the above sum of P7,220.00. ... at any time even after the lapse of ten years
from the date of this instrument'. After the execution of the document, plaintiff
limited himself to verbally requesting defendant to settle his indebtedness
from time to time. Plaintiff did not file any complaint against the defendant
within ten years from the execution of the document as there was no property
registered in defendant's name, who furthermore assured him that he could
collect even after the lapse of ten years. After the last war, plaintiff made
various oral demands, but defendants failed to settle his account, — hence
the present complaint for collection.
Court of First Instance of Cebu sentence the original defendant, the
deceased Jose A. Villamor, to pay Canuto O. Borromeo, now represented by
petitioners, the sum of P7,220.00 within ninety days from the date of the
receipt of such decision with interest at the rate of 12% per annum from the
expiration of such ninety-day period.
Court of Appeals reversed the decision.
ISSUE: WON the CA erred in reversing the ruling of the CFI in finding the
lack of validity of the stipulation amounting to a waiver in line with the principle
"that a person cannot renounce future prescription"
Ruling: Yes. CA erred in reversing the CFI’s ruling.
It is a well-settled maxim that between two possible interpretations, that which
saves rather than destroys is to be preferred.
Even from the standpoint of what for some is strict legalism, the
decision arrived at by the Court of Appeals calls for disapproval. It is a
fundamental principle in the interpretation of contracts that while ordinarily the
literal sense of the words employed is to be followed, such is not the case
where they "appear to be contrary to the evident intention of the contracting
parties," which "intention shall prevail."
Such a codal provision has been given full force and effect since the
leading case of Reyes v. Limjap, a 1910 decision. Justice Torres, who
penned the above decision, had occasion to reiterate such a principle when
he spoke for the Court in De la Vega v. Ballilos thus: "The contract entered
into by the contracting parties which has produced between them rights and
obligations is in fact one of antichresis, for article 1281 of the Civil Code
prescribes among other things that if the words should appear to conflict with
the evident intent of the contracting parties, the intent shall prevail."
 Manresa, commenting on article 1255 of the Civil Code and stating the
rule of separation just mentioned, gives his views as follows: 'On the
supposition that the various pacts, clauses, or conditions are valid, no
difficulty is presented; but should they be void, the question is as to what
extent they may produce the nullity of the principal obligation. Under the view
that such features of the obligation are added to it and do not go to its
essence, a criterion based upon the stability of juridical relations should tend
to consider the nullity as confined to the clause or pact suffering therefrom,
except in cases where the latter, by an established connection or by manifest
intention of the parties, is inseparable from the principal obligation, and is a
condition, juridically speaking, of that the nullity of which it would also
occasion.' ...
The same view prevails in the Anglo-American law as condensed in
the following words: 'Where an agreement founded on a legal consideration
contains several promises, or a promise to do several things, and a part only
of the things to be done are illegal, the promises which can be separated, or
the promise, so far as it can be separated, from the illegality, may be valid.
The rule is that a lawful promise made for a lawful consideration is not invalid
merely because an unlawful promise was made at the same time and for the
same consideration, and this rule applies, although the invalidity is due to
violation of a statutory provision, unless the statute expressly or by necessary
implication declares the entire contract void.
..."
What emerges in the light of all the principles set forth above is that
the first ten years after November 29, 1933 should not be counted in
determining when the action of creditor, now represented by petitioners, could
be filed.
From the joint record on appeal, it is undoubted that the complaint
was filed on January 7, 1953. If the first ten-year period was to be excluded,
the creditor had until November 29, 1953 to start judicial proceedings. After
deducting the first ten-year period which expired on November 29, 1943,
there was the additional period of still another ten years. Nor could there be
any legal objection to the complaint by the creditor Borromeo of January 7,
1953 embodying not merely the fixing of the period within which the debtor
Villamor was to pay but likewise the collection of the amount that until then
was not paid. An action combining both features did receive the imprimatur of
the approval of this Court.
As was clearly set forth in Tiglao v. The Manila Railroad
Company: "There is something to defendant's contention that in previous
cases this Court has held that the duration of the term should be fixed in a
separate action for that express purpose. But we think the lower court has
given good reasons for not adhering to technicalities in its desire to do
substantial justice." The justification became even more apparent in the
latter portion of the opinion of Justice Alex Reyes for this Court: "We may add
that defendant does not claim that if a separate action were instituted to fix the
duration of the term of its obligation, it could present better proofs than those
already adduced in the present case. Such separate action would, therefore,
be a mere formality and would serve no purpose other than to delay." There is
no legal obstacle then to the action for collection filed by the creditor.
Moreover, the judgment of the lower court, reversed by the respondent Court
of Appeals, ordering the payment of the amount due is in accordance with
law.
LILIA B. ADA, et.al. Petitioners, vs. FLORANTE BAYLON, Respondent.
FACTS:
Rita Baylon, was alleged to have been used the income ofbthe estate
produced by parcels of land co-owned by petitioners. They claimed that Rita
took possession of the said parcels of land and appropriated for herself the
income from the same hence, this prompted petitioners to file a Complaint for
partition, accounting and damages against the former. During the pendency of
the case, Rita, through a Deed of Donation, donated a lot in favor of Florante
Baylon. Petitioners filed again a petition that the said donation be rescinded in
accordance with Article 1381(4) of the Civil Code.
ISSUE:
Whether the deed of donation to Florante Baylon is subject for rescission.
HELD:
The kinds of rescissible contracts, according to the reason for their
susceptibility to rescission, are the following:
1. those which are rescissible because of lesion or prejudice;
2. those which are rescissible on account of fraud or bad faith;
3. those which, by special provisions of law, are susceptible to
rescission.
In the case at bar, the lower court aptly ordered the rescission of the donation
in favor of Florante. It is undisputed that, at the time they were gratuitously
conveyed by Rita, the subject lot are among the properties that were the
subject of the partition case then pending with the RTC. Rita’s failure to inform
and seek the approval of the petitioners or the RTC regarding the conveyance
gave the petitioners the right to have the said donation rescinded pursuant to
Article 1381(4) of the Civil Code.
Read full Article here.
 Rescission is a remedy granted by law to the contracting
parties and even to third persons, to secure the reparation of
damages caused to them by a contract, even if it should be
valid, by means of the restoration of things to their condition at
the moment prior to the celebration of said contract. It is a
remedy to make ineffective a contract, validly entered into and
therefore obligatory under normal conditions, by reason of
external causes resulting in a pecuniary prejudice to one of
the contracting parties or their creditors.
Contracts which are rescissible are valid contracts having all
the essential requisites of a contract, but by reason of injury or
damage caused to either of the parties therein or to third
persons are considered defective and, thus, may be
rescinded.
LILIA ADA, LUZ ADANZA, FLORA BAYLON, REMO BAYON, JOSE
BAYLON, ERIC BAYLON, FLORENTINO BAYLON and MA. RUBY
BAYLON V FLORANTE BAYLON
AUG 13 2012 | REYES, J
FACTS
Case involves the estate of SPS FLORENTINO [died NOV 7 1961] and
MAXIMA ELNAS BAYLON [MAY 5 1974] – SPS BAYLON
 At the time of their death, SPS BAYLON were survived by their legitimate
children – RITA, VICTORIA, DOLORES, PANFILA, RAMON and LILIA
o DOLORES: Died intestate and without issue [AUG 4 1976]
o VICTORIA: Died [NOV 11 1981] and was survived by her daughter,
LUZ ADANZA
o RAMON: Died intestate [JUL 8 1989] and was survived by
FLORANTE, his child from his first marriage and FLORA his second
wife and their legitimate children RAMON JR., REMO, JOSE, ERIC,
FLORENTINO and MA. RUBY
 PETITIONERS: Filed with RTC a complaint for partition, accounting
and damages against FLORANTE, RITA and PANFILA – SPS BAYLON,
during their lifetime, owned 43 parcels of land in Negros Oriental
o After the death of SPS BAYLON, they claimed that RITA took
possession of said parcels of land and appropriated for herself the
income from the same
o Using the income produced by the parcel of land, RITA purchased 2
parcels of land situated in Dumaguete City – RITA refused to effect a
partition
 FLORANTE, RITA & PANFILA: They and PETITIONERS co-owned 22
out of 43 parcels of land – RITA actually owned 10 parcels of land out of
43 parces which PETITIONERS sought to partition, while the remaining
parcels of land are separately owned by PETRA CAFINO ADANZA,
FLORANTE, MELITON ADALIA, CONSORCIA ADANZA, LILIA, and
SANTIAGO MENDEZ
o Lots were acquired by RITA using her own money – denied that RITA
appropriated solely for herself the income of the estate of SPS
BAYLON and expressed no objection to the partition of the estate of
SPS BAYLON but only with respect to the co-owned parcels of land
 During pendency of the case, RITA, through a Deed of Donation
conveyed the lots to FLORANTE [RITA DIED INTESTE WITHOUT ANY
ISSUE – JUL 16 2000]
o Learning of the donation inter vivos in favor of FLORANTE,
PETITIONERS filed a Supplemental Pleading – praying that the
donation in favor of FLORANTE be rescinded (A1381(4) CC); RITA
was already sick and very weak when the said Deed of Donation was
supposedly executed and thus could not have validly given her
consent thereto
 FLORANTE & PANFILA opposed the rescission of said donation –
A1381(4) CC applies only when there is already a prior judicial decree on
who between the contending parties actually owned the properties under
litigation
RTC: parcels of land be partitioned among heirs of SPS BAYLON; declaring
the donation inter vivos rescinded without prejudice to the share of
FLORANTE to the estate of RITA
 Death of RITA during pendency of the case, having died intestate and
without any issue, had rendered the issue of ownership moot since
parties are the heirs to her estate
 In rescinding the donation, it was rescissible since it was entered in to by
RITA without knowledge and approval of the litigants or of competent
judicial authority [since it was involved in the case for which
PETITIONERS have asked the Court to partition]; MR DENIED
CA: RTC REVERSED & SET ASIDE – before PETITIONERS may file an
action for rescission, they must first obtain a favorable judicial ruling that the
lots belong to the estate SPS BAYLON and not to RITA [action for
rescission is premature and cannot be joined with their action for
partition, accounting and damages through a mere supplemental pleading]
Petition for review on certiorari (R45)
ISSUE: WON CA erred in ruling that the donation inter vivos of the lots in
favor of FLORANTE may only be rescinded if there is already a judicial
determination that the same actually belonged to the estate of SPS
BAYLON? YES
MISJOOINDER OF CAUSES OF ACTION
The complaint filed by PETITIONERS involved 2 separate distinct and
independent actions – partition and rescission
(1) PETITIONERS raised the refusal of their co-heirs, FLORANTE, RITA and
PANFILA to partition the properties which they inherited from SPS
BAYLON
(2) In their supplemental pleading, PETITIONERS assailed the donation inter
vivos of the lots made by RITA in favor of FLORANTE pendent lite
The action of partition and rescission cannot be joined in a single action
By a joinder of actions, or a joinder of causes of action is meant the uniting of
two or more demands or rights of action in one action, the statement of
more than one cause of action in a declaration.
 It is the union of two or more civil causes of action, each of which
could be made the basis of a separate suit, in the same complaint,
declaration or petition.
 A plaintiff may under certain circumstances join several distinct demands,
controversies or rights of action in one declaration, complaint or petition
 OBJECTIVE: To avoid a multiplicity of suits where the same parties and
subject matter are to be dealt with by effecting in one action a complete
determination of all matters in controversy and litigation between the
parties involving one subject matter, and to expedite the disposition of
litigation at minimum cost. The provision should be construed so as to
avoid such multiplicity, where possible, without prejudice to the rights of
the litigants.
 While parties to an action may assert in one pleading, in the alternative or
otherwise, as many causes of action as they may have against an
opposing party, such joinder of causes of action is subject to the
condition, inter alia, that the joinder shall not include special civil
actions governed by special rules
IN CASE AT BAR, THERE WAS A MISJOINDER OF CAUSES OF ACTION
 The action for partition filed by the PETITIONERS could not be joined
with the action for the rescission of the said donation inter vivos in favor of
FLORANTE
 An action for partition is a special civil action governed by Rule 69 of
the Rules of Court while an action for rescission is an ordinary civil
action governed by the ordinary rules of civil procedure
 The variance in the procedure in the special civil action of partition and in
the ordinary civil action of rescission precludes their joinder in one
complaint or their being tried in a single proceeding to avoid confusion in
determining what rules shall govern the conduct of the proceedings as
well as in the determination of the presence of requisite elements of each
particular cause of action
A misjoined cause of action, if not severed upon motion of a party or by
the court sua sponte, may be adjudicated by the court together with the
other causes of action
Misjoinder of causes of action is not a ground for dismissal
 The courts have the power, acting upon the motion of a party to the case
or sua sponte, to order the severance of the misjoined cause of action to
be proceeded with separately
 If there is no objection to the improper joinder or the court did not
motu proprio direct a severance, then there exists no bar in the
simultaneous adjudication of all the erroneously joined causes of
action
 RP V HERBIETO - Misjoinder of causes of action and parties do not
involve a question of jurisdiction of the court to hear and proceed with the
case. They are not even accepted grounds for dismissal thereof.
o The misjoinder of causes of action and parties involve an implied
admission of the court’s jurisdiction.
o It acknowledges the power of the court, acting upon the motion of a
party to the case or on its own initiative, to order the severance of the
misjoined cause of action, to be proceeded with separately (in case of
misjoinder of causes of action); and/or the dropping of a party and the
severance of any claim against said misjoined party, also to be
proceeded with separately (in case of misjoinder of parties)
 RULE only applies if the court trying the case has jurisdiction over all
causes of action therein notwithstanding misjoinder of the same – if no
jurisdiction over a misjoined cause of action, then misjoined cause of
action has to be severed from the other casues of action, and if not
severed, any adjudication rendered by the court with respect to the same
would be a nullity
IN CASE AT BAR, FLORANTE posed no objection, and neither did RTC
direct the severance of the petitioners’ action for rescission from their action
for partition
 While this may be a patent omission on the part of RTC, this does not
constitute a ground to assail the validity and correctness of its decision.
RTC validly adjudicated the issues raised in the actions for partition
and rescission filed by the petitioners.
ASSERTING A NEW CAUSE OF ACTION IN A SUPPLEMENTAL
PLEADING
CA: Said action for rescission should have been filed by the PETITIONERS
independently of the proceeding in the action for partition. Action for
rescission could not be lumped with the action for partition through a mere
supplemental pleading [COURT DISAGREES]
A supplemental pleading may raise a new cause of action as long as it
has some relation to the original cause of action set forth in the original
complaint [S6R10 ROC]
 YOUNG V SPOUSES SY - As its very name denotes, a supplemental
pleading only serves to bolster or add something to the primary pleading.
 o A supplement exists side by side with the original. It does not replace
that which it supplements.
o A supplemental pleading assumes that the original pleading is to
stand and that the issues joined with the original pleading remained
an issue to be tried in the action. It is but a continuation of the
complaint.
o Its usual office is to set up new facts which justify, enlarge or change
the kind of relief with respect to the same subject matter as the
controversy referred to in the original complaint.
o The purpose of the supplemental pleading is to bring into the
records new facts which will enlarge or change the kind of relief
to which the plaintiff is entitled; hence, any supplemental facts
which further develop the original right of action, or extend to
vary the relief, are available by way of supplemental complaint
even though they themselves constitute a right of action.
 A supplemental pleading may properly allege transactions,
occurrences or events which had transpired after the filing of the
pleading sought to be supplemented, even if the said supplemental
facts constitute another cause of action
 LEOBRERA V CA – A supplemental pleading must be based on matters
arising subsequent to the original pleading related to the claim or defense
presented therein, and founded on the same cause of action [may not be
used to try a new cause of action]
 PLANTERS DEVELOPMENT BANK V LZK HOLDINGS AND
DEVELOPMENT CORP – While a matter stated in a supplemental
complaint should have some relation to the cause of action set forth in the
original pleading, the fact that the supplemental pleading technically
states a new cause of action should not be a bar to its allowance but only
a matter that may be considered by the court in the exercise of its
discretion [a broad definition of cause of action should be applied]
IN CASE AT BAR, the issue as to validity of the donation inter vivos is a new
cause of action that occurred after the filing of the original complaint
HOWEVER, the prayer for rescission of the said donation in their
supplemental pleading is germane to and is in fact intertwined with the
cause of action in he partition case since lots donated are included among
the properties sought to be partitioned
 PETITIONERS claim that lots form part of the estate of SPS BAYLON,
but cannot be partitioned unless the gratuitous conveyance of the same is
rescinded. Thus, the principal issue raised by the PETITIONERS in their
original complaint remained the same.
MAIN ISSUE: PROPREITY OF RESCISSION
PETITIONERS: CA erred in remanding the case to RTC for the determination
of ownership of lots – RTC aptly rescinded the donation pursuant to A1381(4)
CC
FLORANTE: Before PETITIONERS may file an action for rescission, they
must obtain a favorable judicial ruling that the lots actually belonged to the
estate of SPS BAYLON. Until then, the action for rescission would be
premature
COURT: The resolution of the instant dispute is fundamentally contingent
upon a determination of whether the donation inter vivos in favor of
FLORANTE may be rescinded pursuant to A1381(4) CC on the ground that
the same was made during the pendency of the action for partition with the
RTC
Rescission is a remedy to address the damage or injury caused to the
contracting parties or third persons
Contracts which refer to things subject of litigation is rescissible
pursuant to Article 1381(4) of the Civil Code
Rescission under Article 1381(4) of the Civil Code is not preconditioned
upon the judicial determination as to the ownership of the thing subject
of litigation
Even if the donation inter vivos is validly rescinded, a determination as
to the ownership of the subject parcels of land is still necessary.
WHEREFORE, PETITION PARTY GRANTED, CA MODIFIED, RTC
DECISION INSOFAR AS IT DECREED RESCISSION OF DEED OF
DONATION IS REINSTATED, CASE REMANDED TO RTC FOR
DETERMINATION OF ONWERSHIP OF LOTS
DEIPARINE, JR vs CA
GR ## GR No. 96643
Petitioner: Ernesto Deiparine, Jr
Respondents: Hon. Courts of Appeals, Cesario Carungay and Engr. Nicanor
Trinidad
Date April 23, 1993
Cruz, J.
DOCTRINE There can be rescission is the injured party is left without other
recourse but to rescind the contract.
(SHORT VERSION)
Respondent Carungay entered to a construction contract with the Petitioner
Deiparine, who is a contractor. However, it came to the knowledge of
Carungay, through Trinidad (his engineer in charge for the construction), that
Deiparine is not following the specifications they agreed on for the building
and the structure lacks strength and not safe for its future occupants.
Carungay moved to rescind the contract. CA ruled in favor of Carungay. SC
affirmed.
FACTS
Respondent Carungay entered to a construction contract with Petitioner
Deiparine (a contractor) for the construction of a three-storey dormitory in
Cebu City. Carungay agreed to pay P970,000 inclusive of contractor’s fee,
and Deiparine bound himself to erect the said building “in strict accordance
to plans and specifications.” The Plan specified that the building must have
3,000 psi (pounds per square inch) as the acceptable minimum compressive
strength.
Through Engr. Trinidad, it came to the knowledge of the respondents that
Deiparine is not following the plans and that the “construction works are faulty
and haphazardly” in order to maximize his personal profit. Carungay sent
memorandums to Deiparine complaining about the work done by the latter,
but the same were ignored.
Carungay asked for a core testing to examine the compressive strength of
the building. Deiparine eventually agreed to undertake such test. The result
was against Deiparine, the building failed to bear the minimum 3,000 psi
compressive strength. Carungay move to rescind the contract. RTC ruled in
the favor of the respondents. CA affirmed. Hence this case. The petitioners
are claiming that the specification of 3,000 psi is not included in their contract
thus not a valid ground for rescission.
ISSUES/HELD
(1) WoN Carungay is entitled to rescission - YES
RATIO
(1) The contention of the petitioner that the specification was not included in
their contract is untenable. It is true that there was no real specification
included in the contract but the same was intended to be followed after the
signing and before the commencement of the construction. Also, the
petitioner’s own project manager admitted that Deiparine was actually
instructing them (the construction people) to ignore the specific orders or
instructions of Carungay and Trinidad. In addition, the Deiparine Construction
Firm is not a very able firm since none of them is a engineer except one who
only visited the construction site two months after the commencement of the
construction.
There are two sets of specifications in the contract: (1) list of the materials to
be used; (2) the required structural compressive strength of 3,000 psi.
Deiparine eventually recognized that there really are specifications but
contested that the minimum compressive strength of 3,000 psi is unnecessary
for buildings since 3,000 psi is only required for roads. According to him,
2,500 psi is enough for buildings.
The explicit deviance to the specifications, in his intial refusal to undergo core
testing, and his preference to his personal profit than that of the proper
execution of the contract, shows bad faith. The court sees no reason to
disturb the ruling of CA that Deiparine did not deal with the Carungays in good
faith. His breach if this duty constituted a substantial violation of the contract
correctible by judicial rescission. When the structure failed under this test,
the respondents were left with no other recourse than to rescind their
contract.
DECISION
Judgment affirmed.
Oria v. McMicking
G.R. No. L-7003, 18 January 1912
FACTS:
Gutierrez Hermanos brought two actions Oria Hermanos & Co. for the
recovery of sum of money. Subsequent to the beginning of the above actions,
the members of the company of Oria Hermanos & Co., dissolved their
relations and entered into liquidation. Tomas Oria y Balbas, as managing
partner in liquidation, acting for himself and on behalf of his other coowners
entered into a contract with the plaintiff in this case, Manuel Orio Gonzales,
which said contract was for the purpose of selling and transferring to the
plaintiff in this action all of the property of which the said Oria Hermanos & Co.
was owner. Among the goods transferred by this instrument was the
steamship Serantes, which is the subject of litigation.
One of the actions instituted by Hermanos was decided by the court in his
favor and subsequently, the execution was issued thereon and placed in the
hands of the sheriff. The sheriff immediately demanded that Tomas Oria y
Balbas, as liquidator of the firm of Oria Hermanos & Co. make payment of the
said judgment, to which he replied that there were no funds with which to pay
the same. Thereupon the sheriff levied upon the said steamer Serantes, took
possession of the same, and announced it for sale at public auction. Three
days before the sale, the plaintiff in this action presented to the sheriff a written
statement claiming to be the owner of the said steamship, and to have the right
of possession of the same by reason of the sale to him by Oria Hermanos &
Co. of all of the property belonging to said company, including the said
steamer Serantes.
ISSUE:
Whether or not the sale between Oria Hermanos & Co. and Manuel Orio
Gonzales was valid.
RULING:
In determining whether or not a certain conveyance is fraudulent the question
in every case is whether the conveyance was a bona fide transaction or a trick
and contrivance to defeat creditors, or whether it conserves to the debtor a
special right. It is not sufficient that it is founded on good consideration or is
made with bona fide intent: it must have both elements. If defective in either of
these particulars, although good between the parties, it is voidable as to
creditors. The rule is universal both at law and in equity that whatever fraud
creates justice will destroy. The test as to whether or not a conveyance is
fraudulent is, does it prejudice the rights of creditors.
In the consideration of whether or not certain transfers were fraudulent, courts
have laid down certain rules by which the fraudulent character of the
transaction may be determined. The following are some of the circumstances
attending sales which have been dominated by the courts badges of fraud:
1. The fact that the consideration of the conveyance is fictitious or is
inadequate.
2. A transfer made by a debtor after suit has been begun and while it is
pending against him.
3. A sale upon credit by an insolvent debtor.
4. Evidence of large indebtedness or complete insolvency.
5. The transfer of all or nearly all of his property by a debtor, especially
when he is insolvent or greatly embarrassed financially.
6. The fact that the transfer is made between father and son, when there
are present other of the above circumstances.
7. The failure of the vendee to take exclusive possession of all the
property.
The case at bar presents every one of the badges of fraud above enumerated.
Tested by the inquiry, does the sale prejudice the rights of the creditors, the
result is clear. The sale in the form in which it was made leaves the creditors
substantially without recourse. The property of the company is gone, its
income is gone, the business itself is likely to fail, the property is being
dissipated, and is depreciating in value. As a result, even if the claims of the
creditors should live twelve years and the creditors themselves wait that long,
it more than likely that nothing would be found to satisfy their claim at the end
of the long wait.
Since the records shows that there was no property with which the judgment in
question could be paid, the defendants were obliged to resort to and levy upon
the steamer in suit. The court below was correct in finding the sale fraudulent
and void as to Gutierrez Hermanos in so far as was necessary to permit the
collection of its judgment. As a corollary, the court below found that the
evidence failed to show that the plaintiff was the owner or entitled to the
possession of the steamer in question at the time of the levy and sale
complained of, or that he was damaged thereby. Defendant had the right to
make the levy and test the validity of the sale in that way, without first resorting
to a direct action to annul the sale. The creditor may attack the sale by ignoring
it and seizing under his execution the property, or any necessary portion
thereof, which is the subject of the sale.
Siguan v. Lim 318 SCRA 725, G.R. No. 134685 (November 19, 1999)
Facts:
1. On 25 and 26 August 1990, Rosa Lim (respondent, LIM) issued two
Metrobank checks to satisfy her debts to Maria Antonia Siguan (petitioner,
SIGUAN).
2. Upon presentment by SIGUAN with the drawee bank, the checks
were dishonoured for the reason account closed.
3. Criminal case for violation of BP 22 was filed by SIGUAN against LIM.
4. On December 29 1992, RTC convicted LIM as charged. The case is
pending before this Court for review.
5. On August 10, 1989, LIM executed a Deed of Donation in favour of
her children, and the same was registered with the Office of the Register of
Deeds on July 2, 1991.
6. June 23, 193, SIGUAN filed an accion pauliana against LIM and her
children, to rescind the questioned Deed of Donation and to declare as null
and void the new transfer certificates of title.
Issue/s:
1. Whether or not the questioned Deed of Donation was made in fraud
of petitioner and, therefore, rescissible.
 Ruling:
1. No. The rescission required the existence of creditors at the time of
alleged fraudulent alienation, and this must be proved as one of the bases of
the judicial pronouncement setting aside the contract. Without prior existing
debt, there can neither be injury nor fraud. While it is necessary that the credit
of the plaintiff in the accion pauliana must exist prior to the fraudulent
alienation, the date of the judgment enforcing it is immaterial.
Since LIMs indebtedness to SIGUAN was incurred in August 1990, or a year
after the execution of the Deed of Donation, the first requirement of accion
pauliana was not met.
Even assuming arguendo that petitioner became a creditor of LIM prior to the
celebration of the contract of donation, still her action for rescission would not
fare well because the third requisite was not met. It is essential that the party
asking for rescission prove that he has exhausted all other legal means to
obtain satisfaction of his claim. SIGUAN neither alleged nor proved that she
did so. On his score, her action for rescission of the questioned deed is not
maintainable even if the fraud charged actually did exist.
The fourth requisite for an accion pauliana to prosper is not present either. (4)
the act being impugned is fraudulent. It was not sufficiently established that
the properties left behind by LIM were not sufficient to cover her debts
existing before the donation was made.
Note / Doctrine:
 Requisites of accion pauliana
1. Plaintiff asking for rescission has a credit prior to the alienation,
although demandable later.
2. Debtor has made a subsequent contract conveying a patrimonial
benefit to a third persons.
3. Creditor has no other legal remedy to satisfy his claim, but would
benefit by rescission of the conveyance to the person.
4. Act being impugned is fraudulent.
5. The third parsons who received the property conveyed, if by onerous
title, has been an accomplice in the fraud.
 (New Civil Code) Article 1381. Contracts entered into in fraud of
creditors may be rescinded only when the creditors cannot in any manner
collect the claims due to them.
 (New Civil Code) Article 1383. The action for rescission is but a
subsidiary remedy which cannot be instituted except when the party suffering
damage has no other legal means to obtain reparation for the same.
 (New Civil Code) Article 1387(1). All contracts by virtue of which the
debtor alienates property by gratuitous title are presumed to have been
entered into in fraud of creditors when donor did not reserve sufficient
property to pay all debts contracted before the donation.
 (New Civil Code) Article 759. Donation is always presumed to be in
fraud of creditors when at the time thereof the donor did not reserve sufficient
property to pay his debts prior to the donation.
 (New Civil Code) Article 1384. Rescission shall only be to the extent
necessary to cover the damages caused.
 Only the creditor who brought the action for rescission can
benefit from the rescission; those who are strangers to the action cannot
benefit from its effects.
 Revocation is only to the extent of the plaintiff creditors
unsatisfied debts; as to the excess, alienation is maintained.
Maria Antonia Siguan vs. Rosa Lim, Linde Lim, Ingrid Lim and Neil Lim
318 SCRA 725; G.R. No. 134685; November 19, 1999
Facts: A criminal case was filed against LIM with RTC-Cebu city for issuing 2
bouncing checks in the amounts of P300,000 and P241,668, respectively to
Siguan
Meanwhile, on 2 July 1991, a Deed of Donation conveying the following
parcels of land and purportedly executed by LIM on 10 August 1989 in favor
of her children, Linde, Ingrid and Neil, was registered with the Office of the
Register of Deeds of Cebu City. New transfer certificates of title were
thereafter issued in the names of the donees. On 23 June 1993, petitioner
filed an accion pauliana against LIM and her children before RTC-Cebu City
to rescind the questioned Deed of Donation and to declare as null and void
the new transfer certificates of title issued for the lots covered by the
questioned Deed.
Petitioner’s contention: claimed therein that sometime in July 1991, LIM,
through a Deed of Donation, fraudulently transferred all her real property to
her children in bad faith and in fraud of creditors, including her; that LIM
conspired and confederated with her children in antedating the questioned
Deed of Donation, to petitioner's and other creditors' prejudice; and that LIM,
at the time of the fraudulent conveyance, left no sufficient properties to pay
her obligations.
LIM’s contention: As regards the questioned Deed of Donation, LIM
maintained that it was not antedated but was made in good faith at a time when
she had sufficient property. Finally, she alleged that the Deed of Donation was
registered only on 2 July 1991 because she was seriously ill.
Issue: Whether the Deed of Donation executed by Rosa Lim (LIM) in favor of
her children be rescinded for being in fraud of petitioner Maria Antonia Siguan?
Ruling:
Even assuming arguendo that petitioner became a creditor of LIM prior to the
celebration of the contract of donation, still her action for rescission would not
fare well because the third requisite was not met. Under Article 1381 of the
Civil Code, contracts entered into in fraud of creditors may be rescinded only
when the creditors cannot in any manner collect the claims due them. Also,
Article 1383 of the same Code provides that the action for rescission is
but a subsidiary remedy which cannot be instituted except when the
party suffering damage has no other legal means to obtain reparation for
the same. The term "subsidiary remedy" has been defined as "the exhaustion
of all remedies by the prejudiced creditor to collect claims due him before
rescission is resorted to." It is, therefore, "essential that the party asking for
rescission prove that he has exhausted all other legal means to obtain
satisfaction of his claim. Petitioner neither alleged nor proved that she did
so. On this score, her action for the rescission of the questioned deed is
not maintainable even if the fraud charged actually did exist."
Cadwallader & Co vs. Smith Bell & Co., 7 Phil 461 – ARTICLE 1398
Facts:
In May 1902, the Pacific Export Lumber Company of Portland shipped upon
the steamer Quito five hundred and eighty-one (581) piles to the defendant,
Henry W. Peabody & Company, at Manila, it was stipulated that they’ll receive
a commission of one half of whatever sum was obtained over $15 for each pile
and 5 per cent of the price of the piles sold. August 2, Peabody and Company
wrote the agent of the Pacific Company at Shanghai that for lack of a demand
the piles would have to be sold at considerably less than $15 a piece; in
response they telegraphed him an offer of $12 per piece.
July 9 Peabody & Company had entered into negotiations with the Insular
Purchasing Agent for the sale of piles at $20 a piece. August 4, Insular
Purchasing Agent sold to the Government two hundred and thirteen (213)
piles at $19 each. More of them were afterwards sold to the Government at the
same figure. Thus it is clear that at the time when the agents were buying from
their principal these piles at $12 a piece on the strength of their representation
that no better price was obtainable, they had already sold a substantial part of
them at $19. In these transactions the defendant, Smith, Bell & Company,
were associated with the defendants, Henry W. Peabody & Company, who
conducted the negotiations, and are consequently accountable with them.
Issue:
Whether or not the contract of sale is subject for annulment.
Held:
Yes. Concealing from their principal the negotiations with the Government,
resulting in a sale of the piles at 19 a piece and in misrepresenting the
condition of the market, the agents committed a breach of duty from which
they should benefit. The contract of sale to themselves thereby induced was
founded on their fraud and was subject to annulment by the aggrieved party.
(Civil Code, articles 1265 and 1269.) Upon annulment the parties should be
restored to their original position by mutual restitution. (Article 1303 and 1306.)
Therefore the defendants are not entitled to retain their commission realized
upon the piles included under the contract so annulled. In respect of the 213
piles, which at the time of the making of this contract on August 5 they had
already sold under the original agency, their commission should be allowed.
VELARDE ET AL. vs. COURT OF APPEALS
G.R. No.: 108346
Ponente: J. Panganiban
Date: July 11, 2001
Petition for review on certiorari questioning the decision of CA denying
petitioner’s motion for reconsideration
Petitioner: Spouses Mariano and Avelina Velarde
Respondent: Court of appeals, David Raymundo and George Raymundo,
respondents
FACTS:
 David Raymundo, herein private respondent, is the absolute and
 registered owner of a parcel of land in Dasmarinas Village, Makati. His father, disputed property to petitioners.
George Raymundo, negotiated with plaintiffs, Velardes for the sale of the said (3) Respondents appealed to the CA which set aside the Order of
property which was, however, under lease Judge Abad Santos and reinstated the decision of Judge
 A Deed of Sale was executed by defendant , as vendor, in favor of Ynares-Santiago dismissing the Complaint, upholding the validity of
plaintiff, as vendee. rescission.
 Prior to the sale, the aforesaid parcel of land was mortgaged to BPI to
secure the payment of a loan of P 1, 800, 000.
 Pertinent stipulations of the Deed of Sale:
⇒ Petitioners paid P800,000 and agreed to assume the mortgage ISSUE1:
obligations on the property to BPI in the name of the vendor
(respondent) Whether or not there was a breach of contract–YES.
⇒ While the application for the assumption of the mortgage obligations on
the property is not yet approved by the Bank, the mortgage
obligations on the property are to be paid for by the vendee, in the Petitioner: nonpayment of the mortgage did not constitute breach of contract
name of the vendor/respondent. considering their request to assume the obligation has been disapproved by
⇒ In the event that the vendee violates any of the terms and conditions, the bank. Accordingly, the payment of monthly amortizations ceased to be
the downpayment of P800,000 and all the payments made with the their obligations, and devolved upon the private respondents again.
Bank on the mortgage loan shall be forfeited in favor of David
Raymundo, respondent. Raymundo shall resume total and
complete ownership and possession of the property sold by way of
Deed of Sale with Assumption of Mortgage and the same shall be HELD/RATIO1: There was a breach of contract. Petitioners did not merely
deemed automatically cancelled and be of no force or effect, in the stop paying the mortgage obligations; they also failed to pay the balance of
same manner as if (the) same had never been executed or entered the purchase price. As admitted by both parties, their agreement mandated
into. that petitioners should pay the purchase price balance of P1.8 million to
 Pursuant to the Deed, plaintiffs paid BPI the monthly interest on the private respondents in case the request to assume the mortgage would be
loan for three months. disapproved. Thus, when petitioners received notice of the bank’s disapproval
 On December 15, 1986, plaintiffs were advised that the Application for of their application, they should have paid the balance of P1.8 million.
Assumption of Mortgage with BPI was not approved. This prompted
plaintiffs not to make any further payment.
 Defendants, through counsel, wrote to plaintiffs informing the latter that Petitioners only sent a letter offering to make such payment only upon
their non-payment to mortgage constituted non-performance of fulfillment of certain conditions not originally agreed upon in the contract of
obligation. sale. Such conditional offer to pay cannot take the place of actual payment.
 Respondents replied through counsel stating that they are willing to pay
the balance not later that Jan 21, 1987. However, such payment
would depend on several conditions newly provided for in the letter. ISSUE2:
 Defendants sent plaintiff a notarial notice of cancellation/ rescission of
the intended sale of the subject Whether or not the rescission of the contract by private respondents was valid
 Procedural History: – YES.
(1) Petitioners filed a Complaint for specific performace, nullity of
cancellation, writ of possession and damages at RTC Makati. Judge
Ynares Santiago dismissed the Complaint, upholding the validity of HELD/RATIO2:
rescission.
(2) Motion for Reconsideration filed. Judge Abad Santos directed to Yes. The private respondents’ right to rescind the contract finds basis in
proceed with the sale. He instructed the petitioners to pay the Article 1191 of the Civil Code.
balance of P1.8 million to private respondents who, in turn, were to
execute a deed of absolute sale and to surrender possession of the
Article 1191. The power to rescind obligations is implied in reciprocal ones, in
case one of the obligors should not comply with what is incumbent upon him.
The injured party may choose between the fulfillment and the rescission
of the obligation, with the payment of damages in either case. He may also
seek rescission, even after he has chosen fulfillment, if the latter should
become impossible.
DOCTRINE: The right of rescission is predicated on the breach of faith by the
party who violates the reciprocity between the parties The breach
contemplated in the provision is the obligor’s failure to comply with an existing
obligation. When the obligor cannot comply with what is incumbent upon it,
the oblige may seek rescission and, in the absence of any just cause for the
court to determine the period of compliance, the court shall decree the
rescission.
In the present case, private respondents have the right to rescind the contract
because of petitioners’ failure to comply with their obligation to pay the
balance of purchase price. Petitioners did not only fail to pay the balance but
also imposed upon respondents new obligations as preconditions to the
performance of their own obligation. In effect, the qualified offer to pay was a
repudiation of an existing obligation, which was legally due and demandable
under the contract of sale.
Mutual restitution required in rescission. The breach committed was
nonperformance of a reciprocal obligation, not a violation of the terms and
conditions of the mortgage contract. Therefore, the automatic rescission and
forfeiture of payment clauses in the contract does NOT apply. Instead, Civil
Code provisions shall govern.
Considering that rescission of the contract is based on Article 1191, mutual
restitution is required to bring back parties to their original situation prior to
inception of contract.
DOCTRINE: Rescission creates the obligation to return the object of the
contract. It can be carried out only when the one who demands rescission can
return whatever he may be obliged to restore. To rescind is to declare a
contract void at its inception and to put an end to it as though it never
was. It is not merely to terminate it and release the parties from further
obligations to each other, but to abrogate it from the beginning and restore the
parties to their relative positions as if no contract has been made.
DISPOSITIVE: WHEREFORE, the assailed Decision is
hereby AFFIRMED with the MODIFICATION that private respondents are
ordered to return to petitioners the amount of P874,150, which the latter paid
as a consequence of the rescinded contract, with legal interest thereon from
January 8, 1987, the date of rescission. No pronouncement as to costs.
PNB vs. PHILIPPINE VEGETABLE OIL COMPANY
49 Phil 897
FACTS:
This appeal involves the legal right of the PNB to obtain a judgement against
Vegetable Oil Co., Inc., for Php 15,812,454 and to foreclose a mortgage on
the property of the PVOC for Php 17,000,000.00 and the legal right of the Phil
C. Whitaker as intervenor to obtain a judgement declaring the mortgage
which the PNB seeks to foreclose to be without force and effect, requiring an
accouting from the PNB of the sales of the property and assets of the
Vegetable Co. and ordering the PVOC and the PNB to pay him the sum of
Php 4,424,418.37
In 1920, the Vegetable Oil Company, found itself in financial straits. It was in
debt to the extent of approximately Php 30,000,000.00. The PNB was the
largest creditor. The VOC owed the bank Php 17,000,000.00. The PNB was
securedly principally by a real and chattel mortgage in favor of the bank on its
vessels Tankerville and H.S. Everett to guarantee the payment of sums not
exceed Php 4,000,000.00
ISSUE:
Whether or not the plaintiff had failed to comply with the contract, that it was
alleged to have celebrated with the defendant and the intervenor, that it would
furnish funds to the defendant so that it could continue operating its factory.
RULING:
In the present instance, it is found that the Board of Directors of the PNB had
not consented to an agreement for practically unlimited backing of the V
corporation and had not ratified any promise to trhat effect made by its
general manager.
All the evidence, documentary and oral, pertinent to the issue considered and
found to disclose no binding promise, tacit, or express made by the PNB to
continue indefinitely the operation of the V corporation. Accordingly,
intervenor Whitaker is not entitled to recover damages from the bank.
PNB vs THE PHILIPPINE VEGETABLE OIL CO.
FACTS: In 1920, the Vegetable Oil Co found itself in financial straits. It was
in debt of approximately P30M. PNB was the largest creditor, owing the bank
P17M. PNB was secured principally by a real and chattel mortgage for P3.5M.
The Vegetable Oil Co executed another chattel mortgage in favor of the bank
on its vessels Tankerville and HS Everette to guarantee the payment of sums
not to exceed P4M.
Mr. Phil C. Whitaker, the General Manager of the Vegetable Oil Co., made his
first offer to pledge certain private properties to secure the creditors of the Oil
Company. At the instance of Mr. Whitaker but inspired to action by the PNB, a
receiver for the Oil Company was appointed by the CFI Manila.
During the period when a receiver was in control of the Oil Company,
Creditors transferred to Mr. Whitaker a part of their claims against the Oil
Company via an agreement. PNB was not a direct party to the agreement
although its officials had full knowledge of its accomplishment and its general
manager placed his OK at the end of the final draft. PNB then obtained a new
mortgage from the Oil Company. Shortly thereafter, the receivership for the
Oil Company was terminated (Feb 1922). The bank suspended the
operations of the Company, and closed the plant.
PNB Bank filed an action to foreclose its mortgage on the property of the
Vegetable Oil Company. The Vegetable Oil Company on its part countered
with certain special defenses with a counterclaim for P6,000,000. Phil. C.
Whitaker presented a complaint in intervention. The judgment rendered was
in favor of the PNB and against the defendant which was ordered to pay the
sum of P15,787,454.54, representing the liquidation between the plaintiff and
the defendant, with legal interest. The counterclaim and the complaint in
intervention were dismissed.
ISSUE: W/N the PNB ever made any contract binding the bank to provide the
necessary operating capital to the Vegetable Oil Co.
HELD: The issue relates to the applicability or non-applicability of the
Statue of Frauds. The broad view is that the Statute of Frauds applies only to
agreements not to be performed on either side within a year from the making
thereof. Mr. Whitaker has entirely performed his part of the agreement, equity
would argue that all evidence be admitted to prove the alleged agreement.
Portions of the minutes of the Board of Directors disclose that the Board
authorized advances to the Oil Company to the extent of more than P1M. No
contract entered into by the General Manager of the Bank would be valid
unless made with the advice and consent of its Board of Directors. What the
Board had decreed was that the Oil Company be financed under the
receivership to the extent of P500,000. No indication that the Board had ever
consented to an agreement for practically unlimited backing of the Oil
Company, or that it had ratified any such promise made by the General
Manager.
No definite agreement binding on the bank but only a general intimation
proffered by the General Manager of the Bank in conference that his bank
contemplated financing the operations of the Oil Company.
Case remanded to the lower court for entry of judgment and further
proceedings.
ORDUA VS. FUENTEBELLA et. Al
G.R. No. 176841 : June 29, 2010
FACTS:
This case involves a residential lot with an area of 74 square meters
located at Fairview Subdivision, Baguio City, originally registered in the name
of Armando Gabriel, Sr. under Transfer Certificate of Title (TCT) No. 67181 of
the Registry of Deeds of Baguio City.
Sometime in 1996 or thereabouts, Gabriel Sr. sold the subject lot to
petitioner Antonita Ordua, but no formal deed was executed to document the
sale. The contract price was apparently payable in installments as Antonita
remitted from time to time and Gabriel Sr. accepted partial payments. One of
the Orduas would later testify that Gabriel Sr. agreed to execute a final deed of
sale upon full payment of the purchase price.
In 1979, Antonita and her sons, Dennis and Anthony Ordua, were already
occupying the subject lot on the basis of some arrangement undisclosed in the
records and even constructed their house thereon. They also paid real
property taxes for the house and declared it for tax purposes, as evidenced by
Tax Declaration in which they place the assessed value of the structure at PhP
20,090.
After the death of Gabriel Sr., his son and namesake, respondent
Gabriel Jr., secured TCT No. T-71499 over the subject lot and continued
accepting payments from the petitioners. On December 12, 1996, Gabriel Jr.
wrote Antonita authorizing her to fence off the said lot and to construct a road
in the adjacent lot. On December 13, 1996, Gabriel Jr. acknowledged receipt
of a PhP 40,000 payment from petitioners. Through a letter dated May 1, 1997,
Gabriel Jr. acknowledged that petitioner had so far made an aggregate
payment of PhP 65,000, leaving an outstanding balance of PhP 60,000. A
receipt Gabriel Jr. issued dated November 24, 1997 reflected a PhP 10,000
payment. Despite all those payments made for the subject lot, Gabriel Jr.
would later sell it to Bernard Banta (Bernard) obviously without the knowledge
of petitioners.
On July 3, 2001, petitioners, joined by Teresita, filed a Complaint for
Annulment of Title, Reconveyance with Damages against the respondents
before the RTC.
The RTC ruled for the respondents. The CA dismissed the appeal,
hence this petition.
ISSUE:
a. Whether or not the sale of the subject lot by Gabriel Sr. to Antonita
is unenforceable under the Statute of Frauds;
 b. Whether or not such sale has adequate consideration;
c. Whether the instant action has already prescribed; and whether or
not respondents are purchasers in good faith.
RULING:
On the first issue, the court notices that Gabriel Sr., during his lifetime,
sold the subject property to Antonita, the purchase price payable on
installment basis. Gabriel Sr. appeared to have been a recipient of some
partial payments. After his death, his son duly recognized the sale by
accepting payments and issuing what may be considered as receipts therefor.
Gabriel Jr., in a gesture virtually acknowledging the petitioners' dominion of the
property, authorized them to construct a fence around it. And no less than his
wife, Teresita, testified as to the fact of sale and of payments received.
Eduardo's assertion in his Answer that "persons appeared in the property" only
after "he initiated ejectment proceedings" is clearly baseless.
On the second issue, the trial court's posture, with which the CA
effectively concurred, is patently flawed. For starters, they equated incomplete
payment of the purchase price with inadequacy of price or what passes as
lesion, when both are different civil law concepts with differing legal
consequences, the first being a ground to rescind an otherwise valid and
enforceable contract. Perceived inadequacy of price, on the other hand, is not
a sufficient ground for setting aside a sale freely entered into, save perhaps
when the inadequacy is shocking to the conscience. The Court to be sure
takes stock of the fact that the contracting parties to the 1995 or 1996 sale
agreed to a purchase price of PhP 125,000 payable on installments. But the
original lot owner, Gabriel Sr., died before full payment can be effected.
Nevertheless, petitioners continued remitting payments to Gabriel, Jr., who
sold the subject lot to Bernard on June 30, 1999. Gabriel, Jr., as may be noted,
parted with the property only for PhP 50,000. On the other hand, Bernard sold
it for PhP 80,000 to Marcos and Benjamin. From the foregoing price figures,
what is abundantly clear is that what Antonita agreed to pay Gabriel, Sr., albeit
in installment, was very much more than what his son, for the same lot,
received from his buyer and the latter's buyer later. The Court, therefore,
cannot see its way clear as to how the RTC arrived at its simplistic conclusion
about the transaction between Gabriel Sr. and Antonita being without
"adequate consideration."
On the third issue, the court finds no quibbling about the fraudulent
nature of the conveyance of the subject lot effected by Gabriel Jr. in favor of
Bernard. It is understandable that after his father's death, Gabriel Jr. inherited
subject lot and for which he was issued TCT No. T-71499. Since the Gabriel
Sr. - Antonita sales transaction called for payment of the contract price in
installments, it is also understandable why the title to the property remained
with the Gabriels. And after the demise of his father, Gabriel Jr. received
payments from the Orduas and even authorized them to enclose the subject
lot with a fence. In sum, Gabriel Jr. knew fully well about the sale and is bound
by the contract as predecessor-in-interest of Gabriel Sr. over the property thus
sold. The prescriptive period for the reconveyance of fraudulently registered
real property is 10 years, reckoned from the date of the issuance of the
certificate of title, if the plaintiff is not in possession, but imprescriptible if he is
in possession of the property. Thus, one who is in actual possession of a piece
of land claiming to be the owner thereof may wait until his possession is
disturbed or his title is attacked before taking steps to vindicate his right. As it
is, petitioners' action for reconveyance is imprescriptible.
In view of this case, the court ruled that petitioner Antonita Ordua is
recognized to have the right of ownership over subject lot covered by TCT No.
T-3276 of the Baguio Registry registered in the name of Eduardo J.
Fuentebella and therefore granted the petition and set aside the decision of
the lower court.
Carbonell vs. Court of Appeals, and Poncio
69 SCRA 99
January 1976
FACTS:
On January 27, 1955, respondent Jose Poncio executed a private
memorandum of sale of his parcel of land with improvements situated in San
Juan, Rizal in favor of petitioner Rosario Carbonell who knew that the said
property was at that time subject to a mortgage in favor of the Republic
Savings Bank (RSB) for the sum of P1,500.00. Four days later, Poncio, in
another private memorandum, bound himself to sell the same property for an
improved price to one Emma Infante for the sum of P2,357.52, with the latter
still assuming the existing mortgage debt in favor of the RSB in the amount of
P1,177.48. Thus, in February 2, Poncio executed a formal registerable deed
of sale in her (Infante's) favor. So, when the first buyer Carbonell saw the
seller Poncio a few days afterwards, bringing the formal deed of sale for the
latter's signature and the balance of the agreed cash payment, she was told
that he could no longer proceed with formalizing the contract with her
(Carbonell) because he had already formalized a sales contract in favor of
Infante.
To protect her legal rights as the first buyer, Carbonell registered on February
8, 1955 with the Register of Deeds her adverse claim as first buyer entitled to
the property. Meanwhile, Infante, the second buyer, was able to register the
sale in her favor only on February 12, 1955, so that the transfer certificate of
title issued in her name carried the duly annotated adverse claim of Carbonell
as the first buyer. The trial court declared the claim of the second buyer
Infante to be superior to that of the first buyer Carbonell, a decision which the
Court of Appeals reversed. Upon motion for reconsideration, however, Court
of Appeals annulled and set aside its first decision and affirmed the trial
court’s decision.
ISSUE:
Who has the superior right over the subject property?
COURT RULING:
The Supreme Court reversed the appellate court’s decision and declared the
first buyer Carbonell to have the superior right over the subject property,
relying on Article 1544 of the Civil Code. Unlike the first and third paragraphs
of said Article 1544, which accord preference to the one who first takes
possession in good faith of personal or real property, the second paragraph
directs that ownership of immovable property should be recognized in favor of
one "who in good faith first recorded" his right. Under the first and third
paragraphs, good faith must characterize the prior possession, while under
the second paragraph, good faith must characterize the act of anterior
registration.
When Carbonell bought the lot from Poncio on January 27, 1955, she was the
only buyer thereof and the title of Poncio was still in his name solely
encumbered by bank mortgage duly annotated thereon. Carbonell was not
aware - and she could not have been aware - of any sale to Infante as there
was no such sale to Infante then. Hence, Carbonell's prior purchase of the
land was made in good faith which did not cease after Poncio told her on
January 31, 1955 of his second sale of the same lot to Infante. Carbonell
wanted to meet Infante but the latter refused so to protect her legal rights,
Carbonell registered her adverse claim on February 8, 1955. Under the
circumstances, this recording of Carbonell’s adverse claim should be deemed
to have been done in good faith and should emphasize Infante's bad faith
when the latter registered her deed of sale 4 days later.
Manzano v. Garcia
GR # 179323 | Nov. 28, 2011
Petitioner: Manzano
Respondent: Marcelino Garcia
(Article 1318 of the Civil Code, Contracts)
DOCTRINE
FACTS
1. This case involves a parcel of land covered by a Transfer Certificate of
Title (TCT) issued in the name of respondent Marcelino D. Garcia with
a land area of 6951 square meters located in Cagayan de Oro City.
2. The property was the subject of a deed of pacto de retro sale allegedly
executed by Garcia in favor of Constancio Manzano, the
predecessor-in-interest and brother of petitioner Vicente Manzano, Jr.
for 80,500 pesos.
3. Under said contract, Garcia purportedly reserved the right to
repurchase the subject property for the same price within three
months from the date of the instrument.
4. Constancio Manzano passed away. Vicente was named the
administrator of the intestate estate of Constancio Manzano.
5. Garcia did not redeem the subject property within the three-month
period. Consequently, Vicente instituted a petition for consolidation
of ownership over the property.
6. Garcia filed an opposition and answer, alleging that the document
evidencing the pacto de retro sale was a forgery. He claimed that he
and his wife were in the United States of America and therefore could
not have possibly executed the said pacto de retro sale.
7. Garcia filed a complaint for annulment of pacto de retro sale and
recovery of the owner’s title with preliminary injunction against
Vicente. They were still in possession of the said property. He came to
know the existence of said document only when the counsel of
Vicente sent him a letter demanding that he should repurchase the
property pursuant to the pacto de retro sale within fifteen days from
receipt of said letter. Upon further inquiry, he discovered that a certain
Mr. P. Pacot had executed the questioned document by
misrepresenting himself as "Marcelino G. Garcia" (bearing the wrong
middle initial).
8. Vicente’s petition for consolidation of ownership over the and Garcia’s
action for annulment of pacto de retro sale and recovery of the
owner’s title with preliminary injunction were consolidated before the
trial court.
9. During the trial, Vicente presented the TCT and Tax Declaration to
prove the due execution of the pacto de retro sale was recorded.
10. Garcia testified that he went to the USA, left the titles of the land with
two of their children. Garcia testified that the signatures appearing in
the pacto de retro sale were not his and his wife’s. He presented his
passport and driver’s license, both of which bear an entirely different
signature.
11. Atty. Mediante, the person who notarized the deed of conveyance in
question, testified that the Marcelino Garcia who appeared in his office
and who executed the pacto de retro sale is not the same Marcelino
Garcia who was in court.
12. Perla Babano, one of the witnesses to the execution of the pacto de
retro sale, likewise testified that the person who introduced himself as
Marcelino G. Garcia and signed the document on May 26, 1992 is not
the same Marcelino Garcia.
13. RTC decided in favor of Vicente, declaring the Deed of Pacto de Retro
Sale legal and valid. Failed to prove that the signature was forged
because of the absence of an expert witness to determine whether the
signatures are made by the same person. RTC doubted the
testimonies of Atty. Mediante and Babano. For Atty. Mediante, he
 admitted he notarizes around 25 to 30 documents per month and
could not describe or remember all the persons appearing before him
for notarization. As regards Babano, the trial court found it unnatural
for an impersonator to show her, a stranger, documents such as the
title to the subject property. RTC also found that the low price paid for
the property insignificant considering that the vendor had the right to
repurchase the property within three months from the sale.
14. CA reversed.Vicente is ordered to return the owner’s duplicate copy
of the TCT. There is no rule requiring expert testimony to determine
the genuineness of a signature appearing on a document. The
signatures are far different.
ISSUE/S
1. Did the CA erred in reversing the decision of the RTC?
PROVISIONS
RULING & RATIO
1. NO
- It is plainly apparent to this Court that the alleged signature of Garcia in
the pacto de retro sale is utterly dissimilar from his customary signature
appearing in the evidence on record.
- In Estacio v. Jaranilla
Trial court may validly determine forgery from its own independent
examination. The trial court judge can do without necessarily resorting to
experts, especially when the question involved is mere handwriting similarity
or dissimilarity, which can be determined by a visual comparison of specimen.
-Section 22 of Rule 132 of the Rules of Court
explicitly authorizes the court, by itself, to make a comparison of the disputed
handwriting.
-The ruling in Rivera v. Turiano is not applicable. In the case at bar, the
variance in the alleged signature was enormous and obvious, such that this
Court can readily conclude that the pacto de retro sale was in all likelihood
made by someone who has not even seen the customary signature of Garcia.
Furthermore, the falsity of the signature was affirmed by two persons.
- Atty. Mediante was also previously approached by the impostor regarding a
loan. As regards to Bobano, it was precisely the presentation of the title that
would convince others that the impostor was the owner of the real property.
- the proper basis for the nullity of the forged pacto de retro sale is not
Article 1409 (which enumerates examples of void contracts) in relation
to Article 15053(which refers to an unenforceable contract and is
applicable only to goods) of the Civil Code as stated by the Court of
Appeals, but Article 1318 of the Civil Code, which enumerates the
essential requisites of a valid contract:
Article 1318. There is no contract unless the following requisites concur:
(1) Consent of the contracting parties;
(2) Object certain which is the subject matter of the contract;
(3) Cause of the obligation which is established.
There are two types of void contracts: (1) those where one of the essential
requisites of a valid contract as provided for by Article 1318 of the Civil Code is
totally wanting; and (2) those declared to be so under Article 1409 of the Civil
Code. The absence of the essential [requisites] of consent and cause or
consideration in these cases rendered the contract inexistent.
DISPOSITION
WHEREFORE, the Petition is DENIED. The Decision of the Court of Appeals
in CA-G.R. CV No. 55408 dated September 26, 2006 and its Resolution dated
August 9, 2007 are hereby AFFIRMED.
Urada v. Mapalad
A.M. MTJ 91-622, 22 March 1993
FACTS:
Atty. Manuel T. Ubarra, on behalf of his client Juanito A. Calderon, charges
respondent, the Presiding Judge of the Municipal Trial Court (MTC) of Pulilan,
Bulacan, with grave misconduct, knowingly rendering an unjust judgment, the
violation of the Canons of Judicial Ethics and the failure to decide within the
mandated ninety-day period. Accused Roberto Cruda worked as a houseboy
of the herein respondent; by that time, he (Calderon) had already observed the
latter’s partiality in favor of the said accused. Roberto Cruda married
Annabelle V. Manlangit respondent’s youngest sister; it was the respondent
herself who solemnized that marriage other office, as evidenced by the
marriage contract; despite such marriage, respondent did not inhibit herself
from hearing the criminal case and instead proceeded to render and
promulgate a judgment acquitting Cruda, her brother-in-law.
Earlier, however, respondent voluntarily inhibited herself in the other case to
avoid suspicion, partiality or bias because accused Cruda had already
become her relative by affinity. Calderon thus asserts that the respondent
acted with bias or partiality in rendering the decision in the criminal case.
Anent the specific charges leveled against her, respondent claims that the trial
on the merits of the criminal case was terminated. After the court adjourned,
Romeo saw the respondent in her chambers to inform her that Roberto and
Annabelle had eloped. Both were, however, married in her office with her as
the solemnizing officer. Thereupon, she inhibited herself. She maintains that
the ground for her inhibition in the criminal case had not yet existed when she
tried the same as she became related to Roberto Cruda within the prohibited
degree only on 9 August 1991, long after the termination of the trial therein.
She denies having knowingly rendered an unjust judgment in favor of her
brother-in-law because she “was persuaded to dismiss the same not on
account that the guilt of Cruda was not proven beyond reasonable doubt but
by the very reason that both the private complainant and the accused therein
were in pari delicto.”
ISSUE:
DEFENSE:
WHETHER OR NOT the doctrine of in pari delicto is applicable in the criminal
case rendered by the judge.
RULING:
No. We find the application of the pari delicto theory in a criminal case to be
strange, to the least. In the first place, the rule on pari delicto is a rule in civil
law. First, in view of the broader grounds of public policy, the rule may not be
invoked against the State. And second, in the prosecution of public crimes, the
complainant is the State — i.e., the People of the Philippines — while the
private offended party is but a complaining witness. Any criminal act
perpetrated by the latter on the occasion of the commission of the crime, or
which may have given rise to the criminal act imputed to the accused is not the
act or conduct of the State and can by no means find it under the doctrine of
pari delicto.
In spite of all this, however, the respondent may not necessarily be liable for
rendering an unjust judgment as there is no convincing evidence on record to
show that she knew such judgment to be unjust and that she rendered the
same with the conscious and deliberate intent to commit an injustice. She
could only be as she is hereby found, guilty of gross ignorance of the law.
A.M. No. MTJ-91-622 March 22, 1993
ATTY. MANUEL T. UBARRA, Complainant,
vs.
JUDGE LUZVIMINDA M. MAPALAD, Respondent.
FACTS:
1) Complainant Atty. Manuel T. Ubarra, on behalf of his client Juanito A.
Calderon, charges respondent, the Presiding Judge of MTC Pulilan,
Bulacan, with grave misconduct, knowingly rendering an unjust
judgment, the violation of the Canons of Judicial Ethics and the failure
to decide within the mandated ninety-day period Criminal Case No.
89-3905.
2) Juanito A. Calderon, the offended party in said Criminal Case alleges
that in the course of the trial of Criminal Case before the MTC, he
noted that accused Roberto Cruda worked as a houseboy of the
herein respondent Judge; she was in favor of the said accused
(Cruda); Roberto Cruda married Annabelle V. Manlangit, respondent
Judge's youngest sister; it was the respondent herself who
solemnized that marriage at her office; despite such marriage,
respondent did not inhibit herself from hearing Criminal Case No.
89-3905 and instead proceeded to render and promulgate, on 17
October 1991, a judgment acquitting Cruda, her brother-in-law.
1) Respindent discovered, that Roberto Cruda had previously been
charged in six (6) criminal cases, and that he has a very sad life story
(see original HAHA). The grim situation confronting Roberto who, at
that time, was twenty-one (21) years old so "moved and touched the
heart and the mother instinct" of respondent who "then resolved to
rehabilitate and reform him, the best way she can." She thus took the
opportunity to have a heart to heart talk with him; after some
motivations, the latter opened up and recounted his tale of bitterness
and hatred against his parents, relatives, neighbors and life itself.
Upon her counseling, he promised to mend his ways; she then
assured him of her help in the settlement of all his cases. (Side story:
love blossomed between her sister and Roberto HAHAHA)
2) Respondent reveals that she interceded in the settlement of the
cases pending against Roberto. Except for Criminal Case No.
89-3905 (case of Calderon) all the other cases were eventually
withdrawn by the complainants who were compassionate enough to
forgive Roberto for his misdeeds. With respect to Criminal Case No.
89-3905, she attempted to resolve the differences existing between
Juanito Calderon, the offended party, and Roberto; but they pursued
with the case.
3) She denies having knowingly rendered an unjust judgment in favor of
her brother-in-law because she "was persuaded to dismiss the same
not on account that the guilt of Cruda was not proven beyond
reasonable doubt but by the very reason that both the private
complainant and the accused therein were in pari delicto. She
admits, however, that she decided Criminal Case No. 89-3905
beyond ninety (90) days from the date it was submitted for decision,
and pleads for this Court's understanding, leniency and compassion
considering that a Municipal Trial Court Judge is saddled not only
 with judicial functions, but quasi-judicial task as well which are
enough to drain most of his/her energy.
Executive Judge of the RTC of Malolos: respondent Judge guilty of grave
misconduct
ISSUE: Whether or not respondent Judge s guilty of grave misconduct? Yes
(Underlying issue: is in pari delicto applicable to criminal cases? NO!)
HELD: We find the respondent guilty of gross inefficiency and neglect of duty.
We have also carefully scrutinized the respondent's decision of acquittal in
Criminal Case No. 89-3905 to determine if she had knowingly rendered an
unjust judgment. A decision would not necessarily be unjust simply because a
judge is disqualified to render it. Knowingly rendering an unjust judgment is a
criminal offense defined and penalized under Article 204 of the Revised Penal
Code; for conviction to lie, it must be proven that the judgment is unjust and
that the judge knows that it is unjust.
In her decision in Criminal Case No. 89-3905, respondent Judge held that
accused Roberto Cruda committed the criminal act imputed to him; however,
the latter was acquitted solely on the ground that he acted in retaliation to the
unwarranted provocation by the complainant. Hence, the accused and
complainant were adjudged to be in pari delicto. The respondent concluded
that they shall have no action against each other and that the court shall leave
them where it finds them.
We find the application of the pari delicto theory in a criminal case to be
strange, to say the least. In the first place, the rule on pari delicto is a rule
in civil law. That this rule can by no means apply in a criminal case is
evidenced by the aforesaid Article 1411. Secondly, in view of the broader
grounds of public policy, the rule may not be invoked against the State.
Thirdly, in the prosecution of public crimes, the complainant is the State, - i.e.,
the People of the Philippines - while the private offended party is but a
complaining witness. Any criminal act perpetrated by the latter on the
occasion of the commission of the crime, or which may have given rise to the
criminal act imputed to the accused is not the act or conduct of the State and
can by no means bind it under the doctrine of pari delicto. To rule otherwise
would be to establish a dangerous doctrine which would irreparably weaken
the very foundations of the criminal justice system and frustrate the
administration of justice. She is hereby found, guilty of gross ignorance of the
law.
Finally, she is guilty of improper conduct because of her interception in
Cruda’s other cases which could only serve to diminish public confidence in
the integrity and impartiality of the judiciary. Her behavior amounted to a
violation of Rule 2.01, Canon 2 of the Code of Judicial Conduct.
WHEREFORE, for grave misconduct, gross inefficiency and neglect of duty,
gross ignorance of the law and conduct prejudicial to the best interest of the
service, respondent JUDGE LUZVIMINDA M. MAPALAD of the Municipal
Trial Court of Pulilan, Bulacan is hereby ordered DISMISSED from the
service.
Modina v. CA
G.R. No. 109355, 29 October 1999
FACTS:
Ramon Chiang sold a lot to Modina as evidenced by a deed of sale. Merlinda,
the wife of Ramon, sought the nullity of the sale alleging that said lands were
not legally transferred to her husband. Modina then filed a complaint for
recovery of possession with damages against the spouses and lessees on
said lot. RTC and CA ruled in favor of Merlinda. Modina insists that the deed of
sale is valid alleging that the sale between the spouses is void under the law,
thereby allowing the principle of in pari delicto to be applicable. Petitioner
avers that these leaves the guilty spouses as they are and keeps the rights of
third persons, such as himself, undisturbed.
ISSUE:
WON the sale of the land to Modina is valid.
RULING:
No. The sale of land between Ramon and Modina is null and void.
Art. 1490 of the Civil Code provides that: “The husband and the wife cannot
sell property to each other, except: (1) when a separation of property was
agreed upon in the marriage settlements; or (2) when there has been a judicial
separation of property under Art. 191.”
Merlinda is still the owner of the said lot. Not being the owner of the land,
Ramon Chiang cannot sell the same to Modina. Hence the sale is void and
inexistent. Petition is denied.
MODINA v CA
1.The parcels of land in question are those under the name of Ramon Chiang
2.He claims that subject properties were sold to him by his wife, Merlinda as
evidenced by a Deed of Absolute Sale dated December 17, 1975,
3.However, CHIANG subsequently sold the land to petitioner Serafin Modina
(MODINA),
4.MODINA brought a Complaint for Recovery of Possession with Damages
against the private respondents, Ernesto Hontarciego, Paul Figueroa and
Teodoro Hipalla
5.Upon learning of the said sale, MERLINDA sought the declaration of nullity
of the Deed of Sale between her husband and MODINA on the ground that
the titles of the parcels of land were never legally transferred to her husband.
6.She claims that fraudulent acts were employed by him to obtain a Torrens
Title in his favor. However, she confirmed the validity of the lease contracts
with the other private respondents.
7.These parcels of lands were those ordered sold by CFI Iloilo and these
formed part of the “Intestate Estate of Nelson Plana” her first husband.
8.RTC: decided in favor of MERLINDA. Declaring as void and inexistent the
sale by Merlinda to as well as the subsequent sale of CHIANG to MODINA
9.CA: affirmed
ISSUE:
1)whether the sale of subject lots should be nullified-- YES
(2) whether petitioner was not a purchaser in good faith-- YES
(4) whether or not only three-fourths of subject lots should be returned to the
private respondent.
RATIO 1:
Art. 1490. The husband and the wife cannot sell property to each other,
except:
(1) when a separation of property was agreed upon in the marriage
settlements; or
(2) when there has been a judicial separation of property under Art. 191.
The exceptions laid down did not exist with respect to the property relations of
Chiang and Merlinda. Therefore, the sale in question is invalid for being
prohibited by law. Not being the owner of subject properties, Ramon Chiang
could not have validly sold the same to plaintiff Serafin Modina. The sale by
Ramon Chiang in favor of Serafin Modina is, likewise, void and inexistent.
Furthermore, the court found no sufficient evidence declaring there was fault
on the part of MERLINDA, therefore, the principle of in pari delicto is
inapplicable and the sale was void for want of consideration. In effect,
MERLINDA can recover the lots sold by her husband to petitioner MODINA.
----The principle of in pari delicto denies all recovery to the guilty parties inter
se. It applies to cases where the nullity arises from the illegality of the
consideration or the purpose of the contract. When two persons are equally at
fault, the law does not relieve them. The exception to this general rule is when
the principle is invoked with respect to inexistent contracts.----
The Court debunked petitioner’s theory that MERLINDA intentionally gave
away the bulk of her and her late husband’s estate to defendant CHIANG.
Because Records show that when Merlinda filed a complaint-in-intervention,
she did not put up Article 1490 as a defense because that would be
inconsistent to her claim that the sale was inexistent. Instead she denied the
existence of the Deed of Sale in favor of her husband and claimed no
consideration in that deed of sale.
RATIO 2:
As a general rule, in a sale under the Torrens system, a void title cannot give
rise to a valid title. The exception is when the sale of a person with a void title
is to a third person who purchased it for value and in good faith.
A purchaser in good faith is one who buys the property of another without
notice that some other person has a right to or interest in such property and
pays a full and fair price at the time of the purchase or before he has notice of
the claim or interest of some other person in the property.
Petitioner cannot claim that he was a purchaser in good faith.
(1)He asked his nephew, to investigate the origin of the property and the latter
learned that the same formed part of the properties of MERLINDA’s first
husband;
(2)that the said sale was between the spouses;
(3)MODINA met all the lessees who informed that subject lands belong to
MERLINDA and they had no knowledge that the same lots were sold to the
husband.
His mere refusal to believe that such defect exists, or his wilful closing of his
eyes to the possibility of the existence of a defect in his vendor’s title, will not
make him an innocent purchaser for value
RATIO 3:
It is a settled doctrine that an issue which was neither averred in the
Complaint nor raised during the trial before the lower court cannot be raised
for the first time on appeal, as such a recourse would be offensive to the basic
rules of fair play, justice, and due process.
The issue of whether only three-fourths of subject property will be returned
was never an issue before the lower court and therefore, the petitioner cannot
do it now.
LIGUEZ VS. COURT OF APPEALS
102 PHIL 577
FACTS:
Petitioner filed a complaint for the recovery of parcel of land against the
widow and heirs of Salvador Lopez. Petitioner averred that he is the owner of
the aforementioned parcel of land pursuant to a Deed of Donation executed in
her favor by the late owner, Salvador Lopez. The defense interposed that the
donation was null and void for having illicit cause or consideration which was
the petitioner’s entering into a marital relations with Salvador, a married man,
and that the property had been adjudicated to the appellees as heirs of
Salvador Lopez by the Court of First Instance.
Meanwhile, the Court of Appeals found that the Deed of Donation
was prepared by a Justice of Peace and was ratified and signed when
petitioner Liquez was still a minor, 16 years of age. It was the ascertainment
of the Court of Appeals that the donated land belonged to the conjugal
partnership of Salvador and his wife and that the Deed of Donation was never
recorded. Hence, the Court of Appeals held that the Deed of Donation was
inoperative and null and void because the donation was tainted with illegal
cause or consideration.
ISSUE:
Whether or not the Deed of Donation is void for having illicit cause or
consideration.
RULING:
NO. Under Article 1279 of the Civil Code of 1989, which was the
governing law during the execution of the Deed of Donation, the liberality of
the donor is deemed cover only in those contracts that are pure beneficence.
In these contracts, the idea of self interest is totally absent in the part of the
transferee. Here, the facts as found demonstrated that in making the
donation, Salvador Lopez was not moved exclusively by the desire to benefit
the petitioner but also to secure her cohabiting with him. Petitioner seeks to
differentiate between the liberality of Lopez as cause and his desire as a
motive. However, motive may be regarded as cause when it predetermined
the purpose of the contract. The Court of Appeals rejected the claim of
petitioner on the ground on the rule on pari delicto embodied in Article 1912 of
the Civil Code. However, this rule cannot be applied in the case because it
cannot be said that both parties had equal guilt where petitioner was a mere
minor when the donation was made and that it was not shown that she was
fully aware of the terms of the said donation.
RELLOSA VS. GAW CHEE HUN
FACTS: On 1944, Dionisio Rellosa, a Filipino, sold to Gaw Chee Hun, a
Chinese, a parcel of land with a house erected on it, located in Manila. Both
parties entered into a lease contract, whereby Rellosa, the vendor, occupied
the land under the condition that Gaw Chee obtain the approval of the sale by
the Japanese Administration. Gaw Chee did not obtain such approval.
Rellosa now seeks to annul the sale and the lease. Gaw Chee, meanwhile,
contends that such sale was absolute and conditional, the same not being
contrary to law, morals and public order. He further states that Rellosa is
estopped from asserting his ownership over the land, after having leased the
same from Gaw Chee, and thus, recognizing Gaw Chee’s title over the
property.
ISSUES: WON Rellosa can have the sale declared null and void and recover
the property considering the effect of the law governing rescission of
contracts.
HELD: The sale in question is null and void, but plaintiff is barred from taking
the present action under the principle of pari delicto.

RATIO: A party to an illegal contract cannot come into court to have his illegal
objects carried out. This is the doctrine of In Pari Delicto. Rellosa’s sale of the
land to Gaw Chee, an alien is against the Constitution and is thus illegal. The
Commonwealth Act provided that such sale is not only unlawful but also null
and void ab initio, that such will effect the annulling and cancelling of the title
originally issued, and reverting the property and its improvements to the
State.
Dionisio Rellosa v. Gaw Chee Hun
Doctrine:
The “In Pari Delicto” doctrine provides that the proposition is universal that no
action arises, in equity or at law, from an illegal contract; no suit can be
mainained for its specific performance, or to recover the property agreed to be
sold or delivered, or the money agreed to be paid, or damages for its violation
Recit-Ready:
On February 2, 1944, Dionisio Rellosa sold to Gaw Chee Hun a parcel of
land, together with the house erected thereon, situated in the City of Manila,
Philippines, for the sum of P25,000. The vendor remained in possession of
the property under a contract of lease entered into on the same date between
the same parties.
Alleging that the sale was executed subject to the condition that the vendee,
being a Chinese citizen, would obtain the approval of the Japanese Military
Administration in accordance with (seirei) No. 6 issued on April 2, 1943, by
the Japanese authorities, and said approval has not been obtained, and that,
even if said requirement were met, the sale would at all events be void under
article XIII, section 5, of our Constitution.
The vendor instituted the present action in the Court of First Instance of
Manila seeking the annulment of the sale
ISSUES:
1. Whether the sale was void because it is against the constitution
2. Whether the petitioner have the sale declared null and void and recover
the property considering the effect of the law governing rescission of
contracts
HELD:
1) Yes, the court held that under the Constitution, aliens may not acquire
private or public agricultural lands, including residential lands. This matter has
been once more submitted to the court for deliberation, but the ruling was
reaffirmed. This ruling fully disposes of the question touching on the validity of
the sale of the property herein involved.
2) No, even if the plaintiffs can still invoke the Constitution to set aside the
sale in question, they are now prevented from doing so if their purpose is to
recover the lands that they have voluntarily parted with, because of their guilty
knowledge that what they were doing was in violation of the Constitution.
They cannot escape this conclusion because they are presumed to know the
law.
Facts:
 February 2, 1944: Dionisio Rellosa sold to Gaw Chee Hun a parcel of
land, together with the house erected thereon, situated in the City of
Manila, for the sum of P25, 000
 The vendor remained in possession of the property under a contract
of lease entered into on the same date between the same parties
 Alleging that the sale was executed subject to the condition that the
vendee, being a Chinese citizen, would obtain the approval of the
Japanese Military Administration in accordance with (seirei) No. 6
issued on April 2, 1943, by the Japanese authorities, and said
approval has not been obtained, and that, even if said requirement
were met, the sale would at all events be void under Article XIII,
section 5 of the Constitution, the vendor instituted the present action
in the CFI of Manila seeking the annulment of the sale as well as
the lease covering the land and the house mentioned, and
praying that, once the sale and the lease are declared null and
void, the vendee be ordered to return to vendor the duplicate of
the title covering the property, and be restrained from in any way
dispossessing the latter of said property
 Defendant answered the complaint setting up as special defense that
the sale referred to in the complaint was absolute and unconditional
and was in every respect valid and binding between the parties, it
being not contrary to law, morals and public order, and that plaintiff is
guilty of estoppel in that, by having executed a deed of lease over the
property, he thereby recognized the title of defendant to that property
 The court declared both the sale and the lease valid and binding
and dismissed the complaint; the court likewise ordered plaintiff
to turn over the property to defendant and to pay a rental of P50
a month from August 1, 1945 until the property has been actually
delivered. As this decision was affirmed in toto by the CA,
plaintiff sued out the present petition for review
 One of the issues raised by petitioner refers to the validity of Seirei
No. 6 on April 2, 1943 by the Japanese authorities which
prohibits an alien from acquiring any private land not
agricultural in nature during the occupation unless the
necessary approval is obtained from the Director General of the
Japanese Military Administration
  Petitioner contends that the sale in question cannot have any
validity under the above military directive in view of the failure of
respondent to obtain the requisite approval and it was error for
the CA to declare said directive without any binding effect
because the occupation government could not have issued it
under Article 43 of the Hague Regulations which command that
laws that are municipal in character of an occupied territory
should be respected and cannot be ignored unless prevented by
military necessity
 We do not believe it necessary to consider now the question relative
to the validity of Seirei No. 6 of the Japanese Military Administration
for the simple reason that in our opinion the law that should govern
the particular transaction is not the above directive but the
Constitution adopted by the then Republic of the Philippines on Sept.
4, 1943, it appearing that the aforesaid transaction was executed on
Feb. 2, 1944
 Said Constitution, in its article VIII, section 5, provides that “no private
agricultural land shall be transferred or assigned except to
individuals, corporations, or associations qualified to acquire or hold
lands of the public domain in the Philippines,” which provisions are
similar to those contained in our present Constitution
 As to whether the phrase “private agricultural land” employed in said
Constitution includes residential lands, as the one involved herein,
there can be no doubt because said phrase has already been
interpreted in the affirmative sense by this court in the recent case of
Krivenko v. Register of Deeds, it was held that under the Constitution,
aliens may not acquire private or public agricultural lands, including
residential lands; this matter has been once more submitted to the
court for deliberation, but the ruling was reaffirmed. This ruling fully
disposes of the question touching on the validity of the sale of the
property herein involved
Issue:
Can petition have the sale declared null and void and recover the property
considering the effect of the law governing rescission of contracts? – No.
Held:
 Following the doctrine laid down in the case of Trinidad Gonzaga de
Cabauatan, et al. v. uy Hoo, et al.: “We can, therefore, say that even if
the plaintiffs can still invoke the Constitution, or the doctrine in the
Krivenko Case, to set aside the sale in question, they are now
prevented from doing so if their purpose is to recover the lands that
they have voluntarily partied with, because of their guilty knowledge
that what they were doing was in violation of the Constitution. They
cannot escape this conclusion because they are presumed to know
the law.
 In Pari Delicto: “a party to an illegal contract cannot come into a court
of law and ask to have his illegal objects carried out. The law will not
aid either party to an illegal agreement; it leaves the parties where it
finds them.”
 It is true that this doctrine is subject to one important limitation,
namely, “whenever public policy is considered as advanced by
allowing either party to sue for relief against the transaction”; but not
all contracts which are illegal because opposed to public policy come
under this limitation
 The cases in which this limitation may apply one “include the class of
contracts which are intrinsically contrary to public policy, contracts in
which the illegality itself consists in their opposition to public policy,
and any other species of illegal contracts in which, from their
particular circumstances, incidental and collateral motives of public
policy require relief.”
 The contract in question does not come under this exception because
it is not intrinsically contrary to public policy, nor one where the
illegality itself consists in its opposition to public policy
 It is illegal not because it is against public policy but because it is
against the Constitution; nor may it be contended that to apply the
doctrine of pari delicto would be tantamount to contravening the
fundamental policy embodied in the constitutional prohibition in that it
would allow an alien to remain in the illegal possession of the land,
because in this case the remedy is lodged elsewhere; to adopt the
contrary view would be merely to benefit petitioner and not to
enhance public interest
Dispositive:
 In view of the foregoing, we hold that the sale in question is null and
void, but plaintiff is barred from taking the present action under the
principal of pari delicto
 The decision appealed from is hereby affirmed without
pronouncement as to costs
PHILIPPINE BANKING CORPORATION V. LUI SHE,
21 SCRA 52
FACTS:
Justina who inherited parcels of land in Manila executed a contract of
lease in favor of Wong, covering a portion already leased to him and another
portion of the property. The lease was for 50 years, although the lessee was
give the right to withdraw at anytime from the agreement with a stipulated
monthly rental.
 She executed another contract giving Wong the option to buy the
leased premises for P120,000 payable within 10 years at monthly installment
of P1,000. The option was conditioned on his obtaining Philippine
citizenship, which was then pending. His application for naturalization was
withdrawn when it was discovered that he was a resident of Rizal.
She executed two other contracts one extending the term to 99 years
and the term fixing the term of the option of 50 years. In the two wills, she
bade her legatees to respect the contract she had entered into with Wong, but
it appears to have a change of heart in a codicil. Claiming that the various
contracts were made because of her machinations and inducements
practiced by him, she now directed her executor to secure the annulment of
the contracts.
The complaint alleged that Wong obtained the contracts through
fraud. Wong denied having taken advantage of her trust in order to secure
the execution of the contracts on question. He insisted that the various
contracts were freely and voluntarily entered into by the parties.
The lower court declared all the contracts null and void with the
exception of the first, which is the contract of lease.
ISSUE:
Whether or not the contracts entered into by the parties are void.
RULING:
The contract is void. The Court held the lease and the rest of the
contracts were obtained with the consent of Justina freely given and
voluntarily, hence the claim that the consent was vitiated due to fraud or
machination is bereft of merit. However the contacts are not necessarily valid
because the Constitution provides that aliens are not allowed to own lands in
the Philippines. The illicit purpose then becomes the illegal causa, rendering
the contracts void.
It does not follow from what has been said that because the parties
are in pari delicto they will be left where they are, without relief. For one thing,
the original parties who were guilty of violation of fundamental charter have
died and have since substituted by their administrators to whom it would e
unjust to impute their guilt. For another thing, Article 1416 of the Civil Code
provides an exception to the pari de licto, that when the agreement is not
illegal per se but is merely prohibited, and the prohibition of the law is
designed for the protection of the plaintiff, he may recover what he has paid or
delivered.
ALFRED FRITZ FRENZEL, petitioner, vs.EDERLINA P. CATITO,
respondent.
G.R. No. 143958 July 11, 2003
FACTS:
Alfred Frenzel and Ederlina Catito had an amorous relationship which
started in King’s Cross, a night spot in Sydney.
During their relationship Alfred bought properties in the Philippines in the
name of Ederlina. Their relationship started to deteriorate when the husband
of Ederlina threatened Ederlina that he would file a bigamy case against her
for having an illicit affair with Alfred, who was also married.
Alfred filed a complaint against Ederlina for specific performance,
declaration of real and personal properties, sum of money and damages.
ISSUE:
Whether or not acquisition of a parcel of land is valid.
RULING:
The sales of three parcels of land in favor of the petitioner who is a
foreigner is illegal per se. The transactions are void ab initio because they
were entered into in violation of the Constitution. Thus, to allow the petitioner
to recover the properties or the money used in the purchase of the parcels of
land would be subversive of public policy.
An action for recovery of what has been paid without just cause has been
designated as an accion in rem verso. This provision does not apply if, as in
this case, the action is proscribed by the Constitution or by the application of
the pari delicto doctrine. 68 It may be unfair and unjust to bar the petitioner
from filing an accion in rem verso over the subject properties, or from
recovering the money he paid for the said properties, but, as Lord Mansfield
stated in the early case of Holman vs. Johnson:69 "The objection that a
contract is immoral or illegal as between the plaintiff and the defendant,
sounds at all times very ill in the mouth of the defendant. It is not for his sake,
however, that the objection is ever allowed; but it is founded in general
principles of policy, which the defendant has the advantage of, contrary to the
real justice, as between him and the plaintiff."
ALFRED FRITZ FRENZEL, petitioner, vs. EDERLINA P. CATITO,
respondent.
Facts:
Petitioner Alfred Fritz Frenzel is an Australian citizen of German descent. He
is an electrical engineer by profession, but worked as a pilot with the New
Guinea Airlines. He arrived in the Philippines in 1974, started engaging in
business in the country; two years thereafter, he married Teresita Santos, a
Filipino citizen.
In 1981, Alfred and Teresita separated from bed and board without obtaining
a divorce.
In 1983, Alfred arrived in Sydney, Australia for a vacation. He went to King’s
Cross, a night spot in Sydney, for a massage where he met Ederlina Catito, a
Filipina and a native of Bajada, Davao City.
Unknown to Alfred, she resided for a time in Germany and was married to
Klaus Muller, a German national. She left Germany and tried her luck in
Sydney, Australia, where she found employment as a masseuse in the King’s
Cross nightclub.
Alfred was so enamored with Ederlina that he persuaded her to stop working
at King’s Cross, return to the Philippines, and engage in a wholesome
business of her own. He also proposed that they meet in Manila, to which she
assented. Alfred gave her money for her plane fare to the Philippines. Within
two weeks of Ederlina’s arrival in Manila, Alfred joined her. Alfred reiterated
his proposal for Ederlina to stay in the Philippines and engage in business,
even offering to finance her business venture. Ederlina was delighted at the
idea and proposed to put up a beauty parlor. Alfred happily agreed.
Alfred told Ederlina that he was married but that he was eager to divorce his
wife in Australia. Alfred proposed marriage to Ederlina, but she replied that
they should wait a little bit longer.
Alfred went back to Papua New Guinea to resume his work as a pilot.
Since Alfred knew that as an alien he was disqualified from owning lands in
the Philippines, he agreed that only Ederlina’s name would appear in the
deed of sale as the buyer of the property, as well as in the title covering the
same. After all, he was planning to marry Ederlina and he believed that after
their marriage, the two of them would jointly own the property.
When Ederlina left for Germany to visit Klaus, she had her father Narciso
Catito and her two sisters occupy the property.
Alfred decided to stay in the Philippines for good and live with Ederlina. He
returned to Australia and sold his fiber glass pleasure boat to John Reid in
1984. He also sold his television and video business in Papua New Guinea.
He had his personal properties shipped to the Philippines and stored at San
Francisco del Monte, Quezon City.
On July 28, 1984, while Alfred was in Papua New Guinea, he received a
Letter dated December 7, 1983 from Klaus Muller who was then residing in
Berlin, Germany. Klaus informed Alfred that he and Ederlina had been
married on October 16, 1978 and had a blissful married life until Alfred
intruded therein.
Klaus stated that he knew of Alfred and Ederlina’s amorous relationship, and
discovered the same sometime in November 1983 when he arrived in Manila.
He also begged Alfred to leave Ederlina alone and to return her to him, saying
that Alfred could not possibly build his future on his (Klaus’) misfortune.
Alfred had occasion to talk to Sally MacCarron, a close friend of Ederlina. He
inquired if there was any truth to Klaus’ statements and Sally confirmed that
Klaus was married to Ederlina.
When Alfred confronted Ederlina, she admitted that she and Klaus were,
indeed, married. But she assured Alfred that she would divorce Klaus. Alfred
was appeased. He agreed to continue the amorous relationship and wait for
the outcome of Ederlina’s petition for divorce. After all, he intended to marry
her. He retained the services of Rechtsanwältin Banzhaf with offices in Berlin,
as her counsel who informed her of the progress of the proceedings. Alfred
paid for the services of the lawyer.
Ederlina often wrote letters to her family informing them of her life with Alfred.
In a Letter dated January 21, 1985, she wrote about how Alfred had financed
the purchases of some real properties, the establishment of her beauty parlor
business, and her petition to divorce Klaus.
In the meantime, Ederlina’s petition for divorce was denied because Klaus
opposed the same. A second petition filed by her met the same fate. Klaus
wanted half of all the properties owned by Ederlina in the Philippines before
he would agree to a divorce. Worse, Klaus threatened to file a bigamy case
against Ederlina.
Alfred proposed the creation of a partnership to Ederlina, or as an alternative,
the establishment of a corporation, with Ederlina owning 30% of the equity
thereof. She initially agreed to put up a corporation and contacted Atty.
Armando Dominguez to prepare the necessary documents. Ederlina changed
her mind at the last minute when she was advised to insist on claiming
ownership over the properties acquired by them during their coverture.
Alfred and Ederlina’s relationship started deteriorating. Ederlina had not been
able to secure a divorce from Klaus. The latter could charge her for bigamy
and could even involve Alfred, who himself was still married. To avoid
complications, Alfred decided to live separately from Ederlina and cut off all
contacts with her. In one of her letters to Alfred, Ederlina complained that he
had ruined her life. She admitted that the money used for the purchase of the
properties in Davao were his. She offered to convey the properties deeded to
her by Atty. Mardoecheo Camporedondo and Rodolfo Morelos, asking Alfred
to prepare her affidavit for the said purpose and send it to her for her
signature. The last straw for Alfred came on September 2, 1985, when
someone smashed the front and rear windshields of Alfred’s car and
damaged the windows. Alfred thereafter executed an affidavit-complaint
charging Ederlina and Sally MacCarron with malicious mischief.
On October 15, 1985, Alfred wrote to Ederlina’s father, complaining that
Ederlina had taken all his life savings and because of this, he was virtually
penniless. He further accused the Catito family of acquiring for themselves
the properties he had purchased with his own money. He demanded the
return of all the amounts that Ederlina and her family had “stolen” and turn
over all the properties acquired by him and Ederlina during their coverture.
Alfred filed a Complaint dated October 28, 1985, against Ederlina, with the
Regional Trial Court of Quezon City, for recovery of real and personal
properties located in Quezon City and Manila. In his complaint, Alfred alleged,
inter alia, that Ederlina, without his knowledge and consent, managed to
transfer funds from their joint account in HSBC Hong Kong, to her own
account with the same bank. Using the said funds, Ederlina was able to
purchase the properties subject of the complaints. He also alleged that the
beauty parlor in Ermita was established with his own funds, and that the
Quezon City property was likewise acquired by him with his personal funds.
Ederlina failed to file her answer and was declared in default. Alfred adduced
his evidence ex-parte.
Alfred prayed that after hearing, judgment be rendered in his favor.
Issues:
a) Whether the Court of Appeals erred in applying the rule of In Pari
Delicto since both parties are not equally guilty but rather it was the
respondent who employed fraud when she did not inform petitioner that
she was already married?
b) Whether the intention of the petitioner is not to own real properties in
the Philippines but to sell them as public auction to be able to recover
his money used in purchasing them?
Ruling:
The trial court ruled that based on documentary evidence, the purchaser of
the three parcels of land subject of the complaint was Ederlina. The court
further stated that even if Alfred was the buyer of the properties, he had no
cause of action against Ederlina for the recovery of the same because as an
alien, he was disqualified from acquiring and owning lands in the Philippines.
The sale of the three parcels of land to the petitioner was null and void ab
initio. Applying the pari delicto doctrine, the petitioner was precluded from
recovering the properties from the respondent.
Alfred appealed the decision to the Court of Appeals in which the petitioner
posited the view that although he prayed in his complaint in the court a quo
that he be declared the owner of the three parcels of land, he had no intention
of owning the same permanently.
His principal intention therein was to be declared the transient owner for the
purpose of selling the properties at public auction, ultimately enabling him to
recover the money he had spent for the purchase thereof.
On March 8, 2000, the CA rendered a decision affirming in toto the decision of
the RTC. The appellate court ruled that the petitioner knowingly violated the
Constitution; hence, was barred from recovering the money used in the
purchase of the three parcels of land. It held that to allow the petitioner to
recover the money used for the purchase of the properties would embolden
aliens to violate the Constitution, and defeat, rather than enhance, the public
policy.
Even if, as claimed by the petitioner, the sales in question were entered into
by him as the real vendee, the said transactions are in violation of the
Constitution; hence, are null and void ab initio.
A contract that violates the Constitution and the law, is null and void and vests
no rights and creates no obligations. It produces no legal effect at all. The
petitioner, being a party to an illegal contract, cannot come into a court of law
and ask to have his illegal objective carried out. One who loses his money or
property by knowingly engaging in a contract or transaction which involves his
own moral turpitude may not maintain an action for his losses. To him who
moves in deliberation and premeditation, the law is unyielding. The law will
not aid either party to an illegal contract or agreement; it leaves the parties
where it finds them.
Under Article 1412 of the New Civil Code, the petitioner cannot have the
subject properties deeded to him or allow him to recover the money he had
spent for the purchase thereof. Equity as a rule will follow the law and will not
permit that to be done indirectly which, because of public policy, cannot be
done directly. Where the wrong of one party equals that of the other, the
defendant is in the stronger position ... it signifies that in such a situation,
neither a court of equity nor a court of law will administer a remedy. The rule is
expressed in the maxims: EX DOLO MALO NON ORITUR ACTIO and IN
PARI DELICTO POTIOR EST CONDITIO DEFENDENTIS.

Futile, too, is petitioner’s reliance on Article 22 of the New Civil Code which
reads:

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

The provision is expressed in the maxim: “MEMO CUM ALTERIUS DETER

DETREMENTO PROTEST” (No person should unjustly enrich himself at the
expense of another). An action for recovery of what has been paid without just
cause has been designated as an accion in rem verso. This provision does
not apply if, as in this case, the action is proscribed by the Constitution or by
the application of the pari delicto doctrine. It may be unfair and unjust to bar
the petitioner from filing an accion in rem verso over the subject properties, or
from recovering the money he paid for the said properties, but, as Lord
Mansfield stated in the early case of Holman vs. Johnson: “The objection that
a contract is immoral or illegal as between the plaintiff and the defendant,
sounds at all times very ill in the mouth of the defendant. It is not for his sake,
however, that the objection is ever allowed; but it is founded in general
principles of policy, which the defendant has the advantage of, contrary to the
real justice, as between him and the plaintiff.”

IN LIGHT OF ALL THE FOREGOING, the petition is DISMISSED. The

decision of the Court of Appeals is AFFIRMED in toto.

Costs against the petitioner. SO ORDERED.