OBLIGATIONS AND CONTRACTS

AN ANALYSIS ON

ARTICLE 1416
NEW CIVIL CODE OF THE PHILIPPINES

Exception to the In Pari Delicto Rule

Submitted by :

Agwilang, Lyle Murth

Tongacan, Kenneth Ray
Lictag, Jeff Lynden

May 19, 2015

ART. 1416. When the agreement is not illegal per se

but is merely prohibited, and the prohibition by the
law is designed for the protection of the plaintiff, he
may, if public policy is thereby enhanced, recover what
he has paid or delivered.

CASE DIGEST
LEONARDO ACABAL and RAMON NICOLAS, petitioners,
vs.
VILLANER ACABAL, EDUARDO ACABAL, SOLOMON
ACABAL, GRACE ACABAL, MELBA ACABAL, EVELYN
ACABAL, ARMIN ACABAL, RAMIL ACABAL, and BYRON
ACABAL, respondents.
454 SCRA 555
CARPIO MORALES, J.:

DOCTRINE ON CIVIL LAW. One who seeks equity and

justice must come to the court with clean hands, otherwise
he have no remedy under the law if the parties are in pari
delicto.
FACTS:
Alejandro Acabal and Felicidad Balasbas executed a Deed of
Absolute Sale over a parcel of land in favor of their son,
respondent Villaner Acabal (Villaner). Villaner was then
married to Justiniana Lipajan. When he became a widower,
he executed a deed conveying the same parcel of land in
favor of petitioner Leonardo Acabal (Leonardo).
However, Villaner later claims that the document he signed
was a document captioned Lease Contract, wherein
purportedly he leased for the property for 3 years to
Leonardo. Villaner filed a complaint with the Regional Trial
Court (RTC) against Leonardo and Ramon Nicolas to whom
Leonardo in turn conveyed the property for annulment of

the deeds of sale. Villaner claimed that he did not know the
contents of the deed he signed which he claimed was a deed
of sale (earlier in the proceedings was mentioned as Lease
Contract). On the other hand, Leonardo asserts that what
Villaner executed was a Deed of Absolute Sale for a
consideration of P10,000.00, which he had already paid, and
as he had become the absolute owner of the property, he
validly transferred it to Ramon Nicolas.
The complaint was dismissed by the Regional Trial Court .
Upon Appeal, the Court of Appeals reversed the said
decision holding the Deed of Sale executed as simulated and
fictitious. Leonardo and Ramon Nicolas
filed a petition
for
Review on certiorari saying: THE COURT OF APPEALS
COMMITTED A REVERSIBLE ERROR WHEN IT RULED
THAT RESPONDENT VILLANER ACABAL WAS DECEIVED
INTO SIGNING THE DEED OF ABSOLUTE SALE WHEN
THE LATTER KNOWINGLY, FREELY AND VOLUNTARILY
EXECUTED THE SAME IN FAVOR OF PETITIONER
LEONARDO ACABAL.
Issues:
1) Is the Deed of Sale valid?
2) Whether or not such case falls on pari delicto.
Ruling:
1) Yes. It is a valid deed. Villaner failed to prove his
allegations for failing to adduce evidence to support
his claims os simulation and lack of knowlwdge as to
the nature of the deed. Leonardos witness on the
other hand was able to prove that the deed was duly
drafted, read and signed by Villaner.
It bears noting that Villaner failed to present evidence
on the fair market value of the property as of April 19,
1990, the date of execution of the disputed deed.
Absent any evidence of the fair market value of a land
as of the time of its sale, it cannot be concluded that
the price at which it was sold was inadequate.
Inadequacy of price must be proven because mere

speculation or conjecture has no place in our judicial

system.
Even, however, on the assumption that the price of
P10,000.00 was below the fair market value of the
property in 1990, mere inadequacy of the price per se
will not rule out the transaction as one of sale. For the
price must be grossly inadequate or shocking to the
conscience such that the mind revolts at it and such
that a reasonable man would neither directly nor
indirectly be likely to consent to it.
2) YES.
It was found that the sale of the said property was
contrary to the Retention Limits set forth by the
Comprehensive Agrarian Reform Law.
Even assuming that the disposition of the property by
respondent was contrary to law, he would still have no
remedy under the law as he and petitioner were in pari
delicto, hence, he is not entitled to afirmative relief
one who seeks equity and justice must come to court
with clean hands. The exception under Article 1416
shall not apply since the protection contemplated
refers to the beneficiary and not to the owner thereof.
The principle of pari delicto, however, is not absolute,
admitting an exception under Article 1416 of the Civil
Code.
ART. 1416. When the agreement is not illegal per se
but is merely prohibited, and the prohibition by the law
is designed for the protection of the plaintiff, he may, if
public policy is thereby enhanced, recover what he has
paid or delivered.
Under this article, recovery for what has been paid or
delivered pursuant to an inexistent contract is allowed
only when the following requisites are met:(1) the
contract is not illegal per se but merely prohibited; (2)
the prohibition is for the protection of the plaintiffs;
and (3) if public policy is enhanced thereby.
The exception is unavailing in the instant case.

However, due to presence of co-heirs of Villaner, the

Supreme Court granted the petition declared the sale
as valid up to the extent only of Villaners legitime on
the subject property.
ANALYSIS OF ARTICLE 1416, NEW CIVIL CODE
General Rule:
Article 1412 (1): When the fault is on the part of both
contracting parties, neither may recover what he has
given by virtue of the contract, or demand the
performance of the others undertaking.
a.)

Governing Principle (In Pare Delicto)

Legal principle that if two parties in a dispute are

equally at fault then the party in possession of the
contested property gets to retain it (courts will not
interfere with the status quo). It implies that if a party
whose action (or a failure to act) precipitates breach of
a contract, or which fails to take appropriate action (or
takes inappropriate action) to limit or recoup a loss,
may not claim damages.

Exception Rule:
Article 1616: When the agreement is not illegal per se
but is merely prohibited, and the prohibition by the law
is designed for the protection of the plaintiff, he may, if
public policy is thereby enhanced, recover what he has
paid or delivered.
a.)

Requisites for Application

a.1) The Contract or Agreement is not illegal

per se;
a.2) The prohibition is for the protection of the
plaintiff; and
a.3) Public Policy is enhance.

SCRA COPY OF THE CASE CITED