SERAFIN MODINA, petitioner,

vs.
COURT OF APPEALS AND ERNESTO HONTARCIEGO, PAUL FIGUEROA, TEODORO HIPALLA
AND RAMON CHIANG, MERLINDA CHIANG, respondents.

Facts: Merlinda Plana Chiang (hereinafter referred to as MERLINDA), sold a parcel of land to Ramon
Chiang (hereinafter referred to as CHIANG) covered by TCT Nos. T-86912, T-86913, and T-86914. and
were subsequently sold by CHIANG to the petitioner Serafin Modina (MODINA), as shown by the
Deeds of Sale. MERLINDA presented a Complaint-in-intervention, seeking the declaration of nullity of
the Deed of Sale between her husband and MODINA on the ground that the titles of the parcels of land
in dispute were never legally transferred to her husband.
Trial Court decided in favor of MERLINDA. Lower Court ruled declaring as void and inexistent the sale
of Lots 10063, 10088, 10085 and 10089 of the Cadastral Survey of Sta. Barbara by Merlinda Plana in
favor of Ramon Chiang as evidenced by the deed of definite sale.
Court of Appeals affirmed the aforesaid decision in toto.
Issues: (1) whether the sale of subject lots should be nullified, (2) whether petitioner was not a
purchaser in good faith, (3) whether or not only three-fourths of subject lots should be returned to the
private respondent.
Held: Petition is DENIED and the decision of the Court of Appeals, dated September 30, 1992, in CAG.R. CV No. 26051 AFFIRMED.
Ruling:
(1) Since one of the characteristics of a void or inexistent contract is that it does not produce any effect,
MERLINDA can recover the property from petitioner who never acquired title thereover.
(2) Petitioner cannot claim that the sale between him and MODINA falls under the exception provided
for by law. 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.
(3) The issue of whether only three-fourths of subject property will be returned was never an issue
before the lower court and therefore, the petitioner cannot do it now. A final word. In a Petition for
Review, only questions of law may be raised.
DIONISIO RELLOSA, PETITIONER, VS. GAW CHEE HUN, RESPONDENT.
Facts: 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 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, Vendor filed an action for annulment of the sale. And said duplicate title be returned
before said property be disposed by vendee. Defendant denied allegations and contended that said
sale is absolute and unconditional.
The trial court declared both the sale and the lease valid and binding and dismissed the complaint.
Court of Appeals affirmed in toto.
Issues: Whether or not the sale in question is valid and, even if it were invalid, plaintiff cannot maintain
the action under the principle of pari delicto?

Held: The sale in question is null and void, but plaintiff is barred from taking the present action under the principle
of pari delicto.
Ruling:
(1) 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.
(2) In Pari Delicto - The proposition is universal that no action arises, in equity or at law, from an illegal contract; no suit
can be maintained for its specific performance, or to recover the property agreed to be sold or delivered, or the money
agreed to be paid, or damages for its violation. 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"The cases in
which this limitation may apply only "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.
(2) Remedies: There are at present two ways by which this situation may be remedied, to wit, (1) action for reversion,
and (2) escheat to the state. An action for reversion is slightly different from escheat proceeding, but in its effects they
are the same. They only differ in procedure. Escheat proceedings may be instituted as a consequence of a violation of
article XIII, section 5 of our Constitution, which prohibits transfers of private agricultural lands to aliens, whereas an
action for reversion is expressly authorized by the Public Land Act (sections 122, 123 and 124 of Commonwealth Act
No. 141).

PHILIPPINE BANKING CORPORATION, representing the estate of JUSTINA SANTOS Y CANON FAUSTINO,
deceased, plaintiff-appellant,
vs.
LUI SHE in her own behalf and as administratrix of the intestate estate of Wong Heng, deceased, defendantappellant.
Facts: Justina Santos y Canon Faustino and her sister Lorenzo were the owners in common of a piece of land in
Manila. Her sister Lorenzo died. At 90 years old, blind, crippled and an invalid, she was left with no other relative to live
with. Her only companions in the house were her 17 dogs and 8 maids. Wong Heng, a Chinese, lived with his family in
the restaurant. Wong had been a long-time lessee of a portion of the property, paying a monthly rental of P2,620.
Wong himself was the trusted man to whom she delivered various amounts for safekeeping, including rentals from her
property at the corner of Ongpin and Salazar streets and the rentals which Wong himself paid as lessee of a part of the
Rizal Avenue property. Wong also took care of the payment; in her behalf, of taxes, lawyers' fees, funeral expenses,
masses, salaries of maids and security guard, and her household expenses.
Justina Santos executed on November 15, 1957 a contract of lease (Plff Exh. 3) in favor of Wong, covering the portion
then already leased to him and another portion fronting Florentino Torres street. The lease was for 50 years, although
the lessee was given the right to withdraw at any time from the agreement; the monthly rental was P3,120.
She executed another contract (Plff Exh. 7) giving Wong the option to buy the leased premises for P120,000, payable
within ten years at a monthly installment of P1,000. The option, written in Tagalog, imposed on him the obligation to
pay for the food of the dogs and the salaries of the maids in her household, the charge not to exceed P1,800 a month.

The option was conditioned on his obtaining Philippine citizenship, a petition for which was then pending in the Court of
First Instance of Rizal.
She executed two other contracts, one (Plff Exh. 5) extending the term of the lease to 99 years, and another (Plff Exh.
6) fixing the term of the option of 50 years. Both contracts are written in Tagalog.
In two wills executed on August 24 and 29, 1959 (Def Exhs. 285 & 279), she bade her legatees to respect the contracts
she had entered into with Wong, But later, she had a change of heart and directed her executor to secure the
annulment of the contracts.
Lower court rendered judgment declaring all contract null and void except for the contract of lease.
Issue: Whether contracts executed are null and void?
Held: The contracts in question are annulled and set aside; the land subject-matter of the contracts is ordered returned
to the estate of Justina Santos as represented by the Philippine Banking Corporation; Wong Heng (as substituted by
the defendant-appellant Lui She) is ordered to pay the Philippine Banking Corporation the sum of P56,564.35, with
legal interest from the date of the filing of the amended complaint; and the amounts consigned in court by Wong Heng
shall be applied to the payment of rental from November 15, 1959 until the premises shall have been vacated by his
heirs.
Ruling:
ecause 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 a violation of the fundamental charter have died and have since been substituted by their
administrators to whom it would be unjust to impute their guilt. Article 1416 of the Civil Code provides, as an exception
to the rule on pari delicto, that "When the agreement is not illegal per se but is merely prohibited, and the prohibition by
law is designed for the protection of the plaintiff, he may, if public policy is thereby enhanced, recover what he has paid
or delivered." The Constitutional provision that "Save in cases of hereditary succession, 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"24 is an expression of public policy to conserve lands for the Filipinos. As this
Court said in Krivenko:
It is well to note at this juncture that in the present case we have no choice. We are construing the Constitution
as it is and not as we may desire it to be. Perhaps the effect of our construction is to preclude aliens admitted freely
into the Philippines from owning sites where they may build their homes. But if this is the solemn mandate of the
Constitution, we will not attempt to compromise it even in the name of amity or equity . . . .
For all the foregoing, we hold that under the Constitution aliens may not acquire private or public agricultural
lands, including residential lands, and, accordingly, judgment is affirmed, without costs.

ALFRED FRITZ FRENZEL, petitioner, vs. EDERLINA P. CATITO, respondent.

Facts: Petitioner Alfred Fritz Frenzel is an Australian citizen of German descent and was a pilot. He was married to
Teresita Santos, a Filipina. Later, the couple separated without benefit of divorce.
Alfred Fritz later met Ederlina Catito, a Filipina and a native of Bajada, Davao City, who was then a masseuse in the
Kings Cross nightclub. Unknown to the German, Ederlina was also married to Klaus Miller, a German national. The
two developed a relationship where Alfred asked Ederlina to come back with him in the Philippines and be engaged
instead in business.
Ederlina found a building at No. 444 M.H. del Pilar corner Arquiza Street, Ermita, Manila, owned by one Atty. Jose
Hidalgo who offered to convey his rights over the property for P18,000.00. Alfred and Ederlina accepted the offer.
Ederlina put up a beauty parlor on the property under the business name Edorial Beauty Salon, and had it registered
with the Department of Trade and Industry under her name. Alfred paid Atty. Hidalgo P20,000.00 for his right over the
property and gave P300,000.00 to Ederlina for the purchase of equipment and furnitures for the parlor. As Ederlina

was going to Germany, she executed a special power of attorney on December 13, 1983[5] appointing her brother,
Aser Catito, as her attorney-in-fact in managing the beauty parlor business. She stated in the said deed that she was
married to Klaus Muller. Alfred went back to Papua New Guinea to resume his work as a pilot.
When Alfred returned to the Philippines, he visited Ederlina in her Manila residence and found it unsuitable for her. He
decided to purchase a house and lot owned by Victoria Binuya Steckel in San Francisco del Monte, Quezon City,
covered by Transfer Certificate of Title No. 218429 for US$20,000.00. On January 23, 1984, a Contract to Sell was
entered into between Victoria Binuya Steckel as the vendor and Ederlina as the sole vendee. Alfred signed therein as a
witness.
Alfred later learned of Ederlina's marriage through Klaus Muller. He confronted the latter and admitted everything.
Ederlina mentioned that she will dirvorced said Kalus.
lfred purchased another parcel of land from one Atty. Mardoecheo Camporedondo, located in Moncado, Babak, Davao,
covered by TCT No. 35251. Alfred once more agreed for the name of Ederlina to appear as the sole vendee in the
deed of sale. On December 31, 1984, Atty. Camporedondo executed a deed of sale over the property for P65,000.00 in
favor of Ederlina as the sole vendee.[21] Alfred, through Ederlina, paid the lot at the cost of P33,682.00 and
US$7,000.00, respectively, for which the vendor signed receipts.[22] On August 14, 1985, TCT No. 47246 was issued
to Ederlina as the sole owner of the said property
The couple decided to put up a beach resort on a four-hectare land in Camudmud, Babak, Davao, owned by spouses
Enrique and Rosela Serrano. Alfred purchased the property from the spouses for P90,000.00, and the latter issued a
receipt therefor.
In the meantime, Ederlinas 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 Ederlinas 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.
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. And that all real and personal properties be returned to him.
Trial court ruled favoring Ederlina.
CA rendered a decision affirming in toto the decision of the RTC.
Issue: Whether or not Frenzel contention is correct?
Held: Petition bereft with merit. 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.
Ruling:
Section 14, Article XIV of the 1973 Constitution provides, as follows:
Save in cases of hereditary succession, no private land shall be transferred or conveyed except to individuals,
corporations, or associations qualified to acquire or hold lands in the public domain.
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.

sum of P700.00 in favor of said Delfin Cruz.

DOMINGO D. RUBIAS, plaintiff-appellant,

vs.
ISAIAS BATILLER, defendant-appellee.

Issue: Whether or not deed of sale executed in favor of defendants is null and void?

Facts: Francisco Militante claimed ownership of a parcel of land located in the Barrio of General Luna,

Ruling: Under the circumstances and considering that petitioner was only discharging his duty
according to his best lights, and could not be said to have in any way acted arbitrarily or in bad faith in
filing the informations with the Circuit Criminal Court, his apology could have been graciously accepted
by respondent judge with an admonition to exercise greater care in the future, in lieu of the
unwarranted imposition of punitive fines in the total sum of P 1,000.00.

municipality of Barotac Viejo province of Iloilo covering an area of 171:3561 hectares. Before the war
with Japan, Francisco Militante application for the registration of the title of the land opposed by the
Director of Lands, the Director of Forestry and other oppositors. during the war with Japan, the record
of the case was lost before it was heard, so after the war Francisco Militante petitioned this court to
reconstitute the record of the case. The record was reconstituted on the Court of the First Instance of
Iloilo and docketed as Land Case No. R-695, GLRO Rec. No. 54852. Trial court dismissed the
application for registration. Pending appeal, Francisco disposed said land to Domingo Rubias, his sonin-law. CA dismissed application for registration.
Domingo Rubias paid taxes to said land and later filed forcible Entry and Detainer case against Isaias
Batiller. Lower Court and appellate court decided in favor of Batiller.
Issue: Whether or not the contract of sale between appellant and his father-in-law, the late Francisco
Militante over the property subject of Plan Psu-99791 was void because it was made when plaintiff was
counsel of his father-in-law in a land registration case involving the property in dispute
Held: Contract of Sale is null and void.
Ruling:
The principles governing the nullity of such prohibited contracts and judicial declaration of their nullity
have been well restated by Tolentino in his treatise on our Civil Code;
Parties Affected. Any person may invoke the in existence of the contract whenever juridical effects
founded thereon are asserted against him. Thus, if there has been a void transfer of property, the
transferor can recover it by the accion reinvindicatoria; and any prossessor may refuse to deliver it to
the transferee, who cannot enforce the contract. Creditors may attach property of the debtor which has
been alienated by the latter under a void contract; a mortgagee can allege the inexistence of a prior
encumbrance; a debtor can assert the nullity of an assignment of credit as a defense to an action by
the assignee.
Action On Contract. Even when the contract is void or inexistent, an action is necessary to declare
its inexistence, when it has already been fulfilled. Nobody can take the law into his own hands; hence,
the intervention of the competent court is necessary to declare the absolute nullity of the contract and
to decree the restitution of what has been given under it. The judgment, however, will retroact to the
very day when the contract was entered into.

BENEDICTO M. JAVIER, as administrator of the Estate of Eusebio Cruz, petitioner,

vs.
DOMINGA VDA. DE CRUZ, and LEONILA, ROMAN, ELISEO, LIBERATA, and MELECIO, all
surnamed CRUZ,respondents.
Facts: Benedicto M. Javier, as administrator of the Estate of Eusebio Cruz, instituted against Dominga

Vda. de Cruz and her children Civil Case No. 5996 to declare null and void a deed of sale of a part of a
parcel of land located in Barrio San Isidro, Taytay, Rizal. The complaint stated that Eusebio Cruz, who
died on February 2, 1941 at the age of 100 years without leaving any will nor compulsory heirs, was
the absolute and exclusive owner of a parcel of mountainous and unimproved land situated in sitio
Matogalo, Taytay, Rizal. Delfin Cruz, by means of deceit and in collusion with persons among them his
father Gregorio Cruz made Eusebio Cruz, who could read and write, stamp his thumbmark on a deed
of sale of a portion of the land described in the complaint consisting of 26,577 square meters for the

Lower court ruled favoring defendants. CA certified case to SC.

Held: The questioned contempt orders and fines imposed therein are annulled and set aside.

POTENCIANO MENIL and wife CRISPINA NAYVE, petitioners,

vs.
COURT OF APPEALS, AGUEDA GARAN, FRANCISCO CALANIAS, MIGUEL NAYVE, JR., and
DEVELOPMENT BANK OF THE PHILIPPINES, respondents.
Facts: On November 3, 1955, Agueda Garan obtained a homestead patent over the land in question.
Original Certificate of Title No. 220 was issued by the Register of Deeds of Surigao in her name
pursuant to the homestead patent. On May 7, 1960, within the prohibitive 5-year period, Agueda Garan
sold the land to movant Patenciano Manil for P415.00, as evidenced by a deed of sale bearing the
same date. Said sale was not registered in Registry of Deeds in Surigao.
August 30, 1964, respondent sold again said land to Potenciano Menil, and for the same price
P415.00. the second deed of sale in the Registry of Deeds in Surigao. Original Certificate of Title No.
220 was cancelled, and Transfer Certificate of Title No. T-60, in lieu thereof, was issued in the name of
Potenciano Menil. A year after, said land was mortgaged to DBP by Menil to secure an agricultural
loan.
Petitioners were in possession of the land in question until sometime in 1967 when private
respondents Agueda Garan, Francisco Calanias, Miguel Nayve, Jr., Rufo Nayve, and Lucio Calanias
forcibly took possession of the said land, and filed against petitioners Civil Case No. 1692 for "Quieting
of Title" before Branch 11 of the Court of First Instance of Surigao del Norte. The said court dismissed
the complaint, awarded damages to the petitioners, and granted the writ of execution prayed for by the
latter.
Civil Case No. 1692 clearly stated that the spouses Menil were legally entitled to the possession of the
land, ordering private respondents to restore possession of the land in litigation to petitioners, and
dismissing Civil Case No. 1816 for insufficiency of evidence. Dismissed Civil Case No. 1816 insofar as
the Development Bank of the Philippines was concerned. CA affirmed said decisions.
Issue: Who are entitled to the land under litigation?
Held: (1) the deed of sale is null and void of the homestead under litigation to petitioners Potenciano
Menil and wife, Crispina Nayve (2) Re-issue Original Certificate of Title No. 220 in the name of private
respondent Agueda Garan (3) petitioners are liable for the payment of the agricultural loan obtained by
them from the Bank for which the land was mortgaged by them as security.
Ruling:
It cannot be claimed that there are two contracts: one which is undisputably null and void, and another,
having been executed after the lapse of the 5-year prohibitory period, which is valid. The second
contract of sale executed on March 3, 1964 is admittedly a confirmatory deed of sale. Even the
petitioners concede this point. Inasmuch as the contract of sale executed on May 7, 1960 is void for it
is expressly prohibited or declared void by law [CA- 141, Section 118], it therefore cannot be confirmed
nor ratified. Article 1409 of the New Civil Code states:
Art. 1409. The following contracts are inexistent and void from the beginning:
(1) Those whose cause, object, or purpose is contrary to law, morals, good

customs, public order or public policy;

(2) Those which are absolutely simulated or fictitious;
(3) Those whose cause or object did not exist at the time of the transaction;
(4) Those whose object is outside the commerce of men;
(5) Those which contemplate an impossible service;
(6) Those where the intention of the parties relative to the principal object of the
contract cannot be ascertained;
(7) Those expressly prohibited or declared void by law.
These contracts cannot be ratified. Neither can the right to set up the defense of
illegality be waived.

THE DIRECTOR OF LANDS, petitioner,

vs.
SILVERETRA ABABA, ET AL., claimants, JUAN LARRAZABAL, MARTA C. DE LARRAZABAL,
MAXIMO ABAROQUEZ and ANASTACIA CABIGAS, petitioners-appellants, ALBERTO
FERNANDEZ, adverse claimant-appellee.
Facts: Maximo Abarquez, availed the services of the Atty. Alberto B. Fernandez and promised to pay
the latter's services on contigent basis one-half (1/2) of whatever he might recover from Lots 5600 and
5602 should the appeal prosper. . Maximo filed for annulment of a contract of sale with right of
repurchase and for the recovery of the land against Agripina Abarquez, elder sister. Agripina Abarquez
contended the share of her brother stating that the latter executed an instrument of pacto de retro prior
to the partition conveying to her any or all rights in the estate of their parents. Petitioner discovered
later that the claim of his sister over his share was based on an instrument he was believe all along to
be a mere acknowledgment of the receipt of P700.00 which his sister gave to him as a consideration
for the care of their father during the latter's illness and never an instrument of pacto de retro. Lower
Court ruled against petitioner. CA reversed decision favoring Maximo.
Fernandez waited that his services be compensated based on the contingent agreement. Instead, sell
the whole parcels of land covered by TCT No. 31841 to petitioner-spouses Juan Larrazabal and Marta
C. de Larrazabal. Fernandez moved to protect his rights over 1/2 parcel of the land by virtue of the
petition of mid affidavit the adverse claim for one-half () of the lots covered by the June 10, 1961
document was annotated on TCT No. 31841. Despite said annotation of adverse claim, Maximo
Abarquez and Anastacia Cabigas conveyed by deed of absolute sale on July 29, 1965 two-thirds (2/3)
of the lands covered by TCT No. 31841 to petitioner-spouses Juan Larrazabal and Marta C. de
Larrazabal.
Vendees moved that adverse claim be cancelled which was opposed by Atty. Alberto B. Fernandez.
Lower Court denied cancellation of adverse claim. The records of the case were forwarded to this
Court through the Land Registration Commission of Manila.
Issue: (1) Whether or not there is validity or nullity of the registration of the adverse claim of Atty.
Fernandez (2) Whether or not the contract for a contingent fee, basis of the interest of Atty. Fernandez,
is prohibited by the Article 1491 of the New Civil Code and Canon 13 of the Canons of Professional
Ethics.
Held: (1) Yes. Having purchased the property with the knowledge of the adverse claim, they are
therefore in bad faith. Consequently, they are estopped from questioning the validity of the adverse
claim. (2) No.
Ruling:
(1) The one-half () interest of Atty. Fernandez in the lots in question should therefore be respected.
Indeed, he has a better right than petitioner-spouses, Juan Larrazabal and Marta C. de Larrazabal.
They purchased their two-thirds (2/3) interest in the lots in question with the knowledge of the adverse
claim of Atty. Fernandez. The adverse claim was annotated on the old transfer certificate of title and
was later annotated on the new transfer certificate of title issued to them. As held by this Court:
The annotation of an adverse claim is a measure designed to protect the interest of a person over a
piece of real property where the registration of such interest or right is not otherwise provided for by the

Land Registration Act, and serves as a notice and warning to third parties dealing with said property
that someone is claiming an interest on the same or a better right than the registered owner thereof
(Sanchez, Jr. vs. Court of Appeals, 69 SCRA 332 [1976]; Paz Ty Sin Tei vs. Jose Le Dy Piao supra).
(2) Article 1491 prohibits only the sale or assignment between the lawyer and his client, of property
which is the subject of litigation. The contract for a contingent fee is not covered by Article 1491. the
payment of the attorney's fees, that is, the transfer or assignment of one-half (1/2) of the property in
litigation will take place only if the appeal prospers. Therefore, the tranfer actually takes effect after the
finality of a favorable judgment rendered on appeal and not during the pendency of the litigation
involving the property in question.
For while Canon 10 prohibits a lawyer from purchasing ...any interest in the subject matter of the
litigation which he is conducting", Canon 13, on the other hand, allowed a reasonable contingent fee
contract, thus: "A contract for a contingent fee where sanctioned by law, should be reasonable under
all the circumstances of the ca including the risk and uncertainty of the compensation, but should
always be subject to the supervision of a court, as to its reasonableness." Canon 13 specifically
permits the lawyer to contract for a con tangent fee which of itself, negatives the thought that the
Canons preclude the lawyer's having a stake in his litigation.

FRANCISCO A. TONGOY, for himself and as Judicial Administrator of the Estate of the Late Luis
D. Tongoy and Ma. Rosario Araneta Vda. de Tongoy, petitioners,
vs.
THE HONORABLE COURT OF APPEALS, MERCEDES T. SONORA, JUAN T. SONORA, JESUS T.
SONORA, TRINIDAD T. SONORA, RICARDO P. TONGOY, CRESENCIANO P. TONGOY, AMADO P.
TONGOY, and NORBERTO P. TONGOY, respondents.
Facts:
Issue:
Held:
Ruling:

LITA ENTERPRISES, INC., petitioner,

vs.
SECOND CIVIL CASES DIVISION, INTERMEDIATE APPELLATE COURT, NICASIO M. OCAMPO
and FRANCISCA P. GARCIA, respondents.
Facts: Spouses Nicasio M. Ocampo and Francisca Garcia, herein private respondents, purchased in
installment from the Delta Motor Sales Corporation five (5) Toyota Corona Standard cars to be used as
taxicabs. Since they had no franchise to operate taxicabs, they contracted with petitioner Lita
Enterprises, Inc., through its representative, Manuel Concordia, for the use of the latter's certificate of
public convenience in consideration of an initial payment of P1,000.00 and a monthly rental of P200.00
per taxicab unit.
One of said taxicabs driven by their employee, Emeterio Martin, collided with a motorcycle whose
driver, one Florante Galvez, died from the head injuries sustained therefrom. A criminal case was
eventually filed against the driver Emeterio Martin, while a civil case for damages was instituted by
Rosita Sebastian Vda. de Galvez, heir of the victim, against Lita Enterprises, Inc., as registered owner
of the taxicab. Decision having become final, a writ of execution was issued. One of the vehicles of
respondent spouses with Engine No. 2R-914472 was levied upon and sold at public auction for
12,150.00 to one Sonnie Cortez, the highest bidder.
Nicasio Ocampo decided to register his taxicabs in his name. He requested the manager of petitioner
Lita Enterprises, Inc. to turn over the registration papers to him, but the latter allegedly refused. Hence,
he and his wife filed a complaint against Lita Enterprises, Inc., Rosita Sebastian Vda. de Galvez,
Visayan Surety & Insurance Co. and the Sheriff of Manila for reconveyance of motor vehicles with
damages.
Lower court ruled favoring Nicasio Ocampo. CA modified decision ordering petitoner to pay the fair
market value of the vehicles.
Issue: Whether or not contract "kabit system" is null and void?

Held: Yes.
Ruling:
The parties herein operated under an arrangement, comonly known as the "kabit system", whereby a
person who has been granted a certificate of convenience allows another person who owns motors
vehicles to operate under such franchise for a fee. Article 1409 of the Civil Code, It is a fundamental
principle that the court will not aid either party to enforce an illegal contract, but will leave them both
where it finds them. The defect of inexistence of a contract is permanent and incurable, and cannot be
cured by ratification or by prescription. As this Court said in Eugenio v. Perdido, 2 "the mere lapse of
time cannot give efficacy to contracts that are null void."

MANOTOK REALTY, INC., petitioner,

vs.
THE HON. COURT OF APPEALS and FELIPE MADLANGAWA, respondents.
Facts: Respondent Felipe Madlangawa claims that he has been occupying a parcel of land in the Clara
de Tambunting de Legarda Subdivision since 1949 upon permission being obtained from Andres
Ladores, then an overseer of the subdivision, with the understanding that the respondent would
eventually buy the lot. Clara Tambunting,owner of lot, died and her entire estate, including her
paraphernal properties which covered the lot occupied by the private respondent were placed
under custodia legis. Don Vicente Legarda was appointed as a special administrator of the estate.
Meanwhile the private respondent remained in possession of the lot in question.
Petitioner became the successful bidder and vendee of the Tambunting de Legarda Subdivision
consisting of 44 parcels of land spread out in the districts of Tondo and Sta. Cruz, Manila, pursuant to
the deeds of sale executed in its favor by the Philippine Trust Company on March 13 and 20, 1959, as
administrator of the Testate Estate of Clara Tambunting de Legarda, in Special Proceeding No. 10809
of the Manila probate court. The lot in dispute was one of those covered by the sale.
Respondent was one of the many occupants who refused to vacate the lots they were occupying, so
that on April 26, 1968, the petitioner filed the action below to recover the said lot.
Trial court dismissed petition. CA ruled the sale by Don Vicente Legarda in favor of the private
respondent is valid, binding, and enforceable against the petitioner.
Issue: Whether or not sale of land is valid?
Held: The private respondent is ordered to SURRENDER the material and physical possession of Lot
No. 277, Block I to the petitioner and to pay the latter the rentals as stated above from May, 1950 until
he surrenders the said lot.
Ruling:
Don Vicente Legarda, therefore, could not have validly disposed of the lot in dispute as a continuing
administrator of the paraphernal properties of Dona Clara Tambunting.
There is nothing in the records that wig show that Don Vicente Legarda was the administrator of the
paraphernal properties of Dona Clara Tambunting during the lifetime of the latter. Thus, it cannot be
said that the sale which was entered into by the private respondent and Don Vicente Legarda had its
inception before the death of Dona Clara Tambunting and was entered into by the former for and on
behalf of the latter, but was only consummated after her death.
Sale between Don Vicente Legarda and the private respondent is void ab initio, the former being
neither an owner nor administrator of the subject property. Such being the case, the sale cannot be the
subject of the ratification by the Philippine Trust Company or the probate court.
After the appointment of Don Vicente Legarda as administrator of the estate of Dona Clara
Tambunting, he should have applied before the probate court for authority to sell the disputed property
in favor of the private respondent. If the probate court approved the request, then Don Vicente Legarda
would have been able to execute a valid deed of sale in favor of the respondent. Unfortunately, there
was no effort on the part of the administrator to comply with the above-quoted rule of procedure nor on
that of the respondent to protect his interests or to pay the balance of the installments to the court
appointed administrator.

CORNELIA CLANOR VDA. DE PORTUGAL, FRANCISCO C. PORTUGAL, PETRONA C.

PORTUGAL, CLARITA PORTUGAL, LETICIA PORTUGAL, and BENEDICTO PORTUGAL,
JR., petitioners,
vs.
INTERMEDIATE APPELLATE COURT and HUGO C. PORTUGAL, respondents.
Facts: Cornelia Clanor and her late husband Pascual Portugal, during the lifetime of the latter, were
able to accumulate several parcels of real property. Hugo Portugal, a son of the spouses, borrowed
from his mother, Cornelia, the certificates of title to the above-mentioned parcels of land on the pretext
that he had to use them in securing a loan that he was negotiating. Cornelia asked the private
respondent for the return of the two titles she previously loaned, Hugo manifested that the said titles no
longer exist. Hugo showed the petitioners Transfer Certificate of Title T.C.T. No. 23539 registered in his
and his brother Emiliano Portugal's names, and which new T.C.T. cancelled the two previous ones.
This falsification was triggered by a deed of sale by which the spouses Pascual Portugal and Cornelia
Clanor purportedly sold for P8,000.00 the two parcels of land adverted to earlier to their two sons,
Hugo and Emiliano. Confronted by his mother of this fraud, Emiliano denied any participation. And to
show his good faith, Emiliano caused the reconveyance of Lot No. 2337 previously covered by TCT
No. RT-9356 and which was conveyed to him in the void deed of sale. Hugo, on the other hand,
refused to make the necessary restitution thus compelling the petitioners, his mother and his other
brothers and sisters, to institute an action for the annulment of the controversial deed of sale and the
reconveyance of the title over Lot No. 3201 (the residential land).
Trial Court declared deed of sale is inoperative. Ca reversed said decision.
Issue: Whether deed of sale is valid?
Held: No. Deed of sale is void ab inito.
Ruling:
Applying the provisions of Articles 1350, 1352, and 1409 of the new Civil Code in relation to the
indispensable requisite of a valid cause or consideration in any contract, and what constitutes a void or
inexistent contract, we rule that the disputed deed of sale is void ab initio or inexistent, not merely
voidable. And it is provided in Article 1410 of the Civil Code, that '(T)he action or defense for the
declaration of the inexistence of a contract does not prescribe.
Deed of sale in controversy is not simply fraudulent but void ab initio or inexistent our ruling on this
third issue would not have any material bearing on the overall outcome of this petition. The petitioner's
action remains to be seasonably instituted.

DEVELOPMENT BANK OF THE PHILIPPINES, petitioner,

vs.
COURT OF APPEALS, CELEBRADA MANGUBAT and ABNER MANGUBAT, respondents.
Facts:Development Bank of the Philippines (DBP) executed a "Deed of Absolute Sale" in favor of
respondent spouses Celebrada and Abner Mangubat over a parcel of unregistered land identified as
Lot 1, PSU-142380, situated in the Barrio of Toytoy, Municipality of Garchitorena, Province of
Camarines Sur, containing an area of 55.5057 hectares, more or less.
Land was originally owned by Presentacion Cordovez which he donated to Luciano Sarmiento who
sold the land to Pacifico Chica. Pacifico Chica mortgaged the land to DBP to secure a loan of
P6,000.00. However, he defaulted in the payment of the loan, hence DBP caused the extrajudicial
foreclosure of the mortgage. In the auction sale held on September 9, 1970, DBP acquired the property
as the highest bidder and was issued a certificate of sale on September 17, 1970 by the sheriff. The
certificate of sale was entered in the Book of Unregistered Property on September 23, 1970. Pacifico
Chica failed to redeem the property, and DBP consolidated its ownership over the same. Said
document contained a waiver of the seller's warranty against eviction.
Respondent spouses applied for an industrial tree planting loan with DBP which was approved despite
the aforesaid certification of the bureau, on the understanding of the parties that DBP would work for
the release of the land by the former Ministry of Natural Resources. The land was used as security.
Said land was declared by Ministry of Natural Resources to be timberland and, therefore, is in law an
inalienable part of the public domain. Respondents filed for annulment of said deed of sale.
Lower court favored respondents. MR was filed by DBP in CA but was denied.

Issue: Whether said sale is void ab inito?

Held: Yes. Respondent spouses Celebrada and Abner Mangubat to pay petitioner Development Bank
of the Philippines the amount of P118,540.00, representing the total amount of the loan released to
them, with interest of 15% per annum plus charges and other expenses in accordance with their
mortgage contract.
Ruling:
The rule that if both parties have no fault or are not guilty, the restoration of what was given by each of
them to the other is consequently in order. This is because the declaration of nullity of a contract which
is void ab initio operates to restore things to the state and condition in which they were found before
the execution thereof.
A contract which the law denounces as void is necessarily no contract whatever, and the acts of the
parties in an effort to create one can in no wise bring about a change of their legal status. The parties
and the subject matter of the contract remain in all particulars just as they did before any act was
performed in relation thereto.
The contract of loan executed between the parties is entirely different and discrete from the deed of
sale they entered into. The annulment of the sale will not have an effect on the existence and
demandability of the loan. One who has received money as a loan is bound to pay to the creditor an
equal amount of the same kind and quality.
Under the foregoing circumstances, what is lost is only the right to foreclose the mortgage as a special
remedy for satisfying or settling the indebtedness which is the principal obligation. In case of nullity, the
mortgage deed remains as evidence or proof of a personal obligation of the debtor, and the amount
due to the creditor may be enforced in an ordinary personal action.

EPIFANIA SARSOSA VDA. DE BARSOBIA and PACITA W. VALLAR, petitioners,

vs.
VICTORIANO T. CUENCO, respondent.
Facts: Two adjoining parcels of coconut land located at Barrio Mancapagao, Sagay, Camiguin,
Misamis Oriental (now Camiguin province), with an area of 29,150 square.The entire land was owned
previously by a certain Leocadia Balisado, who had sold it to the spouses Patricio Barsobia (now
deceased) and Epifania Sarsosa, one of the petitioners herein. They are Filipino citizens. Epifania
Sarsosa then a widow, sold the land in controversy to a Chinese, Ong King Po, for the sum of
P1,050.00. Ong King Po took actual possession and enjoyed the fruits thereof.
On August 5, 1961, Ong King Po sold the litigated property to Victoriano T. Cuenco (respondent
herein), a naturalized Filipino, for the sum of P5,000.00. Epifania "usurped" the controverted property,
and on July 26, 1962, Epifania (through her only daughter and child, Emeteria Barsobia), sold a onehalf (1/2) portion of the land in question to Pacita W. Vallar, the other petitioner. Respondent instituted
before the Court of First Instance of Misamis Oriental a Complaint for recovery of possession and
ownership of the litigated land, against Epifania and Pacita Vallar.
Lower court dismissed complaint and declared Pacita W. Vallar as lawful owner. CA reversed decision
declaring Vicotriano T. Cuenco as absolute owner.

VICENTE GODINEZ, ET AL., plaintiffs-appellants,

vs.
FONG PAK LUEN ET AL., defendants, TRINIDAD S. NAVATA, defendant-appellee.
Facts: Jose Godinez who was married to Martina Alvarez for valuable consideration, sold the
aforesaid parcel of land to the defendant Fong Pak Luen, a Chinese citizen. Defendant Fong Pak Luen
executed a power of attorney in favor of his co-defendant Kwan Pun Ming, also an alien, who
conveyed and sold the above described parcel of land to co-defendant Trinidad S. Navata, who is
aware of and with full knowledge that Fong Pak Luen is a Chinese citizen as well as Kwan Pun Ming,
who under the law are prohibited and disqualified to acquire real property in this jurisdiction. The heirs
of the spouses are now contending the validity of the sale.
Lower court ruled dismissed the case.
Issue: Whether or not the heirs of a person who sold a parcel of land to an alien in violation of a
constitutional prohibition may recover the property if it had, in the meantime, been conveyed to a
Filipino citizen qualified to own and possess it.
Held: Respondent Navata, the titled owner of the property is declared the rightful owner.
Ruling:
There can be no dispute that the sale in 1941 by Jose Godinez of his residential lot acquired from the
Bureau of Lands as part of the Jolo townsite to Fong Pak Luen, a Chinese citizen residing in
Hongkong, was violative of Section 5, Article XIII of the 1935 Constitution which provided:
Sec. 5. Save in cases of hereditary succession, no private agricultural land will
be transferred or assigned except to individuals, corporations, or associations
qualified to acquire or hold lands of the public domain in the Philippines.
The meaning of the above provision was fully discussed in Krivenko v. Register of Deeds of Manila (79
Phil. 461) which also detailed the evolution of the provision in the public land laws, Act No. 2874 and
Commonwealth Act No. 141. The Krivenko ruling that "under the Constitution aliens may not acquire
private or agricultural lands, including residential lands" is a declaration of an imperative constitutional
policy.
However, we see no necessity from the facts of this case to pass upon the nature of the contract of
sale executed by Jose Godinez and Fong Pak Luen whether void ab initio,illegal per se or merely proexhibited.**
Sarsosa vda. de Barsobia v. Cuenco (113 SCRA 547) we had occasion to pass upon a factual situation
substantially similar to the one in the instant case. We ruled:
But the factual set-up has changed. The litigated property is now in the hands of
a naturalized Filipino. It is no longer owned by a disqualified vendee.
Respondent, as a naturalized citizen, was constitutionally qualified to own the
subject property. There would be no more public policy to be served in allowing
petitioner Epifania to recover the land as it is already in the hands of a qualified
person. Applying by analogy the ruling of this Court in Vasquez vs. Giap &
Sons: (.96 Phil. 447 [1955])

Issue: Whether or not sale to Ong King Po, a Chinese, was inexistent and/or void ab initio?
Held: Yes. Subsequent sale after said first sale is valid. Respondent, therefore, must be declared to be
the rightful owner of the property.Pacita Vallar, should not be held also liable for actual damages to
respondent. In the absence of contrary proof, she, too, must be considered as a vendee in good faith
of petitioner Epifania.
Ruling:
The sale of the land in question in 1936 by Epifania to Ong King Po was inexistent and void from the
beginning (Art. 1409 Civil Code) because it was a contract executed against the mandatory provision
of the 1935 Constitution, which is an expression of public policy to conserve lands for the Filipinos. The
litigated property is now in the hands of a naturalized Filipino. It is no longer owned by a disqualified
vendee. Respondent, as a naturalized citizen, was constitutionally qualified to own the subject
property. There would be no more public policy to be served in allowing petitioner Epifania to recover
the land as it is already in the hands of a qualified person.

CONCHITA LIGUEZ, petitioner,

vs.
THE HONORABLE COURT OF APPEALS, MARIA NGO VDA. DE LOPEZ, ET AL., respondents.
Facts: Petitioner-appellant filed complaint against the widow and heirs of the late Salvador P. Lopez to
recover a parcel of 51.84 hectares of land, situated in barrio Bogac-Linot, of the municipality of Mati,
Province of Davao. Plaintiff averred to be its legal owner, pursuant to a deed of donation of said land,
executed in her favor by the late owner, Salvador P. Lopez, on 18 May 1943. The defense interposed
was that the donation was null and void for having an illicit causa or consideration, which was the
plaintiff's entering into marital relations with Salvador P. Lopez, a married man; and that the property
had been adjudicated to the appellees as heirs of Lopez by the court of First Instance, since 1949.
CA ruled against plaintiff and found that property donated was conjugal in nature. And said deed of
donation was never registered.

Issue: Whether or not deed of donation executed is null and void?

Held: No.
Ruling:
The situation of the children and forced heirs of Lopez approximates that of the widow. As privies of
their parent, they are barred from invoking the illegality of the donation. But their right to a legitime out
of his estate is not thereby affected, since the legitime is granted them by the law itself, over and above
the wishes of the deceased. Hence, the forced heirs are entitled to have the donation set aside in so
far as in officious: i.e., in excess of the portion of free disposal (Civil Code of 1889, Articles 636, 654)
computed as provided in Articles 818 and 819, and bearing in mind that "collationable gifts" under
Article 818 should include gifts made not only in favor of the forced heirs, but even those made in favor
of strangers, as decided by the Supreme Court of Spain in its decisions of 4 May 1899 and 16 June
1902. So that in computing the legitimes, the value of the property to herein appellant, Conchita
Liguez, should be considered part of the donor's estate. Once again, only the court of origin has the
requisite date to determine whether the donation is inofficious or not.
Lopez could not donate the entirety of the property in litigation, to the prejudice of his wife Maria Ngo,
because said property was conjugal in character and the right of the husband to donate community
property is strictly limited by law (Civil Code of 1889, Arts. 1409, 1415, 1413; Baello vs. Villanueva, 54
Phil. 213).
ART. 1409. The conjugal partnership shall also be chargeable with anything which may
have been given or promised by the husband alone to the children born of the marriage in
order to obtain employment for them or give then, a profession or by both spouses by
common consent, should they not have stipulated that such expenditures should be borne
in whole or in part by the separate property of one of them.".
ART. 1415. The husband may dispose of the property of the conjugal partnership for the
purposes mentioned in Article 1409.)
ART. 1413. In addition to his powers as manager the husband may for a valuable
consideration alienate and

Held: No. The defect of in existence of a contract is permanent and cannot be cured by ratification or
by prescription. The mere lapse of time cannot give efficacy to contracts that are null and void.
Ruling: Although not outrightly penalized as a criminal offense, the kabit system is invariably
recognized as being contrary to public policy and, therefore, void and in existent under Article 1409 of
the Civil Code. It is a fundamental principle that the court will not aid either party to enforce an illegal
contract, but will leave both where it finds then. Upon this premise it would be error to accord the
parties relief from their predicament. Article 1412 of the Civil Code denies them such aid. It provides:
Art. 1412. If the act in which the unlawful or forbidden cause consists does not
constitute a criminal offense, the following rules shall be observed:
1. When the fault is on the part of both contracting parties, neither may recover
that he has given by virtue of the contract, or demand, the performance of the
other's undertaking.

AURELIO G. BRIONES, plaintiff-appellee,

vs.
PRIMITIVO P. CAMMAYO, ET AL., defendants-appellants.
Facts: Aurelio G. Briones filed an action against Primitivo, Nicasio, Pedro, Hilario and Artemio, all
surnamed Cammayo, to recover from them, jointly and severally. Defendants executed the real estate
mortgage as security for the loan of P1,200.00 given to defendant Primitivo P. Cammayo upon the
usurious agreement that defendant pays to the plaintiff and that the plaintiff reserve and secure.
Defendants replead all their allegations, that plaintiff, by taking and receiving interest in excess of that
allowed by law, with full intention to violate the law.
Lower court ruled that defendants pay the claimed amount.
Issue: Whether the creditor is entitled to collect from the debtor the amount representing the principal
obligation; secondly, in the affirmative, if he is entitled to collect interests thereon, and if so, at what
rate.

In the present case, it is scarcely disputable that Lopez would not have conveyed the property in
question had he known that appellant would refuse to cohabit with him; so that the cohabitation was an
implied condition to the donation, and being unlawful, necessarily tainted the donation itself.

Held: Appellee may recover from appellant the principal of the loan (P1,180.00) only, with interest
thereon at the legal rate of 6% per annum from the date of the filing of the complaint.

Conchita Liguez declared entitled to so much of the donated property as may be found, upon proper
liquidation, not to prejudice the share of the widow Maria Ngo in the conjugal partnership with Salvador
P. Lopez or the legitimes of the forced heirs of the latter.

True, as stated in Article 1411 of the New Civil Code, the rule of pari delicto applies where a contract's
nullity proceeds from illegality of the cause or object of said contract.

TEJA MARKETING AND/OR ANGEL JAUCIAN, petitioner,

vs.
HONORABLE INTERMEDIATE APPELLATE COURT * AND PEDRO N. NALE, respondents.
Facts: Defendant bought from the plaintiff a motorcycle with complete accessories and a sidecar in the
total consideration of P8,000.00. Out of the total purchase price the defendant gave a downpayment of
P1,700.00 with a promise that he would pay plaintiff the balance within sixty days. He failed to pay
wherein the latter demanded payments. The records of the LTC show that the motorcycle sold to the
defendant was first mortgaged to the Teja Marketing by Angel Jaucian though the Teja Marketing and
Angel Jaucian are one and the same, because it was made to appear that way only as the defendant
had no franchise of his own and he attached the unit to the plaintiff's MCH Line. The agreement also of
the parties here was for the plaintiff to undertake the yearly registration of the motorcycle with the Land
Transportation Commission. The plaintiff, however failed to register the motorcycle on that year on the
ground that the defendant failed to comply with some requirements such as the payment of the
insurance premiums and the bringing of the motorcycle to the LTC for stenciling, the plaintiff saying
that the defendant was hiding the motorcycle from him.
Petitioner Teja Marketing and/or Angel Jaucian filed an action for "Sum of Money with Damages"
against private respondent Pedro N. Nale.
Lower court favored petitioner. CA affirmed decision.
Issue: Whether or not respondent court erred in applying the doctrine of "pari delicto."?

Ruling:

However, appellants fail to consider that a contract of loan with usurious interest consists of principal
and accessory stipulations; the principal one is to pay the debt; the accessory stipulation is to pay
interest thereon.
The question therefore to resolve is whether the illegal terms as to payment of interest likewise renders
a nullity the legal terms as to payments of the principal debt. Article 1420 of the New Civil Code
provides in this regard: "In case of a divisible contract, if the illegal terms can be separated from the
legal ones, the latter may be enforced."
In simple loan with stipulation of usurious interest, the prestation of the debtor to pay the principal debt,
which is the cause of the contract (Article 1350, Civil Code), is not illegal. The illegality lies only as to
the prestation to pay the stipulated interest; hence, being separable, the latter only should be deemed
void, since it is the only one that is illegal.